Macau Business Daily, Jan 16, 2014 by Business Daily

www.macaubusinessdaily.com

Year II

Number 456 Thursday January 16, 2014

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

‘Bangkok dangerous’ fears hit local tour agents L

ocals’ bookings for Bangkok tours are down by as much as 40 percent year-on-year this month amid political turmoil in the Thai capital. Protesters wa nt i ng t he government of Prime Minister Yingluck Shinawatra to be replaced by an unelected “people’s council” this week

effectively shut down the business and main hotel district with a series of huge rallies. EGL Tours (Macau) Co Ltd and Hong Thai Travel Services (Macau) Ltd have already cancelled Bangkok tours organised for the Chinese New Year holidays, which start on January 31.

They acted even as Hong Kong pondered whether to maintain its ‘red’ travel alert to Bangkok – imposed on December 2 – advising against all non-essential visits. Air Asia and Air Macau Co Ltd yesterday told Business Daily they had no plans to cut flights.

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HK regulator nods bid made for Chong Hing Bank

Government mulls incentives for solar power

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Tourist price inflation rises 6.33 percent during 2013 Page 2

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Labour crunch a bigger Cotai risk than table cap: report

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Macau’s labour shortages – unless addressed – will make it hard for the new generation of Cotai casino resorts under construction to open with the “required” number of tables. So suggests a report from Morgan Stanley Research Asia/Pacific in Hong Kong. “…most of the casinos will not open on time with the required number of tables due to a potential labour shortage,” say the authors.

Name

January 15

HSI - Movers

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Local fast food firm in rush to build Hengqin ‘food plaza’

‘Heavy’ sentences urged for La Scala tycoons accused of corruption

Hong Kong-listed Future Bright Holdings Ltd has revealed its plans for a ‘food plaza’ on Hengqin Island neighbouring Macau. It would have up to 100 restaurants and be the first step in a “logical expansion” onto the mainland. “Food and beverage is our core business, for which in Macau we can no longer find enough land and people for expansion,” said the firm’s managing director Chan Chak Mo.

Prosecutors asked the Court of First Instance to hand down “heavy sentences” against two Hong Kong businessmen charged with bribery and money laundering. The case “severely” damaged the city’s international image, said assistant prosecutor-general Paulo Martins Chan. Joseph Lau Luen Hung and Steven Lo Kit Sing could each face a jail sentence of up to 11 years if found guilty, according to Macau law.

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%Day

LENOVO GROUP LTD

5.51

TENCENT HOLDINGS

3.14

NEW WORLD DEV

2.40

CHINA COAL ENE-H

2.13

KUNLUN ENERGY CO

1.48

TINGYI HLDG CO

-0.69

CHINA SHENHUA-H

-1.11

HENDERSON LAND D

-1.57

COSCO PAC LTD

-1.94

WHARF HLDG

-2.20

Source: Bloomberg

I SSN 2226-8294

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January 16, 2014 April 19, 2013

Macau

HK regulator approves bid for Chong Hing Bank Trading arm of Guangzhou govt to enter Macau’s banking market Vítor Quintã

vitorquinta@macaubusinessdaily.com

Chong Hing has one branch in Macau and another in mainland China

he Hong Kong Monetary has approved a bid of HK$11.6 billion (US$1.5 billion) from Yue Xiu Group for 75 percent of Chong Hing Bank Ltd. The deal, which would give Yue Xiu a foothold in Macau, could be closed by February 15, Chong Hing Bank said in a filing to the Hong Kong Stock Exchange yesterday. Yue Xiu, a trading arm for

the government of Guangzhou, is offering HK$35.69 for each of the 326.25 million Chong Hing shares it’s seeking. That’s a 4.6 percent discount to the stock’s last price before a trading suspension. The bank’s founding Liu family will offer a stake equal to about 51 percent of the company, according to the statement. The first acquisition of a Hong Kong lender since 2009

will give Yue Xiu a network of 53 branches and help its units seek funding outside mainland China. Chong Hing, founded in 1948, has a network of 51 branches in Hong Kong and one branch each in Macau and mainland China. Chong Hing’s Macau branch saw its 2012 profit fall by almost half from the previous year to just 705,300 patacas (US$88,200). However, its revenue rose

by a quarter of 9.34 million patacas mostly because lending more than tripled to 240 million patacas. Despite its small size, Chong Hing’s Macau branch has allowed the company to get a slice of the lucrative syndicated loans to gaming operators. In January Chong Hing was announced as a participant in a US$1.4 billion syndicated loan for the construction of the

US$2.9 billion Studio City, controlled by Melco Crown Entertainment Ltd. “Yue Xiu’s subsidiaries have business relations with Chong Hing or will become Chong Hing’s customers in the future,” Steven Chan, a Hong Kong-based banking analyst at Maybank Kim Eng Securities Pte, said in October. “Chong Hing may also help Yue Xiu develop cross-border yuan business.” Yue Xiu said it intends to keep the lender’s stock exchange listing. Chong Hing Bank will sell its headquarters on Des Voeux Road in Hong Kong’s city center to the family’s Liu Chong Hing Investment Ltd, the current parent company, for HK$2.23 billion. Chong Hing Bank will distribute the proceeds as a special dividend of HK$4.52 a share. Hong Kong’s role as an international center for trade in the yuan has attracted Chinese financial institutions seeking to expand abroad, including China Merchants Bank Co, which paid US$4.7 billion for the Wu family’s Wing Lung Bank Ltd in a deal completed in 2009. The increasing integration of Chinese and Hong Kong firms was driven by increased cooperation between the city and the mainland’s economy, the internationalisation of China’s currency and Hong Kong’s development as an offshore yuan center, Yue Xiu said in an October statement explaining the reasons for its offer. Yue Xiu Group, founded in 1985 by Guangzhou as a trading company for Hong Kong and Macau, operates in businesses including real estate, securities and transportation infrastructure. With Bloomberg News

Got mulls incentives for solar power Rules on solar energy grids could be ready this year, says Arnaldo Santos Tony Lai

tony.lai@macaubusinessdaily.com

he government believes solar energy has development potential here and is pondering the creation of incentives to encourage more enterprises to join the bandwagon. Arnaldo Santos, director of Office for the Development of the Energy Sector, said yesterday they have carried out some tests on solar energy in schools and public swimming pools. The results show that solar energy resources here are “quite abundant” and can be used for about 1,000 hours each year, he told media on the sidelines of a seminar on solar energy. This estimate is lower than the 1,300 hours of sunshine per year mentioned in 2011 by Valdis Dunis, chief executive of Solar Cities Asia, a company that designs, makes and installs photovoltaic panels on rooftops in South China. Mr Santos said the government “is now studying measures to encourage investments on solar energy from

Macau has great potential to harness solar energy, government says

enterprises or individuals”. The administration is looking at either start-up subsidies or setting higher prices for the city’s sole

electricity distributor Companhia de Electricidade de Macau – CEM, SA to buy the energy from these enterprises, said the office head.

“[In] Germany the solar energy is priced at four to five times the normal electricity tariff. If the electricity costs 1 dollar and some cents [a unit], the electricity suppliers have to purchase the solar energy at 6-8 dollars [a unit],” he explained. Mr Santos believes it would possible to implement such incentives here. The electricity distribution concession signed between the government and CEM says the utility must buy this type of energy if it is deemed safe, the official added. CEM is the sole electricity distributor to the city but most of the electricity used here is imported from mainland China. Mr Santos said the Office for the Development of the Energy Sector hopes to finish drafting rules on the setting up of solar energy grids this year. The rules, which will include safety standards, could encourage more investments, he added.

January 2014 April 19,16, 2013

Macau Research backs Macau Cable TV extension Macau Cable TV Co Ltd, the city’s sole cable television operator, should continue to operate on a “transitional” basis after its exclusive concession ends on April 21, University of Macau professor Tam Kam Weng told media yesterday. Mr Tam said a study on local television services commissioned by the government would include this suggestion, as a way to ensure television services remain stable. The university’s preliminary report will be sent to the government “within a few days” with suggestions on how to upgrade the existing television services.

Bangkok riots grounds flights and tour groups Travel bookings for holidays in the Thai capital have dropped as political turmoil continues Stephanie Lai

sw.lai@macaubusinessdaily.com

ravel agencies and airlines are feeling the pinch after big drops in package tours for Bangkok as anti-government rallies continue to rock the Thai capital. EGL Tours (Macau) Co Ltd and Hong Thai Travel Services (Macau) Ltd told Business Daily they had cancelled Bangkok tours over the Lunar New Year vacation that begins on January 31. “Actually we have had no tour groups travelling to Bangkok since early December and until February 2,” Hong Thai general manager Siu Chi Shing told Business Daily. “We will have to see how the current protest will evolve and what will happen in the election on February 2 before deciding to resume the group tours,” he said. Travel agencies here cancelled tours even as Hong Kong pondered whether to maintain its red travel alert to Bangkok. Hong Kong’s Security Bureau raised the red travel alert – the second highest level – on December 2, and travellers were advised to avoid travel to Bangkok. Macau Travel Industry Council president Andy Wu Keng Kwong told Business Daily there are currently no tour groups in Bangkok. Macau has no travel alert system but many travel agencies here, in particular the Hong Kong-based companies, take the Hong Kong alerts as an important reference. And any review of the red travel alert in Hong Kong would determine whether Macau travel agencies resume their tours.

Revenue dip EGL Tours told Business Daily they had suspended all tour groups

Fewer and fewer tourists are going out during the Lunar New Year vacation because many of them are working in hotels or in the retail sector Siu Chi Shing, Hong Thai Travel Services (Macau) general manager

Opposition rallies have occupied parts of Bangkok since December

to Bangkok until February 10. “For the upcoming Chinese New Year, we forecast a 20 percent drop in the package tours destined for Southeast Asia,” Hong Thai’s Mr Siu said. The protests that have shut down parts of Bangkok for more than a month are not the only factor. “Fewer and fewer tourists are going out during the Lunar New Year vacation because many of them are working in hotels or in the retail sector,” he said. “They usually stay to work during the period.” Hotel and flight bookings for independent travellers have fallen since December, Hong Thai and EGL Tours said. “We expect to see a 30 to 40 percent drop in revenue from individual travel packages to Bangkok during December and January,” said Mr Siu. A five-day Bangkok tour, the most popular travel package, normally costs 4,000 patacas (US$500) to 5,000 patacas a person, he said. The cost could rise to 7,000 patacas during peak periods such as Lunar New Year. “In the past year we had 200 to 300 individual travel packages booked for Chinese New Year

Bangkok is a very popular destination for local tourists and, from past experiences, it can always resume business quite quickly Winston Ma Sze Lok, Air Macau general manager for South China

holidays,” said Mr Siu. “But this year we had 100 less.” Air Asia and Air Macau Co Ltd told Business Daily they had no plans to cut the number of flights between Bangkok and Macau.

