MOP 6.00 Closing editor: Alex Lee Publisher: Paulo A. Azevedo Number 527 Monday April 28, 2014
Massive profits
Year III
Sands China earnings rose 50 percent in the first quarter of this year after mass market gamblers from mainland bet more money on its properties. Company CEO Sheldon
Adelson wants to attract longer-stay clients to Macau to boost revenues from hotels, retail and entertainment. Investors are expecting a golden quarter for major casino operators Page
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Smartphone applications will be the first line of concern for the data protection watchdog. In an interview with Business Daily, deputy coordinator of the Office for Personal Data Protection reveals that guidelines for public and private usage will be issued later this year
HSI - Movers April 25
Name
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GDP to dip
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Flying for the future
Reuters’ poll shows the country’s gross domestic product is likely to grow 7.3 percent in 2014. Lower than the 7.7 percent of 2013. Low results that could mark the weakest showing in 24 years
The airport wants to save as much as 3.7 million patacas a year by reducing annual power consumption to 2.8 million kWh. Cutting carbon emission levels by 20 percent and increasing waste recycling and treatment by 180 percent in 2018 are some of the targets of the airport’s five-year environmental plan
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China Resources Po
0.81
CITIC Pacific Ltd
0.43
Lenovo Group Ltd
0.00
PetroChina Co Ltd
-0.34
China Merchants Ho
-0.40
New World Develop
-2.69
Galaxy Entertainme
-2.81
China Resources Lan
-2.94
Sands China Ltd
-3.15
Sino Land Co Ltd
-3.59
Source: Bloomberg
I SSN 2226-8294
INTERVIEW
Race to be number 1
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Mercedes Benz sales have grown 66 percent year-on-year. In an exclusive interview with Business Daily brand retailer Zung Fu General Manager says the target is to be the number one luxury car seller in Macau. Rental and property prices are a real obstacle to expansion but nevertheless the company is preparing to enlarge the current showroom in August Pages 6 & 7
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April 28, 2014
Macau Portuguese Parliament approves presidential visit
The Portuguese parliament unanimously approved an official presidential visit to China. The visit includes Macau. Correspondingly, President Aníbal Cavaco Silva is due in China from May 11th to 19th following the invitation from his peer Xi Jinping. This is the first official visit by any Portuguese President to China for practically a decade following President Jorge Sampaio’s visit in 2005. Cavaco Silva’s trip also coincides with the 35th anniversary of Portugal establishing diplomatic ties with the People’s Republic of China.
Watchdog growing teeth The data protection watchdog will issue guidelines for handling data involving the use of smartphone applications amid rising concerns over such usage Tony Lai
tony.lai@macaubusinessdaily.com
Ken Yang Chongwei
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rotection of personal data in the usage of smartphone applications will be one of the major tasks for the local watchdog, which could release relevant guidelines in the second half of this year. The Office for Personal Data Protection says that they are also engaged in productive dialogue with counterparts elsewhere to tackle multijurisdictional cases. Ken Yang Chongwei, deputy coordinator of the Office, told Business Daily in an interview, “[Smartphone] applications are only the new creations of the past few years… and many app developers are not really concerned about data protection and privacy as the sector has grown so quickly.” “Many users also don’t really care about such [privacy issues], so this has become one of the conspicuous issues we have paid attention to.” An international conference held in Warsaw in September, gathering data protection and privacy commissioners from across the globe, estimated that there are over 6 million apps today and that the figure is increasing by more than 30,000 a day. There are two types of
complaint and enquiry the local watchdog typically receives regarding apps – one concerns direct marketing messages users receive via social apps like Whatsapp, and another is that companies unscrupulously use apps to harvest user information. The Office revealed in an annual review in February that it received 18 complaints in 2012 and last year regarding mobile and tablet apps.
Rules formulated Addressing the rising trend, Mr Yang said: “Right now we’re collecting information about the development of apps in Macau and we have to issue a guideline in the second half of this year, for both public bodies and private companies in Macau, about data protection in such area. “For example, [apps should enable] the user to be aware of what information it will collect from them when they use it and whether the information will be transferred to a third party.” The Office has so far released 11 guidelines on data protection in different areas, reminding entities to avoid breaching the city’s data protection law of 2005.
The watchdog will also increase public awareness of data protection safety and security regarding apps via more promotional campaigns this year, its deputy coordinator added. Apart from the advanced technology, globalisation also imposes challenges upon data and privacy commissioners, as a single case of data privacy breach may involve more than one jurisdiction. Earlier this month, Macau’s Judicial Police arrested the operator of a website – naming and shaming Macau casino gamblers for alleged bad debts – for breaching data protection laws. The website first came to public attention in August but it took over eight months for authorities to arrest the suspect as the server of the website is located in Singapore.
Legal status Commenting in general on cases, Mr Yang said: “Regardless of whether the entity is a public body or private firm, regardless of location or the means it uses, it must be obliged to the local data protection ordinance if it has handled personal data here.
Regardless of whether the entity is a public body or private firm, and regardless of the location or the means it uses, it must be obliged to the local data protection ordinance if it has handled personal data here Ken Yang Chongwei, deputy coordinator of Office for Personal Data Protection
“So I can’t see why the public say we have no solution [for such cases]. It is surely more difficult [for our investigation] as we cannot directly collect evidence from other places; but we can still carry out [investigations] via cooperation with our counterparts.” “Other jurisdictions may also conduct their own investigation after receiving information [from us],” he added. The deputy coordinator stressed that they have strengthened cooperation with other jurisdictions for data and privacy protection. “We have done a lot of work but some work we cannot reveal too much about” due to the sensitivity of the issues, he added. Established in 2007, a bill concerning the organisation of the watchdog has also been submitted to the Executive Council for review, giving the Office the legal status of statutory body. Mr Yang declined to elaborate on details of the bill and timetable, as it is still up for review. He only said that this can help in international cooperation with the recognised status of statutory body.
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April 28, 2014
Macau
A billion quarter for Sands China Profit jumped 50 percent to US$938 million in the first quarter to beat investors’ estimates, with mass market gamblers from the mainland playing a decisive role. Macau casino operator predicts more revenue in the future with Cotai strip expansion and increased length-of-stay visitors Alex Lee
alex.lee@macaubusinessdaily.com
S
ands China reported a record first quarter profit beating market expectations after revenues from mass market tables continued to rise above 50 percent as more gamblers from mainland China bet on the casino operator’s resorts such as The Venetian and Cotai Central. Sheldon Adelson said he hopes to increase profits in the territory with longer-length stay visitors and improved infrastructure. In the first quarter of this year, the Macau unit of Las Vegas Sands reached an adjusted property operating profit (earnings before interest, taxes, depreciation and amortization) of US$938 million, 49 percent more than a year earlier (US$624 million). The performance trumped the analysts’ consensus of US$937 million. Mass market gamblers were decisive in the quarter’s performance. Revenues from this segment totalled
US$1.34 billion, an increase of 54,2 percent. In the last 12 months profit generated by the mass market rose 56 percent to US$2.44 billion from US$1.56 billion. This growth added US$900 million to Sands China profit, reported the company. “We continue to grow faster than the Macao market in mass table games, the most important and profitable table segment. Our growth rate was 40% faster than the Macao mass market as a whole”, said Sheldon Adelson, the US billionaire chairman of Sands in a conference call on Friday.
The Venetian leading Sands China net income increased 66 percent to US$754 million and revenues climbed 36 percent to US$2.72 billion in the first quarter. In terms of gross gaming revenue, the company says it is leading the Macau market with a 23.2 percent share.
The soaring of Macau casino earnings has lifted the profits of the US parent company Las Vegas Sands. Earnings, excluding onetime items, jumped to US$97cents a share, above investors’ estimations (US$94 cents), with sales growing 21 percent in the quarter.
In the first quarter, The Venetian Macau achieved the largest share of revenues amassing US$1.2 billion, 35.8 percent more than a year ago. Cotai Central increased its revenues by 40.9 per cent to US$827 million, followed by Four Seasons with US$370 million. Sands Macau revenues remained
flat at US$314 million. “In Macau, we delivered record financial results, with strong growth and operating momentum reflected in every segment of our business. We welcomed more than seventeen million visits during the quarter to our Macau property portfolio”, Mr Adelson told investors.
Longer length-stay visitors Greener times for Macau operators needed in Macau, says Adelson W T o investors, Sheldon Adelson reiterated his confidence that Macau gambling market will continue to fuel Sands group profits, mainly through three channels: more casinos, more mainland gamblers and more visitors extending their stay in the territory. Sands China aspires to increase the utilization of its current 9 thousand suite and hotel rooms for mass gaming costumers in Macau and hopes to deliver a total of 13 thousand rooms when the Parisian Macau and the fourth tower in Sands Cotai Central opens in 2015. The flow of mainlanders to Macau is increasingly patronising Sands casinos. In the first quarter, Chinese visitors from outside Guangdong province rose 21 percent from a year earlier. “We believe future growth will be enhanced by governmental
infrastructure investments in Macao, the Special Economic Zone of Henquin Island and throughout China. These investments will enable more people to more easily reach Macao and will contribute to Macau’s evolution as the leading business and leisure destination in Asia”, stated Sheldon Adelson in a conference call. With more clients coming from faraway places, Sands China expects to attract more revenues in the future as the latter spend more on dining, retail and entertainment. “We believe increasing length of stay in the years ahead will also contribute to growth’, the chief executive officer said. Macau continues to struggle to retain visitors more than two days in the territory. Today, the average length of stay is 2.1 days, far below Hong Kong’s 3.7 days, Sands China reported. A.L.
ith the first quarter earning season starting, investors are confident that major casino operators in Macau will show in the coming weeks robust profits and revenues with the support of mass market gamers, more tables available and wider revenue margins in rooms and suites, a Telsey report finds. After Sands China, MGM is the next in line to deliver its first quarter results on April 29. Telsey estimates an operating profit at property level of US$648 million dollars, 16.2 percent more than a year ago (US$557 million) with revenues climbing 13.2 percent to US$2.6 billion. The mass market is the main driver of growth, with its expected revenues set to increase almost 50 per cent, after the gaming operator has suffered less volatility in this segment compared to its competitors. The revenue per room should be one of the highlights for MGM this quarter, after CEO Jim Murren said he’s expecting a 10 per
cent rise. For Melco Crown, earnings in the quarter should peak US$409 million from US$246 million in the previous year, a 46.7 percent climb. The roaring performance of City of Dreams will be pivotal, says the report, supported by 43.1 percent mass market revenues surge. The gross revenues should accelerate 14.6 percent to US$1.5 billion in the first three months, lagging behind the market growth of 19.8 per cent. New marketing strategy and a floor expansion could boost Wynn’s results as Macau’s performance continues to offset lower gains in Las Vegas. Telsey waits for a US$477 million first quarter operating income in line with market consensus (US$478 million) and an 5.8 percent improvement from a year ago. Total revenues are set to advance 13.2 percent to US$1.56 billion surpassing investor’s predictions of US$1.48 billion. A.L.
