Macau Business Daily, Aug 18, 2014 by Business Daily

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 606 Monday August 18, 2014

CE announces manifesto

Year III

he sole Chief Executive election candidate has announced his manifesto. Incumbent CE Fernando Chui Sai On has identified four pillars of policy. The living environment, development, social solidarity and better governance take centre stage. He also said that the scale and speed of development of the gaming industry would be curtailed in the interests of a diversified economy. Election day is August 31 Page

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Sands China on a roll

VIP and debt provisions weigh on Genting Singapore

The gaming operator posted adjusted EBITDA of US$1.74 billion in the first six months of the year. Almost 36 percent more than in the same period a year earlier. The only fly in the ointment is the government suspension of its Parisian Macao project

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Mass market casino cashcow

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Credit boom

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Loans to foreign companies have increased 20-fold. Total credit approved by Macau banks increased as much as 30 percent in June. New mortgage loans to non-residents amounted to MOP2.25 billion Page 4

Shorter red-tape The Chinese cabinet is wielding its scissors. It plans to eliminate 21 processes in several industries. The cabinet also urged banks to reduce charges to companies in order to reduce costs

HSI - Movers August 15

Name

%Day

China Mobile Ltd

5.78

Lenovo Group Ltd

2.66

CITIC Pacific Ltd

1.35

Power Assets Holdi

1.33

Wharf Holdings Ltd

1.28

Want Want China H

-0.91

China Unicom Hong

-0.92

AIA Group Ltd

-1.04

Tingyi Cayman Islan

-1.08

China Resources Lan

-1.16

Source: Bloomberg

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INTERVIEW

Restructure needed

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Chui Sai On’s administration needs restructuring, says Sonny Lo Shui Hing. The head of the department of Social Sciences at the Hong Kong Institute of Education tells Business Daily that the SAR Government should be more alert. To public unrest. To livelihood issues, transportation and housing. Overall, he rates the political situation here as ‘relatively stable’ Pages 6 & 7

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August 18, 2014

Macau

‘Controlled’ gaming on the cards Can Macau divest itself of its sole dependence upon the gaming industry within five years? While the answer may remain unknown for now, Chui Sai On said his future administration would strive to build a diversified economy by controlling the scale of the gaming industry Kam Leong

kamleong@macaubusinessdaily.com

he only candidate for the fourth term Chief Executive election, Fernando Chui Sai On, officially announced his political platform on Saturday morning. He stated that the scale and speed of development of the gaming industry would be curtailed in the interests of a diversified economy. The political platform presentation was held by the Electoral Affairs Commission in the Macau East Asian Games Dome. Some 265 Commission members attended, of which only 17 were able to raise questions for Mr. Chui during the Q&A session. These focused primarily on housing, human resources, the political system and education issues. In his platform address, Mr. Chui spoke about the city’s housing, transportation issues and the reorganisation of government structure, in addition to policies controlling the gaming industry. The whole platform comprises four pillars; namely, the living environment, development, social solidarity and better governance.

Controlling the gaming industry The next government administration will control the scale of the gaming industry in addition to extending its supervision of it, according to Mr. Chui’s platform. Although he said that a group would review the issuing of casino licences he did not reveal if the government will reduce the number of licences. However, he pledged that no imported labour would be hired as dealers in the next five years in order to protect the benefits of local employees. Meanwhile, casino operators would be expected to assume the responsibility of arranging housing and means of transportation for their non-resident workers. In addition, ‘profession authentication’ will be promoted in the gaming industry, according to Mr. Chui, who said that the government would offer opportunities for gaming workers to obtain higher education, in order to cultivate more local medium to high management staff in the casinos.

[private housing] are really high in the market at the moment; hence, citizens should consider more before they actually purchase,” he said. “However, as a capitalist city, we cannot build only public housing on all the land although such an issue is our main focus right now.” With regard to transportation, the Chui administration will control the numbers and routes of casino shuttle buses to ease traffic congestion. It would also extend the supervision of taxis and study the issuing of a specific taxi licence.

Reorganising government structure

“We don’t hope that Macau people can only be dealers in casinos but [hold] higher positions,” Mr. Chui said during the Q&A session. He said that the government had held several meetings with the gaming companies willing to offer more management positions to promote their stuff.

Diversified economy, investment fund He also said that the gaming industry in Macau has entered a period of adjustment from its previous rapid development. The government will increase the promotion of nongaming elements in the city in order to achieve a diversified economy, such as continuing to develop the MICE industry, the cultural and creative industries as well as Chinese traditional medicine. The government will also support ‘Made in Macau, Macau Creativity’ brands by giving priority to such brands to be purchased by the government. Meanwhile, a long-term system of allocating fiscal dividends as well as a capital growth fund for the Special Administrative Region will be created

to make better use of the city’s fiscal reserves to get higher returns. “We need to emphasise a moderately diversified economy because we have to prevent [the chance] that a crisis might be brought [about] by the single economy . . . [In addition] when an unexpected crisis happens, returns from the fund may still ensure part of the income of the government,” Mr. Chui said.

Housing and transportation He also said that the future government will review and analyse the planning of reclaimed Zones B, C, D and E in the new urban area, and strive for the completion of parts of the public housing construction in Zone A by 2020. In addition, the government may consider offering more types of public housing, such as allowing people to rent their flats prior to actually purchasing them. As the incumbent Chief Executive, Mr. Chui announced the increase in numbers of public housing earlier, saying that the public housing units in Zone A of the new urban area will be increased to 28,000. “In my opinion, the prices of

Castles in the air Kam Leong

kamleong@macaubusinessdaily.com

hile there is a possibility that the government may control the scale of the gaming industry in the future, Ambrose So Shu Fai, chief executive of Sociedade de Jogos de Macau (SJM), said he believes that the industry is not worried that such a development would

affect their businesses. “Slowing down the growth [of the business] will not [overly] affect us. If you observe the overall economic development around the world, especially in Southeast Asia, it is hard [for anywhere] to achieve [economic] double digit growth like before,” Mr.

So told reporters during the political platform presentation on Saturday. He believes that the general public would like to see healthy and sustainable growth in the gaming industry. He does not support the issue of more gaming licences in the near future as this would only

Mr. Chui told reporters that he will retain the government structure of five secretaries but the administration will be streamlined to resolve the problem of functions overlapping different departments. Moreover, the government will review the central recruitment system, and re-evaluate the wage level and purchase ability of civil servants, especially those occupying lower grades. An accountability system will also be established for different grades of government department. Asked by reporters about his opinion on some associations suggesting political reform next year, Mr. Chui stated that this opinion was only one side of the coin, while he had also heard the other side of opinions. He said that democratic development would rely on the demands of society. “There are many different opinions in society. Young people like voicing out their own perspectives, which a government should actually listen to,” he responded when asked by Commission member Agnes Lam Iok Fong if he would promote universal suffrage for the CE election in his future term. Mr. Chui’s election campaign period finishes August 29. As the only candidate in the election, he will win the election if he can get more than 200 Commission members’ ballots on Election Day – August 31.

“make the problem of human resources worse.” In addition, he agrees that the gaming business should not be the only industry in the city to be developed. According to the Chief Executive, as stated in his political programme, gaming operators will be responsible for offering housing to their non-resident workers, a move which Mr. So says the government had never mentioned or brought up until now. “Well, this is something I’ve heard for the first time; of course, we’ll keep dialogue open with the government to know exactly what their

policy is and whether we can cope with the situation,” said Mr. So, adding that “at the present moment, we do offer housing allowances to non-resident workers.” However, Mr. So thinks that if the government requires the gaming operators to build homes for its imported workers then the government should provide land to the operators. “We cannot build in the air, so where does the land come from? We have to talk with the Macau Government,” he said. He added that it is not difficult for the government to provide operators with land to build such housing on.

August 18, 2014

Macau Changing of the guard The former spokesperson of China’s Ministry of Commerce, Mr. Yao Jian, has assumed the position as one of the vice-directors of Beijing’s representative China Liaison Office in Macau, a press statement released by the unit has announced. The 52-year-old official has been the ministry’s spokesperson since October 2008, and was the deputy mayor of Qingdao City from August 2011 to September 2012, state-run media outlet China News Agency reported on Friday. Meanwhile, Ms. Qiu Hong, a vice-director at the Liaison Office who also served at the Ministry of Commerce prior to working in Macau, has stepped down from the Office, the press statement said.

Sands China posts record H1 profit Following the robust growth of its earnings in the first half of the year, the casino operator is still awaiting the resumption of work on its major new Cotai project Stephanie Lai

sw.lai@macaubusinessdaily.com

asino operator Sands China Ltd has posted a record adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$1.74 billion (13.87 billion patacas) for the first half of this year, a rise of 35.7 percent from a year ago, fuelled by growth in the mass and premium mass segment. Most of the operational profit came from Sands’ flagship property, The Venetian Macao, which recorded an increase of 23 percent to US$872.9 million. Sands Cotai Central’s adjusted EBITDA also saw a leap of 85.2 percent to US$513 million, the casino operator noted in its interim results filed with the Hong Kong Stock Exchange on Friday.

