Iraqi armed groups dial down US attacks on request of Iran commander

February 19, 2024 | 5:48 pm

BAGHDAD — A visit by the commander of Iran’s elite Quds Force to Baghdad has led to a pause in attacks on US troops by Iran-aligned groups in Iraq, multiple Iranian and Iraqi sources told Reuters, saying it was a sign Tehran wants to prevent a broader conflict.

Esmail Qaani met representatives of several of the armed groups in Baghdad airport on Jan. 29, less than 48 hours after Washington blamed the groups for the killing of three US soldiers at the Tower 22 outpost in Jordan, the sources said.

Mr. Qaani, whose predecessor was killed by a US drone near the same airport four years ago, told the factions that drawing American blood risked a heavy US response, 10 of the sources said.

He said the militias should lie low, to avoid US strikes on their senior commanders, destruction of key infrastructure or even a direct retaliation against Iran, the sources said.

While one faction did not initially agree to Mr. Qaani’s request, most others did. The next day, elite Iran-backed group Kataib Hezbollah announced it was suspending attacks.

Since Feb. 4 there have been no attacks on US forces in Iraq and Syria, compared to more than 20 in the two weeks before Mr. Qaani’s visit, part of a surge in violence from the groups in opposition to Israel’s war in Gaza.

“Without Qaani’s direct intervention it would have been impossible to convince Kataib Hezbollah to halt its military operations to deescalate the tension”, a senior commander in one of the Iran-aligned Iraqi armed groups said.

Mr. Qaani and the Quds Force, the arm of Iran’s Revolutionary Guards that works with allied armed groups from Lebanon to Yemen, did not immediately reply to requests for comment for this story. Kataib Hezbollah and one other group could not be reached for comment. The US White House and Pentagon also did not immediately respond.

Mr. Qaani’s visit has been mentioned in Iraqi media but the details of his message and the impact on reducing attacks have not been previously reported.

For this account, Reuters talked to three Iranian officials, a senior Iraqi security official, three Iraqi Shi’ite politicians, four sources in Iran-backed Iraqi armed groups and four Iraq-focused diplomats.

IRAQ-US TALKS RESUME
The apparent success of the visit highlights the influence Iran wields with Iraqi armed groups, who alternate between building pressure and cooling tensions to further their goal of pushing US forces out of Iraq.

The government in Baghdad, a rare ally of both Tehran and Washington, is trying to prevent the country again becoming a battlefield for foreign powers and asked Iran to help rein in the groups after the Jordan attack, five of the sources said.

Prime Minister Mohammed Shia al-Sudani “has worked with all relevant parties both inside and outside Iraq, warning them,” that escalation “will destabilize Iraq and the region,” Mr. Sudani’s foreign affairs advisor Farhad Alaadin told Reuters when asked to confirm Mr. Qaani’s visit and the request for help to rein in armed groups.

The attack “played into the hand of the Iraqi government,” a Shi’ite politician from the ruling coalition said. Following the subsequent lull in hostilities, on Feb. 6 talks resumed with the United States about ending the US presence in Iraq.

Several Iran-aligned parties and armed groups in Iraq also prefer talks rather than attacks to end the US troop presence. Washington has been unwilling to negotiate a change to its military posture under fire, concerned it would embolden Iran.

The United States currently has some 2,500 troops in Iraq and 900 in Syria on an advice and assist mission. They are part of an international coalition deployed in 2014 to fight Islamic State, mainly in the west of the country and eastern Syria.

A US State Department spokesperson, who declined to comment on Mr. Qaani’s visit to Baghdad, said the US presence in Iraq would transition to “an enduring bilateral security relationship.”

The United States asserts that Iran has a high level of control over what it calls Iranian “proxies” in the region. Tehran says it has funded, advised and trained allies but they decide operations on their own.

Another US official recognized Iran’s role in reducing attacks but said it was not clear if the lull would hold.

“We need to see more work done on the ground,” by Iraq to control the militias, a separate, senior, US official said, noting just a few arrests were made after a December mortar attack on the US embassy in Baghdad.

AIRPORT SECURITY
With Iran bracing for a US response to the Jordan attack, Mr. Qaani made the visit quick and did not leave the airport, “for strict security reasons and fearing for his safety,” the senior Iraqi security source said.

The strike in 2020 that killed former Quds Force leader Qassem Soleimani outside the airport followed an attack Washington also blamed on Kataib Hezbollah that killed a US contractor, and at the time sparked fears of a regional war. Along with Soleimani, the drone killed former Kataib Hezbollah leader Abu Mahdi al-Muhandis.

Both Tehran and Baghdad wanted to avoid a similar escalation this time round, nine sources said.

“The Iranians learned their lesson from the liquidation of Soleimani and did not want this to be repeated,” the senior Iraqi security source said.

A high-ranking Iranian security official said: “Commander Qaani’s visit was successful, though not entirely, as not all Iraqi groups consented to de-escalate.” One smaller but very active group, Nujaba, said it would continue attacks, arguing that US forces would only leave by force.

It remains to be seen how long the pause lasts. An umbrella group representing hardline factions vowed to resume operations in the wake of the US killing of senior Kataib Hezbollah leader Abu Baqir al-Saadi in Baghdad on Feb. 7.