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April 28, 2014
Macau
Smoke to clear by June: govt
Pansy Ho to kick off G2E Asia
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he 8th Global Gaming Expo Asia (G2E Asia) to be held from May 20 to 22 will feature MGM China Holdings Ltd co-chairperson and executive director Pansy Ho Chiu King as keynote speaker on the first day of the show at The Venetian Macau. In addition, the speaker lineup at the event will feature other industry leaders, including Gamal Aziz, president of Wynn Macau Ltd; Edward Bowers, senior vice president, Global Gaming Development, MGM Resorts International; Grant Bowie, chief executive officer, MGM China Holdings Ltd; Grant Chum, senior vice president, Global Gaming Strategy, Las Vegas Sands Corp.; Mike Mecca, president and CEO, Galaxy Entertainment Group Ltd; Kelvin Tan, chief of international marketing and executive vice president, Melco Crown Entertainment Ltd; and Will Shen, Vice President of Asia Development, Caesars Entertainment.
he government will announce its technical guidelines for the installation of smoking lounges in casinos by June or July this year at the soonest, Health Bureau director Lei Chin Ion told media on the sidelines of a Legislative Assembly meeting on Friday. For the upcoming technical guidelines to be launched, Mr Lei said his Bureau is going to discuss the approval criteria for the establishment of smoking lounges with the public works departments and Fire Services Bureau. Under the partial smoking ban in casinos, those who have applied for smoking areas – permissible on up to fifty percent of casino floor space - need to submit a monthly air quality report to the Health Bureau. Speaking to media on Friday, Mr Lei said that allowing smoking
lounges or cabins to be installed on mass gaming floors without gaming facilities should achieve better effects in terms of air quality control than current smoking control measures. Existing smoking control measures, however, shall continue to apply to VIP gaming floors, the director said.
The Health Bureau head added that the installation of smoking lounges on the mass gaming floor area should be mandatory for the 14 gaming establishments that failed the second round of air quality tests held in April and May last year. S.L.
Ka-Ho Tunnel construction to start in Q3 T he principal construction of the 500-metre long Ka-Ho Tunnel - a project that will link the east of Cotai to the northeast tip of Coloane island - is expected to start in the third quarter of this year and last for at least 2 years, the Infrastructure Development Office announced on Friday. The Office has accepted eight of nine bids cast for the tunnel construction project, which cost
the project from over 254 million patacas (US$31.8 million) to about 540 million patacas. The proposed construction period ranges from 900 days to 930 days. The two-way tunnel, comprising four lanes, will have its northern entrance start near the Rua da Central Térmica de Coloane in eastern Cotai. The tunnel will be connected to the area near Ka-Ho Port, the northeastern tip of Coloane island
where Macau Oil Terminal and Macau Cement Manufacturing Co Ltd are located. Currently, cars have to go through Estrada do Istmo, and the narrow Estrada da Barragem de Ká Hó, Estrada do Altinho de Ka Ho to traverse the urban zones of Coloane and Taipa to Ka-Ho. The tunnel is expected to cut travel time for the said distance by 10 to 15 minutes. S.L.
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April 28, 2014
Macau Govt to spend MOP376.2mln on healthcare vouchers The government is expected to spend around 376.2 million patacas in this year’s healthcare voucher programme. During a briefing at the Executive Council, spokesperson Leong Heng Teng announced that the subsidy for this year had increased to 600 patacas from last year’s 500 patacas. For the whole of 2013, only half of the printed vouchers were used, totalling 140.4 million patacas. The annual healthcare voucher programme began in 2009 and subsidises medical expenses incurred at government-approved private clinics, including dental clinics and practitioners of Chinese traditional medicine. The vouchers can be printed as of May 1 and used until August 31, 2015.
Green plan in the wings
Continuing education subsidy increased The Macau International Airport has produced a five-year to MOP6,000 environmental plan that could reduce carbon emissions The government has increased the continuing education subsidy to 6,000 by 20 percent by 2018 patacas per person from the previous 5,000 patacas. Executive Council spokesperson Leong Heng Teng said the new programme will run from 2014 until the end of 2016. This will cost the government 700 million patacas over the next two years, an increase from the previous 500 million patacas of the past three years. Macau residents aged 15 or above are entitled to spend the subsidy on government-approved courses or examinations. The programme was initially set for three years but has been extended for another two. There had been concerns that the new programme would not cover driving lessons but the government chose to leave that unchanged. Mr Leong said that this subsidy helps support locals and students to improve their skills.
Non-resident workers total 145,692
Sara Farr
sarafarr@macaubusinessdaily.com
Airport’s first electric vehicle
C Some 145,692 non-residents worked in Macau as at the end of March, a 5.7 percent increase over the total recorded at the end of 2013. Official statistics released by the Human Resources Office show that imported workers from mainland China accounted for around 63 percent of the total at 92,228, followed by the Philippines with 19,821 and Vietnam with 12,642. Analysed by industry, the majority of these non-residents work in hotels and restaurants. In addition, there were 334 Americans in Macau at the end of last month, more than half of whom work in the recreational, cultural or gaming sectors. There were 281 non-resident workers from the United Kingdom, 239 from Australia and 140 from Canada. The majority of the latter work in the education sector, according to the data.
utting carbon emission levels by 20 percent and increasing waste recycling and treatment by 180 percent in 2018 are some of the aims of the new five-year environmental plan put together by Macau International Airport. Once all measures are in place, the Airport could save as much as 3.7 million patacas a year by reducing annual power consumption to 2.8 million kWh. While environmental projects started a few years ago there was never any long-term plan until now, said Sandro Kou, acting director of the infrastructure department of Macau International Airport Co Ltd (CAM). The plan, announced on Friday, is divided into three stages between 2014 and 2018. The first stage runs through the rest of this year and comprises mainly detailed planning and preparation works. Stage two is the implementation of such works, and will be enacted next year through 2016. In the third and final stage, spanning 2017 and 2018, an assessment will be conducted on the efficiency of the Airport’s environmental enhancement.
Recycle corner at the departure terminal
Another objective is to secure Airport Carbon Accreditation by 2018, for which Macau International Airport has already applied and is awaiting a decision. Only seven airports in the Asia Pacific region are duly accredited, three of which are in Australia. Abu Dhabi in Dubai and Singapore are two other hubs that have also secured Airport Carbon Accreditation. Currently, all lighting in the MIA terminals and runway has been changed to LED, the air-conditioning
Sandro Kou
system has been retrofitted, and the baggage handling system upgraded. According to the plan, the Airport will develop an intelligent metering and monitoring system in the passenger terminal building, upgrade its integrated broadband mobile system and optimise control and energy consumption. In addition, a new solar shading device and high performance glazing is in place in the departure terminal. These feature images of tourist and historical sites in Macau, without passengers even realising its ecofriendly nature. Mr Kou said he hopes that the annual recycled and treated waste can reach 51,900kgs in 2018. The feasibility of using natural gas at the Airport will also be explored, as will the replacement of the Airport’s fleet of cars with eco-friendly vehicles. Currently, five hybrid cars and one electric car serve the Airport. “Every year, there are renewals of equipment. This (plan) is different,” Mr Kou said, declining to announce, however, how much the Airport is investing in the five-year environmental plan.
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HOSPITALITY More of the same The number of visitors arriving in Macau in the first quarter of this year was up by 8.7 percent relative to the same period last year. This figure represents a significant rise when compared with the similar figure in 2013. It stood then at just 1.9 percent. Overall, the total number of visitors in the last four quarters ending in March increased by more than 1.7 million visitors, compared with the previous four quarters. That is a rise equivalent to 6.1 percent. These figures suggest that growth in the number of tourists is kicking in again, after a period of slower growth for most of 2012 and in the beginning of 2013. Mainlanders mostly feed the rise in visitors. The respective homologous growth in the first quarter reached a value of 17.2 percent, corresponding to an addition of more the 2.3 million visitors in the last four full quarters, compared to the previous four.
Mercedes moves up a gear Considering the size of the territory, the healthy condition of the economy, the fact that local consumers are very status driven and that European brands are overcoming Japanese marques, luxury cars are selling more than regular vehicles. In an interview with Business Daily, the general manager and head of Zung Fu Macau - the exclusive retailer of Mercedes Benz here - says this is a general trend for the car industry as a whole as well as for his own brand. Having witnessed a 66 percent growth year-on-year of Mercedes Benz sales in the territory, Pawin Sriusvagool says that Zung Fu wants to be the number one luxury car seller in the territory. As a result, he told Business Daily that Zung Fu is already preparing to expand the current Mercedes Benz showroom in Macau, in August, in order to be able to display more models of the European brand. Mr Sriusvagool added, however, that despite being optimistic about the growth of Mercedes Benz sales rental and property prices represent real obstacles to the company’s expansion in the territory. The future will depend on how the local economy evolves. Luciana Leitão Photo by Manuel Cardoso
You’re planning a renovation of the Mercedes Benz showroom. Is this a sign that business is going well? This showroom has been here since 2008. We’re planning to renovate the showroom and it will be ready around August. We need to expand because we have many more new models coming up and we need space to display cars; here we can only display eight. After renovation, we’ll be able to display 12 cars. It’s expanding, it’s growing and we have a wider product range. Also, Mercedes Benz has a certain corporate identity, which we need to update from time to time. In this case, we’ll change the colour and the floor but the focus will be on improving overall customer experience. These changes are making Macau’s tourism increasingly dependent upon arrivals from China, a trend that is consolidating. The combined share of the top three sources of visitors has been around 90 percent for an extended period but that share is essentially sustained by China. For the last six quarters, the proportion of mainlanders in the total number of arrivals has exceeded the 60 percent threshold. Conversely, growth in the two next biggest sources of visitors has been in negative territory for most of the period shown here. That was the case for both Hong Kong and Taiwan in seven of the last eight quarters. Their combined share of the total number of visitors dropped from more than one third in early 2010 to less than one quarter currently.
