“National Discipline: The Key to our Future”
Message to Congress
Of His Excellency Ferdinand E. Marcos
President of the Philippines
On the State of the Nation

[Delivered at the Legislative Building, Manila, on January 26, 1970]

I. INTRODUCTION

This is for me a historic privilege. No man can be exalted higher than to be chosen twice by his own people to lead them; this, at a time of great anxieties and great expectations for the nation and for the world.

Permit me, then, to begin this report by thanking our people for their mandate, and congratulating all those who were elected to office in the last elections.

But the honor of this mandate pales beside its gravity. I interpret this mandate not just as a call to continue in office, but a summons to supreme self-exertion in the service of the nation.

Our country summons us all to exert ourselves to the limit of our God-given powers, endurance, and wisdom to raise the nation to a bold, new future.

The situation in the world, as well as that in the Philippines, is marked by sweeping change.

We cannot move forward within the grooves of old habits and outmoded institutions. Progress demands that the barriers of centuries be broken.

But the pursuit of development and the breaking of barriers to progress require such energy and endurance as may strain our resources, both of the public and the private sectors. Thus, the balance of payments problem is now the most immediate and urgent challenge facing our country.

But from an intimate knowledge of our problems, I know and I say that there is no reason to be afraid of the dollar gap. It can and will be bridged in a short time. We should be more concerned about the moral gap—a gap in our self-confidence and our strength of purpose as a nation, a gap that threatens all classes of people in all stations of life.

We must turn these difficulties and problems into opportunities to strengthen our moral fiber as a people, to temper our will and character, to imbue the nation with a permanent sense of discipline so necessary to the achievement of progress.

Today, we must offer the alternative to anarchy—a constructive nationalism, not a vituperative chauvinism.

There is ferment and a desire for change. Many cannot describe, nor do they know, the change that they aspire for, but the instinct is there; let the leaders in government help define and outline it for them.

We must offer reforms in the electoral system, abolish social iniquity, work out a government machinery reorganization, provide a modernized penal system, discard feudalism and at the same time oppose fascism.

We must be understanding, even with those who refuse to understand us.

For when we establish priorities in development, many will question their lack of standing in such a plan of development as well as in the listing of expenditures. Sometimes we must suffer in silence, for they will question not only our acts but also our motives as well. Silent we will be, aware as we are that ultimately—as the expression goes—the truth will out, as it always will. These are hazards of authority and leadership. This is the measure of responsibility. You and I must patiently explain.

Government today is often charged with being insensitive, likened to a corporation without a soul. We must demonstrate that government does have the capacity for compassion—for the weak, the underprivileged, and the destitute. All the agencies of the government must respond to the needs and problems of the common people.

Our confidence in the future rests on a solid base, namely, our present achievements. The past four years have shown that the spirit of the Filipino people, properly challenged, will more than match the dimensions of the challenges they have to confront.

The only condition is that the nation discipline itself towards its goals. I am not speaking of discipline imposed by a tyrannical government, but of self-discipline in the active exercise of freedom.

Discipline is our salvation as a nation and the key to our future greatness.

We can no longer plead as an excuse immaturity or smallness in the world. We have grown in population to 37 million people, making us the 15th largest nation. Among the developing countries, we rank seventh in the world in population. Countries similar to us in geographical area, such as Great Britain and Japan, have demonstrated their capacity to become world leaders. We do not, we need not, aspire to world leadership. We do have the potential to play a larger role in world affairs. But first, we must acquire the discipline of self-denial, the ability to sacrifice present gratification and ease for permanent and lasting national progress.

I ask the leaders of our government—including the members of the Seventh Congress—to set the example and lead the way for national self-discipline.

Let me now turn to the facts of our economy.

II. THE ECONOMY

Our economy is developing vigorously.

The economic difficulties—namely, the balance of payments problem and inflation—that beset us are consequences of the massive capital expenditures that we made and not of stagnation. As such, they are temporary and can be surmounted. But to surmount them, we need strength of purpose and discipline. We have to subordinate our personal desires to the needs and aspirations of the nation. We have to train ourselves to use our resources carefully and fruitfully.

To get an overview of our economic state and to provide a context for our new programs, allow me to review the economic gains of the past four years.

Highlights of 1969

The impulse of growth, which compels the most intense application of government resources into the process of national expansion, was well on the scene in the four years that ended in 1969.

In those four years, we sought to retrieve the economy from stagnation and decay, and in 1969 it was possible for us to see that our labors had paid off. Revived in purpose and seeking. To pursue larger goals, we found the evidence of our achievement not only in concrete roads, bridges, schoolhouses, and other such palpable things but above all in the new determination of the people and government not to cruise along its difficulties but rather to confront them with all the resources at our command.

At this point, it is important to note three salient points relevant to economic activity:

  1. First, our investment incentives policy has stimulated industrial production to a considerable degree very much more than in the past several years.
  2. Second, our total exports continued to grow in 1969 by 6.4%, despite last year’s drought and storms and an almost 25% reduction of exports of copra and other coconut products; and
  3. Third, the Filipino capitalist has increasingly assumed the bulk of investments in our economy, so that today, he assumed 94.0% of the total estimated investments.

Employment Opportunities

The growth of the economy and the vigorous implementation of development programs by the government had the corollary effect of expanding the employment opportunities of the people.

Job opportunities in 1969 maintained the annual average increase of 647,000 new jobs, which represents 220% increase over the 1965 figures. This massive increase is of particular significance because its main beneficiary was the rural areas, where employment opportunities soared to a record annual average of 453,000.

The principal targets in our economic development plan have been exceeded. You are aware of the figures and I shall not repeat them.

No Devaluation; No Controls

We have adopted a budget for expenditures of our dollars. This will limit importation of both producer and consumer goods and will tend to increase prices in our country, especially because of the tendency to order even those unnecessary imports. Accordingly, we have asked the help of the International Monetary Fund, which sent a team of experts for consultations with our monetary authorities. We will not, however, agree to the devaluation of our peso which may cause untold suffering to our lower classes; nor will we accept outright controls. Either places our economy in rigid limits.

The International Monetary Fund consultative team is now studying with our monetary authorities the courses open to us without devaluation and without controls.

In the meantime, I have insisted that the plight of our economy be alleviated by the lifting of the suspension of guarantees by the Development Bank of the Philippines and the Philippine National Bank and the allowance of the importation of essential consumer goods.

The General Welfare

I have been informed by these authorities that the situation in the Philippines is not as grievous as most of our detractors would like us to believe. Accordingly, I am assured that with the proper measures, after a period of six months we should recover from this temporary imbalance in our economy.

In the meantime, we must be patient even with the most impatient among our people. No one is more in a hurry for development and for improvements than I. But I repeat I must balance the public good against the welfare of the few, and naturally you and I must always choose the general welfare against limited welfare.

But we must be understanding to even those who refuse to understand us. This must be our policy.

Some New Programs

In the past four years, our principal programs were the infrastructure, the educational system, agricultural development, land reform, manpower training, and the encouragement of exports. We will continue with these programs and add to them the new program of tourism, rural electrification, and emphasis on export-oriented industries, as well as the establishment of trade schools all over the country.

Board of Investments

Since the start of the Four-Year Program in 1966, encouragement was given to export-oriented industries, industries utilizing indigenous raw materials, and industries creating backward and forward linkages in the economy, through our Investment Incentives Act which you approved several years ago.

Since then, our Board of Investments has approved as of 1969, 128 projects from 221 applications.

Free Trade Zone

I reiterate my congratulations to the Sixth Congress for the speedy enactment of the bill establishing a Free Trade Zone in Mariveles, Bataan. We have laid the groundwork for the establishment of the Free Trade Zone.

This is an experiment. It is my hope that once this succeeds you will be able to establish other free trade zones in other ports of the country. The economic benefits that this will generate are tremendous and far-reaching. The free trade zone has aroused enthusiastic interest not only here but abroad.

Mining

During the past three calendar years, mineral production reached the billion-peso mark, registering an increase of 73% in 1968 over that in 1965. Production increased further the following year with a total output valued at P1,048.1 million.

Production of precious metals, including platinum and palladium, for 1969, reached a total of P124.6 million; base metals, P607.3 million; nonmetals, including cement, P316.2 million.

Vigorous Growth

We not only surpassed the planned targets of the first Four-Year Plan; we continued to surpass them at accelerating rates. Actual growth in real terms of our gross national product increased from 6.2% in 1966 and 1967 to 6.4% in 1968 and 6.5% in 1969.

Our economy is on the verge of take off to self-sustaining growth. Measured against 1967 prices, our gross national product for 1969 reached P27.783 billion, surpassing planned targets by 9.4%.

More important, we successfully increased the absorptive capacity of our economy for investments through government infrastructure investments, incentives and assistance to private industry. We have arrested the erratic fluctuation of our economy and maintained consistent growth.

The year 1969 was marked by deterioration in the foreign exchange position of the Philippines accompanied by expansion in money supply and a relatively modest rate of increase in prices.

Rice, roads, schools, and other essential projects of the government, as well as the capital goods required by an expanding industrial sector, were the factors, in concrete form, which helped increase money supply and weighed heavily on the demand for imports. Directly, the implementation of these programs required the importation of many types of machinery, communications equipment, railway, and other transport equipment. Indirectly, through the purchasing power released in the wake of their implementation, these programs also gave rise to increased demand for imported consumer goods and for domestically produced goods. Since the production of the latter required the heavy importation of raw materials, increased demand for domestic goods also meant added pressure on the country’s limited supply of foreign exchange.

Another major cause in the reduction of the foreign exchange resources was the higher level of activity of business firms, particularly those in the export sector. As in the case of firms producing goods for domestic consumption, these export firms were heavily dependent on imported machinery as well as imported raw materials to bring about an expansion in their production.

A third cause of the heavy demand for foreign exchange which, however, could only be indirectly traced to the excessive credit for monetary expansion in the economy was of more recent origin. These were the speculatory activities centering on devaluation and exchange controls, which induced business firms to import more than their normal requirements and build up their inventories, thus contributing to the fall in the reserve.

In the face of all these problems, the Central Bank has made the following moves: (1) raised the reserve requirement of all banking institutions by two percentage points; and (2) raised the rate of special time deposit (STD) requirements in order to mop up excess liquidity.

A related measure to these twin deflationary moves was the adoption of a program of dispersing part of money supply, now overly concentrated in centers of population, to the rural areas; this should lead to a reduction in the velocity of circulation of money, an effect equivalent to a reduction in the volume of money.

Cognizant of the initial effects that these new measures would have on production, employment and prices, the Central Bank further took steps to ensure the immediate and continuous availability of raw supplies and materials to industrial establishments. These firms were allowed to open automatically letters of credit equivalent to 55% of their 1968 importations, spread out on a quarterly basis.

For the long run, in order to revise the production patterns of the economy, measures have been devised to promote a more outward-looking, export-oriented type of development. In cooperation with other government agencies, the Central Bank stands ready to adopt additional facilities for export industries. With the support given to these industries, the heavy dependence of the economy on imports should be reduced. The wherewithal to provide the foreign exchange necessary for imports or for such other imports, which an increase in foreign exchange earnings (and thus in money supply) will induce, will be forthcoming.

If these and other monetary and fiscal measures that are being considered can be successfully implemented, then the base will have been laid for an economic structure that will not only be able to overcome the present foreign exchange difficulties of the country but also enable the country to achieve a consistently high rate of growth.

An Explanation of the Balance of Payments Problem

The question is often asked: Why were our dollar expenditures more than our dollar earnings? Let me remind our people that this is a free society; that up to now we have not imposed controls. Correspondingly, we were all free to import, to travel, and to spend abroad as much as each could afford. Today, government expenditures have therefore been restrained, public works projects suspended except the maintenance of communications and the continuation of ongoing projects, credit has been restricted, industrial and commercial loans by government financing institutions have been stopped. So have the guarantees given by the Development Bank of the Philippines and the Philippine National Bank been suspended.

Our economy has been temporarily placed in a straitjacket.

Exports

Our external sector, it is true, continues to hamper our development efforts. But despite last year’s drought and an almost 25% reduction of our exports of copra and coconut products, total exports still grew by 6.4%. An outstanding development was the growth of almost 60% in the export of copper concentrates.

Imports

We have managed to maintain import levels to that of 1968; imports grew by only 0.2%. This reduction came primarily through a reduction of importation for consumption. Consumption imports dropped to 12.6%, and imports of producer goods now comprise 87.4% of total imports.

This emphasizes the need to promote and to diversify exports.

