Macau business daily, Feb 25, 2014 by Business Daily

MOP 6.00

march from Tap Seac Square to government business daily 1 headquarters to show their opposition to what they regard as relentless expansion of casinos. The group is also against allowing migrant workers to work here as croupiers. Forefront of Macau Gaming president Ieong Man Teng told Business Daily that the union was arranging the protest march because the government had failed to respond to a petition that the union handed it a week ago. More on page

www.macaubusinessdaily.com

Year II

Number 483 Tuesday February 25, 2014

Publisher: Paulo A. Azevedo

Closing Editor: Michael Grimes

Casino workers A to protest against gaming expansion

Friday April 19, 2013

May is the target for civil service pay rise say unions

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Hang Seng Index 22580

22518

22456

22394

22332

22270

February 24

HSI - Movers

3 Name

Mainland visitors up 15 pct y-o-y in January

Retail sales MOP66 billion in 2013

Buy from Macau, Assembly president urges govt

The total number of visitors to Macau last month was 2.5 million, an 8 percent increase over the same month last year. The increase was mainly due to the Chinese New Year holiday falling at end-January rather than February. Mainland arrivals increased by 15 percent year-on-year to 1.7 million, with the majority – 815,240 – coming from Guangdong Province, 59,924 from Fujian Province and 54,046 from Shanghai.

Retail sales totalled 66 billion patacas (US$8.26 billion) for the whole of 2013, up by 23 percent over those of the previous year. The latest data released by the Statistics and Census Service shows watches and jewellery accounted for the majority of the total, with sales reaching 20.5 billion patacas, followed by goods in department stores with 10.4 billion patacas in sales.

One of the city’s business and political leaders has urged the government and gaming operators to buy locally produced products and services to help the economy to diversify beyond tourism and casino gambling. “It is a pity that the relevant government departments have not truly understood the importance of the manufacturing industry to the economic diversification of Macau,” said Ho Iat Seng.

Page

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BELLE INTERNATIONAL

5.91

SANDS CHINA LTD

0.76

HANG SENG BK

0.48

CHEUNG KONG

0.34

POWER ASSETS HOL

0.32

HANG LUNG PROPER

-2.76

CHINA RES ENTERP

-2.78

CHINA OVERSEAS

-3.57

WHARF HLDG

-3.68

CHINA RES LAND

-5.74

Source: Bloomberg

I SSN 2226-8294

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February 25, 2014 Friday April 19, 2013

Macau Sin Fong’s residents to petition govt The displaced residents of Sin Fong Garden, a residential building that faced near‑collapse in October 2012, are filing petition to the government on Friday. They allege lack of “convincing findings” on what they say are fundamental flaws with the structure and the tilting problem of adjacent residences, the head of Sin Fong Garden’s management committee Wong Man Sang told Business Daily. An additional investigation on the cause of Sin Fong Garden’s near-collapse incident began in December and initial findings would be reported soon, the government noted in a press statement yesterday.

SMEs’ new borrowing up 29pct in second half 2013 Credit limit approved by Macau banks totalled MOP16.3 billion according to govt Sara Farr

sarafarr@macaubusinessdaily.com

he number of loans to small- and medium-sized enterprises (SMEs) approved by local banks increased 29.1 percent in the second half of last year to 16.3 billion patacas (US$2.04 billion) over the first half of 2013. This is also a 33.8 percent increase over the same

period a year before. Statistics released by the Monetary Authority of Macau show that the collateralised ratio – the proportion of credit limit to tangible assets pledged – was 77.7 percent, up 2.5 percentage points when compared with that of the last survey period. This is also a

12.9 percentage points increase when compared with the same period of 2012. At the end of last December, the outstanding value of total SME loans increased 22.4 percent from end-June, equivalent to a 26.9 increase from a year earlier to 40.4 billion patacas. When compared with the

Visitors up 8pct in January

he total number of visitors to Macau last month was 2.5 million, an 8 percent increase over the same month last year. The increase was mainly due to the Chinese New Year holiday falling in February. Official figures released yesterday by the Statistics and Census Service show that 54 percent of the total number of visitors, or 1.3 million, were same-day visitors from mainland China. In January, the number of mainland visitors increased by 15 percent year-on-year to 1.7 million, with the majority – 815,240 – coming from Guangdong Province, 59,924 from Fujian Province and 54,046 from Shanghai. Mainland Chinese visitors travelling under the individual visit scheme accounted for 49 percent of total mainland visitors, or 832,381 people.

MOP16.3 bln SME loans in 2H 2013

six months ending June 30, bank loans to SMEs categorised as “non-monetary financial institutions” increased by 67.4 percent. Loans to the “wholesale and retail trade” increased 44.7 percent, and loans to the “transport, warehouse and communications” sector increased at a 23.9 percent rate. Loans for “agriculture and fisheries”, “restaurants, hotels and similar activities” and “education” dropped 10.9 percent, 10.7 percent and 6.1 percent, respectively. The utilisation rate, defined as the proportion of outstanding credit balance to credit limit granted, rose 8.3 percentage points from six months ago to 65 percent. In addition, the outstanding balance of delinquent SME loans increased by 12.6 percent to 144.5 million patacas at the end of 2013 from that of six months ago. When compared to a year ago, the balance dropped 52 percent. The delinquency ratio, a ratio of delinquent loans’ outstanding balances to total SME loans outstanding, dropped 0.14 percentage points from end-June or 0.59 percentage points from a year earlier to 0.36 percent.

Square Inn Hotel: clarification

In addition, the number of visitors from Taiwan totalled 77,859, showing a 1 percent increase year-on-year. Those from South Korea totalled 59,143, representing a 12 percent increase year-on-year. The number of visitors from Hong Kong decreased by 3 percent to 494,149 and Japan also dropped 4 percent to 25,736. There were also 1 percent fewer visitors from the United States in January when judged yearon-year, or 14,483 individuals. The was a 7 percent drop in visitors from Australia, to 11,311, and a 4 percent decline in Canadian tourists, to 5,750. However, the number of visitors from Russia increased by 6 percent to 4,115. For the most part, the average length of stay remained unchanged with the majority staying only one day in Macau. S.F.

n February 19, in a story titled ‘Three-star hotel still has no licence’ we reported a Hong Kong regulatory filing from Rosedale Hotel Holdings Ltd saying it had disposed of a proposed hotel property in Macau after waiting more than six months for such a licence. Macau Government Tourist Office has asked us to clarify the reasons the licence had not been granted. MGTO said in a statement: “MGTO received the application of [a] three-star hotel operation licence for ‘Dynasty Oriental Hotel’ submitted by ‘Dynasty Oriental Hotel Co., Limited’ on 11 October 2006. “The applicant suggested amending its request into a twostar hotel licence application on 15 May 2009. The hotel also requested to be renamed to ‘Square Inn’. Its

hotel blueprint was amended a few times but still failed to meet the legal requirements. Since 18 August 2010, the applicant has not made any follow up regarding the request of hotel operation licence. In 2011 and 2012, MGTO sent out letters requesting the applicant to follow up with the application but no reply was received.” MGTO added in its statement: “After more than two years, MGTO received the applicant’s blueprint documents (with follow-up of firesafety concerns) again on 15 January 2013. Nonetheless, the design failed to meet the requirements again based on the advice given by Fire Services Bureau on 27 February 2013. Consequently. MGTO urged the applicant again to follow up on 11 October 2013 but the applicant did not give any reply.”

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February 25,19, 2014 Friday April 2013

Macau Fewer residents gambled in past year: study The Social Welfare Bureau said the gambling participation rate of residents dropped from 56 percent in 2010 to 49.5 percent in 2013. The result comes from the latest study of the University of Macau commissioned by the bureau. The rate for residents showing initial problem gambling signs dropped from 2.8 percent to 1.9 percent in three years, said the bureau’s director Iong Kong Io. The rate for residents with pathological gambling symptoms stayed at 0.9 percent last year, down from 2.8 percent in 2010.

May the target for civil service pay rise One union wants salary hike backdated to January Stephanie Lai

sw.lai@macaubusinessdaily.com

he civil service pay committee will meet soon to discuss the next increase for government employees, with a view to putting more money in their pockets from May, according to committee member Lei Kong Weng. “For the past two years the civil service pay rise has come into effect in May,” Mr Lei told Business Daily. “We want the same schedule for the pay rise this year, but that means we’ll have to speed up our meetings so we can make a proposal for the Legislative Assembly to discuss and approve [it],” he said. The civil service pay committee proposes changes in the remuneration of civil servants, but the government has no obligation to accept its pr posals. Government policy is to give all civil servants every year a uniform pay increase that is roughly in line with inflation. Last year the government increased their pay by 6.06 percent. Mr Lei said the government, in deciding on this year’s pay increase, would take into consideration pay trends in the private sector, the government’s finances, inflation and the opinions of the civil service unions. Two unions, the Professional Civil Servants Association of Macau and the Macau Civil Servants Association, have demanded a percentage increase no smaller than the rate of inflation last year, which was 5.5 percent. Neither union has a seat on the civil service pay committee. The Professional Civil Servants Association of Macau comprises mainly high-ranking officials and senior technical staff. Its director, Kun Sai Hoi, told us:

“We would also like the upcoming pay rise backdated to January.” Mr Kun said this would better restore the purchasing power of civil service pay, which had been weakened by inflation.

