Ferdinand Marcos' Seventh State of the Nation Address

I. INTRODUCTION

In these times of rupture—of a breaking of nations, of radical change in values, of sudden departures and great, perilous beginnings—we stand as a people and as a nation.

This nation stands, tested by adversity and deriving strength from it, sum­moning a fresh will from the continuing challenges that are the historical legacy of all struggling nations.

Yes, this nation not only stands; it will also prevail.

I know that some of you would be satisfied by an admission of failure, a confession of weakness, a contrite promise to do better, but such a posture will neither lift the cloud from our minds nor carry our nation forward. We have not been mandated by our people to inaugurate the age of despair.

Our nation has passed through difficult times—and prevailed.

Honesty permits neither pessimism nor complacency.

We have blind partisans from both sides of the fence. There is total darkness for one side and dazzling brightness for the other. Clinging to either of these absolutes may reveal our temperament, but it will neither define our condition nor secure our future as a nation.

Our continuing survival, no less than our hopes for a better life, will depend on how seriously and how honestly we make the effort to understand the times we live in. We have just been through a most difficult year, and this is true for the rest of the world as it is with us. Only the most insular among us will fait to understand that many of the major decisions that affect our daily lives are made not in our own country but in the distant centers of the world.

The monetary crisis last year, as a consequence of which the American dollar was to all intents and purposes, devalued, created a situation in which, as someone observed, the “poor nations of the world are compelled to maintain the high living standards of the rich.” We were not exempted from the effects of this radical monetary event.

Diplomatic crisis—whether it be the admission of the People’s Republic of China to the United Nations, the threat of world war, or the actual outbreak of war between India and Pakistan—affected the economic environments of all nations, but most of all, the poor.

On the domestic scene, the re-establishment of the Communist Party of the Philippines, with a Jacobin zeal for domination and conquest, the creation of communist front organizations, the Maoist uprisings, the recriminations of the 1971 campaign, the corruption of our police agencies, the rise in the consump­tion of drugs and pornography, not to say the bloody conflicts between Christians and Muslims in Mindanao — all these struck us with simultaneous force.

We had to survive all these crises or not at all. And for this reason, we took the limited options open to us as a small and developing nation.

I need not mention at length anymore the natural calamities that beset the country last December and early this year.

But one thing is undeniable: 1971 saddled us with crises—not singly but in battalia.

We were not given elegant choices. We just had to survive, and there was only one way: to impose restrictions on ourselves.

I invite you, therefore, to consider the good along with the bad, to put our successes side by side with our failures—in sum, to clarify in our minds the magnitude of the challenge to our national existence.

Honesty demands that we consider the undeniable gains in the economy along with the throwbacks to our stagnant past. Faced with adversity, we shifted our economic emphasis from consumption to production, from imports to exports. We floated the peso to measure our real worth, for we paid heavily for the economic proclivities of an irresponsible and possibly naive past. All the tough decisions of economic development and social progress were made with the full knowledge of their consequences, some of which are, indeed, punish­ing. But these decisions had to be made. The alternative was between a protracted life of dubious comfort and a long life of a secure national future.

It is an ancient propensity of men to look for scapegoats in adversity. This has been the easy foundation of most political criticism. But political responsi­bility obliges us to look for causes. The search for scapegoats is always a futile exercise.

Let us honestly understand one fundamental thing about our national con­dition. And that is: through all our policies and actuations in the past six years, we have been solving the problems spawned by past errors and misjudgments; we are just beginning to tackle those generated by the present—and we have yet to anticipate those that will face us in the future. Leadership now is a three-headed Janus looking back, front, and forward through the entire dimension of time.

Will I, then, apologize that in facing the crisis born out of the past, this leadership must yet meet the pressing problems of the present? Shall we regret vainly that no nation is endowed with the capacity for solving all important problems simultaneously? Shall we lament the fact that the fate of men and nation’s is to solve their problems according to an order of precedence?

We have long passed the age of innocence. We are much wiser now, and we know that all our dreams have their responsibilities, all our aspirations their in­evitable price. To understand this is to understand what we can do so that we shall not drain energies lamenting those that we cannot do.

We cannot achieve progress at the pace and of the nature that we wish without counting the human and material cost.

We cannot have the peace and order that are ideally desired without per­sonally involving ourselves in attaining it.

We cannot, as the saying goes, have guns and butter in equal and great amounts.

Every goal we choose involves a hard choice—a sacrifice, on the one hand, and an aspiration, on the other. To believe that there is a soft choice is to live, as some of us do now, in a fool’s paradise.

II. FOREIGN AFFAIRS

Last year I spoke of the need to make an accommodation with reality. That reality is now upon us. Forces set in motion over the last two years have begun to alter the character of international relations. In the short span of one year, world affairs have acquired a new and more precise shape, with the hopeful elements predominating and setting the stage for fresh constructive endeavors on behalf of stability and durable peace.

No one minimizes the great potential for crisis in such problem areas as the Middle East where outlook for peace has dimmed in the past year; or in Indo­china where the war has decelerated without opening new vistas for permanent settlement. In Africa, south of the Sahara, characteristic tensions incident to the problems of nation-building, continue to make the region of the world highly volatile and unpredictable, characteristics which are emphasized by the unresolved problem of racialism and violation of human rights. The recent eruption of violence between India and Pakistan is an unfortunate reminder of the still precarious balance which obtains between the forces of order and disorder.

In the changing context of world affairs, however, it can be said that the range of available means for the management of world tensions has increased in the past year. The tacit agreement to the status quo in Europe has resulted in fruitful initiatives the consequences of which are already visible in the growing unity of the Common Market countries, in the removal of the causes of friction in Berlin and in the rapprochement between the Socialist countries of Eastern Europe and the rest of the continent.

Thus, in Europe there is a new stability which will contribute in highly significant ways to the resolution of one of the world’s most difficult and most persistent problems, namely, the limitation of the weapons of war.

Historic Events in Asia

But the changed character of world affairs is more marked in Asia. Two events of colossal impact on world events occurred in 1971—the admission of the People’s Republic of China into the United Nations, signifying a complete turn in the foreign policies of nations; and the beginnings of a rapprochement between the United States and the People’s Republic of China which, if consummated, will almost certainly cause the most far-reaching alteration in the relations among nations in more than one generation.

The Philippines, in recognition of its compelling national interests and in response to the inevitable pressures or new world developments, necessarily has to modify its outlook and revise its policies in ways which take a more precise account of its interests in a radically altered world environment. Thus in the last twelve months we have begun a process of change unprecedented in our short history as a free country. Flexibility has been the touchstone of the emerg­ing foreign policy of the Philippines; the national interest its unchanging guide; and a hard and independent assessment of new international realities its new hallmark.

Internal Subversion

Change implies two things—on the one hand, the resolution of old problems, and on the other the emergence of new, and often not less difficult problems. Frequently, they are faces of the same coin. If the impending rapprochement between the United Slates and the People’s Republic of China has diminished the chances of widespread conflict in Asia, it has also raised in a new and alarming form the question of national and regional security, particularly in Southeast Asia. The problem arises in the expected intensification of internal subversion. Insofar as subversion is an internal problem, the classic solutions are as follows—a strengthened military capability; and intensified social and economic development as a means of improving the national capacity to resist dissidence. These solutions we are determined to pursue.

Our need is to gain time. It is for this reason that I would prefer new conver­sations with the United States leading to the formulation of programs in anti­cipation of the consequences of American phase-out from Southeast Asia. A practical plan which can be put into effect in the interim period should diminish anxieties not only in the Philippines but throughout the region. At the same time it should place us in an unassailable position of strength militarily, socially and economically, in dealing with the expected upsurge of dissidence.

The problem of subversion will in the future assume regional dimensions. Therefore it is important that the steps being taken to strengthen economic collaboration in the region be supplemented by cooperation in this limited military sense. We realize that a regional military alliance is not feasible, nor is it, with its inevitable overtones of the diminishing cold war, a desirable one. However, simpler forms of military cooperation, perhaps in exchanges of views and information, may be useful in the circumstances.

Regional Cooperation

The problem of security and the problem of increased economic strength lead me to the view that the prospects of regional collaboration will improve considerably in the future. The work of the ASEAN and the ASPAC, together with regional initiatives undertaken outside of these important institutions, will begin to assume great importance in our lives.

It is for this reason that I have urged the convening of a meeting of Heads of State in order to study more thoroughly the whole range of alternative open to the region to insure security and to intensify economic and social cooperation. No greater obligation devolves upon the countries of Southeast Asia. We have already endorsed the plan for the neutralization of Southeast Asia in principle and shall study, in concert with fellow members of the ASEAN, various implementation plans to ensure the achievement of the objectives of the decla­ration of foreign ministers.

Relations with Socialist Countries

Less than two weeks ago, the Philippines took the fateful step of opening diplomatic relations with two Socialist countries of Eastern Europe, namely, Romania and Yugoslavia. Depending upon the success of these initiatives—and there is no reason to doubt their success—we will study the possibility of relations with other Socialist countries of Europe as part of the widening web of intercourse with friendly countries.

The opening of relations with Yugoslavia and Romania should be regarded therefore only as a first step in a worldwide rapprochement with Socialist countries. Because of certain difficulties, many of a technical diplomatic character, it is not possible at this time to establish relations with the Soviet Union. However, I hope that before my term as President is over, we shall have overcome those difficulties and that the long deferred mutual relations between the Philippines and the Soviet Union shall have been set up on a firm basis.

People’s Republic of China

In dealing with other nations, we operate on the principle that the world is no longer dichotomous. On the contrary, today is the era of multiple alignments. We are required, therefore, to make concurrent efforts to ease the way towards the establishment of relations with the Soviet Union’s rival Socialist state, the People’s Republic of China.

With that great power, we will undoubtedly have official and unofficial contacts with its representatives in the United Nations. In recognition of the right of its more than 900 million people to be represented in the World Organization, we supported their admission into the United Nations. We feel that their presence there will be beneficial—and indeed necessary—to the solution of numerous world problems. At the same time, we hope that its membership in the world body will encourage Asia’s lone nuclear power to use its expanding influence for constructive purposes which will benefit Asia and the rest of the world.

The question of bilateral association with the People’s Republic of China at this time is complicated by the unclear nature of its relations with the Nationalist regime in Taipei. As far as we are concerned, we welcome all forms of intercourse with the two governments. This has been made difficult however by the conditions relating to these internal differences between the two which the two governments seek to impose on the world at large. Therefore an early settlement of the Peking-Taipei question, on their own free choice, should make it easier for us and for many other nations to realize the objective of multiple alignments in this part of the world.

Unity of Foreign Policy

In the task of shaping foreign policy, the national leadership as reflected in the Foreign Policy Council fortunately has approached such tasks in the spirit of bipartisanship. This speaks well of all of us, for the starting point of foreign policy is always the national interest, and once this interest is identified, our leaders must close ranks. There could be no better proof of the creative use of foreign policy to secure the national interest than the organization of a consultative group of countries showing confidence in the soundness of the Philippine future by allotting us urgently needed assistance.

It is our hope that we shall always be able to depend on such bipartisan cooperation to resolve outstanding issues of foreign policy. One such question is the recognition of the new state of Bangladesh, which is under study by the Foreign Policy Council. This question has to be examined not only in the light of our libertarian history but also of our present alliance.

III. PEACE AND ORDER AND NATIONAL SECURITY

PEACE AND ORDER

The most urgent problem of the nation today—possibly through the rest of this decade—is the problem of peace and order. All our plans for development, themselves urgent, are contingent upon our successful management of this grave national problem. Only in conditions of calm and social stability may we hope to undertake the manifold and diverse tasks necessary for sustained growth.

Peace and order, therefore, leads the agenda of government through the remainder of my Administration. I am determined that the challenge to public authority posed by criminal and lawless elements will be met (his year and the next with all the power and resources of government.

At the moment, there are two elements in the peace and order problem which constitute the real menace to government and society. These are internal subversion and the rising tide of criminality in our midst. A third element, external aggression, poses no immediate threat; as a relatively remote problem, therefore, it can be regarded with no sharp sense of urgency. 1 am certain that we can spread over a period of time our efforts to deal adequately with the possibility of external aggression by means of defense preparations that I shall report upon shortly.

On the other hand, internal subversion and rising crime, both of them grave and existing perils, call for swift and uncompromising action.

Over the years, simple criminality, violent forms of dissent and active insurgency have combined to produce an increasing threat to authority. I am determined that this threat will be met with all the resources available to government. But for this purpose, I ask that Congress lend its full cooperation. The time to meet the challenge of lawlessness, in the form of ordinary crimes, violent upheavals, private armies, and crime syndicates, is now: beyond this year may be too late. The centers of public authority, the three branches of government, have a joint responsibility to undertake at once a powerful and relentless drive against the criminal elements which have eroded public faith in the ability of government to ensure order and stability in every community around the nation.

The increasing frequency of criminal activity poses a threat not only to duly constituted authority, but ultimately to the entire social order. This is why it is my unswerving aim that the priorities in the agenda of 1972 shall be led by a program against criminality and violence. This year, and through the next, we will permit no compromise with crime and vice; I want all the resources of government to be organized and managed so as to wage full and unremitting war against those who, for one reason or another, conceive of government as an object to be scorned, abused and terrorized.

New Concept of Penology

Let it not be said, however, that I wish to perpetuate the principle of retributive justice which is the foundation of our antiquated Penal Code. I am fully aware that the existing Code, based on the ancient Penal Code of Spain (1848), does not make it possible for society to prevent the imminent or probable harm to society by persons socially dangerous. Modern criminologists include among such persons the professional hoodlums, murderers, thieves, bag snatchers, persons suffering from highly communicable disease, drug addicts, alcoholics and mentally deranged persons. Suspension of sentence upon first offenders of light offenses is likewise absent from our anachronistic Penal Code.

Persons socially dangerous should be placed under confinement even before they have actually struck their victim, if in the Judgment of the court, after proper showing and trial the subject is socially dangerous. His confinement under the circumstances is not a punishment but a precautionary and therapeutic necessity. The subject shall be released by the court upon satisfactory evidence furnished by psychiatrist or physician that he is no longer socially dangerous or dreadful.

