U.S. cities try new way to help the poor: give them money

By Andy Sullivan

WASHINGTON (Reuters) – Spurred by the coronavirus pandemic, dozens of U.S. cities are deploying a new tool in their war on poverty: cash.

At least 16 cities and counties are handing out no-strings-attached payments to some low-income residents, a Reuters tally found. At least 31 other local governments plan to do so in the months ahead.

That’s a departure from most U.S. anti-poverty programs, which provide benefits for specific needs like groceries or rent and require recipients to hold a job or look for work.

Advocates say the people receiving the aid, not bureaucrats, know best how to spend their money.

“It’s a complete rejection of the notion that we need to Big Brother people to a way out of poverty,” said Michael Tubbs, who set up the nation’s first “basic income” program in 2019 while he was mayor of Stockton, California.

Jonathan Pedro, 37, said he has been able to pay down debt and buy hockey equipment for his 11-year-old son thanks to the $500 monthly checks he gets through a Cambridge, Massachusetts program aimed at single parents.

“I’ve been trying really hard to bounce back and this check makes it so much easier,” he said.

Cash payments were a pillar of the U.S. safety net for much of the 20th century but fell out of favor amid criticism that they discouraged people from working. Democratic President Bill Clinton scaled them back, made them temporary and added a work requirement in 1996. Fewer than one in four poor families now get those benefits.

In recent years, the notion of a universal basic income has gained currency in the face of worries that automation will lead to widespread layoffs, and a belief among racial-justice advocates that the current system is inadequate and demeaning. Andrew Yang made it the centerpiece of his long-shot bid for the 2020 Democratic presidential nomination.

The federal government provided a proof of concept over the past two years, sending more than $800 billion to households in three COVID-19 aid packages. Washington delivered another $93 billion to 36 million families this year through an expanded child tax credit.

Those relief packages included $500 billion to state and local governments, and at least 16 local governments are using the money to set up Stockton-style basic income programs for low-income residents, records show.

Others are drawing on funds provided by Mayors for a Guaranteed Income, an advocacy group formed by Tubbs, or private philanthropy.

“We’re 60 years into the war on poverty, and the notion of giving money to poor people still feels profoundly new. Maybe that’s the problem,” said Melvin Carter, the mayor of St. Paul, Minnesota, which launched a basic income program last year.

Unlike Yang’s proposal, which would have covered everybody, the new city-based programs are small in scale, typically serving several hundred families, and are aimed only at low-income people.

Some cities invite people to apply and then do a random drawing. Others focus on specific populations: St. Paul targets families with newborn children, while Pittsburgh says half of its 200 participants will be Black women.

Durham, North Carolina, will provide checks to people getting out of prison. A program in Jackson, Mississippi, focuses on Black mothers in public housing.

Advocates hope these efforts will ultimately convince Washington to set up a national basic income program.

They point to a sheaf of studies that show positive results. Participants in Stockton’s program were more likely to be working full-time, while participants in Jackson were more likely to pay their bills on time. One survey found that recipients spent less on alcohol and tobacco than they did before.

‘ALTERNATIVE OPTIONS’

With many U.S. businesses struggling to hire workers, some say it would be better to expand existing programs.

“If the goal is more work, then we have alternative options,” said Kevin Corinth, who served as a top White House economist in the Trump administration and is now at the University of Chicago’s Harris School of Public Policy.

A national program also would be expensive. One proposal to keep every American above the poverty line, set at $26,500 for a family of four in 2021, would cost $876 billion, more than doubling U.S. anti-poverty spending. Another would cost more than twice that amount.

Advocates say their first step is to shore up the expanded child tax credit, which is due to expire at the end of this year. Cost concerns prompted Democrats to cut a permanent expansion from President Joe Biden’s imperiled $1.75 trillion “Build Back Better” spending proposal.

