US embassy cable - 05MANILA4223

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 004223 
 
SIPDIS 
 
E.O. 12958: DECL: 09/08/2015 
TAGS: PREL, PTER, MOPS, EAID, ECON, RP, UNSC 
SUBJECT: MEETING WITH PRESIDENT ARROYO 
 
 
Classified By: Acting DCM Scott Bellard, reasons 1.4 (b) and (d) 
 
1.  (C)  Summary.  According to President Arroyo, the GRP 
would still like to help with Hurricane Katrina and views our 
bilateral relationship as strong.  GRP positions on UN reform 
are almost identical with the US.  The GRP will continue 
cooperation with the US on terrorism, including terrorist 
financing.  The GRP is now ready to endorse the Proliferation 
Security Initiative.  The peace process with the MILF is 80 
percent complete, with more talks expected later in 
September.  The GRP is meeting or exceeding major economic 
targets, even before implementation of the expanded VAT. 
Millennium Challenge Corporation Threshold Country funding 
will help further.  Destabilization efforts and personal 
security concerns had caused the GRP temporarily to put the 
National Telecom Commission back under the Department of 
Transportation and Communication.  While distracted by such 
concerns, Arroyo remains committed to strong cooperation and 
good ties with the US, and would clearly welcome attention 
and public statements from US leaders during the New York 
meetings.  End Summary. 
 
2.  (U)  Charge d'Affaires Johnson, accompanied by A/DCM, 
called on President Gloria Macapagal Arroyo (PGMA) at 
Malacanang Palace on September 8.  She was joined by Foreign 
Secretary Alberto Romulo and Assistant Secretary Ariel 
 
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Abadilla. 
 
Hurricane Katrina 
----------------- 
 
3.  (U)  CDA Johnson expressed thanks and appreciation to the 
people and government of the Philippines for voicing sympathy 
and support for the victims of Hurricane Katrina, and to the 
GRP for its generous offer of assistance.  PGMA said that it 
was an "honor" to be able to help, noting the "world class" 
quality of Philippine medical personnel, whom the GRP had 
also sent to Aceh in the aftermath of last year's tsunami. 
She reiterated commiseration with Hurricane Katrina's 
victims, noting the tragedy was still ongoing.  CDA explained 
that the USG continued to assess various offers of assistance 
and was trying to work out the best way to use them 
effectively. 
 
Bilateral 
--------- 
 
4.  (SBU)  PGMA said that she believed the US-Philippine 
relationship was "very, very strong" and she asked for 
statements of support from the USG.  CDA noted that the 
reason he was sent was to ensure that the relationship 
remained strong and kept up its momentum. 
 
UN 
-- 
 
5.  (C)  CDA asked about PGMA's agenda at the UN during her 
visit to New York September 13-15.  PGMA underscored the 
importance of the Philippine role as President of the UN 
Security Council this month, describing the "focus of reform" 
as on the UNSC.  She said she expected further discussion at 
the UNSC Summit, but admitted a lack of consensus.  PGMA said 
that the US and GRP had similar views and approaches on 
"ninety-nine percent" of the UN reform issues.  CDA urged 
Philippine representatives in New York to be more vocal and 
work closely with US counterparts.  PGMA highlighted 
Philippine support for a permanent UNSC seat for Japan, but 
added that the time was not yet ripe for that step.. 
 
Terrorism 
--------- 
 
6.  (C)  CDA urged further efforts in the next few days to 
capture Abu Sayyaf Group leader Khaddafy Janjalani in 
Mindanao, noting the important implications of such a success 
even beyond the Philippines.  PGMA said that she had 
instructed the military to "maximize support" from the US in 
these operations. 
 
7.  (U)  CDA explained that the Embassy, in conjunction with 
the City of Manila and the Department of Foreign Affairs, was 
organizing an event to commemorate victims of terrorism 
worldwide on Sunday, September 11, and welcomed PGMA to 
participate along with the Mayor and Acting Foreign 
Secretary.  PGMA did not respond. 
 
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8.  (C)  PGMA reiterated the GRP's desire to receive 
helicopters promised during her 2003 visit to Washington, and 
noted that she believed the GRP had had a commitment from the 
USG to receive them by April 2005.  A/DCM clarified that 
demands for helicopter parts for US forces in Iraq and 
Afghanistan had caused some delays, but the process was 
ongoing. 
 
9.  (C)  CDA cited the importance of better controls on 
terrorist financing, including from Saudi Arabia, and urged 
more attention.  PGMA and Romulo noted the GRP chairmanship 
of the UNSC committee on terrorist financing and said that 
the GRP "supported your concerns" on this committee. 
 
10.  (C)  PGMA reiterated that passage of counter-terrorism 
legislation was one of her top three legislative priorities. 
 
