Macau Business Daily, Jan 13, 2014 by Business Daily

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Government drafts management rules for ferry terminals

Deputy editor-in-chief Editor-in-chief Tiago Azevedo Number 453 Monday January 13, 2014 Year II

Fosun Intl to buy 80 pct of Portuguese insurer

Vitor Quintã

MOP 6.00

April 19, 2013

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Economy to grow 9.1pct this year: University of Macau Page 5

Suncity deal

aids ho-cheng alliance H

ong Kong-listed International Entertainment Corp will pay up to HK$7.35 billion (US$948 million) for 70 percent of an entity called Suncity International Holdings Ltd. The latter is said to be wholly beneficially owned by Alvin Chau Cheok Wa – barely 40 years old and widely regarded as a star of the Macau junket sector. A public listing for Suncity interests has been mooted for some

time. Associates of Suncity Group Ltd, founded in 2007, roll as much as 135 billion patacas (US$16.9 billion) in VIP chips per month. At the back of the deal is a 32-year alliance between two of Hong Kong’s richest and most influential clans – the Ho family and the Cheng family. International Entertainment’s director Henry Cheng Kar Shun is also a non-executive director of SJM Holdings Ltd. Page 4

www.macaubusinessdaily.com

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Hang Seng Index 23045

22979

22913

No LRT in sight – but planners moot extension

‘Fast fashion’ chain new tenant for Yellow House

Planners for Macau’s Light Rapid Transit (LRT) railway – originally due to have a first phase opening in 2012 – are already discussing extending the still-under-construction network to the public housing estate at Seac Pai Van. It would cost of up to 700 million patacas (US$88 million) per kilometre. Separately the Transportation Infrastructure Office has ordered a further 48 LRT carriages worth more than 822 million patacas.

Clothing brand Forever 21 Inc is to open its first store in Macau this spring. It will pay HK$2.4 million (US$309,500) per month for the privilege, as one of the main tenants for the six-storey commercial space – known as the Yellow House – next to one of Macau’s tourism hotspots, St Paul’s Ruins. The site’s owner – restaurant operator Future Bright Holdings Ltd – gave the news on Friday.

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Interview

Lust but also caution, from China art lovers: Christies Auctioneer Christie’s is now preparing for private sales and e-commerce in mainland China, having held its first independent auction in Shanghai. The managing director of Christie’s Asia, Rebecca Wei, says the art business in China is promising. Ms Wei told Business Daily in an interview that her auction house meant to make its Shanghai saleroom into an international centre, like its salerooms in New York and London. Pages 6&7

22847

22781

22715

January 10

HSI - Movers Name

%Day

CHINA RES POWER

3.64

CHINA RES LAND

2.84

CHINA OVERSEAS

2.76

NEW WORLD DEV

2.52

HENDERSON LAND D

0.92

GALAXY ENTERTAIN

-2.50

CHINA LIFE INS-H

-2.64

CHINA PETROLEU-H

-2.71

CITIC PACIFIC

-3.00

BELLE INTERNATIO

-4.22

Source: Bloomberg

I SSN 2226-8294

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January 13, 2014

Macau

Seac Pai Van’s LRT line plans unveiled The government begins asking the public what they think of three proposals Stephanie Lai

sw.lai@macaubusinessdaily.com

The branch line could make it easier for residents of Seac Pai Van to get to the peninsula

he government has begun soliciting public opinion on three proposals for extending the Light Rapid Transit (LRT) railway to Seac Pai Van, Macau’s biggest public housing complex. The Transportation Infrastructure Office says the branch line could cost up to 700 million patacas (US$88 million) per kilometre. Transportation Infrastructure Office technical consultant Michael Lam Soi Hoi told reporters on Friday that the branch would link the Lotus Bridge border crossing to the second public hospital in Cotai and Seac Pai Van. Transportation Infrastructure Office deputy director Ho Cheong Kei said the extension would soon be indispensable. “There will be more demand for transport as we will have more residents living in the Seac Pai Van housing and using the new hospital complex in the future,” Mr Ho said. The Health Bureau said in August that construction of the new hospital, near the Macau Dome, would be finished by 2019. Mr Lam said the branch line would make it possible to go from Seac Pai Van to the peninsula in half an hour. The journey now takes one hour by bus. The first of the three plans for the branch envisages stations near the hospital and the Seac Pai Van public housing. Construction consultancy Ove Arup & Partners Hong Kong Ltd estimates that a train would take about three minutes to travel the 1.6 km stretch of line. “Under this proposal, the hospital station would be west of the hospital complex. We could build a pedestrian link from the station to the hospital,” Mr Lam said. “Passengers would have to walk for two to three minutes from the station to the hospital,” he said. “We would also have to build a connection to the overpass in the Seac

Pai Van public housing.” The overpass connects the towers owner-occupied housing and rented housing in Seac Pai Van.

Too curvy The second plan would put the last stop right inside the Seac Pai Van public housing. Mr Lam said the first two plans would be easier and quicker to put into action. The third plan would put a station right outside the main entrance to the public hospital.

We will have more residents living in the Seac Pai Van housing site and using the new hospital complex in the future Ho Cheong Kei, Transportation Infrastructure Office deputy director

Mr Lam said this plan would be the most difficult to put into action. “There would be more curves in the line if we adopted this proposal, so construction could be more difficult and require more time,” he said. A train would take four minutes to travel the 2.3 km stretch of line.

All three plans envisage a footway linking the Lotus Bridge station to the Taipa LRT line. The Seac Pai Van branch and all three stations on it would be above ground. Mr Lam said an underground line would be more difficult to build because of all the underground cables and water pipes already laid below the surface. He also said the branch would traverse landfills, which made tunnelling less desirable. All the proposals would allow further extension of the LRT to the rest of Coloane from Seac Pai Van. But the government has yet to decide on this. “A transit link to Coloane can supplement the inadequate bus services,” Mr Lam said. “But at the same time, it will bring more passenger traffic to Coloane and make the city’s back garden more crowded.” The officials said the government would solicit public opinion on this.

Speeding up Mainland news media have reported that construction of the stretch of the Guangzhou-Zhuhai high-speed railway that will connect Gongbei to Hengqin Island is scheduled to start this month and take three and a half years to finish. Plans are afoot to link the Guangzhou-Zhuhai railway to the LRT via the Lotus Bridge. Asked whether the imminence of the start of work on the GongbeiHengqin stretch of the GuangzhouZhuhai railway made construction of the Seac Pai Van branch of LRT more urgent, Mr Ho said only: “Last year we formed a task force with the Guangdong government and signed an agreement to work out how to connect Hengqin and our LRT route.” He added: “We are speeding up our research on this issue.” Mr Lam said: “According to our

estimate, construction of the Seac Pai Van LRT branch alone would take at least three to four years.” He added: “Without public opinion on what route the branch will take, it’s still hard for us to say at the moment when construction may start.” The Transportation Infrastructure Office began the public consultation on Friday and will finish it on February 23.

Extra LRT carriages ‘necessary’, says govt The Transportation Infrastructure Office has ordered 48 more Light Rapid Transit (LRT) railway carriages from Mitsubishi Heavy Industries and Itochu Corp. The deputy director of the office, Ho Cheong Kei, said the purchase was “necessary” to meet a requirement for extra capacity for the lines that will extend the LRT to Seac Pai Van, Hengqin Island and the new border crossing in Ilha Verde. The government will pay over 822 million patacas (US$103) for the extra carriages, according to the December 30 Official Gazette. Mr Ho said the government would pay the price Mitsubishi offered in 2010. He said any further purchases would require a new sales agreement. The government ordered 110 carriages in March 2011 to meet a requirement for capacity of 7,800 passengers an hour. “The contract reserved some flexibility for the government in carriage purchase,” Mr Ho said. “We didn’t want to buy too many carriages right from the start.”

January 2014 April 19,13, 2013

Macau TV service disruption hits over 30,000 households

editorial

More than 30,000 households in the downtown Macau peninsula were left without television services for over four hours on Saturday, Macau Cable TV Co Ltd said on its website. The Bureau of Telecommunications Regulation said in a statement also on Saturday it had ordered the company to follow up the incident and review its network facilities. The blackout happened when the demolition of a project in the area damaged two optical fibre connections, Macau Cable TV said. All services had returned to normal before 1pm Saturday, the company added.

The hard road Vítor Quintã

vitorquinta@macaubusinessdaily.com

Fosun to buy 80 pct of Caixa’s insurer

Chinese firm gets foothold in Macau through Fidelidade Tiago Azevedo

tiago.azevedo@macaubusinessdaily.com

hina’s Fosun International Ltd bought 80 percent of Portugal’s Caixa Geral de Depósitos SA’s insurance unit for 1 billion euros (10.9 billion patacas), beating out U.S. buyout firm Apollo Management International LLP. Fosun International will buy the stake in the insurer with its own funds, Portugal’s Secretary of State for Finance Manuel Rodrigues told reporters in Lisbon on January 10. Fosun International is acquiring 80 percent of Fidelidade – Companhia de Seguros SA, Multicare – Seguros de Saúde SA and Cares – Companhia de Seguros SA, all of which subsidiaries of Caixa Seguros e Saúde SA, the insurance arm of state-owned Caixa Geral de Depósitos, it said in a filing to the Hong Kong Stock Exchange on January 10. “The amount of the investment is subject to further adjustment based on the insurance companies’ asset variations,” the company said. The parties will enter into the agreement “in approximately 30 days

MOP10.9 bln Fosun is paying for stake in Caixa’s insurer

from the date of this announcement”, Fosun International said. The detailed terms “are still to be finalised” and the acquisition “is still subject to certain regulatory approvals in Portugal,” Fosun International said, adding that “the acquisition may or may not materialise”. Portugal is selling the company as a condition for a 78 billioneuro (US$106 billion) European Union bailout, which requires the government to dispose of assets and raise revenue.

