sciences; the provision of basic health and social services; and the assessment and conservation of natural resources. No country that aspires to economic development can say that it cannot afford these duties of government. It cannot afford not to educate its children. It cannot afford not to build up the health of its people. It cannot afford not to give aid and encouragement to art and science. It is the function of a government aspiring to economic development to establish and maintain the institutions which enable its citizens to become resourceful. The bulk of the capital for the economic development of a country must come from its own people. There are important reasons for this. In the first place, the amount of funds that can conceivably be obtained from foreign sources will always fall far short of a nation's capacity to use capital. Larger amounts of capital have been moving across national boundaries since the end of World War II than at any time in the past, but the demands still far exceed the supply. Secondly, a country which imported too large a proportion of its capital would be faced for a long time with heavier carrying charges than it can readily meet in foreign exchange. Many industrialized countries, including the United States, have been developed in part by foreign capital, but in every case, the bulk of their capital investment is the result of their own savings. These considerations underline the importance for a government to create a climate and devise incentives which will stimulate and mobilize domestic savings, and then channel these savings into productive investment. Thus have I indicated some of the functions of government, which are basic, indispensable ingredients to economic development. To discharge these functions effectively calls for government personnel trained in the art of administration, devoted to the public service, and scrupulous of the public welfare. In my discussion of economic development thus far, I have reviewed the main factors which a nation should keep in mind in planning and developing its economic life. In so doing I have attempted to emphasize the basic principle, appli-cable to every country in the world today, that national development must be based primarily on national resources and must come largely from the effort of the people concerned. With regard to assistance which a foreign country can furnish to aid and accelerate another nation's economic development, my Government has decided to place chief emphasis on First. Assistance in finding ways and means of tapping the reservoirs of foreign capital, to supplement local capital, in the creation and expansion of productive enterprises. Second. Assistance in providing scientific and technical "know-how" and "show-how" in the various fields of activity directly related to a nation's economic development. I have briefly discussed up to this point what a nation must do for itself and what assistance it is reasonable to expect from a foreign country in a wide-ranging, long-term program of economic self-development. Now let's apply this general information to the question at hand: The economic self-development of the Philippines and what the United States can contribute to this great undertaking. The conditions my Government considers essential before assistance to a country can be justified have been clearly defined in connection with the European recovery program. These conditions, which will apply also to aid under the "Point 4 program," have been inherent in all I have said thus far about economic development. Specifically they are: (1) practical and realistic plans of action, (2) maximum self-help, by the nation itself, and (3) existence of internal conditions favorable to economic development. Let's think about these three conditions for a few moments, as they relate to the economic development of this country. 1. Agriculture.-The wealth necessary to support a prosperous nation exists in Philippine soil and waters. For this reason, the foundation of the country's economic structure must be agriculture. Increase in agricultural production is essential today to relieve the drain on foreign exchange from food imports and to maintain an expanding industrial population. Agricultural production can be increased by the use of better seed and fertilizer, irrigation, improved methods and techniques of farm operations, the more extensive use of mechanized equipment, improved marketing facilities, adequate credit at low rates for small farmers, a program of continuous research and experimentation, and by bringing under cultivation a larger percentage of the arable lands. Is the country at present doing all it can to increase its agricultural productivity in these and other ways? If not, what more can it do in terms of its own resources? 2. Industrialization.-While I feel that primary emphasis should be placed on agriculture, it would appear that Philippine economy has developed suffi ciently to warrant the launching of a carefully planned program of industrial development to produce products for home consumption, which otherwise would have to be purchased in foreign markets. New, small-scale rural industries, including handicrafts, could be developed which would furnish farm laborers with work during those periods of the year when they are not engaged in agricultural activities, thus increasing both their total productivity and their standard of living. Mining could be further developed and the processing of ores advanced to increase their sales' value in foreign markets and to form the basis for more advanced industrialization in the future. Of particular importance is the manufacturing of items to promote agricultural development, such as fertilizer. Progress in the field of industrial development will, of necessity, be slow. It must, however, be built on a sound foundation, in proper balance with an expanding agricultural program. Does this country have plans for industrial development? If so, is it using its own resources, in maximum degree, to implement such plans? 