Year II
Number 502 Monday March 24, 2014
Publisher: Paulo A. Azevedo
MOP 6.00
business daily 1
Friday April 19, 2013
Mortgage boom
January saw an increase of 138 percent in the value of new mortgages granted by banks compared with December 2013. Loans to acquire shops and homes. Page 5
www.macaubusinessdaily.com
Land deal Not yet but almost. Macau needs more land if it wants to diversify its economy so the only choice is entering the mainland, says the director of the Liaison Office. And the land reclamation the central government gifted Macau? Already decided: housing, infrastructure, tourism facilities, medical and government offices. Page
3
Yuan to ease inflation Inflation continues strong, due to eating out, higher rents and pricey vegetables. But the weaknessing of the yuan might help to slow it down.
Roles reversed?
Page
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The US National Security Agency has purportedly infiltrated Huawei servers in its Shenzhen headquarters. Gigantic amounts of information have been seized and communications breached between firm’s managers and top government officials, claim media.
HSI - Movers March 21
Name
Page
9
INTERVIEW: Eileen Stow
Red tape tying up business
Government TV cheaper than Cable TV Page 2
400 Chinese await “gold” visa applications Page 4
2
%Day
Li & Fung Ltd
21.17
China Overseas Land
7.05
China Resources L
6.48
China Shenhua En
5.16
China Mengniu
5.07
HK & China Ga...
-0.62
Sands China Ltd
-1.26
Bank of East Asia
-1.34
Kunlun Energy Co
-3.42
China Mobile Ltd
-3.73
Source: Bloomberg
I SSN 2226-8294
British Business Association of Macau Chairman Eileen Stow says big British businesses have Macau in their sights. But tight labour is a major problem for them and her own SME. Government red tape is hampering the efficient allocation of resources, she says, and stifling expansion plans for her company and Macau in general. Pages
6&7
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Macau
Mixed signals? The operating costs for a govt-owned subsidiary to relay free TV signals will be cheaper than the current plan utilising Macau Cable TV, govt says Tony Lai
tony.lai@macaubusinessdaily.com
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Yuan tipped to curb inflation Consumer price inflation hovers around 6 percent, but an economist thinks the yuan’s slump may keep it tethered – somewhat Tony Lai
tony.lai@macaubusinessdaily.com
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he weakness of the yuan may ease inflation in Macau in the weeks to come, an economist says. The Statistics and Census Service announced on Friday that the annual rate of consumer price inflation was 5.65 percent last month because of the higher cost of eating out, higher rents for housing and higher prices for vegetables. The annual rate of consumer price inflation was 6 percent in the first two months of this year. An assistant professor of finance and business economics at the University of Macau, Jenny Huang Bihong, said growth in tourism continued to drive up prices. “Macau is only a small place,” Ms Huang said. “When it receives an influx of hundreds of thousands of tourists, demand will rise and consequently increase prices.” Official data show the city had 2.5 million visitors in January, 8.3 percent more than a year earlier. Ms Huang said inflation might ease in the months to come because the yuan, the currency used to pay for most of Macau’s imports, had weakened. “This could help importers here get a better deal out of trade with the mainland, lowering imported inflation a little,” she said. But she said the effect of a weaker yuan on inflation might be limited because domestic consumption was now the main driver of inflation. The Reuters news agency reported that the yuan weakened by 1.2 percent last week, its biggest fall in any week since 1992.
The United States dollar – which the pataca is indirectly pegged to – ended Friday at 6.2250 yuan. That meant the yuan had lost 2.8 percent of its value this year. Analysts say there are signs that the yuan is now stabilising. Ms Huang thinks this year’s inflation rate will be similar to last year’s 5.5 percent. “But we will have to wait for a few more months to see – particularly how the mainland’s economic performance will affect the number of tourists coming here,” she said. She said the rise in Macau interest rates that the tightening of US monetary policy would probably cause might reduce liquidity in the property market here, so curbing housing prices and thus inflation. But, in the meantime, the opening of big new casino-resorts in Cotai from next year onwards would draw in more tourists and migrant labour, perhaps pushing up consumer prices, he said. The Macauhub news service has reported that The Economist Intelligence Unit expects inflation here to be in the range of 6 percent to 6.3 percent this year and next. The Statistics and Census Service says the annual rate of inflation in the cost of restaurant meals was 7.35 percent last month. Inflation in housing costs, which include mortgage payments, was 14.4 percent. Housing rent inflation was 15.1 percent. Reductions in prices of package tours after the Lunar New Year deflated recreation and culture costs by 2.7 percent. With Reuters
t will cost less for a governmentowned firm to relay free-to-air television signals than the current mode via Macau Cable TV Co Ltd, the Bureau of Telecommunications Regulations said. Almost all private antenna companies agree with the new proposal to broadcast free TV signals after April 21 except for the antenna firm controlling Macau Cable TV. The government is “at the final stage” of setting up the wholly-owned firm, said Hoi Chi Leong, the Bureau’s acting director, and they will set up a centre to relay signals to households via private antenna firms. The majority of Macau’s households currently get their free-to-air television from the 14 antenna companies, which pick up broadcasts from Macau Cable TV based per an agreement inked in August. But the agreement expires on April 21, when Macau Cable TV’s exclusive 15-year cable television concession also expires. Mr Hoi told reporters after meeting the antenna firms on Friday that the running expenditure for the new broadcast mode “will surely be cheaper than the current level”. But he has yet to project how much public money the government will fork out
to set up the firm. The administration now pays Macau Cable TV 980,000 patacas (US$122,700) a month to relay signals to the antenna. Yeung Ka Ke, a representative of the antenna firms, said after Friday’s meeting that they “90 percent agree” with the government’s proposal, only hoping that the government give them legal status during the process. The Court of Second Instance ruled last year that it was illegal for the antenna firms to relay TV signals. But not all antenna firms are happy. Kong Seng Paging Ltd, which controls Macau Cable TV, released press statements on Saturday and yesterday saying it was kept in the dark about the latest arrangement. “The government did not arrange for Kong Seng to meet together with the other public antenna companies [on Friday]. We were not informed and do not understand the reasons for such a differential treatment,” said one of the statements. Business Daily reported last week that a company source in Macau Cable TV and observers had criticised the government’s proposal to set up a wholly-owned firm, blurring the roles of regulator and market player.
crime Loan sharks reeled in
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t around 5.15pm on 20th March, Judiciary Police arrested 4 mainlanders for imprisoning an individual in a hotel room, near Central district. On 16th March, the victim, a Chinese national, gambled away all his money in a casino near Central district and was propositioned by four loan sharks offering him their “services”. In exchange for the money borrowed, the victim had to agree to give them 30% of his winnings, sign an I.O.U. and hand over his ID documents. He accepted the deal and asked for money three times, each in the amount of HKD300,000. The first two rounds went well enough for him. He won and managed to give HKD250,000 to the lenders but he ended up losing all the remaining and tapped them for a third loan. Once again, Lady Luck gave him the cold shoulder and he was unable to cover his debt. On 19th march at around 2am, the loan sharks decided to take the victim to a hotel room and lock him up. The victim managed to call his relatives in China about his situation and they called the police. Judiciary Police subsequently arrested the four men and found the victim’s documents as well as the IOU. The four loan sharks are currently in custody, with investigations ongoing. P.F.M.
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Macau
Diversifying Macau…
in the mainland Li Gang says Macau needs more land in Nansha and Cuiheng. Space to diversify its economy Stephanie Lai
sw.lai@macaubusinessdaily.com
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he director of the Central People’s Government Liaison Office in Macau, Li Gang, has said the city needs land in neighbouring Guangdong if it is to diversify its economy, even though it is reclaiming five areas of land from the sea. “Macau’s area will total only about 34.5 square km: the nearly 30 square km it already has, plus the 1 square km of the University of Macau’s Hengqin campus and the 3.5 square km of the reclamation areas,” Mr Li told reporters on Friday. “In the long run, this space is far too little, given the city’s rate of population growth and economic development,” he said. “Macau lacks space and human resources, so the MSAR government is in talks about developing land in Cuiheng and Nansha while continuing to cooperate on Hengqin.” Cuiheng is in Zhongshan and Nansha is in Guangzhou. Mr Li said the authorities on Hengqin Island had set the bar to
investment by Macau high, and that the Macau government’s next step was to persuade them to lower it. He said Zhongshan had set no similar bar. Macau enterprises could engage in manufacturing and the medical services business in Nansha or Cuiheng, while high-tech enterprises could operate on Hengqin, he said.
Cooperation models Secretary for the Economy and Finance Francis Tam Pak Yuen said on March 16 that the joint venture set up by Macau and Guangdong to own and develop the Chinese traditional medicine park on Hengqin was one model for cooperation in Nansha and Cuiheng. Mr Tam did not say what any other models might be. Macau rents the land on Hengqin occupied by the University of Macau’s new campus. The Hengqin authorities have also reserved 4.5 square km of the island for investors from Macau. They have set aside land in various parts of the island for investments by Macau in researching and producing Chinese traditional medicines, in tourism and leisure, in cultural and creative industries, in the information technology industry and in trade services.
Crowded out According to Mr Li, the growth of Macau’s population and labour force meant it was more crowded than Hong Kong. “The supply of land in Macau is tight, especially now the government is reserving space for public housing and other public facilities,” he said. Secretary for Transport and Public
In the long run, this space [Macau] is far too little, given the city’s rate of population growth and economic development Li Gang Director of the Liaison Office in Macau
Liaison office long under watch The director of the Central People’s Government Liaison Office in Macau, Li Gang, has said Beijing’s anti-corruption arm, the Central Commission for Discipline Inspection, has always monitored all officials of the liaison offices in the special administrative regions of China. Last week the commission disclosed publicly for the first time that it kept an eye on the liaison offices in Macau and Hong Kong.
Works Lau Si Io told the Legislative Assembly last month that the five reclamation areas could be used for public and private housing containing 33,000 to 43,000 flats of about 700 square feet each. The government plan for the reclaimed land is to use it for housing, tourism facilities, infrastructure, public medical facilities and government offices. The government thinks that the population could be nearly 750,000 by 2020. Mr Lau said the government would solicit further public opinion on the plan in the fourth quarter of this year. The State Council approved the plan in November 2009. The Macau government has consulted the public about it before: between June and August 2010, and between October and December 2011.
