Ferdinand Marcos' Fourteenth State of the Nation Address

History has invested a prophetic dimension to the unprecedented decision which we took seven years ago. This decision, as we know, was Proc­lamation 1081, which is the foundation, the legal basis of what we have since called the “New Society.”

There can be no question now about the wisdom of that decision, nor of the orientation of the course that we have taken in the last seven years. The Re­public has been saved and continues its vital existence notwithstanding the threat that sought to divide it, destroy it, and fragment it.

On the other hand, the world has grown more perilous since then. The problems have become more complex and critical; it was just possibly a stroke of good fortune, the generosity of Divine Providence, that we have meanwhile established a government strong enough to apply political reason and political resolution to cope with the crisis that has visited not only our nation but the world.

Our experience, in simple summary, is this: In 1972, we established the crisis government in order to arrest the tide of turmoil, the course of chaos, and the momentum of the seven deadly threats to the Republic: insurgency, conspiracy, secessionist, criminality, graft and corruption, foreign intervention and manipulation, other forms of dissidence and subversion.

This extraordinary action, dramatic as it now appears, was taken within the framework of the legal order; in fact, an affirmation of the rule of law. Our initial successes were equally dramatic and extraordinary from all accounts. A new course was set for the nation which not a moment earlier was on the verge of dismemberment and ruin. However, no sooner were the seven deadly threats met when another crisis, this time not directly of our own making, threatened our national stability just as it disturbed the stability of other nations of the world. This was the oil crisis of 1973 to 1974. At the time, if you will recall, the Philippines was already drawing 95 percent of its commercial energy requirements from petroleum, a trend that was determined in the early 50s all over the world because of the convenience and relatively lower cost of petroleum.

Realizing the strategic sensitivity of ensuring our expedient and economical flow of oil from supply points to end consumers, I promulgated Presidential Decree 354 creating the Philippine National Oil Company, vesting it with corporate powers to engage in crude oil purchasing, marketing, refining and distribution. Today, PNOC-commissioned tankers move anywhere from 90 to 100 percent of our imported crude oil.

PNOC has also been instructed to initiate direct government-to-government contracts for the procurement of oil. In 1972, we did not have a single contract on a government-to-government basis. We were completely dependent on private oil marketers and suppliers. We are regarded, in this connection, as the first country to sign a government-to-government contract with Kuwait.

The economic record, therefore, for the last seven years, will clearly show that for all the political, social and economic threats to the Republic, both internal and external, our government, our Republic, our people, one and in concert, succeeded in building a new society consonant with our historical aspirations.

We cannot, by any means, say that we have established an ideal social order, for to live in this world is fundamentally to struggle at every turn, but we have defused the forces of dismemberment, disunity and destruction.

Stating this as early as 1973, when we observed the first year of the New Society, I nonetheless cautioned against complacency and backsliding, for the ills of the old society were not and up till now have not been completely up­rooted from our midst. I said then, as I say it now, we should not delude our­selves into complacency and false security. Real security depends on our continuing efforts. Sacrifices do not end, alertness does not lag when old problems are solved, for there are always new problems that confront us. These problems, in a world that has shrunk, come from without and not from within, Developing nations such as ours do not control the drift of international events. Even developed countries themselves are shaken by these events; they have not learned from these events, and when they are thus shaken, the whole world reels to the reverberations. We have one such phenomenon today.

So it is that we are now again faced with an energy crisis brought about by events beyond our control. But before dwelling at length on these, let me first assure you that despite the energy crisis that we are now experiencing, our gov­ernment intends to pursue its development goals, particularly those stated in the Five-Year Development Plan.

On the whole, policy directions for 1979 will be aimed at moving the economy closer to the target— over-all economic growth of 6.5 percent, as well as keeping the inflation rate within manageable levels. The oil price increases are related developments that have exceeded our original inflation assumption of seven percent contained in the original Five-Year Development Plan. Nevertheless, the government will continue to intensify the efforts to contain inflation. Our experts have set a maximum tolerable level of 15 percent.

The world oil crisis today has become the single, most important issue to face the peoples of the world. A world leader has advanced the view that the crisis can only be met if the people consider the steps needed to meet the challenge as “the moral equivalent of war.”

