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N. Korea warns of ‘security crisis’ if US, S. Korea escalate tensions

WIKIMEDIA COMMONS

SEOUL  North Korea on Wednesday said South Korea and the United States missed a chance to improve relations and are risking a “serious security crisis” by choosing to escalate tensions as they conduct joint military drills. 

Kim Yong Chol, a general and politician who played a leading role during historic summits between North Korean leader Kim Jong Un and former US President Donald J. Trump, criticized South Korea and the United States for responding to Pyongyang’s goodwill with “hostile acts.” 

The statement comes a day after Kim Yo Jong, the powerful sister of leader Kim Jong Un, warned Seoul and Washington over annual joint military drills set to begin this week.  

For the second day in a row, North Korea did not answer routine calls on inter-Korean hotlines, South Korea said on Wednesday. 

The hotlines were only reconnected at the end of July, more than a year after the North severed them amid rising tensions. 

The sudden resumption in inter-Korean calls followed a series of letters between South Korean President Moon Jae-in and Kim Jong Un, but the new flare-up casts doubt on Mr. Moon’s goal of improving relations with Pyongyang in this last year of his presidency. 

It also raises the prospect of new North Korea missile tests, something Pyongyang has often done in the past to signal its displeasure. 

Kim Yong Chol singled out Seoul for what he said was a missed opportunity to improve inter-Korean relations by going ahead with the drills. 

The South must be made to “clearly understand how dearly they have to pay” for choosing their alliance with Washington over peace between the Koreas, he said in the statement carried by state news agency KCNA. 

“We will make them realize by the minute what a dangerous choice they made and what a serious security crisis they will face because of their wrong choice,” Mr. Kim said. 

US President Joseph R. Biden, Jr., has said it is up to Pyongyang to respond to his pledge to seek “practical” ways to engage. 

North Korea has also said it is open to diplomacy, but that the United States and South Korea have clung to hostile policies, such as continuing to hold regular military drills. 

Analysts said Pyongyang may be using sharp rhetoric to boost its leverage in future talks, wring concessions from South Korea, or distract from domestic economic crises. 

“The Kim regime is shifting blame for its struggles to restart the economy after a long, self-imposed pandemic lockdown,” said Leif-Eric Easley, a professor of international studies at Ewha University in Seoul. 

“Pyongyang is also trying to pressure South Korean presidential candidates to express differences with US policy on sanctions and denuclearization,” he added.   Sangmi Cha and Josh Smith/Reuters

From Middle East to India, women ‘violated’ in Pegasus hack

UNSPLASH

BANGKOK/BEIRUT — Dozens of women across India, the Middle East, and North Africa who were likely targeted for surveillance by governments using Pegasus spyware are now at a heightened risk of being blackmailed or harassed, tech experts and victims said.  

Developed by Israeli tech firm NSO, Pegasus turns a mobile phone into a surveillance device — using its microphone and cameras and accessing and exporting messages, photos, and e-mails without the user’s knowledge.  

Deploying the software in countries with few privacy protections, restricted freedom of expression, and broadly conservative societies can pose a particular risk to women, rights activists warned.  

“A woman being targeted for surveillance is different from a man being targeted because any information can always be used to blackmail or discredit her,” said Anushka Jain at the Internet Freedom Foundation in Delhi, that is providing legal assistance to two activists — including a woman — who were targeted.  

“Women already face harassment online. If they think they can be surveilled, they may self censor even more and will simply be afraid to speak up,” said Ms. Jain, an associate counsel.  

A leaked database of 50,000 phone numbers that were possibly compromised between 20172019 included dozens of numbers of women  60 of them from India, among them journalists, activists and homemakers, according to Indian news portal The Wire.  

One potential target was a former Supreme Court employee who accused then-chief justice Ranjan Gogoi of sexual harassment, although judges later dismissed the complaint. Several members of her family were also on the list.  

“She was not a public persona, so she was being surveilled for no other reason than that (complaint),” Ms. Jain said of the woman, whose identity has not been publicly disclosed.  

“It’s a massive invasion of her privacy,” Ms. Jain told the Thomson Reuters Foundation.  

Indian authorities have declined to say whether the government had purchased Pegasus spyware for surveillance, only saying that “unauthorized surveillance does not occur.”  

In an e-mailed statement, an NSO spokesperson said that it undertakes “vigorous pre-sale human rights and legal compliance checks to minimize the potential for misuse” and has cut access to clients who have been found to be abusing the technology.  

The spokesperson declined to say whether any of those shutdowns were linked to the use of material gathered through Pegasus to blackmail or otherwise intimidate women.  

PAWNS TO SETTLE SCORES’ 
In India and beyond, some women were suspected to have been targeted not because of their activities, but because they were linked to other potential targets.  

Abha Singh, a lawyer and former bureaucrat in Mumbai, said the news that she was a potential target came as a “huge shock.”  

Her brother, a senior law enforcement officer, was also on the list, according to The Wire.  

“Women have become pawns to settle scores, and are being implicated for nothing other than who they are connected to,” said Ms. Singh.  

“But I will not be silenced; I will carry on with my work,” said Ms. Singh, who works on issues including gender justice and freedom of expression.  

A similar trend emerged in the Middle East and North Africa, said Alia Ibrahim, co-founder of Daraj, the regional media outlet that partnered with Amnesty on the Pegasus Project.  

She estimated a third of the potential targets in the region were women  including rights defenders and journalists, but also women linked to powerful men or men who were themselves targeted.  

