WEEKLY SUMMARY SPECIAL REPORT THE PHILIPPINES: NEW SOCIETY, OLD PROBLEMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500060008-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 16, 2016
• Document Release Date: August 30, 2004
• Sequence Number: 8
• Publication Date: May 3, 1974
• Content Type: REPORT

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Secret
Weekly Summary
Special Report
The Philippine:: New Society, Old Problems
Secret
N2 986
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May 3, 1974
No. 0018/74A
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 I wish to emphasize these two objectives.
We wish to eliminate the threat of a
violent overthrow of our republic,
but at the same time, we must now reform
the social, the economic, and the
political institutions in our country.
The plans, the orders for reform
and removal of the inequities of that
society ...the general program for a
new and better Philippines will be
explained to you. But we must start
out with the elimination of anarchy
and the maintenance of
peace and order.
President Ferdinand Marcos
TV Speech to the Nation on
September 23, 1972,
the day after Martial Law was declared.
 When President Marcos declared martial law on September 22, 1972 during his
second term in office, he justified his action on the grounds of widespread social and
economic deterioration and a Communist political conspiracy. He announced that
he would found a "New Society" focusing on four main tasks: creating a new
political structure; stimulating economic growth; improving internal security; and
exploring new directions in foreign policy. Few Filipinos believed the 2llegations of
a serious Communist threat, but nonetheless, after 18 months of martial law, most
remain tolerant of one-man rule, hoping that Marcos will use his power to carry out
sweeping reforms.
Marcos had long talked about what reforms Philippine society needed and had
even set down his blueprint in a book, Today's Revolution: Democracy. He asserted,
however, that the venality of Philippine politicians allowed local vested interests, the
so-called oligarchy, to thwart his attempts at reform. He wanted a new constitution
that would strengthen the position of chief executive and eliminate the two-term
provision of the existing document that barred him from office after December
1973. By the summer of 1972 it was clear that Marcos could get whatever
constitutional changes he desired, but public opinion was turning against him and he
feared he could not win another election. He decided that declaring martial law and
suspending the constitution was the only way he could remain in office.
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A mood of malaise and discontent and a
feeling that "things could not continue like this"
permeated! Philippine society by 1972. A public
opinion poll in March showed 60 percent of the
electorate favored the platform of a burgeoning
political movement-Philippine Statehood USA-
ihat called for rejoining the US as the 51st state.
Others blamed the "national mess" on the US-
style government willed to the Philippines in
1946. They enthusiastically supported the call for
a new "Filipino-style" constitution that would
correct the ills of the existing system.
A large number of Filipinos felt that drastic
change was needed, despite the fact that Philip-
pine society was in many respects better off in
1972 than in 1970. The economy, buoyed by
increasing world market prices for Philippine ex-
ports, was experiencing a mild upswing. Although
violence remained a fact of life for many, major
crime statistics were down. Student radicalism
had declined sharply since 1971 and armed dissi-
dents in the countryside were kept in hand by
local army and constabulary units.
The popular impression that social and polit-
ical decay was accelerating was strengthened by a
series of events beginning in mid-1972. In June,
the President and his wife Imelda became the
center of a political scandal stemming from
charges that they were bribing constitutional con-
vention delegates. In July and August floods dev-
astated the heavily populated, rice-growing region
of central Luzon and opposition politicians and
journalists seized on the issue to stir up resent-
ment against government flood control policies
and its mismanagement of the relief effort. Soon
afterward a series of urban bombings erupted,
which the government claimed were part of a
Communist plan to destroy Philippine
democracy.
On September 22, an unsuccessful attempt
was made to assassinate Marcos' defense secre-
tary. Alleging an immin3nt coup,
rommunist Marcos declared martial law.
speculating for weeks that the President had a
secret plan to declare martial law in order to
perpetuate his rule. But for many Filipinos, the
martial law announcement was something of a
relief, promising an end to the nervous political
situation.