Saadi was also a member of the Popular Mobilization Forces (PMF), a state security agency that started out as mostly-Shi’ite armed groups close to Iran that fought against Islamic State, highlighting just how intertwined the Iran-backed armed groups are with the Iraqi state.

US-led forces invaded Iraq and toppled former leader Saddam Hussein in 2003, before withdrawing in 2011.

Shi’ite armed groups who spent years attacking US forces in the wake of the 2003 invasion went on to fight on the same side as, though not in direct partnership with, US soldiers against Islamic State until it was territorially defeated.

In the subsequent years, rounds of tit-for-tat fighting with the remaining US troops escalated until the US killing of Soleimani and Muhandis.

Those killings prompted Iraq’s parliament to vote for the exit of foreign forces. Prime Minister Sudani’s government came to power in October 2022 on a promise to implement that decision, though it was not seen as a priority, government officials have said.

The situation changed again with the onset of the Gaza war.

Dozens of attacks and several rounds of US responses, including the killing of a senior Nujaba leader in Baghdad on Jan. 5, led Sudani to declare that the coalition had become a magnet for instability and to initiate talks for its end.

He has kept the door open to continued US presence in a different format via a bilateral deal.

Iraqi officials have said they hope the current lull will hold so the talks, expected to take months if not longer, can reach a conclusion.

At a funeral service for Saadi, senior Kataib Hezbollah official and PMF military chief Abdul Aziz al-Mohammedawi vowed a response for the latest killing, but stopped short of announcing a return to violence. The response would be based on consensus, he said, including with the government.

“Revenge for the martyr Abu Baqir al-Saadi means the exit of all foreign forces from Iraq. We won’t accept anything less than that,” he said. — Reuters

Hague-based world court to hear arguments on Israeli occupation of Palestinian territories

February 19, 2024 | 5:45 pm

THE HAGUE — The United Nations’ (UN) top court on Monday opens a week of hearings on the legal consequences of Israel’s occupation of Palestinian territories, with more than 50 states due to address the judges.

Palestinian Foreign Minister Riyad al-Maliki will speak first in the legal proceedings at the International Court of Justice (ICJ) in The Hague.

In 2022, the UN General Assembly asked the court for an advisory, or non-binding, opinion on the occupation.

While Israel has ignored such opinions in the past, it could pile on political pressure over its ongoing war in Gaza, which has killed about 29,000 Palestinians, according to Gaza health officials, since Oct.7.

Among countries scheduled to participate in the hearings are the United States — Israel’s strongest supporter, China, Russia, South Africa and Egypt. Israel will not, although it has sent written observations.

The hearings are part of a Palestinian push to get international legal institutions to examine Israel’s conduct, which has become more urgent since the Oct. 7 attacks by Hamas in Israel, which killed 1,200 people, and Israel’s military response.

They also come amid mounting concerns about an Israeli ground offensive against the Gaza city of Rafah, a last refuge for more than a million Palestinians after they fled to the south of the enclave to avoid Israeli assaults.

Israel captured the West Bank, Gaza and East Jerusalem — areas of historic Palestine which the Palestinians want for a state — in the 1967 war. It withdrew from Gaza in 2005, but, along with neighboring Egypt, still controls its borders.

It is the second time the UN General Assembly has asked the ICJ, also known as the World Court, for an advisory opinion related to the occupied Palestinian territory.

In July 2004, the court found that Israel’s separation wall in the West Bank violated international law and should be dismantled, though it still stands to this day.

Judges have now been asked to review Israel’s “occupation, settlement and annexation…including measures aimed at altering the demographic composition, character and status of the Holy City of Jerusalem, and from its adoption of related discriminatory legislation and measures.”

Since 1967, Israel has greatly expanded Jewish settlements in the West Bank — an action Palestinians say compromises the creation of a viable Palestinian state. It has also annexed East Jerusalem in a move not recognized by most countries.

The General Assembly also asked the ICJ’s 15-judge panel to advise on how those policies and practices “affect the legal status of the occupation” and what legal consequences arise for all countries and the United Nations from this status.

The advisory opinion proceedings are separate from the genocide case that South Africa filed at the World Court against Israel for its alleged violations in Gaza of the 1948 Genocide Convention. In late January the ICJ in that case ordered Israel to do everything in its power to prevent acts of genocide in Gaza.

The outcome of the advisory opinion would not be legally binding but would carry “great legal weight and moral authority,” according to the ICJ. — Reuters

Sydney school, supermarket tainted with asbestos as crisis widens

February 19, 2024 | 5:44 pm

supermarket-grocery-shopper — PHILIPPINE STAR/MIGUEL DE GUZMAN

SYDNEY — Seven more public sites in Sydney, including a school, sports hub and supermarket, were exposed to asbestos, authorities said on Monday, as the contamination of the toxic material widened, and officials rushed to remove it from public spaces.

Traces of bonded asbestos in mulch have been found in 41 spots scattered across Australia’s most populous city since early January when it was found in a playground.

In response, the New South Wales state government has set up an asbestos task force to give more resources and support to the Environment Protection Authority (EPA), in one of the agency’s largest probes in decades.

