ISSUES IN THE STUDIES OF PUBLIC ADMINISTRATION:

FEDERALISM, BUILD, BUILD, BUILD THEORY AND TRAIN LAW

A Research Critique Presented to the Faculty

of the College of Accountancy, Business, Economics
and International Hospitality Management – Graduate School
Batangas State University
Batangas City

In Partial Fulfillment
Of the Requirement for the Subject
PA 613 Studies in Public Administration

Submitted to:
DR. AMANTE A. MOOG

By:
MARY ANN E. ANTENOR

July 2018
 FEDERALISM: A NEW VENTURE TO LOCAL AUTONOMY

MARY ANN E. ANTENOR

Doctor of Public Administration

INTRODUCTION

Honestly, I’ve never been a fan of Mayor Duterte even before the Election
Day happened. The main reason for this was that, his way of speaking has
bothered me during the time of his campaigns from all over the country. I
wouldn’t want to have a President who frankly speaks whatever he wants to
without considering whom he was talking to and what he is talking about.
Despite everything that has been, the majority has chosen him to lead the
Philippines for 6 years. Even though it’s not what I wanted I learned to look on
the brighter side of his propagandas.

Even before President Duterte ran for presidency, he was open in

supporting the implementation of a federal type of government in the Philippines
just like some of the powerful countries in the world namely United States,
Canada, India, Malaysia and Australia. For some reasons there are major pros and
cons that this type of government can bring and it could pave the way for more
political issues. But, looking on the brighter side and major goal of this type of
government, there will be an equal distribution of political power over the
finances, plans for development and laws to the local government units.

What is Federalism?

Federalism is a system in which political power is divided between a

central (national) government and the smaller government units. The central
government is often called the federal government, and the smaller units, states
or provinces. The division of powers is usually defined in the Constitution. In a
true federal system, some powers are constitutionally reserve for the states or
provinces. The central government has direct authority over the people
concerning powers granted to it in the constitution.

Federalism is a form of government in which government powers are

divided between the central government and its constituent political units called
states, regions, or local government units as specified in the constitution. The
structure will essentially divide the country into autonomous units with a national
government focused on interests that are nationwide in scope. The autonomous
units on the other hand will have primary responsibility over developing their
industries, public safety, education, healthcare, transportation, recreation, culture,
and other unit-specific interests. Under this paradigm, the autonomous units will
have more power and mandate over their finances, development plans, and laws
exclusive to their jurisdiction.

Pros and Cons

As an open-minded Filipino, I would stand and agree with the advocacy of

President Duterte in changing the unitary government to a federal type of
government. Not only President Duterte is in favor of this change but also his
Senators Peter Allan Cayetano and Bong Bong Marcos. On the other hand,
Senator Grace Poe who is one of Duterte’s presidential rival thinks that it will just
create a continuous political dynasty if the change is approved. Apart from the
possible disadvantages that this government can bring, it can also bring much
more benefits and ease to each Filipinos in the country. First things first, local
governments will decide for themselves. Manila, being the center of the
national government, receives more attention and funds, thus more development
has been made while neglecting the other parts of the country. Having a federal
government means allowing the equal distribution of power over the local
government units in the country. More Filipinos will benefit and see the
transparency of the budget that has been allocated for the development of the
states. The federalized states would be able to manipulate and grow their own
without being interfered by the centralized government. With that being said,
more opportunities and jobs will be open to the different autonomous regions
which will give a positive thinking to the people to return to their own places.
There may be more business opportunities and contractors in different parts of
the country which will pave the way for a, second, decongested Manila and
third, specialization of labor. Because of the specialization of labor, creativity,
initiative and resourcefulness will be achieved instead of being dependent in the
centralized government. Aside from that there will be a development of the
national culture as well as the sustainability of the cultural diversity and social
pluralism. Apart from all those high expectations and positive outlooks, there are
also some disadvantages this system can bring. Some states may not possess the
same amount of natural resources the other states have or skilled labors. This
might call for an uneven development and competition of the states. When it
comes to taxes, instead of just one tax, there will be a national and local taxes
imposed for the federal type of government. Political dynasties also continue to
stand as an issue in a federal type which may create confusion over
responsibilities. As what has Grace Poe quoted, “There is autonomy and the
proposal is by region. What if a particular region is dominated by only one
family?”(Lacorte, 2015)

But, still, the main reason for such advocacy is to distribute equal power. It
has nothing to do with political dynasties because the people, still, have the right
and freedom to choose whoever they want to elect in the long run. Above all
these, there will always be an unfixed issue with that of the Moros who want to
have a separate nation instead of an autonomy. Federalism may not be an
enough solution for this and will still need a further concession between the
government and the Moros. But, on the positive side, the federal type of
government will still provide a gap for the building of differences wherein the
Moros can develop and promote their own culture.

Rodrigo Duterte, being the President for 6 years, would continue to push
his advocacy of having a federal type of government. There’s nothing we can do
about it whether we want it or not. However, this political transformation will
surely end the deeply rooted unitary government done by the early
administrations. The change that everyone wants is nearly coming.
Concern 1: Are we ready for Federalism?