In this decade of energy scarcity, energy has become a common, although not a unifying, interest among developed as well as developing nations, of producers and consumers, of brilliant and common, ordinary men. To be sure, the oil crisis as we know it today is not mankind’s first recorded encounter with something we can call an energy crisis. And it may well not be its last. Man has experienced the energy crisis in many forms in the past; as a labor scarcity in the age of the primitive hunter; as an animal scarcity in the age of the agricultural tiller, and now as petroleum scarcity in the age of the industrial processor.

A lesson that we can learn from our past experience is simple: The impru­dence of being overly dependent on one key product or fuel. The petroleum story of the 70s appears no different from the past, so that it almost seemed natural that the world economy, functioning under the virtual monopoly of petroleum, had to stumble upon the crisis.

We have learned a lesson well, and our efforts are only limited by time as well as resources. To date, the government supplies 145,000 barrels per day or 64 percent of the country’s total oil requirements. We are indeed happy to report that because of the energetic activities of the First Lady and Minister of Human Settlements, we have added to our supply 1,200,000 barrels annually from the People’s Republic of China. At the same time, the concern of our friends and neighbors in Asia, most especially President Suharto, head of state of the Republic of Indonesia, has resulted in practically a swap of our surplus rice with their oil and an additional supply of 2 million barrels of oil annually from Indonesia.

These two sources just about cover whatever possible deficiencies there are going to be in the supply of oil in the Philippines in the immediate future.

But hand in hand with developing immediate administrative capabilities in the oil industry, which was brought about by the service contract and the discovery of oil in the Palawan area, the government has also taken a direct interest in the development of other indigenous energy resources. Again, with reasonable good foresight, we were able to lay down the institutional frame­work for geothermal development, as it was with oil exploration years before the 1973 oil embargo was declared. And today, as you know, the payoff is starting to materialize.

This monumental achievement, which I ascribe once again to the generosity of a benevolent Providence as well as to the foresight of our people and the national leadership, this monumental achievement was made possible largely through an accelerated growth of oil exploration and development launched in 1972 with the promulgation of Presidential Decree No. 87 on December 21. 1972, a few months after the proclamation of martial law.

The decree introduced the service contract to replace the concession system. A total of 30 service contracts has been granted over the various oil basins of the country. A total of 56 wells have been drilled, and within that time, we have managed six oil discoveries. In addition, seismic activities under other service contracts have opened up new areas for heretofore unexplored areas. It will be appreciated that a total of about $150 million has been sunk by oil prospectors in the continual search for oil.

As the tempo of oil exploration increase in the succeeding years, it is our hope that we will correspondingly increase our indigenous sources of other forms of energy. The strategy of the government in its dual approach to the energy problem is to accelerate the development of alternative energy resources including coal, geothermal and non-conventional energy. I need not go into how coal production has jumped by almost 100 percent over the last year or two. And we are now moving from oil-fired generators to coal-fired generators. We have changed the leases of coal land into service contracts under the same theory that we adopted with respect to the service contracts in oil prospecting.

Meanwhile, the nine-year geothermal effort has generated a total of 415 megawatts in field stream capability. The exploration or development of geothermal energy has been advancing since the pioneering work in the geothermal field in Tiwi in 1972. At present, you are well aware that there are three fields being developed: these are Tiwi, Makban or the Makiling-Banahaw complex which is barely 40 kms from Manila and therefore may become the principal source of electric energy in the capital area soon, and the Leyte geothermal project. At least, we still have another source of energy in the Batasang Pambansa.

In the field of non-conventional energy, a large degree of research and development work is now being carried out to adapt promising technologies to Philippine conditions. The national non-conventional energy program was introduced in January 1977 when 1068 was enacted. Since then, some 42 projects in the areas of solar, wind and biomass energy have been administered. These include the pilot electrification of an entire village or barangay using agricultural waste as fuel, industrial solar water heating, and biogas generation. As of end of the year 1978, 344 biogas plants have been constructed; the majority are privately installed units, less than one-third being government demonstration units. The Central Luzon region accounts for nearly one-fourth of the totally installed units in the country. Over-all, nearly 60 percent of the biogas units are in Luzon. It is now the policy of government to spread out this particular experience not only in Southern Luzon but also in the Visayas and in Mindanao.

In addition, the non-conventional program will devise technologies which will reduce consumption even of conventional fuel; for instance, one such project is the technological feasibility of utilizing alcogas as motor fuel. I have received reports from Commodore Protacio, head of the Sta. Barbara project under the Office of the President and currently attached as one of the assistants in the Ministry of Energy, to the effect that even low-grade alcohol which had been rejected because of its water content, can with the use of the device known as “alco-tipid,” be used as supplementary fuel for motor vehicles. This device separates water from alcohol as it is being used in the engine. And it can be easily made from local materials and does not require any engine alteration for its installation. The new process will be used by the Armed Forces of the Philip­pines first and then by other vehicles of government and later by private vehicles.

