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Inside Asia’s arms race: China near ‘breakthroughs’ with nuclear-armed submarines, report says

CARLOS DE SOUZA-UNSPLASH

HONG KONG — A submarine arms race is intensifying as China embarks on production of a new generation of nuclear-armed submarines that for the first time are expected to pose a challenge to growing US and allied efforts to track them.

Analysts and regional defense attaches say evidence is mounting that China is on track to have its Type 096 ballistic missile submarine operational before the end of the decade, with breakthroughs in its quietness aided in part by Russian technology.

Research discussed at a conference in May at the US Naval War College and published in August by the college’s China Maritime Studies Institute predicts the new vessels will be far harder to keep tabs on. That conclusion is credible, according to seven analysts and three Asia-based military attaches.

“The Type 096s are going to be a nightmare,” said retired submariner and naval technical intelligence analyst Christopher Carlson, one of the researchers. “They are going to be very, very hard to detect.”

The discreet effort to track China’s nuclear-powered and -armed ballistic missile submarines, known as SSBNs, is one of the core drivers of increased deployments and contingency planning by the US Navy and other militaries across the Indo-Pacific region. That drive is expected to intensify when Type 096s enter service.

The Chinese navy is routinely staging fully armed nuclear deterrence patrols with its older Type 094 boats out of Hainan Island in the South China Sea, the Pentagon said in November, much like patrols operated for years by the United States, Britain, Russia and France.

But the Type 094s, which carry China’s most advanced submarine-launched JL-3 missile, are considered relatively noisy — a major handicap for military submarines.

The paper notes that the Type 096 submarine will compare to state-of-the-art Russian submarines in terms of stealth, sensors and weapons. It said that jump in capabilities would have “profound” implications for the US and its Indo-Pacific allies.

Based partly on Chinese military journals, internal speeches by senior People’s Liberation Army (PLA) officers and patent data, the paper charts more than 50 years of the PLA navy’s often-glacial nuclear submarine development.

It contains satellite imagery taken in November at China’s new Huludao shipyard showing pressure hull sections for a large submarine being worked up. That puts construction on schedule to have the boats operational by 2030, the timeline stated in the Pentagon’s annual reports on China’s military.

The research also details potential breakthroughs in specific areas, including pump-jet propulsion and internal quieting devices, based on “imitative innovation” of Russian technology.

Neither the Russian nor the Chinese defense ministries responded to Reuters’ requests for comment.

The vessel is likely to be significantly larger than the Type 094, allowing it to contain an internal “raft” mounted on complex rubber supports to dampen engine noise and other sounds, similar to Russian designs.

Mr. Carlson told Reuters he did not believe China had obtained Russia’s “crown jewels” — its very latest technology — but would be producing a submarine stealthy enough to compare to Moscow’s Improved Akula boats.

“We have a hard time finding and tracking the Improved Akulas as it is,” Mr. Carlson said.

Singapore-based defense scholar Collin Koh said the research opened a window on discreet research projects to improve China’s SSBNs as well as boosting its anti-submarine warfare capabilities.

“They know they are behind the curve, so they are trying to play catch-up in terms of quieting and propulsion,” said Mr. Koh, of Singapore’s S. Rajaratnam School of International Studies.

Mr. Carlson said he believed China’s strategists would, like Russia, keep SSBNs within protective “bastions” close to its coasts, utilizing recently fortified holdings in the disputed South China Sea.

ECHO OF THE COLD WAR
The prospect of advanced SSBNs will significantly complicate an already intense subsurface surveillance battle.

In an echo of the Cold War-era effort to hunt for Soviet “boomers,” the tracking of Chinese submarines is increasingly an international effort, with the Japanese and Indian militaries assisting the United States, Australia and Britain, analysts and military attaches say.

Anti-submarine warfare drills are increasing, as are deployments of sub-hunting P-8 Poseidon aircraft around Southeast Asia and the Indian Ocean.

The United States, Japan, India, South Korea, Australia, Britain and New Zealand operate the advanced plane, which use sonobuoys and other more advanced techniques, such as scanning the ocean surface, to find submarines far below.

The United States is also carrying out the biggest overhaul of its top-secret undersea surveillance network since the 1950s to combat China’s growing presence, Reuters reported in September.

The prospect of a quieter Chinese SSBN is driving, in part, the AUKUS deal among Australia, Britain and the US, which will see increased deployments of British and US attack submarines to Western Australia. By the 2030s, Australia expects to launch its first nuclear-powered attack submarines with British technology.

“We are at a fascinating point here,” said Alexander Neill, a Singapore-based defense analyst. “China is on track with a new generation of submarine ahead of the first AUKUS boats — even if they are at parity in terms of capability, that is highly significant,” said Neill, an adjunct fellow at Hawaii’s Pacific Forum think-tank.

Even if China’s submarine force reaches technological parity, it will need to train aggressively and intensively over the next decade to match AUKUS capabilities, he added.

Vasily Kashin, a Moscow-based Chinese military scholar at HSE University, said it was possible Chinese engineers had made the breakthroughs described in the report.

Although China most likely obtained some key Russian technology in the 1990s after the break up of the Soviet Union, Mr. Kashin said, there was no known sharing agreement between Beijing and Moscow outside of a 2010 nuclear reactor agreement.

He said China may have made progress via adaptations of Russian designs and through other sources, including espionage, but it is unlikely they have the newest-generation Russian systems.

