US embassy cable - 05MANILA5619

S E C R E T SECTION 01 OF 05 MANILA 005619 
 
SIPDIS 
 
NOFORN 
 
STATE FOR H, EAP, INR/EAP, AND EAP/MTS 
H PASS TO SENATOR BOND FROM CHARGE D'AFFAIRES JONES 
USPACOM ALSO FOR FPA HUSO 
NSC FOR H. MORROW 
SECDEF/OCD/ISA/AP FOR ALLEN 
 
E.O. 12958: DECL: 12/01/2015 
TAGS: PREL, PINR, ASEC, OVIP, PINS, MOPS, MARR, PGOV, RP 
SUBJECT: SCENE SETTER FOR SENATOR CHRISTOPHER BOND 
 
Classified By: (U) Charge d'Affaires, a.i., Paul W. Jones 
for reasons 1.4 (b) and (d) 
 
1.  (S/NF) Summary.  Comprehensive counterterrorism efforts 
-- ranging from the military to humanitarian to public 
diplomacy -- top the broad U.S. agenda in the Philippines' 
still struggling democracy.  In Manila, you will meet 
President Arroyo, National Security Advisor Gonzales, 
National Intelligence Coordinating Agency (NICA) Director 
Garcia, and a range of congressional leaders.  Your visit 
will come on the heels of that of Director for National 
Intelligence Negroponte.  You should use your meetings to 
thank President Arroyo for her support against terrorism, to 
express support for democratic institutions, to warn against 
emergency measures, and to encourage progress in peace talks 
with the Moro Islamic Liberation Front (MILF).  The 
government needs to improve dramatically interagency 
cooperation, joint military coordination, and institutional 
reform of the police, military, and judiciary to win against 
the terrorists.  In the nearer term, it needs an 
anti-terrorism law, which is currently under consideration in 
Congress.  RMAS' robust assistance has helped lead to major 
counterterrorism successes.  Your public remarks should 
underscore our increasingly successful partnership with the 
GRP on counterterrorism, our hopes for further peace and 
development in Muslim Mindanao in particular, and our support 
for democratic processes and rule of law.  President Arroyo 
continues to seek U.S. approval in her fight for political 
survival.  Focusing on our substantive cooperation will 
address her concerns, without identifying us too closely with 
a still-troubled Administration. 
 
2.  (U) Summary continued.  You will also meet with the 
American Chamber of Commerce (AmCham) of the Philippines, 
which works closely with us and with senior Philippine 
officials on improving the business climate here.  You will 
hear of the range of American business activities, as well as 
the significant impediments to greater investment, which the 
Philippines desparately needs.  You should use this meeting 
to encourage the AmCham's efforts to promote economic reform 
initiatives that lead to greater privatization, trade 
liberalization, and open markets for the mutual prosperity of 
both our countries.  End Summary. 
 
MAIN THREATS 
------------ 
 
3.  (C) The list of problems faced by Philippines is lengthy 
and reflects the substantive agenda ahead of both the GRP and 
the USG here: corruption, ineffective governance, endemic and 
widespread poverty, weak democratic institutions and 
political parties, and challenges to law and order from 
ineffective military and police capabilities in the face of 
numerous insurgencies and terrorist movements.  At the top of 
our agenda, as reflected in our Mission Performance Plan, are 
our counterterrorism efforts.  Jemaah Islamiyah (JI) and Abu 
Sayyaf Group (ASG) terrorists continue to elude government 
forces in Mindanao and the Sulu Archipelago, while the 
Communist Party of the Philippines/New Peoples' Army 
(CPP/NPA) maintains a country-wide presence bent on 
destabilization.  The Rajah Solaiman Movement (RSM) -- 
despite the recent arrest of its leader, Ahmad Santos -- 
represents a growing 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 
devastated crowds of shoppers and commuters. 
 
4.  (S/NF) Amid these challenges, President Arroyo continues 
to fend off Opposition attempts to force her to step down 
following allegations that she engaged in cheating to win the 
2004 presidential election and that her immediate family 
benefited from illegal gambling revenues.  Arroyo continues 
to look for positive, public signs of support from the United 
States.  Pictures of Arroyo with President Bush at the APEC 
Summit were prominently displayed on the front pages of local 
newspapers, and she will want to use your visit also to 
bolster the perception that the U.S. and the Philippines 
remain close partners, and that she personally has close ties 
to senior USG officials. 
 
