Manuel L. Quezon, Fifth State of the Nation Address, January 24, 1939

His Excellency Manuel L. Quezon
President of the Philippines
To the Second National Assembly
On the the State of the Nation and Important Economic Problems

[Delivered at the Opening of the First Session in the Assembly Hall, Legislative Building, Manila on January 24, 1939]

Gentlemen of the National Assembly:

I take pleasure in congratulating you upon your election to this Second National Assembly, and to you, Mr. Speaker, I wish publicly to express my deep feeling of satisfaction that your distinguished colleagues have elevated you to this position of great responsibility and honor.

As we enter upon the second and last period of my administration, we should once more make public avowal of our objectives and of our firm determination to achieve them.

The Philippines is our country, and we shall make it the home of a free people—not alone politically, but economically as well. And this economic freedom must not be limited to the concept of national self-sufficiency, but must extend to every hamlet and hearth in this land. For of what practical value can the “right to life, liberty and the pursuit of happiness” be to a person, if he does not actually enjoy it and his only freedom consists in the freedom to starve or die?

This then is our ultimate goal: That the political rights vouchsafed to all our people by the Constitution be made real and effective by affording to every person willing to work the opportunity to earn a decent livelihood.

The First National Assembly laid the foundations for the attainment of this goal. It made an enviable record worthy of emulation. Only a visionary could claim that this task can reach fruition during the life of one administration or of even a generation. We have to rebuild our national structure on the solid and permanent foundation of social justice. Laws alone will not do it. We have to fight against prejudices, wrong notions, and outworn customs and traditions. We have to preach the fundamental principles of Christianity, and make them the underlying philosophy of our political and social institutions.

The great work initiated by the First National Assembly with such signal success we have to continue and carry forward. This is the mandate we have received from our people and which we dare not disobey.

No party has ever received such a vote of confidence as the Nationalist Party did at the last general election. Not a single candidate from the minority parties has been elected to this body. The faith and trust which our people have placed in our party in this extraordinary manner demands, in turn, from each of us extreme fidelity and devotion to duty. Not only must we steadfastly forge ahead with our determination to elevate to the topmost the moral, cultural, political, economic, and social conditions of our people, that they may be free from every sort of bondage, but our official acts and deeds should be such as to convince our people of the earnestness and honesty of our aims.

As the head of the State and the leader of our party, I venture to express the hope that the National Assembly will resist every temptation to divide itself into groups or blocs that may tend to weaken our unity of purpose and action. One of the dangers of such division lies in the possibility that the general interests of the nation may be overlooked, at least temporarily, and sacrificed for the benefit of the particular interests represented in the group or bloc. Obviously, one of the reasons why our people did not elect to the Assembly members representing the opposition is because they realize the importance of avoiding waste of time in political bickering in the proceedings of this body in these anxious days when every single energy we can command should be devoted to the difficult task of preparing our nation for an independent existence in an international situation so fraught with danger. Moreover, organized groups or blocs within a party are inconsistent with party responsibility and majority rule.

Gentlemen of the National Assembly, with your permission, I shall now proceed to give you a report on the state of the nation and to submit my recommendations regarding measures of first importance which I consider deserving of your prompt attention. From time to time, I shall take the liberty of sending to this body other messages concerning matters which, in my opinion, should be acted upon at this session.

During the past year the country enjoyed peace and order. There have been conflicts between capital and labor, but without serious consequences. Both the Department of Labor and the Court of Industrial Relations are entitled to commendation for the happy solution of such conflicts. However, we would be closing our eyes to the realities of the situation were we to believe that labor in our country is satisfied with its lot. There is growing unrest and discontent, specially among the farm laborers, not due entirely to the activities of professional agitators and irresponsible so-called labor leaders. Our laborers cannot be easily led astray by agitators when they have no real grievances. The Government is deeply concerned with the well-being of our masses, and it will not cease in its efforts to better their condition until ample justice is secured to them.

New public schools and classes have been opened and the enrollment in the public schools last year was increased by over 243,000. Approximately 18,500 kilometers of roads were in existence at the end of the year, and new wharves and other port facilities have been constructed. Public hospitals have been increased or enlarged, and clinics and dispensaries have been established in many localities. We are making progress in providing the remotest sections of the country with the services of doctors, dentists and nurses, and it is my earnest hope that during the next three years every town will be provided with these services. Sanitary conditions have been improved. We have not had any serious outbreak of epidemics and every threat or danger was effectively checked. An important housing project has been started in the vicinity of Manila to permit wage-earners and low-salaried employees to acquire or build their own homes. Should this project be successful, as I hope it will be, similar projects will be initiated in other communities.