“China is not an adversary of Russia in the naval field,” Mr. Kashin said. “It is not creating difficulties for us, it is creating problems for the US.” — Reuters

PHL has ‘done enough’ policy tightening, finance secretary says 

Philippine Finance Secretary Benjamin E. Diokno believes the central bank has “done enough” policy tightening to tame inflation, but reiterated future interest rate moves would remain data dependent.

Mr. Diokno’s remarks echoed that of the country’s economic planning minister, who on Friday said further rate hikes may be unnecessary because inflationary pressures in the Philippines were being driven by supply-side factors.

The annual inflation rate quickened for a second month in September to 6.1%, bringing the year-to-date average rate to 6.6%, far from the central bank’s 2%-4% target for the year.

Mr. Diokno also noted there has been some moderation in underlying price pressures, as core inflation, which excludes volatile food and energy prices, slowed to 5.9% in September from 6.1% the previous month. 

“We have done enough,” said Mr. Diokno, who is a member of the central bank’s seven-member policy making monetary board, during a news conference on Friday for release on Monday. “Core inflation has gone down.” 

The Bangko Sentral ng Pilipinas has kept its benchmark interest rate steady at 6.25% at its last four meetings, and said on Friday it was ready to resume tightening as needed. 

It next meets on Nov. 16 to review policy, after the Philippines releases its third quarter growth data on Nov. 9.

Some economists said September inflation, which was above market expectations, could prompt the central bank to resume hiking rates next month.

Mr. Diokno said growth in the second half of the year would likely be faster than the first half’s 5.3% expansion, supported by the anticipated pick up in infrastructure spending in the last quarter. Manila has a 6.0-7.0% growth target for 2023. — Reuters

Globe named Best Company to Work For in Asia for three years in a row

Renato Jiao, Chief Human Resource Officer at Globe, and Nico Bambao, Globe Vice President for People Experience, receive the award for Globe as one of the Best Companies to Work for in Asia 2023, the fourth time for Globe to win the recognition (2019, 2021, 2022 and 2023).

Leading digital solutions platform Globe recently scored a three-peat after being named by top regional human resource publisher HR Asia as one of the Best Companies to Work for in Asia (Philippines Chapter) from 2021 to 2023.

The award was presented to Globe at the recent gala night held at the Manila Marriott Hotel. Aside from securing this honor for three consecutive years, Globe first won it in 2019.

“It fills me with immense pride to share that the Globe Group has once again been named one of the Best Companies to Work for in Asia by HR Asia! And what makes this win sweeter is that this marks the third consecutive year we’ve won this award, and four times in total since 2019,” said Renato Jiao, Chief Human Resource Officer at Globe.

“I could not be prouder to be part of an incredible HR team that keeps forging new heights to care for our people. This win fuels us to keep creating wonderful moments that every Ka-Globe will treasure and be inspired by,” he added.

Nico Bambao, Globe Vice President for People Experience, meanwhile, said: “With Renato Jiao at the helm, our HR team is inspired by this award to remain focused on helping employees feel more empowered and find meaning in their work. Success starts within and this milestone is for all of you, Ka-Globe.”

HR Asia started in 2009 as a bi-monthly magazine. Primarily targeted at HR professionals, the publication serves as a source of information for best practices and up-to-date HR trends around the world.

The HR Asia Best Companies to Work for in Asia Awards is a recognition program for organizations identified by their employees as premier employers in Asia, determining the best places to work.  It targets companies throughout the region and honors those with exemplary HR practices, high levels of employee engagement, and outstanding workplace cultures.

The high-profile nature of the award attracts applications from Fortune 500 companies, as well as multinational corporations and government-linked companies. The awards ceremony is held annually in Cambodia, China, Hong Kong, India, Indonesia, Malaysia, UAE, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam.

This year saw a notable surge in nominations, with 205 companies vying for the prestigious title of Best Companies to Work for in Asia Philippines 2023. A staggering 13,850 survey participants shared their insights and experiences, emphasizing the region’s extensive participation and engagement.

The 2023 Philippines program recognized 50 outstanding organizations that have excelled in creating exemplary work environments for their employees. With the theme “Celebrate Diversity, Equity and Inclusion,” HR Asia has taken a significant step forward in recognizing and promoting workplaces that foster diversity, equity, and inclusion by placing these values at the forefront of the selection process.

To learn more about Globe, visit https://www.globe.com.ph/. 

 


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Israel retaliates after Hamas attacks, deaths pass 1,100

Israel as seen in a screenshot from Google Maps.

 – Hamas‘ assault on Israel drove oil prices higher on Monday as markets priced in fears of a wider conflict in the Middle East, a day after Israel pounded the Palestinian enclave of Gaza in retaliation for one of the bloodiest attacks in its history.

Fighters from Islamist group Hamas killed 700 Israelis and abducted dozens more as they attacked Israeli towns on Saturday, the deadliest incursion into Israeli territory since Egypt and Syria’s attacks in the Yom Kippur war 50 years ago.

In response, Israeli air strikes hit housing blocks, tunnels, a mosque and homes of Hamas officials in Gaza on Sunday, killing more than 400 people, including 20 children, in keeping with Prime Minister Benjamin Netanyahu’s vow of “mighty vengeance”.

“The price the Gaza Strip will pay will be a very heavy one that will change reality for generations,” said DefenSe Minister Yoav Gallant in the town of Ofakim, which suffered casualties and had hostages taken.

Israeli military spokesperson Lieutenant Colonel Jonathan Conricus said the country had called in around 100,000 soldiers.

