VZCZCXRO6624
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHML #0059/01 0080749
ZNR UUUUU ZZH
O 080749Z JAN 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9345
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC IMMEDIATE
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION IMMEDIATE
RHHMUNA/CDRUSPACOM HONOLULU HI IMMEDIATE

UNCLAS SECTION 01 OF 02 MANILA 000059 
 
SIPDIS 
 
SIPDIS 
SENSITIVE BUT UNCLASSIFIED 
 
STATE FOR EEB/TPP/MTA, EAP/MTS, AND EAP/EP 
NSC FOR DANIEL PRICE AND MICHAEL SMART 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR PREL RP
SUBJECT: SCENESETTER FOR DEPUTY NATIONAL SECURITY ADVISER DANIEL 
PRICE 
 
 
¶1. (SBU) Summary: Embassy warmly welcomes Deputy National Security 
Adviser for International Economic Affairs Daniel Price to the 
Philippines.  The relationship and spirit of partnership between the 
United States and the Philippines are strong.  The U.S. is the 
Philippines' largest trading partner, the largest investor and the 
largest donor of grant foreign assistance.  During your visit, you 
will meet with several key government officials and important 
figures in the Philippine business community.  Our entire team looks 
forward to making your visit productive and useful.  End Summary. 
 
---------- 
BACKGROUND 
---------- 
 
¶2. (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 has declined in recent decades.  Filipinos are mainly Roman 
Catholic (83%) or otherwise Christian (10%) with a Muslim minority 
(6%) based on the southern island of Mindanao and in Manila. 
Approximately 38 percent of Filipinos earn less than $2 per day. 
 
------------------- 
PHILIPPINE POLITICS 
------------------- 
 
¶3. (SBU) Philippine politics is free-wheeling, focused primarily on 
the charisma of individual political leaders, and still largely 
oligarchic, with most wealth and political power concentrated among 
influential families.  President Gloria Macapagal Arroyo assumed the 
Presidency in 2001 after a "people power" movement swept out her 
predecessor, whom she recently pardoned after he was convicted of 
corruption.  She is a strong leader who has faced a series of 
challenges to her rule, including unsuccessful impeachment efforts 
and low-level military coup attempts.  The President's political 
position improved after May 2007 elections gave her allies a large 
majority in the House of Representatives, decreasing any impeachment 
threat.  With three years left in her term, the President appears 
intent on establishing her legacy, with a focus on the economy and 
jobs, infrastructure, and seeking stability and peace on Mindanao. 
 
 
------------------- 
ECONOMICS AND TRADE 
------------------- 
 
¶4. (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.  Texas 
Instruments broke ground this year on a $1 billion facility to 
produce microchips at the former Clark Airbase, while AES, a 
Virginia-based power generation and utility company, announced the 
$930 million acquisition of a large coal-fired power plant through 
the government's privatization scheme. 
 
¶5. (U) The Philippine economy performed well in 2007.  Although 
statistics for the entire year are not yet available, the economy is 
on track to grow at around seven percent for the entire year, the 
strongest growth and expansion in three decades.  Unemployment and 
inflation are down, and government revenues are up.  The peso soared 
against the dollar and climbed against other currencies, as well, on 
the back of respectable export growth and a surge in remittances by 
overseas Filipinos.  These positive macroeconomic developments have 
occurred in spite of factors that in the past might have shaken 
business confidence or dampened performance, including rising fuel 
prices, repeated corruption allegations against the Arroyo 
Administration, coup plots, terrorist bombings, and an unruly 
legislature. 
 
¶6. (SBU) 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 
economic reform and for the interests of U.S. business. 
 
¶7. (U) Intellectual property rights protection remains a significant 
concern, and the Philippines remains on the U.S. Trade 
Representative's IPR Watch List.  The Philippine government promotes 
IPR protection, and seizes IPR infringing materials including 
 
MANILA 00000059  002 OF 002 
 
 
clothing, software, and optical discs, but the lack of prosecutions 
and inability to obtain convictions is a major problem. 
 
¶8.  (U) The Philippines is a member of the World Trade Organization, 
and is a signatory to its major agreements.  However, over the past 
several years the Philippines has backed away from its former policy 
of unilateral tariff reduction, and has not been proactive in the 
Doha Round negotiations, especially on agriculture and market 
access.  The Philippines participates in several trade-related 
groupings of developing states, including the G-20 and the Cairns 
Group. 
 
------------------------ 
COUNTERTERRORISM EFFORTS 
------------------------ 
 
¶9. (SBU) Three U.S.-designated terrorist organizations are active 
and dangerous in the Philippines, despite significant military 
success against them over the past two years.  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.  A Joint U.S. Special Operations Task 
Force (JSOTF-P) of several hundred personnel provides direct support 
to the Philippine Armed Forces in Mindanao, sharing intelligence, 
advice, and assistance. The major thrust of U.S. development 
assistance is focused in conflict-affected areas of Mindanao through 
USAID to help reduce support for terrorists. The Philippine military 
has undertaken successful programs 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 
------------------------- 
 
¶10. (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.  While significant progress has been made on 
the territorial borders of the new political entity, 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. 
 
--------------------------------------------- -- 
HUMAN RIGHTS: COMBATING EXTRA-JUDICIAL KILLINGS 
--------------------------------------------- -- 
 
¶11. (SBU) President Arroyo has consistently expressed her commitment 
to resolve the problem of extra-judicial killings and has taken 
steps in this direction.  While many of these deaths and 
disappearances are more likely attributable to local disputes than 
to military or police action, it is clear the government must do 
more to ensure these crimes are fully investigated and responsible 
parties -- whether or not they are connected to military or police 
-- are brought to justice.  The government has created a police task 
force, special courts and an armed forces human rights office. 
Extra-judicial killings decreased dramatically in 2007, but more 
still needs to be done. 
 
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/ 
 
KENNEY