MOP 6.00 Closing editor: Sara Farr Number 586 Monday July 21, 2014
Publisher: Paulo A. Azevedo
MIA taking off
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Year III
ir cargo may not be doing too well. But Macau International Airport’s aviation business grew about one-fifth in the first half of the year. The airport made more than half a billion patacas in revenues, up 18 percent. Passenger service fees and landing fees rose by 21.5 percent. And some 2.61 million passengers used the airport PAGE
Hong Kong manufacturers retreat from PRD
Housing law shake-up www.macaubusinessdaily.com
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The Subsidised Housing Law will be amended and reviewed. Following a two-month public consultation ending in September. Once opinions and suggestions are analysed, a new bill will be drafted, presented and put up for another public consultation. The amendments, however, are substantial and overdue
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Macau ‘determined’ to fight money laundering
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Funding culture
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There’s lots of online interest. And some 30 applications have been received by the Cultural Industries Fund. But the majority are missing proper documentation. The second phase of applications will only open in the first quarter of next year. The government is offering locally registered companies a direct subsidy or interest-free loan. Depending upon the nature of the project Page 3
Changing of the guard
HSI - Movers July 18
Name
Role reversal
The BRICS are offering alternatives. And sending strong signals to the World Bank and IMF. Despite shallow support from the Western-controlled institutions, a worrying feeling dogs the old order
Analysts are lowering estimates for MGM Resorts. Meanwhile, Las Vegas is set to outperform Macau for a change. Some analysts forecast MGM China will post the third worst figures in the second quarter. Others predict a profit of US$210 million
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%Day
China Overseas Land
1.97
China Mengniu Dairy
1.34
Sun Hung Kai Propert
0.57
Lenovo Group Ltd
0.55
Wharf Holdings Ltd
0.53
Tingyi Cayman Island
-1.38
China Shenhua Energ
-1.42
China Unicom Hong K
-1.54
Kunlun Energy Co Ltd
-2.13
Sands China Ltd
-2.69
Source: Bloomberg
I SSN 2226-8294
INTERVIEW
The art of business
Brought to you by
High rents are hard on everyone. But for struggling artists they are a nightmare. The Art for All Association was forced to shut its gallery this year for this reason. But government funding may come to the rescue. New AFA president Alice Kok talks to Business Daily about business, making a profit, and encouraging the green shoots of art appreciation
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2014-7-21
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2014-7-22
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2014-7-23
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July 21, 2014
Macau
Viva Las Vegas: Sin City offsets MGM China performance Union Gaming has lowered its second quarter profit estimates for MGM in Macau below analysts’ consensus. The brokerage, however, is increasingly confident that the Las Vegas operation recovery will compensate for Macau’s slowdown Alex Lee
Alex.lee@macaubusinessdaily.com
I
t used to be the other way around but this time it’s Las Vegas covering the losses of Macau. At least for MGM Resorts. In a report released Friday, Union Gaming said that Las Vegas’ MGM operations in the second quarter are likely to outperform market estimates, while in Macau, through the parent company MGM China, profits and revenues will probably lag predictions. ‘We think the quarter will reflect good growth in Las Vegas, which should help offset mixed results from MGM’s regional assets’. MGM will report results for this last quarter on August 5. Union Gaming lowered its figures for MGM China, predicting a profit of US$210 million in the second quarter, behind the market consensus of US$225 million, with the brokerage admitting it has taken a conservative view on Macau’s performance in the quarter. ‘Our below consensus profit estimate reflects our near-term view on Macau’, stated Union Gaming. On the other hand, the brokerage is above consensus with MGM Las Vegas operations, expecting a profit of US$342 million between April and June against
US$338 million predicted by other analysts. ‘The Las Vegas recovery story remains on track’, underlined Union Gaming, with better hotel occupancy rates and higher revenues from gaming tables. The US operations are likely to compensate for the softer Macau returns in the second quarter. Union Gaming forecasts a net income of US$631 million for MGM Resorts, up from the previous estimate of US$625 million due to Las Vegas.
In Macau, the turbulent year expected by the market is taking form as gaming revenue news is being released; the second quarter earning season will be another confirmation of a downward trend set to last through the summer at least. According to Morgan Stanley, for example, MGM China will be the third worst performer in Macau, with profit growth expected to be almost flat (3 percent increase year-on-year in the
second quarter), following a drop in revenues of 4 percent caused by a steep decline in VIP gaming (decreasing 17 percent). Union Gaming says one of the factors against the company is that MGM China is ‘still a single-asset operator with exposure only to the generally slower-growing Macau Peninsula’. The second quarter results are in sharp contrast to MGM China (and its peers here) compared to the first three
Parisian construction works suspended The Land, Public Works and Transport Bureau has called for construction work to be halted after some structures were discovered to have been built without the proper licence
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he Land, Public Works and Transport Bureau (DSSOPT) has called a halt to the construction works of Sands China’s Parisian in Cotai because ongoing works have not been authorised by the government. The Bureau explained to Jornal Tribuna de Macau (JTM) that so far only permission for earthworks on the site have been granted. However, a one-storey structures has already been built without a proper licence. According to the DSSOPT, the halt was called on June 9, two days after two workers were accidentally injured on the construction site. It was after the inspection of the construction site that the Bureau detected the illegal work. Contacted by JTM, Sands China refused to comment on the issue saying it did not have anything to add to the information provided by DSSOPT.
However, in a note at the construction site, Venetian Cotai, owned by Sands China Ltd, announced the suspension of the works and that it is ‘focused on collaboration with the Special Administrative Region of Macau Government’. It also stated that in order to resume construction the company has applied for licences that will allow works to continue in accordance with Macau law. The company has also guaranteed that work needed to meet safety standards is underway in order to prevent accidents caused by typhoons and adverse climate conditions from happening on the construction site that may impact workers and the public. DSSOPT also posted a notice at the construction site announcing the suspension of the construction works. The document states that according to the evidence collected on June
9 the ongoing construction works were not included in the licence for earthworks. According to the Bureau, this has violated the law on urban construction.
MOP2,500 fine The Bureau run by Jaime Carrion also mentioned that the managing contractor –from the company Ever Apex Construction – has to suspend with immediate effect the construction of the infrastructure. If the works are not suspended DSSOPT warns that the contractors may face a fine of up to 2,500 patacas or charged with criminal responsibility. JTM attended the construction site and says that works seemed to continue with hundreds of workers going in and out of the area. DSSOPT, however, said that it has been monitoring the construction
months of the year. In the first quarter, the gaming operator reported a 32 percent increase in profits year-on-year, with revenues climbing 26 percent and mass market gains growing 46 percent. The slowdown of Chinese customers, both VIP and mass, and the influence of Beijing in restricting more visitors here through transit visas are a threat to new clients at MGM tables, says Union Gaming. The delays in MGM’s Cotai project caused by the government approval process, the impact of the upcoming full smoking ban, UnionPay limitations and regional competition arising from other Asian destinations are risks to watch in the near future. Despite the slowdown and lower estimates, Union Gaming says that this view does not reflect the brokerage’s long-term perspective on MGM. ‘We believe there’s significant growth to be added through the end of the decade and beyond. It could take several months, at least until the first openings in Cotai, to begin to see supply driving demand again”, said the brokerage in a note to clients.
site and that there is no sign that work continued following the suspension. The Bureau added that the last inspection was conducted on Thursday and that it did not detect any untoward movement on the construction site. DSSOPT also said that it has developed many procedures to monitor the construction site. The Bureau also added that the ongoing strategy would be optimised and better regulated with social development. The government had recently suspended construction work on the Parisian following an accident that left two workers injured. Prior to the accident in January four workers were injured in another accident. DSSOPT said that the latest accident, per all such occurrences on construction sites, is being followed according to the law. During the construction of The Venetian casino-resort, Sands China was fined 900,000 patacas by the government due to a delay in the use of the land granted. At that time, the government extended the grant rights until April 17, 2016. The Parisian is expected to open in the fourth quarter of 2015; Las Vegas Sands will invest some 16.7 billion patacas in its construction. Exclusive JTM/Business Daily
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July 21, 2014
Macau Prosecutors still probing “unusual” bus operation The Macau Prosecutors Office is still looking into the “unusual situation” in which a bus ran all day without any record of collecting a fare and the operator was paid for the service. The case should be concluded this year, Prosecutor General Ho Chio Meng told media on Saturday. Noting that the investigation was a difficult one, Mr. Ho said that his team of prosecutors have found “abnormalities” with the bus run frequencies, revenues and costs, but did not have evidence to instigate any immediate prosecution against the bus company. Mr. Ho’s office started an investigation into the case following complaints after the Audit Commission released a special report in May last year highlighting the said unusual situation, as well as slamming the lax government supervision of bus operations and irregular arrangement of bus schedules.
