Macau Business Daily June 6, 2016

Reconstruction of Hotel Estoril to be by public tender.

PUBLIC WORKS Page 3

Monday, June 6 2016!YEAR V NR. 1058 MOP 6.00 PUBLISHER PAULO A. AZEVEDO CLOSING EDITOR ALEX LEE INSURANCE

Dah Sing’s life-insurance businesses in Macau to be sold to Fujian Thai Hot Investment Co. Page 5

www.macaubusinessdaily.com

GAMING

Legislator Si Ka Lon requests environmental assessment project information to be made public. Page 7

INFRASTRUCTURE

China’s “One Belt, One Road” project faces developing hurdles Pages 10 & 11

RIDING A GOOD WAVE TECHNOLOGY

Macau Pass has been enjoying considerable growth. Its cooperation with Alipay that boosted number of terminals and overall consumption has proved to be the right move. And the number of cards has also been “growing every month”, the company’s Technical Director, Harvey Chan tells Business Daily in this interview discussing new projects and expectations. Pages 6 & 7

Voicing defence

Are we there yet?

Will this month mark the return to gaming growth?

Analysts are divided. Macau’s GDP contraction will be lower than 10 per cent, according to a local economist, much better than almost 22 per cent last year. However, don’t be fooled.

Slower gaming revenues might seem bad, but casinos and the government are still financially healthy, and the city continues to perform four times better than its main rival, Las Vegas.

GAMING The report on pages 8 and 9

HK Hang Seng Index June 3, 2016

20,947.24 +88.02 (0.42%)

Link REIT

+2.78%

China Resources Power

+2.13%

Hengan International Group

+0.07%

Lenovo Group Ltd

+2.63%

Wharf Holdings Ltd/The

+2.00%

Belle International Holdings

0.00%

Tingyi Cayman Islands

-1.83%

China Mobile Ltd

-1.29%

Li & Fung Ltd

+2.27%

Hang Lung Properties Ltd

+1.76%

Galaxy Entertainment Group

0.00%

Sands China Ltd

China Shenhua Energy Co

+2.25%

CITIC Ltd

+ .46%

MTR Corp Ltd

0.00%

PetroChina Co Ltd

-0.74%

Henderson Land Develop-

+2.21%

Bank of East Asia Ltd/The

+1.38%

China Unicom Hong Kong

0.00%

China Construction Bank

-0.39%

-0.89%

27° 30° 27° 30° 26° 30° 26° 30° 27° 31° TODAY

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Source: AccuWeather

LABOUR His Bureau has been criticised over and over again. This time, Labour Affairs Director, Wong Chi Hong, decided to air his views and defences. In an interview with TDM radio, in Chinese, Mr. Wong talked about employee rights and training programs, and what ‘local workers first’ really means. Page 5

2 Business Daily Monday, June 6 2016

MACAU AIRPORT

More passengers at airport

The Macau International Airport registered passenger volume in April of more than 528,000 passengers, an 8.6 per cent increase year-onyear, while total traffic volume exceeded 4,800 movements, up 5.7 per cent year-on-year, according to a press release issued by Macau International Airport (MIA). Analysed by region, traffic to and from Southeast Asia and Taiwan was considered to have ‘performed well’, with a recorded 13.6

per cent and 20.4 per cent growth, respectively, while Mainland China reported a 6.7 per cent decline during the same period. In a month-tomonth comparison, passenger volume and total traffic volume decreased 0.38 and 0.4 per cent respectively. The recent establishment of a twice weekly charter service between Macau and Moscow

by Royal Flight Airlines, was mentioned as having ‘filled up the blanks’ of the current long flight services at MIA. N.M.

CONSTRUCTION

Ready to build The 7th edition of the International Infrastructure Investment and Construction Forum in Macau saw 14 project agreements for infrastructure projects between Mainland China, Macau and international companies Nélson Moura nelson.moura@macaubusinessdaily.com

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HE second day of the International Infrastructure Investment and Construction Forum (IIICF) saw 14 cooperation agreements for infrastructure projects between companies from Mainland China, Macau and foreign countries, Macao Trade and Investment Promotion Institute (IPIM) President, Jackson Chang stated at the international forum’s last day press conference at The Venetian Macao.

This is the fifth time the IIICF has taken place in Macau, an international forum with the theme of investment in and construction of infrastructure, founded in 2010 by CHINCA (China International Contractors Association) with the approval of the Chinese Ministry of Commerce, according to IPIM. The forum attracted more than 8,000 delegates from nearly 100 countries and regions, including about 150 ministerial officials and nine province representatives from the Greater Pearl River Delta zone, Secretary for Economy and Finance Lionel Leong Vai Tac stated previously. This year’s edition saw the participation of 600 institutions from the construction, developer, equipment, services and consulting sectors, according to IPIM, as well as 50 politicians from more than 30 countries and regions, and more than 20 international financial institutions such as the Inter-American Development Bank, Bank of China, and the Asian Development Bank, according to the President of the China International Constructors Association, Fang Qiunchen.

The Portuguese connection

On the last day of the event, a seminar for financing and cooperation for productive capacity between China and Portuguese-speaking countries was held, with the IPIM President stating that one of the forum’s objectives was to create connections between companies from Macau, Mainland China and Portuguese-speaking countries.

One of the participating local companies was Chalestrong Engineering Technology and Consulting Limited, the only distributor of Chinese state group Beijing New Building Material Co., Ltd ,(BNBM) selling building materials in the markets of Africa, East Timor and Macau.

“This is the fourth time we have come to the forum since 2011. It’s a good platform to reach Portuguese-speaking countries, which are the focus of our company, such as Mozambique and East Timor, since through the forum we meet many delegations and businessman to network with. I believe Macau needs construction know-how from other countries, but as a developed city the way we do construction, we can share our methods with developing countries as a way to create investment opportunities,” the Chalestrong Vice-president, Afonso Chan, told Business Daily. Chalestrong was one of the companies who signed business deals during the event, for a project in Mozambique, with Afonso Chan telling Business Daily that if the local Macau government is really focused on making the territory a platform for business between China and Portuguese-speaking countries, it should motivate young talent in

Macau to pursue knowledge in Portuguese language as a way towards achieving this.

Resurrecting the Silk Road

“The MSAR gives great importance to the international forum, as a way to expand Macau’s influence in infrastructure cooperation at an international level,” Jackson Chang stated at the press conference, underlining the role of the forum as a way to promote the Silk Road Economic Belt and the 21st Century Maritime Silk Road (‘One Belt, One Road’), by providing cooperation between industrial and financial sectors, while helping Mainland Chinese companies to enter international and Portuguese-speaking

countries.

The ‘One Belt, One Road’ is a development strategy initiated by President Xi Jinping in 2013, involving the New Silk Road Economic belt that will link China with Europe and a Maritime Silk Road that connects China with Southeast Asian countries, Africa and Europe, as Business Daily reported previously.

“This is rare opportunity to find contractors for different areas, from road to airport construction fields, and we have never seen a forum with this amount of stakeholders and financiers,” Secretary of Ministry of Transport and Infrastructure of Kenya stated at the press conference.

