Macau Business Daily, Feb 25, 2015

MOP 6.00 Closing editor: Sara Farr

V

isitors still flock here for gambling and shopping. But they’re spending less time and money in Macau. Data from the Statistics Bureau reveals that Mainland visitor per capita spend dropped 30 pct in 2014 Q4 Y-O-Y. Despite National Day Golden Week and Christmas. Total visitor spend was down 14 pct for the period. The whole of 2014 posted a slight growth of 3.7 pct Y-O-Y, taking in MOP61.74 billion.

PAGE 4

Year III

Number 736 Wednesday February 25, 2015

Publisher: Paulo A. Azevedo

Just in the black

HSI - Movers February 24

Name AIA Group Ltd

2.36

CITIC Ltd

1.79

Sino Land Co Ltd

1.11

China Mobile Ltd

1.05

SARs say enough

Tingyi Cayman Island

0.94

Wharf Holdings Ltd/T

-1.41

Belle International

-1.62

Sands China Ltd

-2.70

Galaxy Entertainment

-2.73

Two SAR’s, one issue.

Too many visitors using the Individual Visit Scheme. Last week MSAR’s Secretary for Social Affairs and Culture raised concerns about the growing number of Mainland Chinese tourists visiting the territory. Hong Kong’s Chief Executive echoes these concerns.

And meets with Beijing officials regarding IVS, among other matters, next month. Some 49 cities on the Mainland are currently eligible for the scheme

HSBC Holdings PLC

-3.54

Page

3

Macau Legend, Dynam partnership talks conclude with no deal announced Page 6 www.macaubusinessdaily.com

%Day

Casinos stocks slump on city’s plan to review Chinese visits Page 6

Mainland Chinese visits to Hong Kong drop amid tensions Page 7

Source: Bloomberg

I SSN 2226-8294

Gaming slowdown Just days ‘til the end of the month. Yet, this could be the worst GGR on record since November 2010. Analysts are forecasting a gaming revenue drop of up to 50 pct for the month of February. Primarily caused, it’s generally agreed, by the slowdown of the Chinese economy

Page

Dredging it all up A gaming concession licence with special benefits. That’s what legislator Ella Lei Cheng I is asking the gov’t to explain.

SJM is allegedly exempt 1pct tax on gross gaming revenues for maritime dredging services. In 2013, this exemption reached MOP900 million. Out of proportion to the market rate, she claims. She requests authorities revisit the agreement when the gaming concession is reviewed

Page

3

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2 | Business Daily

February 25, 2015

Macau

LRT Taipa route outline apparent this year The head of GIT says the foundation works for the elevated bridge on the Taipa side of the LRT is nearly done, thus the public will be able to see the outline of the bridge and the stations this year. The design of the southern Peninsula line and plan for the northern line will be confirmed during the first half Kam Leong

kamleong@macaubusinessdaily.com

I

nterim co-ordinator of the Transportation Infrastructure Office (GIT) Ho Cheong Kei says that the construction of the elevated bridge pile foundation

for the Taipa route of the Light Rail Transit (LRT) is almost finished, claiming that the public will be able to see the outline of the elevated bridge and the LRT

stations this year. “[We] are now working on the construction of the upper structure [of the Taipa route]. Meanwhile, the construction of the abutments

is 80 per cent complete… During the second half of this year, when the main constructions are almost finished, such as the elevated bridge and the LRT stops, we will start installing the system for the LRT,” he said on TDM Radio show Macau Forum yesterday.

Recently, Secretary for Transport and Public Works Raimundo Rosario told reporters after meeting with a sub-committee of the Legislative Assembly that the government cannot provide a schedule for when the city’s whole LRT will be finished but indicated that the Taipa side will not be operational in 2016 as originally slated.

Claiming the delay in the construction of the Taipa route is due to the construction of a depot, the Secretary said that the government would discuss the resolution of this issue with the contractor. Yesterday, the GIT acting head said the government is still in discussions with the contractor.

On the other hand, Mr. Ho said that the design work for the southern line of the Peninsula route, connecting Golden Lotus Square to Barra, will be finished during the first half of this year.

“Right after the design work, we will open the tender [for the construction],” he said.

In addition to the design work of the southern line, the government will decide which of the three plans will be adapted for the northern line of the LRT on the Peninsula, connecting Golden Lotus Square to the Border Gate. Mr. Ho said that the government is now analysing the opinions in the proposals for the northern line collected from previous public consultations.

Last June, the government proposed three plans for the northern line of the LRT, which are all to be elevated sections, located at Avenida Leste do Hipódromo, Avenida 1º de Maio and along the coastline, respectively. The government estimated at that time it would spend at least MOP500 million per kilometer on construction whichever proposal is eventually selected.

Urban Planning Committee Go Green receives secretariat dismissed land grant

T

he secretariat of the advisory body Urban Planning Committee has been dismissed. The announcement was made last week and published in the government’s Official Gazette yesterday with effect from today.

The government proposed winding up the secretariat claming that the dismissal is to meet the Chief Executive’s policy of a ‘learner structure and simpler administration’.

Starting from today, the Land, Public Works and Transport Bureau (DSSOPT) will replace the secretariat in the provision of administrative and financial assistance to the Committee. All staff working for the secretariat on non-permanent contracts will be transferred

to the DSSOPT. This move has aroused some suspicion from the public, and legislator Ng Kuok Cheong handed in a written inquiry yesterday calling the dismissal of the secretariat ‘abrupt’, questioning whether the decision seeks to weaken the Urban Planning Committee’s independence and its power of supervision and monitoring.

Ng Kuok Cheong said there are over 10 advisory bodies in the SAR Government, and they all have secretariats, such as the Cultural Heritage Committee, Talent Development Committee and Medical Affairs Committee, etc. The legislator pointed out that the dismissal was announced without public consultation

or press conference at which details behind the decisions should have been given.

When talking to reporters last week after announcing the bill, Chief Executive Chui Sai On said the Secretary for Transport and Public Works, Raimundo Rosario, who is also acting as president of the Urban Planning Committee, made the suggestion.

Chui said that there are over 10 committees that receive administrative and financial support directly from the secretaries’ offices or from departments of bureau-level. He added that the Secretary for Administration and Justice Sonia Chan Hoi Fan is reviewing all the advisory bodies for the SAR Government, with the result to be released in due course.

G

o Green, a company that sells ecological motorcycles, has been granted an 86 square metre plot of land in Rua de Cinco de Ourubro and Rua do Teatro to build a seven-storey building for residential and commercial use on a longterm lease. The dispatch was signed by the Secretary for Transport and Public Works, Raimundo Rosario, on January 30 and published in the government’s Official Gazette on February 11.

According to a report

by Portuguese language newspaper Jornal Tribuna de Macau (JTM) that dates back to July 2011 when Go Green first opened its store in Avenida Horta e Costa, the company sought to introduce environmentally friendly transportation in order to reduce pollution

levels in the territory.

The ecological motorbikes instead of using an engine that ran on fuel used a rechargeable battery, avoiding the discomfort of exhaust emission and noise.

Storeowner Chio Kam Long told JTM then that the government embraced the initiative and that they had had meetings with government and that he was expecting more incentives for their business as well as for people in Macau ‘going green’.

According to the attached contract to the Secretary’s dispatch, of the seven-story building, 455 square metres would be for residential use and 106 square metres would be for commercial use. The rent is MOP123 per year and the price for the right to use the plot of land MOP49,120.

Business Daily | 3

February 25, 2015

Macau

Legislator urges gov’t to review SJM’s concession for dredging services Ella Lei Cheng I claims that the one per cent tax exemption for SJM’s dredging services is too much of a cost as the gaming operator generates vast revenues Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he gaming concession contract of Sociedade de Jogos de Macau SA (SJM) includes a special term: the company is in charge of dredging the city’s harbour and other maritime obligations. In exchange, it gets corresponding tax benefits – one per cent gaming tax exemption.

Legislator Ella Lei Cheng I submitted a written enquiry urging the government to reconsider the measure’s rationale when reviewing the gaming concession contracts, as the one per cent tax equalled more than MOP900 million (US$112 million) in 2013, which is considerably more than the government would have paid for the dredging

services alone, according to the legislator.

At present, casinos need to pay a direct tax of 35 per cent on gross gaming revenues. The law also states that they are obliged to pay a further two contributions of up to 2 per cent for ‘cultural, social, economic, educative, scientific, academic or philanthropic actions’ through the Macau Foundation and up to 3 per cent for ‘urban development, tourism promotion and social security.’ The maximum tax is therefore 40 per cent, although it is currently set at 39 per cent.

Now, gaming operators pay 1.6 per cent to the Macau Foundation and 2.4 per cent

for ‘urban development, tourism promotion and social security’ (1.4 per cent in SJM’s case, which, in exchange, is responsible for dredging and other maritime obligations).

The one percentage point tax break might have been worth MOP300 million when the gaming concession contract was first signed but with the development of the gaming industry in the SAR the amount that the government has spent on dredging services equalled MOP806 million in 2012, and over MOP900 million in 2013.

“If the gross gaming revenues continue to be on a high level, that means that the government is paying a huge

chunk of public money on the dredging services,” said Ella Lei at a press conference earlier this month addressing the issue. “We think this provision of the contract needs to be reviewed.”

This issue came to the surface as more than 20 former employees at the dredging department of the Sociedade de Turismo e Diversões de Macau, SA (STDM) sought help from the legislator for compensation of overtime and annual leave.

SJM’s parent company STDM was in charge of the dredging work. In 2013, the responsibility for keeping the city’s waterways navigable was transferred to Macau

Dredging Services Ltd. – a wholly owned subsidiary of SJM Holdings Ltd. This move was said to be in accordance with SJM’s strategy as listed on the Hong Kong Stock Exchange.

Some former employees of STDM said that when their old contracts were terminated, they received compensation for having been laid off but the remaining compensation for overtime and annual leave went unpaid. They hope for a more reasonable solution.

Ella Lei said dredging is a paid public service, and urges the government to better supervise the gaming operator in providing its employees with better benefits.

