THE DEPUTY SECRETARY'S MAY 5 MEETING WITH

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 002277

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E.O. 12958: DECL: 05/18/2015
TAGS: PREL PTER MARR ECON OVIP RP CH BM IZ SU ID
SUBJECT: THE DEPUTY SECRETARY'S MAY 5 MEETING WITH
PRESIDENT ARROYO


Classified By: Acting Political Counselor Joseph L. Novak
for reasons 1.4 (b) and (d).


1. (U) May 5, 2005; 10:00 a.m.; Manila, the Philippines.


2. (C) Summary: President Arroyo underscored to the Deputy
Secretary on May 5 that she considered the U.S. to be the

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Philippines' closest partner in dealing with security,
economic and other issues. She confirmed that her government
strongly supported efforts to combat terrorism and was moving
forward with anti-terrorism legislation. She stated her
support for negotiations with the Moro Islamic Liberation
Front (MILF) but remarked that the MILF's division into
different factions made negotiations difficult. The Deputy
Secretary noted the importance of defense reform in the fight

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against terrorism. Arroyo agreed and asked that the U.S.
provide similar support for the Philippine National Police
(PNP). The Deputy Secretary said we would look into this.
Arroyo said she was pleased with her government's economic
reforms, but admitted that they were painful for much of the
populace.


3. (C) Summary (Continued): Turning to regional and
international issues, Arroyo said Chinese President Hu
Jintao's recent visit had gone very well. It was her view
that China wanted stability in the region and knew that it
had responsibilities that came with its fast-growing economy.
The GRP remained concerned about Burma taking over ASEAN's
rotating chairmanship and believed that Burma would defer due
to opposition from other ASEAN countries. Arroyo said the
GRP maintained good relations with Indonesia and she was
impressed with President Yudhoyono. The Deputy Secretary
asked for Philippine support in the UN Security Council
regarding Sudan and Darfur. Arroyo replied that the U.S.
could count on continued strong support. The Deputy
Secretary also briefed President Arroyo about progress in

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Iraq. End Summary.


4. (C) President Arroyo underscored to the Deputy Secretary
that she considered the U.S. to be the Philippines' closest
partner in dealing with security, economic and other issues.
She remarked that the millions of Filipino-Americans were a
living example of our enduringly close ties. Relations had
improved since she and President Bush had taken office in
2001, and September 11 in particular had drawn the two
countries together. The Deputy Secretary expressed
appreciation to the GRP, noting that the U.S. wanted to
continue to work closely with the Philippines. He was going
to visit Corregidor later in the day to underline the
lasting, historical nature of the U.S. partnership with the
Philippines.


5. (C) The Deputy Secretary noted that the GRP had made
counter-terrorism a high priority and he asked about progress
in that area. Arroyo said one of her government's highest
priorities is to enact comprehensive anti-terrorism
legislation, and the GRP now believed it had enough support
in the House and Senate to move it forward. She emphasized
that there would be no compromise on the issue of terrorism,
but she added that terrorists had been embedded in Mindanao
long before she had become president. The GRP was doing its
best to root them all out and destroy their enclaves.
Departing from the standard Philippine view that the New
People's Army (NPA) posed the most serious threat to the
country, Arroyo pointedly declared that destroying the JI
(Jemaah Islamiyah) was its highest priority. She warned,
however, that the war against terrorism would be a protracted
struggle. For example, many terrorists were freely using sea
routes in the region to transit from country to country.
This ease of access had to be addressed.


6. (C) The Deputy Secretary asked about the MILF and the
situation in Mindanao. Arroyo responded that the MILF was
not a cohesive group, which made negotiations difficult.
Murad Ebrahim, the MILF leader, had support from many in the
group, but not from everyone. Some elements of the MILF were
cooperating with the JI. Nonetheless, negotiations with the
MILF would draw the more moderate members of the MILF towards
a more peaceful solution, and the recent talks in Kuala
Lumpur on such issues as ancestral domain had gone well. NSC
Advisor Gonzales remarked that he was both optimistic and not
optimistic about the talks. He noted that he was worried
that the MILF might take an intransigent position regarding
ancestral domain, which would be difficult to reconcile.
Arroyo said the GRP would continue war with those MILF
elements who coddled the JI, and the GRP had communicated
that to Murad. The President thought that most people in
Mindanao wanted peace. There were elements, however, in some
areas where there has been conflict who were hawkish, verging
on "anti-Muslim." These elements really did not support
negotiations with the MILF, fearing that the government might
give in on too many issues. As the elected president with
five years left in her term, however, Arroyo said she was no
longer too worried about her political situation and wanted
to do the right thing. Overall, the GRP would continue to
deploy a comprehensive political, military, and development
strategy to defeat terrorism. Focusing excessively on any
single aspect of this strategy would not succeed. The Deputy
Secretary agreed that such a comprehensive strategy was

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needed -- the U.S. knew that well in regards to its own
engagement in Iraq and elsewhere.


