Macau business daily, Feb 18, 2014

Publisher: Paulo A. Azevedo

Closing Editor: Michael Grimes

MOP 6.00

China grants QFII licence to Monetary Authority

Friday April 19, 2013

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Year II

Number 478 Tuesday February 18, 2014

hina’s securities watchdog has licensed the Monetary Authority of Macau to invest in mainland capital markets via the Qualified Foreign Institutional Investor (QFII) scheme, the regulator said yesterday. It didn’t specify what it meant in cash terms.

Business Daily asked the monetary authority for more information but none was available by press time.

The China Securities Regulation Commission published the updated list of QFII investors on its website. It also listed several central banks of China’s Asean neighbours – Bank of Korea, Bank of Thailand and Bank Negara Malaysia as having received approval for investment quota under the scheme.

We reported in January that the Macau government had applied for QFII allowance, likely to be invested via the territory’s de facto sovereign wealth fund.

More on page 3

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Union warns against ‘flexible’ table cap

business daily 1 Xiamen Airlines’ Dalian route by end March Page 2

January public surplus hits MOP12.6 bln Page 5

Solaire names Crown exec head of VIP Page 6

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A union of casino workers, Forefront of Macau Gaming, says it may take protest action if the government ignores its request to enforce strictly the limit on annual growth in the number of gaming tables.

The union says the cap limiting annual growth to three percent is the “ultimate solution” for safeguarding the jobs of its members.

The group delivered a petition to government headquarters yesterday.

“We are asking the government whether it is committed to limiting the growth of gaming tables to three percent every year,” said union president Ieong Man Teng.

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HSI - Movers Name

Macau, Taiwan clinch open skies agreement

RMB14.3 bln so far invested in ‘super bridge’

NagaCorp eyes Macau-Cambodia air links

Macau and Taiwan signed yesterday an open skies agreement which allows airlines to carry unlimited passengers and freight between here and the island, and allows more airlines to do it.

The deputy director of Taiwan’s Civil Aeronautics Administration, Lee Wan-lee, told reporters after the signing ceremony: “The new accord allows more operators to serve Macau-Taiwan routes, so that there will be fair competition between the operators…”

More than one third of the estimated 34.7-billion-yuan (45.4-billionpatacas) public investment in the main structure of the Hong KongZhuhai-Macau Bridge – that will span the Pearl River Delta – is already committed according to a mainland report, quoting officials there.

Guangdong newspaper Zhujiang Evening News quoted the Zhuhai Transport Bureau as saying on Sunday the bridge is on track to open by 2016.

Hong Kong-listed NagaCorp Ltd wants to fly gamblers from Macau and mainland China to its gaming resort in Phnom Penh, Cambodia’s capital.

The company’s chairman, Timothy McNally, confirmed the reports to Business Daily yesterday. In a phone interview, Mr McNally said the company already has one aircraft and is the process of purchasing an additional three. Two of these are Airbus A320s.

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%Day

Tencent Holdings

5.74

Ping An Insurance .

3.82

China Coal Energy

2.78

China Resources

2.18

China Shenhua Energy

2.14

Sands China

- 3.36

Galaxy Entertainment

- 3.23

Lenovo Group Ltd

- 1.72

Tingyi Holdings

- 1.46

Cheung Kong Holdings

- 1.27

Source: Bloomberg

I SSN 2226-8294

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22 business daily

February 18, 2014 Friday April 19, 2013

Macau

Macau, Taiwan clinch open skies agreement New deal lifts restrictions on air services on routes between the jurisdictions Stephanie Lai

sw.lai@macaubusinessdaily.com

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acau and Taiwan signed yesterday an open skies agreement which allows airlines to carry unlimited passengers and freight between here and the island, and allows more airlines to do it.

The deputy director of Taiwan’s Civil Aeronautics Administration, Lee Wan-lee, told reporters after the signing ceremony: “The new accord allows more operators to serve Macau-Taiwan routes, so that there will be fair competition between the operators, and the public can now enjoy a greater choice of flights and cheaper fares.”

The open skies agreement permits an unlimited number of scheduled flights between Macau and the Taiwan cities of Taipei and Kaoshiung.

The deal allows regular charter flights between Macau and Taichung, Hualien, Taitung, Tainan, Chiayi, Magong, Penghu and Kinmen in Taiwan.

It puts no restrictions on the frequency of charter flights or how many passengers they can carry.

Officials signing the air pact in Macau yesterday

The open skies agreement does not, however, cover so-called ‘fifth freedom’ rights, which allow an international flight to pick up passengers at an intermediate destination and take them to its final destination.

The term of the new agreement is indefinite. It will come into effect soon, but neither of the signatories could say precisely when.

Mr Lee said: “Negotiation of the open skies deal follows the warming of relations across the Taiwan Strait.”

The present air services agreement allows only Macau flag carrier Air Macau and Taiwan’s Eva Airways, TransAsia Airways and Mandarin Airlines to serve Taiwan-Macau routes.

The present agreement permits the airlines to carry only 19,400 passengers and 400 tonnes of freight on these routes.

Air Macau and the Taipei Airlines Association signed the present agreement in 1995. It was due to expire in 2005, but the signatories continue to stick to it.

Xiamen Airlines launching Dalian route by end March Step forward to expand flights between Macau and northern China Stephanie Lai

sw.lai@macaubusinessdaily.com

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ainland carrier Xiamen Airlines Co Ltd intends to launch daily flights between Macau and the northeastern city of Dalian via Hangzhou starting from March 30, the airline confirmed to Business Daily.

The Civil Aviation Authority of Macau told the newspaper it is currently assessing Xiamen’s application to serve route.

“We will launch a five-hour flight from Macau to Dalian, and another from the city back here every day, where the flight will have a stop-over in Hangzhou to pick up passengers,” said Tai Kam Chio, general manager at Global International Tourist Co. Ltd – the local partner and flight booking agent for the carrier.

The direct flight between Dalian and here would save mainland visitors the time and trouble of flights via Shanghai or Beijing Mr Tai noted.

“The online booking for MacauDalian route may start next week or early March, depending on the Civil Aviation Authority’s approval,” he said. “But at this stage we’re setting the fares at around 2,000 yuan (US$327) for a round trip flight,” the official added.

Another mainland carrier China Northern Airlines, which merged with China Southern Airlines Company

Xiamen Airlines Boeing 737-800

Ltd in 2003, operated scheduled flights between Dalian and Macau for six months until July in 1998, before giving up for “commercial reasons”, Civil Aviation Authority told Business

Daily in an written reply.

“I think the carriers are still quite interested in expanding routes between here and northeastern China, which is what the local market still

lacks,” said Mr Tai. Currently, Tianjin and Zhengzhou in Henan province are the two other northern Chinese cities that Xiamen Airlines is serving via Macau.

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February 18,19, 2014

Friday April 2013

Macau Legislators demand better taxi controls Legislators want tighter controls on taxi drivers. During yesterday’s plenary session at the Legislative Assembly, a number of legislators said some taxi drivers are “racist”, and “bad drivers” and should be blacklisted, reported Rádio Macau. They asked that the government carry out a careful inspection of the taxi industry, suggesting cabs be fitted with a GPS. The legislators also questioned the government on whether or not it is planning to renew the concession for one of the taxi companies running what’s commonly known as the ‘yellow cabs’. The government is usually not represented during plenary sessions and, as such, did not reply to any of the legislators’ queries.

China grants QFII licence to Monetary Authority But no information yet on size of investment quota for the SAR Michael Grimes

michael.grimes@macaubusinessdaily.com

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hina’s securities watchdog has given a licence to the Monetary Authority of Macau to invest in mainland domestic capital markets via the Qualified Foreign Institutional Investor (QFII) scheme, the regulator said yesterday. It didn’t specify what allowance – in cash terms – Macau would get.

Business Daily asked the monetary authority for more information but none was available by press time.

The mainland regulator involved – the China Securities Regulation Commission – published the updated list of QFII investors on its website.

It also listed several central banks of China’s Asean neighbours – Bank of Korea, Bank of Thailand and Bank

Monetary Authority of Macau

Negara Malaysia as having received approval for investment quota under the scheme.

Business Daily reported in January that the Macau government had applied for QFII allowance, which is likely to be invested via the territory’s de facto sovereign wealth fund. In a written reply to questions from this newspaper, the Monetary Authority failed at that time to say how big a quota it had sought.

QFII status allows licensed “foreign” investors – including the two Special Administrative Regions of the People’s Republic of China and institutions based there – to invest in shares listed at the Shanghai and Shenzhen stock exchanges. Outside

investment in the mainland’s stock markets is limited by quotas.

Overseas institutional investors need to apply for a licence from China’s securities regulator to be eligible to seek investment quotas from the foreign exchange regulator.

Bank of Korea said last month that China’s State Administration of Foreign Exchange would allow it to invest an additional US$300 million in Chinese stocks under the QFII scheme.

China granted US$3.4 billion in fresh quotas to licensed overseas institutional investors this month as of January 27, according to earlier data released by the SAFE.

By December 25, SAFE had

licensed 228 QFIIs to trade in mainland stocks, and had granted them quota together worth US$49.7 billion.

Observers have told Business Daily that investing in the mainland stock market would make the Macau government’s fiscal reserve investments more diverse, but that improvements in the return on its investments would be limited.