Generally speaking, our national defense program has been carried out as planned, both as to cost and the number of men trained. Two full classes of trainees have now been processed through the instructional cadres and their organization into effective military unit’s proceeds apace. Acquisition of arms, equipment and supplies is in approximate step with the production of tactical units. The Air Corps is steadily evolving into an effective fighting unit, both as to personnel and to equipment.

Deserving of special mention is the Philippine Military Academy in Baguio and its progress toward the establishment of a training course calculated to produce a highly trained, loyal and efficient professional leadership for our Army.

One accomplishment of the year toward which effort had been long directed was the separation of the Constabulary from the Army. From the beginning it was realized that law enforcement is not properly a military responsibility. Yet the necessity for using the Constabulary, as it existed in 1935, as the nucleus out of which to establish the Army’s foundation, and the paucity of trained men for key positions had been the causes of the temporary consolidation heretofore existing. In the hope of avoiding wholesale transfers from the Army for police work, the establishment of a State Police from civilian sources was attempted in 1936. When the lack of trained personnel demonstrated that this method could succeed only if large numbers of officers and enlisted men were made available, it was decided, to avoid administrative complications, to separate from the Army the necessary individuals and organize them into a Constabulary. This has been done, and there is every reason to believe that the reconstituted organization will quickly earn a popular respect and prestige equal, and even superior, to the reputation in this regard enjoyed by the organization that existed prior to the establishment of the Commonwealth.

As a final word respecting the Army, I want to urge you, once again, to give to all matters concerning our future security the earnest consideration their fundamental importance deserves. If eternal vigilance is the price of freedom, let us then be ceaselessly vigilant. Our defensive system requires no unusual sacrifice by any individual, but its success depends primarily and almost exclusively upon a unification of the efforts of all toward this common and vital purpose. To attain such unification in a democracy, the military plan must be supported by popular intelligence, confidence, and enthusiasm. It is a special function of Government to see that this confidence is fairly earned and assiduously sustained. To this end let us see to it that every law we pass and every military measure we adopt shall reflect an unselfish and national purpose, that it shall impose injustice on none, and that it shall promote the security and defend the peace, the possessions and the liberty of all.

The business enterprises of the Government, especially the Philippine National Bank and the Cebu Portland Cement Company, were operated at a profit during the past year. The Manila Railroad Company has at long last completed its southern line. The gap which existed for many years between Tayabas and Camarines Sur was connected at a cost of about P2,000,000. This was one of my dreams that have come true. The significance of this achievement will be readily seen when we consider the fact that a daily, comfortable, fast and inexpensive communication service has been established between Manila and the Bicol provinces. At the same time the completion of this southern line means increased earnings for the railroad. The National Rice and Corn Corporation stabilized palay and rice prices at levels which, under the circumstances, properly safeguarded the interests of consumers and producers alike. The National Development Company is completing the construction of certain factories and studying the organization of others, in line with our policy to promote industrial development and provide more opportunities for the employment of labor. It is our policy with regard to many of these new industries merely to do pioneering work and ultimately to transfer them to private ownership and management.

Our foreign trade during 1938 suffered a slight reduction, mainly on account of low prices for our export products. It is to be noted, moreover, that our imports increased materially, while our exports decreased in value resulting in larger imports than exports decreased in value, resulting in larger imports than exports. This is an unhealthy condition for a country like the Philippines and every step should be taken to guard against the persistence of this adverse balance of trade. This situation may be due in part to increased purchasing power as a result of the expenditure by the Philippine Government of proceeds of the excise taxes on Philippine products collected in the United States. At the beginning, these remittances were made through the Dollar Exchange Standard Fund which resulted in an increase of circulation. In order to avoid this undesirable effect, the necessary measures have been adopted to effect the transfer of these funds through normal bank exchange transactions, without the necessity of releasing new currency by the National Treasury.

