3rd Mindanao Policy Research Forum

3rd Mindanao

Policy Research Forum

Federalism as a Policy Option for a Decentralized Inclusive Development: A Critical Inquiry

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Gains and Pitfalls of Decentralization

Fiscal Federalism

Draft Philippine Federal Constitution

Copyright Š 2018 by the Mindanao Development Authority All Rights Reserved. Except for fair use in book reviews, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise without prior written permission of the copyright holder.

Published by the Mindanao Development Authority The Mindanao Development Authority (MinDA) is a government agency created through Republic Act 9996.

It is mandated to promote, coordinate, and facilitate the active and extensive participation of all sectors to effect socioeconomic development of Mindanao. It also acts as the Philippine Coordinating Office (PCOBE) for the Brunei Darussalam-Indonesia-Malaysia-the Philippines East ASEAN Growth Area (BIMP-EAGA), ensuring the active participation of Mindanao and Palawan in the sub-regional economic cooperation.

CONTENTS FOREWORD 2

Keynote Address

by Atty. Kenneth Vincent P. Beldua FOREWORD

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Keynoteby Address

by Atty.

Vincent P. Beldua Welcome Remarks Fr. Richard V. Kenneth Ella

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Opening Remarks

by Dr. Marife Ballesteros Opening Remarks by Dr. Marife Ballesteros

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Welcome Remarks by Fr. Richard V. Ella

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SESSION 1: Gains1:and Pitfalls of Decentralization SESSION Gains and Pitfalls of Decentralization Decentralization, Autonomy, and Federalism: Sustainable Development and Peace in the Fringes

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Discussion on Gains and Pitfalls of Decentralization by Atty. Naguib Sinarimbo

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US Federal Model and Experience: Points for Consideration by Mr. Hezekiah Concepcion

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Decentralization, Autonomy, and Federalism: Sustainable Development and Peace in the Fringes by Atty. Benedicto Bacani

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Relevance of Fiscal Federalism to Philippine by Development Issues and Challenges Discussion on Gains and Pitfalls of Decentralization Atty. Naguib Sinarimbo

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SESSION 2: Fiscal Federalism

Fiscal Design and Subnational Governance: Autonomy and Equity Considerations

Why the need for Federalism? by Dr. Robert Panaguiton Discussion on Fiscal Federalism by Dr. Acram A. Latiph

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Discussion on Fiscal Federalism by Mr. Ramon Beleno

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SESSION 2: Fiscal Federalism

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3: Draft Philippine Federal Constitution Issues and Challenges Relevance ofSESSION Fiscal Federalism to Philippine Development

by Mr. Romulo Emmanuel E. Miral, Jr., Ph.D. The PDP Laban Model of PH Federalism

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on the Draft Philippine Federal Constitution by Mr. Lito Lorenzana Fiscal DesignDiscussion and Subnational Governance: Autonomy and Equity Considerations Discussion on the Draft Philippine Federal Constitution by Mr. Miguelito Ocapan

by Dr. Rosario G. Manasan

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Why the need for Federalism? by Dr. Robert Panaguiton

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Discussion on Fiscal Federalism by Dr. Acram A. Latiph

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Discussion on Fiscal Federalism by Mr. Ramon Beleno

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US Federal Model and Experience: Points for Consideration by Mr. Hezekiah Concepcion

SESSION 3: Draft Philippine Federal Constitution The PDP Laban Model of PH Federalism by Mr. Jonathan Malaya

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Discussion on the Draft Philippine Federal Constitution by Mr. Lito Lorenzana

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Discussion on the Draft Philippine Federal Constitution by Mr. Miguelito Ocapan

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ANNEX

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Datu Abul HJ Abul HJ.Khayr KhayrD. D.Alonto Alonto Secretary Secretary Mindanao Mindanao Development Development Authority

ayor Isabel Climaco-Salazar of the great city of Zamboanga.

Representatives from higher education institutions, my fellow workers in government, our distinguished guests, advocates of peace and development in Mindanao, ladies and gentlemen, Bismillah al-rahman al-rahim Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh.

First and foremost, let me extend my warmest congratulations to all the men and women who worked tirelessly to make this event possible.

To the Philippine Institute for Development Studies, Ateneo de Zamboanga University, and my fellow colleagues in the Mindanao Development Authority, bear in mind that the hard work that you have displayed these past few days will pave the way to a more progressive future for Mindanao and for the rest of the country.

Our appreciation also extends to our partners and participants in this activity. The knowledge and inputs that you have shared during the span of this forum is truly invaluable.

The conduct of this policy forum resonates with me from a highly personal space. Having witnessed and endured the turbulent years of strife in Mindanao along with my fellow brothers and sisters, I have come to realize that the only way to permanently put the regime of fragmentation and violence in Mindanao to rest is to pursue initiatives that will transcend beyond any affiliation or interest.

That is why we are extremely blessed to have been graced by a leader who has a complete

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FOREWORD

grasp of where this challenge stems from and how to move past it. With President Rodrigo Duterte’s strong stance to a federal form of government, we are now looking towards an era of genuine autonomy which may spur the kind of socio-economic development that Mindanao rightfully wants and deserves.

Hence, we are on the right track with what we have achieved so far and rest assured that this will jumpstart a lot of greater things for our region and for the country.

Your insights during this activity bear a lot of weight in ensuring that a Mindanawon perspective towards a federal government will be greatly taken into consideration.

This is why we are committing to have the results of this forum packaged into a publication that will be shared to core policy makers in the government - particularly to the 25 members of the consultative committee that will be reviewing the constitution as well as to the members of the constitutional amendment and Mindanao Affairs committees from the Senate and the House of Representatives.

With the recent declaration of the LegislativeExecutive Development Academy to put prime focus on the shift towards federalism as their primary legislative agenda, we can also look forward to more fruitful discussions that will firm up this initiative.

all the stakeholders involved in the picture regardless of their political, cultural, ethnic, or religious affinity.

An All-Moro Convention will also provide them with a platform to map out their political outlook should a federal republic be established.

As the chairman of MinDA and as a Bangsamoro, I can assure you that we are not going to stop until we get everyone on board in this undertaking. Every person, every voice, every opinion merits great importance in establishing a state that values unity and empathy over divisiveness and indifference.

After all, federalism only looks at the best interest of the Filipino.

Let us work together as we paint a brighter future for the Philippines. Let us push for federalism and support our President in his quest for genuine change.

Once again, my heartfelt congratulations to everyone involved in the 3rd Mindanao Policy Forum.

Shukran and wasalaam! May the blessings and wisdom of the Almighty guide us in this endeavor.

Among these discussions will be the conduct of an All-Moro Convention which will broaden our perspectives regarding this monumental shift in governance. This will be a great opportunity to highlight the Bangsamoro agenda by gathering

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Atty.

KennethVincent VincentP. P.Beldua Beldua Atty.Kenneth Secretary Secretary Sangguniang Panglungsod of of Sangguniang Panglungsod Zamboanga City City Zamboanga

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ecretary Datu Abul Khayr Alonto, Chairman, Mindanao Development Authority (MinDA); Fr. Karel San Juan, S.J., President, the Ateneo de Zamboanga University; other esteemed guests, fellow workers in government, ladies and gentlemen, good morning.

On behalf of our City Mayor Maria Isabelle Climaco-Salazar, I would like to welcome our guests, visitors and organizers to the City of Zamboanga. Bienvenidos! We thank as well the Ateneo de Zamboanga University for serving as the host institution of the Third Mindanao Policy Research Forum.

In the past, the Philippines has had attempts at a reform towards federalism when it was recommended as one of the goals of the proposed charter change. However, the attempts failed because opposition from various sectors believe this reform was used to extend the term limit of the Chief Executive. Yet, here we are again. Today, we find ourselves in each other’s midst to gather insights from local stakeholders in our hope to formulate sound policy interventions for the development of our regions.

our desire to craft the design of our potential federal constitution or federal structure, we are eager to deliberately avoid the mistakes and pitfalls in older federations. And in borrowing concepts and ideas from federal countries, we would like to understand the guiding principles so that we can properly adopt them and even adapt them to local conditions to meet our specific needs. Hence, this forum.

On our part, we have extensive experience in decentralization. Decentralization was seen as a response to the dilemma in governance. It is also viewed as a support in the development of the nation by bringing the government closer to the people through administrative deconcentration and political devolution. It has been reasoned that this strategy will facilitate faster delivery of needed basic services and promote participatory governance. Since the enactment of the Local Government Code of 1991, we have been undergoing devolution and decentralization for the past 25 years.

The enactment of the Local Government Code of 1991 is considered the most fundamental and far-reaching policy that addressed the decades-old problem of a highly centralized politico-administrative system with most significant political and administrative decisions concentrated in Manila. The enactment of the Code was welcomed by most sectors of society.

It radically transformed the nature of the power relationships between the central government and the thousands of local governments in the countryside through the devolution process. It finally transferred the responsibility for the delivery of basic services to the local government units, including appropriate personnel, assets, equipment, programs, and projects.

We have been gripped by the “federalism fever” as no less than our President himself champions federalism. . New life is being breathed into the idea of changing the government from a unitary form to a federal one. Quoting Professor Aries Arugay of UP Diliman’s Department of Indeed, at the end of the day, local autonomy Political Science, the Chief Executive seems means less reliance upon the national to be motivated by inequality and corruption government, including “allotments” made in Mindanao in pushing for such change. In

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KEYNOTE ADDRESS

a weak state. A weakened economy, political instability, rapid population growth, etc. are concerns that challenge Philippine governance. Various reforms and strategies have been tried to improve governance. The undergoing consideration on revising the 1987 Constitution and adopting federalism is the Senator Pimentel, a major proponent of the move to adopt a federal system of government, latest development. in a primer presented at the annual convention Issues and concerns regarding the conversion of the Integrated Bar of the Philippines at Tacloban City on April 2002 identified two main to federal system from the recent unitary structure have to be confronted. Federalism is reasons why the federal system is better than touted as a possible means to resolve provincial the present unitary system. According to him disparities in the country and end the war and the federal system has the structures needed to a) hasten the economic development among development problems in Mindanao brought the various regions of the country by allocating on by separatists’ movements, since the structure allows for national and regional units power which at present is concentrated in the of government to have distinct and overlapping central government to the regions that will jurisdictions. be converted to federal states. The devolved powers will allow the federal states to mobilize Quo vadis? their resources for development without being hindered or controlled by the central government; and b) dissipate the causes of the While the idea of federalism is attractive for most Filipinos, the possible benefits that are recurrent armed Moro challenges against the government and, thereby, lay the basis for a just marketed by the idea will inevitably come at a cost, and will require extensive time and and lasting peace in Mindanao. effort from both governments and citizens alike. The current administration has to make It has been recognized that federalism is sure the people are satisfied with the division not the answer for solving all governance problems. However, given the abovementioned of responsibilities that will be stated in the Amendment, and that the work towards hypotheses as rationale, it will improve building a federalist country will not alienate Philippine governance. As mentioned earlier, other states or leave them behind, the way they the structure of a federal government will are being left behind right now. empower the people and accelerate the country’s development.

We hope that with further and wider discussion of the presented recommendations, we can The Philippine politico-administrative system is replete with examples of tensions between a develop a meaningful and genuine change in our institutions. In the end, all we desire to see highly centralized governmental structure and the demands for autonomy among the various is a Philippine society which is just, fair, and peaceful with a government that truly serves. component local units: at one level, there is demand among component local institutions for autonomy from the central government in order On this note, I wish everyone great favor as you to enable them to become more responsive to proceed with this forum. Muchisimas gracias y buenas dias! local situations and, paradoxically, strengthen by the national government, and increased reliance upon internally generated resources, or resources jointly generated with other institutions, be it the other local government units, private institutions, etc.

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WELCOME REMARKS

Fr. Richard V. Ella Vice-President for Administration Ateneo de Zamboanga University

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uenas Dias! First of all, I wish to welcome you all to the Ateneo de Zamboanga University.

As a leading academic institution in this part of Mindanao, we are happy to host the 3rd Mindanao Policy Forum on Federalism which is a topic that is indeed worthy of discussion and analysis since this is the alternative form of government that has been promoted by the current administration with the hope that it will bring about the much needed development in the countryside.

As a nation, we have been used to a more centralized form of government, which has its own advantages and disadvantages. How federalism will bring about necessary changes to ensure a more equitable distribution of resources and less bureaucratic style of government is certainly worthy of consideration. It is my hope that this forum will bring about a deeper understanding of the possible implications that federalism will bring should we shift to this form of government.

On behalf of Fr. Karel San Juan, our University President, I wish to welcome once again the representatives from the academe, government agencies, local government units, private sector, and civil society who are here present and to thank the Mindanao Development Authority and the Philippine Institute for Development Studies for organizing this event together with the Ateneo Research Center.

God bless and Muchas gracias a todos!

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ayor Maria Isabelle Climaco-Salazar, Fr. Karel San Juan, Sec. Datu Abul Alonto, Distinguished speakers and guests, ladies and gentlemen. Good Morning.

The month of September has been declared as the Development Policy Research Month (or DPRM) under Proclamation No. 247 issued in 2002. The PIDS takes the lead in the annual observance of the DPRM and we use this occasion to promote awareness and appreciation, at the national and sub-national levels, of the importance of policy research in the formulation of sound and relevant policies and programs.

Since 2015, PIDS has partnered with the Mindanao Development Authority (MinDA) in organizing the Policy Research Forum in Mindanao. Today, marks the third year of the Mindanao Forum and PIDS would like to acknowledge and express our appreciation to MinDA and

OPENING REMARKS

Dr. Marife Ballesteros Vice President Philippine Institute for Development Studies

to the Ateneo de Zamboanga University for co-organizing this event.

The topic in today’s Forum is “Federalism as Policy Option for a Decentralized Inclusive Development: A Critical Inquiry.” This topic is in line with the DPRM theme for this year, which is “Strengthening Decentralization for Regional Development.” There has been an increasing number of discourse at the onset of the Duterte administration to revisit decentralization and to consider Federalism as a policy option to address long-standing national issues, specifically the Mindanao separatist movement, drugs and terrorism, corruption, poverty and income inequality, and oligarchic monopoly.

governance.

However, as leaders, intellectuals, researchers, we need to pause and think: what do we really know about Federalism?

While Federalism will eventually be a political process, it should first be anchored on a non-partisan, objective, and scientific study of the achievability of its goals and desired outcomes.

We need to design our own decentralized form of government. We learn lessons from other federal systems but we cannot just copy from them. The design has to be creative, contextual, and uniquely Filipino.

We have a series of activities lined up to discuss the issue.

The Mindanao Forum is the In particular, Federalism is first of the Policy Research one of the 28 priority bills of Forum prepared for this year’s the Duterte administration.

DPRM. We have gathered There are indeed very strong together experts from different views that Federalism is the enabling mechanism for clearer academic disciplines to provide a critical and evidence-backed and stronger accountability in

inquiry into the topic. The Forum as shown in your program has three sessions and the discussions are as follows: (1) gains and pitfalls of Philippine decentralization; (2) fiscal federalism; and (3) a proposed Philippine Federal Constitution.

Before I end, allow me to thank the members of the DPRM Inter-agency Steering Committee for their support and partnership in the DPRM each year. My sincerest thanks to NEDA, Civil Service Commission, PIA, Presidential Management Staff, DILG, and Bangko Sentral ng Pilipinas.

This year, in view of the theme on decentralization, we have also invited the Department of Budget and Management and the DOF-Bureau of Local Government Finance to be part of the steering committee.

Let us all look forward to the healthy and productive exchange of ideas and insights.

Thank you and good day.

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SESSION 1

US Federal Model and Experience: Points for Consideration Mr. Hezekiah Concepcion Professor, Ateneo de Zamboanga University (AdZU)

The objectives of the presentation are to review the historical development of the Federal form of government in the USA, consider good features of Federal system of government in the USA, and identify issues and concerns for policy and academic research. There are many models of Federalism (e.g.

European model). There is a need to look at the functions of the autonomous communities.

The website www.cornell. law.edu defines Federalism as a system of government in which the same territory is controlled by two (2) levels of government. Generally, an overarching national government governs issues that affect the entire country, and smaller subdivisions govern issues of local concern.

The United States has a federal system of governance consisting of the national or federal government, and the government of the individual states.

from the original government.

The powers of the federal government are the delegated powers by the states, of which the original powers come from the states. In the Philippine set-up, the concurrent powers are granted by the Constitution to Congress and devolved to the Local Government Units (LGUs).

The concurrent (shared) powers between the national government and the state government are the following, namely: collect taxes; regulate banks; establish and administer a judiciary; borrow money; In the USA, the national government has the following provide for common good; and powers, namely: make treaties; make and enforce laws. establish and regulate postal Further, the state government system; regulate foreign and has the following powers, interstate commerce; tax to wit: establish local imports/exports; declare war; maintain military; coin money; government; regulate intrastate commerce; public protect copyright/patents; education – schools; conduct make all laws “necessary and

In a US Federal set-up, there are two (2) levels – the national and the local or state governments. Do not use the term decentralization but federal. The power that the states perform was derived

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proper” to meet responsibilities per the U.S. Constitution; regulate citizenship and immigration; and maintain race and gender equality.

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elections; provide for common good – protecting health, safety/morals; regulations for marriage; professional licensure; all powers not delegated to the national government or denied to the states per the U.S. Constitution; provide health care and insurance; and recognize gun rights.

care; and taxation and public funding. With President Trump abolishing the Deferred Action for Childhood Arrivals (DACA), a lot of social problems occurred, affecting 800,000 children.

On one hand, there are also some good practices being practiced in a Federal set-up, namely: democracy thrives in debates; cooperation and I think the US Federal system is not the template. They have compromise; creativity and innovation; local autonomy problems in the education and empowerment; efficiency sector. Some school districts and responsiveness; and in Texas are closed. There cultural democracy. Among are contentions between the Tausugs, they practice the school and the local complete resolution strategy. government. The taxation In cases wherein conflict system in the US varies according to states. Different among families results to states have different structures homicide, they usually resolve in tax collections and different these through the community leaders by way of a conflict sources of revenues. Some resolution. The culture and citizens in the U.S. pay taxes history in the Philippines are twice. Other states in the US distinct, allowing the Filipino have 50% tax revenues. communities to chart their own destinies and preserve The American system is not their culture. perfect. One issue that they failed to resolve resulted Is the shift to Federalism a to Civil War. There are contentious debates between formula for success? No, if we situate our discussion on federal and state government research. There is a need over sovereignty issues and nullification theory; individual to come up with national consensus if there is a liberties and gun rights; clamor to be decentralized. social and racial equality; Personally, I am only asking culture wars; immigration, if we need to change into a social security and health

federal form of government.

I am glad if we situate in academic research because this is the area that we need to discuss. Look into the political history. Acknowledge Muslim communities already functioning as states. Address the conflict in Mindanao. If we federalize the 13 states, this is another level in the bureaucracy. On one hand, the resources to adopt a new form of government are very minute if the new form of government will address the peace and order situation in Mindanao.

Before changing the form of government, we need to consider various aspects such as the history; Muslim Filipinos aspiration for selfdetermination; political culture; political expediency; cost; alternative models of federalism and decentralization (Spain and Portugal); and national consensus, among others.

Is there really an overwhelming clamor to change the form of government? Come and let us reason together.

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Decentralization, Autonomy, and Federalism: Sustainable Development and Peace in the Fringes Atty. Benedicto Bacani Executive Director, Institute for Autonomy and Governance

have to shift to federalism and why don’t we just improve the Local Government Code and implement it so that we can really empower the LGUs?” we remain to be within the confines of this first column, wherein power is not actually transferred to the LGUs. We just decentralize functions.

Figure 1. Decentralization, Autonomy and Federalism

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coordinative. The RDC is a planning and coordinating body, but it has no political power. Decentralization is only from the national government to the LGUs. The triad of decentralization is merely administrative decentralization, which means that some of the functions of the government are better Structure of Government implemented at the local What structure of government level, precisely because Local Government Units are closer do we have now? As of the to the communities. For more moment, we have what is efficient delivery of services, illustrated by the first two political structures that are columns in Figure 1. closer to the people that they serve would be in the We have the decentralization best position to plan and to to Local Government Unitsprovinces, cities, municipalities deliver the specific functions of the government which are and barangays- governed by the Local Government Code. At provided for under the Local the middle tier is the Regional Government Code.

