US embassy cable - 05MANILA5137

C O N F I D E N T I A L SECTION 01 OF 04 MANILA 005137 
 
SIPDIS 
 
STATE FOR EAP DAS JOHN 
STATE ALSO FOR INR/EAP, EAP/RSP, AND EAP/MTS 
NSC FOR GREEN 
SECDEF/OSD/ISA/AP FOR ALLEN 
 
E.O. 12958: DECL: 11/03/2015 
TAGS: PREL, PTER, PINS, EAID, MOPS, ECON, EFIN, RP 
SUBJECT: SCENESETTER FOR EAP DEPUTY ASSISTANT SECRETARY OF 
STATE ERIC JOHN 
 
Classified By: (U) Charge d'Affaires, a.i., Paul Jones 
for reasons 1.4(b) and (d). 
 
1.  (C) Summary.  Our strategic relations with the 
Philippines are important to both countries, and we seek to 
work even more constructively not only bilaterally but in a 
variety of regional and international fora as well. We have a 
comprehensive program of engagement with the GRP -- ranging 
from counterterrorism cooperation and defense and police 
reform to discussions on trafficking in persons and Trade and 
Investment Framework Agreement (TIFA) negotiations.  You will 
see most of the major players during your visit: Executive 
Secretary Ermita; Foreign Secretary Romulo; Defense Secretary 
 
SIPDIS 
Cruz; National Security Advisor Gonzales; and Armed Force of 
the Philippines (AFP) Chief of Staff Senga.  You should use 
your meetings to push for institutional reform, TIP 
convictions, and anti-terrorism legislation.  We suggest you 
convey our confidence in the constitutional framework for 
resolving political differences, and our opposition to 
martial law or emergency rule, which would undermine the 
fight against terrorism, defense reform, and prospects for 
better economic development.  End Summary. 
 
DOMESTIC DISTRACTIONS 
--------------------- 
 
2.  (C) President Arroyo continues to fight for her political 
viability, as she struggles against allegations that she 
engaged in cheating to win the 2004 presidential election as 
well as other allegations that were at the basis of the 
failed impeachment effort earlier this year.  There is 
growing concern that these domestic woes are increasingly 
distracting her and senior officials from the GRP's 
substantive agenda, which we share in many important areas. 
The Congress and nation are now set on a course of 
constitutional change, which potentially could transform the 
Philippines into a parliamentary system, with or without a 
President, within one to two years, and possibly create a 
truly federal state.  Much legislative and political capital 
and attention will be focused on this process over the months 
ahead, another distraction to progress on important 
substantive goals as well as passage of needed legislation. 
GMA's political woes have not yet had a significant impact on 
the AFP and the Philippine National Police (PNP) -- our two 
principal counterterrorism partners -- but could have an 
effect over time.  Either a declaration of martial law or a 
coup attempt would prove disastrous to either institution, as 
well as to investor confidence and to the Philippines' 
international image, as would the perhaps even more likely 
(but as yet still unlikely) scenario of emergency measures 
imposed by the GRP (septel). 
 
STRATEGIC CONTEXT 
----------------- 
 
3.  (C)  Despite never-ending domestic political dramas and 
tensions, the Philippines remains an important strategic 
partner, treaty ally, and a vibrant (if messy) democracy, as 
GRP officials will welcome again hearing from you.  No matter 
how much the GRP and GMA herself claim to seek a balanced 
relationship among the US, PRC, and Japan, the US is 
virtually indisputably the Philippines' number one partner. 
Our views and opinions matter considerably here, as we have 
seen once again by recent efforts to get the USG to take 
sides in GMA's domestic dilemmas.  Our security alliance 
remains robust and of importance to US troops and USG 
objectives as well as to those of the GRP in enhancing 
regional stability and in combating terrorism.  We have 
worked together productively in regional and international 
fora, and need to continue to seek better ways to ensure even 
more effective communication and cooperation.  As Foreign 
Secretary Romulo proudly noted to CDA on November 3, the GRP 
 
SIPDIS 
had voted with the US in 101/105 votes in the UNSC during its 
tenure.  We will want to involve the GRP closely in the 
US-ASEAN Enhanced Partnership, and should try hard to get the 
GRP to focus on a productive agenda during its tenure 
beginning in summer 2006 as ASEAN Chair.  The GRP has not 
always been a very pro-active partner in APEC -- its 
chairmanship of the APEC Anti-Terrorism Task Force from our 
perspective here has been notably lackluster -- but there is 
goodwill in the GRP to do still more.  This will be a good 
opportunity to ask for and to discuss new ideas and 
initiatives for regional cooperation. 
 
4.  (C)  Many observers here continue to obsess about the 
booming Philippine-PRC relationship, with numerous 
commentaries warning that this will come at a cost to the 
even more important US-Philippine ties.  We should be 
prepared to discuss candidly our views of the PRC and its 
intentions within the region and globally, and to highlight 
the importance with which we view integrating the PRC ever 
more closely into the regional and international communities. 
 
