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Vitor Quintã
MOP 6.00
Kunming route 1 revived – by China Eastern
April 19, 2013
www.macaubusinessdaily.com
Year II
Number 380 Friday September 27, 2013
Editor-in-chief Tiago Azevedo
Deputy editor-in-chief
Carson Yeung to testify in money laundering case Page 7
Airport is near retail capacity
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acau International Airport – opened in 1995 as Portugal’s parting gift to the city – is now running its departure lounge at 80 percent capacity, the operating company said yesterday. With 4.8 million passengers expected to fly in and out this year, the departure hall “is nearly saturated,” said Winnie Hsu, director of Macau International Airport Co Ltd’s commercial
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Hang Seng Index
development department. “The building is only designed to hold six million passengers,” she added. Lack of space is also limiting growth of nonaviation revenue. That – including pre-departure shopping – generated 425.9 million patacas (US$53 million) in 2012 – 55 percent of total revenue. But there’s no space to add more shops said Ms Hsu.
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September 26
STDM taps Portugal’s ‘golden visa’ market
HSI - Movers Name
One of Stanley Ho Hung Sun’s companies has developed luxury homes in Portugal for Chinese investors. The properties come with more than a nice fitted kitchen. Apartments in STDM’s ‘Casas do Parque’ project in Lisbon have the bonus of a so-called ‘golden visa’. Last October the Portuguese government began offering residency to foreign investors that transfer at least 1 million euros (10.6 million patacas) to Portugal, open a business that creates a minimum of 10 jobs there or buy local real estate worth at least 500,000 euros.
%Day
LENOVO GROUP LTD
0.98
CHINA MERCHANT
0.87
GALAXY ENTERTAIN
0.74
CHEUNG KONG
0.67
CITIC PACIFIC
0.51
CHINA COAL ENE-H
-1.47
WHARF HLDG
-1.71
CATHAY PAC AIR
-2.21
LI & FUNG LTD
-3.06
WANT WANT CHINA
-3.06
Source: Bloomberg
I SSN 2226-8294
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Hengqin land for local ‘creatives’
Japan not tussling with Macau: Fitch
SJM boss calls for ‘better’ labour policy
Hong Kong-listed Lai Fung Holdings Ltd and eSun Holdings Ltd say a subsidiary that won a bid to buy a 130,000 square metres plot on Hengqin Island will reserve space for Macau’s creative industries. eSun, one of the original investors in the Studio City casino project on Cotai, divested its interest there after Melco Crown Entertainment Ltd took a 60 percent stake in 2011.
Macau’s casinos are unlikely to face much competitive pressure from Japan if gaming resorts are legalised there, says a note from Fitch Ratings. Macau will: “…remain insulated because more than 53 percent of its 28.1 million visitors last year came from nearby Hong Kong and the province of Guangdong, indicating that Macau remains largely a day trip, local market,” says the credit research agency.
The chief executive of Macau casino developer SJM Holdings Ltd said yesterday he hoped the government could develop a “better” policy on imported labour – so his firm and others could complete their planned Cotai casino resorts. “If you don’t have enough labour supply it will set everybody back,” said Ambrose So Shu Fai on the sidelines of an event outside Casino Grand Lisboa.
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Macau Yuan transfer limits could be relaxed: ICBC China’s central bank and Guangdong province are discussing a pilot plan to relax the daily limit on yuan transfers from Macau to mainland China, said Stephen Lui, deputy chief executive officer of Industrial and Commercial Bank of China (Macau) Ltd. However, it is not yet known when the plan might be enforced, he told media on the sidelines of a press briefing on the bank’s online remittance service yesterday. Currently, an individual Macau bank customer can only transfer a maximum of 50,000 yuan (65,240 patacas) per day to the mainland.
Dearth of space restricts airport shopping options Even so, the airport expects to make more money from shoppers this year Stephanie Lai
sw.lai@macaubusinessdaily.com
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he operator of Macau airport is having difficulty catering to the travelling public’s urge to shop because its retailing space is limited. Macau International Airport Co Ltd’s (CAM’s) non-aviation business generated revenue of 425.9 million patacas (US$53 million) last year, 55 percent of the total. CAM’S director of commercial development, Winnie Hsu, expects further growth this year in retailing business in particular and in nonaviation revenue in general as the number of passengers keeps rising. “About 30 percent of the passengers shop at our airport, so we have to continue to work hard to attract the remaining 70 percent,” Ms Hsu told Business Daily. She was referring to outbound passengers. Each shopper spent, on average, 506 patacas, she said. Ms Hsu was speaking on the sidelines of the fourth China and Portuguese-speaking Countries Airports Conference. Because the airport is so small, all its shops are in the departure halls.
China Eastern flies Kunming route M
ainland Chinese carrier China Eastern Yunnan Airlines Co Ltd will start flying next month between Macau and Kunming, a route that Air Macau Co Ltd dropped in 2008. The Civil Aviation Authority of Macau confirmed to Business Daily that it received late Wednesday the mainland carrier’s request to launch the route to the capital of Yunnan province. The carrier, a joint venture between the Yunnan government and the mainland’s second largest airline China Eastern Airlines Corp Ltd, will fly two times a week starting October 10, said a spokesperson for the authority. But the spokesperson noted the regulator is yet to approve this route.
About 30 percent of Macau airport’s outbound passengers shop before flying
Ms Hsu said the airport had no retailing space left, so setting up more shops was not an option. The airport operator expects 4.8 million passengers to arrive or depart this year. The departure hall was “nearly saturated”, Ms Hsu said.
It is not the first time that there will be direct flights between Macau and the southeast Chinese city Air Macau operated this route before but the city’s sole carrier dropped it on December2008, blaming weak demand. There is no official data available on how many visitors from Yunnan province visit Macau. The latest data from the Macau Statistic and Census Service only show the city received over 420,000 mainland visitors coming by air in the first eight months this year, up by 23.9 percent from a year earlier. If the Kunming route gets off the ground, the airport will have 22 routes connecting it to 21 mainland cities. Air Macau and Xiamen Airlines both launched direct flights to Zhengzhou of Henan province last week. Mainland authorities have approved 14 additional flights connecting mainland cities to Macau during the seven-day National Day holidays next month, mainland media reported. T.L.
“The building is designed to hold only 6 million passengers,” she said. “We have to reserve some more space for passengers to rest before boarding.” The airport is pondering what to do about King Power Duty Free (Macau) Co Ltd.
King Power’s exclusive concession to handle the commercial aspects of the airport’s shops expires next year.
Greater variety Ms Hsu said CAM’s revenue from duty-free shopping by outbound passengers made up at least 75 percent of its non-aviation revenue last year. She said that before 2008 most of the shoppers at the airport were passengers from Taiwan using Macau as a staging post on their way to or from the mainland. “Now most of our customers are from mainland China,” she said. Ms Hsu said that in the past few years the airport had tried to offer a greater variety of cosmetics, alcoholic drinks and tobacco products to meet demand from mainlanders. “As early as 2004 we had already foreseen that the retail segment would undergo a big change because that very year the airport introduced low-cost airlines, whose passengers’ shopping pattern is hugely different from conventional ones,” she said. “So a difference that you can see is, for instance, that we have premium cosmetics brands like SK II and La Mer alongside massmarket ones like Lancôme, Clinique and Olay,” she said. “Of course, we have to cater to the mass instead of just to a particular shopping group, so we have also introduced a bookstore and a souvenir store recently.” Ms Hsu said the airport had tried to lure pharmacies like Watsons, Mannings and Grupo Popular to set up shop there, but that it had been difficult because pharmacies had trouble getting suitable staff.
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September 27, 2013 April 19, 2013
Macau
Golden visas are bait for STDM Lisbon flats Stanley Ho’s company dangles EU residency in front of buyers of upmarket housing in Portugal Tony Lai
tony.lai@macaubusinessdaily.com
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ntertainment group Sociedade de Turismo e Diversões de Macau, SA (STDM) is using Portugal’s golden visa scheme to entice mainlanders to buy homes in high-end housing that the company is building in Lisbon. This month STDM, founded by gaming tycoon Stanley Ho Hung Sun, began promoting in Macau and Hong Kong a housing project in Lisbon called Casas do Parque. A written statement by STDM says the company will offer “onestop investment immigration services” ranging from selling homes to legal advice on immigration to Portugal. Last October the Portuguese government began offering residency to foreign investors that transfer at least 1 million euros (10.6 million patacas) to Portugal, open a business that creates a
minimum of 10 jobs there or buy real estate there worth a minimum of 500,000 euros. The STDM statement says it sees a business opportunity in mainlanders immigrating to other countries by investing in real estate. Business Daily asked STDM for more information but we had received no reply by the time we went to press. Ricacorp (Macau) Properties Ltd regional director Melvin Leung said: “I don’t know whether STDM is the first Macau developer to offer this one-stop service on the visa scheme. “But it is surely the sole Macau firm that currently has the resources to do so.” Mr Leung added: “Other Macau developers would have difficulty in tapping into the Portuguese real estate market as they are new, while STDM has been operating in
Chief Executive cabinet spending soars T he cabinet of Chief Executive Fernando Chui Sai On cost the government 207 million patacas (US$25.9 million) last year, up by almost half from 2009. Mr Chui was elected to replace former chief executive Edmund Ho Hau Wah in 2009. Chief executive spokesman Alexis Tam Chon Weng revealed these figures in a reply, made available yesterday, to an inquiry filed by legislator Ng Kuok Cheong. The cabinet spent more money because it had to increase the salary and housing subsidy of the 41 people working there, Mr Tam noted. He added that the spending increase was “reasonable” given that the office expanded its workforce in order to undertake a new task: handling external affairs with Guangdong province, Taiwan and Portugal. Legislator Mr Ng filed a written inquiry in late July questioning the sharp rise in the office running costs.
