Macau Business Daily, Dec 1st, 2014

MOP 6.00 Closing editor: Joanne Kuai Number 678 Monday December 1, 2014

Publisher: Paulo A. Azevedo

MSAR records first GDP decline IN 5 years

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Year III

t had to happen, and it has. Macau’s GDP declined 2.1 percent y-o-y in Q3. The first time in five years the SAR has reported an economic contraction. Private investment has increased 41.5 percent but the finger is being pointed at the sluggish service trade. Exports of gaming services have dropped 12.3 percent in real growth. And exports of ‘other tourism services’ dropped 0.7 per cent, despite increasing visitor arrivals. Four international institutions and rating agencies urged Macau to diversify its economy in May PAGE

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Anti-graft campaign takes heat out of China’s private jet market

Cute overload

PAGE 9

Chow Tai Fook considering acquiring stakes in diamond mines

Forever young. Japanese company Sanrio’s Hello Kitty celebrates her 40th birthday this month. But she’s showing no signs of slowing down.

The first Hello Kitty theme park to open outside Japan is all set. And is due to open on New Year’s Day 2015 in Zhejiang. The Chinese property developer previously pledged to build another theme park on Hengqin

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HSI - Movers November 28

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Name

%Day

Bank of Communicatio

6.46 5.04

Bank of China Ltd

3.63

Junkets jack it in

Cross strait hurdles

Cathay Pacific Airwa CITIC Ltd

3.05

It was a good idea. Until reality set in. The junket model looks nearly broken, says a Standard Chartered analyst. VIP room promoters are struggling to attract high rollers. And to collect on debt. Gaming operators are increasingly turning to the mass market

We live in interesting times. Last weekend, Taiwan became the focus of attention. Local elections returned a resounding anti-KMT result. Relations with Mainland China are in the forefront of analysts’ thinking. While economic forecasts don’t invite optimism

China Resources Land

2.51

Hutchison Whampoa L

-1.72

China Resources Ente

-2.53

Kunlun Energy Co Ltd

-3.12

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PAGES 11 & 16

PetroChina Co Ltd

-3.33

CNOOC Ltd

-5.50

Source: Bloomberg

www.macaubusinessdaily.com

Interview

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Zhuhai calling It’s become something of a trend. A growing number of Macau residents are considering making Zhuhai their home. And a place to do business, says Jean Jacques Verdun, founder of Delta Bridges Media Ltd. He told Business Daily that MICE and F&B represent the best investments. And definitely roll with the punches. It’s a jungle out there in businessland

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2 | Business Daily

December 1, 2014

Macau Housing prices rebound in October The average price of residential flats bounced back last month, up 9.2 per cent month-on-month, or 3.2 percent year-on-year, reaching MOP106,341(US$13,313) per square metre on a saleable area of 68 square metres, according to the latest data released by the Financial Service Bureau (DSF). Nevertheless, the data shows that the total transactions of residential flats continued to decrease in October, down 40 transactions month-on-month to only 421, of which 344 transactions involved flats in Macau, 63 in Taipa and 14 in Coloane.

Lippo posts HK$105mln loss Sara Farr

sarafarr@macaubusinessdaily.com

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ippo Ltd reported an overall loss of HK$105 million for the six months ended September 30.

In a filing with the Hong Kong Stock Exchange, the group said last year’s same-period profit of HK$272 million was ‘mainly attributable to the significant profit arising from [its] property development project in Beijing which was completed in the third quarter of 2013.’

Turnover for April to the end of September totalled HK$1.5 billion compared to HK$3.3 billion a year earlier.

The group is known for its property development projects in mainland China, Macau, Singapore and parts of the Asia Pacific region.

In Macau, Lippo is the developer for ‘M Residences’, a property development project close to the reservoir that is slated to be completed

next year. According to the filing with the Hong Kong Stock Exchange, pre-sales were launched in November 2011 and ‘received satisfactory response.’

Around 96 percent of the residential units had been pre-sold for a total of HK$1.2 billion prior to September 30, 2014. ‘The revenue and profit arising from the project will be reflected in the group’s results in the year of completion,’ the filing reads.

Once complete, ‘M Residences’ will provide a total of 311 residential units.

‘It is aimed to complete the

development before the current financial year-end,’ the group said in Friday’s filing.

The group’s property development recorded revenues of HK$59 million in the six months ended September 30, compared with the HK$1.9 billion recorded in the same period a year earlier. This revenue derived mainly from the completion of the sale of properties In the Beijing EconomicTechnological Development Area in mainland China in the third quarter of last year. ‘Since no new property development was completed during the [six month] period [ended September 30], the revenue decreased significantly,’ the filing reads.

‘As a result, the segment profit decreased to HK$16 million for the period [compared with 2013’s HK$667 million].’

DSAT: Few gaming shuttles rented from bus companies

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ransport Bureau (DSAT) director Wong Wan claimed that only a “small proportion” of the gaming shuttles that three gaming operators provide for their labour are rented from bus operators, stressing in his reply to legislator Si Ka Lon’s written interpellation that bus companies can run rental services as long as they do not affect the public bus service.

The legislator queried again whether bus operators renting buses to gaming operators would affect the public bus service. He wrote in his enquiry that ‘although it is necessary to guarantee the [transportation of] gaming workers, such cooperating mode [between bus companies and gaming corporations] may lead bus companies to withdraw buses for public service to substitute [those for private service]

when there are problems with the shuttles for employees and construction workers of casinos or when there are not enough bus drivers.’

Mr. Si pointed out that such cooperation between the bus and gaming operators may decrease the number of buses for public service, questioning whether the Bureau has any measures to supervise or avoid the buses for public service being used for private service.

The head of the Bureau, meanwhile, said that it would continue supervising the frequency of each bus route and communicate with the related gaming operators in order to keep the measures improving. In addition, he claimed that providing gaming shuttle buses for casino workers may help resolve traffic pressure, in terms of capacity and efficiency.

K.L.

First Hello Kitty Park outside Japan opening in Zhejiang Mainland property developer Shanghai Insight, known for its cooperation with Sanrio for the Zhejiang theme park project, earlier showed interest in Hengqin Stephanie Lai

sw.lai@macaubusinessdaily.com

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he first theme park featuring the iconic Japanese cartoon character Hello Kitty outside Japan, located in Zhejiang Province in China, is partially opening in January next year following an inauguration ceremony on Friday marking the completion of the two years-plus construction.

The Hello Kitty-themed amusement park, located in Anji City, occupies a 1.6 square-kilometer site featuring six sub-theme parks. The construction of the 2 billion yuan (US$325.6 million) project, jointly designed by cartoon character creator Sanrio Co Ltd and U.S.-based theme park designer Hettema Group, will feature two hotels – one of which is a Hello Kitty-themed 5-star accommodation pending the announcement

of an opening date.

The theme park is built and managed by mainland Chinese property developer Shanghai Insight (Group) Co Ltd, which was authorised by Sanrio to build the Hello Kitty cat theme park in Zhejiang.

The other two Hello Kitty theme parks are located in Tokyo and Kyushu in their home island.

The chairman of Shanghai Insight, Mr. Liao Chunrong, is a Zhejiang-born businessman who acquired residency in Macau. Mr. Liao’s company submitted a bid earlier through a Macau-registered firm to build another theme park comprising two hotels in Hengqin, situated in one of the plots located in the “Guangdong-Macau Cooperation Industrial Park” - a term the Hengqin authority uses with reference to a

collection of different zones scattered across the island designated for tourism and leisure, cultural and creative, information technology and other trade services.

The theme park that will be established in Hengqin,

which reportedly also features Hello Kitty elements, is an 800 million yuan investment, the Hengqin Administrative Committee announced in late October.

Macau’s Legislative Assembly President Ho

Iat Seng and former Chief Executive Edmund Ho Hau Wah also attended the event along with provincial officials from Zhejiang at the inauguration ceremony of the Hello Kitty theme park on Friday.

Starting on December 5, the online ticketing system of the Hello Kitty theme park in Zhejiang will be operational. According to the official website of the park, the admission fee for an adult visitor on a weekday is 260 yuan, while that for a child is 200 yuan; for weekends and national holidays, the admission charges will cost 60 yuan more.

The management of the theme park predicts visitor arrivals could exceed 1 million for the whole year following the imminent opening in January, media reports note.

Business Daily | 3

December 1, 2014

Macau

GDP slowing down Macau’s gross domestic product decreased by 2.1 per cent in the third quarter of the year, the first drop for the last five years Sara Farr

sarafarr@macaubusinessdaily.com

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t hasn’t happened quite without warning. In May, as many as four international institutions and rating agencies urged Macau to diversify its economy. A warning that seems to have fallen on deaf ears with gaming revenues dropping steadily for the past five consecutive months, and now a slowdown in the territory’s gross domestic product (GDP) – the first quarterly growth that has been below zero for the last five years.

The latest official figures released by the Statistics and Census Service (DSEC) reveal that Macau’s GDP for the third quarter of the year decreased by 2.1 per cent year-on-year in real terms. According to the report, the ‘sluggish service trade is the leading cause of the downturn,’ the statistics bureau says.

Figures show that exports of gaming services dropped 12.3 per cent in real growth during the third quarter of the year, leading to the current economic downturn. In addition, exports of ‘other tourism services’ also dropped 0.7 per cent, despite the increasing number of visitor arrivals in the same quarter.

Of the major components of Macau’s GDP are private investment, which increased by 41.5 per cent, government final consumption expenditure, which also increased 8.1 percent and private consumption expenditure, which increased 7.2 percent.

In addition, expanding investment lessened the magnitude of the territory’s economic contraction.

‘Gross fixed capital formation, the gauge of investment, continued to expand and rise by 38.1 per cent year-on-year,’ the report reads, adding that with the number of largescale tourism development projects underway, private investment saw

a 41.5 per cent growth. Of this, investment in construction increased by 43.8 per cent, while investment in equipment increased 28.9 per cent.

Government investment increased 5 per cent, with investment in public construction expanding 15 per cent, but that of equipment shrinking 34.7 per cent.

Meanwhile, government final consumption expenditure increased 8.1 per cent in the third quarter of the year over that of the same period a year earlier, while compensation of employees rose 2.6 per cent and net purchases of goods and services increased by 14.2 per cent.

Overall, imports of goods and services decreased by 2.5 per cent, with imports of services decreasing 17.8 per cent, while overall exports of goods and services dropped 9.3 percent, with exports of services alone decreasing 9.9 per cent.

‘The decline in exports of gaming

Source: DSEC

services deteriorated, slowing further by 12.3 per cent year-on-year, albeit the increase in visitor arrivals and lower visitor spending resulted in a 0.7 per cent decrease in exports of other tourism services,’ the statistics report on the third quarter GDP reads.

The private sector, however, witnessed consumption expenditure, with full employment of the labour force and soaring manpower needs being conducive to a yearly 7.2 per

cent increase in private consumption expenditure in the third quarter. In addition, household final consumption expenditure increased by 6.7 per cent in the domestic market and another 10.6 per cent in the market abroad, official data shows.

