One of the most pressing topics in the Philippines today is the government’s campaign to transform the country into a Federal State. The issue has been so controversial that many public figures and organizations have expressed either their support or disapproval of the impending change within the country’s government system.
Understanding Federalism
What is Federalism? In definition, a federal government is a type of governance that allows a separation of powers between two governing entities: first, the central government, and second, the local state governments. These two ruling powers will serve under a national government.
In the proposed Philippine federal system, there will be huge changes not only on the distribution of duties and jurisdiction of power but also in other aspects of governance. For instance, the central government will have the responsibility to maintain the armed forces, declare war, print money, and participate in treaties with other foreign governments.
On the other hand, local state governments will have the power to set up their own courts, build infrastructure in their region, and most importantly, regulate and tax businesses.
Running a business under a Federal Government
Perhaps the biggest question that most businessmen and entrepreneurs have about Federalism is this: how will this dramatic change in the government system affect their operations?
Just like any government policy, there will always be two sides of the coin: there will be pros and cons of a federal state that businesses might experience once the new system will be implemented. The first part of the article will focus on the more positive side of the proposed change in the constitution and the later portion will give you an idea of the consequences that this form of government could bring. Here are the things that businesses should expect under a federal government.
1. States will enjoy the benefits of the equally-distributed regional budget.
Recent reports revealed that the National Capital Region (NCR) got the lion’s share of the national budget, leaving other parts of the country lacking the necessary resources to answer to their region’s financial woes. In fact, data revealed that an estimated Php428.5 billion has been allocated to the country’s capital region – and this unequal distribution of resources is one of the reasons why many people, including President Rodrigo Duterte, wants to shift to federalism.
This is because, under the Federal Government, every state in the country will receive equal benefits in terms of budget and resources. These changes will have the potential to change everything, giving poorer places in the country a chance to rise from the worries of poverty and finally compete with other regions.
The results can potentially benefit businesses in the regions: solving poverty within these economically-challenged areas is a first step to a stronger and a more competitive market.
2. Different local states will mean more opportunities for expansion.
A federal system of government will divide regions into independent states, and there will be opportunities for expansion especially for enterprises that operate solely in metropolitan areas.
Since a federal government allows equal distribution of wealth among its member states, it can help smaller governments and their economies a much-needed boost. A healthier economy leads to highly active market because of the better spending power of among the regions’ citizens.
3. The decentralized characteristic of the government will boost the job market.
As mentioned earlier, one defining a characteristic of a federal state is its decentralized nature in which smaller states can run and conduct business independently. This freedom can allow the business sectors of each state to blossom, promoting more demands for employment.
The expansion of the job market from the current central capital region, Metro Manila, to other regions in the Philippines, will trigger a more dynamic social and economic mobility across the country. This means that there will be plenty of opportunities for business owners to find the best workers from a wider and more diverse talent pool.
Additionally, highly-skilled workers will no longer need to focus on Metro Manila for employment and instead, they can finally rely on job opportunities from businesses within their states.
4. Smaller states can finally focus on strengthening their prized industries.
Many regions in the Philippines rely on different industries and sectors in promoting a healthier economy. Some areas are more specialized in agriculture or fisheries. Some take pride in their vibrant ecotourism, while others celebrate their region as a bustling business center. Other regions take a dominant part of their revenue from fruit and flower farming, and the rest have their own industries to be proud of.
Under a decentralized government, states have the freedom to choose from a more specific specialization. Their newly-granted autonomy gives them the financial and labor boost to develop their own industries, attracting skilled workers, experts, and innovators to help them achieve their business goals.
5. A federal state can ideally provide a faster response to social issues.
Under the new type of governance, citizens will have the opportunity to ask help from the government through their state officials. This is because they will now be closer to the government and will no longer need to travel to the central region to solve their economic and social needs.
These social issues that include public safety, health care, education, recreation, culture, laws, transportation, and most importantly, business and finance, can be easily addressed by state governments—faster and more efficiently.
Such ease of solving the most present social and economic issues can bring more optimism and credibility especially from the perspective of potential investors. A peaceful, economically and politically stable region is also an alluring sight for businessmen and entrepreneurs. Most importantly, creating this ideal environment for residents and businesses to prosper can easily promote further growth and assurance for future generations.
Understanding the consequences
Many believe that federalism is not a perfect system. With all the advantages of the distribution of financial powers, the new laws on taxation as well as spending on the country’s public funds, some consequences will reveal themselves in the long run.
For one, different tax rates in the different regions can be a negative blow, especially for businesses. Experts agree that the country’s present tax system is more business-friendly because it’s uniform and it provides easier ways of doing business.
The final version of the reform in the government is still on its early stages. Debates and questions still need to be addressed, and there will still be several changes that it might undergo in the future. Perhaps the best thing that business owners have to do is to stay informed and updated of the most pressing issues that could affect them in the future.
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