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Audi Philippines holds midyear financing promo for e-tron models

Audi Q8 e-tron — PHOTO FROM AUDI PHILIPPINES

AUDI PHILIPPINES is extending financing options on select models — more notably on its electric Audi e-tron offerings: the Audi Q8 e-tron and the Audi e-tron GT. The midyear promotion is expected to feature easy-pay packages and other offerings to make these Audi models more attainable.

The Audi Q8 e-tron is said to be a model that combines “powerful electric performance with sophisticated design.” Boasting a dual-motor setup, the Q8 e-tron delivers sprightly acceleration and a smooth, quiet ride. Its spacious cabin features leather upholstery and an advanced infotainment system. The Q8 e-tron, said Audi Philippines, is suitable for both city commutes and long-distance travel, with advanced safety systems and driver assistance assuring safety and peace of mind.

Meanwhile, the Audi e-tron GT marries “sporty aesthetics and cutting-edge technology.” Its high-performance electric powertrain delivers “exhilarating acceleration, precise handling, and a dynamic driving experience.” Audi Philippines says that a sport-tuned suspension and aggressive styling set it apart, while a “meticulously crafted interior provides a luxurious atmosphere.” An advanced infotainment system, premium materials, and customizable settings ensure a heightened driving experience. The e-tron GT also incorporates the latest in driver assistance technologies.

For more information, contact Audi Philippines at 0917-836-1479.

PSEi member stocks performed — July 5, 2024

Here’s a quick glance at how PSEi stocks fared on Friday, July 5, 2024.


Peso may rise on rate cut view

BW FILE PHOTO

THE PESO may continue to rise against the dollar this week amid rate cut bets at home and abroad following slower-than-expected Philippine headline inflation in June and data showing a cooling US jobs market.

The local unit closed at P58.53 per dollar on Friday, strengthening by five centavos from its P58.58 finish on Thursday, Bankers Association of the Philippines data showed.

This was the peso’s strongest showing in almost a month or since its P58.52-a-dollar finish on June 7.

Week on week, the peso likewise rose by eight centavos from its P58.61-per-dollar close on June 28.

Slower Philippine June inflation supported the peso on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The June consumer price index (CPI) print strengthened the case for a Bangko Sentral ng Pilipinas (BSP) rate cut by next month, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Headline inflation eased to 3.7% year on year in June, from 3.9% in May and 5.4% in the same month a year ago, the Philippine Statistics Authority reported on Friday.

This was within the BSP’s 3.4-4.2% forecast for the month and was slightly slower than the 3.9% median estimate in a BusinessWorld poll of 14 analysts. This also marked the seventh straight month that the CPI settled within the BSP’s 2-4% annual target.

The June CPI matched the 3.7% print in March and was the slowest in four months or since the 3.4% recorded in February.

For the first half, Philippine headline inflation averaged 3.5%, above the central bank’s 3.3% full-year forecast but still within its 2-4% annual goal.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board is “on track” and “somewhat more likely than before” to slash rates at its Aug. 15 policy meeting as he expects inflation to further ease this semester with the implementation of lower tariffs on rice.

For this week, the peso’s movement against the dollar will be driven by US nonfarm payrolls data released on Friday, Mr. Roces said.

US employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, pointing to a slackening labor market that keeps the Federal Reserve on course to start cutting interest rates soon, Reuters reported.

Mr. Ricafort added that the market will also monitor June US consumer and producer inflation data to be released this week, as well as Fed Chair Jerome H. Powell’s semiannual testimony before the US Congress, which could provide hints on the US central bank’s policy path.

He expects the peso to move between P58.40 and P58.60 versus the dollar this week. — AMCS with Reuters

Slower inflation, rate bets to drive up PHL stocks

BW FILE PHOTO

PHILIPPINE SHARES are expected to rise this week as slower headline inflation in June strengthened the case for a Bangko Sentral ng Pilipinas (BSP) rate cut within the year, analysts said.

The Philippine Stock Exchange index (PSEi) fell by 0.22% or 14.74 points to close at 6,492.75 on Friday, while the broader all shares index went down 0.19% or 6.88 points to end at 3,508.99.

Still, week on week, the PSEi climbed by 1.26% or 80.84 points from its 6,411.91 finish on June 28.

