MOP 6.00 Closing editor: Luis Gonçalves Publisher: Paulo A. Azevedo Number 688 Monday December 15, 2014
Caught in the act
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Year III
moking is an expensive habit. By November, the Health Bureau had fined 7,200 people in Macau for smoking offences. Overall, residents accounted for 61.1 pct of those nabbed. While tourists made up the greatest number of offenders in casinos. The typical violator was a male resident caught in a Tap Seac cybercafé. Video game parlours and parks were also happy hunting grounds for Health Bureau officers. From January 1, the ban extends to bars, dancehalls and sauna parlours PAGE
Cash surplus down 16% Six straight months of declining gaming revenues is taking its toll. On operators and government finances. From January to October, the fiscal surplus decreased 15.7 pct from a year ago. MOP85.5 billion is still a lot. But that’s MOP15 billion less than in 2013
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Major cyber attack shuts down Sands casinos
China Star’s Macau gaming interests dim
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Prada profits down 44pct with Macau and HK
Originally, it was hot to trot. But China Star Entertainment has had second thoughts about its gaming prospects. It will now channel the proceeds of its HK$134 million share issue into film production. As recently as September the company said it would invest ‘in gaming/gaming related business in Macau’. It did not mention its gaming operation in Lan Kwai Fong Hotel
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Macau more globally connected since handover, says Beijing PAGE 2
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Xi arrives next Friday
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It’s now 100 pct confirmed. PROC President Xi Jinping will visit Macau on December 19 and 20. He’s here for the city’s 15th handover anniversary celebrations. Plus the inauguration ceremony of the territory’s new leading officials
HSI - Movers December 12
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Name
Rethinking the numbers
It’s a real conundrum. But a few percentage points make all the difference. The Chinese central bank is recommending new targets for 2015. The evolution of the economy in recent months has prompted a major rethink. From growth to exports, every indicator needs adjusting
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7 year itch It’s been 7 years. But Asia Adult Expo is transforming itself. From a trade networking event into a consumer show. Some exhibitors are disappointed at the low turnout of professional buyers; while others consider it a great platform to promote their brands to the public.
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%Day
Kunlun Energy Co Ltd
2.74
Sino Land Co Ltd
2.46
Galaxy Entertainment
2.23
Wharf Holdings Ltd/T
2.12
Sands China Ltd
2.12
CITIC Ltd
-1.18
Cathay Pacific Airwa
-1.25
Want Want China Hol
-1.38
Tingyi Cayman Island
-2.40
Belle International
-3.29
Source: Bloomberg
www.macaubusinessdaily.com
INTERVIEW I SSN 2226-8294
Still a lot to do Lots to do yet. And the buck stops at the desk of the incoming Secretary for Transport and Public Works, Raimundo do Rosário. Fred Ma, president of the Macao Association of Environmental Protection Industry, lists the unfinished tasks in an interview with Business Daily. From recycling to natural gas distribution to excessive energy consumption. It’s difficult to say the Environmental Protection Bureau (DSPA) was a very big improvement, he says
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December 15, 2014
Macau HZMB: Shuttle buses an option
China Star Entertainment concentrating on movies Hong Kong-listed China Star Entertainment is channelling the proceeds of its HK$134 million share issue away from the gaming business here Stephanie Lai
sw.lai@macaubusinessdaily.com
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ilm distributor and gaming services firm China Star Entertainment Ltd announced on Friday that the proceeds from its share subscription plan would be applied to film production and general working capital of the company as opposed to investing in the gamingrelated business in Macau. Under the share subscription plan, first announced by Hong Kong-listed China Star Entertainment on July 8, the company issued a total of 1.5 billion subscription shares at HK$0.09 per share – a deal that could generate net proceeds of HK$134.3 million (US$17.3 million). The HK$0.09 per share price was a discount of 28 per cent on the closing price in Hong Kong stock trading on July 8, the date when the share subscription plan was first announced by China Star Entertainment. The price also represented 9.41 per cent of the enlarged capital of the company.
An announcement filed by China Star Entertainment with the Hong Kong Stock Exchange after trading hours on Friday reads that the proceeds from the share subscription would be used for ‘film production and general working capital of the company’ rather than on gaming investment as mentioned in previous filings. ‘As disclosed in the circular [dated September 12], all the net proceeds of the share subscription of approximately HK$134.30 million will be used for investment in gaming/gaming related business in Macau to be identified by the board in future,’ the filing noted. ‘However, no suitable investment has been identified by the board up to the date of this announcement,’ China Star Entertainment said. ‘In order to increase the group’s flexibility in its financial and treasury management and to cope with the continuing development of the other businesses of the group, the board has resolved
to allocate the net proceeds for other immediate business operation requirements, in particular, production of new films and general working capital for the group.’ The subscriber of the shares is a company called Long Joy Investments Ltd managed by businessman Mung Kin Keung, who was appointed cochairman of China Star Entertainment in July. In an earlier release filed on November 21, China Star Entertainment announced the disposal of Lan Kwai Fong Hotel at an agreed price of HK$3.75 billion, although the deal was still subject to formal documentation. China Star Entertainment did not mention what would happen to the gaming operation inside Lan Kwai Fong Hotel, as the property still houses gaming facilities operating under the licence of Sociedade de Jogos de Macau S.A.. The latest filing on Friday from the gaming services firm also noted that it has entered into a formal agreement with the purchasing party over the disposal of four plots of land near the Lan Kwai Fong Hotel. The formal completion of the land disposal is slated to take place on April 15 or 28 business days following an agreement reached between China Star Entertainment and the purchasing party, a company called Bestmix Holdings Ltd, of which 51 per cent is held by Hong Kong-listed property investment firm CSI Properties Ltd. In the November 21 filing, the company noted that the four plots of land could be disposed of at an initial consideration of HK$2.23 billion; while an additional consideration of HK$1.93 billion is payable by the purchaser in the event that the Macau Government grants the right of development of the four plots within 48 months of the date of the letter of intent being signed by the would-be purchaser.
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Tung Ying Building, which Chinese Estates acquired for HK$1.1 billion in 2003 from the renowned Ho Tung family to turn into a shopping complex. The purchaser of the retail complex from Chinese Estates is Hong Kong billionaire Joseph Lau Luen Hung, who is still the controlling shareholder of the company with some 75 per cent of its total issued shares. The disposal deal has yet to obtain independent shareholders’ approval as Mr. Lau’s position in the company constitutes a connected transaction, the Friday filing noted. Chinese Estates explained that
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Macau more globally connected since handover
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the disposal of ‘The ONE’ is made at a time when ‘certain retail business sectors have shown indications of reaching their peaks’, and potential less returns for property investors is expected when Hong Kong’s interest rate follows the possible increase in the Federal Reserve interest rate, causing higher bank borrowing expenses. A ‘majority part’ of the net sale proceeds from the disposal of ‘The ONE’ will be used to pay a special dividend, Chinese Estates said on Friday, while the remaining would be used as general working capital for the company.
he Commissioner of the Ministry of Foreign Affairs of China in Macau, Hu Zhengyu, said that the Ministry has been actively assisting the Macau Government and local organisations to participate in international exchange, according to TDM radio. He claims that the number of international organisations that Macau has joined has increased to more than 100 vis-a-vis some 50 prior to the handover. Meanwhile, 108 countries have granted Macau SAR passport holders visa-free access or visa-on-arrival services, compared to only three countries in 1999. Mr. Hu said that he is proud of the current development of Macau, perceiving that the Special Administrative Region can make more use of its function as a platform for exchange between China and Portuguese-speaking countries. In addition, he thinks that Macau should attract more Portuguesespeaking countries to join the Global Tourism Economy forum to enhance cooperation between them.
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Joseph Lau buying retail complex from Chinese Estates ong Kong-listed Chinese Estates Holdings Ltd announced on Friday that it is selling its retail complex ‘The ONE’ situated in Tsim Sha Tsui in Hong Kong to the company’s controlling shareholder Joseph Lau Luen Hung, a disposal that could generate net sale proceeds of over HK$7.77 billion (US$1 billion). The disposal agreement, announced by Chinese Estates after trading hours on Friday, noted that the valuation of the commercial property The ONE amounted to HK$7.78 billion. The ONE, situated in Nathan Road in Kowloon, was formerly known as
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assenger shuttles buses connecting the Macau, Hong Kong and Zhuhai borders of the Hong Kong-Zhuhai-Macau Bridge (HZMB) may be offered by the three governments following the announcement that no public transport vehicles will be permitted to use the Bridge. In an e-mailed reply to Business Daily last Thursday night, Macau’s Transport Bureau (DSAT) said that the three governments are discussing the details and evaluating proposals involving the operation of shuttle buses between the respective borders, in addition to their intention to issue tenders and determine the qualifications necessary for shuttle bus drivers. An announcement will be made to the public once arrangements are confirmed, it said. Business Daily reported last Friday that all public transportation, including taxis, will be prohibited from using the HZMB, according to Hong Kong’s Secretary for Transport and Housing Anthony Cheung Bingleung. DSAT also said in its reply that all external vehicles using the Bridge to enter Macau will be required to park in a large-scale car park building at the border in order to avoid vehicles ‘flooding’ Macau.
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December 15, 2014
Macau Xi arrives next Friday It’s now 100 pct confirmed. PROC President Xi Jinping will visit Macau on December 19 and 20. He’s here for the city’s 15th handover anniversary celebrations. Plus the inauguration ceremony of the territory’s new leading officials. Chief Executive Fernando Chui Sai On will assume his second five-year term of office. The last time that China’s top leader visited Macau was five years ago, when then-President Hu Jintao came to the city to celebrate the 10th handover anniversary. Mr. Xi’s visit here will be a day after the city sees extended border entry hours introduced at its inland checkpoints, with the Hengqin-Macau border scheduled to operate around the clock.
More than 7,200 people breach smoking law Tourists were responsible for the greater proportion of cases in casinos
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total of 7,275 people were found guilty of breaching the tobacco control law from January to November this year, the Health Bureau announced last week. Of these, 7,247 cases involved smoking in prohibited areas, six were related to the sale of tobacco in places of free access and 22 cases were related to products that did not meet label requirements. In 2014, the majority of people smoking in prohibited areas were males (6 730) accounting for 92.9 per cent of the 7 247 infractions, while females accounted for 7.1 per
cent of the infractions (517 cases). Regarding the origin of people fined by the Health Bureau, Macau residents accounted for 61.1 per cent (4 428), while tourists accounted for 35.4 per cent (2,565) and non-residents accounted for 3.5 per cent (254). The majority of breaches of the tobacco control law occurred in cybercafés with a total of 1,300 cases (17.9 per cent). Videogame parlours (1,282; 17.6 per cent) ranked second followed by parks/ public gardens and other leisure places (847; 11.6 per cent).
