Just recently, the President of the Philippines called for the expediency to

amend the 1987 Constitution. In the eyes of our President, it is high time
that we should be sensible of our countrys malady, and, therefore,
undertake the necessity of some speedy and powerful remedy. We in the
Mindanao business community think that no other alternative is more
compelling.

It can be recalled that on September 2004, the pro-active Mindanao

business community, through the Mindanao Business Council (MBC),
presented the Mindanao Action Agenda to Her Excellency Gloria
Macapagal-Arroyo during the 13th Mindanao Business Conference
(MinBizCon). As an expression of support to the present administration, we
have collectively committed to the quest for the private sectors important
role in the pursuit for just, equitable, and lasting peace in the island.

One of the private sector commitments under the Mindanao Action Agenda
is the shift to a federal form of government. To help achieve this goal, the
MBC and the local chambers of commerce together with Kusog Mindanaw
as the lead non-government organization, commit to pursue local
empowerment under a federal set-up through the establishment of the
multi-sectoral Mindanao Coalition of Cities for Transparent and
Accountable Governance.

There is certainly a great economic force behind this advocacy. Regional

disparities with respect to population size, per capita income,
administrative capacity and social needs, do not allow for simple solutions.
And so it is important thresh out the issues affecting regional development
in the context of the proposed reform to a federal state.

Investments and Federalism

In the first place, the new system should give due consideration to
sustainable and equitable socio-economic development through the
promotion of inter-state and intra-regional cooperation. Thus, policies on
trade and investment will be re-evaluated and planned according to the
regions capacity to produce as well as the demand in the local, national
and/or international market.

For the business sector, this means an increased concentration on local

industries, diversified quality products and greater trade benefits from
regional policies. Consequently, businessmen will have a more conducive
and competitive business environment and investors will be able to make
investment decisions over the longer-term. A well-grounded model country
that dashed for economic growth is Malaysia. The success of the Malaysian
Government is partly because of diversification of its manufacturing base,
diversification of its export markets, and strengthening of its industrial
capabilities. In particular, Ipoh, which is in the heart of the tin mining
region and close to the rice bowl sections of West Malaysia, is served by
trading firms specializing in mining and rice farming equipment and
supplies. Businesses specializing in mining and rice farming equipment and
supplies and trading centers having countryside marketing facilities are
also a significant source of revenue for the locality.

Taxation and Federalism

In the second place, a federal form of government results in greater

autonomy to revise taxation policies. Since local governments are semi-
autonomous entities within the state framework, review of rates is faster
and more reflective of the cost of services that a particular region provides.
And even though tax rates in general are linked to a broader political
process, a federal system would devise and take into consideration the
fairer calculation of rates beneficial to all parties involved within the region.
The right of the federal government to levy taxes shall, as Hamilton puts it,
contain in their own nature a security against excess. They prescribe their
own limit, which cannot be exceeded without the end proposedthat is, an
extension of the revenue. Following the politico-economic by Brennan and
Buchanan (Brennan, Geoffrey And James M. Buchanan (1977): Towards a
Tax Constitution for Leviathan. Journal of Public Economics 8: 255-273)
federalism leads to lower tax burden. The mobile factors that are capital
and labor render a mobile tax base in the federal states. This induces the
positive force of taxes that matches local situations. Practically, a federal
system in relation to taxation translates to savings for investment, which
drives economic growth and prosperity.

Simplified Bureaucracy

Lastly, the decentralized decision making structure provides greater

proximity to the people and forces the governments to be more responsive
to its citizens' (the business sectors) preferences. Economic development is
achieved through inter-sectoral dialogue and equitable distribution of
wealth that render significant improvements in local infrastructure. There
would be more access to local resources, e.g. developing better privileges to
local contractors for infrastructure projects.

Also, a direct impact of a strong link between the government and the
business sector opens broad spectrum of business support services in an
effort to achieve a consolidated approach when representing the viewpoint
of private enterprise in its relations with the government. This would allow
the development of small businesses to be competitive with large
businesses in any industry. Through direct involvement and community
action, we see rapid development and the proliferation of our interests.

With these advantages it can hardly be supposed that the adverse position
would have an equal chance for a favorable issue.
WE ARE for a federal form of government. This commitment has been
enshrined in our advocacy since we converged in 1991 as the broadest and
largest grouping of cooperatives, people's organizations, non-government
organizations and non-government individuals. It is within the context of
political parity and economic equitythe twin goals of genuine people's
development-- that firmed up our commitment for a federal republic of the
Philippines. The interrelatedness of political stability and economic
empowerment are clearly manifested as we assist and work with the
communities in the six regions, as well as in the 25 provinces in Mindanao.
Such relationship can also be gleaned from the national development
perspective: between Mindanao and the central government in Manila.

