Ferdinand Marcos' Fourth State of the Nation Address

I. INTRODUCTION

A Nation Transformed

I have come to report to you on a nation transformed.

Twelve months ago, I rendered to you and to the people an account of how we began to translate the Filipino dream of national greatness into reality. The central theme of that report was the achieving spirit that animated the vigorous partnership between the government and the people. Today, I ask you to witness with me the metamorphosis which the new achieving spirit of the Filipino people has brought about.

The Crises of 1966

In 1966, when I assumed the stewardship of our government, all levels of our national life were wracked by traumatic crisis. With your help, we not only succeeded in overcoming those crises, we also began to stride forcefully and hopefully towards real progress.

The Breakthrough of 1967

In 1967, the energies of the nation were spent on the construction of the physical supports of our economy and society. Our heroic efforts were rewarded by numerous breakthroughs, principally in food production, public works, construction, and education.

A Year of Expansion

In 1968, we expanded our scope to include the public services, foreign relations, domestic and foreign commerce, and industry. The year just past was distinguished by the confirmation of our competence for progress. In the barrios, to whose rapid improvement the year 1968 was dedicated, there is now a growing impatience for progress, a deeper appreciation of the need for self-reliance in meeting day to day problems of development.

A Metamorphosis

I shall describe more thoroughly our achievements last year in the next section of this report. Altogether, they signify an end and a beginning. The year1968 saw the end of frustration, resignation, cynicism and indolence, of complacency, and of indifference, the chief obstacles to Philippine progress. On the other hand, the past year marked the beginning of purposive, concerted action for national progress, the beginning of our national metamorphosis. For in 1968, we began to shed the habits of the past and to install in their stead new attitudes, new frames of reference, and new values. The result has been a widening of our vision, an expansion of our horizons, arising national strength.

This transformation is essentially spiritual.

It is a prophecy come true.

The Vision of Rizal

In his time, when there seemed little hope of Philippine freedom and progress, Jose Rizal saw that a new Philippines was inevitable. But to hasten that day, he prescribed a positive break with the past. He called on his countrymen to redeem themselves from a reputation for indolence, to acquire a new spirit for work and a new Filipino consciousness. There was no doubt in his mind about the requirements of progress: “In order that (the Filipino) may make progress it is necessary that a revolutionary spirit, so to speak, should boil in his veins since progress necessarily requires change; it implies the overthrow of the sanctified past by the present, the victory of new ideas over the old accepted ones. . . .”

In the 1890′s Rizal saw the rise of “new men” and “anew social order” within a century. In 1968, the New Filipino and the New Filipinism came into being.

I ask you to ponder this vital new force in the life of the Filipino people in relation to the pattern of national development since the 1900′s.

A Stagnant Economy

In the economic sphere, our attempts at development from the turn of the century until 1965 were long on grandiose schemes and short on real accom­plishments. Over-dependence on a few agricultural products doomed our economic development efforts to failure from the very start. In nearly half a century until our political independence, no real effort was made to end our dependence on a single market, to look for new trading partners, and to industrialize the economy.

The ancient character of our economic life persisted even beyond the grant of Philippine independence in 1946, attesting to the feeble and unsuccessful efforts to change what has always been the root of our economic maladies, the inequitable distribution of land. Excessive land holdings concentrated in a few families, on the one hand and conditions of want and tenancy approaching slavery, on the other, comprised an economic structure that had to be, but never was, altered. This, together with the colonial status of our economy from 1900, consigned the Filipino people to a remarkably long experience of economic backwardness.

This condition is summarized by an American observer, who said: “. . . as it gained political independence, the Philippine Republic was still far from possessing economic sovereignty. The United States, on the other hand. retained some of the economic and military advantages of a colonial power while it was relieved of the burden of administration and of direct responsibility for Philippine welfare.”

In the post-independence years, there were no important changes. Although the requirements of an expanding economy were appreciated after the wholesale pillage and devastation of the last war, the nation continued to make little progress away from its old patterns of land tenure, production, and foreign trade. The inertia of dependence may be best dramatized by the steadily in­creasing importation of rice which the Philippine government had to make from year to year, culminating in the unbelievable P264-million purchase in 1965.

Industrial growth was at first limited to the advantage of alien interests that were determined to keep the Philippines within the bounds of a limited agricul­tural economy; and then subsequently set on an erratic course by half-hearted efforts. By 1965, some industrial activity had been induced; but because of the catastrophic mismanagement of the national economy, 1,400 corporations were dead or dying or in dire need of massive government aid before the year was over.

Origin of Social Problems

These and numerous other difficulties can be traced to the period beginning with the turn of the century. These were, of course, to a large extent, due to our own backward economy, the most cruel feature of which is the seemingly unbridgeable gulf between the rich and the poor. The feudal conditions among the peasantry, the stark contrasts and inequalities spawned by tenancy and landlordism, called for penetrating and drastic solutions. The continued impotence of government and society to respond to the legitimate demands of the poor and the oppressed gave rise to despondency and cynicism which culmi­nated in the explosive discontent of the late 40′s and early 50′s.

The crime and disorder of the post-war years aggravated these con­ditions. These words of another American observer describe the chaos of the liberation years: “At the end of the war it was difficult to restore law and order and to preserve and foster democratic processes. Manuel Quezon was missed …. The primordial struggle for existence gave a degree of lawless­ness and criminality to practically every province and section of the country. Robberies, kidnappings, and daylight assaults on buses, trucks and trains were almost daily occurrences. The traditional respect for individual freedom and human rights was insufficient to counteract the petty criminals, the bandits, and the Communist-led groups who debauched the cities and disturbed the country­side. . . .”

A Defective Political System

Our government machinery, indeed our existing political system, has been incapable of producing satisfactory conditions of living. All through these years, no serious attempt to correct obvious faults and deficiencies in our economic and social life has been made. The political structure that was erected during the first half of the century, save for a few insignificant alterations, has remained unchanged to the present day.

The inefficiency and the immorality in government are partly due to this defective political system. What is more, this political system has obstructed the democratic process. The system also has ironically been the chief obstacle to our progress. The sad truth is that we have kept our faith in democracy despite the inadequacies of our democratic institutions.

Excessive partisan politics is responsible for the abuse of democratic principles in this country, and for the consequent inability of certain sectors of society to apply themselves with dedication and vigor to the advancement of the nation. There is an urgent need to curb the selfish and callous tendency of some of our leading citizens to engage in political activity at the expense of the public good.

It is for the purpose of answering this need that Republic Act 4880 was passed by Congress and approved by me on June 17, 1967. The provisions of this law are clear: “It shall be unlawful for any political party, political commit­tee, or political group to nominate candidates for any elective public office voted for at large earlier than one hundred and fifty days immediately preceding an election, and for any other elective public office earlier than ninety days immediately preceding an election.”

And again: “It is unlawful for any person whether or not a voter or candi­date, or for any group or association of persons, whether or not a political party or political committee, to engage in an election campaign or partisan political activity except during the period of one hundred twenty days immediately preceding an election involving a public office voted for at large and ninety days immediately preceding an election for any other elective public office.”

It is my hope, and undoubtedly yours too, that this lawful and necessary injunction is obeyed, this year and every election year hereafter, so that we may with the resulting harmony and cooperation, more speedily perform the common responsibility of nation-building.

It is fortunate that the nation will, just two years from now, call a constitu­tional convention. I leave it to the delegates of that convention to evolve a truly democratic system, one which will not merely bend, as our system does today, to the wishes of a traditional elite and perpetuate the status quo. Democratic institutions must be instruments of national advancement. Democracy must symbolize change.

Our Tasks

Given these conditions and these premises our principal tasks were first, to lay the groundwork for the industrialization of the economy: second, to bring about social justice; third, to change the values and attitudes of the people; and fourth, to alter our foreign policy.

In short, our goal is nothing less than the complete transformation of our social, economic, and political milieu, the reorientation of our people’s idea of themselves and of their capability, and the complete change of the assumptions that govern our relations with other nations.

The New Filipinism

To carry them out, it was necessary to make bold decisions. We did not hesitate to make these decisions because we know that they go to the heart of the matter and that they will change permanently the character of our national life. Our aim is clear: to set the nation on a firm and unchangeable course towards progress and independence.

This is the New Filipinism. This is the turning point.

II. A RECAPITULATION

Some Highlights of 1968

The thrust of the administration’s program has been towards a full and relentless application of our people’s energies to nation-building.

This emphasis made its greatest impact on infrastructure development, food production, foreign relations, government reforms, labor and social services, trade and industry, and community development.

In specific terms, how did we implement the national desire for basic and far-reaching economic and social change?

1. We built more concrete roads than were ever built from the turn of the century to 1965.

From the start of the American regime to the end of the past Administration, the government built only 995 kilometers of concrete roads, 7.268 kilometers of asphalt roads, 39,075 kilometers of feeder roads, and 76,693 lineal meters of permanent national bridges.

In the three years of the present Administration, we increased the total length of concrete roads by 105 per cent; that of asphalt by 20 per cent; that of feeder roads by 15 per cent; and that of permanent national bridges by 17 per cent.

2. In three years, we reduced by almost 50 per cent the backlog of school­rooms which had accumulated through the decades.

In 1965, there was a shortage of 90,000 schoolrooms. After three years, the fabrication of Marcos-type and army-type schoolhouses by the present Admi­nistration had made available 42,165 new schoolrooms. This is in contrast to a total of 400 schoolhouses built in the four years of die previous Administration, We expect to fill up the remaining requirements by 1969-1970.

3. A breakthrough in rice production enabled us to export the staple for the first time in our history. Before this, we had been habitually importing rice. In 1965, we spent P264 million to purchase 570,000 metric tons of the cereal from abroad. In 1968, we stopped importing rice; what is more, we earned $5.9 million from our rice exports and $1.17 million from the sale of certified rice seeds to various countries.

Our achievement in this field in a time of declining rice production inmost countries has elicited the admiration of the whole world.

4. We raised the land reform program to the level of serious action for the first time. At the end of 1965, a total of only 12 municipalities had been proclaimed land reform areas. From January 1966 to October 1968, the present Administration declared 50 municipalities land reform areas. At the end of 1969, we expect all of Central Luzon to be a land reform area.

5. We initiated bold and decisive support to the growth of private industry. The Board of Investments, created in 1968, has set up a system of priorities in our accelerated industrialization effort. Overall industrial production in 1968 increased by 30 per cent over that of 1965. In 1968, industrial employment was 14 per cent more than that of 1965.

6. Investment has increased. The private sector has regained faith in government. In Fiscal Year 1965-66, the total paid-up capital invested by newly registered corporations, partnerships and single proprietorships was P323.7 million. In Fiscal Year 1967-68, this amount rose to P478.4 million, an increase of 47 per cent.

7. The economy, in a state of ruin at the end of 1965, has gained new life. This is reflected in the growth rate achieved in 1968. The real gross national product increased by 6.3 percent, to anew peak of P17,594 million in constant 1955 prices. In 1968, there was growth and stability in the economy.

8. The external stability of the currency has been maintained. The Central Bank adopted stabilization measures to augment our foreign exchange supply and ease the pressure on the international reserve. In the last quarter of 1968, as a result of these measures, we had a $25 million surplus. Before that, we had successive deficits, ranging from $14 million to $38 million.

9. Internal growth was matched by an expanding outlook in foreign relations. We have begun to look farther a field in exploring new international relations. The twin needs for additional markets and for greater security have compelled us to come to grips with new and still changing realities. We look. ahead to trade with Socialist countries.

10. In national defense, we have introduced a new and more self-reliant defense program. In 1966, I directed the Armed Forces to formulate a unilateral defense plan built around the Home Defense Force, or the concept of the Special Forces. With the possible diminution of the American military force in Asia, we must consider the new challenges of security—alone, if necessary.

11. We contributed our share to the task of maintaining peace in Asia. True to our commitment to regional security, we have refused to be stampeded into rash action in seeking a solution to the Sabah problem. Instead, we have constantly appealed for peaceful settlement of the claim, by any of the means enumerated in the Manila Accord. We have set for ourselves new standards of responsibility and maturity in our diplomacy.

12. In 1968, our export trade gained unprecedented momentum. In 1965, exports amounted lo $768 million. In 1967, this amount increased to $812 million.

13. An alert and uncompromising attitude against venalities and ineffi­ciency in government has characterized our management of the public service in the past three years. Instant response to reports and complaints of official malfeasance has marked our performance in this field. As a result we have encouraged complaints on governmental corruption.

We have acted decisively and even mercilessly against our own close associates, where necessary.

Up to 1965, only 68 employees had been charged with various offenses. Only two cases had been decided. As of 1968, there were 850 criminal and administrative charges filed against government officials and employees. Of these employees and officials, 28 in 1968 had been suspended; 119 dismissed. Among the latter were two CFI judges; 11 municipal judges, and five fiscals or assistant fiscals. .

In the Bureau of Customs, 91 criminal and 111 administrative cases have been filed, or a total of 202 cases. Of these, 60 criminal cases are pending in fiscals’ offices; 31 criminal and 11 civil cases are pending before the PARGO; and 15 new administrative cases are still pending in the Bureau of Customs.

In police administrative cases, the Police Commission received a total of 630 cases. As a result, 101 policemen were dismissed and 21 were suspended.

14. Community development projects increased by 427 per cent. This increment has benefited more than six million people. For 128,158 self-help projects, the government provided assistance in the amount of P47.5 million. During the four years of the past Administration, P13.3 million were given to aid 24,306 community development projects.

The private sector, for the first time, joined in the community development program, with such projects as the Operations “Kasama”; Low-Cost Housing Project for Rural Areas undertaken with the Archdiocese of Sorsogon; and the Lanao Special Operations, with the Asia Foundation and Mindanao State University.

15. We obtained unprecedented benefits for labor. In 1968, 42,000 Filipino workers in local US bases and in US offshore military installations secured benefits amounting to P80 million annually under two separate agree­ments entered into by the Philippine and the American governments. On the other hand, about P350 million in new benefits were won by our workers through collective bargaining and direct enforcement work by the Labor Department. These measures are reflected in higher real incomes for our workers and, therefore, increased purchasing power.

16. Industrial peace was maintained. The incidence of strikes was reduced by 65 per cent compared with the previous Administration.

17. We have given the country its first feasible manpower development program. Skills training meets frontally the problem of unemployment. Since September 1968, some 25,000 men and women have been trained in 110 man­power training centers; a total of 70,000 will have been trained at the end of the year. Our manpower development program is the model and forms an important segment of the Asian Manpower Plan. It has won the support of the ILO and other UN agencies.

18. There is a new vitality and dynamism in social welfare work. The Social Welfare Administration, which was elevated to department level last year, set up branch offices in 10 newly created provinces, ensuring more widespread social welfare benefits.

New initiatives in this field have been provided by the First Lady’s Integrat­ed Social Welfare Program. Her varied projects are designed to intensify the work of existing agencies. They combine innovation and purposefulness.

19. We expanded health services and provided free medicines to our indi­gent population on a scale never before attempted. The controls of diseases and the extension of health facilities to remote areas have been the object of closer cooperation between government and the private sector. This is necessary in the face of the fact that a survey in Mindanao in 1966 showed that 60 per cent of our people die without ever seeing a doctor or a nurse.

In 1965, the per capita expenditure for free medicine was P0.04. In 1968, it was P0.52.

In 1965, the appropriation for rural health was P23 million. In 1968, this was P35 million.

We have asked Congress to provide a special fund for health to ensure conti­nuing and adequate support for health services.

20. Education has achieved new vigor. We are solving both the deficiencies in the quality of instruction and the physical inadequacies, such as the class­room shortage and the textbook shortage. One out of five Filipinos is in school today, posing problems as well as offering tremendous possibilities for national improvement.

Education has been geared to development needs. There are now courses in rice culture; manpower training through vocational courses and training centers for out-of-school youths; tree-planting projects to accelerate the reforestation program. Barrio schools are being established.

21. The science and technology program has been expanded to answer the requirements of accelerated national growth.

We have encouraged and supported scientific research and development.

We have established special funds for science and education to support programs in these fields.

22. We have answered the challenge of crime and lawlessness with a pur­poseful peace and order program. The crime rate was reduced by 4.7 per cent in 1967 from the 1962 level. This was further reduced in 1968 to a level very much lower than that of any year during the seven-year period from 1962-1968.

Compared to more developed countries, like the United States, Britain, and France, where police agencies are highly skilled and much better equipped, crime growth in the Philippines has been small.

Nevertheless, a relentless program to combat crime has been pursued.

We have intensified police training. Besides a national police academy, we have six regional training schools to professionalize police agencies around the country. They will train and graduate policemen at the rate of 1,000 per quarter. This is being done without Congress providing funds for them.

Peace and order has always been a responsibility of local government. This has limited the ability of the national government to deal directly with local crime. This situation must end. The PC, if it is to be a truly national police organization, must be authorized to enter a town or city and, if necessary, take over the apprehension and prosecution of local criminals.

Financing difficulties have also prevented improvement of police facilities and enlargement of police forces. These difficulties should be remedied.

23. We have inaugurated a more effective and purposeful program in Central Luzon. In the past, the approach to this problem had been extremely erratic, swinging from one extreme to the other. At one time, government sought to deal with the problem by repressive measures, at another by extreme leniency and accommodation. We recognized the socio-economic character of the problem and have embarked on a massive, long-range social justice program unprecedented in the history of the region. Coupled with this approach, however, is a firm military effort against those who would subvert the Republic. In recent days, military operations for this purpose have crushed the backbone of armed dissidence in the area.

24. We have launched special programs to quicken the pace of social uplift work for people. Our programs of urban development and urban renewal are designed to meet the problem of expanding population. We have embarked on a massive housing program.

We have relocated squatters in urban areas to healthier and better developed environments. We have only begun to solve this serious problem. In the coming year, we shall tackle it more vigorously and systematically.

We have developed training programs for the youth, particularly for those who are out of school. They are being trained in useful lines of work.

And finally, we have developed a program for the rehabilitation of ex-con­victs and the so-called derelicts of society.

Our new investments program in its very first year has already accelerated industrial and agricultural growth. Consequently, vast new frontiers for individual and family advancement have been opened.