Macau market Although details are still scarce, Fosun International is likely to get access to the Macau market through Fidelidade. The insurer is a branch of Portugal’s Companhia de Seguros Fidelidade Mundial SA and offers some of its products here through Banco Nacional Ultramarino SA. Caixa Geral de Depósitos owns both the bank and Fidelidade Mundial. Fidelidade’s non-life division here posted a profit of 11.1 million patacas in 2012, a 26.5-percent increase on 2011. Data for last year is not available yet. The insurer’s market share increased to 8.3 percent in 2012 and was “close to 9 percent” in the first quarter of last year, general manager, Paulo Barbosa, said in an interview in July. The acquisition may be good news to Fidelidade as it might enjoy a higher credit rating, which would allow it to grab part of the casino business and boost its growth. Fosun International, the

Caixa Geral selling the company as a condition for a EU bailout

investment arm of China’s biggest closely held industrial group, is seeking to diversify its holdings overseas and won the approval to buy French resort operator Club Mediterranee SA with Axa Private Equity in July. Fosun International has an insurance venture with U.S. life insurer Prudential Financial Inc and operates Peak Reinsurance in Hong Kong. But Moody’s Investors Service says that Fosun International’s bid for Caixa Seguros e Saúde “is credit negative”. The rating agency downgraded Fosun International to Ba3 last year, with a stable outlook. “Although the proposed acquisition is largely in line with Fosun’s expansion strategy for global investments, which focuses on growing its insurance business, there are uncertainties associated with the company’s plan to operate and integrate the Portuguese insurance business, given that it lacks a track record in the European market,” said Alan Gao, a Moody’s vice president and senior analyst. “Fosun’s ability to fund its overseas investments through offshore funding is still developing, and we will closely monitor how the company will finance the acquisition if the bid succeeds,” Mr Gao said in a December report sent to Business Daily on January 10. Moody’s says Fosun’s liquidity is manageable but warns that if the company takes an aggressive debtfunded approach to acquisitions, “its ratings and outlook could come under negative pressure”. With Bloomberg News

his newspaper was launched almost two years ago to provide readers in Macau and elsewhere with business and economics stories that other media failed to report consistently. Though 21 months is insufficient time to assess properly any project with a long-term vision, I believe we have made a difference. Business Daily has helped dispel the view that the economy is nothing but abstract numbers, by showing how business trends impact people’s lives. A lot remains to be done. Despite our best efforts, Macau’s businesses and economy remain woefully underreported. One needs only to take a look at the sheer amount of information released by publicly listed companies with a presence in Macau to see how much news goes uncovered. A recurrent theme in our pages has been the labour shortage, and the news media are not immune to it. In the face of mounting competition for qualified workers, unconventional schedules and daily deadlines are a tough sell. Meanwhile Business Daily must work in financial circumstances similar to those of any other English-language medium, which include the absence of the sort of government subsidy that helps the Portuguese-language and Chinese-language news media survive. The lack of any subsidy and the small market of readers give English-language media no option but to rely on advertising revenue. Macau’s top-heavy economy leaves little room for smaller companies to expand, or to spend on promotion and marketing. In the end a huge chunk of advertising revenue comes from the handful of big companies that dominate the economy: casino operators and public utilities. Looking back at the surprisingly high number of editorial and opinion pieces I have written since this newspaper was launched, I quickly notice almost all of them are dedicated to criticising the government. The government’s incompetence in handling money and protecting the public interest makes it almost too easy to write scathing opinion pieces every other week. In contrast, very few of my opinion pieces have criticised the behaviour of private companies – but not for any lack of reason to. Real estate speculation, exploitation of imported labour, disregard of responsible gambling and the environment are but a few of the sins that Macau’s companies should be held accountable for. There has been no deliberate decision on my part to avoid writing negative opinions about private companies. I have simply found myself drifting towards the easy way out. Macau’s news media are unashamedly local because that is how we must be in order to serve our readers best. But that does not mean we are doomed to provincialism. Media companies must be more ambitious with their investment, and not settle for what is good enough. We journalists must choose the hard road, ask the difficult questions and go the extra mile for every story.

Real estate speculation, exploitation of imported labour, disregard of responsible gambling and the environment are but a few of the sins that Macau’s companies should be held accountable for

January 13, 2014

Macau

Ho-Cheng alliance renewed in Suncity deal SJM-linked firm paying up to HK$7.35 bln for Alvin Chau stake in casino VIP business Michael Grimes

michael.grimes@macaubusinessdaily.com

he effective stock market listing – via majority acquisition by another party – of interests linked to one of Macau’s biggest VIP gambling room investors Suncity Group Ltd, also appears to concentrate further the ownership of key sections of the city’s gaming market – 12 years on from supposed liberalisation. International Entertainment Corporation – a Hong Kong-listed firm – will pay up to HK$7.35 billion (US$948 million) for a 70 percent stake in an entity called Suncity International Holdings Limited. The latter is wholly beneficially owned by Alvin Chau Cheok Wa – barely 40 years old and described in the media variously as ‘chairman’, ‘CEO’ or ‘founder’ Suncity Group Ltd. The filing refers to his underlying business as Sun City Gaming Promotion Co Ltd. The deal – as usual in Macau and Hong Kong – involves some twists and turns, some reunions between old friends, and at least one offshore entity. But partial listing may also shed some light for the public on exactly how big are Suncity’s gaming and non-gaming interests. Business Daily last year reported an executive of Suncity saying that the volume of non-negotiable VIP gambling chips ‘rolled’ at Macau junket rooms affiliated to Suncity Group Ltd reached a record 135 billion patacas (US$16.9 billion) in June 2013 alone. That’s equal to the reported annual turnover in 2012 of China Vanke, the mainland’s largest residential real estate developer. Those kinds of sums explain why International Entertainment Corp is willing to pay so much. “Buying into an existing junket operator is probably the easiest way to participate in Macau’s casino boom,”

mining. There’s no indication in the filing that International Entertainment Corp will be buying direct exposure to those assets. Arguably however, Mr Chau’s creation of alternative revenue streams and a diversified asset base has given him the option of capitalising more efficiently and cheaply his underlying junket business – which depends on getting credit to players.

Giving back

said Grant Govertsen, a managing partner at Union Gaming Group, and who is based in Macau. “Macau’s government is unlikely to give out more casino licenses, but the city’s tremendous growth in casino business is largely driven by the mainland VIPs brought by the junkets,” he added. Much of the junket trade is based on intangibles e.g., getting Chinese high rollers to Macau’s junket rooms via a

combination of political goodwill in mainland China, and the cooperation of a vast a network of player agents and sub-agents. But Mr Chau’s enterprise appears to be a little more solid. He has been diversifying his interests and investments since soon after the firm was founded in 2007. As well as the obvious areas – mainland real estate – he has also reportedly put money into other sectors – such as Indonesian

Mr Chau has also shown a willingness to put profits from gaming back into the Macau economy. Suncity’s work includes funding for a local group called Inspirational Youth Association, which offers prizes for young people with good business ideas. For every silver lining, there’s also a cloud. In this case it’s concentration of interests, a familiar theme in Asian business. Sitting at the back of the deal is a 32-year alliance between two of Hong Kong’s richest and most influential clans – the Ho family and the Cheng family. International Entertainment Corp lists Henry Cheng Kar Shun as a director. Henry Cheng is also named as a non-executive director of Macau casino developer SJM Holdings Ltd in its 2013 interim report. He’s also chairman of Chow Tai Fook Jewellery Group Ltd, one of the world’s largest listed jewellery chains by market capitalisation. Henry Cheng’s father Cheng Yu Tung in 1982 bought a 10 percent stake in SJM’s parent firm Sociedade de Turismo e Diversões de Macau SA. As recently as February last year he was described as maintaining a “beneficial interest” in STDM. With Bloomberg News

Govt drafts new rules to manage ferry terminals T

he government is seeking opinions from the tourism industry and experts on new rules to help manage all ferry terminals in the territory, the Marine and Water Bureau said yesterday. The rules will better divide the terminals into spaces for different uses and give more power to the bureau, it said in a press statement. But the statement did not say when they would finalise the administrative regulation. The ferry terminals will be divided into restricted areas, public areas and commercial areas “so that appropriate management

measures can be set up based on the features of different areas,” said the bureau. The move could better “protect the normal operation of businesses” inside the terminals as well, it said. The administrative regulation will also grant the bureau led by Susana Wong Soi Man law enforcement powers inside the ferry terminals. The bureau can then “supervise and penalise” any law violations within the terminals, it added. Ip Va Hung, head of the bureau’s port management department, said they would seek opinions from ferry firms and the tourism industry to

improve the regulation. The bureau briefed the g o v er n m en t’ s To u r i s m Development Commission on the regulation on Friday, according to the statement. The city’s terminals, including the Outer Harbour Ferry Terminal in the Macau peninsula and the Taipa Temporary Ferry Terminal, handled over 24 million passengers last year, up by 1.3 percent from 2012, the statement adds. Taipa’s new ferry terminal will be finished in the second half of this year, the Infrastructure Development Office said last month. T.L.

Taipa’s new ferry terminal could be ready in the second half of 2014

January 13, 2014

Macau

UM forecasts 9.1 pct GDP growth in 2014 The university predicts that economic growth, driven by visitor spending and investment, will slow this year Stephanie Lai

sw.lai@macaubusinessdaily.com

acau’s economy will grow by 9.1 percent this year as the mainland reforms its own economy, a study by the University of Macau’s department of economics concludes. The study report, published on Friday, estimates that Macau’s gross domestic product grew by 10 percent last year. The University of Macau researchers, led by Nobel prizewinning economist James Mirrlees, believe Macau’s GDP will grow slightly more slowly this year, against the backdrop of a recovery in the world economy, than last year. “The gradual pickup of the United States economy and the positive growth in Asia back Macau’s steady economic growth,” assistant professor of economics Kwan Fung said during a briefing on the study. Official data show the annual rate of growth in GDP in the mainland, the major market for Macau’s services, slowed to 7.8 percent in the third quarter of last year. Professor of economics Chan Chi Shing said during the briefing

that the researchers expected the mainland economy to grow at a similar pace this year. Mr Chan said growth in the mainland would be slower as the government there sought to have the economy powered less by investment and more by consumption. Mr Kwan said: “Spending by mainland Chinese visitors here and the ongoing projects of the gaming companies in Cotai will

KEY POINTS Growth in investment to slow Consumption growth steady Pay rises to match inflation

The mainland’s push for a consumer-driven economy could help Macau, researchers say

continue to be positive factors for the city’s economy.” The researchers expect Macau’s exports of services, mainly gaming, to grow by 9.7 percent this year. They estimate that services exports grew by 10 percent last year. They forecast that investment growth will slow to 4.9 percent this year from 6 percent last year.

