Journal. [1966]

Domestic Monetary Situation. The domestic monetary situation became increasingly confused during the closing weeks of the
electoral campaign as the Go veinment scurried to squeeze all available
sources for pesos to support its extraordinarily high level of expesnditures during the pre-election period. The remaindeur o;f tile quarter
was dominated by efforts to "pick up the pieces", to permit current
government payrolls to be met and vital governmental services to be
continued. The Central Bank was most haid pressed to remain within
the ceiling established for its net domestic assets by tLe IMF standby
agreement (this ceiling was increased by P100 million early in January,
1966). As a consequence of the Novemb r 6 re-valuation of the peso,
the Government was able to tap tie "Revaluation of International
Reserves,' account, (the accumulated proceeds from the 20% retention
scheme) for P134 million. With re-valuation, the Government ihad
incurred an obligation to IMF for this amount as additional peso equivalent of the local currency portion of its subscription; it chose to liquidate this obligation with a non-interest-bearing note rather than with
pesos from the Revaluation account; the corresponding amount of
pesos thus became available from the Revaluation account for current
budgetary operations and served to tide tihe Government over until
the change of admninistration, December 30. 1965.
For the private sector, tnerke could be no effective relief under
these circumstances. Credit repmained tight and can be expected to
continue so, as long as such a large part of the Cential Bank's net domestic assets are required as loans and credits to the Government and its
institutions. Hopefully, the new administration's announced policy
of "honesty and austerity" will include imposition of fiscal and budgetary responsibility such as to enable the credit requiirepents of the private
sector, especially of the industrial enterprises, to be more adequately
fulfilled.
Industry and Mining
Industry. Based on the Manila Electric Company's industrial
electrical power consumption figures, which arje felt to be a reasonably
accurate measure of industrial production in the Philippines, the industrial sector of the economy continued to grow. Industrial consumption
of electricity increased by 6.8% during the 4th quarter as comparexd
to the same period in 1964 For the year 1965, industrial consumption
of electrical power increased by 9.9% over 1964.
Some significant inc:eases and decreases in electric power consumption by i dustry were noted during the quarter. The oilrefining, coconut
productis, and wire and cable industries showed increases, while the
enarmlinMg d:ugs, and poultry feeds industries registered decreases.
Mining. Tie value of mineral production during the 4th quarter
of 1965 totaled P169.9 million, a 16% increase over the 3rd quarter
level of P138.9 million and a 30% incr ease over the 4th quarter a year
ago. Metallic mineral production was valued at P80.9 million, a 14.8c%0
increase o'zer tae 3:d quarter. Tae increase is attributed in the main
to aigher prices for copper, together with an increased demand for
Pnilippine refractory and metallurgical chromite and increased production of iron ore pzllets following the reolution of start-up difficulties
at Pnilippine Iron Mines. Non-metallic minerals production was valued,
at P57.2 million, a 21.7% increase over the 3rd quarter which is attributed almost entirely to increased cement production. Precious mineral production during the 4th quarter was valued at P22.7 million,
an increase of 6.2%7o resulting from increased production of gold and
silver.
In November, the Sarigao Mineral Reservation Board rejected
the two bids received in response to a public bid offering for the operation of Parcel II of the Surigao Mineral Reservation. The Board stated
that the bidders had failed to meet the technical and financial conditions
of the bid. The Board reportedly recommended to t;-e President that
negotiations be conducted with qualified parties interested in devel
oping the Surigao laterite deposits in the hope ti-at the numerous
problems which exist from the point of view of investors can be pinpointed and resolved.
Also in November, the Bacnotan Cement Industries, Inc. announced the signing of an agreement with the Mitasui Bussan Company
of Tokyo for the loan of $7.5 million to-construct a cem nt plant at
Davao, Mindanao. Toie loan reportedly carries a 5.75%0 interest charge,
is repayable over a 10-year period and is guaranteed by tie Development Bank of the Philippines. Tie construction of a 4,000,000 bagper-year plant at Davao will reportedly bring Bacnotan's total annual
capacity to 10,000,000 bags.
In December, the Boaid of Directors of Philippine Oil Development Company, after reviewing its record of performance and future
prospects, particularly the ex )iration of it- exploration concession'.
beginning in 1966, resolved that a proposal to dissolv/e the corporation
be presented to the stockholders in March, 1966. PODCO, established
in 1935, has been the most active explo ation company, having drilled
198,635 feet of holes at a total expenditure of P32.2 million without
finding commercial quantities of petroleum.
Transportation
Civil Aviation. In December, the Paiilippine Civil Aeronautics
Board issued a decision cancelling the third frequencies of PAA and
NWA, effective December 28.
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ECONOMIC INDICATORS
Fourth Quarter, 1965
(Millions of pesos and end of quarter unless otherwise specified)
4th Quarter 3rd Quarter 4th Quars.r
1965 1965 1964
International reserves....... 188.5 - 166.9 135.8
(million,U.S. dollars)
Money supply.............. 2,936.3 1 2,768.9 2,716.7
E. Currency in circulation.. 1,414.7 1,312.6 1,251.6
b. Demand deposits....... 1,521.6 1,456.3 1,465.1
Domestic credits........... 7,424.4 1 7,266.0 6,773.7
i. Central Bank.......... 1,603.6 1,622.3 1,578.0
). Commercial banks...... 5,820.8 t 5,643.7 5,195.7
Savings and time deposits of
commercial banks.... 2,407.1 i 2,420.4 2,356.2
oublic debt outstanding. Domestic.............. 3,139.2 t 3,063.9 2.904.2
). Foreign (million U.S.$)... 487.9 t 377.5 186.2
Jonstructioa permit value... 25.0 27.3 52.7
(Manila)
Paid-in capital (new firms)... 33.6 35.2 47.3
Foreign trade (f.o.b. in
million U.S.$),. Imports............... 58.2 2 216.9 207.6
>. Exports............... 60.4 2 199.5 164.5
duction
Sugar, (short tons)......... 396,143 125,957 r 362,649
Copra, (long tons).......... 275,665 264,297 2.38,394
Coconut oil (long tons)...... 96,318 69,331 101,424
Desiccated coconut (long
tons)................ 21,853 22,201 16,070
Abaca (bales).............. 147,901 188,530 164,089
Logs (thousand bd. ft.)...... 526,683 1,211,902 645,056
Gold (fine oz.)............. 112,960 t 110,345 t 100,200
Copper metal (m.t.)........ 16,727 15,566 17,500
Refractory chromite ore
(m.t.)............... 129,672 117,793 105,000
[ron ore (m.t.)............. 354,676 349,613 424,500
Industrial power sales (MERALCO) million kwh... 277.3 275.2 259.6
ce Indices, Manila
Wholesale (1955-100)........ 155.6 1.52.4 150.9
Retail (1955-100)............ 153.1 151.7 153.9
consumer (1955-100)........ 144.1 142.4 144.5

