Elpidio Quirino, Fifth State of the Nation Address, January 26, 1953

Message
of
His Excellency President Elpidio Quirino
To the Joint Session of Congress
on
The State of the Nation

[Session Hall, Legislative Building, Manila, at 5:00 p.m., Monday, January 26, 1953]

Mr. President, Mr. Speaker, Members of the Congress:

I wish to express my gratitude for your generosity and for the concurrent resolution passed by both Houses, inviting me to address this last session of the Second Congress this afternoon. It is not probable that the Executive and the Members of Congress would no longer be on speaking terms simply because certain divergent views have divided us in the recent past.

This Congress came into being at the start of the present administration. We have since faced in common the sharp challenge of extremely difficult problems, putting to severe test not only the vision and quality of contemporary statesmanship but the genius, resourcefulness, and patriotism of our people.

It is gratifying to report in honest retrospect that our Government has buckled down manfully to speed the restoration and improvement of our internal and external security, our finances, our essential public services, and our badly damaged economy.

Owing to the marked improvement in the state of law and order our people have been able to concentrate their attention on the development of their farms, industrial activities, and other productive ventures.

Our external security has been greatly enhanced by a mutual defense treaty with the United States and by the accelerated implementation of our military assistance pact with her, as well as by the clarification and strengthening of our common defense efforts of long standing.

Our finances have been bolstered. Our National Government revenue jumped from P316,302,246.09 in 1949 to P611,460,943.82 in 1952, with the purchasing power of our peso maintained and its value recognized as one of the most stable in the world.

Our national economy has been so improved that the national income has increased from P4 billion in 1946 to over P7 billion in 1952.

We have raised the salary standard, stabilized the status, and liberalized the privileges of the rank and file of the personnel of the National Government, especially the teachers, the nurses, the enlisted men in the Army, and the low-salaried employees, providing adequate pension and retirement systems for them.

Our essential public services have been progressively improved and expanded, spreading throughout the country the benefits of health, education, and social welfare for our people to enjoy. Our death rate has been reduced; our birth rate, increased. The hardy perennial problems of inadequate school space and inadequate rice supply have become things of the past. And what is more, prices have gone down, living standards have been raised, and the lot of the common man, especially the laborer, has been greatly improved.

Our foreign relations have grown and so developed that one of the sources of our strength is in the sympathy and high regard of our friends across the seas.

All these have placed us in a firmer and sounder position, increased our international credit, and enhanced our name and prestige abroad.

I shall endeavor to make a more detailed but cursory review of how we have attained these accomplishments.

INTERNAL SECURITY

The task of advancing our internal security has been closely tied up with the problem of solving the threat of dissident terrorism and violence and of pacifying age-long social discontent. Therefore, we have sought the armed dissident elements in the open field, broken up their potential for organized disorder, and given them opportunity to return to peace and production. It has been a painful, costly, and tedious process, taxing our conscience in the sacrifice, in many cases, of life and property, in order to secure tranquility in our land and preserve our liberties and democratic institutions. Obviously we could not achieve these objectives merely at the point of the gun. We adopted a bold and ambitious program of social amelioration, mobilizing all our resources in an effort to provide a life of substance and contentment to the less fortunate, and cushioning the harsh effects of force with the reward of a home and a farm not only to the dissidents who were vanquished or who voluntarily surrendered and who promised to return to the ways of peace, but also to the so-called landless and homeless among our population. And our watchword has since been “land for the landless, home for the homeless.”

As a result, the Huks, who form the armed forces of the local Communists, are now driven to the mountain fastnesses and isolated hideouts hardly able to gather the remnants of their politburo which has been broken since more than a year ago. Discouraged and disillusioned, their followers are now daily surrendering, many of them starting a new life in settlements prepared for them, in the EDCOR under the Army, and in the mass settlement projects under the LASEDECO.

LAND DISTRIBUTION

We have invigorated the LASEDECO. Until December last, it had already distributed to landless settlers 11,728 farm lots of from 8 to 12 hectares each, covering a total area of 120,000 hectares, besides allocating 11,308 home lots. These settlers are now farming their own land in Cotabato, Bukidnon, Isabela, and Palawan. They have hospitals, dispensaries, and tractor pools. They produce annually approximately 2.5 million cavans of palay, in addition to secondary crops like corn, mongo, and peanuts. There are now in operation, on the other hand, the EDCOR farming communities provided with modern facilities in Kapatagan, Lanao, and Buldong, Cotabato, for deserving dissidents and their families, many of whom now own their farm and home.

