In 1948 the National Economic Council drew up an overall agricultural and industrial program which became the basis for subsequent industrial planning. Presented as a 5-billion dollar development undertaking, the program was submitted to the International Bank for Reconstruction and Development in support of an application from the Philippines for a loan for certain hydroelectric projects. With some modifications, the program received the necessary approval of the National Economic Council and in 1950 was modified and reduced in magnitude by the Philippine Economic Survey Mission, which reexamined the Government's plans for rehabilitation and economic development.* Although achievements fell far short of the plan, as of mid-1953, there had been considerable accomplishment. The hydroelectric developments were progressing and several important industries were initiated or expanded-the production of fertilizers, other chemicals, steel products, textiles, paper, and a shipyard and accessory shop facilities. In March 1954 a new 5-year development plan was announced by President Magsaysay which called for an investment of more than 4 billion pesos by the Government and private capital. Under this program more than one-fourth of the total investment (1,191 million pesos) is expected to be in the field of manufacturing. Moreover, the other largest segment of expected expenditureconstruction-will facilitate industrial expansion. The Government has taken various specific steps. to foster the development of industries. Important among these was the passage of legislation granting tax exemption and certain other privileges for "new and necessary industries." As of June 1953, 163 establishments had been granted tax exemption under Republic Act No. 35, the original law providing for such exemption; almost all of these were manufacturing enterprises. Import and exchange controls also have served to stimulate the establishment and expansion of local industries. Equipment for such industries. is given preference over other types of imports. Government initiation of a survey of mineral The Philippine Economic Survey Mission was appointed by President Quirino in May 1950 preparatory to the survey of Philippine postwar conditions made later that year by the U. S. Economic Survey Mission. The report of the Philippine mission was made available to the U. S. mission. Criteria for tax exemption and the exemptions permitted are given in chapter XII. resources, part of the program of the U. S Foreign Operations Administration, and the road construction program also assist industrial development. The revision of the Philippine tariff may be expected to provide protection and encouragement for local industries. As of 1953 an additional special treatment for "new and necessary industries" was provided in the ruling that they are exempt from customs duties. United States aid programs have assisted industrialization in the last few years. Two of the most recent developments are the industrial guaranty and loan fund and the establishment of an "industrial development center." As of the third quarter of 1945, 900,000 pesos had been granted in industrial loans under the Foreign Operation Administration's loan guaranty program and two large loans were under consideration. The industrial development center, which was expected to get well under way by early 1955, will provide technical assistance in industrial management and productivity. Philippine Government corporations operate some manufacturing enterprises; those directly concerned with industrial production include the National Development Corporation (NDC), the Cebu Portland Cement Company, the National Power Corporation (NPC), the Insular Sugar Refinery, and the National Shipyards and Steel Corporation. The NDC owns and operates textile mills and lumber and woodworking establishments as well as coal mines, engineering and warehousing departments, and an applied science laboratory. It also controls a number of subsidiaries, such as a shoe factory and pulp and paper mills. The NPC operates the large new fertilizer plant. Thus the Philippine Government plays an important role in manufacturing and is an actual or potential competitor with private enterprise. To a certain degree the Government's participation in industry was brought about by the necessity of rehabilitating a war-devastated country; owing to the fact that private capital was not available in sufficient quantities to meet the need, Government initiative appeared necessary. However, viewed from the standpoint of potential investors Government competition tends to block the flow of private capital into similar undertakings. Recently policy statements and certain actions seem to indicate that the Government will eventually reduce its industrial operations and assume a less prominent part in the industrial economy. Principal Problems Philippine industry shares many of the problems common in all countries in the early stages of industrialization-scarcity of trained labor and skilled technicians, inadequate research facilities, lack of standardized raw materials, and the absence of quality standards for products. An important handicap is the timidity of local capital to enter the field of manufacturing. Private financial institutions are reluctant to grant long-term loans to manufacturing enterprises; industrial loans granted by commercial bankers in 1950 comprised only 4 percent of their total loan advances. Interest rates are generally high, and capital is used principally to finance real estate and trade transactions. Long-term loans for industrial development, which involve greater risks, have