The Cabinet economic cluster and the Philippine business community have taken a public position against President Rodrigo Duterte, who is the principal promoter of—and who is obsessed with—the idea of installing the federalist form of government in this country. If a signboard were made to depict the situation, it would read Rodrigo R. Duterte versus the Economic Managers and the Philippine Business Community.
The Cabinet economic cluster—a.k.a. The economic managers—is led by Secretary of Finance Carlos Dominguez III, Neda (National Economic and Development Authority), Director-General Ernesto Pernia, Secretary of Budget and Development Benjamin Diokno, Secretary of Agriculture Emmanuel Piñol and Secretary of Public Works and Highways Mark Villar—have taken the position (1) that the federal Constitution drafted by the Duterte-created Constitutional Committee is unclear and ambiguous, (2) that a shift to federalism will disrupt the nation’s growth momentum (3) that a federal government will be very costly and (4) that federalism will place at risk this country’s external credit ratings.
That is quite an indictment of the proposal shift to a federal form of government. Secretary Dominguez has until now been quiet on the subject of federalism, although from time to time he has let go of remarks about the need for fiscal stability. But in a recent appearance before a Senate hearing on the economic implication of federalism, the Department of Finance chief unburdened himself of his sentiments toward federalism.
A shift to federalism would derail the Duterte administration’s infrastructure program, Secretary Dominguez said. “Instead of the ambitious Build, Build, Build program going into full swing; the big-ticket items in the pipeline may instead be Build Minus Three.” Responding to Senator Ralph Recto, Dominguez said that this country’s investment-grade credit ratings would “go to hell” if the shift to federalism proceeded. He said that it was the responsibility of the nation’s economic managers to point out the ambiguous and unclear provisions of the draft Constitution, “especially when the possible repercussions could result in dire, irreversible economic consequences.”
As example of draft-Constitution provisions that were ambiguous and unclear, Secretary Dominguez pointed to (1) the fact that, while it provided for the respective taxation powers of the Federal Government and the federal regions and for the federal sates’ 50-percent share in income, excise and value-added taxes and customs duties, the draft Constitution “(has) no provision on expenditure assignment and (2) the fact that while it contained an enumeration of the respective exclusive powers of the Federal Government and the federal regions. The draft Constitution was “silent on the funding source for the exercise of these powers.” and (3) the fact that while it provided for an Equalization Fund of not less than 3 percent of the annual national budget (General Appropriations Act), the draft Constitution does not state whether this amount will be taken from the share of the Federal Government or the shares of the federal regions.
In sum, he was “confused” by the draft Constitution where fiscal matters were concerned.
In their joint statement the nation’s largest business organizations—these included Philippine Chamber of Commerce and Industry, Makati Business Club and Management Association of the Philippine and Financial Executives of the Philippines—placed themselves squarely behind Secretary Dominguez and his colleague. “We echo the concerns of the fiscal and economic experts about the ambiguous provisions on the division of revenue and expenditure responsibilities between the proposed Federal Government and the federated regions,” the statement read. It went onto say: “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.”
One of two things can happen in the wake of the strong common position on federalism that has been taken by the Duterte administration’s economic team and the Philippine business community. The drafting committee could, motu propio or under instructions from President Duterte, agree to address the fiscal issues raised by the economic managers and the businessmen. Or it could decide to not revisit its handiwork and to adopt a take-it-or-leave-it attitude.
Given the statures of Secretary Dominguez and his colleagues and of the leaders of the business organizations, an attitude of obduracy on the part of Mr. Duterte and the consultative committee could very well write finis to the entire federalism caper.