MACAU LEGEND

Still waiting for Savan Vegas Hotel Macau Legend Development Limited announced the release of the information dispatch regarding the Savan Vegas Hotel and Entertainment Complex deal in the Lao People’s Democratic Republic, noting that it will be delayed until June 30, according to a filing to the Hong Kong Stock Exchange. The dispatch, signed by Macau Legend CEO, David Chow Kam Fai justified the delay, stating the need to finalise financial information regarding the Savan Vegas Hotel. This comes after Macau

David Chow Kam Fai

Legend announced that it had entered into a ‘Project Development Agreement’ with the Lao People’s Democratic Republic Government to purchase the Savan Vegas Hotel, located in Savannakhet Province in the centre of Laos for US$42 million (MOP335.64 million). The same dispatch detailed that the unaudited net book value of the Savan Vegas Hotel as of December 31 last year was approximately US$31.09 million, as reported by Business Daily. N.M.

Business Daily Monday, June 6 2016

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MACAU SOCIETY

Remembering Tiananmen publicly remembered and the Hundreds of people gathered in San Ma Lou for a vigil to remember the victims of Tiananmen, including young people who had never heard of the massacre which took place 27 years ago. Macau and Hong Kong are the only places in China where Tiananmen can be

two cities hold annual vigils to remember the tragedy. About 125,000 people attended the Victoria Park event in Hong Kong. In Macau, the vigil was organized by the Union for Democratic Development of Macau by Au Kam Sam and Ng Kuok Cheong.

PUBLIC WORKS

Public tender to reconstruct Hotel Estoril Government decides not to directly adjust the reconstruction of the old building to Portuguese architect Siza Vieira.

The Macau government will no longer give the reconstruction project of the old Hotel Estoril directly to Portuguese architect Alvaro Siza Vieira.

It has instead decided to open the work up to a public tender.

According to Secretary for Social Affairs and Culture, Alexis Tam, the Portuguese architect has been informed of the decision and will be invited to participate in the tender. “[Direct adjustment is] according to the law. But that was the idea last year. Today, the situation is different because many architects want to compete. In the end, it is a political issue,” said Alexis Tam, quoted by Radio Macau.

According to the secretary, in Macau “there are also good architects,” and a tender is “more transparent”.

In April last year, the Macau government invited Siza Vieira to reconvert the building of the former Hotel Estoril into an arts center and art schools for young people.

The Portuguese architect publicly defended the demolition of the hotel and decision to not maintain the

facade of a building that is commonly associated with the start of casino operations by tycoon Stanley Ho, and therefore a part of the history of the largest industry in the territory.

Then came a debate on the renewal of the building, which has been abandoned since the 1990s, and its

eventual patrimonial and historical value, and the Macau government launched a public consultation process.

In September, city planners association Macau Root Planning launched a petition to ask for the evaluation of the assets of the former Estoril hotel and adjacent pool.

On 15 March this year, the Macao Cultural Heritage Council decided that the building would not be classified.

4 Business Daily Monday, June 6 2016

MACAU E-VISA

New e-visa service to nine countries

The Macau SAR Identification Department (DSI) is offering Macau SAR passport holders a new online e-visa application service for travelling to other countries and regions, according to a press release by DSI on Friday. After the compilation of data and confirmation from relevant countries and regions, so

far a total of nine countries including Australia, Cambodia, Canada, Colombia, Gabon, India, Kenya, Myanmar and Zambia have approved e-visas for Macau SAR passport holders to enter their countries. Local residents can apply for e-visas online at the DSI’s website. The new service saves the public time as they will not need to go to a nearby embassy or consulate to apply for a travel visa. A.L.

POLICY

Lets be more transparent with environmental assessments, says legislator Public views should be considered and environmental assessment project information should be accessible to the public, urges Si Ka Lon With the rapid development of Macau, major infrastructure and private projects are on the rise and environmental problems have been gradually occurring. The lack of

institutionalized assessment of the environmental impact of public projects has been a concern to legislator Si Ka Lon, so he recently decided to send a written interpellation to the

RETAIL

Moiselle expects annual profit to drop Clothing retailer Moiselle International Holdings Limited issued a profit warning that it expects to record a loss for the fiscal year ending 31 March, compared to the same period in 2015, it informed the Hong Kong Stock Exchange.

The company told the Hong Kong Stock Exchange a preliminary assessment of the group’s unaudited consolidated management accounts, showed the significant decrease in turnover was caused by ‘weak consumer sentiment and sluggish retail consumption in Hong Kong’ and a decrease in the turnover by tourists from Mainland China.

The company’s deterioration of operating environment in Mainland China was also mentioned in the warning, as one of the causes for

the significant decrease in turnover and operating margin, the filing mentioned.

According to an interim report for the first six months of 2015 published

by Moiselle in September last year, the company recorded a loss of HK$31.9 million (US$4.1 million/ MOP32.85 million) as turnover fell by 21 per cent year-on-year to HK$161.2 million, while the gross profit margin decreased to 76 per cent compared with 82 per cent in the same period of last year. N.M.

government, asking when public consultation will take place for the assessment of the environmental impact of certain projects.

Another enquiry the legislator wrote to the government asked whether public views are being taken into consideration for recent projects such as the Alto de Coloane residential project and the new contagious disease control centre.

The legislator stated that he required more information transparency on such projects to the public.

Director of the Environmental Protection Bureau (DSPA) Raymond Tam Wai Man, replied to Si Ka Lon’s enquiry saying that the environment assessment on projects had collected opinions from relevant governmental

departments, organizations and industries as a foundation for further collecting public opinions. A public consultation will be conducted as soon as possible when the conditions are met, Raymond Tam mentioned.

In regards to the new contagious disease control centre, the Health Bureau (SSM) previously conducted an environmental assessment on the building through a professional consulting company, including quality of air, noise, water, waste and eco-systems, in order to reduce and minimize the environmental impact during construction of the project. Mr Tam also replied that DSPA is open to public participation in environmental assessment on projects. A.L.

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MACAU LABOUR

In the name of the working needs Labour Affairs Bureau guarantees that his department protects employees’ rights such as equal pay for non-resident and resident workers, and provides training programs for local workers to increase their competitiveness.

Annie Lao annie.lao@macaubusinessdaily.com

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S Macau’s economy has entered a period of adjustment, the Labour Affairs Bureau (DSAL) is providing a one-stop service for employees who may lose their jobs during this period. The director of DSAL, Wong Chi Hong attended the TDM radio program ‘Macau Forum’ to discuss the labor policies with the audience.

The services provided by DSAL, include upholding the rights of employees and making immediate job referrals. DSAL also provides training courses depending on the employees’ academic qualifications and skills so they can obtain “relevant certificates and gain relevant skills to be able to re-enter the labor market”, Mr. Wong stated.

Both non-resident workers and local workers “should receive equal amounts of work and salary”, Mr. Wong pointed out during the radio program. He said the Bureau pays attention to salary rates when assessing companies for hiring non-resident workers in order to protect the employment rights of local workers.

DSAL is also assisting workers in the gaming industry to obtain maintenance licenses for job referrals Mr. Wong added. So far, DSAL has successfully assisted more than 80 employees to switch jobs within their companies.

for hiring non-residents, this will be seen as a criminal act and DSAL will immediately pass the case to the Judiciary Police (PJ) to handle.

