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Russia has secret war drone project in China, intelligence sources say

WIKIMEDIA/MIL.RU

RUSSIA has established a weapons program in China to develop and produce long-range attack drones for use in the war against Ukraine, according to two sources from a European intelligence agency and documents reviewed by Reuters.

IEMZ Kupol, a subsidiary of Russian state-owned arms company Almaz-Antey, has developed and flight-tested a new drone model called Garpiya-3 (G3) in China with the help of local specialists, according to one of the documents, a report that Kupol sent to the Russian Defense ministry earlier this year outlining its work.

Kupol told the Defense ministry in a subsequent update that it was able to produce drones including the G3 at scale at a factory in China so the weapons could be deployed in the “special military operation” in Ukraine, the term Moscow uses for the war.

Kupol, Almaz-Antey and the Russian Defense ministry did not respond to requests for comment for this article. China’s Foreign ministry told Reuters it was not aware of such a project, adding that Beijing had strict control measures on the export of drones, or unmanned aerial vehicles (UAV).

Fabian Hinz, a research fellow at the International Institute for Strategic Studies, a London-based defense think-tank, said the delivery of UAVs from China to Russia, if confirmed, would be a significant development.

“If you look at what China is known to have delivered so far, it was mostly dual-use goods — it was components, sub-components, that could be used in weapon systems,” he told Reuters. “This is what has been reported so far. But what we haven’t really seen, at least in the open source, are documented transfers of whole weapon systems.”

Still, Samuel Bendett, an adjunct senior fellow at the Center for a New American Security, a Washington-based think tank, said Beijing would be hesitant to open itself up to international sanctions for helping Moscow’s war machine. He said more information was needed to establish that China was playing host to production of Russian military drones.

The White House National Security Council said it was deeply concerned by the Reuters report of the drone program, which it said appeared to be an instance of a Chinese company providing lethal assistance to a US-sanctioned Russian firm.

The White House has not seen anything to suggest the Chinese government was aware of the transactions involved, but China has a responsibility to ensure companies aren’t providing lethal aid to Russia for use by its military, a spokesperson added.

Asked about the Reuters report, a North Atlantic Treaty Organization spokesperson said via e-mail: “These reports are deeply concerning, and Allies are consulting on this matter.”

“The Chinese government has a responsibility to ensure its companies are not providing lethal assistance to Russia,” added the spokesperson, Farah Dakhlallah. “China cannot continue to fuel the largest conflict in Europe since the Second World War without this impacting its interests and reputation.”

Britain’s Foreign Office called on China to stop providing diplomatic and material support to Russia’s war effort.

“We are extremely concerned by reports that Russia is producing military drones in China,” a spokesperson said.

“This adds to a growing body of open-source evidence that Chinese companies are enabling Russia’s illegal invasion of Ukraine. The supply of weapons would be a direct contradiction to statements from China that it would not provide weapons to relevant parties of the conflict.”

The G3 can travel about 2,000 km (1,200 miles) with a payload of 50 kg (110 pounds), according to the reports to the Russian Defense Ministry from Kupol, which was placed under US sanctions in December 2023. Samples of the G3 and some other drone models made in China have been delivered to Kupol in Russia for further testing, again with the involvement of Chinese experts, they said.

The documents do not identify the Chinese drone specialists involved in the project that it outlined, and Reuters was unable to determine their identity.

Kupol has taken delivery of seven military drones made in China, including two G3s, at its headquarters in the Russian city of Izhevsk, according to the two separate documents reviewed by Reuters, which are invoices sent to Kupol in the summer by a Russian firm that the two European intelligence sources said serves as an intermediary with Chinese suppliers. The invoices, one of which requests payment in Chinese yuan, do not specify delivery dates or identify the suppliers in China.

The two intelligence sources said the delivery of the sample drones to Kupol was the first concrete evidence their agency had found of whole UAVs manufactured in China being delivered to Russia since the Ukraine war began in February 2022.

They asked that neither they nor their organization be identified due to the sensitivity of the information. They also requested certain details related to the documents be withheld, including their precise dates.

‘DOUBLE STANDARDS’
The sources showed Reuters five documents in all, including two Kupol reports to the ministry in the first half of the year and the two invoices, to support their claims of the existence of a Russian project in China to manufacture drones for use in Ukraine. The program has not previously been reported.

