Order Code RL33233
CRS Report for Congress
Received through the CRS Web
The Republic of the Philippines:
Background and U.S. Relations
January 10, 2006
Thomas Lum
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division
Larry A. Niksch
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

The Republic of the Philippines: Background and U.S.
Relations
Summary
This report discusses key issues in U.S.-Philippine relations and developments
in Philippine politics, economics, society, and foreign relations. Global terrorism
concerns have brought the United States and the Republic of the Philippines (RP)
closer together, but they also have produced some bilateral tensions and highlighted
weaknesses in Philippine economic, political, and military institutions. The RP faces
terrorist threats through alleged cooperation among three groups — Jeemah Islamiah
(JI), the main Southeast Asian Islamic terrorist organization with ties to Al Qaeda;
Abu Sayyaf, a small, violent Muslim separatist group which operates in Mindanao
and the Sulu Archipelago in the southern Philippines; and the Moro Islamic
Liberation Front (MILF), an armed separatist group with alleged ties to both JI and
Abu Sayyaf. President Gloria Macapagal-Arroyo has strongly supported the U.S.-led
war on terrorism. Since 2001, the Philippines has received the most dramatic
increase in U.S. foreign assistance in the East Asia-Pacific region, particularly
foreign military financing (FMF). In May 2003, the United States designated the
Philippines as a Major Non-NATO Ally. Since 2002, joint U.S.-RP military
exercises (Balikatan) have focused on counter-terrorism efforts. The Balikatan
exercises of 2002, in which U.S. troops provided non-combat assistance, significantly
reduced the strength of Abu Sayyaf. However, there is also evidence that Mindanao
appears to be transforming into a significant base of regional operations for JI.
Furthermore, the rise of the Rajah Solaiman Movement (RSM), composed of Muslim
converts from the northern Philippines, has the potential to expand the reach of
Islamic terrorism to Manila and the main island of Luzon.
Despite general agreement on the importance of U.S.-RP relations and the U.S.-
led war on terrorism, bilateral frictions have occurred as the Philippines has become
more assertive regarding its self-interest and sovereignty. Meanwhile, the RP’s
relationship with China has become more cordial while economic cooperation
between the two countries has deepened. In July 2004, President Arroyo withdrew
Philippine forces from Iraq in response to the demands of Islamic militants who had
kidnaped a Filipino contract worker, despite some criticism in the United States that
the Philippines was “caving-in to terrorists.” The RP government has also objected
to U.S. consideration of a greater combat role for U.S. troops in joint military
exercises and of placing the MILF, with whom Manila is negotiating a peace
agreement, on the U.S. list of terrorist organizations. Some analysts argue that the
United States should pay more attention to the underlying causes of terrorism in the
RP, and that the lack of widespread economic development as well as political
corruption and instability in Philippine politics and the armed forces (AFP)
undermine efforts at dealing with Philippine and Southeast Asian terrorist threats.
The United States Agency for International Development (USAID) has attempted to
address underlying causes of violence in Muslim Mindanao, including lack of
economic development and poor governance. Other issues covered by this report
include the Arroyo election scandal; the U.S. Marine rape case in the Philippines; and
Filipino World War II veterans’ claims for full U.S. veterans benefits (H.R. 4574).
This report will be updated periodically.

Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Political Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Election Scandal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Charter Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Overseas Filipino Workers (OFWs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Foreign Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Promoting U.S. Trade and Investment in the Philippines . . . . . . . . . . . . . . . 6
Terrorist, Separatist, and Communist Movements . . . . . . . . . . . . . . . . . . . . . . . . 7
The Abu Sayyaf Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S. Policy Toward Abu Sayyaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Rajah Solaiman Movement (RSM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MNLF and MILF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
U.S. Policy Toward the MILF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Philippine Communist Party (CPP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Foreign Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Developments in U.S.-RP Military Relations and Security Ties . . . . . . . . . 12
Balikatan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Joint Maritime Patrols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Marine Rape Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SOFA with Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Philippines-China Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
U.S. Foreign Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Filipino Veterans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Time Line: Major Historical Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
List of Figures
Figure 1. Map of The Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Tables
Table 1. U.S. Assistance to Philippines, 2002-2006 . . . . . . . . . . . . . . . . . . . . . . 18

The Republic of the Philippines: Background
and U.S. Relations
Overview
The United States and the Republic of the Philippines (RP) maintain close ties
stemming from the colonial period (1898-1946). Global terrorism concerns have
brought the United States and the RP, two treaty allies, closer together nearly a
decade after the U.S. troop withdrawal from Philippine bases in 1992. Despite
general agreement on the importance of U.S.-RP relations and the U.S.-led war on
terrorism, however, some bilateral frictions have arisen as the Philippines has
become more assertive regarding its self-interests and sovereignty. Some analysts
argue that the United States should place greater emphasis upon the underlying
causes of terrorism in the Philippines, such as political corruption and uneven
economic growth.
The main pillars of the bilateral relationship are the U.S.-RP security alliance,
shared values and interests regarding democracy and combating terrorism, trade and
investment ties, and extensive people-to-people contacts. Filipino-Americans
number approximately 2.4 million, making them the second-largest Asian-American
population, and comprise the largest immigrant group in the United States armed
forces.1 Over 100,000 Americans live in the RP. In November 2005, the Senate
agreed to S.Res. 307, “to recognize and honor the Filipino World War II veterans for
their defense of democratic ideals and their important contribution to the outcome of
World War II.” In December 2005, a similar resolution was introduced in the House
(H.Res. 622), while Congress approved two additional resolutions, S.Res. 333 and
H.Con.Res. 218, which acknowledged the contributions of Filipino-Americans to the
United States over the last century. Broad U.S. policy objectives include maintaining
the U.S.-RP alliance as the bilateral relationship matures and evolves into one of
equal partners, supporting RP anti-terrorism efforts, and promoting stable and
responsive democratic institutions and equitable economic growth in the Philippines.
Key considerations for Congress regarding U.S. policy toward the RP include
the following:
! Carrying out joint anti-terrorism military exercises within the
constraints of the Visiting Forces Agreement and Philippine
sensitivities regarding national sovereignty.
! Developing an appropriate stance toward the Moro Islamic
Liberation Front (MILF) as it negotiates a peace agreement with the
Philippine government. The MILF historically is a separatist group,
1 U.S. Census Bureau, 2000; Migration Policy Institute, 2003.

