VZCZCXYZ0004
OO RUEHWEB

DE RUEHML #2827/01 2290938
ZNR UUUUU ZZH
O 170938Z AUG 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7940
INFO RUEHBK/AMEMBASSY BANGKOK IMMEDIATE 2275
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 6185
RUEHHI/AMEMBASSY HANOI IMMEDIATE 6361
RHHMUNA/CDR USPACOM HONOLULU HI//FPA//

UNCLAS MANILA 002827 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP AND H 
 
E.O. 12958: N/A 
TAGS: OREP PREL EAID RP
SUBJECT: SCENESETTER FOR CODEL REYES 
 
REF: MANILA 2645 
 
STATE 107079 
 
¶1. (SBU) Chairman Reyes and Members of the Delegation, a warm 
welcome to the Philippines!  The relationship and spirit of 
partnership between the United States and the Philippines are 
strong.  Your visit comes at a time when the Philippine military is 
still mourning the loss of soldiers in Mindanao while bravely 
fighting terrorism.  Your delegation's condolences would help cement 
our spirit of partnership.  The unique bond shared between U.S. and 
Philippine veterans further strengthens our ties, as the memory of 
our partnership in World War II resonates here.  U.S. interests in 
this major non-NATO ally center on strengthening democracy, 
fostering economic growth, fighting terrorism, and providing superb 
services to our American and Filipino publics.  The U.S. is the 
Philippines' largest trading partner, the largest investor, and the 
largest donor of foreign assistance. 
 
¶2. (SBU) During your visit, you will meet with senior members of the 
Philippine government and Congress, and U.S. business, to reinforce 
our strong bilateral ties, as well as pay tribute to the dead and 
missing from World War II immortalized at the American Cemetery. 
You will travel to Mindanao to see first hand our joint 
counterterrorism efforts.  Our entire team looks forward to making 
your visit productive and useful.  End Summary. 
 
---------- 
BACKGROUND 
---------- 
 
¶3. (U) The Philippines, with almost 90 million people, has one of 
the fastest-growing populations in Asia.  Metro Manila, home to at 
least 12 million people, is the largest city in a country made up of 
over 7,000 mainly mountainous islands.  Literacy (94%) remains high, 
although the standard of public education and other government 
services is declining.  Filipinos are mainly Roman Catholic (83%) or 
 
otherwise Christian (10%) with a small Muslim minority (6%) based in 
Mindanao.  Approximately 40 percent of Filipinos earn less than $2 
per day, with a much higher percentage of Muslims in Mindanao eking 
out a living below this threshold. 
 
------------------- 
PHILIPPINE POLITICS 
------------------- 
 
¶4. (SBU) Philippine political life is free-wheeling, centered 
primarily on the personal charisma of individual political leaders, 
and largely oligarchic, with most wealth and political power 
concentrated among a few influential families.  Then-Vice President 
Gloria Macapagal Arroyo assumed the Presidency in 2001 after a 
"people power" movement swept out her predecessor.  She has regained 
her footing after a series of challenges to her leadership, 
including an unsuccessful impeachment efforts in 2005 and 2006 -- 
based on accusations of vote rigging in 2004 elections -- and an 
alleged coup plot that led to her week-long declaration of a "State 
of National Emergency" in February 2006. 
 
¶5.  (SBU) Midterm elections in May left the Senate still in 
opposition hands, while the President's allies increased their hold 
on both the House of Representatives and local government.  While 
the threat of impeachment has now been decisively removed by 
overwhelming control of the House, personality-driven politics 
remain visceral as presidential hopefuls in the Senate are already 
campaigning for the 2010 presidential election.  We fully expect 
President Arroyo to complete her term in 2010.  The rancorous 
political atmosphere will complicate her efforts to establish a 
legacy, which she has focused on the economy and jobs, 
infrastructure, and seeking stability and peace on Mindanao. 
 
------------------- 
ECONOMICS AND TRADE 
------------------- 
 
¶6. (U) The U.S. remains the Philippines' largest trading partner, 
with over $17.3 billion in two-way merchandise trade.  Major U.S. 
exports include electronics and agriculture.  The U.S. is also the 
largest investor here, with $6.6 billion in equity.  This week Texas 
Instruments broke ground on a $1 billion facility to produce 
microchips at the former Clark Airbase, while AES, a Virginia-based 
power generation and utility company, announced a $930 million 
acquisition of a large coal-fired power plant through the 
government's privatization scheme. 
 
