Macau Business Daily March 11, 2016 by Business Daily

MOP 6.00 Closing editor: Joanne Kuai

President Xi Jinping to tackle business barriers Page 10

Year IV

Number 999 Friday March 11, 2016

Publisher: Paulo A. Azevedo

Gaming operators reducing number of shuttle buses Page 8

China to issue alleviating measures against bad debt Page 11

Fitch affirms Macau’s stable outlook

There are negative and positive factors. But Fitch ratings agency gives Macau ‘AA-‘. On the downside, the territory is adjudged to be too dependent on gaming. With the city’s banks overexposed to the Mainland. But Fitch is generally upbeat on Macau’s performance. Praising the city’s ‘exceptional’ public and external finances. With approval of gov’t policy and high income levels. Fiscal reserves are included ‘among the strongest across Fitch-rated sovereigns’, the agency emphasised Page 8

Utilising space

Brought to you by

HSI - Movers

Page 2

More hotel rooms on the horizon. At the end of Q4 some16 hotel projects were under construction. Which are expected to provide an extra 10,738 rooms to accommodate the city’s tourists

Page 2

China’s consumer prices increased 2.3 pct in February from one year earlier. Up from January’s 1.8 pct, official data showed. The inflation rate, the highest since July 2014, beat expectations

Page 10

17 gov’t departments rent private offices. The consequence of a lack of official space. Director of Financial Services Bureau (DSF) Iong Keong Leong finds himself on the sharp end of Legislative Assembly questions. Legislator Ella Lei Cheng I wants the department to rethink rentals to make better use of public money

Growing supply

Prices up

March 10

SARs still talking

Still no timetable for signing the mutual legal assistance agreement with Hong Kong. Secretary for Administration and Justice Sonia Chan Hoi Fan (pictured) says progress is being made. And hopes the agreement can accommodate a bill that defines the framework for inter-regional mutual assistance in criminal matters

Page 3

Name

%Day

Li & Fung Ltd

+4.95

Kunlun Energy Co Ltd

+1.94

Sands China Ltd

+1.81

AIA Group Ltd

+1.08

Want Want China Hold

+1.08

China Life Insurance Co

-2.01

Belle International Ho

-2.03

CITIC Ltd

-2.25

Cathay Pacific Airways

-3.99

Wharf Holdings Ltd/Th

-5.98

Source: Bloomberg

www.macaubusinessdaily.com

Creative and Cultural Industry

Shooting to fame

I SSN 2226-8294

Production house Shoot and Chop has just opened. Driven by Macau-Canadian-Chinese Kenny Leong, who is fast building a reputation. His ‘no punches pulled’ videos are getting people talking. About local social and political issues. It’s all in a bid for fame, he proclaims

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March 11, 2016

Macau

Almost 11,000 hotel rooms under construction in 2015 Q4 15,352 private housing units are being developed or awaiting occupation approval João Santos Filipe

jsfilipe@macaubusinessdaily.com

uring the fourth quarter of last year 16 hotel projects were under construction, which are expected to provide an extra 10,738 hotel rooms to the city, according to the latest data released by the Bureau of Land, Public Works and Transport (DSSOPT). With regard to the hotels under construction, nine are located on the Macau Peninsula (588 rooms), while one is located in Taipa (373 rooms), five are in Cotai (9,541 rooms) and one is in Coloane (236 rooms).

According to information released yesterday, during the last three months of 2015, some 34 hotels were in project phase, which could add as much as 8,882 rooms to the city. Of these hotels in design phase, 28 will be on the Peninsula, providing 3,407 rooms, one will be in Tapia (126 rooms), three in Cotai (4,881 rooms) and two in Coloane (468 rooms). In 2015, a total of 106 hotels were operating in the territory,

recording an average occupancy rate of 80.5 per cent. This was an increase of 8 hotels, which includes the mega resorts Studio City and Galaxy Phase II vis-a-vis 2014, when the average occupancy rate stood at 86.5 per cent

Private house buildings

DSSOPT also released figures regarding private housing being developed in the territory during the fourth quarter of 2015. According to DSSOPT, there

were 81 housing buildings being developed in Macau, adding 12,736 housing units. Of these buildings, 70 buildings will be placed on the Macau Peninsula, meaning 12,198 units. Three buildings will be in Taipa (263 units) and 8 buildings are to be developed in Cotai (275 units). Besides the 81 buildings being developed, 18 buildings are under inspection to receive a licence for occupation that will add another 277 housing units to the city’s stock.

Fixed asset investment DSF: 17 gov’t departments wholly renting private offices of MOP41 bln slated

he Director of the Financial Services Bureau (DSF), Iong Keong Leong, said a total of 17 public departments are currently wholly renting private commercial venues for their operations – while the majority of other departments are wholly or partly working in government-owned properties. Legislator Ella Lei Cheng I recently filed an interpellation with the DSF head, urging the financial department to review the needs of public departments renting private commercial venues for their offices in order to decrease the related expenses and make better use of public money. According to the 2016 Budget, the Secretary for Economy and Finance Lionel Leong Vai Tac has

allocated nearly MOP1.1 billion (US$137.5 million) for government bodies to rent private offices this year, double the MOP420 millionodd of 2011. In his reply to the legislator, Mr. Iong claimed that most government-owned properties had already been allocated for office use by public departments. “As the remaining minority cannot fulfill departments’ actual needs due to their old age, unsuitable size, remote locations and lack of auxiliary facilities, they are still being managed by the Financial Services Bureau (DSF),” the official wrote, adding his department would strengthen communications with other departments for better use of the city’s public resources. In the same enquiry, the

directly-elected legislator also complained about the department’s waste of public money having left the second floor of the government’s public service complex in Areia Preta vacant for some six years. Mr. Iong responded that public departments are stationing inside the complex in different phases in consideration of the relationship of different public services, as well as the co-ordination of human resources. He added that the Identification Bureau would expand its current services in the building to the second floor during the second half of 2017 with 11 new counters introduced, suggesting the complex would become fully operational at that time.

for Hengqin this year

ixed asset investment of MOP41 billion (US$5 billion) is planned to be achieved in Hengqin New Area this year, according to local media Macao Daily reporting on the 2016 Key Construction Projects Meeting that took place in the neighbouring island of Zhuhai City. The plan includes 15 projects with a building area of 1.2 million square metres in total and 54 properties with total building area of 580,000 square metres. Basements with a total area of 700,000 square metres are to be finished and new projects with a total area of 1.1 million square metres are to be started. For the mentioned fixed asset investment,

six main projects are from Guangdong Province with investment of MOP3.9 billion planned. Some 38 main projects are from Zhuhai City with planned investment planned of MOP13.3 billion, while 86 main projects are in Hengqin with planned investment of MOP36.6 billion. More than ten projects from Macau will also be finished. In addition, the construction of more than 20 infrastructure projects including the Cheung Wan Tunnel, the Hengqin Port and the Integrated Transportation Hub, and the Light Rail Transit (LRT) Hengqin Extension Line are assured. B.L.

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March 11, 2016

Macau

Mutual legal assistance agreement of SARs still on table Secretary for Administration and Justice Sonia Chan said she could not confirm when the agreement would be signed as the parties are still dealing with the details

ecretary for Administration and Justice Sonia Chan Hoi Fan (pictured) said there is no timetable for Macau’s mutual

legal assistance agreement with Hong Kong as the two cities are still negotiating the details of the co-operation. “The progress of the

Hong Kong could surrender fugitives to the city On the other hand, the Secretary stressed yesterday that the SAR Government would have the right to request Hong Kong to extradite fugitives to Macau if verdicts are still effective after the implementation of the extradition treaty. Asked by reporters whether that would be the case for Hong Kong businessmen Joseph Lau and Steven Lo, the official declined to comment. “We repeat that when this agreement is implemented, we can request the other [SAR to] surrender [a fugitive] or execute

[a ruling] if their verdicts are still effective,” she said. In 2014, the two aforementioned businessmen were found guilty of corruption and money laundering in paying a bribe of MOP20 million (US$ 2.5 million) to the city’s ex- Secretary for Transport and Public Works Ao Man Long in 2005. They were sentenced to five years and three months in jail but due to the lack of extradition agreement between the two Special Administrative Regions neither of the two Hong Kong businessmen is currently behind bars.

negotiation [with Hong Kong on the agreement] is quite smooth in that we have reached certain consensus… Nevertheless, there are still some adjustments to make following studies by both sides,” the Secretary told reporters yesterday following a closed-door meeting with Hong Kong’s Secretary for Justice Rimsky Yuen Kwokkeung. Ms. Chan said she hopes the future extradition agreement between the two cities would be consistent with a recent governmentproposed bill that defines the framework for inter-regional mutual assistance in criminal matters. “As we want to integrate the contents of the agreement with those of our future law, we cannot give a specific timetable,” the official claimed.

No schedule

Yesterday, the president of Legislative Assembly, Ho Iat Seng, told reporters on

the sidelines of the National People’s Congress in Beijing that the local legislature had already received the draft text for the inter-regional extradition bill from the government after the Chinese New Year. But the AL president indicated that legislators had not yet scheduled a time to discuss the bill as they were handling more than ten bills.

Meanwhile, Ms. Chan told reporters that her office will do its best to assist legislators evaluate the bill. She also remarked that the SAR Government’s negotiation on another mutual legal assistance agreement with the Mainland China had reached consensus on most of the contents. J.S.F.