 
A REAL TERRORISM THREAT 
----------------------- 
 
5.  (C) The terrorism threat here is real.  Porous borders, 
weak institutions, fragile government, a long-running Muslim 
insurgency, and ever-present corruption make the Philippines 
highly vulnerable.  Jemaah Islamiyah (JI) and Abu Sayyaf 
Group (ASG) terrorists continue to elude government forces in 
Mindanao, while the Communist Party of the Philippines/New 
People's Army (CPP/NPA) maintains a country-wide presence 
bent on destabilization.  The Rajah Solaiman Movement (RSM) 
represents a significant worry because of its ties to foreign 
financing and the ability of its members -- Christian 
converts to Islam -- to "blend in."  The Philippines has a 
recent history of terrorist attacks on its own territory. 
The February 28, 2004, bombing of Superferry 14, which killed 
over one hundred Filipinos, was the second worst terrorist 
attack in Asia after the October 2002 Bali bombings, while 
the February 14, 2005 "Valentine's Day" bombs in Manila and 
Mindanao killed and injured many shoppers and commuters. 
 
6.  (C) The GRP has, however, racked up some recent 
successes.  On October 26, Philippine military and police 
arrested Ahmad Santos, the fugitive leader of RSM, and eight 
other suspected terrorists at a safe house in Zamboanga.  On 
the same day, Philippine Air Force intelligence operatives 
seized Sattar Yusop, an ASG member under US indictment for 
his role in the Dos Palmas kidnappings.  On October 28, a 
Philippine court convicted and sentenced to death three JI, 
RSM, and ASG terrorist for their roles in the 2005 
"Valentine's Day" bombing in Manila (septel). 
 
COMPREHENSIVE COUNTERTERRORISM ENGAGEMENT: USAID 
--------------------------------------------- --- 
 
7.  (SBU) Our counterterrorism engagement in the Philippines 
ranges from humanitarian relief and economic development to 
military cooperation and public diplomacy. USAID's Livelihood 
Enhancement and Peace (LEAP) program reintegrated over 28,000 
former Moro National Liberation Front (MNLF) combatants into 
productive society as successful farmers, and USAID stands 
poised -- should the GRP sign a peace agreement with the Moro 
Islamic National Liberation Front (MILF) -- to seek funding 
to provide similar assistance to the MILF. 
 
JUSMAG - TRAINING AND REFORM 
---------------------------- 
 
8.  (C) Joint US Military Assistance Group-Philippines 
(JUSMAG-P) plays a vital role in our efforts to improve 
Philippine capabilities.  The US-trained and equipped Light 
Reaction Companies (LRCs) and Light Infantry Battalions 
(LIBs) are the tip of the spear in the counterterrorism 
fight.  Over the longer term, JUSMAG-P support for the 
Philippine Defense Reform (PDR) program will prove key to the 
GRP's ability to stand alone without US assistance, capable 
of meeting the needs of the Philippine people and serving as 
a reliable coalition partner. 
 
JSOTF - INTELLIGENCE FUSION AND CIVIL MILITARY OPERATIONS 
--------------------------------------------- ------------ 
 
9.  (C) In addition to helping the AFP fuse intelligence with 
operations in the hunt for wanted terrorists, Joint Special 
Operations Task Force-Philippines (JSOTF-P) has broadened its 
scope to include civil-military operations in Mindanao.  This 
approach, coupled with USAID's  longer-term programs, attacks 
the environment in which the terrorists thrive.  JSOTF-P's 
efforts in support of the AFP will initially focus on the 
island of Jolo in the Sulu Archipelago, an established ASG 
stronghold, with the additional goal of improving perceptions 
of the AFP and GRP among the citizens of Mindanao. 
 
PUBLIC DIPLOMACY - GETTING THE STORY OUT 
---------------------------------------- 
 
10.  (SBU) The Philippines is an exuberant media environment. 
 Much of our effort ends up devoted to ensuring that 
journalists get their facts straight.  However, we also take 
every opportunity to get our side of the story out.  Our 
initiatives, such as "Muslim Life in the Philippines," have 
found a ready audience, and we have in the works a film 
chronicling the successful joint US-AFP effort to defeat the 
ASG on Basilan.  PAS works hand-in-glove with both USAID and 
JSOTF-P to ensure that perceptions of our efforts on every 
front are positive.  There will be a high level of interest 
in your press conference. 
 
ECONOMY NOT STRONG, BUT STEADY 
------------------------------ 
 
11.  (U) Although the Philippine economy is growing by nearly 
5% each year, it is constrained by massive debts to both 
domestic and foreign bond-holders.  Combined liabilities of 
the government and state-owned enterprises equal 90% of GDP, 
and the debt-service payments on these loans gobble up a 
third of the annual budget.  The just implemented expansion 
of the Value Added Tax to include fuel and power will help 
the GRP further reduce its fiscal deficit and increase 
spending on social services, such as health and education, 
and on the expansion and repair of roads and railway lines. 
Although the GRP has tried to soften the initial impact of 
the tax, there are signs of continuing public protest over 
the higher price of oil, and calls by political opponents to 
amend or repeal the VAT law because it accelerates inflation. 
 