All these developments have been set in motion because of this Administration’s deep and abiding concern for the welfare of the great mass of the downtrodden and underprivileged. We must as quickly as possible rescue millions of our countrymen from the poverty and deprivation in which they have lived all their lives.

This is the immediate aim of all our endeavors.

The thrust to full development is unmistakable in every field. I sincerely believe that, with the continuing support of our people, the breakthroughs and innovations of the past year will, before long, establish a momentum which neither future negligence nor design can easily diminish or destroy.

Many more aims, however, remain to be fulfilled by that partnership with government which, imbued with the New Filipinism, has brought us to this historic turning point. Our production in agriculture and industry must continue to expand. We must not forfeit the new vitality in the nation’s life by another lapse into in action and indifference. We must further increase the national rate of growth.

III. GENERAL MATTERS

The Gross National Product

In 1968, the economy grew in the manner that has come to be regarded as normal since the beginning of this Administration: that is, gross national product increased at an unprecedented rate. According to the National Economic Council, real gross national product at 1955 prices increased by 6.3 per cent in 1968 to a new level of P17.594 million. Both figures exceed the second-year targets of our Four-Year Economic Program which seemed so ambitious at the time they were set. The sector that led this growth was agri­culture, which increased at the rate of 8.9 per cent to P4,796 million, a new level.

Infrastructure

The rapid increase in government facilities and services also has by now come to be accepted as normal. According to the latest report of the Infra­structure Operations Center, we have now completed more than three quarters of our four-year road asphalting program. In irrigation, we have rehabilitated or completed projects covering a total of 212,546 hectares and completed 106 kilometers of access roads. More than 42,165 new schoolbuildings have been constructed. These are only some of the evidences of internal expansion which we will describe in more detail later.

Price Movements

A unique feature of the economy in 1968 was the realization of growth without the usual concomitant movement in prices. In developing countries, it is generally recognized that the forces that induce growth are exactly the same forces that put pressures on prices. The gains to our people’s welfare resulting from an increase in income can therefore be minimized by the extent of price inflation.

On this score, our country had a significant year. Prices, as reflected in the Consumer Price Index for Manila, were literally held to a standstill. The CPI Manila level for 1968 was exactly equal to that of 1967. Consumer Price Index for the whole Philippines showed the same stability, registering only a 0.7 per cent increase over 1967.

According to the Economic Monitor, December 23, 1968, “In terms of prices, this year might yet rum out to be the most stable. For one, the consumer price index for Manila has not shown any appreciable change since January of the current year, increasing from 152.7lo only 154.2 last month or a minuscule 1.5 percentage points rise registered for the same period last year.

“This relative stability of the general price level is apparently the offshoot of the success of the Administration’s agricultural food production program notably in cereals. Meat and fish output were also reported to have gone up. All these factors are reflected in the small increase in the price index of food of only 2.8 percentage points, from 179.4 to 181.5.”

Last year, we expanded not only our economic but also our political horizons. It is probable that future historians will consider the political re­direction more important than the economic gains.

A New Foreign Policy

In 1968, our foreign policy became truly international. We took the first Steps toward the possible recognition and establishment of full relations with the countries of the Socialist bloc.

These countries have many things to offer the Philippines in terms of technical knowledge and trade opportunities.

Postulates of Foreign Policy

Actually, the emphases have changed but the principles of our foreign relations are constant. We have been guided at all times by seven postulates.

Foremost is the national interest. Our foreign policy is always governed by our unswerving commitment to the welfare and dignity of the Philippines, by the need to protect our independence, territorial dignity and national dignity.

In protecting and promoting the national welfare, we have at the same time strengthened our links with Asia.

Considerations of the nation’s welfare also compel us to establish strong safeguards against the threat of communist aggression, infiltration and subver­sion. At the same time, we have an open mind concerning relations with Socialist countries, particularly those of Eastern Europe.

We are firm in our belief in the rule of law. We have a rich tradition of freedom and civil liberties. Our foreign policy will uphold this tradition.

We have always supported the United Nations. We believe in viable and mutually advantageous regional defense arrangements.

Peace and security are inseparable. We believe that progress in Asia is the common concern of the countries of the region. Their cooperation for prosper­ity and stability is possible only in a period of peace.

Finally, we are resolute about accelerating economic development. We aim to overcome poverty not only in the Philippines but in the other countries of Asia as well.

A New Defense Policy

In 1968, we revised the basic assumptions of our national defense. We assumed the eventual withdrawal of the United States from Asia and we began to make new defense plans based upon this contingency.

A Harsher World

In short, in 1968, we began to consider seriously all of the responsibilities of political and economic independence, and prepared to assume these responsibilities. We made a hard and realistic appraisal of the Asian situation and the world situation that the Philippines is likely to face in the near future. We found that in many ways it would he a harsher world than the one we face today, a world in which the Philippines may be hard pressed even to survive as an independent country. We formed our policy for the future on the realistic assumption that this harsh world would indeed come to pass; and in this world we planned not merely to survive but to emerge as a leader.

What will be the contours of this world?

Special Economic Relations

One of them we already know for certain, that our special relations with the United Slates will come to an end, at least in their present form. These relations have been a mixed blessing, and some would not be sorry to see them fade away completely. However, our industrialization program will require huge amounts of foreign exchange, and we still have not sufficiently diversified our export products and markets. We are carrying out such a program of diversification but in the transitional period, until this program is completely implemented, we must preserve the advantages that we already possess. Our needs for foreign exchange are so great that, we must retain all the markets we now have besides making a vigorous effort to develop new ones.

The Withdrawal of the United States

The second feature of this new world is almost as certain. The United States, having been morally divided and economically strained by the Vietnam conflict, will seek to reduce its military commitments in Asia. For many this will be a severe but healthy shock. It will force them to abandon those outdated assumptions ‘hat are reinforced by the presence of a great and friendly military power.

The time has come for us to start looking out for ourselves, because no one else will. There is now an urgent need to modify our defense and foreign policies in order to make them hew closer to the national interest.

Union of Developing Countries

The third feature of this new world is somewhat more positive. The developing countries of the world, speaking as regional groups, have begun to assert themselves forcefully in the formulation of world economic policy. We have seen in the last few years the formation of several regional unions, the first operations of the Asian Development Bank and two plenary meetings of the United Nations Conference on Trade and Development. We have seen the developed nations agree that non-reciprocal preferences should be granted to the exports of developing nations, and that in the interest of diversifying the composition of these exports, these preferences should be granted to exports of manufactured goods as well as to traditional raw materials and semi-manu­factures. During the current year we may see agreement on a primary list of products to which these preferences will be granted.

To prepare our country for this new world we formulated last year the following guidelines:

Industrialization

First, we must now industrialize further in order to end our poverty and in order to protect our national integrity.

We enter this difficult world with one important advantage: our break­through in agricultural production. Freed from the problem of feeding our people, we can concentrate more of our resources on industrializing our economy and on making our boundaries secure.

Agro-Industrial Development

The pattern of development that we have chosen is the balanced develop­ment of both agriculture and industry. At this stage of our economic develop­ment, agriculture is an important support because it generates both the capital and the capability for industrialization. Our main export products, which earn the foreign exchange that we need to buy capital equipment, are still agri­cultural products. The complete neglect of agriculture now will only set back our plans for the industrialization of the economy.

This does not mean that this will be the permanent pattern of our economy. Simultaneously with the increase in the productivity and efficiency of agri­culture and as soon as we have the capital resources and technology for industrialization, we will move on without hesitation to the industrial stage because industry is the only sure and lasting foundation of a strong, modern state.

The National Interest

Second, a drastic change in our foreign policy is necessary. For too long we have been too trusting of foreigners, unthinkingly accepting their beliefs and preconceptions along with their economic and military domination. From now on our foreign policy will be dictated only by our national interest.

Independent Development

Third, our development will be our own affair. We are developing the Philippines for the Filipinos and it follows that all tools as well as all gains must rest in the hands of Filipinos. This is not by any means an expression of xeno­phobia. For certain phases of our industrialization program, the help of foreigners is necessary. In selected lines of industry, their rights and interests will be protected.

Efficiency and Discipline

Finally, since we shall be forced in the future to rely more and more on our own resources, we must develop greater efficiency and discipline. We have already begun to reorganize the government for greater efficiency and discipline. The spirit of this movement must permeate the entire society.

IV. A PORTRAIT OF THE NATION

Allow me now to discuss the achievements, problems, and policies of 1968 in detail.

COMMERCE AND INDUSTRY

The Gross National Product

I have already referred to the satisfactory growth of the national product. For fiscal year 1968 we programmed a growth rate of 5.8 per cent for gross national product. The actual growth rate was 6.0 per cent. We expected agri­culture to grow by 5.4 per cent, a rate which already represented a considerable improvement over past growth. Such was the national response to our rice and con production program that actual growth exceeded even this ambitious expectation, and the actual growth figure in real terms was 7.0 per cent. Intact, as is now well known, we were able for the first time to export rice. The figures for calendar year 1968 are even more impressive. The growth in real GNP is 6.3 percent: in volume of agricultural production, no less than 8.9 percent.

Mining and Manufacturing

Mining and manufacturing grew at the rate of 5.8 per cent. Compared with growth rates in previous years, this is quite impressive although it tell short of the target by 2.2 percent, although it is the impression of many businessmen that growth in the manufacturing sector was much better than what the official statistics indicate.

Greater Industrial Efficiency

It is for this reason that we are re-examining the administration of govern­ment financial assistance and incentives, which apparently have not promoted as much efficiency in industrial production as we would like to have. There have been heavy imports of machinery, and conspicuous additions to productive capacity; but output has not increased significantly.

I want the private sector to utilize our economic resources efficiently. There have been too many cases of wasteful duplication and the building up of unnecessary capacity. I now ask private businessmen to consider more carefully the needs of their industry and their country as well as their own enterprises; and I have required government financial institutions to be stricter in their evaluation of applications for government support.

Mergers

Another policy I have been considering is to encourage mergers and other such rationalizations of the structure of industry. Our capital resources are too precious to be dissipated by unnecessary duplication. In the future, we shall require a much better return to the economy in exchange for government support.

Balance of Payments

As is only to be expected when aggregate demand increases, when higher incomes are available to a greater number of people than even before, and when industry is expanding at a fast rate, our balance of payments experienced some pressure last year. The difficulties were complicated by the fact that natural disasters prevented our exporters from taking full advantage of the higher prices that prevailed for our export products.

The deficits resulted principally from the country’s impatience to grow. Close to three-fourths of total imports during the last two years were of essential and semi-essential producers goods, the demand for which arose from the combined investment programs of the private sector and the government. An additional one-tenth of our imports was in the form of essential consumer goods. Maturities of international obligations incurred in the past also contributed significantly to our balance of payments burdens. It appears that these pressures on our external position have been the cause of certain misgivings on the part of the business community over the future prospects of domestic credit, the exchange rate and the international reserve. Indeed, the large volume of imports during the last two years partly reflect the efforts of traders and manufacturers to build up inventories in anticipation of adverse movements in the exchange rate or in fear of possible exchange controls.

I wish to state in the strongest terms that there is no basis for these fears. The country’s balance of payments problems are well within manageable bounds and can be handled without resorting to further credit restrictions, exchange controls, or devaluation.

Also, I am asking the Monetary Board to look into the possibility of implementing some suggested measures to be undertaken during the coming months to alleviate the pressures on the international reserve.

Using Available Acceptance Lines

The first is to encourage commercial banks to avail of additional short-term borrowings from abroad by fully utilizing their available acceptance lines. In line with its policy of restructuring our external debt, the banks will be asked to stretch the maturity periods of their unused credit. The Central Bank, for its part, will provide commercial banks with automatic forward exchange cover of their external exposure arising from the financing of imports through acceptances.

Trade Credits from Suppliers

Second, domestic importers will be given the inducements to finance their imports from trade credits available directly from their suppliers, whether the importers are independent companies or subsidiaries of foreign corporations. The general principle to be applied is that imported commodities sold locally for credit—such as equipment, durables, and raw materials—should also be imported on credit rather than for cash- thereby call on our importers to use, or to negotiate for, deferred payment terms from their foreign suppliers. The Central Bank will stand prepared to provide them with forward cover through their commercial banks.

These measures 10 avail of import credits are intended to minimize immediate drains on the reserves rather than to encourage larger volumes of imports at this time. The amount of total imports will still be subject to judicious moderation, both by monetary policy instruments and by fiscal restraint.

Deferments of Remittances Abroad

Third, foreign-owned companies that enjoy the country’s hospitality and profit from its markets are requested to refrain from adding to the country’s foreign exchange burden by deferring the remittance of their profits abroad, particularly when such remittances are made possible by borrowing from domestic credit sources. Such profit remittances constitute a significant part of the country’s annual invisible outflows. A judicious curtailment of such remit­tances will be a graceful token of the readiness of foreign companies to cooperate with the government in lightening the pressures on the international reserves. It will also be an expression of their confidence in the future of their host country.

I ask those foreign enterprises which avail themselves of domestic credit facilities to finance their remittances abroad, to refrain from making any remittances for the remainder of this year. I ask those enterprises which do not use domestic credit facilities to reduce their remittances in 1969 by 50 per cent.

Foreign Sources of Long-Term Capital

Fourth, we will intensify our program to tap foreign sources of long-term capital, in the form of loans or equity, whichever may be suitable under indivi­dual circumstances. This is in line with our basic policy that a developing country like the Philippines should absorb as much foreign financing as its future debt-servicing capacity will allow.

Expansion of Exports

Finally, we shall continue our campaign to expand the country’s exports by working towards the establishment of a strong, aggressive merchandising capability and by gearing our internal investment policies towards the enhance­ment of our competitiveness abroad and the improvement and standardization of the quality of our products.

The investment priorities plan will give some idea of the likely new products that can be developed for export. As for market opportunities, one of the most interesting results of our missions to the Socialist countries was the list they brought back of the commodities we could export to the Socialist countries together with the prices that these commodities may be expected to fetch. This list, which has been widely publicized, has undoubtedly already attracted the interest of many of our businessmen. It shows that there is a wide range of com­modities in providing which we can undersell the present suppliers to the socialist countries by margins ranging from 10 per cent to 70 per cent. Some of these commodities, moreover, are traditional exports for which the regular markets are static or contracting or commodities of which there is chronic domestic overproduction.

The conditions under which sales to Socialist countries will be made seem satisfactory. Best of all, the Socialist countries seem to have a much more positive view of trade with developing countries than do their Western counter­parts. Socialist imports from the developing countries have continually in­creased at a faster rate than their total foreign trade; and this seems to be their deliberate national policy. The reasons behind this policy are obvious, but there is no harm in our taking advantage of it if adequate safeguards are taken. Almost all of our Southeast Asian neighbors have been doing so for several years, and have generally benefited.

Domestic Savings and Investments

We should realize, however, that the country’s success in raising long-term capital abroad depends on our own success in mobilizing capital at home. This emphasizes the urgency of generating domestic savings in massive proportions to finance investments in new industrial plants and equipment, in agricultural improvements, in public works, and in essential social services.

The Investment Incentives Act which Congress enacted in 1967 was designed to encourage the private sector to generate the capital for investment in new areas. The large number of applications for registration under the Act by enterprises seeking to enter these high-priority fields is a convincing indication of the effectiveness of the Act in stimulating private investments. I am confident that its operation will accelerate private investment efforts in the future as well as rationalize the country’s over-ail development pattern.

The government, for its part, must keep pace with the country’s require­ments by continuously implementing its own development projects and by providing adequate public and social services. Any shortcomings in the govern­ment’s efforts in these areas will pose serious obstacles to the country’s total development drive.

This underscores the importance of new taxes. The need for more revenues is acute. It left us no choice but to ask, as I did, for new sources of income. We categorically reject inflation as a way of financing government development projects: the sources of funds must come from savings in the form of taxes.

We should, however, spare the low-income group from any additional tax burdens. The burden of taxation must fall on those who can afford it. The price of progress must be paid primarily by the wealthy, rather than by the poor. Moreover, our efforts to increase tax revenues at home will increase our inter­national credit standing. They are a dramatic indication to foreign lenders of long-term capital that we are prepared to make the necessary sacrifices to promote our economic development.

Last year nine tax measures were enacted into laws. These were among the principal recommendations embodied in the 1968 Tax Reform Program of my Administration which was drawn from the recommendations of the Joint Legislative Executive Tax Commission during this and the previous Administration.

FINANCE

Improvement in Revenue Collection

The collection performance of the BIR has remarkably improved. From 63 per cent in 1964, the level of efficiency went up to 75 percent in 1967. There are strong signs that efficiency has improved further in 1968 as shown by our high tax compliance.

Total revenue collections have increased from P1,869 million in fiscal year 1966 to P2,589 million in fiscal year 1968. The total collections of the BIR and the Bureau of Customs in the last three years covering the period 1966 to 1968 increased significantly over that of the previous three years (1963 to 1965). Overall rate of increase almost doubled from 9.5 per cent to 18.2 per cent for the two periods. The increase in internal revenue collections rose from 12 per cent to 15.7 per cent and that of customs collections, a more impressive increase, from 2.5 per cent to 25.9 per cent.

Along with the rise in revenue collections, the requirements of a growing economy for increased government facilities and services have also been increasing. In fiscal year 1969 alone, the total requirements of the national government amount to P3.450 million. However, the amount that can be generated to finance this requirement will only be P2,997 million, leaving a gross financial gap of P453 million. The magnitude of the problem is such that if we do not muster the required additional resources, we will not be able to meet our goals. Our goals are reflected in the growing demand for more school-buildings, housing, health, irrigation, power and water facilities, roads, communications, peace and order and wage adjustments for government employees.

I make a special appeal to Congress to enact the measures to enable the government to respond to these needs.

The Central Bank and Monetary Policies

In monetary affairs, official effort was geared towards maintaining stability and servicing the financial needs of a developing and growing economy. Monetary action during the year was aimed at keeping inflationary pressures under control and overcoming balance of payments difficulties, which persisted throughout most of 1968. Towards the end of the year, however, there were positive indications of the effectiveness of monetary measures in contain­ing credit expansion, improving the pattern of credit flows, and in relieving the pressure on the country’s external accounts. The Central Bank also continued to play a key role in developing the credit markets and in ensuring the smooth functioning of the banking system.

