H&M probes abuses at Myanmar garment factories

August 16, 2023 | 5:00 pm

LONDON — H&M told Reuters it is following up on 20 alleged instances of labor abuse at Myanmar garment factories that supply the world’s second-largest fashion retailer, just weeks after top rival Zara owner Inditex said it is phasing out purchases from the Southeast Asian country.

A UK-based human rights advocacy group tracked 156 cases of alleged worker abuses in Myanmar garment factories from February 2022 to February 2023, up from 56 in the previous year, indicating a deterioration of workers’ rights since a military coup in February 2021.

Wage reduction and wage theft were the most frequently reported allegations, followed by unfair dismissal, inhumane work rates, and forced overtime, according to a report by the NGO, the Business and Human Rights Resource Centre (BHRRC) seen by Reuters and set to be published on Wednesday.

“All the cases raised in the report by BHRRC are being followed-up and where needed remediated through our local team on the ground and in close cooperation with relevant stakeholders,” H&M said in a statement.

“We are deeply concerned by the latest developments in Myanmar, and we see increased challenges to conduct our operations according to our standards and requirements,” the Swedish retailer said.

The BHRRC has been tracking allegations of workers’ rights abuses in garment factories since the military junta took power in Myanmar, plunging it into political and humanitarian crisis. The tracker includes abuse cases at 124 separate factories.

The BHRRC said it tracks cases of alleged abuses through sources including union leaders, international media, and local media such as Myanmar Labour News, and seeks to verify reports by checking with brands and interviewing workers. Reuters did not independently verify its findings.

There have been 21 cases of alleged abuses linked to Inditex suppliers, according to the report. Inditex declined to comment on the report.

A spokesperson for Myanmar’s military government did not reply to a request for comment on the findings. The Myanmar Garment Manufacturing Association did not reply to a request for comment.

MADE IN MYANMAR
Spanish group Inditex was the latest brand to say it would cut ties with Myanmar suppliers, after Primark and Marks & Spencer last year, in a trend that some say could ultimately leave garment workers worse off.

Some brands have instead ramped up monitoring of suppliers in Myanmar, the survey conducted by the BHRRC found. Field offices in the country, for example, enable brands to conduct their own inspections instead of relying on external audits.

Dublin-based Primark has doubled its number of Yangon-based staff even after announcing last September it would stop sourcing from Myanmar, the survey found, while Danish fashion company Bestseller increased its number of staff on the ground from three to 11 since the coup.

H&M and Bestseller are among 18 brands that are part of the European Union (EU)-funded MADE project aimed at improving labor conditions in Myanmar’s garment factories.

The EU’s stance is that companies should continue sourcing garments from Myanmar, where the industry is a key employer, with more than 500 factories producing clothes and shoes for big brands.

“By engaging as a company in discussions with local labor rights groups and trade unions on wages and labor conditions you can have leverage,” said Karina Ufert, CEO at the European Chamber of Commerce in Myanmar.

“By leaving the country, it is difficult to see how you can have an influence on local conditions.”

Vicky Bowman, former UK ambassador to Myanmar and director of the Myanmar Centre for Responsible Business, said the international brands under pressure to stop buying from Myanmar are also the most likely to provide stable jobs and take additional steps to guard against rights abuses.

“If they leave, either the jobs disappear entirely, or factories scrabble to receive orders from footloose buying agents who care only about cheap labor and do not worry about factory conditions,” Bowman told Reuters. — Reuters

Norway wealth fund to firms: Use AI, but do it responsibly

August 16, 2023 | 4:59 pm

artificial-intelligence-3382507_1920 — STOCK PHOTO | Image by Gerd Altmann from Pixabay

OSLO — Norway’s $1.4-trillion wealth fund, the world’s single largest stock market investor, is urging firms it invests in to engage with artificial intelligence (AI) as a way to drive profits, but to do so responsibly, top officials told Reuters.

Fund Chief Executive Officer Nicolai Tangen said it was crucial for all firms in its portfolio to engage with AI, as it is “potentially a massive driver for productivity and efficiency” that is becoming an everyday business tool like power, computers or the internet.