5.17 mln
number of mainland visitors in the first quarter
Are you satisfied with the sales growth rate? We’ve been in Macau for 21 years. In the first year, we sold about 50 cars; last year we sold around 1,200. Why the boost in sales? Mainly we have the Macau economy to thank - the growth of the gaming industry has a spillover effect on different parts of the economy. Also, we thank the wealth of the population of Macau. Thirdly, it’s because Macau has an environmentally friendly tax, which allows buyers to enjoy a tax reduction of up to HK$60,000. Fourthly, Mercedes Benz has a new generation of compact cars - and for these the price is very competitive, enabling many customers, mainly the young generation in Macau, to be able to purchase a Mercedes. Also, we are slowly overcoming
Within those 1,213 cars, how many were high end? About 40 percent were entry models and the rest high-end models.
In 2013, the overall market grew 9 percent but the luxury market grew 43 percent, almost fivefold. Last year, we sold 1,213 cars, which is equivalent to about 66 percent growth year on year
the Japanese segment because our pricing is very competitive. We see that we have conversion from Japanese buyers (Toyota and Honda) and that they’re interested in our new entry models. Right now, European brands have already overtaken Japanese brands in Macau. Why has this happened? Consumers in Macau are very status driven - it’s a small territory, and the European brands project a stronger status symbol. Everything combined allows the luxury market to grow exponentially compared to the overall market. In 2013, the overall market grew 9 percent but the luxury market grew 43 percent, almost fivefold. For Mercedes Benz, we sold 1,213 cars last year, equivalent to about 66 percent growth year on year.
Who are your clients? Most Mercedes Benz clients are local business owners. Secondly, we have the second-generation of wealthy people - rich people, children of business owners. Thirdly, the Mainland Chinese they look for cross border vehicles. Fourthly, all the major casinos buy vehicle fleets. For example, last year, we launched the S Class - almost every single casino in Macau uses the S Class as its main transportation, with four or five seats. The seven-seater fleets, however, are still dominated by Toyota and Nissan. What percentage of your sales come from casinos? It’s becoming less and less, proportion wise. Right now, probably 90 percent of our sales are going to people either living in Macau or living in Mainland China but I would say the majority goes to people living in Macau and working in Macau, so the cars go directly back to the economy. As for the casinos, it’s becoming less and less, even though we are number one in the casino market in terms of luxury sedans. The casinos have a purchase policy: some casinos change their cars every three years, while others change every six years, and when they buy they buy 10 or 20 units. We are selling about 1,200 cars, so you can see the proportion. At one point, casinos accounted for 30 percent of our overall business but it’s becoming less and less because we’re selling more to locals.
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April 28, 2014
Macau In Macau, it’s becoming very difficult to park due to the lack of parking spaces. Has this trend had any impact on Mercedes Benz sales in the territory? Last year, Mercedes Benz sold around 5,000 cars in Hong Kong, while in Macau we sold about 1,200 but Macau is 40 times smaller than Hong Kong. The size of the road is one of the major hindrances in the growth of the car business but it all comes down to how the government will tackle the situation. Let’s say that there are too many cars on the road, lack of parking spaces, too much pollution, and the government decides to issue some rules or regulations to limit the number of cars on the road. This would definitely have a big impact on the overall car business, not just Zung Fu business. Up to now, have you seen any impact? The government always talks about the traffic situation and they want to improve the situation with the light railway transit [LRT]. The LRT is one solution but it will not solve the entire problem. Look at the way Macau people live: in small streets, which the LRT cannot reach. It means they will still rely on their own transportation system and there are not enough buses and taxis on the road. These are the factors that may force Macau residents to buy a car. Regarding electric cars, is Mercedes Benz aiming to launch any model in Macau? In terms of Zung Fu Macau, we aren’t introducing any electric models this year. Our competitor [BMW] has already introduced this but from the manufacturer’s perspective electric cars and alternative energy vehicles are becoming more important because of the impact on the environment. Right now, we have a few models available and running that are electric. We also have a sports car which is purely electric in the B Class. Major obstacles for the electric car include the fact that you need a power station to charge your car, the length of time cars can last [between charging] on the road and the maximum speed of the car. I’d say putting all these together we’re only at the beginning. We’re at the beginning in Macau? Probably in the whole world. If the manufacturer can solve all these three factors, the popularity of the electric car will increase. Secondly, the government is very keen to promote this, so it could come up with a scheme that makes the electric car more affordable and I’m sure that this will have an impact on demand. If the government wants to push for this, it’s going to have to make the price of electric cars very attractive for the local population.
Doubling the workforce Regarding the possibility of the recognition of Mainland Chinese drivers licences in Macau, do you believe that if that goes forward it might impact your business? This is a politically sensitive question. I don’t know if that’s going to happen, it all depends on the government. If they’re allowed to drive here, do these people have enough purchasing power to buy our cars? Are they legally allowed to own the cars? If both answers are yes, then of course it would
Pawin Sriusvagool
luxury segment represents a higher proportion of sales than in Macau. You can see the difference in the buyers. Maybe we have a slightly younger group of customers, proportionally, compared to Hong Kong.
Look at the way Macau people live: in small streets, which the LRT cannot reach. It means they will still rely on their own transportation system and there are not enough buses and taxis on the road; these are the factors that may force Macau residents to buy a car
have a positive impact on us. What we need to think about further is that if they buy a lot of cars, a lot of cars would be running on the road and this would create further traffic and pollution problems. Will the government come back and do something to stop this? If that were the case, of course it would have a negative impact on us. There’s no clear-cut answer to your question; it all depends on how the government want to approach this situation. Is there a big difference between the Macau and Hong Kong market regarding what concerns the type of buyer and the way the market works? For the Macau market, small cars tend to do better because the roads are narrower. For Hong Kong, I’d say it’s a pretty mature brand. This year, in Macau the European brands overtook Japanese cars but it happened in Hong Kong a few years ago. In Hong Kong, the big
Do you see potential for growth in Macau? I’m quite hopeful about the business of Zung Fu and Mercedes Benz, given we have a very good product life cycle. We’re at the point where we have all the new models either being launched or about to be launched, meaning that product-wise we have a greater advantage compared to our competitors. From the retailer perspective, we’re doing different things to improve our business operation. We will have expanded from 50 to 100 people by the end of the year. We’re hiring a lot of locals to work for our company. We’re training our workforce so that they’re very equipped. In terms of service, we’re doing lots of things to expand our service capability - we moved our facility two years ago and by doing so customers don’t have to wait so long to have their car fixed. As for the showroom, we’re going to expand, so that we can more cars on display as well, and can improve the overall customer experience. We have the product, the facility and the people to do business and we’re also changing the way the process is being done. How much do you expect to increase your sales in a few years time? Last year, it was 66 percent but I don’t expect this year’s growth to be as big as last year’s. But I’m definitely aiming at double-digit growth for the period I’m GM. Secondly, we need to be number one in the luxury market, ahead of our competitors. Competition is tough here. How do you plan to overcome it? Yes, but it all comes down to the fact that we need to understand customers. We need to provide the best service and the best product. In this case, Mercedes Benz is the best car in the world. The compact car owners will grow with our brand. In the next five years, when they grow older, they will switch to C, E or S, and that is the strategy Mercedes Benz is undertaking worldwide.
With the Cotai development picking up in 2016, do you expect a sales boost? Definitely it will have a good impact on us. And if casinos continue to choose Mercedes we can increase our sales volume, especially for the S Class. If the Cotai project also expands business and creates more jobs for locals, people will be getting wealthier and will be able to afford more Mercedes Benz, so it will have an impact on us. The problem for us of expansion is availability of land and the cost of rental and land. If we were to expand to another showroom, we need to think carefully where and how much, because rental and property prices have increased. So, you believe the demand will be there but you might have difficulties expanding the business? All businesses in Macau will experience the same situation. In Macau’s case, it is more about demand pulling everything else - inflation, property prices and salaries. We sell more cars, people are getting richer but we’re also paying more operating costs. Everyone is experiencing the same thing. Is Hengqin island a solution for expansion? It’s an interesting subject because it provides a platform for Macau to grow further and to diversify its economy. But what we’re not sure about is whether all cars from Macau will be allowed to drive there. Let’s say we set up a business in Hengqin - can we sell there? And are they allowed to come to Macau? This is not yet clear. Will it belong to China 100 percent or will it be part of Macau? These are all questions that we need answers to before we can start moving forward. Could you have grown more if in Macau there weren’t these problems with operating costs? We have all the key ingredients that will allow us to grow in the double-digits but things can change all of a sudden. Government policies can disrupt our business. Also, now the Macau economy relies a lot on tourism from China; will China’s economic slowdowns have an impact? Internally, we’re prepared for growth - but outside factors are things we cannot control.
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April 28, 2014
Macau Sri Lankans demand govt thwart Packer casino plans Hundreds of members of Sri Lankan opposition parties have marched through Colombo, demanding that the government stop Australian gaming tycoon James Packer from building casino-resorts in the country, Reuters reports. The news agency says the protest march coincided with the beginning of a debate in parliament about whether to approve projects by Mr Packer’s Crown Resorts Ltd worth more than US$1.3 billion (MOP10.38 billion). The government is in favour of the projects, but religious leaders, opposition parties and some members of the governing coalition are against. Mr Packer is co-chairman of Macau casino operator Melco Crown Entertainment Ltd.
4,500 licensed real estate agents
Hengqin video project a virtual reality Hong Kong conglomerate has teamed up with U.S.‑based Major League Gaming to build an arena dedicated to video game competition A total of 1,485 provisional real estate agent licences and 4,538 real estate agent licences have been granted as at April this year, the government announced on Friday. A little less than 40 licences were withheld because the agents and agencies were working from a residential building and other properties not designated for business. The government is introducing slight amendments to the Real Estate Agents Law, less than a year after it came into effect on July 1, 2013. With the new amendment, agents and agencies established before the law was first drafted in November 2012 are given a five-year provisional licence. Those whose agencies or outlets are on a property deemed residential will be given a provisional licence for three years. “This is to better regulate the real estate market here,” Executive Council spokesperson Leong Heng Teng explained.
