Carlos P. Garcia's Fourth State of the Nation Address

by Carlos P. Garcia

Mr. Senate President, Mr. Speaker, Members of the Congress:

It is with deep satisfaction and warranted optimism that I now open the fourth regular session of this Congress. For during the year 1960 Divine Providence has made it possible for us as a nation to attain new summits in our unending Odyssey in the highway of progress and development. Our success has deepened our faith and heightened our hope that the Philippine Republic will live to attain its sublime national Destiny.

As we lurch forward into the future, we derive new strength and fresh inspiration by surveying the horizon we have traversed during the year under review. We see that we have reached new heights of prosperity and development as a result of our momentous decision to enact into legislative mandates the fiscal stabilization measures which we implemented vigorously.

Thus under the stewardship of the Nacionalista administration:

(1) The Philippines chalked up a new high in dollar reserve standing at $205 million during the last quarter of 1960 after paying our short term foreign obligations in the amount of $84 million.

(2) Our gross national product has registered a spectacular increase by P600 million in 1960 and stands at an estimated level of P10.8 billion as against P10.2 billion in 1959.

(3) Our favorable balance of payments which we lost during and after the war, and which we regained only beginning 1959, has continue to rise in 1960 in the amount of around, $30 million, and the reserve, as of December 31, 1960, stands at $192 million as against $162 million in 1959;

(4) We continue to have a balanced budget and even a surplus in the general funds,

(5) Our peso both here and abroad is steadily gaining in strength, rising from P4.10 to the dollar in 1959 to P3.20 to the dollar beginning December of 1960;

(6) Because of the success of the stabilization program which went even beyond our most sanguine expectation to the chagrin and discomfiture of the prophets of doom, we were able to start in April 1960 the Administration’s four-year decontrol program. Even before the year ended, we began the second stage of decontrol and all indications are that we will complete in two years the four-year decontrol program and, God willing, by 1962 our national economy shall be completely free;

(7) In the moral aspect of our national life, I am happy to report that our campaign against graft and corruption has achieved an unprecedented record. In the year reviewed we had in round figures 22,000 administrative cases and decided 14,000 cases with 9,500 convictions and 4,000 exonerations. The rest are still pending. A total of 740 criminal cases were filed.

In general, it can be said without fear of successful contradiction that the year 1960 has been a year of signal achievements in many fields, specially in economics; it marked perceivable advances in our international prestige, and the sun and stars of our flag are shining brighter.

I. ECONOMIC PROGRESS AND DEVELOPMENT

A. Improvement in the National Economy

The great improvement in our fiscal position is a high point of the year just past. Easily its most encouraging aspect is a budgetary surplus in the general fund.

Customs and internal revenue collection had a combined increase of P151.7 million in the fiscal year ending June 30, 1960. To this increase, Customs contributed P101.9 million and Internal Revenue, P49.8 million.

From July 1 to December 31, 1960, actual collections of the two agencies totaled P676.3 million, representing an increase of P55.8 million over those of the corresponding period last year. This is an indication that collections for the current fiscal year will surpass that of 1960.

These marked increases in revenue collections were achieved as result of a determined campaign against graft and corruption and of reforms in the Bureau of Internal Revenue and in the Bureau of Customs.

Despite an increase of about 13 per cent in our imports as against only a 10 per cent increase in our exports, we continued to improve the favorable balance-of-payments position we achieved in 1959 for the first time in decades. This encouraging trend has in turn raised our international reserve to a new high of $205 million during the last quarter of 1960.

The recovery of the economy has been made possible mainly by the successful implementation of the stabilization program, the principal features of which were the margin fee and budgetary retrenchment measures.

As part of the stabilization program and as a prerequisite to decontrol, we continued the monetary restriction during the early part of 1960 in order to hold down prices and maintain the international reserve.

Since the margin levy, the major measure of the stabilization program, went into effect about the middle of 1959, the external value of the peso has continued to increase. In July and August, 1959, the free market value of our currency was as low as P4.10 to $1.00; as of December 1960 it has improved to P3.20 to $1.00. The drop in 1959 was partly due to the increased demand for foreign exchange born of our efforts to accelerate industrialization. However, the margin levy, associated with a more discriminate foreign exchange allocation and selective credit policies and the exercise of greater fiscal restraints, has brought about a continuing improvement in the external value of the peso.

External confidence in our economy has been so enhanced that foreign banks have gone as far as offering loans for economic development both to our government and to private investors. This puts to shame the self-proclaimed prophets of doom who had greeted our proposed economic stabilization measures with dire predictions of economic disaster.

The success of the stabilization program in solidifying and strengthening our internal and external financial position encouraged the Administration to consider the relaxation of restrictions and controls.