I urge Congress to cooperate in making this reform in our penal system possible.

Conditions of Insurgency

I would be less than candid if I did not acknowledge that government could have done better by way of confronting the challenge posed by violent and criminal elements. I am aware that unsolved crimes, recurring social conflicts erupting in bloodshed in certain areas, the reported activities of so-called private armies, the increasing boldness and inventiveness of criminal elements, and repeated acts of violence in public demonstrations and rallies have contributed to the erosion of confidence in and respect for public authority.

The situation in the Philippines, however, has been aggravated by conditions of insurgency in some parts of the country, a fact which has given to the peace and order condition a unique character. No less than the Supreme Court has recognized the existence of a rebellion in the country, when it said in its historic decision concerning my suspension of the privilege of the writ of habeas corpus: “we entertain … no doubts about the existence of a sizeable group of men who have publicly risen in arms to overthrow the government and have thus been and still are engaged in rebellion against the government of the Philippines.”

Apart from its normal share of ordinary crime and lawlessness, therefore, the Philippines the past few years has had to face the added problem of putting down a publicly announced challenge to order and public authority. Compared to the limited means available to our police agencies, the threat of criminal elements to society is far from puny and negligible.

It is with this in mind, and fully conscious of my responsibility for the safety of our citizens and the orderliness of society, that I suspended the privilege of the writ of habeas corpus when an intolerable increase in insurgent activity came to the knowledge of our intelligence authorities. This decision was fully warranted by the circumstances; after asking itself whether “public safety requires the suspension of the privilege of the writ of habeas corpus,” the Supreme Court in the same decision declared that it was “not prepared to hold that the Executive had acted arbitrarily or gravely abused his discretion when he then concluded that public safety and national security required the suspension of the privilege of the writ. . . .”

The Supreme Court has taken note of the existence of a state of rebellion in the country, and has upheld the suspension of the privilege of the writ of habeas corpus which I proclaimed last year. It acknowledged the validity of the view I took that lawless elements engaged in an armed insurrection and rebellion “have created a state of lawlessness and disorder affecting public safety and the security of the state.” These lawless elements, consisting of Communists of the Maoist faction and members of the New People’s Army, had been engaged in terrorism and violent acts, such as assassinations and kidnappings, thus endangering public safety and threatening national security. It is significant that the Supreme Court, after assessing all the evidence, declared that the New People’s Army is per se proof of the existence of a rebellion, and that consequently the President of the Philippines “had reason to feel that the situation was critical” and that therefore, “he had substantial grounds to entertain such belief.”

As you will recall, I immediately lifted the suspension of the privilege of the writ of habeas corpus after being satisfied that the Communist threat to our national security had sufficiently diminished.

Crime Rates

The ordinary peace and order situation, though comparatively better than that obtaining in most developed as well as developing countries, is itself serious enough to call for immediate and extraordinary measures. Of the total volume of crime recorded in 1971, as compared to 1970, there was a slight increase of 7.18 per cent. While minor offenses registered a decrease of 8.4per cent, index crimes rose, significantly, by 11.52 per cent.

The contributing factors include inefficient, corrupt and in many cases even criminal policemen; certain politicians who have placed personal power and ambition above the public service; failures of government and of society itself to assure the safety of witnesses; and serious inadequacies in the resources of government.

Peace-Keeping Organs

I ask you to look at the peace-keeping organs of government. If you look closely enough I believe you will agree that the means available to them are totally inadequate to cope with the ingenuity and willfulness of the criminal elements in our era, many of whom have been more agile and thorough-going than government in taking advantage of technological advances in our time. Unless our agencies are adequately supplied and supported, criminals will continue to treat government with little respect.

I am especially anxious about persistent reports that many members of our police organizations not only are corrupt but are members of criminal syndicates, and as such are responsible for any number of crimes which, for obvious reasons, have remained unsolved. This situation will not be tolerated any longer. Appropriate steps are now being taken to eradicate criminal elements from within our police forces, and I hope that both the citizenry and the proper authorities will give their support and make possible this cleansing process in our police organizations.

It has come to our knowledge that many members of our police forces are linked to security agencies, reported to have a membership of around 27,000, and that many of the unsolved crimes have been committed by individuals protected by this alliance. It is my aim that the licensing of security agencies shall be immediately reviewed and that henceforth stricter measures be adopted for such licensing.

The rise of smuggling which we had all but stamped out some years ago, has also contributed to the peace and order problem.

Drug addiction and an increasing traffic in pornographic material have likewise aggravated the peace and order problem. Drugs and pornography are especially deleterious because they constitute a threat to the fabric of morality which is indispensable to the preservation of public order. They are perils against which we must be particularly watchful because they work insidiously, undermining the character and spirit of our people, and producing their peculiar form of destruction without force and violence.

These are the varied aspects of crime and lawlessness which imperil public order and the safety of our homes and individual lives. Set against the forces of the law, with their meager resources and the doubtful competence and integrity of some individual law enforcers, they give us reason to chastise ourselves and to re-examine our aims and resources.

We must therefore modernize and professionalize the national agencies, such as the National Bureau of Investigation and the Philippine Constabulary. The local police agencies in the urban areas must have sufficient mobile units and communications equipment as well as recording systems to enable [hem to operate with efficiency. All of them must develop continuing programs of their own to train their staffs in up-to-date methods and facilities against crime.

It is no less important in our effort to deal with crime that we develop the regional concept in crime control. All too often, there are incidents which exceed the jurisdiction or competence of local police agencies. For this problem, there are two possible solutions: either arrange an organizational tie-up between the national and local police agencies, or bring local agencies together in a consortium or a metropolitan police-type of arrangement which will, among other things, allow a sharing of resources and avoid conflicts—an all too common weakness.

For most cases it may be preferable to have local agencies working together, without involving the national agency. The organizational require­ments for such exclusively regional tie-ups could, however, be complicated, and would in such a case perhaps call for legislative action. If police reforms attain nationwide proportions through legislative support, I foresee local communities, singly or collectively, assuming greater responsibility for their security, freeing the national police agencies for specific tasks involving national security.

Since there are deficiencies in the law that created the Police Commission, the legislative program I am going to propose includes the amendment of the Police Act so as to enhance more readily the professionalization of our police forces.

The drug menace, by all indications, is spreading particularly among the young. This year, we must launch a special campaign and create funds to era­dicate this new menace.

At the same time, I am convinced that drug addiction should be approached from the psychiatric or medical viewpoint, rather than regarded strictly as crime.

Loose Firearms

The problem of loose firearms compounds the peace and order problem. The Department of National Defense has launched a drive by the Armed Forces in collecting and registering loose firearms- This mission also involves agencies like the NBI, the Police Commission, local police forces, and the Peace and Order Coordinating Council.

Last year, 5,252 loose firearms were collected, captured or confiscated; 760 holders of loose firearms were apprehended and prosecuted; and 32,300 assorted firearms were registered.

From all the foregoing, it is quite clear that public participation in preserving peace and order is an important element of the total effort that I propose to undertake against crime and lawlessness. Before my term is over, I wish to see that this public participation, among others in the form of greater vigilance, more active support of public agencies by means of voluntary testimony, and the like, shall have become more assertive and consistent. I cannot stress too much that the citizenry has a crucial role in determining the conditions in which it shall live.

NATIONAL SECURITY

I have repeatedly said that the continuance of the United States protective umbrella in the Asian region is one of the realities that we will have to live with through the next several years. But Asian security is essentially the responsibility of Asians; it is therefore incumbent upon us now to take every possible Step towards self-reliance in the defense of our homelands in this region against aggression and internal subversion.

I have, therefore, directed the Armed Forces to undertake a program over the next five years aimed at developing a self-reliant defense posture. This program will entail the expenditure of P1.5 billion, or an annual appropriation of P300 million, exclusive of current yearly outlays for the Armed Forces.

I am certain our people share my determination that this program be carried out successfully, so that the national desire to achieve unilateral defense capabilities shall be fulfilled without unnecessary delay. There are two basic requirements for the fulfillment of this national goal. We must, on the one hand, expand the concept of citizenship training for defense.

The second requirement for the success of this program is adequate equipment. This will assume increasing importance in the next few years because of the diminishing assistance through the military assistance program, and the gradual withdrawal of American military forces in the Far East.

Our military authorities are even now evolving a training program geared to non-conventional warfare capabilities, using indigenous materials for wartime requirements.

I realize that to safeguard the nation adequately from any external or internal threat to its security and to the peaceful pursuit of its aspirations we need more than improvements in the organization and resources of our defense establishment. A more important requirement is the solidarity of mind and purpose among our people, that essential loyalty to flag and country which is the key to national stability and genuine progress. I, therefore, take this opportunity to call on all segments of society once again to provide our government the moral support for our program of national security and survival.

IV. THE ECONOMY

During the past six years, I devoted major portions of my State of the Nation message to economic issues. This preoccupation with the economy sterns from my firm belief that continuous progress of our society is possible only if it rests on a vigorous economic foundation.

The performance of the economy during this period may be the subject of a number of plausible interpretations.

Today, we have conflicting viewpoints about our economy. The pessimists see. for instance, the following failings or deficiencies in our society, and on such a basis, predict our collapse.

A. The exchange rate adjustment in 1970 which led to a reduction in the international value of our currency;

B. The rise in consumer prices during the past two and a half years;

C. The shortfall in rice production during the 1970-71 crop years;

D. The change in the U.S. sugar quota for the Philippines; and

E. The depressed stock market conditions in 1970 and 1971.

The optimists, on the other hand, see only the achievements, like:

A. The increasing length of all-weather highways;

B. The success of the crash program for rice production in 1968-70;

C. The 21 per cent expansion in exports in 1970, which made us surpass the billion-dollar mark that year;

D. The increase in international reserves from $120.90 million in December 1969 to $219.04 million in December 1971; and

E. The resiliency of the economy in adjusting to substantive changes in the frame-work within which it operates.

A Real Picture of the Economy

A true picture is a blend of these two extreme views, a mosaic of achievements and failings. Even the cynics would agree that our experience in the past six years demonstrated that:

Our farmers are capable of adopting modern agricultural methods and of achieving spectacular increases in output in response to proper price incentives;

Our laborers are capable of acquiring technical skills and of operating complex production processes;

Our professionals are capable of absorbing new knowledge and of modify­ing these to suit local conditions;

Our businessmen are capable of expanding existing operations and venturing into pioneering production activities;

Our legislators are capable of formulating timely policies to service the needs of the economy; and

Our government officials are capable of planning substantive programs and executing these to successful conclusions.

These capabilities were demonstrated by the self-sufficiency levels of rice production in 1968-70 and the expanding output of other agricultural crops, like bananas; by the operation of satellite communications; by the experimentation in agricultural research institutions; by the development of financial markets and of the banking system; by the growing sophistication of marketing techniques; by the enactment of the export tax and the passage of the export incentives act; by the expansion in exports and the stabilization of the peso; by the restructuring of the foreign debt and the larger availability of liberal external financial assistance; and by the enlarged coverage of irrigation facilities.

Application of these capabilities had, as confluence, the growth of national income at the average annual rate of 6.2 per cent between 1965 and 1969, exceeding the five per cent growth target set by the United Nations for the development decade of the 1960's; the increase in export earnings from $737 million in 1965 to P1,118 million in 1971; the emergence of new products in industry and agriculture; the adoption of high yielding varieties in rice agri­culture; the growth of retail supermarkets; and the gradual diversification of the regional and product composition of our exports.

One outstanding feature of our recent experience is that when the private sector and the government act in concert, their combined efforts result in almost immediate solution to difficult economic problems. As a result, the per­formance of the economy in the past six years, compared to achievements in previous periods as well as the performance of other democratic countries, is something that we can be proud of.

The Economy in 1971

These are some of the key features of the economy in 1971:

1. Production, income and export receipts recorded unprecedented levels despite declines in world prices of some of the country's major export commodities and recessionary tendencies abroad.

2. The gross national product (GNP) at current prices rose to a level of P48,110 million, representing an increase of 20.6 per cent over the year 1970 level of P39,893 million.

In real terms (constant 1967 prices), this means GNP expanded from P31,983 million to P34,051 million in 1971, representing a real growth of 6.5 percent.

3. Gross domestic capital formation experienced a significantly better rate of growth, 28.1 per cent compared to 22.1 per cent of the previous year. Its level moved up from P8.131 million to P10,425 million in 1971.

Reduced to real terms, gross domestic investment in 1971 increased by 8.7 percent, that is, from a level of P6,625 million to P7,203 million (computed in 1967 prices).

4. Exports of goods and services made strong gains of 10.2 per cent; and imports increased by the lower rate of 9.2 per cent. Exports climbed from P7,930 million to P8,742 million last year. This real increase (in 1967 prices) of our exports is deceptively hidden by the drop in the prices of our major exports in 1971, leading to smaller dollar revenues for more goods shipped. Meanwhile, imports only increased from P8,017 million to P8,752 million.

The Four-Year Development Plan

Economic performance must be measured against the targets of performance we have set for ourselves. Invariably, the targets set out in the develop­ment plans have been exceeded by our economy's performance.

For instance, our development plan in fiscal year 1970 was planned at a rate of five per cent growth. The actual growth of the economy in real terms (in constant 1967 prices) was 6.4 per cent that fiscal year. Our revised develop­ment plan for FY 1971-1974 set a target growth rate of 4.5 per cent for fiscal year 1971 in view of the anticipated effects of the fiscal and monetary stabiliza­tion program. All things considered, the actual growth rate for the same period was 5.5 per cent, in excess of one per cent over target.

It is in line with these facts that in the adoption of a rolling Four-Year Development Plan for FY 1972-1975, the growth targets of performance against which we have matched our resources have been raised. In fiscal year 1972, the current one, our aim is to raise the economy's growth by 6.5 percent. Based on the economy's performance this year of 6.5 per cent expansion, we are now on the way to achieving our fiscal year 1972 targets for the economy. Thereafter, we aim to attain a seven per cent annual growth rate.