Development Councils (RDCs), When people ask “why do we whose power is merely he usual questions are what will change if we shift to federal and if the shift to federalism is a form of a political reform, because if we are going to change, at least we have to be changed for the better. We are not changing just for the sake of changing.

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The second type of decentralization that we have is the decentralization to autonomous regions. Under Article 10 of the Constitution, we have a middle tier of government in the form of two autonomous regions: the Muslim Mindanao and the Cordillera regions. The Cordillera region does not have an organic law so decentralization is based on an Executive Order, although a bill to this effect was recently filed in Congress, triggered by the proposals to shift to federal. In this special arrangement, we have decentralization of powers under a unitary system. Unlike the RDCs, the autonomous region has political powers. It is a government by itself. It has a legislature and Regional Assembly. It has policy making powers, executive powers and to a certain degree, judicial powers through the establishment of Sha’riah

unlike what happens under a unitary system. Under a unitary system, decentralization is merely administrative, where the relationship is basically symmetric between the national and the regional government. sIf we shift to Identity: As a means of ensura federal system, the central ing peace, stability and mutual government must necessarily accommodation in countries that constrict and contract while have territorially concentrated differences of identity, ethnicity, the regional governments religion or language. should expand. Regional governments will decentralize administration to LGUs, courts. These are what we thereby providing for a regional have now – two types of autonomy and decentralization. state or state government which is a coherent political If we shift to a federal system, structure consisting of a regional government, a state we will have a middle tier government and LGUs. It government not only for has to be coherent. That is the Autonomous Region in why if we shift to a federal Muslim Mindanao (ARMM) system, we have to look at and the Cordillera, but for all the design. If the central the other regions that will be government would still be created. We will either have bigger and would still have a federal states or autonomous Senate and a Congress, but regions or whatever the another tier has been added framers will decide to call the with its own Congress and you federal states. You now have see that there is something the national government, the wrong with the sharing, then federal state, and the Local there is a need to look at the Government Units. Let me design. When you share that emphasize that the kind of means that you divide it, then decentralization used is the you should not be bigger but philosophy of shared rule become smaller. The second and self-rule. Federal states philosophy is self-rule on the share power with central part of the federal states. government. This is what is called shared sovereignty.

Why federalize? We federalize Shared sovereignty is very because of efficiency and controversial, so oftentimes, identity. We see federalism the issue of sovereignty is as a means of improving avoided. When we talk of service delivery, ensuring that shared rule, the Constitution decisions are made at the most provides the assignment of appropriate level, protecting powers. Under a Federal setagainst the over-concentration up, there is self-emulation of power and creating more and limitation of the national opportunities for democratic government’s sovereignty in favor of regional states or state participation. We also view governments. This means that federalism as a means of the powers given to the states ensuring peace, stability and mutual accommodation in cannot just be taken back, Why Federalize?

Efficiency: as a means of improving service delivery, ensuring that decisions are made at the most appropriate level, protecting against the over-concentration of power and creating more opportunities for democratic participation.

countries that have territorially concentrated differences of identity, ethnicity, religion or language. These are the two reasons why advocates of federalism are really pushing for a federal system: equitable government distribution of national wealth and resolution to the Mindanao conflict.

We have been emphasizing federalism and local governments. When we restructure the government, we should just not be concerned about the relationship of the central and national government and the regional or state governments.

We have to look also at the relationship within the regional and state governments and their constituent Local Federalism as a political reform measure restructures government including local governance within a federal state.

Evolving a cohesive and working federal state composed of federal state governments and constituent local government units is key.

Delineation of powers between federal states and LGUs is as critical as central-state relations.

Government Units. The key is for the regional states to really function as one coherent coordinated body with its Local Government Units.

This is where the problem lies, because our LGUs and local politicians would never agree because of entrenched political interest. We have seen this in the ARMM as well as in the Bangsamoro Basic Law (BBL). Even if the BBL is passed, it will not change the political economy of LGUs in

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Sri Lanka, Nepal, Indonesia, Malaysia and now the Philippines is also looking at it to manage multi-ethnicity and pluralistic society. We know that peace agreements are one of the ways by which we can attain peace in Mindanao and now, the issue of the implementation of peace agreements arises. So why have peace agreements (Moro Islamic Liberation Front and Moro National Liberation Front) not been fully implemented? It is because of constitutionality issues. We have seen this in the BBL, What will happen to LGUs? even in the ARMM. The Every time you talk about ARMM law is good enough but the problem is that it federalism to barangay chairpersons, they will ask cannot be fully implemented because of constitutional you what will happen to the barangays? To provinces, what issues. For instance, if you will happen to the provinces? look at the police, the regional police for the ARMM is LGUs will still have their powers. It is also a question of already in the ARMM law but efficiency, as an additional tier it has never been implemented of government will be added. because of the resistance of In the US, it is passed from the national police saying that federal states, then counties. according to the Constitution, The problem with the LGUs there is only one national police. Thus, the Constitution in the Philippines is that these are very small. Because is really the problem. It is an obstacle to the when you need to appease a political family, you create implementation of the peace agreements. No President has LGUs. actually admitted this except Delineation of powers this current President. between federal states and I will talk about the LGUs is as critical as centralstate relations. I leave to implemental approach because the other speakers the other this is important. When you aspects of the efficiency part. talk of constitutionality, are we talking of framework?

Are we looking at specific Autonomy and Federalism provisions? In the discussion to Address Identity and Sovereignty-Based Conflicts of BBL in the previous administration, the late Miriam In theory, if it is multi-level, Defensor-Santiago and Justice multi-cultural ethno linguistic Mendoza were talking about conflicts, federalism is the the unconstitutionality of the best political system. We have framework of the CAB and seen that in India, Pakistan, of the proposed BBL. Why? the ARMM or the Bangsamoro because we are configuring only the relationship between the regional government and the national government. The LGUs will remain to look up to the national Local Government Code and the Internal Revenue Allotment (IRA). The LGUs would never accept a structure where the IRA will be coursed through the Regional Government. They will not allow that because that is where their power lies. If you touch that, the LGUs will not support federalism.

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Because it calls for a substate. According to them, this is only applicable under a federal system of government.

So, do not look at the provisions, as the provisions will just flow from the framework. If the framework itself is unconstitutional, then the provisions are also unconstitutional. That is what is important. Most of us agree that it is within the parameters of the Constitution. It comes to a point that if you pass that, there are many diverse interpretations that are difficult to implement. The problem is on the workability of the law that you will pass and that in the end, you will leave the implementation to the bureaucrats. If your bureaucrats have a unitary mindset, there is no way you can implement this, based on our experience in the ARMM. The signing of the peace agreement is good but when it comes to the implementation, the ones that will be followed are the Assistant Secretaries and the Directors. They will just say it is unconstitutional, and therefore, cannot be implemented. The reason why you really have to entrench this in the Constitution is to change the mindset of the bureaucracy. You need to decentralize in a meaningful way. A Bangsamoro sub-state has no place in a unitary framework/constitution. No less than a federal system can accommodate the new political entity. Refine the BBL provisions. It can be done.

Actually, there is no need to shift to a federal form of government to accommodate the BBL, but you still need to amend the Constitution.

You can still have sub-state

belonging to the whole ARMM will now be part of the Bangsamoro. Those in the island provinces will definitely not accept that because that is clearly unconstitutional.

The Constitution talks about provinces and cities and the phrase geographical areas actually refer to the Cordillera and not to the Bangsamoro.

Moro Autonomy vs.

Autonomy of the Rest The point that I am making here is that we are in a complicated situation because features under the unitary have federalism and charter we know that we need to system as long as that is in the change, and a President change the charter and we Constitution. who is willing to spend his need to shift to federal but political capital or changing the problem now is that we In the President’s inaugural the constitution for Mindanao can only federalize if we peace. The problem is that it address, President Duterte federalize the whole country. is still a drawing. Federal and This means that you will said he is committed to charter change are still both also have to listen to the implement all the peace drawings. That is the reason majority of the Filipinos in the agreements – between the why the MILF’s position is BBL crafting of the Bangsamoro MILF and MNLF, in step first, before federal. Congress region or federal state. That with legal and constitutional says BBL first, but you cannot is what our Moro brothers reforms. So what does the implement the proposal and sisters are aiming at. If President say? Yes, let us without charter change. Of you subject it to the National implement it but I believe course, Congress will pass Federalism Movement, the that you cannot implement the BBL but it will not be the peace agreements might it without charter change, BBL that you are proposing. be drowned. You have to which means that until the There will be changes. This is negotiate now with the other charter is amended, you not what you have submitted. regions. Do you think the cannot fully implement the This is the problem now of other regions would let go peace agreements. This the list of priority bills of of some of their resources is problematic now. The LEDAC, wherein the BBL is and some of their taxes to be MILF’s position is that not included. Thus, the leader given to the Bangsamoro? Of when they signed this of the MILF complained. The course not. There is also that agreement with the Aquino President says a BBL that argument that it is better to administration, they know is constitutional. He is not negotiate with one national that the peace agreement endorsing what has been government than negotiate can be implemented without submitted because there are with all the other regions. the charter change. We still many problems. Based You look at the proposals cannot blame them because on our studies under this new now. Bangsamoro is definitely it is their comfort level. The Aquino administration’s proposal, ARMM should be a state government, one position is that you do not regarded as a geographical federal state. The problem is need to change the charter unit and not by province. If it is symmetric. This means to implement this agreement. majority of the inhabitants that they do not recognize But now here comes this new of the whole ARMM say its distinctiveness, history political context, where you yes to BBL, those provinces and they do not recognize 3rd Mindanao Policy Forum |

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that there have already been agreements signed on this.

You have to be careful also by saying that federalism is the solution. If it is not the right kind of federalism, if it is symmetric federalism that does not recognize the uniqueness and distinctiveness of the peace agreements and all that have been done, then it will only have powers like all the regional states and that would be very risky.

Figure 2. Implementing Peace Agreements

The assertion of the Bangsamoro is different. It is sovereignty-based. The assertion of other states is equitable distribution. These are totally different assertions.

Thus, asymmetric federalism is needed. This is what many people cannot understand, even revolutionary groups.

When you have a signed agreement and you translate it to public policy, the arena changes. It is not the same as two-party negotiations. This will now be interest-based and multi-party public arena. You have to look at the workability, capacity, resources and constitutionality. The problem with the implementation of the peace agreements in the past administrations is we depended on leaders, specific persons especially on President Benigno Simeon "Noynoy" Aquino III. Why is it that the roadmap is only for six years? If President Aquino leaves, it should be finished.

That cannot be because if you do political reforms, peace agreement is essentially a political reform that will take a long time. Revolutionary groups want to immediately be in power, so they go for the short term, but it is unrealistic.

In terms of involving effective, efficient and relevant government interventions, the LGUs are the keys to this. The LGUs matter in the delivery of services, whether addressing violent extremism or not. Unless you change and reform the political economy, then nothing is going to change. You will just place expectations on people.

You need to change leaders.

Structures would remain to be the same. If there would be more money, this just means more money going to the pockets of the people. That is the only thing that will change.

Policy and implementation part have to be really thought of well. So, there is really a need to expand the discourse on this and look at workability, capacity resources and constitutionality.

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will be accepted or not. If the Bangsamoro advocates said that they will accept this but it is all watered down, then they cannot explain to their own people also, especially to the young people. There is the restlessness of the people on the ground and the lack of trust in the institutions and in the processes. Violent extremism can really take root under this political context.

What you really need is a series of legislations and eventually, the charter change amendment and good transitional mechanisms and processes. Why do we need these now? It is because the political context under which the peace agreements are to be implemented has changed.

What is the change? The change is that there is an opportunity for charter change Incremental Approach and/or federalism which was not there and not present There has to be an incremental when they were negotiating all approach to this. The problem these peace agreements. Do with the legislation of BBL is you put wine in an old wine that it is zero-sum, one-time spill? It will burst. You want big time or winner take all. to put new wine in a new wine Advising the revolutionary spill. The problem is that there groups and the government has been political interest that is difficult. In the end, you has been entrenched already want the Congress to pass this in the past processes. If you but you have to check if this talk about political reforms

Discussion on Gains and Pitfalls of Decentralization Atty. Naguib Sinarimbo Co-Convenor, Bangsamoro Study Group

I

will start off with the ARMM and the ban for self-determination of the Bangsamoro so that our conversation will have a context. The first thing that I want to share is that President Duterte mentioned on the shift from unitary system to federal system as part of his proposition to resolve the Bangsamoro question. And precisely, the Bangsamoro question, which translated into legal terms, is the issue on sovereignty. This means that the issue of the Moro is the denial of the right to determine their future. They have their reasons why they need their right to selfdetermination. The story is that the sovereignty was lost when the Spaniards sold the Philippines to the Americans in 1898. Prior to 1898, the Moros – Sultanates of Sulu and Maguindanao were already full states – complete with territory, people, government, and sovereignty. The three are present as of now; you still have people, ARMM as a government, and territory that you can still define. What is lacking and what is not addressed as of the present by the current Constitution is the issue of sovereignty. the Autonomous Region in Muslim Mindanao has the authority to determine and issue permits in mining. In fact, the Regional Government has issued permits in mining in Tumbagaan, Languyan Island. What has been mined there is nickel. The organic law states the definition of strategic minerals and the What is the problem of sovereignty in a unitary set-up? division of power as to who will issue the permits. If it The problem of sovereignty is not strategic minerals, the in a unitary set-up is that the sovereignty is indivisible. You Regional Government can issue. If you look at R.A. 9054 cannot divide. The Congress in the enumeration of strategic cannot divide it with other minerals, nickel is not included, sub-national legislative assembly in the determination so the Regional Government and charter change, what is the nature of the constitution? of what law and policy to pass. issued permits. Unfortunately, For political scientists who are In partnership with the unitary there was a mining firm which was not able to obtain a permit there, one of the functions of concept of the government is the Constitution is to reconcile the indivisibility of sovereignty. from the Regional Government and so, they went to the If you go through the rulings and manage conflicting national government. The political interests. That is why of the Supreme Court national government issued a if you shift to a federal system relating to the indivisibility of policy stating that nickel is now or change the charter, this will sovereignty, the sovereignty actually just entrench partisan is really indivisible in a unitary a strategic mineral. Therefore, Constitution in the Philippines. the Regional Government political interests. Political This has become our problem, cannot issue permits, only interests per se are not bad not only in Mindanao but also the national government can but partisan political interest issue. This is now what we to the sub-national legislative will not resolve the problems call conflict in the exercise of assembly. Case in point, of this country.

For better understanding, there are two types of sovereignty.

Internal sovereignty, uncontrollable and right that focuses on authority to determine their choices, and external sovereignty. This is the case of our Constitution that is being lodged in Congress. So whatever policy, whatever law that Congress decides to enact, it can do so.

Nobody can restrict it. That is the expression of internal sovereignty. Externally, you can observe sovereignty if a country can freely have a

relationship with another country. If you are outside of the Philippines and you look at the Philippines being able to relate to any country, through its diplomatic relations, it means that it exercises sovereignty which is external and we call it independence.

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beginning with Limbona vs.

Mangelin vs. Dilangalen, or the latest one, 1153, the Synchronization Law of ARMM. The Supreme Court consistently said that the given power is a delegation. Hence, it can be taken, amended or superseded. So, even if I miss 1,001 powers to a subnational legislative assembly, if I still hold the indivisible sovereignty, I can still take it back. The given powers are useless because you can take it back. Thus, if Congress does not agree with your policy in the case of mining permits or education policy, they can always pass a national law superseding the law If the problem is the translation that you pass. That is where the problem really is. You of the Bangsamoro question cannot solve the Bangsamoro on the loss of sovereignty of question without addressing the Bangsamoros, how do the real question. What is the you resolve it? Can we not Bangsamoro question? It is a return sovereignty? We have already tried the past Regional question of loss sovereignty.

Government and their power sharing. You look at Article 10, What is the only proposition Section 20 of the Constitution, that is feasible without breaking up the Republic? that is where the heart of the The only proposition sound problem is. That is the grant enough to address the issue of of power to the Regional sovereignty is FEDERALISM. Government. Article 10, Section 20 states that “within You still maintain the whole Philippines but the sovereignty its territorial jurisdiction and subject to the provisions of this is divided and not only one Constitution and national laws, national power exercises the organic act of autonomous national sovereignty. It allows some powers, not only regions shall provide for delegated but delineated legislative powers over: (1) through a constitutional administrative organization, instrument which is federal (2) creation of sources of revenues, and (3) enumeration constitution. Federalism is a covenant and therefore, of nine items of the powers. neither of the two can amend Apparently, there are powers or change the covenant. You for the national government and the Regional Government. will have to agree on changing Is it a delineation of power or a it. This is why in our own thinking, if you look at the mere delegation of power? agreements signed by the MILF As you read through the cases and the government, there is an Annex on Power Sharing ruled by the Supreme Court, sovereignty. Can we resolve it within the unitary system of government? It can happen not only in ARMM but also in other Local Government Units as well. The division of powers is not a real power-sharing in a unitary set-up but a delegation.

In law, what has been delegated can actually be taken back, superseded, set aside, or amended because the ultimate holder of power is one national government. This is the concept of the Constitution.

You cannot go beyond the Constitution because we have constitutionalism. Otherwise, your acts or policies will be declared unconstitutional.

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practically on the powers of the central government, reserved Bangsamoro exclusive and shared powers called concurrent. Now it has been divided.

If you look at the drawing presented earlier, it is very illustrative. It shows what federalist and state list is.

They are not converging but separate. There is no taking of powers. If I give you the power to grant mining permits for specific resources, I will not take that. I will not issue a mining permit for the same mining resources that I have already allowed. If I do that, the people will go to the arbiter, which is the constitutional court, which practically rules on the determination of whether you have exceeded in the exercise of powers. That is what is needed. As of today, it has not been realized yet because the national will still get the powers given to you and yet, you cannot question it because the national is still the ultimate determinant.

We think that the perfection of the peace agreement only happens when you shift to a federal system that now squarely addresses the question of sovereignty.

Therefore, it addresses the Bangsamoro question. This is true to those regions that also aspire for a legitimate self-determination agenda.

That is the ultimate aim of the people. You have a historical experience for Bangsamoro but it can also be true to other regions here in the country.

That is the debate about the unitary moving toward a federal set-up in the country.

Why the need for Federalism?

Dr. Robert Panaguiton Professor, Ateneo de Zamboanga University (AdZU)

Many people say that the Philippine Constitution is a beautiful constitution and almost the best. There were lots of additions that were responsive. For example, if there is a clamor for local governance and decentralization, there is the Local Government Code (LGC).

If we ask for autonomy (i.e.

ARMM and Cordillera), there is the Indigenous People’s Rights Act (IPRA) for the cultural sector.

There were also lots of mismanagement and corruption. When President Duterte came, there were lots of changes in ARMM. In Zamboanga, there were lots of movements on the ground like the Certificate of Ancestral Domain Title (CADT) applications. There was a decrease in corruption and illegal drugs nationwide. The Philippines is using the same form of government, with little improvement and less good results. This is the same form of government. The difference is the one managing the government.

Why the need for Federalism?

The Local Government Code comes from Congress but it is lacking. The ARMM centers on unitary and constitutional

barriers. I believe there is a good promise in Federalism.

The people are tired of promises. Many people give their trust to President Duterte. He promises lots of things. There is a need to look at the people who will manage the new form of government. If we put the same people, it will yield the same result. There is so much to corrupt within its own area of coverage. Federalism is a good promise. Further, there is a need to reform leaders and bureaucrats. It is more difficult to change the mindset of the people, the way the people decide and implement the laws. The problem lies on how to change the mindset of the people and have the discipline that we need.

to have discipline, eliminate corruption and change the way we to look at the form of government. In this move towards Federalism, it is also a shift for reform on the kind of people that we have.