HK CE to consult Beijing on revised IVS terms The administrations of Hong Kong and Macau are mulling talks on possible restrictions to the Individual Visit Scheme which currently allows millions of Mainland Chinese tourists to travel to the two SARs Stephanie Lai

sw.lai@macaubusinessdaily.com

W

hile the Macau Government remarked last week that a review is to be soon conducted of Mainland China’s Individual Visit Scheme (IVS), Hong Kong Chief Executive Leung Chun Ying said yesterday that his administration would meet with Beijing in March. High on the agenda will be the tightening of arrangements under the IVS scheme for Mainland tourists visiting the city given its increasingly challenged tourism capacity.

Speaking ahead of an Executive Council meeting yesterday morning, Mr. Leung said he would raise the issue of a possible tightening of the IVS policy with the central government when attending the concurrent sessions of the National People’s Congress and Chinese People’s Political Consultative Conference in Beijing early next month.

The Hong Kong Chief Executive noted that he understood the growing influx of Mainland Chinese visitors into the city has “formed pressure on people’s livelihoods”, and that he did not agree to further increasing the number of eligible areas in the Mainland that could apply for the IVS visa to travel to Hong Kong.

“I’ve always expressed to the central authority that our [tourism] capacity is limited, and that I don’t agree to adding more cities eligible for the Individual Visit Scheme,” Mr. Leung said, speaking to media yesterday.

“In fact, for the Mainland residents

– whether they’re travelling in groups or on a multi-visit permit, or on the Individual Visit Scheme - the policy has never been changed or relaxed. We understand that the growing number of tourists has formed increasing pressure on people’s livelihoods.”

“Firstly, there has been no relaxed [IVS] policy; and secondly, we’re discussing with Beijing whether there’s room to tighten the policy, so that the natural growth of Mainland tourists coming here can be controlled,” he added.

A similar concern about the huge number of Mainland Chinese tourists coming here and its impact on the quality of life of residents in the MSAR has also prompted the Macau Government to review the IVS policy with Mainland authorities

after the Chinese New Year vacation, Macau’s Secretary for Social Affairs and Culture Alexis Tam Chon Weng told reporters last week.

At the time, the Secretary said he did not have draft plans improving the IVS visa policy but he has noted the possible tightening of arrangements under the scheme.

The Director of the Macau Travel Industry Council, Andy Wu Keng Kuong, said he did not expect that a possible tightened IVS policy by the Hong Kong government would overly impact Macau.

“For the joint tour of Hong Kong and Macau, this route is actually much more adopted by package tours than individual Mainland visitors,” Mr. Wu remarked to Business Daily.

“Currently, Hong Kong is running a multiple-visit permit system for Mainland visitors, which Macau is not,” said Mr. Wu. “For Macau, where many of our IVS visitors are from Guangdong, they can only apply for such visa every two months – and this in effect is already a cap in itself [thus] I think any further cap on tourist arrivals is not necessary.”

The Council’s director reckons that the city’s current number of hotel rooms and infrastructure can still support the growing influx of tourists, although the government could introduce a shuttle service to help divert visitors away from much populated sites like San Ma Lou on the Macau Peninsula during festive seasons.

For Hong Kong and Macau, the IVS policy currently allows Mainland Chinese living in 49 eligible cities of the Mainland to apply for a travel permit to visit individually instead of applying under a tour group visa.

Macau received a record 31.5 million visitors last year, of whom 67.4 per cent or over 21 million were from Mainland China, according to the Statistics and Census Service.

About 9.57 million Mainland Chinese visitors travelled here last year under the IVS scheme, representing about 45.6 per cent of total Mainland visitor arrivals. Around 47 per cent of these aggregate Mainland visitor arrivals, or 9.98 million visitors, travelled here on a tour group visa.

4 | Business Daily

February 25, 2015

Macau opinion Not all tourists are the same

Total visitor spend down 14pct in Q4 as Mainlanders rein in Despite the Golden Week of National Day and the Christmas holidays during the fourth quarter of last year, the city did not earn much from tourists, particularly Mainlanders, whose spending per capita slumped by almost 30 per cent y-o-y Kam Leong

kamleong@macaubusinessdaily.com

José I. Duarte Economist

T

he Chinese New Year brought to Macau a huge number of tourists.

Final numbers have yet to be determined but possibly close to two million people crossed the borders. With crowded public areas, the disruption of transportation, and stretched services, the full tally has yet to be made.

However, it is enough to look at the many photos taken at various places in the city to become clear that some actions must be taken, if the benefits from the tourism industry are to be made compatible with both its sustainability and residents’ quality of life.

The issue is not new. Since at least 2009, the rising wall of visitors has put increasing strains on the city and its population, suggesting that a more ‘managed’ growth would be forthcoming.

As has been the case in other instances, the lure of the fast buck has trumped more prudent and sustainable approaches. That may be changing and better late than never. The New Year peak, for all its negative impact, may have provided the required trigger to make an appraisal of the situation unavoidable.

According to media reports, the Secretary for Social Affairs and Culture stated the intention to review the operation of the Individual Visa Scheme with the Mainland authorities. As an increasing number and share of tourists come from the Mainland, that is certainly the point at which to start. It is a necessary step if some moderation, or even reversal, of the existing trends is to be achieved. It is too early to know what the Secretary has in mind and what the elements of such negotiation might be. But this is not a matter of numbers alone, as not all visitors impact (or benefit) the region in the same way. It is important, therefore, that the issue is not framed in terms of the total number of visitors only. I suppose we need a more subtle approach.

Over half of the visitors to the city fall into the category of same-day visitors.

They, and especially those on packaged tours, put a high level of stress on the city. They stay, on average, just a few hours in town, are on the move most of the time, rush to the most popular places during the same periods - and, in the end, spend little on local commerce. A policy crafted to limit visitors from the Mainland should, therefore, focus primarily on limiting the number of this type of visitor.

Conversely, it should be calibrated carefully in order to allow – even stimulate – an increase in the number and sources of overnight visitors and to encourage them to stay longer. They visit more places, do it in a more leisurely manner, make wider usage of the local services and facilities – and spend much more. A rise in their numbers should be encouraged.

T

he total spending of visitors in Macau dropped some 13.9 per cent year-on-year during the fourth quarter of last year, primarily due to the average spend of Mainland tourists decreasing by nearly 30 per cent year-on-year in the quarter, the latest data released yesterday by the Statistics and Census Service (DSEC) reveals.

During the fourth quarter of 2014, the total spending of visitors in Macau reached only MOP14.05 billion. The per capita spend of visitors amounted to MOP1,757 as compared to the MOP2,201 shelled out during the same period in 2013, representing a drop of 20.2 per cent.

Spending by overnight visitors, which accounted for 44.9 per cent of the total, dropped whilst that by same-day visitors increased.

According to DSEC, the total spend by overnight visitors in the fourth quarter of 2014 reached MOP11 billion, a slump of 17.7 per cent year-on-year, while the spending of same-day visitors increased by 4.2 per cent, yet only amounting to MOP2.99 billion.

Although the total spending of visitors dropped during the fourth quarter, for the whole year of 2014 it still posted a slight growth of 3.7 per cent year-on-year, reaching MOP61.74 billion.

Per capita spending for the whole year of 2014, by contrast, registered a drop of 3.5 per cent, decreasing from MOP2,030 in 2013 to MOP1,959.

Less spending by major markets The decrease in the per capita spending of visitors in the city is due to the per capita spending of Mainland visitors dropping to MOP2,038 from MOP2,801 during the fourth quarter, which is down by 27.3 per cent yearon-year, despite the fact that they still spent more than most other tourists.

Nevertheless, Mainland tourists, the biggest source of visitors to Macau, were not the only group to spend less in the Special Administrative Region.

According to DSEC data, tourists from Hong Kong and Taiwan, who represented the second and third biggest tourist sources for Macau last year, spent 3.79 per cent and 3.94 per cent less year-on-year, respectively, amounting to some MOP912 and MOP1,510 per head in the quarter.

Total spending of visitors (million MOP)

The per capita spending of Japanese tourists decreased by 4.7 per cent year-on-year in the quarter.

They spent, on average, MOP1,716 in Macau during the three months.

However, other markets, such as tourists from Singapore and Malaysia spent more in the quarter, up 10.2 per cent and 5.1 per cent year-onyear. They were also the groups spending the second most and the third most in Macau in the three months, amounting to MOP 1,977 and MOP1,718 per head, respectively.

In addition, long-haul visitors spent

Per-capita spending of Mainland tourists (MOP)

2014

2013

Variation

2014

2013

Variation

61,749

59,541

3.7%

2,362

2,563

-7.8%

Q1

Q1

Q1

Q1

15,948

14,479

2,534

2,640

Q2

Q2

Q2

Q2

15,486

13,940

2,659

2,511

Q3

Q3

Q3

Q3

16,261

14,803

2,220

2,321

Q4

Q4

Q4

Q4

14,054

16,318

2,038

2,801

10.1% 11.1% 9.8% -13.9%

-4.0% 5.9% -4.4% -27.2%

more in Macau in the previous quarter.

Visitors from the United Kingdom spent MOP1,518 per person, representing a year-on-year increase of 19 per cent, while visitors from the United States spent 12.1 per cent more compared to the same period last year, amounting to MOP1,395.

Spending patterns Official data also shows that only the Mainland tourists spent more on shopping than on accommodation whilst in the city last quarter.

They spent 52.9 per cent of their total spending, or 62.9 per cent for those travelling here on the Individual Visit Scheme, on buying jewellery and watches, local food products, cosmetics and perfumes quite evenly.

Other tourists spent most on buying local food products. Tourists from Japan, Hong Kong and the U.S.A spent more than 80 per cent of their total outlay on food here.

Meanwhile, none of the non-Asian visitors or Japanese visitors bought jewellery or watches in Macau during the last quarter, whilst all other Asian visitors did.

Business Daily | 5

February 25, 2015

Macau

JL Warren Capital: Chinese economy slowdown hitting Macau gaming industry Gaming operators should prepare for the worst month in gross gaming revenue terms since November 2010, according to the research firm that expects revenues to shrink 51 per cent João Santos Filipe

jsfilipe@macaubusinessdaily.com

M

acau casinos are suffering the consequences of the strong negative winds blowing in from Mainland China’s economy, with gross gaming revenue (GGR) now expected to shrink 51 per cent in February, research firm JL Warren Capital noted in a report on the gaming industry.

