MOP 6.00 Closing editor: Joanne Kuai Number 749 Monday March 16, 2015
Publisher: Paulo A. Azevedo
Macau in recession
M
Year III
acau is in technical recession. The territory’s Gross Domestic Product has registered two consecutive quarterly declines. With gaming revenues dropping for nine consecutive months, GDP plunged again in Q4 2014 by 17.2 pct. Casino finances typically generate more than 80pct of all government revenues. And represents more than half of the economy. Fallout from the current gaming crisis is proving to be much more damaging than in 2009 PAGE
Becalmed real estate
3
Fiscal surplus slumps 30 pct in February
PAGE 2 Suncity in talks with Vietnamese Government for casino investment
New residential mortgage loans approved in January totalled MOP3.8 billion. Compared to MOP3.7 billion in December 2014. Although a slight increase (2.7 pct) on the previous month, it posted a Y-o-Y decrease of 12.5 pct. New loans for commercial property reached only MOP4.8 billion
PAGE 4 Macau tertiary education attracts Mainland undergraduates
PAGE 5 Macau boom-bust comes full circle under Xi as US$111 bln evaporates
PAGE 2
PAGE 10
HSI - Movers
Best foot forward
March 13
Name
That’s it for now. The National People’s Congress wound down yesterday amid a battery of messages strengthening the tactics for the current year. Premier Li Keqiang said the central gov’t is ready to manoeuvre if the stalling economy puts jobs at risk
Recycled water in the pipeline Many plans in the offing. Macao Water Supply Co. Ltd. will start construction on a new water treatment plant in Seac Pai Van by year-end. Anticipating much greater demand. ‘Production’ will be ready by 2017 when the first phase of the project is completed. Meanwhile, the gov’t is preparing for recycled water in the SAR after 2016. Originally, a water recycling plant in Coloane was to be up and running this year
PAGE 11
PAGEs 6 & 7
%Day
China Shenhua Energy
2.97
Bank of China Ltd
2.11
Bank of Communicatio
2.04
China Mengniu Dairy
1.99
Tencent Holdings Ltd
1.37
Sino Land Co Ltd
-1.69
China Resources Powe
-2.04
Galaxy Entertainment
-2.29
Li & Fung Ltd
-2.58
Lenovo Group Ltd
-4.20
Source: Bloomberg
www.macaubusinessdaily.com
INTERVIEW
I SSN 2226-8294
Portuguese portions Home from home. That’s the philosophy, and so far so good. Portuguese beerhouse chain Portugália has got off to a flying start in Taipa. More restaurants are on the horizon in Macau. And the company is looking at Hong Kong and China down the road. But one step at a time, says Bruno Castro, Executive Manager for the territory. He tells Business Daily that the focus right now is on providing authentic Portuguese cuisine and contact with Portuguese culture. For Asians as well as Portuguese patrons
PAGES 8 & 9
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2 | Business Daily
March 16, 2015
Macau MGM Macau increases salaries 5 to 8 per cent The employees of MGM China working in MGM Macau are to receive an increase in March ranging from 5 to 8 per cent, the company board announced last week. According to the information released, non-management workers whose monthly salary is or less than MOP12,000 will have a raise of MOP700 per month, which means a 6 to 8 per cent increase. For staff earning more than MOP12,000 the increase will be 5 per cent. “MGM China is committed to providing a competitive level of benefits and compensation to our team members”, Grant Bowie, Chief Executive Officer & Executive Director of MGM China, said.
Residential mortgage loans up 3 pct in January Amounting to MOP3.8 billion (US$475,000), they also represent a drop of 12.5 per cent year-on-year Kam Leong
kamleong@macaubusinessdaily.com
N
ew residential mortgage loans increased by 2.7 per cent month-on-month during the first month of this year, while new commercial real estate loans dived 24 per cent, compared to December 2014, the latest official data released last Friday by the Monetary Authority of Macau (AMCM) reveals. According to AMCM, the total amount of new residential mortgage loans approved in January totalled MOP3.8 billion, compared to MOP3.7 billion in December 2014. Although it represents a sight increase compared to the previous month, it also posted a year-on-year
decrease of 12.5 per cent. In addition, more than 96.6 per cent of the total value of mortgage loans was extended to Macau residents, increasing 4.2 per cent month-on-month in terms of amount, while those to non-residents dropped 27.2 per cent month-on-month. In terms of type of residential flat, only some MOP337 million in mortgage loans were granted to purchasers to buy uncompleted units, sharply down 57.3 per cent monthon-month, or 24 per cent compared to the same period in 2014. Meanwhile, new loans for commercial property reached
only some MOP4.8 billion, compared to the MOP6.3 billion in December 2014. It also represents a year-onyear drop of 13.1 per cent. Moreover, the total amounts that local residents received from the new loans dropped 21.6 per cent month-onmonth, while those of nonresidents fell 40.4 per cent compared to the previous month. On the other hand, there were more receivers of loans for residential flats who did not pay their debts on time in January. According to AMCM, the outstanding value of residents’ mortgage loans reached 154.4 billion, which is an increase of 27.6
per cent year-on-year, or a slight growth of 1 per cent month-on-month. The local residents component made up 94.1 per cent of the total outstanding amount. In addition, the outstanding amount for such residential mortgage loans to residents and non-residents rose by 1.1 per cent and 0.3 per cent month-on-month, respectively. Concurrently, the outstanding amount of loans for commercial real estate increased 3.6 per cent from end-December 2014 and was up 43.2 per cent from endJanuary 2014 to MOP126.5 billion. Residents accounted for 90.3% of the loans.
Compared to one month earlier, the outstanding amount of such loans to residents and non-residents grew 3.7 per cent and 2.9 per cent, respectively. At the end of January 2015, the delinquency ratio for new residential mortgage loans approved remained virtually unchanged from a month ago at 0.07 per cent, increasing 0.02 percentage points from the same period in 2014. Meanwhile, the ratio for new commercial real state loans remained unchanged from a month ago at 0.05 per cent, or up 0.02 percentage points from endJanuary 2014, according to AMCM.
Fiscal surplus slumps 30 pct in February The fiscal surplus for the first two months of the year plunged to MOP15.76 billion (US$1.97 billion) from MOP22.4 billion just one year ago. Meanwhile, the government’s expenditure in the two months slightly decreased by 2.4 per cent year-on-year
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he city’s fiscal surplus plunged in the first two months of this year, amounting to only MOP15.76 billion, following a continuous decline in gaming taxes reaching government coffers. The latest update on the central account by the Financial Services Bureau (DSF) reveals that the fiscal surplus that the Special Administrative Region registered at the end of February had dropped by 29.8 per cent year-on-year compared to the MOP22.4 billion that Macau generated during the first two months in 2013. The data also indicates that the government is actually generating
less fiscal surplus in February. In January, the fiscal surplus of Macau stood at some MOP8.3 billion, suggesting that the fiscal surplus gained last month was only some MOP7.4 billion, representing a year-on-year drop of 24 per cent, or month-on-month drop of 10.3 per cent. Nevertheless, the MOP7.4 billion fiscal surplus still meets the government’s budgeted annual surplus of MOP51.86, or an average MOP4.32 billion per month. In addition, the drop in the fiscal surplus has slightly narrowed compared to the year-on-year drop of 34.1 per cent in January.
The fall in fiscal surplus resulted from the decrease in revenues that the government gained, which declined 25.2 per cent year-on-year, amounting to MOP20.2 billion. Gaming taxes, accounting for 84 per cent of total revenues, dropped 22.7 per cent year-on-year during the first two months of the year, amounting to MOP16.9 billion, following the accumulated gaming revenues drop of 35.1 per cent yearon-year to MOP66.7 billion in the two months. Other direct taxes, meanwhile, rose by 29.2 per cent, reaching MOP733 million, compared to the same period of last year. By contrast,
indirect taxes slumped 46 per cent year-on-year, despite only amounting to some MOP519 million. On the other hand, the accumulative expenditure of the government during the first two months slightly dropped by 2.4 per cent year-on-year, amounting to MOP4.39 billion. This also suggests that the expenditure of the government in February had decreased by 16 per cent year-on-year, spending only some MOP2.2 billion. Compared to January, the expenditure in the month slightly increased by some MOP17 million. K.L.
Business Daily | 3
March 16, 2015
Macau
It’s official: Macau is in recession And a big one. The local economy has suffered its biggest contraction since the handover, with GDP plunging 17.2 per cent in the fourth quarter. Fallout from the current gaming crisis is proving to be much more damaging than in 2009 Luís Gonçalves
Luis.goncalves@macaubusinessdaily.com
A
few months ago, Melco Crown CEO Lawrence Ho warned that the current gaming crisis was going to be much worse than the previous one in 2009, when the global financial crisis buffeted China and local casinos. With gaming revenues dropping for nine consecutive months, it was no surprise that the local economy was going to suffer accordingly. Although expected, the sheer size of the impact on the last quarter is likely to generate negative shockwaves this week. In the fourth quarter of last year, Macau Gross Domestic Product (GDP) fell 17.2 per cent from a year ago. That’s the biggest contraction of the local economy since 2001, when data started to be compiled by the Statistics and Census Service. It’s also almost twice the previous worst drop in GDP recorded here (the second quarter of 2009 when GDP decreased 9.9 per cent). With a new plunge in GDP in the fourth quarter, Macau is officially in recession, after five straight years of riding one of the world’s largest
economic booms due to the casino industry. A jurisdiction enters into recession when two consecutive quarters of GDP decline. In the third quarter of 2014,the economy contracted 2.3 per cent. The driver behind this spectacular fall is known: plunging gaming revenues. The money generated by casinos finances more than 80 per cent of all government revenues and represents more than half of the economy. With such high dependence, when the gaming industry suffers the economy follows suit.