Kupol’s reports did not give more precise locations for sites related to the project. Reuters was also unable to determine whether the Defense ministry gave the company the green light to proceed with the serial production proposed.

Beijing has repeatedly denied that China or Chinese companies have supplied Russia with weapons for use in Ukraine, saying the country remains neutral.

In response to questions for this article, the Foreign ministry told Reuters that China’s position presented a contrast with other nations with “double standards on arms sales” whom it said had “added fuel to the flames of the Ukrainian crisis.”

The ministry said earlier this month that there were no international restrictions on China’s trade with Russia, when responding to a Reuters report that Kupol had started to produce the Garpiya-A1 long-range military drone in Russia using Chinese engines and parts.

The new documents reported here indicate state-owned Kupol has gone further by sourcing complete UAVs from China.

Both Russia and Ukraine are racing to ramp up their production of drones, which have emerged as highly effective weapons in the war.

David Albright, a former UN weapons inspector who heads the Institute for Science and International Security research group, and has conducted extensive work on Chinese and Russian cooperation on drone production, told Reuters that Kupol could skirt Western sanctions on Russia by setting up a production facility in China where it could access advanced chips and expertise.

But Bendett at the Center for a New American Security said Beijing had reason to tread carefully: “For a factory to exist officially that builds UAVs for the Russians exposes China to some of the more severe effects of the sanctions, so it’s not clear the extent to which China would be willing to expose itself.”

The Ukrainian government did not respond to a request for comment for this article.

US REAPER DRONE
The G3 is an upgraded version of the Garpiya-A1 drone, according to Kupol’s reports sent to the Defense ministry. It was redesigned by Chinese experts working off blueprints of the Garpiya-A1, they said.

Kupol said that within eight months, the project in China would be ready to produce a Chinese-designed REM 1 attack UAV with a payload of 400 kg. The two European intelligence sources said this system would be similar to the US Reaper drone.

The sources said another Russian defense firm called TSK Vektor acted as the intermediary between Kupol and Chinese suppliers in the project. They said the Russian firms worked with a Chinese company called Redlepus TSK Vector Industrial, based in Shenzhen, without specifying Redlepus’ role.

TSK Vektor and Redlepus did not respond to requests for comment.

A separate document reviewed by Reuters reveals plans involving Kupol, TSK Vektor and Redlepus to establish a joint Russian-Chinese drone research and production center in the Kashgar special economic zone in China’s Xinjiang province.

Reuters was unable to determine who produced the document, which bore the logos of the three companies, or identify the intended recipient.

The 80-hectare “Advanced UAV Research and Manufacturing Base” would be able to produce 800 drones a year, the document said. No timeline was given for when it would be operational.

Last week, Russian President Vladimir Putin said his military had received around 140,000 drones in 2023 and that Moscow planned to increase this number tenfold this year.

“Whoever reacts faster to demands on the battlefield wins,” he told a meeting in St. Petersburg about drone production. — Reuters

Lebanese PM thinks ceasefire between Israel and Hezbollah possible

TOY SOLDIERS, Hezbollah and Israel flags are seen in this illustration taken on Oct. 15, 2023. — REUTERS

UNITED NATIONS/BEIRUT/JERUSALEM — Lebanese Prime Minister (PM) Najib Mikati has expressed hope that a ceasefire could be reached soon to end fighting between Israel and Iran-backed Hezbollah that has shaken his country and raised fears of a ground invasion.

The United States, France and several allies called for an immediate 21-day ceasefire across the Israel-Lebanon border while also expressing support for a ceasefire in Gaza following intense discussions at the United Nations on Wednesday.

Mr. Mikati welcomed the call for a truce but said the key to its implementation is whether Israel, which has been moving troops closer to Lebanon, is committed to enforcing international resolutions.

Asked if a ceasefire could be secured soon, Mr. Mikati told Reuters: “Hopefully, yes.”

Mr. Mikati’s caretaker administration includes ministers chosen by Hezbollah, widely seen as the country’s most powerful political force.

The ceasefire would apply to the Israel-Lebanon “Blue Line,” the demarcation line between Lebanon and Israel, and would allow the parties to negotiate towards a potential diplomatic resolution of the conflict, a senior Biden administration official said.

UN Special Coordinator for Lebanon Jeanine Hennis-Plasschaert on Thursday welcomed the call for an immediate 21-day ceasefire to allow the space for diplomacy to succeed.

