The year 1966 was in a very real sense a “Philippine Year” in the United States. Americans, both official and private, paid more attention to the affairs of our former ward in the Pacific than at any time since independence in 1946. It was a year in which the Philippines could hardly reiterate the familiar plaint that they are “being taken for granted.”1
Least publicized, but not the least important for long term understanding, was the Philippine-American Assembly held in Davao in February. Under the joint sponsorship of the American Assembly and the Philippine-America Society nearly 70 leaders in business, finance, government, journalism and education from both countries gathered for the fullest and freest discussion of mutual problems that the two peoples had ever known. This dialogue was an important indicator of the maturing of the relationship.’ The Davao meeting was followed by two regional Assemblies in the U.S. on the same topic, and there will be a third.
These Assemblies concluded, against the background of rising Filipino nationalism and an increasingly self-conscious effort to establish a distinct national identity, that the main problem areas in Philippine-American relations were Southeast Asian strategy, military bases, investment climate, trade relations, economic aid and veterans affairs. In the course of the year, which included President and Mrs. Marcos’ highly successful state visit to the U.S. and President Johnson’s trip to the Philippines scarred by violent demonstrations, progress was made in certain of these areas. And all Philippine problems received heightened attention in the U.S.
The Vietnam Aid Bill was the most debated foreign policy measure in the history of the Philippine Congress. Manila wags dubbed the 1966 session the “Vietnam Congress,” “Viet Cong,” for short. Before his election President Marcos had himself been opposed to sending Philippine forces to Vietnam, a move first proposed by Macapagal. It is not surprising then that he initially met with widespread opposition in the Congress when he asked in January for a P 35 million appropriation to enable the dispatch of 2000 “non-Combatant” troops. Finally in August, Congress gave its assent, but not without an unusually high percentage of negative votes. In the meantime Marcos had apparently engaged in some Johnsonian arm-twisting.2 Politicians who had not benefited from any new “pork barrel” appropriations since 1961, reportedly, were particularly susceptible to such persuasion.
At the Manila Conference there was some indication that Marcos sought to retrieve an image of Asian independence which had been tarnished by widely published rumors of U.S. pressure regarding aid to South Vietnam. He made a bold effort to get the conferees to recommend a halt to the bombing of North Vietnam, but was quite unsuccessful.
U.S. military bases have now become a much less important source of Philippine-American friction than they were only two years ago, due in large part to the August 1965 agreement which, after a decade of wrangling, granted to the Philippines essentially the same jurisdiction over the bases and American military personnel which NATO countries have. The tentative 1959 accord to reduce the length of the U.S. base lease from 99 to 25 years was formalized in the Rusk-Ramos Agreement in September.
Disputes over the status of American investors have become relatively more important. An unusually stringent interpretation of the Retail Trade Nationalization Act affecting American firms is still sub judice and though a matter of much debate, was not one of negotiations in 1966. In May, Secretary of Foreign Affairs Narciso Ramos formally proposed discussions on the abrogation of “parity” rights for American business before their expiration in 1974, but no progress report has yet been made. The Investment Incentives Bill, which included guidelines for foreign investment policy, languished in the Philippine Congress while Secretary of Finance Eduardo Romualdez said in New York that the Philippines was looking to private foreign capital “for massive outside help” in implementing the Four Year Development Plan.3 In September President Marcos issued an administrative order to clarify foreign investors’ rights; all uncertainties do not seem to have been resolved, however. Some articulate Filipinos contend that foreign credits should be sought, not investments. But adequate channels for a substantial flow of American loan capital to the Philippines have not yet been established.
The major issues in trade relations revolve around the question of what kind of treaty should replace the Laurel-Langley Agreement in 1974 – or earlier. However, in late 1966 a new dispute threatened to halt PhilippineAmerican trade altogether. In a move to combat “technical smuggling,” especially undervaluation of exports to the Philippines, the Philippine government decided to require American and other exporters to send a “shipper’s export declaration” with every shipment. The U.S. government declared that the documents were “confidential” and could not be sent; American exporters threatened to boycott the Philippines if the requirement was not dropped. That danger has been averted by minor compromises on both sides, but the incident reminds us that solution of old problems does not guarantee smooth sailing in the future of PhilippineAmerican relations.