He expressed fear that the cabinet’s competences were overlapping with other government departments, namely Macau Economic Services and the Macao Economic and Cultural Office in Taipei. Mr Tam reveals the government spent nearly 60 million patacas last year to renovate the Government headquarters and a rented space at the nearby Macau Chinese Bank building. That space was used as support office for the Executive Council, advisors to the Chief Executive cabinet, the Government Spokesperson Office and the Protocol, Public Relations and External Affairs Office created last year. Mr Tam denied that the government was trying to hide the renovation costs, stressing that only tenders above 1 million patacas had to be announced on the Official Gazette. S.L.
Portugal for many years.”
At home in Portugal Ricacorp has been appointed to help promote Casas do Parque here and sell space in it. The Casas do Parque website says STDM has over 20 years of experience in Portugal, and manages the Casino Estoril gaming complex near Lisbon. Mr Leung said the advertising here was directed at mainlanders, because many Macau people already had Portuguese passports. The STDM statement says Casas do Parque is STDM’s first real estate project abroad that is meant for mainlanders. The statement says STDM will make presentations on the project in Guangzhou and Shanghai in the next two months. It fails to say how many homes
the development will contain. Mr Leung has no estimate. “It is a big residential project and [STDM] has so far completed only part of it, which is now on sale,” he said. The STDM statement says the development will contain flats with between one and four bedrooms, the starting price being 180,000 euros. This summer Midland Realty (Macau) Ltd also began helping customers to buy property in Portugal with a view to obtaining residency there. By last month the Portuguese Consulate-General in Macau had received 61 applications for golden visas, most of the applicants being mainlanders seeking residency in the European Union by buying property in Portugal.
A flat in Casas do Parque in Lisbon costs at least 180,000 euros
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September 27, 2013
Macau
Hengqin land kept for creative SMEs
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A Hong Kong group intends to put Macau cultural and creative enterprises on some of its land on Hengqin
Fleeting passages Visitors to Macau come in two kinds: those that stay overnight and those that do not. Day-trippers stay, on average, for under five hours. The brevity of their stays varies little with where they come from. In contrast, how long overnight visitors stay depends to an appreciable degree on where they come from. Given that a considerable proportion of overnighters do not stay in hotels and the continuous availability of transport to Hong Kong, many overnighters may come for only short stays. The proportion of day-trippers that the statistics show may therefore be an underestimate of the number of visitors than come for only short stays.
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Day-trippers make up mostly stable proportions of visitors from Macau’s main sources. The plots in the chart showing daytrippers from the mainland and Hong Kong are almost flat and close to the average in the period represented. This is to be expected, considering the predominance of mainlanders and Hongkongers among Macau’s visitors and how near they live. Hong Kong is only a short hop away, and most visitors from the mainland come from Guangdong, just across the border. Over half of visitors from the mainland and Hong Kong stay just a few hours. Smaller but still appreciable proportions of visitors from Japan and South Korea are day-trippers. They probably visit Macau on their way to Guangdong or as members of package tours that take them to several places. The number of day-trippers from Taiwan has declined markedly, now that Taiwan people have direct access to the mainland by air, instead of having to use Macau or Hong Kong as a staging post.
Tony Lai
tony.lai@macaubusinessdaily.com
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Hong Kong conglomerate controlled by prominent businessman Peter Lam KinNgok has said it will reserve space for Macau cultural and creative enterprises on its newly acquired plot of land on Hengqin Island. Lai Fung Holdings Ltd and eSun Holdings Ltd jointly told the Hong Kong Stock Exchange late on Wednesday that a subsidiary had won a plot of over 130,000 square metres on Hengqin with a bid of 523.3 million yuan (682.73 million patacas). “The site is zoned or planned for cultivating and developing cultural and creative industries in Hengqin,” their joint statement says. Both companies are part of Lai Sun Group, which Mr Lam chairs. The group has plans to invest at least 3 billion yuan in the Hengqin project. The project is “expected to benefit from the growth in the tourism and commercial activities in Macau, Hengqin and the Pearl River Delta region”, the statement says. The project “may include the establishment of a specific designated zone catering for small and medium cultural and creative enterprises of Macau”. Lai Sun Group declined to give Business Daily details. A source close to the group, who asked not to be identified, said the two companies were “now considering several plans they have in hand, but there must be areas zoned for the Macau SMEs”.
The source said “nothing has been decided yet” about how much land would be reserved for Macau SMEs or how to get them involved in the project.
On the bandwagon The president of the Macao Comickers Association, Michael Wong Tin Chon, said Hengqin could give Macau small enterprises the space they lacked. “What interest Hengqin holds for us is that there is a lot of space, while the space and facilities in Macau are limited, with high rents,” Mr Wong told Business Daily. Mr Wong, who runs a shop that sells products related to comics and games, said jumping on a big company’s bandwagon would be a good way for Macau SMEs to explore Hengqin. “It is difficult to ask SMEs to start doing business there by themselves,” he said. He said Hengqin could have the potential to set up something similar to the 789 art zone in Beijing. But Mr Wong has reservations. “The government has also talked about helping us to explore Hengqin, but nothing has been announced yet,” he said. The chief executive of design company Macau Creations, Wilson Lam Chi Ian, said any expansion on Hengqin would depend on the availability of financial and human resources. Mr Lam said Macau Creations would focus first on improving its
J.I.D.
18%
Fall in proportion of day-trippers among Q2 visitors from Taiwan, 2008-13 Hengqin could give Macau small enterprises the space they lack
business in Macau. Lai Sun Group is planning to build facilities for film and television entertainment, cultural art workshops, live performances, exhibitions and trade fairs, and to build theatres, museums, an auction centre and hotels.
First step The Hengqin authorities, eSun and Lai Fung signed in September 2011 an agreement for the two companies to develop a cultural and creative zone on the island, and the project is part of the outcome of that agreement. Our source close to Lai Sun Group said the land purchase announced on Wednesday was just the first step on the way to the development of the cultural and creative zone. The source said the group would “continue to bid for more land on Hengqin in the future”. The 2011 deal commits eSun and Lai Fung to investing about 18 billion yuan in developing a zone covering about 1 square km. ESun was one of the original shareholders in the owner of the land in Macau where Studio City resort is being built. The company later dropped its plan to develop film and entertainment facilities on the land because of a shareholder dispute. It sold its stake of 60 percent to gaming company Melco Crown Entertainment Ltd for US$360 million (2.9 billion patacas).
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September 27, 2013
Macau
Japan not competing with Macau for gamblers: Fitch Elsewhere, Union Gaming gives more details on what investors here are planning in Land of Rising Sun Michael Grimes
michael.grimes@macaubusinessdaily.com
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acau’s casinos are unlikely to face much competitive pressure from Japan if gaming resorts are legalised there, says a note from Fitch Ratings. Macau will: “…remain insulated because more than 53 percent of its 28.1 million visitors last year came from nearby Hong Kong and the province of Guangdong, indicating that Macau remains largely a day trip, local market,” says the credit research agency. Business Daily reported earlier this week that the proportion of all Macau’s visitors coming from the mainland rose to 65.5 percent in August – the highest percentage since collection of such data began in 1998. Of the 1.88 million arrivals from the mainland, 46 percent – 861,944 people –were from Macau’s neighbouring province Guangdong. Tourists from Hong Kong, T a i wan, Indonesia an d Japan travelling to Macau all declined in number year-on-year in August. In the past, some of the fluctuations in visitor arrivals from Southeast Asia and East Asia have been linked to the presence or absence of direct air services to Macau.
KEY POINTS Macau likely to remain mainland-focused: Fitch Japan may compete for Asian regional customers LVS wants Singapore-style iconic casino resort in Japan MGM Resorts wants local partner, venues in clusters Wynn Resorts’ boss benefits from 30-yrs of casino building
Fitch suggests there is the potential for some competition for regional customers by Japanese casino resorts. “Japanese casinos would likely target and attract a broad Southeast Asian and international visitor base, so Macau would feel some limited pressure,” states the ratings agency.
Japan proposals Elsewhere, Union Gaming Group, which recently held an investor forum in Japan to discuss casino liberalisation there with senior casino industry executives, gave some more details on the plans of existing Macau concessionaires and sub-concessionaires for entering the Japanese market. Writing of Las Vegas Sands Corp, and referring to the company’s distinctive Marina Bay Sands property in Singapore, Union Gaming states: “Like Singapore, the company anticipates developing an iconic building that redefines the skyline.” LVS’s project would have a “heavy MICE [meetings, incentives, conferences and exhibitions] focus with a greater focus on overseas Asian (rather than domestic) MICE events,” says the research house, adding LVS would prefer a 10-year exclusivity period and allow development in the city centres of major metropolitan areas. The operator would also prefer the Japanese government implement a two-tiered tax structure for VIP and mass-market gambling, states Union Gaming. “[LVS] Would prefer that locals are allowed to participate in gaming (subject to safeguards) and that there are no restrictions/ obligations on partnerships,” adds the research house. MGM Resorts International, a 51 percent investor in MGM China Holdings Ltd, the developer and operator of MGM Macau, would in Japan like to develop an integrated resort with a local partner, says Union Gaming. “[MGM] Advocates allowing
Pastures new? Non-Chinese gamblers may be tempted by Japan
for IR development in clusters – namely two IRs in a common area (e.g. downtown Tokyo or Osaka) in order to promote critical mass,” writes the research house, adding the casino operator would prefer a “fixed and limited” number of licences. MGM would also like Union refers to as a “heavy ‘green’ focus that could align well with Japan’s environmental efforts”. Union Gaming says that Steve Wynn, chairman of Wynn Resorts Ltd, has the benefit of 30-plus years of casino resort development. Union adds that a time frame in excess of two years for the passage of a gaming legalisation bill and a follow-up casino regulatory bill would probably work to Wynn’s advantage. By then Wynn Palace, the firm’s under construction new
resort on Cotai in Macau should be at or near completion, and the bad publicity from the breakdown of the business partnership between Mr Wynn and pachinko machine manufacturer Kazuo Okada should have faded from memory. Union Gaming states: “In our view, the longer it takes for Japan to pass a gaming bill the better it is for Wynn Resorts. This is due to two factors: firstly, having Wynn Resorts’ latest and greatest resort on Cotai open in time to showcase it during an RFP [request for proposal] process should prove helpful, and; secondly, time has a way of healing wounds and the further back the Okada dust-up the less likely it is that the break-up impairs the company’s chances of obtaining an IR licence.”