Francis Tam Pak Yuen, Secretary for Economy and Finance, said in early January that the fiscal reserve was worth 168.2 billion patacas (US$21 billion) as of December 30.

The yield on its investments had been 2.9 percent in 2013, he added.

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February 18, 2014 Friday April 19, 2013

Macau Animal rights bill rejected Macau is yet to regulate animal rights, after a great majority of legislators yesterday voted against a proposed bill seeking to protect animal rights. The bill was rejected because some of its “aspects and definitions” were “ambiguous”. In addition, the government said it was already drafting its own regulation on animal rights. The proposed bill was the initiative of legislators Jose Pereira Coutinho and Leong Veng Chai.

Only seven legislators voted in favour of the bill, 14 against it and nine chose to remain absent from voting on this proposed bill. Legislators in favour of the bill said the decision to vote against the bill puts Macau a step behind other international cities, as it is an important issue that should be regulated.

Casino staff outside government headquarters yesterday

Union warns against making table cap flexible Casino workers say the labour market could cope with demand for croupiers if growth in the number of gaming tables was strictly limited Tony Lai

tony.lai@macaubusinessdaily.com

A

union of casino workers, Forefront of Macau Gaming, says it may take protest action if the government ignores its request to enforce strictly the limit on annual growth in the number of gaming tables.

Forefront of Macau Gaming says the cap limiting annual growth to three percent is the “ultimate solution” for safeguarding the jobs of its members.

The union delivered a petition to government headquarters yesterday.

“We are asking the government whether it is committed to limiting the growth of gaming tables to three percent every year,” union president Ieong Man Teng told Business Daily after handing in the petition.

“If there is no response from the government on the matter, we do not rule out taking further action, like organising a protest at the end of this month or early next month.”

The government has said the cap on growth will be enforced until 2022.

But Secretary for the Economy and Finance Francis Tam Pak Yuen has said on several occasions that the

government will allow growth of over or under three percent in any given year as long as the number of tables in 2022 turns out to be the same as it would have been if the growth rate had been a constant three percent every year.

Mr Ieong thinks this is just a loophole to allow “relentless gaming expansion” which will lead to casino operators demanding permission to employ migrant workers as croupiers.

Last week a gaming executive asked the government to consider relaxing its policy of reserving croupier positions for Macau permanent residents.

“Last year annual growth in the number of tables was nearly five percent, even when no new resort opened,” Mr Ieong said.

“There could be several thousand more tables by 2017, after the completion of several new Cotai resorts, if the government does not control the growth strictly,” he said.

“We support the enactment of a law banning migrant workers from working as croupiers. But we believe the ultimate solution to this problem is not to let the gaming industry grow

unrestricted.”

Gaming Inspection and Coordination Bureau figures show Macau had 5,750 gaming tables at the end of last year, 265 or 4.8 percent more than at the end of 2012.

Mr Tam has said 200 tables are in Sands China Ltd’s Sands Cotai Central and 50 in Galaxy Entertainment Group Ltd’s Galaxy Macau. Both casino-resorts opened in 2012.

Mr Ieong said that if the government strictly limited growth in the number of tables to three percent, the labour market could easily meet demand for more croupiers, because fewer than 200 extra tables would need to be manned each year.

He said gaming employees were worried that allowing migrant workers to work as croupiers would reduce pay rates for the job.

A research report issued by Morgan Stanley last month says the new casino-resorts due to open in Cotai may require another 12,600 employees to man the tables they will contain.

At present 17,600 people are

employed as dealers, so the pool of croupiers will have to increase by 70 percent.

The chief executive of SJM Holdings Ltd, Ambrose So Shu Fai, last week urged the government to consider relaxing its policy of reserving croupier positions for residents.

Mr So said this would allow casinos to replace resident dealers they promote, and so make it easier for residents to move up the career ladder.

The New Trade Union of Staff of Casino Companies in Macau and the Association for People’s Livelihood Rights drew up a petition objecting to Mr So’s remarks and delivered it yesterday to his company’s Grand Lisboa casino.

The mere mention of the idea of relaxing the policy of reserving croupier positions drew thousands of protesters out into the streets on two occasions last year.

Forefront of Macau Gaming organised one of the demonstrations.

The union said over 10,000 people had taken part. The police put the figure at 3,000.

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February 18,19, 2014

Friday April 2013

Macau

RMB14.3 bln already invested in ‘super bridge’ Hong Kong-Zhuhai-Macau Bridge basic structure will cost around RMB34.7 bln Tony Lai

tony.lai@macaubusinessdaily.com

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ore than one third of the estimated 34.7-billionyuan (45.4-billionpatacas) public investment in the main structure of the Hong KongZhuhai-Macau Bridge – that will span the Pearl River Delta – is already committed according to a mainland report quoting officials there.

Guangdong newspaper Zhujiang Evening News quoted the Zhuhai Transport Bureau as saying on Sunday the bridge is on track to open by 2016.

Official data from the Zhuhai bureau shows that the completed investment of the bridge’s main infrastructure totalled 14.3 billion yuan by end of last year.

This accounts for around 41 percent of the total investment of the bridge’s key infrastructure, or also known as the ‘main bridge’, comprising of a dual three-lane carriageway and a tunnel.

The investment for the main bridge is co-funded by the governments of Macau, Hong Kong, and Guangdong province.

According to the website of the Infrastructure Development Office here, the Macau government has already dispersed 1.98 billion yuan for the main bridge, while Hong Kong has provided 6.75 billion yuan and Guangdong has given 7 billion yuan.

The rest of the funding was financed by a syndicated bank loan led by

Bridge due to be completed by 2016

Bank of China Ltd. Apart from the main infrastructure, the bridge project also includes immigration facilities and link roads separately connecting the main bridge to the three communities it serves. The total project including those extras is expected to reach more than 72.9

billion yuan – a figure announced when the construction first began in 2009.

But none of the governments have since updated the total costs. But according to numbers last updated in 2012, the cost for the link road on the Hong Kong side has already

has already increased by at least 54 percent – from HK$16.2 billion to HK$25 billion.

The entire bridge, which is nearly 50 kilometres long, will shorten the land travel time between the three places from several hours to an hour, by cutting out the coastal route.

January public surplus hits MOP12.6 bln So far this year, the government has spent MOP1.9 bln of its budget newsdesk@macaubusinessdaily.com

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acau recorded a 12.6 billion patacas (US$1.6 billion) surplus in the first month of this year, the highest it has been for the month of January in the last two years.

For January 2012 and 2013, Macau recorded surpluses of 8.7 billion and 10.4 billion, respectively.

According to figures from the Financial Services Bureau, so far this year the government has spent 1.9 billion patacas, although no detailed figures on capital expenditure are yet available.

The territory’s budget execution rate was of 10.3 percent in January. For the whole of 2013, Macau pocketed 141 billion patacas from taxes, primarily from the gaming industry.

Direct gaming tax is 35 percent, giving the government a total of 12.1 billion patacas in the month

The Monetary Authority of Macau – sitting on a healthy surplus (Photo: Manuel Cardoso)

of January alone. This tally is an increase of 18 percent compared to that of the previous year. In January 2012, gaming tax totalled 8.9 billion, while that number rose to 10.6 billion in January 2013.

An additional levy on casino bets of up to two percent of the gross is imposed by the government and paid to Macao Foundation and then redistributed to local charities and associations.

A further levy of up to three percent of the gambling gross goes on city development, tourism promotion, and social security. Casino concessionaire Sociedade de Jogos de Macau SA, founded by former monopoly holder Stanley Ho Hung Sun, pays only 1.4 percent of the latter levy, in lieu of dredging work along Macau’s coastline. In 2012 that difference was worth 806 million patacas (US$100 million) to the company.

Secretary for economy and finance Francis Tam Pak Yuen said last week Macau as a whole could expect a double-digit growth for gaming revenue in 2014.

Last year, revenues reached an all-time high of 360.75 billion patacas, an increase of 18.6 percent compared to that of the previous year.

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Macau

Solaire names Crown exec head of VIP marketing Owner Bloomberry in September ended Bill Weidner’s management deal for Manila casino Michael Grimes

michael.grimes@macaubusinessdaily.com

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loomberry Resorts Corp, developer of the US$1.2 million (9.6 billion patacas) Solaire Resort & Casino at Manila Bay in the Philippines, has appointed a Crown Melbourne executive as senior vice president of international marketing.

Laurence Upton previously held the equivalent level position for VIP marketing at Australian gaming operator Crown Resorts Ltd at its Melbourne casino resort.

There he was responsible for developing marketing offices in East Asian countries including China, Vietnam, Japan and South Korea. He will take up his new post on March 3.

In a filing to the Philippine Stock Exchange, Bloomberry praised Mr Upton’s track record in managing relationships with some of the world’s biggest high rollers “including international celebrities”. The firm added: “In just two years, Mr Upton

Solaire Resort & Casino, Manila

was able to significantly grow Crown’s emerging market turnover”.

In September last year

Bloomberry ended its relationship with another group of high profile Western casino executives with

Macau connections. It cut the management contract for Solaire held from its opening in March 2014 by Global

Gaming Asset Management.

GGAM is led by Bill Weidner, a former president and chief operating officer of Las Vegas Sands Corp. Mr Weidner was at LVS during its construction of Sands Macao, which opened in 2004, and the US$2.4 billion The Venetian Macao, which opened in August 2007.

