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Philippine import and exchange restrictions

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Philippine import and exchange restrictions

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Content PHILIPPINE IMPORT AND EXCHANGE RESTRICTIONS A T h e sis P re s e n te d to th e F a c u lty of th e D epartm ent of Economics U n iv e r s ity of S o u th ern C a lif o r n ia In P a r t i a l F u lf illm e n t o f th e R equirem ents f o r th e Degree M aster o f A rts by P i l a r Romulo Magno Jan u ary 1952 UMI Number: EP44716 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI' Dissertation Publishing UMI EP44716 Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 -1 3 4 6 U-c > \ \ ^ 0 < L *&2 M IW This thesis, ‘ written by ...................P i „ l a r _ _ R _ .^ g n o ................................................ under the guidance of htzZ.— Faculty Com m ittee, and approved by all its members, has been presented to and accepted by the Council on Graduate Study and Research in partial fulfill ment of the requirements for the degree of M A ST E R OF A R T S Chair TABLE O F CONTENTS CHAPTER PAGE I . INTRODUCTION................................................................................... 1 The problem p re s e n te d ..................................................... 1 I I . PRE-WAR AND POST-WAR TRADE BALANCE OF THE P H IL IP P IN E S ................................................................... * + F o re ig n tra d e ^ o f th e P h i l i p p i n e s ............................. * + The S p an ish p e r i o d ................................. 5 The .American p e r i o d ..................................................... 5 P o st-w ar p e rio d ........................ 7 Trade d e f i c i t s . . . . . ................................................ 8 F a c to rs b eh in d th e tr a d e d e f i c i t s .................... 9 War damage . . . .......................................................... 9 Lack of im p o rt c o n t r o l ................................. 10 War damage re m itta n c e s ........................................... 10 L is t of p re-w ar p r i n c i p a l e x p o rts ........................ 12 I I I . THE. M ONETARY SYSTEM OF THE PHILIPPIN ES.................... 20 The P h ilip p in e g old exchange s ta n d a rd . . . . 20 The d o l l a r exchange s ta n d a rd . . . ........................ 22 The new m onetary system ........................ . . . . . 23 IV. THE PHILIPPINE CENTRAL B A N K ............................................ 26 The C e n tra l Bank and f o r e ig n exchange . . . . 26 O p eratio n i n gold and f o re ig n exchange . . . 30 Exchange r a t e s ................................. 32 iv CHAPTER PAGE V. ECONOMIC CONDITIONS OF THE PHILIPPIN ES............ 35 Japanese o cc u p a tio n p e rio d ........................................... 35 L ib e r a tio n p e r i o d .......................................................... . 37 V I. IMPORT CONTROL...................................................................... * 4 -1 Recommendation of th e J o i n t F i l i p i n o - A m erican F in an ce Commission .................................. * 4 -2 The Im port C o n tro l Law o f 19*+8........................... *+ 3 E x e c u tiv e Order No. 1 9 * 4 -.................................... ^ Amendment to E x ec u tiv e Order No. 193 • « • ¥$ E f f e c ts o f th e Im port C o n tro l Law . . . . * 4 -5 E x e c u tiv e O rders Nos. 295 and 297 * 4 * 6 S e le c tiv e c r e d i t c o n t r o l ......................................... *+7 P ro v is io n s of C ir c u la r No. 1 9 ........................... 50 Goods a f f e c t e d ............................. 51 The new Im port C o n tro l Law o f 19*4-9.................. 51 V II. PUBLIC REACTION TO THE TRADE CONTROL MEASURES. . 5 * 4 - Arguments s t a t e d a g a in s t tr a d e c o n tr o ls . . . 5 * + Too d r a s t i c and to o s u d d e n ................................ 5 * + Cause f u r t h e r i n f l a t i o n . . . . . . . . . . 55 R e s t r i c t t r a d e , reduce p r o f i t , s tim u la te h ig h o v e r h e a d ........................................................ 55 C lo sin g of f i r m s ........................................................ 58 E f f e c t on f o r e ig n im p o rte rs .................................. 59 V CHAPTER PAGE D efenses f o r tr a d e c o n t r o l ........................ 59 To p re v e n t d r a in on th e r e s e r v e s .......... 59 S tim u la te lo c a l p ro d u c tio n .................................. 61 V I I I . THE IMPORT CONTROL ADMINISTRATION............... 63 Im port c o n t r o l an o m alies ........................................... 63 An a n a ly s is of th e im port c o n tr o l a d m in is tr a tio n .............................................................. 66 Im port c o n tr o l a s th e most p re s s in g problem o f businessm en a t p r e s e n t . . . 66 Poor and d e f e c tiv e im p lem en tatio n of im port c o n tr o l l a w ................................. 67 Im port C o n tro l Law i n d i r e c t l y in s tru m e n ta l in th e b i r t h of a new i r r e g u l a r i t y . . . 70 E f f e c t o f ioiport .c o n tro l on l o c a l ; > s ' . businessm en ......................................................... 72 IX. FOREIGN EXCHANGE CONTROL . ...................................... 73 Im p o sitio n of F o re ig n Exchange C o n tro l . . . 7b C ir c u la r No. 2 0 ................................................. 75 X. ADMINISTRATION OF FOREIGN EXCHANGE CONTROL . . 8l C ir c u la r No. 2 6 ...................................................... 81 Exchange payment p o l i c i e s ...................................... 83 I m p o r t s ............................ 8* + I n v i s i b l e s ............................................................. 85 F o re ig n exchange f o r t r a v e l ........................ 85 v i CHAPTER PAGE For s tu d e n t m aintenance and l i v i n g expenses ................................................ 86 M edical ex p en ses and m aintenance . . . . 86 A u th o rized t r a v e l fo r b u s in e s s p u rp o se s. 86 In te n d in g e m ig ra n ts ........................................... 87 W ithdraw al o f sa v in g s and c u r r e n t a c c o u n ts h e ld w ith banks o r t r u s t f i r m s .......................................... 87 R em ittance of e a rn in g s from p r o p e r tie s of n o n - r e s id e n t o w n e r s .................. 87 R em ittance o f p ro ceed s from war damage p a y m e n ts ........................................................ . 88 R e n ta ls and r o y a l t i e s ; r e n t on m in e r's lamps ..................................................... 88 R o y a lty c o n tra c te d p r i o r t o exchange c o n tr o l . . . . . . . . ............................. 88 F ilm e x c h a n g e ....................... 89 S hipping and a i r l i n e com panies . . . . . . 89 R e m ittan c es in payment of c h a r t e r h ir e of v e s s e ls . . . . . . .................................. 89 Payment o f m is c e lla n e o u s s e rv ic e s rendered 90 Payments of o b lig a tio n s . ........................ 90 In su ra n c e payments ................................................ 91 v i i CHAPTER PAGE R em ittance c o v e rin g s a l a r i e s and p e n s io n s. * 92 G if t and d o n a tio n s ....................... 93 O ther p u r p o s e s ................................. 93 X I. THE PHILIPPINES AND SUPREME COM M A NDER FOR THE ALLIED POWERS TRADE AND FINANCIAL AGREEMENT 97 E x e c u tiv e O rder No. 3 2 8 ....................................... 97 Im ports from Japan . ....................................... 100 E x p o rts t o J a p a n ..................................................... 100 X I I . FOREIGN EXCHANGE T A X .................................... 103 The Economic Survey M ission .................................. 103 The p assag e of th e F o re ig n Exchange Tax B i l l .................................................... . 10? R e a c tio n to th e ta x on f o re ig n exchange . 107 Why th e ta x must be i m p o s e d ............ 110 P ro v is io n s of R ep u b lic A ct No. 601 . . . . 115 C ir c u la r No. 2 5 .............................................................. 118 X I I I . THE PROBLEM OF CONTROL..................................................... 123 D e te rm in a tio n o f p r i o r i t i e s .................................. 123 D i s t r i b u t i o n of exchange ........................ 126 The a u c tio n p r i n c i p l e ........................................... 127 XIV. CONCLUSIONS......................................................... 131 Economic h ig h li g h ts o f 1950 131 The o u tlo o k f o r 1 9 5 1 ............................... 133 v i i i PAGE BIBLIOGRAPHY........................................ . ............................................. 136 APPENDIX A .. REPUBLIC ACT NO. 330 l*+2 APPENDIX B. REPUBLIC ACT NO. b 2 6 ......................................... lMf APPENDIX C. EXECUTIVE ORDER NO. 1 9 3 ................................ 156 APPENDIX D. EXECUTIVE ORDER NO. 206 ................................ 160 APPENDIX E. EXECUTIVE ORDER NO. 2 9 5 ................................. l 6l APPENDIX F. EXECUTIVE ORDER NO. 328 ................................ 166 APPENDIX G. CENTRAL BANK CIRCULAR NO. 2 0 ...................... 170 APPENDIX H. CENTRAL BANK CIRCULAR NO. 2 5 ..................... 173 APPENDIX I . CENTRAL BANK CIRCULAR NO. 2 6 ...................... 180 LIST OF TABLES TABLE PAGE I . Sugar E xport o f th e P h ilip p in e s to A ll C o u n trie s (1931 to 1 9 ^ 9 ).................................. 13 I I . Coconut O il E x p o rt of th e P h ilip p in e s To A ll C o u n trie s (1931 t o 19^9) . . . . . . l*f I I I . Abaca E x p o rt of th e P h ilip p in e s to A ll C o u n trie s (1931 to 1 9 * + 9 ) ............................. 15 IV. Copra E x p o rt of th e P h ilip p in e s to A ll C o u n trie s (1931 to 1 9 ^ 9 ) ............................. 16 V. Tobacco E x p o rt of th e P h ilip p in e s to A ll C o u n trie s (1931 to 1 9 ^ 9 ) ............................. 17 V I. E m b ro id eries and Lumber, Tim ber, and Log E x p o rts o f th e P h ilip p in e s to A ll C o u n trie s . . . . 18 V II. D e s s ic c a te d C oconut, Canned P in e a p p le , and Iro n Ore E x p o rts of th e P h ilip p in e s . . . . 19 V I I I . I n t e r n a t i o n a l R eserv es o f th e C e n tra l Bank and F o re ig n Exchange H oldings of O ther B anks. . 79 IX. Trade P lan Between th e P h ilip p in e s and SCAP (Occupied Japan) f o r th e P e rio d from J u ly 1, 1950 t o June 30, 1951 • ............................. 99 X. E xport D ra fts N e g o tia te d Under th e P h ilip p i n e - SCAP Trade and F in a n c ia l Agreements . . . . 102 CHAPTER I INTRODUCTION T h is i s a stu d y of s i g n i f i c a n t developm ents in th e P h ilip p in e economy a f t e r World War I I . Among th e s i g n i f i c a n t e v e n ts were th e e s ta b lis h m e n t of th e C e n tra l Bank and th e co n sequent fundam ental change t h a t to o k p la c e in th e c o u n tr y ’ s m onetary system . At th e tim e th e C e n tr a l Bank was o rg a n iz e d , th e P h ilip p in e s was c o n fro n te d w ith fo u r m ajor i n t e r r e l a t e d economic and f i n a n c i a l problem s: 1 . Slow r e h a b i l i t a t i o n of many of i t s m ajor in d u s t r i e s , such a s a b a c a , s u g a r, and to b a c c o . 2 . U nfavorable b a la n c e of payment p o s i t i o n r e s u l t i n g m ain ly from an e x tre m e ly la r g e im p o rt of n o n - e s s e n t i a l items. 3 . How im p o rts can be reduced and a t th e same tim e keep w ith in check th e i n f l a t i o n a r y f o r c e s a t work. *+. B rin g in g ab o u t a b a la n c e betw een governm ent income and e x p e n d itu re s in th e fa c e of in c r e a s in g u rg e n t demands fo r v a r io u s governm ental s e r v ic e s . The Problem P re se n te d The w h o lly u nbalanced f o r e ig n tr a d e of th e P h ilip p in e s a f t e r World War I I has r e s u l t e d i n a d i s l o c a t i o n of th e i n t e r n a l economy and th e w eakening o f th e f o r e ig n exchange p o s i t i o n o f th e R e p u b lic . To remedy t h i s u n d e s ira b le s i t u a t i o n and to p re v e n t f u r t h e r d r a in on th e d o l l a r r e s e r v e s o f th e P h ilip p i n e s , th e Government d ecid ed to impose what i s now known a s th e "Im port C o n tro l" m easures on n o n - e s s e n t i a l and lu x u ry a r t i c l e s . The achievem ent of th e o b je c tiv e s of th e c o n tr o l m easures now in f o rc e i s e x tre m e ly n e c e s s a ry i f th e P h ilip p in e s w ished to p re v e n t a f u r t h e r d e t e r i o r a t i o n of th e c o n d itio n of th e i n t e r n a t i o n a l r e s e r v e s of th e n a tio n w hich w i l l be v e ry damaging to th e n a t i o n a l economy. A d e s c r i p t i o n of th e s e developm ents and o f th e a c tio n s ta k e n r e l a t i v e to them in th e m onetary f i e l d i s th e p r i n c i p a l c o n te n t o f t h i s stu d y . In t h i s s tu d y , th e w r i t e r t r i e d to p r e s e n t th e d e v e l opment and p ro g re s s of th e P h ilip p in e f o r e ig n tr a d e under th e S p an ish p e r io d , under th e American o c c u p a tio n up to th e p r e s e n t a d m in is tr a tio n under th e new r e p u b lic . The w r i t e r t r i e d to show th e p o l i t i c a l and economic c o n d itio n s w hich g r e a t l y in f lu e n c e th e im p o s itio n of th e im p o rt c o n t r o l , th e d e f e c ts and w eaknesses of th e im port c o n tr o l laws and th e system a s a w hole, and th e n e c e s s a ry s te p s to improve th e s a id economic problem . In th e p r e p a r a tio n of t h i s s tu d y , th e method used was t h a t of l i b r a r y r e s e a r c h supplem ented la r g e l y by c o rre sp o n d ence w ith th e P h ilip p in e C e n tr a l Bank and w ith th e P h i l i p p in e C o n g ress. Most of th e f a c t s used in t h i s stu d y was 3 b a se d m o stly from th e F i r s t and Second Annual R ep o rt o f th e C e n tr a l Bank of th e P h ilip p in e s to the most r e c e n t bank b i l l s p assed in A ugust 1951. A nother so u rce of th e f a c t s i n t h i s stu d y was th e M anila new spapers and m agazines. CHAPTER I I PRE-WAR AND POST-WAR TRADE BALANCE OF THE PHILIPPINES The war and su b se q u en t p o l i t i c a l and, economic c o n d i t i o n s b ro u g h t about m ajor changes in th e o v e r a l l tr a d e p a t t e r n of th e P h ilip p i n e s . The s h i f t from th e e x p o rt b a la n c e s b e fo r e th e war to im port b a la n c e s in th e p o st-w a r y e a r s , p a r t i c u l a r l y in th e tr a d e w ith th e U nited S t a t e s , r e f l e c t s th e fundam ental change in th e tr a d in g p o s itio n of th e P h i l i p p i n e s . P o s i t i v e tr a d e b a la n c e s were th e r u l e d u rin g th e p re-w a r y e a rs e s p e c i a l l y in th e decade j u s t b e fo re th e o u t b re a k of th e w ar. A lthough n e g a tiv e b a la n c e s were c a r r ie d w ith th e m a jo rity of th e c o u n tr ie s w ith which th e P h i l i p p in e s tra d e d d u rin g th e p re-w ar y e a r s , th e s e were more th a n o f f s e t by th e la r g e s u r p lu s in th e f o re ig n tr a d e w ith th e U n ited S t a t e s , th e most im p o rta n t f a c t o r in th e f o re ig n tr a d e o f th e P h ilip p i n e s . x I . _ FOREIGN TRADE OF THE PHILIPPINES The P h ilip p in e s had been engaged in f o r e ig n tr a d e w ith n e ig h b o rin g A s ia tic c o u n tr ie s p r i o r to th e a r r i v a l o f th e S p a n ia rd s i n 1521. The C hinese t r a d e r s to o k th e most s i g n i f i c a n t p a r t in t h i s t r a d e . I t was even b e lie v e d t h a t P h ilip p in e - C h in e s e tr a d e r e l a t i o n s began i n ab o u t th e y e a r 5 1000 B. C ., b u t no re c o rd s to v e r i f y t h i s c o n te n tio n have been a v a i l a b l e . ^ The P h ilip p in e -C h in e s e tr a d e in c re a s e d s t e a d i l y u n t i l th e a r r i v a l of th e S p a n ia rd s . The S p an ish P e rio d The a r r i v a l of th e S p a n ish c o lo n iz e rs f u r t h e r expanded t h e f o r e ig n t r a d e of th e P h i l i p p i n e s . However, under th e S p a n ish reg im e, tra d e was r e s t r i c t e d o n ly to S pain and M exico, in acco rd an ce w ith th e m e r c a n t i l i s t p r a c t i c e of th e tim e w herein a l l c o lo n ie s w ere r e q u ir e d to su p p ly th e mother c o u n try w ith raw m a te r ia ls needed for th e p ro d u c tio n o f th e l a t t e r 1s e x p o rt com m odities. The volume o f f o r e ig n tr a d e was f a i r l y c o n s ta n t from 187*+ to 189*+. D uring th e s e l a s t tw en ty y e a rs of th e S p an ish r u l e , th e a v e ra g e t o t a l f o re ig n tr a d e of th e P h ilip p in e s was about $75,0 0 0 ,0 0 0 a n n u a lly .^ The American P e rio d The P h ilip p in e s o v e rse a tr a d e re c o rd e d a h e a lth y e x p a n sio n under th e American reg im e. The r e c i p r o c a l f r e e tr a d e r e l a t i o n s h i p between th e P h ilip p in e s and th e U nited Pedro A dlao, "The Commodity F o re ig n Trade of th e P h i l i p p i n e s ," (u n p u b lish e d M a s te r 's t h e s i s , The U n iv e r s ity o f S o u th ern C a l i f o r n i a , Los A n g ele s, May 19+ 0), p. 8. 2 Hugo M il le r , Economic C o n d itio n s of th e P h i l i p p in e s (B oston: Ginn & Company, 1920), p . 393* 6 S t a t e s , e s t a b l i s h e d by th e P a y n e -A ld ric h T a r i f f Act o f 1909? s tim u la te d th e grow th of P h ilip p in e f o r e ig n t r a d e . The s a id Act en a b led th e P h ilip p in e s t o e x p o rt more th a n i t c o u ld have o th e rw is e , inasm uch a s h e r p ro d u c ts co u ld com p e te fa v o ra b ly w ith s im ila r e x p o rts from o th e r c o u n tr ie s . The e s ta b lis h m e n t of p r e f e r e n t i a l tr a d e p r e c i p i t a t e d a lo p s id e d ex p an sio n and c o n c e n tr a tio n i n th e developm ent of p r e f e r r e d e x p o rt i n d u s t r i e s , many of w hich w ere un ab le t o compete s u c c e s s f u l ly in a f r e e m ark et. The danger of such tr a d e r e l a t i o n s h i p s had been p o in te d o u t d u rin g t h e a g i t a t i o n a g a in s t d u ty - f r e e P h ilip p in e p ro d u c ts to th e U n ited S t a t e s . Some o f th e s e d an g ers had been s ta te d a s fo llo w s s 1. The p r o te c te d tr a d e p e rm its P h ilip p in e in d u s t r i e s , l i k e su g a r, to grow and expand under a r t i f i c i a l . . . c o n d itio n s . W ith th e p r e f e r e n t i a l p o s i t i o n enjoyed by th e P h ilip p in e p ro d u c ts , p ro d u c e rs in th e P h ilip p in e s w i l l c o n tin u e t o produce a t c o s t much h ig h e r th a n th o s e of c o m p e tito rs from o th e r c o u n tr ie s . . . 2 . R e c ip ro c a l f r e e tr a d e and co n sequent c o n c e n tra t i o n of P h ilip p in e tr a d e w ith th e U n ited S ta te s induced th e P h ilip p i n e s to d is r e g a r d o th e r p o s s ib le m a rk e ts. A d is c o n tin u a n c e of f r e e tr a d e would p a ra ly z e P h ilip p in e f o r e ig n t r a d e , a t l e a s t te m p o ra rily , and p e rh a p s , fo r a long tim e . . . 3 . . . . where c o m p e titio n among s e l l e r i s a b s e n t o r weak, th e s c a le o f p r ic e s i s h ig h e r th a n t h a t which would p r e v a i l under open c o m p e titio n . . , . C om petition i s n o t c a u sin g us to red u ce our c o s t of p r o d u c tio n ,3 3 I b i d . , p. 398. 7 F o re ig n tr a d e expanded to a l e v e l of 1*200,000,000 by 1913 and surged to a new h ig h of ^*+60,000,000 by 1918. The s h a rp in c r e a s e i n 1918 was caused by th e g r e a t demand f o r raw m a te r ia ls and i n f l a t i o n a r y p r ic e s caused by World War I . Trade s t e a d i l y in c re a s e d u n t i l i t reach ed a new l e v e l b of ^ 6 2 0, 0 0 0 ,0 0 0 in 1929. Post-W ar P e r io d . No f o r e ig n tr a d e e x is te d d u rin g th e Japanese occupa t i o n . A ll dom estic p ro d u c ts were c o n f is c a te d by th e Japan e s e and sh ip p ed to Japan fo r th e consum ption of b o th h e r p eo p le and h e r army. In marked c o n t r a s t to th e f a v o ra b le tr a d e b a la n c e of over 6 l . 8 m illio n pesos a n n u a lly from 1937 to 19^ 1 ? p o s t war tr a d e of th e c o u n try s t a r t i n g from 19* + !?* re c o rd e d an a v e ra g e an n u al d e f i c i t of 503 m illio n p e s o s .^ The huge d e f i c i t s were due p r im a r ily to th e g r e a t s l a s h in e x p o rts on acco u n t o f th e d e s tr u c tio n s and rav ag e s b ro u g h t ab o u t by w ar, r e s u l t i n g in th e c h a o tic socio-econom ic c o n d itio n o f th e c o u n try , and a ls o due t o th e abnorm al demand f o r im p o rts caused by th e low s to c k s of goods in th e c o u n try . L . F a c ts and F ig u re s of th e P h ilip p in e s (M anila: B ureau o f P r i n t i n g , 1929). ^ F i r s t Annual R eport of th e C e n tra l Bank of th e P h i l i p p i n e s . I 9S9 , PP. 3 4 -3 5 . 8 The p r o p e n s ity to im port consum ption goods a r e due p r im a r ily to th e la r g e funds made a v a i l a b l e under th e U n ite d S ta te s a id program and government d isb u rse m e n ts w hich a r e n o n r e c u r rin g ; th e stro n g demand f o r consumer and r e c o n s tr u c tio n goods r e s u l t i n g from th e d e v a s ta tio n and d e p r iv a tio n s of th e w ar; th e more w id e ly d is p e rs e d d i s t r i b u t i o n o f money income among th e low er income group and th e changing s ta n d a rd of l i v i n g of th e s e g ro u p s, r e s u l t i n g in g r e a te r demand fo r consumer goods; and th e i n f l a t e d d om estic p r ic e s a s compared w ith th e p r ic e l e v e l of im p o rted goods.® I I . TRADE DEFICITS A co m parative stu d y of th e p re-w ar and p o st-w a r P h i li p p i n e tr a d e p o s i t i o n can be made from the fo llo w in g 7 c h a r t :' PHILIPPINE, TRADE *BALANCE P re-w ar and P o st-w a r« ( I n m il lio n of p e s o s )0 P e rio d T o ta l Trade Im ports E x p o rts Trade B alance 1937-1 +1 596.*+ 2 5 3 .8 3 1 5 .6 (6 1 . 8 ) 19J+5 5 9 .2 5 7 .9 1 .3 - 5 6 .6 19^6 7 2 0 .1 5 1 9 .7 1 2 8.b - ^ 6 3 .3 19*+7 1 ,5 5 1 .8 1 ,0 2 2 .7 529.1 -J+93.6 19^8 1 , 8 0 7 .2 1 ,1 7 1 .7 6 3 5 .5 - 5 3 6 .2 19^9 1 ,6 ^ 2 .0 1 ,1 2 2 .0 520.0 -6 0 2 .0 From 19^5 to 19^8, tr a d e d e f i c i t s t o t a l l e d 1,666 m i l l i o n p e s o s. In a d d i t i o n , th e r e was a d e f i c i t of 600 ^ The B e ll R e p o rt, U. |3. Economic Survey M is s io n ’s R e p o rt. 1950. ^ F i r s t Annual R eport of th e C e n tra l Bank of th e P h i l i p p i n e s . M anila, 19*+9, P • 37. o The peso i s e q u iv a le n t t o a h a l f d o l l a r . 9 m i l l i o n pesos on ac co u n t of i n v i s i b l e ite m s . Up to 19*+ 7> t h e huge d e f i c i t s were met a d e q u a te ly by U nited S t a t e s c r e d i t , g r a n t s , and o th e r U nited S ta te s governm ent e x p e n d itu res. By 19*+8, however, th e s u b s t a n t i a l amount of f o r e ig n exchange re c e iv e d from th o s e so u rc e s proved i n s u f f i c i e n t to make up f o r th e d e f i c i t s , and in t h a t y e a r , th e i n t e r n a t i o n a l r e s e r v e s d e c re a se d to a le v e l of 8^0 m illio n p e so s. In 19*+9» th e i n t e r n a t i o n a l r e s e r v e s d e c re a se d to 518 m il lio n p e s o s , or a d e c lin e in t h a t y e a r of 322 m illio n p e so s. T h is la r g e drop in th e i n t e r n a t i o n a l r e s e r v e s was p r im a r ily due to th e heavy tr a d e d e f i c i t w hich in 19*+9 amounted to 817 m illio n p e s o s , and th e e x c e s s of n o n - tra d e r e m itta n c e s over n o n -tra d e r e c e i p t s (e x c lu d in g U. S. governm ent expend i t u r e s ) , w hich a g g re g a te d ^ 7 m il lio n p e so s. F a c to r s Behind th e T rade D e f i c i t s T here a re s e v e r a l economic and f i n a n c i a l f a c t o r s b eh in d th e tr a d e d e f i c i t s s in c e th e end of the w ar. War damage. — The main re a s o n f o r th e e x c e ss of im p o rts over e x p o r ts was th e damage w rought by w ar. The P h ilip p i n e s emerged from th e war w ith a s e v e r e ly d e v a s ta te d economy. Most of the su g a r m i l l s , mine eq u ip m en ts, p u b lic u t i l i t i e s , and o th e r i n d u s t r i a l f a c i l i t i e s were d e s tro y e d . F u rth e rm o re , th e hemp, su g a r, c o p ra , and abaca la n d s w ere abandoned due to th e d e t e r i o r a t i o n i n th e peace and o rd e r 10 o f th e c o u n try a t th e tim e , and w hich has become w orse. P ro d u c tio n of m ajor e x p o rt com m odities has n o t re a c h e d th e p re -w a r l e v e l s . B ice is back to p re-w ar le v e l and corn and co co n u t p ro d u c tio n s a r e n e a r th e l e v e l of p re -w a r, b u t th e p ro d u c tio n of su g a r, a b a c a , g o ld , tob acco and to b a cco p ro d u c ts i s s t i l l la g g in g behind pre-w ar l e v e l s . Lack of im port c o n t r o l . — S ince l i b e r a t i o n , im p o rts exceeded e x p o r ts . In view of the heavy d i s s i p a t i o n o f r e s o u r c e s n e c e s s a r y f o r th e r e h a b i l i t a t i o n and r e c o n s tr u c t i o n o f consum ption goods, th e J o i n t P h ilip p in e -A m e ric a n Commission recommended in 19^7 the im p o s itio n of Im port C o n tro l. The Im port C o n tro l, however, was put i n t o e f f e c t o n ly in 19*+9• War damage r e m it ta n c e s . — The U nited S ta te s R ehabi l i t a t i o n A ct of 19^6 p ro v id ed t h a t war damage payments sh o u ld be made d i r e c t l y and in lump sums to a la r g e number o f i n d i v i d u a l s . A la r g e p a r t of the aw ards c h a n n ele d in to th e p u b lic p u rc h a s in g power. T his has f u r t h e r induced a h ig h p r o p e n s ity to im port lu x u ry and n o n -lu x u ry ite m s . The o u tla w in g of th e Jap an ese peso and the c lo s in g of banks a t th e tim e of th e l i b e r a t i o n in 19*+6 fo rc e d th e governm ent to is s u e e ig h t hundred m il lio n pesos of new t r e a s u r y c e r t i f i c a t e s , making a t o t a l of one b i l l i o n p e s o s ’ c u r re n c y in c i r c u l a t i o n a l l backed up by a one hundred p e r c e n t 11 d o l l a r r e s e r v e ( u n t i l th e end of 19*+8, th e P h ilip p in e s o p e ra te d under a one hundred per c e n t c u rre n c y r e s e rv e sy ste m ). T h is in c r e a s e in money a t th e same tim e t h a t t h e r e was a s h o rta g e of prim e com m odities em phasized f u r th e r th e i n f l a t i o n a r y t r e n d . In O ctober 19^9? a s t a f f member of th e I n t e r n a t i o n a l M onetary Fund made th e fo llo w in g o b s e rv a tio n , summing up th e economic p l i g h t of th e c o u n try : At th e end of th e w ar, th e P h ilip p i n e s p o sse sse d over h a l f a b i l l i o n d o l l a r s of f o r e ig n exchange which would make p o s s ib le th e fin a n c in g of a la r g e p a r t o f th e ex p e cte d t r a d e d e f i c i t s of th e en su in g two or th r e e y e a r s . T h is would have meant t h a t th e abnorm al d o l l a r r e c e i p t s a c c ru in g to th e P h ilip p in e s on war damage a c c o u n t would be s e t a s id e fo r th e use i n th e d ev e lo p ment program , p a r t i c u l a r l y a f t e r 1951 when th e P h i l i p p in e economy would be in a p o s it io n t o a b s o rb la r g e im p o rts f o r eq u ip m en ts. U n fo r tu n a te ly , d u rin g th e y e a rs from 19^5 to 19l+8, th e P h ilip p in e s had a tr a d e d e f i c i t so la r g e a s to r e q u ir e the use of a p p ro x im a te ly a l l th e d o l l a r a id c u r r e n t l y r e c e iv e d . However, th e g r e a t b u lk of th e im p o rts had been of consumer goods. Though a d m ittin g t h a t th e d e la y in i n s t i t u t i n g th e im p o rt c o n tr o ls has been c o s t l y , th e P h ilip p in e Govern ment can p le a d t h a t t h e i r c o u n try was among th o se most s e v e r e ly damaged in th e G re at War and th e d e p r iv a tio n s u f f e r e d by t h e i r people made i t p o l i t i c a l l y im p o s sib le t o impose r e s t r a i n t s on the im p o rt of consumer goods. The ta s k of d i r e c t i n g and r e o r i e n t i n g th e economy is one of s p e c i a l d i f f i c u l t y f o r a c o u n try w hich has only r e c e n t l y a c h ie v e d p o l i t i c a l independence (on Ju ly 19*+6) and w hich has t h e r e f o r e , had l i t t l e o p p o rtu n ity to d ev elo p th e b road and m u ltip le s k i l l s r e q u ir e d f o r su ch a task.-? 9 S t a f f Memo No. *+00 ( I n t e r n a t i o n a l M onetary F und), O ctober l 8 , 19^9, p. 1. 12 I I I . LIST OF PRE-WAR PRINCIPAL EXPORTS B e fo re th e w ar, e x p o r ts p lu s gold were g e n e r a lly in e x c e s s of im p o rts . The te n le a d in g e x p o rts of th e P h i l i p p in e s a re s u g a r, coconut o i l , a h a c a , c o p ra , to b a c c o prod u c t s , e m b ro id e rie s , lumber (tim b e r and lo g ) , d e s ic c a te d c o c o n u t, canned p in e a p p le , and ir o n o r e . A t a b u l a t i o n of th e v a lu e of th e s e e x p o rt p ro d u c ts from 1931 to 19^9 i n c l u s i v e , i s shown on T a b le s I to V I I .10 10 Summaries of P. I . F o re ig n T ra d e . 19^1 t o 19*+9 (M an ila, P h i l i p p i n e s ; B ureau of Commerce, 19*+9) * 13 TABLE I SUGAR EXPORT OF THE PHILIPPINES TO ALL COUNTRIES (1931 t o 19*+9) Year Q u a n tity (K ilo s ) T alu e (P eso s) 1932 1933 193* 1935 193 193 1 3.9 19*+1 191*2 !9^3 19*4-4 l< * f 19^6 19*+7 752,932,232 1,016, 568,150 1 ,0 7 8 ,6 5 2 ,6 7 1 1 ,1 5 2 ,8 4 0 ,7 3 3 516, 232,686 8 9 9, 8 3 8 ,3 6 7 8 7 1, 0 4 5 ,1 3 0 8 6 8 ,2 5 3 ,2 5 8 ? 2 |,3 2 1 8*+ 576 717 191*9 18,81+9,! f 216,770,57* 550,l+0^,M +9 9 9 ,9 2 6 ,2 1 0 1 1 9 ,6 0 3 ,7 6 9 1 2 8,666,851 130,909,181 65,981,6 M + 1 2 3 ,8 7 ^,3 5 9 1 1 5 ,^1 2 ,3 8 7 100,0M+,407 5 7 ,2 3 0 ,9 6 5 > f,0 8 l,l8 8 M , 580,253 7 5 ,0 ^ 1 ,7 8 2 14 TABLE I I C O C O N U T OIL EXPORT O F THE PHILIPPINES TO ALL COUNTRIES 1931 TO 19^9 Year Q u a n tity (K ilo s ) V alue (P eso s) 1 6 4 ,9 7 0 ,1 9 6 2 7 ,1 7 1 ,2 6 7 1 1 4 ,6 7 2 ,5 7 5 1 4 ,6 7 1 ,6 5 9 1933 1 5 9 ,6 2 0 ,6 2 0 1 8 ,0 5 0 ,1 5 0 193* lM +,853,000 1 2 ,7 9 4 ,1 1 4 1935 1 6 5 ,1 9 * ,0 0 0 2 4 ,0 1 0 ,1 9 7 1936 1 5 9 ,6 2 2 ,8 3 0 2 6 ,2 7 4 ,3 4 2 1937 1 6 3 ,2 9 6 ,9 7 1 4 0 ,3 4 7 ,4 0 6 1938 1 6 5 ,6 2 3 ,2 7 0 2 0,806,882 1939 1 6 7 ,7 0 2 ,1 8 2 1 6 , 8 2 0 ,6 8 8 19*0 1 56,893,113 1 6 ,2 4 7 ,8 9 5 1941 1 9 2 ,0 0 7 ,2 3 9 2 5 ,6 3 5 ,3 1 5 19; 1945 ......................... ....................... 1946 1 ,5 2 2 ,0 0 0 207,222 1947 1 8 ,1 4 4 ,9 5 6 2 ,1 4 5 ,9 7 0 1948 4 7 ,2 7 8 ,7 7 4 3 8 ,0 5 4 ,5 4 6 1949 2 5 ,0 1 1 ,4 5 7 1 0 ,7 5 6 ,0 2 5 15 TABUS I I I ABAGA EXPORT O F THE PHILIPPINES TO ALL COUNTRIES 1 9 3 1 TO 19^ 9 Year Q u a n tity (K ilo s) V alu e (P esos) 1931 1932 1933 193^ 1935 1936 1937 1938 1939 19*0 19^1 19^2 1 9 19^5 1 9 ^ 19^7 191+8 1 3 2 ,1 1 3 ,1 . 105+783,072 1 5 2 ,0 6 6 ,0 ^3 1 7 ^,5 0 0 ,3 3 6 18 8 ,2 0 0 ,5 0 5 167, 12^,218 165,3 3 9 ,3 9 8 1 ^ 1 ,3 1 ^ ,9 5 6 1 7 7 ,8 2 8 ,7 5 5 177,i+Mf,080 1 6 2 ,2 7 3 ,^ 1 2 ^ ,^ 8 2 ,5 5 7 8 6 ,1 3 9 ,0 3 7 16,277,008 1 2 ,1 1 ^,5 8 3 17,885,812 1 0,031, 20^ 13 ,7 * 7 ,7 1 9 1 7 ,3 2 3 ,1 3 6 2 2 ,9 ^ 7 ,9 3 3 3 ^ ,1 7 7 ,1 9 7 * 3 ,2 7 9 ,3 7 3 2 0 ,3 1 8 ,3 ^ 7 2 3 , 7 ^ , 9 7 3 2 5 ,3 9 6 ,1 2 9 3 5,001,210 9 ,6 5 2 ,5 7 6 6 3 ,^ 3 5 ,8 7 ^ 6 0 , 2 9 ^ ,0 8 7 3^ ,^ 0 3 ,0 9 5 16 TABLE 17 COPRA EXPORT G F THE PHILIPPINES TG ALL COUNTRIES 1931 TO 19^9 Year Q u a n tity (K ilo s ) V alue (P eso s) 1931 1 7 4 ,2 3 9 ,1 6 5 1 8 ,3 0 0 ,8 0 8 1932 1 3 7 ,2 4 0 ,6 0 4 1 0 ,2 6 6 ,4 5 4 1933 3 0 8 ,7 5 3 ,4 6 8 1 7 ,9 1 2 ,0 5 7 1934 3 4 2 ,7 0 6 ,0 0 0 1 7 ,2 1 0 ,2 4 9 1935 2 5 2 ,8 9 9 ,0 0 0 2 1 ,9 7 4 ,6 6 0 1936 2 9 1 ,0 8 7 ,7 3 0 2 9 ,9 9 9 ,5 6 8 1937 2 3 6 ,5 4 3 ,5 6 6 3 1 ,9 6 9 ,3 9 9 1938 3 4 2 ,0 6 7 ,0 2 3 2 4 ,5 1 2 ,0 2 8 1939 3 9 8 ,4 4 6 ,1 3 7 2 6 ,8 0 3 ,7 2 2 1940 3 4 1 ,9 3 0 ,3 7 1 2 2 ,3 0 5 ,2 3 1 1941 2 6 5 ,1 4 8 ,7 7 0 516,190 1< 191 1945 4 ,0 1 8 ,6 4 7 7 8 ,0 2 0 ,8 1 1 1946 3 8 9 ,9 8 5 ,2 9 6 35*s}U*,33}* 1947 1 ,0 0 0 ,0 8 4 ,8 6 0 3 0 9 ,4 0 0 ,1 2 4 1948 5 8 6,993,362 7 5 ,1 4 8 ,8 6 8 1949 2 0 9 ,3 3 7 ,1 4 9 2 3 5 ,1 4 6 ,1 8 9 17 TABLE ? TO BACCO EXPOUT O F THE PHILIPPINES TO ALL COUNTRIES 1931 TO 19*+9 Year Q u a n tity (K ilo s ) V alu e (P eso s) 1931 1932 1933 193* 1935 1937 1938 1939 19*0 19^1 19^2 I# 19*+5 19**7 19^8 19^9 1 ^ ,8 ^ 1 ,6 7 5 1 2, 800,118 1 0 ,3 5 5 ,7 8 7 1 0 , 3 8 9 , ^ 7 12,003,658 10,^89,866 9 , 966,216 1 9 ,9 2 9 ,2 7 9 1 ^ 5 3 2 ^ 6 10, 292,061 7 ,2 0 8 ,3 8 7 3 ,3 5 0 2 ,5 0 3 ,3 1 1 **,3 8 2 ,9 8 2 2 ,6 7 6 ,^ 5 1 2 , 126,780 6 , 8 1 3 ,9 0 8 6,^18,682 5 ,9 5 1 ,9 6 8 6 ,7 2 7 ,3 0 6 6 ,5 7 7 ,1 3 0 5 ,1 2 ^ ,0 9 9 6 ,5 7 9 ,1 5 2 6 ,3 3 5 ,2 5 1 8 ,8 3 9 ,7 5 3 6 ,9 7 0 ,2 8 5 6 ,0 7 3 ,6 3 0 738,997 665,292 S 5 ; 8 ! 18 TABLE VI EMBROIDERIES AND LUMBER, TIMBER, AND LOS EXPORTS O F THE PHILIPPINES TO ALL COUNTRIES 1931 TO 19*+9 EMBROIDERIES LUMBER, TIMBER, Year . __________ AND L O G V alue (P e so s) V alue (P e so s) 1931 5,31*+,259 3 ,6 8 1 ,2 0 3 1932 6 ,6 9 9 ,6 ^ 9 1 , 660,*+50 1933 3 ,7 9 8 ,6 3 1 2,537,21*+ 1935 5 ,3 3 2 ,8 * 0 *+, 3* 2 ,790 1935 1 0 ,1 5 2 ,*+89 5 , 0 2 3 ,5 1 6 1936 8 , 5% , 110 6 , 199, 2* + © 1937 7 ,3 7 7 ,6 0 6 7,886,22*+ 1938 10,229,62*+ 5 ,6 5 0 ,5*+l 1939 10,71*+,!*+*+ 8 ,3 6 3 ,1 7 7 1 * 9 ,1 7 6 ,6 9 5 7 ,1 7 7 ,1 0 9 19*+1 7 ,2 9 5 ,6 2 1 8 ,87*+, 925 19*+2 --------------- --------------- 19**3 ..................... ..................... 1 Q u i i . ____ _ _ _ 19*+5 * + 8 ,0 6 0 19**6 83,228 17*+,( 19*+7 2 ,8 3 5 ,1 1 6 528,* _ 19^8 1 3 ,9 1 7 ,2 7 6 5 ,6 7 5 ,8 5 9 19*+9 5,787,8*+8 2 ,9 1 8 ,2 7 9 19 TABLE V I I DESICCATED COCONUT, CANNED PINEAPPLE, AND IRON ORE EXPORTS OF THE PHILIPPINES TO ALL COUNTRIES 1931 TO 19*+9 Year DESICCATED CANNED COCONUT PINEAPPLE IRON ORE V alue (P eso s) V alue (P esos) Value (P esos) 1931 1932 1933 193*+ 1935 1936 1937 1938 1939 19*+0 19*+1 19*+2 IU 19**-5 19*+6 19*+7 19^8 19*+9 3 , 6*+*+,2 57 3 ,2 3 3 ,^ 0 2 3 ,3 6 5 ,6 0 9 *+,509,079 7,92*+, 630 8 ,79*+, 125 1 2 ,6 9 3 ,2 6 3 7 ,6 2 3 ,7 1 5 8 ,8 3 7 ,^ 9 5 7 , 381,862 1 2 ,0 9 8 ,8 0 5 *+,1 0 0 , *+80 19,05*+,656 57, *+91,099 2 0 , 111,768 596,969 267,976 818,*+88 31*+, 796 l , 0 0 3,0*+6 3 ,3 ^ 5 ,6 9 7 2 , 1 2 9, *+80 3,*+15,809 *+,998,211 3 , 0 0 1 ,3 8 1 * + 0 35 29,3*+9 l,l*+ 3,929 2,863 ,*+27 2 , 652,078 5 ,5 2 9 ,^ 8 0 7,6*+8,327 5 ,3 2 3 ,9 9 7 307,337 1,7*+8,915 CHAPTER I I I THE MONETARY SYSTEM OF THE PHILIPPINES From 1903 to 1923, th e M onetary system of th e P h i l i p p i n e s may be d e s c rib e d a s t h a t of a gold exchange s ta n d a r d . A c o u n try i s s a id to be on a gold exchange s ta n d a rd when i t s m onetary u n i t i s n o t d i r e c t l y redeem able in g o ld , b u t i n s ta n d a rd u n i t of some gold c o in or g o ld b u lli o n s ta n d a rd c o u n try . B ecause of th e u n u su a l r e l a t i o n s h i p betw een th e U n ite d S t a t e s and th e P h i l i p p i n e s , the peso has been pegged t o th e American d o l l a r a t a two to one r a t i o . The a r r a n g e ment o f pegging th e peso to th e d o l l a r has been prompted by th e f a c t t h a t f o r e ig n exchange r e c e i p t s from e x p o rts form th e backbone of th e P h ilip p in e economy, a s w e ll a s by th e f a c t t h a t th e U n ited S t a t e s , a g a i n s t whom th e P h i l i p p i n e s i s c a rr y in g on pegging o p e r a tio n s , is i t s m ajor e x p o r t m a rk e t. The P h ilip p in e Gold Exchange Standard The P h ilip p in e Gold S tan d a rd A ct o f 1903 p ro v id ed f o r th e c r e a tio n of the Gold S tan d a rd Fund. P a r t of th e fund was h e ld in New York, and p a r t in M anila. In o rd e r t o m a in ta in p a r i t y , th e Gold S tan d a rd A ct made f iv e 21 p r o v is io n s : ^ 1 . To exchange a t th e I n s u la r T re a su ry in M anila f o r P h ilip p in e c u rre n c y o f f e re d in the sura of n o t l e s s th a n te n thousand p eso s or U n ited S ta te s c u rre n c y o f f e r e d in the sum of n o t l e s s th a n f iv e th o u s a n d -d o lla r d r a f t s on th e g o ld s ta n d a rd fund d e p o s ite d in th e U n ited S ta te s or e l s e w here, ch a rg in g fo r th e same a premium o f t h r e e f o u r th s of one p e r c e n t f o r demand d r a f t s , and one and o n e -e ig h th p er c e n t f o r te le g r a p h i c t r a n s f e r s , and t o d i r e c t th e d e p o s i t o r i e s o f th e fund of th e P h ilip p in e Government i n th e U n ite d S ta te s to s e l l upon th e same te rm s and in th e l i k e amount exchange a g a in s t th e gold s ta n d a rd fund in th e P h i l i p p i n e s . The premium ch arg ed might be in c re a s e d o r d e c re a s e d te m p o ra rily by o rd er of th e S e c r e ta r y of F in an ce and J u s t i c e , sh o u ld c o n d itio n s in h is judgment need such a c t i o n . 2 . To exchange a t p a r , on a p p ro v a l of th e S e c r e ta r y o f F in an ce and J u s t i c e , U n ited S t a t e s paper c u rre n c y of a l l k in d s fo r P h ilip p in e c u rre n c y , and v ic e v e r s a . 3 . The exchange of U n ited S ta te s gold c o in s or gold b a r s f o r P h ilip p in e c u rre n c y i n th e amount of n o t l e s s th a n t e n th ousand pesos or f i v e th o u sa n d d o l l a r s , c h a rg in g f o r ^ Document l¥ + « F i f t y - e i g h t h C o n g ress, Second S e s s io n , pp. "288- 8 9 . 22 th e same a premium s u f f i c i e n t t o cover th e exp en ses of t r a n s p o r t i n g gold c o in s from New York to M a n ila, th e p r e mium to be d eterm in ed by the S e c r e ta r y o f F in an c e and J u s t i c e . *+. To w ithdraw P h ilip p in e c u rre n c y exchange and d e p o s it in th e T re a su ry from c i r c u l a t i o n u n t i l p a id o u t in re sp o n se to demand made upon i t , in ac co rd an c e w ith th e p r o v is io n of th e A ct. 5. To w ithdraw from c i r c u l a t i o n U n ited S ta te s paper c u rre n c y and g old c o in and gold b a r s r e c e iv e d by th e In s u l a r T re a su ry i n exchange fo r P h ilip p in e c u rre n c y u n t i l th e same s h a l l be c a lle d o u t i n re sp o n se to t h e p r e s e n ta ti o n o f P h ilip p i n e c u rre n c y made n e c e s s a ry in in c re a s e d c o in a g e , in w hich e v e n t, f o r th e purpose of p ro v id in g such c o in a g e , th e c o in so o b ta in e d becomes p a r t of th e gold s ta n d a rd fu n d . The D o lla r Exchange S tan d a rd When th e U n ited S t a t e s had gone o f f th e gold s ta n d a r d , th e m onetary system of th e P h ilip p in e s a u to m a tic a lly r e le g a te d to t h a t of a d o l l a r exchange s ta n d a r d . "When th e s tro n g c u rre n c y i s on a gold s ta n d a r d , th e pegged c u rre n c y i s on a gold exchange s ta n d a r d . When th e s tr o n g c u rre n c y le a v e s th e g o ld s ta n d a r d , weak c u rre n c y r i d e s w ith th e f o r mer in th e ups and downs of exchange f l u c t u a t i o n s . The 23 weak c u rre n c y is th e n r e f e r r e d to a s b ein g on the s t e r l i n g p or on th e d o l l a r exchange s t a n d a r d .” F or many y e a r s , th e P h ilip p in e T re a su ry is s u e d c e r t i f i c a t e s backed by one hundred per cen t of th e U nited S ta te s d o l l a r s . The T re a su ry bought and so ld d o l l a r s on demand a t an exchange r a t e o f f i f t y c e n ts f o r e v e ry P h ilip p in e p eso . The money su p p ly a u to m a tic a lly resp o n d ed to the d o l l a r s u r p lu s and d e f i c i t s in th e b a la n c e of i n t e r n a t i o n a l paym ents. The one hundred p e r c e n t c u rre n c y r e s e rv e system has te n d ed t o f r e e z e n e e d le s s ly a la r g e p a r t of th e i n t e r n a t i o n a l r e s e r v e s , i r r e s p e c t i v e of w h eth e r or n o t th e d o l l a r r e s e r v e m a in ta in e d was b a d ly needed in a p e rio d of c r i s e s . T h is system d id n o t respond e f f e c t i v e l y to th e dom estic needs of th e P h ilip p in e economy. The New M onetary System In 19^95 a f t e r th e d e c l a r a t i o n of th e Independence of th e P h i l i p p i n e s , a s i g n i f i c a n t e v e n t o c c u rre d w hich should p rove t o be o f f a r - r e a c h in g im portance to th e P h ilip p in e economy. T his e v e n t was th e e s ta b lis h m e n t of th e C e n tra l Bank of th e P h i l i p p i n e s , in acco rd an ce w ith R ep u b lic A ct No. 2 6 5 , w hich r e s u l t e d in th e fu ndam ental change of th e coun t r y ' s m onetary system . ^ F ra n k S o u th a rd , F o re ig n Exchange P ra c tise and P o lic y (New York and London: McGraw H i l l Book Co. , I n c .,1 9 ^ 9 5 > P*160. 