Tap Seac was the most prevalent place in terms of infringement accusation, with 32.8 per cent of cases registered there. In 281 of the cases it was necessary for Health Bureau agents to request the assistance of police officers. Since January of this year, 81.3 per cent of people accused of breaching the tobacco control law have paid the requisite fine. In total, since the law came into effect in January 2012 some 23,603 people have been accused of breaching the tobacco control law. Since that time until November, a
total of 665,235 inspections have been conducted by Health Bureau agents. There were a total of 445 cases of people smoking in prohibited areas in casinos from January to November. Of these cases, tourists accounted for 80.7 per cent (359) of accusations, while Macau residents accounted for 18.9 per cent (84) and non-resident workers 0.4 per cent (2). Again, men committed most of the infractions, accounting for 93 per cent (414 percent) of the cases
in casinos, while 7 per cent involved women (31). In relation to the smoking ban inside casinos, it is worth noting that in October the law was tightened, as it is now prohibited to smoke on mass market gaming floors. From January 1, 2015 the more restrictive tobacco control law will be applied to bars, dancehalls and sauna parlours, where smoking will be completely prohibited. Breaching this law will result in a MOP400 fine. J.S.F.
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December 15, 2014
Macau
Surplus cash down 16pct Macau’s surplus dropped to MOP85.5 billion in the first nine months of the year
Macau-China trade reaches US$3.3 bln
Sara Farr
sarafarr@macaubusinessdaily.com
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aming revenues have been on the slide for six straight months now but government revenues from direct taxes (of which gaming accounts for a combined 39 per cent) increased 9.7 per cent to MOP121.6 billion in the first nine months of the year. Total government revenue from January to the end of September was MOP126.4 billion, down 5 per cent from a year ago.
The government’s surplus also decreased by 15.7 per cent in the ninemonth period to MOP85.5 billion from the MOP101.4 billion recorded last year. Analysing the official data released Friday by the Financial Services Bureau (DSF), the ‘sales of durable goods’ increased by 97.8 per cent, contributing MOP1.6 million to local revenue, while ‘sales of capital assets’ registered the biggest decrease of 90.1 per cent to MOP352.9 million.
Gaming addiction cases already surpass 2013 total
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heng Kung Hui Gambling Counselling and Family Wellness Centre received 54 requests related to gaming addition from January to October. The number of cases exceeds those registered during the 12 months of 2013. Ip Kam Po, Assistant Director of the Centre, told the Chinese broadcaster of Macau Radio that he was concerned about this trend. When the Centre started its activities in 2010, it received over 350 requests for counselling on gambling. Since July this year, the Centre has begun to operate a gambling counselling service via mobile apps and social
Property income also increased by 4.3 percent to MOP2.5 billion, compared to MOP2.4 billion recorded a year earlier. Overall capital revenue dropped 78.3 per cent to MOP4.8 billion from MOP22.1 billion a year prior. Of these, ‘reimbursements not deducted from payments’ totalled MOP179.1 million between January and September, representing a 95.1 per cent increase from last year’s MOP91.8 million. ‘Other capital revenue’ dropped 78.3 per cent from MOP18.2 billion in the corresponding period of 2013 to MOP3.9 billion. Government expenditure for the first nine months of the year increased 29.7 per cent to MOP40.9 billion from MOP31.6 billion in 2013. Current expenditure registered a yearly rise from MOP28.4 billion to MOP38.1 billion, a 33.8 per cent increase, while ‘payroll’ increased by 13.6 per cent to MOP10.7 billion. The biggest spending in government expenditure was recorded under ‘current transfers’ and totalled MOP19.9 billion, an increase of 52.9 per cent, while the slowest growth was that of ‘payroll’, followed by ‘goods and services’. The latter registered a 17.3 per cent increase to MOP5.6 billion between January and September from MOP4.7 billion. In addition, government capital expenditure decreased to MOP2.9 billion, a 7.9 per cent drop from MOP3.1 billion recorded in the same period last year. Of this, government investment dropped by 16.6 per cent to MOP1.9 billion, while ‘capital transfers’ increased a staggering 137.7 per cent to MOP97 million from MOP40.8 million. Financial transactions totalled MOP920.7 million, a 7.6 per cent increase from the MOP855.6 million recorded in the corresponding period of 2013.
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ilateral trade between Macau and Mainland China reached US$3.36 billion during the first eleven months of the year, according to the General Administration of Customs of China. The amount of trade had increased by 3.7 per cent year-on-year, a China news service reported, claiming that the growth of bilateral trade between the city and the mainland had surpassed the overall growth of China’s foreign trade by 0.3 percent. According to the news outlet, Chinese Customs data shows that accumulative exports from China to Macau reached some US$30.3 billion between 1999 and 2013, increasing year-on-year 11.9 per cent annually. Meanwhile, accumulative imports from Macau to China totalled US$3.16 billion since the handover to 2013, rising 10 percent on average year-on-year. The news outlet also indicated that the value of China’s Macau exports and imports reached US$3.57 billion, a jump of 19.4 per cent year-on-year, compared to the 7.6 per cent yearon-year growth of Chinese’s general foreign trade. Trade between Macau and China, however, is not always that smooth. According to historical Chinese Customs data, bilateral trade between the regions was affected by the financial tsunami in 2008 and 2009, leading to negative growth in the regions’ trade then. Following the crisis, bilateral trade between the SAR and China increased year-on-year 8 per cent in 2010, and was up by 18.7 per cent year-on-year in 2012, the news outlet reported. K.L.
Prada profits plunge 44 pct
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networking, which Mr. Ip told Radio Macau shows an increase in requests. The majority of requests come from members of the family of the gaming addicted. He says that the actions of the government and associations have resulted in an increase in the awareness of being able to request counselling. According to the data of the Centre director, the new requests were made by people aged 35 to 55. Of these, 20 per cent of requests emanated from people under 29 years old. Some 25 per cent of requests were from workers in the gaming sector. JTM
talian luxury group Prada said it would continue to cut costs next year and open fewer shops than planned after profits plummeted 44 percent in the three months to end-October, hurt by declining sales. Street protests in Hong Kong since late September have added to the difficulties Prada faces in Asia - its biggest regional market, accounting for 38 per cent of sales - as slowing economic growth and a crackdown on corruption in China cools consumer demand. Group sales fell 6 per cent from August-October to 792 million euros (US$975 million), Prada said. Before accounting for currency moves, sales were down 8 per cent from a year ago. Net profit fell to 74.5 million euros from 132.6 million euros. Earnings before interest and
tax also fell 44 per cent. Pro-democracy protests which have blocked access to major Hong Kong shopping districts for nearly two and a half months contributed to a 9 per cent decline in Prada’s sales in Greater China. Slowing gambling activity in Macau has also weighed on results. “We acknowledge that the results are below expectations, not only for external market
conditions but also for some internal factors,” Chief Financial Officer Donatello Galli said in an analyst call. Galli said he saw no improvements in the short term and declined to give an outlook for 2015. The board would examine cost-cutting measures in January and the group would cancel or delay some of the 50 shop openings pencilled in for next year. Reuters
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December 15, 2014
Macau
Asia Adult Expo in transition In the 7 years that Asia Adult Expo has been held in Macau since 2008, the event has been transformed from a trade networking opportunity into a consumer show. Some exhibitors are disappointed at the low turnout of professional buyers, while some consider it a great platform to promote their brands to the public Joanne Kuai
joannekuai@macaubusinessdaily.com
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he three-day 2014 Asia Adult Expo was held last weekend at The Venetian. Exhibitors from 10 countries and regions, including Hong Kong, China, Australia, Germany and the US, joined this year’s edition. Even though more than 17 countries and regions pre-registered buyers visited the major annual adult expo of the Asia Pacific region, some exhibitors were disappointed at the low turnout of professional buyers and the deals they signed. “Any professional buyers would be disappointed when walking into this venue,” said Silvia Lu, manger of Yiwu Ideal Leather Co., Ltd, a manufacturer of adult sex products. The manufacturer from Zhejiang Province in Mainland China said she had visited the Shanghai Adult Expo and experienced a much better atmosphere there than in Macau. “The number of exhibitors are much more, and also the visitors. Here, it’s kind of quiet. We’re hoping to reach out to some overseas markets from Europe, the US or Hong Kong and Macau but if the professional buyers didn’t show up on Friday, it’s unlikely they would during Saturday or Sunday,” said Ms. Lu.
Marketing springboard Some other exhibitors, however, were glad to promote their brands at the expo and consider Macau a great entry point to the Mainland China market. Cobeco Pharma, a Dutch company that produces nutritional supplements, cosmetics, pharmacy and sexual wellness products wanted greater exposure to the public through the 2014 Asia Adult Expo as they are developing the Asian market.
“Our European market is very mature. Starting from this year, we’re trying to explore the Asia market. It’s our first time coming here to Macau’s Adult Expo, which is for the public. We were at another expo in Hong Kong which was exclusively for the trade in August,” said Tina Young, Asia Pacific Assistant Manager of Cobeco Pharma. “The main purpose for us being here is really for the general public to know our brand, to get familiar with our brand and know that it’s safe and good.” The manufacturer also got themselves some good deals at the fair. “Some business owners approached us trying to be distributors in China. Some online sex shops also put down orders for our products. These are great opportunities,” said Ms. Young. SampsonStore.com is one of the old friends of Asia Adult Expo which has patronised it since the very beginning. The company is a condom and lubricant distributor based in Hong Kong that distributes many different types of brands, from America, Japan and Germany to Watsons, Mannings, and different adult shops all over Hong Kong, Taiwan and mainland China. “In the beginning, the show used to be more of a trade show [visited by] a lot of Europeans, Americans, Australians that came from all over the world but now it has changed more to a consumer show,” said Jordan Weiser, Director of Sales in Asia of Pjur Group that works directly with SampsonStore.com. “The fact that we now focus on retail instead of trade at this type of show is a much better formula.”
The distributor said timing is very important for an expo, and “it’s very hard for buyers that are from Western countries to come all the way to Macau one week before Christmas”, explaining why they are focusing on the retail model of individual customers at this Macau expo. In order to attract some customers, the distributor set up a workshop for people to experience how to make a condom by themselves. “In Hong Kong and Taiwan, SampsonStore.com is the exclusive distributor of Sagami condoms. When people ask what do you do as a business, and we tell them, we make condoms and we distribute condoms, they think we’re crazy. But when you think about it, it’s a normal thing. It’s in everyday life. It’s in every store, every shop. So we thought it would be interesting to show people how a condom is actually made,” said Mr. Weiser. “It’s actually one of the easiest thing you’ve ever seen. You have to get the right latex formula, you take the condom ball, and you dip it in and dry it off. And boom! You have a condom. It’s only a threestep thing.” Mr. Weiser also disclosed that they tried to get a good deal on the booth this year and spent HK$10,000 to HK$20,000 in coming to this 2014 Asia Adult Expo in Macau, which they thought would “either breakeven or go a little bit above breakeven; no problem - easily.”