Tight labour market The researchers expect growth in personal consumption spending to edge up to 6.2 percent this year from 6 percent last year. They expect the unemployment rate to stay at 1.9 percent, third lowest in the world, meaning the labour market will remain tight. The study report says median monthly earnings rose by 6.8 percent last year to 12,068 patacas (US$1,511). The researchers expect median monthly earnings to increase by 5.6 percent to 12,740 patacas this year. They forecast that the annual rate of consumer price inflation will slow to 5.2 percent this year

from 5.5 percent last year. Mr Kwan said high prices and rents for property were the main driver of inflation. Official data show housing rents were 15 percent higher in the first 11 months of last year than in the equivalent period of 2012. Housing costs, including mortgage debt servicing payments, were 13.8 percent higher. Mr Chan said he expected the advanced economies to pick up moderately, predicting growth of 2.6 percent in the United States and 1 percent in the euro zone. Citing an International Monetary Fund forecast made in October, he said he expected the world economy to grow by about 3.6 percent this year. “It is against this backdrop that the economic growth of Hong Kong, another big market for Macau’s services exports, will be milder this year,” he said. The University of Hong Kong predicted in a study report published on Thursday that Hong Kong’s economy would grow by between 3.1 percent and 4.4 percent this year.

January 13, 2014 April 19, 2013

Macau Brought to you by

HOSPITALITY December’s visitor odds The figure for the first 11 months suggests that the number of visitors last year was the most ever. But the annual rate of growth was slower than in years gone by. In 2010 and 2011 the annual rate growth was well over 10 percent. In 2012 it was under 1 percent and last year it was probably 4 percent. To a greater extent than ever, the growth was due to more mainlanders visiting. If as many mainlanders visited last month as in December 2012, then the annual rate of growth in the number visiting last year would be almost 10 percent. The chart compares the number of visitors that would have had to have come last month for last year’s total to equal the year before’s; the actual number of visitors in December 2012; and the difference between the two, showing how many more or fewer visitors there would have been last year than the year before if the number last month was the same as in December 2012.

Chinese buyers less crazy now, says Christie’s exec

uctioneer Christie’s is now preparing for private sales and e-commerce in mainland China, having held its first independent auction in Shanghai. The managing director of Christie’s Asia, Rebecca Wei, says the art business in China is promising. Ms Wei told Business Daily in an interview that her auction house meant to make its Shanghai saleroom into an international centre, like its salerooms in New York and London. Christie’s already has a presence in Hong Kong, which allows it to tap the Macau market. It has no plan to hold an auction here in the near future, but Ms Wei does not rule out her company holding other events here as more buyers take part in its auctions. Luciana Leitão

leitao.luciana@macaubusiness.com

Even if many fewer mainlanders visited last month than in December 2012, the number that visited last year would have been at least the same as the year before. But even if the number of visitors from Hong Kong was the same last month as in December 2012, the number last year would have been 3.9 percent smaller than the year before. And even if the number of visitors from Taiwan was the same last month as in December 2012, the number last year would have been 6.4 percent smaller than the year before.

17.01 mln Mainlanders that visited in first 11 months of 2013

What plans does Christie’s have in mainland China? We are the first international auction house with representative offices in China. Our first was in Shanghai in 1994 and then in Beijing in 1996. We’ve been there for many years already. Last year, in March, we were granted the first wholly-owned enterprise licence in China to run an auction. That’s where I think China is becoming hot. That was quite a success. It’s a milestone for Christie’s and for the auction business worldwide, because China finally opened its doors to foreign auction houses. Our vision for China is Christie’s Shanghai as an international

auction platform. It’s like the salerooms in Hong Kong, London and New York. That’s what we want to groom that saleroom to be. In China, we’re focusing a bit more on tailoring a bit to the local environment. We are doing contemporary jewellery, watches, wine, and at the same time we’re in Western art paintings. We’re the first to auction a Picasso in China so I think – down the road, if we look at two, three years down the road – we’ll definitely do more in China. We’ll continue our auctions in China and we will do a minimum of two sales a year. Besides that, we’re going to introduce private sales to China. We’re going to enable private sales among clients. We’ll also introduce e-commerce/ online auctions – which we introduced last year globally – and then an e-store: a big retail store kind of model, an e-gallery. It’s been quite successful. We’ve run 40 or more sales this year and I can easily see it doubling next year. It’s getting popular and we’re going to introduce that to China. Are you introducing that already this year in the mainland market? Yes. Today China as a market still has regulations or policies that we, as an international house, have to follow, and we’re learning at the same time. So as time goes on I see a very bright future for us in China. Meanwhile, on the other front, we’re going to introduce more education programmes there. Last year we actually collaborated with CEIBS, a top MBA school in China. We did a kind of art programme and it was very popular, and we’re going to repeat that this year. As a market, China is still young in art investment or in auctions, so I think Christie’s, as the leading auctioneer internationally, we are going to help nurture the market and educate the clients, making sure their interests are taken care of. In September you held your first independent auction in Shanghai. Why did it take so long for you to do so? It wasn’t difficult to obtain a licence. Fortunately, we had the right chance and the right opportunity and we grabbed it. Shanghai has been very open as a city, and we’ve always been there. We’ve been in China for 20 years and we’ve been learning all this time, closely following government policies and regulations. So when we noticed Shanghai presented an opportunity for a licence, we applied. And every step we followed the government guidelines, and we got it. It’s like in the eighties, when China opened up. The government is being quite cautious. All these years, China has had a very painful history,

losing its culture overseas, with lots of things being stolen, and this has always been a pain and a shame in history. I think the government is being cautious to protect cultural assets. They don’t understand much about the value an international house can bring to the market, so we set up representative offices and we’ve been in consistent dialogues with the government. At the same time, it seems auction houses are coming into form in China, like Poly and Guardian, and they are also going overseas. There is a healthy exchange and the government sees it. We’ve actually had collaboration with an auction house in Beijing before, and we’ve been leasing our brand to that auction house for eight years. Also, the government sees that Christie’s, as an auction house, still creates value and we can bring more culture back home for China than the other way around. Allowing us to auction contemporary art and jewellery and wine and watches to start off, and Western watches after 1949, this is a very healthy start and we see it as blessing from the local government. What are the main difficulties you’ve had getting into the Chinese market? China is a very promising market, but auctions are a new concept to the client and to the government. The auction business only came into form 10 years ago, and it really took off only five years ago in China. Incidents happened which are not that encouraging. It’s a 200-year-old auction house. Reputation is everything. So we need to cope with local expectations and, on the other hand, we will not compromise the rules and codes we live by every day. We have to educate the market. We have to be the role model to our peers there. But that’s just one challenge. Secondly, the majority of the rich people are in a very early stage in art collection. There are very few art collectors, compared to New York or Hong Kong. The Chinese collectors are at a very early stage and they are very eager to learn. You need to educate them and to help them in how to appreciate art. We need to give them art history. But there is little in Chinese education, in the education programme, about art. I can tell you today that the younger generation, they Google, they are typing, they only recognise simplified Chinese, they forgot their classics. The younger generation is simply going contemporary. I’m hearing Chinese culture got diluted over the generations. This is

January 2014 April 19,13, 2013

Macau licence allows a broad scope of operation and our aim is to provide a comprehensive selection of categories to mainland Chinese collectors, from the established categories of contemporary art, jewellery, watches and wine to new categories such as Chinese contemporary ink paintings and categories which are new to the Chinese market. We will not be able to deal in any cultural relics or other restricted work under the current licence, restricted by China’s laws and regulations. I do see a better prospect down the road, when the government sees Christie’s – 207 years, in all different countries – our being successful there. The government will realise that, and we respect their decision. But we do believe the government will see we’re really an art centre worldwide, and it’s well respected, and we want to contribute more to China. They’re setting up free trade zones in Shanghai and maybe other parts of the country. We’re positive that it won’t take long before we can sell art pieces dated before 1949.

If we look at two, three years down the road we’ll definitely do more in China In Chinese paintings and art works, I do see buyers in China becoming more rational We have no shortterm plans for setting up a saleroom in Macau. It’s covered today by Hong Kong

something that Christie’s and China are bringing back home, together with our friends in China, Poly and Guardian. On the other hand, Chinese education doesn’t talk much about Western art. To them, Rembrandt and Picasso probably all sound the same. It is all Western art. So on that front we’re emphasising more on education and – to protect their interests – making sure they’re making the right decisions for themselves. These are the challenges when we go in there. Copyright infringement has always been an issue in mainland China, and is entangled directly with art. How can an international auction house deal with it? In our auctions, we’ve received very few cases like that. But we do have clients, once they’ve auctioned a painting from an artist, that ask if they can make copies to give to their friends. We will say: “Sorry, in our catalogue it has always been stated very clearly what copyrights belong to whom”. So you have to be especially careful when dealing in the Chinese art market? How many people copy Christie’s in mainland China? They came up with a similar company name and exactly the same Chinese name, and they tried to mock up the Christie’s website. It’s shameless people out there, but this is not new. China has always been like that. China

has been developing so fast, and the country tries to keep up with the value system. We will do what we can to protect the market. What were the criteria for choosing the items you put on sale in the auction in Shanghai? Did you adapt them to the local taste? The Shanghai saleroom: we want it to be an international stage, so it’s not just going to be for Chinese. Everywhere where Christie’s has a saleroom, it sells internationally and the Shanghai sale, if you look at the end results, we had two-thirds of the bidders from China and onethird from outside China. Yes, we will tailor to the Chinese taste, but at the same time we want it to be international. The arts that go in there are not 100 percent Chinese, so you have the Andy Warhol, the Picasso. And they bought the Andy Warhol and they bought the Picasso, so that was, in fact, more than we expected. But the Morandi didn’t get through to anyone. Now, they know the Morandi because everybody heard about it post-press release, and they were all curious to know about the one they didn’t buy. “Oh, that’s Morandi. So who’s Morandi?” The buyers from China then actually went to London and New York for the Morandi. It’s really fun when you see it, and it’s healthy. Were you surprised with the results from the Shanghai auction? It’s fascinating to see the results. One is: you see the Chinese versus

the international, and it’s more popular with the local Chinese than we thought. The second surprise was when we brought the Picasso. If you were in that room, you would be really amazed to see three or four Chinese bidding against each other. The price was the same, even a little bit higher than we would have achieved in New York or London. So we see strong appetite for Western art. The third surprise was in the luxury category: a watch in which we clearly saw what the local Chinese are fond of. But being there, and auctioning there, it’s fascinating. We see not just the bidders, but the people rushing in to register with us, the passion for art. You see groups of people rushing in into an exhibition room. That’s very encouraging. When will you hold a second auction? You will see another one in spring. Every year we will have two sales going forward: one in spring and another one in autumn. Will you focus also on Western art in the second auction? I won’t say focus. But we will do more Western paintings, for sure. One of the restrictions is you cannot sell cultural relics from before 1949. Are these legitimate restrictions? I see the government is also thinking about making sure we lift the bar. In relation to the operation in Shanghai, the