 
12.  (U) A stronger, more stable economy could boost foreign 
direct investment to the Philippines, which flows in at a 
paltry level compared to other countries in East and 
Southeast Asia.  To boost development and prosperity, the USG 
encourages economic reform initiatives toward greater 
privatization, trade liberalization, and open markets, and we 
have worked closely with GRP officials on the Philippines' 
Millennium Challenge Corporation concept paper focusing 
heavily on anti-corruption and revenue enhancement efforts. 
US firms account for the largest stock of FDI in the country, 
and the US is still the country's largest trading partner, 
counting trade in goods and services.  But as you will hear 
from members of the American Chamber of Commerce, corruption 
is an admitted impediment to investors, along with the high 
cost of electricity, poor infrastructure, bureaucratic 
delays, weak enforcement of intellectual property rights, and 
an unpredictable legal system. 
 
TRADE AND INVESTMENT FRAMEWORK AGREEMENT (TIFA) 
--------------------------------------------- -- 
 
13.  (U) The USG addresses bilateral, sectoral, and even 
individual company issues through regular Trade and 
Investment Council meetings organized under the Trade and 
Investment Framework Agreement (TIFA).  The USG provides 
advice and support for policy reform and projects through 
technical assistance, training, and development programs 
through USAID, which may include access to funds from the 
Millennium Challenge Account.  Even so, there are prime 
opportunities in various fields, including information 
technology with the proliferation of call centers and back 
office operations, mineral extraction, energy development, 
agriculture, and the country's primary export -- 
semiconductors and electrical components.  Working to the 
country's short-term financial advantage is the enormous 
influx of remittances from Filipinos living and working 
abroad, who are sending home over $10 billion this year, 
which bolsters consumer spending, props up the peso, promotes 
development projects, and helps the country meet its 
financial obligations. 
 
TRAFFICKING IN PERSONS (TIP) 
---------------------------- 
 
14.  (U) The Philippines is an origin point for 
internationally trafficked persons and also suffers from an 
internal TIP problem.  Most victims are young women.  The GRP 
is nonetheless publicly steadfast against TIP.  In 2003, 
Congress passed Republic Act 9208, a comprehensive 
anti-trafficking law.  However, the State Department 
designated the Philippines as a Tier 2 Watch List country in 
2004 and re-designated it on the Tier 2 Watch List in 2005. 
You should underscore the seriousness of the TIP problem with 
GRP officials, including the possibility of a downgrade to 
Tier 3 next year.  Ambassador John K. Miller of G/TIP is also 
scheduled to visit the Philippines December 3-6. 
 
15.  (SBU) The GRP's ability to address the problem is 
limited by poverty, unemployment, and socio-economic factors 
that encourage migration, a weak rule-of-law environment, and 
sex tourism.  The GRP coordinates anti-TIP efforts through 
the Inter-Agency Council Against Trafficking (IACAT), which 
is chaired by the Secretary of Justice.  GRP enforcement of 
its anti-trafficking law has increased as more law 
enforcement officers, prosecutors, and judges receive 
training.  Although several TIP cases are pending, there have 
been no convictions under the anti-trafficking law yet  You 
and Ambassador Miller can make even more explicit that 
convictions will be the most meaningful evidence of real 
progress in this important fight. 
 
 
THEMES: 
COUNTERTERRORISM COOPERATION 
AND ANTI-TERRORISM LEGISLATION 
------------------------------ 
 
16.  (SBU) In your meetings with Executive Secretary Ermita, 
Foreign Secretary Romulo, National Security Advisor Gonzales, 
Defense Secretary Cruz, and AFP Chief of Staff Senga, you 
should stress our support for effective interagency 
counterterrorism cooperation.  The Philippine House has 
consolidated its efforts behind one anti-terrorism bill, 
which is now out of Committee for consideration by the full 
House.  However, there are five different bills pending in 
the Senate, three of them filed by the Opposition.  Nominally 
pro-Arroyo Senator Manuel Villar is moving to consolidate 
these drafts into one bill.  In your interactions with all 
your interlocutors and the press, you should stress the need 
to pass effective anti-terrorism legislation that will give 
law enforcement agencies the tools to fight and defeat 
terrorism. 
 
CONSISTENT MESSAGE - "RULE OF LAW" 
---------------------------------- 
 
17. (C) Rumors continue to abound about GRP planning to 
impose emergency rule and Opposition efforts to foment a 
coup.  Either emergency rule or a coup attempt would splinter 
the AFP and PNP, undermine the nascent reform efforts 
currently underway, intensify economic problems, fuel the 
Communist insurgency, and potentially plunge the country into 
turmoil.  You should stress in each of your meetings the 
USG's confidence in the constitutional process in the 
Philippines, and firm opposition to any extraordinary 
measures. 
 
18.  (U)  Embassy will separately provide an annotated 
schedule, with goals and talking points for each meeting. 
 
 
Visit Embassy Manila's Classified website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
 
Jones