Macau MICE on right track The organiser of the Vertical Expo Services Co. Ltd started Asia Adult Expo in 2008 when The Venetian was first built.
“We cast a vote of confidence in Macau back then and we’re still confident. We see Macau as the Las Vegas of the Orient with great conventions and exhibitions going on,” said Wilson Tong, Fairs Director of Vertical Expo. “The exhibitors at our expo are very professional. They are the elite of this industry and business, and qualified licence holders,” said Mr. Tong. “The expo is featuring more entertainment elements where we provide businessmatching platforms but it’s also an eyeopener to let the public get more used to these concepts and feel comfortable about talking about it openly.” “We have received great support from the Macau Government as the region is developing its MICE industry and helping these specialised exhibitions as well,” said Mr. Tong. “Through this platform we’re confident about reaching the Asia Pacific market or even the US, Australia, Germany and many places in the world.” The company just held a tradeonly Adult Expo in Hong Kong in August, and Mr. Tong also disclosed that they had held similar events in Shenzhen in Guangdong Province and in Taiwan, although they were less than satisfactory as most of the visitors were browsers rather than buyers, thus he thinks “the visitors in Macau are of better quality”. Vertical Expo currently holds two events in Macau - one is the Asia Adult Expo, and the other is the Asia Funeral and Cemetery Expo & Conference, which mainly caters to professionals. Next year’s edition of the Funeral Expo will take place from 12 to 14 May 2015 in Macau. In addition, the company is planning to bring a new Adult Internet Summit to Macau next year.
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December 15, 2014
Macau Brought to you by
HOSPITALITY MICE facts The figures for MICE events (Meetings, Incentives, Conferences, Exhibitions) in the third quarter indicate that their total number was up by 5.2 per cent when compared to the same period last year. If we take the three full quarters for which data is currently available, annual growth stands at 7.8 per cent. This corresponds to 59 more events accounted for in the first nine months of 2014 than in the same period in 2013. Most of the increase is attributable to meetings by various types of organisation: government bodies, associations and companies. Of a total of 39 additional meetings in that period, they were responsible for two-thirds. The share of meetings conducted by associations and similar organisations alone amounted to over 40 per cent of the total. Another quarter of that increase came from exhibitions.
The overall distribution of events, classified according to type, has been relatively stable over time. Recent figures, for both the last two years, 2013 and 2014, have been, in relative terms, mostly in line with the corresponding values for the full period for which data is available - that is, since the first quarter of 2009. Taking the cumulative figures for the months of January to September, for all years, we find that meetings of all types represented close to 82.5 per cent of the total. In the last two years, that share was slightly higher, up two percentage points. That figure was mostly due to a peak in company events, which in 2003 alone reached more than 60 per cent of all events. Exhibitions and Conferences posted higher shares in the last two years than was the case in previous years. Conversely, the number of incentive events seems to follow a steady downward trend.
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weekly exhibitions in Q3
“It’s difficult to say the Environmental Protection Bureau (DSPA) was a very big improvement” The president of the Macao Association of Environmental Protection Industry, Fred Ma, lists the unfinished work in the environmental field to be inherited by the incoming Secretary for Transport and Public Works, Raimundo do Rosário, hoping to see improvements. Macau is still unfamiliar with recycling, natural gas distribution remains unsatisfactory, and the territory has one of the world’s highest rates of energy consumption as well as an increasing number of vehicles on the roads, he says. Luciana Leitão leitao.luciana@macaubusiness.com Photos by Ruka Borges
We have a new Secretary for Transport and Public Works. What challenges face him regarding environmental protection? One of the things has to do with the recycling behaviour of citizens, how to educate citizens to participate in recycling programmes. This isn’t only the duty of the new Secretary, as he also needs the cooperation of IACM to get more people to participate. At this moment, all you can see is that the recycling stations are not very functional. Sometimes, when you go there, you can see people put different garbage in and they use it as a normal garbage can. In commercial and residential buildings, there should be some place for recycling or even the property management should participate in recycling programmes. Right now, the penetration rate is very low. What’s missing regarding the environment? There are still problems in the operation of natural gas — the price to provide natural gas to the power station is much lower than the market price, that’s why the operator doesn’t have enough natural gas to provide. But there will need to be some changes in the future, since the power stations are ready to supply more clean energy; and even they are now buying more electricity from Mainland China. The other source of pollution comes from vehicles. One way is to control and introduce more environmentally friendly vehicles to lower CO2 emissions but on the other hand you can see that vehicles have increased a lot in recent years and you never see anything halting the growth. Now, the Transport Bureau has suddenly realised that they have to exert
The bus services are not satisfactory, the LRT is not ready and it’s still far behind. The new Secretary needs to face this
some control on the growth of vehicles. So, these are two critical things that still need to be resolved: one is the natural gas supply - how are you going to solve it, what is the incentive or the regulations to benefit the whole of Macau as well as how can you give incentives to provide natural gas. The other problem is how to slow down the traffic; this isn’t only about controlling the number of vehicles on the street, it’s related to the public transportation of Macau. At this moment, the government’s in a difficult situation because if they want to reduce vehicle numbers they need to tell the public we have a Light Railway Transit for them so you can take public transportation to reduce private vehicles, but now it’s not the case and everybody’s complaining. The bus services are not satisfactory, the LRT is not ready, and it’s still far behind. The new Secretary needs to face this.
But if we had more electric vehicles on the streets — private and public ones — that could alleviate some of these problems, right? It could but it’s not a reality at this moment; maybe it will be in a couple of years. We have very limited choice [regarding electric vehicles] and not much variety, and still very far behind for public consumption. In terms of legislation, you’ve mentioned a few times in different media outlets that there needs to be more specific regulations regarding the construction sector. What were you referring to? One of the things the government has been trying to apply is the [mandatory] environmental impact assessment on every major construction works, they were trying to apply some rules. The second thing is whether it would be possible to apply a cost/penalty for dumping solid construction waste materials. At this moment, it’s still a huge problem and we need to find a way to solve it. The landfill is almost full. There should be some way to minimise this, maybe have some treatment factories there.
More rules What are the legal instruments still lacking in the territory to protect the environment? We have a new bill for noise pollution although the outcome is still not known yet. The most difficult to measure is household pollution, the noise happening in your neighbourhood, that’s always the problem. It’s very difficult to enforce the law in this situation. Another thing is we’re talking about air pollution, including indoor air conditioners. As I’ve been saying in the newspapers,
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December 15, 2014
Macau
the government has tried to set up some guidelines for indoor air conditioners and sometimes measured the VLC in the air but these are only guidelines and never were really turned into law. A few years ago, it happened in a commercial building that they had several barrels of VLC painting materials and the building had to be evacuated because people felt sick. This kind of indoor air pollution is still not regulated. Also, some restaurant kitchens have some pollutants and people keep complaining about the smell but this is also very difficult to measure. If this is only about smell, it’s very difficult to enforce. Regarding the noise bill, you mentioned that the main problem regards households, not construction sites. Could the law make it easier to be enforced? It’s very difficult to enforce but that’s why we need to see. It was just approved not long ago, so we need to wait. Also, regarding some vibration noise, it’s not specified in this law yet — some very low vibration that’s also very annoying, low frequency vibration. The Environmental Protection Bureau (DSPA) was set up in 2009. Do you think there’s been an improvement in this field?
We have very limited choice [of electric vehicles] and not much variety, still very far behind for public consumption
It’s difficult to say that the DSPA was a very big improvement because as you see there are still many problems to be resolved in the future
Before it was established, there was only a council providing some consultancy to the government but now they have the power to enforce. It’s difficult to say the DSPA was a very big improvement because as you see there are still many problems to be solved in the future. We also participate in the Environmental Protection and Energy Conservation Fund and this has been an encouragement, especially in reducing energy consumption and light [pollution]. Macau is a 24-hour city with one of the highest levels of energy consumption in the world. What can be done to tackle this? There are two things that need to be considered: one is the lighting because the casinos are open 24 hours. Recently, we had a group of people from Beijing trying to study the consumption — for instance, if you switch everything from normal lighting to LED, it may not be possible because casinos may need a specific type of lighting. So, how to transform this lighting into a more energy-saveable lighting? You can’t ask them to change, as there needs to be some studies on this. The second thing has to do with air conditioning, which is one of the big sources of consumption in casinos. Some people are talking about sharing an air conditioning system — like central
air conditioning - in which several hotels share the same source of air conditioning. Still, in Macau there are problems in this; if you need central air conditioning you need lots of frozen water for cooling, and in Macau it might be difficult. The ocean quality is not like in Hong Kong — [ours] has more silt. You’ve mentioned quite a few problems regarding environmental protection. Is Macau actually moving forward or backwards? It will move forward eventually. They’re now trying to pass a law on solar energy. At this moment,
all the energy is consumed through CEM — it’s the company that has the concession — which is why you can’t produce your own energy. Now, they’re trying to introduce a law for solar energy to be turned public. That’s maybe one of the ways to conserve energy for those big buildings. We’ll have solar energy and in a few years the Light Railway Transit will be ready; even through the Science and Technology Development Fund we also support technologies to make modifications for the buses to be able to use natural gas and also what concerns air conditioning.
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Gaming
Nuke remark stirred hack on Sands M
ost gamblers were still asleep, and the gondoliers had yet to pole their way down the ersatz canal in front of The Venetian casino on the Las Vegas Strip But early on the chilly morning of February 10, just above the casino floor, the offices of the world’s largest gaming company were gripped by chaos. Computers were flatlining, e-mail was down, most phones didn’t work, and several of the technology systems that help run the US$14 billion operation had sputtered to a halt. Computer engineers at Las Vegas Sands (LVS) Corp. raced to figure out what was happening. Within an hour, they had a diagnosis: Sands was under a withering cyber-attack. PCs and servers were shutting down in a cascading IT catastrophe, with many of their hard drives wiped clean. The company’s technical staff had never seen anything like it. The people who make the company work, from accountants to marketing managers, were staring at blank screens. “Hundreds of people were calling IT to tell them their computers weren’t working,” says James Pfeiffer, who worked in Sands’ risk-management department in Las Vegas at the time. Most people, he recalls, switched over to their mobile phones and personal e-mail accounts to communicate with co-workers. Numerous systems were felled, including those that run the loyalty rewards plans for Sands customers; programmes that monitor the performance and payout of slot machines and table games at Sands’ U.S. casinos; and a multimilliondollar storage system.