5.  (S/NF) The government's political woes have not yet had a 
significant impact on the Armed Forces of the Philippines and 
the Philippine National Police, our two principal 
counterterrorism partners, but could over time.  National 
Security Advisor Gonzales told the Charge November 21 that he 
had recommended that the President impose emergency rule to 
counter the CPP/NPA threat.  Recent RMAS reporting indicates 
Arroyo may indeed be weighing whether to enact emergency rule 
-- a move we believe she had backed away from in mid-October. 
 Resorting to emergency rule, a declaration of martial law, 
or a coup attempt would likely divide the military and the 
police, inflame the Opposition, and further diminish the 
attractiveness of the Philippines as an investment 
destination.  The USG would oppose any of these options, and 
we have said so publicly and privately. 
 
USAID - ECONOMY AND LIVELIHOOD 
------------------------------ 
 
6.  (SBU) Our counterterrorism engagement in the Philippines 
ranges from humanitarian relief and development to the 
military and public diplomacy.  USAID's Livelihood 
Enhancement and Peace (LEAP) program has reintegrated over 
28,000 former Moro National Liberation Front (MNLF) 
combatants into productive society as successful farmers, and 
stands poised -- should the GRP sign a peace agreement with 
the MILF, as both sides increasingly appear to expect in the 
next few months  -- to provide similar assistance to the 
MILF.  USAID's broad spectrum of development programs (in 
infrastructure, education, governance, health, economic 
growth, environment, and energy) in conflict-affected areas 
of Mindanao have made a positive impact in communities 
vulnerable to exploitation by terrorists, as well as 
contributed to greater judicial efficiency, electoral reform, 
and promotion of rule of law nationwide. 
 
JUSMAG - TRAINING AND REFORM 
---------------------------- 
 
7.  (C) The Joint US Military Assistance Group-Philippines 
(JUSMAG-P) plays an increasingly  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.  Although the AFP failed to capture 
ASG leader Khaddafy Janjalani during Operation Layas Pagad 
this summer, it did, as a direct result of US support and 
training, conduct unusually sustained combat operations in 
the field for over 60 days.  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 and transform the AFP into a more modern, 
effective, and transparent institution, capable of meeting 
the needs of the Philippine people and serving as a more 
reliable coalition partner. 
 
JSOTF - INTELLIGENCE FUSION AND CIVIL MILITARY OPERATIONS 
--------------------------------------------- ------------ 
 
8.  (C) Joint Special Operations Task Force-Philippines 
(JSOTF-P) provides advice, assistance, and intelligence 
fusion to the AFP in the hunt for wanted terrorists. 
Additionally, 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.  Following a 
successful program in Basilan island (the former stronghold 
of the ASG), JSOTF-P's efforts in support of the AFP 
civil-military operations will now focus on the island of 
Jolo in the Sulu Archipelago, the current ASG base, with the 
goal of changing perceptions of the AFP and Philippine 
government among the citizens of Mindanao. 
 
9.  (S/NF) There are indications that ASG leaders Janjalani 
and Abu Solaiman as well as JI operative Umar Patek are now 
in Jolo.  JSOTF-P Liaison Coordination Elements (LCEs) on the 
island can help improve AFP efforts to target the terrorists 
through intelligence fusion and training assistance. 
PUBLIC DIPLOMACY - GETTING THE STORY OUT 
---------------------------------------- 
 
10.  (SBU) The Philippines remains an exuberant media 
environment, with much of our effort devoted to ensuring that 
journalists get their facts straight.  We also take every 
opportunity to get our side of the story out. Initiatives, 
such as our recently published "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.  Our Public Affairs office 
works hand-in-glove with both USAID and JSOTF-P to ensure 
that perceptions of our efforts on every front are positive. 
 
REWARDS PROGRAMS - SYNERGIES 
---------------------------- 
 
11.  (S) Our rewards effort builds upon the synergies between 
the State and DoD programs to attack the web of social, 
religious, and cultural ties upon which the terrorists have 
relied for their safety and freedom.  The promise of a reward 
encouraged individuals to step forward to help the AFP get 
ASG leader Hamsiraji Sali, ASG terrorist Toting Craft Hanno, 
and JI operative Jeki.  The USG has already paid out rewards 
for numerous other terrorists.  We anticipate the recently 
announced reward of $10 million under Rewards for Justice for 
the JI's Dulmatin will help bring him to justice. 
 
RMAS - CRITICAL SUPPORT 
----------------------- 
 
12.  (S/NF) RMAS support and direction of the PNP's 
Intelligence Group (IG), Task Force Sanglahi, and the 
Intelligence Service of the Armed Forces of the Philippines 
(ISAFP) have proven critical to the capture of a number of 
terrorists and the disruption of operations directed against 
US interests.  RMAS assistance helped lead to major 
successes, such as the capture of RSM leader Ahmad Santos and 
JI operatives Jeki and Faiz. 
 