Authorities have so far cordoned off areas in parks, some in popular tourist spots, and closed two schools. Contaminated spots in other sites have been blocked from the public.

Just under 700 tests returned negative results as of Sunday, the EPA said in its latest update, while results from three schools have not yet been received.

A concert by pop superstar Taylor Swift, set to take place this weekend in the city’s west, would go ahead after tests at the venue. The Sydney Gay and Lesbian Mardi Gras Fair Day event scheduled for Feb. 18, which usually draws hundreds of thousands of revelers, was canceled.

Except for one location, the type of asbestos discovered so far is bonded asbestos, considered low risk to human health and the environment if not disturbed, but health officials have been conducting precautionary testing.

Asbestos became popular in the late 19^th century as a way to reinforce cement and for fireproofing, but research later found the inhalation of asbestos fibers could cause lung inflammation and cancer. It is now banned in much of the world. — Reuters

More than 400 detained in Russia at events in memory of Navalny, rights group says

February 19, 2024 | 5:42 pm

ST. PETERSBURG, Russia — More than 400 people have been detained at events across 32 Russian cities since the death of Alexei Navalny, President Vladimir Putin’s most formidable opponent, according to rights group OVD-Info, as Russians continued to gather and lay flowers.

It has been the largest wave of arrests at political events in Russia since Sept. 2022, when more than 1,300 were arrested at demonstrations against a “partial mobilization” of reservists for Mr. Putin’s military campaign in Ukraine.

Mr. Navalny, a 47-year-old former lawyer, fell unconscious and died on Friday after a walk at the “Polar Wolf” Arctic penal colony where he was serving a three-decade sentence, the prison service said.

OVD-Info, which reports on freedom of assembly in Russia, said the largest numbers of arrests occurred in St Petersburg and Moscow, where Mr. Navalny’s support had traditionally been strong. As of 2000 GMT on Saturday, more than 200 people were detained in St. Petersburg.

But there was no mention of the events on Russian state news agencies, which are under full Kremlin control. There were also no stories about the hundreds of people across Russia who have continued to defy authorities to lay flowers at impromptu Navalny memorials.

The death of Mr. Navalny robs the disparate Russian opposition of its most prominent leader as Mr. Putin prepares for the March presidential election — a rubber-stamp vote set to keep the former KGB spy in power until at least 2030.

Footage filmed by Reuters on Saturday in St Petersburg showed dozens gathering by a monument to the victims of repression. Protesters laid flowers and candles, while some sang hymns and others hugged each other, shedding tears.

“I felt very sorry for him and for our country,” said an 83-year-old woman attending the vigil who declined to give her name. “I’m scared.”

A Reuters reporter at the scene said some 30 people were arrested shortly after the singing finished.

OVD-Info also reported individual arrests in smaller cities across Russia, from the border city of Belgorod, where seven were killed in a Ukrainian missile strike on Thursday, to Vorkuta, an Arctic mining outpost once a center of the Stalin-era gulag labor camps.

The online news outlet SOTA reported that in Luhansk, a Ukrainian territory now under Russian control, residents laid flowers in Navalny’s honor at a monument commemorating the victims of the Soviet Union leader Joseph Stalin.

In another city, flowers were laid at a monument to the heroes of the early 20^th century Russian Revolution.

“Despite the authorities’ attempts to remove the flowers, they keep appearing,” SOTA reported.

Footage filmed by Reuters in Moscow showed law enforcement bundling people to the ground in the snow, close to a spot where mourners had left flowers and messages in support of the dead opposition leader.

“In each police department there may be more detainees than in the published lists,” OVD-Info said. “We publish only the names of those people about whom we have reliable knowledge and whose names we can publish.”

Reuters could not immediately verify the count. Police declined to comment. — Reuters

Any rate cuts before Fed may hurt peso

February 19, 2024 | 12:34 am

By Keisha B. Ta-asan, Reporter

THE PHILIPPINE central bank should cut borrowing costs at an off-cycle meeting before April to support consumer spending and investments, an economist said at the weekend, but others said any rate cuts before the US Federal Reserve starts its own easing could hurt the peso.

The Bangko Sentral ng Pilipinas (BSP) should have started cutting interest rates by 25 basis points (bps) last week to ease the effect of tight policy on consumption and investment, Enrico P. Villanueva, a senior economics lecturer at the University of the Philippines Los Baños, said.

“BSP’s mandate is not to quell inflation at all costs,” he said in a text message. “It is to promote price stability that is supportive of sustainable growth and employment. With more favorable data coming in, I hope BSP would start even a small rate cut at its next meeting, or even at an off-cycle meeting.”

After emerging as the most aggressive central bank in the region, the BSP kept the key rate at 6.5% — the highest in nearly 17 years — for a third straight meeting at its first policy review of the year.

The Monetary Board hiked borrowing costs by 450 bps from May 2022 to October 2023 to tame inflation and help support the peso against the dollar.

“I think BSP is being more conservative than its risk-adjusted inflation forecast,” Mr. Villanueva said. “That conservatism comes at a price.”

Last week, the BSP lowered its risk-adjusted inflation forecast for this year to 3.9% from 4.2% but raised its outlook for 2025 to 3.5% from 3.4%.