Ripping Cords
In an effort to save as many machines as they could, IT staff members scrambled across the casino floors of Sands’ Vegas properties The Venetian and its sister hotel, the Palazzo - ripping network cords out of every functioning computer they could find, including PCs used by pit bosses to track gamblers and kiosks where slots players cash in their tickets. This was no Ocean’s Eleven. The hackers were not trying to empty a vault of cash, nor were they after customer credit card data, as in recent attacks on Target Corp., Neiman Marcus Group LLC and Home Depot Inc. This was personal. The perpetrators wanted to punish the company, or, more precisely, its chief executive officer and majority owner, the billionaire Sheldon Adelson. Although confirming their conjectures would take some time, executives suspected almost immediately the assault was coming from Iran. This was new. Other countries have spied on American companies, and they have stolen from them but this is likely the first time - occurring months before the late November attack on Sony Pictures Entertainment - that a foreign player simply sought to destroy American corporate infrastructure on such a scale. Both hacks may represent the beginning of a geopolitically confusing, and potentially devastating, phase of digital conflict. Experts worry that America’s rivals may have found the sweet spot of cyberwar - strikes that are serious enough to wound American companies but below the threshold that would trigger a forceful government response. More remarkable still, Sands has managed to keep the full extent of the hack secret for 10 months.
In October 2013, Adelson, one of Israel’s most hawkish supporters in the U.S., arrived on Yeshiva University’s Manhattan campus for a panel titled ‘Will Jews Exist?’ Among the speakers that night were a famous rabbi and a columnist from the Wall Street Journal, but the real draw for the crowd in the smallish auditorium was Adelson, a slightly slumped 81-year-old man with pallid jowls and thinning hair who had to be helped onto the stage by assistants.
Desert Detonation
With a net worth of US$27.4 billion, Adelson is the 22nd wealthiest person in the world, thanks mostly to his 52 per cent stake in Las Vegas Sands. He has built the most lucrative gaming empire on earth by launching casinos in Singapore and China whose profits now dwarf those coming from Las Vegas.
Numerous systems were felled, including those that run the loyalty rewards plans for Sands customers; programmes that monitor the performance and payout of slot machines and table games at Sands’ U.S. casinos; and a multimillion-dollar storage system
An owner of three news outlets in Israel and a friend of Prime Minister Benjamin Netanyahu, Adelson also spends large sums of money supporting conservative politicians in the U.S.; he may be best known for contributing some $100 million in a failed attempt to unseat a President. At Yeshiva he described how he’d handle talks with Iran about its ongoing nuclear programme. “What are we going to negotiate about?” Adelson asked. “What I would say is, ‘Listen. You see that desert out there? I want to show you something.’” He would detonate an American warhead in the sand, he said, where it “doesn’t hurt a soul. Maybe a couple of rattlesnakes and scorpions or whatever.” The message: The next mushroom cloud would rise over Tehran unless the government scrapped any plans to create its own nukes. “You want to be wiped out? Go ahead and take a tough position,” Adelson said, to light applause. It took only a few hours for his remarks to be posted on YouTube and ricochet around the Internet. Iran’s Supreme Leader Ayatollah Ali Khamenei responded two weeks later, according to the country’s semiofficial Fars News Agency, saying America “should slap these prating people in the mouth and crush their mouths.” Physically, Adelson and Sands are well protected. He appears in public with a phalanx of armed bodyguards, said to be former agents of the U.S. Secret Service and Mossad, Israel’s intelligence agency. Sands paid almost US$3.3 million to protect Adelson and his family last year, according to a company filing. That’s on top of what Sands spends on vaults, security cameras, biometric screening devices, and one of the largest private police forces of any U.S. company, all to safeguard the millions of dollars of cash and chips that flow through its operations every day. But the company has been slow to adapt to digital threats. Two years ago it had a cybersecurity staff of five people protecting 25,000 computers,
according to a former executive. The board authorised a major upgrade of tools and personnel in 2013 but the project was slated to be rolled out over 18 months, and it was in its infancy as Adelson mused about nuclear strikes at Yeshiva. Unbeknownst to Sands, one month after Khamenei’s fiery speech, hackers began to poke around the perimeter of its computer networks, looking for weaknesses. Only later, after the attack, were investigators able to sift through computer logs and reconstruct their movements. These details appear in internal documents describing ‘Yellowstone 1,’ the company’s code name for the incident, and have been corroborated in interviews with a half-dozen people familiar with the breach and its aftermath. Ron Reese, a spokesman for Sands, declined to answer specific questions about the attack or to make Adelson available. By January 8, 2014, the hackers were focused on Sands Bethlehem, a 3,000-slot-machine casino and resort in Bethlehem, Pennsylvania, which has its own website and computer network. It’s a minor outpost in the company’s empire but going after the weak link in the security chain is a well-worn hacker trick. That day, the hackers launched a first, hour-long attack to try to break into the Sands Bethlehem virtual private network, or VPN, which gives employees access to their files from home or on the road. The hackers used software that cracks password logins by systematically trying as many as several thousand letter combinations per minute; the software keeps going until it either guesses right or runs out of permutations. It’s a brute-force method, sort of like the safecracking tools in movies that spin through every possible combination to find the correct set of numbers.
Brute-Force Attacks
The hackers redoubled their efforts on January 21 and 26, again
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Gaming
casinos that foreshadowed Sony throwing hours-long attacks at the Bethlehem Sands network. Later, investigators would detect the work of at least two different hackers or teams trying different ways to get in. At the time, IT managers in Bethlehem, alarmed at the sudden surge in failed login attempts, began a conference call with Sands security managers in Las Vegas. But brute-force attempts are common - almost half of all companies experience them, according to Alert Logic Inc., a Houston security firm - and casino staff wasn’t overly concerned. They put another layer of security on the accounts that were being attacked, so that entering the network would require more than just a password. It was of little use: Five days later, on February 1, the hackers found a weakness in a Web development server used by Sands Bethlehem to review and test Web pages before they went live. Once inside, the pace of the attack quickly escalated. Hackers used a tool called Mimikatz to reveal passwords used previously to log in to a computer or server. Collecting passwords as they went, the hackers gained access to almost every Sands file in Bethlehem, according to three people familiar with the incident. But the Bethlehem computer system was a box - and what they were really after was the key that would let them out. Sometime before February 9, they found it: the login credentials of a senior computer systems engineer who normally worked at company headquarters but whose password had been used in Bethlehem during a recent trip. Those credentials got the hackers into the gaming company’s servers in Las Vegas. As they rifled through the master network, the attackers readied a malware bomb. Typing from a Sony VAIO computer, they compiled a small piece of code, only about 150 lines long, in the Visual Basic programming language. The programme proved potent.
Sheldon Adelson, Chairman of the Board, Las Vegas Sands, Inc.
Not only does it wipe the data stored on computers and servers but it also automatically reboots them, a clever trick that exposes data that’s untouchable while a machine is still running. Even worse, the script writes over the erased hard drives with a random pattern of ones and zeros, making data so difficult to recover that it is more cost effective to buy new machines and toss the hacked ones in the trash. Investigators from Dell SecureWorks Inc. working for Sands have concluded that the February attack was likely the work of ‘hacktivists’ based in Iran, according to documents obtained by Bloomberg Businessweek. The security team couldn’t determine if the Iran Government played a role but it’s unlikely that any hackers inside the country could pull off an attack of that scope without its knowledge, given the close scrutiny of Internet use within its borders. “This isn’t the kind of business you can get into in Iran without the government knowing,” says James Lewis, a senior fellow at the Center for Strategic and International Studies in Washington. Hamid Babaei, a spokesman for Iran’s Permanent Mission to the United Nations, didn’t return several phone calls and e-mails. Months after the Sands fiasco, and just days after Rogers’s comments, hackers broke into Sony Pictures Entertainment, crippling the studio’s e-mail, payroll, and other systems and leaking gigabytes of company secrets, including full-length cuts of five major holiday films and the Social Security numbers of 47,000 employees and contractors, including Sylvester Stallone and Judd Apatow. The perpetrators of Sands released their malware early in the morning on Monday, February 10. It spread through the company’s networks, laying waste to thousands of servers, desktop PCs, and laptops. By the afternoon, Sands security staff members noticed logs showing that the hackers had been compressing batches of sensitive files. This meant that they may have downloaded - or were preparing to download - vast numbers of private documents, from credit checks on highroller customers to detailed diagrams and inventories of global computer systems. Michael Leven, the president of Sands, decided to sever the company entirely from the Internet. It was a drastic step in an age when most business functions, from hotel reservations to procurement, are handled online. But Sands was able to keep many core operations functioning - the hackers weren’t able to access an
IBM mainframe that’s key to running certain parts of the business.
Major Break
Hotel guests could still swipe their keycards to get into their rooms. Elevators ran. Gamblers could still drop coins into slot machines or place bets at blackjack tables. Customers strolling the casino floors or watching the gondolas glide by on the canal in front of The Venetian had no idea anything was amiss. Leven’s team quickly realised that they’d caught a major break. The Iranians had made a mistake. Among the first targets of the wiper software were the company’s Active Directory servers, which help manage network security and create a trusted link to systems abroad. If the hackers had waited before attacking these machines, the malware would have made it to Sands’ extensive properties in Singapore and China. Instead, the damage was confined to the U.S. The next day, the hackers took aim at the company’s websites, which were hosted by a third party and still running. The hackers defaced them, posting a photograph of Adelson chumming around with Netanyahu, as well as images of flames on a map of Sands’ U.S. casinos. The hackers
The perpetrators wanted to punish the company, or, more precisely, its chief executive officer and majority owner, the billionaire Sheldon Adelson. Although confirming their conjectures would take some time, executives suspected almost immediately the assault was coming from Iran
left messages for Adelson himself. One read, “Damn A, Don’t let your tongue cut your throat.” They also included a scrolling list of information about Sands Bethlehem employees that had been stolen in the breach, including names, titles, Social Security numbers, and e-mail addresses.