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Macau Ambrose So, SJM chief executive
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Financial Monitor Cruising speed The main contributors to consumer price inflation have been the prices of some of the basics. The fastest-rising prices include the prices of food and shelter and, to a lesser degree, clothes. However, the prices of most other goods and services that the consumer price index reflects have also been rising, so contributing to inflation. The costs of healthcare, education, leisure and culture, transport, communication and miscellaneous goods and services together account for almost one-third of the CPI. These costs have followed different paths in the past few years. 140
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SJM CEO calls for ‘better’ labour policy Ambrose So says unless changes made, all Cotai casino developers could face delays
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Michael Grimes
michael.grimes@macaubusinessdaily.com
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Among the prices of goods and services represented in the chart, the most problematic to look at are the prices of miscellaneous goods and services. Since the base of the CPI was last reset, the prices of miscellaneous goods and services have risen the most. But because this component of the index is such a hotchpotch, we are disinclined to give it much significance. Of the other components of the CPI shown here, healthcare costs were the fastest-rising in the period represented. From the beginning of 2010 to last July they rose by almost onequarter. Healthcare costs were alone among the other components in rising at a faster rate than the average. Transport cost inflation and leisure and culture cost inflation were slightly less than the average, broadly speaking. Transport costs seem to be stabilising, but leisure and culture costs seem to be under increased upward pressure. Education and communication costs have helped curb consumer price inflation. Education costs remained virtually unchanged throughout the period shown. Communication costs are now 17 percent lower than they were three years ago. But education and communication costs together account for only about 8.7 percent of the CPI. J.I.D. The content of this column is the work of Business Daily’s journalists.
6.38 % Annual rate of healthcare cost inflation in July
he chief executive of Macau casino developer SJM Holdings Ltd said yesterday he hoped the government could develop a “better” policy on imported labour – so his firm and others could complete their planned Cotai casino resorts. “There’s always a problem in the labour supply,” said Ambrose So Shu Fai on the sidelines of an event outside Casino Grand Lisboa. He added: “…as we go on with this construction in Cotai we hope that there will be a better policy in order to facilitate construction so that we can complete in time…If you don’t have enough labour supply it will set everybody back.” Business Daily reported yesterday that Lo Kai Jone, chairman of the Macau Construction Association – a lobby group for the building industry – is calling on the government to handle construction labour importation issues “in a more flexible manner”. In 2010 the government announced a ‘one-for-one’ policy on construction labour, i.e., one local hired for every imported worker. In March 2012 there were hints of a relaxation, after then Labour Affairs Bureau director Shuen Ka Hung moved to another job. The fact Mr Lo is now calling in public for flexibility suggests there’s stalemate between the sector and the administration. The developers may have been emboldened to go public with their frustrations because of the strong showing of candidates linked to the casino industry in Macau’s election on September 15 for the
Legislative Assembly. Chan Meng Kam – an investor in Casino Golden Dragon, an SJM-licensed property – got three members of his ticket elected. Angela Leong On Kei, an executive director of SJM, missed getting a third person for her ticket by only a handful of votes, and has lodged an appeal. But as this newspaper reported on September 19, the election success of casino industry interests has drawn the attention of the central government.
Liaison Office Bai Zhijian, director of the Central People’s Government Liaison Office in Macau, appeared in comments to the local media to acknowledge some discontent among locals that tourism growth was outpacing infrastructure development. He added the casino industry in Macau is not offering enough non-gaming activities to
If you don’t have enough labour supply it will set everybody back Ambrose So
tourists and residents. Yesterday SJM’s CEO played down any suggestion that the central government was giving a warning to the casino sector to temper its ambitions for gambling growth. “I don’t read that as a warning to the industry,” said Mr So. “I think both the central government and also the Macau SAR government always stressed that Macau’s economy needs certain diversification…He is just reminding us that we should put in more non-gaming elements.” Mr So was asked about a suggestion by Michael Leven, president of Las Vegas Sands Corp – reported yesterday by Business Daily – that Macau might want to reconsider its policy of using localsonly as casino dealers. Mr So stated: “As far as the croupiers [sic] are concerned, they’ve got to be local residents.” But he added: “If there aren’t enough people then of course we support [the idea of non-residents]. [Otherwise] Where do we get the labour to make this operational?” The SJM CEO mentioned at a press conference on September 5 a capital cost of HK$25 billion (US$3.2 billion) for the firm’s entire 700-table SJM Cotai resort and a possible opening in 2017. He said yesterday the casino portion would probably be “less than five percent” of the gross floor area developed on the company’s own 70,500 square metres (758,856 sq. feet) plot. SJM is still in talks to combine that site with Ms Leong’s own 180,000 sq. m. plot next door, which is zoned for non-gaming, said Mr So.
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September 27, 2013 April 19, 2013
Macau
Carson Yeung to testify in money laundering trial HK businessman with Macau ties makes U-turn over giving evidence
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arson Yeung Ka Sing, the owner of English football team Birmingham City on trial for money laundering, will testify next month in a reversal of an earlier decision not to take the stand. District court Judge Douglas Yau yesterday allowed the Hong Kong businessman’s application to reopen his defense after it had earlier rested. The trial will resume October 15. M r Yeung, 53, plead ed n ot guilty to five charges of laundering HK$721.3 million (US$93 million) in deposits from parties including Macau casino operator SJM and securities firms over a seven-year period to 2007. SJM deposited 14 cash cheques worth HK$72.45 million in total into bank accounts controlled by Mr Yeung, it was said in court in May. His lawyers claimed that money came from gambling winnings. Mr Yeung also made a payment of HK$35 million to SJM in early 2005, the court heard. The son of a vegetable stand salesman ran a successful hair salon and parlayed his earnings into savvy investments in real estate and stocks, Mr Yeung’s lawyers said. M r Yeung w as c h airman of
Grandtop International Holdings Ltd, which in 2007 bought a 29.9 percent stake in the United Kingdom football club for 15 million pounds (192.8 million patacas). Mr Yeung bought the rest of the club in 2009, paying 81.5 million pounds to David and Ralph Gold and David Sullivan and Grandtop changed its name to Birmingham International Holdings Ltd. In a January filing Birmingham International said the football club purchase was underwritten by Kingston Securities Ltd – a unit of Hong Kong-listed Kingston Financial Group Ltd. Kingston Financial Group bought Casa Real casino hotel in 2005 and it also owns the Grandview casino hotel here. Both operate under SJM’s gaming licence. Police allege that the purchase was partly funded by money connected to his money laundering charges. His defense says he earned that money from trading stocks. Mr Yeung was arrested in June 2011 and shares of Birmingham International have been suspended since. The football club had a 42 percent drop in sales in the second half of
Mr Yeung, a former hairdresser is facing five charges of money laundering
last year, after the team’s relegation from the top-flight Premier League 2011, according to its interim report. Birmingham International issued a profit warning September 9 it attributed to the sales of
players registrations. The company said last month it was still in preliminary negotiations over the sale of its stake in the soccer club. With Bloomberg News
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September 27, 2013 April 19, 2013
Greater China
Strong demand for ADB asset-backed securities China’s regulators search for ways to make more credit available
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gricultural Development Bank of China completed its first-ever sale of assetbacked securities, as regulators push securitisation as a tool to enable banks to support the economy with new credit. Agricultural Development Bank, one of China’s three policy banks devoted to non-commercial lending, sold 1.27 billion yuan (US$207.5 million) worth of securities, with each of the three tranches attracting strong demand from investors, official media reported yesterday. China’s leaders have pledged to scale up a pilot project for securitisation of bank loans as a way to clear space on bank balance sheets for new lending, while also satisfying investor demand for higher-yielding fixed-income assets. The senior tranche of the deal, worth 945 million yuan, was auctioned at an interest rate of 5.30 percent with subscriptions totaling 1.68 times the deal size, China Securities News reported yesterday. That compares to the official benchmark bank deposit rate of 4.75 percent for five-year time deposits, highlighting the attraction of such products to investors. T he m iddle tran che , worth 100 million yuan, was 2.4 times oversubscribed and auctioned at 6.74 percent, the paper said. The subordinate tranche, worth 229 million yuan, was 6 times oversubscribed, but the paper did not disclose the interest rate. Analysts say securitisation could be a useful tool for diversifying credit risk outside the Chinese banking system. Asset-backed securities could also help to draw demand for high-yielding investments away from opaque and illiquid wealth management products. But they also cautioned that many obstacles remain to scaling up securitisation rapidly enough to have a significant impact on the financial system. Only about 32 billion yuan in securitised products were outstanding in China at the end of June, clearinghouse data show. That compares with more than 56 trillion yuan in commercial bank loans, 27 trillion yuan in bonds, and 4.2 trillion yuan in trust loans that are often packaged into wealth management products. Reuters
China’s State Council approved the nation’s first free-trade area in Shanghai zone in July
Analysts split on benefits of Shanghai free-trade zone Trial zone could have little impact on Chinese economy
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hina’s plan to set up a test zone in Shanghai with reduced state control over policies from interest rates to foreign investment has split analysts over whether it will boost the economy across the nation. Eight of 17 respondents to a Bloomberg News survey said the so-called free trade zone will have no effect or a negligible impact on growth, while eight said it will boost annual expansion by 0.1 percentage point to 0.5 point over the next five years. One economist in the survey, conducted from September 18 through Wednesday, said growth would increase by 0.5 point to 0.9 point. Any boost from the zone, set to officially open next week, would help premier Li Keqiang sustain 7 percent annual expansion this decade and add to potential engines of growth including urbanisation. Economists surveyed over the past week also indicated they expect gross domestic product gains to moderate next year after bouncing back this quarter. “The Shanghai free trade zone is going to be a hotbed of liberalisation and will have a huge economic impact in that area,” said Louis Kuijs, chief
China economist at Royal Bank of Scotland Group Plc in Hong Kong. “But in our understanding it will be, especially in the first years, quite shielded off from China’s wider economy. So the impact on the macro economy isn’t going to be large.”
