Two years ago I came before you for the first time to report on the state of the nation and I gave you a faithful picture of a nation bogged in crisis and a people gripped by fear of the future. Barely a year ago I came again before you to report that the crisis had been surmounted and that the people had a new lease on hope and faith. Today, as I pass the halfway mark of my term of office, lam glad to report that in the year just past we have sustained the momentum of our advance; we have moved forward at an accelerated and accelerating rate.
Many grave problems remain and most of our people’s needs remain acute. But today we face them with the confidence of self-made success; we have lost our fear of the future; problems have become challenges and goals to action.
In terms of history two years is just a fleeting instant in the life of a nation. What could be done in two years, set against the centuries-old hard crust of problems—the mass poverty, ignorance and disease that make up the main heritage of a former subject people?
But we believed in our people. We believed that in two years a resolute people could do something meaningful for themselves—perhaps meaningful enough to alter their destiny. We set out two years ago to accomplish some basic tasks which popular belief held to be impossible. The results of our common labors hearten us. For they show that the impossible can be attained and that in some respects, it has in fact been attained.
Some of these achievements are in fact historic breakthroughs for our people in their march to a fuller life. Others are much less spectacular, but in the long run just as important. Consider the following:
—We have succeeded in solving our chronic food shortage. The country has attained self-sufficiency in rice and corn one year ahead of the deadline set for it by our Administration. This fulfills a historic dream of several generations of Filipinos who equated the solution of the rice problem with the nation’s self-esteem.
—We have built up the physical underpinnings of our economic development faster and more thoroughly than any other Administration before us. The government’s output of roads, bridges, irrigation dams, airports, portworks and other infrastructure projects exceeded by several hundred per cent the total accomplishments of preceding Administrations.
—We have attained the growth objective set in our four-year development program. In agriculture, the rate of growth in the past two years averaged 6 per cent, which exceeds the target of 4 per cent in the program. In manufacturing, the target increase was 7.1 per cent; the actual increase has been placed at 8.7 per cent. We have increased per capita income. In terms of real national income the preliminary estimates show an increase of 5.4 per cent against the goal of only 5 per cent.
Investments in 1967, according to preliminary figures of the NEC, amounted to P5.375 billion compared to P4.562 billion in 1966, showing a growth rate of 17.8 per cent. An independent, non-governmental source, the Economic Development Foundation, places the figure at P5.614 billion, or an increase of 23 per cent.
Paid-in capital of newly registered corporations for the period January 10 November, 1967, totalled P385 million compared to P358 million in 1966 and P294 million in 1965. Increased capitalization of existing corporations amounted to P1,108 million in 1967 compared to P824 million in 1966.
—We have boosted rural employment by about 10 per cent and community development self-projects by 68 per cent over the preceding years.
—We have coped successfully with the runaway problem of housing for the nation’s school children in the face of a population explosion. In less than two years’ time, the production of school buildings dwarfed me combined total of three preceding Administrations during the past dozen years.
—We have increased the collection of taxes by 21 per cent over the previous years and in the second semester of Fiscal Year 1966-1967 customs collection increased by about 50 per cent over the comparable period of the preceding year.
—We have successfully carried out land reform for the first time on a meaningful scale, encompassing the second district of Pampanga. With our assistance, hundreds of leasehold agreements were initialed throughout Central Luzon. We have demonstrated that land reform is attainable under a sincere and determined government.
—Confronted with the threat of a foreign-inspired rebellion in Central Luzon, we honestly sought to turn this grave danger into a great opportunity for the development of this pivotal region. We have spurned counsel to further fratricide; we welcome the reconciliation of brothers; we eschew civil strife unless forced upon us by lawless and unscrupulous elements.
—The problem of smuggling which used to overshadow most other problems in our national life has been placed fully under control. Direct smuggling has been wiped out. Technical smuggling is still being combatted. But the dramatic rise in revenue collections and in textile production proves that this form of smuggling, which is more difficult to control, is being sharply curtailed.
—The conservation of our natural resources, especially forestry and fisheries, is now a major program of our government. It requires strict compliance with the laws on reforestation and discourages marginal and therefore wasteful logging. This solicitude of the government will extend to the entire patrimony of the nation.
—We have dutifully ploughed back our earnings as a nation to the tasks of development. We have become a more disciplined and far-sighted nation. We devote 60 per cent of our budget to social and economic development. A more dramatic index of our new orientation towards production rather than consumption is this fact: up to 84 per cent of our imports in the previous year consisted of capital goods, reversing the traditional proportion of non-essential to essential importations.