Philippine veterans’ claims seem to be vying for the title of “major irritant” in the near future. President Marcos, himself a veteran, can be expected to press this matter. Legislation is now before the U.S. Congress to appropriate additional benefits of $17 million for Filipino veterans. But total Filipino claims are much larger. The language of the joint presidential communique in September gives some indication of the nature of the impasse: “President Marcos put the case of the Philippine veterans. President Johnson explained the problems and limitations from the standpoint of the U.S.”
In sum, though 1966 was also a year which marked the re-establishment of Philippine diplomatic relations with Malaysia, the revival of the Association for Southeast Asia, the location of the new Asian Development Bank’s headquarters in Manila, and a state visit to Japan, it witnessed, on balance, an intensification of relations with the U.S. If intensity of communication produced understanding, this is to be welcomed. In view of the significance of the Filipino search for a national identity associated with Asia, however, the development of these two separate stands may pose continuing pressures.
Samuel Huntington has reminded us that political development can, under certain circumstances, turn to political decline and decay. It is a sobering thought as we look at Philippine domestic affairs in 1966. If one is to take presidential oratory at face value, the Philippines has already begun the process of decline. Ferdinand Marcos, in his December 31st inaugural address, declared dramatically: “Filipinos have ceased to value order. Justice and security are myths. Our government is gripped in the iron hand of venality, its treasury is barren.” Later President Marcos revealed that in 1965 the gross national product had been declining. He believed that conditions had combined to produce “an outlook of the people” characterized by despair and that the country had been “dangerously” close to “a sudden uprising.” 
President Marcos proceeded to open his first state of the nation address: “We are in crisis.” He was, of course, issuing a call to action. Thus he could be excused a certain exaggeration of the urgency of the task. But it was, indeed, a very modest exaggeration.
In part the problems Marcos faced were typical of the point in the electoral cycle at which he found himself. The great cost of Philippine election campaigns, and their gradual prolongation, has meant that increasingly the year before a presidential election the incumbent has little time, or government funds, for anything but politics. A raft of superfluous appointments are made, foreign exchange is dissipated and government coffers are drained-not to mention the pockets of private donors. In the last six months of 1965 the Philippine government borrowed P300 million just to meet budgeted outlays.
It was hoped by many that President Macapagal’s abolition of foreign exchange licensing would eliminate the major cause of corruption, and reduce campaign expenditures. However, party managers, accustomed to the earlier pattern, continued to assess businessmen, particularly Chinese, the same amount of contributions that they had when the importer with a dollar license could well afford a cut for the ruling party. In some sectors the assessment was regularized by being processed through industry associations.
Since tariffs replaced foreign exchange rationing as the main instrument for protecting local industry, smuggling replaced kickbacks. The substitution was not for the better. The steps taken by the smugglers to buy protection corrupted a wider range of officialdom than ever before. Revenue and foreign exchange losses from smuggling have been estimated at hundreds of millions of dollars per year. Even Red China got into the act, smuggling Swatow embroideries into the Philippines to be resold in the U.S. as a Philippine article.
In addition to the loss of revenue and foreign exchange and the corruption of law enforcement officers, smuggling has been disastrous for infant industry in the Philippines, which was, in effect, denied tariff protection. The textile industry has been hardest hit. By the end of 1965 only four out of the country’s 70 textile mills were operating, mainly because of the competition of smuggled fabrics. The leather, rubber products, cigarette, paper and pharmaceutical manufacturers were also hurt.
President Marcos decided first to focus his administration’s energies on the related problems of smuggling and law enforcement. Success in these fields would not only have immediate economic benefit, but would make political capital as well. Thus one of the most crucial appointments which Marcos made was that of Col. Jacinto Gavino as Customs Commissioner, a retired army officer. Gavino had been the general manager of the National Rice and Corn Corporation under Magsaysay, and had an almost unparalleled reputation for honesty and efficiency. That reputation did not seem impaired in the early months of the difficult 1966 assignment. In July customs collections were already more than 50% above those in July 1965. By November, however, Gavino had been removed by President Marcos for keeping improper company. Marcos was learning the pitfalls of graft-busting.
