US embassy cable - 05MANILA3282

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 003282 
 
SIPDIS 
 
STATE FOR EAP/EP, EB/TPP/BTA/ANA 
STATE PASS USTR FOR BWEISEL AND DKATZ 
STATE PASS USAID AND OPIC 
TREASURY FOR OASIA FOR AJEWELL 
USDOJ FOR MCRAWFORD 
USDOC FOR 4430/ITA/MAC/DBISBEE 
 
E.O. 12958: DECL: 07/15/2015 
TAGS: ECON, EFIN, EINV, PGOV, TBIO, RP 
SUBJECT: ARROYO REBUILDING ECONOMIC TEAM 
 
REF: A. A) MANILA 3154 
     B. B) MANILA 3061 
 
Classified By: Economic Officer Shawn Waddoups for reasons 
1.4(b) and (d) 
 
1.  (C) Summary: In the wake of the exodus of key 
economic advisors, President Arroyo began reconstruction of 
her economic team on July 12 with the appointment of 
Margarito Teves as Secretary of Finance.  On July 14, she 
announced other key appointments, including Peter 
Tavilia as Secretary of Trade and Industry, Romulo Neri as 
Budget Secretary, and Zamzamin Ampatuan as head of the 
National 
Anti-Poverty Commission.  Tavilia and Neri both have strong 
connections to Speaker of the House of Representatives Jose 
De Venecia. 
Their appointments seem to strengthen his position amidst 
on-going 
discussion of possible Charter Change.  End Summary. 
 
------------------------------------ 
New Finance Chief "best possible fit" 
------------------------------------ 
 
2.  (U) President Arroyo named the current president of 
government-owned Landbank and former Congressional ally 
Margarito "Gary" Teves as Secretary of Finance on July 12. 
Teves 
studied in the U.K. at the City of London College (BS in 
Business Economics) and the U.S. at Williams College in 
Massachusetts (MA in Development Economics).  After three 
terms as a 
congressman, he worked as a consultant promoting economic 
reform in the 
Philippines, including under contract with a USAID-funded 
project. 
Then-President Estrada named him president and CEO of 
Landbank of the 
Philippines in 2000, a position he held until his recent 
appointment. 
Business leaders hailed his appointment, but one called it 
"the toughest 
job in Asia." 
 
3.  (C)  DOF officials privately told econoffs that they 
welcomed his 
appointment and predicted he would focus more on 
Congressional 
and local business contacts and less on the international 
business community than his predecessor -- something they 
view as crucial to institutionalizing the reforms currently 
being implemented.  Since his appointment, he has 
repeatedly emphasized that his top priority is 
implementation of the Expanded Value Added Tax, currently 
under a temporary restraining order from the Supreme Court 
(ref B), and continuing to improve tax collection. 
Other observers commented that he likely will be able to 
marshal support 
among business elites for these priorities because 
of his ties to the oligarchic Ayala family (he served as 
the Ayala Corporation's chief economist before his election 
to Congress).   Business contacts told econoffs that Teves is 
the "best 
possible fit for the job, given the current situation," and 
described him as "an able technocrat."  They lauded his 
record of 
good governance, effective reform and "capable 
administration" at Landbank. 
They also pointed to his record of supporting free trade, 
constructive engagement 
at the WTO and opening the financial services sector to 
foreign 
competition as signs that he will continue to push needed 
reforms as the leader of the President's economic advisors. 
 
4.  (C)  Teves comes from a political family with roots in 
the influential and protectionist "Sugar Bloc," but 
colleagues agreed that he was 
firmly committed to liberalization of the Philippine 
economy, especially through legislation he sponsored while 
in Congress, often with then-Senator Arroyo as co-sponsor. 
Even opposition 
lawmakers praised Teves.  Senator "Jingoy" Estrada, the son 
of former President Estrada and a fierce opponent of 
President Arroyo, told acting Pol/C on July 13 that Teves 
was a "brilliant choice" and "one smart guy." 
 
-------------------------- 
From Stock Market To Trade 
-------------------------- 
 
5.  (U) Arroyo tapped Peter Favila to head the Department 
of Trade and Industry (DTI) on July 14.  Seen as a "private 
sector guy," Favila continues the recent run of respected 
business leaders brought in by Arroyo to be head the effort 
to attract foreign investors to the Philippines.  Unlike 
his two predecessors (former Finance and Trade Secretary 
Cesar Purisima and former Trade Secretary Juan Santos), 
Favila's business 
career has been focused almost exclusively on Filipino 
enterprises and not 
the international business community.  He has extensive 
experience in the Philippine banking sector.  He has no 
obvious experience in managing the "real side of the 
economy," as one observer put it to econoff.  He comes from 
the camp of influential local tycoon Lucio Tan, having 
headed Tan's Allied Banking Corp. from 1998 to 2001.  He 
was also the president and CEO of Philippine National Bank 
(PNB) from 1995-1998.  Until his appointment, he sat on the 
board of advisors for Philippines Airlines (PAL) and was a 
board member for Tan's MacroAsia.  He also served for many 
years on the Board of Directors for the Philippine Chamber 
of Commerce and Industry (PCCI).  Favila studied at the 
University of 
Pennsylvania's Wharton School. 
 
