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“A Turning Point for the Nation”

Message to the Batasang Pambansa


Of His Excellency Ferdinand E. Marcos
President of the Philippines
On the State of the Nation

[July 22, 1985]

Mr. Speaker, Mr. Pr ime Mini ster,


Distinguished members of the Bata sang Pambansa:
In keeping with both tradition and duty, we meet today as trustees of our people to set
anew th e annual agenda for the nation.
We should perhaps take note that this tradition surround ing 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 Par liament dates back to the very birth of our First
Repub lic.
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 he re in our land.
There are others, and I ha ve come here tonight to report that our democracy has
prevailed over a year of crisis and un certainty, and to seek your support and
collaboration in meeting a new turning point in national life.
Highligh ts of the Year
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 cri sis was at its
height . There was turbulence and confrontation on ou r 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 hav e decisively stopped the slide of our economic for tunes, and restored them to
health and renewed activity. Against every forecast of collapse made by so many, w e
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 in stitutions 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 re sponse 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 insti tuted 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 be yond .the arc of crisis into a new phase of struggle.
At certain times in our history, the aspirations of our peo ple and the course of events
converge at a single time to shape a turning point in national life.
So it was in 1 896 when this land was rocked by th e tremor s 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 t his decisive t urning point in our hi story when we either thrust our
economy forward into full mo dernization or forever remain in th e shallows; when we
either stop once .and for all the challenge of Communi sm in thi s country or be overrun
by it; when we either attain the full promi se of democrac y or be l ed awa y into alter -
native routes toward th e future.
To meet thi s challenge, we must addre ss squarely those great issue s on which the future
of the nation hangs .
National Economic Recovery
When we speak of national prioritie s today, the fir st on our minds is the econom y, and
specifically the progress of the na tional economic recove ry program.
To understand recent developments and directions in the economy mu st first under stand
the nature of the cri sis that struck us in 198 3.
To .simplify a rather comple x phenomenon, the crisis stem med from two factors: Our
vulnerabilit y to the unexpected drop in access to international credit and high inte rest
rates, and our difficulty in managing ou r balance of pa yments po sition with limited
resources.
These two factors were already constricting the growth of the economy when traged y
struck former Senator Benigno Aqui no, Jr. in Augu st 1983. The tragic e vent, ho wever,
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 circum stances that we formulated the na tional economic recover y
program. The program which began in 1984 stressed five main lines of action:
- First, a financial package to modify the maturities of part of ou r external debt, to
resume normal credit lines, and to commit fresh credits to finance import s, eliminate
arrearages and build up our international reserves;
- Second, a disciplined financial and budgetary program to stabilize our balance of
payments posi tion, exercise g reater con trol on publi c spending and contain inflation;
- Third, a structur al adjustment prog ram for the econo my, consisting of major tariff and
agricultural reform s, libera lization of import restrictions, investme nt and e xport
promotion and energy self-reliance;
-Fourth, an economic priorities plan focu sed on the ba lanced development of both
agriculture with industry; and
-Fifth, the e xpansion of outreach programs in employ ment, health, nu trition, housing,
education, and the improve ment in the quality of s ocial services to help our people,
especially the most disadvantaged, to cope with the effect s of the economic cri sis and
the impact of the stabilization program.
These adjustments were ofte n criticized as too severe and pai nful, but these were
necessary to put the econom y back on its feet.
We did not flinch in biting the bullet as they s ay. With will and with imagination, we
have ta ken the cour se to relief and recovery. And today , as we meet here in this
chamber, we can proudl y say tha t we have passed the ini tial test. Economic reco very
has begun. '
The fin ancial pack age for the period fro m October 17, 1983 to December 1 986 amounts
to $13,760 million. Of thi s amount, about $3.6 billion represent "new money"
principall y intended for the general requirements of the economy.
The mo st critical component under the program is the stand by facility from t he IMF
amounting to SDR 615 million or ap proximately $610 million. The Philippine request
for this fa cility was approved by the IMF boa rd on December 14, 1984. ' We drew the
first tranche of $ 80 million last December 28, 1984 and thi s was used to pay the bridge
financing loa n extended by the go vernment s of the United States, Japan, and Korea
subsequent draw downs will be contingent upon the achievement of cer tain qu arterly
performance criteria outlined in the economic adju stment progr am. We expect the
release of the second tranche of $107-million thi s July because we have met
successfully the performance target a greed with the IMF last May 31, 19 85.