“The local market was able to close higher last week despite episodes of profit taking in the start and end of the week. We’re seeing a buildup of upward momentum as the market was able to maintain its ground above 6,400 and at the same time break above its 50-day exponential moving average,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message over the weekend.

“The market sustained its recovery, further boosted by the lower inflation print for the month of June,” online brokerage 2TradeAsia.com said in a market report.

For this week, Mr. Tantiangco said the slower-than-expected June inflation print may give Philippine stocks a boost.

“The latest inflation data is seen to be supportive of prospects of a rate cut soon by the Bangko Sentral ng Pilipinas, which in turn is positive for the market,” he said.

Philippine headline inflation rose to 3.7% year on year in June, easing from 3.9% in May and 5.4% in the same month a year ago.

This was within the BSP’s 3.4-4.2% forecast for the month and was slightly slower than the 3.9% median estimate in a BusinessWorld poll of 14 analysts. This also marked the seventh straight month that the consumer price index (CPI) settled within the BSP’s 2-4% target band.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board is “on track” to deliver its first rate cut in over three years at its Aug. 15 meeting as they expect inflation to continue easing this semester.

“Investors are also expected to watch out for the US’ June inflation print, which would provide clues on the Federal Reserve’s policy direction,” Mr. Tantiangco added.

“More recent hawkish comments from the Fed point to a no cut in July, but the admission of disinflation and latest Fed minutes showing concern over the impact of elevated rates are suggesting a potential crack in September,” 2TradeAsia.com said.

June US CPI data will be released on Thursday, July 11.

Traders of federal funds futures saw a roughly 77% probability of a rate cut at the Fed’s Sept. 17-18 meeting, according to CME Group’s FedWatch tool, Reuters reported.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.5% range since last July.

Mr. Tantiangco put the PSEi’s support at 6,400 and resistance at 6,700, while 2Trade-Asia.com placed support at 6,350 and resistance at 6,600. — S.J. Talavera with Reuters

Free trade negotiations with UAE expected to wrap up by October

REUTERS

THE PHILIPPINES hopes to conclude negotiations with the United Arab Emirates (UAE) on their proposed Comprehensive Economic Partnership Agreement (CEPA) as early as October, the Philippine Exporters Confederation (Philexport) said.

In a bulletin, the association quoted Trade Undersecretary Allan B. Gepty as saying that he hopes to finish talks with the UAE before the year ends.

“Our agreement with the UAE is to conclude the negotiations within the year. We’re looking at October or November,” Mr. Gepty said.

The Philippines and the UAE planned four full rounds of face-to-face negotiations aside from virtual meetings to move things along. 

“The first round was held in May 2024, and they are now set to conduct the second round, focused on market access negotiations, from July 8 to July 10 in Manila,” he added.

CEPA is a free trade agreement (FTA) aimed at expanding trade and investment opportunities with the UAE and the greater Gulf region.

In December, the Philippines and the UAE signed the terms of reference for the CEPA, setting guidelines for the conduct of the negotiations and the scope and coverage of the FTA.

The Departments of Agriculture, Labor and Employment, and Environment and Natural Resources, the Tariff Commission, Board of Investments, and the Bureau of Customs are joining the talks as negotiations progress. 

“Working groups are being created to negotiate the relevant chapters of the ToR, which include trade in goods, rules of origin, trade in services, digital trade, customs procedures and trade facilitation, investment, intellectual property rights, and trade and sustainable development,” it added.

The Department of Trade and Industry (DTI) said it sees opportunities to access the UAE market for halal-related products, tropical fruit, garments, and high-end finished consumer goods.

“Some of the Filipino food and other agri-based products with unrealized export potential in the UAE include banana, desiccated coconut, coconut oil, pineapple, and raw cane sugar. Also with much potential are personal care products, including perfumes and eye makeup,” it added.

Tradeline Philippines reported that total trade between the Philippines and UAE grew 5% to $1.9 billion in 2023.

“If realized, the PH-UAE CEPA will be the first FTA of the Philippines with a member state of the GCC (Gulf Cooperation Council) and in the entire Middle East,” Philexport said.

“It will also be the Philippines’ fourth bilateral FTA after the Philippine-South Korea FTA signed in 2023, the Philippines-Japan Economic Partnership Agreement in 2006, and the Philippine-European Free Trade Association FTA in 2016,” it added. — Justine Irish D. Tabile

Doubts raised about Dalian train arbitration

PHILSTAR FILE PHOTO

DOUBTS have been expressed about the prospects of the Transportation department’s plan to seek an arbitration ruling against Chinese train maker CRRC Dalian Co. Ltd.

