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Viewing cable 08MANILA603, Anti-Smuggling Efforts in Cebu

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Reference ID Created Released Classification Origin
08MANILA603 2008-03-11 00:48 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Manila
VZCZCXRO0894
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHML #0603 0710048
ZNR UUUUU ZZH
O 110048Z MAR 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0051
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUCPDOC/USDOC WASHDC IMMEDIATE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI//FPA//
UNCLAS MANILA 000603 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/MTS, EAP/EP, EEB/IFD/OMA 
STATE PASS EXIM, OPIC, AND USTR 
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE 
TREASURY FOR OASIA 
USDOC FOR 4430/ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV PGOV RP
SUBJECT:  Anti-Smuggling Efforts in Cebu 
 
Ref:  07 Manila 3819 
 
1.  (SBU) Summary:  Following the progress that an anti-smuggling 
coalition of business chambers, companies, and foreign embassies 
achieved in the Subic Freeport (reftel), a coalition led by the 
American Chamber of Commerce with Embassy support visited Cebu, the 
most important port in the central Philippines, to expand advocacy 
against fuel and vehicle smuggling into the Philippines.  Persuading 
local officials to take effective action will take persistence and 
close monitoring -- as it did in Subic.  The group's visit to Cebu 
received substantial media coverage and drew attention to the 
problem there.  End Summary. 
 
Cebu Background 
--------------- 
 
2.  (U) Cebu City is the second largest metropolitan area in the 
Philippines after Manila.  Cebu's export zones, helped by its 
central location and deepwater port, have fueled its relative 
prosperity by attracting significant foreign direct investment. 
Cebu's government officials realize that addressing the concerns of 
foreign investors is important to ensure growth in the region. 
 
The Current Issue: Fuel and Auto Smuggling 
------------------------------------------ 
 
3.  (SBU) Fuel: As reported reftel, according to official Philippine 
Customs statistics, fuel demand has not kept pace with economic 
growth in the Philippines.  Fuel industry analysts suspect smuggling 
is the major reason for this anomaly.  Some of the smuggled product 
may be tax-exempt oil intended for the Philippine economic zones, of 
which Cebu has several.  Furthermore, the numerous Philippine 
islands and offshore transfers of oil to smaller ships make oil 
shipments difficult to track.  Estimates of smuggled fuel run as 
high as 20% of the total, adding up to upwards of 10 billion pesos 
in lost tax revenue for the country as a whole. 
 
4.  (SBU) Auto smuggling:  High import duties for new vehicles makes 
second-hand vehicle smuggling a particularly lucrative business.  As 
an indication of the scale of the problem, there were 29,000 new 
vehicles registered with the Land Transportation Office in the Cebu 
region during the first ten months of 2007, versus legal sales of 
less than 5,000.  Lost tax revenue for the whole country may be as 
high as 5 billion pesos. 
 
Anti-Smuggling Dialogue 
----------------------- 
 
5.  (SBU) Smuggling occurs throughout the Philippines.  As reported 
reftel, an anti-smuggling coalition made some progress in November 
when Subic Freeport authorities tightened anti-smuggling measures. 
This coalition held an anti-smuggling dialogue in Cebu City on 
February 28 with local representatives from the Bureau of Customs, 
Port Authority, the Board of Investment, Land Transportation Office, 
and the Ombudsman. 
 
6.  (SBU) The lack of a single administrator or coordinator among 
Philippine government agencies in Cebu made the dialogue there less 
productive than the anti-smuggling coalition had hoped.  Philippines 
officials there acknowledged the reputation of Cebu as a haven for 
smuggling, yet declined to take responsibility, pointing to the 
complicated shipping process.  Indeed, the Presidential 
Anti-Smuggling Group has noted that while a number of vehicles were 
seized, there were no arrests or convictions. 
 
7.  (SBU) Comment: The group that visited Cebu realizes that its 
visit was just another step towards spurring effective action on a 
multifaceted problem that occurs throughout the Philippines. 
Nevertheless, the visit received substantial media coverage, raising 
awareness about the issue, helping to exert at least some pressure 
to address it, and highlighting the need for better coordination 
between the Ombudsman, Bureau of Customs and the Department of 
Justice. 
 
Kenney