Macau prepares for smooth APEC conference
The SAR Chief Executive’s spokesperson, Alexis Tam, led a government delegation last Friday to Sanya, Hainan province, to meet with the National Tourism Administration of China, charged with discussing the minutiae and smooth organisation of the 8th Ministerial Meeting of APEC Tourism (Asia Pacific Economic Cooperation) to be held in Macau in September. China will be the host country after 13 years. Both parties discussed various topics, including hosting arrangements, media, security, promotion and other preliminary plans in addition to defining activities reaching positive results. APEC - currently with 21 members - was established in 1989 to promote the regional economic cooperation of the Asia Pacific sphere.
Stephanie Lai
sw.lai@macaubusinessdaily.com
H
engqin New Area, Macau’s immediate neighbour dedicated to developing its tourism credentials, will see its first-ever video game stadium on the island, thanks to a partnership between members of Hong Kongbased conglomerate Lai Sun Group and U.S. e-sports company Major League Gaming (MLG), Inc. Lai Fung Holdings Ltd and eSun Holdings Ltd, both part of the Lai Sun Group, jointly informed the Hong Kong Stock Exchange on Friday of their plan to build the first-ever MLG Gaming Arena in the “V-Zone”, a video game destination designed as the centrepiece of Lai Fung’s 18 billion yuan (US$2.8 billion) “Creative Culture City” project on Hengqin Island. Lai Sun Group is chaired by prominent Hong Kong businessman Peter Lam Kin Ngok, who is concurrently chairman of the Hong Kong Tourism Board. The arena will be designed to showcase regular video gaming competition geared to both live audiences and online viewers of Major League Gaming’s digital broadcast site MLG.tv. The arena will seat 15,000, Bloomberg Businessweek reports. The business news outlet also noted that Lai Fung had contacted Major League Gaming last year to ask if it would run the Hengqin arena and offer to fund it completely. The wider “V-Zone” project, aside from featuring the video game arena, is also slated to include an exposition area for game developers to feature new and upcoming games, creative workspaces, gaming themed restaurants and retail shops, the Friday filing noted. V-Zo n e i s i n ten d ed to b e developed in Phase 1 of the Hengqin
Creative Culture City development, jointly with Lai Fung (80 percent) and eSun (20 percent), with a capital commitment of no less than 3 billion yuan. Phase 1, including the arena, is slated for completion in 2017, the filing said. The idea for the V-Zone was conceived about a year ago when Hong Kong-based property developer Lai Fung approached New York-based arts and culture firm AEA Consulting, Bloomberg Businessweek reports. Through a subsidiary, Lai Fung and eSun acquired land occupying over 130,000 square metres in the heart of Hengqin with a bid of 523.3 million yuan last year in order to develop the 3 billion yuan project, both companies jointly told the Hong Kong Stock Exchange on September 25. At the time, the filing noted that the acquired site is “zoned or planned for cultivating and developing cultural and creative industries in Hengqin”, which may also include a specific designated zone for small and medium cultural and creative enterprises from Macau.
cultural art workshops, live performances, cultural art product exhibitions and trade fairs. While Lai Fung is the investment arm of Lai Sun Group in China engaged in property projects, eSun is engaged in the operation and investment in media, entertainment, music production and distribution, television programmes, films, and cinema operations.
3 billion yuan
Capital commitment
Creative Culture City The wider gaming-themed park Creative Culture City is to be developed on a one square kilometre site, for which Lai Fung hopes to attract both tourists as well as companies that would build offices in the area. As early as in September 2011, Lai Fung and eSun announced an agreement reached with the Hengqin administration to pursue the “Creative Culture City” project, which includes but is not limited to film and television entertainment, music, new media, creative designs,
The eSun enterprise was one of the original shareholders in the ownership of the land in Macau where Studio City resort is being built. The company later dropped its plans to develop film and entertainment facilities on the land because of a shareholder dispute. It sold its stake of 60 percent to gaming company Melco Crown Entertainment Ltd for US$360 million (2.9 billion patacas).
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April 28, 2014
Greater China
Yue Yuen resolves US$27 million strike The strike began after a worker checked the balance on his social security account and found the company had been underpaying its contribution
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he company, which makes shoes for clients including Adidas AG and Nike Inc., said more than 80 percent of the 45,000 workers at its Gaobu factory in China returned to work after a strike. The stoppage cost the company about US$27 million in direct costs, including lost profits and additional air freight costs, and the settlement for the more-than-week-long dispute will raise employee costs by about US$31 million this year, the Hong Kong-based company said in a stock exchange filing on Friday evening. Production resumed as China’s human resources ministry ordered Yue Yuen to rectify benefit payments to workers who have demanded more pay and employer contributions to social-security accounts. Yue Yuen didn’t “truthfully report” socialsecurity payments it was making for employees at its factories in Dongguan, Li Zhong, a Ministry of Human Resources and Social Security spokesman, said on Friday. Yue Yuen will make contributions to cover the missing payments, the exact amount of which isn’t yet determined, according to Friday’s filing. This is in addition to adjusting future benefits payments and giving workers an additional 230 yuan (US$37) a month each living allowance, Yue Yuen said. The plant that supplies the German sportswear maker in Yue Yuen’s
US$31 million
employee costs rising following the strike Adidas diverted part of its production to other factories
factory complex in the city of Dongguan in Guangdong province is now fully operational, Adidas said earlier on Friday by e-mail. Employees at the Yue Yuen complex had been striking since April 14. Dongguan’s Social Security Department told the shoemaker to fix the situation by on Friday, Li said through state-run china.com.cn. Yue Yuen said last week it would adjust its social-security payment plan effective May 1, according to George Liu, a spokesman for the company. “The ministry is closely monitoring the development of the situation, and will guide Guangdong province in its handling of the situation to protect the legal interests of workers,” Li said in Friday’s statement. Li said China passed
a law on April 24 in which the action of cheating on social-benefit payments would fall under its criminal law. The strike began after a worker checked the balance on his socialsecurity account and found the company had been underpaying for its contribution.
Full contributions The shoemaker will “make full socialsecurity contribution in accordance with relevant laws and regulations,” Liu said on Friday by e-mail. The plan to adjust payments was made after consultation with government authorities, according to Liu. China will step up its implementation and supervision of its social-benefits
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law and improve the auditing of these payments, the human resources ministry’s Li said in the online comments. Authorities will also guide the company and workers to negotiate through unions, he said. The work stoppage led Adidas to move some future production away from Yue Yuen’s Guangdong province shoe factory. The production move was meant to “minimize the impact on our operations,” Katja Schreiber, an Adida’s spokeswoman said by e-mail. Yue Yuen, which had 423,000 employees as of 2012, also makes shoes for brands including Puma SE, Asics Corp., New Balance, Timberland Co. and Reebok. Bloomberg News
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10
April 28, 2014
Greater China Industrial profits up Profits earned by China’s industrial companies rose 10.7 percent in March to 513.2 billion yuan (US$159.9 million) from a year earlier, faster than the 9.4 percent pace in the JanuaryFebruary period, the government said yesterday. During the first quarter, profits of industrial companies rose 10.1 percent, the National Bureau of Statistics said on its website. Industrial companies include mining firms, manufacturers and power generators. Analysts see initial signs of stabilisation in the Chinese economy due to the government’s targeted measures to underpin growth, but believe more policy support may be needed.
Seven million homes planned China aims to start building more than 7 million units of public housing this year, the Ministry of Housing and Urban-Rural Development said on Saturday, signalling the latest government move to counter high property prices. The government intends to finish building 4.8 million units this year, the ministry said on its website. The government has spent more than four years trying to tame record home prices on concerns that they were stoking an asset bubble and some see the efforts bearing fruit. Home price inflation slowed to an eight-month low in March.
Currency controls pilot programme China will expand a trial programme to make it simpler for multi-national firms to transfer funds within and outside the country, in a move that will further open its tightly controlled capital account. The experiment, which began in 2012 in Beijing and Shanghai, came in response to growing demand from international companies operating in China for more freedom to use their growing amounts of yuan to boost the efficiency of their management of capital. However, Chinese regulators have also been keen to keep any speculative pressures on the currency at bay.
Potential IPOs tested China’s top securities regulator said it will start examining four companies hoping to list, the first time it will do so in an 18-month freeze on the auditing of initial public offerings. The four companies including the Kuajishan Wine Company, will be audited on Wednesday, the China Securities Regulatory Commission (CSRC) said on its website late on Friday. China halted new listings for 14 months from late 2012, in a move some analysts said was aimed at shielding sluggish domestic equity markets from further downward pressure.
Poll predicts deeper The poll also showed that consumer inflation may remain steady at
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hina’s economy is expected to slow further this year, as Beijing continues to make reforms its top priority and rules out major stimulus to spur short-term growth, a Reuters poll showed. The country’s gross domestic product is likely to grow 7.3 percent in 2014, according to the median forecast in a poll of 34 economists, a reading that is lower than 7.7 percent in 2013 and could mark the weakest showing in 24 years. “Obviously, the top leadership has shifted more focus to reforms and employment,” said Xie Yaxuan, economist at China Merchants Securities, in a research note to clients. “And the weak economic data in the first quarter already signals that macro policy is firstly to serve reforms.” The Chinese government has unveiled a slew of targeted measures recently to give a lift to the slowing economy, but analysts said most of the steps are aimed at improving the long-term economic structure rather than at generating a one-off boost to short-term growth. Beijing has pledged to provide favourable tax policies for smaller firms and speed up investment to revamp shanty towns and hasten the construction of railways in the poorer western provinces. Premier Li Keqiang also said on Wednesday the government will allow private investment in 80 projects
Premier Li Keqiang announced allowing private participation in more than 80 state-controlled businesses
Manhattan sees increasing Chinese landlords The brokers say that many Chinese buyers are also investing abroad so they can own property near major educational institutions
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or the first time, the Chinese have become the biggest foreign buyers of apartments in Manhattan, real estate brokers estimate, taking the mantle from the Russians - whose activity has dropped off since the unrest in Ukraine and the imposition of sanctions against Russia by the United States. Wealthy Chinese are pouring money into real estate in New York and some other major cities around the world, including London and Sydney, as they seek safe havens for their cash and also establish a base for their children to get an education in the West.
