MOP 6.00 Closing Editor: Michael Grimes
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hief Executive Fernando Chui Sai On has expressed while in Beijing – and for the first time publicly – his desire to serve another five years in the city’s top job. But he will need to do more to ensure the central government’s confidence after the No 3 leader in the communist party’s seven-member ruling committee said yesterday that Macau’s pace of economic diversification was “slow”. It was the strongest language used so far by China’s top leadership to indicate it wants to see a broadening of the city’s wealth-generating activities beyond casino gaming. Mr Chui said: “I know everyone is very concerned whether I will participate again in the chief executive election. I can be frank now and tell you all that I have interest in running.” More on page
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Year II
Number 489 Wednesday March 5, 2014
Publisher: Paulo A. Azevedo
Chui says he wants to run again
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Deadly H7N9 influenza reaches city’s borders
Domestic violence could be public crime Page 2
MICE business wants more large events
Exports of live poultry to Macau are continuing even as wet markets trading live birds in Zhuhai were closed for sterilisation after the H7N9 bird influenza virus killed a 59-year-old man. The victim – from Zhuhai’s Xiangzhou district – died on Sunday. His death was reported in the mainland media on Monday. Officials in Zhuhai have not said from where the person contracted the disease. Page
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Govt oversight ‘falls short’
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What has been the actual impact of strengthening the oversight powers of the special committees in the Legislative Assembly? Very little, if some political scientists are to be believed. The coordinator of the University of Macau’s public administration programme, Eilo Yu Wing Yat, says that without regularly scheduled meetings to look over government policies, the additional power is meaningless. Page
%Day
Tingy Cayman Islan
3.50
Hutchinson Whamp
3.22
Cheung Kong Hold
2.40
China Petroleum
2.07
PetroChina Co Ltd
1.85
Sun Hung Kai Prop
-1.03
Lenovo Group Ltd
-1.07
China Resources
-1.39
Cathay Pacific Air
-2.04
Belle International
-3.53
Source: Bloomberg
Inspiration into cash flow
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The Macau government fund for cultural and creative industries has 200 million patacas (US$25 million) available to help to small- and medium-sized enterprises working in the sector. Companies are now planning how to get hold of some of it. It’s expected the government will invite applications for funding from creative sector SMEs some time after May. Pages
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Macau Domestic violence could become public crime The Social Welfare Bureau wants domestic violence to become what’s known in the Civil Code legal system – inherited from the former Portuguese administration – as a “public crime”. The definition would apply to cases where there were consecutive allegations of such behaviour, said Iong Kuong Io, director of the Social Welfare Bureau, on the sidelines of a media event. A draft bill is being finalised and will then be sent to the Legislative Assembly for discussion. But it is still too early to tell when the bill will be voted on and enacted since there is no overall consensus amongst the centres that help victims of domestic violence, indicated Mr Iong. Currently, domestic violence is not punishable by law if the victim does not report the crime. The Women’s General Association of Macau said last year that during the eight years it has run a refuge, it has received 712 victims of domestic violence. Of these, 427 were women and 285 children. S.F.
Govt oversight falls short Beefed up powers offered to the Legislative Assembly’s special committees cannot fix flawed structure, academics say Tony Lai tony.lai@macaubusinessdaily.com
voting mechanism is satisfactory. “But the committee should open their meetings for the media and public so that the public can be aware of the stance of legislators,” Mr Lou said. “In this way, I think they would be under more pressure to handle the matter in terms of public interests.” The motion tabled at the assembly says committee meetings should be held behind closed doors, unless half of its members agree to open the meeting to the public. Mr Lou also said he wanted the committee to have a mechanism that would exclude legislators with a conflict of interest. The assembly’s three special committees were set up in 2009 to oversee public finance, public administration, and land grants and public concessions. They have been criticised for meeting only infrequently and for not having a standard working mechanism.
Supervision promised
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hat has been the actual impact of strengthening the oversight powers of the special committees in the Legislative Assembly? Very little, if some political scientists are to be believed. The coordinator of the University of Macau’s public administration programme, Eilo Yu Wing Yat, says that without regularly scheduled meetings to look over government policies, the additional power is meaningless. The assembly’s special committee on public finance tabled a motion this week that spells out how the committee functions. The changes give the committee, chaired by Mak Soi Kun, the “competence to follow up any important issues related to the policy
areas it supervises”. But the committee’s powers are not unfettered. It may intervene only with approval from half of its members.
Accountability issue “I really don’t see from this move how determined the Legislative Assembly is to hold the government accountable [for any mistakes],” Mr Yu said. “The mechanism right now seems only to be paying lip service for the sake of supervision rather than having any practical impact.” With more than half of the assembly’s members approved by the chief executive, or appointed by friendly grass-roots organisations and
industry groups, they can be easily swayed, he said. The 10-member committee on public finance has six indirectly elected and chief executive appointed legislators, including Chui Sai Cheong, brother of Chief Executive Fernando Chui Sai On. “It is good for the special committee to hold meetings when there is any urgent issue it has to deal with,” Mr Yu said. “But I think it is more important for the committee to function regularly, like actively having a meeting every two months or every quarter to discuss issues.” The coordinator of the Macau Polytechnic Institute’s public administration programme, Lou Shenghua, says the committee’s
Legislative Assembly president Ho Iat Seng pledged earlier this month that they would step up supervision of the government by strengthening the special committees. “The Legislative Assembly should be clearly aware that there is still a huge gap between what it has done and residents’ expectations,” he said. Mr Mak, who heads the special committee on public finances, promised last week they would “ask for the government’s explanations… on projects that the public does not have a clear grasp [of] or that are alleged abuses of public money”. The government has faced a chorus of public criticism for exceeding budgets on large-scale infrastructure, including the Light Rapid Transit railway project, whose 11-billion-pataca (US$1.38-billion) budget is yet to be set.
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Chui says he wants to run again But a top leader in Beijing expresses concern about pace of economic diversification under his charge Tony Lai tony.lai@macaubusinessdaily.com
The Chief Executive with Guangdong’s party secretary Hu Chunhua yesterday
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hief Executive Fernando Chui Sai On has expressed while in Beijing – and for the first time publicly – his desire to serve another five years in the city’s top job.
…the economic diversification development in Macau is quite slow Zhang Dejiang, National People’s Congress standing committee chairman
But he will need to do more to ensure the central government’s confidence after the No 3 leader in the communist party’s seven-member ruling committee said yesterday that Macau’s pace of economic diversification was “slow”. It was the strongest language used so far by China’s top leadership to indicate it wants to see a broadening of the city’s wealth-generating activities beyond casino gaming. In comments to the media on the eve of the National People’s Congress meeting, Mr Chui confined his response to remarks to the local leadership poll expected later this year. “I know everyone is very concerned whether I will participate again in the chief executive election. I can be frank now and tell you all that I have interest in running.” “But we have to follow every step of the law in the chief executive election.” Mr Chui said an official announcement could only come after details for December’s election are revealed later this year. He has refused to comment on any run for re-election on at least
four occasions before yesterday, but Mr Chui is generally regarded as Beijing’s favourite for the post once his five-year tenure ends on December 19. Mr Chui said the possibility of a second term would not be discussed during his five-day visit to Beijing that began yesterday. He also rejected claims that Beijing had already decided he would be reelected as chief executive. For all the encouragement, Beijing gave a strong signal that Mr Chui needs to improve. The National People’s Congress standing committee chairman Zhang Dejiang met the Macau and Hong Kong deputies from the Chinese People’s Political Consultative Conference behind closed doors yesterday.
Land squeeze Macau deputy Ho Teng Iat repeated Mr Zhang’s comments in the meeting that “the economic diversification development in Macau is quite slow”. “He hopes Macau should do more
work on diversification,” she said. But the city requires more land to diversify away from gaming, Mr Chui told Guangdong’s party secretary Hu Chunhua yesterday afternoon. The first five minutes of that meeting were open to the media, who reported Mr Chui as saying that Macau “needs more cherished land resources in its bid for diversification”. Meanwhile, two Macau deputies submitted a motion to the political consultative conference that Beijing should “gradually set up a plan for land resources development of Macau”. The petitioners included Chui Sai Cheong, the Chief Executive’s older brother. The motion urges Beijing to make additional land available near Macau – without mentioning Hengqin Island – and to allow more land reclamation. High on the agenda of the Chief Executive’s meeting with Mr Hu was the possibility of opening the city’s border crossings for 24 hours a day some time this year. There was no official response to the proposal last night.
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MICE business wants more large events The industry expects its workforce to double over the next five years as sector develops Tony Lai
tony.lai@macaubusinessdaily.com
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T
he meetings, incentives, conventions and exhibitions business could do with more large events, an industry association had said. Official data showed that only one in 20 meetings held in Macau last year fitted that description. Statistics and Census Service data show 964 meetings were held here last year, only three more than the year before, and that 66 exhibitions were held, only five more than the year before. But the number of people that attended these events was about 2 million, 26 percent more than the number that attended events held in 2012. “This shows that the way that Macau’s MICE industry is developing has gradually changed from increasing the quantity of events to improving the quality of events,” said the president of the Macau Convention and Exhibition Association, Eva Lo Tak Wah.