In the meantime, low-income participants like Andrea Coleman, 40, are finding it a little easier to make ends meet. The mother of three, who works as a home nurse, said she plans to buy a proper pair of shoes to replace the foam sandals that serve as her only footwear in St. Paul, Minnesota, where the temperature is expected to dip to 7 degrees Fahrenheit (-13.9° Celsius) this week.

“It’s that extra money that helps get over that little hump, helps get that burden off your back,” she said. “It gives me a free heart.”

(Reporting by Andy Sullivan; Editing by Scott Malone and Paul Simao)

Agencies distribute food, blankets, cash as hunger and cold threaten Afghanistan

KABUL (Reuters) – Aid agencies delivered food, blankets and cash to hundreds of displaced families in Kabul on Wednesday as humanitarian assistance begins to trickle into Afghanistan following warnings the country faces potentially catastrophic famine this winter.

The distribution of aid to 324 families represents a tiny fraction of the needs in Afghanistan, which faces a severe drought as well as a near collapse of its economy following the withdrawal of Western support.

Chilly weather on Monday underlined the urgency in getting assistance to thousands of displaced people in the capital, many having fled from the provinces and sleeping in tents or improvised accommodation around the city.

As people lined up inside the UN compound for handouts of food and basic household items, larger crowds gathered outside, many desperate for help.

“We got this assistance, but we cannot spend the winter with it,” said Bibi Pashtoon. “Winter is difficult, and we have nothing except God, and we need more help.”

But the challenge of providing the aid is massive. As well as farmers and rural people displaced by drought, poverty has extended into the cities where widespread unemployment has forced many to try to sell their household goods to raise money.

“Around 50,000 Afghan people from different provinces of the country have been displaced because of recent conflicts and are in Kabul. Our assistance continues to needy people every week,” said UNHCR spokesperson Babar Baloch.

Even before the Taliban’s victory over the Western-backed government in Kabul two months ago, more than 18 million Afghans, or about half the population, needed humanitarian aid, according to the United Nations High Commissioner for Refugees.

Other UN estimates suggest that as much as 97% of the country’s population could be plunged into poverty by next year in a worst-case scenario.

The Group of 20 major economies pledged this week to provide humanitarian assistance to Afghanistan and the United States has promised separately to help relieve the immediate hardship facing millions of Afghans as the cold season begins.

However donor nations have been reluctant to give any funds directly to the new Taliban government, meaning the aid is likely to be channeled through international agencies.

Wednesday’s distribution was overseen by the UN High Commissioner for Refugees (UNHCR), the International Organization for Migration, the World Food Program and the Danish aid agency DACAAR.

(Writing by James Mackenzie; Editing by Nick Macfie)

U.N. aid chief to Ethiopia on famine in Tigray: ‘Get those trucks moving’

By Michelle Nichols

UNITED NATIONS (Reuters) – United Nations aid chief Martin Griffiths said on Tuesday he assumes famine has taken hold in Ethiopia’s Tigray where a nearly three-month long “de-facto blockade” has restricted aid deliveries to 10% of what is needed in the war-torn region.

Griffiths told Reuters during an interview that his request was simple: “Get those trucks moving.”

“This is man-made, this can be remedied by the act of government,” he said.

War broke out 10 months ago between Ethiopia’s federal troops and forces loyal to the Tigray People’s Liberation Front (TPLF), which controls Tigray. Thousands have died and more than two million people have been forced to flee their homes.

“We predicted that there were 400,000 people in famine-like conditions, at risk of famine, and the supposition was that if no aid got to them adequately they would slip into famine,” said Griffiths, referring to a U.N. assessment in June.

“I have to assume that something like that is happening,” he said, adding that it was difficult to know exactly what the situation was on the ground in Tigray because of a de-facto aid blockade and lack of fuel, cash and trucks.

Ethiopia’s U.N. mission in New York said that “any claim on the existence of blockade is baseless.” It said aid groups “faced shortage in trucks as a result of the non-return of almost all trucks that traveled to Tigray to deliver aid.”