Growth of Major Economic Sectors

As usual, agriculture led other sectors with a growth rate of 7.6%; mining and manufacturing followed with 5.9%, transport and communications with 4.5%, and commerce and services with 4.2% and 4.1%, respectively. Only construction registered a downward trend of 0.8%.

Prices

Despite the rice scare in August and the complaints about high prices, average consumer prices for the entire country moved up by only 1.7% in 1969. Average Consumer Price Index for December 1968 was 154.1 against the CPI index of 156.7 in 1969, an increase of 2.6 index points or 1.7%.

This is a far cry from the average 5.0 and 5.9% increases in consumer prices we experienced in 1966 and 1967, and way below worldwide trends of spiraling prices. Forty-one countries surveyed in 1968 showed price increases ranging from 12 to 455%.

Except for August and December when speculation unnecessarily raised prices by 2.1% and 2.5%, respectively, monthly increases in prices in 1969 consistently remained below 1%.

Revenue Collections

We have intensified revenue collections. In the past four years, the total BIR and Customs collections rose to P10,128.13 million, an increase of P8,558.81 million over that of the previous administration.

Reforms in BIR and Customs

We undertook major reforms in our operations. In the Bureau of Internal Revenue, these included the strict implementation of the Anti-Graft and Corrupt Practices Act, the use of electronic and data machines and various drives to increase voluntary tax compliance.

In the Bureau of Customs, these reforms included administrative measures for greater autonomy in different offices, adoption of the “immediate payment system” in obtaining the release of importations from Customs, the standardization of the classification and valuation of imports, upgrading of law enforcement agencies, expansion and improvement of port facilities, opening of new principal ports of entry, and providing new incentives to boost tourism.

Erring personnel were dealt with accordingly. One hundred ninety-six criminal cases were filed against officials and employees in the Bureau of Internal Revenue, and 215 cases were filed against undesirable employees and officials in the Bureau of Customs.

Improved Treasury Operations

Sound principles and practices in fiscal management in the conduct of local treasury operations were installed to enhance the financial viability of local governments.

Treasury operations were improved. From FY 1966 to FY 1969, the total gross receipts of the National Treasury accruing to the general fund amounted to P9,994.96 million, an increase of P2,640.72 million or 35.9% over the period from FY 1962 to FY 1965.

The net receipts of the general fund during the last four years were P8,835.10 million compared to P6,348.65 million under the previous administration, an increase of P2,456.56 million or 33.5%.

We upgraded the management of the public debt by establishing a Treasury Bills Program and developing a Bill Market, issuing Tax Anticipation Bills, issuing the “Gold Subsidy Series” of treasury bills, and creating the Financial Policy Committee.

Protection of Industry

We improved the insurance business, putting an end to the unhealthy competition that once obtained because of the uncontrolled increase in the number of insurance companies.

We stabilized the embroidery industry.

In general, we protected Philippine industries, either through the imposition of special dumping duties or through the prohibition of entry, or control, of the quantity of imports that may injure, or prevent the establishment of, local industries.

Rice and Corn

One of the most gratifying results of our efforts in agriculture in the last four years is our successful rice and corn production campaign. Our national average yield of 30-40 cavans per hectare jumped to 60-80 cavans per hectare as a result of the introduction of high-yielding rice varieties and the installation of the proper infrastructure and credit facilities. Our national yield for corn also hit an average of 20 cavans per hectare.

Export Incentives for Rice

It is highly possible that a surplus of rice will become apparent this year and in later years to come. For the time when we begin to sell rice in the international market, we will need an export policy for rice to insure a steady and reliable source for our buyers.

The Rice and Corn Administration may have to be authorized to issue export licenses to private traders at a pro rata share based on the milling capacity of their respective millers. In general, export licenses must be issued only for the export of high-quality long-grain varieties, unless it is clearly shown by the exporter that a demand exists for the medium and short-grain varieties.

Infrastructure

During the four-year period, the Department of Public Works and Communications built some 8,560 kilometers of concrete, asphalt, feeder, and development roads, and 21,770 lineal meters of permanent bridges at a cost of almost P623 million.

During the same period, it constructed more than 57,100 schoolrooms all over the country.

For flood control, it constructed 26 kilometers of earth dikes, 4,678 lineal meters of revetments, and dredged about 3,274,000 cubic meters.

In portworks, it constructed 18.5 foreign berths, 53.5 domestic berths, and 50 lightcraft berths. It also constructed a substantial number of warehouses and cargo sheds, causeways and bulkheads, seawalls, and has reclaimed more than 2 hectares as port area.

The Civil Aeronautics Administration finished 50 projects and installed 18 air navigational systems.

The Bureau of Telecommunications has established 1,319 telegraph and radiotelegraph stations around the country.

Microwave links are also being established; 13 VHP/UHF radio stations have been completed.

During the period covered, the Irrigation Services Unit installed 4,837 pump units benefitting an area of more than 128,000 hectares of riceland, capable of producing 10,000,000 cavans of palay per year.

Growth of Manufacturing

The manufacturing sector of the economy expanded at a vigorous rate. Measured in terms of its contribution to the total net domestic product at constant 1955 prices, the manufacturing output increased at an average annual rate of 5.9% for the period 1966 to 1969 compared to an average growth rate of 4% for the period 1962 to 1965.

The Central Bank index of physical volume in manufacturing corroborates the trend. Manufacturing output rose by 31.2% from 196.7 in 1962 to 200.9 in 1965 as compared to a rise of 59.8% from 218.6 in 1966 to 258.8 in 1969. Nondurable manufactures gained by 27.7% during the period 1962-1965 as against a gain of 35.5% during the period 1966-1969, while durable manufactures increased by 48.1% for the same periods

Commerce and Trade

Commerce and trade contributed an average of 15% of the net domestic product at 1955 prices during the four-year period 1966-1969, and expanded at an average annual rate of 4.8% over the period.

In domestic trade, Filipino participation in the retail trade significantly increased since the Nationalization Act of 1954. This increase is a reflection of the implementation of the law. For the period 1966 to 1968, 94.8% of new retailers were Filipinos with an average capitalization of 87.5% of the total capital. For the previous four-year period, Filipino participation in the retail trade was only 90.6%, with a capitalization of only 88.3%.

The Marketing Revolution

The Greater Manila Terminal Food Market Inc. was established to facilitate the flow of goods from the production centers to the consumer areas, thus providing as well an accessible and convenient outlet for the produce of about 500,000 farmers in 27 provinces in Luzon, Visayas, and Mindanao. This is a virtual revolution in marketing, benefitting farmers and wholesalers, retailers, and other intermediaries.

This marketing scheme is intended to stabilize, and perhaps even to decrease, the prices of prime commodities.

Foreign Trade

In foreign trade, we established a new record when our total overseas commerce reached a total value of $1.98 billion with an increase of about 27% over that in 1965 of $1.576 billion. While our exports increased by 10.1%, from $763.5 million to $848 million, our imports increased by 42.4%, from $807 million in 1965 to $1,150.2 million in 1968.

This trade imbalance, however, was caused by importations of capital equipment, raw materials, and semiprocessed goods by our various industries.

Of the total value of imports during the Calendar Year 1965, 87.4% was spent for the purchase of machinery and equipment, raw materials, and supplies, and only 12.6% for consumer goods. For the year 1968, the relative percentages of imports of producer and consumer goods were 88.3% and 11.2%, respectively.

Thus, the trade imbalance has been largely brought about by the expanding industrial development of the country. However, there is a built-in correction in the imbalance, for once these industries begin to produce with the equipment imported, they will augment their own domestic requirements, substitute the goods currently imported, and provide a surplus for export.

Eventually, therefore, this imbalance will relieve the pressures on our international reserves and thus strengthen the country’s credit and financial position abroad.

Cottage Industries

Under the leadership of the NACIDA, cottage industries have become an important part of the economy. Since 1965, a total of P161,097,087 have been earned by our cottage products. For 1969, the initial records give us hope that the value of exports of cottage products may reach the P100-million mark.

In terms of domestic investments alone, as of September 30, 1969, the capitalization of the 34,274 NACIDA-registered producers increased by P16,327,988.47 from a total of P63,860,991.72 in June 1968, making the capitalization total P80,188,980.19. These NACIDA-registered producers today employ 598,100 workers.

Last October 7, 1969, we inaugurated the joint RP-Japan Technological and Development Center. In this modern laboratory in Marikina, Rizal, bamboocraft, rattancraft, ceramics, fibercraft, woodworking, forging, and small machine parts manufacture will be taught.

Tourism

This administration pledges full support to our tourism industry. The following are some of the policies initiated to stimulate tourism:

  1. “Open Skies” Policy—I have instructed the Civil Aeronautics Board to work out the final details towards the implementation of the “open skies” policy.
  2. Tourist Courts—I have ordered the Department of Justice to create one city court and one Court of First Instance that will make decisions on crimes against tourists within 48 hours.
  3. Tourist Police—I have also instructed the Metrocom to create a special team to insure the safety of tourists. This will augment BTTI’s Tourist Police Force.
  4. Improvement of Manila International Airport—$26 million was appropriated to improve the Manila International Airport for jumbo jets.
  5. No Visa Policy—The 14-day visa free facility was changed to 21 days in order to encourage and to facilitate the entry of tourists.
  6. Honor System in Inspection—The Bureau of Customs adopted last year the “honor system” in inspecting baggage of tourists. Tourists are simply asked if they have anything to declare, and are allowed to enter without further inspection.
  7. Development of Tourist Spots—The Philippines has many tourist attractions. Special funds will be appropriated to develop these tourist spots.
  8. Hotels—By the end of 1970, there will be some 4,000 first class hotel rooms—enough to accommodate additional tourists for the next two years.
  9. Tourism Incentives Bill—The Board of Travel and Tourist Industry is preparing a tourism incentives bill. This bill will make investments in hotels and other related tourist enterprises more attractive to the private sector.
  10. Promotions—Our tourist promotions are geared towards our major markets, namely the United States, Japan, and Australia. We plan to intensify this particularly in 1970 because of the Expo ‘70 fair in Osaka.
  11. Educational Campaign—I appeal to all Filipinos to extend their hospitality to all foreign visitors. We ask the BTTI, PTTA, and the Department of Education to cooperate in educating the public on the value of tourism.
  12. BTTI and PTTA—The BTTI Chairman will head PTTA’s Board of Supervisors, and the Commissioner of Tourism will be a member of that body. This will bring about full coordination.
  13. Image of the Philippines—We have gained a negative image abroad partly because of unfair and exaggerated publicity of crime stories. Crime is a worldwide problem and is not exclusively Filipino. We call on the press to cooperate in our tourism effort by refraining voluntarily from unduly sensationalizing crime stories.
  14. Domestic Tourism—The Board of Travel and Tourist Industry has initiated a program of cooperative development of local attractions with provincial and municipal governments. It will encourage domestic tourism.

Goals for the Next Four Years

Our basic goal is prosperity and economic security for the bulk of our people. To bring this about, we must industrialize.

Economic Takeoff

Full attainment of this goal cannot come within the next few years. But it is our goal nonetheless. What can be attained in the coming years is economic takeoff.

We cannot let this opportunity for economic takeoff pass. Developed countries keep moving and other developing countries keep developing. The more we delay, the greater will be the gap between us and the advanced countries, the harder it will be to catch up or compete with them. Furthermore, a hesitation today will mean the negation of all our efforts and sacrifices in the past.

Developing a Domestic Market

A principal objective of our economic program is the development of a sizable domestic market. Employment can be increased substantially only if our industries can find markets of sufficient size as to warrant a high rate of absorption of labor into industrial employment. The infrastructure program has been an important first step in the extension of our domestic markets. Our price support program for agricultural products and our community development program have transferred purchasing power to the rural areas and broadened the base of the domestic market.

The next step is the stimulation of regional markets. Plans are in process to establish a number of free ports throughout the country to encourage direct regional exports to international markets. We intend to emphasize the development of secondary urban centers as growth points in each region through our capital expenditures program in the years to come. We have already started to decentralize industry away from Greater Manila; we shall provide additional incentives for further decentralization to these regional centers. The dispersal of institutions of higher learning and hospital facilities is to be encouraged. The reorganization and revitalization of regional development authorities under competent administrators shall be pursued. Finally, increased emphasis shall be given to the exploitation of mineral, marine, and agricultural resources on a regional level as the basis for stimulating regional income.

Specific Goals for 1971

Our goal in 1970 is to stabilize the economy and provide for readjustment and restructuring of production activities. To this end, we shall limit growth in real GNP in FY 1971 to 6.2% and real per capita income growth at 2.6%.