Federalism as a Peace Option

Our collective quest for peace is anchored on the results of the talks
between the government and the Moro Islamic Liberation Front, between
the government and National Democratic Front, and between the
government and the Revolutionary Proletariat Movement in Mindanao.
While we remain optimistic on the mainstream peace process, greater
people's participation in the peace talks must also take place.

One of the most important developments contributing to the shift in the

world political paradigm from a centralized government to federalism has
been the demonstrated utility of federal arrangements in peace-making. In
a world well advanced in its movement toward federalism as the new
paradigm for interstate and intergroup relations, we must expect it also to
offer considerable promise for peace-making. As federalists, we work hard
to find ever better ways to utilize and apply federalism to the cause of
peace.

There is a certain justification for this seeming truth in that "federal" is a

loaded term, one that, more than simply describing arrangements and
institutions, has to do with serious principles, real attitudes, binding
relationships, specific expectations with regard to mutual trust, in short,
the will to federate. Even if the discussion of federalist political culture is
relatively not new on the political science agenda, the sense that federalism
can only succeed where such political culture exists sufficiently also figures
into this equation. Even less expressed is the expectation that federalism
has at least one of its major roots in the idea of federal liberty, that is to say,
liberty to do that which is mutually agreed upon in the founding compact or
its subsequent constitutional modifications. Without federal liberty as an
accepted principle neither freedom nor responsibility can develop properly.

One of the ways to overcome the deficiency seems to be by widening the

sphere to be encompassed by the solution. This is necessary for federal
peace-making to take place, in some cases from the very first. For example,
efforts to bring together two separate units are inevitably problematic not
only because it is easy for every issue to turn into a zero-sum game with one
side winning and the other losing, but it also is difficult to transform
develop or transform issues into ones in which both sides win. It is true that
in some cases when both sides are losing sufficiently, widening the sphere
helps them come together to control their losses.

No matter what form federalism takes, how federal institutions are

designed, and what federal principles are emphasized, it is generally clear
by now that where there is a positive attitude toward federalism and a will
to build a federal system, where the political society involved rests on
sufficient trust, sufficiently widespread to allow the many leaps of faith that
must be taken to make federalism work, where political culture is either
favorable or at least open to federal arrangements, where all of this leads to
a wider understanding of liberty as federal liberty, then federalism has a
good chance of succeeding when used for peace-making. It may have
almost as good a chance if most of those elements are present and some
chance even if one or two of them is. But it seems quite clear that without
any, the chances of success are extremely limited.
Federalism and the Right to Self-Determination

Asserting and reclaiming their self-determination is essential among

Lumad and Bangsamoro peoples.

The Lumad peoples have persistently expressed their own preference for
self-determination, having seen that their absorption into the unitary
political system has brought about the establishment and solidification of a
threat to their very own existence and the integrity of their distinct cultures.

The Bangsamoro have their own distinct identity and vested interest that
must be respected and cannot be satisfied by a continued subscription to
political uniformity. With the Autonomous Region in Muslim Mindanao,
the central government has allowed, albeit grudgingly, a departure from the
stranglehold of central authority. The passage of the Local Government
Code in 1991 further chips away powers from central authority; the local
government units from the regional autonomy to the barangay are able to
exercise greater self-determination.

The right to decide and choose that is best for one's self is a sacred right
that cannot be taken away from any individual and citizen. Those deprived
of this right are also unable to fulfill their aspirations for the future.

Under a federal set up, greater powers will be devolved to the local
citizenry, making grassroots participation more meaningful and broaden
the powers of the citizens over the state.
Self-determination comes in many forms. In the political sphere, it comes
in the form of semi-independent units. In the Philippines: sitio, barangay,
municipality, province, regional autonomy, nation. Self-determination
grows with increased political autonomy or the ability to stand on one's
own feet. In the political history of the world, greatest autonomy to political
units is experienced by the states of a federal state.

The more obvious advantage is greater power-sharing between the national

or federal government and the state/local government. Since the states will
have their own legislatures, real decision-making is brought closer home to
the people. This is the immediate consequence of the political re-
structuring. But, in fact, the citizens can push further to ensure that in the
federal constitution and the state laws, greater people participation in the
decision-making process is institutionalized.

