Fidel V. Ramos, Third State of the Nation Address, July 25, 1994

His Excellency Fidel V. Ramos
President of the Philippines
To the Congress
On the State of the Nation

[Delivered at the Batasang Pambansa, Quezon City, on July 25, 1994]

“From Growth to Modernization” 

Sa nakalipas na dalawang taon, malayo na ang ating narating—na magkasama—tungo sa ating nagkakaisang pangarap na mabuting buhay para sa lahat ng mga Pilipino sa pagsapit ng ika-dalawampu’t isang siglo. Ang unang taon ay iniukol natin sa pagsasaayos ng ating kabahayan—ang pagbabalik ng katatagang pampulitika, pagpapalaganap ng pambansang pagkakaisa, at pagpapalakas ng panlipunang pagsasama-sama—na kinakailangan ng pag-angat ng ating ekonomiya. Ang pangalawang taon ay iniukol natin sa pagluluwag ng ekonomiya—pagbubukas nito sa tunggalian, ang pagbibigay ng pantay-pantay na pagkakataon sa mga kalahok sa ating ekonomiya.

Ladies and gentlemen of the Ninth Congress:

Over these two years, we have come a long way—together—towards our shared vision of a better life for Filipinos as we enter the 21st century. The first year we devoted to putting our house in order—to restoring political stability, enhancing national unity, and strengthening social cohesion—as the requisites for economic recovery. The second we devoted to liberalizing the economy—opening it to competition, and leveling the playing field of enterprise. Already we are beginning to enjoy the modest fruits of these first reforms.

  • The insurgency no longer exacts the toll of dead and wounded it did over the last 10 years.
  • Approved investments over the first semester of 1994 have totaled P240 billion, more than double our expectation for the whole of 1994. Tourist arrivals are growing at 19% on an annualized basis.
  • The Philippines has reestablished its credit worthiness with the international financial network as well as regained the confidence of the world’s donor community.

If we began under a smog of skepticism, we have proved to ourselves how much we can do—if only we put our act together and pulled as a national team. Now that we have met our minimum goals, we can look beyond economic growth to the full modernization of our country. Laying the groundwork for modernizing our economy and our political system is the central task of this government and this Congress. And our end-goal must be to secure social equity for the poorest among us, particularly the basic humanities of life: to enable every single Filipino to develop his or her capabilities to their farthest limits.

The record of those first two years is appended to this report, which I submit for the Congressional record. Let me sum up its highlights before I move on to our legislative program for this Third session. First, political stability. To restore civic order was our most pressing commitment. That commitment you and I have redeemed. Armed with reason and goodwill, we are well on our way to a lasting and honorable peace with dissidents and insurgents. All-out war we reserve for criminals, terrorists, and plunderers. We have broken the back of the biggest crime syndicates, dismantled the most notorious armed groups, and effected changes in the leadership and chain of command of our police force to improve its credibility and efficiency. We will not consider this work done until every citizen can feel reasonably safe—at home, in the workplace, and on the streets. Second, the economy. We have begun dismantling the mechanisms of protection and privilege which have hobbled our economy these past 30 years, while also focusing it on exports and global competitiveness. The country now feels a surge towards growth that is fully supported by such indicators as low interest rates, single-digit inflation, a stable peso, sufficient foreign exchange reserves, rising investments, and the vigorous development of growth centers nationwide. Our GNP grew at the rate of 4.8% in the first quarter of 1994, and we are confident it will hit 5% this year.

Thanks to the statesmanship of this legislature, we in the executive branch were able—under a grant of temporary emergency powers—to end last year’s energy crisis. Through innovations like the “build-operate-transfer” [BOT] schemes, we are better able to rebuild our long-neglected infrastructure. We upgraded our science and technology manpower capability. By 1998, we shall produce around 3,000 competent scientists and engineers. We have also established two additional Philippine Science High Schools in Visayas and Mindanao. We will continue to fast-track the improvement of science and technology foundations of young Filipinos. Already these efforts have begun to pay off: not only in higher GNP growth and increased productive activities in the countryside, but—what is more important—in restoring to ordinary Filipinos the sense that life can truly become better, for themselves and their children. Third, the environment. Here our guiding principle is that future generations should not have to pay for the needs of the present. We intend to leave this Philippine spot on Earth cleaner and greener than we found it. Out of Smokey Mountain and Payatas—notorious symbols of our environmental degradation—will eventually rise new greenery, and new lives.