“Our job is to make sure that at the end of this war, Hamas will no longer have any military capabilities to threaten Israeli civilians with, and in addition to that we also need to make sure Hamas will not govern the Gaza Strip,” he said.

The violence fueled volatility on global markets on Monday, with concerns about possible disruptions to supplies from Iran, helping to drive Brent crude LCOc1 up $4.18, or 4.94%, to $88.76 a barrel by 0120 GMT in Asian trade.

Iran is an ally of Hamas and while it congratulated Hamas on the attack, its mission to the United Nations said Tehran was not involved in the attacks.

Any sustained rally in oil prices would act as a tax on consumers and add to global inflationary pressures, which weighed on equities as S&P 500 futures ESc1 shed 0.7% and Nasdaq futures NQc1 lost 0.6%.

Several international air carriers have suspended flight services with Tel Aviv in light of the Hamas attack, saying they are waiting for conditions to improve before resuming.

Beyond blockaded Gaza, Israeli forces and Lebanon’s Iran-backed Hezbollah militia exchanged artillery and rocket fire on Sunday, while in Egypt, two Israeli tourists were shot dead along with a guide.

Appeals for restraint came from around the world, though Western nations largely stood by Israel, while Iranian President Ebrahim Raisi telephoned the Hamas chief to congratulate him for the “victory” and Hezbollah and protesters in various Middle Eastern nations lauded Hamas.

In southern Israel on Sunday, Hamas gunmen were still fighting Israeli security forces more than 24 hours after their surprise, multi-pronged assault of rocket barrages and bands of gunmen who overran army bases and invaded border towns.

“My two little girls, they’re only babies. They’re not even five years old and three years old,” said Yoni Asher who recounted seeing video of Palestinian gunmen seizing his wife and two small daughters after she took them to visit her mother.

Uri David told a news conference he spent 30 minutes on the phone with his two daughters, Tair and Odaya, during an attack until they no longer responded to him and that he did not know their fate.

“I heard shooting, shouting in Arabic, I told them to lie on the ground and hold hands,” he said, breaking down in tears.

 

CAPTIVES

Israel‘s military, which faces awkward questions for not thwarting the attack, said it had regained control of most infiltration points along security barriers, killed hundreds of attackers and taken dozens more prisoner.

Israeli air strikes on Gaza destroyed Hamas‘ offices and training camps, but also houses and other buildings. The Palestinian health ministry said 413 Palestinians, including 78 children, were killed and 2,300 people wounded since Saturday.

“As an occupying power, Israel has no right or justification to target the defenseless civilian population in Gaza or elsewhere in Palestine,” the Palestinian foreign ministry said, denouncing a “barbarous campaign of death and destruction”.

Hamas fired more rocket salvoes into Israel on Sunday.

The Israeli military said it had deployed tens of thousands of soldiers around Gaza, a narrow strip of land that is home to 2.3 million Palestinians, and was starting to evacuate Israelis around the frontier.

“This is my fifth war. The war should stop. I don’t want to keep feeling this,” said Qassab al-Attar, a Palestinian wheelchair user in Gaza whose brothers carried him to shelter.

Israel has not released an official toll but its media said at least 700 people were killed in Saturday’s attacks, children among them. Military spokesperson Daniel Hagari called it “the worst massacre of innocent civilians in Israel‘s history.”

Several Americans were killed by Hamas attackers, a White House National Security Council spokesperson confirmed, saying the U.S. would continue to monitor the situation closely.

About 30 missing Israelis attending a dance party that was attacked by gunmen emerged from hiding on Sunday, Israeli media reported, putting the death toll at the outdoor gathering at 260.

Palestinian fighters took dozens of hostages to Gaza, including soldiers and civilians, children and the elderly. A second Palestinian militant group, Islamic Jihad, said it was holding more than 30 of the captives.

The capture of so many Israelis, some pulled through security checkpoints or driven bleeding into Gaza, is another conundrum for Netanyahu after past episodes when hostages were exchanged for many Palestinian prisoners.

“The cruel reality is Hamas took hostages as an insurance policy against Israeli retaliatory action, particularly a massive ground attack and to trade for Palestinian prisoners,” said Aaron David Miller, a senior fellow at the Carnegie Endowment for International Peace.

 

UNABATED VIOLENCE

US President Joe Biden spoke to Netanyahu for the second straight day on Sunday, saying in a post on the social media platform X that he expressed “my full support for the people of Israel in the face of an unprecedented and appalling assault by Hamas terrorists.”

US Defense Secretary Lloyd Austin said he had ordered the USS Gerald R. Ford Carrier Strike Group to the eastern Mediterranean as a show of support to Israel and would also begin providing fresh munitions to Washington’s closest Middle Easy ally.

In Gaza, Hamas spokesperson Hazem Qassem condemned the U.S. announcement as “an actual participation in the aggression against our people” and said the group would not be intimidated.

The shocking flare-up may undermine US-backed moves towards normalizing relations between Israel and Saudi Arabia – a security realignment that could threaten Palestinian hopes of self determination and hem in Hamas‘ main backer, Iran.

Tehran’s other main regional ally, Lebanon’s Hezbollah, fought a war with Israel in 2006 and said its “guns and rockets” stand with Hamas.

The escalation follows surging violence between Israel and Palestinian militants in the Israeli-occupied West Bank, where a Palestinian authority exercises limited self-rule, opposed by Hamas that wants Israel destroyed.

Conditions in the West Bank have worsened under Netanyahu’s hard-right government, with more Israeli raids and assaults by Jewish settlers on Palestinian villages, and the Palestinian Authority called for an emergency Arab League meeting.