Social Orientation of the Development Plan

However, growth rates alone convey no meaning unless planning itself can guarantee that this growth reaches the widest possible number of beneficiaries within a certain period. We plan the economy to benefit the social needs of our citizens.

In this vein, we have addressed the development program to respond to the social needs of our people. The social programs which recur in every sectoral plan for the economy is designed to cut unemployment, boost incomes, elevate living and health standards, and provide essential utilities like power and water in the rural areas.

Through an all-out strategy of land reform, land distribution, food produc­tion campaigns and general welfare projects, the social programs all hope to eliminate the prime sources of social discontent.

Employment

One important consequence of these growth targets is the increase in employment opportunities for our growing labor force. Coupled with various policy changes which shift favorable incentives for labor-intensive industries, the employment picture will be improved. This is not to say that unemployment will be erased. We start out with fairly heavy magnitudes of unemployment. The process of economic development, moreover, has a way of exposing hidden underemployment into "open" unemployment. But the only way to provide more employment and thereby reduce unemployment is by economic growth and wise policies.

Factors Affecting Our Economic Performance

It is not yet recognized by many of our people that the economy’s perform­ance is also subject to factors which are outside the sphere of influence of the government, the businessmen, and other members of our society.

The monetary crisis at the beginning of 1970, for instance, was due in large part to the unhistoric combination of a drop in world prices of coconut products and a contraction in Philippine coconut production in 1969. The drop in prices was due mainly to developments in the countries that buy our coconut products, which is outside of our control, and the latter was in turn due to the heavy typhoons late in 1968. As a consequence of these two external factors, exports of coconut products decreased by $73 million in 1969 and this accounted for more than one-half of the $137 million balance of payments deficit in that year.

The calamities wrought by typhoons in 1968 were repeated towards the end of 1970. This time, the calamities wrought havoc to rice and corn production and distribution in the Bicol region, thence in Central Luzon and finally in Cotabato. Before the farmers could recover from the ravages wrought by the typhoons, the tungro disease crept in and aborted the natural upturn in rice production. As a consequence, consumer prices continued to rise in late 1970 and 1971 and rice had to be imported to supplement domestic supplies.

The slower growth of exports in 1971, compared to the previous year, as another example, was brought about by adverse developments in the world market reminiscent of what happened in 1969. This time, the factors that operated during the second half of 1971 were the port strikes in the United States and the disturbances in world trade and payments brought about by the August 15, 1971 dollar defense measures of President Nixon. The adverse effect of these factors was manifested in the decrease in world prices and physical volume of demand for lumber products, copper and coconut products.

While we have thus shown that economic difficulties could be solved, we have yet to contend with the problem of consolidating the gains we have achieved in certain areas as, at the same time, we go on to other fields of endeavor for sustaining the momentum of economic development. We have yet to acquire the reserves to meet temporary shortfalls, such as those brought about by adverse weather conditions, crop infestation and international developments, without having to sacrifice the new programs that would yield the continuity of our economic progress.

Shortfalls Despite Our Achievements; Need for Policy Reforms

However, our economic vigor has potentials that have not been fully tapped. Just look around our neighboring countries and we see progress measured in excess of 10 percent growth per year. Given our better endowment of resources and the ingenuity and flexibility of our people, there is no reason why our society and economy should not be able to achieve as much and why we should not impose later much higher goals than we now have.

The requirements for much faster growth are basically tied to economic policy reforms of a sweeping character. We have tried to spell these out in the present Four-Year Development Plan.

Some of these we have already done. We have instituted basic changes, especially the exchange rate reform we adopted in 1970. But this measure still requires further complementation from various policies that are part of a consistent framework.

Our quest for the combination that would bring about the full realization of our economy's potentialities therefore continues. Finding the right combina­tion is urgent not only because of the inexorable pressure of our expanding population, but also because the complexity of economic operations rises with the level of economic activities. We are not looking for ad hoc solutions, but rather we are searching for structural changes.

Tariffs

An example of changes we had to adopt recently is in the area of tariffs. I am in favor of sweeping tariff reform, which will revise the total structure of our tariff system and enable it to serve our high goals of economic development, efficiency, and protection.

But in the meantime that the mind of Congress is not made up, we have to make do with patchwork changes designed to restructure tariffs to the end that we may better be able to encourage local production, improve customs administration and collection turnover, conserve foreign exchange and promote other economic goals.

This year, two important executive actions undertaken by powers given to me by Congress led to a rewriting of some parts of the present Tariff Code. The real achievement of these recent tariff changes relates not to the span of ground covered, but more importantly, to the "over-all" consistency that the rehashed package now lends to a once disorganized and voluminous tariff code. The "over-all" approach that I hope will be adopted by Congress is a far cry from the patchwork remedies that we have had to do in the meantime.

External Support: A Vote of Confidence

We continue to witness the unfailing vote of confidence shown by international bodies regarding our economic capability as gauged from the on stream of external financial assistance.

True, government coordinating and planning efforts are still engaged in restructuring our external debt through an orderly phasing out of amortizations along with a calculated dosage of new debts incurred.

In the inaugural meeting of the Consultative Group in Paris last year, our credit relations with the total world community were favorably assessed. The Consultative Group, which is instituted by the World Bank, is the forum for aid coordination and development assistance from both bilateral and multi-lateral sources, with four major countries as members and seven others as observers, and five major international bodies.

I am proud to report that we are getting increasing support from the international financial community. During 1971, external financial assistance with long term maturities was extended to the Philippines in the amount of $145.9 million.

The external financial assistance already extended in 1971 came from:

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The total, therefore, of all long term credits extended and under negotia­tions amounted to $311.4 million in 1971, the magnitude of which is evidence of the confidence of the international community in the Philippine government.

In this connection, I must add that we just recently submitted a country program proposal for United Nations Development Program (UNDP) assistance amounting to $20 million covering the fiscal years 1972 to 1976. This document has been acted upon and approved by the UNDP governing council. The assistance therein requested is designed to utilize inputs from different specialized UN agencies primarily for realizing the targets in the development plan to which the proposal has actually been annexed. In addition, we continue to receive supplementary assistance from other UN Agencies and other bilateral sources of technical cooperation and assistance.

Counterpart Finance

The continued confidence we are generating for long term development assistance from the Consultative Group, other foreign governments, and international banking institutions depends on how we continue to raise our own internal effort in raising domestic sources of finance. This means that our government must increase non-inflationary counterpart financing for long term loans and for programs of foreign assistance from all sources. Without counterpart finance, the amount of development resources we can have will be fairly more limited than we can presently raise and absorb. This is because the devel­opment loans we need to help ourselves will not be forthcoming in the same volume. For us, the unwanted consequence of this would be a reduced rate of economic development, not more. Therefore, I am proposing that we raise additional tax resources to be part of the Development Fund which I shall refer to again. This will assure that we can achieve the investment goals of our Four-Year Development Plan.

Monetary Situation

In the monetary field, the growth of money supply in 1971 was moderate. If grew only by seven per cent as compared with about 19 per cent in 1969. Domestic credit grew by 12 per cent in 1971 or an estimated amount of P1 .67 billion enabling total credit to reach P15.77 billion. Of this increase the private sector accounted for P1.37 billion and the government, only P0.3 billion.

The moderate growth in credit and money supply assured stability and growth in the economy. As all of you know, excessive money supply and credit create demand which results in increased prices and imports, thus endangering international reserves.

In 1971, the international reserves reached $245 million. $35.5 million higher than its $209.4 million level on December 31, 1970, or about twice the level in December 1960. This level of reserves was achieved despite heavy external debt service payments and adverse international monetary and trade developments during the second half of 1971.

The debt payments in 1971 totaled $471.5 and, as a result, the total debt of the Philippines was reduced by $100 million by December 1971 as compared with the December 1970 level.

The general economic outlook in 1972 appears to be brighter in certain areas than the actual picture in the year just past. The currency realignment should bring about an expansion in world trade and an increase in the demand for Philippine exports.

The government's program to devote a great deal of its resources to food production and infrastructure that will facilitate production and transportation will result in lower prices which will be to the advantage of the wage earners. In addition, the building of more rural banks will provide the credit for productive rural economic activities.

The Development Concept

For this year's agenda, the task of development has the second highest priority. As I suggest elsewhere in this Message, the maintenance of peace and order is a pre-condition to the goals of national development. What this means, further, is that it is our desire as soon as practicable to shift most of our expend­itures to the capital requirements of growth, and make this the Administration's principal task. We should therefore endeavor to enhance and harness the productive power of all elements of our society. Those who are not now contributing to production must, in particular, be roused to an awareness of their duty. At the same time, they shall continue to be given the opportunity and the incentives for participating in the nation's productive effort.

The front-line of production, as always, consists of the agricultural and the industrial sectors. Concurrent and articulated growth of production in these two areas remain our emphasis; as growth in industrial production proceeds, agri­culture is bound to be influenced in the direction of rationalization, in effect the industrialization of the agricultural process, which I feel will achieve our goals of development.

We will promote the energetic flow of capital into both agricultural and industrial production. Thus we must try to stem the rising tide of government expenditure, the bulk of which are devoted to operating expenses, and shift as much of it as possible to capital investment needs of production.

This year the Central Bank hopes to complete a survey which can lead to an expanded, socially oriented banking system capable of more equitable alloca­tion of resources to all levels of the population. This can be done by increasing the rural banking system, one bank in each municipality for example, with as many stockholders as possible drawn from the community itself.

On my instructions, efforts have already been started to reverse the trend in the expenditures under the general fund for capital investment and administra­tive operating expenses. Here are the figures.

In 1971, the current operating expenditures comprised 83 per cent of the general fund, while capital outlay was a mere 12 per cent.

In FY 1972, we have set aside 86 per cent for current operating expenses, and 14 per cent for capital outlay.

In FY 1973, we are allotting 82 per cent for current operating expenditures, and 18 per cent for capital outlay.

This steady upward trend in capital outlays compared to current operating expenditures will, I hope, continue beyond 1973.

At the same time I have laid new emphasis on the diffusion of the benefits of development. I intend to provide, on as large a scale as the resources available will provide, programs with three objectives:

First, programs to distribute the benefits of economic development as widely and equitably as possible, both among social classes and among geographic regions.

Second, programs to improve the environment and living conditions of die masses.

Third, programs to ensure the maximum development of our human resources. I propose to provide every Filipino with the opportunity to advance in every way, by providing opportunities for education and self-help in econo­mic enterprises.

I shall spell out in detail, in this and later Messages, the content of these programs, in the meantime, let me illustrate them by a few examples.

Distributing the Benefits of Development

We shall distribute the benefits of economic development primarily by means of three main programs in the Four-Year Development Plan.

First, a massive regional development program, to uplift depressed regions of the country. This will involve the preparation and implementation of a regional development program for each of the country's ten regions, and the breaking up of government offices and agencies into regional offices, as specified under the Reorganization Plan. We propose to begin this program with the regions of Mindanao.

Second, a program implementing a national employment policy. While paying lip service to the principles of labor-intensive production, most of our incentives still tend to favor capital-intensive technology. We shall formulate and implement the program to ensure the highest possible levels of employ­ment.

Third, a long-term agricultural procurement and production program, to ensure the masses of the ready and reasonable availability of basic foodstuffs.

The second category of programs involves the involvement of the environment and living conditions of the masses. These include programs for mass low-cost housing and rural electrification. These also include improvement of the basic services the government provides the people, fore­most among which is peace and order. These services, furthermore, must be provided with the utmost efficiency; and I urge the immediate enactment of the proposals contained in the Reorganization Bill.

Developing Human Resources

Our most important programs concern the development of human resour­ces. I wish to afford to every Filipino the opportunity to live and work, if not in affluence, at least in dignity and self-respect. This he cannot do if he is ill-educated, or jobless, or subservient to landlord or employer.

The most important of our programs in this category continues to be Land Reform, which still suffers from lack of funding. I ask Congress to provide this program with the resources the farmers and the country need.

We have formulated a long-term program to make our educational system more responsive to national needs.

We have formulated a manpower development program, which includes training and placement services and a manpower center in every municipality.

We have begun several programs aimed at improving the economic oppor­tunities of the masses through cooperation and self-help. These include live­stock dispersal and cooperative farming which harness the energy of our youth, which too often find an outlet instead in wasteful and unproductive violence. This is a powerful force, which can be utilized for the concrete benefit of both the country and the young. Let us together define useful and attractive lines of endeavor; perhaps constructing feeder roads, providing educational and medical services, directing barrio improvement projects, and providing our unemployed and out-of-school youth opportunity to serve their country.

For the financing of all these programs, I am proposing the creation of a Development Fund, which will receive the proceeds from certain tax measures and direct them toward development projects.

The pressures for change in our society daily become rarer. It is a process that we not only accept, but seek to master. We at the center of govern­ment must not only react to change, but generate it. I have outlined some of the innovations we are seeking to create; I undertake to maintain this innovative approach.

It is the only way to meet the challenge of revolution.

RESEARCH AND DEVELOPMENT

Scientific and applied research explains in large part the story of moderniza­tion of progressive countries. I recognize that the promotion of research and development is a universal task of nation-building fostered by the government. Applied research in industry and agriculture will enable us to find new products and uses for our resources. It will encourage a more vibrant and productive climate for our economic future. Academic institutions, research institutes, private industry and government are enjoined to link together in cooperative efforts. On the part of the government, we are determined to raise more resour­ces to support research and development and to make better and more effective use of whatever existing resources we have, like the Science Fund.

Archeological and Historical Research

Special emphasis will also be given to archeological, anthropological, and historical research. We should foster studies that delve into our ancient roots and help us define our past more clearly; in this connection, we should give more funds and more powers to the National Museum so that it can develop an institution of which we can all be proud.

PRICES

The solution to the problem of increasing prices undoubtedly deserves a high place in our priorities. However, it will serve no one to regard the problem with less than a clear mind and an honest purpose. The classic answer to infla­tion is to manage the growth of money supply and at the same time to increase production. We have in fact increased production— 6.5 GNP in real terms, and moderated growth of money supply from 19 per cent in 1969 to about seven per cent during the past two years.