Between January 1966 and September, 1967, government financial institutions provided long-term financial assistance to private enterprise in the amount of P4.4 billion in loans, equity investments, and guarantees. Of this amount, about 40 per cent went into manufacturing and about P1 billion consisted of assistance to rehabilitate industries that became distressed during the previous Administration.
—We have developed a more creative role for the Armed Forces of the Philippines in the task of economic and social development. Thus our defense effort now serves also our peaceful development goals which, in the long run, constitute the true ramparts of our security as a democratic society.
—We have introduced administrative innovations and reforms which have raised the level of public service significantly, especially in the fields of rice production, land reform, infrastructure, and manpower development — through systematic coordination of related programs. This has filled up a gigantic gap in public administration which had made it impossible for government-wide programs to succeed in the past.
—We have achieved the first stages of effective local self-government through decentralization. In the past year the local governments increased significantly their share in internal revenue taxes and were relieved of financial burdens in the upkeep of agricultural extension workers and rural health units.
—We have laid the basis for industrial democracy through the creation of a private securities market and the increasing participation of the public in the financing of economic development. The goat ofP200 million in DBP progress bonds has been oversubscribed.
—The general peace and order has been maintained and criminality has been reduced in most areas, except in the metropolitan areas where the national agencies do not exercise jurisdiction.
—The price of rice has been stabilized though the last two typhoons last year disturbed the prices of other components such as vegetables. The problem now is how to keep the price of rice profitable for the farmers.
—For the first time our people have witnessed the punishment of Fiscals and Judges, up to the level of Judges of the Court of First Instance, for purported abuse of their offices. Innovations have been introduced to facilitate justice, changes that expedite preliminary investigations, eliminate red tape, and deny bail to those who pose a grave danger to society and seek the immediate prosecution and punishment of feared and influential criminals.
—The National Police Commission has been organized and strengthened. The rules and regulations for all police forces have been finalized. All major services of the Armed Forces have been utilized in the peace and order drive, resulting in the immediate breakup of pirate gangs in the Visayas and Mindanao. The government today is coping more effectively with the menace from roving Huk bands, smuggling syndicates, carnapping groups, kidnapping, rape and robbery hoodlums and teenage gangs.
—Our foreign exchange reserves more than doubled in the past two years, from almost $100 million in 1965 to $237 million as of January 1968.
—After twenty years of muddling through and groping for a policy on investment, we have now an Investment Act. A Board of Investments is now preparing the rules and regulations and the priority areas for investment. This should clear up unnecessary blocks to foreign and domestic investments in our country.
—Education has become more than ever a reality for the poor. About 8,100 new school buildings have been constructed and erected. Scholarship funds and student loans funds for the poor have been extended.
—With the substantial increase in rural health units and free medicine for the needy, medical facilities have been extended to the indigent population all over the country.
—We initiated the improved conduct of political campaigns by reducing the period for campaigning and by setting up a workable machinery for the curtailment of election expenditures.
—We have maintained our military security, dealt a firm hand against subversion, and increased the atmosphere of friendship and security with our common neighbors.
—More than P520 million have been channeled into the rural areas in 1967 as a result of the increase in rice production and the subsidy to rice and corn. This has promoted a new demand among fanners for the acquisition of modem farming equipment and household goods. Thus, the increased income of the fanners becomes mass purchasing power for the goods of industry and stimulates further economic growth.
—Subsuming all these achievements is a new spirit and a new outlook discernible in the Filipino people—the will to confront the tasks of development and of nation-building purposively and energetically.
These are achievements not of a particular government administration but of the Filipino people as a whole. All these results, realized with no increase in material resources, tell a story about us—a success story that exhilarates by its very novelty and rarity in our national experience. We are no longer what we always believed we were—a nation of incompetents and failures. We have become a nation of achievers. We have begun to undergo the experience of competence which forms the basis of genuine self-confidence for men and nations.
There is a new birth of confidence in ourselves as Filipinos. This is in itself a source of great creative power. It reminds us of our distinguished heritage as the nation that pioneered the libertarian movement in Asia and founded the first democratic republic in our part of the world.
Some Goals for 1968. This year we shall be called upon to initiate bold steps to support the pace of development that we have begun, to maintain the momentum of our social and economic advance, and to achieve within the next two years a meaningful degree of well-being among our people.
