Macau business daily, Feb 17, 2014 by Business Daily

Viva the pataca during Year of the Horse Page 5

MOP 6.00 Year II

Number 477 Monday February 17, 2014

Publisher: Paulo A. Azevedo

Closing Editor: Michael Grimes

Tourists push city to bursting point, legislators say

SmarTone posts first loss here in four years Page 5

Luk Fook reports 7 pct rise in CNY sales Page 8

egislative Assembly members have urged the government here and in Beijing to halt new policies that would encourage more mainland tourists to the city. The members called for more effort to ease the strain tourists place on the city’s infrastructure during holidays. Macau had more than one million visitors during the Lunar New Year vacation week that ended on February 6. That was a 13-percent increase over the equivalent period last year, Macau Government Tourist Office data show. About 770,000 tourists were from the mainland, a 23-percent increase. Pro-democracy assembly members Au Kam San and Antonio Ng Kuok Cheong say in a letter to the Macau deputies in the National People’s Congress that the city has little capacity to handle more tourists. More on page 2

CE stresses local dealers-only – again www.macaubusinessdaily.com

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Chief Executive Fernando Chui Sai On stressed again on Friday that casino dealer positions can only be filled by permanent residents. It follows a comment on Thursday from a senior casino executive calling on the government at least to study the possibility of using non-resident dealers. “Until this moment we are still resolute that only local residents can work as casino croupiers; [a policy] which has not changed,” said Mr Chui on Friday before his departure for an official visit to the mainland’s Guangxi province. He didn’t however completely shut the door on the notion of adjusting the policy. He hinted that provided locals had adequate employment opportunities, labour policies could be framed to suit business needs.

Hang Seng Index

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February 14

HSI - Movers

Lucky 88 pct of city’s GDP from gaming: Fitch

Name

Macau derived nearly 88 percent of its gross domestic product from gaming in 2012 according to the latest sovereign assessment from Fitch Ratings. “Revenue from gaming accounted for 87.7 percent of GDP, while the government is estimated to have relied on this sector for 76.5 percent of its revenue in 2012,” says the report from Anna Thung, based in Hong Kong. Page 4

%Day

Galaxy Entertainment

2.41

Sino Land

2.13

Tingyi Holding

1.74

Tencent Holdings

1.57

COSCO Pacific

1.55

CITIC Pacific

-1.38

AIA Group

-1.35

China Resources

-1.29

Li & Fung

-1.13

Belle International

-1.06

Source: Bloomberg

Interview

I SSN 2226-8294

Tourism industry needs rethink: academic To avoid the sort of overcrowding seen during Chinese New Year, the government needs to create new routes for tourists, as well as reorganising the throng visiting popular sites such as the Ruins of St Paul’s, says Amy So Siu Ian. Ms So, director of the hospitality and gaming management programme at the University of Macau, added that the government needs to think about its tourism master plan. Pages 6 & 7

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February 17, 2014 Friday April 19, 2013

Macau

United – pan democrat Au Kam San (left) and union-backed legislator Kwan Tsui Hang (right)

Tourists push city to bursting point, legislators say Legislative Assembly members demand action to cut holiday overcrowding Stephanie Lai

sw.lai@macaubusinessdaily.com

KEY POINTS Pan democrats, unions, call for cap on mainland tourism ‘Not right time’ for multientry for Zhuhai residents Govt ‘not considering’ visitor arrival tax: MGTO Paid leave in Guangdong factories may ease holiday rush

Macau hopes Guangdong labour policy will thin peak season crowds The Guangdong government intends to ensure this year that all employees in the province are entitled to paid annual leave, the Chinese-language Macao Daily news has reported. The Chinese-language newspaper quoted Macau Government Tourist Office director Maria Helena de Senna Fernandes as telling reporters on Saturday that the government here had yet to look into how that would affect tourist numbers from Guangdong. She said offering paid annual leave could reduce the inflows during peak holiday periods. Ms Fernandes said that would suit Macau’s residents and the tourism industry.

crowds, and that it is hard to offer good service to so many tourists all at once. A plenary session of the National People’s Congress is due to be held in Beijing next month. The letter, released on Friday, says there should be limits on Macau’s engagement with the mainland. “Now is not a suitable time to allow Zhuhai residents multiple-entry permits to visit, nor is the moment right to make Guangdong driving licences valid in Macau and viceversa,” it says. The letter expresses opposition to expanding the individual visa scheme. The scheme gives residents of dozens of places in the mainland visas to travel to Macau as individuals rather than as members of tour groups. In a written inquiry published on Saturday, member of the legislative assembly Kwan Tsui Hang,

Paid leave for Guangdong workers will smooth holiday demand Maria Helena de Senna Fernandes, MGTO director

representing the Macau Federation of Trade Unions, called for more government effort to encourage tourists to visit at times other than the peak holiday periods – such as the Lunar New Year – and therefore prevent the city’s infrastructure from being overwhelmed. Macau Government Tourist Office’s director Maria Helena de Senna Fernandes told reporters during a visit to Guangxi on Saturday that the government was not considering levying an arrival tax on visitors entering the city by land as a means to limit the number of tourists.

Arrival tax Hong Kong pro-democracy groups People Power and the Democratic Party have called for the Hong Kong government to impose an arrival tax of HK$20 (US$2.58) to HK$100 on visitors from the mainland to curb the number of tourists and deter mainland tourists from running parallel imports across the border. Hong Kong Chief Executive Leung Chun Ying said last Tuesday that his government would not even consider the idea, not least because the mainland could impose an equivalent tax on visitors from Hong Kong. Macau Chief Executive Fernando Chui Sai On said at a press briefing on Friday that the mainland had no plans to expand the Individual Visit Scheme. Mr Chui said his government would make an inter-department effort to assess the city’s capacity for tourists, and consider how their numbers affect its infrastructure and quality of life.

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Macau

CE stresses local dealers-only Dealers – again ‘abused by But Fernando Chui Sai On hints that then policies could be adjusted to industry needs

Legislator Pereira Coutinho says casino workers may lose their job if they report being attacked by disgruntled players

Tony Lai

tony.lai@macaubusinessdaily.com

hief Executive Fernando Chui Sai On stressed again on Friday that casino dealer positions can only be filled by permanent residents. It follows a comment on Thursday from a senior casino executive calling on the government at least to study the possibility of using non-resident dealers. “Until this moment we are still resolute that only local residents can work as casino croupiers; [a policy] which has not changed,” said Mr Chui on Friday before his departure for an official visit to the mainland’s Guangxi province. He didn’t however completely shut the door on the notion of adjusting the policy. He hinted that provided locals had adequate employment opportunities, labour policies could be framed to suit business needs. The city’s top official also reiterated the administration’s “ultimate goal” is to let more residents to enter the senior management of major local companies including casino operators. “Apart from the personal efforts of residents [it] also needs the enterprises to cooperate with [the government] and provide opportunities,” he said, adding he was “optimistic” that would happen. Mr Chui’s remarks came a day after casino operator SJM Holdings Ltd’s chief executive, Ambrose So Shu Fai, asked the government to consider studying opening up some dealer positions for non-residents amid likely labour shortages. Unemployment in the city stood at only 1.8 percent last year, and recruiting for key positions including gaming floor staff is a growing challenge even without the proposed six new casino resorts due to open on Cotai between 2015 and 2018. “We, the industry, certainly think it best if croupier positions are open to migrant workers,” said Mr So last week. “If all croupiers must be Macau residents, they cannot move upward as we cannot hire people to replace them as they are promoted.”

newsdesk@macaubusinessdaily.com

No to outside dealers – Macau’s Chief Executive Fernando Chui Sai On (Photo: Manuel Cardoso)

But Mr Chui on Friday said he saw “no conflicts” between locals climbing the career ladder and the locals-only restriction on casino croupiers. But he did not say whether the government would study the labour demand issue as the SJM boss urged. He said only: “The SAR government will entirely ensure the employment of the locals and their chance for upward mobility and improving living quality first, when studying the future policies for employed population and labour.”

Looming crunch A research report issued by Morgan Stanley last month said the new casino-resorts due to open in Cotai may require 12,600 employees just to man their gaming tables. It would represent about a 70 percent increase on the local workforce of

Package tours up by 7pct As many as 9.78 million visitors came to Macau on package tours in 2013 newsdesk@macaubusinessdaily.com

he number of visitors coming to Macau on package tours in 2013 increased by 7.2 percent to 9.78 million. That’s despite the mainland authorities’ ban in October on socalled zero fare tours to Macau but incorporating compulsory shopping – in the past frequently a source of conflict between visitors and locals. When the ban came into force, it resulted in a 9.9 percent year-on-year

gamblers’

fall in package visitors in November. But mainland media outlets reported that tour operators based on that side of the border quickly found ways around the rules. Official figures released on Friday by Macau’s Statistics and Census Service show that for the whole of last year, there were more people travelling in package tours than in 2012. However, that number decreased slightly by 1.3 percent last

approximately 17,600 recorded as employed as dealers in the second quarter of last year. Secretary for Economy and Finance Francis Tam Pak Yuen also said last week the administration was confident the supply of resident labour would match demand by the new casino-resorts starting next year. Mr Chui also reiterated on Friday the government is striving to prolong tourists’ length of stay and also visitor satisfaction, rather than simply focusing on expanding visitor numbers. The government would continue to study the carrying capacity of Macau and divert tourists away from crowded tourist spots, he added. Asked whether he will run again for the post of chief executive after his five-year term ends in December, Mr Chui said that was “still in consideration”.