Also, with external demand, merchandise exports grew 11.4 per cent year-on-year, while merchandise imports expanded by 12.4 per cent in the third quarter of the year.

Macau-PRC trade for Jan-Oct slows

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ith Macau’s exports of goods to mainland China sharply declining in the first ten months of this year, the growth pace of the bilateral trade between the city and mainland has been much slower when compared to the same period last year, the latest data released by China’s Ministry of Commerce shows.

In October alone, the value of bilateral trade of goods traded between Macau and mainland China rose year-on-year by 17 percent to US$340 million (2 billion yuan or 2.7 billion patacas), a month that saw the mainland’s exports to here rise 26 percent to US$330 million, while the city’s exports to the mainland declined 62 percent to US$10 million.

For the first ten months of this year, the bilateral trade value between the two places at US$2.98 billion represented a year-on-year rise of only 1.36 per cent, a much slower growth pace when compared to the nearly 28 per cent seen for the same period last year as the growth of mainland’s exports to here decelerates, while

Macau saw less exports to its most important trade partner, data from the ministry shows.

The value of the mainland’s exports to here reached US$2.82 billion for the January-October period, a rise of only 7.6 per cent from the US$2.62 billion in the same period last year when the city saw 23 per cent year-on-year growth in mainland exports value. For Macau’s exports to mainland in the first ten months of this year, ministry data showed that the value had dropped by an annual 62 per cent to US$160 million.

Meanwhile, some 30 investment projects from Macau companies were approved by mainland authorities in October, involving a total value of US$40 million.

For the first ten months of this year, 296 investment projects from Macau companies were approved by the mainland, involving some US$470 million, representing a year-on-year rise of nearly 12 percent.

S.L.

The Tourism Crisis Management Office (GGCT) recommends Macau residents, before travelling: • •

• • •

Plan previously your holiday destination; Leave a copy of your ID document and overseas contact details with your family or friends; Prepare a list of local emergency contacts in your travel destination; Protect yourself with travel insurance; Stay alert at the security of your destination.

In case of serious accidents or disaster during your travel, call the 24 Hour Tourism Hotline at (853) 2833 3000.

For additional details please visit our website: www.ggct.gov.mo Tourism Crisis Management Office (GGCT) Alameda Dr. Carlos d’Assumpção, n.os 335-341, Edifício “Hotline”, 5.o andar, Macau Telefone (853)28723993 Fax (853)28722726

4 | Business Daily

December 1, 2014

Macau Brought to you by

HOSPITALITY Sleep pairs The number of hotel customers in October reached a figure of close to 863,000 guests.

That value represents a moderate increase of 3.8 per cent relative to the same month last year, amounting to 32,000 additional guests. This appears to confirm the return to growth started in September, following several months when the dominant trend was a slight contraction. Since March, most homologous monthly growth rates have been negative, by figures varying between minus 0.8 percent and minus 2.6 percent. Mainland China keeps increasing its share of the total number of guests. For all of the current year, and for the first time on record, that share always stood above 60 percent. The October total was more than 5.3 percentage points above the figure for the previous year. The sector is approaching a point where, as a rule, of every three hotel guests two will be from the mainland.

Xiao Nan Guo Restaurants acquire Pokka Macau Mainland China restaurant chain operator Xiao Nan Guo Restaurants Holdings will take 65 per cent stake in Pokka Hong Kong Cooperation in a bid to develop the coffee chain’s brands on the mainland João Santos Filipe

jsfilipe@macaubusinessdaily.com

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iao Nan Guo Restaurants and the managing director of Pokka Hong Kong, Pauline Wong Shui Ching, reached an agreement on Wednesday 26 November to acquire Pokka Hong Kong and Pokka Macau from the Singapore-based company Pokka Corporation In the amount of HK$300 million. The deal is due to be closed on 7 January.

‘The group sees great potential in developing Pokka Hong Kong’s business in the People’s Republic of China. Given its strong network in the catering market in the PRC, the group will make it a priority to work with Pokka Hong Kong to develop

an ambitious business plan to exploit and adapt Pokka Hong Kong’s brands in the PRC’, Xiao Nan Guo said in a filing with the Hong Kong Stock Exchange.

‘The initial focus is on developing a coffee shop and related business, to be followed by the cafe-style restaurants business, both under the Pokka Café brand’, the Shanghai based company explained.

The group also explained this decision is made with the intention of increasing cuisine offerings, stressing that the experience of Pokka Hong Kong and know-how in Western-style and Japanese food would benefit the group.

Xiao Nan Guo Restaurants and Pauline Wong have to pay directly to Pokka Corporation a total of HK$216 million as the closing purchase and another HK$40 million in different installments over five years. The remaining HK$44 million is related to post-closing payments to Pokka Hong Kong the acquiring parties involved in the deal agreed to pay.

Once the agreement is sealed, the control of Pokka Hong Kong and Pokka Macau will be handed to Million Rank Limited (MRL). In turn, Xiao Nan Guo’s subsidiary will control 65 percent of MRL and Pauline Wong will control the remaining 35 percent, through her company Rosy Metro.

Café de Coral maintains momentum The group that is primarily engaged in the operation of quick service restaurants achieved a profit of HK$243.1 million during the first six months of the fiscal year

As has been the case recently, only Macau has also followed an upward trend. Its share has been hovering around the 6 to 7 per cent levels, while its absolute figures have followed the dominant trend set by the mainland. Macau guests were up by 4.7 per cent relative to last year, and by no less than 25.6 per cent relative to two years ago. All other regions showed declining quantities. The biggest contraction was registered for Honk Kong guests. Their numbers declined 12 percent on last year, and by a full third on two years prior. Similar figures for Taiwan were minus 6.5 per cent and minus 39.6 per cent, respectively. As a result of these trends, for most of this year the combined share of mainland and Macau guests exceeded the 70 per cent threshold.

2,000

AVERAGE DAILY NUMBER OF MACAU RESIDENTS STAyING IN HOTELS, OCTOBER

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afé de Coral posted a profit of HK$243.1 million during the first six months of the fiscal year of 2014/2015, roughly the same amount of the same period the previous year (HK$242.9 million).

“Despite the challenges that our business faced during the period, the group maintained its performance in the first half of fiscal year 2014/15 through disciplined execution of our sustainable growth strategies”, Chief Executive Officer Sunny Lo Hoi Kwong said.

The largest Café de Coral revenue derives from Hong Kong. With HK$3.75 billion in revenues, 79.3 percent (HK$2.99 billion) comes from the neighbouring Special Administrative Region. The Mainland Chinese market is responsible for 18.4 percent (HK$690 million) of the revenue and the North American market accounts for 2.3 percent (HK$70 million).

Given that only 2.3 percent of the group’s revenue comes from North America, it is no surprise that Café de Coral plans to sell its assets on that continent in order to focus its

operations in Mainland China and Hong Kong.

‘Nevertheless, after careful consideration, the Company decided to dispose of its business operation in North America in order to provide greater focus on its core business in Hong Kong and Mainland China and to better utilise resources to achieve the long-term growth of the group’, the interim report said.

The group will receive HK$54.4 million for its assets in North America, with the deal expected to be completed on 16 December 2014.

The company also admitted that it was affected by the food scandals in China (related to chicken meat) and Taiwan (cooking oil).

‘The recent food safety incidents in the region clouded the whole food and catering industry, which inevitably also affected us’, they said.

As for the second half of the fiscal year, Café de Coral stressed the importance of keeping costs under control, given higher operating costs and a slowdown in retail sales.

J.S.F.

Business Daily | 5

December 1, 2014

Macau

Dynam Japan net profits drop 12pct Sara Farr

sarafarr@macaubusinessdaily.com

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apanese pachinko hall operator Dynam Japan Holdings Ltd Co reported net profits of HK$641 million for the six months ended September 30, a 12.4 percent drop over the same period last year.

In its interim results filed with the Hong Kong Stock Exchange, the company said its profit before income tax was down 8.7 percent from that of a year ago to HK$1.05 billion.

In addition, revenue dropped 1.8 percent to HK$5.7 billion between April and the end of September.

In June, the Japanese pachinko hall operator said it was still waiting for the Macau government to approve an application to operate ‘next generation pachinko machines’ here.

The plan, according to Dynam’s chairman Yogi Sato, who was quoted by Hong Kong financial wires and media at the time, is to place up to 100 of these new machines in a new hotel that scheduled to open in September. While Mr. Sato did not name the property to open in September, Dynam said previously that

it belongs to Macau Legend Development Ltd. The group’s Prague Harbourview hotel in Fisherman’s Wharf is their only property slated to commence operations this year.

Friday’s filing with the Hong Kong Stock Exchange says the company has ‘also invested in casino operator Macau Legend as well as concluding a memorandum of understanding related to operation of entertainment facilities and food and beverage outlets within Macau Fisherman’s Wharf.’

The MOU the filing refers to is in regard to a prototype of the next generation pachinko machines. ‘The company is now in discussions with and is undergoing preparation for making an application for the approval of the Gaming Inspection and Coordination Bureau of Macau [DICJ] and other competent authorities,’ the June filing reads. The MOU amendment and extension was set to expire on November 25, 2014.

CY Foundation performance dived in H1

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ong Kong listed company CY Foundation posted a net loss of HK$11.9 million (US$1.48 million) during the first half of its fiscal year ended September 30, 2014. This was driven by the Group’s lossed in the electronic gaming business in Macau.

The Group filed with the Hong Kong Stock Exchange Thursday evening after trading hours announcing that its performance for the half year had dipped, compared to a net profit of HK$7.8 million during the same period of its last fiscal year.

The Group claimed the loss was because of ‘the depreciation of multi terminal machines and amortization of initial investment cost’ in its electronic gaming business, which is provision of services for the management of electronic gaming equipment in Macau.

Meanwhile, another primary business of the Group, its packaging products business, registered an increase of 179 per cent year-on-year in its net profit,

soaring from HK$1.4 million to HK$3.9 million.

The company’s electronic gaming business and packaging business contributed approximately HK$64.1 million and some HK$29.8 million to its turnover, respectively.

Facing a net loss during the interim year, CY Foundation said its management believes that ‘the Group is on track to turning around…[and] . . . will continue to look for potential sites in Macau as well as Southeast Asia.’

‘The management expects the electronic gaming business will bring sustainable cash inflow and profit to the Group in the future. The packaging business of the Group showed operational improvement continuously,’ the company wrote in the filing.

In addition, the company is expecting to expand the number of gaming machines in operation to 1,000 by the end of this fiscal year, with 3,000 machines by the end of the fiscal year ending March 31, 2017.

K.L.

6 | Business Daily

December 1, 2014

Macau

Residents should invest in MICE and F&B across the border, says founder of Delta Bridges Zhuhai is becoming more attractive for Macau residents, in terms of living and investment opportunities.

