MEETING WITH PRESIDENT ARROYO

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 004223

SIPDIS

E.O. 12958: DECL: 09/08/2015
TAGS: PREL PTER MOPS EAID ECON RP UNSC
SUBJECT: MEETING WITH PRESIDENT ARROYO


Classified By: Acting DCM Scott Bellard, reasons 1.4 (b) and (d)


1. (C) Summary. According to President Arroyo, the GRP
would still like to help with Hurricane Katrina and views our
bilateral relationship as strong. GRP positions on UN reform
are almost identical with the US. The GRP will continue
cooperation with the US on terrorism, including terrorist
financing. The GRP is now ready to endorse the Proliferation
Security Initiative. The peace process with the MILF is 80
percent complete, with more talks expected later in
September. The GRP is meeting or exceeding major economic
targets, even before implementation of the expanded VAT.
Millennium Challenge Corporation Threshold Country funding
will help further. Destabilization efforts and personal
security concerns had caused the GRP temporarily to put the
National Telecom Commission back under the Department of
Transportation and Communication. While distracted by such
concerns, Arroyo remains committed to strong cooperation and
good ties with the US, and would clearly welcome attention
and public statements from US leaders during the New York
meetings. End Summary.


2. (U) Charge d'Affaires Johnson, accompanied by A/DCM,
called on President Gloria Macapagal Arroyo (PGMA) at
Malacanang Palace on September 8. She was joined by Foreign
Secretary Alberto Romulo and Assistant Secretary Ariel

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Abadilla.

Hurricane Katrina
--------------


3. (U) CDA Johnson expressed thanks and appreciation to the
people and government of the Philippines for voicing sympathy
and support for the victims of Hurricane Katrina, and to the
GRP for its generous offer of assistance. PGMA said that it
was an "honor" to be able to help, noting the "world class"
quality of Philippine medical personnel, whom the GRP had
also sent to Aceh in the aftermath of last year's tsunami.
She reiterated commiseration with Hurricane Katrina's
victims, noting the tragedy was still ongoing. CDA explained
that the USG continued to assess various offers of assistance
and was trying to work out the best way to use them
effectively.

Bilateral
--------------


4. (SBU) PGMA said that she believed the US-Philippine
relationship was "very, very strong" and she asked for
statements of support from the USG. CDA noted that the
reason he was sent was to ensure that the relationship
remained strong and kept up its momentum.

UN
--


5. (C) CDA asked about PGMA's agenda at the UN during her
visit to New York September 13-15. PGMA underscored the
importance of the Philippine role as President of the UN
Security Council this month, describing the "focus of reform"
as on the UNSC. She said she expected further discussion at
the UNSC Summit, but admitted a lack of consensus. PGMA said
that the US and GRP had similar views and approaches on
"ninety-nine percent" of the UN reform issues. CDA urged
Philippine representatives in New York to be more vocal and
work closely with US counterparts. PGMA highlighted
Philippine support for a permanent UNSC seat for Japan, but
added that the time was not yet ripe for that step..

Terrorism
--------------


6. (C) CDA urged further efforts in the next few days to
capture Abu Sayyaf Group leader Khaddafy Janjalani in
Mindanao, noting the important implications of such a success
even beyond the Philippines. PGMA said that she had
instructed the military to "maximize support" from the US in
these operations.


7. (U) CDA explained that the Embassy, in conjunction with
the City of Manila and the Department of Foreign Affairs, was
organizing an event to commemorate victims of terrorism
worldwide on Sunday, September 11, and welcomed PGMA to
participate along with the Mayor and Acting Foreign
Secretary. PGMA did not respond.

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8. (C) PGMA reiterated the GRP's desire to receive
helicopters promised during her 2003 visit to Washington, and
noted that she believed the GRP had had a commitment from the
USG to receive them by April 2005. A/DCM clarified that
demands for helicopter parts for US forces in Iraq and
Afghanistan had caused some delays, but the process was
ongoing.


9. (C) CDA cited the importance of better controls on
terrorist financing, including from Saudi Arabia, and urged
more attention. PGMA and Romulo noted the GRP chairmanship
of the UNSC committee on terrorist financing and said that
the GRP "supported your concerns" on this committee.


10. (C) PGMA reiterated that passage of counter-terrorism
legislation was one of her top three legislative priorities.