December to just under 875,800. This was mainly due to a decrease in the number of visitors from South Korea. In addition, the number of residents choosing to travel outbound in package tours was up by 1.7 percent, with mainland China as their primary destination, followed by South Korea and Taiwan. The total number of times residents travelled outbound last year was 1.45 million, a 12 percent increase over 2012. Of these, 549,488 were as part of package tours. Last year, Macau had a total of 98 hotels and guesthouses with a total of 27,764 guest rooms available, registering a 6.5 percent increase yearon-year. Five-star hotels accounted for 18,371 rooms – 66.2 percent of the total. According to the official figures, a total of 10.7 million guests checked in to hotels and guesthouses here for the whole of last year, an increase of 11.8 percent.

asino dealers are being made targets of abuse by angry losing gamblers, says a legislator. He adds that some dealers are frightened to complain in case they are blacklisted as troublemakers. In a written enquiry to the government, legislator Jose Pereira Coutinho calls on the government to protect the rights of casino workers who want to file a complaint. He says casino workers have had plastic cups, bottles of water, cigarette packets and even cigarette butts thrown at them by gamblers. This mainly happens in the VIP rooms, suggests the legislator. In the mass gaming areas “there would be too many witnesses,” Mr Pereira Coutinho told Business Daily. During the 2013 Chinese New Year holiday five people complained directly to the legislator about such abuse he said. Upon learning of the allegations of physical attacks and verbal abuse, he went to the casinos in order to see for himself, he told the newspaper. It is not just the dealers but also floor staff who serve beverages that are victims of such attacks, he added. According to the legislator, casino workers who often complain are blacklisted to the point that they lose their job at one casino, and become “un-hirable” at another. “The government has to do something and report these cases to police,” Mr Pereira Coutinho said, adding “authorities should act in accordance with the law and allow for proper ways in which workers can lodge complaints without fear of repercussion.” According to him, casino companies usually fail to act on these forms of complaints, covering up such acts, for fear of losing VIP clients. “It’s bad enough that these workers are already under a lot of stress from working shifts. Such acts [of violence] only bring about more stress and can take a toll on workers’ personal relationships with family and friends,” the legislator added.

Jose Pereira Coutinho

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Macau Clean air ideas being studied Macau could have cleaner air under a plan to regulate emission levels. According to the government, the aim is to reduce the levels of sulphur oxide by 64 percent and nitrogen oxide emissions by 24 percent. Thereafter the aim is to reduce output of those gases and also particulates by 39 percent annually. It’s part of the government’s 10-year Macau Environmental Protection Plan. It launched in 2010 but implementation hasn’t begun yet. Macau will also regulate air pollution from motor vehicles and engines to give residents a better quality of life, the government added.

Lucky 88 pct of city’s GDP from gaming: Fitch Research house gives a long term rating for the territory of ‘AA–‘ with a ‘Stable’ outlook Michael Grimes

michael.grimes@macaubusinessdaily.com

acau derived nearly 88 percent of its gross domestic product from gaming in 2012 according to the latest sovereign assessment from Fitch Ratings.

“Revenue from gaming accounted for 87.7 percent of GDP, while the government is estimated to have relied on this sector for 76.5 percent of its revenue in 2012,” says the

report from Anna Thung, based in Hong Kong. The research house gives a long term rating for the territory of ‘AA–‘ with a ‘Stable’ outlook.

It adds: “The general government enjoys a debt-free status. Macau achieved substantial budget surpluses, averaging 15.4 percent of GDP from 2003 to 2012, significantly outpacing its ‘AA’ peer median of negative 0.1 percent. This has enabled the accumulation of a large pool of fiscal reserves, which are expected to reach 237 billion patacas [US$29.7 billion], or 59 percent of GDP, in 2013.” But Fitch notes: “Sharp rises in housing prices, spurred by prolonged low interest rates and strong investment demand, have raised concern over housing affordability. The authorities have implemented a number of property cooling measures, leading to early signs of stabilisation.” The Gaming, Lodging and Leisure team also note in their territory report – part of their ‘Eye in the Sky’ series – that there are also some risks for gaming investors. “Risks and constraints include a vulnerability to adverse changes in visa and/or cash transfer policies; susceptibility to credit availability and macroeconomic conditions on mainland China; the finite nature of the gaming concessions; and meaningful new supply coming online over the next several years in Macau and surrounding jurisdictions (e.g. the Philippines, Australia, Vietnam, etc.).”

77%

Amount of govt revenue from gaming in 2012

Nonetheless, the research house expects the casino sector to show 12 percent year-on-year growth in gaming revenues for 2014. “The lower growth forecast relative to 2013 (18.6 percent) is mainly due to lack of new supply at least through late 2015. Growth may pick up in late 2015 as new Cotai projects start to come online, starting with Galaxy Macau phase 2 and Melco Crown’s Studio City,” it states. Fitch adds: “Infrastructure improvements and strong mass market demand will continue to drive growth and provide a cushion against potential disruptions in VIP play, which is more susceptible to credit availability and the mainland China economy.”

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Viva the pataca in Year of the Horse The city’s currency could have a better foothold against the yuan than the previous years, an economist says Tony Lai

tony.lai@macaubusinessdaily.com

n the first month of this calendar year the pataca started strongly against the currencies of Macau’s main trading partners. It coincided with the beginning of a tapering in the United States’ policy of so-called quantitative easing for the US dollar (i.e., effectively propping up the US dollar by buying US Treasury bonds). The pataca is indirectly pegged to the US dollar, which in turn has lost ground against mainland China’s currency the yuan in recent years – partly as a result of QE. But an economist told Business Daily it’s “likely” the pataca can establish a better foothold against the yuan than hitherto. The Monetary Authority of Macau announced on Friday the index of the pataca’s trade-weighted effective exchange rate rose by 0.09 points from December to 96.8 last month. The higher the index the stronger the pataca. But the January 2014 figure is still 0.12 points fewer than for January 2013. “The value of the pataca surely gains strength if the [value of the] US dollar rises,” said Liu Chun Wah, assistant professor of economics at the

“Both the US dollar and the yuan have potentials for appreciation [this year],” said the economics professor. “The yuan can still continue to rise if there is no ‘hard landing’ for the mainland [Chinese] economy while the US dollar can potentially rise with the taper in the US bond-buying.”

Yuan milestone

University of Macau. January’s sequential improvement followed the US government’s decision to reduce its monthly bond buying in January to US$75 billion (600 billion patacas) from US$85 billion in December. The US Federal Reserve is cutting a further US$10 billion from its bond-buying programme this month. According to data compiled by Bloomberg,

the US dollar index, which tracks how the greenback performs against a basket of other major currencies – excluding the yuan – was at 81.31 points by January 31, rising by 1.59 percent from 80.04 points at December 31. The US dollar also slightly strengthened – by 10 basis points – against the yuan in January. But Mr Liu said it is too early to say this means the pataca is on a rising track.

The Wall Street Journal newspaper quoted Justin Chan, HSBC’s co-head of markets Asia-Pacific, as saying last month he expected China’s currency to hit a milestone six yuan to the US dollar this year, “marking a new era for the currency and coinciding with faster [renminbi] reforms and liberalisation”. How the pataca fares for the rest of this year depends on which rises faster – the greenback or the yuan – Mr Liu said. “But…even if the yuan continues to strengthen against the pataca the rise [appreciation] will not be as rapid as in the past few years,” the university professor added. According to Business

Daily’s calculation based on the official data, the yuan has strengthened against the pataca at an average annual rate of nearly 2.86 percent in the past three years. Mr Liu said a stronger pataca could help to ease the city’s imported inflation – linked to the fact mainland China is the city’s main source of imported essentials. The overall consumer price index has been driven by internal demand plus a boost from tourists in recent years, he added. The city is likely to receive around 30 million visitors this year. Secretary for Economy and Finance Francis Tam Pak Yuen said on Thursday inflation this year is likely to hover at five to six percent. The average annual rate of inflation last year was 5.5 percent. The territory’s de facto central bank also said on Friday Macau’s foreign exchange reserves amounted to 129.5 billion patacas by end of last month, rising by 0.4 percent from December but declining by 5.5 percent from January last year. The January figure was about 14 times the amount of currency in circulation here.

SmarTone posts first loss here in four years Mobile telecoms operator blames it on fall in revenue from roaming services Tony Lai

tony.lai@macaubusinessdaily.com

marTone Mobile Communications (Macau) Ltd had an operating loss in the second half of last year. It was the first negative result in four years. The parent firm of the telecoms operator blamed a decline in revenue from roaming services. The Macau operation reported an operating loss of HK$9.3 million (US$1.2 million) in the six months ended December 31, 2013, compared to profits of HK$27.4 million in the same period of 2012, SmarTone Telecommunications Holdings Ltd told the Hong Kong Stock Exchange. The loss came despite SmarTone Macau’s revenues rising slightly – by 0.7 percent to HK$279 million – in the six months to December 31, while its earnings before interest, tax, depreciation

and amortisation slipped by over half to HK$23.4 million. It is the first time the Macau unit has been in the red since a HK$19.4 million loss in the six months into December 2009. The company cited “the weak economy” as the reason at the time – specifically “the lower contribution from roaming business”, according to the filing. Business Daily asked more information from SmarTone Macau but the company said it has no additional comment aside from the filing of its parent firm. In the financial year ended June 30, 2013, SmarTone Macau saw its operating profit decline by over two-thirds yearon-year to HK$23.2 million. In February last year three of the city’s telecommunication operators – including SmarTone Macau

–reduced roaming charges for voice calls and text messages between mainland China and Macau by between 11 percent and 24 percent. In August there was another reduction in roaming charges of at least 13 percent, according to a statement at the time from the regulator, the Bureau of Telecommunications Regulation. The Macau operation accounted for nearly 4.3 percent of the overall revenue of the parent company by the end of last year, according to the filing. SmarTone Holdings reported a decline of 32 percent – to HK$311 million – in profits across all markets in the second half of last year. Aside from the loss, SmarTone Macau also suffered a service disruption of over six hours at the end of

last month following a fire that damaged its network facilities at the Golden Dragon Centre in NAPE district. The telecommunications bureau said at the time it had ordered SmarTone to provide a report on the incident within 24 hours. A company spokesperson on Friday confirmed to Business Daily that a report had been submitted to the government

but did not reveal details. This newspaper asked the telecommunications bureau whether a fine would be imposed on SmarTone Macau but there was no reply before press time. Hutchison Telephone (Macau) Co Ltd, operating here under the brand of 3 Macau, also suffered disruption as a result of the same fire.

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Tourism industry needs rethink: academic

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HOSPITALITY Rising stars In December, hotel occupancy rates stood 3.1 percentage points above their levels in the same month the year before. Occupancy rates went up for almost all categories of hotels, including guesthouses. The only exception was two-star hotels. Their occupancy rate dropped by 4 percentage points. There may be some under-reporting here; or this may be the effect of an increased competition from three-star hotels. The latter rate reached 90.9 percent in December, a figure that was above the sector’s average and up by 4 percentage points, relative to December 2012.