“We would also like the civil service pay committee to establish a more definite timetable for civil service pay adjustments every year, and be more open in its day-to-day work,” he said.

Mr Lei said his committee was aware that public opinion was in favour of changes in the system for remunerating civil servants, but that the matter was not on the agenda of any of its forthcoming meetings.

Retail sales total MOP66 billion in 2013 Volume of sales went up 24pct year-on-year

etail sales totalled 66 billion patacas (US$8.26 billion) for the whole of 2013, up by 23 percent over those of the previous year. The latest data released by the Statistics and Census Service shows watches and jewellery accounted for the majority of the total, with sales reaching 20.5 billion patacas, followed by goods in department stores with 10.4 billion patacas in sales.

The overall volume of retail transactions increased by 24 percent for the whole of last year. Communication equipment topped the list, accounting for 49 percent of the total transactions, watches and jewellery accounted for 39 percent and leather goods 27 percent. In the fourth quarter alone, retail sales were up by 14 percent to 18.3 billion patacas, compared with 16.1 billion in the previous

quarter. Sales of watches and jewellery amounted to 5.6 billion patacas, accounting for 30 percent of the total, while sales of goods in department stores took up 16 percent, leather goods 11 percent, and men and women’s clothing 10 percent. The value of retail sales in the final quarter of 2013 alone increased 25 percent. The volume of retail sales increased by 28 percent net of inflation year-on-year.

Around 68 percent of retailers surveyed said sales volume had increased or held stable in the fourth quarter of 2013 over that of the previous quarter. The remainder – 32 percent – said they had noticed a decrease in sales volume. In terms of retail prices, 68 percent said they had kept the price stable, while 25 percent increased prices and 7 percent decreased their charges.

For 66 percent of retailers, stock levels remained constant, while 16 percent reported low stock levels. Retailers are optimistic about sales this year, with 19 percent expecting sales volume to increase. The majority of retailers, accounting for 58 percent of the total, expect prices to remain the same. And 23 percent expect sales volume to decline. S.F

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February 25, 2014 Friday April 19, 2013

Macau Angela Leong seeks casino worker gambling ban SJM Holdings Ltd executive and legislator Angela Leong On Kei has asked the government to consider banning casino employees from gambling in any casino, not just their workplace. That would bring them in line with civil servants, who can only gamble in casinos on the first three days of Chinese New Year. Secretary for Economy and Finance Francis Tam Pak Yuen said the matter could be raised during discussions in 2015-16 on the concession renewals. He added the opinions of the Commission Against Corruption, Commission of Audit and the Public Prosecutions Office would be considered regarding general renewal issues.

Workers to protest against gaming expansion A trade union threatens further action if govt persists in ‘ignoring’ it Tony Lai

tony.lai@macaubusinessdaily.com

The earlier casino workers’ protest on October 10

union of casino workers will hold a protest march on Sunday to voice its demand that the government strictly curb growth in the number of gaming tables. The union, Forefront of Macau Gaming, says the demonstration will be just the first of a series of protests if the government fails to disclose how many more tables it will allow the casino operators to have for the new resorts they are building in Cotai. The union says the demonstrators will march from Tap Seac Square to government headquarters to show their opposition to what they regard as relentless expansion of casinos. The group is also against allowing migrant workers to work here as croupiers. Forefront of Macau Gaming president Ieong Man Teng told Business Daily that the union was arranging the protest march because the government had failed to respond to a petition that the union handed it a week ago. “The casino operators have applied to the government for many gaming tables for their new Cotai developments, but the government has never said how many tables it will let them have,” Mr Ieong said.

“Based on our calculations, the new Cotai resorts may have thousands of new tables, requiring at least 20,000 croupiers and pit supervisors,” he said. “The local labour force may not be a big enough, leading casino operator to ask to import migrant workers to fill croupier positions.” Secretary for the Economy and Finance Francis Tam Pak Yuen has said repeatedly that in deciding how many tables the casino operators should be allowed, the government will take into consideration what attractions other than gaming their new resorts will have, and how their new resorts will contribute to the development of Macau.

..the government has never said how many tables it will let them [casinos] have Ieong Man Teng, president, Forefront of Macau Gaming

Only the start But the government has given no figure for how many tables the casino operators will be allowed, beyond references to the table cap of three percent compound annual growth from December 2012-January 13 through to the end of 2022. A research report issued by Morgan Stanley last month says the new resorts in Cotai may require

12,600 employees to man the tables they will contain. At present casinos employ at least 17,600 people as croupiers, so the pool of croupiers will have to increase by 70 percent, Morgan Stanley predicts. Mr Ieong thinks that to protect casino employees the government should strictly limit annual growth

in the number of gaming tables as per the table cap policy. But Mr Tam has said growth can be over or under 3 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 number had grown by a constant 3 percent ever year. Gaming Inspection and Coordination Bureau figures show Macau had 5,750 gaming tables at the end of last year, 4.8 percent more than a year earlier. Mr Ieong said at least 500 people would take part in Sunday’s march. “Sunday’s protest is only the start of a series,” he said. “If the government has still not given any substantial response after the protest, we have plans to step up our action, including industrial action,” he said. He declined to elaborate. In October Forefront of Macau Gaming union held a protest against the idea of changing the government’s policy of reserving croupier positions for Macau permanent residents. The union said over 10,000 people had taken part. The police put the figure at 3,000.

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February 25,19, 2014 Friday April 2013

Macau Stanley Ho pays to renovate consulate Casino entrepreneur Stanley Ho Hung Sun and fellow businessman Ng Fok are to pay for renovations respectively to the auditorium of the Portuguese Consulate in Macau and to the consul’s official residence (pictured) at the former Hotel Bela Vista on Penha Hill. News agency Lusa quoted the consul, Vítor Sereno, saying the auditorium at the consulate would be fitted with new technology, also giving it a more modern look. Mr Sereno declined to say how much the work would cost. He did say Mr Ho would be paying for the consulate work and Mr Fok for the residency.

So long suckers? Macau’s junkets perform a function casinos just can’t do as well Michael Grimes

michael.grimes@macaubusinessdaily.com

“D

emocracy” the British wartime leader Winston Churchill is said to have remarked “is the worst form of government, except for all the others.” Something similar could be said of the junket system in Macau casinos. The death of Macau gambling’s middlemen – the junket operators that bring in high rollers from the mainland and beyond – has been oft predicted. But they’re still here and apparently thriving, thanks to the particular challenges of moving any money – let alone gambling money – across mainland China’s international borders. Casino operators here have made no secret of the fact they would eventually like to run their businesses without junkets. Pansy Ho Chiu King, co-chairperson [sic] of MGM China Holdings Ltd, said as much recently in evidence to investigators checking the suitability of MGM China’s parent firm MGM Resorts International for a Massachusetts casino licence. The reasons for wanting a junket free Macau casino industry differ from operator to operator. Those with licences in the United States would certainly have an easier time from their domestic regulators and politicians if the junkets could just disappear without the loss of VIP business that would entail. But if the maxim when analysing any deal or industry is ‘follow the money’, then a key motivation for a junket-free world is profit. “Direct VIPs give us considerably

higher profit margins,” MGM China’s chief executive Grant Bowie told Bloomberg News recently, referring to the process whereby the casino manages the high roller directly. A casino can make 10 percent to 15 percent more from big- time Chinese players if it hosts them itself, instead of paying junkets to do the same job in exclusive VIP rooms it leases to them, according to Karen Tang, an analyst at Deutsche Bank AG in Hong Kong. Others put the potential at as much as 50 percent more.

Casinos have a much more in-depth database to tap Richard Huang, analyst, CLSA Ltd

“Casinos have a much more indepth database to tap,” Richard Huang, a Hong Kong-based analyst at CLSA Ltd, told Bloomberg. They have more opportunities to collect debts too. “With most of the rich Chinese having offshore bank accounts or properties, that gives casinos increased comfort in extending them credit.” But that raises two key problems: credit issuance and credit risk. Junkets survive because – like cleaner fish clinging to a shark – they perform a function no one else can or wants to do – namely managing the opaque and risky world of cross border money movement from and to the People’s Republic of China. A quick glance at the High Court lists in Hong Kong reveals a steady trickle of Chinese gamblers – many previously directly managed by the Macau casinos – who haven’t paid off their markers. Only if the defendants have assets domiciled in Hong Kong is it likely the casino will get at least some cents on the dollar back. If a high roller doesn’t honour his credit issued by a junket, the casino management and the government still get paid their cut of his or her play.

Steady grip In that environment, junket operators, led by Suncity Group and Jimei Group, have a steady grip on the industry. Still, some are feeling the pressure. “We are being squeezed,” Yu Yio Hung, who operates a single VIP room at Altira casino, told Bloomberg.