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March 11, 2016

Macau opinion

To be or not to be

Pedro Cortés

Lawyer cortes@macau.ctm.net

et’s see how the week of a person in Macau pans out. Monday, Mr. Chio wakes up and he is a tailor. Being a tailor is great. There are many clients that need a white-collar shirt. Mr. Chio makes the best collars in Macau, Taipa and Coloane. He is thinking of expanding to Cotai. There are potential clients there and he is very enthusiastic about the business opportunities beckoning. Tuesday. Mr. Chio is now called Ho. As Mr. Ho he is a runner at an international firm that sells shoes. His day is filled with taking care of papers and delivering them to the appropriate departments. He is very happy with his salary, as there is a high demand for this type of job and the salary has tripled in the last 10 years. Wednesday, Mr. Ho changed into Mr. Meng. He is the owner of a machine rental business for the construction of many hotel chains. He is rich and his daughter is already studying in New Zealand where his brother is a successful restaurant chain owner. Thursday, Mr. Meng is now Mr. Ho Meng. The name has enlarged and fortunately he has a very stable cleaning services company due to a contract he has landed following three years of presentations to the biggest local restaurant chain company. Friday, Mr. Ho Meng changed into Mr. Meng Ho. He is a prominent lawyer. Because of that he was able to rub shoulders with some of Macau’s prominent leaders. He is very, very happy with his office, which has increased from one sole practitioner to 10 lawyers. He is great at what he does and he’s thinking about expanding to Taiwan and Japan. Well, the above may not be possible. Fortunately or unfortunately, we cannot be, with few exceptions, one thing today and another tomorrow. We cannot have one function on Mondays and another on Tuesdays and Fridays. We cannot be from Sporting Macau on Monday and support the local football champion Benfica Macau on the other days. As one cannot be a magistrate to be interrogated and not a magistrate to have the imprisonment rules applied. It is a privilege to be a magistrate. That was what the law intended to rule and foresee. And the law cannot be breached by the highest court of Macau, which has the obligation to preserve the second system. Yes, my dear and learned friends: what we are discussing here is whether Macau is the second system or not. I hope it continues to be but there are many signals that I may be wrong, as I have been many times in my life.

Non-resident worker applications denied to create local upward mobility The Chief Executive has stated that the lowered approval rate for blue cards will “motivate big companies like gaming operators to be more responsive to enable more local employees to join their management teams”

cross all sectors in Macau only 75.97 per cent of skilled nonresidents applying in 2015 managed to have their working permits authorised or renewed, the second lowest approval rate for the past five years. In the gaming sector, the Human Resources Office approved just 1,075 non-residents of the 1,369 that applied as new applicants and renewals, an approval rating of 78.53 per cent, the lowest rate on record since such data became available in 2011 and about 12 percentage points less than the average recorded in the 2011-2014 period. This is due to an effort to “motivate big companies like gaming operators to be more responsive to enable more local employees to join their management teams,” as stated by Chief Executive Fernando Chui Sai On in his Annual Policy Address in 2013. This push for upward mobility

for local workers was echoed by Secretary for Economy and Finance Lionel Leong Vai Tac, stating that non-resident workers are here to “complement a shortage in the local workforce,” in a meeting with gaming operators last year. The government has focused on more areas than just gaming in its efforts to elevate locals to managerial roles, with figures on the hotel and restaurant industry only granted or renewed permits for 857 out of the 1,138 skilled labour requests in 2015, a 75.31 per cent approval rating as compared to the 87.82 per cent average recorded in the period between 2011 and 2014. The retail sector recorded a 56.22 per cent approval rating last year, compared to 71.02 per cent between 2011 and 2014, renewing and approving only 271 of the 482 skilled workers that applied.

Casinos and big operators are not the only ones affected with many SMEs suffering the consequences of the policy. The overall approval rate of labour quotas for foreign workers was 58.37 per cent and 59.07 per cent in 2014 and 2015, according to the Human Resources Office, versus over 67 per cent in 2013. The government used to approve quotas for two foreign personnel for every three local workers in SMEs in the past but now it only approves quotas for two for four or five local workers employed, says president of the Macau Businesswoman’s Association Kong Mei Fan. Official guidelines for industries outside the construction industry – where one resident must be hired for each nonresident – have never been issued. Read the full story in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com

Residents criticize Landfills Director Plan The main issue is housing, with many residents believing that the new housing density in Zones A and B should be low

n the third phase of public consultation on the plan to create and develop five new zones using landfill 59 per cent of participants are still worried that their expectations might not be met, a 4 percentage point drop from the previous consultation. Phase B of the project, to be created on the shore abutting Sai Van Lake and Nam Vam Lake, was the cause of a greater number of opinions, split at 41.4 per cent that agree with the project and 33.8 per cent that don’t. The main issue is housing, with many residents believing that the new housing density in the area should be low, to minimise a perceived ‘significant impact’ on human and geographical development, which could affect cultural heritage in the region. On a scale of one to 10, the level of acceptance of a zone destined for administrative and judicial buildings

is 6.1, with some residents choosing Zone B as the desired zone as these buildings should be ‘surrounded by financial and commercial areas’. Others suggest that some of the lots slated for government use be used for commercial and housing instead, with administrative and judicial buildings moved to Zones C and D ‘so that the view of Penha Hill is not affected.’ Zone A, located next to the island border for the new Hong Kong-Zhuhai-Macau Bridge, met with favourable views from locals on the construction of public housing although traffic and population density are of concern, given a ‘very unfavourable position’ concerning traffic and public installation strategies, prompting a request to review parameters for the 28,000 planned public housing units to be constructed in the area. Other suggestions fielded in the

consultation include accelerating the construction of, allowing motorcycles on and keeping open 24 hours the Hong Kong-Zhuhai-Macau Bridge; creating tourism attractions such as a food square, assorted entertainment elements and a path for people to walk or bike along as well as creating infrastructure including sport and leisure facilities, large gardens, libraries and venues for the creative industries. In the planning of Zones C, D and E of the New Landfills, the majority of residents agree with the adoption of a ‘low carbon level’ concept, which would be achieved by using ‘environmentally friendly materials’. The third phase of the consultation gathered 6,510 opinions. Read the full story in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com

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March 11, 2016

Macau their offices to Hengqin in the future and view it as their back office.

Zhuhai property prices

Midland expects corporations to shift office to Hengqin Facilities and remuneration costs in Hengqin favour corporations, according to Midland Macau Bami Lio

bami.lio@macaubusinessdaily.com

ffice buildings under construction in Hengqin will have some impact on the office real estate market in Macau, and corporations may move their offices there, Managing Director of Midland Macau (Zhuhai and

Macau districts) Brian Chu told local newspaper Macao Daily. Chu stated that the quality of offices in Hengqin is better than in Macau, citing the example of ageing office buildings in Macau NAPA area, while facilities, management

and maintenance in Hengqin are comparatively better. He added that the cost of remuneration is high in Macau and that it is difficult to hire staff, while the cost in China is lower and it is easier to attract staff. Corporations in Macau may move

Mr. Chu said that last year the price of real estate in Macau had decreased some 30 per cent from its peak, with new properties dropping to around MOP6,000 (US$ 750) per square foot, which is heading to its bottom. The price of new properties in Zhuhai is getting higher than in Macau while that should not be the case. He therefore expects the lowest price in Macau will most probably appear in May or June. Property developers also observe the trends in the market, Chu added, saying the price of new properties cannot be as high as more than MOP10,000 per square metre. They will set new prices according to market conditions; if prices are too high to meet demand they will cool market confidence. Midland Macau is planning three more branches in the western district of Zhuhai in addition to the eight already existing in Zhuhai. The company says it’s going to increase the number of employees by 70 per cent, on top of the existing 400. It is also considering expanding their business to Zhongshan in Guangdong province. The company says it will handle Zhuhai properties in Macau because there are fewer transactions in the Macau market, and staff salaries will have to increase as they can sell in different regions. Midland Macau primarily provides property agency services in Hong Kong, China and Macau.

Mainland Chinese writer praises freedom of MSAR

Corporate

Chen Xi Wo talked about two of his controversial books banned in China at the Macau Literary Festival

“I H&M launches its biggest recruitment campaign Global clothing retailer Hennes & Mauritz AB (H&M) unveiled its largest recruitment campaign in Greater China called ‘Place of Possible’ on March 3. The programme aims to support the company’s continued expansion plans. A total of 44 H&M employees across the region are acting as brand ambassadors

to attract new talent to join the fashion retail industry. “It feels natural for us to launch the ‘Place of Possible’ campaign with our own employees as the brand ambassadors because they are our most important asset,” said Magnus Olsson, Country Manager of Greater China at H&M.

n Macau, I feel like I can breathe in freedom here as I’ve never had opportunities of this kind for public exposure with the audience before in China where you can only say what they like to hear,” said Chen Xi Wo. The author of ‘I Love My Mom’ and ‘The Book of Sins’, presented a talk at the Old Court Building during the fifth Macau Literary Festival on Wednesday night. “If public secrets were revealed in my books, they would be banned, but I want to reveal the secrets. This kind of genre does not fit in with the contemporary literary [scene] in Mainland China and I am an aggressive and provocative writer,” he explained. Mr. Chan has been bombarded by criticism for his books depicting incest, political deviance and corruptive society in Mainland China. “My books are banned in China.

The publishers lost a lot of money so they stopped contacting me. As a writer, I need to break the barriers and be free. Not only do I have to go through many procedures, also the publishers need to go through rigid censorship with the Chinese Government,” He said during the talk. Chen Xi Wo is a Mainland Chinese writer born in 1963 in Fuzhou, Fujian. ‘I Love My Mom’ is the first English translation of his works, which, published in Taiwan in 2007, is banned in China. ‘The Book of Sins’ caused an international sensation when he sued the Chinese Government for banning the book. He has won awards such as the British PEN Award and the Mainland Chinese People’s Literature Award, with his books translated into English, French, Italian and Japanese. A.L.

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March 11, 2016

Macau New production house in Macau creates a stir with social and political critiques

Shoot and Chop – the new production house unafraid to tell its truth Production house entertains, delights, critiques and invests in products before clients. Kelsey Wilhelm

Kelsey.wilhelm@macaubusinessdaily.com

as long as I’m not bashing people and the government,” he maintains.

Never for the money

Secretary for Social Affairs Alexis Tam attends 3 Black Suits photo exhibition

hoot and Chop Production House is the most recent brainchild of founder and coowner Kenny Leong, an outspoken, self-proclaimed “Macau-CanadianChinese” who upon his return to the MSAR three years ago set out to raise local voices on social and political problems, injustices, lack of regulation and an underdeveloped artistic environment. With a viewpoint that “the sky is the limit,” he tells Business Daily the ups and downs of the current business environment, how to have faith in your product, create what you believe in, and his unique perspective on the territory. Moving back to Macau in 2013 with only “MOP12,000 in my account”, an amount that at the time could last him “three months”, Leong set out to be famous, spending over MOP350,000 of his own money to purchase equipment and creating video after video to drive his online viewership. His success, evidenced by the amount of views his productions consistently generate – the most recent of which is topping a combined 800,000 views on social media site Facebook - has propelled him across various platforms, investors and ideas, eventually setting up the current four-man operation: Shoot and Chop Production House.

