Diosdado Macapagal's Second State of the Nation Address

One year ago we stood on this same platform to announce before the Nation the tasks that we pledged ourselves to perform. We stand here again today to render an accounting to the Congress and to the people of what has been done to accomplish these tasks, where the country now stands and what next is to be done to build the economic and social progress that has become the urgent right of all our people.

The past year has been a crucial one. We began our labor for the people under extremely adverse conditions. The gov­ernment was bankrupt; it was operating on a deficit of P250 million. The international reserves were in extremis, with the dollar reserves at $103 million and the Central Bank obligated in the sum of $341 million at preferred rates ranging from P2.00 to P3.20 per $1.00. Graft and corruption had seeped into every nook and crevice of the government, both national and local. The people had assumed an attitude of cynicism, an attitude that made them shrug off corruption as inevitable. While population was increasing at the rate of 3.2 per cent annually, the rate of economic growth had decreased from 7.8 per cent in 1955 to an annual average of only 4.4 percent each year thereafter until and including 1961, and symptomatic of the economic deterioration, prices were steadily rising to exorbitant heights without hope of abatement.

It was in this depressing setting that we undertook the difficult task of straightening out the national shambles and building the structure of a better future for our people.

We committed ourselves to the solution of two major problems facing the country. One was the need for moral regeneration and the other, the need for a faster rate of economic growth. We shall in this report recount what has been done toward the accomplishment of these tasks.

Before doing so, however, we beg your indulgence to express with candor some thoughts on relevant matters that have aroused the public interest. Among these has been the concern expressed for the two-party system because of our alleged desire to control both Houses of Congress by accepting leaders and members of the Opposition into the Administration.

Congress-Executive Relations

We reject the imputation that we seek the control of Congress. Having been in Congress ourself, we do not think any one can control Congress by making it do what it cannot be intelligently persuaded to do voluntarily. What we seek is the constitutional cooperation of Congress—that is to say, the cooperation that the Congress and the President owe to each other in the interest of the people in accordance with the party system of government which we have adopted in our Republic. That constitutional cooperation is best attained—and we submit that this was the intent of the Constitution—when Congress and the President pertain to the same political party. It is only this situation that makes possible party responsibility without which the two-party system is a farce. It was this situation under which all our predecessors had worked since the founding of the Republic. This would not mean placing Congress in the control of the Executive because, as it happened in 1951-53, the fact that the political party of the President had a majority in both Houses of Congress did not necessarily mean that the President had the cooperation, much less the control, of Congress. We submit that given the pitfalls of rabid partisanship, it is desirable for our democ­racy that the Congress and the President should pertain to the same party. This situation whereby the Congress and the Executive pertain to the same party should in the normal course be brought about in an election. However, if through an imperfect operation of the democratic mechanism which we strive continually to improve, this desirable situation does not result from an election, it is neither against democracy nor against the national interest to endeavor to bring about the situation through the inherent freedom or some other legitimate measures allowed in a democracy.

It was against the background of this political philosophy that in the course of the past year, many leaders of the people who enjoy the faith, confidence and support of their constituents, some of them being members of this Congress, have placed the interest of the people above their partisan in­terest and have joined cause with the Administration in the her­culean endeavor to promote a rapid rate of progress for our people. Their action is not to be gauged in terms of those drifting ways of the past but in the light of the urgency of courageous and decisive action called for by the national am­bition for monumental progress in the inspired present. We know that these leaders have taken these steps primarily be­cause of their conviction that the socio-economic blueprint that we are energetically carrying out in order to bring about rapidly the prosperity of our people is the right course for the Nation. We hereby make it of record, as the highest spokes­man of our people and in their name, for the judgment of our posterity that in our view, these leaders who have joined us in our endeavor have performed less of an act of partisan in­fidelity and more of an act of patriotism which our people approve of and accept with appreciation and gratitude.

Civil Liberties

The other matter to which we beg leave to refer in candor has been the anxiety shown for the Constitution and civil liber­ties because of alleged dictatorial, impatient and vindictive tendencies on our part. This concern is without basis in fact.

Permit me to state that we are too much of a lawyer to disregard the Constitution and the law. Our seeming im­patience is over unduly prolonged argumentation about the law because we believe that whenever there is legal controversy, which is unavoidable among lawyers, the best step in the public interest is to elevate the controversy to the Supreme Court, in the meantime go about our tasks, accept the decision of the Supreme Court when it is handed down, and then proceed in our ways of serving the people along the lines indicated by the Supreme Court decision. It has been our invariable attitude that irrespective of our personal views, we shall abide by and implement the decisions of the Supreme Court. As long as the President of the Republic abides by the decisions of the Su­preme Court, there can be and there will be no dictatorship in this country. Like all Filipinos, we are lovers of freedom and we are against dictatorship in our country, and whether now or in the future, we are with those who will fight the establish­ment of a dictatorship in our land.

In truth, our seeming impatience over fruitless wrangling is but a reflection of the impatience of our people to be given the chance to enjoy the good life to which they are entitled. Legal issues must be debated. But while we debate, the people feel the pangs of hunger and demand that their problems be solved before it is too late.

Indeed, we confess to one impatience—to the impatience which we believe to be the impatience of our people that measures be taken immediately to enable our impoverished people quickly to have a better life. To us, this is more than impatience; it is a passion. We cannot help feeling and thinking otherwise because we have personally known the pain of hunger and poverty.

Because of our actions which are reflective of the impatience and hunger of our people for a better life, it is possible that we may have hurt and offended others. We ask their forbearance. It is not our wish to hurt or prejudice anyone if we could avoid it. We bear no resentment against anybody. If it were possible, we wish all to be our friends. To say that we are vindictive is to trample upon the truth. There is abso­lutely no touch of vindictiveness in our being. The truth is, we have a task to pave the way for the improvement of the livelihood of our people within the span of our mandate and we intend to do this task in the best and most effective manner within the sanction of the Constitution and the law. We are resolved not to fail in this undertaking of achieving economic progress during our tenure. It is around this resolve that all our decisions and actions revolve. Accordingly, those who will help us we shall clasp as friends, irrespective of relations in the past; and similarly, those who will seek to frustrate us we shall be constrained to resist vigorously, likewise irrespective of events in the past. We deny the offense of vindictiveness, dictatorial tendency, disregard of law, and other imaginary offenses leveled against us. We confess only to one offense, if it be an offense, which is that we love our country and people dearly. Since we have only this opportunity of a life­time to help our people attain a better life, we are grimly resolved to sacrifice friendships and everything and even our own self, our own comfort, security and happiness, for the dedicated pursuit of bringing about the prosperity and hap­piness of our people in the quickest possible time.

Partisan conflict is perhaps unavoidable in a democracy like ours which is operated on the party system. At the beginning of our labor, we had wanted to avoid participation in partisan strife. Without now dwelling on the responsibility for the change, we have been lately constrained to take part in partisan activity within proper bounds in the conviction that without an increased political preponderance in our favor, we face frustration in the task of bringing about a sufficient degree of economic and social progress for our people during the period of our trust. If partisan contention is inevitable in a representative government, we fervently hope that it can be minimized for the sake of the public welfare. We ardently wish that more and more of us who are representing and leading our people will more and more recognize the occasions and matters where partisan attitude must end because there the national interest which requires united action begins. It is our fervent longing that one such matter and occasion that should be regarded as meriting united national action is the successful implementation of our socio-economic development program because of our conviction that it is only through the resultant general pros­perity that our masses can share the boon of a good life. It is our prayer that in things required for the success of the program, partisan strife can be avoided. Indeed, on our part, we have participated in partisan activity only as inevitably required by the need to insure the success of the Nation’s socio-economic development program.