AIRSTRIKES POUND LEBANON
Israel has made a priority of securing its northern border and allowing the return there of some 70,000 residents displaced by near-daily exchanges of fire since war broke out in October between Israel and Hamas in Gaza on Israel’s southern border.

Israel widened its airstrikes in Lebanon on Wednesday and at least 72 people were killed, according to a Reuters compilation of Lebanese Health ministry statements. The ministry earlier said at least 223 were wounded.

Israel’s military chief said a ground assault was possible, raising fears the conflict could spark a wider Middle East war.

Over the last several months, Washington has been engaging with officials in Israel and Lebanon to reduce hostilities, a senior Biden administration official said.

Israel’s UN Ambassador Danny Danon told reporters before a UN Security Council meeting on Wednesday that Israel would welcome a ceasefire and preferred a diplomatic solution. He then told the Security Council that Iran was the nexus of violence in the region and peace required dismantling the threat.

World leaders voiced concern that the conflict — running in parallel to Israel’s war in Gaza against Palestinian Hamas militants also backed by Iran — was escalating rapidly as the death toll rose in Lebanon and thousands fled their homes.

Israeli airstrikes this week have targeted Hezbollah leaders and hit hundreds of sites deep inside Lebanon, where hundreds of thousands have fled the border region, while the group has fired barrages of rockets into Israel.

Hezbollah has suffered heavy blows recently. Some of its senior commanders have been assassinated and thousands of communications devices used by its members have exploded, causing deaths and injuries.

Lebanese hospitals have filled with the wounded since Monday, when Israeli bombing killed more than 550 people in Lebanon’s deadliest day since its civil war ended in 1990. — Reuters

Franchise Negosyo para sa Negros Expo set for October 2024 at SM City Bacolod

The highly anticipated Franchise Negosyo para sa Negros Expo 2024 is set to take place on Oct. 4-5, 2024, at the North Wing Atrium of SM City Bacolod, promising two days of exciting opportunities for aspiring entrepreneurs, business owners, and franchise enthusiasts.

Expo Highlights: With over 30 exhibitors representing 200+ local and international brands, the Franchise Negosyo Expo is the best venue for those looking to explore franchising options. Attendees will have the unique opportunity to meet representatives from a variety of industries, including food, retail, service and more, offering insight into franchising as a practical and profitable business model.

Seminar Lineup: The event will feature a series of educational seminars designed to guide entrepreneurs at different stages of their business journey. Attendees can gain practical knowledge from industry experts on topics such as:

How to Invest in the Right Franchise (Free Seminar) — Meant to educate the public on wise franchise investment for would-be franchisees who want to start a business or diversify their investment via franchising such as OFWs, existing and aspiring entrepreneurs, business owners, etc.

How to Franchise Your Business (Paid) — Designed for business owners looking to expand their brand, this seminar will cover key steps in turning a local business into a successful franchise.

Franchise Forum (Free Seminar) — A dynamic panel discussion where top industry leaders and franchise owners share their experiences, challenges, and insights on growing their brands.

Franchise Negosyo para sa Negros Expo serves as a bridge between potential investors and established franchises, empowering attendees with the knowledge and resources they need to succeed. Whether you’re a budding entrepreneur exploring franchise opportunities or a business owner looking to expand, this expo provides an invaluable opportunity to network, learn, and grow.

Registration to the expo is FREE and open to the public, with free admission to the expo floor and free seminars. Attendees are encouraged to register online to reserve seats for the seminars, as spots are limited.

Mark your calendars for Oct. 4-5, 2024, and join us at SM City Bacolod’s North Wing Atrium for this great opportunity to discover franchising success at the Franchise Negosyo para sa Negros Expo!

Franchise Negosyo para sa Negros is made possible with the support of DTI Region VI, Metro Bacolod Chamber of Commerce and Industry (MBCCI), Overseas Workers Welfare Administration (OWWA), SM City Bacolod, SM Supermalls, GCash for Business, PLDT Enterprise, Park Inn by Radisson Bacolod, Carrier The Air Authority, Grainsmart Café, Living Water, Miguelitos Ice Cream, Macao Imperial Tea, Mitsubishi Motors, Francorp, U-Franchise, Shell, UnionBank, Net 25 Eagle Broadcasting Corp., BusinessWorld, Business Mirror, Mega Mobile (Inquirer Mobile), Asia Journal / Balikbayan Magazine, The Philippine Star, and Philippine Daily Inquirer.

