FEDERALISM

NECESSITY
Why is federalism needed in the Philippines?
Federalism is needed in the Philippines due to the following reasons:
1. Federalism is a Peace Option
Our collective quest for peace is anchored on the results of the talks between the government and
the Moro Islamic Liberation Front, between the government and National Democratic Front, and
between the government and the Revolutionary Proletariat Movement in Mindanao. While we
remain optimistic on the mainstream peace process, greater people's participation in the peace
talks must also take place.
One of the most important developments contributing to the shift in the world political paradigm
from a centralized government to federalism has been the demonstrated utility of federal
arrangements in peace-making. In a world well advanced in its movement toward federalism as the
new paradigm for interstate and intergroup relations, we must expect it also to offer considerable
promise for peace-making. As federalists, we work hard to find ever better ways to utilize and apply
federalism to the cause of peace.
There is a certain justification for this seeming truth in that "federal" is a loaded term, one that,
more than simply describing arrangements and institutions, has to do with serious principles, real
attitudes, binding relationships, specific expectations with regard to mutual trust, in short, the will
to federate. Even if the discussion of federalist political culture is relatively not new on the political
science agenda, the sense that federalism can only succeed where such political culture exists
sufficiently also figures into this equation. Even less expressed is the expectation that federalism
has at least one of its major roots in the idea of federal liberty, that is to say, liberty to do that
which is mutually agreed upon in the founding compact or its subsequent constitutional
modifications. Without federal liberty as an accepted principle neither freedom nor responsibility
can develop properly.
One of the ways to overcome the deficiency seems to be by widening the sphere to be
encompassed by the solution. This is necessary for federal peace-making to take place, in some
cases from the very first. For example, efforts to bring together two separate units are inevitably
problematic not only because it is easy for every issue to turn into a zero-sum game with one side
winning and the other losing, but it also is difficult to transform develop or transform issues into
ones in which both sides win. It is true that in some cases when both sides are losing sufficiently,
widening the sphere helps them come together to control their losses.
No matter what form federalism takes, how federal institutions are designed, and what federal
principles are emphasized, it is generally clear by now that where there is a positive attitude toward
federalism and a will to build a federal system, where the political society involved rests on
sufficient trust, sufficiently widespread to allow the many leaps of faith that must be taken to make
federalism work, where political culture is either favorable or at least open to federal arrangements,
where all of this leads to a wider understanding of liberty as federal liberty, then federalism has a
good chance of succeeding when used for peace-making. It may have almost as good a chance if
most of those elements are present and some chance even if one or two of them is. But it seems
quite clear that without any, the chances of success are extremely limited.
2. Federalism and the Right to Self-Determination
Asserting and reclaiming their self-determination is essential among Lumad and Bangsamoro
peoples.
The Lumad peoples have persistently expressed their own preference for self-determination, having
seen that their absorption into the unitary political system has brought about the establishment and
solidification of a threat to their very own existence and the integrity of their distinct cultures.

The Bangsamoro have their own distinct identity and vested interest that must be respected and
cannot be satisfied by a continued subscription to political uniformity. With the Autonomous Region
in Muslim Mindanao, the central government has allowed, albeit grudgingly, a departure from the
stranglehold of central authority. The passage of the Local Government Code in 1991 further chips
away powers from central authority; the local government units from the regional autonomy to the
barangay are able to exercise greater self-determination.
The right to decide and choose that is best for one's self is a sacred right that cannot be taken away
from any individual and citizen. Those deprived of this right are also unable to fulfill their
aspirations for the future.
Under a federal set up, greater powers will be devolved to the local citizenry, making grassroots
participation more meaningful and broaden the powers of the citizens over the state.
Self-determination comes in many forms. In the political sphere, it comes in the form of semiindependent units. In the Philippines: sitio, barangay, municipality, province, regional autonomy,
nation. Self-determination grows with increased political autonomy or the ability to stand on one's
own feet. In the political history of the world, greatest autonomy to political units is experienced by
the states of a federal state.
The more obvious advantage is greater power-sharing between the national or federal government
and the state/local government. Since the states will have their own legislatures, real decisionmaking is brought closer home to the people. This is the immediate consequence of the political restructuring. But, in fact, the citizens can push further to ensure that in the federal constitution and
the state laws, greater people participation in the decision-making process is institutionalized.
3. Federalism and Diversity
This year's Human Development Report of the United Nations Development Programme highlights
cultural diversity. At our end, we also delight in UNDP's 2004 report because that has been our
general advocacy for Mindanao: that we promote respect and understanding among the diverse
and unique groups of people whether they are Lumad, Bangsamoro or Christian settlers.
Diversity and development might seem to sit oddly together. But they are intimately linked, and the
report seeks to show that they are not related in the way many people assume. The UNDP's press
release says unambiguously that there is no evidence that cultural diversity slows development,
and dismisses the idea that there has to be a trade-off between respecting diversity and sustaining
peace. In countries like the Philippines, and in regions such as Mindanao, there is enough to argue
that indeed diversity plays an important role in development given the composition of the ethnic
groups: 13 ethnolinguistic groups representing the Bangsamoro people, 18 ethnolinguistic
groupings of the Lumad, and the settlers who are Ilonggo, Ilocano, Cebuano, Boholanon, and so on.
The not too obvious but significant advantage of federalism is its ability to address the demands of
a pluralistic society, meaning one that has a mixture of populations of diverse cultures and
ethnolinguistic identities. This is nowhere more pronounced than in Mindanao, with its Moro
population of about 4 million and the Lumads numbering about 2 million, altogether making about
40% of the total Mindanao population.
It is noted that only in a federal structure of government it is possible to properly and correctly rule
such a society in such a manner as to accommodate the distinctiveness of each nationality while
orchestrating them all towards the common national goal which comprehends their diversities.
4. Federalism and Fiscal Management
Although there is a need to establish correlation, it has been noted that the most of the politically
stable and economically advanced countries in the world follow a federal set-up. These include
Germany, the United States of America, Canada, Australia, Brazil, Mexico, Austria, Argentina, and
closer to home, India and Malaysia.
It is interesting to note that seven of the top twelve countries in the world in terms of per capita
income in 1997 were federal, while six of the top 12 in gross domestic product were likewise