Fame is the game

Kenny Leong describes fame as the basis to attracting his clientele base – a natural by-product of his focus on issues in Macau that others intentionally shy away from; in particular, criticizing the government – one of the main targets of his ‘Pissed-off man’ videos, which have featured blazing dialogues denouncing polemic initiatives like the Wealth Partaking Scheme. In one such video he compared the scheme

of Macau residents receiving a yearly “allowance” to “shut me up”, before having money stuffed in his mouth, MOP9,000 handed to him and lapsing into silence. This is only one of the issues he spears, not with the intention of railing against the government, but as part of the core ideology of the company which he describes as “to promote change and to challenge – not the government – but challenge the minds of people living here.” He points out that every city has its problems, but by setting up his company here, a place that he calls home, he can open the door to dialogue. “I think as a production house, we’re using our own platform, our own business to voice out the opinions of the Macau people,” says the Shoot and Chop founder. “I feel like it’s necessary to put a voice to things that you don’t like or things that you want changed.” Recently, the production company published a video to raise awareness about the safety of motorcycle helmets in the city, done by bashing a series of different helmets repeatedly with a hammer and counting how many hits it took before the helmets lost their integrity and shattered into pieces – a simple but effective way to demonstrate his point about a local lack of enforcement of regulations on helmets. standards.

Political activism

He has managed to attract the attention of Secretary for Social Affairs Alexis Tam, establishing an important dialogue and allowing Leong to express to the Secretary his “outlook of creative arts and the structure of the creative arts industry in Macau”. And he finds the Secretary positive and supportive, saying, “He is one of the few believers, in my opinion, that really sees a great future in the arts community”.

The entrepreneur doesn’t feel any fear about speaking up against what he sees as injustices or problems, despite the potential repercussions in such a small society. He explains that the production house’s work, often political in nature, can have a backlash but is not created with negative intentions. “I think everything that we do in a way ties to not only the public but political people and politics in general. So in a way, if you’re touching politics, the government will know. When you’re pointing out problems, I don’t know how much the government will like it, but at the same time these problems are important for the government and the people to know. So I’m not afraid to voice the problems and issues here,

Of course, I want to be famous; once you have that power, once people know you, then it’s that much easier to push out your videos, that much easier to push out your ideas and your thinking. Kenny Leong, founder and co-owner of Shoot and Chop Production House

Kenny finds himself in a unique situation in what Joe Liu, co-founder of media and marketing company MOME – which has featured a number of Kenny Leong’s videos and worked with the Shoot and Chop founder – describes as a “small market, compared to Hong Kong.” Mr. Liu supports Leong’s stance that the MSAR “needs quality productions here as a showcase to drive the demand. Without that, without enough people here doing it, it’s very hard for people to see or realise what can actually be done.” But creating interesting and entertaining content doesn’t pay the bills. “Ccreating audio-visual content is fun but if it's purely just for the fun, no profit or revenue would be generated, and a lot of people would shy away from that. Why work in a production house making peanuts, when you could grab a simple casino job making [money] handsomely?” asks the showman. The reason, it seems, is the power of visibility and fame: “It’s not always about money. I want the power first,” he explains. “Of course, I want to be famous. Once you have that power; once people know you, then it’s that much easier to push out your videos, that much easier to push out your ideas and your thinking.” However, nothing is achieved without money, and running a production company involves staff, equipment rental, transportation and more, a reason for which Kenny Leong is grateful to his investors, both current and former. “I’m just really blessed that I have people believing in my work,” he explains, “I have a wonderful partner in Iwin Kuok” – the investor in the production house and main force behind a new initiative to drive the “clientele work” side “that includes TVCs (television commercials), promos and short films,” he said. “We’re creating another line just to cater to income-based projects,” in order to “offer to our clients and other businesses our services through what we do best: production.”

Macau’s got talent

Shoot and Chop is not the only name in the game in the production industry; in fact, Macau is not at all lacking in talent in the area, a fact that many are happy to state. Campbell McLean, General Manager and Executive Producer of media production company Aomen TV, pointed out to Business Daily that the talent is definitely here, and on the increase. “There’s a lot more good quality, younger, talent available in Macau compared to when I first came here eight years ago,” says Mr. McLean, mentioning that it’s enough to deal with “current demand” but that it “could benefit from more exposure to larger, bigger budget and international work because younger crews in particular

Business Daily | 7

March 11, 2016

Macau learn their trade skills by working with larger productions or production personnel with more experience.” Nuno Veloso, founder and owner of boutique photo studio Core Studios, which also specialises in production work, explains that talent is definitely here, but most creative people are restricted to day jobs to get by. “I don’t see a lack of creative people in Macau anymore,” says Mr. Veloso. “Some of them might be a little bit afraid of making the next step, so they are basically just working in a normal daily job . . . when they could have their own company doing what they are good at but I think they prefer to be a bit more stable.”

Mixed view

MOME is one of the few places outside of casino resort production departments where these two possibilities meet, as co-founder Joe Liu describes of their production work: “we do everything in-house pretty much.” His viewpoint on the talent pool here is mixed: “It’s not easy to find so many production professionals who can be both good at creative and at the same time commercially aware,” he explains. The current environment could be the drive behind this, Mr. Liu says “the industry itself is not really growing a lot – by the number of support. Therefore, the demand is not really responding in the same way.” So how to get around this? The common viewpoint is that the only way to attract attention to your productions is to invest in yourself and create – exactly what Kenny Leong is doing through Shoot and Chop – which officially launched its first video in January of this year. Nuno Veloso sees this investment as absolutely necessary for success, saying, “You need to be the first one investing in yourself because no-one else will do it if you don’t show first that you have done it and that you have been successful . . . people need

MOP 350,000 amount personally invested by Mr. Leong in his production equipment

to open their minds more and their budgets to invest in their own crafts.”

Get creative

The challenges facing production houses in Macau are simple but encompassing. “The shrinking economy is going to affect everybody,” explains Leong. “If the big time players don’t have enough then even the small time players will not get those big time gigs as well, so just getting the bigger paying gigs to sustain your company and paying your employees and paying all the essentials will be tough. But at the same time, you just have to get creative in promoting yourself.” Coming from a background where he did everything himself, Leong still sees the “sky is the limit”. “It’s just amazing for me to be able to live in this place,” he says. And his focus is on the now: “I just think about my next project and that’s enough because life is that fragile. I don’t know if I will have three years to live, hopefully, but still, I’m just taking everything day by day.” Still, every artist dreams, and in an ideal world Kenny would take Shoot and Chop much further than the current limitations allow. “If I had all the power and all the money, hell no, it [the current scope of the business] wouldn’t be the same. I’d start a legitimate TV channel and broadcast and show everything that I

believe in. Not only my own content but other people’s work as well, especially within the arts community because artistic people have a lot of expression and a lot of opinions and a lot of creativity and a lot of things that they want to say but it’s balled up in their mind or in their own work.” Artists in Macau, much like in other cities, must deal with limitations. “The market's appeal for your product determines if you will be able to make a living off your art,” he reflects, “and that is never easy here in Macau. Any artistic products, including media productions are in their infancy locally. It will take a period of time, usually a long one, to fully develop something that caters towards the public mass,” he opines.

Government support

This support for local artists is something Leong firmly believes in, saying, “I think we need the exposure for the artists in Macau. But I don’t want to only limit [myself] to Macau, I want to be a broad kind of platform that is also accessible to people from Hong Kong, Taiwan, China – I think that’s the main focus, the Chinese community here; not only limited to them, but everybody living here.” Support from the government for the creative industries has been forthcoming, in many shapes

Kenny Leong, founder and co-owner of Shoot and Chop, in his studio located in the Macau Design Center

including the Cultural and Creative Industries Fund. Aomen TV’s Campbell McLean sees the current process as “overcomplicated” and Core Studio’s Nuno Veloso has not procured government support because “before you’re able to get any sort of external support to your company you need to prove yourself that you can do it by your own self,” a sentiment echoed by Shoot and Chop’s independence so far from government support. McLean, however, applauds the existence of these types of programmes saying “one can’t complain about the fact that there is a subsidy available, for people do benefit from that. That’s great. At least someone is taking the initiative to provide assistance in some form or another.” Leong agrees with the sentiment, echoing that these types of initiatives can allow creatives to break out of purely money-oriented jobs and pursue their dreams. “I think it’s great that we as artists have the CCIF backing us up in this city. It shows that a part of the government cares for its local artists with their investments in us, helping propel us to become our fullest of potentials [something that] every true artist seeks out to achieve.” Shoot and Chop is located in the Macau Design Centre, in the northern Areia Preta area of Macau and spreads its work primarily through its YouTube and Facebook channels.

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March 11, 2016

Macau

Fitch praises city’s ‘exceptional’ public and external finances However, the credit rating agency says that Macau’s economy is too dependent upon gaming and stresses that the exposure of the banking sector to the Mainland may pose problems João Santos Filipe jsfilipe@macaubusinessdaily.com

xceptionally strong public and external finances, government policy, and the high income levels in the territory are the positive reasons mentioned by Fitch credit rating agency yesterday in ranking the default risk of the territory at ‘AA-’ with a stable outlook. This level is the fourth highest in the agency’s scale, after ‘AAA’, ‘AA+’ and ‘AA’, and ‘denotes expectations of very low default risk’. ‘Macau's ratings are underpinned by exceptionally strong public and external finances, a credible policy framework, and high income levels’, the report issued by the Hong Kong office of the American company said. Still on the side of the positive side of the Macau economy, the agency stresses the ‘budget surplus in 2016 [will] stand at 2.9 per cent of Gross Domestic Product (GDP)’, which will still be affected by ‘gaming revenues falling by a more modest 5 per cent’.

the agency is concerned about its exposure to the economy in China. ‘Fitch continues to view Macau's large banking system exposures to China as a potential risk to its credit profile, even though asset quality remains high. The Monetary Authority of Macau (AMCM) estimated Mainland China exposures were MOP364 billion (US$45.51 billion) as of June 2015 (27per cent of banking sector assets)’, the agency noted. The fiscal reserves, which represent 5.2 times the government’s projected budget for 2016, and external finances, are included ‘among the strongest across Fitch-rated sovereigns’, it was highlighted.

