Just recently, the President of the Philippines called for the expediency to amend the 1987 Constitution. In the eyes of our President, it is high time that we should be sensible of our country’s malady, and, therefore, undertake the necessity of some speedy and powerful remedy. We in the Mindanao business community think that no other alternative is more compelling.

It can be recalled that on September 2004, the pro-active Mindanao business community, through the Mindanao Business Council (MBC), presented the Mindanao Action Agenda to Her Excellency Gloria Macapagal-Arroyo during the 13th Mindanao Business Conference (MinBizCon). As an expression of support to the present administration, we have collectively committed to the quest for the private sector’s important role in the pursuit for just, equitable, and lasting peace in the island.

One of the private sector commitments under the Mindanao Action Agenda is the shift to a federal form of government. To help achieve this goal, the MBC and the local chambers of commerce together with Kusog Mindanaw as the lead non-government organization, commit to pursue local empowerment under a federal set-up through the establishment of the multi-sectoral Mindanao Coalition of Cities for Transparent and Accountable Governance.

There is certainly a great economic force behind this advocacy. Regional disparities with respect to population size, per capita income, administrative capacity and social needs, do not allow for simple solutions. And so it is important thresh out the issues affecting regional development in the context of the proposed reform to a federal state.

Investments and Federalism
In the first place, the new system should give due consideration to sustainable and equitable socio-economic development through the promotion of inter-state and intra-regional cooperation. Thus, policies on trade and investment will be re-evaluated and planned according to the region’s capacity to produce as well as the demand in the local, national and/or international market.

For the business sector, this means an increased concentration on local industries, diversified quality products and greater trade benefits from regional policies. Consequently, businessmen will have a more conducive and competitive business environment and investors will be able to make investment decisions over the longer-term. A well-grounded model country that dashed for economic growth is Malaysia. The success of the Malaysian Government is partly because of diversification of its manufacturing base, diversification of its export markets, and strengthening of its industrial capabilities. In particular, Ipoh, which is in the heart of the tin mining region and close to the rice bowl sections of West Malaysia, is served by trading firms specializing in mining and rice farming equipment and supplies. Businesses specializing in mining and rice farming equipment and supplies and trading centers having countryside marketing facilities are also a significant source of revenue for the locality.

Taxation and Federalism
In the second place, a federal form of government results in greater autonomy to revise taxation policies. Since local governments are semi-autonomous entities within the state framework, review of rates is faster and more reflective of the cost of services that a particular region provides. And even though tax rates in general are linked to a broader political process, a federal system would devise and take into consideration the fairer calculation of rates beneficial to all parties involved within the region. The right of the federal government to levy taxes shall, as Hamilton puts it, “contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without the end proposed—that is, an extension of the revenue.” Following the politico-economic by Brennan and Buchanan (Brennan, Geoffrey And James M. Buchanan (1977): Towards a Tax Constitution for Leviathan. Journal of Public Economics 8: 255-273) federalism leads to lower tax burden. The mobile factors that are capital and labor render a mobile tax base in the federal states. This induces the positive force of taxes that matches local situations. Practically, a federal system in relation to taxation translates to savings for investment, which drives economic growth and prosperity.

Simplified Bureaucracy
Lastly, the decentralized decision making structure provides greater proximity to the people and forces the governments to be more responsive to its citizens' (the business sector’s) preferences. Economic development is achieved through inter-sectoral dialogue and equitable distribution of wealth that render significant improvements in local infrastructure. There would be more access to local resources, e.g. developing better privileges to local contractors for infrastructure projects.
Also, a direct impact of a strong link between the government and the business sector opens broad spectrum of business support services in an effort to achieve a consolidated approach when representing the viewpoint of private enterprise in its relations with the government. This would allow the development of small businesses to be competitive with large businesses in any industry. Through direct involvement and community action, we see rapid development and the proliferation of our interests.
With these advantages it can hardly be supposed that the adverse position would have an equal chance for a favorable issue.