Tax receipts exceeded budget estimates during the last year. The income from taxation, however, for the year 1938 was P8,076,362.49 below the collections for the year 1937, exclusive of the proceeds of the excise taxes from the United States. This reduction in revenue may be attributed to three causes: (1) the low prices for our agricultural products both for domestic consumption and for export, (2) the stock market slump during the year 1938, and (3) the fact that in 1937 large amounts were collected for taxes due in preceding years. Despite the reduction in the public revenues the fiscal position of the Government remains sound and strong. As the budget which I shall present to the National Assembly will reveal, the expenditures of the Government during the year 1938 were well within the income for that year, with an excess in collections accruing to the general fund over the ordinary expenditures amounting to P12,410,420.21 at the close of the year.

The low prices for our export crops during the past year were a serious blow to a large portion of our population. This emphasizes the necessity that we should endeavor to establish our economy in an ever-growing proportion on the basis of our home market, because export crops must face conditions which are beyond the control of our Government.

As I have already reported to the last National Assembly, the President of the United States, in consultation with me, appointed the Joint Preparatory Committee on Philippine Affairs to study and make recommendations concerning future trade relations between the United States and the Philippines. The Committee has submitted its report and recommendations to the President of the United States and to the President of the Philippines. Copies of this report were furnished to the members of this body. The report will be officially transmitted to the Assembly tomorrow. I commend it to your careful and earnest consideration. President Roosevelt and I have both approved the report and recommendations of the said Committee and it is my understanding that the President will urge the Congress to enact appropriate legislation to carry into effect those recommendations. One of these recommendations is to do away with the restrictions on the expenditure of the proceeds of the excise tax on coconut oil, and another is to bind copra and abaca free of United States duty during the Commonwealth period. While it is not necessary for the National Assembly to pass any legislation effectuating such recommendations until the Congress of the United States has acted thereon, I earnestly recommend that you approve a resolution endorsing the recommendations of the report, so that the Congress of the United States may be informed that, if it should take favorable action on said recommendations, the National Assembly would do likewise. It is my hope that the Congress of the United States will approve legislation putting into effect the recommendations of the report at an early date, in order to place American-Philippine trade relations on a more fair and equitable basis, and to permit the Philippines properly and intelligently to plan its economic adjustment in preparation for independence.

In connection with this matter, I have sent as my special representative to Washington the Honorable Sergio Osmeña. Vice-President of the Philippines, to conduct, with the cooperation of the Resident Commissioner, the necessary negotiations with the Government of the United States. With the authority, they have enlisted the assistance of the Honorable Antonio de las Alas, formerly Secretary of Finance. I am in constant touch with the Vice-President who is keeping me advised of the progress of their work. So difficult and delicate a task could not have been entrusted to better hands.

Yielding to the wishes of the members of the last National Assembly and of the business community, I agreed to defer action upon my proposals for a tax revision and appointed a Tax Commission to study the matter. The Tax Commission has effected a revision of our internal taxation, taking into consideration the fiscal adequacy of our system of public revenue, a more fair and just allocation of the tax burden, and the need of insuring a more equitable and sound redistribution of wealth. I also instructed the Commission to revise the tax system of our local governments with a view to supplying them with definite sources of revenue and a sufficient income to meet their growing needs. The report of the Tax Commission will be transmitted to you at an early date and I trust that it will receive your favorable attention.

I also desire to submit to your consideration the enactment of necessary legislation for the settlement of sparsely populated regions of the Philippines, specially in Mindanao. This is important not only for obvious political reasons and as a means to promote economic development, but also to relieve the acute congestion of population existing in certain agrarian areas. The National Economic Council has recommended a carefully prepared plan to carry out this objective. The plan contemplates a ten-year program aiming at the settlement in these vacant areas of about 500,000 people on selected lands adapted to subsistence farming and the production of certain money crops. This project will require an estimated total outlay of P20,000,000 which may be appropriated from the proceeds of the excise taxes. The report and recommendations of the National Economic Council on this matter will be transmitted to the National Assembly within a few days.