Downside and banking exposure

The risks that may lead to a default by the territory are for the most part related to dependence upon the gaming industry and the Chinese

economy, through tourism and the banking sector. “The ratings are constrained by the territory's volatile macroeconomic performance, high concentration on the gaming industry and Mainland China, as well as some relatively weak structural indicators”, the rating agency stressed. This year, Fitch is expecting the GDP of the territory to dip another 6.5 per cent, following a fall of 20.3 per cent in 2015. The rating services company also says the decline in gaming revenues will only be partly ‘counterbalanced by moderate growth in consumption and investment from ongoing resort construction’. While the asset quality of the banking sector is said to be ‘high’

Negative and positive factors

In future, Fitch is not expecting the rating of the territory to be upgraded or downgraded and this is why the outlooks is defined as ‘stable’. However, the agency stressed that some factors may lead to a change in the rating of the city. Of the negative factors that may affect Macau, Fitch mentions ‘a severe economic shock from China, in light of the close economic and financial linkages’ and ‘a sustained decline in gaming revenues’. Of the positive factors, the credit rating agency highlights the ‘diversification of the economy into sectors less reliant upon gaming and China’ and ‘sustained improvement in the sovereign balance sheet strength’.

W W W. T H E S C R I P T R O A D . O R G

Gaming operators reducing number of shuttle buses

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三月 • MARÇO

MARCH 2016

The intention, according to DSAT, is for the shuttle bus routes in the territory to be cut by 20.55 per cent from 73 routes to 58

aming operators have recently been urged by the Traffic Affairs Consultative Committee to reduce the number of shuttle bus routes, and they are already taking action as requested. The plan revealed by the government indicates that the goal is for the number of shuttles routes in the territory to decline 20.55 per cent to 58 bus routes from the 73 operating in 2015. As of this moment, the number stands at 65 bus routes, a decline of 11 per cent per cent, according to Portuguese language newspaper Hoje Macau, which quotes the Transport Bureau (DSAT). In terms of number, Sands China is the operator to have cut the largest number of routes, reducing its bus routes by four shuttle buses from 21 to 17. Regarding the number of routes operated by the company, this

represents a decline of 17 per cent. The American operator has already accomplished its final goal in terms of the reduction of shuttle buses. During the same period, SJM Holdings recorded a decline of three bus routes from 12 to nine. In percentage terms, this is the largest cut among the operators representing 25 per cent of its own operated routes. However, the company founded by Stanley Ho still has to cut another two bus routes. MGM has already accomplished its goal by cutting the number of bus routes from 5 in 2015 to 4 this year, a 20 per cent decline year-on-year. The remaining operators, Melco Crown, Galaxy and Wynn, have yet to cut the frequency of their shuttle buses. The companies are expected to reduce the routes by 7.15 per cent, 18.75 per cent and 20 per cent, respectively. J.S.F.

Business Daily | 9

March 11, 2016

Gaming

The US$1 billion plot to rob Fed accounts leads to Manila casinos A Bangladesh official said the central bank plans legal action against the Fed to retrieve missing funds David Tweed and Arun Devnath

The funds were used to buy casino chips or pay for losses at venues including Solaire Resort & City of Dreams Manila, according to a local newspaper

scheme to steal nearly US$1 billion from Bangladeshi bank accounts at the U.S. Federal Reserve, an unidentified ChineseFilipino businessman linked to casinos in Manila and a lax antimoney laundering regime. These are just some of the intriguing elements in a murky story shaping up to be one of the biggest documented cases of potential money laundering in the Philippines. It risks setting back the Southeast Asian nation’s efforts to stamp out the use of the country to clean cash, and tarnishing the legacy of President Benigno Aquino as elections loom in May. The case highlights the threat to any institution -- government or private -- from increasingly sophisticated criminals intent on thieving from unsuspecting and unprepared victims through cyber attacks, including stealing bank codes. Bangladesh is the 20th most-cyber attacked country, according to a real time cyber threat map developed by Kaspersky Lab, an international software security company. “Even as banks continue to harden their defences against such sabotage, hackers too have upped their game to breach servers by utilizing both technical skills and rogue elements within the financial institutions,” said Sameer Patil, an associate fellow at Gateway House in Mumbai who specializes in terrorism and national security.

Bangladesh accounts

The story begins in Bangladesh, a country of about 170 million people that’s recently found itself with record foreign reserves thanks to a low wagefuelled export boom and inward remittances. Some of those reserves were held in an account at the Federal Reserve Bank of New York. Finance Minister Abul Maal Abdul Muhith this week accused the Fed of “irregularities” that led to the unauthorized transfer of US$100 million from the account. The Bangladesh central bank said the

funds had been stolen by hackers and that some had been traced to the Philippines. A Bangladesh central bank official who is part of a panel investigating the disappearance of the funds said Wednesday that a separate transfer of US$870 million had been blocked by the Fed. The official requested anonymity because the investigation is private.

No signs

A Fed spokeswoman said there were no signs its systems had been hacked. Instructions to make the payments from the central bank’s account followed standard protocol and were authenticated by the SWIFT message system used by financial institutions, she said. A Bangladesh official said the Fed should’ve checked the payment orders with the central bank, and that it plans legal action against the Fed to retrieve the missing funds. A Fed spokeswoman on Wednesday said she had no comment when asked about the attempted US$870 million transfer and Bangladesh’s plans to recoup the funds. In the Philippines, the gaming regulator said it is investigating reports that as much as US$100 million in suspicious funds were remitted to the bank accounts of three casinos it didn’t identify. The probe highlights a potential weakness in Filipino attempts to stamp out money laundering that arose after lawmakers in 2012 succeeded in excluding casinos from the institutions required to report suspicious transactions to the AntiMoney Laundering Council. The country is at risk of rejoining a “gray list” of countries that aren’t doing enough to fight laundering, Teresita Herbosa, chairman of the Philippine Securities & Exchange Commission, told reporters earlier this month.

‘Black eye’

“This is a black eye on the entire Philippine financial sector,” said

corruption and erasing the “Asia’s sick man” tag that had been used to describe the Philippines for decades. His efforts have had some success. The Philippines ranked 95th out of 168 nations and territories in Transparency International’s 2015 corruption perceptions index, up from 134th in 2010. The Philippine Daily Inquirer has led reporting on the theft. It wrote last month that cash may have entered the Philippines via the Jupiter Street, Makati City, branch of Rizal Commercial Banking Corp. The money was converted into pesos and deposited in the account of an unidentified Chinese-Filipino businessman who runs a business flying high net worth gamblers to the Philippines. The funds were used to buy casino chips or pay for losses at venues including Bloomberry Resorts Corp.’s Solaire Resort & Casino and Melco Crown Philippines Resort Corp.’s City of Dreams Manila, according to the paper. There was no suggestion in the report the banks or casinos named were complicit with any improper movement of funds.

‘Every stage’

The probe highlights a potential weakness in Filipino attempts to stamp out money laundering

Senator Serge Osmena, chairman of the Senate committee on banks and financial institutions. There are loopholes in the anti-money laundering law, he said. While lawmakers will investigate the case at a hearing March 15, they won’t be able to amend the law before the end of Aquino’s term, Osmena told Bloomberg. Aquino spokesman Sonny Coloma said he had no information on reports that funds from the Bangladesh central bank reached the Philippines. The case is being handled by the AMLC, an independent body, Coloma said. Bangko Sentral ng Pilipinas Governor Amando Tetangco, who heads the AMLC, did not reply to mobile-phone messages seeking comment.

Presidential election

Aquino can only serve a single six-year term and has backed the candidacy of Mar Roxas, his former interior secretary. The outgoing president touts his record of curbing

Bloomberry Resorts investor relations director Leo Venezuela and City of Dreams Manila Vice President Charisse Chuidian didn’t reply to calls and phone messages. Funds were later dispatched into accounts outside the Philippines, the paper said, including to Hong Kong. The Hong Kong Monetary Authority declined to comment. The Inquirer separately reported the head of the Rizal branch where the transactions occurred had made a statement that top bank officials were aware of the transactions “at every stage.” Rizal’s shareholders “are fully committed to comply with all banking laws and regulations, in particular those on money laundering,” Vice Chairman Cesar E.A. Virata said in a statement Wednesday. In a separate statement, the bank’s Chief Executive Officer Lorenzo Tan condemned “any insinuations that the top management of the bank knew of and tolerated alleged money laundering activities in one branch.” The exact amount stolen from Bangladesh is a moving target. While Muhith said the Fed was responsible for at least US$100 million, another Bangladeshi central bank official who asked not to be identified said US$20 million of a US$101 million total had been recovered from an account held in Sri Lanka, leaving $81 million unaccounted for. That figure matches the amount Rizal’s Virata said the bank was investigating. “The Philippines still struggles to establish a robust bureaucracy that can properly supervise and regulate the financial system,” said Richard Javad Heydarian, an assistant professor of political science at De La Salle University. There are still a “myriad of loopholes in the Philippines’ legal and law enforcement system.” Bloomberg News

10 | Business Daily

March 11, 2016

Greater China

February consumer inflation hits fastest pace since 2014 China’s consumer price index rose 1.4 percent in 2015 from a year ago Xiaoyi Shao and Pete Sweeney

hina’s consumer inflation beat forecasts in February, accelerating at its fastest pace since July 2014, while producer prices slowed their slide for the second straight month, taking some pressure off policymakers to rush out more monetary easing. While the food-driven consumer price increase is likely to be welcomed by regulators worried that China could fall into a deflationary trap, some economists expect upward price pressures in the months ahead to be modest. Annual consumer inflation edged up to 2.3 percent in February, the National Bureau of Statistics said yesterday, from January’s 1.8 percent and above the 1.9 percent predicted by analysts. That was the fastest year-on-year increase since July 2014. A 7.3 percent pick-up in food prices was mainly due to cold weather and the Chinese New Year seasonality effect, Yu Qiumei, a senior NBS statistician, said in a statement accompanying the data. Non-food inflation was 1.0 percent. “Inflation is much higher than expectations,” said Guo Lei, chief economist at Founder Securities, in Shanghai.

Prices of vegetables displayed in a Beijing supermarket

“The recent rebound in oil prices, recovery in food prices and surging home prices in big cities all contributed to higher inflation in February. We think inflation will not surpass the government target of 3 percent this year but the rising inflation will obviously restrict room for further policy easing.” China aims to keep consumer inflation at around 3 percent in 2016 to reflect factors such as rising labour cost, price fluctuations of agricultural

products and the impact of further price reform. “A target of higher price increases will be conducive to reducing expectations of deflation,” the National Development and Reform Commission (NDRC), the country’s top economic planner, said in a work report on Saturday. China’s consumer price index rose 1.4 percent in 2015 from a year ago, far short of Beijing’s 3 percent target for 2015.