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but allegedly has had growing ties to Philippine and Southeast Asian
terrorist organizations.
! Effectively channeling U.S. development assistance, particularly in
Muslim Mindanao, in order to address root causes of terrorism.
! Laying the groundwork for negotiating a Free Trade Agreement with
the RP.
! Responding to problems of political corruption and turmoil in the
Philippines that may distract RP government attention from issues
related to the economy and to separatist and terrorist groups in the
South.
! Addressing claims by Filipino World War II veterans for full
veterans benefits on par with their American counterparts.
! Responding to the diversification of Philippine political, economic,
and security ties in the region, including the RP’s strengthening
relations with China.
Some analysts assert that the U.S.-
Republic of the Philippines (RP)
Philippine relationship is stronger than
in Brief
at any time since the U.S. troop
Capital: Manila
withdrawal from Philippine bases in
Area (comparative): slightly larger than
1992. Since 2002, joint military
Arizona
exercises, which resumed in 2000 after
Government: unitary republic, presidential
a five-year hiatus, have focused
system, bicameral legislature,
independent judiciary
primarily on counter-terrorism efforts.
Population: 87.8 million
During President Gloria Macapagal-
Religions: Roman Catholic — 80.9%; other
Arroyo’s state visit to Washington in
Christian — 7%; Muslim — 5%; other
May 2003, the United States pledged
— 7%
increased military assistance and
Ethnic groups: Malay (95%); Chinese (2%);
Meztizo (Malay-Chinese or Malay-
designated the Republic of the
Spaniard, and other) (2%); Other (1%)
Philippines (RP) as a Major Non-NATO
Labor force by occupation: agriculture —
Ally.2
36%; industry — 16%; services —
48% (2004)
Public debt: 74.2% of GDP
Other analysts contend that the lack
Unemployment rate: 11.5% (2005)
of widespread economic development as
Literacy: 92%
well as political corruption and
Life expectancy: 69.9 years (total
instability in Philippine politics and the
population)
armed forces (AFP) undermine U.S.-RP
GDP per capita (PPP): $5,000 (2004)
Human Development Index Ranking: 83 (out
efforts at dealing with domestic and
of 177)
regional terrorist threats. In April 2005,
U.S. Embassy Charge d’Affairs in
2 Catharin Dalpino, “Separatism and Terrorism in the Philippines: Distinctions and Options
for U.S. Policy,” Testimony before the Subcommittee on East Asia and the Pacific, House
International Relations Committee
, June 10, 2003.

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Manila, Joseph Mussomeli, caused an uproar among RP officials when he stated that
parts of Muslim Mindanao, with its poverty, lawlessness, porous borders, and links
to regional terrorist groups, could develop into an “Afghanistan-style” situation.3 In
May 2005, U.S. Ambassador to the Philippines, Francis Ricciardone, announced the
cancellation of a U.S.-aided road project in Cotabato province in southern Mindanao,
describing Cotabato as a “doormat” for Muslim terrorists.4 Some RP officials
countered that U.S. officials exaggerated the lack of political control in the province.
Political Developments
Election Scandal
Gloria Macapagal-Arroyo, daughter of former RP President Diosdado
Macapagal, former RP Senator and Vice-President to Joseph Estrada, assumed the
Presidency in 2001 when President Estrada resigned amid a corruption scandal and
popular uprising. Having survived a military coup attempt in July 2003, President
Gloria Macapagal Arroyo won the presidential election of May 2004. In 2005, she
faced mass protests and calls for her resignation following allegations that she
“rigged” the 2004 presidential race against Fernando Poe. In a recorded telephone
conversation that occurred prior to the end of vote counting, Arroyo reportedly told
an election commissioner that she wanted to secure a million-vote margin. In June
2005, one year into her six-year term, President Arroyo publicly apologized for a
“lapse in judgment” but vowed to remain in office and to allow the controversy to be
“mediated through the constitutional process,” thus favoring risking impeachment
over resigning.5 This scandal followed accusations earlier in the year that the
President’s husband, son, and brother-in-law received kickbacks from illegal lottery
operators. In July 2005, ten members, or about one-third, of the President’s cabinet
resigned. Among those calling for her to step down are Susan Roces, widow of Poe,
and former presidents Joseph Estrada (himself under indictment for corruption) and
Corazon Aquino. On August 31, 2005, while opposition legislators boycotted the
proceedings, a congressional committee voted to quash all impeachment complaints
against the President.
According to some analysts, currently there is no viable alternative to Arroyo.
Although support for the president is low — her approval ratings dropped from 50%
in May 2005 to under 25% since June 20056 — few Filipinos believe that her ouster
would bring improvement to either the political system or the economy. So far, no
organized opposition or spontaneous mass movement has generated overwhelming
pressure for Arroyo to resign. Many Filipinos reportedly believe that Vice President
3 Julie S. Alipala, “U.S. Envoy Says He’ll Miss Driving People Crazy in RP,” Philippine
Inquirer
, May 1, 2005.
4 Carlos H. Conde, “Corruption Troubles Philippine Military,” International Herald
Tribune
, May 26, 2005.
5 Paul Alexander, “Support for Philippine President Crumbles,” Washington Post, July 8,
2005.
6 BusinessWorld (Manila), July 25, 2005; BusinessWorld (Manila), November 17, 2005.

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(and former television actor) Noli de Castro, although popular, lacks the experience,
expertise, and will to tackle the country’s intractable economic and political
problems. The support of former President Fidel Ramos has provided some
legitimacy to the Arroyo presidency and, according to some analysts, dampened the
likelihood of a military coup.7 The Philippine military, from which over a dozen
coup attempts have arisen since the fall of Marcos in 1986, has remained quiet on the
whole. The Catholic church, which played a prominent role in two “people power”
movements (toppling Marcos in 1986 and Estrada in 2001), has remained relatively
officially neutral toward President Arroyo. Defacto U.S. support came in the form
of a statement by acting U.S. Ambassador Joseph Mussomeli who declared that the
United States supported Filipinos applying “the rule of law” in determining Arroyo’s
status and that the United States did not favor either a military coup d’etat or another
episode of “people power.”8
Some experts conclude that Philippine politics is prone to instability and abuses
of power. The political system is dominated by an elite whose influence reaches
back to Spanish colonial times. Political groupings tend to be fragmented and
unstable. Political parties are driven more by sectoral and community interests than
ideology, and their members often transfer allegiances. The legislature acts as a
“watchdog,” but has difficulty articulating broad policy options. In this political
atmosphere, charismatic leaders often rise to the top and then distribute the spoils of
victory to their cronies.9
Charter Change
Since the fall of Ferdinand Marcos, some Philippine leaders have proposed
reforming the political system in order to produce political stability and effective
governance. President Arroyo has advocated “charter change” as a means toward
these ends, including the following: eliminating presidential campaigning, which
many political analysts argue produces “celebrity” candidates rather than competent
chief executives; producing stable political party alignments; and reducing
corruption. Arroyo’s proposal includes a change from a unitary system to a federal
one, in order to provide more autonomy and reduce tensions among restive ethnic
groups in the south; and the creation of a parliamentary-cabinet system with a
unicameral legislature, in order to achieve better leadership and coordination between
the executive and legislative branches. Former President Ramos strongly supports the
reform as a means of making economic reform easier to pass and of producing better
candidates for executive office. Some analysts argue that many Filipinos outside of
metro Manila — and two-thirds nationally — are opposed or indifferent to the
proposed constitutional reform and support the bicameral structure.10
7 Gerard Finin, “Philippines’ Ramos Plays ‘Queenmaker’ while Presidential Musical Chairs
Does Little for the Poor Majority,” East-West Wire, July 11, 2005.
8 Bonner, Raymond and Conde, Carlos H. U.S. in Wary Diplomacy with Besieged
Philippine Leader. New York Times, July 22, 2005. P.A3.
9 Alex Magno, “The Perils of Pedestals,” Time Asia, July 11, 2005.
10 Social Weather Stations, September 2004.