A support institutional program to include non-conventional technologies such as biogas and solar drying in the regular curricula of agricultural colleges and universities and selected trade schools is now under coordination between the various ministries. The Ministry of Human Settlements will spearhead the rural proliferation campaign.

As a basic policy, the non-conventional energy program aims to shorten research and development work through judicious selection of technologies and by applying relatively available technologies in appropriate utilization modes. Moreover, the non-conventional program is geared to benefit the rural sector, and most of the projects demonstrate non-conventional energy utilization for localized energy systems.

We are now on a threshold of a new era, a transition from an age of heavy dependence on oil as a principal energy source. It is unfortunate that the world has developed such a strong dependence on oil to the extent that the weaning process is proving to be traumatic for many nations in the world. And the Philippines is not an exception.

We have to realize however that the decades of me 80s and perhaps well into the turn of the century do not offer us any relief from the energy crisis as we know it today, unless we carefully plan to live with what is turning out to be the realities of our times. We have to live with the fact that we cannot continue to depend on an unstable and depletable energy source, much less an important one. The level of energy independence that any country enjoys is now directly related to its political and economic independence. Not only must we strive to develop alternative energy resources to oil: we must develop what we now have indigenously for us to feel any significant amount of security or independence. In the face of this crisis, we can at least rest assured that the government will continue to provide the same quality of leadership that has to dale minimized the effects of this worldwide crisis in our country. The same kind of foresight will characterize our planning efforts in the continuing campaign to achieve greater energy independence.

Another dimension of this issue is that while supply may be more readily available, the price of crude oil in the world markets can only be expected to rise further. Another meeting is scheduled by OPEC before the end of the year, which can only mean additional costs to the oil-importing nations of the world. Right now rationing appears to me a remote possibility, even as we restrict the sales of petroleum products to the 1978 level which is equivalent to 84 million barrels.

All this will prove crucial because the world this year experienced a se­quence of price increases for crude oil. We started the year with $12.70 per bar­rel, which went up to $14.55 plus a surcharge of $l per barrel in April. Just last June, however, the price was increased to $18 per barrel for Saudi, Arabian crude to a high of $23.50 for other crudes. This represents an over-all increase of 27 percent. As a result, therefore, the oil bill this year is expected to account for at least 26 percent of the total imports, or more than double the 1973 frac­tion. We will spend about $1.5 billion for oil this year. In 1972, we spent $150 million.

Our life style, as with other countries, will necessarily have to change. Energy conservation is now a value that must be cultivated in our children and among our people almost as intensely as patriotism and dedication to the mother country. For today, many of us must learn to live without some of the con­veniences or luxuries that are now part of the life styles of those in the upper socio-economic level. It is to this level of the society that we direct our appeal for energy conservation, in the same way that we appeal to developed nations to trim their energy appetites.

The government will continue its efforts to make the country self-reliant in energy thru accelerated development of indigenous alternative resources. We will continue to provide the kind of planning to our energy program with the kind of foresight that has thus far minimized the effects of this year’s crisis on the lives of most of our people.

I have often paid tribute to the ability of the Filipino to weather any crisis that threatens to disrupt me tranquility of his daily pattern of living. We have faced many crises in the past and we have always come out a better and stronger breed of people. It is a small comfort of course for our people to know that we are experiencing the same difficulties as the rest of humanity. In fact, the im­pact of today’s energy crisis, from alt indications, appears to be the hardest on people living in developed countries of the world because it has abruptly caused a change in their accustomed life style. The reaction, in fact, of many of these people is a feeling that somebody, somewhere has deprived them of their per­ceived right to use energy as they please. In many cases, the reaction of these people, particularly those in big countries like the U.S., has been violent.

We in the developing world, particularly the Filipinos, perhaps, are better equipped to weather this crisis, for we have long been used to deprivation and impoverishment. We are not only more patient but, perhaps, more resilient to adapt to the changing environment, more ingenious in providing for our needs by whatever means, and less dependent on the machines that have become so much a part of daily existence in the developed world.

