VZCZCXRO8024
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #1608/01 1370648
ZNR UUUUU ZZH
O 170648Z MAY 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6527
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3219

UNCLAS SECTION 01 OF 03 MANILA 001608 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR EAP A/S HILL FROM AMBASSADOR 
 
E.O. 12958: N/A 
TAGS: PREL PHUM PTER ECON RP
SUBJECT: SCENESETTER FOR EAP ASSISTANT SECRETARY HILL 
 
¶1.  (SBU) Summary.  A warm welcome again to the Philippines! 
As you arrive, the Philippines will still be focused on 
recent mid-term election for the Senate, House, and 
provincial positions.  Final national results will not be 
available until as late as June 14.  In the counter-terrorism 
realm, the Armed Forces of the Philippines demonstrated 
sustained, impressive combat prowess in ongoing operations 
against Abu Sayyaf and Jemaah Islamiyah terrorists, and 
remains fully committed to the Defense Reform and Battalion 
Retraining Programs.  The peace process throughout Mindanao, 
as well as peace talks with the Moro Islamic Liberation 
Front, are moving forward.  The government has undertaken new 
steps against unlawful killings, but violence and slow 
justice remain of concern.  The economy performed well in 
2006, and the U.S. continues to be the Philippines' largest 
trading partner, with over $16 billion in two-way merchandise 
trade.  The Philippines has played a welcome leadership role 
within ASEAN on Burma, North Korea, and counterterrorism. 
 
¶2.  (U)  While we know how busy you will be with the ASEAN 
Regional Forum Senior Officials Meeting, we hope to set up a 
working lunch with top officials handling Mindanao to provide 
you first-hand insights, and also to arrange brief radio and 
TV interviews to discuss U.S.-Philippine relations and ASEAN 
issues.  End Summary. 
 
---------------------- 
2007 MIDTERM ELECTIONS 
---------------------- 
 
¶3.  (U) Philippine mid-term elections took place on May 14, 
but final results will not be available for a few days, or at 
the national level perhaps as late as June 14.  With turnout 
rates of about 75 percent, the enthusiasm of Philippine 
voters was palpable, and the dedication of electoral workers 
and more than one million volunteers was a tribute to the 
determination of the Philippine people to ensure the freest 
and fairest elections possible.  However, election-related 
violence left an estimated 126 dead, including police and 
soldiers.  There is widespread concern that cheating will 
escalate during the canvassing process. 
 
¶4.  (SBU) U.S. interests remain focused on the success of 
democratic processes.  The outcome of the elections will not 
in any meaningful way affect our close ties and cooperation 
with the government, which will remain pro-American and 
anti-terrorism.  A top concern for the Arroyo Administration 
is to ensure sufficient Congressional seats to block future 
impeachment motions against President Gloria Macapagal 
Arroyo, especially since opposition forces will likely 
dominate the new Senate.  President Arroyo's allies are 
hoping election of new pro-Administration "party list" 
representatives will not only help protect her against 
impeachment but will also serve as leverage against possible 
challenges within her coalition related to charter change 
that could limit her powers or term of office. 
 
--------------------------------------------- ------------ 
INCREASED COMBAT PROWESS AND COMMITMENT TO DEFENSE REFORM 
--------------------------------------------- ------------ 
 
¶5.  (SBU) With U.S. support, the Armed Forces of the 
Philippines (AFP) has demonstrated sustained, impressive 
combat prowess in its ongoing counterterrorism operations, 
notably now on the southern island of Jolo.  Improved 
operational readiness rates for aircraft and vessels, 
casualty treatment, night helicopter medical evacuations, and 
tactical field skills are directly attributable to U.S. 
training, advice, and assistance.  Successful operations by 
AFP troops -- including soldiers, Marines, airmen, and 
sailors -- against Abu Sayyaf and Jemaah Islamiyah terrorists 
since August 1, 2006 led to the deaths in military operations 
of Khadaffy Janjalani and Abu Solaiman, the top two leaders 
of the Abu Sayyaf Group, and kept Jemaah Islamiyah terrorists 
on the run.  We plan to pay out US$10 million from the 
Rewards for Justice program in early June. 
 
¶6.  (SBU) The Philippine Defense Reform Program is 
transforming the Philippine military into a more transparent, 
accountable, and effective institution.  This U.S.-supported 
effort aims at a complete restructuring of the military 
establishment ranging from personnel management and logistics 
to acquisition and training.  With the advice of the Joint 
U.S. Military Assistance Group and a 13-member team of U.S. 
experts, the AFP and Department of National Defense have 
already registered significant gains. U.S. Special Force 
troops are helping jump-start the newly begun Battalion 
Retraining Program, which will retrain all 72 Army and 12 
Marine battalions. 
 