“We of course expect them to use AI for the best possible benefit of the business,” Mr. Tangen said in an interview. “AI is a huge opportunity for companies and for society, but we need to make sure that it is used in the right way.”

Tangen said a company that would not engage with AI “would disqualify themselves as being complete morons.”

The fund invests in 9,200 firms worldwide, for which it sets expectations on a range of issues, from children’s rights to climate change.

Its latest document, to be published Wednesday, is on consumers’ interests, with a heavy focus on AI.

When talking to firms about responsible AI, the fund will concentrate particularly on the healthcare, finance and large tech sectors, because their use of the technology will have an especially strong impact on consumers.

Companies must be able to explain why they are developing particular AI systems and how they have been designed, trained and tested, according to the document. There should also be effective human oversight and control.

That is so “people (who) are affected by the outcomes can actually go back to the company and ask ‘how does your algorithm work? Why did I not get the loan?’”, said Carine Smith Ihenacho, the fund’s chief governance and compliance officer.

Among other expectations set in the document, the fund said companies must be proactive in their management of AI-related risks, and have systems in place if or when things go wrong.

Special responsibility lies with the top tech companies that develop AI technology since they are driving the change, said the fund, a top ten investor in Microsoft, Amazon, Alphabet and Nvidia.

“They have to take responsibility for their development and use of AI,” said Smith Ihenacho, adding the fund had already discussed AI with the large US tech companies in its portfolio.

“We have done it and we will continue to do it,” she said.

She welcomed recent self-regulation moves by US tech giants as “a good start” but noted that there were “no proper regulations in place yet” and that more was needed.

In July, US AI companies made voluntary commitments to the White House to implement measures such as watermarking AI-generated content to make the technology safer.

“That is where there is room for investors like us to come in and fill the gap,” said Smith Ihenacho.

Tech is the largest sector in the fund’s equity investments, representing 11.9% of its total value at end-2022, its data showed.

Dialogue with companies and voting at annual general meetings is the focus of its environment, social and governance (ESG) approach, but the fund can, and does, divest from companies that do not comply with its requirements. Last year it divested from 74 firms on those grounds. — Reuters

Prayers, terror and a race to escape as wildfire bore down on Hawaiian town

August 16, 2023 | 4:58 pm

Hawaii, US-wildfires — A CHARRED BOAT lies in the scorched waterfront after wildfires fanned by the winds of a distant hurricane devastated Maui’s city of Lahaina, Hawaii, US, Aug. 9. — MASON JARVI/HANDOUT VIA REUTERS

OLOWALU, Hawaii — Yadira Ulloa was pumping gas near the apartment building where she lived on the western side of Maui when the winds kicked up, blowing shingles off the roof and propelling the wildfire that would soon incinerate her town of Lahaina.

The winds from a distant hurricane were so fierce they shook her car, and as the fire approached, Ulloa began to pray. Her teen daughter, she realized, was alone in their apartment.

“God guided me,” she said as she recalled the day last Tuesday when a wildfire ripped apart her community. “I went straight to my apartment and there was my daughter.”

“Let’s go!” Ulloa told her. “We ran away.”

Racing down the stairs, seeing the blaze come closer, Ulloa began to cry. “The fire didn’t stop,” she said. “It came running.”

They climbed into Ulloa’s blue truck and fled. The gas station, she later learned, exploded when the wildfire reached it, and the apartment building burned to the ground.

The inferno killed at least 101 people after racing from grasslands outside town into Lahaina.

The magnitude of the fire, which charred a 5-square-mile (13-square-km) area of town in hours, combined with the logistical challenges of recovery have taken a toll on many of Lahaina’s 13,000 year-round residents, who are also facing the prospect of precious tourist dollars evaporating.

Ulloa, who works as a housekeeper, and her daughter found refuge with an older daughter in the village of Olowalu. But the 55-year-old has been barely able to eat or sleep in the days since. Like many here, she wishes there had been an emergency alert warning to spur people into leaving sooner.

Taxi driver Kiet Ma, 56, was at home as the fire bore down, just 50 feet (15 m) away from his house. His wife Daisy Luu, 56 and also a taxi driver, was out on the road somewhere in the swirling black smoke. He couldn’t reach her because phone and electrical services were down.

