DEFENSE SECRETARY CRUZ DETAILS PLANS TO IMPROVE

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 003846

SIPDIS

SECDEF/OSD/ISA/EA FOR ALLEN

E.O. 12958: DECL: 08/18/2015
TAGS: MOPS MARR MCAP PREL PTER PINS RP
SUBJECT: DEFENSE SECRETARY CRUZ DETAILS PLANS TO IMPROVE
THE AFP

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


1. (C) Summary. Defense Secretary Cruz's multi-faceted
reform agenda includes establishing new budget and
procurement procedures, buying counterinsurgency equipment,
revamping training, and restructuring Armed Forces of the
Philippines (AFP) intelligence services. The GRP hopes an
eventual peace deal with the Moro Islamic Liberation Front
will enable it to use its improved combat capabilities to
crush the Communist Party of the Philippines/New People's
Army (CPP/NPA) and defeat the Abu Sayyaf Group (ASG) and
Jemaah Islamiyah (JI) terrorists. Cruz is grateful for US
anti-terrorism assistance, and welcomes additional US help in
professionalizing the AFP's intelligence cadres. With some
notable budget reforms and acquisition successes already
under his belt, Cruz appears poised to bring about a
significant transformation of the AFP. However, the GRP's
financial constraints may impact Cruz's ability to get the
AFP the equipment it needs. End Summary.

ESTABLISHING A BUDGET
--------------


2. (SBU) During an August 17 courtesy call by Charge
d'Affaires Johnson, Secretary of National Defense Avelino
Cruz reviewed his plans to restructure the Armed Forces of
the Philippines (AFP). Cruz said he had broken the 46
billion peso (approximately $822 million) AFP annual budget
into seven clearly defined mission areas. In order better to
justify the budget to Congress (and to the Secretary of
Budget and Management),the budget makes clear specific
needs, including 400 million pesos ($7.15 million) to cover
increased fuel costs, 3.3 billion pesos ($59 million) for
counterinsurgency equipment, and 3 billion pesos ($53.6
million) for basic infrastructure upgrades for villages in
rebel-controlled areas.

IMPROVING ACQUISITION
--------------


3. (SBU) Cruz explained how improvements to the acquisition
system are now taking effect. To improve transparency,
representatives from the Catholic Bishops' Conference of the
Philippines (CBCP) and the Makati Business Club now have an
oversight role in the procurement process. Suppliers are
only permitted to talk to the bids and awards committee in an
open forum to avoid any appearance of favoritism or conflict
of interest.


4. (SBU) Cruz said he planned to create a corps of defense
acquisition specialists composed of 55 civilians and 55
military officers. "I told my service chiefs that I want
quality officers assigned to acquisition and that the quality
of the equipment they would get would be directly
proportional to the quality of acquisition officers they
supplied," Cruz stated. Charge commended Cruz for his budget
initiatives, noting that the United States strongly supported
the Philippine Defense Reform effort.

BUYING NEW EQUIPMENT
--------------


5. (C) Cruz said the Cabinet had just accepted in principle
his 18-year, 210 billion peso ($3.75 billion) plan to procure
new equipment for the AFP. The first phase would concentrate
exclusively on acquiring counterinsurgency equipment,
including radios, flak vests, squad automatic weapons, patrol
boats, and, helicopters. "This is basic equipment, not
modernization," Cruz commented, noting that LTG Romeo
Dominguez, the commander of North Luzon Command (an area of
intense Communist insurgent activity) had reported that his
troops needed to replace 30-percent of their rifle barrels.
"We're almost building from scratch," Cruz noted.


REVAMPING TRAINING
--------------


6. (C) Cruz said he also intended to improve training. The
incoming Philippine Army commander, MG Hermogenes Esperon,
had orders strictly to enforce Cruz's directive to train
twelve battalions annually. (Note: According to DAO, due to
their heavy operational tempo, some Philippine Army
battalions have not undergone training in over 13 years. End
note.) To win the counterinsurgency fight, Cruz said he
wanted to realign the AFP's force structure to add 2,700
junior officers. "We need small unit leaders who can think,"
Cruz said. Officer Candidate School offered the quickest way
to reduce the officer to troop ratio from 12:1 to 8:1; Cruz
plans an additional 550 million pesos ($9.8 million) in
upgrades to the Camp O'Donnell officer training facility in
Tarlac.

RESTRUCTURING INTELLIGENCE
--------------


7. (C) According to Cruz, the continued heightened terrorist
threat mandated a restructuring of AFP's intelligence
services. "We're afraid foreign elements are coming in to
try to indoctrinate Filipinos to commit suicide bombings,"
Cruz said, adding, "we have enough people but not in the
right place." Incoming AFP Chief of Staff LTG Generoso
Senga, because of his intelligence background, would take a
personal hand in developing a professional cadre of mid-level
intelligence officers focused on combating terrorism and
insurgency, Cruz explained.

MAKE PEACE WITH THE MILF; CRUSH THE NPA, ASG, AND JI
-------------- --------------


8. (C) Cruz said the GRP hoped an eventual peace agreement
with the separatist Moro Islamic Liberation Front (MILF)
would remove 10,000 MILF combatants from the fight, allowing
the AFP to concentrate its expanding combat power against the
CPP/NPA. Cruz indicated that the GRP's autonomy offer to the
MILF might include the right to exploit natural -- including
subsoil -- resources in a yet-to-be-defined "ancestral
domain" area, a long-standing MILF demand. Faced with the
AFP's improved capabilities, the CPP/NPA would collapse,
allowing the GRP finally to eradicate the Abu Sayyaf Group
and Jemaah Islamiyah threats, Cruz predicted.


9. (C) Increased USG engagement with Indonesia had improved
the situation with JI, Cruz said, adding that the Philippines
was closely cooperating with Indonesia and Malaysia on
patrolling their porous common borders. Cruz noted
Singaporean efforts to promote greater maritime cooperation
in the Malacca Straits, commenting that if an effective
mechanism developed there, it could serve as a template for
the adjoining seas. Cruz expressed worry about the growing
Muslim insurgency in southern Thailand, whose "viciousness"
and intensity were so alien to the Thai character. Charge
noted separatist feelings in Southern Thailand were based on
long-standing historical grievances, acerbated by Islamist
extremists.

PRAISE FOR US ASSISTANCE
--------------


10. (C) Cruz praised US counterterrorism assistance. US
intelligence fusion had provided active leads in the hunt for
JI and ASG terrorists. Security assistance training of the
Light Reaction Companies (LRCs) by Joint United States
Military Assistance Group Philippines (JUSMAG) had upgraded
the AFP's ability to react quickly to terrorist threats.
Cruz said he would also welcome US help in professionalizing
the AFP's intelligence services.

COMMENT
--------------


11. (C) Cruz, as usual, was well prepared with facts and
figures and a clear vision of where he wants to take the AFP.
He has already achieved some success in reforming the budget
and acquisition systems. His commitment to reform appears
firm despite the political distractions he faces, as a key
adviser of President Arroyo, from the incessant partisan
bickering and turbulence. Fiscal constraints, a
cash-strapped GRP budget, and rising fuel costs may
nonetheless impact Cruz's ability to achieve all of his goals.


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JOHNSON