THE POST WAR RELIEF, REHABILITATION &
RECONSTRUCTION OF THE PHILIPPINES

A Research Paper Submitted in Partial Fulfillment

Of the Requirements in History 230 – The Japanese

Occupation of the Philippines

Submitted to:

DR. RICARDO T. JOSE

Department of History- Graduate Program

College of Social Sciences and Philosophy

University of the Philippines-Diliman

Submitted by:

JOSE ANGELITO P. ANGELES

2003-78545

April 2006

This war has not only caused untold misery and suffering to the individual; it has also brought about wanton destruction, economic dislocation and financial bankruptcy to the nation at large. Farms and industries have to be rehabilitated; banks and credit institutions have to be reopened; roads and bridges have to be repaired; schools and hospitals have to be rebuilt; destroyed and damaged properties, both public and private, have either to be rehabilitated or indemnified. The legitimate claim of the common laborer and of the small farmer who has lost his only work animal and nipa hut must be given preferential attention.

           - SERGIO S. OSMEÑA

        President,Commonwealth

        of the Philippines

        (1944- 1946)

Prologue

On November 15, 1935, the Philippine Commonwealth was inaugurated with Manuel Quezon and Sergio Osmeña as president and vice president, respectively. The historic event was attended by United States Vice President John N. Garner, US House Speaker Joseph W. Byrns, Secretary of War George H. Dern, the members of US Congress, foreign dignitaries, and more than 250,000 people. In ten-year period, on July 4, 1946, Philippine independence would be granted in accordance with the provisions of the Tydings-McDuffie Independence Act, and the Philippine Republic would take the place of the Commonwealth, as provided for in the (1935) Constitution.

The more than thirty years of American rule before the Commonwealth was eventually established brought the Philippines material prosperity. According to President Quezon’s August 13, 1938 address on the Fortieth Anniversary of American occupation of the Philippines:

…Under its fold, peace and prosperity have come to this favored land. Materially we have developed education, sanitation, agricultural and industrial enterprise. Security and happiness, freedom from financial pressure, a higher mode of life, all are ours. A new and progressive outlook upon the modern problems of life is in the making. All of this we owe to that starry flag and the great people it represents. When it finally comes down from Fort Santiago in 1946 it will find somewhere in its fold the grateful hearts of a people – a new and vibrant republic facing with optimistic hope its rising dawn.

            The historic inauguration of the Commonwealth already had as background the imminent rolling thunders of war in Europe and the Pacific. In Asia, Japan was aggressively building an empire of her own in the pursuit of her megalomaniac dream of a Greater East Asia Co-Prosperity Sphere. It was followed by Germany[1] and Italy.[2] International peace and security was tottering. The League of Nations was decadent and divided. Foreseeing trouble and perhaps indicative of the growing jitters over a possible Japanese invasion, President Manuel Quezon sought the establishment of the Philippine Army with General Douglas MacArthur as Field Marshall. However, lack of funds and logistics hindered the development of the defense structure of the Philippines.

            As the situation in the Pacific worsened, United States President Franklin Delano Roosevelt called back Gen. MacArthur to active duty as the Chief of Staff of the United States Army Forces in the Far East (USAFFE). Likewise, the United States Congress approved the appropriation of $269,000,000 for the Philippine Army on December 17, 1941, a week after the Japanese had invaded the country with frenzied fury.

            On December 8, 1941, the Japanese in a wholly unprovoked and treacherous manner, attacked the American naval installation in Pearl Harbor. A few hours after, swarms of Japanese planes bombed Manila and other major cities in the Philippines including American bases in Subic and Clark. The surprise attack in Pearl Harbor and the Philippines led to a three-year war in the Pacific.

            A few months later, the Philippines fell to the mighty samurai of the Japanese Empire. For three hellish years, the Filipinos were coerced and reared for the purpose of Japanese selfishness and aggrandizement. The Philippine economy plunged into its lowest levels.[3] Due to destruction brought by the war and problems on peace and order, agricultural production fell resulting to higher inflation. The printing of worthless Japanese “Mickey Mouse” money further aggravated the worsening economic situation.

            In October 1945, three years after the fall of the Philippines, the American forces under General Douglas MacArthur together with President Sergio S. Osmeña landed in Leyte and re-established the Commonwealth government. In March 1945, the American liberated Manila from the Japanese. About 100,000 Filipinos died, many of them from Japanese cruelties. In August 1945 Japan surrendered to the Allies after the atomic bombing of Hiroshima and Nagasaki.

            The war left the Philippines a terribly devastated country and, according to David Bernstein, was a nightmare of chaos and corruption, of misery and destruction, of raw nerves and overwhelming desire for escape.[4]

The Paper and Methodology

            This paper discusses the devastation and destruction caused by the Japanese and the consequent liberation in the Philippines. It  also touches on  the initial and long-term measures implemented by both the Philippine and American governments to address the post-war economic dilemma of the Philippines.

            In coming up with this research, the researcher employed both primary (Official Gazzette for laws, executive orders, congressional resolutions, speeches and other historical papers and documents; Congressional Records; books; and others) and secondary sources (articles, and other books). Likewise, documentary and legal research methods were utilized in this paper.

            In his quest for relevant information, the researcher went to the following to gather data: University of the Philippines – College of Law library; UP Manila College of Arts and Sciences library; UP Main Library- Filipiniana Section; UP Asian Center; the National Library; Commission on Elections library; and the Manila Bulletin. He also used his collection of books and magazines as reference in this research.

The Government-in-Exile

            While in exile in the United States, President Manuel L. Quezon was preoccupied with the problems of relief, rehabilitation and reconstruction of the Philippines once the Japanese were driven out of the country.[5] On September 14, 1943 President Quezon issued Executive Order No. 7-W creating a Post-War Planning Board. The Board was composed of Vice President Sergio Osmeña as Chairman and Joaquin M. Elizalde, Resident Commissioner of the Philippines to the United States; Andres Soriano, Secretary of Finance; Maj. Gen. Basilio Valdez, Secretary of National Defense; and Auditor General Jaime Hernandez as Members. The Board was tasked:

1.      To study and recommend plans for relief of the population immediately upon reoccupation of the Philippines, and to formulate proposals for the obtaining of such supplies as may be required for this purpose, and for the restoration of public and private property.

2.      To study and recommend plans for the rapid rehabilitation and reconstruction of the Philippine economy, including agricultural, labor, industrial, financial, and commercial rehabilitation and reconstruction; and to prepare plans for the development and improvement of Philippine natural resources, agriculture, trade, industry, shipping, public works, education, public health and nutrition, amid the new conditions that will exists after the defeat of the Axis.

3.      To study the post-war trade and other relationships between the Government of the Philippine Republic and other governments, with particular reference to the United States and to the neighbors of the Philippines in the Far East.

4.      To study and recommend plans for the security of the Philippines after the defeat of Japan.

5.      And, in general, to survey, collect data on, and analyze all post-war problems of the Philippines and to recommend plans and programs for the wise solution of these problems.[6]

Likewise, the Commonwealth Government worked earnestly to reach an agreement with the American Government concerning “our financial needs, restoration of public and private property, encouragement of the revival and growth of Philippine commerce, industry, and agriculture, and a clear understanding of our future relations with the United States.[7]”

Realizing that “relief can best be performed by a military agency of the Philippine Government in conjunction with military operations of the United States armed forces,” President Quezon issued Executive Order No. 12-W creating the Division of Civil Affairs in the Philippine Army. The Division was tasked to accomplish the following objectives:

a.      To effect the necessary liaison between the President of the Philippines, the Commander-in-Chief of the Southwest Pacific Area and the people of the Philippines during military operations and before normal civil government is reestablished.

b.      To execute the plans decided upon for the relief of the people of the Philippines immediately upon the landing of the military forces of the United States.[8]

On June 20, 1944, President Quezon issued Executive Order No. 13-W creating the Philippine Commonwealth Relief Committee. The Committee was charged with the following functions:

a.      To plan for the relief of the people of the Philippines in coordination with other agencies, official and private, dedicated to the same task;

b.      To purchase in behalf of the Philippine Government the supplies of food, medicine, clothing, and other necessities for the relief of the inhabitants of the Philippines, and make pertinent arrangements for transportation. All purchase contracts shall be made by the Philippine National Bank, New York Agency.[9]