The financial package likewise provides the country with $925 mi llion in new loans and
a credit line of about $3 billion to finance import s, and re schedules ove r a period of 10
years maturiti es of $5.8 billion , falling due between 1983 and 1986.
The pledge of n ew money by our commercial creditor s will enable us to service our
external debt obligations on a current basis, including the e limination of arrears by the
end of our IMF program period. The r estoration of the trade facility, on the other hand,
will reo pen normal trade financing whose disruption had imposed a heav y cost burd en
on dom estic producer s.
It has been s uggested by some quarter s that th e government did not have to deal with
the International Monetary Fund with respect to our debt paym ents. What, in fact, were
our other options? We cou ld have follo wed the example of countries like Cuba, North
Vietnam and North Korea, whic h did not keep up their payments. Or else we could have
merely ignored ou r default without any regar d for the consequenc es to the creditors.
Dealing with the IMF and other creditor s, however, was the only hono rable alternative,
first, because we are a signatory to the Bre tton Woods Agreement of 1945 and cannot
therefore renege on our debt payment s; and second, be cause we have to protect ou r
external position in view of future requir ements for capital.
With respect to the economic s tabilization program, we are meeting successfully the key
objective of impro ving our bal ance of payments pos ition.
The deficit in the current account was reduced to $ 1.3 billion in 198 4 from $2.7 billion
in 1983, s urpassing the target of $ 1.5 billion set for the year. The large improvement in
the curre nt accoun ts resulted in an overa ll balance of paymen t 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 eve n more positive with a cu rrent a ccount
surplus of $165 mi llion as com pared to a deficit of $502 mi llion for the same period in
1984.
This was, however, due to a mo re significant drop in imports b y 12.6 percent whil e
expor ts fell by 11.4 percent over t he same period in 1984. By end of May , the trade
deficit was narrowed down by 22 percent to $220 mi llion compared to $ 283 million for
the same period in 1984. The dec line 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, nonme tallic mineral manufactures, garments, and
nickel and fish products.
On the other hand, non-merchandise trade improved im mensely 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-Ma rch 1985, this declined by $212 mil lion 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 pe rcentage 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 pe rcent as of July 19
this year. For the first six months of this year, the interest rate averaged 25.6 percent.
The deceler ation of the in flation rate was d ue to a number of policy measures ,
significant of w hich i s the effective management of liquidi ty by limiting the gr owth in
reserve money thro ugh active open mark et operations and other credit instruments.
Consequently, reserve mon ey expansion was limited to 1 3.6 percent in end-May 19 85,
reaching P30.9 b illion and well within the P34 .4 billion targ et during the sa me peri od.
You mu st realize how diff icult it i s to contain a budget deficit at such lo w levels but we
were able to cut our o verall deficit to 1.8 percent of GNP in 1984, a nd to kee p it within
the progr am target of 2 .0 percent of GNP. T his improvemen t was due to an austere
spending policy, together with an increa sed revenue collection f rom im plement ation of
new revenue mea sures and im proved tax collection .
Certain ta xes were modified-to alleviate the burden on the taxpayers, p rovide bu siness
opportunities and br oaden the ta x base. In particul ar, the tax base has been broadened
mainly by withdrawing ta x exemptions from public and pri vate enterpri ses and by
shifting from spec ific to an ad valorem m ade of tax levy. A uniform tax rate on interest
earnings has been adopted, the method of inven tory valuation f or income and corporat e
taxation ha s been modified , and a levy -of a one percent ta x on all foreign e xchange
transactions i n lieu of the levy on selec ted transaction has been imposed.
To reduce the cost of ra w material s and make our indu stries operate mo re efficiently ,
average nominal tariff ra tes were lowered to 2 8 percent in J anuary this year f rom the
pretariff reform average ra te of 43 percent. A uniform mark -up of 25 per cent on
imported good s has also been adop ted. Moreover, an addi tional 46 nonessential and
unclassified consumer items can no w be freely imported without p rior approval from
the Central Bank , bringing to 967 · the total num ber of liberalized item s.
In the energy sector, our dependence on oil imports has gra dually declined due to a
continu ous substitution of domest ic ener gy resources for impo rted ene rgy. The share of
indigenous en ergy resources to our total energ y consumption has increased to 44
percent for the fir st four mon ths this year from la st year's 42 percent . Consequentl y, our
oil import bill for th e same p eriod 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 artifi cial 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 gas oline 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 pr ice 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 im port 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 dec lined during the drought-stricken years, per capita consumption of rice
rose. And it is imperative that the National Food Author ity 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 dur ing
the same period in 1983, based on quarterly integrated sur veys of households.