We need to have discipline first before we change to Federalism. Who will discipline us? The structure can help in disciplining the people. If we implement a very strict rule, somehow it can discipline the people. Many have worked around the law. We do not repeat the same structure and the same promises. We need an iron hand on Federalism.

With the kind of people that we have right now, are we ready for Federalism? We need

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SESSION 2

Relevance of Fiscal Federalism to Philippine Development Issues and Challenges Romulo Emmanuel M. Miral, Miral, Jr, Jr.,Ph.D Ph.D. Director General, Congressional Policy and Budget Research Department (CPBRD)

T

he Philippines’ anemic progress in eradicating poverty characterized by weak economic growth and highly unequal economic opportunities can be traced to the highly centralized political and economic governance of the country. The term “Imperial Manila” pejoratively refers to the concentration of economic and political powers in the central government located in the nation’s capital and the consequent lopsided economic development that favors Metro Manila and its surrounding regions. Federalism and its prospects of even sharing of power and resources between the central and local governments and more balanced regional development was part of the campaign of President Rodrigo Duterte. It may have struck a chord with many Filipinos, especially those who have been left out by the narrow and concentrated distribution of economic and political benefits.

De Dios (2008) provided empirical evidence on the negative impact of political

the executive and the central government undermines the government’s capacity to efficiently and effectively provide public goods, such as infrastructure, education, and health services that are essential for broad-based and inclusive economic growth. The taxes collected from taxpayers nationwide, including proceeds from government borrowings, are pooled to finance the provision The disproportionately huge of government services share of the powers of the through the national budget.

Office of the President, Thus, the national budget is powers which can be used to like a common pool resource secure economic rents and accumulate wealth, makes the with its attendant problem that is more popularly known in the Office a highly coveted prize economics literature as the among the country’s elite. In the absence of effective checks “tragedy of the commons”. and balances, these powers can be easily abused, ushering As a common pool resource, in corruption. When corruption the national budget and reaches intolerable limits and other national government the ruling elite shows signs of resources are available for the perpetuating itself in power, use of government agencies political conflicts and instability from the national to the emerge. barangay levels. They can be used to finance goods and Aside from being linked services that are national in to political instability and scope, such as defense and corruption, the concentration foreign relations. But most of powers and resources in of the services funded by instability and corruption on Philippine economic performance1, which, he pointed out, are closely linked to the concentration of power and resources in the executive, particularly in the President.

He notes that the power of the Philippine President over fiscal resources and appointments in the bureaucracy are greater than his American counterpart.

1Political instability and corruption disturb the conduct of economic activities; threaten systems of ownership, production, and distribution, increase risk resulting in lower investments. By comparing foreign direct investment (FDI) shares between the Philippines and other ASEAN economies, De Dios (2008) estimated that up to 20 percent of the Philippines’ variation in relative shares in FDI for the period 1985 to 2006 can be explained by differences in political stability. This figure rises to 50 percent for the period immediately after the Plaza-Louvre Accords. Perceived corruption on the other hand, can explain 25 to 50 percent of the variation in the investment-to-GDP ratio in the Philippines for the period 1985 to 2006.

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the national government have localized benefits. For example, the full benefits from huge physical expenditure items, such as school buildings, roads, bridges, irrigations, and hospitals are obviously confined to the area where they are located.

Since local residents only pay partially for the cost of these goods and services (as the projects are funded from taxes collected nationwide), they would be interested in getting as many local projects from the national budget as possible. However, the national budget is also finite, and channeling parts of it to particular sectors/localities/ groups necessarily lessens what is available to the rest.

they would have to establish and maintain favorable relationships with the powerful central government.

This practice is familiarly known as the patronage system.

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In the Philippines, the patronage system permeates all levels of government, from the barangay to the national government. Local leaders need the support of national leaders who control the vast resources of government.

National leaders need the support of local leaders who have direct influence over local voters. This mutual need feeds the bargaining process that chiefly characterizes national-local government relations.

to reckon accountability after the point of exchange of votes for patronage, convinced that they have delivered their part of the bargain. By sidetracking accountability, clientilistic patronage shifts the focus of government officials from ensuring the soundness and responsiveness of policies and programs to maximizing personal benefits from government resources.

Over time, the formulation and implementation of policies and programs that can truly promote economic development and reduce poverty are systematically neglected.

Finally, centralized powers over resources are manifested in the sectoral versus spatial On the financing side, it is orientation of government also the interest of each As Hutchcroft (2014) planning and budgeting. sector or group to minimize pointed out, the patronage The Philippine Development its share of the tax burden. system in the Philippines is Plan is organized by sector, Indeed, a major reason for the highly clientilistic. It is made and the national budget is Philippines’ weak tax effort operational by exceedingly structured along sectoral relative to its peers is the personal and reciprocity-based departments. The Philippine numerous tax exemptions relationships among national Development Report (2013) given to various groups (e.g. leaders, local leaders, and pointed out that instead of senior citizens, persons with the electorate. Votes can be an integrated structure that disabilities, boy scouts and girl directly exchanged for fund factors in demand based on scouts, cooperatives, power allocations, as in the case of local geography, the national sector, shipping sector). The the pork barrel system. The government is, instead, Philippines’ value added tax same exercise is carried out organized in “vertical silos” by system, for instance, has at the level of the electorate. sector or agency and, within the highest number of line Voters do not necessarily each agency, by program. exemptions at 143 compared choose leaders or policies Failing to address the impact to Indonesia’s 37, Thailand’s and programs on the bases of geography to human 35, Vietnam’s 25, and of ideology and soundness. development by defending Malaysia’s 14 (Department of Instead, votes are cast the sector-oriented planning Finance 2017). based on the distribution of and budgeting system has patronage. curtailed human capabilities, The power to control this delimited living standards, and common pool resource is The exchange of votes for prevented market expansion. at the hands of a highly short-term financial assistance centralized government. For or dole-outs does not only Decentralization efforts in the the various groups or sectors dissipate and misallocate Philippines to maximize their shares of public resources; it also the national budget and/or weakens the accountability The 1987 Philippine minimize their tax burden, of public officials. They cease Constitution espouses local

Figure 2. Implementing Peace Agreements autonomy as a means to promote more responsive and accountable governance.

Pursuant to the Constitution, the Local Government Code of 1991 was enacted. The Code devolved certain basic services and regulatory functions to local governments. The Code also vested them with additional taxing powers and gave them higher shares in the internal tax revenues of the national government. Also pursuant to the Constitution, regional development councils (RDCs) were established to facilitate administrative decentralization, reinforce autonomy, and promote economic growth and social development in the regions.

Finally, the Autonomous Region of Muslim Mindanao (ARMM) was established in 1989. The organic act establishing the ARMM defines its government structure, powers, responsibilities, and functions.

A common weakness of government decentralization reforms from administrative decentralization to the creation of ARMM and devolution under the Local Government Code is the failure to commensurately

decentralize control over public finances and/or revenue raising powers to the subnational levels. Planning and administration were decentralized to the regions, but budgeting decisions remained largely with the central offices of national government agencies. The RDC is supposed to serve as the primary institution for planning and coordinating all economic and social development efforts in the region, but it cannot lay claim to a regional budget.

be subjected to the budgeting process of the national government. The internal revenue allotment (IRA) of local governments is formulabased and automatically released. However, to the extent that local governments are assigned greater expenditure functions relative to their taxing powers, and are heavily dependent on national government transfers, which are widely perceived to be inadequate, local governments are also in the same predicament as ARMM. Local autonomy is stymied by the ARMM, as its name indicates, limited amount of resources is supposed to have a regional under local government government with a degree of control. Moreover, when the autonomy to effectively chart national government directly the development of the region provides services already on the basis of its unique devolved to local governments culture and history. However, according to the former’s due to inadequate revenue own priorities then provides raising powers and financial assistance or transfers to local resources, ARMM has been governments based on its relegated to an administrative own discretion, it is effectively agency of the national exercising control over local government that submits to governments. the annual budgeting process of the national government.

To promote efficiency and accountability, there should Local governments are be direct correspondence considered more autonomous between the benefits and than ARMM because they costs of public spending. The have separate budgeting locality that benefits should systems that do not have to ably raise revenues and pay 3rd Mindanao Policy Forum |

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concurrently assigned to different government levels.

It is critical, however, that the assignment of functions and responsibilities is clear and stable.

other government levels on the basis of a predetermined allocation formula. Clearly, the proper assignment of taxes to the different government levels is one way of addressing the common pool resource problem.

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that aim to minimize or make tolerable the disparities in fiscal capacities of subnational governments. The objective of an equalization transfer system is not to provide uniform services or to even The devolved powers produce economic growth but to ARMM and the local to ensure that all individuals, governments, as provided Own-source revenues are regardless of their place in the Organic Act and the better means of financing of residence, are entitled Local Government Code, subnational government to prescribed standards of are generally attuned to services than national government service. Economic the principles and design of government transfers. If growth cannot be expected federalism. However, unlike subnational governments to be even across space the structure of federations, are dependent on taxes that but it does not preclude ARMM and local governments they collect from their own geographic convergence in the Philippines are not jurisdictions, they have a of living standards (Human provided with revenue direct stake in its development Development Network, 2013). powers sufficient to consider and the prosperity of them truly autonomous. For their constituents. They Many problems of the highly example, the major taxes, are thus more likely to be centralized government such as personal income tax, responsive to their respective system in the Philippines can corporate income tax, excise locality’s real needs and be addressed through proper tax, value-added tax, and act with accountability. At devolution of expenditure customs duties, are assigned the same time, resident functions and taxing to the national government taxpayers/voters are likely powers and concomitant leaving the local governments to be more vigilant about intergovernmental transfers. with only the minor taxes. how their taxes are spent However, there are certain by their governments. structural and institutional A major feature of tax Indeed, this is the essence challenges, which can be assignment in federations is of decentralization - to better addressed by a shift to the practice of joint taxation, bring decision-making and a federal form of government. tax sharing, and general accountability down to the revenue sharing that allow subnational levels.

The Philippines has the the different government highest number and the levels to enjoy some degree However, as incomes of smallest sizes of first-tier of autonomy. Under joint subnational governments subnational government in taxation, the power to increasingly come from East Asia. Decentralization impose a particular type of own-source revenues, there of expenditure functions tax is granted to more than is a strong possibility that and revenue raising powers one level of government. the disparity in the fiscal to reduce the size of the To avoid overutilization of capacities among them common resource pool is a particular tax base, the will be more pronounced constrained by the size and different government levels given differences in initial administrative and technical are given limits on the tax capacities, endowments, and capacities of the first-tier rates that they can impose. other conditions. The more subnational governments.

In tax sharing and revenue developed ones will be able The provinces and cities, sharing, the power to tax is to generate more revenue which are currently the firstexclusively assigned to one for the same tax rates, and tier subnational governments government level, usually provide better economic and in the Philippines, are too the national government. social services. To address this, small to absorb many of the The taxing government then federations have established expenditure functions and shares the tax proceeds with equalization transfer systems revenue raising powers of the

national government. Thus, the proposal for a federal form of government, which provides for the creation of bigger subnational government, such as a regional government, makes sense. More national government expenditure functions and revenue raising powers can be assigned to regional governments, thereby breaking up and reducing the

size of the common resource pool. At the regional level, the size of the common resource pool as well as the number of claimants will be smaller, rendering the incidence of costs of and benefits from government spending more visible and thus promoting greater vigilance and accountability.

SELECTED REFERENCES Acemoglu, Daron, and James A Robinson. 2012. Why Nations

http://www.hdn.org.ph/20122013-philippine-human-

Fail: The Origins of Power, Prosperity and Poverty. New York:

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Hutchcroft, P. D. 2014a. “Dreams of Redemption: Localist Strategies of Political Reform in the Philippines,” in Susan H.

Australia DFAT; World Bank. 2015. Making Education

Williams, ed., Social Difference and Constitutionalism in Pan-

Spending Count for the Children of Autonomous Muslim

Asia (New York: Cambridge University Press, 2014).

Region of Mindanao : Public Expenditure and Institutional Review for ARMM Basic Education. World Bank, Washington,

Mele, D., 2004. "The principle of subsidiarity in organizations.

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A case study," IESE Research Papers D/566, IESE Business

handle/10986/22397 License: CC BY 3.0 IGO.

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Balisacan, A. M., H. Hill and S. F. Piza. 2006. An Overview: The Philippines and Regional Development. Tokyo: Asian

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Development Bank Institute. https://www.adb.org/sites/

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default/files/publication/159365/adbi-dynamic-regional-dev. pdf

Olson, M., 1969. ‘The Principle of Fiscal Equivalence: The Division of Responsibilities Among Different Levels of

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Government’, American Economic Review Proceedings, 49:479-

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Fiscal Design and Subnational Governance: Autonomy and Equity Considerations Dr. Rosario G. Manasan Senior Research Fellow, PIDS

Regions CO++ NCR CAR RI II III IVA IVB V VI VII VIII IX X XI XII XIII

DA PhP M % distn 4,528 16.4 1,114 2,023 2,195 2,243 1,754 1,311 1,440 1,543 1,164 1,337 1,230 1,441 1,426 1,773 1,064

4.0 7.3 8.0 8.1 6.4 4.8 5.2 5.6 4.2 4.8 4.5 5.2 5.2 6.4 3.9

BFAR PhP M % distn 2964.4 53.9 0.0 34.8 0.6 152.3 2.8 148.3 2.7 174.3 3.2 170.9 3.1 189.4 3.4 218.9 4.0 191.4 3.5 294.5 5.4 250.8 4.6 160.0 2.9 127.1 2.3 130.3 2.4 122.8 2.2 166.8 3.0

DENR PhP M % distn 2,379 19.9 54 0.5 546 4.6 302 2.5 501 4.2 550 4.6 864 7.2 731 6.1 521 4.4 521 4.4 586 4.9 631 5.3 895 7.5 694 5.8 484 4.1 949 7.9 728 6.1

Phil 27,588 100.0 5,497 100.0 11,934 100.0 a/ refers only to "various local infrastructure" and "local infrastructure"

DPWH a/ PhP M % distn 15,911 18.9 18,105 21.5 746 0.9 2,205 2.6 1,762 2.1 4,610 5.5 5,752 6.8 1,469 1.7 2,711 3.2 2,359 2.8 3,817 4.5 3,886 4.6 7,300 8.7 4,032 4.8 4,029 4.8 3,485 4.1 2,003 2.4 84,183

100.0

DTI PhP M % distn 261 13.9 6 0.3 81 4.3 90 4.8 106 5.7 140 7.5 160 8.6 86 4.6 135 7.2 92 4.9 90 4.8 101 5.4 71 3.8 93 4.9 99 5.3 123 6.6 141 7.5 1,876

100.0

DSWD PhP M % distn 5,843 47.7 748 6.1 197 1.6 355 2.9 274 2.2 514 4.2 560 4.6 294 2.4 417 3.4 523 4.3 451 3.7 366 3.0 428 3.5 423 3.4 347 2.8 284 2.3 235 1.9 12,259

100.0

DILG PhP M % distn 969 9.0 156 1.4 640 5.9 444 4.1 317 2.9 383 3.5 469 4.3 557 5.2 1,142 10.6 829 7.7 706 6.5 1,159 10.7 539 5.0 662 6.1 680 6.3 364 3.4 794 7.3 10,811

100.0

PNP PhP M % distn 70,948 94.8 779 1.0 141 0.2 179 0.2 152 0.2 291 0.4 283 0.4 121 0.2 216 0.3 287 0.4 245 0.3 185 0.2 181 0.2 178 0.2 176 0.2 163 0.2 134 0.2 74,841

100.0

DOH PhP M % distn 17,176 17.0 3,169 3.1 2,609 2.6 5,576 5.5 3,745 3.7 7,463 7.4 7,441 7.4 4,062 4.0 6,717 6.6 7,623 7.5 7,440 7.4 5,121 5.1 5,291 5.2 5,405 5.3 5,011 5.0 4,140 4.1 3,121 3.1 101,109

100.0

DepED PhP M % distn 20,483 5.5 30,835 8.3 7,787 2.1 20,893 5.6 13,207 3.5 31,326 8.4 39,600 10.6 20,040 5.4 24,425 6.5 30,375 8.1 28,525 7.6 23,808 6.4 17,839 4.8 16,942 4.5 16,471 4.4 17,122 4.6 13,521 3.6 373,200

100.0

TableTable 1. Budget of Various 1. Budget of VariousDepartments Departments

F

ederalism is a hot topic.

It is one of the promises of the president during the campaign. There is support from the super majority of the house and PDP Laban.

But over time, the Federalism discourse is often framed as the countryside’s revolt against imperial Manila. Short way of saying, government is too centralized despite decentralization under the Local Government Code.

Another aspect of the narrative relates to the persistent disparity of income across regions. Take a look at the different departments, and how much the share is of the central office (Table 1).

A big portion of the General Appropriations Act budget is allocated to the Central Offices of various departments. This

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23

does not necessarily mean that the budget is being spent in the National Capital Region, where the Central Offices are physically located. What it shows is that it is upon Central Office’s discretion where to give the money. Table 2 would show you how persistently Metro Manila, followed by the three regions – NCR, Region IVA, and Region III, has the highest Per Capita Income.

A more nuanced look at this would indicate that there is, in fact, some improvement in the sense that while Metro Manila continues to have the highest Per Capita Income, the other regions are starting to catch-up; with the exception of those in red, or the Regions III, XII, and ARMM. These are the regions that have yet to catchup. In fact, the disparity of other regions’ income relative to NCR has narrowed over time since the implementation of the Local Government Code.

As I was about to say earlier, over time there have been more critical perspectives about federalism. The University of the Philippine School of Economics said in a forum, “If federalism is the answer, what is the question?”

A governor who I shall not name said, “Autonomy is of primary importance, federalism is just secondary.”

“Imperial Manila vs dynastic countryside”, is a quote coming from the Ateneo de Manila University School of government. Then there are questions: Is federalism poverty reducing or poverty inducing? Will it really alleviate poverty? What is the budgetary cost of the shift to federalism? These are the questions we are trying to answer. We will not be able to provide all the answers but we will try.

If federalism is the answer, what is the question? Basically that points to what do we really want to happen? What are the development goals?

Development goals are these: to have better service delivery, a more accountable government, and equity in

development. That’s what PDP Laban says. Economic literature supports that there are potential benefits that can be secured by adopting a federal form of government:

“public services-tax package” they prefer, thus, dampening rent-seeking tendency of local politicians.

3) Federal system enhances local accountability to the extent that lower level 1) Increased efficiency, governments have some resulting to increased degree of revenue autonomy societal welfare to the extent (i.e., if they raise a significant that federal system brings amount of revenues from local government closer to the people, thereby allowing lower taxes and user charges). Also, it level governments to respond provides greater accountability to local needs and preferences by allowing people to choose the government that they like. of their constituents. The If a particular state government jurisdiction of the level of taxes unreasonably or provides government paying for the poor services, people can delivery of a given public choose to transfer to another service coincides with the state. Migrate, in other words. geographic area where benefits of said public service 4) Federal system is key to are confined. Otherwise, government will tend to under- addressing ethno-cultural conflict as it accommodates provide services which have regional diversity –religious, positive benefit spillovers to linguistic, ethnic, or cultural other jurisdictions.