First-half net revenue for Sands China reached US$5.08 billion, an increase of nearly 25 percent from US$4.07 billion a year ago, while the group’s profits increased by 45.7 percent to US$1.37 billion. Provider of the city’s largest capacity in terms of gaming area and number of hotels, Sands China is facing the uncertainty of the earlier suspended works of its new Cotai casino-resort project The Parisian Macao. The suspension of construction activities has lasted some two months following an on-site accident at the property in June; Sands China noted in its Friday filing that it is ‘pending receipt of certain government approvals, which management has

been informed are scheduled to be issued in October 2014’. The US$2.7 billion integrated resort project - featuring a halfscale replica of the Eiffel Tower - is to include a gaming area for an unspecified number of gaming tables, as well as a hotel with over 3,000 rooms, suites and retail, entertainment, dining and meeting facilities. The Parisian Macao project is slated to open in late 2015. ‘The company is working to accelerate the permit approval process, and as with projects of this nature, will continue to analyse options for both a full and phased opening of the facility in 2015,’ Sands China wrote in its interim results filing.

August 18, 2014

Macau

Loans to foreign companies grow 20-fold Total credit given by banks in Macau increased by 30 percent in June Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

ortgage loans to foreign companies in Macau skyrocketed in June, growing more than 20-fold from a year ago, as firms used residential properties as collateral (guarantee) for access to credit to finance their activities here. The incorporation of new companies in Macau is beating records every quarter; since the beginning of the year more than 2,500 businesses have begun operating in Macau. The newly approved credit is boosting Macau banks’ balance sheets. According to data released by the Monetary Authority of Macau (AMCM) on Friday, new mortgage loans to nonresidents amounted to 2.25 billion patacas in June, a 20-fold increase from a year ago, when mortgages to foreigners in Macau reached 110 million patacas. The huge increase was ‘mainly driven by loans approved to enterprises, using uncompleted units of residential properties already acquired as collateral and for purposes other than purchase of residential properties,’ the AMCM said. New mortgage loans approved for residents also posted a solid performance. They increased 16.4 percent from May and more than doubled (jumping 140 percent) from a year ago. Banks here approved 6.93 billion patacas in credit for residents to buy property.

In total, the new mortgage loans grew to 9.18 billion patacas in June from 6.04 billion patacas in the previous month, a 51.8 percent rise, AMCM said. Compared to June 2013, the value of new mortgages tripled (an increase of 207.4 percent). The increasing price of homes in Macau is forcing residents and non-residents to ask banks for bigger loans. Today, the Macau banking system has outstanding mortgage loans of 137 billion patacas. That’s 5.4 percent more than in May (130

billion patacas) and 30 percent above what was reported a year ago, AMCM data reveals. The mortgage market is still dominated by Macau’s clients, responsible for 94 percent of the total of outstanding loans. Compared to May, the outstanding amount of credit for residential grew 4 percent and 34.6 percent in June to residents and non-residents, respectively. New commercial real estate loans increased by 95.1 percent in June compared to May to 10.9 billion patacas. Of these, almost all – 99

percent – was granted to residents. In terms of value, new real estate loans for commercial purposes to residents doubled – increasing 97 percent – while those to non-residents remained flat, decreasing 0.7 percent. On an annual basis, new approvals of commercial real estate loans grew 181.2 percent. Non-performing loans in Macau continue to be almost nil. The delinquency ratio for mortgages was 0.06 percent for all credit for housing, while for commercial purposes it stayed unchanged at 0.08 percent.

Taiwan putting brakes on low-cost tourism UM maintaining The Taiwanese Government is concerned that foothold in Taipa low-cost tours are affecting the quality of tourism, thus it is considering preventing tourists from joining high-quality tour groups flying from Macau, Hong Kong or other jurisdictions João Santos Filipe

jsfilipe@macaubusinessdaily.com

aiwan will implement stricter rules to evaluate the quality of Chinese tour groups when they apply for entry permits in order to avoid the deterioration of travel quality, the Taipei Times reports. The new measures will affect Chinese mainlanders flying to Taiwan via Macau Airport. According to the Taiwanese newspaper, Lai Ping Jung, director of division for hotel, travel and training division of the Tourism Bureau, said that Chinese tourists joining high-quality tour groups must arrive through direct crossstrait flights or via Kinmen, Matsu or Penghu. This will prevent tourists from joining these tours group when they arrive through Macau, Hong Kong or other places. “We’ve found that tourists arriving through Hong Kong,

Despite moving to a new campus in Hengqin the University of Macau will still maintain a presence in Taipa to improve the quality of Macau’s higher education

W Macau or other places tend to be from all over China and join the tours organised by travel agencies in Hong Kong or Macau,” Lai Ping Jung said. “The relatively cheaper flights between Taipei and Hong Kong in comparison to the direct cross-strait flights have left room for low-priced groups to exist,” he said. The Taiwanese Government believes that when travel agencies offer low-cost tours they will compensate for their losses through commissions earned from shopping stops,

which will impact the quality of the tours. The low-cost tours lower the quality of travel offerings and disrupt the market, the Tourism Bureau said. Another measure will regulate the number of shopping stops that highquality tours may make. According to the Taiwanese Tourism Bureau, the number of Chinese mainlanders arriving from Macau, Hong Kong or other places accounts for between 19 percent and 35 percent of all Chinese tourists in Taiwan.

hile the University of Macau has moved to a new campus in Hengqin, Zhuhai, the government has announced that the original campus will be used to invest in and develop higher education here. ‘As the works to move the University of Macau from the old campus in Taipa to the new one in Hengqin Island are coming to an end, the government of the Special Administrative Region of Macau has announced that the old Taipa facilities will be used for the development of higher education in articulation with the need to discover and promote new talent,’ reads a government statement. ‘The government has already announced that the University of Macau will be allowed to use some facilities,

such as the University of Macau building that from now on will be known as the University of Macau (Taipa Hill),’ says the statement. ‘Also the Centre for Continuing Education, the Centre for Macau Studies and the Centre for Engineering Research and Testing will be kept in the same buildings.’ The handover of Macau of the Sports Complex has yet to be considered. There will be a refurbishment of the building in order to increase its size and create more space in order to adequately meet the requirements of higher education institutions. Also, the complex is expected to be opened to the general public. The new campus in Hengqin cost approximately 9.8 billion patacas and was entirely paid for by the government.

August 18, 2014

Macau Brought to you by

HOSPITALITY More Rooms In the last eight full quarters, the number of guests staying in local hotels represented about one-third of all Macau visitors in the period. That share has been rising, certainly boosted by the opening of various new lodging facilities and the significant increase in the amount of rooms entailed. The biggest contributors to this evolution have been guests from the Mainland. Their figure rose by almost 72 percent between the first half of 2010 and the first half of 2014, bringing the figures in that period from less than 2 million guests up to more than 3.4 million. That rate stands significantly above the overall growth rate, which in that period was set at the comparatively mild value of 39.5 percent.

The next major contributors to the hotels’ occupancy rates follow very different paths. Taiwan also tells a positive story, albeit with a much lower growth figure than the mainland: the growth registered in the period was just below 25 percent. But the trend may be somewhat underestimated due to the unexpected drop in the number of guests recorded in the first half of this year. That development reversed the gains consistently made in recent years. A similar slowdown in the last period happened in Hong Kong. The coming months will tell if this presaged a trend reversal. We must note, however, that in the Hong Kong case that sharp break further accentuated the losses noticed since 2012. The number of guests from Macau, on the contrary, kept rising. For the first time they represented more than half of the corresponding figure for Hong Kong. The remaining Asian countries, taken together, are following a path quite similar to that of Hong Kong.

9.8%

Macau hotel guests growth in the first semester, year-on-year

Government needs restructuring, says political analyst The next administration should focus on restructuring and enhancing the coordination between different departments. So says the head of the department of Social Sciences at the Hong Kong Institute of Education, Sonny Lo Shiu Hing, in an interview with Business Daily. Mr. Lo believes that the government needs to be more alert to public unrest in order to avoid events such as the recent demonstrations against the top public officials bill. Still, the head of department believes Macau’s political situation is relatively stable, and the next government should try to maintain the current status quo. As the main priorities for the new administration, he expects it to focus on livelihood issues, transport and housing, as these top the list of public concerns. Luciana Leitão leitao.luciana@macaubusiness.com

How would you rate Macau’s current political situation? Very stable, relatively speaking, because there will only be one Chief Executive candidate in the elections and the local prodemocracy movement is still relatively weak. Although 20,000 people suddenly went onto the streets to protest against the bill concerning the benefits of principal officials, overall, Macau is politically highly stable. Considering it was the first time Macau had witnessed such huge demonstrations, does this mean anything? For the first time in Macau’s history suddenly 20,000 people protested against the government. It was due to several reasons: suddenly, the Macau identity erupted because many young generations of Macau citizens believe that the bill concerning principal officials was against the interests of Macau citizens. Number two: Macau citizens utilised social media, especially the Internet, for mobilisation, which was unprecedented. Number three: the government appeared to calculate that the public reaction to the bill - because the government tended to rely on the Legislative Assembly to deal with the content of the bill and the Legislative Assembly Committee – would not be strong, so I think there were miscalculations not only by the government but also by the Legislative Assembly. Due to these three factors, we saw an unprecedented number of young protesters on the streets. Do these demonstrations change something in the current Macau political landscape? The huge demonstrations will change the political situation in two aspects: number one, the government of Macau will be more sensitive to public protest and opinion. This time, we could see that the Chief Executive

The bill itself was only a stimulus to trigger the protest but underlying economic prosperity in Macau’s casino capitalism [culture] lies public discontent especially among the young citizens of Macau

immediately met some of the key legislators, including the Legislative Assembly president, in order to have the bill toned down or eventually delayed, in order to deal with the demands of the public. Also, these protests have stimulated more young people to continue to press the government in the coming years — these protests represent a change in the generation of young democrats in Macau because the older generation of Macau democrats have become older or more conservative in terms of strategy and tactics from the perspective of young citizens. We’ll see more activities from young Macau people who have a much stronger Macau identity than the previous generation of Macau democrats. Were these demonstrations only because of the bill or are they, in fact, related to structural issues? Definitely. The structural conditions of the protest included the income inequality in Macau since 2002, when the casino franchises were internationalised and expanded as well as liberalised.