Bloomberry and GGAM are currently involved in litigation over the ending of the Solaire management contract.

On February 10 Bloomberry said in a filing that it had been granted an extension until tomorrow on a temporary injunction granted by the Regional Trial Court of Makati. The temporary court order blocks GGAM from selling a stake in Bloomberry Resorts. GGAM had purchased 8.7 percent of Bloomberry prior to Solaire’s opening.

According to a Bloomberry regulatory report on January 17, GGAM had contracted to sell its shares on January 15 “to approximately 50 institutional investors” and was poised to complete the sale by a cross transaction through the PSE. Bloomberry – led by local entrepreneur Enrique Razon – said in its January 17 filing that the shares were the subject of a counterclaim by some of its subsidiaries, and that matter related to an arbitration case due to be heard in Singapore.

Corporate MGM Macau donates to Intl School of Macao MGM Macau – the casino resort operated by MGM China Holdings Ltd – has donated 1.4 million patacas (US$175,300) to the Business Supports Education programme of The International School of Macao.

John Crawford (centre left) the school’s founding governor, and Howard Stribbell, head of school, were presented with a cheque for the amount by Wendy Yu (centre right) vice president of human resources of MGM Macau, and Cristina Kuok, director of corporate affairs.

The donation will enable the school to continue providing the local and expatriate communities with top-level academic and extra-curricular programmes according to a press statement by MGM Macau.

The school provides a Canadian teaching curriculum to local and expatriate students, with English as the primary language of instruction.

The institution announced last year plans to construct a Phase II building that will increase our overall capacity to 1,600 students and keep pace with Macau’s educational demands Stribbell said last year.

BBAM goes green in March The British Business Association of Macao is to hold an event called Clean Tuesday Macao on March 11 at the Mandarin Oriental, Macau, starting at 6pm.

It will include a presentation on green technologies at The Venetian Macao and at Las Vegas Sands Corp’s planned new Cotai resort called The Parisian Macao.

Rishi Tirupari and Syed Mubarak, directors of sustainability for the local unit Sands China Ltd will be in attendance.

Additionally, Alfons Goyens of Global High Technologies Ltd, will talk about ‘In- Slab Cooling and Heating’.

In July 2012 LVS issued what it said was the gaming industry’s first report on sustainable development to be verified by a respected international body.

The ‘Environmental Report’ listed the firm’s green building designs, environmentally responsible operations, green meetings and stakeholder engagement”.

Its Macau market rival MGM Resorts International, majority owner of MGM Macau, cited Newsweek magazine in 2011 ranking MGM Resorts as the most “green” resort and casino company.

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Friday April 2013

Macau DKSH acquires Glory Medicine Ltd Switzerland-based DKSH Business Unit Healthcare said yesterday it had acquired The Glory Medicine Ltd, one of the leading healthcare distributors in Macau. The target firm has 35 specialists with a focus on sales and marketing, logistics and distribution, after-sales services, technical support and tender management. Sammy Vong, general manager, The Glory Medicine, commented: “DKSH will provide our clients and customers with access to wider opportunities and an increased product portfolio.” Glory’s current management team will stay with DKSH and continue to lead the Macau operations. Both parties have agreed not to disclose any financial details of the transaction.

NagaWorld

NagaCorp eyes Macau-Cambodia air links Cambodian casino operator wants to work with local travel agencies to fly gamblers to Phnom Penh newsdesk@macaubusinessdaily.com

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ong Kong-listed NagaCorp Ltd wants to fly gamblers from Macau and mainland China to its gaming resort in Phnom Penh, Cambodia’s capital.

The company’s chairman, Timothy McNally, confirmed the reports to Business Daily yesterday.

In a phone interview, Mr McNally said the company already has one aircraft and is the process of purchasing an additional three. Two of these are Airbus A320s.

Before flights commence, there are many processes that need to be completed, Mr McNally said, adding that the company wants to establish cooperation with travel agencies both in Macau and mainland China.

Gamblers will be encouraged to visit Cambodia, not just for gambling, but also to visit heritage sites such as Angkor Wat and other temples.

“There will be a different focus for different markets [VIP and mass market],” Mr McNally said.

“One of our strategies is to increase

We won’t be competing with Macau. What we are doing is enhancing and increasing the numbers [of travellers] Timothy McNally, chairman NagaCorp

our relationship with junket operators, not only in Macau but in Singapore and the Philippines… to increase our market share,” the chairman

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added. The aim is not only to target gamblers but families from mainland China as well as tour groups for its mass-market business.

“We won’t be competing with Macau. What we are doing is enhancing and increasing the numbers [of travellers],” Mr McNally said.

Hong Kong media quoted NagaCorp chief financial officer, Philip Lee Wai Tuck, as saying the company is also going to invest around US$45 million (359 million patacas) in airport facilities in Phnom Penh.

According to the reports, Mr Lee said an aircraft that is 10 or 15 years old can around US$10 million to purchase outright. Mr Tuck was also quoted saying that the company has the capital needed and needs no financing through share placement.

Currently, the company is working on getting approvals with the respective authorities in both Macau and Cambodia Mr McNally told us.

As for expected turnover amounts of the players NagaCorp is targeting to recruit, Mr McNally said the company is growing double digits and is optimistic. “We’re looking for steady growth on junket [operations],” he added.

Earlier this month it was announced that NagaCorp had set up a marketing office in Macau to bolster its relationships with junket operators here.

In December it was announced that Mark A. Brown – president of The Venetian Macao and also of Sands Macao from April 2006 to April 2009 – had been appointed chief operating officer of NagaWorld Ltd, the Phnom Penh resort.

NagaCorp’s planned casino development in Primorye – near Vladivostok in the Russian Far East – is targeted to open in 2018. NagaCorp is also interested in opening casinos in Thailand and Myanmar if local laws allow it said Mr McNally earlier this month.

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Greater China Solar wars threatened Solar panels are pictured in the Xinsheng Park in Taipei, Taiwan.

According to media reports, the US International Trade Commission (ITC) said that Taiwanese and Chinese solar imports are damaging domestic manufacturers. Last week the commission voted unanimously in favour of a complaint brought by SolarWorld AG against imports of solar panels from China and Taiwan, according to a lawyer for the company.

The decision by the panel is the first of four the company must win before duties are placed on imports from the two nations.

UBS buys control of futures broker UBS AG has agreed to buy a majority stake in China’s Shanghai Pumin Futures Brokerage Co Ltd, the Swiss bank said in a statement yesterday.

UBS will inject 90 million yuan (US$14.8 million) into the Chinese futures brokerage, giving the Swiss bank a 95.42 percent stake in Pumin Futures, the statement added. The financial futures market in China was launched in April, 2010, which reached 141 trillion yuan (US$23.24 trillion) in 2013, including the newly introduced treasury futures, the release added.

More baby ‘safe havens’ China will provide safe havens for parents to abandon unwanted children across most of the country, despite debate on whether they could see more babies dumped, state media reported. The country has set up 25 so-called baby hatches in 10 provinces and major cities since June 2011, the official Xinhua news agency said Sunday. More will be built in another 18 regions, it added, citing the China Centre for Children’s Welfare and Adoption (CCCWA). The havens usually have an incubator, a delayed alarm device, an air conditioner and a baby bed, the report said.

Territorial row in East China Sea Three Chinese ships sailed through disputed waters off Tokyo-controlled islands in the East China Sea yesterday, the latest such incident in the bitter territorial row between the Asian giants. The Chinese coastguard vessels entered the 12-nautical-mile territorial waters off one of the Senkakus, which China claims and calls the Diaoyutais, at around 10am, Japan’s coastguard said. Chinese vessels and aircraft have regularly approached the East China Sea archipelago – thought to harbour vast natural resources bellows its seabed – after Japan nationalised some of the islands in September 2012, setting off the latest round in a longrunning territorial dispute between the Asian powers.

The bank aids China in implementing the state’s strategic priorities

One country one lender China Development Bank proposes taking on sole local-lender role

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hina Development Bank Corp., the nation’s largest policy lender, is proposing to become the sole financier to local governments as mounting debt threatens efforts to promote urbanization.

The evaluation of loans, extension of credit and debt servicing to the nation’s towns and cities should be centralized under CDB or another bank chosen through bidding, Hu Huaibang, chairman of the policy lender, wrote in the official Qiushi magazine. Tackling the problem of local-government debt is necessary to help promote urbanization, he wrote.

Premier Li Keqiang has already been relying on China’s so-called super bank to finance the construction of affordable homes for workers who’ve moved from the countryside to cities in numbers double the population of Japan. Concern about local liabilities that have swelled to 17.9 trillion yuan (US$2.95 trillion) has added to record borrowing costs as investors

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speculate defaults may spread.

“This is an interesting and welcome proposal to get a grip of the explosive growth of local government obligations,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole SA, wrote in a research note. “Given that CDB is a 100 percent government-owned policy bank, this would streamline management of local debt and help contain it, as well as put central government guarantee behind all forms of local government loanbased obligations, likely including LGFV debt.”

Debt audit Local-government debt jumped 67 percent as of June from 10.7 trillion yuan at the end of 2010, according to data compiled by the National Audit Office. CDB extended 116.6 billion yuan of new loans to affordable-housing projects in 2012, accounting for more than 60 percent

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of the total lent by the nation’s banks to such projects.

