Closing editor: Sara Farr
MOP 6.00
Fewer suspicions F
Publisher: Paulo A. Azevedo
ewer suspicious transactions were reported to the Financial Intelligence Office in 2013. The gaming, insurance and banking sectors accounted for most. Of the 1,595 transactions reported last year, 70 percent were from the gaming industry alone. Any casino transaction exceeding 500,000 patacas (US$62,614) is reported to the Gaming Inspection and Coordination Bureau
Year III
Number 555 Friday June 6, 2014
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www.macaubusinessdaily.com
Half time
Watching the pennies
The World Cup kicks off next week. Analysts say that could rebound on Macau’s gaming revenues this month and next. A paltry 1 percent increase is predicted as gamblers watch and wager on the action. Credit Suisse says investors’ expectations for 2Q can only be achieved if June revenues climb 18 percent. An unlikely result
The Chinese government is confident that it has its economic housekeeping in order. Authorities are also confident growth rates will stay on track according to forecasts Page Page
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2
HSI - Movers
Exports buoyant Exports of manufactured and industrial goods are set to continue to increase. Continuous growth has been recorded from February to May. A quarter of surveyed export firms expect sales to increase in the next six months. But lack of labour, as usual, is dragging down expectations
June 5
Super-sized loans
Name
Sands China Ltd is one of four borrowers that inked US$20 billion-worth of loans between them. This is the biggest syndicated loan in the Asia Pacific region outside Japan
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Passenger movement increase
%Day
Sino Land Co Ltd
4.50
Henderson Land Dev
3.59
New World Develop
1.56
Sun Hung Kai Proper
1.51
China Life Insurance
1.43
Sands China Ltd
-1.35
Power Assets Holdin
-1.41
Lenovo Group Ltd
-1.64
China Unicom Hong K
-1.73
CNOOC Ltd
-2.21
Source: Bloomberg
I SSN 2226-8294
Brought to you by A 16 percent increase in passenger movement at Macau International Airport last month alone. Overall figures show mainland China and Taiwan were the two preferred destinations by local residents Page
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June 6, 2014
Macau
World Cup penalty for gaming revenues in June Following a disappointing May, gaming revenues in Macau could go even softer in June. The World Cup kick-off in Brazil may divert gamblers from casinos to other channels to watch and wager on one of the most famous sporting events on the planet. Credit Suisse believes that the World Cup effect could waylay revenues in June Alex Lee
Alex.lee@macaubusinessdaily.com
T
he World Cup is expected to slow the pace of Macau’s gaming revenue growth in June as gamblers are diverted from casinos to watch and bet on the football tournament that starts in a week in Brazil. If the second quarter revenues performance was already threatened after a weak May, June promises to be even worse for operators. According to Credit Suisse, the World Cup could turn an already weak June softer with gross gaming revenues set to increase between 1 and 6 percent year-on-year during the current month. If confirmed, this will be the worst revenue performance of the year. So far, January holds the slowest record, when revenues climbed 7 percent. In May, gaming industry gains in Macau grew 9.3 percent, well below the market consensus of an average 14 percent, a disappointing growth for investors whose casino shares lost more than 3 percent in a single session in Hong Kong. ‘Heading into June, we expect GGR growth trend to remain soft due to the World Cup starting in mid-June and kicking in from the higher comparison base. Assuming the average daily revenue (ADR) range of 950 million patacas to 1 billion patacas for June 14, June GGR would grow even slower at 1-6% only,’ Credit Suisse wrote in a note to clients this week. The Swiss bank underscored that the World Cup is likely to divert the gaming budget and traffic from casinos, as gamblers and fans focus on the matches to watch and bet.
Less tourists in Macau Questioned by Macau Business Daily, Grant Bowie, Chief Executive Officer (CEO) of MGM China, conceded that the World Cup might affect the industry but stressed that it was not possible to assess the impact it will have on gaming business. “The impact caused by the World Cup, if there is one, is that customers may be allocating more time to watching the World Cup rather than travelling to Macau,” he said. That notwithstanding, Bowie went
30 pct
The World Cup might affect the industry but it is not possible to assess the impact it will have on the gaming business Customers may allocate more time to watch the World Cup than travel to Macau Grant Bowie MGM China CEO
on to say that any possible effects of the tournament on Macau’s gaming industry will be short-lived. “This [distraction from gaming] will be a short term effect and we expect to see increased visitation after the event,” he said. In May, Wells Fargo estimated that Macau gaming revenue growth was trending between 13 to 15 percent year-on-year. When May revenues grew only 9.3 percent, the US bank said that to reach a hike of 14 percent in the second quarter gross gaming revenues would have to increase by 17.5 percent in June. If Credit Suisse figures are correct, however, this will be hard or even impossible to achieve.
Joyless June Bank of America Merrill Lynch recently said that it’s anticipating 7 percent growth in gaming revenues in June to 94 billion patacas, while the forecast for the second quarter is an 8.9 percent year-on-year rise. The Football World Cup is going being hosted in Brazil from 12 June to 13 July and so its effects are very likely to span the two months. To host the tournament, which will be broadcast worldwide, Brazil has invested US$14 billion (111.8 billion patacas). If history repeats itself, the Macau gaming industry is set to suffer a setback during June and July. According to Credit Suisse analysis, during the last World Cup, held in South Africa in 2010, revenues in Macau recorded the biggest drop in two years, despite favourable comparisons with the same months in 2009. Following record growth in May 2010, when revenues grew 94 percent year-on-year, in June, when the tournament started, casino gains plummeted to a 65 percent increase and 70 percent in July.
Drop in gaming revenues In June 2010 during the last World Cup
Brazil’s diminished gains Hosting the World Cup, one of the world’s most prestigious sporting events, will have a fleeting effect on Brazil, with only short-term impact on sales and with the biggest gains coming from brand imagery rather than company profits. According to Moody’s, the tournament will raise Brazil’s stature on the world stage but the benefits will be short-lived for most rated Brazilian companies, infrastructure providers, host cities and states, and the Brazilian Government. The investment (US$1.1 billion) is marginal in a US$2.2 trillion economy. More than 3.6 million tourists are expected during the World Cup period, with revenues for food and beverage, lodging, car rental, TV broadcasting and advertising sectors likely to increase although ‘disruptions associated with traffic, crowding and lost work days will take a toll on business,’ says the rating agency. Moody’s sees little impact on the country considering the limited duration of the World Cup and the size of the country’s economy, writing: ‘While the event offers a potential reputational benefit, it could be marred by a reprise of the social unrest seen last June or if needed infrastructure is not ready.’
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June 6, 2014
Macau Suspicious casino, bank deals down in 2013 The proportion of suspect transactions filed with the prosecuting authorities remained low, data from the Financial Intelligence Office reveals Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he Financial Intelligence Office received 1,595 reports of suspicious transactions for 2013, fewer in both from those filed by the gaming sector and the banking and insurance sector when compared to the previous year. According to the Office’s latest newsletter, released on Wednesday, the number of suspicious transaction reports it received in the past year was 245 cases fewer than 2012, or 13.3 percent less, despite the city experiencing continuous growth in gaming revenues. As usual, some 70 percent of the city’s suspect transactions were reported by the gaming sector, which last year reported 1,138 such cases to the Financial Intelligence Office – a decrease of 14.3 percent when compared to 2012. All of the other suspicious transaction cases filed with the Office last year were in the banking or insurance sectors, whose reported cases also declined by 10.4 percent. Casinos are required to report to the Gaming Inspection and Coordination Bureau any transaction worth over 500,000 patacas (US$62,614). The
1,595
suspicious transactions reported in 2013 gaming bureau then passes cases of suspicious transactions to the Financial Intelligence Office. In other parts of the world, transactions above US$3,000 must be reported, following standards
set by the Financial Action Task Force, the international body set up to counter money laundering. The Office did not detail in the newsletter the reason for the decrease in suspicious transactions filed in
the past year. However, the number of cases probed by Macau’s prosecutors remain only a small fraction of the total number of suspicious transactions reported to the Office. For 2013, the Financial Intelligence Office sent only 147 suspicious transactions reports, or 9.2 percent of all filed reports, to the Public Prosecutor’s Office for further investigation. The director of the Financial Intelligence Office, Deborah Ng Man Seong, has mentioned to media before that the Office passed on to prosecutors only cases of “very high risk” transactions. The Office sorts the suspicious transaction reports it gets into those indicating a low risk of a crime being committed, those indicating a medium risk, those indicating a high risk and those indicating a very high risk. Most reports of suspicious transactions here are classified as medium risk, a level that indicates something illegal is afoot, requiring more careful investigation, Ms Ng said in May last year.
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June 6, 2014
Macau
MIA passenger volume climbs 16pct
Brought to you by
HOSPITALITY MICE takeoff? The total number of MICE events (meetings, incentives, conferences, exhibitions) went up by 20 percent in the first quarter of the current year, compared to the same period last year. Significant rises were recorded in most types of events. All activities show increases varying between 15 percent and 44 percent in that period, except exhibitions, for which there was no change. However, if we compare current results with the figures for the same quarter of 2009, the picture changes noticeably. Overall, the number of events in the last full quarter was about three percent below the average for the full period represented here. The same pattern occurs in most of the various categories of events, with decreases ranging from 41 percent (incentive meetings and travel) and 18 percent (conferences). The only exception was the number of corporate meetings, which rose by more than 19 percent.