Many Macau people are not happy with the performance of the government, especially because they find it very difficult to move up the social ladder. Secondly, related to the issue of income inequality is the difficulty of social mobility. Even though Macau people earn more money than ever before still many of them find inflation very high and cannot really have their increased salary match the increasing inflation rate, so overall it seems that their social mobility has been quite restrictive and limited. As a result, many young people in Macau came out to protest against the government bill. The bill itself was only a stimulus for triggering the protest; but underlying economic prosperity in Macau’s casino capitalism [culture] lies public discontent - especially among the young citizens of Macau. Will these protests change something in the way the local government acts? The demonstrations did change the government in the sense that the Chief Executive and government officials’ concern were quickly communicated to the legislators to see whether the bill should be delayed or revised. In that sense, the protest had immediate impact but it remains to be seen whether the government continues to be sensitive to public opinion expressed in protests or even demonstrations. Sometimes, the government cannot anticipate sudden protest and demonstrations. The Macau Government has to be more sensitive to public protests and demonstrations than ever before.

Changing government We have only one candidate running for Chief Executive. Can we expect any changes when Chui Sai On is re-elected? The government will slightly

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August 18, 2014

Macau

change in a number of ways after the Chief Executive election. There may be a real restructure of the government portfolio. Community and additional portfolios should be created so as to make the government more efficient. It is fair to say that if Macau wants to maintain an image of efficiency and capacity, the restructuring of government ministries will be a must. Some foreign diplomats have appeared to question whether the Macau bureaucracy has a strong [enough] capacity to deal with the speed of change, including casino capitalism, economic diversification, social change and housing policies. The government has to strengthen the bureaucracy in several aspects. Number one: restructure so as to enhance administrative efficiency and coordination. Number two: in terms of governmental department coordination there can be better inter or intra-governmental department coordination, and more discussion should be enhanced among the departments themselves. Number three: crisis consciousness among the senior levels of civil servants will have to be enhanced. It seems to me that some senior civil servants and even middle-ranking [civil servants] are not really crisis-conscious — perhaps they’re relatively complacent or perhaps they’re relatively satisfied with what’s been going on with Macau for a long time. Although Macau has economic prosperity, it is imperative or urgent for the government to instil a stronger sense of crisisconsciousness among Macau bureaucrats or middle-ranking civil servants, so that whenever crisis erupts Macau bureaucracy will be competent and efficient as well as professional enough to deal with such crises. Crisis prevention or even crisis decision-making will have to be enhanced in Macau. What do you expect will be the priorities of the new administration? The new government will focus mostly on livelihood issues, as well as transportation and housing policies that have been implemented but are not really in

full swing in order to satisfy the demand of lower class citizens that there should be better and larger scale economic housing. Apart from transportation and housing, social welfare will have to be enhanced. The Macau Government cannot rely on the annual policy or annual tradition of distributing money to citizens. In the long run, a more comprehensive social welfare scheme has to be implemented to provide a protective umbrella for Macau citizens, especially when the younger generations have a stronger sense of Macau identity. With regard to transportation, that may be a priority. They have to deal with the insufficient number of taxis, the quality of taxi drivers, all these quality basic grass root level issues which have an impact on how tourists and citizens view the capability of government performance. Do you expect one of the priorities to be the need for economic diversification? The government has already formulated a policy of economic diversification and we can see in Hengqin Island a convention and exhibition centre, eco-tourism, a [traditional] Chinese medicine park, which are all part of the [government’s plan to implement diversification]. The problem is that the Macau Government needs a more comprehensive blueprint in

It lacks the legal basis for achieving universal suffrage to select the Chief Executive by direct votes and to achieve a fully directly elected legislature

terms of economic diversification. It seems to me that there’s been no concrete government document on the economic diversification of Macau, so I think the think tanks of the Macau Government will have to be enhanced. For me, one problem of the Macau Government is that the existing think tanks in Macau are relatively weak in proposing long-term planning, long-term solutions or long-term alternatives for the government to consider. The second [term] Chui Sai On administration will have to enhance capacity in several ways: inviting existing think tanks to expand their membership and also to enhance the quality of research so that quality reports will be published; inviting neighbouring regions’ think tank members to voice their opinions and share their opinions on how Macau’s economic diversification and other policies can be improved. The think tanks themselves in Macau have to be reorganised in such a way that ideally there is more coordination, more communication, more seminars to discuss Macau’s future, including a whole range of policies on livelihood issues, casino concessions, on the performance of casino operators, on livelihood issues affecting the citizens. How about housing? In terms of housing policies, the government has already formulated its plan — very clear planning in terms of establishing a number of targets in the coming years. The challenge of the government is to implement these plans. In order for the Macau Government to deliver its promises in terms of housing, annual reports from the housing portfolio ministers or annual reports from the housing secretary will have to be strengthened, so that there can be some sort of public accountability in the government housing blueprint. In the past, the government talked about performance practice but it remains to be seen how these performance pledges will be carried out annually. A stronger Macau Government will have to require each minister or each secretary to publish reports about

the progress of their performance pledge in previous years, so that bureaucratic capacity will really be enhanced.

No legal basis for democracy Is universal suffrage something Macau is really considering or are we far from reaching it? The Portuguese, during the final negotiations, did not insist on a stipulation in the final Portuguese joint declaration on universal suffrage. It lacks the legal basis for achieving universal suffrage to select the Chief Executive by direct vote and achieving a fully directly elected legislature. However, because the younger generation has a very strong Macau identity, they are very keen to push the double-directly election, namely the direct election of the Chief Executive through universal suffrage and the direct election of the entire Legislative Assembly. Having said that, I don’t expect either the Central Government in Beijing or the Macau Government will sense any urgency in implementing further electoral reform, as long as public demand is not strong enough. Both the Central Government in Beijing and the Macau Government will likely choose the current status quo — for them, as long as Macau has political stability, this is already a good model of the Macau ‘one country, two systems’, which can demonstrate to Taiwan that ‘one country, two systems’ can work well. Still, if the new Macau Government has the determination to respond to public opinion, it should consider democratisation at the grass roots level; namely, in Macau there are now consultative committees and each consultative committee is composed of appointed members and members directly elected by the citizens. One possible way is to inject some directly elected elements into these consultative committees. There will be advantages of democratisation of the lower level consultative committees: the younger generation will gain more political experience; the gap between the government and the people will be narrowed; consultative committees can have better opinions.

August 18, 2014

Macau

VIP and debt provisions weigh on Genting Singapore

Mass market casino cashcow Investment bank CLSA expects the mass market to continue fuelling Macau’s casino market. The continued development of this segment will boost its profitability vis-a-vis the VIP sector

T G

enting Sinagapore, the operator of Singapore’s Sentosa casino, reported last week a flat performance in the second quarter due to a slowdown in VIP revenues and more provisions made against bad debt. The company said its operational profit (EBITDA or net profits minus interest, taxes, depreciation and appreciation) reached SG$313.8 million in the last quarter. That’s 1 percent more than the SG$310.8 million reported a year ago. Net revenues amounted to SG$751 million, missing market expectations of around SG$760 million, mainly caused by lower than expected VIP volume, Union Gaming said Friday in a report on Genting Singapore’s results.

Impairment charges also increased in the quarter to SG$82 million, almost double that of the previous quarter (SG$58 million) and three times more than a year ago (SG$32 million). Genting Singapore’s Resorts World Sentosa and Las Vegas Sands’ Marina Bay Sands are the world’s most profitable casinos. The operator said it was well placed to bid for an integrated resort in Japan once the casino bill was passed. Japan’s Prime Minister Shinzo Abe has thrown his weight behind casinos as a way to revitalise the economy, and a bill to legalise casinos could be put to a vote in parliament this year. ‘Our team continues to monitor developments and actively prepare for events that

may arise upon the passing of this first phase bill. The group has sufficient financial resources and is well-placed to bid for this opportunity,’ Genting Singapore said. Union Gaming said that Singapore’s management tone was ‘notably less optimistic’ with the current trends, expecting a slowdown in VIP revenues over the next three quarters. The brokerage decided to revise down its estimations for this year and next. Union Gaming is expecting Genting Singapore to have an operational profit of SG$1.471 billion this year versus its previous SG$1.473 billion. In 2015, profits could total SG$1.471 billion, less than the SG$1.503 billion predicted just weeks ago. L.G. with Reuters

he mass market will be the engine of Macau’s gaming market as the VIP segment is saturated, CLSA gaming analyst Jon Oh said in an interview with broadcaster CNBC. “If you think about mass market data for the year we’re talking about a sector that’s growing near to 22 percent. That’s a pretty damn healthy number as far as I’m concerned,” he said. “If you look at VIP, maybe the growth is not as healthy from 0 to 1 percent. That’s because I feel the VIP is a saturated market.” Despite gross gaming revenues slowing down for two months in a row, the gaming analyst rejected the idea that Macau’s gaming industry faces any problem. “Macau business and gaming is not going away. Chinese people have been gaming for thousands of years. We have seen a slowdown in VIP and we know what’s

causing that,” he said. “We think that anti-corruption measures in China are showing up today and that’s the reason why the segment is not as attractive as it was three or two years ago.” The fact that mass is more profitable to casinos than the VIP market is also one of the factors driving growth in Macau. “If you want to describe it in baseball terms, I think the mass market brings the second innings [half of the game]. If you think about the penetration of China in Macau we’re only looking at 1.4 percent of Chinese people visiting Macau once a year,” he said. “I think casino operators will have to continue to think about how to continue to grow the mass market, how to move resources from VIP to mass market because mass market is simply four times more profitable than VIP,” he concluded. J.S.F.