The central bank also cut its baseline inflation forecast for this year to 3.6% from 3.7% but kept its projection for 2025 at 3.2%.

“The most telling fact is that BSP itself states that its own risk-adjusted inflation forecast is already within target,” Mr. Villanueva said. “Risk-adjusted forecast is the extreme worse scenario compared with the baseline. This is a strong basis to begin rate cuts.”

BSP’s decision to keep rate steady last week reflects worries of inflationary pressures globally, Cid L. Terosa, a senior economist at the University of Asia and the Pacific (UA&P), said in an e-mail.

“Although domestic inflation has toned down in many countries including the Philippines, external pressures such as disruptions in trade routes and geopolitical tensions in Asia, the Middle East and Europe continue to bolster the possibility of inflationary pressures overflowing to many countries,” he said.

Inflation eased to its lowest in three years to 2.8% in January from 3.9% in December and 8.7% a year ago. It was the second straight month that inflation was within BSP’s 2-4% target.

‘PLAY IT SAFE’
The central bank will likely remain cautious before easing rates, Robert Dan J. Roces, chief economist at Security Bank Corp., said in a Viber message. “Base effects, elevated rice prices and potential minimum wage hikes could still threaten the rosy picture.”

Central bank officials earlier said inflation might pick up to more than 4% next quarter due to base effects, before it slows down again in the second half.

Despite the three-year low January inflation figure, rice inflation continued to accelerate to 22.6% from 19.6% in December, the highest since March 2009.

Rice was also the most significant contributor to January inflation, adding 1.3 percentage points. The commodity had the biggest weight in the overall inflation basket at 8.87%.

The House of Representatives is seeking to pass an across-the-board wage increase of as much as P400 for workers in the private sector, higher than the Senate’s P100 proposal.

Mr. Roces said the spike in US inflation in January has pushed market expectations of Fed rate cuts, with the US central bank likely to cut policy rates midyear.

“Locally, tight national savings and a wide current account deficit make pre-Fed cuts risky for the BSP,” he said. “Meanwhile, a robust gross domestic product and rising credit growth give the BSP room to wait.”

US inflation rose by 0.3% month on month in January after increasing by 0.2% in December. Inflation was 3.1% annually, slower than 3.4% in December. Economists polled by Reuters had forecast inflation at 0.2% on the month and 2.9% yearly.

Policy makers from the US Federal Reserve had said they want convincing evidence that inflation is on a sustained downward trend before they consider cutting borrowing costs. The Fed raised its policy rate by 525 bps to 5.25-5.5% from March 2022 to July 2023.

“We expect both the Fed and BSP to ease rates later this year, but BSP will likely play it safe and follow the Fed’s lead,” Mr. Roces said.

Ryota Abe, an economist from Sumitomo Mitsui Banking Corp. (SMBC), said in a note maintaining the 100-bp interest rate differential with the Fed would prevent the peso from depreciating.

“Many market participants now expect the Fed to start cutting rates in the second quarter of 2024,” he said. “If BSP cuts rates by 25 bps every meeting starting at the June 27 meeting, it could cut rates by 100 bps this year.”

The BSP may not cut rates before the fourth quarter, assuming the Fed’s easing cycle starts a quarter earlier, ANZ Research economists Debalika Sarkar and Sanjay Mathur said in a separate note.

“BSP needs to remain patient with its current monetary policy setting amid double-digit consumer credit growth, renewed current account pressures and still-elevated household inflation expectations,” they said. “Our year-end 2024 policy rate forecast of 6% assumes a 50-bp rate cut in the last quarter of 2024.”

The BSP will hold its next policy review on April 4.

Economists see inflation within target until 2026 — BSP survey

February 19, 2024 | 12:33 am

fish-market — A wide variety of fish at the Marikina Public Market. — PHILIPPINE STAR/ WALTER BOLLOZOS

ECONOMISTS expect inflation to stay within the Philippine central bank’s 2-4% target until 2026, but supply shocks and second-round effects continue to pose risks to the outlook, the Bangko Sentral ng Pilipinas (BSP) said last week.

Analysts’ average inflation estimates this month for 2024 and 2026 were 3.9% and 3.4%, unchanged from BSP’s January survey, it said. Their mean inflation estimate for next year rose to 3.5% from 3.4%.

“Analysts expect inflation to remain manageable this year and settle within the target range,” the central bank said in its latest monetary policy report. “However, risks to the inflation outlook continue to be dominated by upside pressures owing to supply-side shocks and second-round effects.”

Inflation slowed to a three-year low of 2.8% in January from 3.9% in December and 8.7% a year ago, the second straight month it fell within the BSP’s target.

The BSP’s baseline inflation forecast for this year is 3.6% and 3.2% for 2025. Full-year inflation may hit 3.9% and 3.5% this year and in 2025 if risks materialize, it said.

Analysts said supply-side pressures would likely come from El Niño and geopolitical tensions, which could spur price increases in basic commodities and services in the Philippines, the central bank said. “A few analysts also cited second-round effects from wage adjustments and higher electricity rates, as well as positive base effects as upside risks.”

