1) What is the Development Policy Research Month about?
Pursuant to Presidential Proclamation 247 signed in September 2002, the Development Policy Research Month (DPRM) is celebrated every September to encourage Filipino leaders and the public at large to appreciate the role and importance of evidence-based research in program planning and policymaking. The DPRM seeks to encourage proper, systematic, and quality policy research in creating social and economic policies.
2) What role does the Philippine Institute for Development Studies (PIDS) play in the celebration of the DPRM?
As the country’s leading socioeconomic think tank, PIDS organizes various activities to demonstrate the importance of policy research and to engage the public to participate. During the month-long celebration, the PIDS, together with the members of the DPRM steering committee, organizes policy seminars and dialogues, press conferences, and roundtable discussions with institutions, fellow researchers, planning advisers, policymakers, and the media. These events demonstrate an exercise in interagency cooperation to emphasize the importance of evidence-based policymaking.
3) Why is there a need to declare a DPRM?
Policy research is an important requirement for effective planning and policymaking. Policies should be evidence-based and the DPRM highlights this fact. It also aims to make people become more aware of the importance of research evidence in crafting programs and policies and to remind our policymakers that we have policy studies and other similar resources that are within their reach for their decision-making processes.
4) What is this year’s DPRM theme?
This year’s DPRM celebration carries the theme “Strengthening Decentralization for Regional Development” or “Pagpapatibay sa Desentralisasyon Tungo sa Kaunlarang Panrehiyon” to highlight the need for in-depth reflections and evidence-based analyses not just on the proposed shift to a federal form of government but encompassing the bigger umbrella of decentralization reforms in the country. Through the various DPRM activities that PIDS has lined up for this year, such as press conferences, regional fora, radio and TV appearances, and the Third Annual Public Policy Conference on “Critical Perspectives on Federalism for Regional Development”, we aim to promote a more inclusive and evidence-based discourse on decentralization issues and reforms, including the debates around federalism.
5) What is the extent of decentralization in local government units (LGUs)?
Before the enactment of the Local Government Code of 1991 or Republic Act No. 7160, the primary functions of local government units (LGUs) were mainly on levying and collection of local taxes, regulation of business activities, and administration of garbage collection, public cemeteries, public markets, and slaughterhouses.
With the passage of the Code, LGUs have been given more powers, authority, responsibility, and resource as categorically provided by the Code.
The Code represented a major step in decentralization. It paved the way for increased local autonomy, expenditure responsibility, and revenue authority. Specifically, it devolved some functions of the national government to local governments such as health, agriculture, public works, environment, and social services, among others.
[Source: Presentation of Atty. Anna Mae Pegregosa of the office of OIC DILG Secretary Catalino Cuy]
6) What are the challenges confronting decentralization in the country?
The goal of decentralization is to let people actively participate in decisionmaking, specifically, in choosing programs and services that can better address local needs. However, this requires sufficient technical capacity on the part of LGUs, as well as supporting institutional arrangements. LGUs are facing greater challenges with the increased powers given to them. They should be able to diagnose problems, identify appropriate interventions and identify target beneficiaries, do their own planning and budgeting, implement projects and programs, and assess their impacts. Institutionalizing a monitoring system at the local level is also one of the challenges faced by LGUs.
[Source: Presentation of Atty. Anna Mae Pegregosa of the office of OIC DILG Secretary Catalino Cuy]
7) What are the steps taken by government to strengthen the implementation of decentralization in the country?
The Department of the Interior and Local Government (DILG), as the agency that oversees the operations of LGUs, has taken steps to strengthen the implementation of decentralization in the country. It capacitates, assesses, and incentivizes LGUs through reforms and programs such as (1) Seal of Good Local Governance (SGLG), (2) Performance Challenge Fund (PCF), and (3)Assistance to Disadvantaged Municipalities (ADM).
The SGLG measures the performance of LGUs infour core areas, namely, financial administration, disaster preparedness, social protection, and peace and order. In addition to these four core areas, LGUs must pass any of the essential areas such as business friendliness and competitiveness, environmental management, and tourism, culture and the arts.
PCF, on the other hand, serves as an incentive to LGUs that passes the SGLG. It is used to finance development projects needed in their areas of jurisdiction.
Meanwhile, under ADM, the national government transfers funds to municipalities after complying with good governance standards (such as, among others, having no adverse audit findings), particularly the DILG’s Seal of Good Financial Housekeeping and the assessment of their Public Financial Management Systems and adoption of corresponding improvement measures.
[Source: Based on present programs of the DILG]
8) What is a federal form of government?
It is a form of government where sovereignty is constitutionally shared between a central government and constituent political units called states or regions.
