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which would be given to agriculture outweigh the loss of revenue involved. The last provision is intended to put the local shipyards in better position to compete with the yards in Hongkong, where all materials are entered free of duty, and to encourage the establishment of shipbuilding and ship-repairing concerns in the islands.

Third. To reduce the rate on machinery and apparatus for mining and the reduction and smelting of ores from the present rate of 10 to 20 per cent, according to the component materials, to a flat rate of 5 per cent ad valorem. About 90 per cent of this machinery comes from the United States at present, and this change is desired to encourage the development of the mineral resources of the islands. Fourth. A minor change is included under the paragraph covering whisky, rum, gin, and brandy, in effect that each and every gauge or wine liter of measurement shall be counted as at least one proof liter. This simply conforms to the internal-revenue laws and tariff of the United States, and while it has the effect of slightly increasing the tariff this is incidental and not for the purpose of protecting any industry.

Fifth. A provision is included permitting invoices of merchandise shipped from the United States to the Philippines to be sworn to before a notary public. The present law requires such oaths executed "before a United States commissioner, collector of customs, or deputy collector of customs." In many of the inland cities of the United States there is none of the last-named officials, and the merchants at those places can not readily meet this requirement. This addition, therefore, would do much to relieve a situation seriously complained of by our merchants.

These changes have all been recommended by the Philippine Commission, the insular collector of customs, the Secretary of War, and the two Resident Commissioners of the Philippine Islands in Washington. The bill was favorably reported upon by the House Committee on Ways and Means and passed by the House of Representatives. It is still pending before the Senate Committee on the Philippines, to which it was referred on May 28, two days before the close of the last session.


In the last annual report of this bureau reference was made to the opening of the first Philippine Assembly by the Secretary of War on October 16, 1907. The Assembly and the Philippine Commission now form, respectively, the lower and upper houses of the legislative branch of the Philippine government, known as the Philippine Legislature. In accordance with the organic law providing for the Assembly, the Legislature duly elected as the two Resident Commissioners to the United States Messrs. Benito Legarda and Pablo Ocampo, and the House of Representatives, by appropriate resolution, extended to them the privileges of the floor with the right of debate, as well as the same rights as Members in the allotment of rooms in the House office building.

It is perhaps worthy of note that the first bill passed by the Philippine Legislature was an act appropriating 1,000,000 pesos for the construction of municipal school buildings, 50 per cent of the cost in each case to be contributed by the municipality.


Encouraging progress has been made in the building of the new railway lines, for which concessions were granted, as shown in previous reports of this bureau, and as far as completed they are reported to be well constructed and well adapted to local conditions. The completion of this work should mean a new impetus to agriculture, increased export possibilities, and substantial elevation of the material and social condition of the people.

In the Orient two-thirds of the income from railways is usually from passenger traffic, but as the railroads in this case will directly affect the exports of agricultural products and quicken all the nerves of trade and manufacture, a steady increase in freight receipts is to be looked for from the date of first operation. The passenger outlook is exceptionally bright. Out of the 14 provinces through which the roads will pass in Luzon the 10 provinces with the greatest prospective mileage have a density of population ranging from 334 to 112 and averaging over 212 per square mile, and have an aggregate population of 2,270,621, which is nearly one-third of the entire population of the archipelago.

In the three Visayan islands-Cebu, Panay, and Negros-in which railroads are to be constructed, the density of population is, respectively, 336, 161, and 94, or an average of 197, while the total population amounts to 1,796,669. The average density of population of Cebu (336) is greater than that of Japan, Italy, Germany, or France; the density of Panay (161) is about equal to that of British India, Portugal, or Denmark, and the density of Negros (the most sparsely populated, with 94) is about the same as that of Spain. The density of population in the United States is about 26, and the four States having the greatest density are Rhode Island, 407; Massachusetts, 348.9; Connecticut, 187.5, and New York, 152.6 These figures speak for themselves and the future of the railways seems assured. No reason appears why the Visayan lines should not pay a fair interest on the investment above the 4 per cent guaranteed by the Philippine government, for outside of the possible passenger business they should develop an increasing freight traffic from the fertile agricultural country through which they pass, and which, up to the present, may be said to have hardly been touched. There is no guaranty on the lines in Luzon.