President Xi vows to remove mountainous barriers to private sector The president reaffirmed his pledge to private entrepreneurs amid a stark slowdown in the state sector that’s dragging growth to its slowest pace in a quarter century

Despite February’s encouraging headline numbers, ANZ economists say the rise in food prices is likely to be temporary and that consumer inflation will remain mild in coming months. “Daily wholesale food prices show that prices have moderated slightly in early March,” ANZ said in a research note. “Non-food CPI edged down to 1.0 percent year-on-year in February, 0.2 percentage points lower than that in January, reflecting disinflation in the other components of the CPI.” Reflecting sluggish demand at home and overseas and overcapacity in key sectors, China’s producer prices remained stubbornly weak, with the producer price index sliding 4.9 percent in February from a year ago. Premier Li Keqiang acknowledged in parliament on Saturday that leaders face “a tough battle” to keep the economy growing by at least 6.5 percent over the next five years, while pushing hard to create more jobs and restructuring state-owned enterprises. China’s trade data released on Tuesday also showed entrenched weakness in the economy as exports tumbled at their fastest pace in more than over six years and imports fell for 16th straight month. Reuters

hurdles and uncertainty of economic restructuring. He cited business people who referred to these issues as “Three Big Mountains” standing in their way: “The Market Iceberg, Financing Mountain and the Restructuring Volcano.” While Xi said the government was trying to address such problems, he acknowledged a lag between proposal and implementation, which he blamed on bureaucratic resistance in the “last kilometre.” “For some reason, the measures that accompany these policies are not very concrete, and some don’t land on the ground,” Xi said.

‘Strong example’

Your gestures, words and deeds set a strong example for society Xi Jinping, President of China

Chinese President Xi Jinping attends the 2nd Plenary Session of the Fourth Session of the 12th National People's Congress (NPC) at the Great Hall of the People in Beijing

resident Xi Jinping pledged to remove obstacles faced by private companies in China, while reminding the entrepreneurs that they owe their success to the Communist Party. In a speech -- delivered at a closeddoor meeting of mostly business leaders -- Xi provided the most detailed explanation yet of his vision for the private sector’s role in China’s state-managed economy. The remarks follow months of questions about the government’s commitment to market-

based policies amid stock-market interventions and impatience about the pace of state-sector overhauls. “The status and function of the non-public sector in our economic and social development has not changed,” Xi said. “Our policy of unwaveringly encouraging, supporting and guiding the non-public economy has not changed. Our policy of creating a sound development environment and providing more opportunities for the non-public sector has not changed.”

The president made his remarks last Friday to a closed-door gathering of delegates from the China Democratic National Construction Association and the All-China Federation of Industry and Commerce. The groups represent private industry in the Chinese People’s Political Consultative Conference, China’s top advisory body, which is meeting in Beijing. The full text of Xi’s remarks was released Wednesday. Xi noted complaints by small businesses and private entrepreneurs about market barriers, financing

At the same, Xi told the business executives that they owed their success to the policies of the Communist Party, which he leads. “The development of China’s non-public sector from small to big, and from weak to strong, is realized under the leadership of the party and the country’s policies and direction,” he said. The remarks sought to clarify the party’s sometimes strained alliance with business forged more than three decades ago, when then-paramount leader Deng Xiaoping shook off Maoera orthodoxy and unleashed China’s economic boom. The price of participating in the system required business executives to “love the motherland, love the people, love the Communist Party and actively practice socialist core values,” Xi said. Entrepreneurs were expected to be philanthropic, produce quality goods and steer clear of corruption. “Your gestures, words and deeds set a strong example for society,” Xi said. “You must cherish and retain your social image.” Bloomberg News

Business Daily | 11

March 11, 2016

Greater China Authorities to allow banks to swap bad debt for equity stakes

Investment in Europe, U.S. hit record high Chinese investment in Europe and the United States hit a record high in 2015, according to a report released by law firm Baker & McKenzie yesterday. Last year, Chinese investors poured US$23 billion and US$15 billion into Europe and America, respectively, according to the report. Italy, France and the United Kingdom were the top three destinations in Europe, and the states of New York, California and Texas were the top U.S. destinations for Chinese investment, it said. Chinese investment was concentrated in the real estate, automobile, finance and information technology sectors, it said.

Anonymous sources said the new regulations would be promulgated with special approval from the State Council

hina’s central bank is preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms, two sources with direct knowledge of the new policy told Reuters. The sources, who spoke on condition of anonymity, said the release of a new document explaining the regulatory change was imminent. The People’s Bank of China (PBOC) did not respond to requests for comment. On paper, the move would represent a way for indebted corporates to reduce their leverage, reducing the cost of servicing debt and making them more worthy of fresh credit. It would also reduce NPL ratios at commercial banks, reducing the cash they would need to set aside to cover losses incurred by bad loans.

US$614.04 billion in non-performing and troubled loans in Chinese banks at the end of 2015

Vehicle sales down

These funds could then be freed up for fresh lending for investment in the new wave of infrastructure products and factory upgrades the government hopes will rejuvenate the Chinese economy. The sources said the new regulations would be promulgated with special approval from the State Council, China’s cabinet-equivalent body, thus skirting the need to revise the current commercial bank law, which prohibits banks from investing in non-financial institutions. In the past Chinese commercial banks usually dealt with NPLs by selling them off at a discount to state-designated asset management

Steel cut plans not enough to solve sector woes According to the China Iron and Steel Association, the debt ratio of major steel mills rose 1.6 percentage points to 70.1 percent last year

hina’s plan to close 100 million-150 million tonnes of poorly performing steel capacity in the next five years is unlikely to be enough to drag the stricken sector out of the doldrums, a parliamentary delegate and steel mill head told Reuters. As it steps up its efforts to deal with price-sapping capacity gluts in industrial sectors, Beijing has promised to force through the closure of hundreds of “zombie” steel mills and will also make funds available to deal with laid-off workers. But Zhang Wuzong, head of Shandong province’s Shiheng Special Steel Group, said the targets laid out in an action plan in February would not be sufficient to tackle a surfeit of capacity estimated at around 400 million tonnes, especially as domestic steel demand continues to decline. “China’s steel production is actually 800 million tonnes, and it

should be at the 1.1 billion or 1.2 billion level, so getting rid of 100 million or 150 million isn’t any good - 300 million or 400 million is more appropriate,” he said. He said he expected domestic steel production to fall around 5 percent a year in the next five years to end the decade at around 600 million tonnes. Production last year was 803.8 million tonnes after dropping for the first time since 1981, with the sector now acknowledging that output has peaked. While urbanisation will continue, China’s cities already have massive housing surpluses, and infrastructure construction - including roads and railways - is already more or less complete, he said, further limiting steel demand. Prices of steel and iron ore have recently shown signs of recovering, driven by post-holiday restocking and the risk of capacity closures in the

companies. The AMCs would turn around and attempt to recover the debt or resell it at a profit to distressed debt investors. The sources did not have further detail about how the banks would value the new stakes, which would represent assets on their balance sheets, or what ratio or amount of NPLs they would be able to convert using this method. Official data from the China Banking Regulatory Commission shows Chinese banks held NPLs and “special mention” troubled loans in excess of 4 trillion yuan (US$614.04 billion) at the end of 2015. Reuters

Vehicle sales in China fell 0.9 percent in February from a year earlier to 1.6 million vehicles, the China Association of Automobile Manufacturers said yesterday. That compares with 7.7 percent yearon-year growth in January, and a 15.4 percent rise in December. For the first two months of 2016, sales grew 4.4 percent compared with the same period a year earlier, the association said at a briefing in Beijing. In January it said it expects vehicle sales to grow 6 percent this year.

HSBC says new national growth target realistic China’s new GDP growth target for 2016 was realistic and consistent with its potential growth strength, despite the current economic slowdown, according to a HSBC research report yesterday. China set this year’s economic growth target at between 6.5 and 7 percent, and the average annual growth rate for the next five years at above 6.5 percent, on Saturday during the national legislature’s annual session. The new target comes as the Chinese economy posted its slowest economic expansion in 25 years last year, while other indicators point to further weakness.

This debt will be solved Magna opening new gradually, and banks seat-making facility will bear certain losses - in mainland this is a certainty Canadian auto parts maker Magna InZhang Wuzong, head of Shandong province’s Shiheng Special Steel Group

top steel producing city of Tangshan, but Zhang said that could not be sustained because it was not based on real improvements in underlying demand. China has made 100 billion yuan (US$15 billion) available to handle layoffs in the steel and coal sectors, with local governments entitled to apply for the funds once “zombie enterprises” have been shut down. But the money would not be used to resolve the thornier problem of bad debts. “This will not just be used to solve steel, but also coal and others, so the allocation to steel will be around a third and it won’t solve the problems, and it won’t solve the problems of asset losses,” said Zhang. According to the China Iron and Steel Association, the debt ratio of major steel mills rose 1.6 percentage points to 70.1 percent last year, with total debts rising to 3.27 trillion yuan. Reuters

ternational is opening a new seat-making facility in China to supply Zhejiang Geely Holding Group Co’s Volvo car group. The 5,200-square-metre facility in Taizhou, China, is to be completed by mid-2016 and will produce complete seating systems for a small crossover utility vehicle, said Magna, which held an investor day in Toronto on Wednesday. Ontario-based Magna, which earns about half its revenue outside North America, has a customer list that includes General Motors Co, Volkswagen AG and Ford Motor Co.

Carrefour to step up spending in mainland Carrefour, the world’s second-largest retailer, said yesterday it would step up investments to renovate and open stores this year to cement its turnaround in Europe and revive weak sales in China. The French company, which scored its fourth straight year of revenue and earnings growth, also said it was waiting for the right time to float its Carmila property unit on the stock exchange. Europe’s biggest retailer proposed raising its 2015 dividend by 2.9 percent to 0.70 euros a share after operating profit rose 2.4 percent to 2.45 billion euros (US$2.68 bln), in line with a Thomson Reuters poll forecast.

