Crossroads (Towards Philippine economic and social progress)
Philippine Star, 11 November 2015

(Nov. 16 will be the 125th birthday anniversary of the second president of the Republic. It would be useful to remember how his presidency relates to our present condition.)


2nd President of the Republic: succession from vice-presidency. Elpidio Quirino is one of the least known among Philippine presidents as time moves on. He succeeded to the presidency unexpectedly when Manuel A. Roxas, the first president, died on the third year of his four-year term.

Quirino’s presidency was eventful and positive for the nation. He won a close election on his own in 1949. His accomplishments do not match the low reputation that is associated with his presidency.

Fate is often cruel when historic times lead to the appearance on the scene of more dynamic personalities. Ramon Magsaysay, the third president, is a more remembered figure, though he was president for even a shorter period, less than three years. (He was killed in a plane crash.)

The most important achievements of Magsaysay happened when he was Quirino’s defense secretary. In that post, Magsaysay broke the back of the communist Huk rebellion, capturing the members of the central politburo and committing them to jail.

Thus, the early communist threat to the young republic was reduced to a manageable distraction in subsequent years even beyond the Quirino years.

In his day, Quirino was highly vilified by a virulent press, making his administration look corrupt when it was quite effective in its pursuit of goals. He was ridiculed for choices he probably was not fully aware of, two expensive items in the Malacanang household as it was being renovated – a new bed and an orinola.

Very eventful times. When the Republic was inaugurated in 1946 with Quirino as vice-president, the Philippine economy had been devastated. Gross output was 30 per cent of the 1940 GDP. Agriculture and industry were either in a state of injury or devastation.

When he took over as president in 1948, the economy was on course for a rapid recovery, helped along by continuing large US (military) expenditure at the end of the war and by US rehabilitation assistance in the form of war damage payments.

America’s version of Marshall plan (not so-called because of very special political and economic relations) was the Philippine Rehabilitation Act of 1947. This US law enabled the appropriation of $520 million for the rehabilitation of the economy – to finance the restoration of destroyed public infrastructure facilities and to award war damage payments for the rehabilitation of properties and businesses destroyed.

(For those who think today this amount of dollar aid was small, consider this. The purchasing power of the dollar of 1940 that was used to evaluate the war damage is worth at least 15 times that of the US dollar of 2015.)

War damage payments helped to speed up the rehabilitation of the economy. These payments contributed immensely to economic rebuilding and to new development. Being quickly disbursed payments within a period of three years until 1950, they provided direct income flows to the recipients.

Economic imbalances. The beginnings of macroeconomic imbalances happened during Quirino’s time. Tax revenues and other government receipts were not enough to cover the large expenditure on rehabilitation and development. Foreign grants (mostly US payments) helped to fill the gap.

Despite the abundance of American economic expenditures and aid, the demand for foreign goods far outstripped the country’s inflows of dollar resources. The magnitude of the reconstruction plus the insatiable want to restore peace time levels of consumption produced this imbalance.

The exchange rate, pegged at the old pre-war and pre-independence value of two to one, also encouraged excessive spending. At about this time, in 1949, the newly created Central Bank opened its doors and the governor (the former secretary of Finance), Miguel Cuaderno, recommended the imposition of import controls.

Later, as conditions tended to worsen, import controls were assisted by more stringent exchange controls. The uses for the allocation of dollars had to be prioritized.

Investments and export recovery. Investments and recovery were helped however by the heavy inflows of assistance from the US.

Infrastructure reconstruction was rapid. Public edifices destroyed by the war were rebuilt with public war damage money. Major roads and bridges, ports and school-buildings were restored. Public utilities were restored.

Private housing and business investments were stimulated by the war damage payments. Damaged businesses – in agriculture, industry, manufacturing and commerce – were assisted in part by the quickly disbursed war damage payments.

New domestic infrastructure projects also came into being. Hydroelectric power began to be harnessed. The Ambuklao Dam in Luzon and the Maria Cristina Falls were harnessed to produce electricity.

The country’s major export industries began to recover. The processing of coconut products expanded and many of the sugar mills began to be restored and exports of these products began to recover. Some mining and timber firms resumed production.

During Quirino’s presidency, the country continued to receive support from US development aid and enjoyed the early years of the special relations covering trade adjustment, war damage payments, and an effort to promote domestic industrialization.

The import and exchange controls encouraged businessmen to produce products that replaced imports. The beginnings of industrial import substitution were promoted by the law promoting “new and necessary industries.”

The government also started to undertake mass housing for low and middle income earners. This program was under the People’s Housing Homesite Corp., a forerunner of the National Housing Authority. Thus begun housing projects designed to be amortized by citizens — Projects 1, 2, 3 and 4 in the Metro Manila area.

The housing displacements during the war and continuous migration to cities haunt us even today. A future in self-financed mass housing was begun during Quirino’s time.

Optimistic future. Although new problems were emerging for the country, there was a lot of optimism in 1953. The economic rehabilitation was carried well forward. New horizons for development were opening up.

In fact, in 1953 the Philippines was well-positioned to become successful in economic development. The country then was the envy of many countries facing postwar reconstruction and development