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Backgrounds: Philippines US Relations
U.S.-Philippine relations are based on shared history and commitment to democratic principles, as well as on economic ties. The historical and cultural links between the Philippines and the United States remain strong. The Philippines modeled its governmental institutions on those of the United States and continues to share a commitment to democracy and human rights. At the most fundamental level of bilateral relations, human links continue to form a strong bridge between the two countries. There are an estimated 2 million Americans of Philippine ancestry in the United States and more than 130,000 American citizens in the Philippines.
Until November 1992, pursuant to the 1947 Military Bases Agreement, the United States maintained and operated major facilities at Clark Air Base, Subic Bay Naval Complex, and several small subsidiary installations in the Philippines. In 1983 and 1988, the United States and the Philippines completed successful reviews and extensions of the Military Bases Agreement, as amended. In August 1991, negotiators from the two countries reached agreement on a draft treaty providing for use of Subic Bay Naval Base by U.S. forces for 10 years. The draft treaty did not include use of Clark Air Base, which had been so heavily damaged by the 1991 eruption of Mt. Pinatubo that the United States decided to abandon it.
In September 1991, the Philippine Senate rejected the bases treaty, and despite further efforts to salvage the situation, the two sides could not reach agreement. As a result, the Philippine Government informed the United States on December 6, 1991, that it would have 1 year to complete withdrawal. That withdrawal went smoothly and was completed ahead of schedule, with the last U.S. forces departing on November 24, 1992. On departure, the U.S. Government turned over assets worth more than $1.3 billion to the Philippines, including an airport and ship-repair facility. Agencies formed by the Philippine Government have converted the former military bases for civilian commercial use, with Subic Bay serving as a flagship for that effort.
The post-U.S. bases era has seen U.S.-Philippine relations improved and broadened, with a prominent focus on economic and commercial ties while maintaining the importance of the security dimension. U.S. investment continues to play an important role in the Philippine economy, while a strong security relationship rests on the 1952 U.S.-Philippines Mutual Defense Treaty (MDT). In February 1998, U.S. and Philippine negotiators concluded the Visiting Forces Agreement (VFA), paving the way for increased military cooperation under the MDT. The agreement was approved by the Philippine Senate in May 1999 and entered into force on June 1, 1999. Under the VFA, the United States has conducted ship visits to Philippine ports and has resumed large combined military exercises with Philippine forces. Key events in the bilateral relationship include the July 4, 1996 declaration by President Ramos of Philippine-American Friendship Day in commemoration of the 50th anniversary of Philippine independence. Ramos visited the United States in April 1998, and then-President Estrada visited in July 2000. President Macapagal-Arroyo met with President Bush in an official working visit in November 2001 and made a State Visit to Washington on May 19, 2003. Numerous U.S. Cabinet-level visits to the Philippines punctuated this latter period, culminating in a visit by Secretary of State Colin Powell in August 2002.
President Macapagal-Arroyo has repeatedly stressed the close friendship between the Philippines and the United States and her desire to further strengthen bilateral ties. Both governments seek to revitalize and strengthen their partnership by working toward greater security, prosperity, and service to Filipinos and Americans alike. Inaugurated into office on the same day as President Bush, President Macapagal-Arroyo lent strong support to the global war on terrorism and the coalition against Saddam Hussein.
Balikatan (Shoulder-to-Shoulder) 02-1 in 2002 contributed directly to the Philippines Armed Forces efforts to root out Abu Sayyaf terrorists and bring development to one formerly terrorist-plagued island. The United States has intensified its annual cycle of combined military training around the country as well as the military's civil affairs and humanitarian projects, funded by $68 million in U.S. Foreign Military Financing projected between 2002-06. In addition, supplemental funding legislated in April 2003 will add another $30 million. Moreover, the International Military Education and Training (IMET) program, $2.4 million in FY 2003, is the largest in Asia and the second-largest in the world. At $148 million, the Philippines is the number one recipient in Asia of Excess Defense Articles. The Mutual Logistics Support Agreement (MLSA) was signed in November 2002 after a year-long negotiation process. Similarly, law enforcement cooperation has reached new levels. U.S.-Philippines law enforcement agencies have cooperated to bring charges against 15 Abu Sayyaf terrorists, implement an extradition treaty, and train some 700 Filipino law enforcement officers in 2002.