Nearly one-fifth growth in Airport H1 revenue CAM saw faster growth in the aviation business segment, though growth in air cargo remains sluggish Stephanie Lai
sw.lai@macaubusinessdaily.com
F
irst-half revenues of the Macau International Airport Co Ltd (CAM) this year rose by nearly one-fifth as growth in the aviation business speeded up and outpaced that of the non-aviation segment. The airport operator disclosed its latest results in a press statement. CAM announced on Friday that its first-half revenue was about 510 million patacas (US$63.8 million), up 18 percent year-on-year. The company gave no profit or loss figure. CAM’s first-half takings from its aviation business, such as passenger service fees and landing fees, rose by 21.5 percent. The airport handled over 2.61 million passengers, 10.7 percent more than a year earlier. CAM expects to handle 5.1 million passengers for the whole year. The rise in passenger volume was registered when two new routes, launched between here and Dalian in mainland China and between here and Siem Reap in Cambodia, were established in the first half of this year. The two new route additions connect Macau International Airport to some 38 destinations, mainly major cities in mainland China and across Southeast Asia. It handled 1,206 aircraft movements of private jets, a leap of nearly 30 percent over the same period last year. CAM also registered mild growth in its air cargo business in the first half of this year: the airport handled nearly 13,000 tonnes of cargo, 3.7 percent more. That was more than half of CAM’s air-freight target for all of this year of 25,400 tonnes, the
2.61mln
passenger-handling in H1 company said in its review of the annual results for 2013. But even if CAM can achieve the yearly air freight target for 2014, the local airport will still see a sixth
consecutive year of continuous decline in air cargo traffic since 2009. The airport handled 26,464 tonnes of cargo last year, nearly five percent less than the previous year. CAM’s first-half takings from its non-aviation business, such as rents for duty-free shops, rose by 17.5 percent from a year earlier. Last year, annual revenue from CAM’s non-aviation business was 495 million patacas, accounting for slightly over half of its overall revenue. The figure was a 16 percent growth compared to the previous year. The airport operator also
mentioned in its Friday statement that it has already finished assessing the bids for the duty-free retail concessions at the airport, and would announce the bidding results later. In April, the airport operator launched a public tender to select two bidders, each of which would get about half the shop space in the airport. The winning bidder is required to invest at least 4.49 million patacas. King Power Duty Free (Macau) Co Ltd’s exclusive duty-free retailing concession for the airport expires in November.
Cultural Fund receives 30 applications
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round 30 applications have been submitted for this year’s cultural fund, the Cultural Industries Fund said in a statement. Between June 6 and July 18, the fund’s webpage was visited some 6,000 times, the application form downloaded 3,000 times and as many as 508 bookings made to submit relevant application forms. The most sought-after funds were for ‘creative design’, ‘digital media’, ‘cultural
exhibitions and performances’ and ‘art collection’. The Cultural Industries Fund said in its statement that the majority of the 30 applications received were missing documents and relevant paperwork. Saturday marked the end of the first session of application, the second one is slated to open only in the first quarter of next year. In May, the government announced that locally-
registered company applicants who meet the government’s criteria for ‘creative design’, ‘cultural exhibitions and performances’, ‘art collection’ and ‘digital media’ can claim either a direct subsidy or interest-free loan from the government depending upon the nature of the project the company is applying to the fund for. The direct subsidy is in the form of direct funding of the applicant’s project or a
subsidised loan: for projects that are engaged in operating a ‘service platform’ for the cultural industries or ‘the development of a tangible or intangible product’ applicants can seek this subsidy from the government, fund regulations state. The administrative committee of the cultural industries fund is authorised to grant funding of up to 500,000 patacas (US$62,619) for projects engaged in the
production of ‘cultural and creative products’. Projects seeking more must approach the fund’s board of trustees and chief executive. Macau’s cultural fund for the financial assistance of individuals and private institutions increased by 275.2 percent to 10.68 million patacas in the first quarter of 2014, from the same period in 2013. The cultural fund totalled 53.9 million patacas in 2013.
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July 21, 2014
Macau Brought to you by
HOSPITALITY Pricey pillows The cost of accommodation is the main component of the Tourist Price Index (TPI), which tries to reflect the changes in prices for the types of goods and services most commonly bought by visitors to Macau. Alone, these costs account for 23 percent of the Index. They are also the main contributors to the oscillations of the Index throughout the year. Accommodation costs are strongly seasonal. In the period observed here, successive quarters occasionally display ups and downs in excess of 25 or 30 percent. This strong seasonality is, however, much less apparent in the overall Index. The exceptionally ‘good’ behaviour of most of the other items distinctly smoothes these seasonal variations. If we add to accommodation the next three major categories of visitor expenditure – Restaurant services, Clothing and Footwear (C&F), and Food, Alcohol and Tobacco (FAT), their combined weight reaches close to 70 percent of the Index. The table below displays the rise in these four components in the second quarter, when compared with their values in the same quarter for each of the previous four years.
Francis Tam
Macau ‘determined’ to fight money laundering
T
he Secretary for Economy and Finance, Francis Tam, said that Macau has laws against money laundering and terrorist financing which shows the government’s ‘determination’ in fighting such ‘serious’ crimes. Speaking at the 17th Annual Meeting of the Asia Pacific Group on Money Laundering and Annual Technical Assistance Forum held in Macau last week, Mr. Tam reiterated that Macau has been an ‘active participant’ in the cooperation effort against money laundering in the Asia Pacific Region and has contributed to the financial safety of the area. Money laundering and
The steady growth of the overall Index is obvious. The prices for the FAT and C&F components are equally steady; and, to a great extent, they follow a very similar growth pattern. The total growth of prices in these categories, in the four years shown, diverged little from the average - by less than 4 percentage points in the FAT case, and less than two percentage points in the C&F case. Stronger growth was noted in the two other categories. In the same period, accommodation prices went up by more than 48 percent, while the bills for restaurant services increased by slightly more than 41 percent.
12.6%
rise in accommodation prices, Q2, on previous year
illegal financial transfers have been a hot topic this year in Macau and mainland China. First, the use of UnionPay terminals in pawnshops and casinos here to let mainlanders take money out of China by skipping the cap imposed by Beijing. More recently, a scheme used by several big Chinese banks has let clients invest limitlessly in overseas domains, triggering the suspicion of money laundering. The anti-money laundering forum in Macau attracted 350 participants from 41 member jurisdictions and 13 observer jurisdictions and organisations. Roger Wilkins of Australia, president of the Financial
Action Taskforce, stressed that countries and regions that don’t follow best practices are risking their financial risk profile or credit rating, potentially affecting their financial position and broader international reputation. Mr. Wilkins also pointed out the need for effective engagement with the private sector. “Where appropriate, stakeholder consultation should be viewed as an opportunity to leverage private sector expertise and work together in the pursuit of common goals. This is particularly important given the crucial role the private sector plays in implementing FATF standards across the globe,” he said.
Hong Kong manufacturers retreat from PRD
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ne-third of Hong Kong companies are planning to decrease their investments in the Pearl River Delta region due to the increase in labour costs over recent years. According to the South China Morning Post, 29.6 percent of Hong Kong manufacturers are likely to scale back their investment in the next three years, up 2.7 percent from last year, based on a survey conducted by The Chinese Manufacturers’ Association of Hong Kong. The survey also shows that 32 percent of Hong Kong manufacturers with factories in the area were planning to move their factories to other areas with lower labour costs,
namely Southeast Asia and remoter parts of Guangdong or other provinces in mainland China. The increase in labour costs is the main reason these Hong Kong based companies are retreating from the area. South China Morning Post
quoted Association chairman Irons Sze as saying that the labour cost in the area has been increasing some 10 to 15 percent every year. In addition, many manufacturers are puzzled by the ever-changing labour policies of Guangdong, which they regard as a bigger problem than the appreciation of the yuan. The Pearl River Delta - which refers to a network of cities embracing the estuary - covers the two Special Administrative Regions of Hong Kong and Macau, as well as Shenzhen, Zhuhai and Guangzhou. It is seen as one of the main hubs of China’s economic growth and one of the major centres for foreign trade in the country.
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July 21, 2014
Macau
Subsidised Housing Law to be amended, reviewed in full Dawn is rising for public housing applicants classified as non-core families or individual applicants. Very soon, more of them will be awarded a ‘precious’ public flat without being an outsider anymore, according to amendments suggested by the government. Kam Leong
newsdesk@macaubusinessdaily.com
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he government plans to fully review the current Subsidised Housing Law in addition to making five amendments, such as setting proportions to distribute future public housing to different groups of applicant. This implies that there will be an increased opportunity for non-core families and individual applicants of being selected. Legal Affairs Bureau’s director André Cheong Weng Chon, along with Housing Bureau deputy director Kuoc Vai Han, has announced that the public consultation will last for two months until September 19. It started on Saturday. The overall review of the law will focus on the core content and its current basic systems, according to Mr. Cheong. It will be processed in “two steps”, the first of which is the consultation session, which primarily revolves around the orientation of public housing and whether the government should change the current system of providing “mainly social housing and a small portion of affordable housing”, the possibility of creating a new type of public housing and whether the government should resume the previous “scoring system”. Following the consultation, the government will draft related amendments by the end of the year before launching another consultation session.