Monetary Measures

To check excessive credit expansion, dampen import demand and channel the flow of credit resources from import financing to domestic production (particularly rice) and export production, several measures were taken. The more important ones included the selective reduction of the expansion of the Central Bank’s credit portfolio from P630 million during January-November 1967 to only P300 million during the comparable period for 1968. In addition to raising the rediscount rates on a selective basis, the Central Bank also increased the margin requirement against selected import in the form of increased com­mercial bank reserves. Again, in October, ceilings on the credit portfolios of commercial banks were imposed to limit the volume of credit for imports at a specified level and to make possible the utilization of additional credit facilities for financing the production of rice and certain export products.

Financing Rice Production

In the formulation of Central Bank policy, growth and development objectives were taken into consideration. This is evident in the selective character of the measures adopted during the period. More importantly, the Central Bank took the necessary steps to provide for the financial requirements of the rice production program which had progressed much faster than anti­cipated. Thus, outstanding Central Bank credit for the rice program increased by P150 million during the year.

The agreement of the International Monetary Fund was also obtained to increase the margin for Central Bank credit operations under the stand-by arrangements by P100 million expressly for the rice program. Significantly, despite the restrictive measures taken, economic development did not slow down. Production statistics continued to show improvements in agriculture and manufacturing.

External Stabilization Measures

For purposes of ensuring the external stability of the currency, the Central Bank acted to augment the supply of foreign exchange and to ease the pressure on the international reserve, particularly those brought about by the burden of servicing official short-term foreign obligations.

In line with this policy, a standby arrangement with the International Monetary Fund of P27.5 million was secured. Upon negotiation of this stand­by arrangement, the U.S. commercial banks agreed to convert $81.5 million of their $234.6 million short-term loans to the Central Bank into medium-term credit (4 years). In the process $24 million of Central Bank deposits which were pledged against the short-term loans were released by the commercial banks. In addition, the Central Bank obtained a $60 million credit line with various com­mercial banks, of which only $10 million has been availed of by the end of the year.

The balance payments during the last quarter of 1968 resulted in a $25 million surplus after registering successive deficits in the four quarters ended July-September 1968 ranging from $14 million to $38 million in October-December 1967. The surplus arose from the reduction of the trade deficit from $81 million in the fourth quarter of 1967 to $61 million in October-December 1968 and the increase in the non-trade surplus from $44 million to $86 million, respectively. The leveling off of quarterly import payments, the gains inexpert and non-trade receipts and the decrease in non-trade payments made the surplus possible.

In the foreign exchange market, Central Bank intervention to stabilize the exchange rate declined from $669 million in 1967 to $395 million in 1968. Although the average selling and buying rates of commercial banks was higher in 1968 than in 1967, the inter-bank rate which averaged P3.917 in 1967 declined to P3.916 in 1968.

Banking Development and Growth

Apart from stabilization problems, there were events which threatened to disrupt the smooth operations of the banking system. As a result of undue publicity given to the impending liquidation of two banks and the subsequent congressional investigation of the matter, a moderate run on banks took place in mid-September. To avert a national crisis, the Central Bank promptly extended full support to the banking system by granting about P100 million emergency loans. The Central Bank authorities also reassured the public of their readiness to extend their aid if necessary. By the end of September, after two weeks, the run subsided and the confidence of the public in banking institutions was re-established.

Notwithstanding this event, the banking system continued to grow and to expand. During the first three quarters of 1968 alone, 29 branches of com­mercial banks, two new savings banks and four branches of established savings banks were opened. Twenty-nine new rural banks and seven branches of deve­lopment banks were established to service the rural areas.

Internal and external monetary pressures are interrelated. Easing of pressure on our balance of payments results in the relaxation of internal credit; and the effect also works the other way around. If new sources of revenue are found, then the Central Bank within our covenants with IMF can ease the restrictions it now places on both public and private borrowing, and will be in a much better position to improve the structure of our external debt.

Public Debt

While the government borrowed a total of P1 602.88 million in Fiscal Year 1968, of which the amount of P1,332.85 million was from domestic borrowing and P270.0 million from foreign sources, a total amount of P1,048.4 million was redeemed. Of this redemption, P889.6 million serviced the foreign indebtedness. In the redemption of the external debt, P24.15 million was for the direct indebtedness of the national government while P134.66 million was for borrowings of government-controlled corporations that were guaranteed by the national government.

Treasury Bills Program

We have, through the Department of Finance and the Central Bank, launched a Treasury Bills Program designed to provide the National Treasury with funds during seasonal lags in revenue collections and at the same time to establish a private market for short-term treasury bills. These securities serve as a standard or benchmark for private investors as they are auctioned competi­tively and traded freely in the open market. The present success of the trading of short-term government bills indicates that a responsive money market for government securities has already been established in our country.

The promulgation of Executive Order No. 97 on October 26, 1967, which created the Financial Policy Committee, finalized the creation of an overall body entrusted with the responsibility of planning and coordinating the financing operations of the National Government and its instrumentalities. Currently, the Committee is concerned with the servicing of the external debt of the Philippines and its restructuring. It is now necessary to restructure our external obligations in order to reduce the pressures on our foreign exchange reserves.

Expenditure Patterns

Annual public expenditures under this Administration were higher than at any other time. This was due to the increased social and economic demands of our rapidly expanding population.

Social development expenditures had always received the biggest cut from the government’s fund resources (44 per cent), while the allotment for economic development was never below 17 percent. In the last year of the past Administration, the allocation for social development was only 31 per cent and for economic development, 11 per cent. Certainly, previous allocations were too low for the present size of our population.

The Financing Problem

The one overriding problem of government is lack of funds. This had hounded previous Administrations; it continues to face us. This fiscal year, we are faced with a financial gap of about P450 million to P500 million. There are four alternative solutions to the “financial gap.” These consist of taxes, borrowing, greater efficiency in collection, and savings.

On taxes, we submitted to you last year a program of proposed tax measures. Some of them you have passed, the others you have not. On borrowing, you gave me the additional authority and we have done the best we can to avail of loans to support our development program both in the public sector and in the private sector. But there are practical limitations that prevent a full utilization of our legal borrowing authority.

Foreign loans usually require local currency counterparts. The generation of local currency on the other hand has to be done in such a manner as would not provoke inflation and balance of payments complications. We have also done much toward the development of a domestic government securities market, but this takes time and the absorbtive capacity thus far developed is still insuffi­cient,

On greater efficiency in collections, the record of revenue collections in both the BIR and Customs during the past three years and the studies of your own as well as our Joint Legislative Executive Tax Commission can attest to the degree of effort we have exerted in this area. On savings, I have already instructed the Budget Commission to effect a reduction in the current year’s program of expenditures as well as to reduce by P200 million what had been originally programmed for FY 1969-1970. But we can go only so far in this area because we started in the first place with an attitude of spending only for the bare essentials. Our people rightly look up to us to provide them the services which they need. These consist of social overhead facilities or infrastructure as well as current services, such as those of education, health, and peace and order.

We cannot, therefore, refuse to heed these demands on the grounds of inadequacy of existing funds.

Additional Sources of Income

My appeal for new sources of income was not supported completely by Congress. My program called for an additional revenue of P1.2 billion, but Congress approved only around P296 million. I appeal to you again to enact in (he next regular session the consolidated Tax Code bill, the gasoline tax, the specific tax on cigarettes, the omnibus amendment to the Tariff and Customs Code, the abolition of some special funds, the elimination of tax exemptions and subsidies, and the tax on idle land.

PUBLIC WORKS AND COMMUNICATIONS

Infrastructure

The construction of those numerous facilities which constitute the infra­structure for substantial and lasting progress has a high priority in our development program. Begun early in 1966, this has continued through 1968. In 1969, public works construction, principally roadbuilding, will not only be continued, it will be accelerated.

Roads

During the period from the turn of the century to 1965 the country had 995 kilometers of concrete roads, 7,268 kilometers of asphalt roads, 39,075 kilometers of feeder roads, and 76,693 lineal meters of permanent national bridges.

In only three years the present Administration finished 1,046 kilometers of concrete roads (or an increase of 105 per cent); 1,502 kilometers of asphalt roads (a 20 per cent increase); 5,694 kilometers of feeder roads (a 15 per cent increase). We have also built 403 permanent national bridges with an aggregate length of 13,007 lineal meters (or an increase of 17 per cent).

The previous Administration, on the other hand, finished in four years only 70 kilometers of concrete roads, 458 kilometers of asphalt road, and 118 kilometers of feeder roads.

The Role of the Armed Forces

In addition, the Armed Forces have, in support of the highway program of the Department of Public Works and Communications, constructed 60.829 kilometers of concrete roads, 42,582 kilometers of asphalt roads, and 544,939 kilometers of feeder roads. The 51st Engineer Brigade of the Armed Forces, which constructed most of these roads, also completed two bridges measuring a total of 72.38 lineal meters, and various civic action centers throughout the country finished 71 bridges.

Schoolhouses, Public Buildings and Hospitals

An important feature of the infrastructure program is the construction of prefabricated schoolhouses. In 1965, there was a backlog of 90,000 schoolrooms. In 1968, 42,165 rooms were made available through the fabrica­tion of Marcos-type and army-type schoolbuildings. At this rate, we should have enough schoolbuildings by 1970.

A total of 287 national buildings and 73 hospitals and sanitaria have also been constructed.

Manila Waterworks System

The Manila and Suburbs Waterworks System, a project partly financed with a $20.2 million IBRD loan, is now 79 per cent complete. Expected to be finished in the latter part of 1969, it will provide the metropolitan area with 300 million gallons of water per day. We have also constructed 116 provincial waterworks and improved 121 others, built 516 artesian wells, rehabilitated 1,955 others, and developed 36 national springs.

Irrigation

We completed 12 national irrigation systems, work on which was suspended during the previous Administration because of lack of funds. These systems irrigate 88,870 hectares. Through the rehabilitation and improvement of existing irrigation systems and the installation of pumps, 120,219 hectares were placed under irrigation, making a total of 209,089 irrigated hectares as of 1968.

Still under construction are 19 irrigation systems and 28 commercial projects. Under study at the moment is the Upper Pampanga River Multipur­pose Project, which will irrigate some 81,000 hectares in Nueva Ecija and supply power and water to Greater Manila. Through the National Irrigation Administration, we are developing eight pilot projects on water management in collaboration with experts commissioned by the Asian Development Bank.

Apart from these projects of the Department of Public Works and Communications, the Armed Forces completed 227 irrigation projects in Central Luzon.

Portworks

To relieve congestion in the ports of Manila, Piers 3 and 15 and the Marginal Wharf of the International Port were completed. A total of 105 other national and municipal projects around the country were finished to complement these Manila Port projects. Altogether, these project, provide an additional 17 foreign and 151/2 domestic ships’ berths. Transit sheds with a total area of 21,054 square meters were also constructed to accommodate the increasing volume of cargo.

In addition, through the combined efforts of the Bureau of Public Works and the Philippine Navy, we have dredged more than 36 million cubic meters of foreshore area at a cost of less than P1.00 a cubic meter, compared to previous costs which were as high as P5 a cubic meter.

Flood Control

To mitigate the destruction caused by floods, especially in the developed delta areas, we have concentrated our flood control works on five major river basins in the country. These works are the Manila Flood Control, Pampanga River Control, Agno River Control, Camarines Sur River Control and Ilog-Hilabangan (Negros Occidental) River Control projects.

Airports

To support the growth of civil aviation and to meet the need of modern air travel, we have embarked on an expanded airports development program.

We have built or improved 22 airports, the more important of which were the Iloilo and Cotabato airports and the Manila International Airport’s terminal apron. The construction or improvement of 33 other airports is now underway.

Telecommunications

Until 1965, the Philippines was one of the three countries in Asia with the poorest telecommunications system. The growth rate of telecommunications in the Philippines was 7.6 per cent annually, just slightly higher than Singapore’s 7.5 per cent and Indonesia’s 6.5 per cent.

To stimulate taster growth in telecommunications, we allowed the private sector to participate more extensively in this industry. Early in 1966, we limited the Bureau of Telecommunications to the function of developing projects in areas where the potential traffic is inadequate, so that private enterprise may make reasonable profits. In less than three years, private telecommunications companies burgeoned and prospered. Last year these companies invested an additional $8,263,300, nearly thrice more than their investments in 1966 which amounted to $3,977.100.

The projected growth of the telecommunications industry is 10.5 per cent a year. Our future program calls for an average yearly investment of $ 15,424,190. This annual additional investment will be provided mainly by the private sector.

We are now working on still another program, which is to get all telecom­munications companies, government and private, to enter into inter-connecting agreements so that a subscriber of one system could easily be connected to a subscriber of another.

Government itself, however, has been more active than at any other time in the past in developing telecommunications. Some of our more important projects are:

1. The Nationwide Telecommunications Expansion and Improvement Program, which is now more than 60 per cent complete. When completed in 1971, it will provide telegraph facilities in all municipalities, a multi-channel radio telephone-telegraph link-up of all provincial capitals and cities, expanded government telephone services in Greater Manila, automatic telegraph switching facilities for direct and fast transmission of messages, and fully automatic telephone systems in at least 27 cities and provincial capitals interlinked with each other and with Greater Manila.

Already in existence are 21 telegraph stations, 25 radio-telegraph stations two radio stations, and eight telegraph-telephone stations. The Telex Switching Operation was also set up last year. The Telex Network in Manila, Baguio and Tarlac now serves 20 automatic telegraph offices in various pans of the country.

2. The Mindanao Telecommunications Development Project, which will provide a system interconnecting 19 cities and towns in that area. This system will link up with the nationwide system through switching facilities at Cagayan de Oro City.

3. Expansion of the Government Telephone System in the Greater Manila area by adding 13,000 telephone lines or 21.000 telephones.

4. Establishment of telegraph facilities in 20 municipalities in Central Luzon and modernization of telegraph plants in 120 municipalities in the same region,

In addition, we have completed the Philippine Communications Satellite (PHILCOMSAT) and the ground tracking stations for the Global Telecom­munications System.

These do not include the massive expansion and upgrading work being dune by die Armed Forces to improve their own telecommunications facilities. When I began my Administration, the interservice communications system of the Armed Forces was primitive. The Air Force could not communicate directly with the Philippine Constabulary, the Army or Navy. They had to course their communications through a central communications system. You can well imagine the inefficiency and contusion that this set-up caused.

We have now considerably improved that system. The equipment of all services of the Armed Forces has been standardized and integrated, and their radio services interlinked.

Concerning the satellite system that we have set up, the private sector has established the main line, which starts from Baguio to Manila and from Manila to Cebu, and finally all the way down to Cagayan de Oro and Davao. This is the main line from which other lines will radiate to all provinces and cities. For instance, there are 1,000 Cebu telephone exchanges interconnected with the Cebu-Philippine Long Distance exchange, which has five incoming and out­going trunks. This alone has increased the power of our communications system a thousand times.

We have also set up a number of troposcatter stations around the country, including one in Ilocos Sur which will link us to Taipei.

Rural Electrification

Up to the recent past, little attention had been given to the electrification of the rural areas. Last year, the Administration took decisive steps to correct this situation.

With the assistance of the USAID, we organized non-profit rural electric service cooperatives. Two such cooperatives have been organized as pilot projects, one in Northern Mindanao and another in Negros Occidental, Their capital requirements were met by low-interest, long-term loans from both the Philippine and United States governments through their respective agencies. Six other electric service cooperatives in other regions are to be organized within the year. With the experience gained from these projects, we expect to extend the program of rural electrification through non-profit, people-owned cooperatives throughout the country at the earliest time possible.

Power development and transmission are also being accelerated. Feasibility studies are being made for the construction of a power transmission grid throughout Mindanao together with the gradual increase in power generation at the Maria Cristina Plant. A thermal plant is being constructed in Bataan. Plans are underway for the generation of about 1.5 million kilowatts in the Greater Manila area and in Luzon within the next five years.

I cannot overemphasize the importance of providing our people with cheap electric power. Adequate power is the base of a modern industrial economy

Infrastructure Goals for 1969

From January through December, 1969, we will pave 328 more kilometers of roads with concrete and 136 more kilometers of main roads with asphalt; build 1,742 more kilometers of feeder and development roads; and construct 10,949 more lineal meters of permanent bridges.

Before the year ends, we expect to complete the Manila and suburbs interim waterworks projects. We will also construct 65 more provincial waterworks systems. Studies are now being made to increase the capacity of the Manila and suburbs interim waterworks projects to meet the fast-growing needs of the area. Simultaneously, a master plan for a sewerage system for the metropolitan area is being prepared.

Some 3,252 additional irrigation pumps will be installed. To meet this goal, we propose to tap Japanese reparations and to work out a deferred payment scheme for procuring additional irrigation units.

We will continue to improve the Port of Manila. We also hope to complete the reclamation of 31 hectares of port area and to construct a breakwater in the International Port, a marginal wharf at the domestic port, and a Fisherman’s Port at the North Harbor. We will construct and improve 17 other national ports and 53 municipal ports.

We will continue working on the five major river control projects already started.

Airport development in 1969 will consist of concrete paving of aircraft movement areas, and the extension of existing runways to accommodate larger jet-propelled airplanes. The airports to be improved are those at Cauayan, Cagayan de Oro, New Roxas, Tagbilaran, Tuguegarao, Legaspi, Surigao and San Jose (Mindoro Occidental).

The construction of seven out of 45 airports programmed for permanent improvement will be undertaken. To accommodate turboengine aircraft, we have also programmed 33 airports for repair and improvement of runways.

GOVERNMENT CORPORATIONS

National Power Corporation

In 1968, the National Power Corporation completed its 218,000 KW Angat (Bulacan) Hydroelectric Plant. The NPC also finished the third unit of the Maria Cristina Hydroelectric Plant, thus boosting the industrial develop­ment of the IIigan Bay area in Mindanao.

Philippine National Railways

We have reduced the losses incurred by the Philippine National Railways from over P8 million at the start of our Administration, to about P1. 8 million in 1967, and to only about P1.6 million last year.