These settlers come from areas where tenancy has long existed. To bring the benefits of land distribution and settlement closer to troubled areas and to meet the reluctance of tenants to move far away from their old homes, I have reserved for the purpose 25,475 hectares in Rizal, 3,763.60 hectares in Nueva Ecija and Tarlac, 20,000 hectares in Isabela, in addition to over 30,000 hectares at Malig, already distributed and settled.

During the last year, 11 subdivision projects have been completed by private contractors. Five survey parties of the Bureau of Lands have undertaken subdivision surveys of public lands. Two hundred forty-nine thousand hectares have been surveyed and distributed to 16,000 settler families. To protect small farmers from land grabbers or speculators, I have issued an executive order reserving for occupation in lots not in excess of 10 hectares each all public lands within six kilometers from all highways, being or to be constructed in Mindanao and other provinces under the PHILCUSA-MSA highway development program.

In Mindanao alone this program covers a network of highways connecting most of the important provinces of the region and traversing rich agricultural lands. The total combined length of these highways is approximately 560 kilometers. This will make available for occupation over 650,000 hectares of land under the provisions of said executive order.

These public land distribution and settlement programs supplement the landed estate purchase program. The Government has purchased since 1947 for resale to tenants 25 landed estates with a total area of 44,000 hectares costing over P18 million. Of this amount P14 million still remains unpaid. We had to borrow the purchase money from government banks. Continued acquisition of other landed estates had to be temporarily suspended because further borrowing from government banks would seriously endanger their financial position.

HOUSING CONSTRUCTION AND SLUM CLEARANCE

We have accelerated the construction of homes for the low-salaried employees and the laborers. In Quezon City the Peoples’ Homesite and Housing Corporation is now operating 2,116 low-cost units. We have even provided a big-sized Labor Hospital for this sector.

We have also attracted private entities in the construction of low-cost houses for the lower middle class. Already the Philippine-American Insurance Company has constructed 50 of this type of houses in the City of Iloilo, another 50 in the City of Baguio, and is now commencing the construction of 600 new units in Quezon City. A plan is afoot to construct similar houses in Tacloban and Legaspi and other centers of population.

Our program of slum clearance is being implemented with the construction of low-cost houses for squatter and low-income families, one in Pandacan, Manila, and another in Bago-Bantay, Quezon City. The former will house 480 families and the latter will have facilities for 800 families.

With the activation of the Philippine Rural Reconstruction Movement in conjunction with the activities of the Social Welfare Administration and the barangay and purok organizations in the barrios, a new impetus is now reawakening social improvement in the rural areas throughout the country.

LABOR

Underlying almost every major governmental activity is the desire to improve the worker’s lot, better his working condition, improve his earning capacity, create for him widening opportunities for continued employment, and raise his living standard.

At no other comparable period has the workingman achieved greater gains for himself and his co-workers than during the past two or three years. These include: (1) raising his wage standard; (2) promotion of his safety against industrial injury and disease; (3) protection of employees sustaining injury or meeting death in line of duty; (4) improvement of working conditions of women and children; (5) expansion of national employment programs leading towards greater and more stabilized employment; (6) protection of prospective workers from illicit activities of employment agencies; (7) protection of workers against irresponsible union leadership; and (8) raising labor standards in general.

A vigorous and determined campaign to enforce the Minimum Wage Law in both urban and rural areas has been pursued to insure for the workers and full benefits of the law.

PUBLIC HEALTH

Public health has remained at high level despite fires, typhoons, and repeated eruptions like those of Mt. Hibok-Hibok in Camiguin Island, Mindanao. Our health authorities and facilities have proven equal to the heavy exigencies imposed by such calamities.

Better sanitation has been achieved in diverse and effective ways. Stricter supervision over public eating places, markets, and slaughter houses has been enforced. Schools, industrial plants, and commercial houses have been subjected to systematic medical inspection. Immunization of the population against epidemic diseases has advanced where it is now willingly sought by everyone, young and old, rich and poor, healthy and infirm alike. We have spread the benefits of artesian well and sanitary facilities to more sectors, and have established an increasing number of hospitals, puericulture centers, charity clinics, and dispensaries

EDUCATION

The recurring school crisis in past administrations has been met since three years ago. Last year we took the last step in this direction. With the diversion of P2,647,000 from the contingent funds of the Bureau of Public Schools, after consultation with the Council of State, we opened 3,000 new semestral classes in November last, benefiting 150,000 more children. In June this year, 225,000 more children of school age will be accommodating.

