VZCZCXRO2797
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #3450/01 2290920
ZNR UUUUU ZZH
O 170920Z AUG 06
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2532
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 5832
RHHMUNA/CDRUSPACOM HONOLULU HI IMMEDIATE
RUEKJCS/SECDEF WASHDC//OSD/ISA/AP// IMMEDIATE

UNCLAS SECTION 01 OF 02 MANILA 003450 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR H, EAP, AND EAP/MTS 
USPACOM ALSO FOR FPA HUSO 
SECDEF/OSD/ISA/AP FOR ALLEN 
 
E.O. 12958: N/A 
TAGS: PREL PTER MOPS ECON EFIN BM AS BX RP
SUBJECT: SENATOR INOUYE MEETS WITH PRESIDENT ARROYO 
 
REF: A. MANILA 3098 
     ¶B. MANILA 3401 
 
¶1. (SBU) Summary:  President Arroyo presented Senator Inouye 
with the Philippines' highest award, the Order of Lakandula, 
on August 14 in recognition of his contributions to the 
U.S.-Philippines partnership.  Senator Inouye praised her 
policy achievements in fiscal reforms, counterterrorism, and 
defense reform.  She vowed to fight Abu Sayyaf terrorists "to 
the finish," and expressed support for beginning Free Trade 
Agreement (FTA) negotiations.  Foreign Secretary Romulo 
briefed on his recent trip to Burma and expressed optimism 
that the regime would take steps in the right direction.  End 
Summary. 
 
¶2. (SBU)  In a ceremony at Malacanang Palace on August 14, 
President Gloria Macapagal Arroyo awarded Senator Daniel K. 
Inouye the Order of Lakandula in recognition of his 
contributions to the U.S.-Philippines partnership, his role 
as a distinguished WWII veteran, and his support for 
Philippine veterans.  She called Senator Inouye "one of the 
best friends" of the Philippines.  Accompanying the Senator 
were Legislative Director Blanco, Defense Appropriation 
Subcommittee Staff Director Houy, as well as the Charge d' 
Affaires, POL/C, JUSMAG Chief, and Department of Veterans 
Affairs Office Director.  Joining the President were 
Executive Secretary Ermita, Foreign Secretary Romulo, Defense 
Secretary Cruz, Senate President Villar, Assistant Secretary 
 
SIPDIS 
of Foreign Affairs for the Americas Carandang, Department of 
Foreign Affairs North American Division Director De Vega, as 
well as the former Ambassador to the U.S. Del Rosario and 
former POL/C Lourdes Yparraguirre. 
 
Domestic Issues 
--------------- 
 
¶3. (SBU) In addition to expressing thanks and his sense of 
honor at the award, Senator Inouye cited President Arroyo's 
"political courage" in pushing through many important 
measures, such as raising taxes.  President Arroyo said 
business people talk of a "sea change" in the Philippines and 
were now more confident about its economic future and 
investment climate.  She noted the GRP had exceeded initial 
revenue targets, while interest on debt was down 
dramatically.  The National Power Corporation was now running 
without a loss for the first time in years.  These fiscal 
returns enabled the GRP to undertake long delayed 
infrastructure investments, as she laid out in her July 24 
State of the Nation Address (ref A). 
 
¶4. (SBU) Charge noted U.S. business representatives were 
pleased that Trade Secretary Favila had requested their views 
on reducing bureaucratic "red tape."  President Arroyo 
announced a Summit on Competitiveness would be held in 
September to seek further progress in improving the business 
climate.  She voiced strong support for an FTA with the U.S., 
urging that we begin negotiating soon, even if they take some 
time to complete.  She also described the important role of 8 
million overseas Filipino workers, including in the U.S., the 
Middle East, and 140 countries. 
 
Counterterrorism 
---------------- 
 
¶5. (SBU) Senator Inouye praised the Philippine Defense Reform 
(PDR) program, on which Secretary Cruz had briefed him 
earlier that day.  President Arroyo expressed thanks for U.S. 
defense assistance, which she highlighted had grown 
significantly since 2001.  Charge noted that the GRP paid the 
vast majority of PDR costs; President Arroyo estimated GRP 
contributions at 5 billion pesos ($97m) per year. (Note: This 
figure likely includes expenditures on the Capability Upgrade 
Program. End note.) 
 