Building a Popular Consensus
For Marcos, a new political equation meant
first neutralizing or eliminating potential oppo-
nents. In the early hours of martial law, the
Philippine Constabulary arrested several hundred
alleged troublemakers-students, teachers, jour-
nalists, opposition politicians, businessmen, and
liberal clergy-and closed all newspapers and
broadcast facilities. Marcos argued, with some jus-
tification, that his enemies would speak out pub-
licly against him no matter what he tried to do,
poisoning public opinion before he had had a
chance to change 'It. He believed that his declining
popularity in his second term was the result of a
hostile press, and to some extent he was right.
Most Filipinos, even skeptical ones, seem
willing to give the President and his new regime
the benefit of the doubt, which compounds the
difficulties of those trying to oppose his control.
Existing constitutional checks, such as the judici-
ary, have been rendered impotent under martial
law. Traditional political groups have turned to
clandestine operations but have had little success.
Moreover, the mainstays of the old politicians-
wealthy patrons who try to protect their own
interests by having a "man" in government-have
quietly accommodated to the new order and have
put some distance between themselves and former
anti-Marcos politicians. Marcos has used martial
law to intimidate many of these so-called oli-
garchs-threatening their property and holding
their close relatives as hostages to ensure coopera-
tion. Most commercial barons have found, in fact,
that martial law is good for business, since labor
organizers and radical political activists have been
suppressed. Moreover, the disappearance of
elected officials has decreased the number of
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bribes and other business expenses associated
with old-style Philippine democracy.
University students and teachers, the most
irreconcilable Marcos critics prior to martial law,
have also shown little enthusiasm for anti-regime
politics in recent months. The activist student
movement was already in decline by early 1972,
the result both of a reaction to the violent dem-
onstrations of 1970-71 and of arrests of top
campus leaders in the fall of 1971. Under martial
law, more students and faculty members have
been detained, and the police have kept univer-
sities under close surveillance. The air of suspicion
Former President Macapagal, who chaired the Consti.
tutional Convention, signs draft of new constitution.
Special Report
and fear that pervades most campus communities
makes political action difficult. Some student
groups have tried to organize anti-Marcos pro-
tests, and some have distributed anti-government
literature but, like the politicians, the students
have been unable to inspire a broad protest move-
ment.
The one area where the President faces in-
creasingly effective opposition is from the Cath-
olic Left. Although still a minority in the Catholic
Church, the liberals have easy entree to all levels
of society, a ready-made communications net-
work, and significant organizational skills. They
help publish and distribute a wide variety of
underground newspapers and pamphlets. Under
martial law, several priests and nuns have been
arrested and church buildings have been searched.
Marcos has tried to balance these repressive acts
by opening a dialogue with some of the more
moderate clergy, but the priests and the govern-
ment find few common taking points.
Church opposition is potentially serious for
Marcos because many of the liberal clergy are
foreigners with access to foreign, particularly
American, journalists and officials. The priests
have the resources to act as the catalyst in form-
ing a united-front opposition movement. Some
militant church liberals already claim they are
cooperating with Communist guerrillas and Mus-
lim radicals in planning such a front.
Most politically active clergy are still reform-
ists, not revolutionaries. If, however, moderates
continue to be frustrated in their efforts to
change the government by "gentle persuasion,"
their radicalization may be inevitable. In time,
Catholic d;ssent in the Philippines could, as has
already happened in some Latin American coun-
tries, develop into an "underground church" in
league with left-wing insurgents.
The ability of any anti-Marcos group to or-
ganize a significant opposition movement will de-
pend on the grcwth of popular frustration with
the new order. F.larcos has thus far managed to
achieve broad popular 2:cceptance for martial law,
for while not everyone sees it as an improvement,
most regard it as no worse than the old system.