For more information, visit our website https://www.pfa.org.ph/event-details/negros.

 


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Eaton appoints VSTECS as authorized distributor for its UPS portfolio in the Philippines

In the photo (L-R): Fernando Morales, Pre-Sales Manager, Eaton Philippines; Chalalai Kwansuwan, Marketing Communication Manager — Philippines, Thailand and Vietnam, Eaton; Lizette Galvez, Head of Power Quality, Eaton Electrical Philippines; Low Seh Min, Power Quality Business Development Director, East Asia, Eaton Electric (Singapore); Tony Lin, Country Manager, Taiwan & Philippines, East Asia Eaton Electric (Singapore); Jimmy Go, President and CEO, VSTECS; Princess Chua, Executive Vice-President and Country Chief Operating Officer, VSTECS; Shirley Wong, Distributed Power Quality Solutions Manager, East Asia, Eaton Electric (Singapore); Ana Aliemante, Sales and Marketing Manager, VSTECS; Mina Catausan, Product Manager, VSTECS; and Melvin Manzanares, Assistant Manager, Technology and Product Solutions Group, VSTECS

Intelligent power management company Eaton today announced the appointment of VSTECS Phils., Inc. as the authorized distributor of its uninterruptible power supply (UPS) solutions in the Philippines. Since its inception in 1998, VSTECS has become one of the Philippines’ leading providers of information technology solutions, offering a comprehensive range of IT products and services designed to meet the needs of businesses in the country.

In the Philippines, where natural disasters and power fluctuations are common, investing in reliable power management is essential for safeguarding IT hardware and preventing costly downtime. Eaton, through VSTECS, offers the Philippine market a range of both single-phase and three-phase UPS products that ensure operational continuity, protect critical infrastructure, and allow precise monitoring and control to optimize performance and efficiency.

Jimmy Yam, vice-president and general manager, East Asia, Eaton’s Electrical Sector, said, “In today’s power-dependent landscape, the ability to safeguard against power disruptions is critical. Together, Eaton and VSTECS are set to support businesses in maintaining their operations seamlessly, even in the face of power challenges. Furthermore, this partnership enables VSTECS’ channel partners to offer tailored, cost-effective power management solutions, enhancing their value proposition and competitive edge in the market.”

VSTECS-Eaton partnership launch

Jimmy Go, president and CEO of VSTECS Phils., Inc., said, “We are thrilled to partner with Eaton to bring their world-class power management solutions to the Philippine market. This collaboration underscores our dedication to providing our customers with reliable and innovative technologies that protect their operations and enhance their capabilities. In addition, with the help of Eaton’s competitive channel programs, we will provide training and tailored sales and marketing support to our channel partners to help them expand their market presence and enhance customer satisfaction.”

VSTECS, as the authorized distributor, will leverage its extensive network and expertise to ensure that Eaton’s power management solutions are readily available and accessible to the Philippine market, empowering businesses and individuals to thrive in an increasingly digital world.

About Eaton

Eaton is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy sources, helping to solve the world’s most urgent power management challenges, and building a more sustainable society for people today and generations to come.

Eaton was founded in 1911 and has been listed on the New York Stock Exchange for more than a century. We reported revenues of $23.2 billion in 2023 and serve customers in more than 160 countries. For more information, visit www.eaton.com. Follow us on LinkedIn.

About VSTECS Philippines

VSTECS is one of the leading ICT distributors in the country, recognized for its extensive portfolio of products, solutions, and services across diverse market segments. Its portfolio is unparalleled, representing over 100 renowned brands and encompassing a wide range of technology solutions. The company has established itself as the go-to partner for businesses in need of reliable, state-of-the-art solutions to address their evolving ICT needs. Its meticulously tailored solutions serve the retail, mobility, commercial, and enterprise markets, precisely meeting industry-specific requirements and driving innovation across sectors.

 


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Join the Ultimate Street Food Party at SM Hypermarket

Foodies everywhere are in for a treat as SM Hypermarket’s Street Food Festival makes its grand return. From September to October, the festival promises to be the ultimate celebration of street food, offering a delectable array of dishes, irresistible deals, and a host of exciting activities.