To avoid the sort of overcrowding seen during Chinese New Year, the government needs to create new routes for tourists, as well as reorganising the crowds going to popular sites such as the Ruins of St Paul’s, says Amy So Siu Ian. Ms So, director of the hospitality and gaming management programme at the University of Macau, added that the government needs to think about its tourism master plan, determining which kind of visitors it wants to attract. If the plan is to make Macau a world tourism and leisure centre, the government needs to enhance visitors’ experience, Ms So told Business Daily in an interview. Direct flights would surely boost the number of tourists coming to the city, she said. But she warned that the government should diversify the city’s offering, improving its cultural elements. Luciana Leitão

leitao.luciana@macaubusiness.com

Photos by Manuel Cardoso

The publication of the December results provides us with figures for the full year. They confirm the trend change noticed in 2012. Overall, occupancy rates had been neatly on the rise after 2009. In 2012, however, they mostly stayed flat, hanging at similar levels as in 2011. The annual plots for the occupancy rates for all categories of hotels indicate clearly that 2013 figures for the sector have indeed stabilised or even decreased slightly. In the last three years the overall occupancy rate showed very small variation, oscillating no more than 0.4 percentage points form one year to the other. That behaviour is dictated by the very steady figures registered in all the top categories of hotels. Three-, four- and five-star hotels, which account for the vast majority of available rooms showed very little variation. We find the same feature in the case of guesthouses. Not so in the case of two-stars, as the annual figures show a neat decrease in the occupancy rate after 2011. The rate went down from 78.8 percent that year to 71.9 percent last year, a total loss of 6.9 percentage points in the last two years. J.I.D.

85.3%

occupancy rate for three-star hotels in 2013, highest in sector

What are the main challenges that the tourism industry faces in the short-run? The first challenge the industry here faces is the human resources’ [shortage]. Definitely it’s one of the big challenges, not only in the tourism but also in the hospitality and the gaming industries. The other challenge we need to face is how to make Macau a world tourism and leisure centre. As all of us know, there are lots of tourists coming to Macau – for example, during Chinese New Year. How can we enhance the experience for the tourists? Another big challenge is the traffic. Definitely, transportation is one of the biggest challenges. This year’s Lunar New Year holiday was very busy with more than a million people coming here. It led some to wonder about the city’s capacity to handle so many tourists. What are Macau’s limitations? Macau needs to think carefully about the tourism master plan. I would say they [the government] really need to think who are the tourists we want to attract and what are the strategies. If we want to make Macau a world tourism and leisure centre, we really need to enhance their experience. If you have too many tourists in one area, it’s very hard to make tourists think about Macau as a leisure centre. So, we really need some in-

depth analysis to do it right. Could the government have done something different to better divert visitors away from the most crowded tourist spots? First of all, the government this year already showed some improvement compared to previous years. Of course, there is always room to improve. For example, the border could be opened longer hours during peak periods, so that not all the people leave or come at the same time. Right now, the major problem is that there are too many tourists coming to the city centre. Many of the first-time tourists will definitely go to the Ruins of St Paul’s, so the issue is if we can try to make them go at different times. If we can ask the tourists to go to the Ruins of St Paul’s at different times, then maybe that area will be a little bit better – it could be, for example, in the evening, since it is not as crowded as it is in the afternoon or in the early morning. At the same time, when they go to the Ruins of St Paul’s usually they use the typical route, passing through the shopping area. There are some small corners or small streets that people can actually walk and go up to the ruins. So, maybe the government can think on how we can promote these routes going to the Ruins of St Paul’s, so that not

all the people go directly through the typical route. You mentioned some improvements. What kind of improvements? We all know that during the busy times they [the government] took crowd control measures, which was an improvement. This was also a good trial to assess the results. Does Macau need more infrastructure and a better transportation system to deal with the tourism growth? Yes. A better transportation system is definitely one important element and also if we look at the Chinese New year, the taxi problem is one big issue that we need to solve. Of course there are a lot of taxi drivers that follow the rules, but there are also some taxi drivers that actually charge a lot more than they should. The government should think on this more seriously, because this can impact the image of Macau. Do you believe Macau is now able to deal with the growing number of tourists? Macau is able to cope with the number of tourists, especially considering we’ll have more integrated resorts, which will be built in the coming years. When you have new resorts, more people may come and visit. The question is not whether Macau is able to cope with the current capacity, but the question is whether Macau is able to become the world tourism and leisure centre and keep this image. Will the city be able to become a world tourism and leisure centre as the government planned? There are lots of things the government needs to do in order to really go for that direction. During Chinese New Year, there were lots of tourists coming at the same time and to one or two attraction sites. The government always says that it needs to lead

If we want to make Macau a world tourism and leisure centre, we really need to enhance their [tourists’] experience

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Macau

tourists to other areas, but one of the problems is that tourists want to go to other areas but they also want to go to the Ruins of St Paul’s, because it is the symbol of Macau. So, the first thing the government needs to do is, if we cannot stop first-time tourists from going to the ruins, we should try to adjust the time that they go to that area. Also, in that central area, there are a lot of old streets and old shops, so the government can think of how to use these different small streets and direct tourists through different walking paths. The second thing is to keep building these integrated resorts and focus more on the non-gaming part [which] will definitely help Macau to have this image. The integrated resorts will combine the gaming and non-gaming part, but if we push the operators to focus a lot more in the non-gaming elements, [that] will definitely help. The third item should be diversification – because we want to become a world leisure centre, we want to diversify our tourist sources, so that we don’t have only visitors from mainland China. So if we are talking about tourists from Western countries, then the cultural part is also important. Currently we do have the cultural sites and we also have a lot of sites that have history but are not very well managed. The government also wants to promote the cultural and creative industries, so we can attract artists to work in these old sites and to develop those old sites into a more cultural and creative atmosphere. For the transportation part, the light rapid transit railway is definitely something that will help. Then, of course, if we can think of a better way to deal with the bus [crowding], then the taxi is also an important part [of the solution]. The government keeps pushing to attract more non-Chinese tourists. Is it possible to achieve that? Cultural and creative industries are a way to do this. Macau has a lot of history, it’s a combination of East and West. There are a lot of old sites, which are not really

being remodelled and redeveloped into cultural sites. Those are the opportunities for Macau. Could this bring other types of tourists? That will attract more Western tourists and tourists other than the Chinese. Most of the Chinese tourists like to go to the famous tourism sites to shop, so it will take some time for them to change. But if we look at a longer vision, then I would say developing the cultural and creative elements, definitely would help Macau to become more diversified and less dependent on the Chinese market. How about the long-haul travellers, who have limited direct flight connections to Macau? How does the city attract those people? Flight connections are one key element. You will attract a lot more tourists from one destination, if that destination has a direct flight to Macau. People just don’t want to transit. Also, developing the promotion of Macau, not just gaming, but also as a leisure centre [is important]. As we promote it as a leisure centre, we have to make sure that we really are a leisure centre. That means the cultural and creative elements [must] already exist and when the tourists come they can feel it. Regarding the tourism, I would

If you have too many tourists in one area, it’s very hard to make tourists think about Macau as a leisure centre

suggest the government think carefully in terms of diversifying the tourism into residential areas or into other areas. Getting the opinions of the residents who live in that area is

very important, because I’m not sure if the residents really want to have a lot of tourists in their own area. This will be important to the new routes the government is planning.

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Macau Melco Crown leads China rally in U.S. Chinese stocks in New York rose on Friday U.S. time, extending the biggest weekly advance since November. Macau casino operator Melco Crown Entertainment Ltd led the rally, along with Guangshen Railway Co., amid signs that growth in China and abroad is picking up. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. added 0.2 percent at 100.73 yesterday, bringing its gain for the week to 3.5 percent. Macau casino venture Melco climbed 0.9 percent after saying it will start paying dividends. E-Commerce China Dangdang Inc. rallied for a seventh day.

Luk Fook reports 7 pct rise in CNY sales Gold products sell strongly spurred by low wholesale prices Michael Grimes

michael.grimes@macaubusinessdaily.com

ewellery retailer Luk Fook Holdings (International) Ltd reported seven percent year-on-year growth in Macau same store sales during Chinese New Year. It didn’t specify the hard numbers. The company already has nine outlets in the city under the Luk Fook brand, and will add another three under the 3D-GOLD brand after recently closing on a controlling investment in the latter’s holding firm. Hong Kong same-store sales for the period were 12 percent up year-on-year, while mainland sales were up nine percent during the Lunar New Year, Luk Fook said in a filing to the Hong Kong Stock Exchange. Same store sales expansion specifically for gold products was 16 percent market wide during the period. The company measured the holiday period from January 17 to February 3, 2014 inclusive, as against January 27 to February 13, 2013, the dates of the previous Lunar New Year. “As [the] gold price was still relatively low, the sales momentum of gold products remained good,” stated the retailer, of the

CNY 2014 results. Same store sales growth for gem products rose two percent in Macau and Hong Kong compared to the equivalent period in 2013, and 13 percent for

the mainland. Luk Fook is taking the equity interest in 3D-GOLD via investment in China Gold Silver Group Co Ltd, a company incorporated in the British Virgin Islands.

The purchaser said in a filing last month that it would provide services and assistance to “enhance and improve operation efficiency and competitiveness, and improve product quality

Kingston Financial delays insider info Deals with controlling Chu and Li families will be revealed to shareholders later this month

ong Kong-listed Kingston Financial Group – which manages two Macau casino hotels – says it has delayed for up to a fortnight issuing a circular detailing the terms of arrangements between the group and its controlling families. The information will now be made available on a date falling “on or before 28 February,” said the firm in a filing to the Hong Kong

Stock Exchange. Combined gaming revenue at Kingston’s two Macau casino-hotels – Casa Real on the peninsula and Grandview at Taipa – rose nearly 11 percent in the six months to September 30 the firm said in an earlier filing. Both casinos operate – under a so-called service agreement – on the gaming licence of Sociedade de Jogos de Macau SA, founded by

Stanley Ho Hung Sun. Pollyanna Chu Yuet Wah, chief executive of Kingston Financial, acquired a controlling stake in Casa Real in 2005 for HK$750 million in cash and 110 million shares according to evidence submitted to a Hong Kong court. Ms Chu fell from 35th to 40th place on Forbes’ latest ‘Hong Kong’s 50 Richest’ list, despite her own net

and standards” of the target businesses. Luk Fook opened its “largest flagship store worldwide” at Circle Square in downtown Macau last year.

worth rising to US$1.4 billion (11.18 billion patacas) from US$1 billion a year earlier. A Kingston unit called Kingston Securities is currently the guarantor for up to HK$339.90 million worth of new shares in China Star Entertainment Ltd. The latter controls Hotel Lan Kwai Fong Macau, another Macau casino-hotel operating under a licence from SJM SA. Profit attributable to Kingston Financial’s owners for the six months to September 30 increased by 34 percent to nearly HK$341.10 million from approximately HK$254,83 million in the year prior period. That was “mainly due to increase in income from margin and IPO financing business” said the group. M.G.