Fourth, social reform. In poverty alleviation, we have moved away from the old “trickle down” policies to “positive bias” for our poorest provinces and the numerous pockets of poverty that are to be found even in our richest cities. Our object is to help the poorest of our poor help themselves by expanding their access to health care, basic education, decent housing, credit, jobs; and by raising their productivity in their traditional occupations. The “Kabuhayan 2000” program alone should create 2 million jobs all over the archipelago these next two years. In land reform, we shall have redistributed, by the end of this year, more than 800,000 hectares of land. That is as much as the previous administration distributed in six years, and 12 times the hectareage the Marcos regime distributed in 14 years. Fifth, the bureaucracy. In our efforts to streamline the civil service—to improve the quality and speed up the delivery of public services—we have started right at the top: in my own office.

Sixth, foreign relations. Our country’s emergence from under America’s wings has given us Filipinos the chance—after centuries of colonial passiveness—to make our own history. We are renewing and expanding our contacts and friendships—in East Asia and North America—so that we can once again become attractive to foreign investment, trade, and tourism. I shall be visiting Western Europe in September to promote our trade, tourism, and investment programs in the European Union. The message I carry wherever I travel abroad is clear and simple: The Philippines is back in business in the heart of the world’s fastest-growing region. And we have committed ourselves unequivocably to ASEAN and its ideal of open regionalism. Together with our immediate neighbors and partners, we are building the regional architecture for our vision of a peaceful, neutral, and nuclear-free Southeast Asia.

How did we accomplish all of these things? We were able to do what we did—not by emphasizing ideology, but by seeking consensus and taking actions. Not by setting people apart, but by bringing them together. Not by charisma, but by quiet competence and patience, patience, patience. The lesson to us is clear: Without hard work, there are no miracles. We must perform as we pray, and pray as we perform.

Even as we consolidate our gains, we can now look toward the full modernization of our country. Three modernizations we must achieve: First, modernization of the economy—increasing productivity and competitiveness. Second, modernization of our politics—making people empowerment work in place of political patronage. Third, social reform—modernization of the Filipino family and the national community. We must prepare our economy for the new trading order ordained by the Uruguay round of the General Agreement on Tariffs and Trade. Our survival in the evolving World Trade Organization will depend on how competitive our export industries can become. In politics, our task is to raise the national capacity of the state. Power must come not from force but from legitimacy. People power must be put to work productively. This I have always believed: We can develop as a working democracy—and not in spite of it. The electoral process we need to focus not on patronage and personalities but on public policies. And we must see to it every citizen develops as great a care for his civic duties as for his civic rights. In social reform, we must never forget we seek growth not for its own sake but only as a means to enlarge each citizen’s enjoyment of the benefits of our democracy, because no amount of growth will mean anything—unless it improves the lot of the common tao. The key reform is to give the ordinary Filipino an inherent stake in our system—the chance to own and manage an honest livelihood and to win his own future.

Let me now take up our tasks of modernization in more detail. The first modernization is that of the economy—to make it more productive; to make it competitive in the world; and to make room for the small- and middle-sized industries which are the building blocks of economic democracy. Export orientation is the only way to self-sustaining growth in our time—whose controlling element is an emergent global economy. In the first five months of this year, our exports reached $5 billion at a growth rate of 16.1%. This growth rate is expected to further increase in the years ahead. Protectionism for us had produced only retarded “infant industries” and a generation of political entrepreneurs who fattened on unearned income from tariff barriers, tax holidays, import licenses, and behest loans. Thus, both self-interest and international commitments compel us to turn our economy outward—toward participation in humankind’s shared adventure of development.

