MLQ and the NEC, 1936-1973

The recent celebration last week at the NEDA recalling its foundational roots as an agency of the government is the inspiration for today’s foray into Philippine economic institutional history.

Memories are short and history tends to be forgotten.

Preparing for independence.” Manuel L. Quezon was the first popularly-elected Philippine president. Aguinaldo was appointed by fellow revolutionaries.

Thus, the second law of the national assembly of the Commonwealth established the National Economic Council. Under the independence law, the Commonwealth government was the 10-year transitional of the Philippines prior to the full grant of political independence on July 4, 1946.

To show the nation’s high priorities, the first law of the new government created the armed forces for national security and defense. The third law was to create the Court of Appeals to strengthen the justice system.

The NEC was to serve as a deliberative national body on economic and social issues. Its principal task was to advise the government on actions to take on these matters. As a council, it only had a skeletal support staff, sufficient to enable its function to serve as a deliberative body.

Therefore, much hope was expected from the NEC.

The principal objectives of the NEC were: (1) To give national development a rational and definite direction through the formation of an economic program based on national independence. (2) To coordinate the efforts of the government in undertaking development projects. And (3) “To advise the govt on economic and financial questions, including the improvement of existing industries and the promotion of new ones, diversification of crops and production, tariffs, taxation and such other matters as may be submitted by the president.

The NEC had a maximum composition of 15 members, appointed by the president with the consent of the Commission on Appointments. The secretary of finance served as its chairmen.

The members of the constituted council were mostly Cabinet members, some managers of major government corporations, and a few selected individuals representing the private sector.

Some of its significant activities in those days were recommendations that led to the creation of the Agricultural and Industrial Bank (a forerunner of the Rehabilitation Finance Corporation, which ultimately became the Development Bank of the Philippines); the enactment of central reserve bank of the Philippines. (This last bill was withdrawn to avert a veto by the US president. Money and currency matters then were not yet within the preserve and powers of the Commonwealth government.)

The NEC significantly recommended to establish the National Power Corporation; the creation of a national land resettlement administration; and the expansion of the National Development Company (an old corporation created during the American colonial period to finance and promote development projects).

Thus, NEC, under its skeletal structure as a council, was critical in providing guidance for economic legislation and economic policy in preparation for true independence.

After the war and after political independence. More than four years of Japanese occupation and serious structural wartime destruction interrupted the Commonwealth period of government. But after the war, the schedule of independence was pursued.

The country, therefore, became a republic in accordance with the independence law in 1946. By then, the immediate problems were those of rehabilitation and the restoration of peace and order were grave and massive. The newly elected leader, Manuel A. Roxas was in charge, but after his death, his vice president, Elpidio Quirino.

Towards the end of 1947, the NEC was reorganized with Miguel Cuaderno, the finance secretary, also serving as in previous years as chairman. Most of the recommendations of the NEC involved rehabilitation of old industries that suffered in the war, especially export and agricultural industries.

Thus the NEC’s work involved preparation of the rehabilitation and development program, and the establishment of a central bank by virtue of a law.

The next major episodes came on the heels of the enlargement of US economic aid as a consequence of the Bell Economic Mission in the 1950s. This was after the war damage payments made by the US government ended in the 1950s.

By then also, the new trade adjustment act had been put on track under the Philippine-US trade agreement (popularly known then as the Bell Trade Agreement). The trade agreement would be amended in 1955 under the Laurel-Langley Trade Agreement to correct inequities that the Philippine government had sought.

The new flow of large US foreign aid helped to direct its attention also to the improvement of the government bureaucracy. This was during the Magsaysay administration when the plan to reorganize the whole government came into being.

In the early 1950s, the NEC lent its staff to help allocate and guide US foreign assistance to the Philippine government. A Philippine Council for United States Assistance (PHILCUSA) under the guidance of its chair, Jose Yulo, loomed large in allocating the aid program.

A consequence of this new focus led to the reorganization of the National Economic Council, in recognition of more active and explicit functions of planning and aid allocation.

The outcome of this effort was the government’s Reorganization Plan No. 10, which featured the organization of the new NEC. The NEC was given organizational structure in three major offices: (1) The office of national planning. (2) The office of foreign aid coordination, which undertook to supplant the Philcusa. And (3) The office of statistical coordination and standards, which was to oversee the nation’s statistical system.

This was the NEC that was to run national economic development planning from 1955 to 1973.

The present National Economic and Development Authority (NEDA) was provided under the Constitution of 1973, which supplanted the 1935 Constitution.

May I end this piece by greeting my readers and countrymen a Merry Christmas and a Bright New Year!

My email is: [email protected]. For archives of previous Crossroads essays, go to: http://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/