Investment not enough According to the Statistics and Census Service, the ‘slump in exports of services was the leading cause of the economic contraction’. The decline in exports of gaming services accelerated from the third quarter, falling almost 30 per cent (-28.9 per cent) last quarter from a decline of 24.9 per cent between July and September. This, despite the increase in visitor arrivals, the report says,
2010
2011
2012
2013
2014
GDP at current prices (billion MOP)
226.9
293.7
343.5
410.0
443.3
Rate of growth in real terms (%)
27.5
21.3
9.2
10.7
-0.4
Per capita GDP at current prices (MOP)
422,657
534,734
603,641
691,578
713,514
27.2
18.6
5.4
6.2
-4.9
Per capita GDP growth in real terma (%)
adding that shrinking visitor spending drove exports of other tourism services down 15.7 per cent. Even the millions of dollars reaching Macau every month to build the new casinos in Cotai were not enough to avoid the worst recession ever in Macau since the handover. Private investment increased 33.7 per cent in the fourth quarter year-onyear, with public investment rising 7.3 per cent. The year 2014 was saved by the opening two quarters when the economy expanded 13 and 8 per cent, respectively. Last year, Macau GDP decreased 0.4
per cent from 2013, the first yearly drop since 2001. But the recession last year also stopped a formidable four-year period in which the economy expanded at a double-digit rate, toppling several economic performance records. In 2010 and 2011, GDP increased 27 and 21 per cent, respectively. With gaming revenues expected to endure their worst low in momentum this quarter (investors are forecasting a drop of 20 per cent) and a recovery only predicted for the Summer, the figures for the economy are looking gloomy with Macau set to have a full year of falling GDP.
4 | Business Daily
March 16, 2015
Macau Beijing to strengthen HK as yuan offshore centre People’s Bank of China governor Zhou Xiaochuan said that Beijing will launch new measures to strengthen Hong Kong as an offshore yuan centre, if necessary. “We have confidence in Hong Kong as a financial centre and their ability to manage risk,” Zhou said at a briefing in Beijing following the National People’s Congress. He added that authorities are positive regarding the recent Shanghai-Hong Kong Stock Connect operation: “The design of the Connect is relatively conservative because it is new.” He also said the Hong Kong-US dollar peg is doing well with changes unwarranted.
Job vacancies in casinos drop to record low The number of positions available in the gaming industry here decreased 60 per cent last quarter to only 841 in a sector that employs almost 60,000 people. Wages went up 8 per cent in December Luís Gonçalves
Luis.goncalves@macaubusinessdaily.com
T
hey’re known as the best jobs in town, and some of the best paid, but in terms of opportunities, the gaming industry in Macau is basically ‘sold out’. According to data from the Statistics and Census Service, job vacancies in casinos dropped to a record low last quarter. In the fourth quarter of last year, only 841 positions were available in casinos here. This, in an industry that employs almost 60,000 people and generates annual revenues of MOP350 billion. In the fourth quarter of 2013, the gaming industry had 1,986 positions to be filled, more than double those of the last quarter. In one year, the job vacancy rate plunged to almost zero (only 1.4 per cent in the fourth quarter of 2014) from 3.4 per cent in
the dominant position in the industry here with a staff of 43,560, followed by dealers (25,752), and services and sales workers (6,626).
Earnings on the rise
the last quarter of 2013. This year, as two new properties are slated to open ( Galaxy Phase II and Melco Crown’s Studio City) vacancies in the gaming industry will receive another boost. Studio City alone plans to recruit 10,000 workers for its integrated resortcasino this year. That’s the
equivalent of 16 per cent of all gaming workers employed today in Macau. Last year, casinos employed 58,524 people, with the overwhelming majority (57,757) working full-time. That’s an increase of 3.4 per cent or 2,000 people between the fourth quarter of 2013 and 2014. Clerks occupied
With the demonstrations last Summer and the benefit packages that gaming companies distributed to retain workers, it’s no surprise that wages in the sector rose last year above inflation. The average earnings in the industry (excluding bonuses and allowances) increased 8.2 per cent in December from a year ago to MOP20,680. Of all categories, it was the upper ones who received the smallest increases. The earnings of directors and managers went up by 5.3 per cent for an average salary of MOP49,950. Clerks and sales
workers in December got 7.4 and 7.9 per cent more than a year ago, respectively. Wages in the gaming industry are on the rise. Since December 2011, the average salary increased from MOP15,000 to more than MOP20,000. The report also states that almost 70 per cent (69.2 per cent), of the gaming companies provided vocational training for their employees. In the fourth quarter, 281 courses were organised, with 23,296 employees participating. The vast majority (98.5 per cent) of participants attended courses during office hours. About 98.0 per cent of the participants attended courses organised by the gaming enterprise, and almost all participants were employersponsored, the report says.
Suncity planning to invest in Vietnamese casino The Macau junket operator is in talks with local authorities to invest in the island of Phu Quoc, in Vietnam. The CEO of the company visited the country last week João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he Macau Suncity group intends to invest in a hotel and casino in Vietnam and last Tuesday CEO Alvin Chau Cheok Wa met with local authorities, according to Vietnamese newspaper VietnamNet. Suncity wants the resort to be placed in Vietnam’s largest island, Phu Quoc, in Rach Tram hamlet in Bai Thom commune. According to the newspaper, the first option of the Macau group was Bai Truong in Duong To commune and it is still the preferred location. However, this area has already been allocated to other investors and unless these investors withdraw their plans it is spoken for Suncity’s interest in Vietnam was welcomed by the Vice Chair of Kien Giang Province, Nguyen Thanh Nghi, who asked the junket operator to submit the official documents with investment plan for consideration. Nguyen Thanh Nghi also advised
Suncity to study very carefully the provisions of the Government of Vietnam on foreign investment, especially investment in casinos. Besides studying investing in Vietnam, the group is stepping into the Philippines market and will start operating in City of Dreams Manila and Solaire Resort. The move had already been announced by president of marketing strategy Choong Yoon Ming but now the group has launched an investment scheme. Suncity has announced on its website that it is issuing 200 shares in Suncity Group Manila as part of a share subscription plan. Of the total 200 shares, 100 shares will be subscribed by the junket operator company. The remaining 100 shares can be subscribed at a cost of HK$5 million per share. The total 200 shares amount to HK$1 billion and the period for subscription expires on 31 March.
Business Daily | 5
March 16, 2015
Macau Korean airline targeting Mainland gamblers sidestepping Macau Jeju Air Co, the leading South Korean budget airline, is targeting Chinese gamblers deserting Macau due to the crackdown on corruption initiated by the People’s Republic of China Government, the company’s Chief Financial Officer, Kim Tae Yoon, said in an interview with Reuters. In order to attract Chinese tourists the company is offering popular liquor and cosmetics onboard to lure Mainlanders to Jeju Island, where the company is based. The South Korean island has seven casinos where only foreigners are permitted to gamble. Kim said that the company was aiming for sales of 1.5 trillion won (MOP10.6 billion) in 2020 from 510.6 billion won (MOP3.6 billion) last year, with 40 jets and 60 routes.
Macau higher education a hotspot for Mainland undergraduates As the number of local students in Macau’s universities decrease, Mainland undergraduates are essential to securing the survival of local institutions João Santos Filipe
jsfilipe@macaubusinessdaily.com
M
acau universities and tertiary institutions are more and more attractive to Mainland Chinese students. According to an article in Hong Kong newspaper South China Morning Post, while Mainlanders’ applications to Hong Kong universities are in decline, Macau is experiencing the reverse. In 2014, the Macau University of Science and Technology (MUST) registered an increase of 30 per cent year-on-year in the number of undergraduate applications to 7,000. Now half of the undergraduate students at MUST come from the Mainland, at some 7,500. To the President of MUST, Liu Liang, this is one of the goals of the Macau Government that wants to develop higher education as a major pillar of the economy of the territory. “The Macau Government places increasing emphasis on higher education, so we are certain to pose positive competition to Hong Kong”, Liu Liang explained to South China Morning Post. This trend surged after the handover of the territory to Mainland China. In 1999, Macau had two universities and two tertiary institutions but the number has ince smore than doubled to 10. Despite Macau’s higher education institutions not meeting the standards of Hong Kong universities in international rankings such as Time Higher Education, lower fees and the cost of living are more attractive than in the neighbouring Special Administrative Region. The Macau SAR has also been deemed an alternative for students who fail to score well enough in national college entrance
examinations to enter China’s top institutions in Beijing, Tsinghua, Fudan and Shanghai Jiaotong. “If you can’t get into the key universities in China, there’s basically no difference between studying [in a second-tier university] and not entering college at all”, Huang Liming, a Zhuhai native studying at Macau Institute for Tourism Studies,
explained to South China Morning Post. However, this trend to increase the number of Mainland students in Macau is essential for the universities, as Paul Pang Chap Chong, registrar at University of Macau, explained. “There aren’t enough local students to admit to our programmes”, he told the Hong Kong newspaper. “Three
years ago, there were 6,000 local graduates. Last year, there were only 5,000. In 2021, there will be only 3,000. We came to a consensus with the government to cap the number of [undergraduate] Mainland students at 18 per cent but due to low enrolment by local students, we will gradually admit more Mainland students”, he conceded.
Wholesale trade workers wages up 11 pct
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he average monthly wages for the city’s w or ker s en gage d in the wholesale trade jumped by 10.9 per cent to MOP11,970 (US$1,496) at the end of 2014 from MOP10,700 one year before, according to data released by the Statistics and Census Service (DSEC) last Friday.
At the end of 2014, some 49,837 people were engaged in the wholesale and retail trade in the SAR, up 8.8 per cent year-on-year. In particular, the number of persons engaged in the retail trade field posted a year-on-year increase of 10.8 per cent. However, their average monthly
salary decreased slightly by 0.8 per cent year-onyear, amounting to some MOP11,870. In addition, the demand for employees in the two fields did not rise as well. According to DSEC, there were a total of 1,280 and 3,103 vacancies for the wholesale trade and retail
trade during the fourth quarter of 2014, slightly up by 2.9 and 0.3 per cent year-on-year, respectively. DSEC data also indicated that the average earnings of full-time employees in the transport, storage and communications field had increased 8.7 per cent year-on-year, reaching
MOP20,301 in December 2014. The average salary of those in security activities rose by 17.2 per cent year-on-year to MOP11,170, while wages for those working for public sewage & refuse operations only rose 1 per cent year-onyear to MOP14,670. K.L.