In view of the indiscriminate printing of worthless Japanese military notes or “Mickey Mouse” money in the country which according to President Quezon “has caused considerable confusion and chaos in the monetary system, resulting in the disappearance of the legitimate currency and coins to the detriment of the economic condition”[10] of the Filipinos, the President issued Executive Order No. 14-W creating the Currency Committee. The Committee was tasked “to confer with the representatives of the Department of Interior, of State, of War, and of the Treasury of the United States with the view of remedying the monetary situation in the Philippines and to arrange for the printing of new Philippine Treasury Certificates and the immediate minting of subsidiary coins ready for use upon the landing of the liberating forces on Philippine soil.”[11]

However, Bernstein criticized President Quezon’s inability to launch an effective postwar planning program in Washington:

“He talked often of such a program, but in practice he was dilatory. It was a prime example of Quezon’s characteristic of lack of planning ability; he was, no doubt, certain that when he landed in the Philippines he would be able to present a hasty improvisation that would meet any immediate need. In any event, it took almost a year of constant persuasion before he finally signed his name to an executive order establishing a Postwar Planning Board, of which he appointed Osmeña chairman (to the disgust of Elizalde). And, having established the Board with wide powers, he effectively hamstrung it by refusing to grant funds with which to build a staff and get to work.”[12]

On September 21, 1944, President Sergio S. Osmeña[13] issued Executive Order 19-W appropriating Ten Million Pesos (Php 10,000,000) for the operation of the provincial, city and municipal civil governments which may be reestablished upon the liberation of the Philippines.[14]

The Commonwealth in the Field

In October 1944, the Americans successfully landed in Leyte. Thus was the beginning of the liberation of the Philippines from the Japanese. The Commonwealth Government was reestablished.

            Price Control. On November 6, 1944 President Osmeña issued Executive Order No. 24 fixing the maximum selling prices of prime commodities “ in view of the shortage of food, other articles of prime necessity, and services caused by the war.[15]”

Maximum Selling Prices

(as prescribed by E.O. No. 24)

            Prices, however, remained higher than those provided for in the said executive order. According to Teodoro Agoncillo: “eggs, which the government pegged at Php0.30 each, were selling at Php 0.70 in all public markets; bananas, whose price was set at Php 0.01 each, were quoted at from Php 0.10 to 0.25 each. Nevertheless, since there was money in circulation the people purchased whatever was offered in the markets. There was much grumbling, of course, but the people had no alternative than to acquiesce to the whims of the profiteers.[16]

            Banks and Financial Institutions. Meanwhile, the banking sector and financial institutions were faced with a disaster. During the occupation, the Japanese issued around 7 billion “Mickey Mouse” pesos. Manila bank losses were estimated at Php 102,000,000 in prewar assets converted into Japanese war notes as a result of debtors paying their prewar obligations in this currency.[17] After the liberation they were left with large quantities of worthless paper and a mess of financial problems.[18]

            Aside from the “Mickey Mouse” money, the emergency and guerilla currencies issued during the war which flooded the provinces demanding redemption by the Philippine Government also became one of the worst headaches of the Commonwealth Government.      

Cognizant of the financial difficulties brought by the war, President Osmeña issued Executive Order No. 25,[19] promulgating rules and regulations concerning currency, books and accounts of banks and debt moratorium. Said executive order declared as legal tender the Victory Series of Philippine Treasury Certificates (Victory Pesos) which is identical to the pre-war Philippine Treasury Certificates except that the word “VICTORY” was overprinted on the reverse side. All pre-war Philippine Treasury Certificates and coins were also valid.

The aforesaid executive order also created an Emergency Currency Committee for each province liberated from the Japanese to “study, investigate, and report on the bona-fide emergency currencies issued by duly authorized currency boards.” The printing of additional emergency currencies was prohibited. Transactions in Japanese military notes were, likewise, enjoined. The books of all banks, their branches and agencies were ordered sealed and existing accounts “frozen.” Payment of debts was also suspended:

II. BANKS, TREASURIES AND OTHER

 ACCOUNTABLE OFFICES

1.      The books of banks, their branches and agencies in the provinces, provincial, city and municipal treasuries and other government accountable offices will be sealed forthwith and existing accounts frozen, as of the date the province, city, or municipality is liberated from enemy occupation and control, pending further action by the Government. All books, accounts and previous records as closed shall become inactive, filed and preserved for reference and other purposes as may be required.

2.      Provincial and municipal treasurers and other accountable officials will open new books of account as soon as their respective offices are duly reconstituted, observing strictly the existing accounting laws, rules and regulations pertaining to accounts and accounting system of the Commonwealth of the Philippines.

3.      Provincial treasurers will accept for safekeeping new savings deposit in pre-war Philippine Treasury Certificates and Victory Pesos. Withdrawals in cash only of not less than one peso may be made from each savings account upon presentation of the deposit book. No interest will accrue on such deposit. In addition to opening new savings accounts, provincial treasuries will provide facilities for exchanging United States dollars for Victory Pesos.

III. DEBT MORATORIUM

1.      Payment of all debts and other monetary obligations contracted after December 31, 1941, except debts and other monetary obligations entered into in any area after the declaration by Executive Order that such area has been freed from enemy occupation and control, is temporarily suspended pending action by the Commonwealth Government.[20]

Haw Pia vs. China Banking Corporation

L-554, April 9, 1948

80 Phil. 604

In Haw Pia vs. China Banking Corporation the Philippine Supreme Court recognized the rights of the belligerent occupant (in this case, the Japanese) over enemy public or private property, including the power of the military government to issue currency. Likewise, the Supreme Court also recognized the Japanese war notes as legal tender:

FACTS: Haw Pia was indebted to the China Banking Corporation in the sum of 5,103.35 by way of overdraft in current account payable on demand together with interests. On September 14, 1941, Haw Pia mortgaged to the defendant bank her property described in the TCT No. 47634 of the Register of Deeds of Manila. On January 2, 1942, the Bank of Taiwan was appointed by the Japanese authorities as liquidator of the China Bank, and from October 7, 1942 to August 29, 1944 plaintiff made payments to the Bank of Taiwan amounting to P6,055.21 to liquidate her obligation with China Bank, payments being made in Japanese military notes.

ISSUES: 1. Whether or not the Japanese Military Administration had authority to order the liquidation or winding up of business of defendant China Banking Corporation, and to appoint Bank of Taiwan liquidator authorized as such to accept the payment by the plaintiff-appellant to said defendant-appellee;

2.      Whether or not such payment by the plaintiff-appellant has extinguished her obligation to the defendant-appellee.

HELD: 1. …the Japanese military authorities had power, under the international law, to order the liquidation of the China Banking Corporation and to appoint and authorize the Bank of Taiwan as liquidator to accept the payment in question, because such liquidation is not a confiscation of the properties of the bank-appellee, but a mere sequestration  of its assets which required the liquidation or winding up of business of said bank.

2. The fact that the money with which the debts have been paid were Japanese war notes does not affect the validity of payments…

            The power of the military governments established in occupied territory to issue military currency in the exercise of their governmental power has never been seriously questioned. Such power is based, not only on the occupant’s general power to maintain law and order recognized in article 43 of the Hague Regulations (Feilchenfeld says in his treatise on International Economic Law of the Belligerent Occupation, paragraph 6), but on military necessity as shown by the history of the use of money or currency in wars.

x x x

            But be that as it may, whatever might have been the intrinsic or extrinsic worth of the Japanese war-notes which the Bank of Taiwan has received as full satisfaction of the obligations of the appellee’s debtors to it, is of no consequence in the present case. As we have already stated, the Japanese war-notes were issued as legal tender at par with the Philippine peso, and guaranteed by Japanese Government “which takes full responsibility for their usage having the correct amount to back them up (Proclamation of January 3, 1942). Now that the outcome of the war has turned against Japan, the enemy banks have the right to demand from Japan, through theirs States or Government, payments or compensation in Philippine peso or U.S. dollars as the case may be, for the loss or damage inflicted on the property by the emergency war measure taken by the enemy. If Japan had won the war or were the victor, the property or money of said banks sequestered or impounded by her might be retained by Japan and credited to the respective State of the owners of said banks were nationals, as a payment on account of the sums payable by them as indemnity under the treaties, and said owners were to look for compensation in Philippine pesos or U.S. dollars to their respective States. (Treaty of Versailles and other peace treaties entered at the close of the first world war; VI Hackworth Digest of International Law, p. 232). And if they cannot get any or sufficient compensation either from the enemy or from their States, because of their insolvency or impossibility to pay, they have naturally suffer, as everybody else, the losses incident to all wars.[21] (Emphasis supplied)

On March 10, 1945, President Osmeña created the Banking Division of the National Treasury through Executive Order No. 33. Said division was empowered to exercise banking functions within the areas freed from the Japanese: “to accept deposits; to make loans; to engage in exchange and other banking operations; to adopt and use a seal; to make contracts; to sue and be sued; and to exercise the powers granted herein and such incidental powers as may be necessary to transact the business of banking.[22]

On April 19, 1945, the Banking Division of the Insular Treasury opened for business on the ground floor of the Banco Hipotecario Building on Plaza Cervantes (in Binondo, Manila). The bank handled current and savings accounts and granted short-term commercial, industrial and agricultural loans.

