By Arjay L. Balinbin, July 18 2018; Business World


MALACAÑANG said it has “clarified” matters with Socioeconomic Planning Secretary Ernesto M. Pernia on the economic impact of a shift to federalism, and asserted that the change of government system does not carry the risk of weakening the country’s fiscal position, as Mr. Pernia had warned.

In a statement on Wednesday, Presidential Spokesperson Herminio L. Roque, Jr. said, “We have discussed and clarified the matter with National Economic and Development Authority (NEDA) Director-General and Secretary Ernesto Pernia. The shift to federalism, we reiterate, would have no adverse effect on the Philippine economy.”

He added: “Our budget will remain the same, as identified national projects would be devolved and transferred to the internal revenue allotment (IRA) of local government units. These projects include maintenance of barangay roads and bridges, water supply services, barangay health centers and daycare centers, solid waste disposal system of municipalities, among others.”

The role of the national government, according to Mr. Roque, “would be to continue to implement Build, Build, Build projects and will… be concentrated on policy making.”

Asked to elaborate, Mr. Roque said in a text message to reporters that “[i]t was only a matter of clarifying that the federal form of government does not require a bigger budget, which might result in a higher deficit.”

Senator Francis N. Pangilinan, who chairs the Senate Committee on Constitutional Amendments and Revision of Codes, said: “Yesterday’s hearing raised a lot of difficult questions needing urgent clarification. Among those questions that need clear answers from the Consultative Committee refer to cost and funding: How much is the creation of a federal government going to cost the Filipino people? How is it to be funded?”

He said “about P55 billion is needed for salaries of new federal state elected officials, according to Dr. Rosario G. Manasan of PIDS (Philippine Institute for Development Studies). And the amount does not include the cost of new infrastructure.”

The committee’s response, according to Mr. Pangilinan, is that “there are already existing regional offices of national agencies. With P55 billion comprising half the tax take from TRAIN 1 (Tax Reform for Acceleration and Inclusion), what is clear so far is that federalism means more taxes or more borrowings or both.”

“These concerns prove that we cannot rush ‘Cha-cha.’ Doing so is like careening off the cliff to political and economic limbo. If we wish to avoid political and economic disaster, we should not rush Charter change,” the lawmaker also said.

In his interview with The Chiefs on Cignal TV’s One News on Monday, Mr. Pernia said that President Rodrigo R. Duterte’s economic management team believes not all regions in the country are ready for federalism.

“[I]t’s unlikely that the regions will be ready… The momentum of infrastructure improvement in the regions is going to be disrupted,” he said.

Mr. Pernia added: “That’s really going to wreak havoc in terms of our fiscal situation and we will certainly experience a downgrading in our ratings.”