Since ancient time, the Philippines have always adopted a unitary form of
government where administrative powers are merely delegated to local
government units. A sudden change in the system of government without any
prior study, analysis, or assessment will lead to detrimental effects. The unitary
form of government is the only structure that we- our government leaders
included- have ever known, and a thoughtless shift to federalism will lead to
disaster. It will be a case of the blind leading the blind. In the midst of ignorance,
the country will go on aimlessly, and eventually fall into a pit. In truth, the one-
size-fits-all policy has no place in the government. There is no such thing as a
perfect system or form of government that is seamlessly compatible with all
countries. The correct of a particular system must always be evaluated on a case
to case basis. Just because federalism works for the United States for instance,
does not mean it will work wonders when adopted by the Philippines. At the end
of the day, no matter how perfect the system of government will remain corrupt,
inefficient, dishonest, and immoral- nothing will ever change.

Concern 2: Citing different parameters and difficulties upon pursuing

Federalism

Fiscal Administration

Fiscal administration as it is define, refers to systems, structures, processes,

resources, and the policy, environment, government, the inter-governmental and
inter-local fiscal relations, affecting among others like allotments and grants by
national government to local government units, taxing powers among them,
policy on tax rates and structures, revenue and expenditure planning, revenue
utilization and expenditure allocation, monitoring and approval of budgets, tax
ordinances and other fiscal measures, policy on borrowing and appointments and
supervision of local fiscal officers.

Several arguments in favor of local provision and financing or the fiscal

devolution have been established by Joumard and Kongsrud (2003) supporting
the idea that the provision of public goods and its financing should be assigned
to the lowest level of government with the capacity to achieve objectives. These
arguments include response to local preferences, increased government
accountability, introducing competition across jurisdictions and supply-side
efficiency.

In responses to local preferences, the traditional theory of fiscal federalism

contends that the central government should have the basic responsibility for
macroeconomic stabilisation functions, national public goods, such as defence,
and income redistribution in the form of assistance to the poor. In terms of
increased government accountability, since local officials can be easily identified
by voters and taxpayers, they are expected to be more accountable, especially if
the costs of providing public services are borne locally. Diversity in fiscal
packages offered by sub-national jurisdictions, in terms of quality and quantity of
public goods and the associated tax burden, may introduce some competition
across jurisdictions and thus incentives for governments to raise public sector
efficiency. The supply-side efficiency is characterized by decentralization which
allows experimentation in the management of public responsibilities. In many
countries however, an information-sharing forum is lacking, reducing the benefits
of these experimentation gains.

In the case of Finance, if the government are to be independent of each

other, each must have not only its own power but also sufficient financial
resources to sustain itself and support its assigned functions. But tax yields are
hard to predict over the long run. Demands on both levels of government have
increased and changed, and the growth of the industrial economy has seriously
altered both government functions and government resources. Every federation
has, in consequence, produced a fundamental disequilibrium between the
distributions of financial resources. In every case, the national government has
emerged with greater resources than it needs to perform its functions while
regional governments have been left with more functions than they can pay for
out of their limited resources. The imbalance can be resolved in three ways: First,
functions may be transferred from the states to the central government. This has
occurred in every federal system but it usually encounters serious political
objections. Second, tax resources may be transferred from the central
government to the states. This, however, rarely solves the problem because it
tends to increase the financial inequalities among the states. Third, funds may be
handed over by the national government to the states.

The readiness of the people in adopting the entirely new form of government

Federalism has a strong appeal for communities that desire to unite for
limited purposes while retaining a large measure of autonomy. The proposals for
world government have been framed in terms of federal principles. The appeal is
particularly strong among the nascent states of Asia and Africa, many of which
contain communities differing in religion, language, tribal origin and economic
interest.

A number of these new nations have adopted various forms of federal

government in order to achieve viable autonomy and protecting community
interest. It could possibly see here in Philippine context under Duterte Presidency.

Distinction between Unitary and Federal Form of Government

Unitary System

Unitary form of Government according to Umar (2013) is a converse of

federalism and is a system in which all powers are centralized in the hands of a
central government. A single central government controls the whole state with
full might. Although the state is divided in provinces and other units but these
divisions are administrative in their nature. These sub-divisions completely work
under the supervision and control of the central government. In unitary form of
government, the political authority is centralized. Unitary state is useful in those
states where there are no strong nationalities or in the small states.

The unitary system, which revolves around a central authority, is the

system used in most presidential and parliamentary countries today. Some refer
to this type as a top-to-bottom government since the power comes from the top
and trickles down to the bottom. This central government is in fact in charge of
policy making and is the ultimate law making body in the land. In many cases
like the Philippines, it delegates these tasks to subsequent provincial and local
government units. These units implement enact laws as mandated by the central
agency.

The main advantage of the unitary system according to Tumangday &

Loyola (2013) is uniformity among the different local and provincial
governments. All major laws and policies are then implemented the same
regardless of the level of government.

