Ferdinand Marcos' Twentieth State of the Nation Address

by Ferdinand Marcos

A Turning Point for the Nation

Mr. Speaker, Mr. Prime Minister,

Distinguished members of the Batasang Pambansa:

In keeping with both tradition and duty, we meet today as trustees of our people to set anew the annual agenda for the nation.

We should perhaps take note that this tradition surrounding the opening of Parliament is as old as the nation itself, in the light of so much talk abroad about the alleged fragility of our democratic institutions.

While the Batasang Pambansa is only one year old today, the declaration of partnership between the Presidency and Parliament dates back to the very birth of our First Republic.

And if this Constitutional principle has survived intact after so many tidal changes in our national history, surely this is one sign that democracy has roots here in our land.

There are others, and I have come here tonight to report that our democracy has prevailed over a year of crisis and uncertainty, and to seek your support and collaboration in meeting a new turning point in national life.

When we convened this assembly for the first time a year ago, we could feel within this chamber the fever of anxiety that gripped the nation. The economic crisis was at its height. There was turbulence and confrontation on our streets. And insurgency and subversion took the moment as an opportunity to revive and regroup.

The past year bears witness to our combined resolve and determination to be master of the crisis, and not its victim.

We have decisively stopped the slide of our economic fortunes, and restored them to health and renewed activity. Against every forecast of collapse made by so many, we have turned the odds in our favor and set a course towards recovery that is without parallel among nations similarly embattled.

We have demonstrated the efficacy of our democratic institutions and processes, in ensuring national stability and in framing policies and programs to meet the tide of crisis in our midst. The elections that brought this Parliament into being and the inaugural session of this assembly exemplify our response at this end.

We have met the grave challenge of subversion and insurgency, which again sought to take advantage of our economic travails’ and political trials. In the measure of the challenge, we have confronted the enemy on every front, we have instituted reforms in our counter-insurgency program and our armed forces, and we have strengthened the bond between our soldiery and our citizenry which is so essential for success in this struggle.

We have strengthened the mechanisms for dialogue and cooperation among all the sectors of our society, seeking relief for the plight of those who have been most adversely affected by the crisis and providing for fruitful partnership between the private sector and the government. A year ago the basis of social concord was. under grave challenge. Today, that is now largely recovered and strengthened.

We have protected the gains and the reforms of the past decade in our response to the crisis, even though we have had to implement stringent measures of economy and prudence. No major social program of reform has been abrogated by our belt tightening efforts; rather savings have been generated in other areas so that the reform effort would continue.

And in our relations with the rest of the world, we have the confidence of other nations and international institutions in our ability to surmount our problems and to meet our obligations and commitments. The seal of international credit worthiness handed us by the International Monetary Fund is only one aspect of this. As important and significant is the renewed vigor of our bilateral and multilateral diplomacy.

Not all the adversities and challenges ate behind us. Our agenda remains heavy and difficult. But we have moved beyond .the arc of crisis into a new phase of struggle.

At certain times in our history, the aspirations of our people and the course of events converge at a single time to shape a turning point in national life.

So it was in 1896 when this land was rocked by the tremors of revolution. So it was in 1941 and 1972.

So it is today. The crisis of the past two years and our efforts to surmount it have led us inexorably to this decisive turning point in our history when we either thrust our economy forward into full modernization or forever remain in the shallows; when we either stop once .and for all the challenge of Communism in this country or be overrun by it; when we either attain the full promise of democracy or be led away into alternative routes toward the future.

To meet this challenge, we must address squarely those great issues on which the future of the nation hangs.

When we speak of national priorities today, the first on our minds is the economy, and specifically the progress of the national economic recovery program.

To understand recent developments and directions in the economy must first understand the nature of the crisis that struck us in 1983.

To simplify a rather complex phenomenon, the crisis stemmed from two factors: Our vulnerability to the unexpected drop in access to international credit and high interest rates, and our difficulty in managing our balance of payments position with limited resources.

These two factors were already constricting the growth of the economy when tragedy struck former Senator Benigno Aquino, Jr. in August 1983. The tragic event, however, triggered the financial crisis, making a tough situation suddenly critical. A debt moratorium had to be enforced on October 17, 1983.