In April of last year, we launched a four-year program of lifting monetary and trade controls aimed at the full restoration of free enterprise eventually. Its first phase called for the creation of a free market for foreign exchange equivalent to approximately one-fourth of all foreign receipts and payments. The results were so encouraging that the second phase was made effective much ahead of schedule, barely six months later. The expanded the free foreign exchange market to approximately one-half. We expect to attain complete decontrol within this year of 1961, thereby completing decontrol in two years instead of four.

As we approach the stage of full decontrol, there is need for reexamining authorized exemptions form the margin levy, which will ultimately result in a unified equilibrium of exchange rate.

Full decontrol may obviously be accompanied by an increase in price of imports, but it will create conditions favorable for the establishment of new industries to increase production for export and employment and, in the long run, stabilize prices. With the savings of foreign exchange resulting from the reduction of imports of consumer goods, we shall have more resources available for the importation of machineries and equipment to expand industrial production.

Complementary to decontrol is credit relaxation. Among other measures, rediscount rates and the bank reserve requirements have been reduced and cash deposit requirement for letters of credit for imports has been abolished. The overall result has been a substantial increase in credit available to the business sector.

Outstanding loans for commercial and savings banks rose from P1.96 billion at the end of 1959 to P2.07 billion at the end of September 1960, or an increase of P110 million in nine months.

There are also continuing increases in agricultural and industrial production, electric power output, transportation and, accordingly, employment and earnings. Agricultural crop yield in 1960 rose by 3 per cent over the preceding year’s level.

The industrial program gained further headway as manufacturing production reached new peaks of output in 1960. It expanded another 8.3 per cent, surpassing the previous year’s gain of 7.8 per cent. Electric power output rose by 80 per cent during the first nine months of 1960 over that of the corresponding period of 1959.

As a result of the expanded industrial and agricultural production the gross national product increased from P10.2 billion in 1959 to an estimated P10.8 billion in 1960 or a rise of P600 million. This represents a six per cent increase over the rate of increase of the gross national product in 1959 over that of 1958.

Accordingly, there has been a continuing growth in employment. When I took over in 1957 the employed labor force was estimated by the Bureau of Census and Statistics at 8,149,000. In 1959 the employment figure rose to 8,959,000 or an increase of 810 laborers. The increased economic activities in 1960 as evidenced by the marked improvement in the gross national product indicates an even higher level of employment in 1960.

B. Agricultural Development

The economic stability that we have achieved is due no less to our economic development policy.

In the agricultural sector, we have pursued the highest priority national objective of self-sufficiency in rice and corn. For this purpose, we have maintained he annual appropriation of P20 million.

Emphasis is being given to abaca and coconut, two of our major export products. To rehabilitate the abaca industry, we are inaugurating a balanced program aimed-at restoring our abaca production to its prewar level of one million bales a year. I urge the appropriation of P20 million for this purpose.

In a effort to discover the means of eradicating cadang-cadang which seriously threatens he coconut industry, research is being intensified by all agencies concerned. For the general development of the industry, I am directing the release of P10 million out of the appropriation of P30 million which has already been provided for the purpose.

It is time that we step up the development of the livestock industry through the enactment of appropriate legislation. At present our meat and milk production meets only 15 per cent of the national requirement. We have to import P48 million worth of meat, milk and dairy products each year. The need for assuring an adequate supply of these vital food product calls for serious efforts to develop the livestock industry.

There is need for stepping up the pace towards increasing fish production from the deep seas. The Philippines tuna resources are among the richest in the world. Let us exploit them.

I recommend the establishment of a Deep-Sea Fishing Administration for the purpose of encouraging, coordinating and assisting the development by the private sector of deep-sea fishing. Accordingly, the Development Bank of the Philippines should set aside no less than P10 million a year for this purpose.

While it is wise to encourage the utilization of our forest resources, we have it necessary to look into their conservation and effective exploitation. Scientific management of commercial forest areas through selective logging has been intensified. For a better implementation of our program of planting trees on denuded watersheds, grasslands and marginal lands, the Reforestation Administration has been established.

To give more force to the laws against illegal deforestation, I urge the amendment of Section 267 of the National Internal Revenue Code so that logs illegally cut shall be subject to confiscation even after the payment of fines.

I desire to place squarely before this Congress the matter of reconciling our policies in the interest of the development not only of the Virginia tobacco but also of the native tobacco industry. The United States is now disposed to welcome the entry of cigars and other tobacco products from the Philippines as a result of her cutting economic ties with Cuba. However, let us not forget that under the prohibitions of Republic Act No. 1194, we do not welcome American tobacco here, and we can hardly expect the United States to be hospitable to our tobacco.

The opportunity of gaining a permanent foothold in the American market for the Philippine cigar industry has presented itself as a result of recent developments and we must seize its opportunity now or we lose it forever.

It would therefore be to the interest of the Philippine tobacco industry that Congress reexamine the commercial restrictions in Republic Act No. 1194 without, however, unduly prejudicing the local Virginia tobacco industry with a view to establishing on a mutually profitable and reciprocal basis the Philippine-American tobacco trade.