Local and national disputes are also less frequent. Since the national
government is the ultimate governing body, local government units cannot enact
their own laws that could duplicate services or undermine laws in effect. Much
like a father with his family, it is the central government’s house, so its rules must
be followed. The unitary system is not without skeletons in its closet. One huge
problem with this structure is that the central agency cannot tackle local
problems head on. This is a problem since upon being carried out by the local
governments, specific needs are easily overlooked in the smaller case analysis.
Like a stressed, overloaded brain of the human body, the higher government is
not able to specifically address many local issues as it tries to balance its many
other responsibilities.

Local government units up to the provincial government may also be ill-

equipped to tackle local concerns. Since the national government deals with
national problems and is responsible for budgeting of sectors, it may allocate
funds for bigger projects and programs, leaving the local governments to fend
for themselves.

Federalism

Federalism is the principle according to which two levels of government,

general and regional exist side by side in the state, each possessing certain
assigned powers and functions.
 Unlike a nation under a unitary form of government, a federal state is
divided into several smaller, self-governed states or regions. These states
function almost like independent countries, and may even have their own set of
state-specific laws – wherein laws may be allowed in some but not in others, but
are directly concerned with nationwide issues such as national defence or foreign
policy. Those issues are handled by a central government, which acts like a
governing body of the smaller, state-governing bodies. The states and the
central government follow a set of rules and policies that define their relationship
and what can and cannot be done by both.

The federal type of governance has many advantages (Walker, 1999). One
of these is the right of choice and exit by the citizens. A federation citizen has
greater freedom of choosing and moving to a state that he or she considers
satisfactory. In a sense, movement by citizens in-between states is an act of
“voting with their feet,” allowing people to “compare different political systems in
the same country.”

Another advantage is the possibility of experimentation as disclosed by

Australian Law Journal (1999). Though experimentation is definitely not a
pleasant word to hear for a leadership role where lives and resources are at stake,
the fact that states have some degree of autonomy allows the central
government to determine which political system, laws, and policies in effect work
positively and maximize welfare. The third advantage according to Walker, and
arguably also one of the most important, is the accommodation of regional
preferences and diversity. This advantage holds much more significance in larger
countries where culture and lifestyles can differ across regions. “By these means,
overall satisfaction can be maximized and the winner-take-all problem alleviated,”
particularly in policies wherein the populace’s opinions are divided. By not
forcing culturally and ethnically different people to make decisions that would go
against their beliefs and opinion, solidarity as a whole federation may be
achieved.

However, a federation is not without its blemishes. Because each state

government has its own style of governance, citizens all over the federation will
be experiencing different levels of welfare. The competencies and efficiency of
each state government will also not be the same, potentially creating further
disunity. A policy exercised across different states may differ in magnitude, like
penalties for criminal offenses. Finally, there is always the possibility of
disagreement and conflict between state and central governments over authority
and power.

INSIGHTS

The system is often blamed for the many inefficiencies and problems faced
by the nation today. There have been numerous pleas for changing the way the
government is set up, mostly for reasons such as welfare and development. We
pit the Philippines’ current government setup against that of its major political
influence, the United States – the federal system.

In the current state of the Philippines under the unitary system, a

centralized form of government that roots itself in Metro Manila, a shift to the
federal system – probably making Luzon, Visayas and Mindanao states of their
own – can yield a lot of changes for the dynamic of the country. Put the two
against each other within the context of the country and ask: which one gives a
better edge?

Running a country is obviously not an easy thing to do. There is an

economy to be managed, international relations to be mended, projects to be
implemented, and problems to be solved. There is only so much a single
governing body can handle, and when macro-management becomes too much
for a single body to handle, it’s time to divide and conquer. This is the essence of
federalism.

CONCLUSION

Every federation therefore, has an amending procedure that requires a

measure of consent from both central and state governments. This does not
mean that each regional government must consent, but only, that they
participate in the process and that some predetermined measure of agreements
must be obtained from them. The details of the procedures differ considerably.

Though the federal system offers many attractive and highly applicable
advantages, its benefits are only realizable when properly implemented.

Those who are advocating for federalism are basically critical of our
present government because the effect according to them is that resources are
not properly allocated and therefore the classic example is the Mindanao
situation. Resources there are very rich and yet it is not as develop as the other
parts of the country. The theory is that if powers are decentralized and the
resources will be better allocated, then we will have more even distributions of
these resources and opportunities and everything. What will be entailed to
change the system is a constitutional amendment. But the question, is the
Philippines ready? Those who are advocates of federalism like the incoming
President Rodrigo Duterte, his theory is that this system of government was
introduce to us by the Americans. The Philippine Constitution, our current
constitution, traces its origin back in 1930’s and before that. According to them, it
is kind of strange that while the Americans were introduce the system of
government to us, they did not introduce the system to us the form of
government that they found useful and effective in their own country. The theory
is that Why did the Americans do these? Because Americans were interested in
harnessing the resources of the Philippines such that if they had introduced a
decentralized form of government, it would even more difficult for them to
exploit the resources. For example, if they want to exploit the mining resources in
Northern Philippines, they have to deal with a government there, meaning a
federal government there in terms of local decentralized government and in the
same way for each country. So, in theory, Americans did these for their own
convenience.