Truck drivers carrying aid into Tigray have been shot at at least twice and some Tigrayan drivers have been arrested in the neighboring region of Afar, although they were later released, according to U.N. reports.

Griffiths said a lot of trucks go into Tigray and don’t come back, compounding the humanitarian problems.

“First of all, they probably don’t have fuel to come out,” he said. “And secondly, they may not wish to, so the consequences for humanitarian operations – whatever the cause – is problematic.”

In Tigray the United Nations says 5.2 million people, or 90% of the population, need help.

According to the United Nations, screening of children under age 5 during the first half of September revealed that 22.7% of are malnourished and more than 70% of some 11,000 pregnant or breastfeeding women are acutely malnourished.

“As a comparison this is about the same levels of malnutrition that we saw in 2011 in Somalia at the onset of the Somali famine,” Griffiths said.

Griffiths said 100 trucks a day of aid needed to get to Tigray, but only 10% had gained access in the past three months.

“We need the Ethiopian government to do what they promised to do which is to facilitate access,” said Griffiths, who met with Ethiopia’s Deputy Prime Minister Demeke Mekonnen last week during the annual U.N. gathering of world leaders in New York.

Mekonnen assured him that access is improving, but Griffiths said “it needs to improve a great deal more.”

(Reporting by Michelle Nichols; editing by Grant McCool)

Greece offers its young people cash and phone data to get COVID shots

ATHENS (Reuters) – Greece will offer its young people a 150 euro ($180) cash card and a free month of phone data to get their first COVID-19 shot, in a government drive to boost vaccination rates in the build-up to the holidays.

The country has been easing restrictions as infections fall, but concerns are rising about the spread of the more contagious Delta variant.

“With the first jab of the vaccine (they) will get a prepaid card of 150 euros,” Prime Minister Kyriakos Mitsotakis told a ministerial meeting.

“It’s a debt to the youth, a gift out of gratitude,” he added.

Around 940,000 Greeks aged 18-25 who get their first shot by the end of the year will be eligible for the “freedom pass” cash bonus, the government said.

They will be allowed to spend it on their summer holidays and cultural events from July 15.

Around a third of the 11 million-strong population is fully inoculated, according to government figures.

Greece could have 80% of its people vaccinated by the autumn if they were convinced about the importance of shots, a government official in charge of vaccinations said on Monday.

“If the message is clear… this target can be achieved by the end of the summer, early in September,” Marios Themistocleous told a weekly briefing.

Greece has reported a total of 421,266 cases and 12,682 related deaths since the start of the pandemic.

The country ended the mandatory wearing of face masks outdoors last week. From Monday, fully vaccinated Greeks can also go to work or the gym without having to test themselves.

($1 = 0.8389 euros)

(Reporting by Lefteris Papadimas and Angeliki Koutantou; Editing by Angus MacSwan and Andrew Heavens)

A child dies, a child lives: why Somalia drought is not another famine

A Somali girl is seen at a internally displaced camp in the northern Somali town of Dollow, Somalia, February 25, 2018. Picture taken February 25, 2018. REUTERS/Baz Ratner

By Maggie Fick and Katharine Houreld

DOLLOW, Somalia (Reuters) – At the height of Somalia’s 2011 famine, Madow Mohamed had to leave her crippled five-year-old son Abdirahman by the side of the road to lead her eight other starving children toward help.

When she returned to search for him, she found only a grave. He was among the 260,000 Somalis who perished.

“You can never forget leaving your child to die,” she says, wiping away tears at the memory seven years later. “It is a hell that does not end.”

This time, the drought has been harsher. Three seasons of rains have failed, instead of two. But none of Mohamed’s other children have died – and the overall death toll, although unknown, is far lower. The United Nations has documented just over 1,000 deaths, mostly from drinking dirty water.

Why?

Earlier donor intervention, less interference by a weakened Islamist insurgency, a stronger Somali government and greater access for aid workers have been crucial.