¶7. (U) The Philippine economy performed well in 2006, and has 
continued to grow strongly in 2007.  For the first half of the year, 
the stock market charted new territory, and the peso soared against 
the dollar on the back of respectable export growth and a surge in 
remittances by overseas Filipinos.  However, both the stock market 
and the peso have slipped slightly during the worldwide financial 
turbulence of the past month.  The government has attacked its 
budget deficit over the past four years through a combination of 
expenditure restraint and tax increases, and has begun to reduce its 
foreign debt.  There nonetheless remain substantial weaknesses in 
the government's ability to collect taxes, and much remains to be 
accomplished on the economic reform agenda, particularly on 
improving the investment climate.  The Arroyo administration has an 
impressive agenda -- privatize the electric sector, build 
infrastructure, increase funding for education, liberalize civil 
aviation, reduce business red tape -- but is moving timidly on most 
of these initiatives.  Embassy Manila is a strong advocate for U.S. 
business interests through our Economic Section, the Foreign 
Commercial Service, and the Foreign Agricultural Service. 
 
¶8. (SBU) Corruption and restrictions on foreign investment shield 
powerful local interests who thus maintain their privileged market 
positions and their increasing wealth.  Well-functioning "special 
economic zones" (including former U.S. bases at Clark and Subic) in 
which most foreign investment is harbored demonstrate that the 
government can implement the policies necessary to compete globally. 
 Many observers believe President Arroyo's best chance for a lasting 
legacy would be in implementing the economic reforms she knows could 
make a real contribution to the prosperity of her people, while 
establishing greater peace in Mindanao. 
 
¶9. (U) U.S.-Philippines development cooperation focuses on economic 
growth, governance, health, education, and the environment.  The 
major thrust of our development assistance is in conflict-affected 
areas of Mindanao.  Along with USAID, USDA and the Peace Corps play 
an important role in promoting socio-economic progress. 
 
------------------------ 
COUNTERTERRORISM EFFORTS 
------------------------ 
 
¶10. (SBU) Three U.S.-designated terrorist organizations are active 
and dangerous in the Philippines, despite significant military 
success against them over the past year.  Parts of Muslim Mindanao 
remain a sanctuary for terrorists who are responsible for bombings 
in the Philippines and Indonesia and kidnapping and killing of 
Americans and Filipinos.  President Arroyo is justly proud that the 
Philippine military has killed several top terrorist leaders in its 
focused military operations.  However, in recent weeks, the 
Philippine military lost some forty soldiers in two clashes with 
these terrorist and insurgent groups, including ten who were 
beheaded on July 10.  The Philippine military killed some thirty 
people in response.  The Philippine military has carefully avoided 
restarting a more general conflict with Muslim insurgents (see 
below).  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.  Equally impressive are the 
military's successful efforts to help separate local populations 
from insurgents through extensive civil-military and humanitarian 
activities.  Separately, the New People's Army of the Communist 
Party continues to extort, bomb and attack remote police and 
military outposts. 
 
------------------------- 
PEACE PROCESS IN MINDANAO 
------------------------- 
 
¶12. (SBU) Negotiations with the Muslim insurgency, under Malaysian 
auspices, are making headway toward establishing a larger Muslim 
political entity within the Philippines that would determine its own 
governing structure.  Once the territory of this entity is 
determined, the challenge will be to bring together Mindanao's 
diverse Muslim, Christian and native communities.  We are pressing 
for concrete progress on this complex agenda this year.  Successful 
peace in Mindanao would make the Philippines a stronger, more 
outward looking partner, while also denying terrorists ungoverned 
spaces. 
 
¶13. (U) Development assistance from the U.S., complemented by 
increasing support from the World Bank, Japan, Australia and others, 
has established growing zones of peace and private sector-led growth 
in Mindanao.  About 60% of USAID's annual development assistance is 
channeled to conflict-affected areas of Mindanao to promote economic 
opportunities, build infrastructure, and carry out health, renewable 
energy, environment, education, local governance, and livelihood 
programs.  These programs attack the conditions of poverty that 
provide breeding grounds for terrorists.  USAID coordinates its 
activities with the U.S. military's Civil Affairs programs.  Our 
exchange programs for students and community leaders offer a chance 
to interact with responsible and moderate Muslims. 
 
----------------------------------------- 
HUMAN RIGHTS: COMBATING UNLAWFUL KILLINGS 
----------------------------------------- 
 
¶14. (SBU) President Arroyo has taken several steps to address the 
complex problem of unlawful killings.  While many of these deaths 
and disappearances are more likely attributable to local disputes 
than to military or police action, it is clear that the government 
needs to do more to ensure that these crimes are fully investigated 
and that responsible parties -- whether connected to military or 
police -- are brought to justice.  The problem is closely related to 
a judicial system which is strained beyond its capacity and 
inefficient.  The government has responded with a police task force 
to investigate the killings and file charges, specially designated 
courts to handle them, 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.  President Arroyo spoke out strongly on the issue in her 
recent State of the Union address.  Still, much more needs to be 
done. 
 