2b A modern c u rre n c y system a d m in is te re d by th e C e n tra l Bank re p la c e d th e d o l l a r exchange sta n d a rd whose e x c e s s iv e r i g i d i t y r e ta r d e d th e economic r e c o n s tr u c tio n and developm ent. Under th e o ld system , th e do m estic su p p ly of money responded p r im a r ily to th e ebb and flow o f f o r e ig n t r a d e . The governm ent had no means o f re g u l a t i n g money supply f o r th e purpose of re d u c in g f l u c t u a t i o n on th e l e v e l of do m estic a c t i v i t y . Under th e new sy stem , th e a v a i l a b i l i t y and c o s t o f money can be g e a re d to th e demand f o r i t , th u s f a c i l i t a t i n g th e im p le m e n ta tio n of much needed r e h a b i l i t a t i o n and d e v e l opment program , in o rd e r to s t a b i l i z e th e c o u n tr y ’s b a la n c e of payment p o s i t i o n and t o m a in ta in th e s ta n d a r d of l i v i n g of the peo p le c o n tin u o u s ly on a h ig h l e v e l . 3 Under th e new l e g i s l a t i o n , th e m onetary a u t h o r i t y and r e s p o n s i b i l i t y to a d m in is te r th e banking system w ere v e s te d in th e C e n tr a l Bank. The peso was d e fin e d in term s of g o ld and sh o u ld c o n tin u e to be e q u a l by law t o f i f t y c e n ts . The p ar v alu e of th e peso can be m o d ifie d o n ly under If th e fo llo w in g c irc u m s ta n c e s : 1 . When the e x i s t i n g p ar v alu e makes im p o ssib le the ach iev em en t and m aintenance of a h ig h l e v e l of p ro d u c tio n , employment and r e a l income w ith o u t: a . The d e p le tio n of th e i n t e r n a t i o n a l r e s e r v e o f th e C e n tr a l Bank; and ^ The F i r s t Annual R eport of th e C e n tr a l Bank o f th e P h i l i p p i n e s . 19*+9 • * * S e c tio n b<? of R ep u b lic Act Ho. 265 ( F i r s t C ongress o f th e R ep u b lic o f th e P h i l i p p i n e s , T h ird S e ssio n ) approved on June 15> l ^ S , e s t a b l i s h i n g th e C e n tra l Bank o f th e P h i l i p p i n e s . 25 b . The c h ro n ic use of r e s t r i c t i o n s on th e c o n v e r t i b i l i t y of th e peso in to f o r e ig n c u r r e n c i e s , o r on th e t r a n s f e r a b i l i t y ab ro ad of funds from th e P h i l i p p i n e s ; c . Undue governm ent in te r v e n tio n i n , or r e s t r i c t i o n o f , th e i n t e r n a t i o n a l flow of goods and s e r v i c e s ; o r , 2 . When u n ifo rm p r o p o r tio n a te changes in p a r v a lu e s a r e made by th e c o u n t r ie s w hich a r e members of th e I n te r n a t i o n a l M onetary Fund; o r , 3 . When th e o p e r a tio n of any e x e c u tiv e or i n t e r n a t i o n a l agreem ent to w hich th e R e p u b lic of th e P h ilip p in e s i s a p a r ty , r e q u ir e s an a l t e r a t i o n in th e gold v a lu e o f th e p eso . For th e l i f e of th e A greem ent, how ever, th e par v a lu e o f th e peso cannot be a l t e r e d , nor can exchange c o n t r o ls be ad o p te d w ith o u t th e p e rm issio n of th e P re s id e n t o f th e U n ite d S t a t e s . CHAPTER IV THE PHILIPPINE CENTRAL BANK The c r e a t i o n o f th e C e n tr a l Bank, e n t a i l e d th e ab a n donment of th e one hundred per c e n t r e s e r v e system ( a p p lic a b le to n o te s and c o in s o n ly ) , w hich had been e n fo rc e d in th e P h ilip p in e s s in c e 1903. I t was r e p la c e d by th e e s t a b lis h m e n t of a modern f l e x i b l e sy stem . The C e n tr a l Bank has been v e s te d w ith th e so le a u t h o r i t y t o is s u e c u rre n c y w ith in th e t e r r i t o r i a l l i m i t s of th e P h i l i p p i n e s . N otes and c o in s is s u e d by t h e C e n tra l Bank are i t s l i a b i l i t i e s and a re is s u e d o n ly a g a in s t an e q u iv a le n t amount o f t a n g i b le a s s e t s re c o g n iz e d by law . The C e n tr a l Bank has a param ount l i e n on a l l a s s e t s of th e bank and i s f u l l y g u a ra n te e d by th e Government of th e R e p u b lic . The C e n tr a l Bank and F o re ig n Exchange The o b je c ti v e s of th e C e n tr a l Bank a s enum erated in th e s u b s ta n tiv e law a r e : (a) to m a in ta in m onetary s t a b i l i t y i n th e P h i l i p p i n e s ; (b) to p re s e rv e th e i n t e r n a t i o n a l v a lu e o f th e p eso , and th e c o n v e r t i b i l i t y of the peso i n t o o th e r f r e e l y c o n v e r t ib le c u r r e n c i e s ; and (c) to prom ote a r i s i n g l e v e l of p ro d u c tio n , employment and r e a l income in th e P h i l i p p i n e s . 27 The fo llo w in g in v e stm e n ts o f a c tio n have been v e s te d in th e C e n tra l Bank f o r th e p u rp o se of a c h ie v in g th e o b je c t i v e s : o p e r a tio n in g old and f o r e ig n exchange, le n d in g to banks and th e governm ent, open m arket o p e r a t io n s , c o n tr o l of bank r e s e r v e re q u ire m e n t, and th e s e l e c t i v e r e g u la tio n of bank c r e d i t o p e r a tio n . Toward th e end of p ro v id in g m onetary s t a b i l i z a t i o n , S e c tio n 68 of th e C e n tr a l Bank Law provides:"*" The C e n tr a l Bank s h a l l m a in ta in an i n t e r n a t i o n a l r e s e r v e a d e q u a te t o meet any f o r e s e e a b le n e t demands on th e Bank f o r f o r e ig n c u r r e n c i e s . In ju d g in g th e adequacy of the i n t e r n a t i o n a l r e s e r v e , th e M onetary Board s h a l l be guided by th e p ro s p e c tiv e r e c e i p t s and paym ents o f f o r e ig n exchange th e P h i l i p p in e s . The Board s h a l l g iv e s p e c i a l a t t e n t i o n t o th e volume and m a tu r ity of th e C e n tr a l B ank’s own l i a b i l i t i e s in f o r e ig n c u r r e n c i e s , to th e volume and m a tu r ity o f th e f o r e ig n exchange a s s e t s and l i a b i l i t i e s of o th e r banks o p e ra tin g in th e P h ilip p i n e s a n d , in s o f a r a s th e y a r e known or can be e s tim a te d , th e volume and m a tu r ity of the f o r e ig n exchange a s s e t s and l i a b i l i t i e s of a l l o th e r p erso n s and e n t i t i e s in th e P h i l i p p i n e s . The co m p o sitio n of th e i n t e r n a t i o n a l r e s e r v e was ? d e fin e d by S e c tio n 69? a s f o llo w s : The i n t e r n a t i o n a l r e s e r v e of th e C e n tr a l Bank o f th e P h ilip p in e s may in c lu d e th e fo llo w in g a s s e t s : S e c tio n 68 of R ep u b lic Act No. 265 ( F i r s t C ongress o f th e R ep u b lic of the P h i l i p p i n e s , T h ird S e s s io n ) approved on June 15, 19*+$, e s t a b l i s h i n g th e C e n tra l Bank of the P h i l i p p i n e s • 2 I b id . , S ection 69. 28 (a) Gold; and (b) A s s e ts in f o r e ig n c u r r e n c ie s in th e form o f : docum ents and in s tru m e n ts of ty p e s c u s to m a rily employed f o r th e i n t e r n a t i o n a l t r a n s f e r of f u n d s ; demand and tim e d e p o s its in c e n t r a l banks, t r e a s u r i e s and commer c i a l banks a b ro a d ; f o r e ig n government s e c u r i t i e s w ith m a t u r i t i e s n o t ex ceeding f iv e y e a r s ; and f o r e ig n n o te s and c o in s . The n e t f o r e ig n exchange a s s e t s of o th e r banks and th e i n t e r n a t i o n a l r e s e r v e of th e C e n tr a l Bank, a s of th e b e g in n in g and th e end of ev ery q u a r te r of the y e a r 19* + 9 » a r e t a b u la t e d below , th e f i g u r e s r e p r e s e n tin g m illio n s of U n ite d S ta te s d o lla rs :-^ Jan 3 Mar 31 June 30 S ept 30 Dec 31 C e n tr a l Bank *t00 336 320 279 230 B anking System 20 27 20 35 29 T o ta l *+20 363 3^0 31^ 259 Q u a r te r ly d e c re a s e - 57 23 26 55 Cumulative d e c re a s e a 57 80 106 161 F o re ig n exchange h o ld in g s shown above c o n s is t of b a la n c e s a b ro a d , f o r e ig n n o te s and c o in s , unm atured e x p o rt b i l l s , f o r e ig n s e c u r i t i e s , and o th e r a s s e t s r e g a r d le s s o f th e c u rre n c y in w hich denom inated, w h erein th e o b lig o r i s ^ The F i r s t Annual R ep o rt o f th e C e n tr a l Bank o f th e P h i l i p p i n e s . 19*+9, p. 29. 29 a n o n r e s id e n t, and f o r e ig n exchange l i a b i l i t i e s in c lu d in g a l l s h o r t- te r m o b lig a tio n s t o , or c la im s o f , n o n r e s id e n ts . In o rd e r to a c h ie v e th e i n t e r n a t i o n a l and dom estic o b je c ti v e s of th e n a t i o n a l m onetary p o lic y , th e C e n tra l Bank i s g ra n te d powers f o r th e r e g u la tio n o f money, c r e d i t and exchange. In ca se o f tem porary d i s e q u i l i b r i a , S e c tio n 70 o f th e P h ilip p in e C e n tra l Bank Law i n d i c a t e s th e p ro c e d u re to If be fo llo w e d : Whenever th e i n t e r n a t i o n a l r e s e r v e of th e C e n tr a l Bank f a l l s to an amount w hich the M onetary Board con s i d e r s in a d e q u a te t o meet th e p r o s p e c tiv e n e t demands on th e C e n tr a l Bank f o r f o r e ig n c u r r e n c i e s , or when e v e r th e i n t e r n a t i o n a l r e s e r v e a p p e a rs t o be in immi n e n t d an g er of f a l l i n g to su ch a l e v e l , or whenever t h e i n t e r n a t i o n a l r e s e r v e i s f a l l i n g a s a r e s u l t o f paym ents or r e m itta n c e s ab ro ad w hich, in th e o p in io n o f th e M onetary B oard, a re c o n tra ry to th e n a t i o n a l w e lf a r e , th e M onetary Board s h a l l : (a) Take such re m e d ia l m easures a s a r e a p p r o p r ia te and w ith in th e powers g ra n te d to th e M onetary Board and th e C e n tr a l Bank under th e p r o v is io n s of t h i s A ct; and (b ) Subm it to th e P re s id e n t of th e P h ilip p i n e s a d e t a i l e d r e p o r t w hich s h a l l in c lu d e , a s a minimum, a d e s c r i p t i o n and a n a ly s is o f : (1) The n a tu r e and c a u se s of th e e x i s t i n g or imm inent d e c lin e ; (2) The re m e d ia l m easures a lr e a d y ta k e n or t o be ta k e n by th e M onetary B oard; ^ I b id . . Section 70. 30 (3) The f u r t h e r m o n etary , f i s c a l or a d m in is t r a tiv e m easures p ro p o sed ; and (M -) The c h a r a c te r and e x te n t of th e c o o p e ra tio n r e q u ir e d from o th e r Government a g e n c ie s f o r th e s u c c e s s f u l e x e c u tio n of th e p o l i c i e s of t h e M onetary B oard. I f th e r e s u l t a n t a c tio n s f a i l to check the d e t e r i o r a t i o n of th e r e s e r v e p o s i t i o n of th e C e n tr a l Bank, or i f th e d e t e r i o r a t i o n cannot be checked e x c e p t by c h ro n ic r e s t r i c t i o n s on exchange and t r a d e t r a n s a c t i o n s or by s a c r i f i c e of th e d o m e stic o b je c tiv e s of a h ig h l e v e l of p ro d u c tio n , employment and r e a l incom e, th e M onetary Board s h a l l pro p o se to th e P re s id e n t su c h a d d i t i o n a l a c t i o n a s i t deems n e c e s s a r y to r e s t o r e e q u ilib r iu m i n th e i n t e r n a t i o n a l b a la n c e o f paym ents of th e P h i l i p p i n e s . The M onetary Board s h a l l subm it p e r io d ic r e p o r ts t o th e P re s id e n t u n t i l th e t h r e a t to th e i n t e r n a t i o n a l m onetary s t a b i l i t y of th e P h ilip p in e s has d is a p p e a re d . O p e ra tio n i n g o ld and f o r e ig n ex ch an g e. — For th e r e g u l a t i o n o f money, c r e d i t and exchange, th e C e n tr a l Bank i s empowered to c o n t r o l d e a lin g s in gold and f o r e ig n exchange. I t may buy and s e l l gold in any form , and a t any tim e , may r e q u ir e d t h a t any g o ld h e ld by any p erso n or e n t i t y be d e liv e r e d to th e C e n tr a l Bank or t o any of i t s a u th o r iz e d a g e n ts . The C e n tra l Bank, b e in g a b a n k e r 's bank, may engage in f o r e ig n exchange t r a n s a c t i o n s w ith P h ilip p in e b a n k s , th e governm ent and i t s i n s t r u m e n t a l i t i e s , f o re ig n governm ents and t h e i r i n s t r u m e n t a l i t i e s , and f o r e ig n o r i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n s , b u t n o t w ith th e g e n e r a l p u b lic . 31 In o rd e r to m a in ta in th e c o n v e r t i b i l i t y of th e p e so , th e C e n tr a l Bank s h a l l , a t the r e q u e s t of any banking i n s t i t u t i o n o p e ra tin g i n th e P h ilip p i n e s , buy any q u a n t ity o f f o r e ig n exchange o f f e r e d , and s e l l any q u a n t ity of f o r e ig n exchange demanded, by su ch i n s t i t u t i o n , p ro v id e d t h a t th e f o r e ig n c u r r e n c i e s so o f f e r e d o r demanded a r e ^ f r e e l y c o n v e r tib le i n t o g o ld o r U n ited S t a t e s d o l l a r s . N o tw ith sta n d in g th e above p r o v is io n s , i n o rd er to p r o t e c t th e i n t e r n a t i o n a l r e s e r v e of th e C e n tr a l Bank d u rin g c an exchange c r i s i s , th e M onetary Board i s a u th o riz e d to im pose emergency r e s t r i c t i o n s on exchange o p e r a tio n s , such a s tem porary su sp e n sio n or r e s t r i c t i o n of s a le s of exchange and s u b je c tin g a l l t r a n s a c t i o n s i n gold and f o r e ig n exchange t o l i c e n s e . S e c tio n 71 * of R e p u b lic A ct No. 265 re a d s a s 7 f o l l o w s : Emergency r e s t r i c t i o n s on exchange o p e r a t i o n s . — N o tw ith sta n d in g th e p r o v is io n s of th e t h i r d p a ra g ra p h o f th e p re c e d in g s e c t i o n , in o rd er t o p r o t e c t th e i n t e r n a t i o n a l r e s e rv e of th e C e n tra l Bank d u rin g an exchange c r i s i s and to g iv e th e M onetary Board and th e Government tim e to ta k e c o n s tr u c tiv e m easures to com b a t su ch a c r i s i s , th e M onetary B oard, w ith th e co n c u r re n c e of a t l e a s t f iv e of i t s members, and w ith th e ^ I b i d . , S e c tio n 73 ( d ). ^ The M onetary Board i s composed of seven members: th e S e c r e ta r y of F in a n c e , th e Governor of the C e n tr a l Bank, th e P r e s id e n t of th e P h ilip p in e N a tio n a l Bank, th e Chairman o f th e Board of G overnors of th e R e h a b i l i t a t i o n F in an ce C o rp o ra tio n , and th r e e o th e r members to be a p p o in te d f o r te rm s of s i x y e a rs by th e P re s id e n t of th e P h i l i p p i n e s , w ith th e co n sen t of th e Commission on A ppointm ents. ^ I b id . , Section 7^. 32 a p p ro v a l of th e P r e s id e n t of th e P h i l i p p i n e s , may te m p o ra rily suspend o r r e s t r i c t s a le s o f exchange by th e C e n tr a l Bank and may s u b je c t a l l t r a n s a c t i o n s in g o ld and f o r e ig n exchange to lic e n s e by th e C e n tra l Bank. The a d o p tio n of th e em ergency m easures a u th o r iz e d in t h i s s e c tio n s h a l l be s u b je c t to any e x e c u tiv e and i n t e r n a t i o n a l agreem ents to w hich th e R ep u b lic of th e P h ilip p in e s i s a p a r ty . As a u th o r iz e d by S e c tio n 72 o f R ep u b lic A ct No. 265, th e M onetary Board of th e C e n tr a l Bank made o b s e rv a tio n s and concluded t h a t t r a n s a c t i o n s in g old a t premium p r ic e s moved tow ard th e d e p r e c ia tio n of th e gold c o n te n t of th e p e s o ; cau sed th e o u tflo w of gold in t o p r i v a t e h o a rd s ; to o k away much needed c a p i t a l fu n d s ; and r e s u l t e d i n an o u tflo w o f funds to p u rch ase la r g e im p o r ta tio n s of n o n - e s s e n t i a l s . The B oard, t h e r e f o r e , s u b je c te d e x p o r ta tio n of g old to l i c e n s e and allo w ed th e im p o rta tio n of gold o n ly f o r in d u s t r i a l or f o r a r t i s t i c p u rp o s e s . The Board f u r t h e r p ro h ib i t e d th e r e s a l e of im p o rted g o ld a t more th a n se v e n ty pesos p e r ounce and r e q u ir e d th e s a le to th e C e n tr a l Bank of tw e n ty -f iv e per c e n t of a l l l o c a l l y mined g o ld . By March 1 0 , 1950, th e C e n tr a l Bank had a c q u ire d $250,*+99.95 w o rth O o f g old from do m estic com panies under t h i s r u l i n g . Exchange r a t e s . — The Monetary Board is re q u ire d to f i x th e r a t e s a t which th e C e n tra l Bank w i l l buy and s e l l Q News item in The M anila Times Mid-week R eview . A p r i l 5, 1950, p. 7. 33 s p o t exchange and th e medium and maximum r a t e s a t w hich o th e r banks may buy t h i s exchange, b u t s a id r a t e s may n o t d i f f e r from th e e s t a b l i s h e d l e g a l p a r i t y by more th a n one- h a l f of one per c e n t fo r th e C e n tr a l Bank and by more th a n one p e r c e n t f o r o th e r b a n k s , u n le s s in any g iv en c a s e , a g r e a t e r d iv e rg e n c e from th e l e g a l p a r i t y e x i s t s in f o r e ig n m a rk e ts . E x e r c is in g t h i s a u t h o r i t y to r e g u l a t e r a t e exchange, th e C e n tr a l Bank d e fin e d from tim e t o tim e , i t s i n i t i a l exchange r a t e s and a t th e same tim e , p r e s c rib e d th e buying and s e l l i n g r a t e s per $100 f o r p r i v a t e b an k s. The r a t e s 9 q u o ted by th e C e n tr a l Bank w ere: « Minimum Maximum Buying R a tes S e l l i n g B ates T e le g ra p h ic t r a n s f e r s , $500 or over ............................. ¥200.75 J* 2 0 0 .8 1 S ig h t d r a f t s .................................. 1*200.70 JP200.80 The r a t e s quoted above a p p ly o n ly t o p u rc h a se s o f f i v e hundred d o l l a r s or more. A r a t e of two hundred pesos w i l l a p p ly t o p u rc h a se s of l e s s th a n f iv e hundred d o l l a r s . The minimum buying r a t e s were e s t a b li s h e d a s th e minimum s e l l i n g r a t e s in every c a s e , and the maximum s e l l i n g r a t e s f o r th e minimum buying r a t e s . 9 « Quoted Exchange R a te s ,*1 C ir c u la r No. 16, C e n tra l Bank of th e P h i l i p p i n e s . June 2 3 , 19^9. 3^ In o rd e r t h a t th e C e n tra l Bank may a t a l l tim e s 1 b ve f o r e ig n exchange r e s o u r c e s s u f f i c i e n t to e n a b le i t t o m ain t a i n th e i n t e r n a t i o n a l s t a b i l i t y and c o n v e r t i b i l i t y of th e p e s o , S e c tio n 80 o f th e Act p ro v id e s t h a t banks may be r e q u ir e d to s e l l to th e C e n tr a l Bank a l l or p a r t of t h e i r s u r p lu s h o ld in g s of f o re ig n exchange. Such t r a n s f e r may be r e q u ir e d fo r a l l or p a r t of such f o r e ig n c u r r e n c ie s a t th e r e g u la r buying r a t e s of th e C e n tr a l Bank. S u rp lu s h o ld in g s of any f o r e ig n c u rre n c y i s d e fin e d a s th e amount by w hich a b a n k 's a s s e t s in the c u rre n c y exceed th e sum o f : ^ (a ) The w orking b a la n c e r e q u ir e d to accommodate norm al s h o r t ru n f l u c t u a t i o n betw een th e b a n k 's s a le s and p u rc h a s e s of s a id c u rre n c y ; and (b) The t o t a l l i a b i l i t i e s of th e bank in th e c u rre n c y . However, th e bank may, in c a lc u la tin g su rp lu s h o ld in g s in any given cu rren cy , w ith th e approval of the Mone t a r y Board, s u b tr a c t from i t s n e t a s s e t s in t h a t currency an amount eq u al to any n e t l i a b i l i t y in o th e r c u rre n c ie s in to which th e s a id cu rren cy is f r e e l y c o n v e r tib le . 10 R epublic Act No. 2 6 5 . A r t i c l e I I I , S ec tio n 80. CHAPTER V ECONOMIC CONDITIONS OF THE PHILIPPINES, 19^2-191 +9 The P h ilip p in e economic c o n d itio n s , l i k e any o th e r c o u n try in th e w o rld , have been g r e a t l y a f f e c t e d by World War I I . From th e v ery b eg in n in g of th e w ar, P h ilip p in e im p o rts and e x p o rts were g r e a t l y ham pered; her e x p o r ts , e s p e c i a l l y , were t o t a l l y c r ip p le d . O ther c o u n t r i e s , p a r t i c u l a r l y th e U n ite d S ta te s who used to send goods to th e P h i l i p p i n e s , c o u ld n o t e x p o rt com m odities b ecau se of th e w ar. T here was th e n a s h o rta g e of th e e s s e n t i a l needs a s w e ll a s lu x u ry ite m s . Ja p a n e se O ccupation P e rio d In 19^2, th e Ja p an ese m i l i t a r y a u t h o r i t y is s u e d a p ro clam atio n - r e q u ir in g th e F i l i p i n o s to a c c e p t th e Jap an ese m i l i t a r y n o te s a t p a r w ith th e l e g a l P h ilip p in e p e so . The p ro c la m a tio n s t a t e d th e f o llo w in g :'1 ' The Im p e ria l Ja p an ese Army, i n th e o ccu p ied a r e a s , w i l l use th e w a r-n o te s ( m i l i t a r y pass-m oney) en d o rsed and is s u e d by th e Im p e ria l Jap an ese Government. A ll th e p e o p le s r e s id i n g w ith in th e concerned a r e a s should be aware of th e fo llo w in g : 1. The w a r-n o te s ( m i l i t a r y pass-m oney) have been is s u e d by th e Im p e ria l Japanese Government and s a id The O f f i c i a l J o u rn a l of th e Jap an ese M il ita r y A d m in is tr a tio n , Volume No. 1, Second E d itio n (M anila, P h i l i p p i n e s : M anila Shim Bun Sha, 19^3)» P* 38* 36 Government ta k e s f u l l r e s p o n s i b i l i t y fo r t h e i r usage h aving t h e c o r r e c t amount to back them up. C i r c u la t e th e w a r-n o te s ( m i l i t a r y pass-m oney) on t h e i r p ass v a lu e w ith no f e a r of any s o r t . 2 . Those who h o ld th e w a r-n o te s w i l l be a b le to u se them in making paym ents of a l l k in d s . 3 . I f anyone a tte m p ts to i n t e r f e r e w ith th e c i r c u l a t i o n of th e w a r-n o te s (su c h deeds a s r e j e c t i o n s o f paym ents, f o r g e r y , or sp re a d in g th e u n tru e n a tu r e of law s co n c ern in g th e w a r-n o te s of any k in d ) , h is a c t w i l l be c o n s id e re d a s h o s t i l e and w i l l be p u n ish ed s e v e r e ly . The w a r-n o te s and th e e x i s t i n g c u rre n c y and f o r e ig n c u rre n c y w i l l be p r o h ib ite d from e x p o r ta tio n and im p o r ta tio n f o r a w h ile . 5* Kinds and c l a s s e s of th e w a r-n o te s w i l l be a s f o llo w s : te n -p e s o n o te s , f iv e - p e s o n o t e s , one-peso n o t e s , and n o te s of one c e n ta v o , f iv e c e n ta v o s , te n c e n ta v o s , and f i f t y c e n ta v o s . D uring th e Jap an ese o c c u p a tio n , no o th e r c u r r e n c ie s w ere allo w ed to c i r c u l a t e i n th e P h ilip p i n e s e x c e p t th e s e p e s o - m i lita r y n o te s is s u e d by t h e Im p e ria l Government and th e P h ilip p in e peso c u rre n c y w hich was a lr e a d y in c i r c u l a t i o n . The t o t a l P h ilip p in e peso in c i r c u l a t i o n th e n was ? 2 b l,2 9 1 ,9 7b or J^lH-.OS per c a p ita o f th e p o p u la tio n . 2 Up to th e p r e s e n t, th e r e has been no d e f i n i t e in fo rm a tio n on th e t o t a l volume o f m i l i t a r y n o te s t h a t were in c i r c u l a t i o n . However, from th e d a ta g a th e re d a t th e S o u th ern Development 2 The B u l l e t i n of P. I . S t a t i s t i c s . Volume I , No. 1, S eptem ber 19b^~. 37 B ank,^ th e e s tim a te d t o t a l m i l i t a r y n o te s c i r c u l a t e d d u rin g th e p e rio d were from e ig h t to t e n b i l l i o n p e s o s , or p er c a p ita of th e p o p u la tio n . Inasmuch a s th e s e n o te s were n o t backed by r e s e r v e s , th e re q u ire m e n t t h a t th e y be a c c e p te d was ta n tam o u n t t o c o n f is c a ti o n of th e I s l a n d ’s r e s o u r c e s and i n d u s t r i e s . The u n lim ite d c i r c u l a t i o n o f Jap an ese m i l i t a r y n o te s n a t u r a l l y ca u sed i n f l a t i o n , a c o n d itio n w hich has co n tin u e d to th e p r e s e n t tim e . D uring th e o c c u p a tio n , P h ilip p i n e f o r e ig n tr a d e was re d u c e d . The Ja p an ese had commandeered a l l the p ro d u c tiv e a s s e t s of th e c o u n try , le a v in g behind a p r o s t r a t e d n a t i o n a l economy. L ib e r a tio n P e rio d Having th u s i n h e r i t e d from the Ja p an ese a heavy b u r den o f i n f l a t i o n and a d is l o c a t e d economy, th e P h ilip p in e s fa c e d th e a d v e rs e p l i g h t o f t r y i n g to meet th e e x ig e n c ie s of p o st-w a r r e h a b i l i t a t i o n . The P h ilip p in e Government, by June 30, 19^6, had a d e f i c i t of two hundred f i f t y - n i n e m il lio n p e s o s . Her e x p o rt t r a d e , her commerce, and h er i n d u s t r i e s were n e g l i g i b l e ; t e r a g r i c u l t u r e had descended The S o u th ern Development Bank was a Ja p an ese con t r o l l e d f i n a n c i a l i n s t i t u t i o n f o r th e e x p l o i t a t i o n of th e P h ilip p in e i n d u s t r i e s and r e s o u r c e s . 38 .to a l e v e l o f a lm o st com plete In ad eq u acy , in c re a s e d in n a tu r e by th e d e s t r u c t i o n of m a c h in e rie s and i n d u s t r i a l equ ip m en t, and th e s c a r c i t y of w orking a n im a ls . Coupled w ith th e s e d is a s t r o u s f a c t o r s and th e economic i n s t a b i l i t y p erm e atin g th e c o u n try was th e heavy im p o r ta tio n o f con sum ption goods and lu x u ry a r t i c l e s . For th r e e y e a r s , th e P h ilip p i n e s gave v e n t to an en erg y of sp e n d in g . "T h is reac h ed an a l l - t i m e h ig h in 19*+8 when o u t o f th e t o t a l im p o rts of J*l, 1 3 6,*+0 9 ,0 6 8 th e n o n - e s s e n t i a l com m odities re a c h e d th e v a lu e of 2*28 6 ,985*5*+2. T his huge sum was sp e n t on ex p en siv e a u to m o b ile s , p erfu m es, h ig h - p r ic e d t e x t i l e s , l i q u o r , and s im ila r n o n - c a p i t a l goods w hich were n o t so v i t a l , in f a c t , n o t even needed in th e im m ediate ta s k of If r e c o n s t r u c t i o n ." The r e s u l t , n e e d le s s t o s a y , was an u n fa v o ra b le b a la n c e of t r a d e . T h is u n fa v o ra b le b a la n c e of tr a d e has ranged from ^ 6 3 m illio n in 19*+6 to 2*500 m illio n in 19*+8. For th e f i r s t h a l f o f 19* + 9 j t h i s u n fa v o ra b le b a la n c e was p la c e d a t 2*350 m i l l i o n . These lo p - s id e d tr a d e b a la n c e s w ere, i t was t r u e , p a r t l y o f f s e t by payments and e x p e n d itu re s of th e U n ited S t a t e s governm ent in th e P h ilip p in e s (as th e War Damage Commission, th e V e te ra n A d m in is tra tio n , and th e ex p en ses in th e P h i li p p i n e s of th e U nited S ta te s m i l i t a r y and n a v a l e s ta b li s h m e n ts ) , w hich had amounted to a b o u t 2 * 2 , 35* + m il lio n up to June 19*+9.................................................................... Our im p o rts f o r th e f i r s t n in e months of 19*+9 re a c h e d a t o t a l of 2 * 802,373 ? 722 a g a in s t e x p o rts of * * The Manila Times Mid-Week Review. June 15» 19*+9» p . *+. 39 JE **K )9, 8 5 2 ,127 or an a d v e rs e tr a d e b a la n c e of 1*392,521,6*4-5. In 19*4-7, th e tr a d e b a la n c e a g a in s t us was ^*4-91,603,90*4- and i n 19*4-8, 2* * 4 -9 7 , 9 9 8, 6 1 2. The f ig u r e s show t h a t e x p o r ts d u rin g th e f i r s t n in e months o f 19^9 d e c re a se d t o th e e x te n t of 1 * 8 9 , 7 9 2 ,6 9 5 compared w ith th e same p e rio d in 19* 4 - 8 . Im ports showed a d e c re a s e of o nly 1*57,6*4-5,52*4- d u rin g th e f i r s t n in e months of 19*4-9 compared w ith th e same p e rio d in 19* 4 -8 .5 I t was obvious t h a t th e v a lu e of P h ilip p in e im p o rts was tw ic e th e v a lu e of h e r e x p o r ts . And b ec au se no one, n o t even a n a t i o n , can c o n tin u e spending tw ic e what i t can e a rn w ith o u t t r a g i c r e s u l t s , P h ilip p in e f o r e ig n tr a d e was i n an unbound p o s it io n a u g u rin g f a t a l consequences to th e n a t i o n a l economy w ith s p e c ia l em phasis to th e d e p le tio n of h e r d o l l a r r e s e r v e s and im m inent danger to th e s t a b i l i t y and c o n v e r t i b i l i t y of th e p eso . To combat t h i s d e tr im e n ta l s t a t e of a f f a i r , th e P h i l i p p i n e governm ent, a s e a r l y a s A ugust 7, 19*4-8, th ro u g h th e Im port C o n tro l Law (R epublic Act No. 330) im plem ented by E x e c u tiv e Order No. 193, Jan u ary 1 , 19*4-9, le d a tw o-pronged d r i v e : c u r ta ilm e n t of n o n - e s s e n t i a l e x t e r n a l e x p e n d itu re s th ro u g h im port and s e l e c t i v e c r e d i t c o n t r o l s , th e re b y p r e v e n tin g th e p l i g h t of c a p i t a l ; re p le n ish m e n t of P h ilip p in e f o r e ig n exchange re s o u r c e s th ro u g h in c re a s e d p r o d u c tio n , e s p e c i a l l y of th e s o - c a l l e d d o l l a r - s a v i n g and d o l l a r - p ro d u cin g i n d u s t r i e s , w hich in c lu d e d the r e h a b i l i t a t i o n ^ I b i d . . December 28, 19*4-9, p. 1 ko o f P h ilip p in e e x p o rt i n d u s t r i e s and th e developm ent of new l i n e s of p ro d u c tio n t o r e p la c e n e c e s s a r y im p o rts . C l e a r ly , th e g o a l o f th e governm ent, from th e above economic b l u e p r i n t , was to s te p up th e p ro d u c tio n of e x p o rt c ro p s in o rd er to b a la n c e im p o rts , or b e t t e r y e t , to exceed e x p o r ts over im p o rts , enough t o e s t a b l i s h a f a v o r a b le b a la n c e of t r a d e . CHAPTER VI IMPORT CONTROL P h ilip p in e im p o rts have o u ts tr ip p e d e x p o rts s in c e l i b e r a t i o n . The c o u n try emerged from th e war w ith v i r t u a l l y no s to c k o f goods on hand. Between 19*+6 and th e end of 19*+9j th e P h ilip p i n e s im ported goods a t th e r a t e of two and a h a l f tim e s t h a t of p re -w a r, w h ile th e e x p o rts amounted, t o o n ly f o u r - f i f t h s of th e p re-w a r volum e. The a d v e rs e b a la n c e was covered p r im a r ily by d isb u rse m e n ts by d i f f e r e n t U nited S ta te s a g e n c ie s and by th e money d e riv e d from the s a le of th e one b i l l i o n d o lla r s * w o rth of s u rp lu s g oo d s. The g r e a t b u lk of th e s e f r e e exchange r e c e i p t s r e tu r n e d t o th e U nited S ta te s a s payment f o r im p o rts o f lu x u ry and n o n - e s s e n t i a l ite m s . An e s tim a te of e ig h ty m il l i o n d o l l a r s had been d i s s i p a t e d on th e s e item s b e fo re th e tr a d e c o n t r o ls were s e t up. Only tw elv e per cen t and f i f te e n per cen t w ere u se d , r e s p e c t i v e l y , f o r th e p u rch ase of c a p i t a l goods and raw m a te r ia l s f o r th e d i f f e r e n t p r o s tr a te d i n d u s t r i e s . - * - W ith so u rc e s of f o r e ig n exchange n o n - re c u r r in g i n n a t u r e , th e a p p a re n t c o n d itio n o f p r o s p e r ity was a r t i f i c i a l and n o t e n d u rin g . ^ S t a t i s t i c a l B u l l e t i n of th e C e n tr a l Bank o f th e P h i l i p p i n e s . 19^9. A perm anent and l a s t i n g economy co u ld be a c h ie v e d o n ly by th e c o u n t r y ’s p ro d u c tiv e c a p a c ity . I t co u ld not depend m erely on such tem p o rary paym ents from th e U nited S t a t e s . These paym ents from th e U nited S ta te s have s te a d i l y d e c re a se d s in c e 19?0. F u rth e rm o re , by 1951 +> th e P h i l i p p i n e s i s to lo s e g r a d u a lly th e fa v o re d p o s i t i o n o f h er e x p o r ts to th e U n ited S t a t e s . Recommendation of th e J o in t F ilip in o -A m e ric a n F in an ce Commission The J o i n t F ilip in o -A m e ric a n F in an ce Commission, in i t s r e p o r t o f June 7, 19^7, had recommended th e fo llo w in g 2 m e a s u re s : 1 . The d iv e r s i o n of th e f o r e ig n exchange r e c e i p t s t o im p o rts of c a p i t a l equipm ent n e c e s s a ry fo r th e c o u n try 's a g r i c u l t u r a l and i n d u s t r i a l c o n s tr u c tio n and developm ent; 2 . L im ita tio n of th e im p o rts of l u x u r ie s and non- e s s e n t i a l s by th e im p o s itio n o f h e a v ie r e x c is e ta x e s ; and 3 . A p i l o t program of im p o rt c o n t r o l of non- e s s e n t i a l s to encourage lo c a l p ro d u c tio n . The im p o s itio n of d i r e c t im port c o n t r o l was a c e r t a i n means o f c o n t r o l l i n g th e volume and consum ption of 2 M iguel C u a d e rn o ,_ S r., " O rig in and P u rp o ses o f Im p o rts Exchange and C o n tr o ls ," The P h ilip p in e s a t th e C a l i f o r n i a S ta te F a i r , September 10, 195>0, p. k-. **3 im p o rts . R egarding th e l i m i t a t i o n on th e im p o rts of lu x u ry ite m s hy th e im p o s itio n of h e a v ie r t a x e s , th e Commission c a r r i e d a p re s e n tim e n t w hich was to a s s e r t i t s e l f i n th e fo llo w in g y e a r s . W ith a m a s te rly p r o g n o s tic a ti o n , th e r e p o r t s a id : These m e asu res, how ever, may w e ll f a l l s h o r t of a c h ie v in g a s u f f i c i e n t l i m i t a t i o n of n o n - e s s e n t i a l im p o rts t o f r e e a d e q u a te f o r e ig n exchange fo r o th e r p u rp o s e s . I t has been th e e x p e rie n c e of European c o u n t r ie s t h a t h ig h ta x a ti o n of lu x u ry im p o rts has n o t been s u f f i c i e n t l y r e s t r i c t i v e . I t i s p ro b ab ly t r u e c o n s id e r in g th e consum ption h a b i t s of th e F i l i p i n o p eo p le and th e c o n c e n tr a tio n of w e a lth , and co n seq u en t c o n c e n tr a tio n of th e consum ption of ex p e n siv e lu x u ry ite m s , t h a t heavy t a x a t i o n o f non- e s s e n t i a l s w i l l be o n ly p a r t i a l l y e f f e c t i v e in th e P h i l i p p i n e s .3 The im p o rt c o n t r o l , w ith a l l i t s f a u l t s (and o f te n , unkind s ta te m e n ts from th e n o n -to o -c o o p e r a tiv e p u b l i c ) , has n e v e r t h e l e s s , a f t e r b a r e ly a y e a r of i t s im p o s itio n , a c h ie v e d th e main o b je c ti v e fo r w hich i t was c r e a te d . The C e n tr a l Bank r e p o r te d t h a t th e " d e t e r i o r a t i o n in th e i n t e r n a t i o n a l r e s e r v e w hich s t a r t e d i n 1 9 ^ and c o n tin u e d w ith if increasing'm om entum in 19*+9 was f i n a l l y checked in 1 950." I . THE IMPORT CONTROL LA W OF 19W The Im port C o n tro l A c t, o th e rw ise known a s R ep u b lic 3 I b i d . , p. 82. L . The M anila Times Mid-Week Review, A p r il 18, 1951, p . 8. Mf A ct No. 330, was e n a c te d on J u ly 15, 19*+8, a u th o r iz in g th e C h ie f E x e c u tiv e to " e s t a b l i s h a system o f im p o rt c o n t r o l by r e g u l a t i n g im p o rts of n o n - e s s e n t i a l and lu x u ry a r t i c l e s , c r e a t i n g an Im port C o n tro l B oard, and p e n a liz in g v i o l a t i o n s o f th e A c t .1 *^ (In Ja n u ary 19^9> E x e c u tiv e Order No. 193 to o k e f f e c t p u rsu a n t to th e s u b s t a n tiv e A c t. T h is was im plem ented by su b se q u en t E x e c u tiv e O rders and C i r c u la r s is s u e d by th e Im port C o n tro l B o a rd .) The p ro lo n g ed p u b lic h e a rin g and th e v a r io u s oppo s i t i o n s to t h i s m easure, b o th by th e l o c a l and f o r e ig n e x p o r t e r s , d e la y e d i t s im p le m e n ta tio n . E x e c u tiv e Order No. 19*+. On December 28, 19l+9j P r e s id e n t E lp id io Q u irin o 6 s ig n e d E x e c u tiv e Order No. 193 p ro v id in g t h a t th e im p o rta t i o n of n o n - e s s e n t i a l and lu x u ry goods b e g in n in g Ja n u a ry 1, 19^9 was r e s t r i c t e d . T his Order i s an im p lem e n tatio n on R e p u b lic A ct No. 330. The Order p ro v id e s fo r an im p o rt li c e n s e fo r a l l non- e s s e n t i a l or lu x u ry a r t i c l e s im p o rted i n t o th e P h i l i p p i n e s . The a r t i c l e s a r e s p e c if ie d i n th e c o n t r o l and th e p e rc e n ta g e c u t s of each lu x u ry or n o n - e s s e n t i a l a r t i c l e t h a t may be im p o rte d . 