This growth rate in GNP and per capita income is sufficiently healthy to prevent unemployment, and at the same time sufficiently modest by now established Philippine standards to enable the stabilization and restructuring of our economy.

To achieve these goals, we shall follow various major policies, of which the more important are

  1. mop excess domestic liquidity and avoid generation of additional money supply and excessive credit expansion;
  2. bolster Central Bank operating reserves;
  3. reduce current government expenditures and rechannel government lending;
  4. dampen speculative activities in the Philippine money market;
  5. restructure existing external debt of the Central Bank;
  6. raise long-term financing for the importation of producer goods;
  7. provide a solid basis in the economy for healthier, more vigorous rates of growth in the future.

Domestic Liquidity

To mop up excess liquidity and prevent fresh generation of new monies, the following measures will be adopted:

  1. The Central Bank shall raise reserve requirements against deposit liabilities of all banks, without exception, by 12.5%. Based on bank deposits of November 1969, this measure will absorb P140 million into required reserves and withdraw a multiple of this amount from the monetary system.
  2. The Central Bank will have reduced by June 30, 1970; its net domestic assets by 10 to 12% of December 1969 levels.
  3. Credit portfolios of commercial banks shall be limited to a growth rate of 8% in 1970 and rechanneled to loan priorities established by the Central Bank, particularly to the financing of exports.
  4. Special Time Deposit requirements will now be required against invisible disbursements and upon maturity 50% of the refund shall be made in the form of government bonds from the Central Bank portfolio.
  5. Terms for Central Bank securities will be made more attractive and competitive to encourage their sale.

The Central Bank Operating Reserves

To bolster operating reserves of the Central Bank the following measures will be undertaken:

  1. A fresh foreign credit of $100 million will be raised and liquidated by June 1970.
  2. The foreign exchange budget will be so managed as to yield a surplus of at least $150 million during CY 1970.
  3. Foreign exchange holdings of commercial banks will be pooled together.
  4. Domestic banks and local branches of foreign banks will be authorized to accept dollar deposits covered by 100% reserve requirements.

Fiscal and Financial Operations

Reduction of imports and the lower level of economic activity will reduce the revenues of government. But the government will not borrow additional funds from the Central Bank. Instead the following fiscal and financial measures will be adopted:

  1. Current expenditures of the national government for 1970 will be reduced by 10%.
  2. Credit operations of government financial institutions will be rechanneled to finance the government investment program.

Restructuring of External Debt

To correct the imbalance in the structure of our external debt, the following measures will be taken:

  1. Maturities of Central Bank loan obligations will be renegotiated and deferred to the end of June 1970.
  2. In June, these short-term loans will be converted into five-year credits.
  3. The DBP, PNB, and NIDC will stop issuing new guarantee for foreign borrowing and will recall guarantees which have been issued but not yet placed in money markets abroad.

Long-Term Financing and Long-Term Growth

The measures we have taken are essentially defensive and short-term in nature. They do not provide for our needs for long-term growth. To provide for our needs for long-term economic growth, the following measures will be undertaken:

  1. We will request the World Bank to organize an Aid Philippine Group that will provide long-term external financing for our economic growth. In its first years, this group will be requested to provide financing for a commodity shopping list. By 1973 and 1974, the Philippines will have prepared projects for external financing and will then present the projects for external financing by the group as well as other institutions of this type such as the World Bank and the Asian Development Bank.
    To date, we have projects whose foreign financing costs alone amount to some $100 million. These projects—which range from beef-cattle-raising to education and infrastructures such as highways, power projects, airports, and ports—are in various stages of preparation for negotiation. Some have been submitted to appropriate agencies; others are awaiting completion of detailed engineering studies.
  2. The entire government machinery will be organized to give top priority and full support to exports in the next five years.

With these stringent measures, we expect to correct our present situation within one year. It will not be necessary to change our foreign exchange rate or reimpose import restrictions as in the ‘50s to accomplish this.

To insure continued and accelerated growth in the future, the national government commits itself to the following undertakings:

A. Capital Formation

The infrastructure program will be continued. Highway expenditures will be limited to those portions previously identified and recommended by the transport survey for their high benefit-cost ratios. The feeder road program will be expanded to catch up with the increased growth of agricultural production.

Our infrastructure program will be geared to support tourism and the export trade.

The capital formation budget for the national government will be as follows:

1971 Infrastructure Projects (in million pesos)
Highways 297.0
Irrigation 71.3
Airports 16.2
Air navigation facilities 17.0
Power 57.6
Schoolbuildings 51.0
Portworks 29.0
Flood control 12.0
National buildings and hospitals 7.0
Shore protection 2.0
Telecommunications 11.1
Upper Pampanga River Project 53.0
Water supply 88.8
Community projects 56.0
Preliminary engineering 5.0

B. Production and Marketing

Having attained surplus production in our basic staple, the agricultural program will expand production in other food and cash crops, especially export crops.

Agricultural credit will be assured through the rechanneling of excess liquidity from consumption into agricultural production. The Central Bank envisions some P250 million for this in 1970.

Unlimited credit will be provided by the Central Bank for export as well as domestic production. Credit for importations will, however, remains restrictive. Guarantees for foreign loans by the DBP and the PNB will be issued selectively and confined primarily to priorities specified by the Board of Investments.

Incentives and protection will be afforded Filipino retailers to broaden and upgrade the Filipino entrepreneurial base. Relevant government institutions like the Department of Commerce and Industry will be mobilized to extend the necessary assistance.

C. Fiscal Planning

In all these developments, the policy of fiscal restraint will be adhered to. Our aim is not to increase expenditures but to restructure or to rechannel expenditures to promote greater economic growth.

Total government expenditures level for 1971 will be maintained at 1970 levels. Capital formation and improved and increased developmental expenditures will be funded from the increased tax take, and savings from government reorganization and rechanneling of government expenditures.

For 1971, we envision a cutback on current expenditures on goods and services of P120 million and P20 million on subsidies. This cutback will enable developmental services to expand by P140 million.

Receipts from current revenues are expected to increase by P190 million, plus P420 million to be generated from the 12 new tax measures passed in 1968 and 1969 and the additional tax measures to be presented to this Congress session. The new taxes will dampen inflationary pressures, allow for freer government credit to the private sector, as well as enable a substantial portion of the infrastructure program to be financed by noninflationary means. Domestic borrowing for the capital development programs will be limited to P240 million and will come from noninflationary sources such as GSIS, SSS, and the common bond sinking fund.

D. Solution of Balance of Payments Problem and Inflation

The most crucial economic problem we face today is our balance of payments. This is a problem caused by the development process. Specifically, it arose from the enthusiasm of the private sector to import more capital goods. Thus, although imports of consumer goods dropped to 12.6%, imports of capital goods increased to 87.4%.

To meet this problem, we have had to adopt certain measures, among them the suspension of certain projects and the restriction of credit.

I have already discussed this problem and its solution.

E. New Strategy for International Trade

The economic program shall give utmost priority to the foreign exchange earning sectors of the economy; this priority shall be enforced in the lending programs of government financial institutions, in tax incentive and funding legislation to be proposed to Congress, in the allocation of the budget of the national government and through all the multiple channels available to government in the management of the economy. The monetary authorities have already enacted initial measures to encourage exports. It is expected that monetary and financial policy shall further orient assistance towards the tourist and export industries.

The Philippines intends to be active in international markets. Our trading strategy shall be dictated by the following criteria:

  1. We intend to achieve eventually a surplus in our international trade.
  2. Our principal exports shall consist of products that use domestic raw materials, manpower, and capital assets.
  3. Trading shall follow economic interests rather than ideology.
  4. We shall progressively increase the proportion of our international trade directed to Southeast Asian countries, in the belief that the long-range growth of the Philippine economy is bound up with the growth of the region.

Admittedly, this plan requires a period of transition: time for manufacturing industries to adjust for competition in international markets; time to build institutions that will support our manufactured exports; and time to develop new markets for our traditional products and new markets for our new export products.

In this interim, we shall have to seek program loans and we may have to face some uncertainty. But we face these uncertainties with much in our favor. We are currently working at lowering trade barriers between ourselves and the Eastern Socialist countries. The Association of Southeast Asian Nations is progressing rapidly towards economic cooperation and integration. We are seeking congressional approval of an omnibus tariff bill, a bill that will enable our industries to compete more vigorously in international markets as well as provide us with the flexibility to enter into tariff agreements to our advantage.

A Self-Sustaining Economy

Success at exporting manufactured goods is the authentic sign of self-sustaining economy. This is the success that we seek.

We are growing at a rate which ordinary laissez faire techniques cannot sustain. In moving into the export markets, we enter into competition with developed economies sustained by highly efficient firms. To compete with them, we must not only husband our resources but we must also program them with equal efficiency. This requires true nationalism, discipline, and sacrifice on our part.

III. SOCIAL REFORM AND HUMAN RESOURCES DEVELOPMENT

The charge has often been made that government is indifferent to the plight of the poor. This is no longer true. In the years of my first administration, government proved itself a real instrument for social reform. Far from being deaf to the voices of despair and discontent, it has shown compassion for the underprivileged. Far from being insensitive to the clamor for change, it has led a quiet revolution to give justice and abundance to the neglected masses.

In my second term, government will continue to perform its new role as the ally of the deprived and the unfortunate. It will continue not only to heed the clamor for change but to lead all sectors of society in translating that clamor into real prosperity and contentment among our people. Government, its conscience awakened, will continue to strive for true and enduring social justice. We have narrowed the gap between the rich and the poor. The years ahead will be devoted to further reform and innovation that will destroy class barriers in Filipino society.

As we enter into our second term, we pledge full commitment to the implementation of the land reform program. We are determined to pursue social justice hand in hand with economic development.

I am aware, as you all are, that economic development is futile and short-lived if it fails to make its benefits felt among the masses of neglected and underprivileged.

We have therefore inaugurated the Human Resources Development Program. This will increase our people’s capacity to take advantage of opportunities created through development.

The improvement of our health services has also been a principal program of the administration. The emphasis in this program has been on providing more services to the rural areas, where they are most needed. To date, we have a total of 1,459 rural health units operating throughout the country—an average of one unit serving 24,594 citizens.

In education, we have confronted the short-run and immediate problems forthrightly and successfully. We had a total of 49,000 elementary school classes added to the public schools system from 1966 to 1969; we produced 90,986 classrooms. This compares favorably with the 800 classrooms produced or constructed from 1962 to 1965, when the total number of new classes was 48,000. Thus, we have favorably solved the problem of accommodation in the schools, which was a principal cause of poor instruction and of a high dropout rate.

The administration of justice has become more efficient and speedy with the creation of special courts to augment the work of the regular courts. For years, the number of cases filed in court annually had always exceeded the number of cases disposed of. But in 1969, the courts of justice effected a dramatic reversal of this trend.

But despite the impressive performance of our courts last year, the backlog of cases dating even before 10 years ago continues to be our primary concern.

More judges are needed. The ideal ratio between judge and population is 1 judge for every 50,000 people; but now this ratio is 1 for every 150,000, truly far from the optimum that a judge could serve effectively.

Our problems in the administration of justice have not, however, deterred us from carrying out a bold and successful peace and order program. This has been possible despite certain abnormal circumstances.

Peace and Order

There are two elements in the peace and order situation in the Philippines. One is simple criminality, which, as the experience of every nation has shown, is conditioned by many social and economic factors. The other element, the state of insurgency obtaining in Central Luzon, is a peculiar Philippine condition.

A close examination of these elements makes only one conclusion possible—that the peace and order condition in the Philippines compares favorably with the rest of the world.

This comparative stability has been possible despite the heavy pressures of a high rate of population increase. As everyone knows by now, the Philippines has one of the highest rates of population growth in the world. Former U.S. Defense Secretary Robert S. McNamara once reported that, at its present rate of population increase—3.5%—the Philippines is on a par with only one other country in the world, India. Considering the direct proportion between “population explosion,” with its accompanying phenomena like industrialization, urbanization, slums, and various tensions, conflicts, and new social relationships, the Philippines should logically be afflicted today with one of the world’s highest crime rates.

On the contrary, it has one of the lowest in the world.

True enough, the volume of crime in the Philippines has increased—I must add, inevitably—but the crime rate per 100,000 population has decreased. The volume of crime rose by 10.5% over a seven-year period; on the other hand, the crime rate per 100,000 population decreased by 13.4%. What does this mean? It means that although the population has grown tremendously over the years, the Filipino citizen today faces less risk of being victimized in a crime than in the early ‘60s.

