Sep 192014

Reference ID Created Released Classification Origin
05MANILA3282 2005-07-15 10:47 2011-08-30 01:44 CONFIDENTIAL Embassy Manila
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 MANILA 003282



E.O. 12958: DECL: 07/15/2015

REF: A. A) MANILA 3154
¶B. B) MANILA 3061

Classified By: Economic Officer Shawn Waddoups for reasons
1.4(b) and (d)

¶1. (C) Summary: In the wake of the exodus of key
economic advisors, President Arroyo began reconstruction of
her economic team on July 12 with the appointment of
Margarito Teves as Secretary of Finance. On July 14, she
announced other key appointments, including Peter
Tavilia as Secretary of Trade and Industry, Romulo Neri as
Budget Secretary, and Zamzamin Ampatuan as head of the
Anti-Poverty Commission. Tavilia and Neri both have strong
connections to Speaker of the House of Representatives Jose
De Venecia.
Their appointments seem to strengthen his position amidst
discussion of possible Charter Change. End Summary.

New Finance Chief “best possible fit”

¶2. (U) President Arroyo named the current president of
government-owned Landbank and former Congressional ally
Margarito “Gary” Teves as Secretary of Finance on July 12.
studied in the U.K. at the City of London College (BS in
Business Economics) and the U.S. at Williams College in
Massachusetts (MA in Development Economics). After three
terms as a
congressman, he worked as a consultant promoting economic
reform in the
Philippines, including under contract with a USAID-funded
Then-President Estrada named him president and CEO of
Landbank of the
Philippines in 2000, a position he held until his recent
Business leaders hailed his appointment, but one called it
“the toughest
job in Asia.”

¶3. (C) DOF officials privately told econoffs that they
welcomed his
appointment and predicted he would focus more on
and local business contacts and less on the international
business community than his predecessor — something they
view as crucial to institutionalizing the reforms currently
being implemented. Since his appointment, he has
repeatedly emphasized that his top priority is
implementation of the Expanded Value Added Tax, currently
under a temporary restraining order from the Supreme Court
(ref B), and continuing to improve tax collection.
Other observers commented that he likely will be able to
marshal support
among business elites for these priorities because
of his ties to the oligarchic Ayala family (he served as
the Ayala Corporation’s chief economist before his election
to Congress). Business contacts told econoffs that Teves is
the “best
possible fit for the job, given the current situation,” and
described him as “an able technocrat.” They lauded his
record of
good governance, effective reform and “capable
administration” at Landbank.
They also pointed to his record of supporting free trade,
constructive engagement
at the WTO and opening the financial services sector to
competition as signs that he will continue to push needed
reforms as the leader of the President’s economic advisors.

¶4. (C) Teves comes from a political family with roots in
the influential and protectionist “Sugar Bloc,” but
colleagues agreed that he was
firmly committed to liberalization of the Philippine
economy, especially through legislation he sponsored while
in Congress, often with then-Senator Arroyo as co-sponsor.
Even opposition
lawmakers praised Teves. Senator “Jingoy” Estrada, the son
of former President Estrada and a fierce opponent of
President Arroyo, told acting Pol/C on July 13 that Teves
was a “brilliant choice” and “one smart guy.”

From Stock Market To Trade

¶5. (U) Arroyo tapped Peter Favila to head the Department
of Trade and Industry (DTI) on July 14. Seen as a “private
sector guy,” Favila continues the recent run of respected
business leaders brought in by Arroyo to be head the effort
to attract foreign investors to the Philippines. Unlike
his two predecessors (former Finance and Trade Secretary
Cesar Purisima and former Trade Secretary Juan Santos),
Favila’s business
career has been focused almost exclusively on Filipino
enterprises and not
the international business community. He has extensive
experience in the Philippine banking sector. He has no
obvious experience in managing the “real side of the
economy,” as one observer put it to econoff. He comes from
the camp of influential local tycoon Lucio Tan, having
headed Tan’s Allied Banking Corp. from 1998 to 2001. He
was also the president and CEO of Philippine National Bank
(PNB) from 1995-1998. Until his appointment, he sat on the
board of advisors for Philippines Airlines (PAL) and was a
board member for Tan’s MacroAsia. He also served for many
years on the Board of Directors for the Philippine Chamber
of Commerce and Industry (PCCI). Favila studied at the
University of
Pennsylvania’s Wharton School.