Mr Li is a member of the commission. “It’s not only now that the liaison offices are under the watch of the Central Commission for Discipline Inspection,” Mr Li told reporters on Friday. “For two decades they have been subject to the supervision of the commission,” he said. “The commission is not responsible for watching the officials of Hong Kong and Macau, but it always supervises central government delegates posted to the liaison offices in both SARs.” A professor at the state-run Chinese Academy of Governance, Wang Yukai, commenting on the commission’s disclosure, said last week that keeping an eye on the liaison offices in Macau and Hong Kong made the commission’s reach “more comprehensive”.
Macau prosecutors clear SHFL, its parent says Return to Bangkok United States gaming equipment supplier Bally Technologies Inc says Macau prosecutors have cleared its subsidiary SHFL Entertainment (Asia) Ltd, of infringing copyrights held by another gaming equipment supplier. Bally Technologies says the Macau Public Prosecutor’s Office has told it that there is no evidence
to support allegations by LT Game Ltd and parent Paradise Entertainment Ltd that SHFL infringed two LT Game patents. The complainants had alleged that an SHFL product, now called SHFL Fusion Hybrid, used patented LT Game technology. SHFL Fusion Hybrid is a multigame electronic table
configuration that combines a live dealer and electronic betting terminals. During the G2E Asia gaming show in 2009, LT Game alleged that SHFL Fusion Hybrid infringed its patents for multi-terminal systems combining electronic betting with a live dealer and live baccarat. The dispute flared again at G2E Asia 2012.
The Macau’s Tourist Crisis Management Office announced on Friday that local travel agencies are once again offering package tours to Bangkok following the lifting of a 60-day state of emergency last week in the Thai capital. This ends a moratorium of two months on local package tour groups to Bangkok.
The Office said some tours of unspecified number may start departing this week and should “remain vigilant” about ongoing anti-government protests. This news follows the Hong Kong announcement lowering the travel alert for Bangkok from the highest level of black to the lowest of amber on Wednesday.
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Macau Outside help to calm electricity hiccups The government and electricity supplier Companhia de Electricidade de Macau – CEM, S.A have sought assistance to probe the reasons for three brief electricity disruptions in the past month. The Office for the Development of the Energy Sector said in a press statement over the weekend that the three hiccups on February 12, 26 and March 12 were caused by “rare” damage to a 220V electric circuit connecting Ilha Verde to the area near the Lotus Bridge. “An international third party” will conduct a review of the circuit this week and the mainland’s Tsinghua University will also analyse data to find the cause of damage, the statement added.
Real estate purchase leads Chinese stampede for visas More and more Chinese are buying properties in Portugal. “Golden” visas enable foreign investors to live in the country and travel through the Schengen Agreement territories. A Chinese investor was detained in Lisbon last Friday following the issue of an international warrant by Interpol Alex Lee
alex.lee@macaubusinessdaily.com
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hinese investors are, by far, the most interested in the “golden visa” programme offered by Portuguese authorities. The concept of the “gold visa” was created within the Residence Authorisation for Investment Activity in Portugal. The scheme, which enables access to multiple European Union territories, requires one of at least three criteria to be fulfilled: acquisition of property worth at least half a million euros (5.5 million patacas), the transfer of at least one million euros or the creation of at least 10 jobs. A remarkable 654 “gold visas” have been issued – 34 for capital transfers, 618 for real estate purchases and two for job creation – totalling some 854 residence permits. But according to the media in Portugal, another 500 are under evaluation, 400 of which have been submitted by Chinese nationals. Recently, the Portuguese Consul in Macau told Lusa news agency that 75 percent of the visas already issued were for Chinese nationals, including the Special Administrative Regions of Macau and Hong Kong. So important is the value of the Chinese investments under the scheme – amounting so far to around 400 million euros – that
Lisbon is now planning to send a liaison officer to Beijing.
First police case Not surprisingly, according to the Portuguese police, the first case has arisen of a Chinese investor being detained by a warrant issued by the international police. Interpol has acceded to a request by Chinese judicial authorities. The male investor, detained last Friday, and in his 40’s, has been living in Cascais, a luxury area on the outskirts of Lisbon, since last year, having purchased a luxury house under the “golden” visa programme. Beijing has requested Portugal to extradite the man, who has since been arraigned in court in Lisbon for a first interrogation. According to local media, Portuguese authorities are now investigating the source of the money used to buy the property. The Portuguese border and foreigners services (Serviço de Fronteiras e Estrangeiros, or SEF) explained at the weekend that the “golden” visa was given to the investor before the international warrant was issued, which means the man had a clean record when he submitted
his application in June 2013. The process was concluded in January this year. In February, Interpol issued the warrant at the request of mainland authorities, who accuse the man of fraudulent crimes. Minister Miguel Macedo (Intern Administration) confirmed in the meantime that all procedures related to this case have been followed according to the law.
11 requests denied Up to date, Portugal has refused a “golden” visa to 11 applicants (5 investors and 6 family members) after the SEF alerted Lisbon for different reasons. The topic is considered “sensitive” since the scheme allows investors the right to travel within the European Union, not only Portugal. European commissioner for Internal Affairs, Cecilia Malmstrom, has already stated that Portugal has “every right to determine the conditions which allow nationals from third countries to have long-term residence rights” in the country. However, according to a letter she wrote to a European deputy from the Netherlands, to which Lusa news agency had access,
Ms. Malmstrom tried to calm the concerns of the nationalist legislator by saying that Portuguese permits “do not allow nationals from third countries to live outside Portugal”. Nevertheless, they can travel for up to three months in European countries that signed the Schengen agreement.
Desirable Lisbon A group of Chinese investors propose buying 22 apartments in one of the central areas of Lisbon. The new residential project is being developed by EPUL, a public company responsible for urban developments. According to Portuguese newspaper Correio da Manhã (Morning Post), the project is located in the Martim Moniz area. Last week, the EPUL board of directors analysed the Chinese proposal and “it seems business will be done”, says the daily. The 22 apartments have been priced at 6 million euros (66 million patacas) and the deal may be transacted under the golden visa programme. The scheme allows foreign investors to live in Portugal and travel within the European Union. Another reason for the investors’ interest is the fact that they will have a large number of apartments in a low density central area of the Portuguese capital which already supports a strong commercial presence of Chinese nationals. A. L.
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Macau Cotai to fuel property values: investor The completion of several mega casino-resorts in Cotai over the next four years will boost property values here, says investor Keck Seng Investments (Hong Kong) Ltd. The company told the Hong Kong Stock Exchange in a filing on Friday that “property values [here] in general are expected to hold steady and increase in line with economic growth”. Company profits contributed to by properties in Macau were HK$210.9 million in 2013, increasing 15.8 percent from the previous year. Keck Seng have invested locally in retail and office properties and its executive director is Paul Tse See Fan, chairman of the American Chamber of Commerce in Macau.
Mortgage lending rises steeply Banks more willing to borrow in the beginning of the year. Shops and homes are the main target Stephanie Lai
sw.lai@macaubusinessdaily.com
138 %
The increase of lending in January compared to December
Photo by L. Almoster
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he value of new mortgages granted by banks for commercial property rebounded steeply to 5.5 billion patacas (US$693 million) in January, the Monetary Authority of Macau says. January’s figure was 138 percent higher than December’s and 46.7 percent higher than the total a year earlier. Centaline (Macau) Property Agency Ltd senior regional sales director Roy Ho said: “Compared with December, banks usually loosen up in granting mortgages in January.” New mortgage lending for commercial property had fallen in November and December. “You can see that as banks near their mortgage lending targets at the end of each year, the terms for mortgage lending for homes or commercial property usually get stricter in December,” Mr Ho said. “So you see a strong rebound in the mortgage lending figures in January,” he said. “We have also noticed that the
valuations by banks of commercial property got closer to the prices being asked it in January, when compared with last year,” he said. Mr Ho said that last year banks had valued commercial property at 50 percent to 70 percent of the selling price, but that in January they had valued it at 60 percent to 70 percent of the selling price.
Unfinished business
Statistics and Census Service data show 246 sets of commercial premises were sold in January, 125 more than the month before and 119 more than
a year earlier. Business Daily’s own calculations indicate that buyers spent 2.68 billion patacas on commercial premises in January, 71.6 percent more than the month before and 177.2 percent more than a year earlier. Official data show 35 sets of office premises were sold in January, six fewer than the month before. But buyers spent 18.46 percent more on office premises in January than the month before, our calculations indicate. The Monetary Authority of Macau says the value of new mortgages for housing rose for the third month
in a row in January to 4.36 billion patacas, 45.2 percent more than in December and 46.2 percent more than a year earlier. Of the new lending for homes by approved the banks, 97.9 percent was for Macau residents. New lending for unfinished flats jumped to 444 million patacas, 213 percent more than in December and 284 percent more than a year earlier. The proportion of lending for shops and homes that was bad debt was 0.04 percent in January, 0.01 percentage point less than in December and 0.06 percentage point less than a year earlier.
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Macau
Macau is a big opportunity
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British companies want to invest in Macau, not settle, says BBAM leader. High-end retail and food and beverages are areas to be expanded
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HOSPITALITY Flying higher In the last three years, the number of MICE events per year has stabilised at around 1,030. Most are meetings of various kinds of organisation and involve a relatively low number of participants. Only exhibitions and to some extent conferences attract significant numbers. They are also the most difficult to monitor effectively and the more sensitive to reporting bias. The data published do not allow for a detailed breakdown of the relationships between types of event, their thematic areas and the number and origin of their participants. Still, it is clear that there are significant differences between the various sectors distinguished in the statistics. Different sectors of activity will, as a rule, display different features in terms of the dominant types of event conducted and the individuals associated with them.
here is a potential for British investment in the territory, mostly in the arts, architecture, trading, service and high-end retail. In an interview with Business Daily, the madam chairman of the British Business Association of Macau, Eileen Stow, says investors are already interested in these areas. Yet, contrary to common belief, the British do not want to move to Macau; they really just want to invest their funds in the territory. Problems like labour shortages and high rentals are not their primary concern. But for the managing director of Lord Stow’s Egg Tarts, sister of deceased founder Andrew Stow, such considerations do affect her own line of business, mostly because she spends her time struggling with human resources issues rather than focusing on expansion. She is now planning to complain to the government that overseas workers on a blue card cannot work in a different outlet from the one specified in their contract. Luciana Leitão leitao.luciana@macaubusiness.com
Photos by Manuel Cardoso
Globally, the average number of participants in all categories of event has risen markedly since 2009, when that figure stood at about 471 participants per event. In 2013, the same figure stood at 1,975 participants, a more than four-fold increase. It is difficult not to consider the possibility of change in the accounting procedures. The jump between 2010 and 2011 was especially dramatic, as the average number of participants more than doubled whilst the total number of events declined. The numbers have kept rising in the last two years, by annual rates in excess of 25 percent. The sectors where those rises are the strongest are Culture and Arts, Tourism, and Education. In the period shown here, their average participation increased 6.5, 4.6 and 4.3 times, respectively. These are also sectors where the influence of the public authorities is likely to be greater, which may, in part, explain the rising figures. J.I.D.