We have maintained our world position as the country with the second highest ratio of school enrollment to total population. We are surpassed in this respect only by the United States.

We now have a goodly number of agricultural and vocational schools. Enrollment in these schools has multiplied and soon an increasing number of youths will be leaving their doors properly equipped with vocational skills so essential in our economic development program.

The important role of private schools in the education of our youth deserves mention here. There are now throughout the archipelago 1,770 private educational institutions from the lower grades to university level, with over three-quarters of a million students. Were the government to shoulder their operation and maintenance, P60 million would still fall short of the money so required, excluding the cost of their buildings and equipment.

PUBLIC IMPROVEMENTS AND COMMUNICATIONS

We have exerted every effort this past year to maintain and add to our system of highways and bridges and of other means of communications. Nearly 29,000 kilometers of roads and over 9,000 bridges are now being maintained and kept open to motor vehicle traffic. Two weeks ago, I opened the new Pinacanauan and Naguilian bridges in Cagayan and Isabela. These bridges together with the Malalam Bridge near Iligan, Isabela, will provide the Cagayan Valley with a continuous road. The Cotabato and Pagaluñgan bridges in Cotabato, which I likewise opened three months ago, will provide through transportation across the Cotabato Valley linking this region with Davao province. Eight, other bridges and 19 port works projects have been completed. Several large edifices, among them the P450,000 Sorsogon High School building and the P400,000 Cebu Capitol annex, are about to be completed. Being started are the P700,000 Quezon Memorial Mausoleum as part of the Quezon Foundation, and the Roxas Memorial Theater whose plans are being readied.

Nearly 500 wire-telegraph offices, 180 radio-telegraph stations, and over 1,160 postal offices now keep our population centers in close contact.

Related to our agricultural development program is our increasing endeavor to construct new irrigation systems. The Burgos Irrigation Project in Zambales, completed last August, waters approximately 6,000 hectares. Five other irrigation projects in the provinces of Quezon, Davao, Leyte, Ilocos Norte, and Nueva Ecija should be completed and harnessed this year. The construction of the P7,500,000 Jalaur irrigation project in Iloilo to serve no less than 15,000 hectares is starting next month. We now have 27 national irrigation systems servicing over 117,000 hectares of rice lands in Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Tarlac, Nueva Ecija, Pampanga, Bataan, Bulacan, Laguna, Quezon, Camarines Sur, Albay, Leyte, Iloilo, Antique, and Zambales.

Sixteen river control projects were completed last year and 35 more are now in varying stages of construction.

AGRICULTURAL PRODUCTION

The level of agricultural production for domestic consumption and for export continues to rise. This year we will be producing enough rice for our own needs. In other food items, such as fish and poultry, production is expanding. Sugar output for the 1952-1953 crop years will not only fill the Philippine quota in the United States for the first time since liberation and our own domestic requirements, but also leave a surplus for other markets.

The total combined production during 1949 of certain selected commodities, like palay, corn, sugar, copra, root crops, etc., amounted to 5,576,000 metric tons. In 1952 this had increased to 7,503,000 metric tons or an increase of 35 per cent in three years. The total area of land devoted to the production of all crops reached 5,326,000 hectares in 1952, which exceeds by 380,000 hectares the 1949 area. At the average of two workers to put one hectare of land into production, we cab see that there were approximately three-quarters of a million more farm laborers who found occupation during 1952, compared t those working in 1949.

INDUSTRIAL PRODUCTION

Most significant has been the rise of new industries and a corresponding increase in industrial production. In two years and a half, we have established such important new industries as jute, iron and steel, textiles, chemicals, glass, nail, incandescent bulbs, toilet soap, rubber tires, plywood, bond and wrapping paper, asbestos, plastics, musical instruments, kettles, tableware, pencils, chalk, etc. Up to November 15 last, 165 new tax-exempt factories had begun manufacturing articles formerly imported.

This recent industrial development has been made possible by new capital investments, both local and foreign. In the manufacturing industries alone, the amount of private capital invested since 1948 at the time of incorporation has reached P117,942,813.88.