The United States also is working closely with the Philippines to reduce poverty and increase prosperity. President Macapagal-Arroyo has subscribed to President Bush's Millennium Challenge, even as President Bush fully supports President Macapagal-Arroyo's "Strong Republic" reform agenda for rooting out corruption, opening economic opportunity, and investing in health and education. USAID programs, worth $84 million in FY 2003, support the Arroyo administration's war on poverty as well as the GRP reform agenda in critical areas, including anti-money laundering, government procurement, and tax collection. Other USAID programs bolstered the government's efforts to heal divisions in Philippine society through a focus on conflict resolution, livelihood enhancement for former combatants, and economic development in Mindanao and the Autonomous Region of Muslim Mindanao, among the poorest areas in the country. Supplemental budget legislation in April 2003 earmarked another $30 million for support to the peace process in Mindanao. Meanwhile, important programs continue in modern family planning, infectious disease control, environmental protection, provision of basic services--as well as PL 480 and 416(B) food aid programs, which together totaled $34.5 million in FY 2002.
More than 130,000 American citizens reside in the Philippines, and nearly 400,000 visit each year. An estimated 2 million Filipinos live in the United States, and they remitted about $3.5 billion in FY 2002. Providing government services to U.S. and the other party's citizens, therefore, constitutes an important aspect of the bilateral relationship. Those services include veterans affairs, social security, and consular operations. Benefits to Filipinos from the U.S. Veterans Affairs and Social Security Administrations totaled $143.9 million and $246.7 million, respectively. Many people-to-people programs exist between the United States and the Philippines, including Fulbright, International Visitors and Aquino Fellowship exchange programs, as well as the U.S. Peace Corps.
Trade and Investment
The United States traditionally has been the Philippines' largest foreign investor, with about $3.3 billion in estimated investment as of end-2002 comprising 22% of the Philippines' foreign direct investment stock. Since the late 1980s, the Philippines has committed itself to reforms that encourage foreign investment as a basis for economic development, subject to certain guidelines and restrictions in specified areas. Under President Ramos, the Philippines expanded reforms, opening the power generation and telecommunications sectors to foreign investment, as well as securing ratification of the Uruguay Round agreement and membership in the World Trade Organization. As noted earlier, President Macapagal-Arroyo administration is continuing such reforms, a position which generally enjoys domestic political support. A major obstacle has been and will continue to be a constitutional restriction on foreign ownership of land and public utilities, which limits maximum ownership to 40%.
During the last few years, the relatively closed Philippine economy has been opened significantly by foreign exchange deregulation, foreign investment and banking liberalization, and tariff and market barrier reduction. In addition, foreign entry into the retail trade sector has been liberalized, with S&R Price as the first foreign company to enter the Philippine retailing market. The Macapagal-Arroyo government also enacted the Electric Power Industry Reform Act of 2001, which aims to restructure the Philippine electric power industry and privatize the National Power Corporation (NPC or Napocor). This legislation presents opportunities for U.S. firms to participate in the power industry in the Philippines. Information and communications technologies, backroom operations such as call centers, and regional facilities, or shared-service centers are likewise leading investment opportunities.
The U.S. Embassy is located at 1201 Roxas Boulevard, Manila; tel.: (63)(2) 523-1001; fax: 526-1474; telex: 722-27366 AME PH. The American Business Center is located at 25/F, Ayala Life - FGU Center, 6811 Ayala Avenue, Makati City. It houses the Foreign Commercial Service, tel.: (63)(2) 888-4088; fax 888-6606 and the Foreign Agricultural Service, tel.: (63)(2) 887-1137; fax: 887-1268.
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