August 18, 2014

Gaming

Sydney Harbour shaping up as battleground for casino war Byron Kaye

KEY POINTS Crown’s FY earnings A$640 mln vs A$622.2 mln analyst estimate Crown posts single-digit growth in Perth, Melbourne Sydney Harbour looms as key to domestic growth

ydney’s picturesque harbourside is shaping as a battleground between junior betting house Echo Entertainment and gaming giant Crown Resorts as their fortunes increasingly converge on Australia’s most populous city. Echo has been raking in money since launching a successful loyalty programme last year to keep customers at its Sydney gaming house The Star. Crown, five times bigger than Echo by market cap, is looking to lure some of its rival’s patrons as its casinos in Melbourne and Perth post tepid revenue growth. Crown, the world’s number six gaming company by market value, last week reported a 35 percent jump in annual net profit, beating analyst forecasts. But that was mostly because of a near doubling in its share of earnings from its Macau joint venture Melco Crown Entertainment (MCE). The company half-owned by James Packer, Australia’s third-richest person, recorded near flat earnings at its core betting houses in Western Australia and Victoria states. Local economies have been hit by factory closures and a

mining slowdown, resulting in earnings growth of just 2.8 percent in Melbourne and 0.3 percent in Perth in the year to June 30. Even as Crown builds and rebuilds properties from Macau to Las Vegas, Australian casinos are still the company’s biggest revenue contributor. They accounted for 68 percent of its pre-tax profit in the last financial year. Crown is staking its future domestic growth to a 1.5 billion Australian dollar luxury casino on Sydney Harbour, set to open in late 2019, with the aim of attracting a widely expected influx of wealthy Chinese gamblers. It will compete with Echo’s existing waterfront casino just a mile away, The Star, which is already taking steps to stop gamblers taking business elsewhere with a loyalty program offering free restaurant meals and hotel upgrades. The loyalty scheme, based on airline loyalty schemes, has 250,000 members and is signing up 6,000 members per month across all Echo properties, a company spokesman said. Last week, Echo, worth 2.7 billion Australian dollars, said a 26 percent jump in pre-tax earnings at The Star

was the main reason group net profit rose 24.6 percent. “There’s no doubt [Western Australia] and Victoria are tracking a little bit worse than NSW and Queensland [state], at least in terms of gaming revenues across the board,” said one gaming analyst who asked not to be named as he was not authorised to comment publicly. “The majority of Chinese tourists in Australia do go to Sydney, and the other destinations less so. That was part of the rationale for going into Sydney for Crown.”

Chinese money Some 759,000 Chinese visited Australia in the year to June 30, up 12 percent on the previous year, the most apart from visitors from nearby New Zealand, according to the Australian Bureau of Statistics. The Chinese are Australia’s number one tourism spenders, Tourism Australia says, spending 4.8 billion Australian dollars in 2013 and with that amount expected to double by 2020.

That is still a small fraction of Chinese outbound tourists, who made 97.3 million worldwide in 2013, half for leisure, spending US$129 billion in 2013, The Economist magazine reported. “The challenge remains to get the players to Australia,” Crown chief executive officer Rowen Craigie said in a telephone briefing. “To do that they’re overlooking Macau and Singapore, they’re turning down Vegas, to get to Australia.” Crown said normalised net profit was 640 million Australian dollars for the year, up from 473 million Australian dollars the previous year and better than the 622.2 million Australian dollars average estimate of 14 analysts polled by Thomson Reuters. The result included a 91.2 percent jump in profit share from its 33.6 percent stake in MCE, to 291.2 million Australian. MCE’s profit rise was fuelled by a strong performance by its “mass market table games business” at City of Dreams casino in Macau, Crown said. Reuters

Road to Atlantic City recovery to be bumpy

ew Jersey governor Chris Christie said the road to Atlantic City’s recovery will be bumpy and he remains committed to turning around the casino resort. Christie, a 51-yearold Republican, said he’s “plugged in” to efforts to reverse the city’s decline and will do all he can to keep open the 11 gaming establishments that account for almost half of the city’s jobs. The growth of regional competitors in Pennsylvania, Delaware, Maryland and New York have cut casino revenue in the city to US$2.86 billion last year from US$5.07 billion in 2006, according to Bloomberg

Industries. Christie called for a “bipartisan summit” on the planned closings of gambling houses including Caesars Entertainment Corp’s Showboat and Trump Plaza Hotel & Casino. “I’m engaged, we’re working and we’re going to do everything we can to make sure that everyone is safe, secure and employed,” Mr. Christie said at a public meeting in Ocean City attended by more than 100 casino workers. “We can’t order a private business to create jobs.” The workers, who held signs and chanted, said they want the governor to

explore whether he can direct the casinos to remain open through the Casino Control Commission or state Division of Gaming Enforcement. The Atlantic Club shut in January, putting 1,600 people out of work. The closing of the Showboat on Aug. 31 will eliminate 2,133 jobs. Trump’s closing, set for Sept. 16, will take away 1,009 more. Revel AC Inc.’s hotel and casino, which employs 3,106 people, is seeking a buyer in bankruptcy. Showboat owner Caesars, meanwhile, is planning to open a new casino in Baltimore. “To just take your ball and go play somewhere else

is just not right,” said Ruth Ann Joyce, who spent 28 years as a bartender at Showboat. “We’re talking about 8,000 families unemployed. This

was a cash cow for the entire state for 36 years. To kick us to the curb at this point is unacceptable.” Bloomberg

August 18, 2014

Greater China JD.com’s quarterly loss widens JD.com Inc., China’s No.2 e-commerce company, reported a bigger quarterly net loss due to costs related to a partnership with Tencent Holdings Ltd and higher spending aimed at better competing with market leader Alibaba Group Holding Ltd. The company’s American Depositary Shares were down 2.2 percent at US$29.35 in early trading on Friday. JD.com, reporting quarterly results for the first time since going public in May, said its net loss widened to 582.5 million yuan (US$93.9 million), or 5.86 yuan (94 cents) per ADS in the quarter ended June 30.

Alibaba film unit detects irregularities

Stronger 2014 growth seen for Taiwan’s statistics agency said gross domestic product will grow Jeanny Kao and Michael Gold

aiwan’s economy will grow faster than expected this year as the launch of new gadgets such as Apple’s iPhone 6 helps to offset any drag from the uncertain recovery of its key trade partners. The bright prospects for the export-driven economy come as China and the United States, Taiwan’s two

biggest trading partners, are showing sub par economic data highlighting the fragile global recovery. “Taiwan’s economy in the second half of this year will not necessarily be affected by global factors due to the release of iPhone 6,” said Tsai Hungkun, a director of the Directorate General of the Budget, Accoutning

and Statistics (DGBAS). Taiwan is a key supplier to Apple Inc. with contract manufacturers on the island making everything from semiconductors to camera modules to casings and then assembling the gadgets for the new smartphone. Taiwan’s statistics agency on Friday said gross domestic product

A media firm Alibaba Group Holding Ltd recently bought said on Friday a review of its finances revealed possible accounting irregularities, casting doubts on the Chinese e-commerce giant’s due diligence as it prepares for a U.S. initial public offering. The announcement by Alibaba Pictures Group Ltd comes less than two months after Alibaba Group completed its US$804 million purchase of a 60 percent stake in the film and TV production company once known as ChinaVision Media Group Ltd.

Green light for Lenovo-IBM deal International Business Machines Corp. cleared a U.S. national-security review for the sale of its low-end server business to China’s Lenovo Group Ltd., letting the US$2.3 billion transaction go forward despite tensions between the two nations. The conclusion of the review by the Committee on Foreign Investment in the U.S., or Cfius, is “good news for both IBM and Lenovo, and for our customers and employees,” Armonk, New York-based IBM said today in a statement. Spokesmen for IBM and Lenovo declined to comment on whether the Cfius clearance included any requirements or concessions.

Zoomlion bids for machinery maker China’s Zoomlion Heavy Industry Science and Technology Co Ltd said on Friday it was bidding to acquire a 60 percent stake in farm machinery maker Chery Heavy Industry Co Ltd for 2.09 billion yuan (US$340 million). Zoomlion, seeking to profit from Beijing’s drive to promote large-scale rural modernisation, said in a stock exchange statement the move could help propel the company to “become a leading agricultural machinery enterprise in China.” The deal comes as major Chinese construction equipment makers respond to a drop in demand for machines in the domestic market.