On March 10, 1945, the President issued Executive Order No. 37 abolishing the Court of Appeals due to “the limited resources of the Commonwealth Government demand that its expenses during the emergency be reduced to the minimum.” [23]

Congressional Measures

            Restoration of the Philippine Congress - On June 9,1945, for the first time since its election in November, 1941, the Philippine Congress held a joint session in a prewar Japanese schoolhouse in Lepanto Street. President Osmeña was hesitant to convene the said Congress because it was full of quislings who had served the Japanese either in the Executive Commission or in the puppet Philippine Republic.[24] However, he was pressured and prevailed upon by General MacArthur’s desire to complete the civil restoration.

            In the Senate, Senators Manuel A. Roxas and Elpidio Quirino were elected as President of the Senate and Senate President Pro-tempore, respectively. Senator Eulogio Rodriguez, Sr. became its Majority Floor Leader.

            In the House of Representatives, Representatives Jose C. Zulueta and Prospero Sanidad were elected Speaker and Speaker Pro-tempore, respectively.

            Congressional Legislations – The following were the pertinent laws on post-war rehabilitation of the Philippines enacted by the First Philippine Congress, to wit:

1.      Commonwealth Act (CA) No. 672 – rehabilitation of the Philippine National Bank (PNB);

2.      CA No. 674, as amended by CA No. 680– appropriation for the operation of the Commonwealth Government beginning July 1, 1945, until the General Appropriation Act for the fiscal year ending June 30, 1946, is approved;

3.      Concurrent Resolution No. 7 – creation of the Congressional Reconstruction and Rehabilitation Commission, excerpts:

Resolved by the House of Representatives, the Senate concurring, That the Congressional Reconstruction and Rehabilitation Commission be, as it hereby is, created, composed of five Senators and five Representatives to be appointed by the Presiding Officer of the respective Houses of the Congress, to carry out the general purposes outlined in the preamble hereof and specifically to perform the following functions:

a.                          To make a survey of the economic conditions obtaining in the country as a result of the war, with a view to proposing a broad legislative plan for the rehabilitation of Philippine economy by making available to the government and the people adequate means to revive Philippine agriculture, industry, and commerce in the shortest possible time;

b.                          To formulate a comprehensive program of well coordinated measures for legislative enactment calculated to effect the simplification of governmental machinery while enhancing the scope of those governmental agencies which will hasten economic development, bring relief to the people, and restore peace and order in the country;

c.                           To formulate a long range policy that will place domestic production in a position to meet the requirements of local needs and foreign trade with the advent of independence, and transfer gradually the burden of supplying the people’s most pressing and most essential needs on the savings of the people themselves through a slowly growing social security system; and

d.                         To accomplish an educational reorientation that will produce the kind of leadership and training that will best promote the enduring welfare of the people.[25]

4.      CA No. 681 – appropriation for the rehabilitation of the Philippine Tuberculosis Society, including the Quezon Institute, and of other agencies engaged in the fight against and the control of tuberculosis;

5.      Joint Resolution No.6 – creation of the Social Security Commission to undertake a survey of progressive social security legislation in democratic countries and submit practical proposals for appropriate adoption in the Philippines;

6.      CA No. 688 – An act fixing a limited period within which notes of the Philippine National Bank should be presented to be stamped or countersigned… declaring null and void all notes not stamped or countersigned;

7.      CA No.689 – An act to penalize speculation on rents of buildings destined for dwelling purposes;

8.      CA No.691 – An act to provide for the free distribution of lots of twenty-four hectares each of agricultural land of the public domain;

9.      CA No.694 – An act creating the Agricultural Machinery and Equipment Corporation;

10.  CA No.697 – An act for the rehabilitation, liquidation, and dissolution of delinquent insurers;

11.  CA No.699 – An act to provide for the participation of the Commonwealth of the Philippines in the International Monetary Fund and the International Bank for Reconstruction and Development;

12.  CA No.704 – An act to establish municipal maternity and charity clinics;

13.  CA No.705 – An act appropriating funds as aid to national, provincial and city hospitals and their dispensaries;

14.  CA No.707 – An act to rehabilitate the Manila Railroad Company;

15.  CA No.709 – An act appropriating the sum of five million pesos to enable the National Housing Commission to resume its functions;

16.  CA No.711 – An act appropriating the sum of five million pesos to enable the National Land Settlement Administration to resume its function;

17.  CA No.712 –An act appropriating four million seven hundred fifty-six thousand and seven hundred eighty pesos (Php 4,756,780.00) for the reconstruction, repairs and maintenance of radio stations and installations, and telegraph lines and stations;

18.  CA No.715 – An act to create a Commission on Reparations;

19.  CA No. 716 – An act creating the Philippine Relief and Rehabilitation Administration, whose functions are as follows:

1.      To act as the agency and representative of the Government of the Commonwealth to deal with the United Nations Relief and Rehabilitation Administration or other relief agencies of the United States Government or abroad.

2.      To plan, coordinate the procurement and equitable distribution of available supplies and equipment for relief and rehabilitation.

3.      To study and formulate plans for the rapid rehabilitation and reconstruction of the Philippines in agriculture, industry, trade and finance.[26]

20.  CA No.718 – An act appropriating the sum of two million nine hundred forty-one thousand pesos from the coconut oil excise tax fund for certain activities under the Department of Agriculture and Commerce.

21.  CA. No.719 – An act to rehabilitate the Cadastral Survey Revolving Fund

22.  CA No.720 – An act to appropriate the sum of five hundred thousand pesos to buy and/or import animals for breeding purposes.

23.  Concurrent Resolution No. 11 – Concurrent resolution requesting the President to: “1. to adjust the price of rice and corn from time to time, giving a reasonable margin of profit to the rice producers, after taking every economic factor into account; 2. to permit the free movement of rice into the City of Manila and other places of the Philippines; 3 to avoid insofar as possible the intervention of middlemen  and other unofficial intermediaries in the purchase, procurement and distribution of rice; 4. to revive the pre-war organization known as the National Rice and Corn Corporation; and 5. to issue rules and regulation to insure a more equitable distribution of rice and corn to the residents of the City of Manila, trough the Rice and Corn Corporation;

24.  CA No. 723 – Appropriating funds for the operation of the Government of the Commonwealth of the Philippines during the period from October 1, 1945 to June 30, 1946; and

25.  CA No.726 – act providing for the rehabilitation of Philippine banks, appropriating funds for that end, and for other purposes. (Under the said law, a Financial Rehabilitation Board was created composed of five members.)

The Philippine Civil Affairs Unit.

 The Philippine Civil Affairs Unit (PCAU) was organized by General Douglas MacArthur in September 1944, a month before the landing of the American forces in Leyte, “for the purpose of assisting the various military commanders in the civil administration and in the relief measures to be undertaken in the Philippine areas as they were liberated.”[27] The PCAU distributed food, clothing, and medicines to the populace. Each member of a family was entitled to a free ration of 1 ½ chupas[28] of rice and 5 ounces of meat, and if available, 1 can of fish, 200 grams of sugar, and 1 ½ chupas of corn meal.  According to Bernstein, “the Army was feeding 600,000 persons daily in Manila alone. Of these, all but 60,000 were paying for the food they received. ”[29]

            In September 1945, however, the Army handed to the Commonwealth Government the responsibility of providing relief “but it did not offer the supplies, warehouses, trucks or other necessities which would permit the Government to pick up where the Army had left off.”[30]

Measures by the Emergency Control Administration

            Inflation. One of the serious problems faced by the Commonwealth Government after the liberation was the high cost of living, especially in Manila. According to the Emergency Control Administration, “it took eight pesos to buy the amount of food that had cost a single peso before the war. Clothing was nine times the pre-war cost. One year after the liberation, eggs sold for twenty-five cents apiece; before the war, they were fifteen cents a dozen. ”[31] The inflation was caused by shortage of goods in the market to meet the demands of the people.