“Arbitration on the Dalian trains will have a poor chance of success. The railcars have been with the DoTr for the last eight years, during which time they have plenty of time to return the cars or seek a refund. Arbitration (only means) more income to foreign consultants,” Rene S. Santiago, former president of the Transportation Science Society of the Philippines, said via Viber. 

The Department of Transportation (DoTr) is considering seeking an arbitration ruling against CRRC, Transportation Secretary Jaime J. Bautista said on the sidelines of an event last week. 

“There will be liquidated damages because they were unable to meet our requirements. But of course, subject to agreement. We should be fair and reasonable in terms of what should be collected from Dalian,” Mr. Bautista said.

“There’s a possibility that this leads to arbitration. In fact, I am seeing that this leads there.” 

The possible pursuit of arbitration could go forward before the planned privatization of the operations and maintenance of Metro Rail Transit Line 3 (MRT-3), which is expected by 2025. 

The government procured the Dalian trains in 2014, with deliveries taking place in 2016. The trains were expected to increase the capacity of the MRT-3 to 800,000 passengers daily. 

Mr. Bautista said that the Dalian trains were too heavy to use the MRT-3 tracks.

Operating them “would result in higher maintenance costs and would also result in higher operating costs,” he said. 

For now, the DoTr is still working with the Chinese train maker to determine how to operate the trains for the MRT-3. 

Earlier, the DoTr said it is hoping to auction the operations and maintenance contract for MRT-3 by 2025.

The private rail line concessionaire may still opt to use the rail cars once it takes over the operations and maintenance of MRT-3, Mr. Bautista said, adding that one of the proponents has submitted a proposal detailing how to operate the Dalian trains. 

“A private concessionaire can find ways to combine the Czech & Dalian trains efficiently by exploring parts standardization,” Mr. Santiago said. 

Nigel Paul C. Villarete, senior adviser on public-private partnership at the technical advisory group Libra Konsult, Inc., said having the concession holder come up with a solution to operate the unused trains would be a better option, rather than seeking arbitration. 

“If these trains can be used, I think we’d better use them rather than completely repudiate the purchase. They may want to do a full financial and economic comparative analysis on the options to take,” Mr. Villarete said via Viber.

However, he said that operating the unused trains once the private concessionaire takes over would entail higher maintenance costs, which can be passed on to consumers if viable. — Ashley Erika O. Jose

Rice EO signals greater PHL openness to trade — BCCP

REUTERS

By Chloe Mari A. Hufana

EXECUTIVE ORDER (EO) No. 62, which cut rice import tariffs to 15% from 35% signals that the Philippines is opening itself up to more trade, the British Chamber of Commerce of the Philippines (BCCP) said.

“When you reduce tariffs… that helps because your signal is that the Philippines is more and more open to trade and investment,” BCCP Executive Director and Trustee Christopher James Nelson told BusinessWorld by phone.

“There’s a lot of interest (from foreign investors) and clearly the signal that the President sent by reducing (rice tariffs) is very good,” he added.

Mr. Nelson added that EO 62 benefits the Philippines because cheaper overseas products will be available in Philippine markets, keeping prices lower.

American Chamber of Commerce of the Philippines, Inc. Agribusiness Chair Christopher A. Ilagan told BusinessWorld via Viber that the Philippines is an important partner for American agricultural business. It is the ninth-largest export market for US agricultural goods.

“EO 62 offers more predictability as it ensures a clear and transparent tariff regime over the next few years, unlike the previous practice of annually renewing the tariff rates, keeping on edge those who are reliant on these trade flows,” he added.

Mr. Ilagan added that improved predictability will keep prices and trade volumes steady instead of fluctuating, especially at the end of financial years.

“Better predictability and policy stability are basic characteristics foreign traders and investors rely on for longer-term commitments in the market,” he added.

Mr. Marcos last month issued EO 62 as an inflation-containment measure.

Rice inflation in June eased to 22.5% from 23% in May for a third straight month of declines.

The Philippine Statistics Authority last week said the price of a kilo of well-milled rice fell to P55.96 in June from P56.06 in May.

