‘Incoming admin must prioritize economic growth over federalism’

MANILA, Philippines — With the country facing a looming fiscal crisis due to the impact of the COVID-19 pandemic, the incoming administration must prioritize the economy over the plan to shift to federalism, according to former socioeconomic planning secretary Ernesto Pernia.

During an interview with “The Chiefs” over Cignal TV’s One News on Friday night, Pernia said shifting to federalism and amending the Constitution can wait, considering that the next government has other “urgent matters” to attend to.

“I would not go into that in the first year of the new administration,” the former National Economic and Development Authority (NEDA) chief said when asked about the possible Charter change as soon as president-elect Ferdinand Marcos Jr. is sworn into office.

“There’s a lot of effort needed in terms of fueling economic growth… It’s not as urgent as the fiscal crisis that we are facing,” he added.

Marcos ran under Partido Federal ng Pilipinas, which pushes for the shift of the form of government to federalism.

Pernia said such shift would be more difficult now, considering the impact of the pandemic and other external factors, including the war between Russia and Ukraine.

“It’s going to be more difficult to do that now with the economy not in good shape as it was when we were talking about federalism,” he said, referring to the first part of the Duterte administration.

“Frankly, I’m not keen about federalism because… they are very unequal in terms of development, resilience and resources. It’s very difficult to have different federal states or regions that are so unequal in terms of economic growth, resource base and all that,” he added.

Duterte also ran with a platform of shifting to federalism, but proposals to amend the Constitution did not push through over the past six years.

Cohesive team

Asked about the incoming economic team of Marcos, Pernia said he is a “bit more confident” as they are expected to work cohesively.

Marcos earlier announced his choice of the following members of his economic team: former budget secretary and incumbent Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno as secretary of finance; former NEDA chief Felipe Medalla as BSP governor and San Miguel Tollways Corp. chief Manuel Bonoan as public works and highways secretary.

He will also appoint former University of the Philippines president and Management Association of the Philippines president Alfredo Pascual as trade and industry secretary.

Other appointees on key fiscal posts, including the Department of Budget and Management, Bureau of Internal Revenue and Bureau of Customs, have yet to be to announced.

According to Pernia, the choice for agriculture secretary will also be important, given the role of the sector in ensuring food sufficiency in the country.

He stressed the need to implement better tax administration to increase revenue collection.

“I think the better approach is to really tighten tax administration and make sure that tax collection is done correctly and that there are no tax evaders or leakages, no wasteful spending,” he said.

“Later on, if still not enough, then maybe we should start implementing those tax measures that were mentioned by DOF,” added Pernia, referring to the Department of Finance’s proposal to implement new taxes to address the gaps brought about by debts incurred over the past years to address the pandemic.

The former NEDA chief stressed that new taxes, if imposed, must “hit the richer classes more than the poor income classes.”

“Tax administration is very imperfect in our country. Just improving tax administration can already generate a substantial amount of revenue,” said Pernia.

“We need better tax administration so that leakages will be minimized. Those who are supposed to pay taxes should pay taxes. The problem, though, is that the incoming president has not paid his taxes so it’s not a good example,” he added, referring to the issue involving the estate tax of the Marcos family.