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ICBC weighs acquisitions in Middle East Part of plans to boost profit from the region by 50 percent this year Matthew Martin

ndustrial & Commercial Bank of China Ltd., the world’s most profitable lender, said it will consider acquisitions in the Middle East as part of plans to boost profit from the region by 50 percent this year. “We’re looking to see if there are acquisition opportunities,” Zhou Xiaodong, chief executive officer for the Middle East, said in an interview from the lender’s Dubai offices. “It’s a good strategy. Part of the reason why ICBC grew so fast in Hong Kong is because of acquisitions.” ICBC is seeking to triple overseas earnings by 2016 and targeting more business with Middle Eastern companies after previously focusing on the local units of Chinese firms in the region, Zhou said. The bank has a goal to increase earnings from the Middle East by half this year and plans to open retail branches in Kuwait, Saudi Arabia and the United Arab Emirates.

KEY POINTS ICBC seeking to triple overseas earnings by 2016 ‘Deep blue sea of opportunity’ in Middle East China third largest trading partner of United Arab Emirates Gulf economy likely to grow 4.1 pct in 2014

ICBC lent US$600 million to regional clients including Emirates airline, Qatar Airways and Dubai Electricity & Water Authority in 2013. This year it’s seeking to boost

lending to Dubai real estate projects, energy companies in Abu Dhabi and infrastructure work in Qatar. In January it advanced US$201 million to Dubai-based real estate investment company SKAI Holdings for the development of a hotel on the Palm Jumeirah. “There’s a deep blue sea of opportunity for ICBC to develop its business in the Middle East,” Mr Zhou said, adding that profit from the region was US$33 million last year. “The Middle East business will play a very important role.”

Trading partner China is the third largest trading partner with the United Arab Emirates, and the second largest trading partner with Saudi Arabia. Trade with Saudi Arabia rose by 188 percent between 2007 and 2012, according to data compiled by Bloomberg. ICBC expects to become the first Chinese lender in Saudi Arabia, the Middle East’s largest economy, when it opens later this year in Riyadh and may also apply for two further branches in the country, Mr Zhou said. It’s also in talks with the Central Bank of the U.A.E. about retail branches in the country. Approximately 2,500 Chinese companies are registered in Dubai, mostly in construction, according to the emirate’s Chamber of Commerce. More than 200,000 Chinese expatriates live in Dubai, the Chamber says. ICBC expanded into Hong Kong in 2000 with the acquisition of Union Bank of Hong Kong. In 2004 it acquired the Hong Kong retail banking arm of Belgium’s Fortis, followed by the acquisition of Chinese Mercantile Bank a year later, according to the bank’s website. In 2008 it acquired Hong Kong-based Worldsec Asset Management Limited. ICBC’s Hong Kong based operations reported a profit of 4 billion Hong Kong dollars (US$517 million) in 2012, up from 3.1 billion in 2011. Economic growth in the sixnation Gulf Cooperation Council is forecast to accelerate to 4.1 percent in 2014, up from 3.7 percent last

year, according to the International Monetary Fund. “The economy is booming in the UAE and the Middle East,” Mr

Zhou said. “We’ve more than 200 clients here and we would like to develop more.” Bloomberg News

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Greater China SEC encourages China whistleblowers The number of employees informing on a company’s wrongdoing in Asia, including China, is expected to rise with a new policy by the US Securities and Exchange Commission to protect whistleblowers, say analysts quoted by the South China Morning Post. “Our firm has seen an increase in the number of whistleblower matters raised within China as a result of an increased focus on governance as well as the Chinese government’s focus on corporations such as GlaxoSmithKline [Pharmaceuticals],” said Mike Murphy, managing director at AlixPartners. The Chinese government is currently investigating GSK, the biggest British drug firm, for suspected bribery on the mainland. “The allure of rewards through [the] SEC represents a source of concern for companies,” the AlixPartners report said.

US considers Taiwan solar tariffs The United States has taken a step towards potentially extending import duties on Chinese solar energy products to also cover panels made with parts from Taiwan in a case that could have a major impact on the fast-growing U.S. solar market. The U.S. International Trade Commission found there was reason to think the imports could harm the local solar industry, putting Washington on a path toward widening the reach of the steep duties it slapped on products from China in 2012 and potentially escalating a tit-for-tat trade spat. The U.S. arm of German solar manufacturer SolarWorld AG had complained that Chinese manufacturers are sidestepping the duties by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products.

Record new credit boosts PRC’s outlook But central government still concerned longer term about default risks

hina’s new credit rose to a record in January, supporting growth in the world’s secondbiggest economy while underscoring risks to the financial system from defaults and bad loans. Aggregate financing, the broadest measure of credit, was 2.58 trillion yuan (US$425 billion), the People’s Bank of China said in a statement on Saturday. New local-currency lending was 1.32 trillion yuan, the highest level since 2010. Trust loans, under scrutiny because of default risks, were about half the level of a year earlier. The data add to better-thanforecast trade numbers in suggesting that China can limit the scale of any slowdown from last year’s 7.7 percent expansion in gross domestic product. At the same time, the figures contrast with a central bank call in mid-January for lenders to control surging loans and highlight diminishing economic returns from credit growth. “Banks are still extending a lot of credit and this will somewhat cool down fears that China is slowing dramatically,” said Liu Li Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd in Hong Kong. “In the government’s mind growth is still quite important.” Aggregate financing exceeded the 1.9 trillion yuan median estimate in a Bloomberg News survey and the previous high of 2.54 trillion yuan in January 2013. Growth in new credit slowed to 9.7 percent last year from 22.8 percent in 2012, according to PBOC figures.

Annual meeting

China rejects Xi-Ma meeting China has rejected Taiwanese President Ma Ying-jeou’s bid for a meeting with President Xi Jinping at a gathering of Asian leaders in Beijing later this year. China decided the annual Asia-Pacific Economic Cooperation summit in October “isn’t the place” for a first-ever meeting between leaders of the two governments, Wang Yu-chi, minister of Taiwan’s Mainland Affairs Council, told reporters in Taipei on Saturday. Mr Wang returned yesterday from a fourday trip to China where he met with Zhang Zhijun, minister of China’s Taiwan Affairs Office, marking the first official cross-strait contact in 65 years. The two met for a two-hour tea in Shanghai last Thursday, where the topic was broached. President Ma said in December he was willing to travel to Beijing for this year’s APEC summit, where leaders of member nations often hold bi-lateral meetings in addition to group discussions.

As China’s Communist Party leaders prepare for next month’s annual meeting of the legislature, the National People’s Congress, officials are grappling with swelling local-government debt, volatility in money markets and risks from shadow banking, highlighted by a bail-out that last month averted the nation’s first trust default in at least a decade. A 10.6 percent jump in exports in January may help Premier Li Keqiang to achieve annual economic growth of at least 7.2 percent, the level that he says is needed to protect jobs. The premier usually presents the government’s expansion target for the year in his annual work report to the NPC. “The government has allowed credit conditions to ease,” said Wang Tao, chief China economist at UBS AG in Hong Kong. “Worries about policy being too tight or that rate increases are hurting credit and economic growth are exaggerated.” While credit growth may remain rapid in the first few months of this year, the pace will slow over the rest of the year, she said.

De-leveraging The jump in loans contrasts with the central bank’s January warning that bank credit was increasing rapidly and also its statement in November that the Chinese economy may face long- term deleveraging. Each US$1 of credit added the equivalent of 17 cents in GDP in the first quarter of 2013, down from 29

cents the previous year and 83 cents in 2007, according to data compiled by Bloomberg. Economists’ estimates for aggregate financing, which includes bank lending, corporate bond issuance and shadow- banking products like entrusted loans, ranged from 1.5 trillion yuan to 2.39 trillion yuan. January’s figure compared with a previously reported 1.23 trillion yuan in December. New local-currency loans compared with the median economist estimate for 1.1 trillion yuan and 1.07 trillion yuan a year earlier. New loans were 482.5 billion yuan in December. Bank lending usually surges in January as financial institutions receive new quotas and offer credit at the start of the year to earn more interest, according to economists at ANZ, Citigroup Inc. and Mizuho Securities Asia Ltd. Last month’s figure may also have been boosted as loans postponed from December were handed out.

Higher rates The weighted average lending rate in China was 7.2 percent in December, up from 6.22 percent a year earlier, PBOC data released earlier this month show. In December, 63.4 percent of loans had interest rates above benchmarks, up from 59.7 percent a year earlier, according to the centra bank.

KEY POINTS New credit rose in January Aggregate financing 2.58 trillion yuan 10.6 percent jump in exports in Jan Calms fears of China slowdown

Money-market rates have also increased. The benchmark seven-day repurchase rate, a gauge of interbank funding availability, averaged 4.7 percent in January, up from 3.08 percent a year earlier. M2, China’s broadest measure of money supply, rose 13.2 percent from a year earlier in January, the Beijing-based central bank said. That matched the median economist estimate and compared with 13.6 percent in December. The growth in outstanding local-currency loans slowed to 14.3 percent in January from 15.4 percent a year earlier. Credit and money-supply growth of about 13 percent should be able to support economic expansion of slightly above 7 percent, said Ding Shuang, senior China economist at Citigroup in Hong Kong. “The government is trying to ensure that money is used more effectively through structural reforms and regulation of shadow banking and if they can achieve that then 13 percent will be supportive of growth,” he said.

