Mindanao and the Future of Federalism in 2022 Onwards
- IAG Philippines
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Senator Aquilino “Koko” Pimentel III delivered these remarks during the first day of Kusog Mindanaw Virtual Conference on October 18, 2021, on the topic ““Federalism and Equitable Share of Mindanao in the National Wealth and Policies That Affect Them”. This copy has been edited for brevity.
First and foremost, I would like to thank Kusog Mindanaw for your kind invitation to be one of the guest speakers. Your conference seeks to strengthen the voice of Mindanao in national policies and programs. As a Mindanawon, I am grateful for this initiative which also seeks to generate ideas for the holistic development of Mindanao.
Let us now go to our topic: “Federalism and Equitable Share of Mindanao in the National Wealth and Policies That Affect Them.”
FEDERALISM AND ITS FUTURE IN 2022 ONWARDS
It is still my cherished hope, and I hope it is yours too, that the shift to the Federal System of Government will be the ultimate legacy of PDP Laban and Tatay Nene Pimentel to the Filipino people.
As someone who has run the PDP Laban for decades, I will continue to bring the message of Federalism to the Filipino people, even though we are currently busy dealing with the COVID-19 pandemic. Actually, this topic of Federalism is the one which attracted me to participate in your conference.
As a Party Leader, I believe that one of the primary missions of our political party is to fix the problems of our nation. We believe in structural analysis in determining what ails our nation. We do not believe that mere changes in the personalities of our leaders can fix our nation’s problems. If the rules and structures don’t change, our leaders will behave the same and it will be “business as usual”, to the detriment and great disappointment of our countrymen.
We believe that we need to change structures and systems to address the root causes of our nation’s problems. Ang importante, we should not be afraid about changing structures and systems. Good governance is, after all, an experiment conducted in the laboratory called life.
Economic progress and development, under our current unitary system of government, has been lopsided in favor of Metro Manila, the center of power, and the areas closest to it. We can see this with our very own eyes. Hence, there should be no need to debate on this factual statement. This inequality has even led the disgruntled to coin the term, “Imperial Manila”.
Just for your information, figures presented during the preliminary budget hearings show that in the 2022 Budget, Luzon gets 64.22% of the Budget, Visayas 15.24%, and Mindanao 20.54%. Mindanao’s 20.54% share is lower than its 2021 share in the Budget of 24.37%.
This is not the final picture however, because large sums of money are lodged in the “Central Office” of Departments and where these sums go can change the percentages I have just mentioned.
The “imperialism” of the one and only center of power under the present unitary system of government has resulted in a “dichotomy”, where there are in the same country the Philippines, places of wealth, comfort, and modernity, co-existing with places of extreme poverty.
To fix the inter-generational problems of poverty, inequality and the societal instability resulting from these two, the PDP Laban has proposed, since its foundation in 1982, the adoption of the Federal System of Government for the Philippines. This is the same priority agenda of the Party in this coming election.
For the long-term benefit of our country, changes in our system of government will have to be made. And PDP Laban will try to influence the coming election’s narrative by including Federalism among the campaign topics. Although I must admit that surveys show that Federalism is not among the top-of-mind concerns of the voters right now.
We see Federalism as the practical solution to the age-old problems of poverty, inequality, and instability that continue to hinder the development of our nation.
The diversity of Philippine society truly provides a challenge which Federalism can address. As a country of more than 7,000 islands, almost 100 dialects, and more than a hundred different ethnic and tribal affiliations, Federalism provides a system wherein national unity is maintained while at the same time recognizing and protecting the diversity of Philippine society.
With Federalism as our Party’s continuing goal, we aim to achieve the following objectives:
- Involve the Regions in national decision making;
- Accelerate the economic development of the Regions;
- Achieve “Peace in Mindanao”; and
- Allow the preservation of the culture and language of the various ethno-linguistic groups of the country.