Suncity and Jimei, as well as Sands China, Galaxy Entertainment Group Ltd and Wynn Macau Ltd declined to comment to Bloomberg on the topic. Ten years after the opening of Sands Macao, Las Vegas Sands Corp’s first Nevada-style mass-market casino in the city, VIPs still account for about two-thirds of Macau’s casino revenue, which last year reached 360.75 billion patacas (US$45.2 billion), about seven times that of the Las Vegas Strip. Proportionately however the contribution to gross revenue of the VIP segment has been slipping recently. Some analysts think that’s because some of what used to be VIP business has simply been ‘rebadged’ as premium mass and transferred to high limits tables on the main floor. There, rebate programmes run by the house are available to big players and – according to some industry gossip – really big premium mass players may still be being managed by junket-like organisations without the knowledge of casino managements. Wealthy Chinese – ever creative when it comes to getting round rules and regulations – will no doubt be looking with some interest at the recent news that Bank of China Macau Branch is to be allowed to issue yuan-denominated loans cross border to companies in Shanghai’s new free trade zone. Expect the authorities to be watching closely to ensure it doesn’t become a conduit for gambling money into Macau. With Bloomberg News

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February 25, 2014 Friday April 19, 2013

Macau

27 housing schemes licensed in 2013 Last year govt tightened rules on registration and pre-selling of homes Sara Farr

sarafarr@macaubusinessdaily.com

total of 27 new private blocks comprising 600 new apartments were licensed by the government as residential properties in 2013. According to the latest official data released by the Land, Public Works and Transport Bureau, the 27 buildings also include a total of around 120 new parking spaces. For the whole of last year, a total of 46 residential housing development projects were completed. That represented an aggregate increase of 2,330 new private home units and 2,130 parking spaces for the city’s housing stock. In addition, authorities were inspecting up to 19 development projects by year-end, comprising 1,700 residential apartments and 2,000 parking spaces. In June last year the Macau government tightened its procedures for off-plan sales and also for property permits and registration of new units, preventing developers from pre-selling without the necessary paperwork. It was a bod to prevent sharp practices including sudden changes of specification by developers, or firms taking deposits and then not

completing schemes. Last month, outside the statistical reporting period, two of the developments were granted a government-issued housing licence. The other 17 still need to submit additional paperwork and ensure they meet all the requirements before being issued with permits. In the fourth quarter of 2013

alone, there were 76 housing projects in the private sector under construction according to the data. Once complete, these will add another 8,100 residential apartments and 8,300 parking spaces to the real estate market. The majority of these residential apartments (5,860) are oneand two-bedroom homes, while

around 2,250 are three- and up bedroom homes. Of the 76 projects under way, 62 are on the Macau peninsula, four in Taipa and 10 in Coloane. According to the Lands, Public Works and Transport Bureau, the proposals for some of these housing development projects were submitted within the last six months.

Corporate Jade artworks at Galaxy Macau

Serving up romance at IFT

Galaxy Macau held a three-day exhibition featuring some 400 jade sculptures, including exquisite Burmese jade jewellery and accessories as well as decorative objects carved from whole pieces of jade. “This exhibition presents artworks of superlative quality that were painstakingly crafted by talented artists,” said Gabe Hunterton, deputy chief operating officer of Galaxy Macau. “As an avid supporter of Macau’s arts and culture, Galaxy Macau will continue to bring a variety of events and programs to residents and visitors in the future.” The exhibition featured artists from China, Taiwan and Macau, including the latest creations by one of Macau’s best jade sculptors, Leong Man Nin. “I would like to thank all parties concerned for their efforts, in particular Galaxy Macau for its support in making this exhibition possible,” said Mr Leong, who also serves as chairman of the Macau Federation of Literary and Art Circles.

Year three students from the Tourism Event Management course at the Institute for Tourism Studies rolled out a new project with a charity cookiemaking event. It marked Valentine’s Day both in the West and in China. This year was the first occasion in 19 years that the Western and Chinese events fell on the same day. Products created by the students included Chinese fortune sticks, known as kau chim. There was also Westernstyle handmade confectionery with the word ‘Love’ on each one. Customers also had the option of creating a personalised – if short – message. A third product on offer from the students were key chains shaped like Dutch clogs. For Dutch people, clogs represent three stages of love. The first clog is for the newborn, the second one acts as a love token and the third one symbolises eternal love between couples. The Valentines event was called “I’m possible …to love”.

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February 25,19, 2014 Friday April 2013

Macau Buy in Macau, Assembly president urges Tony Lai

tony.lai@macaubusinessdaily.com

ne of the city’s business chambers has urged the government and gaming operators to buy more locally produced products and services to help the economy to diversify beyond tourism and casino gambling. “It is a pity that the relevant government departments have not truly understood the importance of the manufacturing industry to the economic diversification of Macau, nor have they fully implemented the ‘Made in Macau’ concept proposed several times by the Chief Executive,” said Ho Iat Seng, chairman of the Industrial Association of Macau, in a speech at the weekend. His remarks were given more bite because he is also president of the Legislative Assembly. Two decades ago, “Made in Macau” was a label that could be found on many textiles and shoes. But with the expansion of manufacturing in neighbouring Guangdong the local factory sector has dwindled almost to nothing. And an economics scholar thinks it will take time before the tag once again generates consumer confidence in local product quality. Ho Iat Seng said in his address that the city was re-positioning itself from traditional manufacturing to

the concept of “Macau productions, Macau creations”. The association has tried to build up its own brands for products since 2009, he said at a gala dinner attended by officials including the city’s Chief Executive Fernando Chui Sai On. Mr Ho’s group has over 500 companies accounting for over 85 percent of the value for the city’s domestic exports each year, its website claims. The manufacturing industry had success in the 1980s and 1990s but its demise has quickened since 2005 when the World Trade Organization ended Macau’s quota allowance for textiles and garments. The territory’s domestic exports fell from 17.32 billion patacas (US$2.17 billion) in 2004 to two billion patacas last year.

Procurement “‘Made in Macau’ products were not given preferential rights during the procurement process of the government departments,” claimed Mr Ho at the weekend. “The gaming companies also did not enact the terms of taking up social responsibility in their concessions, namely supporting local enterprises,” he added. Some observers say that in other service areas, local firms need to

raise their standards if they want to win more business. In November, the president of the Macau Union of Suppliers Associations told us that casinos and hotels were increasingly buying food directly from Hong Kong and mainland China. But industry sources have told Business Daily privately that the product range, product quality and logistics chain management offered by Macau companies is often inferior to what is offered by outside suppliers. As far as local manufacturing is concerned, Mr Ho admits there are “huge hurdles” beyond even the rising labour expenses and other costs employers face here. The median monthly earnings of the employed population reached 12,300 patacas (US$1,537.5) by end of last year, rising by over one-third from 9,000 by end of 2009. “[We] hope the government can set up an example in giving priority to buying products manufactured and designed locally,” said Mr Ho, adding he also wanted to see the administration “encourage private enterprises to support the development of the manufacturing sector and the diversification of Macau’s industries.” Jack Chang Chak Io, vicepresident of Macau Association of

Economic Sciences, thinks it will take time for the private sector to adopt more locally manufactured products. “It will be a slow gradual process as many residents are still used to the concept that most products made here – even aside from food souvenirs – are meant for export,” said Mr Chang. “Industry here also does not offer a range of product varieties except food and clothing.” “Private companies also do not have much knowledge about the local products – and confidence [in them],” he added.

Govt support Mr Chang agrees the government can take a lead in helping the sector via more promotion. “But in the end whether private enterprises adopt more ‘Made in Macau’ products is still a commercial decision,” he added. But he noted some gaming companies had already used local manufacturers for staff uniforms. The industrial association’s Mr Ho also said the government can help industry by approving commercial buildings for industrial use. Industrial buildings could also include workshops or factory shops for tourists to visit, he added.

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Greater China Cost of China disasters surges to US$69 bln Natural disasters including droughts, floods and earthquakes cost China 421 billion yuan (US$69 bln) in 2013, official data showed on Monday, nearly double the total in the previous year. China has always been prone to natural disasters but a changing climate is causing more extreme weather, which hits food production, threatens scarce water resources and damages energy security, according to the government. Data released by the National Statistics Bureau showed flooding and mudslides cost China 188 billion yuan in 2013, 20 billion more than in the previous year.

China home prices Big cities most affected by government’s curbs on credit

ew home price growth in China’s first-tier cities slowed in January after local governments implemented property measures to rein in escalating values and banks tightened lending. Home prices in the capital city of

Beijing and the southern business hub of Shenzhen both rose 0.4 percent from a month earlier, the National Bureau of Statistics said in a statement today, the slowest pace since October 2012. Prices in Shanghai added 0.5 percent, the smallest increase

since November 2012, and those in Guangzhou gained 0.7 percent. Property shares slumped after the data was released and as Shanghai Securities News reported that Industrial Bank Co. suspended loans to some developers. At least

HSBC cost cuts set to lift profits HSBC’s profits are expected to rise by almost a fifth to US$24 billion for 2013 as it benefits from a cost-cutting drive that spans managing its documents more efficiently to telling staff to use business class air travel less. Chief executive Stuart Gulliver has sold or closed 60 businesses, axed 40,000 jobs and taken a knife to costs since taking over three years ago, and last year’s operating costs are expected to tumble US$5 billion from 2012 and lift profits. Analysts expect Gulliver to keep a tight rein on costs.

Meat processor’s net profit up 34 pct China’s largest meat processor Henan Shuanghui Investment & Development Co Ltd said its 2013 net profit rose 33.7 percent, boding well for an initial public offering by its parent WH Group Ltd which is expected to be the biggest Hong Kong listing since 2010. Annual net profit rose to 3.86 billion yuan (US$633.68 million) due to lower input costs which boosted margins, the company said in a statement to the Shenzhen stock exchange yesterday. China is the world’s biggest pork consumer and estimated per capita spending on meat, poultry and processed products more than doubled to 1,184 yuan (U$190) in six years.