12 | Business Daily

March 11, 2016

Asia NZ’s surprise rate cut stokes talk of global currency war

KEY POINTS NZ cenbank surprises by cutting rates to record‑low 2.25 pct

Still, at 2.25 percent New Zealand has among the highest policy rates in the developed world

RBNZ Governor Graeme Wheeler said policy makers were concerned about slowing growth in China

ew Zealand’s central bank unexpectedly cut interest rates to a record-low 2.25 percent yesterday, triggering a slide in the local dollar and sparking talk of a global currency war as countries seek to revitalise their economies in a world of slow growth. New Zealand’s move to trim the Official Cash Rate by 25 basis points follows the Bank of Japan’s historic decision in January to adopt negative interest rates and comes ahead of the European Central Bank’s policy

review later in the day when it is expected to cut rates deeper into minus territory. The Reserve Bank of New Zealand cited low domestic inflation and a deteriorating global economic outlook as factors in yesterday’s rate cut, on the same day as Moody’s ratings agency warned of a credit risk to the country’s banks from tumbling dairy prices. RBNZ Governor Graeme Wheeler said policy makers were concerned about slowing growth in China, and

highlighted risks around Beijing’s unexpected devaluation of the yuan in August - a move that sparked fears of a global currency war. “If China had a very significant and prolonged devaluation it would in essence spread deflation around the world,” Wheeler told reporters at a press conference. Given China’s dominant role in the international trading system “by and large every other currency would be appreciating against the Chinese currency,” he said. The spectre of currency devaluations took centre stage at a meeting of G20 policy makers in Shanghai this month, especially after China’s August move stoked uncertainty over its currency policy and after Japan’s surprise shift to negative rates. The G20 finance ministers however played down talk of beggarthy-neighbour policies and agreed to inform each other in advance about policy decisions that could lead to currency devaluation. While yesterday’s RBNZ rate cut wasn’t aimed at bringing down New Zealand’s exchange rate, Wheeler said that “pretty well most central banks would like to see their exchange rates lower.” A decline in the New Zealand dollar would “be appropriate given the weakness in export prices,” he said.

Japanese firms hang loose on cash for investors Companies have bought back or announced plans to buy back shares worth more than US$79 billion

apanese firms sitting on more than US$3 trillion of cash are buying back their own shares at a record rate, while turning a deaf ear to calls from Prime Minister Shinzo Abe to step up spending on wages and investment to support the economy. In February alone, taking advantage of low prices, Japanese companies from Softbank to Nissan announced they would buy back a total of US$9.3

billion in shares, according to Thomson Reuters data the highest since November 2010 and a monthly amount surpassed only five times in the last 30 years. Japan’s largest companies are under pressure to boost meagre returns for their investors, but the volume of cash funnelled back raises doubts over the effectiveness of policies to revive growth with cheap cash, part of the government’s “Abenomics” stimulus programme.

Stokes talk of currency war amid wave of global easings

Instead, companies are either sitting on cash - inventories and cash balances are at record levels - or returning it to their shareholders, unable to find investment prospects. Total shareholder returns, which include dividends as well as buybacks, are at record highs. Since Abe came to power, promising to lift the economy out of the doldrums with an unprecedented monetary boost, Japanese companies have bought back or

Governor Wheeler cites China slowdown as major risk Kiwi tumbles as Wheeler keeps door open for further cuts The slowdown in China and generally cooling global demand have hurt growth in New Zealand and pulled inflation sharply under the RBNZ’s 1-3 percent target band. The central bank is now forecasting annual inflation at 1.1 percent by end2016, down from its prior projection of 1.6 percent made at the December policy review. Still, at 2.25 percent New Zealand has among the highest policy rates in the developed world - well clear of the U.S. Federal Reserve and the likes of Japan and the ECB - and ample room to deliver further cuts. On the domestic front, RBNZ’s Wheeler warned that the dairy sector faces challenges as the price of global dairy - the nation’s biggest export earner - remain subdued. That risk was underscored on Thursday by Moody’s Investors Service. It said the decision by dairy giant Fonterra Cooperative Ltd. this week to lower its forecast pay-out to its farmer shareholders is “credit negative for New Zealand banks.”

announced plans to buy back shares worth more than US$79 billion. That would have been enough to build 100 car factories or 30 semiconductor plants. There is little sign of buybacks cooling substantially, as companies continue to take advantage of low share prices. Overall capital expenditure, meanwhile, remains below pre-financial crisis levels.

Wage stagnation

Another channel for cheap money to boost consumption and growth could have been wages, as large companies post record profits. But government calls for wage rises to banish the deflationary mind-set that has bedevilled Japan since the early 90s have gone mostly unheeded. Price-adjusted wages fell 0.9 percent last year, the fourth straight decline, and

Reuters

a Reuters survey last month showed that 84 percent of big companies plan to raise pay less than 2 percent this year. Fears of job cuts prompted workers at Toyota, which sets the tone for much of Japan Inc., to seek a monthly increase of just 3,000 yen (less than US$27) - half of last year’s sum. The unions have also swallowed the rise in buybacks without any hint of distaste. And yet companies are awash with cash. Government data showed corporate internal reserves stood at 350 trillion yen (US$3.11 trillion) in the fiscal year to March 2015, against 300 trillion yen two years earlier. In comparison, capital spending was only 70 trillion yen, up 5 trillion yen in the past three years but still below the 76.8 trillion yen seen before the 2008 global financial crisis. Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Óscar Guijarro, Kam Leong, Joanne Kuai, Bami Lio, Annie Lao GROUP SENIOR ANALYST José I. Duarte 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 Lu Yang | lu.yang@projectasiacorp.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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March 11, 2016

Asia Philippine exports at lowest in 3 years The latest data showed that while electronics shipments rose for the fourth month in a row in January, the rate of increase slowed for a second straight month Neil Jerome Morales and Enrico Dela Cruz

hilippine exports in January slipped to their lowest in three years on weak demand in key markets such as China, a trend that could persist in the near term though a bump-up in government spending is seen supporting one of Asia’s fastest growing economies. Shipments fell to US$4.19 billion in January - the lowest value since February 2013 - from US$4.36 billion in the same period last year, despite a 5 percent rise in electronics shipments, the statistics agency said yesterday. Other key exports all declined, including machinery and transport equipment, apparel and clothing accessories. “If you look at the performance of non-electronics export, that has been fairly weak for quite some time and we think for the first half this year, it is unlikely we are going to see any major improvement coming from the exports front,” said Rahul Bajoria, economist at Barclays in Singapore. All the same, the Philippine economy is unlikely to slow sharply as some of its neighbours as higher government investment on infrastructure and a burst of campaign spending ahead of the election of a new leader on May 9 should support growth. “Underlying growth will remain

Port of Manila

supported by infrastructure project spending and we do think consumption demand will remain fairly strong,” Bajoria said. The Philippine economy grew 5.8 percent in 2015, one of the strongest expansions in the world amid a turbulent year for markets as a slowdown in China, tumbling oil and other commodities stoked deflationary pressures and prompted a wave of global policy easings. The government is targeting growth of 6.8-7.8 percent this year, down from an earlier goal of 7-8 percent, reflecting the downturn in the global economy.

Singapore: the most expensive place to live

But that is still faster than the 6.0 percent growth forecast pencilled in by the International Monetary Fund last month. Shipments to China, the fourth biggest market for the Southeast Asian country and one of the top destinations particularly for local minerals, slipped 8.6 percent from last year while exports to the United States, the No. 2 market, were up only 0.7 percent. Exports to top market Japan increased 7.7 percent while shipments to third biggest market Hong Kong grew 2.6 percent. Reuters

Bank of Korea stands pat, dampens expectations for cut Christine Kim and Choonsik Yoo

after North Korea added to existing tensions between the two Koreas saying yesterday it would liquidate South Korean assets left in the North. “There’s no sign of the economic conditions improving during March, but having said that, I can’t say for sure that chances will grow for a rate cut in April,” Stephen Lee, economist at Samsung Securities, said of the governor’s remarks. Twenty-two of the 33 analysts polled by Reuters before yesterday’s decision saw steady rates from the March meeting. Of those who saw rates on hold this week, however, 13 respondents said the BOK would cut rates in April or some time later in the year. The Bank of Korea has been facing mounting pressure to lower borrowing costs in the past few weeks as indicators have shown little evidence of Asia’s fourth-largest economy rebounding. Lee dismissed an argument that the Bank of Korea may need to

Indonesia launches warehouse-sharing scheme Indonesia launched yesterday a warehouse-sharing scheme aimed at improving competitiveness by reducing the cost of moving goods around the sprawling archipelago. The scheme was inaugurated by President Joko Widodo, whose administration has announced a run of measures to revive the economy since September last year, including offering incentives to firms to share warehouses situated in bonded zones. “We want our logistic costs the same with our neighbour or at least near theirs. If we don’t manage to do that, don’t even dream of competing,” Widodo said, adding that current costs were 2.5 times those in Singapore.

Japan says El Niño weakens

The central bank has been facing mounting pressure to lower borrowing costs in the past few weeks

outh Korea’s central bank kept its policy on hold yesterday and its chief suggested he was not ready to ease policy soon, dampening bond futures prices and bolstering the won currency. The Bank of Korea’s (BOK) monetary policy committee held the policy rate steady at record-low 1.50 percent for a ninth consecutive month. One of the seven members voted for a 25 basis-point cut, as he did last month. “We will have to see what oil prices will be like going forward, but they have come up considerably and U.S. economic indicators are showing upbeat trends,” Governor Lee Ju-yeol told reporters. “I believe this will be positive for the global economy, improve export conditions, and also help in stabilising global markets,” he said. Lee noted that upside and downside risks to the economy appeared to be balanced. The won’s rally continued even

Singapore is still the world’s most expensive place to live, while China’s Hong Kong has moved up seven places in the ranking into joint second place with Zurich, according to the Economist Intelligence Unit (EIU)’s Worldwide Cost of Living survey released yesterday. Singapore has the highest score of 116, while Zurich and Hong Kong get 114, ranking the second place, EIU’s latest report showed. In joint eighth place, Seoul makes up a trinity of Asian cities among the 10 most expensive cities.

lower interest rates to weaken the won currency and keep exporters competitive, saying the effect of a rate cut on the currency’s value was uncertain. The central bank will also revise in April its economic forecasts for this year and 2017, which are expected to be downgraded. The BOK’s growth projection for this year currently stands at 3.0 percent. Cratering exports have weighed on the economy as shipments fell for a 14th straight month in February in the country’s longest falling streak, but Governor Lee shrugged it off by saying yesterday it was a global pattern and that South Korea was in fact faring relatively well. January factory output declined at the fastest pace in a year as production of key export products fell. Government data out on Wednesday showed that production overall in South Korea has weakened. Reuters

Japan’s weather bureau said yesterday the El Niño weather pattern, which is often linked to heavy rainfall and droughts, was expected to continue weakening and that there was a high possibility the weather would return to normal by summer. The Japan Meteorological Agency projected a similar forecast last month. El Niño - a warming of sea-surface temperatures in the Pacific - can trigger drought in Southeast Asia and Australia and floods in South America, hitting production of key foods such as rice, wheat and sugar.