Sizzling Deals and Irresistible Promos

Shoppers can look forward to these fantastic deals:

  • Get up to P40 off on select Street Food Festival items when you use your SMAC card at any SM Hypermarket. Available in all stores.
  • Online Shoppers will enjoy exclusive deals with a minimum purchase of P1,500 worth of groceries inclusive of any Street Food Festival participating items at smmarkets.ph.
    • September: get FREE SM Bonus French Fries plus P50 off delivery on orders with Street Food Festival items.
    • October: receive a limited-edition Street Food Festival tote bag and P50 off delivery.

In select SM Hypermarket stores, shoppers can save with the following promos:

 

  • With a P3,000 total, including Street Food Festival items, shoppers can score a FREE gift from participating vendors.
  • Hit the P3,000 mark, inclusive of Street Food Festival items, and take home 10 free sticks of BBQ Master when you use your SMAC card.
  • For those who reach P5,000 groceries inclusive of Street Food Festival, you can snag a Limited-Edition SM Turon Pillow for just P200 — an exclusive offer for SMAC members.

The Ultimate Street Food Experience Awaits!

The Ultimate Street Food Party Expo, its grand activation, kicks off the festivities on Sept. 14-15, 2024, at SM Hypermarket Mall of Asia. Shoppers can enjoy all the fantastic offers previously mentioned, plus these exclusive Expo-only deals:

  • Spend P3,000 (inclusive of Street Food Festival items) and grab a Street Food Festival Bag for just P100.
  • For a total of P3,000 (inclusive of Street Food Festival items), dive into the Pool of Prizes game, where 600 lucky winners will each take home P500.
  • When you shop P500 worth of Street Food Festival items, you can try out the classic Party Pabitin for a chance to win great prizes.

Mark your calendars for the next Expo at SM Hypermarket Fairview on Oct. 19-20, 2024. With even more opportunities for fun and flavor, this is truly one party you won’t want to miss!

SM Hypermarket’s Street Food Festival is made possible thanks to the support of our partners, Knorr, Lady’s Choice, Nestle, Maggi Magic Sarap, Purefoods, 555, Lucky Me, Farm Fresh, CDO, and Bounty Fresh.

This is set to be an unforgettable celebration of food and fun. Families and friends are encouraged to come together, savor delicious street food, and create lasting memories. Truly, this is the ultimate street food party of the year — come join the fun and indulge in the flavors!

 


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Fintech behind Atome Philippines card among SEA’s Top 30 tech startups

Advance Intelligence Group Limited (AIGL), the Singapore-based fintech startup behind Atome Philippines’ PayLater Anywhere Card, has been listed in the inaugural NextGen Tech 30, an award which recognizes Southeast Asia’s Top 30 tech startups. 

The award is the region’s first collaboration between the public and private sectors. Among those involved were tech venture capital firms Granite Asia, KKR, and Northstar Group, multinational corporation DBS Bank, and Singapore’s Economic Development Board and InfoComm Media Development Authority.

The roster of NextGen Tech 30 winners include water treatment provider Gradient, agritech company Chickin, and online learning platform Prep. 

AIGL’s use of artificial intelligence, as well as its risk management strategy, is helping solve the credit crunch challenge in the Philippines, according to Magic Tang, head of Atome Cards. 

“For so many of our Atome Philippines cardholders, it is their first-ever card product, and we are also seeing very high daily engagement and use cases to afford basic necessities,” he said in a September 25 press statement. “This eventually graduates them to build a credit history and on-ramp to traditional financial products and services.”

ADVANCE.AI, an AIGL subsidiary, also announced last month that it had signed an agreement with state-owned Credit Information Corporation to launch a credit bureau in the Philippines. 

Total outstanding credit card volumes increased year-over-year to 11.2 million cards in Q4 2023 from 9.3 million cards in Q4 2022, based on a 2024 analysis by TransUnion, an information and insights company. Over the same period, the credit card penetration rate – or the percentage of adults holding at least one credit card – reached over 15% of Filipino adults.   

Data from the Credit Card Association of the Philippines showed that credit card spending in the country increased by 39% to reach P853 billion in the first half of 2023 – a rise from the 29% increase the previous year.Patricia B. Mirasol

YGG partners with Parallel for a $100,000 tournament at the YGG Play Summit

image source: https://store.steampowered.com/app/2604930/Parallel/

Web 3.0 startup Yield Guild Games (YGG) is partnering with trading card game (TCG) Parallel in a $100,000 prize pool tournament at the YGG Play Summit in Manila, Philippines. 