National Development Company

The National Development Company invested 55 per cent of the total authorized capital stock in the PHILCOMSAT, which in turn is the par­ticipant in the International Satellite Communications System, to which our Republic is a signatory. The Philippines’ first station consisting of 12 circuits was inaugurated recently. This undertaking is not only highly beneficial to our economy, since a net operating profit of over P2 million is assured, but it will also revolutionize the communications system of the nation.

The Government Service Insurance System

To meet the needs of the people of the rural areas more quickly, the GSIS established offices in Laoag, Baguio, Bacolod and Tacloban. Very soon, branch offices wilt also be established in IIigan, Isabela for the Cagayan Valley area and in San Pablo City for the Southern Tagalog region.

In the past year, the GSIS has given no less than P99 million in salary loans and another P166 million in real estate loans. It has also granted P11 million in insurance claims and invested P128 million in stocks and bonds.

The Social Security System

The SSS last year launched a massive low-cost housing program, financed the establishment of more public hospitals, liberalized salary and educational loans and extended its coverage.

During the last three years the SSS has registered 813,600 wage earners and 21,600 employers, or 24.8 per cent of alt wage earners and 36.7 per cent of all employers registered since 1957. As of the end of 1968, member-employers totaled 87,000 while wage earners totaled 2,215,600.

The SSS has paid out a total of P153 million in all kinds of benefits over a period of 11 years and four months to about 460,000 members. Over one-half of this amount was paid in the last three years, during which the number of claims increased considerably. This increase could be attributed mainly to the speedy processing of claims.

Low-Cost Housing

The promise of this Administration to promote low-cost housing is now being fulfilled. To give more meaning to the provisions of the SSS charter, the System starting in January, 1968, embarked on a massive low-cost housing program for its low-income members. The revised housing program which in the main grants loans to employers for the employees’ housing project at a maximum of P15,000 instead of the previous P60,000, represents a major shift of policy. By extending the amortization of the loan from 15 to 25 years, the System has made it possible for the ordinary workers to own houses.

Medicare

The SSS supports the Medicare bill now pending in Congress. This program will provide hospital and medical services to a large number of workers who, for financial reasons, would not ordinarily be able to pay for such services. The program aims to include the dependents of the members of the System.

Industrial Estates

One definite step we have taken to develop the less favored regions of the country is the creation of the Industrial Estates Corporation as a subsidiary of the National Power Corporation. Its first undertaking is the Limay Industrial Estate Pilot Project in Bataan. Similar projects have been programmed for Cebu City, Davao City and Iligan City.

The Limay pilot project will yield lessons and examples for the establishment of similar projects in areas where economic development is sluggish. It envisions a complete industrial complex incorporating the industrial community formed by the Bataan Refinery, the ESSO Fertilizer Plant, the Bataan Thermal Plant, the Philippine Columbia Carbon Plant, the bulk storage facilities, and the Wood Mosaic Plant. A steel company, a textile company, a copper wire company and sulfuric acid company have signified their intention to build their factories in the estate.

Aside from stimulating the growth rate of the economy of the country, the industrial estates project will help decentralize industries, and thus help minimize socio-economic problems such as unemployment, criminal delinquency, sub-standard housing and the like.

LABOR

We stressed the protection and promotion of the quiet hero of our development—the Filipino worker. In 1968, we multiplied our efforts in his behalf and for the welfare of his family.

New Labor Agreement with the United States

For the first time in 20 years, the Philippine Government last year succeeded in negotiating two separate labor agreements with the United States government, extending wide-ranging benefits to 61,000 Filipino workers in local US bases and to 16,000 Filipinos employed in American offshore military installations in Southeast Asia and the Pacific. Additional monetary benefits for these Filipino workers under the agreements are estimated to reach P80 million annually. To these workers have been ex­tended also for the first time the right to self-organization and collective bargaining.

Dollar Repatriation Program

Through the dollar repatriation program, our overseas workers in the Pacific and Southeast Asia may now safely and expeditiously remit their earnings to their dependents and beneficiaries in the Philippines through the Philippine National Bank. This program is not only a welcome convenience to [hem but is expected lo boost our foreign exchange reserve by some S100 million annually.

Crash Manpower Program

In the summer of 1968 without funds provided for in the Appropria­tions Act, we launched a “crash” manpower development program for our unemployed citizens. The initial effort involved training centers in four provinces. A scant P100,000 and the facilities of trade schools and colleges were used. In three months, we were able to train 1,000 people in various skills to qualify them for immediate employment.

Inspired by this success, we directed the Manpower Development Council to undertake a nationwide program of “accelerated manpower training”. One hundred ten centers are now in operation from Batanes to Sulu.

The principal government agencies engaged in the manpower devel­opment effort are the Manpower Development Council, the Department of Education, and the Department of Labor. The program is also supported by city and provincial executives, leaders in industry and agriculture, labor, civic and religious leaders. Above all it has elicited enthusiastic response from our people,

In the last six months we have trained some 25,000 men and women at the cost of less than P100 per trainee. By the end of 1969 we hope to raise this total to 70,000.

The manpower development program is a breakthrough in the solution of the perennial unemployment problem. For the first time we have set up a national program designed to give new skills to workers who otherwise would have no chance to gel formal training.

UNDP-ILO Assistance Program

The success of our program has impressed international agencies. Mr. David A. Morse, director general of the ILO, has paid tribute to our program which he held up as a model for the Asian Manpower Plan adopted by the ILO at its Tokyo conference last year. The United Nations Development Program and the International Labor Organization have given 75 scholarships and study grants for administrators and instructors involved in the manpower development project.

The United Nations has also granted our request for special fund assistance valued at $2 million to the Philippine national industrial training plan. This project will equip our research and demonstration centers in support of our manpower program.

Placement of Workers

Our manpower program involves not only training but also placement of workers.

A nationwide network of employment centers is the necessary complement to our skills training program. We have expanded the public employment service to strategic regional sites all over the country.

We now urge the city and provincial governments to implement the executive agreements for the establishment of their own local employment centers,

And finally we ask for the immediate passage of the manpower training bill which is now in the Senate.

Enforcement of Labor Laws

We have intensified me enforcement of labor laws, resulting in the increase in restitutions paid to our workers by P12 million in 1968 over the previous fiscal year, or an increase of 35 per cent. A highlight of this program was the attention given to our unorganized and underprivileged workers, principally the “sacada” or migrant workers, other types of agricultural workers and household help. In this connection, we have opened two employment offices in Iloilo City and Bacolod City to regulate the activities of contractors and middlemen who supply “sacada” labor.

Free Trade Unionism

We have consistently encouraged and supported free trade unionism and collective bargaining. The administration unequivocally upheld freedom of association and the right to collective bargaining when these were threatened last year. We have also caused the repeal of the law requiring leaders of organized labor to submit non-subversive affidavits every year. We shall continue to defend and preserve the rights of our workers to participate in shaping the conditions under which they work.

Industrial Peace

Industrial peace was more stable last year in spite of a few dramatic strikes. Work stoppages went down by five per cent in 1968 compared with the previous year, and by 65 per cent compared with the average for the previous Administration. We have helped in the conclusion of 520 collective bargaining contracts and other agreements resulting in the pay­ment of more than P180 million in wages and fringe benefits to 126,142 employees.

More than 47 per cent of all strikes in 1968 arose from inter-union jurisdictional disputes. In fact, inter-union raiding has become a major threat to industrial peace. To arrest this alarming development, we call on organized labor, especially on the leaders of the leading labor federations, to get together and adopt a code of ethics with a workable provision for no-union-raiding. At the same time, we have asked the Department of Labor to prepare a bill designed to correct this problem.

The Filipino worker won substantial wage increase and fringe benefits and restitutions of wage differentials resulting from collective bargaining and direct enforcement work by our labor department. Roughly quantified, these accretions amount to about P350 million.

International Labor Affairs

We have increased our voice in international labor affairs. The leadership of the Philippines in the conferences held by the International Labor Organization in Geneva and Tokyo last year was hailed by no less than the ILO director-general during his recent visit to the Philippines last year.

This year, as in previous years, we shall demand that the worker and his family be given their due share of the fruits of our national drive for growth and development.

Brain Drain

A Department of Labor study on the “brain drain” problem has brought to light the exploitation of our doctors and nurses abroad under the exchange visitors program, and the unrestricted migration of technicians and skilled workers of developed countries. We have directed the agencies concerned. such as the Manpower Development Council, to attend to this problem, which adversely affects our economic development.

EDUCATION

Our School Population

We accommodated 6.5 million children in the grade schools under the best conditions in the last decade. Our cumulative classroom production since 1958 exceeded 37,000 rooms. We had 1.5 million high school students and 640,000 college and university students. Our school population of 8.4 million exceeded the total national population of 60 other countries of the world. The schools and studentry were mobilized for development projects, especially for massive tree-planting and civic action activities.

Vocational Education

We are revitalizing vocational schools and work education projects. We have paved the way for local responsibility for education by creating municipal, city, and provincial school boards.

Athletics

We began a ten-year construction program of sports centers, by providing P1 million for athletic facilities for the interscholastics and P100,00 to P400,000 for regional meets, spread throughout the nation,

Special Education Funds

Recently Congress passed the special education fund, making available some P106 million from certain taxes for educational projects. The P106 million will be appropriated annually for new classes, schoolbuildings, textbooks, teaching devices, machinery and equipment for vocational courses.

We have a program to aid private education, notably the Philippines-US trust fund of P24 million from which grants and loans will be made available to private schools. Projects related to national development have been given priority. The fund will double in ten years.

Our government will also set up its own P24 million trust fund for private education. Earnings from this fund will help private schools update courses related to development. The fund will also be used to stimulate university growth in various regions of the country, this easing student congestion in Manila.

Other Aid Funds

A big part of the $27 million war damage fund was given to private universities to encourage them to give courses in technology and science and to engage in basic research.

We have also funds to improve private medical schools. We plan a medical internship dispersal project under which interns will be asked to do a tour of duty in provincial hospitals. This might also arouse their social conscience and reduce the “brain drain.”

The Textbook Program

We have given new stress to a textbook program. By 1970 we expect to produce 10 million textbooks a: a cost of P40 million. About 3.5 million textbooks were turned out last year. To help hard-pressed parents, we scrapped textbook rentals in public intermediate schools. By the middle of this year, we will also do away with textbook rentals in public high schools.

Dispersal of Colleges

To broaden college opportunities for young men and women in the rural areas, we plan to disperse colleges and universities all over the country. We hope to give incentives through tax privileges or credit arrangements to rural colleges. We also plan to disperse technological schools in areas with high agricultural and industrial potentials.

Higher Education

We continued to support the University of the Philippines as a free and independent institution of higher learning. The financial contribution of the national government to the university budget has increased by 100 per cent since 1962, and the State University on its pan has set the pace in our edu­cational world while developing a nationalistic and Asian orientation in its courses and general policies.

The Mindanao State University in Marawi City has been maintained as a center for Muslim studies and culture.

Asian Regional Projects

We have tried to push regional education projects such as a Southeast Asian regional center for graduate study and research in agriculture, and a center for tropical medicine in this country. During my state visit to three neighboring countries, I also proposed a University of Asia.

All these show that we have responded to the challenge of an imminent revolution in education that demands an educational perspective appropriate to a nation moving forward into the 1970s.

CULTURAL DEVELOPMENT

The National Library

An integral part of national development is cultural growth.

Cognizant of its role in the cultural development of the country, the Nation­al Library has started the first post-war inventory of its holdings. To enable our scholars and students to use its collection, it has created special reading rooms—an Asia Room, Theses and Dissertations Room, Rare Books and Manuscripts Room, Social Sciences and Humanities Room. It has also organized additional libraries, bringing the total to 32 provincial libraries, 16 city libraries. 229 municipal libraries, and 19 barrio libraries. We plan to set up reading centers in all barrios.

Through a National Advisory Council on Libraries, we intend to initiate a system for coordinating all types of libraries, whether public, special, university, and private libraries, to make the total library resources of the country available to all.

The National Museum

The role of a National Museum as a medium for public education has had a positive impact on the community as evidenced by the increased number of visitors to the exhibition halls of the national Museum, which has through its long-range program of cultural research gradually closed the gaps in the chronology of Philippine pre-history and history.

Our present building for the National Museum, however, leaves much to be desired, and we plan to provide a new location, possibly one of the government buildings at the Agrifina Circle in the Rizal Park.

The Uses of History

On the proposition that history is both inspiration and energizer of a nation, the National Historical Commission through public lectures, publications, exhibitions, and historical conservation sought to imbue our citizens with a deeper historical sense.

Our national archival materials, now safely housed in the National Library, are being processed, catalogued, and micro-filmed for the use of the scholars and researchers. This meets a long-felt need of Filipino scholarship.

YOUTH PROGRAMS

The youth development program is a new concept for our schools. We have a three-pronged program — (1) for out-of-school youth, (2) for students, and (3) for integrated youth training.

Summer Youth Program

We also have the summer youth program to promote physical fitness and the productive use of leisure time.

Also under our youth program is the summer reforestation project. I have released P175,000 for this program which now has 8.000 youth volunteers in 33 provinces.

Other volunteers conduct free tutorial classes in summer for out-of-school youth. Senior vocational students give training in basic skills while bright college and high school students tutor elementary pupils in civics, reading, writing, and arithmetic.

We also have youth volunteers working at community sanitation, repair of roads and bridges, agricultural extension work, literacy classes, and com­munity beautification.

Child Development

To know more about our children, the National Coordinating Center for the Study and Development of Filipino Children and Youth is undertaking a com­prehensive study program. Research projects on subjects such as the value system, study habits, physical development, and nutrition of our youth have been conducted and the findings made available to the public. Clinical services have been provided: seminars and programs coordinated. The Center also runs a Children’s Village that serves as a laboratory school and demonstration center for better education.

Leaders Tomorrow

These are some of the reasons why I believe in the capacity of our youth—the new generation of Filipinos—to lead the country forward. I am gratified that despite upheavals on campuses all over the world, our students have been more responsible. They demonstrate, but peaceably; they engage in the national dialogue over important issues and they are responsive to the challenges of nation-building. And it is precisely for this reason that I have initiated the move to reduce the voting age from 18 to 21 years. We want to keep them politically involved, responsible, and above all receptive to new skills, new knowledge, and new responsibilities as leaders.

SCIENCE AND TECHNOLOGY

Lag in Science

The Constitution provides that the State must promote science and scientific research. But progress in this field has been very slow.

The following statistics should illustrate the paucity and inadequacy of scientific manpower and investment in our country.

In the United States, there are S53 scientists per million population; Russia has 772 scientists per million; West Germany has 486; France has 333; Italy, 350; Australia, 334. In the Philippines, we have 135 scientists per one million Filipinos.

Again, in the United States, the per capita expenditure of science is P90. In England, it is P60. In the Philippines it is from P.60 to P0.65. This goes show how far we lag behind developed countries with respect to our investment on technology and scientific research.

Recognizing the primary importance of science and technology in national growth, the government has accelerated its program to encourage scientific research and development far beyond all previous levels.

A Science Community

On April 6, 1968, we proclaimed 35 hectares located at Bicutan, Taguig. Rizal, as the site of the Philippine Science Community. On this land shall rise a complex of edifices to house research laboratories, multi-purpose pilot plants, technical workshops, a science museum, a scientific library, and other facilities for research.

NSDB Research Projects

Through the National Science Development Board, we have completed 52 research projects within the last fiscal year and are now engaged in 181 projects. These studies, oriented to social and economic development, involve projects in agricultural and natural resources, industry and engineering, medicine and allied sciences, food and nutrition, behavioral sciences, and basic sciences. Although the government sector was the major recipient of grants-in-aid from the NSDB, private agencies were also supported in their research programs.

Manpower Training and Science Scholarships

Through the manpower training program of the NSDB, public and private high school and college science teachers throughout the country were trained in several institutes and seminars.

The program of graduate and undergraduate training of science scholars was continued. Thirty-eight foreign scholarships for advanced training of deserving staff members of the Board and its agencies were obtained from different international agencies and through bilateral agreements.

The government also conducted a workshop on fisheries and oceanography to accelerate fishery research and to identify areas in which science-based technology might be applied for economic development.

Private Research

We shall utilize more fully private institutions for urgently needed research. The government will be ready to award important research contracts to deserving private institutions, including our colleges and universities. Tax incentives, including double exemptions, are contemplated for the promotion of private research. This is the kind of partnership that will effectively advance the frontiers of science in our country.

FOREIGN POLICY

Our principal problem is to break out of the prison of old attitudes and outmoded habits of thought. New realities confront us. We must adjust to these realities.

Our nation, acting alone, cannot do it. I think this is the lesson that the sixth decade of the twentieth century has taught us. We must act in concert, small and great nations alike, to achieve common objectives. Despite Vietnam, the Middle East and Czechoslovakia, the world to day is in a better position to meet, in common constructive endeavor, the challenges of building a durable peace.

The prospective conquest of the moon has electrified the imagination of the world. If we can harness the courage, the vision and the daring of the space travellers towards the solution of terrestrial problems, then perhaps we can begin to make that bold stride towards the future.

Two great challenges face the world today. The first is the problem of peace and security. The second is raising the living standards of peoples everywhere. No one would dream of minimizing the difficulties of these problems. In both the stakes are large— the future of generations to come and the survival of life as we know it. We of this generation hold the future in mortgage. We cannot afford to fail.

Communist China

I said last November, in a speech at the Manila Overseas Press Club, that we in Asia must strive towards a modus vivendi with Red China. I reiterate this need, which is becoming more urgent each day. Before long, Communist China will have increased its striking power a thousand folds with a sophisti­cated delivery system for its nuclear weapons.

We must prepare for that day. We must prepare to co-exist peaceably with Communist China. For our part, this means relentless work towards full self-development, so that we can live beside our powerful neighbor with confidence and dignity. For her own part, Communist China must accept the fact that superior military strength cannot justify aggression.

I believe that the faith and goodwill, as well as the competence, for peaceable co-existence exist in the heart and mind of all Asians.

