412. National Security Council Report1

NSC 5813/1

UNITED STATES POLICY TOWARD THE PHILIPPINES

Note by the Executive Secretary to the National Security Council

REFERENCES

  • A. NSC 5413/1
  • B. OCB Report on NSC 5413/1, dated April 2, 1958
  • C. NSC Action No. 1907
  • D. NSC 5813
  • E. SNIE 66–58
  • F. Memo for NSC from Executive Secretary, same subject, dated June 2, 1958
  • G. NSC Action No. 1922

The National Security Council, the Secretary of the Treasury, Mr. Walter Williams for the Secretary of Commerce, and the Director, Bureau of the Budget, at the 368th Council meeting on June 3, 1958, adopted the draft statement of policy on the subject contained in NSC 5813, subject to the amendments set forth in NSC Action No. 1922–b.

The President has this date approved the statement of policy in NSC 5813, as amended and adopted by the Council and enclosed herewith as NSC 5813/1; directs its implementation by all appropriate Executive departments and agencies of the U.S. Government; and designates the Operations Coordinating Board as the coordinating agency.

The Financial Appendix, an Economic Aid Annex (Annex A), and a Military Annex (Annex B) are also enclosed for the information of the Council.2

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The enclosed statement of policy, as adopted and approved, supersedes NSC 5413/1.

James S. Lay, Jr.3

Attachment

STATEMENT OF U.S. POLICY TOWARD THE PHILIPPINES

General Considerations

Importance of the Philippines

1. The Republic of the Philippines is important to the United States and the Free World.

a.
Politically, the special relationship and close alliance between the United States and the Philippines serve to illustrate to other Asians that a young Asian state can benefit directly from association with the United States and at the same time adhere to its ideals of self-determination.
b.
Strategically, the Philippines forms a principal link in the Far East defense perimeter, of special value at this time because of its geographic relationship to Communist China, Japan, Formosa, Indonesia, and the countries of the Southeast Asian mainland.
c.
Economically, the Philippines is one of the most important areas of U.S. commercial activity in Asia, both as a market and as a field for investment.

Internal Political Situation

2. Garcia’s Administration. The preponderance of political power in the Philippines rests with the Nacionalista Party, which, in the national elections of November 1957, retained control of the Congress and the Presidency. President Carlos P. Garcia is a shrewd old-guard Nacionalista politician whose opportunistic approach to the problems of government, and tendency to surround himself with weak men dependent upon him politically, have, in the short period of his administration, already resulted in a serious decline in effective leadership and a sharp rise in government corruption. Judged on his record as President since March, 1957, most of Garcia’s energy and attention are apparently focussed on consolidating his political power by patronage, political payoffs, and playing off one faction against another. Moreover, Garcia has no wide political base from which he can derive support for an effective program conflicting with the interests of major Philippine groups.

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3. The Opposition. Potentially, the most important political opposition group is made up of the Magsaysay-oriented younger politicians. However, this group is now divided between the Progressive Party (composed of many of Magsaysay’s closest associates) and elements of the Liberal Party (including Vice President Diosdado Macapagal). The political future of these younger leaders will depend in a large measure upon whether they can unite to form a single effective political organization which can demonstrate to the people that it will carry out a program in the spirit of Magsaysay’s honest and energetic administration. In the 1959 senatorial and 1961 presidential elections, such a unified party could have widespread popular appeal if the corruption and ineffectiveness of the Garcia administration continue. Moreover, the creation of a strong opposition from these groups might exert a constructive influence on Garcia.

4. Garcia and the United States. From the standpoint of U.S. policy, the Garcia regime already represents a sharp retrogression from the Magsaysay period, and its prospects for improved performance in the future are not reassuring. The problem of U.S.-Philippine relations during the Garcia administration is complicated by:

a.
Garcia’s apparent belief that the United States must come to his rescue financially.4
b.
The possibility that Garcia, in an effort to obtain U.S. assistance in the amounts desired by him, might adopt more nationalistic attitudes or reopen the matter of U.S. base rights.
c.
The fact that Maysaysay’s program made a lasting impact on the hopes and aspirations of the people for a better life, with the result that they may quickly become restive unless their lot is improved.

It is not possible at this time to forecast with certainty Garcia’s reactions to the pressures on his administration.