Admittedly, Federalism is a complex proposal. Adopting all of these changes need time and will definitely take time. Also, our definition of Federalism requires that the relationship between the different levels of government (National/Central vis-à-vis Regional/Local) is defined in and protected by the Constitution.
While we were on our struggle for the adoption of Federalism, the Supreme Court gave us a welcome ruling in the case of Mandanas, et al. v. Executive Secretary, et al. (G. R. Nos. 199802 and 208488) which fully implemented Section 6, Article X of the 1987 Constitution.
Because of this Ruling, the Executive Branch has issued Executive Order No. 138, “Directing Full Devolution of Certain Functions of the Executive Branch to Local Governments, and the Creation of a Committee on Devolution”.
To those who believe in Federalism and its first step, decentralization, these are welcome developments.
EQUITABLE SHARE OF MINDANAO IN NATIONAL WEALTH
Funding must be decentralized, and functions must be devolved in favor of the local government units (LGUs). This is consistent with the principle of subsidiarity that suggests that “social and political issues should be dealt with at the most immediate or local level that is consistent with their resolution”. Kung sino ang naka danas ng problema, doon ninyong subukang solusyonan ang problema.
Ensuring the equitable share of LGUs in the national financial resources, improving their capacity to deliver basic services to their constituents, and enhancing their transparency and accountability in managing public resources are keys to improving local autonomy and decentralization.
The landmark Mandanas ruling happened in 2018. Since then, the celebrated ruling has inspired hope that the Philippines can now have a “taste” of the Federal System of Government, nationwide.
In this case, the Supreme Court held that all collections of national taxes, except those accruing to special purpose funds and special allotments for the utilization and development of the national wealth, should be included in the computation of the base of the just share of LGUs.
The Mandanas ruling clarified that the share of the LGUs from the Internal Revenue Allotment (IRA), now referred to as the National Tax Allotment (NTA), includes other national taxes like customs duties.
There is more to this ruling than meets the eye. We look at this not just as a transfer of resources but an opportunity to strengthen decentralization and improve the delivery of social services in the Philippines.
Certainly, it will promote fiscal decentralization. With the corrected interpretation of the “just share in the national taxes of LGUs”, which is 40% of ALL national taxes collected by the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), and other agencies, more funds will be available at the local levels.
As such, the NTA shares of LGUs in Fiscal Year (FY) 2022 shall be PhP 959 billion based on the certifications submitted to the Department of Budget and Management by the BIR, BOC, and Bureau of Treasury on the actual collections of national taxes in FY 2019. This is PhP 263.5 billion, or 37.9% higher, than the FY 2021 shares of LGUs.
Consequently, it will encourage more local government accountability. The substantial increase in the shares of the LGUs from the national taxes will empower the LGUs in providing basic services and facilities to their constituents, and aid them in the effective discharge of other duties and functions devolved to them under the Local Government Code. An important provision to study is Section 17 of the Local Government Code or RA No. 7160.
EO 138 was issued directing the full devolution of certain functions of the Executive Branch to the LGUs. Under the said EO and in accordance with Section 17(g) of RA No. 7160, the basic services and facilities fully devolved shall be funded from the share of the LGUs in the proceeds of the national taxes and other local revenues.
Local chief executives shall also ensure that any fund or resource available for the use of their respective LGUs shall be first allocated for the provision of basic services or facilities devolved before applying the same for other purposes, in accordance with relevant laws and budgeting and auditing laws, rules and regulations.
EO 138 established the “Committee on Devolution” (COMDEV), to be headed by the DBM Secretary, to oversee its administrative and fiscal decentralization goals.
To carry out the plan, the national government agencies (NGAs) and LGUs shall prepare respective devolution transition plans (DTPs) which conform to the guidelines to be jointly issued by the DBM and the Department of the Interior and Local Government (DILG).
The NGA DTPs shall identify and clarify the functions and services devolved to the LGUs, by level of LGU, based on RA No. 7160 and other relevant laws, and the strategy for and phasing of devolution to the LGUs.