Apple moves data storage to China Apple Inc. has begun storing personal data for some Chinese users on servers provided by China Telecom, marking the first time that the company has stored user data on mainland Chinese soil. Apple attributed the move to an effort to improve the speed and reliability of its service. It also represents a departure from the policies of some technology companies, notably Google Inc., which has long refused to build data centres in China due to censorship and privacy concerns. All data stored with China Telecom, as with all data centre providers worldwide, will be encrypted.

Directorate General of the Budget, Accoutning and Statistics headquarters

HK Q2 GDP shrinks on weak consumption From a year earlier, the economy grew 1.8 percent in the June quarter Saikat Chatterjee

ong Kong’s economy contracted in the June quarter as shoppers cut back on their spending, forcing the government to lower its growth target for the year. The drop in consumption was driven by a decline in tourist spending largely aggravated by China’s spreading anti-graft campaign. A drop in purchases of luxury items such as watches and jewellery, coupled with weak domestic spending, has led to five consecutive monthly declines in retail sales. The US$250 billion economy contracted 0.1 percent in the June quarter compared with a revised seasonally adjusted 0.3 percent expansion in the March quarter. From a year earlier, the economy grew 1.8 percent in the June quarter, its slowest pace of expansion in nearly two years and compared with a revised 2.6 percent in the first quarter of 2014. The government cut the full-year growth target to 2 to 3 percent from 3 to 4 percent at the start of the year. The economy expanded 2.9 percent in 2013. Analysts said the slowdown was unlikely to reverse anytime soon

with the government signalling only a slightly better second half thanks to an improving mainland economy. “Domestic demand has taken a beating and despite the slight

improvement in exports, it is going to be very hard to meet the revised growth estimates,” said Kevin Lai, deputy head of economics at Daiwa Capital Markets in Hong Kong.

August 18, 2014

Greater China

Taiwan

releases, solid handheld device demand and stable consumption at home as main drivers of growth in the second half of the year. DGBAS minister Shih Su-mei said: “The Taiwan domestic economy is recovering and on a stable track.” “Semiconductor exports are benefiting from continued external demand in mobile devices,” she said, adding that “semiconductor firms continue strong capital investment growth.”

3.41

Pressure on rates

KEY POINTS Q2 GDP revised to +3.74 pct vs initial estimate +3.84 pct 2014 GDP raised to +3.41 pct from preliminary +2.98 pct Govt says new iPhone release supports local economy

will grow 3.41 percent in 2014, which would be the fastest since 2011. It was also an upward revision from its previous estimate for a 2.98 percent expansion. The agency also said that Taiwan grew 3.74 percent in the second quarter, slightly lower than its initial reading of 3.84 percent. Growth in the third quarter is expected to slow slightly to 3.62 percent and a further 3.08 percent in the fourth quarter from a year earlier, the agency said. The government cited tech gadget

The economy of China, Taiwan’s biggest trading partner, showed further signs of softening in July despite a burst of government stimulus measures, suggesting more policy support may be needed to keep growth on track as a property downturn worsens. Taiwan’s strong growth estimate for 2014 has raised the possibility the central bank will hike interest rates before the year-end. Analysts expect Taiwan’s central bank to keep rates steady at its next quarterly meeting in September as inflation stays manageable, but rates could be raised by the fourth quarter of this year or the first quarter of next. Taiwan forecast its inflation rate, as measured by the consumer price index, to rise 1.64 percent this year, slightly higher than an earlier estimate for a 1.53 percent increase. In 2015, inflation should be 1.46 percent, the agency said. “The pressure from inflation is not really that great right now,” said Sonny Hsu, a vice president with Moody’s Investor Service. Reuters

Property database will be closed to public The government has denied that the aim of the database is to help keep official abuse in check

he Chinese public cannot access a planned property database that has been seen by some as a vital tool for tackling the country’s deep-rooted problem with corruption, preliminary rules released by the government showed on Friday. The database has been in the works since 2010 and is supposed to allow users to see how many properties a person owns. It has been touted by some experts as an antidote for rampant graft because of the transparency that it could provide, especially when it comes to officials owning more properties that they should be able to afford on government salaries. But the system has been repeatedly delayed as regional Chinese governments balked at the idea of having a searchable, central record of home purchases that could expose the wealth of corrupt officials. Under the draft proposals for the database released by the government on Friday, only the owners of a property and “interested parties” can view the record in the database.

Without owners’ consent, records in the database cannot be disclosed to the public, it said, without further elaboration or explanation. The draft rules, open for public consultation until September 15, were supposed to have been announced at the end of June. The government has denied that the aim of the database is to help keep official abuse in check, saying instead that it is to help authorities levy a real estate tax nationwide and temper China’s near-record home prices. As housing is regarded as one of the best ways to preserve the value of savings in China, multiple home ownership is common, creating a headache for policymakers who need to address the unhappiness of those who cannot afford to buy a home. Fighting pervasive graft is a central theme for China’s government under the leadership of President Xi Jinping, who has warned, like others before him, that corruption threatens the survival of the Communist Party. Reuters

Financing costs for firms reduced

KEY POINTS

China has been slashing layers of red‑tape this year in its most ambitious plans for reforms in three decades

2014 growth outlook cut to 2-3 pct from 3-4 pct Q2 GDP shrinks 0.1 pct q/q from revised 0.3 pct growth in Q1 Inflation forecast cut as economic growth weakens

hina will cut red tape and permit lower levels of government to approve some projects, the cabinet said on Friday, in the latest measure to reduce the cost of doing business in the world’s second-biggest economy. Twenty-one approval processes were abolished for industries including mining, shipping, banking, telecoms and civil aviation, the cabinet said

in a statement on the government’s website. The right to approve some projects including those in the education sector and which involve the use of land, quality-control certificates and radioactive devices will also be extended to lower levels of the government. China has been slashing layers of red-tape this year in its most

“I think a realistic target for fullyear growth would be the 2 percent area,” he added.

Spending slump Consumption - the biggest contributor to Hong Kong’s economy - is set to prove a drag with, “domestic demand likely to maintain only a rather slow pace of expansion in the second half of the year,” the government said in a statement. The Hong Kong retail sector relies heavily on mainland Chinese visitors who accounted for around one-third of Hong Kong’s retail sales in 2013, Credit Suisse said in a recent report. Consumption followed by trade, and then investments, are the biggest drivers for economic growth. Hong Kong’s Retail Management Association has revised down the city’s 2014 retail sales growth to 5 percent from 12 percent, with other analysts also cutting their estimates. Reuters

CITIC was one of the banks the National Development and Reform Commission told to stop levying miscellaneous fees such as financial advisory fees

ambitious plans for reforms in three decades, directed at giving market forces a greater role in the economy. Separately, the country’s top economic planner also urged banks to scrap or cut some charges to reduce costs faced by Chinese firms, in line with a broader government effort to lower financing costs and support the real economy. The National Development and Reform Commission said it told 15 banks early in August to stop levying miscellaneous fees such as financial advisory fees, and consultation fees for managing foreign exchange risks. The banks summoned in August included China Merchants Bank, CITIC Bank, Everbright Bank, Ping An Bank and Bank of Beijing. China’s big four banks - Industrial and Commercial Bank of China Ltd, Agricultural Bank of China, Bank of China and China Construction Bank - had already promised this year to cut excessive charges. To energise China’s economy, the government has pledged to cut borrowing costs for firms by reducing the time taken to approve some loans, and enlarging the scale of re-lending and re-discount programmes for the farm sector and smaller firms. The bank regulator also recently conducted a special inspection across China to prevent banks from excessively charging their customers, an official told Reuters on Friday. Reuters

August 18, 2014

Asia Chugai denies takeover talks Chugai Pharmaceutical Co Ltd has denied a media report saying Roche Holding AG is in talks to buy the almost 40 percent stake in the Japanese company that it does not already own for about US$10 billion. The Swiss group could announce a deal to take full control of its Japanese partner for oncology and arthritis drugs as early as this coming week, although no final decision has been made, Bloomberg said. The Japanese firm, in a news release late on Saturday, said the media report “is not based on any announcement made by Chugai or Roche.”

SoftBank still merger hungry Company’s founder said that he wanted a stronger number‑three carrier to take on US market leaders Verizon and AT&T

apanese mobile carrier SoftBank’s failed bid for T-Mobile marked a rare defeat for its brash billionaire founder, but few expect it to side-line a man intent on building “the world’s number-one company”. After years of scooping up companies big and small, Masayoshi Son’s voracious appetite for

acquisitions hit a snag amid reports earlier this month that the firm’s US unit had abandoned a US$32 billion offer for T-Mobile in the face of regulatory opposition. Son never confirmed his plan to scoop up T-Mobile. But he repeatedly said that he wanted a stronger number-three carrier to take on US

market leaders Verizon and AT&T, after last year’s monster US$21.6 billion acquisition of Sprint. The T-Mobile acquisition was seen as key to that strategy. The 57-year-old Son -one of Japan’s most colourful entrepreneurs, who by his telling grew up poor, scrounging food from his neighbours

Tourist arrivals in Thailand fall The number of tourists arriving in Thailand in July fell 10.9 percent from a year earlier, according to data from the Department of Tourism, showing the key industry has not recovered from dents caused by prolonged political tension. The lucrative tourist sector, which accounts for about 10 percent of the Thai economy, suffered its biggest drop in visitors in June - the first full month after the army took power on May 22 in a bid to end tensions and get economic activity going again. Arrivals from China, Thailand’s biggest source, tumbled 25.3 percent.