As an initial relief measure, the Emergency Control Administration issued Order No. 1 regulating the “leases of stalls in the public markets of Manila, including suburbs, and the need of licenses to engage in the sale of foodstuff and other articles of prime necessity.”[32] It also prohibited the selling and peddling of any goods on the public sidewalks, houses and buildings, stores, shops and any other places without license from the City Treasurer of Manila. The same order was revoked, however, by Administrative Order No. 12 issued by President Osmeña on July 25, 1945.[33]

            The Emergency Control Administration in its Order No.2 fixed the maximum selling prices of other prime commodities not specified in Executive Order No. 24, as amended by Executive Order No. 29:

On March 12, 1945, Tomas Confesor, Emergency Control Administrator, issued Order No. 3 regulating the entry and sale of rice and corm in the City of Manila. The regulation aimed to prevent the hoarding of rice and corn in the market. Pursuant to this order, “no person shall be allowed to bring in rice and/or corn from the provinces into the City of Manila”[34] without a permit from the Emergency Control Administration. Otherwise,  said goods “shall be confiscated and placed immediately under the custody of the Emergency Control Administration for proper disposition.[35]”

            Bona fide residents of Manila, however, were entitled to bring from the provinces rice for their consumption, at the rate of 1½ sacks of 56 kilograms per person for the period from June 1 to December 31, 1945. Any head of the family who would bring rice to Manila must first file with the Emergency Control Administration an application for himself, the members of his family, and his servants.[36]

            On March 20, 1945, the Emergency Control Administration, through Order No. 4, fixed the maximum selling prices of the following goods, thus:

            On May 24, 1945, to thwart the growing problem of hoarding and racketeering, the Emergency Control Administration issued Order No. 18 regulating the entry of sugar, panocha, mongo, all kinds of beans, camote,[37] gabi, fresh fish, dried fish, dilis, bagoong and other prime commodities into Manila and the sale thereof.[38] Under the said order, a permit from the Emergency Control Administration was required to bring into Manila the said commodities, whether for home consumption or for  distribution to the public. Otherwise, said goods “shall be commandeered and placed immediately under the custody of the Emergency Control Administration for proper disposition.[39]

            On August 29, 1945, however, the Emergency Control Administration issued Order No.21 promulgating rules and regulations with regards to the entry into and movement from Manila of foodstuffs and other prime commodities, thus:

1.      “No permit of any kind shall be required for bringing foodstuffs and other articles of prime necessity in the City of Manila.

2.      The movement and transfer of foodstuffs and other articles of prime necessity from the City of Manila to the provinces and elsewhere in the Philippines shall be subject to control and must be provided with a permit issued by the Emergency Control Administration.

3.      Any and all commodities taken out of the City of Manila without the proper permit as specified in section 2 hereof shall be commandeered and placed immediately under the custody of the Emergency Control Administration for proper disposition.

4.      No officer, person, firm or corporation shall commandeer, requisition, or confiscate any foodstuff or article of prime necessity anywhere in the Philippines without the written and specific authority of the Emergency Control Administration.“(Emphasis supplied)

Rentals. On May 7, 1945, Administrator Confesor issued Order No. 12 fixing the rentals of houses and buildings in Manila at not more than 25% above the pre-war rates (rentals prevailing during the last semester of 1941). House owners were required to submit a report of their house rentals to the Committee for the Control of House Rentals.[40] “Any owner, tenant or other person who shall, directly or indirectly, violate any of the provisions of this order shall, upon conviction, be punished by imprisonment for not more than one year or by a fine of not more than two thousand pesos (Php 2,000), or both, in the discretion of the court. ”[41]

Graft and Corruption

Despite the measures undertaken by the Commonwealth Government and the Emergency Control Administration, the shortage of necessary consumer goods and the relatively large amount of money in circulation made prices skyrocketed. According to the Bureau of Census and Statistics, the figures for the cost of living of wage-earners’ families in Manila (in 1945), all items, as compared with 1941 level at 100 were as follows: March 550, April 589, May 680, June 736, July 742, August 715, September 699, October 726, November 738, December 660; average 683.3.[42]

            The problem was made even worse by the hoarding of rice and the sale thereof in the black market. The Secretary of the Interior and Administrator of the Emergency Control Administration blamed corruption and greed for the problems besetting the Commonwealth Government:

There is enough rice to sell to everybody at that price (Php 0.32 per ganta). And yet you may ask me the question: Why is there a black market of rice in the City? All that I can tell you is this: You can blame neither the Government nor the American army. Most of the blame should be placed on the people themselves for lack of cooperation.

            There seems to obtain a feeling amongst us that we should resort to tricks and illegitimate schemes to fool one another. There are still amongst us people who have been accustomed to making money in the illegitimate and corrupt way. They are now doing everything they can do to revive the old way with all its evils.

            Several corrupt high officials of the government were involved in the black market business. This was revealed in the halls of the Senate by Senator Eulogio Rodriguez during his exchange with Senator Salipada K. Pendatun:

            Senator Pendatun: We were about to get a large shipment of rice, I understand, from Mexico. But when that was made known to the International Food Board, we were informed that if we got that rice, we were to get it at black market price. So, that shipment was stopped and it was decided to get the rice through the International Food Board. I believe that is the reason why we did not get that large shipment coming from Mexico. However, the International Food Board, I understand, has promised to give all the rice that the Philippines needs at the price fixed by the International Food Board.

            Senator Rodriguez: That might be true, but as you know, the people that need rice most are the Filipinos, because that is our staple food.

   Senator Pendatun: Well, I agree with you in that. But I am just revealing the reason why we have not received any shipment up to now, namely, that because of the black market price that we are about to pay to Mexico, and in order to avoid paying said price, we made the order through the International Food Board.

Senator Rodriguez: I wish to correct the belief of some of our senators – that we cannot get rice; we can get it from other countries. But I say, and for sure, that all the rice that we have at present is the stocked obtained during the administration of President Osmeña, and not a grain has come since our President Roxas assumed office. And the same holds true not only in regard to rice, but also clothes. These clothes that they are distributing were acquired during the time of President Osmeña. Since we are on the subject of graft and rackets allegedly committed during the time of Osmeña, I should like to ask this: Where are the 1,000 sacks of sugar acquired by the present administration? Who is to be blamed for their loss?

Senator Pendatun: I understand that there were tons of UNRRA goods stolen from the bodegas during the time of Osmeña, and there were hundreds of sacks of rice during the tine of Osmeña which were sent to the provinces but never reached their destination. There were stolen right in transit.

Senator Rodriguez: As I said, many accusations are being made against Osmeña. But what can you say about the loss of 1,000 sacks of sugar? If you were President Roxas, do you think you could be held responsible for something you did not do? No, the man appointed by you should be responsible, not you. But what I have heard is that President Osmeña gave you this and that. President Osmeña does not know anything about this.

Senator Pendatun: Why was General Homma sentenced to hang by a United States Court Martial although he did not kill a single Filipino in the Philippines?

Senator Rodriguez: The Japanese army killed Filipinos at his command.

Senator Pendatun: Now, if that is the case, General Roxas must be hanged also.

Senator Rodriguez: It is high time that the President of the Philippines stop this grafting, and if it cannot be stopped it would be better to abolish the PRRA since it encourages robbery in the country. You know about the loss of 1,000 sacks of sugar valued at thousands of pesos. You have heard of a military police sergeant who stole P28, 000 worth of clothes stored in the PRRA bodega. Now, what had been done? Nothing. There was an investigation, but what are its results?

Senator Pendatun: What is that?

Senator Rodriguez: P25,000 worth of clothes. They were stolen from the PRRA, and the sergeant was accused of having stolen them. If he did not actually do the stealing, at least he was the mastermind. He was the one guarding the bodega.

Senator Pendatun: Who is the sergeant?

