This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 001889 
 
SIPDIS 
 
FOR THE DEPUTY SECRETARY 
 
E.O. 12958: DECL: 04/26/2015 
TAGS: PREL OVIP PTER EAID ECON MARR RP
SUBJECT: SCENESETTER FOR VISIT OF DEPUTY SECRETARY ZOELLICK 
 
REF: MANILA 1799 
 
Classified By: Ambassador Francis J. Ricciardone, reasons 1.4 (b) and ( 
d) 
 
Who we are 
---------- 
 
¶1.  (U)  Manila is our fourth largest post, with about 265 
American employees and 1000 locally engaged staff.  Our aim 
is to be the United States' best.  The mission of our team of 
26 USG agencies is to revitalize and carry to maturity the 
US-Philippine partnership and alliance by strengthening our 
mutual security, building our mutual prosperity, and 
providing excellent service to Americans and Filipinos.  Our 
historic Chancery on the edge of Manila Bay was the site of 
the war crimes trials of the Japanese commanders in the 
Philippines in World War II and still proudly bears scars 
from the Battle of Manila. 
 
Counterterrorism 
---------------- 
 
¶2.  (C)  The Global War on Terrorism has propelled the 
rebuilding of our military-to-military ties under the 
framework of an 1951 Mutual Defense Treaty and a 1999 
Visiting Forces Agreement.  The Philippines became a Major 
Non-NATO Ally in 2003.  Four indigenous terrorist groups are 
on the USG's Foreign Terrorist Organization list.  Operatives 
of the Jemaah Islamiyah are also present and are training 
local terrorists, who conducted Asia's second most deadly 
terrorist attack with the February 2004 bombing of a 
"Superferry" in Manila Bay.  They also bombed Manila and two 
other cities on Valentine's Day 2005.  We conduct military 
training programs year-round (26 in FY 2005), including 
humanitarian and civil action programs.  We will provide $ 
29.76 million in Foreign Military Financing in FY 2005, along 
with $ 3 million in IMET (the largest program in Asia and 
second largest in the world).  Our Joint Special Operative 
Force-Philippines (JSOTF-P) provides Operations/Intelligence 
Fusion to the Armed Forces of the Philippines in Mindanao to 
improve the AFP's CT ability. 
 
¶3.  (C)  Despite some military successes and captures or 
killings of several terrorist leaders, we have not yet turned 
the tide in the GWOT here.  AFP performance is spotty at 
best.  Some field commanders remain reluctant to act 
decisively.  Opsec is inadequate.  Although we are improving 
AFP performance capabilities with our training and advice, 
the AFP needs systemic reform.  It will never reach our 
operational goals without strong RP leadership, and sustained 
US assistance.  The Philippines Defense Reform initiative 
begun in 2004, with the GRP providing most of the funding and 
the USG only a minority share, has begun such a process of 
institutional change.  If sustained, it should lead to a more 
professional, modern, and effective military establishment. 
 
¶4.  (C)  We need to conduct a similar reform project for our 
other key partner in the GWOT -- the Philippine National 
Police, rated the most corrupt and broken of the key GRP 
institutions of democracy and governance.  As an initial 
step, in late 2004 we requested INL funding for a "Management 
Assessment of the Philippine Police" (MAPP), which would 
provide a roadmap for systemic reform.  The GRP is so 
enthusiastic that it would like to sign a Memorandum of 
Understanding on the MAPP during Foreign Secretary Romulo's 
May 17 meeting with Secretary Rice.  INL has not yet 
committed funding to the project, although it plans to send a 
team in June to consider this project. 
 
¶5.  (C)  USAID's assistance programs in Mindanao (where about 
60 percent of all its in-country funding goes) are an 
effective tool in the local fight against terrorism.  Over 
25,000 former combatants of the Moro National Liberation 
Front have already received livelihood assistance, and we are 
awaiting a peace accord with the Moro Islamic Liberation 
Front to offer similar assistance to MILF combatants.  Our 
other assistance programs are providing better health care, 
education, and computers to local schools and have 
transformed some former conflict areas -- notably Basilan 
island -- into zones of peace where economic development is 
again taking place.  USAID-backed education assistance is 
discreetly challenging the spread of extremist Islam through 
private, often foreign-backed radical madrassahs in Mindanao 
and even Luzon. 
 
Economic woes 
------------- 
¶6.  (C)  Despite respectable growth rates of 5-6 percent, the 
Philippines has had by far the lowest overall growth among 
the original ASEAN members over the past three decades.  A 
population growth rate of over 2 percent constrains per 
capita growth.  The Philippines also has one of the lowest 
ratios of tax revenue to GDP in the region, about 11 percent. 
 Corrupt revenue bureaucracies, widespread tax evasion, and 
special interest tax exemptions have led to fiscal deficits 
and massive consolidated public sector debt, now about 140 
percent of GDP.  Debt service on the national debt consumes 
over 40 percent of the national budget.  Although Arroyo's 
economic team receives high marks from the Philippine and 
foreign business community, the GRP on occasion has shown 
ill-considered interest in raising tariffs and arbitrarily 
imposing new taxes as a source of badly needed revenues. 
 
¶7.  (C)  The Philippines could serve as a "proof of concept" 
country for President Bush's Millennium Challenge Initiative. 
 The GRP's concept paper to the Millennium Challenge 
Corporation seeking funding as a Threshold Country addressed 
some of these issues, notably anti-corruption efforts, where 
USAID's assistance is already yielding results. 
Strengthening the rule of law and the judiciary will also be 
key to transform the Philippines and to create sufficient 
economic progress to sustain growth and job creation. 
 
¶8.  (C)  One of the safety valves for the Philippines has 
been the export of Overseas Filipino Workers (OFWs), now 
estimated at about ten percent of the total population or 
twenty percent of the working population.  They remit at 
least $ 8 billion each year and help to maintain a positive 
cash flow as the GRP manages debt service payments on its 
public foreign debt of about $ 28 billion, of which more than 
half is ODA lending. 
 
¶9.  (C)  Unfortunately, the OFW phenomenon has also led to 
abuses in the trafficking of persons; the GRP is currently 
listed as a "Tier Two Watch List" Country but runs the risk 
this year of a downgrade to Tier III, which the Embassy 
believes is unjustified and therefore opposes.  The progress 
made in 2004 in instituting prosecutions under a 2003 
anti-TIP law is encouraging.  We have encouraged G/TIP's 
Ambassador Miller to visit both to witness the GRP's 
commitment to and to encourage further progress against TIP. 
 
Services 
-------- 
 
¶10.  (U)  With over 130,000 American citizens resident in the 
Philippines, and visits by about 400,000 others annually, 
there is a heavy demand for consular services.  Our consular 
staff adjudicated over 200,000 NIVs and 50,000 IVs in 2004, 
while processing 10,000 US passport applications.  The 
Embassy hosts the only Veterans Affairs office outside the US 
to provide services to this large community. 
Ricciardone