5. Nationalism. There is a genuine and growing nationalist sentiment in the Philippines which is thus far not identified with anti-Americanism. However, a small but important group has attempted to exploit resentment of Philippine political and economic dependence upon the United States by emotional and chauvinist appeals. The political focal point of ultra-nationalist sentiment is currently the Nationalist-Citizens Party, founded by the chauvinist-nationalist Senator Recto and the devoutly Catholic but anti-clerical Senator Tanada.5 This Party is supported by an influential and vocal segment of the Filipino elite, speaking through the Daily Manila Chronicle. Although [Page 861] the Recto group has now officially left the ruling Nacionalista Party, its influence upon the Party’s old guard and within the Garcia Administration remains strong. Unless successful settlement of outstanding issues between the two countries is effected, Philippine nationalism will take on an increasing anti-American coloration. In any event, within the framework of the over-all alliance with the United States, and a generally pro-American attitude, there will be increased pressure for a more independent foreign policy.

6. Minorities.

a.
Muslims. The largest and politically most significant minority group in the Philippines is formed by the more than a million Muslims (Moros) concentrated in Mindanao and the Sulu archipelago. Since independence, Filipino Muslim contacts with other Muslim peoples, particularly in Indonesia and Egypt, have been more actively pursued and have prompted Philippine concern that the Philippine Muslims may be transformed into a subversive element within the Philippine nation. This concern has been compounded by the growth of Communist influence in Indonesia.
b.
The Chinese Community. The Chinese community, estimated at between 300,000 and 400,000, is by far the largest alien minority in the Philippines. The Chinese have held strongly to their culture and traditions, and have acquired economic power greatly disproportionate to their numbers. As a result, the Chinese have traditionally been a prime target of nationalist hostility. Discriminatory measures have been imposed against them, and they have commonly been the source of substantial campaign contributions to the Filipino candidates and heavy bribes to Filipino legislators and officials. Although frequently forced from the Chinese under pressure, such funds have at the same time been an important source of Chinese political influence. A strongly anti-communist Philippine Government with full diplomatic relations with the Government of the Republic of China has kept communist influence among the Chinese minority to a minimum. However, as long as Chinese Communist pressures remain strong and the Chinese minority is largely unassimilated, the Chinese in the Philippines will constitute an important potential instrument of communist subversion.

7. Americans in the Philippines. U.S. citizens constitute the second largest alien minority in the Philippines, and are estimated at approximately 45,000, including a substantial number of Filipino ethnic origin, about 11,000 United States Government employees and military personnel, plus dependents of the latter two categories. The American business community occupies a position of considerable importance in the economy and enjoys commensurate esteem and prestige. Direct private American investment is estimated at approximately $300 million, almost half of total foreign investment in the Philippines. Under [Page 862] the terms of the Revised Trade Agreement between the United States and the Philippines,6 U.S. citizens are accorded equal rights with Filipinos until 1974 in the “disposition, exploitation, development, and utilization” of natural resources and the operation of public utilities, and are also accorded national treatment with respect to engaging in other activities. In an increasingly nationalistic economic environment, increasing criticism of this equal rights arrangement can be expected. While most of the provisions of the Revised Trade Agreement are being carried out satisfactorily, the Philippines has never offered to implement the important provision for consultation with the United States prior to taking restrictive action affecting U.S. trade, and has ignored our requests for consultation in specific cases.

8. Church and State. Roman Catholicism has been the dominant religion in the Philippines since the Christianization of the archipelago by the Spanish. Under Spain, the Roman Catholic Church enjoyed the active support of the Spanish administration. Under American rule, strict separation of Church and State was enforced. As a protest against Church refusal to appoint Filipinos to leading Church offices, the nationalist element of the Filipino Catholic hierarchy broke away in 1898 to establish what became the Aglipayan Church. This and various other Protestant churches attracted those who had opposed the Catholic Church’s role during the Spanish period. During the American period and the first years of independence, the Roman Catholic Church was preoccupied with problems of reorganization and reconstruction as well as with adjustment to the new status of the nation. In recent years, the Church has reasserted its claim to an official position as the dominant religious force in the Philippines, and issues and problems of relations between Church and State have again captured public attention. The struggle between Catholic Action and the anti-clerical group, which comprises both Catholics and non-Catholics, has for the most part taken place in politics and education where the Church is resuming an active political role and seeking to control the public school curriculum. In their attacks on the Catholic Church’s open involvement in politics, its opponents point to the long history of Church opposition to reforms and to greater autonomy for Filipinos.