federal, while six of the top 12 in gross domestic product were likewise federal.
Assuming that we are under a federal structure, would the economic crisis faced by the nation
today be isolated in Manila only? It is definitely possible.
Decentralized fiscal systems offer more potential for improved macroeconomic governance than do
centralized fiscal systems, because they require greater clarity about the roles of various players
and decision-makers and-to ensure fair play-greater transparency in rules governing interactions.
Challenges of globalization usher in fiscal reforms in developing countries. Among federalist
countries, the following are noticeable:
Monetary policy is best entrusted to an independent central bank with a mandate for price stability.
Fiscal rules accompanied by gatekeeper intergovernmental councils or committees provide a
useful framework for fiscal discipline and coordination of fiscal policy.
The integrity and independence of the financial sector contribute to fiscal prudence in the public
sector.
To ensure fiscal discipline, government at all levels must be made to face the financial
consequences of their decisions.
Societal norms and consensus about the roles of various levels of government and limits to their
authority are vital to the success of decentralized decision-making which can happen only under a
federal structure.
Tax decentralization is a prerequisite for sub-national access to market credits.
Higher-level institutional assistance may be needed to finance local capital projects.
An internal common market is best preserved by constitutional guarantees.
Intergovernmental transfers in developing countries undermine fiscal discipline and accountability
while building transfer dependencies that cause a slow economic strangulation of fiscally
disadvantaged regions.
Periodic review of jurisdictional assignments is essential to realign responsibilities with changing
economic and political realities.
Finally, and contrary to a common misconception, decentralized fiscal systems offer more potential
for improved macroeconomic governance than do centralized fiscal systems.
The New Hope for Mindanao and the Philippines
Indeed the federal system is worth looking into as a more ideal set-up for Mindanao and the
Philippines. More importantly, it is one system that may be able to effectively address the current
and peculiar situation of Mindanao not only as a victim of neglect but also as a unique island-region
that harbor three peoples of diverse backgrounds, customs, culture, traditions, and social systems.
More specifically, it is a political option that may help prevent a stalemate that can lead to another
Mindanao war.
Clearly, what Mindanao needs is unity in diversitynot integration, not assimilation-or at least
harmony in diversity. Admittedly, a federal system is friendlier to this idea than the unitary and
centralized system that we have.
Just recently, the President of the Philippines called for the expediency to amend the 1987 Constitution. In the
eyes of our President, it is high time that we should be sensible of our countrys malady, and, therefore,
undertake the necessity of some speedy and powerful remedy. We in the Mindanao business community think
that no other alternative is more compelling.
It can be recalled that on September 2004, the pro-active Mindanao business community, through the
Mindanao Business Council (MBC), presented the Mindanao Action Agenda to Her Excellency Gloria MacapagalArroyo during the 13th Mindanao Business Conference (MinBizCon). As an expression of support to the
present administration, we have collectively committed to the quest for the private sectors important role in
the pursuit for just, equitable, and lasting peace in the island.
One of the private sector commitments under the Mindanao Action Agenda is the shift to a federal form of
government. To help achieve this goal, the MBC and the local chambers of commerce together with Kusog