Mr. Wong stressed that this situation “will not be tolerated” and DSAL will cancel all a company’s quotas for hiring non-resident workers and administrative penalties will apply to the offenders.

DSAL has been sending their field inspectors and labor inspectors to construction sites to check if the non-resident workers are being legally hired and whether companies are following the legal practice standards. The inspectors will “immediately record the situation in assessment reports for future approval of non –resident workers” Mr. Wong explained. If any problems are found during the inspections, they will be “followed up strictly”.

Further research on human resources in the local market will be conducted such as an analysis of the types of jobs being done by

non-resident workers in the local market and the types of occupations that local residents would like to take, according to Mr. Wong. Therefore, training courses have gradually been set up, including for facility maintenance, he explained.

Mr. Wong also stressed that the Bureau does not allow the injection of non-resident workers to affect the local resident market for employment and promotion opportunities.

In 2015, DSAL offered a total of 282 training courses with a total of 6,032 participants enrolled, of which 206 courses were completed, with 4,642 people finishing the courses, according to the official data from DSAL.

4,642 Number of people finishing the courses

Training programs to meet the needs

In line with the Macau SAR becoming a ‘World Tourism and Leisure Centre’ and to promote the development and orientation of ‘Moderate Economic Diversity’ in the city, DSAL has provided training and vocational skill certifications for local personnel in order to meet the demands of the city’s workforce, according to a press release published by DSAL on Friday.

The main focus of the vocational training courses and skills testing programs is on hotels, restaurants, gaming, transportation, construction, engineering, maintenance, management of facilities, property management, personal care services and retail. This is in order to foster the economic and industrial development of the city in terms of diversity, and to address the need for diversified talents through enhancing the employability and competitiveness of local workers.

As of last April, a total of 14 different types of enterprises had participated in these training programs, including gaming companies, hotels, telecommunication companies and engineering companies, with a total of 99 companies offering their staff paid training. After finishing the programs, 34 local people were newly recruited and 52 people were recruited back by their companies, and are now waiting for their employment to start, according to the press release.

DSAL also deploys staff to monitor and better understand the recruitment situations in the recruitment market, and requires companies to provide the results of recruitment events.

Last year, the Bureau attended a total of 55 recruitment events, which about 6,200 people attended.

206 Number of training courses completed in 2015

Local workers first

Hiring non-resident workers can only be used to supplement a shortage of local workers Mr. Wong said during the radio program, adding that he hopes employers understand this. In addition, if employers submit false information for applications

INSURANCE

Unlock the value of the business Dah Sing sells insurance unit for more than 12 billion patacas Jonathan Browning and Alfred Liu

The shares of Dah Sing Financial Holdings Ltd. climbed the most in almost six weeks after the Hong Kong banking group agreed to sell its life-insurance operations to Fujian Thai Hot Investment Co. for HK$10.6 billion (US$1.4 billion).

The sale, which is subject to regulatory and shareholder approvals, includes Dah Sing’s life-insurance businesses in Hong Kong and Macau, and is expected to close in the fourth quarter, the company said in a statement late last week. The deal also includes an agreement that allows the life-insurance businesses to sell products through Dah Sing Banking Group Ltd. and Banco Comercial de Macau for the next 15 years.

Thai Hot, a Chinese firm that invests in real estate, insurance and health

care, beat out property developers and insurance companies seeking a slice of Hong Kong’s market for insurance policies, which is benefiting from surging Chinese demand.

Purchases of insurance and related investment policies by mainland visitors to Hong Kong almost doubled in the first quarter from a year earlier to HK$13.2 billion, the city’s insurance regulator reported last week.

“A lot of mainland companies, especially the real estate firms, are seeking to expand into the financial services sector,” said Edmond Law, a Hong Kong-based analyst with UOB-Kay Hian Holdings Ltd. “It’s not easy to get a license and not many takeover targets are available, that’s why Dah Sing got such a good offer.”

Country Garden Holdings Co., China Life Insurance Co., Canada’s Sun Life Financial Inc. and Chinese investment firm JD Capital were among the companies picked to submit second-round offers in April, people familiar with the matter said previously.

Ageas SA said in August it will sell its Hong Kong life unit to JD Capital for

HK$10.7 billion.

Dah Sing Financial, which controls one of the last independent Hong Kong banks, announced in January that it was exploring the sale of its insurance operations as it sought to unlock the value of the business.

Key Points Sale includes life insurance operations in Hong Kong, Macau Company expects deal to close in the fourth quarter of 2016

Thai Hot Investment will pay about HK$7.8 billion of the total deal amount just for Dah Sing’s Hong Kong life insurance business, the bank said. That’s equal to about 2.23 times the unit’s carry value as of December, which is the sum of its audited net-asset value and value of in-force long-term life business, according to Bloomberg Intelligence analyst Steven Lam.

Majority stake

Interest in the Dah Sing unit comes

even after a wave of new restrictions on policy purchases by Chinese residents that are aimed at controlling capital outflows. Such purchases allowed individuals wanting to move money abroad a convenient way around China’s foreign exchange controls.

Thai Hot Investment, based in China’s Fujian province, owns assets in industries from real estate to insurance and health care, and is a controlling shareholder of Shenzhen-listed Thai Hot Group. The investment firm, which had more than US$13 billion of assets at the end of last year, completed the acquisition of a majority stake in Newport Beach, California-based Alliance HealthCare Services Inc. in March.

Huang Qisen, chairman of Thai Hot Group, is a member of the 12th National Committee of the Chinese People’s Political Consultative Conference, according to the company’s website. Calls to Thai Hot Group seeking further comment weren’t answered.

Dah Sing said the sale won’t affect its general insurance subsidiaries.

BLOOMBERG

6 Business Daily Monday, June 6 2016

MACAU

COMPANIES

Macau Pass gears up for the e-commerce era Card issuer: ‘Opening the third-party payment platform market not totally good’ Kam Leong kamleong@macaubusinessdaily.com Photos by Cheong Kam Ka

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HE Technical Director of local stored-value card issuer Macau Pass, Harvey Chen shares the company’s business updates and its current process of developing the e-commerce sector. In addition, the company executive believes that the development of the city’s third-party payment market needs more support from the government and banks.

Nevertheless, He does not think the government’s intention to open up the market will bring only good to future operators, he tells Business Daily.

For 2015, total revenues of Macau Pass registered a significant growth of 49 per cent year-on-year according to the recently published 2015 annual results. What are the factors driving such a notable increase?

In 2015, we saw our business expanding stably whilst the card issuance business also posted stable development. In particular, during the second half of last year, we started our cooperation with Alipay, which boosted the number of Macau Pass terminals [installed] in merchants located in the city’s tourism districts.

This new cooperation boosted overall consumption via Macau Pass [terminals], especially those from Mainland Chinese tourists. On the other hand, for the card insurance sector, Macau Pass also recorded a quite good performance with the number of cards issued growing every month.

How many Macau Pass cards are now in circulation?