Finally, at around 4:30 pm, he said, “I decided it’s time to run.” He followed a neighbor out as the fire bore down. Emergency sirens came on, he said, but their announcements blared evacuations for a different part of town. For two nights, he slept in his car outside the fire zone before joining his wife at her sister’s home in Olowalu – the same home where Ulloa’s daughter rented a room.

On Thursday, Ma and Luu went back to check on their home – it was gone. Twenty years of work, driving private taxis on the island, putting everything into their house, and there was nothing left. Luu showed a visitor before-and-after photos – a peaceful looking ranch-style suburban home, bounded by a fence on a property dotted with palm trees. And then rubble.

“All my life put in, and it’s gone in a minute,” she said. — Reuters

Latin Americans fall prey to more online scams as cybersecurity lags

August 16, 2023 | 4:58 pm

MEXICO CITY — Gabriella Batalha didn’t think much when she noticed she had been logged out of Instagram – until the next day when she found her account overrun with sensational posts touting high-yield cryptocurrency investments.

To recover her account, the 27-year-old lawyer from Rio de Janeiro had to pay 200 reais ($40) to a “consultant” she found on YouTube, a man she says could have been a scammer himself.

“It took me two days to recover my account, and I was under a lot of stress,” she said.

Batalha is not alone. Online scams in Brazil jumped 65% last year to over 200,000, according to data from the Brazilian Public Security Yearbook published last month.

And across Latin America, online frauds and cyberattacks are at an “all-time high,” says cybersecurity company Tenable, posing an urgent problem for a well-connected region.

Latin America’s recent progress on technological inclusion has created new opportunities for scams, experts say, with the pandemic fueling a trend toward mobile banking and shopping using payment systems like Brazil’s hugely popular PIX.

The region is increasingly online. In 2022, 77.9% of the population in Latin America and the Caribbean used the internet, up from 74.8% the year before and above the global rate of 66.3%, according to the International Telecommunication Union (ITU).

And nearly half of Latin American internet users spend an average of six hours a day on social media, according to a report by cybersecurity company Kaspersky.

“The increasing reliance on new technology has made it easier for cybercriminals to attack more frequently,” said Kerry-Ann Barrett, a cybersecurity specialist at the Organization of American States (OAS).

The threats are increasingly complex and costly, costing the region billions annually, Barrett said.

In Peru, for example, a gang scammed a construction company out of over $62,000 by pretending to be a bank with a fake website, according to the attorney general’s office.

In Mexico, scammers have targeted unsuspecting victims with fake job offers via text message, only to entice victims to share sensitive personal data, according to media reports.

“Latin America is a priority target because it has a very connected population, which means that they are always exposed,” said Claudio Martinelli, managing director for Latin America for Kaspersky.

Institutions and governments are also more vulnerable than in other parts of the world. In a ranking of 93 countries on cyberthreat risks compiled by fraud prevention software SEON, nine of the 10 Latin American countries were ranked in the bottom half.

Three Latin American countries – Honduras, Nicaragua and Venezuela – were seen among the 10 countries with the highest risks for cyberthreats.

The region, meanwhile, had the highest share of unprotected data in the world in 2022, Tenable said, making companies vulnerable to threats like ransomware, a kind of attack that locks a computer and then demands money for its release.

Ransomware was responsible for six of every 10 attacks in 2022, including an attack on Costa Rica’s finance ministry by Russian hackers, who demanded $10 million.

Latin America’s ability to safeguard against future attacks is handicapped by a lack of regulation and judicial investigations, said Marcos Simplicio, a professor specializing in cybersecurity at the University of Sao Paulo.

“Virtual crime is no different from physical crime,” he said. “As long as it’s making a profit, and if there is little chance of punishment, it will continue.” — Reuters

China military action to US stopover would be election interference, Taiwan VP says

August 16, 2023 | 2:02 pm

China-Taiwan-Chess — CHESS PIECES are seen in front of displayed China and Taiwan’s flags in this illustration taken Jan. 25, 2022. — REUTERS

TAIPEI — Any Chinese military action in response to stopovers in the United States by Taiwan Vice President William Lai would be an attempt by China to interfere in the island’s elections, Lai said during a trip to Paraguay.

