Philippines Defence and Security Report Q3 2009

The first quarter in 2009 saw some key movements within the Philippine defence and security arena. These include the delivery of 15 T41-B trainer planes donated by South Korea and continued conflict with separatist rebel groups that has resulted in the kidnapping of both international and local officials.

The rebel group Moro Islamic Liberation Front (MILF) has reportedly abducted three teachers. Another separatist group, the Abu-Sayyaf Group (ASG), has kidnapped three officials from the International Committee of the Red Cross. These recent attacks highlight the continued conflict between the government and the rebel group and their apparent inability to establish successful peace talks.

Washington has offered to provide more assistance to the Philippines to build capacity to defeat Islamic militants, Manila's defence chief announced on June 1 2009. Since 2002, about 300 US commandos have been stationed in the south of the country to train, advise and assist Philippine troops fighting a small group of Muslim rebels with ties to regional militant network Jemaah Islamiah (JI).

The military offensive against the Moro Islamic Liberation Front (MILF) in Mindanao continued to escalate forcing civilians to flee. There have been repeated air strikes and rebel counter-attacks. The military reported casualties included 10 Muslim rebels and one soldier killed on 27 May in military assault on southern rebel base: 14 rebels were killed in subsequent attacks.

In separate conflicts, 10 New People's Army (NPA) rebels were reported killed in Agusan del Sur province on May 21 after a clash with security forces. Meanwhile, three police and five militants were killed in a May 7 clash with Abu Sayyaf rebels.

We maintain our 2009 GDP growth forecast for the Philippines at 2.8% in spite of the 2.3% seasonallyadjusted quarter-on-quarter (q-o-q) economic contraction in Q109 as we see it likely that we will see positive, albeit weak, growth for the remainder of the year. However, this will be dependent on continued fiscal and monetary stimulus. The government lowered its growth forecast for 2009 from 3.7-4.4% to 3.1- 4.1% and its 2010 forecast from 4.9-5.8% to 4.3-5.3% on April 16. The IMF cut its 2009 growth forecast for the Philippines from 2.25% to 0% in its latest Asia Pacific Regional Outlook released on May 5.

Ratings agency Fitch cut its 2009 growth forecast from 0.5% to 0.1% on May 6. This quarter, we have introduced a significant new aspect to BMI's Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the 'prevalence' of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR also recognises the 'threat' of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns.

In the Philippines we assess the CTR for Manila. These City-Specific Ratings are created via an integration of the state-wide threat, with an evaluation of the city-specific characteristics and level of activity