3563
average number of participants in Cultural and Artistic events, 2013
What are the business opportunities for the British in Macau? There are artistic opportunities, architectural opportunities, trading opportunities, service of course; and also, in terms of retail, the really high-end retail. The British have a long history of craftsmanship. You go to somewhere like Burlington Arcade in London and it goes well beyond the labels. In a short period of time, the richer Chinese visitor will get bored with the labels or feel that they have to have something even more exclusive or accessories for cars and so forth. There is a huge business opportunity for those people here. What are the main obstacles? The main obstacles are people preferring to operate on a friendship network basis rather than a network that might actually give them what they want in the end. People talk about staff. Of course, staffing is a problem if you’re
Eileen Stow
actually opening up an office here or if you’re opening an actual business, like I run a business. But if you’re a businessman from the UK, for example, you may be offering jobs to the Brits: the idea is created here, the contract is signed here, but the jobs happen in the UK. People often talk about the British coming over for business but in reality the British Government is seeking to generate employment in the UK, it’s not seeking to ship guys abroad. Often, there’s a misunderstanding about how the British would conduct business in Macau. What is the right perception of how the British can do business in the territory? The right perception is that British companies want a bite of the cherry of Macau. They may set up a small office here but they’re actually seeking to allow Macau to benefit from their creativity, whilst providing jobs for their fellow countrymen in the UK. For instance, sausage suppliers: they’re probably looking for a Macau distributor, and to be able to bring their sausages to Macau. People talk about business opportunities but don’t often talk about people like me, completely uprooting themselves, putting
their whole financial lives on the line, coming here and making something of it. Britain is not going to build a casino. Is language an obstacle for British businessmen coming here? It’s not an obstacle if you’re prepared to pay for a translator. If you’re setting up business here, it’s part of the cost - unless you’re ahead of yourself and learned Mandarin in college! Over the years you’ve been here, do you see more people speaking English? I find that my Chinese staff is more likely to speak English than they are Portuguese. Portuguese seems to be prevalent in people working in the government but not necessarily in the service industries.
Labour shortages always a problem But for those British willing to establish themselves in the territory, like others in Macau, labour shortage is an issue, right? It applies to everyone. If you’re actually setting up a business here, you’re going to need local labour. The reality is negative. I spend a lot of my time worrying about staff issues. I can’t worry
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Macau about my five or 10-year plan because I’m worrying about staff. I can’t even say ‘I think I’m going to expand next year’ because I don’t have anyone to manage. At this stage, it just seems a cross I don’t want to bear. It has had a huge negative impact on everybody. We’d rather be talking nice things about Macau. You mentioned some investment opportunities for the British. Are the British currently investing in these sectors or in others? They will start investing in highend retail. We’ve had a visit from a UK trade mission, and all these guys are interested in doing business in Macau. They’re highend retail, some of them are F&B. It’s really exclusive fashion and high-end F&B. The idea is growing. The British Government has chosen high value areas for investment or big opportunities, and Macau is one of these. This mission was organised by UK Trade & Investment. These are the guys they’re bringing in, that they see fit in the market. Is the local government handing out incentives to bring them here? There’s no government incentive from outside of things, as far as I’m aware, besides diplomatic assistance. When you arrive in Macau, there’s IPIM, of course, an organisation that doesn’t get the praise it should. For instance, if one of these guys came here and wanted to get an office IPIM could get an office for a length of time, free of charge, because IPIM does a huge amount of work to encourage overseas investment and diversity as well. Lord Stow’s been a success, right from the beginning. But do you believe that if Andrew had arrived in Macau now and put in place the same idea that he would still be as successful? It’s interesting, because this business has evolved. It wasn’t so much a business plan. Today, you could still set up something that is different - that’s what Andrew did at the time; a small business that offered a product that people couldn’t get anywhere else. And you see some interesting little cake shops popping up, thinking ‘what can I do that that everyone else isn’t doing?’, whereas the old Chinese mentality was ‘if he’s doing it, then I’m going to do it, too’. There’s huge room for diversifying and still bringing in a little bit of Eastmeets-West. Even with the current labour shortages and high rentals? The thing is, you start by not going into the high rental areas. A problem I’ve noticed is that people want to go to the busy places. If the product is good, people will
People often talk about the British coming over for business but in reality the British Government is seeking to generate employment in the UK, it’s not seeking to ship guys abroad
I would show them [the government] my figures, my customer levels, and point out that we can’t provide the service we want to provide without the staff levels we need to provide that service
come to you. Find a low cost place because rental is your biggest gamble. Not many people had cars in 1989 when we opened, and that’s how it’s been. We didn’t open in the main square of Leal Senado but we do own a comfortable core business.
Lord Stow’s to expand production line Will you continue expanding Lord Stow’s? The overseas operations are franchises, and most of these are 15 years old; we’re not looking to expand that at the present time. Expand here? I’m spending so much time here supplying the demand we currently have, which is great, that my expansion is all on the production side. All my investment this year is going into refurbishing and expanding the production side, and investing in updated machinery all the stuff we have is handmade, all machinery we might have assists that. We’re not mechanising any of our existing production. I’m looking at an egg-separating machine. I’ve got to look into the future, into how we continue with our production, with the labour issues, who’s available for those jobs, and how we can continue to give you everything handmade within those confines. This is our 25th year of business and I’ll be looking into promoting that a little bit and giving the staff a huge party.
So, at this point, you’re mostly focusing on expanding your production capacity, and until that happens you can’t expand. But do you expect to in 5-10 years? We provide everything ourselves, and I can’t just announce ‘I’ll just open another shop’. We’re currently making 12,500 egg tarts a day; if I open another shop, that’s going to be 15,000 egg tarts a day. That’s very nice but who’s going to make them? Where are they going to sit? So, you are also being affected by the usual SME problems, like rentals? Rental always. We’ve been here long enough for me to be able to do my sums, and know whether I can afford or not to pay a certain rental. The business is phenomenal but the customer still chooses where to go. But you’ve got the demand, right? Yes, because we have the reputation. And that’s something I never take for granted. If I weren’t worried so much about my HR opportunities, I’d have time for that five to 10-year business plan. I haven’t been able to do it. I’m constantly focusing on HR and production. I don’t want to be huge. We don’t want to be on every street corner, it dilutes your reputation. We’re so proud to be associated with Macau in the way we are, to be recognised as a Macau icon. Yes, there’s the incentive of opening something else but where that will be and when that will be,
I don’t know. In Macau or outside Macau? In Macau. We’ve been offered the opportunity to go to Hengqin but we have no interest because we would have to manage a Hengqin operation, and we’re Macau. And I’m not interested in having a partner. What’s wrong with being happy with the business you’ve got? Would it be easier to expand if current labour policies changed? It would actually be nice if there were more consultation with the likes of me, about the problems we face. I don’t know; maybe it does go on and I’m not invited. I’d like the government to talk to me. Is that too much to ask? What would you tell the government? I would show them my figures, my customer levels, and point out that we can’t provide the service we want to provide without the staff levels we need to provide that service. What I do have an issue with is that I’m a company with a number of outlets. If I have an overseas worker, that overseas worker can’t help out in an emergency in another outlet. I’m legally not allowed to send them because that blue card ties them to a particular outlet. And the question is, why can’t they be contracted to the whole company? Then, I can send them to where I need, and relieve the stress for everyone. I shall be writing to the head of the Labour Department about this matter.