At the moment, Macau Pass has issued some 2.3 million cards in total, whilst those in circulation amount to more than 70 per cent of the total. In addition, we have issued some 200,000

chipped cards. Chipped cards will be the main focus of Macau Pass in the future. Macau Pass will be able to carry out many different customised services for our users of chipped cards, which we believe will provide more options to residents. For example, as long as card holders pass the identity verification, they can use their chipped Macau Pass cards along with our new third-party payment platform M+ Pay for purchases.

For regional cooperation, Macau Pass joined China’s City Union network last year…

Yes, we joined this network last November. Macau Pass is in fact in the five batches of [cities] joining the network of City Union which now covers some 101 Chinese cities.

This is a very significant service, as it assists users of Macau Pass travelling to quite a number of Chinese cities with our cards, such as Beijing and Shanghai.

BUSINESS PEOPLE THE MAIN USERS Who are the major users for these types of cards connected to the Chinese network?

Users can be divided into two groups.

One is local businessmen that always need to travel between Macau and the Mainland. As such, this type of card makes their use of public transportation in the Mainland very convenient. On the other hand, it is vice-versa – Mainland businessmen using this kind of card in the Special Administrative Region. This is also the meaning of this network, which provides mutual connections.

How is the progress for the intended cooperation with Hong Kong’s card issuer Octopus?

Macau Pass has ready reached certain cross-regional cooperation with Octopus, for example Octopus card users can make purchases in the

city via Macau Pass terminals using Octopus cards. For the future, we are striving to make Macau Pass cards usable in Hong Kong too. But of course, this would require communications and negotiations with Hong Kong’s related authorities and other organisations. It will take a certain amount of time before the service can be implemented.

Is there any timetable for the implementation?

There is no actual timetable for this part yet.

THIRD-PARTY PAYMENT PLATFORM The company’s new third-party payment platform M+ Pay was launched April-end. How is the usage of the platform so far?

For the time being, we have seen more than 30,000 members registering on our platform. In terms of transactions, owing to the fact that the platform has only recently been launched and users are still getting used to it, we actually see users are a bit cautious. Hence, I reckon there is much room for the transaction number to be improved. For the future, we will work more on promotion and on providing more convenient ways for users to use our platform.

The current issue is that support from banks is not yet enough. So we will try to cooperate with more local banks in the future so that users can have more options.

How many online shopping platforms are currently accepting M+ Pay? M+ Pay is already available on the local e-commerce platform MacauMarket. com. We have also reached agreements with Macaueshop.com and Macaushibao.com. We are scheduling to make M+ Pay go online on these two platforms.

In your opinion, how can you make more residents use the third-party payment platform when they do online shopping locally?

First of all, e-commerce platforms

themselves need to provide more kinds of services to users, such as more varied options of goods in order to fulfil demands of different users.

For example, in addition to physical commodities, platforms should consider offering more virtual products, such as e-vouchers for buffets and other services. Platforms need to be diversified for their products.

2.3 Million Total number of Macau Pass cards 70 percent of them in circulation

Is Macau Pass working on making M+ Pay available on China’s biggest e-commerce platform Taobao.com?

In fact, we have been in talks with Alibaba and Alipay. We hope M+ Pay could soon go online on Alipay so that Macau residents can use our payment platform on Taobao and Tmall. Nevertheless, due to the current resources [of Macau Pass] and the internal resources of Alipay, no significant progress has been made in this part of cooperation. There is no timeframe. Yet, we are striving hard, hoping to reach this agreement.

The transaction amount on M+ Pay is capped at MOP5,000 per time by the Monetary Authority of Macau (AMCM). Do you see this as a restriction for the platform’s development as such an amount could easily be exceeded when users buy electronic products?

We can actually resolve this cap in two ways. AMCM only approves a maximum transaction amount of MOP5,000 due to some safety concerns with online transactions. The monetary authority has actually suggested that Macau Pass could apply for a higher maximum transaction amount based on the actual use of our platform. But of course, Macau Pass will need to provide certain proposals for management plans, and control of risks for AMCM’s evaluation and approval. Hence, this cap can actually

Business Daily Monday, June 6 2016

7

MACAU be increased in the future.

Meanwhile, we are also cooperating with local banks to provide instalment plans for our users so that the cap amount will not bring any restrictions to our users. In addition, if users make the transactions directly via their online-banking accounts, they are also not restricted by the cap.

For the past one month, who have been the major users of M+ Pay? Local residents account for half, while Mainland residents also account for the other half. The aim of M+ Pay is to service local residents. Hence, we will provide more living-related services for our residents. I perceive that the purchasing ability of local residents is still quite strong. It is just that not many merchants or platforms are able to provide related services online.

Given the support of the government for e-commerce, Macau Pass hopes to cooperate with more e-commerce platforms and online merchants.

OPENING UP THE MARKET How do you view the government’s plans to open up the local third-party payment platform market?

To develop third-party payment platforms and to open the market will for sure boost the development of the local e-commerce industry, which is an encouraging measure.

Nevertheless, for the moment, I think it is more necessary for the government to boost cooperation between local merchants, banks, and third-party payment platforms. As an operator of a third-party payment platform, Macau Pass sees that local banks are actually restricted by human resources and their administrative procedures when we try to cooperate with them. Hence, our process of promoting e-commerce is a bit slow. This would require the government’s policies to change the situation.

Some people believe Macau is quite a small market. Do you see there is enough demand to support fully opening the market for third-party payment platforms in the future?

Based on the current situation, I don’t think opening up the market would necessarily benefit the development of third-party payment platforms in the city. It is because the population of Macau is small, coupled with the low viability of e-commerce business and the low acceptance rate of users. Hence, if there are too many third-party payment platforms, it will be quite stressful for operators to orientate themselves in the market, as human resource costs are quite high. Besides, these companies may not generate expected revenues and their services may be decreased…

They may feel stressed about their operations.

Is Macau Pass worried about the competition once the government opens up the market?

Macau Pass aims to serve local residents and the majority of our services are for public interests. As such, our orientation in the market would be a bit different from other third-party payment platforms in the future.

Macau Pass not only focuses on generating revenue but also serving local residents. In addition, Macau Pass is one of the 29 authorised [monetary] bodies in the territory so its responsibilities would also be different from other new operators.

MOBILE APPLICATIONS How is the development of Macau Pass’s mobile application launched in 2014-end that allows users to top up their values?

In April, Macau Pass launched a new version of this mobile application running with smartphones on the Android system, in order to integrate the product with our newly launched third-party payment platform. As such, in addition to only allowing users to top-up their cards with the NFC (Near Field Communication) function, the new version of the app includes a function that is approved

“We are striving to make Macau Pass cards usable in Hong Kong too”

by AMCM – which allows users to create their own online payment accounts and to make transactions as high as MOP5,000 per time, up from the previous MOP1,000. Moreover, Macau Pass has launched another mobile app for iPhone users too.

After all, the number of Apple users may occupy a bigger proportion in Macau.

“Support from banks is not yet enough. So we will try to cooperate with more local banks in the future so that users can have more options” How many times have these two applications, for Android and iPhone, been downloaded?