Both carriers said they were closely monitoring political developments. “We will maintain four daily flights between Bangkok and Macau,” said Celia Lao Sio Wun, Air Asia’s general manager of airport and network planning for Greater China. “But we did notice slower bookings for Bangkok this month, and the passenger load factor for the upcoming Chinese New Year is also not as good as last year.” “For a 180-seat plane, our passenger load factor for the Lunar New Year vacation last year for Bangkok flights was around 90 percent.” “This year it has dropped to 65 percent.” Air Macau general manager for South China Winston Ma Sze Lok said the airline has recorded a 20 percent to 30 percent year-on-year drop in passenger loads on Bangkok flights since December. “But overall the political incidents in Bangkok do not have a really big impact on our revenue,” said Mr Ma. The business situation was far from “a crisis”, he said. “Bangkok is a very popular destination for local tourists and, from past experiences, it can always resume business quite quickly.”

January 16, 2014

Macau

Labour crunch bigger Cotai risk than table cap: report Most of new casinos ‘will not open on time with the required number of tables’: Morgan Stanley Michael Grimes

michael.grimes@macaubusinessdaily.com

acau’s labour shortages – unless addressed – will make it hard for the new generation of Cotai casino resorts under construction to open with the “required” number of tables. So suggests a report from Morgan Stanley Research Asia/Pacific in Hong Kong. “We believe that Macau’s current 1.7 percent unemployment rate, construction of six mega casinos, and the eventual need for local dealers could mean that most of the casinos will not open on time with the required number of tables due to a potential labour shortage,” say the authors. The headline unemployment rate officially stood at 1.9 percent in the first 11 months of 2013. The December number has not yet been released by the government, but the needle on the headline rate has only moved by 10 basis points – and then only downward – since September 2012. So far much of the debate about the business prospects for Cotai – and the new venues due to open between 2015 and 2018 – have focused on whether the new venues will get all the tables they want under the government’s cap policy; rather than on labour issues. A recent report by China International Capital Corporation Hong Kong Securities Ltd thinks the best predictor of table allocation for Cotai will be ratio of committed capital expenditure to existing tables. By that measure, it thinks Galaxy Entertainment Group Ltd will be best placed to get the most timely table allocation best aligned to its operational needs. But Morgan Stanley’s report – by managing director Praveen K Choudhary and his colleagues Alex Poon and Thomas Allen – suggests the staffing issue cannot be ignored. The six major new resorts are expected to open on Cotai between

In demand – resident casino dealers

2015 and 2018. Public policy currently reserves live dealer posts to permanent residents. That seems unlikely to change soon. The mere hint that the government might be asked to consider some relaxation on the point – first reported in a Business Daily story in September – brought thousands of protestors out on the streets a week later. Morgan Stanley says in its report, referring to the new Cotai venues: “We expect total demand of 12,600 [table] staff for the six casinos, assuming seven personnel per table, 1,800 new tables (300 per operator), and a total new labour supply of ~700 per annum over 2014-2017.” The research unit calculates its estimate based on government data indicating 35,000 permanent

residents aged 15 to 19 at the end of 2012; plus historically stable figures for the labour force participation rate (50 percent) and a stable percentage of employment in the gaming industry (20 percent). “We hear from casino executives that they have a lot of difficulties hiring quality dealers,” says Ben Lee of gaming industry consultancy IGamiX Management & Consulting Ltd. “In essence they [casinos] are drawing from the pool of local unskilled labour that would have normally gone to the housekeeping segment,” he adds. Additionally, it can’t be assumed by casino managements that they will be able to mitigate any dealer shortages in future by adding more live dealer electronic tables – those

that offer traditional casino games such as baccarat and roulette, but with electronic betting and bet settlement and with one dealer serving tens or even scores of players sitting at individual terminals. Francis Tam Pak Yuen, the government official in charge of public policy for the gaming industry, hinted on January 6 at the Legislative Assembly that the administration was considering capping the numbers of electronic tables. “Gaming tables may not play a major role in the casino resorts in the next 10 or 20 years and perhaps the electronic gaming machines [would have] accounted for a principal position instead,” said Mr Tam, the city’s Secretary for Economy and Finance.

Furniture maker approved for Nasdaq listing

Nova LifeStyle bought a Macau-based exporter of sofas in April

evada furniture maker Nova LifeStyle Inc, which bought a Macau exporter of sofas in April, has been approved for listing in New York’s Nasdaq stock exchange. Nova LifeStyle’s shares will move from the OTC Markets to Nasdaq, the second-largest stock exchange in the world by market capitalisation, tomorrow, the company said in a statement. The Nasdaq listing will help Nova LifeStyle achieve “greater visibility with investors around the world as we continue to work to grow our business and sell our products internationally,” said company president Tawny Lam Thanh. Nova LifeStyle became a publicly traded company in

June 2011 and in August last year it applied for a Nasdaq listing. Ms Lam described it as “a logical next step”. She said in a written statement issued at the time: “We continue to grow the business organically as well as through mergers, as recently demonstrated by our acquisition of the Bright Swallow International Group Ltd.” Nova LifeStyle paid Zhu Wei US$6.5 million (51.9 million patacas) for Bright Swallow. Macau-based Bright Swallow sells Chinese-made sofas in Canada through The Brick Ltd, a furniture retailer with over 200 outlets. Bright Swallow, which is registered in the British Virgin Islands, moved to new offices in Hong Kong in October with a view to expanding its business there. Nova LifeStyle has Nova Furniture Macao Commercial Offshore Ltd here to export its products to other markets. V.Q.

January 16, 2014

Macau

Fast feeder in a rush to get onto Hengqin Future Bright says island is next ‘logical’ step to expand its restaurant business Stephanie Lai sw.lai@macaubusinessdaily.com

food plaza on Hengqin Island with up to 100 restaurants is the first step in a “logical expansion” onto the mainland for Macau restaurant operator Future Bright Holdings Ltd. Managing director Chan Chak Mo told Business Daily the food plaza would have a gross floor area of about 140,000 square metres. It would form part of a complex that includes an exhibition hall and would attract consumers from Hengqin, Macau and Zhuhai, he said. In a filing to the Hong Kong Stock Exchange after trade closed on Tuesday, Future Bright said it had presented the proposal to the Macau Trade and Investment Promotion Institute, one of the coordinating bodies. The project includes up to 100 restaurants and food souvenir shops, an exhibition hall and logistics facilities, offices, warehouses and car parks, the filing says. Future Bright controls several restaurant chains but Mr Chan says the Hengqin plaza would include brands from other companies. “We will seek to provide a very diverse range of cuisines there,” Mr Chan said. “Food and beverage is our core business, for which in Macau we can no longer find enough land and people

Future Bright’s Chan Chak Mo says its Hengqin complex would target Macau and Zhuhai consumers

for expansion. “So this investment project in Hengqin is our logical expansion.” Mr Chan, who is also a member of the Legislative Assembly, did not reveal the scale of the investment.

Island style Future Bright’s is one of nearly 90 applications to invest in Hengqin Island put forward by Macau companies during a three-month application window ended in October.

An evaluation committee is assessing the proposal before telling Hengqin authorities which projects it endorses. The applicants presented their projects to the committee yesterday and today. Future Bright’s plan was included in Hengqin’s leisure and tourism group. These businesses can hold land leases for between 40 years and 70 years, the stock exchange filing says. Land prices to these businesses are fixed between 1,685 yuan (US$278.67) to

100

Restaurants planned for Future Bright’s Hengqin food plaza

3,057 yuan a square metre. Secretary of Economy and Finance Francis Tam Pak Yuen said on January 6 that Macau’s review of the investment projects in Hengqin would end this month. The bid review committee was formed in April. It is composed of government officials, including Macau Trade and Investment Promotion Institute president Jackson Chang, professionals from different industries and academics. Liu Yang, director of the Bureau of Communication and Cooperation at the Hengqin New Area Administrative Committee, said in October they would accept the bids recommended by Macau unless they contradict the island’s regulations. All Macau investment projects will be established in the Guangdong-Macao Cooperation Industrial Park, an area of 5 square kilometres on the island. Future Bright’s project would be in the plots reserved in the park for the leisure and tourism sector, which are scattered throughout the south of Hengqin Island. Chimelong International Ocean Resort, a complex of amusement park and hotels that occupies nearly 5 square kilometres, is in the island’s southeast.

No change in individual visa scheme: govt After HK gets freeze in visa scheme expansion to more mainland cities Tony Lai

tony.lai@macaubusinessdaily.com

here is no adjustment to the individual visit scheme for mainland Chinese coming to Macau, the authorities said after Hong Kong announced a freeze on the programme expansion. “The [Macau] SAR government has received no notice from the central government on any change” in the number of mainland cities covered by the Individual Visit Scheme, the government spokesperson office said in a press statement yesterday. The scheme allows mainlanders to visit Macau and Hong Kong as individuals rather than as part of tour group or under business visas. The government’s statement came after Hong Kong chief executive Leung Chun Ying said Beijing agreed on a “temporary” freeze on the number of cities covered by the scheme. Mr Leung said during a policy address yesterday the central government also agreed not to expand the scope of multiple entry visas after

negotiations held last year (see more on page 10). The spokesperson office stressed the situation in Macau and in Hong Kong is “different” because there are no multiple entry permits for mainlanders visiting Macau. The office did not say whether the city has discussed the policy with Beijing. It only added the SAR government will inform the public of any change. The scheme launched in 2003 has been extended to cover 49 mainland cities. It was last updated in January 2007. About 45 percent of the 1.54 million mainland visitors to the city in November travelled under the Individual Visit Scheme, official data show. The Policy Research Office announced last year it would review the impact of the policy. No progress has been reported since. T.L.