Huawei seeks U.S. smart phone foothold China’s Huawei Technologies believes it can take advantage of recent changes in how operators in the United States sell phones to get a foothold in the allimportant market, an executive with its consumer division said on Sunday. Huawei, best known as a maker of telecom network gear, became the world’s third-biggest smartphone manufacturer last year, through the sale of mid-priced handsets within its fast-growing domestic market and an increasing appeal to priceconscious consumers in western Europe. But the group is viewed in the U.S. with suspicion after lawmakers flagged Chinese telecommunications equipment as potential security risks. It has also suffered from its difficult-topronounce brand name, its executives have acknowledged.

Shanghai – a first tier city for property

Yuan extends worst drop in 2 years Macro indicators trouble analysts and investors

hina’s yuan extended a decline from the biggest weekly drop in more than two years after the central bank weakened the currency’s reference rate for the fifth day amid concern the economy is slowing. The official Purchasing Managers’ Index will probably come in at 50.1 for February, the least since June, according to the median estimate in a Bloomberg survey before date due March 1. A preliminary reading of a private gauge released last week showed output contracted by the most in seven months. The yuan could weaken in the short term and might even fall below the PBOC’s daily fixing, China International Capital Corp. analysts led by Wensheng Peng wrote in a note yesterday. The currency dropped 0.11 percent to close at 6.0984 per US dollar in Shanghai, after falling 0.41 percent last week, according to China Foreign Exchange Trade System prices. It’s the weakest level since Nov. 5. The People’s Bank of China cut the reference rate by 0.02 percent to a two-month low of 6.1189 in the longest run of reductions since November. “Concerns over China’s growth and the weak PBOC fixings have spurred some panic price actions in the yuan market,” said Bruce Yam, a

Hong Kong-based foreign-exchange strategist at Sun Hung Kai Forex. “The yuan is likely to weaken more before consolidating, while the longterm trend is turning a bit bearish as economic data could point to weaker growth.” The currency in Shanghai was 0.34 percent stronger than the central bank’s reference rate yesterday, the least since October 8. The gap climbed to as high as 0.97 percent in January, the widest since May. The onshore spot rate is allowed to diverge a maximum 1 percent from the daily fixing.

Offshore yuan The yuan traded in Hong Kong slipped 0.06 percent to 6.0969 per

dollar, after climbing as much as 0.06 percent earlier, according to data compiled by Bloomberg. It fell 1 percent last week in the steepest slide since September 2011, making it the worst performer in February among 12 Asian exchange rates tracked by Bloomberg. The offshore yuan’s premium returned as it is now trading 0.01 percent stronger than the onshore spot rate. The yuan’s recent weakness is within the normal range and doesn’t signal a change in economic fundamentals, Finance Minister Lou Jiwei said over the weekend in Sydney, after a meeting with counterparts from the Group of 20 nations. “You can’t say that the yuan is starting to depreciate just because of some small volatility.” Bloomberg News

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Greater China

slow 10 Chinese cities, many of them provincial capitals, have tightened local property policies since November, with major cities Shenzhen, Shanghai and Guangzhou raising minimum down payments for second homes to 70 percent from 60 percent.

KEY POINTS Shanghai price rises smallest since Nov 2012 10 cities tightened housing credit since Nov Shanghai Stock Exchange Property Index fell 5.4 pct Some developers may default on debt

“We see firm determination by the Chinese government to curb the property market,” Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd, said by phone yesterday. “Measures on the financial market are having an impact on the property market. We should see a turning point this year when home prices in China’s first-tier cities stop rising.”

Shares fall The Shanghai Stock Exchange Property Index fell 5.4 percent at the close of trading, the biggest drop in eight months and the most among the five industry groups on the benchmark Shanghai Composite Index. Poly Real Estate Group Co. lost 8.5 percent to 6.77 yuan in Shanghai trading, while China Vanke Co. slid 6.6 percent to 6.69 yuan in Shenzhen. Both posted their biggest declines since June. Chinese developers traded in Hong Kong also fell. China Overseas Land & Investment Ltd dropped 3.6 percent to HK$20.25, the biggest decline in almost eight months, while Evergrande Real Estate Group Ltd slipped 5 percent to HK$3.25. Housing values climbed in 62 cities in January from the previous month, the lowest number since July. Private data also showed signs of cooling in the residential real estate market. Home prices increased 11.1 percent in January from a year earlier, the slowest pace in a year, according to SouFun Holdings Ltd, the nation’s biggest real estate website. Industrial Bank issued a notice before the Chinese Lunar New Year that started at the end of January to suspend mezzanine and supply-chain financing in the real estate sector until the end of March, Shanghai Securities News reported today, citing the notice.

Loan default Some Chinese developers may default on their debt as property

trust loans worth about 350 billion yuan (US$57 billion) mature this year, according to Jefferies Hong Kong Ltd. Real estate mezzanine financing makes up 10 percent to 20 percent of annual property investment, with trust firms and private equity funds contributing the most, wrote China International Capital Corp. analysts led by Huang Jie yesterday. Mezzanine financing in the property industry involves giving a loan to a developer while an affiliate of the bank buys a stake in the firm and sells it back at a later date. It is often structured in a way that makes it look like an equity investment rather than a loan. The property market slowed in January, a traditionally low season for the industry, as banks kept mortgage policies tight with no discounts.

Taiwan to up income tax on banks Insurance sector will also pay 3 percentage points more

Existing home prices fell 0.1 percent in Beijing last month from December and increased 0.1 percent in Shanghai, according to yesterday’s data. Beijing, Shanghai, the country’s financial centre, and the southern business hubs of Guangzhou and Shenzhen are considered first tier by the bureau of statistics. The four “are characterized by high levels of international business connectivity, deep corporate bases and welldeveloped international grade stock, and they are the country’s most liquid and transparent markets,” according to broker Jones Lang LaSalle Inc. New home price gains in firsttier cities also slowed from a year earlier. Housing values in Guangzhou and Shenzhen rose 19 percent and 18 percent, respectively, from a year earlier, the slowest pace since July. Prices in Beijing jumped 15 percent, the lowest since August, and increased 18 percent in Shanghai, the least since September.

aiwan’s finance ministry said yesterday it will raise the income tax paid by banks and insurance companies to 5 percent from 2 percent now, in a move some economists see as the first step toward raising some corporate taxes. “This seems it is just the first step,” said economist Forest Chen of Ta Chong Bank. The general goods and services tax “will probably be next, as it only stands at 5 percent, relatively lower by regional term,” Chen said. The tax increase for banks and insurers, which is still subject to parliament approval, is part of Taiwan’s broader effort to tackle its rising debt. The island’s debt has surged in the past years, rising to T$5.4618 trillion (US$182 billion) as of January, according to local media reports. No comparison figure was available. Income tax paid by securities houses, futures and asset management firms will remain the same at 2 percent, the ministry said in a statement. Taiwan banking stocks fell 1.7 percent yesterday after local media reported the tax hike. The main share index slipped 0.5 percent.

Bloomberg News

Reuters

Slowing gains

Property shares fall most in 8 mths Fears of slowing growth in mainland economy

hina’s stocks fell, sending the benchmark index to its biggest loss in seven weeks, amid speculation that reduced lending to the property industry will curb growth in the world’s second-largest economy. China Vanke Co. and Poly Real Estate Group Co., the nation’s biggest developers, plunged more than 6 percent after the Shanghai Securities News reported Industrial Bank Co. and other banks have tightened lending to the property sector. Industrial Bank led declines for lenders with a 3.7 percent loss. China Petroleum & Chemical Corp., the refiner known as Sinopec, slid as much as 6.4 percent, erasing gains since it announced plans to sell a stake to private investors. The Shanghai Composite Index dropped 1.8 percent to 2,076.69 at the close. A measure of property stocks in the Shanghai gauge tumbled the most since June, extending declines after a report showed slowing new-home price growth. The central

bank singled out developers this month as one of three types of borrowers most at risk as authorities seek to tame debt that the Chinese Academy of Social Sciences estimates at 215 percent of gross domestic product. “Property prices are at a high level and the industry may enter a correction period,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

“Given the fact that the property industry is a pillar of China’s economy, growth will lose steam once the industry suffers. That’s also bad for global growth.” The CSI 300 Index declined 2.2 percent to 2,214.51. The Hang Seng China Enterprises Index slid 1.4 percent. The Bloomberg China-US Equity Index fell 0.5 percent on Friday. A gauge of property

stocks in the Shanghai index slid 5.4 percent, the most among five industry groups. Vanke, the nation’s biggest listed developer, tumbled 6.6 percent to 6.69 yuan. Poly Real Estate plunged 8.5 percent to 6.77 yuan. Gemdale Corp. fell 7.7 percent to 5.91 yuan. Industrial Bank, part owned by a unit of HSBC Holdings Plc, might suspend some property-related loans

through the end of March, the Shanghai Securities News reported, without saying where it got the information. A press official from Industrial Bank declined to comment on the report. The stock fell 3.7 percent to 9.12 yuan. Brokerages including Guotai Junan Securities Co., Haitong Securities Co. and Shenyin & Wanguo Securities Co. separately held internal meetings on Sunday to discuss speculation that some banks suspended lending to developers, the 21st Century Business Herald reported that day, without citing anyone. The media reports of a halt in lending are “partly true,” analysts led by Qiu Guanhua at Guotai Junan wrote in a report. The suspension will last to the end of next month, they wrote. New home price growth in China’s first-tier cities slowed in January after local governments implemented property measures to rein in escalating values and banks tightened lending. Bloomberg News