Five amendments The five amendments the government proposes to include: altering the evaluation system, keeping applicants’ information for future application use, allocating proportions to distribute public housing to different groups, adding exceptional permission for certain applicants to apply for housing, and increasing applicants’ stay in Macau to more than 183 days in the year prior to application. Mr. Cheong believes that once the amendment of allocating certain proportions of public housing to core-families, non-core families and individual applicants, the public housing system will be fairer. The effect, he said, would be that non-core families and individual applicants would no longer be “outsiders”. ‘’For instance, if the government releases 1,000 public housing units, when there are more than 1,000 core families applying, all of these 1,000 units will go to the core-families. As such, the non-core families and individual applicants will not have the chance to be selected,” said Mr. Cheong “If we have 1,000 units of public housing, after the amendments, 700 will be distributed to core-families,” he said, “while 200 units [will be allocated] to non-core families and the remaining 100 units will be assigned to individual applicants”. In addition, amending this article will limit families of more than three members to choosing two and three-
If we have 1,000 units of public housing, after the amendments, 700 will be distributed to core-families, while 200 units [will be allocated] to non‑core families and the remaining 100 units will be assigned to individual applicants André Cheong Weng Chon, Legal Affairs Bureau director
bedroom units only, in order to correct the situation of “resources distributed wrongly, avoiding the situation of a family of five applying for a onebedroom flat”. However, this amendment will not be applied to the previous applicants of the 1,900 pubic housing units nor the amendment of limiting the days that applicants should stay in Macau. The government has also suggested changing the current selection system from “first evaluate, then draw” to “first draw, then evaluate” following a basic evaluation of the submitted documents. Such a change would speed up the selection process, according to Ms. Kuoc. Asked how much time the selection process for the current 1,900 units will be reduced by if the amendment is made, Ms. Kouc said that there is no time frame yet and that they are still classifying applicants’ basic information.
Applicants’ information, exceptional permission Mr. Cheong said that if applicants are not successful in their first application their information will be kept by the relevant department. However, he added that such administrative procedures do not mean that the information will automatically be used for the next
round of selection. Applicants, eventually, still have to express their interest in being put on the list again. On the other hand, exceptional permission to apply for public housing will be given to those deemed ‘unqualified’ after inheriting property from siblings or parents but whose income is not enough to support or resolve their housing problems, according to the proposal. Ms. Kuoc also said that amendments proposed and to be made should not affect the previous selection results or the previous applicants’ rights. Hence, people whose parents still own public housing units are not given exceptional permission even though they are applying for a unit in their own name. These five amendments, up for public consultation along with the overall law review, will be passed for legislative discussion in two months, “once the public [arrive at] a consensus after the consultation sessions”, said Mr. Cheong. The current Subsidised House Law, which came into effect in 2011, has been criticised for its selection system. Currently, the Bureau is selecting 1,900 qualified applicants from the 42,703 total received in March. As many as 100,000 residents’ names are in these applications, Ms. Kuoc added.
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July 21, 2014
Macau
Infancy of an art market There are few collectors, few artists and few spaces. In an interview with Business Daily, the head of Art for All Association, Alice Kok, says Macau’s art market is still in its infancy but holds out prospects for future growth, even though the real estate situation is a formidable barrier. As the new president of AFA, she says the Association is now going through a time of crisis with the closing of the gallery. But the cultural and creative industries fund may have arrive in the nick of time. Luciana Leitão leitao.luciana@macaubusiness.com
Photos: Manuel Cardoso
As the new president of AFA, what are your projects? The current situation is that at the beginning of the year AFA had to close the gallery because we didn’t have enough funding to pay the high rent. Last year, we were on the 10th floor, and then we had to move down because the owner had increased the rent. Then we found this on the 3rd floor, and we moved in, but it’s still very expensive, so we had to close the gallery at the beginning of the year. We don’t have a gallery now. The first step will be finding the funding and re-opening the gallery. Right now, we share our office with another company, so we’ll see what can be done. As for other projects, the work started six years ago. We’re continuing that work. You’re applying to the cultural and creative industries fund. What kind of projects will you submit? The projects will be the exhibitions, the international art fairs and, during our election period, with the new team, we’ve been discussing new ideas, like the opening of a school and some other activities that include talks among artists and with the public, and maybe a magazine about the cultural industries. But this is a very initial brainstorming period, so I cannot say for sure. The fund is aimed at businesses and AFA is a non-profit organisation. Have you already changed the nature of the Association? Yes. The new direction is to run the AFA gallery on a commercial basis, to make us more independent, not solely dependent on the funding, but it takes time to establish the market. That will be our aim. We’ve been selling art works since the beginning and during these six years we’ve realised it’s possible to do it, but it’s far from being a profitable activity because AFA needs money to run. Right now, it’s still early to say we’re already independent but the perspective is this. For example, the cultural industries fund is aimed at companies, so we can see that the development of the cultural industries has to target the commercial sector. Before we were working as a non-profit organisation but it can’t be run like that all the time — we were so dependent upon government help, so the aim would be to make it more effective in terms of selling our artwork and our activities, like having our own gallery and our own school.
Business mindset Is it the right approach to develop cultural and creative industries through companies? I think so, to inject more dynamism into the market. With
more interested. Contemporary art sometimes reflects more contemporary society, so they also feel an interest in having it in their home. I can see this is happening also. There are still a few artists in Macau. Is it a natural reflection of the size of the population or does it have to do with the lack of an art school in the territory? I’m saying few but in the past six years we can see many new artists emerging. Of course, relatively speaking, in terms of our population we aren’t a big group. AFA has 44 members. At the same time, during these six years when James Chu and others founded the Association there were only six and now we’re 44.
We’ve been selling art works since the beginning and, during these six years, we’ve realised it’s possible to do it but it’s far from being a profitable activity
companies, we’ll be able to have more ideas — we’ll be more in control of the situation, running it as a company instead of as an association. Art is also a business somehow. It’s sensible to do it and as artists we’re not so concerned about making a business out of it, but AFA is so that we’ll be able to work. Many artists often get married, maybe they buy apartments, they pay the rent and the concern is to survive, to make a living and raise a family. The government has been talking about this fund for quite a few years already and finally last month it was launched. At the same time, AFA is changing, and with the sort of crisis AFA is facing, by losing the gallery, this is the right timing for us. Everything came together for us to try something new. This fund took a lot of time to be launched. Did it make sense to discuss it for such a long time? I was not especially impatient about it. I don’t know what is too long. We were doing our job and at a certain point it happened.
Do you believe this fund will be effective in promoting the cultural and creative industries? At first sight, from the perspective of AFA, this comes at the right time. We were running out of funding. Even though our sales record last year was not so bad; but because of the rents and human resources we still don’t have enough funding. With this fund, we’ll be able to inject new resources.
The business You had a reasonable sales record last year. Does this mean that Macau will finally have an art market? People buy art. We have a few collectors in Macau, also working in big companies but of course if we compare this to other markets Macau is a very small market. We have few artists by comparison, and also locals don’t have a very open approach to buying art. These last six years, with AFA, we see it’s still possible but it’s still at a very early stage. So, it’s related to the mentality of the locals? It comes together with culture in general. It’s not something we can impose. It’s something we can develop in parallel with our work, the communication between the artist and the public and also with the changes in society. People have to see that art has a role in their lives, bringing meaning and beauty. It’s a process that cannot be forced — it comes naturally. As for the art market, even in Europe it took a long time to develop. In Macau, we’re still at the beginning. Are locals more interested in traditional Chinese art than contemporary? At AFA we do contemporary art and we can see people are getting
Is cooperating with resorts, as with what’s been happening with MGM Macau, the right approach to developing art in the territory? That’s what we’re doing; working with the hotels, not with gaming but with tourism and hospitality. We’ve been working with MGM for a few years already — they have a gallery. Yes, a lot depends on how it’s done. Before, from what we know in art history, we had commissioned works — rich people would commission artists to do specific portraits and paintings. Nowadays, when we’re working with MGM we’re still quite free: it’s not the commission approach, they provide the space, visibility and we provide our work. In my experience, the cooperation with MGM has never been a restrictive one. It depends on how we do it — if they provide the resources and at the same time our works give them space, art, beauty and meaning of art and culture, it’s quite beneficial for both [parties]. For the time being, I feel quite
We have a few collectors in Macau, also working in big companies but of course if we compare this to other markets Macau is a very small market. We have few artists by comparison, and also locals don’t have a very open approach about buying art
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July 21, 2014
Macau Interview
As for the art market, even in Europe it took a long time to develop. In Macau, we are still at the beginning
positive about this. I don’t feel especially oppressed — it’s an equal exchange.
The buyers Who are the collectors in Macau? We have different buyers, maybe a few locals interested in collecting Macau art work, who are passionate about the cultural scene of Macau, we have people like that. Also, we have the more general public, working already, who sometimes see art works and sometimes like to put them in their homes. Also, through international art fairs, we have our market in Beijing, through 798, and now we just went to London. We were in Singapore, in Hong Kong also, and in different places. In Macau, there are still very few [collectors] to really conclude something from it. Is there any way to make local art more attractive to locals?
Of course. That’s our job. First, the orientation is very clear — as an artist, we need to maintain the good quality of our work. And then the exhibitions. The exhibition is a very important space for us to make contact with people, but for the artist it is not something that can happen like that. We need to have enough energy. For the artist, it’s not enough to make one beautiful work — it’s about research, a series of collections of art works. For that to happen, we need time, we need space and we need our energy to put into it. So, exhibitions are very important and essential for the artist to open up more possibilities, to invite people to see our work.
come back, to get inspired by other things. What is good about Macau is that it’s a very small place, but we are very mobile, we can move, we can go out, we can go to China to see what’s happening on the mainland; we can go to Hong Kong and Europe. Macau has that dynamic to go out and see. I went to France and came back. During the last 10 years, I was also in Tibet and in different places, so we can bring all these influences back to Macau. Macau is more like my studio. If I only stayed in Macau in my studio, I would not be so inspired because it’s such a small place. At the same time, it’s a good place to work and bring in different influences.