“That’s the justification  that they’re a mother, wife, daughter,” Ms. Ibrahim said.  

The most high-profile targets were arguably Princess Latifa, daughter of UAE Prime Minister Sheikh Mohammad bin Rashid al-Maktoum, and Princess Haya Bint al-Hussein, her stepmother and the Prime Minister’s former wife.  

The possibility that their phones  and those of two female friends of Latifa’s  were surveilled has been linked to the foiling of the younger princess’s attempt to escape the UAE in 2018.  

Hatice Cengiz, the fiancée of murdered Saudi journalist and dissident Jamal Khashoggi, and his wife Hanan al-Atar were also identified as possible targets.  

Among the nearly 10,000 leaked phone numbers tied to Morocco, were Salma Bennani  the wife of the king, himself identified as a potential target  and Claude Mangin, the French wife of Sahrawi activist Naama Asfari, who has been imprisoned in Morocco since 2010.  

That had created a broader malaise among women in the region who never considered they could be the target of such sweeping surveillance, said Ibrahim.  

“You become paranoid or scared that you’re constantly being watched because of the people that you know,” she added.  

‘BODILY VIOLENCE’ 
Even if researchers could confirm a device was compromised, they could not identify what material may have been collected  raising concerns that private conversations or revealing photographs may have been swept up.  

Mobile phones contain information that is “deeply personal and intimate,” so a hack has greater impacts for women, said Vrinda Bhandari, a lawyer who works on digital rights and privacy issues in India.  

“When their phone is hacked, women experience this not just as a privacy violation, but also as a violation of their bodily integrity  akin to bodily violence,” she said.  

Such pressures are familiar to Moroccan journalist Hajar Raissouni, who was sentenced in 2019 to a year in prison on charges of having premarital sex and an abortion, which is illegal in Morocco unless the pregnancy threatens the mother’s life.  

Ms. Raissouni told the Thomson Reuters Foundation her number and that of her husband had been listed as possible Pegasus targets.  

“Your whole phone is at the program’s mercy  so my whole life was open to these people,” she said.  

That had made her much more paranoid  constantly deleting pictures of herself from her phone, using codes to communicate with loved ones, and leaving her devices in a separate room during private conservations, she said.  

“Our chats with our relatives our friends, photos of our bodies  if they leak that, given how fast this material spreads on the internet  they can use that against us.” — Rina Chandran and Maya Gebeily/Thomson Reuters Foundation

Seizing the moment (and knowing where to draw the line)

Screenshot via Martin N. Cervantes/Facebook

By Brontë H. Lacsamana 

Riding on the high of historical wins by weightlifter Hidilyn F. Diaz and boxer Nesthy A. Petecio, brands took the opportunity to congratulate the athletes behind the Philippines’ Olympic medal haul. 

Exhibiting wit and creativity befitting the essence of moment marketing — pushing out social media content that links a brand to a trending moment — these types of releases must also take care not to cross a line. 

“When it comes to ‘publicity rights,’ what would appear to be vital is the misappropriation or misuse by one party of a ‘celebrity’s’ image, name, or any indicator of their personal identity, without the latter’s consent, for commercial benefit,” said Augusto R. Bundang, head of copyright practice and the litigation of intellectual property and labor cases at the Sapalo Velez Bundang & Bulilan law firm, via e-mail.   

BEST PRACTICES
Martin N. Cervantes, brand manager for Smart Prepaid Home Wifi, compiled in several Facebook posts the cleverest congratulatory messages that brands circulated immediately following the wins of Ms. Diaz and Ms. Petecio 

“They were prepared for it since the Tokyo Olympics is current and there was expectation that some of our athletes would deliver something,” said Mr. Cervantes, a marketing veteran with 18 years of experience. “And a lot of people also had this line of thinking that there would be an opportunity for gold.”  

The brands that reacted well to the wins, according to Mr. Cervantes, were the ones that linked their promise, moniker, or tagline to the athletes’ victories. This included the National Archives of the Philippines’ material, which showed the archive stamps forming the Olympic rings with words below thanking Ms. Diaz for leaving a mark in Philippine history.   

Netizens, meanwhile, clamored for Nestea’s material (owing to the obvious pun on Ms. Petecio’s first name). The beverage brand came through with an image of hands holding up glasses of iced tea with words of congratulations. Nestlé, owner of Nestea, also pledged to donate products to the boxer’s hometown of Santa Cruz, Davao Del Sur.  

With the image, name, or indicator akin to a trademark, Mr. Bundang said: “It is rather difficult to say if a congratulatory post may be construed as misappropriation, more so if the post expresses only praises and, on its face, does not create an impression that the celebrity is already endorsing the company or the product of the greeter.”  

He added that the wordings of the post, and the image, name, or indicator utilized, are critical in determining if the celebrity’s publicity rights have been violated or not. This explains why many promotional materials went the route of simple and concise thanks or congratulations, with very few using the athletes’ images.  

Those that did, meanwhile, were within their rights. “Smart used image and likeness because they have that capability being part of the MVP Group, which has been supporting athletes through the MVP Sports Foundation,” said Mr. Cervantes, referring to Smart Communication Inc.’s use Ms. Diaz’s photo as she made her final, 127-kg. lift with the words “Simple. Gold ako.”   

PLASTIC?
Brands with no affiliation with the athletes — yet used their name, image, and indicator — came off as riding on their coattails, and were called out by Orocan, a plastic product manufacturing company, for their inauthenticity. 