Almost half of all mainland visitors come to Macau using an individual visa

January 16, 2014 April 19, 2013

Macau

La Scala’s developers should be punished to the full extent of the law, a prosecutor said

‘Heavy’ sentences urged for La Scala developers Corruption trial has damaged Macau’s international image, prosecution lawyers tell court in closing comments Tony Lai tony.lai@macaubusinessdaily.com

wo Hong Kong businessmen deserve “heavy sentences” of up to 11 years’ jail for allegedly laundering funds and bribing officials to win the right to develop land near the airport, a court heard yesterday. Prosecutors told the Court of First Instance that the developers behind the botched La Scala housing project, Joseph Lau Luen Hung and Steven Lo Kit Sing, had “severely” damaged Macau’s international image. Assistant prosecutor-general Paulo Martins Chan said there was “irrefutable evidence” the businessmen gave former government secretary Ao Man Long HK$20 million (US$2.58 million) in 2005 in return for advance information on the sale of land near the Macau airport. The pair could face a maximum sentence of 11 years’ jail if they are found guilty. Delivering his closing statement in court yesterday, Mr Chan said Mr Ao “nearly created a new underground system with the help of businessmen” to turn public resources into “vehicles for private interests”. “This case has made the residents lose confidence in the administration, as well as severely hurt the international image of Macau,” he added. “[The court] should consider heavy sentences.” Mr Chan said the two men could be jailed for between two and eight years on the charge of money laundering. Before the law was revised in 2006, a guilty verdict would attract

a jail term of between five years and 15 years. Including a maximum sentence of three years for the charge of corruption, the men could each face up to 11 years in jail. Mr Ao was sentenced to 29 and a half years’ jail in earlier trials.

Distorted criteria Mr Chan said there was evidence that Mr Lo and Mr Lau, the chairman of Hong Kong-listed developer Chinese Estates Holdings Ltd, had paid Mr Ao the money and the nowjailed civil servant breached his professional obligations. A HK$20-million cheque signed by Mr Lau was made out to a company called Eastern Base that the same day transferred the same amount to a bank account controlled by Mr Ao. Mr Chan said there was no evidence that Eastern Base offered “consultancy services” in return for the money, contradicting testimony by the defendants. Mr Ao “carefully designed” the tender’s bidding criteria to benefit the businessmen. “The rules decide the result,” Mr Chan said. Mr Ao told the tycoons the land would be sold four months ahead of the official announcement in June 2005 so that Mr Lau and Mr Lo could begin preparing a bid. They had an edge over two other bidding parties, who had 10 days to prepare a bid.

The winning proposal was like “fine cuisine prepared in slow cooking”, unmatched by other rivals, Mr Chan told the court.

Legality questioned Mr Ao had also “unusually intervened” in the bid evaluation process to make sure the land was awarded to Moon Ocean Ltd – a company controlled by Mr Lo and later bought by Chinese Estates. Mr Chan said there were doubts if any of the three bids met eligibility criteria because they were not among the original companies invited to bid. Lei Pou Fat Development Co Ltd, the umbrella company that managed the land near the airport, in which the government had a stake of 88 percent, offered the land to Moon Ocean. Mr Chan said the bid process should have been scrapped because “the legality [of the process] should override any other considerations”. Moon Ocean and Jones Lang LaSalle won the tender with a HK$1.3-billion joint bid. Even though Lei Pou Fat was a private firm, Mr Ao made the decisions because the government controlled 88 percent of the firm. In his closing argument yesterday, Mr Chan rejected the defence’s objections that Mr Ao’s “friendship notebooks” and personal paperwork could not be used as evidence. The legal team for the defence had said there were doubts about their authenticity, and that they had

PROSECUTION CLAIMS ‘Irrefutable’ evidence of corruption Public land a vehicle for private interests Tender requirements tailor made All bids for the airport site were ineligible

been seized without Mr Ao’s official acknowledgement. The “friendship notebooks” are said to contain his agenda and the bribes he took. Mr Chan said yesterday the court had accepted the evidence’s authenticity during previous trials. “How trustworthy the evidence is depends on the evaluation of the judge,” he said. The trial continues today with lawyers for the defence delivering their final arguments. Mr Lo may break his silence. He has so far chosen to remain silent on the charges and not attended the court. Mr Lau has attended the proceedings that began in June.

January 2014 April 19,16, 2013

Macau

Tourist price inflation up 6.33pct in 2013 Rise in final quarter linked to pricey hotels for National Day holidays, Macau Grand Prix Michael Grimes

michael.grimes@macaubusinessdaily.com

he cost of Macau hotel rooms jumped 13.32 percent year-on-year in the fourth quarter when judged against a basket of visitor services. The next biggest gainer was the cost of food, alcoholic beverages and tobacco. That category rose 8.36 percent in the final three months of 2013 according to the Tourist Price Index released yesterday by the Statistics and Census Service. “Soaring hotel room rates during the National Day holidays, the Macau Grand Prix and Christmas holiday period, as well as dearer prices of clothing and handbags, pushed up the price index..,” said the statistics service. The TPI judged as a whole increased by 6.33 percent year-on-year to 142.26. It doesn’t include the rise in the cost of casino bets. Deutsche Bank estimated average massmarket minimum bets for live dealer baccarat in Macau’s seven biggest casinos rose 37 percent in the 12 months to June as more visitors chase

Deep pockets required – tourist price rises quicken

a limited number of tables. An essential visitor expense that is measured by the Tourist Price Index is restaurant meals. They rose 6.53 percent year-on-year in the final three months of 2013. A significant general

inflationary trend in restaurant prices began in 2011 – mostly linked to rising costs of ingredients, labour, and commercial rents.  The average TPI for the whole of 2013 increased by 6.80 percent year-on-year. After peaking at year-

on-year expansion of 18.85 percent in Q4 2011, the tourist price inflation rate declined to around quarter of that, with 4.45 percent growth in Q4 2012. Now it is creeping up again, and may be outpacing the inflation faced by residents

for everyday living. Latest official data said consumer price index inflation averaged 5.51 percent in the twelve months to November 30. However the CPI is also likely to pick up pace again if predictions of a 10 percent rise in wages and home rental costs come true. On January 6, Business Daily reported that local recruitment agencies expected professionals’ salaries to rise by up to 10 percent in 2014. Macau casino concessionaire Sociedade de Jogos de Macau SA has already announced a pay deal for this year that will in effect give all staff a rise above the 2013 inflation rate. It included a “living subsidy for 2014” – worth 175 percent of one month’s salary for SJM workers earning fewer than 17,000 patacas (US$2,125) a month. Property consultancy Jones Lang LaSalle (Macau) Ltd on Tuesday predicted that housing rental costs could rise by as much as 20 percent this year.

Corporate Supergeo secures Macau reseller

Power from the people in CEM energy initiative

Supergeo Technologies Inc, a global provider of geographic information system (GIS) software and solutions, has partnered with Star Vision to promote its SuperGIS mapping solutions in Macau, Hong Kong, and part of mainland China. The new partnership with Star Vision, a Hong Kong-based company, is part of a wider plan to expand Supergeo’s business in Greater China. The Taiwan firm said in a statement that its GIS technology products can “help clients overcome operational risks and therefore improve the competitiveness of their organisations”. The SuperGIS software allows clients to develop custom GIS platforms “with reasonable prices,” Supergeo added. Star Vision, established in 1989, is a company that specialised in offering land survey, remote sensing, information technology, GIS consulting and training, and system integration services. But Supergeo is already looking beyond the mainland. The company is also in search of business partners in the United Kingdom and in Germany.

An energy saving initiative by the city’s sole electricity distributor Companhia de Electricidade de Macau SA (CEM) helped reduce local emissions as well as the size of participating customers’ bills. The judging panel for Macau Energy Saving Contest 2013 estimated those taking part saved nearly 23 million kilowatt hours of electricity over the course of six months from May to October 2013. According to Business Daily calculations based on data from the government’s Statistics and Census Service, Macau private households each used on average 1,220 kWh of power in the third quarter last year. That suggests CEM’s initiative saved enough electricity to serve the needs of nearly 9,500 Macau homes for half a year. Since last year, Macau’s casino concessionaires have been switching off exterior lights on their properties for an hour at night once per month. It’s an extension of the Earth Hour initiative held annually by the World Wildlife Fund.

January 16, 2014 April 19, 2013

Greater China

Apple fights for slice of China smartphone China Mobile will start offering the iPhone tomorrow Bill Savadove

he world’s biggest mobile network is ready to offer Apple’s iPhone, but while the United States technology giant has declared China its biggest future market, it faces an uphill battle to unseat Samsung and homegrown competitors. China Mobile has more than 760 million customers but for years it has declined to provide the iPhone as the two companies argued over commercial terms. The country’s other big mobile telecommunications firms, China Unicom and China Telecom, already stock the product, and China Mobile will join them tomorrow. Analysts expect the move to boost the number of subscribers for China Mobile and lift Apple’s iPhone sales in China by millions – but in all likelihood it is far too late for it to take the lead. Although the iPhone commands fanatical devotion from its Chinese fans, South Korea’s Samsung rules the smartphone market with more than 18 percent share, according to consultancy Analysys International. Apple sits in a lowly eighth place with a 3.5 percent share as of the third quarter last year, with six Chinese companies ahead of it, many offering cheaper phones using the Android

operating system. “The domestic high-end smartphone market is much more diversified and competitive now, leaving users more choices,” said Wang Jun, an analyst for Beijing-based Analysys. “It’s likely Apple will move up one or two places in the market-share rankings, but it’s impossible for it to make it into the top three or four,” he said.