Lawmakers are seeking to increase the minimum wage this year. The Senate wants a P100 minimum wage hike, while the House of Representatives said it is studying a proposal to increase wages by as much as P400.

BSP Senior Assistant Governor Iluminada T. Sicat earlier said the central bank’s baseline projections did not take these proposals into account.

In the report, the BSP said the baseline forecast includes the P40 minimum wage hike in the National Capital Region in July last year and 8.7% average wage increase for nonagricultural workers in areas outside Metro Manila.

The central bank also factored in a possible wage increase of P28 in August and P29 in September 2025. These could lead to an annual increase of 4.6% for both years, in line with historical wage increases.

“(If) the assumed increase in minimum wage is beyond what we have incorporated in the baseline… this could pose a threat to the inflation outlook,” Ms. Sicat told reporters last week.

Meanwhile, analysts expect a 68.2% probability from 63.4% last month that inflation will stay within the target this year, while there is a 31% chance that it will breach 2-4%.

The likelihood of inflation falling within the target next year increased to 78% from 65.9%, while the probability of inflation settling within 2-4% in 2026 rose to 82.9% from 64.2%.

“The results of the survey showed that majority of the analysts anticipate the BSP to keep the current policy setting until the second quarter before reducing the policy rate in the second half of this year by a range of 50 to 125 basis points (bps),” the central bank said. “For 2025, the BSP is seen to further loosen its policy stance by a range of 25 to 300 bps.”

The BSP kept the key rate at 6.5% for a third straight meeting at its first policy review of the year, the highest in nearly 17 years. The Monetary Board tightened borrowing costs by 450 bps from May 2022 to October 2023.

There were 24 respondents in the BSP’s survey of private sector economists, which was held from Feb. 6 to 12.

The BSP said it had lowered its risk-adjusted inflation forecast for this year by 0.5 point to 3.9% due to the lower baseline forecast and decreasing risks.

The central bank removed the impact of higher transport fares from a planned jeepney modernization and lowered the probability of jeepney fare hikes. It also sees less impact from high global oil prices.

It also removed the nonextension of lower tariff rates for pork, rice and corn as risk to inflation.

“While the risks to the inflation outlook continue to tilt toward the upside over the policy horizon, inflation risks in 2024 have eased compared with the previous round,” BSP said.

Still, the estimated impact of risks to the inflation outlook outweighs the possible impact of downside risks, it added. — Keisha B. Ta-asan

Higher-than-expected wage hikes may stoke prices, keep rates high

February 19, 2024 | 12:32 am

infra-construction-workers — Workers are seen installing steel at a construction site in Santa Cruz, Manila. — PHILIPPINE STAR/EDD GUMBAN

By Luisa Maria Jacinta C. Jocson, Reporter

HIGHER-THAN-EXPECTED minimum wage increases could spur prices to spiral out of control and prompt the central bank to keep rates tighter for longer, according to analysts.

“Although raising the minimum wage might boost household spending via higher real disposable income, such a hike would not be ideal from a price stability view,” Oxford Economics economist Makoto Tsuchiya said in an e-mail.

“Higher wages could potentially raise inflation expectations, which might start a wage-price spiral, requiring the central bank to keep rates higher for longer,” he added.

Lawmakers are seeking across-the-board minimum wage hikes for workers in the private sector.

The Senate last week approved on second reading a bill that seeks an across-the-board wage increase of P100. The House of Representatives said it is studying a proposal to increase wages by P350 to P400.

Bangko Sentral ng Pilipinas (BSP) Senior Assistant Governor Iluminada T. Sicat earlier said the central bank’s baseline inflation projections did not take these into account.

In June, the National Capital Region Tripartite Wages and Productivity Board approved a P40 increase in the daily minimum wage for Metro Manila.

“To the extent the assumed increase in minimum wage is beyond what we have incorporated in the baseline, and if you notice, it’s not part of the risk adjustments we presented, this could pose a threat to the inflation outlook,” Ms. Sicat told a news briefing last week.

BSP’s baseline inflation forecast for this year is 3.6% and 3.2% for next year. Inflation may average 3.9% and 3.5% this year and next year if the risks materialize.

Inflation eased to 2.8% in January from 3.9% in December, the second straight month it fell within the central bank’s 2-4% target.

“In the absence of wage hikes, subsiding inflationary pressures and softer economic activity should lead the bank to ease monetary policy as soon as the second quarter in our view,” Mr. Tsuchiya said. “A minimum wage hike would jeopardize this process.”

The BSP kept its benchmark rate unchanged at 6.5% at its third straight meeting on Thursday. It last raised borrowing costs by 25 basis points (bps) in October. It hiked rates by 450 bps from May 2022 to October 2023.

“If the hike materializes, the central bank’s inflation forecast will also likely rise, possibly making them more cautious to unwind tight monetary policy depending on the magnitude of the wage hikes,” Mr. Tsuchiya added.

Diwa C. Guinigundo, country analyst for the Philippines at GlobalSource Partners, said any wage adjustments should not fan inflation.

“Our workers deserve some adjustment in their daily wage,” he said in a Viber message. “The issue is the amount. Less than their own productivity contribution, the resulting final wage should not be inflationary. Higher than that, people argue it could be inflationary.”