The experience of nations shows that the cost of development must be borne mainly by the people themselves. Increasingly, the burden of development will have to be shared by citizens in proportion to their economic means. It is in this spirit that the Administration plans to propose to the Congress this years sweeping reform in our traditional and inadequate tax structure. To act on this will requires an atmosphere of courage and civic spirit and the ability to face the unpleasant today in return for the just rewards of tomorrow.
It seems to me that this will put to a test the capacity for courage and statesmanship of the distinguished numbers of Congress.
We appeal to you for your support so that the means required to sustain the pace of our efforts for national development can be made available to the government.
I think we can now point to a well-defined consensus as to certain priorities that will demand our undivided attention and concern in the year just beginning.
A national consensus certainly stands behind the fuller implementation of the Land Reform, especially in Central Luzon.
A massive housing program for low-income groups will be launched under a coordinated leadership with various agencies of the government taking part. An energetic thrust in the field of manpower training will be carried out, to upgrade our labor skills and meet the growing needs of business and industry for technicians and skilled hands. We shall engage in a vigorous campaign for the promotion of Philippine export products to realize an increased amount of foreign exchange needed to provide the import requirements of our growing economy.
We shall concentrate great energies on the problem of peace and order. Local governments will be asked to play a more active role.
We shall press vigorously the existing efforts to assure our food self-sufficiency on a sustained basis, to meet the crisis posed by the lack of school-houses for our children, to conserve our natural resources, and to upgrade our human resources through adequate educational facilities.
Success of the Economic Program. As we look back over the last two years, we can say that, in general, we have good reasons to be pleased; and our satisfaction is heightened by the fact that, on the most important occasion so far given them to make their opinions felt, the great majority of our countrymen have shown that they agree with our estimate. Halfway through the Administration, and almost halfway through its economic program, both the progress and the prospects of the country are encouraging. Many serious problems still confront us; but some of the most critical ones have been handled with a success that has surpassed even our early expectations. A good start has been made toward solving the others.
The Administration addressed itself upon taking office to the three roost serious requirements:
1. Attaining self-sufficiency in food production;
2. Providing the necessary infrastructure to support our industrial program and serve the growing population; and
3. Assuring the country of large and steadily growing foreign exchange earnings, under the present particularly difficult conditions.
A necessary condition to securing these was the solution of the peace and order problem.
These problems had to be solved to attain the basic objective of the economic program, which was to increase real income per head by about 2.5 per cent annually. This meant that gross national product had to increase at the average of 6.1 per cent annually over the four years of the plan: the target growth rates to increase progressively from 5.8 per cent in the first year to 6.3 per cent in the fourth year.
In the attainment of these targets, large amounts of both investible resources and foreign exchange were expected to be needed; and foreign exchange was thought harder to obtain. Domestic savings were expected to fall short of investment requirements by a total of P2.4 billion over the four years of the program; but the shortage of foreign exchange earnings as compared to import requirements was projected at P3.3 billion. A high priority was therefore attached to the expansion and diversification of our exports.
Progress. The end of last year was also the end of the first year and a half of the Four-Year Plan, and a partial comparison is now available of targets and accomplishments for fiscal year 1967. In most sectors, achievements have surpassed expectations. The target growth rates for the first year of the program were 5.0 per cent for real national income and 5.8 per cent for real gross national product. A rough comparison may be made with actual growth rates obtained during the last calendar year. According to preliminary estimates, these were 5.4 per cent for real national income and 5.6 per cent for real gross national product: the first figure well over the target, and the second just under it.
The target growth rate for agriculture was 4.0 per cent for the four years of the plan. Over the last two years, our agricultural production index has been growing at almost 6 per cent annually. The increase in real agricultural value added was 5.1 per cent during the last year. Target growth rates were also exceeded in the transportation and commerce sectors and just about matched in the service sector. The manufacturing sector has responded vigorously to massive government support. I shall dwell later on the extent of this response.
Especially encouraging was the extremely high growth rate in agriculture over these two years, almost one and a half against the target rate that had seemed ambitious by the standards of the past. It is an indication that, well ahead of schedule, we have made a major breakthrough in food production. The National Economic Council has certified that we will have a substantial over-supply of rice at the end of the current crop year.
Industry. When this Administration took office in 1966, our manufacturing sector was in a state of deterioration. Many of our factories had sputtered to a stop or had substantially reduced their operations, laying off thousands of workers and leaving idle a considerable portion of our industrial capacity.
Recognizing the importance of industrial development to our country’s economic growth, we immediately instituted measures to relieve the manufacturing sector.