‘The environment of declining global competitiveness and profitability that many Small and Medium-sized Enterprises in this old economy face is causing owners, managers and employees to cut back on Capex and consumer spending. If slower growth ultimately leads to declining employment, both actual unemployment and the anticipation of unemployment will weaken consumer demand. Add to that the anti-corruption campaign’s blight on conspicuous consumption, and it is no surprise that Macau casinos

are empty and Chinese New Year spending looks likely to be subdued’, it was explained in the report on the Macau gaming industry.

On February 8, JL Warren Capital predicted that GGR would drop 46 per cent year-on-year in February but the new report says the scenario is worse than expected and that they are now forecasting a 51 per cent fall to MOP18.5 billion. The research firm also notes that investors should be surprised by the ‘mass segment decisive deceleration’.

In its earlier forecast, JL Warren Capital assumed GGR would shrink to approximately MOP20.7 billion with average daily revenue (ADR) accounting for MOP668 million. Now ADR is assumed to be MOP661 million, which will result in a drop to MOP18.5 billion and a year-on-year decline of 51 per cent from MOP38 billion.

While February 2014 was the best

month ever for the gaming industry, if the JL Warren Capital forecast proves right then February 2015 will be the worst month since November 2010, when gross gaming revenue accounted for MOP17.4 billion.

‘China’s old economy – low-tech and medium-tech manufacturing

dependent upon export markets – is sputtering. These factories are shutting down. Globally, trade is no longer growing at more than twice the rate of GDP, as was the case during China’s Golden Age of 1980-2007’, it was added to explain the downtrend in the Special Administrative Region.

JL Warren Capital also stressed that the influences of Mainland China’s economy are not creating new factors that deteriorate casino revenues but rather amplify the effects of Macau’s debit crisis, increasing global competition, the corruption crackdown and the consequences of the deterioration of the spending power of average visitors.

The research firm highlighted that despite low expectations, February was a disappointing month for the gaming concessionaires.

‘We expect that the sector’s earnings and EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] for the full year will be revised down once again after the GGR during the CNY disappoints despite the already low expectation’, the report reads. ‘We see approximately 10-15 per cent downside in the stocks of Macau casino operators’.

Forecast for February 2015 of JL Warren Capital Total (MOP million)

Average Daily Revenue (MOP million)

Feb 1-8

5,300

663

Feb 9-15

3,703

529

Feb 16-22

3,500

500

Feb 23-28

6,000

1000

Overall

18,503

661

Days

UnionPay cards swiped US$6.52 trillion in 2014 The state-backed card brand said it would cater to the demands of ‘post-80s’ Chinese outbound travellers as it is a group of affluent spenders Stephanie Lai

sw.lai@macaubusinessdaily.com

U

nionPay International, a subsidiary of the state-backed China UnionPay card brand, said that the global transactions of UnionPay cards reached US$6.52 trillion (41.1 trillion yuan) last year, representing a year-on-year growth of 27.3 per cent.

In a statement issued on Monday, the card brand said that it expected the spending of Chinese outbound travellers would continue to grow this year, driven in particular by the ‘post-

80s’ generation or the ‘millennials’ – a group of young travellers aged below 35 years.

Business Daily approached UnionPay International for the spending patterns of its ‘post-80s’ Chinese clients travelling abroad but had not received further information from the company by the time the story went to press.

‘The post-80s generation in China is now in the prime of its career life. They are technologically savvy, have higher

disposable incomes compared to their parents’ generation and desire to see more of the world, making this group big spenders on international travel,’ UnionPay International noted in its statement. ‘Their spending potential is now drawing the attention of more overseas merchants to offer tailored services catering to their demands.’

‘UnionPay International has been expanding its market globally to cater to the spending demand of travellers, including Chinese millenials,’ the

card brand said.

Mainland Chinese tourists comprise a majority of visitor sources for both Hong Kong and Macau: according to official data, total inbound Mainland Chinese tourists travelling in Hong Kong reached 47.2 million people in 2014, which represents 77 per cent of overall visitors; while for Macau, which received a total of 31.5 million of visitors in the year, 67.4 per cent, or over 21 million visitors, were from Mainland China.

6 | Business Daily

February 25, 2015

Macau

Macau casinos slump on city’s Macau Legend, plan to review Chinese visits

Dynam talks stall

G

alaxy Entertainment Group Ltd. led declines in casino shares after a senior Macau official said the city wants to study restrictions on mainland Chinese tourists to ease overcrowding.

The government will approach China’s central government in Beijing to analyze Macau’s capacity for visitors, and to consider how “too many tourists impact residents’ quality of life,” local broadcaster Teledifusao de Macau cited the Secretary for Social Affairs and Culture Alexis Tam Chon Weng as saying on a radio talk-show.

Galaxy fell 2.5 percent to HK$41 as of 11:45 a.m. in Hong Kong trading, the lowest intraday level in more than two weeks. Sands China Ltd. dropped 2.4 percent, while Wynn Macau Ltd. fell 1.8 percent, MGM China Holdings lost 2.3 percent, and SJM Holdings Ltd. was down 1.3 percent. The benchmark Hang Seng index fell 0.6 percent.

Chinese President Xi Jinping in December urged Macau to diversify away from its reliance on casinos, and turn the city into a world tourism and leisure center. Macau’s

C

casino revenue slumped an eighth straight month in January for the longest losing streak on record, as Xi’s twoyear long crackdown on official corruption and stricter travel rules have deterred high rollers from entering the territory.

Visit scheme There will be talks between Macau and mainland authorities from the capital and provinces, local media reported, citing Tam who

spoke to reporters on February 19.

China introduced the so-called Individual Visit Scheme in 2003 to allow mainland residents to visit Macau and Hong Kong by obtaining entry permits without the need to travel with tour groups. The program was first implemented in four Guangdong cities in the south and extended to 49 cities throughout China.

The number of mainland Chinese visitors to Macau for

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the first four days of the Lunar New Year rose 6.7 percent to 443,421, compared with the same lunar calendar period a year ago, according data from the Macau Government Tourist Office.

China’s Lunar New Year started from February 19 this year, while the country’s public holiday for the festival is from February 18 to February 24. Hong Kong markets reopened on Monday after a two- day break.

Bloomberg

asino and hotel operator Macau Legend Development Ltd. declared to the Hong Kong Stock Exchange yesterday that it had not entered into any ‘definitive agreement’ with pachinko operator Dynam Japan Holdings Co. Ltd. prior to both parties’ nonbinding memorandum of understanding (MOU) expiration on Monday, which was one that translated into ‘opportunities for business co-operation’ between the two groups. Macau Legend first entered into a nonbinding MOU with Dynam in August 2013, under which Dynam would set up and operate a minimum of 100 electronic games in Macau Fisherman’s Wharf. The memorandum also spelled out that the Japanese firm would market Macau Legend’s hotels and casinos in Macau to its customers in Japan and Korea. The MOU was extended twice last year without further concrete results announced.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

Those people and their actions are our inspiration.

•••

info@goldfishmacau.com +853 2833 1258

Business Daily | 7

February 25, 2015

Hong Kong

Hong Kong stocks fall as hsbc slumps most in 18 months on profit

H

ong Kong stocks fell, with the Hang Seng Index halting its longest winning streak in seven months, as its biggest stock, HSBC Holdings Plc., dropped the most since August 2013 after reporting earnings slumped.

HSBC was the largest contributor to declines on the Hang Seng after the London-based bank said pretax profit dropped by 56 percent. Energy shares retreated and airlines rose after crude oil slid below $50 a barrel, with China Oilfield Services Ltd. losing 2.5 percent and Air China Ltd. jumping 4.6 percent.

Casino stocks declined for a second day after local media reported the number of tourists from the mainland fell, sending Galaxy Entertainment Group Ltd. 2.6 percent lower.

The Hang Seng slid 0.6 percent to 24,697.37, halting six days of gains, its best winning streak since last July.

The Hang Seng China Enterprises Index of mainland stocks traded in the city fell 0.3 percent to 12,007.27.

Mainland exchanges will re-open today after being shut since February 18 for Lunar New Year holidays.

“Analyst have already reduced their expectation for HSBC and yet the company came in below expectations, so analysts will continue to cut,” said Daphne Roth, the head of Asian equity research at ABN Amro Private Banking, which manages about $218 billion. “Chinese tourists are certainly traveling a lot more, but they’re going beyond just Hong Kong and the usual places. I see them increasingly going to countries such as Thailand.”

Heaviest weighting HSBC fell 3.3 percent to HK$69.65 after reporting pretax fourth-quarter

profit of US$1.7 billion, missing analyst estimates of US$3.7 billion.

The bank is the heaviest-weighted stock on the Hang Seng, accounting for about 12 percent of the measure.

Shares in London trading slumped 4.6 percent.

Energy shares slumped after crude oil in New York dropped 2.7 percent on Monday. China Oilfield lost 2.5 to HK$11.90 while China Petroleum & Chemical Corp., also known as Sinopec, dropped 1.2 percent to HK$6.37.

Air China gained 4.6 percent to HK$6.82 and China Southern Airlines Co. advanced 2.7 to HK$3.86.

Greek reforms Investors are also watching the situation in Greece after a February 20 agreement with creditors. The

head of the group of euro- region finance ministers expects Greece to deliver a package of economic measures that will satisfy creditors and avert another emergency round of negotiations.

Under the draft agreement, the government had until midnight Greek time to complete a list of policies in return for continued funding. A draft list was sent to creditor institutions on Monday.

Investors will receive further clues on the Federal Reserve’s assessment of the U.S. economy and the timing of an interest-rate increase when Chair Janet Yellen gives two days of testimony to Congress starting Tuesday. Federal fund futures traded on the CME Group Inc. exchange are signaling October as the most likely month the Fed will raise rates, according to data compiled

by Bloomberg.

“The Fed is worried that low interest rates will lead to a rise in excessive risk taking, but besides stocks nothing else has been going up by a terribly large amount,” said Koichi Kurose, who oversees about 6 trillion yen (US$51 billion) as Tokyo-based chief market strategist at Resona Bank Ltd. “I think she’ll strike a fine line and refrain from saying anything particularly bullish or bearish for stocks.”

Futures on the Standard & Poor’s 500 Index were little changed after the underlying index fell less that 0.1 percent from a record in New York on Monday.