It was in these circumstances that we formulated the national economic recovery program. The program which began in 1984 stressed five main lines of action:

- First, a financial package to modify the maturities of part of our external debt, to resume normal credit lines, and to commit fresh credits to finance imports, eliminate arrearages and build up our international reserves;

- Second, a disciplined financial and budgetary program to stabilize our balance of payments position, exercise greater control on public spending and contain inflation;

- Third, a structural adjustment program for the economy, consisting of major tariff and agricultural reforms, liberalization of import restrictions, investment and export promotion and energy self-reliance;

- Fourth, an economic priorities plan focused on the balanced development of both agriculture with industry; and

- Fifth, the expansion of outreach programs in employment, health, nutrition, housing, education, and the improvement in the quality of social services to help our people, especially the most disadvantaged, to cope with the effects of the economic crisis and the impact of the stabilization program.

These adjustments were often criticized as too severe and painful, but these were necessary to put the economy back on its feet.

We did not flinch in biting the bullet as they say. With will and with imagination, we have taken the course to relief and recovery. And today, as we meet here in this chamber, we can proudly say that we have passed the initial test. Economic recovery has begun.

The financial package for the period from October 17, 1983 to December 1986 amounts to $13,760 million. Of this amount, about $3.6 billion represent “new money” principally intended for the general requirements of the economy.

The most critical component under the program is the standby facility from the IMF amounting to SDR 615 million or approximately $610 million. The Philippine request for this facility was approved by the IMF board on December 14, 1984.’ We drew the first tranche of $80 million last December 28, 1984 and this was used to pay the bridge financing loan extended by the governments of the United States, Japan, and Korea subsequent draw downs will be contingent upon the achievement of certain quarterly performance criteria outlined in the economic adjustment program. We expect the release of the second tranche of $107-million this July because we have met successfully the performance target agreed with the IMF last May 31, 1985.

The financial package likewise provides the country with $925 million in new loans and a credit line of about $3 billion to finance imports, and reschedules over a period of 10 years maturities of $5.8 billion, falling due between 1983 and 1986.

The pledge of new money by our commercial creditors will enable us to service our external debt obligations on a current basis, including the elimination of arrears by the end of our IMF program period. The restoration of the trade facility, on the other hand, will reopen normal trade financing whose disruption had imposed a heavy cost burden on domestic producers.

It has been suggested by some quarters that the government did not have to deal with the International Monetary Fund with respect to our debt payments. What, in fact, were our other options? We could have followed the example of countries like Cuba, North Vietnam and North Korea, which did not keep up their payments. Or else we could have merely ignored our default without any regard for the consequences to the creditors.

Dealing with the IMF and other creditors, however, was the only honorable alternative, first, because we are a signatory to the Bretton Woods Agreement of 1945 and cannot therefore renege on our debt payments; and second, because we have to protect our external position in view of future requirements for capital.

With respect to the economic stabilization program, we are meeting successfully the key objective of improving our balance of payments position.

The deficit in the current account was reduced to $1.3 billion in 1984 from $2.7 billion in 1983, surpassing the target of $1.5 billion set for the year. The large improvement in the current accounts resulted in an overall balance of payment surplus of $243 million in 1984, reversing a deficit of $2.1 billion in 1983.

The result of the first four months of 1985 are even more positive with a current account surplus of $165 million as compared to a deficit of $502 million for the same period in 1984.

This was, however, due to a more significant drop in imports by 12.6 percent while exports fell by 11.4 percent over the same period in 1984. By end of May, the trade deficit was narrowed down by 22 percent to $220 million compared to $283 million for the same period in 1984. The decline in export receipts was mainly due to unfavorable markets for our major traditional exports, like coconut, sugar, copper concentrates, logs, timber, offsetting the gains from nontraditional exports in chemicals, copper metal, textile yarns, handicrafts, nonmetallic mineral manufactures, garments, and nickel and fish products.

On the other hand, non-merchandise trade improved immensely from a deficit of $336 million during the first quarter of 1984 to a surplus of $210 million for the first four months this year.

We have built-up in international reserves to $1.06 billion as of June 1985.

Our total foreign liabilities at end-December 1984 amounted to $25.4 billion. As of end-March 1985, this declined by $212 million to the level of $25.2 billion.

Developments in the external account, together with prudent monetary and fiscal policies, have stabilized the foreign exchange rate and stopped the depreciation of the peso.

In the domestic sector, tl1e rapid acceleration of commodity prices has levelled off. The inflation rate has declined by a significant 7.34 percentage points from 34.99 percent in May to 27.65 percent in June this year. Even more gratifying is the mere increase of 1.5 percent in the inflation rate from January to June of this year.