I should like to once again express my confidence in our ability to live with, adjust and meet the energy crisis. As our people realize the importance of this issue, I am confident that they will positively read in the knowledge that indi­vidual response to this crisis is as important as what governments can and are now doing to minimize the effects of this crisis on the people.

I have dwelt at some length on the problem of energy because it is the primary concern of all our people. On the other hand, the energy problem will long remain the controlling factor in our continuing struggle with other deve­loping nations for economic and social emancipation. To many economists and social thinkers, this objective is a dream that seems to be receding, for in their judgment, the human prospect as a rule is horrible. I must say, however, that the times may be bleak, but the worst thing that could happen to mankind is for its leaders to listen to the voice of despair and pessimism. While it is true that the problems of mankind are now gigantic and crucial, it is not the first time that man himself has faced seemingly insurmountable problems. I agree with the wisdom of those who hold, and I quote “that the pessimism about man serves to maintain status quo.”

With this in mind, let us go to the other sectors of the national economy. With respect to prices, the increase in the price of oil will pose, and continue to pose, a major problem and will critically influence the expansion of the econ­omy for the remaining months of 1979.

The increase from $14.92 per barrel to $18.97 effective July 1, 1976 means an increase of 27 percent. Translated into domestic prices, this would mean an average increase of 20.4 percent in the prices of petroleum products. Because of this and related developments, we will exceed our original inflation assump­tion of seven percent, as I have already stated. Nonetheless, it is the intention of government to exert, intensify and increase all existing efforts to hold it down to around 15 percent.

The times are difficult and we have to call for sacrifice on the part of every­one. We are doing all we can to cushion the inflationary effects of oil price increases; however, we can succeed only to some extent in protecting ourselves from the full impact of actions taken abroad. Prices of such commodities as oil are beyond the control of small nations like the Philippines. Considering our limited domestic oil resources and the need to keep the oil industry viable, it will be necessary for the government and the private sector, the consumers and the producers, to now move together in unison to attain solutions to each and every aspect and dimension of the problem.

I have spoken of conservation. Now let me move to what I consider also an important aspect of prices: food. For food constitutes about half of the consu­mer’s budget. For this reason, government’s anti-inflation policy must continue to place primary stress on expanding food production. In the past, government has launched a successful technology package to further improve agricultural production— Masagana 99, Maisan and other programs pertaining to agricultural productivity have proven to be successful. So much so, I am told, that we have a surplus of about 500,000 tons of rice available for export. We are beginning to export; in the last meetings with various countries, we have agreed to export part of this rice in view of the fact that the next harvest seems to be good. And our warehouses are bulging with rice.

If you will remember, in 1972, we imported $600 million worth of rice as we did in 1970 and 1971. Before 1973, we were a deficit country. Every year before that, we imported rice in various quantities and amounts—anywhere from $100 million to $600 million a year, depending on the climate and on the harvest of our farms. After the agricultural development program, specifically the program of irrigation, Masagana 99, transfer of technology, the credit program for the farmers, and the land reform program—although the projec­tions were that for the first four years we would continue to be a deficit country, surprisingly we became self-sufficient in rice and now have a surplus.

We are moving this experience, successful as it has been, from the produc­tion of grain to the production of all types of protein, vegetable and animal. In order to maintain the expected moderate increments in livestock and poultry, the Agricultural Investment Priorities Plan (AIPP) has already given priority to livestock production, fishery, poultry, agriculture and dairy.

In the area of agrarian reform, greater emphasis should be placed on the leasehold, on land transfer activities, as well as on settlement projects. The cooperatives must continue to be encouraged. Agrarian reform, I must emphasize, is the bedrock of our social transformation, for it relates directly to our revolution of the poor, which is the basis of our New Society.

I need not talk about the fishery sector, for as you know we have started the Biyayang ’79 Program, a supervised credit scheme for small fishermen. And at the same time, we have released a massive amount of credit for the develop­ment of all types of fishery resources, patterned after the Masagana 99.

Alongside this program, government has started to initiate complementary projects such as government procurement schemes and the establishment of cold storage facilities. All these are designed to keep the country from spending precious dollar reserves for the importation of food products.

Together with increased agriculture and fishery production, the provision of environmental safeguards to maintain the quality of life will be a major con­cern. Toward this end, the proper management of the country’s natural resources should be continuously pursued.

For the forestry sector, therefore, I reiterate the continuance of the policy that we have initiated—that we must ultimately end up with the total ban and prohibition on the export of unworked logs.