“They’re the only one who pointed out how brands jumped onto the bandwagon after the win, even though the athletes were given little attention while training,” said Mr. Cervantes.   

He concluded that most of the ads showcased Filipino wit and creativity, though it would be much better if brands and companies also invested in athletes.

US weighs 2050 target in bid to wean airlines off fossil fuels

Los Angeles World Airports/Jacob Brosseau

US President Joseph R. Biden, Jr.’s administration is quietly discussing a target date of 2050 for weaning aircraft off fossil fuels as part of the White House’s broader push to fight climate change, sources familiar with the matter said.  

The White House in recent days has stepped up efforts aimed at transforming the US economy, including promotion of climate-directed infrastructure spending and bringing auto companies on board for its push for more electric vehicle use.  

The Biden administration is contemplating incentives to support private-sector production of sustainable aviation fuel (SAF) as it searches for ways to eliminate greenhouse gas emissions in the hard-to-electrify aviation industry.  

The administration is looking at a 2050 target for airlines to fly on 100% jet fuel from renewable sources, said two sources, who spoke anonymously to be candid about the discussions.  

The discussions are still in the early stages with few details available, the sources said. The United States and Europe are trying to find ways to encourage production and adoption of SAF, which is two to five times more expensive than standard jet fuel.  

Sustainable aviation fuel, made from feedstocks such as used cooking oil and animal fat, at present accounts for only a miniscule amount of overall jet fuel use.  

The administration confirmed that SAF is on its radar but did not comment on or confirm the 2050 target.  

“As part of the Build Back Better agenda, President Biden proposed catalytic investments to propel innovation and deployment of sustainable aviation fuels,” said Ali Zaidi, the Deputy National Climate Advisor for the White House.  

“The administration is committed to advancing climate solutions in every sector and segment of the economy — with the urgency that the climate crisis demands.”  

CARROT AND STICK 
The aviation sector cannot count on electrification as a near-term solution because of the weight of the batteries.  

Mr. Biden’s administration, which has set a goal for net-zero emissions by 2050, has discussed incentives and targets to increase SAF. It is currently taking a different approach than Europe, where regulators are seeking to force suppliers to blend rising amounts of SAF into their kerosene, a move opposed by US airlines.  

The White House and industry groups are expected to meet virtually later this month to promote alternative jet fuels, although specific actions that might be taken are not clear, three sources said.  

Environmentalists say a European-style mandate is needed to raise production and bring down SAF’s price. However, Angel Alvarez Alberdi, secretary general of the European Waste-based and Advanced Biofuels Association, fears the EU’s mandate will redirect the limited pool of affordable feedstocks available to make SAF.  

“It could be a debate around the carrot and the stick,” John Slattery, head of engine maker GE Aviation, a unit of General Electric Co, said of SAF demand during a recent Eurocontrol podcast.  

SMALL MARKET 
Global demand for jet fuel currently totals roughly 200 billion liters a year, but airline trade group IATA estimates just 100 million to 120 million liters of SAF will be produced in 2021 — just 0.05% of overall fuel.  

Planes and engines capable of running without fossil fuels are being planned for around 2025 and 2030, depending on the model. Current engines can theoretically run on 50% sustainable blends.  

It is not yet clear whether government efforts will succeed at making sustainable fuel more affordable for pandemic-battered airlines. Fuel is the second-largest expense for airlines after labor.  

Refiners make more renewable diesel right now because federal and state governments offer more incentives, such as California’s credit of 45 cents per gallon.  

Congress is debating a tax credit of up to $2 per gallon for SAF. If such a credit were available, World Energy, the largest US SAF producer, would be able to sell its SAF for roughly the same as conventional fuel, said Bryan Sherbacow, the company’s chief commercial officer.  

World Energy’s Los Angeles-area plant uses around a third of its 25 million-gallon annual capacity for making aviation fuel, with the rest producing other renewable fuel. The company is betting on SAF becoming more affordable, as it is boosting the plant’s SAF capacity to around 150 million gallons by 2023.  

If incentives were balanced, “we would probably be making a lot more jet fuel,” Mr. Sherbacow said. — Allison Lampert and Stephanie Kelly/Reuters

New Zealand should only reopen border in early 2022, panel advises 

Image via Brett Taylor/CC BY 2.0/Wikimedia Commons

WELLINGTON — New Zealand should keep its borders shut until early 2022 and reopen only after the vast majority of its adults have been vaccinated against the coronavirus, a government-appointed panel said on Wednesday.  

It said the country, which last reported a local case of coronavirus disease 2019 (COVID-19) transmission in February, needs to stick to its strategy of eliminating the virus to avoid straining its health system, with the virus rapidly mutating overseas.  

“The advisory group considers that an elimination strategy is not only viable, but also the best option at this stage of the pandemic,” the panel said in a report.  

New Zealand Prime Minister Jacinda Ardern has won global plaudits for containing local transmission of COVID-19 through tough lockdowns and shutting the border in March 2020. The country has recorded just 2,500 cases and 26 deaths.  

The government is set to announce plans this week for reopening, based on the experts’ advice.  

“The challenge of dealing with regular importations of the virus through our borders should not be underestimated,” the panel said in a report.  

“Hence we support the idea that re-opening of the borders in 2022 should start in a carefully planned, phased way…”  

The panel recommended New Zealand’s vaccination program should be completed before reopening. So far only 21% of the country has been fully vaccinated.  

