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Cablegate: President Focuses On Economy in State of The

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OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHML #1788/01 2101146
ZNR UUUUU ZZH
O 281146Z JUL 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1420
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHHMUNA/CDRUSPACOM HONOLULU HI PRIORITY

UNCLAS SECTION 01 OF 02 MANILA 001788

SENSITIVE
SIPDIS

DEPT FOR EAP/MTS

E.O. 12958: N/A
TAGS: PGOV PREL PINS PINR SOCI PTER ECON KPAO ASEC
RP
SUBJECT: PRESIDENT FOCUSES ON ECONOMY IN STATE OF THE
NATION ADDRESS

1. (U) In her penultimate State of the Nation Address (SONA),
Philippine President Gloria Macapagal Arroyo highlighted her
administration's efforts to improve the country's economy and
help the poor cope with rising food and fuel costs. The
President called for legislation to implement a peace
agreement with Muslim insurgents. She stressed several
successful development projects supported by the USG;
included a projected photo of her with President Bush from
her recent Oval Office visit; and privately thanked the
Ambassador for her recent visit to Washington. The
atmosphere inside Congress was festive, while thousands
outside in heavy rains protested peacefully against her
presidency.

2. (U) In the weeks leading up to the address, the media has
focused on recent polling numbers showing President Arroyo as
increasingly unpopular, prompting her to use the annual
address as a forum to tout her national social welfare plan.
President Arroyo also reminded the Philippine people of the
large number of infrastructure projects completed during her
tenure as president. She appeared confident as she delivered
her 55-minute remarks, laying out specific accomplishments,
including successfully addressing the global rice and energy
crisis through effective government intervention.

ADDRESSING USG INTERESTS
------------------------

3. (SBU) The President's address hit on several issues with
which the Mission has been significantly involved, including
the Millennium Challenge Corporation (MCC), the peace
process, and the roll-on roll-off transportation system. In
addressing a widespread perception of government corruption,
President Arroyo thanked the MCC, which she said has
commended the country's gains in fighting corruption,
contributed 1 billion pesos to fight against graft, and
declared the Philippines eligible for more grants. The
President hailed a recent breakthrough in the government's
peace process negotiations with Muslim insurgents in
Mindanao, a breakthrough which the Mission helped bring about
with sustained engagement with all the key players. The
President also highlighted new irrigation systems of
farmlands in Mindanao, citing the unprecedented increase of
irrigated land to a historic 1.5 million hectares in
Mindanao, an accomplishment made possible by USG assistance.
Similarly, the President touted the roll-on roll-off highway
(RORO), a transportation system that permits trucks to roll
on to a ferry and roll off on another island, a project which
has had significant U.S. support. President Arroyo said that
in 2007, RORO vessels carried 33 million metric tons of cargo
and 31 million passengers, and the Administration built 39
RORO ports, with 12 more slated to start in the next two
years.

MIXED POLITICAL REACTION
------------------------

4. (U) The reaction to President Arroyo's SONA was mixed,
with Administration supporters predictably giving her speech
high marks, while political opponents were unsparing in their
criticism. Administration supporter Senator Miriam Santiago
described the speech as professional, complimenting the
President on her use of statistics to buttress her claim that
lifting the Value Added Tax would hurt, rather than help, the
nation's poor. Similarly, House Speaker Prospero Nograles
said the speech had been factual, and successful in conveying
its message. He added that it would do much to facilitate
needed legislation through the house. Conversely, House
Minority Leader Ronald Zamora, a noted Administration critic,
stated that the President's remarks were simply a "feel-good
speech," adding that he was not surprised that she
highlighted success stories of average citizens to make her
Filipino audience "feel good." He added that he did not hear
President Arroyo outline an agenda to address, or assign
responsibility for, the country's problems.

PROTESTERS OUT IN FORCE
-----------------------

5. (U) Thousands of Filipinos from many walks of life
weathered heavy rains and wind to protest the President's
address, and placards and banners denouncing the
administration lined the streets. Labor unions, including
the leftist Kilusang Mayo Uno, jeepney drivers, peasants, and

MANILA 00001788 002 OF 002


others came out in force to demand across-the-board pay
increases. Civil society groups attended to protest various
issues, including an end to government corruption, repeal of
the Value Added Tax, and ouster of the president. Political
organizations, including Bayan Muna, the most prominent
leftist political party, came out to protest killings of
leftist activists, allegedly by government security forces.
Despite the seriousness of the charges against the
Administration, a festive atmosphere prevailed throughout the
day, which culminated with the burning of a giant effigy of
President Arroyo riding an airplane bearing the stars and
stripes.

COMMENT
-------

6. (SBU) COMMENT: The global economic crisis has hit the
Philippines hard, and the President is clearly feeling the
heat from low wage earners, who have seen a significant
erosion in their purchasing power. Her address, delivered
partly in English and partly in Tagalog, probably to appeal
to the masses, was largely meant to explain and justify some
of the Administration's more controversial programs,
including the Value Added Tax. In the face of widespread
polls indicating significant reductions in her popularity,
President Arroyo saw this as an opportunity to tout her
Administration's many successes in the economic area and
elsewhere, while defusing critics' charges of the
Administration's neglect of those most hard-pressed by recent
rises in cost of food, fuel and another necessities. While
the number of protesters that came out to demonstrate against
President Arroyo was significantly higher than in previous
years, the rallies were nonetheless peaceful, and probably
only a reflection of the tough economic times.

KENNEY

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