On aid, investments and freedoms

US Ambassador Harry K. Thomas visited BusinessWorld last week and sat down with the paper’s editors and reporters for a wide-ranging discussion. Here are excerpts:

Mr. Thomas: It’s great to come to BusinessWorld; you have a very unique history in the Philippines… we wanted to engage the media to talk about trafficking in human persons — it’s a modern-day form of slavery…

We are very pleased that Secretary [Hillary] Clinton was able to raise the status of the Philippines from Tier 2 watch list to Tier 2. However… There are only 25 prosecutions, and there needs to be more…

We work closely with the Visayan Forum [Foundation, an NGO] which we have given over $6.6 million in the last five years. We’ll continue to do that. This is your country, these are your people, and we understand it’s a global challenge … but we hope that BusinessWorld and others can continue to publicize this, and help combat that.

BusinessWorld: Now that we’ve been taken out of the watch list, what can the Philippines expect in terms of assistance from the US?

Mr. Thomas: As I said, we gave $1.6 million this past year, and $6.62 [million] to the Visayan Forum to help combat trafficking, it helps them with their halfway houses, it helps them educate. Cecilia Flores-Oebanda [founder and director] is a great hero of the Philippines, not only for her being incarcerated during the Marcos years, but for trying to help these boys.

But we provide other technical assistance, to training, done that to judges, prosecutors. We’ll bring a Department of Justice attorney here … we’d love to do that with investigators next. We find that we really need to get into the barangays … we’ll have to get into those places.

BW: In an extreme case of armed confrontation between the Philippines and China or any other claimant in the South China Sea, up to what extent will the US response be, considering under the MDT [Mutual Defense Treaty] there are a number of restrictions?

Mr. Thomas: Our position has been consistent and clear: we take no position on, we take no sides … We encourage all claimants to sit down at the negotiating table. We oppose any coercion, show or threat of force. We think that the Declaration of Conduct between ASEAN and China should be fully enforced, that the other claimants Philippines, Vietnam, Malaysia, Brunei, should sit down themselves. We think there will be plenty of time to do that in the upcoming conferences with the EAS [East Asia Summit] coming up, the ARF [ASEAN Regional Forum] and the APEC [Asia-Pacific Economic Forum].

Secretary Clinton, then Secretary [Robert] Gates, Director of National Intelligence [James] Clapper, met with your very able Foreign Secretary [Albert F.] del Rosario … they repeatedly said that the United States stands by our treaty obligations. And I don’t think I need to add anything … and we don’t deal in hypotheticals.

BW: How can the US manage strategically trade and elections in order to gain mutual advantage for both parties? As the US government deals with elections next year and with the weakening economic indicators, and particularly in terms of the GSP — has it lapsed, will it be reviewed, and of course, in the first place, why not consider a trade agreement with the Philippines in place of the GSP? Of course the SAVE Act, whether it will be pushed?

Mr. Thomas: I’ll answer them, but just one at a time.

The easiest is the Save [Our Industries] Act — that is up to Congress, that is not up to the Executive, and you can see from the papers that Senator [John] McCain joined Senator [Daniel] Inouye. And that is for your very able new ambassador [Jose] Cuisia [Jr.] … he will have to lobby along with the Filipino-American community …

The other question was trade — very simple. In February, President Obama selected the Philippines as one of four countries in the world for partnership for growth, which is enhanced engagement. And we have in February and two weeks ago we brought two teams here from the US to meet with Secretaries [Florencio B.] Abad, [Cesar V.] Purisima, [Gregory L.] Domingo, [Cayetano W.] Paderanga to discuss constraints on economic growth and to see how the Philippines could one day see to the Trans-Pacific Partnership (TPP).

Out of that meeting, it was agreed the US Trade representative Ambassador [Ron] Kirk, who was here last July 1 as President Obama’s representative, invited a Filipino delegation to come to Washington in September to go through the Trans-Pacific Partnership chapter and verse, to see what exactly the Philippines should need to do should the Philippine people, government, and Congress decide this is what you want…

Clearly, there are three things that need to be done: Executive Order, laws issued, and laws amended. And again, that is not for us to comment on, again that is up to the Philippine government, people, and parliament. But that is what we’re doing to show how serious we are to have the Philippines included in the trans-Pacific partnership.

The GSP would be null and void if you are going to do TPP. I didn’t say when. It’s up to you to decide whether you want to become [a member].

BW: Was there an official invitation?