Thus, we harnessed all government agencies to an unrelenting drive against smuggling. Tariffs on imports were strictly administered to protect local products; anti-dumping measures were intensified. On the positive side, our domestic industries were encouraged to step up operations, to expand and to diversify according to the demands of the local and foreign markets. Infrastructure projects were implemented to aid industrial undertakings. Capital investments were stimulated in both domestic and foreign sectors through the issuance of an Administrative Order to guide investments, the approval of an amendment to the Corporation Law to allow broader investments in mining ventures, and the enactment of an Investment Incentives Act designed to induce the rapid growth of industries.
The most tangible results of government assistance to industry in the past year were in financing. To alleviate the crisis of manufacturing and mining enterprises, the Development Bank of the Philippines accelerated the industrial refinancing program which the Administration launched in its first year. By November 1967 a total of P1,073 million had been channeled to distressed industrial enterprises under the program.
In addition, the Administration geared the lending operations of DBF, GSIS, SSS and PNB to the need to bolster the pace of industrialization. By the end of September last year, these financial institutions had extended accommodations totalling four and a half billion pesos. Nearly 40 per cent of this figure, more than PI.7 billion, was coursed to mining and manufacturing enterprises.
The beneficial effects of this financial assistance and of these measures instituted to curb smuggling and protect the local products, can be readily seen in the upsurge of activity in our industrial sector. Production for the second quarter of last year, the latest available figure, exceeded the comparable 1966 level by 8.7 per cent. Formerly distressed industries have come up with definite signs of good health, particularly the textile industry which was floundering and hence required sizeable aid from the government. Other essential industries also showed significant improvement. The output of plywood rose by 14 per cent in 1967; veneer by 38 per cent; cement by 28 per cent; and tire manufacturing by 20 per cent.
In general, mining and manufacturing in 1967 made very favorable improvements over 1966, and even more from earlier years. Similarly, and significantly, electric power consumption rose by about 15 per cent from the level in 1966.
The gratifying trends in the operations of our existing industries have carried over to the business atmosphere. Our private sector—our entrepreneurs, investors and industrialists have shown a new faith in the future of Philippine industry. Some 2,112 new corporations were registered in 1967, an increase over the figure for 1966 and exceeding the registrations in 1965 by over 40 per cent. The subscribed capital stock of these corporations combined reached over P400 million, representing a tremendous amount of fresh capital pumped into Philippine industry. Out of these registrations, some 483 new companies with over P150 million in subscribed capital were in mining and manufacturing.
As to the actual implementation of industrial projects, we identified more than 40 major ventures in mining and manufacturing which started operations during the past two years of this Administration. The essential products which these projects are now adding to our industrial strength include great volumes of refractory chromite, magnetite, tiles, cement, plywood and veneer, resins, ammonium sulphate and liquid ammonia, carbon black, synthetic fabrics and petroleum products. A host of other large-sized plants are currently in the process of construction or expansion. Some will supplement existing production capacities, while others will introduce new product lines for the domestic market and for our export trade. The new capacities will include among others, steel products, copper ore and copper concentrates, pulp and paper, and plasticizers.
We have also reached the final stages of negotiations for the exploitation of our valuable nickel deposits in Mindanao, which offer the prospects of a huge new source of foreign exchange income for our economy from the export of nickel or ferro-nickel, mild steel billets and cobalt.
Financing for Development. We have succeeded in securing substantial financing abroad for our economic development projects. The support we helped secure for shipping has already been mentioned. Also, during the calendar year 1967, foreign funds amounting to P12.5 million were secured from the World Bank for the construction of the Bataan Thermal Plant in Limay and the Maria Cristina Hydroelectric Plant Unit 4 in Iligan City. These power projects, when completed generate 75.000KW from the Bataan Thermal Plant and an additional 50,000 KW from the Maria Cristina Unit 4.
Loan agreements with the AID were similarly approved during the year. Irrigation received a $4.7 million loan to finance the acquisition of equipment needed for irrigation construction and rehabilitation work. Also, a $2.0 million loan for undertaking feasibility studies was granted.
Assistance has likewise been granted to our export crops, of which the case of abaca may be cited. The production of abaca dipped by 4.9 per cent from 135.3 thousand metric tons in crop year 1966 to 128.7 thousand metric tons in crop year 1967. To alleviate the plight of this industry, the government extended financial help by releasing P2.5 million to the Abaca Corporation of the Philippines.
Prices of abaca were also threatened when the U.S. announced its decision to dispose of its abaca stockpile. The Philippine government intervened in behalf of this industry and secured an agreement for a more orderly schedule of disposal.