This decrease in crime rate, or decrease in personal risk, was particularly notable between the years 1967 and 1968. In 1968, the third year of my administration, the crime rate fell by 28%, to 150 per 100,000 populations. This was the lowest crime rate since 1959.

What makes this record even more significant is that, as I have pointed out, we are also burdened by a condition that is not experienced by other countries. Central Luzon, the traditional seat of social unrest, has contributed heavily to the escalation of crime figures.

As everybody knows, the murders, homicides, and kidnappings which have resulted from the unrest and dissidence in Central Luzon have been indiscriminately recorded as acts of simple criminality in the statistics of crime, thus considerably increasing the visible signs of public disorder and producing a false picture of peace and order in the country.

In other words, without the crimes which should properly be distinguished as results of the insurgency in Central Luzon, the crime volume and crime rate in the Philippines would have been even less.

This has been possible because of the administration’s three major programs against crime, namely: the improvement of our capability for crime prevention, improvement of law enforcement, and improvement of the administration of justice.

Another reason for the comparatively stable peace and order situation in the Philippines is the improvement in the economic condition, brought about by breakthroughs in food production, infrastructure, and foreign trade. Over the past four years, many of our people have experienced enough improvement in their living conditions to be able to discard the despair of the past and begin to entertain hopes of a good future. This has helped ease the social and private tensions that are often a source of increased criminality.

The program against crime has had to be carried out with scant resources. For instance, I have been constrained to draw from savings of the executive department to finance the purchase of better police equipment needed by some local governments.

In this and other creative ways, the administration put to good use the same meager resources that were available to earlier administrations.

Central Luzon

In Central Luzon, the armed threat to the Philippine state continues but is definitely under control. The truly critical areas have been narrowed to about seven municipalities in Pampanga and Tarlac.

We cannot say that the problem of dissidence can be solved tomorrow or the next week or even a year from now. We delude ourselves in thinking that a final solution by military means can be found. For revolt in any of its forms invariably has a deeper root in the thinking, the aspirations, and the psychology of the group in revolt.

That is why the government has launched a development program in Central Luzon in which currently about 48 national government agencies are taking part. In the past three years, more than a hundred million pesos has been spent on various development programs in this region; almost the whole region has been placed under land reform.

Our program in Central Luzon is to be pursued patiently and with vigor whether the Huks exist or not. In a sense, it is a proving ground for the proposition that democratic government can be an effective instrument for social change and social justice.

The military, of course, have their own duty to deal with unbridled violence. Progress can hardly be attained in an atmosphere of constant fear and danger to life and property. Since early last year, we have increased the strength and capability of the PC in Central Luzon. Whereas there were a mere 1,000 in the six provinces of Central Luzon two years ago, there are now or will be, when all the PHILCAG elements are fielded, more than 3,000. It is paradoxical that while the government is actually engaged in putting down an armed threat to the State, we have actually now more troops engaged in development work than we have engaged in combat.

We are meeting this rebellion with just enough force to cope with open violence and the threat to life and property, not forgetting that the few misguided individuals are part of our people. The programs of development are directed to the welfare of the people as a whole.

The Armed Forces therefore are engaged in civic and social action—those small-scale, short-term direct help that the military provide in terms of health services and other direct services. PHILCAG will engage in long-term construction and improvement of facilities and communications. They will reinforce the civilian agencies in the Central Luzon Development Program that are engaged in social and economic uplift on the principle of self-help, self-determination, and social cooperation.

It is in this spirit, too, that now we are undertaking the military actions against actual violence with the closer and more active participation of the mass of the people. I refer to the new concept of the barrio home defense, as recommended by the field officers engaged in Central Luzon. It has been said that a people get the government they deserve. By the same token, the peace and order that a locality will get is what the people in that locality strive and work for. Recent developments in Central Luzon indicate that the people in those beleaguered provinces have become so fed up with dissident threats and violence that they have volunteered to take on the fight themselves with, of course, the active help and support of our regular forces.

In Pampanga, almost all the mayors are committed to the program; in southern Tarlac where the “Ma-Mao” is active in three towns including part of the capital, the mayors and rural leaders have become so involved in the program that as a result, the so-called New People’s Army had to take stem countermeasures against the very people they were ostensibly protecting from abuses of the government, by an orgy of killings and indiscriminate armed attacks. Not against combat troops, but against the defenseless barrio people.

The First PC Zone reports that there are 50 barrios that have fully organized their barrio home defense forces, and many more barrios are being organized. Eventually about 400 barrios will be organized in the provinces of Pampanga, Tarlac, Nueva Ecija, and Bataan. A barrio home defense unit is composed of 10 male volunteers from the barrio under the close supervision of a five-man control and training team of the military. Its mission is to protect the barrio from dissident depredation, threat, and exploitation, and to deny to the enemy the resources in food, money, shelter, and other forms of support that he could get if the barrio were defenseless and afraid.

There are some who have voiced reasonable fears about the concept. Not a few, for example, believe that we have merely revived the once despised civilian guards. Others fear that the home defense forces might conceivably be used by local political leaders for their own ends. To these well-meaning doubters, it may be explained that the barrio home defense unit consists of volunteers from within the barrio. They are trained and closely supervised by responsible noncommissioned officers of the PC or Army. These volunteers are not going to be controlled by any local politician, big or small; their arms are secured in storage in the military detachment when they are not on duty; and none of the volunteers will be employed in any mission outside their barrio except when actually defending a nearby barrio under direct armed attack.

Community Development, Others

Community development retained its high priority in the programs of the administration for 1969. Through the Presidential Arm on Community Development, we continued to make progress in our rural communities in terms of physical and social improvements, increased economic viability, and political maturity among the rural folk. This was done through the channeling of more resources to the community development program and an intensified campaign to involve the barrio folk in the work of developing their communities.

Through the Commission on National Integration and the Presidential Assistant on National Minorities (PANAMIN), we have reclaimed thousands from a life of backwardness and deprivation and brought them into the stream of national progress.

The acceleration of the housing program has been a major concern of my first administration. I propose to redouble the pace of construction and resettlement in my second term. Economic development will be meaningless unless low-cost housing is made possible for the bulk of the population in urban as well as in rural areas.

As another means of enriching the life of our people, this administration recognizes the indispensable role of science and technology in national development. Through the National Science Development Board, the government is determined to develop the country’s resources and to apply these resources to the acceleration of the economic, social, and cultural progress of the country.

Let us examine more closely the individual fields of activity through which the government has sought, and will continue to seek, social reform and develop our human resources.

Health

I have already said, the emphasis of our health program has been to provide more services to the rural areas, where a good number of the people, as surveys have shown, have never seen a doctor in all their lives.

With the present high growth rate of the population, we should have more rural health units in our efforts to implement fully Republic Act 3797, entitled “An Act Strengthening Health and Dental Services in the Rural Areas.”

Disease Control

We plan to intensify surveillance and investigation of disease problems, especially with reference to the acute communicable diseases, which have remained as the major disease problem. We also intend to continue with the special control programs, with the assistance of international agencies, on such diseases as malaria, tuberculosis, cholera el tor, leprosy, cancer, and malnutrition.

Food and Drugs

In the last four years, this administration provided the impetus for the operation of the Food and Drug Administration, established in 1963, to insure a safe and good-quality supply of food, drugs, and cosmetics, and to regulate their production, sale, and distribution. We will continue to protect the public against unsafe food and fake drugs and cosmetics.

Potable Water

More efforts will be exerted on the general improvement of the environment especially with regard to the provision of potable water supply and sanitary methods of waste disposal. The health education of the masses as an important element of disease prevention and control will be similarly intensified.

Dental Services

To improve dental services, I propose to Congress the passage of pending bills seeking to amend Republic Act No. 951 relative to the provision for school dental services in private educational institutions, and to regulate the operation and maintenance of dental laboratories.

Government Hospitals

Our government hospitals, which are performing heroic tasks in the face of inadequate facilities, must be provided with more funds to enable them to keep up with the increasing demand for their services.

The Philippine General Hospital, originally created as a training hospital for the UP College of Medicine, is one such government hospital that has been forced to operate beyond its normal capacity. As a vital link in the administration’s program to serve the hospital needs of the people, it deserves more support from the national government.

Justice

I have pointed out that in 1969, the courts of justice disposed of more cases than were filed, thus reversing a trend that had existed for years.

Courts of First Instance nationwide scored a disposal ratio above 105%. Municipal courts averaged 102%. City courts also reached above 102%. In Manila, where crime density is highest, the Courts of First Instance averaged over 120%. And all the circuit criminal courts, fully operative only this year, lived up fully to public trust by dispensing impartial justice promptly. The Manila Circuit Criminal Court, for example, disposed of 483 cases out of 623 filed during the year.

The special courts matched the impressive performance of the regular courts. Their disposal ratios for 1969 are 105% in the Court of Agrarian Relations, 101% in the Court of Industrial Relations, and 129% in the Court of Tax Appeals. Of 45 tax court decisions appealed to the Supreme Court, 43 were affirmed and one merely modified, while one was reversed.

This performance of the judiciary is best reflected in the fact that at the end of last year, fewer cases were pending in court: only 81,239 as of the year-end compared to 85,341 in 1968.

On Judicial Reforms

We implemented promptly the 1969 social justice legislation intended to benefit the less privileged sector of society. No doubt these measures will promote access to the courts and insure equality before the law. Indigent litigants and their witnesses now receive travel and other allowances for attending court. Free transcripts of stenographic notes are furnished to indigent or low-income parties in judicial and nonjudicial proceedings. Bail requirements are now dispensed with in cases involving minor criminal offenses or city and municipal ordinances. And where indigent persons are victims or accused, the criminal cases are given preference over others to expedite their disposition.

Substantive and procedural reforms continue to be our concern. We are now implementing the equalization of caseload among municipal courts as well as providing further assistance to overburdened CFI salas.

Even more significant, the Department of Justice has installed a computer program exclusively for criminal cases. It is now possible to tell promptly the stage which a particular case has reached, from filing to conviction or acquittal. In a matter of minutes, the judge’s performance record on criminal cases can be reliably retrieved. Undue delay is therefore checked promptly. And our court administrators can now pinpoint and correct defects, if any, in the criminal justice process.

On Prosecution of Crimes

Through the fiscal’s offices and the prosecution staff, we have intensified the administration’s campaign against criminality. This campaign has netted 10,981 convictions. Through the Bureau of Immigration, we caused the deportation of the notorious corruptor, Ernesto Ting, and 283 other undesirable aliens. Illegal entrants, dummies, syndicate operators, smugglers, and other aliens violating our laws have been apprehended and punished.

The relentless campaign against graft and corruption to maintain the people’s faith in government continues. Those executive officials, judges, prosecutors, fiscals, and other national officials accused of wrongdoing have been investigated, and those guilty held accountable. It secured, for example, the conviction of a suburban mayor in the traffic reflectors case, now on appeal. For cause, 14 judges have been suspended, removed, or dismissed, bringing to a total of 30 the judges found erring since 1966.

For the first time, the Philippine Government, through the department, has asserted its right to exercise criminal jurisdiction over criminal offenses in military bases and those committed elsewhere by U.S. military personnel and civilian components where those cases are beyond the competence of courts martial under U.S. law. Henceforth, Philippine courts and fiscals offices will take cognizance of such cases.

On Prison Reforms

We pursued a plan for the decongestion of the national penitentiary. At the same time, we have successfully started the self-sufficiency in food program for the Bureau of Prisons. Penal colonies in Sablayan, Davao, and Iwahig have reported successful food projects. Prison industries now include shoe and slipper-making, handicraft, carpentry, plywood and hollow blocks production, and electronics. Our objective is to make our prisons truly a school for productive citizenship and moral reform.

Circuit Criminal Courts

While 112 new CFI salas have been created by law in 1969, they now require organizing, funding, and staffing if they are to be operative soon. More circuit criminal courts are needed, with expanded criminal jurisdiction, to help further decongest the clogged dockets of regular courts.

An objective analysis will show that while demands for their services have rapidly expanded, there had been no systematic or commensurate support in terms of men, money, and material for our justice agencies. Consistently, the Department of Justice has received less than 2.5% of the national budget. As new duties are laid on the department, its material requirements also increase and must be met if it must fulfill its tasks successfully.