3. Power.-Basic to both industrial and agricultural development is, of course, the use of the nation's water resources for light, power, and irrigation. Is the country at present doing all it can to utilize its water resources for economie development? 4. Public health.—The economic development of your nation will depend to a considerable extent on the health and physical strength of the people. Every effort must be made to strengthen the nation's health by the development of effective physical-training programs in the schools and by the eradication of those diseases, such as malaria and tuberculosis, which today are depriving the country yearly of millions of man-hours of productive labor. The United States Public Health Service has demonstrated by its work on Negroes and elsewhere what can be done to eradicate malaria and other disabling diseases. Is this country doing all it can for itself in the field of public health? Has it a future program leading eventually to the complete elimination of serious health hazards? 5. Education.-All phases of economic development depend to a large extent upon education. The schools of a democracy such as yours and mine must produce men and women who have strong bodies, good minds, stable emotions, sound character; they must be able to read and write and think straight; they must possess the knowledge and skills essential to productive effort in the fields of agriculture, industry, and commerce, and in the professions. Is the country doing all it can, within the scope of its own resources, to so train its youth as to make possible for the Nation a maximum use of its human resources? 6. Financial stability.-Financial stability is a prime requisite for economic development. In this connection consideration must be given to whether financial stability is being maintained by holding budgetary expenditures to a level that makes it possible for the Government to meet the genuine needs of the country. The percentage of the national income that can be taken through taxation, without acting as a drag on the economy, is an open question. It is somewhat difficult, however, to establish the need for outside assistance for internal expenditures if the percentage of national income taken through taxation is much lower than that of most other countries and particularly lower than that of the country from which assistance is asked. It would appear equally difficult to establish the need for foreign-exchange assistance unless the maximum effort is being made with what is available internally in the Philippines. Is the country providing and maintaining essential government services at an adequate level? If not, what more can it do within the scope of its own financial resources? 7. Domestic capital.-I said earlier in this speech that the bulk of capital for the economic development of a country must come from its own people. I understand that there is a considerable amount of local capital here in the Philippines today that could be used for capital investment. If this is true, what is being done, and what more can be done in the future to increase the flow of such capital into productive enterprises? 8. Foreign exchange.-A country that desires to use all the resources available to it to promote economic development, should make the most judicious use of its foreign exchange. By this I mean, the use of as large a portion of such exchange as possible for capital imports and agricultural equipment and supplies that will help to increase productivity, and, conversely, as small a portion as possible for goods that would be immediately consumed. How is the foreign exchange of your country used at present? What can be done in the future to increase still further the percentage of foreign exchange used for those types of imports that will directly contribute to increased productivity? 9. Internal conditions.-If United States private capital is to come to the Philippines in larger amounts in the future than it is at present, the Government must establish internal conditions and devise incentives which will stimulate such investments. This involves among other things, law and order, a sound financial system, and an effective program to alleviate social unrest by promoting a higher standard of living for those of your people who for generations have been able to eke out only the barest possible existence. Is your country doing everything it can to establish internal conditions favorable to economic development such as the maintenance of law and order, development of a sound fiscal system and raising the living standards of its lowest economic groups? 10. Production costs.-Another internal factor vitally affecting the inflow of foreign capital for industrial development is the question of production costs, which must be low enough to insure the investor a reasonable profit on his investment. I discussed this matter a few weeks ago while I was in Washington. Unfortunately, my words were misquoted and my meaning misunderstood. Let me make myself clear on this matter once and for all. Production costs in the Philippines today are high—in fact substantially higher than in many countries currently seeking United States private capital. If the Philippines is to compete successfully with these other foreign countries for United States capital, such costs must be reduced. I want to make it very clear, however, that I am not talking about employee wages, which constitute only one element in the total cost of production. I want to make it clear, also, that I am definitely prolabor and confidently looking forward to the day when the standard of living of the laborer will be materially higher than it is today, as productivity increases. In referring to a reduction in production costs I have in mind such factors as the