They shall also include the definition of standards for the delivery of devolved services; strategy for the capacity development of the LGUs; framework for monitoring and performance assessment of the LGUs; and an organizational effectiveness proposal to strengthen the department/agency in assuming "steering functions" as part of the devolution efforts.
The EO also directed the COMDEV to propose a “Growth Equity Fund” to Congress to address issues on marginalization, unequal development, high poverty incidence, and disparities in the net fiscal capacities of LGUs. We just have to look at the source of this fund, because funds already decentralized should not be re-centralized again.
Relative to this, I remember a statement I always emphasize in my talks on Federalism: “If we are to universally guarantee basic services for each and every citizen, we should decentralize and democratize the funding and the discretion over the funds.”
EO 138 is indeed a step forward toward our goal of federalizing the Philippines. Just like our Federal Government model, if we allocate the funding to the regional and local governments and let them implement and provide the services, then it will be more efficient and effective, more felt. Mas nakakarating, mas nararamdaman.
Federalism is about bayanihan or solidarity, so that no one is left behind. Each region or state will be given the funds, discretion, and the responsibility to provide each citizen of the Republic of the Philippines the guaranteed minimum basic services. Under the PDP Laban model of Federal Government, the equitable share of each citizen in Mindanao in the national wealth is thereby ensured.
Just for your information, on the proposed 2022 National Budget, which the Senate will tackle in plenary when it resumes session in November, our national government seeks to approve PhP 3.195 trillion as direct share of the regions for development in both urban and rural communities. This is equivalent to 63.6% of the 2022 budget. Out of this, the proposed regionalized budget for Mindanao is PhP 656.5 billion. This is lower compared to the allocated PhP 767.2B for the Mindanao region in the 2021 National Budget.
POLICIES THAT AFFECT MINDANAO
Mindanao is already productive. With a population of around 27 million, our island of Mindanao is the food basket of a country of around 110 million. Mindanao contributes 40% of the national food requirements; 30% of the national food trade; and 45% of the country’s total fish production.
Agriculture is therefore essential as it represents 68% of the jobs in Mindanao. However, agriculture is the primary and often the only source of income in Mindanao rural areas where 80% of the poor live.
There are jobs in agriculture, but these are not enough for the number of people in Mindanao. At this point in time, our people need jobs.
Hence, in addition to agriculture, we should entertain manufacturing in Mindanao in order to create more jobs.
According to Ruchir Sharma in his book “The Ten Rules of Successful Nations”:
“Of the three main economic sectors - agriculture, services, and manufacturing - manufacturing has been the ticket out of poverty for many countries. Even today, xxx, no other sector has the proven ability to play the booster role for job creation and economic growth that manufacturing has in the past.”
We have been productive in Mindanao, but we need to be more productive as a people.
At this point in time, we need to provide our people with jobs and/or sustainable livelihood.
Your Legislature is trying its best to reform existing systems in order to attract investments, both foreign and domestic, which can generate jobs for our people.
Our new law called “Corporate Recovery and Tax Incentives for Enterprises” or the CREATE Law, lowered corporate income taxes by 5% which was even made retroactive to July 2020. This measure is estimated to provide almost one trillion pesos worth of tax relief to enterprises over the next 10 years. The hope is for these savings from taxes to be re- invested to expand the ongoing business and create more jobs.
Your Congress is also considering other measures designed to “rationalize” and make more attractive or “reasonable” our rules on foreign investments such as the amendments to the Retail Trade Act, the Foreign Investments Act, and the Public Service Act, among others, in the hope of attracting foreign direct investments which would generate jobs here in our country.
As the Chairman of the Committee on Trade, I have successfully shepherded the passage of the Amendments to the Retail Trade Act. Once we are rid of Covid and the “business confidence” is regained, I hope to see our People benefitting from the jobs created by this law.