Size matters “But the data show medium-size to small meetings still made up the greater proportion of meetings last year,” Ms Lo told a business seminar. “There is still much potential for more large meetings to be held here,” she said. “Large international MICE events can attract more upmarket visitors whose purchasing power is several times greater than that of normal visitors.” Over 83 percent of the meetings last year used less than 500 square metres of floor space. Only 6.1 percent used over 1,000 square metres. Of the events held last year, 81 percent were organised by Macau individuals or entities and 14 percent by Hong Kong individuals or entities. M s Lo believes more big international meetings and exhibitions
MOP500 mln spent on continuing education
There is still much potential for more large meetings to be held here Eva Lo, president, Macau Convention and Exhibition Association
could come to Macau this year, lured by the latest inducements that the government is offering. Macau Economic Services has 100 million patacas (US$12.5 million) of government money at its disposal this year for the purpose of attracting more international events to Macau. It can spend the money on subsidising the outlays of event organisers on promotion, transport, accommodation, catering and rent. Ms Lo said the development of the MICE industry meant it needed
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more qualified people to work in it. “The MICE industry employs about 2,500 people now and we expect to need to recruit 2,300 qualified people in the next five years,” she said. She urged the government to take action to ensure the supply of suitably trained workers.
Talent plan The government set up in January a Talent Development Committee to come up with long-term policies for providing Macau people with skills that complement economic development. Ms Lo said conventions were important for the economy. “Some experts in the sector estimate … that revenue of 1 pataca for the MICE industry can mean revenue of 10 patacas in 13 other ancillary industries, including the hotel, food and beverage and logistics businesses,” she said. Official data show that while exhibition organisers spent 299.7 million patacas last year, 28.1 percent more than the year before, their revenue was only 180.4 million patacas, just 16.3 percent more.
he government has spent more than 500 million patacas (US$62.5 million) on the first phase of the controversial continuing education scheme. The Education and Youth Affairs Bureau said in a press statement yesterday more than 140,000 residents had joined the initial threeyear programme – which ended last year but is due to have a second phase. The overall participation rate of permanent residents in the first phase was 36 percent. “The number of participants has matched the goal we set up,” the statement added. Under the launch phase, Macau residents aged 15 or above were entitled to a maximum 5,000 patacas to spend on governmentapproved courses or examinations. The amount of subsidy for the second phase – due to start this year but at a date still to be announced – has already been raised to 6,000 patacas. The city’s Commission of Audit released a report in 2012 claiming that hundreds of courses and exams in the initial scheme had been wrongly approved. The bureau said yesterday it carried out 7,200 inspections between 2011 and 2013 to “ensure the reasonable and effective use of public money”. It only found “individual cases” of violations which it had already reported to the juridical departments, the statement added. But the statement yesterday illustrated no new details for the second phase. Kong Ngai, chief of the bureau’s continuing education division, said last month they are expected to spend 700 million patacas on the new phase. Educational institutions might next month be able to start applying for accreditation of courses for phase two. T.L.
Hundreds enquire about CTM’s latest disruption
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he city’s largest telecommunications operator, CTM – Companhia de Telecomunicações de Macau SARL, received hundreds of queries after another service disruption – this time lasting about four hours. But neither the company nor the government could confirm why CTM’s “number portability database” failed on Friday to function properly. A spokeswoman for the company told Business Daily by phone that her company received 500 enquiries from customers over the incident, which lasted until noon on Friday. CTM provided no figure on the number of customers affected by the disruption. The company said in a press statement the malfunction of its
database affected some of its fixedline and mobile users and that they could not make phone calls and send messages during that time to subscribers of other mobile operators. A spokeswoman for the Bureau of Telecommunications Regulation confirmed that CTM had submitted a preliminary report on the incident. But “there are still some ongoing procedures” before the regulator can confirm whether the default on Friday was attributable to the company, she added. The company suffered three disruptions to mobile or Internet services in May, October and November last year. The bureau spokesperson said it would soon have the final investigative reports on those incidents. T.L.
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Macau Deadly H7N9 influenza reaches city’s borders Health bureau cannot rule out an outbreak here, after a Zhuhai man dies from virus Stephanie Lai
sw.lai@macaubusinessdaily.com
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xports of live poultry to Macau are continuing even as wet markets trading live birds in Zhuhai were closed for sterilisation after the H7N9 bird influenza virus killed a 59-year-old man. The victim – from Zhuhai’s Xiangzhou district – died on Sunday. His death was reported in the mainland media on Monday. Officials in Zhuhai have not said from where the person contracted the disease. Macau’s Health Bureau yesterday told Business Daily the man suffered from chronic bronchitis and was a regular visitor to wet markets. “We expect that there will be more cases of human infection of the H7N9 virus this spring and winter, and we do not rule out the chances that such cases may appear in Macau,” the Health Bureau said. “We’ve already informed Civic and Municipal Affairs Bureau and reinforced the checks for fever at all borders in Macau. “Any passengers going to or coming from Zhuhai detected with fever, and who have touched live poultry before their departure or arrival, will be immediately sent to Conde de São Januário General Hospital for medical assessment,” the bureau added. Registered farms in Zhuhai supplying live poultry to Macau will remain open, according to importer Nam Yue Food Stuff and Aquatics Co Ltd and the Civic and Municipal Affairs Bureau. “So far, we haven’t received any virus-infected samples from the breeding farms in Zhuhai, or other irregularities with their operation,” a Civic and Municipal Affairs Bureau spokesman said.
…we do not rule out the chances that such cases may appear in Macau Health Bureau
“The exports from these breeding farms to Macau should remain unaffected.”
High alert The most recent death was the second confirmed instance of the influenza virus in Zhuhai. Officials reported a sample of the virus strain was found at a live poultry market in Doumen district on January 5. There are 378 reported cases of human infection from the H7N9 strain in the mainland, and there
have been at least 88 deaths. The Health Bureau says Macau is on a level 3 alert over the outbreak. The World Health Organization uses a scale of 1 to 6, with level 6 being the most serious – a global influenza emergency known as a pandemic. MGM C h in a H o ld i n g s L t d chief executive Grant Bowie told Business Daily his company was ready to confront any outbreak of the avian flu virus. Temperature checks for guests could be introduced and sanitation measures would be stepped up, he said.
“We’ll work closely with the Health Bureau in public monitoring [on the avian influenza],” said Mr Bowie. Most known human infections from the H7N9 virus result from contact with infected poultry, and a minority of cases appear to have resulted from limited person-toperson transmission, the World Health Organization says. Business Daily asked Galaxy Entertainment Group about its contingency plan to respond to an outbreak of the avian flu, but did not receive a reply by the time the story went to press.
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Inspiration into cash flow The Macau government fund for cultural and creative industries has 200 million patacas (US$25 million) available to help to small- and medium-sized enterprises working in the sector. Companies are now planning how to get hold of some of it. Luciana Leitão
Slow motion The number of visitors that came to Macau in packaged tours fell last January by almost 3 percent, when compared with the same period the year before. This is a noticeable break with the corresponding figures in earlier periods. Years 2012 and 2011 posted increases of 19 percent and 38 percent, respectively. The decrease in the number of excursionists from China represented about one third of the total. The split of the Lunar New Year holidays between January and February may explain partially these figures. We will have to wait for the February figures to ascertain that. Compared with China, all the other countries and regions are quite small in their contribution. Even the figures from Taiwan, the second biggest source of excursionists in 2012, amounted for most of last year to under onetenth those provided by China. Hong Kong was one of the few bright spots, as its numbers rose by 17 percent, allowing the region to recover the second spot in this ranking.