T
he number of passengers using the Macau International Airport (MIA) as their means to enter and leave the territory increased by 16 percent in May over that of the same month last year. According to figures released yesterday by the airport company, air traffic movements also increased by 6 percent to 21,000 last month compared to that of a year ago. The long Labour Day weekend saw more residents travelling outbound this year than in 2013, with the two most popular destinations still being mainland China and Taiwan. Overall figures show that between
January and May this year Macau International Airport recorded an increase of 11 percent in passenger volume, while the mainland China market recorded an increase of 20 percent and Taiwan 14 percent. During the recent Dragon Boat Festival three-day weekend the airport recorded a total of 41,581 passenger movements, of which the majority, some 22,815, were departures. In addition, the international airport here fared reasonably well in terms of passenger movement compared to other Southeast Asian routes that dropped due to recent political unrest in the region, MIA said
in a statement, adding that the airport is ‘optimistic about prospects with the government actively coordinating with tourism parties, joint efforts of the industry, and continuously improving passenger services, which should minimise the adverse effects of political factors.’ The airport also began using its ‘express link’ facilities midlast month. These are located in the passenger terminal and ‘have gained approval and support from the related government departments and other aviation entities,’ the statement reads. S.F.
Tigerair Taiwan plans bilateral flights to Macau The plot shows, however, that in absolute terms the figures for the various types of events are quite different. The vast majority of events are meetings, organised by firms, government departments or associations. On average, corporate meetings alone represent about 60 percent of all events, a proportion that rises occasionally to values above 70 percent. If we add to those corporate meetings, all the meetings organised by the government and the associations, their combined share goes to figures typically situated between 80 and 90 percent of the total. Those events that last longer and bring more visitors from abroad, like conferences and exhibitions, represent much smaller shares of the total. The latter two kinds of event have both posted, in the period shown, about 15 events per quarter. Moreover, the region seems to have lost much of its earlier attractiveness for incentive meetings and travel. J.I.D.
276
number of events, 2013Q1
Stephanie Lai
sw.lai@macaubusinessdaily.com
J
eff Chang Chiu Hua, manager of marketing and sales at budget carrier Tigerair Taiwan, says the company’s objective is to launch a daily bilateral flight between the island and Macau, but remained uncertain over the timeframe for launching the flight. The open sky agreement, inked between both parties in February, allows more airlines to fly the route carrying unlimited passengers and freight between Macau and Taiwan. The agreement was sent to the Transportation Committee and Internal Administration Committee of Taiwan’s Legislative Yuan on May 2 for review before coming into effect, the Mainland Affairs Council of Taiwan informed Business Daily in an email reply. Currently, only Macau’s flagship
carrier Air Macau Co Ltd, and Taiwan’s Eva Airways Corp, TransAsia Airways Corp and Mandarin Airlines are allowed to offer bilateral flights. The rare act for an open sky agreement to undergo a review by the legislative authorities in Taiwan arises from the consideration of having a cross-straits pact that is ‘transparent’ for public understanding and to show ‘respect for the supervisory power of the parliament,’ the Mainland Affairs Council noted in a reply to Business Daily. The Council has been in charge of leading the talks over the open sky agreement between Taiwan and Macau. Another freshly established Taiwan-based budget carrier - V Air - established by TransAsia Airways in November last year, noted that Macau might not be the first choice for the
company to launch flights from and stressed that more assessment on the route is necessary. On top of the lag for the open sky agreement to be validated, a more important consideration for V Air is to decide if launching flights to here will divert its legacy carrier parent TransAsia Airways’ existing business from the Macau route. “The portfolio of passengers flying between Macau and Taiwan is diversified – aside from leisure travellers there is also a proportion of Taiwan businessmen that take the Macau flights destined for mainland China,” V Air told Business Daily. “It is a typical portfolio that suits a legacy carrier, but may not be easy to be applied to a budget carrier as Macau is not primarily a destination for individual travellers [from Taiwan].”
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June 6, 2014
Macau
Exports get a shot in the arm Confidence is growing in Macau’s exporters as 25 percent of companies say they’re expecting a sales increase in the next six months, official data revealed. Lack of human resources is deeply affecting the pharmaceutical sector, the best performer of the first quarter Alex Lee
Alex.lee@macaubusinessdaily.com
A
fter three consecutive monthsofgrowthbetween February and May, the exports of manufacturing and industrial goods are set to continue on the upside. In the first quarter, almost 25 percent of Macau’s firms who sell to foreign markets say they’re expecting a jump in sales in the next six months, double the previous quarter and a sign of a future boost in external trade. According to official data published yesterday, 23.3 percent of industrial companies who export from Macau say they’re estimating a sales increase in the next six months, a more optimistic view than three months prior. In the last quarter of 2013, only 14.5 percent of firms were waiting for an improvement in their international arm. In addition to the more positive outlook, the exporters’ sentiment is still far from that of a year ago. In the first quarter of 2013, 40 percent of industrial companies were expecting to increase sales. The purchasing manager’s survey also revealed that 1.2 percent of these exporters expect a large hike in sales, while 22.1 percent estimate a soft and moderate rise. Companies in the red are also dwindling. In March, 14.6 percent of industrial and manufacturing exporters in Macau admitted that they are facing a sales decrease for the next semester. In the last quarter of 2013, the companies with similar outlook totalled 19.4 percent
and a year ago they surpassed a third (31.6 percent). Almost 3 percent (2.8 percent) of exporters expect a sharp decline in business.
No pill for jobs The survey’s results are an indication that exports from Macau will probably increase in the coming months as more companies are expecting a hike in sales than those who are not. In the first quarter, for each exporter with a negative outlook, almost two had a sunny outlook. Exports
of industrial goods have risen the way, with clothing and for three consecutive months garments next in sales ranking. already. Between February A lack of human resources and May, sales to foreign was the main complaint by markets increased 60 percent. Macau’s exporters, affecting Mainland China and South East Asia were the best performing markets for Macau’s exporters, the survey said, followed by Hong Kong and Japan. Feb-May sales Latin America, on the other hand, was the increase to foreign underperformer of the markets quarter. By product, pharmaceuticals led
60 pct
62 percent of those polled. The number of workers decreased 2.7 percent quarter-on-quarter and 5.7 percent year-on-year. The pharmaceutical sector, despite having the most favourable outlook, was also the one suffering most from a lack of workers (86 percent of managers say they need more employees to cope with increasing sales). High wages, expensive raw materials and growing competition were also major concerns for Macau’s exporters.
Iao Kun rolling chip turnover US$1.59 billion I
ao Kun Group Holdings Co Ltd rolling chip turnover for the month of May in the company’s VIP rooms in Macau was US$1.59 billion (12.7 billion patacas), down 4 percent year-over-year vis-a-vis US$1.66 billion (13.3 billion patacas) for the month of May of last year. The company explained that the drop in rolling chip turnover was due to the severe nearly 10-day rainstorms in mid-May which hit both Hong Kong and Canton Province. The win rate for May was 2.32 percent, the group, whose VIP rooms are primarily focused on high stakes baccarat, announced. Baccarat accounts for approximately 88 percent of total Macau casino winnings. However, not all the news was
bad for Iao Kun Group. Since the beginning of the year until May rolling chip turnover reached US$8.08 billion (64.5 billion patacas), up 12 percent, compared with US$7.21 billion (57.6 billion patacas) for the first five months of last year. In comparison, so far, Iao Kun has posted a monthly average rolling chip turnover of US$1.62 billion (12.9 billion patacas), while in 2013 the average was US$1.44 billion (11.5 billion patacas) per month. Iao Kun Group currently participates in the promotion of five major luxury VIP gaming facilities in Macau sited in StarWorld Hotel and Casino, Galaxy Macau Resort, Sands Cotai Central, City of Dreams Macau and Le Royal Arc Casino.
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June 6, 2014
Macau
Super size me Super-sized loans revived in Asia as buying surge boosts volumes Chris Bourke and Foster Wong
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he last time Asian syndicated loans were this big, Bill Clinton was U.S. President and the iPod hadn’t been invented. The average deal size in the Asia-Pacific region outside Japan was US$372 million in the first five months of this year, data compiled by Bloomberg show. That’s the highest for the period since 2000, as the top four borrowers, including Macau casino operator Sands China Ltd. (1928) and Malaysian oil and gas group SapuraKencana Petroleum Bhd., signed more than US$20 billion of loans between them.
has become the new hundred million,” Ashish Sharma, the head of AsiaPacific syndication at Credit Suisse Group AG in Hong Kong, said in a May 30 interview. “Companies considered mid-cap a few years back have become much larger enterprises, and commensurately, their funding requirements for capex and acquisitions have increased significantly.” While just US$54 billion of syndicated loans were completed in the region during 2000, the largest was a US$12 billion facility for Doncaster Group Ltd. to help finance the acquisition of Hong Kong Telecom.
Giant Offering
US$14.2 billion
regional loans now being marketed in syndication Maturing Asian companies are taking advantage of the narrowest bank-loan interest margins in four years to grow by acquisition and refinance large slices of existing debt. Merger and acquisition activity in the Asia-Pacific region jumped 60 percent to US$325.6 billion this year, Bloomberg-compiled data show, helping syndicated lending volumes swell to US$161 billion, the most for a first five-month period since 2011. “In Asian loans, a billion dollars
Some US$14.2 billion of loans are now being marketed in syndication in the region, with US$7.8 billion in the pipeline, preliminary data compiled by Bloomberg show. The consortium taking Chinese online game developer Giant Interactive Group Inc. private, led by the company’s chairman and an affiliate of Baring Private Equity Asia Ltd., has attracted five lenders to its US$850 million facility with about five others seeking approvals, people familiar with the matter said. Malaysia’s MISC Bhd., the world’s second-largest shipper of liquefied natural gas, plans to boost the size of its seven-year loan to US$1.5 billion from US$700 million as 12 banks seek to join the club facility, a separate person said last week. “We remain quite optimistic in terms of Asia’s loan volumes in the second half,” Atul Sodhi, chairman of the Asia Pacific Loan Market Association, said in an interview
before its annual conference in Macau today. “We’ll continue to see cross-border acquisitions from Asian corporates, especially from China,” said Sodhi, who’s also head of global loan syndications at Credit Agricole Corporate & Investment Bank SA in Hong Kong.