MORAL REGENERATION

Anti-Graft Policy

We shall now dwell on our twin tasks of moral regeneration and a faster rate of economic growth. In undertaking a moral regeneration drive, we adopted a constructive and forward-looking outlook and policy. We have resorted more to con­structive, preventive and remedial measures for moral renais­sance than to punitive actions.

In accordance with a constructive anti-graft policy, we undertook a series of measures to eliminate the sources of cor­ruption in the Executive Branch of the government which is our prime field of responsibility. We abolished the system of foreign exchange controls, aware that this had become a festering source of venalities. We made appointments to im­portant positions on the primordial basis of integrity and honesty. We conducted searching investigations of government irregularities. We dismissed public officials for dishonesty, dereliction of duty, official irresponsibility, and grave abuse of authority and other similar violations of the code of upright public service. We have not spared even the closest friends—people whom we have long known and who had done much for us—because we believe that our duty is not to serve friends but to serve the people. We issued an executive order pro­hibiting government officials from having official transactions with any of the President’s immediate relatives. The members of our official family made public their assets and liabilities although this is not required by law.

We took positive steps to re-establish the moral identity of the Filipino. Our people are inherently a race of honest men and women. With a view to enhancing these qualities, we took official cognizance of acts of honesty, respect for the law, simple living, punctuality, courtesy, cleanliness, de­votion to the people in public trust, frugality, discouragement of gifts, discontinuance of large official retinues, patronage of native materials, and the like. We honored humble citizens who performed deeds of honesty. We conferred a Presidential Citation upon officials and individuals who have demonstrated adherence to the creed of honesty and integrity. Realizing the tremendous persuasive powers of the Presidency, we and our family have striven to set personal examples in honesty, simplicity and dedication.

In view of the number of wrongs deliberately or carelessly committed in the past, for the full investigation and prose­cution of which there would be no material time, we have limited punitive actions to a degree sufficient to deter similar wrongs in the future. Mainly, these cases consisted of those concerning the top offenders in certain categories of venalities, committed by Filipinos and aliens, which should be discouraged and eradicated as roadblocks to the progress of the country. We hope that the constructive and remedial results from these exemplary cases would be sufficient and would not constrain us to expand action in our determination to effect moral recon­struction as a prerequisite to national progress.

The categories of venalities on which we took action against the top offenders were the following: (1) aliens who organized networks of corruption to advance their business interests; (2) former aliens who, although not weaving elaborate webs of corruption, were engaged in venalities to promote their a business interest; (3) aliens who engaged in profiteering activities; (4) aliens who evaded the payment of taxes; and (5) aliens who, contrary to law, participated actively in par­tisan politics.

Among the nationals, we took action on the following persons: (1) those who utilized organized political power to build business empires, and vice-versa; (2) those who mis­used public trust to amass wealth; (3) those who evaded the payment of taxes; (4) those who perpetrated smuggling; (5) those who committed copra overpricing; and (6) those unscru­pulous labor leaders who have exploited their followers for selfish purposes.

In connection with the action taken against aliens who corrupted public officials, we have so far relieved fifteen high officials, accepted the resignation of one of our cabinet members and reassigned another cabinet member to another post. In acting on other irregularities, likewise relieved the presi­dent of the government commercial bank and the chairman of its board of directors who were our own appointees.

In this moral drive to which the Administration has de­dicated itself, the innocent need not fear, for they will not be molested. The well-to-do need not feel apprehension, for the drive is aimed not at them but at the unscrupulous oper­ators who, using unfair and illegal means, have amassed ill-gotten wealth to the detriment of the general welfare. In point of fact, our goal is to create conditions of fair and equal opportunity wherein the maximum number of our people may become prosperous and wealthy through honest toil. The busi­nessmen need not have anxieties, for the drive is not against businessmen but against powerful politicians who have used their political office and influence to dominate vital business ventures and compete with bona fide businessmen. Even the guilty will be given every opportunity to present and defend their case.

To those who promote their interest through hard work and integrity, we shall give the protective shield of the Ad­ministration and provide them with all the opportunities to advance further. But the law can be justly merciless, too, in its retribution on those who believe that they are above the law. We will be fair even to those who will be unfair to us, but we will act resolutely against those who betray the trust of the people. We believe that it is in this way that true democracy, which is the system which our people have cherished, will nourish in our country.

The results of our moral drive have been gratifying. The “tong” system in which businessmen made regular pay­ments to government officials has ended. The practices of pay­ing commission, percentage, overprice or kick-back in consideration of contracts and public service has been curbed. The webs of corruption which unscrupulous individuals had woven in our society through many years of unrestrained activity have been destroyed. The commission of graft at the higher echelons has been virtually terminated; at the lowest levels of government, it has been substantially minimized. We will relentlessly go after venalities at all levels of the public service.

ECONOMIC GROWTH

We shall now dwell on the most vital endeavor of our generation—the propulsion and maintenance of a faster rate of economic growth that can provide the needs of our multi­plying population. In facing our awesome responsibility when we took over the Administration, it was obvious to us that after eliminating the stench of moral decay in the Govern­ment and in our society, the main task was to rescue the economy from the suffocation that choked it to paralyzation, loosen and remove the manacles that impeded its movement, infuse it with vigor and guide it forward. All our multifarious problems spring from the lack of financial sustenance arising from an anemic and unproductive economy. While the Nation has been undergoing a population explosion, the food on the Nation’s table available for distribution for the people’s needs have been too scanty to provide adequately for ail the sectors who are entitled to the essential services of the State. The Government could not repeat the miracle of feeding five thou­sand with five loaves of bread and two fishes. The obvious and indispensable solution to our country’s myriad problems was to develop as rapidly as possible our natural resources in order to increase the food on the Nation’s table, thereby enabling more of our people to partake of the wealth that God has bestowed for the use not of a few but of all.

It was to meet frontally this grave problem that we insti­tuted decontrol and launched the Nation’s integrated five-year socio-economic development program in our first State-of-the-Nation Message to this Congress on January 22, 1962. It will be recalled that the House of Representatives adopted this Program. While the Senate, avowedly for lack of time, did not act on the program, the National Security Council, in which the Senate is represented, has officially adopted the same. The Five-Year Integrated Socio-Economic Development Program, therefore, has become the Nation’s Program. It is your program, as much as it is our own. It is our People’s program. We cited in that program, a three-fold objective, namely:

First, the immediate restoration of economic stability;

Second, the alleviation of the plight of the common man; and

Third, the establishment of a dynamic basis for future growth

Let me review with you what has been done in relation to these three major goals.

ECONOMIC STABILITY

Our first act upon assuming office was to dispel the at­mosphere of uncertainty that pervaded the business commu­nity and discouraged the steady expansion of the country’s productive ventures. On January 21, 1962, as a fundamental and necessary step for stabilizing business conditions and for setting a more rational basis for business plans, we lifted foreign exchange controls. These accomplished two desirable effects: it allowed the exchange rate to be determined by the forces of the free market; and it removed from public au­thorities the power of allocation and control over foreign ex­change funds. The only exceptions were the required sale of twenty per cent of export proceeds to the Central Bank and the settlement of contractual obligations at rates previously agreed upon.

After an anxious supervision of the currency reform, we are now able to declare that the decontrol program has worked out extremely well, with a minimum of adverse repercussions. Fourteen weeks after decontrol was proclaimed, the exchange rate began to stabilize at levels reflective of the real external value of the peso. Since May, the selling rate of commercial banks has kept within the range of P3.87 to P3.92 per U.S. dollar. A new stabilizing factor has emerged with the sub­stantial increases in forward exchange transactions during the last twelve months from $0.26 million in February to $50.41 million in November.