Damage The company is still tallying the damage. Documents and interviews with people involved in Yellowstone 1 show that the hackers’ malicious payload wiped out about threequarters of the company’s Las Vegas computer servers. Leven, in a brief interview last month before a private event, estimated that recovering data and building new systems could cost the company US$40 million or more. This is the next frontier of cyberwarfare. If an enemy of the U.S. were to digitally target the country’s electrical grid or natural gas pipelines, the president would consider a range of powerful responses, including military options, according to leaked descriptions of two executive orders signed by President Obama. But Las Vegas casinos don’t deliver essential services to the U.S. population, apart from Cirque du Soleil addicts. Nor do movie studios. Even months of nuisance attacks on the websites of major American banks in 2012 and 2013, which U.S. intelligence officials connected to Iran’s Republican Guard, didn’t meet the threshold. The damage wasn’t serious enough. “If there is a physical Chinese attack coming up the Houston Ship Channel, I know who to call,” Hayden says. “If there is a cyber Chinese attack coming up the fibre-optic cable in the Houston Ship Channel, what does U.S. law say the U.S. Government should do? I think what we’re finding is there isn’t a real robust answer.” It’s a lot easier to tell who fired a nuclear weapon than a digital one, which is simple to acquire and hard to trace. States often outsource hacking to proxies, including groups that behave a lot like the ones that officially took credit for both Sands (the ‘Anti WMD Team’) and Sony (the ‘Guardians of Peace’). A growing number of experts, including former national security officials who’ve seen the problem from the inside, say the next escalation may be companies doing what the U.S. Government won’t. If states can hire hackers to do damage, why can’t their victims defend themselves using the same techniques? Bloomberg
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Greater China Construction Bank to issue preference shares China Construction Bank (CCB), one of four major banks in China, on Saturday announced it plans to sell no more than 600 million preference shares to raise up to 60 billion yuan (US$9.8 billion) in a private placement. The issuance is targeted at qualified domestic investors, and the plan will be subject to approval from the China Banking Regulatory Commission and China Securities Regulatory Commission (CSRC), according to the bank’s filing to the Shanghai Stock Exchange. The plan aims to boost the bank’s tier-one capital, improve its capital quality, and sustain healthy business development, said the CCB.
Syngenta sees GMO corn approved Syngenta AG expects to win Chinese government approval soon for imports of a type of genetically modified corn at the centre of lawsuits over U.S. grain shipments rejected by Beijing, a company spokesman said on Friday. Syngenta, one of the world’s largest seed companies, will make an announcement when it receives official documentation from China that MIR 162 corn has been cleared for import, spokesman Paul Minehart said. Approval would be significant because U.S. corn trading with China has essentially shut down since Beijing began turning away cargoes containing MIR 162 corn in November 2013.
China to become Smart’s top market China could overtake Germany and Italy to become the biggest market for Daimler AG’s mini car brand Smart in a few years, Smart chief executive Annette Winkler said on Saturday. “When we started, many people doubted that Smart could be a success here, because normally, luxury, premium cars in China is about big cars,” Winkler told reporters in Shanghai, where Smart is celebrating the fifth anniversary of its China launch. But during some months of this year, China has already been the top world market for Smart, she said.
Vanke doubts on property market recovery China’s largest residential developer, China Vanke Co Ltd, said on Saturday that many cities were still suffering excess housing supply, giving a less optimistic view than other developers who say the property market has bottomed out. Vanke also said the impact of China’s rate cut last month was limited, though beneficial, for the property sector. Vanke also said the impact of China’s interest rate cut on November 21, the first reduction in two years, was limited, though beneficial, for the property sector.
Ex-Bright Food chair under suspicion A court in eastern China has accused the former chairman of state-owned Bright Food Group Co Ltd of embezzling some US$31 million and of accepting bribes, state media reported. The allegations against Wang Zongnan relate to his time at state-owned companies Shanghai Friendship Group and Lianhua Supermarket Holdings Co Ltd. Wang was general manager at Shanghai Friendship Group and then at Lianhua Supermarket before becoming chairman at Bright Food in 2006 until his resignation for health reasons in 2013. At a hearing in Shanghai, prosecutors accused Wang of embezzling 190 million yuan (US$31 million) between 2000 and 2006.
Central bank warns of possible growth deceleration Economists who advise the government have recommended a lower growth target in 2015
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hina’s economic growth could slow to 7.1 percent in 2015 from an expected 7.4 percent this year, held back by a sagging property sector, the central bank said in research report seen by Reuters yesterday.
Stronger global demand could boost exports, but not by enough to counteract the impact from weakening property investment, according to the report published on the central bank’s website, www.pbc.gov.cn.
China’s exports are likely to grow 6.9 percent in 2015, quickening from this year’s 6.1 percent rise, while import growth is seen accelerating to 5.1 percent in 2015 from this year’s 1.9 percent, it said.
Businesses stare at China-U.S. trade talks A treaty would help lower investment barriers by limiting the sectors in which foreign investment is restricted
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.S. businesses are hoping for a pledge from American and Chinese officials at talks in Chicago this week to move ahead quickly on a planned investment pact between the two countries. Joint Commission on Commerce and Trade meetings on December 16 through 18 are aimed at smoothing out snags ranging from beef exports to currency manipulation in a trade relationship worth more than US$600 billion a year. Although there will be no formal negotiations on a bilateral investment treaty, lobbyists hope officials will build on leaders’ recent commitments to speed up talks. “We hope there is a positive statement about their intent to continue to move those negotiations forward as quickly as possible,” USChina Business Council Vice President Erin Ennis said. A treaty would help lower investment barriers by limiting the sectors in which foreign investment is restricted, which currently range from soybean crushing to telecommunications. “Those negotiations loom large in the background of the (joint commission) in terms of China opening its market much wider to foreign investment,” said Jeremie Waterman, U.S. Chamber of Commerce executive director for China. U.S. Trade Representative Michael Froman told reporters on Friday the next step would be China’s offer on excluded sectors in early 2015. “We
U.S. Trade Representative Michael Froman (R) pictured with U.S. Secretary of State John Kerry (L) during their latest visit to China
are encouraging them to ensure that that list is as short and as narrowly tailored as possible,” he said. As the talks begin, Commerce is due to announce the final ruling in a trade dispute over solar panel and cell imports from China and Taiwan. That decision could sour the mood by confirming duties that would almost triple the cost of some products. But Commerce Secretary Penny Pritzker, speaking on the same call as Froman, said she did not expect any impact on discussions, which will be led on China’s side by Vice Premier Wang Yang. U.S. officials also plan to keep up pressure on China’s protection of trade secrets and antitrust laws,
which have been criticized for lacking transparency and targeting foreign companies, Froman said. U.S. Agriculture Secretary Tom Vilsack will press China on slow progress in accepting U.S. beef 11 years after a mad cow disease scare. He is also likely to raise the issues of import restrictions on U.S. cotton and barriers to imports of some U.S. genetically modified crops. “They have an approval process to consider the safety of those products, and it needs to be more responsive to the scientific process and also more timely,” said Jason Hafemeister, trade policy coordinator at the USDA’s Foreign Agricultural Service. Reuters
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Greater China Trust insurance fund to start with US$6.5 bln Each firm in trust industry is required to contribute 1 percent of their net assets to the fund, while each trust product will pay 1 percent of the money raised
6.9 pct 2015 China’s exports growth PBOC forecast
The report warned that the Federal Reserve’s expected move to raise interest rates sometime next year could hit emerging-market economies. Fixed-asset investment growth may slow to 12.8 percent in 2015 from this year’s 15.5 percent, while retail sales growth may quicken to 12.2 percent from 12 percent, it said. Consumer inflation may hold largely steady in 2015, at 2.2 percent, it said. China’s economic growth weakened to 7.3 percent in the third quarter, and November’s soft factory and investment figures suggest fullyear growth will miss Beijing’s 7.5 percent target and mark the weakest expansion in 24 years. Economists who advise the government have recommended that China lower its growth target to around 7 percent in 2015. China’s employment situation is likely to hold up well next year due to faster expansion of the services sector, despite slower economic growth, said the report.
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planned insurance fund for China’s trust industry will have an initial size of around 40 billion yuan (US$6.47 billion), the state-owned China Securities Journal reported, citing unidentified officials from the banking regulator. The fund, the first of its kind, will mark the capstone of Beijing’s long campaign to insure all of China’s financial industries, reducing risk in the country’s shadow banking sector while preparing the way to allow more defaults and bankruptcies.
The trust insurance fund will only be the last resort to help rescue trust companies instead of conducting compensation payments China Banking and Regulatory Commission spokesman
Reuters
The China Banking and Regulatory Commission (CBRC) on Friday published rules governing the management of the planned insurance fund, but did not say when the fund would be set up. Under rules, which come into effect immediately, each firm in China’s US$2.1 trillion trust industry is required to contribute 1 percent of their net assets to the fund, while each trust product will pay 1 percent of the money raised. According to an unidentified CBRC executive, the fund will have an initial size of about 40 billion yuan and continue to grow every year, the China Securities Journal reported. When the insurance scheme matures, the regulators will also set different contribution rates depending on the risk profile of the trust firms, the paper said. China has established similar funds for securities, insurance and commodity futures companies. It
is also preparing to set up its first deposit insurance fund to protect bank customers. Unlike the other insurance programmes, the trust firms will not use the funds to compensate investors in the case of bankruptcies. Instead, they will be used in the liquidation and restructuring of companies that received trust investment. “The trust insurance fund will only be the last resort to help rescue trust companies instead of conducting compensation payments,” a CBRC spokesman was quoted in a statement as saying. “Assuming the role of a ‘security network’ for the industry, the fund will effectively separate risk in industry from the government ... and help digest the risk of individual trusts within the sector.” The rules also listed five situations in which the fund will help bail out individual firms. These include when a trust is declared bankrupt, is short of capital to support its operations or is ordered to close for irregularities. Assets under management at China’s 68 trust firms rose to 12.95 trillion yuan by the end of the third quarter this year, making trusts the single biggest financial sector after commercial banks, official data shows. Reuters
Brokers scout for talent as profits soar Official data showed Chinese retail investors opened over a million new brokerage accounts in November Engen Tham
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hina’s brokerages are on a broad-based hiring spree to capitalise on booming local stock markets and a surge in new clients and trading activity that is giving their profits a big boost. The central bank’s surprise interest rate cut on November 21 and the Stock Connect scheme, which opened earlier that week, allowing direct trading of Hong Kong and Shanghai stocks on each other’s bourse, has fuelled an influx of retail investors and a jump in trading volumes, while a resumption of new mainland share listings this year has brought underwriting fees back to life for larger brokers. In recent months, demand for staff from brokerages has increased by around 20 percent, said Chen Xia, a head-hunter at Unique. “Just this month, we’ve received four brokerage requests for employees, whereas before, sometimes there would be business, sometimes there wouldn’t,” said Shi Guangming, a financial services head-hunter
from Hunter W S. Small to mid-sized brokerages such as Chinalin Securities, Donghai Securities and Jianghai Securities are looking for analysts, researchers and asset managers, said Shi. The firms could not immediately be reached for comment. Official data showed Chinese retail investors, who conduct 60-80 percent of
stock trades in China, opened over a million new brokerage accounts in November, up 280 percent year-on-year, after years of stagnation. That has translated into feverish trading on Chinese benchmark indexes in recent weeks, with volumes on the Shanghai Composite Index hitting a record high on December 9. The market value of the index is up by a fifth since the rate cut.