Average annual incomes of both rural and urban households have increased over the
years. The average rural household in come 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 con tributed to the increase in rural and agricultural
household in comes. 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 nonplantat ion agri cultural workers has been increased to P46.67 and
P36.67, respec tively, from P4.75 in 1972.
The average urban household income, on the other hand, has been positively affected
by the series of minimum wage adjust ments . These have raised the present minimum
wage of nonagri cultural workers in and outside Metro Manila to P57.08 and P56.00,
respectively, from P8.00 in 1972. In the public sector, gov ernment 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 genera l
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 se ctor by 2.1 percent as of the first quarter pre vented a
larger fall in .real output. The improved income in agri culture will raise the purchasing
power of two-thirds of our po pulation who live in the rural areas and eventually raise
the demand for industries and re vive industrial activit y.
The l atest statistics show that th e level of unemployment has levelled off. The fir st
quarter data f or 1985 show ed an actual de crease in the unemployment rate t o 5.8
percent from 6. 3 percent and the underemployment rate to 24 percent from 36.5
percent, over the same period last ye ar. The number of laid-off worker s for the fi rst
four mon ths of th is yea r also decreased by 43.7 pe rcent to 2 3,280 from 41,326 over t he
same period l ast year.
An e ven closer look at th e employment d ata showed that the num ber of self-emplo yed
increased by 12.8 percent in the first quarter this year over t he same per iod last year.
This offsets a decline in the number of wage an d salaried worker s, which fell by 1.6
percent over the same period last year. Thi s reflects the resiliency o f our peopl e when
they venture into entrepreneurial activities as a matter of eco nomic adjustment and
social p rotection.
To a ssist the l aid-of f workers, an additional P45.6 million was released as
unemployment a ssistance loans during the first semester. Industrial peace was
promoted with the increased num ber of collecti ve bargaining agreements reaching a
total of 1,9 31 as of Ma y covering some 255,000 workers.
Sugar work ers who we re affected by the slump in the world price of sugar were gi ven
assistance in the form of an emergen cy employment p rogram. U nder the program,
displaced sugar plante rs and millers were encour aged to plant food and cash crop s in
sugar land s rendered idle due to drastic production setbacks. In addition , I have
recently imposed a sugar production qu ota of 1. 6 million tons to keep this co mmodity
available in the dome stic market as well as to fulfill our coun try's export quot a
requirement to the U.S. I have also di rected the Philippine Suga r Commi ssion to
ensure that the domestic pric e of sugar b e maintain ed at P300 per picul to enable sugar
producer s to gain re asonable profits.
I have ordered the rele ase of funds to rehabilitate areas de vastated by the recent
typhoons. I assure you, there are enough stock s of rice to meet any contingency. .
Moreo ver, P1.4 million was disbursed in the form of long term soft loans to assi st
distressed hospitals in upgrading their facilities and services in the fi rst five months of
1985. The pri mary health care approach has also been instituted in 37,705 ba rangays
as of March 1985. M eanwhile , Pag-ibig housing loans availed by members reached
P4,368.6 million in April 19 85, an in crease of 12.7 percent from the December 1984
level.
Tasks for Economic Manag ement
All these gains, t aken singly or toge ther, are a signpost telling us that the reco very
program is working, and that the sacrifices and t asks we have bor ne with fortitude
have not b een for naught. When we say that t he Cassandras of doom among us and in
the forei gn media have been wrong in th eir prognosis on the countr y, these are the
realities on which we b ase ou r claim.
But we have only passed the f irst sta ge in the arduous road to recovery. We cannot
linger on the road and risk a lapse to compla cency.
What was true at t he onset of the crisis is still true today: our econom y, hence o ur
recovery efforts, are challenged by circum stances b eyond our contr ol, by condition s
beyond our shores. We are confronted by a s lowdown in world tr ade, by a growth
recession in our m ajor trading p artner, the U.S ., by a fall in export pri ces and by a
growing wa ve to pr otectionism in the developed econ omies of U.S., Jap an and Euro pe.
These will hamper our p rospects for a higher export growth, but thi s should enc ourage
us to f urther diversify our exports and search for other nontradition al markets for our
product s.
We mu st recognize that the emergence of a dynamic national economy will n ot be an
accide nt of de velopment, but the product of a national effort animated by a vi sion of
the fu ture.
At lea st six areas of econom ic management ne ed to be subjected to further action and
reform for the re st of 1985 a nd 1986.