Bloomberg

Mainland Chinese visits to Hong Kong drop amid tensions The head of the travel industry said this is normal, especially for any traveller who feels unwelcomed in the destination they’re visiting

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he number of mainland Chinese visitors to Hong Kong during the Lunar New Year holidays fell for the first time in about 20 years as they have felt increasingly unwelcome amid political unrest in the city.

The drop comes as Hong Kong’s leader Leung Chunying said he would raise the issue of large numbers of mainland Chinese visitors with Beijing at a parliamentary meeting next month.

“If we have to restrict or decrease the numbers of mainland Chinese coming to Hong Kong then we must continue to discuss this with [China]... this is a difficult task,” he said.

The drop, though a mild

0.3 percent over the first three days of the holiday, is the first decrease in Lunar New Year arrivals from China in about two decades, according to a major travel industry group, and could presage longer term decreases that could impact the city’s economy.

“It’s alarming,” said Joseph Tung, the Executive Director of Hong Kong’s Travel Industry Council.

Over 40 million mainland tourists streamed into Hong Kong last year, spending freely in luxury shops, malls, restaurants and hotels, as well as emptying local stores of daily necessities such as baby milk formula and cosmetics.

Tung and other travel industry heavyweights say political tensions in

Hong Kong including prodemocracy demonstrations last year and a recent spate of anti-China shopper protests in local malls have discouraged tourists from mainland China.

“Put yourself in their shoes. If you feel as though people are not welcoming you, why would you come to Hong Kong?” Tung said.

“If these things carry on... the high spenders in China can just go elsewhere, like Europe.”

China is the biggest source of outbound tourists globally, and mainland tourists are expected to double to 200 million by 2020, according to a report last month by CLSA. A total of just 437,199 of those tourists arrived in Hong

Kong early in the new year, the Immigration Department said.

Hong Kong was returned to China in 1997 under a formula that granted it a separate legal system, far greater freedoms than in mainland China and an eventual goal of universal suffrage.

Democracy activists occupied major roads for twoand-a-half months last year to demand open nominations in the next chief executive election in 2017. Beijing refused to negotiate, saying it would allow only between pre-screened candidates.

Nearly three months after police cleared the last of the protesters, lingering frustration has stoked a new

front of radical activism and turned shopping malls and university campuses into fresh battlegrounds targeting mainlanders.

A shortage of hotel rooms and tourist attractions as well as shifting exchange rates are also hurting Hong Kong, according to CLSA, which predicts Hong Kong’s share of mainland tourists will drop to 26 percent in 2020 from 41 percent in 2013.

The trend in China’s other special administrative region, Macau, is the opposite. Visits to the gambling hub by mainland Chinese grew 6.9 percent to 434,549 in the first three days of the Lunar New Year, according to the city’s tourist board.

Reuters

8 | Business Daily

February 25, 2015

Greater China China vows to step up bribery blacklist The Supreme People’s Procuratorate (SPP) has vowed to improve the national online database of people convicted of bribery to better combat corruption.

Song Hansong, director of the SPP’s job-related crime department, said the top procuratorate will promote the use of the blacklist system at the central level this year and launch a job-related criminal record archive. The SPP also plans to improve the bribery database to support batch queries and online reservations for inquiries in a bid to make public inquiries more convenient, Song said. Launched in February 2012, the database makes names of convicted bribers available across the country for public inquiry.

Maintaining competitive edge key as Hong Kong delivers budget KEY POINTS Hong Kong to deliver budget at 0300 GMT Wednesday Expected to announce initiatives to boost work force Forecast to support working class amid widening wealth gap

Car crashes outside Taiwan leader’s office A black sport utility vehicle (SUV) crashed into a security barrier outside the office building of Taiwan leader Ma Ying-jeou early on Monday, his office spokesperson Ma Wei-kuo said. The 39-year-old driver, identified by the surname Lin, was taken away by police soon after the crash. Though the SUV sustained damage, the driver was not injured. The spokesperson said although the right of expression is to be respected, any type of violence should be condemned.

Aussie connection with China Australian businesses have been told how they can benefit from Australia’s new free trade agreements with China, Japan and South Korea at a special business forum held in. The inaugural Future Asia Business Luncheon was introduced by Sydney Mayor Clover Moore, and featured CEO of Austrade, Bruce Gosper, who detailed what the agreements mean for local businesses, and how they can take advantage of the new open door to Asian markets. More than 140 business and government representatives attended the event, which is part of Sydney’s annual Chinese New Year Festival.

HK’s composite interest rate down to 0.36 pct The Hong Kong Monetary Authority announced that the composite interest rate decreased by three basis points to 0.36 percent at the end of January 2015, from 0.39 percent at the end of December 2014.According to the authority, the decline in the composite interest rate, which is a measure of the average cost of funds of banks, in January reflected decreases in the weighted funding cost for both deposits and interbank funds.

China’s A shares raise 724.9 bln yuan in 2014 China’s A shares raised altogether 724.9 billion yuan (US$118 billion) in 2014, according to the country’s securities watchdog. The China Securities Regulatory Commission (CSRC) said that 47.1 billion yuan was raised through the initial public offering (IPO) of 94 enterprises, and 677.8 billion yuan from the refunding by 609 listed companies.

The CSRC said it continued reforms on phasing out the current approval-based method for IPOs and implementing a registration-based system.

H

ong Kong is expected to unveil measures to support lowincome families and boost the city’s labour market in its annual budget on Wednesday, although an uncertain economic outlook makes bold new initiatives unlikely.

The government has warned that the Chinese-controlled city risks

losing its competitive edge and must strive to maintain economic stability after more than two months of prodemocracy protests paralysed parts of the Asia financial centre.

Finance Secretary John Tsang is also expected to announce economic growth for the fourth quarter of last year, when tens of thousands of

democracy activists severely disrupted daily life before police cleared protest camps in December.

Hong Kong’s economic expansion was seen at 2.1 percent in the fourth quarter, according to six analysts polled by Reuters, slowing from annual growth of 2.7 percent in the third quarter.

Hong Kong is forecast to outline relief measures for the poor and elderly, take steps to provide more affordable housing, and offer incentives to encourage greater

China boosts Martin Air market debut The Jetpack maker struck a financing deal with China’s KuangChi Science Ltd worth A$50 million over the next two years

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ew Zealand-based Martin Aircraft Ltd soared as much as 63 percent in its Australian share market debut on Tuesday, after the jetpack maker raised A$27 million ($21 million) to help bring its personalised aircraft to market.

Martin, which struck a financing deal with China’s KuangChi Science Ltd worth A$50 million over the next two years, hopes to start delivering the $200,000 jetpacks initially to fire, police and search-and-rescue

services in the second half of 2016.

The investment from KuangChi, developer of a helium-powered, floating platform that transmits Wi-fi signals from the edge of space, will enable Martin to speed up its research and development capabilities.

“KuangChi Science will bring alien technology to the company ... It will enable us to make a lighter, stronger jetpack and increase its lift capability even more,” company spokesman Mike Tournier said.

Technically neither a jet nor a pack, the aircraft are powered by 200-horsepower petrol engines, with two ducted fans to provide lift and directional control. They can reach altitudes of 1,000 metres (3,280 feet) and fly for 30 minutes at speeds of up to 74 kmh (45 mph).

Martin Aircraft said it was currently taking orders for jetpacks for personal use to be delivered in 2017, and would form a joint venture with KuangChi based in Hong Kong to market the flying machines in China, where interest from wealthy individuals was growing.

“They’re not looking for it as a replacement for their cars, but they just want a jetpack; it’s the thing to have,” Tournier said.

Martin is also developing an unmanned version which can carry up to 120 kg (265 pounds) and could be used by the military, oil and gas, mining and farming industries, and help it break into the $98 billion market for unmanned aerial vehicles.

Martin’s shares opened at A$0.60 versus their A$0.40 issue price, and hit a high of A$0.65 before retreating. It last traded at A$0.43.

KuangChi Science subscribed to A$21 million worth of the shares on offer, making it Martin’s largest shareholder with a 37.8 percent stake.

The company has agreed to subscribe for a further A$29 million worth of convertible notes, which would give it about a 52 percent share of the company.

Reuters

Business Daily | 9

February 25, 2015

Greater China workforce participation, economists said.

Home prices have more than doubled since 2008 in one of the world’s most expensive property markets, putting a strain on business costs and worsening income gaps.

More than one million of the city’s seven million people live below the poverty line.

One-off measures could include a salaries tax rebate, a waiver on property rates, raising the tax allowance for parents from HK$70,000 to HK$80,000 per child and policies to support industries affected by the protests, according to local media.

Tsang is also expected to dish out sweeteners worth more than HK$20 billion in the budget, local media reported.

Hong Kong, which has a minimum wage of HK$32.50 (US$4) per hour, has handed out billions in previous years, although Wednesday’s budget is not expected to reveal any major initiatives, given the uncertain economic outlook.

The former British colony’s fortunes are closely tied to mainland China, where the economy grew at its slowest pace in 24 years in 2014 as property prices cooled and companies and local governments struggled under heavy debt burdens.

Tsang is expected to announce a budget surplus of at least HK$60 billion for the financial year ending March 31, according to accounting firms Deloitte and KPMG, handily beating the government’s forecast for a HK$9.1 billion surplus.

Reuters

Chinese New York of Africa plan ‘Extremely Ambitious’ The area located in a suburb northeast of Johannesburg in South Africa will become a hub for Chinese firms investing in sub-Saharan Africa

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hanghai Zendai Property Ltd.’s plan to develop a suburb northeast of Johannesburg into the “New York of Africa” is “extremely ambitious,” according to AECI Ltd., the chemicals company that sold the land last year.

Shanghai Zendai bought the 1,600-hectare (3,954-acre) plot for 1.06 billion rand ($91 million) from AECI last year and announced plans to build a financial center and 35,000 houses to rival Johannesburg’s current business hub of Sandton.

“The problem is a lot of it is agricultural land,” Mark Dytor, chief executive officer of the South African chemicals and explosives manufacturer, said by phone Tuesday.

“You have to open it up, you have to put in roads, sewage lines, water et cetera. Of course, you have to do that and fund it yourself.”

The area will become a hub for Chinese firms investing in subSaharan Africa, Shanghai Zendai Chairman Dai Zhikang said in November 2013. Modderfontein used to house an explosives factory

Johannesburg skyline

that opened in 1896 to support the mining industry that’s the source of a third of all gold the world has yet produced. The company will spend 80 billion rand on the development over the next 15 years, he said.