I
t’s expected the government will invite applications for funding from creative sector SMEs some time after May. Already, wouldbe applicants are full of ideas for potential projects – including in some cases business expansion outside Macau – though they prefer not to give too many details in case they help a competitor. Macau Creations – a retail business selling original artworks of local artists – is one of the businesses interested in outside investment – maybe involving mainland China, Taiwan or even North America. “I’m now working together with a big corporation,” says Macau Creations’ founder Wilson Chi Ian Lam. “Based on the government requirements, I think we’re suitable and we’re the target audience”, he says, commenting on the likelihood of gaining government support for his plans. He expects the fund to support projects based on the strength of the candidates’ business plans as well as the quality of their creative ideas. If candidates don’t have experience of drawing up a business plan, he advises them to get help from outside. Macau Creations has three shops across the territory, but the one near the Ruins of St Paul’s is the most emblematic. But it’s about to close
We want to educate the market that local paintings are for sale Florence Lam, Iao Hin Gallery
its doors after the landlord asked for a rent increase. The sort of funding promised by the government might have helped – had it been available sooner. But Mr Lam doesn’t attach any blame to the authorities here. “The government has its own procedure and people need to be patient,” he explains. Having that shop for three years in a tourist hotspot has been a big help he says in developing his own
business and business skills. “My job is done [there]”, he says. He’s now looking for other opportunities. Some regard the idea of public subsidy for creative industries as a wasted effort. They argue that even creative enterprises should be subjected to the ‘creative destruction’ of market forces. But Wilson Lam is confident the prospect of public funding for his enterprise would give him “more energy and power” and help him to reach his goals more quickly. That would also give him the freedom to help others just starting along the same path. “If I – together with the fund – can give them a hand, it’s a better start”, he says. James Chu Cheok Son says the association he heads – Art for All Society (AFA) – will also apply for government funding. On that basis, the association would be changed from a nongovernmental organisation to a commercial company, to be able to meet the requirements of the fund. “AFA can apply to build a platform – as a commercial gallery with branches in Macau, Beijing and later on in Hong Kong – but we need to prove how the money will be used and how the money will help the art business in Macau”, he explains. “We have been working on it [the plan] for years but it’s not the right
The January results for most of the other major Asian countries were mixed. Important sources of visitors such as Japan and South Korea saw their January figures decrease by about 6 percent and 24 percent respectively. In the case of Japan, that suggests a relative stabilisation in the trend. The number of Japanese in packaged tours more than halved in the last couple of years. In the case of South Korea that result goes against the main thrust of recent times, but it still well above what it was two years before. The fastest rise was registered by India. However, its impact is low. Figures are quite low, just 7,100 visitors in January, and prone to some noticeable volatility.
22,000
visitors on packaged tours decrease, January, on previous year
Iao Hin Gallery
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Macau Creations
time to tell [all] at this moment. It will involve design, artworks and a complex of gallery, shop and studios for all these Macau creative products.” AFA’s existing gallery will also close due to rent demands. But if the organisation is successful in getting the funding, he expects there would be new opportunities to reopen it. “Sure we will, since we have all the best artists, the best artworks and the products developed from these artworks, and, most importantly, we have the network and the best resources from the last six years”, he says. Mr Chu says there are many other creative companies preparing to submit projects as soon as applications are invited. “[They include] movies, creative products, factories turned into artist studios, a creative restaurant and a shopping mall”, he says, without revealing who is behind them. As for the fund, he hopes it is able to provide long-term support and maintain a stable policy that won’t change every year. The director of Iao Hin Gallery, Florence Lam, says that, as a commercial gallery, it is in a good position to market art, developing cooperation with other galleries outside Macau. Ms Lam adds that her gallery also wants to “educate the market that local paintings are for sale” and not just to be enjoyed in a museum. As such, when applications for the fund start, she expects to have a plan “in line with the gallery’s mission, strengthening the atmosphere of the cultural industries of Macau.” Albert Chu, a director in the audiovisual arts who is also the head of CUT Association, says his proposal
Art for All Society’s Autumn Salon
How the fund will work
The government has its own procedure and people need to be patient Wilson Lam, Macau Creations
is still in the planning stage. “For us [directing and production companies] it is a good thing, but we need to know how to apply for it [funding], we need to wait for the regulations”, he says. Most of the people related to film production and directing are usually established in companies. “Most of the production people have a one-man company, so most of us are qualified to apply – [but we need to know how] to match with the regulations”, he says. He has no idea how much per project the fund is able to release. Now, he is more focused on applying to the Cultural Affairs Bureau for funding. Only after that will he think about the fund for creative and cultural industries.
The government announced the creation of the creative industries fund last October. According to the Creative Industries Council vice-president José Chui Sai Peng, it will be ready to begin allocating money in the second half of this year. James Chu Cheok San, a member of the Cultural Industries Committee, is expecting applications to be launched in May and suggests that the fund will invite applications two times per year. It will award grants or make interest-free loans to deserving enterprises or projects in creative industries. The government has seeded the fund with 200 million patacas. According to the government regulations, the fund intends to support companies with projects “that contribute to incubation, industrialisation or mass production in the field of cultural industries, that push forward the research and exploration, conception, production, sales and promotion of cultural and creative products and that contribute to the promotion of intellectual property…”. Business Daily understands the council is still setting up the rules for the fund, and that it will need the approval of the government. But the fund will otherwise have “administrative, financial and patrimonial” autonomy. In a note sent to Business Daily, the secretariat for Social Affairs and Cultural replied that following the decree-law regulating applications for subsidies, a committee will be set up to choose and decide the right candidates. José Luís de Sales Marques, member of the fund’s council, says the regulations that created the fund already give some hints about its goals. “The idea is that the fund supports companies or entrepreneurs, and that’s one of the aspects that marks the difference between this fund and other types of support mechanisms to the small and medium enterprises”, he says. Mr Sales Marques adds that one of the fund’s intentions is that the “projects are evaluated with the utmost independence”. As to the main sectors the fund will support, Mr Sales Marques says: “If everybody looks at what has been happening lately – and to the development of the work by the council and the Cultural Affairs Bureau – there are some areas appearing related to media, cinema, video, design.” He adds that certain support organisations might also be eligible – such as those working in intellectual property, venue allocation or administrative management. “In most cases [applicants for funding], we’re talking about micro-companies, with one or two individuals, and we have organisations that need to give support to these companies for the development of their projects”, he says. He explains that within the “broad definition” of cultural and creative industries, as defined in the government regulations, there is room for several areas. “Even dancing or music projects can be included, it all depends on how they are presented.” Most of all, funds will be allocated to projects with the prospect of being self-sustainable and profitable. “The idea is that the cultural and creative industries are related to the economy and market. So, we want companies that are capable of getting [producing] services or products within the logic of the market”, he adds.
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Signs China slowing further February export, import growth weakening Adam Rose
C
hina’s export and import growth likely slowed in February, causing its trade surplus to shrink by more than half, a Reuters poll showed, reinforcing views that its economic momentum is weakening as leaders prepare to unveil key targets for 2014. Soft manufacturing numbers for February have heightened concerns about the extent of the slowdown in the world’s second-largest economy, thought its services sector appears to have regained some momentum. Export growth is expected to ease to 6.8 percent in February compared with a year earlier, compared with 10.6 percent in January. Import growth will also dip, to 8.0 percent, from 10.0 percent. As a result, the February trade surplus is likely to drop to US$14.50 billion, from US$31.86 billion in January.
Analysts cautious Still, analysts cautioned against reading too much into the figures for the first two months of the year. “Chinese New Year continues to play havoc with incoming data,” Mark Williams and two other Capital Economist economists in a note. “The rush to complete orders ahead of the festival appears to have boosted exports in January. With this factor no longer supporting exports in February, we suspect that headline
export growth will have cooled.” To help smooth out distortions from the week long holiday, which fell predominantly in early February this year, the statistics bureau will release combined data on retail sales, industrial output and investment for January and February next week. The combined figures for all three indicators are expected to show a slightly slower rate of growth than in December.
We expect Jan and Feb’s combined data…to show…economy kicking off 2014 on a weaker, but still acceptable pace Tao Wang and other economists at UBS
“We expect January and February’s combined data set to show the Chinese economy kicking off 2014 on a weaker, but still acceptable pace,” Tao Wang and other economists at UBS in a note. A surge in new loans last month will also likely taper off sharply in February, the poll showed. In January, new loans totalled 1.3 trillion yuan (US$211.51 billion), more than double December’s figure and on par with 1.07 trillion yuan (US$174.09 billion) at the same time in 2012. In February, loans are predicted to fall to 716 billion yuan (US$116.49 billion). The broad M2 money supply is likely to stay steady in February at 13.2 percent, according to the poll. Consumer inflation is expected to ease to 2.0 percent from 2.5 percent in January, while the producer price index is expected to drop 1.9 percent, falling for a 24th straight month and faster than a decline of 1.6 percent in January. Trade and inflation data will be released this weekend. Recent economic data for the economy has been mixed, and the long Lunar New Year holiday has made it harder to assess momentum. Weak investment and declining manufacturing PMI readings have been countered by surprisingly buoyant exports and bank lending. But weakening output has created concern that the Chinese factory
sector is dragging on global activity alongside that of the United States, while European manufacturers have enjoyed a solid start to the year.
Monetary policy As a long-term goal, China has been trying to reduce the economy’s dependence on exports and enhance the role of domestic consumption, but it is unclear how much growth it might be willing to sacrifice to reach that goal. In 2013, China’s economy grew 7.7 percent, steady from the previous year and just ahead of the official target of 7.5 percent, which would have been the slowest growth since 1999. Some analysts have said weak numbers would encourage the government to loosen monetary policy to keep the economy growing at 7.5 percent, which government economists have said could again be the official target this year. “Policymakers are aware of the patchy and distorted nature of data at the start of every year, so will unlikely make any significant policy changes in the near term,” said Tao Wang and the other UBS economists, in their note. China’s leaders will unveil major economic targets and reform priorities for this year at the start of an annual parliament meeting toa. Reuters
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Macau Nissan’s China sales up sharply
Sinopec seeks lower crude prices
Nissan Motor Co Ltd and its local joint venture on the mainland sold about 71,900 automobiles in China in February, up 55.6 percent from a year earlier, the Japanese automaker said yesterday. That follows a 0.4 percent year-on-year drop in January and a 70.4 percent jump in December. Sales of Japanese cars have been slowly recovering after taking a heavy beating from a surge anti-Japan sentiment following a territorial dispute between Beijing and Tokyo in late 2012. The company’s sales in the first two months of the year came to about 167,100 cars, up 17.8 percent from the same period a year earlier.