Is Macau an inspiring place to create art? I’m not only staying in Macau; we have to go out a little bit and
Would it be important to have a higher education course in arts in Macau? Very important. Arts education is very important because when we consider the sustainability of the art scene in Macau we have been having new artists emerging now but we need to already think of the next generation. When I graduated, I came back to Macau and we were relatively fewer than now and thanks to different schools. They also developed art education in high, middle and primary school. We can see it has been developing, but for us to have a higher education degree is very important. We still don’t have a really fine arts school, where we really develop and train professional artists. That would be very important for the art scene in Macau to develop in the long run.
In Macau, there are still very few [collectors] to really conclude something from it
We still don’t have a really fine arts school, where we really develop and train professional artists. That would be very important for the art scene in Macau to develop in the long run
With the launching of the creative and cultural industries fund, is there a possibility for the art market to grow? I really cannot speculate on that but our best shot is to do our best. This fund will be able to help us launch a new wave of activities, and these new activities will bring people’s attention to what we’ve been doing. With the expenses getting higher, we need to keep the pace. Rentals are very important. Space is very important and in Macau that’s what we lack. The real estate situation in Macau is really quite difficult. At least, we have a chance and then the outcome I don’t know. I always think that if we keep on moving we’ll get somewhere.
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July 21, 2014
Greater China Development Bank opens in Venezuela The China Development Bank (CDB) opened an office in Caracas on Saturday, a move that indicates the two countries will further strengthen their economic relations. Addressing the opening ceremony, CDB President Hu Huaibang stressed the importance of the office in boosting Chinese investment in Venezuela and promoting two-way trade. Present at the event were senior Venezuelan government officials including Minister of Economy and Finance Rodolfo Marco Torres. Established in March 1994, the CDB, a joint stock bank wholly-owned by the Chinese government, is primarily responsible for funding largescale infrastructure, social development and international cooperation projects.
June forex purchase likely to rebound Foreign exchange purchases in June will rise significantly from May, Lian Ping, chief economist at Bank of Communications, was quoted by Saturday’s China Securities Journal as saying. Lian noted that June’s exports are very likely to move up following improvements from March to May, probably resulting in a bigger trade surplus and more funds available for foreign exchange. In previous months, bowing to downward pressure, individuals and banks preferred to hold forex and cross-border direct investment has slowed. Lian forecast yuan funds available for foreign exchange will see continuous monthon-month increases in the second half of 2014.
Formosa company insurance works China’s Taiwan-invested Formosa company in Vietnam, which was hit by riots in May, was given some 50.3 billion Vietnamese dong (over US$2.38 million) from insurance companies and the Ha Tinh provincial people’s committee Saturday afternoon. Specifically, insurance companies announced to pay Formosa 20 billion Vietnamese dong (nearly US$948,000) in advance for insurance. Meanwhile, Ha Tinh provincial committee gave Formosa 30.3 billion Vietnamese dong (nearly US$1.44 million) to support the company “to stabilize operation” after suffering from riots in May, reported Vietnam’s state-run news agency VNA on Saturday.
Chinese tourists abandon In June, 136,726 Chinese visited Vietnam, down from 194,018 in the figures show
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or years Nguyen Huu Son has guided Chinese tourists around Vietnam’s popular coastal city Danang, but a bitter maritime dispute between Hanoi and Beijing means he is now out of work. Relations between the communist neighbours plunged to their lowest point in decades when Beijing moved a deep-sea oil rig into disputed waters in the South China Sea in early May, triggering deadly riots in Vietnam. The rig has since been withdrawn. But the Chinese tourists have not returned. “It’s never been this bad before... My company has almost no customers, no work,” Son told AFP. Son’s salary has been cut by twothirds, but he feels “embarrassed” to take even this reduced pay package as he knows his company is not making any money at all. “We focus on individual travellers, not tour groups, and 100 percent of them cancelled... I have nothing to do with my time,” he said, adding that he was mulling a change of career. After the mid-May riots, in which China says four of its nationals were killed, Beijing evacuated thousands of citizens and issued a “yellow” travel warning for Vietnam. While this was reasonable in the immediate aftermath of the riots -which mostly affected Taiwanese and South Korean businesses- maintaining the travel warning when any danger to
Vietnamese Prime Minister Nguyen Tan Dung
tourists has passed smacks of politics, said Professor Jonathan London at City University of Hong Kong. “It reminds one of Beijing’s campaign to reduce mainland tourism to the Philippines,” London said, referring the economic fallout from the 2012 standoff over the Scarborough Shoal. After a dispute over the uninhabited shoal, Beijing warned its citizens
about travel safety in the Philippines, prompting mass cancellations.
Economic impact Chinese tourist arrivals to Vietnam were down 29.5 percent in June from the previous month, according to official figures. In June, 136,726 Chinese visited Vietnam, down from 194,018 in May
US$7.5 billion loan for Argentina The money will help in the construction of two hydroelectric dams in Patagonia Eliana Raszewski
Kenya to share on ecosystem management Experts from China and Kenya’s major institutions are due to meet in the Kenyan capital Nairobi next Tuesday to share key findings on sustainable ecosystem management and climate change adaptation, the United Nations Environment Programme (UNEP) said Saturday. UNEP said in a statement that low-cost technologies which can reduce the cost of providing safe drinking water to rural Kenyans by 50 percent will be shared at the gathering. Some findings and insights from the pan-regional UNEP-China- Africa Cooperation Programme on Environment will be a national master plan for rainwater harvesting in Kenya, according to the statement.
A handout picture provided by the Presidency of Argentina shows Argentinian President Cristina Fernandez de Kirchner (R) during a press conference after a meeting with her Chinese counterpart Xi Jinping (L) in Buenos Aires, Argentina, 18 July 2014
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rgentina signed deals to borrow US$7.5 billion from China at a time when the Latin American country cannot tap global capital markets because of disputes over unpaid debt. Among the deals signed, Argentine President Cristina Fernandez and her Chinese counterpart, Xi Jinping, agreed on a loan for US$4.7 billion from the China Development Bank for the construction of two hydroelectric
dams in Patagonia. China Gezhouba Group Corp and Argentina’s Electroingenieria SA won contracts last year to build the two dams, which will have a combined generating capacity of 1,740 megawatts. The Chinese bank also granted a US$2.1 billion loan to help finance a long-delayed railway project that would make it more efficient to transport grains from Argentina’s agricultural plains to its ports.
“It’s a day we can define as foundational in the relations between our two countries,” Fernandez said after signing the deals. China is Argentina’s second-largest trading partner after neighbour Brazil. In 2013, Argentina’s trade deficit with the Asian country increased more than 20 percent to US$5.8 billion. Argentina is the world’s thirdlargest exporter of soy and corn. China is the main buyer of its soybeans.
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July 21, 2014
Greater China
Vietnam
Citi loans run aground on ports’ metals probe
May and 216,659 in April this year,
The total is a large portion of the bank’s roughly US$400 million-worth of so‑called repo commodity financing deals in China
29.5 percent C decrease of Chinese tourist arrivals to Vietnam in June
and 216,659 in April this year, the figures show. Vietnam will continue tourism promotion efforts in China, aiming to show “Vietnam is a safe destination,” said Nguyen Manh Cuong, an official at the tourism department. Tourism is an important source of revenue for communist Vietnam, contributing nearly six percent of the country’s gross domestic product in
Xi, China’s first president to visit Latin America’s third-largest economy in a decade, arrived in the capital city of Buenos Aires on Friday after participating in a summit of emerging economies of the BRICS nations - Brazil, Russia, India, China and South Africa - in Fortaleza, Brazil, earlier this week. He also signed a three-year agreement for an US$11 billion swap operation between the central banks of Argentina and China that will let the Latin American country pay for Chinese imports with the yuan currency. “The exchange will mainly serve to facilitate investments in the currency of the country providing the funds and to strengthen the level of international reserves,” the Argentine central bank said in a statement. Argentina signed a similar deal with China in 2009. The central bank could ask for the total or partial disbursement of the 70 billion yuan in exchange for pesos to invest it, or to exchange it to dollars to fuel its reserves, said an Argentine central bank official, who spoke on condition of anonymity. Fernandez’s government has imposed stringent import and capital controls to safeguard dwindling foreign reserves, which it needs to pay its debts. It has been virtually shut out of global credit markets since staging a massive 2002 default. Hopes that Argentina’s government might access markets again soon hinge on the country reaching a deal with holdout creditors who rejected its debt restructuring in 2005 and 2010. Fernandez said the deal between the two central banks could offer “stability in exchange rates at the moment we are, as a country, suffering speculative attacks by vulture funds.” Reuters
2013, official statistics show. Chinese visitors make up the largest single group of arrivals - more than 1.1 million in 2014 overall, despite the sharp fall off after May. The next largest group, South Korea, saw 405,634 arrivals. The average Chinese visitor stays five days and spends US$300 if they travel by land, or US$700 if they have arrived by airplane, Cuong said. This compares to an average stay of about 10 days by European or American tourists, who spend up to US$3,000 during that period, official figures show. Vietnamese tourists have also been cancelling trips to China in droves, although the government has not issued any travel warning, said one travel agent who declined to be named. AFP
itigroup Inc has about US$280 million in loans tied to commodities in two Chinese ports which are at the centre of a probe into possible fraud, a senior executive said on Friday, becoming the first U.S. bank to disclose its potential exposure. The total is a large portion of the bank’s roughly US$400 million worth of so-called repo commodity financing deals in China. Short for repurchasing agreements, repo deals give customers access to short-term credit in exchange for goods. “At this stage we believe the activities are isolated and just specific to those very specific locations,” Chief Financial Officer John Gerspach said in a conference call with analysts. The loans are to clients that are non-Chinese subsidiaries of large multi-national corporations and the contracts are guaranteed by the parent companies, he said. Citi is the latest bank to disclose the size of its financing business in Qingdao, China’s seventh largest port, and nearby Penglai where authorities have been investigating suspected metals financing fraud since May. The probe centres on a private metals trading firm, Decheng Mining,