2) Increased efficiency and welfare also results to the extent that Federal system promotes interjurisdictional competition assuming that the population have the ability to “vote with their feet” to get the Regions NCR CAR RI II III IVA IVB V VI VII VIII IX X XI XII XIII ARMM

1985 11,575 6,880 6,005 5,582 7,642 6,900 5,059 4,210 5,132 4,332 3,719 4,653 5,266 5,700 4,966 4,518

1994 37,070 15,457 14,233 15,296 18,481 21,875 13,076 11,227 13,418 12,254 10,740 10,401 12,254 14,713 12,802 11,122 9,661

1997 61,211 25,544 23,019 19,846 28,119 32,651 19,216 16,591 19,411 19,549 15,650 18,623 20,030 20,239 18,072 15,880 14,611

2003 65,625 36,240 29,925 31,008 37,590 44,876 26,625 26,071 27,273 28,341 24,220 20,792 26,173 27,492 26,612 20,672 17,722

2006 81,336 46,788 34,658 35,414 46,296 50,393 27,421 30,450 31,815 33,601 30,108 27,687 32,905 32,676 27,239 27,088 18,106

2009 91,792 55,167 46,530 47,123 53,227 61,555 35,452 35,763 40,450 43,902 38,765 34,947 39,405 41,188 37,454 34,383 23,996

2012 96,891 66,453 53,736 49,953 62,348 71,952 46,583 39,536 52,811 49,061 40,713 39,390 45,757 48,840 40,154 43,513 25,244

Phil

6,294

17,564

27,303

35,597

42,372

51,489

58,583

Coefficient of variation

0.327

0.433

0.478

0.368

0.393

0.337

0.315

Table 2. Per Capita Household Income, in current prices (in php)

Table 2. Per Capita Household Income, in current prices (in php) 3rd Mindanao Policy Forum |

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more centralized than Canada, which is also federal. Malaysia which is federal is in fact more centralized than Philippines, which is unitary. With regard to the fourth potential benefit, the adoption of the federal form of government does not necessarily prevent the break-up of conflict-ridden states. One example that is always cited in the literature

is the old Pakistan breaking up to the present Pakistan and Bangladesh. But this we simply cannot say will happen to us. Those are not exactly technical.

et me reiterate that in the Federal form, delegation of powers is written in the constitution. In a multitiered Unitarian, the system that we have now, powers are delegated. Precisely because division of powers and resources between federal government and state government is written in the Constitution, it is extremely important that the design of the federal form of government should be subject to careful study. Otherwise, bad design gets enshrined in the Constitution, making it more difficult to correct a mistake. The point is, “the

devil is in the details.� It is not enough that we express our intent to shift to a federal form of government; we should also be able to distinguish its form.

and State Governments face the right incentives for an efficient and equitable delivery of public services. At the end of the day, what we want is that we are able to enjoy essential services from the government.

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Now if you look at those four potential gains, the first three are largely a function of decentralization. You can get that with or without federalism as long as you decentralize very strongly.

One way of looking at that is that countries with federal form are not necessarily decentralized in the same way.

Germany, which is federal, is

L

If the objective is to promote subnational autonomy and promote the potential benefits from more decentralized governance, the principles that guide the design of fiscal aspects of the federal form of government, which I will articulate later, are just as relevant for the design of a more decentralized unitary form of government. The aim of those principles is to ensure that the Federal Government

The distinction between multitiered unitary & federal form of government are as follows:

Let me now go to the direction of the reform.

First, I argue that the design should be informed by lessons learned from the Philippine decentralization experience.

What are the deficiencies of the fiscal decentralization framework under the Local Government Code? In terms

of expenditure assignment, lack of clarity, broadly defined concurrent powers, too broad definition of devolved powers, and overlapping, and at times, unclear assignment of functions. For example under the Local Government Code, agriculture is devolved. The Department of Agriculture (DA) has its own program that it implements on the ground.

We would often hear people feedback about how the program runs contradictory to their actual need. Introducing the concept of shared powers might address this issue. Another deficiency is “unfunded mandates”, and what is the result of that?

Relevant services are either not delivered at all or not delivered in sufficient quantities.

too much reliance on block grants to achieve different grand objectives. Let’s consider other modes as there could be better design involving transfers.

The four pillars of reforming the fiscal decentralization framework are as follows: 1. Expenditure Assignment 2. Tax Assignment 3. Intergovernmental Transfers 4. Subnational Credit Finance

Exclusive powers of State Governments: 1. Supervision of LGUs 2. Police 3. Fire protection 4. Early childhood education 5. Water supply, sanitation and sewerage 6. Waste management 7. Road traffic management 8. Parks

Shared powers of FG and SG: 1. Regional planning, land use management It’s not so much as to which 2. Law and order (provision of powers will be shuffled but prosecution services) the consistency of items 3. Basic education, higher and one to three. When we talk TVET education about would be powers of the 4. Health subnational government, we 5. Labor and employment need to ensure that in terms 6. Social welfare and social of tax assignment and in terms assistance of transfers, the subnational 7. Agriculture, fisheries and governments will have aquatic resources In terms of tax assignment, we enough resources to fund the 8. Industry expenditure responsibilities have a low level of revenue 9. Tourism given to them. Credit finance autonomy, particularly for 10. Road infrastructure is important for macro-fiscal provinces. There is little fiscal (with national primary roads stability. space given by the Local exclusively assigned to FG) Government Code with regard 11. ENR management to local government’s power to Here’s the suggested design, 12. Energy and mind you, this is at the levy tax.

13. Science and technology minimum exclusive powers.

In terms of intergovernmental What do we mean by shared transfers, there is vertical Exclusive powers of Federal powers? With respect fiscal imbalance. Funds Government: to shared powers it is downloaded to local 1. National defense important to articulate in governments as provided by 2. Foreign affairs the constitution/legislation the Local Government Code 3. Immigration principles that should guide are sufficient in the rolling out 4.International trade the sharing of powers. This of their mandated roles and 5. Interstate commerce should not be construed responsibilities. Inadequate 6. Agrarian reform as concurrent power. I equalization is another issue. see concurrent power as There are LGUs that get too I put agrarian reform there confusing; it will result to many transfers relative to what on the list of exclusive overlapping functions in they need. Meanwhile, others powers of the federal the end. What you want is don’t even have enough. government because the something believable. For Case in point, Metro Manila function is redistributive example, education. Which has a large tax base given in nature. Redistribution of among the roles belong to the number of corporations land is beyond the power of the national government? The located there. And yet they’re individual state governments. crafting of the curriculum, still receiving Internal Revenue determining school calendar, Allocation (IRA). There is also etc. Which among the roles 3rd Mindanao Policy Forum |

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belong to the subnational government? Actual delivery of the service. Take the case of road infrastructure. Which among the roles belong to the national government?

Everything that is related to policy standard setting, the construction and maintenance of the primary road - the road backbone; the road network backbone that transfer north to south. But the secondary roads, secondary national and tertiary national, these can be delegated to the state including provincial roads. Those kinds of schemes should be clear in a federal form of government.

Otherwise if we say that it is shared and concurrent, there will definitely be overlapping of mandates.

Expenditure assignment.

I have made preliminary estimates. We reviewed the budgets of various government agencies and we took the liberty of delineating the scope of beneficiaries of their respective programs, whether these benefitted only local constituents, or whether these are national in scope. This is what we found out: 54% of total national government (NG) budget net of debt service or 8.5% of GDP would still belong to the federal. State governments (SGs) will get 45% of the national budget net of debt service or 7.2% of GDP. These are tentative estimates, based on 2016 GAA. Tax assignment.

What is very important in tax assignment is that autonomy is not relegated, meaning, state local governments are able to raise a significant amount of revenue on their own so they do not

become dependent on IRA. Therefore, it is crucial that we thoroughly study which taxes the state government can levy. One of the proposals is residence-based surtax on personal income tax. Status quo, each one of us pays personal income tax to the national government. We will allow LGUs or the state governments the power to impose say 1% of taxable personal income of residents.

We estimate that this will give you about Php 19B. We will transfer the power to impose the motor vehicle user charge to the state governments. Once the VRA (Valuation Reformation Act) is implemented, there will be additional increase in source of tax. What I’m saying is that we need to identify more ways for State Government to levy tax in order to ensure some degree of revenue autonomy.

If it’s business as usual, in the aggregate, around 80% of state government plus local government will still be dependent on transfers. I feel that’s not quite enough revenue autonomy.

I want you to take note, sometimes people have this misconception that if you allow more powers to levy tax, revenue increases. But it should be noted that NCR, Regions III and IVA will have the biggest takeaway.

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Why is that? These regions have the actual tax bases; consequently they will have the bigger revenues.

And what that means is that, going into the shift to federal form of government, equalization transfers are needed to support those

states that have least capacity to generate revenue from tax collection. Transfers should be proportionate to the size of tax bases to ensure that state governments and local governments are able to deliver what they’re supposed to be doing.

It should be a golden rule to limit use of state government borrowing to finance capital investments. There should be firm commitment, “no bailout.” If a local government goes bankrupt, the national should not bail-out. In addition, and learning from South American federal governments, policy and mechanisms to address bankruptcy should be crafted.

Cost of shifting to federal form of government.

We are adding another layer when we shift to a federal form of government, another layer entails additional overhead cost. Taking into consideration that each state government would require a governor, vice governor, their respective staff, and then the corresponding operational expense. Further, there will be additional senators; each state will also need a legislative body. If we follow the existing organic act, there will be 812 legislators elected by popular vote. If we follow former Senator Nene Pimentel’s proposal where three (3) legislators are elected by popular vote in each province/ city plus three (3) sectoral representatives in each province/ city, there will be 1,356 legislators. If we follow the Bangsamoro Basic Law (BBL) model, which proposes at least 10 legislators per legislative district (40% of whom are elected by

Proposed New Taxes Region

PIT surtax

Motor vehicle registration

NCR CAR RI II III IVA IVB V VI VII VIII IX X XI XII XIII ARMM

5,641 345 609 637 2,348 2,283 631 358 985 1,110 571 494 690 900 553 351 116

5,075 240 511 320 1,634 1,591 103 261 651 952 199 341 396 454 477 162

Phil

18,624

13,367

Existing taxes under LGC, 2015

% distn of new taxes (combined) 33.5 1.8 3.5 3.0 12.4 12.1 2.3 1.9 5.1 6.4 2.4 2.6 3.4 4.2 3.2 1.6 0.4 100.0

Real property tax

Local business tax

IRA

Total LGU income

21,205 411 1,502 539 4,881 9,741 530 814 2,350 2,226 444 451 1,248 1,420 726 462 30

37,341 573 1,328 713 4,360 8,745 555 899 1,719 3,553 513 552 1,548 2,084 766 666 116

17,404 10,355 16,753 16,723 29,890 33,881 14,572 18,966 25,222 22,095 18,741 13,036 17,419 15,686 16,946 13,188 12,231

92,839 13,741 26,080 20,106 46,031 60,917 16,986 22,949 35,073 41,498 22,669 15,692 23,474 21,897 20,276 16,267 12,761

48,981

66,028

313,107

509,257

Table 3. Projected SG Revenues Aggregated at SG Level (in million pesos)

Table 3. Projected SG Revenues Aggregated at SG Level (in million pesos) popular vote, 50% are party representatives, and 10% are sectoral representatives), we will have 2,380 legislators per state. Total estimated annual cost ranges anywhere from Php 33B to 63B. This is a recurring cost. Apparently, cost will really depend on size, number of the state, size of legislative body, and the size of the second chamber.

Pre-conditions for success.

We need to do these two things. 1) Reform the party system so as to institutionalize strong political parties with “coherent ideological programs and policy platforms and internal organizational discipline” (Matsuda 2014).

Provide budget support to political parties and disallow turncoats. We should not allow politicians to change political party affiliation. 2) Eliminate the high barrier to entry in the political arena by disallowing political dynasties.

If we do not address political dynasty, even if we shift to federalism, it will not resolve anything.

Risks in adopting federal form.

Unless we have good fiscal equalization, widening of regional disparity will be inevitable. It was discussed earlier that the tax base are in NCR, Region III and Region IVA. The disparity of tax bases among places will result to unbalance in terms of fiscal autonomy. Accountability may weaken if there is low revenue autonomy. Without the preconditions mentioned earlier, likelihood of elite capture is high. And finally, coming from previous experience with passing any legislation, possibility is high that the initial model for a Philippine federal government will be changed to reflect the particular interest of the actual framers of the constitution.

In conclusion, we have two

options to choose from: shift to a federal form of government or reform the fiscal aspect of local government code. Question.

Who are the decision makers?

The political leaders, you and I, all of us. How to choose?

We hope that the presentation has given you some insight on what to look for and what to look out for. We have to weigh the relative net benefit, benefits less costs, of the two policy options. And then, let’s assess the probability of success.

Maraming salamat po!

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Discussion on Fiscal Federalism Dr. Acram A. Latiph Professor, Mindanao State University (MSU) - Marawi

These are some of the salient points discussed: 1) We have highly centralized and poor performing interventions aimed toward poverty reduction and 2) centralization is basically inefficient and ineffective.

This also leads to lack of fiscal discipline, corruption, political patronage, and overlapping and ambiguous mandate across various levels of government. This is more profound in the case of ARMM where for example DPWH National and DPWH ARMM are arguing with each other on whose responsibility is it to repair of some highways. The next slide basically talks about some of the benefits that we will have from a federal state.

In a federal state, you have more accountability in terms of the fund and how it is going to be used because the fund is going to be generated from within the state. Unlike the current system we have today, wherein the national is downloading it. The idea is that this inefficiency we have today, according to the two presenters, may be remedied by having a federal state.

For example, we know that whoever the President of the Republic of the Philippines is, the place where he/she was born or raised in will be a favourite destination for funding. Case in point: during Noynoy and Cory, it was Tarlac. During Marcos,

everything in Ilocos Norte was being developed. Now it’s the time of Duterte. Davao will get a lot of funding and, probably Mindanao.

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Now under federalism, some of our speakers mentioned that the shift to federalism is really costly. This is one thing we should worry about because this may add burden to the tax payers. And the disparity among regions may widen because there is an inherent difficulty in extracting blood from stone.

For example, in ARMM, you cannot tax the people who have no income to tax in the first place. But, hopefully, federalism may cure most of the maladies and problems we face today under a unitary system.

Now my observation is, and this is rarely taken into account in most of the discussion about federalism, that local executives are seen as dispensers of funds rather than takers. This makes them wary of assuming more fiscal responsibilities in tax collection. Now this is a very important concept. Let me give you an example. When the VAT was amended to be increased, it was senator Recto who pushed for it.

What happened next is that he lost the elections. If you talk about the Bangsamoro, the reason why tax collection is very low is related to the possibility of winning the election. Now if you have let us say, for example a federal system, and I am vying for governor of a state, I will

not campaign to increase taxes so I will be more winnable in the elections. So you have this vicious cycle wherein all political leaders are unwilling to increase tax collection, even if they have the power, because this is counterproductive and constitutes political suicide.

This is one of the things I see as probably an obstacle because this is actually happening in ARMM. If you go to the Bangsamoro, a lot of local executives don’t want to collect taxes because if you increase tax collection you will not win in the next election. Now, will federalism really result to accountability, efficiency, and effectiveness in governance, public service and higher development outcomes? My guess is, and it

has been mentioned before, if you don’t have the required precondition to the quality of structure, then it will not because what happens is you lose the power of check and balance. Today, the current system, if you have an erring local executive, a bad governor, then the national government can repair it assuming the national government is good. But under the federal state, since the power is divided between the two, it is very difficult for the national government, the federal government to check into the bad things being done by the state government.

Remember that in federalism you divide the power between the federal and the state.

Meaning to say the state and the federal government

are now equal. The national government, whatever the state government is doing, the federal government cannot interfere. So if there is a problem wherein the state government is bad, then there is nothing that the national federal government can do to correct that bad thing because they’re co-equals.

Another question is that will rich regions, notably National Capital Region and Southern Tagalog, share their funds with others? This is a problem and it has been mentioned before so I will not discuss it.

Hopefully they’re good people so they will share their funds.

Now if you look at the GDP per capita, NCR is up there while ARMM is down there.

With the regional disparity, when you create a federal system equating all the regions as the same and creating the same rule, then it’s going to fail. That’s why in the creation of the federal system, it is very important that each one of these regions has its own different rules that take into account specific peculiarities and existing political, environmental, as well as economic landscapes.

Now let’s take a look at the commercial data across regions of Mindanao as this will be the basis of tax collection.

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regression is concerned, the contributor in reducing poverty and increasing human development is the good governance index; which is to say, how well is governance within the LGU.. The crux of the matter is, to a certain extent, not really the money that matters most. It’s how you use the money.

Now in the shift from unitary, what really matters is the transition period. How will lagging provinces be supported? Dr. Manasan has already made a good comment and suggestion.

How will funds be distributed?

Who gets more and who gets less? In fact one good ARMM is very small compared So meaning to say these two study that I would like to to Zamboanga and the Davao regions must somehow have look into is where wealth is Region. So tax collection to shoulder all the rest. But created. The National Capital within these areas will be there is a caveat behind this.

Region is getting a lot of quite different. So what Is money what really matters actually happens is you have most? I did a simple regression money but they do not create this gap dependency wherein and it turns out IRA per capita the wealth. I’ll give you an rich regions will become rich and the amount of money the example. If one company has and poor regions will become local government is receiving a plantation in Bukidnon or Maguindanao, they don’t pay poor. So the gap would don’t really matter when it their taxes there. They pay actually widen if you rely on comes to change in human state collection of taxes. development index and good their taxes in Makati City. So wealth is generated within governance index. the Bangsamoro but taxes Figure 3 shows that those are not paid within because in red are dependent on As much as this simple allocation from national funds.

Those in green are actually giving back to the national funds. The national capital region is giving a lot, southern Tagalog is giving a lot. The rest are actually taking funds from the national government. Will it be sustainable when we shift to federalism? Only these two regions are sustainable.

It will imply that these two regions will have to subsidize the other regions. Now one thing that I really like is ARMM being not the biggest taker.

It’s actually the Bicol region.

So in a sense we are not the last. Usually we are at the last.

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our government setup allows taxes to be paid anywhere.

So, most prepare their taxes at their offices in Makati City.

That’s why the revenue of Makati City is very high. If you look into JAKA, they have a huge plantation in Mindanao but they don’t pay taxes in Mindanao. They pay taxes in Makati City. That’s how taxes are paid. In other words, wealth is created in Mindanao, but the taxes to that wealth are being paid in Metro Manila.

Ultimately, when we talk about the move to any form of government, it boils down to the improved quality of governance. Does this system really improve the quality of governance? Because what we have today is actually very paradoxical. Let me tell you the case of why it is very difficult to improve. The people who are supposed to bring in development and economic growth in the area are the very same people who don’t want development and economic growth to happen.

That is a very, very scary conclusion. Why? If you talk about the Bangsamoro, to certain extent ARMM, most of the local executives are not college graduates. They are the guys who are the toughest in war clothes, those who are bold and outspoken. And they don’t want everyone in their locality to become engineers and doctors because once they become rich and they become educated, then they no longer have a hold on them. So what they want to do is to maintain status quo so that these poor people will still be dependent on them. This is the existing

system, the condition of the locality is very poor and the situation tends to perpetuate because the leader who is supposed to develop the area doesn’t want it developed from fear of losing control over constituents. That is the biggest problem we have in terms of development and that’s the reason why poverty, in certain areas, keeps increasing over time.

Anyway, I will leave you with this picture because my time is up. I will leave you with the picture of what federalism is

all about.

If the Philippines is a person, this is what he looks like right now and what an ideal shift to federalism should be. Currently, everything is channelled into the head, in the central government in Metro Manila. The localities are not empowered and we look ugly. What we want is the ideal federal state, wherein every part of the Philippines is fully developed and contributes to the Philippine national growth.

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Discussion on Fiscal Federalism Ramon Beleno III Chairman, Political Science Department, Ateneo da Davao University (AdDU)

B

efore jumping into conclusion on whether or not to it would be beneficial and practical to change the Philippine system of government from unitary to federal, let us first answer this question: What are the problems we intend to resolve? The 2 presentations this afternoon precisely tried to answer said question.

The presentations highlighted three main problems that the Philippines is facing with the current system that we have, namely: Fiscal, Administrative or governance, and Cultural.

Although the two presenters did not exactly categorize it as such, I just made the classifications for us to better understand the issues.

The first classification is the fiscal problems. One of the major issues of the unitary form of government is the unequal distribution of resources. It was highlighted in one of the presentations that there was centralization in the utilization of the state resources. The government is so centralized that those who are near the center are the ones who usually enjoy the resources. This is to the expense of the marginalized rural provinces wherein the presence of the government is hardly felt. It has also been discussed that the distribution of state funds to the provinces and municipalities rests on the allocation of the

Internal Revenue Allotment (IRA). In fact, many of the provinces where factories and plantations are located do not actually enjoy the fruits of their productivity because the companies usually pay their taxes where their main offices are located—at the center.