Scary stories New trust loans issued in January were 106.8 billion yuan, the PBOC said, down from 210.8 billion yuan a year ago. “There could be a demand issue here,” said ANZ’s Liu. “Investors have been hearing scary stories about trust loans so maybe they are finally starting to realize the risks in this sector.” In its fourth-quarter monetary policy report this month, the central bank said it will strengthen supervision of wealth- management products and the interbank business that many smaller financial institutions turn to for funding. It also signaled higher money-market borrowing costs as it seeks to squeeze speculative lending and curb risks. “The central bank has made clear that it is still not comfortable with the pace of credit growth,” Mark Williams, an economist at Londonbased Capital Economics Ltd., said in a report after the data. “We therefore expect market rates to continue to trend higher, further slowing the pace of credit growth, particularly in the shadow banking sector.” Bloomberg News

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Greater China

Quirky IPOs make a splash in Hong Kong Mainland funeral service firm among the more offbeat offerings

nvesting in unconventional companies can be something of a gamble. But recent soaring debuts in Hong Kong show significant enthusiasm among ordinary investors hoping to make a quick return on the stock exchange’s less orthodox offerings, analysts say. “People have an impression that the stock market is the place that you can get good return even though it’s not always the truth. It is the mindset of a newer market,” Doug Young, a Shanghai-based writer on capital markets and Chinese corporates, told said. Hong Kong was the world’s top IPO venue from 2009 to 2011, and while it has fallen away recently the New Year has started with a bang, especially for less orthodox companies. Fu Shou Yuan, the largest mainland Chinese funeral services provider, saw its December US$215 million (1.8 billion patacas) IPO oversubscribed by nearly 700 percent, while its shares have risen more than 40 percent since its debut to Friday’s close of HK$4.8. Cemeteries are big business in China, where the country’s growing middle classes are increasingly willing to spend large amounts on plots of lands for their loved ones when they depart. Hong Kong’s recent unorthodox IPO offerings is Magnum Entertainment, a nightclub operator that owns three venues in the city’s famously raucous Lan Kwai Fong

entertainment district. When Magnum listed in January it was a red hot item, raising HK$126 million (US$16.25 million) for its IPO, and was 3,500 times oversubscribed, a record for the city. Its share price soared 90 percent on the first day. According to copies of the entertainment group’s IPO prospectus that were posted online, Magnum may have been aware some of its potential investors might not be entirely au fait with what a modern nightclub looks like. Second-hand luxury handbag retailer Milan Station held the record for being the most oversubscribed IPO until Magnum toppled its crown early this year. The retailer grabbed 77 percent more than its IPO price of HK$1.67 on its trading debut in 2011, and was 2,000 times oversubscribed.

Casino-like Investing in unconventional companies for a quick return can come with high risks, analysts warn. “It’s like a casino more than a stock market,” Geo Securities CEO Francis Lun said, adding that as long as investors subscribe and “play the market”, the shares in the company will be successful. Magnum shares have dropped since its January 23 listing from a high of HK$2.84 to HK$2.23 on Friday. The same day, Milan Station’s

Beijing air pollution eases Follows two days at ‘hazardous’ level

ir pollution in Beijing eased after two days of hazardous levels as firework displays traditionally used to mark the end of the Lunar New Year festival added to atmospheric contamination. Micrograms-per-cubic-meter concentration of PM2.5, fine particulates that pose the greatest risk to human health, fell to 178 near Tiananmen Square in central Beijing at noon yesterday after averaging 432 in the past 24 hours, according to data on the website of Beijing’s air-monitoring centre. The World Health Organization advises day-long exposure of no higher than 25. Thirty-three Chinese cities recorded air quality indexes at heavily polluted levels on Feb. 14, the end of the 15-day Lunar New Year celebration, with the PM2.5 level in Beijing’s Tongzhou district reaching

900 even as residents touched off fewer fireworks this year, according to Xinhua News Agency. “The recent pollution may be caused by fireworks,” Li Zhenlong, 30, who works in the energy industry

The government can’t act like it is blind. It has to shoulder its responsibility CCTV microblog

shares closed at HK$0.87, a far cry from the HK$1.67 IPO price. “Most investors at that moment are subscribing due to short term profit,” Core Pacific Yamaichi head of research Castor Pang said, adding that share price surges for such companies are usually a short-to-medium term phenomenon. At the more mainstream end of the market, large companies are still making impressive IPOs despite the comparative drop off from the halcyon days between 2009 and 2011. Sinopec Engineering, part of stateowned Chinese oil giant Sinopec, raised US$1.8 billion for its May 2013 IPO, in one of the biggest deals of the year. In December, China Cinda, a state-

in the Chinese capital, said. “We shouldn’t completely forbid firecrackers, this depends on people’s own free will, while the government should largely promote not doing it.” Fireworks sales in Beijing during the festival declined 38 percent from a year earlier, Xinhua reported, citing data from the municipal fireworks office. China Central Television yesterday accused Beijing officials of turning a blind eye to the city’s worsening air quality in recent days after they didn’t initiate an emergency response to the situation. “The government can’t act like it is blind. It has to shoulder its responsibility,” the business channel of the state network wrote on its Sina microblog. “Isn’t there anybody in charge of handling the smog?” Beijing announced in October that it would take emergency measures – including cutting road traffic and shutting schools – when the city issues a red alert, its highest air pollution warning. A blue alert, the lowest of the four levels, has been in effect since yesterday, according to Xinhua. Chinese authorities are seeking to clean up the nation’s air and water in an effort to assuage public anger over environmental degradation. Pollution is the leading cause of social unrest in China, according to Chen Jiping, a former member of the Communist Party’s Committee of Political and Legislative Affairs. “Smog is due to emissions from factories and cars,” said Zhang Jiaxing, a 16-year-old building guard. “Of course fireworks are also bad for the air even if not a main reason. The government should strengthen the environment protection industry and investigate and punish polluting factories.” Bloomberg News

owned debts management firm, raised US$2.5 billion and saw its shares surge almost 30 percent on its debut. But not all major IPOs have met expectations. The stock market debut of a utility trust owned by Asia’s richest man Li Ka Shing went with a whimper not a bang in January, despite being Hong Kong’s biggest IPO of the year so far. Analysts like Doug Young believe the average ‘mom and pop’ investor will continue subscribing to quirky IPOs as long as the market remains in good shape. “There hasn’t been a really bad downturn in the market,” he said. “But when they lose enough money they will probably stop doing that.” AFP

Wanxiang wins Fisker asset auction C

hina’s Wanxiang Group won an auction for the assets of Fisker Automotive Holdings Inc., the bankrupt maker of luxury plug-in hybrid cars, with a US$149.2 million bid. Wanxiang topped Hybrid Tech Holdings LLC during the auction, which began two days ago and went through 19 rounds of bidding, with an offer that includes US$126.2 million in cash and US$8 million in assumed liabilities, Fisker said on Saturday in a statement. U.S. Bankruptcy Judge Kevin Gross is scheduled to consider approving the sale tomorrow in Wilmington, Delaware. “This is a great result for all Fisker stakeholders,” said Marc Beilinson, the carmaker’s chief restructuring officer.

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Asia India to tighten spending India’s finance minister is expected to tighten spending in an interim budget today. At the same time he is likely to resist the temptation to announce a populist spending spree in a bid to stave off defeat at looming elections. Finance Minister P. Chidambaram, of the embattled ruling Congress party, is expected to focus on fiscal consolidation in his budget speech to the Indian parliament, his final one before a national vote due by May. “There is no room for populism. He will have to stay focused on the current account deficit, fiscal deficit and inflation,” said Vivek Rajpal, an interest rates strategist at Nomura Singapore Ltd. The government aims to limit the size of its fiscal deficit to 4.8 percent of gross domestic product for the current financial year, at a time when economic growth is at decade lows.

Smaller planes in demand as Asia travel booms Budget carriers cash in on the region’s growing middle classes Martin Abbugao

‘Think twice’ on Oz says Branson British tycoon Richard Branson urged businesses to “think twice” about investing in Australia, after the government there said it was considering offering financial help to national carrier Qantas. “Should the Australian taxpayer be forced by the Australian government to prop up the Qantas group as federal Treasurer Joe Hockey is suggesting, business people worldwide should think twice about investing in Australia for fear of such intervention in their sectors,” said Mr Branson. He also said Qantas already received most government travel spending and “should not be granted further special privileges over all its competitors.” In December Qantas said it was facing some of its toughest-ever challenges as it flagged a half-year loss of up to US$269 million (2.15 billion patacas) and the axing of 1,000 jobs. The airline reports its interim first-half results later this month.

Shippers switch to containers Food importers in Asia are switching from dry bulk cargo ships to container vessels, which normally carry goods such as toys and TVs, as they offer a way to import smaller amounts and can be cheaper per tonne. Asian import demand for animal feed grains is increasing as rising incomes trigger a move away from the traditional rice-based diet into more meat and dairy products, providing more opportunities for smaller importers. China is expected to surpass the European Union as the world’s leading consumer of pork on a per capita basis by 2022, while its dairy product consumption is expected to rise by 38 percent, according to the U.N. Food and Agriculture Organization. “You’ve got a lot of small growing businesses in South East Asia that can afford 1,000 or 5,000 tonnes of an agricultural commodity but cannot participate in large trade. Containers represent an opportunity to those businesses,” said Brian Bickford, president of AgriLogistics, a U.S. company specialising in grain shipping.

maller passenger planes are increasingly in demand in Asia as budget carriers cash in on the region’s growing middle classes by expanding their reach to less prominent cities, industry executives say. So-called “regional” jets – short to medium-haul aircraft that generally seat fewer than 100 passengers – were among the best sellers at the Singapore Airshow, which ended at the weekend. Jimmy Lau, managing director of show organiser Experia Events, said demand for smaller aircraft will rise as Asia’s burgeoning middle class sustains the growth in air travel that began in metropolitan areas. “The people who will be likely making good inroads are the Embraers and the Bombardiers who will be selling their smaller regional jets to countries like Indonesia, Thailand and Malaysia,” Lau told reporters as the Airshow ended with deals totalling a record US$32 billion (255.6 million patacas). Embraer, the Brazilian plane maker, forecasts that Asia-Pacific carriers will take delivery of 1,500 new jets in the 70- to 130-seat segment over the next 20 years, with a total value of US$70 billion. This would represent nearly 20 percent of global demand. Canada’s Bombardier expects the region to get one-third of the 12,800 aircraft in the 20 to 150-seat segment it forecasts to be delivered worldwide in the next two decades. The company’s vice president for marketing Philippe Poutissou said that Bombardier sold almost 80 percent of its planes to Western countries in the past. Four-month-old Indian carrier Air Costa sprang the biggest surprise at the event when it ordered 50 E-Jets E2 planes from Brazilian manufacturer Embraer worth US$2.94 billion, with purchase rights for 50 more.