Federalism and Diversity

This year's Human Development Report of the United Nations

Development Programme highlights cultural diversity. At our end, we also
delight in UNDP's 2004 report because that has been our general advocacy
for Mindanao: that we promote respect and understanding among the
diverse and unique groups of people whether they are Lumad, Bangsamoro
or Christian settlers.

Diversity and development might seem to sit oddly together. But they are
intimately linked, and the report seeks to show that they are not related in
the way many people assume. The UNDP's press release says
unambiguously that there is no evidence that cultural diversity slows
development, and dismisses the idea that there has to be a trade-off
between respecting diversity and sustaining peace. In countries like the
Philippines, and in regions such as Mindanao, there is enough to argue that
indeed diversity plays an important role in development given the
composition of the ethnic groups: 13 ethnolinguistic groups representing
the Bangsamoro people, 18 ethnolinguistic groupings of the Lumad, and the
settlers who are Ilonggo, Ilocano, Cebuano, Boholanon, and so on.

The not too obvious but significant advantage of federalism is its ability to
address the demands of a pluralistic society, meaning one that has a
mixture of populations of diverse cultures and ethnolinguistic identities.
This is nowhere more pronounced than in Mindanao, with its Moro
population of about 4 million and the Lumads numbering about 2 million,
altogether making about 40% of the total Mindanao population.

It is noted that only in a federal structure of government it is possible to

properly and correctly rule such a society in such a manner as to
accommodate the distinctiveness of each nationality while orchestrating
them all towards the common national goal which comprehends their
diversities.

Federalism and Fiscal Management

Although there is a need to establish correlation, it has been noted that the
most of the politically stable and economically advanced countries in the
world follow a federal set-up. These include Germany, the United States of
America, Canada, Australia, Brazil, Mexico, Austria, Argentina, and closer
to home, India and Malaysia.

It is interesting to note that seven of the top twelve countries in the world in
terms of per capita income in 1997 were federal, while six of the top 12 in
gross domestic product were likewise federal, while six of the top 12 in
gross domestic product were likewise federal.

Assuming that we are under a federal structure, would the economic crisis
faced by the nation today be isolated in Manila only? It is definitely
possible.
Decentralized fiscal systems offer more potential for improved
macroeconomic governance than do centralized fiscal systems, because
they require greater clarity about the roles of various players and decision-
makers and-to ensure fair play-greater transparency in rules governing
interactions.

Challenges of globalization usher in fiscal reforms in developing countries.

Among federalist countries, the following are noticeable:

Monetary policy is best entrusted to an independent central bank with a

mandate for price stability.

Fiscal rules accompanied by gatekeeper intergovernmental councils or

committees provide a useful framework for fiscal discipline and
coordination of fiscal policy.

The integrity and independence of the financial sector contribute to fiscal

prudence in the public sector.

To ensure fiscal discipline, government at all levels must be made to face

the financial consequences of their decisions.

Societal norms and consensus about the roles of various levels of

government and limits to their authority are vital to the success of
decentralized decision-making which can happen only under a federal
structure.

Tax decentralization is a prerequisite for sub-national access to market

credits.

Higher-level institutional assistance may be needed to finance local capital

projects.

An internal common market is best preserved by constitutional guarantees.

Intergovernmental transfers in developing countries undermine fiscal
discipline and accountability while building transfer dependencies that
cause a slow economic strangulation of fiscally disadvantaged regions.

Periodic review of jurisdictional assignments is essential to realign

responsibilities with changing economic and political realities.

Finally, and contrary to a common misconception, decentralized fiscal

systems offer more potential for improved macroeconomic governance than
do centralized fiscal systems.

The New Hope for Mindanao and the Philippines

Indeed the federal system is worth looking into as a more ideal set-up for
Mindanao and the Philippines. More importantly, it is one system that may
be able to effectively address the current and peculiar situation of
Mindanao not only as a victim of neglect but also as a unique island-region
that harbor three peoples of diverse backgrounds, customs, culture,
traditions, and social systems. More specifically, it is a political option that
may help prevent a stalemate that can lead to another Mindanao war.

Clearly, what Mindanao needs is unity in diversitynot integration, not

assimilation-or at least harmony in diversity. Admittedly, a federal system
is friendlier to this idea than the unitary and centralized system that we
have.

Sources:

1. MINCODE Development Agenda: A Socio-Cultural and Political

Approach to Mindanao Peace and Development. 2003.

