Oct 202014
 

http://wikileaks.org/cable/2007/03/07MANILA1020.html#

Reference ID Created Released Classification Origin
07MANILA1020 2007-03-29 09:25 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Manila
VZCZCXRO8585
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #1020/01 0880925
ZNR UUUUU ZZH
O 290925Z MAR 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5882
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 6048
RUEHGZ/AMCONSUL GUANGZHOU IMMEDIATE 4311
RUEHHK/AMCONSUL HONG KONG IMMEDIATE 4564
RUEHGH/AMCONSUL SHANGHAI IMMEDIATE 0038
RHHMUNA/CDRUSPACOM HONOLULU HI IMMEDIATE
RUEHIN/AIT TAIPEI IMMEDIATE 1463
RUEKJCS/SECDEF WASHDC IMMEDIATE
UNCLAS SECTION 01 OF 03 MANILA 001020

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MTS AND EAP/CM

E.O. 12958: N/A
TAGS: PREL ECON EINV ETRD CH RP
SUBJECT: THE CHINESE ARE COMING…WELL MAYBE NOT QUITE YET

REF: 05 MANILA 1954

MANILA 00001020 001.2 OF 003

¶1. (SBU) SUMMARY: Filipinos predicted that the economic
rise of the People’s Republic of China would benefit the
provinces of north Luzon, which, thanks to mineral resources,
agricultural potential, gambling, and beaches, should be a
natural draw for Chinese tourists and investors. However, no
significant PRC investors have set up businesses in Ilocos
Norte so far, and PRC tourism has stagnated. Deep-rooted
problems with the local investment climate, including poor
infrastructure and infighting among local politicians, are
likely the key factors for this. With the imminent opening
of a PRC Consulate in Ilocos Norte, local officials are
hopeful that their province will yet become a destination of
choice for Chinese investors and tourists. The problems of
Ilocos Norte are illustrative of many localities in the
Philippines where political and economic conditions
discourage overall new investment and tourism, not only from
the PRC. END SUMMARY.

OPTIMISTIC PREDICTIONS
———————-

¶2. (U) Philippine officials have identified northern Luzon
as the ideal site for investors and tourists from the PRC.
With its close proximity to the PRC, its mineral resources,
agricultural potential, gambling facilities, and beautiful
beaches, northern Luzon could in theory be a magnet for PRC
wealth. The northwesternmost province of Ilocos Norte
(coincidentally, Marcos country, where the current governor
is the son of the late dictator) figured prominently in these
expectations. Philippine President Arroyo once remarked that
“there are 400 million Chinese who can afford to travel and
are curious about the world around them,” highlighting that
capital city “Laoag is only about an hour and a half away
from Canton and two hours from Shanghai.” In a recent media
interview, President Arroyo observed that “the Chinese are
very, very interested in coming to Ilocos Norte because it is
very near China.”

LACKLUSTER RESULTS
——————

¶3. (SBU) According to interlocutors in Ilocos Norte,
however, the enthusiastic pronouncements of the President
have not led to developments on the ground. A senior
official in the local Filipino-Chinese Chamber of Commerce
told poloff that Ilocos Norte has seen “no substantial
Chinese investments” in any sector. The statistics of the
Laoag sub-office of the Department of Tourism show that
Ilocos Norte averaged only about 400 PRC tourists a month in
¶2006. A tourism official predicted that these numbers would
likely drop further with the recent cancellation of the Hong
Kong-Laoag flight and the reduction of the Guangzhou-Laoag
charter flight from once a day to twice weekly. This
continues a downward trend begun in 2005, with the
cancellation of direct flights from Shanghai and Macau. In
contrast, tourist arrivals from Taiwan have steadily averaged
almost 2,000 a month.

¶4. (U) Tourism authorities said that that they had escorted
numerous PRC business delegations through Ilocos Norte over
the past several years, but have seen no notable commitments.
Ilocos Norte Governor Ferdinand “Bong Bong” Marcos, Jr. also
traveled frequently to the PRC in 2005 and 2006 to drum up
business for the province, but has had little to show for his
efforts, they noted.