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Greater China
Authorities announce economic reforms China’s central bank will focus on liberalising bank deposit rates over the next two years
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hinese Vice Premier Zhang Gaoli reaffirmed to a group of visiting senior foreign executives and officials yesterday that the country will introduce market-based interest rates and a market-based exchange rate for the yuan currency. Zhang, speaking at the annual China Development Forum, said China will “introduce a modern and competitive market system with fair
The yuan exchange rate will be more and more determined by the market and the People’s Bank of China’s decisive role on the exchange rate will weaken Yi Gang People’s Bank of China vice governor
and open market rules”. He provided no details. China’s central bank will focus on liberalising bank deposit rates over the next two years, while loosening its grip on the yuan currency to give greater influence to market forces. “Our priority this year and next year is pushing forward reform of bank deposit rates,” Yi Gang, People’s Bank of China vice governor said at an economic forum in Beijing. “The yuan exchange rate will be more and more determined by the market and the People’s Bank of China’s decisive role on the exchange rate will weaken,” he said. Central bank chief Zhou Xiaochuan said earlier this month deposit rates were likely to be liberalised in one to two years, but government economists and policy advisers told Reuters they believed the central bank was treading cautiously as economic growth slows. The central bank already allows banks to set their own lending rates, but in practice they do not have full freedom because of controls on deposit rates. Zhang added that a key government priority will be fiscal and tax reform, including development of “an open and standardised budget system”, which is crucial as China moves to address issues associated with local government debt and local government finance. China’s local governments
Yi Gang, People’s Bank of China vice governor
are responsible for 85 percent of total government expenditure but collect less than 50 percent of the country’s total revenues, according to statistics compiled by the Asian Development Bank. Zhang also said the government was moving forward with updating its value-added tax, excise and
consumption tax. Zhang said that a “fair and unified tax system” was needed. The yuan has lost 2.8 percent so far this year, unwinding the gains it made in 2013 amid suspected central bank efforts to introduce two-way currency moves to deter speculative inflows. Reuters
Preferred stocks get in the game Chinese banks planned to issue new types of debt and equity securities to raise funds
ICBC Tower from the Shanghai Bund at
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hina has issued rules for a trial program allowing companies to sell preferred stock, expanding financing options for the nation’s banks as they seek to address tougher capital requirements. Companies can issue the shares if they are included in the Shanghai Stock Exchange 50 A-Share Index, the China Securities Regulatory
Commission said in a statement on its verified microblog account yesterday. Publicly traded companies can also issue preferred stock to pay for acquisitions and buy back shares, the CSRC said. Lenders including Industrial & Commercial Bank of China Ltd. account for at least 34 percent of the A-share index. Chinese banks said
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Greater China
NSA increases its victims’ list infiltrating Huawei The U.S. agency copied a list of more than 1,400 clients and internal training documents for engineers
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he U.S. National Security Agency has infiltrated servers in the headquarters of Chinese telecommunications and Internet giant Huawei Technologies Co., obtaining sensitive information and monitoring the communications of top executives, the New York Times reported on Saturday. The newspaper said its report on the operation, code-named “Shotgiant,” was based on NSA documents provided by Edward Snowden, the former agency contractor who since last year has leaked data revealing sweeping U.S. surveillance activities. The German magazine Der Spiegel also reported on the documents. One of the goals of the operation was to find any connections between Huawei and the Chinese People’s Liberation Army, according to a 2010 document cited by the Times. But the newspaper said the operation also sought to exploit Huawei’s technology. It reported that the NSA aimed to conduct surveillance through computer and telephone networks Huawei sold to other nations. If ordered by the U.S. president, the NSA also planned to unleash offensive cyber operations, it said. The newspaper said the NSA secured access to the servers in Huawei’s sealed headquarters in the city of Shenzhen and got information about the workings of the giant routers and complex digital switches the company says connect a third of the world’s people. The NSA also tracked communications of Huawei’s top executives, the Times reported. Der Spiegel reported that the NSA breached Huawei’s computer network and copied a list of more than 1,400 clients and internal training documents for engineers. “We have access to so much data that we don’t know what to do with it,” the magazine cited an NSA document as saying. The magazine said the NSA also is pursuing a digital offensive against the Chinese political leadership. It
last year that they plan to issue new types of debt and equity securities to raise funds following tighter capital requirements that took effect in January 2013. “This is very good news for banks,” Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp., said by phone. “It has become increasingly difficult for banks to raise capital by selling common shares on the secondary market as valuations have declined steadily in the last two years.” Increasing competition for deposits and rising bad loans have dragged the Hong Kong-traded stocks of the nation’s four biggest banks including ICBC down by more than 12 percent this year. The shares were valued on March 13 at a mean 0.94 times net assets, or book value, the lowest level since Agricultural Bank of China Ltd.’s initial public offering in 2010, data compiled by Bloomberg show.
Convertible stock Preferred shareholders have a higher claim on a company’s assets than common stockholders in the event of liquidation. While they are usually
Temasek to buy stake in Watson Singapore state investor Temasek Holdings has agreed to buy just under a quarter of health and beauty retailer A.S. Watson for about US$5.7 billion in what would be its single biggest investment and one that would boost its exposure to Asia’s fast growing consumer sector. The purchase of the 24.9 percent in A.S. Watson, owned by Asia’s richest man Li Ka-shing, is part of Temasek’s aggressive reshaping of its US$170 billion portfolio to ensure higher returns by increasing its exposure to unlisted companies. A.S. Watson’s business includes personal care stores that dominate the beauty and health market in China.
Wine dispute solved with EU China and the European Union have reached a deal to end a dispute over European wine exports to China. Beijing opened an inquiry last year into whether Europe was selling wine in China at unfairly low prices. The agreement was reached by involving Chinese and European wine producers, with support from Brussels and Beijing, EU Agriculture Commissioner Dacian Ciolos said. Under the terms of the deal, European producers have committed to providing technical assistance to help develop the Chinese wine industry. In return, Chinese buyers will promote European wine more widely in China.
Huawei headquarters in Shenzhen
named the government targets as former Chinese prime minister Hu Jintao and the Chinese trade and foreign ministries.
‘Plans and intentions’ “Many of our targets communicate over Huawei-produced products. We want to make sure that we know how to exploit these products,” the Times quoted an NSA document as saying, to “gain access to networks of interest” around the world. “If we can determine the company’s plans and intentions,” an analyst wrote in the 2010 document, “we hope that this will lead us back to the plans and intentions” of the Chinese government. The Times also reported that as Huawei invested in new technology and laid undersea cables to connect its US$40 billion-a-year networking operation, the NSA was interested in getting information on key Chinese customers including “high priority targets - Iran, Afghanistan, Pakistan, Kenya, Cuba.” The Times quoted William Plummer, a senior Huawei executive
accorded fewer voting rights, owners of preferred stock are typically entitled to a fixed dividend before funds are paid to common shareholders. Publicly traded companies are barred from issuing preferred shares convertible into common equity, the CSRC said. Banks are exempted if capital ratios drop below a trigger level, it said. The watchdog and the CBRC will issue rules regarding the compulsory conversion of banks’ preferred shares into common shares. China’s new capital rules require systemically important banks to have minimum capital buffers of 11.5 percent before the end of 2018, according to the China Banking Regulatory Commission. For banks that the regulator doesn’t classify as systemically important, the requirement is 10.5 percent.
‘In need’ The banking industry’s capital adequacy ratio was at 12.19 percent at the end of December down from 12.28 percent at the end of last March, according to CBRC data. China’s publicly traded banks
in the United States, as saying that the company did not know it was a target of the NSA. “The irony is that exactly what they are doing to us is what they have always charged that the Chinese are doing through us,” the Times quoted Plummer as saying. “If such espionage has been truly conducted then it is known that the company is independent and has no unusual ties to any government, and that knowledge should be relayed publicly to put an end to an era of mis- and disinformation,” the Times quoted Plummer as saying. The Times noted that U.S. officials see Huawei as a security threat and have blocked the company from making business deals in the United States, worried that it would furnish its equipment with “back doors” that could enable China’s military or Chinese-backed hackers to swipe corporate and government secrets. Snowden last year fled to Hong Kong and then to Russia, where he has asylum. The United States wants him returned to face criminal prosecution. Reuters
need to raise as much as 500 billion yuan (US$80.3 billion) next year to replenish Tier 1 capital, a gauge of financial stability, according to Liu Jun, an analyst at Chang Jiang Securities Co. in Wuhan city. Chinese banks mostly rely on issuing common stock and retained earnings to replenish their Tier 1 capital, Liu wrote in a December report. Due to slowing profit growth, expanding loan books and poor valuations, lenders are “badly in need” of preferred stock as a Tier 1 capital alternative, he said. Increasing the Tier 1 capital ratio by 50 basis points would hurt earnings by just 1.1 percent when issuing preferred shares, compared with a 4.5 percent dilution from common equity, Michael Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co., wrote in a report in October. ICBC, the nation’s largest bank by assets, last year approved a plan to raise as much as 60 billion yuan in 2014 by selling so-called Tier2 securities, a type of debt that will include conditions for a forced writedown on the principal. Bloomberg News
New Chinese search engine in town China’s major news organizations started a new Chinese-language Internet search engine last weekend, Xinhua News Agency reported. A company funded jointly by China’s four major newspapers, two news agencies and state television, said Xinhua, the country’s official news agency, developed the search engine, Chinaso.com. The founders include the People’s Daily, Xinhua and China Central Television, it said. Chinaso.com is a consolidation of Jike.com, started by People’s Daily in 2010 and Panguso.com, begun by Xinhua in 2011, according to a March 2 report in the Global Times, owned by People’s Daily.
CNPC fined for environmental damage Chad has fined the local unit of China National Petroleum Corporation (CNPC) US$1.2 billion for environmental violations. The government suspended all of CNPC’s activities in the country in August for violating environmental standards while drilling for oil in the south, and ordered an audit of all crude oil explorations in the country. It allowed CNPC to resume operations in October after the company improved its environmental practices. The government urged the company then to strictly respect environmental rules, in particular those concerning the management of waste.
Sinopec 2013 profit gains 3.4% Asia’s biggest refiner, reported a 3.4 percent increase in 2013 profit as earnings at its refining and marketing units gained. Net income at the company officially known as China Petroleum & Chemical Corp. was to 66.1 billion yuan (US$10.6 billion), or 0.53 yuan a share, from 63.9 billion yuan, or 0.55 yuan, the Beijingbased company said today in a statement. That missed the 67.8 billion yuan mean of 12 analyst estimates compiled by Bloomberg. China last year changed its system for setting gasoline and diesel potentially helping oil companies curb refining losses.
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Greater China Barclays loses opportunity to “open sesame” Bank misses out on slice of Alibaba pie by Bloomberg show. The decision to work for rivals was seen as a flagrant shot at Alibaba, one person said, and London-based Barclays will now be one of the few global banks not to land a spot on Alibaba’s share sale, said the people. Spokesmen for SoftBank, Barclays and Alibaba declined to comment on the relationship.