We signed the Uruguay Round of Agreements to improve our market access to the rich countries and to qualify for special treatment in world trade. The reduction worldwide of both tariff and nontariff barriers should benefit initially our exports of agricultural products, as well as of textiles and garments. In return, we commit ourselves to bringing down in a calibrated manner the barriers we have set up against the import of specific agricultural and meat products.

We have taken the following initial steps to improve our export competitiveness:

  • Through the Monetary Board, we are easing exporters’ credits by lowering reserve requirements; liberalizing outward dollar investments, and widening exporters’ access to loans from the foreign currency deposit units of banks.
  • The Export Development Council I have asked to implement strategies and programs to enhance productivity in export industries.

I have already reduced import duties on a long list of capital equipment our export industries need.

All the bills proposed by our cabinet clusters are listed in the annex to this address. Nearly half of them were previously certified as administration bills at the 1993-1994 session year. Others were agreed on at our first social pact of September 1993. I realize you may not have the time to decide on every one of them. We submit them all, nevertheless, as an indication of our priorities and concerns in the executive branch—while also indicating the ones which are, in our view, most urgent. The Public Works Act and the anti-pilferage of electricity measure which are in bicameral conference committee should now be acted on including the Magna Carta for Exporters which was earlier passed by the House and now on second reading in the Senate. In agri-industrial development, we place the highest priority on the bill on high-value crops, the mining and environment codes, and the House bill awarding protection to the ancestral domains of our cultural communities. In other areas of the macroeconomy and finance, we propose various bills to simplify our tax and tariff structures, enhance the investment climate, encourage the flow of credit to our rural areas, and promote long-term savings.

Our whole tariff structure, we mean to rationalize—to remove distortions brought about by differentiated rates, which have worked only to protect inefficient industries and penalize exports. We will continue, if not accelerate, the program to reduce tariffs until these reach one uniform rate. Simplifying and bringing down the tariff level is the best way to stop smuggling and corruption at the Bureau of Customs. We also need to recast our laws on trusts, monopolies, oligopolies, cartels, and combinations injurious to public welfare—to restore competition where it has disappeared, and to preserve it where it still exists. In a word, we need to perpetuate competition as a system to regulate the economy and achieve global product quality. To carry on structural reforms, level the playing field, and dismantle monopolies and cartels, we seek the urgent passage of various bills. These include the anti-racketeering and anti-trust/anti-monopoly bills already with you.

To improve government’s capability to provide adequate services and infrastructure for the economy, we seek an amendment to the Public Transport Service Law—last revised in 1952—to rid it of its restrictive regulatory framework and to foster a new competitiveness in our land, water, and air transport industries. Efficient transport must complement our breakthroughs in the telecom industry which has served to link our archipelago more closely by high-tech means. In energy development, we seek your authority to increase the capitalization of the National Electrification Administration [NEA], and develop geothermal energy fields. We must create indigenous power reserves to serve our expanding economy.

The second modernization is about politics and governance. Ultimately, modernization is about good government. If we are to improve the quality of our national life, we must first improve the quality of our governance. In our part of the world, the economic success of less-than-democratic societies is being used to cast doubt on the prospects of countries like ours, which seek to modernize as functional democracies. We have already given our reply to this false wisdom. But we cannot neglect the core of the authoritarian challenge. We must prove democratic government is not necessarily inefficient and ineffectual. We have gained much headway in preventing constitutional gridlock and in legislating reform. But we have not yet achieved the level of political will and national capacity that enable a nation to transform its dream of modernization into reality. The true measure of national capacity is neither the size of a country’s army, nor the way power is centralized in one man or group of men. It is how effective political institutions are at solving problems, mediating conflicts, carrying out policies, and implementing programs for the people’s welfare. To this end, we seek approval of bills to modernize the armed forces and the national police.