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Greater China

Chinese hustle part 2 The rise and pending fall of Hanlong Group chairman Liu Han

iu Han – a Chinese businessman who achieved world renown when a school he had previously donated survived the 2008 Sichuan earthquake while many government buildings collapsed – is one of 36 people being investigated for alleged links to criminal gangs reports Xinhua. According to Xinhua, an official Chinese news agency, Liu Han’s gangrelated criminal background is no secret in his power base, Sichuan. In 2007, Internet postings accused him of tax evasion and of being the head of a local crime syndicate. “When I was having the posts erased, Liu Han told me to remove the one about tax evasion but to leave the criminal gangs, because it’s good for business,” recalled Sun Huajun, Liu’s right-hand man. Liu protected his business with his gang and funded his gang from his business, and “thus was engineered his dizzying ascent into the realm of the super-rich”, stated the media outlet. Back in March, 1997 when Liu Han set up Hanlong Group in Mianyang – later to become a major conglomerate earning him billions of yuan – he told Sun to recruit a gang of “hatchet men” in the guise of security guards, reports Xinhua. He had his younger brother Liu Wei purchase stocks of ammunition and they built an underground arsenal in Guanghan it’s alleged.

Weapons seized When the gang was raided by police in 2013, the police confiscated three grenades, 20 guns, 677 bullets, 2,163 shotgun cartridges, and more than 100 knives. Liu’s syndicate was reported to be extremely hierarchical, says Xinhua, with Liu Han being the head, Liu Wei and Sun as Liu Han’s right-hand men, and several key members reporting to Liu Wei and Sun. At the bottom, unlimited numbers of thugs were at his disposal, according to the police. Liu Han reportedly wanted fierce fighters. As long as they

fought for the “organisation”, the organisation covered for their crimes, regardless of the casualties involved reports Xinhua. According to Liu’s rules, gangsters should claim no involvement with Hanlong if caught by the police. Anyone who revealed the organisation’s secrets was severely punished. Those who hesitated to kill were expelled, while murderers like Tang Xianbing, were promoted to manager’s positions with annual salaries of 100,000 yuan. After Sun Huajun and another alleged henchman Miao Jun killed another gang boss in Mianyang, Wang Yongcheng, Liu Han arranged their escape, and rewarded Sun with a Cadillac, an Audi and over 300,000 yuan. Miao Jun received 600,000 yuan.

Liu Han made over HK$230 million taking mainland citizens to gamble in Macau Xinhua

With carrots and sticks, Liu Han established absolute authority in the gang. Blood cleared the path for Liu Han’s businesses and surrounded by a cabal of ferocious gangsters, the wealth of Liu snowballed. According to the police, after killing another rival gang leader, Zhou Zheng in 1998, Liu Han and Liu Wei monopolised gambling and loan-sharking in the city of Guanghan. Their dominance expanded to sand extraction, construction and building material markets in and around Guanghan.

Terror reigns The slaughter of Xiong Wei – a village leader of a protest against a land grab by Liu Han – and the murder of rival gangster Wang Yongcheng helped clear the way for real estate development in Mianyang. Liu won a tender for lucrative projects such as Mianyang airport and Hanlong Bridge. He also acquired the Forgood Distillery Co., Ltd below market price. In 2000, Liu Han moved Hanlong Group’s headquarter from Mianyang to Chengdu, Sichuan’s capital city, reaching out to more sectors. When his organisation zeroed in on a project, other bidders backed off. Interviewed by the Wall Street Journal in 2010, Liu said, “Liu Han has always been a winner, never lost.” Since 2000, violence played a smaller a part in his gang’s dealings. The fear had already been spread. Its job was done. Liu Han and his gang dominated local politics and the economy by intimidation. According to Xinhua, Liu Han and his Hanlong Group meddled in and monopolised many industries. His business empire was backed by menace. Evidence shows, says the media outlet, that he and his gang have accumulated enormous wealth in property, mining, and electricity, through loan sharking and stock market manipulation, by illegal mergers and acquisitions, and any other means available to them. They controlled more than 70

companies, including two listed ones, and four based overseas. They have swindled loans worth 4.6 billion yuan; taken shares in overseas gambling companies; and made over 230 million Hong Kong dollars (US$29.6 million) taking mainland citizens to gamble in Macau. Liu Han’s criminal empire has amassed nearly 40 billion yuan of assets and hundreds of cars, including Rolls-Royces, Bentleys and Ferraris says the news agency. Liu Han and his accomplices spent their illegal gains on firearms, knives and vehicles to help offenders escape, hide out and to cheat the law says Xinhua. He awarded bonuses to the lieutenants who did his bidding, gave them houses, money and drugs. He bought political capital and built a “protective umbrella” through bribery. “It is not hard to see how the brothers survived successive inquiries during their ten years of lawlessness. Every failed investigation shored up their influence and power until the two were a formidable force in local political, commercial and judicial circles,” states Xinhua.

Officials tried Alongside the Liu brothers in the dock are three former local political and legal officials: Liu Xuejun, former political commissar of the Deyang public security bureau’s criminal police contingent, Lyu Bin, director of Deyang public security bureau’s equipment and finance department, and Liu Zhongwei, deputy chief prosecutor of the people’s procuratorate in Shifang City. According to Liu Wei, aside from financial favours, he would also accommodate the trio at his own club where the four would do drugs and party together. In return, Liu Xuejun buried case files and Liu Han used his influence to procure promotion for him. “Liu Xuejun also ran ‘interference’ after homicides, while Liu Zhongwei and Lyu Bin provided firearms and ammunition”, claims Xinhua.

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Asia

Hot stuff

The region’s rice industry may be wilting, but Cambodia’s pepper industry is blossoming

hrough a canopy of palm leaves, sunlight falls onto 1,000 four-month-old pepper plants, each one climbing about two feet up a wooden pole in the ground. “We will be ready to harvest pepper from here in about 18 to 20 months,” says one of Kep province’s farmers, Ngoun Preung, proudly looking out over his half-a-hectare plantation. On the small strip of land, 20 evenly spaced plants are lined up in each of the 50 rows. Preung’s harvest will be part of a record-shattering yield forecast by the Kampot Pepper Promotion Association, which represents farmers in both Kampot and Kep provinces. The association’s president, Ngoun Lay, says the amount of land now under cultivation in the southern coastal growing region is triple what it was a few years ago. Prior to 2013, close to 32 hectares of land were home to pepper plants. In 2014, the cultivation area has reached more than 90 hectares, largely due to the presence of new foreign investors, Lay said. Companies from Japan, India and a conglomerate of investors from Singapore, Malaysia, Hong Kong and China are pouring money into pepper plantations, mostly in joint ventures with local partners. Once a pepper plant goes in the ground, it takes two to three years to mature and be ready for harvest. A single plant yields between one to two kilos of pepper. With careful care, the same plant will continue to mature in cycles for years. Pepper harvests taking place later this year are expected to yield 30 tons. With the huge increases in cultivated land, next year may yield more than 180 tons, Lay said. A third-generation grower, Preung says planting pepper is in his blood.

His family, like many others across the province and in Kampot, have been growing pepper since the French colonial days. After being forced to stop during the Khmer Rouge era, many returned in the early 1980s only to face decades of low prices.

Domain status Today, thanks to Geographical Indication (GI), a World Trade Organization status upgrade granted in 2010 that links the quality of a product to its origin, exports and prices are on the rise. The region’s growers are being rewarded for their persistence, and newcomers are quickly jumping on board, looking to capture a slice of the market. The “Kampot pepper” GI brand covers a very specific area: five of the eight districts in Kampot and one district in Kep, where the plant grows in identical soil and conditions. January to May is harvesting season for farmers who have plants ready for picking. While most farmers will contribute to the upcoming harvests, many, like Preung, will also watch over new crops planted late last year until they are ready for 2015 and beyond. No farther than 15 kilometres from Preung’s plot, the Japan Investment Company has helped buy up more

2 Years

for pepper plant to mature

than 60 hectares. Five water tanks holding 30,000 litres between them feed 12,750 plants via an irrigation system, according to Mouch Sum, the plantation manager. The company hopes to expand to cover 40 hectares in the near future. The pepper has a spicy character that will help distinguish it in global markets, said Chan Samen, Kep’s deputy provincial governor. Samen, who comes from generations of pepper farmers, manages one of the new farms in Damnak Changaur district.

Gourmet’s delight “Pepper planted in the Kampot region produces different tastes because of the soil quality and the geographic location of the area that lies between the coast,” he said. “I think that is the effect of the sea weather.” Asked if the two jobs presented a conflict of interest, he responded that his managerial position is a part-time technical advisor role only, wholly divorced from politics. The rise of pepper is also causing a rise in land prices and standards of living. Before 2013, a hectare in Kep’s Damnak Changaur district would sell for US$3,100, according to Samen. Today, it is closer to US$6,500, he said. Samen added that land disputes, like those that have emerged elsewhere as a result of the industrialisation of agriculture, are non-existent. Smallholders like Preung aren’t worried about the bigger companies jumping onto the bandwagon. The plant has been good to him, and he doesn’t think that will change. “Farmers used to ride bikes or broken down motorbikes,” he said. “Now they have new ones, some even have cars.”