The same downward trend in inflation rates was observed in all areas of the country. Metro Manila’s rate decreased even more significantly by 8.72 percentage points from 30.91 percent in May to only 22.19 percent in June. For areas outside Metro Manila, the inflation rate slid down further by 7.1 percentage points from 35.83 percent last month to 28.73 percent in June.

Substantial decreases in food prices were observed in many areas of the country, notably in Metro Manila. From January to June this year, prices of vegetables and fruits declined by 4.32 percent fish by .50 percent, and eggs by 2.14 percent. Between May and June, there have been encouraging decreases in the prices of certain food items.

At the same time, the interest rate (Manila reference rate, 90 days) has gradually tapered from a peak of 37.4 percent in November 1984 to 23.6 percent as of July 19 this year. For the first six months of this year, the interest rate averaged 25.6 percent.

The deceleration of the inflation rate was due to a number of policy measures, significant of which is the effective management of liquidity by limiting the growth in reserve money through active open market operations and other credit instruments. Consequently, reserve money expansion was limited to 13.6 percent in end-May 1985, reaching P30.9 billion and well within the P34.4 billion target during the same period.

You must realize how difficult it is to contain a budget deficit at such low levels but we were able to cut our overall deficit to 1.8 percent of GNP in 1984, and to keep it within the program target of 2.0 percent of GNP. This improvement was due to an austere spending policy, together with an increased revenue collection from implementation of new revenue measures and improved tax collection.

Certain taxes were modified-to alleviate the burden on the taxpayers, provide business opportunities and broaden the tax base. In particular, the tax base has been broadened mainly by withdrawing tax exemptions from public and private enterprises and by shifting from specific to an ad valorem made of tax levy. A uniform tax rate on interest earnings has been adopted, the method of inventory valuation for income and corporate taxation has been modified, and a levy -of a one percent tax on all foreign exchange transactions in lieu of the levy on selected transaction has been imposed.

To reduce the cost of raw materials and make our industries operate more efficiently, average nominal tariff rates were lowered to 28 percent in January this year from the pretariff reform average rate of 43 percent. A uniform mark-up of 25 percent on imported goods has also been adopted. Moreover, an additional 46 nonessential and unclassified consumer items can now be freely imported without prior approval from the Central Bank, bringing to 967· the total number of liberalized items.

In the energy sector, our dependence on oil imports has gradually declined due to a continuous substitution of domestic energy resources for imported energy. The share of indigenous energy resources to our total energy consumption has increased to 44 percent for the first four months this year from last year’s 42 percent. Consequently, our oil import bill for the same period this year has gone down by 6 percent. By yearend, we will be 50 percent self-sufficient in energy requirements.

Moreover, our government has veered away from the artificial pricing of electricity and petroleum products to reflect as close as possible the supply and demand for these products in the market. In particular, our government has narrowed down the price differential between close substitutes such as premium gasoline and diesel and has gradually reduced the level of subsidized consumption for residential customers.

In the agricultural sector, pricing, marketing and other forms of administrative controls are being phased out in support of a balanced agro-industrial development. The retail ceiling price of rice will be lifted in October this year, while that of corn has been lifted since October last year. Domestic trading of sugar has been returned to the private sector and the export marketing system for coconut products has been liberalized. I have ordered the preparation of rehabilitation and development plan for the sugar industry even as we provide food and other assistance to displaced workers.

Furthermore, the importation of wheat and the distribution of’ flour have been opened to the private sector.

These measures will give more incentives to the farm sector to produce more efficiently as agricultural product prices would now reflect competitive market conditions.

I want to say a few words here on why we have had to import rice recently. These importations are due to the production shortfalls caused by the combined effects of the prolonged drought in 1983 and 1984, typhoons, spiraling production costs, and standstill on credit. The current imports will beef up our buffer stocks for the lean months of July through September. This has become compelling because while palay production declined during the drought-stricken years, per capita consumption of rice rose. And it is imperative that the National Food Authority holds enough rice in stock to stabilize the market when rice prices are deregulated in October l.

Significantly, this year, we expect to harvest our largest rice crop ever. We foresee a harvest of 163.9 million cavans of palay, equivalent to 5.4 million MT of milled rice. This is 4.5 percent higher than last year’s harvest, and 1.2 percent higher than our 1982 record crop.