The favorable effects of decontrol have registered them­selves conspicuously. Our export receipts increased by $103 mil­lion over the previous year, while our import bill decreased by $72 million. In contrast to a trade deficit of $144 million in 1961, our external trade accounts showed a surplus of $31 million last year. Our international reserves grew from a level of $103 million at the beginning of the year to $140 million at the end, in spite of the large amount of foreign repayments and of our long term and preferred foreign com­mitments from $341 million to $137 million. Operating receipts of the national government increased by P290 million over those of the past year. The total paid-up capital on new corporate investments rose from P100.6 million in 1961 to P110.3 million in 1962, reflecting an increase of 9.6 per cent. Agricultural production increased by 6.5 per cent in palay alone, and 7.1 per cent for all food crops. Industrial production for the first six months increased by 7.3 per cent.

The year also brought in external developments which will provide us with more resources for future development. The first was the passage by the United States Congress of the War Damage Act, providing for $73 million, which would bolster our balance of payments position. The second was the decision of foreign aid agencies to integrate their aid programs with our own socio-economic program.

Prices

The effect of decontrol on prices was moderate and far less disturbing than what was originally anticipated. In this connection, may we be permitted to correct once and for all the misrepresentation that during the presidential campaign we pledge to lower prices. We did not make any such com­mitment. We could not have made such pledge considering our platform for decontrol. Anyone who persists in claiming that we made this pledge is deliberately, maliciously, and ir­responsibly misleading the people.

Our pledge during the campaign was not to lower the prices but to stop rising prices, which are two different things. This is evidenced by our posters and radio jingles all over the country which cried; “Stop corruption! Stop rising prices!” There was only one commodity the price of which we pledged to lower—and that was rice, the staple food of our people. We have fulfilled this specific pledge and consider­ing that rice is the prime food of our people, we will continue to do everything that is in our power to insure that rice is made available at lower prices at all times within the reach of the masses of our people.

Although it was not our pledge to lower the prices of commodities but to stop their inordinate rise, the objectives of our socio-economic development program once attained will in truth result in the equivalent of lower prices. As the real incomes of our people rise due to increasing production and greater employment, our people will be able to buy more goods because of larger incomes, even though prices may be somewhat higher in peso terms.

Pending the arrival of that stage in our socio-economic development program when income levels will be much higher— and purchasing power correspondingly greater—what is the present situation on prices? Although prices all over the world have been rising, the rise of prices in the Philippines has been so moderate that, according to a world survey made by the Associated Press in November, 1962, prices in the Phil­ippines are second to the lowest in the world. According to this survey, the lowest prices are in the Netherlands, second in the Philippines and third in Egypt and the highest prices are in France, second in Italy and third in the United States. During the past year, the consumer price index increased by 6.7 per cent in Manila and by 4.3 per cent outside Manila. In comparison, after currency reforms in other countries similar to our decontrol, prices increased by 12 per cent in Mexico, 15 per cent in Thailand, 30 per cent in Indonesia, and 102 per cent in Argentina.

This is the important fact; that price levels have been stabilized and real incomes are rising through the increase in production and job opportunities brought about, by our socio-economic development program and the Emergency Em­ployment Administration, Opposition leaders are authority for the thesis that it does not matter if prices in peso terms are rising, as long as the real incomes of the people are also rising. That is exactly what has been done and what will continue to be done: increase jobs and incomes. The incomes of the government personnel, including the armed forces, have been increased. The total increased wages in the public sector amounted to P93 million. Increase of wages in private enter­prises has also been correspondingly taking place. The incomes of the producers, farmers and exporters have been increasing because of the higher peso value of their produce and exports as a result of decontrol. The income of coconut producers alone has increased by P145 million.

One difference between the recent past and the present may be stated to be that in the past, prices continued to rise exorbitantly without hope of relief for the people. At the present time, the people have been assured of rice and corn at lower prices; the prices of other prime commodities have been stabilized; and there is not only hope but legitimate ex­pectation that with the passage of time the quantity of goods and services will so increase and incomes will so rise that prices will be well within the reach of our people.

The achievement of relative price stability was due in large measure to the increase in domestic production and to the operations of the Rice and Corn Administration and the NAMARCO. A major stabilizing factor was the observ­ance of monetary and fiscal prudence on the part of the Ad­ministration as a precautionary measure incident to decontrol in order to forestall speculation, to keep the exchange rate in rein, and to cushion the excessive monetary expansion per­petrated in 1961.

Credit

As an initial step incident to decontrol, credit was tightened by the Central Bank, but credit restrictions were relaxed from the second quarter on. The liberalization of credit was made permissible by the stability of the exchange rate and the exercise of fiscal responsibility. If complaints of money tight­ness continued to be raised, the reason was largely statutory rather than regulatory for the lending capacity of several banks had hit the limit imposed by law on the ratio of their net worth to their risk assets. In order to expand credit in the scope that will be helpful and non-inflationary, legis­lation is necessary, as will hereafter be proposed.

Fiscal discipline was achieved by keeping government spend­ing from unduly expanding and by increasing revenue collec­tions. The broadening of the tax base as a consequence of the change of value of the peso and the intensification of customs and internal revenue collections improved the fiscal position of the Government. The result was the generation of a cash surplus of P159 million during the second half of FY 1962 to offset partially the cash deficit of P246 million incurred during the first half under the previous administration. Thus, the over-all cash deficit incurred in the first six months of the fiscal year was reduced by P87 million, after repaying the obligation incurred by the past administration to the Central Bank in the sum of P100 million. During the first calendar year of our Administration, we achieved a cash surplus of P16 million as compared to a deficit of P215 million in the corresponding period of 1961.

The use of monetary and fiscal instruments for the preser­vation of stability after decontrol was complemented by a set of specific commercial policies to protect and encourage local industries. As a result of investigations made by the Tariff Commission and the National Economic Council, we revised the tariff schedules in January and June last year and again in January, this year to accord more protection to do­mestic producers of essential commodities, particularly textiles. These modifications embraced over 200 domestic industries employing about 40,000 persons.

We also took positive measures through the Department of Finance to counteract the dumping of certain subsidized foreign products such as black iron, galvanized iron pipes, and truck tires and tubes. Had these not been imposed, some of the moat essential industries operating in the Philippines would have been adversely affected.

The foregoing steps taken were, among the many efforts undertaken, in cognizance of the temporary disruptions which inevitably accompany a major shift in the fundamental pattern of our economy. The removal of artificial market structures, the elimination of windfall exchange profits, the placing of entrepreneurs on a free competitive basis—all these had to be achieved in the soonest possible time with the least possible dislocation.

Full Decontrol

It is desirable to effect full decontrol by providing a substi­tute for the 20 per cent retention of dollar export receipts by the Central Bank. Such step will pave the way of the early establishment of a fixed par value for the peso which will provide greater incentives to exports, facilitate long-range plan­ning and greater inflow of foreign investment. A substitute measure would yield more revenues to the Government than the 20 per cent retention scheme the proceeds of which do not entirely accrue to the National Government but merely places the Central Bank in a position to support the Government expenditure program in an amount equivalent to the peso rights accruing to the Bank from the 20 per cent requirement.

The substitute source of revenue should not fall indiscrimi­nately on all exports because this would go against one of the objectives of decontrol which is to stimulate the develop­ment of new and specially processed and manufactured export goods. The impost should bear mostly on exported raw ma­terials and should exclude manufactured goods. An untaxed raw material export is a burden on domestic processors, who have to pay domestic sales taxes and a subsidy to foreign labor and capital, thus fomenting unfair competition against our processed exports.

WELFARE OF THE COMMON MAN

The Administration has unequivocally committed itself to the mission of alleviating the plight of the common man. It is explicitly one of the major goals of the Socio-Economic Program that the less fortunate masses are provided a larger and increasing portion of the Nation’s economic and social benefits, and that the transition to a free market is done as helpfully as possible to the common people.