First, we shall con tinue to adhere to a disciplined financial and budgeta ry program to
stabilize our balance of payment :, position , maint ain an enduring reduc tion in the
inflation rate, and e xercise greater contr ol on public spending.
We hope to maintain positive interest rates pri ncipally by keeping the infl ation rate as
low as possible to en courage greater domestic produc tion and investment s. We expect
the inflation rate to decelerat e further to ar ound 10 percent b y the end of this year and
further down to a single digit level by 1988. Money supply e xpansion will be restricted
to around 1 5 percent to further bring down the infl ation rate.
Dome stic borro wings of the public sector will be regulated and the national
governmen t budgetar y deficit will be further cut down this year.
The stimulu s for growth w ill definitely come from the in vigorated rural and
agricul tural sectors and an inten sified e xport activity in lieu of a slack on government
spending and pri vate real investment s.
Second, we shall strengthe n and where necessary, reh abilitate the financial system t o
impr ove its efficienc y and to re store public confidence .
In particula r, government f inancial i nstitutions will be reformed to avoid unn ecessary
duplicati on of functions as well as e xcessive and une ssential com petition with the
private sector. We shall acti vely assist mergers a nd consolida tions among bank s to
encour age the m to b uild u p their resources and equity ba ses. We shall pursue the
restructu ring of the legal and administrati ve framework f or priva te institutions. Al so,
the Central Bank's role as a stabilizer a nd overse er of banks will be furthe r
strengthened .
Third, we shall limit g overnment sector in volvement to sociall y desirable activities
and to those wherein the p rivate sector is unable or un willing to invest in due to
unprofi tabilit y, high risks, and exorbitant co st inv olved but which activities are also
of high social and economic p riority. Thi s would enable the pri vate sector to continue
its dynam ic role in our economic recover y in the conte xt o f a free e nterprise
econom y. Our go vernment can then utilize it s limit ed and critical resources more
efficientl y, effec tively and economically as possible over the long run th rough th e
judicious use and management of govern ment corporation s, among others.
Towards this end, the coor dination, super vision and regu lation of go vernmen t
corporat ions will be tigh tened to en sure public accountability. We shall subject
government corporations to more rigorous performance criteria, based on their
economic and social contributi on, actual output and producti vity and co st recovery
record. In addition, pr ivate firms and assets which have been transferred or acquir ed
by th e government due to fo reclosure, default or non fulfillment of contractual
obligation s shall be rehabilit ated onl y after t hey have been p roven to be satisfactorily
viable. O therwise , their divestiture to t he private sector at the best te rms available will
be unde rtaken.
Fourth, we shall step up the revenue gene rating capacity of the public sector through an
upgrading of the ta x and non tax system and through more efficient re source utilization .
Let me say at once, we do not propos e or contemplate any new taxes except where
action is req uired to repeal and ch ange certain tax me asures in the interests of
impro vement and fairness.
To improve resource mob ilization, we will strive for a more efficient tax coll ection
system to achieve a broader ta x base. Improve ment in the collection and utilization of
tax resources shall be the focu s of our efforts . Vola tile international ta xes shall be
replac ed by m ore desirable domestic tax es. The t ax and gross recei pts on foreign
exchange tran sactions and the remaining five percent additiona l ad valorem import
duty shall eventually be phased out i n favor of alternative and better tax measures.
To ensure more efficient resource utiliz ation, public investments will be re gularly
programmed. Due to our limited public funds, we have to curb any future spending.
Priority shall be given to ongoing projects, t hose with the highest eco nomic and soci al
rates of ret urn, and t hose w hich are financed from foreign sources.
Fifth, we shall revitalize the agricultural sector, which i s envisioned to propel n ational
recovery and su stain economic growth in the comin g years.
In terms of out put, agricultural value added is expe cted to increa se owing to the
implementa tion of various policy reforms in the agricultural sector. The reform s shall
be built on the principles of liberalization, d eregulation and technological
modernization. Policy deci sions will be aimed at de veloping a more buoyant and
competiti ve agr icultural secto r and at improving the inc entives to small fa rmers .
Finally, we mus t press o n structural refor ms to impro ve the efficiency of resource
allocation, to make our indu stries internationally competiti ve and to dev elop and
diversif y domestic sources of ene rgy.
For such changes to be undertaken smoothly, ' it is impera tive 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 favor able 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.
Social Development
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 al l in diffus ing 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 shut downs
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 imple mentation of our recovery program . The other side of
this is government's obligation and commitment to the improvement of the q uality of
people's lives, especial ly of those in the disad vantaged groups.