Contrary to what was happening a few years ago, now we’re seeing the middle class from Macau - well educated, even foreigners - turning to Zhuhai for a more affordable rent. In an interview with Business Daily, the founder of Delta Bridges Media Ltd, Jean Jacques Verdun, says that people in Macau are also looking across the border for investment opportunities. And he believes that they are there, especially in the MICE and F&B sectors.

Luciana Leitão

Lucianaleitao@macaubusiness.com

Communting between Zhuhai and Macau for many years, how do you see this movement of local residents choosing the border city to live in?

A lot of people from Macau have been moving to Zhuhai; it’s not a new phenomenon. What is changing now is that the middle class — the people with good jobs, good education and a good salary, even foreigners — are also thinking of moving to Zhuhai.

That’s what’s different from the last few years.

don’t speak Mandarin in your daily life, you’re still O.K. For business, you don’t really need it — you would need a really good level of Mandarin to be able to do business in Mandarin. All we foreigners have assistants who translate for us, which is even better. There’s no misunderstanding — even if you speak quite good Mandarin, you may not understand all and Chinese businessmen are really good businessmen; they’re pretty smart, so make sure you understand clearly what they say.

Do you believe this will start to affect the prices/rental of housing in Zhuhai?

Not really, not in a massive way.

Even if more locals from Macau move to Zhuhai, Zhuhai is pretty big and the population of Macau is not that huge. If you work in Macau and you have residency, even if it’s temporary, it’s quite easy to get a tourist visa for one year or six months. You’ll have no problem living in Zhuhai with that kind of visa.

People have been moving to Zhuhai only because of the rents in Macau?

Some, yes. Some are also looking for business opportunities. They’ve been running a business for a few years in Macau, they’re doing well and they want to expand. When you’re in Macau, one direction you could expand is towards Hong Kong and another direction is China.

Are there are a lot of investment opportunities in Zhuhai, for Macau people?

More and more.

I would say a few years back, no.

A lot of industry in China was manufacturing and I don’t know anyone in Macau really involved in manufacturing. The thing is with China, since 2008, there’s been a

What is changing now is that the middle class — the people with good jobs, good education and a good salary — are also thinking of moving to Zhuhai

switch in the economy, designed by the central government, happening in front of us, from manufacturing to the service industry. In that sense, it kind of matches what Macau people can do.

It would have been difficult 10 years ago, or even five years ago, but now it’s the time that a lot of Macau companies can do business in China. Nicer companies or the hotel-related service industry, you have lots of really good companies in Macau doing PR, advertising, creativity and all these things have their chance to find customers and develop their business in Zhuhai and in southern China.

Are Macau people looking for such business opportunities because they can’t pursue them in the territory?

Even if they’re doing well, business is meant to grow. It could also be that Macau is becoming saturated and a lot of people are offering the same type of service and so they share fewer customers.

The challenges Is it easy for a foreigner to get into a market such as Mainland China?

China is a tough market but it’s doable. It’s not impossible. To set up a company is not too difficult to do in China today. It’s a process; it takes longer than in Macau or Hong Kong, it’s bureaucratic, but it’s smooth.

What advice would you give foreigners from Macau wanting to set up a company in Zhuhai?

It’s better if you have a company in Macau already, whatever the business scope. If it’s a restricted business scope in China, using the CEPA agreement you can still have that business scope in China. For example, advertising is restricted in China for foreigners — you can, but it’s really complicated to open an advertising agency, as a foreigner, in China. But if you have an operating advertising agency in Macau, there are some conditions, but if you fulfil these conditions, when you create your company in Zhuhai you are allowed to have an advertising licence. There are still required resources to open a company in China — you need to invest a minimum amount of money, and the minimum is RMB200,000; you need to have an office, you need to register with the Tax Bureau, you need to go through all this bureaucratic process, you must make sure there’s a reason to do it first. My advice would be to test the market a little before creating a structure there.

How about language barriers — is it required to speak Mandarin to open a business in Mainland China?

Not really. My Mandarin is not really good, even after a few years.

For my daily life, I’m O.K. If you

Business in Mainland China is all about connections and the ties you make with people. Can someone who has no experience in Mainland China and wants to start a business in Zhuhai do it that easily?

It will take some time. But in Macau the need for relationships to do business is perhaps even stronger in Macau than in Zhuhai.

People who are doing business in Macau are familiar with that already and if they’re thinking of expanding it’s because they’re successful. It’s less hermetic than Macau, in fact. The Mainland Chinese are pretty open.

One tip for the businessman willing to do business in Zhuhai — they have this notion of the old friend and the new friend.

They have a great sense of hospitality in Mainland China, they’re very welcoming, but you can’t expect them to be your best friend when you’ve only known them recently. The Chinese have got the reputation of cheating a lot, and I don’t think that’s automatically true, just that they’re really smart. So, if you’re weak, they can take advantage of you; just that this is business, not in a ‘stealing’ way.

Areas of investment What areas are better for Macau residents to invest in, in Zhuhai?

Two big areas. I would say MICE would definitely be one of them.

Zhuhai is very ambitious in [terms of] MICE projects. They have a huge conference area and if a MICE company with experience in Macau establishes there they would have business opportunities — and not just Zhuhai, because then you have Zhongshan, Guangzhou.

The other [opportunity] would be in F&B — it is really lacking in Zhuhai and if done well can be pretty successful.

Looking at the current state of the real estate sector in Macau, do you think Zhuhai can be considered an alternative?

Business Daily | 7

December 1, 2014

Macau Macau is not just gaming. All these events are really an asset and it’s something that is missing in the cities in the Pearl River Delta

structure in Mainland China, Zhuhai, and that’s a PR agency.

We noticed that a lot of our Chinese customers, when they purchase an ad on our platform they always ask for PR related services; that we did, case by case.

At one point we were making more money from the PR-related services side than the actual advertising, so it made sense to evolve and to create an official PR agency, and even to re-brand as a PR agency. I’m doing much more business in the Mainland than in Macau now, so it’s better for me to project ourselves as a PR agency rather than a media one in China.

For purchasing real estate, the prices in Zhuhai are much cheaper than Macau — not that cheap, if you compare them with Europe; for what you get the prices are not that low. Of course, it’s different — you don’t own the property forever, it’s only for a couple of years.

It’s a question of what would you do with that property. Is it just for investment or do you want to live there? I recommend for people who want to live there, they should buy or rent in the Huafa properties, which are in the downtown area. What about Hengqin? Sure, if you want to invest — Hengqin is not liveable at the moment, there’s nothing there.

It will come but it will take a few years, so it all depends on your priorities.

Would you say Zhuhai is a safer investment, compared to Hengqin?

Maybe. Also, because the prices in Hengqin are already pretty expensive at the moment, they’re more expensive than in Zhuhai.

I believe Hengqin is going to do fantastically well, I’m not being pessimistic about the Hengqin area . . . but Zhuhai is safer.

Is it easy for a Macau resident to buy a property in Zhuhai?

There are less and less [constraints]. They tried to cool down the market a few years ago, so they stopped non-Zhuhai residents buying property but they’ve changed that now. If not in every area in Zhuhai, in most areas it is lifted. So, for either foreigners or Macau residents, it’s a bit easier to buy property in Zhuhai.

Would you say, after MICE and F&B, that real estate is the third best investment option for a Macau resident?

The prices for Zhuhai can only go up in the next few years. The Hengqin apartments that they sold a few weeks ago were all sold out in 48 hours. It’s still a hot market — the prices are cheaper than Guangzhou or Shenzhen, much cheaper than Macau.

The opening of the border will mean more buyers from Macau, for sure, that’s going to be good

It would have been difficult 10 years ago, or even five years ago, but now it’s the time that a lot of Macau companies can do business in China

for prices going up, and the bridge coming two years later. The actual prices will jump when people from Macau and Hong Kong start to massively buy in Zhuhai.

Is there a risk for prices in Zhuhai to become as high as in Macau?

I don’t think so because of the situation in both Macau and Hong Kong. Their territories are very limited and the space is limited, even more so in Macau, that’s why prices are going crazy.

Zhuhai is a pretty big city, with a lot of open space and unused space so far — so, rather than the prices going crazily high, I believe there will be constant growth with maybe a little peak when Hong Kong and Macau people start buying property here. But I don’t think it will go up as crazily as Macau.

The Delta Bridges How did the idea to create Delta Bridges come up?

I don’t have a media background.

I have a background in education and the idea came from many years ago, when I lived in Zhuhai and there was no information in English. More and more foreigners were coming to Zhuhai and they were always asking the same questions — they knew I was the guy to ask the questions of because I arrived before anybody else. I was the first one in Zhuhai, as

a foreigner. Then I had the idea that in order to avoid repeating the same answers to create a little website just about Zhuhai and to give practical information.

The commercial interest in that is that I had started a Chinese department in Zhuhai — a department to learn Chinese, within a school — to attract foreigners who had freshly arrived in Zhuhai, to learn Chinese in our school and to have a website with some information was the smart thing to do. They went to the website to look for the information, they saw the ads to learn Chinese and they came to our school to learn Chinese.

I founded Delta Bridges in 2008, in Macau, with several partners. The first two years were pretty tough because it was the financial crisis.

We survived, we broke a few bones on the way, a few of my partners left at the time, but we survived and since 2010 we’ve been steadily growing. For the media part, we’re not trying to make a big splash — we’re a niche market; media is very sensitive in China and we operate in China, we’re one of the few foreign media [outfits] that operate in China, and my concept is to be non-political and non-sensitive.

You’re targeting the expat community?

My target is the expats, the overseas Chinese and the Chinese educated abroad. Our website and city guide is written in English, so we target an English-speaking audience and we have quite a lot of Chinese readers. My idea was to target the travelling business community. We’re not targeting the tourists, we’re targeting the people who are established in south China or the Pearl River Delta already and either for business or for pleasure need to go from one city to the next.

The company started as being based in Macau but hasn’t it distanced itself from the territory?

We started with this media company registered in Macau, it’s still there and it’s still operating from Macau. Since then, we’ve created a branch or another

Why the decision of investing more in Mainland China, instead of Macau?

My idea was to explore the Pearl River Delta, get information and sell this to Macau, especially to casinos, in terms of advertising.

One problem I didn’t think of is the casinos are not so excited about advertising in a media in China — they’re not allowed to do it, so they’re very careful about doing that. My business model kind of broke a little bit. They put ads in the Macau media but we’re distributing the media on the doorstep of the people who gamble in their places. They were quite reluctant to do it — at first I thought it was because we were too small or too new and then I had a meeting with Wynn casino and they explained really clearly: “We’re very careful about advertising on the Mainland. We’re not supposed to do it; if we do it, we’re very careful.” Then I realised I needed to change the model a little.