2. B.R. Rodil. Suitability of the Federal System in Mindanao. Undated.

3. Rey Magno Teves. A Federal Republic of the Philippines. Undated.

4. Rey Magno Teves. Impasse Breaker: An Islamic State Within a Federal
Philippines? Intersect. Intersect. September 1999.
Federalism is based on dual sovereignty of the Federation and the
States. In the Federal Republic every Estado is an autonomous regional
component of the Federal Republic.

-oOo-

As I have written in one of my previous articles, the first priority in an

honest-to-goodness Charter Change (Cha-Cha) thru a Constitutional
Convention (Con-Con) is the shift from highly centralized Unitary System
to a highly decentralized Federal System. The main reason, for this is to
dismantle Manila Imperialism and achieve more effective and efficient
governance. When we adopt a Federal System, we must carefully divide the
Philippines into several autonomous States. The question then is: How
many States will compose a federalized Philippines?

In the book of Dr. Jose V. Abueva titled, Charter Change for Good
Governance published by the Citizens Movement for a Federal Philippines
(CMFP), eleven States has been proposed. These are:

Bangsamoro (ARMM) with 5 provinces;

Davao Region and Central Mindanao with 8 provinces;

Western and Northern Mindanao with 12 provinces;

Central-Eastern Visayas with 10 provinces;

Western Visayas and Palawan with 7 provinces;

Bicol with 7 provinces;

Southern Luzon with 8 provinces;

Metro Manila (NCR) with 6 provinces;

Central Luzon with 7 provinces;

Cordillera (CAR) with 6 provinces; andNorthern Luzon with 9 provinces;

The criteria adopted in this proposed division are:

Economic Viability

Contiguousness; and

Culture

The writer, on the other hand, recommends a Two-Step Determination of

Autonomous States to ENSURE economic viabilities of these States with
Minimum of financial risk for both the Federal / National government
and State governments.

Here is my proposed initial or first eight States:

Bangsamoro (ARMM) with 5 provinces;

Davao Region and Central Mindanao with 8 provinces;

Western and Northern Mindanao with 12 provinces;

Visayas and Palawan with 17 provinces;

Bicol and Southern Luzon with 15 provinces;

Metro Manila (NCR) with 13 cities and 4 adjacent municipalities;

Central Luzon with 7 provinces; and

Cordillera and Northern Luzon with 15 provinces

Yes, the criteria of Economic Viability and Contiguousness are initially

given more importance.

After 15-20 years, the Second Step will take place. This means that
Congress or the New Parliament will mandatorily review these eight States
and see if there will be a need to divide one or more of these States into a
maximum 9to avoid gerrymandering) of two. Of course, the same three
criteria mentioned earlier will guide said review. No need for another Cha-
Cha to do this for Congress or the New Parliament Constitution.

This Two Steps approach will end once and for all questions about
economic viability of some States. This also shows that if we really desire
for a Federal Republic of the Philippines in the earliest time, WE CAN DO
IT ONE CHA-CHA. No more of this grassroots/constituent-initiated
transition as proposed by the controversial Consultative Commission
(Con-Com) which is actually a design to delay the adoption of a Federal
System in the country. No more of this two Cha-Chas before a federal
system is finally adopted. Of course sufficient time must be allocated in this
regard. No undue rush on Cha-Cha thru Con-Con.

We are aware that some smaller areas would like to become immediately
as autonomous States such as Palawan, Cebu, SoCSarGen (South Cotabato,
Saranggani and General Santos), etc. To be honest, such position somehow
presents some serious negative reactions especially from anti-federal
people which use this argument that some federalists are creating their own
fiefdoms. That is why we appeal to these federalists to sober up a little
and support our Two Steps strategy. Those places I mentioned can later
on pursue this matter after we gained more experience and improved the
countrys economic standing in implementing the federal system. How
about it guys?

The powers appropriately vested in the autonomous State government

must be clearly specified in its State Constitution. These are:

Education

Health

Infrastructure and Public Works

Agriculture

Industry

Police

State Judicial System

Communication and Transportation

Custom and Taxation

Others

The autonomous State will have this local government set-up:

Autonomous State

Local Government Units as before:

Provinces / Chartered Cities

Component Cities / Municipalities

Barangays
Although the topic of federalism has been discussed since the 1971
Constitutional Convention, there are still many areas that are not clear even
to political analysts. In the interest of full disclosure, I will state now that I
have always been in favor of a federal system of government and I have
written several columns in the past about this topic. However, today I want
to focus on clarifying certain issues.