Cabinet approval The State Council, or cabinet, approved the Shanghai zone in July, billed as the nation’s first free-trade area, on 29 square kilometers of land in China’s biggest commercial center. While a draft plan seen by Bloomberg News shows the zone may liberalise 19 industries from banking to shipping and allow freer convertibility of the yuan, the government hasn’t published details. Miao Hui, chief China economist at Daiwa Capital Markets in Hong Kong, said the Shanghai zone will help the broader economy in part because it will generate 200 billion yuan (US$32.7 billion) to 300 billion yuan in investment, which is “very significant” at 0.6 percent of gross domestic product. “Most of the investment is definitely in that area but of course there will be spillover,” Mr Miao said. “If you build a modern office tower you need to buy steel, cement, all
these things from the rest of China.” Mr Li said in March, after taking office, that “reforms unleash huge dividends.”
City’s potential “It’s time for the country to choose a new trial for opening,” Mr Li told an economic work meeting in March. “Shanghai is qualified and has the foundation to have the trial.” The Bloomberg survey found a median estimate of 7.7 percent from 31 analysts for third-quarter growth, up from August’s projection of 7.5 percent and a 7.5 percent reported pace in the second quarter. The fourth-quarter estimate rose to 7.6 percent from 7.3 percent, and the median forecast for the full year increased by 0.1 percentage point to 7.6 percent. At the same time, the median projection for 2014 expansion declined to 7.4 percent from August’s 7.5 percent, with forecasts ranging from 6.7 percent to 8.6 percent. Economic data, led by manufacturing, have shown acceleration so far this quarter, and the government’s broadest measure of credit rose more than forecast in August. Bloomberg News
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September 27, 2013 April 19, 2013
Greater China
HK picks transparency in Alibaba IPO battle Stock exchange sticks to rulebook after corporate governance scandals Eleni Himaras
H
ong Kong Exchanges & Clearing Ltd, the world’s second-largest bourse operator by market value, is making a stand for transparency in the competition for Alibaba Group Holding Ltd’s initial public offering (IPO). Alibaba is moving toward a United States listing after talks with the bourse broke down following management’s proposal for a governance structure that leaves executives in control, according to two people familiar with the matter. China’s largest e-commerce firm is leaning toward making the New York Stock Exchange its home market, said one of the people, who asked to not be named because the process is private. Hong Kong’s exchange is under pressure from regulators and investors to uphold standards after accounting scandals involving Chinese companies from Hontex International Holdings Co to Boshiwa International Holding Ltd. The bourse is focusing on derivatives and commodities to boost profits as listings dry up, buying the London Metal Exchange for 1.4 billion pounds (US$2.2 billion) in December. “The benefit of turning away people who ask for favors is that
it will maintain standards and attract better quality companies,” David Webb, a former exchange director who founded local governance watchdog Webb-site. com, said by telephone. “If you maintain standards, investors pay for the quality. If you improve them, they’ll pay more.”
IPOs Slow Lorraine Chan, a spokeswoman for Hong Kong Exchanges, declined to comment on the IPO, citing a company policy. The exchange’s listing committee had a regularly scheduled meeting yesterday. Companies raised US$7.6 billion through Hong Kong IPOs this year, compared with US$20 billion in the same period of 2010, when the stock exchange became the world’s biggest venue for first-time offerings, data compiled by Bloomberg show. Listing fees accounted for 11 percent of Hong Kong Exchanges’s revenue in the six months ended June 30, according to a company statement. “They have to balance between the IPO pipeline and the rule of law,” said Dominic Chan, an analyst at BNP Paribas SA, who has Hong Kong Exchanges rated as the equivalent of sell.
The bourse and the regulator “don’t really want to let go of the quality of the listing rules for just one company,” he said. Alibaba, founded by former English teacher Jack Ma, may raise about HK$100 billion (US$12.9 billion) in an initial sale, Ernst & Young LLP said on June 28. That would make it the world’s biggest IPO since Facebook Inc raised US$16 billion last year.
Alibaba partnership Allowing Alibaba’s partnership to veto board nominations would enable Mr Ma, who owns 7.4 percent of the stock, and his management team to run the company without worrying about being pushed out by an activist investor with a different strategy, a person familiar with the matter said last month. While the United States allows dual-share structures, Alibaba would be subject to more stringent reporting requirements and a class-action litigation system, which do not exist in Hong Kong. “It is very important for HKEx to not make exceptions and to maintain market integrity, especially in light of what has happened with Chinese companies in recent years,” said Arjan Van Veen, an analyst at Credit
Suisse Group AG, who has the stock rated neutral. “There are plenty of companies in Hong Kong and China that would want to do similar things, so making an exception creates a very difficult scenario.” Hong Kong has faced several corporate governance scandals surrounding mainland companies listing in the city. Hontex, which raised US$141 million in a December 2009 IPO, in June 2012 agreed to pay shareholders US$133 million to end a lawsuit. The company, which had been suspended since just three months after the IPO, was delisted this week. Boshiwa, a Chinese maker of children’s apparel and licensee of the Harry Potter brand, said in March 2012 that Deloitte Touche Tohmatsu resigned as its auditor because of a lack of financial information. The company, which raised US$321 million in a September 2010 IPO, has been suspended from trading in Hong Kong for 18 months. Bloomberg News
Appliance maker eyes bank business A
unit of China’s Gree Electric Appliances Inc of Zhuhai plans to set up a private bank, the second Chinese home appliance player to eye a move into the financial industry after Suning Commerce Group Co Ltd announced its own plans last month. Gree, with a market value of US$14 billion, said in a filing to the Shenzhen stock exchange late on Wednesday that Zhuhai Gree Group Finance Co Ltd is in initial talks with Zhuhai Hengqin Village Bank, but said no agreement has been reached. Gree, the country’s top appliance maker by sales, gave no further details. Suning, which is seen by some as China’s answer to Best Buy Co Inc, said in August it had submitted an initial application to authorities to establish a private bank on the mainland, more than a week after Beijing unveiled plans to establish more financial institutions to support cash-starved smaller firms. The government will support the establishment of more village banks and credit companies in areas where smaller firms are concentrated, according to the guidelines. The State Administration Industry & Commerce said earlier this month that the name “Suning Bank” was approved for use, fueling hopes that Suning might be the first private company to run a retail bank. Alibaba is likely to take its initial public offering to New York
Reuters
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September 27, 2013 April 19, 2013
Greater China
Coatmaker Bosideng eyes Europe deals to boost sales Chinese companies are gunning for overseas acquisitions in luxury retail
B
osideng International Holdings Ltd, the Chinese coatmaker that runs a store in London’s West End, said it is close to buying a United Kingdom chain and has met with European luxury companies as it seeks deals on the continent. Bosideng is close to acquiring an 80-store apparel chain in England to sell its down jackets, and is also in early talks with European highend coat brands about making a possible acquisition, Julie Sun, the company’s vice-president for corporate strategy and investor relations, said in an interview. The Hong Kong-listed coatmaker, which sells down jackets and winter coats under brands such as Bosideng and Snow Flying on the mainland, is pushing to build a European presence to boost its image at home and increase sales outside China. Close to a third of Chinese luxury buyers will shop in Europe in 2013, up from a fifth last year, according to McKinsey & Co. “The majority of Chinese consumers still prefer Western brands and products over local ones,” Ms Sun said. “With so many Chinese traveling abroad, if they go to New
York’s Fifth Avenue, Paris, Milan and they see your store, it would help your sales and help brand recognition.” The acquisition of the United Kingdom chain, which is privately owned and currently loss-making, will likely be completed by the end of next month, Ms Sun said. Bosideng will pay a minimal sum for the chain, she said, declining to specify the amount.
European deals The Chinese coatmaker, which had 13,009 down-jacket retail outlets as of March 31, is separately looking into a possible European acquisition or partnership to help it enter the luxury jacket market, Ms Sun said. It is searching for a high-end European coat maker with global recognition and is open to working through a licensing deal or joint venture, the executive said. The company is working with investment bankers now and has met with three European coat makers during a recent trip to the region, she said. “Bosideng is well-positioned in China in the mid- to low-end market,” Ms Sun said. “But for the
Bosideng invested 300 million yuan to open a flagship store last year in London
Haitong to buy leasing company from TPG
H
aitong Securities Co, China’s second-largest brokerage by market value, said it plans to buy Shanghai-based leasing company UT Capital Group Co from United States private-equity firm TPG Capital for US$715 million. Haitong will buy 100 percent of UT Capital, the Shanghai-based firm said in a filing to the city’s stock exchange on Wednesday. Haitong will pay cash for UT Capital, which TPG bought in 2008, TPG said in a separate e-mailed statement.