--------------- 
VETERANS ISSUES 
--------------- 
 
¶15. (U) The U.S. Department of Veterans Affairs Manila Regional 
Office and Outpatient Clinic are the VA's only full-service 
facilities located in a foreign country.  VA provides monetary 
benefits to approximately 15,000 veterans and dependents in the 
Philippines and provides health care to approximately 4,000 veterans 
residing here.  The VA operation in Manila has a sizeable economic 
impact here, worth about $143.5 million in FY 2005.  This figure 
factors in monetary benefit payments, operating costs, and medical 
equipment provided to the Philippine Government's Veterans Memorial 
Medical Center.  Due to the low standard of living in the 
Philippines and the cultural preference to conduct business through 
middlemen, claims fraud remains a significant challenge.  While we 
have success in identifying fraud, obtaining prosecutions through 
the Philippine justice system is difficult. 
 
¶16. (SBU) Filipino veterans have over the years challenged and 
questioned what they perceive as lack of equality in the benefits 
they receive as compared to those received by U.S. veterans of WWII 
or those Filipino veterans residing in the U.S.  This issue 
continues to be the focus of intense lobbying by various Filipino 
advocacy groups.  Filipino veterans and their dependents enjoy a far 
greater standard of living here than their ineligible counterparts, 
many of whom receive benefits from the chronically in-debt 
Philippine Veterans Affairs Office at the rate of approximately $100 
per month. 
 
¶17. (U) During your visit, you will honor the dead and missing from 
World War II at a wreath-laying ceremony at the Manila American 
Cemetery and Memorial.  The cemetery is the largest in area of the 
cemeteries built and administered by the American Battle Monuments 
Commission, occupying 152 acres of the former Fort William McKinley. 
 17,206 of our military Dead, including 3,744 burials of unknown 
soldiers and 570 Philippine nationals, are buried at the cemetery. 
Most of these soldiers lost their lives in defense of the 
Philippines in 1941 and 1942 or in the long but victorious return of 
the American forces in 1944. 
 
------------------------------ 
SOCIAL SECURITY ADMINISTRATION 
------------------------------ 
 
¶18. (U) The Social Security Administration Division in Manila serves 
as the hub for social security work for all the Embassies and 
Consulates in the East Asia Pacific Region. The division currently 
serves 41,000 beneficiaries and pays out over 25 million dollars 
each month.  In the Philippines alone, there are almost 20,000 
beneficiaries. 
 
---------------- 
CONSULAR AFFAIRS 
---------------- 
 
¶19. (U) The Consular Section provides services (reports of birth, 
passports, notarial and emergency support) to the approximately 
130,000 Americans living in the Philippines as well as the 
additional roughly 120,000 visiting the Philippines at any given 
time.  The Section issues about 60,000 immigrant visas a year, 
including visas to large numbers of nurses, teachers, and physical 
therapists.  The Section sees almost 200,000 nonimmigrant visa 
applicants annually, including large numbers of merchant mariners 
and temporary seasonal workers. 
 
------------------------- 
THEMES AND TALKING POINTS 
------------------------- 
 
¶20. (SBU) You may wish to use the following talking points in your 
meetings with Philippine government officials and business leaders, 
and in any public remarks: 
 
-- The Philippines is a committed partner in the vital effort to 
fight terrorism and secure peace and prosperity for our two nations. 
 Our delegation looks forward to learning more about U.S.-Philippine 
cooperation during this visit. 
 
-- Our condolences to the Armed Forces of the Philippines and the 
families of the soldiers who recently lost their lives in Mindanao. 
 
-- The U.S. military advises, assists, and shares information with 
the Philippine military, and conducts exercises, civil-military and 
humanitarian work, and other visits here at the invitation of the 
Philippine government. 
 
-- Philippine Defense Reform represents a commitment to undertake 
fundamental institutional change within the Armed Forces of the 
Philippines.  We're proud to be partners in this program. 
 
-- We take the issue of extra-judicial killings seriously -- murder 
is murder.  It is important to apprehend suspects in these killings 
and provide a fair but judicial process.  We are encouraged by steps 
the Philippine government has taken to try to get control of this 
problem. 
 
-- We are working with the Philippines to help achieve higher 
economic growth and spread this growth, especially to the poor and 
disadvantaged. 
 
-- (If asked about the case of a U.S. Marine convicted of rape of a 
Filipina at Subic in November 2005) I cannot comment on an ongoing 
legal case in the Philippine justice system.  Both our governments 
remain committed to the pursuit of justice as well as adherence to 
the terms of the Visiting Forces Agreement. 
 
 
Visit Embassy Manila's Classified SIPRNET website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
 
You can also access this site through the State Department's 
Classified SIPRNET website: 
http:// www.state.sgov.gov/ 
 
JONES