The industrial sector will continue to set the pace for the economy’s expan­sion, but steps must be taken to alleviate the undesirable effects of inflation, Foreign investment will continue to be tapped and encouraged; the incentives will be maintained, if not increased. The capabilities of Filipino managers and entrepreneurs will not be overlooked, of course, in our reception of foreign in­vestment. They are a source of capital and a medium for the transfer of technology.

Talking about the transfer of technology, I have just created a service within the Technology Resource Center that can link source and mobilize technol­ogical expertise in both government and private sectors here and abroad for pre-investment and project development requirements of a client technology user.

The government has invested funds and lime as well as talent and organiza­tion in scientific research such as the National Science and Development Board, the Philippine Council for Agricultural Research and Resources, the Plant Breeding Institute, the International Rice Research Institute, the Bureau of Plant Industry researches, the Bureau of Forest Products researches and many other projects of government that have come up with breakthroughs in many fields and should have been utilized a long time ago in either industry or agriculture and other areas of the economy. But this has not been so. The general assumption has been that once a technology is developed to commercial stage, the market machinery will automatically lead firms to adapt and invest in the technology. But this is not happening.

The critical gap is in the pre-investment and project development stage applying improved technology. Technology users, particularly firms of small capital base, cannot invest in these high-risk front-end costs. And these are not acceptable financing risks in the banking world. Furthermore, there is no sys­tem linking users to technology information and expertise suitable to both government and private sectors here and abroad.

There is a sufficient number of Filipino scientists in the Philippines as well as abroad. Abroad, I count about 6,000, more than 6,000, who are ready to help in this endeavor. But the connecting link between technology users in industry and agriculture and the scientists does not exist. I have therefore created such a link, and this is the service corps as well as its funding. We have to establish a government fund to be known as the Technology Delivery Fund which can be recovered through the proceeds of viable projects implemented by the Tech­nology Resource Center of the Philippines, and form an intermediary organiza­tion that will mobilize the supply of experts from government and private sec­tors to assist the technology users.

Of course, no one is compelled to utilize the services of this corps, but once they use such services they will have to pay for these on the basis of the viability of the project. 1 therefore created the Management Advisory Council, com­posed of government people, to be chairmanned by the chairman of the Re­organization Commission, Dr. Armand Fabella, with the Deputy Minister of Human Settlements as vice chairman, the Presidential Assistant for Economic and Developmental Affairs, Mr. Ruben Ancheta, the Deputy Minister for the Budget, Dr. Manuel Alba, and a representative from the National Science Development Board, the chancellor of U.P. Los Banos, and the chairman of the Development Bank of the Philippines, and a representative from the Tech­nology Transfer Board as members. This ties up the general efforts on the part of government to harness all available resources, especially in science and re­search, to maintain the momentum of progress that we have initiated in Philippine society.

This does not mean, however, that we are going to waste our funds in re­searches. These researches have already been made in other countries. This is precisely the role of the Technology Resource Center which will act on the ins­tructions of the technology group transmitted by me through the Minister of Energy. And this particular transfer of energy will probably have special application in the researches on energy.

At this stage, I wish to call attention to the fact that the comprehensive, mas­sive program of research and development on energy will cost half a billion pesos annually. Because of this, I am constrained to propose the addition of a tax on the energy using sectors that have the highest capacity to pay.

Because I presume this assembly to be enlightened about the very real threat of the energy problem to our national security, I request all of you to support this proposal to increase the specific tax on gasoline by a modest three centavos per liter—a greatly reduced figure from the five-centavo tax this R&D program will require. I have ordered that the tax figure be reduced because I feel that the people cannot afford the high tax. The reduced tax will involve the least dislocation in the economy. Three centavos per liter cannot be too high a price to pay for stability, security and survival.

It will be necessary for the Batasang Pambansa and the executive depart­ment to now move on to the plan to restructure tariffs as an affirmation of our commitment to fight protectionism and to work for free trade among countries. The country’s export drive must not be compromised by the increased cost of petroleum products. Solid export performance will spur the growth of the Phil­ippine economy and alleviate the balance of payments (deficit) posed by the energy crisis.

The procedural aspects of exportation must be looked into. I ask the Bata­sang Pambansa to help in simplifying such procedures. Our economic develop­ment, limited as it is by the energy crisis, must not be further decelerated by bureaucratic delays. Temporary assistance measures in favor of export-oriented industries that are severely affected by the energy crisis must be designed and implemented. Measures must be designed to encourage industries to shift to alternative sources of energy other than petroleum.

