A shift to federalism could derail the Duterte administration’s infrastructure projects and disrupt the Philippine economy’s growth momentum, according to the National Economic and Development Authority (Neda).

In a televised interview on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia said the country can’t afford to rush into adopting a federal form of government.

Pernia said shifting to a federal form of government will affect the government’s “Build, Build, Build” (BBB) program. Many of these projects can be completed under the current presidential form of government by the time President Duterte steps down from office.

“We [the economic managers], including myself, do not oppose federalism. It may well be the ‘Holy Grail’ that we are aspiring for,” Pernia said.

“But, you know, going to the Holy Grail takes time. You cannot rush your approach to the Holy Grail because you need to make a lot of preparations, and that’s essentially what we’re saying,” he added.

Pernia said around 32 of the 75 flagship projects are already on track to be completed by 2022. Many of these projects are region-specific or seek to promote interregional connectivity.

Once completed, these projects will place regions and provinces at a better position to benefit from the gains that federalism offers.

If there is a shift in the form of government, these projects may be negatively affected and not delivered on time. These are “economic externalties” that increase the financial costs of federalism.

“If we complete our Build, Build, Build program, many of these regions will have been addressed in terms of infrastructure deficit, in terms of human capital deficit,” Pernia said.

“These are the things we should do first, this is all we’re saying, and then we would be better prepared for federalism,” he added.

Based on the initial estimate of the Neda, Pernia earlier said federalism will cost around P120 billion. But, Pernia said, this is a preliminary estimate and did not include the economic costs of federalism.

Pernia said the financial cost is based on the needed expenditures for a larger number of public officials, particularly the 400 congressmen, 36 senators and hundreds of officials for regional assemblies, as well as courts.

He added this will also include the construction of new buildings for this new system of government and more vehicles purchased for service of the different officials of the regional government.

“It’s going to cost a lot more,” Pernia said. “[Because] that is just [the] financial cost. We are not even talking about the economic costs in terms of negative externalities on the economy.”

Assuming that the draft federal constitution would be voted on today, Pernia said he will not vote in favor of it.

Pernia said the draft constitution lacked analysis and basis, especially when it comes to the financial aspect of running the affairs of the government.

He said it would help if there was an annex that provided the analysis for the financial and economic provisions in the draft.

“The draft lacks analysis and data. It’s not data-driven, it’s not analysis-driven,” Pernia said. “On the financial aspects, on the economic aspects especially, there’s nothing, there’s nothing there. Its really just an assignment of revenue but not the expenditure responsibility, for example.”

In July Pernia already said the economic team had a lot of misgivings regarding federalism and said transitioning to a federal form of government in the medium term could disrupt the country’s economic momentum.

Pernia said the Neda recommended that the transition to federalism be done in no less than 15 years to ensure that the Philippine economy can maximize its growth
momentum.

The Constitutional Commission is proposing a three-year transition, which will start soon after the new constitution is approved in the 2019 plebiscite.