Mr. Thomas: Yeah, we did it. We don’t publicize everything that we do but we wanted to show them that we’re very serious about this. Obviously, partnership and growth is not just TPP, there’s Treasury department issues, USAID, homeland security, rule of law, governorship, this is a huge undertaking that we have … our focus is not just military, and this is the President’s choice to include the Philippines.

BW: Regarding the Millennium Challenge Account, the Philippines is a recipient of a $434-million grant. It has only started, it’s a five-year program. But looking ahead, what would you look at to make the Philippines qualified for another compact grant, and will you sustain that kind of program?

Mr. Thomas: That’s up to the MCC Board … it’s way too early, this is just the first year, and in one country in Latin America they extended the compact, but most countries it’s been five years and that’s it. And there have obviously been very few countries selected in the MCC. So what we have to do is let’s get through these first few years and see how it’s done… The big challenge would be doing the road in Samar, that’s $200 million of the $434.5 million…

One of the things I would like to say about MCC … we have an executive board, which is all Filipinos. We hired an executive director, former head of the Ayala Foundation, so how many employees do we have from America? Two. The rest are Filipinos — that’s a new way of giving assistance, we think there’s enough talent in this country…

BW: We always sound like we want money from the US, what are you guys asking from us?

Mr. Thomas: Good question, what are we asking for the Philippines? Right now, clearly, we’re not asking for bases. We are asking, as I said, we would like to see the economy opened, we would like to see it open so there could be more FDI, that has to be your decision on how you want to open the economy, or whether you want to open the economy.

When we look at the Asian tigers, or even India — not only do the wealthy get wealthier, but the middle class grew tremendously. I lived in India 15 years ago when they were just opening, they were charging that Coca-Cola and McDonald’s will be the new colonizers, all of this, and now what do you see? You see a lot of young Indians staying in India — they may go to school in the UK or the US, but they want to come home and work in their own country, and they make great salaries and they have great benefits.

So we say, don’t be trapped by history … The United States is the Philippines’ strategic ally and partner, and to have a country that’s an ally with a strong economy is also great for the United States…

BW: You mentioned the need of opening the economy. We need to do that if we join the TPP?
Mr. Thomas: You’d have to.

BW: But as you know there are constitutional restrictions?

Mr. Thomas: As I said, there are three things with partnership for growth — EOs, new laws, and amendments — and that’s not up to the United States, that’s up to your government and people whether you want to do that. But when you look at lack of FDI — it’s a consumer-driven economy, not a manufacturing or export economy. The largest exports are the semiconductors coming out of basically two Texas Instruments plants, that’s a huge percentage of your exports.

Also, you have highest power cost in Asia, and it’s kind of a false thing when you say that it’s 2nd after Japan. I would say it’s just as high if not higher, because in Japan, while residential is very high, the industrial is 50% of residential; where here the residential and industrial is very high…

BW: You’re looking at opening the service sector?

Mr. Thomas: Well … we have American companies that do all kinds of investment, but they’re restricted here in ways they are not in other countries, and I’m not saying it’s just American companies, it’s Chinese, Thai, it’s any foreigner, right? It really is.

But again, that can’t be us saying it, it has to be your decision…

BW: You mentioned phasing out USAID, is there a definite timeline?

Mr. Thomas: No, we’re not doing it. But my point is, again, we’re celebrating 50 years of AID, we’re celebrating 50 years of Peace Corps, and we’ve had more Peace Corps volunteers in the Philippines than any country in the world, but at some time, you have to say, is this what you want, assistance, or do you want to be an assistance provider? You know, Korea grew out of this, Japan grew out of this. Malaysia, they grew out of AID programs.

BW: Is there pressure back home to cut aid considering the US deficit?

Mr. Thomas: Remember, President Obama selected the Philippines as one of four countries for enhanced engagement, so we’re not cutting aid, we haven’t cut assistance.

Remember, we gave AID through many programs here, you’re not just talking about MCC. We have the longest, continuous Fulbright program in the world in the Philippines, we send Humphrey [Fellowship] scholars, Watson fellows, we send a lot of kids from Mindanao for a year training or six weeks in America …

Last week, we gave to our veteran’s hospital here, you know we have the only veteran’s clinic overseas, we gave a brand-new $1.3-million MRI machine, and we have to build — we can’t just give the machine — we have to build the entire facility inside…

We just gave $5 million to enhance our cemetery, it’s the largest cemetery overseas, and matanda (old) folks like me like the rocks and the drawings but the young kids want it interactive, so we have to do that, make it interactive, and a local corporation, a local company, won the contract over American firms…

BW: How would you characterize US-Philippine relations?