Local financing units must repay a record 299.5 billion yuan of bonds this year, according to Everbright Securities Co., the most since it started compiling the data in 2000 and up 56 percent from 2013.

Finance Minister Lou Jiwei wrote in an article in November that China’s medium-to-long-term fiscal situation faces serious challenges. Some localgovernment debt is beyond the capacity for repayment and some overdue debt has emerged, he said.

Aggregate financing, the broadest measure of credit, was 2.58 trillion yuan (US$425 billion), the People’s Bank of China said in a Feb. 15 statement. 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.

Bloomberg News

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Friday April 2013

Greater China

The glory of Mr Wong Urbanisation helps turn ex-truck driver to billionaire

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ong Choihing, a former truck driver, has become a billionaire as shares of Hydoo International Holding Ltd., a Chinese trade-centre developer he leads, soared more than 70 percent since its debut in October.

Shares held by Wong’s family are worth more than US$1.1 billion, according to the Bloomberg Billionaires Index. They own about 60 percent of the company, according to Hong Kong stock- exchange filings. He has never appeared on any wealth rankings.

Wong was the fifth child in a family of 10 and used to be a truck driver before he became a developer

in 1995. He and his family built 19 trade centres in seven Chinese provinces by 2010, according to Hydoo’s prospectus.

“It couldn’t happen to a more deserving businessman,” said Peter Fuhrman, who runs Shenzhen-based China First Capital and was Wong’s investment banker in 2010. “He invented a powerful and innovative business model 20 years ago, stayed with it, kept reinvesting and adapting well to the huge changes in China’s economy during this time.”

Two calls to Hydoo’s investor relations office in Shenzhen weren’t answered. Wong, 61, couldn’t be reached for comment.

Trade centres are properties where wholesaling is the primary form of business and a wide range of products are traded, including hardware, electric tools, building materials, furniture and home furnishings, home electronics and apparel.

Rapid urbanization The company had been developing eight trade centre projects in six provinces and autonomous regions in China as of July 31, 2013. Its projects are mostly in China’s less developed third- and fourth-tier cities, such as Ganzhou in Jiangxi province and Wuzhou in Guangxi

Zhuang Autonomous Region.

“Hydoo is one of the leading developers focusing on developing large-scale integrated trade centres in tier 3 and 4 cities and selected tier 2 cities in China,” Li Xingwen, a Hong Kong-based property analyst at ICBC International Holding Ltd., said in a research note on Jan. 14. “The company has unparalleled advantages in the sector it operates in,” said Li, who recommends buying Hydoo shares.

City dwellers in the world’s second-largest economy exceeded the number of people living in rural areas for the first time in China’s history in 2011. The urban population has grown at a 3.6 percent compound annual rate since 2002, or 21 million people per year.

Hydoo sold shares to the public in Hong Kong on October 31. Hony Capital Ltd., backed by Lenovo Group Ltd.’s parent Legend Holdings Ltd, owns 14.9 percent of the company.

Bloomberg News

Prostitution crackdown after Dongguan raids

Gold jeweller to buy U.S. oil operator

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hina’s security ministry told police across the country to “firmly crack down” on prostitution, gambling and illegal drugs after state media exposed widespread prostitution in the southern manufacturing city of Dongguan.

The Ministry of Public Security convened a meeting after the reports of the sex trade thriving in Dongguan and sent a team to Guangdong province, a notice on the ministry’s website said last Sunday. Security organs in every region should draw a lesson from the case and clean up the crimes to improve people’s sense of safety and level of satisfaction, it said.

City police in Dongguan took away 162 people for investigation after a report by state-owned broadcaster CCTV exposed prostitution at hotels, saunas and massage parlours in the city, the government said on February 10.

A crackdown on prostitution in

Michelle Yun

China could wipe out 100 billion yuan (US$16.5 billion) of related economic activity, an analyst at Minsheng Securities said this month.

Dongguan’s police chief and vice mayor has also been removed from his position, CCTV said on its official micro blog.

Guangdong’s leader, Hu Chunhua, is known as “little Hu,” and tipped by some analysts to win a top position in the country’s next political transition in 2022. He was appointed party secretary of the province in 2012.

In January, provincial paramilitary forces and police in the province busted a village that manufactured crystal meth. Helicopters and speedboats accompanied the law enforcement officers as they carried out 109 drug raids, arresting 182 people and seizing three tons of the narcotic, the official Xinhua News Agency reported January 2.

Bloomberg News

oldleaf Jewelry Co., a Chinese jewellery retailer with gold mining investments, plans to buy U.S. oil and gas operator ERG Resources LLC for at least US$665 million. Goldleaf’s shares surged.

The Beijing-based company will pay for the acquisition with a private share placement, raising as much as 5.7 billion yuan (US$940 million) from no more than 10 investors, Goldleaf said in a statement yesterday to the Shenzhen stock exchange. It will hold 95 percent of Houston, Texasbased ERG after the purchase.

The acquisition is in line with the company’s strategy to become a “cross-border, trans-market international resources enterprise,” Goldleaf said in a separate statement.

Buying closely held ERG would give Goldleaf a foothold in oil assets along the Gulf Coast and California, adding to US$16 billion of oil and gas deals announced by Chinese companies

in the past year, according to data compiled by Bloomberg. ERG sold 13 oilfields to Australia’s Linc Energy Ltd. in 2011 for US$236 million.

ERG has US$350 million of loans outstanding as of Dec. 31, which pay more than 10 percent annual interest, according to Goldleaf. The oil company will boost its profitability after it pays off the higher-cost loans with funds from Goldleaf, the Chinese company said. The acquisition still needs approval from U.S. and Chinese regulators.

Goldleaf, which suspended its shares on Jan. 1, resumed trading yesterday in Shenzhen and gained by the daily limit of 10 percent to close at 13.77 yuan.

The Chinese company generated 8.7 billion yuan of sales in 2012 and had 1.9 billion yuan of assets as of the end of that year, according to data compiled by Bloomberg.

Bloomberg News

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Greater China

The price of a child Tiger moms turn guardians of one-child policy as law eases

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osa Xia, a 39-year-old mother in Shanghai, is allowed to have a second child. She doesn’t think she can afford it.

She reckons a fifth of the 6,000 yuan (US$989) a month she earns as a Shanghai nanny goes to her 12-yearold daughter Amy: saxophone and ballet lessons, on top of food and school. Then there’s saving for her only offspring’s college education.

“She saw people playing saxophone on TV, got interested and asked for lessons. It’s expensive, so of course I’d rather she hadn’t asked, but I gave it to her anyway,” said the migrant worker, who scrimps on clothing and her own meals to give her daughter the chance of a better future.

Doting parents like Xia help explain why China’s move to ease family-planning rules is unlikely to reverse falling birth rates that have saddled the country with a shrinking labour pool and aging population.

While lifting the restrictions – imposed through fines, forced abortions and sterilisation – may prove popular at home and with rights advocates abroad, attempts to unpick the state’s meddling with family sizes face roadblocks from Confucian tradition, urbanisation and the rising costs and especially expectations wrought by China’s economic resurgence.

Following Japan “The fact is, a huge change in mentality about family, children and future is evident,” said Nicholas Eberstadt, a demographer at the American Enterprise Institute, a Washington- based policy group.

“China is heading in the direction of other low-fertility East Asian nations such as Japan, South Korea and Taiwan.”

Cost is at the forefront of the minds of many parents.

Many baby goods cost more in China than they do in the U.S., partly because of Chinese parents’ willingness to pay up for their only

progeny. A packet of 114 Procter & Gamble Co.’s Pampers Baby Dry diapers sells for 309 yuan on China’s Tmall.com website, about 12 percent more than a similar product on Wal- Mart’s online site in the U.S. Abbott Laboratories’ Similac Advance formula for babies younger than one costs 199 yuan on Tmall.com, 40 percent more than in the U.S. The Standing Committee of the National People’s Congress in late November approved rules that allow couples to apply for permission to have a second child where either parent is an only offspring. That loosened the policy that allowed a second baby if both parents are only kids.

China introduced the one-child policy in 1979 after the population jumped more than 70 percent in the three decades following the Communist Party’s civil war victory, even as the economy stagnated.

In fact, annual population growth was already in decline. It had dipped below 1 percent five years earlier and hasn’t breached the mark since – this year, it will expand 0.45 percent to 1.36 billion people, according to U.S Census Bureau estimates. Japan’s population will shrink for a sixth year; South Korea and Taiwan’s will grow less than 1 percent.

Fewer, more success “They share common cultural values that place enormous emphasis on the success of their children,” said Wang Feng, a sociology professor at University of California, Irvine.

“Chinese parents want their children to be successful, and they do this by having fewer and investing in them.”

Such aspirations have thrown up a group of so-called tiger moms, made famous by author Amy Chua in a book describing strict, disciplinarian Chinese mothers.

The corollary is inflation, both in the money and the time it takes to rear a child as parents wage an arms race to secure the best of the limited

KEY POINTS One-child policy introduced in 1979 Population will expand 0.45 pct to 1.36 billion In Shanghai daughters are becoming more popular

opportunities available – raising the barrier to entry for a second child.

For example, to get into a good school, many parents pay a large “sponsorship fee” or buy an apartment in the area. To make them stand out, kids are signed up for expensive or unusual activities -- Xia proudly related how her daughter was top of her class in origami.

