U.S. Defense Assistance to the
Government of the Philippines

Question: Does the U.S. Embassy monitor the assistance it provides to the Armed Forces of the Philippines?

Answer: Yes. The Joint U.S. Military Assistance Group Philippines (JUSMAG-P) has primary responsibility for this oversight, in addition to its task of conducting security assistance operations to improve the capabilities of the Armed Forces of the Philippines (AFP) and to enhance interoperability between the AFP and the armed forces of the United States.

Question: What types of monitoring does JUSMAG undertake?

Answer: There are several different programs operated by JUSMAG.

A. End Use Monitoring (EUM):

JUSMAG-P manages this program to ensure that all military articles and services provided by the U.S. Government to the Government of the Philippines are utilized for their intended purpose and are not transferred to a third party or disposed of without Department of State (DoS) approval. JUSMAG-P observes and reports the end use of U.S. origin defense articles and services. JUSMAG-P works with the AFP to ensure accountability, including an annual inventory requirement by the AFP.

B. Enhanced End Use Monitoring (EEUM):

The EEUM program covers defense article(s), service(s) and/or training or political situations that require rigid non-standard provisos, notes, or other conditions of sale. Transfer of sensitive items is contingent on factors of trust with verification, firm enforcement, and monitoring mechanisms. AFP is required to provide adequate security for these items and report any loss immediately. JUSMAG-P Security Assistance Officers observe and report on the use of defense article(s), service(s), and/or training that require EEUM. Jointly with the AFP, JUSMAG conducts:

-- 100% inventory upon delivery;
-- 5% inventory at least once a year;
-- Random reviews, at least once a year, of the AFP records of monthly, two-man verifications.

For example, the EEUM covers such sensitive equipment as Third Generation Night Vision Devices (NVDs). The AFP currently has 667 NVDs covered under the EEUM, and another 129 on order. As another example, JUSMAG and the AFP in October 2004 conducted a 100% inventory of all Light Reaction Company (LRC) equipment provided over the past three years.

C. Developing Country Combined Exercise Program (DCCEP):

The DCCEP pays the incremental expenses, at a reasonable and proper cost, of the goods and services consumed by a developing country as a direct result of its participation in a bilateral/multilateral military exercise with the U.S. Such reimbursable incremental expenses include rations, fuel, training ammunition, and transportation, but do not include allowances or other normal costs of the foreign country's personnel.

For each joint exercise between the AFP and U.S. forces, the U.S. Pacific Command sets maximum DCCEP reimbursement based on requirements specific to each exercise. During and following the exercise, both AFP and U.S. personnel document and validate the incremental expenses incurred by the AFP. JUSMAG-P validates receipts and forwards them to PACOM J4 (Logistics, Engineering and Security Assistance Directorate) for processing. Upon approval, PACOM releases funds to JUSMAG-P. The U.S. Embassy Finance Office then disburses a check for the approved amount payable to the AFP, never to an individual. Further flows of the funds within the AFP are the responsibility of the AFP’s internal financial management and control processes, and are not monitored by the U.S. Government.

Question: What is the Philippine Defense Reform (PDR) Program?

Answer: The PDR is the AFP’s implementation, under the orders of President Arroyo, of recommendations made in the Joint Defense Assessment (JDA) of 2003. This program arose from the meetings of the two Presidents in Washington and Manila in 2003. Through the JDA, U.S. experts assisted AFP experts in analyzing strategic resources, tactical capabilities, logistics infrastructure, training capabilities, etc.

Question: How large a program is PDR, and who pays for it?

Answer: The Government of the Philippines has provided $17.54 million in support of PDR for 2004. The U.S. Government dedicated $7 million in Fiscal Year 04 (October 2003 to September 2004) to implement PDR initiatives. These funds are deposited into the Federal Reserve Bank in New York and are managed under the rules and regulations governing Foreign Military Sales.

Question: Are anti-corruption programs part of PDR?

Answer: Yes. PDR implementation will consist of systemic, institutional change, supporting long-term reform. All PDR priority programs include assessments of current AFP systems and processes. Targeted strategies and the transparency that comes with automation (personnel rosters, inventory, budget and finance, acquisition and procurement, etc.) will diminish opportunities for graft and corruption as better management systems are designed and implemented.

Question: What are the main priorities for PDR?

Answer: The JDA identified 65 key areas and 207 ancillary areas of concern and distilled these into 10 top priorities for implementation under the PDR:

· Multi-year Defense Planning System (MYDPS)
· Improve Operations and Training Capacity
· Improve Logistics Capacity
· Staff Development Program
· Improve Personnel Management System
· Develop a Multi-Year Defense Budget
· Improve Acquisition System
· Improve Modernization Program
· Strengthen Underlying Socio-Economic Conditions
· Conduct continuing Assessments

Question: Does the U.S. sell military items to the AFP?