6 | Business Daily
March 16, 2015
Macau
Govt’: Recycled water on tap after 2016 The government is rushing to prepare the generation of its own recycled water to complement the city’s ever-rising demand for H2O which is now heavily reliant upon the western tributary of the Pearl River Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he supply of recycled water in Macau will only be ready after 2016 as the government has already missed its initial target to have a water recycling plant built in Coloane. It was originally intended that usable water would be generated by this year, Business Daily has learnt from Marine and Water Bureau director Susana Wong Soi Man. “We’ve already laid out our basic requirements for [the construction] of the water recycling plant [in Coloane], and now the Environment Protection Bureau (DSPA) is preparing the public tender for this project,” Ms. Wong told Business Daily on the sidelines of an event held by French waste and water group Suez Environnement in Beijing on Friday. “The construction of the water recycling plant is indeed a delay to what we have planned,” the Bureau’s director added. “Now, we don’t really have a concrete timeline about when the plant can start to generate usable
recycled water but we’re sure that such supply will only be ready after 2016.” In 2013, the government garnered public support for its outline of a ten-year plan (2013-2022) calling for the construction of two water recycling plants and for such water to account for 10 per cent of the city’s total consumption by 2020-2022. A ‘short-term’ target as stated by the government in the plan was to have the production technology and water quality specifications for recycled water updated in Macau’s Regulation for Water Supply and Wastewater Drainage by 2015, as well as having the water recycling plant in Coloane constructed and ready to produce a daily 12,000 cubic litres by this year. Although the pipelines for supplying recycled water is already in place at Seac Pai Van public housing complex and the University of Macau’s Hengqin campus, missing this short-term target for recycled water use means that these pipelines would have to be left idle for more years.
In a statement released in January, DSPA confirmed the delay in executing several infrastructure projects, including the construction of the water recycling plant, an upgrade of the city’s incineration plant and modification works for the sewage treatment plant on Macau Peninsula. These projects involved an investment of over MOP200 million (US$25 million).
Catching up Accounting for the delay in this string of public works projects, however, DSPA only briefly attributed it to the ‘complexities of the infrastructure projects’ and ‘a longer than expected time’ for preparing the public tender documents. Speaking to Business Daily on Friday, Ms. Wong said that the planned launching of the public tender of the recycling water plant project should be now “in the final stage”. “Our target is: before we have the supply of recycled water, the legal framework
for that is in place,” she said, referring to the amendment of the Regulation for Water Supply and Wastewater Drainage. The Marine and Water Bureau director noted that the discussion on the legal amendment, which started with the Land, Public Works and Transport Bureau (DSSOPT) last year, is still ongoing. “We’re trying to encourage more casino operators to take part in the use of recycled water,” Ms. Wong told us, “although we don’t have a law in place yet or a big incentive for them to support our plan.” Nevertheless, the Bureau director noted that the pipelines for supplying recycled water are already in place at City of Dreams and the soon-to-be-completed Studio City, as well as Wynn Palace in Cotai, which is also under construction. “For these casino-resorts, basically they have dual pipelines supplying the running water and also the recycled water, respectively,”
Ms. Wong said. “And the recycled water is used to flush the toilets, as well as for greenery and landscaping – which fits in with what we have planned for the use of recycled water.” “Our second phase target is to supply the recycled water with a higher purity to the casino operators, so that they can apply it to their air cooling system,” said Ms. Wong. The second phase Ms. Wong refers to is the period 2016-2019, whereby the government intends to expand the laying of more recycled water pipelines in the city’s newly reclaimed urban zones. The eventual goal for the government is to achieve the use of recycled water accounting for 10 per cent of the city’s total consumption by 2020-2022, by which time the city should see a second water recycling plant constructed on the Macau Peninsula increasing the total production capacity of recycled water to 52,000 cubic metres a day.
Business Daily | 7
March 16, 2015
Macau
New water treatment plant construction by year-end The new project of Macau Water Supply Co. Ltd. will be located at Seac Pai Van. The soonest the water production of the new treatment plant will be online would be by 2017, the company says Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he city’s sole water distributor - Macao Water Supply Co. Ltd. - says it wants to start construction on a new water treatment plant in Seac Pai Van by the end of this year, so that it is operational by 2017 when the first phase of the project is completed, according to company chairman Steve Clark speaking to media in Beijing on Friday. While Macao Water plans to have the Main Storage Reservoir Water Treatment Plant III expansion project on the Macau Peninsula operational by the middle of this year, the water distributor is also planning to start the construction of a new water treatment plant in Seac Pai Van to cope with rising water consumption driven by ongoing casino-resorts expansion in Cotai. It would also serve as enhanced security for water supply in the city. “Macau is growing very quickly. In terms of last year, the water demand grew by 6.5 per cent,” said Mr. Clark, chairman of Macao Water and Suez Environnement Asia’s CEO. “Now to me, that growing demand [means] there will be a need for a new water treatment facility, and particularly inside Seac Pai Van because that is the area in Cotai where more and more casinos are setting up – and these are huge hotels and leisure complexes.” The water consumption of Macau last year totalled about 83.5 million cubic metres, according to Macao Water. “The first phase of that [Seac Pai Van water treatment plant] will be 100 million litres a day, and it will take at least one and a half years or two years to construct,” Mr. Clark explained. “So it will be 2017 by the time it’s producing water. The second phase will be another 100 million litres a day.” A preliminary budget for the Seac Pai Van water treatment plant project was put at MOP800 million (US$100 million), as mentioned by Macao Water’s executive director Felix Fan in December last year. Mr. Fan also noted at the time that the government would shoulder part of the project cost. Business Daily approached Marine and Water Bureau regarding how much the government will spend on the new water treatment plant project, to which the Bureau only replied that the subject is “still being discussed”. Speaking on Friday, Mr. Clark noted that the company was still calculating the cost of the new project. The production of Main Storage Reservoir Water Treatment Plant III, when completed this year, can reach 60,000 cubic metres of water a day. With four other water treatment plants on the Macau Peninsula and Coloane, the completion of the expanded Main Storage Reservoir Water Treatment Plant means that the company can produce 390,000 cubic metres of water a day. The joint venture Sino-French Holdings (Hong Kong) Ltd. holds an 85 per cent stake in Macao Water. Sino-French is 50 per cent owned by French utility Suez Environnement,
with another 50 per cent owned by Hong Kong-listed NWS Holdings Ltd.
New structure, new goal The world’s second-largest water and waste group, Suez Environnement, which provides technical support for the water treatment for Macao Water, announced in Beijing on Friday that it is scrapping the brand names of its various divisions and moving to a single brand. Suez, which has a presence in 70 countries, operates some 40 different brands, including SITA, Degremont, Lyonnaise des Eaux, Agbar and Ondeo, as a result of international expansion and the integration of new activities. The simplifying of the Suez brand architecture is for ‘improved performance and commercial efficiency’, the company said in a statement. The restructuring, complete with new ‘Resource Revolution’ tagline, follows a similar reorganisation at market leader and top Suez competitor Veolia in 2013.
Like Veolia, Suez is looking for more growth from its international waste and water business as its French water concessions operations lose traction. The two firms are increasingly focusing on recycling raw materials and recuperating energy from waste, while offering waste and water treatment for clients in the mining, oil and gas exploration and agrifood industries. The restructuring of Suez means that the city’s solid waste collector CSR – Macau Waste Systems Co. Ltd., a joint venture between a subsidiary of the French utility SITA Waste Services and Macau’s HN Group – would drop the brand SITA, to be replaced by Suez, Mr. Clark confirmed on Friday. SITA owns a majority stake in CSR. As Suez reorganises around a single brand and along regional lines, the company’s Asia chief spoke of big ambitions to grow in China amid rising competition amongst fellow Chinese and foreign waste and water firms.
“China represents only about 5 per cent [of Suez’s group-wide revenue] at the moment. One reason for that is because we operate through joint ventures and partnerships,” Mr. Clark commented. The China segment also includes Hong Kong and Macau. The Suez Asia CEO added that the company’s managed turnover in China in 2013 was 1.3 billion euros (MOP10.9 billion), a figure also covering the operations of its joint ventures and partnerships in the country. “If I look at that, I intend to grow that [revenue] significantly . . . to double by 2020,” Mr. Clark said of the growth prospects for Suez’s China operations. Suez is also targeting a 50/50 percentage in terms of revenue from water and waste management in China by 2020. Currently, 80 per cent of Suez’ s revenue in China is from water management, while the remaining 20 per cent is from waste, Mr. Clark said. with Reuters
8 | Business Daily
March 16, 2015
Macau “A significant number of tourists come to Macau because of the contact with Portuguese culture” Portuguese beerhouse chain Portugália has opened its first restaurant in Macau and the Executive Manager for the territory, Bruno Castro, explained in an interview to Business Daily how the company expects this to be the first step to expanding in Asia João Santos Filipe
jsfilipe@macaubusinessdaily.com
Portugália opened its first restaurant in Macau last week. Is the company happy with the results of the first few days?
Portugália invested MOP10 million to join the market. Can you explain how this money was invested?
We’re satisfied with our first days of operating in Macau. Based on the opinions of our clients, the food and service has been able to meet the quality we are after. It’s different planning to serve steaks and then actually serving them, mainly when you are entering a new market.
The MOP10 million investment was channeled into the creation of the restaurant, which involved the renovation of the building and similar expenses for us to be ready to operate.
Is Portugália investing all the money alone or does it have local partners?
Portugália is a Portuguese beerhouse chain entering an Asian market, where there is a strong Portuguese community. Are these customers your main target?
This project is a joint venture where Portugália has 70 per cent equity and Macau based company Sniper Capital holds the remaining 30 per cent. In this venture we have the responsibility of implementing and managing the restaurant. In an operation of investing abroad, whether it is in Macau or in another location, it is very important to have local partners and our company understands that very well. Considering the distance between Portugal and Macau it’s easy to understand that the two cultures are very different. In this aspect, local know-how is essential.
