Federalism needs more study, says Diokno

Budget Secretary Benjamin Diokno PHOTO BY EARVIN PERIAS

Budget Secretary Benjamin E. Diokno on Tuesday joined a growing list of Cabinet members expressing hesitance to take a plunge into the planned shift to a federal form of government, saying it needed deeper study.

“Now that it’s the major issue of the day, I will suggest to the economic managers that we should come up with an in-depth study,” Diokno said at the Meet Inquirer multimedia forum.

“I’ve been teaching fiscal federalism for many years,” he said.

“The core of federalism is the fiscal side—how do you finance the federal government?” he added.

“The important thing is, first of all, let’s figure out what functions are going to be federal and what functions are to be local or state,” Diokno said.

“Only then can you determine financing, [as] financing follows the functions,” he added.

Diokno said the way the proposed new Charter was drafted was “not clear.”

“That’s our problem: It’s not clear,” he said.

Draft lacking

Diokno said that although he wanted the economy opened up, the draft Charter prepared by the constitutional commission “does not do that.”

“I want to open up education, I want to open up mass media, open up competition — all these public services, open them up,” he said.

He said it would be key to a useful debate on federalism if there was a study “looking at various scenarios.”

“For example, who’s going to take care of our public debt?” he said.

Would states share the debt burden or would the federal government shoulder it alone?

“What functions are we going to assign to the states?” he said.

“We can’t just adopt a system of government without knowing the implications,” Diokno said.

“Healthy and rigorous discussion is healthy for democracy,” he said.
“I’m for further study,” which can be done in three months, he added.

The Department of Finance had warned that the shift to a federal form of government could bloat the budget deficit to P1.2 trillion.

6.7-percent deficit

Gil S. Beltran, finance undersecretary and chief economist, said the deficit would reach 6.7 percent of gross domestic product, the biggest ever.

After local business chambers urged Congress to go slow on federalism, more groups have followed suit.

In a joint statement on Tuesday, 19 mostly business groups expressed concern over the consequences of shifting to federalism.

The 19 organizations were Alyansa Agrikultura, Asia Pacific Real Estate Association, Bankers Association of the Philippines, Foundation for Economic Freedom, Institute of Corporate Directors, Investment House Association of the Philippines, Judicial Reform Initiative, National Real Estate Association, Organizations of Socialized Housing Developers of the Philippines, People Management Association of the Philippines, Philippine Constructors Association, Philippine Institute of Certified Public Accountants, Philippine Women’s Economic Network, Semiconductor and Electronics Industries in the Philippines Inc., Shareholders’ Association of the Philippines, Subdivision and Housing Developers Association, Tax Management Association of the Philippines, UP School of Economics Alumni Association, and Women’s Business Council Philippines.

Monumental shift

“Both the private and public sectors cannot be perceived as lacking in resolve on the fiscal front, seeing how financial markets are so sensitive,” said the groups in a joint statement.

“For this reason, many other organizations join the seven large business organizations in calling for legislators to weigh carefully the costs and risks associated with the proposed monumental shift to a federal system of government,” the statement said. —With a report from Roy Stephen C. Canivel