In connection with cigar manufacture, it may be necessary that government policy should encourage mechanization of cigar making if we hope to fill our cigar quota in the American market to the tune of 180 million cigars of which we have only filled the meager amount of six million cigars.

C. Industrial Development

Even more significant and decisive strides have been made in the field of industrial development.

In food processing, two wheat flour mills and three milk canning plants are now in operation. Three additional flour mills will start this year. The goal for the production of cotton textiles is 300 million yards a year. Spinning and weaving capacity is being rapidly expanded towards this end. The ramie textile mills in Davao will soon be in operation.

To step up the supply of building materials, five new cement factories have been approved during the last two years. Already cement prices have gone down. Now the cementing of all our highways will be made feasible. Soon we may export this product.

Centrifugal sugar production is also expected to increase with the additional sugar quota for the Philippines to the tune of half million (500,000) tons. In this connection, I am glad to announce that necessary credit facilities have been extended by the Philippine National Bank with the support of the Central Bank and the Development of the Philippines to permit the ready expansion in sugar production and take advantage of the opportunity of increasing the country’s foreign exchange earnings in the amount of about $60 million. All in all, the total amount of sugar we have to export to the United States this year is 1.4 million tons. We have to produce this or lose the additional quota.

We are also aiming at self-sufficiency in the production of pulp and paper. We have now an aggregate annual capacity of 95,200 tons of paper and 9,500 tons of pulp. The additional pulp and paper mills will raise production to the level of national requirement. Our other important objective is to produce newsprint paper.

We are also stepping up production of acetic acid, soda ash and caustic soda. We have established a sheet glass factory and three glass container factories.

Fuel production registered a substantial expansion. The most notable development in this field is the construction of three new petroleum refineries in addition to one already in operation.

This administration is determined to realize its major project of establishing integrated steel plants. It has encouraged and supported the participation of the private sector in this industry. The private segment of our economy has made initial investment towards owning 49% of the capitalization. Private participation in the Iligan project calls for appropriate amendments of the charter of the National Shipyards and Steel Corporation which I strongly recommend.

To provide greater stimulus for the industrial development program, it is essential that appropriate business incentives he provided for. Fiscal measures are necessary to reduce the initial burden incident to the establishment of new enterprise.

The establishment of basic industries requires large capital investments. To lighten the initial burden, I recommend legislation granting basic industries full exemption from duties and taxes on their initial fixed capital requirements.

To improve the position of Filipino firms and corporations resulting from certain weaknesses in their capital structure and to provide incentives to all investors, other assistance measures should be approved by Congress.

On the other hand, there are certain industries which have been granted incentives under the Barter Law. Prior to decontrol, products of these industries could not be exported for dollars profitably. With the present rate of exchange under the second phase of decontrol, the need for such an arrangement no longer exists. I therefore, recommend the repeal of the Barter Law.

With regard to the restrictive provisions of the mining petroleum and corporation laws which deter the full development of our mining industries, I urge that measures be considered to relax them.

To undertake effectively the development program, we must expand and modernize transportation, communications, power and irrigation systems.

To expand our overseas shipping facilities the National Development Company procured 12 ocean-going vessels, nine of which have been delivered. Two interisland vessels have been constructed by the National Shipyards and Steel Corporation. We are modernizing the Government Telephone System on a national scale. We have acquired the right-of-way for the extension of the Manila Railroad lines to Cagayan and Sorsogon and it is expected that construction work will begin before June 30 this year.

The age of cement roads has come to the Philippines. It is high time that the main highways traversing the various agricultural and industrial areas (about 15,000 km. long) be paved with cement o reduce the cost of maintenance. The use of cement instead of asphalt in the construction of our roads will be far more economical in the long run. Local cement production will soon be expanded so as to bring down the price thereof and enable the government to undertake this ambitious project. I urge that Congress consider the adoption of a program cementing our national highways. To finance the initial phase of this project, I recommend the appropriation for the next fiscal year of the amount of P35 million. This will enable us this year to pave with cement at least 350 kilometers of our national highways to be apportioned in the following manner: 150 kilometers for Luzon, 100 kilometers for Visayas and 100 kilometers for Mindanao. This apportionment is in line with the industrial dispersal policy of this Administration.

In this connection, offers of private corporation or contractors to build for the government portions of the cement road system, under special terms or deferred payment plan, should be welcomed and accommodated.

Industrial power output has been increased by 265,000 kilowatts due mainly to the operation of the Binga Hydro electric project. Studies for four other hydroelectric projects with a total capacity of 359,000 kilowatts have been completed.