Toward this end, we have implemented various measures primarily designed to make available the basic economic neces­sities of food, shelter and clothing to the masses at prices they can afford.

Rice and Corn

One of the major problems which we have sought to elimi­nate has been the recurring shortages in our staple foods. Since the enactment of Republic Act No. 3452 creating the Rice and Corn Administration (RCA) last June, we are pleased to state that the rice crisis, which had been persistently plaguing our economy and which necessitated the importations of rice, particularly in 1961, is now an event of the past. To be more specific, in 1961 it cost our people P60 million in rice importa­tion without solving the problem; in 1962, without importation, it cost the RCA only P1.5 million while paying Pll.50 per cavan of 45 kilos of palay to the rice growers and distributing rice at P0.85 to P0.95 per ganta to the consumers.

As a result of its operations, the RCA has been able to accomplish, with exceptional success, the primary objective of not only stabilizing the price of rice and corn, but also providing the necessary incentives to our farmers to produce more of these staple foods by offering them a fair and just return for their produce. Since the last harvest, the RCA has embarked on massive palay procurement operations. It is now operating about 150 warehouses throughout the country with an aggregate capacity of six million cavans of palay. In addition, the RCA operates over one hundred mills capable of processing 10,000 cavans of rice daily.

The National Economic Council has estimated a surplus of over eight million sacks of palay by the end of the current crop year.

In conjunction with the operations of the RCA, the Rice and Corn Board has actively implemented the Rice and Corn Nationalization Law in accordance with the law’s spirit and intention.

In the success achieved by the RCA in coping with the rice problem, acknowledgment is due not only the adminis­tration leaders in Congress but likewise the opposition leaders who cooperated fully with the rice and corn program of the Administration, particularly Senate President Eulogio Rodriguez and former Speaker Daniel Romualdez.

The spectacular success that has been attained in solving the rice problem and avoiding the recurrent rice crisis, which was achieved with the help of leaders of the Opposition, is an indication of what real cooperation between the Adminis­tration and the Opposition can accomplish to help our people in their difficulties. We keep on praying that in the midst of our partisan strife, the light of Divine inspiration will one day illumine our minds and hearts in order to persuade us on both sides to cast away our differences and in a mag­nificent moment of national solidarity act in unison to solve successfully together the problems that are working hardships on our people.

Fish

Having coped with the problem of providing rice to our people, we moved to develop the fish industry in order to complete the components of the food of our people—rice and fish. Toward this end, the Emergency Employment Adminis­tration (EEA) has worked out a P15 million fishery develop­ment project with the Bureau of Fisheries, which is expected to increase fish production within five years by about P45 million annually. This fishery project includes, among others, the establishment of twenty stationary fishing nets in coastal provinces and fishing grounds, and the construction of sixteen fishing ports as well as refrigeration stations in strategic coastal provinces.

Prime Commodities

To cushion the increased procurement costs of imported prime commodities in 1962, we created, with the cooperation of the leaders of the Opposition, a bipartisan Technical Com­mittee on Prices last July for the purpose of studying and recommending measures which would best achieve the stabili­zation of the prices of prime commodities at reasonable levels.

In accordance with the Committee’s recommendations, the NAMARCO has been importing, since July of last year, the net national requirements for milk, sardines and corned beef, and selling them through its outlets at landed costs. As a result of this intensive program of importation by the NA­MARCO, the prices of imported prime commodities have been stabilized at prices within the reach of the masses.

On the basis of the findings and recommendations, of the Secretary of Health, the Administration imported over half-a-million pesos worth of life-saving drugs. The direct im­portation of life-saving drugs is a temporary measure during the period of transition which is intended mainly to provide relief to the masses who still cannot afford to pay for these prime drugs. We wish to commend our domestic drug manu­facturers for maintaining pre-decontrol price levels.

The Administration realized that certain industries in the private sector could be affected by the NAMARCO’s importa­tion program. Consequently, steps were taken to limit the items imported by NAMARCO and slowly shift activities to­ward promoting the increasing acceptance by Filipino consumers of locally-made articles. The NAMARCO has started to embark on an extensive program of procuring, distributing and merchandising locally-produced goods.

Moreover, the Department of Commerce and Industry has taken steps to encourage local investors to establish whole milk factories, meat and fish canneries in order to lessen and eventually eliminate our dependence on imported prime com­modities. The response of the private sector has been gratify­ing. By the first half of this year, we look forward to the operation of a whole milk factory, and in the near future, the establishment of fish and meat canneries which will eventually render the NAMARCO importations of prime commodities unnecessary.

Shelter

Next to food, steps have been taken to provide the people with adequate shelter. The administration is striving hard to rectify the deplorable housing conditions of the masses. Toward this goal, bids have recently been opened for the construction of a P3 million multi-storey tenement project in Tondo as the first phase in the Administration’s massive housing program for the poor. Two other housing projects have been scheduled for construction in other Manila districts and one in Makati. The program calls for the construction of similar multi-storey tenements in urban sites in the provinces. We hope that through this program of making available decent dwellings at reasonable costs to the low-wage earners, the situation wherein the poorest of our people will be adequately housed and sheltered will become a reality in the immediate future.

Clothing

Having taken steps to provide our people with food and shelter, measures were likewise undertaken to provide them with clothing. In order to make adequate clothing available to the masses, we launched, with the cooperation of the Textile Mills Association, a program for the production and distribution of a low-cost, durable cotton material known as the “Pag-Asa” cloth which costs P0.95 a yard for men and P0.65 a yard for women, ex-factory. Through this program, we hope to fulfill the objective of the low-income people being adequately yet inexpensively clothed,

Income

The program to provide our people with their essential need in food, shelter and clothing would be futile unless we give them an opportunity to earn the income with which to quire these needs. Our first step in this direction was to increase the income of the wage-earners. Republic Act No. 3500 which was enacted last year created a Salary Adjustment Fund amounting to P16.2 million. From this fund, we effected, an increase of at least ten pesos a month in the salaries of approximately 91,000 government employees.

Employment

The next step was immediately to provide the people with employment while awaiting the creation of job opportunities private enterprises as envisioned in the five-year socio-economic development program. To achieve our goal of pro­viding maximum employment opportunities in public economic development projects, the EEA embarked last November on a nation-wide program with the immediate aim of alleviating the deplorable state of unemployment and underemployment in the country.

The bulk of the projects undertaken by the EEA are in the nature of productive public works such as the construc­tion, improvement, and repair of roads and highways, find irrigation projects throughout the rural areas.

Mention has already been made of the EEA large-scale fishery project. In the field of handicraft industries, the EEA has recruited and trained the necessary labor for the National Cottage Industries Administration (NACIDA) according to the latter’s standards and specifications.

The EEA is also actively supplementing the program of the Bureau of Agricultural Extension through the tapping of fresh agriculture graduates and their assignment to various municipalities and barrios lacking extension workers. One of the requirements for agricultural extension workers, which is an improvement of the past practice, is for them to reside in the barrios.

In coordination with the National Resettlement and Reha­bilitation Administration (NARRA), the EEA has embarked on twelve projects for the clearing of land and the construction of feeder roads encompassing a total area of 20,000 hectares. Furthermore, it has undertaken intensive work in forest con­servation and reforestation together with the Bureau of Forestry.

University for Workers

In our mission to build a better future for the common man, we did not confine ourselves to helping him acquire the food, shelter and clothing that he needs, and the income with which to obtain such needs. We proceeded to open an additional and special opportunity for his children to attain a higher success than was possible for their elders. It is in this spirit that the Administration launched the establishment of a Labor University in Makati, Rizal, which will provide the common man with the opportunity to aspire for greater achievements through the acquisition and development of the necessary skills required by our expanding economy.