Lombard case dropped Receivers agree NZ$10m settlement with failed finance firm

ew Zealand’s Financial Markets Authority has dropped civil proceedings against four Lombard Finance directors reports the New Zealand Herald. The move follows the failed company’s receivers reaching a NZ$10 million settlement with the men, their insurers and an unnamed “third party”. The receivers had made civil claims against the directors for alleged breach of duties but announced yesterday a settlement had been reached. The receivers said that the FMA had consented to the settlement, which involved former directors – Sir Douglas Graham, Michael Reeves, William Jeffries and Lawrence Bryant – as well as the men’s insurers and a “third party”. Lombard receiver, PwC partner John Fisk, said he could not reveal who this “third party” was as it would breach the terms of the settlement agreement. As a condition of the agreement, the FMA has dropped its civil proceedings against the directors, which were filed in the country’s High Court in 2010 but were on hold. “FMA is of the view that the PwC settlement represents the best outcome for Lombard investors, and that given it had limited prospects of achieving any better recovery through its own claim it was in the public interest to consent to the settlement and discontinue its claim,” the receivers said. About 3,900 secured debenture holders were owed NZ$111 million when Lombard collapsed in April 2008. Fisk said the settlement will mean a further payout to these investors of nine NZ cents in the dollar. This brings the total payout so far to 22 cents in the dollar. Receivers expect the final payout to secured investors to be 25 cents in the dollar once two remaining properties are dealt with. Fisk said he hopes the receivership to be wrapped up in around a year. Fisk said 310 capital note holders who had invested NZ$10.4 million in Lombard and 230 subordinated note holders who had invested NZ$3.7 million were unsecured and were unlikely to receive any money back. The FMA also brought criminal proceedings against the four Lombard directors for false statements in offer documents and advertisements. The four were found guilty on the majority of these charges in the High Court and Graham and Bryant were sentenced to 300 hours community service and ordered to pay reparation of NZ$100,000. Jeffries and Reeves were each sentenced to 400 hours community service.

9 NZ cents

The famous Kampot pepper

Amount on the dollar returned to some Lombard Finance investors

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Asia

Indian election frontrunner Modi slams China Claims northern neighbour has ‘expansionary mindset’

Indian opposition leader Narendra Modi

ndian opposition leader Narendra Modi attacked China for its “expansionary mindset,” signalling he’d take a tougher stance in a territorial dispute with Asia’s biggest economy as polls show his party extending its lead ahead of elections. Modi said India would never give up territory in a speech two days ago at an election rally in Arunachal Pradesh, a state on the northeastern Indian border that is partly claimed by China. He urged Chinese leaders to instead build economic ties with India as the world’s most populous nations target US$100 billion in bilateral trade by next year. Modi’s remarks signal he may adopt a more strident position than Prime Minister Manmohan Singh in relations with China, joining Japan and the Philippines in pushing back against Beijing’s leaders. Even so, Modi will probably find himself more concerned with the U.S. withdrawal in Afghanistan, according to Dipankar Banerjee, founding director of the

Institute of Peace and Conflict Studies in New Delhi. “He won’t have time to think about China,” said Banerjee, a retired major general in the Indian army who commanded troops on the border with China for more than a decade. “Without any manner of doubt the Afghanistan withdrawal is a critical question. If Modi takes over that will be his biggest foreign policy headache.”

Tough stance India and China, nuclear-armed neighbours that are home to more than a third of the world’s people, briefly fought over territory in 1962. Last year saw the most serious incident in a quarter-century when India alleged Chinese troops had crossed into Indian-held territory, triggering a three-week stand-off that ended with a deal negotiated by army commanders. “The world does not welcome the mindset of expansion in today’s

US$100 bln

Target for IndiaChina trade by 2015

times -- China will also have to leave behind its mindset of expansion,” Modi told a cheering crowd in Pasighat on Saturday, referring to the border dispute. “I swear in the name of the soil that I will protect this country.” China wants to settle the border dispute with India at the earliest opportunity and has never waged a war of expansion, Hua Chunying, a spokeswoman for China’s Foreign Ministry, said at a briefing today in response to a question about Modi’s comments. Both China and India have made clear their resolve peacefully to solve disputes, Hua said. In a separate speech also on February 22, Modi criticised the ruling Congress government for allowing in an influx of migrants from neighbouring Bangladesh. While Hindus fleeing persecution from attacks would be welcome, others from the predominately Muslim country would be sent home, he said. Bloomberg News

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

Bangkok dangerous

Honda’s first ‘foreign’ top boss appointed

Baht declines after blasts add to Thailand growth concern

Honda Motor Co named the first foreigner and also first female to its all-Japanese, allmale roster of board members and operating officers yesterday, helping it catch up with rival Japanese carmakers in diversifying its executive ranks. Japan’s third-biggest carmaker named Issao Mizoguchi (pictured), a Brazilian of Japanese descent and senior vice president at Honda South America, as one of its 23 operating officers. Honda also appointed Hideko Kunii, a professor at Shibaura Institute of Technology, to its 13-member board of directors. She will be one of two non-executive directors on the board.

Yumi Teso

hailand’s baht weakened after blasts at anti-government protest sites killed four over the weekend, adding to concern there is no end in sight for the unrest that is damaging growth. Three people were killed when an explosion ripped through Bangkok’s main shopping district on sunday and a five year-old girl died in a separate blast in the eastern Trat province on Saturday. The economy grew 2.9 percent last year, slowing from a revised 6.5 percent pace in 2012, and the National Economic and Social Development Board cut its 2014 expansion forecast this month to 3 percent to 4 percent from a previous range of 4 percent to 5 percent. “The prolonged unrest will damage the economy and that’s also an underlying factor weighing on the local currency,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Losses in the baht may be limited by speculation of month-end demand from exporters.” The baht fell 0.1 percent to 32.56 per US dollar as of 3.10pm in Bangkok, according to data compiled by Bloomberg. It has dropped 4.3 percent since the protests began on Oct. 31, the most among the 11

Thai rice failure hitting Cambodia While last year was full of good news for Cambodian rice exports, which hit a recordbreaking 378,800 tons, 2014 is getting off to a much slower start. Observers say Thailand’s disastrous rice scheme is largely to blame. Thai Prime Minister Yingluck Shinawatra’s controversial pledge to pay farmers above market rates for their rice is coming to an end this month, and it has been wreaking havoc on global markets. Stockpiles accumulating since the scheme was introduced in 2011 have risen to record levels, and an anticipated fire sale has buyers holding out in anticipation of cheap rice flooding the market.

most-traded regional currencies. Onemonth implied volatility, a measure of expected moves in the exchange rate used to price options, declined six basis points, or 0.06 percentage point, to 6.56 percent. Global funds sold $573 million more local equities than they bought this month through Feb. 21 and offloaded a net $20 million of Thai

bonds, official data show. Thailand’s two-year sovereign bonds fell. The yield on the 3.125 percent notes due in December 2015 rose two basis points to 2.32 percent, data compiled by Bloomberg show. The rate was 2.3 percent on Feb. 21, the lowest level since the bonds were auctioned in 2010. Bloomberg News

New Zealand’s Kiwibank expects to continue to expand its profits in the second half of its financial year reports the New Zealand Herald. But the lender says it will face challenges from rising interest rates and more people moving onto fixed mortgage rates. Kiwibank, the biggest profit generator for state-owned parent New Zealand Post, said first-half profit fell 10 per cent because of a squeeze on lending margins and infrastructure spending. Profit fell to NZ$52 million in the six months ended December 31, from a record NZ$58 million in the same period a year earlier, the Wellington based lender said in a statement.

Freeport to resume Indonesia copper exports Will happen in ‘near future’ says government minister

US$500 mln Copper exports affected by ban

.S. miner Freeport-McMoRan Copper & Gold is expected to resume copper concentrate exports from Indonesia in the “near future”, a minister said, after halting shipments due to a dispute over new mining rules imposed last month. Freeport and Newmont Mining Corp, which together produce virtually all of Indonesia’s copper, are locked in talks with the government over an export tax that the companies say breach their contracts. The comments from Indonesian Industry Minister M.S. Hidayat are the first indication the two sides are

close to a resolution. “Freeport, in principle, understands the regulations and will obey it,” Hidayat told reporters yesterday after meeting with Freeport Indonesia CEO Rozik Sutjipto. “Freeport will also export concentrate in the near future. On the export tax relaxation, the finance minister will consider it after Freeport builds a smelter.” Freeport was not immediately reachable for comment on the expected resumption of its exports. Hidayat did not mention Newmont in his comments. President Susilo Bambang

KiwiBank profits fall 10 percent

Yudhoyono on January 12 imposed the controversial mining law, which included the disputed tax and a ban on mineral ore exports, to force miners to process raw materials in Indonesia. But confusion and disputes over the new rules have halted US$500 million worth of monthly mineral ore and concentrate exports. The problems have also disrupted plans to invest US$4 billion in copper smelters. Before the ban, Indonesia was the world’s biggest exporter of nickel ore. It is also a major supplier of refined tin, thermal coal and copper. Reuters

South Korea to aid North on foot-andmouth South Korea has offered North Korea help with an outbreak of foot-and-mouth disease in pigs, which would be the first government-level humanitarian help since 2010 and comes as ties between the rivals have been warming. North Korea’s Ministry of Agriculture said in state news agency report on Saturday at least 3,200 pigs had been infected with foot-and-mouth and some had died but most were slaughtered. The outbreak, which began on January 8, had caused economic losses and was spreading because of shortages of vaccines, diagnostic means and disinfectants, the news agency said.