Somali women stand in line to receive infants food aid in the northern Somali town of Dollow, Somalia, February 26, 2018. Picture taken February 26, 2018.REUTERS/Baz Ratner

Somali women stand in line to receive infants food aid in the northern Somali town of Dollow, Somalia, February 26, 2018. Picture taken February 26, 2018.REUTERS/Baz Ratner

Another reason is that aid agencies are shifting from giving out food to cash – a less wasteful form of aid that donors such as Canada, Europe and Australia have embraced, although the United States still has restrictions on food aid.

The U.S. Congress will debate a move toward cash-based aid this year when lawmakers vote on a new Farm Bill. Christopher Barrett, an expert on food aid at Cornell University, is one of many scholars, politicians and aid agencies demanding reform.

“A conservative estimate is that we sacrifice roughly 40,000 children’s lives annually because of antiquated food aid policies,” he told Congress in November.

 

FROM FOOD TO CASH

In 2011, a few donors gave out cash in Somalia, but the World Food Programme only gave out food. It was often hijacked by warlords or pirates, or rotted under tarpaulins as trucks sat at roadblocks.

Starving families had to trek for days through the desert to reach distribution points. Their route became so littered with children’s corpses it was called “the Road of Death”.

Now, more than 70 percent of WFP aid in Somalia is cash, much of it distributed via mobile phones. More than 50 other charities are also giving out cash: each month Mohamed receives $65 from the Italian aid group Coopi to spend as she wants: milk, medicine, food or school fees.

Cash has many advantages over food aid if markets are functioning. It’s invisible, so less likely to be stolen. It’s mobile so families can move or stay put.

WFP said it gave out $134 million directly to Somali families to spend at local shops last year.

A woman walks past thw makeshift shelters at the new Kabasa Internally displaced camp in the northern Somali town of Dollow, Somalia, February 25, 2018. Picture taken February 25, 2018. REUTERS/Baz Ratner

A woman walks past thw makeshift shelters at the new Kabasa Internally displaced camp in the northern Somali town of Dollow, Somalia, February 25, 2018. Picture taken February 25, 2018. REUTERS/Baz Ratner

“We … basically gave confidence to the market to stay active,” said Laurent Bukera, head of WFP Somalia.

And money is more efficient than bags of food: in Somalia, cash aid means 80 cents in every $1 goes directly to the family, rather than 60 cents from food aid, said Calum McLean, the cash expert at the European Union’s humanitarian aid department.

Cash might have saved little Abdirahman.

“I could have stayed in my village if I had had cash. There was some food in the markets. It was expensive, but if you had money, there was food to buy,” Mohamed said sadly.

GLOBAL SHIFT

Aid groups have been experimenting with cash for two decades but McLean says the idea took off five years ago as the Syrian civil war propelled millions of refugees into countries with solid banking systems.

Donors have adapted. Six years ago, five percent of the EU’s humanitarian aid budget was cash distributions. Today, it is more than a third.

Most of the initial cost lies in setting up the database and the distribution system. After that, adding more recipients is cheap, McLean said. Amounts can be easily adjusted depending on the level of need or funding.

“Cash distributions also becomes cheaper the larger scale you do it,” he said.

Most U.S. international food assistance is delivered by USAID’s Food for Peace Office, which had a budget of $3.6 billion in 2017.

Just under half those funds came through U.S. Farm Bill Title II appropriations, which stipulate that most food must be bought from American farmers. The U.S. Cargo Preference Act requires that half of this be shipped on U.S.-flagged vessels.

Despite these restrictions, Food for Peace increased cash and voucher programs from 3 percent of the budget in 2011 to 20 percent last year.

But sourcing food aid in the United States is expensive and wasteful, said Barrett, who oversaw a study that found buying grain close to an emergency was half the price and 14 weeks faster. Arguments that food aid supported U.S. farmers or mariners were largely false, he said.

HOW IT WORKS

Aid groups use different systems to distribute cash, but most assess families, then register them in a biometric database, usually via fingerprints. Cash is distributed using bank cards or mobile phones or as vouchers.