The bulk of the credit facilities and dollar allocations has been extended to industries in Manila and suburbs. I have directed a study on the dispersal of the industries supported by basic facilities. Our policy in this connection is to give priority to the area with the greatest potential. Priority should be given to the systematic development of Mindanao because of its tremendous natural resources and because it is the least developed among the three groups.

The financial resources required for economic development at the rate necessary to sustain a continuing growth will call for the tapping of idle savings and channeling them to productive investments. Towards this end, public policies should learn from the experience of more advanced countries by encouraging the establishment of investment houses quite distinct from the mutual funds. This will further strengthen the financial basis of the economy and assure sources of long-term funds for desirable productive ventures.

D. Economic Nationalism and Trade

Even as we are making provisions for expanding production, we have attended to increasing outlets for our output. We have promoted foreign trade both to expand the demand for our traditional exports and create foreign markets for new products.

In implementing the Retail Trade Nationalization Act, the Department of Commerce and Industry registered and assisted a great number of new Filipino retailers. This Congress also passed during the last session the Rice and Corn Trade Nationalization Law.

The role of non-agricultural cooperatives in the economy has gained added strength with the establishment of the Philippine National Cooperative Bank.

At present, there are a number of agencies with which businessmen have to deal in setting up an enterprise. In order to serve their needs, especially those of foreign investors, a law should be enacted centralizing these functions under one office.

I also recommend to revision of the General Banking Act to delimit the share of foreigners in jointly owned banks.

I propose the amendment of Republic Act No 1130 to abolish the Anti-Dummy Board and to transfer its function to the Department of Justice.

Without detracting from the policy to strengthen the position of Filipinos in economic activities, I consider it essential for the purpose of pushing the economy into a self sustaining momentum that we attract foreign capital to a greater measure than it has flowed into the country.

However, to attract foreign investment, it is necessary to provide for it a favorable climate, including the protection of foreign investors against non-business risks and assurance of an equitable treatment.

This year, as already announced, is “See the Philippines Visit the Orient Year.” For the convenience of tourists, our national airport is being modernized to make it suitable for jet travel. With this we expect to attract more tourists. But we must spend for the establishment of necessary tourist attractions and facilities. Our national trait of hospitality to our foreign visitors should be made manifest in and through Customs, immigration Office, Visa Office, hotels, taxis, trains, and other transportation media, and by the people themselves. We are determined to make our income from tourism among the biggest items contributing to our dollar reserve.

II. EDUCATION, SOCIAL WELFARE AND COMMUNITY DEVELOPMENT

A. Problems in Education

I consider it urgent that we take a closer look at the financial shortcomings of our public school system.

In line with my previous recommendation to reexamine the present method of financing our primary and secondary schools, propose the enactment of the Stabilization of School Financing Bill.

This bill provides for a partnership plan among the national, provincial, municipal and city governments in the financing of public primary and secondary education. Obviously, the additional financing responsibilities that shall be borne by the local governments would call for permissive legislation authorizing provincial and municipal governments to adopt measures to provide funds for adequate school maintenance.

To correct the acute shortage of textbooks we initiated a textbook printing project to print 35 million textbooks at a cost of P47 million, plus $5.9 million as counterpart.

Private schools continue to play an important role in education. They accommodate 60 per cent of the secondary students and 90 per cent of those on the college and graduate levels. To the end that the highest standards of instruction possible may be maintained, an increase in the supervisory personnel is necessary. Supervision over private educational institutions in secondary and collegiate levels may be participated in by a Committee or Board elected by such private institutions. I urge legislative consideration of the idea to grant qualified private educational institutions a margin of curricular freedom to allow educational diversity in educational unity.

The University of the Philippines has maintained its traditional role of setting national standards for scholarship and research. More liberal financial support would enable it to intensify and expand its program of graduate studies and research and, what is more important, to enable it to embark on extension work of participating actively in community development.

B. Science and Technology

We have intensified the national effort to improve the foundation of our scientific progress and we have encouraged science consciousness. We have maintained the science scholarship program. Arrangements are being made to establish a science high school in Manila. The U.P. College of Agriculture is gradually being recognized as the training institution for Asia in agricultural science. The establishment in Los Baños of the International Rice Research Institute will make the Philippines the center of scientific efforts to improve he industry that produces all of Asia’s staple food.

With the establishment of the Philippine Atomic Research Center, the production of isotopes for uses in agriculture, industry and medicine is not far off.

In connection with the installation of the reactor in the Philippine Atomic Research Center, I recommend the passage of the Indemnity Bill which was introduced in last year’s session of Congress.

To stabilize the national research program, I also urge Congress to consider the utilization of a portion of the proceeds from the foreign exchange levy to assure continuous financing of important research projects.

C. Social Welfare

The Administration has given relief to and alleviated the plight of about 900,000 victims

of disaster and calamities. We also met the problems of juvenile delinquency, the physically handicapped, the infirm and the aged, the squatters and beggars. Some 40,000 individuals were helped to find new homes in more suitable surrounding or sent back to the provinces or to NARRA settlements. Additional efforts to relocate squatters are in progress. The Philippine Charity Sweepstakes has raised great amounts of funds for social welfare activities. The broadening of the scope of its benefits should be considered by Congress.