Reuters asked five of the top real estate brokerages for their ranking of foreign buyers in New York City. The Chinese ranked first in both volume and value of sales in all their estimates. Opinions differed on just how the Russians, Europeans and South Americans stacked up next. There are no official figures collected on the national and ethnic backgrounds of home buyers because of U.S. fair housing laws, designed to protect against discrimination. The Chinese interest is mainly a valuation play, real estate experts say. After the U.S. housing bust in
Property loans climb Bank loans to Chinese home buyers and property developers rose sharply in the first quarter of 2014, Reuters calculations from central bank data showed on Friday, even as the property market has shown signs of cooling. Chinese banks lent 797 billion yuan (US$128 billion) to homebuyers and developers in the first three months of 2014, up from 440 billion yuan in the fourth quarter and 12 percent higher than a year earlier. Strong demand for property loans suggests China’s housing market remains resilient even if growth is cooling. Official data showed home price gains slowed to an eight-month low in March.
Manhattan property market is changing from Russians to Chinese
2007-2010, home prices in major U.S. cities fell to levels that made them attractive. While U.S. prices have been recovering, they are still appealingly low by comparison with many other parts of the world. Many Chinese buyers are switching their interest away from markets like Shanghai, Hong Kong and Singapore amid fears that prices have soared to frothy levels in those cities. Luxury apartments cost between US$4,100 and US$5,000 per square foot in Hong Kong, while in Manhattan and Sydney they cost half that, ranging from about US$2,100 to US$2,500, according to
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April 28, 2014
Greater China
slowdown
Job market resists slowdown The government has pledged to create 85 million jobs in urban and rural areas between 2012 and 2015
2.6 percent this year
KEY POINTS China GDP expected to grow 7.3 pct in 2014 C.bank seen cutting banks’ RRR by 50 basis points in Q3 Inflation estimated at 2.6 pct in 2014
ranging from the energy, information and infrastructure sectors as part of reforms to increase privatisation. Analysts said slowing property industry investment, uncertainties over export demand and credit volatility stemming from shadow credit defaults could be the major downside risks for China’s economy this year.
Knight Frank’s Prime International Residential Index. London is also cheaper, at US$3,300 to US$4,100 per square foot. The brokers say that many Chinese buyers are also investing abroad so they can own property near major educational institutions. Some are buying homes near top colleges -even though their children are so little they can’t walk yet. More than 80 percent of wealthy Chinese want to send their children overseas to school, according to the Hurun Report, a Shanghai-based publication. “By far and away, the Chinese are the fastest growing demographic,” said Dean Jones, a U.S.-based broker with Sotheby’s International. “They are the top consumer for real estate, and New York is front and centre.” Added Pamela Liebman, CEO of the Corcoran Group, one of the best known New York real estate firms: “In sheer numbers, the Chinese outspend the Russians in every segment of the market.”
The Russians: “They’re gone” In Manhattan, it wasn’t long ago that Russian oligarchs dominated the gilded world of real estate, gobbling up status-heavy, marquee properties, such as an US$88 million, Robert A.M. Stern-designed penthouse and a US$75 million mansion with a ballroom and a rooftop aerie. Now, many brokers say, Russian buyers have become scarce largely because of fears that the struggle over Ukraine will worsen leading to increasingly tough U.S. sanctions on politically-connected and wealthy Russians. “They’re gone, they’re gone,” said Sotheby’s International broker Nikki Field, “They’ve been gone since the
The poll also showed that consumer inflation may remain steady at 2.6 percent this year, unchanged from the level in 2013 and comfortably within the government target of 3.5 percent. Economists in the poll also believe the central bank will cut the amount of deposits that banks must hold as reserves by 50 basis points in the third quarter while keeping benchmark interest rates steady for the whole year. The central bank unveiled a targeted cut in required reserve ratios for rural banks and credit cooperatives earlier this week to shore up the weaker agricultural industry in the economy. But the central bank said the move does not suggest any change in the direction of its prudent monetary policy. Some analysts also said the targeted RRR cut means the chance for universal monetary stance loosening is quite low, given the still accommodative liquidity condition in the economy. “We do not think monetary policy should or will play a major role, as overall credit growth remains solid,” said Tao Wang, economist at UBS in a note to clients. “It is the lack of final demand, excess capacity and barriers to private investment that are inhibiting growth,” she said. Reuters
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hina created 3.44 million new jobs in cities in the first three months of this year, bringing the urban jobless rate down slightly to 4.08 percent, the labour ministry said on Friday. The figure at the end of December was 4.1 percent and the slight drop could offer the latest evidence that the country’s job market was faring well despite a slowdown in the broader economy. “Although the economy grew at a slower pace, the increase of each percentage point of GDP actually produces more jobs than before due to an improving economic structure,” Li Zhong, the spokesman of the Ministry of Human Resources and Social Security, told reporters at a media briefing. Beijing has repeatedly stressed that employment is the first priority for the government, and economists also say it is the top factor that may trigger big-scale stimulus measures if the economy continues to lose momentum. China’s economic growth dipped to a 18-month low in the first quarter, with exports, investment and credit all pointing to a weak showing, fanning worries about pressures on the job market. The government has unveiled a slew of steps to boost employment, including extending tax breaks for entrepreneurs to the end of 2016 and
broadened to include all industries and types of workers. Li added that during the first three months of this year, nine out of China’s 32 provinces raised monthly minimum wages by an average of 13.2 percent. Beijing has mandated that minimum wages rise at least 13 percent a year during the course of the current five-year plan, which runs to 2015. The government has pledged to create 85 million jobs in urban and rural areas between 2012 and 2015 while holding the jobless rate under 5 percent, underscoring its resolve to stave off any unrest that may flare up as China’s economy slows. The urban registered jobless rate is China’s only official unemployment indicator, but some analysts say it may not be enough to truly reflect the employment situation as it excludes about 269 million migrant workers from its surveys. Reuters
Taiwan leaders clash on nuclear development
By far and away, the Chinese are the fastest Premier earlier last week rejected opposition growing demographic. demands to halt construction of the plant They are the top consumer for real estate, and New he government on Friday nuclear campaigners. York is front and centre refused opposition demands for Newspaper reports overnight said Dean Jones, Sotheby’s International
Crimean outbreak.” The Chinese grew to 28.5 percent of Field’s international business in the first quarter of 2014, up from 19 percent last year. “We’ve only scratched the surface with Chinese demand,” Field said. Chinese buyers typically used to pick up properties in the US$1 to US$5 million range in New York, often buying two and three at a time for investment purposes, the brokers said. But lately they have been moving up market, brokers say. The current in-vogue building among the Chinese is Central Park’s One57, a new skyscraper designed by Pritzker Prizewinning French architect Christian de Portzamparc, where they can spend US$18.85 million for a three-bedroom or US$55 million for an apartment taking up the entire 81st floor. The building comes with all of the amenities of a five-star hotel. Reuters
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an immediate referendum on the future of the country’s contentious fourth nuclear plant, but reiterated it would hold a referendum before the plant starts operations. In a rare meeting with the opposition leader, President Ma Yingjeou insisted that an on-going series of safety checks should be completed, but said he would not allow fuel rods to be installed or the plant to be activated before a referendum. “Upon completion of the safety checks, we’ll hold a referendum to decide the future of the fourth nuclear power plant,” Ma said. Taiwan’s share market fell 2 percent in the session on fears of higher electricity prices that could dent the economy, the worst one-day fall since early February. Plans for the power plant have come under the spotlight in the wake of the 2011 Fukushima disaster in Japan, with the public sceptical about the safety of such facilities in earthquake-prone regions such as Taiwan. Taiwan’s premier earlier this week rejected opposition demands to halt construction of the plant, sparking threats of street protests from anti-
the government had agreed to put the planned 2016 commercial start-up of the plant on hold due to opposition and public pressure. Ma noted that Taiwan stocks fell for three months 14 years ago from 6,400 points to about 4,000 points when the then-government, led by the DPP, announced a halt to the construction of the same plant located in northern New Taipei City. “We don’t want to see the same mistakes happening again,” he said. Taiwan’s three current nuclear power facilities would have to serve longer if the fourth one does not start operating as planned, the economics ministry has said. Taiwan’s first nuclear plant is set to be decommissioned between 201819, while the second is set to close between 2021-23. Some 40 percent of the island’s electricity is generated by burning coal, 30 percent using natural gas and 18.4 percent by nuclear power plants, according to the economics ministry. Taiwan sits near the so-called ring of fire region of seismic activity around the Pacific Ocean. Reuters
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April 28, 2014
Asia
Japan-US trade deal still at
Indian banks see pick-up after elections Negotiators from the 12 TPP countries are to meet in Vietnam in
J ICICI Bank Ltd and Axis Bank Ltd, two of India’s top private-sector lenders, are betting on a pick-up in loan demand after the general election ends next month, as big companies revive investment plans. The two banks, which beat quarterly net profit estimates helped by a surge in retail loan demand and higher fee income, also expect pressure on asset quality to ease slightly in the current fiscal year that began on April 1. Opposition leader Narendra Modi is favourite to become prime minister for the Hindu nationalist Bharatiya Janata Party (BJP), which has a strong lead in opinion polls.
CapitaLand profit falls Singapore’s CapitaLand Ltd, Southeast Asia’s largest property developer, said on Friday its first-quarter profit dropped 1.7 percent, as lacklustre sales from its Singapore unit weighed on the company’s income. CapitaLand reported a profit after tax and minority interest of S$182.8 million (US$145.26 million) for the quarter ended March 31. The company’s revenue fell 3.4 percent to S$612.6 million, on a lower contribution from its Singapore operation, the company said in a statement. CapitaLand sourced 35 percent of its revenue from Singapore and 27 percent from China in 2013.
Mazda forecasts record profit Mazda Motor Corp forecast an 18 percent rise in net profit for the year to next March, aiming for a second year in a row of record earnings as a weaker yen bolsters the export-oriented automaker’s business. The company forecast a 2014/15 net profit of 160 billion yen (US$1.57 billion), roughly in line with the 170 billion yen mean estimate of 18 analysts polled by Thomson Reuters I/B/E/S. For the latest quarter to end-March, the second-tier Japanese automaker reported a net profit of 58.3 billion yen, nearly seven times the year-earlier result.