The Philippines is also part of the largest free trade area in the world, and we expect to approve this largest free trade agreement, the RCEP, soon.
Mindanawons should start studying the details of this free trade agreement this early so that we can find out how we can take full advantage of this free trade agreement involving not only the ten ASEAN countries but also China, Japan, South Korea, Australia, and New Zealand. Just imagine that expansive area as your potential market!
As I have stated, we are already productive, but we need to be more productive. Without any surplus, there is nothing to trade under RCEP!
As we focus on productivity, surplus, and trading, we should be aware too that some big-ticket items under the “Build, Build, Build” Program are to be implemented here in Mindanao.
My staff has found the following:
- The Panguil Bay Bridge project, which is to cost PhP 7.3 Billion;
- The Mindanao Railway Tagum-Davao City-Digos segment, which is to cost PhP 81.7 Billion;
- The Davao City Coastal Road Bypass Project, which is to cost PhP 19 Billion;
- The Davao Expressway Project, which is to cost PhP 69 Billion;
- The General Santos City Airport Industrial Complex or Aerotropolis, which is to cost PhP 959
These infra projects will create jobs for our people in the short term. These will also open up new investment opportunities in Mindanao as well as provide the infrastructure or hardware support for our call for more productivity, more surplus, and more trading in Mindanao, and from Mindanao.
To achieve sustainable and inclusive economic security, economic linkages between and among markets and production areas need to be strengthened. But more than that, we need to establish more physical linkages in Mindanao through building and improving our infrastructure, transport, and communication facilities.
We also need to aspire and work for a just and lasting peace in Mindanao.
In light of Mindanao’s diverse religions, ethnic groups, ideologies and cultures, a just and lasting peace shall be prioritized for the overall development of the region.
When we say just and lasting peace, we shall endeavor to include the protection of the people of Mindanao from threats such as violent conflicts, terrorism, disease, among others.
All the stakeholders must participate to promote the culture of peace in Mindanao, prevent radicalization, and counter violent extremism.
We must also uphold the spirit of the Indigenous Peoples Rights Act (IPRA), a law compatible with human security in the sense that it promotes social justice and human rights. The National Commission on Indigenous Peoples (NCIP) should encourage more participation of our indigenous people in its various programs.
I firmly believe that the development process and peace process should involve good governance and broad people participation. We need to encourage strong public-private cooperation and to empower our local civil society groups and non-government organizations who do the grassroots work.
There are grants for the Mindanao Peace and Development Program-Rise Mindanao (MINPAD-Rise Mindanao) and Support to Bangsamoro Transition Program (SUBATRA). The grassroots should be encouraged to participate in these programs.
As we “develop” Mindanao, we need to protect and sustain Mindanao’s ecological integrity and healthy environment.
Mindanao is endowed with “riches”. Mindanao is a paradise. Let us treasure the land of our birth.
Let us be conscious of the protected areas of Mindanao.
Mindanao is endowed with rich mineral resources. Its metallic deposits include lead, zinc, ore, iron, copper, chromite, magnetite, and gold. Gold mined in Mindanao accounts for nearly half of the national gold reserves. Its non-metallic mineral resources include marble, salt, sand, gravel, silica, clay, and limestone.
When it comes to the use of our mineral resources, let us be open to following the example of Indonesia, which, I suggest, we should treat as our “big brother” when it involves this subject matter.
Let us allow the use of our mineral resources but not the exploitation of our land.
Not only should mineral resources be considered as a source of national income, but also as national assets to boost national economic growth. Hence, we should adopt a mineral value-added policy.
Let us not be satisfied with the direct shipping of ore. That actually perpetuates the old colonizer-colony set-up. Let us move up the value chain for minerals production and increase the direct and indirect employment opportunities for our people and ensure that local communities participate in a fair share of the benefit from mining activities. Let us therefore encourage investments especially for mineral processing and refinery.