According to the presentations, this problem can be addressed by a federal system wherein the power to collect taxes are both exercised by the federal government and the state governments. With this, the more productive the state government is, the more that they are able to utilize the fruits of their productivity because the power to collect and release funds are no longer centralized or monopolized by the center. The prioritization of development funds and projects will no longer be according to will of the central government but to the source of the fund.

Second issue addressed by federalism is the maximization of resources. Since resources and productivity would be the primary source of funds for the state governments, they would make sure that the funds developed in an area, municipality, or city are based exactly on the needs of the said place. People in the central government could no longer initiate funds that would solely

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serve the interests of their political careers because projects would be initiated locally. Thus, the projects are presumed to be more adaptive to the needs of the people.

Third issue to be addressed better by a federal form of government is the reduction of poverty. It was said that there was no single formula that can address poverty in the Philippines. In fact, the problem of poverty is dependent on the situations in the locality. As such, to address poverty, it should be based on the specific needs of the people. Different regions and places demand different approaches in poverty alleviation. As such, a centralized approach would not be feasible in addressing the issues of poverty. This can be better addressed by a federal form where the state governments are in a better position to determine the causes of poverty and how to actually address them.

On the administrative or governance aspect, three main issues can be addressed by a federal form: efficient delivery of services, stabilization of politics, and transparency and accountability. A federal form of government can provide a more efficient delivery of services. This is due to the fact that a federal form of government is technically and physically closer to the people.

It would very taxing for a centralized government to deliver services to its more than 100 million people spread across more than 7000 islands. The best way to address this problem is to fully empower the local governments by means of federalism. Decentralization and devolution is not enough because it would still require the control and supervision of centralized government, which a federal form of government can offer. Closing the space between the government and the constituents would mean faster and more efficient delivery of services (i.e. the Yolanda case).

Aside from efficient delivery of services, the federal form of government can also help in the stabilization of politics in the Philippines. One of the major prerequisite to federal form is a stable political party system. The post authoritarian elections have resulted to the emergence of new political parties that do not adhere to party discipline and accountability. As a result, political individuals who aspire for national position would just rather make a new political party if none of the established political parties would take him/her as the party’s bearer. Because of this, local leaders who would want to run for a position would resort to patronage politics to avail of campaign funds or share of state funds when elected. This is quite evident – every after national election members of congress would switch to the president’s political party because they want to avail of the presidential patronage.

Lastly, the problems of corruption might be addressed since a federal form promises transparency and accountability. Under the federal form, since resources and funds are already concentrated among the state governments (SG), the people would want to make sure that their funds are accounted for because if there is corruption within the SG, it would only

be the local SG that will be affected and not the whole country. Due to this, the constituents and the residents will make sure that no one will steal their money. Under a unitary form, transparency and accountability is a challenge since the money used comes from a general fund.

Last issue addressed is the problem of cultural diversity.

The Philippines is considered as one of the most diverse countries in the world.

It is a mix and match of different tribes and culture.

Therefore, policies created by the government must not be centralized and uniform because it might contradict the tradition and culture of the other tribes. Empowering local governments by a federal form addresses this point. Since the SG exercise the power of legislation together with the federal government, SGs are expected to legislate policies that will address the unique culture and traditions of the people within their territory.

Therefore, cultural diversity will no longer be an issue in governance.

Second, federalism will also be able to address the issue of self-determination. Insurgency is strong in the Philippines, especially in Mindanao.

This is due to the fact that before colonizers arrived, the Filipinos were already used to governing themselves. But when the colonizers came,

they established a unitary form of government in order to have a better hold of the Philippines. Self-determination might be the key to genuine and lasting peace in Mindanao.

The differences in culture should not be a challenge in the building of a nation. Selfdetermination is one of the best features of federalism.

More importantly, the Philippines needs a government that is sensitive to local circumstances. Under a federal form, the government being physically closer to the people, can address the specific and unique needs of the people.

However, the benefits of a federal form come with a price. As such, in the future, the following questions must be answered in order for people to fully appreciate and understand the essence of a federal form of government: 1. Can the Philippines afford it?

2. What will happen to state governments with lesser resources?

3. Will putting another layer of governance make government services more expensive?

4. Are the provinces/regions ready “infrastructurally”?

5. How do we address warlordism and dynasties?

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SESSION 3

The PDP Laban Model of PH Federalism Jonathan Malaya Executive Director, PDP Laban Federalism Institute

The Philippines has a unitary system of government by an accident of history. The Spaniards and Americans who colonized our country saw that that fastest way to subjugate the native peoples was to set-up a highly centralized system with Manila as the imperial capital. Despite the archipelagic nature of the country inhabited by diverse cultures, the unitary system was carried over even when the Philippines gained its independence and became a Republic in 1946.

Through time, the disadvantages of a unitary system became apparent in the country. The system concentrated political and economic power in the “center” and thus, development was limited in areas close to Manila and stifled elsewhere. Not surprisingly, in a country of more than 100 million people, sixty two per cent (62%) of the country’s GDP comes from Metro Manila, Central Luzon, and CALABARZON while the rest of the country is suffering from underdevelopment and low investment. Our system of government has resulted in a grave imbalance in the distribution

of resources among regions and local government units.

Unfortunately, this inequality has led to social unrest, with various groups (especially in Mindanao) arming themselves to fight against the system.

Clearly, there is a need for change.

The problem, we submit, is our highly centralized form of government and the solution, we believe, is the adoption of the federal system. We believe that the only way to bring about equitable and widespread development in our country is for the central government to share power – political and economic – with the regions and LGUs. The unprecedented assumption to power of President Rodrigo Roa Duterte and his political party, PDP Laban, has given the country a rare opportunity to introduce systemic change to our country’s system of government, among other Constitutional Reforms.

The solution advocated by PDP Laban since 1982 is to abandon the unitary system and shift to a Federal system of government. Federalism, a system of governance, has been adopted by many nations in the world such as

the United States, Germany, Malaysia, and Australia to keep their countries strong and progressive while allowing the different communities within their country to work together for the progress of all.

As a political think tank, the PDP Laban Federalism Institute has been studying and advocating for Federalism in the Philippines. In July of 2016, the Federalism Study Group composed of various political scientists, lawyers, politicians and practitioners was convened by the Institute under the direction of Senate President Aquilino “Koko” Pimentel III. The group was tasked to study various federalism models from around the world, determine what model would be best for our country, and propose the necessary amendments to the Constitution.

In proposing amendments to the Constitution, the Federalism Study Group approached this task based on the following principles: 1. There is no “one size fits all model” of Federalism.

Federalism scholars contend that there are as many federal models as there are federal

2Members: Dean Dr. July Teehankee (DLSU), Vice Dean Dr. Ed Araral (Lee Kuan Yew School of Public Policy), Prof. Ed Tayao (LOGODEF), Dr. Tony Avila, Dir. Novel Bangsal (CPBRD, HRep), Atty. Valery Brion (Office of the Senate President), Dir. Mon Casiple (IPER), Dr. Grace Jamon (UP Diliman), Mr. Francis Manglapus (CAPDI), Dr. Edwin Martin (ASPAP), Dir. Gen. Jun Miral (CPBRD, HRep), Mr. Raphael Montes (CLRG, UP NCPAG); Sec. Gary Olivar (FEF), Atty. Al Oxales (O/Senate President), Atty. Salma Rasul (PCID), Atty.

Vince Revil (PDP Laban), Sec. Gary Teves (FEF), Mr. RV Vicerra (CDPI), Mr. Jojo Villano, and Federalism Institute Director Jonathan Malaya.

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countries; every federal country has a distinct model that works best for its own country. Countries who wish to shift to a federal system – like the Philippines -- must discern its own version of federalism according to the peculiar conditions of their societies. Therefore, it is important to learn from the experiences – whether good or bad – of existing federations.

amending the fundamental law, concentrating only on the articles and provisions that would enshrine federalism into the Constitution and strengthen our public institutions, among others.

Thus, there are articles in the 1987 Constitution that are left practically untouched such as Articles on the Bill of Rights, Citizenship, and Suffrage, among others.

Chairman, President Rodrigo Duterte. We studied our 25year experience of devolution under the Local Government Code, our 20-year experience with ARMM, as well as many models of Federalism, Decentralization, and political arrangements from around the world.

Some of the salient features of the proposal include a shift to a Federal Government with a It is essential that we Semi-Presidential System or a 2. There is a different continue to strengthen our Hybrid Parliamentary System context to Federalism in the democracy not by supplanting similar to the governments Philippines. Many of the or doing away entirely with in Taiwan, South Korea, established federations in the the 1987 Constitution but Portugal, and, to a certain world like the US and Australia by improving the current extent, France. It also features are examples of “coming Constitution, the charter a transition mechanism for together” federalism, meaning that allowed us to abandon Regional Governments to they were independent Marcos authoritarianism and prepare themselves for further states that decided to bond move forward. In doing so, decentralization, provisions together. We, on the other we ensure Constitutional to strengthen political parties, hand, will be an example of a continuity and stability mechanisms to regulate “holding together” federalism, while at the same time make political dynasties, and other because we are already a adjustments in our charter political and electoral reforms. unitary state seeking to shift to address the needs of the into a federation. Thus, many present and the future.

PH Federal System of the standard features The PDP Laban Model of PH of federal countries like Federalism being proposed There shall be two “shared sovereignty” between herein draws lessons Constitutionally-established the federal and regional from other countries but orders or levels of government governments do not apply to is customized to our own – the Federal Government us because of our different needs and circumstances. and the Regional Government. context.

The foundational ideas were Unlike the present system provided by the ideologues where there are overlapping 3. There is no need to come of Federalism like Sen. mandates between the up with an entirely new Aquilino “Nene” Pimentel Jr., National Government Constitution. The 1987 the founder of PDP Laban and Local Government Constitution has many good and father of the Local Units (LGUs), each level of provisions that need not be Government Code. We also government in the Federal changed. Thus, we have taken took into account the salient structure will have its a “surgical” approach towards features outlined by our Party particular jurisdiction. The 3rd Mindanao Policy Forum |

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Federal Government shall have exclusive legislative powers over National Defense, Police and National Security, Foreign Affairs, Currency, Immigration, and other matters that concern the entire nation3. In addition, all residual powers are retained by the Federal Government but these may be delegated to the Regional Governments.

the allocation and provision of funds and resources to local Governments within the Region, among others.

Semi-Presidential System. It is proposed that our current Presidential System which concentrates executive power in a single office, the Presidency, be replaced with a semi-presidential or hybrid parliamentary system where executive power is dispersed The creation of Regional among the President, the Governments is guided by Prime Minister, the Cabinet, the principles of Autonomy, the Parliament and the Subsidiarity, Solidarity, Regional Governments.

Decentralization and The logic for this division Devolution, Democracy and of executive powers in the Accountability. Basically, since context of the Philippines local governments are closest are as follows: First, in to the people, they are the the transition to a more ones who are best equipped decentralized system of to deliver basic services to the governance, we need a people. Those basic services, popularly elected presidency however, that are best to hold and unite the country delivered under a national together and ensure that the standard shall be a shared transition to federalism and power4 between the Federal transfer of powers to the and Regional Governments. regions will be successful.

We propose the creation of The President can help as an 11 regional governments the arbiter of disputes between composition of which shall be the federal and regional attached as an ordinance to governments and among the Constitution5. regional governments.

Second, we need an effective Regional Governments shall president to deal with have primary legislative powerful countries like China powers over basic services and the United States, as well such as Social Welfare as to effectively compete in and Development; a globalized world economy.

Tourism; Irrigation, Water Third, we need a president and Sewerage; Waste who can decisively address Management; Fire Protection; the numerous national Regional Development security problems and natural Planning; Franchises, disasters. Fourth, a pure Licenses and Permits; and parliamentary system without

strong political parties can be unstable. It will take time to build strong political parties.

We need a president to ensure that there is no gridlock in our political system and a president who can remain decisive in cases of national crises.

Finally, having a president, a prime minister, a cabinet and regional chief ministers will help spread out the burdens of governance, avoid a single issue agenda and, most importantly, help speed up regional development by giving more powers to the regions, which is the main objective of our reform. More horses pulling the national and regional wagon together is better than one6.

Therefore, we propose both a President and a Prime Minister for our country. The President, who is nationally elected, shall be the Head of State. He/ she will be the symbol of the nation and the decisive leader in times of crisis. He/she will be primarily responsible for the country’s National Defense and Foreign Affairs.

The President can veto acts of Parliament, appoint members of the Judiciary, nominate and, with the consent of the Federal Assembly, appoint the Prime Minister and he/she can dissolve the Federal Assembly depending on certain conditions, and call for new elections. Given these powers, the President will be insulated from day-to-day politics and

4In the case of basic education which is proposed to be a shared power, the Federal Department of Education shall set the curriculum, minimum standards and conduct assessment and testing of all basic education institutions while the Regional Governments can handle classroom construction, creation of teaching items, provision of school furniture and equipment, etc.

5This follows the proposal of Senator Nene Pimentel. Nonetheless, the number and composition of these regional governments shall be subject to extensive consultation with the people on the ground, thus, we will leave this matter for the Constitutional Convention or Constituent Assembly to finally settle.

6Dr. Ed Araral, Vice Dean, Lee Kuan Yew School of Public Policy, National University of Singapore

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act as an “elder statesman.” and 40% elected through the The President is given a Proportional Representation maximum of two 5-year terms. system of accredited national political parties7. The Federal The Prime Minister, on the Assembly shall have the other hand, shall be the Head power to initiate legislation of Government and he shall which shall go through the now handle the day-to-day mandatory 3-readings. The affairs of government. It Prime Minister shall also come is now the Prime Minister from the Federal Assembly who will set domestic and together with the Cabinet, a economic policy and control majority of which shall come public finances. He/she should from the Assembly. be a member of the majority party or ruling coalition in The Senate shall now be the Federal Assembly in elected by region just like in order to be appointed by the other Federal countries. In President as Prime Minister. the exercise of its legislative He/she is responsible for the powers, the Senate shall program of Government and concur on all bills and determines the guidelines resolutions passed by of national policy, appoints Federal Assembly before it members of his/her Cabinet becomes law. But in order and other officials except to avoid the duplication of those appointed by the functions between the two President, and prepares the chambers and to streamline National Expenditure Program the legislative process, and submits it to the Federal the 3-reading rule shall no Assembly for approval. longer apply to the Senate.

One reading shall suffice.

The Parliament. It is proposed Moreover, it cannot initiate that the present Bicameral legislation. The power of the legislature be retained but Senate shall be limited to the with different names, powers, review of bills passed by the and functions. Legislative Federal Assembly8. power shall be vested in Parliament which shall have Instead of a bicameral two houses or chambers – the Commission on Appointments, Federal Assembly and the it shall now be the Senate who Senate. shall confirm appointments Under the hybrid made by the President and Parliamentary system, primary Prime Minister to the Cabinet legislative power is vested (except when the nominee on the Federal Assembly is a Member of Parliament) which will be composed and to other positions (e.g. of 400 members – 60% Constitutional Commissions) elected by plurality votes in that require confirmation.

Legislative Electoral Districts The Senate shall continue

to act as the Impeachment Court; approves treaties and international agreements, and screen and nominates appointments to the Judiciary instead of the Judicial and Bar Council.

There shall be 3 senators elected from each Region.

Both the Senators and the Members of the Federal Assembly shall a have maximum of two 5-year terms.

Transition Mechanism to a Federal System. For federalism to succeed there must be serious consideration to a smooth transition mechanism.

We should learn from the painful experience we had with the devolution of health services et. al. under the 1991 Local Government Code where no smooth transition mechanism was put in place. Since the shift to a federal system will impact on practically all government agencies and levels of government, the transition must be slow, deliberate and purposeful.

It is proposed that there be a three-step process in the transition process. This is important to ensure the capability and readiness of the Regional Governments and their constituent Local Government Units to take on the devolved powers and responsibilities from the Federal Government.

The transition mechanism will also give Parliament

7The Proportional Representation or PR system will improve on the current Party-list system we have under the current Constitution.

8This power is referred to in Parliamentary democracies as Consent Legislation. This is not to say that the Senate cannot propose a bill or resolution. It can still do so but not in its chamber. Any senator may submit a proposed bill or resolution to the Federal Assembly who shall act on it consistent with its rules.

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the time needed to amend national laws as well as enact complementing legislation.

The organizational structure and operations of the commissions shall be defined by the Regional and Local Government Code.

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Within 5-10 years from the establishment of the Regional Government, the Regional Commission shall submit to Step 1: Regional and Parliament for approval a Local Government Code proposed Regional Organic (RLGC). Eighteen months The Regional Commissions Act more responsive to the from the ratification of the shall serve as the interim needs, culture, and aspirations amendments to the 1987 Regional Government of the region. The Act shall Constitution, a Regional and acting as a collegial body define the basic structure of Local Government Code shall with both executive and government for the region be enacted by Parliament legislative Powers. A Regional consisting of an Executive to replace the 1991 Local Chief Administrator who Department headed by a Government Code. The RLGC is a professional manager Chief Minister and a Regional shall define the powers, appointed by the Commission Assembly composed of functions, and responsibilities En Banc shall act as the Chief elected representatives from of Regional Governments Executive Official tasked each province and city. The and their constituent with running the day-to-day regional chief executive called LGUs. The Code shall also operations of the Regional Chief Minister shall be elected provide the taxing powers Government. The Commission by the Regional Assembly and other sources of funds shall create and organize the from among its members. of the Regional and Local government offices necessary Once the Regional Organic Governments. And it shall for the effective and efficient Act is approved by Parliament, provide for the creation of an functioning of the Regional the Regional Commission Equalization Fund which shall Government. shall transfer its powers and replace the Internal Revenue functions to the Regular Allotment (IRA).

The rationale behind the Regional Government. establishment of a Regional Fiscal Reforms. Changes in Step 2: Regional Commissions. Commission as the Interim the allocation of funds to Once the Regional and Regional Government are as the regions are at the heart Local Government Code follows: Firstly, it will reduce of the shift in the system of is passed, the Regional the cost of establishing the government. The unequal Governments are deemed regional government as the distribution of public funds to created. But in order to save commissioners are already the regions is one of the major on government resources and receiving their salaries causes of underdevelopment do away with the need for from their respective LGUs; new elections for Regional Secondly, the regional positions, the Regional government can operate Governments in the interim right away without the need shall be governed through for new elections which Regional Commissions. Each takes time and entails cost Regional Commission shall be to government; Thirdly, it composed of the incumbent allows the constituent units Governors of Provinces and to determine the agenda of Mayors of Highly Urbanized the regional governments Cities and Independent until such time that region Component Cities within the can transition to a regular Region. The chairmanship of regional government through each commission shall be by an Organic Act. rotation among its members for a term of one-year term.

Step 3. Regional Organic Act.

in the country. We will pursue the principle that the budget shall follow the division of powers; which means that the regions should be given the necessary funds to properly exercise the powers devolved to them.

proposed that relatives of incumbent politicians up to the 2nd degree of affinity or consanguinity shall be prohibited from running for public office in the territorial jurisdiction where the incumbent was elected.

In order to establish strong At present, 83% of national and cohesive political government revenue are parties, Parliament shall be controlled by the national mandated to promote the government and only development of political parties as public institutions 17% are allocated to local governments. Under our that shall serve as a formula, this will change in mechanism for communication favor of regional governments: and cooperation between 60% to be controlled by the people and the the Regional Governments government, facilitating and only 40% by Federal political organization and Government9. representation.

To support this initiative, Political, Electoral, and Other political turn-coatism shall be Reforms. For Federalism to prohibited. Party switching succeed, it should come with shall be banned within 1 a package of electoral and year immediately preceding political reforms. We believe or following an election, that federalism can fail if we otherwise he loses his position do not institute changes in our and shall be prohibited from political and electoral system. running in the next election.