Currently, these two applications have been downloaded over 50,000 times altogether. Meanwhile, we are continuing to discuss with local banks about cooperation. At the moment, there are three banks supporting

value topping-up via the app. They are Tai Fung Bank, OCBC Wing Hang Bank and Banco Comercial de Macau, S. A. We expect that the number of banks cooperating with Macau Pass will increase by one or two within this year. In addition, we are in talks with local banks to cooperate with the online payment part as well. We expect that local banks may support a new type of online payment as soon as the third quarter of this year.

As the authorised agent for Alipay in the Special Administrative Region, how is the development of this sector going so far?

The latest data indicates more than 600 terminals have been installed to support Alipay payments in Macau.

We see that this part of the business has been and will be growing faster and faster. For now, we can disclose that the total transaction value of Alipay in Macau, via Macau Pass, increased 10-fold in the first quarter of this year, compared to the last quarter of 2015. As I said, merchants accepting Alipay payments are primarily located in the tourism districts.

As such, it has boosted consumption

by Mainland Chinese tourists.

But will the acceptance of Alipay payments in Macau actually decrease the number of tourists using Macau Pass cards?

There are no conflicts in this regard.

After all, Macau Pass was only a stored-value card issuer for transportation in the very beginning and it has gradually developed to provide for small-amount transactions.

As such, Macau Pass cards still have advantages. The same is the case for Alipay as well – it has varied kinds of users of which some 400 million are verified users. The consuming ability of this group is quite high.

Macau Pass is launching mobile payments this year, as disclosed at a recent public event. Can you tell us more about the new product?

I can only tell you that the new product will be similar to Alipay’s smallamount payment – which allows users to use their Macau Pass accounts even when they’re without their cards. The new service will include all merchants of Macau Pass, which is a wider scope than Alipay which is primarily used in tourism districts.

In addition to mobile payments, are there any other near-future plans you can share with us?

Macau Pass will expand more of our applications of payment [methods] with our partners, such as those in the industries of e-commerce and tourism. But for tourism, we may still need to rely on the actual service providers to make Macau Pass’s platform linkable to many other different services.

8 Business Daily Monday, June 6 2016

MACAU

GAMING

June, the month of growth?

Analysts are divided on the possibility of returning to revenue growth already this month.

A

NALYSTS are divided as to whether June will come to mark the first month of growth in revenues

by Macau’s casinos, after two years of consecutive monthly declines.

In a statement sent to Lusa news agency, Grant Govertsen, from Union Gaming, anticipates revenues of 17.5 billion patacas (US$2.18 billion), less than 1 per cent growth year-on-year, but which, if it happens, will be a first

in a two-year cycle.

The calculation aligns with that of Aaron Fischer (CLSA consultant), who last month anticipated zero growth (0 per cent) for June, revising downwards its own forecasts of 5 per cent, advanced in January.

The return to a path of gaming revenue growth in June is, however, far from certain, with other analysts anticipating declines of between 1 and 8 per cent.

Carlo Santarelli and Danny Valoy,

from Deutsche Bank, note that the trend in May - the month in which casino revenues fell 9.6 per cent was more negative than expected by investors.

While acknowledging that performance can improve year-on-year they believe that revenues from Macau’s casinos will remain in negative territory this month, anticipating a decline of about 6 per cent.

JP Morgan goes even further by advancing the possibility of “June being the worst monthly performance of gaming revenue in 70 months”.

The investment bank anticipates

that casino revenues could fall between 5 and 7 per cent in annual terms, to between 16 billion and 16.4 billion patacas (between US$2 billion and US$2.05 billion), a value that, if confirmed, would be the lowest since September 2010.

Several analysts interpret this year as the “stabilization” of the Macau gaming industry, but are divided regarding the 2016 outcome.

Chief Executive Fernando Chui Sai On, when presenting the budget for 2016 last November, took a cautious stance and said that the Government predicts that casinos would close the year with revenues of 200 billion patacas (US$25 billion). If confirmed, that will mean a double digit fall (around 13.3 per cent).

GDP contraction lower than 10 per cent, economist Economist Albano Martins anticipates that the gross domestic product (GDP) of Macau will suffer a real contraction of less than ten percent in 2016, after the ‘fall’ of 20.3 per cent last year.

“The indication we have is relatively better compared to the first quarter of the previous year,” in which GDP fell 21.9 per cent in real terms, according to revised data, “which indicates that most likely at the end of the year contraction will be in the single

digits,” Albano Martins said to Lusa.

In this sense, the economist points to a contraction in the range of between 5.8 and 7 per cent for this year.

This prediction is based on the idea that the decline in gaming revenue will be lower over the next months.

“Everything suggests that the gaming industry will contract less in the coming months and there will be even two, maybe three [months] of positive growth,” which “suggests that the contraction will be tightening a little bit more in the second half of the year”.

The worst case scenario anticipated by Albano Martins matches the International Monetary Fund forecast (IMF) released in April, pointing to a contraction of GDP of around 7.2 per cent in the 2016 statement and a return to growth in the following year.

However, Moody’s - which in May reduced the ‘rating’ of Macau, from Aa2 to Aa3 due to a “sharp weakening of the economy, the still highly

volatile growth”, coupled with “limited response” by the government to falling gaming revenues - has a darker perspective.

This is because the rating agency also predicts a contraction in 2017, while noting that the pace of decline may slow. In the medium term, anticipated, annual real GDP growth should stabilize at between 1.5 and 2 per cent.

The Monetary Authority of Macau said, earlier this year, that the economy would continue to “adjust” in 2016, but less compared to 2015, mainly due to a less gloomy outlook regarding the performance of the gaming industry, but has not advanced concrete forecasts.

Macau’s GDP contracted by 20.3 per cent in 2015, reaching 368,700 patacas (US$46.08 billion).

The city’s economy has been in decline since the third quarter of 2014, the year in which - for the first time since the handover to China in 1999, GDP decreased (by 0.9 per cent).

Business Daily Monday, June 6 2016

9

MACAU

Two years of bad luck does not mean the end of “good fortune” Although the longest run of ‘bad luck’, the ‘crisis’ of the Macau gaming industry is something for interpretation: revenues from casinos, even having been falling for two consecutive years, are still four times higher than Las Vegas’.

Local casinos closed 2015 with revenues of 230.84 billion patacas (US$28.85 billion) - 34.3 per cent less than the previous year - in what was the second consecutive year of slowing revenues, after decreasing 2.6 per cent in 2014.

This prolonged downward trend, which began in June 2014, is the result of a ‘cocktail’ of factors that analysts attribute to the effects of the anti-corruption campaign launched by

Beijing, the confidence blow inflicted by a series of embezzlements in the VIP gaming rooms (for high-rollers), the increasing restrictions on China’s capital movements and the slowdown of the second world economy.

Despite the ‘crisis’, the revenues of just over 30 casinos continue to be worth four times that of Las Vegas although they previously amounted to seven times - and Macau continues to hold the title of world gaming capital.

And although below the psychological barrier of 300 billion patacas (US$37.5 billion), revenues last year were nearly the same amount generated in 2011, which was 267.86 billion patacas (US$33.48 billion).