Also, given the insights we derived from this COVID-19 pandemic and its effects on economies, on world trade, and on the world financial system, we should collectively call on our Bangko Sentral not to sell our gold reserves. Let them remain in our vaults. Let us not exchange a mined valuable resource for paper and ink.
Mindanao also has vast potential for renewable energy sources.
However, we need to protect Mindanao from the threats of climate change.
According to the 2017 Philippine Climate Change Assessment, by 2050 Visayas and Mindanao are expected to be drier than usual. Huge decline in rainfall and lengthier dry periods will affect the amount of water in watersheds and dams, thereby limiting agricultural and energy production.
It is thus our collective responsibility to combat the effects of climate change.
Especially at the local level, our local government units need to recalibrate the planning, preparation, and implementation of their respective climate action plans.
At the national level, the National Climate Change Action Plan should be strictly implemented. As a country, we should know our particular climate risks and vulnerabilities, and we must be ready to always address them promptly and scientifically.
While we are ramping up again the campaign for the Federalism agenda, we should take advantage of what our campaign for decentralization has achieved so far. We should make use of the Mandanas ruling to further improve fiscal decentralization and make the Federalism agenda more understandable and acceptable to our People.
LGUs should not waste the chance given by EO 138 to improve the basic services and facilities fully devolved by the Executive Branch to the LGUs. Now is the time for local leaders na magpakitang gilas.
And to sustain our progress, our leaders at the national and local government levels must ensure close coordination and communication so that the development goals of each level are well-aligned particularly during this unprecedented crisis.
Let us encourage events such as this “Kusog Mindanaw” Conference where public and private leaders and their constituents can effectively discuss how to strengthen consensus on important national and local developmental issues.
It is therefore my hope that the people of Mindanao will benefit from what we are doing in this five-day conference as we pursue a “Mindanao Agenda” which will lead to equitable and sustainable socio-economic development in our region.
I wish all participants the best. Thank you very much!
 Taken from Wikipedia
 In recapitulation, the national taxes to be included in the base for computing the just share the LGUs shall henceforth be, but shall not be limited to, the following:
- The NIRTs enumerated in Section 21 of the NIRC, as amended, to be inclusive of the VATs, excise taxes, and DSTs collected by the BIR and the BOC, and their deputized agents;
- Tariff and customs duties collected by the BOC;
- 50% of the VATs collected in the ARMM, and 30% of all other national taxes collected in the ARMM; the remaining 50% of the VATs and 70% of the collections of the other national taxes in the ARMM shall be the exclusive share of the ARMM pursuant to Section 9 and Section 15 of R.A. No. 9054;
- 60% of the national taxes collected from the exploitation and development of the national wealth; the remaining 40% will exclusively accrue to the host LGUs pursuant to Section 290 of the LGC;
- 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products; the remaining 15% shall accrue to the special purpose funds pursuant created in R.A. No. 7171 and R.A. No. 7227;
- The entire 50% of the national taxes collected under Sections 106 (Value-Added Tax on Sale of Goods or Properties), 108 (Value-Added Tax on Sale of Services and Use or Lease of Properties) and 116 (Tax on Persons Exempt From Value-Added Tax (VAT)) of the NIRC as provided under Section 283 (Disposition of National Internal Revenue) of the NIRC;
- 5% of the franchise taxes in favor of the national government paid by franchise holders in accordance with Section 6 of R.A. No. 6631 and Section 8 of R.A. No.
 Fiscal decentralization involves shifting some responsibilities for expenditures and/or revenues to lower levels of government
 Data from the DBM
 [DATA FROM DBM] To ensure the fair distribution of resources and foster inclusive growth across all regions, PhP3.195 trillion, or 63.6% of the proposed 2022 National Budget, will be earmarked for development in both urban and rural communities. Out of this, the proposed regionalized budget for Mindanao is PhP656.5 billion.
 Out of the PhP3.149 trillion direct share of the regions in the 2021 National Budget, Php767.2B was allocated to the Mindanao region.