1 As of November 30, 1965
2 As of October 31, 1965
t tentative
r revised

During the quarter several expansion plans were revealed. Philippine Air Lines announced that, beginning November 1, it would offer
once-a-week DC-8 service Manila-Singapore-;Mganila. PAL also aninounced that its frequencies to the United States, Hong Kong, Taipei,
Sidney, and Singapore would be increased during 1966 and that
its present Viscount service Manila-Taipei-Manila would be replaced
by jet aircraft. PAL President and Chairman Toda announced that
PAL has ordered a third long-range jet, a DC-8, Series 50, for delivery
in June, 1967, a third BAC-111 jet for delivery in January, 1967, and
will take delivery of 6 more Fokker Friendships during 1966. Tne first
two BAC-111 are scheduled for delivery in M/arch and July, 1966.
Filipinas Orient Airways (Fairways) took delivery of 2 Japanese YS-11
aircraft during the quarter. This was the first foreign sale of this limitcd-production model manufactured by the Nihon Aeroplane Manafac-. turing Company. These jet-prop aircraft were placed in domestic
trunk line operation.
P litippin" Air Lines suffered two accidents during the period.
In October, a Viscount ran off the runway when its brakes failed while
landing at Bacolod and a DC-3 crashed on Nichols Air Base during
take off from Manila Domestic Airport, killing, 1, injWing 37, and destroying the aircraft. In December, an Air Manila DC-3 crashed at
LegaEspi City in bad weather, killing the pilot and first officer, injuring
15 passengers, and destroying the aircraft.
Mari: ime Ac'iviOy. The Manila South Harbor (an international.
pori) did not exp4iience a traditional period of congestion during the
Christmas season. This was due, in part, to the All-Japan Seamen
U.iion's strike in Japan. Talk and speculation continue to the effcct
that a Port Autitority siould be ce.ated, which in turn would automatically solve the multifarious problems of the South Harbor. There
may be little cause for Filipinos to be so sanguine, but in either case
suclh legislation has yet to be submitted and passed by the Administration.
Railroad Activity. On December 30, 1965., 2 diesel-electric
locomotives ordered from the International General Electric Company
of New York arrived in the Philippines. General Alfredo M. Santos
(ret.), the General Manager of the Philippine National Railroad announced on December 31 that the remaining 11 locomotives, ordered
from the same company, will be delivered by early March, 1966. The
locomotives are powered with 1,050 horse-power engines and according
to Santos are capable of easily pulling 11 passenger coaches or 14
loaded freight cars.
Agriculture
Agricultural production during the 4th quarter of 1965 showed
mixed trends for foqd and export crops. Rice production was up conTHE JOURNAL OF THE AMERICAN CHAMBER OF COMMERCE
July, 1966