With the improved outlook, brokerages are busy setting up investment companies, wealth management teams and asset management firms, headhunters said, all of which need manpower. Haitong Securities, China’s second-largest listed brokerage by market capital, plans to hire around 10 new members for their research team, said an employee at Haitong Securities, who declined to be named because she cannot speak to the media. While Haitong is always on the prowl for talent due to natural attrition rates, staff movement across all brokerages has been much higher than it was last year, she added. Haitong could not immediately be reached for comment. The annual salaries of junior analysts range from 100,000 yuan to 150,000 yuan, and their bonus is often based on how many reports they write, said headhunters.
Senior ‘star’ analysts can make up to 10,000,000 yuan (US$1.62 million), according to head-hunters, as their salaries are tied to commission earned from the funds they introduce to the brokerage and the points awarded to them by the funds they serve. “The atmosphere is great. Everyone is really happy. Everyone is thinking about how to make more money,” said the Haitong employee. Brokerages are reporting surging profits, with China’s market leader CITIC Securities Co Ltd ringing in 886.2 million yuan of net profit in November, more than 500 percent up on last year. “The little virtuous circle which they’ve got going is they’re selling margin debt to investors who are then turning around and buying their stocks for them,” said Thomas Gatley, China Corporate Analyst, at Gavekal Dragonomics Haitong Securities Co Ltd also posted its highest ever quarterly profit in September. Reuters
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Asia WB arm to boost Myanmar investment The International Finance Corporation (IFC), a private investment arm of the World Bank Group, is striving to boost investment in Myanmar which is expected to reach about US$400 million by the end of June 2015, up from 92 million dollars as of November this year, the semi-official Global New Light of Myanmar reported yesterday. It also sees increase with its investment in the country to over US$1 billion over the next three years with a focus on development of its private sector, IFC said in a statement.
Indonesia ups coal output Indonesia has raised its coal output targets for 2014 and 2015, the mining ministry’s coal director said, to meet a targeted 25 percent increase in non-tax revenue from the mining sector amid plummeting global coal prices. Indonesia, one of the world’s biggest exporters of thermal coal, ships about US$2 billion worth of coal a month. Output is expected to be around 450 million tonnes in 2015, compared with a previous target of 425 million tonnes, Bambang Tjahjono Setiabudi, the director for coal at the Mining Ministry, told Reuters.
Laos to promote rice export to China
India’s central bank governor calls for selling at home While supporting a push by Modi to make it easier to do business in India and to produce domestically, central banker cautioned against an export-led plan Sandrine Rastello
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ndia needs to produce and sell more at home to avoid overly relying on exports to a world that is forecast to see sluggish economic growth, central bank governor Raghuram Rajan said. “Slow industrial country growth has made more difficult a traditional development path for emerging markets -– export-led growth,” Rajan said in a speech in New Delhi. “Emerging markets now have to rely once again on domestic demand, always a difficult task because of the temptation to overstimulate.” In a speech outlining his vision for India’s economy, Rajan cautioned against using an undervalued exchange rate to boost exports. He recommended that Prime Minister Narendra Modi avoid incentives for specific sectors as part of his “Make in India” initiative, a plan to boost the share of manufacturing in Asia’s third-biggest economy to 25 percent from about 15 percent.
“India is different, and developing at a different time,” Rajan said. “We should be agnostic about what will work.” Rajan recommended the implementation of a goods and services tax, and repeated that the
main role of the central bank is to keep inflation low and stable. The Reserve Bank of India and the government will discuss the timing to move toward the centre of a medium-term inflation target of between 2 percent and 6 percent, he said. The bank now aims
Raghuram Rajan, Reserve Bank of India, recommended the implementation of a goods and services tax
Asian manufacturers cause duty-free trade in IT goods to collapse Laos is planning to expand rice exports to neighbouring countries, mainly China, official Lao news agency KPL on Saturday quoted Phoungprarisak Pravongviengkham, Lao Vice Minister of Agriculture and Forestry as saying. In an interview with media on the occasion of the on-going eighth Ordinary Session of the National Assembly convening in Lao capital Vientiane during December 9-26, the Lao official said, “During my visit to China, I learned that over 200 million people in China like to eat sticky rice. With this knowledge, I realized that farming rice for export to China could be very encouraging.”
Cambodia-China companies ink biz deals Two business agreements were signed between 21 companies from East China Fujian province and their Cambodian counterparts at a business matching meeting here yesterday. Zheng Xiaosong ,vice governor of Fujian province, said the meeting was aimed to expand trade and investment ties between Fujian province and Cambodia, noting that the bilateral trade volume amounted to US$158 million last year.
Tom Miles
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alks on cutting trade tariffs on hundreds of information technology products collapsed, delaying and potentially scuppering a deal estimated to be worth US$1 trillion to global trade. “We are disappointed not to be celebrating a deal this week. We missed a big opportunity,” U.S. Ambassador Michael Punke said at the World Trade Organization (WTO). The talks aimed to update the WTO’s 17-year-old Information Technology Agreement, which guarantees zero-tariff and dutyfree trade on hundreds of products, adding about 200 more products to the list. Several participants blamed the failure on a deadlock between China and South Korea over liquid crystal display (LCD) screens. “The participants have significantly reduced the gaps on expanding the coverage of the
ITA agreement in recent days, but unfortunately it has not been possible to finalize the negotiations this week,” WTO Director General Roberto Azevedo said in a statement. Participants are expected to reconvene in 2015 to see if they can overcome the blockage. “Manufacturers urge negotiators to come back to the table as early as possible in the new year to agree to a strong product list in order to unlock much-needed growth opportunities for manufacturers and their workers,” said Linda Dempsey, vice president of international economic affairs at the U.S. National Association of Manufacturers. But China, which wants to foster its own LCD industry, refused, demanding that all countries accept the same terms that it agreed bilaterally with the United States last month after a long-standing stalemate. One trade official involved in the
talks said South Korea had offered a number of concessions, but there had been no reciprocal move by China. Other countries also offered changes to try to entice China to make the last small step needed for a deal, the official said. Another trade diplomat said South Korea had asked China to include accumulator batteries on the list, but Beijing said no. “They couldn’t move the last few centimetres,” he said, adding that both sides were equally to blame for the collapse. Chinese officials were not available for comment. Although Friday’s deadline for finishing the negotiation was artificially imposed, U.S. Ambassador Punke had said the talks’ “success or failure” would be decided this week. His European Union counterpart, Angelos Pangratis, said: “Later it will not be easier. ... Now is the moment.” Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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December 15, 2014
Asia As a country that does not belong to any power blocks, we do not ever want to be in a position where we need multilateral support Raghuram Rajan, Reserve Bank of India governor
for 8 percent in January and 6 percent a year later.
‘Not as resilient’ “In reacting to developments, however, the central bank has to recognize that emerging markets are not as resilient as industrial economies,” he said. “So the path of disinflation cannot be as steep as in an industrial economy because an emerging market is more fragile, and people’s buffers and safety nets are thinner.” Rajan has vowed to fight entrenched inflation to underpin sustainable growth as Modi seeks to revive an economy that has expanded at less than 6 percent after an average of 8.7 percent from 2006 to 2010. Rajan left interest rates unchanged
last week while signalling a possible easing early next year. While the U.S. and lower oil prices may help spur global expansion, there is still a “palpable sense of gloom in the industrial world,” with Japan in a recession and the euro region on the brink of one, Rajan said. India, which like other emerging markets faced a flight of capital last year when the Federal Reserve first mentioned reducing stimulus policies, needs a multipronged approach to make sure it’s not vulnerable again, according to Rajan.
‘Make in India’ While supporting a push by Modi to make it easier to do business in India and to produce domestically, Rajan cautioned against an exportled plan that would leave India contending with export champions such as China at a time of subdued demand in the richest nations. The “Make in India” strategy pursued by the government shouldn’t discourage imports through higher tariffs but instead create a better environment for Indian companies to compete and foreign counterparts to invest, he said. Asia’s third-largest economy also needs a unified market, more domestic savings to finance demand, and clear plans from the government on reducing the budget deficit, he said. “Countries tend to over-stimulate, with large fiscal deficits, large current account deficits, high credit and asset price growth, only to see growth collapse as money gets tight,” he said. Bloomberg News
Telkom to lead Indonesia’s broadband expansion Fransiska Nangoy and Eveline Danubrata
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tate-owned telecom firm PT Telekomunikasi Indonesia Tbk will take the lead in a US$24 billion drive to expand Indonesia’s broadband capacity over the next five years, the communication and information minister said. Rudiantara, part of newly elected President Joko Widodo’s administration, said the government is considering extending unspecified incentives to the company as it seeks to improve Internet access in Southeast Asia’s largest economy. “I’m in the position to support Telkom to take a lead on this broadband plan,” he told Reuters. The government is in the process of finalising the details of the plan, he added. Only 12 percent of Indonesia’s total population had access to mobile broadband last year, and that was at a relatively slow speed of 512 kilobyteper-second, according to ministry data. For fixed line broadband, access was even lower at 5 percent of the total population. Faster Internet and better access would give a boost to Indonesia’s nascent e-commerce market, which the minister estimated could more than
double to US$25 billion by 2016 from around $12 billion this year. Rudiantara said the government was discussing incentives with local e-commerce companies such as PT Tokopedia, but he declined to give further details. In October, Japanese technology giant SoftBank Corp and U.S. venture capital firm Sequoia Capital announced a US$100 million investment in Tokopedia. Rudiantara declined to give further details about the regulation, but said he expects the number of telecom operators in Indonesia to more than halve to four in the next decade. A price war to gain subscribers over the last few years and the high operating costs have squeezed the profits of telecom firms including Telkom, PT Indosat Tbk and PT XL Axiata Tbk. XL Axiata, part of Malaysia’s Axiata Group Bhd, acquired mobile phone operator PT Axis Telekom Indonesia for US$865 million earlier this year. In October, XL Axiata said it will sell 3,500 towers to telecom infrastructure firm PT Solusi Tunas Pratama Tbk in a 5.6 trillion rupiah (US$460 million) deal. Reuters
Australia needs budget to adapt new trade scenario The ruling Liberal-National coalition has failed to get many of the savings measures it set out in its annual May budget
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ustralia will take budget measures to cushion an economy facing its worst decline in terms of trade in more than half a century, Treasurer Joe Hockey said yesterday, with the government poised to unveil large cuts to services and spending. The budget cuts are expected to be announced today alongside a midyear economic outlook that will factor in the heavy hit Australia’s resourcedependent economy has taken from a sharp fall in commodity prices in recent months. “If we don’t use the budget as a shock absorber for this extraordinary fall in the terms of trade, then Australians will lose jobs, and we’ll lose our prosperity,” Hockey told reporters in Sydney. “The forecast decline in the terms of trade this year is the largest since records were first kept in 1959,” he said. Economic growth is forecast to stay at 2.5 percent and rise to 3 percent over the next few years, Hockey said, while unemployment is likely to rise to levels “a tick higher” than forecast in May.