Indonesia draft ownership bill Indonesian lawmakers are looking to restrict foreign ownership of plantations to no more than 30 percent, as the top palm oil producer tries to maximise land usage, protect indigenous people and tighten environmental controls in the sector. A new draft bill drawn up by members of Indonesia’s parliament aims to open up the sector to smaller, local players. But it would also discourage foreign investment just after the nation has set an ambitious goal of raising its palm oil output by a third to 40 million tonnes by 2020.

Construction delays at Aussie LNG plants Engineering giant Bechtel Corp reached a new workplace agreement on Friday with construction workers, averting strikes that could have delayed the start-up of three liquefied natural gas (LNG) plants it is building on Australia’s east coast. Bechtel is building US$62 billion worth of LNG plants on Curtis Island off the state of Queensland, where the Construction, Forestry, Mining and Energy Union (CFMEU) approved a new pay and work schedule deal after rejecting two earlier offers. Some workers had tried to block others getting to and from Curtis Island over the past week ahead of the vote, disrupting activity.

A SoftBank branch in Japan

Malaysia unexpectedly accelerates on exports Analysts raised their 2014 growth estimates for Malaysia after Friday’s data

alaysia’s growth unexpectedly accelerated to the fastest pace in six quarters on surging exports, adding scope for the central bank to raise interest rates further. The ringgit rose to a nine-month high. Gross domestic product rose 6.4 percent in the three months through June from a year earlier, after climbing 6.2 percent in the first quarter, the central bank said in a statement in Kuala Lumpur Friday. The median in a Bloomberg News survey of 25 economists was for a 5.8 percent increase. Malaysia was the first in Southeast Asia to raise its benchmark rate in 2014 as investment, private consumption and overseas orders for the nation’s goods sustained growth. Southeast Asia’s third-largest economy is outperforming its regional counterparts amid slowing expansions in Indonesia and Singapore last quarter. “It’s one of the standouts so far, one of the few economies actually seeing growth picking up strongly,” said Krystal Tan, a Singapore-based analyst at Capital Economics Ltd.

Northport Malaysia Wharf in Port Klang. Exports have been peaking lately

’’This means that the central bank would have room to further normalize monetary policy.’’

Raising forecasts GDP expansion this year will probably exceed the central bank’s forecast range of 4.5 percent to 5.5 percent, Governor Zeti Akhtar Aziz said Friday. The government will announce a new growth forecast during its budget, she said. Barclays Plc. and Australia & New Zealand Banking Group Ltd.’s analysts raised their

2014 growth estimates for Malaysia after Friday’s data. Indonesia’s growth eased to the slowest since 2009 last quarter, while Singapore’s expansion was the least in more than a year. Thailand may say its economy swung to an expansion of 0.1 percent in the second quarter from a year ago, according to the median of 15 estimates before the data is released August 18. The government is spurring investment by making it simpler for companies to operate in the country. Bloomberg News

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August 18, 2014

Asia SoftBank mobile service subsidiary Brightstar.

SoftBank does not discuss whether or not we intend to purchase particular firms Masayoshi Son, SoftBank founder

to feed to the family’s livestock- is rarely at a loss for words. But he had little to say when asked about the T-Mobile flop. “SoftBank does not discuss whether or not we intend to purchase particular firms,” he told reporters in Tokyo. “I have never made an official comment on this, and I will not have an official comment today.” However, he added: “I am always exploring various options.” Son may have pulled back because he has his eye on another company and needed to free up cash, analysts said. “My guess is that he needed to cancel it because he cannot let two major deals run at the same time,” said Satoru Kikuchi, analyst at SMBC Nikko Securities in Tokyo. “I see this as a good thing,” he added. In the wake of the deal’s collapse, Sprint replaced its chief executive Dan Hesse with Marcelo Claure, who heads

‘No. 1 company’ Money-losing Sprint had been dogged by criticism over poor network quality and spotty coverage, but Son insisted that those problems are gone and the firm under a new chief was going to offer big discounts to win back customers. He also hired former Google executive Nikesh Arora, who may have persuaded his new boss to drop the T-Mobile deal to pursue grander ambitions. The new hires “can be seen as a sign that SoftBank is taking a more proactive global strategy that isn’t limited to international telecom operations, but also involves the Internet and the media,” Barclays analyst Keiichi Yoneshima said in a client note. “The Sprint deal has expanded its international businesses and those moves will likely accelerate.” Son is one to think big. Last year, he told shareholders that he was aiming to turn Japan’s third-largest telecom company into a global behemoth that outpaces the likes of ExxonMobil, JPMorgan and Apple. “I used to discreetly say we would be among the world’s top 10 firms, but that doesn’t fit my goals anymore,” he said. The firm is nowhere near that level right now and was largely unknown outside Japan before the Sprint deal was announced. AFP

Thai rice on market again First rice sale approved since Thailand coup

hailand’s military government approved the sale of 73,000 tonnes of rice from government stocks in its first successful sale since the army seized power in May, less than the 167,000 tonnes it aimed to sell in a tender last week. The sale of rice, worth more than 737 million baht (US$23.1 million), from state warehouses to rice exporters, millers and domestic retailers follows a failure to shift any grain last week, in the military’s first tender since it took control. Duangporn Rodphaya, directorgeneral of the Foreign Trade Department at the Commerce Ministry, which oversees rice stock sales, said 12 private companies were successful out of 36 bidders. “The tender price this time was close to the market price,” a government official at the commerce ministry said. The price of common grade Thai 5-percent broken rice was steady at US$440 per tonne on Friday, slightly below the same grade from Vietnam at US$450-US$455 a tonne. In its first tender last week, offers were below the government’s expectations, and the sale was halted by the state, which did not disclose a minimum floor price. Thailand is estimated to hold up to 18 million tonnes of rice in state

18 mln

tonnes of rice estimated Thailand state stockpiles

stockpiles, almost twice what it used to export each year. The Southeast Asian nation has mammoth stockpiles of rice after the previous government bought rice from farmers at prices well above market levels for the staple grain. The army, which seized power in a bloodless coup in May, made the repayment of farmers who were owed money under the controversial scheme one of its priorities. It also halted rice sales while it inspected warehouses to check how much grain was being held and in what conditions. Duangporn said the next round of bidding would take place soon and that floor price assessments would be amended in order to speed up sales. Reuters

India ‘will honour’ WTO trade deal pledge Government is seeking to wrest concessions from developed nations on allowing food subsidies for its poor

ndia will keep a pledge to ratify a trillion-dollar global pact on easing trade restrictions, a minister told local media Saturday, adding negotiations with fellow World Trade Organisation members had not hit a “dead end”. Commerce Minister Nirmala Sitharaman’s remarks to NDTV network marked a softer public tone to India’s stance on the Trade Facilitation Agreement (TFA) - a universal customs clearance deal which would mark the first big global trade liberalisation deal in two decades. She said she wanted to stress the WTO negotiation process “certainly has not hit a dead end”, after New Delhi refused to ratify the accord in down-to-the-wire negotiations last month at the organisation’s Geneva headquarters. India is seeking to wrest concessions from developed nations on allowing food subsidies for its poor. “We are agreeing to everything done in Bali, we are not saying we are going to dishonour that commitment, we will honour that commitment,” Sitharaman said. All 160 WTO members, including India, agreed to the accord at the December 2013 meeting on the Indonesian

We are agreeing to everything done in Bali, we are not saying we are going to dishonour that commitment, we will honour that commitment Nirmala Sitharaman, India’s Commerce Minister

Indian Prime Minister Narendra Modi addressing the nation in his first Independence Day speech from the Red Fort in New Delhi, India, 15 August 2014

holiday island. But at the same time she reiterated India must have the right to ensure food security for its hundreds of millions of poor farmers and consumers through grain subsidies that developed nations regard as distorting trade. The minister’s remarks came after visiting US Secretary of State John Kerry told new Prime Minister Narendra Modi earlier this month that New Delhi’s

stance on the pact sent the wrong message about his pro-business government’s desire to liberalise India’s economy, which remains state dominated. Modi told Kerry that developed nations must “understand the challenges of poverty” in developing nations. Experts believe the trade facilitation pact could boost global commerce by US$1 trillion by modernising and

streamlining trade rules to allow goods to pass more easily through customs. According to the Baliagreed timetable, the TFA was due to go into effect in mid-2015 after what WTO officials had expected to be its rubber-stamp ratification last month. At the time of the Bali accord, the trade body’s members agreed on a fouryear “peace clause” to protect India from WTO action over

subsidies and stockpiles until a “permanent” solution” was reached. But after the Bali pact, Indian officials complained there were nearly two dozen meetings on the trade pact and just a handful on farm subsidies. The commerce minister called India’s last-minute refusal to ratify the pact “a little course correction (that was) desperately needed”. AFP

August 18, 2014

International Africa’s “grand” FTA gaining momentum Negotiations to set up a grand free trade zone encompassing 26 countries in eastern and southern Africa are progressing well and may be completed in 2015, a year before schedule, officials with Southern African Development Community (SADC), one of the three participating regional blocs, have revealed. The Tripartitie Free Trade Agreeement (Tripartitie FTA), being negotiated among SADC, Common Market for Eastern and Southern Africa (COMESA), and East African Community (EAC), is expected to benefit 600 million people in 26 African countries, or half of the African Union (AU) members, with a combined domestic product of about US$1 trillion.