In basic terms, it will divide the country into autonomous regions with a national government handling interests that affect the entire nation, such as foreign policy and national defense. Meanwhile, the autonomous regions or states, which are further broken into LGUs, will be responsible for developing their local industries, education, health care, public safety, and transportation, among others.
In this setup, states or regions have more control over their finances, development plans, and laws exclusive to their jurisdiction.
Examples of federal countries are United States of America, Canada, Australia, Brazil, India, and Malaysia.
9) How different is a federal form of government from the existing setup?
At present, the Philippines has a unitary form of government, wherein majority of administrative powers and resources are with the executive branch of government. The executive branch headed by the President of the Philippines decides how much power and resources are given to the LGUs.
Under a federal system, sovereignty is shared and powers are divided between two levels of government, namely, the state/regional governments and the federal government, each dealing directly with the citizenry in the exercise of their powers.
The federal government has authority to independently decide on interests affecting the whole country. The same goes with the state/regional governments on interests relating to their respective territories. However, neither of them can unilaterally alter the power of the other.
10)Why is it important to study the proposed shift to federalism?
Given that the division of powers between the federal government and the state governments is embedded in the Constitution, the government should carefully study the design of this form of government and its application in the Philippine context. PIDS promotes the need for a multidisciplinary approach in examining federalism, including the allocation of powers and resources.
First, we need to carefully examine the distribution of functions to each level of government under a federal form of government. In most federations, the federal government handles the foreign affairs, national defense, macroeconomic and monetary policies, and interregional transportation. The state governments, on the other hand, take charge of the provision of social services (including education, health services), local infrastructure, and maintenance of peace and order. Meanwhile, the two usually share the responsibility concerning agriculture, environment, and natural resources.
The Constitution must specify which powers are exclusive to the federal or state governments and which are to be shared by both. Moreover, we must determine which level of government handles the residual powers, or those powers not explicitly assigned in the Constitution. Doing so reinforces the autonomy and accountability of governments in exercising their powers.
11) What are the potential benefits of shifting to a federal form of government?
Initial assessment done by fiscal policy expert and PIDS Senior Research Fellow Rosario Manasan shows some potential benefits of shifting to a federal form of government, namely:
a) A federal form accommodates regional diversity. That is, a federal system brings government closer to the people, by allowing LGUs to respond to the different needs and preferences of their local constituencies. As an archipelago of over 7,000 islands and 28 dominant ethnic groups, the Philippines is composed of regions that have their own unique situations—geographic, cultural, social, and economic in nature. Federalism allows them to create solutions to their own problems, instead of the national government deciding for them.
b) It also promotes increased efficiency. Given that taxing and spending powers are decentralized to state governments, they can determine the allocation of their own funds to promote their own development without going through the process of getting approval from the national government. They can also implement local economic development strategies, such as tax breaks, to attract more investments and create jobs.
c) A federal system also strengthens citizen participation and accountability in local governance. The setup of state governments allows people to be more involved in decisionmaking and in the identification of programs beneficial to them.
These potential gains, however, may still be secured with greater decentralization even without a shift to a federal form of government. In fact, federalism does not equate to decentralization. For example, Malaysia, which follows a federal system, is more centralized than the Philippines, which has a unitary system.
12)Why is the allocation of financial resources to each level of government important? What are the guiding principles in assigning taxing powers?
Allocating financial resources to federal and state governments is important for two reasons. First, the degree of the allocation of resources may enable or constrain governments in their exercise of their legislative and executive responsibilities. Second, the taxing powers and expenditure are themselves important instruments for affecting and regulating the economy. Each level of government must have enough "own" revenues to finance their public services. This is an important element in promoting local accountability to constituents.
Ideally, taxes assigned to federal governments are (1) taxes that can be exported to residents of other jurisdictions or those which interfere with the interjurisdictional trade, (2) taxes on mobile factors of production, and (3) redistributive taxes like personal income tax, among others. Meanwhile, taxes on immobile factors and user charges are ideally assigned to state governments.
13)How do other countries with a federal system of government assign taxing powers to federal and state governments?
Nearly all federations have assigned the majority of major revenue sources to the federal government. Such concentration of resources is deemed necessary for the federal government to perform its redistributive role and maintain economic stability and development. It may also be due to the perceived greater efficiency of federal level tax administration agencies.
Most federations specify in their constitutions the revenue-raising powers of the two levels of governments, such as:
(a) Customs and excise taxes are almost always assigned to federal government to ensure an effective internal custom and economic union.