The progress of railroad construction in each island is as follows:


The following table shows the length of the new lines constructed and in operation June 30, 1908:

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In addition to the foregoing there have been constructed since June 30 on the Batangas line 43 miles, and on the line to San Fernando Unión about 5 miles, while it was confidently reported that by November 1 the Antipolo line would be completed. Recent reports state also that it is expected that trains will be running on the Batangas line as far as Calamba by the middle of November. The completion of the remaining mileage of the proposed lines contracted for under the concessionary act is being pushed as rapidly as possible consistent with the conditions to be met.


The first 20-mile section, extending from Iloilo north to Pototan, was opened for construction operation in March, 1908. Track laying on the second 20-mile section has reached the Jalaur River at Passi, mile 33. Grading is proceeding from that point north toward Capiz, the northern terminus, and it is expected that the second 20-mile section will be ready for construction operation in December. On the first section 85 per cent of the masonry is completed, on the second section 20 per cent, and the steel bridges for both sections are on the island. Seventy-five per cent of the work has been done on the shops, sheds, storehouses, and the terminal buildings at Iloilo, and the station buildings between Iloilo and Dueñas (mile 29) are 90 per cent completed.

Passenger equipment for Panay, consisting of 2 combination parlor and first-class cars, 2 combination baggage and second-class cars, and 9 second-class cars, was placed in service on July 1, 1908.

A conservative estimate based upon the exports and imports and local business, as compared with the operated line in Luzon, gives assurance of a net revenue of at least 5 per cent, or 1 per cent above the governmental guaranty, upon the cost of construction at the beginning of operation, and nowhere in the islands is the future growth and development of traffic more promising.


The main line, extending from Danao south through Cebu and Carcar to Argao, was preliminarily completed and placed in construction operation in May, making a total of 59.4 miles of continuous track on this island. Ninety per cent of the masonry work is completed and 90 per cent of the steel bridges erected, with the exception of two additional spans ordered for the Argao River. Ninety-five per cent of all the buildings on Cebu is completed.

Passenger equipment for Cebu, consisting of 2 combination parlor and first-class cars, 2 combination baggage and second-class cars, and 9 second-class cars, was placed in service on June 20, 1908.


Benguet is a province in northern Luzon, lying in the mountain ranges just east of the west coast. It is a plateau of more than 5,000 feet elevation, a country of pine trees and grass, where the temperature, never rising above 80° and never falling below 40° F., gives to it the invigorating atmosphere of the Adirondacks without their extremes of heat and cold. It is the most healthful location

in the islands. Baguio, its capital, is now used also as the "summer capital" of the islands to enable officials, both Filipino and American, to escape the heated season in Manila and to recuperate from the strain and ailments of the lower Tropics.

A railroad now reaches from Manila to Camp No. 1, in the Bued River Canyon, about 22 miles from Baguio. The Philippine Commission has built a fine macadamized road from this point to Baguio, to meet the immediate demands of traffic of carts, wagons, carriages, and automobiles. Authority has been given to extend the railroad to Baguio and bids have been requested for this purpose, but thus far without result, despite the inducement held out in the offer of the use of the highway as a roadbed, which would materially reduce the expense of construction.

Ground is now being sold there for schools and churches and for private residences to Filipinos and Americans. There has been. reserved for military purposes a tract of land sufficient for quarters, drill ground, and adjuncts of a full brigade. The only expense would be for barracks and quarters. A hospital has already been built, together with quarters for a small detachment and a number of officers. Reports submitted by medical officers of the hospital show cures of diseases that do not respond readily to treatment in the United States. The value of a station there where every regiment in the Philippines might be sent from time to time for recuperation can hardly be overestimated. It would save lives and would save money. If Congress, to provide such a post, would make a suitable appropriation, to become available only upon completion of a railroad, it would not only serve both the interests of economy and efficiency, but would assure this extension, since the traffic incident to the maintenance of even a regiment there would doubtless be sufficient to pay operating expenses.