¶6. (SBU) Senator Inouye also complimented the GRP strategy on 
counter-terrorism, calling it the "Philippines model" -- a 
combination of military efforts and humanitarian programs. 
The Senator suggested he would encourage more Codels to visit 
and see this model for themselves.  President Arroyo called 
it a "two-handed" approach, combining a hand of friendship 
with a hand of law and order.  She noted the three year 
durable ceasefire with the Moro Islamic Liberation Front 
(MILF) and praised MILF cooperation against terrorists, 
kidnappers, and criminals.  She expressed hope that the Moro 
National Liberation Front (MNLF) on Jolo, where a major 
 
MANILA 00003450  002 OF 002 
 
 
offensive by the Armed Forces of the Philippines (AFP) 
against Jemaah Islamiyah and Abu Sayyaf Group leaders 
continues, would provide similar cooperation (ref B).  She 
said she had sent AFP Chief of Staff General Esperon to Jolo 
with instructions to "finish the fight."  She also praised 
the contributions to peace of USAID's LEAP Program in 
reintegrating 28,000 MNLF insurgents.  She noted, however, 
that the MNLF now wanted the release of its imprisoned leader 
Nur Misuari, about which she wanted to consult with friends 
and allies, in return for full cooperation against 
terrorists.  She asked Senate President Villar if he would 
support such a move, but he was non-commital.  Secretary 
Romulo described MNLF opposition to the Philippines' bid to 
gain Organization of the Islamic Conference (OIC) observer 
status. 
 
¶7. (SBU) President Arroyo also commented that 
U.S.-Philippines intelligence cooperation was proceeding 
well.  She noted counterterrorism collaboration with the U.S. 
and Australia.  Secretary Cruz described on-going Status of 
Forces Agreement negotiations with Australia and predicted an 
agreement with Brunei even sooner. 
 
¶8. (SBU) Senator Inouye said he understood that morale was 
improving among AFP troops, which President Arroyo attributed 
to better and more equipment and improved first aid. 
Secretary Cruz also cited more regular training and practice 
 
SIPDIS 
as factors.  Charge noted that local communities on Jolo also 
were receptive to the AFP during current operations; 
Secretary Cruz agreed this was encouraging. 
 
SIPDIS 
 
Burma 
----- 
 
¶9. (SBU) President Arroyo noted that Secretary Romulo had 
just visited Burma in one of his first acts since the 
Philippines assumed the ASEAN Chair.  Secretary Romulo 
praised President Arroyo's consistent leadership on Burma, 
including breaking with ASEAN consensus in order to support 
UN Security Council consideration.  He reported on his visit 
to the new capital of Burma, where the "entire junta" had 
received him.  He extended President Arroyo's invitation to 
Than Shwe to attend the ASEAN Summit in Cebu in December, and 
commented that, if he attends, it would be a clear signal 
that Burma intended to make progress on the roadmap. 
President Arroyo commented that he had stayed away for 
several years, since he did not want criticism for having 
"nothing to report."  Secretary Romulo claimed he also found 
it hopeful that Burma was building a convention center in the 
new capital for completion by 2008, another signal Burma 
might seek ASEAN Chairmanship after Singapore, once it had 
advanced on the roadmap.  Burmese leaders had assured Romulo 
they would try to convene a national convention and forge 
national reconciliation.  He said the Burmese leaders told 
him they had already tried Western democracy and then 
socialist democracy and now wanted to seek another format. 
President Arroyo commented on "intense debate" among Burmese 
policy makers, while Romulo pointed to the fate of Khin Nyunt 
as a sign of what happens to the defeated. 
 
¶10. (SBU) President Arroyo voiced support for release of Aung 
San Suu Kyi and political prisoners.  She noted, however, 
that five ASEAN leaders meeting recently in Brunei had 
pondered what role ASEAN could realistically play in 
influencing positive change in Burma, when even the "Great 
Powers" where unable to convince the regime.  She said 
ASEAN's influence lies partly in Burma realizing that fellow 
ASEAN members, as neighbors, have Burma's interest at heart. 
 
¶11. Senator Inouye did not have an opportunity to clear this 
message. 
Jones