US$200 Million
Alibaba headquarters in Hangzhou
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he investment bank lost the chance to be among firms sharing hundreds of millions of dollars in fees from Alibaba Group Holding Ltd.’s initial public offering when it advised and financed Charlie Ergen’s failed effort to buy Sprint Corp. last year, several people with knowledge of the matter said. Ergen’s bid was a challenge to SoftBank Corp., which eventually acquired Sprint for US$21.6 billion, and upset the Japanese company’s founder Masayoshi Son so much that he pressed Alibaba to stop working with Barclays, the people said, asking not to be identified discussing private information. SoftBank owns about 37 percent of Alibaba and Son took his request directly to the company’s
founder Jack Ma, the people said. The decision to back Ergen highlights the risk of working with competing clients. To pick sides, larger banks use a process called “business selection” in situations where they may alienate another company, with the decision typically based on which client will bring in more fees over the long term. Still, Son’s decision to punish Barclays is against the interests of Alibaba’s other shareholders, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “It is counter to the interest of a company to cut out a globally important underwriter simply because a major stockholder wants to punish it,” he wrote in an e-mail. “Powerful
people who want revenge should not use third parties to wreak it.” Son called Ma last spring, in the midst of the struggle over Sprint, and asked that Ma keep Barclays off of an US$8 billion loan that Alibaba was seeking, one person said. Aware of Son’s anger, Barclays turned its attention later in the year to other Chinese Internet companies that could go public, another person said. The bank ended up working with Tencent Holdings Ltd., Asia’s largest Internet company by market value, on its recent purchase of a 15 percent stake in Alibaba rival JD.com Inc., and is pitching for a role on JD.com’s own IPO, this person said. Barclays ranks ninth among IPO underwriters this year, data compiled
The Alibaba sale, which will be managed by banks including Credit Suisse Group AG, Morgan Stanley and Deutsche Bank AG according to a person familiar with the matter, could be bigger than Facebook Inc.’s US$16 billion offering in May 2012. Other banks working on the sale include Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., that person said. Alibaba said March 16 it had decided to start the process for an IPO in the U.S. The sale may be equivalent to about a 12 percent stake in the company, a person familiar with the matter said earlier. Based on the average US$153 billion valuation in a Bloomberg News survey of analysts, that would make it an US$18.4 billion offering. Banks on Facebook’s sale earned fees of 1.1 percent of the sum it raised. Assuming a similar percentage for Alibaba, underwriters would get about US$200 million. “This shows the power of reputation and the dangers of backing a losing horse,” said Tim Loughran, a finance professor at the University of Notre Dame in Indiana. “I don’t find it too surprising that Masayoshi Son is still annoyed with Barclays. Big inside owners of IPOs only want to deal with investment banks they trust.” Bloomberg News
Everyone wants to entertain China China Media Capital is raising money to invest in Chinese media
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hina Media Capital, a statebacked investment fund, said it’s raising money from investors including WPP Plc, Time Warner Inc. and Softbank Corp. to invest in Chinese media and entertainment companies. China Media Capital is preparing a fund of a “few hundred million” U.S. dollars, Chairman Li Ruigang said in an interview in Shanghai March 20, declining to be more specific. WPP, the London-based world’s largest advertising company, confirmed the investment. The company will also be announcing two acquisitions in China this week, Chief Executive Officer Martin Sorrell said in a phone interview from Beijing. Entertainment companies are seeking to tap demand in the world’s second-largest economy as consumer spending grows and incomes increase. Walt Disney Co. and DreamWorks Animation SKG Inc. have formed partnerships in China where boxoffice receipts rose 36 percent to
US$2.7 billion in 2012, making it the biggest film market outside the U.S. and Canada. China Media Capital already counts DreamWorks, the studio behind the “Madagascar” films, and Time Warner as among its partners in China. “In this country, you can see the population of the middle class, it is growing so fast,” Li said. “They want to spend money not only to buy luxury goods, they also want quality entertainment, quality content.”
US$2.7 bln 2012 box office
Jerry Yang Yahoo founder, one of the investors
China Media Capital started in 2009 with an initial fund size of 5 billion yuan (US$803 million) from investors including China Development Bank Corp. The U.S. dollar fund’s investors also include Crown Resorts Ltd. Chairman James Packer and former Yahoo! Inc. cofounder Jerry Yang, Li said.
WPP Acquisitions The fund currently owns a stake in Caixin Media Co., and was part of a group that purchased Rupert Murdoch’s 21st Century Fox Inc.’s
minority stake in Star China TV in January. Hiroe Kotera, a spokeswoman for Tokyo-based SoftBank, declined to comment. Mark Arbib, a spokesman for Packer’s Consolidated Press Holdings Ltd., could not immediately comment. Summer Wilkie, a New York-based spokeswoman, confirmed Time Warner’s investment in an e-mail, declining to reveal investment figures. WPP will announce the China acquisitions today and on Tuesday, Sorrell said, declining to give specifics. Bloomberg News
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Asia
Politics clouds Thai economy The agitation was the latest chapter in an eight-year crisis
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hailand’s Constitutional Court annulled last month’s general election, leaving the country in political limbo without a full government and further undermining a prime minister faced with impeachment over a failed rice subsidy scheme. Weakened by five months of unrest, Prime Minister Yingluck Shinawatra is expected to defend herself before an anti-corruption commission by March 31, and a decision to seek her impeachment could come soon after that, with the Senate expected to take up the matter quickly. As the crisis deepens, there is a growing risk that the “red shirt” supporters of Yingluk and her brother, ex-premier Thaksin Shinawatra could confront their opponents in the streets, plunging Thailand into a fresh round of political violence. Twenty-three people have been killed in the unrest since November, and the economy suffered and tourists stayed away as protesters shut government offices and at times blocked major thoroughfares in Bangkok to try to force Yingluck out. Consumer confidence is at a 12year low, prompting the central bank on Friday to cut its economic growth forecast for this year to 2.7 percent from 3 percent. Confident that her Puea Thai Party
United front for democracy against dictatorship, Red Shirts, protests in 2010
would win, Yingluck had called an election on February 2 in a bid to defuse anti-government protests, and since then has headed a caretaker government with limited powers. The Constitutional Court judges ruled in a 6 to 3 vote on Friday that the election was unconstitutional because voting failed to take place on the same day around the country. Anti-government protesters had stopped voting in about a fifth of constituencies, and in 28 of them voting was not possible at all because candidates were unable to register. The agitation was the latest
chapter in an eight-year crisis that pits Bangkok’s middle class and royalist establishment against supporters of Yingluck and Thaksin Shinawatra, who was toppled by the army in 2006 and lives in exile to avoid a jail term for graft. Encouraged by the dwindling number of protesters in recent weeks and relative calm on the streets, the government lifted a state of emergency on Wednesday. But the focus has shifted to the courts, in particular to the prospect of Yingluck being impeached over a rice scheme that has gone badly
wrong, with hundreds of thousands of farmers not getting paid for grain sold to the state since October. “Independent agencies are being quite obvious that they want to remove her and her entire cabinet to create a power vacuum, claim that elections can’t be held and then nominate a prime minister of their choice,” said Kan Yuenyong, an analyst at the Siam Intelligence Unit, referring to the courts and the anti-corruption commission. “If they run with this plan, then the government’s supporters will fight back and the next half of the year will be much worse than what we saw in the first half,” he said. More upheaval would scupper chances of the recovery in private spending and therefore in the economy in the second half of the year, that Bank of Thailand Governor Prasarn Trairatvorakul had tentatively forecast in a speech on Thursday. The central bank’s new forecast of 2.7 percent growth this year compares with the 4.8 percent it was expecting last October, just before the political crisis flared up. “Tourism should improve after the lifting of the state of emergency and that will also help support growth in the second half,” said Assistant Governor Paiboon Kittisrikangwan. But the outlook is highly uncertain. “We would not be surprised to see further downgrades to the Bank of Thailand’s growth assessment given persistent weakness in domestic activity amidst lingering political uncertainty,” said Benjamin Shatil, an economist at JP Morgan in Singapore.
India equips for election run Some analysts hope the new government will speed divestments to bolster revenue generation
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he government rose as much as US$1.4 billion through share sales, in a push to shore up state finances before it heads into a tough parliamentary election next month. As a result, New Delhi managed to exceed its sharply-lowered budget target to raise as much as US$3.1 billion via stake sales in some private as well as state companies in the fiscal year to March 31, after years of falling short. Some analysts hope the new government, taking office in May, will speed divestments to bolster revenue generation and trim the budget deficit, as part of efforts to revive slowing economic growth. Finance Minister P. Chidambaram had pencilled nearly US$9 billion in divestment revenues into his budget for this fiscal year, but slashed that
India’s Finance Minister P. Chidambaram
figure last month to US$3.1 billion. He also set an ambitious target of raising US$8.5 billion from further share sales in the next fiscal year, but this estimate could be revised by a possible successor after the election. “With the next government in place, one would only expect better fortunes from stake sales,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy think tank. “A recovery in growth sentiment in the market should help sell stakes quite early in the next fiscal year to meet the target.”
Reduced expectations Stake divestment was a key plank for the ruling Congress party, forecast to face its worst defeat in the upcoming parliamentary election, its support undermined by an economy growing at its slowest pace in a decade. Against the revised target of raising US$2.6 billion by selling stakes in state companies and another US$490 million from selling part of its holdings in some private companies, the government is set to end the year with a combined US$3.5 billion. The government on Friday raised about US$900 million by selling 9 percent of Axis Bank Ltd, India’s No.3 private-sector bank by assets, to institutional investors. The sale will pare the government’s ownership in Axis Bank, held via a trust fund called Specified Undertaking of the Unit Trust of India (SUUTI), to 11.7 percent. Reuters
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Drought leads Aussies to mining records Shipments from Queensland will rise 14 percent to 205 million metric tons ending June
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he drought across most of Australia’s Queensland state means coal producers are exporting record volumes into an oversupplied market, depriving them of the usual price gains caused by weather disruptions. Shipments from Queensland, the biggest exporter of coal used in steelmaking, will rise 14 percent to 205 million metric tons in the 12 months ending June 30, the government says. The heavy rains that crimped output and boosted prices in three of the past four years by flooding pits such as Cockatoo Coal Ltd.’s Baralaba mine haven’t come this year. “Waters that we collected during that flood we’re now utilizing” to reduce dust and in the construction of a wall to protect against a 1-ina-1,000 years flood, said Andrew Lawson, Cockatoo’s managing director. “Water is a risk and an opportunity,” said Lawson, who joined the company a year after flooding in 2010-halted output. Deluges in Queensland in 2010 and 2011 swamped mines and washed away rail lines, driving the cost of coking coal to a record and the price of thermal coal burned in power plants to a 30-month high. Sparse rains this year have led to drought in 79 percent of the state, the biggest area ever. There were 65.86 million tons of coal shipped in the four months to March from terminals at Gladstone, Abbot Point and Hay Point in Queensland, port data compiled by Bloomberg show. That’s up from 58.59 million a year earlier and 45.62 million in 2010-11. Asian steelmakers are getting record-low prices in supply contracts for hard coking coal while power producers are paying the least in
about four years for their fuel. The glut in coking coal is estimated by Morgan Stanley to be about the equivalent of 3 percent of annual seaborne trade. A cut of at least 15 million tons is needed to restore tightness, Sanford C. Bernstein & Co. said in a report last month. Supply of thermal coal will exceed demand by 42 million tons this year, or 4 percent of global trade, UBS AG said in a January report. “It’s a very oversupplied market,” said Daniel Morgan, an analyst at UBS in Sydney. “I’m not a big bull on thermal. We desperately need some sort of cuts but it hasn’t happened.” While declining prices are a boost for companies such as Japan’s Nippon Steel & Sumitomo Metal Corp., they will crimp profits at producers including Anglo American Plc. Strikes by train drivers from Aurizon Holdings Ltd. and Pacific National, a unit of Melbourne-based Asciano Group, may curb exports and boost prices. The companies, currently negotiating labour agreements, are the biggest haulers of coal by rail in Australia.