Workers as Proprietors

In addition to opportunities to have food, shelter, clothing, income and higher education, we likewise opened the oppor­tunity to the common man to become a proprietor and to be­come acclimated to the responsibilities of such station. It was for this purpose that the Administration sold the National Development Company textile mills in Manila to the labor unions. This bold experiment, which is an unprecedented case in Philippine labor history, is a manifestation of our pro­found desire to improve the lot of the common people. Should the workers succeed in this epochal grant of opportunity to them to become proprietors, the gates of similar oppor­tunity will be opened wider in other disposable government enterprises.

Abolition of Tenancy

Having passed successfully through the crucial period of transition from a controlled economy to free enterprise, it is time that decisive action be taken to effect the now long-delayed land reform. Land being our most valuable resources, salutary changes is imperative in the land system. Our agricultural productivity has tended to be static; farm incomes have re­mained below subsistence level.

The most basic cause of this failure is the land tenure system. About one-half of our farmers remain share-croppers, perpetually in debt to landowners who not infrequently are non-resident landowners. So long as this condition persists, agricultural development will be sluggish. The structure of agriculture needs to be recast before any appreciable growth in productivity and incomes can be possible.

The Land Reform Act of 1955 has failed to bring about significant changes. Still intact is the tenancy system which tends to perpetuate traditional farm methods as it provides no incentive for greater production. Under this system, in­creases in yield through scientific farming accrue mostly to the landowners. On the other hand, for his extra effort and investment a tenant receives less than one-fourth of the net proceeds from improved farm practices. The inevitable result is apathy among tenants towards more productive farm techniques.

We must now confront the land problem with the realism, courage and boldness that the situation demands. We must no longer stall or equivocate. The time has come to abolish tenancy in our farms.

We should replace tenancy with owner-cultivator ship with due regard to the just rights of the former landlord. As a people who take pride in freedom as a way of life, we must now do away with tenancy which has become the centuries-old tattoo of economic slavery and social degradation for the man who tills the farm. We must establish a new and economically-sound set-up in which the former tenant will be­come a dignified participant in bringing forth the productivity of the good earth. We must give the tenants liberty from economic peonage, in which they have long languished, so that they will become free men who will share with dignity in the task of building the Nation.

In doing this and in setting up the tenant farmers as in­dependent landowners, we shall release tremendous productive energies that will boost economic and social development. We shall release large capital resources tied up in absentee land­lordism to business and industry. We shall set our tenants free from poverty and debt.

An over-all program to abolish tenancy, as well as to assist farm laborers and wage earners, the free settlers of public land and farmers owning private land of less than family size, will bring about an overdue readjustment of our social struc­ture; it will correct the present imbalance in our society, where there are enormous concentrations of land, wealth and political power in the hands of a few. It will set loose the energies of millions, put new life in the rural areas, and raise pro­ductivity, mass income and purchasing power. Not least, the land reform program will make democracy truly meaningful to our people.

Labor

In addition to the specific measures we have implemented to cushion the lot of the common man during the transition to a decontrolled economy, it would be well to mention the services of those government agencies primarily concerned with our people’s welfare.

As industrial peace is essential to the nation’s economic growth, the Administration’s policy is to promote labor-manage­ment cooperation concomitant with the growth of free and responsible trade unions. The Department of Labor has been increasingly active in the role of arbitrator and conciliator for both Labor and Management. With the Department’s active assistance, around four hundred collective bargaining agree­ments were signed and close to three hundred other agreements adjusting grievances were reached.

We have commenced action against unscrupulous labor leaders in order to protect labor from exploitation from their own ranks. It is hoped that the limited action we have taken in this regard will sufficiently promote responsible labor leader­ship for the well-being of the workers and that, toward this end; it shall not become necessary to expand deterrent measures.

At the same time, the Administration successfully extended the protection of the law to farm workers, particularly in the sugar industry.

Labor-management frictions are bound to arise especially in a growing economy, as evidenced by the occurrence of labor strikes which spurred undue excitement last year. It may be pertinent to note, however, that while over 32 per cent of the strike notices filed with the Labor Department in 1961 matured into strikes, the comparative figure for 1962 was only 17 per cent, a figure almost twice less than that for 1961.

Education

Basic to the efforts toward economic expansion and the growth of social benefits to the common man is the proper education of the citizenry. It was toward this objective that the Department of Education formulated policies and imple­mented measures to improve the quality of instruction and to strengthen the curricula in all levels of instruction. Thus, during the past year, 13,000 new classes were opened by the Department of Education on the elementary level as compared to 10,300 new classes opened during 1961.

Health

Through the Department of Health, the Administration directed intensive efforts toward the prevention, if not the total elimination, of the diseases and epidemics which threaten the health of our people.

When we assumed the burden of handling the people’s affairs the most pressing problem of health which confronted us was the raging El Tor epidemic. Through the aggressive implementation of health control measures, the authorities were able, within a short period of time, to contain the epidemic.

In the same manner, we have acted vigorously to meet a possi­ble smallpox threat from abroad by ensuring an adequate supply of vaccine through importation.

The Health Department has expanded its rural health units with the establishment of 33 additional ones, while expansion of hospital services was achieved through the completion of 31 hospitals with a total capacity of 1,050 beds.

Social Welfare

The Social Welfare Administration, for its part, has un­dertaken the construction of a Regional Vocational Rehabilita­tion Training Center for the blind and other physically handicapped. Moreover, it has implemented creditably Republic Act No, 3467 which created a Calamity Fund of P14 million for the rehabilitation of some 45,000 families who suffered in the floods and typhoons that ravaged the country early last year. Material aid valued at P250.000 was extended to some 64,000 destitute families. The political factor in the dis­tribution of relief by the SWA has been virtually eliminated.

A regular committee on relief has been created headed by the Executive Secretary and the Social Welfare Adminis­trator. This has made possible the instantaneous ministration of relief in the event of calamities.

BASIS FOR GROWTH

Aside from attending to the pressing problems of restoring stability to the economy and providing for the immediate needs of the people, we addressed our efforts to the third goal of the nation’s socio-economic program of providing a dynamic basis for the future growth of our economy.

Upon adoption of the Integrated Five-Year Socio-Economic Program, which aims at increasing our gross domestic product over the five-year period at a compound rate of 6%, we es­tablished the technical staff for translating this basic program into action. We started the operation of this machinery for the implementation of the Program without delay.

Implementation

The machinery that we set up for implementing the Pro­gram was in consonance with a basic philosophy that should bear on all government decision-making: that all the public resources at the disposal of the Government shall be pro­grammed and allocated carefully and efficiently and concentrated on projects that contribute most substantially to the country’s productivity. Our procedure departs radically from the past methods of wastefully allocating the government’s capital funds in a haphazard, uncoordinated and dissipated and often political fashion, resulting in the forfeiture of the large benefits the country could have obtained had they been pro­grammed more rationally and imaginatively.

In addition to creating new bodies, we have revitalized existing agencies and rapidly transformed them into effective executive arms for implementing our economic program.

Thus, the integrated Five-Year Socio-Economic Development Program is now underway. The Government is now financing a set of capital and development projects under a special three-month master budget which we have drawn up within existing authorizations for the purpose of continuing or com­pleting those existing projects that have immediate priority in terms of the requirements of the over-all Program. These projects are now being undertaken by the Department of Public Works and Communications, National Power Corporation, NAWASA and other appropriate government agencies.

The implementation of the Program will require the con­tinuous construction of fixed and lasting facilities, on the part of the private and the public sector, for the production of necessary goods and services. In the private sector, these facilities include new farms and farm improvements, new factories, and more mining facilities. In the public sector, they include those basic overhead facilities such as roads and bridges without which the private sector can not advance.