Senator Rodriguez: He is a sergeant of the military police. You find that out from Mr. Coscolluela. And there are many other things I could reveal here, but this is not the time to say what I know. You have said many things already about Osmeña. Osmeña has retired, he has nothing more to do with the administration, but you wait until I say more about your administration. Well, I know. You will know too. Somebody told me that some senators have obtained second-hand PRRA goods and sold them in the black market. I can prove this. Just give us a little time, and I will find out who they are. I am sorry, Mr. President, that Senator Pendatun dragged me into this. This was not the object I had in mind. (Emphasis and Italics supplied)

            Later, several senators were implicated with charges relating to anomalous dealings in surplus and relief goods. The most controversial was the case of Senate President Jose Avelino.[43] Senator Avelino, after his infamous “what are we in power for” speech was found guilty by a Senate inquiry  of “entering into dummies into at least two contracts – one for 4,558 cases of accessory packs and one for 50,000 cases of beer – with the Government Procurement Commission… and that through these contracts, he defrauded the government by an amount not less than P66,700, which he converted to his own use and benefit, in culpable violation of Article VI, Sec. 17 of our Constitution, Section 1 of Commonwealth Act No. 626, and the Agreement on Surplus Properties between the United States and the Philippines…” Senator Avelino was suspended for one year from office.

            Other senators implicated were Mariano Jesus Cuenco (for negotiating the purchase of six FS surplus vessels at a reduced cost of P1 million pesos for the Bisaya Transportation Company) and Carlos P. Garcia (for allegedly selling thru a dummy P98, 000 worth of relief textile from the PRRA in the black market for his own profit).

The April Elections: From Osmeña to Roxas

On January 5, 1946 the Philippine Congress enacted Commonwealth Act No. 725 calling for an election of the President, Vice President, Senators and members of the House of Representatives.

President Sergio Osmeña of the Nacionalista Party and Senate President Manuel Roxas of the Liberal Wing of the Nacionalista Party, subsequently renamed the Liberal Party, were the major contenders for the presidency.

Senate President Roxas ran under the platform of speedy rehabilitation of the war-torn Philippines, to name a few:

1.      The adoption of a consistent and well-considered program of construction of homes for those who had lost them during the war with the financial assistance of the government on the long-term installment plan at reasonable interest and within the borrowing capacity of each family;

2.      to combat inflation and formulate plans and policies to bring about a gradual process of deflation without causing hardships on business or the lives of the people;

3.      the immediate redemption by the National Treasury of all checks, warrants, vouchers and other outstanding obligations issued or contracted before the war;

4.      the granting of every assistance to banks, building and loan associations and other institution of credit; and

5.      to immediately effectuate plans for the economic rehabilitation and reconstruction of the country.

The April 23 , 1946 elections resulted in the victory of the Liberal Party. Roxas and his running-mate Senator Elpidio Quirino were elected President and Vice President, respectively. The Liberals won nine out of sixteen contested senatorial seats.[44]

On May 26, 1946, Roxas was inaugurated as the last President of the Commonwealth.

The Philippine Rehabilitation Commission

            Among  the tasks of the Commonwealth Government-in-Exile in Washington was to pin on the Americans the responsibility for the reconstruction and rehabilitation of the Philippines after the liberation. The Government urged the passage of necessary legislation from the US Congress on that respect. Such legislation was passed by the US Congress and approved by US President Franklin Delano Roosevelt on June 29, 1944. The law provided for a Philippine Rehabilitation Commission, composed of nine Americans and nine Filipinos: Americans: Wayne Coy of The Washington Post; Lynn R. Edmister; Evett D. Hester; Senators Millard Tydings, Bennet Champ Clark, and Arthur H. Vandenberg; Representatives Jasper Bell, Dan R. McGehee, and Richard J. Welsh; Filipinos:[45] Vice President Sergio S. Osmeña; Joaquin Elizalde; Jaime Hernandez; Manuel Nieto; Carlos P. Romulo; Col. Alejandro Melchor; and Urbano Zafra. It was charged to investigate all the war damages and other rehabilitation needs for proper action:

            In approving the said law, President Roosevelt praised the valor of the Filipino people and pledged full assistance to the Commonwealth Government on the rehabilitation and reconstruction of the Philippines:

            We are ever mindful of the heroic role of the Philippines and their people in the present conflict. Theirs is the only substantial area and theirs the only substantial population under the American flag to suffer lengthy invasion by the enemy. History will attest the heroic resistance of the combined armies of the United States and the Philippines in Luzon, Cebu, Iloilo, and other islands of the archipelago. Our character as a nation will be judged for years to come by the human understanding and the physical efficiency with which we he help in the immense task of rehabilitating the Philippines. The Resolution creates the Philippine Rehabilitation Commission whose functions shall be to study all aspects of the problem and after due investigation report its investigation to the President of the United States and the Congress, and to the President and the Congress of the Philippines.[46]

            Before the Commission could settle down to earnest work, President Quezon died.[47] Osmeña, the new President, left the Commission and appointed Col. Mariano A. Eraña as an additional member.

America’s Promise

The devastation brought by the war and the three cruel years of Japanese occupation was worse than what the bewildered President could ever imagine. The destruction was even made worse during the Liberation.

Manila, the most cosmopolitan city in the Far East, was laid in ruins. Bombs, shells and fire had shattered its bridges, centuries-old churches, grandiose and modern buildings, and houses.[48] Miraculously, the Malacañang Palace – the presidential palace and seat of the Commonwealth Government survived the inferno. In the countryside, “farmers were unable to produce basic foods, for nearly all carabaos were gone, either taken by the Japanese or killed for food.[49] Provincial towns were badly hit and burnt to the ground.

Upon his arrival in Leyte with the American liberation forces on October 20, 1944, President Osmeña assured the Filipinos of America’s pledge:” We have the word of America that our country which has been ravaged by war will be reconstructed and rehabilitated. Steps have already been taken to this end.[50]”

The Philippine Commonwealth, with its limited resources and almost close to bankruptcy, only provided little relief to the disconcerted Filipinos. The only hope for their long-term relief was the fulfillment of American promises.

Pilgrimage for Aid. On March 12, 1945 President Osmeña flew to the United States to seek medical treatment and to discuss the rehabilitation and reconstruction of the Philippines with President Roosevelt. On April 5, 1945 President Osmeña conferred with President Roosevelt on issues of relief and rehabilitation, war damage, financial and technical assistance, redemption of emergency and guerilla notes, military bases, and the future trade relations between the United States and the Philippines.

After the meeting, President Roosevelt held a press conference, his last before he died a week later, and announced that:

“We are absolutely unchanged in our policy of two years ago, for immediate Filipino independence.

Then we talked about more current problems, after the Islands are cleared of the Japanese. We are absolutely unchanged in our policy of two years ago, for immediate Filipino independence.

That brings up a great many things, like relief, the rebuilding of communications, roads, highways, bridges, and so forth, so as to get civilized life running in a normal way. I do not know yet – I am not ready to announce dates, because nobody knows when the country as a whole will be ready to go ahead with the distribution of relief without being fired on. The relief probably ought to be undertaken by us on a perfectly defined plan. I put to it to President Osmeña this morning.

There are other things which are not immediately practical, in one sense. For example, in Manila, the famous old Cathedral – which is one of the oldest cathedrals in the Far East. I think this country will want, as a gesture of sentimentality, to restore the Cathedral of St. Dominic. Other things, like wrecks and harbors with Japanese ships, it certainly is our duty to take those wrecks and blow them up, so commerce at different ports will be able to function again.

Then we discussed all kinds of things on the question of rehabilitation in regard to trade. We have not yet gotten from the Congress a definite statement as to tariff question. After 1898, we gave the Spaniards, who were the defeated party at that time, ten years to work out the tariff problem; we have been under a tariff ever since, which has been fixed from time to time by the Congress of the United States after commissions in some cases have sat. I do not think we can treat the Filipinos any worse than we did the Spaniards on problems of that kind. My thought is we should maintain the present tariffs between the Philippines and the United States after they get their independence. In their present status, give them a chance to turn around before we get a new tariff, and we ought to consider the economic needs of the Filipinos as a whole.”[51]

Unfortunately, President Roosevelt died of a massive cerebral hemorrhage on April 15, 1945. President Harry Truman, Roosevelt’s successor, assured President Osmeña that he will “endorse and carry through to their conclusion the policies laid down by President Roosevelt respecting the Islands and the independence of the Filipino people… The Philippine people, whose heroic and loyal stand in this war has won the affection of the American people, will be fully assisted by the United States in the great problems of rehabilitation and reconstruction which lie ahead.”(Emphasis supplied).