Water is a risk and an opportunity Andrew Lawson Cockatoo’s managing director
Goldman Sachs Goldman Sachs Group Inc. expects an average coking coal price of US$135 a ton this year while Australia & New Zealand Banking Group Ltd. predicts US$140. Spot prices fell 4.8 percent to US$129.65 in January and were at US$118.75 on March 13, according to data from Energy Publishing Inc. Thermal coal may average US$88 a ton in 2014, the median of five analyst estimates compiled by Bloomberg last month shows. The fuel averaged US$85.27 last year and was at US$75.60 in the week that ended March 21, according to globalCOAL,
a London-based data provider. Few producers are profiting at current prices, said Richard Goyder, the chief executive officer of Perth-based Wesfarmers Ltd.,
Superannuation Fund to invest in US gas The new investment will increase the fund’s energy sector investments to around 11 percent
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ew Zealand’s Superannuation Fund said it would invest US$250 million in North American gas and oil investments run by global private equity firm KKR & Co LP, tripling its investment in the company as the state pension fund increases its exposure to private equity. The US$21 billion pension fund will invest up to US$175 million over the next 3-5 years in natural gas exploration and production projects in North America along with energy infrastructure and services, it said in a statement. The remainder would be invested into KKR’s new Energy Income and Growth Fund, which focuses on unconventional gas and
oil resources. Combined with its investments in KKR’s Asian Fund and its 2006 Fund, the Superfund’s latest investment brings its total planned investments in KKR to around US$335 million. Set up in 2003 to partially fund the cost of future pension payments for New Zealand’s 4.5 million people, the Superfund has invested in private equity since 2005. The latest chunk will boost the fund’s private equity investments from around 3 percent of its total portfolio at the moment. Matt Whineray, general manager of investments at the fund, said the new investment would increase its exposure to the energy sector, adding
that the fund hoped to capitalise on the rapid development of natural gas and unconventional oil assets, and offer other benefits. “These benefits include improved expected returns, resilience in relation to a rapidly changing sector and greater insight into, and control over, our investment exposures,” Whineray said in a statement. “Our focus on responsible investment will also be bolstered by KKR’s expertise in the management of environmental, social and governance factors.” When fully funded, the new investment will increase the fund’s energy sector investments to around 11 percent of its total portfolio from
which operates the Curragh mine in Queensland. The first half of this year will be tougher for coal prices than the previous six months, he said. Bloomberg News
10 percent at the moment. This would take energy holdings back to levels seen in mid-2013, before the fund sold down some of its stake in New Zealand petrol retailer Z Energy Friday’s announcement expands the Superfund’s investments in the U.S. energy sector, and follows a US$100 million investment in Bloom Energy, which uses solid oxide fuel cell technology to create power, and US$55 million in wind turbine manufacturer Ogin. Reuters
US$175 mln
3-5 years investment in natural gas exploration
editorial council Paulo A. 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 Cynthia Wong, Luciana Leitão, Michael Armstrong, Óscar Guijarro, Pierre-François Metayer, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Brands & Trends Raquel Dias 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 Murdoch quits Australia share listing Exiting the Australian exchange will simplify the media company’s capital structure
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1st Century Fox Inc., the film and television company controlled by billionaire Rupert Murdoch, received stockholder approval to move ahead with plans to cease trading of its shares in Australia. Class B shareholders, the only group with voting rights, approved the proposal, Murdoch said at special investor meeting in New York. The measure passed by about a four-to-one margin, Fox said in a regulatory filing. The company plans to make its official request for removal from the Australian Securities Exchange next week, with the delisting likely to take place by May 8, according to regulatory filings. Murdoch is delisting Fox shares in Australia, his birthplace, after cleaving off his New York-based film and TV unit from his newspaper and publishing business that operates under News Corp. News Corp., which retained most of the assets in Australia, will continue to trade in the country. “Today we are here to consider a further step in the evolution of 21st Century Fox,” Murdoch, 83, said at the meeting.
Nasdaq-listed stock. The change may allow Murdoch and his family to vote more of their 39.4 percent voting stake, according to a person with knowledge of the decision, as some Australian institutions divest the stock from their funds. Fox had 798.5 million Class B shares outstanding as of Jan. 31, according to filings. The U.S. Federal Communications Commission limits TV station owners to less than 25 percent foreign control. To comply, Fox suspends some voting rights for non-U.S. stockholders. The Murdoch family trust in the past agreed to limit its voting stake to be proportional. Murdoch started his media empire in Australia after inheriting regional publishing assets from his father. In 1985, he became a U.S. citizen as he sought to add TV assets and in 2004 moved the media company to the U.S. Bloomberg News
Rupert Murdoch, 21st Century Fox main shareholder
Fox Class A, the nonvoting stock, was little changed at US$32.73 at the close in New York. The stock has declined 6.9 percent this year. Exiting the Australian exchange will simplify the media company’s capital structure and increase the stock’s liquidity, Fox said in January. Holders of shares listed in Australia will be able to switch to the company’s
Today we are here to consider a further step in the evolution of 21st Century Fox Rupert Murdoch 21st Century Fox main shareholder
Communist leaders arrested in Philippines
Japan Bank creates an investment fund Sumitomo Mitsui Trust Bank Ltd and Japan Bank for International Cooperation (JBIC) will team up with British private equity group CVC Capital Partners Ltd to set up an Asian investment fund totalling more than 300 billion yen (US$2.93 billion), the Nikkei business daily said on Sunday. The fund aims to help Asian businesses in nations such as Indonesia and China grow by taking management control and later selling them to mostly Japanese firms, the report said without citing sources. The announcement is expected early in the week, it added.
Philippines to sign aircraft contracts The Philippines will award aircraft contracts to South Korean and Canadian companies worth US$525.62 million (23.7 billion pesos), a senior defence official commented, boosting its capability as tension simmers in the South China Sea. The Philippines has embarked on a five-year, 75-billion-peso modernisation programme to boost its capability to defend its maritime borders. Philippines would acquire 12 FA-50 fighter-trainers and eight Bell 412 helicopters under a government-to-government deal. Korean Aerospace Industries Ltd. got the contract for the fighter-trainers worth 18.9 billion pesos.
Svenska to sell bonds in Australia Svenska Handelsbanken AB is seeking to become the first Swedish bank to sell senior unsecured bonds in Australia as Europe’s best-capitalized major bank diversifies its funding sources. The bank is waiting for the right timing after establishing an Australian borrowing program, said Bengt Edholm, head of Stockholm-based Handelsbanken’s treasury. The issue would probably be A$500 million (US$455 million) to A$750 million, Edholm said. Handelsbanken opened its first office in Australia in 2012 to serve its Nordic and U.K. corporate customers with operations in the country.
Four decades of insurgency in Mindanao has killed as many as 200,000 people
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he Philippine military yesterday arrested the top two leaders of a 45-yearold Maoist rebel group for crimes including murder, in a move seen to boost President Benigno Aquino’s drive against insurgency. Benito Tiamzon, chairman of the Communist Party of the Philippines and its armed wing the New People’s Army, his wife Wilma Austria, the second-in-command, and five others were arrested in Aloguinsan town in Cebu in central Philippines. “The arrests will cripple their organization since they are in charge of command and control,” Lieutenant Colonel Ramon Zagala, a military spokesman, said by telephone. He didn’t give other details of the arrests. The National Democratic Front, the Maoist group’s political organization, demanded the immediate release of Tiamzon and Austria in a statement on its website, saying that under an agreement with the government in the 1990s they are immune from arrest during the peace negotiations. The talks between the government and the group, estimated by the military to have as many as 4,000 fighters, have been at an impasse since February 2011 after the rebels pressed for the release of their arrested members before proceeding. “This is a huge blow that could weaken the organization,” said Ramon Casiple, executive director of the Institute for Political and Electoral Reform in Manila. “They are known hardliners against the
peace talks. This will strengthen the hand of those who want to pursue the peace process.” The rebel group says it has close to 10,000 high-powered firearms, from nine when it was founded in 1969. The Communist Party will celebrate its 45th founding anniversary on March 29.
High Alert The arrests of Tiamzon and Austria “does not change our basic stance that peace negotiations with the CPP-NPA can only proceed with a clear and time-bound agenda that provides some possibility of bringing us closer to a final peace agreement,” Teresita Deles, Aquino’s peace adviser, said by telephone. The Armed Forces of the Philippines is on high alert, Defense Secretary Voltaire Gazmin said yesterday. “Of course, retaliation is expected so the AFP is ready for this.” Earlier this month, nine government troops were killed when alleged Communist Party fighters attacked a police station at dawn in Matanao, Davao del Sur in the country’s south. Two of the attackers were also killed. The NPA, in a statement yesterday, claimed to have “thousands” of guerrillas in 71 of the 80 Philippine provinces. Separately, the government and the Moro Islamic Liberation Front, a Muslim rebel group whose insurgency is concentrated in the main southern island of Mindanao, will sign a final
peace agreement on March 27. Four decades of insurgency in Mindanao has killed as many as 200,000 people and stifled the island’s development. Ending one of Southeast Asia’s most entrenched conflicts could help bring investors to Mindanao, unlock mineral deposits worth an estimated US$300 billion and mark a key achievement for Aquino. Mindanao can attract as much as US$1 billion of investments after a final peace agreement is reached, Trade Undersecretary Adrian Cristobal said in October. “Peace will be President Aquino’s legacy, and he’s paying close attention” to these developments, Casiple said. “The arrest of Benito and Wilma Tiamzon is another victory for the combined efforts between Armed Forces of the Philippines (AFP), Philippine National Police (PNP) and other stakeholders in pursuit of peace and security,” Bautista said in a statement. “We will continue to strengthen our resolve to bring other criminals to justice in honour of the victims of the violence perpetrated by the Communist Party of the PhilippinesNew People’s Army and in honour of our people who deserve to live in peace and developed society.” The conflict has killed more than 40,000 people. The government offered a 5.6 million pesos (US$123,600) reawrd for the arrest of Benito Tiamzon in 2012. Bloomberg News & Reuters
India companies target UE banks Companies in India are cutting borrowing costs by targeting European private banks with the first bonds denominated in the Swiss franc since 2012. Bharti Airtel Ltd., India’s biggest mobile operator, sold 350 million francs (US$396 million) of 3 percent notes last week, while Bharat Petroleum Corp. issued 200 million francs of 3 percent securities in February. Billionaire Sunil Mittal’s Bharti has an average weighted fixed coupon of 10.25 percent on rupee paper and 5.13 percent on dollar bonds, data compiled by Bloomberg show.