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Rural Filipinos in particular find some im-
provement in their daily lives. Gun-control meas-
ures and government pressure against the goon
squads of local landlords and politicians have de-
creased the amount of petty extortion, harass-
ment, and cattle rustling that formerly plagued
poor farmers. Despite delays in the implementa-
tion of land reform, most peasants still hope and
expect that their turn will come. Recently, there
have been signs that constabulary corruption and
brutality is increasing, but apparently the level is
still tolerable. The government has publicly pun-
ished some constabulary men accused of wrong-
doing, but critics charge that the worst offenders
usually go free because they are officers.
Benefits to urban areas under martial law are
less evit'ent. Their plight is of special concern for
Marcos' regime because they are also the class
that furnishes the Philippine military. Urban resi-
dents are long-time enemies of Marcos and prob-
ably hard to impress. Their sons and daughters
crowd the universities, but graduate to unemploy-
ment. They aye beleaguered by rising prices for
food, fuel, and services. The urban crime rate has
r,.,t changed appreciably, altnnugh random vio-
LLLice as a result of privately owned arsenals has
been curbed by the new gun-control measures and
life seems a bit more orderly.
Appealing to public disenchantment with
the old political system, Marcos has tried to in-
crease support for his regime by creating new
institutions. He has pushed through the constitu-
tional convention a draft providing for a parlia-
mentary form of government and "transitory pro-
visions" that in effect ratify martial law and give
Marcos total discretionary power in implementing
the new constitution.
The Marcos constitution climaxes a trend in
Philippine administration toward greater concen-
tration of power in the hands of a single national
executive. Under the new constitution, the prime
minister has sweeping discretionary powers. The
National Assembly may not initiate legislation on
national affairs, has little power over the purse,
and no influence on government appointments.
Special Report
At most, it may delay some executive actions.
The Supreme Court has broad new powers over
lower courts but, at the same time, the executive
has greater power toF appoint and dismiss mem-
bers of the court itself.
The new constitution also brings local gov-
ernments under much closer control by the cen-
tral administration. It removes police functions
from local jurisdictions, integrating them into a
new national police force, and gives the central
government the final word on local economic
matters. Much of the emasculation of local gov-
ernm9nts has in fact already been accomplished
under martial law. Major decisions-acceptance of
the new constitution, continuing martial law,
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Nev Peoples' Army base areas
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convening a national legislative body-have been
referred from existing institutions to newly organ-
ized, ?;xtra-constitutional bodies called bcrangay.
These carefully controlled village-level citizens'
assemblies report directly to the President, and
Marcos hopes that in the absence of elections, the
barangy meetings will satisty the public's desire
to participate in government.
Insofar as he cares at all, the Philippine voter
probably misses the politicians of the old system
more than the elections. For all their faults, the
o!d-style politicians did provide a point of contact
with the government to which the Filipino could
appeal for redress of grievances, a job, and various
minor but comforting services. There is no person
or institution in the new system to fill this func-
tion.
Marcos is moving to eliminate all intervening
bodies between himself and the public. He is not
only centralizing administration, he is "personal-
izing" it as well. Activities of the Marcos family
dominate the government-controlled media, and
evc.y plan or benefit with any significance is
attributed directly to some act of Marcos or his
wife. This budding personality cult is potentially
a risky business-when difficulties arise, Marcos
will have problems placing the blame on others.
Moreover, his sudden death or incapacitation
could gravely threaten political stability and cause
divisive competition among various aspirants for
power. The unsolved succession problem has
created some difficulties already. Foreign busi-
nessmen, for example, have expressed doubts
about long-term investment prospects if they can-
not be certain of an orderly succession. Marcos
claims to have made a secret political testament,
but there is little guarantee that it would be
honored by those ambitious to fill the power
vacuum caused by his sudden departure.