Experts have been saying the art business in mainland China is slowing down. Is Christie’s concerned that this may affect business? When they say cooling down, it might be that people are becoming more rational than before. Probably you’re talking about the pricing level in 2011 and 2012, when you saw crazy people bidding up against each other in the auction room and the market place for the leading Chinese artists. We see people becoming more rational nowadays, which is healthy. They calculate the numbers now before rushing into the auction room. Actually, I would not say it’s cooling down. I see this season less phenomenal art pieces coming to China. The top pieces have been collected in the last three to five years. People are keeping it and not selling it. There are no signs showing a slowdown. It’s actually speeding up. We have increased sales by 30 percent to 40 percent in China. We see, actually, China coming back very strongly in the past two seasons. But in Chinese paintings and art works, I do see buyers in China becoming more rational. The old art collectors, even the new, are becoming more rational compared to 2010, 2011. How about Macau? Does Christie’s have any intention of doing something here? In Asia we’re very busy now with Hong Kong and mainland China. We’re launching our gallery in February, so with e-commerce coming into the region, we’re pretty full at this point. Macau is attractive, but given it is quite close to Hong Kong – it’s is just one hour away by ferry – we have no short-term plans for setting up a saleroom in Macau. It’s covered today by Hong Kong. But we will do more events in Macau. We do see some good buyers coming from Macau for our sales, and Macau is becoming more important for us. Will you consider organising an auction in Macau? When the time comes, we will. In the short term, I cannot commit to that. When the time comes, we sure will, as we do in all other regions. Is Macau still too small an art market? Compared to Hong Kong.

January 13, 2014 April 19, 2013

Greater China

HK suffers as smog drives away busi People looking to expand their careers are thinking twice about settling down Aaron Tam

hit by extended bouts of choking, acrid smog, with heavy industries and car-use both among the key culprits. Commercial hub Shanghai was also blanketed in dense smog in December, delaying flights and spurring sales of face masks. Air pollution expert Alexis Lau, a professor at Hong Kong University of Science and Technology’s Division of Environment, believes Hong Kong will not reach the average annual pollution levels seen on the mainland, as the city’s government introduces its anti-pollution scheme. “Because of stringent control measures in Hong Kong, the concentration levels should be dropping,” he said. But for some, leaving Hong Kong is the only solution. Clear the Air campaign group chairman, James Middleton, says he already knows people who have chosen to relocate. “Quite a lot of people have left (due to air pollution),” he told AFP. “I would say anybody with children and even those who have asthma will leave.” Pollution has reached serious levels on four days so far this year

he New Year has revived old problems for Hong Kong as a murky smog blankets the usually glittering skyline, fuelling complaints from locals and visitors alike, and raising pressure on the government to act. The government’s new, more stringent, pollution index has revealed the frightening extent of the problem, with high or very high levels of pollution recorded almost every day since it was implemented at the end of 2013. The Air Quality Health Index (AQHI) came into effect on December 30 and links pollutants to health risks. Pollution levels have reached the index’s top “serious” category on four days so far, under which people are

advised not to stay outdoors for a prolonged period. Hong Kong has already fallen to number three in the International Institute for Management Development 2013 World Competitiveness Yearbook, compared to its top spot in 2012 – and city lawmakers have admitted that air pollution is driving away businesses. People looking to expand their careers in Hong Kong are thinking twice about settling down. “Hong Kong would be a good place to live for a few years, but raising kids? I’d be very cautious about it,” Todd Scott, a 37-year-old visitor and head of investment relations from Canada, who just got engaged, told AFP as he walked along the smog-

Pressure on government hidden waterfront.

Bad winds The city’s position on the southern edge of the Pearl River Delta – one of China’s largest manufacturing centres – makes clearing pollution more challenging, city leader Leung Chun-ying has said. Winter months in particular see winds blowing in from the mainland, bringing a haze of pollutants. Levels of PM2.5 – tiny particles in the air considered particularly hazardous to health – in Hong Kong were similar to Beijing on Friday afternoon, according to the Beijing based air quality information website aqicn.org. The Chinese capital is regularly

Tourists expecting to take holiday snaps from the famous Victoria Harbour waterfront have found it hard to distinguish Hong Kong’s trademark skyscrapers and mountainous backdrop, while residents are becoming increasingly worried for their own health. “It’s scary,” said Julie Crossley, a 39-year-old sales manager from South Africa, visiting the city for the first time with her young daughter. “I’m scared of what she’s breathing in.” For German tourist Harald Gummlich, 60, the pea souper was not what he was expecting. “We’re still waiting for blue skies,” he said. Hundreds of residents have taken to Twitter, Facebook and newspaper websites to voice their concern.

Chinese tycoon eyes Nicaragua canal Planned waterway could put an end to Panama Canal monopoly

icaraguan president Daniel Ortega and Chinese tycoon Wang Jing on Saturday said plans to start building a US$40billion canal across the Central American country were on track for late 2014. Wang Jing’s Beijing Interoceanic Canal Investment Management Co has secured the right to dig a waterway in Nicaragua that will rival the Panama Canal and be hugely significant to world trade if it is completed. Mr Ortega gave the group a concession to operate the future waterway for 50 years, renewable for another 50. “The Nicaraguan government and

HKND Group are pleased to confirm that canal construction work will begin as planned in December 2014,” the two said in a brief statement. Their remarks appeared aimed at shooting down any idea of a delay. Nicaragua’s Canal Authority chief Manuel Coronel Kautz recently was quoted as saying work would not start on the Nicaraguan waterway until 2015. It is the biggest infrastructure project by far attempted under the government of Mr Ortega. And it would have huge strategic value, potentially interrupting commerce in Panama’s waterway between the Atlantic and Pacific. Panama is currently expanding its

century-old canal, and the massive project is running behind schedule. The Panamanian upgrade aims to make that 80-kilometer (50-mile) waterway, which handles five percent of global maritime trade, big enough to handle new cargo ships that can carry 12,000 containers. That project is costing US$5.2 billion, including a third set of locks for the canal which currently welcomes ships that carry up to 5,000 containers. Feasibility studies are under way in Nicaragua. But it is not yet known how the future canal might be built in mechanical and logistical terms, if it gets a final green light. AFP

Chinese tycoon Wang Jing won a 50-concession for

January 2014 April 19,13, 2013

Greater China

iness

“Yesterday’s pollution was truly shocking - made my eyes sting,” Hong Kong based @Alieeeson tweeted Thursday. Local campaign groups are hoping the results of the new AQHI system will finally galvanise the government into action. “It certainly should kick the government into doing something,” Clean Air Network chief executive officer Kwong Sum-yin told AFP. Melonie Chau, senior environmental affairs officer at Friends of the Earth, said the data “can help the public... exert more pressure on the government.” The index monitors the concentration levels of multiple pollutants and measures their health effects through tracking hospital admissions for respiratory and cardiovascular diseases. Its introduction comes after Mr Leung pledged to make pollution one of his top priorities during his five-year term, with an official report saying it was the “greatest daily health risk” to the city’s residents. Government proposals to reduce emissions include a plan to replace more than 80,000 older commercial diesel vehicles between 2014 and 2019, and a requirement for container ships berthing in the city to use cleaner fuels. But campaigners are frustrated at what they see as a lack of urgency in implementing the moves. “We are not very happy with the timeline,” Kwong Sum-yin said. A government scheme to replace catalytic converters on 20,000 vehicles, mostly taxis, kicked off in October last year to lower nitrogen dioxide. The Clean Air Network is pushing for comprehensive low emission zones on the roads and in Hong Kong waters. Friends of the Earth’s Ms Chau suggested the government should also consider limiting the number of cars on the road when air pollution reaches a certain level. AFP

the planned canal

The explosion caused 750 million yuan (US$124 million) of losses

Sinopec executives punished for Qingdao blast Pipeline explosion killed 62 people in November

u Chengyu, chairman of China Petroleum & Chemical Corp., Asia’s largest refiner, was disciplined for a November 22 pipeline explosion in Qingdao that killed 62 people, Xinhua news agency reported. Mr Fu was given a demerit on his official record, the news agency said Friday, citing the State Council. Vice chairman Wang Tianpu received a “large demerit” and head of safety Wang Yongjian was fired, it said on its website. A total of 48 officials were disciplined and 15 face criminal charges, Xinhua said. Sinopec, as China Petroleum is known, and its units failed to “fulfill production safety responsibilities, root out potential risks and conduct appropriate emergency response,” Xinhua reported. The refiner had warned the government two years before the blast that urbanisation was interfering with repairing the pipeline, originally built in a sparsely populated suburb. The explosion, which also injured 136 people, was the deadliest since at least 2005 and caused 750 million yuan (US$124 million) of losses, Xinhua reported earlier. Sinopec said it “deeply apologises to the people of China and Qingdao”, and will “remember the bloody lesson,” in a statement posted on

its Weibo website. Both Sinopec and the Qingdao government were responsible for not taking potential risks seriously, Huang Yi, a spokesman for the State Administration of Work Safety, said at a press conference on Thursday. Ineffective emergency procedures, operational violations and flawed designs were among problems identified, Mr Huang said.