 
ECONOMY NOT STRONG, BUT STEADY 
------------------------------ 
 
13.  (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 consume 
two-thirds of the annual budget.  The just implemented 
expansion of the Value Added Tax to include fuel and power 
will help the Government 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.  There appears to be a grudging acceptance of 
the need for new taxes to restore fiscal imbalances. 
 
14.  (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 foreign direct 
investment in the country, and the US is still one of 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 a significant 
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. 
 
THE ROLE OF THE AMERICAN CHAMBER OF COMMERCE 
-------------------------------------------- 
 
15. (U) The American Chamber of Commerce of the Philippines 
works closely with us to promote a sound business environment 
in the Philippines. It produces reports and meets with senior 
government leaders, including the President.  The AmCham is a 
private, independent and non-profit association incorporated 
under Philippines laws in July 1920. It is affiliated with 
the Chamber of Commerce of the U.S.A. (COCUSA) and the 
Asia-Pacific Council of American Chambers (APCAC).  It 
maintains close liaison with other foreign chambers in Manila 
and Philippine business groups: the Employers Confederation 
of the Philippines (ECOP), Philippine Chamber of Commerce & 
Industry (PCCI), Philippine Association of Multinational 
Regional Headquarters (PAMURI), Makati Business Club (MBC), 
Management Association of the Philippines (MAP), Financial 
Executives Institute of the Philippines (FINEX), and other 
trade and business organizations.  It also networks in the 
U.S. with the Philippine-American Chamber of Commerce in New 
York, US-RP Business Committee, Asia Society, and the 
US-ASEAN Council.  AmCham works closely with various parts of 
the American Embassy in Manila, particularly with the Foreign 
Commercial Service, the Economic Section, the Agricultural 
Office, USAID, and the Consular Section. 
 
 
PRESS THEMES 
------------ 
 
16.  (SBU) In both your private and public remarks, we 
encourage you to highlight: 
 
--  Partnership:  The Philippines is a valued partner in the 
Global War on Terror, as well as a Major Non-NATO Ally 
(despite the sudden pull-out of Philippine troops from Iraq 
in July 2004 in response to the kidnapping of Philippine 
driver Angelo De La Cruz); 
 
--  Anti-terrorism legislation: the Philippine House has 
consolidated its efforts behind one anti-terrorism bill, 
which is now out of Committee for consideration by the full 
House.  The Senate has also consolidated behind one bill. 
However, legislative action remains stalled, despite pressure 
from the Arroyo administration for action.  You should stress 
the need to pass effective anti-terrorism legislation that 
will give law enforcement agencies the tools to fight and 
defeat terrorism, without compromising civil liberties; 
 
--  Peace talks:  With growing optimism by both the 
Government and the MILF that the Malaysian-brokered peace 
talks could end with an agreement by mid-2006, both sides are 
also looking for USG developmental support similar to what we 
provided in the wake of the 1996 agreement with the Moro 
National Liberation Front.  Settling Bangsamoro claims for 
autonomy would politically mainstream a 15,000-strong 
insurgent group, and make a significant contribution to 
stabilizing the region.  You should commend President Arroyo 
for the progress her government has made thus far, emphasize 
the strong US backing for the successful conclusion of the 
negotiations, and note USG willingness to consider new 
assistance programs by USAID to advance the goals of the 
peace agreement. 
 
IF ASKED 
-------- 
 
17.  (SBU) 
 
--  Espionage case:  The October 2005 arrest in the United 
States of an FBI employee of Filipino descent for espionage 
made front page news for weeks in the Philippines, focusing 
on his alleged ties with Opposition leaders former president 
Estrada.  Alleged Embassy reporting was quoted in the press, 
apparently designed to create discord between the government 
and the United States.  Our consistent line is that the issue 
remains before the courts and we cannot comment on law 
enforcement matters. 
 
--  Alleged rape case:  Six U.S. Marines are now under 
investigation by Philippine officials as well as by US 
military authorities for involvement in an alleged rape in 
Subic on November 1.  They remain in U.S. custody under the 
terms of the Visiting Forces Agreement (VFA).  Our consistent 
line is that we intend fully to comply with the terms of the 
VFA, that we are committed to seeing justice done, and that 
the accused should be presumed innocent until proven guilty. 
 
Visit Embassy Manila's Classified website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
 
Jones