UT Capital’s main operating unit is UniTrust Finance & Leasing Corp, which provides financial leasing services to more than 3,000 customers in China in industries including health care, education, printing, textiles, machine tools, electronics and injection molding, TPG said. In April, TPG was seeking US$800 million for UniTrust, Reuters reported at the time, citing unidentified people with knowledge of the matter. Morgan Stanley and UBS AG were handling the deal, the news agency said. UT Capital’s total assets increased to 10.5 billion yuan (US$1.72 billion) in 2012 from 4.4 billion yuan in 2010, TPG said in its statement Wednesday. The company’s net income was 199 million yuan in the first half of 2013, TPG said. Bloomberg News
growing population of the middle class, they moved to other higher brands to pursue lifestyle. We need to get a foothold in this sector to improve our profit margin.” Bosideng, run by chairman Gao Dekang, invested 300 million yuan (US$49 million) to open a flagship store last year at a sixstory property on London’s South Molton Street. The company sells menswear made with Italian fabric, and in July signed a sponsorship deal with English Premier League club Tottenham Hotspur.
Slowing economy Bosideng and domestic rivals have faced weakening economic growth on the mainland, where the economy expanded 7.5 percent in the second quarter from a year earlier in its second straight deceleration. China’s slowing economic growth, trends such as online shopping and the entrance of new foreign fast-fashion brands weighed on the nation’s apparel industry, Bosideng said in a June 26 earnings statement. The company’s shares plunged on June 27 after it reported net income for the year ending March 31 fell 25
percent from a year earlier to 1.08 billion yuan. The stock is down 23 percent this year, compared with a 2 percent gain for the benchmark Hang Seng index. Other Chinese companies have also made overseas acquisitions in luxury retail. Fosun International Ltd., the investment arm of China’s biggest closely held industrial group, has agreed to buy a stake in Raffaele Caruso SpA, an Italian maker of suits for companies including Christian Dior SA. The purchase of 35 percent of Caruso through a capital increase will be completed this month, the clothier’s chief executive officer Umberto Angeloni said in a September 6 interview. Bosideng has built a strong brand in outerwear, has a unique design and invested in technology to improve its products, said Doreen Wang, Beijing-based head of client solutions at Millward Brown China, which runs annual brand surveys in the Asian nation. “It’s early stages, but if they continue the efforts that they are doing, they will have the best chance to successful among the Chinese fashion brands going overseas.” Bloomberg News
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September 27, 2013 April 19, 2013
Asia
Japan’s economy ‘exceptionally good’, Abe tells Wall Street Stimulus efforts speeding corporate investment, but not in Japan
J
apanese prime minister Shinzo Abe urged Wall Street traders to invest in Japan, promising in a speech at the New York Stock Exchange on Wednesday that its economy will become a driving force for global recovery. Since taking office last December, Mr Abe’s stimulus efforts have barely dented a slide in private-sector investment at home, but they have done wonders for accelerating Japanese investment elsewhere in Asia. Mr Abe vowed to conclude regional free trade talks by the end of the year and promoted Japanese products from sushi to LED light bulbs and a high-speed train system he said could link New York and Washington in less than an hour. Mr Abe took office in December vowing to revive the moribund economy with what’s been dubbed Abenomics, a combination of drastic monetary easing, fiscal stimulus and regulatory reform. The economy has since seen three straight quarters of economic expansion and the Topix index has risen 41 percent this year. “The Japanese economy that now surrounds us is exceptionally good,” Mr Abe said in his New York Stock Exchange speech, urging traders to “buy my Abenomics.” He got an early sign of how his blueprint to revive Japan’s industrial vim and economic vigour was working when two of his country’s biggest car makers unveiled US$900 million worth of
Mr Abe vowed to conclude regional free trade talks by the end of the year
investments to boost production. There was one drawback: the new assembly plants and expanded factories announced by Mazda Motor Corp and Honda Motor Co Ltd are not in Japan, but more than 2,000
miles away, in Thailand. Capital expenditures in Japan fell 4 percent in the first six months of this year, compared with the same period of 2012. Japanese investment in Asia, meanwhile, rose 22 percent,
according to the Japan External Trade Organization, or Jetro. “Manufacturing investment is still contracting because companies are investing abroad,” said Izumi Devalier, Japan economist at HSBC in Hong Kong. Government spending and a weaker yen can’t conceal that Japan’s manufacturers are still forsaking their country’s shrinking population, high costs and regulatory barriers in favour of faster-growing, younger economies in Asia. Whether or not “Abenomics” works at home, it’s already helping soften the blow of slowing growth and a receding tide of cheap dollars as investors pull funds out of Asia to bet on recovery in the United States and Europe. Foreign investors have pulled at least $7.7 billion from stock markets in Asia outside Japan and China since May, according to data from Nomura and Jefferies. Japanese direct investment in Southeast Asia also helps weaken the yen, boosting the exporters profits. But increased profits only help Japan’s economy if companies use them to boost investment and wages. Japanese companies socked away roughly US$144 billion in cash between June 2012 and June this year, according to the Bank of Japan, bringing their total cash pile to US$2.24 trillion. That means that for every yen they earned in additional net income, three-quarters of it went into the bank. Bloomberg News/Reuters
Tokyo Electron takeover could be mold-breaker Japan could be close to overcoming foreign investment barrier Nathan Layne
A
pplied Materials Inc’s US$10 billion acquisition of Tokyo Electron Ltd is more than just a milestone foreign takeover in Japan – it’s a rare forward-looking deal in a country where selling to an overseas rival is usually a last resort. United States-based Applied Materials, the world’s largest maker of chipmaking equipment, and thirdranked Tokyo Electron announced the all-stock deal late on Tuesday. On completion, it would be the biggest foreign takeover of a Japanese manufacturer. While board representation is to be split evenly, Applied Materials shareholders will own 68 percent of the new company, keeping them firmly in control. Analysts were surprised by the move in part because Tokyo Electron has a solid balance sheet and didn’t need a deal to survive. That makes the deal stand out against other big inbound transactions, many of which involved a struggling target – such as Citigroup Inc’s US$16
billion acquisition of broker Nikko Cordial in 2007-08 and Renault SA’s US$5 billion injection into Nissan Motor Co almost a decade earlier. Edward Johnson, a partner at law firm Orrick, Herrington & Sutcliffe, said the willingness of a blue-chip Japanese company like Tokyo Electron to cede control to a foreign rival could encourage other Japanese firms to consider similar moves. “I don’t think it’s a one-off. I think it has broader implications,” said Mr Johnson, whose practice includes advising foreign companies on investments in Japan. While Japanese companies spent a record US$83 billion on overseas acquisitions in 2012, inbound deals totalled just US$15 billion. Over the past 10 years, there have been far fewer foreign acquisitions in Japan than anywhere else in Asia. Foreign deals accounted for just 5.85 percent of acquisitions in Japan compared to Asia ex-Japan’s 26.48 percent, Datastream data show. Many international companies
have refrained from making major investments in Japan due to a general perception the country is not open to foreign capital and a belief they would have trouble cutting costs. Prime minister Shinzo Abe has made inviting foreign investment one of the components of his strategy to revive the world’s third-
largest economy. Ken Siegel, managing partner at law firm Morrison & Foerster in Tokyo, said private equity funds continue to seek opportunities in Japan, but it could take time before corporate buyers follow Applied Materials’ lead. Reuters
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September 27, 2013 April 19, 2013
Asia
S.Korea rolls back elderly aid as revenue drops New president faces public pressure to fulfill election pledges
S
outh Korea president Park Geun Hye was forced to scale back aid she pledged to pensioners in her 2014 budget and delayed plans to eliminate the deficit as the government forecast the first drop in revenue in four years. In her first budget draft since taking office in February, Ms Park boosted welfare spending to a record while scaling back a plan to expand pension benefits as dwindling revenue restricts her ability to increase support for an aging population. The deficit is forecast to remain at 1.8 percent of gross domestic product, a seventh straight year of shortfalls in Asia’s fourth biggest economy, the finance ministry said in its proposal. “I feel sorry not all senior citizens will be paid,” Ms Park said yesterday, according to a statement released by the presidential house. “I will do my best to implement within my term my promises and things that I couldn’t implement as scheduled due to the currently difficult fiscal conditions.” Ms Park faces public pressure to fulfill election pledges to spend 135 trillion
won (US$126 billion) over five years to bolster social safety nets and defence as slower growth and steps to revive an anemic housing market sap revenue. While Standard & Poor’s this week cited South Korea’s “sound” fiscal position for affirming its long-term ratings at A+, the government won’t balance its books by 2017 as planned, according to the finance ministry.
Balancing target Ms Park aims to stoke a rebound after the economy grew 1.1 percent in the second quarter from the first quarter, the fastest in more than two years. The finance ministry forecast growth will accelerate to 3.9 percent in 2014 from 2.7 percent this year. “While it would be correct to reduce spending for fiscal soundness as we’re experiencing difficulty raising taxes, it’s necessary to maintain fiscal spending at an appropriate level to cement a recovery,” Finance minister Hyun Oh Seok said in a briefing in Sejong. The government projects the fiscal deficit will narrow
to 0.4 percent of gross domestic product by 2017, dropping a goal from May to balance the books “by the end of the current administration,” finance ministry statements show. The president’s five-year term ends in February 2018.