A large portion of the smuggling had been so-called “technical” smuggling, a broad category which is to be distinguished from dodging the Philippine Navy on the high seas. It is often carried on at the Manila piers by customs inspectors in connivance with importers. This has been substantially reduced by a mechanism which brings economic interest groups directly to the support of government policy designed to protect them, an uniquely constructive involvement of industry in public administration. Gavino invited industry associations, e.g., the Textile Mills Association of the Philippines, the Pulp and Paper Manufacturers Association, and the Association of Drug Manufacturers, to provide him with technical advisors on appraisal to be present at the piers. It is, of course, in the interest of these associations to have competing imports pay full duty on an honest and accurate appraisal.
Outside of Manila the suppression of smuggling was usually the task of the armed forces and police. Some Constabulary and Navy officers were, however, in collusion with the smugglers. The President’s judicious use of dismissal, transfer and disciplinary action has significantly changed that situation. But the complicity of local police was much more difficult to deal with. In the Philippines municipal police come under the authority of the elected mayor, and thus indirectly under the influence of governors and Congressmen. Such policemen, in fact, have often been little more than the mayors’ bodyguards, and all-purpose henchmen. Thus to reform the local police Marcos needed new legislation, and he asked for it. Few thought that he would get it, however. But rising public indignation, sparked by frequent reports of personal vendetta and intimidation by policemen in and out of uniform-not to mention the revelation that one town had as a chief of police a convicted murderer who had escaped sentencing-as well as the skillful use of pressure by the President caused the bill to pass in early September. Now local police will be brought under a centralized and relatively depoliticized administration. This does not insure honesty and efficiency, but it does make it more possible. In any case, the passage of this bill may indicate that the President did not completely dissipate his influence in Congress to get the Vietnam Aid Bill passed, as many had feared would be the case.
President Marcos claimed in August that he had been able to cut smuggling by 40%. Another measure of the success of the collection drive at the customs is that all 70 textile mills were brought back into full production. This may not be spectacular progress, but it is certainly noteworthy.
In addition to raising more revenue, through a revamp of the Bureau of Internal Revenue as well as the Customs, Marcos has attempted to solve the government’s financial problems by laying off casual employees and not filling existing vacancies in the civil service. He has thus reduced what was a daily deficit of about PPA million in 1965.
For the economy as a whole, while drafting more long-range plans, the Marcos administration has also tried a variety of ingenious short-term devices to mobilize scarce capital and channel it into the more viable of the large number of firms in financial difficulties. A World Bank loan of $25 million to the Private Development Corporation of the Philippines will further this effort to strengthen industry. The “long term economic plan” which has been adopted by the Marcos administration is both less detailed and more realistic than previous blueprints. Its most notable feature is that it covers only the fiscal years for which President Marcos has responsibility in his present term and thus is not, as earlier counterparts sometimes were, simply a re-election platform. It recognizes the seriousness of the high population growth rate of 3.2% and admits its relationship to growing unemployment, estimated at more than 8% of the labor force-not including the underemployed.5 Recognition of the low annual per capita growth rate-less than 1%-in the previous five years was also realistic, but whether a projected annual per capita growth of 2.4% for the coming four is achievable remains to be seen.
Like President Macapagal, Marcos did not stress agrarian problems in his campaign. Nor did he-emulating his predecessor again-give them primary attention in his first few months in office. Some even accused the President of being uninterested in existing agrarian programs and agencies since they were so closely identified with ex-President Macapagal. In any case, dramatic evidence of Huk revival in Central Luzon had begun by mid-year to cause some revision of priorities.
Almost every year in the last decade the Philippine Congress, at appropriations season, has been presented with the phenomenon of the “budgetary Huk.” Thus both Congress and the press have become cynical about the cry of “Huk” emanating from military sources. This year, however, the wolf appeared in more convincing guerrilla clothing. The most spectacular strike by the revitalized Communist movement was the July ambush killing of the mayor of Candaba who, as president of the Anti-Huk Mayor’s League of Pampanga, was on his way to a conference with the President. This was one of 71 killings attributed to the Huks in the first eight months of 1966.