I need not go into credit policies. For as you know, largely as a result of speculative importation for inventory build-ups in the face of another round of oil price increases, the demand for credits soared. To control liquidity expan­sion and tone down inflation, various contractionary measures were instituted by the Central Bank. We have successfully kept liquidity expansion at 17 per­cent, well within the set ceiling of 20 percent, and this has moderated inflation­ary pressures.

But recently the Central Bank rediscount window has been reopened, strictly on a selective basis however.

I have directed a re-study and reassessment of the capital program of our government. I ask the Batasang Pambansa to participate in this effort.

In view of the current energy situation, the 1979 budget is expected to be ad­versely affected due to the following major factors: I) increased budgetary out­lays to finance the increased cost of priority activities, especially infrastructure; 2) adjustments in current operating expenditures; and 3) additional funding re­quirements of government corporations, especially those with international commitments.

These pressures are expected to inflate the budgetary deficit from P5.5 to P6.5 billion. However, we have imposed ceilings on the expansion of current government operating expenditures. If you will remember, when I first became President, the current operating expenditure then was as high as 85 percent. We knocked it down to 70 percent and then 67 percent. And now we have set a ceil­ing of 65 percent for the current operating expenditure in order that there may be funds available for capital expenditures especially for infrastructure, power and food production.

To minimize the impact of the oil price increases on the country’s capital program, a move has been made to review the capital projects of the Ministry of Public Highways, Ministry of Public Works, and of government corporations attached to these ministries. This is to identify the projects most essential to the attainment of the objectives of the development plan and the present external conditions. Projects thus identified will then be given priority in capital outlays.

I do not know of any men or women more capable and better qualified to de­termine the priorities of projects in the capital program than the members of the Batasang Pambansa. I therefore request that the members actively participate in the reassessment of the various projects of the capital program of the government.

It will be necessary to increase the sources of income of government. This will of necessity include taxation. There are no easy and soft choices whenever we are confronted with crisis. It is one of the most difficult obligations of leadership to impose a lax at a time when people are already suffering from high prices. However, there are no alternatives. Our options are closed. It will be necessary, however, for the Batasang Pambansa to help in the study to improve the tax collection machinery of government.

I request that the energy demonstrated by the members of the Batasang Pambansa in what sometimes may be called “peripheral areas of interest” now go into this more solid and substantial requirements of our economy and our survival. It will be necessary of course to go into various specific taxes. We must restructure, for instance, taxes on cigarettes and alcoholic beverages. There must be a consolidation and reduction of taxes on hotel room occupancy and the removal of present exemptions therefrom for certain tourist groups, the consolidation and revision of the amount of the documentary and science stamp taxes and the reimposition of the three percent contractor’s tax on agents and the contractors for embroidery apparel for export, and an increase in the fixed taxes on certain businesses.

Government will probably have to move into direct taxation more and more. This has been our basic policy from the beginning.

In consideration of the revenue target for 1980 of around P31.7 billion, the following package of tax measures may have to be considered by the Batasang Pambansa:


 * 1)     a uniform franchise tax; 2) an upward division of the percentage tax on dealers and securities and leading investors; 3) separate taxation of capital gains from sale of real property; 4) manpower training tax on Filipino professionals and non-professionals leaving the country to compensate for the brain drain; and 5) minimum income tax on all those exempt from filing income tax.

In addition to this, the government may have to use taxation as a regulatory tool to curb the wasteful consumption of energy. In this connection, we are con­sidering an upward revision of the specific tax rate on certain fuel items and the imposition of an energy tax on electric power consumption in excess of a certain minimum.

Export and premium taxes will be reviewed with the view to supporting our thrusts in export expansion and diversification.

With respect to international relations, I don’t think that there is any further need for me to clarify what is quite well-known to most of the members of the Batasang Pambansa.

While the presentation that I have just made calls for measures which will be necessary for a major readjustment period in the Philippines, I believe that we can manage through the period, although heroic efforts will be needed.

We find ourselves concerned and involved, of course, in the Indochinese tensions. Events in Indochina and the invasion of Cambodia, the counter-invasion of Vietnam by China, the confrontation along the Thai-Khmer border raise the specter of vulcanizing or fragmenting the Indochinese region.