Proliferation Security Initiative
--------------


11. (C) CDA urged GRP endorsement of PSI, while noting some
past participation in PSI-related activities. PGMA said that
"we're with you; whatever you want us to say, we will." She
asked that we craft a statement and provide to DFA for
issuance. Foreign Secretary Romulo clarified that an
inter-agency review was still ongoing on this issue, however.
CDA acknowledged some GRP concerns that Filipino seamen on
ships seized or inspected under PSI could be at risk, but
confirmed that they would not face criminal liability.
Romulo expressed appreciation for this important
clarification. PGMA concluded that "you can count on our
support."

Peace process
--------------


12. (C) PGMA admitted that negotiations between the Moro
Islamic Liberation Front (MILF) and the GRP had been
"informally put on hold" during the elections in the
Autonomous Region in Muslim Mindanao due in part to concerns
that Lakas party candidate Zaldy Ampatuan (the eventual
winner) was anti-MILF. She noted that Ampatuan had now
pledged to support the peace process. Romulo said that talks
would resume later in September. PGMA claimed that the
agreement is "eighty percent" complete, with only the
relatively less contentious issue of governance remaining.


13. (U) PGMA said that the GRP still wanted to avail itself
of USIP's help regarding advocacy and capacity building in
particular, but admitted continued Malaysian sensitivities.
CDA noted that USIP remained eager to help. He added that
the USG also hoped, once there is a MILF/GRP peace agreement,
to offer a program similar to USAID's successful LEAP ("Arms
to Farms") provided to the Moro National Liberation Front.

Economic issues
--------------


14. (SBU) PGMA noted that, even without the expanded VAT,
revenues were 7 billion pesos over target in August, as a
result of better collections, new taxes on alcohol and
cigarettes, and greater internal economies. She cited this
success as another sign that the government had not come to a
"standstill" due to the political turbulence. She added that
GRP spending remained 35 billion pesos under the deficit
ceiling. She said that Finance Secretary Teves was currently
reviewing tax rates and regulations, since then-Finance
Secretary Purisima had crafted these "when he was plotting

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against me." She noted some calls for deferment of
application of the VAT on power, which she noted the Senate
had added to the Administration's bill. She also said that
Teves was now working out the timing for the 70 pct input
credit cap, which will further hurt the power sector. She
pledged to reduce the tariff on imports of oil, but would not
predict by how much: "I don't want to micromange; I provide
strategic direction." She said such measures were important
to the "takeoff" on which the Philippines is now on the
verge. She cited effects on oil prices of increased energy
consumption by India and China and uncertainties in Iraq and
Venezuela, asked about the US position on reserves, and
speculated that world leaders would have to discuss how to
respond to "speculative actions" that affect oil prices. CDA
noted that President Bush had already authorized use of the
US Strategic Reserve in the aftermath of Hurricane Katrina.


15. (SBU) CDA noted that the Millennium Challenge
Corporation had approved the GRP's concept paper for the
Threshold Country program, and offered congratulations. He
cited the potential for substantial funding. PGMA said that
she thought this had happened several months ago, but Foreign
Secretary Romulo explained that the GRP had only met its

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deadline several months ago to submit the concept paper. He
added that participation in MCC could also advance Millennium
Declaration goals, as would the proposed "debt-for-equity"
swap advanced by the GRP. CDA noted that the USG was
examining this proposal carefully and would respond soon to
House Speaker De Venecia's letter to the President.


16. (C) CDA raised concerns about the transfer of the
National Telecom Commission to the Department of
Transportation and Communication. PGMA explained that the
transfer was "temporary" but was needed because "I am in a
security situation with the ongoing destabilization efforts."
She promised that the GRP was "committed to the direction
that we have been taking" and would not change, but DOTC
would have to oversee the NTC until the "destabilizers stop."
She cited her "obligation to defend my continued stay here,"
despite these efforts and people power movements in Manila.

Comment
--------------


17. (C) PGMA's concerns about security and destabilization
were unusually explicit. Totally absent were any plans for a
political and historical legacy to include Constitutional
reform that could potentially shorten her term in office.
While clearly distracted by these concerns, she remains
committed to a strong bilateral relationship and to
cooperation on issues of major importance to us, including
global terrorism and UN reform. She would clearly welcome
opportunities to meet US leaders in New York and to bring
home with her some positive statements for domestic
consumption.

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JOHNSON