There is a wrong impression that the choice is between a unitary form of

government which we have now and a federal form of government.
There are actually three choices for forms of government unitary, federal,
confederate. Federalism is actually the middle choice between
centralization and confederation.

In a unitary form of government, there is one level of government the

national government. All other forms of government are subordinate to the
central government.

In both federalism and confederalism, there are two levels of government.

In a confederation, however, the central government is subordinate to the
regional governing bodies. In a federal form of government, there is a clear
division of authority between national government and the state or regional
government. The central government will remain more powerful than the
state because of its authority over national concerns.

For example, in a federal government, the national government retains sole

power in the areas of foreign affairs, national defense, monetary and fiscal
policies and constitutional issues. The central government will, therefore,
continue to have sole power to make treaties, control the armed forces, and
a common currency. The Constitutional bodies will remain Supreme
Court, Central Bank, and Comelec.
A brief look at American history might shed some light on this issue. The
original United States was actually a confederation of 13 states. When the
US Constitution was being drafted, a Federalist Party was organized to
support a stronger central government while maintaining the 13 states. A
group called the Anti-Federalists wanted a weaker central government. The
final US Constitution invoked federalism which was considered as being in
the middle of the political spectrum between a confederacy and a unitary
government.

Opinion ( Article MRec ), pagematch: 1, sectionmatch: 1

The American Civil War (1861-1865) was between the South who wanted a
confederacy and the North who wanted to retain the federal union. That is
the reason why the Southern states that seceded from the United States of
America called themselves the Confederate States of America.

The other issue that must be clarified is that the choice of having a
presidential and parliamentary form of government is a different debate
than choosing a unitary or federal government. Just for emphasis, a
parliamentary or presidential form of government can be instituted in a
federal, unitary or confederate form of government.

There are also three choices that are available parliamentary, presidential
and a combination of the two. United States is an example of a presidential
form; Japan and the United Kingdom have a parliamentary form; and,
France has a combination of both presidential and parliamentary.
Division of powers

In a federal form of government, the constitution must prevail. Therefore,

the division of powers between the federal and regional form of
governments must be clearly stated in the constitution. The constitution
must also provide for powers that are not explicitly stated in the
constitution. In Germany and the United States, the powers that are not
specifically granted to the federal government are retained by the states.
Other countries, like Canada and India, are different in that powers not
explicitly given to the states are retained by the federal government.

In the granting of powers to the state, there are also two ways. If all the
states have the same powers, this is called symmetric federalism. In a
federal form of government where some states are given different powers or
some possess greater autonomy, this is called asymmetric federalism.
This is often done when it is clear that a state or region possess a distinct
culture. In the case of the United Kingdom, Scotland has been given greater
autonomy than England, Wales or Northern Ireland. In Spain the regions
dominated by the Basques and the Catalans have more powers than the
other Spanish regions.

In the division of powers, India has four lists of powers Union List,
Concurrent List, State List, and Residuary List. I am not advocating that we
copy the India model. But I am presenting it here as a possible basis for
discussion.

In the Union List, there are approximately 100 areas which is reserved for
the federal government. Some of the areas are defense, armed forces,
atomic energy, foreign affairs, citizenship, airways, currency, foreign trade,
inter- state trade and commerce, banking, customs, elections and the
Supreme Court.
In the State List, there are more than 60 items on the list. Some examples
are police, local governments, public health and sanitation, land tenures,
fisheries, trade and commerce within the state, public markets and
gambling.

The Concurrent List has more than 50 items where uniformity is desired
but not considered essential. If there is any conflict between the laws made
by the federal and state government, the legislation by the federal
government shall prevail. Some items on this list are criminal law, marriage
and divorce, adoption, forestry, labor unions, education, administration of
justice except Supreme Court and High Courts.

In the United States, the federal government sets the minimum wage but
the individual states have the right to enact its own minimum wage which,
however, must be higher than the federal minimum wage.

The shift to federalism, even with Charter change, will be an evolving

process and not an overnight change as some people wrongly envision.
Even in the United States, the delineation of powers between the national
and the state governments is continuously changing.

There are advantages and disadvantages to instituting federalism in the

Philippines. There will be losers and winners in any shift to a different form
of government. So we need to have a vigorous national debate. But the first
step is to understand what federalism really means and while Charter
change will formalize the structure, the process of federalizing can actually
begin without Charter change.