Some charities place no restrictions on the cash; others, like WFP, stipulate it can only be spent at certain shops with registered shopkeepers.

In Dollow, the dusty town on the Ethiopian border where Mohamed lives with her surviving children, families say the cash has transformed their lives.

Gacalo Aden Hashi, a young mother whose name means “sweetheart”, remembers trudging past two dead children in 2011 on her way to get help. A third was alive but dying, she said, and her weakened family had to press on.

When she arrived at the camp, men were stealing food aid to give to their families, she said.

“Men were punching each other in line every time at food distributions,” she said. “Sometimes you would be sitting and suddenly your food would be taken by some strong young man.”

Now, she says, no one can steal her money – Coopi uses a system that requires a PIN to withdraw money. Most of her cash goes on food but with a group of other women she saved enough to open a small stall.

“The cash may end, but this business will not,” she said.

PROBLEMS PERSIST

Cash won’t work everywhere. In South Sudan, where famine briefly hit two counties last year, the civil war shut markets, forcing aid agencies to bring in food by plane and truck.

Sending cash to areas hit by earthquakes would drive up prices. But in a drought, where livelihoods have collapsed but infrastructure is intact, cash transfers are ideal, experts say.

Some problems remain. There’s often little co-ordination among donors – for instance, there are seven separate databases in Somalia, said McLean, and monthly stipends can vary widely.

In Uganda, authorities are investigating reports of fraud after the government used its own biometric registration system for refugees.

And if there’s no clean water or health service available, then refugees can’t spend money buying water or medicine.

But most scholars agree that switching to more cash aid would save more lives, a 2016 briefing paper by the Congressional Research Service concluded.

(Additional reporting by George Obulutsa; Writing by Katharine Houreld; Editing by Giles Elgood)

‘Jackpotting’ hackers steal over $1 million from ATM machines across U.S.: Secret Service

A hooded man holds a laptop computer as blue screen with an exclamation mark is projected on him in this illustration picture taken on May 13, 2017.

By Dustin Volz

WASHINGTON (Reuters) – A coordinated group of hackers likely tied to international criminal syndicates has pilfered more than $1 million by hijacking ATM machines across the United States and forcing them to spit out bills like slot machines dispensing a jackpot, a senior U.S. Secret Service official said on Monday.

Within the past few days there have been about a half-dozen successful “jackpotting” attacks, the official said.

The heists, which involve hacking ATMs to rapidly shoot out torrents of cash, have been observed across the United States spanning from the Gulf Coast in the southern part of the country to the New England region in the northeast, Matthew O’Neill, a special agent in the criminal investigations division, told Reuters in an interview.

The spate of attacks represented the first widespread jackpotting activity in the United States, O’Neill said. Previous campaigns have been spotted in parts of Europe and Latin America in recent years.

“It was just a matter of time until it hit our shores,” O’Neill said.

Diebold Nixdorf Inc and NCR Corp, two of the world’s largest ATM makers, warned last week that cyber criminals are targeting ATMs with tools needed to carry out jackpotting schemes.

The Diebold Nixdorf alert described steps that criminals had used to compromise ATMs. They include gaining physical access, replacing the hard drive and using an industrial endoscope to depress an internal button required to reset the device.

A confidential U.S. Secret Service alert seen by Reuters and sent to banks on Friday said machines running XP were more vulnerable and encouraged ATM operators to update to Windows 7 to protect against the attack, which appeared to be targeting ATMs typically located in pharmacies, big box retailers and drive-thrus.

While initial intelligence suggested only ATMs running on outdated Windows XP software were being targeted, the Secret Service has seen successful attacks within the past 48 hours on machines running updated Windows 7, O’Neil said.

“There isn’t one magic solution to solve the problem,” he said.

A local electronic crimes task force in the Washington, D.C., metropolitan area first reported an unsuccessful jackpotting attempt last week, O’Neill said.