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Some analysts argue that charter change, which may be viewed as a panacea by
some, would not fundamentally alter some of the characteristics that plague
Philippine politics. Other analysts argue that charter change would distract
government attention away from economic reforms and public attention from
President Arroyo’s legitimacy problems. While constitutional change appears to
have support in the Arroyo-controlled House of Representatives (more for
parliamentarian government than federal), it is reportedly opposed by a majority in
the Senate, which is proposed to be abolished under such reforms.
Economy
During the post-World War II period, the Philippines was considered the
second-most developed country in East Asia, after Japan; however, the country has
fallen behind other developing nations in Southeast Asia. Compared to other
countries in the region, the RP’s once-prominent position as a destination for foreign
investment has also declined. In 2004, the country ranked 100 among 140 countries
in foreign direct investment (FDI). The top foreign investors in cumulative terms in
2003 were Japan ($3.67 billion) and the United States ($3.52 billion). Analysts state
that the Philippine economy has been hampered since the 1950s by numerous factors,
including political corruption, bureaucratic incompetence and red tape, an entrenched
economic oligarchy (“crony capitalism”), government deficit — over 30% of the
domestic budget goes toward making interest payments — and foreign debt, a highly
inequitable distribution of wealth, the emigration of talented professionals, poor
infrastructure, a high birth rate (2.3%), and violent crime. On a scale measuring
perceptions of corruption, the Philippines ranks in the bottom third of Asian
countries, along with Pakistan, Vietnam, Indonesia, and Bangladesh. Per capita
income is $5,000, just below China’s $5,600.11 The Philippines ranks number 84 on
the United Nations Development Programme’s Human Development Index (just
ahead of China).
President Arroyo’s economic reform agenda includes reducing public
expenditures, raising prices for public utilities and transport, raising the value-added
tax, punishing citizens more severely for tax evasion, and privatizing some
government corporations. The last president to carry out sustained economic reform
was Fidel Ramos (1992-1998), who lifted controls on foreign exchange, permitted
foreign banks in the country, busted monopolies, and deregulated airlines and
telecommunications companies.12 Positive developments under the Arroyo
administration include a declining budget deficit, surging remittances from abroad,
and strong performance in the agricultural sector. In 2004, economic growth at 6.1%
was the highest in 15 years. For 2005, economic growth is estimated at 4.5%.13
Corruption reportedly has been prosecuted in some high-profile cases, but remains
pervasive at middle bureaucratic levels.
11 Central Intelligence Agency, World Factbook (2004 est., purchasing power parity basis).
12 George Wehrfritz and Marites Vitug, “Gloria’s Last Stand?” Newsweek, July 11, 2005.
13 Economist Intelligence Unit, Country Report — Philippines, April 2005; Global Insight,
Inc.

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Overseas Filipino Workers (OFWs)
The Philippine economy is highly dependent upon remittances from abroad. In
2004, nearly 10 million Filipinos overseas remitted $8.5 billion (compared to $506
million in FDI), equal to 10% of GDP and more than half the government budget.
Remittances for 2005 have reached $10 billion. While this source of income is a
boon to the economy, some observers argue that it is not promoting long-term
economic development or job creation. The flight of educated professionals may also
indicate the depletion of the middle class which has long been considered the
bulwark of democracy in the Philippines. The Philippines is facing a brain drain of
growing severity. Officials predict a record 1 million Filipinos may go abroad in
2005. Leaders of the Philippine medical community warned that the country could
face a healthcare crisis due to the surge in doctors leaving the country to work as
nurses in the United States, Europe, and the Middle East. Roughly 9,000 doctors, or
12% of the total, have left the country since 2002.14
Foreign Trade
The RP’s largest trading partners are the Japan, the United States, China
(including Hong Kong), Singapore, and Malaysia. Merchandise exports are
dominated by electronics, garments, and machinery and transport equipment.
Exports to the United States have been falling slightly. In 2004, the Philippines
exported $9.4 billion in goods to the United States, compared to $10 billion in 2003
and $10.9 billion in 2002. The Philippines trails all major Southeast Asian states in
exports to the United States. One of the fastest growing industries in the Philippines
is call centers, growing at an estimated 50% in 2004 and a projected 50%-70% in
2005, and maintaining the potential to surpass India.
Promoting U.S. Trade and Investment in the Philippines
One policy option for Congress is to encourage U.S. trade with and investment
in the Philippines as a means toward keeping the Philippines economically
competitive in the region and helping to provide social and political stability. The
Philippines welcomes U.S. investment in power, infrastructure, mining, and global
sourcing (call centers, business processing, medical transcription). In 2002, the Bush
Administration inaugurated a trade initiative with ASEAN (Enterprise for ASEAN
Initiative or EAI) which offers the prospect of bilateral free trade agreements (FTAs)
with countries that have demonstrated a commitment to economic reforms and
openness. The United States has concluded a Trade and Investment Framework
Agreement (TIFA) with the Philippines as a foundation for a possible future FTA.
Continuing collaboration on intellectual property rights (IPR) protection would help
the Philippines prepare for FTA negotiations.
14 Roel Landingin, “Philippines Faces Healthcare Crisis as Doctors Leave for Better Jobs
Abroad,” Financial Times, September 26, 2005; Alan Sipress, “Political Crisis Impedes
Governance in the Philippines,” Washington Post Foreign Service, October 2, 2005.