Peacemaking has been stalled for years, with Israeli politics distracted this year by internal wrangling over Netanyahu’s plans to overhaul the judiciary.

Hamas leader Ismail Haniyeh said the assault would spread to the West Bank and Jerusalem. Gazans have lived under an Israeli-led blockade for 16 years, since Hamas seized control of the territory in 2007.

“How many times have we warned you that the Palestinian people have been living in refugee camps for 75 years, and you refuse to recognize the rights of our people?” said Haniyeh.

The United States led Western denunciations of Hamas‘ attack, with Biden issuing a blunt warning to Iran and others on : “This is not a moment for any party hostile to Israel to exploit these attacks.”

The UN appealed for the creation of humanitarian corridors to bring food into Gaza and said at least 70,000 Palestinians in Gaza are seeking shelter in schools it runs. – Reuters

US to send military ships, aircraft closer to Israel

STOCK PHOTO | Image by 12019 from Pixabay

 – The United States will send multiple military ships and aircraft closer to Israel as a show of support, Defense Secretary Lloyd Austin said, with Washington believing Hamas’ deadly attacks may have been motivated to disrupt a potential normalizing of Israel-Saudi Arabia ties.

Hamas fighters rampaged through Israeli towns as the country suffered its bloodiest day in decades on Saturday. Israel battered Palestinians with air strikes in Gaza on Sunday, with hundreds reportedly killed on both sides. The spiraling violence threatens to start a major new war in the Middle East.

At least three Americans were among those killed, CNN reported on Sunday, citing a US memo.

Austin in a statement said he ordered the moving of the USS Gerald R. Ford Carrier Strike Group to the Eastern Mediterranean closer to Israel. The force includes the carrier, a guided missile cruiser and four guided missile destroyers.

Austin also said the United States had also taken steps to augment US Air Force F-35, F-15, F-16, and A-10 fighter aircraft squadrons in the region.He said the United States would also provide munitions to Israel.

US President Joe Biden told Prime Minister Benjamin Netanyahu on Sunday that additional assistance for the Israeli Defense Forces was on its way to Israel and more would follow in the coming days, the White House said after their call. US Vice President Kamala Harris also held a call with Israeli President Isaac Herzog.

The Pentagon in a later statement said Austin spoke to Israeli Defense Minister Yoav Gallant to update him on US responses and “to express support for the people of Israel and to receive updates on Israel’s operation to restore security and safety from Hamas’ terrorist attack.”

“The Secretary reaffirmed the unwavering support of the United States for Israel‘s right to defend itself,” the statement said. It said Austin underscored that the US steps “were taken to strengthen the US military posture in the region to bolster regional deterrence efforts.”

A few dozen pro-Palestinian protesters gathered at Times Square in New York City and near the White House in Washington on Sunday, expressing opposition to the US’ support of Israel.

Some protesters carried banners saying “End US aid” and “resistance is not terrorism.” New York Governor Kathy Hochul on Saturday had condemned plans for such demonstrations, saying they were “morally repugnant.”

The attack by Hamas launched at dawn on Saturday represented the biggest and deadliest incursion into Israel since Egypt and Syria launched a sudden assault in an effort to reclaim lost territory in the Yom Kippur war 50 years ago.

 

DISRUPTING SAUDI-ISRAEL RELATIONS

“It wouldn’t be a surprise that part of the motivation may have been to disrupt efforts to bring Saudi Arabia and Israel together, along with other countries that may be interested in normalizing relations with Israel,” US Secretary of State Antony Blinken told CNN on Sunday, in regard to the attacks.

Hamas on Saturday said the strikes were driven by what it called escalated Israelattacks on Palestinians in the West Bank and Jerusalem as well as against Palestinians in Israeli prisons.

Hamas leader Ismail Haniyeh had highlighted threats to Jerusalem’s Al-Aqsa Mosque, the continuation of an Israeli blockade on Gaza and Israeli normalization with countries in the region.

Netanyahu last month said he believed his country was on the cusp of peace with Saudi Arabia, predicting that the move could reshape the Middle East. Saudi Arabia, the home of Islam’s two holiest shrines, has long insisted on the Palestinians’ right to statehood as a condition of recognizing Israel – something many members of Netanyahu’s nationalist religious coalition have long resisted.

The United States on Sunday said that Saudi-Israel normalization efforts should continue despite the latest attack.

“We think it would be in both countries’ interests to continue to pursue this possibility,” US Deputy National Security adviser Jon Finer told Fox News Sunday.

 

FIGHTING CONTINUES IN GAZA

Mr. Blinken labeled the attack on Israel as a “terrorist attack by a terrorist organization.”

Mr. Blinken added that there was relative calm on Sunday in most of Israel but intense fighting in Gaza, an Israeli-blockaded Palestinian enclave that has witnessed weeks of protests by youth groups due to long-time grievances related to the Israeli military occupation, the Palestinian national cause and prolonged economic strife.

He added that there was not yet any evidence seen by the United States of Iran being behind the latest attack in Israel but he noted the long-standing ties between Iran and Hamas, which governs Gaza.- Reuters

‘Get Britain building again’, UK’s Labour sets out growth plan

STOCK PHOTO | Image by Tom from Pixabay

 – Britain‘s opposition Labour Party will promise on Monday to get the country building again if elected to government, saying the way to spur much-needed economic growth is to smooth the path for the construction of new infrastructure.

