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 04 MANILA 002335 
 
SIPDIS 
 
STATE FOR EAP/PMBS 
NSC FOR GREEN 
DOD/ISA/AP FOR ALLEN 
SEOUL FOR ERIC JOHN 
 
E.O. 12958: DECL: 05/20/2015 
TAGS: MOPS MARR PREL PINS PTER CH RP
SUBJECT: DEFENSE SECRETARY MAKES STRONG PUBLIC CASE FOR PDR 
 
REF: A. MANILA 1960 
     ¶B. MANILA 2112 
 
Classified By: (U) Political Officer Paul O'Friel 
for reasons 1.4(b) and (d). 
 
¶1.  (U) SUMMARY. In a major speech at the prestigious Manila 
Overseas Press Club, Secretary of National Defense Cruz made 
a strong public pitch for Philippine Defense Reform (PDR), 
saying it would allow the Philippines to defeat the multiple 
insurgencies and terrorist threats facing the country.  In 
the subsequent Q&A session, Cruz said Philippine military 
exchanges with China were a natural part of warming relations 
between the two countries.  He viewed the Visiting Forces 
Agreement (VFA) as a "valid legal mechanism" for 
counterterrorism cooperation with the United States.  While 
open to case-by-case cooperation on specific counterterrorism 
scenarios, Cruz said the Philippines needed to exercise 
"sovereign judgment" in determining what was best for the 
nation's security.  He had short shrift for any talk of 
coups.  The AFP is loyal to President Arroyo and will defend 
the Constitution, Cruz stated.  END SUMMARY. 
 
$366 MILLION EFFORT FOCUSED ON TEN KEY AREAS 
-------------------------------------------- 
 
¶2.  (U) In a May 18 address to a packed audience of 
journalists, diplomats, business executives, and government 
officials at the prestigious Manila Overseas Press Club, 
Secretary of National Defense Avelino Cruz said his vision 
 
SIPDIS 
was to transform the Philippine defense establishment into a 
more effective institution by undertaking a series of 
comprehensive, systematic reforms.  Demonstrating a masterful 
display of facts, figures, and arguments, Cruz -- backed up 
by separate presentations by Assistant Secretary for Defense 
Reform Roberto Nuqui and Armed Forces of the Philippines 
(AFP) Vice Chief of Staff Vice Admiral Ariston De Los Reyes 
-- laid out a compelling justification for PDR, promising 
that it would allow the Philippines to defeat the multiple 
insurgencies and terrorist threats facing the country in 6-10 
years.  PDR, budgeted at 4 billion pesos per year for five 
years (totaling approximately $366 million) -- over and above 
the regular defense budget -- would focus on ten key areas: 
 
-- Implementation of a multi-year defense planning system 
(MYDPS); 
-- Improvement of AFP operations and training; 
-- Improved logistics capability; 
-- Better staff development; 
-- Development of an effective AFP personnel management 
system; 
-- Implementation of a separately funded Capability Upgrade 
Program (CUP) for the AFP; 
-- Improved defense budget system and management controls; 
-- Creation of a centralized defense acquisition system and 
staff; 
-- Enhancement of the AFP's civil military operations; and 
-- Development of accurate baseline data on critical AFP 
functional areas. 
 
A RESOURCE-DRIVEN PROCESS 
------------------------- 
 
¶3.  (U) Having issued the first-ever multi-year Defense 
Planning Guidance in December 2004, Cruz said he wanted to 
use multi-year planning to establish a resource-driven 
process, in which all defense budget proposals would be 
evaluated according to need. 
 
INDIVIDUAL AND UNIT TRAINING A MUST 
----------------------------------- 
 
¶4.  (U) Operations and training were important to PDR's 
success.  Pointing to the AFP training backlog (Note: Some 
battalions have not undergone any training in over 10 years. 
End Note), Cruz emphasized that individual and unit training 
is a must.  His goal was to train 12 infantry battalions each 
year, using Ft. Magsaysay as a National Training Center, 
supported by two regional training centers in the Visayas and 
Mindanao. 
 
LOGISTICS FOCUSED ON OPERATIONAL READINESS 
------------------------------------------ 
¶5.  (U) The logistics effort would focus on improved 
operational readiness and reliability rates for key mobility 
and combat systems: trucks; aircraft; helicopters; patrol 
craft; and M105 howitzers.  Cruz's target is a 70-percent 
mission capable rate. 
 
STAFF DEVELOPMENT TACKLES FUNDAMENTAL ISSUES 
-------------------------------------------- 
 
¶6.  (U) Cruz said he intends to recruit 90 hand-picked 
civilian university graduates to run the PDR's defense 
resource management and defense acquisitions programs. 
Broader personnel management improvements would target 
recruitment, assignments, promotion, tenure of key officers, 
military justice, separation, and retirement. 
 