“In reality, they will use the lowhanging fruit that is available for office parks and residential housing,” Dytor said. “To build another Sandton in Modderfontein right now is extremely ambitious,” he said, referring to Africa’s biggest financial district in northern Johannesburg.

AECI declared a special dividend after the land sale. The payout of 3.75 rand a share is in addition to

an ordinary dividend of 2.25 rand a share for 2014, itself a 7 percent increase from 2013, AECI said in a statement on Tuesday.

Profit attributable to ordinary shareholders climbed 16 percent to 1.1 billion rand in 2014 from a year earlier. AECI’s sales from its chemicals and international operations mitigated a drop in income because of last year’s five-month platinum strike, Dytor said.

“That’s the diversification of the group,” he said. “We’ve purposely decided not to be in any one geography or any one mineral.”

Bloomberg

Bird saliva coffee seeks global appetite for China delicacy China consumes almost 90 percent of all bird’s nests, traditionally eaten in soup, creating an industry that last year recorded US$5 billion in sales and which executives expect to double by 2020

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rized in China for its alleged health benefits for hundreds of years, nests made from swiftlets’ saliva are being mixed into coffee and cereal as the Southeast Asian producers of the delicacy seek to broaden its appeal, and their profit margins.

The nests are among the world’s most expensive foods, selling for up to US$2,500 a kg and the swiftlets that weave them are indigenous to Indonesia, Malaysia, Thailand and Vietnam.

China consumes almost 90 percent of all bird’s nests, traditionally eaten in soup, creating an industry that last year recorded US$5 billion in sales and which executives expect to double by 2020.

Companies such as Malaysia’s Swiftlet Eco Park, one of the country’s largest developers of swiftlet houses, want bigger gains by expanding their product line and market beyond China, where importers can often dictate the price.

“Ask anybody in the industry where is your market and they’ll say China and Hong Kong. Everybody is going there,” said Group

Managing Director Loke Yeu Loong. “We are looking at new markets, but if I sell raw bird’s nest to Europe or India, they don’t even know how to cook it.”

Swiftlet Eco makes coffee, skin care, puddings and candies with bird’s nest. Loke declined to give specific sales figures but said the profit

margin on some of these products was 10 times more than the raw nests.

The company is also spending big on marketing bird’s nest as a health food in the Middle East, Europe and the United States and plans to raise about $30 million through an initial public offering and New York

listing in the third quarter of this year.

Southeast Asian swiftlets’ nests are particularly popular in the Lunar New Year festivities, which began in China last week, and are believed to be rich in nutrients that can help digestion, raise libido and improve the immune system.

Malaysia is the world’s largest producer of raw nests after Indonesia.

Lee Kong Heng, president of the Malaysian Federation of Bird’s Nest Traders Association, says marketing bird’s nest as a supplement would attract younger, wealthier and more health-conscious consumers worldwide.

Vietnam’s largest birds’ nest producer Yen Viet Joint Stock Co. is also keen to play up the benefits of the delicacy.

The company makes cereals and porridge and is investing into scientific research in a bid to increase global sales, said Chief Executive Dang Pham Minh Loan.

Malaysian bird’s nest producers are well placed to market to the majority Muslim Middle East because the nests are halal, or a food permissible under Islam, Swiftlet Eco Park’s Loke said.

With more research, he hopes birds nest will become a global phenomenon. “We can conduct research and prove the benefit of consuming bird’s nest scientifically,” he said.

Reuters

10 | Business Daily

February 25, 2015

Greater China

Animated Xi Jinping again an online hit Cartoons entitled “Is the ‘Mass Line’ Campaign for Real?”, “Is It Easier for the Public to Get Stuff Done with the Government?” and “Are Officials Really Scared?”

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hree online animations themed around China’s anti-corruption campaign and featuring President Xi Jinping have been a hit over the Spring Festival, with netizens delighting to what is apparently a relaxing of attitudes to depicting Chinese leaders by cartoon.

The animations, each about two minutes long, c o m par e t he situ ation before and after the ‘Mass Line’ campaign, the 20132014 initiative aimed at strengthening ties between CPC officials and the public.

They are entitled “Is the ‘Mass Line’ Campaign for Real?”, “Is It Easier for the Public to Get Stuff Done with the Government?” and “Are Officials Really Scared?”

The cartoon Xi eats and talks with members of the public, waves a flag bearing the characters of “Mass Line campaign”, and wields a stick to hit a tiger, a reference to his targeting of high-ranking corrupt officials.

The videos were uploaded to popular Chinese video streaming website Youku and were picked up by other major video websites as well as social media forums Weibo and WeChat the following

day. They have been viewed hundreds of thousands of times.

As with October 2013 animation “How Do They Become State Leaders?”, which was the first to feature Chinese leaders, the producer is mysterious.

The clips are credited to the unknown producer “Chaoyang Studio” and no other information is provided. “How Do They Become State Leaders?” was credited to “On the Road to Revival Studio”.

An Internet user with

the screen name “Glory and Dream” said that “we see in the clips the CPC central committee’s determination to fight corruption”.

Some netizens called for the swatting of “flies”, referring to lower-ranking corrupt officials.

Observers have speculated that the cartoons are designed to break the conventional mystery surrounding Chinese leaders and publicize government policies in a more attractive, easily-digestible way.

Xinhua

China becomes attractive market for Kenyan flower farmers

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hina has become a new attractive market for Kenyan flower farmers exploiting diversified avenues for retailing their produce.

Kenya leads in the export of cut flowers to the European Union (EU) with a 38 percent share beating Colombia and Israel, according statistics from to the Kenya Flower Council (KFC).

But as many investors continue to take interest in flower farming, exploiting new markets with huge potential for a sustainable supply is becoming an inevitable aspect in the industry.

And China has turned out to be a potential destination for high value roses.

“We are focusing more on Asia and China in particular because the EU market has so many players and the

rate of expansion in Kenya is higher than the growth of the EU market,” said Pigeon Blooms Managing Director Eliud Njenga, whose farm exports roses to China.

“Penetrating into the Chinese market would neutralize monopolization of prices thus benefiting flower farmers in the country in the long-term,” Njenga told Xinhua in an interview on Thursday in Naivasha, the country’s flower capital.

Creating an enabling environment for direct flights between the two countries largely boosts exportation of flowers from Kenya to China as Njenga argues.

In 2013, Kenya Airways, the East African nation’s carrier launched direct flights to China, a development, Njenga says would further enhance commercial relations between the two countries.

“I believe the direct flights will play a key role in growing the business between Kenya and China,” said Njenga.

Significantly, huge population in China and growing demand for quality roses provides Kenya with a viable customer base to capitalize on.

Overtime, the floriculture industry in the country currently worth more than 1 billion U.S. dollars has transformed with adventure of new technology and innovations of better performing flowers.

“The flower industry in Kenya is more than four decades and evolved over the years in the use of modern technology,” said the Pigeon Blooms Managing Director.

Since Kenya has gained popularity in high quality flower farming, breeders in rose flowers have set base in the country with the aim of enhancing

the sector’s productivity.

Njenga said premiums roses exported to China are grown in high altitude parts of Kenya and whose high quality provides a competitive leverage in the Asian market.

“All major players in the industry in terms of buyers, suppliers of machinery, green houses, and irrigation equipment among others also have their base in Kenya. This has made it easier for growers to access respective services,” said Njenga.

Kenya is famed for producing unique flowers, a factor attributed to its sustained market relations with the EU which puts great emphasis on quality production.

Despite the challenges of climatic changes, Kenya still holds a favorable environment for growing exceptional flowers as the industry stakeholder maintains.

Njenga said roses grown in the country have been proved to have the longest shelf life thus preserving their quality throughout the retailing period.

“Here in Kenya, flowers are also handled professionally after harvest.

This has ensured their high quality,” he said.

Even as Kenyan flower farmers seek to exploit a growing market in China, they face competition from others countries such as Colombia and Ecuador.

However, Njenga is convinced that the Kenyan flowers would be most preferred due to their fair retail price and long shelf life.

Reuters

Business Daily | 11

February 25, 2015

Asia

U.S. concerned over “made in Indonesia” smartphone law Less than a third of Indonesians own a smartphone, a much lower rate than China’s almost 80 percent, making the country a highly attractive market for Apple and rival Samsung

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he United States is pressing Indonesia to relax localcontent rules it believes will handicap efforts of tech firms such as Apple to expand into one of the world’s last big markets where demand for high-end smartphone has yet to really take off.

The regulation, which would come into force on Jan. 1, 2017, requires companies that sell smartphones and tablets in the fast-growing economy of 250 million people to produce 40 percent of their content locally.

The office of the U.S. Trade Representative (USTR), America’s chief trade negotiator, said it was raising the issue with the Indonesian authorities and in multinational forums.

Critics of the “made in Indonesia” rule, including an influential U.S. business group, say it could increase costs and restrict access to technology.

“The United States shares these concerns, and strongly supports ensuring that information and communications technology, which can be instrumental to economic development, be openly available in Indonesia,” said a USTR spokesman in Washington.

Less than a third of Indonesians own a smartphone, a much lower rate than China’s almost 80 percent, according to figures from research firm Canalys, making the country a highly attractive market for companies such as Apple Inc and South Korean rival Samsung Electronics Co Ltd. Samsung has already begun producing phones in Indonesia after opening a factory near Jakarta last year.

Apple’s supplier Foxconn, whose flagship listed unit is Hon Hai Precision Co Ltd, has been dragging its feet as it negotiates with the Indonesian government over a proposed investment that would include manufacturing smartphones.

Apple and Samsung did not immediately respond to requests to comment on the local-content rule.

Indonesia’s Communications Minister Rudiantara, who is working on the regulation that is due to be finalised by March, could not reached for comment.

Rudiantara told Reuters in January that the regulation would help Indonesia get a share of the roughly US$4 billion in annual domestic smartphone sales and support President Joko Widodo’s pledge to switch the country from an economy that mainly consumes products, to one that produces them.

The American Chamber of Commerce (AmCham) raised concerns about the rule in a Feb. 12 letter to Rudiantara.

“We fear that the approach taken in this draft regulation could inadvertently restrict access to new

technologies, raise the cost of ICT for Indonesian companies, stimulate grey and black markets for mobile phones, and carry other unintended consequences,” AmCham said in the letter, seen by Reuters.

