VZCZCXYZ0000
OO RUEHWEB

DE RUEHML #1998/01 2350928
ZNR UUUUU ZZH
O 220928Z AUG 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1672
INFO RHHMUNA/CDRUSPACOM HONOLULU HI IMMEDIATE

UNCLAS MANILA 001998 
 
 
STATE FOR EAP/MTS AND EB/TRA 
STATE PLEASE PASS TO PEACE CORPS JIM METZGAR 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PREL RP
SUBJECT: SCENESETTER FOR PEACE CORPS DIRECTOR TSCHETTER'S VISIT TO 
THE PHILIPPINE 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1.  (SBU) Welcome to the Philippines!  You are coming at an 
interesting and challenging time.  Increasing food and energy prices 
have put the economy and the social situation under strain, 
increasing the incidence of poverty.  Legal challenges before the 
Philippine Supreme Court aborted the long-awaited signing of a 
memorandum of understanding (MOA) between the Philippine government 
and the Moro Islamic Liberation Front (MILF), triggering conflict 
between government forces and Moro rebels in a number of communities 
in the southern Philippines.  The annual cycle of weather-related 
disasters is also well underway bringing typhoon-related crop damage 
to several regions.  Your visit presents an opportunity to highlight 
the spirit of volunteerism and the role of the Peace Corps at a time 
when President Gloria Macapagal-Arroyo has repeatedly called for the 
government, private sector, and development partners to work 
together to alleviate poverty, overcome disaster, contribute to 
development, and promote peace. 
 
Activities in a Nutshell 
------------------------ 
 
¶2.  (U) During your visit, you will be briefed by the Mission 
Country Team; meet with Secretary of Foreign Affairs Alberto Romulo; 
pay a courtesy call on President Gloria Macapagal-Arroyo; and 
participate in a number of media events.  You will also fly to 
Dumaguete City (the capital city of Negros Oriental in the Central 
Philippines) to meet with Peace Corps officials and volunteers and 
view a USAID wastewater treatment project. 
 
The Economy in Brief 
-------------------- 
 
¶3.  (U) The United States is the Philippines' largest trading 
partner, with over $17.1 billion in two-way merchandise trade in 
¶2007.  Major U.S. exports include electronics and agricultural 
products.  The U.S. is also the largest investor here, with over 
$6.6 billion in equity. The Philippine economy grew by 7.3% in 2007, 
the fastest pace of growth in over three decades.  Gross Domestic 
Product (GDP) growth is expected to slow in 2008, but still reach a 
respectable 5-5.5%, spurred in part by a resilient service sector 
(particularly a booming Business Process Outsourcing industry) and 
strong overseas workers remittances (expected to hit $16 billion in 
2008, more than 11% of Philippine GDP). 
 
¶4.  (U) Record economic growth and an improved image moved the 
Philippines up five places to 40th in the latest World 
Competitiveness Yearbook rankings, its best performance since it 
joined the listing over a decade ago.  President Arroyo has an 
impressive reform agenda -- privatizing the electric power sector, 
building infrastructure, increasing education and health funding, 
and reducing business red tape -- but still faces significant 
hurdles, particularly to improving the investment climate and 
addressing corruption. 
 
¶5.  (U) There has been limited progress over the past decade in 
reducing poverty and addressing the inequitable distribution of 
incomes.  According to recently released poverty statistics, poverty 
increased between 2003 and 2006 to engulf a third of the population. 
 Spurred by surging food and fuel prices, inflation has accelerated 
this year, reaching 12.7% in July, a seventeen-year high.  High 
inflation will push even more Filipinos into poverty, challenging 
the government to balance subsidies and hunger alleviation programs 
for the poor against fiscal consolidation goals. 
 
¶6.  (SBU) Socio-economic development in the Philippines is uneven 
and poverty is characterized by wide disparities across regions and 
populations, even during periods of high economic growth.  Poverty 
is especially severe in rural areas.  Most of the lagging regions 
and provinces are in Mindanao while the frontrunners are in Luzon 
island.  Overall, 47% pf Mindanao's population subsisted below 
government-established poverty thresholds during 2006, much higher 
than Luzon's 28% poverty incidence.  While Mindanao features some of 
the country's more progressive cities and municipalities, human 
development indices of some of Mindanao's most depressed provinces 
approximate the world's poorest countries (such as Ghana, Sudan, and 
Zimbabwe). 
 
