SCENESETTER FOR CODEL INOUYE

UNCLAS SECTION 01 OF 04 MANILA 000123

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP AND H
SEOUL PLEASE PASS TO CODEL INOUYE

E.O. 12958: N/A
TAGS: OREP AMGT ASEC AFIN RP KS
SUBJECT: SCENESETTER FOR CODEL INOUYE


1. (SBU) Summary: Embassy warmly welcomes Senator Inouye and
Senator Stevens back to the Philippines! The relationship
and spirit of partnership between the United States and the
Philippines are strong. U.S. interests in this major
non-NATO ally center on strengthening democracy, fostering
economic growth, fighting terrorism, and providing superb
services to our American and Filipino publics. The U.S. is
the Philippines' largest trading partner, the largest
investor, and the largest donor of grant foreign assistance.
During your visit, you will meet with President Arroyo and
will travel to the southern island of Mindanao to see
first-hand our joint counterterrorism and development
efforts. Our entire team looks forward to making your visit
productive and useful. End Summary.

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BACKGROUND
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2. (U) The Philippines, with almost 90 million people, has
one of the fastest-growing populations in Asia. Metro
Manila, home to at least 12 million people, is the largest
city in a country made up of over 7,000 mainly mountainous
islands. Literacy (94%) remains high, although the standard
of public education and other government services is weak.
Filipinos are mainly Roman Catholic (83%) or otherwise
Christian (10%),with a Muslim minority (6%) in the southern
island of Mindanao and in Manila. Approximately 38 percent
of Filipinos earn less than $2 per day, with a much higher
percentage of Muslims in Mindanao eking out a living below
this threshold.

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PHILIPPINE POLITICS
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3. (SBU) Philippine politics is free-wheeling, focused
primarily on the charisma of individual political leaders,
and still largely oligarchic, with most wealth and political
power concentrated among influential families. President
Gloria Macapagal Arroyo assumed the Presidency in 2001 after
a "people power" movement swept out her predecessor, whom she
recently pardoned after he was convicted of corruption. She
is a strong leader who has faced a series of challenges to
her rule, including unsuccessful impeachment efforts and
low-level military coup attempts. The President's political
position improved after May 2007 elections gave her allies a
large majority in the House of Representatives, decreasing
any impeachment threat. With less than two and a half years
left in her term, the President appears intent on
establishing her legacy, with a focus on the economy and
jobs, infrastructure, and seeking stability and peace on
Mindanao.

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ECONOMICS AND TRADE
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4. (U) The U.S. is the Philippines' largest trading partner,
with over $17.3 billion in two-way merchandise trade. Major
U.S. exports include electronics and agriculture. The U.S.
is also the largest investor here, with $6.6 billion in
equity. In 2007 Texas Instruments announced further
investment of $1 billion in microchip production, while AES,
a U.S. power company, acquired a coal-fired power plant for
$930 million. The Philippine economy grew about seven
percent in 2007, the strongest expansion in three decades.
Unemployment and inflation are down, and government revenues
are up, even in the face of rising fuel prices, continued
corruption allegations, terrorist bombings, and political
tumult. President Arroyo has an impressive reform agenda --
privatize the electric sector, build infrastructure, increase
education funding, reduce business red tape -- but still
faces significant hurdles, particularly in improving the
investment climate.

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COUNTERTERRORISM EFFORTS
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5. (SBU) Three U.S.-designated terrorist organizations are
active and dangerous in the Philippines, despite significant
military success against them over the past two years. Parts
of Muslim Mindanao remain a sanctuary for terrorists who are
responsible for bombings in the Philippines and Indonesia,
and kidnapping and killing of Americans and Filipinos. A
Joint Special Operations Task Force (JSOTF-P) of several

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hundred personnel provides direct support to the Philippine
Armed Forces in key locations in Muslim Mindanao, sharing
intelligence, advice, and assistance. The major thrust of
U.S. development assistance is focused through USAID in
conflict-affected areas of Mindanao, to help reduce support
for terrorists. President Arroyo is justly proud that the
Philippine military has scored successes against several top
terrorist leaders in its focused military operations.
Equally impressive are the military's successful efforts to
help separate local populations from insurgents through
extensive civil-military and humanitarian activities.
Separately, the New People's Army of the Communist Party
continues to extort, bomb and attack remote police and
military outposts.

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IMPROVED COMBAT PROWESS
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6. (SBU) With U.S. support, the Armed Forces of the
Philippines (AFP) is demonstrating improved combat capability
in its ongoing counterterrorism operations on the southern
island of Jolo. AFP troops -- including soldiers, Marines,
airmen, and sailors -- have remained engaged in sustained
action against Abu Sayyaf and Jemaah Islamiyah terrorists
since August 1, 2006. Improved operational readiness rates
for aircraft and vessels, casualty treatment, night
helicopter medical evacuations, and tactical field skills are
directly attributable to U.S. training, advice, and
assistance. Successful operations have led to the deaths in
military operations of Khadaffy Janjalani and Abu Solaiman,
the top two leaders of the Abu Sayyaf Group, and kept Jemaah
Islamiyah terrorists on the run.