The need to provide the government with better instruments for dealing with supply shortages was revealed again in 1971. There was a rice shortage; and because we could not remedy the gap until the last minute, food prices rose by over 29 per cent. This was largely responsible for the increase of over 23 in the consumer price index.

Some traders also apparently took unwarranted advantage of the situation to increase their margins. Wholesale prices rose by less than 16 per cent, or about seven per cent less than consumer prices.

Export prices were depressed in relation to other prices. In the face of a price increase of 17 per cent for all domestic products, and in spite of increased costs, wholesale export prices rose by only six per cent.

Also last year, the Price Control Council was reestablished by law to prevent monopoly, hoarding, injurious speculation, manipulation and pro­fiteering with respect to the supply and marketing of commodities. The Council has waged a vigorous campaign against profiteers, blackmarketeers, hoarders and speculators. It has also prevented what could have been the spiraling of the prices of petroleum products, textiles, textbooks, school supplies, milk, drugs and construction materials. The task of the Council continues this year.

AGRICULTURE

We can, and should, produce all the rice and corn our people and our industries need. But government cannot always foresee nor can it always quickly offset the destructive effects of natural calamities, such as those wrought by typhoons and diseases which ruin standing crops.

This is exactly what happened in 1971, which, on the whole, was a disas­trous year for Philippine agriculture.

The havoc wrought by the typhoons of 1970 resulted in a severe rice shortage in 1971, so that the country had to resume rice importations anew after having been self-sufficient for the three previous years. The conflicts that broke out in Cotabato in December of 1970 continued through 1971, thus drastically reducing rice and corn production in one of the major rice bowls of the country. Moreover, the rains that came in the wake of the typhoons cut corn production severely, resulting in a soaring of corn prices. This, in turn, led to a shift to rice by the com-eating population, thus artificially increasing the demand for rice at a time when supply was already short. Political hysteria in election year 1971 further aggravated the situation by encouraging panic-buying and hoarding. The net result was a steep rise in the price of rice immediately preceding the elections in November, although this was followed by a price decline shortly thereafter.

As if this were not bad enough, an outbreak of the dreaded tungro disease hit the main rice crop unexpectedly toward the end of the year, resulting in drastic production declines in Central Luzon and a few other parts of the country. Coupled with the 1971 typhoons and a continuation of the Cotabato strife, the rice plague means additional importations in 1972, despite an intensified rice production program which has already been mounted.

Emergency Steps

To alleviate the rice shortage and to restore the country once more to self-sufficiency, I have taken the following emergency steps;

First, I have instructed all the government financial institutions to extend P180 million worth of additional agricultural credit for this palagad or dry season crop. This should provide farmers with the additional funds required for [he higher priced farm inputs brought about by the 1970 floating rate. For the main crop that is planted in mid-year 1972, we intend to mobilize a total of about P400 million in additional credits from different sources.

Second, I have instructed the RCA to use about P100 million, generated from our long-term credit purchases of rice, for a price-support program for palay. This should assure our farmers of a sure market for their palay at a profit, thus encouraging increased production.

Third, the Bureau of Plant Industry—acting on my orders—has launched a seed-production drive to produce tungro-resistant seed varieties to replace the non-resistant varieties. This, together with a massive agricultural information campaign now being conducted by our 4,000 farm technicians, should prevent any recurrence of the rice disease for this year.

Fourth, we are redoubling our efforts to irrigate more rice lands. I have approved the purchase and installation of 4,700 more irrigation pumps through­out the country. I have also ordered the release of funds to the National Irriga­tion Administration to enable it to repair communal irrigation systems. Altogether, this should place about 50,000 more hectares under irrigation this year.

Fifth, having obtained a World Bank loan of $14.3 million, the Develop­ment Bank of the Philippines and the National Food and Agricultural Council have undertaken a PISO-million effort to modernize and upgrade our rice storage and warehousing facilities all over the country.

National Grains Authority

Finally, I ask Congress again, as I did last year, to pass the bill which wilt abolish RCA and to create in its stead a more viable National Grains Authority. I also ask Congress to provide sufficient funds to this new agency and to the entire rice industry lest we perpetuate our insufficiency in rice.

While these steps are being taken, we have already contracted for more rice abroad — largely on the basis of long-term credit — in order to assure our people of sufficient rice for their needs this year. This should tide us over this critical period.

So much for rice.

Fortunately, not all was bleak in agriculture. While rice overshadowed all other developments, we did forge ahead in many agricultural fields.

Other Production Programs

Coconut production jumped unexpectedly by almost 40 per cent this year, resulting in vastly increased exports of coconut oil and copra. World prices however fell sharply in the face of this substantial increase in exports. We are now therefore vigorously engaged in opening up new markets—including Mainland China and Eastern Communist Countries—for our increased production in order to stabilize world market prices for coconut oil and copra.

We have accelerated our fish production program. Additional credit, a much-expanded fishery extension force and additional cold storage and marketing facilities enabled us to produce considerably more fish in 1971 than in previous years. We have even begun to export modest but growing quantities of shrimp and other marine products because of this accelerated program.

1971 also saw further advances in our meat-production drive. We dispersed some 4,000 heads of cattle, 4,000 heads of swine, and 200,000 ducklings in 1971. This will result in the rapid upgrading of our local livestock breeds and in the revitalization of our waning duck industry.

We also launched, for the first time in our history, a milk-production program designed to offset the vastly-increased prices of milk and milk products in the world market. The only real answer to increased world prices, as you all know, is to produce the commodity ourselves in order to be less vulnerable to the economic policies of other countries. This we have started to do in this vital commodity, milk.

Land Distribution

As deep as the hunger for food is the hunger for land. We took giant strides in satisfying this hunger in 1971 as a result of a massive land distribution drive. Our Bureau of Lands last year issued 50,158 land patents to small settlers compared to 32,000 the year previous. This represented an increase of fully 56.7 per cent over the previous year. In addition, 1971 was notable as a year when explosive land conflicts disappeared from the front pages of our news­papers. This was largely a result of the excellent, quiet work undertaken by the Small Fanners' Commission and by the Presidential Action Committee on Land Problems which I created in August of 1970 to tackle this serious problem.

Our mining and oil-exploitation sectors received new boosts from the government last year. We provided credit and other forms of assistance to our nickel projects. We formulated new and liberal guidelines designed to attract badly-needed foreign investment into the oil-exploration industry. In coopera­tion with foreign entities, we launched new ventures to harness our vast thermal and gas resources for producing power. We began to explore the possibility of new markets for our copper concentrates in the light of a sudden drop in world copper prices. Even now, we are seriously studying the economic feasibility of establishing our own copper smelting facilities to protect our copper industry.

One of the most important things that we did in 1971 was to establish, after careful studies, the basis for a truly effective forest conservation program. A Presidential Committee on Wood Industry Development, which I created in March of last year with private sector representatives, recommended sweeping reforms in our forestry and conservation policies. I have approved these recom­mendations and the stage is now set for the rapid rationalization and develop­ment of our wood industries and the protection of our forest resources. In this field too, we will need legislation to institutionalize the recommended reforms. I recommend to Congress the bill that we are now preparing in order to conserve our forest patrimony for our generations to come. Unless we take drastic steps now, we will have reached the point of irreversible descent by 1985. At that point, it will be too late to prevent our rich country from becoming a wasteland.

COMMERCE AND INDUSTRY

This period saw marked advances in the areas of export trade, tourism, cooperatives and consumer protection.

Foreign Trade

In 1970, our total trade rose by 21 per cent over the aggregate export receipts for 1969. Export earnings in manufacturers alone showed remarkable increase, after the adoption of the new exchange rate policy.

Although we continue to gain from our recent efforts, developments due to factors not within our control—the international monetary crisis, unfavorable prices for our exports in world markets, strikes in US ports, etc.—slowed down our export expansion.

We enjoyed a balance of payments surplus of $10 million in 1970. This was attributed largely to the sales of copper concentrates, pineapple in syrup, molasses, plywood, desiccated coconut and bananas. We would have had a better trade performance on our side if we did not have to import rice and corn in 1971.

The Department of Commerce and Industry revitalized its commercial intelligence corps; provided a better market structure for the smooth geogra­phical movements of goods and services; and aligned its export promotion program with that of the United Nations Development Program. UNDP has committed itself to assist us in this effort.

Tourist Industry

Realizing that tourism is vital to our economy, we have given it a special emphasis.

The DCI is perfecting a plan which would promote tourism in other countries with the help of foreign-based marketing organizations. The target includes the estimated 400,000 Filipino nationals in the United States. This program also calls for the improvement and modernization of entry facilities into our country, at air and major seaports, tourist plants, amusement centers and recreational parks and the removal of tax problems that deter Filipinos from coming to their own country either as tourists, investors, returning residents or plain visitors. With the tragic fire that caught the Manila International Airport last weekend, the rehabilitation of tourism facilities requires high priority for airport development.

With the expected boost in the tourist industry, it is estimated that some $40 million in revenue can be revitalized for the support of the country's develop­ment program.

Cooperatives

The organization of more consumer and industrial cooperatives by pro­viding incentives in the form of capita] required to finance productive enter­prises are a requisite complement of the economic development program.

During fiscal year 1971 some 447 non-agricultural cooperatives were registered as against 291 for fiscal year 1970, thereby increasing the number of registered cooperatives to 4,917 as of June 30, 1971. For fiscal year 1971, credit union led the number of registration with its 265, followed by consumer cooperatives with 142. For the first half of FY 1971-72, an additional 208 cooperatives were registered, bringing the total registration to 5,125 as of December 31, 1971.

Protection of Consumer Rights

We have likewise placed emphasis on the regulation of business enterprises engaged in the sale of goods vital to national growth. The private business sector was drawn into this undertaking to dramatize the importance of con­sumer education. Primers on fair trade laws and practices were disseminated and seminars and lecture forums were conducted in the different parts of the country.

FINANCE

The performance of the Department of Finance last year was impressive. Increases were registered not only in the revenue collections of both the Bureau of Internal Revenue and the Bureau of Customs but also in the cash balances in the Bureau of Treasury, in the rate of repayments of public debt, and in the assessments and collections of real property taxes.

The BIR last year realized a gross collection exceeding the P3 billion marks, representing an increase of 23.2 per cent over that of fiscal year 1969-70 (P2.084 million). The net collection on the other hand for fiscal year 1970-71 was PI,581 million or an increase of P243 million or 18.18 per cent over that of fiscal year 1969-70 (PI ,388 million).

For the current fiscal year, the first semester’s BIR gross collection (July 1 to December 31, 1971) was Pl,240 million, an increase of P201 million or 19.34 per cent over that of the first semester last fiscal year (P1,039 million). The corresponding net collection for the same period (July 1 to December 31, 1971) was P844 million, an increase of P 158 million or 23.03 per cent over that of the same semester.

The Bureau of Customs had a gross collection of P1,562 million for calendar year 1971, representing an increase of P355 million or 29.44 per cent over that of the preceding calendar year (P1,207 million). A comparison on the fiscal year basis shows that collections by the Bureau in fiscal year 1971 were P1,378 million, representing an increase of P352 million or 34.34 per cent over that of the preceding fiscal year (Pl,026 million). Collection for the first semester of the current fiscal year was P828 million which, compared to that of the first semester of the last fiscal year (P644 million), shows an increase of P184 million or 28.69 per cent.

General Fund

The General Fund in the Treasury had a cash balance on June 30, 1971 of P397.66 million which, compared to the balance on June 30, 1970 of P84.64 million, shows an increase of P313.02 million. On December 31, 1971 the cash balance was P249,49 million, showing an increase of P70.3 million over that of December 31, 1970 (P170.19 million).

Assessments of taxable real properly in provinces and cities as of June 30, 1970 add up to P18.617 million which rose to P19,883 million as of June 30, 1971, representing an increase of P1,266 million. On real property tax collec­tions the totals are P149 million for fiscal year 1970 and P173 million for fiscal year 1971, showing an increase of P24 million.

The increased collection of the Bureau has been made possible by the collection through banks which has reduced substantially the issuance of fake receipts by unscrupulous persons; grouping of internal revenue examination by industries; extensive use of collection and assessment data prepared by electronic data processing; improvement of tax audit methods of examination and investigation of internal revenue taxes; collection of delinquent accounts thru R.A. No. 5203 or by warrants of distraint and levy.

Foreign Investments

The Administration has taken an active role in attracting desirable foreign investments into the country’s economy. Among the more successful of these programs is the progressive car manufacturing program. Expressions of serious interest to submit proposals for participation in the progressive car manufactur­ing program have been received from domestic assemblers in collaboration with the largest automobile manufacturers in the world. In particular, Ford Motors of the United States has indicated a strong preference for the Philippines as the site of a pioneering car manufacturing program for the Southeast Asia region. Others reported as being interested are General Motors, also of the United States; Toyota and Nissan of Japan, Renault and Volkswagen of Europe. Although the proposals are expected to be submitted at the end of this month, coming from various sources, the indications are that substantial invest­ments in manufacturing facilities will be made as part of the program proposals.

Such bold investment decisions, in response to a climate of confidence that has been engendered, will undoubtedly speed up the industrialization of our country.

New Industrial Investments

Industrial investment took place in the form of expansion of capacities both in exports and the domestic market industries. Imports of industrial machinery for this purpose exceeded 1970 levels. Manufacturing plants in new industries were also established; the Paper Industries Corporation of the Philippines started operations in Bislig, Surigao del Sur as the first integrated newsprint and Kraft paper plant from wood materials in Southeast Asia; The Filipinas Synthetic Fiber Corporation in Sta. Rosa, Laguna as the first manufacturer of synthetic textile fibers in the Philippines, and the Philippine Explosives Corporation in Bataan as the first manufacturer of dynamites and industrial explosives in the country.

Construction is also going on in Bukidnon of a plant to manufacture high grade paper from abaca, which will represent an entirely new utilization in the Philippines of a traditional raw material export, and stimulate the whole abaca industry.