A family of five needs at least P13,797 a month or P460 a day to meet basic food and nonfood needs, according to data from the local statistics agency.

Labor groups and employers should negotiate to help achieve fair adjustments, Mr. Guinigundo said. Congress should involve wage and job experts in the debates so that wage increases are “neither inflationary and anti-capital nor meaningless to workers themselves.”

“An increase in wages can help households cope with rising prices,” Nicholas Antonio T. Mapa, a senior economist at ING Bank N.V. Manila, said in an e-mail. “However, it might be best to go through the current practice of regional wage boards precisely in order to tailor-fit wage increases to the cost of living per region.”

Gov’t told to expand funding sources, rein in spending to hit growth targets

February 19, 2024 | 12:31 am

By Beatriz Marie D. Cruz, Reporter

THE GOVERNMENT of Philippine President Ferdinand R. Marcos, Jr. should expand its funding sources and manage spending to meet economic growth targets this year, according to lawmakers.

This was after analysts said the dry spell brought by El Niño could temper growth this year.

“We need to strike a balance between… [what is] realistic and [what is] aspirational,” Marikina City Rep. Stella Luz A. Quimbo told BusinessWorld on the sidelines of a House of Representatives hearing last week.

Ms. Quimbo, who is also a senior vice chairperson of the House Committee on Appropriations, noted that growth slowed last year due to a huge contraction in state spending in the second quarter.

Government spending slowed to 4.3% amid red-hot inflation and rising interest rates.

Albay Rep. and House Committee on Ways and Means Chairman Jose Ma. Clemente S. Salceda brushed off calls to revise growth targets but cited the need to manage government spending.

“We saw that (slow government spending) coming,” he said in a Viber message. “That’s why the House initiated a policy of broadening the sources of funding for unprogrammed allocations in the 2024 General Appropriations Act.”

Congressmen in November approved on third and final reading a bill that would allow the government to tap excess funds of government-owned and -controlled corporations (GOCC) in funding unprogrammed budgets.

Finance Secretary Ralph G. Recto said last week the government might have to adjust its fiscal targets for the year to be “more realistic.”

Economic managers are targeting 6.5% to 7.5% GDP growth this year under the Development Budget Coordination Committee’s (DBCC) latest macroeconomic assumptions.

It also projects a growth target of as much as 8% in 2028 under its medium-term fiscal and growth goals. Philippine economic growth slowed to 5.6% last year, falling short of the state’s 6-7% goal.

Mr. Recto said DBCC’s entire medium-term fiscal framework is under review. “The fiscal plan was made when (Mr. Marcos) became president in 2022,” he told reporters. “There was no war in the Middle East, the Ukraine war had just begun. Thereafter, prices of food and oil rose.”

Former Finance Secretary Margarito B. Teves in an interview last week said the government should revisit its economic growth targets “to have more conservative assumptions.”

“We have to really go back to the assumptions that brought about the target of the government,” Mr. Teves separately told BusinessWorld on the sidelines of the hearing.

Raul V. Fabella, a retired professor from the University of the Philippines School of Economics, said the government might miss its fiscal goals this year due to El Niño.

“We might not meet the target because of the many issues,” he told reporters last week. “We have El Nino, floods in Mindanao, a dry spell in Negros, etc.”

The economy shrank by 0.5% in 1998, when the country experienced the worst El Niño dry spell in history.

Economic managers expect that the National Government’s budget deficit to hit P1.39 trillion this year, or 5.1% of GDP.

Under its fiscal framework, revenues are expected to account for 15% to 16% of GDP, while expenditures will be about 20%.

“Overall, especially in view of the prospect of lower Fed rates, I think this year will be better for growth,” Mr. Salceda said.

SMC-led group told to show financial projections for NAIA

February 19, 2024 | 12:07 am

NAIA-airport — Passengers disembark from their vehicles in front of the Ninoy Aquino International Airport (NAIA) Terminal 1 in Pasay City, Oct. 6, 2023. — REUTERS

By Ashley Erika O. Jose, Reporter

THE offer of San Miguel Corp. (SMC) consortium to rehabilitate and operate the Ninoy Aquino International Airport (NAIA) may face challenges as the financial viability of the project will heavily depend on the changing market environment, an analyst said.

“The consortium should provide detailed financial projections outlining their expected revenue streams, operating expenses, capital expenditures, and cash flow forecasts over the duration of the contract,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message to BusinessWorld on Sunday.

“These projections will help assess whether the proposed revenue share is feasible and sustainable in the long run,” he added.

He said the financial viability of the project will depend on the travel demand in the region, competition from other airports, and the changing economic environment that could influence travel patterns.

Last week, the Department of Transportation (DoTr) awarded the contract to rehabilitate, operate, and maintain NAIA to a consortium led by SMC.

The SMC SAP & Co. Consortium, composed of San Miguel Holdings Corp., RMM Asian Logistics, Inc., RLW Aviation Development, Inc., and Incheon International Airport Corp. (IIAC), has proposed to allocate 82.16% of NAIA revenues to the government.

The 15-year concession agreement for NAIA can be extended for a further 10 years based on the consortium’s performance. The SMC-SAP group plans to invest a total of P122.3 billion over a 25-year period.