“We need to do more to further strengthen our borders and bolster our health defenses, including through the vaccine rollout, before we can safely open the border further, and that will take a little more time to properly prepare,” Associate Minister of Health Ayesha Verrall said in a statement.  

She said the panel’s advice had evolved due to the emergence of the highly infectious Delta variant.  

Businesses and public sectors facing worker shortages have called for a more rapid opening up, but the panel said that would make the country vulnerable to infection.  

Ms. Ardern last week opened one-way quarantine-free travel for seasonal workers from Samoa, Tonga and Vanuatu to address labor shortages in the horticulture industry.  

New Zealand suspended a quarantine-free travel “bubble” with Australia in July following outbreaks of the Delta variant there. — Reuters

MPIC features global ESG experts in first group Sustainability Summit

Metro Pacific Investments Corporation (MPIC) assembled an impressive line-up of global environmental, social and governance experts in their first-ever Group Sustainability Summit held virtually last August 6.  The summit was attended by over 300 participants composed of MPIC’s and MVP Group Companies’ Board of Directors and Senior Management as well assustainability champions across all of MPIC’s businesses.

Staying true to MPIC’s commitment to elevate its sustainability initiatives across the group, the summit was designed to bring key issues such as climate change, sustainability reporting standards, investor expectations and emerging global trends, among others, at the forefront of senior management’s agenda.

“Sustainability is the hot topic today and we all know that climate risk has steadily risen in our risk management boards. However, most of us will probably want to have a fuller understanding of what sustainability means and how it may impact the way we manage our companies,” said MPIC President and CEO Jose Ma. K. Lim as he opened the Summit. “I think the more interesting parts are the discussions on sustainable financing options and the changing expectations of shareholders and investors from management of their investing companies. I hope all the attendees find the topics stimulating and helpful in our journey towards a truly sustainable business model for each of our companies and for our country.”

“The group has a very strong social ethic beyond our traditional role of providing goods and services for a profit. The major metric by which our success should be measured is how well we uplift the lives of our people,” said MPIC Chairman Manuel V. Pangilinan. “I think we have the ability to push the sustainability agenda ahead of other corporates in this country. I’m glad that this summit sends an affirmative but resounding message that it is time to really be serious about these sustainability programs within our group and within the business community in general in the Philippines.”

Aligning with global best practices in sustainability begins with ensuring that decision-makers are kept abreast with recent developments and trends. To achieve this goal, MPIC purposely partnered with established institutions who graciously shared their insights during the summit.

Neil Stewart, Director of Corporate Outreach at the Value Reporting Foundation, spoke about the importance of global reporting standards and how the merging of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) is a major step in driving the global alignment of reporting standards.

EY Leader for Climate Change and Sustainability Services and Oceania Chief Sustainability Officer Mathew Nelson stressed the importance of going beyond compliance as he discussed EY’s Global Climate Risk Disclosure Barometer.

Brendan Baker, Vice President, and ESG Climate Specialist at MSCI, discussed the value of forward-looking, return-based quantification of climate change risks.

BSR Vice President for Asia-Pacific Jeremy Prepscius led the panel on “Transformation to Net Zero” with co-panelists Melissa Brown, Partner at Daobridge Capital and the Director for Group Sustainability of an established player in the power industry in Asia.

Speakers from S&P Global’s Sustainable1, Michael Salvatico, Head of Asia Pacific ESG Business Development, and Bertrand Jabouley, Head of Sustainable Finance, Asia-Pacific, covered global emerging ESG trends and sustainable financing options.

MPIC Investors M&G Investments represented by Ben Constable-Maxwell, Head of Impact Investing, and Michael Bourke, Head of Global Emerging Markets and Fund Manager commended the group’s impressive metrics in human capital excellence as well as its efforts as a strategic partner of the government in helping improve lives in the Philippines.  They also shared their expectations on environmental, social and governance matters from their investee companies.

Yayu Javier, United Nations Global Compact Network Philippines (UNGCP) Chairperson highlighted key sustainability areas of focus where MPIC and UNCGCP can jointly make meaningful contributions in.

The afternoon sessions included a discussion on sustainability reporting trends in the Philippines by SGV & Co Business Consulting Partner Joseph Ian Canlas.  Finally, Business for Sustainable Development’s Executive Director Bonar Laureto took the group into a deep dive into the materiality assessment and strategy development process.

Hosted by Atty. Mike Toledo, MPIC Vice President for Government Relations, the summit also featured MPIC Group Sustainability Council Champions who capped each session with their key take-aways.

MPIC Chief Finance Officer and Chief Sustainability Officer Chaye A. Cabal-Revilla who has taken on the challenge of driving the group’s Sustainability strategy said, “We cannot operate our businesses with just profit in mind.  More importantly, we have to be driven by purpose – we can always do good while doing well.  We have put Sustainability at the heart of MPIC to future-proof not just our business but our existence as humanity. We all have to work together.  Adhering to global sustainability reporting standards and integrating sustainability into our DNA and everything that we do is really key into making it pervasive and successful. This also means that everybody has to help out.”

Indeed, everyone has a role to play in ensuring that the generations to come can also benefit from nature’s gifts.  MPIC is fully embracing its role, not just through the provision of essential services, but also as a driver of positive change.  As a leading infrastructure investment company, MPIC is committed to contributing to the achievement of the 17 United Nations Sustainable Development Goals (SDG), with SDG #9 Industry, Innovation, and Infrastructure as its anchor.