If you follow that theory, it is not the question of readiness but the
question of what is appropriate under the Philippine circumstances because
readiness is a function of leadership. We are a country that needs entirely good
governance and strong leadership. Whether it is in the present form of
government or the federal form of government, we need good leaders and good
governance until and unless you have those elements, anything can happen. If it
will be determined that the federal government is more appropriate is not the
question of readiness but the mechanism for amending the constitution to put in
place. I am fascinated with the previous comment that it can be done in 6
months. We must go through on the details whether it is realistic or not. It always
boils down into the question of political will once you put that in place. And of
course transitory provisions should establish depending on how they craft the
amendments. In this sense, there are adjustments in the structure locally.

RECOMMENDATION

Some says that federalism is worth a try but others say it is not. But if it
helps to protect and maintain diversities that are valued highly by the constituent
peoples, then its serves as a valid and useful purpose.

As appealing as the “United States of the Philippines” would sound, a

conversion is not applicable just yet, not until the people and the government
itself are prepared for the drastic change and the responsibilities brought on by
doing so.

Personally, I would like to give it a shot because much of the worst

countries deeply rooted from underdevelopment and corruption. As long as the
allocation of functions has been reviewed to ensure conformity with the
constitutional distribution, federalism will always be a worth try.
REFERENCES:

Department of the Senate Occasional Lecture Series at Parliament House (1999).

Ten advantages of a federal constitution. Australian Law Journal, 73, 9,
634-58.

Federalism, The World Book Encyclopedia Volume 7.

Joumard, I. and Kongsrud, P.M. (2003). “Fiscal relations across government

levels.”Economics Department Working Papers No. 375, Organization for
Economic Cooperation and Development, December 10.

Lacorte, G. (2015). “Duterte to Poe: Study pa more on federal and feudal states”.
Inquirer Mindanao, Retrieved:http://newsinfo.inquirer.net/728122/duterte-
to-poe-study-pa-more-on-federal-and-feudal-states#ixzz4AONGwaiH

Tumangday, R. & Loyola, R. (2013). “Head to head: Governance: Unitary vs

Federal”. The Lasallian, June 11, 2013.

Umar, F. (2013). “Unitary form of government, definition and characteristics of

unitary state”, Retrieved: (http://www.studylecturenotes.com)

Walker, G.de Q. (1999). “Rediscovering the Advantagae of Federalism”.

Retrieved: http://www.aph.gov.au
 BUILD, BUILD, BUILD THEORY OF PRESIDENT DUTERTE: A NEW
PROSPECT FOR PROSPERITY AND ECONOMIC ALLEVIATION

MARY ANN E. ANTENOR

Doctor of Public Administration

INTRODUCTION

The Philippines is in a position to be self-sufficient. Its geographical

situation is away from the Southeast Asian mainland, and as such, it developed a
different culture, far unique compared to its neighbors.

Duterte’s administration rose to power at a time when the Philippines is

though slowly rising back on its feet and trying to take away the humiliation of
being the most corrupt or often called as the “Sick man of Asia.”

Decades of mismanagement, starting from the Marcos administration, the

Cory takeovers, the Ramos privatization, the Erap impeachment, Gloria’s
negligence, and Noynoy’s fiscal conservatism, has created the overarching public
opinion in which Filipinos feel that the government not only has left them, but
has no interest in helping them.

The situation is ripe for the rise of another populist leader, this time, much
more bold than the others, with seemingly no basic understanding of
international diplomacy. His words spark both caution and fear, from domestic
opposition as well as international observers; I can already say that his legacy will
be a controversial one.

His war on drugs is ruthless and precise, calling to attention the way the
country’s judicial systems have failed the ordinary Filipino. His attempt at
addressing the country’s infrastructure by allocating billions of pesos to build,
build, build, calls to attention the mismanagement of the preceding
administrations. His international diplomatic antics call to mind the failure of
Filipino diplomats to engage a better deal with its neighbors. His desire for a
federalist parliamentary Philippine republic calls to attention the Manila-centered
politics, on which every huge decision is made for millions of Filipinos.

ISSUES

President Duterte’s ambitious build, build, build project to transform the

Philippines could become his legacy (Heydarian, 2018).

Duterte’s build, build, build agenda comes into the picture, hoping to
bridge the gap in economic policies of past administrations. Under his
administration, the Southeast Asian country is experiencing an infrastructure
boom unseen since the time of strongman former President Ferdinand Marcos.

