Business groups urge lawmakers to weigh costs of shifting to federalism

By: Roy Stephen C. Canivel, Philippine Daily Inquirer, Aug 12, 2018

Local business groups are worried about the consequences of shifting to a federal form of government, echoing the woes earlier raised by some of the country’s economic managers.

Seven business groups, including the country’s largest business group the Philippine Chamber of Commerce and Industry (PCCI), are urging lawmakers to weigh carefully the costs, risks and uncertainty of the shift.

In a statement on Sunday afternoon, the local business chambers called for “full, open, and dispassionate dialogues” about federalism, a move that would have far reaching effects in the country and its future.

The call for dispassionate talks came after a member of the consultative committee urged President Rodrigo Duterte last week to fire the socioeconomic planning and finance chiefs for speaking out against federalism.

“We, the undersigned business organizations, appeal to our legislators to weigh carefully the costs, risks and uncertainty associated with the proposed monumental shift to a federal system of government,” the statement read.

These groups are the following: PCCI, Cebu Business Club, Employers Confederation of the Philippines, Financial Executives Institute of the Philippines, Makati Business Club, Management Association of the Philippines, and Philippine Exporters Confederation.

According to them, they echo the concerns of fiscal and economic experts about the ambiguous provisions on the division of revenue and expenditure responsibilities between the proposed federal government and its federated regions.

They cited the alarming cost of federalism, which was flagged to as much as P120 billion in term of direct costs by the National Economic and Development Authority.

Under those provisions, which call for a 50-percent share of the regions from the national government’s revenue collections, Finance Secretary Carlos Dominguez III said the government might incur “a very large” budget deficit.

Asked in a Senate hearing last week what this would do to the country’s credit rating – which acts a measure of creditworthiness – Dominguez said it would “go to hell.”

The groups worry that this might lead to a fiscal deficit of 6.7 percent of the gross domestic product, which is way beyond the target of the economic managers.

“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,” they said.

The groups commended the transparency of the economic managers and the researchers in the Philippine Institute for Development Studies “in openly sharing their analysis and airing their concerns to the public.”

“We support and join their call for a more detailed analysis of the fiscal impact of federalism to serve as basis for the deliberations in Congress,” they said.

“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,” they added.

They said the business community would be ready to work with the government in the bid for sustained and inclusive economic growth. /atm