Crackdown on money laundering Regulators push banks to prevent casinos’ money laundering

Britain closer to full recovery Britain’s economy is “more than halfway” down the path to full recovery, but any interest rate rises will be “limited” and “gradual”, Bank of England (BoE) boss Mark Carney said yesterday. In an interview with The Sunday Times, Carney declared that the economy was now undergoing genuine expansion following the economic crisis of 2008. “Wherever the finish line was in the depths of the crisis, we are much more than halfway towards that finish line now,” he said. Carney sought to reassure indebted householders that interest rates were not set to rise sharply any time soon.

Argentina’s Eurobonds holders to appeal Holders of euro-denominated Argentine bonds plan to appeal a U.S. judge’s ruling blocking the country from making payments on their debt, according to a court filing on Friday. In a notice filed in Manhattan federal court, lawyers for the bondholders challenged an August 6 ruling from U.S. District Judge Thomas Griesa that Argentina cannot pay the bondholders until it also pays holdout investors who refused to restructure their debt in the wake of Argentina’s 2001-2002 default.

Porsche prevails at U.S. appeals court Porsche Automobil Holding SE persuaded a U.S. federal appeals court to uphold the dismissal of a lawsuit by more than 30 hedge funds that claimed to suffer big losses because the German automaker fraudulently cornered the market in Volkswagen AG shares. The 2nd U.S. Circuit Court of Appeals on Friday said Porsche’s alleged wrongdoing was “so predominantly foreign” that it could not be held liable in U.S. federal courts under domestic securities fraud laws.

FedEx indicted on new charges FedEx Corp faces a new charge of conspiring to launder money in a U.S. criminal case over the company’s drug deliveries for rogue online pharmacies despite warnings from law enforcement. The latest indictment, filed in court on Friday, said FedEx accepted payment from several pharmacies when it knew the revenue was the product of invalid prescriptions. FedEx was first indicted last month on counts including conspiracy to distribute controlled substances. Senior company managers were repeatedly warned that online pharmacies which had been the subject of criminal prosecutions for supplying drugs without prescriptions were using its services, the indictment said.

A panorama of Las Vegas

arge global banks are facing increased pressure from U.S. regulators to clamp down on casino money-laundering as the government pushes the industry to police not only its own transactions but customers’ as well. Bankers, casino executives and consultants said the U.S. crackdown has resulted in unprecedented scrutiny and collaboration between the two industries, including banks vetting casino customers’ anti-money laundering systems, checking to make sure casinos don’t accept anonymous wire transfers, and offering databases and other information to help the gaming industry identify risky transactions. While the idea of money-laundering through casinos is nothing new - and has been fodder for plots in Hollywood movies like “Casino” - until recently, banks haven’t been expected to take part in regulators’ and prosecutors’ pursuit of such criminals. Some bank executives grumble about the extent of the work they have to do for government enforcement agencies now, and the penalty for failure. Standard Chartered Plc. said on August 6 that a computer in its anti-money-laundering surveillance system made an error, which a source said could trigger fines between $100 million and US$340 million payable to New York State’s financial regulator. In an interview with Reuters on August 7, Standard Chartered Chief Executive of Asia, Jaspal Bindra, said the penalties are unfair. “We are supposed to police that our counterparties and clients are not money laundering,” said Bindra, “and if when we are policing we have a lapse, we don’t get treated like a policeman who’s had a lapse, we are treated like a criminal.” Casinos were historically a popular place for criminals to launder money because it was easy to make large-scale transfers through casino accounts, and swap ill-gotten gains for chips, and back into clean cash. Because of this, regulators have required casinos to report suspicious or abnormally

large transactions for a number of years. That hasn’t stopped the flow of illicit funds because criminals have grown more sophisticated in working around the rules, and because casinos have not always fully complied with the rules, according to anti-moneylaundering consultants. In recent years, regulators have also become more aggressive about enforcing the rules - on both casinos and banks. In 2012 financial institutions agreed to pay US$3.5 billion in anti-money laundering infractions, up from the US$26.6 million in 2011, according to the Association of Certified Anti-Money Laundering Specialists. In light of the enforcement actions and tough public statements by federal authorities, banks have begun taking further steps to ensure their casinos customers’ accounts are legitimate. As opposed to merely asking whether a casino has anti-money laundering programs, banks are now reviewing them and conducting onsite work to test their efficacy, said Adam Shapiro, a director specializing in preventing money laundering at Promontory Financial Group. The casino industry is just one of many that enforcement officials have started targeting through banks to enforce laws.

Time to step up Preventing money laundering has become a higher priority for the Department of Justice and other enforcement officials in recent years, and banks have been a key target of enforcement actions. HSBC Holdings PLC and JPMorgan Chase have been censured for lax controls that did too little to prevent money laundering by Latin American drug cartels and Ponzi schemer Bernie Madoff, respectively. The increased scrutiny on banks in regards to money-laundering has only recently extended to the casino industry. In August 2013, Las Vegas Sands Corp agreed to pay the Justice Department more than US$47 million

over anti-money laundering lapses linked to high-roller Zhenli Ye Gon, a Mexican pharmaceutical magnate. Prosecutors said Ye Gon transferred around US$45 million to Las Vegas Sands, mostly from accounts of Mexican currencyexchange companies with which he had no obvious affiliation. His actions did not arouse any serious suspicion from casino staff, prosecutors said. Ye Gon is currently fighting extradition to Mexico, which has charged him with drug trafficking. His case is pending, according to his attorney. Pressure on the gambling industry intensified over the past year as the head of a U.S. Treasury agency that monitors the financial system for evidence of money laundering gave two speeches reminding the casino industry of its compliance obligations. Jennifer Shasky Calvery, who has led the agency - called the Financial Crimes Enforcement Network, or FinCEN - since September 2012, has a background in prosecuting organized crime. But there are limits to how much banks should be expected to know about the casino customers because casinos are either unwilling or unable to hand over detailed information about individuals to bankers, said one anti-money laundering executive at a large bank. In addition to regulators’ own actions, bank examiners are pressing institutions they oversee to better manage the risk associated with the casino-related transactions they process, compliance officers in both industries said. The anti-money laundering executive said his bank has forbidden casinos from accepting transfers of large sums of money from corporations or limited liability companies if the identity of the person that controls the account is unknown. Owners of private businesses and operators of junkets to Las Vegas commonly transfer money from such entities to gamble, but they could also be used for illicit purposes. Reuters

August 18, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

China’s crisis management capacity remains strong

Lo, Shiu Hing Sonny

Professor and Head, Department of Social Sciences, Hong Kong Institute of Education

Firemen attend a mourning service for the quake victims in Ludian

he Chinese government response to the recent outbreak of the earthquake in Yunnan province proved that the capability of the government of the People’s Republic of China (PRC) in managing earthquake crisis remains swift and strong. Its capacity of coping with the earthquake is arguably much stronger than the Taiwan government in managing the propane explosion in the city of Kaoshiung. Once the earthquake broke out in Ludian and Longtoushan in Yunnan province, the PRC government responded swiftly in several ways: the dispatch of the border police in Yunnan to the affected areas and rescue the victims; the immediate mobilization of 2,500 officers from the Chengdu military to the earthquake-plagued regions; and most importantly the tradition of the Chinese Premier, Li Keqiang, to inspect the situation and demonstrate the central government’s concern about the well-being and welfare of the affected citizens. The mobilization of the border police to Ludian was very swift; in one case highlighted by the CCTV, one police officer even sacrificed his life when he tried to satisfy the aspiration of an old man to rescue his wife in a mountainous region, where a sudden aftershock occurred and a rock hit the young 23year old police officer. His death signalled the determination of the PRC public security agency to tackle the earthquake crisis promptly. When the People’s Liberation Army (PLA) was mobilized to the scene, it used far more advanced equipment, notably five satellites, to carve out the images of the affected regions than the 2008 Wenchuan earthquake. During the 2008 Wenchuan earthquake, the PLA was even criticized by the Premier Wen Jiabao as too slow in reacting to the earthquake crisis. Even worse, some PLA helicopters encountered accidents in the

The rapid response of the PRC government authorities to the outbreak of the Yunnan earthquake was impressive

difficult terrains in Wenchuan. In the 2014 Yunnan earthquake, the PLA utilized sophisticated equipment and facilities, dismantling a number of dangerous lakes that were created by the earthquake and which posed tremendous threat to the lives of villagers. Unlike Wen, Li did not criticize the PLA operation, but instead PLA officers were shown in the CCTV news as holding his arms in fear of his personal safety. Li’s swift reaction reflected a long-standing tradition of the Chinese premiers in visiting the earthquake-plagued regions, including the late Zhou Enlai who visited Xingtai immediately after the earthquake in 1966, and Wen Jiabao’s high-profile visit to Wenchuan in 2008. The rapid response of the PRC government authorities to the outbreak of the Yunnan earthquake was impressive. As with the 2008 Wenchuan earthquake, the PRC government tackled the earthquake crisis professionally and systematically. While the police and health officials set up makeshift washrooms for affected citizens quickly, they also sprayed chemicals to prevent an outbreak of infectious diseases. On the other hand, the PLA officers distributed thousand bowls of

