Terror, political violence seen to hound PH

Risks from political violence as well as terrorism are expected to hound the Philippines this year as the Islamic State (IS) tries to turn the country into a hub for militants in the region, according to global risk management, insurance and reinsurance brokerage services provider Aon.

In its report, “2017 Risk Maps: Guide to Political Risk, Terrorism and Political Violence” released last week, Aon said it saw “a continuation of terrorism trends from last year,  such as abductions of shipping crew and the kidnap for ransom of foreign nationals.”

Aon last year raised the terrorism and political risk level of the Philippines from “moderate” to “high.”

“The terrorism and political violence risk level is likely to remain ‘high’ in the Philippines during 2017, with the IS promoting the country as a regional hub for militants not able to travel to Syria or Iraq,” Aon said.

Several factions of the Abu Sayyaf and other groups in the southern Philippines have pledged allegiance to IS but the “clearest indication of direct connections” between the Islamic State and local terror groups was seen last year.

The IS has also named one of the Abu Sayyaf leaders as the head of the “caliphate in the Philippines,” Aon said.

The Davao City bombing, which killed 14 people in September, the attempted bombing of the US Embassy in Manila in November and the Hilongos, Leyte province, blast in late December by IS-linked groups “suggest that they are increasingly intent on attacks outside of core operating areas in Western Mindanao and the Sulu archipelago, including in the capital,” Aon said.

Moro recruits

It said IS supporters were actively recruiting among the ranks of the Moro rebels who had expressed their commitment to the peace process with the government.

It also said the political situation in the Philippines “[would] probably be broadly stable” as President Duterte continued to consolidate his hold on power.

Aon, however, warned that the President’s “authoritarian tendencies and his violent, controversial campaign against drugs [pointed] to the potential for sudden and destabilizing political crises to emerge.”

Nonetheless, Aon said that “economic reforms and low interest rates [were] partly offsetting the political uncertainty” in the country.

Similar views were expressed by Euben Paracuelles, executive director and senior economist for Southeast Asia at Nomura Securities.

In a briefing on the sidelines of a meeting of finance ministers from the Association of Southeast Asian Nations in Lapu-Lapu City, Cebu, Paracuelles said investors were paying attention to “political noise” about the Philippines, and this could derail the growth, but the administration’s aggressive infrastructure drive and proposed tax reforms could offset the risk.

Even with politics impacting investor sentiment, so long as the administration ramps infrastructure and undertakes reforms, “that should remain very supportive of the overall economic outlook for the Philippines,” Paracuelles  said.

Nomura is currently expecting the Philippine gross domestic product (GDP) to grow by 6.3 percent in 2017, slightly lower than the 6.8-percent growth in 2016, yet still faster than the projected pace of its neighbors. —WITH A REPORT FROM VICTOR SILVA/rga