On May 5, 1945, President Truman with the concurrence of President Osmeña, appointed Senator Millard Tydings, chairman of the Philippine Rehabilitation Commission, his special envoy to examine the conditions in the Philippines and submit recommendations. President Osmeña was “deeply moved by President Truman’s understanding of the needs, hopes and aspirations” of the Filipino people:

“President Truman is bringing into their logical fruition those policies initiated under his illustrious friend and predecessor, the late President Roosevelt. The presence of Senator Millard Tydings, of Maryland, and those who will accompany him on his presidential mission to the Philippines will be welcomed by all Filipinos.”

Soon, President Osmeña would realize that his efforts were considerably set back with the death of President Roosevelt. His optimism would soon turn into desperation and disenchantment.

The Tydings Mission

            On May 23, 1945, President Osmeña arrived in Manila after more than three months in the United States. With him were Senator Millard Tydings and the members of his mission: Vice Admiral W.T. Tarrant, Brigadier General Frank E. Lowe, Col. Julian Baumann, George E. Ames, E.D. Hester, J. Weldon Jones, Ben Dorfman, Daniel S. Brierley and C.H. Matthieson. The mission was tasked to survey the rehabilitation and reconstruction of the Philippines.

            After a six-day stay in Manila, Senator Tydings and all members of his mission except E.D. Hester returned to the United States. On June 2, 1945, Senator Tydings revealed the grim condition of the Philippines: “So dire are the problems of the Philippines as a result of the  war that the mission gave itself over completely to the acquisition of such data as would aid us in helping them… to start machinery moving to get the Filipino economy going again.”

            On June 5, 1945, Senator Tydings reported to President Truman their findings and proposed the following for the rehabilitation of the Philippines:

1.      “Gifts of such funds as are necessary for Army and Navy engineers to reconstruct buildings and other structures as soon as war conditions permit.

2.      Loans to the Philippine Government in sufficient size to finance further reconstruction.

3.      Strict compliance with legislation calling for complete independence of the Philippines as quickly as economic conditions permit.

4.      General treatment of the Philippines in any other way possible to expedite the return to normal conditions. ”[52]

On June 8, 1945, Senator Tydings appeared before the United States Senate to report on his mission to the Philippines. He urged the US Congress to appropriate $100,000,000 as an “outright gift…through which America could show its appreciation for the heroism of the Filipinos.” In his report to the United States Senate, Senator Tydings pointed out, among other things:

1.      “The dire need of food for the Philippines and the huge task of repairing the widespread devastation of war. He said that his mission had secured 8,000 tons of shipping for the Filipinos exclusively during June. He added: ‘We anticipate that 30,000 tons of shipping will be available for the same purpose during July and expect there will be more thereafter.’

2.      The Philippines is unable to supply sufficient shelter, food and other materials for the hundreds of thousands of American troops already here and still to arrive. ‘Obviously,’ he said, ‘these things must come first. The very lives of the Filipino and American soldiers depend on their having everything they need to win a quick victory.’

3.      From ten to fifteen percent of all the buildings in the Philippines has been destroyed and possibly another ten per cent has been damaged.

4.      Tens of thousands of Filipinos are without shelter, food, clothing and medical care.

5.      Light, water, and communication systems are almost totally destroyed and interisland transportation is non-existent.

6.      The food situation is tragic, and there is shortage of seeds, farming implements and work animals.

7.      No major steps have been taken to rehabilitate the sugar industry because no crops can be harvested for export probably until 1948. Abaca and copra production, however, can be restored to normal as soon as equipment and transportation are available.

8.      America should maintain its military and naval bases in the Philippines, Marianas and Hawaii, not for purposes of throttling liberty or trade or for subjugation, but as guarantee of peace. ”[53]

Out of these proposals two important legislations were enacted by the United States, the War Damage Act and the Bell Trade Act.

The McNutt Mission

            On July 20, 1945, Commissioner Paul V. McNutt of the United States War Manpower Commission arrived in the Philippines under instruction from President Truman to make a survey of Philippine health and welfare problems. With him were General William Rose, Dr. Robert Honstott, and Robert W. Weasley.

            The mission made trips to the provinces and conferred with President Osmeña, Congressional and local leaders, and General MacArthur. The mission lasted only for eleven days.

            Later, on September 6, 1945, President Truman appointed McNutt as United States High Commissioner to the Philippines. President Osmeña praised the appointment as a show of  “America’s interest in working with us to restore normalcy and to bring our country back to the road of progress from which the war has deflected us.”

The Last American Visit

            Frustrated because of the slow pace of rehabilitation, President Osmeña left for the United States on September 26, 1945 to confer with President Truman and US Congressional leaders on financial and economic measures for the rehabilitation of the Philippines. President Osmeña arrived in Washington on September 29. He was accorded full military honors, including a 19-gun salute. He was greeted by a number of high-ranking American officials, among whom were US High Commissioner Paul V. McNutt, Senator Millard Tydings, US Secretary of Interior Abe Fortas, and Representative C. Jasper Bell.

            On October 1, President Osmeña conferred with President Truman at the White House on plans for preparing the Philippines for independence on July 4, 1946 and measures for financial assistance for the Philippines. The following were some of the items taken up during the conference:

            “Relief. The relief program of the Philippines now undertaken by the Commonwealth Government will receive the assistance of the American Red Cross, the Philippine War Relief, Inc. of the United States, and similar relief organizations which will be provided with sufficient funds from the National War Fund.

            Public Health. The U.S. Public Health Services shall assist the Commonwealth Government in formulating and carrying out an adequate program of port quarantine and public health in the Philippines and shall utilize for this purpose much of its personnel, funds, supplies and equipment as may be available.

            Future Trade Relations. The Congress of the United States will be requested to extend for a period of 20 years reciprocal free trade as it existed between the United States and the Philippines in 1940.

            Emergency Currencies. As these currencies were issued to advance the conduct of the war, they are the primary responsibility of the U.S. The Secretary of War shall take immediate steps after proper investigation to redeem the authorized emergency currency lawfully issued and used by the forces of resistance and by the civil agencies that supported them.

            Inflation. The War Shipping Administration shall put all available ships to carry consumer goods, supplies and equipment to the Philippines to help control the inflationary trend through the restoration of normal trade.

            Government Finance. Congressional authority will immediately be secured to place at the disposal of the Commonwealth Government for expenditure for general purposes all proceeds of the coconut oil excise tax and sugar excise tax now being held in the United States Government for special purposes.

            Law and Order. The Commonwealth Government will be assisted in the early reorganization of the Philippine Constabulary on a non-military basis in order to adequately cope with any problems arising from war conditions. This includes the support of the U.S. Army to the campaign now being waged by the Commonwealth Government to secure the surrender of unlicensed arms.

            Reconstruction of Public Works. The Commonwealth Government will be aided in the restoration of its seriously damaged means of communications and, upon receipt of reports from the Secretaries of War and Navy and the Administrator of Federal Work Agency, appropriate legislation will be requested from Congress to make funds available for the accomplishment of this project.

            Surplus Property. The cessation of war has left a large quantity of materials which can be utilized to advantage in the immediate relief and reconstruction of the Philippines. The Surplus Property Board shall immediately consult the Philippine Commonwealth authorities for the purpose of selecting and making materials needed for said relief and reconstruction.[54]”

            Items on future trade relations, redemption of emergency currencies, the release of excise taxes on Philippine exports, the reconstruction of public works and the transfer of surplus property, however, needed legislation from the US Congress.

            On October 25, 1945, President Truman, pursuant to the items agreed upon with his conference with President Osmeña, issued letters and memorandums to several heads of various departments and agencies of the United States Government recommending specific steps to carry out the relief program to the Philippines:

To the Secretary of War:

As a result of prolonged enemy occupation of the Philippines, the law enforcement agencies of the Commonwealth Government were seriously disorganized. Bearing in mind the fact that the War Department was responsible originally for the organization of the Philippine Constabulary, which had such an excellent record prior to the war, I believe that the War Department should assist in every possible way by the assignment of officers and men and the transfer of necessary equipment in reorganizing the Constabulary on a nonmilitary basis.

President Osmeña has advised me that the War Department has already been of assistance in this task and that considerable problems have been made by the Commonwealth Government. But he and I, feel however, that continued assistance until the reorganization is completed would be helpful.

I ask that this continued assistance be extended to the Commonwealth Government so that law and order may be fully restored in the shortest possible time, and that you submit a report to me as soon as a program has been formulated.