The government is set to embark on an ambitious $180 billion

infrastructure spending which set to transform the Philippine economy.
According to the Department of Finance (DOF), the government is looking at 75
flagship projects, which include six airports, nine railways, three bus rapid transits,
32 roads and bridges, and four seaports that will help bring down the costs of
production, improve rural incomes, encourage countryside investments, make the
movement of goods and people more efficient, and create more jobs. The
government is also aiming to construct four energy facilities that will ensure
stable power supply at lower prices; ten water resource projects as well as
irrigation systems that will raise agricultural output; five flood control facilities
that will help protect vulnerable communities as well as boost their resilience
against the impact of climate change; and three redevelopment programs that
will deliver sustainable solutions to best meet the needs of urban population. If
successful, Duterte could once be ushered in an unprecedented era of inclusive
economic development.

To be fair, recent years have seen consistently high economic growth in

the country. Since 2011, the Philippines has broken out of its historically growth
pattern to feature among fastest growing nations in the region. The World Bank
expects the Philippine Gross Domestic Product (GDP) to grow by 6.7% in 2018
and 2019, the highest in Southeast Asia. The Duterte administration, however, is
hoping to nudge growth to the 7-8% territory.
 But the country’s growth has been shallow and far from comprehensive,
leaving high levels of unemployment, poverty and hunger relatively untouched.
And this is where the Dutertenomics’ “build, build, build” agenda comes into the
picture.

THE CONCERN

On one hand, infrastructure has been a major source of concern for

foreign investors, who have been discouraged by the country’s weak
infrastructure and heavy utility costs. Those investments are crucial to create well-
paying jobs for the millions of poor and unemployed Filipinos.

According to an authoritative study by the Japan International

Cooperation Agency (JICA), traffic congestion in Manila, caused by poor
infrastructure, carried a daily price tag of P2.4 billion ($45 million) in 2012--a
figure that is expected to almost triple by 2030. According to the 2017 World
Economic Forum’s competitiveness report, the Philippines ranked 97th in the
world in terms of infrastructure. In a separate report by the United Nations, the
Philippines ranked 5th in Southeast Asia in terms of access to physical
infrastructure.

Duterte’s two immediate predecessors, Gloria Macapagal Arroyo and

Benigno Aquino III, oversaw a decade of sustained macroeconomic reform,
anchored by fiscal tightening, moderate inflation, expanding trade surplus and
steady economic growth. Yet, the cost of their disciplinary economic policies was
lack of sufficient investment in basic infrastructure. Under the Aquino
administration, in particular, under-spending was a major concern.

Both the Arroyo and Aquino administrations were also overly dependent
on private-public-partnership (PPP) schemes with local conglomerates, which
lacked proper competencies.

Duterte, however, can now build on his predecessors’ legacy by diverting

the Philippines’ expanding fiscal pie to address infrastructure woes. Leveraging
his skyrocketing approval ratings (80%), combined with a new foreign policy
direction as well as a super-majority coalition in the legislature, his administration
is marshaling necessary funds to finance and sustain its ambitious economic plan.

WHO’S FOOTING THE BUILD, BUILD, BUILD BILL?

Unlike his predecessors, he is ditching the PPP modality in favor of larger

reliance on government revenues as well as Official Development Assistance
(ODA), particularly from Japan and China, as his main sources of infrastructure
funding.

To support the new modality, Duterte has normalized relations with China,
which has offered $7.3 billion in infrastructure investments, and Japan, which has
been a leading investor in the Philippines for decades.

Duterte also passed a new tax reform package, which is expected to raise
sufficient revenues to fund infrastructure spending. According to Mr. Chua, up to
70% of newly-raised revenues (estimated to raise P786 billion over the next 5
years) are earmarked for supporting the “build, build, build” campaign.

Communications Secretary Martin Andanar said that the government

hopes the tax reform will “not only solve our present infrastructure gaps, but also
support the country’s future growth.”

However, the Duterte’s ambitious infrastructure vision could be hobbled

by chronic challenges. Experts have expressed doubts and concerns over
absorption capacity of government agencies to undertake projects competently
and on time; risk of large-scale corruption and bidding anomalies affecting
foreign, especially Chinese-led, projects; lack of construction workers and skilled
labor; as well as growing pressure on Philippine peso and international reserves
due to need for importing intermediate goods and technology for infrastructure
boom. Supporters, however, claim that even if the government fails to achieve
half of its ambitious goals, Duterte could still go down in history as a harbinger of
a golden age of infrastructure buildup in the country. Infrastructure could very
well be one of the Filipino president’s defining legacies.

As the Philippines’ “Build, Build, Build” infrastructure program takes off,

government agencies are improving processes and gaining access to best
practice and new technologies. As the Philippines ramps up infrastructure
investment under President Rodrigo Duterte’s ambitious “Build, Build, Build”
program, government agencies are changing the way they do business to make
sure projects happen on time and on budget. The Asian Development Bank (ADB)
is also supporting this effort through a new $100 million loan for the
Infrastructure Preparation and Innovation Facility (IPIF). Infrastructure projects
worth about $3.8 billion will be prepared under the facility. It will help the
government expedite the cabinet’s review and approval process and shorten
start-up periods for priority infrastructure projects (Marquez, 2017).