Fierce competition “Fierce competition and the social eagerness to get ahead or at least to stay on par with peers - especially on things symbolizing success, such as house, car and other consumption goods – are still the main forces that drive Chinese society,” said Cai Yong, an assistant professor at the University of North Carolina.

Urbanization – long established globally as an effective contraception – is magnifying the effect. As more and more children enter cities, their parents are forced into competition for limited resources, Cai said. In Shanghai, the reported fertility level is 0.7 births per woman per lifetime.

Xinhua News Agency website reckons it costs 2.76 million yuan to take a child from birth to college in Beijing. The report on the state-owned news organization’s website cited an informal survey and calculations

suggesting that a husband and wife earning the average per capita income would need to work for 23 years without eating and drinking to afford it.

More than half the about 900 respondents in a separate informal survey after the policy announcement carried out by the Internet portal Sina said they wouldn’t have a second child because the financial stress was too great.

The cost of bringing up a son is also turning a long ingrained Confucian preference for male children on its head.

In Shanghai, where men are expected to own their own home before they get married, daughters are becoming more popular, a government poll of 1,005 city residents showed in November. Almost 45 percent said they would feel less burdened with a girl as there would be no pressure to buy a house.

Even on the farm, where the extra hands that come with big families were once seen as a bonus, attitudes are changing. Wu Dehui, a 52-yearold asparagus farmer from Anhui province, said the eldest of his three sons chose to stop at one child.

One’s Enough “These days, you have to send children to kindergarten, buy them all sorts of snacks and stuff,” said the tanned and small-built farmer with pronounced wrinkles around his eyes. “In my day, you never needed to do that.”

Sons are also expected to splurge on weddings these days, making them too expensive to raise, Wu and his wife said.

Ultimately, China’s system of residence permits, or “hukou,” may be the biggest added cost for migrant workers such as Shanghaibased nanny Xia. She sets aside about 2,000 yuan each month for unexpected medical bills, as the Jiangsu province native and her daughter are excluded from health and education benefits card-carrying Shanghai city residents get.

“With a child, you really need to plan and budget,” says Xia, who won’t spend more than 100 yuan on blouses so she can save for Amy’s education and medical costs. “I want a second child, I just can’t afford one.”

Bloomberg News

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Friday April 2013

Asia

Indonesia’s Islamic insurers boost offer Move is ahead of rules requiring spin off from parent institutions Al-Zaquan Amer Hamzah

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ompanies selling Islamic insurance (takaful) in Indonesia are boosting agent numbers and product ranges ahead of a new rule that will require them to be run independently.

Indonesia, the world’s fastestgrowing market for takaful, is dominated by takaful “windows” which allow insurers to offer Islamic and conventional products side by side. A new law requiring takaful firms to be spun off into stand-alone businesses is expected this year.

“We are encouraging pockets of our agency to focus on the takaful side, so when the spin-off comes, we will already have a distribution in place,” Bert Paterson, who heads Sun Life Financial Indonesia, a unit of Canada’s third-largest life insurer, said in a telephone interview.

Sun Life, which manages global assets of US$590 billion, saw 7 percent of its earnings come from Asia in 2012.

The Indonesian unit grew its distribution network by nearly half to 7,100 agents last year and over 90 percent have been trained to sell takaful products. More agents are branching out into Indonesia’s rural areas, moving beyond markets already crowded with conventional players.

“A significant part of our growth has come from leaders opening up offices in towns outside their natural catchment area. It’s good for them as entrepreneurs, and good for us to increase our footprint,” Paterson said.

Takaful firms have also begun to explore new streams of revenue in market segments that remain

relatively untapped. In August last year, Sun Life launched a product that helps Muslims save for their pilgrimages to Mecca.

“We want to play in fields where other people are not,” said Abdul Mulki, head of sharia business for PT Ansuransi Bangun Askrida, one of the country’s largest takaful windows.

The company recently entered medical malpractice insurance, which is sold to doctors and offered, the firm says, by only one competitor in Indonesia.

Operating costs are expected to triple when the takaful business is spun off. “We need to double our premiums to 200 billion rupiah (US$17.1 million) and this will count on new business. We have profit margins of 35 percent but the spinoff will have extremely high costs.

To maintain the margins, we need to double the premium,” said Mulki.

Product terms Unlike conventional insurance, takaful is based on the concept of mutuality; a takaful operator sets up a fund to oversee and manage pools of money contributed by policy holders.

As of December 2012, there were five full-fledged takaful firms in Indonesia and 37 sharia units of conventional insurers. The spin-off legislation is expected to set minimum capital requirements for takaful operators, which could oblige some smaller ones to close.

“I think shareholders are going to have to make some very strategic calls,” Paterson said. “Not all of them

have the critical mass to justify a spin-off, so we’ll see consolidation and opportunities to acquire portfolios of business.”

Indonesia, with the world’s biggest Muslim population, is potentially a rapid growth market for takaful.

It accounted for 24 percent of the Association of Southeast Asian Nations’ gross takaful contributions in 2012, compared to Malaysia’s 71 percent, a report by Ernst and Young showed.

Poor consumer awareness of services, a shortage of human capital and the lack of regulatory clarity are obstacles for the industry in Indonesia.

“The business prospects in Indonesia are huge, but the problem in Indonesia is that they are busy reading what can and cannot be done in terms of sharia,” said Mulki.

Indonesian takaful firms also struggle to achieve yields from investment as they are limited to investing 20 percent of their funds in more liquid and developed Islamic finance markets such as Malaysia.

“The majority of takaful companies still invest onshore, as foreign fund managers rarely go into Indonesia to offer offshore products, so we are not familiar with the options,” Abdul Chalik, head of sharia for Allianz Life Indonesia, told Reuters.

“Indonesia has said it wants to be an Islamic finance hub to rival its neighbor. The government has to bring in a range of measures to develop the Islamic finance market in general - when that happens you’ll see exponential growth on the takaful side,” said Mr Paterson.

Reuters

Long-bonds back in Islamic Finance Investors’ thirst fuelled by relative drought for the products

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he rally in long-dated Arabian Gulf Islamic bonds that’s giving investors returns almost three times the regional average shows no sign of abating, fuelled by debt sales slowing to a trickle.

Sukuk from the Gulf Cooperation Council maturing in 10 years or more handed investors 3.19 percent this year, compared with an average gain of 1.13 percent for all maturities, according to data compiled by Bloomberg. Those due in seven to 10 years returned 3.17 percent.

Sales of dollar-denominated Islamic bonds from the region are off to their slowest start in five years after the U.S. Federal Reserve’s plan to cut bond-buying drove up Treasury yields last year and increased borrowing costs. The lack of options for investors may help spur further gains for long sukuk, according to Exotix Ltd and Quantum Investment Bank Ltd. “There has not been much new debt on offer,” Ahmed Shehada, head of trading at QNB Financial Services in Doha, said by phone. “So while investors are still trading cautiously, they have gradually gained an appetite for long- dated paper.”

Dubai government’s US$650 million bond due May 2022 is the best-performing GCC sukuk this year, returning 3.64 percent. Qatar’s US$2 billion of 2023 securities and Saudi Electricity Co.’s 2023 notes have gained 3.29 percent.

“Most of the long-dated debt is from strong names who have backing from government,” Montasser Khelifi, a Dubai-based senior manager for global markets at Quantum Investment, said by phone yesterday. “There is more rallying to come. The Dubai Investments sale showed the market is hungry for new issuance.”

A unit of Dubai Investments PJSC became the only GCC issuer to sell a dollar sukuk this year when it priced US$300 million of notes last week.

Investors ordered 10 times more securities than were on sale, Khelifi said. It’s the slowest start to the year for sales since 2009, when no sukuk had been sold by Feb. 17, according to data compiled by Bloomberg.

Islamic bonds maturing in more than 10 years lost investors 6.25 percent last year, compared with an average gain of 3.04 percent for all GCC sukuk. The risk of high volatility in long- dated bonds remains, according to Mr Shehada.

“It’s not something you jump into with both feet,” he said. “It’s good to have some in your portfolio to enhance yield, but not a major chunk.

And you should stick to names with low volatility, like Dubai.”

Dubai’s 2022 sukuk returned 1.30 percent last year, compared with an average loss of 1.51 percent for all sukuk maturing between seven and 10 years. The yield on 10-year U.S. Treasuries climbed 72 percent in 2013 to 3.03 percent, before falling 29 basis points this year.

Bloomberg News

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February 18, 2014 Friday April 19, 2013

Asia Aurizon up 18 pct in first half Top Australian coal hauler Aurizon Holdings Ltd reported an 18 percent rise in underlying half-year profit yesterday spurred by strong coal volumes and cost cuts, and raised its outlook for coal haulage this year. Aurizon has benefited from customers like top global coking coal exporter BHP Billiton ramping up output to lower unit costs at a time of weak coal prices. The rail group said it expects coal haulage volumes to increase by up to 9 percent to 207 to 212 million tonnes in the year to June 2014, up from an earlier forecast for about 5 percent growth.

Manila Water to bid for Indonesia scheme Manila Water Co. and a partner have qualified to bid for a bulk water supply project in Bandar Lampung in Indonesia.

Manila Water continues to explore other potential projects in Indonesia and plans to expand its operations in Vietnam, it said in a stock exchange filing yesterday. The utility, which serves half of the Philippine capital, didn’t name its partner in the Bandar Lampung bid. Manila Water last year failed to win approval for its proposed purchase of a 51 percent stake in PT PAM Lyonnaise Jaya, which supplies water to western Jakarta.

