Political culture and underdevelopment

THE draft federal constitution prepared by a presidential commission provides a bigger share of national taxes - not less than 50 per cent - to the proposed 18 regions, to be “equally divided among them and automatically released.”

As reported in media, the regions are also entitled to a share of an equalization fund equivalent to “not less than three percent of the annual national budget” and “distributed based on the needs of each region.”

The poorer regions, or those that require higher government support to achieve “financial viability and economic sustainability” will have a bigger bite of the equalization fund, the amount to be determined by a Federal Intergovernmental Commission.

I apologize if this may sound harsh. But it appears that the draft constitution intends to solve the pervasive poverty and underdevelopment outside Metro Manila and major urban centers by throwing money at the problem. The problem goes beyond money.

According to the Department of Finance (DoF), the NCR generates 78 per cent of its income locally, thereby making it a “super region” under the proposed federal charter. Under our present unitary set-up, the NCR’s revenues are “shared” with other local government as Internal Revenue Allotment (IRA), and funding for various infrastructure and development projects. One can say that NCR, and the other economically-vibrant regions, subsidize the poorer regions.

Under the proposed federal charter, the NCR will no longer be obligated to “subsidize” poorer regions. It will also get an equal share of national taxes, which then become surplus income for the region. The notion that with federalism the other regions will be able to catch up with NCR is a foolish one.

And while the laggard regions will be entitled to an equal share of national taxes as the more economically-vibrant regions, the big question is whether these local governments can spend the added revenues efficiently, or what technocrats call absorptive capacity.

A fifth-class locality may find itself suddenly awash with money to build concrete roads and bridges. But can it build these infrastructure on time and up to quality? Will these roads and bridges automatically bring in investors or will they end up as roads and bridges to perdition?

Consider our experience with the Autonomous Region of Muslim Mindanao (ARMM). I have written about this in a previous column.

Since its creation in 1989, the ARMM has received a more than a generous share of the national budget. Add to ARMM’s yearly budget the PDAF of its congressmen and generous foreign development assistance. We can hardly consider ARMM as cash-strapped.

Yet, according to the Department of Social Welfare and Development (DSWD), the ARMM is the poorest region in the country. Clearly, money - or the lack of it - is not the culprit behind the region’s poverty.

I have been proposing an assessment of the ARMM experience to help uncover lessons – good and bad – in the management of autonomous regions. Sadly, the proponents of federalism have been silent.

One also needs to study carefully the concept of an equalization fund. It may be argued that creating an equalization fund simply extends the unitary system’s practice of a central authority extending subsidies to poor localities, and as a result, encouraging economic dependence on a strong, centralized government. Political scientists have pointed to Malaysia as an example of a federal government with a strong, central leadership. Not surprisingly, some federalism proponents point to Malaysia as their model.

We simply need to look at our experience with the IRA. The law provides for its automatic release, yet we know that has not been the case. In previous administrations, the IRA was wielded as a political tool to ensure pliant localities. The estimate of unreleased IRA has been placed at trillions of pesos.

While we can only ascribe good intentions on the part of the presidential commission, we must remember that at the end of the day, it is Congress that will have the final say on the form of government. The members of Congress may have divergent views on the issue, yet their interests, personal and political, interlock.

There are other factors that need to be threshed out before we embrace the unknown, namely the interplay of politics and governance, the pervasiveness of political dynasties, and the uneven development that will not immediately be corrected by a shift to federalism.

Changing the form of government without changing the political culture will only benefit vested political and economic interests and in many localities, the political and economic elite are the same. Without these reforms, we may be cursing our people to an eternity of poverty and underdevelopment.