THE INFRASTRUCTURE PROGRAM

The construction of more highways and other public works activities is in line with the government’s goal of providing infrastructure to enhance eco­nomic activities.

Highways

During the last six years, a total of 38,409 kilometers of roads and 30,903 meters of permanent bridges were constructed at a cost of P866 million.

Last year alone, we paved with-concrete or asphalt 449 kilometers of roads, constructed 528 kilometers of gravel roads and 3,736 meters of permanent bridges.

Next fiscal year’s program envisions the concrete-paving of 340 kilometers of roads, asphalting of 777 kilometers, and construction of 1,311 kilometers of developmental or feeder roads and the construction of 5,000 meters of permanent bridges.

We have accelerated the implementation of the Philippine-Japan Highway Project this fiscal year and we shall speed up work further on the project next year.

In Mindanao, the construction of roads with great economic value will be started this year. They are the General Santos-Cotabato Road, the Digos (Davao)-Cotabato City Road which will be implemented from a World Bank loan.

Airports

The rehabilitation of the MIA from the disastrous fire a few days ago is our foremost priority for airport development.

Emphasis is also being given to the construction and improvement of air­ports throughout the country and the facilities necessary for their operations. To ensure safety of air travel, the government is pursuing the construction of modern air navigation facilities all over the country. We expect to accomplish this important project within the next two years.

Last year, we constructed and improved 75 airports with a total expenditure of P32.4 million. Likewise, we constructed 37 new air navigation facilities, and improved and maintained 95 facilities.

Our program for the next fiscal year involves the continued acquisition and installation of equipment for on-going projects and the implementation of the $ 1.0 million Belgian loan for the lighting facilities for the Manila International Airport and 12 trunk line airports.

Telecommunications

During the last six years, we started three telegraph and radio stations costing P2,1 million. On (he nationwide telecommunications expansion and improvement project, we have constructed telephone exchanges, troposcatter, microwave and high frequency stations. Phase I of this NTEI project is nearing completion.

We completed and inaugurated the Bicol microwave link under the NTEI Project. This system is expected to ease up traffic through voice and telegraph circuits between the Bicol Region and Manila and other parts of the country.

We established high grade UHF, VHF radio links from Cebu to Western Visayas, particularly to Negros, Iloilo, Capiz and Akian. Among the stations commissioned were Kalibo, Roxas, Iloilo and Bacolod.

We envision the implementation of the Mindanao Telecommunications Development Project the next fiscal year.

Irrigation

We have completed 20 additional irrigation project systems in the last six years to increase rice production. These include the Upper Pampanga River Project and the Cotabato Irrigation Project.

Next year, we hope to open up new irrigation systems, including the Magal River Multi-Purpose Project, the construction of communal irrigation systems in places where water resources are limited and the intensified pump irrigation program.

Pump Irrigation

To provide irrigation water to rice-producing regions which are not yet served by gravity irrigation, the government is pursuing the procurement of irri­gation pumps for sale to small farmers at cost and on long-term basis. We intend to procure more pump units this year. Last year alone, 3,372 pump units were installed which covered 47,062 hectares of agricultural lands.

Public Works

During the last six years, the Bureau of Public Works completed one over­seas berth and three domestic berths to add to our existing shipping facilities. Among the ports we hope to develop this year are the Ports of Manila, Iligan, Davao-Sasa, the Ports of Batangas, Tabaco, Cagayan de Oro, Cotabato and Makar. We shall also accelerate the development of the Navotas Fisheries Port Project.

On flood control, the government is making arrangements for the im­plementation of the Manila and Suburbs Food Control Project to be financed from the Japanese loan. Negotiations are being made so that a major portion of capital investment for this project can be accommodated from the loan fund and the rest from a local fund. A bill has also been filed in Congress to raise funds for this project.

We have constructed 20 and improved and repaired 34 national buildings and hospitals, distributed 2,792 and erected 2,016 two-room and three-room units of the Marcos-type school buildings; constructed 216 rooms of non-pre­fabricated school buildings; constructed 110 and repaired and/or improved 626 school and public buildings like home economics and shop buildings, public markets and libraries, constructed 3,190 meters of seawall protection; dredged to adequate water depth in all national ports, harbors, navigable rivers and waterways throughout the country; improved the esteros, repaired and improved river walls, pumping stations and surveys of the Manila and Suburbs Flood Control and Drainage. We have completed the construction of 200 meters of revetment at Calumpit, Bulacan, and 1,356 meters of earth dikes along the Rio Chico River at Aliaga and Licab, in Nueva Ecija.

The Bureau continued the nationwide inventory and appraisal of surface water and groundwater potentials of the country for the formulation of plans for the scientific utilization and control of the country’s water resources for flood control, irrigation, power generation, water supply, water transport and water-based recreation.

Land Transportation Commission

We shall institute further reforms at the Land Transportation Commission in order to intensify its collection efforts. This agency contributes a considerable amount to the Highway Special Fund which the Administration uses to finance infrastructure development projects.

In the last six fiscal years, the LTC has collected P501,355,369 in revenues of which P451,093,877 went to the Highway Special Fund.

We have procured a plate-making plant from Japan through reparations which, during the fiscal year of operation, contributed to the national treasury a total of P933,392. The plate manufacturing plant of the LTC is advantageous not only because it has prevented tampering of plates but also has simplified fund accounting.

Tourism Infrastructure

The tourism industry has grown consistently during the last decade. Tourist traffic increased from 50,657 visitor arrivals in 1960 to 144,071 in 1970, equi­valent to a growth rate of 11.2 per cent annually. Excepting 1962, tourism receipts, which were estimated at $2.9 million in 1960, increased steadily to a high level of $97.8 million in 1970. The tourist industry was the fourth top dollar earner in 1970, the total dollar receipts from the industry exceeding the value of total export shipment of coconut oil. The total receipts that year constituted about nine per cent of the total export proceeds and 36.8 per cent of the total invisible receipts in 1970. There have been other encouraging develop­ments since.

The Development Bank of the Philippines lent P10 million to build addi­tional hotels.

In addition, we are building youth hotels in 12 selected areas. This is in support of the youth travel program which forms an important segment of domestic tourism program. This program anticipates a shortage of 851 rooms by 1974 and approximately 1,800 rooms by 1975. Additional hotel rooms now under construction are expected to meet such shortages.

Our current plans call for an outlay of P3.7 billion for infrastructure development designed to meet the priorities of tourism development.

Infrastructure facilities invariably improve the climate for more tourist investment. These include roads and highways, bridges, water systems, air­ports — all essential parts of the Four-Year Development Plan.

Bilateral agreements with foreign countries pursuant to the open skies policy enunciated a couple of years ago seek to generate additional airline frequencies which would bring more visitors into the country. Consequently, promotional efforts in the various travel markets of the world may now be expanded to generate a massive flow of tourist traffic to the Philippines.

I am pleased to report that the National Economic Council has recom­mended the use of $1 million out of the Japanese reparations programs to double our efforts to attract a greater number of Japanese visitors to the Philip­pines. This effort will also be extended to the Australian and European con­tinents as our financial resources become adequate.

The participation of the private sectors is indispensable in the overall tourist development and promotion efforts. It is my earnest hope that the various elements of the private sector will continue to cooperate with the national tourist organizations in promoting and developing our tourist industry.

In the field of investment incentives for the tourism industry, there are areas where the government can fully assist in development and promotion. These areas being explored include repatriation and remittance of earnings, capital gains, tax exemptions, and tax allowances for special investments in tourist plant projects and services. It is my hope that this will eventually attract foreign investments in the Philippine tourism industry.

I appeal for congressional support in the enactment of appropriate legisla­tive measures intended to liberalize certain existing tax burdens which dis­courage the return of Filipino residents in foreign countries. This may also bring about the entry of the much needed foreign exchange for capital require­ments. Within the framework of existing laws, the executive agencies of the government have substantially effected the remedial administrative measures but Congress can help in this effort through the enactment of concrete and specific provisions of law.

V.    BARRIO LEVEL DEVELOPMENT

One major focus of development under this Administration was the barrio. In stressing rural development we ran afoul of a school of economic thought that asserted that development programs at the barrio level should have the last priority. I disagreed with this thinking because the barrios are the backbone of our nation and their uplift and development is a precondition of the national progress.

During the past six years we have initiated a number of successful projects for the rural areas. It was during this Administration that the barrios were enfranchised politically; we now seek to enfranchise them economically.

REGIONAL DEVELOPMENT

Economic disparities exist not only among social classes but among regions of the country; and the latter is as great an evil as the former.

This past year, we have emphasized and accelerated our regional develop­ment planning work to reduce the income gaps in the different regions of the country. The objective of our regional development program is to bring down from the national to the regional level the overall goals and targets formulated by the national planning agencies for easier translation into appropriate projects.

Last December I directed the Presidential Economic Staff to assume the additional functions of formulating plans and guidelines on regional develop­ment and to coordinate all national government efforts pertaining to regional development. To carry out these functions, there has been created within the PES a regional development monitoring and planning system to serve as the basic organizational framework for a more realistic and effective regional development planning work in the country.

We are also setting up government administrative centers in all regions of the country. I have directed all national government branches and offices in one region to locate their branch offices in one strategic area or city in the interest of efficiency, expediency and economy.

Our goal of wider income distribution necessarily calls for regional dis­persal of industries to prevent undue concentration of economic activity in just one area and to spread the benefits of economic development throughout the country. To this end, the Board of Investments has launched an investment promotion drive in the provinces. This is in line with the regional dispersal concept of the fourth investment priorities plan as developed by the BOI.

NEW OFFICE

This year we will create, tentatively by executive order, an Office of Local Government and Community Development. I ask Congress to firm this up with the proper legislation.

This Office will be service and development-oriented and it will have the following functions.

(1) Assist the President in exercising general supervision over local governments;

(2) Strengthen local governments so that they can perform their functions with greater autonomy and with greater capacity to carry out development pro­grams;

(3) Formulate, develop and coordinate programs on urban and rural community development;

(4) Promote, organize, and develop all types of cooperatives and develop new areas for cooperative enterprise;

(5) Administer technical assistance, training, and research program de­signed to improve local governments;

(6) Coordinate local development plans with national development plans.

Through this department, we will involve the local governments in all aspects of the development planning and we will give substance to the policy of local autonomy.

The idea of an office or department of local government and community development was endorsed unanimously by the Governors and City Mayors League.

RURAL ELECTRIFICATION

Vast areas of our country are still denied a vital mark of modernization: electric power. For this reason, these areas—and their people—are cut off from the main current of development and growth. They are unable to tap their potential for irrigation, mechanization, cottage industries, and agro-industrial activities which are necessary to raise the quality of life in those areas.

Realizing all this, I have made rural electrification a priority program of my Administration.

In 1971, through the National Electrification Administration, we com­pleted and energized 35 municipal electric systems, and set in motion the construction of 38 rural electric cooperative systems. Initially, we expanded the Victorias Rural Electric Service Cooperative System in Negros Occidental and energized the Misamis Electric Service Cooperative System in Mindanao. These two cooperative systems alone now provide, on a 24-hour basis, electric service to some 10,000 homes in 14 municipalities. For the 36 other systems, groundwork has been prepared last year, including the drawing up of feasibility studies, organization and registration of electric cooperatives, and the finalization of loan agreements amounting to P182 million. The completion of these 36 rural electric cooperative systems will provide low-cost power to some six million people in our rural areas.

Under our Four-Year Development Plan, we are called upon to build 186 powerhouses, 193 generating units, and 193 transmission systems during the next four years, which altogether will cost us P94 million from local sources and $7 million from foreign sources.

I now ask Congress to join us, by enacting the necessary laws in funding our program for the liberation of our vast rural areas from darkness, backwardness and impotence.

EMPLOYMENT POLICY

For a long time we have assumed that employment is an automatic con­sequence of development, that as we ascend the ladder of progress, unemploy­ment decreases. Our experience, however, has shown that this is not always true. We have found out that it is possible to attain higher levels of growth with­out any significant consequences on employment, unemployment, and under­employment.

We have concluded that to meet the problem of unemployment or under­employment, national plans have to be given an employment orientation. We have therefore given our new Four-Year Development Plan a strong employ­ment bias.

Our major efforts in employment promotion are manpower training and development, the stimulation of cottage industries, rural employment and special preference for labor-intensive industries and economic activities.

Manpower Training

In my State of the Nation message last year, I directed the National Man­power and Youth Council to fit the accelerated manpower training program to the requirements of industry.

This we have nearly achieved. We have successfully modified the accel­erated manpower program by instituting more stringent controls and by align­ing its training projects to the needs of industry and the national economy.

Last year, the total output of all our training projects was 65,242 trainees. Of these, 33,205 were trained in the accelerated manpower training project; 27,037 were trained in out-of-school youth projects; and 5,000 were given skills upgrading and Instructor training. The total cost of these projects was P9,781,789.66.

Some 45 per cent of these trainees were employed in industry and 30 per cent became self-employed after training. As an employment strategy, therefore, the manpower development program is proving to be effective.

This year, we shall launch an accelerated manpower training program in agricultural skills and cottage industries to buoy up employment in the rural sector, to increase food production, and to raise the productivity of farm workers.

We shall begin initially by setting up an agricultural training center in every province. Gradually, as the need arises, we will expand training operations down to the municipal and the barrio levels.

For this purpose, we shall utilize existing agricultural schools and the training facilities of all government agencies. This program will be a major undertaking of the National Manpower and Youth Council, the Department of Agriculture and Natural Resources, the Department of Education and the NACIDA.

We shall offer courses in handicrafts, rice and corn production, poultry and cattle raising, animal husbandry and such other agricultural skills as would promote production and employment on a self-help basis.

This agricultural training program will be a desirable complement of our accelerated industrial training program. The development of skilled manpower in our urban and rural areas will continue to occupy a high priority in my program of government. It is, in my view, an important component of our total development strategy.

Rural Employment

The strategy of economic development we have been pursuing has revolved around the development and strengthening of the agricultural sector so that the increasing purchasing power of our agricultural producers and their families would provide a mass market for the products of our industries.