At the same time, as I was running around the Delta, originally just to get information, I wasn’t expecting to get money in the Mainland as I thought it was going to be hard although in fact it was doable. I haven’t given up on Macau — I still wish to target Macau for the non-gaming activities that there are in Macau. Whether foreigners or educated Chinese, a lot of them will want to come to Macau not for gaming but for the culture and creativity you have here.

Have you approached the hotels for advertising?

I’m in the process of re‑approaching the people who do these events. The good news is that MGTO understood our approach and they’ve been supporting us for two years now.

Macau is not just about gaming.

All these events are really an asset and it’s something that is missing in the cities in the Pearl River Delta. There’s more and more non-gaming. When I started, four or five years ago, there was less.

A lot of the casinos, MGTO, some cultural associations; I would say Macau is booming in terms of events at the moment.

8 | Business Daily

December 1, 2014

Macau

Junket model breaks down as gamblers walk away The junkets’ long-time virtuous cycle has become a vicious one.

Funding liquidity remains very tight, and the business model looks nearly broken, says Standard Chartered analyst Philip Tulk

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unket operators that connect China’s wealthy punters to Macau’s casinos are waiting as long as a year for gamblers to repay billions of dollars of loans, crippling the business model of an industry that sustains the world’s biggest casino centre.

These businesses, which lend to high rollers and operate private gambling rooms, normally collect within 30 days and charge interest rates as high as 3 percent per month on overdue balances, according to Macau-based junket consultant Tony Tong.

Now the junkets are on the hook for a surge in bad debts as China’s economic slowdown and a crackdown on corruption chase some VIP gamblers away. With little access to credit and slow repayments, the money isn’t flowing.

“The business model looks nearbroken,” said Philip Tulk, an analyst with Standard Chartered in Hong Kong.

Heng Sheng, one of the largest junket operators, told investors in October that 30 percent of the outstanding debt owed to its agents was over a year old, according to notes taken by a participant at a conference that was closed to the media. Many gamblers were making monthly instalments rather than the normal practice of paying in full.

A Heng Sheng representative declined to comment, saying he was not authorised to talk to the media.

It is difficult to establish how much credit these junkets extend because much of the business is done informally, but one Hong Kong-based analyst at an international bank estimated there was HK$100 billion (US$12.90 billion) of outstanding debt.

China limits the amount of yuan that Chinese can take out of the country, so junkets serve as a conduit by lending Hong Kong dollars or Macau patacas that are accepted in the casinos.

This system insulates casino companies from credit risk, and helped propel Macau revenues to US$45 billion last year – seven times Las Vegas’s take. Macau’s revenues are on track to fall 1-2 percent this year, well off last year’s gain of 19 percent.

Without a healthy junket industry, casinos operators such as Las Vegas Sands Corp and Melco Crown Entertainment would have to rely on mass-market gamblers or extend VIP credit directly – a practice that has led to write-offs in places such as Singapore, where junkets are tightly restricted.

US$450 million debt Wealthy coal baron Lu Zhong Lou is one extreme example of how the junket business can go wrong.

Ranked among China’s wealthiest tycoons by Forbes, the 49-year-old from Shanxi province frequented luxurious casinos including Wynn Macau Ltd’s caramel-hued VIP parlours and Galaxy Entertainment Group’s diamond-encrusted saloons, according to six people familiar with his gambling habits and photographs of Lu playing at baccarat tables, obtained from some of his creditors.

He owes junkets and Chinese businessmen as much as $HK3.5 billion (US$451 million), according to his creditors and local media. Reuters was unable to independently verify that figure after reviewing some signed contracts with junkets.

Junket operators say not all lending is recorded in contracts, and Lu’s tally may be inflated by interest as well as side betting, an illegal arrangement between a gambler and junket operator where every dollar bet on a table represents as much as 20 times more.

In a series of phone calls with Reuters, Lu initially agreed to speak to a reporter about the gambling debts but then declined. Ji Jin Wu, a legal representative for Lu, said he was unable to comment without Lu’s permission.

Lu is not considered a “princeling” son of top-ranking Chinese officials, although he is a member of China’s advisory body and has several heavyweights associated with his private companies including the daughter of an army general.

Naming and shaming Lu’s creditors said his wealth and influence made it especially difficult to collect, and local media reported in October that two of his creditors were detained by Chinese authorities for reasons unclear.

“Currently it is hard enough to collect debt from low-ranking state executives let alone for the higher ranked ones. How do you pressure them? You can’t. You have to write it off,” said Peter Wong, director at Total Credit and Risk Management Group, which helps companies recoup debt.

As gambling debt is illegal in China, some junket operators interviewed

by Reuters said they had flown to mainland China to try to seize assets and pressure debtors, a strategy that has been successful in a few cases.

Others have resorted to naming and shaming debtors through a Macau-focused entertainment and leisure website called Wonderful World, which lists more than 700 gamblers, including Lu. Charlie Choi, who oversees the day-to-day running of the website (www.99world.com), says the solution lies in clearer, enforceable rules.

“Macau needs to have some kind of protection for junkets to support the industry as this is what Macau depends on,” he said. “They need to have a system to let creditors and operators know the risks.”

Reuters

Corporate Hovione files its first investigational new drug application with FDA Hovione has announced it has filed its first Investigational New Drug (IND) Application with the U.S. Food and Drug Administration (FDA). This event represents a milestone in Hovione’s strategy of developing improved drug delivery options for established drugs, the company said in a statement.

The IND was submitted for minocycline gel, a novel formulation using a new patented crystalline base form of minocycline, to administer topically one of the most widely prescribed oral antibiotics for acne. Currently, there are no approved topical formulations of minocycline for the treatment of acne. Pending FDA’s acceptance of the IND submission, Hovione plans to initiate human clinical Phase 1/2 studies in early 2015.

“This filing represents a turning point in Hovione’s history. It builds on 50 years of manufacturing Active Pharmaceutical Ingredients, Particle Engineering and Formulation” Carla Vozone, Hovione’s senior director of product development and licensing, said. “This is a novel route of administration for a drug with proven safety and efficacy over more than 30 years of clinical use. We believe the targeted delivery to the site of action will reduce systemic exposure and thus potentially reduce the adverse events profile”.

Business Daily | 9

December 1, 2014

Greater China

Corruption crackdown clouds China’s corporate jet market Manufacturers remain positive about the longer-term outlook Bill Savadove

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akers of the world’s private jets are looking to promote their aircraft as business tools in China rather than luxury toys for the super-rich, as a corruption crackdown slows sales in the country.

Chinese leader Xi Jinping launched a drive against graft after he came to power in late 2012, accompanied by policies to enforce austerity among officials -- hitting sectors ranging from highend liquor to luxury watches.

The market for private jets is a small, albeit fast-growing aviation segment in China, but the corruption campaign has taken some heat out of the market, according to industry officials.

“We’re in this antiextravagant thing so numbers are down a little bit,” said Briand Greer, president of Honeywell Aerospace for Asia-Pacific, which supplies the aviation industry.

“To me it’s like the river has slowed a little bit.

Growth will be there, but it’s a different period right now,” he told AFP. The first US Gulfstream jets only arrived in China in 2003, widely seen as the dawn of the new market. By 2013, there were an estimated 248 business jets in China -- a 28 percent jump from 2012, according to consultancy Asian Sky Group.

At China’s premier air show in Zhuhai earlier this month, major players including Gulfstream, Canada’s Bombardier and Brazilian firm Embraer put their products on display.

Even the Commercial

A Bombardier exhibition facility at an air show

Aircraft Corp. of China, the country’s major civil aircraft maker, showed a plastic model of a new business version of its ARJ21 regional jet, as it seeks to steal market share away from foreign firms.

“Business jets should not be treated as a luxury product because it’s considered a business tool to improve efficiency,” said Christine Yan, Bombardier’s China marketing manager for business aircraft and aerospace.

“As long as this benefit can be recognised... in the long run it’s still a very good outlook,” she told AFP on the side-lines of the air show.

Infrastructure issues Manufacturers remain positive about the longerterm outlook for the China market, citing steady economic growth and Chinese

companies heading abroad to do business.

“For a long time, it’s been wealthy individuals buying a jet because they needed somewhere to put their money. It was cool to have a business jet,” said Greer of Honeywell.

“There’s starting to be a recognition that this is a tool that you can utilise to be more efficient,” he said.

But Chinese customers for private jets are undoubtedly concentrated among the country’s wealthy, with the aircraft sometimes costing tens of millions of dollars -- Airbus gave a list price of US$80 million when it unveiled a budget version of its ACJ319 corporate jet earlier this year.

Bombardier’s popular Global 5000, which seats up to 12 people, lists for just over US$50 million while the longer-range Global 6000 is

Some individuals are now renting for a one-off trip or time-sharing with others

US$62 million, according to the company.

In a survey this year, independent wealth publisher the Hurun Report estimated 40 percent of China’s “superrich” -- defined as those with fortunes of at least US$16 million -- plan to use private jets in future.

Film industry eyes box office records The success of the Chinese film industry has been attributed to the disposable income of the affluent class

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hina’s rapidly expanding film industry is aiming to smash box office records the forthcoming film season with movies from the country’s best home-grown talent.

The Spring Festival is a popular time for social activities. Every year a selection of films are screened during this “new year film season celebration”.

Director John Woo’s “The Crossing” will open the season on December 2, followed by the release of around over 70 big-budget movies until the season ends with the Lantern Festival.

Last year, a record-breaking 180 million people spent 6.4 billion yuan (US$1 billion) on 71 films in the corresponding period.

Critics and experts are upbeat this year will be a huge success, both in terms of profit and quality.

Major film makers, including Huayi Brothers, Huace Film & TV and Enlight Media, are actively promoting their films in the hope of becoming the carnival’s top titles.

The success of the Chinese film industry has been attributed to the disposable income of the affluent class, who are willing to spend more on entertainment and leisure.

China boasts around 2,300 production houses, releasing some 700 movies every year, ranking third in the world in terms of production capacity.

Xinhua

The Hurun Report’s founder Rupert Hoogewerf said Chinese buyers typically pay US$20 million to US$80 million for a private jet, but some individuals are now renting for a one-off trip or time-sharing with others.

“It’s the evolution of the market,” he said.

On top of the corruption crackdown, there are other bottlenecks on the market.

Limits on airspace -which is largely controlled by the military in China -- often lead to lengthy delays for scheduled flights, while there is a lack of airports and other infrastructure specifically to service private jets.

China has just 286 landing sites suitable for private planes, according to state media.

The government plans to “open” low-altitude airspace of under 1,000 metres nationwide next year, state media have reported.

But the move appears to be aimed at the broad category of general aviation -- which includes gliders, light aircraft, and crop-dusters -- instead of commercial flights.

Corporate jets cruise at far higher altitudes, but industry officials are encouraged by the decision.

“It’s a step in the right direction,” Steve Cass, vice president of corporate communications for Gulfstream, told AFP at the air show.

“Any time you have this much growth in such a short period of time, you’re bound to run into infrastructure issues.”