and its related companies, which are alleged to have used fake warehouse receipts at the ports to obtain multiple loans secured against a single cargo of metal. The company has not commented on the probe. As the fall-out of the scandal that has engulfed the base metals market continues, other foreign banks including Standard Bank Group and trading and investment firms, such as Citic Resources Holdings Ltd, face hundreds of millions of dollars of losses. This week, Standard Chartered launched legal action to recoup its losses. Reuters
Brazilian beef to boost exports Exporters think the volume will rise dramatically after lifting the 2012 embargo
We believe that those markets will grow stronger, as a result of efforts that we did prior to the embargo to ship more value‑added products Chinese president Xi Jinping (R) walks to his meeting with his Brazilian counterpart Dilma Rousseff (not pictured) during an official welcome ceremony at Alvorada Palace in Brasilia, Brazil, 17 July 2014
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razilian beef exports to China will increase by more than US$1 billion next year following the decision by the world’s secondlargest economy to lift an embargo on Brazilian beef, the president of an industry group said. The additional sales to China are unlikely to hamper exports to Hong Kong, said Antonio Camardelli, president of group Abiec, which represents beef exporters in Brazil. Hong Kong gained relevance, alongside Russia, as a destination for Brazilian beef exports when China imposed the embargo. The embargo, which was lifted on Thursday, had been in place
since December 2012, when an atypical case of mad cow disease was discovered. Brazil is not a major supplier to China, with just 17,000 tonnes of beef exported before the embargo was implemented. “We believe that those markets will grow stronger, as a result of efforts that we did prior to the embargo to ship more value-added products,” Camardelli said in an interview. Brazil’s farm lobby, the National Confederation of Agriculture, praised China for ending the embargo but said Beijing would need to approve more slaughterhouses before shipments could really take off. Currently only eight Brazilian
Antonio Camardelli, president of group Abiec
slaughterhouses have permission to export to China, the confederation said. Camardelli said another nine facilities are prepared to export to China if approved. Although pork is a more common staple in the Chinese diet, as demand for protein has increased in the world’s most populous country, industry sources estimate that hundreds of thousands of tonnes of beef from countries including Brazil and India have been smuggled into China through Hong Kong and Vietnam. Reuters
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July 21, 2014
Greater China Brazilian President Dilma Rousseff (R) and her Chinese counterpart Xi Jinping observe an official welcome ceremony at Alvorada Palace in Brasilia, Brazil, 17 July 2014. Both met within the scope of the BRICS Unasur summit taking place from 15 to 17 July
Not just another BRICS in the wall The launch of a development bank and an emergency reserve fund appears to be a concrete attempt to address BRICS own circumstances Jeremy Tordjman
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y creating their own multilateral financial institutions, the BRICS emerging-market powers are shaking up global economic governance but remain far from dismantling the post-war system dominated by the West. For the past 70 years, the International Monetary Fund and the World Bank have been the pillars of the world’s economic system, coming to the rescue of countries in trouble and supporting development projects, respectively. But the Bretton Woods institutions are regularly criticised for their inability to reflect the growing and important contributions of the major emerging economies to the global economy. China, the world’s second-largest economy, continues to have just slightly more voting power in the IMF than Italy, about five times smaller. And, since their creation in 1944, the IMF and the World Bank have only been led by Americans and Europeans. “Broader global governance reforms have become stalled, despite the many commitments made by advanced economies to emerging markets to give them a more prominent role in international financial institutions and other international forums,” said Eswar Prasad, a trade policy professor at Cornell University and a former IMF expert. In this context, the launch Tuesday of a development bank and an
emergency reserve fund by the BRICS -Brazil, Russia, India, China and South Africa- appears to be a concrete attempt to address those inequities. “If the existing institutions were doing their jobs perfectly, there would be no need to go to the trouble of creating a new bank, a new fund,” said Paulo Nogueira Batista, who represents Brazil and 10 other countries at the IMF, in an interview. The mere creation of the two BRICS institutions sends a strong signal to Western powers, where some doubt the ability of the five powerhouses to surmount their individual needs and ambitions. The launches “are significant actions that represent a game changer as they turn statements and rhetoric about cooperation among these countries into reality,” Prasad said. Still, many areas of uncertainty cloud the new BRICS structures, giving the IMF and the World Bank a long lead on their fledgling rivals.
Battles for influence For now, only the BRICS countries will be able to draw from the $50 billion in the New Development Bank and $100 billion in the Contingent Reserve Arrangement. However, proof of the new institutions’ effectiveness will come when other countries knock at their door for money. “Will the BRICS take the financial risk to lend to other countries? And what conditions will they impose?”
We have not the least interest in distancing ourselves from the IMF. On the contrary, we wish to democratize it and make it as representative as possible Dilma Rousseff, president of Brazil
said an IMF official, who spoke on condition of anonymity. Accustomed to bailing out a country, and being reimbursed, in exchange for austerity conditions, the IMF has the kind of expertise that “doesn’t happen overnight,” the official said. Some also have concerns that the BRICS institutions -dominated by China- will be less careful about safeguarding the environment or fighting corruption when they make their financing deals.
Aware of their current limitations, the BRICS made a point to say they were working closely with the IMF. Some of their financing would be available only to countries already receiving Fund assistance. Dilma Rousseff, the president of Brazil, said the creation of the BRICS institutions did not mean her country was moving away from the IMF. “We have not the least interest in distancing ourselves from the IMF,” she said. “On the contrary, we wish to democratize it and make it as representative as possible.” Unsurprisingly, the Bretton Woods institutions responded with offers of cooperation. The IMF managing director, Christine Lagarde, said in a statement Wednesday that her staff would be “delighted” to work with the BRICS team on the reserve fund. The World Bank, facing other new development rivals and undergoing a major internal restructuring, welcomed the arrival of an “invaluable partner” in the battle against poverty, a bank spokesman told AFP. This display of friendliness, however, could in time give way to rivalries and battles for influence in the corridors of the 188-nation institutions, based in Washington. “The new institutions aren’t created against anyone,” said Nogueira Batista, the IMF representative. “But they are a first step toward a multilateral world.”
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July 21, 2014
Asia
Reliance Q1 profit beats estimates Investors have been fretting about Reliance’s oil and gas exploration business Aman Shah
A thermal power plant in India
I
ndian energy conglomerate Reliance Industries Ltd’s quarterly net profit topped market expectations, bolstered by strong revenue growth in its oil and gas business and higher margins in its core refining business. Reliance, which operates the world’s biggest refinery complex in a single location in western India, said average gross refining margin rose to US$8.7 per barrel for the June quarter from US$8.4 per barrel a year earlier. A 27 percent rise in sales at its oil and gas exploration and production business - driven by a sharp jump in its U.S. shale gas unit revenue - helped the company, controlled by India’s richest
man, Mukesh Ambani, post a 13.7 percent rise in the net profit in AprilJune, its fiscal first quarter. Investors have been fretting about Reliance’s oil and gas exploration business, which for more than two years has suffered sharply falling gas output from the Krishna Godavari D6 block off India’s east coast. Reliance says unexpected geology caused the decline in output, but this has been rejected by the oil ministry, which believes output has fallen due to non-drilling of the promised number of wells. The government has refused Reliance permission to recover $2.4 billion invested in D6 to develop offshore
gas fields in order to counter the drastic D6 output drop. Reliance - and its partners in the block, BP Plc and Niko Resource - are in arbitration with the government over the matter, and a repeatedly deferred rise in natural gas prices. Alok Agarwal, the chief financial officer of Reliance, said the company had not made any provisions related to the matter. The increase in gas prices, approved by the previous federal government, would have almost doubled the price of domestically produced gas from the current $4.2 per million British thermal unit from April 1. “We have said that a better gas price is a prerequisite for investment and nothing has changed,” Agarwal said. Reliance posted a net profit of 59.57 billion rupees (US$988 million) in the quarter ended June, rising from 52.37 billion rupees a year earlier. Revenue rose 7.2 percent to 1.08 trillion rupees, the company said in a statement on Saturday. Analysts on average expected it to post a profit of 56.14 billion rupees, according to Thomson Reuters data. Reliance, which has expanded into consumer-focused services like retail and telecommunications, is in the middle of its largest ever capital investment plan - a three-
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KEY POINTS Q1 profit 59.57 bln rupees vs 56.14 bln rupees estimates Gross refining margin US$8.7/bbl in Q1 from US$8.4/bbl yr ago Retail unit revenue up 14.5 pct in June quarter year, US$30 billion investment cycle ending March 2016. The company posted revenue of nearly 40 billion rupees from its retail business, a growth of 14.5 percent over a year ago. Reliance expects to double sales at the unit every three to four years. “We are further expanding our retail business in existing markets while exploring newer markets and channels,” Ambani said in the company statement. Shares in Reliance, India’s third most valuable company with a market capitalisation of roughly US$53 billion, ended down 0.6 percent on Friday at 976.75 rupees. The stock has risen about 9 percent this year. Reuters
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July 21, 2014
Asia ASEAN economic officials meet
India to tighten trade pact conditions Trade Ministry said it would “find it difficult” to support the protocol unless it was satisfied that adequate measures were taken on issues important to poor countries
A three-day ASEAN senior economic officials meeting is underway in Yangon to make preparations for an ASEAN economic ministers meeting scheduled for August, meeting sources said yesterday. The ASEAN Senior Economic Officials Meeting, first hosted by Myanmar and began on Saturday, was participated by delegates from ASEAN countries and dialogue partners and the Deputy SecretaryGeneral of ASEAN. The Saturday meeting discussed matters related to the ASEAN Economic Community (AEC), progress in integration of priority sector and reports which are going to be submitted to the institutions.
