Is business ready for the Philippines being a federal state?

The incoming administration has the shift to a federal system high on its agenda. The idea of the incoming president from Mindanao obviously is to de-centralize decision-making and shift much of that power to the federal states to be created.

While the idea of federalism is not new in the Philippines ñ the idea has been raised by previous administrations / commissions, business has not really studied the effect of federalism on governance and the business environment yet.

Under the Aquilino Pimentel proposal, there will be 11 federal states, four federal states in Luzon will be Northern Luzon, Central Luzon, Southern Tagalog and the Bicol area; four federal states in the Visayas will be Eastern Visayas, Central Visayas, Western Visayas, and the provinces of Romblon and Palawan; and Mindanao will be composed of three federal states of Northern Mindanao, Southern Mindanao, and a separate state for the Bangsamoro.

In most foreign countries with a federal system, the federal government wields powers over foreign affairs and national defense. 

Pimentel proposes that a Philippine federal government should additionallyretain control over the justice system and the public school system. The rest of governmental powers will be delegated to the autonomous state governments.As many as 70 percent of Filipino politicians are connected to dynasties who have ruled the towns and provinces for generations, how much more influence and wealth will these dynasties manage if more powers from the national government are devolved and handed over to their control?

Given the intent of the Duterte administration to shift to a federal system, local and foreign business will have to spend time and effort to look at the recommendations made by Philippine commissions /experts in previous years and, at the same time, study best practices in federalism around the world, from a number of European countries, to the US and Canada, and to examples in Mexico and other parts of the world.

Once those experiences have been studied, both the incoming administration, both House of Congress, and business will have a better idea what will work in the Philippines and what business has to do/change in order to adjust to a different system. The good thing is that we will have time; the shift is not going to happen immediately, it will take a number of years.

In the meantime, it will make good sense to develop a closer dialogue with LGUs. The European Chamber of Commerce of the Philippines (ECCP), recognizing the already substantial power of the LGUs, has started to develop a closer cooperation between the LGUs and business.             Part of the partnership is effectively implementing a project called ëIntegrity for Jobsí with the basic concept to create transparent LGUs with a clear mid- to long-term vision to attract investors who will offer jobs. Integrity circles, composed of LGUs, business and civil society, are part of this process which is presently rolled out to a wide number of LGUs.