Taiwanese officials say China could launch military drills this week, using Lai’s stopovers in the United States as a pretext to intimidate voters ahead of an election next year and make them “fear war”.

China, which claims Taiwan as its own territory, has a particular dislike of Lai who has in the past described himself as a “practical worker for Taiwan independence”. He is the front-runner to become the next president in January’s election.

Speaking to reporters on Tuesday in Paraguay, where he arrived via New York, Lai said such U.S. transits were routine and China had no cause to use them as an excuse to “verbally and militarily intimidate Taiwan”, the island’s official Central News Agency reported.

“If China uses the transits as an excuse to again launch verbal and military intimidation or other threatening methods, it just confirms international media reports that China is attempting to intervene in Taiwan’s election with military threats,” the news agency cited Lai as saying.

Lai, however, said he had confidence in Taiwan’s people.

Taiwan’s defense ministry said on Tuesday it had yet to see any large-scale Chinese maneuvres near the island.

In April, China held war games around Taiwan after President Tsai Ing-wen returned from California where she met U.S. House Speaker Kevin McCarthy on her way back from Central America.

China has denounced Lai’s New York stop – he is due in San Francisco on Wednesday on his way back to Taipei – and said he is a separatist “troublemaker”.

Both Taiwan and the United States have sought to keep Lai’s U.S. stopovers low key, and Lai said there were “no special arrangements” to meet with U.S. officials.

China considers Taiwan to be its most sensitive and important political and diplomatic issue, and it is a constant source of Sino-U.S. friction.

Speaking at a conference in Moscow on Tuesday, Chinese Defence Minister Li Shangfu said “playing with fire on the Taiwan issue and vainly trying to ‘control China with Taiwan’ is bound to end in failure”.

Lai has been in Paraguay for the inauguration of its new president. It is one of only 13 countries to maintain formal diplomatic ties with Taiwan.

Lai posted on his Facebook pages pictures of him in Asuncion shaking hands with and chatting to U.S. Interior Secretary Deb Haaland, as well as Spain’s King Felipe VI and Brazilian President Luiz Inacio Lula da Silva, who were there for the same event.

China says Taiwan has no right to state-to-state ties and has been trying to pick off Taiwan’s remaining diplomatic allies. Honduras, once a stalwart friend of Taipei’s, switched ties to Beijing in March. — Reuters

Ukraine says Russian drones threatened Danube port, key for grain exports

August 16, 2023 | 1:58 pm

Ukraine’s air force on Wednesday said a large group of Russian army drones entered the mouth of the Danube river and headed toward the Izmail river port near the border with Romania.

Social media groups reported hearing air defense systems firing in the area near two Danube ports – Izmail and Reni.

The governor of southern Odesa region, Oleh Kiper, asked residents of Izmail district to take shelter at around 1:30 a.m. (2230 GMT) and cancelled the air raid alert one hour later.

Ukraine’s Danube ports accounted for around a quarter of grain exports before Russia pulled out of a U.N.-backed deal to provide safe passage for the export of Ukrainian grain via the Black Sea.

They have since become the main route out, with grain sent on barges to Romania’s Black Sea port of Constanta for shipment onwards.

A Russian attack on the Izmail port sent global food prices higher in early August. — Reuters

Musk’s X delays access to content on Reuters, NY Times, social media rivals

August 16, 2023 | 1:57 pm

Social media company X, formerly known as Twitter, delayed access to links to content on the Reuters and New York Times websites as well as rivals like Bluesky, Facebook and Instagram, according to a Washington Post report on Tuesday.

Clicking a link on X to one of the affected websites resulted in a delay of about five seconds before the webpage loaded, the Washington Post reported, citing tests it conducted on Tuesday. Reuters also saw a similar delay in tests it ran.

By late Tuesday afternoon, X appeared to have eliminated the delay. When contacted for comment, X confirmed the delay was removed but did not elaborate.

Billionaire Elon Musk, who bought Twitter in October, has previously lashed out at news organizations and journalists who have reported critically on his companies, which include Tesla and SpaceX. Twitter has previously prevented users from posting links to competing social media platforms.

Reuters could not establish the precise time when X began delaying links to some websites.