In order to democratize It is also proposed that state political power, we propose subsidy shall be provided to make the anti-dynasty to political parties based on provision in the Constitution their electoral performance self-executing. It is in the previous election just like they do in mature democracies. This is to reduce or all together eliminate the influence of big business and drug and gambling lords in our politicians.

The current party list system is also proposed to be improved and transformed into a system of proportional representation.

The 3-seat cap will be removed in order ensure that the ruling party is able to muster a majority and ensure a stable parliamentary system.

As to the restrictive economic

provisions in our current Constitution, we propose that we delegate to Parliament the matter of fixing the percentage of allowable foreign ownership in nationalized economic activities. Land ownership in the country, however, shall be reserved only for Filipino citizens.

Since corruption is still a curse devastating our country, we shall continue to strengthen the Ombudsman, Sandiganbayan, and the Commission on Audit and make them a strong presence in every Region.

Our Last Hope. As argued

by President Duterte, it is our firm belief that the next logical, and perhaps the only peaceful, legal and constitutional avenue left open to those who wish to lay down the foundations for a just and lasting peace and development not only in Mindanao but in the entire country is the adoption a federal system of government.

In conclusion, we do not see federalism to be the cure-all to all our problems. In fact, there is no cure-all to all of our nation’s ills. Federalism is not a perfect system; but it may be the answer to the country’s lingering problems rooted in our country’s multi-cultural federal nature. Maybe it is time to recognize the Filipino identity as a “diversity of identities” and not one single monolithic artificial construct.

We submit that it is the recognition of differences that make communities prepared to embrace a common identity with others. The time for change is now.

9The Federal government will remain responsible for the national debt.

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Discussion on the Draft Philippine Federal Constitution Lito Monico Lorenzana Prime Mover, Citizen’s Movement for Federal Philippines

Today’s main political issue seething for several decades since the establishment of our Republic was the cry for the Mindanao-nons to extricate themselves from the political and economic dominance by the center. The Muslim and Christian brothers have never been as closer today to fulfilling this decades-long dream of the abolition of the Unitary System of government, a systemic anomaly perverting the concepts of democratic good governance. After almost 100 years, thanks to this President, we are at the cusp of achieving this change. Let us not make a mess of it by precipitate moves.

a unicameral parliament v/s a bicameral; a ceremonial president v/s a strong one; and the Prime Minister as Head of Government leading towards an eventual Federal system of government. The major divergence in both positions is in the question of the timing of the restructuring of the political elements. CDP believes that the process of revising the Philippine Constitution and the intricacies of a shift to a parliamentary government will take more time than the remaining 57 months of Duterte’s presidency.

The popularity of a FederalParliamentary system rose almost singlehandedly The PDP-Laban has made through the sheer personality a compelling case for a of a Mindanao-non, who Parliamentary bicameral in his 2-decades as a local government within a Federal government executive system – all to be realized understood and suffered within the remaining days of President Duterte’s term – 57 through the imbalances and discrepancies within the months. This is the PDPLaban’s position; predicated on unitary system. The voters a President possessed with the took him and these concepts clarity of his vision buttressed on faith. But for the shift to Federal-Parliamentary to with the political will to ram succeed, the beneficiary, the this through. people need to know what’s The CDP/Lakas/CDPI (Centrist in it for them before they buy into it. Therein lay the Democratic Alliance or CDA) conundrum. position on the other hand is similar to the PDP-Laban in After an aberrant unitary stance but with a slight twist;

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government practiced over a century, long embraced values of political patronage have permeated the body politic.

This needs to be overhauled and new practices inculcated over time safeguarded by judicious laws.

The roadmap to federalism is thus designed to mitigate the shock to the body politic arising from the purging of traditional political practices through the immediate passage of reform laws, now pending in Congress. Furthermore, the critical process of transition to a Parliamentary-Federal Republic has to be in place in the revised constitution so the assurance of its continuity is safeguarded by the constitution itself even beyond the term of the current President.

To reiterate, the CDP roadmap simply adapts to the exigencies of real change “tunay na pagbabago”, the rallying slogan of the Digong, accelerating change where feasible without unnecessarily upsetting institutions and government services.

The CDP, presents it roadmap to Federalism, to wit: Step 1: Put in place four (4)

preconditions & while revising the 1987 Constitution.

Political Party Reforms; Ban Political Dynasties; Pass a universal Freedom of Information Law; and

Political Party Development and Financing Act (a bill pending in Congress for several years) which will: Penalize “Turncoatism” (or the switching of political parties, “Balimbing”, “Political Butterfly”);

of Information Bill (FOI) to enforce transparency in all transactions in government.

This law will allow public access to information pertaining to official acts, transactions or decisions, and compel transparency and accountability in public service.

Enforce transparent mechanisms providing and regulating campaign financing to eliminate graft, corruption, and patronage (corporate & individual contributions); and through

The fourth precondition is initiate electoral reforms that would put in place a system Step 2: Immediate transition that will not pervert the will into a parliamentary of the populace. Any system government. that adheres to the democratic principles should consider Step 3: Creation of clean and fair elections as Autonomous Territories leading State subsidy that will imperatives. The COMELEC towards a Federal Republic professionalize political parties must be reformed to remove by supporting their political all quasi-judicial work and education and campaign transfer electoral contests to initiatives. the judiciary.

Step1: Put in place four (4) preconditions.

Second precondition is These preconditions have a to enact a law banning high probability of passage First precondition is political the Political Dynasties as while we have a President party reform. We need real mandated in Article II Section endowed with tremendous political parties. Not the type 26 of the 1987 Philippine political capital and have the we have today or have had Constitution. This will ban the political will to act decisively. in the past several decades. concentration of powers by Political parties are primarily the dynastic families in the Step2: Immediate transition to formed not only to contest barangay, local, and national a Parliamentary Government elections and hold power positions. If Congress will not in government but they again pass an enabling law, The excerpts are lifted up must possess an ideological then what should be written in from the comprehensive study core, aggregating the needs the revised constitution should of the 2005 Constitutional and aspirations of a diverse be self-executory.

Commission (ConCom) created segment of our society.

by President Gloria Arroyo.

The third precondition is (PLEASE ACCESS WWW.CDPI. This reform can be achieved the passage of the Freedom ASIA) through the passing of the Electoral Reforms

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Briefly, Parliamentary system is known too as “Party Government”, as the political parties have ascendancy over personalities and because of the pivotal role of political parties in parliamentary elections, governance and public administrations. In our proposal, the legislative and the executive powers are fused in a unicameral parliament; and “Head of the Government” is the Prime Minister with his cabinet recruited from among the members of parliament; while the President is the “Head of State” with mostly ceremonial powers; elected from among the members of Parliament. The Prime Minister (Head of Government) can be booted out of office through a “vote of no confidence”; not impeachment.

the Federal Republic of the Philippines is created.

TIME FRAME Step1: Put in place four (4) preconditions.

September 2017 – May 2019 Plebiscite (20 mos)

This should be done now.

There are bills pending in Congress and the Senate on these 4 preconditions. With the Mindanao-nons on top of the legislative process, there is no doubt these preconditions can be put into play. A more detailed presentation is in the CDP written documents, in our hand outs and websites, www.cdpi.asia. The 25-man ConCom must be organized and given 6 months to present to the President and the Constituent assembly Step 3: Creation of autonomous territories leading (ConAss) a working draft of the new Parliamentary-Federal towards a Federal Republic Constitution for ratification through a plebiscite.

The 2005 Consultative Commission’s “out of the Step2: Immediate transition to box” version of a Federal a Parliamentary Government State (Bangsa) has its roots on the concept of autonomy, May 2019 – May 2022 (36 subsidiarity and selfmos) determination.

Bebot is an imperative.

By the time the President steps down, the Parliamentary Government is in place where Party Government will be in effect. The Head of Government will be chosen by virtue of the political party majority or through party coalitions. The President or Head of State will be elected from among the members of Parliament. Transitory provisions in the 2022 Constitution may allow DU30, by then 77 years of age, to be the Head of State with lesser powers but with his political ascendance intact; or he so chooses to retire.

Step 3: Creation of autonomous territories leading towards a Federal Republic May 2022 – May 2028 (6 years)

In the CDP version, Parliament allows the provinces and highly urbanized component cities to evolve first to an autonomous territory. “Self-determination” is central to this decision.

Government can’t impose on the body politic the territories that will eventually become States in a Federal format.

The transition to a In this version, we allow the provinces and highly urbanized Parliamentary Government can Provinces and Cities need to negotiate as to actual be effected immediately after component cities to evolve territories and population to the plebiscite in May 2019. first to an autonomous encompass a bigger state; The complications of getting territory. “Self-determination” the considerations of the political parties organized is central to this decision. If a natural resources and wealth; can be alleviated through the referendum is passed, within Political Party and Government the similarity of customs and a year, Parliament must enact Subsidy bills, which are part of language; and even the seat an organic law defining the of the State Capitals. Some the preconditions, pending in autonomous territory's land Congress, having gone through of the Provinces and Cities area, powers, obligations and will be ahead of the pack and revisions and amendments in sources of revenues (taxes). some will be laggards so the the last two administrations.

If 3/5 (60%) of the provinces development of a Federated The vaunted DU30 political and component cities of Republic will not be uniform. will will be reinforced by the Philippines become All these need time and with Senator Koko and Speaker autonomous territories, then

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guidance from Parliament.

If a referendum initiated within the Cities and Provinces composing the future autonomous territory is passed, then within a year, Parliament must enact an organic law defining the autonomous territory's land area, powers, obligations and sources of revenues (taxes).

If 3/5 (60%) of the provinces and component cities of the Philippines become autonomous territories, then the Federal Republic of the Philippines is created.

common goal. And in this end, we need massive political education throughout the country and this can only be achieved when all likeminded political parties and individuals will turn their backs on differences and march forward in a single rhythm, firm in resolution and clear on principles.

Reaching the 60% hurdle rate may take years depending on how fast the other provinces and component cities can become autonomous territories. Provinces and cities that have not agreed among each other to become an autonomous territory will be disadvantaged, but the success of its neighboring autonomous territory would be a huge incentive to likewise convert themselves into one.

Federalism is indeed a complex process and may take several years before the country can fully implement it. However, if we do not educate and involve ourselves in the debate now, then we will never learn and be able to help build our beloved nation as immediately as possible. We need most specially to engage the millennials for they have the energy to manifest the positive changes we wish to take place in our society.

And, lastly, we need an alert and knowledgeable citizenry that can compel this nation’s movement towards this

3rd Mindanao Policy Forum |

44 49

Discussion on the Draft Philippine Federal Constitution Miguelito Ocapan Local Government Unit, Zamboanga del Sur

When the issue of federalism reached our province, Governor Antonio Cerilles asked the district revenue officer as to how much the revenue income of the province of Zamboanga del Sur is. According to the revenue district officer, the estimated income of the province coming from IRA for 2017 is at least 1.3B. However, we need more than 1.4B revenue for 2017.

equalization? What happens to the poor regions, poor provinces? For a province like ours, we will not be able to deliver government services.

With regard to devolution, section 284 of the Local Government Code provides for that on the third year of its implementation; 40% of national revenue will go to the local government. Fast forward to 25 years of its implementation, only 17% Just recently in the news, of national revenue is being mayors from Metro Manila have signified their support for given to the local government.

Government functions such as the shift to a federal form of government. It’s not surprising provision for health services, social services, among others as LGUs in Metro Manila are have been devolved to the rich. Maybe the income of local government. Workloads Metro Manila would roughly have been devolved, but not account for one-sixth of the the needed funds. How do country’s budget. Theirs is different to ours, even with our you expect local governments roughly around 100 M income to deliver without sufficient budget? Previous presenters plus IRA, our budget is still running short for the province have pointed this out. We need of Zamboanga del Sur. Exactly fiscal reforms to balance out inequalities among regions. the reason why we need the Local Government Code In the federal system of because we depend on IRA. America, states have agreed on three goals. These are defense, The previous discussions diplomacy, and money. In tackled fiscal equalization; the presentation of Mr. Jon we need to strictly provide Malaya, judiciary, national for fiscal equalization in the defense, and foreign affairs shift to federalism. However, fall under the president under what if state governments invoke sovereignty and refuse the draft federal constitution.

Other functions are given to to pool resources for fiscal

50 3rd Mindanao Policy Forum |

45

the federal states. This implies an additional burden to the states; the local governments might not be too welcoming about the notion of having more functions. As it already is, local governments struggle to deliver due to budget reasons.

Lastly, Gov. Cerilles expresses that we are open to charter change. Replace everything that needs replacing in the current system; add provisions that help achieve peace and growth in our country.

ANNEX

US Federal Model and Experience: Points 6/11/2018 for Consideration Hezekiah Concepcion

OBJECTIVES: US FEDERAL MODEL AND EXPERIENCE: POINTS FOR CONSIDERATION* Hezekiah Concepcion Social Sciences Department School of Liberal Arts

Carlos Dominguez Hall Ateneo de Zamboanga University September 7, 2017

THE US FEDERAL SYSTEM

Review the historical development of the federal form of government in the United States of America (USA); Consider good features of federal system of government in the US; and Identify issues and concerns for policy and academic research

FEDERALISM Federalism is a system of government in which the same territory is controlled by two levels of government. Generally, an overarching national government governs issues that affect the entire country, and smaller subdivisions govern issues of local concern. The United States has a federal system of governance consisting of the national or federal government, and the government of the individual states (www.cornell.law.edu)

FEDERALISM: US CONSTITUTION

  REGULATE CITIZENSHIP AND IMMIGRATION  MAINTAIN RACE AND GENDER EQUALITY

54



PROVIDE HEALTH CARE & INSURANCE* RECOGNIZE GUN RIGHTS*

DUAL GOVERNMENT

The federal government can influence the states in some ways…

Education, social welfare, assisted housing and nutrition, homeland security, transportation, and emergency response are key areas where states deliver services using federal funds and subject to federal guidelines.

6/11/2018

TAXATION SOURCES OF STATE [LOCAL] REVENUES VARY PER STATE: State income taxes are separate from the federal tax laws enforced by the IRS. State taxes are levied by each individual state government ― there is no system that encompasses the separate taxes for all 50 states. For this reason, state taxes will vary (sometimes greatly) based on where one lives, shops, invests, works, and conducts business. State taxes may be administered by a department of revenue, department of taxation, state treasurer, or state comptroller.(www.irs.com/articles/income-tax ) •

EXAMPLES: SOURCES OF STATE REVENUES

TAXATION SOURCES OF STATE [LOCAL] REVENUES VARY PER STATE:  Alaska and Wyoming – taxes on oil, coal and natural gas exploration  New Hampshire – 65% from property taxes  Other fees – license to carry a handgun

“PITFALLS” Contentious debates between federal and state government over Sovereignty issues and nullification theory Individual liberties and gun rights Social and racial equality (E.g.: Loving v. Virginia, 1967) Culture wars (E.g.: US v. Windsor, 1913, Obergefell v.

Hodges, 2015) Immigration, social security and health care Taxation and public funding*

GOOD PRACTICES Democracy thrives in debates. Cooperation and compromise Creativity and innovation Local autonomy and empowerment Efficiency and responsiveness Cultural democracy

IS THERE A NEED TO SHIFT TO FEDERALISM TO ADVANCE PUBLIC WELFARE?

Advancement of the physical, economic, social, and cultural wellbeing of the people (De Leon & De Leon, 2014)

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6/11/2018

REFERENCES

POINTS FOR CONSIDERATION: Printed Matter:

 History  Muslim Filipinos aspiration for self-determination [M. Mastura,2001]  Political culture  Political expediency  Cost  Alternatives models of federalism and decentralization (Spain & Portugal)  National Consensus  Other considerations

56

Boston College Law School, Notes: Survey of US Legal History, 1996.

Hector de Leon & H. de Leon, Jr., Textbook on the 1987 Philippine Constitution, 2014.

Robert L. Maddex, State Constitutions of the United States, 1998.

Michael O. Mastura, “Federation as Our Option” (Roundtable Discussion, March 26-27, 2001, Zamboanga City).

Montiel, Cristina J. Montiel and Judith de Guzman, Political Psychology of Spain’s Transition to the Estado de las Autonomias, 2006.

Kenneth Newton and John W. Van Deth, Foundations of Comparative Politics, 2010.

Christian E. Rieck, Global Perspectives on Federalism, 2002 Reprint.

United States Information Agency, Outline of American History, 2005.

United States Bureau of International Information Programs, About America: How the United States is Governed, 2004.

Online Source: The Constitution of the United States (electronic copy, accessed June 1, 2013) abs-cbnnews.com (accessed July 9, 2016) taxpolicycenter.org (accessed July 9, 2016) www.cornell.law.edu Hezekiah Concepcion: faculty, Social Sciences Dept., School of Liberal Arts, AdZU

Decentralization, Autonomy, and Federalism: Sustainable Development and Peace in the Fringes Atty. Benedicto Bacani

Decentralization, Autonomy and Federalism: Sustainable Development and Peace in the Fringes

Why Federalize?

• Efficiency: as a means of improving service delivery, ensuring that decisions are made at the most appropriate level, protecting against the overconcentration of power and creating more opportunities for democratic participation.

• Identity: As a means of ensuring peace, stability and mutual accommodation in countries that have territorially concentrated differences of identity, ethnicity, religion or language.

Autonomy and Federalism to Address Identityand Sovereignty-Based Conflicts

Autonomy Arrangements or a federal constitution may be more appropriate than a unitary constitution in managing multi-ethnicity and a plural society.

6/11/2018

Decentralization, Autonomy and Federalism Administrative Decentralization to LGUs Natl Govt

RDCs

LGUs

Decentralization of Shared Rule Powers (autonomous Self Rule Regions) (Federalism) Natl Govt

Natl Govt

ARMM

Federal States

LGUs

LGUs

Federalism and Local Governments

• Federalism as a political reform measure restructures government including local governance within a federal state.

• Evolving a cohesive and working federal states composed of federal state governments and constituent local government units.

• Delienation of powers between federal states and LGUs is as critical as central-state relations.

Issues

Constitutionality of Peace Agreements and Implementing Laws (ARMM Organic Law, Proposed BBL) Moro Autonomy vs. Autonomy of the Rest Incremental Approach

India, Pakistan, Sri Lanka, Nepal, Malaysia, Indonesia, Philippines.

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1

6/11/2018

Constitutional Issues

What is unconstitutional, FRAMEWORK or PROVISIONS?

A Bangsamoro sub-state has no place in a unitary framework/constitution. No less than a federal system can accommodate the new political entity.

President’s Inaugural Address

Refining the BBL provisions and/or at most surgical amendments to the Constitution are sufficient.

Moro Autonomy vs. Autonomy of the Rest Historical Injustice (sovereignty-based aspirations) vs. Equitable allocation of national wealth Moro Autonomy as Sui Generis and the case for Asymmetric Federalism De-link BBL to federalism Surgical Amendments or shift to Federalism?

Autonomous or Special Regions are possible within a Federal State.

Implementing Peace Agreements TA/FPA

ARMM Organic Law

FAB/CAB

BBL

Ideology (Negotiations) 2 Parties

Positions-Based

Policy

Implementation

(Legislation) (Governance) Public Arena (Multi-Party)

Interest Based

(workability, capacity, resources, constitutionality)

Incremental Approach

One-time big time, winner take all, zero sum vs Incremental approach Series of legislations/ charter change amendments and a good transitional mechanism and process

Amending ARMM Organic Law making ARMM as interim Bangsamoro and transitional mechanism Implementation of Peace Agreements in step with constitutional reforms.

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2

Relevance of Fiscal Federalism to Philippine 6/11/2018 Development Issues and Challenges Romulo Emmanuel M. Miral, Jr., Ph.D.

Th e Philippines’ economic growth performance has paled in comparison with i t s peers in the region, but it has fared well in the recent years.

R elevance of Fiscal Federalism to Philippine D evelopment Issues and Challenges R o mulo Emmanuel M. Miral, J r.