Intense competition The iPhone launch just two weeks before the Chinese New Year, a traditional time for gift-giving, should benefit both China Mobile and Apple, analysts said. But Kevin Wang, director of China research for consultancy IHS iSuppli, agrees that Apple has a tough job on its hands. “Although cooperation with China Mobile will help boost Apple’s sales and market share in China, it’s unlikely that its share will rise to among the top three, given the intense competition in China’s smartphone market,” he said. “Smartphones that cost around 1,000 yuan (US$164) are the most popular,” he added. In the United States, an iPhone

Apple opened a new store in Beijing last week

Beijing grants first gold licences to foreign banks Move could ease local prices, still higher than in most Asian nations international prices in 12 years. ANZ and HSBC were awarded import licences late last year, two sources with direct knowledge of the matter told Reuters. Other trading sources said China Everbright Bank has also received approval to join the nine local banks already allowed to ship gold into China. Beijing strictly controls how much the banks import through a quota system. “China is actually increasing its transparency. I think there will possibly be further access to other banks as well,” said Cameron Alexander, manager of Asian precious metals demand at metals consultancy GFMS, which is owned by Thomson Reuters. China faced a supply crunch early in 2013 when a sharp plunge in gold prices released pent up demand that eroded inventories at banks and jewellery sellers. Premiums in China tend to be higher as supply is tighter than other parts of Asia due to the quota system and the limited number of import licences. China faced a gold supply crunch early in 2013 due to a sharp price plunge

hina has granted licences to import gold to two foreign banks for the first time, sources said, as moves to open the world’s biggest physical bullion market gather pace. Allowing more banks to import gold could increase the supply of the

metal into the country, easing local prices that are higher than in most Asian nations. China’s gold imports more than doubled last year to over 1,000 tonnes – ousting India as the biggest buyer – as demand soared to unprecedented levels due to the first drop in

String of changes Premiums are currently about US$15 an ounce over London prices, compared to less than US$2 in Singapore and Hong Kong. They rose to a record high of US$30 in April-May last year. China imported 1,060 tonnes of gold from Hong Kong in the first 11 months of 2013. Beijing does not release gold trade data, so numbers

from Hong Kong – the main conduit for gold – provide the best estimate on imports. But traders warned the award of the new licences did not necessarily mean imports would jump sharply from 2013’s record volumes, as the level of demand would be the main factor driving shipments. But they added that the move indicated appetite for gold would likely be strong. The granting of new licences is the latest in a string of steps by China to ease restrictions on bullion trading and boost market accessibility. “China will need to allow more foreign players into the physical gold market if it’s planning to have foreign investors participate on its gold futures,” said one of the sources. “This is the first step that the regulators are taking to ensure that its gold futures contract in the freetrade zone can take off.” Reuters

KEY POINTS ANZ, HSBC first foreign banks to get permits Could improve supply, ease premiums Is part of move to open China gold markets

January 2014 April 19,16, 2013

Greater China

pie

5s with 16GB of storage retails for US$649 while that same phone is US$726 in Hong Kong and US$867 in the mainland itself through the Apple Store, due to taxes and other charges. The higher prices in China have given rise to a flourishing market for smuggled iPhones, eroding official sales in the country. As a result, many China Mobile subscribers have already procured iPhones and use them on its network, though some functions suffer.

Largest market Apple’s revenue in Greater China – which includes Hong Kong and Taiwan – still reached US$5.7 billion for its fiscal quarter ended in September 2013, up 24 percent from the previous quarter, according to the company. Apple chief executive Tim Cook said in January last year that he expected the country to become its largest market, though he gave no timeframe. But analysts said China Mobile will have to make its pricing attractive to potential subscribers to promote sales of the iPhone, which could eat into its profits. China Mobile had yet to announce prices Tuesday, despite the imminent launch, but with investors also worried about profitability, its Hong Kong-listed shares had fallen 3.72 percent since the agreement with Apple was announced in late December. But some Chinese consumers are unimpressed by the combination. One microblog user posted: “Those who like the iPhone wouldn’t wait for China Mobile to sell it. Those who dislike the iPhone will not like it after China Mobile launches it.” AFP

Bank lending slows as govt curbs speculation Record decline could limit pace of economic expansion

hina’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending. Aggregate financing was 1.23 trillion yuan (US$204 billion), the People’s Bank of China said yesterday in Beijing. That compared with 1.63 trillion yuan a year earlier. China’s foreign-exchange reserves, the world’s largest, rose to a record US$3.82 trillion at the end of December from September’s US$3.66 trillion. A record decline in new credit in the second half is set to limit the pace of economic expansion this year as policy makers focus on controlling financial risks and implementing the broadest reforms since the 1990s. China’s debt buildup has evoked comparisons to Japan before its lost decade and the run-up to the Asian financial crisis. “The picture going forward is for a slowdown in credit growth,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “The central bank has been intervening on a very large scale – there’s obviously immense pressure for

the yuan to rise,” she said, commenting on the larger currency reserves. New yuan loans were 482.5 billion yuan in December and M2 money supply rose 13.6 percent from a year earlier, the central bank said. Analysts surveyed by Bloomberg projected aggregate financing of 1.14 trillion yuan, new local-currency loans of 570 billion yuan and money-supply growth of 13.9 percent, based on median estimates. The yuan has increased about 2.8 percent against the dollar in the past 12 months. Bloomberg News

HKex mulls curbs to limit trading errors’ impact Increased automation of trading had led to high-profile mistakes Eleni Himaras

ong Kong Exchanges & Clearing Ltd is studying whether the world’s fourth-largest stock market needs circuit breakers to prevent trading errors from causing large declines or surges in prices, according to a person familiar with the matter. A committee has been

formed by the Hong Kongbased bourse and is in the early stages of its evaluation, said the person, who asked not to be named because the matter is private. No decision has been made on introducing the curbs, the person said. Hong Kong Exchanges hasn’t reached any conclusions on circuit breakers, said

Lorraine Chan, an exchange spokeswoman who declined to comment on whether a committee was formed. Exchanges have responded to the increased automation of trading by introducing curbs to prevent mistaken transactions from influencing prices. United States equity

markets are now protected by a system known as limit up/ limit down, which prevents trades outside certain price bands. Chicago-based CME Group Inc, owner of the world’s biggest futures market, pauses trading during extreme volatility. Singapore Exchange Ltd plans to add circuit breakers this year, while Hong Kong’s securities regulator implemented rules for brokers and money managers on January 1 designed to reduce risks tied to electronic trading. “Risk controls implemented at the individual participant level cannot substitute for exchange-level risk controls such as circuit breakers,” Gabe Butler, the head of electronic trading sales for Asia at Morgan Stanley, said in a telephone interview. “We have discussed these ideas with exchanges, including the Hong Kong exchange.”

China’s errors

Hong Kong exchange introduced on Jan 1 rules to reduce electronic trading risks

Hong Kong Exchanges said in April that it didn’t plan on introducing circuit breakers, rebuffing a 2012 request from

25 market participants. Since then, its neighbor in China has seen two highprofile mistakes: an August 16 error at Everbright Securities Co that spurred a more than 6 percent swing in the Shanghai Composite Index, and orders to sell on December 20 that caused shares to plunge. United States exchanges introduced volatility curbs after the stock- market plunge known as the flash crash in May 2010, which erased more than US$800 billion of value in minutes. Singapore’s proposal involves halting a security for 5 minutes if it fluctuates 10 percent in either direction. The move by Southeast Asia’s biggest bourse came after a plunge in shares of three companies erased US$6.9 billion in market value over three days in October. “While we apply our own comprehensive risk controls, it’s only the central venue that is in a position to manage the impact when multiple participants execute on a venue and their combined activity affects a particular stock or the market,” Mr Butler said. Bloomberg News

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Greater China

HK leader vows to tackle poverty Leung Chun Ying raises target for private and public housing

ong Kong’s leader yesterday announced plans to tackle rising poverty in a policy speech delivered amid growing public discontent with his administration. In his second policy address, chief executive Leung Chun Ying unveiled a HK$3 billion (US$390 million) scheme to help the working poor, among other social policies.

Some 700,000 people will benefit from the scheme, which will provide extra subsidies for low-income working families. “The current-term government is determined to tackle the poverty problem,” Mr Leung said. “Our poverty alleviation policy is to encourage young people and adults to become self-reliant through

employment, while putting in place a reasonable and sustainable social security and welfare system to help those who cannot provide for themselves,” he said. Hong Kong found almost 20 percent of its residents live in poverty after in September setting its first benchmark to measure the problem in the city of seven million.

Mr Leung said in his speech that the government would do its “utmost” to increase housing supply. The government said it would increase the maximum number of dwellings that can be built on a piece of land by 20 percent for some densely populated areas, which analysts said would increase short-term supply but create more cramped conditions. Mr Leung said the government would raise the target for the completion of private units each year over the next five years by 40 percent, to 13,600 from an average of 9,680 over the past five years. He raised the forecast for public housing supply over the next 10 years by 36 percent. To meet the public housing supply target, the government aims to provide an average of about 20,000 public rental housing units and about 8,000 cheaper government units for sale a year. Mr Leung announced no significant steps to reduce pollution, with just a few measures including lowering the sulphur content of local marine diesel from 0.5 percent to 0.05 percent, and ocean-going vessels at berth in Hong Kong being required to switch to low sulphur diesel from 2015. The government also announced steps to boost education including subsidies for poor students, exchange programmes and raising the number of slots for higher education. Mr Leung unveiled plans to build hotels on the western island of Lantau to expand its tourism capacity. The government will conduct studies to develop Lantau, where the Hong Kong-Zhuhai-Macau Bridge will land, he said. With agencies

Provinces cut expansion targets as Xi shifts focus Chinese president preaches environmental protection and debt reduction

t least seven Chinese provinces are setting lower growth targets for this year than in 2013, adding to signs that expansion will slow as the government focuses on policies to sustain the economy in the long term. Hebei, which borders Beijing in the north, set an 8 percent growth goal amid “unprecedented pressure” from air-pollution controls, according to an annual work report published Tuesday in the official Hebei Daily. Last year’s target was 9 percent. Fujian in the southeast and Gansu and Ningxia in the northwest are also targeting slower expansion, state-run websites show. President Xi Jinping is trying to shift local officials’ focus to environmental protection and containing debt rather than just short-term economic growth. The latest regional targets suggest leaders will set a national goal this year of 7 percent, down from 7.5 percent in 2013, said Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB. “We are facing increasingly severe difficulties and contradictions,” Hebei governor Zhang Qingwei said in the work report delivered January 8, according to Hebei Daily. Setting an 8 percent growth goal indicates a focus on more concrete and reasonable growth, improving people’s lives, ample employment and the quality of development, he said. The central government normally

publishes the country’s growth goal in March at the annual meeting of the National People’s Congress. Last year’s target was 7.5 percent, and the State Council said in December that the economy probably grew 7.6 percent in 2013. Additional provinces may announce 2014 growth goals in the coming days as regional congresses meet.