Accordingly, through more efficient and effective resource use, we will expand and
improve the delivery of basic social services.
In health and nu trition, the primary health care approach will conti nue to ensure the
provision of e ssential h ealth services to th e most basic communiti es. Also, we will
further strengthen th e herbal medicin e program to cut down reliance on importe d drug s
and introduce acupun cture in various ho spitals to reduce th e costs of medical c are.
Likewise, we are committed to fur ther impro ve and develop the health inf rastructure
network, particularly ho spitals , to meet the needs of the growing po pulation.
In education, the quality and equity in elem entary educa tion will be sustained through
the Progr am for D ecentralized Education Dev elopment (PRODED). Through thi s
program, the elementary cu rriculum i s gradually being revised to em phasize the 3Rs
and the inculc ation of humani sm and Filipi nism. Improvements initiated by PRODED
at the elementary level will be 'continue d onto the secondary education program .
The study-now-pay-lat er plan will be further expanded to extend educ ational lo ans to
poor but deserving tertiary stu dents. Likewi se, sch olarship programs will be broadened
at both undergraduate and gradu ate levels .
In hou sing, we will shift our shelter produc tion program to rural areas and make it
more affo rdable to a greater num ber of people b y offering l ow cos t housing unit s.
Moreo ver, no new massive housing units’ c onstruction will take place, except those
already approved for production and those which are in the process of construc tion.
We have a lso limited th e Pag-Ibig housing to P50,000 to ensure that the program
benefits accrue to the lo w and middle income groups. Furthermore , an addition of three
new housing loan benefits has been ap proved aimed at helping Pag-Ibig member s for
their education al, medical and o ther needs, f or home improvement, and for organized
labor and government employee organizations .
The Rent C ontrol Law has also been implemented and rents have been programmed for
adjustments on a staggered basis to help some one million hou se renters all over the
land cope with the current economic crunch and to encourage more social and low-co st
housing acti vities.
We shall also step up local and overseas job placements to compensate for the de cline
in employment opportunities due to the general slo wdown in industrial activity.
Moreover, we will create more jobs through the Kilusang Kabuhayan at Kaunla ran
(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.
Peace and Securit y
In pursuing these initiati ves for the economy and society, peace and security are
impera tive to success. This administra tion 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 ha ve 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 prior ity
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 be ing 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 sub ject of all kinds of scenarios on when and how the Communists will take
over. This kind of "o veracting" on the part of those who do not know the situation first
hand merely serves to con fuse the issues and do not help u s 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 in fluence, it is still far from being an immediate
threat to gov ernment 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 perce nt of v iolent incidents perpetrated in the
countryside and in some urban areas in recent years have be en ini tiated b y the NPA .
Political bias should never cloud ou r perceptio ns of the se acts o f violence and
terrorism. From J anuary 1985 to J une thi s year, t he NPA moun ted attack s on 27
municip al buildings and 29 integrated national I NP sta tions, causing an estimated
damage o f P92 million. In the period from 19 81 to 1984, damage cau sed by NPA
attacks amoun ted to P 330 million . In terms of lives lost, NP A violence and terrorism
have taken the li ves of 600 c ivilians, including 46 government of ficials. .
Our re sponse to the in surgency has been a dual strategy . In the short term, this strategy
consis ts of the uncompromising utilization of military power and the application of
national se curity laws against insurgent s. For the long term, however, our strategy
seeks to achieve social, economic and political deve lopment as the la sting gua rantee
for social peace.
It is wo rth remembe ring that the Philippines stand unique in Asia in having
succes sfully beaten a communi st insurgency twice, and without any help from foreign
troops. The record of our current cam paign a ssures us that we will do so ag ain.
For we ha ve not been standing still, re sting on pa st victories, in confronting the pre sent
insurgency challenge . As the enemy has changed in tactic s and weaponry in recent
year, so have we on our part sought t o make major adjustments in ou r counter -
insurgency program, not lea st 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 prior ity on both troop discipline and morale.
At the same time, we have l aunched a P1 billion civic action program to be
implemented together with the military cam paigns in those areas whe re the NPA
operates. Increased civil relations work has enabled our a rmed forces to mobilize local
populations to help government in civic action programs, and in drawing up integrated
securit y plans for the entire communi ties.
As this twin-pronged strat egy is seeping into re bel-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 solu tion 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 ene my 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.
Strengthening our democratic institutions
To say this is to underscore the fact that we must fight vi gorously 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 under-
score 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 e xperience s and our needs . Our
institu tions must be in the image of our need s, other wise they will not serve us well.