Regular-milled rice prices increased to P51.07 in June from P51.03 in May, and special rice prices rose to P64.56 in June from P64.41 in May.

“Tariff cuts will evidently lower the price of rice; the assumption is that the gain from the tariff reduction is fully passed on to the consumer. Another assumption is that market prices remain constant,” Action for Economic Reforms coordinator Filomeno S. Sta. Ana III told BusinessWorld in a Viber message.

“That said, we cannot simply rely on imports despite tariff cuts. The sustainable, longest-term solution is to increase our agricultural efficiency and farmers’ productivity,” he added.

Mr. Ilagan said that lower tariffs for commodities the Philippines is short on can help in managing affordability.

“EO 62 will help the majority of Filipinos in managing their food-related expenses while also supporting the food industry in general that is reliant on a number of imported ingredients to create value addition through food production and service,” Mr. Ilagan added.

On Thursday, farmer groups asked the Supreme Court for a temporary restraining order to block EO 62, saying they were not consulted on the tariff adjustments as required by law.

Mr. Ilagan said any tariffs that will be raised should still be reinvested in Filipino farmers.

“These funds can be used to support farmers affected by the increased competition from abroad, while also earmarking these revenues to invest in enhancing the competitiveness of the sector, especially those sub-sectors whose produce are heavily reliant on for our own food security, such as rice, corn, and meat products,” he said.

Finance Secretary Ralph G. Recto in June said the government will forego up to P22 billion in revenue due to the tariff cut. He described the move as “short-term,” citing the need not to be too reliant on imported rice.

‘Modern’ skills in PHL workplace to depend on constant industry-schools dialogue — ORT Israel

TESDA

THE PHILIPPINE government must enable constant dialogue between industry and schools to ensure that the future workforce is equipped with modern skills needed to be globally competitive, according to Israel’s largest education network.

“We need to really create a close dialogue between the industry and education sector,” Alona Kletsel, head of international business development and marketing of ORT Israel, told a media roundtable in Taguig City on July 5.

“The (dialogue participants) need to be quick enough and prompt enough, agile, to be able to adapt education programs in real time to real industry needs.”

ORT, which is funded by Israel’s Ministry of Education, has 30 vocational colleges and 220 secondary education schools worldwide.

She was in Manila last week to meet with officials from the Department of Education, Commission on Higher Education, Technical Education Skills and Development Authority, local government units, and universities on the potential use of artificial technology (AI) to lighten teacher workloads.

Israeli Ambassador to the Philippines Ilan Fluss said ORT is working closely with the private and public education industries to enhance science, technology, engineering, and mathematics programs.

“The start of innovation and technology is teaching and educating innovation and technology to the future leadership of the country,” he said at the roundtable.

President Ferdinand R. Marcos, Jr. has said his government aims to create at least three million new jobs through upskilling and reskilling programs.

Last year, he signed the Trabaho Para sa Bayan Act, which sets up an inter-agency council to draft an employment roadmap to improve the quality of jobs available.

National Economic and Development Authority Secretary Arsenio M. Balisacan has said the 10-year jobs masterplan must include plans to allow workers to keep up with emerging technologies such as AI.

In a 2023 report, the Asian Development Bank (ADB) said the Philippines should use education technology to bridge the skills gap or risk job losses due to rapid technological advancements.

“In order to expose the children to the industry (they wish to pursue), you have to show them the road which will lead them to work in this organization,” Ms. Kletsel said. — John Victor D. Ordoñez

UN sees tourism as means of easing tensions, attracting FDI

REUTERS

THE PHILIPPINES can use tourism to ease tensions with China and attract foreign investment, a United Nations (UN) official said.

“Tourism is a driver of peace. That’s why this year we decided to launch UN Tourism for Peace, and basically what we desire is to promote how tourism can open borders, can open up (visitors to) new cultures,” UN Tourism Executive Director Natalia Bayona told BusinessWorld last week.

The Philippines is currently embroiled with China in a dispute over territorial waters, with recent flare-ups triggered by the Philippines seeking to fish in traditional fishing grounds and resupplying military outposts in the South China Sea.

She estimated the number of ongoing conflicts at about 60, while possible changes of government via elections also introducing a note of uncertainty in investment decisions.

In March, Philippine foreign direct investment (FDI) net inflows rose 23% year on year to $686 million, bringing the first-quarter inflows to nearly $3 billion, according to preliminary data from the Bangko Sentral ng Pilipinas.