5 R e p u b lic Act No. 330. J u ly 15, 19*+8. ^ E x e c u tiv e Order No. 193 or R e p u b lic A ct No. 330. The Board s h a l l f i x quota fo r each a r t i c l e in term s of q u a n tity or v a lu e , and s h a l l a l l o c a t e each quota to th e im p o rte rs. Amendment to E x ecu tiv e Order No. 193. - - E xecutive Order No. 206 was iss u e d which amended S e c tio n h of Execu- 7 t i v e Order No. 193> and which read as f o llo w s :' The Import C ontrol Board s h a l l f i x th e quota fo r each a r t i c l e in term s of q u a n t i t i e s or t o t a l money v a lu e s and s h a l l a l l o c a t e such quota, by a u t h o r i t y of the P r e s id e n t, to th e im p o rte rs duly r e g i s t e r e d for such a r t i c l e on the b a s is of t h e i r r e s p e c tiv e q u a n ti t i e s or v a lu e s of im ports during th e base p e rio d reduced i n accordance w ith th e p erce n tag e s h e r e in p re s c rib e d in Appendix "B". Provided, t h a t th e Board upon re q u e s t of an im p o rte r, may t r a n s f e r h is quota from one a r t i c l e to a n o th e r. The amendment was made in accordance w ith th e recom mendation of th e Import C o n tro l Board, which re c e iv e d p e t i t i o n s from th e number of im p o rte rs for perm ission to t r a n s f e r quotas from one item to a n o th e r. E f f e c t s of the Import C o n tro l Law. — In th e f i r s t h a l f of 19*+9j the e f f e c t s of th e Import C o n tro l Act began to be f e l t , a lth o u g h th e ex a ct r e s u l t d e s ir e d had not been brought ab o u t. For in s ta n c e , w hile th e im ports of tobacco p ro d u cts s u b s t a n t i a l l y d e c re a se d , th o se of autom obiles and p a r t s in c re a s e d . The a p p a re n t reaso n for t h i s occurrence ^ C ir c u la r No. 1 0 . Im port C o n tr o l B oard , M a n ila , March 2 1 , 19^9 • b6 was th e presence of p ric e l i m i t s to th e goods s u b je c te d to c o n t r o l. Im ports s h i f t e d from the h ig h -p ric e d and h ig h - q u a l i t y goods t o those n o t a f f e c t e d hy the r e s t r i c t i o n s . T h is c o n d itio n continued in th e second h a lf of 19**9. There were some fa v o ra b le e f f e c t s . However, th e se d id n o t occur in s u f f i c i e n t amounts to a t t e s t to t h e ad e quacy of <the r e g u la tio n s a lre a d y imposed. The i n e f f e c t i v e n ess of th e curbs could be a t t r i b u t e d t o : 1. The p erce n tag e c u ts which were not ad e q u ate ; 2. The quotas g ran te d to im p o rte rs could be t r a n s f e r r e d from one a r t i c l e to a n o th e r; 3. The p u ttin g of p r ic e l i m i t s on c e r t a i n im portant ite m s ; and The sm all number of item s included in the c o n tr o lle d l i s t . T h e re fo re , more d r a s t i c measures were c a lle d for and were prom ulgated in th e form of E xecutive Orders No. 295 and No. 297* which took e f f e c t on December 1, 19^9 and December 2^, 19^9* r e s p e c t i v e l y . These r e g u la tio n s were expected to b rin g about the d e s ire d r e s u l t s . E x ec u tiv e Orders Nos. 295 and 297 In an e a rn e s t move t o conserve the dw indling mone t a r y r e s e r v e s , E xecutive Order No. 295 was prom ulgated on December 1, 19^9* and amended by E xecutive Order No. 297 *+7 on December 2*+, 19*+9* The o b je c tiv e s of th e s e measures w ere: f i r s t l y , to move toward q u a n t i t a t i v e solvency by reducing im ports and th u s b rin g tr a d e to a b a la n c e ; and seco n d ly , to use a p o lic y of im port r e s t r i c t i o n s as a means of s tim u la tin g a more h e a lth y and d i v e r s i f i e d economy, th e re b y reducing P h ilip p in e dependence on an advantageous m arket t h a t , sooner or l a t e r , would be c lo se d . E x ecu tiv e Order No. 295, as amended, tig h te n e d the e n t r y of lu x u ry goods by s la s h in g the q u o tas of e x is tin g im ports and by in c re a s in g th e curb l i s t . The Import Con t r o l measure c u ts on luxury goods were from e ig h ty to n i n e t y - f i v e per cent and were from f i f t y to s e v e n ty -fiv e per cent f o r sem i-luxury goods. E x ecu tiv e Order No. 297 was passed to r e l a x the con t r o l of c e r t a i n im ports p re s c rib e d i n E xecutive Order No. 295. The changes e f f e c te d were th e e lim in a tio n from the c o n tr o l l i s t fo u r c o n tro l ite m s, th e l i b e r a l i z a t i o n of the p erce n tag e c u ts on v a rio u s a r t i c l e s , and the a d d itio n of Q s ix new item s t o th e c o n tr o l l i s t . I I . SELECTIVE CREDIT CONTROL In o rd er to d isc h a rg e the r e s p o n s i b i l i t y of p r e s e rv in g th e i n t e r n a t i o n a l and dom estic s t a b i l i t y of th e currency — See Appendix E. 1*8 and to m a in ta in th e f r e e c o n v e r t i b i l i t y of the peso i n t o o th e r f r e e l y c o n v e rtib le c u r r e n c ie s , th e C e n tra l Bank was r e q u ire d t o m ain tain an i n t e r n a t i o n a l r e s e r v e in an amount s u f f i c i e n t to meet any f o r e s e e a b le demand upon i t s fo re ig n exchange. The s e l e c t i v e c r e d i t c o n tr o l program was one of th e in stru m e n ts of C e n tra l Bank a c tio n f o r th e a tta in m e n t of th e se o b je c ti v e s . To r e s t r a i n f u r t h e r the im p o rta tio n of lu x u r ie s and n o n - e s s e n tia ls and to channel the flow of funds to th e a c q u i s i t i o n of m achinery, equipm ent, and o th e r c a p i t a l goods n e c e ss a ry i n th e economic development program, C ir c u la r No. 19, d e sig n a te d " S e le c tiv e C red it C o n tro l," was imposed on November 17, 19*+9» The C irc u la r was based on S e c tio n 110 of the Republic Act No. 265, o th erw ise known as the C e n tra l Bank A ct, which a u th o riz e d th e Monetary Board to s e t r e s t r i c t i o n s on th e g ra n tin g o f bank c r e d i t fo r th e im p o rta tio n of c e r t a i n lu x u r ie s and n o n - e s s e n tia l goods when such im p o rta tio n was p r e j u d i c i a l to the g e n e ra l w el f a r e of the economy. S e c tio n 110. Margin req u irem en ts a g a in s t l e t t e r s of c r e d i t . — In order to r e s t r i c t th e g ra n tin g of bank c r e d i t f o r purposes which a r e c o n tra ry to th e g e n e ra l w e lfa re of th e P h ilip p i n e s , th e Monetary Board may a t any tim e p re s c rib e minimum cash margins fo r th e opening of l e t t e r s of c r e d i t , and may r e l a t e the s iz e of th e re q u ir e d margin to th e n a tu re of the t r a n s a c t i o n to be fin a n c e d . i+9 The Board may p a r t i c u l a r l y use i t s powers under t h i s s e c tio n to r e q u ir e hig h margins fo r th e opening of l e t t e r s of c r e d i t to fin a n c e th e im p o rta tio n of lu x u r ie s or o th er n o n - e s s e n tia l goods, or to fin a n c e any goods th e im p o rta tio n of which a t the tim e , i s co n sid ered by the Monetary Board to be unduly prompted by s p e c u la tiv e m otives p r e j u d i c i a l to the i n t e r e s t s of the P h ilip p in e econom y.9 I t was p a r t i c u l a r l y notew orthy t h a t d e s p ite the con t r o l s , im ports continued to exceed e x p o rts , and th a t a big p o r tio n of th e im p o rta tio n s t i l l went to n o n - e s s e n tia l items and not to m ach in eries and o th e r c a p i t a l goods. Of the 6 ^ .1 per cen t of t o t a l in flo w accounted fo r by n o n -esse n t i a l s in 19*+8, l e s s th an four per cent was c u t in the f i r s t s i x months of 19*+9. From January to September 19^9» im ports exceeded e x p o rts by 7*39*+,521,6*+5 and fo r th e same p e rio d in 19! +8, th e u n fa v o ra b le balan ce amounted to 75 21 +0,371 +,l+71 +. F u r th e r more, d u rin g th e month of October a lo n e , t h e i n t e r n a t i o n a l r e s e rv e s dropped to an alarm ing low l e v e l of about h a l f a b i l l i o n pesos from a volume o f ?558,19^>000 to ? 5 2 7 ,650,000 as re p o rte d by th e C e n tra l Bank. Due to th e inadequacy of th e r e s t r i c t i o n procedure of the Import C o n tro l O ffice A d m in is tra tio n re g a rd in g the im p o rta tio n of lu x u r ie s and n o n - e s s e n tia ls as a scheme to conserve the c o u n tr y 's r e s e r v e , the C e n tra l Bank found i t s e l f c o n s tra in e d to 9 S e c tio n 110 o f R epublic Act No. 265 ( F i r s t Congress o f th e P h ilip p in e R epublic, T h ird S essio n ) approved on June 15, 19^-8, e s t a b l i s h i n g the C e n tra l Bank of th e P h ilip p in e s . 50 is s u e C irc u la r No. 19? r e g u la tin g f a c i l i t i e s on the n o n - e s s e n t i a l s . ^ P ro v is io n s of C irc u la r No. 19 T h is s e l e c t i v e c r e d i t c o n tro l measure r e q u ire d a cash margin of e ig h ty per c e n t of a l l l e t t e r s of c r e d i t co v erin g th e im port of goods l i s t e d under th e o rd e r, and p r o h ib ite d banks from r e le a s in g th e documents covering such a r t i c l e s , except on a cash b a s i s . The r e g u la tio n s covering th e exchange r e s t r i c t i o n s were as follow s 1. A cash margin of e ig h ty per cent s h a l l be re q u ir e d f o r a l l l e t t e r s of c r e d i t and a u t h o r i t y to purchase f o r th e im p o rta tio n of goods, m erchandise, and other com modities. 2. No such l e t t e r of c r e d i t or a u t h o r i t y to pur chase s h a l l be iss u e d except on a ca sh b a s i s . 3. Proceeds of bank lo a n s and d is c o u n ts and unused o v e r d r a f t l i n e s s h a l l n o t be used in th e same bank or in any o th e r bank, i n p ro v id in g for th e cash d e p o s ito r margin req u irem e n ts of e ig h ty per cent re q u ire d in paying or in l i q u i d a t i n g d r a f t s covering im ports of goods, m erchandise, ^ Manila D aily M irro r. November 18, 19*+9? p. 1* C irc u la r No. 19 . C e n tra l Bank of the P h ilip p in e s , November 17? 19^9. 51 and com modities, or in usin g such proceeds to pay, or in making re m itta n c e s to pay or to cover f o r such goods. *+. No bank s h a l l g ra n t or perm it the use of t r u s t r e c e i p t f a c i l i t i e s by t h e i r custom ers, d i r e c t l y or i n d i r e c t l y , fo r th e purpose of f a c i l i t a t i n g the r e l e a s e of any goods, m erchandise, or commodities covered by d i r e c t purchase c o l l e c t i o n b i l l s . Goods a f f e c t e d . — About one hundred f i f t y item s were d i r e c t l y a f f e c t e d . These in clu d ed autom obiles and o th e r v e h i c le s , je w e lr ie s , p re c io u s m etals and s to n e s , p e r fume and t o i l e t p r e p a r a tio n s , beauty c u ltu re equipm ents, games and amusement equipm ents, ex cep tin g a t h l e t i c e q u ip m ents, b ev erag es, wines and o th e r l iq u o r s ex c ep tin g th e e x t r a c t s fo r l o c a l b o t t l i n g p u rp o se s, beer and a l e , f i r e works and f i r e c r a c k e r s , to y s , t e x t i l e s , m usical in stru m e n ts and r a d i o s , g la s s and g la ssw a re s, tobacco and tobacco p ro d u c ts , l e a t h e r and s y n th e tic s k in s , n u ts and c a n d ie s , ru b b er and p l a s t i c p ro d u c ts , woods, bamboo, r a t t a n , e l e c t r i c a l a p p lia n c e s , and many o th e r ite m s. I I I . THE NEW IMPORT CONTROL LA W OF 19*+9 P r io r to th e te rm in a tio n of the Import C o n tro l Act o f 19^8, or Republic Act No. 330) th e C ongress, in a special s e s s io n of December 31) 19^9) passed th e New Import C o n tro l 52 Law of 19^9, or R epublic Act No. **26. Under the New Import C o n tro l Law of May 1950, or R epublic Act No. *f26, a l l im p o rts were s u b je c t to lic e n s i n g by th e Import C o n tro l Board. A ll Im ports were c l a s s i f i e d in to th re e c a te g o r ie s : ex-quota goods, non-quota goods, and quota goods. Ex-quota goods were th o se provided f o r under S e c tio n 8 of the New Import C ontrol Law. S ec tio n 8: The follow ing im ports s h a l l be adm itted w ith o u t im port quota a l l o c a t i o n : 1. Raw m a te r ia ls im ported to be used in the manu f a c t u r e of commodities c o n s is tin g of prime a n d /o r f i r s t n e c e s s ity im ports as d e fin e d in t h i s A ct, as w e ll a s raw m a te r ia ls which in them selves c o n s t i t u t e prime an d /o r f i r s t n e c e s s ity im ports and e s s e n t i a l im p o rts, when used in lo c a l or in the m anufacture of d o lla r- s a v in g and d o lla r-p ro d u c in g com m odities, i f such raw m a te r ia ls a r e not s u f f i c i e n t l y a v a i l a b l e in th e P h ilip p in e s . 2. A r t i c l e s , goods and commodities in te n d ed s o le ly f o r the p e rso n a l use of the person im p o rtin g , provided no fo re ig n exchange i s used. 3 . S u p p lies and equipments in te n d ed s o le ly f o r th e use of th e Armed F orces of the P h ilip p in e s and of the U nited S ta te s of America, P h ilip p in e Government, and semi-government h o s p i t a l s and th e P h ilip p in e N a tio n al . Red C ross; books, su p p lie s and equipments f o r sc h o o ls and those fo r th e use of the community c h e st and o th er d u ly r e g i s t e r e d c h a r i t a b l e o r g a n iz a tio n s and c h a r i t a b le m issio n ary e s ta b lis h m e n ts . **. A r t i c l e s , goods and commodities im ported in exchange or b a r te re d w ith P h ilip p in e p ro d u c ts , except lu x u ry im ports d e fin e d by t h i s Act and c o n tr o lle d non- e s s e n t i a l im p o rts produced or manufactured l o c a l l y in s u f f i c i e n t q u a n t i t i e s to meet th e demand of th e p u b lic ; p ro v id ed , t h a t th e Import C ontrol Board s h a l l determ ine what P h ilip p in e E xport s h a l l not be p erm issab le f o r b a r t e r purposes under th e p ro v isio n of t h i s A ct. 53 5. Goods in ten d ed s o le ly fo r use in r e l i g i o u s r i t e s and cerem onies. 6. Goods im ported p u rsu an t to th e p ro v is io n s of any P ric e C o n tro l Law or r e g u la tio n . 7. Goods in ten d ed s o le ly fo r r e n t , l e a s e , or e x h i b itio n ; p rovided, t h a t a t l e a s t tw e n ty -fiv e per c e n t of th e g ro ss r e n t a l s , r o y a l t i e s , and ea rn in g s p aid th e r e f o r e s h a l l not be allow ed fo r re m itta n c e s a b r o a d .12 Non-quota goods were th o s e not provided for by the Import C o n tro l Law. N o tif ic a tio n s to A uthorized Agents No. 10 of the Exchange Department of th e C e n tra l Bank, iss u e d on January 17* 1950, r e s t r i c t e d the im p o rta tio n of goods to s ix per cent of the t o t a l amount of im port issu ed by the a u th o riz e d agent to th e same customer in 19*+9. These ex quota goods were c l a s s i f i e d in to m achinery, raw m a te r ia l s , and e s s e n t i a l consumption goods. Quota goods s p e c ia lly enumerated in the Import Con t r o l Law were c l a s s i f i e d as prime com m odities, e s s e n t i a l com m odities, n o n - e s s e n tia l lu x u ry , and lu x u ry com m odities. CHAPTER V I I PUBLIC REACTION TO THE TRADE CONTROL MEASURES The c o n tr o l measures adopted d iv id e d th e people in to two schools of th o u g h t. One school of thought held the view t h a t th ey were to o d r a s t i c in scope and t h a t they would lower th e sta n d a rd of l i v i n g . The o th e r claim ed t h a t c o n t r o ls were n e c e ssa ry to s t a b i l i z e th e economy of th e P h ilip p in e s . Arguments S ta te d A gainst Trade C o n tro ls There a re s e v e r a l arguments t h a t a ro s e a g a in s t tra d e c o n t r o ls in th e P h ilip p in e s . Some of them a r e as fo llo w s: Too d r a s t i c and too sudden. — While b u s in e s s c i r c l e s d e c la re d t h a t the government had s in c e r e m otives in e s ta b li s h in g import c o n tr o ls in view of th e p re c a rio u s s i t u a t i o n of th e r e s e r v e s , th e d ec re ase from th e p o in t of view of im p o rte rs, in the im ports made e f f e c t i v e by C ir c u la r No. 19 a re co n sid ered "too d r a s t i c and to o sudden." The im p o rte rs d e c la re d t h a t the obvious e f f e c t s were to s to p im p o rta tio n sin c e very few im porting firm s would be i n a p o s it io n to comply w ith th e re q u ire m e n ts. Commercial banks p r o te s te d on th e ground t h a t i t was a " d e l i b e r a t e ham strin g in g of the movement of c r e d i t , which is the 55 li f e b l o o d of b a n k in g .”'* " Cause f u r th e r i n f l a t i o n . - - The P re s id e n t of th e American Chamber of Commerce scored th e new measures by d e c la r in g t h a t "many of th o se a f f e c t e d f e l t t h a t th e P h i l i p p i n e s would be in for t h i n tim es and i n f l a t i o n would c e r t a i n l y fo llo w on top of unemployment and f a l l i n g govern ment re v e n u e s.” He f u r th e r s t a t e d th a t th e newly stepped- up im port c o n tr o l (C irc u la r No. 19) i s a " t h r o t t l i n g down which may come c lo se to stopping t h e whole economic p m achine.” R e s t r i c t t r a d e , reduce p r o f i t , s tim u la te high o v er h e a d . - - According to th e r e a l t o r , c o n t r o ll in g im p o rts, from th e p o in t of view of businessm en, w i l l r e s t r i c t t h e flow of tr a d e and would lead t o th e c o n tr a c tio n of supply which would s tim u la te hig h er p r i c e s . Since i t i s not p o s s ib le under our p re s e n t s t a t e of economy to re p la c e th e c o n tro lle d commodities by a t once producing them l o c a l l y , f e a r s of a d ec re ase in supply w i l l encourage hoarding and blackm arketing of goods, th u s causing an i n f l a t i o n a r y tre n d of th e p r ic e l e v e l . The e n t i r e p r ic e s t r u c t u r e is a f f e c t e d . Even p r ic e of goods not under c o n tr o l may a ls o r i s e unduly. Another ad v erse e f f e c t of im port c o n tro l is t h a t i t w i l l in c re a s e unemployment. With tr a d e and commercial a c t i v i t i e s r e s t r i c t e d , th e c a l l f o r s e r v ic e s w i l l n a tu r a l l y d e c re a se . R e t a i l m erchant, m erchandising s t o r e s , 1 The Manila Evening News. December 20, 19*+9, P» 7- 2 The P h ilip p in e H erald E d i t o r i a l . November 19, 19^9, p. 1. 56 and o th e r a l l i e d b u sin e sse s d i r e c t l y or i n d i r e c t l y a f f e c t e d by th e c o n t r o l, w i l l be fo rc ed to c u r t a i l t h e i r a c t i v i t i e s , i f not com pletely give them up, throw ing many people out of work in th e p ro c e ss. In the face of reduced tr a d e and b u sin e ss a c t i v i t i e s , r i s i n g p r ic e s and in c re a s in g unemployment, i t does not tak e much th in k in g to r e a l i z e t h a t p re s e n t s o c ia l con d i t i o n s w i l l be f u r t h e r ag g rav ated u n le s s th e govern ment i s prepared to supply jobs or dole out money to th e unemployed, th ro u g h s t a t e l e g i s l a t i o n . Wages and s a l a r i e s cannot r i s e f a s t enough during i n f l a t i o n p e r io d s , so t h a t wage e a rn e rs and s a l a r i e d people w i l l f in d i t in c r e a s in g ly d i f f i c u l t to meet th e c o s t of l i v i n g . 3 W ith th e p erce n tag e c u ts p re s c rib e d on a l l im ports under R epublic Act No. *f26, th e b u sin e ss of le g itim a te N . im p o rte rs has been reduced to alm ost s u i c i d a l l e v e l s . Aside from th e ra t'h e r b ig p ercen tag e re d u c tio n s in im porta t io n s of commodites (prime im p o rts, f o r t y per c e n t; e s se n t i a l im p o rts, from f o r t y to s i x t y per c e n t; n o n - e s s e n tia l im p o rts, s ix ty to e i g h ty per c e n t; and lu x u ry im p o rts, e ig h ty t o n in e ty per c e n t ) , im p o rte rs have a l s o had to s u f f e r a t h i r t y per cent r e d u c tio n in th e t o t a l quotas p e r- m itte d , which is th en a l lo c a te d by law to "new im p o r t e r s .” W ith reduced b u s in e s s , th e re have been reduced p r o f i t s . Overhead expenses, on th e o th e r hand, e i t h e r remained ”as i s " or became g r e a t e r , what w ith th e added feed to be paid t o " te n per c e n te rs " employed fo r "e x p e d itin g issu a n ce of ^ The Manila Evening News, December 20, 19*+9, P» 7. L. The Mani l a E v en in g C h r o n ic le « Decemba* 9 * 1 9 5 0 , p. 1 . 57 l i c e n s e s . ” On th e b a s i s of th e s e f a c t s , one needs no g r e a t amount of e f f o r t to r e a d i l y p e rce iv e th e h ercu lean ta s k fa c in g b u sin e ss c i r c l e s in the s tr u g g le for s u r v iv a l. Added to th e unw arranted c u rta ilm e n t and d im in u tio n of i t s b u s in e s s i s the h ard sh ip t h a t im p o rte rs meet in o b ta in in g im port l i c e n s e s . An a p p l ic a tio n fo r a licen se under '’normal" circu m stan ces i s a c te d upon f o r a t l e a s t two or t h r e e months a f t e r i t is f i l e d . During th a t p e rio d of tim e, th e im porter or h i s r e p r e s e n t a t i v e sweats i t out in th e -Im p o rt C ontrol O ffice fo llo w in g up such a p p l i c a t i o n . 5 The extreme d elay in secu rin g l i c e n s e s n a t u r a l l y r e s u l t e d i n the corresponding d elay in p la c in g o rd ers w ith s u p p lie r s abroad, and the consequent d e la y i n th e d e liv e r y of the goods to th e im porter concerned. Due to th e d elay in g e ttin g l i c e n s e s , businessm en were caught, more o fte n th a n n o t, in th e c r o s s f i r e of f l u c t u a t i n g p r ic e s brought about by the law of supply and demand. And, as in the U nited S t a t e s , which is th e main im port supply l i n e of the P h ilip p in e s , the e x p o rta tio n of s e v e r a l item s has been made s u b je c t to ex p o rt li c e n s e s . Times have not been r a r e when the e x p o rt lic e n s e in America has ex p ired w ith o u t the im p o rter in the P h ilip p in e s having a s y e t o b tain ed h is im port lic e n s e f o r th e commodity th a t was o rd ered . S tatem ent of Jose Y. Orosa, Vice P re s id e n t of th e H eacock's Company, M anila, in th e Manila Evening C h ro n ic le . December 9» 1950, p. 6. 58 C losing of f i r m s * — Some b u sin e ss f irm s , unable to sta n d the s t r a i n of more s t r i n g e n t im port c o n tr o l r u l e s and r e g u l a t i o n s , were compelled to f o ld up and c lo s e shop, throw ing t h e i r p erso n n el out of employment i n t o the army o f th e unemployed. The c lo s in g down of b u s in e s s e s ta b lis h m e n ts , r e s u l t ing in w idespread unemployment, is the d i r e c t o ffs h o t of the im p o sitio n of tra d e c u rb s. The im p o s itio n of the im port c o n t r o l — (a) has caused l a y - o f f s ; (b) along w ith or a s a s u b s t i t u t e for l a y - o f f s , wages have been reduced as a retren ch m en t measure; and (c) has r e s u l t e d in h ig h e r p r ic e s of com m odities, th u s c u r t a i l i n g the p u rch asin g power of th e wages. The c u rta ilm e n t of employment o p p o r tu n itie s is by no means confined t o e s ta b lis h m e n ts d e a lin g w ith con t r o l l e d goods. There is an o th er group of w orkers, th e dock w orkers or ste v e d o re s upon vjhom the e f f e c t s of th e c o n tro l system have been a s c a t a s t r o p h i c .6 B u sin ess firm s are f o r tu n a te i f t h e i r l a i d - o f f or d ism isse d w orkers meekly submit to t h e i r d is c h a r g e . F re q u e n tly , th e se employees and la b o re rs a re members of la b o r unions and w i l l not a llo w them selves t o be given "French le a v e " w ithout a f i g h t , or w ithout added co n cessio n s from the b u sin e ss firm s concerned. Sometimes, the m a tte r i s brought to th e Court of I n d u s t r i a l R e la tio n s f o r a r b i t r a t i o n , but e v e n tu a lly , i f no am icable s e ttle m e n t i s re a c h e d , a la b o r case is brought a g a in s t th e company. T h is , a g a in , means more expenses and more headaches for th e company or f o r th e im p o rte rs . 6 S tatem ent of the S e c re ta ry of Labor, P rim itiv o Lovina, in the Manila Times. January 26, 1950. E f f e c t on fo re ig n im p o r te rs . — Import c o n tr o ls have probably r e ta rd e d fo r e ig n in v e stm e n ts i n the P h ilip p in e s because of u n c e r t a i n t i e s as to fu tu re p o l i c i e s and the f e a r o f f u r th e r r e s t r i c t i o n s a g a in s t fo re ig n im p o rte rs . Said one John R. Humburger, an American businessman r e p r e s e n tin g th re e United S ta te s t e x t i l e companies in the P h ilip p i n e s : "The bulk of fo re ig n im p o rte rs doing b u sin e ss h ere has a lre a d y f e l t th e e f f e c t s of the o n e-sid e d im port r e s t r i c t i o n s imposed by th e P h ilip p in e Government. The s t a t e of th in g s here forbodes a gloomy fu tu re f o r th e 7 im p o rte rs of p ro d u cts c l a s s i f i e d as lu x u ry i t e m s .11' D efenses For Trade C ontrol However, th e re are a l s o some d efen ses f o r th e im p o s itio n o f th e tr a d e c o n t r o l s : To prevent d r a in on the r e s e r v e s . — Top government o f f i c i a l s have fought for c o n t r o l s . P re sid e n t Q uirino, in a p re ss conference on December 7» 19^9, defended th e p as sage of im port curbs by d e c la rin g t h a t th e immediate ad v e rse e f f e c t s of th e im port c o n tro ls were only tem porary and t h a t in the long ru n , c o n tro ls would te n d to s tim u la te th e e s ta b lis h m e n ts of dom estic e n t e r p r i s e s and would ^ent. the f a s t d ra in on the c o u n try ’s r e s e r v e s . The 7 The M anila E v en in g C h r o n ic le . December 1, 19^9» p . l . 60 P re s id e n t in d ic a te d t h a t the sh o rta g e caused by the d r a s t i c c u t s in the m a jo rity of im port item s would d r iv e the n a tio n t o an in c re a s e d p ro d u ctiv e a c t i v i t y in an e f f o r t t o make up l o c a l l y f o r what they would be m issing a b ro ad . The main concern of the government i s to speed up p ro d u ctio n of d o lla r - e a r n i n g p ro d u c ts, he d e c la re d . Governor Miguel Cuaderno of th e C e n tra l Bank, com menting on rem arks concerning C irc u la r No. 10, a s p ublished by the p r e s s , s a id : In one case i t was s t a t e d th e purpose of the a c tio n o f the Monetary Board in r e s t r i c t i n g bank c r e d i t fo r th e im p o rta tio n of lu x u r ie s and n o n - e s s e n tia l goods is t o complement the Import C ontrol Law. This is not e x a c tly c o r r e c t for w h ile the import c o n tr o l r e g u la t i o n c u t th e q u a n tity t h a t may be imported of th e s e a r t i c l e s , the C e n tra l Bank r e g u l a t i o n s a r e designed t o f u r t h e r d isc o u ra g e the im p o rta tio n of th e q u a n tity allow ed by th e Import C o n tro l r e g u la tio n . The C e n tra l Bank r e g u la tio n s were not in ten d ed to k i l l tr a d e in g e n e ra l, bu t th ey w i l l trem endously a f f e c t the b u sin e ss of th o se who were engaged in th e im p o rta tio n of lu x u ry and n o n - e s s e n tia l goods. As was s t a t e d i n the Bank*s p re ss r e l e a s e , the a c t i o n taken by the Monetary Board was c a lc u la te d to d i v e r t th e flow of funds t o the a c q u i s i t i o n of e s s e n t i a l c a p i t a l goods . . . . In a n o th er c a s e , i t was s ta te d t h a t th e measure adopted by the C e n tra l Bank might do as much harm as good on th e m orale of the community and on th e imme d i a t e economic h e a l t h of th e c o u n try . The C e n tra l Bank was charged w ith th e r e s p o n s i b i l i t y of m a in ta in in g th e s t a b i l i t y of the c o u n tr y 's c u rren cy which was one of the p r i n c i p a l a t t r i b u t e s of a h e a lth y economy. I t was p r e c i s e l y t o p re se rv e the sound s t a t e of eco nomic h e a l t h t h a t th e Monetary Board was c o n s tra in e d to ta k e a c tio n t o prevent th e d e p le tio n of th e f o r e ig n 61 exchange re s e rv e s of th e country t o such an e x te n t as t o make i t im possible fo r the c o u n try l a t e r to im port r i c e and o th e r food commodities and equipment e s s e n t i a l to the a g r i c u l t u r a l development S tim u la te lo c a l p ro d u c tio n . — In a r a d io b r o a d c a s t, Mr. V i r a t a , D ire c to r of the Department of Economic R esearch o f th e C e n tra l Bank, defended S e le c tiv e C re d it C o n tro l, s t a t i n g t h a t w hile t h e c r e d i t c o n tr o l measure w i l l r e s u l t in a r e d u c tio n of government r e s e r v e s , i t w i l l prevent a much g r e a t e r re d u c tio n in the f u tu re when a severe b u sin e ss d e f l a t i o n becomes a r e a l i t y due to th e continuous outflow o f much-needed d o l l a r s in the form of th e im p o rta tio n of lu x u r ie s and o th e r n o n - e s s e n t i a l s . He s a id : The s e l e c t i v e c r e d i t c o n t r o l measures w i l l : 1. S tim u la te the demand for s u b s t i t u t e a r t i c l e s ; 2. S tim u la te the p ro d u c tio n of a d d i tio n a l item s; and 3. In c re a s e employment a s a r e s u l t of th e v ig o ro u s im plem entation of o th e r p r o je c ts in the economic d e v e l opment program of the governm ent.9 Jose P. M arcelo, P re sid e n t o f -th e P h ilip p in e Chamber o f I n d u s t r i e s , v ig o ro u sly opposed the a b o l i t i o n of im port c o n t r o l s , i n an answer to a c o n g re s sio n a l move fa v o rin g a b o l i t i o n . "New and n e c e s s a ry i n d u s t r i e s need maximum 8 The Manila Evening C h ro n ic le % November 26, 19^9, p . 1 . 9 The Manila Sunday Times, November 20, 19^9• P* 1* 62 10 p r o te c tio n from the government he d e c la r e d , adding t h a t th e c o n tr o ls served as a sp ark plug in an h o nest-to-goodness i n d u s t r i a l i z a t i o n program. He a v e rre d t h a t : 1. I t served to m ain tain the d o l l a r re s e rv e s which should be s p a rin g ly used fo r e s s e n t i a l goods not produced l o c a l l y . 2. W ith an i n d u s t r i a l i z e d economy, im port c o n tr o ls would redound to th e r a i s i n g of the sta n d a rd of l i v i n g among th e people of th e P h ilip p i n e s , and 3 . Under the p re s e n t s e t- u p , F i l i p i n o s have b e t te r chances to a c q u ire a l a r g e r sh are in b u s in e s s . A New York e d i t o r i a l d e c la re d t h a t sa id c o n tro l measures were n e c e s s a ry , a lth o u g h " th e re w i l l be an o u tc ry t o the e f f e c t t h a t s la s h e s in some c a te g o r ie s a r e f a r too sharp and some arguments t h a t P h ilip p in e re c o v e ry w i l l be slowed down a t t h i s sta g e by lim itin g a v a i l a b l e amount of goods t h a t a r e n o t n e c e ss a ry in luxury c l a s s e s , a lth o u g h 1 1 th e y a r e so named. . . ." The Manila Times. A p ril 18, 195l> P» 2. I b i d . . December 7 ? 19*+9j P» 1. CHAPTER V I I I THE IMPORT CONTROL ADMINISTRATION The im p o s itio n of th e import c o n tro l has been gen e r a l l y and u n i v e r s a lly a c cep ted by even the most a d v e rs e ly a f f e c t e d businessmen a s " in d is p e n s a b le u n t i l th e i n t e r n a t i o n a l payment p o s it io n of th e co u n try can be im proved."1 I f any c r i t i c i s m has been le v e le d a g a in s t th e government f o r th e im p o s itio n of th e im port c o n t r o l, such c r i t i c i s m was p r i n c i p a l l y and p rim a rily d ir e c te d a g a in s t th e la c k of c l a r i t y in p o lic y and in th e i n t e r p r e t a t i o n of th e law, as w e ll as a g a in s t th e la c k of c o o rd in a tio n between th e Import C o n tro l Board and th e C e n tra l Bank—th e two a g e n c ie s e n t r u s t e d w ith the enforcem ent of th e im port and exchange 2 c o n t r o l s , r e s p e c t i v e l y . Im port C o n tro l Anomalies Less than a month a f t e r th e im p o sitio n of th e f i r s t Import C o n tro l Law, or Republic Act No. 330, unscrupulous p erso n s began to e x p lo it t h e i r r a c k e te e rin g p o s s i b i l i t i e s . D e a le rs took th e o ccasion a s a s ig n a l fo r rampant p r o f i t e e r in g and even o f f i c i a l s d i r e c t l y connected w ith c o n tr o l 1 The B e ll R ep o rt. 1950. 2 The E v en in g C h r o n ic le . O ctober 2 5 , 19^9? P* ! • 6b enforcem ent began to e n r ic h them selves th ro u g h the la w 's v a r io u s lo o p h o le s. One need not go f a r to see th e f a i l u r e of th e im port c o n t r o l . The s to r e s a l l over th e C ity of Manila were h e a v ily stocked w ith many lu x u ry ite m s, in d ic a t in g t h a t th e im p o rta tio n of lu x u ry goods was not checked a t a l l . A lie n im p o rte rs had circum vented th e im port c o n tro l law by: 1. U nderpricing the im p o rta tio n of c o n tro lle d a r t i c l e s . 2 . Padding of in v o ic e s which were th e b a s is of th e a l l o c a t i o n of c o n t r o ll e d a r t i c l e s . 3. R e g is te rin g dummy F i l i p i n o im p o r te rs , who would s e l l t h e i r q u o ta s. A lleged s e rio u s anom alies in t h e Import C o n tro l were exposed by th e C e n tra l Bank when i r r e g u l a r i t i e s in th e Import C ontrol O rg a n izatio n had been u n e a rth e d . S p e c ia l i n v e s t i g a t o r s from th e C e n tra l Bank d isc o v e re d t h a t : 1. Hundreds of quota a p p l ic a tio n s r e p r e s e n tin g the main b u lk of lo c a l im p o rte rs were n o ta riz e d by only one p erso n , an o f f i c i a l of th e Import C o n tro l O rg a n iz a tio n . 2 . C e rta in lo c a l b u s in e s s e s were using dummies to o b ta in la r g e r quota a l l o c a t i o n than th ey were e n t i t l e d t o , under th e e x i s t i n g r e g u la tio n . 6 5 3 . E n t r i e s in th e quota le d g e r were no t made in accordance w ith th e proper acco u n tin g p ro ced u re.^ The anom alies and i r r e g u l a r i t i e s unearthed and con firm ed by th e ap p o in ted c o n g re s s io n a l group and s p e c ia l p ro b ers were:** 1. I l l e g a l and i r r e g u l a r iss u a n c e s of q u o tas and l i c e n s e s in c lu d in g th e shipment of one m illio n p e so s' w orth of c i g a r e t t e s ; 2 . E x iste n c e of dummies; 3 . Padding of in v o ic e s ; E x iste n c e of ten per c e n te rs and p ro fe s s io n a l in te r m e d ia r ie s who p r o f i t e d on t h e i r in t e r c e s s i o n work between th e im port o f f ic e and th e im p o rte rs ; and 5. The improper keeping of th e Import C ontrol O rg a n iza tio n le d g e r and o th e r re c o r d s . As a r e s u l t of t h i s i n v e s t i g a t i o n , a revamp of th e Import C o n tro l O rg an izatio n was made. However, d e s p ite continuous r e o r g a n iz a tio n and i n v e s t i g a t i o n , which a re b ein g done up t o th e p re s e n t tim e , anom alies and c o rru p tio n s co n tin u e to e x i s t in th e Import C o n tro l A d m in istratio n . ^ The Evening C h ro n ic le . M anila, October 25» 19*+9» pp. 1 and 10. ^ The E v en in g C h r o n ic le . M a n ila , O ctober 3 0 , 19^9> p . 1 . 66 An A n aly sis of th e Import C ontrol A d m in istra tio n Import c o n tro l as th e most p re ssin g problem of businessm en a t p r e s e n t . — Of th e m u ltif a r io u s p re ssin g pro blems facin g lo c a l businessm en th e se days, none could pos s i b l y compare w ith the g r e a t problems t h a t have been posed by th e im p o sitio n of import c o n tro l r e g u la tio n s by th e government. While i t has been s a id t h a t l o c a l b u sin e ss c i r c l e s were re sig n e d to th e im p o sitio n of th e im port con t r o l a s d ec id ed ly a "n e cessary e v i l " i f t h e c o u n try ’s economy had to be s t a b i l i z e d , y e t , alm ost a l l of them were unanimous in th e sentim ent t h a t th e machinery e s ta b lis h e d by the government f o r th e im plem entation of th e Import Con t r o l of 19^8 and the New Import C ontrol of 19*+9 was so d e f e c tiv e t h a t much was l e f t to be d e s ire d in th e way of improvement. The good t h a t th e c o n tro l did f o r th e co u n try in th e m a tte r of the c o n se rv a tio n of P h ilip p in e d o l l a r r e s e rv e s could n o t, by any sta n d a rd or c r i t e r i o n , o f f s e t by as much as o n e -h a lf t h e e v i ls r e s u l t i n g from i t s im p o s itio n . The i n e f f i c i e n c y w ith which th e im port c o n tr o l was a d m in iste re d has le d Congressman Ferdinand Marcos of Ilo c o s N o rte, Chairman of th e p o te n t House Committee on Commerce and In d u s try , to urge th e r e p e a l of th e Import C o n tro l Law, th e a b o l i t i o n of the Import C ontrol A d m in is tra tio n , and th e 67 t r a n s f e r of i t s powers to th e C e n tra l Bank. In making th is bo ld move, Congressman Marcos sa id t h a t "no e x te n s iv e expla n a tio n s were n e c e ss a ry to show t h a t th e import c o n tr o l law had not liv e d up to th e e x p e c ta tio n s of i t s a u th o rs and of t h e p u b lic ," and f u r t h e r , " t h a t w h ile i t i s tr u e th a t we have conserved i n t e r n a t i o n a l r e s e r v e s , i t has a t th e same tim e p laced us i n d is r e p u te in i n t e r n a t i o n a l e y e s," and m oreover, "has caused i n f l a t i o n of p r ic e s and co rresp o n d in g s u f f e r i n g in the lower c la s s e s of th e p o p u la tio n ." ^ Poor and d e f e c tiv e im plem entation o f im port c o n tr o l law . - - P r a c t i c a l l y every country of any s ig n i f ic a n c e in th e world today imposes im port or exchange r e s t r i c t i o n s of some s o r t f o r th e p r o te c tio n of i t s n a t i o n a l economy. For e s s e n t i a l l y , th e p r in c ip l e behind c o n tro ls is la u d a b le and d e se rv in g in the h ig h e st commendation. This p o in t i s reco g n ized by even th e s e v e re s t and b i t t e r e s t c r i t i c s of th e system who te n a c io u s ly uphold th e o p p o site view. How e v e r, no m atter how w ell-c o n c eiv ed a system i s , i t may work ou t d i f f e r e n t l y from t h a t o r i g i n a l l y in ten d ed due to poor, d e f e c tiv e a n d /o r weak im plem entation. The main c r i t i c i s m of l o c a l businessmen a g a in s t th e p re s e n t system of the im port c o n tr o l as imposed in th e — c r The Import C o n tro l i s now c o n c u rre n tly being t r a n s f e r r e d to th e C e n tra l Bank. £ The Manila Tim es. December 6, 1950, p. 1. 68 P h ilip p in e s was lo c a li z e d in th e Import C o n tro l A d m in istra t i o n ' s weak and i n e f f i c i e n t im plem entation of th e Import C o n tro l Law. T his d e f e c tiv e machinery i n th e v ig o ro u s im plem entation and ex e cu tio n of th e p ro v is io n s of th e Import C o n tro l Law might be tr a c e d to th e fo llo w in g fa c to rs : 1. Most of the p erso n n el composing th e Import Con t r o l A d m in is tra tio n d id not p o ssess th e n e c e ss a ry c i v i l s e rv ic e e l i g i b i l i t y and te c h n ic a l exp erien ce in t h e i r r e s p e c tiv e p o s i t i o n s . The m a jo rity of th e p erso n n e l had been a p p o in ted to t h e i r p re s e n t p o s itio n s on th e s t r e n g t h of t h e i r p o l i t i c a l a f f i l i a t i o n s , r a t h e r than on th e b a s i s of t h e i r f i t n e s s fo r th e jo b . The in e f f i c i e n c y i n th e Import C o n tro l A d m in istra tio n was so rampant t h a t a t one tim e, A lfonso C a lalan g , then Deputy Governor of th e C e n tra l Bank, was no longer a b le to c o n ta in h is in d ig n a tio n a t r e p o r ts of n e e d le s s d elay in the issu a n ce of im port lic e n s e s to im p o rte rs . He minced no words in d e c la rin g t h a t n in e ty p e r cent of th e p erso n n el of th e Import C ontrol A d m in istra t i o n were "incom petent” and m iserab ly u n q u a lifie d t o d i s charge the fu n c tio n s of t h e i r o f f i c e and t h e i r t r u s t . 2 . There was no c l e a r - c u t p o lic y nor m ethodical system in th e a p p ro v a l of im port l i c e n s e s . The s i t u a t i o n in the Import C o n tro l A d m in is tra tio n remained confused from day to day. There was no e f f e c t i v e l o c a to r system . An 69 im porter might have to w a it fo r weeks or even months b e fo re he was informed of the s t a t u s of h is a p p l i c a t i o n . A f o o l p roof f i l i n g system was s t i l l to be e s ta b li s h e d . License a p p l i c a t i o n s , in c lu d in g th o s e a lre a d y approved, could be l o s t e a s i e r th a n lo c a te d . 3. F requent changes and amendments in the r u l e s and r e g u la tio n s of th e Import C o n tro l A d m in istra tio n l e f t most im p o rte rs in th e d ark as to th e l a t e s t developments t r a n s p i r i n g t h e r e in and were conducive t o the l o s s of f a i t h and confidence on the p a r t of the im p o rte rs in the i n t e g r i t y and honesty of the v e ry persons charged w ith th e e f f e c t i v e im plem entation of th e Import C o n tro l Law. Indeed, th e freq u en cy w ith which th e government, t h e Import C ontrol Board, and th e Import C o n tro l A d m in is tra tio n amended the r u l e s and r e g u la tio n s governing im port and exchange con t r o l s , had reached th e s ta g e where a la rg e p a r t of th e tr a d e and b u s in e s s c i r c l e s in th e P h ilip p in e s no longer b e lie v e d the o rd ers or r e g u la tio n s iss u e d from day to day. The t r a d e r s expected t h a t the same would be changed or amended in a few days. This " re lu c ta n c e to b e lie v e in th e re a s o n a b le permanence of an im port c o n tro l or exchange c o n t r o l o rd e r, has n a t u r a l l y brought ab o u t—as i t w i l l s t i l l co n tin u e to b rin g a b o u t—a s t a n d s t i l l in some 70 7 f i n a n c i a l and commercial t r a n s a c t i o n s . " ' *+. P e rso n a l squabbles among o f f i c i a l s of th e Import C o n tro l Board, the Import C o n tro l A d m in is tra tio n , and th e C e n tra l Bank, a t t r i b u t a b l e to th e la c k of u n d e rsta n d in g as t o the r e s p e c tiv e fu n c tio n s of each and th e la c k of c o o r d i n a t io n in th e d isc h a rg e of t h e i r r e s p e c tiv e t r u s t s , "caused c o n s id e ra b le confusion and d e la y in th e shipm ent of mer- o ch an d ise from abroad t o th e P h ilip p i n e s ." Import C o n tro l Law i n d i r e c t l y in s tru m e n ta l in th e b i r t h of a new i r r e g u l a r i t y . — The Import C o n tro l Law was an economic tra g e d y . Whereas, i t was o r i g i n a l l y conceived as a m aster scheme to save the country from a p o s s ib le d e p le tio n of i t s d o l l a r r e s e r v e s , i t u n co n scio u sly prepared th e ground f e r t i l e for th e b i r t h of an i n c i p i e n t i r r e g u l a r i t y which e v e n tu a lly sp ro u ted in th e Import C o n tro l Adminis t r a t i o n , and which th r iv e d on the p re s e n t co n fu sio n and chaos r e ig n in g t h e r e i n . T h is g ath ered s t r e n g t h day by day from the incom petence, g r a f t , and c o rr u p tio n w ith which the s a id o f f ic e in d u b ita b ly reek e d . T h is new i r r e g u l a r i t y embraced "dummies", "new im p o r te rs " , " f ly - b y - n ig h t im p o rte rs " , " Q u o t a - t r a f f i c k e r s " , "m a rk e te e rs", and "fake im p o rte rs" who a p p lie d fo r quota 7 The Manila Tim es. January 26, 1950, p. 1. ^ The Manila Tim es. January 9j 1950, p. 3. 