259. Telegram From the Embassy in the Philippines to the Department of State 1

8989. Ref: Manila 8875.2 Subj: Talk with Marcos on Economic Issues.

1.
Marcos told me Sept 20 that he wanted me to know that, in spite of all his other problems,3 he was still devoting considerable time and study to our own problems. He then talked with great knowledge about the problems created by the recent Supreme Court decisions, etc. He made a number of very interesting statements.
2.
He said he was not calling Congress back immediately for another much needed session, even though an extremely important bill had not been passed, as he did not want to risk any legislation just now on questions such as parity, or even efforts aimed toward getting legislation which would keep the waters muddy.
3.

He said he was slowly coming to the conclusion that the Supreme Court itself should correct some of its decisions, and that this might be the best route to try to proceed. He asked what I thought of SC action which would clear the titles of American-owned land as far as individuals are concerned, but not insofar as the state was concerned.

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I said I didn’t understand him. He replied that owners of property would be free to make any sale that they wanted to and the govt would then be free, through legislation, to spell out the ground rules for the future. He said this would get the matter back to being the subject of negotiations between two govts, where it belonged in the first place and not in the courts. We could then agree on such matters as a reasonable transition period, etc. I think he has in mind here something like a conveyance to the state or possibly escheat at the end of an agreed transition period, if private sales have not been made by that time. He may need something like this to get the Court or the Congress to go along with a stretched out transition. I said on first thought his suggestion seemed to hold promise. I felt, however, his choice of words wasn’t very good as the average person would conclude from the manner in which he had used the word “state” that perhaps confiscation would be the end result. He said he had nothing like that in mind whatsoever. I said that I thought wording was important as under his proposal some time would elapse when people wouldn’t know what was going to happen. He said this deserved thought.

4.
I asked if he would consider separating out the Luzon Stevedoring case and consider quick legislation for its correction. He said this was a bad case, indeed, and had to be corrected without too much delay. He said he thought it best, however, that the SC itself correct it, as the court had made a great error in extending its decision way beyond what the case before it called for. He said he thought the SC should reverse itself and allow foreign participation in boards of directors. If that was not corrected the Philippines would never get any foreign investment. I agreed. I asked if he could broaden this to include executive management. After some discussion he said he didn’t really know, but it was worth studying as he agreed that in some cases, such as advanced technological enterprises, it would be an asset to have foreign executive management.
5.
Marcos said he thought some parts of the retail trade problem could be handled by legislation. His tentative thought was that the term “retail trade” should be redefined by Congress (perhaps by amending the Retail Trade Act which reserves retail trade to Filipinos but is vague about defining “retail”) and at least make exception for bulk transfers to commercial outlets, which would take care of our oil companies and a number of others who sell (wholesale in our practice) directly to retailers (rubbers, drugs, etc.).
6.
I told him that we had some thoughts of what might seem reasonable and fair on all these matters and I wondered if he would mind receiving them from me. He said he would welcome that. I asked if there was anyone else in his government that it would be useful for us to have sessions with. He said he thought that he and I had better do [Page 555]it. He said the only two working with him on these matters were the Secretary of Justice and the Solicitor General (a good team). He said things were very delicate, and he even had to work indirectly through friends with the Court.
7.
I told Marcos I remained extremely concerned about draft economic provisions in the steering committee at the ConCon. I said if these provisions were ever calendared we would all be in a real mess, as the parliamentary procedures in that body would mean that all these provisions would have to be changed line-by-line or even word-by–word through lengthy floor debates that would be emotional and could go on for a long time as well as come out in the wrong place.
8.
Marcos then launched into quite an exposé on the ConCon. He said if they could move promptly, which he thought they couldn’t, this could be a way they could handle some of the needed reforms in the country. He said it was such an unruly mess, however, that he had just about concluded that they would not finish their job in time for the ’73 elections (quite a significant statement). When we finally got back to the provisions that I said worried me, he said he would do what he could to get the various provisions referred back to organic committees and out of the steering committee.
9.
I said we were all in a box on these issues. On the one hand it was extremely important that our business interests see some sign of movement, and I dreaded the thought of a long period of no apparent motion. I said at least I could let the word get out that we were talking, but there wasn’t much I could pass along of our private talks.
10.
It is encouraging that Marcos was this forthcoming on our investment issues. He was obviously prepared, as he asked me September 19 on the phone if I wanted Abad-Santos or Mendoza at our meeting. I said “no” because I wanted to discuss quite delicate matters (reported separately).
11.
I want to keep working with him on these matters in confidence, and things have now reached the point where, as suggested in Manila 8875, I need to get as many as possible of our needs in front of him. An early answer to this reftel would therefore be greatly appreciated.
Byroade
  1. Source: National Archives, RG 59, Central Files 1970–73, FN 9 PHIL–US. Secret; Priority; Exdis.
  2. Not printed.
  3. In telegram 8990 from Manila, September 22, Byroade reported that there were “several indications” that Marcos was “seriously considering martial law” as a possible option “because of increasing violence such as continuation of current rash of bombings, which would render effective operation of government either difficult or impossible.” (National Archives, Nixon Presidential Materials, NSC Files, Box 557, Country Files, Far East, Philippines, Vol. IV)