Rinehart Record The biggest loan in the region this year backed the development of Australian billionaire Gina Rinehart’s Roy Hill iron ore mine. The US$7.2 billion debt package, a record for Australian mining, was signed in March and comprised loans and guarantees from five export credit agencies and 19 banks, according to a March 20 statement from Roy Hill Holdings Pty. Sands China, a unit of Sheldon Adelson’s Las Vegas Sands Corp., signed a two-tranche US$4.39 billion facility in March that refinanced existing debt, while SapuraKencana agreed on a four-tranche US$4.99 billion deal that same month to help refinance funds used for its two most recent acquisitions. While M&A activity in Malaysia and Thailand fell in the first five months of 2014 compared with a year earlier, Chinese deals were up 74 percent to US$117.5 billion. Australian activity during the period climbed 150 percent to US$62.5 billion and Hong Kong deals more than tripled to US$23.6 billion. “We expect an uptick in M&A financing this year,” Sharma said. “Funding isn’t a constraint for the right client and deal. They can fund their deals from loans, bonds and the U.S. term loan B market for
acquisitions. A bridge loan can be taken out quickly by a loan, bond or equity issuance.”
Richest Man Thai retailer CP All Pcl signed an 81.9 billion baht (US$2.5 billion) facility in March to help repay a bridge loan for its acquisition of Siam Makro Pcl last year, the country’s biggest ever takeover. Power Assets Holdings Ltd., controlled by Asia’s richest man Li Ka-Shing, borrowed HK$37 billion (US$4.8 billion) in January to back the spinoff of its Hongkong Electric Co. Average borrowing costs for loans in Hong Kong fell 75 basis points to 166 basis points in the five months from a year earlier, according to Bloomberg-compiled data. Across the region, they fell 64 basis points to 182, the least for that period since 2010. That’s led to jumbo refinancings. Noble Group Ltd., Asia’s biggest commodity trader by sales, signed a US$2 billion facility in May that helped refinance a revolving one-year loan for 25 basis points less. Sun Hung Kai Properties Ltd., Hong Kong’s second-biggest developer, inked a HK$14 billion deal in January that refinanced debt at 23 basis points lower. “Hong Kong pricing, especially for blue-chip names, has come down quite a lot since the last quarter of 2013,” Boey Yin Chong, a managing director and head of syndicated finance in Singapore at DBS Group Holdings Ltd., said in a May 30 interview. “But I don’t think it will go down further and will pick up in the second half.” Bloomberg
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June 6, 2014
Macau
Cairns labelled ‘next Macau’ David Fickling
O
nce a stop on the hippie trail, Cairns is now a haven for backpackers and divers. By 2019, Tony Fung predicts it’ll be a gambling destination to rival Macau. The Hong Kong property developer last week won early-stage government backing for plans to build an A$8.15 billion (US$7.6 billion) casino resort on a former sugarcane farm north of the town. With targeted first-stage completion in late 2018 and 7,500 hotel rooms around an artificial lagoon, 18-hole golf course and water park, it’ll nearly triple the region’s hotel accommodations and be bigger than Singapore’s two casino resorts put together. “We are extremely confident that Cairns can be a global destination,” Justin Fung, Tony’s son and chief executive officer of development company Aquis Resort at the Great Barrier Reef Pty., said in a May 28 phone interview. “This is the closest western city to China,” he said of the tropical Australian city where the brother of former U.S. presidential candidate Howard Dean dropped out in the early 1970s. Fung’s quest faces competition across the region as investors locked out of Macau, which has licensed just six casino operators to tap its US$45 billion gambling market, plan new resorts from Sri Lanka to South Korea, the Philippines and Japan. With Chinese spending on overseas trips rising 26 percent during 2013 to US$129 billion, the country is already the world’s largest source of outbound tourist revenue. Competition from Asian gaming resorts and gambling websites is a challenge to Australia’s casino industry, according to a November report by researcher Ibisworld Inc. Revenue growth will slow to 2.9 percent a year over the five years to June 2019, from 3.6 percent over the previous five, Ibisworld estimates. With A$4.8 billion of expenditure by Chinese tourists in 2013, Australia is currently capturing less than 4 percent of China’s tourism exports. Casinos revenue of A$3.5 billion accounts for just 18 percent of a gambling sector dominated by slot machines in pubs, sports betting and lotteries, according to a 2010 government report. Cairns’s existing Reef Casino Trust, the city’s only casino operator, posted A$24 million in revenue last year, and competes with Crown Resorts Ltd. and Skycity Entertainment Group Ltd. gambling halls in Perth and Darwin that are also less than eight hours’ flight from Hong Kong. That’s not deterring the government of the city’s Queensland state, which plans to issue three new
casino licenses to lure Asian gamblers and stimulate job growth amid a fall in coal prices that will help drive a A$324 million decline in government mining royalties by June 2017.
Singapore model Proposed developments in Cairns, Brisbane and the Gold Coast could bring the same benefits that Genting Singapore Plc (GENS)’s Resorts World Sentosa and Las Vegas Sands Corp. (LVS)’s Marina Bay Sands brought to Singapore, Queensland Premier Campbell Newman said last October. The hotels helped fuel a 20 percent jump in tourist numbers to the city-state after they opened in 2010, he said.
family company has already bought about 77 percent of the Reef Casino Trust (RCT) as part of a A$214 million takeover. “We’re sitting on the doorstep of the Great Barrier Reef,” he said. “As the Chinese middle-class and wealthy travel, one of the first things they’re going to embrace is the natural environment. Cairns has that in spades.” Floods, tornadoes, a strong Australian dollar and the rise of competing markets in Asia have stymied growth at some resorts along the Great Barrier Reef. Properties on Dunk and Bedarra islands, for example, sold in late 2011 for about 15 percent and 20 percent of their 2007 values respectively. Chinese-Australian billionaire William Han paid A$12 million for Lindeman Island in 2012, a 10th of what Club Mediterranee SA had spent to buy and expand it in the early 1990s.
Man-eating crocodiles
As the Chinese middle-class and wealthy travel, one of the first things they’re going to embrace is the natural environment. Cairns has that in spades Justin Fung, Aquis Resort CEO
Stage 1 of the Aquis resort would have 4,000 rooms, and there’s no date set for the expansion to 7,500. “Everyone’s seen the success of Singapore, which is just being used as a blueprint elsewhere,” Killian Murphy, an analyst at CIMB Group Holdings Bhd., said by phone from Sydney. “Potentially Australia as a whole becomes a better sell into the Chinese market” if it has more resorts for tourists to choose from.
Natural setting Cairns is well placed to exploit that market, said Fung. Another Fung
Sandwiched between the volcanic Atherton Tablelands and the lagoon of the barrier reef and fringed by mangrove swamps populated by man-eating crocodiles, Cairns has attracted Chinese visitors since gold prospectors flocked to the region in the 1870s. It’s grown into a tourist spot and jumping-off point for visits to the Great Barrier Reef, the world’s largest coral system, “a perfect place to meet other travelers” whose downtown is “more board shorts than briefcases,” according to the Lonely Planet tourist guide. It’s home to more than 10 scuba-diving schools and 40 backpacker hostels. Not everyone welcomes the proposed development. “It’s horrific,” said Gayle Hannah, who came to the region as an 18-yearold in 1971. “Most likely it’s going to sit there and moulder and just be a headache.” Hannah lived on communes in the hills behind Cairns in the early 1970s, where “people had the good old peace, love and brown rice philosophy,” she said. She became friends with Howard Dean’s younger brother Charlie while working on a organic farm in the region set up by three other Americans, “Ivy Leaguers who’d left because of Kent State and Vietnam.”
Dean’s fate The younger Dean later traveled to Laos where he was captured and executed in 1974 by guerrillas. His remains were discovered and
repatriated in 2003, when the former Vermont governor was running for the Democratic presidential candidacy ultimately won by John Kerry. Building such a big resort in the region is “crazy,” she said. “The Asian market is looking for the things we already have -- the reef, rainforest, quiet, birds, good food,” she said. An online petition opposing the development has attracted 1,753 signatures at the website communityrun.org. The 343-hectare (848-acre) site for the Aquis resort will include two theaters, a convention center, a sports stadium, a water park, and an aquarium, as well as shops, restaurants, and 1,800 homes for staff, according to a July 2013 proposal to the government.