Economic Situation

9. Basic Economic Situation. With considerable aid and assistance from the United States, the Philippines has succeeded in a large measure in recovering from the extensive damage of World War II, and has [Page 863] gone on to attain production levels substantially above those of the pre-war period. The population of 23 million is increasing at an estimated rate of from 2 to 3 per cent per year, but the rate of increase of the Philippine economy has been roughly twice as fast, although the rate of increase slackened somewhat in 1957. However, the distribution of income continues to be seriously unequal, and there continue to be problems of unemployment and underemployment. Despite the availability of ample arable land, the Philippines has not achieved self-sufficiency in food production. The Philippine economy remains predominantly agricultural, but a gradual diversification is taking place. The preponderant role of the United States in Philippine foreign trade has been declining in recent years, and Philippine commerce with Japan and Northwestern Europe has increased proportionately. Despite this decline, the continued importance of the United States to the Philippine economy is indicated by the fact that in 1956 the United States purchased more than 50 per cent of total Philippine exports, and U.S. Government expenditures (exclusive of assistance) provided 18 per cent of total Philippine foreign exchange receipts.

10. Current Economic Situation.7 The fiscal policies of the present administration have jeopardized financial stability and promoted inflationary pressures. Election politics and widespread evasion of exchange regulations led to a serious weakening of the exchange control system in 1957, and international reserves during that year diminished by one-half. At the same time, cumulative budget deficits and lenient credit policies began to undermine the internal price structure. Faced with the double threat of dangerously low international reserves and growing inflationary pressures, the Garcia administration in December 1957 announced an “austerity” program to restore the financial position of the nation. However, the program soon lost most of its momentum and there appears to be little determination left to enforce its restrictive measures. The early relaxation of the “austerity” controls and prospects of a large budget deficit in FY 1959 indicate that the Filipinos intend to rely primarily on external assistance to restore financial stability.

The U.S. Role

11. It is in the U.S. interest that the program initiated by Magsaysay to improve the status of the Philippine peasant and raise the level of political morality in the government be continued successfully.

12. The United States has provided economic assistance to the Philippines under the Mutual Security Program since FY 1951, although since Magsaysay’s death it has been difficult to maintain the [Page 864] effectiveness of the program. In the period from FY 1951 through FY 1957 the United States spent $12 million in technical assistance directed toward improving the effectiveness of government services and increasing agricultural and industrial production. In the same period, economic aid expenditures for public works, industrial and agricultural development, public health, rural improvement, and education and military construction totaled $120 million. During the same period, the Philippines drew $26 million from Export-Import Bank lines of credit totaling $93 million. All Philippine loan applications thus far submitted to the Development Loan Fund have either been referred to the Export-Import Bank or rejected.

13. U.S. information programs in the Philippines provide current material supporting U.S. policy objectives to newspapers, radio, movies, television and other public information media. This task is greatly facilitated by the fact that almost all important daily newspapers, all serious magazines, most radio programs and most government publications are in English. Widespread knowledge and understanding of English results from its use since the earliest days of the U.S. administration as the means of instruction in all grades of the public school system. However, since the Japanese occupation the level of English teaching in the schools has steadily deteriorated. There are nine distinct languages in the Philippines, and English serves as a means of communication among various sections of the country. Unless standards are restored, particularly among primary school teachers, the Filipinos are in danger of seeing a decline in their ability to communicate easily among themselves and with the rest of the world through English.

Foreign Relations

14. Philippine foreign policy continues to be one of active and close alignment with the democratic world, particularly the United States. In recent years closer relations with some other Southeast Asian states such as Vietnam, Thailand and Pakistan, as well as Philippine participation in SEATO, the Colombo Plan, ECAFE, and meetings of the Bandung group, have sharpened its awareness of regional problems. In 1956 the Philippines finally reached a reparations agreement with Japan8 and ratified the Japanese Peace Treaty. Diplomatic relations have since been established, but the residue of hostility toward the Japanese as a result of the war, together with the constant Philippine fear of Japanese economic domination, have kept relations between the two countries cool. The Philippines has no diplomatic relations with the Sino-Soviet bloc; no cultural exchanges with the bloc have been permitted; and trade is negligible.

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Threats to Philippine Security

15. Internal Threats. The threat of the Philippine Communist Party to Philippine internal security has decreased steadily since 1950. The Communist Party and its military front, the Huks (Hukbong Mapagpalaya ng Bayan), were formally outlawed by statute in 1957; and the Huks were reduced by the Magsaysay counteroffensive from 10,000 well-organized armed men in 1950 to about 500 scattered and harried individuals today. However, the Communist Party has adopted political action in place of armed rebellion as its primary tactic and is currently concentrating its energies in an attempt to subvert the influential urban intelligentsia. The susceptibility of this element of the population to manipulation of slogans about “nationalism” and “colonialism” makes it a useful potential instrument in the Communist plan to destroy the alliance between the United States and the Philippines.