Congressional Policy & Budget Research Department House of Representatives

The Third Mindanao Policy Research Forum Organized by: Mindanao Dev elopment Authority Philippine Institute for Dev elopment Studies Ateneo De Zamboanga 7 September 2017 AdZU Auditorium, Zamboanga City 2

Poverty has remained a formidable development challenge for the Philippines.

Ec o nomic growth and poverty in the Philippines are highly uneven across regions.

Note: $1.9 a day (PPP) is about P40a day per person; the PSA national poverty line is about P60 a day per person.

3

The Philippines’ anemic progress in eradicating poverty characterized by weak economic growth and highly unequal economic opportunities can be traced to the highly centralized political and economic governance of the country.

4

Concentration of Powers and Resources in the Executive and Central Government

5

Political Instability

Weak Investment

Corruption 6

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6/11/2018

National government and local government shares in total government revenues, Philippines, 1990, 2000, 2010, and 2015

National government and local government shares in total government expenditures, Philippines, 2009, 2011, 2013, and 2015

7

8

Com mon Pool Resource Problem Societal Goals

The centralization of revenues created a common pool resource with its attendant problems:

Sectoral Outcomes

National Government Agencies/Departments PAPs

Key Result Areas

• Weakening of fiscal discipline • Weakening of al l ocative and operational efficiency (“Divide by N”) • Increasing tol erance of corruption • Patronage politics and political dynasties

Major Final outputs

Provinces Cities Municipalities

9

W eak government coordination

Problem: Fragmented government services

Barangays 10

Government Decentralization:

•Coordination between and among different levels of government is weak.

1.Administrative decentralization or Deconcentration

•The requirements for strong coordination are lacking: clear division of responsibilities, adequate funding, and bureaucratic capacity (Balisacan, Hill and Piza, 2006) .

2.Political decentralization or Devolution  Local Government Code of 1991  Organic Act Establishing the ARMM

•Moreover, the Philippines local government system is highly fragmented with no strong middle level government.

11

12

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6/11/2018

H ighly fragmented local government system

Fragmented local government units + patronage politics = Fragmented government services National Government

Number of LGUs

Provinces: 81 Cities: 145 Municipalities: 1,489 Barangays: 42,036

Provinces

Highly Urbanized Cities Barangays

Component Cities Municipalities

Barangays

Barangays

Population/voters

Notes: Provinces are fiscally, the weakest.

Cities are fiscally, the strongest.

Cities have the combined powers of provinces and municipalities.

13

14

C o mmon Structural Characteristics of Federations

Importance of Middle-level Governments • It is important to recognize the critical role of middle-level governments. In countries with unitary government like the Philippines, there are usually no strong middle-level governments.

• However, the federal form that serves as model for government decentralization reforms is built on the presence of strong fiscally autonomous middle-level governments (e.g. states) that deal with the central government on even ground.

• Ultimately, the issue is not decentralization versus centralization, but of achieving the right balance and better coordination among different levels and units of government.

• two levels of government, i.e., national and subnational that directly govern their constituents, • execu tive and legislative authorities formally defined in the country’s Constitution, • provision of autonomy for the levels of government through proper assignment of revenue resources, • representation of subnational governments in federal policy making institutions, • mandated bodies (cou rts) or mechanisms (referendu ms), to settle disputes among governments, • institutions tasked to facilitate intergovernmental collaboration for services with shared responsibilities.

15

-- Watts, 1996

16

Subsidiarity

F i scal Equivalence: Vertical Fiscal Balance

• “nothing should be done by a larger and more complex organization which can be done as well by a smaller and simpler organization”

• Correspondence between those who receive the benefits of a public good and those who pay for it

(Mele, 2004)

• Links cost to benefit • Leads to congruence between deciding on expenditure and financing

• Prevents free riding 17

• Higher level governments should not exercise functions which can be carried out efficiently by lower level governments , but rather the former should support and help coordinate the activities of the latter.

18

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6/11/2018

Fiscal Equalization: Horizontal Fiscal Balance •Each unit within a particular level of government (or each state in a federal system) has the capacity to provide services at a comparable standard.

Shift to Federal Government?

National Government Provinces

Highly Urbanized Cities Barangays

Component Cities Municipalities

Barangays

Barangays

Population/voters 19

20

Tha nk you a nd good day.

21

4 62

Fiscal Design and Subnational Governance: 6/11/2018 Autonomy and Equity Considerations Rosario G. Manasan

Overview of presentation

Fiscal Design and Subnational Governance: Autonomy and Equity Considerations

 Context  Why reform the fiscal decentralization framew ork  Direction of reform  Cost and risks in shifting to federal form of government

Rosario G. Manasan, Senior Research Fellow 7 September 2017

 Conclusion

Philippine Institute for Development Studies Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

RGManasan

RGManasan

Federalism is a hot topic …

2

Federalism discourse in the public arena

 Adoption of federal form of government – one of President Duterte’s campaign promises and he reiterated this thrust in his 1st SONA in 2016

 Federalism oftentimes framed as representing the “countryside’s revolt against imperial Manila”  Short way of saying, government is too centralized despite decentralization under Local Government Code  another aspect of this narrative relates to the persistence of wide regional disparities in per capita household income, regional shares in GDP, and poverty incidence

 Strong support for federalism among members of super majority at the House  Shift to federal form of government – part and parcel of proposed constitutional amendment/ revision

 PDP-Laban  actively involved in advocacy and design of “federalism model” for the Philippines RGManasan

Regions

DA

BFAR

PhP M % distn

CO++ NCR CAR RI II III IVA IVB V VI VII VIII IX X XI XII XIII

4,528 1,114 2,023 2,195 2,243 1,754 1,311 1,440 1,543 1,164 1,337 1,230 1,441 1,426 1,773 1,064

Phil

27,588

DENR

PhP M % distn

16.4 2964.4

DPWH a/

PhP M % distn

34.8 152.3 148.3 174.3 170.9 189.4 218.9 191.4 294.5 250.8 160.0 127.1 130.3 122.8 166.8

19.9 0.5 4.6 2.5 4.2 4.6 7.2 6.1 4.4 4.4 4.9 5.3 7.5 5.8 4.1 7.9 6.1

100.0 5,497

100.0 11,934

100.0 84,183

4.0 7.3 8.0 8.1 6.4 4.8 5.2 5.6 4.2 4.8 4.5 5.2 5.2 6.4 3.9

DTI

PhP M % distn

53.9 2,379 0.0 54 0.6 546 2.8 302 2.7 501 3.2 550 3.1 864 3.4 731 4.0 521 3.5 521 5.4 586 4.6 631 2.9 895 2.3 694 2.4 484 2.2 949 3.0 728

15,911 18,105 746 2,205 1,762 4,610 5,752 1,469 2,711 2,359 3,817 3,886 7,300 4,032 4,029 3,485 2,003

18.9 21.5 0.9 2.6 2.1 5.5 6.8 1.7 3.2 2.8 4.5 4.6 8.7 4.8 4.8 4.1 2.4

DSWD

PhP M % distn

DILG

PhP M % distn

PNP

PhP M % distn

DOH

PhP M % distn

3

RGManasan

DepEd

PhP M % distn

PhP M % distn

17,176 3,169 2,609 5,576 3,745 7,463 7,441 4,062 6,717 7,623 7,440 5,121 5,291 5,405 5,011 4,140 3,121

20,483 30,835 7,787 20,893 13,207 31,326 39,600 20,040 24,425 30,375 28,525 23,808 17,839 16,942 16,471 17,122 13,521

5.5 8.3 2.1 5.6 3.5 8.4 10.6 5.4 6.5 8.1 7.6 6.4 4.8 4.5 4.4 4.6 3.6

100.0 373,200

100.0

261 6 81 90 106 140 160 86 135 92 90 101 71 93 99 123 141

13.9 5,843 0.3 748 4.3 197 4.8 355 5.7 274 7.5 514 8.6 560 4.6 294 7.2 417 4.9 523 4.8 451 5.4 366 3.8 428 4.9 423 5.3 347 6.6 284 7.5 235

47.7 969 6.1 156 1.6 640 2.9 444 2.2 317 4.2 383 4.6 469 2.4 557 3.4 1,142 4.3 829 3.7 706 3.0 1,159 3.5 539 3.4 662 2.8 680 2.3 364 1.9 794

9.0 70,948 1.4 779 5.9 141 4.1 179 2.9 152 3.5 291 4.3 283 5.2 121 10.6 216 7.7 287 6.5 245 10.7 185 5.0 181 6.1 178 6.3 176 3.4 163 7.3 134

94.8 1.0 0.2 0.2 0.2 0.4 0.4 0.2 0.3 0.4 0.3 0.2 0.2 0.2 0.2 0.2 0.2

100.0 1,876

100.0 12,259

100.0 10,811

100.0 74,841

100.0 101,109

17.0 3.1 2.6 5.5 3.7 7.4 7.4 4.0 6.6 7.5 7.4 5.1 5.2 5.3 5.0 4.1 3.1

Per Capita HH income, in current prices (in pesos) Region

RGManasan

63

5

1985

•

1994

1997

2003

2006

2009

2012

2015

NCR

11,575

37,070

61,211

65,625

81,336

91,792

96,891

110,792

CAR

6,880

15,457

25,544

36,240

46,788

55,167

66,453

69,814

RI

6,005

14,233

23,019

29,925

34,658

46,530

53,736

59,704

II

5,582

15,296

19,846

31,008

35,414

47,123

49,953

61,731

III

7,642

18,481

28,119

37,590

46,296

53,227

62,348

73,230

IVA

6,900

21,875

32,651

44,876

50,393

61,555

71,952

81,075

IVB

5,059

13,076

19,216

26,625

27,421

35,452

46,583

60,857

V

4,210

11,227

16,591

26,071

30,450

35,763

39,536

45,877

VI

5,132

13,418

19,411

27,273

31,815

40,450

52,811

55,881

VII

4,332

12,254

19,549

28,341

33,601

43,902

49,061

58,621

VIII

3,719

10,740

15,650

24,220

30,108

38,765

40,713

49,682

IX

4,653

10,401

18,623

20,792

27,687

34,947

39,390

47,344

X

5,266

12,254

20,030

26,173

32,905

39,405

45,757

54,468

XI

5,700

14,713

20,239

27,492

32,676

41,188

48,840

64,072

XII

4,966

12,802

18,072

26,612

27,239

37,454

40,154

48,001

XIII

4,518

11,122

15,880

20,672

27,088

34,383

43,513

50,654

9,661

14,611

17,722

18,106

23,996

25,244

26,437

ARMM

a/ refers only to "various local infrastructure" and "local infrastructure"

Big portion of the GAA budget is allocated to the Central Offices (COs) of various departments. T his does not necessarily mean that the these amounts actually gets spent in the NCR where COs are physically located. However, it means COs do exercise wide degree of discretion in allocating these to the regions during budget execution

4

Phil

6,294

17,564

27,303

35,597

42,372

51,489

58,583

67,622

Coefficent of variation

0.327

0.433

0.478

0.368

0.393

0.337

0.315

0.301

Per capita household income in NCR continues to be the highest in 19852015 but disparity in other regions’ income relative to NCR’s has narrowed RGManasan

6

6/11/2018

If federalism is the answer, what is the question?

Federalism discourse in the public arena  More critical perspectives have started to emerge

 Proponents (e.g., PDP Laban) say:

 If federalism is the answer, what is the question? – UPSE  “Autonomy is of primary importance, federalism is just secondary” – Governor X  Imperial Manila vs dynastic countryside – ADMUSoG  Is federalism poverty-reducing or poverty-inducing?  What is budgetary cost of shift to federal form of government?

RGManasan

 “Federalism is the practical solution to age-old problems of poverty, inequality and instability  … it provides a system where national unity is maintained while protecting the diversity of our society”

 Economic literature suggests that potential benefits can be secured by adopting a federal form of government

7

RGManasan

Potential benefits of shift to federal form of government

Potential benefits of shift to federal form of government

1. Increased efficiency  increased societal w elfare to the extent that …

2. Increased efficiency and welfare also results to the extent that …

8

 Federal system promotes interjurisdictional competition assuming that the population have the ability to “vote with their feet” to get the “public services-tax package” they prefer

 Federal system brings government closer to the people, thereby allowing lower level governments to respond to local needs and preferences of their constituents  The jurisdiction of the level of government paying for the delivery of a given public service coincides with the geographic area where benefits of said public service are confined

o Thus, dampening rent-seeking tendency of local politicians

o Otherwise, government will tend to under-provide serv ices which have positive benefit spillovers to other jurisdictions RGManasan

9

RGManasan

Potential benefits of shift to federal form of government

Potential benefits of shift to federal form of government

3. Federal system enhances local accountability to the extent that …

 The first 3 of these potential gains - largely a function of the extent of decentralization







Lower lev el gov ernments hav e some degree of rev enue autonomy (i.e., if they raise a signif icant amount of rev enues f rom local taxes and user charges) Also, results f rom enhanced citizen participation in local gov ernance

Said gains may be secured with greater fiscal decentralization with or without shif t to the federal form of gov ernment

 Countries with federal form of government are not necessarily decentralized to the same degree and some of them may be less than decentralized than those with unitary form of government

4. Federal system key to addressing ethnocultural conflict as it accommodates regional diversity – religious, linguistic, ethnic, or cultural



 RGManasan

10

11

Germany (federal) more centralized than Canada (f ederal) Malay sia (f ederal) more centralized than Philippines (unitary ) RGManasan

12

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6/11/2018

Distinction between multi-tiered unitary & federal form of government

Potential benefits of shift to federal form of government

 Multi-tiered unitary form of government – local government units exercise only the powers that the central govt (CG) chooses to delegate to them

 With regards to the 4th potential benefit, adoption of federal form of government does not necessarily prevent break-up of conflictridden states (e.g., Pakistan  present Pakistan and Bangladesh)

 CG can unilaterally withdraw powers delegated to subnational units

 Federal form of government – powers are shared by at least two levels of gov ernment (i.e., federal government and constituent units), each having some degree of autonomy in the exercise of certain powers, and each of which “deal directly with the citizenry in the exercise of their powers” [self-rule]  Division of powers and allocation of resources between federal government (FG) and constituent units (state/ regional/ provincial govts) are written/ guaranteed in constitution  Neither level of government can unilaterally alter the powers of the other 14

RGManasan

13

Distinction between unitary & federal form of government  Precisely because division of powers and resources betw een FG and state governments (SGs) are written in constitution, design of federal form of government should be subject of careful study  Otherwise, bad design gets enshrined in the constitution, making it more difficult to correct mistakes

Distinction between unitary & federal form of government  If the objective is to promote subnational autonomy and secure potential benefits from more decentralized governance, principles that guide design of fiscal aspects of federal form of government are just as relevant for decentralized unitary form of government  These principles are aimed at ensuring that the FG and SGs face the right incentives for an efficient and equitable delivery of public services.

15

16

Design should be inform ed by lessons learned from Philippine decentralization experience

Overview of presentation  Context

 Deficiencies in the design of intergovernmental relations (or national- subnational relations) under the LGC – fiscal aspects

 Why reform the fiscal decentralization framew ork – w hat are the potential gains?

 Expenditure assignment – lack of clarity o

 Direction of reform  Costs and risks in shifting to federal form of government

o

 Conclusion

 Tax assignment – low level of revenue autonomy, particularly for provinces RGManasan

18

17

a/

65

Ov erlapping and, at times, unclear assignment of f unctions across various levels of government  introducing concept of shared powers might address issue U nf unded mandates  Relevant services either not deliv ered at all or not deliv ered in sufficient quantities

intergov ernmental relations = national-subnational relations

6/11/2018

Design should be inform ed by lessons learned from Philippine decentralization experience  Deficiencies in the design of intergovernmental relations under the LGC – fiscal aspects

 Deficiencies in the design of intergovernmental relations under the LGC – political economy  legislative overhaul of the LGC – difficult (Matsuda 2011)

 Intergovernmental transfers o o

Design should be inform ed by lessons learned from Philippine decentralization experience

o

Vertical f iscal imbalance; Inadequate equalization Too much reliance on block grants to achieve different grant objectiv es – differentiated use of alternative types of transfers likely to improve LGU incentives

 Subnational credit finance o

Too much reliance on procedural rules deter optimum LGU credit financing of local infrastructure

o

But, more autonomous SGs under federal form likely to increase fiscal risks unless adequate fiscal rules are put in place

Congress as an institution is cautious about expanding the resource base of LGUs  “Fiscally stronger LGUs depend less on individual national legislators for financial assistance and hence would result in loss of political leverage for members of the Congress [over the LGUs within their districts]. …. . if more resources were made available to provinces, gov ernors could emerge as strong political rivals, more so than they are already ….”

19

Reforming the fiscal decentralization framework – four pillars

20

Reforming the fiscal decentralization framework – suggested design 1. Expenditure assignment

1. Expenditure assignment 2. Tax assignment

 Monetary policy, currency and banking - Independent central bank

3. Intergovernmental transfers

 Exclusive powers of FG o o o o o

4. Subnational credit finance  Internal consistency of items 1-3 just as important as the specif ic f unctions and taxing powers that will be assigned to FG and SGs, esp. in terms of addressing potential risk of widening disparities in serv ice prov ision under a more decentralized regime

o

National def ense Foreign af fairs Immigration International trade Interstate commerce

Agrarian ref orm

 # 4 – important f or f iscal/ macro stability 21

Reforming the fiscal decentralization framework – suggested design

Reforming the fiscal decentralization framework -– suggested design 1. Expenditure assignment

1. Expenditure assignment



 Exclusive powers of state governments (SGs) o o o o o o o o

22

Shared powers of FG and SGs o o o o o o o o o o

Superv ision of LGUs Police Fire protection Early childhood education Water supply , sanitation and sewerage Waste management Road traf fic management Parks

o o o 23

Regional planning, land use management Law and order (provision of prosecution services) Basic education, higher and TVET education Health Labor and employment Social welfare and social assistance Agriculture, fisheries and aquatic resources Industry T ourism Road infrastructure (with national primary roads exclusively assigned to FG) ENR management Energy Science and technology 24

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6/11/2018

Reforming the fiscal decentralization framework – suggested design

Reforming the fiscal decentralization framework -– suggested design

1. Expenditure assignment

1. Expenditure assignment

 Residual powers – FG

 Preliminary estimate of costs of FG/ SG responsibilities assignment described above is followed

Note: With respect to shared powers, it is important to articulate in constitution/ legislation, principles that guide sharing of power FG and SGs (e.g., FG – policy, standard, oversight and financing, if applicable, of some of the specific competencies; SG – provision or production/ service delivery)

o

FG - 54% of total NG budget net of debt service or 8.5% of GDP (estimated based on 2016 GAA)

o

SGs (inclusive of what is now distributed to LGUs in the form of the IRA) - 45% of total NG budget net of debt service or 7.2% of GDP (estimated based on 2016 GAA)

25

Reforming the fiscal decentralization framework -– suggested design

Reforming the fiscal decentralization framework -– suggested design

2. Tax assignment – in addition to taxes currently assigned to LGUs right now , SGs shall have pow er to impose 

 

26

2. Tax assignment  Need to identify more SG taxing powers to ensure some degree of revenue autonomy for SGs

Residence-based surtax on personal income tax – say , 1% of taxable personal income of residents; – PhP 19 billion Motor v ehicle user charge or motor v ehicle registration f ees and driv er’s license f ees – PhP 13 billion Some increase in rev enues f rom existing LGU taxes if pending bills in Congress are passed (e.g., VRA)

o

Otherwise, need to rethink preliminary expenditure assignment to ensure some revenue autonomy

27

Projected SG revenues aggregated at SG level (in million pesos) Propose d ne w taxe s Re gion

PIT surtax

Existing taxes under LGC, 2015

Motor % distn of ve hicle new taxes re gistration (combine d)