Oz reef bosses cleared of interest conflict An inquiry has found that two members of the board that manages Australia’s Great Barrier Reef have no conflict of interest despite links to the resources sector, Environment Minister Greg Hunt said yesterday. Hunt in October ordered an independent inquiry into claims that the Great Barrier Reef Marine Park Authority (GBRMPA) had relaxed its stance on industrial development because of ties to the coal and gas industry. The allegations were contained in an Australian Broadcasting Corporation investigation into links to the resources sector of two of GBRMPA’s five board members, Tony Mooney and Jon Grayson.

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International

Hungry like the wolf Sweden’s cull ban on European apex predator heightens rural tensions Tom Sullivan

armers and hunters in Sweden are crying foul over a wolf hunt ban, which they say threatens their way of life, and may lead to civil disobedience. “I think we could live with some wolves, but not as many as there are now. They’re getting too close to people,” Elsa Lund Magnussen told AFP at her small sheep farm and abattoir outside Karlstad in south-central Sweden. She pointed through the driving snow to a wooded area a stone’s throw from her traditional red wooden house and sheds. “A wolf killed a moose calf just over there a week ago,” she said, shaking her head. “When you know a wolf can turn up on your land anytime, it changes your whole quality of life. You don’t dare let your dogs out in the yard ... and people say you need to take a rifle when you walk in the forest!” Wolf hunting is a sensitive issue in Sweden, as in other European countries where the carnivores were re-introduced in recent decades and enjoy protected status under EU conservation laws. The European Commission threatened the Nordic country with legal action in 2013 over a planned cull, later stopped by a Stockholm court.

outside Karlstad. “Of course wolves have to eat too, but the question is how much?” he asked. Jan Bergstam, an environmental activist, believes hunters and farmers are exaggerating the wolf threat to get subsidies and because they are angry that the predators get in the way of hunting with dogs.

Then the wolf conflict worsened in January when the court blocked another planned cull of 30 wolves following an appeal by environmental groups on the grounds that it violated EU law. Now only strictly limited “protective hunts” are allowed in the event of wolves killing livestock or posing a clear threat.

Fencing lessons

No hater The ruling came just a month after the government unveiled a new wildlife policy allowing the wolf population to be culled down to 270 from the current level of about 400. “Sweden has never had so many large predators as now,” Environment Minister Lena Ek said at the launch of the report, which said the country had a viable wolf population that needed curbing to “take into account people who live and work in areas with a concentration of predators”. Environmentalists rejected that claim, calling it a political decision taken on shaky scientific grounds. Their legal victory has angered many small farmers like Lund Magnussen who point to rising numbers of

Of course wolves have to eat too, but the question is how much? Gunnar Gloeersen, hunter

sheep attacked by wolves across the country – up from 292 in 2008 to 411 in 2012. “I’m not a wolf hater, but if my animals are attacked by wolves I will lose a lot of money and it could put me out of business,” she said, adding that totally fencing off wolves is impossible and far too costly. Another group who say they are paying too high a price for protecting wolves are Sweden’s hunters – about 500 of whom live in this part of Vaarmland county, including Gunnar Gloeersen, who organises the local hunt

Oldest-known Holocaust survivor dies at 110 Spent two years at Nazis’ Terezin concentration camp James Pheby

lice Herz-Sommer, the world’s oldest known Holocaust survivor and the subject of an Oscarnominated documentary, has died in London aged 110, her family announced Sunday. Herz-Sommer, originally from Prague in what is now the Czech Republic, spent two years of World War II in the Nazis’ Terezin concentration camp, in the then Czechoslovakia, where she entertained inmates by playing the piano. Her grandson, Ariel Sommer, said: “Alice Sommer passed away peacefully this morning with her family by her bedside. Much has been written about her, but to those of us who knew her best, she was our dear ‘Gigi’. “She loved us, laughed with us, and cherished music with

us. She was an inspiration and our world will be significantly poorer without her by our side. We mourn her loss and ask for privacy in this very difficult moment.” According to an update on the Facebook page for her Oscar-nominated film “The Lady In Number 6: Music Saved My Life”, she died on Sunday after a short illness. “She was still living in her apartment, when she fell ill on Thursday, she spent two nights in hospital and passed this morning,” it said. A later update read: “heaven just got a little better”. The 38-minute film, in which she shares her life story and describes the importance of music and laughter for a happy life, is up for best short documentary at next Sunday’s Academy Awards.

He said hunts should be limited to a few cases where wolves repeatedly attack livestock or leave too few moose for hunters. “We’ve been helping farmers set up fences, and not one with fencing has had their animals attacked by wolves,” he said. Resolving the legal dilemma may take years, and many expect it to end up in the European Court of Justice. The European Commission may also be reluctant to reopen discussions on a hardwon directive from 1992 that protects more than 1,000 animal and plant species across the continent. But the longer the delay, the more frustration and anger will grow in the Swedish countryside. AFP

Producer Nicholas Reed said of the film: “Kids all over the world grow up on superheroes, what we, their parents, must remind them, is documentaries tell stories about ‘real superheroes.’ “Superheroes are based on great people, real people, like Alice Herz-Sommer.” Writing on the film’s website, Herz-Sommer, who was a family friend of existentialist writer Franz Kafka, describes how “music saved my life.” Around 140,000 Jews were sent to the Terezin camp, of whom 33,430 died. AFP

Superheroes are based on great people, real people, like Alice HerzSommer Film director Nicholas Reed

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February 25,19, 2014 Friday April 2013

Opinion Business

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Leading reports from Asia’s best business newspapers

Overshooting in emerging markets

TAIWAN TIMES Macquarie Capital Securities Ltd downgraded its investment ratings for Taiwan’s steel sector, citing the government’s planned opening to Chinese steel imports. “The import policy risk will emerge as a substantial headwind for local steel mills in 2014,” Macquarie’s Taipei-based analysts David Liao and Corinne Jian said in a research note issued. The brokerage’s warning comes as Taiwan considers easing restriction on imports of upstream steel products from China as part of Taipei’s follow-up trade negotiations with Beijing over the Economic Cooperation Framework Agreement signed in 2010.

NZ HERALD Sky Network Television, New Zealand’s dominant pay-TV company, posted a 22 percent gain in first half profit as it benefited from lower programming costs and as more subscribers switched to its premium MY SKY service. Net profit increased to NZ$82.1 million in the six months ended December 31, from NZ$67.4 million in the year earlier period, Auckland-based Sky TV said in a statement. That beat First NZ Capital estimate of NZ$74.1 million. Revenue rose 2.9 percent to NZ$456.4 million and programming costs dropped 8.9 percent to NZ$13.5 million.

STRAITS TIMES Singapore seniors living in bigger Housing Board flats may soon have the option of converting a part of the lease on their flat into cash. This is after National Development Minister Khaw Boon Wan said that the government is considering expanding the criteria for the lease buyback scheme, which is currently only for those living in three-room and smaller flats. He was responding to questions from reporters, on the sidelines of a post-budget forum. Although the scheme has not been very popular, Mr Khaw said it provides more options for seniors.

PHNOM PENH POST Cambodia’s bike exports rose last year, reaching US$300 million in value, Prime Minister Hun Sen annouced. Speaking at a trade conference in Phnom Penh, the prime minister was confident that Cambodia could maintain its current export rates in traditional markets while expanding into other industries. “In 2013, the value of exports of garment products was more than US$5 billion. Besides this, exports of footwear, bicycles, electronic equipment, rice and rubber are all among the new products that are strongly on the rise,” he said.

Michael Spence

Nobel laureate in economics, Stern School of Business

ntil relatively recently, countries’ so-called middle-income transitions were largely ignored – in part because what was supposed to be a transition often became a trap. A few economies in Asia – particularly Japan, South Korea, and Taiwan – sailed through to high-income status with relatively high growth rates. But the vast majority of economies slowed down or stopped growing altogether in per capita terms after entering the middle-income range. Today, investors, policymakers, and businesses have several reasons to devote much more attention to these transitions. For starters, with a GDP that is as large as the combined total of the other BRICS countries (Brazil, Russia, India, and South Africa) plus Indonesia and Mexico, China has raised the stakes considerably. Sustained Chinese growth, or its absence, will have a significant effect on all other developing countries – and on the advanced economies as well. Second, the developed economies are out of balance and growing well below potential, with varying but limited prospects for faster growth on a five-year time horizon. By contrast, emerging economies, with their higher growth potential, increasingly represent large potential markets to tap.