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Terrorist, Separatist, and Communist Movements15
The Muslim terrorist and insurgency situation in the southern Philippines has
become increasingly complex since 2002 when Philippine and U.S. forces conducted
a relatively successful operation against the Abu Sayaf terrorist group on Basilan
island off the southwestern tip of the big southern island of Mindanao. The operation
reduced Abu Sayyaf’s strength from an estimated 1,000 active fighters to an
estimated 200-400 in 2005. Another apparent positive development in the southern
Philippines is that the cease-fire between the Moro Islamic Liberation Front and the
Philippine government and AFP has held, and negotiations for a settlement are
ongoing in Malaysia. However, there are other developments of a decidedly negative
nature that could worsen the overall situation in the southern Philippines and even
the Philippines as a whole. One is the growing cooperation among Abu Sayyaf,
several major MILF commands, and elements of Jeemah Islamiah (JI) on Mindanao.
JI, the Southeast Asian Muslim terrorist organization with ties to Al Qaeda, appears
to have made Mindanao a primary base for building up its cadre of terrorists.
Moreover, this cooperation among the three groups appears to be transforming
Mindanao into a significant base of operations rather than just a site for training; and
these operations appear to target increasingly the Philippines for terrorist attacks.
This, too, is related to another new development, the emergence of a group of
Filipino Muslim converts in the northern Philippines, the Rajah Solaiman Movement,
which is working with Abu Sayyaf and JI. The result has been an increase in terrorist
bombings since 2002 both in number and destructiveness and an increase in the
number of bombing targets in the northern Philippines, including Manila.
The Abu Sayyaf Group
Abu Sayyaf is a small, violent, faction-ridden Muslim group that operates in the
western Mindanao and on the Sulu islands extending from Mindanao. It has a record
of killings and kidnaping and has had past, sporadic links with Al Qaeda.16 Abu
Sayyaf kidnaped three American citizens in May 2001, including the Burnhams, a
U.S. missionary couple. One of the Americans was beheaded in June 2001. In June
2002, Filipino army rangers encountered members of the Abu Sayyaf group holding
the Burnhams. In the ensuing clash, Mr. Burnham and a Filipina female hostage
were killed, but Mrs. Burnham was rescued.
Philippine military operations since 2001, supported by the United States, have
weakened Abu Sayyaf on Basilan island and in the Sulu islands, but. However,
under the leadership of Khadaffy Janjalani, Abu Sayyaf has reoriented its strategy and
appears to have gained greater effectiveness as a terrorist organization. Janjalani de-
emphasized kidnappings for ransom and instead emphasized developing capabilities
for urban bombings. He improved ties with key military factions of the MILF and
15 See CRS Report RL31672, Terrorism in Southeast Asia, coordinated by Bruce Vaughn.
16 The ASG reportedly provided support to Ramzi Yousef, an Al Qaeda agent convicted of
planning the 1993 bombing of the World Trade Center. In 1994, Yousef rented an
apartment in Manila where he made plans and explosives to blow up 11 U.S. passenger jets
simultaneously over the Pacific Ocean.

CRS-8
established cooperation with JI. He also re-emphasized the Islamic nature of Abu
Sayyaf. Thus, even though Abu Sayyaf’s armed strength has fallen from an estimated
1,000 in 2002 to 200-400 in 2005, the threat from the organization may be growing.17
Khadaffy has moved some of its operations and leadership to the mainland of western
Mindanao. There it reportedly has established links with elements of JI, using
several MILF base camps. There, the two groups reportedly engage in joint training
with emphasis on bomb-making and urban bombings.18 In March and April 2003,
Abu Sayyaf, JI, and MILF cadre carried out bombings in Davao on Mindanao, which
killed 48.
By mid-2005, Jemaah Islamiah personnel reportedly had trained about 60 Abu
Sayyaf cadre in bomb assembling and detonation.19 Since March 2004, the
Philippine government has announced that it uncovered several Abu Sayyaf plots to
conduct bombings in Manila, including the discovery of explosives. One reported
target was the U.S. Embassy. In April 2004, police officials reportedly determined
that a February 2004 bombing of a Manila-based ferry, in which 194 people died,
was the work of Abu Sayyaf and the Rajah Solaiman Movement, a group of idealistic
Filipino Muslim converts from the Manila area. In February 2005, Abu Sayyaf
carried out three simultaneous bombings in three cities, which indicated a higher
level of technical and operational capabilities. According to Philippine national
security officials, Abu Sayyaf reportedly is training Rajah Solaiman members to carry
out terrorist bombings in Manila and several other cities.20
U.S. Policy Toward Abu Sayyaf
Within a few months after the September 11, 2001 terrorist attack on the United
States, the Bush Administration moved to extend direct military support to the
Philippines in combating Abu Sayyaf. The United States committed 1,300 U.S.
military personnel in 2002 to support Philippine military operations against Abu
Sayyaf on Basilan island, an island southwest of Mindanao. In 2005, the Philippines
and the United States developed and implemented a combined operation in Western
Mindanao against Abu Sayyaf, and U.S. military personnel also participated in non-
combat operations on Jolo island in the Sulu island chain southwest of Basilan, and
additional operations on Jolo were planned for February-March 2006. (For a more
detailed discussion of U.S.-Philippine military cooperation, see the section on
Balikatan.)
The U.S. military role appears to be based on three objectives: (1) assist the
Philippine military to weaken Abu Sayyaf in its redoubt of Jolo and the other Sulu
17 Abuza, Zachary. Balik-Terrorism: The Return of the Abu Sayyaf Group. Carlisle, U.S.
Army War College, 2005. P. 27. Mogato, Manny. Fighting in the Philippine South Rages,
Soldier Killed. Reuters News, November 24, 2005.
18 Ibid., p. 14-19, 22-24.
19 Mogato, Manny. “Philippine Rebels Linking up with Foreign Jihadists.” Reuters, August
21, 2005. Del Puerto, Luige A. PNP [Philippine National Police]: Alliance of JI, RP
Terrorists Strong. Philippine Daily Inquirer (internet version), November 20, 2005.
20 Abuza, Balik-Terrorism: The Return of the Abu Sayyaf, p. 36.