On June 13, the Department of Foreign Affairs announced stricter rules for visas for Chinese nationals in response to crimes allegedly involving Chinese.

The Department of Tourism said China is the third-largest market in terms of visitors to the Philippines, with a 6.56% share of international arrivals, as of June 1.

Asked what can be done to promote tourism despite the tensions, Ms. Bayona said: “What we are going to do after the regional commission of Asia-Pacific with the Philippines is that we will start working on education, and we will start working on investment promotion.”

She added that UN Tourism also plans to create an academy that will upskill Filipino workers in gastronomy skills.

“We are working to create an economic framework that can help investors to come and invest in the Philippines. Next year, we will be able to launch officially the investment guidelines,” Ms. Bayona added. — Aubrey Rose A. Inosante

PEZA hopes to sign MoA next month to facilitate pharma ecozones dev’t

By Justine Irish D. Tabile, Reporter

THE Philippine Economic Zone Authority (PEZA) said that it is hoping to finalize its updated partnership agreement with the Food and Drug Administration (FDA) next month which will set the rules for the development of economic zones specializing in pharmaceutical-industry locators.

“We are in the process of finalizing the guidelines with our FDA counterparts and will soon be ready to sign this landmark document between our agencies,” PEZA Director General Tereso O. Panga told BusinessWorld.

According to Mr. Panga, the goal of revisiting PEZA’s decade-old memorandum of agreement (MoA) with the FDA is to ultimately improve access to healthcare for all.

He said that a revision incorporates changes to the policy landscape like the Ease of Doing Business Law, the Universal Healthcare Law, and President Ferdinand R. Marcos, Jr.’s Executive Order No. 18, which established green lanes for strategic investments.

“Given the introduction of new measures and priorities through the past years, it becomes highly necessary to update the PEZA-FDA MoA, not just to integrate changes in existing legal bases but also to reflect the duties and responsibilities of both agencies in carrying out this administration’s priorities,” he said.

The new MoA is expected to embody the national commitments of PEZA and the FDA under the Philippine Development Plan, particularly on the implementation of the ecozone transformation roadmap and strengthening health systems and health care access and delivery.

“With this revised MoA, we expect the FDA to commit to the prompt facilitation of our ecozone locators’ applications for FDA permits, licenses, and certifications,” Mr. Panga said.

He said that streamlined applications will help attract pharma-related investments such as the manufacturing of drugs, active pharmaceutical ingredients (APIs), and medical devices and equipment, including the conduct of clinical trials and research and development activity.

Meanwhile, PEZA is also working on the guidelines that will govern the establishment and registration of pharma zones.

“This will also provide the qualifications (including minimum infrastructure requirements) and processes for potential pharmazone developers and operators,” Mr. Panga said.

“Likewise, it will outline registrable activities that locator companies may undertake within a pharma zone in order for them to avail of the fiscal and non-fiscal incentives under the PEZA framework,” he added.

PEZA plans further meetings with the Philippine Chamber of Pharmaceutical Industries and the Philippine Pharmaceutical Manufacturers Association this month to consult them on the guidelines.

The investment promotion agency is also waiting on the comments of the FDA and other stakeholders.

“We are currently farming out the rough draft of the guidelines for relevant National Government agencies and private stakeholders, particularly pharmaceutical and medical device associations and manufacturing companies,” Mr. Panga said.

“The finalization of the guidelines will commence as soon as we consolidate and harmonize their comments and inputs on the existing version thereof,” he added.

Last week, Mr. Panga said that an ecozone in Victoria, Tarlac, has been approved by PEZA’s board and is now awaiting proclamation. The ecozone is due to become the country’s pioneer pharma zone.

Earlier this year, Mr. Marcos instructed his officials to establish pharma zones to lower the cost of medicine and medical devices.

Key GenAI cybersecurity challenges and risk mitigation strategies

IN BRIEF:

• While it holds extraordinary promise for the future, GenAI comes shrouded in various concerns, extending from ethical dilemmas to security susceptibilities.

To mitigate attack vectors, organizations must establish comprehensive regulations and standards that can guide the responsible use and development of GenAI.

Generative artificial intelligence (GenAI) has the capacity to understand, learn, adapt, and implement knowledge across a broad range of tasks at a level equal to or beyond human capability. Unlike Narrow AI, which is designed to perform a specific task such as voice recognition or recommendation algorithms, GenAI can apply intelligence to any problem, and be able to perform any intellectual task that a human being can do.