AFP

10 | Business Daily

December 1, 2014

Greater China Weakness to persist for department stores The challenges faced by Chinese department stores are likely to continue, casting a shadow on the sector for the next 12 months or even longer, Fitch Ratings predicted earlier this week. Weakness prevailed in department stores in China with declined revenues and even shutdowns. Analysts believed slowing consumer spending and economic growth contributed to the lacklustre performance.

“A rising supply of department outlets as well as the growing popularity of alternative formats such as shopping malls, specialty stores and e-commerce, has intensified the competitive landscape,” Fitch said in a latest report.

Gas pipelines fully operating Natural gas imports to China through the China-Central Asia Gas Pipelines exceeded 65 million tonnes till October, Khorgos customs in northwest China’s Xinjiang Uygur Autonomous Region announced yesterday. The pipelines, China’s first major energy cooperation project in central Asia, run from Turkmenistan across Uzbekistan and Kazakhstan to China, with a total delivery capacity of 55 billion cubic meters of natural gas every year, one fifth of China’s natural gas needs. According to Khorgos customs, the lines delivered 17 million tonnes of gas from January to October this year, with a year-on-year growth of 3.5 percent.

Port throughput growth slows Throughput at China’s ports remained at a low level from January to October, data released by the Ministry of Transport (MOT) showed. Freight handled at the country’s major ports grew 4.6 percent year on year in the first ten months to nearly 9.3 billion tonnes, compared with a 9.9 percent increase in the same period last year. Port throughput is an important indicator of a country’s foreign trade. China’s foreign trade volume slowed to a 2.5 percent growth from January to October from a 7.6 percent rise in the same period in 2013.

GM to recall 40,000 sedans General Motor Co’s main Chinese joint venture will recall 40,496 Buick LaCrosses in March next year due to faulty headlights, China’s top quality watchdog said.

Shanghai General Motors Co, GM’s venture with SAIC Motor Corp, will recall all the Buick LaCrosse sedans made between January 11 2006 and November 8 2006, the General Administration of Quality Supervision Inspection and Quarantine said on Friday. The company will change the parts free of charge, it said.

GM could not be reached for comment.

Carmakers in China recalled a record 5.3 million vehicles last year.

Unified ETC system to be launched China will launch a national unified electronic toll collection (ETC) system in the next year to solve freeway congestion, save logistics cost and cut emission. The national ETC network will be primarily completed by the end of 2015 based on a regional system that will cover 14 provinces by this year end. The ministry expects no less than 25 percent of passenger cars will be equipped with transponders and all the toll station along major expressways will be covered with the system by that time.

Chow Tai Fook exploring diamond mine acquisitions The jeweller plans to open five stores of the newly acquired Hearts on Fire diamond brand in China by March

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how Tai Fook Jewellery Group Ltd. is considering acquiring stakes in diamond mines to secure long- term supply of the gems as it targets growing demand for diamond jewellery in China.

Several mines around the world have asked Chow Tai Fook to invest, and the company has looked at some Canadian ones, Executive Director Adrian Cheng said in an interview in Shanghai. The world’s largest

listed jeweller currently has diamond processing and cutting factories, and doesn’t own any mines, he said.

“There are a lot of opportunities, but it is not very easy because it is always in a foreign country,

Alibaba-backed Momo seeks up to US$232 million in IPO Momo, which generates most of its sales through membership subscription fees, posted US$26.2 million in net revenue in the nine months through September Leslie Picker

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omo Inc., the Chinese application that lets users send text, photos or video to people nearby, is seeking as much as US$232 million in a U.S. initial public offering.

The company is offering 16 million American depositary receipts for US$12.50 to US$14.50 apiece, according to a regulatory filing today.

Concurrent with the IPO, the company plans a private placement to existing shareholder Alibaba Group Holding Ltd. of US$50 million in Class A shares and US$10 million in Class A shares to 58.com Inc., the filing shows. The stock will be listed on the Nasdaq Stock Market under the symbol MOMO. Momo had 60.2 monthly active users at the end of September -more than double the number from the year-earlier period. Facebook Inc. acquired messaging start-up WhatsApp Inc. for US$19 billion in February, while other services from Twitter Inc.’s micro blogging site to photo-sharing site Instagram LLC have honed their own messaging products.

Jack Ma wants to repeat experience after successful Alibaba’s IPO

Momo, which generates most of its sales through membership subscription fees, posted US$26.2 million in net revenue in the nine months through September. The company is unprofitable, the filing shows.

Alibaba invested in Momo in November 2012, taking a 20 percent stake at an implied valuation of US$100 million, according to a report

by Brean Capital LLC last month.

Momo is planning a partnership with the Chinese e-commerce giant with targeted ads for merchants on

Alibaba, with whom Momo would share marketing revenue, according to the filing.

Momo was co-founded by Yan Tang, who worked at Chinese Webgame operator NetEase Inc. for about eight years until 2011. Other investors in Momo include Matrix Partners China, Yunfeng Capital Co. and Sequoia Capital.

Morgan Stanley, Credit Suisse Group AG, JPMorgan Chase & Co. and China Renaissance Securities are managing the IPO. Bloomberg News

Business Daily | 11

December 1, 2014

Greater China would depend on the location and quality of the diamonds, and it would be difficult to pin down a price for acquisitions, he said.

Hearts on fire

We need to measure the political risks, economic risks, deployment of staff — it’s not an easy decision Adrian Cheng, Chow Tai Fook, Executive Director

somewhere in Africa or Botswana, or anywhere around the world,” Cheng said about the mines. “We need to measure the political risks, economic risks, deployment of staff -- it’s not an easy decision.”

Chow Tai Fook, whose name partly means “big blessing” in Chinese, is expanding into the diamond business as rising incomes boost demand for precious gems in China. The jeweller plans to open five stores of the newly acquired Hearts on Fire diamond brand in the Asian nation by March and expand to more than 300 stores in Greater China by fiscal 2019.

Chow Tai Fook is very cautious with mergers and acquisitions, and is only exploring the mine purchases, Cheng said. Any investment decisions

The Hong Kong-based maker of gold chains and pearl earrings bought diamond jewellery seller Hearts on Fire for US$150 million in August to expand its product offerings. The U.S. company will open its first mainland China stores in Shanghai, Nanjing city and Hainan Island, Glenn Rothman, chief executive officer of Hearts on Fire, said November 27.

The American company plans to target female consumers, mostly between the ages of 25 and 45, Cheng said. The stores will run workshops and have specialists on hand to explain more about diamond selection to its customers, he said.

Chow Tai Fook last week reported first-half profit fell 23 percent to HK$2.69 billion (US$346 million) after sales of gold products declined 41 percent to HK$14.5 billion from a year earlier.

Sales of gem-set jewellery, which contributed almost 30 percent to the group’s total, grew 25 percent to HK$8.29 billion during the period.

Founded in 1929 in the southern Chinese city of Guangzhou, Chow Tai Fook is celebrating its 85th anniversary this year. It had 2,191 points of sale as of September.

Chow Tai Fook plans to expand outside China and will open stores in duty-free areas in Korea and the Middle East to tap demand from affluent Chinese tourists, Cheng said.

The jewellery chain opened a point of sale in South Korea’s Jeju Island, according to its earnings statement.

Bloomberg News

China to increase fuel tax to curb pollution The government will use the added revenue to combat pollution, address climate change and improve public health and the environment

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hina increased its fuelconsumption tax the first time in five years amid falling global oil prices as part of steps to fight pollution and cut carbon emissions.

China will boost the tax on gasoline, naphtha, solvent oil and lubricating oil by 0.12 yuan a litre, according to a statement posted on the Ministry of Finance’s website.

The levy on diesel, jet fuel and fuel oil will increase by 0.14 yuan a litre.

The new levels are effective since yesterday.

The nation is seeking to fight pollution and improve energy efficiency amid record smog levels in cities including Beijing and Shanghai. Chinese President Xi Jinping in a pact with U.S. opposite Barack Obama agreed to cap China’s carbon emissions by 2030 and turn to renewable sources for 20 percent of the country’s energy.

The government will use the added revenue to combat pollution, address climate change and improve public health and the environment, according to a separate statement. The

fund will also be used to encourage new energy car development, the ministry’s tax division said in a statement.

“Increasing the fuel consumption price to a suitable level can not only help to curb pollution, reduce emissions, guide rational consumption demand, promote efficient usage of oil, but also can help the development of a new-energy industry,” the tax division said.

The price of gasoline and diesel will be unchanged after the increase due to falling global oil prices, the ministry said. The tax rise is the first in five years, according to Shandongbased energy consultancy SCI99.

Brent crude, one of several crude grades monitored by the government in Beijing, has fallen 30 percent this year.

The country will also stop collecting some taxes on small displacement motorcycles to aid low income groups, the ministry said.

Consumption taxes on vehicle tires and alcohol and leaded gasoline will also be scrapped.

Bloomberg News

Taiwan revises down 2015 growth outlook The statistics agency also amended its forecast for inflation in 2015, now putting the increase in the consumer price index at 0.91 percent instead of 1.46 percent Jeanny Kao and J.R. Wu

Taiwan’s economy broadly relies on the production of electronics and more recently Apple’s iPhone

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aiwan trimmed its forecasts for exports and economic growth for next year as major trading partners China and Europe both face significant headwinds.

The government now projects exports to grow 3.56 percent in 2015, instead of the earlier-forecast 4.09 percent. It tweaked the 2015 GDP growth projection to 3.50 percent from 3.51 percent while raising this year’s one to 3.43 percent from 3.41 percent.

The reduced forecast for exports could raise concern

about where demand for Taiwan’s top-notch technology goods will come from once the frenzied demand for Apple Inc’s newest smartphones cycle down.

“Next year China and the European Union will see belowpar growth,” Joshua Gau, a section chief in the DirectorateGeneral of Budget, Accounting and Statistics, told reporters.

“This is the main reason for the downward revisions.”

Taiwanese companies produce components that make up the bulk of Apple’s iPhones, from the semiconductors to

the camera lenses and home buttons to the casings.

Taiwan’s export orders, an indication of global tech demand, are set to reach a record this year, the economics ministry said last week, estimating the total at around US$480 billion.

‘Significant decoupling’ But export orders track goods made by Taiwan-owned factories both on the island and overseas, while exports only measure goods shipped from Taiwan itself.

Next year China and the European Union will see below-par growth.

This is the main reason for the downward revisions Joshua Gau, Taiwan’s Directorate-General of Budget, Accounting and Statistics, section chief

“There’s been a significant decoupling of export orders from actual exports,” said KGI Securities economist Andrew Tsai. “If we’re just looking at electronics products, about 90 percent is manufactured abroad.”

The statistics agency also amended its forecast for inflation in 2015, now putting the increase in the consumer price index at 0.91 percent instead of 1.46 percent.

Taiwan’s government has been calling for more trade with China, the island’s largest trading partner, particularly after the mainland and South Korea this month said they had reached in-principle agreement on a free trade agreement (FTA).

