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 SIPDIS 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. SIPDIS ¶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 SIPDIS 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 SIPDIS 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. Visit Embassy Manila's Classified SIPRNET website: http://www.state.sgov.gov/p/eap/manila/index. cfm You can also access this site through the State Department's Classified SIPRNET website: http://www.state.sgov.gov/ JOHNSON