Before last year Indonesia’s fledging electronics industry had no smartphone manufacturing.

“One big concern of many companies, and not just American companies, has been that Indonesia lacks the supply chain to produce high quality mobile phones,” Lin Neumann, the head of the Indonesian branch of AmCham, told Reuters.

The letter to Rudiantara also warned the rule could contravene international trade law governed by the World Trade Organisation (WTO).

“The policy of forced localization of manufacturing activities could have implications in terms of Indonesia’s WTO obligations,” the letter said.

The United States, which is currently pursuing four trade cases against Indonesia, has repeatedly raised concerns about Indonesia’s rules on local content in investment in the telecommunications sector at the WTO. Reuters

Singapore low-tax status intact even with increase for wealthy

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ingapore is raising the top marginal tax rate to 22 percent from 20 percent, the finance minister said in his budget speech on Monday, the first such increase in decades. Taking effect from 2017, the rate applies to those with a taxable income of more than S$320,000 ($235,000) a year, with smaller adjustments for others among the top 5% of earners. It will help fund more welfare spending and payouts for the elderly, the government said.

While unexpected, it’s unlikely that local bands will start doing energetic covers of the Beatles’ Taxman, as Singapore’s rate still remains among the lowest in the world. Here’s how

Singapore stacks up against some OECD countries: The increase in the top tax rate “is unlikely to trigger any immediate adverse impact on Singapore’s ability to attract top individuals to relocate, work and live in Singapore,” said Alan Lau, tax partner at KPMG in Singapore. “The country continues to be a strong draw for its clean image, strong security, good livability and most importantly, meritocratic system.”

Singapore doesn’t take its tax competitiveness lightly, Finance Minister Tharman Shanmugaratnam said. And that’s evident in its low corporate-tax rates, as well: Bloomberg

12 | Business Daily

February 25, 2015

Asia

Asia banks and investors challenge Europe’s lead in ship finance A third of the 150 shipping managers surveyed by HSH are already working with Asian banks on the financing of new or second-hand vessels

Asia’s ever-growing importance in shipping is strongly related to the high financing power of capital providers and the key position of Asian shipyards Ingmar Loges, global head of shipping for international clients at HSH

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sian banks and investors will step up funding to the maritime industry, posing a growing challenge for European lenders that have traditionally dominated ship finance, according to a survey by HSH Nordbank AG. “Asia’s ever-growing importance in shipping is strongly related to the high financing power of capital providers and the key position of Asian shipyards,” Ingmar Loges, global head of shipping for international clients at HSH, said in a statement on Tuesday.

German maritime lenders,

including market leader HSH, are predominantly invested in container shipping. That market is battling a seventh year of overcapacity after a boom in ship deliveries coincided with the financial crisis.

Saddled with billions of euros in bad debt, lenders including Commerzbank AG and Norddeutsche Landesbank curbed or halted lending to the industry, leaving room for new players to grow in ship finance.

China’s state-owned banks such as Industrial & Commercial Bank of China Ltd., the nation’s largest

lender, on the other hand “are as active as never before” in ship financing, Klaus Stoltenberg, global head of shipping at Deutsche Bank AG, said at a conference last May. A third of the 150 shipping managers surveyed by HSH are already working with Asian banks on the financing of new or second-hand vessels. For about one in six companies, Asian strategic investors are the biggest financiers, according to the study. Hamburg, Germany-based HSH didn’t provide comparative figures.

Bank debt accounted for $513

billion, or 44 percent of capital allocated to the world fleet and order book at the start of this year, according to fund manager Tufton Oceanic Ltd. Private-equity firms stood at $180 billion or 15 percent of the total.

Some 80 percent of mostly European shipping firms surveyed expect Asian banks and investors to expand their market share. Twothirds of respondents plan to open a base in Asia, if they haven’t already, to be closer to investors in that region, according to the study.

Bloomberg

Japan lower house approves reflationist Harada for BOJ board

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he lower house of parliament gave approval yesterday for an advocate of aggressive monetary easing to join the Bank of Japan’s divided policy board, in a move regarded as supportive of Governor Haruhiko Kuroda’s push for radical stimulus.

Yutaka Harada, a 64-yearold Waseda University professor, will replace Ryuzo Miyao, also an academic, whose five-year term ends on March 25.

The government nominee is expected to receive the assent of the upper house on Wednesday. The ruling coalition holds a solid majority in both chambers.

Opposition parties voted against the nomination, arguing that radical monetary stimulus could cause excessive weakening in the yen,

which would drive up import costs for resource-poor Japan and hurt households’ purchasing power.

Miyao swung the board narrowly in favour of October’s surprise monetary easing that was decided by a 5-4 vote. The close vote has given greater significance to the board’s composition, as it suggested the difficulty Kuroda might face should he want to ease further.

Harada, who wrote a book with BOJ deputy governor Kikuo Iwata on how bold monetary easing can beat deflation, may give Kuroda a stronger grip on the divided board, analysts say.

However, Harada told Reuters in January that the BOJ does not necessarily need to persist with its 2 percent inflation target, a view that may complicate debate within

KEY POINTS Harada is seen supportive of BOJ Kuroda’s radical stimulus Upper house expected to follow suit Opposition wary of stimulus impact on excess yen weakening

the board.

The focus of monetary policy should be on stimulating the economy rather than achieving an inflation target, which should be considered only as a means for reflating growth, Harada said.

“I think it’s okay even if the BOJ doesn’t achieve 2 percent inflation in fiscal 2015. It’s important, instead, to guide policy so that the economy can continue to grow around 2 percent.”

For now, Harada’s appointment is unlikely to trigger an immediate shift in policy.

Last week Kuroda said that he saw no current need to expand monetary stimulus, but that the bank would determinedly ease policy further if his inflation plans were disrupted by risks.

Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, 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 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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Business Daily | 13

February 25, 2015

Asia 930 flights delayed during CNY in Vietnam

Bangchak Petroleum to invest over US$600 million

Around 928 flights carried out by registered airlines in Vietnam were delayed during the Lunar New Year holiday, accounting for 22.1 percent of total flights, according to the Civil Aviation Authority of Vietnam (CAAV).

Among those, the national flag carrier Vietnam Airlines topped the rate of delayed flights with 23.8 percent. From Feb. 15 to last Sunday, four registered airlines in Vietnam including Vietnam Airlines, VietJetAir, Jetstar Pacific Airlines and Vietnam Air Services Company (VASCO) carried out 4, 203 flights, said CAAV in its report to the Ministry of Transport.

Cambodia attracts US$4 billion Cambodia attracted investment projects with a total value of 4 billion U.S. dollars last year, Sok Chenda Sophea, secretary general of the Council for the Development of Cambodia. “Domestic investors topped the chart among all investors in Cambodia last year, followed by Chinese, Malaysian and Japanese investors,” he told reporters after a meeting with lawmakers in the commission on investment. He said investment projects were focused on garment and footwear factories, electronic industry, shopping malls, tourism, and agriculture.

Indian police arrest Defence Ministry staff Indian police have arrested a casual worker employed at the Ministry of Defence for helping some thieves steal confidential documents from government ministries, said local media.The man was allegedly involved in providing forged identity card to a key accused in a Petroleum Ministry leaks case, while police maintained that no sensitive documents were leaked or stolen from the Defence Ministry. With this, 14 people have been arrested in the corporate espionage case related to the Petroleum Ministry, while one person was arrested Monday on charge of leaking confidential documents from coal and power ministries.

Sri Lanka Central Bank maintains rates Sri Lanka’s Central Bank on Tuesday decided to maintain current policy interest rates on expectations of reduced inflation, the authority said in a statement. Accordingly, the Standing Deposit Facility Rate (Repurchase Rate) would remain at 6.50 percent while the Standing Lending Facility Rate (Reverse repurchase Rate) remains at 8.00 percent. Inflation increased to 3.2 percent in January 2015 from 2.1 percent in December 2014 while annual average inflation declined marginally to 3.2 percent from 3.3 percent recorded in the previous month.

Myanmar and S. Korea to strengthen ties Myanmar and South Korea will cooperate in the development of economic and infrastructure, land and fishery sectors, Myanmar’s media reported. The international conference on building a knowledge network between Myanmar and South Korea was held with the aim of promoting their relations and seeking new business opportunities in Myanmar on Monday, said the Global New Light of Myanmar.

B

angchak Petroleum PCL will invest 20 billion baht ($610 million), mainly on exploration and production, in 2015 and 2016 as part of a plan to spend 90 billion baht in the next six years to boost its business, the Thai oil refiner said.

About 60 percent of the two-year budget will be spent on upstream exploration, with the rest used in the firm’s renewable business, newly-appointed president Chaiwat Kovavisarach told reporters on Tuesday.

Bangchak, like other oil refiners, has been hit by a plunge in oil prices, further diversifying into biofuel and solar power to minimise risk from the refinery sector.

It also acquired about 80 percent of Australian oil and gas explorer Nido Petroleum Ltd in 2013 to secure energy supplies.

Bangchak is keen to join bidding for petroleum concessions in Thailand and is in talks to buy petroleum

fields in the Gulf of Thailand and South China Sea that are expected to conclude later this year, Chaiwat said.

The firm plans to raise its refining capacity to 105,000 barrels per day (bpd) in 2015 with an estimated

KEY POINTS To spend 60 pct of 20 bln baht budget on exploration, production Plans to invest total 90 bln baht in next 6 years To raise refining capacity to 105,000 bpd in 2015

average refining margin at about $6 per barrel to $7 per barrel.

The company’s 120,000 bpd refinery had an average crude run of 86,480 bpd in 2014, down from 99,340 in 2013 due to annual maintenance, it said.

Meanwhile, it plans to raise the capacity of its renewable power plants by 300 megawatts over the next two years, while more than doubling its biodiesel production capacity to 810,000 litres per day, it said in a statement.

The company expects core earnings before interest, tax, depreciation and amortisation (EBITDA) of 10.4 billion baht in 2015, rising to 25 billion baht in 2020, the statement said.

Its EBITDA stood at 5.16 billion baht in 2014, down 45 percent from the year before as its refinery business was hit by the weak oil prices. But EBITDA from its solar power business rose 85 percent.