16. External Threats. Externally, the proximity of Communist regimes on the Chinese and Vietnamese mainlands heightens Philippine concern over the rise of Communist strength in Indonesia. Under the terms of a Mutual Defense Treaty (1952), the United States and the Philippines recognized that an armed attack in the Pacific area on either country would be dangerous to the peace and safety of the other, and each agreed to act to meet the common danger in accordance with its own constitutional processes. Similar guaranties are provided through Philippine membership in the collective security system established by the Southeast Asia Collective Defense Treaty. The 1947 Agreement on Military Bases in the Philippines and the 1947 Agreement on Military Assistance to the Philippines strengthen further the close mutual security relationship between the Philippines and the United States.

Military Problems

17. Military Assistance. During the period FY 1950–FY 1957, U.S. military assistance programmed for the Philippines totaled $167 million, with deliveries totaling $143 million. Additionally, excess stocks valued at $25.5 million were programmed during the FY 1950–57 period, of which $15.7 million was delivered through FY 1957.

18. The Philippine Armed Forces. U.S. military assistance has made possible a considerable build-up and reorganization of the Philippine armed forces, first to combat the Huk menace and subsequently to concentrate on the preparation for resistance to external aggression. At present, these forces consist of: an Army of about 27,300 men, currently being reorganized into one active and three standby infantry divisions; a Navy of about 3,660 men, 32 combat vessels and 23 auxiliary and service vessels; an Air Force of 4,840 men and 154 [Page 866] aircraft; and a Constabulary of 10,000 men. These armed forces are capable of providing for internal security, contributing to defense of the Philippines, and making a limited contribution to the collective defense of the Western Pacific area.

19. U.S. Forces in the Philippines. U.S. military forces (9,730 men as of July 1, 1957) are stationed in the Philippines to assist in meeting the requirements of U.S. forward strategy in the Western Pacific, including defense of U.S. bases in the Philippines. Such U.S. bases provide fleet support for U.S. naval forces in the area, operating and staging facilities for the U.S. Air Force, and emergency training facilities for the U.S. Army.

20. Base Negotiations. In the summer of 1956 the United States undertook to open negotiations with the Philippine Government looking toward a land adjustment under the 1947 Military Bases Agreement. The United States had requirements for additional military sites, including approximately 16,000 acres of land needed for improvement or expansion of present facilities. In return the United States was willing to relinquish rights to 128,108 of the 542,270 acres under its control and to return a cargo unloading facility in the Port of Manila. When the negotiations were opened, the Philippines raised a number of issues, including the revision of the jurisdiction provisions of the Military Bases Agreement and the correlation of the Bases Agreement, the Military Assistance Agreement, and the Mutual Defense Treaty, as conditions precedent to the land adjustment. These points were discussed with Philippine officials by the Bendetsen Mission, but an impasse was reached on the question of criminal jurisdiction, and the negotiations were recessed in December 1956. While negotiations have not been formally resumed, a number of matters have been resolved through diplomatic channels. The United States has agreed to turn over to the Philippines the Manila Air Station in July 1958; agreements have been concluded for the establishment of a Mutual Defense Board; and it has been agreed that Philippine liaison officers will be placed at major U.S. bases in the Philippines. Several major issues, including criminal jurisdiction, are still outstanding.

Objectives

21. A stable, effective, democratic Philippine government capable of carrying out economic development and social reform, and a stable, expanding Philippine economy, which will reflect credit on the democratic system.

22. Continued availability in the Philippines of necessary U.S. bases.

23. A Philippine military establishment capable of maintaining internal security and contributing to the defense of the Philippines and to the collective defense of the Western Pacific area.

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24. Philippine policies based upon close relationship with the United States.

Major Policy Guidance

Political

25. Encourage President Garcia and his administration to (a) strengthen the efficiency and effectiveness of its operations, (b) reduce graft and corruption, and (c) restore the popular confidence in government which existed under Magsaysay.

26. Encourage the Magsaysay-oriented younger political leaders to become an effective united political force for economic and social reform.

27. Conduct U.S. relations and activities in the Philippines with full respect for Philippine sovereignty and independence, in order to foster an increased sense of mutuality in all aspects of U.S.-Philippine relations, including questions of defense and military bases.

28. Encourage the Philippines to (a) improve the quality of Philippine diplomatic representation in non-Communist Asia and (b) establish resident missions in Malaya, Laos, Burma and Cambodia.