MANILA 00001608  002 OF 003 
 
 
 
------------------ 
MILF PEACE PROCESS 
------------------ 
 
¶7.  (SBU) Exploratory talks between the Philippine Government 
and the Moro Islamic Liberation Front (MILF) should resume 
soon in Kuala Lumpur now that the May 14 midterm elections 
are over.  Territory for a prospective "Bangsamoro Juridical 
Entity" remains the key issue in the negotiations.  The MILF 
appears to be more flexible regarding the territorial 
boundaries of a new Muslim political entity.  The 
government's plan is for a transitional council -- including 
the MILF, Moro National Liberation Front (MNLF), and Muslim 
political leaders -- to take the place of 2008 elections in 
the existing Autonomous Region in Muslim Mindanao and to 
define Muslim self-determination in the next entity. 
 
¶8.  (SBU) The enabling legislation and plebiscite to create 
this "Bangsamoro Juridical Entity" will hinge upon majority 
support from the new Congress.  Members of both peace panels 
are concerned about potential "spoilers" -- powerful business 
families, traditional politicians, extremist insurgent 
commanders, and/or "hawkish" elements in the Philippine 
military -- to a peace accord, and a likely 
opposition-dominated new Senate will further complicate the 
political game plan.  We have intensified our dialogue with 
all parties, and will soon increase our contacts with local 
officials now that elections are over.  Durable peace would 
be good for the Philippines, and crucial to denying 
terrorists' sanctuary. 
 
--------------------------------------- 
URGING ACTION AGAINST UNLAWFUL KILLINGS 
--------------------------------------- 
 
¶9.  (SBU) We continue our strenuous efforts at all levels to 
reign in unlawful killings of leftists, journalists, and more 
mainstream politicians.  We are concerned about such 
killings, whoever is responsible, but particularly about 
allegations that members of the security forces may be 
responsible for some.  I and the country team have discussed 
this extensively with President Arroyo and her Cabinet, who 
assure us of their commitment to bring those responsible to 
justice.  Unlawful killings, especially outside major cities, 
is a historical problem in the Philippines related to a weak 
judiciary.  We take very seriously our vetting 
responsibilities under the Leahy Amendment for all Philippine 
security officials receiving USG-funded training. 
 
¶10.  (U) President Arroyo has taken several steps to address 
this problem, including a police task force to investigate 
the killings and to file charges, specially designated courts 
to handle these cases, a rejuvenated Presidential Human 
Rights Commission, a new Armed Forces Human Rights office to 
investigate allegations, and additional funding for the 
Commission on Human Rights.  The Embassy in early May 
organized a ground-breaking seminar that brought together 
Philippine police and prosecutors to build patterns of 
coordination in preparing successful cases and to provide 
training by U.S. experts from the FBI, Department of Justice, 
and the U.S. military.   We have requested additional USG 
funding for the Philippine Commission on Human Rights and 
assistance by U.S. experts to the Armed Forces Human Rights 
Office. 
 
------------------- 
ECONOMICS AND TRADE 
------------------- 
 
¶11.  (U) The U.S. remains the Philippines largest trading 
partner, with over US$16 billion in two-way merchandise 
trade.  Major U.S. exports include electronics and 
agriculture.  Texas Instruments recently announced its 
decision to invest US$1 billion for the construction of new 
facilities to produce microchips at the former Clark Airbase. 
 The U.S. is also the largest investor here, with over US$6 
billion in assets.  The large American Chamber of Commerce in 
Manila is proud of its history as the first American Chamber 
of Commerce abroad. 
 
¶12.  (U) The Philippine economy performed well in 2006. 
Growth hit an estimated 5.5 percent, while inflation slowed 
to only 4.7 percent.  Both the stock market and the peso 
ended the year at the highest levels in recent years.  The 
economy was bolstered by a 15 percent increase in remittances 
by overseas workers, a recovery in exports, and sensible 
fiscal policies, which have brought the budget deficit under 
control.  The Millennium Challenge Corporation administers a 
 
MANILA 00001608  003 OF 003 
 
 
US$21 million Threshold Program through USAID, focusing on 
anti-corruption and revenue enhancement.  The U.S. assists in 
economic development, anti-corruption, environmental 
protection, and poverty alleviation through our policy 
advocacy and an active USAID, USDA, and Peace Corps presence 
throughout the country. 
 
---------------- 
ASEAN LEADERSHIP 
---------------- 
 
¶13.  (U)  President Arroyo hosted a successful series of 
ASEAN-related summits in January 2007, using her various 
chairman's statements to articulate welcome forward-leaning 
positions on Burma and North Korea.  She also ensured the 
adoption of a new ASEAN Convention on Counterterrorism that 
will enhance -- or, in many cases, create -- new patterns of 
regional cooperation against terrorist networks. 
 
Visit Embassy Manila's Classified website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
KENNEY