The Role of the Military
The Philippine military, long considered one
of the most professional and least political in
Southeast Asia, has taken on a new, broader role
under martial law, and will be an important factor
in any post-Marcos regime. Marcos began subtly
changing the military's character and preparing it
for a political role prior to 1972. Politically de-
pendable officers were gradually moved into top
command positions, often being promoted over
the heads of more capable men not considered
personally loyal to Marcos. Many of the top offi-
cers now come from Marcos' own ethnic group-
the Ilocano of northwest Luzon, a group noted
for their strong clan loyalties. Marcos' governing
clique is now popularly referred to as the "Ilo-
cano Mafia."
With the suspension of regular government
bodies under martial law, much real authority
over local affairs passed to the military command-
ers, who became the most visible link with the
central government. In the early days of martial
law, the military not only provided the muscle
that arrested critics and imposed law and order,
but in many instances it ran government bureaus
and supervised private corporations. Many offi-
cers thoroughly enjoyed their new responsibili-
ties. Today, military men still have watchdog
positions on the boards of some corporations and
government bodies, but they apparently do not
run these organizations.
Marcos is well aware that the military could
turn against him, and he has taken steps to assure
its loyalty-increasing military pay and fringe
benefits, speeding promotions, adding to the
number of officer slots, and publicly praising the
military's constructive role in the new order. The
military has yet to articulate any interests or
ambitions different from those of Marcos. Some
officers have grumbled about civilian interference
with the military's handling of the Muslim insur-
gency in the south, but thus far Marcos has been
able to smooth the ruffled feathers. 'There has
also been some resentment against civilian offi-
cials who do not aggressively enforce martial law
reforms, but the military shows no inclination to
move against alleged ills without Marcos' orders.
Stimulating Economic Growth
In the years immediately preceding the
Marcos take-over, the principal limitation on the
country's economic growth was poor agricultural
performance. This stemmed partly frorr natural
disasters (drought, floods, and crop dic.iases) but
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The first tenant farmers to qualify under martial law land-
reform decrees receive their deeds from President Marcos.
program is likely to run into increasing opposition
from landlords as it rnoves to break up smaller
landholdings. Marcos must move carefully at this
stage because many of these landlords are from
the military or the middle class, whose political
support he needs. Changes in industrial incentives
have partly removed the built-in bias against- pro-
duction for export. The administrative and finan-
cial system has been completely revamped, and
tax measures stalled for more than a decade in
Congress are now an integral part of the fiscal
system. Rules and regulations governing foreign
investment have been greatly modified. While
many obstacles to economic growth remain un-
touched, the measures taken under martial law
have made a significant start toward correcting
some fundamental problems.
The economy experienced a marked upswing
in 1973, though the reforms had little to do with
it. A weather-induced agricultural recovery and a
record balance of payments surplus resulted
mainly from sharp price rises in world commodity
markets. These factors produced an economic
growth rate in 1973 of 8-10 percent (a sharp
contrast with the mediocre 5.5 percent average
between 1967 and 1972) and gave the Philippine
economy a cushion it has lacked for many years
and bought time for the reforms to have some
impact. Foreign exchange reserves at the end of
the year totaled $876 million compared with only
$282 million a year earlier. This superior perform-
ance was marred only by a failure toy contain
inflation. According to official indices, consumer
and wholesale prices were up 27 percent and 51
percent respectively.
The outlook for this year is decidedly less
good With a tighter import situation, a probable
decline in exports, and continuing inflation, real
growth will probably slow to about 6 percent.
The government has been successful in lining up
new sources of fertilizer imports, but there is :;till
a question as to whether supplies will arrive in
time for the major rice planting that begins in
June. Even ,with favorable weather and timely
fertilizer arrivals, agricultural cutput is not likely
to increase by more than 3-4 percent, compared
with 11 percent last year. While the government
has been tak;ng a more active role, agricultural
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also from tight credit policies, price controls, and
the government's failure to fund promised price
supports for high-yielding varieties of rice.