Recommendation has already been made from your office for an appropriation by Congress for the construction of an electric or other railway from Camp Överton, on the north shore of Mindanao, to Camp Keithley, on Lake Lanao, in the center of the Moro country. Camp Keithley is the most important post strategically in the whole Moro Province, and must always be maintained. It is 25 miles from Camp Overton, from where all its supplies have now to be hauled by wagon. It has been estimated that a steam or electric railway could be built and equipped for what it will cost under present conditions to transport supplies for three years. Once such a railroad were in operation, of course the cost of troops at Camp Keithley would be materially reduced. Camp Keithley is 3,000 feet above the sea, a very healthful post, and if made more accessible by a railway its importance will be materially increased.


In the last annual report of this bureau there was given in full the text of the act of Congress approved March 4, 1907, providing for the establishment of an agricultural bank in the Philippine Islands, for which legislation the necessity had been well set forth in preceding reports of the Philippine Commission and in several hearings before congressional committees. Private capital having hesi

tated, however, to enter upon this enterprise, and its necessity becoming still more apparent, the Philippine government determined itself to carry into effect the intent of the act of Congress indicated. During the first session of the Philippine Legislature a resolution enacted February 12, 1908, was passed, providing for a mixed commission to prepare a plan of organization of an agricultural bank, with a capital of 1,000,000 pesos; and based upon the favorable opinion of the Attorney-General of the United States, dated April 16,1908, covering the legality of the proposed action, an enactment of the Philippine Legislature, passed June 18, 1908, established the agricultural bank of the Philippine government and appropriated 1,000,000 pesos out of general funds as its capital.

Loans under this act are limited to between 50 and 25,000 pesos, and the administrative control of the institution and its means and methods of conducting business are plainly fixed in the interests of all concerned and wisely safeguarded by the law.

Under date of October 9, 1908, a cablegram from Manila stated that the bank had begun operations, and that the first loan had been made to an American farmer of Tarlac Province. It seems beyond question that this bank will prove an important factor in the restoration and promotion of agriculture in the Philippine Islands.


The transactions of the postal savings bank, which began operations in the Philippines as a part of the bureau of posts October, 1906, show a steady increase of business for the past fiscal year and indicate that the institution is well received by all classes.

On June 30, 1908, there were in operation 12 first-class, 106 secondclass, and 127 third-class branches, or a total of 245, with net deposits aggregating 1,031,994.04 pesos, covering 5,389 open accounts. This is a net increase of 3,058 accounts, or 56.7 per cent, over the fiscal year 1907. Up to the end of this fiscal year the bank had been patronized by a total of 7,346 depositors since beginning operation, October 1, 1906, as compared with 2,676 at the end of 1907. A classification of depositors by nationality shows 3,725 (50.71 per cent) Americans, 3,294 (44.84 per cent) Filipinos, 132 Europeans, 151 Asiatics, and 44 societies. The separate deposits range from a few centavos to over 5,000 pesos. An increase is noted of nearly 10 per cent over the previous year in the number of Filipino depositors, tending to demonstrate that the institution is gaining the favor and confidence of the Filipino people. This is to be regarded as an encouraging sign, as the bank was established primarily for the benefit of the Filipinos, and the ultimate success of the venture must necessarily depend upon their patronage.


My last annual report showed that paper currency to the amount of 47,000,000 pesos had been shipped to the Philippines. During the past fiscal year there were prepared at the Bureau of Engraving and Printing of the Treasury and forwarded to Manila 1,000,000 pesos in 2-peso notes and 3,000,000 pesos in 500-peso notes. The cost of the 4,000,000 pesos was $5,831.96, and the expense of shipment $70.19, a total of $5,902.15.

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