The government has identified an initial list of priority projects to be

supported under the facility. An ongoing $5 million technical assistance grant is
helping the government recruit experts for these projects and strengthen project
management and monitoring systems in implementing agencies.

“The seriousness and dedication with which the government has taken this
BBB program is really commendable,” said Richard Bolt, ADB Country Director for
the Philippines. “ADB is committed to boosting the Philippines’ capacity in
preparing these projects and managing the risks to help ensure Filipinos across
the archipelago benefit from the country’s strong growth.”

The IPIF builds on ADB’s experience in supporting the government’s effort

to restructure the Public-Private Partnership (PPP) Center for the Philippines in
2011. The bank also helped the government set up a project development and
monitoring facility, which provided assistance in identifying, developing, and
financing bankable PPP projects. Based on ADB’s estimates, projects to be
developed under the IPIF will add as much as $10 billion to the country’s gross
domestic product between 2019 and 2024.

“Proper infrastructure allows people access to work, markets, education,

health care, housing, and other services that will lift their standards of living. It
also boosts business potential and economic opportunities especially in rapidly
growing areas. This project will help the Philippines realize its potential and
remain competitive,” said James Leather, ADB Principal Transport Specialist.

INSIGHTS

In my own perspective, political risk can sometimes deters investment. In

some of my readings, investors are worried by the volatile and unpredictable
shifts in national politics and intends to not put their investments in place. By this,
I do believe that political leadership must be a catalyst of economic growth. They
must have enormous political capital that is good and beneficial to the people as
public support. From that, sustained high level commitment to economic
development may have actually have a chance to reach fruition.

Another thing, we all know that the primary contributing factor to the fast
growth is the large spending by the government. The government should invest a
lot of projects that lead to the development of the country’s economy. And I
think it should be greatly invested in infrastructure. But then, it is also improtant
to consider the growth of those who are at the grassroots of the society.

The Build, Build, Build Program of Duterte’s administration can be a

burden at the moment for most of the people. It is due to the traffic congestions
brought by construction and rehabilitation of so many infrastructure projects but
I know that these burdens will not take longer as this program will entail lot of
benefits and assistance in the long run.

CONCLUSION

The Duterte government is approving infrastructure projects faster than its

predecessors, which are due to become the country’s main gateway to the world.
The Philippines is now in track to meet the government’s full-year growth target
of high percentage of economic growth until 2022.
 Moreover, the country’s economy is driven by a very strong demographic,
household debt which is still manageable and there is boost that is likely to come
from infrastructure spending of the Build, Build, Build Program.

RECOMMENDATION

There are many challenges in implementing a major infrastructure project.

It will be a big help if the masterplan, feasibility study, and detailed engineering
design are carefully carried out to realistically address the requirements of a
particular project. I always disagree with President Duterte on a wide range of issues,
because that is what democracy protects—the right to disagree. But I understand where
he is coming from. For me, He really is a symbol of the Filipino hope of something
different. That is why, I want to see and wait for the projects of the Build, Build, Build
program to be done for me to consider that he is really worth of my support on his
advocacies.

REFERENCES:

Heydarian, R.J. (2018). Duterte's Ambitious 'Build, Build, Build' Project To

Transform The Philippines Could Become His Legacy. Out of Asia Editor’s
Pick. Retrieved from:
https://www.forbes.com/sites/outofasia/2018/02/28/dutertes-ambitious-
build-build-build-project-to-transform-the-philippines-could-become-his-
legacy/#4cb558d81a7f

Marquez, R. (2017). Making “Build, Build, Build” Work in the Philippines. Asian
Development Bank (ADB). Retrieved from:
https://www.adb.org/news/features/making-build-build-build-work-
philippines
 TRAIN LAW: TAX REFORM FOR ACCELERATION AND INCLUSION ACT

MARY ANN E. ANTENOR

Doctor of Public Administration

INTRODUCTION

Started this year January 1, 2018, millions of Filipino workers including

myself, seen an income tax reduction on our pay slips because of the newly
implemented TRAIN Law. The TRAIN Law or Republic Act 10963 is a tax reform
packages for a simple, fair and efficient tax system.

Essentially, TRAIN lowers personal income tax, simplifies the estate and
donor’s tax, and expands the value-added tax (VAT) range. On the other hand, it
increases excise taxes on fuel, mineral products, vehicles, and cigarettes. It also
imposes new taxes on sugar-sweetened beverages and cosmetic procedures.
Revenues collected from TRAIN will fund the government’s infrastructure and
socio-economic programs.

What does this mean to an ordinary employee like me? Is it good or bad
news? According to the government, the benefits of tax reform will outweigh the
effect of price hikes resulting from the higher excise taxes. That remains to be
seen. For now, I’ll be hopeful and look at the good effects of this new law on my
personal finances.

What is TRAIN Law?