Philippines ready for monetary action The central bank is ready to impose measures to rein in liquidity growth and dampen inflationary pressures, but is mindful of the impact of an interest rate increase on the growing Southeast Asian economy, its governor said on Saturday. The Bangko Sentral ng Pilipinas (BSP) is trying to follow a path towards normalisation but is “not wedded to a pre-set policy course of action,” Governor Amando Tetangco told a forum of currency dealers in the central Philippine city of Cebu, adding that its policy moves remain data dependent.
apan and the United States have found “common ground” to forge a two-way trade deal, but may not be able to resolve remaining sticking points in time for a mid-May meeting of top negotiators seeking a broad regional deal, a senior Japanese official said. Marathon talks during U.S. President Barack Obama’s state visit to Tokyo last week yielded progress -hailed by the two sides as a “key milestone”- but the two sides stopped short of announcing a deal vital to the Trans-Pacific Partnership (TPP), a 12-nation bloc that would extend from Asia to Latin America. The upbeat tone, however, was a contrast to the emphasis on “gaps” after previous rounds of talks on a bilateral deal that has been stalemated by differences over access to Japan’s agriculture market and both countries’ car markets. “What Obama’s visit produced after many lengthy negotiations was a common ground on which the two sides believe we can continue to work to find a mutually acceptable solution,” the senior Japanese official told Reuters. He declined to be identified because of the sensitivity of the talks. “We no longer have to worry that the lack of a Japan-U.S. pathway is going to block negotiations with other countries. This is a very important landmark Obama was able to produce,” he said. But he
added he was “not optimistic” that Washington and Tokyo could work out remaining issues “in a month or two”. Negotiators from the 12 TPP countries are to meet in Vietnam in mid-May, followed by a gathering of Asia-Pacific trade ministers in China
on May 17-18. Obama and Abe will likely meet next at an Asia-Pacific summit in China in November. Both Obama and Abe have domestic constituencies keen to see their leaders stick to rival stances: a U.S. demand that Japan scrap all tariffs and Japan’s pledge to protect
Singapore GPD to be revised up Growth eased to 5.1 percent in the first quarter, compared with 5.5 percent growth in the fourth quarter
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irst-quarter growth could be revised higher after data on Friday showed unexpectedly strong industrial output in March, double the pace of market expectations. Manufacturing output in March surged 12.1 percent from a year earlier, far exceeding expectations in a Reuters poll for growth of 6.3 percent. Output rose 6.1 percent on a month-on-month, seasonally adjusted basis, quicker than the median forecast of 1.5 percent. The jump in manufacturing output was stronger than what was implied by the government’s advance estimate of first-quarter gross domestic product (GDP) released last week, raising the prospect of an upward revision to January-March GDP. The strength in industrial production was all the more
surprising since it came after the city-state’s non-oil domestic exports fell more than expected in March, on declines in shipments to the United States and Europe. “It was quite strong, it appears to be fairly broad-based, and importantly we saw fairly upbeat sequential growth,” said Daniel Wilson, an economist for ANZ in Singapore. “Our model is pointing towards an upward revision to GDP,” he added. First-quarter GDP could be revised to show growth of around 3.5 percent to 4.0 percent on a quarteron-quarter, seasonally adjusted and annualised basis, bringing yearon-year growth up to more than 6 percent, Wilson said. The government’s advance estimate of January-March GDP had shown that Singapore’s economic growth had slowed to 0.1 percent in
the first quarter from the previous quarter on an annualised, seasonally adjusted basis. On a year-on-year basis, GDP growth eased to 5.1 percent in the first quarter, compared with 5.5 percent growth in the fourth quarter. First-quarter GDP could be revised up to show growth of 5.8 percent year-on-year and 2.6 percent on a quarter-on-quarter, seasonally adjusted annualised basis, economists for United Overseas Bank said in a research note. The jump in manufacturing output in March suggests that the manufacturing sector component of GDP expanded by about 10 percent in January-March from a year ago, up from 8 percent growth shown in the advance estimate of GDP, said Francis Tan, an economist for United Overseas Bank. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai, Tony Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso WEB & IT Janne Louhikari interns Cynthia Wong, Yvonne Wong 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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April 28, 2014
Asia
slow pace mid-May
politically powerful farmers in five sectors including rice, beef and pork.
Total package Yet both leaders are keen for a deal - Obama because TPP is central to his “pivot” of military, diplomatic and
economic resources to Asia and Abe because he has touted the trade deal as a key element of reforms needed to generate economic growth. Japan’s Yomiuri newspaper reported over the weekend that the two sides had in fact reached a “basic agreement” in last week’s talks, but that Tokyo wanted to avoid announcing it for fear of hurting the ruling party’s prospects in a Sunday by-election for a seat in parliament’s lower house. Obama faces opposition from a wary Congress and farm good exporters worried that Washington will settle for “TPP-Lite”. Commenting on the Yomiuri report, the Japanese official said both sides had offered significant compromises, with the United States dropping insistence on scrapping all tariffs and Tokyo offering bolder market access improvements than previously. But he said no deal would be reached until all elements were in place. “Nobody is dreaming that we have concluded everything,” he said. “All professional trade negotiators know that unless everything is agreed, everything is open,” he said, adding stakeholders in both countries had to be brought on board. Among the issues yet to be thrashed out are the period of time over which tariffs will be reduced and what sort of steps Japan can take to soften the blow on farmers. “There are a lot of uncertainties we need to resolve, either technically or politically,” the Japanese official said. Both sides expressed optimism that progress on a U.S.-Japan deal will breathe momentum into the push for a regional pact covering 40 percent of the world economy and creating a rule-based framework that could entice Asian giant China to join. Reuters
Crown to build a no-casino resort in Sri Lanka Opponents say that vague phrase might give the company room to open a casino in the future
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ri Lanka’s parliament approved a US$400 million development by Australian casino operator Crown Resorts Ltd on Friday, but said it would not be allowed to open a casino there. The hotel and shopping complex proposed by Australian gambling tycoon James Packer’s company is opposed by religious leaders and opposition parties who fear it will eventually be allowed to operate a casino, something they see as a threat to traditional Buddhist morality. Economic Development Minister Basil Rajapaksa said that would not happen. “We will not allow casinos. I emphasise that. They (investors) asked (for permission for casinos), but we did not grant permission and we will not allow it in future either,” he said at a heated debate in parliament. Opponents expressed scepticism, noting that excluding a casino at the resort had not been written into law. “Why is the honourable minister misleading this house, the entire country, and the Buddhist clergy? I have the gazette with me,” opposition lawmaker Joseph Michael Perera told
parliament, referring to the official journal that publishes legislation. The gazette states that the Crown project will be a 400-room tourist resort with shopping malls, offices and “associated facilities”. Opponents say that vague phrase might give the company room to open a casino in the future. Crown Resorts Ltd was not immediately available for comment. Packer, one of Australia’s richest men, first obtained cabinet approval for Crown’s projects in September, but the terms were altered and the process has been delayed. There are only a few, mostly small-scale, casinos in Sri Lanka and opponents of bigger operations fear they would lead to a boom in prostitution and damage religious values and culture in the mainly Buddhist island nation. Parliament approved two other projects: a US$300 million resort near Packer’s planned complex, and a development called Water Front by Sri Lankan conglomerate John Keells Holdings, which also plans to include a casino, worth up to US$850 million.
Asia’s growth forecast shows low expectations Elsewhere in Asia, growth is expected to be tepid in 2014
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rowth in emerging Asian countries will be lacklustre this year and contribute less to the global economy, despite signs of recovery in the region’s major trading partners in the West, Reuters polls showed on Friday. Much will depend on how China - the world’s secondlargest economy - performs. After clocking double-digit growth rates on average over the last three decades, China’s economy has slowed as the government repositions it to rely more on domestic demand. The consensus from over 200 economists polled April 15-24 was for growth in economies from China to India, Indonesia, Singapore and Thailand to be steady and near last year’s largely lacklustre levels. That suggests contributions to the world economy from Asia - which for many years drove global growth may diminish and the road back to strength could be long and slow. These latest results are similar to a Reuters poll published last week which showed major global econ-
Shanghai’s financial core in Pudong
omies will only expand at a modest rate, while other emerging markets - particularly Latin America - are in for a challenging year. “The region will continue to march forward at a low growth rate - not bad, not great, just what it’s done for the past two years. Grumble, stumble,” David Carbon, head of economic and currency research at DBS Bank, wrote in a note. The poll results suggest
that the run-up in many stock markets over the past few years on hopes for a strong global pickup that has not yet come may have been overdone. China’s first-quarter growth there weakened to its slowest pace in 18 months, highlighting signs of waning momentum, although the slowdown had been widely expected. Economists predict a 7.3 percent average growth
rate for China this year, which would be the slowest expansion since 1990, and a further cooling to 7.2 percent in 2015. “Hard landing fears are escalating again even though estimates for GDP growth do not reflect such pessimism,” wrote Carbon. What remains more of an unknown is how China will manage to ease itself off a credit-fuelled investment binge since the financial crisis hit
Reuters
and how well it will deal with the overhang and subsequent pressure on asset prices. Policymakers in Beijing are unperturbed and say the modest slowdown is as expected and will continue. But that change has had knock-on effects on other countries in the region, as well as Australia, that fuel China’s appetite for commodities. The latest poll shows Australia’s economy will expand 2.8 percent in 2014 before picking up slightly to 3.0 percent in 2015. Still, that would be short of the 3.25-3.5 percent pace that in the past has been considered “normal”. Elsewhere in Asia, growth is expected to be tepid in 2014, with investors pulling funds out of the region and moving them into developed countries as the outlook there improves. India’s economy is expected to grow at a lacklustre pace of 5.5 percent in the fiscal year 2014/2015. Doubts remain over whether key reforms will be pushed through even if a business-friendly opposition party wins national elections in May. “If we get into a situation where again the (new) government, because of coalition politics, is not able to implement good policies - then that is the biggest risk,” said Anubhuti Sahay, senior economist at Standard Chartered Bank. “We have seen such situations since 2010.” Reuters
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April 28, 2014
International
Political and economic future linked in Croatia
Merck to sell consumer unit
Croatia may be one of only two EU countries whose economy will contract this year
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olitical leaders need to come to agreement on how to end the former Yugoslav republic’s longest economic recession on record and avoid “serious” social consequences, President Ivo Josipovic said. “Like the historical consensuses on independence and the country’s future in the European Union, this is the moment when Croatia needs to seek an understanding on its economic direction within the wider political spectrum, primarily between the two major political parties,” Josipovic said on an interview.