Air Costa wants to connect cities in southern India such as Bangalore, Chennai, Hyderabad and Vijayawada, as well as key secondary cities in the country’s north and northwest.

Reaching further “Our philosophy is that we believe that 70 percent of the population, of the huge 1.2 billion population in India, still reside in these nonmetros,” Air Costa chief financial officer Vivek Choudhary said. Bangkok Airways, which describes itself as a “boutique” airline that serves popular tourist destinations in the country as well as the Maldives, Laos and Cambodia, ordered six 72600 planes from European plane maker ATR for US$150 million. Thai budget carrier Nok Air ordered two Q4 100 aircraft – which can seat 70-80 passengers – from Bombardier to help it expand into smaller cities in Thailand and neighbouring countries, and may buy six more. Nok Air chief executive Patee Sarasin said the airline’s strategy is to use 33-seater planes to penetrate small towns and stimulate air travel, and then to increase frequency or use bigger aircraft as demand rises. “There are so many airports in Thailand that are underutilised and so many towns that are underdeveloped in terms of the flying experience,” Mr Sarasin said. Poutissou of Bombardier said his company is also aiming at a slightly larger aircraft class with its C Series of planes that can seat up to 150 passengers, competing directly with popular single-aisle planes made by Boeing and Airbus. The Airbus A320 and Boeing B737 – currently favoured by Asia’s major budget carriers – can seat between 126 and 200 passengers.

Poutissou said regional jets and single-aisle planes can complement each other, and he expects airlines to have a combination of both. Boeing and Airbus are watching their smaller challengers. “They are moving up into that part of the market [single aisle] in order to compete directly with us,” said Randy Tinseth, vice president for marketing at Boeing. Tinseth said Boeing and Airbus must assume that one of the smaller aircraft manufacturers, including some from China, will become successful. “It’s not a question of whether they will be successful, but when,” he said. John Leahy, Airbus chief operating officer, said he was not “overly concerned” about the upcoming competition. But he added: “If you ask ‘Will Airbus and Boeing be under threat in the next 10 years?’ The answer is no. And 20 years? The answer is probably yes.” AFP

KEY POINTS Bombardier, Embraer to sell smaller jets to Indonesia and Malaysia Air Costa ordered 50 E-Jets E2 planes from Embraer Regional jets and singleaisle planes can complement each other Boeing and Airbus are watching their smaller challengers

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com CLOSING 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

Dubai stocks advance

Japan PM keen to cut corporate tax rate Linda Sieg and Yuko Yoshikawa

rime Minister Shinzo Abe is determined to cut Japan’s corporate tax rate, Chief Cabinet Secretary Yoshihide Suga said. It’s a step experts suggest could boost the global competitiveness of Japanese companies and make the country more attractive to foreign investment. Mr Suga, who serves as the government’s top spokesman and is one of Mr Abe’s most trusted aides, also said Japan’s participation in talks on a United States-led free trade pact – the Trans-Pacific Partnership – was a vital part of the Prime Minister’s growth strategy. It represented the “Third Arrow” in his “Abenomics” policy that also includes hyper-easy monetary policy and fiscal spending. “The Prime Minister has made a definite statement regarding a reduction in the corporate tax rate,” Mr Suga told Reuters in an interview. “We want to achieve this.” Finance ministry officials have expressed concern that cutting the corporate tax rate, considered high by global standards at about 35 percent for national and local taxes combined, would worsen the public debt, which is already the highest among advanced nations. But Mr Suga said “whatever the finance ministry says, the government policy will not change. We will consider what will happen to government finances if the corporate tax rate is lowered, but the prime minister has said all along that a reduction is necessary. We want to do that properly.” Mr Abe took office in December 2012 pledging to revive the economy and end the deflation that has plagued it for a decade and a half. Mr Suga said that nearly 14 months later Japan was on track to escape deflation. “Without a doubt, we have been able to create the atmosphere such that

we can escape from the deflation that has continued for 15 years,” he said. “I think that we are a cabinet that will achieve the two extremely difficult [goals] of escaping deflation and rebuilding the government finances,” he added. He said the real test would come after the government raised the 5 percent sales tax to 8 percent in April. “Without a doubt, the critical time awaits us after the sales tax rise,” he said. Another rise to 10 percent is scheduled from October 2015.

Trust in Kuroda Mr Suga said it was up to the Bank of Japan to decide whether further monetary easing would be needed if the economy struggles after the April

Without a doubt, the critical time awaits us after the sales tax rise Chief Cabinet Secretary Yoshihide Suga

sales tax hike. “With regard to monetary policy, Bank of Japan Governor [Haruhiko] Kuroda shares the Abe government’s way of thinking so we want to trust him and leave it to Governor Kuroda.” The Bank of Japan launched an intense burst of monetary stimulus last April, when it pledged to accelerate inflation to 2 percent in about two years with aggressive asset purchases. The central bank is likely to stand pat on monetary policy next week, but is hardly complacent. With a global recovery still fragile, Japanese companies are wary of boosting wages and capital spending enough to compensate for a slump in household spending expected after the April tax rise. Investors have mostly applauded the first two “arrows” of Mr Abe’s economic prescription, but have been disappointed by the growth strategy, including a perceived lack of progress in key areas such as labour market reform. Asked about such views, Mr Suga noted that deregulation and other structural reforms generally needed legal changes, but said he wanted to show the direction on changes in key sectors of labour, medical care and agriculture by the end of June. He added that Japan’s participation in the Trans-Pacific Partnership talks was a vital part of the growth strategy. “From here on, I think that the ‘arrow’ with the longest flight time will be TPP,” he said. Japan and the United States held high-level talks in Washington this weekend in search of a two-way compromise ahead of a meeting of ministers from the 12 participating countries in Singapore later this month. A key sticking point is Japan’s desire to maintain tariffs on politically sensitive agricultural products such as rice.

Amlak resumption

South Korea’s Iranian crude imports, however, can vary month on month as one of the two South Korean refiners that buys from Iran receives oil only every other month. SK Energy and Hyundai Oilbank are the only South Korean refiners that buy Iranian oil on a regular basis. Under the agreement, Tehran also won access to US$4.2 billion of its oil revenues frozen abroad by eight money-transfer schedules through July if it carried out its part of the deal to curb its nuclear enrichment programme. Following the first payment by Japan earlier this month, South Korea and India could become the second and third Asian nations to make back payments to Iran for crude oil imports, according to sources. Japan, Asia’s fourth-largest economy imported a total of 10.6 million tonnes of crude last month, or 2.5 million bpd, compared with 11 million tonnes in January 2013, according to the customs data. Reuters

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Reuters

negotiate their differences to settle a final deal. Until then, no big jumps are expected in crude imports by Iran’s top four buyers China, India, Japan and South Korea. The four importers have been steadily cutting purchases over the last two years to avoid falling foul of toughened U.S. and EU sanctions put in place in 2012. The four Asian buyers together cut oil imports from Iran by 15 percent on the year to an average of 935,862 bpd in 2013, government and industry data showed. The interim agreement reached last November allows the OPEC member to keep exports at the current reduced levels of about 1 million bpd – under half of pre-2012 levels – and opens a door for lifting shipments later. South Korea won its last U.S. waiver at end-November. It did so by hitting its target for cutting Iran oil shipments by 15 percent to around 125,000 bpd in the June-November 2013 period over the previous six months.

ubai shares climbed the most in two weeks, led by property developer Deyaar Development PJSC, after gains in emerging markets and better-thanexpected corporate earnings boosted sentiment. Saudi Arabia’s gauge rose. In Dubai the DFM General Index rose as much as 3.2 percent, the most since January 28. Deyaar surged 11 percent, the most in three weeks, after the company’s board recommended foreigners be allowed to own its shares. Saudi Arabia’s Tadawul All Share Index added 0.6 percent. Emerging-market stocks posted their biggest weekly gain in five months on February 14 after data showed U.S. consumer confidence in February was stronger-than-projected and the euroarea economy expanded more than forecast in the final quarter last year. Deyaar’s 2013 profit quadrupled and earnings at Union Properties PJSC jumped nearly nine-fold as property prices surge on the back of Dubai’s accelerating economic growth. “This is purely a momentum driven market and there is a lot of positive news, such as better-thanexpected corporate earnings, a merger between the United Arab Emirates’ two exchanges, and Amlak going back to the market,” Tariq Qaqish, a director at Dubai-based Al Mal Capital PSC said by e-mail yesterday. The recommendation of Deyaar’s board to allow foreign shareholders is helping the stocks as well, he said.

Dubai and Abu Dhabi completed due diligence on a potential merger of the two stock markets in the U.A.E., bringing the combination a step closer, two people familiar with the matter said on February 3. A debt restructuring at Dubai-based mortgage provider Amlak Finance PJSC is almost complete, Economy Minister Sultan Al Mansoori said on January 30. It could lead to resumption in trading in Amlak, suspended since 2008. Deyaar climbed to 1.37 dirhams with volume at more than twice the threemonth daily average after its board recommended allowing foreigners to own up to 25 percent of the developer’s stock. Dubai Islamic Bank PJSC, which owns more than 40 percent of Deyaar, gained 5.5 percent to 6.34 dirhams. Abu Dhabi’s index added 0.1 percent. Qatar rose 0.2 percent, Bahrain jumped 0.2 percent, Oman increased 0.1 percent while Kuwait was down 0.4 percent. Israel’s benchmark TA-25 index gained 0.7 percent to 1,318.44 at 10:50 a.m. in Tel Aviv. The gauge was led by Opko Health Inc. that advanced 7.8 percent to 29.52 shekels, tracking a two-day gain in its U.S. traded shares. Teva Pharmaceutical Industries Ltd. advanced 0.6 percent to 155.50 shekels after a filing showed that Soros Fund Management LLC boosted its stake in the Petach Tikva, Israel-based drug maker. The yield on Israel’s 2023 benchmark bonds due March 2023 fell 3 basis points, or 0.03 percentage points, to 3.51 percent after January inflation declined more than expected.