Tibet exception Caixin, a Chinese financial news provider, reported last month that China plans a 7.5 percent growth target for 2014. Guizhou, whose growth target of 14 percent last year was the highest among China’s provinces, will ensure expansion of 12.5 percent in 2014 and strive for about 13 percent, the state-run China News Service reported December 20. Guangxi has a 2014 target of 10 percent growth, according to a January 2 article on the People’s Daily website, down from an 11 percent goal last year. The coastal province of Fujian set a 2014 growth goal of 10.5 percent, according to a January 12 report on the People’s Daily website. That compares with an 11 percent target in 2013. Gansu expects growth of 11 percent this year, according to a report from state-run provincial television posted Tuesday on the Gansu Daily website. Last year’s target was 12 percent.

Ningxia’s chairman said in a December 25 speech that this year’s growth target is about 10 percent, according to the remarks posted December 31 on the People’s Daily website. The 2013 goal was 12 percent. Beijing Communist Party secretary Guo Jinlong said last month that the city would set a 7.5 percent growth goal for this year, compared with the 8 percent target for 2013.

Not all provinces are setting a lower target. Tibet has a goal of 12 percent growth in 2014, according to Chinatibetnews. com, website of the official Tibet Daily. That’s the same as the 2013 target. Bloomberg News

Regional data suggest Xi Jinping will set a growth goal of 7 pct this year

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Asia

Singapore central bank says property market stabilising Monetary Authority denies report over possible credit bubble meltdown

ingapore’s central bank has refuted suggestions in a United States magazine that the affluent city-state faces a risky credit bubble linked to high property prices. A statement issued late Tuesday by the Monetary Authority of Singapore (MAS) said the property market is stabilising, household balance sheets are strong and the financial system is robust. “Singapore is not facing a credit bubble that puts the country or its banking system at any risk of crisis,” the MAS said in response to an online article in Forbes magazine published this week. “Serious observers and investors are not in doubt about the country’s financial health.” Annual home sales dropped 33 percent to 15,301 units in 2013, according to government data released yesterday. New housing loans have declined. In the article, Forbes contributor Jesse Colombo warned Singapore was headed for an “Iceland-style meltdown”, referring to the European nation that was brought close to bankruptcy when the financial crisis broke in 2008 and exposed the vast over-expansion of its banking system. Mr Colombo warned low interest rates have led Singaporean households and companies to borrow more, fuelling a surge in property prices that may not be sustained. He said the risk is that the United States could end its zero interest rate policy in the next few years, lifting borrowing costs around the world and bursting bubbles such as in Singapore, leaving investors with huge debts they cannot repay. “Singapore’s bubble will most likely pop when bubbles in China

Home sales dropped by a third last year, official data show

and emerging markets pop and as global and interest rates continue to rise,” Mr Colombo wrote. “The growth of Singapore’s credit bubble is inextricably linked to the country’s soaring property bubble because Singaporeans are going into debt to invest in property or buy more expensive houses than they can afford, similar to Americans during the US housing bubble of 2003 to 2007.” But the MAS said the government has “taken decisive steps to cool property demand and prevent excessive leverage”.

Singapore’s home sales plunged 82 percent to 259 units in December from a year ago, the lowest since January 2009. New housing loans continue to decline, with the number falling 35 percent year-on-year in the third quarter of last year, it said, adding that property prices are also falling. It also said that the average loanto-value ratio of outstanding housing loans stands at a healthy 47 percent as of the December quarter. “Third, the financial system is robust,” MAS said. It pointed to an assessment by the

Japan backs Fukushima operator’s revival plan Despite opposition to restart of Kashiwazaki Kariwa nuclear plant

apan’s trade ministry said yesterday it would approve a revival plan for the utility responsible for the Fukushima nuclear disaster, Tokyo Electric Power Co, its second attempt at restoring battered finances. The plan hinges on Tokyo Electric (Tepco) restarting its Kashiwazaki Kariwa nuclear plant to cut fossil fuel costs, a contentious issue staunchly opposed by the local governor. An earlier plan by Tepco outlining a revival after its Fukushima plant was hit by a massive earthquake and tsunami in 2011, triggering triple meltdowns at the site, had to be torn up because it could not restart Kashiwazaki. Japan’s trade minister Toshimitsu Motegi met Tepco president Naomi Hirose yesterday to officially approve the plan. Tepco is also pledging to cut costs by reducing fuel spending and forming partnerships with other utilities, as well as upgrading fossil fuel plants, the Nikkei newspaper

Following the Fukushima disaster Japan has become more dependent on fossil fuel

reported yesterday. The company is majority owned by the government after an earlier bailout. Tepco’s previous revival plan revolved around a Kashiwazaki restart in early 2013. The new plan envisages a restart of two reactors

at the station in July and the utility hopes all seven reactors will go online by fiscal 2016. The disaster at Fukushima, the worst nuclear crisis since Chernobyl in 1986 eventually brought about the halt of all nuclear power plants in

International Monetary Fund (IMF) that found Singapore’s financial system “would remain sound” even if there was a sharp hike in interest rates and slump in property prices. The IMF also said Singapore’s banks are “resilient, with strong financial and capital positions”. Rajiv Biswas, Asia Pacific chief economist at global consultancy IHS, told AFP regional central banks and financial regulators are aware of the risks and have taken measures to prevent credit bubbles from building up. AFP/Bloomberg News

Japan so they could be vetted under tougher new standards. Opposition to atomic power remains strong in the country and is set to become a major issue in an election next month for governorship of metropolitan Tokyo, which owns a stake in Tepco. Most candidates are opposed to restarting nuclear power plants and one, former prime minister Morihiro Hosokawa has received the strong backing from Junichiro Koizumi, one of Japan’s most popular leaders, who ruled between 2001 and 2006. In the nearly three years since the disaster, the utility has been plagued by a string of setbacks at the Fukushima station north of Tokyo, including leaks of highly radioactive water last year, prompting the government to step in with more support. The local governor in Niigata, where Kashiwazaki is located, has been a vocal opponent of Tepco’s management and has questioned whether the company has the ability to operate a nuclear station, following the failings in its preparation and response to the disaster. He has publicly called for the Tepco’s liquidation. Tepco is aiming to have all seven reactors at the Niigata plant, the world’s biggest atomic station, operating by fiscal year 2016. Reuters

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Asia

Malaysia firms see fraud rising Corruption remains routine in Southeast Asia’s third-largest economy

Mr Singh’s government wants to invest US$1 trillion in infrastructure

Tax break drives record bond sales to Indians As government raises funds for infrastructure construction Anurag Joshi

ndian borrowers are set to sell a record amount of rupee bonds to individuals as prime minister Manmohan Singh offers tax breaks to help raise funds for rail lines, roads and ports, according to the biggest underwriter. Axis Bank Ltd, which managed 21 percent of rupee issuance last quarter, said offerings to non-institutional buyers will be a record for the year ending March 31. Such sales already raised 241 billion rupees (US$3.9 billion) from April 1 to December 31, the most ever for any similar period, according to exchange data. SREI Infrastructure Finance Ltd is marketing a three-year note at 250 basis points more than State Bank of India’s deposit rate, exceeding the 200 basis point spread in a similar offering in April. Mr Singh’s government, seeking to invest US$1 trillion in infrastructure, requires the majority of tax-free bonds funding the program to be sold through public offerings, including to individuals. Borrowers led by Indian Railway Finance Corp. are planning 130 billion rupees of new issuance under the plan, as transport bottlenecks contribute to the slowest economic growth in a decade. “Public issues are a better investment for retail investors than bank fixed deposits and mutual funds as returns are higher,” said Shashi Kant Rathi, Mumbai-based head of

debt capital markets at Axis Bank. “Public issues of bonds will be a record this financial year.”

Infrastructure push India’s infrastructure is ranked 85 among 148 nations, behind China, Vietnam and Indonesia, in the Global Competitiveness Report for 2013-14 from the World Economic Forum. Mr Singh’s ruling Congress party is trying to improve services and create jobs as the world’s largest democracy braces for elections this year. Authorities have allowed 13 stateowned companies to raise as much as 480 billion rupees through tax-free securities this financial year. Companies must raise at least 70 percent of those offerings through public issuance, of which about 40 percent must be sold to retail investors, according to a Central Board of Direct Taxes circular dated August 8. Borrowers sell most of their taxfree bonds to individual investors from January to March, the last quarter in India’s fiscal year, before a March 31 cut-off for benefit eligibility, according to data from Securities and Exchange Board of India.

Strong response “Public-sector companies are increasingly raising debt via public issues as finance ministry rules don’t allow them to sell more than 30

percent of the total amount allocated through private placements,” according to Rajiv Datt, New Delhibased managing director at Indian Railway Finance. The company was the nation’s biggest seller of non-institutional debt in 2013. “Response to public issues was strong in 2013 and we will see a record this financial year ending March too.” India Infrastructure Finance Co, Indian Railway Finance and Power Finance Corp are among issuers permitted by the government to sell tax-free notes to individuals, trusts and partnerships. Interest income on these bonds is exempt from taxes, which increases the effective return for investors, according to S.J. Balesh, a Mumbaibased senior director at IDFC Ltd, the third-biggest lender by market value to infrastructure. Central bank governor Raghuram Rajan raised the benchmark repurchase rate by 50 basis points to 7.75 percent since taking charge in September to curb the highest consumer-price inflation in a basket of 17 Asia-Pacific economies tracked by Bloomberg. The mounting cost of goods and services is prompting savers to seek higher-yielding investments to preserve their capital. Yields on 10-year government bonds have risen 91 basis points in the past year to 8.71 percent.

alaysian corporate executives said bribery and corruption were worsening in the graftplagued country, according to a survey, despite government pledges to tackle the crime. Eighty percent of respondents said they felt bribery and corruption had increased between 2010 and 2012, according to the government-backed survey conducted by professional services firm KPMG and released on Monday. The perception that bribery and corruption were a “major problem for businesses in Malaysia” was shared by 90 percent of those surveyed, the survey said. “A whopping 71 percent of respondents also believed that bribery and corruption is an inevitable cost of doing business, whilst 64 percent believed that business can’t be done in Malaysia without paying bribes,” it added. KPMG said it received responses from 10 percent of companies on the Malaysian stock exchange, which has about 900 listed firms. Corruption – ranging from small bribes solicited by police to refrain from issuing traffic tickets to multimillion dollar contracts awarded without a transparent tender process – is routine in Southeast Asia’s thirdlargest economy. Prime minister Najib Razak, whose 57-year-old ruling coalition was re-elected last May with a reduced parliamentary margin due in part to voter weariness with corruption, has repeatedly vowed to crack down on graft since he took office in 2009. But critics say little has changed, and successful prosecutions of highprofile figures are rare. Abu Kassim Mohamed, head of the Malaysian Anti-Corruption Commission (MACC), wrote in a foreword to the survey that “admittedly, there is still much to be done to increase confidence” in the government’s anti-graft fight. The MACC is frequently attacked by the opposition for dragging its feet on cases involving ruling-coalition figures while aggressively pursuing cases linked to government critics.