The worry for the island’s policymakers is that South Korea and Taiwan are export competitors. An agreement between Taiwan and China on trade in services has been held up in Taiwan’s parliament since March, after a massive protest blocked its ratification.

A senior Chinese official on Wednesday said an FTA with Seoul presents a challenge for Taipei and warned that Taiwan would not enjoy the same treatment as South Korea in the China market without ratification of the cross-strait services pact.

Reuters

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December 1, 2014

Asia Myanmar suffers trade deficit Myanmar sustained a trade deficit of US$2.72 billion in the first seven months (April-October) of the 2014-15 fiscal year, according to official statistics Saturday. With its total foreign trade amounting to US$16.46 billion during the period, its export stood at US$6.87 billion while its import took US$9.59 billion. In October alone, foreign trade hit US$2.37 billion, of which export stood at US$1.03 billion while import stood at US$1.34 billion. According to the Central Statistical Organization, Myanmar also suffered a trade deficit of US$2.652 billion in the whole of the 2013-14 fiscal year.

Indian growth slows less than Poor corporate earnings in the September quarter highlighted weak Manoj Kumar

Myanmar gets ADB loan

Indian Prime Minister Narendra Modi in the Maligaon Railway Stadium in Guwahati City delivers address at the flag-off ceremony of the first train that will run between Mendipathar in Meghalaya state to Guwahati in Assam state

Myanmar has obtained a loan of US$80 million from the Asian Development Bank (ADB) to upgrade a highway in south-western Ayeyawady Delta, a semi-official media reported yesterday.

The loan, announced by the ADB, will be provided for upgrading a 54-kilometer section of Maubin-Pyapon road and bridges along the route as they were worst hit by Cyclone Nargis in 2008, the Global New Light of Myanmar said. The project is expected to be complete by September 2018, the statement added.

India eases gold restrictions India has scrapped a rule mandating traders to export 20 percent of all gold imported into the country, in a surprise move that could cut smuggling and raise legal shipments into the world’s second-biggest consumer of the metal after China. Along with a record duty of 10 percent, India introduced the so-called 80:20 import rule tying imports to exports of jewellery last year to bring down inbound shipments and narrow the current account deficit that had hit a record.

Philippine bank lending up Loans extended by major banks in the Philippines rose by 21.1 percent yearon-year to 4.23 trillion pesos (US$94.17 billion) in October, the local central bank said Friday. The Bangko Sentral ng Pilipinas (Philippine central bank or BSP) said the growth in bank lending in October was faster than the 20.5 percent recorded in September. Loans for production activities, which continued to make up bulk or 90.1 percent of the total loan portfolio, expanded 19.7 percent on year to 3.77 trillion pesos (US$83.93 billion).

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slowdown in India’s economy in the last quarter will increase calls for Prime Minister Narendra Modi to step up reforms but was less severe than feared, giving the central bank ammunition to resist government pressure to cut interest rates.

Gross domestic product expanded 5.3 percent in the July-September quarter from a year earlier, as a manufacturing slump took the bounce out of Asia’s third-largest economy.

Growth in the previous quarter was at a 2-1/2 year high of 5.7 percent.

Thanks to growth in services and

stronger-than-expected farming after a bad monsoon, the reading was higher than predicted by economists polled by Reuters, who on average forecast growth of 5.1 percent.

Worried by the growth performance, and encouraged by low oil prices and falling inflation, Finance Minister Arun Jaitley will reiterate his request that Reserve Bank of India Governor Raghuram Rajan cut interest rates when the central bank holds it policy review on Dec. 2, ministry officials have told Reuters.

Rajan can be expected to argue that with the slowdown not as severe as some forecast, inflation concerns carry more weight.

“If it was a very, very low number, there would have been pressure on the governor to act immediately. The better than expected overall GDP growth gives him that cushion” to wait, said Upasna Bhardwaj, Economist at ING Vysya Bank.

Economists polled by Reuters said a cut was unlikely, although markets have priced in a 25 basis point cut in the repo rate to 7.75 percent.

India is behind China, but among other large emerging economies it fares relatively well. On Friday, Brazil

Malaysian Airlines’ new management to be announced this month The announcement came just four hours after MAS posted its worst quarterly loss since late 2011

M

alaysian Airline System Bhd (MAS), which is due to be taken private after being hit by two separate air disasters this year, will be replaced by a new company called Malaysia Airlines Bhd, with details to be announced this month.

Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund and MAS’s parent company, said late on Friday that it expects to make a key announcement on the leadership of the new company at the end of December, when MAS is to be delisted.

Malaysia Airlines Bhd, which is due to take over the national carrier

of the same name, will be operational

by July 1 next year, Khazanah said.

MAS’s current chief executive is Ahmad Jauhari Yahya.

The announcement came just four hours after MAS posted its worst quarterly loss since late 2011, as passenger numbers and average fare yields fell sharply following the two successive disasters - the loss of flight MH370 en route to China and then the destruction of flight MH17 over Ukraine.

“The outlook for MAS has improved slightly due to lower fuel prices, although intensive regional

and global competition, high operational costs, and the impact of the MH370 and MH17 tragedies continue to drive the urgency of the airline restructuring,” Khazanah said in a statement.

Earlier this month most minority shareholders in MAS accepted the offer by Khazanah totalling US$421 million to take the carrier private.

Khazanah, chaired by Malaysian Prime Minister Najib Razak, aims to delist MAS from the Kuala Lumpur stock exchange by the end of the year.

This is part of a 6-billion-ringgit (US$1.8 billion) restructuring aimed at returning the carrier to profit within three years of the delisting.

“With the delisting, the first tranche of Khazanah’s conditional capital injection amounting to 2 billion ringgit will be disbursed for the repayment to minority shareholders, as well as for working capital and restructuring expenditure,” it said.

Reuters

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Business Daily | 13

December 1, 2014

Asia

feared

crawled from recession with quarterly growth of 0.1 percent.

Consolidated power

consumer demand

Now the onus is on the government to boost growth by reviving the investment climate and get reforms moving. That will have a more pronounced impact on growth in the next fiscal year Shivom Chakrabarti, HDFC bank, Senior Economist

Elected in May with the first single party majority since the early 1980s, Modi was expected to live up to his market-friendly reputation by aggressively pursuing a reform agenda to remove obstacles to India’s industrialisation.

Instead, his government has consolidated power by winning provincial elections to gain control of key states while offering little in the way of substantial new legislation.

The measures Modi has taken so far, including allowing more foreign investment in defence and construction, slashing red tape for businesses and ending major fuel subsidies, have yet to change the mood on the ground.

The global outlook has not helped, with India’s exports slowing in the second quarter after orders from Europe dropped. Trends suggest overall growth will likely be at the lower end of the government’s 5.45.9 percent target for the fiscal year.

That would be an improvement on the previous two years of sub-five percent growth, the weakest phase since the 1980s, but still far too slow to generate the jobs needed for India’s rapidly expanding workforce.

Data on Friday showed that seven months into the financial year the fiscal deficit is at 90 percent of its full year target as tax income fell short. Jaitley may choose spending cuts to meet his deficit goal, at the cost of further pressure on demand.

Reuters

Vietnam to allow more foreigners to buy property Mai Nguyen

V

ietnam has eased restrictions on foreign ownership of property in an effort to lure the cash needed to revive a market saddled with oversupply since a real estate bubble burst in 2011.

The Southeast Asian nation has been battling with lingering bad debt after years of easy credit and lax oversight came to an end three years ago, sparking a crash in the property market and leaving the banking sector unable to provide the credit companies needed to grow.

Investors with business interests in Vietnam from Singapore, China and Japan were the most likely to buy property, attracted by the potential for higher yields in Vietnam than at home, property firms and analysts said. Singapore and Japan are the second and third biggest sources of foreign direct investment in Vietnam after South Korea.

Lawmakers amended the law on foreign property ownership on Tuesday to allow foreign investment funds, foreigners with valid visas, international firms with operations in Vietnam and overseas Vietnamese

to buy residential properties. The changes will take effect in July 2015.

Overseas Vietnamese send home around US$11 billion a year in remittances.

“A lot of that (remittance) money can go into property for them, so I think that’s the big headline and the motivator for this,” said Troy Griffiths, Deputy Managing Director of property firm Savills Vietnam.

The property market had shown signs of improvement before the changes. The value of property in inventory fell to 83 trillion dong (US$3.90 billion) by September, from 170 trillion dong in March last year, according to local media.

Property market participants welcomed the new law as a boost to liquidity and to clearing some of the property from the market linked as collateral to bad debts.

Foreigners working in Vietnam have been permitted to own houses since 2009, but red tape and usage restrictions for foreign-owned houses dissuaded buyers, with just 100 out of some 80,000 foreigners managing to own house as of October last year.

Reuters

Indonesia overhauls oil giant Pertamina Pertamina, which reported a 20 percent drop in income to US$1.15 billion for the first half of 2014 compared to the same period last year, has been aggressively acquiring energy assets both at home and abroad to offset its declining output Fergus Jensen and Wilda Asmarini

I

ndonesia’s new government took its first steps to clean up a grafttainted oil and gas industry on Friday, overhauling the management of state giant Pertamina and pledging major reforms of the company’s energy trading division.

Indonesia is looking to restore investor confidence in Southeast Asia’s biggest crude producer after a series of corruption scandals led to the downfall of top oil officials under former president Susilo Bambang Yudhoyono.

Indonesia’s new president, Joko Widodo, and the country’s main anti-graft watchdog, the Corruption Eradication Commission (KPK), are separately making moves to get rid of the so-called “oil and gas mafia”, which has profited from the country’s decaying industry.

On Friday, the president director of cement firm PT Semen Indonesia, Dwi Soetjipto, was appointed to be the new head of Pertamina.

“We will immediately carry out the president’s direction to seriously clean up Pertamina,” Soetjipto

told reporters after his new position was announced, adding that he welcomed investigations by the KPK and other agencies.

“As long as we have integrity, we don’t need to be worried about (the investigations),” he said.

Soetjipto’s first job will be to appoint new Pertamina board members after State Enterprises Minister Rini Soemarno announced the dismissal of all board directors.

“We want to speed up efforts to make Pertamina

transparent - to make it into a world-class company - so today it was decided to dismiss all directors of Pertamina and appoint new directors,” Soemarno told reporters.

Pertamina has struggled with declining crude

production and insufficient gas infrastructure, which has forced former OPEC member Indonesia to import more and more foreign oil.

Over the next five years, Pertamina plans to spend US$61 billion, 83 percent of which will be on upstream development including mergers and acquisitions.

“It’s good to choose (Soetjipto) as Pertamina CEO because he hasn’t been contaminated by the oil and gas mafia,” said Fahmi Radhy, a member of the oil ministry’s reform team.

The so-called “mafia” is believed to steal vast amounts of money in the trading of crude and oil products into Indonesia, Ari Soemarno, a presidential energy adviser and former Pertamina chief, told Reuters.