(b) Corporate income taxes are most often assigned to federal government. Corporations, in earning their income, tend to cross state boundaries, and the location of their headquarters does not necessarily reflect the geographical sources of their income. However, in some federations, this tax may be under concurrent jurisdiction of federal and state governments.
(c) Although usually attributed to the location of residence, personal income taxes are often shared by both federal and state governments. In some areas, such as Austria and India, however, these go exclusively to the federal government.
(d) Sales/consumption taxes are often shared by both federal and state governments.
14)Another issue in the proposed shift to a federal system is the ownership and management of natural resources. Why is there a need to study this issue thoroughly?
Natural resources are typically distributed unevenly across the country. Given that the ownership or control of these resources determines who gets revenue from their exploitation, this can promote uneven economic development that can strain the stability of the federation. This raises the need for a thorough assessment of the assignment of ownership and control of such resources between federal government and state governments.
15) Another issue on federalism is the uneven fiscal development among states. Some states may not be as ready for autonomy as others. How do we correct this imbalance?
Designing good intergovernmental transfers is key to addressing risks of uneven fiscal development. Intergovernmental transfers could be in the form of tax shares, unconditional block grants, or specific-purpose conditional grants to assist poorer states. Conditional grants, however, tend to reduce the autonomy of states.
Another way is through equalization arrangements, which is currently the practice in some federations like Germany, Canada, and Switzerland. This could be formula-based involving some measures of fiscal capacity (e.g., Switzerland, Canada, Belgium), expenditure need-based (e.g., Australia administered by the Commonwealth Grants Commission), or a combination of indicators of revenue capacity and expenditure need (e.g., Spain). It could also be based on the recommendations of an independent finance commission (India) or a National Finance Council (Malaysia).
Initiatives on federalism and decentralization
16) Are there suggestions on how the Philippine government should implement federalism?
Yes. In fact, there are already several proposals on the kind of federalism the country should adopt.
a) PDP-Laban’s proposal
At present, the PDP-Laban, as presented by its president Aquilino Pimentel III, is pushing for a semi-presidential executive-legislative setup under the federal system of government (with 11 regions) wherein the president and the prime minister both have powers. The president, as the Head of State, would have power over national issues such as military, foreign affairs, and national defense. Meanwhile, the prime minister would serve as the Head of Government and has power over domestic issues. Senators, who would represent each of the 11 regions, would cover issues on national budget, national defense, and foreign affairs.
Under this proposal, there would be two orders of government—federal and regional. The federal government will focus on issues concerning the entire nation while the regional government will focus on providing basic services to the people. There are also instances when the two will share powers. The revenue share of regional governments is expected to increase. In a Senate press release, Pimentel was quoted as saying that the proposal is “uniquely Filipino”.
The PDP-Laban Federalism Institute is also preparing a draft federal Constitution which will be submitted to Congress. The DILG has also urged LGUs to hold federalism forums at the barangay level for a more inclusive federalism proposal.
b) Other proposals
There is also a proposal from Aquilino Pimentel Jr.—a staunch advocate of federalism and one of the founders of PDP-Laban—to divide the Philippines into 11 federal states. While it would not affect the current existing congressional districts, the senators would be elected from each of the federal states.
Another proposal is from the Citizens’ Movement for a Federal Philippines (CMFP) which viewed federalism as a “panacea to the deteriorating relationship between Muslim groups with the Philippine government” (Cureg and Matunding 2006). Although similar to Pimentel’s proposal in terms of the number of states, it wants a “federal-parliamentary form of government”.
17) Are there proposals leaning toward decentralization and its other types instead of federalism?
There are experts saying there is actually no need for a federal form of government nor change the 1987 Constitution if the goal is to decentralize power in Metro Manila or distribute resources more equitably to the regions. For example, retired Supreme Court Justice Vicente Mendoza said in April this year that with the current form of government, the 1987 Constitution, and the Local Government Code, the country can actually achieve it. Meanwhile, former University of the Philippines President Jose Abueva suggested amending only certain provisions of the 1987 Constitution.
18)Are there ongoing efforts to push through with federalism?
To shift to federalism, the Constitution must be amended first through any of the three: Constituent Assembly, Constitutional Convention, and the People’s Initiative.
There have been a number of resolutions on both houses of Congress seeking for constitutional reforms to be able to establish a federal form of government in the past years. One of the recent ones was in October 2016—a resolution calling the 17th Congress to turn itself into a Con-Ass that was passed at the committee level.
By the end of 2016, President Duterte issued Executive Order (EO) 10 creating a 25-member committee that will study, conduct consultations, and review provisions of the 1987 Constitution. It was supposed to present its findings six months after the issuance of the EO, so that those can be used by Congress as it deliberates on the amendments of the Constitution.