While it holds extraordinary promise for the future, GenAI comes shrouded in various concerns, extending from ethical dilemmas to security susceptibilities. This article will explore some of the key challenges of GenAI and risk mitigation strategies from a cybersecurity perspective.

KEY CHALLENGES OF GENAI
A persistent issue of AI is the lack of transparency, frequently referred to as the black box problem. It’s difficult to understand how complex AI models make decisions, and this can create a security risk by allowing biased or malicious behavior to go unchecked.

Businesses are rapidly exploring GenAI solutions with little forethought on the security implications on the rest of the IT estate. There is currently no limit for the complexity of attack surfaces of AI systems or other security abuses enabled by AI systems. In addition, AI models heavily rely on third-party technologies, where the large language models (LLMs) like ChatGPT are outside the control of an enterprise. Consequently, the learning parameters where AI systems may be trained for decision-making outside an organization’s security controls or trained in one domain and then “fine-tuned” for another raises concerns about intended and actual usage.

Datasets used to train AI systems may become detached from their original and intended context, or may become stale or outdated relative to deployment. This introduces the problem of decisions made on incorrect data. Moreover, changes during training of models may fundamentally alter AI system performance and outcomes.

LLMs typically capture more information than they process, and considering the privacy policy of ChatGPT, the platform may regularly collect user data such as IP address, browser info and browsing activity. These may be shared with third parties, competitors, and regulators. The use of pre-trained models that can advance research and improve performance can also increase levels of statistical uncertainty and cause issues with bias management, scientific validity, and reproducibility.

On top of the computational costs for developing AI systems and their impact on the environment and planet, it is very difficult to predict failure modes for the emergent properties of large-scale pre-trained models. AI systems may require more frequent maintenance and triggers for conducting corrective maintenance. Additionally, it is challenging to perform regular AI-based software testing, or determine what to test, since AI systems are not subject to the same controls as traditional code development.

“Artificial stupidity,” the term used to describe situations where AI takes decisions that may seem illogical to humans due to its inadequate understanding of the real-world context, presents another challenge. Talk of AI singularity, a hypothetical scenario where AI outstrips human intelligence, have also started to gather momentum. Critics argue that a super-intelligent AI poses a real existential risk, as it might spin out of human control.

The dehumanizing effects of GenAI are another cause for concern. Over-reliance on AI risks devaluing human skills and minimizing human interactions. Moreover, the widespread application of GenAI may give rise to economic disparity, as the benefits of AI may not distribute evenly across society. Finally, the misuse of GenAI, particularly for harmful purposes like illegal surveillance, spreading propaganda, or weaponization, cannot be overstated.

The already dense and complex AI landscape is further complicated by substantial hype and a multitude of diverse solutions. The resulting application environment is scattered with multiple third-party technology solution components which require thorough vetting in enterprise contexts.

TYPES OF GENAI ATTACKS
There are various types of GenAI attacks manifesting across enterprises. Adversarial attacks involve manipulating an AI model’s input data to make the model behave in a way that the attacker desires, without triggering an alarm. For example, an attacker could manipulate a facial recognition system to misidentify an individual, allowing unauthorized access.

A data poisoning attack involves maliciously manipulating the data used to train AI models. By introducing false or misleading data into the training dataset, attackers can compromise the accuracy and reliability of AI systems. This can lead to biased predictions or compromised decision-making. On the other hand, a model theft or model inversion attack may attempt to steal and/or reverse-engineer AI models to obtain sensitive information.

In a transfer learning attack, an attacker manipulates an AI model by transferring knowledge gained from one domain to another, resulting in the AI system producing incorrect or harmful outcomes when applied to new tasks. In input manipulation, interacting with a chatbot or an AI-driven system can lead to incorrect or harmful responses simply by changing words or asking tricky questions. For instance, a medical chatbot might misinterpret a health query, potentially providing inaccurate medical advice.

AI can also be used by malicious actors to automate and enhance their cyberattacks. This includes using AI to perform more sophisticated phishing attacks, automate the discovery of vulnerabilities, or conduct faster, more effective brute-force attacks.