Mindanaw as the lead non-government organization, commit to pursue local empowerment under a federal
set-up through the establishment of the multi-sectoral Mindanao Coalition of Cities for Transparent and
Accountable Governance.
There is certainly a great economic force behind this advocacy. Regional disparities with respect to population
size, per capita income, administrative capacity and social needs, do not allow for simple solutions. And so it is
important thresh out the issues affecting regional development in the context of the proposed reform to a
federal state.
5. Investments and Federalism
In the first place, the new system should give due consideration to sustainable and equitable socio-economic
development through the promotion of inter-state and intra-regional cooperation. Thus, policies on trade and
investment will be re-evaluated and planned according to the regions capacity to produce as well as the
demand in the local, national and/or international market.
For the business sector, this means an increased concentration on local industries, diversified quality products
and greater trade benefits from regional policies. Consequently, businessmen will have a more conducive and
competitive business environment and investors will be able to make investment decisions over the longerterm. A well-grounded model country that dashed for economic growth is Malaysia. The success of the
Malaysian Government is partly because of diversification of its manufacturing base, diversification of its
export markets, and strengthening of its industrial capabilities. In particular, Ipoh, which is in the heart of the
tin mining region and close to the rice bowl sections of West Malaysia, is served by trading firms specializing in
mining and rice farming equipment and supplies. Businesses specializing in mining and rice farming equipment
and supplies and trading centers having countryside marketing facilities are also a significant source of
revenue for the locality.
6. Taxation and Federalism
In the second place, a federal form of government results in greater autonomy to revise taxation policies.
Since local governments are semi-autonomous entities within the state framework, review of rates is faster
and more reflective of the cost of services that a particular region provides. And even though tax rates in
general are linked to a broader political process, a federal system would devise and take into consideration the
fairer calculation of rates beneficial to all parties involved within the region. The right of the federal
government to levy taxes shall, as Hamilton puts it, contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without the end proposedthat is, an extension of
the revenue. Following the politico-economic by Brennan and Buchanan (Brennan, Geoffrey And James M.
Buchanan (1977): Towards a Tax Constitution for Leviathan. Journal of Public Economics 8: 255-273)
federalism leads to lower tax burden. The mobile factors that are capital and labor render a mobile tax base in
the federal states. This induces the positive force of taxes that matches local situations. Practically, a federal
system in relation to taxation translates to savings for investment, which drives economic growth and
prosperity.
7. Simplified Bureaucracy
Lastly, the decentralized decision making structure provides greater proximity to the people and forces the
governments to be more responsive to its citizens' (the business sectors) preferences. Economic development
is achieved through inter-sectoral dialogue and equitable distribution of wealth that render significant
improvements in local infrastructure. There would be more access to local resources, e.g. developing better
privileges to local contractors for infrastructure projects.
Also, a direct impact of a strong link between the government and the business sector opens broad spectrum
of business support services in an effort to achieve a consolidated approach when representing the viewpoint
of private enterprise in its relations with the government. This would allow the development of small
businesses to be competitive with large businesses in any industry. Through direct involvement and
community action, we see rapid development and the proliferation of our interests.
With these advantages it can hardly be supposed that the adverse position would have an equal chance for a
favorable issue.
What is federalism?
It is a form of government where sovereignty is constitutionally shared between a central governing authority
and constituent political units called states or regions.