We need reforms, and we seek a balance between development and social wellbeing. But social aid must be focused on those who are most in need Ivo Josipovic, President of Croatia
The Adriatic Sea nation, which joined the EU in July, has failed to harness its membership in the
bloc to pull itself out of a five-year recession. The country’s US$60 billion economy is now 12 percent smaller than it was before the 2008 global crisis, the secondbiggest contraction in the EU after Greece, according to Zagreb-based Independent Union of Research. The Social Democrat-led government of Prime Minister Zoran Milanovic is struggling to rein in a bloated public payroll and cut unemployment that reached 22.3 percent in March. The cabinet on April 24 submitted to the EU a budget plan to narrow the fiscal deficit to 4.4 percent of economic output this year, below the EU target of 4.6 percent. Croatia may be one of only two EU countries, along with Cyprus, whose economy will contract this year, according to an International Monetary Fund report released this month. Sluggish public and private consumption and low foreign direct investment will contribute to a “certain” fall in gross domestic product in 2014, central bank Governor Boris Vujcic said.
Large, inefficient “Our administration is too large, on both local and central levels, and it is also not efficient enough,” Josipovic said. “We need reforms, and we seek a balance between development and social wellbeing. But social aid must be focused on those who are most in need.” The Social Democrat was elected president in 2010 after pledging to protect civil rights and eradicate corruption. However, neither major political party has widespread support, with both the ruling Social Democrats and the Croatian Democratic Union, the main opposition party, polling at
less than 20 percent, according to a survey by Ipsos Puls. Josipovic is the highest-ranked politician in the survey, with 68 percent support.
Corruption persists The current government rode to power in 2011 on promises to fix the economy and eradicate corruption. Scores of government officials have since been charged with graft, and former Premier Ivo Sanader in 2012 was sentenced to 10 years in prison for abusing his office in a case involving Hungary’s refiner Mol Nyrt. and Austria’s Hypo Alpe-Adria-Bank International AG. The Supreme Court is expected to issue a binding verdict on the case in coming weeks. Josipovic said investors are still concerned about corruption. While the government in recent years enacted laws to ease investment, complaints about red tape remain, Josipovic said. “Investors seek speed and more legal certainty,” Josipovic said. The yield on the Croatian government’s dollar bonds maturing in 2024 rose 0.02 percentage points on Friday to 5.527 percent in Zagreb, the highest since April 3. The cost to insure the country’s debt against non-payment for five years using credit-default swaps was 309 basis points, compared to 223 basis points for similarly rated Hungary, and 168 basis points for former Yugoslav partner Slovenia, according to data compiled by Bloomberg. Croatia’s public debt reached 67 percent of gross domestic product by end-2013, according to the central bank. Finance Minister Slavko Linic said in November that Croatia can meet its financial obligations this year without seeking aid. Bloomberg News
Zalando under fire over work conditions The workers, most of them foreigners staying in temporary accommodation, also said they were paid less than the initially promised wages
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he rising European online retailer has hit controversy in its home country Germany after an undercover TV report claimed gruelling work conditions in one of its logistics centres. A TV journalist took a job at Zalando for three months and secretly filmed inside the centre in the central city of Erfurt, where some 2,000 staff package products for Internet shoppers. The reporter for commercial channel RTL said she had to walk as much as 27 kilometres (17 miles) during her eight-hour shifts, up and down aisles in the vast centre, and was told by superiors that sitting down for a rest is “frowned upon”. While several employees, their faces disguised, are heard complaining in the report about tough conditions as their every move is digitally monitored, a local medical worker
reports that ambulances are sent for exhausted workers on an “almost daily” basis. “We are constantly subject to controls and enormous performance pressure,” said the journalist, who denounced labour law violations for the job that pays just above Germany’s planned new national minimum wage of 8.50 euros (US$11.50) per hour. Berlin-based Zalando AG, founded in 2008, has since grown into a multinational e-commerce company that sells shoes, clothing and other lifestyle products across Western Europe and Scandinavia and is expanding into Poland. Its marketing campaign features delighted clients who scream with joy when their goods arrive by package. The company, which is considering an IPO, saw its turnover rise 50 percent to 1.8 billion euros last year, but has not yet reported a profit.
Similar criticism has also hit its competitors, including US-based pioneer Amazon, stirring debate in Germany about online retail giants allegedly riding roughshod over workers’ rights to try to crush the competition by all means. Last year Amazon found itself at the heart of a scandal after German public broadcaster ARD in a report accused it of using a security agency employing guards in typical neoNazi garb to monitor some of its employees. The workers, most of them foreigners staying in temporary accommodation, also said they were paid less than the initially promised wages. After the RTL report, some online critics mocked Germany’s Zalando as “Sklavando”, playing on the German word for slave. AFP
Merck & Co Inc is in the final stages of selling its consumer healthcare unit for close to US$14 billion, with Bayer AG and Reckitt Benckiser Group Plc among final contenders to clinch a deal as soon as next week, people familiar with the matter said. Germany’s Bayer and British consumer products group Reckitt have emerged as frontrunners to win the auction after each offering roughly US$13.5 billion for the Merck consumer unit, best known for Coppertone sunscreen and Claritin allergy medicine, the people said.
Competition bill passes Mexico’s Senate Mexico’s Senate voted to approve an economic competition bill on Friday, sending it to the lower house for its consideration and helping to clear the way for other pending legislation, including laws that will implement a sweeping energy reform. The competition bill, aimed at weakening the industrial heft wielded by a handful of families, is one of several pieces of legislation awaiting approval as the regular congressional session draws to a close at the end of this month. Lawmakers face a legislative logjam that includes a pending electoral reform.
UK economy needs EU A British exit from the European Union could wreck London’s position as the only financial centre to rival New York and isolate the country’s economy, research ordered by a lobby group for banks and money managers showed. Prime Minister David Cameron has promised to renegotiate the terms of Britain’s EU membership and hold an “in-out” referendum by the end of 2017 if re-elected in a 2015 national election. But many of the most powerful banks, insurers and money managers in the City of London are concerned UK could slip out of the EU.
UN to lift Ivory Coast sanctions The Security Council is set to partially ease a decade-long arms embargo on Ivory Coast and lift a ban on diamond exports, diplomats said on Friday, despite claims by U.N. experts the measure failed to stop illicit trafficking of rough diamonds. The West African country, emerging from a decade-long crisis that culminated in a brief war in 2011, has been pressing the Security Council to end the diamond embargo that was put in place in 2005 the wake of an initial 2002-2003 civil war.
Canada freezes on foreign workers The Canadian government said on Friday companies should raise wages to encourage more Canadians to apply for unfilled jobs, saying the freeze it imposed this week on restaurants hiring temporary foreign workers is a wakeup call for all employers. The moratorium is on foreign hires in food-service businesses only. It follows media reports that McDonald’s Corp restaurants turned away qualified Canadians while using Canada’s Temporary Foreign Worker Program to fill job openings. The employment and social development minister said he was distressed that wages in Canada have barely kept pace with inflation since the global economic downturn.
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April 28, 2014
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Asia’s giants under new management Kishore Mahbubani Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore
Bangkok Post The Bank of Thailand’s recent announcement revising down its 2014 gross domestic product (GDP) growth forecast was based on weaker-than-expected growth in the first two months and the prospects of further delays in the next fiscal year’s budget disbursement, says a senior central bank official. Spokeswoman Roong Mallikamas said the move to reduce this year’s growth forecast comes after January and February data suggested lower-than-expected growth. Meanwhile, the government’s fiscal-2015 disbursement is expected to be deferred by up to six months due to the months-long political turmoil.
VietNam News The health of the banking system has improved, with good reports coming in about asset quality, capital adequacy ratio and liquidity, according to the National Financial Supervisory Commission (NFSC). In an overview report of the financial markets in 2013 and the forecast for 2014 published on Thursday, NFSC said that the total bank assets in 2013 increased by 15 per cent. More importantly, it said, the asset structure had improved, with the share of interbank assets falling from 23 per cent in 2011 to 17 per cent in 2013.
Jakarta Globe Puma Energy, a global oil company, said it was looking to boost its business in Indonesia, capitalizing on the country’s accelerating economic growth. The oil company said it aimed to build new oil terminals in Balikpapan, East Kalimantan. The plan is rolled out on top of the company’s recent acquisition of Medco Sarana Kalibaru (MSK), the fuel storage and distribution unit of Medco Energy Internasional — Indonesia’s largest listed oil and gas company. Puma’s recent investments underscored its intention of becoming a key player in the oil storage and distribution business in Indonesia.
The Age The Japanese ship caught in the middle of a high-stakes dispute with China linked to the war of 1937 was carrying iron ore produced by BHP Billiton’s mines in the Pilbara. Fairfax Media can reveal the Melbourne-based resources heavyweight was indirectly involved in the protracted legal battle that came to a head last week when a Shanghai court ordered the seizure of a Japanese ship owned by Mitsui OSK Lines. It is understood Mitsui’s 230,000-tonne Baosteel Emotion had begun its journey in Western Australia at BHP’s Pilbara iron ore operations.