Part of cost-saving plan for mainland oil giant
HK stocks rebound on low volume Hong Kong’s benchmark stock index advanced on low volume, rebounding from its biggest decline in a month as tensions mounted in Ukraine, with Tencent Holdings Ltd. contributing the most to the advance. The Hang Seng Index added 0.7 percent to 22,657.63 at the close in Hong Kong on trading volume 23 percent below the 30-day average. The measure slid 1.5 percent yesterday as Russia’s growing military presence in Ukraine prompted a global selloff. The Hang Seng China Enterprises Index of mainland companies, also known as the H-share index, rose 0.3 percent to 9,776.77.
PRC loosens local govt bond rules Chinese regulators have loosened restrictions on bond sales by local governments, in a move to help localities manage their rising debt loads by re-financing at lower interest rates. The National Association of Financial Market Institutional Investors (NAFMII) will allow local government financing vehicles (LGFV) to sell paper even if their debt ratio exceeds 100 percent, so long as their liability ratio does not exceed 60 percent, two sources who have seen the regulation told Reuters. The debt ratio is defined as the ratio of outstanding debt to annual fiscal income, while the liability ratio is the ratio of debt to gross domestic product within the locality.
Baosteel, Minmetals turn to Kyrgyzstan for coal China’s Baoshan Iron & Steel (Baosteel) and Minmetals Development are near deals to buy at least half a million tonnes of coal a year from an Australian firm operating in Kyrgyzstan, sources said. The bid by the industrial conglomerates to get coal from China’s western neighbour comes amid efforts to curb the burning of the resource in and around the capital Beijing, where air quality has left the city shrouded in a noxious haze at times. Baosteel, China’s largest steel producer, intends to ship its share of the coal to its Bayi Steel works in Xinjiang province, a source close to the deal talks told Reuters yesterday The region is on the western edge of northern China, bordering Kyrgyzstan and about 4,000 kilometres (2,500 miles) from Beijing.
COFCO in talks for Noble’s agribusiness China’s biggest grains trader COFCO Corp is in talks to buy Noble Group Ltd’s agribusiness arm in a deal that would value the division at around US$1 billion, people familiar with the matter said. Acquiring the Noble unit would help China develop a powerful agricultural trading house, an entity the country has lacked. Chinese trading firm Unipec is already one of the world’s biggest crude oil buyers. State-backed COFCO, which last week agreed to buy a 51-percent stake in Dutch grain trader Nidera, is conducting due diligence on the Noble unit, said the sources who declined to be identified because the matter is not yet public.
Chen Aizhu and Judy Hua
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hina’s Sinopec Corp is seeking to buy crude oil at a lower price starting from April, trade sources said, as Asia’s biggest refiner aims for savings after spending nearly US$150 billion on crude shipments last year. The move comes amid a push by Beijing to make bloated state behemoths more efficient and as Sinopec attempts to restructure to add value for investors. Two weeks ago Sinopec announced it will partially privatise its marketing arm. Sinopec has asked its trading arm China International United Petroleum and Chemical Co. Ltd., or Unipec, to target a purchase price of US$1 per barrel discount to the weighted average of benchmark crude Brent, Dubai and WTI on free-on-board basis, said three traders with direct knowledge of the matter. Sinopec has previously tried to rein in crude costs but the latest plan is seen as more aggressive, with one company trader putting the cost-saving target at nearly US$1.5 billion a year.
Volumes stable The move is unlikely to impact China’s oil import volumes or weigh significantly on global oil prices that have drawn support for a good part of the past decade from the country’s ballooning consumption. But it may make Unipec, one of the world’s biggest crude buying companies, tap the swaps and futures market actively to hedge costs and drive it to buy more cost-competitive crudes such as Iraqi Basra Light. The new plan was mooted by Sinopec’s refining department, which has over the past few years pressed Unipec to curb costs. But this time the plan has won the backing of Sinopec Chairman Fu Chengyu, two company traders said. “The message from Sinopec’s management is clear: to squeeze
more profits from the markets, setting a higher standard for the Unipec traders,” said a crude trader who is a former Sinopec procurement official. State-owned Sinopec currently does not have a target price for its crude buying. It was not immediately clear how the new target price compares with last year’s actual buying cost. Sinopec and Unipec officials were not immediately available to comment. Sinopec, formally known as China Petroleum & Chemical Corp , spent nearly US$150 billion on its crude imports in 2013, according to Reuters estimates based on customs data. It is China’s largest crude oil importer, taking up roughly two-thirds of its total imports that averaged 5.6 million barrels per day (bpd) last year. Sinopec operates 35 refineries in China and procures most of the nearly 4 million bpd foreign crude via Unipec, but also uses state traders such as Sinochem Corp and Zhuhai Zhenrong Corp as import agents. Despite signing up with Iraq for higher term imports, Unipec may be tempted to buy more Iraqi Basra oil from the spot market as the Middle
Eastern exporter offers flexible contract terms and thus more room for discounts, said another trader. There are hurdles, however, for Sinopec. Unipec traders may not be motivated enough as the company does not provide incentive schemes that are as attractive as those offered by western trading houses, traders said. “Nor would they have the stomach for speculation in the paper markets, as this is still a big taboo for state traders,” said the third trader, who has close dealings with Unipec. But Unipec’s new chief Simon Chen will be under pressure to make the plans work. Chen, formerly head of the firm’s crude trading, replaced Dai Zhaoming, previously a refinery manager and planning official as Unipec president around mid-2013. Unipec was founded in 1993, initially as a joint venture of Sinopec and the then monopoly state-trader Sinochem. Since 2004, Sinopec took full control of the trading vehicle and has expanded it to a global operation with offices in London, Hong Kong, Singapore and New York. Reuters
State media link ex-security chief to corruption
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government-controlled Chinese newspaper linked Zhou Yongkang to a corruption probe for the first time, signalling that an official announcement of an investigation into the ex-security chief may be near. “It has been revealed that people close to Zhou Yongkang” were allegedly involved in corruption, said an article in yesterday’s Global Times that had no by-line. A separate commentary in the same edition said “It seems that the investigation into Zhou hasn’t concluded yet.”
Government blessing Publishing Zhou’s name in government-sanctioned media in such a way – without making any announcements on his fate – sends a strong message that Communist Party leaders including President Xi Jinping are pushing ahead with an
inquiry into him, said Joseph Cheng, a political science professor at the City University of Hong Kong. “This could be Xi making other senior leaders accept that the prosecution is unavoidable,” Cheng said in a phone interview. “Another interpretation is that Xi is pulling the bow without releasing the arrow: exerting pressure but still willing to negotiate.” The article that appeared in yesterday’s Global Times summarises a report on Monday in the Beijing News about a probe into Zhou’s family. While the Beijing News article doesn’t contain Zhou’s name, the Global Times article mentions his name seven times. Chinese investigators have questioned more than a dozen senior officials as part of a graft probe of Zhou, Reuters reported in January, citing three people with ties to the leadership. Zhou, who also served
as public security minister from late 2002 until 2007, has been put under virtual house arrest at a villa in the city of Tianjin, Reuters reported. At least five people with ties to Zhou are now under investigation by the party over graft allegations. Coverage of Zhou has increased since Lu Xinhua, a spokesman for China’s top government advisory body, was asked at a March 2 press conference about media reports regarding the former security chief. Lu, spokesman for the Chinese People’s Political Consultative Conference, responded by saying that anyone violating laws and Communist Party disciplinary rules would be punished no matter what position he holds. That exchange, including the use of Zhou’s name in the question posed to Lu, was published by state-owned media including the Beijing News and China News Service. Bloomberg News
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Greater China
Goodbye luxury Xi Jinping leads biggest anti-corruption push since Mao Shai Oster
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resident Xi Jinping’s campaign against corruption is growing into one of the broadest in China’s modern history, snaring dozens of businessmen and government officials and positioning Xi as the country’s most powerful leader in decades. With the country’s legislature gathering in Beijing this week, Xi is sending a message that no one is beyond his reach. He has targeted a network of people associated with Zhou Yongkang, a retired member of China’s Politburo Standing Committee. Besides being a former member of the country’s highest governing body, Zhou headed the national oil company and China’s domestic security agency. “This is the most ambitious anticorruption campaign since at least Mao’s days,” said Anthony Saich, a professor at Harvard University’s John F. Kennedy School of Government in Cambridge, Massachusetts, who heads a training programme for Chinese officials and executives.