The Communist Threat

One good result of the cold war detente is the fragmentation of the communist empire. Where there was only one center of power, today there are several. Nationalism within the former communist empire, rather than ideology as such, has become the real motive force in the relations of the communist countries with each other and with the outside world. The trend towards relaxation is clear. Communist China’s willingness to resume the Warsaw talks with the United States, the Soviet Union’s “feelers” towards agreement on arms control are important straws in the wind.

As far as the Philippines is concerned, external Communist aggression represents a minimal threat—at least, not to the extent we once felt it to be. Our real problem is the growth of internal communism arising from urgent economic problems. The main thrust of my Administration is towards economic development or, which is the real meaning of economic growth, raising the living standards of our people.

Vietnam

A just peace in Vietnam has always been our endeavor since the 1966 Manila Summit Conference. Any negotiations must provide room for compromise; that seems to be elementary. We feel that the principles enunciated in the Seven-Nation Summit Conference are sufficiently broad to provide leeway for both parties to reach agreement. The Paris negotiations will probably take a long time. But the fact that the Paris negotiations are taking place at alt seems to be a good sign. It is the clearest expression yet that a desire for peace exists; half the battle is thereby won.

Role of Japan in Asia

The terms of the presumptive withdrawal of the United States from Asia have not been spelled out in detail. This may mean, at the least, a desire to avoid further involvement in Vietnam-type operations in Asia; or, at the most, diminution of economic aid and relinquishment of security obligations in Asia.

On the theory that U.S. withdrawal would cause a power vacuum in the region, Japan is being increasingly talked about as the inheritor of the role of the United States. All possible contingencies are being studied by the Philippines.

My Administration is undertaking an intensive study of the problem.

Regional Cooperation

Closer regional cooperation has been one of the main tenets of my Adminis­tration. To this end, we have formed the ASPAC, revived the ASA, and begun the ASEAN. The main drawbacks have been the lack of practical experience in regional cooperation. We are all, in a manner of speaking, undergoing on-the-job training. The other drawbacks are regional conflicts, such as the Sabah controversy between the Philippines and Malaysia.

These impediments are considerable but not insurmountable. The practical aspects of cooperation will be mastered in time and as for conflicts, they should be isolated and solved peacefully and in accordance with tested procedures of international law. In this way, we may succeed in preventing disruption of regional cooperation activities.

For this reason, we have proposed, more than once, the creation of an Asian political forum, to help solve intra-regional conflicts or, at least, defuse potentially explosive situations.

Another reason we attach great value to regional cooperation is that, individually, the nations of Southeast Asia are hard-pressed to achieve the objectives of independence in the economic sphere. In the case of the Philip­pines, the first objective of self-sufficiency in the staple foods has been achieved. But beyond that, we feel that regional cooperation can accelerate growth.

Our Claim to Sabah

If the Philippines were not convinced of the validity of its right to Sabah, we would be the first to say, “Drop the claim.” But we feel that on legal, historical and moral grounds, the Philippine claim to Sabah is justified. We are bound to pursue it as a matter of principle and as a matter of justice.

We will pursue the claim peacefully in keeping with the spirit of previous understandings with Malaysia and in accordance with the principles of national law. The claim is in the national interest and we intend to pursue it by making use of all available peaceful resources. We are encouraged by the fact that many of our Asian friends are helping in the search for a modus vivendi between the Philippines and Malaysia.

NATIONAL DEFENSE

We are passing through a transitional period in world politics and we have only ill-defined landmarks to guide us. What will emerge are, without question, new relationships among the great powers in Southeast Asia, and between them and the smaller powers, including the Philippines. What has become obvious, even at this stage, is an impending American withdrawal in the military sphere, an event of great importance to countries which have hitherto depended upon American military guarantees.

Our defense policies have begun to take these emerging changes into account, to follow three guidelines:

A Flexible Approach

First, these policies should provide for a more flexible approach vis-a-vis the main powers in our part of the world.

A more workable relationship with the United States, based on realism and mutual advantage, should be developed.

Regional Defense Arrangements

Second, Philippine defense policies must take in account regional defense arrangements.

In this connection, it should be noted that the Southeast Asia Treaty Organi­zation (SEATO) has been plagued by disunity, giving rise to severe criticisms as well as to doubts that it can and will do the part for which it was created in 1954. In any case, SEATO can in the meantime be strengthened. But another organization can issue out of the present situation.

Sabah

Finally, these policies should give a high priority to the peaceful settlement of our Sabah claims.

Since the end of the last war, Philippine defense policies have been formu­lated in response to entirely foreign, domestically irrelevant crises, such as Berlin. Korea, the Congo, even Vietnam. For the first time, an issue of tre­mendous domestic importance has come up: to recover a territory about which a great many of our citizens, particularly in the South, feet strongly.

The settlement depends of course on a number of variables, any one of which may upset the formula for settlement.

On our part, we have been consistent with our declarations of peaceful intention. We have doused the war-fever that raged in the South. We shall continue to search for solutions that are in keeping with our dignity and integrity as a nation and with our regional commitments.

AGRICULTURE

Rice Production

One of the most heartening breakthroughs of the Administration is in rice production. We have always been known as an agricultural country, and yet—to compound this seeming handicap—we were one of the biggest importers of rice. In the last three years, we have dramatically increased rice production to a level never before attained. We began producing rice not only for our own con­sumption but for export as well. We have drastically reduced importation of rice from a record high of 570,000 tons in 1965 to zero in 1968. This means a savings of P264 million a year, the amount we spent to import rice in 1965.

As we had envisioned in 1967, we were able to export rice worth $5.9 million to different countries. We suffered a temporary setback in our exporta­tion program due to the long drought that hit a wide area of Luzon and the typhoons that destroyed our crops. However, with the present trend in rice pro­duction, we expect to be able to resume exportation this year.

We attribute this success in rice production to the effective implementation by the Rice and Corn Administration of the price support law which was enacted in March, 1966. This price support law increased the price of palay fromP12to P16acavan, and of corn from P9 toP13acavan. In addition, the RCA has a going program to improve warehousing techniques, rice milling methods and marketing.

Although we expect to be 7.5 million cavans shy of our projection of 121 million cavans for the crop year 1968-69 because of the natural calamities that .came our way, we expect our rice supply to remain plentiful and the price to remain lower than the projected level, although higher than last crop year.

With the tremendous success and confidence gained, as well as the lessons teamed in the last three years, we are optimistic about our agricultural capability.

Breakthroughs in Other Areas in Agriculture

Along with the tremendous success of the rice and corn production pro­gram, our development goals in agriculture were substantially enhanced by increased productivity in the sugar industry, the planting of new areas to coconut, the intensification of the cattle dispersal program, the opening of arti­ficial insemination centers, and the revitalization of the fishing industry.

These have been made possible by the increase of technical knowledge, and the channeling of fresh resources to the agricultural sector. Our experience in 1968 proved that only through the use of technology in agriculture can we realize the goal of maximum agricultural productivity.

Agricultural Research

One of the most significant developments in the last three years has been the increase in quality and quantity of agricultural research. An important factor for the breakthrough in rice production was the development and subsequent multiplication of the high-yielding varieties, like IR-8, BPI-76, College 18, College 4-63 and IR5. We now have corn varieties that yield three or four times the ordinary varieties. Superior strains of mongo, tomatoes, eggplants, bush sitao, sorghum, soybean and sugarcane, have been developed. Chicken broilers far superior to the common “dumalaga” and “inahin” have contributed to better nutrition for our people. We have developed a new chicken breed that can lay more eggs than the white leghorn.

These developments prompt us to view with boundless optimism the prospects of food abundance in the near future.

However, in spite of the major breakthroughs we made in agricultural research, there is still much that remains to be done. We hope soon to make the Philippine Coconut Research Institute fully operational. It is crucial for us to improve the productivity of our coconut plantations so that we can ward off the encroachment of soybeans and synthetics in our traditional markets for coconut products. The same goes for the sugar industry. There is an urgent need to raise sugarcane productivity so that this industry can earn more foreign exchange.

Agricultural Development South of the Typhoon Belt

The natural calamities that last year befell several of our major crops, particularly rice, sugarcane and coconut underscore the fragility of this important section of our economy. If Mindanao offers too great an attraction to agro-industrial entrepreneurs, it is largely because it is outside the typhoon belt and the rainfall is abundant and evenly distributed throughout the year.

The promise that was once Mindanao is now fast becoming reality. The influx of investments in new coconut plantations, citrus and coffee farms, bananas and pineapples, hog, farms and cattle ranches in our southern frontier strongly attests to the foresight and pragmatism of our new breed of entrepreneurs who have chosen to go south. All these would not have taken place, however, without the vigorous support of our financial institutions who have gone into partnership with our pioneering entrepreneurs.

Stimulating the Fishing Industry

A major deterrent to the development of our fishing industry is lack of cheap rice. To solve this problem, the Philippine Fisheries Commission started in June, 1968 the fisheries infrastructure program. The objective of this program is to provide the fishing industry with cheap ice and cold storage facilities in strategic fishing areas. The Philippine Fisheries Commission will establish 17 ice plants and cold storage projects in various parts of the country.

By the end of this month we expect the completion and operation of five ice plants, one each in Mercedes, Camarines Norte; Masinloc, Zambales, Guiuan, Samar; Sagay, Negros Occidental; and Magallanes, Sorsogon.

By June of 1969, we expect two more ice plants to be in full operation. These ice plants are situated Barugao, Leyte and Liminangcong, Palawan.

By the end of fiscal year 1969 these seven ice plants will produce 8,000 MT of ice. The remaining ten ice plants are now in various stages of construction.

We expect to operate our 40-ton ice plant in Bato-Bato, Sulu and the ice plant in New Washington, Aklan, by December of this year. Other ice plants and cold storages now under construction in Bayawan, Negros Oriental; Pala-Pala, Iloilo; Saravia, Negros Occidental; Dalahican, Quezon; Jolo, Sulu: and Pio Duran, Albay will be in operation in 1970.

Expanding Fish Production

In 1968, the volume of fish catch was about 745,000 metric tons, represent­ing 68 percent of our nutritional requirements for fish. Our goal is to attain self-sufficiency in fishing by 1972,

To invite investments, the Board of Investments has made fishponds and deep-sea fishing priority areas for government assistance. A fishing port is being constructed in Navotas which will be backed up by the Greater Manila Terminal Food Market to serve a major outlet for fresh food commodities, including fish.

Coupled with the in vestment incentives and the infrastructure support being given to the fishing industry, we now propose to set up a regional fishery re­search center with the support of the countries in Southeast Asia and Japan and the US Government. This center will conduct basic and applied research on freshwater and brackish water fishery.

We will also continue to stock our major lakes, swamps and other inland bodies of water with fry and fingerlings.

Saving the Abaca Industry

A major problem is the steady decline of our abaca exports. Technological advances leading to the development of many types of synthetic fibers have eroded our traditional market for abaca cordage. Sisal and henequen which are cheaper have also undercut abaca in the constricting market for natural fibers,

We have to find new uses for abaca. Long and painstaking research efforts are now starting to pay off. Several pulp and paper plants are now using low-grade abaca for pulp production. Abaca is now being used for tea bags. Studies are being made for the use of abaca for textiles as well as to replace jute in the production of sacks for rice, fertilizer and sugar. The Gomez process for the manufacture of abaca chips as raw material for long fibered pulp will soon be tested on a commercial scale with the establishment of a pilot project with the financial support of the National Development Company. The Board of Invest­ments has included the manufacture of long-fibered pulp in the priority areas for investment. In the long run, diversification appears to be the only feasible solution to the abaca problem. In the short run, we are exploring new markets for abaca within the Socialist bloc; we have also asked our friends in the West­ern block to refrain from further disturbing the market for natural fibers.

The Greater Manila Terminal Food Market

After so many years we have finally taken the first bold step toward estab­lishing an organized national marketing system which will stabilize the prices of prime commodities and which will induce qualitative and quantitative im­provements in food production, thereby raising the income and standards of living of our rural population.

I refer to the Greater Manila Teminal Food Market, or GMTFM, which will be the first of a network of food terminals to be established in strategic places all over the country. The GMTFM will rise, before the end of this year, on a 120-hectare lot in Fort Bonifacio along the South Superhighway. When com­pleted the GMTFM will be a combined producer-wholesaler-transit market complex equipped with the latest in storage, refrigeration, food handling and trading equipment, for effective wholesale distribution of the produce of more than one million food farmers from 27 supplier-provinces in Luzon, the Visayas, and Mindanao.

The GMTFM will not, as mistakenly believed, buy and sell for its own account but will provide the facilities and services to enable farm producers, wholesalers and other legitimate traders and large-scale consumers, to engage in spot wholesale buying and selling of fresh produce under conditions of free market interplay to prevent any group from monopolizing or cornering the supply of fresh produce.

The GMTFM will, however, not merely provide physical marketing facili­ties but will correct the sharp imbalances between food supply and demand, with their attendant violent price fluctuations. It will be deeply involved in various programs and projects intended to change the produce marketing system in our country, and it will protect the small food growers from exploita­tion by unscrupulous middlemen. It is presently engaged in the organization of cooperatives of producers who will be financed from production to marketing by six commercial banks chosen by the Bankers Association to the extent of P60 million to P120 million.

Along with correction of food supply and demand imbalances and erratic price fluctuations and raising the income of our rural population, the GMTFM will, among others, promote ancillary and service industries; strengthen the food processing industries by assuring them a steady supply of quality and graded food commodities; develop superior varieties of foodcrops; and intro­duce new techniques of fresh food preservation, handling and transport, pack­aging and trading; create a favorable climate for the export of certain commodi­ties; and even improve the dietary habits of Filipinos. All these will generate far-reaching social and economic benefits.

Forestry

In 1968, we carried out a determined campaign to protect and conserve our forest resources. We enforced the selective logging system and the requirement to consolidate timber licenses into working units of at least 20,000 hectares with 25,000 cubic meters of annual allowable cut each.

Under the selective logging system, only the mature timber of at least 60 centimeters in diameter may be cut thus leaving behind a healthy residual and logged-over area for future harvest. Thus, without damage to our forest resources, logging areas expanded significantly during the last three years, with the aggregate annual allowable cut increasing from 6,439,059 cubic meters in 1966 to 11,048,008 cubic meters in 1968. Consequently, the total income of the government from forest charges during the three-year period reached the unprecedented amount of PI 12,582,139.83.

At the same time, disposable forest lands were opened to profitable uses, including fishponds, recreation sites and resorts, pastures, private camps, radio stations or communications station sites, and the like.

During the period, 10 watershed forest reserves with a total area of 103,107.6 hectares were established while 16 other watershed areas were surveyed.

Reforestation is being carried out by the government, schoolchildren, volunteers, loggers, and civic organizations. However, their efforts are not enough. Vast tracts still have to be reforested. This year we will intensify our reforestation effort. Our target is the reforestation of denuded watershed areas and forest parks. At the same time we will improve our system of guarding our forests. I have also asked the relevant agencies of the government to prepare a comprehensive wildlife conservation plan. I intend during my incumbency to do everything to conserve our forests and wildlife.

HEALTH

The improvement of health services for the people, especially for those in the rural communities, is a principal program of this Administration.

Free Medicine

On free medicines for the people, the per capita expenditure of our govern­ment in 1965 was four centavos. Today for free medicine we spend 52 centavos per person. In other words we are distributing throughout the country about PI 6 million worth of free medicines as compared to only PI .3 million in 1965 to 1966.

Rural Health Services

The rural health program of the Department of Health provides health and medical services to 80 percent of our people. As of July 1967, a total of 1,352 rural health units served the same number of municipalities. By July 1968, although additional units were created to increase the total to 1,459, still a number of municipalities remain unserved. Furthermore, of the existing rural health units, one thousand are not completely staffed and are operating with in­adequate supplies and medicines. We will seek to correct these inadequacies this year.

Nutrition Centers

We concluded an agreement with AID for the establishment of 500 nutrition centers for children all over the country. At the same time we are engaged in a campaign to show the need for better food, for we are all well aware of the nutri­tional deficiencies of our people.

COMMUNITY DEVELOPMENT

The PACD continues to be an agent of change in our rural frontiers.

Self-help Projects

Over the past three years, our barrio people completed with minimal go­vernment assistance a total of 128,158 projects worth P47,599,469.67 is compared to 24,306 projects valued at P13,365,522.50 during the four years of the previous Administration. This means an increase of 427 percent in number of projects and 156 percent in project cost. These projects now serve over six million people.

In the past years the PACD served 16,000 barrios as against only 3,600 during the four years of the previous Administration. This is a gain of 345 per cent.

A new feature of the community development program is the participation of the private sector. Some of the major activities undertaken with private support are: Operations “Kasama’” in cooperation with the University of Sto. Tomas; low-cost housing project for rural areas in cooperation with me Arch­diocese of Sorsogon; the Lanao special operations in cooperation with the Asia Foundation and Mindanao State University, and many others.

Volunteer Programs

Through its volunteer program, the PACD with financial support from the Asia Foundation, initiated the Volunteers for the Improvement of the Philippines (VIPs), trained no less than 250 student volunteers from 16 univer­sities and colleges in the Bicol region under the Bicol Students Volunteer Service Program (BSVS), and cooperated with the civic action program of the Department of National Defense in launching the Rural Service Volunteer Program (RSVP).

Participation in the Food Production Effort

The PACD played an important role in the implementation of our rice and corn self-sufficiency program. Among its contributions are communal irriga­tion works, self-help barrio roads, farm to-market roads, and cement dryers. From the reparations allocation of the PACD, centrifugal irrigation pumps, power tillers, marine diesel engines, and agricultural tractors have been sold to small farmers in Central Luzon on very liberal amortization plans.

P100 Million Rural Development Fund

PACD field workers throughout the country were directed to assist in the implementation of the P100 million Rural Improvement and Community Development Fund project.

SOCIAL WELFARE

Last year, the Department of Social Welfare set up branch offices in the 10 newly created provinces, in Mt. Province, Davao, Agusan, Samar, Cotabato and Misamis Oriental. The Department also established two community centers in Manila, which gave vocational training to 10,000 out-of-school youth. With the support of the private sector, child-caring institutions were decentralized, while a Reception and Study Center was set up in Cagayan de Oro City. Three hundred seventy families with 2,653 dependents were given financial and technical aid to gel them back on their feet.

