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‘Hot money’ swings to net outflow in October

United States one-dollar bills are seen in this Nov. 14, 2014 file photo — REUTERS

Short-term foreign investments continued to exit the Philippines for the second month in October as investors sought higher returns in other countries, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Transactions on foreign investments registered with the central bank through authorized agent banks (AABs) posted a net outflow of $328.19 million in October, according to BSP data released on Thursday.

The October figure represents a reversal from the $83.44 million in net inflows seen a year earlier. However, it is 52.9% lower than the net outflow of $698.01 million in September.

Investments of this nature are commonly referred to as “hot money” due to the ease with which these flows can enter or leave an economy.

“Portfolio outflows from the Philippines persisted as investors sought better returns in countries like the United States,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

“The attractive interest rates, strong stock market performance, and ongoing economic resilience in advanced economies and financial centers such as Singapore and Hong Kong have been driving investments in those regions,” she said.

BSP data showed that gross outflows dropped by 19.1% to $1.28 billion in October from the $1.58 billion seen in the previous month.

October outflows more than doubled (128%) from the $561.11 million recorded in the same month in 2022.

The BSP said the United States received 61.9% of total outward remittances.

Meanwhile, gross inflows stood at $954.38 million, 7.5% higher than the $887.61 million posted in September and by 48% from $644.55 million a year earlier.

The bulk of investments (60.5%) went to Philippine Stock Exchange (PSE)-listed securities, mainly in banks, property, holding firms, casinos and gaming, as well as food, beverage and tobacco.

Around 39.5% of the foreign inflows went to investments in peso government securities and other instruments.

Investments during the month mostly came from the United Kingdom, the United States, Luxembourg, Singapore, and Hong Kong, which accounted for 88% of the total foreign inflows.

For the first 10 months of the year, hot money yielded a net outflow of $732.58 million, a reversal from the $320.24 -million net inflow in the same period last year.

Moving forward, Ms. Velasquez said portfolio inflows to the Philippines may improve in November and December.

“This is primarily due to the sentiment that the US has already reached its peak policy rate, which could prompt investors to divert their investments towards countries like the Philippines,” she said.

The Federal Reserve is widely expected to keep borrowing costs steady in its December policy meeting before its start cutting interest rates in 2024. The Fed has raised rates by 525 basis points (bps) from March 2022 to July 2023.

Back home, the BSP raised policy rates by 450 bps from May 2022 to October 2023, bringing the benchmark interest rate to a 16-year high of 6.5%.

“Additionally, the appreciation of the Philippine peso is expected to further facilitate portfolio inflows as we approach the end of the year,” Ms. Velasquez added.

The BSP expects hot money to yield a net inflow of $2 billion this year. — Keisha B. Ta-asan

BSP says November inflation likely between 4-4.8%

Inflation unexpectedly accelerated for the first time in seven months in August, as food and transport costs rose. — PHILIPPINE STAR/EDD GUMBAN

By Keisha B. Ta-asan, Reporter

The Philippines’ headline inflation may have settled within the range of 4% to 4.8% in November, according to the Bangko Sentral ng Pilipinas (BSP), citing mitigating factors such as lower vegetable prices, reduced oil costs, and a stronger peso.

If realized, inflation would fall from 7% a year ago and 4.9% in October. It could also be within the BSP’s 2-4% target, ending 19 straight months of above-target inflation. The Philippine Statistics Authority will release the November inflation data on Dec. 5 (Tuesday).

“Higher prices of most agricultural commodities like rice, fruit, fish, and meat items and adjustments in electricity, LPG (liquefied petroleum gas), and toll rates are the primary sources of upward price pressures in November,” the BSP said in a statement on Thursday.

Manila Electric Co. said the power rates for typical households increased by P0.2347 per kilowatt-hour (kWh) to P12.0545/kWh in November due to higher transmission charges.

LPG prices increased by P0.45 a kilogram in November, its fourth straight month of increase. The cost of a regular 11-kg LPG tank rose by P4.95 to P5.50.

“Meanwhile, lower prices of vegetables and petroleum products along with the peso appreciation could contribute to downward price pressures,” the central bank said.

In November alone, pump price adjustments stood at a net decrease of P1.9 a liter for gasoline, P4.45 a liter for diesel, and P3.3 a liter for kerosene.

The peso also rebounded to the P55-a-dollar mark in November, closing at P55.485 on Thursday, up by P1.245 or 2.2% from its P56.73 finish on Oct. 31.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data dependent approach to monetary policy formulation,” the BSP added.

The BSP sees inflation averaging 6% for this year and 3.7% for 2024, before easing to 3.2% in 2025.

BSP Governor Eli M. Remolona, Jr. has said inflation would likely stay above 2-4% in the first half of 2024 before slowing down in July.

To tame inflation, the Monetary Board raised borrowing costs by 425 basis points (bps) from May 2022 to October 2023, bringing the key interest rate to 6.5%, the highest in 16 years.

Enrico P. Villanueva, senior lecturer of economics at the University of the Philippines Los Baños, said inflation may ease within the 2-4% next year.

He said there are concerns about the impact of El Niño on food prices, but he hopes the new secretary of the Department of Agriculture will have measures to address the weather event.

“Once inflation comes within target range, I hope BSP will consider small rate cuts of 25bps throughout 2024 to bring down cost of doing business and reduce household loan interest payments,” he said in a text message.

The BSP’s last policy-setting meeting for the year is on Dec. 14.

LANDBANK supports ACEN’s RE projects with P20-B loan

(front) LANDBANK President and CEO Lynette V. Ortiz (right) and ACEN President and CEO Eric Francia (left) lead the signing of a P20-Billion loan agreement to fund ACEN’s general corporate requirements and investments in renewable energy projects on 29 November 2023 in Makati City. Joining them (from L-R) are ACEN Chief Finance and Compliance Officer Maria Corazon Dizon, Treasurer Cecile Cruzabra, and Head of Corporate Finance Juan Martin Syquia, alongside LANDBANK Senior Vice Presidents Lucila E. Tesorero and Ma. Celeste A. Burgos.

