Identifier
Created
Classification
Origin
05MANILA2278
2005-05-18 06:42:00
CONFIDENTIAL
Embassy Manila
Cable title:  

THE DEPUTY SECRETARY'S MAY 5, 2005 MEETING WITH

Tags:  PREL PTER MARR MASS MCAP ECON ETRD EFIN KISL 
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C O N F I D E N T I A L SECTION 01 OF 04 MANILA 002278 

SIPDIS

STATE FOR NEA/NGA AND EAP/PMBS
STATE ALSO FOR S/CT, DS/T/ATA, AND INL/AAE
DOJ FOR OPDAT, ICITAP, OIA, AND NIC
NSC FOR GREEN
DOD/ISA/AP FOR BG ALLEN

E.O. 12958: DECL: 05/18/2015
TAGS: PREL PTER MARR MASS MCAP ECON ETRD EFIN KISL
OVIP (ZOELLICK, ROBERT),KIPR, EAIR, EAID, SA, RP
SUBJECT: THE DEPUTY SECRETARY'S MAY 5, 2005 MEETING WITH
PHILIPPINE CABINET OFFICIALS

REF: A. MANILA 1748

B. MANILA 1961

C. MANILA 2042

D. MANILA 5502

Classified By: Political Officer Paul O'Friel
for reasons 1.4.(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 04 MANILA 002278

SIPDIS

STATE FOR NEA/NGA AND EAP/PMBS
STATE ALSO FOR S/CT, DS/T/ATA, AND INL/AAE
DOJ FOR OPDAT, ICITAP, OIA, AND NIC
NSC FOR GREEN
DOD/ISA/AP FOR BG ALLEN

E.O. 12958: DECL: 05/18/2015
TAGS: PREL PTER MARR MASS MCAP ECON ETRD EFIN KISL
OVIP (ZOELLICK, ROBERT),KIPR, EAIR, EAID, SA, RP
SUBJECT: THE DEPUTY SECRETARY'S MAY 5, 2005 MEETING WITH
PHILIPPINE CABINET OFFICIALS

REF: A. MANILA 1748

B. MANILA 1961

C. MANILA 2042

D. MANILA 5502

Classified By: Political Officer Paul O'Friel
for reasons 1.4.(b) and (d)


1. (U) May 5, 2005; 9:00 a.m.; Manila, the Philippines.


2. (C) SUMMARY. Anti-terrorism legislation will be on top of
the Arroyo Administration's agenda once the Philippine
Congress passes a value added tax. GRP officials told Deputy
Secretary Zoellick they hope to rally support around an

SIPDIS
Administration bill, and believe they have enough votes to
pass legislation. The GRP is optimistic about prospects for
peace with the Moro Islamic Liberation Front (MILF),with
some predicting an agreement before year's end. Divisions
within the MILF may cause the organization to splinter once
an accord is signed, with more radical elements continuing
the fight. Defense Secretary Cruz vowed to the Deputy
Secretary that if this happens, the Armed Forces of the

SIPDIS
Philippines would go after all those who do not support
peace. Philippine National Security Advisor Gonzales worried
about the impact of Wahabi proselytization in the
Philippines, but admitted that the presence of one million
Filipino workers in Saudi Arabia puts the GRP in a difficult
position. The Philippine government is committed to pursuing

reform of the Philippine National Police, similar to the
comprehensive effort now underway in the Armed Forces of the
Philippines. Economic prospects appear to be looking up,
with the passage of a "sin" tax, aggressive efforts to
increase revenues, a more serious campaign against
corruption, and an improved investment picture. The
Philippines hopes to have completed revisions to its
Millennium Challenge Account submission in time for the
upcoming meeting between the Secretary and Foreign Secretary
Romulo. END SUMMARY.

COUNTERTERRORISM OVERVIEW
--------------


3. (C) Executive Secretary Ermita opened the meeting with
senior members of President Arroyo's cabinet by asking
Philippine National Security Council (NSC) staff to provide
the Deputy Secretary an overview of GRP counterterrorism
efforts. Having faced insurgency and terrorism since the
1960's, the Philippines was now confronted with the danger of
Islamist extremism. As rival visions of Islam struggled for
dominance in the Muslim world, Jihadists were keen to export
their ideology, and threatened to turn the Philippines into a
proxy battlefield. To cope with this and other threats, the
Philippines had established in March 2004 the Anti-Terrorism
Task Force (ATTF). Grouping some 46 agencies, the ATTF
allowed the GRP to marshal and target scarce resources in the
anti-terrorism fight. As of May 2005, the ATTF claimed to
have captured or killed 115 terrorists, including 20 Jemaah
Islamiyah (JI) operatives.