On the whole, investments in corporate and partnership ventures in 1952 were on the same level with those of the preceding year. Filipino capitalists and businessmen were greatly encouraged to adopt modern corporate methods increasingly. We have taken appropriate measures to safeguard public interest and to protect investors by the adoption of methods designed to curb, through rigid examination, the issuance of “watered” stocks by registrant corporations.

From February 1 to April 30 this year, we shall have the first Philippines International Fair. Besides the display of Philippine products together with those of the participating nations to promote world trade, the Fair will also show the agricultural, commercial, and cultural progress of the country as well as the recent advance that we have made in our industrial development.

DOMESTIC AND FOREIGN TRADE

Greater efforts have been exerted on the whole towards increased Filipino participation in domestic trade. The capital structure of the corporations and partnerships registered during the first eleven months of the year shows that our nationals lead in both fields, especially with regard to investment of small merchants.

Less than two years hence, the tariff levies on our exports to the United States will be in operation. By that time we shall be manufacturing articles and goods needing export markets and facing stiff competition there. We must therefore, attend to the problem of foreign trade promotion. We must locate markets for our products. This means that our home production should be placed on a competitive basis abroad not only in price but in quality. But more than anything else, our home market should be developed in order to promote our foreign trade.

Philippine foreign trade during the first eleven months of 1952 has aggregated P1,411.8 million, of which P773.4 million represents imports and P638.4 million represents exports. On the basis of these figures, the total trade for the whole year is expected to reach well over P1.5 billion, which will be less than the 1951 total of P1,790,516,663.

There is need for readjusting our foreign trade. We must redirect our productive potential towards agricultural development for self-sufficiency in the prime needs of our people, and towards industrial development base on the utilization of local raw materials. But unless our own countrymen ready and willing to invest in processing, are given adequate protection, they cannot survive in competition with foreign manufacturers. To rise above

subsistence level, and to achieve a standard of living to which we are entitled, we cannot afford to remain permanent suppliers of raw materials for industrial powers and permanent importers to processed consumer goods. It is time to readjust our trade and tariff policies to suit present conditions and to make them more effective instruments of our economic development.

I propose the creation of a Tariff Commission to study the present tariff rates carefully and in detail. This we should do while we present our side to the United States in our desire to readjust our trade relations with her. The Problem is not easy. It will take some time before we can expect concrete recommendations for the required changes. Immediate action is essential not only to hasten our industrial development, but to provide for the necessary machinery or authority to act on the urgent changes or modifications in the tariff schedules to protect our interest in the meantime.

THE GOVERNMENT CORPORATIONS

Much of the implementation of our economic development plans is entrusted to the corporations owned or controlled by the Government. Taken together, the operations of these corporations, except those of the Central Bank, the Philippine National Bank, and the Rehabilitation Finance Corporation, netted during the fiscal year 1952 a profit of P4,000,000 from a total income of P208,000,000. The three financial institutions made total profits of P24,933,202.43.

The Manila Gas Corporation whose majority stock has been acquired by the Government has been rehabilitated and has been operating since last month.

This year other important basic industries will begin operations. The two principal projects of the National Shipyards and Steel Corporation will be completed—the Mariveles shipyards in March, and the Iligan steel mills in September.

The Cebu Portland Cement Company with its present annual output of six million bags, together with the output of two privately-owned plants, does not fully meet local demand. A new plant of three million-bag capacity is therefore, under construction in Bacnotan, La Union.

The National Power Corporation’s Maria Cristina hydroelectric and fertilizer plant projects will begin operations this May. The Ambuklao project is 15 per cent completed and the transmission lines to Manila are under installation. This project is estimated to cost P101,000,000, of which P61,000,000 has been furnished by our Government and $20,000,000 by loan from the United States Export and Import Bank. When completed it will supply power to the areas around the Mountain Province, to Pangasinan, Nueva Ecija, Tarlac, Pampanga, Bulacan, Bataan, and Manila. Its reservoir will also supply irrigation water to approximately reservoir will also supply irrigation water to approximately 40,000 hectares of rice land in Northern and Central Luzon.

AGRICULTURAL AND INDUSTRIAL CREDIT

The three financial institutions of the Government, the Central Bank, the Philippine National Bank, and the Rehabilitation Finance Corporation have continued the admirable partnership they have virtually established in meeting the credit requirements of Philippine agriculture and industry. Today, there is hardly any commercial, agricultural, or industrial activity of national economic importance which has not been assisted by one or all of these corporations,―the Central Bank indirectly, of course, through the support it has given to the loan activities of the two other institutions.

