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Armed Forces of the Philippines (AFP) Chief Public Affairs Office and army colonel Noel Detoyato gives a press statement regarding on the execution of a Canadian hostage, John Ridsdel by Abu Sayyaf militants in the southern Philippines, inside the military headquarters in Quezon city, metro Manila, Philippines April 26, 2016. REUTERS/Romeo Ranoco

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By Manuel Mogato

MANILA (Reuters) - When the deadline for his ransom passed this week, Canadian John Ridsdel was beheaded by his captors, the Abu Sayyaf, whose network in the Philippines is only gaining in strength thanks to vast sums earned from kidnappings that pay.

The Islamic State-linked group has made tens of millions of dollars from ransom money since it was formed in the 1990s, security experts say, channelling it into guns, grenade launchers, high-powered boats and modern equipment.

The Philippine military is finding it increasingly difficult to weaken Abu Sayyaf, whose name translates as "Bearer of the Sword" and is based in the southern island of Jolo.

Although it is a rebel group fighting for an independent Islamic nation in the south of the mainly Roman Catholic Southeast Asian nation, its militants often seem more motivated by the money they can make from kidnappings and piracy.

Neighbouring Indonesia said last week after 14 tugboat crew were kidnapped that piracy on a shipping route along its sea border with the Philippines could reach Somalian levels and warned commercial vessels to avoid the area.

Sidney Jones, a Jakarta-based counter-terrorism expert, said there were links between Abu Sayyaf Group - known as ASG - and Islamic State-backed groups in Indonesia, the faction behind Monday's beheading appeared to be in it for the money.

"This ransom business has been hugely successful for Abu Sayyaf ... it's gotten them lots of money and freedom to operate," she said.

Ridsdel, 68, was snatched from a high-end holiday resort last year and beheaded on Monday when the deadline for buying his freedom expired.

The group's price for his life was 300 million pesos (£4.4 million), the same set for another Canadian, a Norwegian and a Filipino woman who appeared with him in a video appealing to their governments to save them.

"BOARD AND LODGINGS"

A Philippine army spokesman said Abu Sayyaf had threatened to behead one of four captives on Monday if the 300 ransom for each of them was not paid by 3 p.m. local time.

The Philippines rarely publicises payments of ransom, but it is widely believed no captives are released without them. Security experts say brokers, messengers and go-betweens are involved at multiple levels, some taking substantial cuts.

Payments are euphemistically called "board and lodgings".

A German couple seized on their yacht in 2014 was released after $5.3 million was paid and, in 2000, the Libyan government, acting as an intermediary, handed over $10 million to free 10 European and Middle Eastern tourists.

Security analyst Rommel Banlaoi said executing Westerners raised Abu Sayyaf's profile and the potential sums involved would encourage other rebel groups to play supportive roles in the business.

"The beheading of John Ridsdel has just increased ASG's leverage," he said. "The risks for other captives have become higher as ASG just demonstrated that the it was not bluffing when imposing deadlines."

ASG is holding 23 hostages, including Japanese, Norwegian, Dutch and Malaysian citizens, and the 14 Indonesians.

Outgoing Philippine President Benigno Aquino has ordered security forces to hunt down Abu Sayyaf militants. The army says 2,500 troops are involved in operations and on Tuesday were pounding rebel mountain positions with artillery fire.

A Philippine intelligence source said that a political solution was vital because the group's ransom earnings were entrenching its network and complicating the military's job.

The region in which Abu Sayyaf operates is impoverished, making it easy to recruit jobless, unschooled youths with the promise of money and gang prestige.

"It's the lifeblood that keeps the lawlessness in the area. Money from kidnap-for-ransom activities is used to buy weapons, faster boats and communications equipment," the source said.

"More unschooled children are joining them and taking up arms. The military cannot solve this problem alone."

(Reporting by Manuel Mogato; Additional reporting by Kanupriya Kapoor in Jakarta; Writing by Martin Petty; Editing by John Chalmers and Nick Macfie)

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