Fatal accidents Mr Fu, 62, who gained a master’s degree in petroleum engineering from the University of Southern California, was appointed Sinopec’s chairman in May 2011 and has helped boost oil production and expand the company’s footprint overseas. The incident at Qingdao is the latest in a series of fatal industrial accidents as China seeks to improve workplace safety. More than 27,700 people were killed or went missing at workplaces in the first half of last year, according to the State Administration of Work Safety. In June, a fire at a poultry plant in the northeastern province of Jilin killed 120 people in the nation’s deadliest blaze in 13 years. The Qingdao accident is the deadliest in the petrochemicals industry since at least 2005, according to a chart of 11

accidents compiled by Xinhua and published on November 22. Two top PetroChina managers were removed from their posts after a fire at the company’s Dalian oil complex killed two people in June. The blaze was a “serious accident” and had a “severely negative impact” on the group, according to a statement on the website of parent China National Petroleum Corp. Ma Fucai resigned as president of CNPC, the nation’s top oil producer, after an explosion that killed 243 at the Chuandongbei natural gas field in southwest China in 2003. More than 10,000 people were poisoned as a result and 40,000 residents living near the site were evacuated. Globally, industry executives have faced repercussions for industrial accidents. Tony Hayward quit as BP Plc chief executive officer in July 2010 after facing rising public anger and attacks from lawmakers over his handling of the worst oil spill in United States history, triggered by the April 2010 explosion on the Deepwater Horizon rig. Masataka Shimizu resigned as president of Tokyo Electric Power Co in 2011 after the utility known as Tepco posted the biggest loss by a Japanese company, stoked by the Fukushima nuclear disaster. Bloomberg News

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Volkswagen takes China car sales lead German carmaker outsells American rival GM for first time in nine years

olkswagen AG outsold General Motors Co in China for the first time in nine years to recapture the lead among foreign automakers in the world’s largest car market. VW’s 2013 deliveries in the country surged 16 percent to 3.27 million vehicles, the Wolfsburg, Germany-based manufacturer said Saturday. Detroit-based GM announced earlier this week that the United States automaker sold 3.16 million cars in the country. Beating GM in China puts VW a step closer to its goal of becoming the world’s largest carmaker by 2018. As the stakes escalate – both have announced combined investment plans totaling US$36 billion in the country – they’ll be facing mounting competition from the likes of Toyota Motor Corp and Hyundai Motor Co at a time when the government is cranking up scrutiny on vehicle sales to combat pollution. “Volkswagen will probably continue to grow more dynamically in China than GM,” said Frank Schwope, a Hanover, Germany-based analyst with NordLB who recommends buying VW shares. “It’s going to remain neck and neck.” Unlike GM, VW counts

Hong Kong in its tallies for the country. GM’s figures include light commercial vehicles.

Growth opportunities While China may already be the world’s biggest auto market, the country has plenty of room to grow as the number of vehicles on its roads only account for about 6 percent of the population, versus 80 percent in the United States and 36 percent in South Korea, according to data compiled by Bloomberg. Such opportunities prompted VW to say in November that it will invest 18.2 billion euros (US$24.9 billion) in China through 2018. That would help the company double the number of models produced in the country to more than 35, according to VW. Among the biggest drivers for VW last year was Audi, the topselling luxury car brand in China, as deliveries expanded 21 percent in 2013. The company is counting on sales of the locally-produced A3 compact car to spur further gains this year. Porsche, which outperformed industry growth last year as Chinese consumers snapped up Cayenne SUVs and Panamera sedans, is counting on its new Macan

SUV to drive growth in 2014.

Regaining lead At GM, incoming chief executive officer Mary Barra will face the challenge of regaining the eight-year lead it held in China with the help of the company’s newly appointed country head, Matthew Tsien. GM, which in April laid out plans to invest US$11 billion in China through 2016, has said it plans to expand the lineup of vehicles for the low-cost Baojun brand in 2014 and introduce nine new or refreshed SUVs in China in the next four years. In 2013, Buicks and Cadillacs led GM’s 11 percent growth in deliveries, while Chevrolet sales underperformed by expanding 4 percent last year. GM has said it plans to introduce four new Chevrolet models in the country this year. All major foreign automakers posted record sales in China last year as it became the first country to see domestic sales of motor vehicles surpass 20 million units – 21.98 million to be exact – in a given year. Sales may exceed 24 million this year, the state-backed China Association of Automobile Manufacturers said last week in Beijing. Bloomberg News

China Coal Energy invests to meet demand China Coal Energy Co, the nation’s secondlargest producer of the fuel, will invest 17 billion yuan (US$2.8 billion) to develop a coal mine in northern China as power demand increases in the world’s second-biggest economy. Targeted production from the mine in Shaanxi province is 15 million metric tons a year, the Beijing-based company told the Hong Kong Stock Exchange Friday. Development of the mine, which has recoverable reserves of 3.28 billion tons, will take more than five years, the company said. The project will produce coal “for civil, gasification and power use.”

Chalco back to black on reduced costs Aluminum Corp of China Ltd, the nation’s biggest producer of the light metal, returned to profit last year as it cut costs and sold assets to its parent. Net income was about 1 billion yuan (US$165 million), compared with a record net loss of 8.23 billion yuan in 2012, the state-owned company said Friday. Chalco sold its aluminum fabrication business in June to its parent for about US$1.3 billion. It said in October it was selling its 65 percent stake in the Simandou iron-ore project in Guinea, a venture with Rio Tinto Group, for about US$2.07 billion.

JinkoSolar to take over rival’s factory JinkoSolar Holding Co, the second-best performing solar manufacturer in 2013, agreed to assume control of a struggling rival’s production assets to boost capacity as global demand for photovoltaic panels climbs. JinkoSolar said in a statement it will take over the Haining facilities owned by Zhejiang Topoint Photovoltaic Co today. The solar industry is emerging from a two-year slump as a global surplus in capacity dragged down panel prices and eroded profits. That drove some companies into bankruptcy, creating acquisition targets for stronger photovoltaic producers, Jinko chief executive officer Chen Kangping said.

US judge opens way for Wanxiang’s Fisker bid

VW’s 2013 deliveries in China surged 16 percent to 3.27 million vehicles

A United States judge rejected a planned sale of Fisker Automotive to Hong Kong businessman Richard Li, opening the way for China’s largest auto parts company to bid for the maker of the Karma plug-in hybrid sports car. United States Bankruptcy judge Kevin Gross said on Friday competitive bidding was the best way forward. Mr Li was planning to “credit bid,” or forgive a portion of what Fisker owes on a US$168 million secured loan that he holds. Under the plan, other creditors were likely to get next to nothing.

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Asia

Indonesia eases mineral export ban after opposition Many miners can continue to export after government U-turn

ndonesia’s president signed off on a controversial mineral ore export ban Saturday after an 11th-hour easing of the policy following opposition from miners and warnings it would hit state coffers, cabinet ministers said. Ministers announced late Saturday night that president Susilo Bambang Yudhoyono had signed the watered down version of the regulation just an hour before it came into effect. The government had originally proposed a blanket ban on the export of certain raw minerals, which also included concentrates, but the revised version would ban ore only and allow concentrates to be exported for the next three years. This means many miners – including United States giant Freeport McMoRan, the biggest miner operating in resource-rich Indonesia – can continue to export. Exports of some key metals, such as nickel and bauxite, are still set to be banned in the nearer future, which may affect a number of miners, the Indonesian Mining Association warned. “Starting from 00:00, January 12, 2014, the export of ore is prohibited,” Energy and Mineral Resources minister Jero Wacik said. Indonesia’s ban on the export of unprocessed mineral ore was aimed at creating added value to the lucrative industry, meaning more jobs and profits would stay in Indonesia. The proposed ban prompted strong opposition from both foreign and domestic miners, some of whom dubbed the policy “nationalistic”, and

Indonesia had originally proposed a blanket ban on exports of certain raw minerals

warned the demands were unrealistic and would lead to widespread closures and lay-offs in the industry. The government has been scrambling to ease the ban in recent weeks, concluding it was unlikely to have the desired effect and would instead be a drain on state revenues in lost tax and royalties. Under the regulation, miners will also be obliged to build smelters by 2017, which some in the industry have complained is costly and

economically unviable. Industry minister M.S. Hidayat said that the government would impose taxes on mineral exports until 2017, when companies will have built smelters and will no longer need to export ore. “We will slap on an export tax, and every year the tax will get progressively higher,” he said. The energy, finance and trade ministries are due to reveal more precise details of the revised ban.

The export ban was announced several years ago but its implementation was delayed to give miners time to fulfil the requirement of building smelters to process their ore before exporting. But miners complained this would involve huge investments and that existing infrastructure was not up to the task. Most took little action, betting that Jakarta would back away from the policy. AFP

IPhone offerings help Docomo lure users Japan’s largest carrier sees fortune change after ending iPhone holdout

he iPhone is going to make a difference for NTT Docomo Inc after all. Japan’s largest carrier added more subscribers than rivals for the first time since December 2011, gaining 279,100 net users last month for 62.2 million total customers. That compares with 222,600 more for KDDI Corp and 224,300 additional users for SoftBank Corp, the companies reported Friday. It’s a sign Docomo can compete against carriers that have been swiping its customers since they started carrying Apple Inc.’s smartphone. Docomo started selling the iPhone 5s and 5c when they were released in September, ending a holdout that saw smaller competitors win market share and lure customers with Apple’s handsets. “From now, the ranking of the companies will be switching because Docomo offers the iPhone,” Satoru Kikuchi, an analyst at SMBC Nikko Securities Inc in Tokyo said Friday. “The iPhone strengthens Docomo’s foundation.” Docomo had resisted the iPhone to focus on handsets from Sony Corp and Samsung Electronics Co

Docomo started selling the iPhone 5s and 5c when they were released in September

and protect its online store dmarket from competition with iTunes. SoftBank was the first of Japan’s operators to offer the iPhone when it began sales in 2008 before KDDI followed in 2011. Docomo’s change of fortune is a preview of what may happen for China Mobile Ltd this year after the world’s largest carrier announced it

will begin offering the iPhone as it rolls out its new fourth-generation network. Like Docomo, China Mobile is its country’s last major carrier to offer the Apple device.