The group, based on the concession agreement, will pay an upfront payment of P30 billion and P2 billion annuity pay aside from the revenue share.

With this, the government is expected to receive a payment of P36 billion a year or about P900 billion for the period of the concession agreement.

“Our proposal is designed not only to elevate NAIA to world-class standards but also to ensure that the government benefits from the most advantageous revenue-sharing agreement. This aims to secure a favorable outcome for our shareholders while prioritizing fairness and long-term sustainability over immediate profits,” SMC said in a statement.

The company is also constructing an international airport in Bulacan.

“The payment to the government consists of three things: the P30-billion upfront payment, P2-billion annuity, and the 82% of revenues. If you add these up that’s a total of P900 billion for the duration of 25 years,” Transportation Undersecretary Timothy John R. Batan said in a media briefing.

The notice of award for the NAIA-PPP project was issued to SMC-SAP on Feb. 16, Transportation Secretary Jaime J. Bautista said, adding that the two other bidders were informed of the decision.

Mr. Batan said the bidders had submitted challenges and disputes regarding the bidding but all of the disputes put forward had already been resolved by the pre-qualification bids and awards committee (PBAC).

“Offering an 82% revenue share to the government suggests a significant commitment to public benefit and potentially a lucrative deal for the government. However, the sustainability of this offer depends on various factors such as the total revenue generated by the upgraded NAIA, operating expenses, maintenance costs, and profit margins,” Globalinks Securities’ Mr. Arce said.

He said the group’s ability to efficiently manage and operate the airport will directly impact its financial performance.

“Assessing and mitigating potential risks such as construction delays, cost overruns, regulatory changes, and geopolitical factors is crucial for ensuring the sustainability of the project,” he said.

Nigel Paul C. Villarete, senior adviser on PPP at the technical advisory group Libra Konsult, Inc., said the Philippines will certainly benefit from the capability of SMC’s partner, South Korea’s IIAC, the operator of Incheon International Airport.

“As far as operating airports are concerned, Incheon Airport has been operated well by IIAC so we should expect NAIA to be operated properly as well. With respect to sustainability (of the revenue share offer), the concession agreement should have addressed this well [covering] all possible scenarios and eventualities that might happen within the concession period,” he said.

For his part, Rene S. Santiago, former president of the Transportation Science Society of the Philippines said with SMC-SAP’s offer being significantly higher than the other bidders, the DoTr has no choice but to award the concession agreement to the group.

“Let us assume that the bid evaluation committee did their job, and cleared the capability of SMC’s bid. With such a price bid, the same committee has no other option but to award. Else, a court challenge,” Mr. Santiago said.

The NAIA upgrade project aims to increase the current annual passenger capacity of NAIA to at least 62 million from the current 35 million.

For 2024, the Manila International Airport Authority has earlier said that it is expecting domestic and international passenger service charge revenue to reach P5.29 billion this year, a 25% increase over the estimated P4.22 billion for 2023.

The revenue from rental fees is expected to increase by 4% to P2.08 billion, concession privilege fees by 16% to P1.46 billion, and aeronautical fees by 19% to P5.32 billion.

A 24% increase to P7.36 billion is expected in the maintenance and other operational expenses.

The Tourism department reported 5.45 million international visitors in 2023, surpassing the year’s target of 4.8 million. For 2024, the department aims to attract 7.7 million international visitors.

UAAGI springs an executive surprise

February 19, 2024 | 12:07 am

VELO_MANNY_PAGE1_image1 — From left are Foton Philippines General Manager Levy Santos; United Asia Automotive Group, Inc. (UAAGI) Chairman Rommel Sytin; UAAGI Chief Marketing Executive Lyn Manalansang-Buena; and Chery Philippines Managing Director Froilan Dytianquin. — PHOTO BY MANNY N. DE LOS REYES

A Chinese New Year gathering turns out to be a double celebration

THE RATHER eleventh-hour invitations came straight from the father-and-son team of Rommel and Timothy Sytin — the former being the chairman of United Asia Automotive Group, Inc. (UAAGI), and the latter its marketing manager. UAAGi is the distributor of Foton trucks and commercial vehicles as well as Chery crossovers that are available with gasoline engines, as hybrids, and as pure EVs.

The date was Feb. 8 and the venue was the upscale Aurora Café at the Pacific Star building in Makati City. It was supposed to be a thanksgiving lunch to celebrate Chinese New Year — and it was. But what the assembled members of the media had no inkling about was the revelation of UAAGI’s new executive — make that executives.

After Rommel Sytin’s welcome remarks, Chery Auto Philippines Marketing Director Froilan Dytianquin followed up with a short speech, but just as he was wrapping it up, he segued to an announcement of a new member of the UAAGI family. The timing was perfect because as he mentioned the name of the new executive, the doors of the restaurant opened and in walked a car executive that needed absolutely no introduction.

She was none other than Lyn Manalansang-Buena, erstwhile executive vice-president of The Covenant Car Company, Inc. (TCCCI), the current distributor of Chevrolet and the founding (and now former) distributor of MG, which is now under SAIC Motor Philippines. Before TCCCI, she was with Volvo Philippines. Altogether, Lyn has more than a quarter century of automotive marketing experience.