Hotel demand With eight hotels including 7,500 rooms once complete, it will be as large as Moscow’s Izmailovo Hotel Complex, the world’s biggest, and surpass the 5,044-room MGM Grand in Las Vegas. “I see more luxury projects creating a gaming destination for the Asian market,” Fung said. “If you can create enough quality product, then certainly the demand is there.” The Fung family have spoken to financial institutions about funding the resort and haven’t yet committed to any, he said. He didn’t name any partners for the project. Queensland may struggle to digest such a sharp increase in gambling tourism, said CIMB’s Murphy. “I just think three new integrated resorts is stretching it,” he said. “Trying to convince a gambler to come here can be difficult. You’re talking a nine- or ten-hour flight” from cities in China. The entire Tropical North Queensland region including the city only contained 3,892 hotel rooms in June 2013, according to government data. Those hotels had occupancy rates of 68 percent in the year and average room rates of A$143 a night, about 25 percent below the national average, separate data show. That’s not deterring Hong Kongbased Fung. The right facilities can attract visitors in numbers like those who’ve been lured by other casino resorts in the region, he said. “We’re on the doorstep of Macau and we’ve seen the incredible growth of that market. We’re close to Singapore and we’ve seen what just two properties there are capable of doing,” he said. “There is that aspect of ‘If you build it, they will come’.” Bloomberg
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June 6, 2014
Macau
Sands’ new recruit could replace Adelson
L
Success Universe jumps ship
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uccess Universe Group Ltd – a 49 percent investor in the Ponte 16 casino resort in the city’s Inner Harbour district – is selling its 55 percent interest in casino ship M.V. Macau Success. According to a group filing with the Hong Kong Stock Exchange, Success Universe says it is in negotiations with an ‘independent third party’ and that ‘no formal or binding agreement for the possible disposal has been entered into’ as of yet. In addition, ‘the possible disposal, if materialised, will constitute
a discloseable transaction for the company.’ M.V. Macau Success is a ninedeck cruise ship based in Hong Kong. The ship features a casino and a number of entertainment facilities, with more than 200 passenger rooms that can accommodate more than 660 passengers. The cruise operates daily from Hong Kong to international waters, and returns to Hong Kong the next day. In 2012, M.V. Macau Success, a cruise ship operated by the company, recorded a 16 percent rise in turnover,
to HK$80.4 million. Success Universe recorded a profit for last year on turnover that fell 3 percent. The company made a profit of approximately HK$12.25 million (US$1.53 million) for the year ended December 31, 2013, compared to a loss of nearly HK$37.98 million in the previous year, according to the group’s annual report released at the end of March. Turnover was about HK$1.58 billion, decreasing some 3 percent from the HK$1.63 billion of the year prior. S.F.
as Vegas Sands Corp founder Sheldon Adelson said the company is looking to hire an executive to run its non-gambling businesses and help lead Sands if he dies, Bloomberg reports. Michael Leven, 76, president and chief operating officer, is scheduled to retire at the end of the year. The new executive would work alongside Robert Goldstein, the head of Sands’ gambling business, Mr Adelson said at the company’s annual meeting in New York. “Rob and whoever we get in the other role will be able to run the company for quite a while until I’m replaced, which I don’t know is possible,” Mr Adelson is quoted as saying when asked about succession plans. Adelson is 80 years old and serves as chairman and chief executive officer. He built Sands from one casino into the world’s largest gambling company. He’s ranked 13th on the Bloomberg Billionaires Index of richest people with a net worth of US$35.4 billion. Adelson, who with his family owns 53 percent of the company’s stock, said he has no plans to retire. “80 is the new 60,” he said. “I’m celebrating my 60th birthday twice.”
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Confident of making the grade The government usually solicits views and proposals from top think tank before making key policy decisions
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hina has stepped up efforts to stop quarterly economic growth falling towards 7 percent and thinks it has been successful for now after preliminary signs that a rapid slowdown has been arrested, sources involved in policy discussions say. That should give the government and central bank at least until the release of second-quarter growth data next month to decide whether the economy needs more intensive support. Two policy steps in the past week significantly broadened the support to the economy without breaching vows to avoid major stimulus, through a quickening of government spending and a second targeted cut in reserve requirements for some banks. The moves look intended to keep growth near 7.2 percent, which Premier Li Keqiang has said is needed to support jobs growth, without the central bank cutting the reserve requirement ratio (RRR) across the board or lowering interest rates. “There is no need for such a move as long as we could maintain quarterly GDP growth rates of 7.27.3 percent, which could be a tipping point for policy change,” Wang Jun, senior economist at the China Centre for International Economic Exchanges, a well-connected think-tank in Beijing. “But growth data for Q2 does not look that bad.” The government usually solicits views and proposals from top think-tanks before
Chinese authorities are facing mild results with austerity and saving mottos. In the picture President Xi Jinping gives a speech at the opening ceremony of the sixth ministerial meeting of the China-Arab Cooperation Forum
There is no need for such a move as long as we could maintain quarterly GDP growth rates of 7.2-7.3 percent, which could be a tipping point for policy change Wang Jun, senior economist, China Centre for International Economic Exchanges
making key policy decisions. Annual growth slowed to an 18-month low of 7.4 percent in the first quarter, and some weak data for April raised concerns that momentum was being lost faster than expected. A Reuters poll found analysts expect annual GDP growth to slow to 7.3 percent in the second quarter. Further, they expect full-year growth of 7.3 percent in 2014, the weakest in 24 years and below the government target of 7.5 percent. The government has acted since April to steady
growth through some focused measures, casting it as policy fine-tuning, and official manufacturing and service sector surveys showed improvement in May. “The employment situation remains relatively stable, which gives the government more confidence about the economy and it believes it’s too early to loosen policy across the board,” Wang said.
Maintaining control China’s leaders have ruled out any large stimulus as the
country is still nursing the hangover from the 4 trillion yuan (US$640 billion) stimulus implemented during the global crisis in 2008-09, which resulted in piles of local government debt. Instead, local governments have been instructed to quicken budget spending and complete allocations this month, a move analysts expect to support growth in the current quarter, but overall spending has not changed. Major banks currently have to keep a fifth of their cash as reserves. Cutting that
Big injection in carbon market
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means companies could buy up to about 110 million offsets each year if they were available. But the new approvals have not come in time to make credits available for companies to use in meeting their 2013 targets, which they must do over the next month or so in five of the markets. “We are waiting for the verification reports from the first two projects, the schedule is tight,” said an official with the National Development and Reform Commission (NDRC), the government body operating the offset scheme and which announced the latest approvals on its website. The NDRC scrutinises projects’ credibility by requiring monitoring and verification cross-checks by three independent auditors. The new projects are mostly wind farms and hydropower plants. They are all registered under the UN’s Clean Development Mechanism (CDM), but the domestic credits they will
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Thousands of Chinese projects have been registered under the CDM hina has agreed to let 14 projects that can generate around 6 million offset credits per year sell them into the country’s six carbon markets, offering a lowcost option for 2,000 power generators and manufacturers to comply with CO2 regulations. The new batch of approvals adds to only two previously approved projects, sparking optimism in the market that a steady supply of offsets -usually cheaper than regular carbon permits- might soon emerge. Under the regional CO2 markets, China’s primary policy to halt the rapid growth of climate-changing greenhouse gas emissions, companies must hand over permits to the government each year to cover for their emissions, or face a fine. Emitters can use offsets, known as Chinese Certified Emissions Reductions (CCERs), from projects that cut carbon emissions to meet 5-10 percent of their targets. That
ratio across the board would free up funds for lending, which could give activity a boost, but authorities would not have control over where the cash went. In April, the People’s Bank of China (PBOC) cut the reserves requirement for rural banks by 0.5 to 2.0 percentage points. Last week, the cabinet announced that it will cut the rate for banks whose lending was geared towards the real economy, although the central bank has yet to specify the size of the decrease.
projects queuing for approval in China
generate are for emission cuts done before they joined the UN market. Thousands of Chinese projects have been registered under the CDM, but as the international offset price has dropped to near zero amid low demand, many of them are considering switching to China’s emerging domestic market instead. But at the moment there is no
procedure for projects to leave the CDM, and no mechanism yet in place to ensure that projects are not given offsets for their emission cuts both internationally and domestically. A total of 187 projects are queuing for approval in China’s market according to an official database, most of them CDM projects. Reuters
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Greater China Working on a petrochemistry development plan China is likely to release a national plan for the development of the petrochemical industry as early as this month, Shanghai Securities News reported yesterday. The plan will come after the State Council pledged safe and green development of the petrochemical industry at an executive meeting chaired by Premier Li Keqiang on Wednesday. Citing anonymous sources, the Xinhua-run newspaper said the plan will lay down rules mainly for oil refining and production of ethylene and aromatic hydrocarbon. The petrochemical industry is one of the pillars of China’s economy and affects people’s daily lives.
HK No. 2 Rafael Hui disguised payments Rafael Hui, Hong Kong’s former No. 2 official, used his position of power to serve his own private interest and received secret and disguised payments, prosecutor David Perry said in his opening statement today in the trial of Hui and Thomas and Raymond Kwok, the billionaire brothers running Sun Hung Kai Properties Ltd. The three men are on trial for charges including conspiracy to commit misconduct in public office and others. Hui, the Government’s chief secretary from 2005 to 2007, took bribes in the form of payments and loans totalling more than HK$35 million (US$4.5 million), prosecutors have said.
Baosteel sets deadline for Aquila China’s Baosteel Resources and its Australian bidding partner yesterday set a deadline of July 11 on their US$1 billion offer for Aquila Resources Ltd., which they are chasing for its iron ore and coal projects. Aquila, 29 percent owned by its founder and executive chairman Tony Poli, now has until June 20 to tell shareholders whether to accept the bid. The board has so far only told shareholders to sit tight while an independent committee reviews the bid of A$3.40 a share.
IMF recommends additional stimuli China only needs to provide additional stimulus if economic growth slows “significantly” below 7.5 percent, the IMF said yesterday. China’s economy is on track to grow around 7.5 percent this year - in line with the government’s target, the International Monetary Fund said. It also said that China’s yuan is moderately undervalued.