4. (C) International support had proven key to this effort.
US, British, and Japanese training had improved capabilities,
but the GRP remained concerned about the changing nature of
the threat. Terrorists were developing expertise in bomb
making and the use of chemical agents, and vehicle-borne
explosives were growing dangers.


5. (C) Thanking Executive Secretary Ermita for this
overview, the Deputy Secretary stated he had come at the
beginning of the second Bush Administration to consult with
the Philippines and other close partners in the region on
economic, political, and security issues. Agreeing that the
fight against terrorism was a long-term struggle, Zoellick
noted that while significant progress had been achieved, it
was important to keep up the momentum. He asked Ermita for
an update on several issues:
- Anti-terrorism legislation;
- Peace negotiations with the Moro Islamic Liberation Front
(MILF);
- A possible mediating role for the US Institute of Peace
(USIP) in the negotiations;
- Defense reform; and,
- Comprehensive police reform.

ANTI-TERRORISM LEGISLATION IN THE WORKS
--------------


6. (C) Ermita said the Arroyo Administration was determined
to pass an anti-terrorism bill once Congress had completed
action on a value added tax. The DND and the Philippine NSC
had agreed on draft legislation and were now coordinating
with key House and Senate staff to rally support behind it.
National Defense Secretary Cruz, who is leading the fight,
stated he believed the Arroyo Administration would have
enough votes on the floor to pass the bill when it came to a
vote. Cruz noted the Administration's bill was a compilation
of UN proposals for effective anti-terrorism legislation that
included a "sprinkling" of elements from the UK's Prevention
of Terrorism Act. Cruz dismissed challenges from the left,
saying the prospective law would strike a good balance
between preserving rights and giving the state the legal
weapons it needed to fight terrorism.

DEALING WITH THE MILF
--------------


7. (C) Ermita said he was optimistic his government would
sign an agreement with the MILF before the end of 2005. The
resumption of formal talks in Kuala Lumpur under the auspices
of the Malaysian government had succeeded in tackling the
difficult issue of "ancestral domain." The GRP, Ermita said,
was keeping tabs on MILF support for the JI. While the MILF
as an organization had disassociated itself from terrorism,
renegade commanders persisted in providing sanctuary to the
JI and ASG. The threat of designation by the United States
as a foreign terrorist organization appeared to have had an
impact on the thinking of the MILF leadership, Ermita noted.


8. (C) Defense Secretary Cruz stated that during the latest
round of talks in Kuala Lumpur MILF negotiators appeared to
have set aside their previous insistence on an Islamic
republic, and seemed ready to work within the framework of
the existing Indigenous Peoples Rights Act, which would allow
the Bangsamoro people to exploit natural resources located in
the Autonomous Region in Muslim Mindanao (ref A). Cruz said
it was critical for the Bangsamoro people to believe they
could legitimately elect political leaders who reflected the
popular will. Granting them political power and economic
rights offered the best hope for a long-term solution.


9. (C) Ermita observed that MILF Chairman Murad had
constantly pressed him on how and when development assistance
could be funneled to Moro communities through the Bangsamoro
Development Agency (BDA). USAID and the USG had been very
helpful in providing assistance to Moro National Liberation
Front (MNLF) areas following the signing of the 1996 peace
accords, Ermita stated, and this formula could be replicated
with the MILF once a peace accord is signed.


10. (C) Cruz said he believed Murad could bring the majority
of the MILF with him in a peace accord, but a minority might
splinter off and continue to fight. If this happens, the AFP
will go after them, Cruz vowed. National Security Advisor
Gonzales pointed out two trends existed within the MILF --
the secular, represented by Chairman Murad, and the
religious. Hashim Salamat had started the process of
"Islamization" within the organization. "This is a tendency
that needs to be checked," Gonzales said, calling the process
worrying. Apparently less confident about the prospects for
an agreement in the near-term, Gonzales said, "What counts is
the cease-fire; what we sign is not as important as the
peace."


11. (C) Ambassador Ricciardone noted the Embassy and USAID
were in direct contact with the BDA and the MILF regarding
development assistance, and stood ready to provide help to
MILF areas free from terrorism. However, elements of the
MILF continued to allow the JI and ASG to seek shelter in
their areas. It made sense to identify these groups or
individuals and list them under the UN 1287 process. Given
Malaysian sensitivities, perhaps the GRP could sound them out
first on this point, and get them "to help lead the charge,"
the Ambassador suggested. The Deputy Secretary stressed our
intent to be helpful.
THE SAUDI QUESTION
--------------