In a speech to the party’s annual conference in the northern English city of Liverpool, finance policy chief Rachel Reeves will set out plans to boost growth, critical to Labour‘s plans to better finance Britain‘s struggling public services.

She will also take direct aim at the ruling Conservatives, or Tories, who cancelled part of a high-speed rail project after 2.3 billion pounds had already been spent on it, and will say “the single biggest obstacle” to building in Britain was government planning rules.

With Labour commanding a hefty lead in opinion polls before an election next year, the party has both wooed companies and is being wooed by them, doubling capacity at its “business day” event which still has a waiting list of hopefuls.

“If we want to spur investment, restore economic security, and revive growth. Then we must get Britain building again,” Ms. Reeves will say, according to excerpts of her speech.

“If the Tories won’t build, if the Tories can’t build, then we will. Taking head on the obstacles presented by our antiquated planning system.”

She will outline Labour‘s plans to ease the building of critical infrastructure for energy, transport and technology, by speeding up its planning within the first six months of government, fast-tracking the planning process for priority growth areas and providing incentives to local communities.

Pledging to restore business investment as a share of gross domestic product to the level under the last Labour government in 1997 to 2010, she will say this would mean an additional 50 billion pounds more every year in the British economy by the end of the decade – the equivalent to 1,700 pounds per household.

Labour has moved to cast off its image as a spendthrift party, promising to stick to a “non-negotiable” set of fiscal rules to ensure the party does not borrow to fund day-to-day spending and to set a budget every year by the end of November.

After spending months setting out their stall to city financiers and business small and large across Britain, their charm offensive has paid off.

Senior business leaders, including the bosses of companies such as Britain‘s energy supplier Octopus and Microsoft, will attend Labour‘s business day – a week after the Conservatives staged their own event to mixed reviews.

Labour business policy chief, Jonathan Reynolds, will tell the event: “Labour is now the undisputed party of business.” – Reuters

Middle East conflict adds new risks to global economic outlook

FREEPIK

 – The outbreak of military conflict in the Middle East may leave central bankers battling new inflationary trends as well as deal a blow to economic confidence at a time when they had expressed growing hope about containing the price surge sparked by the pandemic and Russia’s 2022 invasion of Ukraine.

The stunning violence in Israel, with hundreds killed as fighters from the Hamas movement invaded from their Gaza enclave and Israel responded in force, added the possibility of a broader Middle East conflict to the sense of global instability sparked by Russian military actions almost 20 months ago.

The impact may take time to become clear, and would depend on how long the conflict lasts, how intense it becomes, and whether it spreads to other parts of the region.

“It’s too early to say” what the implications may be, though oil and equity markets may see immediate fallout, Agustin Carstens, general manager of the Bank for International Settlements, said in a presentation to the National Association for Business Economics.

But the war has the potential at least to add an unpredictable set of forces to a global economy that was already slowing and to US markets still adapting to the likelihood that the Federal Reserve will maintain high interest rates longer than many investors had expected.

“Any source of economic uncertainty delays decision-making, increases risk premia, and especially given that region…there is an apprehension about where oil is going to open,” said Carl Tannenbaum, chief economist with Northern Trust.

“The markets will also be following what the scenarios are looking like,” he said, and whether, after decades of instability in the Middle East, this outbreak of violence evolves differently.

“The question will be is this iteration something that will throw the long-term equilibrium out of balance?”

 

BLOW TO CONFIDENCE

That and related issues will likely vault high on the agenda of global financial leaders gathering this week in Morocco for meetings of the International Monetary Fund and World Bank to take stock of a global economy that remains in a deep state of flux from the pandemic and rising trade tensions.

For central banks it poses the dilemma of whether it is likely to lead to new inflation pressures – the region is not just home to major oil producers like Iran and Saudi Arabia, but also to major shipping lanes through the Gulf of Suez – or deal such a blow to confidence that the economy stutters.

Federal Reserve officials have cited recent high energy prices as a possible risk to their outlook of gradually easing inflation, and also said that they felt the US economy was likely to avoid a recession – absent some sort of unexpected, outside shock.

With conflict now raging in a major oil-producing region, the reaction among traders and major players like Iran and Saudi Arabia will be watched closely to see if another price surge is coming, while trading on bond and stock markets in coming days will show how markets anticipate the likely fallout.

“The conflict poses a risk of higher oil prices, and risks to both inflation and the growth outlook,” said Karim Basta, chief economist at III Capital Management, leaving the Fed to sort out whether higher prices or slower growth is the greater concern.

Fed officials were already watching a recent rise in US Treasury bond yields for signs investors may have pushed financial conditions beyond what was needed to cool inflation, and raised the risk of a too-stark economic slowing.

To the extent the Israeli war with Hamas heightens concerns about the global economy it could reverse that trend if capital rushes towards the relative safety of US Treasury bonds, as often happens at times of potential crisis.

While falling market interest rates might under other circumstances be seen as a possible source of renewed inflation, encouraging consumers and businesses to borrow and spend, the context might lead to a different conclusion with emphasis on the perceived risks to the economy of a new regional war. – Reuters

California caste bill veto a setback for advocates; opponents say stigma averted

California Governor Gavin Newsom’s veto of a bill that would have banned caste discrimination was seen as “heartbreaking” by the legislation’s advocates while being welcomed by those who felt such a law would have stigmatized a minority in the state.

The bill itself, as well as the buildup to its passage by state lawmakers and its veto, saw intense debate on the issue in California and beyond.

Opponents of caste discrimination say it is no different from other forms of discrimination like racism and hence should be outlawed. Activists hoped that if it were passed into law in California, the legislation would have led to similar steps in other US states.