Alibaba buys half Soccer Club
China’s Alibaba Group Holding has agreed to buy a 50 percent stake in Guangzhou Evergrande Football Club, Alibaba’s chairman Jack Ma and Xu Jiayin, chairman of the Evergrande group, said at a media conference yesterday. The companies did not immediately give a figure for the investment, but Chinese state media reported earlier on Thursday it would total 1.2 billion yuan (US$192 million).
New global index series to FTSE’s standard global benchmarks currently do not include China
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lobal index provider FTSE Group said yesterday it is planning to introduce a new series of indexes that will allow investors to include China’s mainland A-shares in global benchmarks at their discretion. The new series, known as the FTSE Global R/QFII Index Series, is designed to allow investors to transition into investing in China’s onshore equity market as the country gradually opens up its domestic markets to foreign investors. “We’re really gearing up for the A-shares market opening up,” said Mark Makepeace, chief executive officer of FTSE Group, in an interview. FTSE’s standard global benchmarks currently do not include China A-shares, and so the new index series will give market participants the option of including A-shares in their global benchmarks without making it a requirement. China’s so-called A-shares are the renminbi-denominated shares of companies incorporated in mainland China and traded on the Shanghai and Shenzhen exchanges. For foreign investors to gain access to the A-shares market, they must do so through a quota system known as the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme. Recent expansion of the quota system, allowing for greater foreign investment in the A-shares market, has prompted major index providers
We’re really gearing up for the A-shares market opening up Mark Makepeace, FTSE Group CEO
like FTSE and MSCI to begin eyeing the inclusion of A-shares in their benchmark indexes. MSCI said in March that it plans to include China A-shares in its benchmark emerging markets index as early as next May. FTSE’s Makepeace said he expects large funds as well as exchange-traded fund issuers in the United States, Europe and Asia to use the new index series to transition into investing in the China A-shares market. Investors will be able to determine the weighting of A-shares in their global benchmarks based on their approved quota for the shares. They can also create customized indexes based on their R/QFII allocation. Reuters
As IPO nears Alibaba coaches about success implications The firm could be worth US$152 billion, according to the average
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s Alibaba prepares for what could be the biggest tech company IPO to date, the Chinese e-commerce giant has been counselling employees on how to deal with the roughly US$41 billion they could unlock through a New York listing. While some staffers have enquired if premium brand BMW sells cars in Alibaba’s corporate orange, others may invest windfall stock gains in property in North America or channel funds back into start-up ventures in China, hoping to build future Alibaba, bankers and financial planners say. The company, though, has been preparing employees for years on how to manage the avalanche of cash, warning them not to be carried away and splurge on material goods. While Alibaba Group Holding Ltd’s co-founders Jack Ma and Joseph Tsai are already billionaires, many more paper millionaires could be minted once employees are free to sell shares some time after the IPO. Current and former Alibaba employees hold 26.7 percent of the company, having built up their holdings through stock options and other incentives awarded since 1999, according to securities filings, though these didn’t detail the number of employee shareholders. The IPO windfall - Alibaba could be worth US$152 billion, according to the average from a Reuters survey
Jack Ma could face difficulties in retaining workers ifw ww Alibaba’s IPO is too
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include China
Coal plans puts global sector at risk Analysts expect China’s coal consumption to peak sometime between 2020 and 2030
A-shares A-shares are the renminbidenominated shares of companies incorporated in mainland China and traded on the Shanghai and Shenzhen exchanges (pictured)
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hina’s increasing efforts to shift away from coal to cleaner fuels could put annual investments of around US$21 billion at risk of being stranded, a research report estimated yesterday. China has relied heavily on coal to fuel its economic growth over the past three decades, and it now burns half the coal that the world consumes each year. But a nationwide pollution crisis, increasing water scarcity and growing concerns over climate change mean Beijing wants to shift to cleaner energy sources. Analysts expect China’s coal consumption to peak sometime between 2020 and 2030. A quick shift, aided by a slower growing economy, would leave assets worth billions at risk of being unprofitable, according to the report by think-tank the Carbon Tracker Initiative and the Association for Sustainable and Responsible Investment in Asia. “Lower-than-expected Chinese thermal coal demand threatens to leave those investors not actively assessing their Chinese coal holdings bearing the brunt of stranded assets and wasted capital,” the report said. Chinese coal companies spent around US$21 billion in 2013 on exploring and developing coal resources, despite a government push to use more natural gas, nuclear power and renewables to generate power. Based on estimates from the
International Energy Agency for coal demand in 2020 under “business as usual” and “new policies” scenarios, the report said that up to 437 gigawatts of installed coal capacity could be at risk in 2020. That would equal 40 percent of expected installed capacity by that year. The report said companies such as Shanxi Coal International Energy Group and Datang International Power Generation Co were at risk from high debt levels amid falling coal prices, while poor quality of coal produced by China Coal Energy Co could put that company at risk if there were strategic shutdowns. Falling consumption would also have an impact on coal producers worldwide, because China is the world’s biggest coal importer, the report said. “This risk is of notable interest to Australian and Indonesia exporters,” it said. China plans to cap its coal consumption from 2015 at 3.9 billion tonnes and has banned the construction of new coal-fired power plants in the region surrounding Beijing as well as in the Yangtze and Pearl river deltas. Those regions have been told to make absolute cuts in consumption. He Jiankun, a top climate adviser to the government, said at a conference earlier this week he expected consumption to peak at around 4-4.5 billion tonnes between 2020 and 2025. Reuters
Qindao port probe into metal financing from a Reuters survey of 25 analysts of 25 analysts - will be larger than anything China has seen because of the depth of the group’s employee ownership and the size of the company. Not just managers, but software engineers and staff from sales and marketing and related companies such as Alipay also stand to benefit from selling shares after the IPO. Some of the 20,000 employees have already had the opportunity to sell part of their stakes during previous Alibaba structured share sales through so called liquidity programs. “The thinking was that if sudden wealth is like venom, giving small doses every now and then was a bit like anti-venom because your company isn’t thrown into chaos,” said a person familiar with Alibaba’s incentive plans who was not authorized to speak publicly on the matter.
Moving on In its IPO prospectus, Alibaba acknowledged its concerns about employee shareholders coming into new-found wealth, and maybe wanting to move on. “It may be difficult for us to continue to retain and motivate these employees, and this wealth could affect their decisions about whether or not they remain with us,” it said. Over recent years, Alibaba executives have discussed with employees how the windfall gains
The investigation is looking into whether single cargoes of metal were used multiple times to obtain financing
26.7 pct G
employees’ ownership share in Alibaba
could change their lives, warning them not to splash it all on “glitzy things”, said people familiar with those discussions. Former Chief Operating Officer Savio Kwan was one of the executives who took part in the talks, the people said, along with external speakers and academics brought in to talk about leadership, personal development and business goals. “One thing Jack (Ma) and Savio did was from the early days prepare employees for the effects of having wealth,” said Porter Erisman, a former Alibaba vice president and director of “Crocodile in the Yangtze,” a documentary about Alibaba’s first decade. “I remember Savio giving a speech about what money means, and he encouraged people to think of money as something that offered more choices. Those choices don’t have to be material goods,” he added. Reuters
lobal trading houses and banks were scrambling to check on their exposure to a probe into metal financing at China’s Qingdao port, as concerns grow that a crackdown into commodity financing could hit trade in the world’s top metal buyer. The investigation at the world’s seventh largest port is looking into whether single cargoes of metal were used multiple times to obtain financing, according to industry sources. This means different banks and trading houses were holding separate titles for the same metal. The inquiry has revived concerns about the impact of China’s deepening credit crisis on its metal imports, much of which piles up in warehouses to be used as collateral. “Now the banks are all flying down to the port and literally, together with the warehouse people and the traders, are physically counting the stocks,” said a source at a global trading company who visited the port this week. “When we were there we did hear a couple of traders holding the same title. One was saying that one (cargo) belongs to me the other trader said it belongs to him. They had the same
document.” Standard Chartered yesterday became the latest to say it was monitoring the situation at Qingdao. Standard Bank Group and a partowned unit of Louis Dreyfus Corp, Singapore-listed GKE Corp., also warned yesterday of potential losses. A spokesman for Trafigura said this week that the trading house was following events at the port and gathering information. Another major player Glencore, which also uses the port, declined to comment earlier this week. Copper prices in London fell to their lowest in more than three weeks on Wednesday, partly due to worries over the probe, though prices steadied yesterday. Reuters
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Asia S.Korea FX reserves rise South Korea’s foreign reserves rose to a record high US$360.91 billion in May, central bank data showed yesterday, rising US$5.07 billion from the previous month in the biggest increase in seven months. The Bank of Korea, in a statement, credited the increase last month to gains from management of the reserves. May is the 11th straight month they hit a record. The increase also came after foreign exchange traders suspected authorities took part in dollar-buying market interventions several times last month to slow the won’s strengthening against the dollar.
Philippine inflation on hold for The rate was also near the high end of a central bank forecast for Philippine central bank headquarters in Manila
NZ starts Pacific islands solar projects Construction has begun on New Zealand-supported renewable energy projects in the Pacific island nations of the Cook Islands and Tuvalu in a bid to reduce their reliance on imported fossil fuels, New Zealand Foreign Minister Murray McCully said yesterday. A New Zealand company had been awarded the construction contracts for two major renewable energy projects that would result in solar energy covering 95 percent of the electricity demands of large parts of the Cook Islands and Tuvalu, McCully said in a statement.