The scenario is far from being bleak. It just seems darker perhaps because expectations were unreasonable in relation to the dramatic growth that had been witnessed. As CSLA consultant Aaron Fischer recently said, optimism was such that in 2013, it was expected that revenues from Macau’s casinos would reach US$80 billion (640 billion patacas) in 2018.

Today, with a more realistic approach, the analyst points to US$38 billion (304 billion patacas) in 2020, amounts similar to those recorded

Industry will recover but no more ‘jackpots’ Revenues have “hit bottom”, are near “stabilization” and will return to growth moderately soon, but the gaming industry will not return to what it was, argue analysts.

“The probability of the gaming industry going back to its ‘peak’ is minimal,” said Ben Lee, an analyst at IGamix consultants, defending that ‘supernormal’ profits are gone, refering to successive record revenues of casinos and the latest “new normal” term used to describe the recent economic environment of China.

Revenues began a downward curve in June 2014, after years of exponential growth. For the whole of 2014 they fell 2.6 per cent, in 2015 decreased by 34.3 per cent and, in the first five months of this year, have declined by 11.9 per cent when compared to the same period last year.

Ricardo Siu, a professor at the University of Macau specializing in the gaming industry, also estimates that the record monthly revenues of 38 billion patacas reached in February 2014 are ‘very unlikely” to be

achieved “in the near future”.

The large rises in gross gaming revenue between 2011 and 2013 are past, he states: “It is true that the market may not return to this number” in the “next five years or even more.”

In the newly presented mid-term review of the sector after liberalization commissioned by the local government - the first study of its kind, which closely examines the state of the territory’s economy – it is said to be “unlikely” that the gross revenues will reach the monthly barrier of 30 billion patacas.

The monthly average for the first five months of 2016 is 18.38 billion patacas (US$2.29 billion), less than half compared to the “peak”.

“The good news is that the industry can return to profitability peak levels without having to reach peaks in terms of gross revenues. This is because the future of Macau is much more focused on the mass segment, which has significantly higher margins compared to the VIP market”, pointed out Grant Govertsen, an analyst at Union Gaming, adding that “in the long-term, the outlook remains very bright for Macau”.

According to Aaron Fischer of CLSA, revenues from mass market will see an average increase of 10 per cent in the period 2016-20, while the VIP gaming segment will see only 4 per cent in a scenario of an average

annual revenue growth of casinos of 7 per cent.

Samuel Huang, a professor at Macao Polytechnic Institute, points out that current monthly revenue is still worth more than the whole year of 1999, for example, emphasising that one should not look at the current scenario “very pessimistically”. While it is true that “in the long term it will continue to depend heavily on the gaming industry, Macau will be fine,” he says.

Also for Ricardo Siu, “unless there are more new ‘problems’ identified in the industry - which seems unlikely - and the Government decides on other serious steps to respond to these ‘problems’, the gaming industry will have reached its worst time in November 2015” - when revenues fell to their lowest levels since November 2010.

Along the same lines, Ben Lee of Igamix believes that “there are still smaller structural issues to be resolved” and that “from a lower base, volatility of gross revenue has been exacerbated”. But he anticipates a “positive change” by the end of the year.

in 2012.

Operators continue to make profits, though smaller, and continue to invest as planned, continuing to open new projects until 2017. And the scenario also remains positive for the government, which charges casinos 35 per cent direct tax on their revenues.

Although the cycle of revenue contraction precipitated public revenues last year for the first drop in at least five years, given the gaming industry’s weight in the budget 76.9 per cent of total revenue of the Administration in 2015 - consecutive years of strong growth have allowed the government to 'line' its financial cushion, based on continuous surpluses and to channel them into reserves.

10 Business Daily Monday, June 6 2016

GREATER CHINA DATA EVOLUTION

May data to suggest economy steadying but not perking up With the economy showing no signs of a quick recovery, analysts expect Beijing to keep up its infrastructure spending spree.

A

FLURRY of data from China in coming weeks is expected to reinforce views that the world’s second-largest economy is slowly steadying but not gaining momentum as investors hoped just a few months ago, a Reuters’ poll of economists showed.

Increased government infrastructure spending and a housing recovery are supporting growth even as Beijing appears to be pulling in the reins on a record credit binge amid worries about the dangers of using too much debt to stimulate the economy.

Though investors’ fears of a hard landing have ebbed, concerns remain that Beijing has not moved fast enough on key reforms such as cutting excess capacity, while debt continues to rise and the yuan currency comes under pressure.

Factory surveys earlier this week gave somewhat mixed signals on the

health of manufacturing, with some signs of steadying but companies continuing to shed jobs in response to weak demand at home and abroad.

With the economy showing no signs of a quick recovery, analysts expect Beijing to keep up its infrastructure spending spree, but are dialing back expectations for further broad policy easing by the central bank.

“China’s policy easing momentum has already peaked. We think that the recent mix of government policy signals should be taken together, in light of policymakers’ on-going bid to achieve both its targets of stabilising near-term growth and progressing on structural reforms,” UBS analysts said in a note on Thursday.

Loan and money data could add to the debate over whether Beijing has shifted to a more cautious stance as debt climbs.

New loans are expected to pick up from April but remain well below the records in the first quarter. After lending hit a six-month low of 556 billion yuan (US$84.44 billion) in April, new loans in May are forecast to total 750 billion yuan.

Growth in M2 money supply, however, may have fallen to an 11-month low, in line with recent calls from the government to reduce leverage. M2 was seen rising 12.5 percent in May from the same period a year earlier, down from 12.8 percent in April.

Trade is likely to remain weak, with exports expected to decline 3.6 percent, twice the pace seen in April. Imports may have fallen 6.0 percent, their 19th monthly decline in a row, though at a slower pace than April’s 10.9 percent drop. China’s trade surplus is forecast to hit US$58 billion in May. Industrial output is expected to have increased 5.9 percent in May, slipping only marginally from April, as the government continues to approve new construction projects.

Investment and retail sales growth likely remained steady, while consumer inflation at 2.3 percent may also

not show much change from April.

Producer deflation may show further signs of easing. Factory-gate prices are expected to have declined 3.3 percent, slower than April’s 3.4 percent fall.

Forex reserves likely fell US$20 billion to US$3.2 trillion, after two months of marginal gains.

China has managed to stabilise foreign reserves after they fell a record US$513 billion last year. But a stronger dollar, which is being fuelled by expectations of a looming U.S. interest rate hike, has renewed concerns about downward pressure on the yuan and a possible resurgence in capital outflows.

The yuan fell 1.5 percent in May, its sharpest monthly drop since last August when the currency was devalued, leaving it near levels last seen in 2011.

Risks of a fresh bout of yuan volatility are rising as some investors employ creative strategies to bet on a fall in the Chinese currency. REUTERS

Key Points May data seen mostly stable from April except trade Exports seen at -3.6 pct y/y vs April’s -1.8 pct Imports seen at -6.0 pct y/y vs April’s -10.9 pct CPI f’cast +2.3 pct y/y, same as April PPI f’cast -3.3 pct y/y vs April’s -3.4 pct Industrial output f’cast +5.9 pct y/y vs April’s +6.0 pct Retail sales f’cast 10.1 pct y/y, same as April New yuan loan f’cast 750.0 bln yuan vs April’s 555.6 bln yuan M2 money supply f’cast 12.5 pct vs April’s 12.8 pct Forex reserves seen easing to US$3.2 trln from April US$3.22 trln Jan-May fixed-asset investment f’cast +10.5, same as Jan-April

Consumer inflation at 2.3 percent may also not show much change from April

SOUTHEAST ASIA PLANS

Silk Road ambitions face obstacles Neighbours protest what they say are excessive Chinese demands and unfavourable financing conditions.

