This piece will attempt to provide an outlook for the
Philippines many decades from now, a view different from articles and analyses
seeking to explain what happened during the previous year and what to expect
for the next.
In particular, this will be an outlook of the Philippines
if it splits up into many new, small island countries.
There are two reasons for considering this view, however
unthinkable it may be for some.
First point: There are dozens of other small countries
with very small populations and small land areas yet they continue to exist as
a country, and even become prosperous and wealthy. (See Table)
Second point: After traveling over land and sea for the
past two weeks in several provinces and islands outside Luzon -- Oriental
Mindoro, Panay Island (Aklan, Capiz, Iloilo, Antique provinces), Guimaras, and
Negros Occidental -- I have come to realize that their growth potentials could
be unleashed by they are allowed to set their own “national” policies -- from
international trade and taxes to local programs and subsidies.
In the table, columns 2 and 3 show how some countries --
despite the small size of their land areas and populations -- persist, and even
thrive, as nation-states, thanks to their own airports, seaports, education and
health care facilities.
Columns 4 and 5 show their level of economic wealth and
Internet connectivity. These are among the indicators of their prosperity
despite their size. Column 6 shows the wide variety or divergence of income tax
policy. At least four of these small countries have zero income tax while some
have rates ranging from 39% to 44%.
Consider these four Asian economies: Hong Kong,
Singapore, Brunei and Bhutan. Despite their small land area and population,
they have food security, fiscal and energy sustainability, dependable
infrastructure, and high Internet connectivity. They can manage on their own.
Why can’t the Philippines’ individual islands do the
same?
Hong Kong will not be as dynamic and rich if it was just
one of the many provinces of China. British colonialism has diversified and
isolated it from the bureaucratism of China, before and after the communist
takeover in 1949. Hong Kong for instance, could set a low income tax of only
17% vs. China’s 45%.
Singapore will not be as dynamic and rich if it was just
one of the many states of Malaysia. Singapore opted for secession, not
federalism. Singapore could set its own lower income tax of only 20% vs.
Malaysia’s 26%.
Brunei too, would not have become as dynamic in energy
development if it was just one of the many states of Malaysia or Indonesia. It
is too far from Kuala Lumpur or Jakarta, and getting exploration and
development permits alone from these national capitals would already be a
bureaucratic headache. Brunei also has an income tax of zero vs. Malaysia’s 26%
or Indonesia’s 30%.
Bhutan has its unique geography and cultural life that
allows it to slowly prosper. It set its own income tax of 25% vs India’s 31%.
The economic potentials of current Philippine provinces
and islands will be larger if their political and business leaders are given
the chance to act as national leaders, not as provincial leaders beholden to
the high officials and policies of the national or central government in Metro
Manila.
A break up into many small countries does not mean
animosity among them. Singapore’s secession from Malaysia did not result in any
armed confrontation between them. Trade and freer mobility of goods and
people/services has cemented friendship and long-term economic partnership
between them.
There are many avenues for inter-country cooperation
within the region. Like the Association of Southeast Asian Nations (ASEAN), the
ASEAN Economic Community, Regional Comprehensive Economic Partnership,
Asia-Pacific Economic Cooperation, World Trade Organization, membership at the
Asian Development Bank (ADB) and World Bank, and so on. Presidents, Prime
Ministers, Cabinet Secretaries or Ministers regularly see each other, several
times a year.
With the continued expansion of the Philippine government
especially at the national or central agencies, there is little chance that it
will agree to a significant income tax cut, or reduction of various taxes,
fees, royalties, penalties and mandatory contributions.
On the contrary, it will only be thinking of ways to
retain those multiple taxes, if not raise them further. The “fiscal tragedy of
the commons” can only worsen in the coming years, not reduce or lessen.
One way to break this tragedy is to create economic
competition among many countries, or, in this case, islands.
For instance, it is possible that some island states can
have an income tax rate of 32% or higher, but it is also possible that other
island states can have zero to 10% income tax and attract lots of
entrepreneurs, professionals, and workers from other islands and other
countries around the world.
The perspective of having new, many small countries out
of the Philippines’ many islands and provinces, is not short-term; it is
long-term. Its viability or nonviability should be explored by local scholars
and actors from various sectors of the country. It is a good way to start the
new year.
Bienvenido S. Oplas, Jr. is the head of Minimal
Government Thinkers, and a Fellow of the South East Asia Network for
Development (SEANET).
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See also:
BWorld 32, RCEP and TPP for the Philippines, December 16, 2015
BWorld 33, Computing rise in tax revenues if rates are cut, December 17, 2015
BWorld 34, Solar power and supply instability, December 24, 2015
BWorld 35, Inter-island shipping and the PPA, Coast Guard, December 25, 2015
Airports, seaports and local government, April 18, 2009
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