71 a l l o c a t i o n s s o le ly f o r th e purpose of s e l l i n g them t o th e h ig h e s t b id d e r r a t h e r th an fo r th e purpose of r e a l l y engag ing in the im port b u s in e s s - - t o the in c a lc u la b le d e trim e n t o f le g itim a te im p o rte rs and of th e g e n e ra l buying p u b lic . Add to t h i s the popular army of "te n per c e n te r s " and " in s id e r s " which in clu d ed s e n a to r s , congressmen, and people in hig h p o s it io n s . This group of im port c o n tr o l " r a c k e te e r s " in c o llu s io n w ith the people " in s id e " follow ed up and secured im port lic e n s e s fo r commercial firm s fo r a fe e ranging from te n per c e n t to t h i r t y - f i v e p er cen t o f th e value of th e l i c e n s e , which amount was u lti m a t e ly borne 9 by the poor consumers. Mr. Jose Y. Orosa, Vice P re sid e n t of H eacock's, and P re s id e n t of th e E s c o lta R e t a i l e r s ' A s s o c ia tio n , w ith b i t i n g sarcasm , r e m a r k e d :^ " . . . th e sc a n d a l, th e r a c k e t , going on in th e Import C o n tro l O ffice has become commonplace. The a p p e la tio n "ten p e r c e n te rs " has become id io m a tic . T his country has been a f f l i c t e d w ith s e v e r a l i l l s h e r e t o f o r e —what w ith su rp lu s p ro p e rty r a c k e t , th e PRATRA purchasing i r r e g u l a r i t i e s , th e schools and o f f i c e s u p p lie s r a c k e t , th e im m igration r a c k e t , e t c . , b u t a l l of th e s e seem t r i v i a l and p e t t y com pared to th e scandal which now plagues the Import C o n tro l O ffic e . We say t h i s because every centavo which a businessm an g iv e s out i n order to o b ta in an im port quota lic e n s e is passed on t o the consumer who t h e r e t o f o r e u l ti m a t e ly s u f f e r s for somebody's m isc h ie f. ^ The Manila Times, November 25, 19^9* P» 1. The Manila Evening C h ro n icle, October 25,19*+9> P* !• The lu c r a tiv e n e s s and alm ost u n lim ite d " p o t e n t i a l i t i e s " of th e se new i r r e g u l a r i t i e s were b e s t ex em p lifie d and borne out by a re c e n t p re s s r e p o r t t o the e f f e c t t h a t a c l e r k i n the Import C o n tro l A d m in is tra tio n , e a rn in g F120.00 a month, was able to c o n s tr u c t a house w orth about f o r t y thousand p e s o s .11 E f f e c t of im port c o n tr o l on lo c a l businessm en. - - There were some im p o rte rs , r e t a i l e r s , and w h o le s a le rs who b e n e fite d from th e im p o sitio n of the Import C o n tro l Law by ta k in g advantage of th e th r e a te n in g s c a r c i t y of consumer goods, in order to hike t h e i r p r ic e s to the g r e a t p re ju d ic e and d etrim e n t of le g itim a te b u s in e s s . More e s p e c i a l l y , the fo llo w in g d e le te r io u s r e s u l t s have been wrought on genuine im p o rte rs and businessm en by th e im p o sitio n of th e Import C o n tro l Law. 11 The M anila E v en in g N ews. November 2 2 , 1 9 5 0 , p . *+. CHAPTER IX FOREIGN EXCHANGE CONTROL As a c o r o l l a r y to the im plem entation of the Import C o n tro l Law, and in order to plug th e lo o p h o le s, in 19^9 th e P h ilip p in e Government, through t h e C e n tra l Bank, saw a need to f u r th e r circum vent th e flow of c a p i t a l abroad by th e i n s t i t u t i o n of F oreign Exchange C o n tro l.^ I t would be w ell to review th e whole s i t u a t i o n of n a t i o n a l fin a n c e from th e view point of why from o th e r r e a sons based on d e t e r r e n t f a c t o r s plaguing th e n a tio n , th e i n s t i t u t i o n of F oreign Exchange C o n tro l was made im p e ra tiv e N otw ithstanding the a p p l i c a t i o n of the Import Con t r o l Law, th e s t a t e of th e f i n a n c i a l c o n d itio n of the country was f a r from commendable. ’’During th e p erio d from October 1, 19^9 t o December 8, 19*+9> th e n e t d e c lin e in re s e rv e s amounted t o s ix hundred n in e m illio n d o lla r 's . In the f i r s t e ig h ty days of December, th e r e s e r v e s d e c lin e d by $l*+.5 m illio n s . . . th e d e f i c i t of $ l 6 l m illio n in 19^9 was more th an fo u r tim es th e 19*+8 d e f i c i t of $38 m illio n ." ^ ^ The B e ll M ission R e p o rt. October 9> 1950, P a rt One S e c tio n V II, ’’Exchange C o n t r o l.” 2 See Table a t the end of t h i s C hapter. The d e c lin e in i n t e r n a t i o n a l r e s e r v e s was g r e a t e s t in th e f i r s t and f o u rth q u a r te rs o f 19*+9. During the f i r s t q u a r t e r , t h i s was accounted fo r p rim a r ily by the heavy tr a d e d e f i c i t . But beginning in O ctober, fo llo w in g t h e w ide sp read cu rren cy d e v a lu a tio n s , a c a p ita l outflow was induced by f e a r of th e d e v a lu a tio n of th e peso. In t h e emergency s i t u a t i o n which e x is te d a t th e end of 19*+9j i t seems c l e a r t h a t th e P h ilip p in e government had no choice ex c ep t to impose exchange c o n tr o ls and to tig h t e n im port c o n t r o ls . I t was thought t h a t a lth o u g h in d ep en d en t, exchange c o n tr o l would e f f e c t i v e l y complement im port and c r e d i t c o n t r o l s . "In f a c t , " Governor Cuaderno of th e C e n tra l Bank o f the P h ilip p in e s s a id , "exchange c o n tro l can n o t succeed w ithout im port c o n t r o ls . Im p o sitio n of F o reig n Exchange C o n tro l On December 9> 19*+9> pu rsu an t to th e p ro v is io n s of R epublic Act No. 265, th e Monetary Board of th e C e n tra l Bank passed by unanimous v o te , C irc u la r No. 20, w ith th e a p p ro v al of th e P re s id e n t of the P h ilip p in e s . In a c c o rd ance w ith th e E x ecu tiv e and I n t e r n a t i o n a l agreem ents to which th e R epublic of th e P h ilip p in e s i s a p a r ty , as th e agreem ent signed by th e P h ilip p in e s w ith th e I n t e r n a t i o n a l ^ The P h i li p p i n e H e r a ld , December 1 0 , 1 9 ^ 9 5 P* 1 75 Monetary Fund, th e B e ll Trade Act of 19^6, and th e Executive Agreement between th e P h ilip p in e s and the U nited S ta te s of America s t a t e s under T i t l e IV, S e c tio n *+02, P aragraph F: ’’That the value of th e P h ilip p in e currency in r e l a t i o n to th e United S ta te s d o lla r s h a l l no t be changed, the c o n v e rti b i l i t y of pesos in to d o l l a r s s h a l l n o t be suspended, and no r e s t r i c t i o n s h a l l be imposed in tb e ^ tr a n s f e r of funds from th e P h ilip p in e s to th e U nited S t a t e s , e x c e p t by agreement L l w ith the P re s id e n t of the United S t a t e s . " In conform ity w ith th e l a t t e r , th e agreement of P re s id e n t Harry S. Truman was asked and o b ta in e d . C ir c u la r No. 2 0 . — C irc u la r No. 20 of th e C e n tra l Bank of th e P h ilip p in e s shows t h a t a l l t r a n s a c t i o n s in gold and fo re ig n exchange a r e s u b je c t to l ic e n s i n g by th e Cen t r a l Bank. Gold producers are re q u ir e d t o s e l l tw e n ty -fiv e p e r c e n t of t h e i r p ro d u ctio n to th e C e n tra l Bank. The rem aining s e v e n ty -fiv e p er cen t can be sold a t th e f r e e market a t th e p r e v a ilin g p r i c e s . E x p o rta tio n and im porta t i o n of gold re q u ire d lic e n s i n g . F o reig n exchange r e c e i p t s by th e r e s i d e n t s and by the banking system must be ^ The B e ll Trade Act of 19*+6. T i t l e IV, S ectio n **02, P arag rap h F. ^ C ir c u la r No. 2 0 . C e n tr a l Bank o f the P h i l i p p i n e s , Jan u ary 1 0 , 1 9 5 0 . 76 su rre n d e re d for conversion in to pesos. A ll e x p o rts of gold r e q u ir e li c e n s e s . In s h o r t, exchange c o n tro l would not a llo w any money going out of th e co u n try u n le ss i t has heen lic e n s e d or screened f i r s t by th e C e n tra l Bank. Any im porter seek ing t o pay an o b lig a tio n in a fo re ig n country must seek p erm issio n of th e C e n tra l Bank f i r s t . Any t r a v e l l e r going out of th e co u n try must seek perm ission t o c a r r y out h is money i n d o l l a r s . Any p a re n t who has a son o r d au g h ter in th e United S ta te s or anywhere e ls e abroad, must seek a lic e n s e fo r his or her r e m itta n c e . T ra n sa c tio n s in c e r t a i n s p e c if ie d a s s e t s s h a ll not be e f f e c t e d , whether n o te s , checks, d r a f t s , b u l l i o n s , d e b e n tu re s , bonds, coupons, bank a c c e p ta n c e s , m ort g ag es, p le d g e s, e x p re ssin g f o re ig n c u r r e n c i e s . No fo re ig n payments w i l l be made, on shipment on consignm ent, u n le ss lic e n s e d . A ll r e c e i p t s of f o re ig n exchange s h a l l be so ld d a i l y to the C e n tra l Bank by those a u th o riz e d to d e a l in fo re ig n exchange. A ll banks in Manila have been d ele g ate d t o a c t as a g e n ts of th e C e n tra l Bank. No debt or l i a b i l i t y h e re to fo r e can be expressed in fo re ig n c u r r e n c ie s or payable abroad. W ithin s ix t y days a f t e r December 9» a l l companies which own a s s e t s ex p ressed in f o re ig n c u r r e n c ie s or , payable abroad w i l l make a r e p o r t to the C e n tra l Bank. In l i n e w ith th e im plem entation of F o reig n Exchange C o n tro l under C irc u la r No. 20 of the C e n tra l Bank of th e P h ilip p i n e s , a C o n tro l Committee of th re e was ap p o in te d , headed by Manuel Marquez, e x e c u tiv e v ic e - p r e s id e n t of th e ^ The F i r s t Annual R ep ort o f th e C e n tr a l Bank. 19*+9. 77 P h ilip p in e N atio n al Bank, and w ith Dr. Andres C a s t i l l o , d i r e c t o r of th e S e c u r i t i e s Department o f the C e n tra l Bank, and N a ta lio B alboa, T ech n ica l A s s is ta n t of th e C e n tra l Bank, a s members. The work of th e com m ittee, among o th e r th in g s , was to determ ine th e maximum amounts to be ex p ected from l i c e n s e s and d r a f t s . A lso, to en fo rce r e g u la tio n s r e l a t i v e t o th e c a rr y in g out o f C irc u la r No. 20. On December 27, 19*+9, two e x p e rts from th e I n te r n a t i o n a l Monetary Fund a r r iv e d in Manila to a s s i s t th e C entral Bank in d r a f t i n g supplem entary r u l e s and r e g u la tio n s co v er in g a l l phases of fo re ig n exchange. The e x p e rts were John Friedm an, l e g a l c o n s u lta n t, and W illiam D rees, econom ist. T h eir t e r r i t o r y of work in clu d ed plugging th e loopholes th ro u g h which d o l l a r s flowed in t o th e b la c k m a rk e ts. The two exchange e x p e r ts , a f t e r being a p p ris e d of th e exchange c o n t r o l r e g u la tio n s a lre a d y en forced by th e C e n tra l Bank, inform ed they had been w e ll planned. Of C ir c u la r No. 20, fa v o ra b le and u n fav o rab le com ments a ro s e from the b u sin e ss c i r c l e s . A few of those profounded fa v o ra b ly w ere: Exchange c o n tro l would plug th e lo o p h o les p o s s ib le under im port or s e l e c t i v e c r e d i t c o n t r o l . Whereas i t was p o ssib le f o r th e big concerns to s h ip m erchandise on consignment to th e P h ilip p in e p r i n c i p a l s , th u s escap in g th e req u irem e n ts th a t a l l l e t t e r s of 78 c r e d i t must be backed w ith e ig h ty per cen t co v e r, th e exchange c o n t r o l w i l l r e q u ir e such consignm ents to be f i r s t lic e n s e d ; o th e rw ise , proceeds re c e iv e d in the P h ilip p in e s would n o t be lic e n s e d to leav e the co u n try . On th e o th e r hand, th e u n fav o rab le r e a c tio n c e n te re d on the fo llo w in g p o in ts : Exchange c o n tro l would encourage i n f l a t i o n and blackm arketing of com modities, not excluding c u r r e n c i e s ; i t would d isc o u ra g e the g o ld i n d u s t r i e s , f o r e ig n in d u s t r y , f o re ig n in su ra n c e which u s u a lly sends out a s s e t s fo r g r e a te r s e c u r i t y , and t r a v e l s of F i l i p i n o t o u r i s t s abroad. 79 TABLE V I I I INTERNATIONAL RESERVES OF THE CENTRAL BANK AND FOREIGN EXCHANGE HOLDINGS OF OTHER BANKS (In M illio n s of U. & D o l l a r s ) 7 I n t e r n a t i o n a l Reserve o f th e N a tio n a l T reas u r y /C e n tr a l Bank a Year and End of Month (1) F o reig n Exchange Holdings o f Other Banks Gross b (2) L i a b i l i t i e s (3) c Net 0*) T o ta l (14*0 19^5 December 557 110 20 90 6^7 19*+6 December 33^ 130 2b 106 bbo 19^7 December 389 113 b5 68 b57 19^8 December ^00 63 b3 20 b20 19*+9 March 336 67 bO 27 363 June 320 50 30 20 3^0 September 279 61 26 35 3 lb Dec. 8 225 6*+ 39 25 250 31 230 53 2b 29 259 1950 Jan. 7 231.36 V9 .5 0 3 0 .8 6 1 8. 6M - 250.00 lU- 223.76 52.83 29.03 23.80 2*+7.56 21 228.30 50.57 2 9 .8 8 20.69 2*f8.99 28 221.98 5^.90 31.67 23.23 2^5.21 31 221.20 5 2 .2 2 23.56 2 8 .6 6 2^9.89 ? ' S t a t i s t i c a l B u l l e t i n of t h e C e n tra l Bank o f th e P h i l i p p i n e s , 19*50. 80 TABLE V I I I (c o n tin u e d ) INTERNATIONAL RESERVES OF THE CENTRAL BANK AND FOREIGN EXCHANGE HOLDINGS OF OTHER BANKS (In M illio n s of U. S. D o lla rs ) I n t e r n a t i o n a l Reserve of the N a tio n al Treas u r y /C e n tra l Bank a Year and End of Month (1) F o re ig n Exchange Holdings of Other Banks Gross b L i a b i l i t i e s c Net T o ta l (2) (3) (*4-) (l+if) 1950: F ebruary March * 4 - 218.85 55.6*4- 2*+. 73 30.91 2*4-9.76 11 216.*4-7 5*4-. 1*^ 2*»-.03 3 0 .1 2 2*4-6.59 18 215.52 5*k i 8 2 2 .2 3 3 1 .9 5 2*4-7. * 4 -7 25 221.60 52.65 22.05 30.60 255.20 28 221.00 5b. 53 2 1 .2 5 33.28 25*4-.28 b 220.00 53.82 23.03 3 0.79 250.79 11 220.89 5*4-. 16 2 2 .3 0 31.86 252.75 18 220.55 51.99 23.06 28.82 250.23 25 2 2 2 .h i 50.30 22. * 4 -8 27.82 250.23 CHAPTER X ADMINISTRATION OF FOREIGN EXCHANGE CONTROL P ursuant to th e p ro v is io n s of P aragraph 8 of th e C e n tra l Bank, C ir c u la r No. 20, v a rio u s n o t i f i c a t i o n s of changes made in f o re ig n exchange p o l i c i e s have been issu ed from time to tim e by th e Exchange C ontrol O ffic e o f the C e n tra l Bank to a u th o riz e d a g e n ts in o rd er to c a r r y on f a i t h f u l l y th e program o f fo re ig n exchange c o n t r o l. During th e f i r s t days of Exchange C o n tro l, a l l a p p l ic a tio n s fo r exchange lic e n s e s were subm itted to the C e n tra l Bank. C i r c u la r No. 26 To minimize d e a lin g w ith th e p u b lic , inasmuch a s the C e n tra l Bank is a b a n k e r's bank, and a t th e same tim e, f a c i l i t a t e th e flow of p a p e rs, C irc u la r No. 26, r e le a s e d on A p ril 17, 1951 announced th a t th e C e n tra l Bank of th e P h ilip p i n e s , a s of th e above d a t e , w i l l not re c e iv e d i r e c t l y any a p p l ic a tio n s fo r exchange li c e n s e s to e f f e c t payments or re m itta n c e s t o concerns ab ro ad , or to c a r r y out exchange from the P h ilip p in e s . A ll a p p l ic a tio n s fo r such li c e n s e s s h a l l be subm itted d i r e c t l y to th e fo llo w in g a u th o riz e d a g e n ts ; (1) Bank of America N. T. & S. S .; (2) N a tio n a l C ity Bank of New York; (3) E q u ita b le Banking C o rp o ra tio n ; (*f) Bank of th e P h ilip p in e I s la n d s ; (5) China 82 Banking C o rp o ra tio n ; (6) P e o p le 's Bank and T ru st Company; (7) P h ilip p in e Bank of Commerce; (8) P h ilip p in e T ru s t Com pany; (9) P h ilip p in e N a tio n a l Bank; (10) P h ilip p in e Bank of Communications; (11) C h artered Bank of In d ia , A u s tr a lia and China; (12) Hongkong & Shanghai Banking C o rp o ratio n ; and (13) American Express Company. (A u th o rity given t o the American E xpress Company i s lim ite d to a p p l i c a t i o n s for exchange in v o lv in g t r a v e l . ) A uthorized a g e n ts may approve a p p l i c a t i o n s fo r exchange lic e n s e s and is s u e sa id exchange lic e n s e s in accordance w ith the a u t h o r i t y g ran te d to them by C e n tra l Bank n o t i f i c a t i o n s , memoranda, and c i r c u l a r s . A p p lic a tio n s fo r exchange lic e n s e s which cannot be a c te d upon by th e a u th o riz e d a g e n ts a r e to be ac ce p ted by them and forw arded to th e Exchange C o n tro l Department o f th e C e n tra l Bank f o r a c t i o n . The a p p l ic a tio n s forwarded s h a l l be accompanied by th e n e c e ss a ry documents and evidences re q u ire d by th e Exchange C o n tro l Department of N o tif ic a tio n s and Memoranda, and s h a l l bear th e name of th e a u th o riz e d agent in th e upper rig h t-h a n d c o rn e r. A fte r g iv in g due a c tio n to th e a p p l i c a t i o n s , th e Exchange C o n tro l Department s h a l l forw ard to th e a u th o riz e d a g e n ts th e exchange lic e n s e s or th e r e j e c t e d a p p l i c a t i o n s , as th e case may be. The a u th o riz e d a g e n t, in tu r n , w i l l 83 forw ard the lic e n s e s or r e j e c t e d a p p l ic a tio n s to th e a p p l i c a n t. A p p lic a tio n s fo r exchange lic e n s e s p re v io u s ly f i l e d w ith th e Exchange C o n tro l Department s h a ll be r e le a s e d in accordance w ith e s ta b li s h e d procedure. On A p ril 13, 195l> th e C e n tra l Bank of th e P h i l i p p in e s , in a subsequent memorandum iss u e d to a l l a u th o riz e d a g e n ts on the s u b je c t "Fees For Handling A p p lic a tio n s For Exchange L ic e n se s ," i n s t r u c t e d such a g e n ts t h a t fe e s to be charged fo r h andling and p ro cessin g a p p l ic a tio n s f o r the exchange li c e n s e s s h a l l be s u b je c t to the fo llo w in g r e q u i r e m ents: (1) Fees charged s h a l l be e q u iv a le n t to o n e -te n th o f one per cent of the v alu e of the a p p l ic a tio n f o r exchange; ( 2 ) a minimum fee of one peso s h a ll be charged per a p p l ic a t i o n ; ( 3 ) a minimum fee of f i v e pesos s h a l l be charged per a p p l i c a t i o n . As an im plem entation to C irc u la r No. 26, on A p ril 13, 1951 9 the C e n tra l Bank of th e P h ilip p in e s iss u e d a Memoran dum to a l l a u th o riz e d a g e n ts summarizing a l l th e r e q u i r e m ents, procedures for handling a p p l ic a tio n s fo r exchange l i c e n s e s , as w e ll as the i n t e r n a l p o l i c i e s of the C e n tra l Bank f o r the e x te n t of g r a n tin g . I . EXCHANGE PAYMENT POLICIES Payment abroad r e q u ir e s l i c e n s e s . L icenses fo r 8 * 4 - r e m itta n c e s , except in payment of im p o rts, are co n d itio n e d upon c e r t i f i c a t i o n of exchange a v a i l a b i l i t y * The follow ing i s a b r i e f d e s c r ip tio n of the exchange c o n t r o l p o l i c i e s in e f f e c t : Im ports Payments fo r im ports p r i o r to the new Import C o n tro l Law had been d iv id e d i n t o two c a te g o r ie s : (a) fo r goods s u b je c t to im port c o n t r o l, and (b) fo r u n c o n tro lle d goods. For th e im port o f u n c o n tro lle d goods, exchange was automa t i c a l l y g ra n te d upon p r e s e n ta ti o n of an im port l i c e n s e . U n co n tro lled goods exchange was a u to m a tic a lly g ran te d up to a lim it of seventy-tw o per c e n t of the t o t a l im port o f such goods sin c e th e year of 19^9• Im ports of u n c o n tro lle d goods in excess of th e seventy-tw o per cent exchange quota were s p e c i f i c a l l y lic e n s e d by th e C e n tra l Bank only when the goods to b e im ported were e s s e n t i a l for th e development of d o lla r-p r o d u c in g and d o lla r - s a v in g i n d u s t r i e s . Exchange procedure of u sin g an exchange quota to l i m i t im ports was imposed as a tem porary sto p gap measure u n t i l th e o v e r a l l im port system could be e s t a b l i s h e d . I t has had the advantage of saving exchange and of being r e l a t i v e l y simple to a d m in iste r during a p erio d when th e re have been many a d m in is tr a tiv e problem s. I t s d isa d v an tag e l i e s i n t h a t i t i s not designed for a q u a l i t a t i v e c o n t r o l i f 85 im ports which, a t th e a n t i c i p a t e d r a t e of d o l l a r e a rn in g s , w i l l be an e s s e n t i a l p r e r e q u i s i t e for c a rry in g out a p o lic y of developing e x p o rt and d o l l a r - s a v i n g i n d u s t r i e s and f o r m a in ta in in g th e p re s e n t l e v e l of p r ic e s for s ta b le com m odities. On May 19» 1950, the new Import C ontrol Law su b jected a l l im ports to l i c e n s i n g . The law a l s o provided t h a t the Im port C o n tro l a u t h o r i t i e s may not issu e im port lic e n s e s in ex c ess of th e amount of exchange a v a ila b le f o r im p o rts, a s c e r t i f i e d by th e C e n tra l Bank. Under t h i s new system , th e C e n tra l Bank c e r t i f i e s to th e Im port C ontrol Board th e a v a i l a b i l i t y o f exchange for im ports on a q u a r t e r l y b a s i s . H en cefo rth , a l l lic e n s e d im ports a r e a u to m a tic a lly g ran te d exchange. I n v i s i b l e s Exchange f o r a l l expenses in c i d e n t a l t o tra d e ( f r e i g h t and in su ra n c e ) is a u to m a tic a lly g ra n te d t o a l l l i c e n s e s t r a n s a c t i o n s . F o re ig n exchange f o r t r a v e l . — T ra v el ab ro ad , except f o r e d u c a tio n a l, m edical, and b u s in e s s p u rp o ses, is being s t r i c t l y r e s t r i c t e d . As a g e n e ra l r u l e , issu an ce of l i c e n s e s to n o n -P h ilip p in e r e s i d e n t s to purchase f o re ig n exchange is not allow ed. However, when a n o n -P h ilip p in e r e s i d e n t can e s t a b l i s h by means of a bank c e r t i f i c a t i o n 86 a n d /o r o th e r s a t i s f a c t o r y evidence, th a t he brought w ith him to the P h ilip p in e s f o re ig n exchange, and t h a t the amount a p p lie d fo r by him i s w ith in th e balan ce th e r e o f a f t e r ded u ctin g a l l h i s expenses d u rin g h is s t a y in th e co u n try , t r a v e l funds w ith in s a i d balance may be allow ed. For stu d e n t ma in ten an ce and l i v i n g ex p e n se s. — An amount no t in excess of $3,600 per annum is norm ally allowed to cover a l l liv in g and o ther expenses of th e student for th e p e rio d of one year from the d a te of a p p l i c a t i o n , le s s a l l s c h o la rs h ip allo w an ces, but not in c lu d in g t u i t i o n fees * and expenses due and payable to the e d u c a tio n a l i n s t i t u t i o n concerned, which must be paid d i r e c t to the i n s t i t u t i o n . Medical expenses and m ain ten an ce. — A ctu al m edical and h o s p i t a l expenses abroad a re allow ed fo r re m itta n c e d i r e c t t o th e p h y sic ia n a n d /o r h o s p i t a l concerned upon th e s u b m itta l of b i l l s th e r e o f . In a d d i tio n , in c a se s of p ro longed s ta y abroad f o r m edical tr e a tm e n t, e s p e c i a l l y a u th o r iz e d by the C e n tra l Bank or i t s a g e n ts , l iv i n g expenses not exceeding $200.00 amonth may be g ra n te d i f b e n e f i c ia r y i s n o t confined in a h o s p i t a l . A uthorized t r a v e l fo r b u sin e ss p u rp o se s. — A dditional funds fo r m aintenance and o th e r l e g itim a te expenses a re allow ed provided th e p erio d a p p lie d f o r i s not covered by t r a v e l funds p re v io u s ly g ra n te d upon t r a v e l e r 's d e p a rtu re 87 from th e P h ilip p i n e s , a t a r a t e not exceeding tw enty d o l l a r s a day f o r t r a v e l in other p la c e s , provided the re m it ta n c e does not exceed t h a t fo r a perio d of t h i r t y days. In te n d in g e m ig ra n ts . — When th e a s s e t is s a t i s f a c t o r i l y e s t a b l i s h e d , the maximum of four thousand d o l l a r s fo r a fam ily may be allow ed. The b alan ce of the proceeds of a s s e t s l e f t or to be l e f t in th e P h ilip p in e s may be p e r m itte d to be withdrawn in monthly in s ta llm e n ts over a period o f tim e to be determ ined by the C entralB ank. W ithdrawal of savings and c u r r e n t acco u n ts held w ith banks or t r u s t f i r m s . — W ithdrawal of savings and c u r r e n t a c c o u n ts a re p e r m is s ib le to cover th e n ecessary liv in g expenses of a b e n e f i c ia r y abroad in accordance w ith the p ro v is io n s of N o tif ic a tio n s to A uthorized Agent No. 22, d a te d F ebruary 8, 1950, as amended. T ra n sfe r t o abroad of sa v in g s and c u r r e n t accounts owned by n o n - re s id e n ts held w ith banks or p r iv a te firm s , a r e not o r d i n a r i l y p e rm itte d by the Exchange C o n tro l D epartm ent. R em ittance o f e a rn in g s from p r o p e r tie s of non r e s id e n t ow ners. — Permanent n o n -re s id e n t owners of p ro p e r t i e s lo c a te d i n th e P h ilip p in e s a re p e rm itte d to re c e iv e i n th e e q u iv a le n t fo re ig n exchange a p o r tio n of th e income or ea rn in g s of s a id p r o p e r tie s n o t exceeding tw enty per 88 cen t of sa id e a rn in g s . R em ittance of proceeds from war damage paym ents. — N o n -resid en t in d iv id u a ls who a re r e c i p i e n t s of war damage payments a re allow ed to r e c e iv e abroad th e e q u iv a le n t in f o re ig n cu rrency of such payments in h ard sh ip c a s e s , and when th e amount involved i s under f iv e hundred d o l l a r s . R e n ta ls and r o y a l t i e s . —Rent on miner * s lam ps. — For an e x i s t i n g o b lig a tio n t o pay fo r m in e r's lamps which was c o n tra c te d p r i o r to the exchange c o n t r o l , the f u l l amount of the b i l l is approved for payment. For c o n t r a c ts e n te re d in to a f t e r th e enactm ent of R epublic Act No. *+26, a t l e a s t tw e n ty -fiv e per c e n t of the r o y a l t y must be r e ta in e d in th e P h ilip p i n e s . The a p p l i c a t i o n must be supported by a copy of the agreem ents. R oyalty c o n tra c te d p r io r to exchange c o n t r o l . — W ith r e f e re n c e t o r o y a l t y due and c o n tra c te d p r io r to th e prom ulgation of th e Exchange C o n tro l, the f u l l amount may be allow ed l e s s the w ith h o ld in g ta x . R e n ta l and r o y a l t i e s c o n tra c te d a f t e r prom ulgation o f exchange c o n t r o l . — R e n ta ls and r o y a l t i e s due and con t r a c t e d fo r a f t e r th e prom ulgation of th e Exchange C o n tro l must have had p r i o r ap p ro v al of th e Exchange C o n tro l D ep art ment. The a p p l i c a t i o n to re m it such r e n t a l s and r o y a l t i e s must be in co n fo rm ity w ith th e a u t h o r i t y . 89 Film exchange, — Seventy-two per cen t of a p ro d u c e r 's share for 19^9 and 1951 is computed, and whichever amount i s s m a lle r is approved f o r re m itta n c e to a p p l i c a n t 's p r i n c i p a l s . Im p o rta tio n of film s must be covered by im port lic e n s e w ith o u t d o lla r re m itta n c e . However, im p o rta tio n of a c c e s s o r ie s and s u p p lie s must be covered by im port lic e n s e w ith d o l l a r re m itta n c e . The C e n tra l Bank must be fu rn ish ed w ith a copy of any m o d ific a tio n of the old agreem ent. S hipping and a i r l i n e companies (of fo re ig n r e g i s t e r b u t re p re s e n te d by l o c a l b ra n c h e s) . — For the income on f r e i g h t and p a s s e n g e r's f a r e , the Companies a re allow ed to re m it the valu e of f r e i g h t l e s s exp en ses, and f o r the pas s e n g e r 's f a r e , seventy-tw o per cent o f th e amount is a u th o riz e d to be re m itte d t o t h e i r p r i n c i p a l s . For steam ship and a i r l i n e companies of l o c a l r e g i s t r y , t h e i r p u rch ases of s u p p lie s and c o s t of r e p a i r s to th e sh ip and planes ab ro ad , may be a u th o riz e d t o be re m itte d to t h e i r c r e d i t o r s , i f p ro p e rly supported w ith an in v o ice or sta te m e n t of a c co u n t. R em ittances in payment of c h a r t e r h ir e of v e s s e l s . — When a lo c a l firm c h a r t e r s a sh ip for th e shipment o f a s p e c i f i c cargo ab ro ad , th e c o s t of c h a r t e r in g th e sh ip may 90 be allow ed t o be re m itte d to th e owner of th e s h ip , provided evidence can be p re se n te d th a t the cargo had been loaded and th e steam er had embarked. Payment of m iscellan e o u s s e rv ic e s r e n d e re d . — S e l l ing Commissions on P h ilip p in e e x p o r t s . — S e llin g commis sio n s may be lic e n s e s fo r re m itta n c e from f i f t y per cent to the f u l l amount due. Buying commissions on P h ilip p in e im p o r ts ♦ — Buying commissions may be lic e n s e s for an i n i t i a l re m itta n c e from tw enty per ce n t to f i f t y per c e n t, depending upon the amount due. P ro f e s s io n a l s e r v i c e s . — These s e r v ic e s a re g en e ra l l y allow ed up to the f u l l amount due. In the event th e i n i t i a l re m itta n c e allow ed does not cover th e e n t i r e claim , th e b alan ce may be lic e n s e d upon subsequent a p p l i c a t i o n . Payments of o b l i g a t i o n s . — C o n tra c tu a l l o a n s . — O b lig a tio n s in c u rre d p r i o r to Exchange C ontrol may be s e t t l e d in in s ta llm e n ts a t the r a t e of from te n to f o r t y per c e n t per in s t a ll m e n t. I n t e r e s t s on loans a re allow ed in f u l l , l e s s th e w ith h o ld in g ta x in proper c a s e s . O bligations in c u rre d a f t e r Exchange C ontrol must have p r i o r ap p ro v al of the C e n tra l Bank. Income ta x e s a b ro a d . — Such ta x e s a re g e n e r a lly allow ed in f u l l f o r r e m itta n c e d i r e c t to the F e d e ra l or 91 S t a t e ta x a u t h o r i t y concerned. Real p ro p e rty ta x e s a b ro a d . — Taxes on r e a l p ro p erty abroad may be allow ed i f th e p ro p erty does not produce an income as c e r t i f i e d by the ta x a u th o r ity o f the place where th e p ro p e rty i s lo c a te d . In surance paym ents. — Premiums of d o l l a r l i f e p o l i c i e s . - - Payments of in su ra n c e premiums on non-peso l i f e p o l i c i e s in fo rc e on December 9> 19*+9> and non-peso l i f e p o l i c i e s in fo rc e a f t e r December 9> 19*+9* i f the in su re d become P h ilip p in e r e s i d e n t s a f t e r the in su ra n c e p o lic ie s were w r i t t e n and is s u e d , a r e g e n e r a lly a llo w e d . Procurement o f d o l l a r - l i f e p o l i c i e s a f t e r December 9» 19^9 by r e s id e n ts i s not p e rm itte d . Loans a n d /o r i n t e r e s t on in su ran c e p o l i c i e s a re gen e r a l l y allowed in amounts equal to twenty per c e n t of th e amount due. The balance may be am ortized in in s t a ll m e n ts depending on the amount in v o lv ed . R em ittances by ag e n c ie s or b ra n c h o f f i c e s of non r e s id e n t n o n - l i f e in su ra n c e com panies. — R em ittances a r e allow ed as to premiums c o l le c te d in the P h ilip p in e s a f t e r d ed u ctin g n e t commissions re c e iv a b le and lo c a l expenses ( in c lu d in g lo s s e s ) chargeable t o Head O ffic e . R em ittances by dom estic n o n - l i f e in s u ra n c e com panies. R em ittances d i r e c t to in su ran c e company abroad a re allowed 92 once every q u a r te r . Amounts a u th o riz e d cover only net amounts due in o u tsta n d in g re in s u ra n c e c o n tr a c ts . R em ittances in payment of in su ra n c e p o lic y or a u t o m atic premium loans a n d /o r i n t e r e s t s th e r e o n . — I n t e r e s t s a re g e n e ra lly allow ed in f u l l . In a d d itio n , tw enty per cen t of a lo a n i s u s u a lly l i c e n s e s f o r re m itta n c e and th e balance am o rtized a t the r a t e of tw enty per c e n t in s ta llm e n t upon subsequent a p p l i c a t i o n . R em ittance covering s a l a r i e s an d p e n sio n s. — Home le a v e s a l a r i e s . - - R em ittances on account of home leav e s a l a r i e s are allow ed monthly a t not exceeding f i f t y per cent of the monthly b a s ic s a la r y and not exceeding f iv e monthly r e m itta n c e s . P e n s io n s . — Pensions a re g e n e ra lly allow ed fo r re m itta n c e , l e s s the w ith h o ld in g ta x . S a l a r i e s of f o r e ig n t e c h n i c i a n s . — In c a se of com p a n ie s which, because of t h e i r s p e c ia liz e d te c h n ic a l r e q u ir e m ents, are unable to fin d lo c a l q u a l i f i e d te c h n ic ia n s and a r e , t h e r e f o r e , c o n s tra in e d to b rin g in under c o n t r a c t, f o r e ig n te c h n ic ia n s , i t i s th e p o lic y of th e C e n tra l Bank to a llo w th e fo re ig n te c h n ic ia n s to re m it abroad an amount e q u iv a le n t to f i f t y per c e n t of t h e i r monthly b a s ic s a la r y . In such c a s e s , however, i t is re q u ire d t h a t b o th th e company and th e f o re ig n te c h n ic ia n c e r t i f y th a t no f u r t h e r 93 a p p l i c a t i o n s fo r exchange re m itta n c e s w i l l be made on b e h a lf of the f o re ig n te c h n ic ia n . G ift and d o n a tio n s . — G ift and d o n atio n s a re a llo w a b le g e n e r a lly in amounts ran g in g from tw e n ty -fiv e d o l l a r s to f i f t y d o l l a r s . However, each a p p lic a n t and/or b e n e fi c i a r y i s lim ite d to only one re m itta n c e a month. Other p u rp o s e s . — Rem ittance of share in th e e s t a t e of P h ilip p in e r e s i d e n t s . — N o n -resid en t h e ir s or le g a te e s g e n e r a lly are allow ed n e c e ssary liv in g expenses out of t h e i r sh a re s of an e s t a t e lo c a te d in the P h ilip p in e s in an amount ran g in g from two hundred d o l l a r s up t o , but not exceeding f iv e hundred d o l l a r s monthly, depending upon th e needs abroad and p e rso n a l circu m stan ces in each c a s e . S u b s c rip tio n to magazines and p r o f e s s io n a l and le g a l p u b lic a tio n s p u b lish ed a b ro a d . - - The Exchange C o n tro l Departm ent has re q u e s te d the Import C o n tro l Board f o r a g e n e ra l im port l i c e n s e to enable th e Exchange C o n tro l Depart ment to lic e n s e re m itta n c e s in payment of in d iv id u a l sub s c r i p t i o n s to magazines and le g a l and o th e r p r o f e s s io n a l p u b lic a t io n s p r in te d a b ro a d . Pending issu an ce of t h i s g e n e ra l l i c e n s e , e v e ry a p p l i c a t i o n fo r exchange fo r payment of s u b s c r ip tio n s to th e se magazines and p u b lic a tio n s must be accompanied by a s p e c i f i c im port lic e n s e issu ed by th e p r o per im port lic e n s in g agency. Rem ittance may be allow ed in 9^ payment of a s u b s c r ip tio n not exceeding two years* d u r a tio n . Dues to a s s o c i a t i o n in fo re ig n c o u n t r i e s . — Evidence must be given of membership in the a s s o c i a t i o n abroad, such a s a membership c a rd , n o tic e card or r e c e i p t covering the l a t e s t payment fo r the same purpose. This re m itta n c e is g e n e r a lly allow ed. A p p lic a tio n s to open peso a c c o u n ts . - - New peso bank a c co u n ts of n o n -re s id e n t p e rso n s, f irm s , e t c . , may be opened o nly w ith th e p r i o r ap p ro v al of th e Exchange C o n tro l D ep art ment. The opening of th e new peso accounts is g e n e ra lly allow ed and i s governed by the p ro v is io n s of N o tif ic a tio n to A uthorized Agents No. 19, dated F ebruary 6, 1950. A p p lic a tio n s t o o p e ra te peso account o f n o n -re s id e n ts a s r e s i d e n t a c c o u n ts . — Such a p p l ic a tio n s a r e g e n e ra lly allo w e d , and a re governed by the p ro v is io n s of N o tif ic a tio n to A uthorized Agents No. 19. T ra n sa c tio n s w ith re s p e c t to an account no t d i r e c t l y connected w ith the b u s in e s s in the P h ilip p in e s of the owner of the a c co u n t, or r e p r e s e n tin g re m itta n c e s from oversea w i l l be s u b je c t to p r io r approval by th e Exchange C o n tro l Departm ent. S e c u r ity T ra n s a c tio n s in s e c u r i t i e s a r e processed in accordance w ith the p r o v is io n s o f N o tif ic a tio n s to A uthorized S e c u r ity D ealers Nos. 1, 2 and 3, d a te d Jan u ary 13, 1950, J u ly 25, 1950, and January 19, 1951, r e s p e c t i v e l y . 9 5 As a m a tte r of e s t a b l i s h e d p o lic y , th e ex p o rt or change of r e g i s t r y of a c e r t i f i c a t e i s allow ed only in fa v o r o f permanent r e s i d e n t s o n ly . Living and m aintenance expenses of dependents abroad of P h ilip p in e r e s i d e n t s . — L icensee has the r i g h t to e f f e c t one re m itta n c e monthly f o r the n e c e ssa ry liv in g expenses of a u th o riz e d b e n e f i c i a r i e s of the lic e n s e e only w ith a maximum per month o f: 1. For each b e n e f i c ia r y r e s id i n g in N orth, C e n tra l or South America, $200.00. 2. For each b e n e f i c ia r y r e s id i n g in A sia , $50.00 a month. * 3. For b e n e f i c ia r y r e s i d i n g in other c o u n t r ie s , $150.00 a month. V. For re m itta n c e s o u ts id e of A sia , the t o t a l amount re m itte d in no event t o exceed $*+00.00 or tw e n ty -fiv e p e r cent of th e income earned monthly i n 1 9 5 0, whichever is l e s s , w ith the u n d erstan d in g t h a t re m itta n c e s up t o tw enty d o l l a r s monthly may be e f f e c t e d n o tw ith sta n d in g an income i n 1950 of l e s s th a n e ig h ty d o l l a r s a month; and 5. For re m itta n c e s to A sia , the t o t a l amount r e m it t e d in no ev e n t t o exceed f i f t y d o l l a r s or f i f t y per c e n t of th e income earned monthly in 1950 whichever i s l e s s , w ith t h e u n d erstan d in g t h a t re m itta n c e s up t o tw enty d o l l a r s 96 monthly may be e f f e c t e d n o tw ith s ta n d in g an income in 1950 of le s s than f o r t y d o l l a r s a month. CHAPTER XI THE PHILIPPINES AND SUPREME COM M ANDER FOR THE ALLIED POWERS TRADE AND FINANCIAL AGREEMENTS C learin g and b a r t e r tr a d e agreem ents a r e a n a t u r a l sequence of exchange c o n t r o l . On Ju ly 18, 1950, th e Phi l i p p i n e government and Japan, th ro u g h SCAP, had signed th e tr a d e and f i n a n c i a l agreem ents which now se rv e a s th e b a s is of b a r t e r tr a d e between th e two n a t io n s . The agreem ents pro v id e fo r an exchange of goods and s e r v ic e s between th e P h ilip p in e s and Occupied Japan, and o r i g i n a l l y were for a p erio d of one y e a r, from Ju ly 1, 1950 to June 30, 1951* E x ec u tiv e Order No. 328 As per E xecutive Order No. 328, th e C e n tra l Bank is d e s ig n a te d a s th e ex p o rt lic e n s i n g agency and th e Import C o n tro l A d m in is tra tio n as th e im port lic e n s i n g agency. The C e n tra l Bank i s f u r t h e r d e sig n a te d as th e p r i n c i p a l f in a n c i a l a g e n t of th e P h ilip p in e government. E x p o rta tio n and im p o rta tio n of s p e c if ie d commodities in the Trade Plan s h a l l n o t be allow ed w ith o u t proper l i c e n s e . The i n s t i t u t i o n d e s ig n a te d as p r i n c i p a l f i n a n c i a l ag e n t of SCAP a c tin g in r e s p e c t of Occupied Japan, is th e Bank of America, Tokyo B ranch. 98 One of th e f e a t u r e s of th e b a r t e r tra d e p act i s th e s o - c a lle d "swing” balance of f i v e m illio n d o l l a r s whereby th e c r e d i to r country r e s e rv e s t o i t s e l f the r i g h t to demand payment in U nited S ta te s d o l l a r any excess over and above a n e t balan ce of f i v e m illio n d o l l a r s . ^ I t is to be noted t h a t u n lik e th e o th e r f o re ig n exchange t r a n s a c t i o n s of th e P h ilip p i n e s , th e proceeds of the e x p o rt to Japan a r e in p e so s, and n o t in U. S. d o l l a r s . The t o t a l t r a d e o r i g i n a l l y estim ated a t tw e n ty -fiv e m il lio n d o l l a r s fo r each co u n try was in c re a se d to th e sum of $33,750,000 i n t h e e a r l y p a r t of 1951*^ Only commodities s p e c if ie d in the Trade Plan may be exchanged, ex cep t by m utual agreem ent where v a lu e s of the d i f f e r e n t commodities in th e P lan may be in c re a s e d or d ecreased a n d /o r new item s in c lu d ed or old ones d e le te d th e r e o f . The schedule of tr a d e between the P h ilip p in e s and SCAP (Occupied Japan) f o r a p erio d from Ju ly 1, 1950 to June 30, 1951, i s shown on th e n ex t page.