Memorandum to the Secretary of the Treasury and the Secretary of War:

It is my understanding that due to shortage of legal currency in certain areas of the Philippine Islands early in the war, and continually thereafter until the reoccupation of the Islands by our forces, a considerable quantity of emergency currency was issued, some by properly authorized officers of the United States Government and some by representatives of the Philippine Government.

It would appear that the War and Treasury Departments make a careful analysis of this situation and submit recommendations as to the necessary steps which should be taken to discharge the obligations that are properly of the United States Government. Any arrangement proposed for the redemption of this currency should include provisions designed so far as possible to avoid any windfall to speculators.

To the Secretary of the Treasury:

During the period of their military invasion of the Philippines, the Japanese issued and unbacked fiat peso and tried unsuccessfully to force its parity with the legitimate Philippine peso. The issue was so unlimited that it came to be worthless, and upon our landing in Leyte it was officially and quite properly declared not to be legal tender.

However, during the invasion period it had rapidly declining value as a medium for local trade, and numerous contracts which involved the enemy currency were settled or entered into. While it would be against the public interest to validate completely these contracts and settlements, a measure is needed to serve as a standard for judgments between debtor and creditors.

Since you have representation in the Philippine through a mission of the Foreign funds Division, I request that you cooperate with the High Commissioner and the Commonwealth Government in drawing up a schedule showing the relative trend of the purchasing power and exchange rates of the Japanese Philippine Peso during the period of invasion.

To the Surplus Property Administrator:

Prolonged enemy occupation and active warfare in the Philippine Islands have left in their wake a tremendous problem of relief and rehabilitation. It seems apparent that there must be large supplies of surplus government property now available which could be used to great advantage in the Philippines in the program which must be undertaken there by the Philippine Government. Such items as construction equipment, medical supplies and hospital equipment are badly needed.

Where such supplies can be used directly by the government of the Philippine Commonwealth, I believe this government should make the supplies available without cost to the Commonwealth. It might perhaps be desirable to arrange the transfer on such terms as would prevent the property from being later offered for sale to the general public.

Since there is at present no legal authority to effect such transfers, I believe we should seek that authority.

To the President of the Export Import Bank:

In connection with the rehabilitation of the Philippine Islands and the restoration of the normal economic life of the Islands, I believe that the Export Import Bank should participate in this program. It should, it seems to me, be possible to work out a program to operate in the islands on a purely business basis which would be of great assistance in restoring normal economic conditions.

May I have your comment on this suggestion, and in the event that you feel that the bank is at present without legal authority to function in the Philippines, your suggestions as to steps that might be necessary to permit it to do so?

To the Administrator of the War Shipping Administration:

In connection with the rehabilitation of the Philippines and the restoration of the normal economic life of the Islands, I am very anxious that all possible steps, consistent with our obligations elsewhere, be taken to supply adequate shipping to the Philippine Islands.

I would be glad to have statement from you as to the plans of the War Shipping Administration and the amount of tonnage which is expected to be available for Philippine trade, particularly in the near future.

To the Chairman of the Reconstruction Finance Corporation:

The almost lack of consumer goods in the Philippines- goods ordinarily imported from the United States – has brought about a serious price inflation and black markets which cause a great distress among the people. An excellent start has been made by the Foreign Economic Administration in cooperation with the War Shipping Administration to eliminate inflation by facilitating normal import trade.

You are, therefore, requested to direct the United States commercial company to use resources and personnel within its jurisdiction to continue and advance the Philippine program which it has undertaken and, where necessary, to sell goods on credit terms not exceeding two years in duration.

As a result, the rehabilitation of the Philippines finally accelerated during late 1945 and early 1946 but more could have been done if not for the turtle-like pace of the US Congress in enacting the necessary rehabilitation measures.

US Congressional Measures

The Philippine Rehabilitation Act of 1946 and Bell Trade Act. During his third and last visit to the United States President Osmeña appeared before the executive session of the Committee on Territories and Insular Affairs of the United States Senate to plead for immediate rehabilitation of the Philippines. In response to this plea, the US Senate promptly passed the Philippine Rehabilitation Bill, introduced by Senator Millard, on December 5, 1945.[55] On April 10, 1946, the US House of Representatives passed the said bill, as amended. On April 30, President Truman approved the bill and became Public Law 370. The law appropriated a sum of $520,000,000 (Php 1,040,000,000) for the rehabilitation of the Philippines, and transferred $100,000,000 worth of surplus materials to the Philippine Government.

            Likewise, The Bell Trade Bill, which established trade relations between the Philippines and the United States after independence, was passed by the United States House of Representatives on March 29, 1946 and by the United States Senate on April 13, 1946.

            Many welcome the two legislations with renewed optimism, albeit there were some disappointment over a rider which provided that no claim for war damages above $500 (Php 1,000) should be paid unless an amendment to the Constitution was made so as to give Americans equal rights in the operation of public utilities and the exploitation of natural resources.[56]

            Several senators opposed the rider and the parity amendments to the Constitution because it “would deprive the free and independent Republic of the Philippines with one of the most effective means to control her own internal economy and stimulate her foreign trade.” According to Senator Alejo Mabanag, the two laws were the “most onerous, most unjust, most outrageous to the Filipino people:”

Despite the acceptance of the Bell Act and Agreement, however, nothing positive and substantial has so far been obtained from America, except the loan of one hundred and fifty million pesos, not for rehabilitation and reconstruction purposes, but for the running expenses of our extravagant and complicated government.

It is true that some millions of dollars in the form of surplus U.S. Government property have been and will soon be delivered to our Government and that other millions of dollars have been appropriated by the United States Congress for the repair of public works here. But such surplus properties and such appropriation have been and are being allocated to us under the provisions of the Tydings Rehabilitation Act, whether or not we accepted the Bell Act. The Tydings Rehabilitation Act provides, as you will remember, that only compensation to private individuals and corporations in excess of 1,000 pesos will be payable after the acceptance of the Bell Act and the Agreement and only after compensations not exceeding one thousand pesos each shall have been paid. Whether or not there will still be a substantial amount left after the payment of small claims and other claims whose payment is not made conditional on the acceptance of the Bell Act is problematical.

I repeat, nothing so far has been obtained for the rehabilitation and reconstruction of our country by the present Administration from the American Government despite the acceptance of the Bell Act and Executive Agreement with all its onerous, one-sided, unfair, and discriminatory provisions.[57] (Emphasis and italics supplied).

In an exchange with Senator Pedro C. Hernáez, Senator Mabanag urged the former to vote for the rejection of the parity amendments because, he believes, nothing advantageous may be derived from such an amendment:

Senator Hernáez: One of the reasons why they are insisting that we amend our Constitution so as to give the Americans equal rights is that those persons or entities asking for damages over Php 1,000 will be paid. Can Your Honor tell us what advantage may be derived from such amendment?

Senator Mabanag: Absolutely none. I maintain that that is a concession demanded from us without any consideration in return.

 Senator Hernáez: My last question is this: Bearing in mind that the claims for Php 1,000 will consume all 800 million pesos appropriated for war damages, may the sugar farmers or centrals, however, still hope that by giving the Americans equal rights, the United States Government will appropriate additional sums to satisfy their claims and those of other entities.

Senator Mabanag: No, I don’t think so. You better change your mind and not vote for that amendment as it will be the biggest crime that we can commit against our people and posterity. The millions intended for the reconstruction and repair of our public roads, as I have already said, cannot be disposed of in the manner our Government sees fit. Probably, our President will suggest the way it should be used, but as a matter of right he cannot do that. He may do so only if they let him. Under the Tydings Rehabilitation Act it is the Government of the United States that will determine what roads or buildings will be repaired. Such an arrangement is very humiliating to us, and on top of that they want us to amend our Constitution so as to give them equal rights in the enjoyment of our natural resources…[58]

Nevertheless, President Manuel Roxas and former President Osmeña urged the acceptance of the Tydings War Damage Act and the Bell Trade Act by the Philippine Congress and the Filipino people. On June 21, 1946, President Roxas addressed the joint session of the Philippine Congress and urged the acceptance of the two controversial legislations:

 “The American Congress has lately passed a Philippine Trade Act and a Philippine War Damage Act. Those two acts provide the pattern of United States aid for our reconstruction and for the rehabilitation of our national economy. Without this assistance we are faced immediately by disaster. Without the helping hand thus extended to us, I do not believe we can survive.