Re al prope rty tax

Local busine ss tax

21,205

37,341

IRA

Total LGU income

% distn of total LGU inc

NCR CAR RI II III IVA IVB V VI VII VIII IX X XI XII XIII

5,641

5,075

33.5

17,404

92,839

18.2

345

240

1.8

411

573

10,355

13,741

2.7

609

511

3.5

1,502

1,328

16,753

26,080

5.1

637

320

3.0

539

713

16,723

20,106

3.9

2,348

1,634

12.4

4,881

4,360

29,890

46,031

9.0

2,283

1,591

12.1

9,741

8,745

33,881

60,917

12.0

631

103

2.3

555

14,572

16,986

3.3

358

261

1.9

814

899

18,966

22,949

4.5

985

651

5.1

2,350

1,719

25,222

35,073

6.9

1,110

952

6.4

2,226

3,553

22,095

41,498

8.1

571

199

2.4

444

513

18,741

22,669

4.5

494

341

2.6

451

552

13,036

15,692

3.1

690

396

3.4

1,248

1,548

17,419

23,474

4.6

900

454

4.2

1,420

2,084

15,686

21,897

4.3

553

477

3.2

726

766

16,946

20,276

4.0

351 116

162

1.6 0.4

462 30

666 116

13,188 12,231

16,267 12,761

3.2 2.5

Phil

18,624

13,367

100.0

48,981

66,028

313,107

509,257

100.0

ARMM

530

28

Reforming the fiscal decentralization framework -– suggested design 3. Intergovernmental transfers

 Need to address vertical fiscal gap – finance should follow function  Critical that disparities in fiscal capacity be addressed through equalization grants  Important to use appropriate type of intergovernmental transfer depending on policy objective (e.g., conditional transfers might be suitable if there is a need to incentivize SGs to provide minimum level of services for merit goods like basic education and public health)

LGU revenues concentrated in NCR, Regions III and IVA  underscore need for equalization transfers RGManasan

67

29

30

6/11/2018

Reforming the fiscal decentralization framework -– suggested design

Overview of presentation  Context

4. SG borrow ing  Golden rule – limit use of SG borrowing to the finance of capital investments only  Firm commitment of FG to “no bail -out” of SG loans  Need for bankruptcy policy and mechanisms for SGs

 Why reform the fiscal decentralization framew ork – w hat are the potential gains?  Direction of reform  Costs and risks in shifting to federal form of government  Conclusion

31

Shift to federal form of government comes at a cost

RGManasan

32

Shift to federal form of government comes at a cost  Elements of this cost

 Elements of this cost  Salaries of governors and vice governors of SGs and their staff as well as operating expense of their offices

 Salaries of Senators (second chamber) and their staff as well as operating expense of their offices – 3 to 7 senators per S G as per PDP



Salaries of state legislators and their staff as well as operating expense of their offices – 3 alternative models o

o o

RA 9054 - 3 legislators elected by popular vote in each legislative district plus sector representatives whose number should not exceed 15% of total number of legislators elected by popular vote  total number of state legislators = 812 Proposal of Sen Nene Pimentel – 3 legislators elected by popular vote in each province/ city plus 3 sectoral representatives in each province/ city = 1,356 BBL model – at least 10 legislators per legislative district (40% of whom are elected by popular vote, 50% are party representatives, and 10% are sectoral representatives) = 2,380

33

Shift to federal form of government comes at a cost  Estimate of additional fiscal burden - ranges fromPhP 33 billion to PhP 63 billion depending on number of states, size of legislative body at SG level and size of second chamber

34

Pre-conditions for success in adopting federal form of government  Reform of party system so as to institutionalized strong political parties w ith “coherent ideological programs and policy platforms and internal organizational discipline” (Matsuda 2014)  Government budget support to political parties

 Eliminate high barrier to entry in political arena – political dynasty (Pilapil 2016)

35

36

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6/11/2018

Risks in adopting federal form of government  Regional disparities may w iden if fiscal equalization is w eak – risk is high given initial condition is bad to start w ith

Risks in adopting federal form of government  Without pre-conditions, likelihood of elite capture large

 Accountability may w eaken if there is low revenue autonomy

 Even if initial design of federal model is coherent at the start, likelihood is high that initial model w ill be changed to reflect the particular interests of the framers of new constitution  Recall concerns raised earlier regarding political economy of fiscal decentralization reform

37

Conclusion

38

Conclusion

 Tw o options to choose from

 How to choose?

 Shift to federal form of government or  Reform fiscal aspects of LGC

 Decision making under uncertainty o

 Who are the decision makers?  Political leaders  You and I  All of us

In choosing between these two policy options, one needs to: a.

weigh relative net benefit (i.e., benefits less costs) of the two policy options and

b.

assess the probability that reform actually results in the desired outcomes

39

P hilippine Institute for D ev elopment Studies

Surian sa mgaPag-aaral Pangkaunlaran ng Pilipinas

40

Thank you WEBSITE: www.pids.gov.ph

Service through policy research

FACEBOOK: facebook.com/PIDS.PH TWITTER: twitter.co m/PIDS_PH

EMAIL: rmanasan@mail.pids.gov.ph

41

69

RGMa na sa n

42

Discussion on Fiscal Federalism

6/11/2018

Dr. Acram A. Latiph Salient Points of the Presentations

Discussion on Fiscal Federalism The Third Mindanao Policy Research Forum on “FEDERALISM as Policy Option for a Decentralized Inclusive Development: A Critical Inquiry” AdZU Auditorium, Zamboanga City September 7, 2017

Dr. Acram A. Latiph Mindanao State University Marawi City, Lanao del Sur

Salient Points of the Presentations • Federal system induce efficiency and effectiveness of government policies; • Also enhances accountability and address regional diversities as well as conform to local environment and political landscape; • Reforms should focus on expenditures and tax assignment, intergovernmental transfers, and borrowings; • Shift to federalism may be costly due to bigger bureaucracy; • Under federalism regional disparity may widen, result to elite capture, and weaken check and balance; and • Federalism may cure many of the maladies and problems that we face today under the unitary system.

• Poor performance on poverty reduction and other development outcomes can be traced to highly centralized political and economic governance;

• Over centralization cause inefficiency and ineffectiveness of policies, delivery of social services and public goods, and favoritism; • Also leads to lack of fiscal discipline, corruption, political patronage, political dynasty, fragmentation and weak governance; and • Further cause overlapping and ambiguous mandate and responsibilities across various level of government.

Some Observations • Local Executives are seen as dispenser of funds rather than taker; making them wary of assuming more fiscal responsibilities in tax collection; • Will federalism really result to accountability, efficiency, and effectiveness in governance, public service and higher development outcomes;

• Level of development and economic growth is highly correlated with fiscal capabilities; and • Will rich regions share their funds to others (notably the National Capital Region and Southern Tagalog).

Commercial data across regions of Mindanao (2011)

Source: http://www.tjpalanca.com/2014/09/regional-accounts-2013.html

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Some Observations

Analysis of HDI and Poverty Incidence vis-à-vis IRA per capita and Good Governance Index (1995 – 2012)

Source: http://www.tjpalanca.com/2014/09/regional-accounts-2013.html

The crux of the matter…

If the Philippines is a person; this is what he looks like and what an ideal shift to federalism should be…

• To certain extent, it’s the use of money that matters most;

• Transition period from unitary to federalism is the key: • How lagging region will be supported?

• How funds will be distributed?

• How to prioritize regions?

• Who gets more and who gets less?

• One good area to look into is where wealth are created and where taxes are paid; and • Ultimately, the move to any form of government boils down to whether it will improve the quality of governance or not.

Current Unitary System

Ideal Federal System

Thank you very much…

2 71

The PDP Laban Model of PH Federalism

6/11/2018

Jonathan Malaya

GENERAL PROVISIONS

Proposed Amendments to the THE 1987 CONSTITUTION OF THE PHILIPPINES

•

• •

CONSTITUTION OF THE FEDERAL REPUBLIC OF THE PHILIPPINES

FEDERAL REPUBLIC SEMI PRESIDENTIAL (DUAL EXECUTIVE) BICAMERAL LEG ISLATURE/PARLIAMENT •

•

•

Semi-Presidential System: DUAL EXECUTIVE PRESIDENT

PRIME MINISTER

Design ation

Head of State

Head of Government

Election

Nation ally Elected (should be nominated by members of the Federal Assembly from registered Political Parties or a Coalesce of Parties with 20% members seated in the Federal Assembly)

From the Federal Assembly (PM is nominated and, with the with the consent of the Federal Assembly, appointed by the President)

Term of Office

5 year term; maximum of 2 terms

May be removed at any time on a vote of no confidence by the Federal Assembly

Federal Assembly Senate

REGIONAL GOVERNMENTS

PRESIDENT • • •

• • •

The Symbol of the Nation and the Decisive leader in times of crisis Primary Responsibility: National Defense and Foreign Affairs Can veto acts of Parliament, including line item veto of budget, revenue and tariff bills Appoints members of the Judiciary Nominates and with the consent of the Federal Assembly, appoints the Prime Minister Can dissolve Federal Assembly depending on certain conditions, and call for new elections

PRIME MINISTER •

Responsible for the program of Government and determines the guidelines of national policy

•

Sets domestic and economic agenda Runs day-to-day affairs of government

• • •

72

Appoints members of his Cabinet and other officials except those appointed by the President Prepares budget and submits to Federal Assembly

THE PARLIAMENT SENATE

FEDERAL ASSEMBLY

Composition

3 sen ators per Region

400 Members (60% elected by Plurality Votes in Legislative Electoral Districts; 40% by Proportional Representatio n in Political Parties)

Term of Office

5 year term, maximum of two consecutive terms

5 year term, maximum of two consecutive terms

6/11/2018

THE PARLIAMENT SENATE • Primarily Represent the Regions in the Federal Government and in the Parliament.

• Exercises consent legislation only on all bills and resolutions passed by Federal Assembly (no need for 3-readings in the Senate) Powers and • May not initiate legislation Responsibilities • Confirms appointments made by the President and Prime Minister except when nominee is a member of Parliament • Act as Impeachment court • Approves treaties and international agreements

JUDICIARY FEDERAL ASSEMBLY • Vested with primary legislative power • Budget appropriation: revenue, tariff bills, and bills authorizing public debts, with the concurrence of the Senate

•

Prov ision f or Appellate Courts in the Regions

•

Abolition of the Judicial and Bar Council

POWERS AND FUNCTIONS OF THE FEDERAL GOVERNMENT

FEDERAL GOVERNMENT •

•

The Federal Gov ernment shall possess all the f unctions and powers v ested in the National gov ernment by previous constitutions.

The Federal Gov ernment shall exercise general superv ision ov er the Executive, Legislativ e and the Judicial Branches

National • Customs Defense and Tariff Police and • International National T rade Security • Inter• Foreign regional Affairs Commerce •

•

Currency and Monetary Policy

welfare and development.

 SUBSIDIARITY: Government services are rendered more efficiently by the government

instrumentality nearest to the people being served.

 SOLIDARITY: The Regions shall act with cooperation and interdependence

with the Federal Government and other Regions for the unity, good and welfare of the entire Federal Republic.

 



 DEMOCRATIC: The structure and system of Regional Autonomy shall be based on democracy in



 ACCOUNTABILITY: Regions shall be governed in accordance with the Constitution and the law



a Federal and Republican State.

and be held accountable for the efficient and honest governance of the Provinces, Cities, Municipalities, and Barangays within its territory and boundaries.

•

General Auditing • Energy

•

•

Postal Service

National Elections• Judiciary and the Administration of Maritime, Land Justice and Air

•

Quarantine

•

T ransportation and Communication

The Philippines shall be divided into:

 DECENTRALIZATION AND DEVOLUTION: The State shall grant and transfer powers, autonomy

and functions to the Regions in accordance with the Region’s competence, capacity, and resources.

Citizenship, • Patents, NaturaIization, T rademarks, Immigration and T rade Names and Deportation Copyrights

REGIONAL AND LOCAL GOVERNMENTS

PRINCIPLES OF REGIONAL AUTONOMY TOWARDS FEDERALISM  AUTONOMY: The State shall allow the people of the regions to determine what is best for their

•

•



Regions Autonomous Regions created by Organic Act and Ratified under a plebiscite by virtue of the 1987 Constitution Provinces Cities Municipalities Barangays

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6/11/2018

POWERS AND RESPONSIBILITIES OF REGIONAL GOVERNMENTS Excl usive Legisl ative Powers: • • • • • • •

Revenue generation and Taxation Social Welfare and Development Tourism Irrigation, Water and Sewerage Waste Management Fire Protection Regional

•

•

Development Planning Franchises, Licenses and Permits Allocation and Provision of Funds and Resources to competent Local Governments within the Region

•

Define the powers, functions and responsibilities of the Regional Government

•

Define Accountabilities of the Regional Governments in relation to the Federal Government

•

Defines how Regional Governments will be funded

•

Provides for the Organizational Structure and Operations of the Regional Commission

•

Provides the Transitory Mechanisms to an elected Regional Government under the Organic Act

•

Provides for an Equalization Fund and the Creation of a National Finance Commission

•

Adheres to the Principles of Externalities. Cooperative and Evolutionary Federalism, Fiscal Equivalence and Good Governance





74

Regional Commissions

The Regional and Local Government Code:

•



O RGANIC ACT

Regional and Local Government Code

Enacted by the Parl iament within a period of eighteen (18) months from the ratification of the Constitution

•

REGIONAL AND LOCAL GOVERNMENT CODE

• Powers and functions of the Federal Government shall be devolved and transferred to Regional Governments • Power of Eminent Domain

STEPS TOWARDS REGIONAL AUTONOMY

REGIO NAL CO MMISSIO N

Organic Act



Organ ized upon creation of a Region an d En actmen t of a Region al an d Local Government Code



Composed of the Incumbent Governors of Provinces and Mayors of Highly Urbanized Cities an d Independent Component Cities within the Region. Chairmanship shall be by succession and rotation among its members (on e-year term)



Un til the en actmen t of an Org a nic Act for each Region , the Region al Commission shall: •

be the Regional Government, actin g as a Collegiate Body with Executive an d Legislative Powers;

•

elect a Region al Chief Admin istrator who shall be a Profession al Man ager to exercise the executive fun ction s of the Commission an d act as the Chief Executive Official;

•

be vested with the power of appointment of Regional Cabinet Members and other government positions ;

•

create an d organ ize the govern men t offices an d bureaucracy n ecessary for effective an d efficien t fun ction in g of the Region al Govern men t;

•

exercise the Legislative Powers granted by the Constitution to Region al Govern men ts

May be submitted by the Commission to the Parliament: •

Ten years (minimum) after the organization of the Regional Commission; AND

•

Upon two-thirds (2/3) vote by the Commission and the Regional Consultative Assembly, voting separately ; OR

•

By Regional People’s Initiative as determined by law within the Region

Organic Acts:

FISCAL FEDERALISM •

The tax system shall follow widely held principles of an efficient tax system

Shall define the basic structure of government for the Region consisting of Elective and Representative Executive and Legislative Departments

•

The taxing powers of the national and local governments will not change

Shall provide for the transfer of Powers and Functions of the Regional Commission to the Regional Government

•

•

May increase the exclusive powers and functions of the Regional Government as provided in the Constitution and the law

Regional Governments should get a constitutionally guaranteed allocation of budgets that allows them to funds their responsibilities

•

•

May provide for Special Courts consistent with the provision of the Constitution and Federal Laws

Increased powers and resources to the Regional and Local Governments should be balanced by greater accountability

•

Federalism requires credible fiscal controls

•

Each level of government shall be vested within sufficient revenue powers that will enable them to perform their respective responsibilities

•

Shall be more responsive to the specific needs and aspirations of the people within the Region;

•

•

The Organic Act or any amendment/revision thereof shall only become effective when approved by a majority of votes cast in a plebiscite in the Region.

6/11/2018

On POLITICAL PARTIES Political Parties shall:

OTHER AMENDMENTS



serve as a mechanism of communication and cooperation between the citizens and the State



facilitates political organization and representation, continuously forming, formulating and ultimately developing informed public opinion



develop a system of administration that is aimed at developing the party’s professional bureaucracy and membership



observe fair, honest and democratic processes in nominating and selecting their candidates for public office

ON ECONOMIC PROVISIONS Principal Objectives:

Revisions:

1. To ensure free comp etition and reduce



Restrictions on foreign ownership in the following areas have been removed: public utility, mass media and advertising

2. To p romote market efficiency based on the



Policy is now left for the Parliament to determine on the following areas: use of natural resources, operation of public utility, labor, agrarian reform and natural resources, and urban land reform and housing

dependence on a few large companies and monopolies in the country;

competency of producers and the enhancement of consumer welfare;

3. To enhance international comp etitiveness

by meeting trade agreement obligations and increasing foreign direct investments



Land ownership is still reserved for Filipinos



ensure the integrity, loyalty and discipline of their members



register to the Federal COMELEC

Reforms proposed:  Party switching shall be BANNED • Elected Officials cannot change their party affiliation during their term of office • Candidates cannot change their political party within one year preceding or following an election • Any elected officials who violates this shall lose his seat, disbarred from being appointed to a public office and prohibited from running in the next election  SUBSIDY will be provided by Parliament to

Political Parties based on their electoral performance in the previous election, subject to audit by the Federal Commission on Audit.

FEDERALISM AS THE GRAND BARGAIN The Package of Reforms to make Federalism succeed: • Make the anti-dynasty provi si on i n the Consti tution self-executi ng

• Support the development of strong and cohesi ve politi cal parties by penali zi ng

poli ti cal butterflies

• Provi de budget support to poli ti cal parti es just li ke i n mature democracies • Insti tute a system of proporti onal representati on

• Li ft the cap on the number of seats a politi cal party can hold • Strengthen the powers of the COMELEC, CSC, COA, Ombudsman and

Sandi ganbayan and ensure thei r strong presence i n every regi on

• Desynchroni zed electi ons

THANK YO U FO R YO UR ATTENTIO N!

PDP Laban Federalism Institute 14F Petron Megaplaza, Gil Puyat Ave. Makati City, Philippines

75

Discussion on the Draft Philippine Federal 6/11/2018 Constitution Lito Lorenzana The 2005 Consultative Commission to Revise the 1987 Constitution (ConCom)

The CDP, LAKAS, CDPI Roadmap to Federalism

LITO MONICO C. LORENZANA PRESIDENT, CENTRIST DEMOCRACY POLITICAL INSTITUTE

CHAIRMAN, CENTRIST DEMOCRATIC PARTY

Unicameral Parliament

• Simultaneaous Federal Presidential System • Bicameral Government • Charter Revisions

• Shift to Parliamentary Government first by 2022 • Federal System by 2028 & beyond • U nicameral Parliament

IN CONTRAST all to be done w/in a period of 57 mos.

(June 2022)

will take more time than the remaining 57mos.

The 11 Regional States per Sen. Aquilino Pim entel Sr.

Prime Minister

President

(Head of Government)

(Head of State)

Cabinet recruited from am ong the members of the Parliament

Elected from among the members of parliament

Vote of No Confidence replace the Prime Minister

Ceases to be a member of parliament and any political party Serves a term of 5 years

Creation of autonomous regions leading towards a Federal Republic Autonomous territory

Allow the provinces and highly urbanized component cities to evolve first to an autonomous territory Self-determination, Autonomy and Subsidiarity

1 76

6/11/2018

PUT IN PLACE FOUR (4) PRECONDITIONS WHILE REVISING THE 1987 CONSTITUTION Sept 2017- May 2019 Through Plebiscite in 20 months

1st precondition: Political Party Reform Possess an ideological core

Political Party Development and Financing Act

2nd precondition : Ban Political Dynasties

Penalize Professionalize Turncoatism Transparent political partiesof (or the switching mechanisms parties)

Article II Section 26 of the 1987 Constitution

We want to eliminate Political Dynasties!

3rd precondition: Passage of Freedom of Information Bill allow public access

Philippines as a Republic

1950

1960

1970 1980 1990 2000 2005 2010

2013

‘self-executory’

2014

Compel transparency and accountability

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6/11/2018

4th precondition: Initiate electoral reforms Clean and fair elections COMELEC must be refor med

3 78

Mindanao Development Authority

Old Airport Bldg., Old Davao Airport Road, Km.9, Sasa, Davao City, 8000 Philippines

minda.gov.ph

fb.com/MinDAGovPHOfficial

@MinDAGovPH