Another problem which demands immediate attention concerns banking and credit, the cost of credit, and credit facilities for commerce, agriculture, and industry. The only institution in the Philippines that grants agricultural credit is the Philippine National Bank, but the limit fixed by law on the amount of the capital and resources of the Bank which may be invested in such credits has already been reached and the Bank is unable to give any more agricultural loans. Credit for capital investment is not available. There is practically no market for industrial bonds. Prevailing rates of interest charged by banks and private money lenders are still high, which fact is a drag upon economic enterprise and business prosperity. The National Economic Council is recommending a reform of our banking structure in order to remedy these evils. The Council proposes the creation of an investment bank for agriculture and industry, to which shall be transferred all the activities of the Philippine National Bank except those exclusively pertaining to commercial banking. The Council also recommends the establishment of a reserve and rediscount institution which will operate precisely in the same manner as the Federal Reserve System in the United States. This will provide a reasonable degree of elasticity and control over the money market and should immediately result in releasing for investment many millions of idle cash now prudently held by the banks as reserves in excess of legal requirements. These proposals will not only insure sufficient credit facilities at reasonable cost, but will, in my opinion, afford credit to small farmers, either directly or through cooperatives, and likewise to large industrial enterprises. Upon the approval of these measures, the Assembly may also consider the wisdom of amending the Usury Law by reducing the maximum rates of interest that can be charged. Considering the importance of credit as an aid to economic enterprise, I request that these proposals, which will be transmitted to you shortly, be given early consideration.

One of the most pressing needs of the Philippines is develop men with the necessary technological training to supply the needs of modern industry and agriculture. There is likewise great need for men who may assume positions of responsibility in the management of business and industry. I believe that the institution which should be principally expected to supply these men is the University of the Philippines. Hence, I have urged the authorities of the University to propose plans for a reorganization of that institution with a view to raising its standards and placing it on the same level with the best institutions of its kind in the world. Pursuant to my request, the Board of Regents has been studying a plan of reforms in that institution and has employed two of the most competent educators of the United States to act as its advisers in that important task. One of the recommendations of the Board of Regents has been studying a plan of reforms in that institution and has employed two of the most competent educators of the United States to act as its advisers in that important task. One of the recommendations of the Board of Regents is the transfer of the University of the Philippines to a new site. This is considered essential in order that University students may be brought under a more strict and wholesome supervision and control, and the proper spirit and atmosphere may be created on the University campus. Moreover, the physical plant of the University must be enlarged and improved, and suitable laboratories provided, if it is to be enabled to grant adequate professional training, specially in science, demanded by present-day progress. Besides being inconveniently located, the actual site of the University is too small to permit of these improvements. The transfer of the College of Medicine will require the construction of a modern hospital on the new site. At any rate, the Philippine General Hospital is no longer adequate to supply the needs of the growing population of Manila, particularly for free patients, and a new hospital is instantly necessary. This transfer of the University will require a considerable outlay, but I believe that the expenditure will be more than justified if we succeed in our efforts to capacitate that institution to supply the Commonwealth with properly trained professional men, business executives, economists, and scientists. Once reorganized and its standards raised, the University of the Philippines would set a mark for private universities to emulate. Fortunately, the present physical plant of the University will not be wasted. The Government is in dire need of buildings to house several offices and the present buildings of the University can be made adequate for that purpose. It would be highly desirable for the National Assembly to act upon the proposed transfer of the University of the Philippines at this session, so that the Government may consider the availability of the buildings of the University in framing its program of construction for government offices.

Heretofore, the municipal and city governments have had, by law, the responsibility of maintaining all elementary instruction. But in order that the purpose of the Constitution may be accomplished, it has been necessary for the National Government to assume the burden of supporting the primary schools, leaving to the local governments only the maintenance of intermediate instruction. As regards secondary instruction, I recommend that provincial governments be authorized to spend their funds only for vocational high schools and not for academic high schools, which, beginning with the school year 1940-1941, should be maintained on a self-supporting basis. Vocational high schools, however, should continue to receive adequate national aid.

To properly cope with the problem of public health and sanitation, I desire to recommend the establishment of a Department of Public Health. This is necessary for a more effective coordination of public health administration, the better to insure the protection and care of the health of our people, particularly those in early age. Furthermore, it is desirable that the Department of Public Instruction be placed in a position to devote itself exclusively to the far-reaching problems of education and to give greater impetus to the up building of the character and physique of our youth. The new Department of Public Health should be given administrative supervision over public sanitation, hospitals, asylums, clinics, dispensaries, and other institutions that minister to the health of the people.