Tipping point Xi, who became president last year, is trying to unwind a culture of bribery and graft that has hurt the government’s legitimacy and jeopardised economic growth. China’s economy is projected to expand 7.5 percent this year, according to a Bloomberg survey in February, the slowest pace since 1990. “In the past, people got tips for doing their jobs, but the effect on economic efficiency was negligible,” said William Overholt, a senior fellow at Harvard University and president- elect of the Fung Global Institute in Hong Kong. “For the first time, corruption has reached a scale that threatens to undermine economic efficiency.” The crackdown comes as Xi moves to consolidate his power. He heads a newly created national security commission, a new group to craft national strategies on Internet security and an economic reform group that
met for the first time this year. An 8,000-character article by the staterun Xinhua News Agency’s Outlook magazine on Feb. 22 lauded Xi for his big-picture vision and economic statements. It didn’t mention Premier Li Keqiang, who like his predecessors was expected to take the lead on reforming the economy. “This is the most sustained drive against high-level corruption since the advent of economic reforms in the early 1980s,” said Andrew Wedeman, a political science professor at Georgia State University and author of “Double Paradox: Rapid Growth and Rising Corruption in China.” “Every anti-corruption campaign is an exercise in public relations. They’re trying to build legitimacy.”
Muted reception Delegates to the NPC meeting beginning today will find a more muted reception this year than they’ve had in the past. National People’s Congress spokeswoman Fu Ying told reporters yesterday lavish perks are
For the first time, corruption has reached a scale that threatens to undermine economic efficiency William Overholt, Harvard University
banned. Instead, delegates will have alcohol-free, self-serve buffet meals so as to set a good role model in the government’s austerity drive. Teams from the Communist Party’s Central Commission for Discipline Inspection were dispatched in October on a two-month nationwide audit as part of a five-year anti-corruption plan. When they uncovered bidrigging at the Three Gorges Dam on the Yangtze River, one of the world’s biggest hydro-power projects, executives remodelled their offices more modestly and downgraded to smaller-engine Audi corporate cars, Xinhua said Feb. 24. More than 50 officials are under investigation for embezzling research funding in Guangdong province, the Guangdong Provincial Commission for Discipline Inspection announced Feb. 14, according to the website of the party-run People’s Daily. The Communist Party’s internal disciplinary organ said it punished 182,000 officials for corruption and abuse of power nationwide last year, 13 percent more than in 2012. This year, police raided brothels in the southern factory town of Dongguan and removed the police chief for failing to stop the spread of prostitution in the city. Foreign companies have been caught up in the anti-graft campaign. Last year, China intensified a crackdown in the health-care industry, accusing the U.K.’s largest drugmaker, GlaxoSmithKline Plc, and Danone, the world’s biggest yogurt maker, of paying medical staff to promote their products and boost sales. Danone’s Dumex baby nutrition unit said it would take disciplinary measures and strengthen governance in China, while Glaxo said it implemented additional antibribery controls in emerging markets.
Goodbye Gucci The crackdown has cut into the sale of high-end goods, from Gucci bags and Ferraris to the white spirit baijiu served at Chinese banquets.
Spending on luxury goods increased about 2 percent in 2013, the slowest pace since 2000 and down from 7 percent last year, according to the consulting firm Bain & Co. Ronnie Chan, a developer of highend malls, said Chinese officials used to clamor to join his ground-breaking ceremonies and now they stay away over concerns that associating with even a reputable real-estate investor is risky. “This is more severe than anything I’ve ever seen,” said Chan, chairman of Hong Kong developer Hang Lung Group Ltd., which has invested US$8.5 billion in China. The recent arrests of Zhou’s associates have raised questions about whether Xi is willing to break a longstanding taboo to go after a member of the party’s innermost circle, risking the possibility of upsetting party elders and destabilising the balance among the party’s factions.
Security budget Zhou was among the most powerful people in the country, holding positions in the past that were roughly equivalent to the director of the U.S. Federal Bureau of Investigations, chief executive officer of Standard Oil Co. and a member of a U.S. president’s cabinet. Under Zhou’s watch, China’s internal security budget grew to be more than the national defense budget. In 2013, it was 769.1 billion yuan (US$125.1 billion). At least five people with ties to Zhou are now under party investigation. They include his onetime aide, the vice governor of Hainan province and a former vice-minister of public security. There are also reports that Zhou himself has been targeted. The probe of Zhou is in its “final stage,” the South China Morning Post reported Jan. 29, citing two unidentified people. Zhou’s eldest son, a businessman with extensive ties in the oil industry and in Sichuan, has been formally detained, the South China Morning Post said Jan. 10. Asked to comment on media reports about Zhou’s fate, Lu Xinhua, a spokesman for this year’s annual meeting of the Chinese People’s Political Consultative Conference, responded that guilty officials will be punished regardless of their rank. Bloomberg News
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Asia
Batik Air to launch Singapore route Competes with Indonesia’s flag carrier Garuda in attracting wealthier passengers
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n response to rising demand for full-service flights, Batik Air will add domestic and international destinations, including Singapore, at the end of this year. It will fly to the city-state three times daily from Jakarta. In a press conference in Singapore, to which Indonesian journalists were invited, Batik Air president director Achmad Luthfie said the Singapore route was a lucrative one because the city-state was a popular destination for Indonesian tourists. “During weekend [Indonesians] come for shopping and touring in Singapore. Meanwhile, during week days they come here for a meeting in the morning and return home in the evening,” Luthfie told the Jakarta Post. According to Luthfie, although the market was very competitive because most Indonesian airlines and foreign fleets also flew the route regularly, demand also continued to rise because the middle class in Indonesia was also rising.
Economic take off “But the opportunity is still vast, judging from Indonesia’s economy which continue to rise,” said the captain pilot. During the media briefing, he was accompanied by corporate secretary Adhitya Simanjuntak and Batik’s public relations officer Leithen Francis. “The premium segment is a very big market in Indonesia,” Luthfie added. After Singapore, the next targets for the Lion Group subsidiary are Malaysia, Hong Kong and Chinese cities like Shanghai and Beijing. Batik, the full-service unit of the low-cost carrier Lion Air, began operating in May last year. It competes with Indonesia’s flag carrier Garuda to attract wealthier passengers. It currently flies to 10 destinations, including Manado, Pekanbaru, Ambon and Balikpapan. It has transported 1
million passengers so far. Luthfie revealed the airline would also fly to Banjarmasin, Batam, Gorontalo, Kendari, Medan, Padang, Palembang, Palu, Timika, Tarakan and Solo. With the additional routes the number of daily flights would increase from 36 to 100. He played down suggestions that Batik directly competes with Garuda, saying his company’s passengers were mostly Lion Air customers who wanted better services in line with their improving economic status. “Lion Air passengers want more services on board,” he said.
Learning curve “We will learn good things from our competitors,” Luthfie replied when asked about how to win in the highly competitive
full-service airline market. Passengers in both economy and business class can enjoy the Lumexis inflight entertainment (IFE) system, which uses Lumexis’ lightweight Fibre-To-The-Screen (FTTS) system for Batik’s Airbus A320s and Boeing 737s. Its Boeing 737-900ER has 168 seats for economy class and 12 for business, while the Airbus A320 allocates 144 seats for economy and 12 for business class. Batik Air also offers on board meals, 15 kilograms of baggage for economy class and 20 kilograms for business class. It provides 32-inch legroom compared to Lion Air’s 30 inches. “Batik Air will be the world’s first fleet to use Lumexis IFE system on Airbus A320s,” said the company president director.
KEY POINTS Batik Air to fly JakartaSingapore 3 times per day Carrier currently serves 10 destinations Is the full-service unit of low-cost carrier Lion Air It began operating in May last year
Facebook targets SME advertising in region Asia Pacific offers key markets as social network tussles with competitors
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acebook, the world’s largest social networking site, is encouraging local small and medium-sized enterprises (SMEs) to raise e-commerce sales in social media, capitalising on trends in social commerce. The move by the US firm aims to increase its online advertising revenue as it competes against search engine Google, said Arrow Guo, Facebook’s head of SMEs for Greater China and Southeast Asia of Facebook. He said Asia Pacific is a strategic region for Facebook in terms of user numbers and revenue growth, particularly India and Indonesia, which are among the world’s top five markets. “Thailand is one of the important countries in Asia-Pacific because of its high number of Facebook users,” Mr Guo told the Bangkok Post. Thailand has 24 million Facebook users compared with 25 million
overall Internet users. Up to 18 million users visit Facebook each day. Some 21 million Facebook users in Thailand access the site via mobile phone, and 13 million of these access Facebook via mobile everyday. Mr Guo said SMEs in Thailand should have Facebook pages to cash in on the high number local users. Sales of smartphones in Thailand are expected to reach 20 million units this year. “Mobile commerce is the future of SMEs,” he said.
