Senate resolution pushed to determine cost and impact of Federalism amid different opinions

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By Macon Araneta i FilAm Star Correspondent

The Senate Committee on Economic Affairs chaired by Sen. Win Gatchalian is set to look into the potential impact that the proposed shift to Federalism would have on the Philippine economy.

Gatchalian filed Senate Resolution No. 823, which directs the appropriate Senate committee to look into the economic effects a shift to a Federal system of government would bring, including the economic risks and opportunities, impact on regional economic growth, additional fiscal costs of the shift to federalism, effects on investments due to emerging issues on the imposition of additional taxes, administration of incentives, and repercussions on ease of doing business in the country.

The resolution has been referred by the plenary to the Committee on Economic Affairs, which Gatchalian chairs.

For his part, Senate President Pro Tempore Ralph Recto said the country’s economic managers are “integral and indispensable to the national conversation” on Federalism. “You don’t shut them out of the discussions; you bring them in because the cost of Federalism is front and center of the issue,” Recto said.

Recto said those who raise revenues and manage the economy “can provide a reality check if a proposal is financially feasible and fundable.”

“Before we communicate what federalism is, can we not first calculate what its cost will be?” he added.

“Every proposal has a cost. Scratch the surface of every provision of a bill, and there is a price tag underneath. We are often told the benefits of a project but not the price,” he said.

While he himself does not often see eye to eye with the views of the economic managers on many issues, “I listen to them, value their views, and appreciate where they’re coming from.”

“Because at the end of the day, it is they who will raise the revenues in implementing proposals we politicians love to sponsor,” Recto said.

“In the case of Finance Sec. Dominguez, he must raise PHP 10 billion a day to finance the operations, the programs of this government. And collecting this PHP 10 billion daily quota from the people is a thankless job,” Recto said.

Recto said every proposal, like Federalism, should undergo a fiscal responsibility check.

“Parang may four-way test. What is the cost to implement it? Do we have the money for it?

Do we have to raise tax or impose fees or create savings or borrow money? What is the per capita burden it will impose?”.

“Running the numbers is a politics-free exercise. You cannot bend it to suit one’s position. If it is financing Federalism, then the results of the studies and simulations should be the basis of how to move forward,” Recto said.

In filing the resolution, Gatchalian cited the divergence of opinion between government economic managers and economists — who say that the country is not yet ready for a change in the system of government — and Malacañang, which has countered that the Federal shift would have no adverse effect on the economy.

He related that Socio-economic Planning Sec. Ernesto Pernia has warned that at this point, the regions in the country are not ready for Federalism, that the momentum of infrastructure improvement in the regions is going to be disrupted, and that the shift to Federalism would entail immense expenditures, which may increase the fiscal deficit to GDP (gross domestic product) ratio.

He also mentioned that members of the academe such as University of Asia and the Pacific Senior Economists Victor Abola and Bernardo Villegas have also expressed concerns that the country might experience hyper-inflation as it shifts to Federalism.

Moody’s Investors Service has similarly opined that the shift to Federalism, accompanied by the “prospective changes to governance frameworks, could have negative implications for public finances and could be a risk for the country’s institutional and fiscal profile,” he added.

The lawmaker noted that the country’s largest business groups, including the Philippine Chamber of Commerce and Industry, Makati Business Club, Management Association of the Philippines, Financial Executives Institute of the Philippines, Semiconductor and Electronics Industries of the Philippines Foundation Inc., and Cebu Business Club, have also raised concerns that the proposed Federal shift may lead to uncertainty among investors.

“In view of these conflicting claims, the Senate must be given an opportunity to evaluate the economic implications of the proposed shift to a Federal system of government,” the Senator stressed.

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