7. (C) The Deputy Secretary, noting that the issue had been
discussed in an earlier meeting (septel),cited the success
of defense reform in the Philippines. Arroyo agreed and
asked that the U.S. provide similar support for reform and
modernization of the Philippine National Police (PNP). She
said she believed that the same template -- including a
baseline assessment -- that had been used for defense reform
would also work for the PNP. The Deputy Secretary replied
that he would look into how we could assist in this area. He
commented that it was also important that the GRP give PNP
reform a real push.


8. (C) The Deputy Secretary asked about the government's
economic reforms. Arroyo said her administration was moving
forward with a comprehensive package and having success in
doing so. She believed, for example, that her
administration's proposed two percent rise in the Value Added
Tax (from 10 percent to 12 percent) would win legislative
approval soon. However, the reforms were difficult and had
proved painful for many people. Her popularity, in fact, had
suffered and she had to walk a tightrope at times. Asked
about tax revenues, Secretary Purisima admitted that
enforcement was a problem. Another problem was that many
export and other enterprises were duty free and not subject
to tax.


9. (C) The Deputy Secretary asked about Chinese President Hu
Jintao's April 26-28 visit. President Arroyo offered her
view that China wanted stability in the region. Hu Jintao
indicated that China supported the Six-Party Talks and
constructive engagement with Taiwan. Queried about whether
China had given any hints regarding its fixed currency
exchange rate, she replied that she had little information on
where the Chinese stood on that, but Hu Jintao knew that
China had responsibilities that came with its fast-growing
economy. Asked about China-Japan tensions, the President
said she believed that the two countries wanted to reconcile.
Prime Minister Koizumi's recent comments had been eloquent
and hopefully would calm down the situation. China appeared
to have been worried that anti-Japan protests might get out
of hand.


10. (C) The Deputy Secretary commented that the U.S. wanted
to see ASEAN strengthened further, and that it would be a
serious setback for our ability to engage if Burma assumed
the rotating chairmanship of the organization in 2006.
Arroyo said the GRP shared this view and had always been on
the front lines supporting democratic change in Burma. The
Deputy Secretary said he had understood from the Thais that
Burma seemed inclined to defer taking the chairmanship.


11. (C) Asked about Indonesia, Arroyo said she was very
impressed with President Yudhoyono, although she did not know
him well. Based on her experience during the recent
Asian-African Summit, Indonesia appeared to be going through
a very difficult time in the aftermath of the tsunami. The
Deputy Secretary remarked that he would be visiting Aceh
Province to check on the relief efforts there. Arroyo
indicated satisfaction with the exchange of information
between the GRP and the Indonesian government in the area of
counter-terrorism.


12. (C) The Deputy Secretary noted that the U.S. considered
the Philippines' role on the UN Security Council (UNSC) to be
important. The U.S. hoped to be able to call on continued
Philippine support on Darfur. There appeared to be signs
that perhaps the political dynamics in Sudan were turning
positive and that that could help the situation in Darfur.
Arroyo replied that the GRP would continue to support the
U.S. at the UNSC.


13. (C) The Deputy Secretary shared some impressions from
his mid-April visit to Baghdad and Fallujah. In the
aftermath of the January elections, a real political process
was taking hold. Further political, military and economic
engagement by the U.S. and other international partners was
crucial. A comprehensive approach that included political,
economic and security elements will be necessary to defeat
the insurgency in Iraq and put the country on a long-term
path. The U.S.and Europe would host a conference on June 22
to show support for the new, democratically-elected
government of Iraq. There had been many inefficiencies built
into the Iraqi economy over the years by Saddam Hussein's
regime and much work was needed to improve the economic
situation.

14. (U) Participants:

U.S.:
The Deputy Secretary
Ambassador Francis J. Ricciardone
EAP Deputy Assistant Secretary Marie Huhtala
D Executive Assistant Ross Wilson
D Special Assistant for Outreach and Public Affairs
Christine Davies
D Personal Assistant Lisa Martilotta
Public Affairs Officer Adam Ereli
D Special Assistant Christian Castro
Deputy Chief of Mission Joseph A. Mussomeli
Political Counselor Scott D. Bellard
Deputy Political Counselor Joseph L. Novak (Notetaker)

Philippines:
President Gloria Macapagal-Arroyo
Executive Secretary Eduardo Ermita
Defense Secretary Avelino Cruz
Finance Secretary Cesar Purisima
Trade and Industry Secretary Juan Santos
NSC Advisor Norberto Gonzales
Press Secretary and Presidential Spokesperson Ignacio Bunye
Acting Secretary of Foreign Affairs Edsel Custodio
Assistant Secretary for American Affairs Ariel Abadilla


15. (U) D Staff has reviewed has reviewed this telegram.

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