Portuguese customers are very important to us and we want them to feel as if they’re at home. However, our strategy is to create a Portuguese environment not only for the Portuguese community but for locals and tourists visiting Macau. We believe this Portuguese environment can give extra value to our restaurant.
What feedback has Portugália received from customers that have been to the company’s restaurants in Portugal?
We’re very happy to be able to say that until now our clients have been telling us that our steak here taste as good, if not better, than the ones being served in Portugal. That’s what we wanted and so far that’s being achieved.
What kind of customers are visiting the restaurant? The day we opened the doors to the public at 12.00 noon, we already had tourists ready to eat in our restaurant. That was surprising because at this phase we are stabilising our operations before trying to reach tourists. But due to our good location they’ve been coming already and that’s very good for us. Our clients have been 50 per cent Portuguese and 50 per cent Asians.
Portugália is now entering a new market where the majority of the clients are Asian. How did you prepare for this market? Our strategy is to offer Asian clients the possibility of experiencing a Portuguese environment. However, at the same time we want this to be a smooth experience so that they can enjoy their time while eating in our restaurant. To achieve this, our menu is all translated into Chinese and English and there are pictures of all the dishes served. These ‘minor’ details are very important in attracting Asian clients.
During the grand opening of the restaurant the chairman of the company, Francisco Carvalho Martins, stressed that Portuguese food is very much appreciated in Macau. But why was Taipa chosen as the location of the first restaurant?
How many people are working in this project at the moment? We have around 20 people involved in this restaurant.
On the one hand, Taipa is a strategic location for us. More and more tourists visit this area because of the shops and restaurants opening here. On the other hand, Taipa is very similar to a small Portuguese village. While the Historic Centre of Macau is too crowded and is not so welcoming Taipa still keeps that feature and has been preserved like that.
You said that Portugália has not actively promoted the brand to a broader audience of tourists and Asian clients. How are you going to do that?
We have a marketing plan that is ready and it is now being prepared to be activated. This should happen by the end of this year or at the beginning of next year. We want to have a strong brand that takes part in the events happening in Macau. More than a restaurant, we want this to be a project. For example, on the 10th July, Portugal Day, Portuguese communities and the birthday of Portugália, we are going to prepare an event to celebrate not only our brand but also Portugal Day with our clients.
A new wave of Portuguese restaurants is opening in the territory. Are you expecting aggressive competition? We’re expecting competition and we welcome it, especially if it brings more quality to the market. However, let me say that
As the new resorts open they are also in the market for workers. Is this something you are concerned about?
This project is a joint venture in which Portugália has 70 per cent equity and Macau based company Sniper Capital holds the remaining 30 per cent
we have a good relationship with our competitors. Competition means that Portuguese food is able to attract many people and that is good for every player. Macau welcomed millions of tourists last year and we believe that a significant part of those tourists came because of the contact with the Portuguese culture they can find. The more projects open in Taipa related to Portuguese culture the better for everybody because it will create a more Portuguese environment that can be very attractive for the tourists. We believe the market is large enough for many players.
We cannot say we are concerned because we have been studying this market for two years. We were aware of this reality before we decided to come here. We identified very well the advantages and risks of being here. In every market there are risks and the same happens in Macau. Real estate value and labour costs and shortage are the risks involved in being here. It’s a critical point and every company faces difficulties in hiring employees.
What is the company’s approach to minimising the impact of labour shortage on daily operations?
We have to define very well our team, knowing we need to be very selective about the people we want to work with us. We’re also very keen on training our staff and transmitting to them the values of Portugália. Those are our main concerns, to avoid a large turnover rate. Besides that, we want to increase their loyalty to the company so they can stay for a long time. If we manage to maintain our workers, it is easier to expand the team. Any company that fails to keep its workers faces more difficulties in hiring people.
How was the process of starting a business in Macau? Was it smooth or troublesome?
There are only a few countries in the world that I know of where you
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Macau
Macau welcomed millions of tourists last year and we believe that a significant number of those tourists came because of the contact with the Portuguese culture they can find here
We think that the brand has potential to grow in Asia. Not taking advantage of this potential would not be very wise
abroad. The effort of bringing the brand to Macau is too large to open one restaurant alone. Also, in order to generate larger profit it makes sense to open more restaurants in Macau. The number of restaurants in Portugal is very significant and even if this restaurant is the most successful its positive impact will be limited inside the group. Secondly, we think that the brand has potential to grow in Asia. Not taking advantage of this potential would not be very wise.
From this perspective, we can see Macau as the entry point to Asia… can say that starting a business is easy. However, what you have to consider is whether it can actually be accomplished. In these expanding abroad processes, it’s very important to choose your partners wisely. In Macau, we chose different partners for different areas because they have the socalled ‘know-how’ and that helped us a lot. But people have also to understand that every territory has its own laws and timings, which have to be respected.
How long did it take from the moment the company started planning to opening the restaurant?
From the first time we were here to study the market to the moment we opened the restaurant it took us around two years. During this time, I was not always in Macau and I cannot tell you precisely how many days I have been away, as I’m involved in other activities of the company. From the beginning, we knew it would take time to open the restaurant because before starting to operate we needed time to study the market, choose a location and also to better understand Macau.
The chairman of Portugália announced at the grand opening of the restaurant that there is a plan for the company to expand in Macau and in Asia. Where do you see the company expanding to after Macau?
Our goal is to expand our business and this is a project for expanding
It is a first step. But at this moment, we’re really focused on Macau, where we believe we can open more restaurants. Before we can actually consider moving to other places we need to have a strong presence here. For now, we want to understand the best locations and opportunities for our new restaurants in Macau. This takes time and requires good planning.
Is Portugália interested in opening restaurants in Macau gaming resorts?
Portugália is not interested in being in any specific place. I think we have a good model that would work well in these resorts. However, it depends on the conditions that we will have there. It is true that we’ve been talking with gaming operators because in Macau it’s impossible to ignore these resorts. It’s a matter of opportunity. That notwithstanding, casino clients have different consumption habits to those tourists in the streets, which we are targeting now.
Outside Macau, what markets are being considered? Hong Kong and Mainland China are logical choices due to the possibility of implementing synergies and because of the visibility that Portugália may achieve in Macau. But there are other countries where we may move next. Still, we have to study the potential of the brand and of Portuguese food in those markets. Just because you open a restaurant in Macau does not
mean that people will enjoy the same model in Mainland China or Hong Kong.
How long do you think this expansion will take?
It will depend on the opportunities and also on the time we think is
required to do it. When it comes to our experience in Portugal, sometimes we have opportunities in places where we were not looking and other times we wait a lot of time for the right opportunity in places where we want to be.
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March 16, 2015
Macau Carson Yeung’s lawyer: Release my client from jail
Macau boom-bust comes full circle under Xi as US$111 bln lost
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ny hope that Macau’s casinos would weather Chinese President Xi Jinping’s antigraft campaign is quickly fading amid a stock-market rout that erased US$111 billion of value. The combined market capitalization of the six main Macau casino operators fell last week below the US$88.5 billion level when Xi was made head of the Communist Party on Nov. 15, 2012. While the industry reached a peak value of US$198 billion in January 2014 as gambling revenues jumped, operators have since tumbled as Xi’s crackdown deterred VIP gamblers from the mainland.
“Beijing’s anti-corruption push spurred an anti-extravagance mindset among wealthy Chinese that are core to Macau’s VIP business,” said Tim Craighead, the head of Asian research at Bloomberg Intelligence in Hong Kong. “This may be here to stay.” Xi warned his fellow leaders when he came to power that corruption would lead to the demise of the party if left unchecked. His campaign has since snared more than 100,000 “flies and tigers,” or low- and high-level officials, according to official data. Macau posted its first ever annual decline in gambling revenue last year as Xi urged the city to wean itself from a reliance on casinos.
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The six main casino operators – Sands China Ltd., Galaxy Entertainment Group Ltd., Wynn Macau Ltd., SJM Holdings Ltd., MGM China Holdings Ltd. and Melco Crown Entertainment Ltd. – were some of the best stocks to own on Hong Kong’s exchange in the five years through 2013, with Galaxy rallying more than 6,400 per cent. A more-than eightfold increase in gaming spending in the decade through 2013 transformed Macau into a gambling center larger than the Las Vegas Strip. Gross gaming revenue this year may drop 18 per cent, JPMorgan Chase & Co. said on March 8, while Deutsche Bank AG recommended on March 10 selling all six stocks. Casino revenue plunged a record 49 per cent last month. The Bloomberg Intelligence index of Macau casino shares fell for a seventh day on Thursday, losing as much as 2.4 per cent. The gauge’s 56 per cent decline from its January 2014 peak compares with a 3.9 per cent gain in Hong Kong’s Hang Seng Index.
he money-laundering conviction of the former Chairman and CEO of Birmingham International, Carson Yeung, should be overturned as the judge failed to properly consider evidence, the lawyer of Mr. Yeung, Clare Montgomery, has said, according to news agency Bloomberg. The lawyer told the Hong Kong Court of Appeal last Thursday that the lower court did not take the right approach in convicting Mr. Yeung of five charges of laundering HK$721 million. She also added that on a separate case after Yeung’s conviction, Hong Kong’s top court increased the level of proof prosecutors need for such offences. “It’s no longer good enough for prosecutors to simply lead evidence of third-party transactions,” Montgomery said. Yeung is serving a six-year jail term after failing to convince the lower court judge that the funds were winnings from gambling in Macau and profit from investments. During the 55-day trial prosecutors said Carson Yeung was part of a money-laundering machine linked to organised crime in Macau.
Trump Taj Mahal survives bankruptcy by joining Icahn Empire
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luxury consistent with our brand and required under our license agreement.” Donald Trump and his company haven’t been involved in running the Atlantic City casinos for about 10 years. Trump still holds a number of gaming licenses in the U.S., but doesn’t own or operate any casinos.