A user on Hacker News, a tech forum, posted about the delay earlier on Tuesday and wrote that X began delaying links to the New York Times on Aug. 4.

On that day, Musk criticized the publication’s coverage of South Africa and accused it of supporting calls for genocide. Reuters has no evidence that the two events are related.

A spokesperson for the New York Times said it has not received an explanation from X about the link delay.

“While we don’t know the rationale behind the application of this time delay, we would be concerned by targeted pressure applied to any news organization for unclear reasons,” the spokesperson said on Tuesday.

A Reuters spokesperson said: “We are aware of the report in the Washington Post of a delay in opening links to Reuters stories on X. We are looking into the matter.”

Bluesky, an X rival that has Twitter co-founder Jack Dorsey on its board, did not reply to a request for comment.

Meta, which owns Facebook and Instagram, did not immediately respond to a request for comment. — Reuters

JPMorgan, US Virgin Islands trade accusations over Epstein

August 16, 2023 | 1:56 pm

NEW YORK — JPMorgan Chase and the U.S. Virgin Islands traded new accusations this week in legal filings over their relationships with the late disgraced financier Jeffrey Epstein.

The largest U.S. bank detailed how Epstein allegedly funneled hundreds of thousands of dollars in payments and loans to a former U.S. Virgin Islands governor and his wife.

The territory in a separate filing cited a 2011 email from a senior JPMorgan executive about suspicious cash withdrawals by Epstein.

JPMorgan made its allegations in a filing of more than 610 pages in Manhattan federal court. The filing containing the U.S. Virgin Islands accusations was more than 680 pages.

The territory is seeking at least $190 million from JPMorgan over the bank’s work for Epstein from 1998 to 2013.

While the documents had been previously submitted to the court, the latest filings contain fewer redactions. A trial is scheduled for Oct. 23.

JPMorgan said former U.S. Virgin Islands Governor John de Jongh and his wife Cecile had an extensive relationship with Epstein that included the receipt of political donations, employment for Cecile, and a $200,000 loan to the family.

The territory, where Epstein owned two neighboring islands, is seeking damages for Epstein’s abuse victims.

JPMorgan in its filing said the territory failed to show why it deserves “victim damages” when “actual victims” of Epstein will receive money from previously announced settlements.

The U.S. Virgin Islands also failed to show that the bank committed obstruction, JPMorgan said.

The territory in response quoted a 2011 email from John Duffy, who led JPMorgan’s private bank at the time, about Epstein’s alleged withdrawals to pay victims.

“JE and I spoke about his pattern of cash withdrawals,” Duffy wrote. “His answer was ‘fuel payments in foreign countries.’” Duffy allegedly asked Epstein to use a separate account rather than his personal account for the payments.

The territory also quoted an email exchange the prior month between Epstein and Mary Erdoes, who now leads JPMorgan’s asset and wealth management business.

“Let’s move on, and make some real money,” Epstein wrote.

“Onwards and upwards, on so many fronts,” Erdoes replied.

The de Jonghs, Duffy and Erdoes are not parties to the lawsuit. Epstein died by suicide in August 2019 in a Manhattan jail while awaiting trial for sex trafficking.

“Rather than account for its own failures to investigate and monitor this criminal under its jurisdiction, USVI blames a bank that did not have USVI’s authority to enforce any law,” JPMorgan said in a statement responding to the territory’s filing.

The bank regretted its association with Epstein, but said it did not aid in his crimes and would not have kept him as a client had it thought he was engaged in sex trafficking.

Regarding the loan to the de Jonghs, the U.S. Virgin Islands maintained there was no evidence it gave Epstein favored treatment in exchange for political donations, and said the loan was made “after the former governor left office.” — Reuters

Google to train 20,000 Nigerians in digital skills

August 16, 2023 | 1:52 pm

ABUJA — Google plans to train 20,000 Nigerian women and youth in digital skills and provide a grant of 1.2 billion naira ($1.6 million) to help the government’s create one million digital jobs in the country, its Africa executives said on Tuesday.

Nigeria plans to create digital jobs for its teeming youth population, Vice President Kashim Shettima told Google Africa executives during a meeting in Abuja. Shettima did not provide a timeline for creating the jobs.