The Public Sector

In the public sector, the Government has the responsibility of using its resources wisely and imaginatively to build, as permanent structures, the social capital necessary for the coun­try’s growth. We accept this in order to stress the long-term nature of our undertaking, to underscore the need for legislative cooperation, and to emphasize the need of concentrating the government efforts and finances on integrated and long-term projects, rather than spreading them thinly on activities that may give the impression of immediate accomplishment but contribute little to lasting social productivity.

The Private Sector

In the private sector, the Government’s efforts in imple­menting the over-all economic program will be to facilitate the growth of private enterprise. The specific projects that we have scheduled during these five years in the field of trans­port, communications, and allied public services are aimed at providing the private sector with the facilities which it needs in order to establish and expand its productive ventures. It is the responsibility of the Government to formulate and execute policies that would establish the proper climate, as well as to provide a framework of legal and administrative precepts that would attract the private sector into channeling its resources into those enterprises that are most desirable from the national viewpoint.

The promotion of high-priority private industries under a system of free enterprise is the most challenging task that faces the Government. It is a task that demands imagination, sensitivity to the businessman’s problems and goals, and de­dication. Indicative of the prospect of successfully meeting this responsibility, we are happy to report to Congress that no less than P1,060,000,000 in new ventures have been formalized in 1962 and that work on these enterprises has begun.

One of the basic reasons for dismantling exchange controls was to provide a more stable, rational and realistic basis for the formulation of business plans, in place of the artificial attractions created by the controlled rates in favor of industries that were highly dependent on imported materials. Accord­ingly, we have established the proper climate for encouraging more ventures into the following basic fields: steel; the fabri­cation of metal products, including machinery and appliances; basic chemical and fertilizer; glass and cement; veneer and plywood; pulp-making; food processing and packing; and allied industries.

With the end in view of laying a basis for the future growth of domestic industries in wholesome directions, the Government has spent the past year in preparing and estab­lishing the machinery for assisting these industries along two principal lines: first, in the area of project development; and second, in the area of financing.

In the area of project development, we have taken measures to help industrialists in the difficult process of preparing and planning for ventures in which the country has had little experience. Among others, we have concluded arrangements with the Agency for International Development (AID) to cooperate with the Philippine government in establishing in this country on a long-term basis, an office of technical men from abroad with extensive experience in the engineering, financial, eco­nomic and market planning of projects. Their main function will be to assure the soundness of projects that local businessmen are planning to undertake, and make them acceptable for financing by foreign institutions were necessary. We have also charged the Department of Commerce and Industry with the task of serving as the clearing house of business problems and of minimizing, if not eliminating, the thousand and one bottlenecks in obsolete government procedures and requirements which have been left over from a decade of controls.

We have also readied ourselves to take positive steps to encourage and provide the proper climate for savings and investment among the small people, so that the opportunities and rewards offered by industrialization and economic growth will be extended to them not only as workers but as owners as well.

Private Industrial Development Bank

In the area of financing, in fulfillment of a plan announced in our message last year, the Government has pushed through the establishment of the Private Development Corporation of the Philippines, which will mobilize and provide the long-term capital which industries of the future will need. The Corpo­ration will start operations within the first quarter of this year with total investible funds of P112.5 million including $15 million which will be contributed by the World Bank, P7.5 million from fifteen foreign banks, and P27.5 million by the Department of National Defense in collaboration with the AID. It is hoped that the AID will make up to our military organization this appreciation for the priority of our eco­nomic progress by using its good offices to augment future military assistance to our military forces.

We have reoriented the lending policies of the government financial institutions such as the DBP, the GSIS and the SSS in order to give priority to the intermediate and basic industries which we seek to establish in the near future.

Foreign Investments

We are gratified that in the past year, keen interest has been shown by businessmen in America, Europe and other parts of the world for the investment opportunities in the country which were opened by the Administration’s policy of private enterprise. We must continue in an even more vigorous manner to welcome foreign capital and investments in. our country. Domestic capital is inadequate to sustain economic enterprises to the extent and magnitude required for the needs of our fast-growing population. Foreign capital, preferably in joint ventures with Filipinos, is needed and will be welcome in our country within the foreseeable future. As our Administration protects Filipino investors, it guarantees to foreign capital and investors fair treatment, and warrants against confiscation and expropriation. We also allow full repatriation of profits as well as capital.

With the foregoing integrated and coordinated measures, we feel confident that we shall have laid the groundwork for a balanced developing economy.

FOREIGN AFFAIRS

Notwithstanding the preferential attention that we have given to moral regeneration and economic growth, we have accorded due attention to all other public services. We pause now to present what the Administration has undertaken in vital fields of government although attending to all respon­sibilities to the people.

With the avowed aim of raising the level of our inter­national prestige, reforms have been carried out in the Depart­ment of Foreign Affairs in order to safeguard and enhance the career service. The political prostitution of the Foreign Service has been firmly resisted.

Philippine-American Relations

With respect to our vital relations with the United States, we are happy to state that we are forging closer ties with the former mother country within the framework of political and economic developments. The approval by the U.S. Con­gress of the $73 million war damage claim has done much toward closer understanding of the mutual problems confronting both countries, and has reaffirmed our faith and confidence in the sense of fairness of the American people. We are elated that the United States has increased the Philippine sugar quota, thus ensuring higher export earnings for the sugar industry and additions to our international reserves.

Philippine-American relations are closest since the found­ing of the Republic. No major problems exist between the two countries. We are gratified at the convincing readiness of the American Government to assist our country in every practicable way in meeting our problems. On our part, as shown by our position in the Cuban crisis, we stand ready to stand by the United States as the leader of the free world in any crisis involving our common security and the defense of mutual ideals and interests.

Other Countries

Closer dealings have been promoted with Asian countries to a point where our neighbors have been keener than in the past to have collaborative efforts with the Philippines for common benefit and in the interest of the region. More­over, closer relations have developed with other countries, par­ticularly with Spain. Steps have been taken to establish on a clear and stable basis the broad relations between the Philip­pines and Japan and the adjustment of long-pending problems between the Republic of China and this country.

Communism

In the context of the cold war, the Philippines had firmly aligned itself against Communism. There have been some questions raised about our uncompromising stand on the matter, but we cannot afford to succumb to the ever-present temptation to relax on our stand. Although we strive so earnestly for economic progress such ideal will be futile if our free and democratic way of life is subverted and lost through lack of vigilance.

The Administration has accordingly maintained relentless vigilance in combating the infiltration of communism in vital sectors of the Government and our society. Through our suc­ceeding program of economic and social progress under the aegis of democracy, the communist enemy is being pushed into retreat and defeat.

The vigorous peace and order campaign launched by the Philippine Constabulary last year, which laid emphasis on intelligence operations in coordination with other intelligence and police agencies, resulted in the capture of three top communist leaders in Quezon City last July, and in the sur­render of Benjamin Cunanan alias Commander Hizon in Arayat, Pampanga.

The Intelligence Service of the Armed Forces was respon­sible for the arrest last May of twelve staff members of the Chinese Commercial News which is suspected of being the propaganda organ of the Chinese Communist Party. Intense and thorough intelligence operations also brought about the discovery of Political Transmission No. 17, a subversive docu­ment of the Chinese Communist Party.

North Borneo Claim

The most important action taken in the field of foreign relations in the past year was the official filing on June 22, 1962 with the United Kingdom of the Philippine claim of sovereignty, jurisdiction and proprietory ownership over North Borneo as successor-in-interest of the Sultan of Sulu. We are gratified at the good will shown by the United Kingdom in holding the talks in London in pursuance of our note on June 22, 1962, in which talk an opportunity has been opened for a friendly scrutiny of the Philippine claim, taken with the security problems of Southeast Asia.