Bloomberg News

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, 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

Tech firms plot Vietnam’s quiet education revolution Toshiba to control UK nuclear firm Japan’s Toshiba said yesterday it would buy a controlling interest in British nuclear firm NuGeneration as it tries to rekindle its atomic business. The engineering giant said it had reached a deal with NuGeneration’s owners – France’s GDF Suez and Spain’s Iberdrola – to take a 60 percent stake in the firm, which plans to build nuclear power plants in northwest England. The purchase was worth about 102 million pounds (US$167 million) but it was “subject to adjustment”, Toshiba said. After closing the deal, expected in the first half 2014, GDF Suez will keep a 40 percent stake.

Tesla boosts sales despite safety issues Electric car upstart Tesla brushed off a new safety issue Tuesday as it turned in sales numbers that underscored its dominance of the United States electric car market. Tesla founder Elon Musk said the issue with a charging adapter for Tesla’s hit Model S was addressed electronically via a software update. Tesla sold about 6,900 of its luxury electric sedans in the fourth quarter as the company continued to step up production to meet a huge backlog of orders. The recent quarter’s pace suggested it could grow another 40 percent or more this year.

Malaysia’s IOI property soars in debut Shares of Malaysian conglomerate IOI Corp’s property business rose 27.9 percent on their stock market debut yesterday after the palm-oil producer raised 1.87 billion ringgit (US$570 million) by spinning of the unit. IOI Properties Group Bhd shares opened 3.21 ringgit, up from their 2.51 ringgit offer price, with IOI Properties Group one of the top property stocks on the Malaysian bourse. IOI has said it will use the proceeds from its listing for debt settlement and future expansion. Malaysia has seen a flurry of big listings in the last two years.

Fortescue cuts junk-rated debt pile Fortescue Metals Group Ltd, the Australian miner that’s looking to boost its credit rating to investment grade, will pay down a further US$1.6 billion of bonds following early repayments in late 2013. The nation’s third-biggest iron ore miner confirmed plans to redeem US$1.04 billion of unsecured notes due November 2015, having previously repaid US$1 billion of the bond, according to a regulatory filing. It will also repay US$600 million of securities due in February 2016. Fortescue is seeking to cut its debt burden as it boosts production and global iron ore prices remain buoyant.

Country’s potential is attracting investors, who struggle to find skilled staff

quiet revolution pushed by Intel Corp is occurring at a top Ho Chi Minh City engineering school: students clustered in small groups design paper towers while the blackboard goes unused. “This class is completely different than traditional classes,” said student Luu Bao Ngoc, 21. “We learn how to problem-solve in a new way.” The class is backed partly by technology companies including Intel, Siemens AG and Cadence Design Systems Inc, who struggle to find students to feed their need for talented workers in Vietnam. They are training Vietnam’s next generation of workers and transforming classrooms amid warnings from the World Bank that the country’s “economic miracle” faces the hurdle of not being able to fill advanced technical jobs. “High-tech investors are most likely to identify Vietnam’s labor quality as a disadvantage to their investment strategy here,” said Adam Sitkoff, executive director of the American Chamber of Commerce in Vietnam. “The risk for Vietnam is if companies that want to invest here can’t find the workforce they need, they will look elsewhere. Human infrastructure is as important as physical infrastructure.” “As a technology company and a long-term investor in Vietnam, Intel’s success relies on the availability of skilled workers,” Sherry Boger, general manager of Intel’s Vietnam factory, said in an e-mail. “We understood from the outset that there would be a need for capacity-building with regard to

Vietnam is trying to encourage an advanced technology industry

skills development.” More than two years before Intel, the world’s largest chipmaker, opened its US$1 billion plant in 2010, the company tested 2,000 graduating Vietnamese students. Just 90 passed the exam and only 40 were proficient enough in English to be hired, the Tuoi Tre newspaper reported in April 2008. “We have seen a significant improvement of the quality of workforce,” Ms Boger said. Intel, which operates its largest test and assembly plant in Ho Chi Minh City, is taking the lead in the movement by companies to train Vietnam’s emerging tech workforce. It can take a generation to create a highly skilled workforce, according to the World Bank. The potential of Vietnam is attracting companies like Intel. Vietnamese students ranked in the top third of countries in math

proficiency in the 2012 Organization For Economic Co-operation & Development’s Programme for International Student Assessment, ahead of countries such as the United States, France and Russia. Still, the country’s brightest young minds are subverted by an educational system that lacks innovation and relies on rote learning, Thomas Vallely, former director of the Vietnam Program at Harvard University, said in an interview in Hanoi. “The problem for companies is the pool of talented university graduates is very small in Vietnam,” he said. As a result, companies are creating internship programs as part of the curriculum of some universities to better prepare students, said Nguyen Huu Le, TMA chairman. “There is a lot of competition for experienced people,” he said. “It’s a difficult situation.” Bloomberg News

SoftBank bets on Snapchat-style data service for business Cloud-based product would keep employer data secure in staff’s gadgets Takashi Amano

oftBank Corp has tied up with a service for corporate clients that allows workers to access their company’s e-mail and presentations via the cloud before destroying the online sessions. Tokyo-based SoftBank, which paid US$21.6 billion for control of Sprint in July, is rolling out the service from Armor5 Inc this month, Suresh Balasubramanian, chief executive officer of the Santa Clara, Californiabased company, said in a phone interview on Friday. Armor5 helps keep employer data secure when workers access companyrelated information on their personal smartphones, tablets or computers. The product is similar to that

of two-year-old Snapchat Inc, which allows users to send photos electronically that disappear after they have been viewed. Armor5’s cloud-based product acts as a security layer in front of services such as Google Inc’s e-mail and online services offered by Salesforce.com Inc, Mr Balasubramanian said. “Armor5 is what we call an on-demand cloud,” he said. “Our cloud exists when you want to access information, then destroys it when you are done with it.” Information is retained on company servers even after it has been removed from the cloud. Yuko Miki, a spokeswoman for SoftBank, said she was checking

the facts. SoftBank is expanding in North America and Europe to counter a declining population at home. Chief executive officer Masayoshi Son is exploring a deal for Sprint to buy the majority of T-Mobile US Inc, people familiar with the matter said in December. Mr Balasubramanian said Armor5 has an active pilot program with Sprint in the United States. SoftBank has investments in more than 1,000 Internet companies, including Alibaba Group Holding Ltd and Yahoo Japan Corp. Bloomberg News

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Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 25.0

113.10

24.9

112.65 33.9

24.8

112.20

24.7

average 24.697

Min 24.55

Last 24.55

24.5

Max 113.1

average 112.354

Min 111.3

Last 112.9

64.0

63.7

63.4

Max 64.00

average 63.702

Min 63.15

Last 63.90

63.1

Max 26.20

average 25.585

Commodities PRICE

DAY %

YTD %

(H) 52W

92.72

0.140403931

-5.791505792

106.2200012

BRENT CRUDE FUTR Feb14

106.42

0.028198139

-3.953068592

112.7999954

GASOLINE RBOB FUT Feb14

261.74

-0.19066504

-6.048314728

286.9299889

243.68999

GAS OIL FUT (ICE) Feb14

903.5

0.36101083

-4.239533651

960.75

840

NATURAL GAS FUTR Feb14

4.362

-0.16021973

3.120567376

4.770000458

3.476000071

294.24

0.20774444

-4.006263865

317.8399801

278.4999847

1237.11

-0.9575

2.8576

1696.2

1180.57

Gold Spot $/Oz

85.56999969

Silver Spot $/Oz

20.0485

-1.1391

2.51

32.46

18.2208

Platinum Spot $/Oz

1416.75

-0.8489

4.4994

1742.8

1294.18

Palladium Spot $/Oz

735.65

0.1021

3.4669

786.5

629.75

1760

-1.095813431

-2.235800583

2174

1725.25

LME COPPER 3MO ($)

7280

-0.668576886

-1.086956522

8346

6602

LME ZINC

2066

0.096899225

0.535279805

2230

1811.75

LME ALUMINUM 3MO ($)

3MO ($)

14340

0.914848698

3.165467626

18770

13205

15.465

-0.096899225

1.24386252

16.77000046

15.12000084

430.75

-0.173812283

2.073459716

606.5

406.25

577.75

-0.258955546

-4.543577034

845

560.5

SOYBEAN FUTURE Mar14

1307

1.121856867

1377.75

1174

COFFEE 'C' FUTURE Mar14

119.2

7.678410117

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

15.45

-0.258231117

-5.850091408

20.47999954

15.40999985

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

Last 25.75

(L) 52W

WTI CRUDE FUTURE Feb14

NY Harb ULSD Fut Feb14 METALS

Min 25.40

Mar14

WHEAT FUTURE(CBT) Mar14

COTTON NO.2 FUTR Mar14

Max 34.05

average 33.883

Min 33.55

Last 33.95

33.5

26.2

36.40

26.0

36.35

25.8

36.30

25.6

36.25

25.4

84.12

0.465782874

-0.61436673

90.61000061

76.65000153

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

Max 36.4

average 36.293

Min 36.2

Last 36.3

36.20

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.8895 1.641 0.9075 1.3613 104.35 7.9867 7.7542 6.0462 61.5438 32.873 1.273 30.11 45 12085 92.817 1.23547 0.82956 8.2382 10.8726 142.05 1.03

-1.2764 0.0183 -0.595 -0.4534 -0.7187 0.0013 0.0026 -0.0926 -0.0468 -0.4198 -0.4399 -0.0332 -0.4111 -0.2896 0.5678 -0.1554 0.4786 0.3496 0.4562 -0.2675 0