New arrangements have been made to provide facilities for the financing of industrial development and to meet particularly the credit needs of small merchants and farmers. First, a special trust fund of P10,000,000 has been set up for the special account of the counterpart fund to guarantee a large share of the risk to be assumed by banking institutions granting industrial loans. Second, a plan has also been adopted whereby loans may be granted to Philippine financial institutions by the Central Bank on behalf of the Export and Import Bank from a fund of $5,000,000 that the latter institution has made available as loan for financing small productive enterprises in the Philippines. Third, rural banks are fast being established in various localities under the supervision of the Central Bank and with governmental capital assistance up to 50 per cent of their own paid-up capital out of an allocation of P2,000,000 from the counterpart fund. Lastly, the Agricultural Credit and Cooperative Financing Administration has been established to deal exclusively and directly with one of the most serious difficulties from which the small farmer has from time immemorial suffered; namely, the procurement and marketing credit. For this purpose it has received a contribution of P2,000,000 from the counterpart fund.

THE MSA-PHILCUSA PROGRAM

These last two projects of loan assistance to the small farmers in line with the order programs of mutual economic assistance have been facilitated under MSA-PHILCUSA auspices. But they are but a few of the several projects to which the MSA and PHILCUSA have addressed themselves.

It is meet to note here the history of the Philippine-American Mutual Assistance Program. Upon my representations to President Truman in January, 1950, the Bell Mission was sent to the Philippines in July of the same year. Shortly after the Bell Mission Report in October of that year, Mr. William Foster came to the Philippines as the personal representative of President Truman to conclude with our Government a preliminary agreement known as the Quirino-Foster Agreement of November 14, 1950, providing the basis on which the United States would grant aid to the Philippines in the amount of $250,000,000. On December 15, 1950, the PHILCUSA submitted to the Council of State an interim aid program, and an allocation of $15 million was granted shortly as advance aid to the Philippines. The bilateral agreement, which is the formal treaty governing the Mutual Assistance Program, was signed April 27, 1951. The United States Congress then allocated to the Philippines another $32 million for expenditure within the 1951-1952 fiscal year. Last year it granted us another allocation of $30 million for the 1952-1953 fiscal year. In addition, the Export-Import Bank has recently granted to the National Power Corporation a loan of $20 million for the Ambuklao Hydroelectric project. The total aid thus far allocated to the Philippines since the start of the Mutual Assistance Program now amounts to $77 million in grants and $20 million in loan. Under the bilateral agreement we have to deposit P2 for each dollar of aid granted to us, to form the counterpart fund. Up to this date, our Congress has appropriated a total of P75 million for this purpose. This amount has been bolstered by counterpart funds derived from the sale of commodities, to the extent of P24,715,535 up to December 31, 1951, so that to date the total amount of the available counterpart fund is P99,715,535. A total of P44,691,267 of this counterpart fund has now been authorized to be spent on all projects under implementation.

Despite the initial difficulties and obstacles inherent in a program of the size and scope of these joint entities, they have chalked up already a number of noteworthy achievements. Over 23,700 tons of fertilizers have been distributed to farmers throughout the country, estimated to increase the yield of rice, corn, fruits, and vegetables to more than P19,900,000. The culture of pure rice and corn seeds has been done on 178 hectares of land, 41 hectares of which have already been harvested. Distribution of the seeds harvested to farmers will begin soon and ought to bolster immensely the country’s drive for self-sufficiency in prime cereals.

PHILCUSA’s assistance in the campaign against mosaic has cleared 50,287.03 hectares of abaca land of infected plants. With the rehabilitation of the U.P. College of Agriculture and the establishment of the Central Experimental Station in Los Baños, we now have facilities for agricultural instruction, research, and extension comparable to the best in other countries. Other MSA-PHILCUSA projects basically of a service nature just coming to the fore will improve our facilities for agricultural production, agricultural research, agricultural extension, soil survey and conservation, vocational and technical education, health programs, road development and rehabilitation, and the improvement of manpower efficiency and of production techniques and processes in industry and trade.