The Land Bank of the Philippines (LANDBANK) approved a P20-billion loan to ACEN CORPORATION (ACEN)—the listed energy platform of the Ayala Group—in support of the National Government’s thrust to expand the country’s mix of renewable energy.

The LANDBANK loan will partially finance ACEN’s general corporate requirements and investments in renewable energy projects, which are aligned with the government’s target under the National Renewable Energy Program to increase the share of renewable energy in the country’s power generation mix from the current 22% to 35% by 2030.

LANDBANK President and CEO Lynette V. Ortiz and ACEN President and CEO Eric Francia formalized the loan agreement on 29 November 2023 at the Ayala Triangle Gardens, Makati City. They were joined by ACEN Corporation Chief Finance and Compliance Officer Maria Corazon Dizon, Treasurer Cecile Cruzabra and Head of Corporate Finance Juan Martin Syquia, alongside LANDBANK Senior Vice Presidents Ma. Celeste A. Burgos and Lucila E. Tesorero.

“LANDBANK is proud to collaborate with ACEN, as we continue to build strategic partnerships to address the impact of global warming and climate change in the country. More than just a loan agreement, we see this partnership as an important step that supports the greening of our energy sector,” said LANDBANK President Ortiz.

ACEN has ~4,500 MW of attributable capacity from its owned facilities in the Philippines, Australia, Vietnam, Indonesia and India, with a renewable share of 98%, which is among the highest in the region.

This year, ACEN allocated up to P50 billion to continue growing its renewable energy portfolio.

LANDBANK’s loan to ACEN underscores the Bank’s thrust of promoting sustainable finance and environmental protection, while funding key economic development sectors to help address the consequences of climate change.

 


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US, partners target North Korea with sanctions following satellite launch

 – The United States on Thursday targeted North Korea with fresh sanctions after its launch of a spy satellite last week, designating foreign-based agents it accused of facilitating sanctions evasion to gather revenue and technology for its weapons of mass destruction program.

The US Treasury Department in a statement said it also applied sanctions to cyber espionage group Kimsuky, accusing it of gathering intelligence to support North Korea‘s strategic and nuclear ambitions.

Thursday’s action, taken in coordination with Australia, Japan and Korea, comes after North Korea last week successfully launched its first reconnaissance satellite, which it has said was designed to monitor US and South Korean military movements.

“Today’s actions by the United States, Australia, Japan, and the Republic of Korea reflect our collective commitment to contesting Pyongyang’s illicit and destabilizing activities,” Treasury’s Under Secretary for Terrorism and Financial Intelligence, Brian Nelson, said in the statement.

“We will remain focused on targeting these key nodes in the DPRK’s illicit revenue generation and weapons proliferation,” Mr. Nelson added, calling North Korea by the initials of its official name, the Democratic People’s Republic of Korea.

South Korea‘s foreign ministry said on Friday that it had blacklisted 11 North Koreans for involvement in the country’s satellite and ballistic missile development, banning them from any financial transactions.

The list includes senior officials from the National Aerospace Technology Administration, which oversaw the satellite launch, and the munitions industry department.

North Korea‘s mission to the United Nations in New York did not immediately respond to a request for comment on Thursday’s sanctions.

Since the launch of the satellite, North Korea said that its leader, Kim Jong Un, has reviewed spy satellite photos of the White House, Pentagon and US aircraft carriers at the naval base of Norfolk. Its state media has also reported that the satellite photographed cities and military bases in South Korea, Guam, and Italy, in addition to Washington.

On Monday, the United Nations ambassadors of the United States and North Korea sparred at the Security Council over the launch and the reasons for growing tensions in a rare, direct, public exchange between the adversaries.

Thursday’s action freezes any US assets of those targeted and generally bars Americans from dealing with them. Those who engage in certain transactions with them also risk being hit with sanctions.

The Treasury said Kimsuky primarily uses spear-phishing to target people employed by the government, research centers, academic institutions and others, including in Europe, Japan, Russia, South Korea and the United States.

In October 2020, the US Cybersecurity and Infrastructure Agency (CISA) described the group as “likely tasked by the North Korean regime with a global intelligence gathering mission.”

Security researchers have found the group impersonating reporters to trick targets into downloading malicious software to spy on them. Kimsuky’s hacking operation has been historically focused on South Korea, Japan and the United States.

In June, the US National Security Agency said the hackers, which have been operating since at least 2012, were “subordinate to an element within North Korea‘s Reconnaissance General Bureau (RGB).” The RGB is a North Korean intelligence agency that is involved in cyber warfare activities, according to analysts, and is under US sanctions.

Also targeted on Thursday were Iran and China-based representatives of US and UN-designated Green Pine, which the Treasury said is responsible for half of North Korea‘s arms and related materiel exports.

Two Russia-based representatives of North Korean banks and one China-based representative were also hit with sanctions, among others. – Reuters

Starting at $60,990, Tesla’s Cybertruck is priced 50% higher than initial estimate

STOCK PHOTO | Image by ElasticComputeFarm from Pixabay

Tesla’s long-delayed Cybertruck will be priced starting at $60,990, over 50% more than what CEO Elon Musk had touted in 2019 and a cost analysts have said will draw select, affluent buyers.

The truck, made of shiny stainless steel and shaped into flat planes, is partly inspired by a car-turned-submarine in the 1977 James Bond movie “The Spy Who Loved Me,” Musk has said.

Its new body material and unconventional, futuristic styling has added complexity and costs to production, and threatens to alienate traditional pickup truck buyers who focus on utility, experts say.

But Mr. Musk, who has priced the vehicle’s three variants between $60,990 and $99,990, said on Thursday the Cybertruck has “more utility than a truck” and is “faster than a sports car.”

He drove a Cybertruck onto a stage to cheers from the crowd and later handed over vehicles to about a dozen customers at an event in Austin, Texas.

“Finally, the future will look like the future,” he said about the truck’s design, showing a video of the Cybertruck towing a Porsche 911 and beating another gasoline-powered 911 in a short race.