CRS-9
islands; (2) neutralize Abu Sayyaf-Jeemah Islamiah training; and (3) kill or capture
Khaddafy Janjalani and other Abu Sayyaf leaders.
Rajah Solaiman Movement (RSM)
The emergence of the RSM in 2005 presents a new terrorist threat to the
Philippines. Unlike Muslims of the southern Philippines, the RSM appears to be
composed primarily of Filipinos from the northern Philippines. The RSM has
emerged from the estimated 200,000 Filipinos who have converted to Islam since the
1970s; many of these are Filipino who worked in the Middle East where they
converted. The RSM’s manpower strength is unknown, but Philippine intelligence
reports indicate that it has cells throughout the main island of Luzon, including
metropolitan Manila.21 Thus, the RSM potentially expands the reach of Islamic
terrorism to Manila and other parts of the northern Philippines. A Manila bombing
plot uncovered in March 2004 involved the RSM, according to Philippine
intelligence officials. The RSM has cooperated with Abu Sayyaf in several bomb
plots including the February 2004 Manila ferry bombing. The RSM also has received
financial support and training from elements within the MILF. The RSM leader,
Ahmed Islam Santos, underwent training in bombing in the MILF’s Camp Bushra on
Mindanao in December 2001.22
MNLF and MILF
The U.S. focus on Abu Sayyaf is complicated by the broader Muslim issue in
the southern Philippines, including the existence of two much larger groups, the
Moro National Liberation Front (MNLF) and the Moro Islamic Liberation Front
(MILF). Both groups have been in insurrection against the Philippine government for
much of the last 30 years. The MNLF signed a peace treaty with Manila in 1996,
which granted limiated autonomy to four Mindanao provinces. The MILF, with an
estimated armed strength of 10,000, has emerged as the larger of the two groups. Its
main political objective has been separation and independence for the Muslim region
of the southern Philippines. Evidence, including the testimonies of captured Jemaah
Islamiyah leaders, has pointed to strong links between the MILF and JI, including the
continued training of JI terrorists in MILF camps. This training appears to be
important to Jemaah Islamiyah’s ability to replenish its ranks following arrests of
nearly 500 cadre in Indonesia, Malaysia, and Singapore. MILF leaders deny links
with JI and Abu Sayyaf, but there are many reports linking some local MILF
commands with these terrorist organizations. Despite over two years of disavowing
links with JI, the MILF has not captured any JI cadre.23 A stronger collaborative
relationship has developed between these MILF commands and Abu Sayyaf since
2002. Zachary Abuza, U.S. expert on Islamic terrorism in Southeast Asia, has
identified four of eight MILF base commands as sites of active MILF cooperation
21 Top Terrorism Suspect Falls. Philippine Daily Inquirer (internet version), October 27,
2005. Montlake, Simon. In Philippines, watchful eye on converts. Christian Science
Monitor
, November 28, 2005. P. 7.
22 Ibid. Abuza, Balik-Terrorism: The Return of the Abu Sayyaf, p. 35-37.
23 Interview with Zachary Abuza, January 3, 2006.

CRS-10
with Abu Sayyaf and JI. He also has identified the MILF’s Special Operations Group
as facilitating joint training and joint operations with Abu Sayyaf. JI uses these
MILF base camps to train both MILF and Abu Sayyaf cadre. Khadaffy Janjalani and
other Abu Sayyaf leaders reportedly have received sanctuary in at least one MILF
base camp.24
The MILF has had tenuous cease-fire agreements with the Philippine
government. The government and the MILF concluded a new truce agreement in June
2003, which has resulted in a substantial reduction in violence and armed clashes.
However, the cease-fire apparently has not reduced the movement of terrorist
personnel and materials between Mindanao and the Indonesian island of Sulawesi
under the direction of JI. (The Mindanao-Sulawesi corridor is one of the weakest
links in the anti-terrorist efforts of Indonesia and the Philippines backed by the
United States). Under the truce, a Malaysian observer team visited MILF camps in
March 2004 and warned MILF leaders to end ties to Jemaah Islamiyah. The
Malaysian team was a forerunner of a larger team of international observers that
began to monitor the cease-fire in October 2004 — and presumably MILF-JI
relations. A new round of Philippine government-MILF political talks has begun.
In May 2003, the Bush Administration promised U.S. financial support of $30
million to support a negotiated settlement between the MILF and the Philippine
government.25
The negotiations between the MILF and the government have concentrated on
the extent of autonomy for Muslim areas and Muslim rights to “ancestral lands”
taken over by non-Muslim Filipinos. Philippine government negotiators predicted
a peace accord in early 2006; but the Philippine military’s Southern Command
asserted in December 2005 that it had intelligence information that the MILF was
violating the cease-fire by recruiting at least 4,000 new members.26 MILF leaders
denied the charge. Government negotiators and advisers to President Arroyo also
denied the Southern Command’s charge, which reflects divisions between military
(AFP) and civilian authorities over strategy toward the MILF. The AFP favors a
more aggressive strategy and is suspicious of a negotiated settlement. Nevertheless,
given the active collaboration between several MILF base commands and JI and Abu
Sayyaf, the Southern Command’s accusation of recruiting may be plausible, although
Dr. Abuza, the U.S. expert cited above, doubts that the number would be near
4,000.27 This collaboration also suggests that key MILF commanders would not
support any agreement between the MILF leadership and the Philippine government
that did not include outright independence for the Muslim areas of the southern
Philippines. In that scenario, the MILF could split with hardline elements joining
24 Abuza, Balik-Terrorism: The Return of the Abu Sayyaf, p. 14-19, 22-24.
25 Curl, Joseph. Bush Will Send More Troops to Fight Philippine Rebels. Washington
Times
, May 20, 2003. P. A10. Bonner, Raymond. Philippine camps are training Al Qaeda’s
allies, officials say. New York Times, May 31, 2003. P. A1.
26 Agence France Presse (Hong Kong), December 13, 2005. Jacinto, Al. Negotiators Hold
Meeting to Prevent Military-MILF Rift. Manila Times (Internet version), December 17,
2005.
27 Interview by author of Zachary Abuza, January 2, 2006.

CRS-11
even more closely with JI and Abu Sayyaf, which would maintain a high level of
terrorist operations despite a settlement agreement. The Arroyo Administration and
presumably the Bush Administration are operating on the assumption that the MILF
leadership sincerely wants a compromise peace and opposes collaboration with JI and
Abu Sayyaf. However, there is another view that the MILF leadership has a
relationship with the hard-line MILF commands similar to that between the political
organization, Sinn Fein, and the armed wing of the Irish Republican Army.
According to this view, the MILF leadership is acting as a front for the hard-line
commands, shielding them from moves against them by the Philippine government
and the AFP.28
U.S. Policy Toward the MILF
The Bush Administration has expressed growing concern over MILF links with
JI and JI’s use of the Mindanao-Sulawesi corridor. The previous cited comments by
the U.S. Ambassador and U.S. Charge d’Affaires in April and May 2005 indicated
U.S. dissatisfaction with this situation and doubts about the Philippine government’s
ability to end Muslim terrorism on Mindanao. The Bush Administration has
considered placing the MILF on the U.S. list of terrorist organizations. However, the
Arroyo Administration has opposed such a move as potentially jeopardizing the
peace negotiations.29 Currently, the Bush Administration also has voiced support for
the Philippine-MILF peace negotiations as the best means of de-linking the MILF
from JI.30 This support boosts the Arroyo Administration against the AFP’s
advocacy of a militarily-aggressive strategy toward the MILF. Moreover, a
breakdown of the negotiations and the cease-fire likely would confront the Bush
Administration with policy decisions regarding a U.S. role in a wider war. The AFP
could be expected to propose increased supplies of U.S. arms and military
equipment; and it likely would argue for a more direct U.S. military role. The
Philippine government might change its previous policy of opposition to a U.S.
military role against the MILF and encourage U.S. actions against the MILF at least
in a role similar to that in the joint exercises against Abu Sayyaf.
However, if significant elements of the MILF opposed a peace agreement and
moved closer to JI and Abu Sayyaf and if they were able to continue or expand
terrorist operations, the Bush Administration would be faced with a different kind of
challenge but one that could include similar pressures for greater U.S. military
involvement. There also would be the challenge of proceeding with implementing
the U.S. commitment of financial aid to support a settlement. This commitment, too,
could confront the Administration with a policy decision of whether or not to employ
U.S. pressure on the Philippine government to implement faithfully its obligations
under a peace agreement. This scenario is plausible, given the reputed poor
28 Commentary on ABC Radio News, December 28, 2005.
29 Abuza, Galik-Terrorism: The Return of the Abu Sayyaf, p. 42. Gloria’s powers of
persuasion. Far Eastern Economic Review, December 12, 2002. P. 10.
30 Asia Security Monitor No. 147, November 30, 2005. U.s. Says Peace Deal in Manila May
Pressure JI. Reuters News, October 22, 2005.