24 mln
Claimed Facebook users in Thailand
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Asia
Retailers happy as protestors leave The 49-day blockade of downtown Bangkok put major crimp in business in two weeks as it looks forward to welcoming 85,000 visitors per day. TRA president Busaba Chirathivat expects the retail industry to grow by 4-5 percent in the first half this year, up from 9 percent in the same period last year. The full-year forecast is 6-7 percent growth despite rising household debt and poor consumer sentiment. Retail growth is predicted to come from expansion into upcountry markets and the entry of new players, especially convenience store chains. She said urban expansion led to consistent growth of new retail stores, while ready-for-consumption products are growing in popularity due to convenience. The frequency and format of marketing at the point-of-sale has developed a more direct approach. Foreign brands have also proliferated as Thailand welcomes more tourists.
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onsumer spending among Thais is expected to recover following the anti-Thaksin People’s Democratic Reform Committee closing three rally sites in the capital Bangkok, reports the Bangkok Post. Retailers expect the positive sentiment to improve if the government revokes the emergency decree. Prominent retail spots that were protest sites in the Pathumwan and Ratchaprasong areas reported improved business this week, with traffic returning to usual levels. After 49 days of protests in front of their
malls including CentralWorld, Siam Paragon, Siam Center and MBK, operators were worried about the longterm impact if the protests continued. They were relieved when the antigovernment protesters decided to leave central locations on Sunday. “If the emergency decree is lifted, it will draw more foreign tourists back to Bangkok,” said Chartchai Tuongratanaphan, an executive with the Thai Retailers Association (TRA). Many operators dusted off their marketing activities, put on hold during the protests. Paibul Kanokwattanawan, chief executive
of The Mall Group, said events at Siam Paragon and The Mall such as its midnight sales campaigns would start later this month. Traffic at Siam Paragon on Sunday shot up to about 80,000, close to numbers during a normal weekend day. During the demonstrations from November to February, traffic dropped by 30-40 percent and the group lost about 500 million baht (US$15.4 million). Its first-quarter sales will likely see a 10 percent contraction for the first time in 30 years. The operators of MBK mall believe business will return to normal
KEY POINTS Mall Group lost 500 mln baht during latest unrest Likely 10 pct fall y-o-y in group’s Q1 sales First such contraction for group in 30 years Retail industry to grow 4-5 pct in first half: TRA
New-look Yangon getting high rise project Singapore, Myanmar investors spending US$230 mln on ‘Golden City’
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ingapore-owned development firm Uni Global Power Ltd together with local partners have announced plans to build a US$230 million complex in Yangon’s Yankin township. It will feature several high-rise residential blocks, a five-star hotel and a shopping mall, reports the Myanmar Times. The project, dubbed ‘Golden City’, began construction earlier this year and will include nine 33-storey residential towers, a 200-room hotel and a luxury shopping mall, all to be built by 2018, said Alex Zhu, chairperson at Golden Land Real Estate Development Co, the project’s developer. “We spent two years researching Myanmar for this project,” he said, adding that his firm will develop the
project with locally based Nature Link Co Ltd. “We applied for land lease in March last year and got the approval from MIC [Myanmar Investment Commission] on September 22 – for 50 years,” he said, adding there was an option for up to 70 years of title. The land is owned by country’s Ministry of Defence. The first phase of the project, to be finished in 2016, will include four 33-storey residential towers, he said, adding that the entire project would include 3.6 million square feet (334,445 square metres) of developed space. Mark Wen, operations manager at Golden City, said they had yet to find a brand to manage the hotel space, but that they were speaking
3.6 mln sq. feet
of developed space
to international hotel chains. “Now we are talking to a few big international hotel chains… including Marriott Garden Hotel, but we are still in negotiation with them and nothing is confirmed yet,” he said. Despite progress, developers admitted that they are currently facing a roadblock as 38 shops located on the development site have yet to move off the land despite having no lease to operate there. “Their lease agreement contracts expired at the end of 2012,” Mr Zhu said, adding that those shops have agreed to move off the premises by the end of the month. “Our local partner talked with them nicely and asked them to move out in a very nice way.”
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 Toyota union cites ‘big gap’ over wages
‘No blank cheques’ for Qantas
Toyota Motor Corp., the world’s largest automaker, faces a “big gap” in negotiations with its workers’ union in Japan, the labour group’s chairman said yesterday. “Our negotiation with the company is like a parallel line,” Mitsuyuki Tsuruoka, the head of the Toyota Motor Workers’ Union, said yesterday at an event near the company’s headquarters in Toyota City, Japan. “We have had two rounds of negotiations so far, but there remains a big gap between us.” The comments reflect potential challenges to Prime Minister Shinzo Abe’s push for companies to raise wages.
But chances of easing rules on foreign ownership of Australian national carrier look slim
Baht rallies most in two weeks Thailand’s baht rose the most in two weeks as stocks climbed after anti-government protesters removed blockades at four main intersections in central Bangkok. The SET Index of shares advanced 1.8 percent this week to a two-month high as demonstrators relocated to Lumpini Park in the capital. The Bloomberg-JPMorgan Asia Dollar Index rose on a report that Russian President Vladimir Putin had ended military exercises as scheduled, reducing concern tension in Ukraine will escalate into full-blown conflict. The baht strengthened 0.3 percent, the most since Feb. 14, to 32.47 per dollar before the close.
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he Australian government insisted yesterday there would be “no blank cheques” to bail out national air carrier Qantas. It follows news that a plan to repeal legislation restricting foreign ownership appears destined to fail. The cabinet of conservative Prime Minister Tony Abbott on Monday evening said it would move to change a section of the Qantas Sales Act which limits foreign ownership to 49 percent. That would free up capital for the airline. But with the Labor opposition and other minor parties making clear they will oppose the legislation in the upper house Senate over fears jobs will be sent offshore, the proposal is effectively redundant. Qantas said the changes were doomed, adding that it needed help now after a A$235 million (US$210 million) loss in the six months to December 31 and a decision to slash 5,000 jobs. “We have consistently said that removal of foreign ownership provisions that apply uniquely to Qantas is an important longer term
objective to create a fair and free aviation market in Australia,” it said in a statement. “However, it is clear that such a move would have limited chance of passing through the Senate.” Qantas complains that is battling not only high fuel prices but fierce competition from subsidised rivals such as key domestic competitor Virgin Australia, which is majorityowned by state-run Singapore
We need immediate action to address the imbalance Qantas statement
Airlines, Etihad and Air New Zealand. “We need immediate action to address the imbalance that has been allowed to persist for almost two years – namely Virgin’s unlimited ability to access foreign capital from government-owned airlines to fund a loss-making strategy against Qantas,” it said. “If this proposal by the government to change the Qantas Sale Act is not passed, we would expect the government and the parliament to consider alternative measures to balance the unlevel playing field in Australian aviation.” But Canberra has ruled out a debt guarantee or line of credit as shortterm help and Treasurer Joe Hockey refused to budge yesterday. “We are not writing out blank cheques,” he said. The government has taken a hard line on taxpayer handouts to business since coming to office last year. “There is no money,” he added. “There’s nothing left in the bank to write out largesse to individual companies.” AFP
Petronas’ Q4 profit surges 45 percent Malaysian oil giant Petronas said yesterday its fourth quarter net profit jumped 45 percent on strong production, making 2013 “one of the best years ever” for the state energy firm. Net profit for the three months ending December 31 stood at 12.76 billion ringgit (US$3.89 billion), up 45 percent from the same period in 2012, while revenue rose 10 percent to 84.8 billion ringgit. Overall the company’s profit increased 10 percent to 65.59 billion ringgit for the last financial year compared to 2012. Revenue added 9 percent to 317.3 billion ringgit.
Hyundai gives Sonata a major makeover South Korea’s Hyundai Motor Co dialled back on the edgier designs that helped it win market share abroad five years ago, launching yesterday a toned-down, angular version of its popular Sonata sedan to appeal to conservative drivers at home. Hyundai, the world’s fifth largest car maker with its Kia Motors Corp affiliate, is banking on the first restyling of the mid-size sedan since 2009 to help reverse a slowdown in sales and revenue growth, as it battles competition from foreign rivals at home and a slide in reliability rankings in the United States, its second-biggest market after China.
Indonesia’s 15 trln rupiah in bond sales Indonesia’s finance ministry raised 15 trillion rupiah (US$1.29 billion) worth of conventional government bonds at an auction yesterday, the ministry’s debt office said, with most yields below the previous auction on Feb. 18. The government sold all offered securities. Total incoming bids were 39.1 trillion rupiah and the highest bid-to-cover ratio was 5.72 for 3-month T-bills. The weighted average yield for 3-month T-bills was 5.61220 percent. While the yield for 1-year T-bills was 6.26667 percent, lower than 6.44258 percent in the previous auction. Yields for 5-year bonds and 10-year bonds fell to 7.84896 percent and 8.08732 percent, respectively.