Tesla shares fell 2% in extended trading after closing off 1.6% at $240.08.

Mr. Musk did not announce the vehicle’s prices at the event, but Tesla’s website listed the prices. Its highest performance variant, the ‘Cyberbeast’ will be available next year, as will the all-wheel drive trim that starts at an estimated $80,000.

The cheapest rear-wheel drive version with an estimated starting price of about $61,000 will be available in 2025.

“This is going to appeal to … definitely a wealthier clientele that can afford the price point and they want something that is unique and quirky,” said Jessica Caldwell, head of insights at auto research firm Edmunds.

“That just isn’t a large segment of the population that can afford that especially where interest rates are.”

After Mr. Musk estimated in 2019 that the Cybertruck would sell for $40,000, the vehicle drew more than a million reservation holders who put down $100 deposits. He had not offered an updated price before Monday, despite rising raw material costs for EVs.

New deposits are $250, Musk said on Thursday.

The price is not a surprise to many, said Paul Waatti, an analyst at consultancy AutoPacific. Waatti told Reuters before the event that the Cybertruck would do well with a smaller audience.

 

GRANDSTANDING SHOWPIECE

Cybertruck, two years behind schedule, enters a hot pickup truck market to compete with the likes of Ford’s F150 Lightning, Rivian Automotive’s R1T and General Motors’ Hummer EV.

Rivian’s R1T has a starting price of $73,000, while the F-150 Lightning starts at about $50,000. The larger and more powerful Hummer EV pickup costs more than $96,000.

The Cybertruck, Tesla’s first new model in nearly four years, is critical to its reputation as a maker of innovative vehicles. At a time when the company is battling softening electric vehicle (EV) demand and rising competition, Cybertruck is also key for generating sales, though not to the extent of the company’s high-volume Models 3 and Y.

Mr. Musk tempered investor expectations about the product last month citing problems in ramping production and warning that it would take a year to 18 months to make it a significant cash flow contributor.

Ahead of the launch, Musk captured media attention on a different subject, giving a profanity-laced interview to the New York Times on Wednesday. He cursed advertisers who left his social media platform X, formerly known as Twitter, because of antisemitic comments.

On Thursday, he said about the truck: “It’s basically an incredibly useful truck. It’s not just some grandstanding showpiece like me.”

 

UNIMPRESSIVE RANGE

The Cybertruck‘s longest-range version can drive an estimated 340 miles (547 km), and comes with a “range extender” or extra battery pack that extends its range to 470 miles.

In 2019, Mr. Musk had said the truck would be able to travel 500 miles or more on a single charge.

“As a truck, the Ford and Chevy are more useful and certainly easier to see out of,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights.

“Given that Teslas almost always fall short of (range) estimates in real world driving by anywhere from 10%-20%, I wouldn’t expect the longest range version of the Cybertruck to achieve more than 300 miles on the road,” he said, noting that the Chevrolet Silverado EV is capable of exceeding its 450-mile rated range.

Mr. Musk has said Tesla was likely to reach a production rate of roughly 250,000 Cybertrucks a year in 2025. He did not update that on Thursday.

During its 2019 reveal, Tesla’s chief designer Franz von Holzhausen took a metal ball to demonstrate the truck’s unbreakable “armor glass” window, only to shatter it.

Mr. Holzhausen on Thursday lobbed a baseball at the Cybertruck window that bounced off. – Reuters

Early pledges to ‘loss and damage’ fund build shaky trust at COP28

Source: https://www.un-ilibrary.org/content/cop28/g

 – The launch of a long-awaited global fund to deal with growing loss and damage from wilder weather and rising seas, at Thursday’s opening of the COP28 climate summit in Dubai, gave the annual talks a “running start”, U.N. climate chief Simon Stiell said.

But the initial euphoria greeting its birth – met with smiles and a standing ovation by negotiators – got a tempered response from vulnerable nations on the frontlines of global warming and activists who said the work is far from over.

“We cannot rest until this fund is adequately financed and starts to actually alleviate the burden of vulnerable communities,” said 39 countries making up the Alliance of Small Island Nations (AOSIS) in a statement after the approval.

Those countries, which include Mr. Stiell’s native Grenada, are bearing a heavier burden as encroaching oceans eat away low-lying land and fiercer storms wipe out large chunks of their economies.

Some of those living in island nations face having to relocate to higher ground or leaving their homelands entirely, with Australia recently agreeing to allow up to 280 Tuvaluans to migrate there annually under a special visa program in response to climate change.

“Success starts when the international community can properly support the victims of this climate crisis with efficient, direct access to the finance they urgently need,” the AOSIS statement added.

While more pledges are expected to be made to the new fund during the two-week COP28, the opening session garnered enough money to officially put it into operation, with a $100-million contribution from the UAE matched with the same from Germany.

Britain gave just over $50 million, while the United States offered $17.5 million and Japan $10 million.

The European Union and its member states later confirmed a further $145 million, bringing the total to more than $420 million so far.

 

TRUST RESTORED?

Ani Dasgupta, president of the World Resources Institute, a US think-tank, said the donations represent “a dramatic turn of events compared to just two years ago when it wasn’t certain if developed countries could ever be convinced to back a loss and damage fund“.

“While inadequate to the scale of what is needed, these early contributions will play a critical role in restoring trust between developed and developing countries as the U.N. climate talks get underway,” he added.

The issue of loss and damage has been hotly debated at successive U.N. climate conferences. For many years, wealthy nations rejected demands to pay compensation for the impacts of their high historical share of planet-heating emissions – a stance reiterated by US climate envoy John Kerry on Thursday.

But last year at COP27, after three decades of pushing, developing countries and small island nations won agreement on the new fund that will pay to repair devastated property, relocate threatened communities or preserve cultural heritage before it vanishes.

The details of where the money will come from and go to, and how the fund will be managed, were left to be worked out by the current COP28 conference in Dubai.