Australia’s Treasurer Joe Hockey
The forecast decline in the terms of trade this year is the largest since records were first kept in 1959 Joe Hockey, Australia’s Treasurer
On Saturday, Finance Minister Mathias Cormann confirmed in a television interview that jobs would be cut, after the Australian newspaper reported that 175 government agencies are expected to be axed and the number of government workers reduced to levels seen eight years ago. “The overwhelming objective here is to ensure that
we streamline the operation of the public service. If you reduce the number of government bodies, there will be an impact on jobs,” Cormann told Sky News. The mid-year review is expected to show the budget deficit for the fiscal year ending in June 2015 had blown out by around A$5 billion (US$4.2 billion) to nearly A$35 billion.
The ruling LiberalNational coalition has failed to get many of the savings measures it set out in its annual May budget through a hostile parliament. Just a year into office, Prime Minister Tony Abbott’s government has suffered record low approval ratings, with the economy running into strong external headwinds.
Australia is reeling from steep falls in prices for major exports. Iron ore, which accounts for 20 percent of export income, has plunged by almost 50 percent this year, slashing export income for the nation’s largest export. The government has had to cut its forecast from US$92 a tonne in May, to US$60 a tonne for the foreseeable future, Hockey said. Reuters
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International Fitch downgrades France to ‘AA’ Fitch Ratings cut its ratings on France to AA from AA+ on Friday, saying the country’s revised deficit-reduction target was not enough to avoid a downgrade. Fitch noted that the government’s budget-saving measures were not enough to change the credit ratings agency’s projections of France’s “government debt dynamics.” The agency had said in October “it would likely downgrade the ratings by one notch in the absence of a material improvement in the trajectory of public debt dynamics following the European Commission’s (EC) opinion on France’s 2015 budget.”
U.S. Senate passes spending bill The U.S. Senate on Saturday passed a US$1.1 trillion spending bill that lifts the threat of a government shutdown as Congress attempts to wrap up a two-year legislative session marked by bitter partisanship and few major accomplishments. The Senate’s 56-40 vote sends the measure to President Barack Obama, who is expected to sign it into law before federal spending authority expires at midnight on Wednesday. Passage of the 1,603-page bill was a long, tough struggle in the Senate and the House of Representatives marked by bitter disputes over changes to banking regulations and Obama’s recent executive order on immigration.
S. Africa defends criticised policy South Africa’s government defended its economic policies after credit ratings agencies cited the country’s low GDP growth and budget and current account deficits as weaknesses. “Important structural reforms are underway in major economic sectors that will boost the economy’s growth,” the national treasury said in a statement in response to the ratings reviews. Ratings agency Fitch maintained South Africa’s BBB rating, two notches above junk status, in a review on Friday, but kept its negative outlook and cut its GDP growth forecast for 2014 to 1.5 percent, from 1.7 percent, due to strikes and electricity supply disruptions.
Oil price drops below fundamentals The secretary-general of the Organization of the Petroleum Exporting Countries (OPEC) said yesterday the price of oil had fallen further than market fundamentals would have dictated. Speaking at an event in Dubai, Abdullah al-Badri added that the November meeting which ruled out a cut in production by members of the group was not aimed at anyone specific. “Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran. And Russia. This also is incorrect.”
Libya appoints another oil official Libya’s recognized government has appointed a second official to head staterun National Oil Corp (NOC), it said as it vies with a rival government for control of the vital oil sector. The OPEC producer has had two governments and parliaments since August when a group called Libya Dawn seized Tripoli, forcing the recognized Prime Minister Abdullah al-Thinni to move to the east. Last month, Thinni appointed al-Mabrook Abu Seif as new NOC chairman. The rival government in Tripoli has named its own oil minister Mashallah Zwai and kept the NOC chairman Mustafa Sanallah in place.
UN talks agree building blocks for new-style climate deal Some environmental groups, however, said the deal, reached at a tent city on a military base in Lima, was far too weak Alister Doyle and Valerie Volcovici
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bout 190 nations agreed yesterday the building blocks of a new-style global deal due in 2015 to combat climate change amid warnings that far tougher action will be needed to limit rising world temperatures. Under the Lima deal, governments will submit national plans for reining in greenhouse gas emissions by an informal deadline of March 31, 2015 to form the basis of a global agreement due at a summit in Paris in a year’s time. The texts, breaking deadlock among weary delegates almost two days into overtime after two weeks of talks, appeased developing countries led by China and India, concerned that previous drafts imposed too heavy a burden on emerging economies compared to the rich. “We’ve got what we wanted,” said Indian Environment Minister Prakash Javedekar, who said the text preserved the notion enshrined in a 1992 climate convention that the rich have to lead the way in making cuts in greenhouse gas emissions. It also satisfied rich nations led by the United States who say it is time for fast-growing emerging economies to rein in fast-rising emissions. China is now the biggest greenhouse gas emitter ahead of the United States, the EU and India. “This is a good document to pave the way to Paris,” EU Climate Action and Energy Commissioner Miguel Arias Cañete told Reuters at the end of two weeks of talks about limiting more floods, desertification, heat waves and rising sea levels. “We went from weak to weaker to weakest,” Samantha Smith of the
What we are seeing is a new form of international cooperation on climate change where all countries participate with a new set of rules Jennifer Morgan, World Resources Institute Former US Vice-President Al Gore speaks during a plenary session at the 20th UN Climate Change Conference COP20 held in the city of Lima
WWF conservation group said of successive drafts at the Lima talks. “This leaves a huge amount for governments and everyone else to do in the next 12 months.”
New style The idea of a U.N. deal with obligations for all nations marks a shift from the 1997 Kyoto Protocol, which obliges only the rich to cut emissions. But it leaves a lot of work for 2015. “I am not going to say it will be a walk in the park in Paris,” said Ed Davey, British Secretary of State for Energy and Climate Change. The U.N. Climate Change Secretariat say that the combined pledges by all nations likely in Paris will be too weak to achieve a goal of
limiting warming to an agreed goal of 2 degrees Celsius (3.6 Fahreneit) above pre-industrial times. Under the Lima deal, national pledges will be added up in a report by November 1, 2015, to assess their aggregate effect in slowing rising temperatures. But, after opposition led by China, there will not be a full-blown review to compare each nation’s level of ambition. In a deal with the United States last month, China agreed to cap its emissions by around 2030. And the text lays out a vast range of options for the Paris accord, including the possibility of aiming for zero net global emissions by 2100 or earlier in a drastic shift from fossil fuels towards renewable energies such as wind and solar power. Reuters
Lagarde to go ahead without Washington It is not clear how the IMF might proceed without the US, given that Washington is a controlling shareholder in the Fund
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he head of the International Monetary Fund said the global lender was ready to discuss ways to move forward without the United States on reforms that would give emerging markets greater IMF voting power. IMF member nations agreed on so-called quota reforms in 2010, with the strong backing of the Obama administration, but the U.S. Congress has so far failed to give the changes a needed stamp of approval. U.S. lawmakers are preparing to leave town for the year without backing the reforms, meaning the United States will miss a deadline the Group of 20 leading nations had set for action. “I have expressed my disappointment to the U.S authorities and hope that they continue to work toward speedy ratification,” IMF Managing Director Christine Lagarde said in a statement.
“As requested by our membership, we will now proceed to discuss alternative options for advancing quota and governance reforms and ensuring that the Fund has adequate
I have expressed my disappointment to the U.S authorities and hope that they continue to work toward speedy ratification Christine Lagarde, IMF Managing Director
resources, starting with an Executive Board meeting in January 2015,” she said. The agreed changes would double the Fund’s resources and hand more IMF voting power to countries such as Brazil, Russia, India, China and South Africa. It would also revamp the IMF’s board to reduce the dominance of Western Europe. Some Republicans in the U.S. Congress have said the changes would cost too much at a time Washington was running big budget deficits. The reforms also ran afoul of a growing isolationist trend among the party’s influential Tea Party wing. It is not clear how the IMF might proceed without the United States, given that Washington is a controlling shareholder in the Fund, but there are a handful of ad hoc measures that could achieve at least a portion of the envisioned governance overhaul. Reuters
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December 15, 2014
Opinion Business
wires
Global energy realism
Leading reports from Asia’s best business newspapers Ana Palacio
Former Spanish foreign minister and former Senior Vice President of the World Bank, is a member of the Spanish Council of State and a visiting lecturer at Georgetown University
THE NEW ZEALAND HERALD Christmas spending is off to a strong start with, up 4.4 per cent on the same time last year. Paymark’s (a local electronic payment system) figures for the fortnight between November 29 and December 13 show shoppers spent US$2.3 billion in the start of Christmas shopping. Paymark processed 46.37 million transactions, a 6.8 per cent increase on the same period last year. Paul Whiston, Paymark head of sales and marketing, said the past 14 days show a strong start to Christmas spending with two big shopping weekends yet to come.
THE STRAITS TIMES Paying with plastic has become so common that outstanding credit card loans are set to top US$10 billion for the first time by Christmas, according to figures from the Monetary Authority of Singapore (MAS). Overall, unpaid balances were at US$9.98 billion as at October, the latest month for which figures are available. That is a jump of more than 70 per cent from US$5.8 billion for the same period in 2009, just five years ago. December, with year-end festive shopping and holidays, has always been the month when people use their credit cards most.
PHILSTAR The Department of Energy (DOE) has teamed up with local solar companies to promote the use of solar energy in the country on the back of growing energy demand and a looming power supply shortage in the summer of 2015. At the opening of the National Energy Consciousness Month, Energy Assistant Secretary Jose Raymundo Acol said the DOE is committed to find solutions to broaden the assistance of the government in promoting renewable energy technologies, particularly solar energy, to reach a wider audience.
THE JAPAN NEWS The Land, Infrastructure, Transport and Tourism Ministry has decided to set a requirement for large buildings newly constructed from fiscal 2016 to fulfil the government’s energy-saving criteria. If planned buildings do not pass the criteria, the construction plans will not be approved in screenings conducted mainly by prefectural governments. The central government will submit a bill to revise the Law on the Rational Use of Energy during an ordinary Diet session next year. The obligation to fulfil the criteria will be applied to large buildings with total floor space of 2,000 square meters or more.