Google Africa executives said a grant from its philanthropic arm in partnership with Data Science Nigeria and the Creative Industry Initiative for Africa will facilitate the program.

Shettima said Google’s initiative aligned with the government’s commitment to increase youth participation in the digital economy. The government is also working with the country’s banks on the project, Shettima added.

Google director for West Africa Olumide Balogun said the company would commit funds and provide digital skills to women and young people in Nigeria and also enable startups to grow, which will create jobs.

Google is committed to investing in digital infrastructure across Africa, Charles Murito, Google Africa’s director of government relations and public policy, said during the meeting, adding that digital transformation can be a job enabler. — Reuters

PHL recommends 500,000 MT rice imports to cover El Niño-related crop losses

August 16, 2023 | 12:49 pm

The Philippines’ Department of Agriculture is recommending additional rice importation of about 500,000 metric tons to cover potential crop losses from the El Niño dry weather condition, a senior official said on Wednesday.

The additional importation by one of the world’s biggest buyers of the staple grain, which should be brought in by private traders, must arrive between November and January next year, Agriculture Undersecretary Mercedita A. Sombilla told a congressional hearing.

The recommended volume is on top of the additional approved rice purchases by private traders this year, of which 300,000 metric tons were supposed to arrive later this month, and another 300,000 metric tons in September.

Ms. Sombilla said 89% of the Philippines’ rice imports so far this year came from Vietnam, with the rest from Myanmar, Thailand, Pakistan and India, among others.

Retail prices for imported and locally produced rice in the Philippines rose further this month by as much as 14%, based on government data, as global and domestic farmgate prices soared, adding pressure on food inflation.

The government expects the impact of El Niño weather pattern on agricultural output to be felt between the last quarter until the first three months of 2024. — Reuters

June remittances hit 6-month high

August 16, 2023 | 12:34 am

US dollar currency — Cash remittances rose to a six-month high in June. — REUTERS

By Keisha B. Ta-asan, Reporter

MONEY SENT by overseas Filipino workers (OFWs) rose to a six-month high in June, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Cash remittances coursed through banks rose by 2.1% to $2.81 billion in June, from $2.75 billion in the same month in 2022.

The June cash remittance inflows are at the highest level since the $3.16 billion in December 2022.

However, the 2.1% annual growth in cash remittances was the slowest in 13 months or since the 1.8% rise seen in May 2022.

“The expansion in cash remittances in June 2023 was due to the growth in receipts from land- and sea-based workers,” the BSP said.

Remittances from land-based workers jumped by 2.1% year on year to $2.29 billion in June, while money sent by sea-based workers increased by 1.9% to $524 million.

For the first six months of 2023, cash remittances rose by 2.9% to $15.79 billion, from $15.35 billion in the comparable period last year.

Security Bank Corp. Chief Economist Robert Dan J. Roces said improved economic conditions in host countries led to more job opportunities and better wages for OFWs.

“Increased demand for labor in host countries boosted OFW employment and remittances… Positive fluctuations in exchange rates increased remittance values in Philippine peso terms,” he said.

The peso closed at P55.20 against the dollar on June 30, appreciating by 95 centavos or 1.7% from its P56.15 close on May 31.

However, the slower growth rate in June may be attributed to base effects, with a high-remittance month in the previous year made growth seem slower, Mr. Roces said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said OFWs may have sent more money back home to support their families amid rising prices.

Headline inflation eased to 5.4% in June from 6.1% both in May 2023 and June 2022, the slowest in 14 months. Still, it marked the 15^th straight month of inflation exceeding the BSP’s 2-4% target band.

BSP data showed cash remittances in the January-to-June period were driven mainly by higher inflows from the United States, Singapore, and United Arab Emirates (UAE).

By country, the US accounted for the biggest share (41.1%) of total remittances during the six-month period.

The US, along with Singapore, Saudi Arabia, Japan, the United Kingdom, the UAE, Canada, Korea, Qatar, and Taiwan, accounted for 79.7% of total cash remittances in the first semester.

Meanwhile, BSP data showed personal remittances, which included inflows in kind, rose by 2.2% to $3.13 billion in June from the $3.06 billion posted in the same month last year.