After much wrangling over where the fund will be housed, a compromise was reached in early November. Developed countries pushed poorer nations into accepting the World Bank as its host for an initial period of up to four years, although the fund will have an independent board.

Julie-Anne Richards, strategy lead at the Loss and Damage Collaboration, a network of policy experts, researchers and campaigners, said rich nations had “railroaded developing countries to get the World Bank shoe-horned in there” by arguing it would get money flowing more quickly.

Now those wealthy governments have a responsibility to play their part by filling the fund with adequate resources, she told the Thomson Reuters Foundation.

The United States in particular was criticized by climate justice advocates for the small size of its contribution compared to it historically large emissions.

“The initial funding pledges are clearly inadequate and will be a drop in the ocean compared to the scale of the need they are to address,” said Mohamed Adow, director of Power Shift Africa, a Nairobi-based think-tank, in a statement.

“In particular, the amount announced by the US is embarrassing for President Biden and John Kerry.”

 

NEW OR RECYCLED CASH?

After the fund was launched in Dubai, developing countries from the Democratic Republic of Congo to Iran and Vanuatu echoed the call for more contributions to the fund and demands for easy access to its coffers for vulnerable countries and communities.

Many aid specialists also warned rich nations against taking their contributions to the new fund from budgets that would otherwise be used to pay for emergency relief in disasters or development programs like health or education.

Ian Mitchell, a senior policy fellow at the Center for Global Development, described Thursday’s loss and damage pledges as “tokenistic”.

“If they’re not additional (to aid), then they may actually be damaging for climate resilience and development,” he told Context.

Other proposals are under discussion for non-government sources of finance that could expand resources for the loss and damage fund, including global taxes on fossil fuels, aviation, shipping and financial trading.

“If there was a new source of revenue for the loss and damage fund then that would be a major breakthrough for climate and development in a way that these incremental amounts are not,” Mr. Mitchell said. – Reuters

US judge blocks Montana from banning TikTok use in state

REUTERS

A US judge late on Thursday blocked Montana‘s first-of-its kind state ban on the use of short-video sharing app TikTok from taking effect on Jan. 1, saying it violated the free speech rights of users.

US District Judge Donald Molloy issued a preliminary injunction to block the ban on the Chinese-owned app, saying the state ban “violates the Constitution in more ways than one” and “oversteps state power.”

TikTok, owned by China’s ByteDance, sued Montana in May, seeking to block the US state ban on several grounds, arguing that it violates the First Amendment free speech rights of the company and users.

TikTok users in Montana also filed suit to block the ban approved by the state legislature which cited concerns about the personal data of Montana users and potential Chinese spying.

TikTok said it was pleased the judge “rejected this unconstitutional law and hundreds of thousands of Montanans can continue to express themselves, earn a living, and find community on TikTok.”

A spokesperson for Montana state attorney general Austin Knudsen’s office, which defended the ban, noted the ruling was preliminary and said “the analysis could change as the case proceeds.”

Mr. Knudsen’s office added it was considering its next steps and looks “forward to presenting the complete legal argument to defend the law that protects Montanans from the Chinese Communist Party obtaining and using their data.”

TikTok said in earlier court filings it “has not shared, and would not share, US user data with the Chinese government, and has taken substantial measures to protect the privacy and security of TikTok users.

Mr. Molloy, who was appointed to the bench by Democratic President Bill Clinton, found merit in numerous arguments raised by TikTok and referenced what he termed “the pervasive undertone of anti-Chinese sentiment that permeates” the state‘s legal case and legislation.

Montana could have imposed fines of $10,000 for each violation by TikTok in the state but the now blocked state law did not impose penalties on individual TikTok users.

Mr. Molloy said Montana sought to exercise foreign policy authority held by the federal government and the state‘s action was too sweeping.

TikTok has faced efforts by some in Congress to ban the app or give the Biden administration powers to impose restrictions or bar foreign-owned apps, but those efforts have stalled.

Many states and the US government have barred TikTok on government-owned devices, but only Montana has sought to completely bar the app’s use.

Former President Donald Trump in 2020 sought to bar new downloads of TikTok and Chinese-owned WeChat, but a series of court decisions blocked the effective ban from taking effect. – Reuters

How the US courted the Philippines to thwart China

PHILIPPINE STAR/EDD GUMBAN

 – Shortly after winning the presidency of the Philippines in May of last year, Ferdinand “Bongbong” Marcos Jr. took his first congratulatory call from a foreign head of state.

US President Joe Biden was on the line.

Mr. Biden’s speed in wishing the new president well delighted Marcos, according to brother-in-law Gregorio Maria Araneta III, who said the Philippine leader proudly told his family about that call a few days later over lunch. It “put a smile on his face,” Mr. Araneta, one of the country’s most prominent tycoons, told Reuters in a rare interview, speaking from his wood-paneled office in Manila.

The US embassy in Manila confirmed Mr. Biden was the first to call. What followed was two trips to the United States in less than a year for Mr. Marcos, and visits to the Philippines by high-ranking Biden administration officials. Among them: Vice President Kamala Harris, Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin.

Manila-based political analyst Julio Amador III described the US outreach as “unprecedented love-bombing” aimed at resetting the US-Philippines relationship. Mr. Marcos’ predecessor, the populist firebrand Rodrigo Duterte, was openly hostile to the United States and attempted to bring his country closer to communist China during his six-year term.

There is urgency to the US charm offensive: America needs Manila squarely in its camp as tensions with China rise in the Asia-Pacific.

The Philippines, Taiwan’s neighbor to the south, would be an indispensable staging point for the US military to aid Taipei in the event of a Chinese attack, military analysts say. China’s ruling Communist Party views democratically governed Taiwan as an inalienable part of China and refuses to rule out force to bring the island under its control.

Under President Xi Jinping, Beijing has laid claim to an ever-widening swathe of the South China Sea and is bent on making his nation the unquestioned military power in East Asia. Such a shift would have far-reaching consequences for US influence, regional security and global trade. More than a fifth of the world’s shipping passes through the South China Sea annually. The narrow straits around the Philippines and Taiwan bristle with undersea internet cables and are vital channels for US naval forces patrolling the region.