If, in the economy, we speak of the physical infrastructures for development, so in our political life, we must lay the administrative infrastructure for effective government. Of this infrastructure, no element is more important than the bureaucracy. Let me be the first to say it: We are not getting the full worth of every peso we spend on each government agency. But, then, we cannot make the bureaucracy do better just by scolding it—as we are often inclined to do. Ladies and gentlemen of Congress: I ask you again: Give me the authority to reorganize the executive branch, or significant portions of it such as the Metro Manila Authority [MMA], so that it can become the efficient administrator of our public life that it is meant to be. I fully support our local government units [LGUs] in their untiring efforts to deliver basic services despite financial difficulties. We are committed to bring to completion and full implementation the Local Government Code of 1991. I shall certify as urgent the bill that intends to allocate internal revenues more equitably to LGUs.

I take this opportunity to express my appreciation to the Supreme Court for its statesman-like handling of recent “hot” issues. Just as the country longs for administrative efficiency, so I feel it welcomes judicial statesmanship. We all know how major projects have escalated in costs—or even abandoned—because of lawsuits by rivals or critics. Judicial review of executive or legislative action is a basic legal and constitutional recourse. But the guiding principle for all—the legislative, the judicial, and the executive branches—should be to act expeditiously to avoid unwarranted delays which cost money and result in lost opportunities.

Step by step, we can make government more and more effective. I commend to this Congress the electoral reforms proposed by the Commission on Elections [COMELEC]. Said electoral reforms seek to modernize the entire electoral process, to include extending the mechanisms for voting of those absent from their voting centers by availing of the new electronic technology to contain electoral fraud; to speed up voting, counting, and canvassing; and especially to severely punish election terrorism. Our democracy is far from perfect, but it works well enough for us to be able to move it away from the politics of patronage, guns, goons, and gold.

The third—and most important—modernization we must accomplish is to bridge the gap between the few who are well-to-do and the many who are poor. Equality cannot wait until after the economic pie has grown much bigger because gross inequality by itself enables the powerful few to override the interests of the powerless majority in the making of public policy. Contemporary history teaches us that, in countries with vast income inequalities (as in parts of Latin America), substantial growth can take place—for prolonged periods—without easing mass poverty or liberalizing the political system. In East Asia, by contrast, sustained economic growth was typically preceded by some social leveling—through land reform, health care, and basic education—which released people’s energies for the national drive to development. Growth with equity is the kind of development to which we aspire.

Our social reform agenda is a systematic, comprehensive, and coordinated package of initiatives that addresses the minimum basic needs of the Filipino poor. This agenda was defined not by government alone, but in consultation with the social sectors adversely affected. Our agenda has both a geographical and a sectoral focus. It zeroes in on our 19 poorest provinces, which have historically received less than their due in government attention.

Ang ating repormang panlipunan rin ay nakatuon para sa mga partikular na grupo ng mga mahihirap na mamamayan. Dahil sila ay hindi iisang uri, ang antas ng kanilang pangangailangan ay nagkakaiba rin. Kaya’t ang mga tugon sa kanilang kalagayan ay dapat lamang na kaagad nilang madama at upang maging angkop ay maaaring magpamalas ng panibagong kakayahan. Ang aking tinutukoy ay ang mga magsasaka at iba pang manggagawa sa bukid, ang ating mga mangingisda, ang ating mga katutubong Pilipino, ang ating mga maralitang taga-lungsod, ang ating mga manggagawa na kulang sa pormal na kaalaman, mga kababaihan at iba pang sektor na nangangailangan ng tulong: mga kabataan, mga may kapansanan, mga matatanda, at mga biktima ng kalamidad.

It will also focus on specific groups of the Filipino poor. Because the Filipino poor are not homogeneous, the nature and degree of their needs are diverse. Thus, the solutions to their predicament must also be direct and creative. I refer to our landless farmers and rural workers; our coastal fishermen; our indigenous cultural communities; our urban poor; our unskilled workers, especially in the informal sector; and other disadvantaged groups: women, vulnerable young people, the disabled, the elderly, and victims of calamities.

After consultations with all these sectors, we have determined the need for three basic types of intervention. The first is to give the poor access to quality basic services—the very imperatives of survival for people living on the margin. The flagship programs under this agenda include socialized housing for the urban poor. The second is to give the poor better means to earn their own living. Priority programs under this agenda include intensified implementation of agrarian reform and a sustained “credit for the poor” effort. The third major item on our social reform agenda is a package of programs that will enable ordinary Filipinos to take part effectively in decision-making processes that directly affect their interests and their welfare. This includes a comprehensive and integrated shelter and urban development financing act, the setting up of a national health insurance system and a policy for intelligent population management. This agenda shall encourage the formation of people’s organizations, the strengthening of cooperatives, and the push to carry out local government code provisions on sectoral representation. It includes the grant of absentee voting rights to overseas workers.