Mixed signals for Japan Concerns loom on consumer spending, possible tax rises Peter Brieger

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apan’s economy has logged its best performance in three years, driven by Prime Minister Shinzo Abe’s growth blitz, but weak second-half growth and an April sales tax rise are denting hopes for a sizzling 2014.

The 1.6 percent expansion last year marked the first annual figures under Abe and his programme, dubbed Abenomics, after the conservative swept national elections on a ticket to restore Japan’s fading status as an economic superpower.

Tokyo championed the figures published yesterday as proof that the drive to stoke growth and conquer years of deflation was taking hold.

“Domestic demand remains in a good shape,” economy minister Akira Amari told reporters Monday, adding that the “economic trend is pointing upward, led by privatesector demand”.

Since Mr Abe swept to office in late 2012, the yen lost about a quarter of its value against the dollar – giving a boost to Japanese exporters – while the Nikkei stock index soared 57 percent in 2013 to post its best performance in over four decades.

But critics fear that a tax rise in April – seen as crucial for chopping

India’s Bharti cellular to buy small rival

Thai GDP growth slumps in Q4

India’s largest cellular carrier, Bharti Airtel Ltd, will buy small mobile operator Loop Mobile for about 3 billion rupees (US$48 million), two sources said, the first merger in six years in an industry long seen as ripe for consolidation. Loop, which operates only in the financial capital Mumbai with about three million subscribers, was up for grabs as a potential acquisition as its spectrum licence lapses on November 28. A purchase would enable Bharti to surpass Mumbai market leader Vodafone by customer numbers, although not by revenue. Mumbai is one of the biggest cellphone markets in India.

Unrest clouds outlook for southeast Asia’s second-biggest economy

Singapore official admits cheating govt Lim Cheng Hoe, Singapore’s former chief of protocol at the Foreign Affairs Ministry, pleaded guilty to submitting false expenses over the amount of pineapple tarts and wines he gave out as gifts. The city-state is noted for its zero tolerance of impropriety among public officials. Singapore media last month reported that Mr Lim – who had 40 years of public service – between February 2008 and May 2012, allegedly made claims for more than 10,000 boxes of pineapple tarts when only 2,200 boxes were used. He was charged in court last October with cheating the government of nearly S$89,000.

Orathai Sriring

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hailand’s economic growth slowed significantly in the final quarter of 2013 and the stateplanning agency cut its forecast for this year because of political unrest that could prevent the formation of a fully functioning government for months.

Southeast Asia’s second-biggest economy after Indonesia grew a seasonally adjusted 0.6 percent in October-December from the previous three months.

That matched a forecast from economists in a Reuters poll but was well down on July-September’s freshly revised 1.4 percent pace.

The economy also grew 0.6 percent from the final quarter of 2012, compared with the poll forecast of 0.4 percent and the previous quarter’s 2.7 percent.

For full-year 2013, the agency said

growth was 2.9 percent, far below the 6.5 percent in 2012 when Thailand was rebounding from devastating floods the preceding year.

The planning agency (NESDB) slashed its growth estimate for this year to between 3.0 and 4.0 percent from the 4.0-5.0 percent seen in November, when anti-government protests began in the capital, Bangkok.

The government tried to end the crisis by moving in December to hold a snap election. That took place on February 2 but was disrupted, meaning there is no quorum in parliament to form a government so a caretaker administration remains in place, with only limited spending and borrowing powers.

The protests have forced many ministries and state agencies to close, including the NESDB itself, which published a truncated economic

statement yesterday.

Built into its forecasts for 2014 is a pick-up in investment in the second half of the year, but it acknowledges that the budgeting process for the fiscal year starting in October will be disrupted.

“Only some parts of the fiscal 2015 budget can be disbursed within the first quarter of the fiscal year,” it said, referring the fourth quarter of calendar year 2014.

The Bank of Thailand’s Monetary Policy Committee next reviews the policy rate on March 12, and many economists expect further easing to help the economy.

KGI Securities economist Pragrom Pathomboorn said he expects a 25 basis point cut at that meeting to 2.0 percent and the rate could fall further to 1.75 percent by June.

Reuters

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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Friday April 2013

Asia

economy

KEY POINTS Economy has best run in three years Weaker second half to 2013 denting hopes for this year Possible April tax rise alarming some investors Weak fourth quarter GDP figures

Japan’s eye-watering national debt – would curtail the recovery. Rates are set to increase to 8.0 percent from 5.0 percent, Japan’s first sales tax rise since the late nineties.

Mr Abe has been calling on firms to hike wages as consumers face paying more for everyday goods, while Tokyo launches a special US$50 billion stimulus package to prop up the post-tax rise economy.

Spring labour negotiations would be likely to generate widespread wage hikes, Abe said Monday, although there has so far been little evidence of big pay or capital spending rises, seen as key to concrete growth, after years of lacklustre consumer demand.

“We expect that a trend of rising salaries will expand more than last year,” Abe told parliament.

Despite Tokyo’s upbeat take on the annual growth figures, they only modestly beat Japan’s expansion in 2012 before Abe came to power, and weakening second half data was likely to stoke more concerns about the pace of recovery.

Consumer and corporate spending in the latter half of the year failed to take off, pointing to a still-cautious mood among households and in the country’s boardrooms.

“Weak Q4 GDP figures show that the surge in spending ahead of the consumption tax hike has yet to come,” Capital Economics said.

“Last-minute spending to avoid the higher sales tax will likely lead to an acceleration in demand in (the first quarter), followed by a slump in the second quarter.”

Lacklustre exports Japan’s growth led G7 nations in the first half of the year, but the

India’s Sensex climbs

economy expanded just 0.3 percent in the October-December quarter, less than the 0.7 percent expansion economists had expected, according Nikkei business daily survey.

Lacklustre exports were largely to blame for the slowing growth, said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The lower yen has boosted stock prices, which propped up consumption,” he said. “But export growth has not been strong.”

The strength of overseas economies, particularly the United States, will be a key factor for Japan’s economy this year, Mr Shinke added.

“It would reasonable to expect further growth as overseas economies are expected to fare better this year,” he said.

But the tax rise looms as a major threat to Abe’s efforts and has stoked speculation that the Bank of Japan (BoJ) would be forced to expand its already unprecedented monetary easing drive later this year to counter a slowdown.

The programme launched by the BoJ, which kicked off a two-day meeting yesterday, is a cornerstone of Mr Abe’s policy, meshing big government spending and central bank easing.

It also calls for deeper reforms, most yet-to-be-seen, including freetrade deals, more flexible labour markets and bringing more women into the workforce.

The Japanese economy grew 1.4 percent in 2012 and contracted 0.5 percent in 2011 as the country was hammered by a quaketsunami disaster and subsequent nuclear crisis.

AFP

Second day of gains ahead of interim budget

S.Korea’s KNOC selling land

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State oil corp will release the land for either a refinery or petrochemical plant

ndian equities advanced, with the benchmark gauge rising for a second day, before the release of details of an interim budget.

Tata Power Co., the nation’s biggest non-state generator, rallied the most on the S&P BSE Sensex index.

Oil & Natural Gas Corp. rose for a second day. Housing Development Finance Corp., the nation’s biggest mortgage lender, increased 1.1 percent.

The rupee weakened 0.2 percent to 62.03 per dollar.

Prime Minister Manmohan Singh’s government will present an interim budget

to cover spending until its term ends in May. The administration is likely to achieve its goal of keeping the budget deficit to within 4.8 percent of gross domestic product this fiscal year and will probably project a gap of between 4.2 percent and 4.4 percent for the next 12 months, according to HDFC Bank Ltd. “The deficit target will be keenly watched and we expect the government keep that in control,” D.K. Aggarwal, chairman of SMC Investments & Advisors Ltd., said by telephone from New

Delhi. “We don’t expect any major announcements as this is not a full-fledged budget.”

Tata Power rallied 2.6 percent, the most since February 6. Oil & Natural Gas increased 1 percent. Housing Development Finance advanced 1.1 percent.

The Sensex has retreated 3.5 percent this year and trades at 13.3 times projected 12-month earnings, compared with the average multiple of 14.4 over the past five years.

The MSCI Emerging Markets Index is valued at 9.4 times.

About 73 percent of the 30 Sensex companies that reported earnings for December quarter have beaten or matched analyst estimates, compared with 70 percent in the September quarter and 47 percent three months earlier.

Overseas funds bought a net US$62.4 million of Indian shares on February 13, reducing the year’s outflows to US$241.3 million, data compiled by Bloomberg show.

They bought US$20 billion last year, the most in Asia after Japan, the data show.

The CNX Nifty Index on the National Stock Exchange of India Ltd rose 0.2 percent to 6,059.65. The India VIX gained 0.4 percent.

Bloomberg News

K

orea National Oil Corp (KNOC) is seeking a refiner or a petrochemical maker willing to buy land to build a 5 trillion won (US$4.70 billion) refining or petrochemical plant, the state-run oil company has said in a public tender document.

KNOC was due to close a tender to sell 92 hectares (227 acres) of the necessary land for 519 billion Korean won (US$488 million) yesterday according to a public tender web site.

South Korean refiner S-Oil Corp is likely to bid to acquire the land for a refinery or petrochemical plant it has been planning, said a KNOC source who declined to be identified as the matter is sensitive.