12. (C) Noting National Security Advisor Gonzales' concern
about the possible negative influence of the Wahabi sect in
the Philippines, Ambassador Ricciardone said he had spoken
with Saudi Ambassador Mohammed Wali about this problem.
Recent evidence seemed to suggest that Saudi nationals were
moving money into the Philippines and passing it to JI
operatives. Mayor Sema of Cotobato City appeared to be
implicated in this traffic, which had recently caused USAID
to suspend a major road construction project in his town (ref
B). The United States was concerned that suspected Saudi
terrorism financiers had been allowed to leave the
Philippines, as had happened in three recent cases (ref C).
While Ambassador Wali had given assurances that these
individuals were taken into custody once they returned to
Saudi Arabia, we are uncertain whether this was true.
Gonzales agreed on the need to address this issue, adding
that the Philippines also wanted to screen Muslim
missionaries. However, the presence of one million
Philippine workers in Saudi Arabia put the GRP in a difficult
position.

DEFENSE REFORM
--------------


13. (C) On defense reform, Cruz said his goal was to upgrade
the capabilities of the Armed Forces of the Philippines (AFP)
in order to allow it to defeat the internal security threats
facing the country within six to ten years. The program to
do so consisted of four thrusts.

- Philippine Defense Reform (PDR),which was focused on
systematic structural change, was the largest component.

- The Capabilities Upgrade Program (CUP) aimed at modernizing
the AFP's equipment.

- A political settlement with the MILF would free up
resources, which would allow the AFP to defeat the Communist
insurgency.

- With the help of its allies, the GRP would continue to
upgrade its capabilities to target the JI and ASG.


REFORMING THE
PHILIPPINE POLICE ALSO A PRIORITY
--------------


14. (C) Ermita said his government hoped to pursue a similar
type of strategic reform effort with the Philippine National
Police (PNP),which having once been part of the AFP shared
many similar problems. Also engaged in the fight against
terrorism, as well as grappling with the challenges of
criminality, transnational crime, and narcotics, the PNP
needed a lot of assistance as it struggled to remake itself
in a comprehensive effort. The Deputy Secretary said while
there were limits on US resources, he would follow up to see
what could be done.

TRADE AND INVESTMENT ISSUES
--------------


15. (C) Finance Secretary Purisima provided a quick overview
of the economy. The Philippines was clearly in a difficult
situation, with about 90-percent of government tax revenue
going to debt service. To deal with this challenge, the
Arroyo Administration was focused on a series of key
objectives: reforming the tax structure; improving tax
efficiency; tightening budget controls; and, privatization.
The newly passed "sin" tax looked like it would generate
considerable revenues, Purisima predicted. Aggressive
prosecution of tax cheats would continue until habitual
evaders changed their mindset, as would the crack down on
smuggling and fight against graft and corruption. Purisima
claimed spending controls had already lowered the budget
deficit, but admitted that squeezing the budget could squeeze
growth. Responding to the Deputy Secretary's question on
whether the Philippines would revise its Millennium Challenge
Account submission, Purisima said, "We hope to have something
in time for the Romulo-Rice meeting."


16. (C) Trade Secretary Santos added investment had grown
last year, with sustained interest by Japan, Taiwan, and
China. The mining sector offered strong potential. Santos
said he regretted the Philippines remained on the Special 301
Priority Watch List, but was hoping that the mid-cycle review
would prove positive. The Deputy Secretary noted optical
media pirating issues remained a problem for the Philippines,
and would have to be resolved. He added Philippine
government policies on air cargo rights and other questions
built up over time, creating a negative image. Resolving
some of these issues would resonate positively in the global
business community.


17. (U) Participants:

U.S.
Deputy Secretary Robert Zoellick
Ambassador Francis Ricciardone
Deputy Assistant Secretary Marie Huhtala
D Executive Assistant Ross Wilson
Deputy Chief of Mission Joseph Mussomeli
Political Counselor Scott Bellard
JUSMAG Chief Colonel Mathias Velasco
Christian Castro, D Special Assistant for EAP
Christine Davies, D Special Assistant for Public Affairs
Adam Ereli, Public Affairs
Paul O'Friel (Notetaker)

GRP
Executive Secretary Eduardo Ermita
Secretary of National Defense Avelino Cruz

SIPDIS
National Security Advisor Norberto Gonzales
Secretary of Finance Cesar Purisima

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Secretary of Trade and Industry Juan Santos

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Acting Secretary of Foreign Affairs Edsel Custodio
BG (ret.) Cesar Garcia, Director General, National
Intelligence Coordinating Agency
LTG (ret.) Victor Mayo, Deputy Director General, National
Security Council
Assistant Secretary for American Affairs Ariel Abadilla


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

Visit Embassy Manila's Classified website:
http://www.state.sgov.gov/p/eap/manila/index. cfm
MUSSOMELI