Mr. Thomas: I can say for the American side it’s, we think it’s excellent; I can’t say what the Filipinos believe…

I can’t apologize for the past. I think that history should be examined, and it should be laid out, and whatever happened, clearly should be examined, should be explained, but don’t be trapped by history, don’t use history as a trap not to excel, nobody should do that, as an individual or a group. But I think that for us, the Philippines is very important. You have four million Filipinos living in the US, maybe 4.5 million now. After China and India, it’s the 3rd largest Asian group. So that brings a lot of closer ties that you don’t even talk about.

BW: How about immigration and tourism?

Mr. Thomas: Immigration is huge … So that four million will grow, we just know it, that’s why we had to construct the embassy new building that way. But we welcome tourist visas, and we definitely welcome people to go study in the United States…
BW: On the issuance of US visas, some say things are more lenient now than before?

Mr. Thomas: We adhere to the law. We adhere to the Immigration and Naturalization Act … One of the main reasons males are rejected visas is because of bounced checks. Because if you have a felony, you can’t go … And then fraternity issues, that they have been charged with something here … Felon, you know, you can’t go.

BW: Are you looking at tax evasion cases?

Mr. Thomas: That depends on if we know it’s a tax issue. But let me ask you this, since you all are in BusinessWorld, is this something that’s examined … Filipinos who have overseas accounts?

BW: You mentioned power costs, so is there a deal that can be made?

Mr. Thomas: Well, you know, in the late 1990s, the United States mapped the Philippines for wind power. We gave it to the government, we didn’t charge, and not much has been done with that. So before we would be willing to map the country for solar power, we would have to see something done with what we did with wind.

BW: What do you think about the President’s (Aquino) first year?

Mr. Thomas: It’s not for me to comment, it’s up to you. We only do foreign policy, and that’s what we should do. If we ever delved into domestic policy — that’s not where we should go; we were colonizers and if you get into that, that’s a slippery slope. And you don’t want to do that with a democracy … we’re very pleased with our foreign relationship, our increasing military and intelligence assistance. As I said, the trade relationship, AID, and all of those, and that’s where we’ll stay.

BW: Will there be an increase in military assistance?

Mr. Thomas: Remember this, the Philippines has gotten more military assistance from the United States in the last 10 years than any country in Southeast Asia. It’s averaged $70 million a year.
And some people mischaracterize excess defense articles…

Now we have a ship coming, the Hamilton [Class Cutter], which we’re told you’re going to rename the General del Pilar … Yes, it’s a 40-year-old ship, but it’s a ship that can be well-maintained. Some people say “we have to have a new ship.” Well, the United States has been in two wars, we don’t have new ships for anybody.

And if you want a new ship, we’d be happy, it would be great for our economy, you have a trade balance with us, you want a new ship, we can give you a cruiser or a frigate, $700 million … And we can deliver that in five to six years.

BW: Exactly what is the US interest in Mindanao?

Mr. Thomas: Terrorism. Very simple.

BW: The Mutual Defense Treaty allows only for attacks against public vessels, wherein the US can actually come in. If it’s a tiny little fisherman you can’t actually be involved?

Mr. Thomas: We don’t engage in hypotheticals … One thing — I do have a question — why do people want a war to find out if you will be assisted?

BW: Will the conflict in the South China Sea ever be resolved in forums like the ASEAN Regional Forum (ARF)?

Mr. Thomas: Let’s hope so. Exercise restraint, sit down and talk.

BW: But ARF is perceived as just a useless talkfest.
Mr. Thomas: Again, that happens a lot, but we have to start somewhere.

BW: Don’t you think we’re too free?

Mr. Thomas: No. And I think people who say that are foolish. Why would you want to give up any of your freedom? Twenty-five years ago you went to the streets for freedom. It’s too precious. You don’t have to have a United States type of democracy, a UK type of democracy, but democracy is the best for all. And you know what, the fact that you could curse President Aquino, or I could curse President Obama, that’s great, and not have to worry about somebody bugging me. As I told people, one of our vice-consuls just left, he’s married to a Chinese national and her in-laws live with them … when they left, they said the thing they loved most about the Philippines was the Internet.

And I said, what? Because in China, they can never be on all of this and here they’re on 24/7, we take that for granted. And the thing about the Philippines, it’s the most Facebooked country in the world. So, what happens if you couldn’t text? That’s giving up a freedom. You can eventually get the economics right, but you never want to give up your freedom.