Integrated Social Welfare Program

Allow me now to talk about the integrated program for social welfare. You will forgive my pride — this is a program that has been called the First Lady’s Integrated Social Welfare Program and would not have been possible but for the First Lady’s determination, and a social conscience sensitized by all that she has seen of poverty and suffering in this country. We will not let politics or malice stand in the way of helping those who need help. For years, and through countless administrations, social workers had been trying to push through the idea of lifting welfare work in the Philippines above the level of rice and sardines. They spoke of decentralizing Welfareville, which had become, through laziness, inadequate funds and sheer ignorance, the dumping ground of society’s rejects. They dreamt of projects with lasting impact, programs and services whose returns might not be immediately discernible but which would help large sectors of the population adjust themselves to life—I refer here to our dependent groups, of all ages: the abandoned, the orphaned, the handicapped, the disturbed, the aged, the poor, the sick—but not until this Administration came along did these dreamers find an advocate. Without a single exception, professional social workers speak of the integrated social program as a milestone, a breakthrough, moving relentlessly towards a reorientation of the entire welfare movement in our country. What is it? Put simply, it is a massive effort, tapping both government and private sources, to help the helpless, but not only in terms of simple food and shelter, but also of adjustment: where those who can, arc taught skills that will help them become independent and responsible members of society; where those who can’t, either by reason of age or of physical or emotional handicap, are given protection and sustenance but in an atmosphere of dignity.

The integrated program is, of necessity, a program of priorities — because the children must be saved immediately, they have come first. Thus, the Nayon ng Kabataan at the Manila International Airport; the Recep­tion and Study Center in Bago Bantay; the Marillac Hills project for girls. Work has begun on the Molave Village, a training school for boys inTanay. Because they don’t have long to live, and because we have a special affection for them, the aged will soon have a home near the Reception and Study Center in Bago Bantay. The pattern is unmistakable: as quickly as possible, Welfareville, long a byword for hopelessness, is being decongested, and its population moved out to the countryside where nothing is being spared, nothing that funds and techni­cal knowledge can give, to provide them with a new hold on life.

I invite my countrymen, particularly the Liberals, to visit these homes, and to see for themselves how much we can do and how far we can go, when we are driven not by self-aggrandizement but by the plaintive cry of the foundling and the orphan, the neglected and the abandoned. The integrated social program does not stop here; when the children will have been taken care of, it will turn its attention to the mentally helpless, both young and old. We are determined to do everything for the National Mental Hospital, and the mentally retarded children and the unfortunates in the barrios. Afterwards, the preventive aspects of wel­fare work will have a share of attention: projects will be put up for out-of-school youths; community programs and youth centers will receive greater support.

SMALL SETTLERS

Our small fanner-settlers, who have courageously dared the dangers and anxieties of frontier life, especially in Mindanao, as well as the cultural minorities with just and rightful claims to the lands of their ancestors, have been given greater protection and assistance. In the latter part of 1967, we created the Small Settlers Protection Committee by Executive Order. Since then, this com­mittee has embarked on its assigned mission of protecting the rights of these set­tlers. Out of the 297 cases referred to the committee, 197 have been resolved. Its initial successes have brought up numerous other land cases, many of which are critical and fraught with grave social implications. Thus, recently we elevated the committee into a commission, headed by a full-time chairman.

The provincial small settlers protection committees will be greatly strengthened under the Small Farmers Commission. Cases of land-grabbing, exploitation of poor and ignorant settlers and cultural minorities by unscrupu­lous and powerful persons and entities, once brought to the attention of the Commission, will be promptly investigated; the whole machinery of the government as well as the powers of the Presidency will be used to protect the rights of these pioneer farmers and to secure for them the assistance of appro­priate government agencies.

Consistent with the forest conservation requirements of the country, we have directed the Bureau of Forestry and the Bureau of Lands to speed up the re-classification of forest lands suitable to agriculture and to release these as alien­able and disposable lands as soon as possible so that the legitimate desire of our landless citizens to own land and become independent farmers can be fulfilled.

We have likewise directed the Board of Liquidators to speed up distribution of former alien-owned lands and settlers’ farms under the old LASEDECO. I am determined that the government under my Administration shall move with utmost dispatch in fulfilling its responsibility to the landless.

NATIONAL INTEGRATION

In 1968, our Muslim brothers and the cultural minorities figured prominent­ly in our overall development program. They were given preference in the allocation of pre-fabricated schoolhouses as well as in the release of the Barrio De­velopment Fund. More scholarships were also awarded last year. especially for the provinces of Lanao del Sur and Sulu.

One of the immediate goals of this Administration is to develop Mindanao. To attain that goal, we have recently revitalized the Mindanao Development Authority which will plan and direct the rational development of that vast fertile island.

At the same time, we have launched the Sulu development program and es­tablished the Mindanao and Sulu Development Commission, which coordi­nates all national agencies involved in the socio-economic development of our southern islands. The Muslims and the other cultural minorities shall continue to receive preferential attention under this Administration.

LOCAL ECONOMIC DEVELOPMENT PLANS

In planning for the future, we have given great importance to the country­side. Thus for the first time in our history, there are now economic development plans for each municipality, province, and city. These are the municipal, pro­vincial, and city economic atlases and development plans prepared by the Presidential Advisory Council on Public Works and Community Development (PACPWACD) in coordination with the local governments and with the assist­ance of technical agencies in the locality. All the 1.412 municipal mayors, 70 provincial governors and 53 city mayors now have copies of these economic atlases.

THE PEACE AND ORDER SITUATION

The problem of maintaining peace and order is not a monopoly of the Phil­ippines. It is a worldwide phenomenon that increases in intensity and extent as a society becomes a complex organism, as population increases, as peoples of varied cultures mingle and live together, as technology encroaches on traditional ways of life. These changes create not only the conditions for a better material life; they create, too, social problems, the most grievous of which are criminality and juvenile delinquency.

Crime Statistics

Although the crime rate in the Philippines may appear intolerable, it is still among the lowest in the world. Crime in the United States, for instance, has increased by 58 per cent since 1958; Canada by 16per cent from 1962 to 1965; Sweden by 39 per cent from 1960 to 1965; and France by 44 per cent for theft alone in 1965. Yet the police agencies in these countries are reputedly among the best trained and best equipped police forces in the world.

In Asia, India reported an increase of 37 per cent in 1963; 20 per cent for Hongkong in 1965; 12 per cent for South Korea on index crimes for every 100,000 inhabitants in 1964; 61 percent for Malaysia on index crimes in 1964; and 22 per cent for Thailand on index crimes in 1964.

In sharp contrast, a study of the crime rate in the Philippines from 1962 to 1965 shows an increase of about eight per cent.

In 1966, the volume of crimes recorded was 18 percent higher than 1962. However, in 1968, the crime incidence registered a decrease of about nine per cent compared to 1966. Expressed in terms of crime rate, this means that the rate of crime incidence in 1966 was reduced by 14 counts for every 100,000 inhabitants in 1968. The reversal of the crime trend in 1968 is attributed to the reduction of crime in the Greater Manila area as a consequence of the revitalization of the METROCOM and the establishment of a system of cooperation among law enforcement agencies in the metropolitan area.

Statistics will show that for the period 1962 to 1965, about 77 per cent of the total number of crimes were committed in Metropolitan Manila, and 13 per cent in the rest of the country. In 1966 and 1967 the percentage of crime incidence in Metropolitan Manila went up to 82 per cent, but dropped to 77 per cent in 1968 a level equal to that of 1962. A significant portion of this reduction was registered in index crimes. The percentage of these index crimes went down to 62 per cent from 68 per cent in 1962.

The Walton Report

This is not to underestimate the seriousness of this problem, nor the deficiencies in our present law enforcement system. These are fully discussed in the so-called Walton Report, based on a survey which I asked to be made on representative police forces around the country.

The conclusions of the Walton Report were: (1) The performance of many law enforcement agencies is sub-standard; (2) Police training is inadequate: (3) Political interference is common; (4) The facilities, budget and logistical support are deficient; (5) Inspection procedures are non-existent or unsatisfac­tory; and (6) Morale is low.

Police Act of 1966

It is obvious that appropriate legislation had to be sought to solve these deficiencies, and the Police Act of 1966 can only be the first major step to upgrade and professionalize police departments all over the country under the supervision of the Police Commission.

We are well on the way to implementing the recommendations of the Walton Report.

Three Programs

The Administration is resolving the crime problem through three major programs, namely: (1) improving our capability for crime prevention; (2) im­proving law enforcement; and (3) improving the administration of justice. The objective of these programs is to develop methods for dealing effectively with the crime problem.

The national government has been seriously hampered in developing a more effective peace and order program by the fact that peace and order has traditionally been the primary concern of local governments. This has set up limitations to its ability to take over responsibility for peace and order every­where in the country.

At the same time, financing difficulties have prevented the procurement of adequate arms. vehicles, laboratory equipment and other facilities, not to mention the need to increase police personnel in many places. To help reduce this problem, the Office of the President has time and again bought the equip­ment and other facilities of a number of police forces with savings in the Executive Department but there is no specific appropriation for our police forces.

The Administration anchors its peace and order programs on the concept of community action. While the national government is committed to provide leadership, coordination, technical and financial assistance, the local govern­ments and the private sector are enjoined to respond in a manner that will ensure the success of the programs.

The Aims of the Peace and Order Program

Our program is intended: (1) To arouse, promote and maintain an active public concern for the prevention of crime and juvenile delinquency; (2) To integrate and coordinate the activities and projects of community organizations into the national crime prevention program; (3) To improve the caliber of the manpower resources of police agencies; (4) To develop inter-police agency teamwork and cooperation; (5) To win the support of the citizen in the peace and order campaign; (6) To make the judicial system more effective by introducing changes that will facilitate the processing of criminal cases; (7) To enhance the dignity of the courts by protecting the judiciary and the prosecuting agencies from pressure groups;(8) To eliminate the backlog of pending cases: and (9) To emphasize correctional treatment of prisoners, and to reduce reci­divism by strengthening rehabilitation, counselling, educational and vocational training activities.

Every possible measure is now being undertaken to improve police efficiency both on the provincial and municipal levels.

Schools for Policemen

In addition to a national police academy at Fort Bonifacio, Rizal, regional training schools are now being established. Today, there are five such regional academies under the supervision of the POLCOM located in Cebu City, Cagayan de Oro, Camp Aquino in Tarlac, Bacolod City, and Lingayen. So far, 26 classes of the one-month chiefs of police course have graduated 1,141 chiefs of police, 118 deputy chiefs of police, and 922 other intermediate rank officers.

Towards the end of 1968, a crash training program was inaugurated to give basic training to policemen in the lower grades as well as to recruits. The first group consisted of trainees from the police forces of Pampanga and Tarlac. Similar courses will be opened in 12 other training centers. The POLCOM has also trained 1,940 chairmen and members of local boards of investigators to upgrade and to systematize investigation procedures in administrative cases.

The crash training program will initially train 1,000 policemen each quarter. This number will be increased as facilities and funds are made available.

Hand in hand with this upgrading program is a rigid process which has been developed to remove misfits and undesirables in police forces. A total of 101 policemen have been dismissed with prejudice, 21 suspended, and eight repri­manded or admonished in 239 cases acted upon by the POLCOM. The appalling state of police efficiency before corrective measures were undertaken is reflected in the fact that some 20,000 out of 30,000 policemen were not qualified to join the police force.

Modernization of Police Equipment

The modernization of police equipment, long overdue, is finally underway. The amount of P10 million was released for this purpose. This amount came from savings of the Executive Department because, as I have already staled, there were no funds provided for this purpose in the Appropriations Act. Already established is a Metropol Communications Network linking five cities and nine municipalities in the metropolitan area. Five municipalities in Rizal have also been helped to put up their communications systems. Technical surveys for setting up communications systems have already been completed in 10 provinces. In time, all these will become a nationwide network.

Upgrading the Philippine Constabulary

The Philippine Constabulary is still the national police. A program for the upgrading of its personnel has been under implementation since 1967. This effort was redoubled in 1968. Every member of the Philippine Constabulary is being trained in the detection, prevention and investigation of crimes as well as the prosecution of criminal cases in court. Members of the force who do not meet these requirements will be weeded out or transferred to the Philippine Army. This is in addition to their training in public relations and in community development.

THE STRUGGLE AGAINST CORRUPTION

Unlike previous stewards of our government, the present administration has, without fear or favor, punished grafters and corrupt public officials.

A Get Tough Policy

In recent months, I have ordered the dismissal or investigation of a district judge, commissioner a chief of police, a city judge and other ranking govern­ment officials

Administrative reforms have been instituted, and more are being carried out, in the bureaus of customs and internal revenue, where the greatest incidence of graft and corruption may be found.

These have resulted in numerous suspensions and dismissals. Among the more prominent cases are the following:

On October 7, 1966, we ordered the suspension of two customs officials and a custom guard found involved in the illegal transfer of cargo, causing a loss of P50,000 to the government. The Customs personnel who were suspended were Rodolfo Espino, acting chief of the manufacturing ware­houses; Cesar Santos, assistant commissioner for operations and concurrently chairman of Cargo Inventory and Disposal Committee; and Edgardo de los Santos, a guard. Administrative charges had been filed against the two officials and the guard by Gen. Pelagio Cruz, the head of the Anti-Smuggling Action Center.

On November 28, 1966, we ordered the suspension of Health Under­secretary Rodolfo Canos upon the recommendation of the special committee that investigated the charges against this official. He was found guilty of willful neglect of duty, grave abuse of authority, dishonesty and conduct prejudicial to the best interest of the service. He was dismissed from the service on August 10, 1967.

On March 30, 1967, we suspended for three months Judge Alfredo C. Mabayad of the municipal court of Roxas, Isabela after he was found guilty of gross negligence and dereliction of duty.

On July 27, 1967, we ordered the preventive suspension of Capts. Vicente M. Orlina and Arturo llagan and Crisanto G. Almoguera, members of the Board of Examiners for Marine Engineers, who were held responsible for the leakage of questions for an examination given in Cebu City. They had been administratively charged by Commissioner Abelardo Subido for bribery,

On August 14, 1967, we suspended for one year Fiscal Carlo Lozada of Surigao del Norte for improper conduct, arising from charges of oppression and harassment. He was also sternly warned that repetition of the offense would be dealt with more severely.

On September 19, 1967, we suspended Governor Javier Ariosa of Zamboanga del Sur, who was found guilty of charges of oppression, dishonesty and grave misconduct.

On January 6, 1968, we suspended and later dismissed from office District Judge Gaudencio Cloribel of Manila.

On March 16, 1968, we suspended Land Registration Commissioner Antonio Nohlejas on grounds of “gross negligence and acts prejudicial to the public interest” for approving subdivision plans based on the new surveys that encroached into public lands. His resignation was accepted later.

On April 27, 1968, we fired Chairman Tomas Martin, Board Members William Buquid and Rene Garcia of the Board of Liquidators for abuse of presidential confidence in the disposal of the 15,925,545 shares of the govern­ment in the Lepanto Consolidated Mining Company.

On July 25, 1966, we fired Provincial Fiscal Geminiano Beloso of Batangas for the loss of over 5,000 cartons of smuggled cigarettes placed in his custody as evidence in the case. The Department of Justice found him guilty of dishonesty and incompetence.

On August 28, 1966, we ordered the dismissal of Provincial Fiscal Juan Salazar and Assistant Fiscal Eliezer Tengco, both of Laguna. Administrative charges were filed against them for dishonesty, misconduct and dereliction of duty while prosecuting a smuggling case involving 7,600 cartons of blue seal cigarettes.

On November 11, 1966, we were informed of the dismissal of nine SSS employees for venalities ranging from dishonesty to immorality. SSS Adminis­trator Gilberto Teodoro pointed out in his report that although the SSS is outside the civil service, the System is applying civil service procedures to employees facing administrative charges to assure them due process and to remove sus­picion of arbitrariness on the part of the SSS management. Teodoro said that 79 administrative cases have been brought against SSS employees. Forty-two have already been fired as of November 10, 1966,

On March 29, 1967, we ordered the dismissal of the three municipal judges, namely, Fernando B. Fuentes, Jr., of Nunungan. Lanao del Norte; Crispin N. Menchavez of Santa Fe, Cebu; and Vicente M. Salumbides ofTagkawayan, Quezon who were found guilty of dishonesty, dereliction of duty, and gross ignorance of the law. On April 1, 1967, we fired Horacio T. Aquino, municipal judge of Panganiban, Catanduanes; and Eloy David, municipal judge of Clark Field, Pampanga. Investigation conducted by a district judge found Judge Aquino guilty of grave misconduct and habitual drunkenness. Judge David was found by investigators guilty of gross incompetence and ignorance of the elementary rules of court procedures.

On May 16, 1967, we ordered the dismissal of Davao Chief of Police Monebrio F. Abellana, on the recommendation of Solicitor General Antonio Barredo, who investigated charges against him and who found him guilty of all charges brought against him except toleration of gambling.

On June 23, 1967, we fired Judge Pascual Beltran of the Municipal Court of Buenavista, lloilo, and Judge Pedro San Roque, of the Municipal Court of Virac, Catanduanes for serious misconduct and inefficiency. Their cases were investigated by District Judge Feliciano Gonzales of the Court of First Instance of Catanduanes, and the findings were reviewed by then Undersecretary Claudio Teehankee.

On June 24, 1967, we dismissed two municipal judges and suspended another. We dismissed Abstenencio Lobitana of Domangig, Zamboanga del Sur Peace Court and Romeo Laurente of the Matab-ob,Leyte Peace Court, who were both found guilty of the administrative charges filed against them. And we suspended for three months without pay Municipal Judge Lorenzo Tecson of SanMiguel, Bulacan Peace Court for ignorance of the law and for issuing “an unjust interlocutory case for robbery.”

On August 13, 1967, we dismissed Provincial Treasurer Hadji Urang Naga, who was found guilty of gross negligence, incurring unauthorized overdrafts, and misuse of trust funds.

On August 24, 1967, we removed from office Municipal Judge Daniel O. Osumo of Kibawe, Bukidnon, after investigations by District Judge Abundo Z. Ameta revealed that Osumo had taken long, unauthorized leaves.