Keeping Name
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rump Entertainment Resorts Inc.’s Taj Mahal in Atlantic City, New Jersey, will survive as part of billionaire Carl Icahn’s empire under a bankruptcy restructuring plan approved by a federal judge. Trump Entertainment, which also owns the shuttered Trump Plaza, adds to Icahn’s gaming venues in the downtrodden seaside town, joining the Tropicana, which the investor acquired out of bankruptcy five years ago. “The Taj will remain open,” U.S. Bankruptcy
Judge Kevin Gross said at a hearing in Wilmington, Delaware. “And it will be a successful venture.” The decision by Gross brings a close to a bankruptcy in which Trump Entertainment found itself on the brink of liquidation multiple times. The company had threatened to close the Taj Mahal over disputes with its union. Trump Entertainment filed for bankruptcy Sept. 9 and shut the Plaza days later. It was one of four Atlantic City casinos that closed last year as the New
Jersey gambling hub was battered by competition from surrounding states. Lenders controlled by Icahn provided Trump Entertainment $20 million in bankruptcy financing to help fund operations until the turnaround plan takes effect.
Both Casinos Under the plan, the Icahn lender group gets control of both casinos by converting about US$292 million of debt into equity in the reorganized company. The Icahn group will also provide US$13.5
million to fund the Taj Mahal after it exits court protection. The casino owner was able to eliminate most opposition to the plan, striking a deal with unsecured creditors last month and with founder Donald Trump on Monday. “I’m happy to have reached a deal with Carl -a friend and someone who my father and I have great respect for,” Ivanka Trump, who helped negotiate the agreement, said in an e-mail. “The Trump Taj Mahal will, in short order, be greatly reinvested in and brought up to the high standard of
Trump Entertainment will continue to use the Trump name on the Taj Mahal, according to court filings. Donald Trump will drop a lawsuit seeking to have the name removed and support the plan as part of the accord. Donald Trump, the realestate tycoon and realityTV star who founded the company, began investing in Atlantic City in the early 1980s. Unsecured creditors agreed to back the plan and, in return, will get US$3.5 million fund, increased from US$1 million, court papers show. The casino operator has been embroiled in a fight with the Unite Here Local 54, which represents more than 1,100 Taj Mahal workers, over its move to scrap the union’s labor deal. The bankruptcy court approved that request, and the union appealed. The reorganization plan will take effect and Icahn will become owner if the appeals court upholds Gross’s decision last year to let Trump Entertainment cancel the union contract. If the court overrules Gross and reinstates the contract, Icahn has the right to back out of the takeover. Bloomberg
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Greater China
Premier confident on manoeuvre policy room He assured that policymakers would prop up the economy if growth was at risk of breaching a “lower limit” Jason Subler
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hina has a lot of room to manoeuvre its policy and boost its economy having avoided using strong, short-term stimulus in recent years, Premier Li Keqiang said yesterday, in a rare suggestion that authorities can do much more to stoke growth. Li, addressing a news conference at the end of China’s annual session of parliament, tried to allay fears about a stumbling economy by vowing to keep it growing at a reasonable speed, even as he acknowledged the job is not easy. He assured his audience that policymakers would prop up the economy if growth was at risk of breaching a “lower limit”, or hurt employment and income gains. “In recent years, we have not taken any strong, shortterm stimulus policies, so we can say our room for policy manoeuvre is relatively big, the tools in our toolbox comparatively many,” Li said. “If the slowdown in growth affects employment and incomes, and approaches the lower-limit of a reasonable range, we will stabilise policies and the market’s long-term expectations for China,” he said at a two-hour briefing. “And at the same time, (we will) increase the intensity of targeted (policy) control,” he said. Turning to his government’s plans to deliver economic growth of around 7
If the slowdown in growth affects employment and incomes, and approaches the lower-limit of a reasonable range, we will stabilise policies and the market’s longterm expectations for China Li Keqiang, China’s Premier
Chinese Premier Li Keqiang speaks during a press conference following the closing of the third session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing
However, Li reiterated that authorities would do what they could to keep growth “within a reasonable range”, and denied any assertion that China was exporting deflation.
A trump card in environmental law percent this year, Li said: “It looks like economic growth has been adjusted lower, but in reality achieving this target will not be easy.” A 7 percent growth target is China’s lowest in 11 years, and would mark the slowest expansion in a quarter of a century if it came to pass. He said it was a challenge for the government to deliver economic growth of about 7 percent this year because the economy was already worth more than US$10 trillion.
Weighed by a property downturn, hefty debt burdens, and lethargic foreign and domestic demand, China’s economy has struggled in the last 15 months or so, as growth in exports, investment, manufacturing and retail sales all waned. That dented growth to a 24year low of 7.4 percent last year, and analysts widely assume that the entrenched cool down would deepen this year. When asked if he was worried about rising financial
risks as the economy struggles, Li acknowledged the dangers but said China could prevent systemic risks from surfacing. He said his government would minimise moral hazards by allowing flareups in financial risks on a “case-by-case” basis, but did not elaborate. Many economists have criticised the government for its reluctance to let big stateowned or flagship private firms fail for fear of increasing unemployment. They say the government’s willingness to support badly run businesses encourages waste and fuels credit danger. Li did not address those concerns, but promised that his government would advance social, financial and economic reforms that are meant to be China’s most ambitious in 30 years.
Reiterating earlier remarks this week by central bank governor Zhou Xiaochuan, Li said the government would unveil an insurance system for depositors this year. At the same time, authorities will toughen their fight against pollution to clean up air, land and waterways by enforcing a new environmental law. “Companies that violate the law and regulation with their emissions, no matter what kind of businesses they are, they will be investigated according to law, and even let those businesses that secretly emit or discharge to pay a cost that they cannot afford to pay,” Li said. “The environmental law is not a cotton swab, but the strongest trump card,” he said. Reuters
Ready for regional financial crises Cabinet’s head sure of China’s capability to deal with financial issues
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hina is capable of preventing systemic or regional financial crises while allowing market-ruled liquidation in individual and isolated cases, Chinese Premier Li Keqiang said yesterday. Li made the remarks after the conclusion of the annual session of the National People’s Congress, China’s top legislature, in response to a question on financial risks in the world’s second largest economy. “It is true that there are individual and isolated cases of financial risks, but at the same time, we are fully capable of preventing systemic or regional financial crises,” the premier said at a press conference. Reassuring the market, he cited the facts that the Chinese economy continues to operate within the
proper range and there is a fairly high saving rate in the country. Regarding concerns over the potential risks which may arise from local government debts, the premier said more than 70 percent of local government debts are in the form of investment which have quite good prospect for yielding returns. “We are also regulating these financing platforms to ensure that we keep the front door open while blocking the back door,” he said. The premier also clarified potential financial risks involving the banking system, pointing to “fairly high capital adequacy ratios and relatively ample provisions” with the country’s banks. “It is true that there are nonperforming loans (NPLs) and
It is true that there are individual and isolated cases of financial risks, but at the same time, we are fully capable of preventing systemic or regional financial crises Li Keqiang, China’s Premier
the NPL ratios have picked up somewhat, but the NPL ratios in China are still quite low in the international context,” he said. While allowing the market to rule individual and isolated cases of financial risks, China will encourage the practice of balancing one’s book in a market-based way so as to guard against possible ethics violations and raise people’s awareness of risks, the premier said. The Chinese authorities will also introduce the deposit insurance system this year and continue to develop a multiple-tiered capital market so as to lower companies’ leverage ratio and help ensure financial services better serve the real economy, said the premier. Xinhua
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Greater China Birth policy to change Chinese Premier Li Keqiang yesterday said China is still reviewing adjustments to the country’s birth policy implemented in 2014 in order to decide whether further changes are needed. Speaking at a press conference after conclusion of the annual parliamentary session, Li said authorities are currently conducting comprehensive reviews on the implementation of the birth policy which now allows couples to have two children if either parent is an only child. “[We will] make improvements and adjustments to the policy in accordance with legal procedures,” the premier said, without giving a specific time frame.
Australia to decide on AIIB membership soon Aussie media said Washington had put pressure on Canberra to stay out
CSSC 2014 profit up China CSSC Holding Ltd, a leading ship builder, posted rising profit in 2014 due to rebounding market demand, the company said. The net profit of the company increased 11.77 percent year on year to 44.19 million yuan (US$7.21 million) in 2014, according to a document filed with the Shanghai Stock Exchange. The company attributed the eye-catching performance to the recovering ship demand as it finished more orders of ships, drilling platforms and diesel engines. The ship maker said the market was still saturated and prices remained low.
Rules on foreign investment reviewed China released revised guidance for foreign investment relaxing many restrictions on overseas capital. “The catalogue of industries to guide foreign investment” issued by the National Development and Reform Commission (NDRC) in conjunction the Ministry of Commerce, opens more areas, mainly services and manufacturing, to foreign business with lower thresholds. Now in its sixth version, the catalogue consists of three parts: industries where foreign investment is encouraged, restricted and banned. The latest revision more than halves the number of industries with restrictions from 79 to 38.
Confident in trade with Russia
China is confident about trade with Russia although a slump has been a cause for concern in the past two months. The decline was billed as a temporary fluctuation, not reflecting the overall trend, Ling Ji of China’s Ministry of Commerce said. Trade between the two countries tumbled 30.6 percent year on year to 61.3 billion yuan (US$10 billion) in January and February due to the state of the Russian economy, a depreciating ruble and changing demand in the two countries. Sino-Russia trade rose to a record high of US$95.4 billion in 2014.