The last item in my report to this Congress concerns the costs of modernization. The 1995 budget complements our objectives of consolidating our economic and political gains and deepening social reform. Our proposed expenditure of P384.7 billion is only 6.4% bigger than the budget you approved for 1994—just about enough to account for inflation. Yet we propose to spend 14% more than we did last year for social services. We are increasing investments in our flagship infrastructure programs as well as in “human priorities”—primary health care, basic education, safe drinking water, environmental sanitation, as well as family planning and nutrition programs. We shall also be spreading safety nets for those social sectors disadvantaged by economic restructuring. Fully 27.8% of the new budget will be spent on social services. Our eventual target expenditure for these human priorities is 5% of GNP. From a crippling 42% of the whole budget in 1986, we expect debt service to drop to 28.7% in 1995. In spite of the Central Bank debt and the continued borrowings made by the National Power Corporation, we hope to bring down the public sector deficit from 2.2% to just 1% of GNP. This greatly reduced public sector deficit is possible because the proposed budget of the national government for 1995 which I am submitting today aims to generate a surplus of ₱15.5 billion. Our children should not pay for what we now enjoy, rather, they should enjoy what we now pay for.

We are enforcing belt-tightening and rigid fiscal controls everywhere in the executive branch—including our public corporations—because we realize how precarious and fragile our economic recovery still is. You and I know development exacts a price—which all those who seek it must pay. That price we Filipinos have paid only reluctantly. Our current tax effort—14.7% of GNP, compared to the 18% average for ASEAN countries (Malaysia is at 22%)—is totally inadequate for paying the costs of development. In 1995, we intend to raise the tax effort to at least 17% of GNP. Without a stable revenue base, the Philippine state will remain weak and dependent. And for as long as our structural problems persist, we shall remain vulnerable to outside pressures and external political and economic shocks. You and I know there is no free lunch in the world out there—just as there is no freedom for the weak. Taxes are a necessary burden citizens must carry, and the best that government can do is to see to it the burden falls heaviest on those who can best bear it. Yet this judicious spreading of the burden, government in our country has not even been able to ensure. The Filipino middle class—and the poor—actually bear disproportionately the burden of paying for public administration. And, ironically, it is also they who suffer most grievously from the lack of basic social services which has substantially resulted from the very high rate of tax evasion by the powerful and influential.

This government is sworn to simplify our tax system, broaden its base, lower its rate, and make it more progressive. The system we propose is also economically efficient—and socially equitable. In the past, tax reform had largely been patchwork—meant only to plug the perennial fiscal deficit. As we move towards the 21st century, we need to establish a progressive tax system capable of consistently meeting the costs of development and modernization. Government also owes conscientious taxpayers the duty of prosecuting tax frauds and tax evaders—all those who seek a free ride on the public good without contributing to its provision. We will be especially severe on tax evasion by the powerful and the freeloaders—and on corruption among our tax functionaries. In exchange for lower overall rates, we propose to minimize the discretion of taxpayers and tax examiners.

The newly expanded value-added tax is meant to be a vital part of our tax reform package. It is designed to be more equitable, and easier to enforce, compared to the complex of 73—yes, 73—sales taxes it replaces. Those who propose to “kill VAT” denounce it as unfair and unjust. But, from government’s side of the fence, its main oppositors are mostly individuals of means who seek to evade their rightful share of the tax burden.

Ladies and gentlemen of the Ninth Congress: How then should we resolve this dilemma of development—of finding the money to invest in our country’s future? We must first of all resist the populist pressures being generated within our paternalistic political culture which looks at government as the exclusive source of goodies in our society—lest our representative system degenerate into what Peter Drucker calls “the pork-barrel state.” Thus, I think we should all get together quietly—you in Congress; we in the executive branch; with representatives of business and industry, the professions, labor, and the peasantry; as well as the churches, academe, media, nongovernment organizations [NGOs], people’s organizations [POs], and consumers—to reach a consensus on paying the unavoidable costs of development.