^ ^ Second Annual R eport of th e C e n tra l Bank of th e P h ilip p i n e s (M anila. P h ilip p i n e s : Bureau of P r i n t i n g , 1951) , p . 87. 2 I b i d . ■ > p. 8 7 . (F u rth e r re v is e d to f i f t y m illio n d o l l a r s -in the e a r l y p a r t of 1951.) ^ I b i d . , p . 8 8 . 99 TABLE IX TRADE PLAN BETWEEN THE PHILIPPINES AND SCAP (OCCUPIED JAPAN) FOR THE PERIOD FROM JULY 1, 1950 TO JUNE 30, 1951 Schedule o f E x p o rts from Schedule o f E x p o rts from th e Occupied Japan t o P h ilip p in e s P h ilip p in e s t o Occupied Japan (Amounts a r e on a c . i . f . (Amounts a r e on a c . i . f . _ _ _ B __s_ !sP h ili|y ^ y 2|Lj2 | ^ ^ 1 . T e x t i l e s and 1 , iro n o r e ..................... $8,000,000 m anufacture s . . $ 3 , 5 0 0 ,0 0 0 2 . Manganese o r e . . . 1,000,000 2 , Iro n and s t e e l , „ ,_ _ ___ _ p r o d u c ts 700,000 3* Scrap s t e e l 500,000 3* Machinery and ^ ° la s s e s .................. 525*000 equipm ent 2 , 6 0 0 ,0 0 0 U n a n Logs............. 1 , 8 7 5 ,0 0 0 *»-. S p e c ia l m achinery 6 . R a tta n ...................... 25,000 and equipment f o r m anufacture 7. Mangrove b a r k . . . 100,000 o f s p e c i f i c p r o d u c ts 2 ,5 0 0 ,0 0 0 8 . Gum c o p a l . . 15,000 5* Other m etal 9* B u ffa lo h i d e s . . . 90,000 m a n u fa c tu re s .. 7 , 0 0 0 ,0 0 0 __ ’ * 10. Hide f l e s h i n g s . . 10,000 6 . G lass and p o r e e l- 1;L s h e l l s f o r b u tto n s 25,000 a in p r o d u c t s . . . 5 0 ,0 0 0 ^ ’ v 12. Kapok or kapok ( • Prismic s l s sind ciib* qooHq aah m ical p r o d u c t s .. 2 5 0 ,0 0 0 S€edS 3 5 0 ,0 0 0 _ 13. Ramie ...................... 1,750,000 8 . Farm e q u ip m e n t...1 ,3 0 0 ,0 0 0 1M -. C o p r a ...................... 6,000,000 9. S h ip s, f is h in g b o a ts and 15. Lumber...................... 6,000,000 equipm ent 5, 1 7 5 ,0 0 0 . ^ ’ ’ 16. Abaca................. 5,000,000 10. O thers c o n s is tin g , „ of e s s e n t i a l raw 17* M is c e lla n e o u s ... 2,^-85,000 m a t e r i a l s , e q u ip ment and s u p p lie s 6,675,000 TOTAL $ 3 3 ,7 5 0 ,0 0 0 TOTAL $ 3 3 ,7 5 0 ,0 0 0 100 Im ports from Ja p a n . - - The im port li c e n s e s issu e d by th e Import C o n tro l A d m in is tra tio n , pursuant to th e P h i l i p - pines-SCAP Trade and F in a n c ia l Agreements as of December 29> 1950, amounted to $ 1 1 ,8 1 0 ,5 1 3 . 6*+. A gainst t h i s amount, so f a r only $2 , 5 6 5, 51 +l+. 19 or twenty per cen t of th e a c tu a l l i c e n s e s issu e d have been a c t u a l l y n e g o tia te d w ith th e Cen t r a l Bank by th e a u th o riz e d ag e n t. The b u lk or c o n c e n tra t i o n of im port a p p l ic a tio n s under th e tr a d e agreem ents w ith L l Occupied Japan is summarized b elo w : Value P ercentage Machinery and equipment . . . . $3)795)591.82 Raw m a te r ia ls ....................................... 7)051, 28V .98 M i s c e l l a n e o u s ...................... 9 6 3 .6 3 7 . 8* + T o t a l ..........................................$ 1 1 ,8 1 0 , 51V.6V 100$ E x p o rts to Ja p an . — Six months a f t e r th e resum ption o f tr a d e w ith Japan (ending December 29) 1950), th e C e n tra l Bank had iss u e d th r e e hundred and tw elve (312) r e g i s t r a t i o n c e r t i f i c a t e s to e x p o rte rs f o r a l l com modities. Holders of such c e r t i f i c a t e s a re e n t i t l e d to tra d e w ith Occupied Japan. The t o t a l amount of lic e n s e s th u s is s u e d , based on a c t u a l l e t t e r s o f c r e d i t opened and o th e r s a t i s f a c t o r y evidences of bona f id e t r a n s a c t i o n s , amounted to $ 1 5, 1 5 0, 9 2 8 .1 5 as of if I b i d . , p . 88. 101 December 29, 1950. The amount of t o t a l shipm ents made r e p r e s e n te d by e x p o rt d r a f t s n e g o tia te d th ro u g h a u th o riz e d a g e n ts was $1 2, 9 2 2, 0 3 2 .3 9 for th e same p erio d under rev ie w . In co nnection w ith export quota r e s t r i c t i o n s , the C e n tra l Bank has decided t h a t only two ite m s, copra and a b a ca , would be s u b je c t to quota a l l o c a t i o n s . D i s tr ib u ti o n o f e x p o rt quotas fo r th e s e two commodities was made on th e b a s i s of th e 19* * 8 - 19**9 ex p o rt average of each a p p lic a n t fo r any of the commodity a p p lie d f o r . A ll o th er commodities s p e c if ie d in th e Trade Plan were co n sid ered " f r e e ” — a v a i l a b l e for lic e n s i n g w ith o u t t h e quota c o n d itio n s . The commodity d i s t r i b u t i o n of P h ilip p in e e x p o rts to Japan under th e p re se n t Philippines-SC A P Trade and F in an c ia l Agreements a r e shown in th e fo llo w in g page w ith copra r e p r e s e n tin g t h i r t y - e i g h t p er cent of th e a g g re g a te t o t a l n e g o tia te d ; lumber accounted for n in e te e n per c e n t, and abaca fo r e ig h te e n per ce n t of the s a id t o t a l . 5 I b i d . , p. 89. 6 I b i d . . p. 89. University of Southern California Library 102 TABLE X EXPORT DRAFTS NEGOTIATED UNDER THE PHILIPPINE-SCAP TRADE AND FINANCIAL AGREEMENTS From Ju ly 18, 1950 to December 29» 1950 I t e m s V a l u e Abaca (Manila H e m p ) .......................................... $ 2 ,2 9 8 ,9 2 0 .2 9 Abaca W a s t e ............................................................. 56,M f0.lf0 Chrome Ore .................................................................................. 132,298.27 C o p r a ...............................................................................................*f, 922,713 .8 6 Gum Copal .................................................................................. 2,800.00 H i d e s ...................................................................................... . 160,353.61 Iro n O r e ...................................................................................... 1 , 58*f,757.68 Kapok s e e d s ............................................................. 12,59l+ .l1 + Logs (Apitong) ......................................................................... 57,909.67 Logs (Lauan) .............................................................................. 907»526.8b L u m b e r...............................................................................................2 , *+32,28^.18 Manganese Ore .................................................................... . 1^6,600.^2 M iscellaneous (Commissions, s e rv ic e ) ....................... l6,368.0*f M olasses ....................................................................................... l66,M f2.17 S h e lls ............................................................................................ 17,776.88 Skin (C ro co d ile , Snakes, L iza rd s) ............................ 1,000.00 V egetable S h o rten in g (M argarine, P u rico ) . . . 5*239.95 T o t a l ............................................................................. $ 1 2 , 9 2 2,026.^0 CHAPTER X II FOREIGN EXCHANGE TAX The ta x on f o re ig n exchange had been recommended s in c e 19^7 by th e J o in t P h ilip p in e-A m erican Commission. But i t was only in 1950 th a t t h i s q u e s tio n of th e exchange ta x was made im p e ra tiv e , when i t was ag ain recommended by th e Economic Survey M ission t o th e P h ilip p in e s and by the p ro v is io n s of th e Q u irin o -F o ste r Agreement. A dherents to th e a p p l ic a tio n of th e exchange ta x on th e P h ilip p in e economy claim t h a t one o f th e p r in c ip a l rea so n s f o r i t s n e c e s s ity is the tremendous p re ssu re of th e d u ty - f r e e im ports from t h e United S t a t e s , an outcome of th e onerous p ro v is io n s of t i e B e ll Trade Act r e s t r i c t i n g th e P h ilip p in e government from imposing t a r i f f s on American goods. T his a c t sta n d s l a r g e ly re s p o n s ib le f o r th e b alan ce of payments d i f f i c u l t i e s c o n fro n tin g the n a tio n . I f i t were not fo r th e B e ll Trade Act which f u rn is h e s such an o b s tr u c t io n , th e P h ilip p in e government would be in a p o s it io n to impose high t a r i f f s on th e United S ta te s im p o rts. The exchange ta x , t h e r e f o r e , i s in e f f e c t , an i n d i r e c t t a r i f f on American goods. The Economic Survey M issio n . In order to remedy fo re ig n exchange d i f f i c u l t i e s , th e ich Economic Survey M ission t o the P h ilip p in e s suggested t h r e e p o s s i b le a l t e r n a t i v e s : '1 ' 1. O u trig h t d e v a lu a tio n . 2. A s p e c ia l im port levy of tw e n ty -fiv e per c e n t on a l l im ports ex cep t r i c e , c o rn , f l o u r , canned m ilk, canned f i s h , and f e r t i l i z e r s ; or a tax of tw e n ty -fiv e per cen t on a l l fo re ig n exchange re m itta n c e s . 3. A very heavy e x c ise tax on im p o rts, p a r t i c u l a r l y on lu x u ry item s. D evaluation was r u le d out a s d e tr im e n ta l t o the n a t i o n a l economy as i t would lower unduly th e p r ic e s of th e e x p o rt goods, a s w ell as of home goods produced w ith th e same re s o u r c e s , b e s id e s d e f l a t i n g th e income of e x p o r te r s , r a i s e the p r ic e s of a g r i c u l t u r a l p ro d u cts for home consump t i o n , and red u ce u n n e c e s s a rily the r e a l income of th e low income groups. A s p e c ia l im port lev y of tw e n ty -fiv e per cent on a l l im p o rts ex cep t a lim ite d number of e s s e n t i a l goods c o n tr a vened th e p ro v is io n s of th e P h ilip p in e Trade Act of 19*+6. A lthough a su g g e stio n of th e Economic Survey M ission to th e P h ilip p i n e s , i t was penned w ith th e c o n d itio n only i f such a change could be e f f e c te d under S ec tio n 31*+ of th e P h i l i p pine Trade Act of 19l+6. 1 The P h i li p p i n e H er a ld , M a n ila , P h i l i p p i n e s , December 2 9 , 1 9 5 0 , p. 1 . 105 Very heavy e x c is e ta x e s on im p o rts, e s p e c i a l l y on lu x u ry goods, were co n sid ered u n d e s ira b le by Congress. T h e ir a p p l ic a tio n would c o n s t i t u t e an in c e n tiv e to r a i s e th e p r ic e s of home-produced goods, w hile a t th e same tim e , d isc o u ra g e the e s ta b lis h m e n t of l o c a l i n d u s t r i e s . Regard ing i t s im p o sitio n on lu x u ry goods, a lth o u g h th e im port of such a c a te g o ry of item s would be c u r t a i l e d , }.ocal p r ic e s of th e same item s would r i s e to such a p o in t as to d r iv e dom estic c a p i t a l to th e p ro d u ctio n of n e e d le s s n o n -e sse n t i a l s . The e f f e c t would be a hin d ran ce t o n a t i o n a l economic s t a b i l i t y which has i t s fo u n d atio n s in th e development of e s s e n t i a l commodities to meet l o c a l b a s ic n e e d s . A ta x on fo re ig n exchange re m itta n c e s c a r r ie d more a p p r e c ia b le b e n e f i t s . Although in ten d ed t o rem ain e f f e c t i v e f o r merely a p erio d of two y e a rs , i t prom ises t o a c h ie v e a balanced economy fo r the country by re d u c in g th e tremendous r i s e in im ports, in c r e a s in g th e volume of e x p o r ts , and s tim u la tin g home p ro d u ctio n th ro u g h th e e s ta b lish m e n t of new and n e c e s s a r y i n d u s t r i e s . The passage of t h e Foreign Exchange Tax B i l l . — The passage of th e F oreign Exchange Tax B i l l a ro u se d c o n s id e r a b le d is c u s s io n in b o th houses of Congress. As o r i g i n a l l y recommended, the proposed t a x r a t e on fo re ig n exchange re m itta n c e s was tw e n ty -fiv e per c e n t. This sought t o boost 106 th e revenue of the government to an e stim a te d y ie ld of 1*180,000,000^ th e re b y meeting th e re q u ire m e n ts of the B e ll M ission R ep o rt. B esides o b ta in in g adequate revenues fo r the governm ent, i t would a t t h e same tim e , d isc o u ra g e th e d i s s i p a t i o n of P h ilip p in e f o re ig n exchange r e s o u rc e s and a l s o encourage p ro d u c tiv e e n t e r p r i s e s to lo c a te them selves w ith in th e P h ilip p in e s . As p re v io u s ly p o in ted o u t, the major goal aimed a t by exchange r e s t r i c t i o n s and im port and p r ic e con t r o l s , in a d d itio n t o o th e r b e n e f i t s which would be d eriv e d from t h e i r im p o s itio n r e l a t i v e t o government f in a n c e , was to minimize im ports in order to in c re a s e th e i n t e r n a l p ro d u c tiv e c a p a c ity of th e n a t io n . This would in c r e a s e th e amount o f e x p o r ts , e s t a b l i s h i n g a fa v o ra b le balan ce of trade, and s t a b i l i z i n g t h e i n t e r n a l economy of th e co u n try th ro u g h c u rta ilm e n t of t h e d e p le tio n of d o l l a r r e s e r v e s . The lower house passed a b i l l p ro v id in g two r a t e s fo r a p erio d of two y e a r s - - f i f t e e n per c e n t d u rin g th e f i r s t y e a r a f t e r th e passage of th e m easure, and tw enty per cen t d u rin g th e second y e a r. The Democratic bloc of th e Senate advocated r e d u c tio n of th e o r i g i n a l ta x r a t e of tw e n ty -fiv e per cen t to tw enty per c e n t, claim ing t h a t o th e r income t o be d eriv e d from o th e r t a x measures would o f f s e t the 2 The P h ilip p in e H e r a ld . Janu ary V, 1 9 5 1 , p. 1 . 107 d if f e r e n c e between tw e n ty -f iv e per cent and tw enty per centP In a communication a d d re s se d t o the S e n ate, S e c re ta ry of F in a n c e , Pio P edrosa, expressed h is b e l i e f t h a t should th e tw e n ty -f iv e per ce n t r a t e not be approved, th e r e would be in c u rre d a n e c e s s i t y f o r tapping o th e r sources of income i f th e government were to implement the Q u irin o -F o ste r Agree ment and th e recommendations o f the B e ll M ission. The Senate was of th e o p in io n t h a t th e tw e n ty -fiv e per c e n t ta x p ro p o sal might work h e a v ily a g a i n s t lo c a l im p o rte rs to th e d e trim e n t of th e P h ilip p in e b u s in e s s in g e n e r a l. R e ac tio n to the ta x on f o r e ig n exchange. — Domestic p u b lic r e a c t i o n and s ta te m e n ts of l o c a l i n d u s t r i a l groups were no l e s s c r i t i c a l in t h e i r opinions re g a rd in g th e impo s i t i o n of the tw e n ty -fiv e per ce n t Foreign Exchange Tax. Some s e c to r s claim ed o p t i m i s t i c a l l y t h a t the F o reig n Exchange Tax would be in e f f e c t a t a r i f f on American goods fo r i t would circum vent th e onerous p ro v is io n s of th e B e ll Trade Act by h a l t i n g te m p o ra rily th e tremendous p re s s u re of d u ty - f r e e im ports from th e U nited S t a t e s . B esides d is c o u r aging im ports and r a i s i n g government revenue, i t would p ro mote and p r o te c t lo c a l i n d u s t r i e s and ach iev e fo r the P h ilip p in e s a balanced economy. I t would ten d to ease th e ^ The M anila T im e s. January 1 0 , 1 9 5 1 , p. 1. 108 th e p re s s u re on the P h ilip p in e b alan ce of payments; ac cru e to the government w in d f a ll p r o f i t s which would o therw ise f in d t h e i r way i n t o th e hands of l o c a l im p o rte rs , and e v e n tu a lly , se rv e a s an a n t i - i n f l a t i o n f a c t o r by e x e rtin g s w ift c o u n t e r - e f f e c t s on th e money supply. A major o b je c tio n r a i s e d by lo c a l i n d u s t r i a l groups s tr e s s e d th e opin io n t h a t the exchange t a x would be eq u iv a l e n t to an ex p o rt t a x on th e producers and i n t u r n , would d isc o u ra g e e x p o rts , th e re b y d e c re a sin g th e d o l l a r income of th e c o u n try , th u s f a i l i n g t o overcome th e trem endous tr a d e d e f i c i t . From t h e American economic s i d e , th e American Chamber of Commerce of th e P h ilip p in e s found th e p ro v is io n s o f th e ta x m easure, in i t s memorandum to the P h ilip p in e Congress on th e proposed tw e n ty -fiv e per c e n t Tax on Exchange, "o p p re ssiv e to American b u sin e ss and n a t i o n a l s , " e s p e c i a l l y where American b u sin e ss o p e ra tio n s would be "o b lig ed t o pay a tw e n ty -fiv e per c e n t ta x on i t s r e m itta b le n e t p r o f i t s in a d d i t i o n t o th e r e g u la r c o rp o ra tio n ta x . . . when l o c a l l y owned firm s and lo c a l n a t i o n a l s a r e n o t s u b je c t to t h i s t a x o b l i g a t i o n ." The memorandum continued in i t s condemnation b o f th e ta x p r o v is io n s : L l The American Chamber of Commerce J o u r n a l. M anila, December 1950, p. H -6 . 109 The e q u ity of t h i s proposed ta x would make f u r t h e r p r o f i t a b l e employment of American c a p i t a l in th e P hi lip p i n e s p r a c t i c a l l y im p o s sib le . I t would com pletely d isc o u ra g e American te c h n ic ia n s from ta k in g employment i n the c o u n try , would speed up th e l i q u i d a t i o n of e x i s t ing American f ir m s , and e x p e d ite in th e d e p a rtu re of American c a p i t a l and n a t io n a l s from th e I s la n d s . A year a f t e r , in a s im ila r v e in , t h e P h ilip p in e Amer ic a n Chamber of Commerce (New York) ad d ressed a l e t t e r to th e United S ta te s S ta te Departm ent, c a l l i n g the a t t e n t i o n of the Honorable Dean Rusk, A s s is ta n t S e c re ta ry f o r Far E a s te rn A f f a i r s , t o th e fo llo w in g : The members of t h i s Chamber f u l l y r e a l i z e th e serious f i n a n c i a l s i t u a t i o n in which the P h ilip p in e Government f in d s i t s e l f and t h a t th e im p o s itio n of a d d i t i o n a l ta x e s i s u n av o id ab le. I t is f e l t , however, t h a t t h i s p a r t i c u l a r form of t a x a t i o n would have many s e rio u s drawbacks. In e f f e c t , i t c o n s t i t u t e s a d e v a lu a tio n of th e peso; w ith only f iv e e s s e n t i a l p ro d u cts exempted from th e a p p l ic a tio n of the t a x , i t would r e s u l t in h ig h e r p r ic e s of many n e c e s s i t i e s and would, t h e r e f o r e , be g e n e ra lly i n f l a t i o n a r y ; i t would impose heavy and unw arranted f i n a n c i a l burdens on a l l b u sin e ss firm s and in d i v i d u a l s , r e g a r d le s s o f n a t i o n a l i t y , who should be e n t i t l e d t o rem it t h e i r e a rn in g s in f u l l . With our knowledge of b u s in e s s and economic co n d i t i o n s in th e P h ilip p i n e s , i t i s urged t h a t recommenda t i o n s be made t o th e P h ilip p in e Government t h a t some more e q u ita b le form of ta x a ti o n be e x p lo re d , and one which would n o t so com pletely d isc o u ra g e new investments and th e f u r th e r development of e x i s t i n g in v estm en ts by Americans and o th e r n a t i o n a l s . In t h i s c o n n e c tio n , we n o te t h a t w hile th e above form of t a x a t i o n i s mentioned i n th e r e p o r t of th e B e ll M ission on pages 85, 8 6 . and 8 7 , i t i s n o t recommended as the b e s t s o l u t i o n . 0 The American Chamber of Commerce J o u r n a l . M anila, January 1951, p. 6 . 110 Why the Tax Must be Imposed A lthough th e v a l i d i t y of th e above argum ents a re u n q u e s tio n a b le , th e u n d isp u tab le f a c t rem ains t h a t s a c r i f i c e s to solve th e n a t i o n 's i l l s , must be borne by a l l th e economic segments of the n a t io n , by th e im p o rte rs , as w e ll a s the e x p o r te rs . I t cannot be denied th a t th e Korean war r e s u l t e d in s u b s t a n t i a l p r o f i t s fo r i n d u s t r i e s , th e re b y improving t h e i r f i n a n c i a l p o s i t i o n s . T his has enabled p ro d u cers to sh o u l d e r th e in c re a s e d burden r e s u l t i n g from such a ta x . Bene f i c i a l re a d ju stm e n ts in i n t e r n a t i o n a l t r a d e , caused by an in c re a s e in th e exports of p r a c t i c a l l y a l l of th e c o u n tr ie s , in o rd e r to meet the e x ig e n c ie s of an in c re a se d volume of s to c k p ilin g of s t r a t e g i c and c r i t i c a l war m a t e r i a l s , and of s c a rc e buying and s p e c u la tiv e a c t i v i t y , no t only w ith r e s p ec t to th e United S ta te s b u t w ith a l l c o u n trie s w ith in th e p e rim e te r of p o s s ib le Communist a g g re s s io n , have su b sta n t i a l l y pushed enormous d o l l a r q u a n t i t i e s in to th e world tr a d e stream s. P ric e s of v a rio u s P h ilip p in e e x p o rt p ro d u cts w ith in th e p e rio d from a week b e fo re the Korean War to the week of August 28, 1950, w ith th e e x c e p tio n of ch ro m ite, had con s id e r a b ly in c re a s e d : 6 .3 per cent for su g ar; 1 9 .6 per cent fo r coconut o i l , per k i l o ; 3^- per cent fo r copra; I1 * per I l l c e n t, 16 per c e n t, and 11 per cent fo r hemp E, J , and H, £ r e s p e c t i v e l y ; and 10 per c e n t fo r copper. Of th e se ex p o rt p ro d u c ts , ch ro m ite , coconut o i l , copper, hemp, and i n a d d i t i o n , manganese o re , c o n s t i t u t e s t r a t e g i c and c r i t i c a l war m a te r ia l s being s to c k p ile d by w a r -f e a rin g c o u n trie s in con sonance w ith rearmament programs b o ls te r e d up t o check the expanding a g g r e s s iv e te n d e n c ie s of th e S o v iet Union. W ith r e s p e c t to th e P h ilip p in e economy, u n t i l domes t i c i n d u s t r i e s can f l o u r i s h and expand and produce on a co m p e titiv e b a s i s , consumer goods which h e r e t o f o r e , have made up P h ilip p in e im ports and which c o n s t i t u t e i t s b a s ic n e e d s, or u n le s s f u r t h e r d e f l a t i o n of money incomes i s re ac h e d , th e p re s s u re on th e P h ilip p in e b a la n c e of payments w i l l n o t sto p . E x p o rte rs , f u r t h e r , should ta k e i n t o c o n s id e r a tio n t h a t one of th e prime o b je c tiv e s of t h e F o reig n Exchange Tax i s t o curb e x i s t i n g heavy i n f l a t i o n a r y p re s s u re s which te n d t o d is r u p t th e economy of th e n a tio n . I f i n f l a t i o n were l e f t f r e e to course i t s a c t i o n s , in th e absence of an exchange ta x , e x p o rte rs would s u f f e r t h e o p p ressiv e burden o f th e high c o s t o f p ro d u ctio n on th e one hand, and th e r i g i d i t y of i n t e r n a t i o n a l p r ic e s on th e o th e r. ^ Second Annual R eport of th e Centra 1 Bank of the P h ilip p in e s (M anila: Bureau of P r i n t i n g , 19^1), p. 31* 112 F u rth erm o re, a safe c o n te n tio n e x i s t s r e l a t i v e to th e co m p etitio n which would a r i s e between l o c a l l y manufac tu r e d goods out of im ported raw m a te r ia ls upon which a ta x has been imposed, and im ported s i m i l a r pro d u cts from abroad. As a r e s u l t of th e ta x , such co m p etitio n would o f f e r a more l u c r a t i v e p o s it io n f o r th e form er. For whereas out o f th e l o c a l l y m anufactured p ro d u cts only th e "im ported segment" would be ta x e d , th e e n t i r e im ported commodity from abroad would bear th e c o s t of th e t a x a t i o n . Thus, th e F o reig n Exchange Tax would prove to be an in c e n tiv e to in c re a se d n a t i o n a l p ro d u c tio n . At th e same tim e, th e mounting re v e nue of t h e government r e s u l t i n g from th e a p p l i c a t i o n of such an in stru m e n t would make up fo r the t r i v i a l changes e f f e c t e d in v a rio u s i n d u s t r i e s . C o n c lu siv e ly th e n , one may s a fe ly advance t h a t th e F o reig n Exchange Tax has more unique advantages th an defects, and i t s la u d a b le a s p e c ts may cover th e fo llo w in g : 1. I t would r e s u l t in an in c re a s e d governm ental revenue which may be c o lle c te d a t low c o s t, and none which would in c u r l e s s a d m in is tr a tiv e d i f f i c u l t i e s . 2. I t would n o t n e c e s s a r i l y p la c e d is p r o p o r tio n a te ly an a d d i t i o n a l h ig h c o st of l i v i n g on th e g e n e ra l p o p u la tio n f o r the l a r g e - q u a n t i t y consumers of im ported goods w i l l com prise th e r i c h and th e middle c l a s s s e c to r s who t r a v e l 113 or have f a m ilie s ab ro ad , or have to make fo re ig n rem itta n c e ^ and who indulge more in the consumption of e s s e n t i a l s . The poor consume m ostly a r t i c l e s of l o c a l p ro d u ctio n and a r e lim ite d by t h e i r means t o in c lu d e in t h e i r e x p e n d itu re s the c o s t l y im ported goods or l u x u r ie s . Moreover, f l o u r , canned m ilk , canned f i s h , f e r t i l i z e r s , c a t t l e , b e e f, and a r t i c l e s needed to promote and in c r e a s e a g r i c u l t u r a l p ro d u ctio n a r e exempted from th e o p e ra tio n of th e ta x . Since th e e s t a b - 7 lish m en t o f the PRISCO, p r ic e s of im ported goods were sub je c te d to c o n t r o l, th e re b y a s s i s t i n g in checking the i n f l a t i o n a r y te n d e n c ie s i n th e g e n e ra l c o s t of l i v i n g . 3 . I t would serv e as an im petus to lo c a l in d u s try f o r a r t i c l e s of lo c a l m anufacture a s shoes, c i g a r e t t e s , coco n u t p ro d u c ts , e t c . , would be p la ced on a c o m p e titiv e le v e l w ith goods m anufactured abroad. I t would r e l i e v e d i f f i c u l t i e s in th e P h ilip p in e b alan ce of payments and would c r e a te a moderate d o l l a r s u r p l u s . 5. I t would tend to e x t r a c t e x c e s s iv e pu rch asin g power in the hands of a few groups, th e re b y r e l i e v i n g i n f l a t i o n a r y p r e s s u r e . The money supply as of October 31> 1950 ( P I , 271 m illio n ) was th e h ig h e s t l e v e l so f a r reached ? P ric e C o n tro l. I I 1 * d u rin g the p ost-w ar p e r io d , su rp a ssin g t h e 19*+8 December peak of jF 5 l,1 9 5 m il lio n . I f th e continued in c r e a s e in th e money supply i s no t checked, a runaway i n f l a t i o n would r e s u l t , which would be worse and more onerous th a n th e ta x measure. 6 . I t would i n s t i l l more f l e x i b i l i t y and perm it a c e r t a i n degree of l a x i t y in th e r i g i d i t y of the im port c o n t r o l s . 7. I t would n o t d isco u rag e p r iv a te i n i t i a t i v e . The U nited S ta te s s t a t i s t i c s show t h a t i n s p i t e of th e high ta x r a t e s , c o rp o ra te income in t h e United S ta te s a t p re s e n t i s h ig h e r than in p rev io u s y e a rs , when ta x e s were low er. The revenue expected from t h i s measure and o th e r ta x a b le sources would enable the P h ilip p in e government to meet i t s f in a n c i a l o b lig a tio n s as t h a t of the Armed F o rc e s, and th e peso demands for new i n d u s t r i a l and a g r i c u l t u r a l p r o j e c t s (th e ECA d o l l a r lo an s a v a i l a b l e only i f the P h ilip p in e govern ment were to provide th e peso c o u n te rp a r t fund f o r such p r o j e c t s ) . B e sid e s, th e enormous p r o f i t s re m itte d abroad by in d iv id u a l and firm im p o rte rs would u n n e c e s s a rily be l o s t to th e d e trim e n t of the much-needed p r o d u c tiv i ty of th e c o u n try in in d u s tr y and a g r i c u l t u r e , and would cause a d e p r iv a tio n of employment o p p o r tu n itie s for th e p eople, as w e ll as a r i s i n g le v e l of n a t io n a l income. 1 15 P ro v is io n s of R epublic Act No. 601. - - The F oreign Exchange Tax B i l l , as f i n a l l y passed by th e Congress of the P h ilip p i n e s , was embodied in Republic Act No. 601, “An Act To Impose a S p e c ia l Tax on F o reig n Exchange Sold by the C e n tra l Bank of th e P h ilip p in e s and i t s A g e n ts .” Upon th e d a te of i t s a p p ro v a l, March 28, 1951, th e Act became e f f e c t i v e and i s to remain e f f e c t i v e f o r a p e rio d of two y e a rs . Under S e c tio n 1 of th e s a id A ct, a s p e c ia l e x c is e ta x of seventeen p er ce n t s h a l l be a s s e s s e d , c o l l e c t e d , and p aid on th e v alu e in P h ilip p in e peso o f fo re ig n exchange so ld by th e C e n tra l Bank o f th e P h ilip p in e s or any of i t s a g e n ts , except as o th erw ise provided in th e Act. Under S e c tio n s 2 and 3» a re l i s t e d th e a r t i c l e s and goods upon which a refund of ta x e s paid on f o re ig n exchange may be made. These in clu d e th e payment of the c o s ts of t r a n s p o r t a t i o n , and charges in c id e n t t o the im p o rta tio n in to th e P h ilip p in e s o f r i c e , f l o u r , canned m ilk, c a t t l e , and b e e f, canned f i s h , soya beans, b u t t e r f a t , c h o c o la te , m alt syrup, ta p io c a , s t a b i l i z e r and f l a v o r s , v ita m in con c e n t r a t e s , f e r t i l i z e r s , p o u ltr y fe e d , te x t and o th e r books, n ew sp rin t im ported by or f o r p u b lis h e r s b u t s u b je c t t o c e r t a i n l i m i t a t i o n s , book paper and book c l o t h , a n e s t h e t i c s , a n t i b i o t i c s , v ita m in s , hormones, X -ray f i l m s , la b o r a to r y r e a g e n ts , b i o l o g i c a l s , d e n ta l s u p p lie s and p h arm a ceu tica l 1 1 6 drugs n e c e ss a ry f o r compounding m edicines, c e r t a i n m edical and h o s p i t a l s u p p lie s in q u a n t i t i e s to be c e r t i f i e d by th e D ir e c to r of H o s p ita ls as a c t u a l l y needed by th e h o s p it a ls ap p ly in g t h e r e f o r e , c e r t a i n drugs and m ed icin es, and a r t i c l e s or c o n ta in e rs used by the im porter h im self in th e m anufacture or p r e p a r a tio n of P h ilip p in e p ro d u cts fo r con signment or e x p o rt abroad, upon s a t i s f a c t o r y p roof t h a t the s a id imported a r t i c l e s or c o n ta in e rs were a c t u a l l y used in th e m anufacture or p r e p a ra tio n of such lo c a l p ro d u cts as have been a c t u a l l y ex p o rte d . S e c tio n s * + and 8 provide fo r th e e x c lu s io n s from the s a id ta x on fo re ig n exchange so ld an d /o r a u th o riz e d t o be so ld by th e C e n tra l Bank of th e P h ilip p in e s for payment of re in s u r a n c e , marine and a v i a t i o n in su ra n c e ; expenses fo r th e dry docking and r e p a i r abroad of v e s s e l , and purchase p r ic e or c h a rte r fe e s o f a i r p la n e s and v e s s e ls of P h i l i p pine r e g i s t r y under c e r t a i n l i m i t a t i o n s ; re m itta n c e s fo r payment of l i v i n g expenses of s tu d e n ts studying abroad not exceeding e q u iv a le n t of th r e e hundred d o l l a r s per month, and fo r payment of t u i t i o n and other school f e e s ; premiums by v e te r a n s on l i f e in su ra n c e p o l i c i e s under th e government of th e U nited S t a t e s ; premiums and o ther amounts due by p o lic y h o ld e rs on l i f e in su ran ce p o l i c i e s issu ed b efo re December 9, 19^9; payment of machinery and/or raw m a te r ia ls 117 t o be used by new and n e c e s s a ry i n d u s t r i e s exempted from th e ta x by R epublic Act Ho. 35; and exchange used for the im p o rta tio n of i n d u s t r i a l and a g r i c u l t u r a l machinery covered by im port lic e n s e s which were g ra n te d and th e co rresp o n d in g l e t t e r s of c r e d i t opened p r i o r to January 1, 1951. S e c tio n 5 a u th o riz e s the C e n tra l Bank o f th e P h i l i p p in e s t o re c e iv e payments of the s p e c i a l e x c is e ta x from p u rc h a se rs of fo re ig n exchange and l e v ie s th e c o n d itio n t h a t th e C e n tra l Bank of th e P h ilip p in e s a n d /o r i t s ag e n ts s h a l l n o t s e l l any f o re ig n exchange w ith o u t th e payment of th e sa id ta x . Refund of ta x e s under S e c tio n s 2 and 3 s h a l l be made by th e C e n tra l Bank of th e P h ilip p i n e s , and such money c o l le c te d s h a l l accrue t o th e G eneral Fund of th e N a tio n a l T reasu ry . S e c tio n 6 p ro v id es th e s a n c tio n s imposed upon th e v i o l a t o r s of th e Act or any of the r e g u l a t i o n s promulgated p u rsu an t t h e r e t o . Punishment upon c o n v ic tio n imposes upon th e accused a f in e in an amount n o t exceeding twenty- thou sand pesos and imprisonment f o r a p erio d not exceeding two y e a r s . Where th e o ffe n d e r i s a c o rp o ra tio n , a s s o c i a t i o n or a p a r tn e r s h i p , th e p e n a lty s h a l l be imposed upon th e p r e s i d e n t , d i r e c t o r s , m anagers, managing p a r t n e r s , as th e c a se may b e , a n d /o r th e person charged w ith th e a d m in is tr a t i o n t h e r e o f . 1 1 8 S e c tio n 7 empowers the Monetary Board of th e C e n tra l Bank of th e P h ilip p in e s to p r e s c rib e and prom ulgate th e n e c e s s a r y r u l e s and r e g u la tio n s to c a rr y out the p ro v is io n s of th e A ct. S e c tio n 9 e x p la in s th e n a tu re of the Act as re g a rd s e x i s t i n g laws and r e g u l a t i o n s . The A ct, w ith th e excep t i o n o f S e ctio n 5, s h a l l n o t be co n stru ed to a b ro g a te , d im in ish or l i m i t in any manner, any of th e powers now e x e rc is e d or to be e x e rc ise d by th e C e n tra l Bank of th e P h ilip p in e s p u rsu an t to e x i s t i n g laws and r e g u la tio n s . S e c tio n s 10 and 11 provide fo r the s e p a r a b i l i t y c la u s e and th e e f f e c t i v i t y of th e A ct. P ursuant to th e p ro v is io n s of S ec tio n 7 o f th e above A ct, th e Monetary Board o f th e C e n tra l Bank of th e P h i l i p p in e s iss u e d C irc u la r No. 25 on th e "R eg u la tio n s R e la tiv e to th e C o lle c tio n of S p e c ia l E xcise Tax on F oreign Exchange Sold by th e C e n tra l Bank of the P h ilip p in e s and i t s A g e n ts .” C ir c u la r No. 2 5 . - - This C irc u la r empowers a u th o r iz e d ag e n ts to c o l l e c t on every s a le of f o re ig n exchange from p u rch asers of fo re ig n exchange (not in c lu d in g exemp t i o n s to the ta x as provided for in S e c tio n s * + and 8 of R epublic Act No. 601 and r e - l i s t e d under S e c tio n 5, p a ra graph (a) of C ir c u la r No. 2 5 ), an e x c is e ta x of sev en teen p e r cent on the v alu e in P h ilip p in e pesos of such s a l e . 119 O f f i c i a l r e c e i p t s r e l a t i v e to such c o l l e c t i o n s h a l l he accom plished in q u i n t u p l i c a t e , th e o r i g i n a l to be handed t o the p u rc h a s e r, the d u p lic a te and t r i p l i c a t e to be sub m itte d to th e C e n tra l Bank, th e q u a d ru p lic a te to be f u r n ish e d to the S e c re ta ry of F in an ce, and the q u in tu p l ic a te t o be l e f t w ith th e a u th o riz e d ag en t and made p a r t of i t s permanent re c o r d s . R e q u is itio n s for o f f i c i a l r e c e i p t s s h a l l be made to the C e n tra l Bank by a u th o riz e d a g e n ts . A b s tra c ts of a l l tax ab le s a le s of fo re ig n exchange e f f e c t e d during th e day s h a l l be made by th e a u th o riz e d a g e n ts showing th e re q u ir e d d e t a i l s , and such on th e b u s i n ess day fo llo w in g th e day of s a l e , to g e th e r w ith th e d u p l i c a t e , t r i p l i c a t e , and q u a d ru p lic a te o f f i c i a l r e c e i p t s is s u e d during th e preceding day, accompanying a c r e d i t a d v ice f o r th e amount of th e ta x c o l le c te d by them on th e s a le s of f o re ig n exchange e f f e c t e d d u rin g th e preceding day, s h a l l be subm itted by the a u th o riz e d a g e n t concerned t o th e Chief Accountant of the C e n tra l Bank. Regarding th e exemptions to the ta x , a p p l i c a t i o n s fo r exchange fo r exemptions s o le ly w ith r e s p e c t to machinery a n d /o r m a te r ia ls to be used by new and n e c e s s a ry .in d u s trie s a s determ ined in accordance w ith R epublic Act No. 35, and f o r the im p o rta tio n of i n d u s t r i a l and a g r i c u l t u r a l machinery covered by an im port lic e n s e which had a lre a d y been g ran ted 120 and the l e t t e r of c r e d i t which had been opened p r io r t o January 1, 1951 (w ith th e e x c lu s io n o f o th e r exem ptions), s h a l l be subm itted to th e C e n tra l Bank. The C irc u la r f u r t h e r r e l i s t s the a r t i c l e s and com m o d ities in clu d ed under S e ctio n s 2 and 3 of R epublic Act No. 601, out of which ta x had been c o l le c te d on s a le s of fo re ig n exchange used fo r th e payment of th e c o s t , t r a n s p o r t a t i o n a n d /o r o th e r charges in c id e n t to t h e i r im porta t i o n i n t o th e P h ilip p i n e s , and th e ta x amount o f which may be refunded upon a p p l ic a tio n f i l e d in d u p lic a t e w ith the Exchange C o n tro l Departm ent, accompanied w ith th e n e c e ss a ry documents. A fte r th e a p p l i c a t i o n has been processed and found in o r d e r, th e refund a p p lie d for s h a l l be a u th o riz e d in w r itin g by t h e D ire c to r of th e Exchange C o n tro l D ep art ment. The C e n tra l Bank r e s e rv e s th e r i g h t to o rd er an exam ination o f any tr a n s a c ti o n covered by th e c i r c u l a r , in c lu d in g th e v e r i f i c a t i o n of any sta tem en t or r e p r e s e n t a t i o n re g a rd in g th e s a le of f o re ig n exchange, and c o l l e c t i o n of or exemption from th e exchange t a x e f f e c te d from such s a le s of fo re ig n exchange. R epublic Act No. 601 was a n e u t r a l i z a t i o n of th e se n tim e n ts of th o se who had co n sid ered a s p e c ia l e x c is e ta x on f o re ig n exchange of tw e n ty -fiv e per ce n t to o onerous and th o s e who, re s p o n s ib le for the fu n c tio n s of governm ent, 121 were adamant in sa lv ag in g th e d e t e r i o r a t e d n a t i o n a l economy. In t r u t h , th e F oreign Exchange Tax B i l l , which reco n c i l e d h eated C o n g ressio n al d e b a te s , was a le v e r between th e governm ental f o rc e s w ield in g th e power of law, d u ty , l o y a l t y , and s a n c t i t y towards n a t io n a l commitments to in s u r e the w e ll-b e in g and s e c u r i t y of th e n a t io n , and th e i n s i s t e n t demands of b ig b u s in e s s , zealous and d e s iro u s alw ays t o m a in tain enormous p r o f i t s . One i s s u r p ris e d to n o te t h a t th e American b u sin e ss community in the P h ilip p i n e s , a f t e r the passage of the F o reig n Exchange Tax B i l l , low ering th e r a t e of th e s p e c ia l e x c is e ta x from a s te e p tw e n ty -f iv e per ce n t t o th e lower seventeen per c e n t, s t i l l h a rb o rs u n fav o rab le im pressions concerning th e p ro v is io n s of th e m easures. Mr. A. V. H. H artendrop, speaking fo r the American Chamber of Commerce of th e P h ilip p i n e s , sa id in h is e d i t o r i a l : In so f a r as b u sin e ss is concerned, th e new t a x a t i o n only in c re a s e s the burden under which i t has been l a b o r i n g . In so f a r as the p eo p le, as consumers, a r e concerned, th e new t a x a ti o n w i l l le a d t o f u r th e r and s te e p in c r e a s e s in p r i c e s . And bo th th e new c o rp o ra te income ta x and th e ta x on s a le s of fo re ig n exchange a r e , a g a in , d is c rim in a to ry . The ta x on s a le s of fo re ig n exchange . . . w i l l prove d e c id e d ly more harm ful to th e n a t io n a l economy, a s d i s t i n c t from th e government g a th e rin g in some q u ic k ta x money . . . th e b i l l , as enacted a ls o c a r r i e s more exemptions than as o r i g i n a l l y proposed, ) 122 b o th c e r t a i n d i r e c t exemptions and some exemptions by re fu n d . \ C e rta in ty p e s of s a le s of fo re ig n ex change,— in g e n e ra l exchange o th e r th a n fo r im ports and l a r g e l y fo r th e s o - c a l l e d i n v i s i b l e item s in th e b alan c e of t r a d e , enjoy d i r e c t exem ptions, among them re m itta n c e s of v a r io u s forms of in su ran ce payments, re m itta n c e s f o r th e d ry docking and r e p a i r o f P h ilip p in e ships ab ro a d , re m itta n c e s fo r th e payment of t u i t i o n and l i v i n g expenses of s tu d e n ts so jo u rn in g ab ro ad , and re m itta n c e s a ls o for c e r t a i n machinery and m a te r ia ls t o be used in new and n e c e s s a ry i n d u s t r i e s as d e fin e d in a n o th er law. On re m itta n c e s f o r a l l o th e r im p o rts, th e ta x must be p a id , bu t in case of re m itta n c e s f o r c e r t a i n prime f o o d s t u f f s , f e r t i l i z e r s , books and p a p e rs, drugs, and m edical and h o s p i t a l s u p p lie s , e t c . , a p p l i c a t i o n for a refund by th e C e n tra l Bank of th e ta x paid may be su b m itted a f t e r the goods have a r r i v e d . The d i s t i n c t i o n made in the law between d i r e c t exemp t i o n and exemption by subsequent re fu n d , appears t o be based on th e f a c t t h a t in th e one c a s e , th e re m itta n c e s a r e c l e a r l y exempt acco rd in g t o th e p ro v is io n s of th e law , w h ile in th e o th e r c a s e , re m itta n c e s f o r th e v a rio u s ty p e s of im p o rts, th e exem ptions can be d efin e d so c l e a r l y so t h a t th e re is a room fo r disagreem ent and need f o r o f f i c i a l a d ju d ic a tio n and d e c is io n . And meanwhile, of co u rse , th e government has th e advantage o f holding th e money. This a l s o means, e q u a lly , of c o u rse , t h a t im p o rters w i l l have t h e i r funds t i e d up, and t h a t p r i c e s , t h e r e f o r e , must go up even f o r th o s e im ports which enjoy exemption by u ltim a te r e f u n d . 