Matt Siegel
Japan to offer subsidy for fuel-cell cars Japan will offer at least 2 million yen (US$19,700) in subsidies for fuelcell vehicles, Prime Minister Shinzo Abe said according to media, as the government and Japanese carmakers including Toyota Motor Corp join forces to speed up the introduction the vehicles. The subsidy would mean that consumers would pay about 5 million yen for Toyota’s fuel-cell sedan, which is set to go on sale by the end of March 2015 and priced at about 7 million yen. Abe vowed to back the technology through subsidies and the purchase of the cars by government agencies.
Pakistan’s central bank keeps rate Central bank decided to leave its key policy rate unchanged at 10 percent for the subsequent two months, the State Bank of Pakistan said in a statement on Saturday. In recent months the rupee has remained stable as Pakistan has rebuilt its foreign exchange reserves following the successful sale of a US$2 billion Eurobond, an auction of 3G and 4G phone licences, and an injection of cash from bilateral and multilateral lenders.
Coal India union to oppose stake sale Unions representing workers at Coal India Ltd, the world’s largest coal miner, will oppose any move to sell a stake in the state-owned company as part of the new government’s plan to shore up its finances, a union leader said on Friday. The government, which has a 90 percent stake in the company whose total value is about US$40 billion, is considering the sale of a 10 percent stake, according to official sources. Prime Minister Narendra Modi’s administration is looking to raise a record US$10.5 billion from asset sales.
Prime Minister of India Narendra Modi speaks during the plenary session of the 6th Summit of the BRICS in Fortaleza, Brazil, 15 July 2014
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leventh hour negotiations to win Indian approval for a breakthrough global trade pact may not have succeeded in the end despite initial signs of progress, sources involved in the discussions said on Saturday. India is the most prevalent among a group of developing nations angry at rich countries for failing to address their concerns about a deal on trade facilitation -struck by WTO member states in Bali last year- that must be detailed by a July 31 deadline. Proponents believe the deal could add US$1 trillion to global GDP and 21 million jobs. But India’s Trade Ministry said on Wednesday it would “find it difficult” to support the protocol unless it was satisfied that adequate emphasis is being placed on negotiations about food security and other issues important to poor countries -sparking furious negotiations at the G20 Trade Ministers meeting in Sydney. Three officials involved in the negotiations, speaking under the condition of anonymity in order to speak frankly, expressed exasperation with what they described as a history of erratic behaviour on the part of the Indian trade team that made it difficult to trust. India has not provided any clear description of exactly what
US$1 trillion
added to global GDP
changes it would like made to the agreement, they said, although it would not matter anyway because no concessions were on offer given how difficult the negotiations had proven to conclude the first time round. The Indian demands appear to have shaken confidence in the new government of Narendra Modi, who came to power earlier this year with a pro-business agenda but now appears set to derail what several officials called the most significant global trade pact in two decades. Australian Trade Minister Andrew Robb said assurances had been given to all of the signatories to the treaty
that their concerns would be met and expressed optimism that it would be resolved before the deadline. “There was strong resolution around the table that India’s issues to do with food security would and should and will be addressed as decided previously and I think there will be discussions about how to satisfy the Indians and they won’t be left behind,” Robb told reporters. The row over subsidies has raised fears that the so-called “trade facilitation agreement”, the first ever global trade agreement under the World Trade Organization, will be derailed. A deal was only reached after New Delhi extracted promises that its concerns related to food subsidies would be addressed. India stockpiles food for its poor, putting it at risk of breaking current WTO rules. In Bali, WTO members agreed to give India a pass until 2017, while negotiating a permanent solution. “We are focused on implementing the full Bali package that will deliver for every country involved,” said Michael Froman, the U.S. Trade Representative. “Reinvigorating the multilateral system is too important to put at risk with any backsliding on commitments.” Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari interns Aries Un, Kam Leong Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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July 21, 2014
Asia
Aquino asks to reverse anti-stimuli ruling
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hilippine government lawyers urged the nation’s top court to reverse a ruling that annulled parts of President Benigno Aquino’s 144.4 billion-peso (US$3.3 billion) stimulus package that boosted the nation’s economy. The country’s executive branch has the power to reallocate and speed up the release of public funds, as it did by fast-tracking infrastructure spending in the three years through 2013, the lawyers said. “The President and his alter egos, in implementing a decidedly successful program, deserve to be afforded the traditional constitutional presumptions that apply to most other forms of public actions, especially the presumption of good faith,” the Office of the Solicitor General said in a 52-page pleading. The Supreme Court voted 13 to zero with one abstention to partially void the stimulus program on July 1, saying it encroached on congress’s final say on spending. Aquino has said the ruling would have a “chilling effect” on the economy as he tries to boost growth that slowed to 5.7 percent in the first quarter, the weakest since 2011. The July 1 ruling runs the risk of “putting our country’s development in a state of paralysis - or worse, reversing the massive progress we have already
made,” Aquino said in a speech on July 15. Several civic groups, including the Integrated Bar of the Philippines, sued the government last year, arguing that the stimulus program, dubbed the “presidential pork barrel,” violated congress’s exclusive power to appropriate funds. The president’s Disbursement Acceleration Program, or DAP, was also controversial because it gave perks to certain lawmakers.
Court ruling The court ruled the executive branch violated the separation of powers under the constitution by suspending certain projects and moving the remaining budgets to other agencies. It also barred the president from funding projects outside the budget law, and nullified the use of standby funds without certification from the national treasurer to show they are savings. In their pleading, state lawyers said that when Aquino assumed office in 2010, he had to stop some projects initiated by his predecessor that were found to be anomalous, which slowed public spending and hampered economic growth. The DAP allowed the president to “stop the flow of scarce resources from
World Bank President Jim Yong Kim (2-L) is applauded by Philippine President Benigno Aquino III (C), Budget Secretary Florencio Abad (L), Finance Secretary Cesar Purisima (2R) and Department of Social Welfare and Development Secretary Secretary Corazon Soliman (R) during their meeting at the Malacanang Presidential Palace in Manila.
projects that are failing and not moving and to reallocate them into projects that have higher chances of success,” Solicitor General Francis Jardeleza said. The program ended earlier this year, having met its goal of achieving economic growth of an average 7.4 percent gross in the first three quarters of 2013, Budget Secretary Butch Abad said in January.
Public works More than half of DAP approved in 2011 went to critical agencies such as the central bank and public works and housing departments, Aquino said this week. More than 33 billion pesos was
spent to repair roads and bridges, on flood control and other infrastructure projects, he said. More than 17 billion pesos or about 12 percent of DAP went to projects identified by lawmakers, local government officials and national agencies, according to a copy of a document posted on the budget department’s website. “The president has authority to transfer savings to other departments pursuant to his constitutional powers,” government lawyers said. The court must also recognize the “designed minimal role of the Supreme Court on these matters,” they said. Bloomberg News
Indonesia’s first target: to cut fuel subsidies Energy subsidies, which mainly benefit the rich, cost the government around US$20 billion a year and are the main factor behind a current account deficit Randy Fabi and Kanupriya Kapoor
T
he top priority of Indonesia’s likely next government will be to cut fuel subsidies to control the country’s widening budget deficit, a move it hopes to accomplish within the first 100 days in office, the vice presidential candidate said on Saturday. Energy subsidies, which mainly benefit the rich, cost the government around US$20 billion a year and are the main factor behind a current account deficit that is expected to be above 3 percent of gross domestic product this year. “There is no alternative. We have to reduce fuel subsidies,” Jusuf Kalla, the running mate of presidential frontrunner Joko “Jokowi” Widodo, told Reuters when asked what they would do in the first 100 days in office. “There is nothing you can do if 25 percent of your budget goes to the middle class (through fuel subsidies). This is crazy.” Jokowi and Kalla are expected to be announced the winner of the July 9 presidential election when the Elections Commission concludes its nationwide vote count within the next
few days. An official election result is expected to be announced by Tuesday. Private groups tracking counting of the ballots show Jokowi ahead of ex-general Prabowo Subianto with around 53 percent of the vote in the closest presidential election ever in the world’s third largest democracy. If confirmed the winner, Kalla said reducing fuel subsidies would be the new government’s top economic
priority once it takes office in late October. Kalla said he was keenly aware of how politically sensitive it was to cut fuel subsidies in Southeast Asia’s largest economy after hiking prices three times when he first served as vice president during the first term of outgoing president Susilo Bambang Yudhoyono. “From my experience, you will not spark any protests if you do it in good time and
with good style,” he said. Protests over fuel price increases contributed to the downfall of the long-serving autocrat Suharto in 1998. Kalla declined to say by how much it would initially reduce fuel subsidies. Jokowi has previously said he would gradually reduce fuel subsidies over a four or five-year period. Indonesian fuel prices are some of the cheapest in the world, currently priced at
There is nothing you can do if 25 percent of your budget goes to the middle class (through fuel subsidies). This is crazy Jusuf Kalla, running mate of Joko “Jokowi” Widodo
A supporter of Indonesian Presidential candidate from the Great Indonesia Movement party, Prabowo Subianto, poses for photographs near a bus with pictures of Prabowo Subianto and his running mate Hatta Rajasa during a gathering in Jakarta, Indonesia, 17 July 2014
6,500 rupiah (US$0.56) a litre for gasoline and 5,500 for diesel. “Indonesia is one of the biggest socialist countries in the world when 25 percent of its budget is going to only energy subsidies. Only Venezuela and Iran maybe have cheaper oil prices than Indonesia,” Kalla said. Reuters
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July 21, 2014
International Angola’s president orders guarantee of BES loans Angola’s president personally ordered that the state guarantee up to US$5.7 billion in troubled loans belonging to the Angolan unit of Portugal’s financially compromised Banco Espirito Santo, a Portuguese newspaper said on Saturday. BES, one of Portugal’s best-known banking institutions, is struggling to contain a crisis which erupted after an audit into its major shareholder Espirito Santo Financial Group revealed irregularities there, leaving a network of other companies controlled by the Espirito Santo family under scrutiny from investors and regulators.