Proliferation Security Initiative 
--------------------------------- 
 
11.  (C)  CDA urged GRP endorsement of PSI, while noting some 
past participation in PSI-related activities.  PGMA said that 
"we're with you; whatever you want us to say, we will."  She 
asked that we craft a statement and provide to DFA for 
issuance.  Foreign Secretary Romulo clarified that an 
inter-agency review was still ongoing on this issue, however. 
 CDA acknowledged some GRP concerns that Filipino seamen on 
ships seized or inspected under PSI could be at risk, but 
confirmed that they would not face criminal liability. 
Romulo expressed appreciation for this important 
clarification.  PGMA concluded that "you can count on our 
support." 
 
Peace process 
------------- 
 
12.  (C)  PGMA admitted that negotiations between the Moro 
Islamic Liberation Front (MILF) and the GRP had been 
"informally put on hold" during the elections in the 
Autonomous Region in Muslim Mindanao due in part to concerns 
that Lakas party candidate Zaldy Ampatuan (the eventual 
winner) was anti-MILF.  She noted that Ampatuan had now 
pledged to support the peace process.  Romulo said that talks 
would resume later in September.  PGMA claimed that the 
agreement is "eighty percent" complete, with only the 
relatively less contentious issue of governance remaining. 
 
13.  (U)  PGMA said that the GRP still wanted to avail itself 
of USIP's help regarding advocacy and capacity building in 
particular, but admitted continued Malaysian sensitivities. 
CDA noted that USIP remained eager to help.  He added that 
the USG also hoped, once there is a MILF/GRP peace agreement, 
to offer a program similar to USAID's successful LEAP ("Arms 
to Farms") provided to the Moro National Liberation Front. 
 
Economic issues 
--------------- 
 
14.  (SBU)  PGMA noted that, even without the expanded VAT, 
revenues were 7 billion pesos over target in August, as a 
result of better collections, new taxes on alcohol and 
cigarettes, and greater internal economies.  She cited this 
success as another sign that the government had not come to a 
"standstill" due to the political turbulence.  She added that 
GRP spending remained 35 billion pesos under the deficit 
ceiling.  She said that Finance Secretary Teves was currently 
reviewing tax rates and regulations, since then-Finance 
Secretary Purisima had crafted these "when he was plotting 
 
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against me."   She noted some calls for deferment of 
application of the VAT on power, which she noted the Senate 
had added to the Administration's bill.  She also said that 
Teves was now working out the timing for the 70 pct input 
credit cap, which will further hurt the power sector.  She 
pledged to reduce the tariff on imports of oil, but would not 
predict by how much:  "I don't want to micromange; I provide 
strategic direction."  She said such measures were important 
to the "takeoff" on which the Philippines is now on the 
verge.  She cited effects on oil prices of increased energy 
consumption by India and China and uncertainties in Iraq and 
Venezuela, asked about the US position on reserves, and 
speculated that world leaders would have to discuss how to 
respond to "speculative actions" that affect oil prices.  CDA 
noted that President Bush had already authorized use of the 
US Strategic Reserve in the aftermath of Hurricane Katrina. 
 
15.  (SBU)  CDA noted that the Millennium Challenge 
Corporation had approved the GRP's concept paper for the 
Threshold Country program, and offered congratulations.  He 
cited the potential for substantial funding.  PGMA said that 
she thought this had happened several months ago, but Foreign 
Secretary Romulo explained that the GRP had only met its 
 
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deadline several months ago to submit the concept paper.  He 
added that participation in MCC could also advance Millennium 
Declaration goals, as would the proposed "debt-for-equity" 
swap advanced by the GRP.  CDA noted that the USG was 
examining this proposal carefully and would respond soon to 
House Speaker De Venecia's letter to the President. 
 
16.  (C)  CDA raised concerns about the transfer of the 
National Telecom Commission to the Department of 
Transportation and Communication.  PGMA explained that the 
transfer was "temporary" but was needed because "I am in a 
security situation with the ongoing destabilization efforts." 
  She promised that the GRP was "committed to the direction 
that we have been taking" and would not change, but DOTC 
would have to oversee the NTC until the "destabilizers stop." 
 She cited her "obligation to defend my continued stay here," 
despite these efforts and people power movements in Manila. 
 
Comment 
------- 
 
17.  (C) PGMA's concerns about security and destabilization 
were unusually explicit.  Totally absent were any plans for a 
political and historical legacy to include Constitutional 
reform that could potentially shorten her term in office. 
While clearly distracted by these concerns, she remains 
committed to a strong bilateral relationship and to 
cooperation on issues of major importance to us, including 
global terrorism and UN reform.  She would clearly welcome 
opportunities to meet US leaders in New York and to bring 
home with her some positive statements for domestic 
consumption. 
 
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JOHNSON