8 The American Chamber of Commerce J o u r n a l. M anila, A p ril 1951> P* 107. CHAPTER X III THE PROBLEM OF CONTROL Import and exchange c o n tro ls p re s e n t two b a s ic prob lems as re g a rd s t h e i r im p o sitio n by th e government. This has always been so in c o u n trie s which have undertaken t o defend them selves a g a in s t a c o n tin u in g b alan ce of payment d e f i c i t s . D eterm in atio n of P r i o r i t i e s The f i r s t problem i s th e d e te rm in a tio n o f a schedule of p r i o r i t i e s . Because exchange has to be r a tio n e d among c o m p e titiv e im p o rte rs , th e need f o r a s u c c e s s fu l s c a le of ‘’e s s e n t i a l i t y ” must be tak en in to c o n s id e r a tio n in o rd e r to ac h ie v e th e l a r g e s t u t i l i z a t i o n of f o re ig n exchange r e s o u rc e s . A d e s i r e fo r f a i r n e s s to a l l im p o rte rs , and the c r e a t i o n of a c o n s tr u c tiv e p a t te r n of im ports t h a t w i l l meet n a t i o n a l economic goals in the schedule ren d er th e atte m p t t o d e v ise such an in stru m e n t no t only d i f f i c u l t but d e l i c a t e . T his is more so because th e P h ilip p in e s p o ssess an economy where c e r t a i n economic goals a re f ix e d and whose im ports c o m p rise'a range of com modities, th e m arginal u t i l i t y of which i s d i f f i c u l t to d eterm in e. Whether machin e ry d eserv es a h ig h e r p r i o r i t y than t e x t i l e s , g ra in p re p a ra t i o n s , or petroleum p ro d u c ts , is a d i f f i c u l t q u e s tio n to 12b d e te rm in e . No d e f i n i t e l i n e may be drawn so as to c l a s s i f y a l l commodities t h a t a re n e c e ss a ry t o meet th e r e h a b i l i t a t i o n program of th e government. I t is c l e a r , however, th a t a l l a r e n e c e ss a ry for th e smooth fu n c tio n in g o f the d a i l y l i f e of th e m asses. None of such commodities a re produced i n t e r n a l l y in such q u a n t i t i e s as to w arran t t h e i r non im p o rta tio n . Y et, they c o n s t i t u t e p a r t of th e g r e a t volume of im ports which must be denied e n tra n ce in to P h ilip p in e m arkets in o rd er to in c re a s e n a t io n a l p ro d u c tio n , c r e a te an in c e n tiv e to th e f a i t h f u l development of n a t io n a l in d u s t r i e s , and su b se q u en tly , i n v i t e an unprecedented boom in e x p o r ts . In th e United Kingdom where th e im p o rta tio n of food and raw m a te r ia ls i s e s s e n t i a l t o o p erate her v a rio u s m anufacturing p l a n t s , th e d e f i n i t i o n s o f p r i o r i t y of u rg en t item s may be c l e a r l y marked. Hence, t h i s problem i s n o t a s d i f f i c u l t th e re as i s in th e P h ilip p i n e s . Another d i f f i c u l t y r e a r s up when the r e l a t i o n between exchange a l l o c a t i o n and th e s ti m u la tio n and p r o te c tio n of l o c a l i n d u s t r i e s must be e s ta b lis h e d in order to promote th e l a t t e r through th e a p p l ic a tio n of th e form er. Care and in te n s iv e study a r e r e q u ir e d . The problem p r e s e n ts a v i t a l n e c e s s i t y in t h a t encouragement should be given only to th o se i n d u s t r i e s th a t would su rv iv e a f re e market and a t 125 th e same tim e, b e n e f i t th e co u n try through th e maximum consumption of l o c a l raw m a t e r i a l s . I n d u s tr ie s s tim u la te d m erely by th e a p p l i c a t i o n of c o n tr o ls p re s e n t a w aste, not only of lab o r and c a p i t a l bu t would, in th e l a s t ' a n a l y s i s , a c t as a d e p re s s iv e in flu e n c e on th e n a t i o n a l economy. The m a tte r o f l o c a l im p o rters who complain f re q u e n tly o f d e la y in th e issu a n c e of l i c e n s e s and who fav o r such iss u a n c e on the b a s is of a " r e p r e s e n ta t iv e p r e - c o n tr o l year s ta n d a rd " , seem t o f o r g e t t h a t th e purpose of th e a p p l i c a t i o n of c o n tr o ls i s to change t h i s sytem. No i n f l e x i b l e p a t t e r n e s ta b li s h e d b e fo re th e c o n tr o l p erio d can se rv e as th e guiding l i n e on issu an c e of lic e n s e s f o r t h i s would se rv e to d e f e a t th e prime reaso n fo r which c o n tro ls have been e f f e c t e d . As in th e case of lu x u r ie s which r e p r e s e n t an a l l im p o rta n t a s p e c t in the volume of n o n - e s s e n t i a l s , i t i s commonly agreed t h a t only a minimum amount of exchange should be a l l o c a t e d f o r such im p o rts. However, a s t r i c t c o n t r o l of such item s would cause a r i s e in t h e i r dom estic p r ic e s and c r e a t e a flow of dom estic c a p i t a l in to th e p ro d u c tio n of such n o n - e s s e n t i a l s - - i n s t e a d of in th e produc t i o n of goods n e c essa ry f o r th e development and r e h a b i l i t a t i o n of th e n a t io n , th e re b y posing a hindrance to n a t i o n a l s e l f - s u f f i c i e n c y and permanent economic s t a b i l i t y . 126 D i s t r i b u t i o n of Exchange The second problem concerns t h e d i s t r i b u t i o n of exchange. The problem opens up avenues to a l l s o r t s of i r r e g u l a r i t i e s , incom petence, and d ish o n e sty caused by p r i v a t e r a tio n i n g and by g r a n ts made only upon a p p l i c a t i o n . O ccurrences of such in s ta n c e s w i l l p re se n t them selves even though th e r e should be a complied l i s t of item s made and a system of p r i o r i t i e s e s ta b li s h e d . C o u n trie s which have a p p lie d c o n tr o ls to t h e i r eco nomies to b e t t e r t h e i r tr a d e p o s itio n s and i n t e r n a l d e v e l opment, have ex p erien ced the f a c t t h a t no m atter how e f f i c i e n t and w e ll - p a tte r n e d t h e i r systems of p r i o r i t i e s a r e , th e g ra n ts of exchange a re e s s e n t i a l l y an a r b i t r a r y d e c is io n of th e agency e n t r u s t e d w ith t h a t f u n c tio n . Hence, a lth o u g h th e h ig h e s t l e v e l s of honesty a re c o n tin u a lly e x e rc is e d , em barrassing charges of d ish o n e sty , d is c rim in a t i o n , and ab u se, may a r i s e and cause a d e t e r r e n t e f f e c t on th e morale of the p o p u la tio n . These two problems p re s e n t a ch a lle n g e t o theeco n o - m is ts and th e f i n a n c i a l e x p e rts of th e co u n try which must wage an e n d le ss se a rc h fo r t h e i r s o lu t io n . C le a r ly , th e dilemma a s s e r t s i t s e l f between two a n g le s : one is an ex trem ely s t i f f schedule of p r i o r i t i e s and im port q u a n t i t i e s which give c o n tr o l o f f i c i a l s no r e a l ch o ice as reg ard s 127 a l l o c a t i o n s and which c e r t a i n l y a re uneconomic and u n r e a l i s t i c in an economy where demand i s c o n s ta n tly v o l a t i l e and huge. The o th e r an g le e x e m p lifie s d i s c r e t i o n w ise ly exe c u te d , but such d i s c r e t i o n , however f i l l e d w ith wisdom, su b seq u en tly opens i t s e l f to a c c u s a tio n s of d is c rim in a tio n and a t th e hands of some, may work in to u n h ea lth y p r a c tic e s which may prove d ero g ato ry to th e n a t i o n a l economy. The a u c tio n p r i n c i p l e . — In some c o u n t r ie s , two p r a c t i c e s have been d ev ised in order to check the e v i l s found i n a r b i t r a r y a l l o c a t i o n s . Both embody th e a u c tio n p r i n c i p l e . One i s p u b lic a u c tio n which p erm its market f o rc e s to have f u l l play to determ ine th e r e c i p i e n t s of f o r e ig n exchange, and th e o th e r i s a p u b lic a u c tio n of im port l i c e n s e s . ^ The f i r s t p r a c t i c e re p la c e s th e a r b i t r a r y g ra n t made by o f f i c i a l s . At p r e s e n t, th e C e n tra l Bank of th e P h i l i p p in e s has c o n tr o l of a l l exchange re s o u rc e s , but the d i s t r i b u t i o n of such exchange w i l l a l t e r from time to tim e from th e normal p r a c t ic e of in d iv id u a l a l l o c a t i o n s . E s s e n t i a l goods im ported in to the co u n try w i l l be accorded exchange c o v e r. " * ■ The P h ilip p in e Bank of Commerce, Monthly L e t t e r , M anila, Septem ber, 1950, p. *+. 1 2 8 For lu x u r ie s and d o u b tfu l e s s e n t i a l s , however, exchange w i l l be o ffe re d a t a u c tio n p la c e s . Two r e s u l t s may accrue from such a system ; the e lim in a tio n of th e a r b i t r a r y a s p e c t p e r ta in in g to i n d iv i d u a l a l l o c a t i o n s , and th e discouragem ent of c a p i t a l e x p o rts which may help to i n v i t e an inward movement of c a p i t a l e x p o rts , which may h e lp f re e market r a t e s . The second p r a c t ic e d i f f e r s from th e f i r s t . Whereas in the f i r s t p r a c t i c e , t h e a u c tio n , s o le ly of exchange, does n o t a f f e c t th e d i r e c t c o n tr o l of th e kinds of im ports w hich may be brought in under th e f r e e exchange purchased, th e second p r a c t i c e , which r e l a t e s to the a u c tio n in g of im port l i c e n s e s , does involve a predeterm ined u t i l i z a t i o n of a v a i l a b l e exchange in to v a rio u s im p o rts, b o th as to q u a n tity and q u a l i t y . This g iv es c o n tro l a u t h o r i t i e s th e a r b i t r a r y power to determ ine a v a i l a b l e exchange f o r im p o rts, as w ell a s the a c t u a l q u a n t i t i e s of goods t h a t may be tak en in . However, as between in d iv id u a l im p o rte rs , i t w aives th e power to a l l o c a t e lic e n s e s f o r such c l a s s i f i c a t i o n of goods. As p re v io u s ly m entioned, the f i r s t p r a c t ic e e lim in a te s d i s c rim in a tio n w ith th e subsequent b e n e f i t s a c c ru in g from th e more e f f i c i e n t employment o f exchange r e s o u r c e s . As a r e s u l t , f re e exchange would flow in to im p o rts y ie ld in g huge r e t u r n s , a lth o u g h such im ports would not be n e c e s s a r i l y of 129 e s s e n t i a l need to th e n a tio n . N e v e rth e le s s , in b o th c a s e s , the a s p e c t of r a i s i n g revenue p re s e n ts i t s e l f . The p u b lic a u c tio n in g of f r e e exchange and im port lic e n s e s would i n f l a t e r a t e s n ea r to t h a t which would r i s e in a w holly f r e e m arket, w ith the con sequence of d riv in g w in d f a ll p r o f i t s to th e monetary a u th o r i t i e s in s te a d of to fav o red im p o rte rs . The huge gain made i n in c re a se d revenues w i l l b e a r r e l a t i v e l y upon t h e sound n e ss of th e goods im ported. As i s , t h i s p r e s e n ts a more b e n e f i c i a l way of r a i s i n g revenues in s te a d of th e f l a t one p er cen t ta x now imposed on every l i c e n s e , n o tw ith s ta n d in g th e soundness of i n d iv i d u a l im p o rts. At f i r s t , the p r a c t i c e may seem d i s t a s t e f u l as to b rin g about th e atm osphere of a ’'m u ltip le cu rren cy p ra c t i c e , " bu t th e n , th e r e s u l t i n g r a t e s a re th e outcome of a f r e e market and n o t of a r b i t r a r y management, and as such, th e d is c r im in a tio n a g a in s t any cu rren cy i s av o id ed . The a tta in m e n t of m u l t i l a t e r a l tr a d in g and f r e e c u r r e n c ie s seems f a r in th e f u t u r e and w i l l r e q u ir e th e com plete co o p e ra tio n from a l l i n t e r n a t i o n a l a g e n c ie s of t r a d e . But a s long as c o n tr o ls w i l l te n d to extend bene f i c i a l r e s u l t s in l i e u of re a d ju stm e n ts of cu rren cy v a lu es t o c o r r e c t b alan ce of payment d i f f i c u l t i e s , a p e rse v e rin g e f f o r t to c u r t a i l th e e v i l s found in a r b i t r a r y a l l o c a t i o n 130 must be c o n tin u e d . For such a purpose, th e a u c tio n p r in c ip l e covering b o th f o re ig n exeliange and im port lic e n s e d eserv es m e rito r io u s and c o n s ta n t r e f l e c t i o n . CHAPTER XIV CONCLUSIONS I t i s f o r tu n a te indeed t h a t the consumer, th e b u s i nessman and the government as a whole, should view th e a p p l i c a t i o n of c o n t r o ls a rig h te o u s b le s s in g . Indeed, th e a m e lio ra te d c o n d itio n s of t r a d e , as w e ll as of fo re ig n and dom estic fin a n c e h e a v ily in v e s te d in l o c a l i n d u s t r i e s , proved t h a t c o n t r o l s , though grim ly i n i t i a t e d , have reaped f o r th e P h ilip p in e s a g ig a n tic boost in revenues enough to cover d e f i c i t s and c r e a te a s u rp lu s . C o n tro ls have a ls o step p ed up p ro d u ctio n to a l e v e l of alm ost c o n g ra tu la to ry s u f f i c ie n c y . The s t a r t i s n o t h o p e le ss; i t b e a rs a marked d e te rm in a tio n to en la rg e th e fa v o ra b le b alan ce of tra d e a lre a d y achieved w ith in a p e rio d of l e s s th an two y e a rs . C o n tro ls have d is p e lle d the o r i g i n a l f e a r of a b u sin e ss breakdown, r e s u l t i n g from th e sudden r i s e and development of new i n d u s t r i e s . I t augurs a f u tu r e unprecedented pro d u c tio n of goods and of n a tiv e crops high enough t o meet th e in c re a s in g demands of l o c a l consumers. Economic H ig h lig h ts of 1950 The economic h ig h li g h ts of 1950 may be termed th e s t a r t of th e new era f o r an independent P h ilip p i n e s . The d e t e r i o r a t i o n in the i n t e r n a t i o n a l r e s e rv e s which s t a r t e d 132 in 19^-6 and which a c q u ire d a tremendous pace towards 19^9» ended w ith a su rp lu s in 1950. That c o n tr o ls have influenced such an advantageous p o s itio n in tra d e is beyond doubt. An in c re a s e of $100.56 m illio n was r e g i s t e r e d in 1950, as compared w ith th e d e c lin e of $159.9 m illio n in 19*+9«^ The d e f i c i t in tr a d e dropped from 2*665.2 m illio n d u rin g 19*+9 to 2*16.9 m illio n in 1950. E xports f o r the year 1950 have been th e l a r g e s t , b o th in v alu e and volume, than t h a t of any of th e pre-w ar y e a rs . In 1950, th e t o t a l v o l ume of the tw enty le a d in g e x p o rts reached 1 .8 m illio n m e tric to n s as a g a in s t 1 .6 m illio n m e tric to n s in 19*+9 • The p h y s ic a l volume of tr a d e fo r 1950 exceeded pre-w ar 2 tr a d e by n in e ty -f o u r per c e n t. During 1950, th e money supply in c re a se d by 2*203.2 m illio n or 19.6 per ce n t from the l e v e l on December 31> 19^9. This abnormal expansion in the money supply during th e l a s t f iv e months of 1950 may be accounted fo r by e x t e r n a l f a c t o r s , p a r t i c u l a r l y , th e in c re a se d proceeds from e x p o rts which helped to c o u n te ra c t th e tr a d e d e f i c i t by n i n e t y - f i v e p er c e n t.-' The Manila Times Mid-Week Review. A p ril 18, 1951, p. 10. 2 I b i d . . p. 10. ^ I b i d . , p . 1 1. 133 P re ss r e le a s e from th e C e n tra l Bank of th e P h i l i p p in e s s t a t e s t h a t th e t o t a l amount of th e i n t e r n a t i o n a l re s e rv e s as of August 1, 1951 i s 1365.79 m il lio n . T his amount i s s t i l l $ 9 .8 8 m illio n more than th e t o t a l re s e rv e which the country had seven months b e fo re on December 31> 1 9 5 0, when th e re s e rv e stood a t $3 5 5 .9 1 m il lio n . The Outlook For 1951. At the tim e of w r i t i n g , th e ou tlo o k fo r 1951 i s o p t i m i s t i c . I t ap p ears t h a t th e demand f o r P h ilip p in e e x p o rt p ro d u cts w i l l co n tin u e to be high. The stro n g i n t e r n a t i o n a l re s e rv e p o s it io n and th e a s su ra n c e of ECA a s s i s t a n c e w i l l enable the country to co n tin u e i t s p re se n t f i g h t a g a in s t i n f l a t e d p r ic e s by allow ing a more l i b e r a l in flo w of e s s e n t i a l commodity im p o rts , b o th to m ain tain con sumption a t an adeq u ate l e v e l and economic development a t a v ig o ro u s pace. The new ta x measures t h a t have been e n a c te d , the e n e rg e tic c o l l e c t i o n of ta x e s and th e g r e a te r v ig ila n c e being e x e rc is e d over government e x p e n d itu re s , b o th fo r con sumption and in v e s tm e n t, have a ssu re d a more s t a b l e f i s c a l o p e ra tio n t h i s y e a r. F urth erm o re, i n f l a t i o n of th e money supply due to d e f i c i t fin a n c in g has been held in check. k P re ss r e le a s e a u th o riz e d by th e Monetary Board of th e C e n tra l Bank of th e P h ilip p in e s on August 7, 1951. 131 * V o lu n tary c r e d i t c o n tro ls which are being observed by th e banks give f u r t h e r assu ran ce t h a t i n f l a t i o n a r y p re ssu re from t h i s source w i l l be avoided. However, th e b r ig h t o u tlo o k f o r 1951 should not make a l l concerned r e la x in t h e i r s tru g g le t o keep i n f l a t i o n in check. The i n t e r n a t i o n a l s i t u a t i o n i s extrem ely f l u i d and much of th e success of dom estic p o l i c i e s may depend upon i t . While »the improvement of the i n t e r n a t i o n a l reserve and th e a v a i l a b i l i t y of ECA aid g iv e th e co u n try a r a r e o p p o rtu n ity to in c re a s e th e l e v e l of economic development and consumption im p o rts, y e t th e r i s i n g tempo of rearmament in th e i n d u s t r i a l c o u n tr ie s , l i k e th e U nited S t a t e s , i s even now reducing th e number and volume of commodities a v a ila b le and c r e a tin g u n c e r t a i n t i e s about t h e i r d e l i v e r i e s . A lthough p re s e n t plans f o r government spending fo r e s s e n tia l s e rv ic e s may seem to be w ith in re a c h of p ro s p e c tiv e reserves a d e t e r i o r a t i o n in the i n t e r n a t i o n a l s i t u a t i o n could compel e x tra o rd in a ry government support and fin a n c in g of m i l i t a r y and c i v i l i a n needs to prep are the country for any e v e n tu a l ity . The P h ilip p in e s is a c h ie v in g success in so lv in g her m ajor f i n a n c i a l problem s. N e v e rth e le s s , she i s s t i l l f a r from a t t a i n i n g a d e s ir a b le l e v e l of p ro d u ctio n and of r e a l income. T o ta l p ro d u ctio n (GNP) i s s t i l l only about n in e ty - 135 seven per cen t o f p re-w ar, and a lth o u g h t o t a l a g r i c u l t u r a l p ro d u c tio n has recovered i t s pre-w ar p o s it io n , per c a p ita r e a l income i s only e i g h t y - f i v e per cen t of p re-w ar. I t i s s t i l l s h o rt of t h i s goal on a per c a p ita b a s is because of the tw enty-seven per cent in c re a s e in th e p o p u la tio n . The lo n g -ru n p ro sp e c ts for th e l e v e l of consumption aid the sta n d a rd of l i v i n g would be gloomy, indeed, u n le ss produc t i o n o u tru n s th e r a t e of in c re a s e in th e p o p u la tio n . The s o lu t io n of th e major f i n a n c i a l problems of the P h ilip p in e s i s only a c o n d itio n precedent to s u b s t a n t i a l expansion in th e f i e l d o f p ro d u c tio n , but th e l a t t e r does not n e c e s s a r i l y fo llo w a u to m a tic a lly from i t . 5 Second A nnual R eport of t h e C e n tr a l Bank of th e P h i l i p p i n e s , 1 9 5 0 , p. 2 . BIBLIOGRAPHY A. BOOKS 137 A gger, Eugene E . , Money and Banking Today. New York: Reynal and H itchcock Company, 19*+1. Angas, Lawrence Lee B a sle y , The Problem o f F o reig n Exchanges. New York: A. A. Knopf Company, 1935. B ra d fo rd , F re d e ric k Alden, Money and B anking. New York: Longmans Green Company, 19*+9. Brown, Harry Gunnison, I n t e r n a t i o n a l Trade and Exchange. New York: The Macmillan Company, 191*+. C handler, L ester Vernon, The Economics of Money and Banking. New York: Harper and B ro th e rs , 194-d. E in z i g , P au l, Exchange C o n tro l. London: The Macmillan Company, L td ., 193*+. E l l i s , Howard S y lv e s te r , Exchange C o n tro l in C e n tra l E urope. Cambridge: Harvard U n iv e rs ity P re s s , 19*+1. E s th e r , F ra n k lin , F o re ig n Exchange E x p la in e d . New York: The Macmillan Company, L td ., 1920. G a irs , Roy Lawrence, P r in c ip le s of Money and C r e d i t . New York: The Macmillan Company, 193^. Goodbar, Joseph E rn e s t, Managing th e People*s Money. New Haven: Yale U n iv e rs ity P re s s , 1935. H a rt, A lb e rt G a ilo rd , Money. Debt and Economic A c t i v i t y . New York: P re n tic e H a ll, 19*+B. Huebner, Grover G erb ard t, F o reig n Trade P r in c ip ie s and P r a c t i c e s . New York and London: D. Appleton and Company, 1930. K ent, Raymond, Money and B anking. New York: R in eh art Company, 1951. K isch, C ecil Hermann, C e n tra l Banks. London: ffecmillan and Company, 1930. L u th rin g e r, George F r a n c i s . Money. C re d it and F in a n c e . B oston: L i t t l e , Brown, and Company, 193&. 133 M i l l e r , Hugo Herman, Economic C onditions in th e P. I . Boston: Ginn and Company, 1920, 393 pp. M ly n arsk i, F e lik s John, Gold and C e n tra l Banks. New York: The Macmillan Company, 1 9 ^ 7 Heed, Harold L yle, Money. Currency and B anking. New York and London: McGraw-Hill Book Company, I n c . , 19^2. Shaw, W illiam A rth u r, The Theory and P r in c ip le s of C e n tra l B anking. London and New York: S ir I Pitmans & Sons, L td ., 193Q. S o u th ard , Frank A lla n , F oreign Exchange P r a c tic e and P o lic y . New York and London: McGraw-Hill Book Company, 19^9. W e s te rf ie ld , Ray B e rt, Banking. P r in c ip le s and P r a c t i c e . New York: The Ronald P re ss Company, 19^0. W i l l i s , Henry P a rk e r, The Theory and P r a c tic e of C e n tra l Banking. New York and London: Harper and B ro th e rs , 1936. B. BULLETINS AND PERIODICALS The American Chamber of Commerce J o u r n a l. M anila, P h ilip p in e s , December 19!?0, January 19^1» A p ril 19?1« The B u l l e t i n of jPj. S t a t i s t i c s . 1 :1 , September 19^5* Cuaderno, M iguel, S r . , "O rig in and Purposes of Imports Exchange and C o n tro ls ," The P h ilip p in e s a t the C a l i f - f o r n ia S ta te F a i r . September 10, 1950, pp. Monthly L e t t e r . The P hilippineB ank of Commerce, M anila, P h ilip p i n e s , September 1950. O f f i c i a l Jo u rn a l of th e Japanese M il ita r y A d m in is tra tio n , 1 to 13, Second E d iti o n , M anila, P h ilip p i n e s , 19^2- 19^3, Manila Shim Bun Sha. P h ilip p in e T rends. Volume 1, No. 1, May 19*+7»* M anila, P h ilip p in e s . 139 S t a t i s t i c a l B u l l e t i n o f th e C e n tra l Bank of th e P h ilip p i n e s , M anila, P h ilip p i n e s , 19^9 and 1950. Yearbook of P. I . S t a t i s t i c s . M anila: Bureau of P r in t in g . C. GOVERNMENT DOCUMENTS The B e ll R e p o rt. United S ta te s Economic Survey M issio n ’s Rep o r t , 19^0. The B e ll Trade Act of 19^6. T i t l e IV, S e c tio n No. *+02, Paragraph F. Document 1 * 4 -* + . F i f t y - e i g h t h Congress, Second S e ssio n , pp. 288- 2 8 9. E x ec u tiv e Orders (Republic of th e P h il i p p i n e s ) : No. 265 approved on June 15, 19*+8; No. 330 approved on Ju ly 15, l^+S; No. *+26 approved on December 19^9. D. GOVERNMENT PUBLICATIONS Census of th e P h i l i p p i n e s . 1939* M anila: Bureau of P r i n t i n g , 19^0-M-l. C ir c u la r No. 10. Import C o n tro l Board, M anila, P h ilip p i n e s , March 21, 19*+9. C ir c u la r No. 16. C e n tra l Bank of th e P h ilip p i n e s , M anila, P h ilip p i n e s , June 23, 19*+9* C ir c u la r No. 19. C e n tra l Bank o f th e P h ilip p i n e s , M anila, P h ilip p i n e s , November 17, 19^9 • C ir c u la r No. 2 0 . C e n tra l Bank of th e P h ilip p i n e s , M anila, P h ilip p i n e s , January 10, 1950. C ir c u la r No. 2 5 . C e n tra l Bank o f th e P h ilip p i n e s , M anila, P h ilip p i n e s , March 28, 1951. C ir c u la r No. 2 6 . C e n tr a l Bank o f t h e P h i l i p p i n e s , M a n ila , P h i l i p p i n e s , A p r il 1 7 , 1 9 5 1 . lM -0 F a c ts and F ig u re s of the P h i l i p p i n e s , M anila: Bureau of P r i n t i n g , 1929* F i r s t Annual Report of the C e n tra l Bank o f th e P h ilip p in e s . M anila, 19*+9, pp. 3*+-37. Second Annual R eport of th e C e n tra l Bank of th e P h ilip p in e s . M anila, 19^1• S p e c ia l M ission t o th e U nited S ta te s R e p o rt. 1938-1939. M anila: Bureau of P r i n t i n g , 1939. S t a f f Memo No. *+00. I n t e r n a t i o n a l Monetary Fund, October I 8 7 1 9 I+ 9 , P. 1- Summaries of P^ X*. F oreign T ra d e . 1931 t o 19J +9. M anila: Bureau of Commerce, 19^9. E . NEWSPAPERS The Manila D aily M irr o r. November 18, 19*+9« The Manila Evening C h ro n ic le . October 191 +9 t o December 1950. The Manila Evening News. December 19^9 and November 1950. The Manila Sunday Times. November 19^9- The Manila Tim es. November 19*+9 to A p ril 1951. The Manila Times Mid-Week Review. December 28, 19*+9 to A p ril 1951. The P h ilip p in e H e ra ld . November 19*+9 to January 1951. F. UNPUBLISHED MATERIALS A dlao. Pedro, ’’The Commodity F o reig n Trade of th e P h i l i p p i n e s , ” Unpublished M a ste r’s t h e s i s , The U n iv e rs ity of Southern C a l i f o r n i a , Los A ngeles, May 19^0, 8 pp. Proposed Program for I n d u s t r i a l R e h a b i l i t a t i o n and Develop ment of th e R epublic of th e P h ilip p in e s . P repared by th e N atio n al Development Company te c h n ic a l s t a f f under th e s u p e rv is io n of th e H. E. B e y ste r C o rp ., M anila, 19^7 APPENDICES Ib2 APPENDIX A REPUBLIC ACT NO. 330 AN ACT AUTHORIZING THE PRESIDENT OF THE PHILIPPINES TO ESTABLISH A SYSTEM OF IMPORT CONTROL BY REGULATING THE IMPORTS OF NON-ESSENTIAL AND LUXURY ARTICLES, CREATING AN IMPORT CONTROL BOARD, AUTHORIZING THE ISSUANCE OF RULES AND REGULATIONS TO CARRY INTO EFFECT SUCH CONTROL AND PENALIZING VIOLATIONS OF THIS ACT. Be i t enacted by the Senate and House of R e p re s e n ta tiv e s of th e P h ilip p in e s in Congress assem b led : S e c tio n 1. There is hereby c re a te d an Import C ontrol Board to be composed of th e S e c re ta ry of Commerce and Indus t r y , as Chairman, th e U n d ersec re tary of F in an c e, and th e G eneral Manager o f th e PRATRA, as members. S e c tio n 2. The P r e s i d e n t , upon recommendation of th e Import C o n tro l Board, s h a l l f i x and a l l o c a t e quotas o f the q u a n tity which may be im ported w ith in a c e r t a i n p erio d of tim e of each kind or c l a s s of n o n - e s s e n tia l and luxury a r t i c l e s . S e c tio n 3. The P r e s id e n t, upon recommendation of th e Import C o n tro l Board, s h a l l prom ulgate such r u l e s and r e g u la tio n s as may be n e c e ss a ry fo r th e p ro p e r enforcem ent a n d /o r im plem entation of t h i s A ct. S e c tio n *+ , I t s h a l l be unlaw ful for any p erso n , asso c i a t i o n , or c o r p o r a tio n , to im port n o n - e s s e n tia l and luxury a r t i c l e s in te n d ed f o r r e s a l e in to th e P h ilip p in e s w ith o u t a perm it from th e P re s id e n t of th e P h ilip p in e s . S e c tio n 5* The v i o l a t i o n of th e p ro v is io n s of t h i s Act s h a l l be p u n ish a b le by a f in e of n o t le s s than f iv e thousand pesos nor more th an te n thousand pesos or by an imprisonment of n o t le s s than two y e a rs nor more than f iv e y e a r s , or by b o th such f in e and imprisonm ent in the d i s c r e t i o n of th e c o u r t: P ro v id e d . T h at, i f the v i o l a t i o n is com- m ited by the manager, r e p r e s e n t a t i v e , d i r e c t o r , a g e n t, or employee of any n a t u r a l or j u r i d i c a l person in the i n t e r e s t o f th e l a t t e r , th e same s h a l l re n d e r s a id n a t u r a l or j u r i d i c a l person amenable to th e p e n a l t i e s co rresp o n d in g to th e o f fe n s e , w ith o u t p re ju d ic e t o t h e im p o sitio n of th e proper 3>3 p e n a lty , e i t h e r p e rso n a l or p ec u n iary , or b o th , upon th e manager, r e p r e s e n t a t i v e , d i r e c t o r , a g e n t, or employee; P ro v id e d , f u r t h e r . That th e p r i n c i p a l s or employees who a r e j u r i d i c a l persons s h a l l be amenable only t o th e pecu n i a r y p e n a lty corresponding to the p a r t i c u l a r o ffe n s e ; P ro v id e d , s t i l l f u r t h e r , That in case of any v i o l a t i o n committed in the i n t e r e s t of a fo re ig n j u r i d i c a l person l e g a l l y doing b u sin e ss in the P h ilip p in e s by i t s manager, r e p r e s e n t a t i v e , d i r e c t o r , or a g e n t, such v i o l a t i o n s h a l l se rv e a s a ground fo r the immediate re v o c a tio n of i t s li c e n s e to do b u s in e s s ; And p ro v id e d , f i n a l l y . That p ro d u c ts im ported in v i o l a t i o n of th e r u l e s and r e g u la tio n s is s u e d by v i r t u e of t h i s Act s h a l l be s u b je c t to f o r f e i t u re in accordance w ith the procedure e s ta b lis h e d under C hapter 29 of th e Revised A d m in is tra tiv e Code. S e c tio n 6 . Nothing in t h i s Act s h a l l be construed t o v i o l a t e any of th e p ro v is io n s of th e E x ecu tiv e Agreement o f th e R epublic of th e P h ilip p in e s w ith the U nited S ta te s o f America, d ated Ju ly f o u r th , n in e te e n hundred and f o r t y - s i x . S e c tio n 7» The a u t h o r i t y h e re in g ran ted to th e P r e s id e n t to r e g u la te th e volume of im p o rts by quota or l i c e n s e or perm it s h a ll te rm in a te on December t h i r t y - o n e , n in e te e n hundred and f o r t y - n i n e . S e c tio n 8 . T his Act s h a l l ta k e e f f e c t upon th e iss u a n c e of an E xecutive Order by the P re s id e n t of th e P h ilip p i n e s . APPROVED: P re s id e n to f the Senate Speaker of the House of R e p re s e n ta tiv e s lMf APPENDIX B REPUBLIC ACT NO. M -26 AN ACT TO REGULATE IMPORTS AND FOR OTHER PURPOSES Be i t en aeted by th e Senate and House of R e p re s e n ta tiv e s of the P h ilip p in e s in Congress assem bled: SECTION 1. As used In t h i s A ct: (a) D e f in itio n s : (1) "Im port quota" r e f e r s to th e t o t a l v alu e of any item of im port allow ed f o r e n try In to th e P h ilip p in e s fo r any s p e c if ie d p e rio d . (2) "Quota a l l o c a t i o n " r e f e r s to th e t o t a l v a lu e of im ports of any p a r t i c u l a r item allow ed t o any im p o rte r, or t h a t p o rtio n of the im port quota granted to th e im p o rte r. (3) "Im port lic e n s e " r e f e r s to th e perm it issu ed by th e Import C ontrol Board to import any p a r t i c u l a r shipment of commodities. (1 + .) ‘'F oreign exchange" r e f e r s to any medium fo r e f f e c tin g i n t e r n a t i o n a l payments. (5) "Old im p o rter" r e f e r s to any p erso n , whether n a t u r a l or j u r i d i c a l , who im ported a p a r t i c u la r commodity in th e y e a rs n in e te e n hun dred fo rty -s e v e n a n d /o r n in e te e n hundred f o r t y - e i g h t . ( 6 ) "New Im porter" r e f e r s t o a l l o th e r im p o rte rs. (7) "Board" r e f e r s to th e Import C ontrol Board. ( 8 ) "Commissioner" r e f e r s to th e Chief of th e Import C ontrol A d m in is tra tio n . lb? ^ SEC. 2. There i s hereby c re a te d an Import C o n tro l Board composed of th r e e members who s h a l l be a p p o in ted by th e P re s id e n t of th e P h ilip p i n e s , w ith t h e consent o f th e Commission on Appointments and s h a l l hold o f f i c e f o r two y e a r s , one o f whom s h a l l be d e sig n a te d as Chairman by the P r e s id e n t. One member s h a l l re p r e s e n t th e C e n tra l Bank; one, th e businessm en; and one, th e consumers: P ro v id ed . That w ith the ex c ep tio n of th e member re p r e s e n tin g th e Cen t r a l Bank, no o th e r member s h a ll be connected w ith th e Government or any of i t s a g e n c ie s , i n s t r u m e n t a l i t i e s , or c o rp o ra tio n owned or c o n tro lle d by i t . VThe two members of th e board n o t r e p re s e n tin g th e Cen t r a l Board s h a l l each re c e iv e a per diem com pensation a t th e r a t e of tw e n ty -fiv e pesos f o r every meeting a tte n d e d , b u t the t o t a l of which per diems for the whole year s h a l l n o t exceed s ix thousand pesos fo r each member. / SEC. 3. The Import C o n tro l Board s h a l l : (1) E s t a b l i s h th e p o l i c i e s governing the fix in g and a l l o c a t i o n of quotas f o r any a r t i c l e , goods or commodity, p u rsu an t to th e p ro v is io n s of t h i s A ct; (2) Promulgate such r u l e s and r e g u la tio n s as may be n e c e s s a ry fo r th e proper enforcem ent a n d /o r im plem entation of t h i s A ct; (3) E x e rc is e su p e rv is io n and c o n tro l over th e Import C o n tro l A d m in is tra tio n , and review , on a p p e a l, any d e c is io n , r u l i n g or opin io n iss u e d by the Import C ontrol A d m in istra t i o n or by i t s Commissioner, and (b) Be re s p o n s ib le for c a rry in g out th e p ro v is io n s of t h i s Act and such r u l e s and r e g u la tio n s iss u e d t h e r e under. SEC. b. In o rd er to provide for the proper ad m in is t r a t i o n m achinery in c a rry in g out th e p o l i c i e s , r u l i n g s , o rd e rs or o p in io n s of the Import C o n tro l Board, as w e ll as th e p ro v is io n s of t h i s A ct, th e r e i s hereby c re a te d th e Im port C ontrol A d m in is tra tio n whose c h ie f s h a l l be known as Commissioner and who s h a l l have th e fo llo w in g powers: *(1) To g ra n t quota a l l o c a t i o n s among im p o rte rs in accordance w ith th e p o l i c i e s e s ta b li s h e d by th e Import C o n tro l Board and th e p ro v is io n s o f t h i s A ct; / , 1^6 (2) To re c e iv e and a c t on a p p l ic a tio n s f o r quota a l l o c a t i o n s and im port l i c e n s e s and is s u e the corresponding quota a l l o c a t i o n s and im port lic e n s e s for a p p l ic a tio n s approved, p u rsu an t to th e p o l i c i e s l a i d down by th e Import C o n tro l Board and th e p ro v is io n s of t h i s A ct; (3) To c a rry ou t and implement a ^ l p o l i c i e s and r e s o l u tio n s e s ta b li s h e d by the Import C o n tro l Board; and (*0 To ap p o in t th e p erso n n el of h is o f f i c e s u b je c t to th e ap p ro v al of th e Import C o n tro l Board; P ro v id e d , That a l l appointm ents in th e a d m in is tra tio n s h a l l be s u b je c t to th e c i v i l s e rv ic e law, r u l e s and r e g u la tio n s . The Commissioner s h a l l be ap p o in ted by th e P re sid e n t of th e P h ilip p i n e s , w ith th e consent of th e Commission on A ppointm ents, and s h a l l hold o f f i c e fo r two y e a r s . He s h a ll re c e iv e a s a la r y of te n thousand pesos per annum. He s h a ll n o t hold any o f f i c e in any government e n t i t y , agency or c o r p o r a tio n , nor s h a l l he have any pecu n iary i n t e r e s t in any company or c o rp o ra tio n a f f e c t e d by th e fu n c tio n s o f h is o f f i c e . a . The Import C o n tro l A d m in is tra tio n s h a l l have an a u d i to r who s h a l l be a p p o in ted by the A u d ito r G eneral and s h a l l re c e iv e a com pensation of s i x thousand pesos per annum. He s h a l l a u d i t th e ac co u n ts of th e Import C ontrol Board and th e Import C o n tro l A d m in is tra tio n , a s w e ll as a l l quotas of a l l item s of im ports and th e a l l o c a t i o n s o f th e same o f a l l im p o rte rs , in accordance w ith a u d itin g laws and u su a l a u d itin g p r a c t i c e s . b . The Import C o n tro l A d m in is tra tio n s h a l l c r e a te a R esearch and S t a t i s t i c s D iv isio n to submit s t a t i s t i c a l data f o r the guidance of th e Import C o n tro l Board f o r f ix in g im port quotas and g ra n tin g im port a l l o c a t i o n s . c . The P re s id e n t of th e P h ilip p in e s s h a l l have d i r e c t c o n tr o l and s u p e rv is io n and c o n tr o l over th e Board and the Im port C o n tro l A d m in is tra tio n . / SEC. 5. Any person d e s ir i n g to import any a r t i c l e , goods, or commodities in to th e P h ilip p in e s s h a l l f i l e an a p p l i c a t i o n fo r a corresponding quota a l l o c a t i o n and th e l i c e n s e w ith th e Import C ontrol A d m in is tra tio n . For old im p o rte rs , th e a p p l i c a t i o n s h a l l be executed under o ath and s h a l l c o n ta in , among o th e r s , t h e i r name, a d d re s s , lb? n a t i o n a l i t y , sto c k on hand o f the goods a p p lie d , th e amount of t h e i r im p o rta tio n in th e y e a rs n in e te e n f o r t y - s i x , n in e te e n hundred f o rty - s e v e n and n in e te e n f o r t y - e i g h t of th e a r t i c l e s , goods or commodities a p p lie d f o r ; and i f a new im p o rte r, h is a p p l ic a tio n s h a l l c o n ta in a statem en t of h is a c t u a l f i n a n c i a l re so u rc e s to fin a n c e the im p o rta tio n of th e goods a p p lie d f o r . ^SEC. 6 . No p erso n , c o rp o ra tio n or a s s o c i a t i o n s h a l l im port any a r t i c l e , goods, or commodity in to th e P h i l i p p in e s w ith o u t a proper im port l ic e n s e iss u e d f o r s a id p u r- . pose in accordance w ith t h i s A ct. Any im p o rta tio n or o rd e r to 'im p o r t any a r t i c l e , goods or commodities under c o n t r o l under the old Import C o n tro l Law between A p ril t h i r t y n in e te e n f i f t y and th e d a te of th e ap proval of t h i s A ct, s h a l l be co n sid ered i l l e g a l u n le s s such o rd er o r im p o r ta ti o n was duly approved by th e old Import C ontrol Board. SEC. 7. Import quotas s h a l l be fix e d by th e Import C o n tro l Board In accordance w ith the follow ing schedule o f p e r c e n ta g e s : / (1) Prime im ports which s h a l l c o n s is t of a r t i c l e s , goods and commodities of prime a n d /o r f i r s t n e c e s s ity and n o t s u f f i c i e n t l y a v a i l a b l e l o c a l l y , l i k e th o se enumerated in Appendix ”A,f h e re to a tta c h e d , s h a ll be reduced by no t more th an f o r t y per centum. C o n s is te n t w ith th e p o lic y of conserving i n t e r n a t i o n a l monetary r e s e rv e s and u n t i l dom estic p ro d u ctio n w a rra n ts r e d u c tio n of im p o rta tio n , e n try of th e s e commodi t i e s s h a l l be allow ed as much as p o s s ib le . ^ (2) E s s e n t i a l im ports c o n s is tin g of a r t i c l e s , goods and commodities which, though n o t of prime a n d /o r f i r s t n e c e s s i t y , a re n e c essa ry f o r th e h e a l t h and m a te r ia l w e l l being of th e p eo p le , l i k e th o se enumerated In Appendix ’’B ", s h a l l be reduced by not le s s th an f o r t y per centum n o r more than s ix t y per centum. Im p o rtatio n of th e s e commodities s h a l l be g rad u a l l y reduced w ith th e end in view of encouraging t h e i r dom estic p ro d u ctio n . ^ (3 ) N o n -e s s e n tia l im ports c o n s is tin g of a r t i c l e s , goods and commodities w hich, though n o t n e c e ssary fo r the 1^8 ^ h e a lth and m a te r ia l w e ll-b e in g of th e p eople, but whose consumption is concom itant w ith th e r i s e of t h e i r stan d ard o f l i v i n g , l i k e th o se enumerated in Appendix ,fCM , s h a l l be reduced by n o t l e s s than s i x t y percentum nor more th an e ig h ty per centum. Im p o rtatio n of th e s e commodities s h a l l be reduced as much as p o s s ib le to s tim u la te dom estic p ro d u c tio n or manu f a c t u r e th e re o f in s u f f i c i e n t q u a n t i t i e s w ith the end in view of u lti m a t e ly supplying th e lo c a l demand f o r such com modities. * (*+ •) Luxury im ports c o n s is tin g of a r t i c l e s , goods, and commodities in ten d ed p r im a r ily fo r o s t e n t a t i o n or p le a s u re , s h a l l be reduced by not l e s s th an e ig h ty per centum nor more th a n n in e ty per centum. To f o s t e r th e h a b it of t h r i f t among the people and to conserve f u r t h e r our d o l l a r r e s e r v e , im p o rta tio n of th e se commodities s h a l l be disco u rag ed com pletely. Upon the j o i n t c e r t i f i c a t i o n by th e S e c re ta ry of A gri c u l tu r e and N a tu ra l Resources and th e S e c re ta ry of Commerce and In d u s try t h a t the dom estic supply of c e r t a i n a r t i c l e s , goods or commodities h e r e to fo r e im ported is s u f f i c i e n t to meet th e lo c a l demand, th e Board s h a l l impose th e maximum p erc e n ta g e re d u c tio n on th e im port quotas fo r such a r t i c l e s , . 