There will be two global online qualifying tournaments to determine the 16 players who will compete at the play summit on November 19-23.  

“[Trading card game] players have always been passionate about the games they play, and many look for opportunities to test their skill at a high-stakes competitive level,” said Gabriel Dizon, YGG co-founder, in a September 25 press statement.  

“Parallel is in a very good position to be able to cater to these players, with many of its mechanics inspired by competitive TCGs such as Magic: the Gathering and Hearthstone,” he said.  

“With YGG organizing these events, many players can have a chance at earning their share of the $100,000 prize pool.” 

The summit will provide insights into the future of gaming, digital ownership, and worldwide Web 3.0 projects. It will also feature activities such as a cosplay competition, live demos, and a one-day conference. 

The YGG-community-managed Facebook group “Everything Parallel” will likewise be hosting contests and posting content designed to engage and attract people to the web3 game. Several educational videos, including deck guides, are also posted on YGG’s YouTube channel.  

Parallel TCG players can expect weekly events up until the November YGG Play Summit. 

Kalos, Parallel TCG’s co-founder whose name is not publicly available, said that he expects “a lot of competitive play in the weeks leading to the summit.” 

“We will be able to emulate that feeling of playing with other people in a card shop while also showing them the advantages that Web3 offers through Parallel TCG,” he said in the same press statement. – Patricia B. Mirasol

Deepfake can cause problems in the 2025 PH elections – IBM

VECSTOCK-FREEPIK

by Almira Louise S. Martinez, Reporter

Falsely generated videos, images, and audio powered by artificial intelligence (AI) can stir up trouble in the 2025 Philippine elections, a multinational technology company said. 

“Some of the deepfake stuff that gets put on there is quite funny, but it is a real problem,”  International Business Machines Corporation (IBM) APAC Vice President, Government, and Regulatory Affairs Stephen Braim said in a virtual interview on Monday. 

According to Mr. Braim, deepfakes have been widely used during elections in different countries like the United States and Taiwan. 

“They had a major problem with one of their neighbors using deepfakes trying to influence the election,” he said on the 2024 presidential election in Taiwan. 

Global superstars and creators were common victims of deepfakes during election season. “Their deep fakes are used in political advertising and to rip them off as content creators,” Mr. Braim said. 

In India, Bollywood actors Aamir Khan and Ranveer Singh were used in viral deepfake videos criticizing Prime Minister Narendra Modi during the general election. 

Additionally, an old video of Home Minister Amit Shah was manipulated using a basic editing tool called ‘cheapfake’ for a political agenda against the then-ruling party. 

Aside from known faces, even the general public can experience the damaging impacts of AI misuse. “There’s a lot of this stuff that’s used to trick people out of giving money over to what they think is a family member,” Mr. Braim said.  

Despite the harmful effects it may cause in the political sphere, proper safeguards are still not in place to protect the people. 

“There isn’t a silver bullet technology out there to handle deepfakes, whether either in the Philippines or anywhere around the world,” he told BusinessWorld. 

Mr. Braim said that the government plays a role in regulating and holding users and developers of deepfakes accountable for their actions. “We think regulation should very much be around to protect elections against the use of deepfakes.” 

He added that user trust is an integral part of the generative AI era. With all the negative implications of AI, Mr. Braim said it undermines people’s trust in a technology that can be useful for productivity, growth, and health outcomes. 

“You know the list is endless. We just got to marginalize the bad use of it,” he said.  

Markets fear ECB’s cautious path risks tipping inflation below target

If traders are right, the European Central Bank is now at risk of pushing inflation below its 2% target by cutting interest rates too slowly, hurting the bloc’s fragile economy.

The swaps market, where investors hedge inflation risk by exchanging payments tied to the rate of price growthsuggests inflation will fall durably below the ECB’s target from January, according to data compiled by Danske Bank for Reuters on Wednesday.

That’s much earlier than the ECB, which expects inflation – currently at 2.2% and potentially dipping below target this month before rising back – to fall to 2% in late 2025.

The ECB has been battling to rein in inflation, which was running in double digits less than two years ago. But price pressures have eased following aggressive rate hikes, prompting the bank to kick off an easing cycle in June. It last cut rates earlier this month.

“The market is signaling to the ECB that they could be behind the curve,” said Analissa Piazza, fixed income research analyst at MFS Investment Management, which manages $639 billion.

If the bank continues quarterly moves through next year – slower than markets expect – it could push inflation below target for too long and then struggle to push it back up in the future, she added.