India cuts Monsanto cotton seed royalties India cut the royalties paid by local firms for Monsanto’s genetically modified cotton seeds by nearly 70 percent on Wednesday, ignoring a threat by the world’s biggest seed company to leave if it did. The move follows complaints from local seeds companies that Mahyco Monsanto Biotech (MMB), a Monsanto joint venture with India’s Mahyco, was charging high royalties. This prompted India’s farm ministry to form a panel to look into the matter, whose recommendation the government has now accepted. MMB has filed a case in a Delhi court, challenging the authority of the panel to determine the trade fee.

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March 11, 2016

International IMF warns global growth forecasts could be lowered The International Monetary Fund may cut global growth forecasts further in the coming weeks, Financial Counsellor José Viñals said yesterday, calling on policymakers to take comprehensive measures to strengthen their economies. In January, the Fund projected global growth of 3.4 percent in 2016 and 3.6 percent in 2017, having revised down its October forecast for both years by 0.2 percentage point. “It is very likely that by the time that we arrive at the spring meetings next month there may be a further downward revision in our forecasts,” Vinals said during an event organised by the Reserve Bank of India.

Argentina increase settlement payment Argentina settled with an additional seven creditors holding defaulted sovereign bonds for US$190 million, Daniel Pollack, the court-appointed mediator in the long-running case said in a statement on Wednesday. Pollack’s announcement brings the total amount of settlements agreed in principle with U.S. creditors to more than US$6.4 billion. The latest agreements take Latin America’s No. 3 economy closer to ending the 14-year legal battle over its historic default which blocked it from global credit markets. On February 2 it reached a US$1.35 billion agreement to settle with a group of Italian investors who held defaulted bonds.

Nasdaq to buy ISE options exchange from Deutsche Boerse The firm said the transaction was expected to be finalized in the second half of the year John McCrank

asdaq Inc said on Wednesday it would buy U.S. options exchange operator International Securities Exchange for US$1.1 billion from Deutsche Boerse AG, the latest deal to emerge from a spate of exchange merger talks. ISE operates three electronic options exchanges which together account for more than 15 percent of U.S. volume, while Nasdaq operates another three. Combined, Nasdaq would command more than 40 percent of the market, extending its lead as the No. 1 U.S. options exchange operator.

“The ability to further that lead gives us advantages as to how we could serve our customers because you have a different volume versus scale arrangement,” Nasdaq Chief Executive Bob Greifeld said in an interview. The deal would also free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group Plc to create a European trading powerhouse that could better compete against U.S. rivals. Intercontinental Exchange Inc said it may make a rival bid for

The ability to further that lead gives us advantages as to how we could serve Private bank our customers because interested in assets in you have a different Barclays’ Africa sale volume versus scale Falcon Private Bank plans to expand in arrangement Africa and will look at opportunities arising from Barclays’ planned sale of its African assets, a senior executive at the Swiss bank told Reuters. Barclays said last week it would sell a 62 percent stake in Barclays Africa, its South Africa-based subsidiary, as it attempts to simplify its structure and seek higher shareholder returns. “We will see what Barclays is going to do. That might be an interesting thing,” Erich Pfister, global head of private banking at Falcon, said in an interview during a visit to Dubai.

Abengoa agrees draft rescue Debt-laden engineer Abengoa said yesterday it had agreed a draft rescue plan with creditors to cut debt and inject fresh cash, in the latest attempt to avoid what could be Spain’s biggest bankruptcy. Loss-making Abengoa, which started out 70 years ago as an engineering business in Seville and expanded into clean energy by taking on huge debts, entered pre-insolvency proceedings last year when lenders refused to extend credit lines. Under the proposal, creditors would lend up to 1.8 billion euros (US$2 bln) to the company over a period of five years.

Chile’s salmon farms losing up to US$800 mln A deadly algal bloom has hit the world’s second biggest salmon exporter, Chile, where nearly 23 million fish have already died and the economic impact from lost production is seen soaring to US$800 million, industry and government sources told Reuters. Unusually high ocean temperatures, due in large part to the El Niño weather phenomenon, have fuelled the algal bloom that has affected 37 of the nearly 415 salmon farms operating in southern Chile. Most of the farms are in ocean enclosures or in estuaries.

Bob Greifeld, Nasdaq Chief Executive

the LSE, raising the prospects of a takeover battle. Nasdaq, which plans to move ISE’s trading platforms onto Nasdaq technology, said it could strip out US$40 million from the two businesses through the transaction. The deal would also give Nasdaq an additional 20 percent stake in the Options Clearing Corporation, for a total of 40 percent ownership in the world’s largest equity derivatives clearing corporation. Greifeld said he had been looking to buy ISE for years, and talks with Deutsche Boerse CEO Carsten Kengeter picked up over the past three months. The deal does not include ISE’s stake in No. 2 U.S. stock exchange operator BATS Global Markets, or blockchain start-up Digital Asset Holdings, which will continue to be owned by Deutsche Boerse, the German company said. Nasdaq said the transaction was expected to be finalized in the second half of the year, pending regulatory approval, and it would likely increase earnings within 12 months of closing. Nasdaq has made several acquisitions in recent years that have helped boost its profits and share price. These include Chi-X Canada, that country’s largest alternative trading system, in a deal that closed last month; and index provider Dorsey, Wright & Associates last year. Reuters

German exports fall unexpectedly in January Seasonally adjusted exports fell 0.5 percent on the month after declining a revised 0.7 percent in December Michael Nienaber

erman exports dropped for the second consecutive month in January while imports jumped more than expected, in a sign that weak foreign demand from China and other emerging markets held back growth in Europe’s biggest economy at the start of 2016. The trade data underlined an ongoing shift in the German economy away from a traditional reliance on exports and toward more consumerdriven growth as demand from China and Russia wanes. “That was a weak start into the year. The slowdown in China is hitting exports. Brazil and Russia also are weak spots,” said Volker Treier, economist

at the DIHK Chambers of Commerce. “But imports have picked up. This signals a revival of domestic investment.” Seasonally adjusted exports fell 0.5 percent on the month after declining a revised 0.7 percent in December, data from the Federal Statistics Office showed. Imports were up 1.2 percent, narrowing Germany’s trade surplus to 18.9 billion euros. Economists polled by Reuters had expected a rebound in exports with an increase of 0.5 percent, and a weaker rise in imports of 0.4 percent. “The symptoms of overall weak global trade are obvious,” VP Bank analyst Thomas Gitzel said.

“The stock market turmoil of recent weeks and concerns about the economy unsettle businesses and consumers around the globe, which is also hitting German exports.” A breakdown of the trade data on an unadjusted basis showed demand from countries outside the European Union fell by 5 percent, while exports to EU countries rose by 1.0 percent. Imports from other EU countries increased by 3.0 percent while imports from other regions fell by 1.1 percent. The German government expects imports to rise at a faster rate than exports throughout 2016 due to falling demand from emerging markets and strong domestic demand. This means net foreign trade is likely to hinder growth, a remarkable development for an economy that for decades has relied on exports, led by its engineering and auto sectors. Recent data painted a mixed picture of the German economy with industrial output rising at its fastest pace in more than six years in January while factory orders fell less than expected at the beginning of 2016. At the same time, sentiment among German manufacturers plunged last month by its largest amount since the bankruptcy of Lehman Brothers in 2008 as concerns about a weaker global growth outlook and nervousness about geopolitical risks increased. Reuters

Business Daily | 15

March 11, 2016

Opinion Business

wires

The end of globalization?

Leading reports from Asia’s best business newspapers

Daniel Gros

Director of the Centre for European Policy Studies

TAIPEI TIMES People First Party Chairman James Soong yesterday urged president-elect Tsai Ing-wen to resort to pragmatism and the middle way in handling cross-strait relations, while shrugging off speculation that he could serve in Tsai’s Cabinet. Soong made the remarks during a joint news conference with Tsai at the Evergreen Laurel Hotel Taipei yesterday morning, following the pair’s first meeting since the January 16 presidential election. The two exchanged views on several issues, such as the pension system, education and judicial reform.

BANGKOK POST Thailand’s foreign direct investment (FDI) this year should experience solid improvement with the launch of the government’s 10 industrial clusters and the integration of the Asean Economic Community. “After the government imposed a series of stimulus packages and new policies targeted at Thailand’s economic recovery amid the fluctuations of the global economy, its efforts have started to improve the situation,” said CLSA Securities’ country head Prinn Panitchpakdi. Mr Prinn said FDI would turn around by year-end and the momentum would continue through 2017.

THE TIMES OF INDIA Entities looking to give up charitable activities and become ‘for-profit’ have to bear a cost. The Finance Bill, 2016 has introduced an ‘exit tax’, which is payable on such conversion. There is a hidden danger as some charitable trusts and other entities, which do not convert into for-profit entities, may also inadvertently find themselves entrapped in the exit tax net. The circumstances under which this can happen is when their registration of the Income Tax Act is cancelled on having made inadvertent mistakes, or if they fail to file a fresh registration application.