1 goods or com modities, as provided fo r i n t h i s A ct. Upon j o i n t c e r t i f i c a t i o n by the S e c re ta ry of A g ric u ltu re and N a tio n a l Resources and th e S e c re ta ry of Commerce and Indus t r y t h a t an a r t i c l e or commodity not under c o n tr o l has a s u f f i c i e n t lo c a l supply to meet ad e q u ate ly the lo c a l demand, and th e Board upon i n v e s t i g a t i o n , i s convinced of th e n ec es s i t y of c o n t r o ll in g such item s to p r o te c t lo c a l in d u s tr y or i n d u s t r i e s , t i e Im port C o n tro l Board, may, p la c e in th e con t r o l l i s t th e sa id a r t i c l e or commodity. The Import C o n tro l Board i s hereby a u th o riz e d to t r a n s f e r a c o n tro lle d im port item from a lower c l a s s to a higher c l a s s of im port should th e Board be convinced t h a t th e l o c a l supply of sa id commodity w a rra n ts s a id t r a n s f e r . 1 SEC. 8 . The fo llo w in g im ports s h a l l be ad m itted w ith ou t im port quota a l l o c a t i o n : (1) Raw m a te r ia ls im ported to be used in the manufac t u r e of commodities c o n s t i t u t i n g prime a n d /o r f i r s t n e c es s i t y im p o rts, as d efin ed in t h i s A ct, as w ell as raw 1^9 m a te r ia ls which in them selves c o n s t i t u t e prime an d /o r f i r s t n e c e s s i t y im ports and e s s e n t i a l im p o rts, when used in lo c a l o r in th e m anufacture of d o lia r - s a v in g and d o lla r-p ro d u c in g com m odities, i f such raw m a te r ia ls a re not s u f f i c i e n t l y a v a i l a b l e in the P h ilip p in e s . (2) A r t i c l e s , goods and commodities in ten d ed s o le ly f o r th e p erso n a l use of th e person im porting provided no fo r e ig n exchange i s used. (3) S u p p lies and equipments in ten d ed s o le ly f o r the use of the Armed F orces of th e P h ilip p in e s and of the U nited S ta te s of America, P h ilip p in e Government and semi government h o s p i t a l s , and of th e P h ilip p in e N atio n al Red C ro ss, books, s u p p lie s and equipments for sc h o o ls and th o se fo r th e use of th e community c h e s t and o th er duly r e g i s t e r e d c h a r i t a b l e o rg a n iz a tio n s and c h a r i t a b l e mis sio n a ry e s ta b lis h m e n ts . (*+) A r t i c l e s , goods and commodities im ported in exchange or b a r te re d w ith P h ilip p in e p ro d u c ts, ex cep t th e lu x u ry im ports as d e fin e d in t h i s Act and c o n tro lle d non- e s s e n t i a l im ports produced or m anufactured l o c a l l y in s u f f i c i e n t q u a n t i t i e s to meet th e demand of th e p u b lic : P ro v id e d . That th e Import C o n tro l Board s h a l l determ ine what P h ilip p in e e x p o rts s h a l l no t be p e rm is s ib le fo r b a r t e r purposes under the p ro v is io n s o f t h i s A ct. (5) Goods in ten d ed s o le ly fo r use in r e l i g i o u s r i t e s and cerem onies. (6 ) Goods Im ported p u rsu an t to the p ro v is io n s of any P ric e C ontrol Law or r e g u la tio n . (7^ Goods intended s o le ly f o r r e n t , le a s e or e x h ib i t i o n : P ro v id ed . That a t l e a s t tw e n ty -fiv e per centum of th e g ro ss r e n t a l s , r o y a l t i e s and e a rn in g s paid th e r e f o r s h a l l not be allow ed fo r re m itta n c e abroad. SEC. 9. No item o f im port no t enumerated in th e appen d ic e s of t h i s Act s h a l l be allow ed an im port lic e n s e and exchange cover in excess of i t s im port v a lu e ( C .I .F .) fo r th e y ea r 19^8 except a g r i c u l t u r a l m achineries and equipment and o th e r m achinery, m a te r ia ls and equipment f o r d o l l a r - producing and d o lla r - s a v in g i n d u s t r i e s . SEC. 10. For the purpose of f ix in g th e im port quota f o r each a r t i c l e , goods, or commodity, th e average annual 1 5 0 C .I .F . v alu e th e r e o f f o r th e y e a rs n in e te e n hundred f o r t y - s i x , n in e te e n hundred f o rty - s e v e n arid n in e te e n hundred f o r t y - e i g h t , s h a l l he used as b a s i s . SEC. 11. W ithin t h i r t y days a f t e r the Import C ontrol Board as h e re in provided s h a l l have fix ed th e im port quota f o r each item of im p o rt, any im porter d e s irin g to import any such item may f i l e an a p p l i c a t i o n w ith the Commissioner f o r an a l l o c a t i o n of a p o rtio n o f sa id im port q u o ta . Any r u l i n g or r e s o lu t io n o f th e Import C ontrol Board, as p ro v id e d in R epublic Act Numbered Three hundred t h i r t y to th e c o n tra ry n o tw ith s ta n d in g , th e a p p lic a n ts may f i l e t h e i r a p p l i c a t i o n w ith in f o r t y - f i v e days a f t e r th e ap p ro v al of t h i s A ct. . SEC. 12. The p o r tio n o f th e im port quotas a v a ila b le f o r old im p o r te rs h a ll be a l l o c a t e d by th e Commissioner among them, in p ro p o rtio n t o th e annual average amount of t h e i r im p o rta tio n of th e a r t i c l e s and on th e evidence of th e s a le s ta x a c t u a l l y paid by them corresponding to th e y e a rs n in e te e n hundred f o r t y - s i x , n in e te e n hundred f o r t y - seven and n in e te e n hundred f o r t y - e i g h t . The im p o r te r s ’ ta x r e c e i p t s corresponding to any p a r t i c u l a r a r t i c l e , goods, or commodity being a c e r t i f i c a t i o n under o a th and o th e r docu m entary evidence s h a l l be used a s the p r in c ip a l b a s i s fo r determ in in g th e v alu e of the p rev io u s im ports of such im p o rte rs : P ro v id e d . That no im p o rter s h a l l be allow ed more th a n t h i r t y per centum o f th e t o t a l im port quota for any item except when such l i m i t a t i o n may, in t h e o pinion of th e Import C o n tro l Board, be d e trim e n ta l t o p u b lic i n t e r e s t . A llo c a tio n for im p o rte rs who imported during a f r a c t i o n only of the y ear 19^7 and 19^8 s h a l l be computed on the b ases of the r a t i o which s a id f r a c t i o n of th e year b e a rs to th e whole y e a r. SEC. 13. In determ ining the a l l o c a t i o n of import quota among old and new im p o rte rs , a l l government ag en cie s im porting any p a r t i c u l a r a r t i c l e , goods or commodity s h a l l be in clu d ed and considered as p r iv a te im p o rte rs , and in such c a s e s , the v alu e of t h e i r r e s p e c tiv e im ports may be based on documentary evidence o ther th an ta x r e c e i p t s . SEC. 1^. The Board s h a l l re s e rv e t h i r t y per centum o f th e t o t a l import quota for any a r t i c l e , goods or com m o d itie s f o r the f i s c a l year n in e te e n hundred f i f t y and n in e te e n hundred f i f t y - o n e , f o r t y per centum f o r th e f i s c a l y ea r n in e te e n hundred f i f t y - o n e and n in e te e n hundred f i f t y - tw o, and f i f t y per centum fo r th e f i s c a l y ear n in e te e n 151 hundred f i f t y - t w o and n in e te e n hundred f i f t y - t h r e e in favor of bona f id e new im p o rte rs who d id n o t import such item s a t any tim e .d u rin g th e y ears n in e te e n hundred f o r t y - s i x , n in e te e n hundred fo rty -s e v e n and n in e te e n hundred f o r t y - e i g h t . To q u a lify as new im p o rte r, one must be a F i l i p i n o c i t i z e n or a j u r i d i c a l e n t i t y of a t l e a s t s ix ty per centum of whose s to c k i s owned by F i l i p i n o c i t i z e n s . A fter th e t o t a l num b er of new im p o rte rs has been determ ined, th e p o rtio n of th e im port quota h e r e in re se rv e d s h a l l be a l l o c a t e d p ro p o r t i o n a t e l y among them on th e b a s is of f i n a n c i a l c a p a c ity and b u sin e ss sta n d in g of th e a p p l ic a n t: P ro v id e d . That s a id a p p lic a n t has been duly lic e n s e d to engage in a b u s i n e ss and in d u s try and has an e s t a b l i s h e d p la c e of b u sin e ss or c o o p e ra tiv e a s s o c ia tio n organized under th e Commonwealth Act Numbered Five hundred s i x t y - f i v e known as th e N atio n al C ooperative A ct. Should th e re be no such new a p p lic a n ts or should th e s a id re se rv e d p o rtio n be n o t e n t i r e l y covered by new a p p l i c a n t s , the sa id re s e rv e d p o rtio n o f th e import quota or any balan ce th e re o f s h a l l be a l l o c a t e d among the r e s t of th e im p o rte rs: P ro v id e d , f u r t h e r . That n othing co n tain e d in t h i s s e c tio n s h a l l in any way im pair or ab rid g e th e r i g h t g ra n te d to c i t i z e n s and j u r i d i c a l e n t i t i e s of the U nited S ta te s of America under th e E xecutive Agreement signed on July f o u r th , n in e te e n hundred f o r t y - s i x , between t h a t co u n try and th e R epublic of th e P h ilip p in e s . SEC. 15. Any e x i s t i n g law, ex e c u tiv e o rd e r or r e g u la t i o n to th e c o n tra ry n o tw ith s ta n d in g , no government, o f f i c e , agency, o r in s tr u m e n t a li ty , except th e Import C ontrol Commis s io n e r , s h a l l a l l o c a t e th e im port quota among th e v a rio u s im p o rte rs : P ro v id e d . That th e P h ilip p in e R e lie f and Trade R e h a b i l i t a t i o n A d m in istra tio n s h a l l have e x c lu s iv e power and a u t h o r i t y to determ ine and r e g u la te th e a l l o c a t i o n of wheat f lo u r among im p o rte rs . Quota a l l o c a t i o n s of any im porter for any p a r t i c u l a r a r t i c l e , in c lu d in g wheat f l o u r , s h a l l not be t r a n s f e r a b l e . I t s h a l l be i l l e g a l to cede, t r a n s f e r , s e l l , r e n t , le a s e or d o n ate, h is or i t s im port quota a l l o c a t i o n or li c e n s e , e i t h e r d i r e c t l y or i n d i r e c t l y or by th e use of any stim u la t i o n , s tr a t e g y or scheme, to persons or e n t i t i e s no t e n t i t l e d to import quota under th e p ro v is io n s o f t h i s A ct, and any vidLation th e re o f s h a l l be p u n ish ab le w ith th e f o r f e i t u r e by the Commissioner of the im port quota or lic e n s e of th e e r r in g p a r ty w ith o u t p r e ju d ic e t o h is s u b je c tio n to the p en a l p ro v isio n s of t h i s A ct. 152 SEC. 16. I f th e Commissioner, a f t e r a thorough in v e s t i g a t i o n , is s a t i s f i e d t h a t an a p p l ic a tio n fo r quota a l l o c a t i o n or lic e n s e is in order and t h a t th e a p p lic a n t has complied w ith a l l th e req u irem en ts provided in t h i s A ct, and th e r u l e s and r e g u la tio n s issu ed th e re u n d e r, he s h a l l approve i t and is s u e th e corresponding im port lic e n s e s P ro v id e d , however. That no a p p l ic a tio n s h a l l remain pend ing in th e o f f ic e of the Import C ontrol A d m in istra tio n f o r a p e rio d longer than s ix t y days, o th e rw ise , th e Commissioner s h a l l be made to account to th e Import C ontrol Board fo r th e d e la y , and f a i l u r e to give s a t i s f a c t o r y e x p la n a tio n s h a l l be gronnd for d is m is s a l or any o th e r a p p ro p ria te a d m in is tr a tiv e a c t i o n . A p p lic a tio n s fo r quota a l l o c a t i o n s s h a l l be numbered c o r r e l a t i v e l y , based on the c h ro n o lo g ic a l o rd e r of t h e i r f i l i n g , showing the d ate and hour each a p p l i ca n t f i l e d h is a p p l i c a t i o n . No a p p l ic a tio n s h a l l be a c te d upon u n le ss a c tio n has been ta k en upon o th e r a p p l ic a tio n s p re v io u s ly f i l e d t h e r e t o . A p p lic a tio n s fo r quota a l l o c a t i o n s s h a l l be stamped w ith th e d ate and hour when i t was f i l e d and a corresponding r e c e i p t s h a ll be issu e d to t h e a p p lic a n t th e re o f showing th e number of th e a p p l ic a tio n , th e d ate and hour of f i l i n g , pu rsu an t to t h e p ro v isio n s of t h i s s e c tio n : P ro v id e d , m oreover. That a l l im port quota a l l o c a t i o n s and lic e n s e s pending a t th e time of th e approval of t h i s Act s h a l l be co n sid ered new a p p l i c a t i o n s in th e l i g h t of th e p ro v is io n s of t h i s s e c tio n . ' SEC. 17. The Monetary Board of th e C e n tra l Bank s h a ll c e r t i f y t o th e Import C o n tro l Board from tim e to time the amount of exchange a v a i l a b l e fo r any s p e c if ie d p erio d f o r im port p u rposes. The Commissioner s h a l l not is s u e any im port lic e n s e when the v alu e involved in su ch im p o rta tio n exceeds th e b alan ce of th e t o t a l fo re ig n exchange a v a ila b le fo r t h a t p erio d as c e r t i f i e d by the C e n tra l Bank. SEC. 18. Upon p r e s e n ta ti o n of an im port lic e n s e duly is s u e d by the Commissioner, th e C e n tra l Bank s h a l l is s u e to th e h o ld e r th e re o f th e co rresp o n d in g exchange co v er. SEC. 19. When the fo re ig n exchange a v a ila b le cannot cover a l l th e a p p l ic a tio n s fo r im p o rta tio n , th e Import Con t r o l Board s h a l l reduce p r o p o rtio n a te ly the fo re ig n exchange a v a i l a b l e among th e import lic e n s e h o ld d rs. SEC. 20. Any v i o l a t i o n of the p ro v is io n s of t h i s Act or any r u le s and r e g u la tio n s issu ed th e re u n d er s h a l l be punished by a f in e of n o t l e s s than f iv e thousand pesos nor 153 more th an f i f t y thousand p eso s, or by imprisonment fo r not l e s s th an two y e a rs nor more th a n f iv e y e a rs , or by both such f in e and imprisonment a t the d i s c r e t i o n o f th e Courts P ro v id e d , That in the case of a l i e n s , th e p e n a lty s h a l l c o n s is t of payment of f in e and immediate d e p o r ta tio n w ith out th e n e c e s s ity of any f u r t h e r proceedings on th e p a r t of th e D ep o rtatio n Board: P ro v id e d , f u r t h e r . That i f th e v i o l a t i o n is committed by th e manager, r e p r e s e n t a t i v e , d i r e c t o r , a g e n t, or employee of any n a t u r a l or j u r i d i c a l person i n th e i n t e r e s t of th e l a t t e r , such v i o l a t i o n s h a l l re n d e r s a id n a t u r a l or j u r i d i c a l person amenable to th e p e n a l t i e s corresponding to the o ffe n s e , w ith o u t p r e ju d ic e t o the im p o sitio n o f the proper p e n a lty , e i t h e r p e rso n a l or p ecu n iary o r b o th , upon th e manager, r e p r e s e n t a t i v e , d i r e c t o r , a g e n t, o r employee: P ro v id e d , f u r t h e r , That any o f f i c e r or employee of th e Im port C ontrol Board and Import C o n tro l A d m in istra tio n v i o l a t i n g any p ro v is io n o f t h i s Act o r r u l e s and r e g u la tio n s iss u e d in pursuance of t h i s law s h a l l be summarily dism issed w ith o u t p re ju d ic e to th e f i l i n g o f c rim in a l a c tio n a g a in s t him: P ro v id e d . f u r t h e r , That j u r i d i c a l persons s h a l l be amenable only to th e f in e p e n a lty : P ro v id e d , f u r t h e r . That in case of any v i o l a t i o n committed in the i n t e r e s t of a fo re ig n j u r i d i c a l person du ly lic e n s e d to engage in b u sin e ss in the P h ilip p in e s by i t s manager, r e p r e s e n t a t i v e , d i r e c t o r or a g e n t, such v i o l a t i o n s h a l l bd s u f f i c i e n t cause fo r the immediate re v o c a tio n of such l i c e n s e : And p ro v id e d , l a s t l y . That a r t i c l e s , goods or commodities im ported in v i o l a t i o n o f t h i s Act s h a l l be s u b je c t to f o r f e i t u r e in accordance w ith the pro ceed in g s e s ta b lis h e d in A r t i c l e E ig h te e n , Chapter T h ir ty - n in e of the Revised A d m in is tra tiv e Code, and under no circu m stan ce or c o n d itio n s may the goods be r e le a s e d to th e im p o rter th e r e o f : P rovided, f i n a l l y . That any o f f i c i a l o r employee of th e th re e aforem entioned ag e n cie s who s h a l l be found g u ilt y o f v i o l a t i n g A r t i c l e s Two hundred ten and Two hundred elev en of th e Revised Penal Code on b r i b e r y , s h a l l s u f f e r n o t only th e p e n a l t i e s provided fo r In th o se two a r t i c l e s but a ls o th e p e n a l t i e s provided for under t h i s s e c tio n , and s h a ll f u r t h e r s u f f e r p e rp e tu a l d i s q u a l i f i c a t i o n from holding p u b lic o f f i c e . Any im porter who o rd e rs to import or im ports any a r t i c l e , goods or commodity w ithout f i r s t secu rin g an import l i c e n s e t h e r e f o r , in accordance w ith the p ro v is io n s of t h i s A ct, s h a l l be d i s q u a l i f i e d to do b u sin e ss in the P h ilip p in e s and h is lic e n s e s h a l l be withdrawn by th e C o lle c to r of I n t e r n a l Revenue. 15^ No member of the Import C ontrol Board nor any o f f i c e r of the C e n tra l Bank or the Import C o n tro l A d m in istra tio n s h a l l d i r e c t l y or i n d i r e c t l y be f i n a n c i a l l y i n t e r e s t e d in any im p o rta tio n b u s in e s s , nor s h a l l he engage h im self in th e im p o rta tio n of goods s u b je c t to th e r e s t r i c t i o n s provided fo r in t h i s A ct. Any o f f i c i a l or employee of th e Import C o n tro l Board, or th e Import C o n tro l A d m in is tra tio n , or the C e n tra l Bank who a id s any person or e n t i t y in the v i o l a t i o n or circum vention of any o f th e p ro v isio n s o f t h i s Act or any of th e r u l e s or r e g u la tio n s issu ed th e re u n d e r s h a l l , upon c o n v ic tio n , be s u b je c t to the same p e n a lty h e r e in above provided and be d i s q u a l i f i e d p e r p e tu a lly from holding any p u b lic o f f i c e . SEC. 21. The sums of seven hundred f i f t y thousand pesos a n n u a lly , or so much th e re o f as may be n e c essa ry to c a rr y out th e purposes of t h i s A ct, and u n t i l Congress p ro v id es o th e rw ise , i s hereby a p p ro p ria te d out of any funds in th e N a tio n a l T reasu ry n o t o th erw ise a p p r o p ria te d , t o d e fra y the expenses of th e Import C o n tro l Board and th e Import C o n tro l A d m in is tra tio n . SEC. 22. Any a c t or e x e c u tiv e o rd e r, r u l e s or r e g u la t i o n s whose p ro v is io n s a re c o n tra ry to or in c o n tra v e n tio n w ith any p ro v is io n s of t h i s Act a re hereby re p e a le d . Any s e c tio n or p ro v is io n of t h i s Act t h a t may be d ec lare d u n c o n s titu t io n a l by a competent c o u r t, s h a l l not a f f e c t th e rem aining p ro v is io n s th e r e o f . SEC. 23. The Import C o n tro l Board s h a l l , as soon a s p o s s ib le , and in no case exceeding s ix t y days, f i x a l l the im port quotas of a l l item s of im ports as provided fo r in t h i s A ct; meantime, a l l the e x is tin g quotas and a l l o c a t i o n s as w e ll as r u l e s and r e g u la tio n s bn im port c o n tr o l s h a ll co n tin u e u n t i l re v is e d or re p e a le d , and th e Members of th e Import C o n tro l Board and th e Import C ontrol Commis s io n e r s h a l l remain i n o f f ic e u n t i l th e P re s id e n t has ap p o in ted t h e i r S uccessors. SEC. 2^-. T his Act s h a l l ta k e e f f e c t upon i t s a p p ro v a l. Approved, P r e s id e n t o f t h e S e n a te 155 Speaker of the House of R e p re s e n ta tiv e s F i n a l l y passed by the Senate on May 18, 1950. S e c re ta ry of th e Senate T his A ct, which o r ig in a te d in t h e House of R e p re sen ta t i v e s , was f i n a l l y passed by the same on May 18, 1950. S e c re ta ry of the House o f Repre s e n ta ti v e s Approved: May 22, 1950 by th e P re s id e n t of the P h ilip p i n e s . 156 APPENDIX C EXECUTIVE ORDER NO. 193 BY THE PRESIDENT OF THE PHILIPPINES PRESCRIBING RULES AND REGULATIONS TO CARRY INTO EFFECT THE CONTROL AND REGULATION OF IMPORTS OF NON-ESSENTIAL AND LUXURY ARTICLES INTO THE PHILIPPINES AS APPROVED FOR IN REPUBLIC ACT NO. 330. By v i r t u e of th e powers v e ste d in me under REPUBLIC ACT NO. 330, e n t i t l e d , "AN ACT AUTHORIZING THE PRESIDENT O F THE PHILIPPINES TO ESTABLISH A SYSTEM OF IMPORT CONTROL BY CREATING AN IMPORT CONTROL BOARD, REGULATING IMPORTS OF NON-ESSENTIAL AND LUXURY ARTICLES, AUTHORIZING THE ISSUANCE OF RULES AND REGULATIONS TO CARRY INTO EFFECT SUCH CONTROL, AND PENALIZING VIOLATIONS OF THIS ACT," I , ELPIDIO QU3RIN0, PRESIDENT OF THE PHILIPPINES, do hereby o rd e r: SECTION 1: From and a f t e r th e d a te of e f f e c t i v i t y of t h i s o rd e r, no n o n - e s s e n tia l or luxury a r t i c l e s p e c i f i c a l l y mentioned in th e l i s t r e f e r r e d to in S e c tio n 2 h ereo f s h a l l be im ported in to th e P h ilip p in e s w ith o u t an im port lic e n s e duly iss u e d by th e Import C o n tro l Board In accordance w ith th e p ro v isio n s of t h i s o rd e r. Such lic e n s e s h a ll be signed "By a u t h o r it y of th e P resident.: Chairman, Import C o n tro l B oard." SECTION 2. The a r t i c l e s included in th e accompanying l i s t . . . , duly c e r t i f i e d by th e Chairman, Import C ontrol Board, by a u t h o r it y of th e P re s id e n t, s h a l l be considered lu x u ry or n o n - e s s e n tia l a r t i c l e s . The Import C ontrol Board, w ith th e a u t h o r it y of th e P re s id e n t, may, from tim e to tim e, and as circu m stan ces w a rra n t, add t o , or d e l e t e from th e sa id l i s t . SECTION 3« The q u a n tity or value of e a c h luxury or n o n - e s s e n tia l a r t i c l e s th a t may be im ported w ith in t h e year 19*+9 s h a l l be fix e d by th e Import C ontrol Board, by a u th o r i t y of th e P r e s id e n t, q u a r t e r l y , se m i-an n u a lly , or a n n u a lly , a t the d i s c r e t i o n of t h e Board in accordance w ith th e sche d u le of p ercen tag e re d u c tio n s p re s c rib e d h e rein as shown in th e accompanying sch ed u le, marked . . . duly c e r t i f i e d by th e Chairman, Import C o n tro l Board, w ith th e a u t h o r i t y of th e P re s id e n t. 1 5 7 SECTION V. The Import C ontrol Board s h a l l f ix th e quota for each a r t i c l e in term s of q u a n t i t i e s or t o t a l money v a lu es and s h a l l a l l o c a t e such q u o ta, by a u t h o r i t y o f th e P r e s id e n t, to th e im p o rte rs duly r e g i s t e r e d fo r such a r t i c l e on the b a s i s of t h e i r r e s p e c tiv e q u a n t i t i e s or v alu e s of im p o rts during th e base p e rio d reduced in accordance w ith the p ercen tag e h e re in p r e s c rib e d . . . . SECTION 5. Not more than twenty per ce n t (20$) of th e quota fix ed fo r each a r t i c l e s h a l l be s e t a s i d e , to be a l l o c a t e d to im p o rte rs who had no im p o rta tio n during th e base p e rio d mentioned in th e next preceding s e c tio n b u t have been r e g i s t e r e d subsequently as im p o rte rs of such a r t i c l e s . No new im p o rter s h a ll r e c e iv e a percentage a l l o c a t i o n b ig g e r than one f i f t h of t h e p erce n tag e a l l o c a te d as quotas to th e old im p o rte rs. A p p lic a tio n s f o r lic e n s e s to import any p o r tio n of t h i s twenty per c e n t (20$) re se rv e d quota must be f i l e d w ith in one month from th e d ate the quota is announced. Any p a r t of t h i s re s e rv e d quota n o t a l lo c a te d or used s h a ll be a v a ila b le fo r a l l o c a t i o n to th e old im p o rte rs. SECTION 6. An import lic e n s e s h a ll remain v a l i d d u r ing the quota p erio d in which i t was is s u e d . I f , fo r J u s t i f i a b l e cause s a t i s f a c t o r y t o th e Import C ontrol Board, th e shipment does not a r r i v e in th e P h ilip p in e s during th e p e rio d in which th e lic e n s e was is s u e d , th e e n t r y d a te of th e lic e n s e may be extended by th e Board. I f th e Board f in d s t h a t th e im p o rter has f a i l e d or has n o t tak en the proper ste p s to im port th e a r t i c l e covered by t h i s l i c e n s e , th e Board may can cel th e lic e n s e and r e a l l o c a t e th e quan t i t y of m erchandise covered by i t to th e old im p o rters in th e same p ro p o rtio n a s t h e i r quota a l l o c a t i o n s and a c c o rd ing to t h e i r a b i l i t y to f i l l th e o r d e r s . SECTION 7. No p erson, firm , or e s ta b lis h m e n t may be g ra n te d im port lic e n s e u n le s s : (a) He is a duly r e g i s t e r e d im porter J.n th e S e c u ri t i e s and Exchange Commission or in th e Bureau o f Commerce; (b) He is d u ly lic e n s e d to do b u s in e s s in th e P h ilip p in e s and has paid a l l law fu l ta x e s and fe e s due from him; and (c) He is r e g i s t e r e d w ith th e Import C o n tro l Board fo r purposes o f th e Import C ontrol Law. 158 SECTION 8. B efore an Import license may be is s u e d , the a p p lic a n t s h a l l f i l e , w ith t h e Board a w r i tte n a p p l i c a t i o n under o a th , c o n ta in in g th e fo llo w in g in fo rm a tio n : (a) The name and a d d re ss of th e Im porter or h is d uly a u th o riz e d agent or r e p r e s e n t a t i v e ; (b) The name and a d d re s s of the E x p o rte r; (c) The p o rt or p o rts of o r ig in of th e a r t i c l e s to be im ported; (d) The p o rt of d e s t i n a t i o n ; and (e) The d e s c r ip tio n of t h e a r t i c l e s to be imported and the q u a n tity and d e c la re d v alu e th e r e o f . SECTION 9. For every a p p l i c a t i o n for an im port l i c e n s e , a f i l i n g fe e of £ 2 .0 0 s h a l l be charged. A lic e n s e fe e of one peso s h a l l be charged fo r ea ch one thousand f iv e hundredpesos of th e c . i . f . v alu e of the a r t i c l e covered by an im port lic e n s e issu ed by th e Board, or f r a c t i o n of th e s a id v a lu e , amounting to f iv e hundred pesos or more. SECTION 10. The amount of a p p l ic a tio n and lic e n s e f e e s c o lle c te d in accordance w ith th e preceding s e c tio n s h a l l c o n s t i t u t e a re v o lv in g fund to cover expenses of o p e ra tio n of th e Board p u rsu an t to th e p ro v is io n s of S ec tio n 5 of E xecutive Order No. 160, s e r i e s of 19^8. SECTION 11. From and a f t e r the d ate of th e e f f e c t i - v i t y of t h i s Order, every c o n su lar in v o ic e issu ed f o r the im p o rta tio n of n o n - e s s e n tia l and luxury a r t i c l e s i n t o the P h ilip p in e s s h a l l show th e Import License number fo r such im p o rta tio n . SECTION 12. A r t i c l e s im ported in v i o l a t i o n of th e s e r u l e s and r e g u la tio n s s h a l l be s u b je c t to f o r f e i t u r e in accordance w ith th e procedure e s ta b li s h e d under Chapter t h i r t y - n i n e of th e Revised A d m in is tra tiv e Code, and to th e p e n a l t i e s p re s c rib e d by R epublic Act No. 330, o th e r w ise known as the Import C o n tro l Law. 1 5 9 SECTION 13. T h is Order s h a l l take e f f e c t on January 1 , 19*+9* A ll commodities a f f e c t e d by t h i s Order leaving th e p o r ts of em barkation a f t e r sa id d a t e , s h a l l be sub j e c t to t h i s Order. Done in th e C ity of M anila, 28th day of December, in th e year of our Lord, n in e te e n hundred and f o r t y - e i g h t , and of th e Independence of the P h ilip p in e s , the t h i r d . (SGD.) ELPIDIO QUIRINO P re s id e n t of the P h ilip p in e s 160 APPENDIX D EXECUTIVE ORDER NO. 206 AMENDING SECTION b OF EXECUTIVE ORDER NO. 193, DATED DECEM BER 28, 19*+8, ENTITLED "PRESCRIBING RULES AND REGULA TIONS TO CARRY INTO EFFECT THE CONTROL AND REGULATIONS OF IMPORTS OF NON-ESSENTIAL AND LUXURY ARTICLES INTO THE PHILIPPINES AS PROVIDED FOR IN REPUBLIC ACT NO. 330." SECTION of E xecutive Order No. 193, dated December 2 8 , 19*+8, i s hereby amended to read as fo llo w s: "SEC. *+. The Import C ontrol Board s h a l l f i x th e quota f o r each a r t i c l e in term s of q u a n t i t i e s or t o t a l money v a lu e s and s h a ll a l l o c a t e such qu o ta, by a u t h o r i t y of the P r e s id e n t, to the im p o rte rs duly r e g i s t e r e d fo r such a r t i c l e on the b a s is of t h e i r r e s p e c tiv e q u a n t i t i e s or v alu es o f im ports during th e base p erio d reduced in accordance w ith th e p erce n tag e s h e re in p re s c rib e d in Appendix B: P ro v id e d . That the Board, upon r e q u e s t of an im p o rte r, may t r a n s f e r h is quota from one a r t i c l e to a n o th e r." Done in the C ity of M anila, t h i s s i x t e e n t h day of March, in the year of Our Lord, n in e te e n hundred and f o r t y - nine , and of th e Independence of th e P h ilip p i n e s , the t h i r d . (SGD.) ELPIDIO QUIRINO P r e s id e n t of th e P h ilip p in e s By th e P re s id e n t: (SGD.) TEODORO EVANGELISTA E x ec u tiv e S e c re ta ry 161 APPENDIX E EXECUTIVE ORDER NO. 295 REVISING THE RULES AND REGULATIONS ON THE CONTROL OF IMPORTS OF NON-ESSENTIAL AND LUXURY ARTICLES INTO THE PHILIP PINES AS PROVIDED FOR IN REPUBLIC ACT NO. 330. By v i r t u e of the powers v e s te d in me by R epublic Act No. 330, e n t i t l e d 1 1 AN ACT AUTHORIZING THE PRESIDENT OF THE PHILIPPINES TO ESTABLISH A SYSTEM OF IMPORT CONTROL BY REGULATING OF NON-ESSENTIAL AND LUXURY ARTICLES, CREATING AN IMPORT CONTROL BOARD, AUTHORIZING ISSUANCE OF RULES AND REGULATIONS TO CARRY INTO EFFECT SUCH CONTROL AND PENALIZ ING VIOLATIONS OF THIS ACT," I , ELPIDIO QUIRINO, PRESIDENT OF THE PHILIPPINES, do hereby o rd er: SECTION 1. From and a f t e r th e .d a t e of e f f e c t i v i t y of t h i s Order, no a r t i c l e included in the l i s t r e f e r r e d to in S e c tio n 3 h ere o f s h a l l be im ported in to the P h ilip p in e s w ith o u t an im port lic e n s e duly issu ed by th e Import C ontrol Board in accordance w ith the p ro v is io n s of t h i s Order. Such lic e n s e s h a l l be signed "By a u t h o r i t y o f the P resident.: Chairman, Import C ontrol B o ard .” SECTION 2. There is hereby c re a te d an a d m in is tra tiv e committee in th e O ffice of the Import C ontrol Board, com posed of t h e E x ecu tiv e O fficer of th e Import C ontrol Board, a r e p r e s e n ta ti v e of th e Department of F inance, and a r e p r e s e n t a t i v e of the C e n tral Bank of the P h ilip p in e s . T h is committee s h a l l ad m in ister the r u l e s and r e g u la tio n s prom ulgated by th e Import C ontrol Board and recommend such changes to th e Board a s from tim e to tim e may be found n e c e s s a ry to improve th e a d m in is tra tio n of import c o n tro ls and to a c h ie v e t h e purposes for which th e c o n tro ls were e s ta b li s h e d . SECTION 3* The a r t i c l e s included in the accompanying l i s t . . . a re hereby d e c la re d to be luxury or n o n -e sse n t i a l a r t i c l e s and to be s u b je c t to the p ro v isio n s of t h i s O rder. The q u a n tity or v a lu e of such lu x u ry or n o n -essen t i a l a r t i c l e th a t may be imported beginning w ith the d ate o f e f f e c t i v i t y of t h i s Order s h a ll be e s ta b li s h e d by the Import C ontrol Board in accordance w ith the p ercentage re d u c tio n s shown in th e accompanying schedule, marked Appendix B. 162 SECTION The Import C ontrol Board may, from tim e to tim e and a s circu m stan ces w a rra n t, make recommendations to th e P re s id e n t f o r a d d itio n s to or changes i n , or d e l e ti o n s from th e l i s t e s ta b lis h e d in Appendix A, and/or in c re a s e s , d e c re a s e s , or o th e r a l t e r a t i o n s in the percentage re d u c t i o n s e s ta b lis h e d in Appendix B. SECTION 5. The Import C ontrol Board s h a l l a l l o c a t e th e quotas e s ta b li s h e d in accordance w ith Appendix B only among th e im p o rte rs r e g i s t e r e d f o r such a r t i c l e d u rin g the y ea r 19*+8. The Import C ontrol Board s h a l l n o t perm it th e im p o rte rs to t r a n s f e r q u o tas from one a r t i c l e to a n o th e r, bu t may perm it th e t r a n s f e r of quotas from one im porter to a n o th e r, provided said im p o rte rs a r e duly r e g i s t e r e d w ith the Import C o n tro l Board. SECTION 6. N otw ithstanding th e p ro v isio n s of the p r e ceding s e c tio n , th e Import C ontrol Board s h a l l s e t a s id e n o t more than tw enty per cent of th e quota e s ta b lis h e d fo r each a r t i c l e in Appendix B for a l l o c a t i o n t o F i l i p i n o im p o rte rs who had ho im p o rta tio n during the base p erio d of 19^8, b u t have been r e g i s t e r e d subsequently a s im p o rters of such a r t i c l e s : Provided, That a l i e n s who, a f t e r th e base p e rio d , a c t u a l l y im ported and s t i l l continue to im port any c o n tro lle d a r t i c l e may a p p ly a s new im p o rte rs of such a r t i c l e . The Import C ontrol Board s h a ll determ ine th e manner of a l l o c a t i n g the q u o ta s to new im p o rte rs. SECTION 7. An im port lic e n s e s h a l l rem ain Tfalid during th e quota p e rio d in which i t was is s u e d . I f , for j u s t i f i a b le cause s a t i s f a c t o r y t o th e Import C ontrol Board, th e shipment does not a r r i v e in the P h ilip p in e s during th e p e rio d in which th e lic e n s e was is s u e d , th e e x p iry d a te of th e lic e n s e may be extended by th e Board. I f the Board f in d s th a t t h e im porter has f a i l e d or has not taken the proper s te p s to import th e a r t i c l e covered by the l i c e n s e , th e Board may c a n c e l th e l i c e n s e . SECTION 8. No p erson, firm , or e s ta b lis h m e n t may be g ran te d an import lic e n s e u n le s s : (a) He is a duly r e g i s t e r e d im porter in th e S e c u ri t i e s and Exchange Commission or in the Bureau o f Commerce; (b) He is duly lic e n s e d to do b u sin e ss in the P h i l i p p in e s and has paid a l l law ful ta x es and fe e s due from him; and ' 163 (c) He is r e g i s t e r e d w ith the Import C ontrol Board fo r purposes of th e Import C ontrol Law. SECTION 9. Before an import lic e n s e may be is s u e d , the a p p lic a n t s h a l l f i l e w ith th e Board a w r i tte n a p p lic a tio n under o ath c o n ta in in g th e fo llo w in g in fo rm atio n : (a) The name and ad d ress o f the im porter or h is duly a u th o riz e d ag en t or r e p r e s e n t a t i v e ; (b) The name, and a d d re s s of the e x p o rte r; (c) The p o r t or p o rts o f o r ig in of the a r t i c l e s to be im ported; (d) The p o rt of d e s t i n a t i o n ; and (e) The d e s c r ip tio n o f th e a r t i c l e s to be imported and the q u a n tity and the d e c la re d value th e r e o f . SECTION 10. For every r e g i s t r a t i o n of an im p o rte r, a f i l i n g fee o f two pesos s h a l l be charged. Upon is s u in g a quota or l i c e n s e , th e Import C ontrol Board s h a ll c o l l e c t a fe e of te n p erso s per one thousand pesos of th e c . i . f . v alu e o f th e a r t i c l e , and one peso for every one hundred pesos of f r a c t i o n th e r e o f . SECTION 11. Shipments covered by payments made by th e im p o rte rs p r io r to th e d a t e of e f f e c t i v i t y of t h i s O rder, or by irre v o c a b le l e t t e r s of c r e d i t or a u t h o r i t i e s t o pur chase iss u e d p r io r to s a id d a te , and so c e r t i f i e d by the is s u in g bank, s h a ll be p e rm itte d to e n te r th e country bu t s h a l l be charged t o p re s e n t an d /o r fu tu re q u o ta s of th e im p o rter fo r th e same or o th e r a r t i c l e s : however, t h e im p o rte r s h a ll f i r s t o b ta in an import l ic e n s e and pay th e a p p r o p r ia te fe e s b efo re th e shipment may be made or re le a se d by customs. S im ila r ly , goods i n in la n d t r a n s i t from po in t of o r ig in , or on dock, on l i g h t e r , or e x p o rtin g v e s s e l , on th e d a te of e f f e c t i v i t y of t h i s Order, i f such circum stances can be proved by the im p o rte r to the s a t i s f a c t i o n of th e Import C ontrol Board, s h a ll be ad m itted in to th e country b u t s h a ll be charged to p re s e n t an d /o r f u tu r e quotas of th e im p o rter for the same or o th e r a r t i c l e s ; however, the im p o rte r s h a l l f i r s t o b ta in an im port lic e n s e and pay th e a p p r o p r ia te fe e s b e fo re shipm ent may be made or re le a s e d from customs. Goods ordered or c o n tra c te d fo r p r io r to th e d a te of e f f e c t i v i t y of t h i s Order by v i r t u e of e x i s tin g v a l i d lic e n s e s an d /o r q u o ta s, s h a l l be allow ed to e n te r th e c o u n try but s h a l l be charged to p re s e n t a n d /o r f u tu r e quotas. 