I shall be calling a second social pact—to bring together all those who oppose the expanded VAT law and those who are for it—to discuss comprehensive and progressive tax reforms—openly, frankly, and I hope, with civility—so we can jointly agree on where the resources to pay for community development and nation building are to come from. Together let us explore every possibility of where to find this money—whether by paring government to the bone, raising the penalties and punishments for tax evasion, privatizing public corporations and other assets, cutting your countryside development funds, or a combination of all these painful options—but let us together find the money to pay our way to progress.

Now to sum up: ladies and gentlemen of the Ninth Congress: These, then, are the civic tasks for which we need your expertise, your industry, and your dedication. Our end-goal must be to lay the groundwork for the Philippines to become a thoroughly modern country, at peace with itself and with its neighbors, and where the least among our people have the decent minimum of material goods to realize the full possibilities of their lives. For a brief period in the early 1950s, the Philippines was second only to Japan in the vigor of its economy. and at an earlier time—now almost exactly a hundred years ago—we Filipinos had also proclaimed East Asia’s first Free Republic. Today we are struggling to catch up with our vigorous neighbors in economic and technological growth. But, perhaps, we are more than abreast of them in one key component of modernization. We Filipinos have already won our democratic revolution. History has made our culture of freedom proof against tyranny. Of course, freedom by itself does not bring about progress. But it provides the most enduring foundation stone for the good society we are trying to build—for ourselves and for those who will come after us. To lay that foundation and to move the country forward to sustainable development are the primary goals of my government. We face this task with optimism—confident we can bring the economy to takeoff, and complete a profound reform of the Philippine State—raising its political will, increasing its national capacity, and strengthening its social cohesion—before the dawn of the new century.

Ladies and gentlemen of the Ninth Congress: These past two years we together have achieved a great deal—in restoring political stability, in turning on the lights once again in our homes and factories, and in returning the economy to the path of growth. But surely, my beloved countrymen, our greatest achievement has been to restore our faith in ourselves, and in what we can do together as a national team. I have always believed we Filipinos are hardest on ourselves: We tend to dwell on our weaknesses, rather than build on our strengths. Perhaps it is because the kind of democracy we have known—for the better part of this century—has emphasized the individual over the community, private gain over the public good, and civic rights over civic duties. But, in truth, the concept of civic duty is the core of the historic tradition of democracy everywhere. If we as a nation are to endure, we must return to this self-discipline of democracy. As individuals and as a national community, we must embrace this principle of civic duty. Only by so doing can we attain the good society our revolutionary generation of a century ago had placed almost within our reach. The momentum of our economic takeoff must be fueled by every Filipino’s ardent desire to see our beloved Philippines returned to her rightful place in the community of progressive nations by the time of the centennial of our independence in 1998. I like to believe these past two years have brought out the best in us. We refused to be intimidated by the power crisis, natural calamities, and new challenges. Instead, we drew on our deepest reserves of spiritual strength, not only to survive and get by, but also—as I said two years ago—to win the future. Finally, my beloved countrymen, the future is dawning upon us.

Naniniwala ako na tayo ay nagpamalas ng ating kahusayan nitong dalawang taong nakaraan. Hindi tayo pumayag na humina ang ating loob dahil sa mga kagipitang ating dinanas—sa kakulangan ng kuryente, sa mga kalamidad, at mga bagong hamon. Sa halip ay humugot tayo mula sa nakalaan nating lakas na espiritwal, hindi lamang upang tayo ay makalampas sa kahirapan kung hindi—tulad ng sinabi ko noon—upang makamit natin ang magandang kinabukasan. Sa wakas, mga minamahal kong kababayan, ang magandang bukas na yaon ay unti-unting sumusikat na sa ating bayan.

Mabuhay ang Pilipinas!

Salamat sa inyong lahat.