Meanwhile, there have been some improvements in income distribution in our country. The share of the bottom 60 percent of families in the income ladder increased by 1.2 percentage points from 21.7 percent during the fourth quarter of 1981 to 22.9 during the same period in 1983, based on quarterly integrated surveys of households.

Average annual incomes of both rural and urban households have increased over the years. The average rural household income increased fivefold from P2,818 in 1971 to P14,646 in 1982, while average urban household income improved fourfold from P5,867 in 1971 to P23,637 in 1982.

The improvement in the palay yield from an average of 30 cavans in 1972 to about 50 cavans in 1984- has significantly contributed to the increase in rural and agricultural household incomes. This was due to our government’s continuing thrust on agriculture as the linchpin of economic growth. Furthermore, the current minimum wage for plantation and nonplantation agricultural workers has been increased to P46.67 and P36.67, respectively, from P4.75 in 1972.

The average urban household income, on the other hand, has been positively affected by the series of minimum wage adjustments. These have raised the present minimum wage of nonagricultural workers in and outside Metro Manila to P57.08 and P56.00, respectively, from P8.00 in 1972. In the public sector, government employees were given a 10 percent salary adjustment beginning January this year. These adjustments were made to enable workers to cope with the price increases and improve the general standard of living.

These encouraging developments in the economy come at a time when the economic recovery of the developed economies is slowing down. Despite the softening of international interest rates and world oil prices, commodity prices are similarly declining.

The tight stabilization program and weak demand for our exports by our major trading partners have impaired our ability to restore economic growth. Nevertheless, the expansion of the agricultural sector by 2.1 percent as of the first quarter prevented a larger fall in .real output. The improved income in agriculture will raise the purchasing power of two-thirds of our population who live in the rural areas and eventually raise the demand for industries and revive industrial activity.

The latest statistics show that the level of unemployment has levelled off. The first quarter data for 1985 showed an actual decrease in the unemployment rate to 5.8 percent from 6.3 percent and the underemployment rate to 24 percent from 36.5 percent, over the same period last year. The number of laid-off workers for the first four months of this year also decreased by 43.7 percent to 23,280 from 41,326 over the same period last year.

An even closer look at the employment data showed that the number of self-employed increased by 12.8 percent in the first quarter this year over the same period last year. This offsets a decline in the number of wage and salaried workers, which fell by 1.6 percent over the same period last year. This reflects the resiliency of our people when they venture into entrepreneurial activities as a matter of economic adjustment and social protection.

To assist the laid-off workers, an additional P45.6 million was released as unemployment assistance loans during the first semester. Industrial peace was promoted with the increased number of collective bargaining agreements reaching a total of 1,931 as of May covering some 255,000 workers.

Sugar workers who were affected by the slump in the world price of sugar were given assistance in the form of an emergency employment program. Under the program, displaced sugar planters and millers were encouraged to plant food and cash crops in sugar lands rendered idle due to drastic production setbacks. In addition, I have recently imposed a sugar production quota of 1.6 million tons to keep this commodity available in the domestic market as well as to fulfill our country’s export quota requirement to the U.S. I have also directed the Philippine Sugar Commission to ensure that the domestic price of sugar be maintained at P300 per picul to enable sugar producers to gain reasonable profits.

I have ordered the release of funds to rehabilitate areas devastated by the recent typhoons. I assure you, there are enough stocks of rice to meet any contingency.

Moreover, P1.4 million was disbursed in the form of long term soft loans to assist distressed hospitals in upgrading their facilities and services in the first five months of 1985. The primary health care approach has also been instituted in 37,705 barangays as of March 1985. Meanwhile, Pag-ibig housing loans availed by members reached P4,368.6 million in April 1985, an increase of 12.7 percent from the December 1984 level.

All these gains, taken singly or together, are a signpost telling us that the recovery program is working, and that the sacrifices and tasks we have borne with fortitude have not been for naught. When we say that the Cassandras of doom among us and in the foreign media have been wrong in their prognosis on the country, these are the realities on which we base our claim.

But we have only passed the first stage in the arduous road to recovery. We cannot linger on the road and risk a lapse to complacency.

What was true at the onset of the crisis is still true today: our economy, hence our recovery efforts, are challenged by circumstances beyond our control, by conditions beyond our shores. We are confronted by a slowdown in world trade, by a growth recession in our major trading partner, the U.S., by a fall in export prices and by a growing wave to protectionism in the developed economies of U.S., Japan and Europe. These will hamper our prospects for a higher export growth, but this should encourage us to further diversify our exports and search for other nontraditional markets for our products.