The workload of the Office of the Solicitor General has more than doubled since more courts have been created and more cases appealed. But there has been no corresponding increase in its personnel. The Courts of Agrarian Relations, which are involved in land reform, urgently need competent special field attorneys. The Juvenile and Domestic Relations Courts in Manila, Quezon City, and Iloilo require social workers and technical men, which, at present, they just borrow from other offices. The Court of Industrial Relations must have a striking force capable of responding to urgent cases at places of labor unrest. The Bureau of Prisons needs expert services in psychiatry and psychology for certain inmates. The per capita subsistence allowance for prison inmates is only P0.70, an unrealistic amount. The Deportation Board has no sala or hearing room, nor personnel of its own; its clerical staff is borrowed from different offices. Almost all regular courts, special courts, and fiscals’ offices require minimal library facilities and research material to speed up their disposition of cases. Moreover, certain judges have had no salas of their own nor adequate security and other facilities. The Board of Pardons and Parole has 19,516 released prisoners under its surveillance spread nationwide, but its limited manpower cannot cope with them. Our prisons are so congested that there had been a recurrence of serious disturbances commonly called riots so that now the dispersal of prisoners, particularly gang members, is imperative.

On Goals Ahead

Looking ahead, always with a view to safeguarding judicial independence and upgrading court performance, we propose strict adherence to the criteria for the wise and careful selection of nominees to the judiciary. These criteria necessarily include moral courage, ethical firmness, and imperviousness to venal influence. A nominee’s judicial temperament must be augmented by decisiveness, capacity for hard work, good health, and zeal for public service. His education, training, association, and experience must show he is eminently qualified to hold a judicial office.

To insure that never again will judicial output of disposed cases fall below par, we will maintain closer supervision of the operations of our courts. Certificates of work accomplished will be scrutinized, and in case of any falsification, prompt action will be taken. No judge will be promoted or transferred if his sala has a heavy backlog of cases. Performance of judges due for retirement or wishes to resign will be assessed so that none will leave unless all cases already submitted for decision are disposed of within a reasonable time. Only those employees, particularly stenographers, whose performance is beyond reproach will be considered for advancement.

While observing retrenchment measures to promote austerity and economy in the public service, we will also focus on revenue-producing functions of the department. Increased earnings for the government will be stressed through intensified, prompt, and proper collections of fees and dues. Promotion of tourism and investments will be supported through appropriate bureaus like the Bureau of Immigration. The police agencies, the fiscals’ offices, and the courts will render prompt assistance to our visitors who are victims of crime and other offenses. At the same time, we will press for the implementation of laws designed to enhance law and order as well as reforms, such as the expropriation and redistribution of landed estates, to promote our economic development and social justice.

Education

Besides an accelerated school-building program, we have taken measures which simultaneously respond to pressing problems and pave the way for long-range improvements in education. Under R.A. 5447, otherwise known as the Special Education Fund Law, local governments retain shares of real property tax proceeds which are budgeted by local school boards to finance local educational improvements. Additional improvements are financed by a national stabilization fund. The local school boards all over the country provide a mechanism for improving education, for making education relevant to local circumstances, and for involving the local communities in a national task.

We have increased the general fund support for state colleges and universities by 30%, the highest in our history.

We have organized a fund for assistance to private education, which provides grants, loans, and other aid to improve the facilities and raise the quality of instruction and research in our private higher education institutions.

We have, for the first time in our history, organized an education planning office to rationalize the management of our educational system by developing a systems approach to education and thereby relating it to our needs and resources.

Meantime, the President’s Educational Survey Commission has been organized. This commission will recommend ways and means to research our broad human resources development goals, to relate educational operations to manpower requirements, to channel national resources to strategic educational projects, to promote development-oriented values in our schools, and to improve the management and structure of the entire educational system.

Such recommendations of the commission as are adopted will be implemented partly through external financing, for which the preliminary steps have already been undertaken.

The task ahead in education is one of creative transformation, the clearing away of outworn attitudes and behaviors, and the utilization of our investment in learning and training to the optimum, in order that our educational system shall become a beneficial and enlightened partnership between our generation and that of the young Filipinos, in whose behalf we labor and spend.

One of the principal projects in our educational reform program is the establishment of more trade schools. The beginnings of industrialization in almost all countries are the small machine shops and workshops. Unless we train the young in trade schools in coordination with the manpower development training program, we will not be able to encourage the growth of small machine shops and workshops in this country.

Labor

The past four years were a time of significant gains for the Filipino worker.

We raised the level of trade unionism. We registered 1,771 new labor unions, extending protection and the benefits of trade unionism to about 100,000 more workers.

Industrial peace was enhanced. We cut down the incidence of strikes by 67% compared with the average during the previous administration.

We upgraded the enforcement of labor and social laws. Increased attention was given to the protection of migrant workers, domestic help, and other unorganized and underprivileged workers. These initial efforts will be accelerated in 1970.

We gave the country its first workable manpower development program. In less than two years, some 100,000 out-of-school youth and jobless young adults learned valuable skills in some 186 training centers throughout the country. The majority of these trainees have found employment or have otherwise become self-employed.

Job opportunities in the last four years increased by 220% to an annual average of 647,000. Rural employment soared to a record annual average of 453,000.

For the first time in over 20 years, we succeeded in concluding two base labor agreements with the United States government, improving the working and living conditions of about 75,000 Filipino workers employed in U.S. military bases in the Philippines and abroad.

Some of the most enlightened labor legislations and policies in our country were carried out during the previous administration. These include the Medicare Act, the Manpower and Youth Development Act, the vigorous implementation of land reform, and mass housing for workers.

We have become a major voice in Asian labor affairs and have strengthened our bonds with the International Labor Organization. As a consequence, we shall establish before the end of the year a NationalSkillsTrainingCenter. An ILO area office has been established in Manila.

Corollary to manpower development, we have given new emphasis to manpower conservation. The promotion of industrial health and safety is now one of the major features of our labor program.

The unification of labor has found support in recent years. We shall encourage and support any move to unify our working classes.

Labor has also enjoyed the widest freedom of expression under our administration. Labor shall increasingly be heard and represented in the major policy-making councils of government.

Social Welfare

The social welfare program of the government gained greater scope and new impetus during the year 1969. Under the aegis of the Department of Social Welfare and the First Lady’s Integrated Social Welfare Program, new projects were launched with the full backing of government and the private sector.

Though less than a year old at the start of 1969, the Department of Social Welfare was able to launch an expanded program designed to improve the lot of our underprivileged. The government budget for FY 1969-1970 provided P16,135,000 for social welfare, the biggest sum yet allocated for social welfare.

In its basic objective, the government’s social welfare program remained the same. We sought to provide more and better opportunities for advancement among the underprivileged Filipinos so that they could rise above their submarginal existence, economically and socially.

What was new in the department’s operations in 1969 was the veering way from the traditional form of help such as relief and institutional care to a concerted development among welfare clients of the capacity for self-determination, independence, and self-respect. To this basic reorientation, there was complementary success in the establishment of modern and improved facilities for the program; the recruitment and training of skilled manpower for social work; and the participation of local governments in welfare projects. In this manner, the government was able to intensify its welfare services and reached a new group of people whose continued existence without the benefit of these social services threaten the peace and security of our society. These developments significantly contributed to the building of a new image for the government’s social welfare program and agencies.

The activities of the Department of Social Welfare during the past year may be classified under three main areas of interest: family welfare services, child and youth welfare services, and vocational rehabilitation.

Family welfare services consisted of direct financial and material aid to families in distress, education and counseling, community services, economic advancement, and substitute home placement. Financial aid to needy families consisted of P100 a month per family, and this aid was extended to a total number of 931 families during the past year. A general assistance fund was also set up for the extension of limited financial and material help to other needy families. Under this fund, 10,480 families were served in 1969. Under family life education and counseling, 192 families were served. Under community services, which consisted of organization activities outside or inside community service center, there are now five community centers in operation serving an estimated total of 10,000 families. Under economic advancement services, 3,481 income-producing projects were organized and assisted.

Child and youth welfare services were intensified through the expanded operation of existing government institutions and the creation of new projects. The Elsie Gaches Village was expanded to become the National Center for Disabled Children, and this was complemented by the establishment of the Nayon ng Kabataan and by the department’s assistance to various boys’ institutions all over the country.

Besides serving children with special needs, the Child and Youth Welfare Program sought the enhancement of opportunities for homeless children, delinquent minors, special youth groups, and children in the rural areas. Under this part of the program, the total number of persons served is estimated at around 10,000 children during the last year.

The vocational rehabilitation program was expanded in 1969 to reach a new group of clients, such as released prisoners, recovered drug addicts, recovered alcoholics, and negative hansenites in addition to the blind, the deaf-mute, and the lame. A guidance clinic program is being developed for the benefit of this special group of clients in addition to existing services which may also be dispensed to them as found necessary. A rehabilitation guidance clinic has been established and is at present initially serving about 100 clients.

The First Lady’s Integrated Social Welfare Program

The social welfare work of the DSW was supplemented considerably by the First Lady’s Integrated Social Welfare Program. Begun in 1967, the program sought to drum up private and government support for welfare projects beyond the reach of government agencies. Working under a system of priorities, the program began with child and youth welfare and later expanded its scope to include welfare of the aged. Projects begun in 1968 were completed in 1969, and among these were the Nayon ng Kabataan at the Manila International Airport, the Molave Village in Tanay, Rizal, and the Marillac Hills project for girls. In 1969, too, the Integrated Social Welfare Program was able to complete the new home for the aged.

Looking to the Seventies

It cannot, of course, be claimed that we have fully answered the social needs of our community. Many of our people have not been reached by our welfare programs, and those who are need more care and guidance than we are able to muster at the moment. But whereas in earlier years our social welfare program was taken cynically as synonymous with hopelessness and failure, today it is looked on by a considerable segment of our people as the promise of a new life.

That promise we are resolved to fulfill.

Land Reform

Leasehold

The scope of leasehold operations has increased from 12 municipalities in 1966, involving 15,691 palay farmers working in an area of 38,473 hectares, to 142 municipalities involving 180,674 palay farmers working a total area of 422,517 hectares. Share tenants benefited totaled 118,407 with a loan volume under the supervised credit program equivalent to P24.9 million. Palay production in land reform areas increased from 49 to 61.5 cavans for the first crop and from 41 to 64 cavans for the second crop.

Settlement Projects

Side-by-side with the operations in leasehold areas was the effort to upgrade land settlement projects in Bukidnon, Lanao, Cotabato, and Palawan. Rehabilitation work as well as initial effort to transform hostile wilderness into livable and dynamic communities were undertaken. The Land Authority has coordinated with other government agencies in the relocation of families in favor of the release of the area for the Greater Manila Terminal Food Market and the Quezon City National Park.

Land Distribution

During the last four years, the Land Authority has issued 5,000 deeds of sale, 349 agreements to sell, and 7,109 orders of award. The issuance of land patents, a function now transferred to the Land Authority from the Bureau of Lands, was also given greater impetus, which in one year of operation issued 1,400 patents against 475 issued by the Bureau of Lands in a four-year period.

Land Capability and Classification

Aerial photogrammetry has been undertaken by the Land Authority in collaboration with some government agencies and a private firm. An aggregate area of 13 million hectares in Central Luzon, Panay Island, Mindanao, and Palawan has been completely photographed. The importance of aerial photogrammetry has been recognized not only for the purpose of land reform but also for regional socioeconomic planning,

Acquisition of Private Agricultural Lands

During our first term, the Land Bank became fully operational. Up to November 1969, it has financed the acquisition of 10 agricultural estates covering an aggregate total of 997,614.5 hectares benefiting 363 farm lessees at a cost of P3,375,900.00. Deeds of sale now pending approval with the Court of Agrarian Relations involved nine agricultural estates, an area of 1,108,178 hectares, benefiting 252 farmer lessees and a cost of P3,821,400.00. To these we have to include the Hacienda Noble Jose in Pangasinan, an area of 1,058 hectares which cost the government P3.7 million. Hacienda El Porvenir, also in Pangasinan, faces final settlement as to just compensation. Two other estates, Mayapak Estate in Mindoro covering an area of 1,248.5 hectares and La Peña Estate in Pampanga with an area of 32 hectares, were acquired and paid for in negotiable land certificates in the amounts of P2.8 million and P112,203, respectively.

The Land Bank has assisted 509 agricultural lessees in redemption cases. An actual consignment of P858,836.00 was made with the Court of Agrarian Relations.

Twenty-one estates to be acquired are under registration and 172 agricultural estates have been referred for investigation by the field units of the Land Reform Project Administration.

During the last session of Congress, I certified a bill authorizing the sale of military camps situated around Manila and suburbs to generate more funds for the Land Bank. Unfortunately, it did not pass. I reiterate its importance here and ask anew that it be passed this year.