 

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UN report ignites fight for funds to build climate defenses

PHILIPPINE STAR/ MICHAEL VARCAS
DAMAGE caused by several typhoons and the Taal Volcano eruption last year reached P113.4 billion, according to the National Economic and Development Authority. — PHILIPPINE STAR/ MICHAEL VARCAS

The United Nations (UN) climate panel’s report on Monday alerted wealthy nations to a lesson many of the world’s most vulnerable countries have already learned through bitter experience: they must adapt quickly to a world with more extreme weather.  

The report by the Intergovernmental Panel on Climate Change (IPCC) made clear the planet will get warmer for at least the next few decades, and seas will rise for centuries — trends that have already triggered weather disasters across the globe.  

“The fact that some changes are going to continue to play out for a long, long time, underscores the importance of paying much more attention to making communities more resilient,” Jane Lubchenco, deputy climate director at the White House Office of Science and Technology Policy, told Reuters.  

As rich nations strain to curb their climate-warming emissions, experts say they will need to prepare for higher sea levels, which can turn storm surges into floods.  

Societies will also need to ready for heat waves by creating public health infrastructure to cope with those who become ill, while regions must rethink urban planning and development to steer communities away from high-risk zones, such as wildfire spots.  

In developing countries alone, the UN has said this will take up to $300 billion in adaptation investments per year by 2030, although other estimates run far higher. Few countries around the world have begun.  

“Adaptation and resilience in general is underfunded nearly everywhere,” said climate scientist Bill Hare, who leads the non-profit Climate Analytics. Developed countries did not pay enough attention to the problem and developing countries did not have the money to spend, he said.  

Development bank funding tells a similar story. Out of seven large development banks, only the African Development Bank in 2019 spent more to help societies adapt to already unavoidable climate change than on efforts to curb emissions, data from the banks showed.  

The European Investment Bank spent just 11% of its climate finance for poorer countries on adaptation that year.  

‘THIS IS WHAT WE’VE BEEN FIGHTING FOR’  

Hours after the report’s release on Monday, the US government said it would spend $5 billion to help states and communities to prepare for climate disasters, for example, by strengthening power grids or water systems.  

Even if global emissions are reduced quickly, the IPCC said average global temperature would rise 1.5 degrees Celsius above the preindustrial average over the next two decades. The world has already seen 1.1°C of that warming — enough to trigger today’s weather extremes.  

“The IPCC pointed out how far behind we are in adapting to the impacts that are already unavoidable,” former UN climate chief Christiana Figueres said.  

“Developing countries — and the most vulnerable populations in all countries — have already been knocked over the head by the adaptation challenge,” she said.  

Developing countries tend to be the most vulnerable to costly climate impacts, and the least resourced to deal with them. For years, they have been struggling to secure the $100 billion a year pledged by rich nations toward helping them prepare for climate disruptions.  

The money that has arrived, so far, has focused on emissions reduction rather than adaptation. Of the $78.9 billion in climate finance transferred by rich countries in 2018, only 21% was spent on adaptation, OECD data shows.  

The IPCC report is likely to spur demands for more financing at a major UN climate conference in Glasgow, Scotland, in November. A failure to deliver could irk the developing world and frustrate talks on other global deals to safeguard the planet.  

“This is what we’ve been fighting for, for a long time,” said James Michel, former president of the Seychelles islands. “We are not warming the planet … but then we are at the receiving end.”  

Around 90% of the Seychelles’ population lives on the narrow coastal plateaus of the Indian Ocean nation’s main islands. Building houses further inland and improving flood defences is an expense the country cannot finance alone, Mr. Michel said.  

Some especially vulnerable nations moved early to adapt.  

Cyclone-prone Bangladesh has built more than 12,000 cyclone shelters along its coastline since 1970 — one of multiple adaptation investments that experts say have drastically reduced storm-related deaths.  

“We have drills on what to do in a cyclone, what to do when a flood comes,” said Saleemul Huq, chair of the expert advisory group of the Climate Vulnerable Forum of 48 countries.  

Not preparing means disasters can be costly, as many wealthy nations have seen. As of July 9, the United States had faced eight weather or climate-related disasters in 2021 with losses exceeding $1 billion each, government data shows.  

This week’s IPCC report focused on physical climate impacts, but next year the panel will release another comprehensive assessment of how countries can deal with climate impacts.  

“Good adaptation policy is well known. You just have to be better prepared for these kinds of events, and every country is going to have to be better prepared,” Mr. Huq said. — Kate Abnett, Valerie Volcovici, and Kanupriya Kapoor/Reuters 

Recession ends as GDP grows by 11.8%

PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINE ECONOMY exited recession in the second quarter, after growing a faster-than-expected 11.8%, according to the Philippine Statistics Authority (PSA).

However, a surge in coronavirus disease 2019 (COVID-19) infections driven by the more contagious Delta variant and renewed mobility restrictions are likely to weigh on economic growth for the rest of the year.

After five straight quarters of decline, gross domestic product (GDP) jumped by 11.8% in the April to June period, a reversal from the revised 3.9% decline in the first quarter of 2021 and the record 17% contraction in the second quarter of 2020.

Gross Domestic Product (GDP) Quarterly Performance (Q2 2021)

This marked the first time the Philippine economy posted growth since the fourth quarter of 2019, right before stringent lockdown measures were implemented to curb the spread of  COVID-19.