GM without fix for some Cadillacs General Motors Co has ordered Cadillac dealers to stop selling some versions of the CTS model-range because the automaker does not have a fix yet for cars recalled in late June over an issue where engines can be shut off if the driver’s knee bumps the ignition key, the company said on Saturday. Details of incidents leading up to the June 30 recall, including three occasions where GM employees bumped the keys and shut off the engines.
Murdoch determined to buy Time Warner
Many investors say the best trading strategy around a potential takeover of Time Warner Inc by Twenty-First Century Fox is to wager that media baron Rupert Murdoch will pay up to get what he wants. The trick is that it may be too late to place the obvious bets. Time Warner said on Wednesday it had rebuffed TwentyFirst Century Fox’s roughly US$80 billion bid, or US$85 per share, in recent weeks over valuation and concerns that the Murdoch family will have too much power.
Commercial lending drives US loan growth U.S. regional banks are ramping up commercial lending to compete more aggressively with their national rivals, offering lower rates and bigger, longerterm loans to win new business as the economy recovers. Most of the big regional lenders reported double-digit percentage growth in commercial lending for the second quarter as businesses across the United States become more confident about borrowing. The downside of this renewed push into commercial lending is the impact on net interest margins, a closely watched measure of how much money banks make from their loans.
Will fate be sealed in next two weeks? 68 percent of S&P 500 companies so far are beating analysts’ profit expectations
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long hoped for improvement in the economy appears to be manifesting itself in secondquarter U.S. earnings, but the next two weeks could be the real test. Companies such as General Electric Co and Intel Corp have reported solid results. In addition, GE believes now is a ripe moment to spin off its private label credit card division in the hopes growing consumer demand will make it more attractive. Intel declared that personal computer sales have stabilized, while it forecast third-quarter revenue above Wall Street’s expectations. Profit growth for the second quarter is now estimated at 6.7 percent - excluding results from Citigroup Inc., which was hit by a big adjustment from a mortgage settlement - better than where they stood at the end of June. In addition, 68 percent of S&P 500 companies so far are beating analysts’ profit expectations, above the 63 percent long-term average, according to Thomson Reuters data. A similarly high percentage of companies are beating revenue forecasts. “Analysts may be underestimating the level of prospective improvement in the second quarter,” wrote Carmine Grigoli, chief investment strategist at Mizuho Securities in New York. The latest profit estimate is up from a July 1 forecast of 6.2 percent, while revenue growth, now 3.2 percent, is on track to be the highest since the third quarter. Still, it’s easy to overestimate the excitement. Many of the early reporting is by financial companies, not always the best barometer of Main Street activity. The next two weeks, however,
Intel headquarters in Santa Clara, USA. The company reported solid results
will see 60 percent of the S&P 500 release their results. That is key for investors looking for confirmation the anticipated economic rebound from the first quarter is more than just weather related. Among the companies set to release figures are Apple Inc., McDonald’s Corp, Coca-Cola Co and Caterpillar Inc. So far in July, six of 10 S&P sectors - particularly healthcare, consumer staples and energy - have shown upward revisions from June, according to Citigroup. “The second quarter is going to be much stronger than the first for the reasons we all know, the weather. Investors are trying to decipher whether this improvement is a weather-related bounce or if there’s actually internal growth happening,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
The U.S. economy contracted at a 2.9 percent annual pace in the January-March period, its worst performance in five years. Recent jobs and other economic data suggest the economy was growing briskly heading into the second half, with growth forecasts for the second quarter now topping a 3 percent annual pace. June’s payrolls report showed a surge in job growth and the jobless rate closing in on a six-year low. One promising sign for the second quarter: typically pessimistic analysts’ forecasts, which most S&P 500 companies still tend to beat, declined just 2.2 percentage points between April 1 and July 1. That is the smallest overall decline since the first quarter of 2011, Thomson Reuters data showed, and about half the average decline seen in the last five years. Reuters
Ponzi’s victims cannot file compensation claims The decision also marks a major loss for the SEC
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U.S. appeals court dealt a blow to the victims of financier Allen Stanford’s Ponzi scheme on Friday, ruling that they were not eligible under federal law to file claims seeking compensation for their losses. The decision by the U.S. Court of Appeals for the District of Columbia Circuit also marks a major loss for the Securities and Exchange Commission. The SEC was seeking to overturn a lower court’s decision from 2012, in which a federal judge rejected a request by the agency to force the Securities Investor Protection Corp (SIPC) to start court proceedings for the fraud victims, some of whom lost millions of dollars. “In declining to grant the SEC’s requested relief, the district court expressed that it was ‘truly sympathetic to the plight’ of the victims,” wrote Judge Sri Srinivasan in the unanimous opinion. “We fully agree. But we also agree with the district court’s conclusion ...,” Srinivasan wrote. SEC spokesman John Nester said the agency was reviewing the decision.
In declining to grant the SEC’s requested relief, the district court expressed that it was ‘truly sympathetic to the plight’ of the victims. We fully agree. But we also agree with the district court’s conclusion Judge Sri Srinivasan
The agency has 45 days to decide whether to appeal it, either by seeking a re-hearing before the appeals court or by filing a petition with the U.S. Supreme Court. Allen Stanford was convicted of fraud and sentenced in June 2012 to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua. Angela Shaw Kogutt, the founder of the Stanford Victims Coalition, told Reuters Friday that the victims were not giving up. “We will continue to pursue all options available to the victims,” she said, adding that her group is weighing legal action against SIPC, and will pressure the SEC to continue fighting. The case marks the first time that the SEC, which oversees the SIPC, has filed a lawsuit against the non-profit corporation to try and force it to start a court liquidation proceeding. Reuters
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July 21, 2014
Opinion Business
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Leading reports from Asia’s best business newspapers
PHILSTAR
The great income divide Kemal Dervis
Former Minister of Economic Affairs of Turkey and former Administrator for the United Nations Development Program (UNDP) Vice president of the Brookings Institution
Bank lending to agrarian reform beneficiaries remained below the level mandated by law during the first quarter, data from the Bangko Sentral ng Pilipinas showed. Universal, commercial, thrift, rural, and cooperative banks extended only P26.937 billion to farmers granted lands by the government, P151.097 billion short of the required P178.034-billion allocation. Borrowings for agriculture and fisheries, meanwhile, summed up to P296.816 billion as of March, higher than the needed P267.051billion allotment. Data from the central bank showed that throughout 2012 and 2013, banks have been unable to comply with the mandated 10 percent allocation.
THE NEW ZEALAND HERALD A major insurer has pulled an about-turn on breast reconstruction costs that had left cancer patients financially and physically distressed. Sovereign Insurance’s cap on payouts above NZ$15,000 was highlighted by the Herald on Sunday in March. It meant much of the surgery breast cancer patients required was not paid for by the insurer. Sovereign has now decided to remove the cap from its two health insurance policies. Chief officer health Joyce Au-Yeung said the NZ$15,000 cap was introduced in 2010 to “provide certainty” for women.
THE INDIA TIMES Mukesh Ambani led Reliance Industries (RIL) on Saturday reported a 5.5% growth in net profit to Rs 5,649 crore on a standalone basis for the quarter ended June 30 (Q1FY15). The lower growth in net profit was because RIL’s other income, that used to contribute over a third of its profits just a few quarters ago, fell considerably to Rs 2,046 crore since the company has deployed its surplus cash reserves for business expansion. The drop in other income was partially offset by a substantial drop in interest outgo during the quarter, an RIL release showed.
THE ASAHI SHIMBUN Using the latest in information technology, farmers are creating digital records of rice harvest yields to identify problems over the winter and formulate more effective plans for growing the following year. Smart agricultural machines are collecting the data and executing the plans. The technology is intended to break from a reliance on “experience and intuition” in rice production by applying science and computer technology. The system gathers the data on rice planting and harvests and carefully considers the optimal rice farming approach for each paddy, year by year.