Widodo has launched an audit of Pertamina’s trading arm, Petral, which has been hit with widespread allegations of corruption.

State Enterprises Minister Soemarno said she was considering relocating Petral’s headquarters to Indonesia from Hong Kong.

Reuters

14 | Business Daily

December 1, 2014

International P&G exploring sale of Wella Procter & Gamble Co is working with Goldman Sachs to explore the sale of its Wella hair care business that could be worth around US$7 billion, sources familiar with the matter told Reuters, as the world’s largest consumer products company streamlines its business. P&G is exploring all options for the unit, which includes a professional and a trade business. That may result in selling the whole or parts, the sources said, cautioning that no final decision had been taken. Prospective buyers could include Unilever and Henkel.

Bafin finds possible criminal acts German market watchdog Bafin has found isolated cases of possible criminal activity during its investigation into banks’ practices in foreign exchange trading, the head of banking supervision was quoted as saying. Authorities around the world are examining whether traders from different banks worked together to influence currency prices, and also whether they traded ahead of their own customers or failed to accurately represent to customers how they were determining the prices.

Egypt pays back deposit to Qatar Egypt has paid back US$2.5 billion that Qatar deposited with it to help prop up the Egyptian central bank’s hard currency reserves, a central bank official said, as the Qatari foreign minister arrived in Cairo for Arab League talks.

The payment brings the amount Egypt has returned to Qatar to US$6 billion, leaving US$500 million outstanding, which the official said would be paid back in the second half of 2015. Qatar helped support the Egyptian economy in the aftermath of the 2011 uprising that overthrew Hosni Mubarak.

Brazil’s Levy tough task to mend finances Incoming finance minister Joaquim Levy faces tough hurdles, including resistance from within the ruling party, as he sets out to restore order to Brazil’s messy public accounts, regain investor confidence and get a stagnant economy moving again.

The fiscal conservative picked by President Dilma Rousseff after her narrow re-election will have to deal with a budget that leaves little room for substantial cuts, and fierce opposition to austerity measures from within the ruling Workers’ Party. Party leftists oppose any belt-tightening that could threaten the expansion of social programs that lifted millions of Brazilians out of poverty in the last decade.

Portugal’s Socialist leader slams coalition Portuguese Socialist Party Secretary-General Antonio Costa on Saturday accused the government of “dividing” the country.

“At a time when the government most needed to unite the Portuguese ... it opted for division and constant confrontation,” Costa said in an opening speech of the party’s congress at the Feira Internacional de Lisboa (FIL) in Lisbon. Costa added that the government had caused “uncertainty” and “unease” and had failed all its budgetary targets. He also criticized the government for the country’s high unemployment rate, which currently stands at around 13.4 percent.

Statoil could pay high cost for response to exploration failure BP, Shell, ExxonMobil and Total are all cutting costs, laying off staff and selling assets to cope with lower oil prices and pressure from investors for higher returns after their 10-year spending spree

A

fter the failure of its risky exploration strategy this year, Norwegian oil firm Statoil is cutting costs as fast and deep as it can to preserve cash for dividends - and may be jeopardising future production in doing so, industry insiders say.

Statoil took a big gamble by committing major resources to what it hoped would be new discoveries in Angola, the Norwegian Arctic and the U.S. Gulf of Mexico. They all failed, leaving two Tanzanian gas fields its only major finds in 2014.

With no new prospects to drill, and a 35 percent drop in the price of oil since June, the company is now paying hundreds of millions of dollars to cancel or suspend a third of its exploration fleet in order to find the cash it needs to pay its dividend, which so far this year equalled nearly all of its 30.9 billion crown (US$4.46 bln) net profit.

Statoil’s problems are several but the root of them can be simply put: it spent too much money on long drilling contracts in exploration areas before ensuring there would be enough work.

Additionally, it took out those contracts at the top of the market, paying record day rates to secure capacity.

The company also introduced a quarterly dividend in 2014, bowing to pressure from investors, and put extra burden on cash flow already strained by years of heavy investments.

The dividend increase came even as its production cost per barrel jumped by a quarter since 2009, while oil prices

have fallen. Analysts estimate Statoil needs oil to rise back to US$110 per barrel for it to finance investments and dividends from its cash flow.

Oil prices recently slumped to fresh lows around US$71 a barrel after OPEC decided not to cut production despite a huge oversupply in world markets.

Analysts say Statoil’s cash flow at this price is already negative before dividends.

Compounding the company’s difficulties, Statoil is without a permanent chief executive. Helge Lund left in October for rival BG Group - where his pay could be almost 10 times higher - and Statoil is currently under the helm of former marketing, processing and renewable energy chief Eldar Saetre.

“Double error” At the start of the decade Statoil revamped its exploration strategy, faced with reserves that were starting to dwindle.

Instead of small, safe projects, the company went after what exploration chief Tim Dodson called “high impact prospects” around the globe, boosting spending and taking on more risk.

The strategy advocated by Dodson - a 29-year veteran of Statoil - worked for several years and the company made big finds in Brazil, Canada, Norway and Tanzania.

With its failure to make big finds this year, Statoil has taken six rigs out of use, mainly in Norway and also Angola, though it says some of these are short-term. Exiting Angola alone cost it US$350 million.

The price of many still-operational rigs is eye-watering. One in Tanzania costs more than US$700,000 a day to run even as charter rates have fallen this year to below US$400,000 per day.

Less exploration will cut Statoil’s reserves while reduced drilling on existing fields could cut into recovery rates and its output, analysts said.

Spending cuts elsewhere, particularly maintenance work on mature fields, could also affect its output.

Though under pressure, the company will stand by its dividend payments, say analysts who met Saetre.

Even with such generous dividends still in prospect, the Statoil stock is down 4 percent in the past year. Over the past three years, it is down by 7 percent, underperforming all majors, including BP, which was weighed down by the cost of its Macondo spill.

Reuters

Cuban sugar mill opens to begin a challenging harvest Cuba produced 8 million tonnes of raw sugar in 1990-1991 before the industry began a precipitous decline Marc Frank

C

uba has begun what looks set to be another difficult harvest for the once-proud sugar industry as it struggles to improve on output similar to a century ago.

The first of 50 working stateowned mills opened in central Cienfuegos province on Saturday, the National Information Agency reported. All but seven mills are expected to be in operation by the end of the year and the remainder in January.

Cuba produced 1.6 million tonnes of raw sugar during its last annual harvest from November 2013 to May 2014, short of the 1.8 million tonnes planned, as hot and rainy weather, organizational and industrial problems and antiquated machinery took their toll.

AZCUBA, the state-run holding company that replaced the Sugar Ministry four years ago, announced last month it hoped to produce 12.5 percent more sugar this season, or around 1.8 million tonnes.

“The October estimate indicated there is more than enough cane to meet the target,” said a source with direct access to unpublished industry data.

Cuba produced 8 million tonnes of raw sugar in 1990-1991 before the industry began a precipitous decline in the wake of collapse of European communism, bottoming out at 1.2 million tonnes when AZCUBA was formed.

All but eight of Cuba’s mills were built before the 1959 Revolution and they operate in an environment

of centralized planning, a state monopoly on trade, crumbling infrastructure and poor financing.

“There is enough cane to produce up to 2 million tonnes of raw sugar, but the 1.8 million goal is more realistic given the state of the mills and infrastructure,” the source said.

Reflecting the lack of investment, the harvest is expected to last 150 days into May, compared with the January-to-April seasons of the 1950s when cane yields were at their highest.

Between 600,000 and 700,000 tonnes of Cuba’s sugar production goes to domestic consumption, 400,000 to an export agreement with China, and the remainder to other destinations.

Reuters

Business Daily | 15

December 1, 2014

Opinion Business

wires

Abe’s safe bet

Leading reports from Asia’s best business newspapers Yuriko Koike

Japan’s former defence minister and national security adviser, was Chairwoman of Japan’s Liberal Democratic Party’s General Council and currently is a member of the National Diet

THE JAPAN NEWS The Confederation of Japan Automobile Workers’ Unions (JAW) has decided to seek increases of at least ¥6,000 per month to basic pay scales as a uniform goal in next year’s shunto spring wage negotiations between labour and management. The JAW position would effectively increase by that amount the monthly salaries of all employees in companies where its labour unions operate. It will mark the second consecutive year in which JAW has demanded an increase to basic pay scales. JAW comprises about 1,000 labour unions of major manufacturers of fully assembled cars and small and midsize parts makers.

THE KOREA HERALD South Korea’s antitrust watchdog said yesterday that it has fined KT Corp. and LG Uplus Inc. a combined 6.2 billion won (US$5.6 million) for undermining fair market competition by excessively lowering prices of their corporate messaging services.

KT and LG Uplus were fined 1.9 billion won and 4.3 billion won, respectively. The two major mobile carriers are accused of taking advantage of their own communications networks to excessively lower the prices of their corporate messaging services, forcing out smaller competitors from the growing market.

PHILSTAR The government expects operations at Manila’s ports to be back to normal by early next year, but notes that there is a need to expand capacity to accommodate an expected increase in transactions in the coming years. “My purview is to solve the problem and hopefully by January or February, this is all over,” Cabinet Secretary Jose Rene Almendras told reporters during the Manila Ports Forum. Trade Secretary Gregory Domingo told reporters in the same event the conditions at the ports have been improving and are expected to continue.

THE STRaITS TIMES A friendly waiter has been the centre of attention at Marina Square’s Supreme Tastes Jiang Nan Chun. Standing at 1.2m tall, the 20kg handy helper does not boast movie-star looks but is just what you would expect to see in a sci-fi flick. Meet the next big thing in the restaurant scene here - an Autonomous Delivery Robot that clears dishes.

Made of ABS (acrylonitrile butadiene styrene), a type of plastic material, it moves along a magnetic black strip in the restaurant and can collect up to 10kg of dirty dishes from dining tables at a go.

Japanese Prime Minister Shinzo Abe (2nd R), who is also president of the ruling Liberal Democratic Party (LDP), his coalition partner Komeito leader Natsuo Yamaguchi (L) and Banri Kaieda (2nd L), leader of the opposition Democratic Party of Japan, and Kenji Eda, leader of opposition Japan Innovation Party, hand-in-hand during a photo session following a live Internet party leaders’ debate on the upcoming Lower House election in Tokyo

J

apanese Prime Minister Shinzo Abe has thrown out the political playbook. With two years remaining in his term, and with his Liberal Democratic Party enjoying comfortable majorities in the Diet’s upper and lower houses, Abe has called a snap general election for December.

Political leaders and pundits worldwide are scratching their heads at Abe’s decision to risk his extensive reform agenda with a throw of the electoral dice. But while Abe may be known for his boldness, he is no reckless gambler. On the contrary, he would have been reckless to launch the third “arrow” of his so-called Abenomics strategy for reviving Japan’s economy – supply-side structural reforms – without a clear mandate for reform.

