Senators Tell Foreign Investors to "Get Out"

UNCLAS SECTION 01 OF 02 MANILA 001417

SIPDIS

SENSITIVE

STATE FOR EAP/MTS, EAP/EP, EEB/IFD/OMA
STATE PASS EXIM, OPIC, AND USTR
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE
TREASURY FOR OASIA
USDOC FOR 4430/ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN

E.O. 12958: N/A
TAGS: EINV ENRG PREL PGOV RP
SUBJECT: Senators Tell Foreign Investors to "Get Out"


1. (U) Summary: A Philippine Senate committee grilled
representatives of foreign chambers of commerce, including the
AmCham on June 6 regarding a letter the chambers had sent to
Philippine President Arroyo opposing a legislative initiative.
Though the business leaders were poorly treated by the Senators,
they held their own and seem to have won the sympathy and support of
interested observers and the press. Though the spectacle served as
yet another warning of the risks of investing in the Philippines, it
may have backfired, solidifying the position of the chambers as
champions of reform. End Summary.


2. (U) The Joint Foreign Chambers of the Philippines, an informal
grouping of major foreign chambers of commerce here, including
AmCham, were raked over the coals by Philippine Senators. Key
Senators were upset with a letter the chamber group sent to
Philippine President Arroyo opposing proposed amendments to the
Electric Power Industry Reform Act (EPIRA).


3. (U) Legislators have proposed amending the Act to speed up the
implementation of open access (i.e., the ability of large consumers
to negotiate the purchase of electric power directly from the
producers, rather than buying it from distributors at fixed rates).
The original Act allows for open access only once the government has
sold off at least 70% of its power generation holdings. The
proposed amendments would lower the requirement to 50%. In fact,
the government has now reached 49% and expects to meet the 70% goal
this year. Members of the chambers oppose the amendments as they
believe it important to the long-term health of the sector (and,
ultimately, to lowering prices) that the government share be
minimized. The chambers are also concerned that amendments could be
added changing unilaterally the terms of the contracts of the
private power producers, some of which are members of the chambers.


4. (U) The Joint Foreign Chambers has been active for some years
lobbying the government on a wide variety of issues, ranging from
competitiveness reforms to promotion of public investment in
infrastructure and education. It frequently interfaces with the
government via letters to the President or other executive branch
officials.


5. (U) Senator Juan Ponce Enrile led the charge in response to the
letter. In a speech to the Senate he decried the "intervention" of
foreigners into the policymaking of the government, the addressing
to the executive branch of a letter regarding an issue currently
before the Congress, and a suggestion in the letter that some
legislators had made "unwarranted accusations against bedrock
principles accepted in progressive countries around the world."
Enrile labeled foreign investors "carpetbaggers, predators, and
buccaneers" and demanded that they appear in the Senate to explain
themselves. Chair of the Senate Energy Committee Senator Miriam
Defensor Santiago invited the Chambers to appear before the
committee on June 6.


6. (U) The spectacle of the foreign businessmen, led by the French
head of the European Chamber, Hubert D'Aboville, being browbeaten by
Senators Enrile, Santiago and Joker Arroyo was televised live
nationwide. Described by some observers as "hapless," D'Aboville
attempted several times to read a prepared statement, but was not
allowed to do so. Instead, he and the other Chamber representatives
(including an AmCham representative) were berated, interrupted, and
heckled by the Senators. At one point Enrile, seemingly enraged,
shouted, "You wanted to make a profit. Because you are forcing the
government to sell [its generation and transmission assets] for a
song. My goodness, get out of this country if you can't live with
us. You're guests in this country."


7. (U) Local Semiconductor Industry representatives present at the
Senate hearing came to the rescue of the chambers, stating that they
also opposed the amendment of the law, as they believed amendment
would delay, rather than promote, the reduction of electricity
prices in the country.


8. (U) Press reporting of the hearing has generally been critical of
the conduct of the Senators. Other Senators have suggested to the
press that they would not have treated foreign investors in such a
manner. Enrile's own repetitive calling of the Chamber
representatives "guests" may have backfired on him, as Filipino
pride in welcoming guests contrasts sharply with Enrile's actions.
Some editorialists have suggested that the hearing may have a
chilling effect on foreign investment.

Ulterior Motives?

MANILA 00001417 002 OF 002


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9. (SBU) A few commentators have gone so far as to suggest that
there may have been ulterior motives behind the show at the Senate.
The Foreign Chambers have been active for some years on a variety of
sometimes controversial economic policy issues. Some analysts
suggest that the Chambers' anti-smuggling efforts may have incited
Enrile's reaction since representatives of the Foreign Chambers last
month discussed smuggling with Enrile's son in law, who runs an auto
import operation operating in Cagayan Special Economic Zone and Free
Port and is suspected of involvement in smuggling.

Comment: Nationalism vs. Hospitality
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10. (SBU) The print press has been critical of the actions of the
Senators and the story had no legs on television, where it was
carried only on Friday and did not elicit much commentary. Though
appeals to nationalism are often effective for Philippine
politicians, the perception that the Senators were rude and treated
their foreign guests poorly may have helped counterbalance
nationalist sentiment in this case. As for the energy act
amendments, Congress adjourned on June 11 without passing them. The
Joint Foreign Chambers are an important ally of the Embassy in
pressing for key economic reforms here. This ordeal may actually
have strengthened their credibility and visibility as a force for
reform.

KENNEY