-0.3026 -0.5515 -1.7851 -1.0971 0.6133 -0.0013 -0.0039 0.134 0.4163 -0.2981 -0.6991 -1.0063 -1.3444 0.7116 0.8964 -0.709 0.5533 1.2478 1.1055 1.7318 0

1.0582 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.228 45.023 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

0.8821 1.4814 0.88 1.2746 87.79 7.9818 7.7514 6.0393 52.89 28.56 1.2228 28.926 40.555 9603 86.41 1.21196 0.82307 7.8281 10.195 116.47 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

(H) 52W

(L) 52W VOLUME CRNCY

4.34

2.843602

-7.462688

5.12

3.265

2961667

17.66

3.335284

4.807119

17.88

11.08

2901494

AMAX INTERNATION

1.72

-1.714286

2.12

0.75

2008800

BOC HONG KONG HO

24.3

0.2061856

-2.213281

22.85

4101362

0.425

1.190476

-1.162792

0.68

0.26

744000

7.25

-1.628223

2.836877

7.45

50000

21.85

-0.2283105

0.2293613

25.4

17.7

14575119

CENTURY LEGEND

NAME

111.30

Currency Exchange Rates

NAME ENERGY

33.7

111.75

24.6 Max 24.95

34.1

CHEUK NANG HLDGS CHINA OVERSEAS CHINESE ESTATES

19.48

-0.5107252

-19.17013

24.7

10.384

33000

CHOW TAI FOOK JE

11.98

-0.9917355

3.633214

13.38

7.44

3844600

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16373.86

0.7130055

-1.223406

16588.25

13445.8

NASDAQ COMPOSITE INDEX

4183.016

1.694769

0.153864

4183.837

3093.324

GALAXY ENTERTAIN

0.5910447

6875.62

6023.44

HANG SENG BK HOPEWELL HLDGS

26.15

HSBC HLDGS PLC

EMPEROR ENTERTAI

4.34

4.076739

8.5

4.66

1.93

2985000

FUTURE BRIGHT

4.93

7.407407

5.11727

5.03

1.47

8284000

77.75

0.193299

11.79007

78.95

7968939

122.7

0.245098

-2.386632

132.8

110.6

532923

-0.3809524

35.3

23.2

734500

85.65

0.528169

1.782529

90.7

77.85

7966594

2.94

2.083333

4.66

2.5

6702013

LUK FOOK HLDGS I

27.9

0.9041591

-5.423729

16.88

1992000

MELCO INTL DEVEL

29.6

2.068966

3.859649

30.55

10.92

8285500

FTSE 100 INDEX

6788.98

0.3268872

DAX INDEX

9621.28

0.8466004

0.7236072

9643.269531

7418.36

NIKKEI 225

15808.73

2.504993

-2.962187

16320.22

10432.97

HANG SENG INDEX

22902

0.4857998

-1.735106

24111.55078

19426.35938

CSI 300 INDEX

2208.941

-0.1764696

-5.196722

2791.303

2023.171

TAIWAN TAIEX INDEX

8602.55

0.6365127

-0.1040463

8647.24

7603.27

MGM CHINA HOLDIN

33.95

0.1474926

2.567981

15.229

3308891

KOSPI INDEX

1953.28

0.3704903

-2.88663

2063.28

1770.53

MIDLAND HOLDINGS

3.74

3.030303

0.268096

4.29

2.68

3652000

S&P/ASX 200 INDEX

5245.429

0.6404391

-1.995078

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4441.594

1.157496

3.916953

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1824.03

-0.596195

-2.299457

1882.2

1597

NZX ALL INDEX

1039.282

1.039088

4.043164

1048.998

901.813

PHILIPPINES ALL SHARE IX

3635.57

0.3954436

0.5879391

4571.4

3440.12

Euromoney Dragon 300 Index Sin

602.52

-0.27

-1.47

STOCK EXCH OF THAI INDEX

1282.04

-1.067237

-1.283575

1649.77

1205.44

HO CHI MINH STOCK INDEX

526.68

0.8366679

4.369535

533.15

440.48

Laos Composite Index

1245.36

-0.2331226

-0.6359036

1455.82

1224.94

HUTCHISON TELE H

NEPTUNE GROUP

0.33

-2.941177

0.4

0.131

40770000

NEW WORLD DEV

10.26

2.39521

4.800818

15.12

9.35

22569675

SANDS CHINA LTD

63.9

0.8681926

0.868195

67.15

33.5

6189658

SHUN HO RESOURCE

1.66

-1.190476

0.6060621

1.92

1.33

98000

SHUN TAK HOLDING

4.79

8.126411

5.043861

4.85

3.27

30696532

SJM HOLDINGS LTD

25.75

-0.1937984

-0.9615385

17.04

6168729

8.77

-1.791713

-1.015798

14.46

7.38

2609838 3391973

SMARTONE TELECOM WYNN MACAU LTD

36.3

0.8333333

3.271688

38.25

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

79.64

1.776358

1.516894

79.64

45.38

383296

BOC HONG KONG HO

3.17

2.258065

-1.552796

3.6

2.99

8615

GALAXY ENTERTAIN

10.12

1.913394

12.31964

10.12

3.8975

9745 4516452

INTL GAME TECH JONES LANG LASAL LAS VEGAS SANDS

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

17.48

3.126844

-3.744493

21.2

14.75

104.81

0.546815

2.363513

104.98

80.86

330998

80.3

1.427308

1.813107

81.85

47.95

3416715 2152547

MELCO CROWN-ADR

43.3

1.571663

10.40285

43.95

17.76

MGM CHINA HOLDIN

4.41

2.55814

2.320187

4.66

5500

MGM RESORTS INTE

25.78

2.09901

9.608841

26.106

11.72

12972771

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.32

1.840491

-0.5987998

3.6

2.2

27356

WYNN RESORTS LTD

207.6

2.029783

6.894595

209.74

111.3456

1587641

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

37.15

0.541272

13350708

CHINA UNICOM HON

10.86

0.1845018

19572684

ALUMINUM CORP-H

2.72

0.3690037

17392668

CITIC PACIFIC

10.18

0.3944773

9682167

BANK OF CHINA-H

3.42

156739815

BANK OF COMMUN-H

5.23

0.5769231

16648913

BANK EAST ASIA

31.8

1.273885

966673

BELLE INTERNATIO

9.55

0.3151261

11917953

BOC HONG KONG HO

24.3

0.2061856

4101362

HANG LUNG PROPER

-0.2347418

1957621

HANG SENG BK

120.1

0.1668057

3756557

HENDERSON LAND D

AIA GROUP LTD

CATHAY PAC AIR CHEUNG KONG CHINA COAL ENE-H

4.32

2.12766

35893735

CHINA CONST BA-H

5.54

-0.1801802

192609209

NAME

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD ESPRIT HLDGS

60 -0.08326395

1526276

NAME

PRICE

DAY %

POWER ASSETS HOL

59.6

-0.5838198

1949071

SANDS CHINA LTD

63.9

0.8681926

6189658

10.76

-0.5545287

3832787

96.6

-0.1550388

2919369

SINO LAND CO

VOLUME

13.82

-0.1445087

34042274

10.1

-1.941748

6271691

SWIRE PACIFIC-A

87.65 -0.05701254

15.94

-0.9937888

3213992

TENCENT HOLDINGS

508.5

3.144016

3980946

TINGYI HLDG CO

21.45

-0.6944444

3503941

10.7

1.134216

6569022

57.85

-2.197802

5446455

23.9

0.2096436

2328637

122.7

0.245098

532923

43.8

-1.573034

2727715

HENGAN INTL

89.55

0.5614823

689162

HONG KG CHINA GS

17.02

-0.3512881

8358813

HONG KONG EXCHNG

127.8

1.107595

1559108

HSBC HLDGS PLC

85.65

0.528169

7966594

CHINA LIFE INS-H

22.75

1.336303

29359386

CHINA MERCHANT

26.55

-0.3752345

3379049

CHINA MOBILE

77.15

-0.5157963

14698611

HUTCHISON WHAMPO

105

0.09532888

4058196

CHINA OVERSEAS

21.85

-0.2283105

14575119

IND & COMM BK-H

4.94

0.2028398

171007314

CHINA PETROLEU-H

5.93

0.8503401

97205613

LI & FUNG LTD

10.86

0.742115

15247444

CHINA RES ENTERP

24.55

-0.203252

2359038

MTR CORP

28.2

-0.3533569

2487995

CHINA RES LAND

SUN HUNG KAI PRO

WANT WANT CHINA WHARF HLDG

MOVERS

922761

1 23047

INDEX 22902 HIGH

23046.41

LOW

22637.55

19.72

-0.5045409

5123492

NEW WORLD DEV

10.26

2.39521

22569675

52W (H) 24111.55078

CHINA RES POWER

19.6

0.8230453

8117472

PETROCHINA CO-H

8.01

0.3759398

34966980

(L) 19426.35938

CHINA SHENHUA-H

22.2

-1.113586

10789375

PING AN INSURA-H

68.65

1.40325

10297563

22637

13-January

15-January

15 15

January 2014 April 19,16, 2013

Opinion Business

wires

The global economy in 2014

Leading reports from Asia’s best business newspapers Klaus Schwab

Jakarta Post Business conglomerate Bosowa corporation will strengthen its automobile-related businesses in eastern areas of the country this year amid consumers’ weakening purchasing power due to inflation. Bosowa has a significant presence in eastern Indonesia, from where it operates multiple businesses, ranging from power plants to toll roads. Bosowa’s automobile business (BBM) contributes about 20 percent to its overall business. Cement contributes another 60 percent. BBM managing director Syamsul Arifin said that the corporation saw the eastern part of country as a “highly promising” market for the automobile industry.

Yomiuri Shimbun Japanese smartphone makers have struggled to compete with foreign companies but some have found success in overseas markets by loading novel technologies in their products. Fujitsu Ltd and Kyocera Corp have developed untapped overseas demand from elderly consumers and users at construction sites by boosting audio and other fundamental functions. In June last year, Fujitsu began selling smartphones targeted at older users in France through major French telecommunication firm Orange SA. Kyocera has used the company’s distinctive applied ceramic technologies to create a smartphone that is easier to hear.