Reuters

Philippines: no need to sync with Fed “It does not have to be in sync with the Fed, neither should it be in the same magnitude as any change in the Fed,” Governor Amando Tetangco said in an interview

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he Philippine central bank can afford to leave its policy settings on hold for most of this year, and the timing and magnitude of any interest rate hike would not be determined by the U.S. Federal Reserve’s actions, its governor said.

The Philippine central bank was tightening policy last year as inflation picked up, and its tone remained hawkish even as many countries around the world eased policy -including Indonesia last week.

Economists in a poll in February predicted the central bank would resume raising interest rates as early as in the second half of the year, or in 2016, depending on when the Fed starts raising U.S. levels.

“It does not have to be in sync with the Fed, neither should it be in the same magnitude as any change in the Fed,” Governor Amando Tetangco told Reuters in an interview at the Bangko Sentral ng Pilipinas in Manila,

adding the central bank will consider domestic conditions and inflation trends.

“We believe the stance of monetary policy remains appropriate right now,” said the central bank chief.

Tetangco said while the central bank considers foreign exchange rate movements when it reviews monetary policy, the peso’s level was not the primary driver for a policy action.

The central bank kept its benchmark interest rate steady at 4.0 percent for the third straight meeting on Feb. 12, with inflation cooling and growth remaining strong.

It next meets on March 26.

With the economy rapidly expanding - the Philippines was the second fastest growing Asian economy behind China last year and falling energy and commodity prices increasing consumers’ spending power, deflation is not considered a threat.

This year, the Southeast Asian nation is aiming for growth of 7-8 percent backed by sustained strong consumption and a rebound in public spending, while China’s growth is expected to slow to around 7 percent.

Inflation is forecast to fall between 2-4 percent this year from 4.1 percent in 2014.

Tetangco said there were no signs of an asset bubble in the country’s rapidly expanding property market, noting that while banks’ property exposure continued to rise, their nonperforming real estate loans were declining.

“We are not thinking of adding any new rule or tighter rules,” Tetangco said, referring to regulations governing banks’ property assets.

He said latest results show universal and commercial banks were in a position “to withstand plausible shocks in their real estate exposure.”

Reuters

14 | Business Daily

February 25, 2015

International

European Gas Prices Rise as Russia Limits Supplies to Ukraine Russian supplies meet about a third of European gas usage, with about 40 percent flowing through Soviet-era pipelines crossing Ukraine

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uropean natural gas prices climbed after Ukraine’s state-owned gas company said Russia violated a European Unionbrokered accord by limiting supplies to less than half the requested level.

U.K. front-month gas, a European benchmark, jumped as much as 2.6 percent on the ICE Futures Europe exchange in London, the most since Feb. 12. NAK Naftogaz Ukrainy asked Russia’s OAO Gazprom to explain why only 47 million cubic meters (1.7 billion cubic feet) of gas were delivered Feb. 22 against the 114 million requested, the Kiev-based company said Monday.

Russian supplies meet about a third of European gas usage, with about 40 percent flowing through Soviet-era pipelines crossing Ukraine.

The yearlong conflict between Russia and Ukraine shows no sign of ending as fighting persists in eastern Ukraine, defying a cease-fire agreement this month.

Gas contracts for longerdated deliveries were “supported by gathering uncertainty over European gas supplies as Naftogaz reports a failing in supply of prepaid gas from its Russian equivalent,” Dorian Lucas, an analyst at Inenco Group Ltd., said by e-mail Tuesday.

“This comes only days after

Moscow announced it was supplying areas of rebel-held eastern Ukraine.”

U.K. next-month gas rose as high as 49.85 pence a therm (US$7.70 a million British thermal units) on ICE and was at 49.7 pence in London. The volume of all futures traded was more than three times the 100-day average for the time of day.

The Dutch contract for next month climbed as much as 3.1 percent to 22.48 euros (US$25.42) a megawatt-hour

on the Title Transfer Facility hub, according to broker data compiled by Bloomberg.

Two days Ukraine’s prepayment for gas only covers two days of supplies if Gazprom delivers the requested 114 million cubic meters, Alexey Miller, chief executive officer of the Russian state-run gas company, said Tuesday in an e-mailed statement. Gazprom will have to stop shipments

to Ukraine when advance payment runs out.

Russia cut gas flows to Ukraine for six months in June after a dispute over unpaid bills.

A temporary deal brokered by the EU allowed supplies to be restored for the winter. There’s been little progress on a new deal for summer deliveries before the current accord expires March 31.

Pricing disputes disrupted Russian flows to Europe amid freezing weather in 2006 and 2009. Gazprom has since built

World Cup committee recommends shorter Qatar tournament Sheikh Salman bin Ebrahim Al Khalifa, the chairman of the committee, said in the statement it was “a challenging task” to find a compromise

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committee appointed by soccer’s governing body recommended that the 2022 World Cup be shortened and held in November and December to avoid the highest temperatures in host nation Qatar.

The FIFA panel said the period was “the most viable” for the World Cup, according to a statement on the soccer ruling body’s website.

Normally, the World Cup is held in June and July, when temperatures in Qatar can rise above 50 degrees Celsius (122 degrees Fahrenheit).

The committee said there should be fewer competition days and the Confederations Cup, a warm-up tournament planned for 2021, should be held in another country. FIFA’s executive committee will discuss the task force’s proposals on March 19 and 20.

Sheikh Salman bin Ebrahim Al Khalifa, the chairman of the committee, said in the statement it

was “a challenging task” to find a compromise, although it believed it had found a solution that could work for all parties.

The proposed date change would disrupt the English Premier League, where dozens of national team players are based, and other

a pipeline under the Baltic Sea to Germany to bypass Ukraine, reducing risk of cuts for European consumers.

Falling liquefied natural gas prices in Asia have also boosted the availability of the chilled fuel for Europe. Four LNG tankers are expected to arrive in the U.K. through March 3 and three are due in Belgium’s Zeebrugge by March 8, according to port authority and ship-tracking data on Bloomberg.

Bloomberg

European championships. European clubs had suggested holding the Qatar tournament in May. The temperatures from May to September are “consistently hot,” according to the committee.

‘Health Risk’ FIFA executives picked Qatar as host ahead of Australia, Japan and South Korea and the U.S., even after an evaluation report by the ruling body’s officials that said it was a “potential health risk” for players for matches to be held there in June and July.

FIFA’s ethics committee said in November there were indications of “potential illegal or irregular conduct” in the awarding of the 2018 and 2022 World Cups to Russia and Qatar, respectively but not enough evidence of wrongdoing to hold the 2010 vote again.

Qatar plans to spend more than US$200 billion on infrastructure, including a rail and metro network and US$9 billion on stadiums.

Organizers have said temperatures could be mitigated by air conditioning systems in stadiums, although they are willing to change the dates.

The FIFA Club World Cup, an annual tournament involving continental champions, could be switched to Qatar in November and December 2021 to serve as a test event, the panel said in the statement.

Bloomberg

Business Daily | 15

February 25, 2015

Opinion Business

wires

Why public investment?

Leading reports from Asia’s best business newspapers Michael Spence

The Phnom Pehn Post

Nobel laureate in economics, Professor of Economics at New York University’s Stern School of Business

Cambodia’s beaches and temples saw an increase in local and foreign tourists during the three-day Lunar New Year celebrations, according to figures released by provincial officials.

Siem Reap, home to the world-renowned Angkor Archaeological Park and a major tourist destination, received around 69,200 visitors, an increase of 25 per cent compared to the same period last year, according to Chheuy Chhorn, deputy director of Siem Reap’s Tourism Department. Of the tourists visiting the famous temples of Siem Reap, foreign visitors accounted for more than 27,200, an increase of 9 per cent compared to last year. Chhorn said Chinese tourists made up more than 60 per cent of these tourists, followed by Vietnamese and then Western visitors.

The Times of India India’s largest online retailer Flipkart has undertaken a massive reorganization at a time when the e-tailer is looking to prune its losses and make itself IPO ready. Under the new structure, Flipkart will be split into three verticals to bring a sharper focus on its strategy and help the company tap its next phase of growth. While the Bengaluru-based company’s co-founder and CEO Sachin Bansal would continue to spearhead the e-commerce biggie at the top, he will also take on an additional role of pushing all the new initiatives at the firm. Sachin, who co-founded Flipkart with Binny Bansal (they are not related) in 2007, will reduce the scope of his day-to-day operational involvement in the company, sources privy to the development said.

The Japan News Major electric appliance makers are focusing on security for the 2020 Tokyo Olympic and Paralympic Games, applying their advanced sensor and information technologies to the development of security and anticrime devices as demand for both has increased recently following a series of terrorist incidents. Panasonic Corp. has unveiled an entrance gate system with enhanced security functions for the athletes village.

The gate opens after authenticating entrants by comparing data in their ID cards when held over a reader with head shots registered beforehand. This function will prevent unauthorized people from entering the village even if they steal ID cards, the company said.

The Korea Herald South Koreans in their 20s have been cutting back on buying cars over the past four years as they cope with tough job-searching amid adverse business conditions, industry data showed Tuesday. Last year, a total of 109,671 vehicles were purchased by people in their 20s here, down 1.7 percent from the 111,558 units in 2013, according to the data by the Korea Automobile Manufacturers Association. The figure has been on a downtrend since 2011 when the number of newly registered cars to owners in the cited age frame dropped 6.2 percent on-year, the KAMA data showed. Overall, the number plummeted 25.9 percent in the four-year period until last year.

T

he world is facing the prospect of an extended period of weak economic growth. But risk is not fate: The best way to avoid such an outcome is to figure out how to channel large pools of savings into productivity-enhancing public-sector investment.

Productivity gains are vital to long-term growth, because they typically translate into higher incomes, in turn boosting demand. That process takes time, of course – especially if, say, the initial recipients of increased income already have a high savings rate. But, with ample investment in the right areas, productivity growth can be sustained.

The danger lies in debt-fueled investment that shifts future demand to the present, without stimulating productivity growth.

This approach inevitably leads to a growth slowdown, possibly even triggering a financial crisis like the one that recently shook the United States and Europe.

Such crises cause major negative demand shocks, as excess debt and falling asset prices damage balance sheets, which then require increased savings to heal – a combination that is lethal to growth. If the crisis occurs in a systemically important economy – such as the US or Europe (emerging economies’ two largest external markets) – the result is a global shortage of aggregate demand.