THE P200,000,000 ECONOMIC DEVELOPMENT FUND

Let us not forget that, even before the inception of the United States aid program, we had already started our own program of economic development using for that purpose the P200 million which was loaned by the Central Bank to the Government under the provisions of Section 137 of Republic Act No. 265 as Economic Development Fund. This fund was allocated to the various government projects upon the recommendation of the National Economic Council, which body likewise approved those projects that were to be undertaken, either by the government directly or through its corporations. The fund was thus distributed and eventually released as follows: (1) P74,677,090.27 to the National Power Corporation for the construction of the Lumot River Diversion Project, the Maria Cristina Hydroelectric and the Ambuklao Hydroelectric Projects; (2) P21,428,688.93 to the National Development Company for the construction of three ocean-going vessels, for advances made to the nail plant, the pulp and paper mills, the Malangas Coal Mines, and the Engineer Island shops, for subscription to shares of stock of the Philippine Electric Manufacturing Co. and the Philippine Air Lines, Inc., and for the construction of the Ilocos Textile Mills in Narvacan, Ilocos Sur; (3) P891,050 to the Cebu Portland Cement Co., to finish the construction of the pulp and paper mills; (4) P20,500,000 to the National Shipyards and Steel Corporation for the construction of the Mariveles National Shipyard and the Iligan Steel Mill project; (5) P15,000,000 to the Land Settlement and Development Corporation for its rice and corn project; (6) P1,984,400 to the Manila Railroad Company for the purchase of ten new locomotives and spare parts from Japan; (7) P10,000,000 to the Bureau of Public Works for the construction of irrigation projects; (8) P40,160,000 to the Rehabilitation Finance Corporation to be used for financing agricultural and industrial projects; (9) P3,500,000 to the Department of Agricultural and Natural Resources for its fertilizer, irrigation pumps, and abaca mosaic disease projects, and (10) P1,843,170.80 to the National Abaca and Other Fibers Corporation for its Davao Abaca project. As of December 31, 1951, there still remained unalloted the sum of P10,015,600, which is reserved for other productive and income-producing projects.

GOVERNMENT FINANCE

Let us now look at our national finances as they bear upon our economy.

Two years ago, we elected for ourselves a goal in the field of fiscal policy which many countries for more favored than us in resources, technical equipment, and manpower have considered unattainable in this age. I am proud to report that in the fiscal year which ended last June 30, we achieved our postwar objective of a balanced budget and were able to match expenditures with revenues.

The latest available figures from the General Auditing Office placed the total income of the National Government for the last fiscal year at P611,460,943.82, as against expenditures of P539,239,957.39. Considering the numerous spheres of government endeavor in which expansion was demanded, the excess of P72,220,986.43 of income over expenditures assumes a happier hue.

We have also progressed in the liquidation of the advances form the Special Funds. In the fiscal year 1952, repayments to the Special Funds aggregated P127,339,715.32, so that as of June 30 last year, only P25 million remained to be refunded. We are addressing ourselves to the eventual repayment of this balance and expect to do this before the close of the ensuing fiscal period.

Local government finances have also noticeably improved. Provincial and municipal governments realized an income of P74,192,000 in the fiscal year 1952. This figure compares favorably with their 1951 performance of P60,830,000. Collections of chartered cities reached P73,712,000, or an increase of P12,623,000 over the 1951 record of P61,089,000. The assessed value of taxable real property in the provinces, municipalities, and cities increased by over P176 million in a year’s time.

While the overall picture appears to be brighter than heretofore, individually, the local governments have still to exert greater efforts towards financial autonomy. Many cannot yet sustain ordinary and essential services or meet legal requirements, like that of the Minimum Wage Law, without allotments from national funds. These fiscal difficulties can be solved. Local boards and councils should early consider measures designed to tap new sources of local income, or to increase prevailing rates of local taxes and fees.

PUBLIC DEBT

The past fiscal year saw a substantial decrease in the public debt by P132,972,858.52. From a figure of P927,327,684.44, at which it stood on June 30, 1951, the public debt has gone down to P794,354,825.92 as of June 30, 1952.

We have complied with the amortization requirements of the loans secured from the U.S. Treasury and from the U.S. Reconstruction Finance Corporation. Treasury notes and treasury bills are being retired on their due dates, and we have not found it necessary to increase the flotation of such issues. In accordance with the provisions of Republic Act No. 800 which amended portions of the Backpay Law, partial redemption of backpay certificates is proceeding apace. About P10 million has already been disbursed in fulfillment of our commitment to loyal and deserving employees of the Government.

