Cablegate: Scenesetter for Peace Corps Director Tschetter's Visit To


DE RUEHML #1998/01 2350928
O 220928Z AUG 08





E.O. 12958: N/A


1. (SBU) Welcome to the Philippines! You are coming at an
interesting and challenging time. Increasing food and energy prices
have put the economy and the social situation under strain,
increasing the incidence of poverty. Legal challenges before the
Philippine Supreme Court aborted the long-awaited signing of a
memorandum of understanding (MOA) between the Philippine government
and the Moro Islamic Liberation Front (MILF), triggering conflict
between government forces and Moro rebels in a number of communities
in the southern Philippines. The annual cycle of weather-related
disasters is also well underway bringing typhoon-related crop damage
to several regions. Your visit presents an opportunity to highlight
the spirit of volunteerism and the role of the Peace Corps at a time
when President Gloria Macapagal-Arroyo has repeatedly called for the
government, private sector, and development partners to work
together to alleviate poverty, overcome disaster, contribute to
development, and promote peace.

Activities in a Nutshell

2. (U) During your visit, you will be briefed by the Mission
Country Team; meet with Secretary of Foreign Affairs Alberto Romulo;
pay a courtesy call on President Gloria Macapagal-Arroyo; and
participate in a number of media events. You will also fly to
Dumaguete City (the capital city of Negros Oriental in the Central
Philippines) to meet with Peace Corps officials and volunteers and
view a USAID wastewater treatment project.

The Economy in Brief

3. (U) The United States is the Philippines' largest trading
partner, with over $17.1 billion in two-way merchandise trade in
2007. Major U.S. exports include electronics and agricultural
products. The U.S. is also the largest investor here, with over
$6.6 billion in equity. The Philippine economy grew by 7.3% in 2007,
the fastest pace of growth in over three decades. Gross Domestic
Product (GDP) growth is expected to slow in 2008, but still reach a
respectable 5-5.5%, spurred in part by a resilient service sector
(particularly a booming Business Process Outsourcing industry) and
strong overseas workers remittances (expected to hit $16 billion in
2008, more than 11% of Philippine GDP).

4. (U) Record economic growth and an improved image moved the
Philippines up five places to 40th in the latest World
Competitiveness Yearbook rankings, its best performance since it
joined the listing over a decade ago. President Arroyo has an
impressive reform agenda -- privatizing the electric power sector,
building infrastructure, increasing education and health funding,
and reducing business red tape -- but still faces significant
hurdles, particularly to improving the investment climate and
addressing corruption.

5. (U) There has been limited progress over the past decade in
reducing poverty and addressing the inequitable distribution of
incomes. According to recently released poverty statistics, poverty
increased between 2003 and 2006 to engulf a third of the population.
Spurred by surging food and fuel prices, inflation has accelerated
this year, reaching 12.7% in July, a seventeen-year high. High
inflation will push even more Filipinos into poverty, challenging
the government to balance subsidies and hunger alleviation programs
for the poor against fiscal consolidation goals.

6. (SBU) Socio-economic development in the Philippines is uneven
and poverty is characterized by wide disparities across regions and
populations, even during periods of high economic growth. Poverty
is especially severe in rural areas. Most of the lagging regions
and provinces are in Mindanao while the frontrunners are in Luzon
island. Overall, 47% pf Mindanao's population subsisted below
government-established poverty thresholds during 2006, much higher
than Luzon's 28% poverty incidence. While Mindanao features some of
the country's more progressive cities and municipalities, human
development indices of some of Mindanao's most depressed provinces
approximate the world's poorest countries (such as Ghana, Sudan, and

Millennium Development Goals (MDGs)

7. (U) The Philippines has made progress in reducing extreme hunger
and expects to reduce the incidence of food-poor Filipinos from
14.6% (2006) to its 10.2% MDG target by 2015. Although hopeful, the
country is farther off reducing the overall incidence of poverty
(which also includes being able to afford basic non-food

requirements) from nearly 33% (2006) to 22.7% by 2015. Although
progress across regions is uneven, the Philippines is moving towards
achieving national MDG targets involving, among others, child
nutrition and child mortality; gender equality; combating HIV/AIDS
and malaria; access to clean water and sanitation facilities; and
selected indicators on environmental sustainability.

8. (U) However, progress has been slow in other important MDG goals
and the Philippines is unlikely to meet MDG targets on universal
primary education and 100% elementary completion rates; a 100%
literacy rate for Filipinos in the 15-24 year-old age bracket;
maternal mortality; access to contraceptives (reflecting resistance
from the Catholic Church); and the proportion of households
(particularly slum dwellers) with access to secure land tenure. The
enrollment ratio in primary education stood at 83.2% in 2006, lower
even than in 1990 (84.6%). The ratio of pupils who started and
completed elementary education improved only modestly between 1990
(69.7%) and 2006 (73.4%), which makes it improbable that the
Philippines will achieve the 100% target by 2015. The literacy rate
of the 15-24 year old segment of the population is no better
currently than it was in the early 1990s (96.6%), not a good
prognosis for achieving 100% literacy for this age group by 2015.

The Political Situation

9. (SBU) President Gloria Macapagal Arroyo assumed the Presidency
in 2001 after a "people power" movement swept out her predecessor,
whom she subsequently pardoned after he was convicted of corruption.
She is a tenacious 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
two 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 in Mindanao.

10. (SBU) The Mindanao peace process suffered a major setback with
the aborted signing of the memorandum of agreement on ancestral
domain between the Philippine government and Moro Islamic Liberation
Front (MILF) on August 5 in Kuala Lumpur. Acting on petitions of
local government officials opposed to the expansion of the Muslim
territory, the Supreme Court issued a temporary restraining order
against the signing of the agreement and in response, the government
has decided to review the terms of the agreement. Disappointed with
the government's failure to conclude the agreement, the MILF -- in
violation of the ceasefire agreement -- initiated a series of
attacks in several communities in central Mindanao. The attacks
have killed at least 50 and displaced some 70,000 civilians and
President Arroyo ordered the Armed Forces to "defend every inch of
territory" against the MILF forces. The Philippine military has
responded decisively, but with discipline. MILF military capability
has been degraded and civilian casualties have resulted in a public
and political backlash against the MILF. Nevertheless, the
government has reiterated its commitment to pursuing the peace
process, once peace and order are restored.

Human Rights Issues

11. (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. With
increased domestic and international pressure, the number of
extra-judicial killings decreased dramatically in 2007, but more
still needs to be done. 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 the
military or police -- are brought to justice. The problem is closely
related to a judicial system which is inefficient and strained
beyond its capacity. Problems such as violence against women, abuse
of children, child prostitution, child labor, trafficking in
persons, and ineffective enforcement of worker rights are also


12. (U) Attaining development objectives involves key,
cross-cutting issues, principally: addressing wide disparities
across regions; curbing high population growth; improving
agricultural productivity; accelerating implementation of basic
education and health reforms; boosting infrastructure; harnessing

fiscal resources; strengthening the capacity of local government
units; effective law enforcement; improving the investment climate;
promoting transparency and accountability; addressing peace and
security issues; and strengthening public-private-donor
partnerships. President Gloria Macapagal-Arroyo has called
repeatedly for unity and strong partnerships as the country grapples
with global economic challenges and domestic political concerns with
limited resources. Your visit to the Philippines provides a timely
opportunity to reiterate continued U.S. government support for
development and poverty reduction efforts, to promote volunteerism,
and to highlight the U.S. Peace Corps' role in these areas.


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