D. Social Security

Today, almost four million people are enjoying the protection and benefits of the Social Security System for the private sector and the Government Service Insurance System for the government sector. These two systems also assist our economic development since a large portion of their resources is being channeled to productive investments in various sectors of our economy.

Agricultural workers are now covered under the Social Security System. They have a right to benefit from the enlightened and altruistic provisions of the Social Security Act.

E. Housing

The problem of providing low-cost housing for our wage-earners, particularly in urban areas, continues to be a major concern of this Administration. The Home Financing Commission, the People’s Homesite and Housing Corporation and the National Urban Planning Commission should coordinate their efforts behind a bold long-range housing program for the masses. We must encourage the participation of private enterprise in this essential program. The Social Security System should embark on a low cost housing project for the benefit of its members.

F. Labor

This Administration has maintained its deep concern for labor’s rights. During the last three years about P11 million were paid to aggrieved workers and employees.

With the establishment of four additional regional offices and the organization of the Women and Minors Bureau within the current fiscal year as already authorized by Congress, our Workmen’s welfare will be further promoted.

The Apprenticeship Division has lately been expanded into a full-fledged office, indicating the importance this Administration gives to skills development. In view of the fact that Asian Economic Development Fund support for the project will cease this year, I urge the appropriation of an adequate sum to continue the operation of the Labor Market Information and Statistics Service Project.

In 1960, 283 new unions were organized and registered and 193 collective bargaining agreements were recorded. The fact that there were only 44 strikes in 1960 as against 59 strikes as the annual average during the preceding three years is an eloquent evidence of the growing contentment in the labor ranks, and of better relationship and understanding between management and labor. With the increasing acceptance by employers of the institution of collective bargaining, industrial peace has been greatly enhanced.

Significantly, through the favorable policies of the present administration, economic activities since 1953 have been so expanded as to accommodate an additional 2.2 million workers, thereby reducing unemployment from 1.4 million or 17 per cent of the labor force in 1953 to only 750,000 or 7.7 per cent of the labor force in 1959.

G. Health

Public health and sanitation services were further extended to the rural areas. Most of the diseases which have been the common causes of death are under control. Marked decrease was noted in the death rate as well as in the infant morality rate.

Hospital services have been improved. Rural health units have continued to minister to the needs of the masses. The Government has upgraded the standards of services.

More and more funds are needed in order to fully provide in the rural areas medical service and health facilities.

H. Rural Reconstruction and Community Development

This Administration has from the start considered our rural inhabitants a special focus of our ameliorative efforts. Accordingly, we have taken every possible step to increase the rate if development in the rural areas.

We have revitalized the agencies dealing with rural credit and cooperative marketing. The operations of the rural banks have been expanded. We have devoted a substantial part of the resources of the Philippine National Bank and the Development Bank of the Philippines to affording credit on reasonable terms to small farmers. The latter has set aside P50 million for small loans. Rural banks have increased to 150 at the end of 1960. We accelerated the grants of land patents and homesteads and the resettlement efforts of the National Resettlement and Rehabilitation Administration. An international Rural Reconstruction Institute to be established in Cavite is designed to be the training center of future rural reconstruction leaders from Asia and Latin America. It is bound to have far-reaching effects on our rural reconstruction and community development.

The establishment last year of the Agricultural Credit and Cooperative Institute at Los Baños is another milestone inn our efforts to revitalize and improve the management of credit and cooperative organizations serving the rural areas.

The Office of the Presidential Assistant on Community Development (PACD) is proving to be an effective instrumentality in the promotion of the welfare of the rural masses. In the short span of four years, the PACD has become a vital factor in the economic, social and cultural progress of our country by reawakening in our people on rural areas their capacity for self-help and an awareness of their ability to recognize their own problems and adopt measures for their solution.

Where once existed barrios wrapped in apathy and a sense of hopelessness, there now thrive invigorated communities inspired by democratic grassroots leadership—a strong guarantee against the inroads of Communism.

From an initial coverage of 22 provinces in 1956, the community development movement now covers 55 provinces. Self-help projects undertaken by the people in the past four years number 29,886 valued at P29 million. These projects included food production, varied barrio improvements, feeder, roads, barrio waterworks and spring development, repair of schools, communal irrigation, promotion of public health, and related improvements.

I urge that we give permanence to the community development program by giving the PACD the necessary power and appropriation to carry on with its task even more effectively.

I. War Veterans Affairs

Our war veterans, war widows and orphans deserved our continuing concern. For the simplification of the administration of veterans’ claim and benefits, we have consolidated all agencies in the Philippine Veterans Administration. It is expected that under the new dispensation the interest of the defenders of our country will be fully attended to including those related to their claims with U.S. government.