A few days later another local partner witnessed similar activity and “developed intelligence” that indicated a sustained, coordinated attack was likely to occur over the next two weeks, O’Neill said. He declined to say where that partner was located.

Jackpotting has been rising worldwide in recent years, though it is unclear how much cash has been stolen because victims and police often do not disclose details.

(Reporting by Dustin Volz in Washington, D.C.; Editing by David Gregorio)

Exclusive: Looted cash, gold helps Islamic State recruit in Philippines

A view of the facade, of the battered Landbank building, looted by militants, in the early days of the Marawi siege, Philippines January 13, 2018.

By Tom Allard

MARAWI CITY, Philippines (Reuters) – Islamist insurgents looted cash, gold and jewelry worth tens of millions of dollars when they occupied a southern Philippines town last year, treasure one of their leaders has used to recruit around 250 fighters for fresh attacks.

The military said Humam Abdul Najib escaped from Marawi City, which the militants had hoped to establish as a stronghold for Islamic State in Southeast Asia, before it was recaptured by the military in October after five months of ferocious battles and aerial bombardment.

Since then, Najib, also known as Abu Dar, has used the booty looted from bank vaults, shops and homes in Marawi to win over boys and young men in the impoverished southern province of Lanao del Sur, military officers in the area said. Hardened mercenaries are also joining, lured by the promise of money.

As a result, Islamic State followers remain a potent threat in Southeast Asia even though hundreds of militants were killed in the battle for Marawi, the officers said.

“Definitely they haven’t abandoned their intent to create a caliphate in Southeast Asia,” Colonel Romeo Brawner, the deputy commander of Joint Task Force Marawi, told Reuters.

“That’s the overall objective, but in the meantime while they are still trying to recover and build up again – fighters and weapons – our estimate is they are going to launch terrorist attacks.”

On Saturday, militants wounded eight soldiers in two attacks in Lanao del Sur, Brawner said, the first such violence since the recapture of Marawi.

In the early days of the occupation of Marawi last May, as black-clad fighters burned churches, released prisoners and cut the power supply, other militants targeted banks and the homes of wealthy citizens, commandeering hostages to help with the plunder.

“It was in the first week. They divided us into three groups with seven people each,” said J.R. Montesa, a Christian construction worker who was captured by the militants.

Using explosives, the militants blew open the vaults of the city’s three main banks, Landbank, the Philippine National Bank and the Al Amanah Islamic Bank, Montesa told Reuters in a town near Marawi. They trucked away the booty, easily slipping out of Marawi because a security cordon was not fully in place.

They also raided jewellery stores, pawnshops and businesses.

Landbank and Al Amanah did not respond to requests for comment. Philippine National said recovering losses because of the Marawi fighting was a concern, but did not give details.

The Islamic celebration of Ramadan was looming at the time the militants struck and banks, businesses and homes had more money than usual, said Marawi City police chief Ebra Moxsir. The Maranaos, the ethnic group that dominates the area around Marawi, are mostly Muslims.

“There was a lot of money inside the battle area,” he told Reuters. “Maranaos keep millions of pesos in safety vaults in their homes. Gold, also. It is a tradition of the Maranao to give gifts of money (during Ramadan).”

Montesa said vans they loaded with the spoils of the raids were “overflowing”, with money, gold and other valuables stuffed into every crevice of the vehicles.

“They were saying it was a gift from Allah. They would say ‘Allahu Akbar’ (God is greatest) while we were stealing.”

DANGEROUS REGROUPING

The military and police have also been accused by rights groups and by Marawi residents of looting during the conflict.

Brawner said a small number of soldiers had been disciplined for looting but the practice was not widespread.

However, the centre of Marawi – home to its major banks, main market and grandest residences – was under the control of militants for months.

Brawner said authorities were unclear exactly how much was taken by the militants.

“It’s hard for us to say. We have heard about 2 billion pesos ($39.4 million) but that’s just an estimate.”