Members of the AIIB in the foundation session
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ustralia expects to make a decision within weeks on whether it will seek to join the China-backed Asian Infrastructure Investment Bank (AIIB), Prime Minister Tony Abbott said on Saturday. Australia’s decision on whether to become a founding member of the institution risks upsetting either key strategic allies the United States and Japan, or top trading partner China. Britain this week said it has sought to become a founding member of the AIIB because it was in its “national interest”, making it the first Western nation to embrace the institution, which
would finance infrastructure projects in the Asia-Pacific. “Our position all along has been that we are happy to be part of some thing which is a genuine multilateral institution such as the World Bank, such as the Asia Development Bank. What we are not prepared to do is to sign onto something which is just an arm of one country’s foreign policy. “ Abbott told Sky News Australia. “We’re looking very carefully at this and we’ll make a decision in the next week or so. I would like to think that it is possible for this to a be a genuine multilateral institution and
I think it could well be an important part of bringing China fully into the international community.” Twenty-one countries were represented at the announcement of the bank in October - Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam. Indonesia later said it would join, and China said earlier this year the number of founder members had risen to 26. But Japan, Australia and South Korea, the other notable absentees in the region, have held back ahead of a March 31 deadline. Japan, China’s main regional rival, has the highest shareholding in the Asian Development Bank along with the United States, while Australian media said Washington had put pressure on Canberra to stay out. Abbott said he hoped many countries, including Japan and the United States, would join the AIIB if was set up as a genuine multilateral institution. Reuters
Merkel partners with China on IT fair Germany is the biggest European economic player in China
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erman Chancellor Angela Merkel on Sunday opens a major IT business fair where official partner China will showcase its rise as a high-tech power. Merkel -- who has visited China seven times in a decade -- will meet Vice Premier Ma Kai as more than 600 Chinese companies exhibit their tech marvels at the CeBIT fair in the western city of Hanover. Jack Ma, head of Alibaba -the online commerce giant that is China’s answer to eBay and Amazon- will give the keynote address, and companies including Huawei, Xiaomi and Lenovo will fill over 3,000 square metres (30,000 square feet) of exhibition space. China’s huge showing “makes it the biggest and strongest partner country presentation we’ve ever seen at CeBIT,” said top exhibition executive Oliver Frese. Bucking China’s wider economic slowdown, information and communication technology are booming in the world’s biggest smartphone market with the highest number of Internet users. “China was known as a supplier of
components and later as a supplier of hardware, smartphones, tablets and also PCs,” said CeBIT spokesman Hartwig von Sass. “Now China has numerous companies that have become world leaders ... for example Huawei, ZTE, Neusoft or Alibaba, some of which are far bigger than western IT companies. “We see this as a shift on the world map: digitisation is going east.”
Industry 4.0 The almost three-decade old CeBIT once dazzled consumers with gadgets but has been overshadowed by big tech events in Las Vegas and Barcelona, leading it to focus on business users. Last year IT professionals made up more than 90 percent of the over 200,000 visitors. For Germany, the event aims to further cement economic ties with fellow export power China as both seek to adapt to the sweeping digitisation of the world economy. Germany calls it “Industry 4.0” -the fourth industrial revolution after steam power, factory mass production and the dawn of electronics and IT.
It refers to connecting automated manufacturing with the online world and the “Internet of Things”, where everything from factories, homes and cars to household appliances will be online. In October China’s Premier Li Keqiang praised the “innovation partnership” with Germany and said his country must better harness the creative talents of its 1.3 billion people. Germany is already by far the biggest European economic player in China, and its exports there have helped it offset the impact of the financial crisis in Europe. Two-way trade last year topped 140 billion euros (US$177 billion). Jost Wuebbeke of the Mercator Institute for China Studies said “the Chinese IT market will grow rapidly in future and have great influence on the global market”. In China-Germany trade, IT still plays a minor role, he said, predicting however that it “could become far more important through GermanChinese cooperation in the field of Industry 4.0”.
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, 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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Asia India’s merchandise exports fall India’s merchandise exports fell by 15.02 percent to US$21.54 billion in February compared with US$25.35 billion in the corresponding month of 2014, the Ministry of Commerce said on Friday. Meanwhile, trade deficit fell to US$6.84 billion from US$8.31 billion in the same month a year ago, mainly on account of lower crude oil prices. The trade deficit for April-February in 2014-15 fiscal year was estimated at 125.22 billion U.S. dollars, a little higher than 124. US$84 billion during same period of previous fiscal year.
Myanmar to permit import of wines Ministry of Commerce will allow local traders to import wines to meet rising demand and control illegal trade, the ministry said Saturday. The ministry will announce the written rules on importation this month. Local registered companies who possess export and import licenses are entitled to apply for the wine import license which will be valid for one year. The importation will be allowed only via sea and air routes in line with the ministry’s rules, with wines of 7 to 20 percent alcohol content allowed.
Indonesian deep-sea ports ready by 2018 An Indonesian minister said that four of five deep-sea port projects envisaged in President Joko Widodo’s plan to boost sea transport would commence their services by 2018. Coordinating Minister for Maritime Affairs Indroyono Susilo said the deep-sea ports expected to be ready in 2018 were Kuala Tanjung in North Sumatra, Kalibaru in Jakarta, Teluk Lamong in East Java and New Makassar in South Sulawesi provinces. Another project was designed to be constructed in Sorong, located in Indonesia’s easternmost province of Papua. All of those projects would facilitate the president’s Sea Toll road program.
Cambodia rebukes “labour abuse” report Cambodia has rejected a U.S.-based Human Rights Watch’s “labour abuse” report, saying the report is groundless, according to a statement released by the Ministry of Labour late on Friday. “Currently, Cambodia has been closely cooperating with the International Labour Organization’s Better Factories Cambodia to inspect and assess labour conditions in addition to the ministry’s existing inspection mechanism on labour conditions, safety and hygiene,” said the statement. The statement said last year, the ministry’s working groups inspected more than 900 factories for 7,191 times and had fined 128 factories for violating labour law.”
Modi closer to Sri Lanka Indian Prime Minister Narendra Modi flagged off a train service between Talaimannar, an island in Sri Lanka’s north, to the capital Colombo. The railway track was built with funding from the Indian government which has already allocated millions of dollars to develop the Tamil dominated north of Sri Lanka. All services on the railway line were stopped in June 1990 after the Tamil Tiger rebels blasted the Mannar bridge in the northern province, which linked Mannar and Talaimannar island during the island’s 30 year civil war.
Philippines plans debt swap and repo The average daily trading volume in the Philippine peso bond market fell to a three-year low in 2014
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he Philippines plans a pesodenominated debt exchange to trim the number of its outstanding securities while seeking to let banks engage in bond repurchases to help reinvigorate the market, Treasurer Roberto Tan said. “The country’s strong economic and fiscal fundamentals must be reflected in the secondary debt market, but the volumes have become volatile,” Tan said in an interview Saturday at the central Philippine island of Mactan, Cebu. “We need to address this, push for initiatives to boost trading volumes and improve the yield curve.” The Treasury may offer two tenors of new securities with a size of at least 50 billion pesos (US$1.1 billion) each in exchange for securities that are illiquid, infrequently traded, expensive and worth retiring, Tan said. The target is to reduce the count of debt securities to below 100 by the end of the year, the treasurer said in his speech before the Fund Managers Association of the Philippines on March 13. The average daily trading volume in the Philippine peso bond market fell to a three-year low in 2014, and returns in the past three months on sovereign peso debt are the least in
year after rising above 20 billion pesos in 2012 and 2013, according to data compiled by Bloomberg. While volumes recovered in January, they were back to low levels again since February, Tan said.
Repo, tax-exempt
Southeast Asia. A healthy domestic debt market is crucial to a government that’s been relying less on overseas borrowing and to fund the nation’s companies investing in records amounts, Tan said. The ratio of domestic borrowing to total debt may increase to 88 percent next year and to 89 percent in 2017 from a planned 86 percent this year, according to presentation materials e- mailed by Tan. Gross borrowing is projected to rise to 760.3 billion pesos in 2016 before easing to 688.08 billion pesos, based on a mediumterm plan in Tan’s presentation. The average daily bond trading value fell to 18.2 billion pesos last
The Treasury is in discussions with the central bank and the Securities and Exchange Commission for the interbank Specials Repo program that will improve pricing of government securities, Tan said. The Bureau of Internal Revenue agreed in January to exempt the repos from documentary stamp tax as long as these are transacted on a “true sale basis.” The government will also establish a primary dealer system to create “market makers who will help provide liquidity” once the repo market is functioning, said Tan, 60, who returned as treasurer this year after a two-year stint as executive director at the World Bank. The Treasury will probably decide today if the market is ready to start trading with state-run pension funds and other tax-exempt companies holding about 800 billion pesos or a third of sovereign debt, Tan said. Bloomberg News
UN disaster meeting opens in tsunami-hit Japan Japan’s Prime Minister pledged US$4 billion in foreign aid in the four years to 2018 for disaster prevention Kyoko Hasegawa
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olicymakers gathered for a ten-yearly meeting on disaster risk reduction Saturday, with hopes high that the conference in tsunami-hit Japan might provide a springboard for efforts to tackle natural disasters and costly climate change. The meeting came as a huge tropical cyclone smashed into Vanuatu in the South Pacific, terrifying residents and causing fears Saturday that dozens of people may have died. UN Secretary General Ban Kimoon said he had met the president of Vanuatu that morning and conveyed “our deepest condolences” as well as solidarity with the people of the archipelago. “What we are discussing here today is very real for millions of people in the world,” he said in a speech. Ban, who has highlighted the rise in extreme weather as global warming has accelerated over the past 10 years, also said: “Disaster risk reduction is a front-line defence against the impacts of climate change.” “It is a smart investment for business and a wise investment in saving lives,” he said.
A report by the UN Office for Disaster Risk Reduction (UNISDR) said global economic losses from disasters cost an average of US$250 billion to US$300 billion annually. “Two thirds of natural disasters come from climate change,” French Foreign Minister Laurent Fabius told AFP ahead of his attendance in the conference. Fabius is president of the COP 21 conference on climate change, which will be held in Paris in December. In a conference speech, Fabius said more than 70 countries were identified as particularly vulnerable and exposed to “extreme weather events” -- typhoons, torrential rain, storms and sand or snow. Rich countries are not “immune” to impact of climate change, he said “but the most exposed countries are the poorest”. African and several small Pacific island nations attending the conference echoed his remarks. The conference is being held in the north-eastern city of Sendai, days after Japan marked the fourth anniversary of a 9.0-magnitude earthquake. The undersea quake on 11 March 2011 triggered a tsunami
that killed around 19,000 people, and a nuclear disaster.