ADB to assist Myanmar in renewable energy The Asian Development Bank (ADB) will help Myanmar develop renewable energy under a three-year project until 2017, according to an official statement published yesterday. The project worth of US$2.2 million aims to generate power to 25 offgrid villages in Myanmar and will include logistics such as offices, staff and other counter support with an estimated cost of US$200,000 to be offered by the Japanese government for technical assistance through the Japan Fund for Poverty Reduction, the statement said. The three-year project will lead to the installation of 10 megawatt of new and small-scale renewable energy installations by 2022.
Solar discovery to rival fossil fuel Australia’s peak scientific research body has used solar energy to generate hot and pressurised supercritical steam at the highest temperatures ever achieved outside of fossil fuel sources, local media reported yesterday. The CSIRO said the solar discovery was like “breaking of the sound barrier” and could end the reliance on fossil fuel, the Courier Mail reported. The research involved two solar thermal test plants featuring more than 600 mirrors, which were directed at two towers housing solar receivers and turbines.
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hilippine inflation quickened in May to a two-and-a-half year high on costlier food and utilities, but the central bank is still seen keeping rates steady for now to support the economy. Economic growth slowed unexpectedly to a two-year low in the first quarter partly due to the impact of a super typhoon late last year, and analysts said the Bangko Sentral ng Pilipinas was likely to keep rates unchanged with inflation
still manageable. Annual headline inflation in May picked up to 4.5 percent, government data showed yesterday, faster than a median 4.2 percent estimate in a Reuters poll and the fastest since November 2011 when the rate was 4.7 percent. The rate was also near the high end of a central bank forecast for annual inflation in May of 3.9 to 4.7 percent. “It’s largely cost-push. I don’t think it changes much in terms of
policy outlook because of the GDP number. They might keep it on hold for now. It’s not due to demand side pressures,” said Patrick Ella, economist at Security Bank Corp in Manila. Food and non-alcoholic beverage was one of the indices on an uptrend, up an annual 6.7 percent in May against 6.2 percent in April. Food prices alone climbed 7.1 percent, compared with 6.5 percent the previous month, as tight supply of
Asia mergers lead Goldman Sachs to reinforce The appointments come as Asia Pacific M&A volumes have surged almost 88 percent to US$298 billion so far this year
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oldman Sachs has named John Kim as its new head of mergers and acquisitions (M&A) for Asia ex-Japan and will relocate Christos Tomaras from London to join that team, amid surging deal volumes in the region. Kim takes over from Richard Campbell-Breeden, who will become vice-chairman of the investment banking division for Asia Pacific exJapan, and chairman of M&A for the region, according to a memo seen by Reuters yesterday. In that role Campbell-Breeden will focus more on advising the investment bank’s most important clients in the region. The appointments come as Asia Pacific M&A volumes have surged almost 88 percent to US$298 billion so far this year from a year ago, according to Thomson Reuters data. That makes it the best start to the year on record, surpassing 2008, the data show.
KEY POINTS John Kim named new head of M&A for Asia ex-Japan Kim replaces Richard Campbell-Breeden, who becomes chairman of M&A Asia M&A volume up 88 percent so far this year
The increased activity has also pushed up the Asian share of global M&A to 20.3 percent from 18.4 percent a year ago, the data shows. Hong Kong, where Goldman Sachs
is reinforcing its M&A team, has been particularly busy. China’s CITIC Pacific Ltd in May announced a landmark deal to buy US$36 billion of assets from its stateowned parent CITIC Group Corp, China’s biggest and oldest financial conglomerate. The next biggest Asian acquisition this year is Singaporean state investor Temasek Holding’s US$5.6 billion purchase of a 24.9 percent stake in Hong Kong’s A.S. Watson. The third largest also involves Hong Kong, with Singapore’s OverseaChinese Banking Corp buying Hong Kong’s Wing Hang bank in April for US$4.95 billion. Kim, who was Goldman’s cocountry head of South Korea and joined the firm in 2000, is moving to Hong Kong from Seoul, the U.S.based investment bank said. Goldman Sachs confirmed the content of the memo. Reuters
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Asia
now annual inflation in May of 3.9 to 4.7 percent
Softbank will use technologies developed by French robotics company Aldebaran
KEY POINTS
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May inflation picks up to 2-1/2-year high, above forecasts Near high end of c.bank’s 3.9-4.7 pct range for May C.bank ready to adjust policy if inflation target at risk Policy rate may be raised 50 bps in H2 - analyst
rice, the national staple, pushed up local prices. The government purchased 800,000 tonnes of rice from Vietnam to boost its stockpile, with the imports scheduled to arrive between May and August. “Inflation is largely due to food prices. It is trending up, and will likely touch close to five percent in the third quarter,” said Gundy Cahyadi, economist at DBS Bank in Singapore. “Inflation will still average between
SoftBank to develop humanlike robots
4.3 to 4.5 percent for the year. It’s not too much cause for panic.” Cahyadi said the central bank could wait until after its June meeting to raise interest rates, and could push up the policy rate by 50 basis points in the second half. The central bank kept the benchmark rate steady at a record low 3.5 percent on May 8 but raised banks’ reserve requirements for the second time in as many meetings on concerns that persistently high liquidity could stoke inflation. Its next monetary policy review is on June 19. Reuters
apan’s SoftBank Corp is developing human-like robots which it will use to staff its cell phone stores, two people with knowledge of the matter said, in a move aimed at expanding the mobile phone and Internet conglomerate’s technological reach. Softbank will use technologies developed by French robotics company Aldebaran, in which it took a stake in 2012, the people added. The Nikkei business daily said production of the robots would be outsourced to Taiwanese electronics manufacturer Hon Hai Precision Industry Co Ltd. SoftBank and Hon Hai declined to comment. The people said it was not immediately clear when the robots would be ready, but the Nikkei said Softbank would put robots in some of its stores this summer and eventually develop a household robot that could provide nursing care for the elderly. Japan’s population is one of the most rapidly ageing in the world and the government hopes companies can offset a decline in the labour force by utilising robotics. Japan’s overall robotics market was worth about 860 billion yen (US$8.38 billion) in 2012 and is forecast to more than triple in value to 2.85 trillion yen by 2020, according to a trade ministry
KEY POINTS SoftBank will initially deploy robots in mobile phone stores -sources Will eventually develop household robots for nursing services -Nikkei Japan govt aims for ‘robotic revolution’ under growth strategy report last year. A draft government growth strategy obtained by Reuters calls for a “robotic revolution” that would increase the use of robots in agriculture 20-fold and double manufacturing use. A number of Japanese technology manufacturers are targeting robotics for growth. Panasonic Corp and robotics research subsidiary ActiveLink Co Ltd this week showcased robotic suits and vests to assist in arduous manual tasks such as carrying heavy loads or picking fruit from trees. Reuters
Japan labour success pushes biz to reform Some companies have to curb operations or even shut down as staff become harder to find and to keep
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on Quijote and Uniqlo, two of Japan’s bestknown mass-market retailers, aren’t waiting for the government’s new growth policies due later this month before implementing their own labour reforms. While many labourintensive businesses face a shortage of low-wage workers as Japan’s economy perks up, discount chain Don Quijote Holdings is drawing five times more job seekers since it bucked tradition and eased application requirements. Fast Retailing, operator of Uniqlo casual clothing shops, is making many of its parttime workers into full-timers, at greater cost, to retain staff and boost productivity. While some companies are coping by revamping practices established over decades of deflation, and perhaps hiking wages or raising productivity, others are having to curb operations or even shut down as staff become harder to find and to keep. This worsening labour crunch could bring a reckoning for the recovery led by Prime Minister Shinzo Abe’s reflationary policies, with bottlenecks either forcing a breakthrough to a more efficient economy, or
leaving the country mired in stagflation as companies’ costs rise and growth falters. “The key is whether Japan can stimulate corporate investments to raise productivity,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute. Growth bottlenecks, he said, could be a necessary step to transform Japan into an inflation-minded economy, weeding out businesses that exploit cheap labour and replacing them with more productive companies. A draft of the government’s new growth plan obtained by Reuters this week includes calls on companies to offer more flexible options for fulltime employment - similar to Uniqlo’s measures - to expand opportunities for women, and would create skill assessment standards to make it easier to change jobs. But the draft plan, which is expected to be revised before it’s unveiled, lacks details on key reforms that companies have long sought, such as a corporate tax cut and exemptions for certain workers from limits on working hours. “There’s a gap emerging between what companies view as necessary to boost business
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Job ads for every 100 job seekers
Uniqlo’s Osaka shop. The famous brand is deeply affected in its home country by labour problems
opportunities and the policies the government is offering,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
Low-wage, low-margin One company struggling under the low-wage, low-
margin model is Watami Co, a nationwide chain of Japanese-style pubs that will close about 60 less profitable locations, or 10 percent of the total, in the year to next March in part because it can no longer afford to hire enough part-timers to properly serve its clientele.
Hiring costs such as job advertisements have jumped to around 9,000 yen (US$88.46) per part-timer, three times what it paid in October 2012 before Abe took power, as workers become harder to find. The average hourly part-time wage has risen to more than 1,090 yen from about 1,030 yen in the same period. The job market is tightening, with April data showing 108 jobs available for every 100 job seekers, the highest ratio in nearly eight years, according to government figures released last week. Some companies are responding by rethinking their hiring and workplace practices to draw more workers and increase their productivity. Reuters
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International BNP Paribas punishment eclipsing past sanctions Settlement talks with the U.S. over sanctions violations have headed out of the ballpark, compared with previous punishments levied by the Obama administration in such cases. The U.S. has been said to seek more than US$5 billion or even US$10 billion during talks in the past month - a penalty higher than the combined US$4.9 billion levied against 21 other banks for transactions tied to sanctioned countries since President Barack Obama took office. An accord of such a magnitude would eclipse BP Plc’s record US$4 billion settlement of criminal allegations last year.