South Korea’s Iran oil imports down 51pct S outh Korea’s crude imports from Iran fell 51 percent in January from a month earlier. Shipments are expected to remain at around 125,000 barrels per day through the first six months of the interim deal on Tehran’s nuclear programme. Under the Geneva accord agreed between Iran and six major powers last November – that went into effect in January – South Korea and other Asian buyers can maintain crude oil imports at the sanctions-reduced rates reached at the end of 2013. South Korea imported 275,169 tonnes of Iranian crude last month, or 65,064 bpd, a fall of 51 percent month on month, and 66 percent down year-on-year, preliminary data from customs show. The interim deal reached last November eases some of the sanctions on Iran, including freeing up some frozen payments for oil, in return for curbs to Iran’s nuclear enrichment programme. Tehran and the so-called P5+1 group of world powers still have to

Biggest gains in a fortnight on earnings, positive Saudi news

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International

Cisco’s dominance bolsters discount in EZchip EZchip also developing new line of processors with a target market twice as large

Zchip Semiconductor Ltd’s New York shares are trading at a discount to their Tel Aviv stock after concern mounted that the chipmaker is becoming too dependent on its biggest client, Cisco Systems Inc. Shares of EZchip, based in Yokneam, Israel, were little changed on Friday New York time, rising 0.4 percent to US$25.58 after plunging 5.6 percent the previous day in the biggest sell off in five months. The stock is trading at an 81 US cents discount versus the Tel Aviv shares. The Bloomberg index of the most-traded Israeli companies in the U.S. gained 4.2 percent. Caesarstone Sdot Yam Ltd., the maker of kitchen countertops, rallied 28 percent after fourth-quarter earnings beat estimates. EZchip chief executive Eli Fruchter said he expects the company’s reliance on Cisco to rise above 40 percent of total revenue this year. Growing dependence on one client could undermine the chipmaker’s earnings in the longer term, Oppenheimer & Co and Chardan Capital Markets LLC said. Clients including Juniper Networks Inc. and Huawei Technologies Co. have said over the past four years that they’ll develop chips in house. “Cisco isn’t going away, but on the

Tyson to acquire Michael Foods T

yson Foods Inc. made a bid to buy Michael Foods Group Inc., the processing and distribution business controlled by Goldman Sachs Group’s private-equity arm, according to two people familiar with the matter. It’s unclear how much competition Tyson will have for Michael. Some bids could come this week for the

flip side they’ve also conceded that Huawei,” and other companies have “internal solutions,” Jay Srivatsa, an analyst at Chardan Capital Markets LLC in New York, said. “Until we see a real ramp-up in fiscal business from the company, those fears will be keeping a lid on the stock.” EZchip’s revenue from Cisco rose 18 percent in 2013 to represent 39 percent of total sales, Fruchter said on a Wednesday conference call with investors. EZchip expects Cisco to be “a greater-than-40 percent customer for us,” he said.

More dominant Sales increased 32 percent from a year ago in the fourth quarter of 2013 to US$20.1 million, the second consecutive quarter of record sales. Adjusted earnings were 34 US cents a share, above the 33-US cent average of seven analyst estimates compiled by Bloomberg. EZchip should benefit this year as Cisco, the biggest maker of networking equipment, grows more dominant in its router business, said Mr Srivatsa, who has a buy rating on the shares and predicts they will rise 25 percent in the next 12 months. Even with record sales, EZchip’s reliance on Cisco and the decision of

company, which may be worth about US$2 billion (16 billion patacas), one of the people said. Offers were due Friday and several private-equity firms were considering bids, said the two people, who asked not to be identified because the sale process is private. Worth Sparkman, a spokesman for Springdale, Arkansas-based Tyson, declined to comment on the bid. Voicemail messages left for Michael’s chief financial officer Mark Westphal and Diane Sparish, a spokeswoman, weren’t immediately returned. Tyson, the largest U.S. processor of beef and chicken, is trying to cushion against some of the volatility in commodity prices by expanding its prepared-foods business, which competes with Hormel Foods Corp. and Hillshire Brands Co. Tyson is

customers like Sunnyvale, Californiabased Juniper and Shenzen, Chinabased Huawei to build their own chips internally mean EZchip’s stock is vulnerable to further declines, according to Andrew Uerkwitz, an analyst with Oppenheimer in New York. “Customer concentration risk weighs heavily on the mind,” Mr Uerkwitz wrote in a report Thursday. “We like what we see in execution and strategy to diversify, but we see street expectations ahead of themselves and customer concentration risk not appropriately priced in.” EZchip is cultivating a new group of clients outside its top three customers Cisco, Juniper, and Shenzen-based ZTE Corp., according to Mr Fruchter. It’s also developing a new line of socalled NPS network processors with a target market twice as large. The company expects to start winning customers for the new chips in the second half of 2014 and to start production in 2016, he said. “We believe that we will be able to win in these market segments and significantly diversify our customer base as a result, easing our current dependency on three customers that generated more than 70 percent of our revenues in 2013,” Mr Fruchter said.

ECB scrutinises assets Auditors visiting European banks to examine accounting procedures

targeting revenue growth of 6 percent to 8 percent for its value-added foods, and in the last year it has bought Bosco’s Pizza Co., Circle Foods LLC and Don Julio Foods Inc. Terms for all three deals weren’t disclosed. Michael’s products include Simply Potatoes, Papetti’s Easy Eggs and Crystal Farms cheese. It has annual net sales of more than US$1.5 billion, according to its website. The Minnetonka, Minnesota-based company was acquired by Goldman from buyout firm Thomas H. Lee Partners LP for US$1.7 billion in 2010, according to data compiled by Bloomberg. Michael was taken private in 2000 in a US$562 million deal led by Goldner Hawn Johnson & Morrison Inc., the data show.

undreds of auditors will arrive at euro-area banks this week to examine their accounting procedures and scrutinise their loan books as the European Central Bank’s review of lenders enters a new phase. Bayerische Landesbank, Germany’s second-biggest state-owned lender, expects about 40 auditors to show up today, leading to costs for the bank of some seven million euros (76.7 million patacas), said chief executive Gerd Haeusler. Erste Group Bank AG of Austria and Bpifrance, based near Paris, also said inspectors will arrive next week. “They’ll need a pretty large room for several weeks,” said Erste spokesman Michael Mauritz in a phone interview. The Vienna-based lender expects auditors from the ECB, the Austrian central bank and outside firms, he said. The ECB is working with local regulators on a yearlong review of 128 of the euro region’s largest lenders to ensure they have enough capital. Political leaders asked the Frankfurt- based institution to take on supervision of the banks starting this November to shore up confidence in the industry and make sure the bailouts of the 2008 financial crisis aren’t repeated. Inspections at some banks will start over the next few weeks. An ECB spokeswoman said the timing of individual auditor visits is a matter for the national authorities. The influx of auditors into bank offices marks the second phase of the ECB’s asset quality review, which began in mid-November. During this stage, lending books that were selected for scrutiny will be checked to make sure the loans are correctly classified. If inspectors find too high a proportion of doubtful loans classified as performing, they will conduct a more thorough study, according to a document distributed by the Bank of Italy to the nation’s lenders and obtained by Bloomberg News. The asset quality review will be used to determine the banks’ common equity Tier 1 ratio, a key measure of financial strength. The ECB set a minimum requirement of eight percent. The ECB’s assessment will conclude later this year with stress tests. Lenders that fail will have to raise fresh capital.

Bloomberg News

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February 17,19, 2014 Friday April 2013

Opinion Business

wires

Friendless China

Leading reports from Asia’s best business newspapers

ASAHI SHIMBUN

Brahma Chellaney

Professor of Strategic Studies at the New Delhi-based Centre for Policy Research

Japan’s Fisheries Agency unveiled a new logo for seafood exports as part of the government’s push to sell more Japanese marine products abroad. Traders will be able to use the logo, which says “Excellent Seafood JAPAN,” for free from April after completing usage approval procedures. The agency said it does not plan to conduct export commodity inspections during the approval procedures “because all Japanese fishery products are excellent.” The logo features waves representing Japan’s rich fishing waters, a leaping fish, and the UNESCO World Heritage site of Mount Fuji.

KOREA HERALD Dongbu Daewoo Electronics is moving to liquidate its manufacturing plant in Spain as a part of its efforts to boost and realign its production concentration in Korea, China and Mexico, a company official said. The planned sell-off, which was “under consideration for some time,” is in part due to high labour costs in the region. Also, the latest debt crisis that affected the eurozone including Spain had made it move forward with the plan, the official said. Daewoo Electronics’ Spain manufacturing plant was built in 1998 with a capacity to produce 600,000 units of refrigerators.

NZ HERALD New Zealand health insurers are offering cheap policies designed to tempt young people. But there are concerns that they may not be cost-effective in the long run. New insurer ‘nib’ and Southern Cross now offer policies that cover part of the cost of things such as GP visits and dentist checks – but not major health costs such as surgery. Prices start from NZ$4.95 (33.09 patacas) a week, or about NZ$260 a year, for nib’s Basic EveryDay package, which pays 60 per cent of the cost of glasses, contact lenses, dental care, physiotherapy and GP consultations.

