SCENESETTER FOR CODEL SMITH

UNCLAS MANILA 000053

SIPDIS

SIPDIS

SENSITIVE BUT UNCLASSIFIED

STATE FOR EAP AND H

KUALA LUMPUR PLEASE PASS TO CODEL SMITH

E.O. 12958: N/A
TAGS: OREP PREL EAID RP
SUBJECT: SCENESETTER FOR CODEL SMITH


1. (SBU) Summary: Embassy warmly welcomes CODEL Smith 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 several key government officials 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 three 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 nearly
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 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 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 in conflict-affected areas of
Mindanao through USAID 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
--------------


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 gradually is
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. Successful 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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CONSULAR AFFAIRS
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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 ISSUES
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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.

-- (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