We must recognize that the emergence of a dynamic national economy will not be an accident of development, but the product of a national effort animated by a vision of the future.

At least six areas of economic management need to be subjected to further action and reform for the rest of 1985 and 1986.

First, we shall continue to adhere to a disciplined financial and budgetary program to stabilize our balance of payment:, position, maintain an enduring reduction in the inflation rate, and exercise greater control on public spending. We hope to maintain positive interest rates principally by keeping the inflation rate as low as possible to encourage greater domestic production and investments. We expect the inflation rate to decelerate further to around 10 percent by the end of this year and further down to a single digit level by 1988. Money supply expansion will be restricted to around 15 percent to further bring down the inflation rate. Domestic borrowings of the public sector will be regulated and the national government budgetary deficit will be further cut down this year. The stimulus for growth will definitely come from the invigorated rural and agricultural sectors and an intensified export activity in lieu of a slack on government spending and private real investments.

Second, we shall strengthen and where necessary, rehabilitate the financial system to improve its efficiency and to restore public confidence. In particular, government financial institutions will be reformed to avoid unnecessary duplication of functions as well as excessive and unessential competition with the private sector. We shall actively assist mergers and consolidations among banks to encourage them to build up their resources and equity bases. We shall pursue the restructuring of the legal and administrative framework for private institutions. Also, the Central Bank’s role as a stabilizer and overseer of banks will be further strengthened.

Third, we shall limit government sector involvement to socially desirable activities and to those wherein the private sector is unable or unwilling to invest in due to unprofitability, high risks, and exorbitant cost involved but which activities are also of high social and economic priority. This would enable the private sector to continue its dynamic role in our economic recovery in the context of a free enterprise economy. Our government can then utilize its limited and critical resources more efficiently, effectively and economically as possible over the long run through the judicious use and management of government corporations, among others. Towards this end, the coordination, supervision and regulation of government corporations will be tightened to ensure public accountability. We shall subject government corporations to more rigorous performance criteria, based on their economic and social contribution, actual output and productivity and cost recovery record. In addition, private firms and assets which have been transferred or acquired by the government due to foreclosure, default or nonfulfillment of contractual obligations shall be rehabilitated only after they have been proven to be satisfactorily viable. Otherwise, their divestiture to the private sector at the best terms available will be undertaken.

Fourth, we shall step up the revenue generating capacity of the public sector through an upgrading of the tax and nontax system and through more efficient resource utilization. Let me say at once, we do not propose or contemplate any new taxes except where action is required to repeal and change certain tax measures in the interests of improvement and fairness. To improve resource mobilization, we will strive for a more efficient tax collection system to achieve a broader tax base. Improvement in the collection and utilization of tax resources shall be the focus of our efforts. Volatile international taxes shall be replaced by more desirable domestic taxes. The tax and gross receipts on foreign exchange transactions and the remaining five percent additional ad valorem import duty shall eventually be phased out in favor of alternative and better tax measures. To ensure more efficient resource utilization, public investments will be regularly programmed. Due to our limited public funds, we have to curb any future spending. Priority shall be given to ongoing projects, those with the highest economic and social rates of return, and those which are financed from foreign sources.

Fifth, we shall revitalize the agricultural sector, which is envisioned to propel national recovery and sustain economic growth in the coming years. In terms of output, agricultural value added is expected to increase owing to the implementation of various policy reforms in the agricultural sector. The reforms shall be built on the principles of liberalization, deregulation and technological modernization. Policy decisions will be aimed at developing a more buoyant and competitive agricultural sector and at improving the incentives to small farmers.

Finally, we must press on structural reforms to improve the efficiency of resource allocation, to make our industries internationally competitive and to develop and diversify domestic sources of energy.

For such changes to be undertaken smoothly,’ it is imperative that we have industrial peace. It is imperative that there be no disruption in the production process which will hamper our government’s efforts to ensure price stability and a favorable financial environment to encourage more investments, the creation of livelihood opportunities and a rise in incomes and wages.

Towards this end, I have recently created the Presidential Council for Economic Recovery. I have directed this body to address issues of importance to economic recovery and to study ways and means to promote a harmonious relationship among the tripartite sectors–government, workers and employers.