The major emphasis we have given to the expansion of our irrigation facilities has been geared to this end.

The advances we have made in the agricultural sector have broadened our horizons and raised our hopes. Through the DANR and the NFAC, we have moved to diversify our agricultural activities so as to produce a greater variety of crops and livestock. Behind all these initiatives is our desire to provide year-round employment opportunities to our rural people. Irrigation provides oppor­tunities for diversification and in turn provides for greater utilization of the available labor force on farm.

To generate additional employment opportunities in our rural areas, we have created the Committee on Rural Employment (CORE) headed by the Secretary of Agriculture and Natural Resources.

Cottage Industries

The stimulation of cottage industries will provide people in the rural areas with employment opportunities that should raise their living standards.

Under the Four-Year Development Plan, “cottage industry is specified as a priority because it is directly linked with the objectives of labor-intensity. Furthermore, it provides service to large scale business that finds it less econo­mical to undertake certain intermediate processes.”

From 1962 to 1970, the average yearly increase of our exports of cottage industry products was 29 per cent as against the average 10 per cent exports growth target. This started with a meager volume of P16.7 million in 1962 to P128.9 million in 1970.

Cottage industries will be greatly influenced by the decision of the ECAFE second preparatory meeting to establish the Asian Handicraft Center in Manila. The Philippines will provide the site and the building while the international agencies and ECAFE member countries will assist in the maintenance and operation of the Center.

To meet this development imperative, the NAClDA has to be restructured and provided with adequate facilities, funds and personnel to undertake ex­tension work, to establish the Asian Handicraft Center, to have more realistic credit and financing programs, and to undertake an aggressive promotion and marketing of cottage products both here and abroad.

We have also created a Cottage Industries Development Enterprise. The main objectives of the CIDE program are: (1) to integrate and coordinate all institutional activities related to cottage industries; (2) to generate employment opportunities in depressed urban areas and in the rural areas; and (3 to create small business opportunities with low capital investments.

The initial phase of operation is centered around an extensive training program to be conducted by the National Manpower and Youth Council in close coordination with the Department of Social Welfare, the Department of Educa­tion and the NACIDA. This will be followed by the organization or production cooperatives with the trainees as their members. These cooperatives will be assisted by the CIDE not only in getting volume orders but also in financing their raw material acquisition. At the same lime, the CIDE will embark on an extensive product development and promotion effort. To finance its initial operations we have released to the CIDE the amount of Pl,006,000.

AGRARIAN REFORM

Our experience in agrarian reform in 1971 showed one thing: Our fanners became more efficient and more productive when placed under the liberating umbrella of agrarian reform. Land reform areas have consistently shown marked increase in general productivity and in gross incomes compared with non-land reform areas.

Gains in Agrarian Reform

Encouraged by this experience, we made substantial gains in land reform in 1971. Leasehold now embraces 236 municipalities in 20 provinces, and covers 30 per cent of all provinces, and 40 per cent of all tenanted palay farms, or approximately a total of 182,000 tenant farmers and their families. Last year also, the Land Bank financed the acquisition of 9,600 hectares benefiting some 4,463 families.

Last year, we streamlined our agrarian reform machinery with the establish­ment of the Department of Agrarian Reform. We removed some impeding defects of the land reform code and poured more money in the Land Bank. We provided for the automatic conversion of all share-tenants into leasehold. At the University of the Philippines, we established an Agrarian Reform Institute. Moreover, we helped organize direct working relationships between the universities and various fanning communities, thus establishing a vital link between our educational system and land reform. We also encouraged the active participation of various groups in land reform activities, such as private foundations, educational institutions, local governments and even religious groups. Some of these groups are now deeply involved in such projects as the Magalang Cooperative Settlement Project, the Tarlac-Pampanga Resettlement Projects and the government resettlement projects in Agusan.

Farm Unions

We also witnessed last year the increasing militancy of farm workers. Some of them in pursuit of land justice were jailed en masse in Davao, Tarlac, Negros, and Laguna. We shall continue to encourage the organization of farm workers into unions and cooperatives, in order to enable them to participate more meaningfully in land reform. Unorganized, farm workers are impotent; organized, they are a real force — perhaps, the decisive propelling force behind land reform.

Last year, Congress put more money in the Land Bank, but that is not enough. With the automatic conversion of all share-tenants into leasehold, we urgently need more funds this year, especially in the form of farm credit for the newly-emerged leaseholders. If we do not provide these funds, leasehold may turn out to be a major disappointment.

Land Consolidation

Land consolidation projects will be undertaken by the Department of Agra­rian Reform on acquired private agricultural landed estates to maximize the utilization of farm lands and to generate increase in productivity at the lowest production cost. Under this scheme, a number of irrigation projects and infra­structure facilities will be constructed.

Feasibility studies are now being undertaken by the Department of Agrarian Reform in coordination with the Presidential Economic Staff for foreign financial assistance needed in the land development and improvement of 22 settlement projects. These settlements have an aggregate area of 423,012 hectares benefiting 24,634 settler- families.

COOPERATIVES

To tap the latent creative energies of our people, especially in the rural areas, we need a mechanism to unify integrate and direct their scattered resour­ces; human, moral and material. This mechanism is the cooperative.

As we all know, the cooperative is not new to us. During the last two decades, we have been promoting it with financial and technical support in many fields; marketing, credit, farming, and others. However, the cooperative has yet to assume in our society the decisive role it has played in the develop­ment of other societies.

To stimulate the formation of cooperatives, we will, starting this year, use a part of the Rural Improvement Fund as seed capital for rural cooperatives. In this way we will separate gainful economic activities such as fisheries, cattle raising, vegetable farming, cottage industries, etc.

A review of cooperative development, on the policy, program and adminis­trative levels, is imperative if we are to profit from this approach to develop­ment. On the policy level, I propose the following:

1. Emphasis on the development of cooperatives in the rural areas where the process of institutional change and building must begin in earnest;

2. The adoption of cooperatives as the primary vehicle for agrarian reform and community development activities;

3. Giving rural cooperatives with their overhead organizations in urban centers maximum share in all government programs especially rice and corn production, procurement and distribution, handling of farm inputs like fertiliz­ers, farm chemicals and the like, distribution of consumers goods and all other suitable activities;

4. Provision of adequate credit financing, managerial, and technical assistance to rural cooperatives; and

5. Integration in one single administrative authority of all cooperatives efforts.

COMMUNITY DEVELOPMENT

We have intensified our community development program in the past 12 months. The main feature of this program is the close cooperation between the barrio people and local governments and national technical agencies.

For the FY 1971, the following were accomplished:

1. 21,566 purely self-help community development projects valued at P42,095,378 were undertaken by the people through their own initiative without any financial assistance from the national government, with the PACD providing only technical and material assistance. These projects are now serving about two million barrio folk.

2. 399 projects worth P2,862,391 were completed to support the food production program of the government.

3. 499 structures valued at P3,918,622 serving at least 500,000 inhabitants were built, including school houses, markets, multi-purpose centers, bridges and feeder roads, 254 community projects for improved health and sanitation such as artesian wells, clinics, waterworks systems and drainage systems were completed, and 21,733 information and training activities were conducted involving 4,997,511 participants at a total cost of P6,961,073 on such matters as family planning, agricultural skills, leadership, local government, planning in community development and nutrition.

We will continue to emphasize this people-government partnership for development in the ensuing years, with the total resources of the PACD con­centrated on solving major problems in the rural areas.

With 26,000 barrios in the country now under the operational coverage of capable PACD fieldsmen, community development will continue to be apriority program of the Administration.

COUNTRYSIDE DEVELOPMENT PROGRAM OF THE DBP

The Development Bank of the Philippines has launched its countryside development program which will give maximum financing assistance to eco­nomic activities in the rural areas. These include farming, cottage industries, small-scale industries and other projects that will hasten the development of the rural areas, create employment and generate higher incomes.

For this countryside development program, the DBP has set aside P300 million to be lent this calendar year. The assistance will be given primarily to small-and medium-size enterprises.

This program marks the resumption by the DBP of its traditional role as a catalyst of growth and development. In the past two years, the DBP had to curtail its operations because its resources were used to pay our foreign obliga­tions, most of them guarantees in behalf of private industries and enterprises.

At the start of 1971 these obligations stood at $410 million. Through judi­cious husbanding of its resources and by intensifying the collection of receiv­ables, the DBP succeeded in reducing this exposure by $163 million by the end of the year, meeting its bills as they fell due and thus preserving its credit stand­ing abroad. The most pressing foreign obligations have now been paid off, and the DBP is fully confident of retiring the remaining accounts as they become due.

With these projects and programs we can accelerate rural development. The main thrust of this development effort is to bring the benefits of growth and progress to the rural masses.

VI. SOCIAL CONDITIONS

HOUSING

The problem of peace and order is closely linked with the problem of housing.

We need 470,000 dwellings a year: 100,000 in the cities and 370,000 in the rural areas. This means building 10 to 12 dwellings a year per 1,000 people, but unfortunately our dwelling construction averaged only two to three units a year per 1,000 people during the last 10 years.

This statistical statement hardly projects the human significance of our housing problem. In human terms the problem means sprawling squatter areas—vast pockets of poverty, ignorance and disease which debase, pervert and stultify their inhabitants. According to recent studies, our squatter areas — in general, lack of adequate and decent housing— account for a large percentage of crimes and criminals in our country.

The GSIS

We have taken decisive steps to meet this problem. Through the GSIS, we launched last year 16 housing projects covering an area of 843 hectares. These will produce in three years a total of 35,755 urgently needed low-cost dwellings. The bulk of these dwellings is within the P12.000 to P22,000 price range, although some higher-cost units were included to provide a healthy “Social Mix” to our projects.

Calling for a total commitment of P616 million, of which P55 million have been released, these GSIS housing projects are in Rizal, Cavite, Bulacan, Laguna, Quezon City, Davao City, Pampanga, Bacolod City, Bataan, Bohol, Legaspi City, Naga City, Camarines Sur, Cebu City, and Tacloban City,

These GSIS housing units which cost relatively less as a result of mass construction are given to GSIS members without equity or down payment and are amortized in 15, 20 or 25 years at six per cent, seven per cent, or eight per cent interest per annum, respectively.

With its improved cash collection rate—a monthly increase of 45 per cent in 1971 over the previous year—we expect the GSIS to sustain at an accelerat­ing pace its housing projects. The GSIS allocates P200 million a year for housing.

The PHHC

Through the PHHC, we have also programmed the construction of 44,521 dwellings covering 2,299.74 hectares at a cost of P520.50 million. However, due to lack of funds, only 13,500 dwellings are now in various stages of construction, the rest being still in the pipeline. These are mainly low-cost dwellings for our low-income workers, in government as well as in the private sector.

The NHC

Through the National Housing Corporation, we built last year 608 bunk houses to accommodate some 2,000 families who lost their dwellings in a big fire. The NHC operates a complex plant, worth P64 million, which mass produces porous concrete planes, chip boards, and woodworks.

The SSS

The SSS housing loan program until December 31, 1967 had not brought about the widest opportunity for home owners especially among the low-income SSS members. Upon my instructions, the SSS beginning in 1968 launched a group housing program for the benefit of its low-income members. The substantial economies of scale realized in group housing as well as certain other advantages has encouraged a number of land developers to participate in the program. Participants’ housing projects are located all over the country from Marikina in the Greater Manila area to Davao City in Mindanao. In group housing alone total releases covering the period September 1968 to December 1971 reached P44,848,828 covering 2,419 completed housing units.

This year, the SSS will further intensify its housing program by giving top priority to the construction of group mass workers housing. The SSS upon my instructions has allocated the amount of P200 million for the purpose.

P1.97 Billion Required

Under our Four-Year Development Plan, we are called upon to build 117,000 housing units which will cost us P1.97 billion. This huge sum will be drawn from the following: 89.66 per cent from government financing institutions, 7.48 per cent from foreign borrowings, 1.98 per cent from PHHC corporate surplus, 0.7 per cent from taxes, and 0.18 per cent from bonds.

I now ask Congress, which has yet to allocate a single centavo for housing, to enact the necessary laws to enable us to finance our urgent, massive housing need.

LABOR

1971 was a lively year in the field of labor.

Despite unsettling factors, such as the election campaign, price shifts and the radicalizing effect of activism, the basic stability of industrial relations established under the Magna Charta of Labor during the last 18 years prevailed.

Industrial Peace

Out of 1,051 strike able cases handled by the Labor Department, only 129 exploded into actual strikes. At the year’s end, only six strike cases remained unsettled. In other words, 922 labor disputes involving 232,633 workers were settled amicably short of strikes and lockouts. Moreover, the Department helped negotiate 181 collective bargaining agreements, providing some P250 million in additional wages and other benefits to over one million workers.

Organized labor achieved new gains. Some 644 new labor unions were registered, raising the number of registered labor organizations to 6,400 all over the country. At the same time, the registration certificates of 317 unions were cancelled.

Labor Law Enforcement

Limited resources and the suspension of enforcement activities during the election campaign and the Christmas season did not deter effective enforcement of labor laws. Through regular and special enforcement campaigns, the Depart­ment in 1971 effected restitutions totaling P2.7 million to 30,400 workers, representing back wages, underpayments, overtime pay and other benefits. In addition, P24.7 million was paid to beneficiaries in 14,420 compensation cases while workers were helped to secure maternity leave benefits amounting to P138,108.

U.S. Base Workers

The Department continued to assist more than 95,000 Filipino workers in US military bases in the Philippines and over 16,000 Filipino workers in US military bases in Southeast Asia and in the Pacific area. The Department helped relocate workers displaced by the closure of Sangley Point, the de-escalation of the Vietnam War and the accelerating over-all reductions in force in US military establishments the world over.

Labor Proposals

In the year ahead, we propose to increase the budget of the Department of Labor to enable it to act effectively as the social conscience of the government.