Manpower and Personnel Development

The land reform manpower and personnel development aspects have been reinforced by the establishment of an Agrarian Reform Institute at the University of the Philippines. The institute shall serve as a repository of research materials, studies, and reports. It shall supplement existing training programs for land reform by offering an academic program for higher specialization and for the professionalization of the agrarian reform bureaucracy.

Future Plans

Agrarian reform must be implemented by a single organization. It is, therefore, important that the present land reform agencies should be reorganized and placed under a single line and comprehensive department. This will insure a simpler, more efficient and economical program planning and implementation.

We intend, within the next four years, to place the entire country under leasehold, thereby completely terminating the share-crop tenancy system. We must look for ways and means, amending the code if necessary, to hasten the implementation of land reform by simplifying prescribed procedures in preparing areas for leasehold proclamation. One method will be to expedite the land capability and classification survey so as to determine feasible lease rentals based on land capability.

We shall embark on a larger land acquisition program under the Land Authority and the Land Bank in order that the establishment of family-owned farms can be realized. To encourage the landowners to offer their landholdings for sale, it is necessary to increase the ceiling of cash payment from its present level.

There is need for legislation to permit the Land Bank to determine the interest rates of the bonds and to widen and enlarge their uses.

Community Development

The Emergence of the Barrio Folk

In terms of technical services and financial assistance, the PACD during the period 1966-1969 stimulated implemented a total of 118,883 community projects, worth P212,146,738.56, with the PACD contributing P175,262,631.04. These projects are demonstrative in nature and commonly serve as stopgaps for the socioeconomic ills of communities. Mainly, they are for increased production and income, public improvements, improved health and sanitation, and for cultural and recreation purposes. All in all, they benefited 31,968 barrios with a combined population of some 30,000,000 people.

In terms of government-sponsored self-help projects, our rural communities, with the aid of local governments and private institutions, implemented a total of 203,260 self-help project worth P59,477,323.63 in terms of cash, materials, labor, and project sites. The degree of participation on the part of the private sector is evident from the fact that for every peso spent by the government, the beneficiaries contributed P2.69

Finally, in the training of the barrio folk development work during the four-year period under review, we were able to organize and finish 177,006 training and information projects involving 13,141,172 participants with a total cost of P24,073,123.94. Of this amount, the government shouldered P800,378.29, or less than three-and-a-half percent of the total cost; the substantial part of the fund was borne by the barrio folk.

All this is evidence of the success of our community development program. This further reinforces our belief that our total socioeconomic program for the nation should be complemented by a program to develop our communities, such as we have done during the past four years.

National Integration

After a dozen years of existence, the Commission on National Integration can look back with pride on its accomplishments.

Particularly during the past four years under an enlightened administration, the CNI has brought about the gradual uplift of the more than 47 known ethnic groups, from the Apayaos in the north to the Badjaos in the south.

This uplift has been brought about through education, legal assistance, social and administrative aid, settlement aids, and accelerated research and public information programs.

In 1969, the CNI’s scholar program reached a new high. A record P3.5 million was appropriated for scholarships to deserving members of the cultural minorities throughout the islands.

The new scholarship policy is in line with the administration’s socioeconomic goals. More emphasis was laid on technical-vocational courses.

In the legal field, the CNI’s lawyers answered the call particularly of the impoverished minorities. CNI legal personnel went to different parts of the country to handle landgrabbing cases for the minorities and prepared the ground for the proclamation of reserved areas as cultural minorities’ settlements.

To enable cultural minority provinces and municipalities to improve their services for the minorities, this year the CNI released a total of P100,000.00 for social development and P62,500.00 as administrative aid.

Seven settlements were in actual operation in 1969. A skeleton force of fieldsmen in six regional offices looked after the minorities’ needs in the rural areas. Basic farm assistance was given to settlers including the assignment of a farm manager to each settlement.

PANAMIN

On August 10, 1967, this administration created the office of the Presidential Assistant on National Minorities (PANAMIN). The PANAMIN has been an extremely successful attempt by the government to focus attention on the problems of our more than four million Filipinos who belong to the national cultural minorities, and to involve actively the private sector in model programs of medical, social, and economic assistance. PANAMIN’s unique organization, which combines both the support of the government and private sectors in programs to accelerate development of our minority people, has received national acclaim—the word PANAMIN providing hope for millions of our fellow citizens. In addition to the occasional services extended to it by other existing agencies of the government, PANAMIN has received a budget from the government of P1,000,000 in cash and in kind. The private sector has contributed an even larger share. The major achievements of PANAMIN during its brief existence are as follows:

  1. Five model socioeconomic development projects were established in minority areas, and seven model projects are in developing stages which will cover the minority areas of the Philippines. These 12 projects will provide the models upon which our national planners and policy makers can prepare a rational development program for the country’s minorities. An example of this is the PANAMIN Tebolih project in South Cotabato where, after proper research was completed, the program was launched and in only two months and two weeks the Tebolih, on a self-help basis, has built an entire barrio including 260 homes, a three-room cement schoolbuilding, a cooperative building, a multipurpose center, a basketball court, a volleyball court, a children’s playground, a bridge, and many other improvements. This barrio site was formerly an isolated, houseless wasteland of Surallah, South Cotabato.
  2. Eighteen medical-surgical missions throughout the country, during which 698,205 people were treated. These included curative and preventive treatment, with serious cases being airlifted to Manila or area hospitals. The pioneer efforts of PANAMIN resulted in stimulating other private and government agencies to undertake similar medical missions. Four medical projects were also established: (1) the Cotabato Floating Clinic; (2) the Bataraza Clinic in Palawan; (3) the Mansaka Clinic in Davao del Norte; and (4) the Tebolih Clinic in South Cotabato. This is the first time that modern medicine has reached these people on a large scale.
  3. The well-known PANAMIN student-volunteer program, which involved students from almost all the colleges and some high schools of Manila, as well as the provinces, continues to be one of the main sources of PANAMIN manpower. It is also highly successful in developing awareness and resourcefulness among our youth.
  4. PANAMIN has undertaken research activities to gather, collate, and disseminate information, which is essential for any viable planning and programming of development projects. The results of these research activities and model projects will provide information as “handbooks” for action program among minorities not only in the Philippines but throughout Asia.
  5. PANAMIN has likewise provided the national minorities with legal assistance. During the same period, PANAMIN has extended hundreds of legal services, and in land cases alone has been able to obtain for our minorities a total of over 16,000 hectares of land in different parts of the country.

Urban Problems and Housing

Urbanization is a concomitant of modernization. Correctly viewed, urban areas constitute a spearhead of economic and social development.

In some cases, however, unplanned growth has resulted in the creeping disease of urban blight. Cities outgrow themselves without realizing it. Inadequate sanitation facilities, shortage of social services, lack of housing resulting in the growth of slums, excessive speculation in land, lack of public transportation coupled with inadequate streets, pollution of the atmosphere—these are some of the symptoms of the progressive disease known as urban blight.

Part of this is due to great population pressure brought about by internal migration. In turn, the migration pattern is set by the undue economic expectations raised by the cities.

The problem is how to maintain the economic viability of the urban areas while averting blight. For blight is not merely a physical condition; it gives birth to social disorders arising from the failure to satisfy the basic needs of the poor.

Traditionally, the solution is decentralization of industries, the creation of other centers as magnets for internal migrants. This, I propose to do. Studies are in progress for the establishment of industrial estates which will form the nuclei of new urban areas.

Such a solution takes time, however; in the meantime, the urgent need is for the provision of housing, alternatively, the relocation of squatters. The success of the Sapang Palay experiment indicates that relocation, when undertaken in a suitable area and when accompanied by a program of community development, offers a practical solution.

For a variety of reasons, however, low-cost housing in urban areas is a more attractive proposition. In 1966, I ordered a thorough study of the housing needs of the country. This resulted in the establishment of the National Housing Corporation, which began operations last year.

The NHC is a pioneering project but its very success emphasizes the dimension of the housing problem of the country. The majority of Filipino families belong to the low- and middle-income groups. The housing needs of the country are estimated at 470,000 units annually for the next 20 years. As against this estimate, the NHC can build only 12,000 units per year. In time, the corporation expects to increase its output but nowhere near the amount needed to absorb all the estimated housing needs.

It is clear that other avenues must be explored to solve a problem of increasing urgency. I propose to tap other resources to augment the efforts of the NHC, but in the long run, I believe that private enterprise should help and recognize the housing problem not only as an investment challenge but as a challenge in civic awareness.

Science and Technology

Scientific Research

To finance scientific research on a sustained basis in the next five years, funds are generated from the science documentary stamps and the additional private motor vehicle tax. Research institutions, both private and government, receive support from the funds. In the last four years, a total of 112 research projects were undertaken, extensive surveys of Filipino scientific and technological manpower, a compilation of research and development activities in the Philippines, a compilation of current and past researches on water, fishery, geothermal power, petroleum, gas, and nuclear raw material resources.

Our science development program emphasizes the upgrading of science teachers, the improvement of science curricula, the provision on teaching equipment, the modernization of laboratory facilities and research in science teaching. Under the teacher-training institutes, a total of 2,354 were trained. We also obtained 100 Leybold Physics equipment through the German technical assistance for the use of the Philippine science high schools.

Three agencies—the Philippine Coconut Research Institute, the Philippine Textile Research Institute, and the Philippine Inventors Commission—were added to the NSDB.

The Philippine Coconut Research Institute is the first step towards the modernization of the coconut industry now facing problems in research and production, processing, marketing, fertilizers and pesticides, training and organization of farmers’ cooperatives, and financing.

The Philippine Textile Research Institute was established by the NSDB in January, 1967, in recognition of the sad plight of the local textile industry. Under Republic Act 4086, textile millers are given tax exemptions for the importation of raw materials, chemicals, and spare parts for equipment. In lieu of taxes and duties, the textile millers pay 1% of their gross sales, which becomes part of the Special Textile Research Fund.

We reactivated the Philippine Inventors Commission on May 8, 1967, to encourage local inventors develop machines useful for our economic development. We plan to establish creative societies in our schools to promote inventiveness among the youth.

The uses of atomic energy for economic development will continue to be explored by the Philippine Atomic Energy Commission of the NSDB. During the last four years, a total of 57 research projects were completed in the following fields: agriculture, biology, medicine, engineering and industry, and the physical sciences. We have also assisted 107 institutions in launching or undertaking nuclear energy work. Seventy-six scientists were sent abroad to study nuclear science and technology; and 482 scientists, medical doctors, engineers, and technicians were provided basic training in the use of nuclear techniques through the commission’s local training courses.

These are the gains and expectations. With the new competence and the new faith in ourselves that have developed through the past four years, we cannot fail.

Indeed, we cannot afford to fail. For we are faced with a grave and persistent problem which, unsolved, will wipe out all our gains and destroy the promise of abundance and stability. This is the population problem.

We are faced by a population crisis. It is time that we became aware of it. Much more important, it is time that we began to take steps to arrest a population growth which, unless checked, threatens to compound our problems in the years ahead.

The Philippines has an average population of 3.5%, one of the highest in the world. At that rate, the present population estimated at 37 million will have increased to 45 million in 1975—just five years from today—and to 53 million by the end of the decade.

There is nothing inherently wrong in rapid population growth. The problem is to increase the rate of national growth over and above population growth. But to suppose that this can easily be done is, to be frank, a dangerous illusion.

This emphasizes the importance of measures for the control of population.

With a soaring birth rate, the prospects for a continued economic development are considerably diminished. Indeed, there is a strong possibility that the gains which we have carefully built up over the years may be cancelled by a continuing population explosion.

Assuming that there will be no decline in the birth rate, the critical areas will be the supply of food, employment, and education. Just to maintain present standards, the Philippines will need, during the decade, a 40% increase in food production and similar percentage increases in schools and job opportunities.

The financial outlay required for these heavy investments, not to speak of equally heavy investments in expanded social and allied services, will inevitably eat away the total capital needed for development.

I do not share the doomsday accent of the prophets of disaster, but I cannot anticipate this prospect with equanimity. My first act therefore after the elections was to convene a council on population to prepare studies on which population policy can be based.

After a careful weighing of factors, I have decided to propose legislation making family planning an official policy of my administration.

The task of government in the control of population is threefold.

The first is education, in order to impress on the people the urgent need for controlling the population.

The second is the dissemination of knowledge on the techniques of birth control sanctioned by scientific and medical practice.

The third is the provision of facilities, especially in the rural areas, where assistance in the use of birth control methods may be extended to the poor.

These will be included in the proposed family planning law.

I am aware of the important role of private initiative in spreading knowledge about family planning. In particular, the mass media have been extremely helpful in pointing out the dangers of the population explosion. I urge them to continue to do so.