EXTERNAL FINANCE AND THE INTERNATIONAL RESERVE

Largely as a result of our success in maintaining domestic stability in the economy, the problem of maintaining external stability has been greatly minimized. The continuing decline in the demand for, and prices of, our export products, coupled with the many destructive typhoons which in recent months laid waste sizable areas planted to domestic and export crops, resulted in an unprecedented drop of $63 million in export receipts during the first 11 months of 1952. Such a substantial decline could have been fatal to the national economy. International reserves could have been depleted to a point where it could have been difficult to import not only vital raw materials and supplies for our industries but even many of the essentials of life. Fortunately, a reduction in imports by $72 million below that of the 1951 level and a moderate rise in United States expenditures in this country served to offset the big drop in export receipts. It was thus that international reserves have been maintained at a level that is adequate, barring unforeseen world developments and provided that we continue to observe sound fiscal and monetary policies.

On the whole, 1952 has been a year marked by great gains in economic strength, both internally and externally. Inflation, still a major problem in many countries today, and which only a few years back appeared to be impossible of solution in our country, has been checked. The retail prices and the cost of living index of wage-earners during 1952 declined substantially from the level of 1951. Consequently, the purchasing power of the peso today, not only of the middle class but also of the low-income groups, has shown definite improvement. We must conserve these gains.

STABILIZATION OF GOVERNMENT FINANCES

But more than we realize, we stand on the verge of possible retrogression.

I would like now to call special attention to the unfavorable trend which government revenues have taken since the middle part of 1952. On account of the continuing low demand for, and sustained drop of the prices of, our export products which resulted in a decline of about $63 million in export receipts during the first 11 months of 1952, total government revenue from taxation for the current fiscal year which was originally predicted at around P526 million, is now estimated to reach P474,000,000 only.

This unforeseen development will be further aggravated by the expiration this year of some of the tax laws which were purposely enacted to balance government revenues and expenditures. In addition, the foreign exchange tax will be sliced from 17 per cent to 121/2 per cent after June 30, this year.

These factors may compel the Government to resort again to deficit spending which, needless to say, is a situation that we should make every effort to avoid. The inflationary pressures which such a program would generate could easily give rise to a rapid deterioration of our international reserves (because of the augmented pressure they would exert for increase imports) or to a spiraling of prices and cost of living, or to both unsalutary conditions at the same time.

Therefore, I earnestly ask you to consider favorably the extension of the tax laws which will expire this year and to retain the foreign exchange tax at its present rate of 17 per cent. This rate is much lower than the 25 per cent originally recommended by the Bell Mission which saw in the measure an alternative to the import duties that our government is unable to impose on account of the restrictive provisions of the Trade Agreement supplement to the Bell Trade Act.

I cannot too strongly stress the grave aftermath likely to result from any failure to recognize the imperative need to retain these tax laws in full force. Adequate taxation is essential, both to assure a sound fiscal position and to maintain economic stability. It was principally because of the enactment of these tax measures in your first and second sessions, complemented by adequate economic, monetary, and credit policies, that we have made considerable headway in the maintenance of economic stability in our country. We should not lose now by default the victories won these past two years in the economic and fiscal fields.

FOREIGN RELATIONS

In the last twelve months, the Philippines concluded treaties of friendship with Cuba and with the Dominical Republic. It also signed 14 other agreements, three of which were on civil aviation for the extension of our air routes to various countries, and eight with United Nations Agencies providing for various forms of technical assistance to the Philippines.

In view of our expanding relations with other countries, new Foreign Service posts were established; namely, a legation in New Delhi and a consulate in Guam, thereby increasing the number of our existing diplomatic missions to 13 and of our offices to 12.

In order to place our Foreign Service strictly on the merit system and thereby insure its efficiency and effectiveness, I signed Republic Act No. 708, otherwise known as the Foreign Service Act of the Philippines. The placing of diplomatic and consular personnel on a career basis with strict eligibility requirements is expected to bring about still higher performance standards among our Foreign Service personnel.

REPARATIONS AND THE JAPANESE PEACE TREATY

Let me take up with you once more our position in connection with the Japanese Peace Treaty. The Senate did not act on the peace treat during its last session. Technically, therefore, we are still at war with that country. Our failure to normalize and stabilize our relations with Japan has stood in the way of the consolidation and strengthening of the defense of our region against the common danger that threatens the countries that comprise it.

From the economic point of view, the uncertainty of our relations with the former enemy has not served our interest. We must stabilize these relations to take advantage among other things of our favorable balance of trade with that country, and determine how we can strengthen our national economy by taking advantage of proffers of Japanese industrial technical assistance.