‘IPhone effect’ Apple sold three of every four smartphones in Japan in October,

the first full month after new models were released, market researcher Kantar Worldpanel ComTech said November 28. Shares of Docomo rose 2 percent to close at 1,749 yen in Tokyo trading Friday, the highest in five years. The stock’s 39 percent advance last year lagged behind the 51 percent surge of the broader Topix index. “It’s the iPhone effect,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc in Tokyo, said by phone. “All three major carriers offer the iPhone now so it will likely be a competition of connectivity, services and content offerings as they vie for subscribers.” The main reason Docomo added more new users than other carriers is because it began offering the iPhone, said Hiroko Shimoyama, a company spokeswoman. Discounts for the Apple handset also helped lure subscribers, she said. SoftBank, which almost tripled in value last year, rose 1.1 percent in Tokyo trading friday. KDDI, whose market value more than doubled in 2013, dropped 0.6 percent friday. Bloomberg News

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Asia

Liar for hire? Fake CVs flood Indian job market Desperate candidates resorting to fraud in a tough employment market Abhaya Srivastava

anagers of an information technology company in New Delhi were puzzled as they sifted through a pile of CVs – as many as 30 job seekers claimed to have worked previously for the same employer. Unwilling to take any chances, the managers approached a firm of professional sleuths that specialises in screening background information given by prospective employees. What emerged left them stunned. The “employer” turned out to be an owner of a dingy one-room mobile repair shop who was pretending to be an human resources manager of a fake information technology firm. In return for money, he answered verification calls and described how the candidates had worked for him previously doing data entry. “Our investigation revealed the conspiracy to show previous experience of three to four months for the candidates,” said Preeta Pradhan, a vice-president at background screening firm AuthBridge. Forging qualifications, faking experience, and inventing companies – desperate candidates are resorting to all sorts of fraud to land jobs in a

tough Indian employment market. Low business confidence and high interest rates have led economic growth to plunge to the lowest in a decade, making private sector job opportunities harder to come by. A survey by AuthBridge, which has screened millions of candidates, showed that nearly one in five had fudged some information on their CV in 2012-13. As many as 51 percent submitted fake education documents.

Employee screening Background screening was hardly heard of in India until the turn of the millennium, and has been largely driven by the outsourcing and information technology industry, one of India’s biggest economic success stories. Foreign companies taking their back office operations to India wanted assurances that employees were reliable, while intense competition led to high staff turnover and huge recruitment needs. The Indian Association of Professional Background Screeners pegs the size of the industry at

about US$32 million annually and growing fast. “With many people competing for the same opening, the temptation to fudge is quite strong,” M. Aswathi, an human resources manager in a leading information technology company, told AFP. “They know that extra years of experience or a diploma from a top college could make it easier for them to grab a job or help them get a better pay package,” she said. Figures from the National Association of Software and Services Companies (NASSCOM) show the number of qualified workers in the information technology sector has risen 17 percent year on year, more than double the rate of growth in new jobs. Those faking their CVs are mainly looking for lower entry-level jobs, although those seeking top positions have also been found resorting to fraudulent tactics, said Ms Aswathi. According to the AuthBridge survey, about eight percent of offers made for leadership positions across industry in the last year were withdrawn because candidates provided false information. But catching the frauds has

become more difficult, opening up a new market for companies such as Authbridge, US-based Rezource that also operates in India, and Supersoft Consultants. They send officers to meet the references given by candidates and check the existence of companies at which applicants claim to have worked in the past. “The need for background verifications will continue to grow as entities continue to fudge data and make false claims,” said Tejas Sanghvi from Supersoft, adding he expected the industry to grow by 15 percent per year. Rezource meanwhile has compiled a list of 1,500 Indian companies that do not exist but give out employment letters to candidates for a price. “One bad hire who gets through the system because the firm does not have a background check process in place will attract more entities with false and exaggerated claims,” said Mr Sanghvi. “On average, between 10 to 15 percent of bad hires are identified by a standard background check process,” Mr Sanghvi told AFP.

The IT industry is one of India’s biggest economic success stories

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, José Carlos Matias, 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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Asia Judge halts India demands over AgustaWestland An Italian judge has blocked demands by India to recover around 300 million euros (US$410 million) in bank guarantees from defence group Finmeccanica in a dispute over a scrapped helicopter deal, two people with direct knowledge of the matter told Reuters. India’s demands came after the New Delhi government last week cancelled a 560-million-euro deal with Finmeccanica unit AgustaWestland for 12 AW101 helicopters over what it termed a breach of integrity relating to alleged corruption. “There will be a hearing in 40 days, meanwhile the tribunal has blocked everything,” a source told Reuters.

Hana to ‘actively’ consider overseas acquisitions South Korean financial group looking abroad as domestic growth slows Seonjin Cha

H Tata Motors bought Jaguar Land Rover in 2008 for US$2.5 billion

Jaguar Land Rover sales rise to record on Asia Pacific Focus on emerging markets paying off for India’s Tata Motors Debjit Chakraborty

aguar Land Rover, the luxuryvehicle division of India’s Tata Motors Ltd, reported record global sales last year, driven by growth in the Asia Pacific and China region. Jaguar Land Rover’s total worldwide sales rose 19 percent last year to 425,006 vehicles, according to an e-mailed statement. Jaguar brand sales jumped 42 percent to 76,668 vehicles, the most since 2005, while Land Rover increased 15 percent for an annual record of 348,338 vehicles, the company said. Jaguar Land Rover, which Mumbai-based Tata Motors bought from Ford Motor Co in 2008 for US$2.5 billion, accounted for 72 percent of group revenue and 88 percent of operating profit for the year ended March 31. In the quarter ended in September, Tata Motors posted profit that beat analyst estimates as rising Jaguar Land Rover sales outweighed a loss at the parent company’s Indian business. “It’s more of a Jaguar Land Rover story now for Tata Motors,” Ronak Sarda, Mumbai-based research analyst at Emkay Global Financial Services Ltd, said by phone. “This provides a good time for investors to make use of the JLR story as Tata

Motors is not generating anything positive in India.” Sales in Asia Pacific and the China region jumped 30 percent during 2013, North America rose 21 percent, the United Kingdom grew 14 percent, Europe 6 percent and other overseas markets increased 23 percent, according to the statement. Under Tata, Jaguar and Land Rover have targeted emerging markets such as China and Russia for growth. In 2013, Jaguar Land Rover had record sales in 38 markets, including Russia, Brazil, Korea and Canada. The sales growth in 2013 was driven by Jaguar’s F-Type convertible and Land Rover’s Range Rover and Range Rover Evoque models, it said. The F-Type began shipping in May. It was “a great year in which we have seen some incredibly exciting new models launched to customers across the world,” Andy Goss, Jaguar Land Rover Group sales operations director, said in the statement. “The Range Rover Sport, F-Type, new engines and drivetrains, and a number of 14 Model Year enhancements to our existing lineup have seen Jaguar Land Rover continue to build strong sales momentum in every global region.” Bloomberg News

ana Financial Group Inc, South Korea’s fourth-biggest financial group by assets, will “actively” consider overseas acquisitions as domestic growth stalls. Seoul-based Hana will also consider forming joint ventures outside its home country, chairman and chief executive officer Kim Jung Tai told reporters in Seoul on Friday. The company wants overseas profit to account for about 40 percent of earnings by 2025 from 16 percent in 2012, Hana said in a statement the same day. “We’ll need to look abroad to become No. 1,” Mr Kim said. “We’ll look into opportunities in the nonbanking sector in Asia and other areas.” South Korean lenders are facing stagnating growth as the domestic population ages and lending margins narrow. Taking into account inflation, Hana forecasts the domestic financial industry’s profit growth will average between 1 percent and 2 percent from 2012 to 2020, the company said in its statement. Hana’s net income in the first nine months of 2013 dropped 49 percent to 898.8 billion won from 1.75 trillion

won a year earlier, according to a Nov. 14 filing. The company wants to boost pretax profit from outside South Korea to about 2 trillion won (US$1.9 billion) by 2025 from 237 billion won in 2012, according to its statement. It’s aiming to almost triple pretax profit to 5.5 trillion won by 2025 from 1.96 trillion won in 2012. Earnings from non-banking will grow to 1.5 trillion won by 2025, compared with 172 billion won in 2012, it said. Hana bought more than half of Korea Exchange Bank in 2012 for 4.4 trillion won and completed the buyout of its competitor last year. Bloomberg News

Maruha cuts production after contamination M aruha Nichiro Holdings Inc’s frozen foods unit said it’s cutting production at a factory in Yubari, northern Japan, as consumers shun its brands following the discovery of pesticide in products made at a separate plant. The company is reducing operations in Yubari after shutting down the facility where the contaminated products were made, said Mizuki Nagaoka, a spokeswoman for the frozen foods unit, Aqli Foods Corp. She declined to say how much the company was reducing production. Japan police have been questioning about 300 employees of the packaged-food maker after hundreds of people were sickened as pesticide contamination at 2.6 million times permitted levels was found in

frozen croquettes. Aqli is reducing production at its Yubari factory by 30 percent, the Nikkei newspaper reported earlier. Food from the company’s factory in Gunma prefecture, northwest of Tokyo, sickened at least 890 people in Japan and was found to contain the pesticide malathion, public broadcaster NHK reported last week. Maruha Nichiro is recalling about 6.4 million bags of frozen foods after finding the pesticide in products including croquettes, frozen pizza and chicken nuggets, the Tokyobased company said in a statement December 29. The company had received 52 percent of the recalled products as of Friday, according to its website. Bloomberg News

14 14

January 13, 2014 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 77.9 77.3

112.5

34.6

111.8

34.4

111.1

34.2

76.7 76.1

Max 77.85

average 76.985

Max 67.05

Min 75.50

average 66.087

Last 76.15

Min 65.10

Last 65.90

75.5

Max 112.5

average 111.5

26.5

66.7

26.4

66.3

26.3

65.9

26.2

65.5

26.1

65.1

Max 26.45

average 26.260

PRICE

DAY %

YTD %

(H) 52W

92.59

0.281609475

-5.923592766

106.2200012

BRENT CRUDE FUTR Feb14

107.38

0.214652357

-3.086642599

112.7999954

GASOLINE RBOB FUT Feb14

266.44

0.304935437

-4.361247712

286.9299889

243.68999

909.5

-0.13724952

-3.603603604

960.75

840

4.16

-1.328273245

-1.654846336

4.770000458

3.476000071

GAS OIL FUT (ICE) Feb14 NATURAL GAS FUTR Feb14

85.56999969

295.37

0.145792365

-3.637609291

317.8399801

278.4999847

Gold Spot $/Oz

1227.03

0.044

2.0196

1696.2

1180.57

Silver Spot $/Oz

19.565

-0.0843

0.0378

32.46

18.2208

Platinum Spot $/Oz

1415.5

0.4114

4.4072

1742.8

1294.18

Palladium Spot $/Oz

735.9

0.2179

3.5021

786.5

629.75

LME ALUMINUM 3MO ($)