On October 7, 1967, we ordered the dismissal of Leocadio A. Vargas, mayor of Mainit. Surigao del None, for neglect of duties amounting to abandonment of his post.

On October 11, 1967, we dismissed Fifth Assistant Fiscal Salvador Macainan, of Bacolod City, for gross misconduct and abandonment of office. The administrative order removing Macainan from his office took note of the fact that Macainan is one of the several persons charged with murder in Negros Occidental Court of First Instance.

On November 18, 1967, we ordered the immediate dismissal of JacintoR. Acaling, register of deeds of Aklan, for unexplained shortage in collections and unauthorized absence from his post.

On November 30, 1967, we ordered the dismissal of City Engineer Godotredo Trinchera of Ormoc City, who was found guilty of malversation of funds, illegal use of government property, and violation of the anti-graft and corrupt practices act.

On March 5, 1968, we fired Judge Gregorio D. Montejo of Zamboanga City on recommendation of the Supreme Court. He was found guilty of ignorance of the law and of advancing his personal interest through his office.

On March 22, 1968, we were informed by POLCOM Chairman Crispinode Castro that he dismissed Chief of Police Genaro C. Ferrer of Binmaley, Pangasinan; Balbino Ibana of Talisay, Cainarines Norte; Deputy Chief of Police Marcefo Abad of Gingoog City; Corporal Emeriano Bonifacio of Binmaley, Pangasinan; and Corporal Enrique Parungao of Gapan, Nueva Ecija.

On January 18, 1969, we ordered the dismissal of Municipal Judge Eligio C. Dajao of Oroquieta, Misamis Occidental; and the suspension for six months of Assistant City Fiscal Felizardo L. Espino of Roxas City, Judge Dajao was found guilty of negligence and ignorance of the law in the disposition of certain criminal cases brought before his sala. Fiscal Espino was found guilty of serious dereliction of duty.

On January 18, 1969, we ordered the dismissal of Municipal Judge Arturo A. Glagara of Talisay, Negros Occidental, for improper conduct, partially in the disposition of cases, and gross dereliction of duty.

Friends and political allies have been treated with equal severity.

PARGO

There are 577 anti-graft cases filed with the Presidential Agency on Reforms and Government Operations alone. Of these, 113 are under current investigation, three are pending preliminary investigation in different fiscals’ offices, four have been filed in the proper courts, 19 have been considered closed and the rest are pending in the agency’s dockets.

Special Anti-graft Groups

The Department of Justice has organized five special anti-graft groups to speed up the investigation and prosecution of graft cases, especially in the Bureau of Internal Revenue, Bureau of Customs, Bureau of Treasury, Insurance Commission and the Bureau of Posts.

We Encourage Complaints

In the past, the attitude of the government towards graft and corruption oscillated between mock horror and toleration. Despite loud declarations to fight graft and corruption, the previous Administration never even bothered to look into this grave problem.

To remove even the shadow of secrecy from any government transaction, we have invited the opposition party to send a representative to the Cabinet Bidding Committee. The function of this body is to review and to approve all contracts entered into by the government. The opposition party had earlier refused this invitation- We appeal to them to reconsider this unaccountable stand.

Our actions prove that we are determined to go after grafters and corrupt government officials. We encourage the citizens to participate in our campaign against graft and corruption by reporting all cases of immorality, dishonesty, and venality in the public service to my Office.

If these complaints are substantiated, then swift and decisive action will be taken.

SPECIAL PROGRAMS

In addition to these, the government last year initiated or expanded several special programs. Accomplishments in these areas were noteworthy.

Board of Investments

The Board of Investments came into operation last year, as authorized by Republic Act 5186, and has had a very successful first year of operation. The First Investment Priorities Plan was published and approved by the National Economic Council and the President, and supporting administrative orders and regulations were promulgated. In response to this first enumeration of the priority areas of investment and in only half a year, applications were received with a total project cost of more than P2.9 billion, a total which it had been thought would require at least a full year to attain. Of more than 140 applications for registration as a preferred enterprise, about 53 have so far been approved.

Urban Renewal

A Presidential Task Force on Urban Development has begun operations and has chosen as initial pilot areas the cities of Cagayan de Oro, Bacolod. Legaspi, and Baguio.

At the same time that we sought to bring down unemployment and to provide security to labor, we recognized as a correlative and equally important concern the housing of our expanding population and the rehabilitation of our cities. These problems are relatively new to our society, but these have increasingly become areas of grave concern in our national plans and goals.

Accordingly, the Administration mapped out an integrated program of urban renewal, with the various government agencies involved as the key to its implementation. These agencies were the People’s Homesite and Housing Corporation, the Department of Social Welfare, the Social Security System and the Government Service Insurance System.

Much of the work was concentrated in the urban sectors of the country where people have tended to congregate in ever increasing number. The combined resources of government agencies made possible the relocation and resettlement of the urban poor as well as the extension of low-cost housing assistance to the low-salaried middle class. We have succeeded in a limited way in clearing our ghettos, and helped ameliorate the lives of resettled slum dwellers.

Housing

Housing was not given full attention in the past, because of the priority re­quirements and exigencies of industrial and agricultural development Now that some progress has been attained in the basic areas, we can include housing in our programs.

As everybody knows, housing continues to be a serious national problem. The housing needs of the country, if spread out over a 20-year period, would be about 470,000 dwelling units a year, computed at 100,000 units in urban areas and 370,000 in rural areas. Viewed in the light of past performance and present capabilities of both the government and private sectors, the requirement assumes discouraging proportions. Nevertheless, something must be done if we are to prevent the degeneration of urban centers into slum squatters areas.

In 1968, we launched a novel nation-wide housing program designed to benefit simultaneously both low-income and middle-income sectors of the population.

This program is a departure from traditional housing programs of govern­ment institutions, which usually finance both lots and buildings within subdi­vision areas or “projects”.

The cost of the houses should be from P5.000 for the lowest-cost units to P25,000, payable in 25 years at six per cent interest and without any down payment.

The program, therefore, will be free from the limitations of project-type housing which, among other disadvantages, involves huge outlays of funds for land acquisition, development, sales, administration, and maintenance. It is also seen as a big step towards the reorientation of the Filipino attitude towards complete individuality in housing, a factor that has prevented the population from benefiting from economies of scale resulting from mass production of prefabricated units. Eventually, it is also expected to clear the path fur private enterprise to take over or assume a more active role in urban and housing development.

The economic and social impact of this program cannot be gainsaid. The extensive use of locally manufactured and fabricated construction materials, such as cement, coupled with the use of Philippine labor, will generate higher productivity and incomes.

The average- or low-income citizen can then be given the opportunity to own real property of such quality and durability that will not only satisfy his and his family’s needs but will give him a feeling of belonging and security.

Since some questions have been raised about the means to implement this program, I ask Congress to help salvage a laudable project that is urgently needed by our people.

Transportation Systems

We began last year, in cooperation with the World Bank a thorough survey of our transportation system.

Good transportation is a basic requirement of a developing country; but much of our transport system has suffered from past neglect and inefficient operation. In the case of government-supplied facilities, the main bottleneck has been shortage of funds. We have been trying in connection with our infrastructure program to define our transportation needs as precisely as possible and to operate a program as efficiently as we possibly can.

Land Reform

There is perhaps no sight more pathetic than the sight of a fanner tilling a patch of ground for someone else. For years, under a system which bound him perpetually to the landlord and the usurer, the Filipino farmer labored and toiled without any hope of breaking his feudal bonds. With the passage or the Land Reform Code, however, hope glimmered at last. But the transition from congressional act to actuality was painfully slow. By the end or the previous Administration, only 12 municipalities had been placed under land reform, involving some 13,000 palay farmers cultivating an area of 35,147.10 hectares.

For land reform to be meaningful, more areas must be placed under its protective mantle. Soon after assuming office in 1966, we proclaimed the entire second district of Pampanga, comprising 12 municipalities, as a land reform area. In February 1968, 22 towns in Nueva Ecija were placed under land reform. And in September 1968, 11 towns and one city in the first district of Laguna also became a land reform area. And so today, land reform covers 60 municipalities and two cities in 12 provinces, and involves 86,939 farmers.

Land Bank

To speed up the transition of lessees into owner-cultivators, the Land Bank has purchased 12 landed estates in the plains of Central Luzon comprising 3,739 hectares costing more than eight and a half million pesos. Twenty-two landed estates covering an area of 3,064 hectares are under negotiation. And 85 landed estates covering 14,000 hectares are being surveyed for possible acquisition.

But we have been partially paralyzed by the lack of a source of funds. Congress eliminated the provisions that established the source of financing of land reform operations, when it passed the Land Reform Code. We are asking Congress for funds to finance land reform but as an alternative we plan to sell Fort Bonifacio Camp Aguinaldo, Camp Crame, and other government properties in the four cities of the metropolitan area. Fort Bonifacio could bring in P500 million and Camp Aguinaldo another P500 million. The money will be used for land reform operations and to boost agricultural productivity in land reform areas.

As a corollary to the leasehold system and eventual land ownership, we have slopped up our resettlement program. We consider it our prime social responsibility to provide land to those displaced by urban and industrial development.

Squatter Relocation

We have, as an example, resettled squatter families from the East Triangle in Quezon Cily to a settlement project in San Pedro, Laguna. We have also opened virgin lands in Central Visayas, Mindanao and Palawan for more than 1.542 farm families from Luzon. The settlement projects of the Land Authority now cover an area of 383.603 hectares, divided into 29.709 farm lots. In these projects, 23.574 families including Muslims were resettled.

Rice Production in Land Reform Areas

Palay production in the land reform projects for the regular crop year of 1967-68 averaged as much as 77 cavans per hectare, or an increase of 37.6 cavans over the pre-proclamation figure at 39.4 to a hectare. This represents a 94.4 per cent increase. Production in the palugad increased by 28 cavans per hectare, from 33 to 61 cavans or by 84.4 per cent over the figure prior to proclamation. This is undeniable proof that a breakthrough in agricultural productivity can be achieved through land reform.

CENTRAL LUZON

A Program of Social Justice

Over the decades, the government has pursued an erratic policy in Central Luzon; at one extreme, a policy of suppression; at another, a policy of appease­ment and accommodation for the Huks. Neither policy has coped with the deep-rooted problems of the region, intact, the problems have grown from bad to worse, erupting now and then into lawlessness, violence and bloodshed. We have discarded these extremist policies and replaced them with a sustained program of social justice and accelerated economic development and a policy of firmness and fairness in dealing with subversive elements.

Central Luzon Development Program

We have launched our Central Luzon development program, which called for an increase of 35 per cent in services and resources committed by 27 government agencies in Central Luzon. The outcome of this program has been spectacular. According to Governor Francisco Nepomuceno of Pampanga, this Administration has done more for Central Luzon in so short a time than all the previous Administrations put together. At the same time, through our policy of firmness in dealing with subversive elements, we have crushed the Huk cadres in Central Luzon, thereby creating a situation in which negative and sterile military operations can now give way to creative civilian activities. All this was accomplished without any curtailment of the liberties of the citizens.

Some of the notable accomplishments in Central Luzon in 1968 are:

In agricultural productivity, P38,986,757.03 in loans was released by the ACA to hundreds of thousands of farmers. From July to November 1968 alone, a total of P9,683,168.87 was issued to 18,848 farmer-borrowers. On the other hand, Central Bank-sponsored loans totalling P128,191,612 were released to 757,536 farmers for farm production, farm mechanization, poultry, fish culture, irrigation pumps and engines, and the development of private irrigation systems. In addition, P12,314,621 was released in commercial loans to 10,488 persons, P3,149,465 in industrial loans to 2,961 persons and P168,900 in other loans to 528 persons. At the same time, 276,250 bags of fertilizers valued at P3,892,400 were distributed in the area. Moreover, 4,215,771 animals were vaccinated, hundreds of thousands of vials of free drugs and biologics were distributed; thousands of cavans of certified seeds, especially the high-yield varieties were procured and distributed; 196,790.83 hectares were surveyed for soil conservation and 637 hectares for topography.

In public works and water resources development, 1,290 pumps irrigating 32,052 hectares were installed while 765 artesian wells were either set up or repaired; 113.999,802 kilometers of concrete, asphalt and feeder roads were built while 999,152 lineal meters of bridges were constructed; the Pampanga River Irrigation System in Talavera, Nueva Ecija, irrigating 23,500 hectares and costing P885,000 was completed while 26 communal irrigation projects irrigating 9,625 hectares were finished, and 54 irrigation pump units irrigating 10,149 hectares were rehabilitated.

In health, 2,320,636 persons were vaccinated; 474,829 mothers and children were extended health services; 11,417 potable water supply and sanitary toilets were constructed, while the Arayat Emergency Hospital, the Baliwag Emergency Hospital, and the San Miguel Emergency Hospital were activated.

In education, 1,178 new schoolbuildings, mostly of the Marcos-type, were distributed and installed; study seminars on the planting of high-yield rice varieties were conducted.

In the administration of justice, 682 cases were terminated and legal assistance was extended to 11,898 farmers.

In labor, 2,205 agricultural establishments involving 39,360 farm workers were inspected to insure compliance with the Land Reform Code and other labor laws and payment of P1,442,612 in various benefits was effected in favor of 1,500 workers.

In social welfare, P327.000 was doled out to indigent families in the area.

SUPPORT OF INDUSTRY

We will continue to support private industry.

Preliminary studies by the Board of Investments have revealed the extent of our industrialization. It has also shown some areas in which the administration of incentives can be improved, and other areas in which new incentives should be granted, and I commend these areas to the attention of Congress.

Special Export Incentive Law

First, although export industries are already granted the highest incentives under the present law, there is still a need for a special export incentives law. The extensive damage done on some of our leading export crops by typhoons late last year has shown once again how important exports are to our economy, and how fragile this link to prosperity can be if it continues to be based on agricultural crops that are subject to the whims of weather. A method of achieving the export of manufacturers which has been found useful by several developing countries is the creation of an export processing zone. A proposal for such a zone is already before Congress. I again invite your attention to it, and recommend its passage.

Omnibus Tariff Bill

Another means for improving our foreign trade balance is also before Congress: the omnibus tariff bill. Since it will contribute substantially to the solution of our largest remaining economic problem, I believe it requires prompt attention. In pursuit of our international economic policy, especially negotiating on a multi-lateral basis, it would be to our advantage to have an updated Tariff Code. If it cannot be passed in toto, then the provisions regarding the tariff negotiating powers of the President should be enacted as a separate piece of legislation.

Small Industries

Second, another path to industrialization which has been insufficiently pursued is the growth of small industries. Our government financial institutions and the Board of Investments have rightly centered their attention on large investments, because this is the way in which their efforts and resources can be most economically employed. However, the medium and heavy industries resulting from these investments will spawn a set of small satellite industries for which the present cottage industries law makes no provision. These small industries should be promoted, both to fill the gaps in our industrial structure and to encourage the growth and spreading of entrepreneurship. Accordingly, we are directing the Department of Commerce and Industry to pay particular attention to the problems of small industries.

Power

Third, as industrial enterprises grow and spread in the regions outside Manila, there will be a growing demand for cheap electric power. This cannot be met by the present town franchises unless the present restrictions to their expansion are removed. There should be legislation allowing the intercon­nection of public utility franchises.

Regional Dispersal

Fourth, a long standing national aim was once again enunciated in the Investment Incentives Law: the regional dispersal of industry. For this purpose, certain activities of the regional development authorities should be placed under the Board of Investments, particularly those relating to the establishment of project priorities. The Board should also be empowered to grant differential incentives for certain regions. These modifications would work to the mutual benefit of the Board and the regional authorities. The Board would be better informed of the regional developments, and regional projects would receive the additional support in the national industrial plan.

Changes in the Structure of Production Taxes

Finally, the present structure of production taxes hinders the integration of industry. It is disadvantageous to produce domestically certain industrial components, such as car components, because the sum of the taxes imposed at different stages of processing amounts to more than the duly on the importation of the finished products. Thus, backward integration is discouraged. Similarly, forward integration is discouraged in the field of mining because producers integrating forward pay a sales tax on a base which includes taxes previously paid in prior processing, whereas a mere exporter of mineral ores pays only the1-1/2 per cent ad valorem tax. Such inconsistencies in our tax laws should be removed by imposing the taxes on value added only, thus permitting deduction of taxes already paid.

V. PROPOSALS

We have made significant gains in the major areas. To sustain the momentum of the gains, new measures and new courses of action are necessary. I therefore propose the following:

EFFICIENCY IN PUBLIC SERVICE

Changes in the Governmental System

I propose the creation of a Presidential commission to study the possibility of major changes in our governmental system to eliminate obstacles to our growth and make our democratic institutions more responsive to the needs of rapid and orderly development and of social justice. I call on Congress to participate in this effort.

Penal Sanctions Against Premature Electioneering

I propose that Congress look into the possibility of strengthening the law on premature electioneering by increasing the penal sanctions against offenders.

SALARIES

Government Employees and Teachers

I have ordered the implementation of the five per cent increase of the salaries of all government employees on July 1 this year. There is an appropria­tion for this increase but the government does not have the cash to implement it. To meet this commitment to the employees of the government, I have ordered a 10 per cent reduction of expenditures in all departments. This reduction is on top of the P200 million savings on government expenditures which I have also imposed for the coming fiscal year.

EDUCATION

1. NEW DEAL FOR TEACHERS

A Trust Fund for Teachers

I propose a new deal through legislation for our public school teachers.

I am recommending the establishment of a trust fund from which can be drawn increases in teachers’ salaries, cost of living allowances, and other fringe benefits. The trust fund for teachers may be started with an initial P5 million from the Department of Finance. This money and its earnings can then be used for the benefit of our teachers,

Local Fund for Teachers

We will meet the special problems of teachers in chartered cities by authorizing local sources of funds (perhaps by increasing their share of the excess in income tax) to be used to improve the status and income of the teachers.