Reuters has been detailing the race between China and the United States to bulk up on advanced technologies that could determine who secures military and economic supremacy this century. Aerial and sea dronesAI-controlled weapons and cutting-edge surveillance are fast reshaping warfare, with implications for the global balance of power.

For the United States, cementing alliances in the Asia-Pacific region is likewise crucial to keeping China in check. The US embrace of Mr. Marcos is key to that project.

To get inside the American effort at mending ties and Marcos’ decisive pivot to Washington, Reuters spoke to more than two dozen current and former officials from both countries. Some spoke on condition of anonymity because they were not authorized to speak to the media.

The reporting revealed a picture of a superpower anxious about China, knocked off stride by Mr. Duterte, and eager to partner with Marcos despite his family’s history of brutality and corruption.

Mr. Marcos’ father, the late strongman Ferdinand Marcos Sr, was a steadfast US ally who was deposed in 1986 after Filipinos revolted against his regime. The elder Marcos was accused of orchestrating the detention and killing of thousands of political enemies and illegally siphoning billions of dollars from public coffers. He died in exile in Hawaii in 1989 without facing trial. After his death, family members returned to the Philippines, where they have remained a force in politics.

President Marcos did not respond to requests to be interviewed for this report. He has sought to recast his father’s time in power as a golden era of development for the Philippines, while saying little about the allegations of wrongdoing. “Judge me not by my ancestors, but by my actions,” he said after his 2022 election win.

The US State Department declined to comment on the Mr. Marcos family’s past. In a statement to Reuters, it said US support for civilian security, democracy and human rights was “integral to US foreign policy and national security interests” in the Pacific. “The US-Philippines alliance is strategically irreplaceable, and a Philippine government that respects the rule of law, good governance, and human rights is essential to maintaining a strong alliance.”

Reuters also learned of efforts by senior Filipino military and government officials that successfully stalled moves by Mr. Duterte to shred the US-Philippines security alliance. The reporting also sheds light on Marcos’ calculus about the risks of aligning himself too closely with China.

Mr. Duterte’s pro-Beijing stance was unpopular with the Filipino public, failed to produce as much Chinese investment as he had promised, and didn’t stop territorial disputes between the two nations, which have intensified

In October, the Philippines alleged that a Chinese coast guard vessel and a maritime militia boat “intentionally” collided with two Filipino boats on a journey to resupply Philippine personnel stationed at Second Thomas Shoal, a contested outpost in the South China Sea. China claimed that the Filipino vessels were at fault.

The United States swiftly backed the Philippines, warning Beijing that it would defend its ally in the event of an armed attack under a 1951 mutual defense treaty.

It’s a stance that pleased Manila, which has felt at times that Washington hasn’t done enough to support the Philippines in such confrontations, two current and one former official told Reuters.

Mr. Duterte declined to comment for this report.

China’s Foreign Ministry, in a statement to Reuters, characterized China and the Philippines as “close neighbors across the sea” with a common interest in friendship. It noted that China was the Philippines’ largest trading partner and a major source of investment that “had improved the living standard of the Filipino people.”

Without naming the United States, the Foreign Ministry added that “some countries, out of self-interest and with a zero-sum mentality, continue to strengthen their military deployment in the region, which is precisely aggravating tensions.”

Regarding Taiwan, the statement said China “insists on striving for the prospect of peaceful reunification with the utmost sincerity and effort, but will never commit itself to renouncing the use of force.”

 

‘HOUSE OF CARDS’

The Philippines is a former American colony that was granted independence in 1946, shortly after World War II. As part of the so-called first island chain ─ a string of islands that encloses China’s coastal waters ─ it has long been a key node in US defense strategy in the Pacific.

In addition to the Philippines, the United States for decades has partnered with other regional allies, including Japan, South Korea and Australia, to access military bases and conduct naval exercises. The enduring US presence has rankled an increasingly militarized and confident China.

The People’s Liberation Army now has a sophisticated missile force designed to destroy the installations, aircraft carriers and warships that are the backbone of American power in Asia. China boasts the world’s biggest navy. It has stepped up “grayzone” operations at sea – aggressive military actions that fall short of acts of war – especially around Taiwan and in contested waters of the South China Sea.

War games staged last year by think tanks including the Center for a New American Security (CNAS), based in Washington, illustrated how indispensable the Philippines would be for a US defense of Taiwan.

US access to Philippine runways and aircraft fuel proved vital in scenarios showing a successful repulsion of Chinese forces in the early days of a conflict, said Becca Wasser, a defense analyst and wargaming expert who ran the exercises for CNAS and has done the same for the US Department of Defense.

“I think that crystallized how important the Philippines could be and how, in some ways, relying on Japan and Australia, which are farther away, is just not enough,” said Ms. Wasser, who leads The Gaming Lab at CNAS.

But the US-Philippines relationship was strained with the 2016 election of Duterte, nicknamed “The Punisher” in the media. He quickly launched an anti-narcotics crackdown that resulted in extrajudicial killings of thousands of suspected criminals, a policy that raised alarms in the administration of President Barack Obama. Duterte also set about moving his country closer to economic powerhouse China, whose leader Xi shares his criticism of a US-led world order.

In October 2016, Mr. Duterte traveled to Beijing and proclaimed a new era of Sino-Filipino cooperation. “America has lost,” he told an audience of Chinese business executives. “I’ve realigned myself in your ideological flow.” Mr. Duterte returned to Manila with $24 billion in commitments under the Belt and Road Initiative, a global investment project that Beijing has used to wield soft power. Only a tiny fraction went ahead, according to the Philippines National Economic Development Authority.

Hostilities peaked in early 2020 after the United States canceled the visa of Senator Ronald “Bato” dela Rosa, who had spearheaded Mr. Duterte’s drug war in his previous post as head of the Philippine National Police. On Mr. Duterte’s orders, the Philippines notified Washington of its intent to terminate the Visiting Forces Agreement (VFA) within 180 days. Ratified in 1999, the pact sets rules for rotating thousands of US troops into and out of the Philippines. The VFA is key to implementing the bedrock Mutual Defense Treaty of 1951 that requires the United States and the Philippines to support one another in the event either is attacked in the Pacific.