¶6. (C) According to Business and civil
society contacts, in addition to his
connection to Tan, he is tightly linked with former
President Fidel Ramos and House Speaker Jose De Venecia.
Only on July 7, he had assumed the position of chairman of
the board
of the Philippine Stock Exchange after four years as a
non-broker director on the Exchange’s board. His
appointment to DTI caught many — apparently including
Favila — by surprise. The business community has reacted
positively to Favila’s appointment, although he has not
received the same unqualified support as Teves. DTI
officials seemed cool to his appointment in conversations
with econoff, but said that he is “level-headed and
professional.” They predicted he would focus on the
of small and medium enterprises and continue the push
for improving infrastructure — such as roads, the power
grid and port facilities — that his predecessors

Out of NEDA and into the Budget

¶7. (U) Arroyo shifted Romulo Neri, until July 14 the
Economic Planning Secretary and Director General of the
National Economic Development Authority (NEDA), to the
position of Budget Secretary. He had organized and then was
General of the Congressional Planning and Budget Office in
the House
of Representatives from 1990 until 2002, when he was named to
the Cabinet;
he is intimately familiar with the budget process. Neri
received an MBA
from the University of California, Los Angeles.

¶8. (C) Neri, since the resignation of Purisima et al, has
been among
the most vocal of Arroyo defenders and Purisima critics.
Neri is very
linked to House Speaker De Venecia, who at one time
advocated naming him to Finance Secretary. He has received
mixed reviews for his performance at NEDA, but his personal
loyalty to Arroyo is at this point unquestioned. The
Budget job will likely be a better fit for Neri. While at
NEDA, local observers frequently criticized him for lacking
the ability to manage the broader macroeconomic aspects of
the job, for lacking vision, and for being too detail
oriented. He was not popular among NEDA officials with
whom econoffs have spoken. According to civil society
contacts, Neri should
consider this move a demotion since NEDA is a more strategic
However, the move will position him to oversee the
budget wrangles during expected efforts to change the
Constitution and to institute federal budget structures in
the event that the Philippines adopts a federal system.

¶9. (C) Arroyo chose to fill the vacancy at NEDA from
within, pulling Neri’s deputy Augusto B. Santos up into the
top spot. Santos started at NEDA in 1990; much of his
career has focused on infrastructure development. He is an
engineer by training, who has little experience with
economic policy. He does not have a strong base of
support, and many here are speculating that he is a
place-holder until Neri moves back to NEDA or someone else
is named to replace him. His appointment failed to elicit
strong comment either positive or negative. Neri, when
asked about his successor, said only that he is the
“senior” official at NEDA and, therefore, a logical
choice. NEDA contacts told econoff they are worried that
much of their time in the midst of a difficult situation
will be consumed with explaining the macroeconomic portion
of NEDA’s operations to Santos, because he has had very
little involvement with that side of the house and often
does not grasp the issues involved.

New anti-poverty chief someone to work with

¶10. (C) Zamzamin Ampatuan, who until July 14 was Office of
Muslim Affairs (OMA) Executive Director, is Arroyo’s choice
to head the National Anti-Poverty Commission (NAPC).
Ampatuan is a close Embassy contact and a widely respected
moderate Muslim
from a prominent Mindanao family. According to all accounts,
he is
clean and has integrity. At OMA, he proved to be a capable
manager, a good
leader, and a media savvy speaker. In moving to NAPC, he is
gaining a
national portfolio and will work on one of Arroyo’s most
pressing challenges
but still be able to focus on Muslim Mindanao, where
Philippine poverty is at its most oppressive.

¶11. (C) Comment: The new secretaries
bring respect among the business community and technical
expertise to their jobs, while at the same time drawing in
important domestic constituencies that their predecessors
did not. Arroyo said publicly that she had chosen “the kind
of team that I
can leave the day-to-day affairs of the government with
while I work on the fundamental reforms,” and pledged to
give the new appointees a “free hand” to craft and
implement needed new reforms with “as little political
interference as possible.” Few local observers believe,
however, that short-term economic policy decisions can be
divorced from the current political uncertainty. Business
leaders are warning that no matter how good the new

are, if she is unwilling and incapable of implementing bold
fiscal reforms they
will be “just decoration in the Cabinet until (they) get
frustrated and leave
like Purisima.” The new economic team may end up being more
of a transitional
team than a true new leadership team.




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