‘Build back better’ “Since taking office, I have been visiting the disaster-hit areas almost every month,” Japanese Prime Minister Shinzo Abe said. “Many residents told me that they want to build a disaster-proof society, to make the hometowns even better than ones before the earthquake” in 2011, he said. “Starting from this earnest wishes, Japan is working on the reconstruction based on the idea of ‘build back better,’” he said. Abe also pledged US$4 billion in foreign aid in the four years to 2018 for disaster prevention, including infrastructure-building, weather satellites and education of 40,000 community leaders. With hundreds of NGOs and interest groups also involved, organisers are expecting around 40,000 people in Sendai, offering a potential US$200 million windfall to the region, including from associated tourism. AFP
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International Fed leaks case reopened The Federal Reserve’s inspector general has reopened a 2012 case involving leaked information from the central bank and a criminal investigation is pending, according to a letter sent to the Fed by a U.S. Congressman. House Financial Services Committee Chairman Jeb Hensarling said the Fed’s Office of Inspector General (OIG) reopened the case on March 4, according to the letter, which was sent to Fed Chair Janet Yellen on Friday. Details of the Federal Open Market Committee’s September 2012 meeting were published by Medley Global Advisors one day before the Fed released minutes of the gathering.
Egyptian tycoon defends sacking slack civil servants Major international companies announced investments during a meeting Stephen Kalin and Michael Georgy
Netanyahu offers finance ministry to rival Israeli Prime Minister Benjamin Netanyahu, trailing in opinion polls two days before a parliamentary election, publicly offered yesterday the Finance Ministry portfolio to a potentially king-making rival. Facing possible upset defeat in the March 17 vote, Netanyahu has launched a media blitz to counter what appears to be a rising tide of support for his main opponent, the centre-left Zionist Union. Moshe Kahlon, a former member of Netanyahu’s Likud party whose newly formed centrist party could be a deciding factor in who becomes prime minister, dismissed the offer as pre-election spin.
BPA’s CEO arrested The chief executive of Andorran lender Banca Privada d’Andorra (BPA), who was suspended along with the rest of the board last week, was arrested overnight on suspicion of money laundering, a police spokesman from the principality said on Saturday. Joan Pau Miquel had been running the bank until financial authorities in Andorra dismissed the board of directors and three managers on Thursday amid a money laundering investigation. Reuters was unable to reach BPA for a comment or to obtain a comment from Miquel. Andorra seized control of privately-owned BPA last week.
Egyptian President Abdel Fattah al-Sisi speaking during the opening session of the Egypt Economic Development Conference
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ne of Egypt’s leading businessmen said the country needs to fire inefficient civil servants to attract investment and strengthen the economy. Speaking at an international investment conference in the Red Sea resort of Sharm El-Sheikh, billionaire Naguib Sawiris, chairman of Orascom TMT Holding, said firm action was needed. “We’re lucky we have these good performing ministers right now, but some of them are stuck with old management from the past, when we should have fired all the people under them and brought in new ones,” Sawiris told the economic summit. Foreign investors have criticised bureaucracy and a bloated civil service of about seven million in Egypt, the most populous Arab country.
On Thursday, President Abdel Fattah al-Sisi ratified an amended investment law designed to give foreign investors fearful of red tape a one-stop shop. “We have a silent revolution where economic reform is concerned ... we have only had seven months,” said Investment Minister Ashraf Salman. Saudi businesswoman Lubna Olayan also called for reforms. “Changing the mind-set of all the bureaucracy in Egypt is the challenge,” she said. Despite the concerns, major companies announced investments during the conference, which Egypt hopes will project an image of stability and improve investor confidence hit by the upheaval after the fall of autocrat Hosni Mubarak in 2011.
British energy company BG will invest US$4 billion in Egypt over two years, its chief operating officer said. Italian oil major Eni signed an agreement with Egypt worth US$5 billion over four to five years. The United Arab Emirates’ Dana Gas will invest US$350 million over 30 months in new development wells, work overs of existing wells, new pipelines and debottling a plant, its chief executive said. UAE’s Masdar and Saudi Arabiabased ACWA Power agreed to explore developing up to four gigawatts of wind, solar and natural gas power generation projects in Egypt. PepsiCo will invest US$500 million in Egypt this year to expand production, its business unit manager for North East Africa Ahmed El Sheikh told Reuters. Cairo wants to double foreign investment in this fiscal year to US$8 billion, despite an Islamist insurgency in northern Sinai and frequent militant attacks across the country of 90 million. Egyptian authorities have mounted a full-scale advertising offensive, with the conference logo “Egypt the Future” found everywhere from billboards to chocolate bars on flights to Sharm el-Sheikh. In Cairo, the headquarters of Mubarak’s National Democratic Party, burned and gutted during the 2011 uprising, is draped with a banner reading “investment is the key to Egypt’s prosperity”. Gulf Arab allies pledged a further US$12 billion of investments and deposits at Egypt’s central bank in a big boost to President Abdel Fattah alSisi as he tries to reform the economy after years of political upheaval. Reuters
U.S. buys time under debt limit The Obama administration said it would expand emergency accounting measures to keep paying the nation’s bills after the government hits a legal debt limit on borrowing next week. In a letter to congressional leaders, Treasury Secretary Jack Lew said the government would be at the statutory limit beginning today. The Treasury will suspend investments in two government pension funds, Lew said. The Treasury on Friday suspended issuance of state and local government series securities, known as “slugs.”
S&P keeps Greece rating on “CreditWatch negative” Standard and Poor’s said Greece’s longterm credit ratings remain on “CreditWatch with negative implications”, citing the government’s “increasingly stretched” liquidity position. “We believe that the lack of a clear short- and long-term funding plan and the related political uncertainty weigh on GDP recovery prospects and tax compliance,” the ratings agency said in a statement on Friday. S&P said it is keeping its ‘B-/B’ long- and short-term ratings on Greece.
KKR, Varde and Deutsche buy GE Capital The streamlined GE Capital finance unit is focusing on funding purchases of heavy equipment, lending money to mid-sized companies and investing in commercial real estate
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consortium of private equity firm KKR & Co LP, alternative investment manager Varde Partners and Deutsche Bank has agreed to buy GE Capital’s Australian and New Zealand consumer lending arm for A$8.2 billion (US$6.26 billion). The trio said in a statement yesterday they were attracted to a business with more than 3 million customers and a long-standing relationship with many of the major retailers in both Australia and New Zealand. “GE Capital is one of the most respected providers of consumer finance in Australasia,” said Ed Bostock, director of KKR Australia. “They are led by a strong management team with an outstanding track
record of partnering with the leading retailers.” General Electric Co has been shrinking its financial services arm GE Capital Corp. after it weighed down the group during the 20082009 credit crisis. GE has also disposed of its appliances unit, real estate holdings and a stake in NBCUniversal. The streamlined GE Capital finance unit is focusing on funding purchases of heavy equipment, lend money to mid-sized companies and to invest in commercial real estate. “This transaction allows us to focus on our strategy to be the world’s premier infrastructure technology company with a speciality commercial financial services business,” said Geoff Culbert, president and CEO
of GE Australia and New Zealand. “We will continue to work with our customers in key industries including oil and gas, energy, healthcare, aviation and mining.” Duncan Berry, the CEO of GE Capital Australia and New Zealand, said the company would continue to build its commercial mid-market lending portfolio and leasing businesses in the region. Advisers to GE on the deal are Credit Suisse AG and Morgan Stanley. Advisers to the acquiring consortium are Bank of America Merrill Lynch, Moelis & Co and Citi. Wesfarmers Ltd. and Apollo Global Management LLC had also made a joint bid for the business, Australian media reported earlier. Reuters
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March 16, 2015
Opinion
A global strategy for disaster risk wires Business
Leading reports from Asia’s best business newspapers
Ban Ki-moon
THE KOREA HERALD
Secretary-General of the United Nations
South Korea posted a trade surplus for the 37th month in a row in February, mainly due to the sharp drop in imports that outpaced the decline in exports, customs data showed yesterday. According to the Korea Customs Service, the country’s trade surplus topped US$7.7 billion last month, up from US$5.36 billion tallied for the previous month and US$850 million a year earlier. Exports backtracked 3.3 percent on-year to US$41.5 billion, while imports nosedived 19.7 percent to US$33.79 billion. Export, import and surplus numbers are roughly on par with provisional figures.
THANH NIEN NEWS Simplified customs procedures and reduced time spent on tax payments are among reforms that have improved Vietnam’s business climate significantly over the past year, experts said at an on-going conference. This progress came on the heels of a government resolution issued in March 2014 that aims to improve the business environment and competitiveness of Vietnam by reducing costs, time and risks involved in doing business in the country, according to the Central Institute for Economic Management. The average time spent on tax and social insurance paper works has been shortened from 900 hours to 400 hours.
PHILSTAR Finance Secretary Cesar Purisima has recognized the potential benefits of Asia-Latin American trade in terms of economic growth. The United States and 11 other countries that border the Pacific Ocean are currently negotiating the trade and investment liberalization pact. The cutting-edge agreement aims to unite a dozen nations with the goal of establishing a free trade area. Seeking to create a 21st century agreement that addresses the myriad of issued faced by an increasingly globalized economy, the mega deal will eliminate tariffs and non-tariff barriers to trade in goods, services and agriculture.
THE TIMES OF INDIA Seeking to soothe the sentiments of foreign investors, disturbed by fresh claims of tax on past transactions by Indian authorities, finance minister Arun Jaitley has said his government was rationalizing the country’s tax system to make it fair. “We are trying to rationalize taxes - that is, lower taxes and introduce a non-adversarial and fair system” the finance minister told an event cohosted over the weekend by the Federation of Indian Chambers of Commerce and Industry and UK-India Business Council.