been less attractive. Other problems faced by Philippine industry in achieving sound industrial expansion include a limited market and high distribution costs, low labor productivity, the tendency to overcrowd tried fields, and the lack of cheap power. The limited domestic market restricts the type of industry which can be operated efficiently. Moreover, the market concentration of industry in Manila and its suburbs, coupled with inadequate transportation facilities, makes for high distribution costs. Although a few products are distributed throughout the country a genuine national market does not exist for many products. Labor in the Philippines, as in other countries where industry is relatively undeveloped, has a lower rate of productivity than in the more industrialized countries. Increased training programs, together with improved equipment in some cases, are needed to raise the efficiency. Local industrial entrepreneurs have tended to enter enterprises already demonstrated to be profitable or those protected by Government regulations. This has resulted in overcrowding in some fields, establishment of industries which are profitable primarily by virtue of temporary controls, and little development in basic industries. kilowatt-hours. This compares with about 120 kilowatt-hours for the Federation of Malaya, 175 for Puerto Rico, 476 for Japan, and 1,190 for the United States. Total power production in 1953 was reported by the Philippine Public Service Commission as about 790 million kilowatt-hours of which 473 million were thermoelectric and 317 million hydroelectric. Table 8 shows the amount of energy produced by the Manila Electric Company (MERALCO), the leading producer and distributor of electricity, and other reporting plant operators as well as that purchased for distribution from Government-owned hydroelectric plants. Source: Compiled by the United States Embassy, Manila, from data of the Philippine Public Service Commission and the Manila Electric Company. Capacities, as of 1953, of the Government hydroelectric plants at Caliraya, Laguna, and at Talomo, Davao, which are operated by the Government's National Power Corporation, were 38,000 and 800 kilowatts, respectively. The electric power plants operated by public utility companies had a larger total capacity as of 1953, amounting to 303,138 kilowatts as follows: Oil (diesel) - Total Consumption According to reports submitted to the Public Service Commission, of the 730,832,594 kilowatthours reported for 1953, 545,612,739 were delivered to customers, 2,999,947 were used by the electric plant operators, and the remaining 182,219,908 were "unaccounted for or lost." The latter figure includes transmission leakages, but is believed to consist largely of unreported sales and stolen power. No overall classification of power consumers is available, but the Manila Electric Company re ported its 1954 sales as follows, in thousands of kilowatt-hours: Residential or domestic, 205,573; commercial, 152,333; industrial, 97,637; public street and highway lighting, 4,900; sales to other public authorities, 52,856; and sales to other electric utilities, 7,094. The total sales were 520,393,000 kilowatt-hours. Consumers of the other electric plant operators are almost entirely residential and commercial establishments. The Manila Electric Power Company makes only about 17 percent of its total sales to industry, and major industries outside the area served by the Manila Electric Company in most cases generate their own power. The predominating electric current characteristics in the Philippines, including power of the Manila Electric Company, are a. c. 110/220 volts, 60-cycle, and 3-phase. Voltages of the 60-cycle alternating current in other centers are as follows: Cebu, 220/440 (2-phase); Davao and Iloilo, each 220 (3 phase); and Zamboanga, 110/220 (3 phase). Power Expansion The principal potential source of power is hydroelectric energy, other types being considered not feasible on a major scale owing to the scarcity of domestic fuels. The National Power Corporation (NPC), which has long been engaged in extensive studies of waterpower resources, now has two major projects under way. One is located at Maria Cristina in Lanao Province, Central Mindanao, and the other at Ambuklao, north of Manila in Mountain Province. The first stage of the Maria Cristina development, which consists of a power plant of 25,000 kilowatts, as well as a fertilizer plant, was completed in 1953 at a total cost of $10,500,000. A second unit of 25,000 kilowatts was installed at Maria Cristina in 1954 and plans call for the installation of a 50,000-kilowatt unit at a future date. The Ambuklao development is aimed at utilizing the 430,000-kilowatt power potential of the Agno River. Construction of the first of 7 hydroelectric plants is now under way; it will have a rated capacity of 75,000 kilowatts and is scheduled for completion in 1955. The other plants are expected to be built as additional financing becomes available. Energy produced at Ambuklao will serve Manila, central Luzon, and the Baguio district, including mines in the area. About half of the power will be distributed by MERALCO. For the Ambuklao development, which will cost about 50 million pesos, a $20-million line of credit was obtained from the Export-Import Bank in 1952 by the Philippine Government. In addition to the two large projects now under construction and further installations planned in the same areas, plans of the National Power Corporation as of 1954 called for the construction of a number of smaller hydroelectric plants with a total capacity of about 10,000 kilowatts throughout