ECB ready to push banks into lending The European Central Bank is poised to impose negative interest rates on its overnight depositors, seeking to cajole banks into lending instead and to prevent the euro zone falling into Japan-like deflation. At its meeting ECB policymakers may also launch a loan programme for banks with strings attached to make sure the money actually gets out into the euro zone economy. It will be the first of the “Big Four” central banks - ECB, Bank of England, Bank of Japan and U.S. Federal Reserve - to go the negative interest rate route.
Sprint and T-Mobile close to a final price Sprint Corp. is nearing an agreement on the price, capital structure and termination fee of an acquisition for T-Mobile US Inc. that could value the wireless carrier at almost US$40 a share, people with knowledge of the matter said. Sprint will offer about 50 percent stock and 50 percent cash for T-Mobile, leaving Bonn-based parent Deutsche Telekom AG with about a 15 percent stake in the combined company. At just under US$40 a share, T-Mobile’s equity value would be about US$31 billion.
German bad bank sells loans pack FMS Wertmanagement, the bad bank formed by Germany to wind down failed lender Hypo Real Estate Holding AG, sold U.S. property loans with a nominal value of US$1.2 billion. The transaction reduces FMS’s U.S. portfolio to US$800 million, the Munich-based company said in a statement today. The assets were bought by Deutsche Bank AG, a person with knowledge of the deal said. The person asked not to be identified because the information is private. Hypo Real Estate, once Germany’s second-largest commercial property lender, transferred assets to FMS as part of a government bailout.
Ivory Coast to raise cocoa forecast The world’s biggest cocoa producer raised its output target to a record after favourable rainfall in growing areas, a person familiar with the government’s forecast said. The West African nation will harvest 1.6 million metric tons to 1.67 million tons of the chocolate ingredient in the 12 months ending Sept. 30, said the person who asked not to be identified because the information has not been made public. The government’s estimate in October was 1.45 million tons to 1.5 million tons, the person said. The previous record was about 1.5 million tons in 2011.
Gazprom to be recapitalised after China deal Russian authorities have estimated that the 30-year China deal could add 0.3-0.4 percentage points to economic growth annually from 2015 Vladimir Soldatkin
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resident Vladimir Putin said on Wednesday that Russia should consider recapitalising state gas company Gazprom after a US$400 billion deal with China which will require multi-billion-dollar investments in pipelines and new fields. “The government and finance ministry should consider the possibility of recapitalising Gazprom in the amount needed to build up new infrastructure,” Putin said at a meeting on energy strategy in the southern city of Astrakhan. Boosting Gazprom’s capital would put additional pressure on the Russian economy, already slowing due to a lack of reforms and following Western sanctions on Russia over its annexation of Crimea, which have weighed on the rouble and triggered capital outflows. Russian authorities have estimated that the 30-year China deal could add 0.3-0.4 percentage points to economic growth annually from 2015. The economy is likely to grow by around 0.5 percent this year, the central bank said. The US$400 billion deal, signed during a visit by Putin last month, secured a major source of supply for China, the world’s top energy user, and opened up a new market for Moscow, which risks losing European customers over the Ukraine crisis. Russia plans to invest US$55 billion in exploration and pipeline construction to China’s border, and China’s CNPC said it would build the Chinese section of the pipeline. A
since the start of the year because of market volatility caused by the Ukraine crisis. For now, Europe is Gazprom’s key export market. The continent gets a third of its gas needs from Moscow, and about half of this is pumped via Ukraine. Moscow and Kiev are in the middle of their third gas row in a decade, which also threatens to disrupt supplies to Europe.
Call to cut reliance
Russian President Vladimir Putin at the Supreme Eurasian Economic Council meeting in Astana, Kazakhstan
Gazprom executive said China would provide a US$25 billion pre-payment. Putin did not say how exactly Gazprom could be recapitalised but hinted it could be done from Russia’s gold and foreign exchange reserves. “In the modern world, endless increases in gold and foreign exchange reserves hold some risks as well,” Putin said, adding that the Chinese contract was certain to recoup the investments in the long run. Russia’s gold and foreign exchange reserves, the world’s fourth largest, stood at US$468.4 billion as of last week, down almost US$41 billion
Following the annexation of Crimea from Ukraine in March, the United States and European Union imposed sanctions on Moscow, spurring talk of a need to diversify the Russian economy, including its financial and energy sectors, away from the West. Putin told the meeting Russia should reduce reliance on foreign equipment in the energy sector and step up efforts to exploit oil and gas in Siberia and Russia’s Far East, which borders China. “Import substitution is not a panacea for all the problems but we understand that it may allow us to guarantee the implementation of many projects,” Putin said, adding that Russia would not halt imports altogether. Russian energy companies have so far said that Western sanctions have not affected their cooperation with global energy majors such as ExxonMobil and Royal Dutch Shell. Reuters
Eurozone retail sales beat expectations Sales in April rose both on the month and on the year for the fourth consecutive month Martin Santa
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etail sales in the euro zone registered their strongest annual growth in seven years in April, outstripping expectations and suggesting Europeans may be willing to start spending again to support the fragile recovery. Sales in the 18 countries using the euro jumped by 2.4 percent, following on from upwardly revised growth of 1.0 percent in March, the EU’s statistics office Eurostat said yesterday. Economists expected a 1.3 percent increase in April. April’s year-on-year expansion was the strongest since March 2007 when sales rose 3.0 percent, according to Eurostat. Portugal was the only country in the euro zone where sales dropped in April. Compared with the previous month,
KEY POINTS Retail sales rise much stronger than expected in April Sales up 2.4 pct y/y, strongest since March 2007 But German sales down m/m for 1st time in five months
sales rose 0.4 percent in April, after downwardly revised growth of 0.1 percent in March. Analysts forecast a 0.1 percent rise in April. Domestic demand in the euro zone has been stifled by persistently high unemployment and uncertainty over the future pace of growth, following the weaker than expected pace of the economic recovery in the first quarter. In a positive sign, sales in April rose both on the month and on the year for the fourth consecutive month. France, the second largest economy in the euro zone, recorded a 1.4 percent expansion on the month, the best reading since July 2013. The situation also improved in Spain and Ireland, where sales returned to monthly growth. Reuters
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June 6, 2014
Opinion Business
wires
Leading reports from Asia’s best business newspapers
An economist’s guide to war and peace
THE STRAITS TIMES Five construction firms were charged in court yesterday with breaking employment laws. JK Integrated, Ng Brothers Scaffolding, Shanghai Tunnel Engineering, Shanghai Tunnel Engineering (Singapore) and Straits Construction face 179 charges in total, The Manpower Ministry (MOM) said in a statement. Alleged offences include not paying workers on time, not granting paid leave that their workers were entitled to and making unauthorised deductions. Chinese company Shanghai Tunnel Engineering and its Singapore subsidiary Shanghai Tunnel Engineering (Singapore) each face 82 charges. Both are involved in several Land Transport Authority MRT projects.
Steve Killelea
Executive chairman of the Institute for Economics and Peace
CHINA DAILY More than 1,300 Chinese mainland millionaires have decided to take Canada’s immigration authorities to court after Ottawa’s decision to terminate its popular immigrant investor program earlier this year, which had previously attracted worldwide entrepreneurs and investors to Canada. According to South China Morning Post, each applicant is seeking C$5million (US$4.57 million) in compensation (2.5 times of the application deposit) if the government refuses to assess their cases. According to Tim Leahy, the Toronto lawyer representing the case, 1,335 of his 1,446 clients had submitted their immigration applications in Hong Kong.
THE AGE Eastern Australia’s largest grains handler, GrainCorp, will cut 80 jobs and shut unprofitable storage sites as part of a US$200 million plan to revitalise the company’s country grain network. GrainCorpwill spend US$200 million over three years, the single biggest capital investment in its country network ever, as it attempts to shift 1 million tonnes of grain from road to rail transport. The company will cut its storage network to 180 sites. It will close more than 72 sites across the network where less than 10 per cent of the east coast crop is received.
JAKARTA GLOBE Indonesia should impose a national, but regionally differentiated strategy to increase rice production and become a self-sufficient nation in providing the staple for its people, a director at an international agricultural organization said. Indonesia, a country with a population of around 250 million, is the third-largest rice producer in the world. Uniquely, the nation remains a rice importer, mainly due to huge rice consumption and inefficient production techniques. Indonesia produced 71.29 million metric tons of unhusked rice last year, up 3.24 percent from 2012, according to data from the Central Statistics Agency (BPS).