Data this week showing euro zone business activity unexpectedly contracted in September vindicated markets, which have expected swifter disinflation than the ECB for a while. Traders now see more than a 50% chance of an October rate cut, even though ECB policymakers have so far refrained from signaling one.

Investors reckon the risk of below-target inflation is rising globally.

While they saw inflation between 2%-3% as the more likely outcome in the United States and the euro zone at end-2025, the share of investors who expect below target inflation rose in both regions this month, a BofA investor survey showed on Sept. 13, just before the Federal Reserve’s 50 basis-point rate cut.

In Sweden, inflation has fallen much faster than expected and been below target for three straight months, prompting the Riksbank to put faster cuts on the cards on Wednesday.

 

GROWTH WORRIES

A key part of the discrepancy is oil prices, which dropped to their lowest in nearly three years below $69 earlier in September LCOc1.

At around $74, they are still over 6% lower than the August 16 cut-off date for the ECB’s latest economic projections.

For sure, markets aren’t signaling the kind of ultra-low inflation that prevailed before the COVID-19 pandemic that the ECB struggled to reignite, prompting it to unleash vast bond purchases and a controversial experiment with negative interest rates.

The swaps point to average inflation of 1.7% over the next year.

And a key market gauge of longer-term inflation expectations EUIL5YF5Y=R, which dropped to a two-year low earlier in September, remains just a touch above 2%.

But crucially, market inflation expectations signal disagreement with the ECB’s outlook on growth.

“The market is thinking the ECB is a little bit optimistic on growth,” said Amundi Investment Institute’s head of developed markets strategy Guy Stear, who expects euro zone growth to improve to 1% next year from 0.8% this year, less than half the rise to 1.3% the ECB expects.

 

INCOME BOOST?

While acknowledging domestic demand will be weaker than previously expected, the ECB reckons goods disinflation has run its course and expects rising real incomes to support consumption and drive growth.

But euro zone households are saving more than they did before the pandemic and some economists reckon they are unlikely to run down those savings and boost consumption as consumer confidence remains weak.

Nomura economists note that, rather than accumulating more cash, savers have upped their asset holdings, making them less likely to spend.

And while volatile, wage growth – which ECB hawks in particular worry risks keeping services inflation high – has slowed more sharply than the bank expected.

Monday’s business activity data, showing German businesses shedding staff at the fastest pace in over 15 years outside of the pandemic, also warranted caution, economists said.

A bleaker economic outlook than the ECB expects would support euro zone government bonds, which have underperformed U.S. Treasuries this year, investors said.

Indeed, rate-sensitive German two-year bond yields DE2YT=RR registered their biggest daily fall in nearly two months following Monday’s data.

“The question simply remains given the weakness in overall growth… just how long can the ECB hold onto the idea that services inflation is sticky and we have to be patient?” said Barclays’s head of euro rates strategy Rohan Khanna.

“The longer they hold onto that argument, it worsens the economic situation and will hence force them into deeper cuts, or potentially even bigger cuts down the line.” – Reuters

Vietnam says Musk’s SpaceX plans $1.5 bln Starlink investment

STARLINK.COM

 – Elon Musk’s SpaceX plans to invest $1.5 billion in Vietnam in the near future, the government of the Communist-run nation said on Thursday, which could help resolve a stalemate over the launch of its Starlink satellite services there.

Months of talks on the offer of Starlink’s satellite internet connection and other communications services were put on hold at the end of 2023, sources familiar with the matter had told Reuters earlier this year, although they resumed later.

“The Vietnamese government is considering the (investment) proposal of SpaceX,” a report on the government portal on Thursday quoted President To Lam as saying, asking the company to work closely on completing preparations for the investment.

The remark followed the leader’s meeting in New York with SpaceX government affairs official Tim Hughes, who said the company planned to invest $15 billion in Vietnam, a promising market for its satellite internet service, the report added.

The government did not clarify where SpaceX’s investment would be made, nor when details could be agreed.

U.S.-based SpaceX did not immediately respond to a Reuters request for comment.

Vietnam’s foreign ministry did not respond to a request for comment.

With 100 million people, Vietnam is a large user base for U.S. internet companies such as Meta’s Facebook and Alphabet, but its ageing equipment can disrupt operations of key optic fiber undersea cables.