“Betrayal” act “Park won’t be able to make all her promises come true and the revenue situation will show that in the
next couple of years,” Kim Hyeon Wook, a Seoul-based economist at SK Research Institute and a former Bank of Korea economist, said before the release. “Her predecessors prioritised fiscal soundness more than Park, which is a concern as welfare demand will only grow.” The government will exclude the wealthiest 30 percent of South Koreans over the age of 65 from a monthly cash allowance of
up to 200,000 won promised to the whole age group by Ms Park, saving about 200 billion won, according to the draft budget. Ms Park won the December vote on a platform of expanded social spending, including the allowance for the elderly, as well as offering free treatment for four major diseases including cancer and cardiac disorders. Scaling back the pension pledge would be an “act of betrayal,” opposition leader Kim Han Gil said at a meeting with elderly people Wednesday. Ms Park’s approval rate slid to 60.9 percent in a poll on September 20 after she failed to convince the main opposition party to end its boycott of the current parliamentary session. Bloomberg News
Members of civic groups are protesting against the government’s revised pension plan
Axiata boosts Indonesia telecom presence P T XL Axiata Tbk, a unit of Malaysia’s largest mobilephone operator, will acquire PT Axis Telekom Indonesia from Saudi Telecom Co and settle US$865 million of the closely held carrier’s debts. XL Axiata, a 66.5 percentowned subsidiary of Axiata Group Bhd, is paying US$100 cash for the share capital of Axis, according to a stock exchange filing in Kuala Lumpur yesterday. The price represents Axis’s enterprise value on a cash-free and debt-free basis, parent Axiata Group said in the filing. The acquisition will allow XL Axiata to add services and coverage after the company said in August second-quarter profit slumped 55 percent to 354.92 billion rupiah
(US$31 million) from a year earlier. Ten operators compete for subscribers in Indonesia’s mobile market, the second-highest number in Asia after India, in what XL Axiata described in May as an “unsustainable situation.” “All industry participants are in agreement that the industry must consolidate,” XL Axiata president director Hasnul Suhaimi said in the statement. “This will be driven by companies like XL who have the will and ability to accelerate the development of high quality communication services in Indonesia.” The transaction still needs regulatory approvals and is expected to be completed by the end of March, the filing shows. Bloomberg News
editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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September 27, 2013 April 19, 2013
Asia
Thailand may exit recession as exports rebound August exports grew higher than forecast, trade deficit shrinks
T
hailand looks more likely to emerge from recession in the third quarter after exports grew at their fastest pace in five months, but analysts warned of risks from still-fragile global demand. Headwinds from flooding on factory production and pressures from capital outflows as the Federal Reserve winds down its monetary stimulus could also restrain a strong turnaround. “It’s a surprise because global demand is not that good. I think exports for the rest of the year should not grow much although we may see
orders in September or October for the New Year. Besides that, there are no clear positive factors for exports,” said KGI Securities economist Pragrom Pathomboornm. Exports in August rose 3.9 percent from a year earlier while imports fell 2.1 percent, data from the Commerce Ministry showed yesterday. A Reuters poll had predicted an annual 0.73 percent rise in August exports and a 3.10 percent gain for imports. Exports, equal to more than 60 percent of the economy each year, rose just 1 percent in the first eight months of 2013 from a year earlier.
Weakness in exports and slowing domestic demand pulled Thailand into a mild recession in the second quarter, as Southeast Asia’s secondlargest economy shrank on a quarterly basis in each of the first two quarters. However, Thai authorities have said the economy should pull out of recession, believing shipments will rebound in the final months of the year, usually the country’s export season. Thammarat Kittisiripat, an economist at TMB Bank, was less optimistic saying the economy might see zero growth, or a small
contraction, in the third quarter from the prior period. Thailand’s surprisingly strong exports add to growing evidence that Asian exporters are starting to reap gains from stronger growth in the United States, the euro zone and Japan.
Recovery mode Taiwan, South Korea, and Japan all posted strong gains in August exports. The Philippines saw July exports rise. The Commerce Ministry said a recovery in the world economy, although fragile, and signs of stabilisation in China’s economy, had led to a rebound in exports after three months of decline. Exports to China in August rose 3.1 percent from a year earlier, compared with July’s 5.3 percent fall. Shipments to the United States rose 3.6 percent year-on-year, and were up 13.4 percent to the euro zone. But exports to Japan fell 6.0 percent. Thai exports to its Southeast Asian neighbours were up a stronger 17.3 percent in August, from 8.6 percent in July. With export growth of just 1 for January-August, however, the ministry’s 2013 target of a 7.0-7.5 percent gain is now out of reach. It will review that forecast next month. Srirat Rastapana, the director general of the ministry’s Department of International Trade Promotion, remained positive about the outlook. “August exports showed a better trend as it’s also the production season while the global economy is in recovery mode,” she told a briefing.
Despite recent floods, Thailand could see economic growth in the third quarter
Reuters
Vietnam tax issues hit new coffee crop New crop beans offered, but no deals as doubt persist ahead of harvest Lewa Pardomuan
R
obusta beans from Vietnam’s new crop were offered this week but there were no reports of deals as exporters stayed on the sidelines, hurt by uncertainties over tax refunds, dealers said yesterday. Physical trading was equally slow in rival Indonesia, with many domestic roasters already well covered. Foreign buyers expect premiums for Indonesian beans to drop when robusta from Vietnam begins entering the market in November. Robusta grade 2, 5 percent black and broken beans from the yet-tobe harvested crop was offered at premiums of US$10 to London’s November contract. There were no offers last week. Beans from the old crop stood at premiums of US$100 a tonne, down slightly from US$110 last week. Robusta is either blended with arabica beans for a lower-cost brewed coffee or processed into instant coffee.
“Nobody wants to buy coffee, unless it’s necessary. Old crop coffee is still on offer but I guess everybody is waiting for beans from the new season,” said a dealer in Singapore. “There’s no use to buy beans now.” Some exporters were also reluctant to strike deals because of loopholes in Vietnam’s system governing valueadded-tax (VAT) payments and refunds for exportable goods. Exporters pay a 5 percent VAT when buying beans from local traders and get a refund once exports are completed. But errant traders do not declare the tax payment, preventing exporters from claiming VAT refunds, dealers and state media say. The tax dodge, which has alarmed major world trade houses and roasters, was partly responsible for recent declines in exports, some dealers said. “The harvest time of the new crop is approaching rapidly in Vietnam
and the VAT problem is probably at the centre of intense discussions or negotiations within government,” SW Commodities said in a report. “But so far no information has been made available to the coffee sector.” Vietnam’s next crop is forecast to hit a record 25 million 60-kg bags in the season to September 2014, a Reuters poll shows.
Vietnam and Indonesia together account for about 24 percent of global coffee output. “Buyers have disappeared recently. They may be willing to buy at premiums of US$60. There could be deals at US$80 premiums, but the volume must be very small,” said a dealer in Sumatra, which is Indonesia’s main growing island. Reuters
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September 27, 2013 April 19, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 54.40
82.50
25.6
54.3
81.85
25.4
81.20
25.2
80.55
25.0
54.2 54.1 54.0 Max 54.4
average 54.183
Min 53.95
Last 54.1
53.9
Max 82.45
average 81.922
Min 79.9
48.4
Max 21.75
average 21.437
PRICE
DAY %
YTD %
(H) 52W
Min 21.35
Last 21.45
(L) 52W
WTI CRUDE FUTURE Nov13
102.76
0.097408923
9.927257167
111.3399963
85.79000092
BRENT CRUDE FUTR Nov13
108.46
0.129246677
3.059673128
115.7599945
96.19999695
GASOLINE RBOB FUT Oct13
267.76
0.175838976
2.909412353
298.210001
246.6799974
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915.75
-0.326530612
1.299778761
980.25
837
3.487
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4.525000095