161 * SECTION 12. Im porters must o b ta in an import lic e n s e f o r every fo re ig n o rd e r placed a f t e r th e d a te of e f f e c t i v i t y of t h i s E xecutive Order u n le ss th e a r t i c l e s to be imported a re n o t s u b je c t to r e s t r i c t i o n s under th e p ro v is io n s of t h i s Order. A r t i c l e s ordered a f t e r sa id d a te w ith o u t an im port lic e n s e s h a l l n o t be r e le a s e d by customs to the im p o rter and s h a l l be c o n fis c a te d by the Import C ontrol Board. SECTION 13. From and a f t e r the d a te of e f f e c t i v i t y of t h i s Order, ev e ry c o n su lar in v o ice issu ed fo r th e im p o rta tio n in to th e P h ilip p in e s of a r t i c l e s s u b je c t to r e s t r i c t i o n s under th e p ro v is io n s of t h i s order s h a ll show th e Import License Number in r e s p e c t t o such im porta t i o n and the q u a n tity and value th e r e o f . SECTION lH-. The b rin g in g of c o n tro lle d a r t i c l e s fo r p e rso n a l u s e , and n o t for r e s a l e , and of a r t i c l e s brought in by, or sen t t o , im p o rte rs or in d e n to rs as sam ples, and n o t r e s a l e , s h a l l be su b je c t to s p e c ia l r u l e s and r e g u la t i o n s to be issu ed by the Import C o n tro l Board. SECTION 15. A r t i c l e s im ported in v i o l a t i o n o f th e s e r u l e s and r e g u la tio n s s h a ll be s u b je c t to f o r f e i t u r e in accordance w ith th e procedure e s ta b li s h e d under Chapter t h i r t y - n i n e of th e Revised A d m in is tra tiv e Code, and to the p e n a l t i e s p re s c rib e d by Republic Act No. 330, o th erw ise known a s th e Import C ontrol Law. SECTION 16. A ll previous a r t i c l e s , c i r c u l a r s , d i r e c t i v e s , r u le s and r e g u la tio n s of th e Import C ontrol Board, which a re in c o n s is te n t w ith , or c o n tra ry t o , th e p ro v is io n s of t h i s E xecutive Order are hereby re p e a le d . SECTION 17. For the e f f e c t i v e enforcem ent of t h i s O rder, d u ly a u th o riz e d ag e n ts or r e p r e s e n ta ti v e s of the Import C ontrol Board s h a l l be p e rm itte d to examine s h ip ments and p e r tin e n t documents. SECTION 18. E xecutive Orders No. 193? dated December 28, 1 9 ^ , No. 206 dated March 16, 19^9, No. 209 dated March 30, 19^9> and No. 231 dated June 28, 19*+9> a re hereby re p e a le d . 1 6 5 SECTION 19* This order s h a l l take e f f e c t on December 1 , 19^9 • Done in the C ity of M anila, t h i s tw e n tie th day of November, in the year of Our Lord, n in e te e n hundred and f o r ty - n in e and of the Independence of th e P h ilip p in e s , th e t h i r d . (SGD.) ELPIDIO QUIRINO P re s id e n t o f th e P h ilip p in e s By th e P re s id e n t: (SGD.) TEODORO EVANGELISTA E x ecu tiv e S e c re ta ry 1 6 6 APPENDIX F EXECUTIVE ORDER NO. 328 PRESCRIBING RULES AND REGULATIONS TO CARRY OUT THE TRADE AND FINANCIAL AGREEMENTS BETWEEN THE PHILIPPINES AND THE SUPREME COM M ANDER FOR THE ALLIED POWERS, DESIGNATING THE AGENCIES THEREFOR, AND FOR OTHER PURPOSES. By v i r t u e of th e powers v e s te d in me by law , and in o rd e r to c a rry out the commitments of th e Government of the R epublic of th e P h ilip p in e s under th e Trade and F in a n c ia l Agreements and th e Trade Plan between t h e P h ilip p in e s and th e Supreme Commander fo r th e A llie d Powers, which were signed a t Tokyo, Occupied Japan on May 18, 1950, I , ELPIDIO QUIRINO, P re sid e n t of the P h ilip p in e s , do hereby o r d e r : SECTION 1. From and a f t e r the e f f e c t i v e d a te of t h i s O rder, no commodity may be exported to or imported from Occupied Japan w ith o u t an ex p o rt lic e n s e or im port li c e n s e , a s the case may be, from the C e n tral Bank of the P h i l i p p in e s or the Import C ontrol A d m in is tra tio n , which a re hereby d esig n ate d r e s p e c tiv e ly as the export and import lic e n s in g a g e n c ie s of the Government. These ag en cies s h a l l each s e t up a s e p a ra te S ectio n or D iv isio n w ith in t h e i r r e s p e c tiv e o rg a n iz a tio n to handle th e lic e n s in g of a l l b a r t e r tra d e t r a n s a c ti o n s e x c lu s iv e ly . A ll li c e n s e s issu ed s h a l l be c l e a r l y marked as having been s p e c i f i c a l l y granted under th e Philippines-SC AP Trade and F in a n c ia l Agreements. SECTION 2. The annual e x p o rts and Im ports of the P hi lip p i n e s to and from Occupied Japan as co n tain ed in the Trade Plan s h a l l be a l lo c a te d and lic e n s e s th e re fo r r e f e r r e d to in the n ex t preceding s e c tio n s h a l l be issu ed only to bona f id e P h ilip p in e e x p o rte rs and im p o rte rs , s u b je c t to S e c tio n 9 h e reo f and such r u l e s and r e g u la tio n s as may be p re s c rib e d and prom ulgated by th e Import C ontrol Adminis t r a t i o n and th e C e n tra l Bank o f the P h ilip p in e s as lic e n s in g a g e n c ie s of the Government. Copies of such r u le s and r e g u la tio n s and t h e i r subse quent r e v is i o n s an d /o r amendments s h a l l be made a v a ila b le t o th e members of th e Committee on Trade and F in a n c ia l agreem ents h e r e i n a f t e r c o n s titu t e d . SECTION 3. In order to c a rry out the p ro v is io n s of S e c tio n 1 (f) and 1(g) of the Trade Agreement, th e re i s hereby c re a te d a Committee on Trade and F in a n c ia l Agreements 167 composed of a r e p r e s e n ta ti v e each from the Department of Foreign A f f a i r s as Chairman, th e Departments of F inance, Commerce and In d u s try , and A g ric u ltu re and N atu ral Resources, C e n tra l Bank, th e Import C ontrol Board, and th e P h ilip p in e R e lie f and Trade R e h a b il ita tio n A d m in is tra tio n , as members, to study ways and means, c o n s is te n t w ith e x p o rt/im p o rt and exchange law s, r u le s and r e g u la tio n s , of e f f e c t i v e l y im ple menting a l l tra d e and f i n a n c i a l agreem ents as have been, or may h e r e a f t e r be, e n te re d in to between the P h ilip p in e s and o th e r c o u n tr ie s ; exchanged such in fo rm atio n w ith the Supreme Commander fo r the A llie d Powers as may from tim e to tim e be n e c e s s a ry ; review the p ro g re ss of a l l b a r te r t r a n s a c t i o n s a s they a f f e c t th e n a t io n a l economy; stu d y th e commodity com position of tr a d e p la n s, in c lu d in g t h e i r p e rio d ic r e v i sio n s i f and when n e c e ss a ry ; and subm it a r e p o r t of i t s f in d in g s and recommendations to th e P re s id e n t as o fte n a s i t i s so d i r e c t e d . SECTION The manner of payment of a l l b a r te r t r a n s a c tio n s in v o lv in g goods a n d /o r s e r v ic e s w ith Occupied Japan, as o u tlin e d in th e F in a n c ia l Agreement w ith th e Supreme Commander fo r th e A llie d Powers, or w ith any o th e r co u n try w ith which the P h ilip p in e s may have s im ila r t r a d e arrangem ent, s h a l l be p re sc rib e d and promulgated by th e C e n tra l Bank of the P h ilip p i n e s , which i s hereby d e sig n a te d a s th e p r in c ip a l f i n a n c i a l ag en t of the Government. SECTION 5. For th e purpose of handling the t r a n s a c t i o n s s p e c if ie d in th e next preceding s e c tio n , th e C e n tra l Bank of th e P h ilip p in e s s h a l l d e s ig n a te i t s sub-agent banks. A l i s t of the banks so d e sig n a te d s h a l l be fu rn ish e d the Department of Foreign A f f a i r s f o r t r a n s m i t t a l t o th e Supreme Commander fo r the A llie d Powers. SECTION 6. To c o o rd in a te the work of th e lic e n s in g a g e n c ie s , the C e n tra l Bank o f th e P h ilip p in e s s h a ll c e r t i f y to th e Import C ontrol Board the amount of ex p o rt c r e d i t s from Occupied Japan a g a in s t which import lic e n s e s may be iss u e d during a s p e c if ie d p e rio d by th e Board. The Import C ontrol Board s h a l l f u r n is h th e C e n tra l Bank d a i l y w ith a copy each of the im port lic e n s e s issu e d by i t . A monthly summary of a l l tr a n s a c ti o n s s h a l l be re p o rte d by both ag en cies to the Committee. SECTION 7. To in s u re the development of balanced tr a d in g , th e Import C o n tro l Board s h a ll no t is s u e import 1 68 li c e n s e s in excess of th e amounts o f export c r e d i t s c e r t i f i e d to i t by the C e n tra l Bank. SECTION 8. Only th e commodities s p e c if ie d in the Trade Plan may be exported to and imported from Occupied Japan. However, upon the recommendation of th e Committee and by mutual agreement between the Government and th e Supreme Commander fo r the A llie d Powers, th e v a lu es of th e d i f f e r e n t commodities in th e Plan may be in c re a se d or d ecre ased an d /o r new item s in clu d ed in or old ones d e le te d from i t . SECTION 9• The proceeds of th e ex p o rt tr a d e w ith Occu p ied Japan and w ith any o th e r co u n try tr a d in g w ith th e P h ilip p in e s on a b a r te r b a s i s , s h a ll be paid f u l l y in pesos. SECTION 10. To be e n t i t l e d to tr a d e w ith Occupied Japan, a p erso n , firm , or e s ta b lis h m e n t must be: (a) One duly lic e n s e d and r e g i s t e r e d t o be in b u s i n e ss in the P h ilip p in e s and has paid a l l law fu l ta x e s and fe e s due th e Government; and (b) One duly r e g i s t e r e d fo r quota a l l o c a t i o n w ith the e x p o rt a n d /o r im port lic e n s in g ag e n cie s h e re in s p e c if ie d . The lic e n s i n g a g e n cie s may r e f u s t to r e g i s t e r or may c a n ce l the r e g i s t r a t i o n of any e x p o rte r or im porter i f in t h e i r judgment such r e g i s t r a t i o n i s in anyway in im ic a l to th e b e s t n a t io n a l i n t e r e s t s . SECTION 11. E xport and im port quotas and lic e n s e s r e f e r r e d to in S e c tio n s 1 and 2 s h a l l be g ran te d only to th e p a r t i e s mentioned in th e n ex t preceding s e c tio n upon t h e i r s p e c i f i c a p p l ic a tio n th e r e f o r c o n ta in in g the fo llo w in g in fo rm a tio n under o ath : (a) Name and a d d re s s of b u s in e s s ; (b) C itiz e n s h ip (c) S p e c ific k in d , number and is s u e date of p r iv ile g e ta x r e c e i p t ; (d) S t a t i s t i c a l y e a rly d a ta for 19*+8 and 19^9 on quan t i t y and v alu e of e x p o rts a n d /o r im ports of the commodity f o r which quota a p p l ic a tio n is f i l e d ; (e) Bona f id e ex p o rt and/or im port o rd e rs a c c e p te d ; and 1 6 9 ( f ) Any o th er data t h a t may he r e q u ire d . SECTION 12. An export or import lic e n s e t h a t i s duly and p ro p e rly iss u e d s h a ll remain v a lid during th e quota p e rio d fo r which i t was is s u e d . I f the lic e n s e is not used d u rin g th e p erio d of i t s e f f e c t i v i t y , i t s h a l l he c a n c e lle d . SECTION 13• In th e a l l o c a t i o n of im port li c e n s e s , th e needs of th e P h ilip p in e Government and i t s in s t r u m e n ta litie s and a g e n c ie s s h a l l he given p r i o r i t y . The req u irem en ts of such i n s t r u m e n t a l i t i e s and ag en cie s as subm itted to th e Com m itte e on Trade and F in a n c ia l Agreements which formed h a s is o f Trade Plan No. 1 s h a l l be c o n su lte d in t h i s reg ard . The term " t e x t i l e s and m anufactures" a s used in th e schedule of im ports in the Trade Plan s h a l l not he deemed to in c lu d e c o tto n p r i n t s , c o lo red y a rn s, denims, k h a k is, h e r ringbone t w i l l s , a n d /o r bleached and dyed a s s o r te d sheetings. Import a l l o c a t i o n s f o r grey c l o t h and c o tto n yarns s h a l l ex c l u s i v e l y he a ssig n ed as raw m a te ria l f o r use o f th e F in is h in g P la n t of the N a tio n a l Development Company fo r processing. SECTION lM-. Any commodity ex p o rted or imported in v i o l a t i o n of t h i s Order and of th e r u l e s and r e g u la tio n s prom ulgated by the lic e n s in g ag en cies s h a l l be s u b je c t to f o r f e i t u r e , and th e g u i l t y p a rty s h a ll be s u b je c t to pen al t i e s and d i s q u a l i f i e d in accordance w ith e x i s t i n g laws from o b ta in in g any o th e r lic e n s e . SECTION 15* Any v i o l a t i o n by an e x p o rte r or an importer of th e p ro v isio n s of t h i s Order and th e r u le s and regulations prom ulgated by th e lic e n s in g a g e n cie s s h a l l serve as grounds fo r th e immediate re v o c a tio n of h is lic e n s e to do b u sin e ss in th e P h ilip p in e s , and in th e ca se of an a l i e n , s h a l l be regarded as s u f f i c i e n t cause fo r h is d e p o r ta tio n . SECTION 16. This Order sha11 ta k e e f f e c t on June 23, 1950, and a l l shipm ents le av in g p o rts of em barkation on or subsequent to sa id d a te s h a l l be s u b je c t to the p ro v is io n s of t h i s Order. Done in the C ity of M anila, t h i s 22nd day of June, in th e year o f Our Lord, n in e te e n hundred and f i f t y , and of the Independence of the P h ilip p in e s , th e f o u r th . (SGD.) ELPIDIO QUIRINO P re s id e n t of the P h ilip p in e s By th e P re s id e n t: (SGD.) TEODORO EVANGELISTA E xecutive S e c re ta ry 170 APPENDIX G CENTRAL BANK CIRCULAR NO. 20 December 9j 19*+9 RESTRICTIONS ON GOLD AND FOREIGN EXCHANGE TRANSACTIONS 1. P ursuant to th e p ro v is io n s of R epublic Act No. 265 (C e n tra l Bank Act) The Monetary Board, by unanimous v o te and w ith th e ap p ro v al of th e P re s id e n t of th e P h ilip p in e s , and i n accordance w ith E xecutive and I n t e r n a t i o n a l Agree ments t o which the Republic of th e P h ilip p in e s is a p a r ty , hereby r e s t r i c t s s a le s of exchange by th e C e n tra l Bank and s u b je c ts a l l tr a n s a c tio n s in gold and fo re ig n exchange to lic e n s i n g by th e C e n tra l Bank. 2. T ra n sa c tio n s in the a s s e t s d e scrib ed below and a l l d e a lin g s in them of whatever n a tu r e , in c lu d in g , where a p p l i c a b le , t h e i r e x p o r ta tio n and im p o rta tio n , s h a l l not be e f f e c t e d , except w ith r e s p e c t t o d e p o s it accounts in clu d ed in subparagraphs (b) and (c) of t h i s paragraph, when such d e p o s it acco u n ts a re owned by, and in the name o f, banks. (a) Any and a l l a s s e t s , provided they a re held through, i n , or w ith banks or banking i n s t i t u t i o n s lo c a te d in the P h ilip p in e s , in c lu d in g money, checks, d r a f t s , b u l l i o n s , bank d r a f t s , d e p o s it accounts (demand, tim e and s a v in g s ), a l l d e b ts , in d eb ted n ess or o b lig a tio n s , f i n a n c i a l s e c u r i t i e s commonly d e a l t in by b an k ers, b ro k e rs and investm ent houses, n o te s , d e b e n tu re s, sto c k s, bonds, coupons, bank a c c e p ta n c e s, m ortgages, p le d g es, l i e n s or o th e r r i g h t s in the n a tu re of s e c u r i t y , expressed in f o re ig n c u r r e n c ie s , or i f payable a b ro ad , i r r e s p e c t i v e of the cu rrency in which th ey a re ex p resse d and belonging t o any p erso n , f ir m ,p a r tn e r s h ip , asso c i a t i o n , branch o f fic e ,a g e n c y , company or o th e r u n in c o r p o ra te d body or c o rp o ra tio n r e s id i n g or lo c a te d w ith in the P h ilip p in e s ; (b) Any and a l l a s s e t s of the kinds included and/or d e s c rib e d in subparagraphs (a) above, w hether or not held th r o u g h ,in , or w ith banks or banking i n s t i t u t i o n s , and e x i s t e n t w ith in th e P h ilip p in e s , which belong to any p erso n , firm , p a r tn e r s h i p , a s s o c ia tio n , branch o f f i c e , agency, com pany, o r o th e r u n in c o rp o rate d body or c o rp o ra tio n not r e s i d ing or lo c a te d w ith in th e P h ilip p in e s ; (c) Any and a l l a s s e t s e x i s t e n t w ith in th e P h ilip p in e s in c lu d in g money, checks, d r a f t s , b u l l i o n s , bank d r a f t s , a l l 171 d e b ts , in d eb ted n ess or o b lig a tio n s , f i n a n c i a l s e c u r i t i e s commonly d e a l t in by b an k e rs, b ro k ers and investm ent houses, n o te s , d e b e n tu re s, s to c k s , bonds, coupons, bank ac c e p ta n c es, m ortgages, p le d g es, l i e n s or o th e r r i g h t s in th e n a tu re of s e c u r i t y , expressed in f o re ig n c u r r e n c i e s , or i f payable ab ro ad , i r r e s p e c t i v e of the cu rrency in which ex p ressed ,an d belonging t o any p erson, f ir m ,p a r tn e r s h ip , a s s o c i a t i o n , b ran ch o f f i c e , agency, company or o th e r u n in c o rp o rate d body or c o rp o ra tio n r e s id in g or lo c a te d w ith in the P h ilip p in e s . 3* No fo re ig n payments may be e f f e c te d except fo r mer ch an d ise im ports (in c lu d in g c o s ts , in su ran c e and f r e i g h t ) n o t se n t on consignment or open account or a g a in s t D/P and D/A c o l l e c t i o n b i l l s , and provided t h a t th e p ro v is io n s of E x ecu tiv e Order No.295 and C e n tra l Bank C ir c u la r No. 19 of November 17, 19^9 have been d u ly complied w ith . b, (a) A ll r e c e i p t s of fo re ig n exchange s h a ll be sold d a i l y to the C e n tra l Bank by those a u th o riz e d to d ea l in fo re ig n exchange. A ll r e c e i p t s of fo re ig n exchange by any perso n , firm , p a r tn e r s h i p ,a s s o c ia t io n , branch o f f i c e , agency, company or o th e r u n in c o rp o rate d body or c o rp o ra tio n s h a ll be so ld to th e a u th o riz e d ag e n ts of th e C e n tra l Bank by th e r e c i p i e n t s w ith in one b u sin e ss day follow ing r e c e i p t of such fo re ig n exchange. Any p erso n , firm , p a r t n e r s h i p ,a s s o c i a t i o n , branch o f f i c e , agency, company or o th e r u n in c o rp o rated body or c o rp o ra tio n , r e s id in g or lo c a te d w ith in the P h ilip p in e s , who a c q u ire s on and a f t e r d a te of t h i s C ir c u la r f o re ig n ex change in whole o r in p a r t , nor re c e iv e le s s th an i t s f u l l v a lu e , nor d elay making ownership th e re o f except as such d e la y is custom ary; provided, f u r t h e r t h a t w ith in one day upon ta k in g ownership or re c e iv in g payment of fo re ig n ex change the aforem entioned persons and e n t i t i e s s h a ll s e l l such fo re ig n exchange to designated agents of the C e n tra l Bank. (b) No p erson, firm , p a r tn e r s h ip , a s s o c i a t i o n , branch o f f i c e , company or o th e r u n in co rp o rated body or c o rp o ra tio n r e s id i n g or lo c a te d w ith in th e P h ilip p in e s , s h a ll purchase fo re ig n exchange d i r e c t l y or i n d i r e c t l y , except from or through a u th o riz e d ag e n ts of th e C e n tra l Bank. (c) Any p erso n , firm , p a r tn e r s h ip , a s s o c i a t i o n , branch o f f i c e , agency, company or other u n in c o rp o rate d body or c o r p o r a tio n , r e s id i n g or lo c a te d w ith in th e P h ilip p in e s desiring and/or in te n d in g to ex p o rt goods, m erchandise and/or commodi t i e s from th e P h ilip p in e s , i f c o l l e c t i o n of th e proceeds of th e s a le th e re o f i s not to be handled by or through a bank in Manila which is a u th o riz e d to d e a l in fo re ig n exchange, 172 s h a l l , p r io r to shipm ent, o b ta in a lic e n s e from th e C e n tra l Bank of the P h ilip p in e s which w i l l have the purpose of in s u r in g th e law fu l d is p o s a l of the fo re ig n exchange pro ceeds of th e goods, m erchandise an d /o r commodities ex p o rte d . 5. No d e b t, o b lig a tio n or l i a b i l i t y expressed in f o r eig n c u r r e n c ie s , or i f payable ab ro ad , i r r e s p e c t i v e of th e cu rren cy in which i t is ex p ressed , s h a ll be in c u rre d from th e d a te of t h i s C ir c u la r f o r th e purpose of e f f e c t i n g a t r a n s a c t i o n or tr a n s a c ti o n s o th e r than th o se s p e c i f i c a l l y a u th o riz e d by t h i s C ir c u la r , except th a t in the normal course of b u sin e ss such d e b t, o b lig a tio n of l i a b i l i t y may be in c u rre d fo r im ports p e rm itte d under paragraph 3 above. 6. W ithin 60 days a f t e r th e d a te of is s u e of t h i s C ir c u l a r a l l p e rso n s, f irm s , p a r tn e r s h i p s , a s s o c i a t i o n s , b ran ch e s, a g e n c ie s , companies or o th e r u n in c o rp o rate d bodies or c o rp o ra tio n s r e s id i n g or lo c a te d in th e P h ilip p in e s h o ld in g , owning or having an i n t e r e s t in the a s s e t s d e sc rib e d in p aragraph 2 above s h a l l submit com plete in fo rm atio n concern in g such a s s e t s to the C e n tra l Bank; th o se r e s id in g or lo c a te d o u ts id e th e P h ilip p in e s s h a l l submit t h i s inform a t i o n to th e C e n tra l Bank w ith in 180 days a f t e r th e d a te of t h i s C irc u la r . A p p ro p riate forms on which to submit the re q u ire d in fo rm atio n w i l l be iss u e d by th e C e n tra l Bank, and n o tic e is hereby given th a t t h i s in fo rm atio n w i l l a p p ly to th e s ta tu s of th e re le v a n t a s s e t s as of December 9? 19*+9* 7. A ll banks in c o rp o ra te d or lic e n s e d to o p e ra te in th e P h ilip p in e s a r e hereby d esig n ate d a s a g e n ts of th e Cen t r a l Bank and as such, a re hereby a u th o riz e d t o d e a l in fo re ig n exchange as p erm itte d by th e terms of t h i s C ir c u la r , o r in th o se which may be issu ed h e r e a f t e r . 8. S t r i c t observance of th e p ro v is io n s of t h i s C irc u l a r i s en jo in e d ; and any p erson, firm or c o rp o ra tio n , f o r e ig n or dom estic, who, being boUnd to th e observance th e r e o f , or of such o th e r r u l e s , r e g u la tio n s or d i r e c t i v e s as may h e r e a f t e r be iss u e d in im plem entation of t h i s C ir c u la r , shall f a i l or r e fu s e to comply w ith , or a b id e , or s h a l l v i o l a t e th e same, s h a l l be s u b je c t t o th e penal sa n c tio n s provided in th e C e n tra l Bank A ct. 9. F u rth e r r e g u la tio n s in r e s p e c t to t r a n s a c ti o n s covered by t h i s C irc u la r w i l l be issu ed s e p a r a te ly . 173 APPENDIX H CENTRAL BANK OF THE PHILIPPINES CIRCULAR NO. 25 March 28, 1951 S u b je c t: R e g u latio n R e la tiv e to th e C o lle c tio n of S p e c ia l E xcise Tax on F o reig n Exchange Sold by th e Cen- t r a l Bank of th e P h ilip p in e s and i t s Agents______ P ursuant to t h e p ro v is io n s of s e c tio n 7 of R epublic Act No. 601, th e fo llo w in g r e g u la tio n s r e l a t i v e t o th e c o l l e c t i o n and refund of the s p e c ia l e x c is e ta x on s a le s of f o r e ig n exchange a re hereby prom ulgated: 1. A uthorized a g e n ts s h a l l , except as o th erw ise i n d i c a te d below, c o l l e c t on every s a le of fo re ig n exchange, and p u rc h a sers of fo re ig n exchange s h a l l pay to th e A uthorized Agent s e l l i n g th e fo re ig n exchange, an e x c is e ta x of 17% on th e v alu e in P h ilip p in e pesos of such s a l e . No s a le of fo re ig n exchange except as o th erw ise h e re in provided s h a ll be e f f e c t e d w ith o u t payment of th e ta x . 2 . For each ta x a b le s a le of fo re ig n exchange, A uthor iz e d Agents s h a l l is s u e an o f f i c i a l r e c e ip t showing c l e a r l y th e d a te of s a l e , th e name of th e s e l l i n g A uthorized Agent, th e name of p u rc h a s e r, th e amount o f fo re ig n exchange so ld , and the amount of the ta x c o l l e c t e d . This o f f i c i a l r e c e i p t s h a l l be accom plished in q u in tu p l ic a te , the o r i g i n a l th e re o f t o be subm itted to th e C e n tra l Bank, th e q u a d ru p lic a te to be fu rn is h e d the S e c re ta ry of F in an ce, and th e q u in tu p l ic a te to be kept by th e A uthorized Agent and made p a r t of i t s perma n e n t r e c o r d s . These o f f i c i a l r e c e i p t s w i l l be su p p lie d to A uthorized Agents upon su b m itta l of r e q u i s i t i o n s t h e r e f o r t o the C e n tra l Bank. 3 . At the end of each b u sin e ss day, A uthorized Agents s h a l l make an a b s t r a c t of a l l tax ab le s a le s of fo re ig n exchange e f f e c te d during th e day, showing c l e a r l y th e names of th e p u rc h a se rs of ta x a b le f o re ig n exchange, th e amount so ld to each, th e number of the covering Exchange l i c e n s e , th e number of th e covering Import C ontrol or FRISCO L icen se, and th e amount of th e ta x c o l le c te d . The amounts of th e ta x a b le s a le s e f f e c te d and of the ta x c o lle c te d d u rin g the day s h a ll be footed to show th e t o t a l s th e r e o f . 17*f On each b u sin e ss day next follow ing the day of s a le o f fo re ig n exchange, A uthorized Agents s h a ll submit to the C hief Accountant of th e C e n tra l Bank a c r e d i t advice fo r th e amount of the ta x c o lle c te d by them on s a le s of fo re ig n exchange e f f e c te d during the preceding day accompanied by th e fo llo w in g : (a) A b s tra c t of c o l le c tio n s mentioned in paragraph numbered 3 h e re o f; and (b) The d u p lic a t e , t r i p l i c a t e and q u a d ru p lic a te o f f i c i a l r e c e i p t s issu ed covering c o l le c tio n s of the e x c is e ta x on s a le s of fo re ig n exchange e f f e c te d during th e preceding day arranged in n u m erical o rd e r. Cancelled r e c e i p t s , i f any, s h a l l lik e w is e be subm itted. 5. (a) S a le s of fo re ig n exchange for any of th e fo llo w in g purposes s h a l l be exempt from th e payment of th e exchange ta x : i ) Payment in re s p e c t of r e - in s u r a n c e ; i i ) Payment in r e s p e c t of marine and a v i a ti o n in su ra n c e ; i i i ) Payment of expenses for the drydocking and r e p a i r abroad of v e s s e ls of P h ilip p in e r e g i s t e r , and f o r th e r e p a i r abroad of a i r p la n e s of P h ilip p in e r e g i s t e r , and pay ment of purchase p ric e or c h a rte re d fe e s o f a i r p l a n e s and v e s s e ls of P h ilip p in e r e g i s t e r : P ro v id e d , T h at, b e fo re v e s s e l s a re se n t to be drydocked abroad, an e s tim a te of th e c o s t of drydocking should be c e r t i f i e d by th e H ulls and B o ile r s D iv isio n of th e Bureau of Customs, and in case of a i r p l a n e s and a i r p l a n e p a r t s , the c o s t of such r e p a i r s and such p a r ts should be c e r t i f i e d by th e C iv il A ero n au tics A d m in is tra tio n ; iv ) R em ittances fo r payment of l i v i n g expenses of s tu d e n ts studying abroad not exceeding th e e q u iv a le n t of th r e e hundred d o l l a r s per month, and f o r payment of t u i t i o n and o th e r school fe e s ; v) Payment of premiums by v e te r a n s on l i f e in s u r ance p o l i c i e s under th e Government of the U nited S t a t e s ; v i ) Payment of premiums and o th e r amounts due by p o lic y -h o ld e rs on l i f e in su ran ce p o lic ie s issu ed b efo re December 9, 19^9; 1 7 5 v i i ) Payment of machinery a n d /o r m a te r ia ls to be used by new and n e c e ssary i n d u s t r i e s a s determ ined in accordance w ith R epublic Act numbered t h i r t y - f i v e ; and v i i i ) Exchange used for th e im p o rta tio n o f i n d u s t r i a l and a g r i c u l t u r a l machinery covered by an import lic e n s e which had a lre a d y been g ran ted and th e l e t t e r o f c r e d i t f o r i t , which had a lre a d y been opened p r io r to January 1, 1951. (b) A ll a p p l ic a tio n s fo r exchange to be used in pay ment of item s f a l l i n g under the p ro v is io n s of paragraph 5 (a) ( v i i ) and ( v i i i ) h ereo f s h a l l be subm itted to th e Cen t r a l Bank. A p p lic a tio n s under paragraph 5 (a) ( v i i ) s h a ll be accompanied by (1) a tr u e copy of th e c e r t i f i c a t i o n given by the S e c re ta ry of Finance t h a t th e a p p l ic a n t has been g ran te d exemption from t h e payment of ta x e s under th e p ro v is io n s of R epublic Act No. 35 and E x ecu tiv e Order No. 3^1; and (2) a g u aran tee by the a p p lic a n t t h a t th e machinery a n d /o r raw m a te r ia l imported s h a l l be used in th e new and n e c essa ry in d u s try g ra n te d exemption from th e payment of i n t e r n a l revenue ta x e s . I f upon in v e s t i g a t i o n i t s h a l l be found t h a t th e machinery a n d /o r raw m a te r ia ls mentioned in th e a p p l ic a tio n have not been used fo r th e purposes s ta te d in the g u ara n te e , th e ta x s h a l l be c o l le c te d . (c) L icenses a u th o riz in g th e s a le of exchange fo r any of the purposes enumerated in su b-paragraph (a) h ereo f s h a ll be p la in ly marked "Exempt from th e payment of exchange t a x ." In th e event an exchange lic e n s e has been so marked but the purpose of th e re m itta n c e i s no t one of th e exempt purposes m entioned, A uthorized Agents s h a l l not honor such lic e n s e s w ith o u t p r io r a u t h o r iz a ti o n in w r i tin g of th e Exchange C o n tro l Departm ent. 6. The ta x c o lle c te d in accordance w ith the p ro v is io n s of paragraph numbered 1 h ereo f on s a le s of fo re ig n exchange used fo r th e payment of the c o s t , t r a n s p o r t a t i o n and/or o th e r charges in c id e n t to th e im p o rta tio n i n t o th e P h i l i p p in e s of th e follow ing commodities s h a l l be refunded in accordance w ith th e se r u l e s : (a) R ic e ; (b) F lo u r; (c) Canned Milk; (d) C a ttl e and b e e f; (e) Canned f i s h ; (f) Soya beans; 176 (g) B u tte r f a t ; (n) C hocolate; ( i ) Malt Syrup; vj) Tapioca; (k) S t a b i l i z e r and f la v o r s ; (1) Vitam in c o n c e n tra te s ; (m) F e r t i l i z e r s ; (n) P o u ltry F e e ; (o) Textbooks, r e f e r e n c e books, and supplem entary re a d e rs approved by th e Board on textbooks an d /o r e s ta b lis h e d p u b lic or p r iv a te educa t i o n a l i n s t i t u t i o n s ; (p) Newsprint imported by or fo r p u b lis h e r s fo r use in th e p u b lic a tio n o f books, pam phlets, magazines and newspapers; (q) Book paper, book c l o t h , chip board imported f o r th e p r i n t i n g of supplem entary r e a d e rs (approved by th e Board on te x tb o o k s) to be su p p lied to the government under c o n tra c ts p e rfe c te d b efo re th e ap p ro v al of Republic Act No. 601, th e q u a n tity th e r e o f to be c e r t i f i e d by th e D ire c to r o f P r in t in g ; (r) A n e s th e tic s , a n t i - b i o t i c s , v ita m in s , hormones, X-Ray f ilm s , la b o ra to ry r e a g e n ts , b io lo g i - c a l s , d e n ta l s u p p lie s , and ph arm aceu tical drugs n ec essary for compounding m ed icin es; (s) Medical and h o s p ita l s u p p lie s l i s t e d in the appendix to t h i s C irc u la r in q u a n t i t i e s to be c e r t i f i e d by the D ire c to r of H o sp ita ls as a c t u a l l y needed by the h o s p i t a l s applying t h e r e f o r ; ( t) Drugs and m edicines l i s t e d in th e appendix t o t h i s C irc u la r and such o th e r drugs and m edicines as may be c e r t i f i e d by the S ecre t a r y of H ealth from tim e to tim e to promote and p r o te c t the h e a lth of th e people of th e P h ilip p in e s . (u) A r t i c l e s or c o n ta in e rs used by th e im porter h im self in the m anufacture or p r e p a ra tio n o f lo c a l p ro d u cts for consignment or export abroad. 7. (a) A p p lic a tio n s fo r refu n d of exchange ta x paid on s a le s of fo re ig n exchange used f o r th e payment of th e c o s t , t r a n s p o r t a t i o n , and/or other charges in c id e n t to im p o rta tio n in to the P h ilip p in e s of any of th e items enu merated in paragraph s ix s h a l l be f i l e d in d u p lic a te w ith th e Exchange C ontrol Department and accompanied by th e fo llo w in g documents: 177 (1) C e r t if i e d tr u e copies in d u p lic a te of th e covering exchange and import l i c e n s e s ; (2) O f f i c i a l r e c e i p t covering th e payment of th e exchange ta x ; (3) C e r t if i e d tr u e co p ies (in d u p lic a te ) of the covering in v o ic e s and shipping documents; and (H-) C e r t i f i c a t i o n of the Commissioner of Customs t h a t th e m erchandise, s t a t i n g th e kind, q u a n tity and v a lu e , has been re c e iv e d in p o rt and r e le a s e d by the Bureau of Cus toms to the im p o rte r on th e d a te s in d ic a te d in sa id c e r t i f i c a t e . (b) In the case of te x tb o o k s, re fe re n c e books, and supplem entary re a d e rs mentioned in paragraph 6 (o) above, th e im porter s h a l l submit i n a d d i tio n a w r i t t e n c e r t i f i c a t i o n of the Board on textbooks an d /o r e s t a b l i s h e d p u b lic or p r iv a te e d u c a tio n a l i n s t i t u t i o n s t h a t th e re fe r e n c e books, textbooks and supplem entary re a d e rs mentioned have been approved f o r use in the sc h o o ls. (c) In th e case of a r t i c l e s f a l l i n g under 6 (p) above, th e im porter applying fo r refund of the exchange ta x s h a ll submit in a d d i t i o n a c e r t i f i e d t r u e copy of th e c o n tra c t e n te re d in to between the a p p lic a n t and th e p u b lis h e rs for whose use th e new sprint has been im ported. (d) In th e case of a r t i c l e s f a l l i n g under 6 (r) h ere o f . th e a p p lic a n t ap p ly in g for refund of the exchange tax p aid s h a l l submit in a d d i tio n c e r t i f i e d tr u e co p ies of. th e Purchase Orders issu ed by P urchasing Agent o f th e Bureau of Supply a t t e s t e d by th e A uditor G eneral and approved by the S e c re ta r y of Finance in a p p ro p ria te cases and a c e r t i f i c a t i o n by th e D ir e c to r o f P r in t in g a s to th e q u a n tity of the a r t i c l e s to be su p p lied to th e sa id h o s p i t a l s . (e) In the case of a r t i c l e s f a l l i n g under paragraph 7 (s) h e re o f, the a p p lic a n t s h a l l submit i n a d d itio n a c e r t i f i c a t i o n of the D ire c to r of H o sp ita ls t h a t the s a id a r t i c l e s a r e a c t u a l l y needed by the h o s p it a ls for which they were imported and co p ies of the c o n tra c ts showing th a t s a id a r t i c l e s were supplied to th e s a id h o s p i t a l s . ( f ) In th e case of a r t i c l e s or c o n ta in e rs used by th e im porter h im self i n the m anufacture or p re p a ra tio n of l o c a l p ro d u c ts, fo r consignment or export ab ro ad , the 178 im porter applying f o r refund of the exchange ta x p re v io u sly paid s h a l l , in a d d i tio n , submit the fo llo w in g : i ) Statem ent under o a th of th e im p o rte r, and i f th e im porter is a p a r tn e r s h ip , c o r p o r a tio n , or o ther a s so c i a t i o n , of th e managing p a r tn e r , p r e s id e n t, manager or o th e r c h ie f ex e c u tiv e o f f i c e r , c e r t i f y i n g t h a t such a r t i c le s or c o n ta in e rs have been used in th e m anufacture or p r e p a r a tio n and formed p a rt of th e lo c a lp ro d u c ts to be d e sig h a te d as to th e k in d , n a tu re and tradem ark f o r con signment abroad, and t h a t s a id lo c a l p ro d u cts have been a c t u a l l y ex p o rted ; i i ) C e r t if i e d tr u e copy i n d u p lic a te of the covering export lic e n s e except i f th e ex p o rt lic e n s e has been is s u e d by th e Export D iv isio n o f th e Exchange C ontrol D epartm ent, a u th o riz in g th e e x p o r ta tio n o f th e lo c a l pro d u c ts in th e m anufacture or preparation of which the a r t i c l e s or c o n ta in e rs mentioned have been used and formed p a r t th e r e o f ; i i i ) C e r t if i e d tr u e co p ies of the in v o ic e s and sh ip p in g documents covering th e e x p o rt; and iv ) C e r t i f i c a t i o n of the Commissioner of Customs t h a t th e p ro d u cts of l o c a l m anufacture have been a c t u a l l y e x p o rte d , s t a t i n g the kind, tradem ark, q u a n tity and the d e c la re d value of such lo c a l p ro d u c ts, th e name of the v e s s e l in which th e l o c a l p ro d u cts were loaded, and the d a te the sa id v e s s e l l e f t th e p o r t of e n try in d ic a te d ; and (g) Such o th e r documents as may be re q u ire d by th e C e n tra l Bank. 8. Upon r e c e i p t of an a p p l i c a t i o n f o r the refund of th e exchange ta x provided in paragraph 7, such a p p l ic a tio n s h a l l be processed and i f found in o r d e r , th e fund a p p lie d fo r s h a l l be a u th o riz e d in w ritin g by the D ire c to r of th e Exchange C ontrol Department. 9. The C e n tra l Bank r e s e r v e s the r i g h t to order an exam ination o f any tr a n s a c ti o n covered by th e se r e g u la tio n s and the v e r i f i c a t i o n of any statem en t or r e p r e s e n ta ti o n in r e s p e c t to the s a le of fo re ig n exchange and the c o l le c tio n o f th e exchange ta x on or exemption from the exchange ta x of such s a le s of fo re ig n exchange. 179 10. Any person v i o l a t i n g any p ro v is io n o f th e s e r e g u la tio n s s h a l l be s u b je c t to the p e n a lty p re s c rib e d in s e c tio n 6 of Republic Act No. 601; Provided, however, That i f the o ffe n d e r i s a c o rp o ra tio n , a s s o c i a t i o n , or p a r tn e r s h i p , th e p e n a lty s h a l l be imposed upon th e p r e s i d e n t, d i r e c t o r s , managers, managing p a r tn e r s , a s the case may be, an d /o r th e person charged w ith the a d m in is tra tio n t h e r e o f . 11. These r e g u la tio n s s h a l l ta k e e f f e c t im m ediately. FOR THE MONETARY BOARD: (SGD.) M. CUADERNO, SR. Gover nor APPENDIX I 180 CENTRAL BANK OF THE PHILIPPINES CIRCULAR NO. 26 S u b je c t; A d m in istra tio n of F o reig n Exchange C ontrol E f f e c tiv e A p ril 17, 1951* the C e n tra l Bank w i l l not re c e iv e d i r e c t l y any a p p l ic a tio n fo r exchange lic e n s e s to e f f e c t payments or re m itta n c e s to abroad or to c a rry out exchange from th e P h ilip p in e s . A ll a p p l ic a tio n s fo r such lic e n s e s s h a l l be subm itted d i r e c t l y to the A uthorized Agents l i s t e d below. The A uthor ized Agents included in t h i s C irc u la r s h a l l a c t on a p p l ic a tio n s fo r exchange lic e n s e s in accordance w ith th e fo llo w in g : 1. They may approve a p p l ic a tio n s f o r exchange lic e n s e s and is s u e exchange lic e n s e s in accordance w ith th e a u t h o r it y h e r e to f o r e granted to them by C e n tra l Bank N o tif ic a tio n s , Memoranda, and C ir c u la r s . 2. A p p lic a tio n s for exchange lic e n s e s which cannot be ac te d upon by th e A uthorized Agents a re to be accepted by them and forwarded to th e Exchange C ontrol Department of the C e n tra l Bank f o r a c tio n th e re o n . A uthorized Agents a r e in s t r u c te d not to forward a p p lic a tio n s u n le s s they a re accompanied by th e documents and other evidences re q u ire d by the Exchange C ontrol Department N o tif ic a tio n s or Memo ra n d a . For a d m in is tr a tiv e c o n tro l purposes a l l a p p lic a tio n s s h a l l bear the name of the A uthorized Agents i n th e upper r i g h t hand c o rn e r. 3. The Exchange C ontrol Departm ent, a f t e r ta k in g the a p p r o p r ia te a c tio n on th e a p p l ic a tio n re c e iv e d from the A uthorized A gents, s h a ll forward to th e A uthorized Agents, th e Exchange lic e n s e or th e r e j e c t e d a p p l i c a t i o n . The A uthorized Agents w i l l , in tu r n , forward the exchange lic e n s e or th e r e je c te d a p p l ic a tio n to the a p p l ic a n t. *+. A ll a p p l ic a tio n s for exchange lic e n s e s a lre a d y f i l l e d w ith the Exchange C ontrol Department of the C e n tra l Bank w i l l co n tin u e to be re le a s e d in accordance w ith e s ta b lis h e d procedure. l 8 l 5* F u rth e r r u l e s and r e g u la tio n s to implement t h i s C irc u la r w i l l be issu ed by th e Monetary Board. THE MONETARY BOARD BY: (S g d .) M. CUADERNO, SR. Governor A p ril 13, 1951 'yftWerstty'of Southerh California Librwy

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University of Southern California Dissertations and Theses

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Asset Metadata

Creator Magno, Pilar Romulo (author)

Core Title Philippine import and exchange restrictions

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Garis, Roy L. (committee chair), Phillips, E. Bryant (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-440820

Unique identifier UC11265572

Identifier EP44716.pdf (filename),usctheses-c20-440820 (legacy record id)

Legacy Identifier EP44716.pdf

Dmrecord 440820

Document Type Thesis

Rights Magno, Pilar Romulo

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA