War ity. be explained by the sharp increase in the mileage and rates. All this development is very gratifying and shows how rapidly the Philippine people respond to improved conditions of transportation, finance, public order, and markets, brought about since the American occupation. The prosper-sharpest advances have been made during the war, as Present depression. Comparative trade statistics. trade. was to be expected, as the Filipinos had few additional war burdens placed upon them and were able to take advantage of the great increase in prices, which brought them unexampled prosperity. The country is suffering from the general world-wide depression at the present time; the prices of products have fallen off very sharply, but even this is less acute than in other countries. It should be noted, however, that whatever mistakes have been made here, they have not been sufficient to arrest the steady rate of progress which these figures prove to have taken place. Your mission has had a careful report prepared showing the gross trade of the Philippine Islands. From 1903 to 1909 the figure was almost stationary; 1909 was the year in which the Payne bill was passed, creating free trade between the Philippine Islands and the United Effect of free States. In the first three years of free trade the trade with all countries nearly doubled. Beginning with 1916 the trade went sharply upward until in 1920 it reached the remarkable total of $300,000,000. We have tried to No figures of get the figures of tonnage in order to analyze this growth in trade and see how much comes from increase in volume and how much is due to increase in price, but have not been able to get these figures. tonnage available. Proportion of trade with United States. An analysis of the trade shows that a curve indicating exports and imports from the United States follows almost the same lines as does that of total trade. Roughly speaking, two-thirds of the business of the country, or $200,000,000, is trade with the United States, and onethird with all other countries. The proportion of gross with business done with the United States has been steadily increasing. As the trade with the United States pays no customs duties and the bulk of the increase has been in Decline of cus- that class of trade, the result is that the total revenues of customs has shown a tendency to fall off, while the cost of collection shows a steady increase. Increase United States. toms revenue. Effect if free In case free trade were to be taken from the Philippine trade abolished. Islands, it is probable that the closing of the rich markets of the United States to the products of the Philippine Islands would be very sharply felt. While the Philippine Government would receive customs duties on an important part of their imports that now come in free of duty, it is believed that the first effect would be a very serious blow to trade. For example, in 1920 nearly $40,000,000 of sugar was exported to the United States, the duty on Export of sugar which would have been 6 or 8 per cent of its value. It is problematical how well Philippine sugar could have stood the handicap of 8 per cent added to the high cost of freight from the Philippines to the United States. 1920. The value of cigars exported to the United States was Cigars. $10,500,000; the duty on these at the present rate would amount to about $30,000,000, which would practically have closed the markets of the United States to these cigars. There would have been a similar closing of the United States markets to leaf tobacco. The collector of customs estimates that the trade which has grown up in Philippine embroidery now reaches $7,500,000 a year and broidery. would have to pay a duty of $4,500,000. As there is no other market for this product, he believes the industry would be practically ruined.1 In the main, it is believed that the loss in internal revenue, were the stimulus of free trade to business removed, would be greater than would be the increased collections of customs duties. In this connection it is interesting to note that the increase in internal revenue started when free trade was given and practically offset the drop in customs receipts at the time. Trade in em Further analysis of the customs shows the principal Export figures. articles exported, measured in value, to have been: 2 Sugar, $49,619,260; hemp, in which the Philippine Islands have a virtual monopoly, $35,862,000; coconut oil, $23,268,886.50; tobacco, $19,927,391; embroideries, $7,811,783.50; and copra, $3,716,870.50. FINANCES. In 1905 the Philippine Government was put on a thorough business basis. All services rendered by one branch of the Government to others were paid for, and 1 See among exhibits indorsement, dated Sept. 9, 1921, of the insular collector of customs. 2 These figures are all for 1920 and are taken from the report of the insular collector of customs. Business basis of Philippine Government, 1905. Change in law. keeping. the books were so kept that the appropriations did not include any interbureau or intergovernmental payments. The law has since been changed, so that the present cost of government includes items of receipts for services sometimes from other branches of the Government, which makes analysis difficult and exact comparison impossible. Involved book-The books are so kept that these amounts can not be ascertained without an analysis of governmental accounts involving prohibitive expense. So that the gross figures of receipts and expense are padded on both sides by intergovernmental charges, which are neither real receipts or expenditures, as they are payments by the Government to itself. The accounts should be so kept that these fictitious entries would be eliminated, in order to enable the officers of the Government to get a true picture of government costs. Intergovernmental charges. ation, 124 cent. Excessive penditures. per ita 1913-1920 com Certain figures, however, stand out so boldly that they can not be questioned. The rate of taxation has been Increase in tax-sharply advanced. The insular gross revenues from taxation in 1913, before the Filipinos were given virtual control of their Government, were $12,500,000, as opposed to $28,000,000 in 1920, an increase of 124 per cent. Government expenditures show a still greater proportion of ex-growth. This increase in the general cost of government has not been accompanied by a proportionate increase in efficiency; on the contrary, as has been noted elsewhere, there has been a general falling off in efficiency.. Taxes per cap- The per capita revenue from taxation has risen from pared with other $1.32 in 1913 to $2.50 in 1920. This compares with the per capita taxation of $23.78 in Great Britain (1914–15), $9.92 in the United States (1914-15), $5.57 in Japan (1915-16), $17.33 in the Argentine Republic (1915), and $7.79 in Brazil (1915) 3, from which it will be seen that the Filipino bears a smaller burden of taxation than the natives in any of the above cited countries. One reason the burden of taxation is so light in the Philippine Islands pense borne by is because the United States has borne all costs of military and naval establishments necessary for the defense of the islands, and other expenses incident to the maintenance of sovereignty, including international, diplomatic, and consular representation. Countries. Military United States. 3x-. 3 These figures are taken from World Almanac, 1917, and are much heavier since the Great War. 4 ênue. Of the total revenues of $40,500,000, $28,000,000 is Sources of revfrom taxation and $10,500,000 from operating income and commercial and industrial units; this does not include earnings of the railroad, which the government owns through ownership of the stock. enue. An analysis of revenue derived from taxation shows the Analysis of revreceipts from internal revenues to be $18,500,000, or twothirds of the total. This internal-revenue collection is nearly four times as heavy as the collections of 1913. Bonded debt. capita with other countries. The bonded debt of the Philippine Islands in 1920 was $22,000,000, for the redemption of which is laid aside nearly $5,000,000, sinking fund, so the net liability is something less than $17,500,000. A comparison with the Comparison per debt of other countries demonstrates that the Philippine Islands has a smaller bonded debt than most countries, the per capita being $1.81, compared with $25 in Cuba, $237.07 in the United States, $853 in England, and $1,159 in France. The Dutch East Indies with $1.92, is the nearest, and China next with a little less than double that of the Philippine Islands." It will be seen that the recent act of Congress increasing the authority of the Philippine pine Islands. Islands to borrow was highly conservative and could be safely further increased without jeopardizing the financial stability of the government. Bonds and notes of the Philippine Islands have been made exempt from federal Government istaxation and are received on deposit as currency reserve. Although not directly guaranteed, it is understood that the credit of the United States Government is behind them; this accounts for the high market value of these United States. bonds. Borrowing capacity of Philip sues exempt. Implied obliga tions of the Provincial and In addition to the insular revenues, there are the pro-municipal revevincial and municipal revenues. These are expended by nues. the provinces and municipalities by vote of their own local authority. An examination of their accounts shows Increase in past a similar expansion, the receipts and expenditures having increased about 100 per cent in the past eight years. eight years. pense. The government expense and cost of materials have Increase in exshown a tendency to a sharp increase. And it is to be noted that a number of new bureaus and offices have New created. bureaus been created. 4 The census shows "income" of $49,000,000; this, however, is incorrect because analysis proves that it includes moneys derived from the sale of bonds. • Figures furnished by the insular auditor. Compulsory de posits by munici THE PHILIPPINE NATIONAL BANK. The story of the Philippine National Bank is one of the pal and provin- most unfortunate and darkest pages in Philippine history. cial governments. This bank was started in 1916, and a law was passed 6 compelling all provincial and municipal governments to deposit all their funds in it; and at the same time arrangements were made to transfer from other banks all government funds there deposited, except trust funds, which were held on deposit in the United States; later the bank was put into a position to get control of these moneys and reserve funds. The sum of $41,500,000, held for the conversion of currency, was transferred to the Philippine Islands, the bank making a large profit in exchange in Questionable doing so. Much of it was then loaned out to speculative concerns under circumstances which have led to grave doubt as to the good faith of the transactions. loans. Presidents. A man presumed to be experienced in banking was brought from the United States and took the first presiInexperienced. dency, which he held a short time. An American inexperienced in banking was then put in charge, and upon his death a Filipino, also without banking experience, became president. The result of all this has been a series of banking losses, estimated by the insular auditor to reach the severe total of $22,500,000. A partner of Report of ex-Messrs. Haskins & Sells, certified public accountants of pert accountants. New York, after a careful examination of the bank, makes the following comment: Losses. Charges ferred. pre ing man brought States. Our examination thus far reveals the fact that the bank has been operated during almost the entire period of its existence prior to the appointment of Mr. Wilson as manager in violation of every principle which prudence, intelligence, or even honesty, dictate. As a result of these findings, charges have been filed against Gen. Concepcion, a former president of the bank. The Government became alarmed at the seriousness of Trained bank the situation and secured the services of an experienced from United banking man from the United States, under whose conservative guidance the affairs of the bank are in a fair way to be put on a sound footing. But a large part of Slow liquida the assets of the bank have been loaned to concerns which probable. will be unable to repay for many years-very largely in sugar centrals and coconut-oil factories. These loans were made in excessive amounts during the period of tion of accounts 6 See section 19 of Act No. 2612 of the Philippine Legislature. |