We also propose the creation of a Workers Bank, the establishment of an Unemployment Insurance System, the merger of the Court of Industrial Rela­tions and the Court of Agrarian Relations into a nationwide system of labor courts, the resurrection of the Office of Public Defenders under the Department of Labor to provide free legal assistance to indigent workers, the creation of a Bureau of Labor Statistics in the Department of Labor, the inclusion of labor relations courses in appropriate levels of the educational system, the funding of a mass labor education program under the Department of Labor, and the enact­ment of a labor code.

Labor Representation

Our democratic revolution aims to give the common man, the most numerous sector of our nation, an effective voice in government. In keeping with this philosophy, I propose to give organized labor representation in all government-owned or controlled corporations and in the judiciary, including the Court of Industrial Relations, the Court of Agrarian Relations, the Court of Appeals and the Supreme Court. I will do this as appropriate opportunities arise starting this year.

Wages

There is a new agitation for the upward revision of the minimum wage. I think, however, that we should give the Wage Commission, which I estab­lished last year under R.S. 6129, a chance to work out a rational system of industry-wide minimum wages based on voluntary agreement of labor and management, or on an actual study of the objective factors which are normally considered in wage-fixing.

Up to now, our efforts at raising the minimum wages have been political acts, emergency measures not based on a facile, objective consideration of the realities relevant to wage determination. I think it is time we departed from this irrational, dislocating and costly practice. I have, therefore, asked the Wage Commission to step up its activities and demonstrate, as soon as possible, the workability of its functions. I understand simultaneous wage studies of various industries are now going on and I expect concrete results soon.

SOCIAL WELFARE

In 1971, our social welfare program benefited more than 12.5 million distressed persons all over the country.

Through the Department of Social Welfare, the government helped train and place 27,265 persons in gainful jobs, provided various material assistance to 28,000 families, enrolled 53,284 families in family life education, gave homes and parental care to 6,796 children, extended emergency relief and reha­bilitation services to 540.170 families, including some 340,000 Muslim and Christian refugees in Mindanao, and gave various forms of assistance to 766,000 squatter families.

This year, we intend to intensify and expand our welfare programs which have a self-help basis. We will also encourage private participation at all appro­priate levels of our total welfare endeavors. Our aim is to tide over the depressed sectors of our population while we stimulate and promote the habits of self-help, raise productivity, and encourage responsible participation in family and community affairs.

EDUCATION

A National Survey of Education

National development requires bold innovations in our educational system. Education must be transformed so that it can become an instrument for the eco­nomic and social transformation of the nation.

As the new decade opened, therefore, we reviewed thoroughly our educa­tional system with the aim of relating it firmly to national development goals.

A national survey of education conducted by the Presidential Commission to Survey Philippine Education was completed in late 1970. The Commission’s recommendations contained in its education survey report submitted to me early in 1971 have provided the basic guidelines to the reforms of education.

A Misaligned Educational System

The Commission concluded that although we have achieved universal edu­cation in the Philippines, education is not linked to development. Planning and policy-making in education are exercises in solipsism. We must now make education policies dovetail with development policies.

The Necessity to Change the Educational System

Our educational system must, therefore, undergo a change in its goals, contents, methods and structure to become relevant to a changed and changing society.

We must change the curricula and the standards of admission and instruc­tion at all levels. To meet middle-level manpower needs, we should put more stress on technical and vocational training as well as on science and techno­logical education.

Our system of higher education must be made more coherent. The public university system should be reorganized to avoid proliferation of institutions and unnecessary and expensive duplication of courses. Grants-in-aid and other incentives schemes must be developed to improve the private colleges and universities and to induce them to align their policies and efforts with the over­all development plan of the country.

At the same time, the administrative structure of the Department of Educa­tion must be improved. We must strengthen the agencies involved in educa­tional planning and research. We must have better coordination so that we can use our facilities and resources more efficiently. Lastly, we must devise a system of administrative decentralization that will make educational programs more responsive to the regional and local conditions and problems within the context of our national goals.

Major Development Projects in Education

Major development projects in a number of critical reform sectors of education have been developed by the Education Department assisted by a special education task force that I created early this year. The projects have been proposed for external financing primarily by the international bank for reconstruction and development. The projects include: a) research and development schools assigned to generate the basis for a desirable curriculum for secondary education, the level that serves the foundation for technical and  higher education and for employment; b) technical institutes, upgrading of trade schools and manpower training centers, to expand and upgrade vocational technical education and skills training; c) science education centers to train science and mathematics teachers and to upgrade the substance and methods of  science teaching at both the elementary and secondary levels; and d) agricultural colleges and agricultural vocational high schools to make agricultural education support our efforts to spur agricultural productivity.

In another direction, recognizing the major role of private education, we are considering policy measures that will enable us to allocate public funds in support of programs of private schools that directly contribute to manpower development in key areas and to improvement of educational quality.

Council on Physical Fitness

Simultaneous with our human resources development program, we should explore and develop ways of encouraging athletics and physical fitness. I will create by executive order a council on physical fitness which will conduct studies and develop projects for the promotion of athletics and physical fitness.

At the same time, we will give fresh impetus to physical education in the public and private schools. Physical Education has been sadly neglected. I am thinking of appointing within the framework of the reorganization plan an Undersecretary for Physical Education.

The implementation of reform measures in education will have deep implications and consequences for many sectors of our society. We con­template legislative measures to provide the authority and the money to carry out such reforms. We will, therefore, submit to Congress a major educational development program.

HEALTH

Both the incidences of diseases and the death rate have declined signi­ficantly, particularly among infants and mothers. However, communicable diseases continue to be a major problem.

This relative improvement in health conditions was brought about by the strengthening expansion of the basic health services, particularly through the rural health units and hospital program: the intensified activities directed towards the prevention and control of diseases through health education; the improvement of the general environmental conditions prevailing in the country;

greater concern for nutritional needs of the population; and the continuous sur­veillance over food, drugs and cosmetics.

Hospital Development

As part of our long-range hospital development program, 32 emergency and provincial hospitals were established, and facilities in existing hospitals updated and improved. The number of beds increased from 18,275 to 19,725or an increase of 1,450 beds. Operational expenditures of government hospitals likewise have increased from P49 million to P97 million.

Medical Assistance Program

The medical assistance program undertaken jointly by the Philippine Medical Association and the Department of Health established it first commu­nity health center and hospital in Talavera. Nueva Ecija. Medical assistance councils now operate in Nueva Ecija, Davao del Sur, Cebu, and Capiz.

In the next four years, the Department of Health will give emphasis to family planning, environmental sanitation, expansion of rural services, medi­cal care, control of communicable diseases, and regulation of food and drugs.

JUSTICE

We have accelerated the administration of justice especially for the masses. We have vigorously prosecuted cases involving government officials, including officials of the Rice and Corn Administration, City and Municipal Mayors, as well as officials and employees of the Department of Justice.

We have broken up the fake passport and fake visa racket against applicants for overseas employment. Similarly, we have collaborated fully with the COMELEC in the investigation and prosecution of election offenses.

House-cleaning in the Department of Justice has also been undertaken, resulting in the removal from the service of an Assistant Provincial Fiscal, sus­pension of a Provincial Fiscal and the dismissal of several division chiefs and assistant chiefs.

The Office of Agrarian Counsel last year created task force “Hukom” for the immediate disposal of pending cases in connection with the special opera­tion for the integrated development of Nueva Ecija.

In 1971, the Bureau of Prisons transferred from the New Bilibid Prison to the Penal colonies a total of 3,702 prisoners to minimize congestion and the incidence of riots.

The National Bureau of Investigation quietly but effectively performed its role particularly in the campaign against narcotics addiction.

Also in 1971, the Bureau of Immigration streamlined the procedure for the clearance of passengers which accounted for the increase in passenger traffic by 86,000 passengers over last year. While it relaxed the entry requirements for tourists, it also activated its intelligence section to monitor the activities of aliens.

The Court of Industrial Relations disposed of 207 cases as a court of appellate jurisdiction. As a court performing trial functions, it handled and terminated 1,229 cases.

The Court of Tax Appeals gave more emphasis to laying down precedents on taxation rather than on the disposition of routine cases, in line with the policy of giving preference to cases of first impression in this jurisdiction, cases which are complicated in nature, cases which involve borderline and untouched problems and cases which involved huge sums of money.

The Anti-Dummy Board doubled the number of cases recommended for prosecution and filed as many cases in court as in the last fiscal year.

On the other hand, the Court of Agrarian Relations achieved a record high in the number of cases handled and disposed exceeding that of the past year.

CONSERVATION

Reforestation

The pace of reforestation is too slow. On the side of the government, there is not enough money for wider and faster reforestation work. On the side of the loggers, I suspect that their interest in reforestation is less than wholehearted.

We will therefore increase the administrative fees on logging so that we will have a fund for reforestation. This, however, will not exempt the loggers from the obligation to reforest their concession areas.

Tree Farming

Side by side with reforestation, we will encourage tree-farming, especially the planting of fast-growing species like the Albizza Falcata and the Mindoro pine tree. We will also encourage the planting of chinchona trees so that we can add quinine to our list of export products.

Pollution

Pollution is not yet a grave problem in the Philippines; this, however, should not make us complacent.

We are fast becoming industrialized. In a number of years, pollution will become a menace unless we do something about it now.

We will set up a center for pollution control and research.

In our industrialization plans and in the evaluation and approval of industrial projects, we should require pollution control devices.

We should look into the effects of industrial and agricultural chemicals on the environment and control their use if they are found to be harmful.

Wildlife and Marine Conservation

The rate of wildlife and marine life destruction in our country is shocking. Some species of wildlife and marine life have disappeared and many on the verge of extinction. We will increase our efforts in wildlife and marine life con­servation.

In all this, we need the full cooperation of everyone. This is a program that should awaken the idealism of every Filipino because it relates ultimately to our place in the scheme of God and nature.

CULTURAL MINORITIES

1971 was, for the minorities, a year of hope in the face of many challenges.

Political wars and exploitation stalked our Muslim brothers in the South. Among other minority groups, there was increased demand for government recognition and assistance.

But we have responded actively to these demands, and even anticipated the problems. We pursued the integration of our cultural minorities into the national mainstream with greater vigor.

Land, education, health, relief and development were the primary concerns of the government, acting through the Commission on National Integration, in the hope of forging a meaningful and lasting national unity among our people and raising the quality of life of our cultural minorities.

Scholarship Program

The Commission on National Integration, notwithstanding its limited budget, supported 3,552 students in 1971 with a total appropriation of P2,800,000.

Eight pensionados were enrolled in universities abroad. Scholarships for social work were granted to deserving members. An exchange program for CNI scholars was sponsored by the Commission to enable the minorities in the north to know more about the minorities in the south, and vice-versa.

To assist the CNI pensionados, a book and library program was carried out with the assistance of the Asia Foundation and USMIP.

Settlement Program

The Commission also maintained 12 settlements in operation in 1971 with a total budget of P100,000.

The CNI as part of the National Minorities Assistance Council (NAMAC) undertook a settlement and tribe development program with emphasis on infra­structure, land ownership, health, and agricultural, economic and educational development.

Research Program

The CNI also conducted last year a research program with the aid of other agencies to secure necessary information on the minorities. This included the agricultural-economic survey of Negrito/Aeta tribes in Zambales, the summer exchange program, the CNI-Asia Foundation program for elementary schools in cultural minority areas, and the library and book program.

Legal Aid Program

The Commission on National integration assisted minorities in the solution of their legal problems through its corps of trial lawyers. The legal division should be expanded for the increased protection of the rights and freedoms of our cultural minorities.

Muslim Areas

I wish to reiterate the policy of the Administration of encouraging invest­ments in agriculture and industry below the typhoon belt.

The present conflicts in the Muslim areas which are largely the result of social and economic conditions have prompted me to create a special task force base in Mindanao, with the specific mission of seeking a better understanding of the problem engendered by those conflicts.

This is the reason most of the loans obtained from the Asian Development Bank are earmarked for Mindanao development and the principal World Bank loan is intended for the completion of the Cotabato-Digos road.

It shall be my policy to increase the number of Muslims in the Armed Forces, both among the officers and the enlisted personnel. There shall also be greater participation of the Muslims in government.

The policy of government has been to integrate all cultural minorities. However, there has been a modification of this policy with respect to the tribes that have wanted to maintain the purity of their culture. Thus, it has been necessary to establish special settlements for them. It may be necessary to adopt such a policy for some parts of me Muslim provinces.

I have in mind those of our Muslim brothers who, for various reasons, including that of refusal to be subjugated by alien forces of conquest, cannot be easily integrated into the rest of Philippine society. These usually have less capability to adjust themselves to the national life. Yet, in the effort to integrate them, many Muslims have been deprived of their patrimony, including their ancestral lands. We must now redress this injustice committed them.

We congratulate the Muslim leaders for taking the initiative themselves to join hands with one another notwithstanding political differences, and for cooperating with government in making settlement efforts possible in critical areas,

The same thing is true of other cultural minorities.

While I am President, I pledge that the Muslims will not be treated as second-class citizens in their own country but shall instead be given the priority in the development of Mindanao, Sulu and Palawan.

I call upon Muslim scholars to participate actively in the study and solution of problems in the Muslim areas.

GENERAL SERVICES

We have taken steps to improve the government’s auxiliary service program to make it more responsive to our needs and make it conform to our Four-Year Development Program.

We are continuously looking for approaches to achieve a more efficient, prudent, economical and responsive auxiliary-service program in the govern­ment.

Along this line, we have streamlined our supply procurement processes and have placed emphasis on the procurement of locally made articles and on the provision of low-cost textbooks.

We have also commenced the building program in the 120-hectare national government center site in Quezon City to achieve the goal of maximum auxiliary-service or “house-keeping efficiency” at least cost.

Similarly, the Department of General Services has stepped up the replace­ment of obsolete printing equipment with more efficient models to cope with the yearly rising printing needs of the government.

To preserve important and original documents for history, the DGS has intensified the archival preservation program through micro-filming, photo­graphy, lamination and other duplicating processes.

REFORMS IN THE CIVIL SERVICE

The government bureaucracy has become so vast and unwieldy that it is no longer an effective instrument of development. Furthermore, the government service has become graft-ridden and government employees have lost sight of the larger goals of public service.