Large mountainous swathes also make internet services less reliable in Vietnam, which could also use satellite internet for tasks such as tighter patrolling in the disputed South China Sea where it is often at odds with China.

Such a step may not go down well with Beijing, however.

 

INVESTING WHERE?

Thursday’s news follows a report this month on the government portal that cited Hughes as saying SpaceX aimed to provide Starlink services to the Southeast Asian nation, after the two sides had resumed talks.

At the time, Hughes, the company’s senior vice president for global business and government affairs, said SpaceX’s deployment of internet services in Vietnam aimed mainly to benefit education and disaster prevention efforts, state media reported.

Last year’s talks were stymied by questions about ownership of the company SpaceX would have to set up in Vietnam, which limits foreigners’ holdings in such firms to half, while SpaceX wanted at least a controlling stake, sources had told Reuters.

It is unclear whether this issue is still a hurdle.

Vietnam also requires data to be stored domestically, with strict controls on what is visible online.

Industry sources told Reuters SpaceX has suppliers in Vietnam, a major industrial hub home to large manufacturing operations of U.S. firms and their contractors.

Apple, with dozens of suppliers in the country, said in April it wanted to invest more by increasing spending on them. – Reuters

North Korea may be able to produce a double-digit number of nuclear weapons, MP says

 – North Korea has enough plutonium and uranium to produce at least a double-digit number of nuclear weapons, a South Korean lawmaker said on Thursday, citing the country’s spy agency.

The agency also sees the prospect of North Korea potentially carrying out a seventh nuclear test after the U.S. presidential election on November 5, Lee Seong-kweun, who sits on the parliamentary intelligence committee, said.

In July, a report by the Federation of American Scientists concluded that Pyongyang may have produced enough fissile material to build up to 90 nuclear warheads, but that it has likely assembled closer to 50.

Lee said it was rare for North Korean state media to report on leader Kim Jong Un’s visit to a uranium enrichment facility, suggesting the report published earlier this month was likely aimed at sending a message to Washington ahead of the U.S. presidential election.

Mr. Lee, who was speaking to reporters after being briefed by South Korea’s National Intelligence Service, also said the report on the visit may be for domestic purposes.

“It was said that the economic situation is dire, so it could be interpreted as an act to instill confidence in residents,” Mr. Lee said.

Pyongyang says its arsenal of nuclear weapons and ballistic missiles to carry them are necessary to counter threats from the United States and its allies.

It also often touts the weapons as a matter of national prestige and proof of the country’s power.

The North Korean Supreme People’s Assembly (SPA), the reclusive state’s rubber-stamp parliament, is set to convene a new session on Oct. 7 in Pyongyang.

During the session, the North might amend its constitution and take follow-up measures to draw new boundaries with the South, Mr. Lee said.

The last SPA meeting was held in January where leader Kim called for a constitutional amendment that would view South Korea as the “primary foe.” – Reuters

How will Japan’s ruling party pick the next prime minister?

 – Japan’s ruling Liberal Democratic Party will elect its new president on Friday to replace outgoing Prime Minister Fumio Kishida and lead a party that has governed the country for most of the past seven decades.

 

HOW DOES THE VOTE WORK?

Two weeks of debates and campaign events across Japan culminate in a gathering on Friday of the nine candidates and other LDP lawmakers at party headquarters in Tokyo for the vote to decide the new leader.

Since the party has a majority in parliament, the winner will become the next prime minister.

LDP lawmakers will cast 368 votes in the first round, with an equal number distributed among rank-and-file members gathered on Thursday.

In the 2021 leadership election, the party had 1.13 million registered members, its website showed.

A candidate securing a simple majority in that poll becomes party leader. If no one secures a majority, a run-off poll follows, between the two candidates with the most votes.

In the second round, each lawmaker again gets one vote, but the share of the rank-and-file drops to 47 votes, one for each of Japan’s prefectures.

In the unlikely event of a tie, the winner will be decided by lot. That has never happened in a leadership contest, but was used in 2010 to decide who would chair the LDP’s upper house caucus.

 

AFTER THE PARTY VOTE

Kishida and his ministers will resign, probably on Monday, and parliament will gather to name the new party leader as his successor, who will then announce a new cabinet and appoint key LDP officials.

The new prime minister may also call a snap general election to seek a national mandate, with at least one leading candidate, Shinjiro Koizumi, having promised to do so. Such elections could come as early as October 27, media have said. – Reuters