Asia’s richest woman steps firmly into mining Australian billionaire Gina Rinehart has secured US$7.2 billion in debt for her Roy Hill iron ore mining project, completing all the funding for a giant mine in Western Australia due to start exporting in late 2015. The 55-million-tonnes a year mine will make Roy Hill Australia’s fourth largest iron ore producer, adding to a looming supply glut built up by bigger rivals Rio Tinto , BHP Billiton and Fortescue Metals Group. “We look forward to becoming a major iron ore producer on an international scale,” Rinehart, chairman of Roy Hill, said in a statement.
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International International support to Argentina in U.S. Court Brazil, France and Mexico are expected to file papers in the U.S. Supreme Court today backing Argentina in its legal battle with bondholders who refused to take part in debt restructurings from the country’s 2002 default, according to a source familiar with the litigation. Lawyers for the three countries will support Argentina’s request that the high court review a court order requiring it to pay US$1.33 billion to “holdout” creditors led by hedge funds Aurelius Capital Management and NML Capital Ltd, a unit of billionaire Paul Singer’s Elliott Management Corp.
Social media clampdown could follow Twitter ban Turkey’s abrupt ban on Twitter Inc. stirred concerns on Friday that the country may pull the plug on other social media and Internet services as it grapples with internal turmoil. Prime Minister Tayyip Erdogan has in the past threatened to block Facebook Inc. and Google Inc’s YouTube as well, though both remained online. YouTube rejected requests by the Turkish government in recent weeks to block certain videos. Some people within Google feared an imminent blackout in the wake of Twitter’s ban, Wall Street Journal cited the people as saying.
New hunting ground for bad loan investors Central and eastern European countries are turning up the pressure on banks to clean up their balance sheets, creating new opportunities for bad loan investors that are seeing returns dwindle in recovering euro zone economies. Keen to bolster fragile economic growth, countries such as Hungary, Poland and Romania are following the lead of their western neighbours and urging banks to sell off bad debts so they can lend more to businesses. “It is not just American distressed funds, but quite a number of potential buyers,” said one mergers and acquisitions (M&A) adviser in Hungary, who asked not to be named.
EU-U.S. energy trade pact Russia’s annexation of Crimea underlines the need for the United States and the European Union to deepen their economic ties via an ambitious trade deal that would also allow Europe to import U.S. gas. U.S. Trade Representative Michael Froman said the rationale “could never be stronger” for a U.S.-EU free-trade pact, despite growing public hostility to it. Brussels and Washington say a trade pact encompassing almost half the world’s economy could generate $100 billion in additional economic output a year on both sides of the Atlantic as well as creating a market of 800 million consumers.
Richest ranking after Crimea crisis Carlos Slim climbs up again to the second ladder
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he 300 wealthiest people on Earth added US$25.6 billion to their collective net worth this week as the U.S. government imposed economic sanctions on several Russian billionaires. Amancio Ortega was the week’s biggest gainer, according to the Bloomberg Billionaires Index. The 77-year-old co-founder of Inditex SA, the world’s largest clothing retailer, added US$2.8 billion to his fortune as the company rallied 2 percent to a one-month high. The company, which owns the Zara chain, said March 19 it plans to open more than 450 new stores this year. Ortega, the world’s fourth-wealthiest person, has a US$63.1 billion net worth. Russia’s richest people staged a comeback after losing more than US$20 billion since the start of the Crimean crisis on February 28, according to the Bloomberg ranking. The country’s 20 wealthiest citizens added US$6.4 billion during the week. “We didn’t see a shooting war break out over Ukraine, which means the stock market has come back as a result,” Walter “Bucky” Hellwig, a senior vice president at BB&T Wealth Management, said by phone from his office in Birmingham, Alabama. “The sanctions were probably less than what was expected.” Moscow’s Micex Index was up 6 percent for the week. The Standard & Poor’s 500 Index rose 1.4 percent to close at 1,866.52 in New York.
Judo partner The U.S. and European Union expanded sanctions levied against Russians tied to Vladimir Putin this week in response to Russia’s annexation of Crimea. Those targeted by the U.S. March 20 included oil-trading billionaire Gennady Timchenko and Arkady Rotenberg, a former judo partner of Putin whose companies won more than US$7 billion of contracts for the Winter Olympics.
Bill Gates, the richest man in the world, and his wife Melinda
Timchenko sold his 44 percent stake in Gunvor Group Ltd., one of the world’s largest commodity traders, to partner Torbjorn Tornqvist, according to a company statement. The move came a day before the U.S. Treasury Department imposed sanctions on the 61-year-old billionaire, who controls a US$7.9 billion fortune. “These are, frankly, actions that don’t cost us anything,” James F. Collins, a Senior Associate at the Carnegie Endowment for International Peace, who served as the US ambassador to Russia from 1997 to 2001, said by phone. “These are kind of a freebie. We are not taking on the danger of reaction that would threaten Boeing’s titanium supply.” Vladimir Lisin, 57, chairman and owner of Novolipetsk Steel OJSC and the country’s 13th-wealthiest person, has lost more than US$2 billion this month after the company fell 15 percent. He has a US$9.9 billion net worth. Alisher Usmanov, Russia’s richest man, lost US$85 million this week. He’s sold shares of Apple Inc. and Facebook Inc. and has bought stakes in Chinese technology companies, Ivan Streshinskiy, head of USM
Generic drugs strategies Israel-based Teva have rallied 23 percent this year
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nalysts at JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. are abandoning their sell ratings on Teva Pharmaceutical Industries Ltd. as the stock posts its best quarterly rally since 2005. All three banks raised their recommendations on Teva, the world’s biggest maker of generic drugs, to neutral from sell in the past two weeks as the stock soared to a three-year high in New York trading. The analysts said the company is making progress in its push to maintain market share of its best-selling drug Copaxone while a boom in mergers and acquisitions in the industry yields deals of as much as US$21 billion.
Shares of Petach Tikva, Israelbased Teva have rallied 23 percent this year. The stock, the biggest investment in billionaire George Soros’s fund, is the third-best performer on the Market Vectors U.S. Listed Pharmaceutical 25 Price Index after trailing the 21 other companies in the measure in 2013. Mounting concern about the company’s leadership and growth outlook has sent Teva’s valuation to 11 times estimated earnings, the second-lowest multiple among 15 global generic drug makers tracked by Bloomberg. “The upgrades are not saying everything is great but, at the valuation it got to” investors are reconsidering their positions, Jacob de Tusch-Lec, who helps oversee
Advisors LLC, the billionaire’s asset- management company, said in a March 14 interview in Moscow. “If you look at the trade restrictions that have been imposed so far, they have been pinpoint specific and are not anything that would restrict trade between Russia and the European Union,” Jack Ablin, chief investment officer at Chicago-based BMO Private Bank, said in a phone call. “It’s a relief rally.”
Slim, Buffett Bill Gates remains the world’s richest person. The Microsoft Corp. co-founder gained US$1.7 billion as the Redmond, Washington-based company reached a 14-year high. The 58-year-old has a net worth of US$79.3 billion, more than 80 percent of which is held outside of the software maker. Carlos Slim regained his title as the world’s second-richest person, a week after he was passed by Warren Buffett. Slim’s America Movil SAB added 2 percent during the week. Slim, 74, has a US$66.2 billion fortune, down 10.3 percent year-to-date, according to the Bloomberg ranking. Bloomberg News
about US$23 billion in equities at Artemis Investment Management LLP in London, said by phone on March 20. “Essentially things have not gotten worse.” Leslie Shribman, a spokeswoman for Goldman Sachs, Lauren Bellmare at Morgan Stanley, and Amanda Smith at JPMorgan declined to comment on their analysts’ reports. Denise Bradley, a spokeswoman for Teva in North Wales, Pennsylvania, didn’t respond to an e-mailed request for comment. JPMorgan has been advising clients to buy Mylan Inc., the biggest U.S. generic-drug maker, since October 2007. The shares have more than tripled since then. Morgan Stanley rated Perrigo Co., a maker of generic over-the-counter medicines, the equivalent of buy on February 4, 2013, before a 50 percent rally. Teva’s next hurdle will be persuading insurers in the U.S. to continue paying for the branded, three- times-a-week shot once a cheaper copycat of the daily version becomes available. Bloomberg News
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Opinion Business
wires
Leading reports from Asia’s best business newspapers
The Bangkok Post An anonymous investor has purchased a villa in Bali for an estimated S$500,000 using bitcoin, the non-regulated, online-only currency. The deal involves the long-term lease of a new 279-square-metre villa at the deLMango Villa Estate and is in accordance with Indonesian foreign ownership laws. It was completed in February through BitPremier, a bitcoin-exclusive trading platform for luxury goods, according to Property Report. NBC News reported that one bitcoin was worth about $610 when the acquisition was finalised and observers believe that it could be the largest bitcoin transaction to date.
The global economy tale
The Korea Herald South Korean President Park Geun-hye will hold summit talks with Chinese President Xi Jinping to discuss issues of mutual concerns in The Hague early Monday, the presidential office announced Sunday. The summit will take place on the sidelines of the third global nuclear summit in the Netherlands city. President Park Geun-hye departs for the Hague on Sunday to attend the world’s nuclear summit and hold bilateral talks with China. Park left Seoul on Sunday for her visit to the Netherlands and Germany.