Millennium Development Goals (MDGs) 
---------------------------------- 
 
¶7.  (U) The Philippines has made progress in reducing extreme hunger 
and expects to reduce the incidence of food-poor Filipinos from 
14.6% (2006) to its 10.2% MDG target by 2015.  Although hopeful, the 
country is farther off reducing the overall incidence of poverty 
(which also includes being able to afford basic non-food 
 
requirements) from nearly 33% (2006) to 22.7% by 2015.  Although 
progress across regions is uneven, the Philippines is moving towards 
achieving national MDG targets involving, among others, child 
nutrition and child mortality; gender equality; combating HIV/AIDS 
and malaria; access to clean water and sanitation facilities; and 
selected indicators on environmental sustainability. 
 
¶8.  (U) However, progress has been slow in other important MDG goals 
and the Philippines is unlikely to meet MDG targets on universal 
primary education and 100% elementary completion rates; a 100% 
literacy rate for Filipinos in the 15-24 year-old age bracket; 
maternal mortality; access to contraceptives (reflecting resistance 
from the Catholic Church); and the proportion of households 
(particularly slum dwellers) with access to secure land tenure.  The 
enrollment ratio in primary education stood at 83.2% in 2006, lower 
even than in 1990 (84.6%).  The ratio of pupils who started and 
completed elementary education improved only modestly between 1990 
(69.7%) and 2006 (73.4%), which makes it improbable that the 
Philippines will achieve the 100% target by 2015.  The literacy rate 
of the 15-24 year old segment of the population is no better 
currently than it was in the early 1990s (96.6%), not a good 
prognosis for achieving 100% literacy for this age group by 2015. 
 
The Political Situation 
----------------------- 
 
¶9.  (SBU) President Gloria Macapagal Arroyo assumed the Presidency 
in 2001 after a "people power" movement swept out her predecessor, 
whom she subsequently pardoned after he was convicted of corruption. 
She is a tenacious 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 
two 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 in Mindanao. 
 
¶10.  (SBU) The Mindanao peace process suffered a major setback with 
the aborted signing of the memorandum of agreement on ancestral 
domain between the Philippine government and Moro Islamic Liberation 
Front (MILF) on August 5 in Kuala Lumpur.  Acting on petitions of 
local government officials opposed to the expansion of the Muslim 
territory, the Supreme Court issued a temporary restraining order 
against the signing of the agreement and in response, the government 
has decided to review the terms of the agreement.  Disappointed with 
the government's failure to conclude the agreement, the MILF -- in 
violation of the ceasefire agreement -- initiated a series of 
attacks in several communities in central Mindanao.   The attacks 
have killed at least 50 and displaced some 70,000 civilians and 
President Arroyo ordered the Armed Forces to "defend every inch of 
territory" against the MILF forces.  The Philippine military has 
responded decisively, but with discipline.  MILF military capability 
has been degraded and civilian casualties have resulted in a public 
and political backlash against the MILF.  Nevertheless, the 
government has reiterated its commitment to pursuing the peace 
process, once peace and order are restored. 
 
Human Rights Issues 
------------------- 
 
¶11.  (SBU) President Arroyo has consistently expressed her 
commitment to resolving the complex problem of extra-judicial 
killings and has taken several steps in this direction. With 
increased domestic and international pressure, the number of 
extra-judicial killings decreased dramatically in 2007, but more 
still needs to be done. 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 or not they are connected to the 
military or police -- are brought to justice. The problem is closely 
related to a judicial system which is inefficient and strained 
beyond its capacity.  Problems such as violence against women, abuse 
of children, child prostitution, child labor, trafficking in 
persons, and ineffective enforcement of worker rights are also 
common. 
 
Challenges 
---------- 
 
¶12.  (U) Attaining development objectives involves key, 
cross-cutting issues, principally: addressing wide disparities 
across regions; curbing high population growth; improving 
agricultural productivity; accelerating implementation of basic 
education and health reforms; boosting infrastructure; harnessing 
 
fiscal resources; strengthening the capacity of local government 
units; effective law enforcement; improving the investment climate; 
promoting transparency and accountability; addressing peace and 
security issues; and strengthening public-private-donor 
partnerships.  President Gloria Macapagal-Arroyo has called 
repeatedly for unity and strong partnerships as the country grapples 
with global economic challenges and domestic political concerns with 
limited resources.  Your visit to the Philippines provides a timely 
opportunity to reiterate continued U.S. government support for 
development and poverty reduction efforts, to promote volunteerism, 
and to highlight the U.S. Peace Corps' role in these areas. 
 
Kenney