Contrary to allegations in some political quarters, this was not a precipitate action. We have personally studied this claim over a period of years. While serving in the Department of Foreign Affairs in 1946, upon a study of this claim in connec­tion with our successful negotiation for the reacquisition of the Turtle Islands, we advocated the filing of this claim.

In 1948, while serving in the Philippine Embassy in Wash­ington, DC, we went over the claim with an American expert in Anglo-Saxon law in George Washington University who sustained the view that this is a valid claim. When we served in the Congress of the Philippines, we successfully authored and sponsored in 1950, a resolution for the filing of this claim. Upon becoming President of the Philippines, acting on the conviction that this was not only a valid claim but that its presentation was demanded by the national interest, it became our inescapable duty to act on the bipartisan resolution of the House of Representatives on April 24, 1962, that the claim be filed now or never.

The situation is that the Philippines not only have a valid and historic claim to North Borneo. In addition, the pursuit of the claim is itself vital to our national security. We could not merely view the placing of North Borneo under Malaya, without presentation and consideration of our legitimate claim to North Borneo. Our claim to North Borneo cannot be less than the claim of Malaya to the territory not only on the basis of superior juridical and historic rights but in the vital in­terest of our national security.

Malaya has no valid claim or right to take over North Borneo. Furthermore, if through arbitrary arrangement, the Borneo territory is placed under Malaya, the latter cannot likely insure for long the security of North Borneo for the free world. A profound and farsighted contemplation of the present and potential security posture in the whole region will conclusively support the judgment that the restoration of North Borneo as part of the territory of the Philippines would be the durable measure that could best insure against territorial disequilibrium and restlessness in the area and could constitute the firm and stabilizing factor to maintain and safeguard the security of the region.

The project to place North Borneo, together with Brunei and Sarawak, under Malaya has already provoked a revolt in Brunei. It can be expected that Indonesia will not settle down accepting the authority of Malaya over Sarawak, Brunei and North Borneo. Moreover, the proposed Federation of Malaysia is not in accordance with the principle of self-determination, which is the accepted way out of colonialism, but appears to be a continuation of colonialism baaed only on an expedient of false security.

It was imperative that the Philippine claim be, as it was, made because if North Borneo was not to be by itself inde­pendent but was to be placed under another state there is no valid reason why, with the legal and historic bases of .the Philippine claim, and considering that North Borneo is con­tiguous to Philippine territory and vital to our security, the new State to be given jurisdiction over North Borneo should not be the Philippines.

It is vital to the security of the Philippines that North Borneo be not placed under the sovereignty and jurisdiction of another state, particularly a state on the Asian mainland like Malaya. In the event, God forbid, that Malaya succumbs to the potent communist threat on the Asian mainland, with North Borneo under Malaya, there would be created a situation in which a communist territory would be immediately at the southern frontier of the Philippines, which would pose a grave and intolerable threat to our country. Against such a threat, we know that our people will fight to the death, for they will rather die fighting for freedom than live in slavery.

Principle of Self-Determination

In laying claim to North Borneo in pursuance of the legal and historic rights and the security interests of the Philip­pines, we recognize the cardinal principle of self-determination of which the Philippines has been a steadfast adherent. In the prosecution, of our valid claim, it is agreeable to us that at an appropriate time, the people of North Borneo should be given an opportunity to determine whether they would wish to be independent or whether they would wish to be a part of the Philippines or be placed under another state. Such re­ferendum, however, should be authentic and bona fide by holding it under conditions, preferably supervised by the United Na­tions that would insure effective freedom to the people of North Borneo to express their true and enlightened will.

ADMINISTRATION OF JUSTICE

Aside from providing the striking force in the Administra­tion’s relentless campaign against graft and corruption, the Department of Justice implemented measures to insure the independence of the judiciary and to attain a speedy and im­partial administration of justice.

In order to ease the congestion in the dockets of our courts, .the Justice Department brought about the filling of the sixty-two existing vacancies in the courts of first instance with men of proven ability and integrity. A closer degree of supervision was exercised over the courts. In order to enable them to discharge their duties promptly and correctly, the Department has taken measures to ensure that the courts are furnished with sufficient personnel, supplies and copies of requisite ju­dicial materials.

The Department is readying reform proposals to strengthen the independence of the judiciary and promote speedy and less expensive litigations for the consideration of a Constitu­tional Convention to amend the fundamental law, if and when the same is convened.

Constitutional Amendments

Multiple and meritorious proposals for amending the consti­tution have been made over a period of years. Moreover, there is need for improving the administrative machinery in order to make the Government more efficient and effective in dis­charging its functions for the welfare of the people. Similarly, the courts, below the Supreme Court require improvement to bolster judicial independence, to make litigations less tedious and expensive and to generally improve the administration of justice, particularly as it affects the common people who cannot afford long and expensive litigations. Likewise, there is need of decentralizing .our government and increasing the authority and responsibility of the provincial, municipal and barrio governments.

These imperative judicial and administrative reforms can­not, however, be attained in a manner as to be effective, just and permanently conducive to public welfare unless they are based on constitutional foundations which will provide for a synchronized and well-balanced, as contrasted with a lopsided and harmful allocation of governmental powers. They should be undertaken only on the basis of constitutional changes which will make possible a synchronized allocation of legislative, executive and judicial powers for the attainment of the best interest of the people.

It is, therefore, imperative that a constitutional convention be called to consider multifarious proposals for the amend­ment of the Constitution. Moreover, inasmuch as the present fundamental law partakes of the nature of a colonial consti­tution in the sense that it was adopted during the time of the Commonwealth and that it could not take effect without the approval of the President of another country, it is desirable to update it in consonance with the fresh spirit of constructive nationalism that invigorates our Nation and which prefers that our fundamental law be not one for an unindependent commonwealth but a Constitution for our free Republic as the expres­sion and embodiment of the true and exclusive will of our sovereign people.

There is an unassailable principle, in connection with amend­ing the Constitution, that the farther the constitutional con­vention is convoked from the next presidential election, the greater the objectivity that will be attained in the consideration and approval of a constitutional change. Unless, therefore, Congress convokes a constitutional convention in this session, the constitutional, judicial and administrative reforms so pa­tently demanded by the national well-being may be well de­ferred indefinitely.

Electoral Reform

To strengthen our democracy and bolster the effective exer­cise of the political rights of the people, we must decisively undertake electoral reforms in this session of Congress which could be applied in this year’s local elections. Action on this matter has long been overdue. These electoral measures should effectively reduce and eliminate election frauds and irregular­ities which tend to defeat the popular will and reduce campaign expenses to the minimum in order to expand the chances of meritorious but unmoneyed citizens to be elevated to elective public office and leadership. The reduction of election expenses to the minimum necessary to conduct a reasonable campaign will also serve to curb corruption because it would do away with the need for candidates to receive contributions from parties who seek government favors.

NATIONAL SECURITY

In the field of national defense, a drastic modification in the plans of the Armed Forces of the Philippines was effected in order to make its activities more responsive to actual conditions such as the modernization of equipment and weapons, and in conformity with the Government’s financial ability to meet the requirements of internal security and the commit­ments for mutual assistance with other countries.

Among the measures taken along the lines of internal se­curity were the following:

(a) The modernization of the Philippine Air Force through the acquisition of jet aircraft and helicopters.

(b) The vigorous work culminating in the capture of top-echelon dissidents and bandits and the surrender of loose fire-arms.

(c) The creation of task forces to carry out peace and order and wage campaigns against blast fishing, kaingin, cattle rustling and smuggling.

We have taken measures to restore and bolster the morale of our armed forces. Among the steps taken were to enforce the retirement and other laws without favoritism and discriminations; the application of the criteria of merit, seniority and justice in appointments, promotions and assignments of army officers; increase of pay for both enlisted men and officers; and a housing program for enlisted men.