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322.8999853
276.1999846
Gold Spot $/Oz
1337.45
1.0601
-19.6466
1796.08
1180.57
Silver Spot $/Oz
21.8747
0.7693
-27.3507
35.365
18.2208
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1432.4
0.1503
-5.6235
1742.8
1294.18
Palladium Spot $/Oz
724.9
0.5423
3.6075
786.5
587.4
LME ALUMINUM 3MO ($)
1804
0.445434298
-12.97636276
2184
1758
7197.5
0.706590178
-9.248518472
8379.75
6602 1811.75
NATURAL GAS FUTR Oct13 NY Harb ULSD Fut Oct13
LME COPPER 3MO ($) LME ZINC
3MO ($)
MAJOR
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
ASIA PACIFIC
CROSSES
1886
0.586666667
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2230
0.545454545
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18920
13205
15.475
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454.75
0
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647
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913
635.5
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1313
-0.662001135
0.78679716
1409.5
1162.5
COFFEE 'C' FUTURE Dec13
116.7
-0.469083156
-25.40747843
200
113.9499969
SUGAR #11 (WORLD) Mar14
18.17
-0.109950522
-11.71039845
22.14999962
16.69999886
ARISTOCRAT LEISU
COTTON NO.2 FUTR Dec13
84.91
0.307147076
7.835915672
93.72000122
74.34999847
CROWN LTD
AGRICULTURE ROUGH RICE (CBOT) Nov13 Dec13
WHEAT FUTURE(CBT) Dec13
World Stock Markets - Indices NAME
21.3
COUNTRY
13825
LME NICKEL 3MO ($)
CORN FUTURE
26.6 26.4 26.2 Max 26.8
average 26.472
Min 26.1
Last 26.8
26.0
Currency Exchange Rates
NAME
METALS
24.8
26.8
21.4
Commodities ENERGY
Last 24.85
21.5
48.6
Last 48.75
Min 24.8
21.6
48.8
Min 48.45
average 24.985
21.7
49.0
average 48.847
Max 25.45
21.8
49.2
Max 49.1
79.90
Last 82.1
COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
15273.26
-0.3999455
16.55294
15709.58
12471.49
NASDAQ COMPOSITE INDEX
US
3761.099
-0.1898757
24.55976
3798.76
2810.8
FTSE 100 INDEX
GB
6543.59
-0.1211931
10.94948
6875.62
5605.589844
DAX INDEX
GE
8636.71
-0.3337322
13.45596
8770.1
NIKKEI 225
JN
14799.12
1.221502
42.36522
HANG SENG INDEX
HK
23125.03
-0.3645039
CSI 300 INDEX
CH
2384.443
TAIWAN TAIEX INDEX
TA
KOSPI INDEX
SK
S&P/ASX 200 INDEX
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
0.9397 1.6041 0.9103 1.3507 98.85 7.9867 7.7541 6.1206 62.205 31.172 1.2549 29.607 43.265 11335 92.888 1.22952 0.84201 8.2664 10.7869 133.51 1.03
0.3524 0.0125 0.0439 -0.0148 -0.3642 -0.0025 -0.0013 -0.018 0.3697 0.3914 -0.0717 -0.0709 0.3698 1.3498 -0.703 0.0561 0.0249 -0.1561 0.0185 -0.3445 0
-9.4527 -0.8346 0.5603 2.4033 -12.8983 -0.0438 -0.0451 1.7972 -11.5907 -1.8991 -2.6695 -1.9387 -5.2236 -13.6039 -3.8336 -1.7926 -3.1579 -0.5916 -2.3779 -14.9352 -0.0097
1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3083 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 10.9254 134.95 1.032
0.8848 1.4814 0.9022 1.2662 77.44 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9563 79.408 1.20302 0.79235 7.8281 10.1113 99.64 1.0289
Macau Related Stocks NAME
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
VOLUME CRNCY
4.47
-0.6666667
41.90476
4.7
2.56
1215509
15.56
0.1931745
45.82943
16.08
8.92
785527
AMAX HOLDINGS LT
1.29
-3.007519
-7.857141
1.72
0.75
1254550
BOC HONG KONG HO
25.15
0
4.356845
28
22.85
8598531
CENTURY LEGEND
0.44
-2.222222
66.03774
0.56
0.23
1251435
CHEUK NANG HLDGS
6.47
-0.154321
8.01336
6.74
3.68
114504
CHINA OVERSEAS
23.2
-1.066098
0.4328988
25.6
17.7
10754071
CHINESE ESTATES
17.64
-1.342282
56.86207
18.12
8.168
92500
CHOW TAI FOOK JE
11.24
0
-9.646299
13.4
7.44
4970800
EMPEROR ENTERTAI
3.5
0.5747126
85.18519
3.56
1.43
4585029
FUTURE BRIGHT
2.54
0
109.5664
2.76
1.103
1838000
GALAXY ENTERTAIN
54.1
0.744879
78.2537
56
24.1
8950360
HANG SENG BK
126.9
-0.07874016
6.908175
132.8
110.6
680737
6950.53
HOPEWELL HLDGS
25.95
0
-21.95489
35.3
23.2
1261960
15942.6
8488.14
HSBC HLDGS PLC
85.2
0.05871991
4.797044
90.7
72.1
9792371
2.066077
23944.74
19426.35938
HUTCHISON TELE H
3.46
0.2898551
-2.808987
4.66
2.98
5158000
-1.835589
-5.48995
2791.303
2023.171
LUK FOOK HLDGS I
24.65
0
1.024592
30.05
16.88
835000
MELCO INTL DEVEL
20.8
-0.7159905
130.8546
21.2
6.55
2794960
8184.68
-1.197745
6.301451
8439.15
7050.05
MGM CHINA HOLDIN
24.85
-0.6
87.14774
25.45
12.18
5500940
2007.32
0.4634495
0.5142534
2042.48
1770.53
MIDLAND HOLDINGS
3.22
-0.3095975
-12.97297
5
2.68
790000
NEPTUNE GROUP
0.185
0
21.71053
0.23
0.131
22470000
NEW WORLD DEV
11.88
-1.164725
-1.164729
15.12
9.98
23161962
SANDS CHINA LTD
48.75
0.308642
43.59352
49.8
26.35
14763319
SHUN HO RESOURCE
1.7
0
21.42857
1.92
1.19
0
AU
5294.455
0.3509517
13.88496
5300.1
4334.3
ID
4431.661
0.5649039
2.663481
5251.296
3837.735
FTSE Bursa Malaysia KLCI
MA
1776.74
-0.4103001
5.197906
1826.22
1590.67
NZX ALL INDEX
NZ
1001.648
0.05663877
13.55871
1004.229
834.309
SHUN TAK HOLDING
4.37
1.864802
4.295941
4.65
2.92
9874417
PHILIPPINES ALL SHARE IX
PH
3840.48
-0.3389092
3.825379
4571.4
3440.12
SJM HOLDINGS LTD
21.45
0.7042254
20.86102
22.382
15.815
6517650
SMARTONE TELECOM
10.34
-1.147228
-26.5625
16.22
9.97
2067639
WYNN MACAU LTD
26.8
3.076923
27.92362
26.9
19
6128907
ASIA ENTERTAINME
3.93
2.610966
39.62496
4.7647
2.4835
131917
74.43
1.22399
66.47283
76.3
43.16
498951
JAKARTA COMPOSITE INDEX
HSBC Dragon 300 Index Singapor
SI
618.73
-0.16
-0.38
NA
NA
STOCK EXCH OF THAI INDEX
TH
1432.05
-0.3375322
2.882329
1649.77
1260.08
HO CHI MINH STOCK INDEX
VN
485.11
-0.2282917
17.25279
533.15
372.39
BALLY TECHNOLOGI
Laos Composite Index
LO
1289.04
-0.7048275
6.113916
1455.82
1038.79
BOC HONG KONG HO
3.28
3.470032
6.840393
3.6
2.99
4700
GALAXY ENTERTAIN
6.96
0.1438849
75.31486
7.16
3.11
40748 2618936
INTL GAME TECH
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
20.91
0.1916627
47.56528
21.2
12.37
JONES LANG LASAL
87.3
0.9832273
4.002856
101.46
72.56
278463
LAS VEGAS SANDS
65.92
-0.2723147
42.80763
66.63
37.8353
5316354
MELCO CROWN-ADR
31.78
2.814623
88.71734
31.99
12.72
2636064
MGM CHINA HOLDIN
3.18
0
81.68404
3.18
1.5895
5900
MGM RESORTS INTE
20.2
0.2979146
73.53951
20.41
9.15
7044437
SHFL ENTERTAINME
22.98
0.08710801
58.48276
23.08
12.35
371388
SJM HOLDINGS LTD
2.77
1.838235
21.61839
2.9481
2.0311
20246
157.61
0.9543941
40.11023
158.13
103.0933
1613538
WYNN RESORTS LTD
AUD HKD
USD
Hang Seng Index NAME
PRICE
DAY %
VOLUME
37.05
-0.1347709
15742600
CHINA UNICOM HON
ALUMINUM CORP-H
2.81
-0.7067138
11622000
CITIC PACIFIC
BANK OF CHINA-H
3.61
0
331897548
BANK OF COMMUN-H
5.84
-0.3412969
31817191
BANK EAST ASIA
33.25
0.4531722
3728238
BELLE INTERNATIO
11.58
0.1730104
11028007
AIA GROUP LTD
NAME
PRICE
DAY %
VOLUME
12.12
-0.9803922
22450634
9.9
0.5076142
4897689
CLP HLDGS LTD
63.95
0.07824726
2230412
CNOOC LTD
15.74
-0.3797468
31763136
COSCO PAC LTD
12.36
0.3246753
12561909
ESPRIT HLDGS
12.22
0.6589786
2928718
BOC HONG KONG HO
25.15
0
8598531
HANG LUNG PROPER
26.05
0.1923077
3426294
CATHAY PAC AIR
15.02
-2.213542
3607120
HANG SENG BK
126.9 -0.07874016
680737
HENDERSON LAND D
48.25
0.1037344
2858395
92.2
-0.8602151
1182100
18.58
0.3239741
3935376
CHEUNG KONG
120
0.6711409
3728561
CHINA COAL ENE-H
4.68
-1.473684
81978814
CHINA CONST BA-H
6.07
-1.300813
315077423
HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG
125
-1.107595
3516177
HSBC HLDGS PLC
85.2
0.05871991
9792371
CHINA LIFE INS-H
20.8
-0.952381
21806249
CHINA MERCHANT
29.05
0.8680556
7780756
CHINA MOBILE
87.5
-0.9060023
12684670
HUTCHISON WHAMPO
CHINA OVERSEAS
23.2
-1.066098
10754071
IND & COMM BK-H
CHINA PETROLEU-H
6.17
0.3252033
103362566
CHINA RES ENTERP
25.2
-0.1980198
1236678
CHINA RES LAND
LI & FUNG LTD MTR CORP
94
0.2132196
3086022
5.58
-0.5347594
210805424
11.42
-3.056027
54245692
30.5
0
2035521
21.9
-0.6802721
7564400
NEW WORLD DEV
11.88
-1.164725
23161962
CHINA RES POWER
18.24
-0.109529
6224700
PETROCHINA CO-H
8.66
-0.2304147
46428477
CHINA SHENHUA-H
24.2
-0.4115226
22516870
PING AN INSURA-H
58.4
-0.5957447
12249509
NAME
PRICE
DAY %
67.3
-0.8836524
2863192
SANDS CHINA LTD
48.75
0.308642
14763319
SINO LAND CO
11.38
-1.386482
6600699
SUN HUNG KAI PRO
105.8
0.1893939
3726688
SWIRE PACIFIC-A
92.9
0.0538503
752037
TENCENT HOLDINGS
409
-0.1464844
2677353
TINGYI HLDG CO
20.65
0.2427184
5154300
WANT WANT CHINA
12.04
-3.059581
12595882
68.8
-1.714286
3985043
POWER ASSETS HOL
WHARF HLDG
MOVERS
19
28
23324.38
LOW
23063.93
3 23330
INDEX 23125.03 HIGH
VOLUME
52W (H) 23944.74 (L) 19426.35938
23060
23-September
25-September
15 15
September 27, 2013 April 19, 2013
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Weak states, poor countries Angus Deaton
Professor of Economics and International Affairs at Princeton University’s Woodrow Wilson School of Public and International Affairs
Bangkok Post The telecom regulator is considering bypassing fourth-generation mobile technology and jumping straight to 4.5G in a drive to lead the region in wireless technology. The National Broadcasting and Telecommunications Commission wants to auction 25 megahertz of the 1800-MHz spectrum along with 17.5 MHz of the 900-MHz spectrum. Both frequencies would be reserved for auction under the package bidding concept next September. Package bidding allows bidders to make a single bid for a group of frequencies or licences.