The look of surprise and delight that lit up the faces of all the media attendees attest to the deep respect that this vibrant, hard-working lady commands from the automotive media. Foton Philippines General Manager Levy Santos was also on hand to welcome the newcomer.

Lyn is now the Chief Marketing Executive of UAAGI. She will handle the marketing operations of Chery, Foton, the upcoming Lynk & Co. premium Chinese brand, and any additional brand that UAAGI might introduce in the future. She reports directly to the chairman.

Expect big things from UAAGI with its veritable dream team of executives and staff from some of the most successful automotive brands in the country.

Airline fuel surcharge to rise in March

February 19, 2024 | 12:06 am

THE Civil Aeronautics Board (CAB) has increased the airline fuel surcharge for March.

The fuel surcharge, which is added to the base fare, was increased to Level 6 from Level 5 in February, the agency said in an advisory signed by CAB Executive Director Carmelo L. Arcilla.

“Airlines wishing to impose or collect fuel surcharge for the same period must file its application with this office on or before the effectivity period, with fuel surcharge rates not exceeding the above-stated level,” CAB said in an advisory over the weekend.

At Level 6, the domestic passenger surcharge ranges from P185 to P665, while the international surcharge ranges from P610.37 to P4,538.40.

The CAB said the applicable conversion rate for March is P56.14 to the dollar.

At the current Level 5, domestic passenger surcharge ranges from P151 to P542, while for international flights, the surcharge varies between P498.03 and P3,703.11.

Airline fuel surcharge is an optional fee, collected and imposed by airlines to recover fuel costs. It is based on the movements in jet fuel prices, using a benchmark known as MOPS (Mean of Platts Singapore).

Budget carrier Cebu Pacific has encouraged passengers to book their flights ahead to take advantage of the lower fuel surcharge.

“Despite the increase in fuel surcharge, Cebu Pacific will continue to offer great value to our passengers through our seat sales that help keep air travel affordable and accessible. We enjoin our passengers to book their flights ahead of time to take advantage of low fares,” Alexander G. Lao, Cebu Pacific president and chief commercial officer, said in a Viber message.

BusinessWorld sought comments from flag carrier Philippine Airlines and low-cost airline Air Asia but has yet to receive comments as of the deadline. — Ashley Erika O. Jose

Porsche comes to shove

February 19, 2024 | 12:06 am

VELO_ANGEL_PAGE1_image2 — Taycan her heart. Author Angel Rivero poses with the fully electric Porsche Taycan that was her favorite on the track. — PHOTO FROM PGA CARS

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Extracting performance from the German brand’s models

By Angel Rivero

WHAT A SPECIAL DAY it was — a three-day extravaganza where speed, luxury, and precision converged in a celebration of four of the most illustrious car brands: Porsche, Audi, Lamborghini, and Bentley. They called it the PGA World of Supercars. And hurrah, I was one of the giddy invitees!

The event was held at the Clark International Speedway from Feb. 2 to 4, and it easily drew close to 300 participants. Guests were afforded the opportunity to test-drive these sophisticated vehicles, and among the driving exercises were a slalom, acceleration and braking, water-wading, and guided laps around the track.

The special opportunity to test the limits of these beautiful machines were carried out under the guidance of seasoned professionals, namely: Filipino race drivers Georges Ramirez and Louis Ramirez, French race driver Benjamin Rouget, and Macanese race driver Rodolfo Avila.

As my participation at the busy PGA World of Supercars event started off with slalom rounds, I got to test the precision and agility of the handsome Porsche Cayman and the Porsche Macan — doing some speedy maneuvering, and using different drive modes. They clearly did not disappoint.

After all, the Cayman is some kind of a slalom virtuoso, because at the heart of its prowess lies a meticulously engineered chassis and suspension system that is calibrated to deliver excellent agility and responsiveness; not to mention that it also carries near-perfect weight distribution.

Meanwhile, the Porsche Macan, even with its larger stature compared to the Cayman, is delightfully adept at maneuvering through slaloms with confidence. Its relatively compact dimensions and finely tuned suspension system allow it to navigate through tight courses with delightful precision and poise.

Following the slaloms were acceleration and braking tests of the Porsche Cayenne V6 and the all-electric Porsche Taycan. The Cayenne V6 accelerates with authority, and its high-performance brake systems allow me to modulate the braking force with control and confidence. But I have to say that the all-electric Taycan was my favorite — as it instantaneously surged forward and upon reaching high speed, still provided the most reassuring and confidence-building stopping power as soon as I stepped on the brakes.

Furthermore, there were also water-wading driving exercises for customers, using the Audi Q7, Porsche Cayenne S Coupe, and the Audi e-Tron 55 Q8. Prospective clients who preferred to test-drive and experience the newest models’ latest features were also given the chance to do so along roads within the vicinity of Clark International Speedway. There were also open-track sessions for car owners who craved for the thrills of pushing their own cars to its limits on the racetrack.

It truly was an awesome experience to explore the varying limits of performance in the cockpits of some of the most revered vehicles. Certainly, these exciting memories will linger even long after all the race tires had cooled.