Study federalism’s effects, legislators told
SEVERAL prominent business organizations on Sunday supported the call of Philippine economic managers to carefully study the impact of adopting federalism in the country.
In a statement, the Makati Business Club, Cebu Business Club, Philippine Chamber of Commerce and Industry, Employers Confederation of the Philippines, Financial Executives Institute of the Philippines, Management Association of the Philippines, and the Philippine Exporters Confederation Inc. appealed 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 came after Finance Secretary Carlos Dominguez 3rd and Socioeconomic Planning Secretary Ernesto Pernia warned lawmakers of the shift’s possible effects.
Dominguez cautioned them last week that the country’s investment grade credit rating would be at risk.
Standard & Poor’s affirmed the country’s “BBB” rating and revised its outlook from “stable” to “positive” in April.
Moody’s Investors Service retained the country’s Baa2 rating with stable outlook in June and Fitch Ratings affirmed the country’s “BBB” rating with stable outlook in July.
The government would incur “a very large budget deficit” once the higher revenue share for local governments was implemented, the Finance chief said.
The groups said they believe “in the need to adhere to the public finance principle ‘funds follow function.’
Accordingly, we echo the concerns of fiscal and economic experts about the ambigous provisions on the division of revenue and expenditure responsibilities between the proposed federal government and its federated regions.”
Pernia earlier warned lawmakers that the government would need an additional P131 billion to be able to shift to federalism.
“Reports indicate an alarming cost to the would-be multilevel government under a federal system. Preliminary estimates range from P72 billion of the Philippine Institute for Developmental Studies to P130 billion of the National Economic and Development Authority,” the groups said.
“The fiscal deficit is estimated to reach 6.7 percent of gross domestic product (GDP), which is way beyond the sustainable 3-percent target of our fiscal managers—a prudential limit also observed by the European Union (EU) for its member-countries,” they added.
The country’s budget deficit program is currently set at P523.68 billion this year and P624.37 billion for 2019.
The amounts are equivalent to 3 percent and 3.2 percent of GDP, respectively.
“We worry about the dire consequences that such fiscal imbalance could have on the economy and the flagship ‘Build Build Build’ program of the [Duterte] administration,” groups 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.
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