Then we have the problem of the boat people. I have this to say, however. Whatever may be the source of the problem, whether it is the Middle East, the Southeast or anywhere else, let us reiterate our stand. The stand of our people is historical. We do not intend to get enmeshed in the internal problems of other nations, nor do we want any interference in ours. But we pray that the world may solve its problems in the spirit of brotherhood—the spirit to which as a nation we address ourselves. It is later than people realize that the world cannot afford greed and power hunger. These are the twin vices of an abundant world. But the world is no longer as abundant as it used to be. The world’s resources are getting scarcer while the population is getting bigger and bigger. By the year 2000, the world’s total population is conservatively estimated to be six billion, four-fifths of which will be in the Third World—Asia, Africa and Latin Ame­rica. Eighty percent of Asia’s population will be below 40 years of age, the majority of which will be minors or non-adults. The economic, social and pol­itical implications are appalling.

But let us not fear the future. No matter how grim it may appear, let us look it straight in the eye. For fear will weaken us. Let us not lose confidence in our­selves. As we said earlier, resiliency is our greatest asset as a people.

On the plus side, we have reason to be optimistic. We have friendly neigh­bors who have expressed their desire to cooperate with us. There are powerful nations who are concerned about our security and at the same time, very res­pectful of our independence and integrity.

The powerful nations such as the Soviet Union, the United States and the People’s Republic of China have expressed their desire to maintain peace in the world. Talks regarding arms limitations have gained in the past few years. The powerful nations have also been concerned and have been very helpful in the economic development of the developing countries.

We may say that the great problems of the world are passing storms. But while fear may be fatal, complacency will certainly be disastrous. Our ability thus far to weather all storms, external and internal, should not delude us into thinking that the quality and nature of present approaches are enough to weather present and coming crises.

Those of us who believe that the time has come to rest, to let go of our com­mand of the situation, to relax and simply indulge, are being suicidal and live in a fool’s paradise.

In this age, more than ever, and in the Philippines particularly, as with other developing nations, the absence of a political bond with the future casts doubts on the ability of nation-states or socio-economic orders to take the measures needed to mitigate the problems of the future. The aggravating factor is that the future problems are intruding into the present. And we cannot close our eyes to them.

Economists speak of a time discount in which people would prefer present indulgence to future rewards. For the future is so distant. But anyone familiar with future shock will know that the future is not distant at all. The bromide that it is later than you think is truer in the present age than any time in the past.

Time and again we have emphasized the wisdom of political scientists and philosophers. The world, the nations need to exercise their political will for the good of all mankind. One cannot have political power without political obe­dience. One cannot have a strong government without a sense of national iden­tity. And one cannot conquer the problems of man without identification with the future.

The leadership that the human predicament calls for requires the capacity to learn the resiliency to take advantage of the forces of change, the sophistication to innovate, and the wisdom to distinguish between what needs to be done and what needs to be delayed.

Leadership is not just one man but an aggrupation. There is the aggrupation called the “executive group.” And there is the aggrupation known as the “legislative group” or in the parliamentary system, the “government.” And there is the aggrupation referred to as the “nation.” And this is the reason why I have called the elections and the organization of the Batasang Pambansa, com­ing after the formation of the barangays as a necessary step towards the comple­tion of our political transformation and development. These actions followed the timetable which, I would like to think, took into account the desires and capacities of our people for political transformation. Some say that the time-table has been slow. Others say it has been too fast. But I am optimistic that further developments in the world and in our country will again provide a pro­phetic dimension to this timetable.

We cannot move too fast. We dare not move too slowly. We must pace our actions according to the heartbeat of our people and the times.

For these reasons, since world and national conditions require certain qual­ities of leadership, today I am announcing the reorganization of the Cabinet.

Under the continuing reorganization program, which the Batasang Pambansa authorized the President to undertake, there has been created by Exec­utive Order a new ministry, the Ministry of Transportation and Communica­tions. Taken out of the original Ministry of Public Works, Transportation and Communications, this Ministry of Transportation and Communications shall be the primary policy planning, programming, coordinating, implementing, re­gulating and administrative-executive arm of the government in the promotion, development, and regulation of a dependable and coordinated network of trans­portation and communications. It shall guide government and provide invest­ments in the development of the country’s entire model transport and communi­cations system in the most practical, expeditious and orderly fashion for maximum safety, service, and cost effectiveness. It shall seek to attain technic­al and economic, as well as other conditions, for the continuing viability of transport and communications and reorganize the postal system of the country.