Channels for the Communication of Grievances

I propose that we look seriously into the possibility of opening up for public school teachers adequate channels through which to communicate their grievances. A grievance procedure on the school level and on the national level should be developed. This will democratize relationships in the teaching profession and will encourage new habits of independence, self-reliance and responsibility on the part of the teachers. They, in turn, will communicate these new attitudes to their students, to a new generation of Filipinos.

2. YOUTH AND STUDENT AFFAIRS

We welcome the new, purposeful militancy and dynamism of our youth and students. We must enlist their energies, their talents and their idealism to the cause of orderly progress and change, to the cause of expanding freedom and welfare for all our people.

Student Grievances

I, therefore, direct the Department of Education to establish immediately a method for hearing and acting on the grievances of our youth and students.

I ask the Department of Education to intervene in student and youth strikes and demonstrations and explore way sand means of realizing their constructive and reasonable demands.

National Youth Commission

At the same time, I am creating a national youth commission which shall advise the President on youth and student affairs. The commission shall also be the main vehicle for the participation of youth and students in the formulation of public policies.

Student Representation in Boards of Regents

Moreover, I propose that steps be taken to open the way for the membership of a representative of the student body in the board of regents of every government college or university, including the University of the Philippines.

Trust Fund for Student Projects

I propose the establishment of a P3 million permanent trust fund, the earnings of which will finance the expenses of student organizations, including those for student welfare projects and student-sponsored civic action projects. This fund will be managed by a board with a majority of civic leaders and students.

Magna Carta for Students

I propose passage of a Magna Carta for students. Through this, we will manifest the fullest encouragement and support for a new role in the new society we are building.

3. THE TEXTBOOK PROBLEM

Textbook Commission

We must meet the problem of the huge textbook shortage, improve the quality of these books and the manner of distributing them.

I propose the creation of a textbook commission for this purpose. I propose the upgrading of the quality of education by inculcating professionalism and raising the quality of teachers, among others by stricter supervision of teacher training and by entrusting the examination of teachers to educators sitting as a board of examiners.

4. RURAL DEVELOPMENT

Barrio High Schools

I propose to correct and rectify deficiencies in our educational system.

The growth of barrio high schools has been phenomenal. Starting with only four schools in 1964, there are today, under a policy of encouragement of this Administration, 1.200 barrio high schools all over the country, employing some 6.000 teachers and providing instruction to 120.000 students.

The establishment of barrio high schools has contributed greatly to the reduction of the number of dropouts from both the grade schools and the high schools. The rate of dropouts before my Administration was estimated at 59 per cent.

Existing regular high schools cannot possibly accommodate all the graduates from elementary schools. There are only 279 regular high schools in the country today.

We must, by legislation, support the barrio high schools and remove any doubts as to its legality as an institution.

5. HIGHER EDUCATION

University of the Philippines

To insure the financial autonomy and institutional independence of the University of the Philippines, I invite Congress to consider the possibility of providing through tax measures a special fund for the support of the University of the Philippines which is at present subsidized by the national government to the extent of 46 per cent of the U.P. budget.

I also invite Congress to consider proposals coming from the constituents of the University itself for the revision of its fundamental law, the University charter that dates back to 1908. The restructuring of the State University will have to be consistent with the constitutional guarantee of academic freedom for state universities and the principles of self-determination that me U.P. faculty and students now invoke.

Science High Schools

I propose the establishment of more science high schools to meet the need for technically trained manpower as we modernize our economy.

MONETARY MEASURES

New Sources of Revenue

I propose that new sources of revenue be provided lo finance the legitimate requirements of our people for improved living conditions. The responsibility for providing the means is yours. The task of using the means you provide, in the manner you indicate, for the service of our people, will be mine.

I propose that we now study and systematize the sources of government financing and their proper allocations including the present classification of special funds.

I propose to cut at least P200 million from the budgetary proposal for the coming fiscal year. This is the same amount I have directed all departments to save from the budget of the current fiscal year.

I propose that Congress now act immediately on all bills pending before it for the improvement of the tax collecting machinery of government, including the consolidated bill on the Internal Revenue Code, the omnibus amendments on the Tariff and Customs Code, especially those pertaining to the removal of escape clauses and ambiguous provisions in both codes and such ambiguous terms as “and others’” in the classification of goods for purposes of taxation and tariff duties.

Ban on Non-Essential Imports

If the importers will not voluntarily do so, I propose a complete and immediate embargo on all luxury and non-essential goods. The continuous and unrestricted importation of such goods strains our foreign reserves, corrupts the tastes of our people, and diminishes our capital resources for the development of agriculture and industry.

On the moral plane, this will promote disciplined living among the citizenry, especially among the more affluent and more fortunate.

Revenue Legislation

To minimize the outflow of dollars and to channel local investible funds into domestic enterprises, I propose a tax on foreign stocks, land and buildings acquired abroad by residents of the Philippines.

Tariff Revision

The present tariff rates should be assessed and revised to promote indust­rialization. More particularly, the approach should now concentrate on the en­couragement of industries producing intermediate and capital goods and raw materials. We now produce many of the things we used to import.

Restudy of Restrictive Policies

I propose the restudy of the present restrictive measures adopted by the Monetary Board, including CB Circular No. 265 which requires the declaration and limitation of the amount of foreign exchange and local currency that can be brought out by travellers leaving the Philippines.

Banks to Use Existing Acceptance Lines

I propose that we increase the available dollars for imports by allowing commercial banks to use their existing acceptance lines for financing imports with advance exchange cover. This will increase our available dollars for imports by at least $200 million.

I propose that domestic importers be given inducements to finance their imports from trade credits available directly from their suppliers whether the importers are independent companies or subsidiaries of foreign corporations.

Foreign Corporations to Suspend Remittances

I call on subsidiaries of all foreign corporations operating in the Philippines to suspend, at least for this year, their remittances of profits in dollars to their mother companies, especially when they have domestic indebtedness.

Foreign Investments

I propose that Congress define exactly the areas in which we are prepared to extend temporary national treatment to foreigners, and the areas in which we are witling to give only most-favored-nation treatment.

Review of Financial Assistance to Private Industry

I propose that the government review its present schemes of financial assist­ance to private industry to favor Filipino capital and, at the same time, discou­rage the importation of non-essential goods and encourage the fuller develop­ment of domestic processing or industrialization of our agricultural products. Also, there must be a serious reappraisal of the premises upon which protection is granted to “infant industries.” It must be stressed that protection to this type of industries can be granted only on a case-to-case basis and will be firmly based on either profitability or ability to adapt to local conditions.

PEACE AND ORDER

Peace and Order Fund

I propose the creation of a special fund for peace and order.

Metropolitan Area Command

I also propose to integrate all police agencies of Manila and suburban areas under a Metropolitan Area Command patterned after Scotland Yard.

More Muscle for the National Police

I propose that Congress examine the possibility of giving the national go­vernment more latitude to step into the peace and order problems on the local le­vel, which is now denied it. This will give a new flexibility to our national po­lice force in coping with stubborn criminality in specific localities.

JUDICIAL MATTERS

New Court of Appeals Branches

I propose that we now provide the necessary funds for the activation of the seven new branches of the Court of Appeals.

Regionalization of Court of Appeals and Court of Agrarian Relations

I propose that branches of the Court of Appeals and the Court of Agrarian Relations be established in various regions of the country to speed up the dispo­sition of cases before them. The regionalization of these courts will progres­sively clear their backlog, while affording citizens in the provinces easier and less expensive access to them.

CFI Research Staff

The administration of justice requires careful study and analysis of facts. I propose the establishment of a research and advisory staff for every Court of First Instance to assist the presiding judges in arriving at well-informed and just decisions.

Assignments of Judges

The backlog of untried and undecided cases in the Courts of First Instance must be prevented from increasing further. I propose that judges of Courts of First Instance with an unreasonable number of undecided cases be denied the privilege of being reassigned to another jurisdiction until they have cleared their dockets.

PRIVATE CORPORATIONS FOR A PUBLIC PURPOSE

Guidelines for Establishment

I propose the enactment of a law defining the guidelines for the creation of private corporations for a public purpose. There is no dispute about the urgency of establishing such corporations in the light of the requirements of develop­ment and public service. Some doubts have been raised about the legality of such corporations. We have no doubt about the legal authority of government financial institutions to create such corporations under the law on corporations and the Constitution. However, questions have been raised regarding the pro­priety as a matter of policy of government institutions exercising such powers. To enable the executive department to plan freely and systematically the crea­tion of such corporations, as the need for them arises, I urge Congress to enact a law setting forth the guidelines for their establishment at the earliest oppor­tunity.

DEVELOPMENT OF EXPORTS

Export Incentives

An export incentives bill should be enacted granting the following incen­tives: 1) deduction of organization and pre-operating expenses; 2) net operating loss carry-over; 3) double deduction of expenses incurred for production, re­search, and development; 4) double deduction of export promotion expenses; 5) deduction of shipping costs to the extent of 125 percent; 6) tax credits on do­mestic components of exported products; and 7) deduction of salaries of per­sonnel who are newly hired and under training to the extent of 125 percent of their actual salary although such deduction should be reduced over a period of three years. This will help reduce our unemployment.

Export Processing Zones

I propose a law authorizing the President to designate export processing zones where foreign-made articles and manufacturing or processing equipment may enter the country tax- and duty-free. Taxes and custom duties, however, shall be collected under the following circumstances: 1) withdrawal of mate­rials from the zone for use in the Philippines; and 2) sale of finished products in the domestic market with deductions for cost of domestic raw materials.

LABOR

Manpower Training

Accelerated manpower development attuned to the needs of rapid economic growth and the solution of unemployment must be a permanent endeavor of go­vernment. I therefore urge that the manpower development bill pending in Con­gress be immediately passed.

Low-Cost Housing

I propose that we change the entire orientation of our public housing policy to suit the needs of the minimum wage-workers. Let us start building houses for the poor. The government should be able to produce housing at not more than P5,000 each unit payable in 25 years at six percent interest and without any down payment. This will open the program to every laborer.

In line with this policy, the SSS, the GSIS, the DBP, the PHHC, and the National Housing Corporation have already shifted the emphasis of their housing programs to low-cost housing. This policy will be pursued vigorously in the coming years.

Unemployment Insurance

I propose the establishment of a workable unemployment insurance scheme to be administered jointly by the Social Security System and the Department of Labor.

Workers Bank

I propose the creation of a workers bank with the GSIS and the SSS provid­ing the seed capital. This bank shall be owned by the workers and shall attend to their urgent credit requirements.

Public Defender for Indigents

I have directed the Department of Labor to reactivate its public defender function, and I ask Congress to vote the necessary funds so that that Department can acquire the personnel needed to extend tree legal aid to the indigent popula­tion. This service is now limited only to househelp. It should be made available to all the needy people seeking justice. , ,

TOURISM PROGRAM

National Tourist Commission

I propose the revitalization of tourism through the establishment of a national tourist commission to supplant present agencies engaged in tourist industry development.

AGRICULTURE

Farm Support

I recommend that the appropriation of the RCA be increased to P40 million a year to enable it to support rice production.

I further recommend that a sum sufficient to liquidate long overdue obliga­tions of the RCA to the Philippine National Bank be appropriated. The payment of these debts, which arose out of previous rice importations, can be effected through a refinancing scheme.

Agricultural Development Below Typhoon Belt

Enormous economic loss is suffered by the country each year because of frequent and destructive typhoons. Similar loss is suffered from droughts. This must be minimized. I propose that Congress and the Executive adopt as a basic policy that investments in agriculture from now on be as much as possible concentrated below the typhoon belt.

HEALTH

Medicare Bill

I propose that Congress pass without further delay the Medicare bill. About 82 per cent of our people are medically indigent. If there is a consensus that we cannot afford a too ambitious program, we can begin with certain pilot areas. We can extend the coverage as we go along.

PROGRAM FOR MINDANAO

Mindanao Development Authority

I pointed out earlier that the Mindanao Development Authority has been revived and strengthened to harness fully the economic potentials of this great region. I propose to authorize it to borrow money from foreign sources to finance major turn-key projects.

Rural Electrification

I propose that steps be taken to accelerate the electrification of Mindanao for which feasibility surveys have already been completed with the help of the USAID. The electrification of the rural areas should be a major concern of our government. I ask Congress to review and update the existing laws on power distribution so that cheap power may be extended to all the people. The obsolete franchise system should be reexamined.

LAND REFORM

Accelerated Central Luzon Program

I propose that we muster the will and the funds to declare Central Luzon as a land reform area by 1969. This will come as the long-promised social revolution in this pivotal region.

Sale of Military Campsites

We shall initiate immediately a program to remove our major military camps from the metropolitan area to new sites farther from the centers of population. I ask that congressional authority be granted to sell the lands now occupied by Fort Bonifacio, Camp Aguinaldo, Camp Crame, and other govern­ment properties in the four cities of the metropolitan area.

The proceeds will constitute a huge fund to finance massive and nation-wide land reform and the modernization of our agriculture.

GOVERNMENT CONTRACTS

Participation of the Opposition Party

I propose that the opposition party, through a chosen representative, participate in the deliberations of the Cabinet Bidding Committee. I have made this invitation before, t reiterate it in the hope that the opposition party will see the importance of accepting this challenge to protect the public interest.

NATIONAL DEFENSE

Developing Self-Reliance

I propose the fuller development of the concept of self-reliant national defense featured by a steady emphasis on highly mobile and versatile special forces.

TREATIES

Review and Correction of Defects

I propose that we accelerate the review of treaties and agreements between the Philippines and other countries. Some features of these treaties and agree­ments go against the national interest. We should rectify them at once.

TRADE, CULTURAL RELATIONS

Relations with Eastern Europe

And finally, I propose that we establish trade and cultural relations with the countries of Eastern Europe.

VI. CONCLUSION

The New Filipinism

I have sought to compress into a kind of ordered perspective the problems and the opportunities, the advances and the setbacks that we have experienced. I submit that in the past three years, the achievements of our people in partner­ship with the government may well represent, in the eyes of history, a cut-off point from the prolonged impotence of our past and the beginning of a new ex­perience of self-reliance, competence, and self-esteem, for the Filipino people and their government.

I submit that during this brief time we have realized, to a significant extent, the prophecy of Rizal that a Filipino of a new type would emerge from this land within a century from the time he wrote it. This New Filipino prophesied by Rizal in his The Philippines: A Century Hence about a century ago has now risen full blown from the loam of history. He has taken command of our nation’s destiny in various spheres of life. The new Filipino man brims over with the creative and purposeful spirit, sees problems not as obstacles but as opportuni­ties for achievement, eagerly engages problems and challenges, and views the future as a challenge of greatness.

The New Filipino symbolizes the extinction of Juan Tamad as the undeserv­ed archetype of the Filipino race and the emergence of a new type of Filipino more competent, more confident, more eager for challenge and achievement

than all his ancestors before him. In this respect he eclipses the pre-Spanish Filipinos whom Morga praised for their courage, industry and independence before colonialism corrupted and enfeebled their spirit. And he matches the vision and the independence with which his ancestors, in 1898, founded the first Republic in the history of Asia as well as the courage of the defenders of Bataan, Corregidor, and the resistance movement.

The experience of the past three years, combining a number of small and big breakthroughs in our national life, shows that the central factor for our progress is still the Filipino; that the Filipino transformed means a nation transformed; that the limit of what we can achieve for ourselves are fundamentally a matter of character — a moral and spiritual limitation,

Although the achievements in rice production, education and industrializa­tion have an undeniable material basis, their common significance is moral and spiritual. They represent, above all, a transformation of the Filipino spirit, from defeatism, sloth and self-deprecation, to a new level of energy, self-esteem and the will to achieve our goals.

This spiritual and intellectual transformation is the New Filipinism.

The New Filipinism represents the discipline and the ethic of independence. It seeks the substance rather than the shadow of freedom. It develops indepen­dence beyond formality to reality.

Under the influence of this spirit, we have started to re-examine our own narrow outlook on ourselves and the world; we have ceased to think of our­selves as a small and insignificant nation, a non-entity in world affairs; we have started to re-examine the time-honored postulates by which we lived during the past five hundred years, and have lifted up our eyes to wider horizons and more ambitious and peremptory goals.

In the foreseeable future, this new spirit will prompt us to reexamine our own basic institutions and perhaps recast them to make more responsive to the needs of our people. We must not hesitate, from a sense of racial timidity, to change what should be changed. From here on we should be guided only by our own sense of what will advance, protect and fulfill our national interest.

We must aim at the reality rather than at the formality of democracy. Politi­cal and social institutions that merely perpetuate entrenched privileges based on the accident of birth must be remolded or replaced with new ones that promote genuine democracy, I am sure the need for such profound changes may well give the forthcoming Constitutional Convention its greatest challenge.

We must not be afraid of innovation in our social, economic, political end cultural life. The New Filipinism is a call for innovation—a revolution direct­ed against the sterile and self-defeating traditions and habits of the race but without bloodshed and without fratricide.

The New Filipinism is the courage to open up new worlds of opportunity and fulfillment for this and future generations.

The New Filipinism is, ultimately, a call to greatness. But any form of greatness must begin with an act of will. In the past three years we—the nation together—performed this act of will and unleashed energies that are now trans­forming this country.

We have accordingly set off powerful trends towards national progress that promise to be irreversible, that will be independent of the accidents of leader­ship and the vicissitudes of parties in the future. It is our conviction that these trends are now so firmly established, future administrations will owe the mo­mentum of their own programs to them, and will be powerless to reverse them.

Transformed by the New Filipinism, the Filipino people will no longer return to the sterility, mediocrity and timidity of the past. The new spirit of achievement will be indestructible, and will fashion, in time, a great nation of Asia.

I have given expression to some ideas that may be bold and unorthodox. But they are the ideas that will guide us through new and unexplored terrain. They are not mere verbalizations; they were distilled from the fads and realities that impinge on our national life. They constitute, therefore, our strategy for meet­ing the problems and events of our time.

There are those among us who will oppose—probably violently—these ideas. Let us hear them out. The democratic dialogue must be preserved. The clash of ideas is the glory and the safeguard of democracy.

My countrymen: we have reached a turning point in our history. The choice is yours. Shall we venture into this brave new world, bright with possibilities, or retreat to the safety of our familiar but sterile past?

I am for crossing the frontier.

Thank you.

Ferdinand E. Marcos