J. River Basin Resources and Flood Control

The devastating floods in many areas in 1960 emphasized the need for revising our policies on reforestation and river basin resources development.

Last Year I stressed the importance of development plans to utilize to the maximum the potentials of our river basin resources. This is necessary, whether it be for power generation, for the irrigation of farm lands or for industry and home use , but particularly to arrest the recurrent ravages of floods.

I therefore urge that Congress adopt measures for the reorientation of public works with a view to combining the objectives of flood control, water conservation, industrial power generation into integrated multi-purpose projects.

III. PUBLIC ADMINISTRATION

A. Improved Civil Service Morale

The enforcement of the new Civil Service Law, including fair and necessary salary adjustments, has improved the morale of civil servants and developed a greater sense of responsibility in the public service. The constitutional injunction that appointments in the civil service shall be based on merit has been strengthened.

I reiterate the recommendation in my message of last year that the new Civil Service Act be improved by eliminating certain provisions apparently inconsistent with the Constitution and also other provisions which are vague, uncertain or incompatible with each other.

B. Public Administration Upgraded

Recognizing the need for upgrading the quality of public administration, executive and supervisory development seminars have been conducted. The beneficial effects of these programs have become evident in the increased efficiency of the various arms of the public service. The increasing appreciation for progressive management was climaxed recently by our sponsorship of the first general assembly of the Eastern Regional Organization on Public Administration.

C. Policy on Government Corporations

The government corporations continue to be worthy instruments of the government for industrial pioneering.

In pursuance of the policy of placing in the hands of private enterprise those corporations that have accomplished their pioneering role, I approved the sale of the Naga Cement Plant located in Naga, Cebu. In 1957 we sold the Bacnotan Cement Plant. The sale of the Maria Cristina Fertilizer Plant for P12 million has also been effected. The Cabinet has already approved the sale of the Insular Sugar Refinery at more than P6 million and is considering the liquidation of two textile mills of the National Development Company. The process will continue until ultimately the government is completely out of business.

D. Work of Joint Legislative-Executive Tax Commission

The Joint Legislative-Executive Tax Commission, created to improve our tax system, has already submitted legislative plans which deserve your serious consideration. These proposals meet the need for additional revenue, without increasing the average taxpayers’ burden, and provide impetus for rapid economic development.

I am prepared to endorse any measure aimed at revising the Tariff and Custom Code, in harmony with the condition that obtain under the decontrol program and external trade. I also urge necessary revisions in the National Internal Revenue Code. Among the changes should be a scheme for the automatic retention of the share of the local governments in the national taxes concomitant with the policy of giving them greater economy.

IV. ADMINISTRATION OF JUSTICE

Our courts of justice have maintained in momentum in reducing delay in the disposition of judicial cases. With the increased jurisdiction granted in 1960 to municipal courts in chartered cities and justice of the peace courts, our higher courts have been relieved of the burden of petty litigations.

They were thus able to devote more time and effort to more important cases.

The Court of Industrial Relations and the Court of Agrarian Relations have done commendable work in settling controversies between labor and management, and between landowners and tenants. There is now industrial and agrarian peace. The Court of Tax Appeals has sped up decision on assessments made by the Bureau of Customs and the Bureau of Internal Revenue.

V. NATIONAL DEFENSE

Our Armed Forces continue to play a vital role not only in the preservation of peace and order but also in our socio-economic activities. They helped beyond the call of duty in school building construction, in relief work during times of public calamities, even in land resettlement and rural development.

There has been a marked decrease in the personnel strength of the Armed Forces since 1953 without impairing its capability to maintain peace and order, carry on with military training and fulfill our international commitments. It is our constant endeavor to keep our National Defense organization abreast with the latest advances. Under the Mutual Defense Pat with the United States we are modernizing our armed forces particularlt in relation to the new weapons and methods of warfare.

VI. FOREIGN RELATIONS

Because of our independent foreign policy, we have gained new prestige in our own region of the world and in the international community. We are truly forging the true image of the Filipino nation. With rational firmness, we have accomplished much without painful disruptions or violent difficulties which normally follow the process.

The bonds of friendship and mutual interest which link the Philippines and the United States, our closet ally and friend, remain firm and enduring. This was remarkably dramatized by the visit here of President Eisenhower last year. On the questions of disarmament, cessation of nuclear tests, the peaceful uses of atomic energy, mutual security, regional defense and respect for the dignity of the human person, the Philippines stands with the free peoples of the world in unity of purpose.

But relations, however, cordial, cannot be entirely free from difficulties. It is to the credit of the Philippines and America, for instance, that wherever such difficulties have arisen, sincere efforts have been exerted to overcome them with fairness and justice.