¶7.  (U) Legislation mandating a three-year tenure for the AFP 
Chief of Staff had passed the Senate and was under 
consideration in the House, Cruz noted.  Pending legislation, 
Cruz said he would require the incoming Chief of Staff (the 
incumbent, General Efren Abu, will retire June 24) to develop 
a succession plan that would ensure a smooth transition in 
the leadership of the AFP, services, and combatant commands. 
He intends to ensure that the next Superintendent of the 
Philippine Military Academy (PMA) -- the Filipino equivalent 
of West Point -- would serve a full three-year tour in order 
institute and see through needed reforms. 
 
CAPABILITY UPGRADE PROGRAM (CUP) 
TARGETS CRITICAL INTERNAL SECURITY NEEDS 
---------------------------------------- 
 
¶8.  (U) The CUP would be divided into 6, 12, and 18-year 
segments, with the first two periods focusing on internal 
security needs: mobility; firepower; communications; and 
intelligence.  Cruz said he had persuaded Department of 
Budget and Management Secretary Boncodin to begin releasing 
in January 2005 470 million pesos (approximately $8.6 
million) each month into the Modernization Trust Fund to 
allow the AFP to begin badly needed equipment acquisitions. 
Cruz hoped to fund the CUP at 5 billion pesos a year 
(approximately $91 million) for the first six years, 10 
billion pesos a year (approximately $183 million) for the 
next six, with funding increasing to 20 billion pesos  a year 
(approximately $366 million) for the last six years as the 
AFP's mission transitioned from internal security to 
territorial defense.  Fifteen percent of acquisition costs 
would be set aside for maintenance, to ensure equipment could 
be maintained and supported over its life cycle. 
 
¶9.  (U) Equipment acquisition would occur within a new 
environment governed by improved financial controls and a 
professional acquisition work force.  Cruz noted he had 
reduced the number of acquisition panels from 119 to a single 
Bids and Awards Committee co-chaired by the AFP Vice Chief of 
Staff and the DND Undersecretary for Acquisition. 
 
AMBITIOUS CIVIL MILITARY PROGRAM PLANNED 
---------------------------------------- 
 
¶10.  (U) Cruz plans an ambitious civil military operations 
program entitled "Kalayaan" ("Freedom") that would provide 
roads, water, electricity, and schools to 500 at-risk 
barangays (communities) each year, with the objective of 
re-establishing the link between the people and the 
government in areas controlled by the insurgents. 
 
INFORMATION MANAGEMENT NETWORK ENVISIONED 
----------------------------------------- 
 
¶11.  (U) Tying all the above elements together would be an 
information management network.  Cruz admitted, however, that 
he had still had not found the right Chief Information 
Officer for the job. 
 
QUALITY OF LIFE ISSUES ON CRUZ'S AGENDA, TOO 
--------------------------------------------- 
 
¶12.  (U) Cruz said he also intends to use PDR to address 
quality of life issues.  He plans a pilot project in June 
2005 that would begin to tackle the problem of enlisted and 
officer housing.  The AFP has identified excess property at 
one of its camps on which it will build through a 
public-private partnership 100 homes for troops and their 
families.  If this template succeeds, Cruz said he would 
replicate it at other camps.  He plans as well to develop 
legislation creating a new matching pension fund for 
soldiers, which Senator Biazon, a former AFP Chief of Staff, 
has promised to sponsor. 
 
CALL FOR JOURNALISTS TO SUPPORT PDR 
----------------------------------- 
 
¶13.  (U) Cruz called on journalists to support PDR, asking 
them to report on it factually.  PDR would help people regain 
their faith in the nation and unite them in a common cause. 
"Help us find solutions," Cruz asked, saying the AFP was 
transforming while performing its missions. 
 
COUNTING THE SUCCESSES 
---------------------- 
 
¶14.  (U) Speaking separately from Cruz, Assistant Secretary 
for Defense Reform Roberto Nuqui listed PDR successes thus 
far: 
 
-- Issuance of the first-ever Defense Planning Guidance; 
-- Creation of a single Bids and Awards Committee; 
-- Streamlining of the AFP "J" staff, including abolishment 
of the comptroller position (J6) and the consequent 
reassignment of 500 personnel from headquarters slots to 
operational units; 
-- Ending the practice of "conversion," or off-budget 
expenditures; 
-- Establishment of the Joint Special Operations Group (JSOG) 
as the AFP's elite counterterrorism unit; 
-- Increased operational readiness rates for C-130 aircraft 
and UH-1H helicopters; 
-- Training 15 senior non-commissioned officers (NCOs) at US 
NCO schools in Hawaii to as the core cadre of the AFP's NCO 
Academy; 
-- Training 3,000 soldiers in combat lifesaving skills, with 
procurement of individual medical kits underway; 
-- Training four Philippine Air Force (PAF) helicopter pilots 
in night flying skills; 
-- Initial development of an aero-medical evacuation 
capability; and 
-- Development of a forward medical service support unit, 
which will be deployed to Jolo in later 2004. 
 