Mr. Dela Rosa did not respond to a request for comment. At the time, he said the cancellation of his visa was the latest in a list of “gripes and disrespect” by the United States.

A retired senior Filipino military officer who served during that time recalled that US officials were “very worried, they thought everything will be like a house of cards falling.”

The Americans “saw the increasing influence of the Chinese” over Mr. Duterte, the officer said.

 

BLOCKING DUTERTE

But behind the scenes, the Philippine military establishment was pushing back against Mr. Duterte’s efforts to chip away at the US alliance, the Filipino military official and six others told Reuters.

US-Philippines cultural ties are strong. More than four million Filipino-Americans live in the United States, and public opinion surveys have consistently shown that Filipinos have high levels of trust in America compared to China. Duterte at a 2017 press conference said “our soldiers are pro-American, that I cannot deny.”

Two of the military officials said the president early in his term had ordered the Philippine navy to stop patrols in areas of dispute with China, instructions they said were ignored by senior commanders on the grounds of national defense. Philippine navy chief Vice Admiral Toribio Adaci Jr. did not respond to a request for comment.

In late 2018, China and 10 Southeast Asian nations convened their first joint maritime drills. Some were held off the coast of China’s southern Guangdong province. While other countries showed up with frigates and destroyers, the Philippine navy sent a single logistics support vessel, according to a senior Filipino military officer with knowledge of the previously unreported events.

The official explanation given to China was that the Philippine navy couldn’t free up larger vessels because it hadn’t received enough advance notice of the exercises, the officer said. The real reason, the officer said, was to avoid looking like a military ally of China: “If we sent a warship, it would not send a good message to the international community.” Two other Philippine officials with knowledge of the situation confirmed this account to Reuters.

China’s Foreign Ministry did not respond to a request for comment on the incident.

Meanwhile, the Philippine military continued joint exercises with the United States, despite a public pronouncement by Duterte in September 2016 that such drills would end because they were something “China does not want.”

A senior defense official, who asked not to be named, told Reuters that he pushed back on that edict and stressed to Mr. Duterte the benefits of the transfer of US technologies. The exercises continued.

Still, to avoid Mr. Duterte’s ire, the two forces ceased mock combat drills, focusing instead on disaster response, according to Blake Herzinger, a former maritime security advisor to the US Pacific Fleet.

“We had to rename all the exercises,” said Mr. Herzinger, who was a US government contractor working on US-Philippines maritime security cooperation at that time. For example, long-running regional warfare exercises known as CARAT, or Exercise Cooperation Afloat Readiness and Training, were ended and reinstated with the Filipino name “Sama Sama” meaning “together.”

The navy also managed to scuttle plans by a Chinese-Philippine joint venture, Fong Zhi Enterprise Corporation, to transform Fuga Island in the northern Philippines into a “smart city” with a high-tech industrial park. The remote island is located less than 400 kilometers from Taiwan and close to subsea internet cables connecting the Philippines with the rest of Asia. Mr. Duterte agreed in principle to the $2 billion deal during a 2019 trip to Beijing. But he quickly backtracked after Philippine military officials went public with fears that China might use the development as cover for a spy post or to facilitate an invasion of Taiwan.

Fong Zhi Enterprise Corporation could not be reached for comment. A representative of the Chinese investor, Hongji Yongye, declined to comment.

Senior government officials in 2019 killed efforts by Chinese companies to take over a shipyard in Subic Bay, a former US naval base in the Philippines that closed in 1992 after Manila terminated a bases agreement with Washington.

Two Chinese firms expressed interest, the government said at the time without naming the companies. Teodoro “Teddy” Locsin Jr, then-foreign minister of the Philippines, told Reuters he concluded the United States would consider such a sale to be “an act of hostility,” given the strategic value of the site. The deepwater port is in close proximity to both the Bashi Channel facing Taiwan and the South China Sea. Reuters was unable to determine the name of the Chinese companies.

Jose Manuel “Babe” Romualdez, the Philippine ambassador to the United States, said he hustled to find an American buyer instead. In 2022, Cerberus Capital Management, a New York-based private equity firm that has invested in defense contractors and national security assets, paid $300 million for the shipyard.

Cerberus declined to comment on the deal.

China’s Foreign Ministry, in its statement, said the Fuga Island and Subic Bay projects were “purely the actions of enterprises of the two sides and should not be subject to excessive political interpretation.”

 

CHARM OFFENSIVE

While many Filipino officials were alarmed by Mr. Duterte’s efforts to cozy up to China, two officials told Reuters there was an upside: They began to hear a more respectful tone from their US counterparts.

“The US was, of course, nervous, and they showed this nervousness by actually reaching out to us and actually speaking in a language that’s very uncharacteristic of the United States,” one of the officials said.

A change of US administrations with the election of US President Donald Trump led to more concrete shows of support for the Philippines.

Many of the islands, shoals and reefs in the South China Sea now claimed by the Philippines – some of which are disputed by China and other nations – were not formally annexed by Manila until 1978. That was well after the signing of the 1951 Mutual Defense Treaty between the United States and the Philippines, creating ambiguity as to whether Washington would assist its ally if an attack came in those places. The United States removed any doubt in 2019, when then-Secretary of State Mike Pompeo traveled to Manila to assure officials that the United States would defend the Philippines in those areas too.

Mr. Pompeo told Reuters he wanted to make it “unambiguously clear” that the United States was committed to providing the “deterrence support that was necessary to push back against an ever-increasing footprint of the Chinese Communist Party in the South China Sea and elsewhere.” It was the “singular purpose of the visit,” Mr. Pompeo said.

He also gifted drones for use by the Philippines to fight Islamist militants operating in the south of the country. The Obama administration had halted some weapons sales to the Philippines over human rights concerns.