On a year-on-year basis, the second-quarter result was the fastest growth recorded since the 12% print in the fourth quarter of 1988.

It also beat the 10.6% median growth estimate in a BusinessWorld poll of 20 economists conducted last week.

However, the Philippines’ recovery momentum slipped, as GDP declined by a seasonally adjusted 1.3% on a quarter-on-quarter basis following a 0.7% growth in the first quarter. The last quarterly decline was recorded in the second quarter last year with a seasonally adjusted contraction of 15.1%.

Metro Manila and nearby provinces were under the strictest lockdown from late March to mid-April this year, as COVID-19 cases surged.

“The robust performance is driven by more than just base effects. It is the result of a better balance between addressing COVID-19 and the need to restore jobs and incomes of the people,” Socioeconomic Planning Secretary Karl Kendrick T. Chua, Department of Finance Secretary Carlos G. Dominguez III and Department of Budget and Management Officer-in-Charge Tina Rose Marie L. Canda said in a joint statement.

Household spending, which accounts for around three-fourths of GDP, posted a year-on-year 7.2% growth in the second quarter compared with the -4.7% and -15.3% in the first quarter and the second quarter of 2020, respectively. Seasonally adjusted, it declined by 2.4% in the second quarter versus last year’s -13.3%.

The investment component, which is represented in the data as capital formation, expanded by an annual 75.5% in the second quarter from the year-on-year declines of 14.8% and 51.5% in the first quarter of this year and second quarter last year, respectively. This was the fastest since the 43.8% growth recorded in the third quarter of 2010.

Trade saw a similar trend during the period with exports of goods and services jumping by 27% year on year compared with the -8.8% and -33.5% in the first quarter of 2021 and second quarter of 2020, respectively. Meanwhile, imports rose by 37.8%, a reversal from the -7% in the previous three-month period and the -37.3% in the same period last year.

On the other hand, government spending dropped by 4.9% in the second quarter — the first time since the 2.1% fall in the first quarter of 2017.

The industry sector recorded a 20.8% year-on-year expansion in the second quarter, the fastest since the 22.8% reading in the fourth quarter of 1988. Meanwhile, services went up by 9.6%, the fastest annual growth since the 9.8% in the second quarter of 2004. On the other hand, agriculture, forestry, and fishing dipped by 0.1% from -1.3% in the preceding quarter and 1.6% growth in the same period last year.

Accounting for seasonal factors, however, industry and agriculture rose by 1.1% and 0.6% in the second quarter, respectively. On the other hand, services declined by 2.8%.

“[A]lmost all sectors bounced back despite the imposition of the ECQ (enhanced community quarantine) and the MECQ (modified enhanced community quarantine) last April and May 2021. This is a clear indication that managing risks, instead of shutting down large segments of the economy, stands a far better chance of improving both economic and health outcomes,” the economic managers said.

They added prospects for a strong rebound this year “remain promising.”

“Although there are speed bumps given the current ECQ in Metro Manila and other parts of the country, we are now better equipped to sustain continuous positive growth,” the economic managers said.

Metro Manila and its nearby provinces are under a two-week ECQ until Aug. 20 to help curb a surge in COVID-19 cases due to the more transmissible Delta variant.

STRONG REBOUND UNLIKELY
For the first half, GDP rose by 3.7%, still below the government’s full-year growth target of 6-7%.

The economy has to grow by at least 8.2% in the second half to meet at least the lower end of the target range, PSA Chief Claire Dennis S. Mapa said at a press briefing.

“On the other hand, if we want to hit the 7%, the economy should grow by 10.2% during the second half,” he said.

Analysts were not as optimistic.

“Despite the double-digit expansion on a [year-on-year] basis, economic momentum actually slowed in [the second quarter] with GDP contracting 1.3% on a [quarter-on-quarter] basis after authorities reimposed tighter mobility restrictions in April,” said ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in a statement to reporters.

“The resumption of lockdowns in April and in August have derailed the economic recovery with the economy backtracking by 1.3% in the second quarter and we can expect this trend to continue in the second half of the year,” Mr. Mapa added.

Alex Holmes, economist at Capital Economics, said the country’s chances of a strong economic rebound this year are “looking slim” given the new surge in virus cases.

“The government’s 6-7% GDP growth forecast for the year now looks out of reach,” he said in a separate statement. “[T]he worsening spread of the virus means we are cutting our 2021 growth forecast, from 6.0% to 5.0%.”

Pantheon Macroeconomics Senior Asia Economist Miguel Chanco was also less upbeat, noting the 2.4% quarter-on-quarter drop in household spending more than reversed the “relatively modest gains” made in the previous two quarters.

Mr. Chanco said the only silver lining in the GDP report was the 12.2% seasonally adjusted growth in total investment based on their calculations, but noted the “punchy gains” made since the third quarter of last year “primarily have been a function of catch-up growth.”

“Capex (capital expenditure) was hit hardest by the virus last year and it remains 15% below the pre-pandemic level, despite the near-75% rise over the last four quarters. All told, it now looks like GDP growth in the mid-4% range is the best the Philippines can hope for this year,” he said in a separate statement.

ANZ Research Senior Economist Bansi Madhavani and Chief Economist for Southeast Asia and India Sanjay Mathur noted headwinds to economic recovery such as high unemployment and underemployment, limited household savings and the banks’ “low propensity to lend.”