Asahi Shimbun The leader of China’s largest state-owned conglomerate has called for a forum of regular dialogue between Japanese and Chinese industry executives to improve bilateral relations. Chang Zhenming, chairman of CITIC Group, made clear he thought that politics and business should be kept separate, especially at a time when bilateral relations are strained by a dispute over the Senkaku Islands. “Cooperation between the business communities of the two nations is important,” Mr Chang said.
Times of India Petroleum minister M Veerappa Moily indicated the government is working to reduce petrol prices. “We are planning for an additional import of 11 million tonnes from Iran and pay them in rupees. This will save us 8.47 billion US dollars,’’ he said. Mr Moily said the ministry also is considering reversing a decision that forced state transport utilities and other bulk consumers to pay market price for diesel.
Jakarta Globe Cosmetic spending in rural Indonesia is catching up with that of urban areas, despite rising costs, according to market research. Hellen Katherina, director of home panel services at Nielsen Indonesia, said that spending on cosmetics in rural areas rose by 28 percent year-on-year to Rp 82 billion (US$7.2 million) in the January-June period. That’s about three times the growth in urban areas, where spending rose 9.4 percent to Rp 606 billion in the first half.
I
n Scotland, I was brought up to think of policemen as allies and to ask one for help when I needed it. Imagine my surprise when, as a 19-year-old on my first visit to the United States, I was met by a stream of obscenities from a New York City cop who was directing traffic in Times Square after I asked him for directions to the nearest post office. In my subsequent confusion, I inserted my employer’s urgent documents into a trash bin that, to me, looked a lot like a mailbox. Europeans tend to feel more positively about their governments than do Americans, for whom the failures and unpopularity of their federal, state, and local politicians are a commonplace. Yet Americans’ various governments collect taxes and, in return, provide services without which they could not easily live their lives. Americans, like many citizens of rich countries, take for granted the legal and regulatory system, the public schools, health care and social security for the elderly, roads, defense and diplomacy, and heavy investments by the state in research, particularly in medicine. Certainly, not all of these services are as good as they might be, nor held in equal regard by everyone; but people mostly pay their taxes, and if the way that money is spent offends some, a lively public debate ensues, and regular elections allow people to change priorities. All of this is so obvious that it hardly needs saying – at least for those who live in rich countries with effective governments. But most of the world’s population does not. In much of Africa and Asia,
states lack the capacity to raise taxes or deliver services. The contract between government and governed – imperfect in rich countries – is often altogether absent in poor countries. The New York cop was little more than impolite (and busy providing a service); in much of the world, police prey on the people they are supposed to protect, shaking them down for money or persecuting them on behalf of powerful patrons. Even in a middle-income country like India, public schools and public clinics face mass (unpunished) absenteeism. Private doctors give people what (they think) they want – injections, intravenous drips, and antibiotics – but the state does not regulate them, and many practitioners are entirely unqualified.
Aid undermines what poor people need most: an effective government that works with them for today and tomorrow
Throughout the developing world, children die because they are born in the wrong place – not of exotic, incurable diseases, but of the commonplace childhood illnesses that we have known how to treat for almost a century. Without a state that is capable of delivering routine maternal and child health care, these children will continue to die. Likewise, without government capacity, regulation and enforcement do not work properly, so businesses find it difficult to operate. Without properly functioning civil courts, there is no guarantee that innovative entrepreneurs can claim the rewards of their ideas. The absence of state capacity – that is, of the services and protections that people in rich countries take for granted – is one of the major causes of poverty and deprivation around the world. Without effective states working with active and involved citizens, there is little chance for the growth that is needed to abolish global poverty. Unfortunately, the world’s rich countries currently are making things worse. Foreign aid – transfers from rich countries to poor countries – has much to its credit, particularly in terms of health care, with many people alive today who would otherwise be dead. But foreign aid also undermines the development of local state capacity. This is most obvious in countries – mostly in Africa – where the government receives aid directly and aid flows are large relative to fiscal expenditure (often more than half the total). Such governments need no contract with their citizens, no parliament, and no tax-collection system. If they are accountable
to anyone, it is to the donors; but even this fails in practice, because the donors, under pressure from their own citizens (who rightly want to help the poor), need to disburse money just as much as poor-country governments need to receive it, if not more so. What about bypassing governments and giving aid directly to the poor? Certainly, the immediate effects are likely to be better, especially in countries where little government-to-government aid actually reaches the poor. And it would take an astonishingly small sum of money – about 15 US cents a day from each adult in the rich world – to bring everyone up to at least the destitution line of a dollar a day. Yet this is no solution. Poor people need government to lead better lives; taking government out of the loop might improve things in the short run, but it would leave unsolved the underlying problem. Poor countries cannot forever have their health services run from abroad. Aid undermines what poor people need most: an effective government that works with them for today and tomorrow. One thing that we can do is to agitate for our own governments to stop doing those things that make it harder for poor countries to stop being poor. Reducing aid is one, but so is limiting the arms trade, improving rich-country trade and subsidy policies, providing technical advice that is not tied to aid, and developing better drugs for diseases that do not affect rich people. We cannot help the poor by making their already-weak governments even weaker. © Project Syndicate
16 16
September 27, 2013 April 19, 2013
Closing Caesars selling shares in public offering MGM Resorts drops sale of Las Vegas mall Caesars Entertainment Corp, the casino company with US$23.5 billion in debt, said it began an offering of 10 million common shares in a sale being run by Credit Suisse Securities. The underwriter has the option to purchase an additional 1.5 million shares, the casino operator said in a statement. Caesars, controlled by Apollo Global Management LLC and TPG Capital, is in the middle of a US$4.85 billion refinancing. Last week, the company led by Gary Loveman (pictured) set the rate on a US$3 billion term loan it’s seeking to refinance borrowings, a source said.
MGM Resorts International Inc is no longer pursuing a sale of the Crystals mall at its CityCenter resort in Las Vegas, chief financial officer Dan D’Arrigo said. The casino company plans to increase the mall’s profitability and revisit a sale in a year or two, Mr D’Arrigo said yesterday. “Nothing’s ever off the market, but we’re not pursuing a sale at this point,” Mr D’Arrigo said. MGM, the largest casino operator on the Las Vegas Strip, said in February it was considering a sale and reported in August that it had received inquiries.
China takes new steps to free interest rates In new move to give market forces a bigger role in financial markets
C
hina will allow banks to price loans based on market-based benchmark rates and will allow banks to launch certificates of deposit soon to pave the way for liberalising bank deposit rates, the central bank said yesterday. Chinese leaders are seeking to steer the world’s second-latest economy towards a growth model that relies more on domestic consumption and want to gradually allow market forces to play a greater role. “We will steadily push forward m a rket - or ient ed in te re st rate reforms,” Hu Xiaolian, a vice governor of the People’s Bank of China, said in a speech published on the central bank’s website. Mr Hu said these are near-term tasks but did not give a timeframe. The central bank will expand market-oriented benchmark rates from the money market to credit markets and organise big banks to offer lending rates to their highquality clients to set the benchmark borrwing costs for the industry. In July, the PBOC scrapped the floor on lending rates but banks still price their loans based on the benchmark rates when they make
loans. The one-year official rate stands at 6 percent. The decision to remove the floor on bank lending rates was seen as a largely symbolic prelude to eventually removing caps on deposit rates, a much more difficult task that will take time. The issuance of certificates of deposit on the interbank market and expansion of market-based pricing of debt products, will “create conditions for steady and orderly liberalisation of deposit rates”, Mr Hu said. The central bank, under the helm of reform-minded Zhou Xiaochuan, has been trying to promote the role of the Shanghai interbank offered rate (SHIBOR) as the benchmark for short-term borrowing costs, now that moneymarket rate are largely determined by market supply and demand. Sources told Reuters in August that China’s top banks are expected to win approval for the issuance of tens of billions of yuan in negotiable certificates of deposit (NCD). NCDs would enable banks to access large amounts of funds at relatively stable costs, providing some alternative to borrowing from the
The central bank has said that more preparations, including a deposit insurance scheme, are needed before a move on deposits. Analysts said its caution also reflected concerns that freeing up deposit rates would squeeze banks’ profits. Reuters
inter-bank market, where the cost of funds can be volatile, as seen in June when a liquidity squeeze briefly sent short-term money market rates to nearly 30 percent.
UK economic growth up as consumer spending rises But business investment posted a surprising drop Jennifer Ryan
U
Consumer spending rose 0.3 percent in the second quarter
nited Kingdom economic growth accelerated in the second quarter as higher consumer spending helped to blunt the impact of a drop in business investment. Household expenditure rose 0.3 percent and disposable income increased 1.5 percent, the most in a year, the Office for National Statistics said yesterday in London. Income was boosted by bonus payments being deferred to take advantage of a tax cut. Gross domestic product (GDP) advanced 0.7 percent in the quarter, matching a previous estimate. Britain’s economy has shown further signs of strengthening this quarter after a recession that’s left GDP 3.3 percent below its previous peak.
While the recovery is gathering momentum, Bank of England policy makers speaking this week emphasised their commitment to keeping the key interest rate at a record low at least until unemployment drops to 7 percent. “There are a few disappointments beneath the headlines,” said David Tinsley, chief UK economist at BNP Paribas in London. “I don’t think it has a huge bearing on the short-term outlook, but it probably raises some more questions about the sustainability going forward.” Consumer-spending growth in the quarter was revised lower from 0.4 percent in the previous GDP estimate. It still added 0.2 percentage point to GDP, the ONS data showed. Compensation of workers surged 3.4 percent, the most since the data series began in 1987. The deferral of some bonuses coincided with Chancellor of the Exchequer George Osborne’s reduction in the top rate of income tax to 45 percent from 50 percent. Business investment dropped 2.7 percent from the first quarter and was down 8.5 percent from a year earlier. The ONS had estimated that investment rose 0.9 percent in the previous GDP report. Bloomberg News