Opponents of the bill said it would have stigmatized an entire minority group – the South Asian and Hindu communities – as being discriminatory and painted the whole community with a broad brush.

Angana Chatterji, a scholar at the University of California, Berkeley, said that caste discrimination has a “pernicious hold” that impacts South Asian communities in the United States and that the California bill “recognized the basic and fundamental right to equality for all who are targets of casteism.”

Activists who supported the bill had launched a hunger strike in early September in a push for it to be signed into law.

In vetoing the bill, officially called Senate Bill 403 or SB 403, Mr. Newsom cited existing laws that already prohibit ancestry discrimination, which he said made the bill “unnecessary.”

Advocacy group Hindu American Foundation, which opposed the bill, agreed with Mr. Newsom and hailed the veto as a major win.

“Any discrimination on the basis of ‘caste‘ violates not only Hindu teachings, but also existing state and federal law. The fight over SB-403 has always been about the best solution for any intra-community discrimination, not whether such protections are needed,” said Hindu American Foundation Executive Director Suhag Shukla.

US discrimination laws ban ancestry discrimination but do not explicitly mention a ban on casteism. California‘s bill targeted the caste system in South Asian and Hindu immigrant communities by adding caste as a protected class to the state’s existing anti-discrimination laws.

The caste system is among the world’s oldest forms of rigid social stratification. It dates back thousands of years and allows many privileges to upper castes but represses lower castes. The Dalit community is on the lowest rung of the Hindu caste system and members have been treated as “untouchables.” India outlawed caste discrimination over 70 years ago.

“I grew up in Orange County, where I was bullied for my caste throughout my education,” said Thenmozhi Soundararajan, executive director of California-based Dalit civil rights organization Equality Labs.

Caste-oppressed Californians are here, and we deserve workplaces and schools free from discrimination and violence,” Ms. Soundararajan said in her testimony in April in support of the bill.

Equality Labs said “it is heartbreaking to receive the governor’s veto.”

The Indian diaspora is comprised of about 4.9 million US residents who were either born in India or reported Indian ancestry or origin, the Migration Policy Institute said late last year. About a million of those reside in California.

The bill was backed by multiple human rights groups like the American Civil Liberties Union (ACLU), Amnesty International and MeToo International.

Opponents of the bill said that since US laws already ban ancestry discrimination, this legislation becomes meaningless and paints the Hindu and South Asian communities with a discriminatory broad brush.

The bill‘s original version was revised after some opposition. The revised version listed caste under “ancestry” and not as a separate category. It was passed by California‘s state Assembly in late August and by the state Senate in early September with a near unanimous vote.

“Creating an entire separate category and law that only applies to minority communities is inconsistent with our constitutional norms,” said Samir Kalra, managing director at Hindu American Foundation.

The bill defined caste as “an individual’s perceived position in a system of social stratification on the basis of inherited status.” – Reuters

GCash offers online shopping protection via GInsure for only P34

From clothes and appliances to groceries and utilities, almost anything can be bought online nowadays — and many Filipinos are doing just that. In line with its commitment to uphold safety and security across its operations, the Philippines’ #1 finance super app GCash offers ‘Online Shopping Protect’ (OSP) via GInsure to help Filipinos purchase online, worry-free.

GCash, in partnership with Chubb Insurance, offers OSP as the answer to every Filipino’s need to protect themselves against fraudulent sellers, especially with double-digit sales being launched left and right this Christmas season. For only P34, users can have 60 days of coverage of up to P20,000 for all their online purchases. The insurance covers scenarios when orders are not delivered, accidentally damaged, not as described, or stolen.

This insurance is pre-ticked when GCash is chosen as the mode of payment, making it possible to seamlessly incorporate protection coverage into online transactions done across 1,500 online shops, including popular e-commerce platforms such as Shopee, Zalora, and TikTok.

“While we continue working towards making our finance for all vision a reality, we also want to ensure we protect our customers in every way possible. With OSP, we aim to lessen fraudulent incidents such as delivery scams for items that are paid with GCash. We also made sure this is made affordable and accessible for all via GInsure,” said Winsley Bangit, GCash Vice President for New Businesses.

When shopping online, users simply need to proceed to checkout and retain the pre-ticked box below which explains the coverage of the product. Next, proceed to pay the amount and check out your purchased items. It’s quick and easy!

Life setbacks could crop up at any moment, and there’s no denying that you will have greater peace of mind if you know that your purchases are covered for various unforeseen situations, for a very minimal amount.

Not yet on GCash? The app is available for free on Google Play and the App Store. For more information, visit www.gcash.com.ph.

 


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‘Much better’ growth seen in 2nd half

PHILIPPINE STAR/WALTER BOLLOZOS

THE PHILIPPINE ECONOMY is expected to perform “much better” in the second half of 2023, as the government ramps up spending, Finance Secretary Benjamin E. Diokno said.

“The second half of growth will be faster than the first half. Because historically also, the fourth quarter is where most infrastructure projects are done,” he said in a press briefing on Friday.

In the second quarter, the Philippine economy grew by 4.3% — its slowest growth in over two years, due to weaker household consumption and a contraction in government spending.

This brought first-half gross domestic product (GDP) to 5.3%, still below the government’s 6-7% target.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan in a separate briefing on Friday said that attaining the 6% growth was still “very much doable.”

Economic managers earlier said Philippine GDP would need to expand by 6.6% in the second half to meet the lower end of the government target.