CRS-12
performance of Philippine governments in implementing the 1977 and 1996
agreements with the MNLF.
Philippine Communist Party (CPP)
The CPP has directed an insurgency under its New Peoples’ Army (NPA) since
the late 1960s. NPA armed strength reached over 25,000 in the early 1980s and was
a factor in the downfall of President Ferdinand Marcos in 1986. After Marcos fell
and democracy was restored, the NPA declined in strength. However, in recent
years, the insurgency has made a slight recovery, reaching an estimated armed
strength of 8,000 in 2004-2005 and operating in 69 of the Philippines’ 79 provinces.31
The CPP also has called for attacks on American targets. In August 2002, the Bush
Administration placed the CPP and the NPA on the official U.S. list of terrorist
organizations. It also pressured the government of the Netherlands to revoke the visa
privileges of Communist Party leader, Jose Maria Sison, and other CPP officials who
have lived in the Netherlands for a number of years and reportedly direct CPP/NPA
operations. In December 2005, the European Union placed the CPP/NPA on its list
of terrorist organizations. This could place greater pressure on the Netherlands
government to restrict Sison’s communist exile group.
Foreign Relations
Developments in U.S.-RP Military Relations and Security Ties
The Republic of the Philippines is a treaty ally of the United States under the
1951 Mutual Defense Treaty, and relies heavily upon the United States for its
external security. In 1991, the Philippine Senate voted 12-11 to revoke the Military
Bases Agreement between the RP and the United States. However, in 1995,
President Ramos invited U.S. forces back on a limited basis through a new Visiting
Forces Agreement (VFA), partially in response to a territorial dispute with China in
the South China Sea (Mischief Reef Incident). In 1999, despite protests by the
Catholic Church and leftist groups, the Philippine Senate ratified the VFA, allowing
joint Philippine-U.S. military operations. In January 2000, the first joint military
exercises (“Balikatan” or shoulder-to-shoulder) between the RP and the United
States in five years took place under the VFA.32 Following the September 11, 2001
attacks in the United States, Manila offered ports and airports for use by U.S. naval
vessels and military aircraft for refueling stops. On March 20, 2003, President
Arroyo announced Manila’s support for the U.S.-led invasion of Iraq and sent a
peacekeeping and humanitarian contingent of nearly 100 soldiers and other
personnel. During President Arroyo’s official state visit to the White House on May
19, 2003, the United States announced a new $65 million program for the training of
31 Hepinstall, Sonya and O’Callaghan, John. Interview — Communists Pose Biggest Threat
to Philippines. Reuters News, January 10, 2006.
32 Leszek Buszynski, “Realism, Institutionalism, and Philippine Security,” Asian Survey,
Vol. XLII, No. 3 (May/June 2003); Anthony Spaeth, Sally B. Donnelly, and Nelly Sindayen,
“Under the Gun,” Time International (Asia ed.), May 9, 2005.

CRS-13
several Armed Forces of the Philippines (AFP) battalions, promised $30 million in
economic aid for Mindanao, and designated the Philippines a Major Non-NATO
Ally.
In July 2004, Islamic militants kidnaped a Filipino contract worker in Iraq and
demanded that the Philippines withdraw its forces from the country. President
Arroyo withdrew the contingent ahead of schedule in order to save the man’s life,
arguing that it was in the best interests of the country to do so, despite some criticism
in the United States that the RP was “caving- in to terrorists.” Although over two-
thirds of Filipinos supported the U.S.-led invasion of Iraq, and over half approved of
the policy of joining coalition forces, they also strongly approved President Arroyo’s
decision. Many Filipinos have relatives working in the Middle East — an estimated
1.3 million Filipino nationals are employed in the region, including approximately
3,000 civilian OFWs in Iraq — and feared that they would become the targets of
terrorists.33
Balikatan
The 2001 terrorist attacks in New York City and Washington, D.C., prompted
concern over Al-Qaeda’s links to Abu Sayyaf as well as greater U.S.-Philippine
military cooperation. President Arroyo and President Bush agreed on the deployment
of U.S. military personnel to the southern Philippines to train and assist the
Philippine military against the terrorist Abu Sayyaf group. In November 2002, the
Arroyo administration signed a Military Logistics and Support Agreement (MLSA)
allowing the United States to use the Philippines as a supply base for military
operations throughout the region. In February 2002, the United States dispatched
1,300 U.S. troops to provide training, advice, and other non-combat assistance to
1,200 Filipino troops against Abu Sayyaf. The U.S. troops included 160 Special
Operations personnel. The exercise included the deployment of over 300 troops,
primarily Navy engineers, to the Southern Philippines to undertake “civic action”
projects such as road-building on Basilan, an island that was the center of Abu
Sayyaf’s activities. In consideration of the Filipino Constitution’s ban on foreign
combat troops operating inside the country, Washington and Manila negotiated
special rules of engagement for the Balikatan exercise. U.S. military personnel took
direction from Filipino commanders and could use force only to defend themselves.
The Balikatan exercise reportedly resulted in a significant diminishing of Abu
Sayyaf strength on Basilan. Abu Sayyaf’s estimated manpower fell to 200-400; but
it continued to operate in the Sulu islands south of Basilan and in western Mindanao.
In addition, the AFP operations improved as a result of U.S. assistance in intelligence
gathering, the supplying of modern equipment, and aid in the planning of operations.
The United States and the Philippines negotiated a second phase of U.S. training and
support of the AFP since late 2002, with an objective of training light infantry
companies for use against both Muslim insurgents and the NPA. According to
33 Social Weather Stations (Manila), September 2004.