BRIC-ing it Third, a majority of the large emerging economies (Indonesia, Brazil, Russia, Turkey, and Argentina, but not China) unwisely relied on large inflows of abnormally cheap foreign capital, rather than domestic savings, to finance growth-sustaining investments. As a result, their current-account balances deteriorated in the postcrisis period. Now, with the onset of monetary tightening in the advanced economies, the imported capital is leaving, in a slightly panicky mode, creating downward pressure on exchange rates and upward pressure on domestic prices. The adjustment now underway requires launching real reforms and replacing low-cost external capital with domestically financed investment. Market uneasiness reflects uncertainty about the duration of the growth slowdown that is likely to result, the implications for credit quality and valuations, herd effects, and the negative returns from bucking the trend. Moreover,

there is concern that an overshoot in capital outflows could produce the kind of selfreinforcing damage to stability and growth from which it is more difficult to recover. These large emerging economies received an apparently free pass to growth: an ability to invest without pursuing arduous reform or sacrificing current consumption. But it is easier to take the detour than it is to return to the main road. But this narrative is largely irrelevant to China, where excess savings and capital controls still limit direct exposure to monetary-policy externalities spilling over from advanced countries. China is not risk-free; its risks are just different. Even so, amid growing concerns about emerging economies’ prospects, China is attracting attention because of its scale and central position in the structure of global trade (and, increasingly, global finance). As a result, risk assessment in China focuses on the magnitude of the structural transformation, resistance from powerful domestic interests, and domestic financial distortions.

government guarantees that back state-owned banks’ balance sheets. The authorities need to remove the perceived guarantee without triggering a liquidity crisis should they let some bank or off-balancesheet trust fail. The list of other challenges facing China is long. China needs to rein in low-return investment; strengthen competition policy; correct a lopsided fiscal structure; monitor income distribution across households, firms, asset owners, and the state; improve management of public assets; alter provincial and local officials’ incentives; and overhaul the planning and financing of urban growth. Thoughtful analysts like Yu Yongding worry that the difficulties of managing imbalances, leverage, and related risks – or, worse, a policy mistake – will distract policymakers from these fundamental reforms, all of which are needed to shift to a new, sustainable growth pattern.

Failure an option In particular, there is considerable uncertainty about the Chinese version of shadow banking, which has grown in large part to circumvent the restrictions embedded in the state-dominated official system. Shadow banking has given savers/investors access to a larger menu of financial options, while small and medium-size enterprises – which play an increasingly important role in generating growth and employment – have gained broader access to capital. The Chinese authorities need to address two issues. The first, establishing regulatory oversight, will be easier to resolve than the second: the potential for excessive risktaking as a result of the implicit

China needs to rein in low-return investment; strengthen competition policy; correct a lopsided fiscal structure

Little wonder that financial markets are feeling slightly overwhelmed. But the swing is excessive. Not all advanced-economy investors

who were chasing yield have deep knowledge of developing-country growth dynamics. As a result, the trend reversal will almost surely overshoot, creating investment opportunities that were missing in the previous environment, in which asset prices and exchange rates were strongly influenced by external conditions, not domestic fundamentals. The major emerging economies are adjusting structurally to this new environment. They do not need external financing to grow. In fact, since World War II, no developing economy has sustained rapid growth while running persistent current-account deficits. The high levels of investment required to sustain rapid growth have been largely domestically financed. China’s challenges are idiosyncratic and different from those of other emerging economies. The structural transformation required is large, and the imbalances are real. But China has an impressive track record, substantial resources and expertise, strong leadership, and an ambitious, comprehensive, and properly targeted reform program. The most likely scenario is that most major emerging markets, including China, will experience a transitional growth slowdown but will not be derailed by shifts in monetary policy in the West, with high growth rates returning in the course of the coming year. There are internal and external downside risks in each country that cannot and should not be dismissed, and volatility in international capital flows is complicating the adjustment. The problem today is that the downside risks are becoming the consensus forecast. That seems to me to be misguided – and a poor basis for investment and policy decisions. © Project Syndicate

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February 25, 2014 Friday April 19, 2013

Closing WhatsApp free calls by mid-year

Vote rigging? UK PM visits North Sea

Fresh from a US$19-billion takeover by Facebook, mobile messaging service WhatsApp said yesterday it would launch free voice calls by mid-year. The introduction of free calls, revealed on the opening day of the four-day World Mobile Congress in Barcelona, Spain, would match rival application Viber’s similar offering. “We are going to introduce voice on WhatsApp in the second quarter of this year,” WhatsApp founder Jan Koum said. Facebook, whose 29-year-old billionaire creator Mark Zuckerberg was the star speaker on the opening day of the industry fair, announced a stock and cash purchase of WhatsApp last Wednesday.

Prime Minister David Cameron visited a North Sea oil and gas rig yesterday before rival British and Scottish cabinet meetings on the future of the industry and ahead of an independence referendum for Scotland. The British leader flew by helicopter to the BP ETAP platform 217 kilometres (136 miles) off the Scottish east coast, in fossil fuel fields that are a major battleground in the campaign ahead of September’s vote. “As I was shown around, I could see how the UK’s broad shoulders provide stability for the industry to invest,” Cameron said on Twitter after the visit.

Greeks bearing their loans EU-IMF creditors back in country for debt talks

uropean Union and International Monetary Fund creditors yesterday began a new audit of Greek finances, with Athens hoping for a deal in two weeks to facilitate its debt repayment needs, a finance ministry source said. “We want this to be over by March 10 owing to the country’s need to repay maturing debt,” an official stated. Greece needs to repay 6.6 billion euros (US$9.0 billion) in treasury bills by late April, according to the debt management agency. Greek state news agency ANA said there were 8.3 billion euros in eurozone loans and another 3.6 billion euros from IMF loans to be claimed by Athens, pending from last year. The so-called ‘troika’ of the EU, the European Central Bank and the IMF first bailed out Greece in 2010 with a programme worth 110 billion euros. When that failed to stabilise the economy, they agreed a much tougher second rescue in 2012 worth 130 billion euros, plus a private sector debt write-off of more than 100 billion euros. Greece has struggled to meet the terms of this second

Evangelos Venizelos

package but hopes it has now done enough to satisfy the troika, especially in achieving a ‘primary budget surplus’ – that is, in the black before debt costs. Greece says it achieved a primary surplus of 1.5 billion euros in 2013. EU data agency Eurostat is expected formally to announce

Nigerian central bank – governor sacked

he acting head of Nigeria’s central bank reassured investors on yesterday that the removal of the former governor would not change policies to strengthen the economy, the second biggest in Africa. President Goodluck Jonathan suspended the former Central Bank of Nigeria (CBN) governor Lamido Sanusi last Thursday over allegations of misconduct – a move seen by analysts as politically motivated. Jonathan appointed Sarah Alade, the CBN’s most senior deputy governor, to take the helm pending parliamentary confirmation of Zenith bank head Godwin Emefeile to succeed Sanusi. Alade said “recent changes at the CBN will not in any way affect the monetary policy direction and pursuit of the bank’s primary mandate of maintaining price and financial system stability”. Nigeria has the second-biggest economy in Africa after South Africa, which is one of the BRICS leading emerging economies. Markets in Nigeria reacted negatively to Sanusi’s dismissal.

the size of the surplus in April. “I am certain that a deal will be achieved before the next Eurogroup (on March 10),” deputy prime minister Evangelos Venizelos said on Saturday after talks with Prime Minister Antonis Samaras. “The results of sacrifices by the Greek people are extremely impressive. The

fiscal adjustment is unique,” said Venizelos, head of the socialist party in the government coalition. He added that Greece still had to enact “structural measures, measures that boost competitiveness, modernise the state, open the market”. The government has pledged to eliminate

regulatory restrictions in food processing, retail trade, building materials and tourism that are “potentially harmful” to competition according to a study commissioned by Athens last year from the Organisation for Economic Cooperation and Development.

Norway in danger from Syria jihadis

Ukraine issues warrant for ousted leader

orway’s intelligence agency said yesterday that it fears an increased “terrorist threat” to its country due to dozens of Norwegian nationals fighting in the Syrian conflict. At least 40 or 50 people with links to Norway have fought, or are currently fighting, with forces opposed to the Bashar al-Assad regime and run the risk of returning as seasoned radical fighters, the Norwegian Intelligence Service (NIS) wrote in its annual threat assessment report. “We conclude that the threat has already increased and will continue to increase throughout 2014,” the head of NIS General Kjell Grandhagen said, adding that these “jihadists” are often in the most radical Islamic groups such as the Islamic State of Iraq (ISIL) and Al-Nusra Front. The NIS estimates that about 2,000 rebel fighters have travelled from Europe to fight the Syrian regime but did not reveal how the figure was calculated.

AFP

kraine issued an arrest warrant Monday for ousted president Viktor Yanukovych over the “mass murder” of protesters and appealed for US$35 billion in Western aid to pull the crisis-hit country from the brink of economic collapse. The dramatic announcements by the ex-Soviet nation’s new Western-leaning team – approved by parliament over a chaotic weekend that saw the pro-Russian leader go into hiding – came as a top European Union envoy arrived in Kiev to buttress its sudden tilt away from Moscow. Three months of unceasing protests over Yanukovych’s shock decision to spurn an historic pact with the EU in favour of closer ties with its old masters in the Kremlin culminated in carnage last week in Kiev that claimed almost 100 lives. Ukraine’s new interim head of the federal police said he held Yanukovych and his team of feared security insiders directly responsible for the deaths.