THE PHNOM PENH POST The government has reached an agreement with two foreign oil companies operating in Cambodia on a proposed fuel-price mechanism, ending a two-month deadlock that has prevented it from implementing a price ceiling on gasoline sold at petrol stations across the Kingdom. “All [petroleum] companies, including the two multinational companies Caltex and Total, have now agreed with the proposed formula,” Commerce Ministry spokesman said. The government proposed the fuel-pricing mechanism in January after months of negotiations between state officials and oil companies aimed at establishing a fuel pricing scheme responsive to changes in global oil prices.

hina has just announced that last year, for the first time since it began opening up its economy to the world at the end of the 1970s, exports declined on an annual basis. And that is not all; in value terms, global trade declined in 2015. The obvious question is why. While global trade also fell in 2009, the explanation was obvious: The world was experiencing a sharp contraction in GDP at the time. Last year, however, the world economy grew by a respectable 3%. Moreover, trade barriers have not risen significantly anywhere, and transport costs are falling, owing to the sharp decline in oil prices. Tellingly, the so-called Baltic Dry Index, which measures the cost of chartering the large ships that carry most longdistance trade, has fallen to an all-time low. This indicates that markets do not expect a recovery, meaning that the data from 2015 could herald a new age of slowing trade. The obvious conclusion is that the once-irresistible forces of globalization are losing steam. The situation in China is telling. In recent decades, as it became the world’s leading trading economy, China transformed the global trading system. Now the value of both imports and exports have fallen, though the former have declined more, owing to the collapse of global commodity prices. In fact, commodity prices are the key to understanding trade trends over the last few decades. When they were high, they drove increased trade – to

the point that the share of trade to GDP rose – fuelling hype about the inevitable progress of globalization. But in 2012, commodity prices began to fall, soon bringing trade down with them. Assume that one ton of steel and ten barrels of oil are needed to produce one car. In 20022003, that bundle of raw materials was worth around US$800, or about 5% of the value of a US$16,000 car. This implies that, during the early 2000s, industrial countries had to export five cars for every one hundred bundles of these raw materials they imported. By 2012-2013, the value of the raw materials needed for a car increased to about US$2,000, about 10% of the cost of the same car (prices of cars had increased by much less). Industrial countries thus had to export double, namely ten cars for the same amount of imports of raw materials. Clearly, there is a direct link between the trends in trade and commodity prices. Given that this connection affects all manufactured goods that require raw material inputs, it should be no surprise that, as commodity prices have declined, so has global trade. One might argue that this example concerns only the value of trade, and that in recent decades, the growth of trade by volume also has exceeded that of real GDP growth. But commodity prices affect trade volumes as well, because higher commodity prices force industrial countries to increase the volume of their exports (ten cars instead of five, in the

Given the massive drop in commodity prices lately, there is little need to seek any other explanation for the recent slowdown in trade

example provided), in order to cover the costs of the same volume of raw material imports. Because food, fuels, and raw materials comprise about a quarter of global trade, when their prices fluctuate – especially as strongly as they have in recent decades – aggregate trade figures are obviously affected. Given the massive drop in commodity prices lately, there is little need to seek any other explanation for the recent slowdown in trade. This is not to say that globalization and trade are one and the same. Globalization entails many other features, including the surge in cross-border financial transactions and tourism, data exchange, and other economic activities. In fact, these other interconnections have fed back into trade, as they have enabled the emergence of global value

chains, whereby different steps of the production process occur in different countries. But this phenomenon has been overestimated. According to the World Trade Organization, the foreign value-added contained in exports is only around 15% for most large economies, such as the United States and the European Union. In other words, global value chains have little impact on these larger trading economies. China is the only exception. Its position as an assembly platform for the world’s products meant that it imported most of the highest value-added elements of those goods. But as the country’s industrial structure matures – Chinese-assembled iPhones now contain more Chinese-made parts than they did just a few years ago – it will move closer to the US and the EU in value-added terms, not the other way around. This is yet another reason why trade might diminish in importance. When something is widely hyped, there is nearly always a real reason for it. Most economies are more open today than they were a generation ago. But it is now becoming clear that the perception that globalization is some overwhelming and inexorable force largely reflected the side effects of the last decade’s commodity boom. If prices remain low, as seems likely, the next decade might well see global trade stagnate, as the trade pattern “rebalances” from emerging economies to the established industrial powers. Project Syndicate

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March 11, 2016

Closing Myanmar starts presidential election for second term of civilian government

Alibaba and Tencent extend their battle to gas stations

A presidential election process for the second five-year term of civilian government began in Myanmar’s parliament yesterday as three parliamentary groups of presidential electoral college submitted their candidates. The presidential election came four months after a general election was held on November 8 last year, in which the opposition National League for Democracy (NLD), led by Aung San Suu Kyi, won the absolute majority of the parliamentary seats. U Htin Kyaw is considered by the NLD and Aung San Suu Kyi herself the most suitable person to be nominated as the constitution blocks Aung San Suu Kyi.

China’s two largest Internet companies have teamed up with the country’s oil and gas giants to take their battle from the web to the fuel station. Alibaba Group Holding Ltd. and its partners agreed to arm China’s biggest oil and gas producer China National Petroleum Corp. with its full set of Internet-based services. That follows rival Tencent Holdings Ltd. securing a stake in China’s biggest fuel producer and distributor. Alibaba’s deal will help the e-commerce emporium tap into CNPC’s network of 20,000 fuel stations. Tencent in August 2014 teamed up with China Petroleum & Chemical to work together in areas including mobile payments and media marketing.

Modi under fire after beer baron owing US$1 billion departs India A consortium of lenders had approached the judiciary to help recover 70 billion rupees from tycoon

ndia’s Prime Minister Narendra Modi came under fire in parliament after a flamboyant former billionaire who owes as much as US$1 billion to creditors left the country amid efforts by policy makers to rein in rising bad loans in the nation’s financial system. A group of 17 banks in India, fighting to recover dues from Vijay Mallya, chairman and founder of the nowdefunct Kingfisher Airlines Ltd., found out Wednesday that their petition to bar him from leaving the country was filed a few days too late. Attorney General Mukul Rohatgi told the Supreme Court, in response to the bankers’ plea, that Mallya had left India on March 2. As opposition parties criticized Modi’s government yesterday for failing to impound Mallya’s passport and prevent him from leaving, Finance Minister Arun Jaitley told lawmakers that banks are taking every possible action to claw back their money. Mallya, 60, said last month

Vijay Mallya, chairman and founder of the now-defunct Kingfisher Airlines

he’d decided to spend more time in England closer to his children and later slammed the media for portraying him as the “poster boy” for bad loans plaguing local banks.

Unfortunate failure

The consortium of lenders, led by State Bank of India, had approached the judiciary to help recover 70 billion rupees (US$1 billion) from Mallya, who has maintained Kingfisher Airlines was an “unfortunate commercial failure” caused by macro economic factors and government policies. The two-judge bench of the

top court headed by Kurian Joseph ordered Mallya to respond in two weeks. In a statement dated March 6, Mallya said he has been making efforts to reach a “one-time settlement” with banks. Mallya owed 90.9 billion rupees, including all interests compounded, as of November 30, Jaitley told lawmakers. “I don’t think this case should be blown out of proportion,” Rohatgi said in an interview with Bloomberg Television India. “I am sure if Mr. Mallya comes back, he is welcome to sit across with the banks, work out a solution, and I think it can be worked out.”

Premium carrier

Kingfisher Airlines, once India’s No. 2 carrier that redefined premium air travel, defaulted on the loans guaranteed by Mallya and United Breweries Holdings Ltd., according to SBICAP Trustee Co. Sumanto Bhattacharya, a spokesman for United Breweries, did not

respond to an e-mail and two calls to his mobile phone. Lenders are stepping up efforts to recover dues amid pressure from Reserve Bank of India Governor Raghuram Rajan to deal with 8 trillion rupees of soured debt. He has ordered them to clean up their balance sheets by March, 2017, by increasing provisioning, resulting in the largest-ever losses. A 700 billion-rupee recapitalization program is under way to help stateowned banks as stressed assets at a 14-year high slow credit growth and threaten Modi’s development agenda for the country. The nation’s top court last month told the RBI to share the list of the country’s largest defaulters in the last five years and directed the government to file an “action taken” report. Mallya’s creditors will auction the Mumbai office of Kingfisher Airlines on March 17, more than three years after financial stress forced the carrier to ground

Recruiter Michael Page warns Vietnamese party introduces candidates for state leadership of tough market in China

its planes and default on payments to employees, airports, lessors and banks.

Losing an empire

Mallya has also been gradually ceding control of his beer and liquor empire to rivals. After Diageo bought United Spirits Ltd. in April 2014, Mallya struck a US$75 million non-compete deal late last month with the London-based company and resigned as chairman. He was to get US$40 million immediately as part of the agreement. Heineken NV is now the biggest shareholder of United Breweries, the maker of the nation’s bestselling Kingfisher beer, with a 42.4 percent stake. Mallya’s holding company has a 33 percent stake, though half of its shares are pledged with lenders. In his statement, Mallya said he has neither the intention nor any reason to abscond, and personally he isn’t a borrower or a “judgment defaulter.” Bloomberg News

Australian lawmakers greenlight plan Melbourne logistics hub

he second plenary session of the 12th Communist Party of Vietnam (CPV) Central Committee (CPVCC) opened here yesterday, introducing candidates for the country’s state leadership. During the meeting scheduled to last till Saturday, the CPVCC will decide nominees for the key positions of president, prime minister and national assembly chairperson upon the request of the 12th CPVCC’s Politburo. The politburo will also ask for the CPVCC’s approval before nominating candidates for other positions, which will be later considered by the National Assembly, reported Vietnam’s state-run news agency VNA. Speaking at the session, CPV General Secretary Nguyen Phu Trong said the personnel issue must be implemented consistently with the personnel orientations adopted in the 12th National Congress. The staffing should be based on common criteria of personnel, with focus on capabilities, strengths, expertise, working experience and development trends, VNA quoted Trong as saying. During the session, the CPVCC will discuss working agenda for its five-year term.

ritish staff recruitment firm Michael Page warned trading conditions had worsened in China and Hong Kong as multinational clients held back hiring decisions in the first two months of its financial year. The company, which mainly finds candidates to fill permanent positions, said yesterday trading so far in the first quarter had followed a similar pattern to its fourth quarter but China had worsened particularly in Hong Kong and Shanghai. Slower economic growth in China and financial market uncertainty had impacted companies’ hiring decisions, Chief Executive Steve Ingham said, particularly in big cities where the bulk of the company’s multinational clients are based. In the first two months of the year, profit in China was down by “small single digit” compared with the same time last year, Ingham told Reuters. Ingham said multinational clients held back hiring decisions as they were concerned about slowing growth in China, but demand from local companies in cities such as Beijing, Guangzhou and Suzhou was still strong.

ustralia passed legislation yesterday to enable the long-term lease of its largest shipping container terminal, the Port of Melbourne, freeing up privatisation plans to move ahead after months of political headwinds. Investors from China to Qatar are flocking to Australian infrastructure because it is seen as well-regulated and predictable, offering a reprieve from volatility in commodity and equity markets. “The Labour government has negotiated in good faith to reach agreement on a bill that delivers a strong offering to the market and a positive economic benefit for all Victorians,” state treasurer Tim Pallas said in a statement, announcing passage of the law. The sale is part of the Australian government’s ambitious A$100-billion privatisation plan to cut debt and upgrade the country’s infrastructure. In the statement, the government said it would set up a new A$200-million agriculture infrastructure and jobs fund to drive regional economic growth and boost exports from the farmers to the port. The Port of Melbourne handles about 2.6 million containers each year.

Xinhua

Reuters