Vietnam opens first high-quality glass factory Will reduce country’s dependence on imports, says management
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ietnam’s first factory manufacturing high-grade and large-sized glass products officially began operations in Dong Nai Province, reports Vietnam News. Officials of the company involved said the factory can help reduce the nation’s reliance on imports for finished products made with float glass. The SADO Group has invested 500 billion dong (US$23.8 million) in the project’s first phase, deploying technologies from global industry leaders including LiSEC, Glaston
and Benteler. The total cost of the project, implemented in two phases, is estimated at 2 trillion dong (US$95 million). General director Nguyen Cong Chinh said his company is the only one in the country that can provide glass products of sizes up to 3.3 metres by 6.0 m that meet exacting European standards including those that apply to soundproofing and insulation. He said the float glass used in the company’s products is imported. The new factory has an annual capacity of 12 million square metres of
several products including tempered glass, digital ceramic printed glass, laminated and insulated ones. It will also make aluminium windows and doors. It has already won export contracts to Cuba and the US. The Bank for Investment and Development of Viet Nam has provided 70 per cent of the funding for the factory and expects to extend support to the project’s second phase under an agreement signed during yesterday’s inauguration ceremony.
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International
Ordinary soldiers struggle with Crimea crisis Russia-Ukraine standoff given surreal edge thanks to shared history Bertrand de Saisset
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also Ukrainian forces. “We cannot do this, we have sworn an oath to Ukraine,” said Stechenko, wearing a chapka fur hat despite the blazing sunshine. “We have to remain loyal to the Ukrainian people, it’s our land.”
Russian soldier could not hide his tears as he leant against a tree, just metres from a Ukrainian military base in Crimea that his unit had surrounded. “You have to understand him, he’s ashamed of what’s happening here,” said Gulya, the mother of a Ukrainian soldier stationed inside the base in Bakhchisarai. “It’s terrible that we fight amongst each other,” added the middle-aged woman, proudly describing herself as a “citizen of Ukraine.” Turning to the crying soldier’s comrades, she pleaded: “We’re not against you, don’t be afraid.” The Black Sea peninsula has come under near complete control from Russian forces and local pro-Moscow militia as Ukraine threatens to sink into its biggest crisis since the Cold War.
Standoff continues But at Bakhchisaray, some 30 kilometres (20 miles) southwest of the Crimean capital Simferopol, the mood was relaxed, nonchalant, almost cordial. Two-dozen soldiers in camouflage outfits and with Kalashnikovs slung on their shoulders strolled casually about in the street. One played with a dog. Asked by an AFP journalist if he was Russian,
Tit for tat
the tearful young blue-eyed soldier nodded timidly. For the Ukrainian officers at the base, there was also no doubt the men in camouflage gear were Russians although they had no insignia to show their origin. “You just have to look at their uniforms,” said the base’s deputy commander Volodymyr Dokuchayev. Commander Sergey Stechenko confirmed that one soldier “introduced himself as a captain from
the Russian Federation,” after unidentified men took up position around the base. But there was little of the tension or animosity expected amid the ongoing mud slinging between Kiev and Moscow, at least on the surface. On Monday Ukraine accused Russia of pouring more troops into Crimea, a region of Ukraine populated mostly by Russian speakers and a strategic host to tsarist and Kremlin navies since the
18th century. Moscow has meanwhile repeatedly stated that it needs to defend its citizens and compatriots in the peninsula, and on Saturday President Vladimir Putin won legislative approval to send Russian forces. Stechenko said the negotiators who came to him had two demands: that he and his men lay down their weapons and that they place all their facilities under joint supervision, by Russian but
“They’re not at all aggressive... They don’t want to shoot at us, we don’t want to shoot at them,” he said of the Russian counterparts. But he admitted: “If they start shooting, we will fire back.” Despite his position at the base, he seemed baffled as to how the situation had escalated so quickly after the ouster of Ukrainian president Viktor Yanukovych – who has since fled to Russia. “Personally, I don’t understand,” the base commander said of the crisis. “We hope it will be resolved in a peaceful manner.” Bakhchisaray was just one of several bases on the Crimean peninsula to be surrounded by pro-Russian forces over the weekend. In a sign that some normality remained, curious residents had already gathered near another of the bases on Sunday, with some posing for pictures with the armed men. AFP
US freezes military ties with Russia In response to Ukraine crisis explains Pentagon
T
he United States has suspended defence cooperation with Russia because of Moscow’s military intervention in Ukraine, the Pentagon said on Monday U.S. time, urging Moscow to “de-escalate the crisis.” “We have, in light of recent events in Ukraine, put on hold all militaryto-military engagements between the United States and Russia,” spokesman Rear Admiral John Kirby said in a statement. The suspension covers “exercises, bilateral meetings, port visits and planning conferences, Kirby said. The United States is closely monitoring the situation in Ukraine, he said. “We call on Russia to de-escalate the crisis in Ukraine and for Russian forces in Crimea to return to their bases, as required under the agreements governing the Russia Black Sea Fleet,” he said. Kirby also stressed that US forces have not altered their presence in the Black Sea or elsewhere in response to the crisis. “There has been no change to our military posture in Europe or the Mediterranean,” he said. Naval forces continue to carry out
We call on Russia to de-escalate the crisis in Ukraine Rear Admiral John Kirby, Pentagon spokesman
“routine, previously planned operations and exercises with allies and partners in the region,” he said. The only US naval ship currently in the Black Sea is the frigate USS Taylor, which is undergoing repairs at the Turkish port of Samsun after running aground, officials said. The commander of the ship was sacked over the incident. The United Sates has condemned Russia for mobilising forces in
Ukraine’s Crimean peninsula after popular protests ousted the country’s pro-Russian president. But US officials have made clear President Barack Obama is not contemplating a military confrontation with Russia. As part of a long-running effort to bolster relations and defuse potential misunderstandings, the American and Russian armed forces hold dozens of training events, port visits, exchanges and meetings every year.
Russian officers took part in an airline hostage rescue exercise scenario with US and Canadian air commanders in 2012 and the chief of the US Navy hosted his counterpart for talks last year. The US military has relied on Moscow’s cooperation in recent years to ferry equipment and supplies across Russian territory to and from Afghanistan. AFP
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March 2014 Friday 5, April 19, 2013
Opinion Business
wires
The banks that ate the economy
Leading reports from Asia’s best business newspapers
GLOBAL TIMES
Howard Davies
Former chairman, Financial Services Authority, U.K.
Suddenly, India and China are talking more and bickering, at least in public, less. In the 60th year of the Panchsheel Treaty, known in China as the Five Principles of Peaceful Coexistence, negotiations on the contentious boundary have not witnessed significant breakthrough, but New Delhi and Beijing are at least talking frequently at various levels to try to find common ground. Fewer than four months after Indian Prime Minister Manmohan Singh visited Beijing, the special representatives from both sides met in Delhi for the 17th time since the mechanism was put in place in 2003.
JAKARTA POST PT Indonesia Power, a subsidiary of state-owned electricity firm PT PLN, is preparing construction of several hydro power plants with a combined capacity of 500 megawatts to cope with the country’s electricity supply shortage. Indonesia Power director for business development Antonius Resep Tyas Artono said the hydro power plants included PLTA Maung in Central Java with a capacity of 360 MW, PLTA Rajamandala in West Java with 47 MW capacity and a number of smaller hydro power plants mostly located in Central Java.
VIETNAM NEWS President Truong Tan Sang praised the importance of dyke projects while inspecting development in the Mekong Delta provinces of Tra Vinh and Soc Trang. The Mekong Delta is one of the three most vulnerable delta regions facing the harsh effects of climate change and is home to thousands of metres of protective dykes. Sang said the sea dykes had helped to control tides, prevent salinisation, protect coastal property, support national security and reduce the risk of drowning. However, local officials told Sang that recent strong tides and waves had damaged thousands of metres of sea dykes and floodpreventing forests.
MYANMAR TIMES Residential tenants in Yangon may have to pay as much as 60 percent more in rent in 2014 than just two years ago, as quality apartment units are still in short supply. The number of tenants looking for modern accommodation continues to grow, experts said. Even with prices for rent growing at an exponential rate now for the fifth straight year, realtors are confident that it is only a matter of time until the bubble that has formed in the city’s skewed property market will burst.
B
ank of England Governor Mark Carney surprised his audience at a conference late last year by speculating that banking assets in London could grow to more than nine times Britain’s GDP by 2050. His forecast represented a simple extrapolation of two trends: continued financial deepening worldwide (that is, faster growth of financial assets than of the real economy), and London’s maintenance of its share of the global financial business. These may be reasonable assumptions, but the estimate was deeply unsettling to many. Hosting a huge financial centre, with outsize domestic banks, can be costly to taxpayers. In Iceland and Ireland, banks outgrew their governments’ ability to support them when needed. The result was disastrous. Quite apart from the potential bailout costs, some argue that financial hypertrophy harms the real economy by syphoning off talent and resources that could better be deployed elsewhere. But Carney argues that, on the contrary, the rest of the British economy benefits from having a global financial centre in its midst. “Being at the heart of the global financial system,” he said, “broadens the investment opportunities for the institutions that look after British savings, and reinforces the ability of UK manufacturing and creative industries to compete globally.”