“In the first days, when we were not able to establish that security cordon around the main battle area, that was the time when they were able to slip out with their war booty.”

The government also said the regrouping of militants in Mindanao, the southern region of the Philippines that has been marred by Islamic and Communist uprisings for decades, was dangerous.

Presidential spokesman Harry Roque told Reuters: “There is always the danger of these groups regaining strength enough to mount another Marawi-like operation.”

Najib is believed to have fled Marawi early in the battle. There are conflicting reports about whether he had a dispute with other leaders or left as part of a preconceived plan.

He attempted to return in August with 50-100 more fighters to reinforce the militants, who by then were losing ground, but he was prevented by an improved security cordon, said Brawner.

“According to reports, they were able to recruit another 100 to 150. So the estimate is 250 all in all, and this includes children,” Brawner said. “They are trying to recruit orphans, relatives of the fighters who died and sympathisers.”

Parents of children are offered as much as 70,000 pesos ($1,380) plus a monthly salary of as much as 30,000 pesos ($590) to hand over their sons to the group, according to security sources and community leaders briefed on the recruitment.

The average family income in the Philippines is 22,000 pesos per month, according to a 2015 government survey. It was about half that in the Autonomous Region of Muslim Mindanao, where Marawi and surrounding areas lie.

Brawner said local residents had told the military that the militant group was also offering bonuses of up to 10,000 pesos ($200) for killing a soldier.

Rommel Banlaoi, a Manila-based security expert, said more experienced fighters had also been recruited. These were “mercenaries” attracted by the payouts, he said, but Najib has also tapped into disaffection among Maranao angered by the destruction of large parts of Marawi by the Philippine military’s bombing campaign.

“That kind of narrative is being used by ISIS to lure people to continue the fight,” Banlaoi said, using an acronym for Islamic State.

NEXT EMIR?

With the looted funds and a loyal following, Najib, could become the new “emir” of Islamic State in Southeast Asia following the death of Isnilon Hapilon in the battle for Marawi, security analysts say.

Najib is a hardened fighter and cleric who studied in the Middle East and reportedly trained with militants in Afghanistan, they say.

He co-founded Khalifa Islamiyah Mindanao, an insurgent group formed in about 2012 that launched a series of bombings in Mindanao.

“He is a very, very important person because he has been there from the start,” said Banlaoi.

Najib had links to Al Qaeda, which earned him the nickname “al Zarqawi of the Philippines”, a reference to the slain leader of Al Qaeda in Iraq (AQI), Abu Musab al Zarqawi. AQI morphed into Islamic State, to which Najib pledged allegiance in 2014.

According to Banlaoi, Najib worked closely with Mahmud Ahmad, a Malaysian militant believed to have died in Marawi who was the key conduit between the Philippines fighters and the Islamic State leadership in Syria and Iraq.

Banlaoi said the recruitment effort by the pro-Islamic State remnants led by Najib was “massive and systematic”.

“If you are well funded, you can do a lot of things.”

(Additional reporting by Martin Petty, Neil Jerome Morales and Manuel Mogato; Editing by John Chalmers and Raju Gopalakrishnan)

Chinese investors find their cash is losing its cachet

logo of yuan

By John Ruwitch and Dasha Afanasieva

SHANGHAI/LONDON (Reuters) – For years, cash-rich Chinese investors have been highly sought after the world over. Now, their cash is losing its cachet.

China’s increasing efforts to prevent capital from leaving the country are eroding the confidence of domestic and foreign investors about getting deals done inside and outside of the world’s second-biggest economy.

Chinese bidders had become ubiquitous in deals in the past two years and were welcomed, said Severin Brizay, head of Europe, the Middle East and Africa mergers and acquisitions for the investment bank UBS.

“Clients were asking if it would be possible to make sure they are involved. Now, we are seeing the reverse: some clients are asking if we can do it without Chinese bidders because of the domestic challenges they face,” he said.