It is in this spirit that I am happy to report to you that, in addition to the major agreements reached last year in the negotiations conducted between our Secretary of Foreign Affairs and the Ambassador of the United States, considerable progress has been achieved more recently on the highly sensitive question of criminal jurisdiction in relation to U.S. bases in the Philippines. I am confident that the remaining unsettled questions in the revision of the Military Bases Agreement will be resolved to the satisfaction of both parties during the war.

Progress has also been made in the current negotiation for the adjustment of the principal obligation and interest under the Romulo-Snyder Agreement. You are aware of the two separate bills under consideration in the Senate and House of Representatives of the United States Congress for the payment of the balance of our war damage claims. The hope that the United States Congress will finally act on those pending measures is quite bright. Furthermore, we will exert our utmost in the American Congress to make permanent the increase of our sugar quota by 500,000 tons now granted us on a temporary basis.

In the World Organization, we continued to support the stabilizing “presence” of the United Nations in troubled spots of the world, such as in Laos and the Congo. We strongly co-sponsored the declaration against the continuance of colonialism in all its form anywhere in the world.

Our policy of closer ties with Asia has also gained fresh momentum. We have accredited a diplomatic mission to Ceylon. We have just authorized a legation in Laos. We concluded with the Government of Indonesia an agreement for joint naval patrol of southern water. We have begun negotiation of a trade agreement with South Korea and will soon meet with Pakistan for the same purpose. We are considering cultural accords with the Republic of China, Pakistan and the United Arab Republic. We have entered into an agreement for the mutual abolition of visa fees with South Korea and Israel. We are also at the stage of concluding a postal agreement with Japan.

At the gracious invitation of President Chiang kai Shek, I paid a most fruitful and rewarding visit to Taiwan during which we renewed the cordial ties that bind our two countries. I shall visit the Federation of Malaya next month.

Our panel of negotiations has also just signed the Treaty of Amity, Commerce and Navigation with their Japanese counterparts. Considering the importance of the Treaty and its effect upon the general economy of our nation, it is my desire that the Treaty be subjected to a thorough scrutiny and exhaustive consideration by as many conceivable segments of our population as possible before it goes through the constitutional process for ratification. I express the fervent hope that the discussion of the Treaty shall be dispassionate and objective with an eye single to the best interest of the nation.

Recent developments and the perceivable trend of possibilities indicate that the problem which Communist China poses to the security of our area might assume a new proportion. It will do us well to asses carefully those possibilities with a view to determining their impact upon our policy towards Communist China and what measures we could devise alone or in cooperation with the free peoples or our region to meet the developing situation.

VII. REPARATIONS

In the matter of procurement and disposition of reparations goods and services from Japan our country, as of November 30, 1960, has received a total of P198.3 million in machineries and equipment for public works, capital goods for government agencies and private entities, and services in the salvage of sunken vessels that clog our sea lanes.

The value of goods and services already contracted by our government, however, is P246 million and the Japanese Government has already paid to Japanese supplies the sum of P227.9 million. Therefore, based on the P225 million due from the Japanese Government during the first four and a half years of the Agreement, Japan has fully met her commitments to the Philippines.

The annual schedule of payments and allocations to the public and private sector is with a view of utilizing reparations payments in such a manner as shall assure the maximum benefits in an equitable and widespread a manner as possible. We set aside P5 million o develop the potential cottage and home industries and thereby provide more employment opportunities for the masses. This policy will be implemented annually as long as necessary. Furthermore, we are now seeing to it that only industrial projects which satisfy a system of industrial priorities should be allowed for procurement.

Effort is being exerted to make full use of the P250 million investment loan by lightening the terms and conditions under which this may be extended.

With a view of obtaining maximum benefits from reparations payments, the Reparations Law should be amended along lines already indicated in my last message.

VIII. YOUTH ORGANIZATION FOR CIVIC SERVICE

The Filipino youth fired with ardent patriotism and raring to do something for their beloved fatherland should be rallied and organized for civic service. They can be immense help in solving the worsening youth delinquency problem. They are a definite asset in fighting Communism. They can be massive assistance, as once in the past, in keeping elections free, honest, and orderly. They can contributed effectively in our efforts for reforestation and against deforestation and also in the conservation of other natural resources. They can wield a tremendous influence for good in moral regeneration and in many other undertakings requiring mass action.

It is therefore recommended that legislation in this direction backed up by adequate financing be adopted.

IX. DRIVE AGAINST GRAFT AND CORRUPTION

At any start of my Administration and again in my 1960 message on the State of the Nation, I pledged total war against graft and corruption in the public service although it is a matter of history that this problem was inherited from a previous regime. I mean to keep my pledge no matter at what cost. The campaign gained added vigor with the implementation of the Anti-Graft and Corrupt Practices Act. The Presidential Anti-Graft Committee has since been probing cases of unexplained wealth.