When we appeal for industrial peace, we do not propose to make labor a scapegoat for the crisis that befell us or a sacrificial lamb on the altar of economic recovery. We are merely appealing for reason and sobriety in the approach to disputes and differences in our industries. And we make the same strong appeal to management never to make the climate of hard times a convenient club with which to frustrate the demands of labor.

In sum, we need the energetic cooperation of all in diffusing the climate of confrontation on labor-management issues with voluntary steps on both sides to amicably discuss and settle issues. Let us take every effort to avoid factory shutdowns as our ready recourse to attain social justice.

For the productivity we seek simply will not be achieved if our factories and plants do not operate. All of us in this country will sink or swim together, and we shall swim above the water only if we will it.

We have always stressed the important role of our most valued resource, the Filipino people, in the successful implementation of our recovery program. The other side of this is government’s obligation and commitment to the improvement of the quality of people’s lives, especially of those in the disadvantaged groups.

Accordingly, through more efficient and effective resource use, we will expand and improve the delivery of basic social services.

In health and nutrition, the primary health care approach will continue to ensure the provision of essential health services to the most basic communities. Also, we will further strengthen the herbal medicine program to cut down reliance on imported drugs and introduce acupuncture in various hospitals to reduce the costs of medical care. Likewise, we are committed to further improve and develop the health infrastructure network, particularly hospitals, to meet the needs of the growing population.

In education, the quality and equity in elementary education will be sustained through the Program for Decentralized Education Development (PRODED). Through this program, the elementary curriculum is gradually being revised to emphasize the 3Rs and the inculcation of humanism and Filipinism. Improvements initiated by PRODED at the elementary level will be ‘continued onto the secondary education program.

The study-now-pay-later plan will be further expanded to extend educational loans to poor but deserving tertiary students. Likewise, scholarship programs will be broadened at both undergraduate and graduate levels.

In housing, we will shift our shelter production program to rural areas and make it more affordable to a greater number of people by offering low cost housing units. Moreover, no new massive housing units’ construction will take place, except those already approved for production and those which are in the process of construction.

We have also limited the Pag-Ibig housing to P50,000 to ensure that the program benefits accrue to the low and middle income groups. Furthermore, an addition of three new housing loan benefits has been approved aimed at helping Pag-Ibig members for their educational, medical and other needs, for home improvement, and for organized labor and government employee organizations.

The Rent Control Law has also been implemented and rents have been programmed for adjustments on a staggered basis to help some one million house renters all over the land cope with the current economic crunch and to encourage more social and low-cost housing activities.

We shall also step up local and overseas job placements to compensate for the decline in employment opportunities due to the general slowdown in industrial activity. Moreover, we will create more jobs through the Kilusang Kabuhayan at Kaunlaran (KKK) and the Kilusang Sariling Sikap (KSS) programs.

The goals of our recovery program have always converged on the overriding goal of human resource development. Every measure of growth we have in the last analysis comes down to what it means for people.

In pursuing these initiatives for the economy and society, peace and security are imperative to success. This administration has shown how much can be done to strengthen law and order in our social life, and to secure the Republic from every threat to overthrow it.

As economic difficulties have beset us during the last three years, however, those seeking the overthrow of. Government by force found the time opportune to expand and intensify their activities. And today the peace and security situation is of priority concern.

Although stability has been attained with respect to the secessionist movement in the South, other elements now pose grave threats to our communities, the most critical of these being the Communist New People’s Army.

There has been a tendency, particularly on the part of foreign media and foreign observers, to exaggerate the extent of the Communist threat, so much so that we are now the subject of all kinds of scenarios on when and how the Communists will take over. This kind of “overacting” on the part of those who do not know the situation first hand merely serves to confuse the issues and do not help us any in dealing with the realities of the problem.

While the CPP/NPA has managed, since 1969, to increase its strength, improve its firepower, and expand its political influence, it is still far from being an immediate threat to government and overall national stability. But it does pose a serious threat to peace and order in some of our communities, and to life and welfare for several thousands of our people. Intelligence estimates today place NPA membership at between 10,000 to 12,000 men, and this armed force is potent enough to affect peace and order conditions in four percent of our 41,615 barangays where it has political and military organizations and in the additional nine percent which it occasionally visits.