Dealmakers said many Chinese firms are unable to close deals because they can not secure official permission to transfer yuan into foreign exchange.

This follows a series of measures by authorities since late last year to tighten restrictions on capital outflows and rein in what officials have called “irrational” outbound investment. The Institute of International Finance estimated capital outflows surged to a record $725 billion last year and it expects even higher outflows this year.

The yuan fell more than 6.5 percent last year against the dollar, its steepest decline since 1994, prompting the central bank to spend hundreds of billions of dollars in reserves to prevent the slide from turning into a slump.

China’s foreign exchange regulator, the State Administration of Foreign Exchange, did not respond to requests for comment.

IMPACT

The measures by authorities have had a dramatic impact.

Overseas direct investment (ODI) by Chinese in December fell almost 40 percent from a year earlier to $8.41 billion, the lowest monthly level in 2016. In January, overseas property purchases by Chinese corporations plunged.

Global stock index provider MSCI expressed concern about the capital outflow measures and China shelved plans for a new crude futures contract because potential foreign participants were worried they would not be able to take yuan profits out of the country.

Chinese conglomerate and cinema chain operator Dalian Wanda’s proposed $1 billion purchase of U.S. entertainment group Dick Clark Productions Inc collapsed over problems getting currency out of China and regulatory approval, online website The Wrap said on Monday.

In another case, a Chinese investor was unable to get permission from authorities to exchange yuan into $30 million to close a U.S. deal, a consultant involved in the project said. The planned $100 million investment in a U.S. residential property portfolio fell through.

“Sellers nowadays will request certain proof,” said Jeffrey Sun, a Shanghai-based partner at the legal practice of Orrick, Herrington and Sutcliffe. “From the sellers’ side, the worry is justified.”

Still, while Chinese regulators are putting proposed deals under greater scrutiny, it does not mean they are shutting the door on outbound investment, lawyers said.

Regulators will approve deals if they make economic sense, Sun said. For example, a steel manufacturer buying a soccer club “is unlikely” to be approved, he said.

“FREAKED OUT”

Fund managers that help Chinese invest abroad, such as China Orient Summit Capital, are changing tack. The firm had been raising money in China for funds to target U.S. and European real estate. It is now looking to raise money in offshore markets, an executive at the company said.

China Orient Summit Capital declined a request for a formal interview.

Companies are also looking to avoid the approval process for buying foreign exchange if they have access to funds outside of China, lawyers and bankers said.

“Every deal at this point is looking for some way to identify offshore funds rather than deal with the capital controls,” said an M&A lawyer in Shanghai, who declined to be identified.

Chinese companies raised a record $111 billion in offshore dollar bonds in 2016, according to data from Dealogic, up from $88 billion in 2015. Some of those funds would have been earmarked for overseas investments, said Ivan Chung, associate managing director at Moody’s ratings service.

Chinese conglomerate HNA Group <0521.HK> announced about $20 billion in outbound deals last year. Thomson Reuters data shows it raised at least $17.05 billion in loans abroad in 2016.

Overall, China’s outbound investment hit a record last year but could have been much higher, said the Rhodium Group, a consultancy that tracks direct investment from China. It said a record 30 deals worth $74 billion and involving Chinese companies were canceled in the United States and Europe in 2016.

“Right now everybody is thoroughly freaked out by capital controls,” Daniel Rosen, a Rhodium partner and adjunct professor at Columbia University, said.

Still, on Vancouver’s upscale West Side, a neighborhood popular with foreign buyers where the price of homes runs in the millions of dollars, realtor Tom Gradecak was less worried about Chinese demand.

In the past, Chinese investors have tended to find ways around capital controls, he said.

“It won’t take them long,” he said. “The people that really want to come here, I don’t think it’s going to stop them.”

(Reporting by John Ruwitch and Samuel Shen in SHANGHAI, Matt Miller in BEIJING, Dasha Afanasieva in LONDON, and Nicole Mordant in VANCOUVER; Editing by Neil Fullick)