We must continue the effort to maintain and bolster the morale of our military organization and to place its various services in tip-top shape in view of their valuable service in our domestic problems of security and socio-economic effort, as well as the growing responsibilities of the Republic on the international scene. Measures should be sought in order to enable the armed forces to maintain itself efficiently and to be provided with its essential needs.

Peace and Order

Attention was given in the past year to the maintenance of peace and order by the police authorities and the Armed Forces.

The Department of National Defense has vigorously waged campaigns against smuggling, illegal fishing, prostitution, nar­cotics, gambling, illegal logging and carnapping, resulting in 1he prosecution of over 2,700 cases and the apprehension of over 24,000 persons.

“Not What is Popular, But What is Good for the People”

We must emphasize that in 1963, the improvement of the rate of economic growth shall be the main objective of our vigorous and sustained efforts. In the final analysis, it will be the resulting and solid economic foundation that will bring about the lasting benefits to our people.

This is a time of supreme challenge for all of us. To push through to advantage the gains made in the Nation’s economic effort, we are called upon to adopt implementory measures that are unprecedented in magnitude. Half-measures will not now suffice. Half-measures will only endanger the success of the critical endeavor to attain an adequate degree of economic and social progress which our people urgently need and which, if we act courageously and patriotically, is now within their reach.

It is a supreme challenge to our courage and patriotism because some of these measures may not be momentarily palat­able to the very people whom we seek to serve. The remedies are of the nature of medicine which is not instantly agreeable to the patient but which he must take for his good. They are measures which, heretofore, being politically disadvantageous, we should not even consider. So this is a time of test which will show who among us are sheer politicians and who are sincere public servants and statesmen. The test will be whether one will refrain or will courageously support those measures needed for the success of our economic program and for the good of the economy and the country but which may not be instantly popular with segments of the people. For those who are faithful to the country and those who are sterling leaders of the people and statesmen, there can be no choice except to support what is needed for the attainment of our goal of rapid economic growth and social progress despite momentary dis­approval from the public. To the true public servant and the statesman, there is only one duty—to do with courage not what is popular, but what is good for the people.

RECOMMENDATIONS

In the light of the foregoing, we respectfully recommend to Congress the following:

First, that the economic measures submitted in last year’s session and which were not passed be now enacted, namely:

(1) Further amendment of R. A. No. 85, providing for the charter of the Development Bank of the Philippines, in order to increase the DBP’s authorized capitalization to P2 billion.

(2) Amendment of R. A. No. 3127, known as the Basic Industries Act, in order to limit the application of tax benefits to industries which can properly be denominated as basic and which require some form of incentives in order to attract investors.

(3) The formal adoption by the Senate of the Integrated Five-Year Socio-Economic Development Program.

(4) A full decontrol measure as a substitute for the 20 per cent retention of dollar export receipts being made by the Central Bank.

(5) An investment incentives law for the encouragement of foreign capital, as well as domestic investments,

Second, that the resolution which we submitted in the previous session for the calling of a constitutional convention be now approved.

Third, that the bill submitted in the last session for the creation of a Moral Commission be enacted into law.

Fourth, that a bill be enacted to effect land reform, includ­ing the abolition of tenancy and assistance to farm laborers or wage-earners, the free settlers of public land and farmers owning private land of less than family size.

Fifth, that legislation is enacted to bring about electoral reforms that would reduce campaign expenses to the minimum and curb election frauds.

Sixth, that legislation is enacted to revise the tax structure and amend the Revised Internal Revenue Code in order to provide for a more equitable assessment of taxes based on ability to pay and to raise revenues to support the vital phases of the Nation’s socio-economic development program.

Seventh, that other economic measures be adopted which are essential to the proper implementation of the Nation’s socio-economic development program, namely:

(6) Amendment of R.A. No. 337, known as the General Banking Act, in order to expand credit facilities by granting greater flexibility to the operations of commercial banks and enable them more effectively to support their functions of extending short-term loans.

(7) Amendment of R.A. No. 1937, the Tariff and Customs Code, providing for authority of the President to modify tariff duties in order to extend and expand the authority in duration and scope granted to the President under Section 402 of the Tariff and Customs Code.

(8) Amendment of R.A. 1000, entitled “An Act Author­izing the President of the Philippines to Issue Bonds to Finance Public Works and Projects for Economic Development, Author­ized by Law, and for other purposes” in order to expand the Government’s borrowing authority to enable it to support more fully the Government’s investment program.

(9) Amendment of R.A. No. 16 entitled “An Act author­izing the President of the Philippines to obtain such Loans or incur such Indebtedness with the Government of the United States, etc.” in order to expand the Government’s authority to procure funds for economic development.

(10) Amendment of R.A. No. 529, entitled “An Act to Assure Uniform Value of Philippine Coin and Currency” in order to allow maximum incentives for the entry of foreign funds.

(11) A law creating a Fisheries Commission which shall foster the development, improvement, management and conser­vation of fishery resources.

(12) A law that would empower the President to reorganize the Bureau of Customs and the Bureau of Internal Revenue in order to effectively rid those offices of venalities and increase their efficiency in their vital function of collecting taxes and revenues due the Government.

(13) A law creating an Export Authority which will be charged with development of export products and the ex­pansion of foreign trade.

(14) A law creating a Food and Drug Administration which shall guarantee the quality, purity, identity, safety and potency of foods and drugs to be provided to the people.

(15) A law creating a Philippine Maritime Commission which shall provide the organizational structure for the orderly operation and growth of Philippine shipping.

Eighth, that other economic legislation than the above-men­tioned which will assure the success of the Nation’s economic program be enacted as will in due course be submitted in an integrated form in a special legislative message to Congress.

The legislative message aforesaid will embody drafts of measures enumerated in the above recommendations but the same will be merely suggestive, leaving it to the Congress and the Members thereof to formulate the bills to be acted upon along the general tenor of the proposals embodied in the Presidential message on legislation.

CONCLUSION

We conclude in the conviction that during the past year, the base has been established for a big push forward in the Nation’s battle against the poverty of our people. The execution of this leap forward in the magnitude needed for success as gleaned from our recommendations is an imperative national necessity. Not to undertake this push or to attempt it half­heartedly and without the mighty exertion required would be a crime to the Nation which future generations will surely condemn. The mighty effort expected entails unprecedented sacrifice on the part of the people and on all of us. Nothing worthwhile can be achieved without tremendous effort and sacrifice. To break the manacles that hold our people chaired to misery in order that they may, at last, enjoy a prosperous life cannot be done without supreme energy and self-denial. This is the .opportunity in generations for our people to reach and to enjoy the fruits of a better life, or in the alternative, tragically to make it recede again away from their reach. We are so convinced in the very depths of our soul about this that we venture the appraisal that if we fail our people in this opportunity, it would have been preferable that we had not gone into their service at all.

On our part, we ask for the continued faith and confidence of the people in our labors and assure them that ail that we do is for their sake and for their well-being. It is not easy to lift our masses out of poverty but we will do what can humanly be done within the period of our mandate to succeed. Having attained the highest honor that a Filipino can dream of, especially for one of our very humble origin, we have no more interest in the discharge of our office except the interest of our country and the prosperity of all our countrymen. As a warranty of our complete devotion to our duty, my wife, children and myself have together vowed to God, to ourselves and to our people that while I shall strive to spread prosperity to our countrymen, on our part, during my incumbency, we shall not enrich ourselves even by one centavo beyond my statutory compensation.

With faith in God Almighty Who watches over mankind, we shall go on, with the collaboration of all well-intentioned countrymen, to pursue and seek, undaunted and unrelenting, that state of nationhood when the Filipino race shall enjoy as a normal state of affairs a blissful and dignified life of plenty for all.