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ALI – More than onethird of the world’s population lives in just three countries: China, India, and Indonesia. With all three undergoing significant political transitions – whether electing a new leader or experiencing a recently installed leader’s first key decisions – this is a decisive moment in shaping the global economy’s future. If Narendra Modi and Joko “Jokowi” Widodo win the upcoming elections in India and Indonesia, respectively, they will join Chinese President Xi Jinping in spurring regional economic growth – likely causing Asia’s rise to global economic pre-eminence to occur faster than the world ever imagined. In the year since Xi assumed the Chinese presidency, he has centralized power to a remarkable degree. Not only has he positioned himself as General Secretary of the Chinese Communist Party and Chairman of the Central Military Commission; he has also neutralized potential rivals, including former Chongqing party boss Bo Xilai and former security chief Zhou Yongkang. Consolidating power in a country as large and messy as China is extremely difficult, making Xi’s accomplishment remarkable, to say the least. After all, it took Xi’s predecessor, Hu Jintao, far longer to achieve a similar degree of authority. But it is only a first step. Xi is now attempting to use this power to push through the difficult reforms that Hu and his prime minister, Wen Jiabao, have been widely criticized for neglecting. Despite the pressure to make up for lost time, Xi knows that he must be pragmatic in his reform efforts. First, he must build a national consensus capable of overcoming the
powerful vested interests that oppose changes – including the dissolution of monopolies, improved market regulation, increased transparency, and tax reform – that would level the economic playing field. While Western leaders generally support Xi’s marketoriented reform strategy, they remain puzzled by his devotion to the CCP. To the Western mind, any truly effective reformer must be a closet democrat, like the Soviet Union’s last president, Mikhail Gorbachev. But Xi has no intention of being the People’s Republic’s last president, and the Soviet Union’s collapse in the wake of Gorbachev’s political reforms taught him the importance of balancing change with stability. For Xi, the CCP’s appeal lies not so much in its ideology as in its capacity to help bolster China’s prosperity. Indeed, China’s current leaders are modernizing nationalists, not communists. They recognize that China’s success over the last three decades is a direct result of its shift toward a more open economy and a freer society – a shift that will continue under Xi. Another modernizing nationalist, Narendra Modi, is likely to become India’s prime minister following the elections that started this month. Modi’s pro-business approach is a major theme of his election campaign, and ordinary Indians are hopeful that his policy program will enhance their wellbeing. As Chief Minister of Gujarat, Modi worked to encourage foreign investment, provide around-the-clock electricity, build roads, and engage in intelligent urban planning. Annual economic growth in the state averaged more than 10% from 2006 to 2012, when
China’s success over the last three decades is a direct result of its shift toward a more open economy and a freer society – a shift that will continue under Xi
the Gujarati city of Ahmedabad was short-listed for the Lee Kuan Yew World City Prize. But history haunts Modi’s campaign – namely, the deaths of more than 1,000 people in anti-Muslim riots in Gujarat in 2002. Though the Supreme Court cleared him of all personal wrongdoing, the tragedy’s legacy persists, making it difficult for Modi to win Muslim votes without alienating his Hindu nationalist base. This has not prevented Modi from taking political risks, beginning with his assertion that India needs toilets more than temples. But his decision to run for Prime Minister is by far his riskiest move, as it will test his national appeal. Of course, even if he wins, Modi will never be able to consolidate power to the degree that Xi has, owing to India’s separation of powers and democratic constitution. At best, he will lead a coalition government, in which his capacity to make compromises
and connect with unlikely allies will dictate his success. Jokowi, the governor of Jakarta, will face a similar challenge if he wins Indonesia’s presidential election in July, given that his party, the Indonesian Democratic Party of Struggle, will not have a majority in parliament. Fortunately, he is a skilled politician – popular, but not populist, with tremendous persuasive powers. These qualities enable Jokowi to deliver results, exemplified in his success in convincing Jakarta’s slum dwellers to leave their shanties to allow for urban development. Under his leadership, highway projects that had been blocked for 16 years have been relaunched in the city. Like Xi and Modi, Jokowi is focused mainly on economic development. In this regard, his background as a furniture manufacturer and exporter is a major asset, enabling him to bring a level of hands-on knowledge and experience that past Indonesian presidents have lacked. Given Jokowi’s business acumen, he understands that Indonesia must improve its logistical capabilities if its economy is to engage the world. Perhaps most important, Xi, Modi, and Jokowi are all pragmatists. They know that, in order to achieve rapid economic growth and modernization – a key priority for all of them – they will need to compromise with opposition forces at home and adopt best practices from abroad. Their shared desire to engage the modern world suggests that their leadership will improve the lives of their countries’ citizens. And better lives for one-third of the world’s population will benefit the rest of us as well. The Project Syndicate 2014
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April 28, 2014
Closing Siemens and GE vie for Alstom
Israel cabinet divided over Palestinian unity deal
Industrial Siemens said Yesterday it was ready to discuss strategic opportunities with French engineering group Alstom after reports it was considering a takeover offer. “Siemens has submitted a letter to the board of Alstom to signal its willingness to discuss future strategic opportunities,” the company said. Siemens made the announcement just as Alstom is being pursued by US giant General Electric.
Israeli cabinet ministers yesterday differed over the likely fallout on the battered Middle East peace process from an intra-Palestinian reconciliation agreement. Wednesday’s surprise deal, which saw Palestinian leaders from the West Bank and the Hamas-run Gaza Strip agree to work together after years of bitter rivalry, was denounced the next day by the Israeli security cabinet. That cabinet said it would “not negotiate” with any Palestinian government backed by the Islamist movement.
New sanctions on the way G-7 readies Russia sanctions as U.S. seeks release of observers Margaret Talev, Phil Mattingly and Daria Marchak
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roup of Seven leaders said new sanctions on Russia will be imposed as soon today, Monday, while the U.S. appealed to the government in Moscow to help win the release of observers seized by rebels in eastern Ukraine. The U.S. sanctions may be unveiled today, according to a U.S. official who asked not to be identified discussing internal deliberations. Representatives of the European Union’s 28 nations will also meet today to widen a list of people subject to asset freezes and travel bans, an EU official said on Saturday. The sanctions will target 15 Russians in positions of power, another diplomat said. Both asked not to be identified because of the sensitivity of the matter. Russia has escalated tensions in Ukraine in part by its “threatening” military manoeuvres and “taking no concrete steps” to help implement an agreement reached April 17 in Geneva aimed at calming the crisis, according to a statement issued by the G-7, comprised of the U.S., the U.K., France, Germany, Italy, Canada and Japan. With Russia’s economy battered by capital flight and stagnant investment, the U.S.
without preconditions for the efforts” by Ukraine’s government and others to “liberate” international military observers seized by pro-Russian separatists on April 25, according to a State Department summary of the conversation. The inspectors and their Ukrainian guides are being held in the city of Slovyansk.
Observers captured
and Europe are preparing to put a further squeeze on President Vladimir Putin’s allies after a round of sanctions last month. “It’s going to be more effective if everybody signs on and everybody’s committed,” U.S. President Barack Obama said at a news conference yesterday in Putrajaya, outside Kuala Lumpur. “We’re going to be in a stronger position to deter Mr. Putin when he sees that the world is unified and the United States and Europe is unified, rather than this is just a U.S.-Russia conflict.”
Associates, officials The sanctions previously imposed by the U.S, the EU, Canada and other allies were
aimed at a number of Putin’s associates and top officials, as well as St. Petersburg-based OAO Bank Rossiya. In the wake of capital outflows and a Russian credit-rating downgrade by Standard & Poor’s, the country’s central bank unexpectedly raised its key interest rate to 7.5 percent, from 7 percent, on April 25. The ruble has lost almost 9 percent this year against the dollar, the secondworst performance among 24 emerging currencies tracked by Bloomberg after Argentina’s peso.
Further penalties The measures against Russia would be coordinated with allies, though penalties
from each country wouldn’t necessarily be identical, the U.S. official said. The new sanctions may target individuals with influence in sectors of the Russian economy, such as energy and banking, White House Deputy National Security Adviser Ben Rhodes told reporters traveling with Obama. Those affected may include “cronies” of Russian leaders, he said. The additional economic penalties pending against Russia follow a conference call that Obama, who is traveling in Asia, conducted with European leaders April 25. U.S. Secretary of State John Kerry telephoned Russian Foreign Minister Sergei Lavrov to urge “support
The militants in Slovyansk captured a bus carrying observers sent by member states of the Organization for Security and Cooperation in Europe, a 57-nation group including Russia and the U.S. that focuses on conflict prevention and preserving human rights, Ukraine’s Interior Ministry said in a statement on its website. Thirteen people were being held hostage, it said. “Slovyansk’s separatists do not want to release military monitors because they are afraid of being stormed and they are going to use the monitors as guarantee of their own safety,” Stanislav Rechynsky, an adviser to Ukraine’s Interior Minister, said in a statement on the ministry’s website. Kerry continued to press the case by the U.S. and other members of the G-7 -- the world’s largest industrial democracies -- that Russia is stoking the conflict in its former Soviet satellite. Russia last week renewed military exercises on its neighbor’s border and Putin warned of “consequences” after Ukraine killed five rebels.
CCB says Q1 profit increases 10 pct
S. Korean PM resigns over tragedy
Philippines to sign defence deal with U.S.
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hina Construction Bank Corp., the nation’s second-largest lender by market value, reported 10 percent growth in first-quarter profit. Net income increased to 65.8 billion yuan (US$10.5 billion) for the three months through March from 59.6 billion yuan a year earlier, the Beijing-based lender said in a filing to Shanghai’s stock exchange. The profit growth may check investors’ concerns that banks will be hobbled by rising defaults amid a slowdown in an economy that had its first onshore bond default earlier this year. China Construction Bank was the third of China’s four largest lenders to report earnings. First-quarter profit grew 14 percent at both Agricultural Bank of China Ltd. and Bank of China Ltd. Industrial & Commercial Bank of China Ltd., the biggest of the four, is due to post results on April 29. Construction Bank shares declined 9.2 percent this year in Hong Kong, compared with the benchmark Hang Seng Index’s 4.7 percent drop. Bloomberg
outh Korean Prime Minister Chung Hong Won has resigned over the government’s failure to properly handle a ferry sinking that may be the nation’s worst maritime disaster in four decades. His resignation was accepted by the country’s President Park Geun Hye. “I offer my deepest condolences to the families of the victims,” Chung said during a televised briefing yesterday. “I apologize to the nation for the government’s failure to prevent the ferry disaster and to handle the accident properly.” Divers are still trying to retrieve bodies from the ‘Sewol’ ferry that sank on April 16 in an area of strong currents off the southwest corner of the Korean peninsula. The official death toll of 187 will likely rise to 302, as no survivors have been found. Relatives of the ferry victims shouted and threw water bottles at Chung as he visited them near the site of the sinking hours after the incident. Bloomberg
Bloomberg
he Philippines and the U.S. will sign an agreement today that will boost the American troop presence in the Southeast Asian nation, as it seeks to counter China’s assertiveness over territorial disputes. Philippine Defense Secretary Voltaire Gazmin and U.S. Ambassador to the Philippines Philip Goldberg will sign the accord for “enhanced defense cooperation” a few hours before U.S. President Barack Obama starts a two-day state visit, Primitivo Berunia, a media relations officer in the Philippine defense department, said by phone. President Benigno Aquino is strengthening military alliances with countries like the U.S., as China pushes its claims in the South China Sea. The agreement is also aimed at bolstering Obama’s economic and security rebalancing to the Asia-Pacific region. A draft deal reached earlier this month respects Philippine sovereignty and prevents the permanent stationing of U.S. troops and the U.S. having military bases or weapons of mass destruction in the country. Bloomberg