1777

-0.448179272

-1.291487293

2174

1736.25

NY Harb ULSD Fut Feb14

LME COPPER 3MO ($) 3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Mar14

7344.5

-0.088423344

-0.210597826

8346

6602

2030

-0.587659158

-1.216545012

2230

1811.75

13525

0.073991861

-2.697841727

18770

13205

15.44

-0.675458347

1.080196399

16.77000046

15.12000084

415.75

-0.299760192

-1.481042654

606.5

414

WHEAT FUTURE(CBT) Mar14

590

0.212314225

-2.519619992

845

586.75

SOYBEAN FUTURE Mar14

1275

0.453023439

-1.353965184

1377.75

1174

COFFEE 'C' FUTURE Mar14

120.9

3.113006397

9.214092141

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

15.68

-0.381194409

-4.448507008

20.61999893

15.67000008

CORN FUTURE

Mar14

COTTON NO.2 FUTR Mar14

83.43

0.348809237

-1.429584121

90.61000061

76.65000153

World Stock Markets - Indices NAME

Min 26.00

Last 26.10

(L) 52W

WTI CRUDE FUTURE Feb14

LME ZINC

110.4

26.0

Max 34.6

average 34.322

Min 34.0

Last 34.3

34.0

37.90 37.55 37.20 36.85 Max 37.85

average 37.241

Min 36.55

Last 36.70

36.50

Currency Exchange Rates

NAME

METALS

Last 111.2

67.1

Commodities ENERGY

Min 110.4

COUNTRY 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

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.8877 1.6456 0.9085 1.3607 104.88 7.9868 7.7544 6.0554 61.9987 33.039 1.2712 30.167 44.67 12158 93.089 1.23607 0.82685 8.2389 10.8684 142.7 1.03

-0.549 0.2437 0.2752 0.1693 -0.1049 0.0075 0.0039 -0.071 0.1231 -0.0575 -0.0472 0.0099 0.0448 0.6333 0.4587 0.1108 0.0798 -0.0583 -0.1721 -0.2663 0

-0.5044 -0.2727 -1.8932 -1.1407 0.1049 -0.0025 -0.0064 -0.0182 -0.3205 -0.7991 -0.5585 -1.1934 -0.6156 0.1069 0.6016 -0.7572 0.8829 1.2392 1.1446 1.2684 0

1.0599 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.228 44.86 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

0.8821 1.4814 0.88 1.2746 87.4 7.9818 7.7511 6.049 52.89 28.56 1.2223 28.913 40.54 9603 86.41 1.20856 0.81349 7.8281 10.195 114.05 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

(H) 52W

(L) 52W VOLUME CRNCY

4.53

-1.735358

-3.411515

5.12

3.265

1076899

17.17

-0.1744186

1.899107

17.38

11.07

961260

AMAX INTERNATION

1.75

-4.371585

1.744184

2.12

0.75

4238375

BOC HONG KONG HO

24.15

0.2074689

-2.816903

22.85

5497543

CENTURY LEGEND

0.425

-2.298851

-1.162792

0.68

0.26

488000

CHEUK NANG HLDGS

7.39

0.5442177

4.822692

7.45

185799

CHINA OVERSEAS

22.3

2.764977

2.293582

25.6

17.7

64957965

CHINESE ESTATES

-1.498929

-4.564317

24.7

10.334

41056

12.76

-1.23839

10.38062

13.38

7.44

14742451

CHOW TAI FOOK JE

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16462.74

-0.4125597

-0.6872308

16588.25

13329.08

NASDAQ COMPOSITE INDEX

4165.611

0.2992645

-0.26287

4177.728

3093.324

GALAXY ENTERTAIN

-0.3827194

6875.62

6023.44

HANG SENG BK HOPEWELL HLDGS

25.9

HSBC HLDGS PLC

EMPEROR ENTERTAI

4.12

4.66

1.89

1847400

FUTURE BRIGHT

4.45

-1.982379

-5.117272

4.9

1.421

2382000

76.15

-2.496799

9.489571

78.7

11263658

122.7

-0.8885299

-2.386632

132.8

110.6

981178

-0.9560229

-1.333333

35.3

23.2

264044 22468146

FTSE 100 INDEX

6723.26

0.02201798

DAX INDEX

9489.31

-0.08980989

-0.6579725

9620.929688

7418.36

NIKKEI 225

15880.33

-1.495647

-2.522691

16320.22

10398.61

HANG SENG INDEX

22787.33

-0.909961

-2.227117

24111.55078

19426.35938

CSI 300 INDEX

2222.221

-0.8782686

-4.62677

2791.303

2023.171

TAIWAN TAIEX INDEX

8514.68

-0.4830523

-1.124426

8647.24

7603.27

KOSPI INDEX

1946.11

-0.6559603

-3.243111

2063.28

1770.53

MIDLAND HOLDINGS

S&P/ASX 200 INDEX

5324.41

0.1572973

-0.519408

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4196.63

-0.09434382

-1.814311

5251.296

3837.735

85.25

-0.175644

1.307188

90.7

77.85

HUTCHISON TELE H

2.89

0.6968641

-1.700682

4.66

2.5

4650285

LUK FOOK HLDGS I

33.65

1.969697

14.0678

16.88

3629000

MELCO INTL DEVEL

29.1

-1.188455

2.105263

30.55

10.6

11470000

MGM CHINA HOLDIN

34.3

-2

3.625382

14.169

9445933

3.55

0.2824859

-4.825738

4.29

2.68

1110000 116440000

NEPTUNE GROUP

0.335

-2.898551

-1.470589

0.4

0.131

NEW WORLD DEV

9.75

2.523659

-0.4085798

15.12

9.35

20113772

SANDS CHINA LTD

65.9

-0.3025719

4.025259

67.15

33.5

12847226

FTSE Bursa Malaysia KLCI

1827.32

-0.2173319

-2.123239

1882.2

1597

SHUN HO RESOURCE

1.65

1.92

1.33

NZX ALL INDEX

1016.608

0.7836796

1.773255

1048.998

888.933

SHUN TAK HOLDING

4.42

-1.777778

-3.070174

4.8

3.27

6378250

PHILIPPINES ALL SHARE IX

3643.05

-0.6691042

0.7948931

4571.4

3440.12

Euromoney Dragon 300 Index Sin

604.8

1.05

-1.1

STOCK EXCH OF THAI INDEX

1263.81

0.4834106

-2.687274

1649.77

1205.44

HO CHI MINH STOCK INDEX

516.98

0.5993384

2.447333

533.15

440.48

Laos Composite Index

1266.25

1.030857

1455.82

1224.94

SJM HOLDINGS LTD

26.1

-2.247191

0.3846154

17.04

7616548

SMARTONE TELECOM

8.89

1.832761

0.3386043

14.46

7.38

7417516 4616374

WYNN MACAU LTD

36.7

-0.67659

4.409668

38.25

ASIA ENTERTAINME

N/A

BALLY TECHNOLOGI

78.42

0.05103343

-0.03823703

79.42

45.38

267773

BOC HONG KONG HO

3.07

-2.539683

-4.658386

3.6

2.99

1300

GALAXY ENTERTAIN

10.1

2.851324

12.09767

10.11

3.8975

45248 3871428

INTL GAME TECH

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

17.77

0.1126761

-2.147576

21.2

14.69

JONES LANG LASAL

103.56

-0.07719027

1.14269

104.33

80.86

338823

LAS VEGAS SANDS

81.18

2.785515

2.928867

81.24

47.95

5811017 3658951

MELCO CROWN-ADR

42.99

2.748566

9.612439

43.2

17.76

MGM CHINA HOLDIN

4.55

-2.360515

5.568447

4.66

1.9017

11886

MGM RESORTS INTE

24.73

0.8975928

5.144556

24.96

11.72

12722299

SHFL ENTERTAINME

N/A

23.25

13.88

SJM HOLDINGS LTD

3.46

3.903904

3.592817

3.6

2.2

20834

205.29

1.875837

5.705161

205.4

111.3456

1406668

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

-0.4815409

2456828

265.6

1.45149

2048509

23.9

2206357

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

3138217

SWIRE PACIFIC-A

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

MOVERS

VOLUME

3 23043

INDEX 22787.33 HIGH

23042.62

LOW

22666.04

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

52W (H) 24111.55078

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

(L) 19426.35938

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

22666

7-January

9-January

15 15

January 2014 April 19,13, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Asahi Shimbun Japan’s business giants expressed optimism over the economy for 2014 on expectations of the yen’s continuing depreciation, but cited the consumption tax hike, stagnant wages and the performance of emerging economies as potential negative factors. Most predicted that the yen will hit the 105-110 range against the U.S. dollar during the coming year. For those who were less optimistic, the consumption tax rate, which is scheduled to increase from the current 5 percent to 8 percent in April, was of primary concern.

The business of Korean reconciliation Paola Subacchi

Research Director of International Economics at Chatham House

the demilitarised zone between the industrial complex and the border, or of North Korean soldiers or workers. Our cameras were checked when we left the country to verify compliance.

Defusing the threat

Korea Herald South Korea will offer strong incentives to potential foreign investors in a bid to attract more foreign direct investment. The move came as part of government efforts to dig up new sources of revenue amid stagnant economic conditions. “In an effort to create more value from FDI, the priority for our policies will be to offer stronger incentives for multinational companies seeking to relocate their head offices or research and development centres to Korea,’’said Trade, Industry and Energy Minister Yoon Sang-jick.