The Philippine Statistics Authority (PSA) is scheduled to release third-quarter GDP data on Nov. 9.

“To help improve economic growth, the Philippine government is expediting its public spending, particularly on infrastructure projects, by directing its agencies to put into action their catch-up plans. These plans aim to enhance budget execution efficiency for the remainder of the year,” the DoF said in a data sheet provided to journalists on Friday.

In the second quarter, government spending contracted by 7.1%, a reversal of the 6.2% growth in the first quarter and 10.9% a year ago, amid agencies’ low budget utilization.

As of end-August, the cash utilization rate of government agencies stood at 93%, behind the year-earlier pace of 95%.

Finance Undersecretary Zeno Ronald R. Abenoja said that with the implementation of these catch-up plans, government spending is projected to improve by the end of the year.

“Of course, there will still be a lot of uncertainty, but certainly the trajectory is a significant improvement from the performance as of the middle of this year,” he added.

Several departments presented their catch-up plans and estimated disbursement rates during the Economic Development Group (EDG) meeting on Oct. 4. These included the Department of Public Works and Highways (DPWH), Department of Transportation (DoTr), Department of Health, Department of Social and Welfare and Development, Department of Agriculture, and the National Irrigation Administration.

“The agencies that were requested to present are those with the biggest allocation of budget, but less than 40% utilization rate based on their latest available data for 2023,” the DoF said.

The DoF said the DPWH “appears to perform well with its catch-up plans and disbursement target that is three-fourths higher than its historical performance in the past five years,” but it was still asked to present since it plays a key role in public construction.

According to the agencies, challenges to efficient spending include seasonality in project implementation, procurement, implementation and payment issues.

“One issue, for example, involves procurement. The documentation requirements, how they define the terms of the procurement. So, a better design of the terms of the procurement will help ensure that the process will proceed as planned,” Mr. Abenoja said.

He noted that the government will be “close” to hitting its spending target this year.

“We think we’ll be close to what was initially planned. So, that’s the commitment that was provided by the different agencies,” he added.

Data from the Bureau of Treasury (BTr) showed that state expenditures as of end-August rose by 3.54% to P3.31 trillion. This accounted for 63% of the full-year spending program of P5.228 trillion.

According to the DoF, the government is ramping up infrastructure spending, reflecting efforts “to enhance the quality of spending in the midst of fiscal consolidation while remaining supportive of growth.”

Data from the Department of Budget and Management (DBM) showed that expenditures for infrastructure and other capital outlays rose by 44.1% to P111 billion in July from P77 billion in the same month a year ago.

Month on month, infrastructure spending was also up by 7.1% from the P119.4 billion in June.

“This was primarily credited to the larger capital expenditures of the DPWH for its various infrastructure projects nationwide,” the DBM said.

It also recorded “sizable” disbursements in railway projects of the DoTr, funding for the Department of Education’s computerization program, and the construction, repair, and rehabilitation of court buildings and offices of the Judiciary.

In the seven-month period, infrastructure spending increased by 12.9% to P618.2 billion from P547.5 billion in the same period in 2022.

The DBM said this was due to “progress billings and payments made for ongoing and completed infrastructure projects of the DPWH, as well as direct payments made by development partners for the foreign-assisted rail transport projects of the DoTr.”

The government is planning to spend 5-6% of GDP annually on infrastructure. This year, it targets to spend 5.3% of GDP on infrastructure, equivalent to P1.29 trillion. — Luisa Maria Jacinta C. Jocson

GIR falls to 7-month low as of end-Sept.

REUTERS

By Keisha B. Ta-asan, Reporter

THE PHILIPPINES’ dollar reserves fell to a seven-month low as of end-September due to the National Government’s payment of foreign debt obligations and the drop in gold prices in the global market.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday evening showed gross international reserves (GIR) stood at $98.69 billion as of end-September, slipping by 0.8% from $99.57 billion as of end-August. It marked the lowest in seven months or since $98.22 billion in February.

However, the dollar reserves rose by 6.1% from $93 billion as of end-September 2022.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) payments of its foreign currency debt obligations and the downward adjustments in the value of BSP’s gold holdings due to the decrease in the price of gold in the international market,” the BSP said in a statement.

As of end-September, the dollar reserves were enough to cover 5.7 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

It is also equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.

Ample foreign exchange buffers protect the country from market volatility and serve as a guarantee for the economy’s ability to pay its debts in the event of an economic downturn.

The month-on-month increase in foreign exchange (FX) holdings was due to the BSP’s possible intervention in FX operations in September, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail note.

The BSP intervenes in the foreign exchange market to smoothen the volatility.

“The peso came under pressure of late, tracking regional weakness as the US dollar reigned due to expectations for further rate hikes by the Fed,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message.

In September alone, the local unit closed at P56.575 against the dollar on Sept. 29, stronger by only two centavos from its P56.595 finish on Aug. 31.

“Despite this pressure, GIR levels remain sizable, downplaying concerns that GIR is now being ‘depleted,’” Mr. Mapa said.

Based on BSP data, foreign currency deposits rose by 28.4% to $827.4 million in September from $644.6 million in August. However, it fell by 49.5% from $1.64 billion a year earlier.

Meanwhile, buffers in the form of gold were valued at $9.79 billion, lower by 4.3% from $10.23 billion as of end-August, but still up by 17.5% from $8.33 billion a year earlier.

The BSP’s foreign investments stood at $83.53 billion as of end-September, slipping by 0.7% from $84.13 billion a month earlier. Year on year, it rose by 6.1% from $78.71 billion a year ago.