“[The latest] data release does not affirm growth recovery. Rather, it confirms that recovery will likely be gradual and protracted,” they said in a note. — Bernadette Therese M. Gadon with inputs from Beatrice M. Laforga and Luz Wendy T. Noble

FDI net inflows slide to lowest in over a year

REUTERS

NET INFLOWS of foreign direct investments (FDIs) dropped in May to its lowest level in over a year, as the emergence of new coronavirus disease 2019 (COVID-19) variants weighed on investor sentiment.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows fell by 25.4% to $429 million in May from $575 million net inflows during the same month in 2020. It was also 36.8% lower than the $679-million FDI net inflows in April.

The May figure is also the lowest since the $317 million inflows in April 2020 and nearly matched the $430 million logged in October.

“The FDI decline in May 2021 reflected renewed investor concerns on the rising cases of the new variants of COVID-19 globally,” the central bank said.

Many countries, including the Philippines, have seen new COVID-19 surges driven by more transmissible variants, particularly Delta.

Colegio de San Juan de Letran Graduate School Dean Emmanual J. Lopez said lower FDIs in May reflect a growing concern among investors over “what looks like a failure of authorities” to control the surge in coronavirus cases in the country.

“But we are expecting a slow recovery in FDI, as the country exits from recession, where investment climate becomes conducive,” he said.

BSP data showed non-residents’ net investment in debt instruments, consisting mainly of inter-company borrowings between foreign direct investors and their subsidiaries in the country, shrank by 23.4% to $269 million in May.

At the same time, non-residents’ net investments in equity capital slumped by 53.4% to $60 million in May. This was mainly due to the 70% increase in equity capital withdrawals to $21 million, alongside a 42.6% decline in equity capital placements to $82 million in May.

Equity capital placements were coming mainly from Japan, the United States and Malaysia, and were channeled into manufacturing, real estate, and financial and insurance industries.

Reinvestment of earnings went up 6% to $99 million in May.

YEAR-TO-DATE RISE
Despite the decline in May, FDI net inflows rose 37.8% to $3.48 billion in the first five months of 2021.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa noted that the year-to-date increase in FDI inflows were mainly backed by the debt instrument components rather than reinvestment of earnings.

BSP data showed non-residents’ net investments in debt instruments surged by 76.2% to $2.2 billion in the January to May period.

“This development shows that although some investors have decided to pour in some money into the Philippines, these types of investment are less permanent and can be withdrawn more easily as compared to fresh equity,” Mr. Mapa said in an e-mail, noting such trend shows investors overall outlook for the economy is still reflective of the crisis.

Reinvestment of earnings rose 3% to $407 million in the first five months, while net investments in equity capital dipped by 0.3% to $1.28 billion.

Equity capital dropped 0.9% to $879 million in January to May. This, as equity capital placements dropped by 5.4% to $1.018 billion, while equity capital withdrawals slid by 26.7% to $139 million.

The central bank expects FDI net inflows to reach $7.5 billion this year. — L.W.T.Noble

Banks’ nonperforming loans continue to climb in June

BW FILE PHOTO

NONPERFORMING LOANS (NPLs) held by Philippine banks continued to pick up in June, reflecting how the pandemic remains a burden on lenders’ asset quality and borrowers’ capacity.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed soured loans climbed 73.9% to P482.991 billion in June from P277.806 billion in the same month in 2020. Bad loans also inched up by 0.7% from the P479.481 billion logged in May.

Despite the increase in bad loans held by lenders, the NPL ratio slightly eased to 4.48% from the 13-year high of 4.49% in May. However, it was still much higher than the 2.57% seen in June 2020.

BSP officials earlier said they expect the NPL ratio to hit “a little over 5%” by end-2021.

Banks across Southeast Asia may continue to face asset quality risks amid the resurgence of infections and containment measures imposed to control the pandemic, Moody’s Investors Service said.

“Thailand, the Philippines, and Indonesia will be hit the hardest in the region because of heightening uncertainties around the reopening of their economies, which makes banks in these countries most vulnerable,” Moody’s said in a note on Tuesday.

For consumption-driven economies like the Philippines and Indonesia, Moody’s said muted demand will impact the debt repayment capacity of borrowers with businesses that are unable to operate due to quarantine restrictions. These makes borrowers from industries such as wholesale and retail trade, dining, hospitality and other travel-related businesses, the most at risk.

BSP data showed that the total loan portfolio of the entire banking industry in June dipped by 0.4% to P10.775 trillion from P10.818 trillion a year earlier. Month on month, it went up 1% from the P10.669 trillion in May.

Past due loans increased by 51.2% to P577.06 billion from P381.426 billion a year ago. These borrowings made up 5.36% of the industry’s portfolio, from 3.53% in June last year.

Restructured loans in June surged by 575% to P328.647 billion from P48.669 billion a year earlier. This brought the ratio to 3.05% from 0.45%.

Banks continued to boost loan loss reserves which rose by 31% to P397.79 billion from P302.926 billion in the same month of 2020. Its ratio to the loan portfolio increased to 3.69% from 2.8%.

Meanwhile, lenders’ NPL coverage ratio — which is an indicator of allowance for potential losses due to bad loans — declined to 82.36% from 109.04%

For the months ahead, concerns on asset quality will continue to affect banks’ risk appetite to extend more loans, Asian Institute of Management economist John Paulo R. Rivera said. He noted the increasing infections and the reimposed lockdowns could cause risk-off sentiment for banks.

Business activities are again affected by the two-week lockdown imposed in Metro Manila and some provinces until Aug. 20.