CRS-14
Philippine government officials, such training usually involves 2,000 to 4,000 U.S.
military personnel.34
Continued Abu Sayyaf bombings led the Defense Department to consider a
more extended U.S. assistance program in the southern Philippines, focusing on the
Abu Sayyaf concentrations on Jolo Island in the Sulu chain. In February 2003,
Pentagon officials described a plan under which the United States would commit 350
Special Operations Forces to Jolo to operate with Filipino Army and Marine units
down to the platoon level of 20-30 troops. Positioned offshore of Jolo would be a
navy task force of 1,000 U.S. Marines and 1,300 Navy personnel equipped with
Cobra attack helicopters and Harrier jets. President Arroyo and AFP commanders
reportedly had agreed to the plan in a meeting on February 4, 2003.
The Pentagon description of the plan was that U.S. troops would be in a combat
role. This and subsequent statements indicated that the Special Operations Forces on
Jolo would participate in AFP offensive operations against Abu Sayyaf and that the
Special Operations Forces would not be limited to using their weapons for self-
defense. The U.S. Marines were described as a “quick reaction” force, undoubtedly
meaning that they could be sent to Jolo to reinforce AFP units. The Cobra helicopters
and Harrier jets would give AFP commanders the option of requesting U.S. air
strikes in support of AFP operations or transporting Filipino troops. The
announcement of the plan caused immediate controversy in the Philippines. Filipino
politicians and media organs criticized the plan as violating the constitutional
prohibition of foreign troops engaging in combat on Philippine soil. Filipino Muslim
leaders warned of a Muslim backlash on Mindanao. At the end of February 2003, the
Bush and Arroyo administrations decided to put the plan on hold and re-negotiate the
rules of engagement for U.S. forces. In May 2003, U.S. military officials said that
the joint cooperation program aimed at Abu Sayyaf on Jolo would be delayed until
the new training was completed.
In 2005, the Philippines and the United States developed and implemented a
combined operation against elements of Abu Sayyaf operating in western Mindanao.
The operation apparently had two objectives: (1) neutralize Abu Sayyaf-Jeemah
Islamiah training and (2) kill or capture Khaddafy Janjalani, the long-time leader of
Abu Sayyaf. The U.S. role reportedly involved intelligence and communications
support of the AFP, including the employment of U.S. P-3 surveillance aircraft;
deployment of Navy Seal and Special Forces personnel with AFP ground units; and
rules restricting U.S. personnel to a non-combat role (although such rules normally
would allow U.S. personnel to defend themselves if attacked).35 Moreover, the U.S.
role also involves non-combat operations on Jolo; in late November 2005, U.S.
troops were deployed into Jolo to assist the AFP in mine clearing,36 and the AFP
announced joint Philippine-U.S. military exercises in the Sulu islands scheduled for
34 Domingo, Bennet S. Subic Rape Case Controversy Overshadows Vfa Benefits. Business
World
(Manila, internet version), November 18, 2005.
35 Bonner, Raymond and Conde, Carlos H. U.S. and Philippines Join Forces to Pursue
Terrorist Leader. New York Times, July 23, 2005.
36 U.S. Troops Remove Land Mines in Philippine South. Reuters News, December 1, 2005.

CRS-15
February 20-March 5, 2006. In this exercise, dubbed Balikatan Shoulder-to-Shoulder
2006, about 5,500 U.S. military personnel will participate. Of these, 250 will
conduct non-combat exercises on Jolo with emphasis on civic action projects:
medical services, repairing roads and bridges, and repairing school buildings.37
Joint Maritime Patrols
Another potential U.S. policy decision could come out of the December 2005
agreement among the Philippines, Indonesia, Malaysia, and Brunei for joint maritime
patrols in the waters separating them. The agreement specifically covers Mindanao
and the Mindanao-Sulawesi corridor. Any future programs to establish maritime
interdiction cooperation between the Philippines and Indonesia likely would produce
proposals for expanded U.S. military aid and training for the Philippine Navy.
U.S. Marine Rape Case
On December 27, 2005, a Filipino prosecutor issued indictments against four
U.S. Marines for allegedly raping a Filipino woman while in the Philippines during
a training exercise. The Marines are stationed in Okinawa. Two other Marines under
investigation were not charged. The indicted Marines have denied the charge. The
Marines currently are in the custody of the U.S. Embassy. The legalities of this case
fall under the 1998 U.S.-Philippine Visiting Forces Agreement (VFA). That
agreement would give Philippine authorities primary jurisdiction over the Marines;
but if the United States should request that the Philippines waive primary
jurisdiction, the Philippine government would have to issue a determination to U.S.
authorities that the case is “of particular importance to the Philippines” in order to
continue primary jurisdiction. Under the VFA, the Marines could remain in U.S.
custody until the completion of all judicial proceedings; however, also under the
VFA, the Philippine government has requested that the indicted Marines be turned
over to Philippine custody. The U.S. State Department has not responded to this
request as of the date of the indictment. If the Marines remain under U.S. custody,
the United States is obligated to make them available to Philippine authorities for
investigative or judicial proceedings. If the Marines are tried and convicted by
Philippine courts, the Philippine and U.S. governments would agree jointly on the
facilities of detention.
SOFA with Australia
The Philippines is discussing creating Status of Forces Agreements with
Australia and ASEAN countries such as Malaysia as part of regional counter-
terrorism efforts. The United States and the RP invited Australian officials to
observe the next Balikatan exercises. Australian Defense Chief Senator Robert Hill
37 U.S. Plans Philippine War Games in Muslim South. Reuters News, January 10, 2006.
Asia Security Monitor No. 151, January 9, 2006.

CRS-16
stated that he hoped that Australia would be able join future Balikatan training and
other assistance or order to deter regional terrorist activities based in Mindanao.38
Philippines-China Relations
The Philippines’ relationship with the People’s Republic of China (PRC) has
improved markedly since the Mischief Reef Incident in 1995. In the past decade, the
Philippines has pursued stable and friendly political and economic relations with
China, while relying upon the United States and the Association of Southeast Asian
Nations (ASEAN) as security and diplomatic counterweights to rising PRC power
in the region.39 Faced with pressure from ASEAN, China promised to abide by the
United Nations Convention on the Law of the Sea, which states that countries with
overlapping claims must resolve them by good faith negotiation. In 2002, Beijing
and ASEAN signed the Declaration on the Conduct of Parties in the South China Sea
(DOC), which many hope will evolve into a formal code of conduct that promotes
a peaceful resolution. In September 2004, President Arroyo visited China. In May
2005, Manila and Beijing signed two agreements aimed at fostering better military
and security cooperation, including allowing Filipino soldiers to train in China,
annual defense and security dialogues, and Chinese technical assistance to the AFP.
Philippine-Chinese bilateral trade reportedly has been growing at an estimated
rate of 55% annually since 2002. The RP is running trade surpluses with both China
(mainland) and Hong Kong Special Administrative Region (SAR). The Philippines
exported an estimated $5.7 billion worth of goods to China and Hong Kong SAR
combined in 2004, compared to $7.9 billion to Japan and $7.2 billion to the United
States.40 Major Philippine export items to China include both manufactured and
agricultural products such as electronics, machinery, copper, mineral oils, and
bananas.41 In April 2005, PRC President Hu Jintao visited the RP during which the
two countries signed economic agreements worth $1.5 billion, including several PRC
development assistance loans for infrastructure projects and PRC investment in the
Philippine mining industry. President Hu reaffirmed the PRC’s commitments to the
China-ASEAN Free Trade Area (ACFTA) and the China-ASEAN Strategic
Partnership for Peace and Prosperity, which the PRC governmebnt had signed along
with the Treaty of Amity and Cooperation in 2003. The two countries concluded
negotiations on a list of Philippine agricultural products to be allowed duty-free
access in China as part of ACFTA.
38 “Philippines Set to Forge Military Pact with Australia,” Asia Pulse Manila, October 18,
2005.
39 Carl Baker, “China-Philippines Relations: Cautious Cooperation,” Asia-Pacific Center for
Security Studies, October 2004.
40 International Monetary Fund, Direction of Trade Statistics Yearbook, 2005.
41 “ASEAN-China Early Harvest Program Forecast to Triple Farm Exports of RP,” Manila
Bulletin
, December 19, 2005.