more efficient use of manpower through better planning, training, and supervision, more attention to employee health and welfare and the development of more efficient production methods and techniques. The reduction of labor costs in Negros, as a result of the malaria-control program of the United States Public Health Service, is a good example of what I mean by reducing production costs without reducing the wages of the laborers. What can be done to reduce production costs in other areas of the country without lowering wages? From the answers to such specific questions as I have just raised should come the answers to such general questions as: Is the Philippines making a maximum use of its own resources to promote its own economic development; if not, what more can it do for itself? With the answers to these questions in hand, the next step will be the formulation of a concrete, specific, realistic plan of action, based upon what appears to be the wisest course of action in terms of the most urgent immediate needs, as well as the long-range needs of the Nation as a whole. Long-range projects necessary to the most beneficial development of the country's resources must be carefully formulated. On the other hand, today's needs are urgent. Without prejudice to the plans for long-range development, top priority should be given to economic development projects which can be undertaken promptly and which will make the greatest net contribution within a reasonable period of time. In brief, a proper balance should be kept between long-run objectives and short-run realities. The members of my Embassy staff will be glad to assist, to the extent desired by your Government, in the drafting of a plan of action such as I have just discussed. As soon as a plan has been completed, which provides for maximum selfhelp on the part of your country itself, my Government stands ready and willing to cooperate in carrying out the plan by assistance under President Truman's point IV program, when necessary funds are made available. Under the point IV program two types of assistance will be available 1. Assistance in finding ways and means of tapping the reservoirs of United States private capital, to supplement local capital, in the creation and expansion of productive enterprises. 2. Assistance, by furnishing scientific and technical knowledge and skill through such activities as training in administration, in industry, and in agriculture; health programs, broad technical missions, and the supplying of individual experts; experiment stations; training fellowships and local technical training institutes; dissemination of information through conferences, seminars, and publications; provision of laboratory material; demonstration services and equipment; advice concerning particular industrial and agricultural projects; resource surveys and general assessment of development potentialities; analysis of methods of production, marketing, and management; and advice on steps designed to mobilize domestic savings for constructive investment. In addition to the foregoing types of assistance under the point IV program, I shall be willing to recommend to my Government, from time to time, other types of assistance which might be required to supplement maximum effort by the Filipino people in order to enable them to build a sound balanced economy. In closing may I say, as strongly as possible, that the Filipino people have every reason to have full confidence in the future of their country. You have vast resources and an intelligent population and the United States stands squarely behind you today, asking only that you do all in your own power to develop your own economy to the end that a steadily increasing percentage of the Filipino people may realize their aspirations for a happier, healthier, and more prosperous life. FEDERAL SUPPLY MANAGEMENT (Overseas Survey) MONDAY, NOVEMBER 5, 1951 HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS OF THE COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS The subcommittee met Monday, November 5, 1951, in the American consulate general's office, Union Building, Singapore, Hon. Herbert C. Bonner, chairman of the subcommittee, presiding. Members of Congress present: Herbert C. Bonner, chairman; Harold Donohue, W. J. Bryan Dorn, Bill Lantaff, Cecil M. Harden, and Charles B. Brownson. Staff representatives present: Christine Ray Davis, chief clerk; Thomas A. Kennedy, general counsel; Herbert Roback, staff member; Annabell Zue, minority clerk; Ray Ward, Bureau of the Budget; John Elliott, State Department escort officer; and Brig. Gen. Clarence V. Fenn, Department of the Army escort. American Embassy personnel present: Gordon L. Canada, general services officer; John Goodyear, consul; James D. Hurd, vice consul; Stanley R. Kidder, administrative officer; Joseph H. Rogatnick, Chief Economic Section; Josephine D. Wharton, disbursing officer; Elmer Newton, director (consul); Lt. Comdr. W. Gordon Cornell, assistant naval attaché; and Lt. Edgar F. Luckenbach, assistant naval attaché. STATEMENT OF STANLEY R. KIDDER, ADMINISTRATIVE OFFICER, UNITED STATES EMBASSY, SINGAPORE, MALAYA Mr. KIDDER. I should like to take this opportunity to welcome the subcommittee to Singapore. We are indeed happy to have you and I know that in view of the work schedule of which you have apprised us that your visit will be productive. Mr. BONNER. We should like especially, sir, to meet with the British agencies here for an informal discussion of their supply problems. This visit should include, we believe, not only the military but the British civilian agencies in this region. any of Mr. KIDDER. I have been apprised of the subcommittee's wish, and arrangements have been made for a conference tomorrow with the Commissioner General and the British military and civilian agencies NOTE.-Asterisks denote classified material deleted for security reasons. 94756-52-42 635 |