The meaning of the population explosion is human misery—a deprivation of the basic necessities for sheer physical survival. This is the rightful concern of the Church, for above all else, it is committed to man as man; anything that diminishes him diminishes all humanity.

I therefore invite the Church to join in a common enterprise to alleviate suffering—to help, just as its sister Churches have helped in many lands where the population explosion is a persistent, an urgent, and above all an intensely human problem.

IV.

Politically, we have achieved several “firsts.”

For the first time, we reelected an incumbent president. We thus shed the wasteful habit of trusting in palliatives in favor of long-range planning and steady, disciplined implementation.

We have geared our foreign policy to the day when we will have to look after our own national security. We have shown that we are politically mature and diplomatically responsible. We have not allowed our differences with Malaysia on Sabah to hamper the more important goal of unifying our part of Southeast Asia for mutual growth and security.

From foreign and trade relations exclusively with “safe” countries, we are moving towards cultural, economic, and diplomatic ties with countries of diverse political persuasions.

The keynote of our foreign policy is self-reliance and independence; the method, flexibility in the pursuit of national objectives; the watch word, nationalism.

Foreign policy does not operate in a vacuum. It operates in a world which resounds with the clash of national interest. For the Philippines, as for any other nation, the objective is to discover among a diversity of purposes a community of interest with other countries which can be pursued for the common benefit.

Thus the need for flexibility. As overdependence on any one country restricts freedom of action, so in reverse does a widening of relations in the international field open a whole new world of opportunities.

This reorientation is, first of all, a recognition of the changed character of the world in which we live, and secondly, a response to the increasingly nationalistic aspirations of the Filipino people.

Foreign policy in previous years had, perhaps unavoidably, marked colonial characteristics. It had ceased to be a useful tool for enhancing the national interest. The new requirements of the Filipino people brought about by changing conditions here and abroad made it imperative that we reexamine outmoded assumptions. Accordingly, I directed the Department of Foreign Affairs to undertake a study in scale for redirecting the main thrusts of our foreign policy and to prepare the means, by which a new forward-looking foreign policy could be implemented.

The burden of the new foreign policy is as follows:

  1. An overall examination of existing agreements with the United Stales for the purpose of (a) removing the “unequal provisions” in the Bases Agreement of 1947, as well as those which derogate Philippine sovereignty; and (b) establishing new bases for economic relations to take the place of the Laurel-Langley agreement which will terminate in 1974.
  2. Strengthening regional cooperation along economic and social lines.
  3. A continuing search for procedures for easing political tensions, possibly in the form of an Asian Forum with an all-Asian membership.
  4. Relaxation of relations with Socialist countries leading to commercial and cultural exchange.

Developments in the past year in the international scene have in the main been hopeful. Although the Cold War has not been entirely eliminated, it is largely residual in character, permitting a change in emphasis from unproductive pursuits to the study of problems having to do with the growth and development of individual countries, especially the developing countries.

While the menace of nuclear war has receded to a certain degree, the problems which have replaced it are equally urgent. Not less than total and annihilating war, the issues revolve and touch upon the ability to survive the perils of the Third World, of which the Philippines is a part.

The threat of escalating poverty in three-quarters of the world, the mounting population pressure, the overincreasing disparity between the rich and the relatively poor countries—the ramifying problems draw upon our reserves of will and purpose in order to survive and, hopefully, to flourish in the critical seventies. The desire and willingness for political accommodations must be matched by a similar desire and willingness for economic accommodations.

These problems cannot be solved by individual countries; they must be solved in common. To this task, we, friends and foes alike, must address ourselves.

In our region of the world, there have been two encouraging developments. The first is the de-escalation of the Vietnam War, and the second is the emergence of the ASEAN as a positive factor in the enhancement of regional cooperation in Southeast Asia.

Regarding Vietnam, we are still in the proverbial tunnel. But the de-escalation has at the very least a symbolic value, namely, that a will exists to find the means for ending a fruitless war which has sharpened political divisions all over the world and added needless strain on the precarious stability of Southeast Asia. We continue to hope for the best while being prepared at all times to contribute to the further easing of tensions which could lead to the ending of the war.

Last December, I ordered the PHILCAG home after humanitarian service in Vietnam. Its record is unstained; its reputation amongst the people it helped at the highest. I recalled the PHILCAG because the funds for its maintenance have run out and because it is needed for similar humanitarian service in Central Luzon. Unfortunately, its return was marred by a controversy which imputed unworthy motives to our government.

I repeat that the PHILCAG went to Vietnam for no other reason than the desire to help a friendly people in distress. Under normal circumstances, the PHILCAG’s assistance would have been viewed with gratitude. But we seem to have been caught in the midst of a bitter internal debate, a bystander dragged into the dirt by combatants too intent on winning a verbal brawl to notice that innocent parties have been hurt.

But I, and still less the PHILCAG, do not ask for the gratitude of the United States Congress or of certain senators. It is enough that peasants in the hills of Vietnam looked upon the PHILCAG as a friendly presence, as a helping hand extended in a time of need.

The last ministerial meeting of the ASEAN should be regarded as a breakthrough stage in the short life of the ASEAN. For the first time since its founding, a map of wide-ranging though modest projects has been drawn. Depending on our capability to implement them, the succeeding years will indicate whether Southeast Asia is at last ready for the novel experiment of regional cooperation. All the signs are hopeful and we feel it must succeed.

The projected withdrawal of the United Kingdom from Southeast Asia coupled with the announced policy of United States military retrenchment in the region after the Vietnam War have added a new dimension to the ASEAN. Interest has been expressed in certain quarters about the possibility of using the ASEAN as the nucleus of a possible indigenous security system.

Such a plan is quite clearly not feasible at this stage. At the same time we should be receptive, while remaining uncommitted, to the merits of a regional security system committed to the defense of the region. Clearly, such a defense system will have limited objectives, and the basis of cooperation may not even be military in the sense that it is usually understood. The necessary task of clarification of objectives, capabilities, and procedures precedes all, and to this at least we must he prepared to contribute.

The normalization of relations with Malaysia added point to the desire to make ASEAN a going concern. In itself, however, the resumption of diplomatic relations with Malaysia is desirable. It removes a source of unnecessary tension in Southeast Asia while permitting countries to pursue the solution of bilateral problem to the benefit of both, among them the antismuggling agreement.

As for the Sabah problem, it is our expressed desire and intention to settle it by peaceful means in consonance with the philosophy of our Constitution and by our commitment to the United Nations Charter. By agreement with the government of Malaysia, the normalization of relations was reached without preconditions, on their part or ours.

In accordance with the broad policy guidelines set forth above, I hope to finalize the plans for the approaching negotiations with the United States on the revision of the Military Bases Agreement, the Military Assistance Pact, the Mutual Defense Treaty, and the Laurel-Langley Agreement.

The implementation of agreements reached with other member-countries in the ASEAN will necessarily take precedence in our efforts to strengthen regional collaboration. This year, the Philippines will play host to the fourth ministerial meeting of the organization, and it is my hope that a food development program which has already been agreed upon in principle, will begin to take final shape.

Consistent with our desire to widen relationships with other countries, I have directed the Department of Foreign Affairs to study the possibility of seeking an associate membership in the European Economic Community. With the establishment of diplomatic relations with Venezuela last year, we are in a position to launch a new campaign for stronger political and cultural ties with the Latin American countries.

With the exception of Nigeria and the Republic of Lesotho, with which we established diplomatic relations last year, Africa south of the Sahara is for all practical purposes a virgin territory to us. We propose to remedy this oversight, for we cannot long remain isolated from a huge region which shares common problems of growth and development with us. I asked the Department of Foreign Affairs to prepare plans for a program of technical assistance to countries in Black Africa which may have need of this form of assistance.

The establishment of viable relationships with countries of Eastern Europe will continue to be an important objective of our foreign policy. Studies are being conducted by the appropriate government agencies, and the private economic sector has been requested to contribute its own information and plans.

As an original member of the United Nations, we take a deep interest in the continued viability of the world organization. It is still true that for most of the countries of the world, especially the developing countries, the United Nations is a Court of Last Resort. We shall continue to need it, more especially in the dangerous years ahead.

It is my feeling, however, that the functioning of the United Nations, with a membership nearly three times its original membership and saddled with problems not envisioned in 1945, could be improved, possibly by a revision of its Charter. Accordingly, the Philippines proposed the inclusion in the agenda for the coming UN session of an item calling for a review of the Charter, with an eye towards strengthening its peacekeeping functions and facilitating the formulation of a worldwide strategy for development.

As regards the Sabah problem, studies are in progress on how the conflict between Malaysia and the Philippines may be successfully resolved in the context of previous agreements. Although the formula is elusive, there is no reason to fear that the issue will remain in permanent deadlock. In the spirit of the new friendship between Malaysia and the Philippines, I continue to hope that the two countries can, in cooperation rather than as adversaries, find a solution to an intractable problem.

A New Constitution

The social and economic inequities in our country are unacceptable. We have to institute radical reforms at once before the situation gets out of hand.

The next few years will lay the basis for a reformation—a revolutionary reformation of our political, social, legal, and economic systems. The coming Constitutional Convention in 1971 will play a singular role in this task of reformation. We must see to it that the 1971 Constitution must be truly the expression of a free and sovereign people and will embody the ideals of Philippine nationalism, social justice, and economic progress. The 1971 Constitution must not seek to perpetuate the inequities of the status quo.

It is imperative, therefore, that the delegates to the 1971 Constitutional Convention represent the widest range possible of the various sectors of our society.

Electoral Reforms

We are interested not just in reforms here and there, but in a sweeping overhaul of our systems to insure the good life and a just society for the Filipino people, and to meet the internal and external challenges for many decades to come.

One of the major sources of public disenchantment with the political system has been the electoral process. With its familiar spectacles of violence, coercion, and fraud, and its general inability to support the aspirations of our people, the present electoral process has been the object of popular disdain through demonstrations and rallies. Under the present system, it has become almost axiomatic that a poor man will not win in an election. With increasing frequency, public office is despoiled by men whose inclination to abuse and excess is demonstrated and sharpened at our polling places.

National Defense

I have always maintained that real security for the nation comes from prosperity and internal order. We have consequently geared our major programs to the fulfillment of these conditions as the final guarantee to our people’s security.

At the same time, however, we must not overlook the requirements of self-defense in case of aggression.

In the context of new realities which loom large in the decade of the seventies, no less than a self-reliant policy can bring about a viable defense posture for the country. Pending resolution of our bilateral treaties in the economic and military fields, steps have been taken by the defense establishment to produce its own arms and munitions at the least cost to the economy.

A restructuring of our armed services with an acceptable balance of foreign equipment support and locally produced items will be the principal focus of programming our defense requirements. In optimizing our defense posture to enhance our security in the face of competing objectives, the priorities in allocating resources in the Armed Forces will take into account the impact of military programs on our national development goals and objectives.

The defense establishment will play an important role in artificial rain stimulation and typhoon control and dissipation. This vital task to be undertaken by our Air Force in cooperation with the United States Air Force holds exciting possibilities and its importance is underscored by the fact that our total losses due to drought and typhoons last year amounted to P315 million, roughly equivalent to our present balance of payments difficulties. These are severe constraints on our development as a nation and if the Armed Forces, through this imaginative use of its resources, can only reduce such staggering losses even by 10%, they would, with this single measure, greatly improve our export posture and correct our foreign exchange deficiencies.

In the field of purely military undertakings, various alternatives for the development of effective internal security forces will be continually examined with the view of modernizing our command and control system and realigning cost ratios of personnel services to logistics. This concept is essential to the attainment of a self-reliant posture in the development of a logistics base.

I am aware, however, that there will be 1,500 officers and enlisted men of the Armed Forces who will be retiring within the next two years. This fact brings out the need to provide funds for AFP retirement benefits which have been building up throughout all these years. For this fiscal year alone, the AFP will need an outlay of P65 million to support its pension fund requirement. I therefore reiterate my proposal to sell selected military reservations, a portion of the proceeds of which will be used to fund the retirement of said personnel in conjunction with another proposal for AFP personnel themselves to contribute to their retirement fund. This retirement, which will include the top hierarchy in the AFP, will also necessitate the projection of a new leadership in the Armed Forces. I am confident that the emergent leaders in the AFP are quite ready and qualified to take over since they have the academic preparation; they have been battle-tested in the Huk and Sulu campaigns, in Korea, and in Vietnam; they understand our close ties with the Western world but are also aware of our Asian ties, and they are attuned to the dynamics of change and our posture of nationalism and self-reliance.