Brenda Goh and Simon Webb

For the south-western city of Kunming, China’s plan to extend a highspeed rail link 3,000 km south to Singapore is already a boon: pristine expressways, a gleaming station and something of a real estate boom, as young buyers crowd property

showrooms.

In Laos, work has yet to start on what should be the first overseas leg of a rail line stretching throughout Southeast Asia. The country, one of the region’s poorest, could struggle to finance even part of the US$7 billion cost and has yet to agree financial terms with China.

From Laos, the railway would enter Thailand. But Beijing’s negotiations have soured there as well, in part over financing, adding to a growing headache for China and highlighting the sort of problems Beijing may face as it develops its economic highways beyond Southeast Asia and across Asia under its “One Belt, One Road” project.

The ambitious plan to build land, sea and air routes reaching across the continent and beyond was announced by President Xi Jinping in 2013 with the aim of boosting trade

by US$2.5 trillion in the next decade.

As China’s economic growth slows, Beijing is encouraging its companies

to win new markets overseas.

But across the Southeast Asia border, China is facing the most complex and possibly most significant obstacles to its ambitions, as its neighbours protest what they say are excessive Chinese demands and unfavourable financing conditions.

They have resisted Chinese demands for the rights to develop the land either side of the railway. Beijing says turning a profit on land development would make the rest of the project more commercially viable and allow it to make a greater upfront financial commitment. Myanmar, in addition, had environmental concerns and cancelled its part of the project in 2014.

For China, Southeast Asia’s concerns are “going to be the first significant hurdle as they implement One Belt, One Road,” said Peter Cai, a research fellow at Lowy Institute for International Policy in Sydney.

China’s foreign ministry and the Export-Import Bank of China did not respond to requests for comment.

Land-linked

Chinese high speed trains

In 2013, all signs pointed to fast completion of the Laos leg. Leaders from both countries agreed to speed up construction - China offered to loan most of the project funds. In November, construction on the line’s terminus in Kunming began.

The 2.1 billion yuan (US$325 million) high-speed rail station in Kunming is now months from opening.

Yet, there is no action in Vientiane despite an elaborate ground-breaking ceremony in December.

Without significant help from China, Laos lacks the financial muscle

Business Daily Monday, June 6 2016

11

GREATER CHINA for the project, diplomats said.

It is unclear why China, which has been vying with Vietnam for influence in Laos, could not offer terms acceptable to Vientiane.

Both countries are invested politically in the scheme. China aims to increase its reach and influence in Southeast Asia and Laos says it wants to turn its country into one that is land-linked, rather than landlocked.

“There were very high-ranking dignitaries from both sides at the signing,” said a Western diplomat in Vientiane. “Most people believe it will cost more than $7 billion, and Laos is struggling to even finance US$2 billion of that.”

The Laos government did not respond to a request for comment for this story. Diplomats though say the inaction reflected an internal Communist Party rift over how the negotiations with China were handled.

They said a shock decision in January by the politburo to exclude Deputy Prime Minister Somsavat Lengsavad from the top decision-making body in part indicated concern at senior levels that the deal’s terms were too favourable for China.

Somsavat had led negotiations on China-related projects and had faced internal criticism for being too pro-Chinese.

“The terms were good for Laos,” Somsavat told Reuters. Construction was delayed because Laos was still “researching some details” and because of local opposition of land issues.

Holding the ground-breaking ceremony on December 2 also raised eyebrows in the leadership because the date clashed with celebrations marking the 40th anniversary of the founding of the Laos People’s Democratic Republic, diplomats said.

With Somsavat out of the government “moves internally by the Laos government have been to renegotiate the terms of this rail agreement,” a diplomat said.

Unrealistic

China has offered at least US$30 billion in loans and credit lines for projects. Zhao Jian, transportation professor at the Beijing Jiaotong University, said China offers concessionary loans of between 2 percent and 7 percent, so any country pushing for cheaper loans was being “unrealistic”.

Still, infrastructure projects like these need to be subsidised, said Kamalkant Agarwal, the head of commercial banking at Thailand’s Siam Commercial Bank.

“You can build these projects if you have a government or Santa Claus to pay for it,” he said. “But otherwise, making these projects profitable is a huge challenge.”

After failing to bridge gaps on financing, investment and costs, Thai Prime Minister Prayuth Chan-ocha told Chinese Premier Li Keqiang at a meeting in Hainan in March that Thailand would go it alone on financing and for now build only part of the project. The Thai line would stop well short of the Laos border.

“They will have to invest more because this is a strategic route that will benefit China,” Thai Transport Minister Arkhom Termpittayapaisith told Reuters earlier this year.

Thailand refused Chinese requests to develop land along the railway route.

“I have said since day one with China, that there will be no offer on land rights,” Arkhom said.

Thai finance ministry sources said the country could secure funds from Japan at much lower rates. Japan is Thailand’s biggest investor but also a country jostling with a more assertive China for influence across Asia, so Beijing would be wary of this idea.

“The ministry does not want to be condemned for borrowing an expensive loan compared with other options to support this project,” said a Thai finance ministry official who attended some negotiations with China.

Key Points

Some Chinese local officials, for their part, see the delays as Southeast Asian dithering.

“We are the face to Southeast Asia,” said Sun Xiaoqiang, vice-director of the Kunming Investment Promotion Board. “Of course, we all hope they will build faster.”

China plans economic superhighway spreading across Asia, beyond

Big gap

China pushing ahead with work in China for Southeast Asia link

The gap between China and Southeast Asia is clearest on the streets of Vientiane and Kunming.

Hundreds of Chinese firms operate in Laos, including Wan Feng Shanghai Real Estate Company, which is building a US$1.6 billion project to supply Chinese expatriates with condominiums and shopping centres.

But the Laotian government has invested little in new rail and roads.

Billions of dollars have poured into Kunming, including the district surrounding the new rail station - described by the World Bank six years

Faces growing headache in negotiations with Southeast Asia

Work yet to start in Laos, first leg into Southeast Asia Negotiations with Thailand also soured, in part over financing ago as a “ghost town”.

“One Belt, One Road is good for Kunming,” said Jin, a teacher, who only wanted to give his surname. “(Those countries) have a lot of issues over politics and governance.

China is ready, but Southeast Asia isn’t.” REUTERS

IN BRIEF RRR

Central bank issues rules on calculating reserve requirement China’s central bank issued rules on Friday on calculating banks’ reserve requirement ratios (RRR) to make the regime more flexible for banks to better manage liquidity. Calculating bank’s reserve requirement ratios will be based on the arithmetic average of their daily outstanding deposits, according to the rules published on the central bank’s website. Currently, calculating RRR is based on each bank’ outstanding deposits at the date of assessment, the central bank said. The rules will take effect from July 15.

