Federalism won’t negatively impact economy — Palace

MANILA, Philippines — Federalism will not set back development in regions not ready for it, Malacañang said yesterday, refuting a warning raised by the country’s top economist.

Presidential spokesman Harry Roque said contrary to concerns raised by Socioeconomic Planning Secretary Ernesto Pernia, shifting to federalism would not involve drastic changes in the budget program nor cause delays or abandonment of infrastructure projects.

Roque said the Palace had already discussed the matter with Pernia who had cautioned the administration against rushing federalism.

While federalism could unlock economic benefits, Pernia earlier said it could also spell disaster for some regions not prepared for such transition. Pernia also heads the National Economic and Development Authority (NEDA).

“Our budget would remain the same, as identified national projects would be devolved and transferred to the internal revenue allotment (IRA) of local government units,” Roque said.

“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,” he added.

“The role of the national government would be to continue to implement Build, Build, Build projects and would hence be concentrated on policymaking,” Roque pointed out.

Roque, however, did not discuss Pernia’s concerns that a shift to federalism could inflict damage on the country’s balance sheet, like pushing the deficit-to-GDP ratio to six percent.

Sharing Pernia’s concern is Rep. Gary Alejano of Magdalo who warned that most regions and provinces would not be able to survive under a federal system being pushed by the administration.

“I agree with the assessment of the National Economic and Development Authority that the poor regions would be left behind in terms of growth. There is huge imbalance when it comes to economic status and availability of wealth and resources among regions in the country,” Alejano said.

He said only Metro Manila and two or three other regions that have enough income would be able to operate on their own without internal revenue allocation (IRA) from the national government.

IRA represents the share of local government units (LGUs) in national revenues. It used to be 40 percent, but the Supreme Court, in a recent decision, increased it. With the ruling, the Department of Finance and Department of Budget and Management estimate that the national government owes LGUs about P1.5 trillion in additional IRA.

Alejano said even the Davao provinces, the home region of President Duterte, would not be able to survive under a federal system.

“Davao region contributes only one percent to the total BIR (Bureau of Internal Revenue) collections, and yet it gets almost five percent in return in the form of IRA,” he said. “Where will they get the remaining four percent deficit considering that regions still have to contribute to national services like defense, foreign relations, debt servicing, and others in the federal setup?”  

In addition to these expenses, federal regions or states would have to pay for employees’ salaries, and operating and capital expenditure requirements, he said.

Alejano also said it is a wrong perception that so-called “imperial Manila” takes most of the country’s wealth. – With  Jess Diaz