Business sector speaks

It began with NEDA head Pernia publicly warning about the possible negative economic  consequences of a transition to a federal form of government. Then came a Senate hearing where Finance Secretary Sonny Dominguez told the country that there could be severe financial damages as a result of a transition to federalism. He was specifically referring to the draft constitution proposed by the Constitutional Commission. 

Similar testimonies from any other personalities may have caused some discussion. But these two were not just Cabinet members; but, the leading economic managers of the present administration. Then came a statement from Defense Secretary Lorenzana saying that the nation should take time before deciding on any constitutional change. 

Most of the Filipino people had not yet really tuned in on the ongoing debate. However, for those who were closely monitoring the ongoing debates – business, media, academe, politicians, professionals, NGOs – the testimonies from the three Cabinet members certainly caused a lot of reaction. Among these were three that seemed to have occurred within days of the public testimonies.

First, there were those who opposed the transition to federalism; but, very few dared to publicly state their views. Most of them limited their discussions to the boardrooms, classrooms, selected forums and social media. Suddenly, these oppositionists of federalism seemed to have become emboldened and there were more public statements coming from them. It was noticeable, however, that many of the public statements have been careful to add that they were supporting the economic managers. 

Second, there were those who supported the concept of federalism but were opposed to certain sections of the draft constitution. The most controversial seemed to be the Transitory Provisions. However, the strong statement coming from the economic managers, Dominguez and Pernia, definitely made even this group pause and reflect. The question for those in this group is that while the concept of federalism is ideal, is the Philippines, under the present political and economic environment, ready for the change at this time? There is also the realization that there are many models of federalism; and we need to take the time and the effort to analyze and recommend which would be the appropriate federalism model for the Philippines. There is also a growing acceptance that the public needs to be educated about this radical change; and this effort may take time. There are also many in this group who believe, like former Chief Justice Puno, that the issue of political dynasties must first be settled preparatory to any transition to federalism. 

Third, and definitely the overwhelming majority of the people,  are only now beginning to be curious about this whole hullabaloo. I notice that there are now more discussions on social media about the issues raised by the economic managers and, of course, that now infamous video supposedly meant to increase awareness of “pederalismo.”

In the business sector, initially seven business associations banded together to express their views on the proposed shift to federalism. The seven were the  Management Association of the Philippines, Makati Business Club, Cebu Business Club, Employers Confederation of the Philippines, Financial Executives Institute of the Philippines, Philippine Chamber of Commerce and Industry and Philippine Exporters Confederation. Within days and prior to its public release, many other business organizations representing the whole gamut of the business sector signified their intention to join in the public statement. The core of the public declaration is the following paragraph:

“Reports indicate an alarming cost to the would-be multi-level government under a federal system. Preliminary estimates range from P72 billion of the Philippine Institute of Development Studies (PIDS) to P130 billion of the  National  Economic and Development Authority. The fiscal deficit is expected to reach 6.7 percent of the Gross Domestic Product ( GDP), which is way beyond the sustainable 3 percent target of our fiscal mangers – a very prudent limit also observed by the European Union for its member countries. We worry about the dire consequences that such fiscal imbalance could have on the economy and the flagship Build Build Build program of the current administration.”

Aside from inflation and the weakening of the peso, there have also been concerns raised by possible external factors that could lead to another financial crisis. The plummeting of the Turkish lira and the possibility of defaulting its billions of dollars of foreign loans to European, Chinese and American banks have led economists to start comparing these to global financial and economic meltdowns in the last three decades. It may be only one country – Turkey – but the Asian financial crisis in the 1990s begun in one country – Thailand. The scenario seems to be the same in Turkey today – huge corporate debt in foreign currency; a real estate bubble; a politicized Central Bank afraid to make hard economic and financial decisions; and wasteful spending by the national government. These could lead to global bank failures and a further strengthening of the dollar as investors seek safer havens. This could mean further weakening of the Philippine peso and more interest rate hikes which, while controlling inflation, will serve to dampen economic growth. 

In the meantime, rather than addressing these pressing economic problems, our politicians are more intent in forming political alliances in preparation for the 2019 senatorial,  congressional and local elections. Because of the looming October deadline for the filing of senatorial candidacies, even discussions on federalism and Charter change have been pushed aside. 

Let me repeat the urgent message of the business sector: “We encourage full, open, and dispassionate dialogues on this proposed shift in form of government, keeping in mind its long-term impacts on future generations of Filipinos.”

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