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ASHINGTON, DC – Thomas Piketty’s book Capital in the Twenty-First Century has captured the world’s attention, putting the relationship between capital accumulation and inequality at the centre of economic debate. What makes Piketty’s argument so special is his insistence on a fundamental trend stemming from the very nature of capitalist growth. It is an argument much in the tradition of the great economists of the nineteenth and early twentieth centuries. In an age of tweets, his bestseller falls just short of a thousand pages. The book’s release follows more than a decade of painstaking research by Piketty and others, including Oxford University’s Tony Atkinson. There were minor problems with the treatment of the massive data set, particularly the measurement of capital incomes in the United Kingdom. But the long-term trends identified – a rise in capital owners’ share of income and the concentration of “primary income” (before taxes and transfers) at the very top of the distribution in the United States and other major economies – remain unchallenged. The law of diminishing returns leads one to expect the return on each additional unit of capital to decline. A key to Piketty’s results is that in recent decades the return to capital has diminished, if at all, proportionately much less than the rate at which capital has been growing, thereby leading to an increasing share of capital income.
Within the framework of textbook microeconomic theory, this happens when the “elasticity of substitution” in the production function is greater than one: capital can be substituted for labour, imperfectly, but with a small enough decline in the rate of return so that the share of capital increases with greater capital intensity. Larry Summers recently argued that in a dynamic context, the evidence for elasticity of substitution greater than one is weak if one measures the return net of depreciation, because depreciation increases proportionately with the growth of the capital stock. But traditional elasticity of substitution measures the ease of substitution with a given state of technical knowledge. If there is technical change that saves on labour, the result over time looks similar to what high elasticity of substitution would produce. In fact, just a few months ago, Summers himself proposed a reformulation of the production function that distinguished between traditional capital (K1), which remains, to some degree, a complement to labour (L), and a new kind of capital (K2), which would be a perfect substitute for L. An increase in K2 would lead to increases in output, the rate of return to K1, and capital’s share of total income. At the same time, increasing the amount of “effective labour” – that is, K2 + L – would push wages down. This would be true even if the elasticity of substitution between K1 and
The tendency of these capital owners to save a large proportion of their income – and, in many cases, not to have a large number of children – would augment wealth concentration further
aggregate effective labour were less than one. Until recently not much capital could be classified as K2, with machines that could substitute for labour doing so far from perfectly. But, with the rise of “intelligent” machines and software, K2’s share of total capital is growing. Oxford University’s Carl Benedikt Frey and Michael Osborne estimate that such machines eventually could perform roughly 47% of existing jobs in the US.
If that is true, the aggregate share of capital is bound to increase. Given that capital ownership remains concentrated among those with high incomes, the share of income going to the very top of the distribution also will rise. The tendency of these capital owners to save a large proportion of their income – and, in many cases, not to have a large number of children – would augment wealth concentration further. Other factors could help to augment inequality further. One that has been largely neglected in the debate about Piketty’s book is the tendency of the superrich to marry one another – an increasingly common phenomenon as more women join the group of high earners. This, too, causes income concentration to occur faster than it did two or three decades ago, when wealthy men married women less likely to have comparably large incomes. Add to that the modern scale effects on professional and “superstar” incomes – a result of winnertake-all global markets – and a picture emerges of fundamental forces tending to concentrate primary income at the top. Without potent policies aimed at counteracting these trends, inequality will almost certainly continue to rise in the coming years. Restoring some balance to the income distribution and encouraging social mobility, while strengthening incentives for innovation and growth, will be among the most important – and formidable – challenges of the twenty-first century. The Project Syndicate 2014
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July 21, 2014
Closing Waning lock-up shares eligible for trade
PMI to show how China is expanding
The value of lock-up shares becoming eligible for trade on China’s stock market this week will dip from the previous week, according to data from the country’s two stock exchanges (Shanghai Stock Exchange pictured). From Monday to Friday, 22 listed companies on the two bourses will see shares worth 23 billion yuan (US$3.74 billion) released to the market after lock-up agreements expire. The value represents a minor decline compared to 24.86 billion yuan the previous week. Under China’s market rules, major shareholders of non-tradable stocks are subject to a lock-up period.
In China, the first round of monthly PMIs, due on Thursday, should show whether the world’s second largest economy is stabilising thanks to Beijing’s measures to shore up growth. The preliminary HSBC (HK headquarters pictured) PMI survey showed in June that factory activity expanded for the first time in six months. The July index will come a week after data showing China’s economy grew slightly faster than expected in the second quarter while new home prices fell in June for a second straight month, prompting speculation about further state stimulus.
Western Ghats in India during monsoon season
Late monsoon turns into nightmare Even if the monsoon revives during the rest of the planting month of July, farmers here expect losses of at least a fifth in summer-sown crops like rice, corn, cane, soybean and cotton
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ndian farmer Asghar Bhura scrapes a living by growing sugarcane, but this year’s late monsoon has left his tiny plot parched and he will earn nothing from his harvest. Bhura will have to go and work for a big grower to feed his family of six, making 250 rupees (US$4.00) a day, as he did when India suffered its last severe drought in 2009. “I have no option but to become a bonded labourer just to feed my family one meal a day,” said Bhura, 50, looking at his stunted crop on his third of a hectare of land. Bhura’s borderline existence is shared by many farmers in the district of Shamli, in the sugarcane belt of India’s most populous
state, Uttar Pradesh, three hours’ drive north of the capital New Delhi. With this year’s monsoon rains several weeks late, the world’s second-largest sugar and rice producer is on the verge of widespread drought in the face of a developing Pacific Ocean weather event known as El Nino, which is often associated with drought in South Asia. In good years, the fourfifths of local farmers who tend a hectare or less, can get by. In bad years, they slide into debt. Some lose their land. Others are forced into servitude. Hunger for land and water feeds social tensions. In nearby Muzaffarnagar, communal clashes last year
killed about 65 people, most of them Muslims, and displaced thousands more. India’s farm sector accounts for about 14 percent of the economy but two thirds of its 1.2 billion people depend on farming to live. Most poor live on the land. Areas that lack irrigation are most vulnerable when the rains fail. Although the national weather office said on Thursday that the monsoon had covered all of India, rainfall in the first six weeks of the wet season has been more than a third below normal. A poor monsoon could raise imports of cooking oil to India, the leading buyer of vegetable oils. The country may also cede its position as
top rice exporter to Thailand. Cane and basmati rice fields in Shamli, a district carved out of Muzaffarnagar three years ago, showed gaping cracks on a recent visit. “For me, my wife and two sons and two daughters, the journey to hell has already started. Our stomachs will be half empty soon,” said Bhura, whose gaunt face and unkempt beard betrayed anxiety and exhaustion.
Late rains Even if the monsoon revives during the rest of the planting month of July, farmers here expect losses of at least a fifth in summersown crops like rice, corn,
cane, soybean and cotton. India harvested 348 million tonnes of cane last year, with an average sugar content of 11 percent. Productivity in Uttar Pradesh typically lags that of other growing regions like subtropical Maharashtra due to poorer soils and a less favourable climate. Another two weeks without rain could lower both tonnage and sugar content, possibly to 8 percent, local farmers reckon. Farmers worry the impact this year could be worse than five years ago, when India suffered its worst drought in four decades. Subsequent supply shortages from the country pushed New York sugar prices to 30-year highs.
Is Germany still the champion?
Last unanimity at Bank of England?
U.S. consumer, house prices muted
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or Germany, the views of purchasing managers (PMIs) on Thursday and of company chiefs surveyed for Friday’s influential Ifo report should show whether a slowdown of Europe’s largest economy detected in the second quarter has spread to the third. Weakness in German industrial output and both domestic and foreign orders have pointed to a poor April-June period after 0.8 percent expansion in the first three months of the year, the fastest rate in three years. Last week’s ZEW index of analyst and investor morale for July, which dropped this month to its lowest level since December 2012, suggested that the third quarter had also started shakily. Forecasts for German manufacturing and services PMIs are broadly stable this month from last, with a third consecutive decline expected for Ifo’s business sentiment index, albeit only a slight dip following a sharper than expected fall in June. “Latest data have been on the soft side and it has really raised people’s attention,” said Reinhard Cluse, chief European economist at UBS.
he Bank of England publishes minutes of its July meeting on Wednesday which will be scrutinised for any signs of growing unease among policymakers at the prospect of keeping interest rates at a record low while Britain’s economy recovers quickly. The bank last month expressed surprise at some financial market prices it said implied a relatively low probability of a rate increase this year. Many economists expect some members of the Monetary Policy Committee to break ranks and vote for a rate hike, especially if a jump in inflation in June proves not to have been a blip. British inflation surged to a five-month high of 1.9 percent in June and house prices rose at their fastest pace in a year, prompting investors to increase bets on a rate rise before the end of 2014. The consensus is for a first hike in November. GDP data due on Friday is expected to show that Britain’s economy finally regained its precrisis size.
Reuters
cross the Atlantic, consumer price inflation is seen pulling back to 0.3 percent month-on-month in June from 0.4 percent in May. May’s price rises, the largest in more than a year, may have reassured Fed officials who had expressed concerns that inflation was too low. However, Federal Reserve Chair Janet Yellen told the Senate last week that early signs of a pickup in inflation were not enough for the Fed to accelerate its plans to raise interest rates, a move currently expected in mid-2015. While data on economic activity and jobs have been broadly positive, there are mixed signs from the housing market, struggling since a rise in mortgage rates caused it to stall in late 2013. New home starts fell in June to a nine-month low, but permits are running ahead of starts, which suggests building activity will pick up in the months ahead. Housing price figures for May are due on Tuesday after declines of annual home price inflation for eight of the nine months to April.