the country and steam power plants with a total capacity of about 6,000 kilowatts to burn local coal. The Manila Electric Company is constructing a fourth unit at its Rockwell Station and has allocated 6,670,000 pesos for expansion and improvement of other facilities during 1955. Power Rates The wholesale power rates of the Manila Electric Company may be taken as an example of the cost of electricity to industry. Under this rate schedule as of 1954, the guaranteed minimum demand is 1,000 kilowatts and the charge is 4 pesos per kilowatt demand per month plus energy charge of 0.03 peso per kilowatt-hour for the first 70,000 kilowatt-hours per month and 0.014 peso for each additional kilowatt-hour, plus a fuel adjustment charge of 0.005 peso per kilowatt-hour. The charges for smaller industrial consumers are somewhat higher. A reduction in these rates was anticipated to take effect in 1955. The average rate paid by industrial consumers of the company in 1954 was 0.0428 peso per kilowatt-hour. Studies made by the NPC of the cost of energy generation in a representative 2,000-kilowatt plant using steam or diesel have shown slightly higher average costs-0.0518 peso per kilowatthour for steam and 0.0483 peso for diesel. Both the Maria Cristina and the Ambuklao projects when completed will provide power at lower rates. Power for heavy power-consuming industries at Maria Cristina varies in cost from 0.007068 to 0.08 peso per kilowatt-hour with a standard energy charge of 0.003 peso per kilowatt-hour. The Ambuklao project expects to provide a large supply at a cost ranging from 0.025 to 0.035 peso per kilowatt-hour at its substations. Private small power developments sell electric power at rates of 0.20 to 0.40 peso per kilowatthour with a 7-peso minimum per month for the use of household industries and shops. CHAPTER VIII Transportation and Communications TRANSPORTATION Transportation facilities in the Philippines suffered considerable damage during World War II, but were rehabilitated and are being expanded. It is recognized, however, that they need still further expansion, improvement, and coordination to facilitate economic development.1 Within a few areas of concentrated population and development, such as in and about Manila and other commercial centers, land transport facilities are well developed. Connection between these centers, scattered along the coasts of several islands, is primarily by coastwise services or air. The best developed land transport net is on Luzon, particularly in the central part, but even that island has large areas not served by highways. Panay, Cebu, Negros, Bohol, Leyte, and Mindanao have a number of highways but no extensive well-developed networks. In much of the country where population is sparse trails and rivers serve as the means of regional surface transport. A notable development in the postwar period is the declining role of railways and the expanding role of highways and commercial aviation; commercial railways now operate on only two islands. Coastal shipping remains of major importance. Highways Road transportation handles most of the land. traffic. Owing to the island nature of the country, overland movement involves short hauls for which motor carriers are well suited. Moreover, large domestic interregional consignments of commodities from producing to consuming areas are not generally required since soil and climatic conditions permit virtually all agricultural produce to be grown within consumption areas. Not only is a high proportion of freight carried by truck, but passenger travel by bus is also heavy. Buses and 1 There has been considerable interest for several years in a nationwide survey of transportation to prepare plans for an improved integrated transportation system. As of late 1954, however, no such survey had been started. trucks serve all leading cities on Luzon and the use of motor transport on other islands is increasing. The Philippines as of 1954 had somewhat over 18,500 miles of roads of which about 9,900 miles were first class, 5,500 miles second class, and 3,100 miles third class. About half of the mileage is on Luzon. Motor-vehicle registrations in 1953 totaled 108,866 units, consisting of 50,876 cars, 54,535 trucks, 1,592 trailers, and 1,863 motorcycles. The total number of registered vehicles in 1954 was about 111,000. Compared with prewar years the Philippines now has about 24 percent more road mileage and about twice as many motor vehicles. Reconstruction of the war-damaged highway system was undertaken under the supervision and with the technical assistance of the U. S. Bureau of Public Roads, in accordance with provisions of the Philippines Rehabilitation Act of 1946. This program, which was completed in 1952, not only put back into use all the highways existing before the war but also opened up new roads. Approximately $58 million was spent jointly by the United States and the Philippines in the construction of 263 bridges and 385 miles of roads. Further assistance was extended later with the inauguration of a 4-year program of highway construction under the joint auspices of the Foreign Operations Administration and the Philippine Government, including provision of technical assistance from the U. S. Bureau of Public Roads. This roadbuilding program has been under way since 1952 and will aid, primarily, the development of Mindanao, which, with improved facilities, will offer potentialities for increased agricultural production and other fields of economic endeavor. The 5-year economic development program announced early in 1954 indicates an expected expenditure of 200 million pesos for roadbuilding. Responsibility