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nergy has become a focal point of global policymaking. As falling oil prices grab headlines worldwide, US President Barack Obama and Chinese President Xi Jinping have signed a major climatechange deal, and October’s European Council decisions could signal real progress toward a serious European Union energy policy. This momentum should be maintained in the coming year, culminating in December’s United Nations Climate Change Conference (COP21) in Paris. But, in order to establish a global energy system that meets growing demand within the constraints of carbon neutrality, we must avoid the pitfalls that have plagued past responses. In particular, we must strike the proper balance between ideology and realism, the public and private sectors, and longand short-term considerations. And, critically, we must follow through on our commitments. When it comes to ideology and realism, the European Union is perhaps the best example of an imbalanced approach, as Europeans’ tendency to lead with their hearts, rather than their heads, has undermined effective action. The knee-jerk rejection of nuclear power by some EU member countries has led to sharp increases in coal usage. Renewables have been pursued with a sort of missionary zeal, regardless of their effectiveness or feasibility. And the EU’s “20/20/20 targets” – a 20% reduction in greenhousegas emissions, a 20% share for renewables, and a 20% increase in energy efficiency, all by 2020 – was more of a mantra than a policy. Bridging the gap between the public and private sectors is
vital to finance the construction of an efficient global energy system. The International Energy Agency estimates that by 2040, the annual investment required in energy-supply infrastructure alone will total US$2 trillion, up 20% from current levels. Over the next 26 years, some US$51 trillion will be needed. This is just part of the overall infrastructure investment shortfall, which stands at US$1 trillion annually – far more than what governments can afford. That is why governments must build innovative partnerships with private-sector actors, while recognizing that energy, as a public good, must be subject to appropriate regulation and oversight. There have been some notable moves in this direction, though it remains to be seen whether they will translate into real action. China has spearheaded the establishment of the Asian Infrastructure Investment Bank. More important, the World Bank, the G-20, and the EU recently launched initiatives aimed at directing the financing power of business toward infrastructure development. The World Bank’s Global Infrastructure Facility is an open platform that brings together multilateral development banks, national governments, and private finance to shepherd infrastructure projects to completion and to fill in gaps that have hampered investment. Pivotal to sparking this investment is the mitigation of associated political risks, especially through an enhanced role for the Bank’s Multilateral Investment Guarantee Agency. Similarly, at last month’s summit in Brisbane, the G-20 created a new Global Infrastructure Hub to facilitate information-
The world does not need more commitments and pledges; it needs action
sharing, thereby streamlining infrastructure projects. And, the EU’s Connecting Europe Facility has allocated €5.85 billion (US$7.2 billion) from now until 2020 to help kick-start private investment in infrastructure projects linking member countries’ energy systems. Of course, the need for privatesector involvement extends beyond investment. The private sector is also better situated to research and develop new production methods that limit demand for fossil fuels. To spur such action, the public sector should offer funds or guarantees, which, though risky, could offer huge benefits. US government funding of research into hydraulic fracturing – the technology now driving the surge in America’s oil and gas production – dates back to the 1970s. This brings us to the need to balance short-term imperatives with long-term vision. Energy projects and policies today must account for the projected increase in emerging-market demand, while ensuring sufficient investment in future generating capacity. For example, over the next
25 years, 60% of the EU’s generating capacity is due to retire – contributing to demand for US$2.2 trillion of energy investment. Furthermore, with US tight-oil production expected to peak in the early 2020s, new sources must be developed, such as in Iraq. Given the long lead time for bringing new projects on-stream, efforts to address the coming shortfall must begin today. In all of these efforts, there is one common imperative: matching words with deeds. The world does not need more commitments and pledges; it needs action. Yet many countries continue to issue weak declarations that fail to produce genuine progress. Once again, this problem is particularly pervasive in Europe. The maxims of today – the need for diverse suppliers, enhanced interconnection, greater efficiency, and a sensible energy mix – have been discussed for at least a decade. In fact, despite the seemingly unending stream of new energy initiatives and projects, Europe has made little progress; its energy situation may even be worse. Repackaging the same old strategies – here one need look no further than European Commission President Jean Claude Juncker’s much-hyped €300 billion investment package – simply will not work. With attention focused on COP21 next December, the coming year will be an exceptional opportunity to build a sound global energy system. Europe, which has prided itself on its energy leadership, should set an example by developing – and then implementing – a realistic long-term strategy that involves the private sector. Project Syndicate
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December 15, 2014
Closing Tourist inflow closely affected by China’s air quality
Wanda poised to become world’s largest 5-star hotel owner
Chinese researchers said yesterday they have measured the effects of air quality on inbound tourists, calling for more attention to air pollution treatment. The researchers looked at the proportion of days each year with air quality that meets the official standard. For each one-percent drop in good air days, the number of inbound tourists fell by about 443,550 people, according to the 2014 China Tourism Development Report released by the Wuhan Chapter of the China Tourism Academy. Researcher Hu Jing, chief of the Wuhan Chapter, said that air quality had become a pivotal factor in people’s travel decisions.
China’s Dalian Wanda Group is accelerating its expansion into the luxury hotel business with plans to become the world’s largest 5-star hotel owner in 2015. Wanda Hotels & Resorts Co. Ltd., a wholly owned subsidiary of Dalian Wanda Group Corp. Ltd., announced that it will build new hotels in 100 Chinese tourism destinations by 2015 to become the world’s largest 5-star hotel owner. By the end of 2018, the company plans to own more than 150 luxury hotels in China, Europe, the United States and Australia. By the end of 2014, the company will own 71 luxury hotels in China.
Xiaomi’s India smartphone ban exposes wider patent risk Sources close to Xiaomi say its leadership has privately acknowledged for years its vulnerability to patent entanglements
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he court order that banned Chinese mobile maker Xiaomi from selling its phones in India has halted its breakneck expansion into the world’s fastest growing major smartphone market and could be just the start of a string of patent challenges. Xiaomi Technology only started selling in India in July and quickly became the country’s fastest growing smartphone brand; with minimal marketing, it is already outselling even lowcost smartphones running Google’s Android One. And then came Wednesday’s court order to stop selling, after a patent infringement case was filed by telecom equipment maker Ericsson. The ban will last until at least February 5, when the Delhi court hears the case again. But that is unlikely to be the end of the young company’s battle over intellectual property (IP) rights. The higher risks of IP litigation in Western markets even played a role in shaping Xiaomi’s strategy of expanding
KEY POINTS Court banned Xiaomi selling in India on Dec. 10 Xiaomi was fastest growing vendor in India More patent problems expected for young start-up Company says to file 8,000 patent applications by 2016
Hugo Barra, Xiaomi’s head of international operations
in India and Southeast Asia, the sources said. Xiaomi said in a statement that “it isn’t easy” to build up a patent portfolio as a startup company, but it aims to have filed 8,000 applications by 2016. On its home turf, Xiaomi has already been dogged by IP controversies with
other Chinese firms, mostly over content rights for its streaming TV service. As its smartphone business, already number one in China, continues to grow, however, industry analysts expect greater pressure at home, particularly since two of its fiercest handset rivals, Huawei and ZTE Corp, are
China, Kazakhstan to sign US$10 bln in deals
Qatar predicts booming economy in 2015
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hina is expected to sign 30 cooperative agreements worth US$10 billion with Kazakhstan as Premier Li Keqiang begins his first official visit to the country, the official Xinhua news agency said yesterday. Xinhua did not give details, but quoted Chinese Vice Foreign Minister Cheng Guoping as highlighting a joint-venture logistics base and urging interconnectivity with highways, railways, ports, air routes, oil and gas pipelines. “The Sino-Kazakh cooperation is developing rapidly. The volume of trade between the two countries is increasing annually by 20 percent,” Xinhua quoted Li as saying in an article. Kazakhstan has become China’s second largest trade partner in the Commonwealth of the Independent States, while China is the second largest trade partner and the largest export market of Kazakhstan, Li was quoted as saying. Li will also visit Serbia and Thailand, but some of the most touchy topics he could encounter are off the agenda, including the fate of Muslims from western China who have fled to Southeast Asia. Reuters
among the top telecom patent holders in China.
Growth setback Until it is lifted, the ban in India will be particularly hard on growth prospects. In a country where just one in 10 people use smartphones, the potential is vast. The market grew 82 percent in the third quarter, while China expanded at a relatively modest 10.8 percent,
according to research firm IDC. In China, Xiaomi already outsells Apple and Samsung Electronics in smartphones, and it became the world’s third-largest vendor as of October, though it is little known outside Asia. Unlike Apple, which introduces a new iPhone just once a year, Xiaomi rolls out updated models frequently, usually in small batches that sell out in seconds. It sells only online, and with minimal advertising, relying on word of mouth to build anticipation for each new launch. In India, Xiaomi initially imported 10,000 devices a week but soon had to ramp that up to 60,000 to 100,000 to meet demand, India business chief Manu Jain told Reuters before the sales ban. It has chartered flights four times to rush in fresh supplies. Jain did not respond to a request for comment on the business impact after the order. Rushabh Doshi, an analyst at technology research firm Canalys in Singapore, said the ban would “leave a gap in the market, to be quickly filled by local or international vendors looking to increase market share”. The court case will also make phone vendors wary about their current patent portfolio and require them to step up their spending on research and development, he added. Reuters
Haiti’s PM resigns amid political crisis
atar predicted its economy would grow 7.7 percent next year, signalling the world’s top exporter of liquefied natural gas expects very little disruption to its finances from the oil price plunge which is worrying many energy exporters. The forecast by the Ministry of Development Planning and Statistics, issued yesterday, was down only marginally from the 7.8 percent estimate for 2015 which the ministry delivered in June this year. Since June, Brent crude oil has tumbled to near US$60 a barrel from around US$115, pressuring the finances of energy exporters around the world. In the Gulf, Bahrain and Oman are expected to be particularly hard hit. But Qatar appears almost immune to cheap oil. Although it is a significant oil producer, the prices of its natural gas exports are only weakly correlated with oil. Even at current oil prices, analysts estimate Qatar’s state budget might break even next year; it has huge fiscal reserves to cover any deficits. Growth of 7.7 percent in 2015 would be Qatar’s fastest expansion since 2011. Reuters
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aiti’s Prime Minister Laurent Lamothe announced his resignation yesterday, following repeated calls for him to step down amid anti-government protests and a political crisis in the impoverished Caribbean nation. Lamothe’s resignation had been widely expected after President Michel Martelly said Friday that the prime minister was ready to leave “to help find a solution” to the country’s political impasse that has seen a failure to hold parliamentary elections in the last three years. “I am leaving the post of prime minister this evening with a feeling of accomplishment,” Lamothe said in a televised address, Haiti’s communication ministry tweeted from its official account. Lamothe’s departure comes amid renewed violent protest against the ruling elite. On Saturday, one man was shot dead during a new round of anti-government demonstrations in the Haitian capital calling for both the president and prime minister to resign. Clashes broke out when hundreds of youths tried to break through police barricades to enter the presidential palace. It was not clear who had fired the fatal shot. AFP