In order to effect an orderly and scientific development of our agriculture and to permit the intelligent planning of agricultural production, it is essential that as soon as possible we undertake an agronomical survey of the Philippines. The Department of Agriculture and Commerce has completed the soil survey of several provinces. This work should be supplemented and accelerated. This agronomical survey has been recommended by the National Economic Council and the Joint Preparatory Committee on Philippine Affairs. I request that sufficient funds be appropriated to carry out this survey, which should indicate to the Government and to the people the crops adapted to different sections of the country.

Another recommendation of the Joint Preparatory Committee on Philippine Affairs is the establishment of agricultural experiment and extension stations. This is a project which should merit our immediate consideration, if we wish to stimulate agricultural enterprises and modernize agricultural methods. I recommend the repeal of the present law requiring a 5 per cent contribution by provinces and municipalities to the local agricultural fund. Better results could be obtained by a consolidation of these experiment and extension stations in typical areas than by dispersing them, as at present, and often duplicating the experiments, in each province. I recommend an appropriation from the proceeds of the excise taxes of a sufficient amount to cover the expenses for the establishment and operation of these situations in such localities as may be determined by the Department of Agriculture and Commerce. Another reason which induces me to make this recommendation is the fact that the finances of local governments are inadequate to support this service and that they cannot continue setting aside such a large portion of their revenues for these stations without jeopardizing other activities imperatively needed by local communities.

Modern industry and agriculture can not be efficiently operated without the aid of scientific research. This is particularly true in the Philippines where technological science of common knowledge is so far behind other countries. We have secured the advice of a renowned scientist to assist the Government in the establishment of an institution for scientific research. It should serve not only the Government but also private industry and agriculture. I shall submit to the National Assembly appropriate recommendations on this subject as soon as the studies of the National Economic Council and the Department of Agriculture and Commerce are completed.

The National Economic Council has recommended the establishment of an Institute of Nutrition. In order to protect the health and build up the physique of our masses such an institution is necessary. The people need to be educated on the nutritive value of different food products. There are many wholesome and nutritious articles that are consumed in some sections of the country which are unknown in others. It is also necessary t formulate dietary programs scientifically balanced which shall be within the reach of the people of the most modest means. Once the Institute completes its study of the different food products that could be produced abundantly and cheaply in the Philippines, the Department of Agriculture and Commerce could conduct a campaign for the production of national interests, has agreed with our Government that political refugees who desire to come to the Philippines shall not be given visas by American consuls without the previous approval of our Government. We owe it largely to His Excellency, the United States High Commissioner, that the State Department was fully appraised of the situation and that this administrative policy was adopted.

At the last session of the First National Assembly I had occasion to express publicly our indebtedness to High Commissioner McNutt for his unstinted cooperation with our Government. I reiterate those sentiments now. It is, therefore, with a sense of great loss for our people and for me that I have heard of his contemplated return to the United States. If he should find it necessary to resign his present post, we would be deprived of a true friend and a most able collaborator, one whom we need at this most critical period and who would be very hard to replace. But if he must leave us, we wish him to know that he takes with him our affection and gratitude, and our prayer that he may succeed in his future undertakings.

To protect the interests of our people and to repair an injustice done to certain races by existing legislation, we should enact a new immigration law. Under our present immigration law passed by the Congress of the United States, Chinese, Indians, and some other Orientals may not be admitted into the Philippines. Ours is an oriental country, and we are an oriental people. We belong to the same racial stock as some of those excluded by our laws. So long as other foreigners are allowed to immigrate to the Philippines, we should admit, under the same terms and conditions, those coming from oriental countries. To avoid, however, a large influx of immigrants from any one country, we should establish a quota that will be the same for all countries.

Gentlemen of the National Assembly, the world in which we live today is an entirely different world from that which we knew only a few years ago. Whereas before the World War, democracy was gaining ground everywhere, mankind is now divided into two great camps—those who believe in democracy and those who feel contempt for it as a completely discredited system of government. By our political education, by our convictions and by our inclinations, we are a democracy. We have established a democratic system of government and the perpetuation of this system will depend upon our ability to convince our people that democracy can be freed from those vices which have destroyed it in some countries, and that it can be made as efficient as any other system of government known to man. It behooves us; therefore, to prove that through a wise use of democratic processes, the welfare and the safety of the people can be promoted, thus contributing our share to the preservation of democracy in the world.