Services, services That is certainly the assumption on which the London market has been built and the line that successive governments have peddled.
But it is coming under fire. Andy Haldane, one of the lieutenants Carney inherited at the BoE, has questioned the financial sector’s economic contribution, pointing to “its ability to both invigorate and incapacitate large parts of the non-financial economy.” He argues (in a speech revealingly entitled “The Contribution of the Financial Sector: Miracle or Mirage?”) that the financial sector’s reported contribution to GDP has been significantly overrated.
Hosting a huge financial centre, with outsize domestic banks, can be costly to taxpayers
Two recent papers raise further doubts. In “The Growth of Modern Finance,” Robin Greenwood and David Scharfstein of Harvard Business School show that the share of finance in US GDP almost doubled between 1980 and 2006, just before the onset of the financial crisis, from 4.9% to 8.3%. The two main factors driving that increase were the expansion of credit and the rapid rise in resources devoted to asset management (associated, not coincidentally, with the exponential growth in financialsector incomes). Greenwood and Scharfstein
argue that increased ‘financialisation’ was a mixed blessing. There may have been more savings opportunities for households and more diverse funding sources for firms, but the added value of assetmanagement activity was illusory. Much of it involved costly churning of portfolios, while increased leverage implied fragility for the financial system as a whole and imposed severe social costs as over-exposed households subsequently went bankrupt. Stephen G. Cecchetti and Enisse Kharroubi of the Bank for International Settlements – the central banks’ central bank – go further. They argue that rapid financial-sector growth reduces productivity growth in other sectors. Using a sample of 20 developed countries, they find a negative correlation between the financial sector’s share of GDP and the health of the real economy. The reasons for this relationship are not easy to establish definitively, and the authors’ conclusions are controversial. But it is clear that financial firms compete with others for resources, and especially for skilled labour. Physicists or engineers with doctorates can choose to develop complex mathematical models of market movements for investment banks or hedge funds, where they are known colloquially as “rocket scientists.” Or they could use their talents to design, say, real rockets.
Short-termism Cecchetti and Kharroubi find evidence that it is indeed research-intensive firms that suffer most when finance is booming. These companies find it harder to recruit skilled
graduates when financial firms can pay higher salaries. And we are not just talking about the so-called “quants.” In the years before the 2008 financial crisis, more than a third of Harvard MBAs, and a similar proportion of graduates of the London School of Economics, went to work for financial firms. (Some might cynically say that keeping MBAs and economists out of real businesses is a blessing, but I doubt that that is really true.) The authors find another intriguing effect, too. Periods of rapid growth in lending are often associated with construction booms, partly because real-estate assets are relatively easy to post as collateral for loans. But the rate of productivity growth in construction is low, and the value of many credit-fuelled projects subsequently turns out to be low or negative. So, should Britons look forward with enthusiasm to the future sketched by Carney? Aspiring derivatives traders certainly will be more confident of their career prospects. And other parts of the economy that provide services to the financial sector – Porsche dealers and strip clubs, for example – will be similarly encouraged. But if finance continues to take a disproportionate number of the best and the brightest, there could be little British manufacturing left by 2050, and even fewer hi-tech firms than today. Anyone concerned about economic imbalances, and about excessive reliance on a volatile financial sector, will certainly hope that this aspect of the BoE’s “forward guidance” proves as unreliable as its forecasts of unemployment have been. © Project Syndicate
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Closing French right backs Cameron on immigration
Party expels ex-chief over China visit
One of France’s top centre-right politicians has backed British Prime Minister David Cameron’s call for limits on the free movement of workers across the European Union. Rachida Dati (pictured), justice minister under former president Nicolas Sarkozy, said migration issues would be a major campaign issue in upcoming elections to the European Parliament. Writing in business daily Les Échos, Dati welcomed Cameron’s proposal to allow national governments to impose quotas to limit immigration from other EU countries. “This word ‘quota’, set on the basis of [a country’s] capacity to integrate and economic needs, must not scare us,” Dati wrote.
Taiwan’s radical pro-independence party the Taiwan Solidarity Union (TSU) said yesterday it would expel its former party chief after his controversial visit to China. Shu Chin-chiang, who was TSU chairman from January 2005 through December 2006, joined a delegation accompanying the island’s former vice president Lien Chan on a trip to China last month. Lien, who paved the way for the current detente when he was the Kuomintang party’s chairman in 2005, met President Xi Jinping. According to a TSU statement, during the visit Shu hailed Lien as “the initiator of peaceful development across the Strait”.
India’s Sahara group boss sent to jail Judges not happy with proposals for paying back rural bond holders
I
ndia’s top court jailed the head of Sahara business group yesterday after he apologised to the judges for failing to show up for a hearing over repaying billions of dollars to small investors. Flamboyant billionaire Subrata Roy, who was remanded in custody for a week, said he was sorry for not personally attending a hearing last week, which had prompted the frustrated top court to order his arrest over the 18-month old case. “I sent an unconditional apology. My reasons for not appearing before the court were genuine,” Roy told the court in New Delhi during a hearing yesterday, referring to his sick, elderly mother. The court remanded Roy – who is often photographed with Bollywood stars and whose Sahara group says it’s worth US$11 billion – to Tihar,
India’s largest jail, until he could present a “concrete proposal” on repayment to investors. Surrounded by media, Roy was earlier attacked by a protester who threw ink in his face as he arrived at the court for the hearing over delays in returning money collected through an illegal bond scheme. As guards whisked Roy away, the shirtless protester yelled “thief” before lawyers and Sahara supporters set upon him, as police dragged him away from the court. During the hearing, the 65-yearold tycoon reassured the court that Sahara would pay back money, collected from rural savers through the bond sales, within three to four months. Roy told the court that he had already given more than US$800 million to the Securities and Exchange
Sanction threats won’t move Russia: Sergei Lavrov R
ussian Foreign Minister Sergei Lavrov said yesterday that threats of sanctions against Moscow are counter-productive and will not change its position on the Ukraine crisis. “Our position is honest and... will not change,” Lavrov told a news conference in Tunisia, where he was on an official visit. “We have always opposed the policy of unilateral sanctions. I hope our partners understand that such actions are counter-productive. “Anger and humiliation are ill-advised.” Ukraine’s new authorities have said that thousands of Russian troops have poured into Crimea during the past few days, in claims backed by Western officials but denied yesterday by Russian President Vladimir Putin. “In its statements, the EU has not once recalled the agreement of February 21,” Lavrov said in reference to a European-brokered roadmap for Ukraine to end violent protests that ousted Kremlin-backed president Viktor Yanukovych. “This means the EU does not want a national unity government and to disarm” groups, he added.
Board of India (Sebi), the securities regulator, which is overseeing the repayment process. A two-judge bench remanded Roy and two other directors in custody until March 11 when it wanted to hear the more detailed repayment plan. Judge K.S. Radhakrishnan said he was “not happy” with proposals so far. Roy was arrested on Friday and
held at a forest department guesthouse in the northern city of Lucknow before travelling to Delhi for the hearing. Sahara, a famous name in India through its former sponsorship of the national cricket team, raised about 200 billion rupees (US$3.2 billion) from savers in a process judged by authorities in 2012 to be against the law.
Syria surrenders third Mozambique police of chemical arsenal killed by suspected says watchdog ex-Renamo fighters S S
yria has surrendered or destroyed nearly a third of its chemical arsenal but remains behind on its international obligations, the head of the disarmament mission told the world’s chemical watchdog yesterday. Syria has already missed several target dates to hand over or destroy its arsenal before a June 30 deadline and the United NationsOrganisation for the Prohibition of Chemical Weapons (OPCW) mission called on Damascus to move faster. “Nearly one third of Syria’s chemical weapons material has now been removed or destroyed,” UN-OPCW coordinator Sigrid Kaag told a meeting of the watchdog at its Hague headquarters. “This is good progress and I expect further acceleration and intensification of effort.” OPCW head Ahmet Uzumcu told the Executive Council meeting that Syria had submitted a revised proposal to complete the removal of all chemicals from Syria before the end of April, after previously saying it could only complete the job by June.
AFP
uspected members of Mozambique’s ex-rebel movement turned opposition Renamo killed four policemen and wounded five others at the weekend, local media reported yesterday. “Four members of the border police died and five were wounded as a result of an attack by armed men from Renamo on Sunday morning in the district of Gorongosa,” independent daily, O País said. The ambush took place in the Mussicadzi district, 60 kilometres (40 miles) from the Gorongosa mountains in central, Sofala province, said the paper. Renamo’s leader, Afonso Dhlakama is believed to be holed up in those mountains. Supporters of Renamo have fought a low-level insurgency against government troops, attacking public infrastructure and killing civilians and soldiers in the past months. In the capital Maputo, Renamo and government negotiators are meantime locked up in new series of talks to ease tensions ahead of the October general elections. The talks are aimed at ending the armed conflict, including the disarmament of Renamo guerrillas.