SCENESETTER FOR VISIT OF DEPUTY SECRETARY ZOELLICK

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 001889

SIPDIS

FOR THE DEPUTY SECRETARY

E.O. 12958: DECL: 04/26/2015
TAGS: PREL OVIP PTER EAID ECON MARR RP
SUBJECT: SCENESETTER FOR VISIT OF DEPUTY SECRETARY ZOELLICK

REF: MANILA 1799

Classified By: Ambassador Francis J. Ricciardone, reasons 1.4 (b) and (
d)

Who we are
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1. (U) Manila is our fourth largest post, with about 265
American employees and 1000 locally engaged staff. Our aim
is to be the United States' best. The mission of our team of
26 USG agencies is to revitalize and carry to maturity the
US-Philippine partnership and alliance by strengthening our
mutual security, building our mutual prosperity, and
providing excellent service to Americans and Filipinos. Our
historic Chancery on the edge of Manila Bay was the site of
the war crimes trials of the Japanese commanders in the
Philippines in World War II and still proudly bears scars
from the Battle of Manila.

Counterterrorism
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2. (C) The Global War on Terrorism has propelled the
rebuilding of our military-to-military ties under the
framework of an 1951 Mutual Defense Treaty and a 1999
Visiting Forces Agreement. The Philippines became a Major
Non-NATO Ally in 2003. Four indigenous terrorist groups are
on the USG's Foreign Terrorist Organization list. Operatives
of the Jemaah Islamiyah are also present and are training
local terrorists, who conducted Asia's second most deadly
terrorist attack with the February 2004 bombing of a
"Superferry" in Manila Bay. They also bombed Manila and two
other cities on Valentine's Day 2005. We conduct military
training programs year-round (26 in FY 2005),including
humanitarian and civil action programs. We will provide $
29.76 million in Foreign Military Financing in FY 2005, along
with $ 3 million in IMET (the largest program in Asia and
second largest in the world). Our Joint Special Operative
Force-Philippines (JSOTF-P) provides Operations/Intelligence
Fusion to the Armed Forces of the Philippines in Mindanao to
improve the AFP's CT ability.


3. (C) Despite some military successes and captures or
killings of several terrorist leaders, we have not yet turned
the tide in the GWOT here. AFP performance is spotty at
best. Some field commanders remain reluctant to act
decisively. Opsec is inadequate. Although we are improving
AFP performance capabilities with our training and advice,
the AFP needs systemic reform. It will never reach our
operational goals without strong RP leadership, and sustained
US assistance. The Philippines Defense Reform initiative
begun in 2004, with the GRP providing most of the funding and
the USG only a minority share, has begun such a process of
institutional change. If sustained, it should lead to a more
professional, modern, and effective military establishment.


4. (C) We need to conduct a similar reform project for our
other key partner in the GWOT -- the Philippine National
Police, rated the most corrupt and broken of the key GRP
institutions of democracy and governance. As an initial
step, in late 2004 we requested INL funding for a "Management
Assessment of the Philippine Police" (MAPP),which would
provide a roadmap for systemic reform. The GRP is so
enthusiastic that it would like to sign a Memorandum of
Understanding on the MAPP during Foreign Secretary Romulo's
May 17 meeting with Secretary Rice. INL has not yet
committed funding to the project, although it plans to send a
team in June to consider this project.


5. (C) USAID's assistance programs in Mindanao (where about
60 percent of all its in-country funding goes) are an
effective tool in the local fight against terrorism. Over
25,000 former combatants of the Moro National Liberation
Front have already received livelihood assistance, and we are
awaiting a peace accord with the Moro Islamic Liberation
Front to offer similar assistance to MILF combatants. Our
other assistance programs are providing better health care,
education, and computers to local schools and have
transformed some former conflict areas -- notably Basilan
island -- into zones of peace where economic development is
again taking place. USAID-backed education assistance is
discreetly challenging the spread of extremist Islam through
private, often foreign-backed radical madrassahs in Mindanao
and even Luzon.

Economic woes
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6. (C) Despite respectable growth rates of 5-6 percent, the
Philippines has had by far the lowest overall growth among
the original ASEAN members over the past three decades. A
population growth rate of over 2 percent constrains per
capita growth. The Philippines also has one of the lowest
ratios of tax revenue to GDP in the region, about 11 percent.
Corrupt revenue bureaucracies, widespread tax evasion, and
special interest tax exemptions have led to fiscal deficits
and massive consolidated public sector debt, now about 140
percent of GDP. Debt service on the national debt consumes
over 40 percent of the national budget. Although Arroyo's
economic team receives high marks from the Philippine and
foreign business community, the GRP on occasion has shown
ill-considered interest in raising tariffs and arbitrarily
imposing new taxes as a source of badly needed revenues.


7. (C) The Philippines could serve as a "proof of concept"
country for President Bush's Millennium Challenge Initiative.
The GRP's concept paper to the Millennium Challenge
Corporation seeking funding as a Threshold Country addressed
some of these issues, notably anti-corruption efforts, where
USAID's assistance is already yielding results.
Strengthening the rule of law and the judiciary will also be
key to transform the Philippines and to create sufficient
economic progress to sustain growth and job creation.


8. (C) One of the safety valves for the Philippines has
been the export of Overseas Filipino Workers (OFWs),now
estimated at about ten percent of the total population or
twenty percent of the working population. They remit at
least $ 8 billion each year and help to maintain a positive
cash flow as the GRP manages debt service payments on its
public foreign debt of about $ 28 billion, of which more than
half is ODA lending.


9. (C) Unfortunately, the OFW phenomenon has also led to
abuses in the trafficking of persons; the GRP is currently
listed as a "Tier Two Watch List" Country but runs the risk
this year of a downgrade to Tier III, which the Embassy
believes is unjustified and therefore opposes. The progress
made in 2004 in instituting prosecutions under a 2003
anti-TIP law is encouraging. We have encouraged G/TIP's
Ambassador Miller to visit both to witness the GRP's
commitment to and to encourage further progress against TIP.

Services
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10. (U) With over 130,000 American citizens resident in the
Philippines, and visits by about 400,000 others annually,
there is a heavy demand for consular services. Our consular
staff adjudicated over 200,000 NIVs and 50,000 IVs in 2004,
while processing 10,000 US passport applications. The
Embassy hosts the only Veterans Affairs office outside the US
to provide services to this large community.
Ricciardone