PRESIDENT ARROYO MEETS REP. ADAM SMITH

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 000104 SIPDIS SIPDIS SENSITIVE STATE FOR H, EAP, AND EAP/MTS E.O. 12958: DECL: 01/17/2018 TAGS: PREL PTER MOPS ECON EFIN RP SUBJECT: PRESIDENT ARROYO MEETS REP. ADAM SMITH Classified By: Ambassador Kristie A. Kenney, reasons 1.4 b and d. ¶1. (SBU) Summary: In a meeting January 10, President Arroyo and Rep. Adam Smith praised Philippine-U.S. counterterrorism cooperation and agreed on the need to combine military action with development assistance. President Arroyo has ordered her forces to focus on senior terrorist figures and believes the armed forces can end all insurgencies by 2010. The President is actively pursuing a peace deal with the Moro Islamic Liberation Front (MILF),and will seek to amend the constitution to allow for federalism. She encouraged U.S. and other diplomats press all sides of the factionalized MILF to seek peace. The President also highlighted the Philippines' strong economic growth and laid out her national development plan. End Summary. ¶2. (SBU) President Gloria Macapagal Arroyo opened her January 10 meeting at Malacanang with Rep. Adam Smith (D-Washington) by noting they had both just returned from visits to the Southern Philippines island of Mindanao, she to Cagayan de Oro and he to Zamboanga. She stressed that recent successes in the counterterrorism and counterinsurgency efforts there were due to the balanced use of both "hard" and "soft" power. ¶3. (SBU) The President went on to praise the "important partnership" between our two militaries, and voiced her pride at our accomplishments together in combating "hardcore terrorists" like the Abu Sayaaf Group (ASG) as well as Muslim insurgent groups. She said that she had recently instructed the armed forces and police to focus on key terrorists, in particular Jemaah Islamiyah member and suspected Bali bomber Dulmatin. She challenged the armed forces to end all insurgencies by 2010, and judged that good progress was evident, not only in Mindanao but against the communist New People's Army (NPA). Recent gains would "snowball" in coming months, she predicted, particularly against the NPA as more communist fronts were dismantled. The government was committing significant money and not just rhetoric in the fight against terror, including on military modernization. This effort was aided by "great" assistance from the U.S. on intelligence, training, and hardware. ¶4. (SBU) Rep. Smith praised the counterterrorism and counterinsurgency effort in Mindanao as a "model for efforts elsewhere," emphasizing that the U.S. was assisting the Philippines in its leading role. He said that the U.S. would like to provide as much equipment and hardware as it could to assist the Philippines. ¶5. (SBU) Turning to the peace process in Mindanao, President Arroyo stressed that the government was pushing for a final peace agreement with the Moro Islamic Liberation Front (MILF),with which a ceasefire had held since 2003. She acknowledged that the peace talks had hit a snag, and that the Philippines National Security Council was striving to resolve the problem. The MILF sought a federated status for its future political entity, and the Philippine government was now drafting a constitutional amendment to allow a federal structure for the country. No other amendments were contemplated, and key Philippine legislators had been consulted and agreed that only this provision would be considered. ¶6. (SBU) Meanwhile, the President asserted, the MILF was losing supporters -- down to 11,000 members -- and faced internal fractures. Some 6,000 members were controlled by MILF chairman Murad Ibrahim, a pragmatic man who is willing to discuss a peace deal. The next largest faction, headed by military Vice Chairman Aziz Mimbantas, opposes the peace talks in the belief that Murad's Maguindanaoan group is monopolizing the negotiation process, and will also monopolize the peace itself. The President suggested that foreign diplomats could help improve the situation by reaching out to Mimbantas as they had reached out to Murad, in an effort to make the vice chairman feel included. The U.S. had been very helpful in using both soft power and hard power in Mindanao, and now foreign diplomats needed to expand "back-channel" discussions not just with Chairman Murad, who controls 60 percent of the MILF, but also with Mimbantas, who controls 30 percent. ¶7. (SBU) The President provided a very upbeat assessment on the economy, noting that the Philippines had enjoyed 28 quarters of economic growth and hoped to post a growth rate of 7 percent for 2007. The original target for balancing the budget had been 2010 but might have actually been achieved in the last quarter of 2007, depending on final figures. Tax reforms in 2004-5 played a key role in the Philippines' MANILA 00000104 002 OF 002 improved economic situation. Before the reforms, the government had to borrow for all its expenditures -- infrastructure, salaries, debt service -- but now there were funds (and even some surpluses) for expenditures. ¶8. (SBU) The President outlined her development plan that divides the country into five "super regions," with each targeted for particulr types of improvements -- roads and ferries in outhern Mindanao, expressways and ports in Luzon, infrastructure for business process outsourcing i Cagayan de Oro, etc. Improving tourist attractons was also a priority. The most important goal however, was improved power infrastructure, andthe Philippines had already made strides in divesifying its power sources, with only 40 percent of power coming from fossil fuel. Geothermal, windand solar power, and biofuels were increasingly iportant. ¶9. (SBU) Unemployment was down and povrty was also slowly improving, but much more wasneeded, the President emphasized. The number ofjobless stood at 2.5 million, down from 4 millio. Polling data showed that some 50 percent of Fiipinos felt they lived in poverty, the lowest rate ever, and one index showed that just 25 percent of the population actually lived in poverty. But the government was increasing investment in social programs, including education, food supplements for school children, and improved teacher training, especially in English. Attaining peace in Mindanao would also aid this effort. ¶10. (C) In closing, Rep. Smith assessed that the United States had done a good job in providing useful intelligence to the Philippine government but that we needed to help the Philippines obtain more equipment to track and eliminate senior terrorist figures. Air assaults in particular had proven valuable in Iraq and Afghanistan, and Rep. Smith hoped the U.S. could provide equipment for this. Of course, there were many claims on U.S. military assistance resources, but the Philippines was a key partner in Southeast Asia, indeed our best partner in the region, he added. ¶11. (U) Representative Smith did not have the opportunity to clear this cable. KENNEY