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'

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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