Federalism: Why Filipinos Just Don’t Get It

Orion PerezSome people – in trying to argue against Federalism – state that Federalism will not help the rest of the country as Metro Manila is responsible for keeping many impoverished areas in the Philippines afloat.

Unfortunately, the fact that Metro Manila contributes the bulk of our GDP is directly derived from the fact that our present day centralist-unitary model of territorial administration has totally failed to provide incentives for the provinces and other cities to develop and have the ability to aggressively attract investments. As a result, over-centralization around Manila means that by default, Manila has first crack at everything because that’s where the seat of power/administration and the approval of permits and what not is.

As a result of this, businesses have tended to prefer to gravitate towards Metro Manila and neglect the rest of the country. This in turn gave everyone from outside the capital the idea that most jobs would be in Metro Manila — which to a huge extent is true. So many people in the rest of the country studied for jobs that were expected to be white collar ones but such jobs were – for the most part – created mostly in Metro Manila.

In the meantime, the centralized unitary model of territorial administration is set up so that while the whole country’s “sub-units” must all remit most of their tax revenue over to the center, after pooling all of this together, the money is then redistributed to each of the sub-units according to “need.”

We ended up with a quasi-Communist system of “from each according to ability, to each according to need” thereby demotivating the various sub-units from developing themselves.

"Click the image to enlarge"
“Click the image to enlarge”

After all, if you are able to bring in investors into your area, most of the taxes collected from companies and employees earning salaries still goes to the central government anyway and then only later gets redistributed to the country’s various sub-units according to “need.” (population, etc). The sub-units that do well feel as if their efforts are useless since they don’t really get to directly enjoy the fruits of their labor. The sub-units that don’t do well still get funding from the central government based on need.

It is this system that has actually empowered lousy politicians and warlords in the provinces. Whether or not they develop their areas, as long as they are in power as a result of winning elections, they receive funding from the central government “based on need” and they get pork barrel allotments based on how committed they are to supporting the powers-that-be in Metro Manila.

The lousy political dynasties and warlords feel no desire to want to develop their areas because they get funds from the central government regardless of whether they deliver or not. And by keeping the people in their areas poor and desperate, these poor people become easier to manipulate as they feel beholden to whomever can help them out. Since the warlords/dynasties are like the proverbial “tuerto (one-eyed man) en la tierra de los ciegos’ (in the land of the blind),” they end up being the KINGS. Everyone is so poor and they’re the only rich-enough guys in the area, so everyone is looking up to them, trying to be nice to them in exchange of sprinklings of goodies, etc.

And thanks to utang na loob (debt of gratitude), the poor people who are “helped” by the warlords/dynasties end up beholden to these local kingpins who get their money FROM FUNDS DISBURSED TO THEM BY THE CENTRAL GOVERNMENT regardless of whether they run their areas well or not.

Ultimately, it is the CENTRALIZED-UNITARY MODEL as done in the Philippines that is the direct cause of the warlords and dynasties issue, yet sadly, many Filipinos have made the mistake of wrongly assuming that Federalism would “worsen the warlords/dynasties problem.”

warlords-of-draenorWhat they don’t know is that Federalism would actually force the regions to have to produce their own revenues in order to fund their own operations, and this would require massive attraction of investors — especially foreign investors — since these are the investors with the know-how/technology and the money. With Federalism, local leaders — including “warlords/dynasties” will be forced to shape up because incompetence will translate into low investments into the area, low job-creation, and thus have low tax revenues, meaning lower funding, forcing them to have to borrow from the central government.

A system in which good politico-economic management leads to more jobs and investments and thus leads to higher tax revenue leading to higher funding for the government in the area incentivizes the leadership to focus more on bringing in more jobs.

Under the centralized-unitary system, there is no such incentive as the LGU’s receive budget allocations anyway based on what the central government in Manila says is appropriate to each LGU.

Clearly, it makes more sense to move over towards a system in which the better the quality of work translates into higher economic returns.

Federalism, thus, is the way to go.

Written by: Orion Perez


Just a regular "Joe" who decided the rat-race in the states was getting to ridiculous for words, and made the move to the Asian side of life.

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