Malaysia Star With a softer outlook on the palm oil inventory for the first half of this year, the crude palm oil price is expected to strengthen over this period. RHB Institute Research analyst Alvin Tai has noted that inventory would ease in the months ahead, providing a lift to palm oil prices. A stronger price catalyst, he believes, however, is in the form of Indonesian state-owned energy firm Pertamina’s upcoming second biodiesel tender. “We believe palm oil prices will strengthen progressively throughout 2014 due to lacklustre production in Indonesia.”

Thanh Nien Vietnamese telecommunication providers have proposed to increase their fee on calls from overseas to Vietnam by more than 30 percent, saying charges are cheaper than in many other countries. The proposal by Vietnam Post and Telecommunication Group (VNPT) to the Ministry of Information and Communications asked to raise the fee from 6.1 US cents a minute to 8.1 cents, which will raise the telecoms’ revenue by some US$12.1 million a year, news website VnExpress reported. A similar proposal from the military-run Viettel asked to charge the same fee from February.

Founder and Executive Chairman, World Economic Forum

t the beginning of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, generating anxiety and, in many places, turmoil. From an economic standpoint, we are entering an era of diminished expectations and increased uncertainty. In terms of growth, the world will have to live with less. To understand the implications of this, consider the following: If the global economy grew at its pre-crisis pace (more than 5 percent per year) for the foreseeable future, its size would double in less than 15 years; at 3 percent, doubling world GDP would take about 25 years. This makes a significant difference to the speed at which wealth creation occurs, with profound effects on expectations. We ignore the power of compound growth to our detriment. As for uncertainty, the world’s four largest economies are currently undergoing major transitions. The U.S. is striving to boost growth in a fractured political environment. China is moving from a growth model based on investment and exports to one led by internal demand. Europe is struggling to preserve the integrity of its common currency while resolving a multitude of complex institutional issues. And Japan is trying to combat two decades of deflation with aggressive and unconventional monetary policies.

Weaker performance For each, the formulation and outcome of complex and sensitive policy decisions implies many “unknowns,” with global interdependence heightening the risk of large unintended consequences. For example, the U.S. Federal Reserve’s policy of quantitative easing (QE) has had a major effect on other countries’ currencies, and on capital flows to and from emerging markets. When QE was launched, it was the least flawed of the available policies, and it averted a catastrophic global depression. But its downsides are now apparent, and its abatement in 2014 could fuel further uncertainty. The Fed’s QE policy, and variants of it elsewhere, have caused the major central banks’ balance sheets to expand dramatically (from US$5-6 trillion prior to the crisis to almost US$20 trillion now),

measures are politically charged and often are blocked by powerful vested interests.

Rising inequality

causing financial markets to become addicted to easy money. This has led, in turn, to a global search for yield, artificial asset-price inflation, and misallocation of capital. As a result, the longer QE lasts, the greater the collateral damage to the real economy. The concern now is that when the Fed begins to taper QE and dollar liquidity drains from global markets, structural problems and imbalances will resurface. After all, competitivenessenhancing reforms in many advanced economies remain far from complete, while the ratio of these countries’ total public and private debt to GDP is now 30 percent higher than before the crisis. This source of uncertainty coincides with weakening performance in many emerging countries. Back in 2007, emergingmarket growth was expected to outpace that of advanced economies by a wide margin, before converging. Today, the advanced economies contribute more to global GDP growth than emerging countries, where growth is

Our societies must become more entrepreneurial, more focused on establishing gender parity, and more rooted in social inclusion

forecast to average 4 percent in the coming years.

Downward pressure Economic conditions are slowly improving in highincome countries, but a range of downward pressures may persist for years. The U.S. economy, for example, remains stuck in a subpar recovery: inflation is too low and unemployment is too high. Official data have often been better than expected, reflecting how resilient, adaptive, and innovative the U.S. economy is, but pre-crisis consumerspending and growth patterns are unlikely to recur. Improvements in the eurozone are real but tenuous. The good news is that the disaster predicted by many pundits has been avoided, and the recession is coming to an end. But improvement does not mean resurgence: achieving the robust growth needed to reduce high unemployment, lower the debt/GDP ratio, and improve the fiscal outlook remains elusive. The greatest risk for the eurozone in the foreseeable future is not a disorderly exit by some countries, but rather a prolonged period of stagnant growth and high unemployment. Meanwhile, the emergingmarket slowdown may well persist, particularly in the largest economies. Over the past 15 years, the BRICs (Brazil, Russia, India, and China) have achieved remarkable progress, but their reforms – including new banking regulations and currency regimes – have been among the least difficult to implement. So-called second-generation reforms, which are more structural in nature, are vital to long-term growth but much more difficult to realise. Elimination of subsidies, labour market and judicial reforms, and effective anti-corruption

The global growth slowdown is taking place against a backdrop of rising economic inequality, owing to labour’s declining share of national income – a worldwide phenomenon, resulting from globalisation and technological progress, that poses a serious challenge to policymakers. Systems that propagate inequality, or that seem unable to stem its rise, contain the seeds of their own destruction. But in an interdependent world, there is no obvious solution, because the high mobility of capital fuels global tax competition. Even in stronger-performing countries, such as the U.S. or the United Kingdom, faster GDP growth has yet to boost real incomes. In the U.S., for example, median household income has fallen by more than 5 percent since the recovery began. More generally, lower growth is fuelling popular protest and social unrest, particularly in countries that were growing rapidly (for example, Brazil, Turkey, and South Africa), owing to the impact of rising living standards on expectations. In such a charged social and political context, reviving high-quality economic growth is crucial. But where will it come from? Technological progress is a distinct, but highly uncertain, possibility. Many disruptive technologies (for example, advanced robotics, nextgeneration genomics, energy storage, renewable energy, and 3D printing) could drive future growth, but their full potential can be realised only in the distant future. With most governments facing fiscal constraints, officials are reluctant to consider projects that might increase public debt. But there is some low-hanging fruit – productive investments that would boost long-term growth and therefore pay for themselves. A focus on four areas, in particular – infrastructure, education, green energy, and sustainable agriculture – could yield high economic and social returns. Ultimately, however, the path to sustained growth requires not just new policies, but also a new mindset. Our societies must become more entrepreneurial, more focused on establishing gender parity, and more rooted in social inclusion. There simply is no other way to return the global economy to a path of strong and sustained growth. © Project Syndicate

16 16

January 16, 2014 April 19, 2013

Closing Libya oil output on the mend

Fed targets student loans as threat to economy

The first expansion in Libyan oil production in 10 months is poised to lower regional crude costs, boosting margins for European refiners that have been closing at the fastest rate in decades. The holder of Africa’s largest crude reserves tripled supply to about 650,000 barrels a day in the three weeks to January 13, according to the government. The production rate, 42 percent of the average for the past decade, is a signal to analysts that competing grades may get cheaper. Europe is likely to profit from rising Libyan production.

Federal Reserve economists are trying to determine whether the burden of student loans represents a trend that will damage United States growth, partly by restricting sales of houses and cars. Student loans are one of the only deteriorating pockets of consumer credit, with balances and delinquency rates rising to record highs. Outstanding education debt exceeded US$1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent, according to the Federal Reserve Bank of New York.

Europe tightens up financial market rules Curbs on speculative trading in commodities and high-frequency trading

he Europe Union (EU) is to tighten regulation of financial markets under a deal to prevent any repetition of the rampant speculation which helped bring down banks and crash the global economy. After two years of tough talks, the European Parliament and negotiators for the 28 member states agreed a

deal in principle that sets new rules to regulate the market, known as MiFID II. “These new rules will improve the way capital markets function to the benefit of the real economy,” said the EU’s Financial Markets commissioner Michel Barnier. “They are a key step towards

The European Parliament reached a deal on new financial regulation

establishing a safer, more open and more responsible financial system and restoring investor confidence in the wake of the financial crisis.” Mr Barnier first pushed for the new rules in 2011 at the height of the eurozone debt crisis which was sparked by the 2008 global financial crash. They aim to curb speculative trading in commodities and to regulate high-frequency trading so as better to protect investors and make the markets less crisis prone. They will apply to investment firms, market operators and services providing post-trade transparency information in the European Union, a parliament statement said. They will notably force market players to buy and sell financial instruments on regulated markets comparable to stock exchanges to ensure that all trading is tracked by MiFID. Another key provision covers high-frequency trading based on automatic algorithmic systems, forcing investment firms to stop trading if price volatility becomes too high. To help limit speculation in food

and energy, authorities for the first time will be able to limit the size of a net position that a person can hold in commodity derivatives. International aid group Oxfam welcomed the deal but warned of the dangers of exemptions, especially for Britain which is home to one of the world’s largest financial markets in London. “Today’s decision marks a good start in tackling ‘gambling’ on food prices which are a matter of life and death to millions,” Oxfam said. But “the deal is far from perfect,” Oxfam said.” Unjustified exemptions were granted to powerful lobbies and limits will be set nationally, rather than at the European level. “There is a real risk, particularly in the UK, of ineffective sky high limits triggering a regulatory race to the bottom between European countries,” it said in a statement. In 2008 the global financial system nearly collapsed when speculative bets, especially in sub-prime United States (US) home loan debt, turned bad, bringing down Lehman Brothers and then a chain of other banks and investment houses.

German economy picking up steam Import outpaced export growth, consumption supportive Sarah Marsh

he German economy grew by a weaker than expected 0.4 percent last year, its worst performance since the global financial crisis in 2009, with strong domestic demand only partially offsetting the continued negative impact of the euro crisis. Yet economists said the data masked the underlying strength of Europe’s largest economy, which they said could grow by up to 2.2 percent in 2014 as the global upturn boosts exports and low interest rates unleash a recovery in investment. The preliminary gross domestic product (GDP) estimate from the Federal Statistics Office, released yesterday, fell just short of the consensus forecast for a 0.5 percent expansion in a Reuters poll of 18 economists. The office said the economy probably grew by around a quarter

of a percentage point in the last quarter, in line with the 0.3 percent GDP expansion in the previous three months. “Under the surface of belowtrend growth, the economic success story continued as unemployment remained low... Private consumption continued its upward trend and even investment showed first signs of life,” said Carsten Brzeski at ING. “With the improved global economic outlook, filled order books, low inventories and the stable labour market, all the ingredients for another strong growth performance of the German economy are there,” he said. Recent forward-looking data has been strong. Business, consumer and investor sentiment have risen to multi-year highs over the past month, while industry orders surged in November. Reuters

A global upturn has boosted Germany’s exports

AFP