The skeptical observers who have held for some time that the “Huk revival” was being confused with endemic banditry and gangsterism had an assist last August from ex-Huk Supremo Luis Taruc, brought from prison to testify to a Congressional investigating committee. The Huks do appear to be engaged in a very successful protection racket in Angeles, Pampanga-which lives off American sin. (This seems to be the Huks’ most substantial “foreign aid.”) A take estimated at nearly a half million dollars a year reportedly enables them to pay comfortable salaries to full-time cadres and thus help keep them honest.
The top Communist leader in Central Luzon today is said to be Pedro Taruc, the ex-Supremo’s nephew. Without announcing an intention of overthrowing the government, Taruc’s “New People’s Democratic Front” nevertheless skillfully exploits the peasants’ socio-economic grievances and complaints of injustice. (The creaky wheels of justice have been even further slowed by Marcos’ failure to fill a number of vacancies in the Court of Agrarian Relations.) Organized civilian supporters may now number over 25,000. An important part of the explanation for these developments comes from the mayor of Bacolor, Pampanga: “Land reform was talked about, promised, and never implemented.”6
President Marcos has attempted to combat this problem with positive measures, pushing for increased production and reform. In June he declared the full implementation of the Land Reform Act of 1963 in Pampanga-for which Huk leaders claimed credit when talking to peasants. He also moved toward financing of the Land Bank, created by the 1963 Act. The Four Year Plan announced that P367.9 million would be spent on land redistribution with the goal of assisting tenants to acquire 91,000 hectares.7 However, these promises must be put in the context of previous failures of well-intentioned leaders and of parallel commitments to the military. The projected four year land redistribution budget, for example, was matched by a proposed fiscal year 1967 military budget of P324.2, or twice the defense budget for 1962. Though this may seem high, more land reform by press release could require an even larger future military outlay.
The more one delves into the complexities of the problems facing the Philippines, the more respect one has for those who are attempting to solve them. Marcos seems to be devoting more intelligent attention to major policy decisions than several of his predecessors-even at the risk of abandoning the “barefeet in the palace” tradition begun by Magsaysay. Even so, he is most unlikely to achieve his announced goals. And time is running out for the Philippines. One would be constrained to adjudge the Philippines already on the threshold of decay, rather than of development, were there not some basis for believing that there is greater determination and impatience in Malacanang than there has been for years.
DAVID WURFEL is Associate Professor in the Department of Political Science at the University of Missouri.
Bundy, William P. “Elements of the Philippine-American Partnership,” Department of State Bulletin, 54 (March 21, 1966), 444-451.
Corpuz, Onofre D. The Philippines. Englewood Cliffs: Prentice-Hall, 1965. Golay, Frank, ed. The United States and the Philippines. Englewood Cliffs: Prentice-Hall, 1966.
Lande, Carl. Leaders, Factions and Parties: The Structure of Philippine Politics. Yale University, Southeast Asian Studies, Monograph No. 6, 1965.
Meyer, Milton W. A Diplomatic History of the Philippine Republic. Honolulu: University of Hawaii Press, 1965.
Reynolds, Quentin and Geoffrey Bocca. Macapagal: The Incorruptible. New York: McKay, 1965.
Romulo, Carlos P. Identity and Change: Towards a National Definition. Manila: Solidaridad, 1965.
Sternberg, David T. “The Philippines: Contour and Perspectives,” Foreign Affairs, 44 (April 1966), 500-511.
1 See, Philippine-American Relations, Report of the Philippine-American Assembly (The American Assembly, Columbia University, 1966).
2 New York Times, March 27, 1966.
3 Ibid, August 8, 1966.
4 Quijano de Manila, “Half Year Mark” Philippines Free Press, August 13, 1966, p. 2.
5 Office of the President of the Philippines, Four-Year Economic Program for the Philippines (Manila: September 1966), pp. 8-9.
6 Denis Warner, “Philippine President Marcos and the Huk Resurgence,” The Reporter (November 3,1966), pp. 28-31.
7 Four-Year Economic Program, op. cit, p. 50.