Industrial growth was also modest. High
growth rates had been achieved in the 1950s
under protective policies but this led to high-cost
industries oriented toward the domestic market
and unable to compete in export markets. As
opportunities for import substitution declined in
the 1960s, so did foreign investment; there was a
net outflow of investment at the end of the
decade. Response to incentives introduced in the
late 1960s was disappointing, and levels of indus-
trial investment remained stagnant through 1972.
The new capacity to legislate by decree
under martial law promised opportunities to deal
with economic problems more directly. The result
was a flood of new measures, many of which
would have been impossible in the previous politi-
cal climate. Since 'ate 1972, the political power
of oligarchic families has been checked, capable
government technocrats have received greater eco-
nomic responsibility, and have responded with
far-reaching policy initiatives. A good beginning
has been made in agrarian reform, although the
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output is still dependent on the vagaries of
weather. Before any real breakthrough is
achieved, the government will have to follow
through with plans to expand flood control and
irrigation facilities. Industrial growth is likely to
be slowed by high costs and shortages of essential
raw materials abroad. Philippine industry depends
heavily on a steady flow of intermediate goods
from Japan, and decreased supplies of Japanese
steel are already causing some difficulties for a
planned expansion of some Philippine industries.
Adequate fuel supplies will be available in
1974, but higher costs of crude oil will adversely
affect the Philippines' balance of payments, lead-
ing to a deficit of perhaps more than $600 mil-
lion. Higher prices for other essential imports
could raise the total import bill by 40-50 percent,
while export receipts should drop by 5-10 per-
cent. Although prices for most Philippine exports
have held up well thus far, they are expected to
soften in the second half of the year in response
to the economic slowdown in the US and Japan.
With its improved credit raiing, the Philip-
pines has encountered little difficulty in recent
months in negotiating long-term commercial cred-
;ts to help stabilize foreign-exchange reserves. A
total of $500 million in five-year revolving credits
has already been arranged with bank consortia in
the US, Europe, and Japan, and greater amounts
are being sought- Inflows of foreign aid and of
long-term private capital continue to be substan-
tial and should help limit the use of reserves.
The government's most difficult and politi-
cally pressing problem is inFlation. The effective-
ness of price controls has now generally dissi-
pated, and the stabilizing effect of good harvests
has been less than hoped fo The unprecedented
price gains of 1973 cont;nued to accelerate into
1974. The government has taken a number of
countermeasures including a cutback in spending,
an 'mproved tax effort, a more aggressive bond
sales )rogram and a more restrictive credit policy.
Curtailing monetary expansion, however, will
only go so far in holding down prices since much
Special Report - 9 -
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Typical fishing village
of the inflation derives from world market pres-
sures on internationally traded goods.
Marcos has given only token response to
pressures for higher wages, but he may not be
able to hold the line much longer. Living stand-
ards of low income groups-particularly urban
workers-have been eroding for some years, and
this trend has quickened since martial law began.
Since prospects for containing inflation this year
are not good, real wages may erode still further,
and Marcos may have to reverse his wage policy
or risk civil disturbances.
A number of measures have been taken to
restructure the industrial sector by encouraging
foreign investment, particularly in those sectors
that promise employment and export growth.
Much will depend on the response of foreign
investors to Marcos' enticements, but investment
should accelerate provided world trade does riot
move into a recessionary phase. In any case, it
will be some time before industrial problems in-
herited from the policies of the 1960s are cor-
rected and the country is able to take full ad-
vantage of its export potential. For the next dec-
ade at least, the domestic market is likely to
remain crucial to growth in industry.
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Internal Security Problems
The Philippines has for some time had two
active armed insurgencies-a Muslim revolt in the
south and a Communist guerrilla movement on
Luzon. In addition, the country was plagued by
widespread violence committed by a citizenry
armed to the teeth and accustomed to settling
political, commercial, and personal feuds with a
bullet. Among Marcos' first acts under martial law
was to enact strict gun control, including a round-
up of unlicensed firearms, and the arrest of sev-
eral notorious gun smugglers and gangsters. Al-
though the guns collected were only a fraction of
those in circulation-and rarely the high-powered
firearms-the tough measures have reduced the
open carrying of guns, which in itself has con-
tributed significantly to law and order.