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COMMITMENT TO DEFENSE REFORM
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7. (SBU) The Philippines' Defense Reform Program is gradually
transforming the Philippine military into a more transparent,
accountable, and effective institution. The effort was
strengthened when Secretary of National Defense Gilberto
Teodoro recently assumed personal responsibility for the
reform program. This U.S.-supported effort aims at a
complete restructuring of the military establishment, ranging
from personnel management and logistics to acquisition and
training. With the advice of the Joint U.S. Military
Assistance Group and a 13-member team of U.S. experts, the
AFP and Department of National Defense have already
registered significant gains. U.S. Special Force troops are
helping jumpstart the newly-begun Battalion Retraining
Program, which will retrain all 72 Army and 12 Marine
battalions.

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PEACE PROCESS IN MINDANAO
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8. (SBU) Negotiations with the Muslim insurgency, under
Malaysian auspices, are making headway toward establishing a
larger Muslim political entity within the Philippines that
would determine its own governing structure. While
significant progress has been made on the territorial borders
of the new political entity, the challenge will be to bring
together Mindanao's diverse Muslim, Christian and native
communities. We are pressing for concrete progress on this
complex agenda this year. Successfully achieving peace in
Mindanao would make the Philippines a stronger, more
outward-looking partner, while also denying terrorists
ungoverned spaces.


9. (U) Development assistance from the U.S., complemented by
increasing support from the World Bank, Japan, Australia, and
others, has established growing zones of peace and private
sector-led growth in Mindanao. About 60% of USAID's annual
development assistance is channeled to conflict-affected
areas of Mindanao to promote economic opportunities, build
infrastructure, and carry out health, renewable energy,
environment, education, local governance, and livelihood
programs. These programs attack the conditions of poverty
that provide breeding grounds for terrorists. USAID
coordinates its activities with the U.S. military's Civil
Affairs programs. Our exchange programs for students and
community leaders offer a chance to interact with responsible
and moderate Muslims.

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HUMAN RIGHTS: COMBATING EXTRA-JUDICIAL KILLINGS
-------------- --


10. (SBU) President Arroyo has consistently expressed her
commitment to resolving the complex problem of
extra-judicial killings and has taken several steps in this
direction. While many of these deaths and disappearances are
more likely attributable to local disputes than to military
or police action, it is clear that the government needs to do
more to ensure that these crimes are fully investigated and
that responsible parties -- whether or not they are connected
to military or police -- are brought to justice. The problem
is closely related to a judicial system which is strained
beyond its capacity and inefficient. The government has
responded with a police task force to investigate the
killings and file charges; specially designated courts to
handle them; a rejuvenated Presidential Human Rights
Commission, a new Armed Forces Human Rights office to
investigate allegations; and additional funding for the
Commission on Human Rights. The number of extra-judicial
killings decreased dramatically in 2007, but more still needs
to be done.

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SERVING PEOPLE
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11. (U) The Consular Section provides services (reports of
birth, passports, notarial, and emergency support) to the
approximately 130,000 Americans living in the Philippines as
well as the additional roughly 120,000 visiting the
Philippines at any given time. State Department officers
issue about 60,000 immigrant visas a year, including visas to
large numbers of nurses, teachers, and physical therapists.
We interview almost 200,000 nonimmigrant visa applicants
annually, including large numbers of merchant mariners and
temporary seasonal workers.

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VETERANS SUPPORT
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12. (U) The U.S. Department of Veterans Affairs Manila
regional office and outpatient clinic are the VA's only
full-service facilities in a foreign country. In FY 2007, VA
provided $165 million in monetary benefits to 15,000 veterans
and dependents -- both American and Filipino -- in the
Philippines and health care to another 4,000 veterans.
Filipino veterans receive benefits based on their service
under U.S. command in World War II. The Philippine
government and Philippine veterans associations are lobbying
for enactment by the U.S. Congress of the Filipino Veterans
Equity Act (House Resolution 760),which would provide
additional benefits to some Filipino WWII veterans and their
dependents.

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THEMES AND TALKING POINTS
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14. (SBU) You may wish to draw on the following themes in
your meetings:

-- The Philippines is a vital partner in the fight against
terrorism to secure peace and prosperity for our two
nations. Our delegation looks forward to learning more about
U.S.-Philippine cooperation during this visit.

-- U.S. military forces are here at the invitation of the
government of the Philippines to provide assistance and share
information with the Philippine military. Together, we
provide health care, build schools, and provide clean water
to communities in need.

-- Philippine Defense Reform is transforming the Armed Forces
of the Philippines into a more modern, capable force. We are
proud to be partners in this program.

-- We take the issue of extra-judicial killings seriously.
Suspects need to be apprehended and tried. We are encouraged
by steps the Philippine government has taken to eliminate
this problem.

-- U.S. development assistance and business partnerships are
helping achieve higher economic growth and spread this
growth, especially to the poor and disadvantaged.


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-- (If asked about the case of a U.S. Marine convicted of
rape of a Filipina at Subic in November 2005) I cannot
comment on an ongoing legal case in the Philippine justice
system. Both our governments remain committed to the pursuit
of justice as well as adherence to the terms of the Visiting
Forces Agreement.

-- You may be asked about your position in the U.S. Congress
on the Filipino Veterans Equity Act.

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/
KENNEY