Philippine Star The Philippines was among the top performers in terms of growth in housing prices worldwide, according to a survey by research house Global Property Guide (GPG). In GPG’s global house price survey for 2013, the Philippines was the fourth top performer with the average price of threebedroom condominium units in the Makati central business district rising 10.56 percent in 2013 following annual increases of 4.85 percent in 2012 and two percent in 2011. “Demand remains strong, as indicated by soaring real estate loans,” the research house said.
The New Zealand Herald The Treasury has finally developed a fair and widely accepted process for the Genesis Energy IPO. The IPO, the Crown’s 25th state owned enterprise sale worth NZ$30 million or more, takes into account the interests of individual investors whereas most of the earlier sales favoured large corporate bidders, overseas institutions and, to a lesser extent, New Zealand institutions. The structure illustrated that the asset sales programme could have been a major success instead of a huge wasted opportunity as far as domestic investors, New Zealand capital markets and taxpayers are concerned.
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Robert J. Shiller 2013 Nobel laureate in economics and Professor of Economics at Yale University
luctuations in the world’s economies are largely due to the stories we hear and tell about them. These popular, emotionally relevant narratives sometimes inspire us to go out and spend, start businesses, build new factories and office buildings, and hire employees; at other times, they put fear in our hearts and impel us to sit tight, save our resources, curtail spending, and reduce risk. They either stimulate our “animal spirits” or muffle them. Visiting Japan on a speaking tour, I am struck by the positive impact of the economy-related stories on people’s thinking and behavior, and also by how fragile that change is. Since Prime Minister Shinzo Abe assumed office in December 2012 and launched his program of monetary and fiscal stimulus and structural reform, the impact on Japanese confidence has been profound. According to the International Monetary Fund, the output gap – the difference between actual and potential GDP – narrowed from -3.6% in 2011 to -0.9% in 2013. Most of the rest of the world lacks a comprehensive, easily understood narrative of positive change similar to Japan’s “Abenomics.” The output gap for the world’s major advanced economies, as calculated by the IMF, remains disappointing, at -3.2% in 2013, which is less than halfway back to normal from 2009, the worst year of the global financial crisis, when the gap was -5.3%. We seem to be at the mercy of our narratives. Ever since 2009, most of us have just been waiting for some story to turn our hearts aglow with hope and confidence – and to reinvigorate our economies. Think of the story of the real-estate boom in the United States and other countries in the first half of
the 2000’s. This was a story not of a “bubble”; rather, the boom was a triumph of capitalist enterprise in a new millennium. These stories were so powerful because a huge number of people were psychologically – and financially – invested in them. Most families owned a house, so they were automatically participating in the boom. And many homeowners, eager to participate even more in the boom and feel like savvy capitalists, bought more expensive houses than they normally would. With the abrupt end of the boom in 2006, that egoboosting story also ended. We were not all investing geniuses after all. It was just a bubble, we learned. Our confidence in ourselves, and hence in our futures, took a hit, discouraging economic risk-taking. Then the financial crisis erupted, scaring the entire world. A story of opportunity and riches turned into one of corrupt mortgage lenders, overleveraged financial institutions, dimwitted experts, and captured regulators. The economy was careening like a rudderless ship, and the sharp operators who had duped us into getting on board – call them the 1% – were slipping away in the only lifeboats. By early 2009, the plunge in stock markets around the world reached its nadir, and fear of a deep depression, according to the University of Michigan Consumer Sentiment Survey, was at its highest level since the second oil crisis in the early 1980’s. Stories of the Great Depression of the 1930’s were recalled from our dimmest memories – or from our parents’ and grandparents’ memories – and retold. To understand why economic recovery (if not that of the stock market) has remained so weak since 2009, we
need to identify which stories have been affecting popular psychology. One example is the rapid advance in smartphones and tablet computers. Apple’s iPhone was launched in 2007, and Google’s Android phones in 2008, just as the crisis was beginning, but most of their growth has been since then.
To understand why economic recovery (if not that of the stock market) has remained so weak since 2009, we need to identify which stories have been affecting popular psychology
Apple’s iPad was launched in 2010. Since then, these products have entered almost everyone’s consciousness; we see people using them everywhere – on the street and in hotel lobbies, restaurants, and airports. This ought to be a confidenceboosting story: amazing technologies are emerging, sales are booming, and entrepreneurship is alive and very well. But the confidenceboosting effect of the earlier real-estate boom was far
more powerful, because it resonated directly with many more people. This time, in fact, the smartphone/tablet story is associated with a sense of foreboding, for the wealth that these devices generate seems to be concentrated among a tiny number of tech entrepreneurs who probably live in a faraway country. These stories awaken our fears of being overtaken by others on the economic ladder. And now that our phones talk to us (Apple launched Siri, the artificial voice that answers your spoken questions, on its iPhones in 2010), they fuel dread that they can replace us, just as earlier waves of automation rendered much human capital obsolete. I had the pleasure of meeting with Abe on this trip. He sticks to the script, telling a story of taking aggressive and definitive action against an economic malaise that has plagued Japan for decades. He inspires confidence; I felt it immediately. Abe is also described as reviving national patriotism, even nationalism. Though I heard none of this from him in my meeting, I think it may be a central part of his story, too. Nationalism, after all, is intrinsically bound up with individual identity. It creates a story for each member of the nation, a story about what he or she can do as part of a successful country. Some of Abe’s most controversial steps, such as visiting the Yasukuni Shrine despite Chinese and Korean objections, only increase the story’s impact. Still, it is not easy for national leaders, even those with Abe’s talents, to manage such stories, just as it is hard for film producers to make a blockbuster every time. No leader can consistently shape the narratives that affect the economy. But that does not rule out the need to try.
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Closing Turkey seeks to enforce Twitter block
New lead for Malaysia jet search
Turkish Prime Minister Recep Tayyip Erdogan’s government moved to enforce a ban on Twitter Inc. yesterday, barring access to the site at service provider levels after Saturday’s blocking of a Google Inc. service used to circumvent the controls. The government stepped up its fight late Saturday by cutting access to Google DNS, which was created in the 1980s to help computers find websites using words instead of numbers. After that failed to stop Turks using social messaging sites, access is being blocked at the service-provider level, Hurriyet said.
More planes began scouring the Indian Ocean yesterday after Chinese satellite photos showing possible debris were backed up by new French images, giving fresh impetus to the hunt for the missing Malaysian airliner. Eight aircraft are searching an area spanning 59,000 square kilometres (22,800 square miles) after China revealed a March 18 satellite shot depicting a floating object 22.5 metres long. The images from French authorities show “potential objects in the vicinity,” Malaysia’s transport ministry said in a statement.
Economy, please
Taiwan leader says protest-hit China trade pact vital for economy
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aiwan President Ma Ying-jeou said yesterday that the island needed to pass a contentious trade pact with China for the sake of its economy, and called on protesters who have occupied parliament in protest to respect democracy and leave. Parliamentary approval of the pact would pave the
way for greater economic integration between the two former geopolitical foes, by opening 80 of China’s service sectors to Taiwan and 64 Taiwan sectors to China. But the demonstrators who have taken over parliament and massed in the surrounding streets for the past five days fear the deal could further swell Beijing’s
economic influence over their proudly democratic island. Speaking to reporters in Taipei, Ma said that Taiwan would suffer economically if it did not sign the agreement with its biggest export destination, China. “I tell you once again, with a responsible attitude, that this is completely for the sake of Taiwan’s economic future,”
said Ma, under whose rule since 2008 Taiwan has signed a series of landmark trade and economic agreements with China. Ma and his ruling Kuomintang Party have promoted the pact, which faces a final review in parliament on April 8, as necessary to maintain Taiwan’s competitiveness
and status as an export powerhouse. They have called it a precondition for Taiwan to join the Trans-Pacific Partnership, a wideranging trade deal among 12 countries, spearheaded by the United States. Ma said he understood the passion of the mostly young protesters, as “the country can only have a future if the youth care about the country and are brave enough to participate”. But he added that with their “illegal” occupation of parliament they were affecting the work of the government, and should withdraw. “Are we not proud of Taiwan’s democracy and rule of law?” Ma said. “If there is no rule of law, democracy cannot be protected -- this is the government’s unswerving basic position.” Taiwan is a former dictatorship that made a peaceful transition to democracy in the late 1980s, and now boasts one of Asia’s most freewheeling democracies. Fights in parliament are common and protests are almost a daily occurrence. The main opposition Democratic Progressive Party has said it fears the pact will hurt small service companies and damage Taiwan’s economy. But it lacks the numbers to block the bill’s final passage. Reuters
Russian threat, NATO
Sin Fong residents occupy street
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ATO’s top military commander said yesterday that Russia had a large force on Ukraine’s eastern border and he was worried it could pose a threat to Moldova’s separatist Transdniestria region. The warning comes a day after Russian troops, using armoured vehicles, automatic weapons and stun grenades, seized the last military facilities under Ukrainian control in Crimea, the Black Sea peninsular that Russian President Vladimir Putin formally annexed on Friday. “The (Russian) force that is at the Ukrainian border now to the east is very, very sizeable and very, very ready,” NATO’s Supreme Allied Commander Europe, U.S. Air Force General Philip Breedlove, told an event held by the German Marshall Fund think-tank. Russia’s seizure of Crimea, which has a majority Russian population, after the ousting of Ukraine’s proRussian president by mass protests has triggered the worst East-West crisis since the Cold War. The United States and the European Union have targeted some of Putin’s closest political and business allies with personal sanctions and have threatened broader economic sanctions if Putin’s forces encroach on other eastern or southern parts of Ukraine with big Russianspeaking populations. Reuters
ozens of people who used to live in residential project Sin Fong Garden yesterday occupied part of Avenida do Almirante Lacerda outside the building. They demanded to meet with Chief Executive Fernando Chui Sai On and Secretary for Transport and Public Works Lau Si Io to discuss the revamp plan and relevant accountability. They were evacuated from Sin Fong in October 2012 as the building was in danger of collapsing but are complaining that the government has yet to present solutions. They threaten to occupy the street indefinitely until the government responds. Legal Affairs Bureau Director André Cheong Weng Chon visited
the demonstrators yesterday evening, saying Mr Lau would meet with them in government offices at 8pm. The protesters were unhappy with this arrangement, however, saying
that they would boycott the meeting. Avenida do Almirante Lacerda remained inaccessible yesterday night when this newspaper went to press.