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Cablegate: Scenesetter for Staffdel Silverberg


DE RUEHML #2869/01 2350845
O 230845Z AUG 07






E.O. 12958: N/A


STATE 110007

1. (SBU) Summary: Embassy warmly welcomes Staffdel Silverberg to the
Philippines. The relationship and spirit of partnership between the
United States and the Philippines are strong. Your visit comes at a
time when the Philippine military is still mourning the loss of
soldiers in Mindanao while bravely fighting terrorism. 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.

2. (SBU) During your visit, you will meet with several key military
and civilian government officials and will travel to Mindanao to see
first hand our joint counterterrorism and development efforts. You
will also travel to Central Luzon, where you will visit U.S. trained
and equipped Philippine special operations forces. Given your
strong interest in historic sites, we have planned a tour of the
Cabanatuan Memorial, the site of a World War II prisoner of war
camp. Our entire team looks forward to making your visit productive
and useful. End Summary.

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3. (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 declining. Filipinos are mainly Roman Catholic (83%) or
otherwise Christian (10%) with a small Muslim minority (6%) based in
Mindanao. Approximately 40 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.


4. (SBU) Philippine political life is free-wheeling, centered
primarily on the personal charisma of individual political leaders,
and largely oligarchic, with most wealth and political power
concentrated among a few influential families. Then-Vice President
Gloria Macapagal Arroyo assumed the Presidency in 2001 after a
"people power" movement swept out her predecessor. She has regained
her footing after a series of challenges to her leadership,
including unsuccessful impeachment efforts in 2005 and 2006 -- based
on accusations of vote rigging in 2004 elections -- and an alleged
coup plot that led to her week-long declaration of a "State of
National Emergency" in February 2006.

5. (SBU) Midterm elections in May left the Senate still in
opposition hands, while the President's allies increased their hold
on both the House of Representatives and local government. While
the threat of impeachment has now been removed by overwhelming
control of the House, personality-driven politics remain visceral as
presidential hopefuls in the Senate are already campaigning for the
2010 presidential election. We fully expect President Arroyo to
complete her term in 2010. The rancorous political atmosphere will
complicate her efforts to establish a legacy, which she has focused
on the economy and jobs, infrastructure, and seeking stability and
peace on Mindanao.


6. (U) The U.S. remains 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. This week Texas
Instruments broke ground on a $1 billion facility to produce
microchips at the former Clark Airbase, while AES, a Virginia-based
power generation and utility company, announced a $930 million
acquisition of a large coal-fired power plant through the
government's privatization scheme.

7. (U) The Philippine economy performed well in 2006, and has
continued to grow strongly in 2007. For the first half of the year,
the stock market charted new territory, and the peso soared against
the dollar on the back of respectable export growth and a surge in
remittances by overseas Filipinos. However, both the stock market
and the peso have slipped slightly during the worldwide financial
turbulence of the past month. The government has attacked its
budget deficit over the past four years through a combination of
expenditure restraint and tax increases, and has begun to reduce its
foreign debt. There nonetheless remain substantial weaknesses in
the government's ability to collect taxes, and much remains to be
accomplished on the economic reform agenda, particularly on
improving the investment climate. The Arroyo administration has an
impressive agenda -- privatize the electric sector, build
infrastructure, increase funding for education, liberalize civil
aviation, reduce business red tape -- but is moving timidly on most
of these initiatives. Embassy Manila is a strong advocate for U.S.
business interests through our Economic Section, the Foreign
Commercial Service, and the Foreign Agricultural Service.

8. (SBU) Corruption and restrictions on foreign investment shield
powerful local interests who thus maintain their privileged market
positions and their increasing wealth. Well-functioning "special
economic zones" (including former U.S. bases at Clark and Subic) in
which most foreign investment is harbored demonstrate that the
government can implement the policies necessary to compete globally.
Many observers believe President Arroyo's best chance for a lasting
legacy would be in implementing the economic reforms she knows could
make a real contribution to the prosperity of her people, while
establishing greater peace in Mindanao.

9. (U) U.S.-Philippines development cooperation focuses on economic
growth, governance, health, education, and the environment. The
major thrust of our development assistance is in conflict-affected
areas of Mindanao. Along with USAID, USDA and the Peace Corps play
an important role in promoting socio-economic progress.


10. (SBU) Three U.S.-designated terrorist organizations are active
and dangerous in the Philippines, despite significant military
success against them over the past year. 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. President Arroyo is justly proud that the
Philippine military has killed several top terrorist leaders in its
focused military operations. However, in recent weeks, the
Philippine military lost some 56 soldiers in clashes with these
terrorist and insurgent groups, including ten who were beheaded on
July 10. The Philippine government claims the military has killed a
similar number of people in response. The Philippine military has
carefully avoided restarting a more general conflict with Muslim
insurgents (see below). 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. 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.


11. (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. Once the territory of this entity is
determined, 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

12. (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.


13. (SBU) President Arroyo has taken several steps to address the
complex problem of unlawful killings. 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 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. President Arroyo spoke out strongly on the issue in her
recent State of the Union address. Still, much more needs to be


14. (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. The Section issues about 60,000 immigrant visas a year,
including visas to large numbers of nurses, teachers, and physical
therapists. The Section sees almost 200,000 nonimmigrant visa
applicants annually, including large numbers of merchant mariners
and temporary seasonal workers.


15. (SBU) You may wish to use the following talking points in your
meetings with Philippine government officials and business leaders:

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

-- Our condolences to the Armed Forces of the Philippines and the
families of the soldiers who recently lost their lives in Mindanao.

-- Philippine Defense Reform represents a commitment to undertake
fundamental institutional change within the Armed Forces of the
Philippines. We're proud to be partners in this program.

-- We appreciate that the Philippines takes the issue of
extra-judicial killings seriously. It is important to apprehend
suspects in these killings and provide a fair judicial process.

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/


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