“If the risks would persist, we can expect NPL to rise and banks being more risk averse in lending to minimize defaults. Containing the recent surge and continuous and rapid vaccination are keys to restoring confidence in lending,” Mr. Rivera said in a Viber message.

Outstanding loans by big banks dropped for the seventh straight month in June by 2%, although it also marked the second consecutive month of softer decline. — Luz Wendy T. Noble

Resumption of face-to-face classes, economic reopening may help Philippines avoid ‘scarring’

PHILIPPINE STAR/ MICHAEL VARCAS
THE Department of Education said the new school year will start on Sept. 13, but face-to-face classes will still not be allowed unless given the go signal by Malacañang. — PHILIPPINE STAR/ MICHAEL VARCAS

THE RESUMPTION of face-to-face classes and the further reopening of more sectors will help the Philippine economy avoid long-lasting damage from the coronavirus pandemic, Socioeconomic Planning Secretary Karl Kendrick T. Chua said.

In a briefing on Tuesday, Mr. Chua said the economic team is concerned about the possible medium to long-term damage caused by the pandemic on the economy, especially sectors severely affected by the lockdowns.

Managing the risks of shutting down the economy and containing the spread of the coronavirus disease 2019 (COVID-19) should be the most cost-effective way of preventing economic scarring for the country, he said.

“And the other thing that we advocate really is to pave the way already for the resumption of face-to-face schooling, the long-term scarring effects of students not being able to learn has a permanent effect also on their future productivity,” Mr. Chua said.

An Asian Development Bank (ADB) report in April showed the country may have lost 0.61 learning-adjusted year of schooling due to the class disruptions last year, which was equivalent to an 8.11% decline from 2020’s baseline.

The ADB had estimated school closures may cost Filipino students $26.9-36.1 billion in lifetime earnings for not attaining the potential income they could have obtained had the pandemic not occurred.

The Department of Education said the new school year will start on Sept. 13, but face-to-face classes will still not be allowed unless given the go signal by Malacañang.

Mr. Chua said the government will continue to manage the health and economic risks, especially as the country is experiencing a new surge in COVID-19 infections.

“I think we should resume our original strategy of, number one, opening more sectors of the economy while adhering to health standards; number two, beginning the plan to open some schools for pilot face to face; and number three, allowing children and families to have more healthier lives by going out safely,” he said. 

The Health department on Tuesday reported 8,560 new COVID-19 cases, bringing active cases to 79,016. Metro Manila and nearby provinces are under the strictest form of lockdown until Aug. 20 to curb a Delta-driven surge.

Think tank Oxford Economics in a July 30 report warned that the Philippine economy faces deep scarring from the pandemic. It estimated the country’s projected gross domestic product (GDP) in 2025 will still be 8.4% lower than its pre-pandemic forecasts.

The debt watcher Moody’s Investors Service also warned of the rising prospects for long-term economic scarring for the Philippine economy as the virus outbreak continues to dampen its recovery.

The government is aiming for a 6-7% growth this year from last year’s 9.6% slump. The economy has to grow by at least 8.2% in the second half to meet at least the lower end of the target, after it registered 11.8% growth in the secon d quarter. — B.M.Laforga

MPIC still keen on Sangley airport project

Offshore company offers to ‘combine’ tollways operation

THE Metro Pacific Investments Corp. (MPIC) remains open to Cavite’s Sangley airport project, its chairman said.

“I think the investment to make a second runway in Sangley operable is much less than building a new airport, so that’s why we are open to it… We’ll… probably take the plunge… It will have to be with half of our eyes closed,” MPIC Chairman Manuel V. Pangilinan told The Chiefs segment on Cignal TV’s One News Channel on Monday.

He said the Cavite airport is a good complement to the Ninoy Aquino International Airport (NAIA) because of their proximity.

“The orientation of the runway is similar to the orientation of the existing runway of the NAIA, so it’s a good second runway to Manila,” Mr. Pangilinan said, referring to the Sangley airport.

But the company will have to assess the “robustness” of air travel in the future, he noted.

“The demand for airports is very evident now,” he added, noting that this keeps the company waiting. “We are fortunate that we have a fairly, under normal times, robust domestic travel market unlike Singapore and Hong Kong.”

Mr. Pangilinan also said the company will need a partner if it decides to bid for the Sangley airport project.

Lucio C. Tan’s MacroAsia Corp. and its partner China Communications Construction Co. Ltd. negotiated with the Cavite province for the project last year, but the latter canceled its notice of selection and award due to the “various deficiencies in the submission of requirements to conclude the joint venture agreement.”

The province has issued a new invitation for firms to submit joint venture proposals for the airport project.

TOLLWAYS
Mr. Pangilinan also said on Monday that MPIC received an offer to “combine” with the toll roads of an “offshore” company.

“We received an offer to combine. This is an offshore tollways operator [combining] with our consort of — I think I’m talking too much — with our own,” he said.

“But I think if we are able to achieve (or) put all those tollways together, we’ll be the largest tollways operator in ASEAN,” he added.

MPIC saw its second-quarter core net income climb 82% to P3.5 billion, as more industries reopened.

For the first half, MPIC’s consolidated core net income rose 13% to P6 billion.

MPIC shares closed 0.80% lower at P3.72 apiece on Tuesday.

MPIC is one of three key Philippine units of First Pacific, the others being Philex Mining Corp. and PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Arjay L. Balinbin