When Mr. Trump came into office and stopped “talking about human rights, suddenly the major complicating factor in the relationship disappeared,” said Gregory Winger, a political science professor at the University of Cincinnati specialized in US-Philippines relations.

Two Filipino officials agreed. Between Mr. Trump and Mr. Duterte there was “a mutual admiration club,” one said.

Mr. Duterte kept extending the deadline to terminate the Visiting Forces Agreement or VFA. Advisors had warned him against the termination. Behind the scenes, military planning for its renewal continued.

In December 2020, shortly after Mr. Biden defeated Mr. Trump for the presidency, Mr. Duterte announced specific terms for keeping the VFA intact: 20 million doses of COVID-19 vaccine.

The Philippines, with a population of about 110 million people, had been hit hard by the pandemic and had few resources to fight it. Vaccine diplomacy would prove critical to keeping the VFA alive, according to a senior Filipino official with direct knowledge of the situation.

As part of the Biden administration’s first trip to Southeast Asia in July 2021, Mr. Austin, the defense secretary, was to visit the Philippines to meet DMr. uterte. The Filipino official told Reuters he advised a member of Austin’s team ahead of time that the defense chief should bring a vaccine commitment with him in order to ensure the continuation of the VFA.

The Pentagon did not respond to a request for comment.

Meanwhile, Mr. Romualdez, the Philippine ambassador to the United States, worked on the president. Mr. Romualdez told Reuters he urged Mr. Duterte to allow the military pact to continue because it would “be in our interest” in tackling the pandemic.

On July 30, 2021, a day after Mr. Austin and Mr. Duterte met in Manila, the White House announced it was giving three million doses of Moderna’s COVID-19 vaccine to the Philippines, bringing the total from the United States to six million doses, the largest donation from a single country. That same day, Mr. Duterte said publicly he would fully restore the VFA.

Mr. Biden had announced a month earlier that America would donate half a billion doses of COVID-19 vaccines to countries struggling with supplies “with no strings attached.” Still, a US embassy official told Reuters that “demonstrating our partnership with the Philippines in combating COVID” helped sway Mr. Duterte’s decision.

 

A FRESH START

In some respects, the election of another Marcos in mid-2022 seemed to be no guarantee of better US-Philippines relations.

Mr. Marcos has ties to Beijing dating to a childhood trip with his mother to meet top Chinese leaders, including Mao Zedong. As a young man he visited China frequently to “drum up business,” according to a 2007 US diplomatic cable published by Wikileaks. During the presidential campaign, Marcos was asked by a journalist whether he would seek US help to address Chinese aggression in contested waters. His response: “If you let the US come in, you make China your enemy.”

Mr. Araneta, Mr. Marcos’ brother-in-law, told Reuters that the president and his family had long felt “betrayed” by Washington for the US role in supporting the change of government that pushed the elder Marcos from power. Still, Mr. Araneta said, Mr. Marcos Jr is a pragmatist who spent a lot of time thinking before his election about “how to get the Americans back” for the sake of the Philippines’ economy and security.

The Biden administration lost no time in trying to reset relations. After Mr. Biden’s congratulatory call, the US president sent Mr. Marcos an invitation to the White House. In September 2022, the two met on the sidelines of the United Nations General Assembly in New York.

Mr. Biden “put him at ease, to assure and explain to him that he wanted to step up the relationship,” a senior Biden administration official told Reuters.

The Philippine side expressed enthusiasm — and surprise — at what the official said was respect shown to them by the Biden team. An interlocutor said the Philippine “experience of great power diplomacy sometimes is lectures, and we do less of the talking,” the official recalled.

Brother-in-law Araneta said Mr. Marcos told the family that Mr. Biden had asked the new Philippine president during the UN meeting, “What can I give you?” and Mr. Marcos had replied light-heartedly that he would take “everything” they could offer.

The White House did not respond to a request for comment.

Mr. Marcos told Filipino journalist Anthony Taberna in August 2021 that he had not visited the United States in more than a decade due to the risk of arrest stemming from a 1995 judgment in a class-action civil lawsuit filed in US district court in Hawaii against him and his mother, Imelda, as executors of his father’s estate. That lawsuit sought compensation for Filipino victims of martial law under Mr. Marcos Sr, when tens of thousands of people were imprisoned and thousands were killed, according to Amnesty International.

The court entered a judgment against the Marcos estate for nearly $2 billion to be paid to more than 9,500 victims, a decision the Marcoses appealed unsuccessfully. When the family refused to disclose the location of the estate’s assets, a contempt judgment of $353 million was imposed in 2012 against Mr. Marcos Jr and Imelda. That penalty has not been paid. Plaintiffs have collected just a sliver – $37 million – of the $2 billion award, from sales of seized artwork and property owned by the family in the United States.

Mr. Marcos’ office had no comment on the case.

In Manila last year, Deputy Secretary of State Wendy Sherman clarified that Mr. Marcos could now enter the United States because of diplomatic immunity conferred on him as president.

Robert Swift, the Philadelphia-based lawyer who launched the civil lawsuit, told Reuters that Washington is placing primacy on its “geopolitical interests and ignoring the interests of … Filipino human rights victims.”

The State Department declined to comment.

Since Mr. Marcos took office on June 30, 2022, the Philippines has received patrol boats and a surveillance aircraft from the US military. The United States has committed to deliveries of coastal and air defense systems, radars, military transport aircraft and drones in the next five to 10 years.

Mr. Marcos has reciprocated. The president has increased from five to nine the number of bases and strategic sites that the US military can access in the Philippines. The US Department of Defense in April said it planned to allocate more than $100 million by the end of the fiscal year for infrastructure investments for the nine locations.

Publicly, Manila and Washington have portrayed the agreement as a way to provide disaster assistance in a country vulnerable to typhoons.

Privately, five current and former Filipino officials acknowledged the bases would likely become staging grounds for any conflict over Taiwan. Three officials said the sites would house prepositioned equipment and fuel. Three of the new sites are in the northern part of the Philippines‘ main island of Luzon, close to Taiwan. The US is also in talks to build a port on the strategic Batanes islands less than 200 km from Taiwan.