Likewise, it is significant that 70 percent of violent incidents perpetrated in the countryside and in some urban areas in recent years have been initiated by the NPA. Political bias should never cloud our perceptions of these acts of violence and terrorism. From January 1985 to June this year, the NPA mounted attacks on 27 municipal buildings and 29 integrated national INP stations, causing an estimated damage of P92 million. In the period from 1981 to 1984, damage caused by NPA attacks amounted to P330 million. In terms of lives lost, NP A violence and terrorism have taken the lives of 600 civilians, including 46 government officials.

Our response to the insurgency has been a dual strategy. In the short term, this strategy consists of the uncompromising utilization of military power and the application of national security laws against insurgents. For the long term, however, our strategy seeks to achieve social, economic and political development as the lasting guarantee for social peace.

It is worth remembering that the Philippines stand unique in Asia in having successfully beaten a communist insurgency twice, and without any help from foreign troops. The record of our current campaign assures us that we will do so again.

For we have not been standing still, resting on past victories, in confronting the present insurgency challenge. As the enemy has changed in tactics and weaponry in recent year, so have we on our part sought to make major adjustments in our counterinsurgency program, not least in terms of reforms within our armed forces.

During the past year, the AFP undertook major reforms in its command structure, personnel training and retraining, unit logistics, and tactics. We have placed the highest priority on both troop discipline and morale.

At the same time, we have launched a P1 billion civic action program to be implemented together with the military campaigns in those areas where the NPA operates. Increased civil relations work has enabled our armed forces to mobilize local populations to help government in civic action programs, and in drawing up integrated security plans for the entire communities.

As this twin-pronged strategy is seeping into rebel-infested areas, we have come to see the softness of NP A support among our people. We see how much of its hold on communities is built on plain intimidation and terror, because government troops can only visit these areas from time to time. And we are more confident than ever that we can establish the kind of social and political infrastructure in these areas that will eliminate this presence in the countryside.

To succeed at this, however, we need to be concerned about providing support to our armed forces, instead of denying it the wherewithal to fight the insurgency. Let us face the fact squarely that the reduction of the defense budget in 1983 and 1984 has done much to sap the potency of our programs.

Let us remember that the structure of compensation under the military bases agreement was not a capricious decision, but an integral part of our defense program.

We need likewise to rebuild anew the links between our military and our people, because upon those ties the final solution to communist insurgency can be forced. Let us recognize that while abuses have been committed by our men in uniform, our defense establishment is not passive before its shortcomings, It is striving today to weed out undesirables from its ranks and to’ institute greater professionalism and discipline in the corps.

In human history, it has often been the fate of a nation’s soldiery “to be neglected and ignored in times of calm, and to be trustingly looked to in moments of fright.” We must not make the mistake of moving to support our armed forces when the enemy is already at the gates.

And let us remember that in the kind of world we live in today, moments of calm and peace are merely the cover under which insurgency and subversion fester. There is no specific time for us to be watchful in our vigil over the security of the nation. Every moment is a test of our watch.

To say this is to underscore the fact that we must fight vigorously also on another front: the battle of ideas.

It has often seemed to me that it is on this front where our shortcomings. are greatest, because we have been complacent while the other side ~as been committed, obsessed, fanatical We have been oblivious to the transparency of radical ideas, while being hesitant in the advocacy of our own ideology. And many of our young have been seduced by the false promises of apocalyptic change.

We need have no fear as we engaged in this struggle of ideas, in this test between our rival faiths and ideologies. But it is no longer enough to simply trust to the worn saw that our people will never be won over by communism or socialism, because of ideals and beliefs they were born to.

Tradition is indeed on the side of democracy. But it i3 vain and illusory to imagine that this struggle can be won without renewing ourselves many times by an act of faith. It cannot be won without tapping anew the great resources of democratic ideology and tradition. It cannot be won if we do not carry the struggle also to the citadels of the enemy, and underscore the sour fruit of communist and socialist experience.

This is the reason why I have not stopped insisting that we must develop and nurture our own democratic ideology, one rooted in our experience and needs.

This is why I believe it is not enough that we parrot the beliefs of others in democratic processes and institutions. We must understand their practical import to society, and why they must be defended.

So much of political life is dominated by cliches and empty slogans. Yet the point of politics and government is exceedingly practical and concrete.

This is the lesson we have been learning in our long education in the ways of democracy.

Thus, we know now that for a democratic political system to be truly effective, a sufficient foundation must be laid in terms of the people’s control over their own affairs. It is not enough that citizens vote periodically in elections. They must participate actively in making decisions that affect their economic and social lives.