United Nations Secretary-General Ban Ki-moon delivers a speech during the opening ceremony of the Third UN World Conference on Disaster Risk Reduction (WCDRR) in Sendai
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urrent disaster-risk levels are alarming. The cost of damage to commercial and residential buildings worldwide is averaging US$314 billion each year, with the private sector bearing as much as 85% of that price tag. At the same time, a new United Nations report shows that annual investments in disaster-risk reduction of US$6 billion can result in savings of up to US$360 billion. Hundreds of business executives, aware of the dramatic costs – and potential benefits – at stake, are now preparing to attend a UN conference on disaster-risk reduction in Sendai, Japan. A decade ago, when the last such gathering was held, the private sector was scarcely represented. This time, companies and entrepreneurs will be there in full force to explore a range of valuable opportunities. The Tohoku region of Japan, where the meeting takes place, is a vivid reminder of how a disaster’s economic impact reverberates far beyond its epicentre. Devastated four years ago by the Great East Japan Earthquake and tsunami, Japan’s automobile production was cut by nearly half. The financial damage did not stop at the country’s borders; as a direct result of the slowdown in Japan, automobile production dropped by some 20% in Thailand, 50% in China, and 70% in India. The risks inherent in globalized production carry great rewards for those who know how to manage them properly. That is why major businesses such as PricewaterHouseCoopers, Hindustan Construction Corporation, AbzeSolar, Swiss Re, AECOM, AXA Group, IBM, and others – spanning many sectors and encompassing all
Enterprises that factor disaster risk into their construction plans will avert the much higher costs of retrofitting later
regions – are engaging with UN experts to improve global strategies for disaster-risk management and reduction. This level of business engagement bodes well for pioneering a new planet-friendly and people-sensitive approach to global prosperity. Indeed, the disaster-risk reduction conference in Sendai is the first in a series of major international gatherings this year. Beyond Sendai, world leaders will convene in Addis Ababa in July to discuss financing for development, in New York in September to adopt a new development agenda, and in Paris in December to reach a meaningful climate-change agreement. Taken together,
these meetings promise to generate transformative action that can set the world on a safer, more prosperous, and more sustainable path. Sustainability starts in Sendai for three major reasons. First, by its very nature, disaster-risk reduction requires forward planning. Second, investment in this area advances both sustainable development and climate action. And, third, helping those who are most vulnerable to disasters is the ideal starting point for the effort to aid all people by establishing universal targets for development and climate change. Over the last 12 months, thousands of lives were saved in India, the Philippines, and elsewhere by improved weather forecasting, early-warning systems, and evacuation plans. Advances in risk reduction that safeguard development gains and business investments must match this progress in disaster preparedness, and we must make wise choices that create greater opportunities in the future. For example, experts estimate that 60% of the land that will be urbanized by 2030 has not yet been developed. Enterprises that factor disaster risk into their construction plans will avert the much higher costs of retrofitting later. More broadly, over the next 15 years, the world will make major investments in urban infrastructure, energy, and agriculture. If this spending is directed toward low-carbon goods, technologies, and services, we will be on our way to creating more resilient societies. More and more industries appreciate this. At the Climate Summit that I convened last September at the UN in New
York, financial institutions, commercial and national banks, insurance companies, and pension funds vowed to mobilize more than US$200 billion by the end of this year for action to address climate change. They envisioned a host of new initiatives, including issuing socalled green bonds and shifting assets to clean-energy portfolios. In a particularly important move, the insurance industry, representing US$30 trillion in assets and investments, committed to creating a Climate Risk Investment Framework for industry-wide adoption by the end of the year. It is time to stop addressing development and humanitarian emergencies separately. Disaster-risk reduction lies at the nexus of development assistance, which seeks to advance better living conditions, and humanitarian aid, which begins after a disaster hits. Starting our international calendar with the Sendai meeting on disaster-risk reduction sends a clear signal that the world is ready to integrate its strategies. I have seen the human toll of disasters – from earthquakes in China and Haiti to floods in Pakistan and Bangladesh to Superstorm Sandy, which affected the Caribbean and North America, even inundating the lower floors of the UN facilities in New York. When business, civil society, and government team up to help countries withstand disasters, they save lives, boost stability, and create opportunities that enable markets and people alike to flourish. Sustainable profits. Sustainable livelihoods. Sustainable development. It all starts in Sendai. Project Syndicate
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Closing China tests planned flight route near Taiwan
Second batch of gov’t vehicles go under the hammer
China yesterday tested a proposed new flight route in the Taiwan Strait in a plan that had sparked a fierce backlash from the island over security concerns, officials said. Beijing has insisted the new route and three others that had all been scheduled to open on March 5 are necessary to ease congestion on an existing flight path, but Taiwan has slammed the unilateral move as “unacceptable” and said it poses a potential air defence threat. Inaugurating the four routes was postponed after protests from Taiwan.
A total of 100 official vehicles will be under the gavel on Wednesday to mark the start of four auctions of the second batch of the official vehicles impounded by central government earlier, said the National Government Offices Administration yesterday. A preview exhibition was held yesterday, the administration said. The auctioned vehicles include Passats and Lincolns, according to the website of Rocar, one of the three auction houses. The official cars are among more than 3,000 taken out of service as part of reform.
Weak euro to help European companies A number of competing U.S. companies said they would look at cutting costs
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he euro’s slide towards parity with the dollar will provide a much-needed boost for European companies this year and force U.S. rivals to adapt their businesses or risk losing market share. While currency hedging arrangements mean the benefits may not be seen straight away, the currency’s weakness has already cheered European chief executives by making their products cheaper overseas and lifting the value of dollar-based sales. “We have been handicapped by the strength of the euro, but now it seems that the wind is turning and we intend to make the most of this very positive currency effect that will help us deliver a nice increase of our sales and our profits in 2015,” Jean-Paul Agon, CEO of French cosmetics group L’Oreal told investors last month. Other companies predicting a tail wind from the around 20 percent drop in the value of the euro over the past six months to US$1.06 on Friday include jet manufacturer Airbus, German car and truck maker Daimler and French engineering groups Schneider Electric and Alstom. Some U.S companies also see positives from the weaker euro, including lower borrowing costs, better performance at European units which export, stronger demand from Euro zone-based customers and, for the leisure sector, increased travel into the continent. However, most U.S. groups that discussed the currency in recent weeks including Apple, Dupont, Priceline, Caterpillar and General Electric, have warned they may face headwinds in
KEY POINTS European companies cheer euro weakness Hedging means benefits may take time to come through U.S. rivals seeking ways to limit damage
Europe and elsewhere, and some, including Xerox, have cut earnings guidance as a result. These companies have said they are now looking to cut costs, increase the portion of inputs they source from inside the euro zone and adopt new pricing policies, to try and maintain market share and margins. “U.S. companies exporting goods to Europe could face margin pressure from price adjustments or promotions in Europe,” said James Targett, analyst at Berenberg. With euro weakness likely to persist
due to the European Central Bank’s quantitative easing programme and a likely hike in U.S. interest rates on the back of a stronger U.S. economy, longer term planning is a must. “You have to think about where your revenues are, where your manufacturing is and where you’re buying your raw materials from,” he added.
Time lag Many companies said hedging contracts would mean the impact of
the lower euro would take time to feed through. Paris-based Alstom and Swiss-headquartered engineer ABB, which has manufacturing plants in the euro zone, said it may not be felt until the second half of the year. Airbus said it was fully hedged for 2015, 2016 and “largely” for 2017, leading analysts to predict it could be 2018 before the group experienced any meaningful uplift. In the meantime, the weaker euro may actually weigh on some European companies’ earnings because companies must report drops in the values of hedging instruments, which move in the opposite direction to companies’ revenues. U.S .companies like Google and PepsiCo. said hedging would mitigate their losses in the short term. However, businesses are also looking at how they can reconfigure their operations to limit the hit from a weaker euro and capitalise on any opportunities.
S. Africa investigates car Aid effort stepped up after crash killing cabinet minister monster Vanuatu cyclone
Spanish banks chase business in foreign climes
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outh African police said yesterday it was investigating a car crash incident that killed Minister of Public Service and Administration Collins Chabane. Chabane died instantly in the crash happening in the northern province of Limpopo yesterday. His driver and a body guard were also killed. The truck driver involved in the crash was not injured. He was blamed for making a U-turn on the highway that caused the crash. “We opened a case of culpable homicide that will be investigated,” Limpopo police spokesperson Colonel Ronel Otto said. The truck driver was not arrested, Otto said, adding that police would investigate and take the dockets to court when it’s finalized for a decision. The Presidency announced the death of Chabane earlier in the day. A presidential statement said South African President Jacob Zuma “is saddened” by Chabane’s death. Chabane served previously as minister in the presidency responsible for performance monitoring and evaluation.
yclone-devastated Vanuatu declared a state of emergency yesterday as relief agencies scrambled to get help to the Pacific nation amid reports entire villages were “blown away” when a monster storm swept through. Communications were still down across most of the archipelago’s 80 islands, although Air Vanuatu said the airport in Port Vila had reopened with limited facilities. The government said it was still trying to assess the scale of the disaster unleashed when Super Cyclone Pam, a maximum category five system, vented its fury on Friday night, with winds reaching 320 kilometres an hour. The UN had unconfirmed reports that the cyclone had killed 44 people in one province alone and Oxfam said the destruction in Port Vila was massive, with 90 percent of homes damaged. “This is likely to be one of the worst disasters ever seen in the Pacific, the scale of humanitarian need will be enormous,” said Oxfam’s Vanuatu director.
Xinhua
AFP
Reuters
ubdued growth prospects at home are pushing mid-sized Spanish banks into foreign acquisitions that would have been impossible a few years ago as they struggled under the weight of bad loans. Helped in many cases by European Union rescue funds, Spain’s banks have reduced huge debts brought on by a property market crash and prolonged recession, and are now looking to grow. But the domestic market remains tough, with many companies still indebted and reluctant to borrow, and competition fierce for the few strong businesses seeking credit. With euro zone interest rates set to remain at record lows for the foreseeable future, some mid-sized Spanish banks are starting to copy the expansion strategy of bigger rivals Santander and BBVA, which weathered the economic crisis at home thanks to their overseas revenues. Sabadell last week became the latest mid-sized lender to seek a deal abroad, making a US$2.6 billion offer for Britain’s TSB. Reuters