In regard to our efforts in Central Luzon, military operations there will continue to be supportive in nature and only to the extent that threats to peace and tranquility are beyond the capacity of local government officials to effectively stop and prevent. The PHILCAG has recently been deployed to Central Luzon in fulfillment of our commitment to alleviate conditions in that area in collaboration with other agencies. It is not my intention to keep PHILCAG on a permanent basis in Central Luzon. It is my hope that the civilian institutions—both public and private—which should be performing the tasks assigned to PHILCAG can eventually assume the responsibilities for these developmental tasks which properly belong to them. If we are to keep democracy alive in this country, there is no alternative but to strengthen these civilian institutions—including the local police forces. I would like to see the day when our people can look up our local police forces with full confidence in their integrity and capability to carry out their peacekeeping responsibilities.

The development of a self-reliant defense posture stems from internal development through rational application of resources. In this direction, the defense establishment will continue to do its share in providing for whatever contingencies that may threaten internal peace and security.

Government Reorganization

Work on the reorganization of government offices, which has long been overdue, is nearing completion. Under the Commission on Reorganization, 17 reorganization panels have conducted studies on how to trim personnel to produce maximum efficiency and promote the full use of resources.

The reorganization panels have proposed organizational changes which are responsive to the need for more efficient, economical, and effective administration. They have not lost sight, however, of the requirements of accelerated social and economic development, as the administration envisions.

The proposals for reorganizing government offices along those lines will be submitted to Congress as soon as possible.

Crucial Years

The seventies are crucial politically. Since we regained independence in 1946, we have matured considerably. We continue to grow in courage, vision, and self-respect.

We have found that “special relations” are not satisfactory. We therefore seek full recognition of our sovereignty and full development of economic independence. We will not tolerate economic ties that will diminish our natural right of self-determination and self-government.

In the coming Laurel-Langley negotiations, we will protect our sovereignty, our rights of jurisdiction, and our self-respect as a mature independent nation.

In recent years, we have seen nationalism develop into a positive and constructive force. Along with it has grown greater confidence among our people, based on their increasing ability to decide their own destiny.

This is fortunate. For it is imperative that when we revise our Constitution, we shall do so with a full knowledge of our capabilities for sustained and self-reliant national growth, as well as of our ability to transcend political and other differences in order to work as one towards national objectives. This unity of purpose and action will require a stern will and a limitless capacity for endurance and sacrifice.

The time to begin developing this determination and strength is now. The discipline which we will need to achieve our goals must be tested from now on against the nation’s numerous and varied problems.

V. PROPOSALS TO CONGRESS

I have reported to you the gains we have made and the problems we have set out to solve. You will doubtless agree with me that the challenge of the future must be met by us together, the executive and legislative forces acting in concert. Convinced that our partnership is indispensable in meeting the requirements of progress, I now submit the following proposals for your consideration.

Comprehensive Export Incentives

I therefore come to you with several proposals: I propose the early passage of a liberal Export Incentives Act. The ultimate objective of this bill is to earn more foreign exchange for our industrialization program and to reduce unemployment. In addition, the provisions of the Internal Revenue Code and the Tariff and Customs Code should be liberalized with reference to the refund of taxes and duties paid or the issuance of tax credits for taxes paid directly or indirectly by exporting enterprises.

As a complementary measure, incentives should also be given to the tourist industry because this will provide us with valuable foreign exchange.

I am proposing that an enabling act be passed to create an Export Guarantee Corporation. This corporation will guarantee our own businessmen against price fluctuations and credit risks. I wish to emphasize the importance of an integrated incentives program for the development of our export industries.

It is my hope that in this session, Congress will review the necessity of the subsidies especially the gold subsidy. Even under existing law, by-product producers of gold should be excluded from these subsidies.

Codification of Laws

In the last sessions of Congress, I submitted the new codification of the Administrative Code. Unfortunately, it was not passed into law. It is my intention to resubmit this code to this new Congress. At the same time, it becomes necessary for us to codify the labor laws, amend the Election Code and the Revised Penal Code, and update the Internal Revenue Code, as well as the Tariff and Customs Code.

On the Election Code

I envision the following reforms in our electoral systems:

  1. Expenses—The existing law limits the expenses of candidates to one year’s salary of the position for which he aspires. However, it does not limit the expenses of the political parties or political committees supporting such candidates. This is the deficiency in our law.
    I repeat my proposal in the 1966 State of the Nation Address, where I suggested that legislation be enacted limiting the period of campaigning which was adopted and that the expenses of all supporters of a candidate, especially a political party or political committees, be limited to P1 every registered voter in the previous elections. Thus, if in the last elections 10 million electors were registered, the total expenditure in the next election for a candidate of a political party including the expenses of political committees, and I refer to a candidate for a national office like that of President and Vice President, should be limited to P10 million. This should be enforced by the Commission on Elections with the support and coordination of all offices in government.
  2. Sample ballots—The printing of sample ballots has become so costly that it is one of the major burdens of candidates. Sample ballots should now be banned in every political campaign. The Commission on Elections, however, should be compelled or directed by law to post in every polling booth a list of all candidates of every political party for the voters to choose from.
  3. Propaganda—The people have been burdened by the propaganda not only of major political parties but also of those participating in any political campaign sometimes to the exclusion of proper dissemination of other more valuable information.
    The new election code should provide for the limitation of such propaganda gimmicks including billboards; the details I leave to you.
    The media should give as a part of public service, a portion of space in case of newspapers and time in case of radio and television, to all political parties that have candidates all over the country.

Financing for Manufacture of Capital Goods

I propose that the Monetary Board be given the power to decide whether it should engage in the rediscounting of long-term notes which arise out of the manufacture of equipment and machinery in the Philippines. The commercial banking sector has been developing quite well but their operations have been largely confined to working capital financing. Our industries have developed to such a stage that we need long-term financing for equipment produced domestically. The domestic manufacturers are always at a disadvantage because they could not offer deterred payment plans unlike the developed and industrialized countries which could extend payment terms. In addition, I propose that the Central Bank should have overall control of all financing institutions. In other words, the entire financial system should be under the control of the Central Bank.

Mining

One of the main obstacles to the accelerated development of the mining industry is overlapping claims. A special court should be created for this purpose to clear the backlog. In addition, the mining law should be amended to allow for orderly prospecting and exploration. The prospectors and explorers should register and designate the area where they will operate. If a claim is then filed, work obligations should be imposed at a higher level than at present so claimholders do not sit on their mining claims. It is only through this process that we can hope for an accelerated development of our mining industry on which we shall depend increasingly for our foreign exchange earnings.

It might be good to mention now that a Land Policy Council should be set up. This council should decide our land use pattern. It should be the responsibility of the council to determine whether a piece of land should remain forestry land, or reserved for raining, or converted to agricultural or residential land. I suggest that we pattern our land use policies after Great Britain’s.

Changes in the Structure of Production Taxes

Finally, the present structure of production taxes hinders the integration of industry. It is disadvantageous to produce domestically certain industrial components such as car components because the sum of the taxes imposed at different stages of processing amounts to more than the duty on the importation of the finished products. Thus, backward integration is discouraged. Similarly, forward integration is discouraged in the field of mining because producers integrating forward pay a sales tax on a base which includes taxes previously paid in prior processing, whereas a mere exporter of mineral ores pays only the one-and-a-half percent ad valorem tax. Such inconsistencies in our tax laws should be removed immediately by imposing the taxes on value added only, thus permitting deduction of taxes already paid.

Agriculture

To generate more agricultural output and enhance the development, exploitation, and utilization of our natural resources, we propose the enactment of legislative measures

  1. to provide incentives for the exportation of fishery products;
  2. to nationalize the administration of the development and conservation of the fishery resources of the Philippines;
  3. to create a land resource council;
  4. to consolidate the different government forestry agencies into a commission;
  5. to put more teeth to our existing forestry laws;
  6. to give permanent status to declared national parks;
  7. to provide a mineral land administration procedure conducive to the discovery of mineral deposits and their early exploitation;
  8. to provide for tax-free entry of mineral prospecting and exploration equipment for use of claim owners;
  9. to introduce a system of incentives in which industries making use of local minerals would be given priorities in credit, tax deductions, and similar support;
  10. to amend the Petroleum Act to enable foreign firms to conduct petroleum exploration and exploitation as government contractors of petroleum reserve areas under terms consistent with the Constitutional limitations;
  11. to give adequate support in terms of personnel, equipment, and other facilities for completing the entire land and soil inventory of the country; and
  12. to provide more financial assistance so as to accelerate further the food production program of the government.

For Land Reform

I reiterate the need for passage of the bill certified in the last session of Congress to establish special funds for land reform and for peace and order. I also seek the approval of the bill authorizing the sale of military camps around Manila and suburbs to generate more funds for the Land Bank. I refer to Camp Aguinaldo, Fort Bonifacio, and Camp Crame.

VI. CONCLUSION

Challenge to Congress

I look upon Congress as a true partner in all our urgent efforts to build and change the nation. I especially look to it to remain a partner that will provide the energy and direction to those particular endeavors that require the highest priority by the government.

In these critical times, the main argument for this partnership is the uncertainty of this new decade, which poses extreme and uncommon perils, even while it holds out bright prospects. Thrust into the full harshness of modernity, without having realized our full economic potential, we must bear the problems and satisfy the needs of an advanced industrial state with the scant resources, facilities, and skills of a developing one. Our needs are not always in proportion to either our status or our capacities; our wants are not always justified by either of them.

Our people are haunted, if not altogether oppressed, by the conviction that they must share all the luxuries and comforts of the powerful industrial states; their appetites are whetted, their expectations increased, by the awesome advance which science and technology enable those other societies to achieve; and they feel themselves unjustly deprived and injured to have to do without the privileges and conveniences that other nations have.

In speaking of progress, they are compelled more and more to deal not in terms of their own particular development, but rather in the challenging terms of the risen technological and industrial classes who set the standards of growth and level of expectation for mankind all over the world.

This, ladies and gentlemen of the Seventh Congress, is our circumstance at the beginning of this critical decade.

In my second inaugural address, I pledged that the Presidency shall provide moral leadership, to change those attitudes and tastes that mock our aspirations and our capacities. I renew this pledge now; with an invitation to Congress that its members join me in setting the proper example of leadership, by passing legislation that will complement the moral influence of government.

I leave it to Congress to determine how it will share this new ethical burden; for I dare not prescribe the required measure of dedication or commitment to this cause. But I issue the challenge to Congress.

Discipline Will Move Us into the Future

I said in my address to the Sixth Congress, a full year ago on this same rostrum, that given the options of living in the comfortable past and striking out towards new and uncharted frontiers, the people must choose the latter. My own choice was unequivocal.

Time has brought us into the threshold of the seventies, But, by crossing the frontier I had spoken of in my last message, we have brought ourselves into the threshold of a new world.

For the Filipino people, it is a world of peril and opportunity.

We shall be in peril of losing our gains through fear and inaction. We face the danger that greed will vanquish the conscience of the rich. The pitfalls of disunity lie in our path. There is the ever-present danger that the courageous vision which enabled us to advance in the past four years will be overwhelmed by cynicism and hypocrisy. We begin life in the seventies wracked by growing pains. Timidity, conservatism, the impulse to resist change stand in the way, ready to thwart our advance.

Let us all resolve to conquer these perils. Beyond them, prosperity and lasting peace wait to reward the nation. But prosperity will always be out of reach, lasting peace will forever be a chimera, if our desire for them does not become a passion and our labors to make them possible are confined to trickles and spurts.

It is not an easy triumph that we want. In the past four years, when our purpose was to shake ourselves free from inertia, we had to strain our hearts and limbs in the unusual exertions of will and work to fulfill our aim.

In the process, we learned the lesson that must attend our present tasks. Today, we are animated by the aim of sustained national growth, and willpower must be built into the character of the nation as an enduring and indispensable discipline.

Discipline will move us, surely and steadily, into the future. It is the fount from which purposefulness and unity spring. In the coming years, we will need increasing courage and perseverance, a greater capacity for sacrifice, larger nobility, a stronger resistance to the temptations of sloth and personal fortune. We can equip ourselves with these only if we begin now to build the strength of character that comes from the discipline of hard work and unswerving purpose.

I am confident that our people, to the last man, have it in themselves to meet the challenges, the duties and perils that we face. But we must together, citizen and leader at the same time, exert a conscious effort to increase and perfect the Filipino potential into a powerful force in active confrontation with life.

We have indeed begun our task. We must continue and we must persevere.

I thank you.


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