BANGKOK POST In a move aimed at speeding up its rice sales, the government put up 220,000 tonnes of its rice stocks on the Agricultural Futures Exchange of Thailand (AFET), drawing several interested potential buyers, mostly retailers and wholesalers. Rice sold via AFET for the second time this year would be mainly from the 2013/2014 season, with five percent white rice making up 167,000 tonnes from the state warehouses in Saraburi, Sing Buri and Chai Nat, and the rest Hom Mali rice 100 percent grade B from warehouses in Phitsanulok, Phayao, Nakhon Ratchasima, Ubon Ratchathani and Chiang Mai.

t a time when China’s territorial assertiveness has strained its ties with many countries in the region, and its once-tight hold on Myanmar has weakened, its deteriorating relationship with North Korea, once its vassal, renders it a power with no real allies. The question now is whether the United States and other powers can use this development to create a diplomatic opening to North Korea that could help transform northeast Asia’s fraught geopolitics. China’s ties with Myanmar began to deteriorate in late 2011, when Myanmar decided to suspend work on its largest and most controversial Chinese-aided project: the US$3.6 billion Myitsone Dam, located at the headwaters of the Irrawaddy River. The decision shocked China, which had been treating Myanmar as a client state – one where it retains significant interests, despite today’s rift. The bold decision to halt the dam project may have hurt Myanmar’s relationship with China, but it was a positive step for its relations with the rest of the world. Indeed, a major political shift followed, bringing about the easing of longstanding Western sanctions and ending decades of international isolation. By distancing himself from China, North Korea’s young dictator, Kim Jong-un, could well be signalling a desire to move in a similar direction. Of course, if he is seeking a thaw in relations with the U.S., he has a long way to go. His welcoming of former American basketball star Dennis Rodman has generated only controversy in the U.S., and his apparent execution by machine-gun of a former girlfriend (as reported by a South Korean paper, citing

unnamed sources in China) is no way to endear oneself to the American heartland. For most observers, the episode that triggered the deterioration in China’s relationship with North Korea – the execution of Kim’s uncle by marriage, Jang Song-thaek – simply reflected North Korea’s erratic and obscure politics. For China, however, it was personal. The treason charges levelled against Jang – China’s most valued friend in North Korea’s regime – included underselling resources like coal, land, and precious metals to China.

Limited options But China’s carefully nurtured “blood relations” with North Korea have been souring almost since Kim succeeded his father, Kim Jong-il, in late 2011. In an early show of defiance, North Korea seized three Chinese fishing boats, detained a reported 29 people on board for 13 days (during which they were allegedly abused), and then demanded US$190,000 in compensation for illegal fishing in North Korean waters. Kim went on to rile China further by carrying out his country’s third nuclear test. Unsurprisingly, China’s staterun media have responded to Kim’s attempts to chart an independent course by accusing him of pursuing the “de-Sinification” of the hermit kingdom. But, beyond an anti-Kim propaganda campaign, China’s options are limited, not least because it has a strong interest in retaining access to North Korea’s vast reserves of iron ore, magnesite, copper, and other minerals – just as it retains access to Myanmar’s massive and

undeveloped reserves. More important, any Chinese attempt to squeeze North Korea, including by cutting off energy and food supplies, would risk triggering a mass influx of refugees. Worse, from China’s perspective, it could bring about the collapse of the Kim family’s rule, which could unravel the North Korean state and lead to a reunified and resurgent Korea allied with the U.S. The prospect of US troops on its border is a nightmare scenario for China. Moreover, a reunified Korea would inherit ongoing territorial and resource disputes with China (concerning, for example, Chonji, the crater lake on Mount Paektu, and islands in the Yalu and Tumen rivers). China would likely accept reunification only if it led to a “Finlandized” Korea that offers permanent

For most observers, the episode that triggered the deterioration in China’s relationship with North Korea simply reflected North Korea’s erratic and obscure politics

strategic concessions to the superpower next door.

Risky negotiation Like North Korea today, Myanmar was, until recently, an isolated, militaristic country suffering under prolonged and escalating internationa sanctions. In fact, reflecting its growing frustration with Kim, China cosponsored the most recent round of United Nations sanctions against North Korea last year. But, whereas Myanmar is a diverse society that has long been ravaged by internal conflicts pitting ethnicBurmese governing elites against many of the country’s minority groups, North Korea is a homogenous, regimented, and nuclear-armed society. In other words, North Korea is a far more potent threat to the rest of the world. Still, the China-North Korea rift marks a potential turning point in northeast Asian geopolitics. If the U.S. is to seize the diplomatic opening, it must shed its reliance on the Chinese to serve as its intermediary with North Korea – a sore point with the Kim regime, given its desire to reduce its dependence on China. Unlike the U.S. opening with Myanmar, which led to U.S. President Barack Obama’s historic visit in 2012, any American engagement with North Korea would have to be based on reaching a denuclearisation agreement. The question is whether Obama – who is weighed down not only by domestic woes, but also by efforts to reach an agreement on Syria and an interim nuclear deal with Iran – has the political room or personal inclination to enter into risky negotiations with North Korea. © Project Syndicate

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Closing U.S. stocks’ best week since Dec

Treasuries drop on taper speculation

U.S. stocks rallied the most for a week since December as comments from Federal Reserve Chair Janet Yellen (pictured) reassured investors about the strength of the economy and corporate earnings exceeded estimates. Goodyear Tire & Rubber Co., Cliffs Natural Resources Inc. and CBS Corp. rallied at least 7 percent amid better-thanforecast results. Applied Materials Inc. jumped 10 percent after predicting rising sales. Time Warner Cable Inc. climbed 7.9 percent after Comcast Corp. agreed to buy it for US$45.2 billion (361.1 billion patacas). Apple Inc. gained 4 percent as Carl Icahn backed away from his push to increase share repurchases at the iPhone maker.

Treasury 10-year notes fell for a second week in the first back-to-back losses this year amid bets the Federal Reserve will push on with bond-buying cuts, viewing the strength of the economy as being masked by harsh weather. Yields on the benchmark securities reached a two-week high as Fed Chairman Janet Yellen said only a “notable change” in economic prospects would prompt a slowing in the pace of purchase reductions. Treasury volatility dropped to a ninemonth low. U.S. factory production unexpectedly fell in January by the most since May 2009 as severe weather weighed on the economy.

White House pledges US$1 bln to tackle climate change Helping communities dealing with extreme weather including floods, drought and wildfires

resident Barack Obama unveiled a US$1 billion (8 billion patacas) fund in his 2015 budget to help communities across the United States prepare for the impact of climate change. California is attempting to cope with its worst drought in recorded history, which is threatening its critical agriculture industry, energy production and other industries. The fund is part of a broader approach to deal with climate change that Obama outlined in his Climate Action Plan in June 2013. While certain elements of that plan can be carried out through executive action, the fund requires Congressional approval, which makes its future uncertain. “Given the saliency of the issues

in communities across the political spectrum, it seems likely to create some momentum for action in Congress, although obviously that is very hard to say in the current environment,” said Billy Pizer, associate professor at the Sanford School of Public Policy at Duke University. Republicans and some Democrats in coal-dependent states have bitterly opposed previous attempts to pass legislation that would put a mandatory limit on carbon emissions. Some have tried to pass legislation that would stop the Environmental Protection Agency from regulating carbon emissions. The proposal will be formally introduced when Obama unveils his fiscal 2015 budget in March. It will help communities deal with

extreme weather events, such as floods, drought, heat waves, and wildfires, according to the White House. Such disasters include Superstorm Sandy in 2012; the April 2011 tornado outbreak in Southern, Midwestern, and Northeastern United States; and California wildfires in October 2007. Funds would be used to research how to better prepare for climate change-related effects like rising sea levels and extreme temperatures and encourage local initiatives. Other investments would include “breakthrough technologies and resilient infrastructure” such as building sea walls and more resilient electricity delivery systems to protect

vulnerable cities and towns. The concept of the fund is based on a recommendation made in December 2012 by the think tank Center for American Progress (CAP). CAP founder John Podesta is a former chief of staff to President Bill Clinton. Podesta returned to the White House in December as a senior adviser to Obama. “Every dollar spent on resilience will save federal taxpayers US$4 in lower disaster recovery costs,” Daniel Weiss, CAP’s director of climate strategy, said on Friday, citing a study by the organization. “Now it’s up to Congress to make this essential preparedness fund into a reality.”

Independent Scotland Greek budget ‘difficult’ to integrate surplus topped with European Union US$2.05 bln

Kuwait’s Global to hire Osmansoy

t will be “difficult, if not impossible” for an independent Scotland to become a member of the EU if it votes to break away from Britain, European Commission president José Manuel Barroso (pictured) warned yesterday. “In case there is a new country, a new state, coming out of our current member state, it will have to apply and the application and the accession to the European Union would have to be approved by all the other member states of the European Union,” he told BBC television in reference to Scotland’s upcoming referendum. “I think it would be ... extremely difficult to get the approval of all the other member states, to have a new member coming from one member state.” Scots will head to the polls to vote on their independence on September 18. “I believe it’s going to be extremely difficult, if not impossible, a new member state coming out of one of our countries, getting the agreement [of member states],” Barroso said yesterday, adding it was for the people to decide on the future of Scotland.

reece in 2013 registered a budget surplus of more than 1.5 billion euros (16.4 billion patacas), exceeding requirements for additional debt aid, Prime Minister Antonis Samaras said yesterday. “We have created a primary surplus in 2013 when the target was for 2014... it is over 1.5 billion euros,” Mr Samaras told To Vima weekly in an interview. “Three times more than we originally calculated,” he said. A month earlier, Mr Samaras had placed the primary surplus – a budget surplus not counting debt-servicing costs – at around 500 million euros. It is the first time in over a decade that the country has registered a primary surplus. Greece hopes to utilise these savings in order to obtain assistance with its enormous debt from its international creditors later this year. Samaras has pledged to give most of the surplus back to those worst affected by four years of austerity cuts. Some European officials however have expressed scepticism over the scope of Greece’s surplus claims. EU data agency Eurostat is expected to formally announce the size of the surplus in April.

lobal Investment House KSCC, the Kuwaiti bank that restructured US$1.7 billion (13.6 billion patacas) of debt, hired Orhan Osmansoy to head its US$600 million distressed assetmanagement business, two people with knowledge of the matter said. Osmansoy, a former chief executive officer of Abu Dhabi- based The National Investor, will lead the so-called special situations asset management business at Global dealing with distressed assets and restructuring, the people said, declining to be identified as the information isn’t public. Global reached an agreement to restructure US$1.7 billion of debt in 2009 before approaching creditors again two years later to seek a “more comprehensive restructuring,” it said at the time. It then de-listed from the Kuwait Stock Exchange and transferred investment assets to a special purpose vehicle, which it manages for creditors. The bank’s special situations arm is charged with managing the SPV and will offer advisory and management services for other companies undertaking restructuring or looking to exit distressed assets, according to one of the people.