Since the institution of martial law, Marcos
increased pressure on Communist orgai,:za-
the spirit of student activism, but its former
power and influence are gene.
Martial law has hac less success with the
Maoist party's guerrilla organization, the New
People's Army, which now has an estimated
1,300 members, up 300 since martial law was
declared. The guerrilla force is concentrated in
the hills of northern Luzon and on the Bicol
Pen;nsula in southern Luzon. The Philippine
armed forces have not vigorously sought them
out-in part because a Communist threat is useful
to the government as clear proof of the danger
that justifies martial law.
In contrast to the Communist guerrillas, the
Muslim insurgents in the southern islands have
posed a significant security threat. Efforts to in-
troduce gun-control provisi~-rs in Muslim areas
exacerbated Ions-standin5 communal tensions be-
tween the resident Muslims and Christians who
have moved in from islands to the north. The
Muslim insurgency has significantly worsened
since martial law. Marcos is not convinced-as are
some of his military commanders-that an armed
solution is practical. He is worried about adverse
diplomatic consequences and about drawing
down troop strength elsewhere. The armed forces
have taken heavy casualties in the south, but have
not been allowed to retaliate in full measure.
Some officers grumble at this "civilian meddling"
in military matters. Although mindful of the dan-
gers of alienating the armed forces commanders,
Marcos is not willing to make the all-out commit-
ment of men and material they are advocating. He
has tried to negotiate where possible but, like his
predecessors, Marcos is committed to the concept
of a unitary Philippine state and will not consider
Muslim demands for autonomy. Manila govern-
ments have always favored assimilation as the
solution to the "Muslim problem," but Muslims
interpret assimilation as the destruction of Islamic
culture and society.
U1 yal 1;40 LIUI !,the Maoist-style Communist
Marxist Leninist, has also suffered under martial
law with many of its urban leaders and cadre
detained and its access to university campuses
diminished. The party's most prominent campus
front, the Kabataang Makabayan (Patriotic
Youth) student organization, has tried to revive
International Muslim delegation visito Marcos to
investigate tiie Philippines' "Muslim problem."
Special Report
The Muslims themselves are divided into sev-
eral ethnic groups with. competing clans and polit-
ical factions. Such factionalism aids the govern-
ment's military operations, but it handicaps nego-
tiation efforts. Where traditional political chiefs
still control Muslim communities, as in parts of
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Mindanao, there is some sentiment for cooper-
ating with Manila. In other areas, especially in the
Sulu archipelago, young militants and fanatic re-
ligious leaders control the movement and refuse
any compromise short of secession.
The Search for New Directions in Foreign Policy
Even before martial law, Marcos was calling
for an independent Philippine foreign policy that
would entail expanded relations with Communist
states and reduced dependence on the US. De-
spite much publicity during the past year about
bold new foreign policy initiatives, however, the
fundamentals of Philippine international diplo-
macy have changed very little. Manila still looks
to Washington more often than not, and Marcos
worries most about the durability of US eco-
nomic and military support, particularly whether
martial law will antagonize US congressmen and
jeopardize aid programs.
Marcos is making a massive effort to win
support from the large expatriate Filipino com-
munity in the US in order to undercut the influ-
ence of his opponents abroad. Much money has
been spent on literature, inexpensive "home-
coming" fares, and "truth teams" designed to
influence public opinion among US-based Fili-
pinos-and, by extension, among US citizens as
Special Report - 11 -
Muslim village on Mindanao
well. Marcos has also tried to reassure American
businessmen that the favorable investment mate established by martial law decrees will con-
tinue. He is putting distance between himself and
the expressions of economic nationalism that
characterized poli-Lical rhetoric, both inside the
palace and out, in the years prior to martial law.