GENAI SECURITY RISK MANAGEMENT
To mitigate attack vectors, organizations must establish comprehensive regulations and standards that can guide the responsible use and development of GenAI. A GenAI Risk and Control framework can be very helpful in highlighting areas of vulnerability and risk mitigation in some of the following areas: 

Threat recognition. Identify possible threats GenAI might enable, such as autopilot system hacking, data privacy threats, decision-making distortion, or manipulation.

Vulnerability assessment. Evaluate weak spots in the system that might be exploited due to GenAI characteristics.

Risk impact analysis. Look into potential implications if any threats were actualized (financial implications, impact on company reputation, etc.)

Mitigation strategy development. Develop strategies to mitigate these risks, whether that means strengthening your network security system, creating backup systems, securing data privacy with improved encryption, or continuously auditing & updating the AI’s programming against potential manipulation.

Contingency planning. Develop a plan for responding to any breaches or issues that occur, despite mitigation efforts. Include steps to fix the issue, mitigate the damage, and prevent future occurrences.

Constant monitoring & updating. GenAI systems should be regularly monitored and updated to patch vulnerabilities and keep up with the evolving threat landscape.

Training & awareness. Ensure that all users of GenAI systems are properly trained on security best practices and are aware of the potential threats.

External cooperation. Cooperate with other firms and institutions to share threat intelligence and promote a collective defense strategy.

Regulation compliance. Ensure compliance with all applicable laws and regulations surrounding data security and AI, such as general data protection regulation (GDPR).

Incident response plan. Prepare a clear and concise plan to follow when a breach occurs, which includes reporting breaches, managing and controlling the situation.

Organizations must consider upgrading cloud security and moving towards zero trust principles, whereby every access request is authenticated, authorized and validated every time. Antivirus systems should be upgraded from the current norm of using a pre-programmed list of known attack vectors (signature based) to systems that can observe unusual patterns and alert on deviations (anomaly based). Embracing GenAI monitoring by introducing the appropriate tools allows organizations to monitor AI prompts and see that they do not deviate from original scenarios.

Review and strengthen security around a GenAI application stack emphasizing on integration points between systems (API’s) and identify AI systems and assets by drawing up a plan of usage. Organizations can assign a dedicated team to test AI models at base and application level, as well as introduce moderation and control on user developed applications, tools and products. Any experimental or uncontrolled work on GenAI within the enterprise must be monitored.

Applying these strategies can minimize the risks associated with GenAI and help efficiently manage cybersecurity.

NAVIGATING AI PITFALLS BY MITIGATING RISKS
While the potential of GenAI is undeniable, a cautious, forward-thinking approach is crucial to navigating its potential pitfalls. It is imperative to establish comprehensive risk mitigation, standards, and frameworks that can guide the responsible use and development of GenAI.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Rajiv Kakar is a technology consulting principal of SGV & Co.

Congress urged to increase funding for UP’s research in South China Sea

UNIVERSITY OF THE PHILIPPINES MARINE SCIENCE INSTITUTE, DILIMAN, Q.C. — MSI.UPD.EDU.PH

By John Victor D. Ordoñez and Kyle Aristophere T. Atienza, Reporters

THE PHILIPPINE Coast Guard (PCG) on Sunday urged Congress to boost the funding of the University of the Philippines (UP) Marine Science Institute so it can conduct research on the country’s resources in the South China Sea amid growing tensions with China.

The state university’s institute has a National Academic Research Fleet but lacks funding for its logistical requirements, PCG spokesman Jay Tristan Tarriela told reporters at Sunday’s state-led marathon that seeks to generate public support for the Philippines in its sea dispute with China, according to a recording sent by Senator Francis N. Tolentino, office.

“It’s about time that we support our marine scientists from the University of the Philippines, give them the proper budget so they can have their own national research fleet and conduct deeper studies guided by scientific research for our position in the West Philippine Sea,” Mr. Tarriela said in mixed English and Filipino, referring to areas of the South China Sea within the country’s exclusive economic zone.

In April, the Philippine Coast Guard spotted the Shen Kuo Chinese research vessel passing through the country’s northernmost province of Batanes before lingering in waters off southern Luzon.

“They are hiding their intentions behind what they call scientific research,” Mr. Tarriela said.

The Chinese Embassy in Manila did not immediately reply to a Viber message seeking comment.

Batanes is just a few kilometers away from Taiwan, a US ally that China considers a renegade province. Batanas was among the key sites of Philippine-US military drills in April.