I do not pretend to tell this Congress that this legislation or the money voted us by the United States Congress will automatically accomplish the rehabilitation of the Philippines. It is my duty to advise you that we must look forward to years of sacrifice and toil to accomplish our aims. Our future is grim, brightened only by the patriotic determination of the Filipino people to succeed, at whatever cost.

In my report to Congress on the state of the nation I described our present precarious economic condition. We are today living through the most crucial period of our life as a nation. Each day brings its crisis to our attention. We are faced by difficulties and decisions which test our capabilities to lead our people.

The obstacles are great and numerous. They will require all our wisdom and courage. One of our sources of hope is the help we have been offered by the United States. That nation which is about to grant us our freedom has also tendered to us the means of solving our economic problems, a protected place in the American market for 28 years and funds to help is rebuild our shattered land.

The American Congress, in order to provide those trade preferences, had to cut across all the protective features of American tariff law. These preferences are being offered exclusively to the Philippines.

This Congress has never been asked to deliberate upon a more vital matter. Your decision will determine the fate of this nation for the next generation. I need not ask the gentlemen of the Congress to lay politics and political expediency aside. I know that regardless of party or faction every one of you recognizes his heavy responsibility. I ask merely that you examine all the facts and make your decisions accordingly. My recommendations are well known now. I propose that you approve the Executive Agreement that I will soon transmit to you. It is my considered judgment that to do otherwise would be to invite economic and finally political catastrophe.”[59](Emphasis supplied).

            On September 18, 1946, the Congress of the Philippines approved the resolution proposing an amendment to the Constitution granting parity rights to Americans in the Philippines. The proposed amendment was appended to the Constitution and provided, thus:

Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to the citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the  United States in the same manner, as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by the citizens of the Philippines.”

            President Roxas campaigned for the ratification of the proposed amendment and promised the Filipino people material prosperity and economic security. At a luncheon given in his honor on September 28, 1946, at the Manila Hotel by the University of the Philippines Alumni Association, President Roxas delivered a speech explaining the importance of the parity amendment:

“…Our own citizens must be given every encouragement and every assistance to participate fully in our economic life and advancement. But in things that we cannot do, whoever can help us, of whatever nationality, creed or color, should be welcome here. Whoever will observe our rules and our national requirements, whoever will contribute unstintingly, helpfully and without improper design to our economic rehabilitation and expansion, is a welcome addition to our present company.

Foreign capital must be invited here, to help us in our great tasks. We should have confidence in our own governmental skills, in our own powers of regulation, and in own ability to safeguard our national interests; we should have no fear of foreign capital; we can well afford to pay its due reward, and retain for our nation the benefits of the development and the employment brought to us.”

            Several senators, among them Senator Eulogio “Amang” Rodriguez of Rizal, opposed the parity amendments and declared that both the War Damage Act and the Bell Trade Act prejudiced the interest of the Filipinos and undermined the independence of the Philippines:

“In my opinion, the repealing of Sections 1, 2 and 3 of our Constitution would mean that even after the Philippines has become independent, it will remain still dependent on the United States Government, because with it we shall have given equal rights to Americans in the operation of public utilities, as lost as well something that is very sacred to our people, namely our natural resources the exploitation of which shall be made open to Americans.”

On March 11,1947 the Filipinos took the bitter pill and approved the amendment to the Constitution granting United States citizens rights to the disposition exploitation, development and utilization of Philippine natural resources. With the approval of the parity amendments, it made ineffective the provisions of the War Damage Act limiting the maximum payment by the Philippine War Damage Commission to $500 to any one claimant.       

The Philippine War Damage Commission

            Composition. On June 5, 1946 the Philippine War Damage Commission was formally organized. Dr. Frank Waring was elected Chairman of the Commission with Mr. John Young and Justice Francisco A. Delgado as Commissioners.

            The Philippine War Damage Commission was composed of six major operating divisions and the Washington division.[60] The six major operating divisions are as follows: The Office of the Chief Examiner (responsible for the examination and adjudication of war damage claim); the Office of the General Counsel (responsible for all legal activities of the Commission); the Chief Accountant (furnished financial and statistical advice to the Commission, and certified and accounted for the expenditures in payment of claims); the Office of Information (responsible for the dissemination of information regarding the rights of claimants, the means by which they might file claims with the Commission and information on the progress of Commission activities); the Office of Field Operations (administered the local field branches of the Commission in the provinces); and the Office of the Secretary, responsible for all business management, administrative, and personnel activities of the Commission.

            Restoration of Public Properties. The Philippines was one of the most devastated countries after the war. A survey conducted by an eminent American engineering firm estimated the total damage to public property, exclusive of roads, bridges, and harbor works to more than US$230 millions. Unfortunately, only about 20 percent of the estimated losses could  be replaced because the US State Department allocated only $57 millions for the restoration of public properties damaged during the war. 99.7% ($55.3 millions) of the $57 millions allocation were made available for the restoration of public property and the remaining $1.7 millions were allotted for administrative expenses (see table below).

Allocation of Public Property Funds

SOURCE: United States Philippine War Damage Commission. Seventh Semiannual Report, Washington: US Government Printing Office, 1950, p. 21.

            Private Claims. On the other hand, $400 millions were appropriated for private property claims - $388 millions were awarded to claimants and the remaining $12 millions were allotted for administrative expenses (see table below).

SOURCE: United States Philippine War Damage Commission. Seventh Semiannual Report, Washington: US Government Printing Office, 1950, p. 6.

            The Japanese occupation of the Philippines and the subsequent liberation of the Philippines brought havoc and destruction to the young Filipino nation. Manila, its beautiful capital was, according to then General Dwight Eisenhower, “the worst damaged city in the world with the possible exception of Warsaw.”

            The problem of relief and rehabilitation were the important issued that confronted both the Philippine and American Governments. The Philippine Government failed to launch an effective postwar relief and rehabilitation program due to lack of funds and the dilatory attitudes of some officials in the Philippine Legislature. This was made worse by America’s passiveness to the needs of the bewildered Filipinos.

            Despite its incapacities, the Commonwealth Government did its best to cushion the sufferings of the Filipinos by providing relief goods and controlling the astronomical rise in the prices of prime commodities. It also negotiated with the American government for the acquisition of surplus goods and the immediate legislation of necessary laws governing the rehabilitation and reconstruction of the Philippines. Said notable achievements of the Commonwealth Government, however, were hampered, if not, defeated by unscrupulous politicians and businessmen for their own selfish and devilish interests.

            With the Commonwealth Government almost inutile to effect massive relief and rehabilitation efforts, it seems the only hope for the Filipinos is the magnanimity of the Americans. They wished! The Americans only took the responsibility of rehabilitating and reconstructing the war-torn country after the Filipinos ratified the lopsided parity amendments to the Constitution giving the Americans parity rights to exploit the country’s natural resources and control its public utilities. The Filipinos choose to give up their dignity in return for the promise of economic prosperity, which up to now remains elusive, only to find out that the Americans only appropriated 20% of what is needed for the reconstruction of public properties destroyed during the war.

            Be as it may, the Philippines did recover from the ashes of the war, numerous public buildings and infrastructures were rebuilt, under the Philippine Rehabilitation Act of 1946, such as the Post Office Building in Plaza Lawton, the Agrifina buildings in Luneta, the Legislative Building, the Manila City Hall, the University of the Philippines, the Philippine Normal School, Jones Bridge and others.

Books

Agoncillo, Teodoro A.. History of the Filipino People  8^th ed., Quezon City: Garotech Publishing, 1990.

Bernstein, David. The Philippine Story, New York: Farrar, Straus and Company, 1947

            Congress of the Philippines. Senate of the Philippines. Congressional Records. Manila: 1945 and 1946.

Hartendorp, A.V.H. The Japanese Occupation of the Philippines, vol. II, Manila: Bookmark, 1967, p. 631

Pacis, Vicente Albano. President Sergio Osmeña; A Fully Documented Biography, vol. II, Quezon City: Phoenix Press, Inc.

Office of the President of the Philippines. Official Gazzette. Manila: Bureau of Printing.

United States Philippine War Damage Commission. Semiannual Report, 7 vols., Washington: US Government Printing Office.

Villegas, Bernardo. Economic Development 3^rd Ed., Mandaluyong City: National Bookstore, 1994.

Newspapers and Periodicals

Manila Bulletin

The Manila Chronicle

The Manila Times