According to the BSP, net international reserves dipped by 0.8% to $98.7 billion as of end-September from $99.5 billion a month prior.

Net international reserves are the difference between the BSP’s reserve assets (GIR) and reserve liabilities such as short-term foreign debt, and credit and loans from the International Monetary Fund (IMF).

The country’s reserve position in the IMF slid by 1.6% to $778.1 million as of end-September from $790.4 million as of end-August. However, it rose by 8.7% from $716 million as of end-September 2022.       

Special drawing rights (SDRs) — or the amount the country can tap from the IMF — stood at $3.77 billion, unchanged from the previous month. It jumped by 4.7% from $3.6 billion a year earlier.

“Still relatively high GIR levels… would continue to provide structural support/buffer/cushion for the peso exchange rate, especially greater protection versus any speculative attacks, going forward,” Mr. Ricafort said.

Mr. Ricafort also noted that in the coming months, the country’s dollar reserves could be supported by the sustained growth in remittances, exports, investments, and revenues from foreign tourism and business process outsourcing firms.

“We could see more seasonal inflows related to remittances on top of the foreign borrowing of the government to augment. However, the peso will likely still remain pressed as the dollar is still expected to be strong on the outlook for Fed,” Mr. Mapa said.

“GIR could continue to edge lower as long as the dollar stays strong, but we don’t expect reserves to be depleted anytime soon,” he added.

Last month, the BSP lowered its GIR projection for this year to $99.5 billion, down from the previous forecast of $100 billion.

The BSP kept its 2024 dollar reserves forecast at $102 billion.

BSP likely to keep hawkish hold for rest of the year

The minimum jeepney fare increase of P1 to P13 started on Sunday (Oct. 8). — PHILIPPINE STAR/MIGUEL DE GUZMAN

THE BANGKO SENTRAL ng Pilipinas (BSP) is likely to maintain a hawkish hold for the rest of the year to support the economy, analysts said.

Diwa C. Guinigundo, the new country analyst for the Philippines of GlobalSource Partners, said consumer prices should not move beyond an average of 3.4% in the fourth quarter to achieve the BSP’s 5.8% full-year forecast. 

“This is going to be tough on both the BSP, which has correctly ruled out any policy rate easing for the rest of the year, and the National Government, which cannot seem to grab the ongoing rice crisis by the horns,” he said in a report dated Oct. 5.

Inflation soared to 6.1% in September, the fastest in five months, from 5.3% in August. Year to date, inflation averaged 6.6%, higher than 5.1% in the same period a year ago and still above the BSP’s recently revised 5.8% forecast for 2023.

“With this latest inflation outturn, and the BSP’s elevated inflation forecasts for this year and the next, we don’t see monetary policy shifting out of a pause, at least not this year,” Mr. Guinigundo said.

He noted that if risks to inflation continue to materialize, it is possible that inflation may go above the BSP’s revised 3.5% forecast for 2024 and could even breach the 2-4% target.

“Supply shocks may be persistent — and this is what we are seeing today. The failure to put in place non-monetary measures lifted the lid, and inflation returned with a vengeance,” he said. 

The Monetary Board has kept the benchmark interest rate at 6.25% since March after hiking borrowing costs by 425 basis points (bps) since May 2022 to tame inflation.

Asked if the Monetary Board would deliver an off-cycle rate increase due to the faster-than-expected September print, BSP Governor Eli M. Remolona, Jr. said in a Viber message on Thursday: “We haven’t decided. We’re still analyzing the data.”

JEEPNEY FARE HIKE
The implementation of a P1 provisional jeepney fare hike starting on Sunday is seen to add to inflationary pressures.

China Banking Corp. Chief Economist Domini S. Velasquez said the P1 increase in jeepney fares will add about 0.17 percentage point to headline inflation.

“Since oil prices corrected, we hope that this would be the last of the fare hikes. The government can provide well-targeted subsidies to drivers and operators instead so that consumers need not worry of additional fare hikes,” she said.

If non-monetary measures are not enough to bring down headline inflation, the BSP could possibly opt for another rate increase this year, Ms. Velasquez said.

“However, we still think that actions to address supply and not curb demand would be more appropriate. Especially given a modest growth environment,” she said.

She added that the inflation data for October and the third-quarter gross domestic product (GDP) data will be the “deciding factors” at the Monetary Board’s next policy review on Nov. 16. 

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the BSP may pause next month if the third-quarter GDP report would reflect a “technical recession.”   

“Our new base case on rates sees 50-bp worth of cuts in the first quarter of 2024, followed by another 25-bp (cut) in the second quarter,” he said.

Third-quarter GDP data will be released on Nov. 9.

On the other hand, MUFG Global Markets Research Senior Currency Analyst Michael Wan said the higher-than-expected inflation print likely means that the BSP will hike at its next meeting “or even earlier in an off-cycle meeting, on the back of the BSP governor’s forward guidance.”

The Bank of America (BofA) also raised its inflation forecasts for this year to 6.1% (from 5.5% previously) and for 2024 to 3.5% (from 2.8%).

BofA Global Research said in a note dated Oct. 5 the BSP may opt for an off-cycle increase depending on the outcome of the US Federal Reserve’s meeting on Nov. 2 (Manila time), and the October inflation print to be released on Nov. 6.

“In our revised forecasts, a policy rate cut may not happen until the second quarter of 2024 and our year-end 2024 policy rate expectation is now higher at 5.5%, from previously 5.25%,” it added. — Keisha B. Ta-asan