At the same event, Mr. Tolentino cited the need to hold more events that would raise public awareness about tensions in the South China Sea.

“Raising public awareness on the West Philippines Sea is key to rallying Filipinos to take a united stand on this issue,” he told reporters.

China claims more than 80% of the South China Sea based on a 1940s map, which a United Nations-backed arbitration court voided in 2016 for being illegal.

The Philippines has failed to enforce the ruling and has since filed hundreds of protests over what it calls encroachment and harassment by China’s coast guard and its vast fishing fleet.

The Center for Strategic and International Studies in a December study said China’s dredging and giant clam harvesting have damaged at least 21,000 acres of coral reefs in the South China Sea. The Chinese Embassy has questioned the study’s results, saying it only relied on satellite imagery.

The Senate in December passed a bill that seeks to boost the country’s defense program through investments in local defense equipment manufacturing. The measure will give the Department of National Defense P1 billion in seed funding.

Last week, the Philippines and China resumed talks to ease tensions in the waterway, days after a standoff at Second Thomas Shoal, where the Philippines has a handful of soldiers on a grounded World War II-era ship.

Manila is hosting the latest round of talks between the two countries under their bilateral consultation mechanism, a format intended to address South China Sea disputes.

Aside from the Philippines and China, Brunei, Malaysia, Taiwan and Vietnam also have claims to parts of the sea.

Thousands of Filipinos joined the marathon, which started in Pasay City. Similar marathons will be held in Cebu in central Philippines next month and in Cagayan de Oro in the country’s south in September to create awareness among Filipinos, Mr. Tarriela said.

Several local governments are also seeking to hold their own marathons, he added.

“It’s a positive sign that even the local government units, not just here in Luzon but also from the Visayas and Mindanao, want to raise awareness about the efforts of the government, of President Bongbong Marcos, on the West Philippine Sea,” he said.

The fun run, which was expected to be attended by more than 7,000 people, was held days after the Philippine military flagged that China has been infiltrating various sectors in the country including local government units, the media and academic institutions.

Tensions with China have worsened in the past year as Beijing continues to block resupply missions to Second Thomas Shoal, where Manila grounded the BRP Sierra Madre ship in 1999 to bolster its sea claim.

‘CHINESE INFILTRATION’
Mr. Tarriela on Saturday said the 165-meter China Coast Guard 5901 vessel, also known as “The Monster,” has been anchored at Sabina Shoal, which is just about 70 nautical miles away from the Philippine island of Palawan, since July 3.

It has been trying to “intimidate” the BRP Teresa Magbanua by keeping close to the Philippine Coast Guard’s biggest and most modern ship, he told a news briefing.

“The Philippine Coast Guard will not be intimidated and is not going to pull back and direct Teresa Magbanua to go back to Palawan.”

Raymond M. Powell, a fellow at Stanford University’s Gordian Knot Center for National Security Innovation, said in an X message that a China Coast Guard ship and at least six maritime militia vessels were “closely shadowing” two PCG vessels passing 14 nautical miles east of the Second Thomas Shoal on Sunday.

The shoal is about 240 kilometers from Palawan province and 900 kilometers from Hainan, the nearest major Chinese landmass.

These developments follow a June 17 standoff at the shoal, where Chinese forces with bladed weapons allegedly boarded Philippine rubber boats and looted rifles.

Philippine Navy personnel fought with bare hands and one of them lost a thumb after the boat he was in got rammed, according to the Philippine military.

Last week, Philippine military chief Romeo S. Brawner, Jr. said China is targeting the education, media, business, and local government sectors in the Philippines.

Beijing has also been trying to gain access to the country through Philippine Offshore Gaming Operations (POGO), he added.

“Chinese infiltration of critical sectors in the Philippines means that Beijing is preparing for any eventuality,” Chester B. Cabalza, president at think tank International Development and Security Cooperation, said in a Facebook Messenger chat. “They are here to stay and observe.”

Hansley A. Juliano, a political science lecturer at the Ateneo de Manila University, said Mr. Brawner should clarify which aspects of education and media China is trying to gain access to.

“Does he speak mostly of the basic education level or even at higher education?” he asked. “It’s one thing to question the presence of Chinese studies programs and networks in the education and security sectors, but it’s another thing to allege they were planted by Beijing,” he said via Messenger chat.