This brought personal remittances 3% higher to $17.59 billion in the first half of the year from $17.09 billion a year ago.

“The outlook remains uncertain due to evolving global conditions and offshore market movements which affect the peso,” Mr. Roces said. “However, economic recovery and stability in host countries will influence remittance trends.”

Mr. Ricafort said he expects OFWs to continue sending more cash to their families, especially as school reopens.

“Risk of an economic slowdown in the US partly due to aggressive Fed rate hikes… would still be a drag for OFW remittances especially if there would be job losses,” Mr. Ricafort said, but added this may be offset by the economic reopening in China.

The central bank expects remittances to grow by 3% this year.

House panel approves bill seeking to reform military pension system

August 16, 2023 | 12:33 am

military parade — The government is pushing to reform the pension system for military and uniformed personnel. — PHILIPPINE STAR/EDD GUMBAN

A HOUSE of Representatives ad hoc committee approved on Tuesday a consolidated bill that seeks to reform the military and uniformed personnel (MUP) pension system.

Albay Rep. Jose Maria Clemente S. Salceda, who is the chairman of the ad hoc committee on the MUP pension system, said the committee members agreed in principle on a substitute bill that is “amenable” to economic managers and the military and uniformed personnel.

“This is a win-win solution, because we are removing the risks of sudden spikes in pension liabilities while also ensuring that salaries and pensions increase at manageable levels,” he said.

Economic managers earlier warned the current MUP pension system is unsustainable and may trigger a “fiscal collapse.”

A copy of the approved bill was not made available as of press time.

Mr. Salceda in a statement said the measure would guarantee salary increases, pension indexation and funding sources for the MUP pension system.

Under the measure, all MUP would now be required to contribute to the pension fund. For active personnel, they would contribute 5% for the first three years, 7% for the following three years, and 9% thereafter. For new entrants, they would have to contribute 9% immediately, but “a larger government counterpart to complete 21% contribution,” Mr. Salceda said.

All MUP will also be guaranteed a 3% salary increase under the measure.

“For the past 25 years, the salaries have only increased for nine years, so this is also a win for the active personnel, who will get a salary increase every year for the next 10 years,” he said.

The retirement age for all MUP will now be fixed at 57, or after completing 30 years of satisfactory service.

Another key provision is the 90% maximum retirement package based on the base pay of all MUP, raising by 5% the previous package for Armed Forces of the Philippines (AFP) personnel.

The measure also includes Philippine National Police (PNP) personnel who leave with less than 20 years’ service in the list of those eligible for a lump sum separation pay.

Mr. Salceda said the bill will retain the indexation of pensions, which means MUP pensioners would be guaranteed an increase in pensions for 10 years. However, this would be capped at 50% of the salary increase.

The current policy where an MUP will be promoted to one rank higher upon retirement will also be maintained.

The measure will also create two separate pension management systems — one for the AFP and another for civilian uniformed personnel.

As part of the reform, there will be a periodic review of pension benefits and a possible increase of up to 1.5% per year, although this may depend on economic conditions and actuarial life of the pension fund.

Finance Secretary Benjamin E. Diokno said in a statement that the creation of the MUP trust funds is one of the key reform proposals. These will be funded through MUP contributions, with a corresponding government share, and supplemented by the proceeds from the sale or lease of MUP assets, he added.

“At the core of our reform package is the creation of separate pension funds that recognize the unique nature of military service, and provide retirement benefits that reflect the sacrifices by the military and uniformed personnel,” Mr. Diokno said.

Mr. Salceda said the government contribution to the MUP fund may reach up to P70 billion.

“If we think about it, the government will contribute more to MUPs, with a counterpart of almost P70 billion. Every P1 that the MUPs will provide, the government will contribute P150,” he said in Filipino.

During the committee hearing on Tuesday, Deputy Treasurer Erwin D. Sta. Ana said the MUP pension system’s dependence on full government funding makes it “highly vulnerable to economic and fiscal downturns, leading to an unstable and an unreliable benefits system.”

The MUP pension reform bill is on the Legislative-Executive Development Advisory Council’s list of 20 priority measures that are targeted for approval by December. — Keisha B. Ta-asan