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EW YORK – Stories of conflict fill today’s headlines: whether it is Syria’s civil war, street battles in Ukraine, terrorism in Nigeria, or police crackdowns in Brazil, the gruesome immediacy of violence is all too apparent. But, while commentators debate geostrategic considerations, deterrence, ethnic strife, and the plight of ordinary people caught in the middle, dispassionate discussion of another, vital aspect of conflict – its economic cost – is rare. Violence comes with a hefty price tag. The global cost of containing violence or dealing with its consequences reached a staggering US$9.5 trillion (11% of global GDP) in 2012. This is more than twice the size of the global agriculture sector and dwarfs total spending on foreign aid. Given these colossal sums, it is essential that policymakers properly analyse where and how this money is spent, and consider ways to reduce the total. Unfortunately, these questions are seldom given serious consideration. To a large extent, this is because military campaigns are usually motivated by geostrategic concerns, not financial logic. Although opponents of the Iraq war might accuse the United States of coveting the country’s oil fields, the campaign was uneconomical, to say the least. The Vietnam War and other conflicts were also financial catastrophes. Similar doubts accompany arms spending during peacetime. One might, for example, question the financial logic of Australia’s recent decision to spend US$24 billion on the purchase of problem-plagued Joint Strike Fighters while simultaneously
preparing the country for the most stringent budget cuts in decades. Wasteful, violence-related spending is not just a matter of war or deterrence. Tough and expensive law-and-order campaigns, for example, though appealing to voters, generally have little effect on underlying crime rates. Whether it is a world war or local policing, conflicts always involve big increases in government spending; the question is whether they are worth the cost. Of course, money spent to contain violence is not always a bad thing. The military, the police, or personal security details are often a welcome and necessary presence, and, if properly deployed, will save taxpayers’ money in the long run. The pertinent issue is whether the amount spent in each instance is appropriate. Certainly, a few countries have struck a fair balance, addressing violence for a relatively small outlay; so there are ways to reduce unnecessary expenditure. Effective budgeting for potential or on-going conflict is best achieved by emphasizing prevention. We know what underpins peaceful societies: an equitable distribution of income, respect for minority rights, high education standards, low levels of corruption, and an attractive business environment. Moreover, when governments overspend to contain violence, they waste money that could otherwise be invested in more productive areas, such as infrastructure, business development, or education. The higher productivity that would result, say, from building a school rather than a jail, would improve citizens’
The global cost of containing violence or dealing with its consequences reached a staggering US$9.5 trillion (11% of global GDP) in 2012. This is more than twice the size of the global agriculture sector and dwarfs total spending on foreign aid
wellbeing, thereby reducing the need to invest in violence prevention. I term this the “virtuous cycle of peace.” Compare, for example, the almost US$10 trillion spent in 2012 worldwide on violence containment to the global costs of the recent global financial crisis. Mark Adelson, the former chief credit officer of Standard & Poor’s, estimates that total global losses from the crisis were as high as US$15 trillion in 2007-2011, which is just half the cost of spending on violence during the same period. If policymakers dedicated the same amount of time and money to preventing and containing conflict, the payoff, in terms of less violence and faster economic growth, could be huge. Governments might begin by re-evaluating their aid spending. Globally, they already spend 75 times more on violence containment than their total combined overseas development aid. And it is no coincidence that countries with the highest expenditure on violence as a percentage of GDP are also among the world’s poorest – North Korea, Syria, Liberia, Afghanistan, and Libya to name a few. Might this money be better directed toward investments that reduce or prevent conflict? Apart from the obvious humanitarian reasons for investing in peace, especially when carried out within established international development frameworks, such investment is also one of the most cost-effective ways to develop an economy and balance a budget. That makes it a discussion well worth having. The Project Syndicate 2014
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June 6, 2014
Closing GM China sales accelerate in May
Russia & DPRK to trade in ruble
General Motors Co. said the increase of its deliveries in China accelerated in May on demand for Buick and Chevrolet vehicles after posting the slowest growth in 14 months. Deliveries in its biggest market climbed 9.2 percent to 276,109 vehicles last month, compared with 6.3 percent in April, according to a statement by the Detroitbased automaker on its website. Among its brands, Buick sales climbed 15 percent, while Chevrolet deliveries rose 13 percent. Cadillac sales climbed 59 percent to 6,118 units in May.
Russia and the Democratic People’s Republic of Korea (DPRK) are ready for settlements in ruble in bilateral trade, a Russian minister yesterday. “Such an opportunity will emerge between Russia and the DPRK - the first accounts have already been opened at Russian banks,” Russia’s Far East Development Minister Alexander Galushka said after an intergovernmental commission session. This will help bolster trade and business cooperation in a considerable way between the two countries, he said. Moreover, the DPRK authorities have agreed to simplify visa procedures for Russian investors and Russian companies staff working in the DPRK.
Cheaper food for second month An FAO index of grain prices fell 1.2 percent from April to 204.4 points
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orld food prices fell for a second month in May as the cost of dairy, grains and vegetable oils declined, the UN’s Food & Agriculture Organization said. An index of 55 food items dropped 1.2 percent to 207.8 points from a restated 210.3 points in April, the Romebased United Nations agency wrote in an online report yesterday. World food prices
are down 3.2 percent from a year earlier. Dairy prices are continuing their slide from a February record amid rising production in New Zealand, where milk output suffered from drought last year, as well as the European Union and the U.S. “The market for dairy commodities is adjusting, following a period of exceptionally high prices in 2013 and early 2014
caused by limited export supplies,” the FAO wrote. “The production outlook has improved.” An index of dairy costs slid 5 percent to 238.9 points in May following a 6.3 percent month-to-month drop in April. Milk collection across New Zealand, the world’s largest dairy exporter, rose 7.7 percent in the 10 months through April, according to Fonterra Cooperative Group Ltd.
U.S. Class III milk spot prices fell 7.2 percent last month after rising to a record in April, U.S. Department of Agriculture data show. Whole milk powder prices fell 8.5 percent in a June 3 auction from two weeks earlier, the eighth straight decline since Feb. 4, according to GlobalDairyTrade. “In general buyers are purchasing only for immediate needs, in the expectation that prices may fall further,” the UN agency wrote. An FAO index of grain prices fell 1.2 percent from April to 204.4 points, according to yesterday’s report. Wheat prices fell last month on expectations that bigger crops in Europe will compensate for a decline in the U.S.
Wheat, corn
In general buyers are purchasing only for immediate needs, in the expectation that prices may fall further
U.S. Gulf wheat slumped about 10 percent last month, the biggest drop since June 2011, according to prices tracked by the International Grains Council. Corn prices dropped 8 percent as planting progressed in the U.S., the biggest grower. Corn “fell in response to favourable growing conditions and good supply prospects,” the FAO wrote. “Wheat prices, which had firmed at the start of the month on slow spring planting
FAO
in the U.S. and tensions in Ukraine, declined during the second half of the month, with weather conditions improving in the U.S. and shipments from Ukraine continuing normally.” The FAO raised its outlook for U.S. corn production this year by 15 million tons to 345 million tons. The forecast for world grain production was increased by 21.6 million tons to 2.48 billion tons, outpacing consumption and helping lift 2014-15 ending stocks to 576 million tons from 565 million tons, the FAO said.
Record crops China and India may harvest record wheat crops, according to the FAO. The agency predicts a “sharp drop” in Canada on lower planting as well as a drop in the U.S., while conditions in Turkey may cause output to fall “significantly,” it said. An FAO index of vegetable oil prices dropped 1.8 percent in May to 195.3 points, with prices falling for palm, rapeseed and soybean oil, the UN agency said. Palm oil futures traded in Kuala Lumpur fell 7.6 percent in May, the biggest such slide since Sept. 2012, amid rising inventories in Malaysia, the second-biggest producing country.
Xi promotes Silk Road spirit at China-Arab meeting
Chongqing carbon market trading to open
Vietnam PM woos investors after riots
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hinese President Xi Jinping called on China and Arab states to make joint efforts in negotiations, implementation and sharing in building the “One Belt and One Road”. Xi made the remarks in his address at the opening ceremony of the sixth ministerial conference of the China-Arab States Cooperation Forum (CASCF) held in Beijing, which called on the two sides to carry forward the Silk Road spirit and deepen their cooperation. The “One Belt and One Road” refers to the “Silk Road Economic Belt” and “21st Century Maritime Silk Road”, concepts put forward by Xi during his visit to Central Asia and Southeast Asia respectively in 2013. Xi noted that in negotiations, China and Arab states need to pool wisdom and share good ideas with each other to achieve desirable results in their joint endeavour to reflect the wisdom and creativity of both sides. Xinhua
he south-western city of Chongqing will be the seventh region in China to launch carbon trading when its market opens on June 13, the local carbon exchange said yesterday, in a move designed to curb the city’s greenhouse gas emissions. The market is the last of China’s planned pilot CO2 markets ahead of the launch of a nationwide scheme later this decade as the world’s biggestemitting nation steps up efforts to slow down rapid emissions growth. A launch date for the market has been set for Friday next week, Cao Zhu, a manager with the Chongqing Carbon Trade Centre, which will host trading under the scheme, told Reuters. “We are testing the market by asking for initial bids around 30 yuan (US$4.80),” Cao said. In the other six markets, a number of prearranged trades have been announced at price levels with strong government backing, ranging from 21 yuan in Hebei province to 60 yuan in Guangdong. Reuters
Bloomberg News
ietnam’s prime minister pledged yesterday to step up economic reforms and prevent a repeat of riots targeting foreign-owned factories, seeking to reassure nervous investors. Nguyen Tan Dung said the mid-May unrest, in which Beijing says four Chinese workers were killed, was “unprecedented and unexpected”. Taiwanese and Korean businesses were hit hardest by the unrest, which saw factories vandalised and set ablaze in parts of south and central Vietnam. Dung said some 90 percent of affected businesses were now back to normal, and promised further assistance for those that were not. He pledged to accelerate Vietnam’s domestic economic reforms with a bigger role for private firms, strengthened institutions and increased financial restructuring, and to pursue integration with the world economy. AFP