VZCZCXRO7957
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #3248/01 2140923
ZNR UUUUU ZZH
O 020923Z AUG 06
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2310
RUCPDOC/USDOC WASHDC IMMEDIATE
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 MANILA 003248 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EAP/EX AND EAP/MTS 
STATE PASS TO USTR FOR BWEISEL AND DKATZ 
USDOC FOR 4430/ITA/MAC/SBERLINGUETTE 
USDOC PASS TO USPTO FOR PETER FOWLER 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR PREL ETTC EINV KIPR RP
SUBJECT: A/S CHRISTOPHER HILL FOCUSES ON PHILIPPINES GROWTH 
POTENTIAL DURING MANILA VISIT 
 
 
¶1.  Summary.  During his visit to Manila on July 31, EAP Assistant 
Secretary Christopher Hill gained a firsthand view of advantages and 
 
SIPDIS 
challenges to U.S. business investment in the Philippines by touring 
two E-services facilities and attending a working lunch with 
representatives from U.S. businesses.  A/S Hill also discussed the 
strong economic relationship between the U.S. and the Philippines 
and the importance of strengthening ties in Southeast Asia in a 
speech to university students and faculty.  End Summary. 
 
-------------------------- 
E-Service Industry Booming 
-------------------------- 
 
¶2.  During a visit to U.S. E-service companies, leading call center 
market specialists outlined goals for A/S Hill and Ambassador 
Kenney:  enlarge total market share from 4% to 10% by 2010; expand 
revenues from $1.2 billion to $12 billion; and increase employment 
from 100,000 to 500,000.  A/S Hill visited ICT Group, a call center 
with 3000 employees fielding customer service calls from the United 
States, and eData Services, a business process outsourcing (BPO) 
operation providing records transcription and software development 
to U.S. physicians and hospitals, attorneys, and health insurance 
providers. eData Services operates 24/7 with a staff of 300 Filipino 
employees. 
 
¶3.  BPO operations have distinct advantages in the Philippines: 
lower labor costs are lower than other S.E. Asian competitors; two 
fiber optic backbones encircling the country; and an 
English-speaking population.  However, staff retention and space 
limitations are potential barriers to business expansion.  To 
address these issues and maintain competitive pricing advantages, 
many BPOs plan to locate call centers outside Manila and work with 
the GRP to provide additional English language training to recruits. 
 
 
--------------------------------- 
American Business Representatives 
--------------------------------- 
 
¶4.  A/S Hill, the Ambassador, and Emboffs met with representatives 
from various U.S. businesses over lunch to discuss factors impacting 
investment in the RP.  Representatives included officials from the 
banking, food, energy, e-services, manufacturing, travel, and 
pharmaceutical industries.  These businesses articulated successes 
and challenges in their sectors.  On the positive side, the call 
center/BPO sector is experiencing significant growth with businesses 
expanding operations to provincial areas.  The GRP is encouraging 
call centers to hire the 30,000 overseas workers returning from 
Lebanon, enabling them to remain in the RP.  Proposed asset sales in 
the energy sector are encouraging.  The Philippines is preparing to 
privatize the National Power Corporation and Mirant, a U.S.-based 
company, is selling its power plants, potentially diversifying 
significant investment revenue. 
 
¶5.  The executives described factors that may impede future 
investment in the Philippines.  Companies in the manufacturing 
industry noted a 6% to 7% drop in purchasing power due to higher 
taxes, increased fuel and electricity costs, and a stronger peso 
that has reduced the value of dollar remittances.  Another concern 
is the constitutional prohibition on foreign land ownership.  (Note: 
Constitutional reform, currently under debate, would likely remove 
this prohibition.)  The education system has declined, with 
overcrowded classrooms and the best-qualified teachers seeking 
employment in the U.S. and overseas.  English fluency has decreased 
over the past 20 years, diminishing the pool of qualified employees 
for U.S. businesses. 
 
-------------------------- 
Philippines' Regional Role 
-------------------------- 
 
¶6.  A/S Hill spoke to university students and faculty about the 
strong relationship between the U.S. and the Philippines and the 
importance of working with other countries in the region to 
strengthen economic ties and regional security.  A/S Hill 
underscored the importance of the relationship between the U.S. and 
ASEAN, in light of the Philippines hosting the ASEAN Summit this 
year.  He expanded on regional issues and noted that the 
Philippines' successful development of democratic institutions 
serves as an example to China.  A/S Hill expressed concerns about 
Burma and North Korea, describing both as being "out of step" with 
the rest of Asia, and emphasizing that multi-lateral approaches will 
be necessary when working with these countries.  With 5% GDP growth 
and good telecommunications, the Philippines is successfully 
attracting international investment, but needs to develop its 
 
MANILA 00003248  002 OF 002 
 
 
infrastructure for greater investment inflows.  A/S Hill 
acknowledged the contributions of Filipino-Americans to the close 
ties between the U.S. and Philippines.  While the U.S. will continue 
providing assistance with programs such as the Millennium Challenge 
Account, A/S Hill said he has confidence in the country's ability to 
solve its own internal problems. 
 
¶7.  A/S Hill did not have the opportunity to clear this cable. 
 
KENNEY