And, indeed, severe demand constraints are a key feature of today’s global economic environment. Though the US is finally emerging from an extended period in which potential output exceeded demand, high unemployment continues to suppress

demand in Europe. One of the main casualties is the tradable sector in China, where domestic demand remains inadequate to cover the shortfall and prevent a slowdown in GDP growth.

Another notable trend is that individual economies are recovering from the recent demand shocks at varying rates, with the more flexible and dynamic economies of the US and China performing better than their counterparts in the advanced and emerging worlds. Excessive regulation of Japan’s non-tradable sector has constrained GDP growth for years, while structural rigidities in Europe’s economies impede adaptation to technological advances and global market forces.

Reforms aimed at increasing an economy’s flexibility are always hard – and even more so at a time of weak growth – because they require eliminating protections for vested interests in the short term for the sake of greater long-term prosperity. Given this, finding ways to boost demand is key to facilitating structural reform in the relevant economies.

That brings us to the third factor behind the global economy’s anemic performance: underinvestment, particularly by the public sector. In the US, infrastructure investment remains suboptimal, and investment in the economy’s knowledge and technology base is declining, partly because the pressure to remain ahead in these areas has waned since the Cold War ended. Europe, for its part, is constrained by excessive public debt and weak fiscal positions.

In the emerging world, India and Brazil are just two exam-

ples of economies where inadequate investment has kept growth below potential (though that may be changing in India).

The notable exception is China, which has maintained high (and occasionally perhaps excessive) levels of public investment throughout the post-crisis period.

Properly targeted public investment can do much to boost economic performance, generating aggregate demand quickly, fueling productivity growth by improving human capital, encouraging technological innovation, and spurring private-sector investment by increasing returns. Though public investment cannot fix a large demand shortfall overnight, it can accelerate the recovery and establish more sustainable growth patterns.

The problem is that unconventional monetary policies in some major economies have created a low-yield environment, leaving investors somewhat desperate for high-yield options. Many pension funds are underwater, because the returns required to meet their longer-term liabilities seem unattainable. Meanwhile, capital is accumulating on highnet-worth balance sheets and in sovereign-wealth funds.

Though monetary stimulus is important to facilitate deleveraging, prevent financial-system dysfunction, and bolster investor confidence, it cannot place an economy on a sustainable growth path alone – a point that central bankers themselves have repeatedly emphasized.

Structural reforms, together with increased investment, are also needed.

Given the extent to which

insufficient demand is constraining growth, investment should come first. Faced with tight fiscal (and political) constraints, policymakers should abandon the flawed notion that investments with broad – and, to some extent, non-appropriable – public benefits must be financed entirely with public funds. Instead, they should establish intermediation channels for long-term financing.

At the same time, this approach means that policymakers must find ways to ensure that public investments provide returns for private investors. Fortunately, there are existing models, such as those applied to ports, roads, and rail systems, as well as the royalties system for intellectual property.

Such efforts should not be constrained by national borders. Given that roughly onethird of output in advanced economies is tradable – a share that will only increase, as technological advances enable more services to be traded – the benefits of a program to channel savings into public investment would spill over to other economies.

That is why the G-20 should work to encourage public investment within member countries, while international financial institutions, development banks, and national governments should seek to channel private capital toward public investment, with appropriate returns. With such an approach, the global economy’s “new normal” could shift from its current mediocre trajectory to one of strong and sustainable growth.

Project Syndicate

16 | Business Daily

February 25, 2015

Closing Fishery survey in South China Sea completed

Land for property falls 25 pct

China has completed a survey of fishery resources in the middle and southern regions of the South China Sea after two years of research, said a Chinese expert. The survey showed the area around the Nansha Islands has fishery reserves of about 1.8 million tonnes, with about half a million tonnes available for fishing, said Yang Beisheng, deputy head of the South China Sea Fisheries Research Institute under the Chinese Academy of Fishery Sciences. More than 20 fish species in the Nansha Islands maritime area are rare or have a high economic value, according to the investigation.

The area of land used in new property developments in China fell by a quarter last year compared with 2013, state news agency Xinhua said, highlighting the extent of the country’s housing downturn. Land allocated to new real estate developments dropped 25.5 percent last year to 151,000 hectares from 2013, Xinhua said, citing data from the Ministry of Land and Resources.

Squeezed by weakening demand and a glut of unsold homes, China’s property market started softening last year. A sluggish housing sector, which accounts for some 15 percent of China’s annual economic output, was one of the biggest drags on the Chinese economy last year.

Greece submits economic plan to euro area creditors

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reece’s month-old government will find out whether a package of new economic measures is enough to win more funding from the euro region to keep the country solvent.

The list of commitments, submitted minutes before the midnight deadline on Monday, includes maintaining current state- asset sales, consolidating pension funds to reduce costs and revamping tax collection and administration, according to draft obtained by Bloomberg News. The European Commission, the European Central Bank and International Monetary Fund, are assessing the list before it goes to finance ministers.

They “will provide us with a first view as to whether these are sufficiently

comprehensive to be a valid starting point for the successful conclusion of the review,” Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, told a European Parliament committee in Brussels before a conference call to discuss the list.

Based on the provisional agreement between Greece and its official creditors on Feb. 20, the approval of the list is a condition for extending the availability of bailout funds for another four months. The current program, which has been keeping Europe’s most indebted state afloat since 2010, was scheduled to expire at the end of this month.

“It ticks a few important boxes

particularly regarding pension reform, fiscally neutral reforms and independence of the public revenue secretariat,” Dimitris Drakopoulos, an analyst at Nomura, said by e-mail. “That said, the problem in our view was always going to be implementation of specific reforms and the ability of this government to close a review.”

Finance Minister Yanis Varoufakis sent the draft measures, which also include legislation on non-performing bank loans and details on the labor market, to the institutions and Dijsselbloem, who said it arrived “just in time.”

Approval of the Greek plans would offer a short reprieve for the country, which risks defaulting on some of

“Tigers” are very well hidden, Banks scrutinized over precious metals says graft watchdog

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its liabilities as early as next month without further financing from the creditor institutions.

At the same time, Prime Minister Alexis Tsipras must try to avoid defections within his anti-austerity Syriza party after it won power on pledges to take back control of Greece’s finances.

“Greece in my mind is part of the international grid and if you want to remain in the grid then ultimately you have to conform,” Larry Fink, chief executive officer of BlackRock Inc., the world’s largest money manager, said in an interview with Charlie Rose aired this week. “It looks like a win with the new government, but the Europeans can say they held steadfast. This in most circumstances will work out.”

The Greek cabinet will convene on Tuesday after the document goes to finance ministers.

The European Commission considers the list comprehensive enough to start to successfully conclude the review, according to an official who asked not to be named because the talks are continuing. It was encouraged by the commitment to combat tax evasion and corruption, the official said.

If approved by the finance ministers, the package needs to be put to national parliaments for formal consent. Lawmakers and officials in Germany, Finland and the Netherlands signaled they won’t stand in the way once their governments grant consent for the aid extension.

“This compromise deal, given that it will be finally approved and validated by the national parliaments in the next few days, is a positive development for Greece and the capital markets as it removes the imminent threat of ECB pulling the plug on the Greek banks,” Vangelis Karanikas, head of research at Athens-based Euroxx Securities wrote in a note to clients.

Bloomberg

Hitachi to Acquire Finmeccanica Rail Unit

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he cases of Zhou Yongkang and Xu Caihou -- disgraced former senior officials -- demonstrate that some corrupt officials “are very well hidden” within the Communist Party of China (CPC), the Party’s graft watchdog cited a bylined commentary on its website on Monday.

According to the commentary quoted by the CPC Central Commission for Discipline Inspection (CCDI), these hidden tigers (high-ranking officials) tend to form cliques and factions, seeking not only money but also political conspiracy, gravely threatening the Party leadership and solidarity.”The tigers we aim at nowadays are deceitful, and tend to lay low,” the article went on, warning that corrupt officials find their ways to survive the sweeping antigraft campaign. The commentary argued that the fight against corruption must be carried on, in light of the daunting challenges, refuting opinions that “the anti-graft campaign is just a gust of wind”.”Some call on an end to the combat against graft and work style revamp, fearing the campaign would go too far if it continues,” the article said, adding “such arguments must be vehemently objected.”

he U.S. Department of Justice (DoJ) and the Commodity Futures Trading Commission are investigating at least 10 major banks for possible rigging of precious-metals markets, the Wall Street Journal reported, citing people close to the inquiries.

DoJ prosecutors are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the CFTC has opened a civil investigation, the newspaper said. The banks are HSBC Holdings Plc, Bank of Nova Scotia, Barclays Plc, Credit Suisse Group AG , Deutsche Bank AG, Goldman Sachs Group Inc , JPMorgan Chase & Co, Societe Generale, Standard Bank Group Ltd and UBS Group AG, the Journal said.

Standard Bank spokesman Erik Larsen declined to comment on the report. The other banks, the DoJ and CFTC did not immediately respond to requests for comment.The CFTC issued a subpoena to HSBC Bank USA in January seeking documents related to the bank’s precious metals trading operations, HSBC said. The DoJ also issued a request to HSBC Holdings in November seeking documents related to a criminal antitrust investigation it is conducting in relation to precious metals, HSBC said.

Xinhua

Reuters

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itachi Ltd. agreed to buy Finmeccanica SpA’s rail business and a signals affiliate in its largest overseas acquisition as it seeks growth abroad.

The Japanese industrial group, which makes nuclear power equipment, rail systems and industrial machinery, will pay 773 million euros (US$874 million) for Finmecannica’s stake in Ansaldo STS SpA and 36 million euros for AnsaldoBreda SpA, the companies said in a joint statement. The deal values Ansaldo STS at 1.93 billion euros, about 9.2 percent more than its market value at the Borsa Italiana close yesterday.

Hitachi has sought to expand overseas as most of Japan’s nuclear power plants remain shut after the 2011 earthquake and tsunami led to radiation leaks at a facility on the northeast coast. Finmeccanica Chief Executive Officer Mauro Moretti is selling the rail unit to focus on faster-growing helicopter, aerospace and defense-electronics businesses and is cutting debt at the company, which is owned 32 percent by the state.

Rome-based Finmeccanica had said in November it received an offer from the Japanese group.

Bloomberg