To reach an early agreement on the reparations question, which is the only factor responsible for the non-ratification of the peace treaty by the Senate, the Japanese Government sent two special missions to the Philippines. I am confident that as a result of our negotiations with them and our direct dealings with the Japanese Government through our mission in Tokyo, we have made progress towards an early settlement of the reparations problem.

EXTERNAL DEFENSE

In compliance with our commitment to the United Nations’ effort in Korea, we have maintained fighting forces in that area. As in other battlefields, the Filipino soldier has again won additional honors and prestige on that front. He is receiving citations for valiant and heroic action.

Uncertainties continue to hang over the international situation. We shall strive to make further provision for our national contribution towards the efforts of free nations to remain free. The improvement of our domestic situation will enable this Government to devote more time and resources to the development of our defense against threats from without, either through infiltration or through direct attack.

In 1951 we entered into a Mutual Defense Treaty with the United States. In the latter part of last year a meeting was held in Manila between representatives of the United States and the Philippine governments to clarify and strengthen the roles that the United States and the Philippines would play in the defense of our territorial integrity, should any threat be poised against it, as well as in the regional security of this part of the world. This meeting also made it possible for our Government to take up possible acceleration of United States military assistance to the Philippines in accordance with our military assistance pact.

World antagonisms notwithstanding, we are determined to contribute however modest to the maintenance of world peace and assist in the preservation of the liberties and rights of free men. From conviction we have cast our lot with the democracies.

Our Government has dedicated itself to the cultivation and fostering of amicable relations with the other peoples of the world, to active participation in the efforts of the United Nations to promote human welfare and maintain world security and peace. We have urged the formation of a system for the common development and defense of the countries of our region. The past year witnessed a perceptible and significant attitude of the responsible powers towards the development of this objective. It is may hope that, in the months to come, it may be possible for the various governments concerned to meet together and work out the basic principles of this project.

CONTINUING PROCESS AND VIGILANCE

I have given you a picture of the important developments during the last three years of our administration. With pardonable pride I can say that they can stand comparison with the record of progress of our nation in any period of our history.

In the face of apparently insurmountable difficulties, in an atmosphere of keen partisanship, aggravated by the confusion, insurgency, and fears fomented by a new world ideology ruthlessly seeking to destroy the very foundations of democratic institutions the world over, we have shown strength of character as a people.

We have been able to put our heads together on matters calling for the highest type of statesmanship. We have achieved that in due course may be characterized as heroic against a backdrop of long and painful vicissitudes. We have established during our time a government stable in its finances and political institutions, rich in promise of yet greater deeds.

But this is a continuing process. It should leave us no time and excuse for complacency. We should and can surpass our past accomplishments and cooperating with one another, solve many of our long standing ills in our time and generation.

Great opportunities are before us, never before presented in the different epochs of our history. With our record of accomplishment, I know we can achieve better things yet. We can continue balancing our budget, prevent the recurrence of any school or rice crisis, and increase the public revenues and the national income in great measure. We can produce more consumption and export goods and manufacture the products which we have heretofore been importing. We can steadily improve our standards of living; assure greater prosperity, satisfaction, and happiness to the masses of our people, individually and collectively. We can attain greater honors by more heroic action in foreign battlefields. We can even say that, in our time, we can write in letters of gold the name of the Republic of the Philippines for our children to cherish.

But all this would be set at naught will have no meaning, and our efforts will be in vain, if we do not employ care and vigilance in the preservation of what we hold dear in our heart and soul as a people. For, in our very midst there are influences not only undermining our stability as a nation but actually destroying the very principles upon which our nation has been founded—our freedom, our democratic institutions, and the way of life we have discovered to be the real source of our happiness.

These destructive influences are active. They always speak to blood baths and revolution. They are determined to overthrow the government and turning their back on the noble sacrifices of our heroes and martyrs, are bent on delivering us to a new power which will ultimately enslave us and our children.

We must stand united to fight them and those who fight for them, if we are to survive as a nation and deliver our precious heritage to the succeeding generations.

We must not be deluded by temporary or personal advantage into allowing these enemies of our freedom and happiness to avail themselves of the confused, precarious atmosphere where they expect to thrive at the cost of our future.

We must give no quarter to them in the open field, in the mountain fastnesses, in the courts, in the press, and even over the radio. Before they destroy us, let us face them and conquer them, face them fraternally if they come to reason and to the folds of the law, and face them as our worst enemy in time of national peril, if they don’t.

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