We should begin a massive retraining program for government employees. The purpose of this retraining is to make government employees more efficient, more perceptive, and more knowledgeable of the development goals of the government.

We should also move more swiftly against erring or corrupt government employees. We should make the investigation and hearing of administrative and anti-graft cases expeditious.

It might even be necessary to create special courts to hear these civil service cases of which we have a huge backlog. One reason for the lax discipline in the civil service is the length of time it takes to resolve an administrative or anti-graft case.

Reforms in the civil service are long overdue. We should have them soon, or our civil service will continue to be a drag on our development efforts.

POPULATION

Population control continues to be an important program of the Administra­tion because of its deep implications for our development goals. I am glad to note that we have made some gains in population control. If the present trend continues, we shall be able, within this decade, to hold in check and to stabilize our population.

MEDICARE

The Philippine Medical Care Commission, which I set up August last year, now, services 3.5 million SSS and 650,000 GSIS members. By April this year, dispensation of benefits will start. We have also begun laying the groundwork for the extension of the Medicare program to all our people.

THE ELECTORAL PROCESS

Once again the last election put the life of our democracy to a test.

The people made their will felt through the polls. And we all abided.

But it was not by accident that the last elections were free, clean and orderly. We took pains to make them so.

With the cooperation of Congress, we worked out electoral reforms which made election frauds difficult. At the same time, we fully mobilized the govern­ment, especially the Armed Forces, to enforce the electoral law. This involved the commitment of 36,000 personnel, 700 vehicles, 12 aircraft and 14 vessels, all of the Armed Forces, for the purpose of insuring peaceful and orderly elections.

No matter which political party or candidates won, the last elections were a vindication of our unfailing faith in democracy.

VII. LEGISLATIVE PROGRAM

Congress this year is faced with the challenge and the opportunity of legislating urgent solutions to a wide spectrum of social and economic problems.

May I call upon you, therefore, to give topmost priority to legislation that will accelerate our social and economic development.

I ask you to vote the necessary funds according to the following priorities already agreed upon by the leaders of the Executive Branch and of Congress in pre-session conferences;

First, for peace and order, principally reforms in the police system, a vigorous campaign against traffic in drugs, and the creation of additional circuit criminal courts;

We must radically reorganize the local police organizations. Either the national government which is held responsible for their failures should be given commensurate powers or the local governments and officials be held liable and punishable for non-performance.

At present, governors who are held responsible for peace and order have no police organizations at their disposal.

The Police Act must be updated and streamlined.

Second, support for the fight against inflation, including incentives for domestic rice production;

Third, a development fund which shall be a special account in the general fund to be used exclusively for special development projects;

Fourth, the reorganization bill which will streamline our government at national, regional and provincial levels to cope with the rising demands of our people;

Fifth, reforms in education to make our school system more responsive to the requirements of national development;

Sixth, rural employment promotion, including manpower training and development, the stimulation of cottage industries, and short-term agricultural activities;

Seventh, rural electrification;

Eighth, agrarian reform;

Ninth, housing for the workers and their families;

Tenth, cooperatives in the rural areas;

Eleventh, postal reforms to modernize and reorganize the postal system of the country. Up to now no funds have been set aside to liquidate the debts of the Post Office amounting to about P24 million.

And twelfth, a systematic retirement law for members of the Armed Forces of the Philippines.

In addition to these projects which require funding, I should like to impress on Congress the importance of a number of bills.

I am reiterating the passage of a law creating a small-enterprise board to encourage the healthy growth of medium- and small-scale industries.

I am recommending the passage of legislation to enlarge the capitalization and strengthen the charier of the Philippine National Bank.

I am asking for the passage of the new oil exploration bill to encourage the entry of high-risk foreign capital and to accelerate the discovery of mineral fuels in our country.

We must study an amendment to the mining laws which will prevent over­lapping claims and which shall end all conflicts which have hindered the development of rich mining claims by authorizing the prior locator to administer and operate the mining claim, subject to the filing of a bond or the deposit of certain portions of the income with the Bureau of Mines or the Department of Agriculture and Natural Resources.

I reiterate the proposal to increase the tax on idle lands, and to confiscate or cancel titles to former public lands acquired by private individuals but which have not been cultivated productively for a long time.

We must now set aside large zones of forest lands which cannot be entered by farmers, settlers, loggers, cattlemen and industrialists. At the same lime, we must determine which parts of our country shall now be opened to agricultural activity; otherwise all forests will continue to be despoiled.

We must now provide all the means for the establishment of at least one copper smelter inasmuch as the additional production of our copper mines have been refused by our traditional smelters or are being penalized with various changes, thus raising the cost of Philippine copper.

We must now provide incentives for the moribund abaca industry and develop the pulp industry derived from abaca fiber.

Congress must now study the strengthening of the Mindanao Development Authority. I urge Congress to provide sources of funds for this purpose specifically and for the development of the Mindanao, Sulu, Palawan area which is below the typhoon belt and therefore less prone to weather calamities.

I ask Congress to provide legislation which will prevent the further migra­tion of Christian settlers in certain areas of Mindanao which shall be set aside for Muslims and other cultural minorities.

To minimize the destructive effects of recurrent floods, a long-range in­tegrated and national flood control program has been prepared and submitted to Congress.

I reiterate the need for the immediate passage of the bills on flood control now pending in Congress.

I also ask Congress to enact the port works bill to improve and develop our major ports.

I propose the establishment of a special irrigation fund for the construction operation and maintenance of irrigation systems to tap our land resources for increased productivity. I also propose an increase in the capitalization of the National Irrigation Administration.

I urge Congress to consider a proposal to create a National Telecommuni­cations Commission to formulate and administer the administration’s policies on telecommunication services.

It is time that the Highway Special Act of 1953 was amended to suit present needs and to provide a rational allocation and sharing of the highway special fund based on technical requirements.

In our drive against criminality, we will need penal laws, both substantive and remedial, which are attuned to the spirit of the time.

I urge Congress to approve the proposed Code of Crimes, now pending before this august body. It radically changes the concept of crime and punish­ment or penology.

I propose that Congress create in the Department of Justice or Labor an institution that will give free legal aid to indigents.

I ask that Congress and the Executive work out amendments to the Civil Service Law that will remove the impediments to the prosecution and dismissal of grafters and incompetents in the government service, many of whom find a ready refuge in the present Civil Service.

Our policy is to respond promptly and vigorously whenever a charge of graft and corruption is brought against any official or employee of the govern­ment. The record has been itemized and often reiterated. More cases of graft have been filed during the past six years against erring officials and employees than during previous administrations.

There are, however, structural defects in the disciplinary machinery of the government which will require a serious review of the Civil Service Law, originally meant to defend merit, but which serves just as well as a refuge of grafters in the government. Recently, five employees in the Bureau of Treasury were found guilty of embezzlement. They were dismissed. But they have been reinstated because of the laxity of the Civil Service. I propose that we work out reforms that would restore to the administrators of government the authority to decide administrative cases, compatible with the responsibility that they are called upon to exercise.

We must correct the laws that shield the crooks and the grafters. Incident­ally, the Office of the President has no direct control over the Civil Service Commission. Perhaps the Constitutional Convention may take cognizance of this problem in their work, but it is our immediate task to change those procedures and practices that make a mockery of public office by giving crooks and incompetents in government an official refuge.

I propose that a period of amnesty for illegal holders of firearms be estab­lished during which they may report and register their firearms, and that after the expiration of the period of amnesty there shall commence a compulsory process to compel seizure, taking into account civil rights.

Congress should also update the law on drug addiction. Both the Depart­ment of Justice and the Department of Health should be given funds and powers for this special crusade.

I should like to make a special plea for the reorganization plan. Under Republic Act No. 6175, the period for the submission by the President of an integrated plan to reorganize the executive branch was extended to not later than 40 calendar days after the opening of the third regular session. This was intended to give time for members of Congress to react to the plan which, under the law, they must either accept or reject in toto. The Reorganization Commis­sion has made revisions and refinements in the plan after taking into account reactions received from members of both Houses of Congress and from heads of the various executive departments.

In the past year the technical staff of the Reorganization Commission also participated in the performance audit of 11 executive departments and nine other major agencies of the government. In the improvement of the plan, due account was taken of the findings and recommendations embodied in the per­formance audit reports, as well as relevant provisions of the recent acts of Congress. Moreover, the technical staff made further in-depth studies to identify and rectify possible deficiencies in the initial draft of the plan. The pattern of administrative regionalization throughout the country was re-examined and refined.

I am certain that the reorganization plan will provide the government with a more rational, economical, and effective machinery for public administration, and thus enable us to plan and implement more effectively our programs of socio-economic development, security and welfare, to say nothing of the requirements of general government.

The implementation of the reorganization plan, if approved, will lead to immediate improvements in administrative structure and operations which need not await the new Constitution. For the administrative and organizational improvements proposed in the plan will remain relevant and applicable, whatever system of government or other fundamental changes the Constitu­tional Convention may eventually adopt.

And finally, I ask for the cooperation of Congress in enacting the laws that will make these programs come alive. You and I have been partners for six years in the exciting but turbulent work of nation-building. We have, you and I, charted a sure and steady course towards a fuller life for our people. Let us keep that course, that direction, and when finally the din of partnership has died down and the silence of history has enveloped our deeds, we hope to have the satisfaction of looking back on this period and whispering to ourselves that with courage and resolution we did not fail our country.

VIII. CONSTITUTIONAL CONVENTION

The Constitutional Convention has set itself, with admirable optimism, the middle of this year as the target date to complete its work. It is my hope that the self-imposed deadline will be met. For the Constitutional Convention has raised great hopes and expectations that its members are now obliged to match with their deeds.

The Convention will determine not only the form of government but also the nature of the society that will emerge in the country. The great social questions — the institution of property, the social and economic relationships based on land, the structure of ownership and control of private and public resources: these are the profound questions that fall to no legislature in ordinary course to decide, but only to a constituent assembly with a mandate to help shape a country’s every foundations.

No Filipino anxious for the welfare of his country, therefore, will begrudge the Constitutional Convention the full measure of best wishes in its historic task.

IX. PROSPECTS FOR 1971

In 1972 it is expected that there will be more funds for economic activity, for industrialists, for entrepreneurs, and for both agriculture and industry.

For instance, for infrastructure alone in the Four-Year Development Plan, we will spend about P8 billion in four years out of the total of P34 billion required by the Plan. We intend to encourage the banks to improve their facilities to finance the requirements of industry by non-inflationary means. At the same time, the source of funding will not appreciably increase the money supply and thus further increase in the pressures of inflation on the economy. Thus, while for the coming year we intend to spend P1.4 billion for infrastructure, most of the expenditures will come from tax collections, savings and loans.

With the expected amendment of the charter of the Philippine National Bank, as agreed upon with the leaders of Congress, the PNB will be in a better position to finance economic activities. The DBP by the beginning of the fiscal year will be in a position to lend out fresh capital in larger amounts for large and medium-scale ventures. The Government Service Insurance System and the Social Security System are engaged in financing various enterprises, most important of which is housing, for which P400 million will be spent. We have also allocated P600 million out of available funds for the National Electrifica­tion Administration.

These are some of the hopeful trends that reinforce the prospects for a brighter economic year ahead of us in 1972.

X.    CONCLUSION

There is a law of development that states: An organism grows according to the demands made upon it. Great demands can build great strength—in responsive men, or peoples.

Faced with awesome demands upon our nation’s vigor and endurance in the past two years, a lesser people might have faltered or even gone under. We did not flinch, we confronted these events. This bold confrontation and mastery of crisis has bred great strength in the Filipino people. I believe that we have emerged from the turmoil and the tensions of our society stronger in conviction and faith in the necessity of human liberty.

Thus, we see initial uncertainty and difference giving way to a strong and solid confidence in the ability of freedom to contend and prevail in any arena. Democracy is not a synonym for political naiveté. Democracy, in the exercise of its own strategic defensive, may program its own permissiveness, in accordance with constitutional processes, to meet the threats to its own existence, in short to defend its own institutions against wanton attacks.

But the main challenge to democracy, in my belief, is not the threat of an alienated minority. We can control this threat. The real test lies in its capacity to perform according to its own standards, according to the hopes that it raises, the dreams that it excites. For democracy must match its own promise in our midst, otherwise it will be judged to have failed, not because it is inadequate but because it has never been tried.

We must make democracy work for our people—in terms of equality and fraternity, but also a wider sharing of opportunities, a more energetic commit­ment to justice, with genuine and unmistakable priorities for the welfare and well-being of the very poor.

We must see to it that economic growth is translated into social progress. Thus may we achieve the ultimate purpose of all economic undertakings, name­ly, the dignity of the human person. This is what I have called a Democratic Revolution.

I ask that Congress write the laws that I have proposed, to give meaning and substance to such a revolution.

Experience warns us that the people’s welfare will here contend against a foe so invisible and yet so real, always corrosive, often all-pervading. I refer to the great tempter that will try to deflect you from your urgent legislative tasks, the spirit of faction, the spectre of partisanship. We must scorn and subjugate this tempter which lurks within us.

We must stand together as one nation because ranged against us are forces sworn to disrupt our cohesion and convert brothers into enemies. No one can put off this menace, nor can we beg for time before our threatened enslavement.

In a world chronically torn by crisis and convulsed with conflict, we shall continue to put our trust in human liberty and dignity: we shall continue to seek our fullest growth in freedom; nor shall we stop to ask the price or count the cost in defending our birthright.

Fortified by the trials we have undergone, the ordeals we have passed, our people can no longer be daunted by crisis in the days ahead. For they will be strong in the knowledge that each hardship surmounted and every crisis mastered can only strengthen the fiber and temper the soul of the nation.

Together we must, in unity, command our present and our future as a nation by converting dangers into opportunities, crisis into strength and today’s reverses into tomorrow’s momentum for advance. The alternative is for us all—the leadership of today regardless of partisan differences—to be judged as having defaulted our last clear chance to keep our country united—and free.

Ferdinand E. Marcos