LACK OF CAPACITY/INFRASTRUCTURE
——————————–

¶5. (SBU) Governor Marcos told poloff that the slow growth of
PRC tourism and investment in his province was due primarily
to a lack of hotel capacity, a view shared by other local
officials. According to one, only the Fort Ilocandia Resort
and Casino (289 rooms) effectively courts PRC tourists.
Currently, there are only about 1000 hotel rooms in all of
Ilocos Norte, and most of these are not up to international
standards.

¶6. (SBU) Another persistent problem appears to be poor power

MANILA 00001020 002.2 OF 003

supply, in part due to the demise of a local development
project — the Laoag-Luzon Industrial Estate — which “never
left the drawing board.” Managers of the Fort Ilocandia
Resort also cited frequent brown-outs as a problem. Other
local officials pointed to the lack of bridges, a deep-water
port, and farm-to-market roads as further hindering economic
progress, if not necessarily tourism.

¶7. (SBU) Another major hindrance to foreign investment is
the difficulty in purchasing or renting property. One
official recalled how the incoming PRC Consul to Laoag City
(see para 10) offered to bring a PRC agribusiness investment
if officials could identify 20 hectares of land for a
greenhouse. Officials decided that in order to rent 20
contiguous hectares of land they would have to deal with
“thousands” of separate owners, and concluded it would be “an
impossible task.” Additionally, there is a constitutional
prohibition on foreigners owning land.

DIRTY POLITICS
————–

¶8. (SBU) Several interlocutors quietly pointed to a conflict
between the Laoag Mayor and Governor Marcos as the “invisible
force” behind the poor investment climate in the province.
Members of the Filipino-Chinese Chambers of Commerce
described to poloff a “hypothetical province” in which the
mayor and the governor, as political enemies, ruthlessly
blocked each other’s development initiatives by imposing
insurmountable regulatory requirements. Another official
commented more benignly that a “lack of government
coordination” had slowed the influx of PRC investment in
Ilocos Norte.

¶9. (SBU) As a reminder of the literal dangers of a bitter
political climate, authorities in 2005 charged the Laoag
Mayor with the murder of his vice mayor, although they later
dropped the charges. The Mayor maintains a protective detail
of eight bodyguards – one of whom, in a recent incident,
accidentally shot the Mayor in the foot with his M-16 rifle.

NEW PRC CONSULATE
—————–

¶10. (U) The long-awaited (since Hu Jintao’s April 2005 State
visit — reftel) formal opening of a PRC consulate in San
Nicholas/Laoag City will take place on April 11. According
to press reports, the Consulate will initially consist of
Consul Chen Lai Ping and attaches Zhing Xin and Yu Shuang.
Chen remarked to local media that “the two countries would
like to strengthen cooperation between Southern China and
Northern Luzon.”

¶11. (U) Chen has publicly indicated that the Consulate’s
primary mission will be to promote PRC investment in Ilocos
Norte, especially in the mining and agribusiness sectors.
Cruz said that the PRC is offering to widen and extend the
runway at Laoag City International Airport and is already
engaged in various feasibility studies. In addition, Chen
noted that the PRC Ambassador promised to bring PRC investors
with him to the opening of the Consulate.

COMMENT
——-

¶12. (SBU) Despite the interest expressed by the governments
of the Philippines and the PRC in encouraging investment and
tourism in northern Luzon, fundamental problems with the
investment climate in Ilocos Norte appear so far to have
discouraged attempts to attract large numbers of PRC tourists
and businesses. Some observers view the opening of the PRC
with a more suspicious eye, suggesting instead that the real
intent is to keep an eye on Taiwan and visitors from Taiwan.
The problems of Ilocos Norte in attracting significant
investment from any foreign source are illustrative of the
conditions in many localities in the Philippines, where
bitter dynastic rivalries sometimes end in stalemate or even
violence, and where hidebound local officials often believe
that attracting investments — whether from the PRC or
elsewhere — is a zero sum game at which the primary goal is
not letting political opponents “win.”

MANILA 00001020 003.2 OF 003

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