6.  (C)  According to Business and civil 
society contacts, in addition to his 
connection to Tan, he is tightly linked with former 
President Fidel Ramos and House Speaker Jose De Venecia. 
Only on July 7, he had assumed the position of chairman of 
the board 
of the Philippine Stock Exchange after four years as a 
non-broker director on the Exchange's board.  His 
appointment to DTI caught many -- apparently including 
Favila -- by surprise.  The business community has reacted 
positively to Favila's appointment, although he has not 
received the same unqualified support as Teves.  DTI 
officials seemed cool to his appointment in conversations 
with econoff, but said that he is "level-headed and 
professional."  They predicted he would focus on the 
development 
of small and medium enterprises and continue the push 
for improving infrastructure -- such as roads, the power 
grid and port facilities -- that his predecessors 
initiated. 
 
------------------------------- 
Out of NEDA and into the Budget 
------------------------------- 
 
7.  (U) Arroyo shifted Romulo Neri, until July 14 the 
Economic Planning Secretary and Director General of the 
National Economic Development Authority (NEDA), to the 
position of Budget Secretary. He had organized and then was 
Director 
General of the Congressional Planning and Budget Office in 
the House 
of Representatives from 1990 until 2002, when he was named to 
the Cabinet; 
he is intimately familiar with the budget process.  Neri 
received an MBA 
from the University of California, Los Angeles. 
 
8.  (C)  Neri, since the resignation of Purisima et al, has 
been among 
the most vocal of Arroyo defenders and Purisima critics. 
Neri is very 
strongly 
linked to House Speaker De Venecia, who at one time 
advocated naming him to Finance Secretary.  He has received 
mixed reviews for his performance at NEDA, but his personal 
loyalty to Arroyo is at this point unquestioned.  The 
Budget job will likely be a better fit for Neri.  While at 
NEDA, local observers frequently criticized him for lacking 
the ability to manage the broader macroeconomic aspects of 
the job, for lacking vision, and for being too detail 
oriented.  He was not popular among NEDA officials with 
whom econoffs have spoken.  According to civil society 
contacts, Neri should 
consider this move a demotion since NEDA is a more strategic 
department. 
However, the move will position him to oversee the 
budget wrangles during expected efforts to change the 
Constitution and to institute federal budget structures in 
the event that the Philippines adopts a federal system. 
 
9.  (C) Arroyo chose to fill the vacancy at NEDA from 
within, pulling Neri's deputy Augusto B. Santos up into the 
top spot.  Santos started at NEDA in 1990; much of his 
career has focused on infrastructure development.  He is an 
engineer by training, who has little experience with 
economic policy.  He does not have a strong base of 
support, and many here are speculating that he is a 
place-holder until Neri moves back to NEDA or someone else 
is named to replace him.  His appointment failed to elicit 
strong comment either positive or negative.  Neri, when 
asked about his successor, said only that he is the 
"senior" official at NEDA and, therefore, a logical 
choice.  NEDA contacts told econoff they are worried that 
much of their time in the midst of a difficult situation 
will be consumed with explaining the macroeconomic portion 
of NEDA's operations to Santos, because he has had very 
little involvement with that side of the house and often 
does not grasp the issues involved. 
 
------------------------------------------- 
New anti-poverty chief someone to work with 
------------------------------------------- 
 
10.  (C) Zamzamin Ampatuan, who until July 14 was Office of 
Muslim Affairs (OMA) Executive Director, is Arroyo's choice 
to head the National Anti-Poverty Commission (NAPC). 
Ampatuan is a close Embassy contact and a widely respected 
moderate Muslim 
from a prominent Mindanao family.  According to all accounts, 
he is 
clean and has integrity.  At OMA, he proved to be a capable 
manager, a good 
leader, and a media savvy speaker.  In moving to NAPC, he is 
gaining a 
national portfolio and will work on one of Arroyo's most 
pressing challenges 
but still be able to focus on Muslim Mindanao, where 
Philippine poverty is at its most oppressive. 
 
11.  (C)  Comment:  The new secretaries 
bring respect among the business community and technical 
expertise to their jobs, while at the same time drawing in 
important domestic constituencies that their predecessors 
did not.  Arroyo said publicly that she had chosen "the kind 
of team that I 
can leave the day-to-day affairs of the government with 
while I work on the fundamental reforms," and pledged to 
give the new appointees a "free hand" to craft and 
implement needed new reforms with "as little political 
interference as possible."  Few local observers believe, 
however, that short-term economic policy decisions can be 
divorced from the current political uncertainty.  Business 
leaders are warning that no matter how good the new 
secretaries 
 
SIPDIS 
are, if she is unwilling and incapable of implementing bold 
fiscal reforms they 
will be "just decoration in the Cabinet until (they) get 
frustrated and leave 
like Purisima."  The new economic team may end up being more 
of a transitional 
team than a true new leadership team. 
MUSSOMELI 
 
" 
 
 
 
. 
MUSSOMELI