South Korea media have also been reporting that S-Oil has been asking the government to help it get land for its project.

S-Oil, with 669,000 barrel-per-day of refining capacity, is looking to expand its paraxylene plant

by buying the land from KNOC, according to the media reports. Paraxylene, used to make clothing and plastic bottles, is produced by processing naphtha, a refined product of crude oil or condensates.

An S-Oil spokesman was not reachable for comment.

KNOC has said that potential bidders must submit approvals from their boards of directors for a refinery or petrochemical plant investment plan as one of the qualifications for participating in the tender for the land.

Results of the tender will be available at 11am today, according to the tender document.

The land on sale is located in the city of Ulsan, over 300 kilometres southeast of Seoul.

S-Oil’s refining facility is in the same city. S-Oil’s largest shareholder with a 35 percent stake is Aramco Overseas Co B.V., a unit of Saudi Arabian Oil Company (Aramco).

Reuters

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International

Top Ecobank executives call Ukraine protesters granted amnesty for CEO’s head Unrest continues in tussle between EU and Russia for country’s political future

Claims of long running at governance problems at the pan-African lender Matthew Mpoke Bigg

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op executives at pan-African lender Ecobank have asked CEO Thierry Tanoh to step down to resolve a crisis of leadership, according to an email sent by the bank’s deputy chief executive to its interim chairman.

The email, reviewed by Reuters, does not specify any grievance against Tanoh but alleges negative effects of long-running governance problems at the bank.

The lender’s pre-tax profit for the first nine months of 2013 grew 56 percent from a year ago, while assets rose to nearly US$20 billion in 2013 from US$8.3 billion in 2008.

But the public airing of differences at the top raises pressure on the leader of one of sub-Saharan Africa’s largest financial institutions before an extraordinary general meeting (EGM) on March 3.

Ecobank’s governance is in the spotlight partly because of an inquiry

by Nigeria’s Securities and Exchange Commission. This began after its then finance director, Laurence do Rego, whom the bank had suspended, told regulators she had been pressured to misstate 2012 financial results.

Ecobank rejected her accusations.

The Nigerian SEC has yet to publish a report on its inquiry.

However, it issued a statement in January saying there was an absence of a clear vision and strategy at the bank, inadequate transparency in recruitment procedures and conflicts of interest. It also cited weaknesses in the board’s ability to manage its own activities, monitor management, evaluate performance and oversee ethical behaviour.

At the EGM in the Togolese capital of Lome, shareholders will vote on governance reforms to address the SEC’s criticism as well as on recommendations by external bodies including professional services

P

organisation EY that were hired by the bank to help its reform programme.

The email seeking Tanoh’s resignation was sent on February 11 by Albert Essien, deputy CEO and executive director of corporate and investment banking, to interim chairman Andre Siaka.

Neither Mr Siaka nor Mr Tanoh responded to Reuters requests for comment.

The email was signed by Mr Essien and three other senior Ecobank managers: deputy group CEO and chief operating officer Evelyne Tall Daouda; group executive director for domestic banking Patrick Akinwuntan; and group executive director for operations and technology Eddy Ogbogu.

All four are on a five-member Group Executive Committee that runs the bank and is led by Mr Tanoh.

The committee members also sit on Ecobank Group’s board, which currently has 12 members.

Under proposals before the EGM to shake up the bank’s board, the four would all lose their seats. Mr Tanoh would be the only member of the executive committee to remain on the slimmed-down, seven-member interim board.

In a second email in the chain, also reviewed by Reuters, Mr Siaka forwarded Essien’s email on February 13 to company secretary Samuel Ayim, asking him to circulate it to the board.

A senior figure at the bank, who asked not to be identified, confirmed the authenticity of both emails.

Messrs Essien, Tall, Akinwuntan and Ogbogu declined to comment to Reuters on the matter, referring queries to the bank’s communications department. “I would want to reiterate that I will not comment on the Ecobank Group outside of the official channels,” Mr Essien said.

rotesters arrested during months of anti-government unrest in Ukraine were granted amnesty yesterday after the opposition agreed to end their occupation of Kiev city hall and other public buildings.

The law dropping charges against the protesters came into effect a day after activists vacated the buildings they had occupied in anger over President Viktor Yanukovych’s decision to reject an European Union trade deal in favour of closer ties with Russia.

However nearly three months after the protests began, the opposition remains firmly entrenched in their sprawling tent city on Kiev’s iconic Independence Square, vowing to keep up pressure on the authorities.

Mr Yanukovych conditionally approved the law at the beginning of the month as he sought to pacify protesters following deadly unrest in Kiev that shocked the country.

The announcement it had been granted came late on Sunday after the opposition conceded to the condition they move out of the buildings.

“The (amnesty) law comes into force from February 17, 2014, and stipulates that charges against people having committed offences... will be dropped,” Ukraine prosecutors said in a statement.

The opposition concession prompted strong criticism on Sunday at the latest mass rally on Independence Square.

“It’s a bad decision... We can’t trust the authorities, they’re crooks. The opposition is making a big mistake,” said Volodymyr Penkivski, a 56-yearold protester, who had travelled from northern Ukraine.

Vitali Klitschko, the former boxer turned opposition leader, acknowledged that the decision to evacuate city hall, though difficult, was the right thing to do.

Reuters

AFP

Possible legal test for VW union vote in US President Barack Obama accuses Tennessee officials of caring more about German shareholders Amanda Becker and Kevin Drawbaugh

W

orkers at a Volkswagen AG plant in Tennessee in the United States, were bombarded with strong anti-union messages before and during their vote to reject unionising last week, but a legal challenge to the outcome over unfair interference would be difficult to mount.

Tennessee U.S. Senator Bob Corker, other Republican politicians in the state, and

several anti-union pressure groups from Washington slugged it out with the United Auto Workers in the campaign to win over employees at the Chattanooga plant.

Even though VW management allowed the UAW to have limited access to the workforce on company property and publicly took a “neutral” stance over the vote, the workers voted not to join the union, which

has been unable to expand into non-union plants in the U.S. South.

The UAW has not ruled out a challenge, saying it will “evaluate” the conduct in the campaign. UAW President Bob King said after the ballots were counted on Friday night that the union was “outraged at the outside interference in this election.”

President Barack Obama on Friday accused politicians

in Chattanooga of being “more concerned about German shareholders than American workers,” according to a Democratic aide who heard the remarks at a closed meeting with lawmakers.

U.S. labour law carefully restricts what employers and unions can say during a unionisation campaign, according to labour lawyers and academics. But outsiders, especially politicians, have

relatively free rein to say what they want.

The U.S. National Labor Relations Board supervised the Chattanooga vote, as it does other union elections.

The NLRB was expected to certify the results soon.

After that, any protest must be made within seven days to NLRB Regional Director Claude Harrell Jr., in the agency’s Atlanta office.

As the campaign in Chattanooga came to a head last week, Senator Corker said publicly that he had learned that Volkswagen would bring an additional vehicle production operation to the plant, creating more jobs, if workers rejected the UAW. The Tennessee senator – a former mayor of Chattanooga – played a key role in bringing the plant to the city. It opened in 2011.

Reuters

business daily 15 15

February 18,19, 2014

Friday April 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

TIMES OF INDIA Parliament is unlikely to provide any real relief for cash-strapped Air India as the government’s promised equity support fell short by nearly 3,600 crore rupees (US$770 million) in the 2013-14 fiscal year. Faced with such a shortfall, which is unlikely to be addressed in the interim budget, AI is now looking to get a sovereign guarantee for a loan of 1,000 crore rupees. “The equity support from the government was supposed to be used to pay off our huge debt burden. But with the infusion falling short, we are forced to raise more loans,” said an official.

Russia’s Potemkin Olympic Village

Nina L. Khrushcheva

Senior fellow at the World Policy Institute in New York

PHNOM PENH POST Overall revenue from Cambodia’s booming tourism sector reached US$2.5 billion last year, according to tourism minister Thong Khon. He said in an interview that the figure, which does not reflect the amount the state collected in taxes on the sector, marked a 15 per cent increase compared with the revenue accumulated in 2012. “It is gross national revenue, meaning what the visitors spent on everything, like restaurants, food, housing, meals, transportation, souvenirs,” he said. Mr Khon referred questions about tax dollars from tourism to the Ministry of Economy and Finance. Officials there could not be reached for comment.

JAKARTA GLOBE Humpuss Intermoda Transportasi, a listed shipping services provider, is seeking some US$500 million in bank loans to help finance its expansion plans this year. The company will use the loans to help fund its investment plans this year and has set its capital spending target at US$600 million for the year. “The loan will help finance around 80 percent of the investment,” Theo Lekatompessy, president director of the company, said on Thursday in Jakarta. The company is talking to several lenders including some European banks, but did not provide any names.

CHINA DAILY Chinese television maker TCL Corp is releasing its first video game console similar to Microsoft Corp’s Xbox later this year, a company executive said amid high expectations for the long-closed sector. “Entertainment will be the biggest focus for us in 2014,” said Hao Yi, president of TCL Multimedia Technology Holdings Ltd, a major subsidiary of TCL. Increasing demand for video games from Chinese youngsters will drive the sales of the company’s new gadgets, according to Mr Hao. The Guangdong-based maker did not disclose the possible release date of the terminals nor a sales forecast.