Pros

1. Higher Take-Home Pay

Since the time you received your first-ever salary, you’ve been dreading to
check your payslips. It really hurts to see huge taxes being deducted from your
hard-earned money.
 Now, you can heave a sigh of relief because if your gross monthly salary is
PHP 21,000 or less, you will no longer be taxed.

Under the TRAIN law, those with an annual taxable income of PHP 250,000
are exempted from income tax payment. Around 83% of taxpayers in the
Philippines will benefit from the tax exemption, as reported by the Department of
Finance (DOF).

The income tax rate for Pinoys earning above PHP 250,000 per year will be
20% to 35% from 2018 to 2022 and 15% to 35% from 2023 and beyond.

Before the tax reform implementation, those with over PHP 250,000 to
PHP 500,000 annual income had to pay 30% tax. Those earning over PHP 500,000
had a tax rate of 32%.

A lower income tax means higher take-home pay for 99% of Pinoy
taxpayers. This also means additional disposable income that you can use to
manage your finances better, like investing your money, buying a life insurance,
and paying off your credit card debt.

2. Fair Tax System

Above-minimum wage and middle-income earners (who had a high tax

rate of 32%) will benefit the most from the TRAIN law, said tax expert Raymond
Abrea in a GMA News online report.

According to the DOF, the new law will lessen the tax burden of the poor
and the middle class, passing it on to the higher-income earners who comprise
0.1% of taxpayers in the Philippines. Those earning more than PHP 8 million
annually will pay a higher maximum tax rate of 35% (previously at 32%).

Prior to TRAIN implementation, economists criticized the 20-year-old

Philippine tax system under the National Internal Revenue Code of 1997 for
being unfair to the Filipino middle class. The Philippines had the second highest
income tax rates in Southeast Asia and seventh in Asia, according to the Joint
Foreign Chambers of the Philippines.
3. Higher Tax Exemption Cap for 13th Month Pay

From PHP 82,000, the tax exemption ceiling for 13th month pay and other
bonuses is now at PHP 90,000. Especially those with total bonuses (including 13th
month pay) of over PHP 82,000 can have more money to spend and save during
the Christmas holidays.

4. Simpler Tax Filing and Payment

Computing the estate tax and donor’s tax used to be very complicated
with different rates. In the old tax code, the estate tax rates ranged from 5% to
32%, and the donor’s tax ranged from 2% to 30%. Under the new tax reform law,
the estate and donor’s tax will have a single, fixed rate of 6%.

For all other tax types, tax compliance is now simpler and easier. Here are the
notable changes to the tax filing and payment process under the TRAIN law:

 Optional flat 8% tax rate on gross sales or receipts not more than PHP 3
million (for self-employed professionals and small businesses) that can be
filed and paid annually or quarterly instead of monthly or bi-monthly
payments of business and income taxes
 Filing of tax return for final withholding tax to be done quarterly rather
than monthly
 Filing of VAT Return and tax payment to be done quarterly rather than
monthly from 2023 onwards

5. Higher VAT Threshold and New Exemptions

TRAIN raises the VAT threshold from PHP 1,919,500 to PHP 3 million.
Goods and services sold by small and micro businesses such as sari-sari stores
(with total annual sales within or below the VAT threshold) are exempt from VAT.
This means no tax is passed on to buyers, lowering the prices they have to pay
when buying from these businesses.

The new law also expands VAT exemption for certain people and products,
including the following:
  Senior citizens
 Persons with disability
 Raw food/agricultural products
 Tourism businesses
 Medicines for diabetes, high cholesterol, and hypertension (from 2019
onwards)
 Health and education
 Renewable energy (zero-rating)
 Homeowner fees (e.g., association dues, membership fees, etc.)
 BPO companies within special economic zones

THE CONCERN: CONS

Most Filipino netizens view the passage and implementation of the Tax
Reform for Acceleration and Inclusion (TRAIN) law in negative light, a recent
study by Research and Tech Lab (RTL) showed.

The study conducted from January to February this year, digital research
firm RTL found that out of 861 recorded sentiments online regarding the TRAIN
Law, 94.08 percent of the engagements considered not helpful at all for the
country. The top three social media sentiments read by the research analytics
group say that the TRAIN law is more of a burden to the Filipinos, it is anti-poor,
and most netizens are generally dismayed by the overall impact of the said law.

The TRAIN was signed into law by President Rodrigo Duterte on December
19, 2017, effectively lowering the personal income tax rates and expanding the
value-added tax (VAT) base starting January 2018.

Other top reasons that TRAIN law is a “No” for most of the online public is
that they claim that it is only beneficial to government officials while it is unfair to
minimum wage earners.

In a separate statement, the Department of Finance said lower personal

income tax rates would give Filipino consumers a combined P10 billion “cash
bonanza” to spend more each month. “Our estimate is P10 billion a month in the
reduction in collections from the withholding tax ... So that means to say people
are going to have P10 billion a month more to spend,” Finance Secretary Carlos
Dominguez III was quoted as saying in the statement. “In effect, those with a
taxable annual income of P250,000, on average, would be able to take home a
cash bonanza equivalent to a substantial one-month’s pay per year,” he said.