¶15.  (U) Several themes figured in Nuqui's presentation: 
 
-- "Defense capability is a national investment;" 
-- "Realistic, systematic, and strategic reforms;" 
-- "Simplification is the key to efficiency;" and 
-- "Strategic partnerships contribute to operational 
capacities." 
 
Nuqui stressed that the AFP/DND partnership for reform was 
strong, and based on the principles of transparency and 
accountability, with quantitative measures of success.  The 
support of US experts had been key to the process.  Policy 
and legislation were needed to institutionalize the reforms, 
Nuqui stated, adding that the DND was preparing a new 
National Defense Act to replace the nearly 70-years old 
existing defense legislation. 
 
Q&A: 
CHINA DEFENSE TALKS 
"LOGICAL OFFSHOOT" TO WARMING RELATIONS 
--------------------------------------- 
 
¶16.  (U) In the following Q&A session, Cruz deftly fielded 
some hard questions from journalists.  Asked whether the 
Philippines was "playing the China card" in its military 
exchanges with Beijing, Cruz said the developing ties, which 
included the upcoming visit in late May of PLA Chief of the 
General Staff Liang Guanglie, were a "logical offshoot" to 
the warming relations between the two countries.  The 
objective, Cruz stated, was to open lines of communication. 
He suggested the Chinese-Filipino security dialogue might 
include disaster management and anti-terrorism, adding that 
the GRP hoped to use the PRC's promised $1.2 million 
engineering equipment grant for the "Kalayaan" road building 
program. 
 
VFA VALID "LEGAL MECHANISM" 
FOR COUNTERTERRORISM COOPERATION 
-------------------------------- 
 
¶17.  (U) Cruz rejected any call to alter the US-Philippines 
Mutual Defense Treaty (MDT), which continued to serve its 
purpose.  "It worked in the past; it works now," he stated. 
While the GRP was studying the possibility of pursuing 
multilateral treaties with ASEAN members, Australia, and the 
United States on such issues as counterterrorism, 
transnational crime, and disaster relief, the Visiting Forces 
Agreement (VFA) provided a "valid legal mechanism" for 
counterterrorism cooperation with the United States, Cruz 
stated.  While open, within the framework of the Philippine 
Constitution, to case-by-case cooperation on specific 
counterterrorism scenarios, Cruz said the Philippines needed 
to exercise its "sovereign judgment" in determining what is 
best for the AFP and the nation's security. 
 
SHORT SHRIFT FOR COUP TALK 
-------------------------- 
 
¶18.  (U) Cruz had short shrift for talk of coups.  He 
believed former defense secretary, retired General Fortunato 
Abat, and other ex-generals had no support within the AFP. 
The AFP is loyal to the President, he stated, adding, "I'm 
highly confident the senior leadership believes in defending 
the Constitution."  Implementing PDR and the CUP, which 
addressed the recommendations of the Feliciano Commission 
Report following the July 2003 mutiny, would serve as the 
best antidote for "alternatives outside the Constitution" and 
"ideas that don't work." 
 
CONDEMNATION OF ATTACKS ON JOURNALISTS 
-------------------------------------- 
 
¶19.  (U) Asked to condemn the recent spate of attacks against 
journalists in the Philippines, Cruz unequivocally stated 
that the killing of journalists had no place either in the 
rule of law or a democracy.  "Journalists are not enemies of 
the state," he said. 
 
STATUS QUO UNACCEPTABLE 
----------------------- 
 
¶20.  (U) Challenged on his promise to end the insurgencies in 
the Philippines within 10 years, Cruz forcefully stated that 
the status quo was unacceptable.  "If we want to be part of 
the 21st Century, we have to end this drag on our economic 
growth," he said. 
 
COMMENT 
------- 
 
¶21.  (C) Cruz was in top form, with a demonstrated command of 
the intricacies of defense reform.  Although he discussed PDR 
with reporters during one of President Arroyo's press 
conferences a few months ago, the May 18 presentation was 
clearly a well thought through effort at strategic 
communications to educate Manila's elite on the reform 
program and build support for it.  Cruz appears to have his 
hand firmly on the pulse of the AFP.  According to his chief 
aide, Undersecretary for Legal and Special Concerns Rodel 
Cruz, Cruz regularly meets with the senior AFP leadership, 
and we will follow with interest how he influences the choice 
of the next AFP Chief of Staff, who will be key to 
implementing PDR. 
 
 
Visit Embassy Manila's Classified website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
MUSSOMELI