In basic terms, it will break the country into autonomous regions with a national government focused only on
interests with nationwide bearing: foreign policy and defense, for example.
The autonomous regions or states, divided further into local government units, will have primary responsibility
over developing their industries, public safety, education, healthcare, transportation, recreation, and culture.
These states will have more power over their finances, development plans, and laws exclusive to ther
jurisdiction.
The central government and states can also share certain powers.
How is it different from what we have now?
We presently have a unitary form of government. Most administrative powers and resources are with the
national government based in Metro Manila. It's Malacaang that decides how much to give local government
units. The process is prone to abuse, with governors and mayors sometimes having to beg Malacaang for
projects they believe their communities need.
PROS
Locals decide for themselves. Regions have their own unique problems, situations, geographic, cultural,
social and economic contexts. Federalism allows them to create solutions to their own problems instead of
distant Metro Manila deciding for them.
The states can establish policies that may not be adopted nationwide. For example, liberal Metro Manila can
allow same-sex marriage which the state of Bangsamoro, predominantly Muslim, would not allow. In the
United States, some states like Colorado and Washington have legalized recreational marijuana even if other
states have not.
This makes sense in an archipelago of over 7,000 islands and 28 dominant ethnic groups. For decades, the
national government has been struggling to address the concerns of 79 (now 81) provinces despite challenges
posed by geography and cultural differences.
With national government, and thus power, centered in Metro Manila, it's no surprise that development in the
mega city has spiralled out of control while other parts of the country are neglected.
More power over funds, resources. Right now, local government units can only collect real estate tax and
business permit fees. In federalism, they can retain more of their income and are required to turn over only a
portion to the state government they fall under.
Thus, local governments and state governments can channel their own funds toward their own development
instead of the bulk of the money going to the national government. They can spend the money on programs
and policies they see fit without waiting for the national government's go signal.
Promotes specialization. The national and state governments can specialize in different policy domains.
With most administrative powers now with the regional governments, the national government can focus on
foreign policy, defense, and other nationwide concerns, like healthcare and taxation.
States have more autonomy to focus on economic development using their core competencies and industries.
The state of Central Luzon can focus on becoming an agricultural hub. The state of Mimaropa, home to
Palawan, can choose to use eco-tourism as its primary launch pad.
Possible solution to the Mindanao conflict. The creation of the state of Bangsamoro within a federalist
system may address concerns of separatists who crave more autonomy over the administration of Muslim
Mindanao.
Decongestion of Metro Manila. Through fiscal autonomy for state governments, federalism will more evenly
distribute the country's wealth. In 2015, 35% of the national budget went to Metro Manila even if it represents
only 14% of the Philippine population.
Lessens dependence on Metro Manila. When there is political upheaval in Metro Manila, other regions that
have nothing to do with the chain of events are left waiting for the resources that ony the national
government can release. With federalism, regions work independently of Metro Manila for most concerns.

Brings government closer to the people. If detractors say federalism will only make local political
dynasties more powerful, supporters give the argument that, in fact, it will make all local leaders, including
those part of political dynasties, more accountable to their constituents. State governments will no longer
have any excuse for delays in services or projects that, in the present situation, are often blamed on choking
bureaucracy in Manila.
Assuming more autonomy for regions leads to economic development, there will be more incentive for
Filipinos to live and work in regions outside Metro Manila. More investors may also decide to put up their
businesses there, creating more jobs and opportunities to attract more people away from the jam-packed
mega city.
Encourages competition. With states now more self-reliant and in control of their development, they will
judge themselves relative to how their fellow states are progressing. The competitive spirit will hopefully
motivate state leaders and citizens to level up in terms of quality of life, economic development, progressive
policies, and governance.
CONS
Possibly divisive. Healthy competition among states can become alienating creating rivalries and
promoting the regionalism that some say already challenges the sense of unity in the country. It could
enflame hostilities between ethnic groups in the country like Tagalogs, Cebuanos, Bicolanos, Ilocanos,
Tausugs, and Zamboangueos.
Uneven development among states. Some states may not be as ready for autonomy as others. Some
states may not be as rich in natural resources or skilled labor as others. States with good leaders will progress
faster while states with ineffective ones will degrade more than ever because national government will not be
there to balance them out.
But in some federal countries, the national government doles out funds to help poorer states. A proposed
Equalization Fund will use a portion of tax from rich states to be given to poorer states.
Confusing overlaps in jurisdiction. Where does the responsibility of state governments end and where
does the responsibility of the national government begin? Unless these are very clearly stated in the amended
Constitution, ambiguities may arise, leading to conflict and confusion. For instance, in times of disaster, what
is the division of responsibilities between state and national governments?
May not satisfy separatists in Mindanao. Separatists are calling for their own country, not just a state that
still belongs to a larger federal Philippines. Federalism may not be enough for them. After all, the conflict
continues despite the creation of the Autonomous Region in Muslim Mindanao.
How the Philippines would look when federal
In some proposals, there will be 10 or 11 autonomous states. Senator Aquilino Pimentel Jr envisioned 11
states plus the Federal Administrative Region of Metro Manila.
Here's how the Philippines will look like as laid out in Pimentel's 2008 Joint Resolution Number 10.
Cost of federalism

Shifting to federalism won't come cheap. It would entail billions of pesos to set up state governments and the
delivery of state services. States will then have to spend for the elections of their officials.
Attempts at federalism in PH
There was an attempt during the administration of President Gloria Macapagal Arroyo. One of her campaign
promises was to reform the 1987 Constitution.
A consultative commission she created recommended federalism as one of the goals of the proposed charter
change. But the attempt failed because of opposition from various sectors who believed Arroyo wanted to use
the reform to extend her term limit.

(Note that shifting to a federal government does not necessarily mean an extension of term limits for the
sitting president. Such an extension would only take place in a shift to a parliamentary government.)
In 2008, Pimentel Jr and Bacolod City Representative Monico Puentevella filed joint resolutions to convene
Congress into a constituent assembly with the goal of amending the constitution to establish a federal form of
government.