This is the reason why we have sought to introduce barangay into the basic unit of our society and why we now diffuse political power to some 240,000 elective officials, where before our people only had some 15,000 elected.

We know too that in spite of all the hectoring from others about how democracy should develop in our land, we can only trust and listen to our experiences and our needs. Our institutions must be in the image of our needs, otherwise they will not serve us well.

I believe this is what we have at last found, after many pitfalls and starts, after many trials and errors; a democratic ideology that can serve our aspirations as a people.

This Parliament no less than the Presidency is a reflection of that faith.

The stability of government today, the strength of leadership, is a function of our experience of governments paralyzed by check and balance and dominated by faction and division.

Clearly there are still many areas, in which our political system and processes require improvement and modification, but the basic edifice is already in place and we have all a stake in defending it;

Similarly, the task of improving political process and institutions in our country must be an abiding concern, and this assembly is the seat for deliberation on such initiatives.

At this crucial time in national life, we must stress anew the need for further reform in the machinery of government. There are three areas in which we should move for improvement:

First, greater economy in government operations in order to generate more savings but without diluting government services.

Second, reorganization of the bureaucracy to make possible more effective and efficient government.

Third, strengthening of the administration and management of government programs from national to regional to local level of the government bureaucracy.

It was once said: “Government is personal. It is as compassionate and vibrant—or as ineffectual and spiritless—as the men and women who shape the laws, who make the decisions, and who translate programs into action.”

I believe there is much that we can do to improve the quality of government itself—its machinery, its manpower and its methods?so that our programs may truly touch the lives of our people and our communities.

In all these initiatives I have proposed, we need the support and collaboration of this assembly. In some areas, we shall look to you for action that requires the making of specific law and policy.

High on your legislative agenda, I urge the honorable members of the Batasan to support the 1986 budget proposal which is the lifeblood of the government’s action program for the nation.

In line with strengthening the political process, we urge the speedy passage of electoral reforms which are vital for the holding of free elections next year.

In support of agriculture as the linchpin of the national economy, we shall seek legislation providing for incentives to agricultural development.

To rationalize the role of private corporations in a free enterprise economy, we shall seek guidance from the Batasan to improve the internal structure and operations of public corporations, and to effectively supervise and regulate corporate activities.

In support of every initiative, we take in the sphere of social equity, government reform, and peace and security; we shall as ever seek the counsel and assistance of this assembly.

This is the course we ask the nation to take.

These are the policies and programs we commend to the support and collaboration of the Batasan.

We have no illusions that these proposed policies and programs will resolve overnight every problem before us, or fulfill in a fortnight every aspiration we nurture.

We know rather that each step in this difficult agenda, each initiative we propose, calls for effort, for dedication, and above all for collaboration among us and with all sectors of society.

The recovery and growth of the national economy, the wellbeing and welfare of our fifty-four million people’, the campaign against communist insurgency and for civility and law in our social life, the revitalization of our armed forces and of the bonds between our soldiery and our people, the strengthening of our democratic institutions and of the apparatus of government-all these tasks are to be hurdled step by step, with patience if necessary but always with the determination to see them through to their fulfillment.

All these tasks are surely not for this leadership alone, not for our sympathizers alone, to pursue and bring to fruition.

Surely this business of making our nation strong and prosperous is above partisanship.

I cannot believe that any Filipino, any of our leaders regardless of party, would wish us to fail in these labors in the petty hope that on our failure they may then rise to power.

I cannot believe that any countryman of ours?the heir of so many historic struggles by our fathers for national independence?would invite upon this land the renewed intervention of foreigners.

Let us, if we must, contend in the political arena.

But when the issue is the welfare, the honor, and the future of the nation, let us be one and undivided.

Let us remember the words said so long ago, but which today are still fresh and full of meaning:

“Let our object be our country, our whole country, and nothing but our country.”

Ladies· and gentlemen of this assembly, when I came here a year ago, it was to forge our partnership at a time of trial for the nation. I return today at a moment of resurgent hope and pride in our land.

I spoke with no little apprehension then. I speak with confidence and optimism now.

For this turning point in national life is also a moment of opportunity for the nation.

Let us seize the moment together. Let us make common cause, whatever party we may belong to, in strengthening our one and only family-our people and our country.

Thank you and good day.

Ferdinand E. Marcos