29. Encourage and support training programs for other Free Asian nationals at qualified institutions in the Philippines, including the Pacific Defense College when established.9

30. Continue to improve the programs for educational exchange between the Philippines and the United States.

31. Encourage an effective public school system in the Philippines along the lines established during the period of U.S. administration. Encourage and give support to the continued use of the English language as (a) a practical educational tool and (b) a means of contact with English-speaking countries and with other nations of the world and among the Filipinos themselves.

32. Continue present information programs, and seek increased emphasis upon areas outside Manila.

33. Encourage the Philippine Government and the leaders of the Chinese Community to initiate policies designed to obtain the maximum non-disruptive rate of assimilation of the Chinese minority into Philippine life.

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Economic

34. Encourage the Philippine Government to follow policies conducive to the sound development and diversification of the Philippine economy.

35. a. Continue to provide (1) economic and technical assistance to facilitate the development and diversification of the Philippine economy, and (2) technical assistance to help in expanding entrepreneurial, managerial, and other technical skills.

b. Seek to persuade the Philippine Government to undertake the necessary budgetary, monetary, and balance of payments measures for economic and financial stability; making clear that the Philippine Government is responsible for achieving and maintaining the internal financial stability essential to sound economic growth.

c. Consideration of any substantial expansion in the total amount of economic assistance to the Philippines should be dependent among other things on absorptive capacity in the Philippines and Philippine performance in utilizing available internal and external resources for well-conceived development purposes based on sound financial policies and administration.10

36. Encourage realistic Philippine programs to reduce existing social and economic inequities and to improve the standard of living of the average Filipino over the long term.

37. Continue to encourage, and support with technical advice, effective government administration, including measures to increase government revenues.

38. Be prepared to negotiate a double taxation convention with the Philippines as a means of encouraging private American investment.

39. Encourage the Philippines to create a more favorable climate for private investment, both domestic and foreign.

40. Seek full compliance with the terms of the Revised U.S.-Philippine Trade Agreement of 1955.

41. Encourage and maintain close and friendly commercial relations between the United States and the Philippines, especially during the period of transition outlined in the Revised U.S.-Philippine Trade Agreement.

42. Encourage the Philippine Government to develop its economy without relying on the assistance of unreasonable protective trade barriers.

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Military

43. Continue to provide military assistance for the purpose of assisting the Philippine armed forces to maintain internal security, to improve their capability to defend against external attack, and to make a limited contribution to collective security in the Western Pacific area.

44. Continue to improve Philippine public understanding of the mutual value of the U.S. bases to the security of both countries; through improved contacts with local public leaders and, where practicable, through increased participation by Philippine forces in the defense, protection, and operation of the base system.

45. Upon Philippine request, review those aspects of the bases arrangements with which the Philippines have expressed dissatisfaction, with a view to reaching mutually acceptable solutions.

46. Seek mutually satisfactory arrangements for unrestricted access to U.S. military bases in the Philippines by the forces of U.S. allies.

47. In the event of overt attack on the Philippines, take military and other appropriate actions in fulfillment of U.S. obligations under the Mutual Defense Treaty with the Philippines and the Manila Pact (SEATO).

  1. Source: Department of State, S/SNSC Files: Lot 63 D 351, NSC 5813 Series. Secret.
  2. None of the Annexes is printed.
  3. Printed from a copy that bears this typed signature.
  4. There have been indications that President Garcia, while visiting the United States in June 1958, may seek substantial additional economic aid over a three-year period. In this connection, it should be noted that there remained available to the Philippines, as of March 31, 1958, undisbursed credits from the IBRD and the Export-Import Bank totaling $85 million. (See Economic Aid Annex (Annex A), page 20.) [Footnote in the source text. Annex A is not printed.]
  5. Senator Lorenzo Tanada.
  6. Signed in 1955 to modify the original provisions of the 1946 Trade Agreements. [Footnote in the source text. The Revised Trade Agreement was signed at Washington September 6, 1955, and entered into force January 1, 1956. (6 UST (pt.3) 2981)]
  7. See Economic Aid Annex (Annex A), page 20, for an estimate of external funds available to the Philippines. [Footnote in the source text. Annex A is not printed.]
  8. See Economic Aid Annex (Annex A), page 20. [Footnote in the source text.]
  9. The Pacific Defense College was originally conceived as a joint U.S.-Philippine undertaking to establish a regional staff college for field-grade officers. By 1960 the United States decided that it should be a SEATO enterprise and put the bilateral project in abeyance. (Memorandum prepared in SPA, September 16, 1960; Department of State, SPA Files: Lot 64 D 391, B–1, Policy and Briefing Papers)
  10. This paragraph is not to be construed as prohibiting the use of the Development Loan Fund as part of the total amount of economic assistance. [Footnote in the source text.]