R

emember the year 2007? Russia was starting to look like a world power again. Its economy was growing at a record 8.5 percent annual rate. Political life had stabilized.

Support for President Vladimir Putin was stratospheric.

The decade-long Chechen rebellion seemed to have been suppressed. And, to top it off, the International Olympic Committee awarded the 2014 Winter Games to Russia’s Black Sea resort, Sochi.

In many respects, it was a strange choice of venue: sunny Sochi has beautiful mountains but little or no snow. It is also 850 miles south of Moscow, with few direct flights from Europe, while the trip from the United States can involve up to four legs.

But in 2007, Russians were becoming more optimistic about their future. Addressing the Olympic Committee, Putin argued that awarding Russia the Games would not only allow it to showcase its post-Soviet achievements; it would also help the country through its political and economic transition. Nothing seemed too difficult for Putin, even mouthing unnecessary democratic platitudes for an Olympic committee whose members had already awarded the 2008 Summer Olympics to Beijing.

But, once construction got underway, the realities of modern Russia could not be so easily hidden. The colossal project, which cost more than US$50 billion – more than all previous Winter Olympics combined – was expected

to turn Sochi into a sporting paradise, packed with arenas and a new airport. Instead, corruption and construction accidents have plagued preparations, with hotels still unfinished just days before the opening ceremony.

Olympian challenges Delay and waste are common in Olympic preparations (Greece in 2004 is an obvious example, and Brazil in 2016 appears to be experiencing similar problems). But Russia is proving to be an unsuitable host for other reasons.

Putin’s Russia is weak, tawdry, and corrupt – and underserving as an Olympic host

For starters, there are concerns about Putin’s own political legitimacy. His controversial and unconstitutional re-election to a third presidential term was condemned internationally and triggered anti-government protests across Russia.

Putin responded to those he considers political enemies by arresting and jailing protesters,

including the all-girl rock band Pussy Riot, following “show trials” (with the Olympics approaching, there have been recent “show pardons”). Such episodes have contributed to a general air of intolerance across Russia, fuelled in no small part by Kremlin-incited chauvinism. A government sponsored anti-gay propaganda law, which indiscriminately criminalizes same-sex couples, has caused outrage abroad.

Local activists have even advised gay athletes not to display signs of their sexual orientation while in Russia.

Similarly, though the Olympics should be an occasion for national pride, foreign – and in particular American – athletes have been told to avoid showing their team colours when outside the grounds. In fact, they have been warned not to wander beyond Sochi’s “ring of steel” security perimeter and the watchful gaze of black-and-grey-clad police officers, even though Olympians typically like to explore local sights.

Soviet era None of this engenders a sense of Olympic solidarity and international friendship.

And it gets worse. The authorities must also contend with threats from Islamist insurgents from Chechnya, who are now operating in other North Caucasian republics, a mere 200 miles from Sochi.

The “black widows” – wives of Islamist fighters killed in the Kremlin’s “pacification” campaign – are believed to be preparing retaliatory suicide

missions at airports, train stations, and on buses.

The last time Russia hosted the Olympics – the 1980 Summer Games in Moscow – the US and its allies staged a boycott in response to the Soviet invasion of Afghanistan.

And yet the Soviet Union was a superpower, stagnant but stable. Its totalitarian secrecy, gargantuan military-industrial complex, ever-present KGB handlers, and apparent disdain for material comforts (at least for ordinary Russians) gave the Communist hegemon a perverse mystique that made even a simple visit to Red Square a trip to remember.

However much the country was hated or feared, one could not deny that is was a major player on the world stage.

Not so today. Putin’s Russia is weak, tawdry, and corrupt – and underserving as an Olympic host. The atmosphere surrounding the Sochi Games reflects many of Russia’s worst traits. In the immortal words of former Prime Minister Viktor Chernomyrdin, describing the country’s economic transition of the 1990’s: “We hoped for the best, but things turned out as usual.”

Even assuming that the Sochi Games pass off successfully, and that, despite the security restrictions and official bigotry, athletes and visitors enjoy their stay, will Russia’s brief display of national pride really be worth the financial and political cost?

Or will Russians wake up six months from now and say, “Yes, our country has a fancy ski resort – at the beach.” © Project Syndicate

16 16 business daily

February 18, 2014 Friday April 19, 2013

Closing Metal Exchange goes direct

Sweden’s tax cuts over

The London Metal Exchange (LME) will expand direct access to data feeds from its electronic trading system, to boost computer-driven trading. High frequency trading elsewhere has spurred controversy and been blamed for volatile movements, such as the plunge in shares on Wall Street in 2010, known as the “flash crash”. Supporters of such trading say it adds liquidity to markets. The European Union agreed last month on new curbs on high-speed trading to be implemented by the end of 2016. Starting on March 24, clients of LME members will be able to plug into a direct data feed.

Swedish Prime Minister Fredrik Reinfeldt (pictured) pledged to end years of tax cuts that polls show alienated voters focused on education spending as he fights for political survival ahead of September elections.

“We could very well consider taking further measures but public finances are superior to all else and that’s our starting point,” Reinfeldt said yesterday at a press conference in Stockholm.

“That means that we won’t push through any more tax cuts in 2015 and 2016 and as it looks right now there won’t be any further tax cuts in all of the next mandate period.”

Renzi poised to form new Italian govt Mayor of Florence, aged 39, engineered removal of party rival Enrico Letta James Mackenzie

I

talian centre-left leader Matteo Renzi said yesterday he would begin talks to form a new government within 24 hours, and expected to lay out a programme of reforms to be completed over the next few months.

Mr Renzi needs to seal a formal coalition deal with the small centre-right NCD party to secure a majority and to name his cabinet before seeking a formal vote of confidence in parliament, probably later this week.

He has promised a radical programme of action to lift Italy out of its most serious economic slump since World War Two, but will have to deal with the same unwieldy coalition which failed to pass major reforms under its previous leader.

“In this difficult situation, I will bring all the energy and commitment I am capable of,” he told reporters after a 90-minute meeting with President Giorgio Napolitano when he was given a mandate to form

Tanker in S. Korea oil spill offloads cargo A

a new government.

“The sense of urgency is extraordinarily delicate and important but it’s also true that, given the time horizon we have set of a full parliamentary term, we’ll need a few days before formally accepting the mandate,” he said.

The 39-year-old mayor of Florence has been expected to take over since he engineered the removal of his party rival Enrico Letta as prime minister at a meeting of the Democratic Party leadership last week, following growing impatience with the slow pace of economic reforms.

The euro z o n e ’ s third largest economy is technically

tanker run by Singapore’s Ocean Tankers completed the offloading of 278,000 tonnes of oil in the sea off South Korea over 15 days after the vessel had collided with a pipeline as it prepared to berth, causing an oil spill.

The pipeline run by GS Caltex Corp leaked oil at a quay off Yeosu, more than 300 km (185 miles) south of Seoul. The spill was estimated at 164,000 litres from the pipeline only, not from the tanker.

South Korea’s ministry of Oceans and Fisheries said on Monday the 318,445 deadweight tonne VLCC (very large crude carrier) Wu Yi San, carrying North Sea crude, had offloaded 140,000 tonnes on Thursday and the rest on Sunday.

Local media said the Wu Yi San, which was chartered to Shell , will be repaired and that it had transferred the crude to another ship, from where it was offloaded to a tank nearby.

GS Caltex, the second-largest South Korean refiner, is owned by Chevron Corp and South Korea’s GS Energy, part of GS Holdings.

no longer in recession since it scraped back into growth in the fourth quarter of 2013. However, it remains profoundly marked by the crisis with a 2 trillion euro (US$2.7 trillion) public debt, a rapidly crumbling industrial base and millions out of work.

German homes climb most in decade G

Reuters

erman home prices rose by the most in at least 10 years in 2013 as low interest rates made it cheaper to finance purchases and prompted investors to switch from bond markets to real estate. The gains slowed in the fourth quarter.

Prices for houses, apartments and residential buildings climbed 4 percent in 2013 from a year earlier, according to an index published today by the VDP Association of German Pfandbrief Banks.

That’s the biggest gain since at least 2003, when VDP began compiling data. Prices rose 3.4 percent in the last three months of the year, the smallest increase in five quarters.

Germany’s housing rally is being driven by low borrowing costs and a shortage in big cities such as Berlin and Frankfurt, where construction lags behind demand. The German government has proposed new laws to curb price and rent increases in an already tightly regulated market.

“Demand for residential properties remains high,” Jens Tolckmitt, VDP’s general manager, said in the statement.

Brazil World Cup city baulks at funding fan zone alone S

occer’s World Cup organisers – already considering dropping a Brazilian stadium because of unfinished work – got a setback from another host site.

The northeastern coastal city of Recife said it will no longer pay for FIFA’s Fan Fest, an outdoor screening venue for fans without tickets, at this year’s event. The fan zones were popular during the 2006 World Cup in Germany and attract thousands of visitors.

Recife’s World Cup secretary George Braga said the city can’t spare the 11 million reais (US$4.6 million), down from an initial estimate of 20 million reais, for the event. The decision comes amid public anger about the amount of money being spent on sporting events in a country with poor health and education provision. Mr Braga said the Fan Fest may still take place if private investors fund it.

“We’ve been thinking about the Fan Fest and came to the conclusion that we alone cannot bear the costs of it,” he told reporters.