for the planning, construction, and maintenance of national roads lies with the Bureau of Public Highways, whose funds accrue mainly from gasoline taxes and motor-vehicle fees. The Philippine Highway Act of 1953 (Republic Act 917) establishes a new formula for the distribution of the revenue from these taxes and fees. Most observers expect that under this new law, which requires 45 percent of such revenue to be spent on the construction of new roads, more funds will be available for roadbuilding in areas where economic development projects are either scheduled or under way. Rates charged for trucking services show wide variations. The Philippine Public Service Commission has not established an overall minimum rate for all trucking concerns but sets an individual minimum rate for each company. The lowest minimum rate authorized by the Commission as of 1953 was approximately $0.10 per ton-mile, while the highest was about $0.24 per ton-mile. These rates, however, apparently do not accurately portray actual trucking charges since most concerns in the central Luzon area were reported to quote considerably below these minimum figures. Sample rate quotations obtained in mid-July 1953 for central Luzon were $0.05 to $0.07 per ton-mile for bulk cargo and, depending on the haulage distance, $0.05 to $0.14 per ton-mile for packaged goods. It must be emphasized, however, that trucking rates vary according to a number of factors, including the type of commodity, the trucking company, road conditions, and the degree of competition in any given area of the Philippines. Furthermore, rebating is believed to be a fairly uniform practice among trucking companies. Railways The two commercial railways confine their operations to the islands of Luzon and Panay. The one on Luzon is the Manila Railroad Company, a Government-owned and -controlled corporation, and that on Panay is the Philippine Railway Company, a private concern. Both freight tonnage and passenger traffic by rail are lower than in prewar years. On account of high operating costs occasioned by the war, as well as heavy competition from trucks and buses, the Philippine railways have been operating at a loss in recent years. The Manila Railroad Company, which serves mostly the central and southern parts of Luzon, operates 585.40 miles of track and as of June 30, 1954, had 94 locomotives and 2,162 other units— passenger coaches, including rail motorcars and trailers, and freight and service cars. In 1954 the railroad carried 1,136,646 tons of freight and 7,110,395 passengers, the largest traffic of the postwar period. This company is rehabilitating its facilities gradually to the prewar level, consistent with the improved financial position. On January 25, 1955, the line from San Fernando to Bacnotan, La Union, a distance of about 13 miles, was In addition, short-line industrial railways, privately owned, are operated by a number of sugar mills and by the major lumber mills. inaugurated. The extension of this line was undertaken principally to serve the Cebu Portland Cement Company plant at Bacnotan. Recently the 5-percent refunding mortgage bonds of the Manila Railroad Company held by the Manila Railroad Company (1906), Ltd., of London, England, in the amount of 26,172,000 pesos maturing in 1956 were transferred to the Rehabilitation Finance Corporation, a Philippine Government entity. The Philippine Government through legislation has agreed to subscribe to additional shares of capital stock of the Manila Railroad Company in the total amount of 7,181,000 pesos, increasing the capitalization to 40,000,000 pesos. The new funds will be spent on rehabilitating equipment and motive power. The Philippine Railway Company in recent years has been handling traffic on about 70 miles of line on Panay, although it also has some track on Cebu. The company has operated at a loss and in 1953 its assets were taken over by the Rehabilitation Finance Corporation. A loan of 1 million pesos is being advanced for 1954-55 for the purchase of new equipment. Waterways Interisland and coastwise shipping.-This shipping, an important factor in the transport economy, to some extent compensates for deficiencies in land transport. By means of direct shipment or transshipment, the interisland fleet connects all ports of importance. Vessels carry crops, minerals, and other export products to major ports for oversea shipment, and distribute through the islands goods originally discharged at ports of entry. Despite severe losses of vessels during the war the Philippines has a sizable domestic fleet. As of 1954, about 3,780 vessels with an aggregate tonnage of more than 300,000 were engaged in interisland shipping. Only about 100 are vessels of more than 150 tons net and about half are regular interisland vessels of over 35 tons working out of Manila. Many of the vessels engaged in interisland trade are craft that were turned over to the Philippine Government by the United States under the Philippine Rehabilitation Act of 1946, and later sold to operators. Although the present facilities may be considered fairly adequate, the fleet is becoming obsolete and some vessels are uneconomical. New vessels are needed but in general capital is not available for fleet improvement. Philippine authorities have been critical of many aspects of the service in recent years; particular concern has been expressed regarding the need for better regulation and rate enforcement. Interisland and coastwise shippers operate under regulations governing freight rates fixed by the Philippine Public Service Commission, which has jurisdiction over all vessels propelled by steam, |