The Ministry shall be composed of the ministry proper, the Office of the Minister, the administrative service, financial and management service, and a planning service. It shall have four bureaus, namely: the Bureau of Land Trans­portation, the Bureau of Air Transportation, the Bureau of Telecommunica­tions, the Bureau of Posts and the National Communications Commission.

I hereby appoint as Acting Minister of Transportation and Communica­tions, Mr. Jose Dans, and as consultant, Mr. Cesar Zalamea.

I have also created a new office which shall be the liaison between the national government and the two autonomous governments of Regions IX and XII. This office shall initially be known as the Commission on Islamic Affairs. I have designated, in addition to his other duties, the present commander of the Southern Command of the Armed Forces of the Philippines, Admiral Romulo Espaldon, as the first commissioner of Islamic Affairs.

It is now necessary to upgrade the efforts of youth and athletic develop­ment. Accordingly, I have promoted the incumbent general manager of the Philippine Charity Sweepstakes, Mr. Nereo Andolong, to the rank of Deputy Minister for Youth and Athletic Development, and have appointed as general manager of the Philippine Charity Sweepstakes its present assistant general manager, Mr. Mario Rama.

Two members of the Cabinet have been asking to be retired for the past several years but we requested that they continue in office until we could obtain the best possible replacements. I refer to the two venerable gentlemen, the gen­tlemen holding the position of Minister of Education, Mr. Juan Manuel, and the Minister of Health, Clemente Gatmaitan.

I have now accepted their retirement, and I have appointed to the Ministry of Education, the present and incumbent president of the University of the Phil­ippines, Dr. O. D. Corpuz.

After consultation with the various sectors of the medical profession, including the incumbent, I have appointed as Minister of Health the present director of the Quezon Institute, Dr. Enrique Garcia.

The Minister on Highways has long requested to be allowed to retire for varied reasons including that of health. But in view of the investigations that were being conducted which reflected upon his good name, he had requested that the investigations be terminated, at least, with respect to him. Although he is not a party dependent and respondent to any of these charges, I thought it best and proper that he be kept during the conduct of such investigations.

Now that the investigations indicate he has had nothing to do whatsoever with the dishonesty and corruption in that Ministry, 1 have accepted his request that he retire.

I realize the many sacrifices of many of the members of the Cabinet who have had to give up their positions in the private sector which were more remunerative, many times more remunerative than membership in the Cabinet. Among those who have sacrificed for so long are the Secretary of Finance whom we borrowed for a few years, the Secretary of Economic Planning, and the Minister of Industry, Mr. Vicente Paterno, whom I now ask again to sacrifice and take over the portfolio of the Ministry of Highways. He also holds the mission to be the trouble-shooter for the President for the entire Cabinet.

At the same time, I am afraid, I have again engaged in drawing from the private sector; on the recommendation of the Honorable Vicente Paterno himself and other specialists in this area, I have appointed as the Ministry of Indusry, Mr. Roberto Ongpin.

The same situation obtains with respect to the Ministry of Trade, Minister Troadio Quiazon has asked to be moved to more interesting activities, since he is more of a lawyer than a trader. Accordingly, I have accepted his retirement as Minister of Trade, and 1 have appointed a member of the Batasang Pambansa as Minister of Trade, Delegate Luis Villafuerte.

The Honorable Acting Minister of Justice, Minister Catalino Macaraig, has been doing a yeoman’s job in the performance of his task. It has become, however, necessary to stabilize the operations of the Ministry of Justice. In accord­ance with tradition and practice, I appoint a member of the Batasang Pambansa as the Minister of Justice. He is a former Justice of the Court of Appeals, and now chairman of the Commission on Safety of the Bataan Nuclear Power Plant, Delegate Ricardo Puno.

It has been the practice agreed upon by the members of the Batasang Pam­bansa and the members of the Cabinet to appoint more ministers of state, especially those representing the regions that are not represented in the Cabinet these days.

Accordingly, I hereby appoint as Minister of State for Foreign Affairs, the former Vice President and former Minister of Foreign Affairs. Delegate Emmanuel Pelaez.

I also appoint as Minister of State for Social Services, the delegate from Marinduque, Delegate Carmencita Reyes.

And as Minister of State for Local Governments and Community Develop­ment, the delegate from Agusan del Norte, Delegate Antonio Tupaz.

And that, my friends of the Batasang Pambansa, finishes my task, the ceremonial task of giving you an insight into what I consider the state of the nation.

Now, may I say, we have no time to lose. We cannot pause. Let us go back to work.

Ferdinand E. Marcos