Jakarta Post Bank Indonesia has decided to maintain its benchmark interest rate at 7.5 percent. “This policy is taken to maintain inflation within our target of 4.5 percent in 2014 while at the same time improving our current account deficit to become healthier and more sustainable,” the central bank Governor Agus Martowardojo said. BI also maintained its lending facility rate and its deposit facility (Fasbi) rate at 7.5 percent and 5.75 percent respectively. Mr Martowardojo embarked on the country’s most aggressive ratetightening cycle in eight years within a month of taking the helm in May, leading to slower expansion and reduced imports.

The Age Twenty-First Century Fox plans to dump its Australian listing, just months after the favoured entertainment business was split from News Corp’s publishing and newspaper assets. The move is part of an “ongoing agenda to simplify the operating and capital structure of our company,” said chairman and chief executive Rupert Murdoch. “Following the separation of our businesses in June last year, 21st Century Fox has only limited operations in Australia, and we believe that consolidating the trading of our stock in the world’s largest equity market would provide improved liquidity to the company’s shareholders and greater efficiencies.”

an trade and commerce foster peace and mutual understanding between hostile governments? When it comes to the Koreas, this question may seem to be beside the point, given the ruthless purge now underway in the North. But it remains an essential consideration for the longer-term future of North Korea and other outcast regimes. The Kaesong Industrial Complex, a joint venture of the North and South Korean governments, is both a tribute to the concept of diplomatic reconciliation through business and a difficult test of its feasibility. Roughly 50,000 North Korean workers are employed in 123 factories that produce about US$450 million worth of goods (mainly textiles, shoes, and household goods). Kaesong is an expensive investment for South Korea, which provides capital and infrastructure, including a power station, a water purification plant, and a hospital. But, more than a decade after its inauguration, the complex runs at 40 percent capacity and has attracted only medium-size companies. Despite generous tax incentives, South Korea’s huge conglomerates, the chaebol, have spurned the experiment, at least partly because of enduring transportation and communications problems. The complex can be accessed only through the demilitarised zone separating the two Koreas, which requires entry and exit passes. The lack of mobile-phone networks and broadband Internet means that South Korean managers must communicate with their headquarters by landline phones and fax. Of course, commercial gain is not the only motivation behind the Kaesong complex.

The South Korean authorities are rightly proud of the initiative, which they view as an investment in future reunification with the North. Seen from this perspective, North Korea’s recent announcement that it will open another 14 special economic zones is a positive development – one that is underpinned by significant financial incentives. Aside from enabling the North to acquire technology and learn market-oriented business practices, the Kaesong complex generates about US$80 million annually in workers’ compensation (the monthly wage of US$160 is far higher than in North Korea).

Political tensions But political and historical tensions continue to shape daily life in Kaesong, where companies operate under the constant threat that North Korea, for whatever reason, will react rashly, even abandoning the joint project altogether. Already last year,

Kaesong is a bit of George Orwell’s 1984, with added elements of nineteenthcentury paternalism

rising inter-Korean tensions led to a temporary shutdown of the complex. As a result, firms must dedicate considerable time and effort to dealing with North Korea’s often volatile and opaque politics, exemplified in the recent execution of North Korean leader Kim Jongun’s powerful uncle, Jang Song- thaek. This challenging climate undermines the project’s viability, even though the business model – based on lower-cost workers from the North producing labour-intensive goods – makes sense. Kaesong is a bit of George Orwell’s 1984, with added elements of nineteenth-century paternalism. The atmosphere is stilted and muffled, with workers moving around in silence and guards everywhere. During a recent visit – the first by a foreign delegation since 2006 – the cold and snowy weather intensified this feeling, creating the sense of being suspended in time and space. The visit began with military jeeps escorting our convoy into North Korean territory. The vehicles’ number plates were covered with white cardboard, and red flags had been affixed to the doors next to the sideview mirrors – for which none of our South Korean hosts was able to offer an explanation. Even the preparation for our visit, which was confirmed less than 24 hours before it began, was somewhat Orwellian. Detailed packing instructions were issued, informing us that we could not bring radios, mobile phones, wireless devices, printed materials, photos, cassette tapes, or DVDs. Despite being limited to cameras with lenses under 160mm, we were not permitted to take photos of

The border between the two Koreas is virtually impenetrable, with gates that open for a half-hour at a time a few times per day. As a result, all personal contact occurs through official channels. Even as diplomatic visitors, we were prohibited from speaking with or giving anything to the workers, whom we watched with a mixture of curiosity and sympathy. The North Koreans seemed to share our desire to connect, as they sought to engage with us to whatever extent they could. The diminutive border guard looked into my eyes, smiled warmly, and asked where I was from. Likewise, lined-up workers at one of the factories responded to my gesticulations with waves and smiles as we passed them. Given the prevailing paranoia, fuelled by propaganda and genuine ignorance, on both sides of the border, it is possible that our hosts were being excessively cautious. Nonetheless, our pre-trip “indoctrination” stifled our reactions, regrettably preventing us from trying harder to reach out to the workers we encountered – an experience that seemed to exemplify the difficulty of bringing North Korea into the international community. Despite their flaws, initiatives like the Kaesong complex help to build an environment of collaboration and trust. As Asia’s recent history shows, authoritarian regimes tend to open up in response to a combination of grassroots movements and gradual topdown reforms. North Koreans may well be prepared to provide the former, but whether the government is prepared to do its part remains highly uncertain, to say the least. The expansion of special economic zones – supported by increased private investment, especially from firms that are not South Korean or Chinese – would significantly improve the odds that North Korea’s regime eases its repressive rule and embraces a programme of economic reform, as China did more than three decades ago. The task of defusing the threat to regional peace and stability that North Korea poses should be one that is shared across Asia. © Project Syndicate

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Closing Citigroup fires trader amid currency probe Beats Music seeks to challenge Spotify Citigroup Inc terminated one of its most senior foreign-exchange traders as regulators probe the alleged manipulation of benchmark currency rates. Rohan Ramchandani, head of European spot trading, had been on leave for almost three months, a Citigroup spokesman said Friday. Regulators are probing whether traders at the world’s largest banks colluded through instant-message groups to manipulate benchmarks such as the WM/Reuters rates. Citigroup controls about 15 percent of the world’s currency trading, second only to Frankfurt-based Deutsche Bank AG, according to a May survey by Euromoney Institutional Investor Plc.

Beats Music, whose founders turned headphones into a must-have accessory, unveiled a subscription music-streaming service that will attempt to make the money-losing category as hip and profitable as its gear. Founders Jimmy Iovine and Dr Dre will offer a US$9.99-a-month product combining hand-curated tunes with technology that chooses music based on users’ tastes and moods. To challenge industry leader Spotify Ltd, Beats Music forged partnerships with AT&T Inc and Target Corp, said chief executive officer Ian Rogers. Unlike others, Beats Music has no plans to offer a free, ad-supported option, he added.

‘Fast fashion’ brand to be Yellow House tenant U.S.-based Forever 21 to launch first store here in the spring says landlord Tony Lai

tony.lai@macaubusinessdaily.com

The Yellow House, near St Paul’s Ruins (Photo: Manuel Cardoso)

lothing brand Forever 21 Inc is to open its first store in Macau this spring. It will pay HK$2.4 million (US$309,500) per month for the privilege, as one of the main tenants for the six-storey commercial space – known as the Yellow House – next to one of Macau’s tourism hotspots, St Paul’s Ruins. Chan Chak Mo, managing director of the site’s owner – restaurant operator Future Bright Holdings Ltd – gave the news on Friday. Forever 21 is – in the United States – one of the most popular exponents of the so-called ‘fast fashion’ model used by firms such as H&M and Zara, where trends in fashion are quickly brought to market at low cost. The Yellow House site hit the headlines last year when it emerged that a Macau Government Tourist Office promoted exhibition – meant to showcase the diversification of the

local economy by displaying products of local designers and companies – was to be displaced because Future Bright wanted a massive hike in rent. The fashion chain will pay double the HK$1.17 million the government used to pay monthly. Future Bright said in a filing to the Hong Kong Stock Exchange a fortnight ago the new tenant “will be required to pay an additional turnover rental” if it exceeds “a certain level of sales” in the five-year lease. Forever 21 is expected to use 21,184 square metres of the venue. It is due to occupy its leased space in March, but may not immediately begin retail operations because of refurbishment, said the same filing. Forever 21 has three stores in mainland China and one in Hong Kong, and 500 world wide, according to its website. Last month another fast fashion

chain – Japan’s Uniqlo Co Ltd – opened its first Macau outlet, at The Venetian Macao. The displaced MGTO exhibition – known as ‘M in M’, (meaning ‘Made in Macau’) is looking for a new home. The Macau Industrial Association – a backer of the ‘M in M’ project – is looking at alternatives such as Tap Seac Square and Macao Science Center to display the products of up to 19 local brands. But Antonio Chui Yuk Lum, chairman of the association’s board of directors, on Friday said “this will not be easy” as the group had to look for space at “an affordable rent level”. Mr Chui – speaking on the sidelines of an association meeting – said he wanted the government to give more support. “The biggest hurdle for the local cultural creative industry is about selling,” he stated.

US retailers fall victims of cyber attacks T

arget Corp and Neiman Marcus are not the only United States retailers whose networks were breached over the holiday shopping season last year, according to sources familiar with attacks on other merchants that have yet to be publicly disclosed. Smaller breaches on at least three other well-known retailers took place and were conducted using similar techniques as the one on Target, according to the people familiar with the attacks. Those breaches have yet to come to light. Also, similar breaches may have occurred earlier last year. The sources said that they involved retailers with outlets in malls, but declined to elaborate. They also said that while they suspect the perpetrators may be the same as those who launched the Target attack, they cannot be sure because they are still trying to find the culprits behind all of the security breaches. Law enforcement sources have said they suspect the ring leaders are from Eastern Europe, which is where most big cyber crime cases have been hatched over the past decade. Only one well-known retailer, Neiman Marcus, has said that they too have been victim of a cyber attack since Target’s December 19 disclosure that some 40 million payment card numbers had been stolen in a cyber attack. On Friday, Target said the data breach was worse than initially thought. An investigation found that hackers stole the personal information of at least 70 million customers, including names, mailing addresses, telephone numbers and email addresses. Reuters

Neiman Marcus was the last retailer to disclose network breaches