In the same statement, the DOF said it has yet to collate data on the net
amount of additional revenues raised from the measures put in place by the
TRAIN law. But according to the RTL study, the increase in take-home pay is
actually useless because of the increased price of some necessities. As a result of
higher excise tax rates, prices of liquefied petroleum gas (LPG) will go up P1 per
liter, diesel by P2.50 per liter, and gasoline by P2.65 per liter. The study also
revealed that majority of Filipinos is worried about the burden that the newly
imposed tax plan will bring unto the country, especially for the working class. As
seen in their social media responses, Filipinos are now vigilant more than ever in
seeing the country grow and the online universe became the top tool in
expressing their thoughts and feelings.

It noted, however, that a percentage of Filipinos remained positive that the

tax reform could be beneficial in the long-term. It was revealed by the same
study that only 5.92 percent of the sentiments analyzed turned out to be hopeful
on the effects that the Train law might bring in the long run. Some believe that
the new system will be beneficial to the country’s progress and believe that the
Train law will discipline ordinary Filipinos. Furthermore, only 1 percent of the
sentiments gathered supports the implementation of the Train law and defends it
from critics,”

INSIGHTS

In a nutshell, the TRAIN reform package is extremely crucial, namely

because we have an outdated and arguably regressive tax system, which
undermines both our egalitarian values as well as economic vitality. The
government, under the current tax system, simply cannot raise enough funds to
deliver basic services matching to the needs of our booming economy and
population.

As per my readings, the current tax system has three main problems: There
are too many exemptions; rates are stagnant and unresponsive to new economic
realities; and bank secrecy laws prevent government from accurately assessing
the revenue base of its citizens, especially the wealthy ones. The TRAIN reform
package aims to address all these issues by reducing exemptions, creating a more
dynamic and updated tax rates across the income continuum, and mitigate bank
secrecy. Crucially, it could help increase our current tax effort by streamlining the
tax system and reducing loopholes and room for regulatory capture of
corruption.

CONCLUSION

While there are supporters of the TRAIN Act who admit that there are
considerable hikes in the taxes imposed on many consumer goods and similar
products, majority of those who opposed argue otherwise. They contend that the
reduction in income tax is rendered meaningless by the tremendous increase in
the taxes to be imposed on consumer goods, prime commodities, medicines,
electricity, and fuel. In particular, the prices of gasoline and fuel products are
expected to increase by three to four pesos per liter.

In turn, the marked increase in fuel prices will trigger a corresponding

increase in the cost of transporting people and goods, which will inevitably
increase the prices of practically everything else. Moreover, the labor sector will
demand an increase in wages, which will also add to the cost of manufacturing
goods and the delivery of services.

Since the additional tax will increase the selling price of every consumer
product, the twelve percent value added tax (VAT) currently imposed on every
sale of consumer products will be computed against a higher selling price, which
will necessarily mean a larger VAT on the sale of what are already very expensive
prime commodities to begin with.
 Critics of the TRAIN Act lament that the new tax legislation not only
increased the taxes on prime commodities, but also reduced the tax on the
importation of luxury vehicles. The rationale for this manifestly pro-rich provision
of the TRAIN Act is a mystery.

The critics maintain that it is easy for politicians to defend the TRAIN Act
because politicians wallow in power, wealth, and privilege. More specifically,
politicians have generous expense accounts by which practically everything they
purchase, such as groceries, airline tickets, and automobile fuel, are paid for by
the taxpaying public. In other words, it’s easy for members of Congress to
impose higher taxes on basic commodities since they are hardly affected by such
tax hikes. It is also pointed out that the TRAIN Act comes at a bad time because
many government officials have been wasting public funds.

RECOMMENDATION

The tax reform law may not be perfect, but it does provide a lot of benefits
to the low and middle-income classes. More money in your pocket, though,
doesn’t mean you should upgrade your lifestyle, too.

We need to adopt the changes by means of managing our finances wisely.

We also remember that prices of some goods will go up as a result of increased
excise taxes. Therefore, we need to save and invest our extra take-home pay, and
spend less on the non-essentials so we can still survive despite of the changes.
On a lighter note, I think it is the proper time for us to quit our unhealthy habits
of smoking and drinking sodas, perhaps, so we could spend our money on much
of our needs and not on our wants.
REFERENCES:

Avecilla, R. (2018). Pros and cons of TRAIN. The Manila Standard. Retrieved
from: http://www.manilastandard.net/opinion/columns/hail-to-the-chair-
by-victor-avecilla/256378/pros-and-cons-of-train.html

Cordova, C. (2018). TRAIN Law pros and cons: Inflation rate just temporary,
assures DOF. Retrieved from: https://www.technochops.com/train-law-
pros-and-cons-inflation-rate-just-temporary-assures-dof/10699/

http://news.abs-cbn.com/business/01/01/18/good-effects-of-tax-reform-will-
outweigh-price-hikes-palace-says