Beijing has condemned the expanded US military access to sites in the Philippines as a threat to regional peace and stability.

The State Department told Reuters the new sites would allow the two nations to “operate together more frequently and with enhanced capabilities.” It referred further questions to the Pentagon, which did not respond to requests for comment.

Mr. Locsin, the former Philippine foreign minister, is now ambassador to the United Kingdom and the president’s special envoy to Beijing. He credits Mr. Marcos for learning from the missteps of his predecessor. While Mr. Duterte’s efforts to ally with China shocked the United States into paying more respect, they delivered neither the riches nor the security his government hoped for, he said.

Mr. Marcos “wasn’t going to repeat that experience. So then, what’s the only answer to that?” Mr. Locsin said. “Turn to the United States and tell them to produce.” – Reuters

Allied Care Experts (ACE) Medical Center – Palawan, Inc. to hold 2023 Annual Meeting of Stockholders on Dec. 19

 


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Disney launches world’s first Zootopia-themed land in China

ARTIST renderings of the new Zootopia-themed attraction at Shanghai Disneyland Resort. — DISNEYPARKS.DISNEY.GO.COM

WALT DISNEY CO. is set to open the world’s first Zootopia land at Shanghai Disneyland Resort as the entertainment giant expands its global theme park footprint and taps into surging demand in China for domestic travel.

The new attraction, based on the popular animated comedy-adventure of the same name, will open on Dec. 20 and feature iconic landmarks from the film and themed restaurants. One of the top draw cards is the “Hot Pursuit” ride, which sees visitors join Officer Judy Hopps and her partner, Nick Wilde, on a police chase to track down kidnapped pop star Gazelle.

It’s the second major themed land launched in quick succession by Disney, following the world’s first Frozen attraction that opened in Hong Kong in November. They’re part of a push to make more of the firm’s theme park and resorts business, with plans to nearly double spending on the segment to $60 billion over 10 years amid major changes in the film and TV industry as well as challenges for its streaming business.

It’s also a sign of the enduring strength of domestic travel demand in China. Facing a raft of economic headwinds, many Chinese are steering clear of expensive overseas trips in favor of vacations at home. Experiential activities have been the big winner and activities like surfing, going to theme parks and touring rural areas have surged in popularity this year, according to travel provider Ctrip.

Shanghai Disneyland Resort has been a major beneficiary, particularly during key holiday periods. During the peak summer travel season, some visitors arrived at 5 a.m. to queue to get in and some of the most popular attractions had wait times of more than three hours.

The $5.5-billion theme park opened in 2016 and Disney owns  43% of the project, with the rest held by state-owned consortium Shanghai Shendi Group Co. A regular one-day ticket costs 475 yuan, though that rises to as much as 799 yuan on certain days like public holidays.

Released in 2016,  Zootopia earned more than $1 billion worldwide and is China’s highest-grossing imported animated feature film ever. Disney announced earlier this year that a sequel is in the works. — Bloomberg

Philippines falls in IMD’s digital competitiveness list

THE PHILIPPINES dropped three spots in the global digital competitiveness index of the World Competitiveness Center of Swiss-based International Institute for Management Development (IMD), finishing at the bottom of its South-east Asian peers.  Read the full story.

BTr eyes less December borrowing

By Aaron Michael C. Sy, Reporter

THE PHILIPPINE government plans to borrow less from the domestic market next month, the Bureau of the Treasury (BTr) said on Thursday, amid a shrinking budget deficit that eases the pressure to finance its debt.

The December borrowing plan is 73% lower than the P225-billion program in November and 60% less than what it raised this month, the BTr said in a memo posted on its website.

The government will borrow P20 billion via Treasury bills and P40 billion via Treasury bonds.

It will sell P3 billion each in 91- and 182-day securities, as well as P4 billion in 364-day T-bills on Dec. 4 and Dec. 11.

The Treasury will also auction off P20 billion each in 10-year and 15-year bonds on Dec. 5 and 12, respectively.

The lower borrowing coupled with a positive outlook for the Philippine economy would likely lead to high demand for both T-bills and T-bonds, analysts said.

The state is borrowing less next month given the shrinking budget gap, Domini S. Velasquez, chief economist at China Banking Corp., said in a Viber message.

Ms. Velasquez said the smaller borrowing via Treasury bills should boost the market rally and aid the decline in interest rates.

“This decision is influenced, in part, by the projected smaller budget deficit for 2023 compared with the initial program,” she said. “As we approach the final months of the year, the government still has around P481.5-billion fiscal space available, which is unlikely to be fully utilized.”

The Philippine government’s budget deficit shrank in October as revenue growth outpaced spending, the Treasury bureau said on Wednesday. The fiscal gap narrowed by 65.27% to P34.4 billion from P99.1 billion a year ago.

In the 10 months to October, the budget gap narrowed by 8.45% to P1.018 trillion from a year earlier. This was equivalent to 67.88% of the full-year P1.499-trillion deficit program.

Revenue increased by 9.41% to P3.224 trillion, which was already 86% of the target for the year.

The government sees no need to borrow more given the approaching Christmas holiday, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Yields would probably decline further if global crude prices and inflation continue to ease, he added.

In October, inflation eased to 4.9% from 6.1% in September and 7.7% a year earlier. This was below the Philippine central bank’s 5.1-5.9% forecast for the month.

October inflation was the slowest in three months but marked the 19th straight month that it breached the central bank’s 2-4% target. Year to date, inflation stood at 6.4%.

“The lower borrowing plan could also suggest that the government had already reached its target for the year,” Robert Dan J. Roces, chief economist at Security Bank Corp., said in a Viber message. “It is also able to fund its spending needs on the back of good revenue, notably during the holiday season.”

The gross domestic borrowing program this year is set at P1.654 trillion, composed of P54.1 billion in T-bills and P1.6 trillion in fixed-rate T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 6.1% of the gross domestic product this year.