I believe this is what we have at last found, after many pit falls and starts, after many
trials and errors; a democratic ideo logy that can serve our aspiration s as a people.
This Parliament no le ss than the Presidenc y is a reflection of that faith.
The stability of go vernmen t today, the strength of le adership, is a funct ion of ou r
experience of go vernments paralyzed by check and balance and domina ted by faction
and division.
Clearly there are still many a reas, in which our political system and processes require
improvement and modification, but the basic edifice is alread y in place and we ha ve all
a stake in defending it;
Similarly , the task of imp roving political proce ss and insti tutions in our count ry must
be an abidin g concern, and this assembly is the seat fo r deliber ation on such initiati ves.
At this crucial time in national life, we must stre ss 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 go vernment operations in order to generate more sa vings but
without diluting go vernment services.
Second, reorganization of the bureaucracy to ma ke pos sible mor e effecti ve and
efficien t governmen t.
Third, strengthening of the administration and manage ment of government programs
from national to regional to local level of the government bureaucracy.
It was once said: " Government is personal. It is as com passionate and vibrant—or as
ineffectual and spiritless—a s the men and women who shape the la ws, who make the
decisions , and who translate program s into action. "
I believe the re is much that we can do to improve the quality of government itself—its
machinery, its manpower and its me thods― so that our programs ma y truly touch the
lives of our people and our communities.
Legislative P rogram
In all these in itiatives I have proposed, we need the support a nd collaborat ion of th is
assembly. In some are as, we shall look to you for action that requires the ma king of
specific law and po licy.
High on your legislative agenda, I urge the honorable mem bers of the Batasa n to
support the 1986 budget proposa l which is the lifeblood of t he government's action
program for the nation.
In line with strength ening the po litical process, we urge the speedy p assage of electora l
reforms w hich are vital for the holding of free elections next year .
In support of agr iculture as the linchpin of the nat ional economy, we shall seek
legislation providing for incentives to agricultural d evelopment.
To rationalize the ro le of pr ivate corporations in a free enterprise econo my, we shal l
seek guidance from the Batasan to improve the int ernal structure and operation s of
public c orporations, and to ef fectively supervise and regulate corporate activities.
In support of every initiative, we take in th e sphere of social equity , government reform,
and peace and security; we shall as ever seek the counsel and assistance of this
assembly.
Conclusion
This is the course we ask the nation t o take.
These are the policies and programs we co mmend to the support and coll aboration of
the Batasan.
We ha ve no ill usions that these proposed p olicies and programs will re solve overnight
every problem before us, or fulfill in a f ortnight every a spiration we nurture.
We know rath er that each step in this difficult agenda, each in itiative we propose, calls
for effort, for dedication, and above all for collabor ation among us and with all sectors
of societ y.
The reco very a nd growth of the national economy, the wellbeing and welfare of our
fifty-four million peopl e', the campaign against communist in surgency and for civility
and law in our social life, the revitalization of our armed f orces and of the bonds
between our soldie ry and our people, the strengthening of our dem ocratic insti tutions
and of t he appa ratus of government-all these tasks are to be hurdled step by s tep, with
patience if nece ssary but al ways with the de termina tion t o see them through to their
fulfillment.
All these ta sks are surely not for this leade rship alone, not for our sympathizer s alone,
to pursue and bring to frui tion.
Surel y this business of making our nation strong and pros perous is above partis anship.
I cannot believe th at any Filipino, any of our leaders re gardless of party, woul d wish
us to fail in these labor s in the petty hope that on ou r failure they may then rise to
power .
I cannot believe th at any countryman of ours ―the heir of so many historic st ruggles
by our father s for nati onal indepen dence ―would invite upon t his land the rene wed
intervention of foreigner s. .
Let us, if we mu st, co ntend in the political arena .
But when the is sue is the welfare, the hono r, and the future of the nation, let u s be one
and undivided.
Let u s remembe r the words sa id so long ago, but which today are still fresh an d full of
mean ing:
"Let our object b e our country, our whole count ry, and nothing but our c ountry."
Ladies · and gen tlemen of thi s ass embly, when I came here a year ago , it was to forge
our partne rship 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 sp eak with confidence and optimism no w.
For this turning point in n ational life is also a moment of opportunity for the n ation.
Let us seize the moment toget her. Let us m ake common cause, whatever party we ma y
belong to, in strengthening our one and only family -our people and our country.
Thank you and good da y.

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