Chinese herb medicine to each citizen so as to prevent them from being affected by flu and other diseases. On the other hand, the police and military arranged the volunteers to go into the disaster regions orderly – a lesson learnt from the 2008 Wenchuan earthquake as the volunteers and non-government groups flocked to the disaster regions, thus causing tremendous traffic jam and affecting the rescue operation. The Yunnan rescue operation demonstrated swift policy learning on the part of the rescue authorities – a progressive step in dealing with the aftermath of the earthquake. Indeed, as some critics have pointed out, the Yunnan province’s inability to deal with the poverty of the rural residents in the mountainous regions means that they were extremely vulnerable to the outbreak of the earthquake. In fact, many houses were made up of bricks and wood, exposing themselves to the 6.5 magnitude earthquake devastatingly. It remains to be seen whether the PRC government will learn from this Yunnan earthquake by accelerating post-earthquake reconstruction and relocation work in the affected regions, especially the alleviation of rural poverty. Many of the some 600 citizens who died in the 2014 Yunnan earthquake were living in poor villages and houses, making them the easy preys to the natural disaster. Comparatively speaking, the PRC government’s strong capability of managing the Yunnan earthquake was a far cry from the chaotic response of the Taiwan government to the propane explosion in the city of Kaoshiung. The Kaoshiung disaster demonstrated several hallmarks in the Taiwanese style of managing a sudden crisis. First, while the Kaohsiung government led by the Democratic Progressive Party mayor appeared to point the finger of responsibility to the central government in Taipei, the Kuomintang authorities in Taipei argued that it was the local

government in Kaohsiung which should have a comprehensive list of the petrochemical companies and their underground pipes. Ironically, both the Kuomintang and the Democratic Progressive Party captured the mayor positions in Kaohsiung in the past and the present, thus making the responsibility issue complex and murky. The central-local tugof-war over the responsibility of the tragic gas explosion in 2014 demonstrated the chaotic crisis management in Taiwan, which is actually a Westernstyle democracy in the sense of having its President directly elected by citizens through universal suffrage, and which practically witnessed the rotation of political party in power in the past. Second, some of the petrochemical companies that built the underground pipes were criticized for not being able to maintain repair work effectively, thus indirectly or directly leading to the sudden explosion of the propane gas. Third, the entire tragedy in Kaohsiung showed that Taiwan perhaps encountered a tragedy of being enmeshed in political struggles between the Kuomintang and the Democratic Progressive Party for a long period of time, rendering a governmental neglect of the importance of maintaining the safety of underground gas pipes. In other words, over-politicization in Taiwan took place at the cost of public maladministration at the local level. In conclusion, the ways in which the PRC government handled the Yunnan earthquake efficiently, professionally and swiftly were a far cry from the chaotic manner in which the government of Taiwan, especially at the local level in Kaohsiung. Perhaps mainland China remains a strong state with strong capacity in managing crises, especially earthquake, but Taiwan as a Western-style democracy displays chaotic crisis management. A Western-style democracy in Taiwan could not cope with crises as effective as a paternalistic state in the PRC.

August 18, 2014

Closing Beijing listed as most charitable Chinese city

FAW-Volkswagen recalls cars in China

Beijing has been listed as the most charitable Chinese city in a new ranking by the Ministry of Civil Affairs (MCA). In the list issued Saturday night, the MCA ranked 294 Chinese cities based on six criteria, including nonpublic donations, volunteer service, charity organizations, government support and the cities’ philanthropic culture. Beijing topped the list, followed by Shanghai and Shenzhen, according to the charity index. The index was created in 2007 by the MCA and its affiliated research institution. It was the third list issued, following rankings in 2011 and 2012.

FAW-Volkswagen Automotive Co. Ltd., a joint venture between Chinese automaker FAW Group and Germany’s Volkswagen Group, will recall tens of thousands of Bora sedans due to a defective power-assisted steering system. The recall affects 54,024 Bora 1.4T sedans manufactured between May 2010 and March 2012, China’s General Administration of Quality Supervision, Inspection and Quarantine said yesterday in a statement. Due to a problem during the part supplier’s manufacturing process, the oil return pipe of the power-assisted steering system may break in extreme cases, making it difficult to steer the vehicle, the statement said.

Blue-sky thinking colours drone industry Lai Yuchen

ong Hong, an experienced drone operator in Beijing, is anxiously waiting for his license. Song and 45 others, having passed theoretical exams and flight tests, are ready to become China’s first batch of certificated flyers of unmanned aerial vehicles (UAVs) - drones. The civil UAV industry is ready to take off in China. There is a huge demand. China’s general aviation sector could hardly be less developed and is unable to meet the needs of all kinds of customers, from disaster relief to crop dusting. Song is the boss of China Eagle, a UAV developer and manufacturer in Beijing. The firm works with the State Oceanic Administration on shore patrols. “A ship patrol can cost up to 1 million yuan (US$163,000) per day, while a drone patrol costs only 300 yuan,” Song said. Shortly after this month’s earthquake in the southwestern province of Yunnan, aerial photos taken by drones provided valuable information for disaster relief. The Aircraft Owners and Pilots Association (AOPA) estimates that there are

China’s drone industry is quite competitive, especially in areas such as avionics and flight control some 10,000 professional UAV operators in China and the number is growing rapidly. The Civil Aviation Administration requires that anyone who wishes to operate a UAV heavier than 7 kg must obtain a license. If the UAV is heavier than 116 kg and operating in the integrated airspace, where manned aircraft also fly, the operator my must have both a pilot’s license and UAV certification. Zhang Feng, secretarygeneral of AOPA, knows it will take time for all drone operators to get licenses, but there will be no punishment for those flying without licenses during the transition period. “The regulation aims to put things in order, not ban people from flying,” he said.

Meng Wei, general manager of Art-Tech UAV in Shenzhen, welcomes the new regulations. “We now know where the boundary is and what we can do. It’s definitely good news,” he said. AOPA China estimate that there are around 300 enterprises involved in the industry, including both state-owned enterprises and private start-ups. “The gap between these companies and their western counterparts is not that big,” said Zhang Feng. “China’s drone industry is quite competitive, especially in areas such as avionics and flight control.” At the beginning of the year, Shenzhen published a 7-year development plan

More Chinese lock-up shares eligible for trade

Massive protest against Occupy Central

he value of lock-up shares becoming eligible for trade on China’s stock market from Monday to Friday will reach 48.4 billion yuan (US$7.87 billion), according to data from two stock exchanges. The volume was up by 14 percent from the previous week. A total of 28 listed companies on both the Shanghai and Shenzhen stock exchanges will see their lock-up shares become eligible for trade during the week. Zhejiang Kaishan Compressor Co., Ltd., a leading producer of air compressors in China, will see shares worth 9.78 billion yuan released to the market on Tuesday, the greatest value among the 28 companies. Under China’s market rules, major shareholders of non-tradable stocks are subject to one or two years of lock-up before they are permitted to trade the shares. A rise in newly unlocked shares will put some downward pressure on the market due to the increase in stock supply. Xinhua

for aviation and aerospace, promising a UAV industrial base with a drone flight testing centre. Research institutions, manufacturers and parts suppliers will be encouraged to set up shop there. With the increasing popularity of small drones, unauthorized flying has become an issue. Last December, air traffic controllers at Beijing Capital International Airport were alerted to a low-flying UAV. Two passenger planes were forced to change course and more than 10 flights were delayed. It turned out to be a company conducting an aerial survey near the airport . Four people were detained for endangering public security.

Zhang Feng, Aircraft Owners and Pilots Association secretary-general

“Reckless flying is dangerous to other aircraft as well as people on the ground. The operator licensure is just a start,” said Ke Yubao, AOPA China’s acting secretarygeneral. Almost all airspace over the Chinese mainland is strictly controlled and all flying for whatever purpose must get official clearance. Xinhua

China’s new energy car output surges

housands of people in Hong Kong marched in protest against Occupy Central with Love and Peace, which is planning mass sit-ins to paralyze the city’s financial district amid a debate over democracy in the territory. Demonstrators led by the Alliance for Peace and Democracy filled several soccer fields at Victoria Park in the city’s east before starting to walk toward Central about 1:30 p.m. The group expected 126,000 people to take part, according to spokesman Robert Chow, who said the group collected more than 1.1 million signatures against Occupy Central. The protest underlines the deep division in Hong Kong over how to pick its new leader in 2017, with the political unrest threatening to erode its status as a global financial centre. The Chinese government has insisted on having candidates vetted by a nominating committee. Beijing is expected to issue an initial ruling on democratic reforms at the end of the month. Bloomberg News

hina’s production of new energy vehicles surged by 280 percent year on year in the first seven months thanks to government support for the fledgling sector. Total production in the January-July period stood at 25,946 units, the Ministry of Industry and Information Technology said yesterday in a statement. During the period, output of pure electric passenger cars soared nearly 700 percent from a year earlier to 13,829 units and that for plug-in hybrid passenger cars climbed about 10 times to 5,027 units. Pure electric and plug-in hybrid commercial vehicles were up by 46 percent and 60 percent, respectively, the statement said. China has rolled out a raft of measures to promote the use of new energy vehicles in its bid to save energy and combat pollution, including tax exemptions, subsidies for car purchases and requirement for government organs to buy more new energy cars. In July, the government announced that new energy cars will be exempted from a 10-percent purchase tax starting from September 1, 2014 to the end of 2017. Xinhua