CRS-17
U.S. Foreign Assistance
Since 2001, the Philippines, a “front-line state” in the global war on terrorism,
has received the most dramatic increase in U.S. foreign assistance in the East Asia-
Pacific region, particularly foreign military financing (see Table 1), although Japan
remains the largest source of bilateral assistance. The United States Agency for
International Development (USAID) has also attempted to address underlying causes
of violence in Muslim Mindanao, including lack of economic development and poor
governance. According to the State Department’s budget request for FY2006, 60%
of Economic Support Funds (ESF) would finance programs in Mindanao related to
the 1996 Peace Agreement with the Moro National Liberation Front (MNLF). Such
programs would be made available to the Moro Islamic Liberation Front (MILF) if
a peace agreement with that group is reached. Major program areas of U.S. foreign
aid in the Philippines include economic governance and anti-corruption; family
planning and health; and conflict resolution, economic growth, basic education, and
resource management focusing on Muslim Mindanao. USAID also plans to broaden
a program to promote peaceful resolution of disputes associated with family feuds
(rido), which reportedly seriously hinder local development. The Conflict
Management in the Philippines project, funded by USAID and implemented by the
Asia Foundation, aims to address clan conflict through research into the problem,
prevention efforts, and creating institutional mechanisms for resolving conflicts over
resources.42 The Millennium Challenge Corporation has selected the Philippines as
a Millennium Challenge Account (MCA) “threshold country,” which qualifies the RP
to receive assistance in meeting the criteria for MCA funds. The MCA program links
development assistance to a country’s performance in “ruling justly, encouraging
economic freedom, and investing in people.”43
Filipino Veterans
Filipino anti-Japanese guerilla fighters, who were inducted into the U.S. army
during World War II, when the Philippines was a U.S. colony, and promised U.S.
citizenship and full veterans’ benefits, are pressing the U.S. Congress to grant full
benefits or equity. Approximately 30,000 of 200,000 Filipino WWII veterans are
still alive, of whom 7,000 live in the United States. In December 2003, the Bush
Administration signed a measure that extended Veterans Affairs health benefits to
the Filipino veterans, who continued to push for legislation that would provide more
complete veterans benefits, including health care to veterans living in the Philippines
and pensions. H.R. 4574, the Filipino Veterans Equity Act of 2006, would deem
certain services performed by Filipino veterans as active military service for purposes
of eligibility for veterans’ benefits through the Department of Veterans Affairs and
repeal certain provisions that disqualify such service.
42 The Asia Foundation, “Conflict Management Program in the Philippines (Interim
Report),” 2004.
43 [http://www.mca.gov/index.shtml]

CRS-18
Table 1. U.S. Assistance to Philippines, 2002-2006
(Millions of U.S. dollars)
Account
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Child Survival and Health
9.4
25.6
22.9
28.8
26.8
21.4
Development Assistance
30.3
24.5
28.2
21.5
27.6
21.5
Economic Support Funds
3.9
33.0
45.0
17.6
34.7
25.0
Foreign Military
1.9
44.0
49.8
19.8
29.7
30.0
Financing
International Military
1.4
2.0
2.4
2.7
3.0
2.9
Education and Training
International Narcotics
0.0
0.0
0.0
2.0
3.9
2.0
Control/Law Enforcement
Non-Proliferation, Anti-
0.0
0.9
2.1
0.7
0.6
5.2
Terrorism and De-mining
Peace Corps
1.8
2.4
2.6
2.7
2.8
2.9
Peacekeeping 0.0
0.0
0.0
15.0
0.0
0.0
Totals 48.7
132.4
153.0
110.8
129.1
110.9
Sources: U.S. Department of State; Foreign Operations, Export Financing, and Related Programs
Appropriations Act, 2006 (P.L. 109-102).

CRS-19
Time Line: Major Historical Events
1542: Spaniards claim the islands and name them the Philippines.
1890s: Insurgency against Spanish rule
1898: Spanish-American War — Spain cedes the Philippines to the United States
1899: Insurgency against U.S. rule
1935: Plebiscite approves establishment of Commonwealth of Philippines; Country is
promised full independence in ten years
1941: Japan invades
1944: U.S. forces retake islands
1946: Philippines granted full independence
1965: Ferdinand Marcos becomes president
1969: Muslim separatists begin guerrilla war
1972: Marcos declares Marshall Law
1983: Opposition leader Benigno Aquino assassinated
1986: Corazon Aquino assumes presidency following “People Power” protests
1989: Coup attempt suppressed
1992: Aquino’s defense minister, Fidel Ramos, wins presidency. United States closes
Subic Bay Naval Station
1996: Philippines government reaches truce with Moro National Liberation Front
(MNLF)
1998: Film star Joseph Estrada elected President
2000: Impeachment proceedings begin against Estrada on allegations of corruption
and violation of the constitution
2001(January): Amid mass street protests, Estrada’s vice-President, Gloria Arroyo, is
sworn in as President. Estrada is arrested for plundering state funds
2001 (March): Moro Islamic Liberation Front (MILF) declares cease fire
2002: Philippines and United States hold joint military exercises
2002: Terrorist bombs detonate in Manila and Zamboanga city, killing ten persons
2003 (July): RP government signs cease fire with MILF
2003 (July): RP soldiers (AFP) seize shopping center in mutiny
2004: Peace talks between government and NPA start but are later called off
2004 (June): Gloria Macapagal-Arroyo wins Presidential election
2004 (July): Philippines withdraws peacekeeping troops from Iraq
2005: Heavy fighting between AFP and MILF breaks cease fire
2005: President Arroyo comes under pressure to resign over allegations of vote-
rigging


CRS-20
Figure 1. Map of The Philippines