Various executive departments have initiated administrative cases numbering 21,992; 13,600 cases were decided with 9,547convictions and 4,110 exonerations. Some 8335 case are pending decision. Criminal cases totaling 740 were filed. I can state with pride and certainty that this record is unprecedented in the annals of all previous administrations. Contrary to gratuitous allegations, I can say, and he record will bear me out, that we have taken action against all accused malefactors in the public service irrespective of whether they are “big fishes or small fries.” I wish to reiterate anew that we cannot move in the dark. We can proceed only against those cases brought to light by civic-minded citizens and supported by evidence. We cannot act on the basis of generalities or on gossips peddled by “ugly wagging tongues.”

I have urged all sectors of the Government as well as the public in general to help in the campaign by supplying us facts and proofs. Graft and corruption is a social problem which cannot be eradicated by mere lip service or mere wishful thinking or condemnatory language in some “corners.”

In this connection the teaching of moral values should be further strengthened through the intensification of Character Education as a separate subject in the curricula of all public and private schools. I consider this emphasis of great value in our campaign against graft and corruption since it will imbue our school children with the concepts of honesty and righteousness at a time when their minds are still impressionable.

Let it sink into the conscience of society that it takes at least two or commit graft and corruption. The bribe giver is as guilty, if not more so, than the bribe taker. It is unfortunate, however that society only condemns the briber taker and even idolizes the wealthy tempter. It is another ironic misfortune that the administration which does the dirty job of flushing out, identifying, exposing and punishing without fear or favor corruption in government, gets as its reward the reputation of being corrupt. If society does not correct this twisted attitude, the day will come when this social cancer will spread deep into the system of our body politics without any doctor that will have the courage to prescribe the remedy and lead the nation to salvation.

I therefore call upon the press, the radio and television to focus their floodlights upon the men who committed the corrupt act and not upon the administration that caught and punished the act. Let us not hide the identity of the corrupt behind generalities. Let us demand that the corrupt men answer for their criminal acts instead of pinning responsibility on President under that novel political heresy of “command responsibility.”

RECOMMENDATIONS

Ladies and Gentlemen of the Congress, I have formulated for your consideration eighteen (18) important recommendations in the course of this message. But before I conclude permit me to tax your indulgence by proposing other recommendations of no less importance and urgency in abbreviated form as follows:

(1) On the broad front of basic governmental reforms. I reiterate all the recommendations I have made for appropriate all amendments to the Constitution in my last message.

(2) To accelerate our industrialization and the utilization of our vast natural resources, I recommend amendments to the petroleum, mining and corporation acts to make them conform with modern advances, problems and trends in leading mining countries;

(3) I recommend amendment of the tax exemption law to exempt specified basic industries from the payment of duties and taxes fixed capital requirement;

(4) I ask you to study the proper utilization of the proceeds from the margin levy to encourage maximum development of priority industries and push through more vigorously important public works to high economic value;

(5) The NASSCO charter has to be amended to permit the participation of the private sector in the corporation’s integrated steel project;

(6) We must extend tariff protection to infant agricultural industries, such as coffee, cacao, citrus, peanuts, and others.

(7) For improved fiscal administration, I recommend the following measures:

(a) Suspension of the tax on capital gains provided such gains are plowed back to investment in industry;

(b) Extension of a preferential rate of income taxes to dividend earned on shares of stock;

(c) Provision be made for carry-over losses;

(d) Further modernization of the tax system by doing away with regressive taxes and by devising a more equitable distribution of the tax burden based on capacity to pay;

(e) Change the allotment base on internal revenue taxes and to effect the automatic retention of shares of local governments. And

(f) Adoption of a uniform and at the same time flexible and updatable real property assessment system.

In this connection I want to interject the observation that land values in and around industrial centers have increased even fifty times as high as, say, a decade ago, and yet their assessment values have remained stationary. Another observation is that when the government buys a real property for some public use, it pays a price ten or twenty times more than the assessed value. There should be a limit of the proportion between the assessed value and the expropriation value so that land assessment should not be brought down too low.

(8) Congressional appropriation of funds to complete the Rizal Centennial Shrine. Unhappy, private contributions for the purpose have run short of the total requirement, and we certainly owe it to the memory of our national hero to come to the rescue of this project and see it through to completion this year.

CONCLUSION

Gentlemen, in my humble way I have outline the legislative task of the year. I have set he goals we should attain, and I have profound faith that we shall attain them with the united determination of Congress. But man is finite and God is infinite and eternal and so we need Him in all our national efforts. Let us therefore pray for His guidance and mercy and that He abide with us forever and fill our days with the abundance of His blessings.

“For His Kingdom is a Kingdom of all ages, and dominion endureth throughout all generations. They shall publish the memory of the abundance of His sweetness and shall rejoice in His Justice.” (Psalm 144)

With Him nothing is impossible; without Him nothing. I thank you.