Fortunately, Abe is almost certain to receive that mandate – not least because he lacks credible opponents. The main opposition party, the Democratic Party of Japan (DPJ), essentially imploded following its previous turn in government, which was characterized by economic malaise and foreign-policy blunders. And Japan’s other political parties have done nothing to convince voters that they deserve to emerge from the political wilderness.

In a sense, Abe is not running against his parliamentary opponents, but against himself.

After the first two arrows of Abenomics – expansionary monetary and fiscal policies – raised expectations that Japan’s economy would finally escape stagnation, the country began slipping back into recession in the second quarter of this year.

As any democratic politician will attest, disappointed expectations may well be the toughest electoral opponent of all. Just ask former French President Nicolas Sarkozy.

Of course, Abe did not face the kind of sky-high expectations that Sarkozy and, for that matter, US President Barack Obama did. It is not that Abe’s 2012 campaign lacked ambition; he set out a bold economic-reform agenda and promised to boost Japan’s global influence. But, after two decades of leaders who – with the exception of Junichiro Koizumi – promised little and achieved less, Japanese voters had little reason to expect that Abe would follow through on his pledges.

Moreover, Japan’s powerful bureaucracy – which has a long history of impeding reform (and has taken too little of the blame for the country’s “lost decades” of stagnation) – was probably not convinced that the election had authorized Abe to push for sweeping change. Expecting Abe to show the same inertia as the DPJ premiers who preceded him, they behaved in the way they always had – advancing their own interests, instead of faithfully enacting the policies of the elected government.

But Abe was not deterred. In his first weeks in office, he announced a ¥10.3 trillion (US$116 billion) stimulus bill and appointed Haruhiko Kuroda, a determined, dynamic, and bold thinker, to head the Bank of Japan. Kuroda wasted little time in initiating expansionary monetary policies – following in the footsteps of the US Federal Reserve and the Bank of England – to help reflate the economy.

The first two arrows of Abenomics began to take effect almost immediately. Japan experienced sustained inflation for the first time since the early 1990s. The stock market boomed. The yen fell to a more realistic level against other currencies. Consumer confidence rose marginally. But Abe knows that all of this will be for

In a sense, Abe is not running against his parliamentary opponents, but against himself

naught unless and until the third arrow is launched.

Beyond his economic strategy, Abe has also delivered in terms of foreign policy. He has visited almost all of Japan’s Asian neighbours, reinvigorating relationships that the DPJ neglected.

In particular, his personal rapport with Indian Prime Minister Narendra Modi has galvanized their countries’ emerging partnership, creating a new strategic centre of gravity in Asia.

Moreover, Abe has settled a nettlesome dispute with the United States over its military bases on the island of Okinawa, thereby fortifying Japan’s relationship with its main ally. And, by reinterpreting Article 9 of the constitution to allow Japan to exercise “collective self-defence” and provide aid to an ally under attack, Abe has made Japan a far more reliable partner for the US and its Asian allies.

Most important, Abe has initiated a realistic and coherent relationship with Chinese President Xi

Jinping. In recent years, rising tensions with China have stripped Japan of the illusion of friendship and goodwill that led it to inject many hundreds of billions of dollars into the country. With a more pragmatic approach, however, Asia’s two largest economies can find a way to support domestic and regional stability, giving them the space to pursue economic reform at home. Allowing secondary issues to jeopardize peace and progress would simply be irresponsible.

Unlike in the last election, Japanese voters now know exactly the kind of government Abe intends to lead. They know that he intends to follow through on his plan to include Japan in the Trans-Pacific Partnership, the USbacked mega-regional free-trade deal currently being negotiated – a move that will require some sacrifices at home.

Abe has proved that reinvigorating the economy is his top priority. In this sense, his decision to postpone the second round of the consumer-tax hike planned for next year is not fiscally irresponsible; on the contrary, it reflects his recognition that Japan’s economy is not yet strong enough to withstand a sharp tax increase.

Finally, Japan’s voters know that Abe is committed to building a durable and consensual regional peace, without which the rest of his plans could not succeed.

There is no doubt about Abe’s intentions or policy commitments.

If the Japanese public returns him to office, he will have the mandate he needs to complete his ambitious, pragmatic, and forward-thinking agenda. It is now up to the Japanese people to give him that mandate, effectively choosing to end two decades of economic malaise and geopolitical irrelevance.

Project Syndicate

16 | Business Daily

December 1, 2014

Closing

China policy in question after Taiwan polls landslide There were 11,130 seats up for grabs with 18 million eligible voters, turnout was 67.5 percent Benjamin Yeh and Laura Mannering

T

aiwan’s warmer relations with China were called into question Yesterday after the island’s Beijing-friendly ruling party suffered its worst-ever polls defeat in local elections, sparking the resignation of Premier Jiang Yi-huah.

The rout came as the ruling Kuomintang (KMT) party struggles to combat public fears of China’s growing influence, as well as a slowing economy and a string of food scandals.

Seen as a barometer before presidential elections in 2016, the poll results may now force the KMT to reexamine its China policy -and encourage the opposition Democratic Progressive Party (DPP), which is traditionally Beijing-sceptic.

“The KMT are not likely to push the ties (with China) forward if they hope not to suffer another huge setback in the 2016 presidential race,” Ding Shuh-fan, a professor at National Chengchi University in Taipei, told AFP. “At the same time China is also unlikely to make concessions and offer substantial economic benefits in talks” given the prospect of the DPP taking power in 2016, Ding added.

“It would be hard for cross-strait head.”

Beijing called for “continued efforts for peaceful cross-strait relations” in the wake of the vote.

“We hope compatriots across the strait will cherish hard-won fruits of cross-

A hand-out photo released by Taiwanese Cabinet shows Premier Jiang Yi-huah announce his resignation following the ruling Chinese Nationalist Party’s defeat in local elections in Taipei

strait relations, and jointly safeguard and continue to push forward peaceful development of crossstrait relations,” said Ma Xiaoguang, spokesman for the State Council’s Taiwan Affairs Office.

‘Too reliant on China’ Taiwan and China split in 1949 at the end of a civil war, but Beijing still claims the island as part of its territory awaiting reunification -- by force if necessary.

Tensions rose markedly during the presidency of the DPP’s Chen Shui-bian from 2000-2008.

Since KMT President Ma Ying-jeou came to power that year on a China-friendly

platform, frosty ties have warmed, leading to a tourist boom of Chinese visitors to Taiwan as well as expanded trade links.

But there is public anxiety at the closer relationship. A proposed services trade pact with the mainland sparked mass student-led protests and a three-week occupation of Taiwan’s parliament earlier this year.

“The Ma administration has been too reliant on China economically,” said 32-yearold designer Tom Shen in Taipei.

“Many people fear that Taiwan will have to do as Beijing orders in the future.”

Two months of democracy rallies in Hong Kong could also have strengthened

anti-Beijing sentiment, said Chang Wu-ueh, director of Tamkang University’s Graduate Institute of China Studies in Taipei.

“The pro-democracy protests in Hong Kong may have indirectly affected voters’ mood in Taiwan and deepened the negative perception of Beijing,” he said.

But Taiwan’s slowing economy will make it hard for any government to reject trade deals with China outright -- and even nonKMT politicians are not ruling out trade negotiations with Beijing.

“Given the huge amount of trade and civil visits across the strait, it would be unrealistic to halt immediately what is

Tanzania parliament sacks corrupt ministers

1.4 mln apply for Chinese civil servant jobs

T

A

anzanian MPs have called for the sacking of several top officials including two cabinet ministers implicated in multi-million dollar energy sector graft scandal, officials said.

The east African nation’s parliament voted for the immediate dismissal of Attorney General Frederick Werema, Energy Minister Sospeter Muhongo, Lands Minister Anna Tibaijuka and the energy ministry’s permanent secretary, Eliakim Maswi.

The vote followed an audit that uncovered the fraudulent payment of around US$120 million in state funds to a private company.

“Following a recent audit there is evidence that the officials facilitated or aided money laundering, tax evasion, corrupt acts and outright theft of billions of shillings from public coffers,” said Zitto Kabwe, chairman of the Parliamentary Public Accounts Committee.

Several key donors to Tanzania, including Britain, Canada, the European Union and Japan, have said they will halt hundreds of millions of dollars in aid to Tanzania unless they are satisfied with the investigation.

AFP

going on,” admitted Shen.

Ding said there was “no way to turn back the tide” of trade and investment relations.

The DPP’s current leader Tsai Ing-wen has moderated her party’s cross-strait stance since she was elected earlier this year.

The KMT took 40.7 percent of the ballots cast in the local polls, while the DPP scooped 47.5 percent.

There were 11,130 seats up for grabs with 18 million eligible voters -- turnout was 67.5 percent.

The KMT went from controlling four of the six major municipalities to just one, while its city and county seats were more than halved.

It lost its key stronghold of Taipei, where independent candidate Ko Wen-je became mayor.

Taiwan’s United Daily News said Yesterday the results were a “noconfidence” vote in the Ma administration.

“Ma must swiftly reform the party and government, otherwise there won’t be a future for the (KMT) party in Taiwan,” it said.

The Liberty Times said Taiwan had given a “huge slap in the face” to the KMT, but warned the DPP against complacency.

“The election has set a clear guideline (for politicians) -anyone who performs poorly will be replaced.”

Ma must stand down at the next elections as he has completed two terms.

AFP

Draft for insurance of bank deposits rule

s many as 1.4 million people have applied for government jobs and are sitting the annual national public servant exam yesterday.

The figure is the lowest in five years, according to a China News Service report. The actual number of people who turned up for the test is not yet available, the report said.

Civil servant jobs are favoured by many Chinese as they offer relative stability, but the popularity of government posts has dropped in recent years.

Some 990,000 candidates took the exam last year, a decrease of 130,000 from the year before.

Nevertheless, the exam is still considered one of the most competitive tests in the country, as there are only 22,200 vacancies in national government agencies, their affiliated public institutions and local branches.

Earlier reports said most positions open this year in government agencies above provincial level will require two years of grassroots working experience. About 10 percent of all vacancies will be set aside for college graduates who became village officials.

hina has issued draft regulations to introduce deposit insurance of its banks for the first time, taking an important step that will pave the way for crucial interest rate reforms.

The draft rules, issued by the State Council’s Legislative Affairs Office, directly cover deposits of up to 500,000 yuan, according to a notice on the website of the People’s Bank of China. Banks have been given until December 30 to comment.

China has considered insuring savers’ deposits for around two decades, but the plans took on new urgency in the past year as the country sought to deepen economic reforms that included removing state controls on interest rates.

Chinese banking rules forbid banks to fix their own deposit rates. Instead, they are only allowed to pay no more than 1.2 times a benchmark deposit rate fixed by the central bank.

The control on deposit rates is a legacy of China’s banking troubles in the early 2000s, when its biggest banks were technically insolvent and bailed out by the government.

Xinhua

Reuters

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