Answer: Yes, the Philippines is a recipient of U.S. Foreign Military Sales (FMS). Section 22 of the U.S. Arms Export Control Act (AECA) authorizes the U.S. Department of Defense (DoD) to enter into contracts on behalf of foreign governments or international organizations. DoD procures defense articles and services under terms and conditions consistent with DoD regulation and procedures. A foreign government may fund such contracts directly, or they can receive a U.S. grant, such as Foreign Military Financing (FMF), Presidential Drawdown Authority (PDA), or grant Excess Defense Articles (EDA).

Question: What safeguards are in place in the FMS program?

Answer: Under the FMS, the U.S. Government does the competitive bidding, contracting, and acquisition of systems and services to get the best price and manages the case for the AFP. Procurement procedures follow the same rules as mandated for the U.S. DoD, with a $5,000 (five thousand dollars) limitation on commissions.

Question: What other advantages are there to the Philippines for FMS?

Answer: The procurement process is completely transparent and enforced under U.S. law. This insulates the Government of the Philippines (and other foreign government recipients) from domestic political charges of procurement irregularities. The "total package approach" provides military equipment in excellent condition, necessary training, and follow-on material and technical support. Additionally, items under FMS come from the same parts bins as for the U.S. and all other foreign users, with the U.S. Government buying in bulk to obtain better prices. The foreign government pays the same price and gets the same quality as does the U.S. military.

Question: Does the U.S. Government provide any goods or services apart from the items the AFP purchases under FMS?

Answer: Under the Foreign Military Financing (FMF) program, the U.S. provides military articles, training, and services to friendly and allied nations, including the Philippines. The amount comes from a U.S. Department of State (DoS) budget request, usually tied to a U.S. national interest, such as countering terrorism and other transnational threats.

Question: Are there opportunities for graft or corruption under FMF?

Answer: No cash is provided under FMF, only goods and services.

Question: How much did the Philippines receive under FMF this year?

Answer: In Fiscal Year 2004 (October 2003 to September 2004), the AFP received goods and services valued at $19,880,000. Another $29.76 million was approved for Fiscal Year 05.

Question: Doesn't the Philippines qualify for additional aid due to terrorism concerns?

Answer: Yes, the U.S. Government has also provided Emergency Supplemental FMF Grants to improve the AFP's counterterrorism capability. In Fiscal Year 04 (October 2003 to September 2004), these grants were worth $15,000,000.

Question: Apart from FMS and FMF, what other U.S. military assistance programs does the AFP qualify for?

Answer: The AFP sometimes receives Excess Defense Articles (EDA), provided on an “as is where is” basis for a fraction of the original acquisition value or on a grant basis. In Fiscal Year 03 (October 2002 to September 2003), the U.S. delivered to the AFP M-16 rifles, M35A2 cargo trucks, three UH-1H Huey helicopters, and one Cyclone-class ship, with a total original acquisition value of $24.81 million. In FY 04, the U.S. offered 20 UH-1H Huey helicopters, with a total acquisition value of $18.60 million; these items were accepted by the AFP in June 2005. The AFP has also benefited from the Presidential Drawdown Authority (PDA), which covers goods and/or services taken from U.S. military stocks. In Fiscal Year 02 (October 2001 to September 2002), the Government of the Philippines received a PDA of $10,000,000 and still has $10,000,000 available from Fiscal Year 04.

Question: What about U.S. military training programs for the AFP?

Answer: The AFP has been a regular participant in the U.S. International Military Education and Training (IMET) program. In Fiscal Year 04 (October 2003 to September 2004), 176 students received training worth over US$2.5 million. A total of $3.0 million is approved for Fiscal Year 05, and student training is in progress.

Question: What about special training related to terrorism?

Answer: Under the U.S. DoD's Counter-Terrorism Fellowship Program, AFP participants receive training and education on counter-terrorism activities. In Fiscal Year 04, 84 students received training valued at $505,257.00. This counter-terrorism training of AFP members by the US Department of Defense is in addition to much more counter-terrorism training and assistance for civilian personnel of the Government of the Philippines, which is separately funded and provided by the Department of State and other US civilian agencies. This USG assistance, including on counterterrorism, to civilian law enforcement agencies in FY 04 was worth $7,375,000. Over 90% of this assistance is in the form of training. There are some small amounts of equipment transfers, and some construction-related assistance, but no direct transfers of funds.

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