In official relations with the US Government,
Marcos often seems to play down areas of differ-
ence, although as a Philippine nationalist he will
bargain hard over economic and military agree-
ments. Marcos seeks to avoid a public cooling of
US-Philippine relations out of concern that this
would encourage his enemies at home and create
international difficulties as well.
Contacts with the Soviet Union and China
have increased since martial law was instituted,
and Manila now has diplomatic relations with all
East European states, although providing only for
non-resident ambassadors. Both Moscow and
Peking have sent trade delegations-received with
suitable press fanfare-but no trade agreements
have been signed and diplomatic ties seem no
closer than two years ago. Neither Peking nor
Moscow considers the Ph;lippine: a primary for-
eign policy target, and Marcos is unlikely to
achieve relations on his terms. Even should ties be
established, neither Communist state promises to
become a major trading partner capable of signifi-
cantly altering the present pattern of Manila's
international economic relationships.
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Perhaps the most important change in Philip-
pine foreign policy in the past year is Manila's
new initiative toward the Arab states. The focus
on the Middle East was not envisioned by Marcos
when speaking of the new directions for Philip-
pine foreign policy under martial law. It arose out
of necessity when problems with the Muslim
minority in the south and a threatened oil crisis
caught Marcos at a disadvantage because he had
diplomatic relations only with Egypt. He first
began broadening contacts with the Arab states in
early 1973 because he was under constant attack
in world Islamic circles by Libyan leader Qadhafi,
but the oil problem accentuated his need for
closer ties with Middle East states. Marcos' will-
ingness to abandon neutrality on the Arab-Israeli
conflict in favor of a pro-Arab stand gained the
Philippines an exemption from the oil embargo.
His dependence on Mid-East oil in turn has made
Marcos that much more sensitive to the need to
keep the Islamic world from condemning his
Muslim policies.
Marcos' Muslim problems have also caused
diplomatic difficulties with his Southeast Asian
neighbors. Indonesia in particular is unhappy with
the continuing tension between Manila and Kuala
Lumpur over Marcos' charge that the Malaysian
Government is aiding the rebels ilalaysian-
Philippine relations were strained fu, trier in 1973
when the issue of Manila's territorial claims to the
Malaysian Borneo state of Sabah was revived.
Under martial law, Marcos has had the op-
portunity and the power to take the drastic meas-
ures needed to reverse the deterioration in the
Philippines' society and economy. Economic re-
forms initiated thus far are a very significant step
in the right direction, but they have only begun
to have an impact on long-standing and complex
problems. Resolution of these problems will re-
quire a sustained effort and a willingness to run
counter to vested interests.
Most Filipinos-though pleased with the ob-
vious manifestations of "progress" such as clean
streets and law and order-are more interested in
jobs, improved living standards and a fairer distri-
bution of wealth. Agrarian reform, however, will
fall flat unless a way is found to reduce the size of
holdings landlords are now permitted to retain.
Tax revenues must be increased still further in
order to finance the expansion of flood :ontrol
and irrigation facilities needed to improve agri-
cultural production. A shift in industrial strategy
designed to stimulate exports and ultimately ex-
pand employment opportunities will require re-
moval of protective barriers favored by local busi-
ness.
Further reforms will entail a confrontation
with important power groups. For all his flam-
boyant rhetoric, Marcos is basically a very cau-
tious and conservative political animal, hesitant to
act if thi outcome cannot be 100-percent guaran-
teed. He has used his expanded power quickly
and effectively to institute stop-gap measures, as
during the threatened petroleum crisis, but has
demurred on decisions that might be politically
risky. As a result, the New Society is losing its
momentum and with it the broad consensus that
supports martial law may begin eroding. Marcos
could lose his chance to restructure Philippine
society, and he runs the risk that Philippine so-
ciety could again become lit le different than it
was on the eve of martial law.
25X1 25X1
Special Report
May 3, 1974
Approved For Release 2004/098-QIRDP85T00875R001500060008-8