SOCIAL SECURITY

National pension fund reports 15.2 pct return rate

SEC PROBE

Jack Ma says hard for U.S. to understand Alibaba The SEC focused on the accounting for affiliated logistics firm Cainiao Network.

Alibaba Group Holding, whose accounting practices are under investigation by U.S. regulators, is a difficult company for the United States to understand, Executive Chairman Jack Ma said in an interview to Chinese media on Friday.

The U.S. Securities and Exchange Commission (SEC) launched a probe earlier this year into the Chinese e-commerce firm’s accounting practices to determine whether they violated federal laws.

Questions about Alibaba’s growth rate and its relations with affiliated companies have dogged the firm for years.

In the interview with China’s official Securities Times, Ma said the investigation does not mean Alibaba has problems but that the SEC is just performing its duties.

“Alibaba’s business model does not have any references in the U.S., so it’s not just a matter of one or two days

“Alibaba’s business model does not have any references in the U.S., so it’s not just a matter of one or two days for the U.S. to understand Alibaba’s business model” Jack Ma, Alibaba’s Executive Chairman

for the U.S. to understand Alibaba’s business model,” Ma was quoted as saying.

The SEC focused on the accounting for affiliated logistics firm Cainiao Network, accounting practices applicable to related-party transactions in general, and operating data from its annual “Singles’ Day” sale, according to Alibaba’s annual report filed last week.

It was not immediately clear what prompted the SEC investigation. Alibaba said in May the SEC advised it the investigation should not be seen as an indication the company had violated federal securities laws.

“We want to thank the SEC for giving us an opportunity to interact,” Ma said in Friday’s interview.

Ma said he did not know when the results of the probe would come, but he hoped that afterwards the regulator would be able to give Alibaba a clear explanation, and a smoother system for communication could be established.

An Alibaba spokeswoman declined to provide additional comment.

Many U.S.-listed Chinese companies have said that foreign regulators and investors do not understand their businesses.

Financial results of Cainiao, started jointly in 2013 by Alibaba, Yintai Holdings, Fosun Group, Forchn Holdings and five major delivery companies, have in the past not been part of Alibaba’s financial statements, raising questions among some investors and analysts.

Alibaba said its latest annual report disclosed for the first time Cainiao’s revenue, net loss, assets and liabilities. REUTERS

China’s National Social Security Fund recorded a 15.19 percent rate of return last year, with income of 229.46 billion yuan (US$34.86 billion), according to an annual report released on its website on Friday.

The rate of return exceeded the average of 8.82 percent since the fund was founded 15 years ago, it said. It did not give details on its investments. Total assets under the social security fund amounted to 1.9 trillion yuan at the end of 2015, an increase of 24.62 percent from the year before, it said.

Appropriations from the government for the fund, including shares, were 70.6 billion yuan, it said.

SHARES SALE

SoftBank adds to Alibaba sale SoftBank Group Corp said on Friday it was selling a further US$1.1 billion of its shares in Alibaba Group Holding Ltd, bringing the total it has sold in the Chinese e-commerce company to US$10 billion. Separately, SoftBank agreed to sell most of its remaining stake in mobile gaming company Gungho Online Entertainment back to the company for 73 billion yen (US$685.38 million), Gungho said. SoftBank, Alibaba’s top shareholder, on Wednesday said it would sell at least US$7.9 billion of shares in Alibaba. That marks SoftBank’s first sale of shares in the Chinese company since it began investing in 2000.

EXPANSION PLANS

BAIC targets 5,000 car sales a year in Mexico by 2018 China’s BAIC Motor Corp Ltd has started selling its own cars imported from China in Mexico and aims to reach 5,000 sales a year by 2018, a senior company executive said. BAIC, the Hong Kong-listed unit of Beijing Automotive Group Co Ltd, joins a host of international automakers who have set up operations in Mexico to access auto markets in the United States and Latin America. It sold its first car in Mexico on Thursday. The Chinese company said it would initially sell a sedan and smaller-size SUV at six dealerships in Mexico.

12 Business Daily Monday, June 6 2016

GREATER CHINA

M&A

HNA Group eyes South American airline groups Avianca Depressed asset values there make this a tempting moment for acquisitions.

Mike Stone and Greg Roumeliotis

C

HINA’S HNA Group has expressed interest in acquiring Avianca Holdings SA and Avianca Brasil, the South American airlines controlled by Bolivian-born entrepreneur Germán Efromovich’s Synergy Group, people familiar with the matter said.

Avianca Holdings and Avianca Brasil are working with investment banks to explore options. They have also attracted interest from U.S. peers United Continental Holdings Inc and Delta Air Lines Inc, the sources said on Friday.

The growing foreign interest in Avianca shows that even as Latin America’s largest economy reels from its worst recession since the 1930s, airlines see the broader region as a growth area and one their route networks must embrace.

If HNA makes the deal, it would be the second major Latin American investment for the aviation, tourism and logistics conglomerate, which has also snapped up air cargo handlers Swissport and Irish aircraft leasing company Avolon.

The Chinese group agreed in November to pay US$450 million for a 23.7 percent stake in Azul SA, Brazil’s third-largest airline, which is

controlled by JetBlue founder David Neeleman.

In a filing later on Friday, Avianca denied that it is negotiating with companies and said it has signed no agreements.

“With the idea of exploring potential

‘The Chinese group agreed in November to pay US$450 million for a 23.7 percent stake in Azul SA, Brazil’s third-largest airline’

long-term strategic associations the company is taking advice from a investment bank,” Avianca said in a filing with Colombia’s financial regulator.

A source at the airline in Bogota said earlier that Chief Financial Officer Gerardo Grajales has flown to China. The structure of an eventual deal remained unclear, said the sources familiar with negotiations.

Efromovich’s Synergy Group separately controls Avianca Brasil, the fourth-largest airline in Brazil, where the government is reconsidering laws requiring domestic control of its airlines. Efromovich has Colombian and Brazilian citizenship.

Delta declined to comment. Avianca Holdings and Avianca Brasil did not immediately respond to questions. HNA and Synergy could not be reached for comment.

The sources asked not to be identified because the deliberations are confidential. REUTERS

COPYRIGHTS

Jaguar Land Rover sues mainland automaker over copycat The two SUVs have a similar shape, with the roof and windows tapering from front to back, and near identical tail lights and character lines on the side panelling.

Jake Spring

Jaguar Land Rover is suing Chinese automaker Jiangling Motor for allegedly copying the British firm’s Range Rover Evoque, a person with direct knowledge of the matter said - a rare move by a foreign automaker to fight copycats in the world’s biggest autos market.

A spokesman for JLR, owned by India’s Tata Motors, said in brief emailed comments to Reuters that a court in Beijing’s eastern Chaoyang district “served Jiangling with newly filed actions surrounding copyright and unfair competition.” He declined to elaborate.

The suit relates to Jiangling’s Landwind X7 sport utility vehicle copying the design of the Evoque, JLR’s first China-made model that went on sale last year, said the person with knowledge of the legal proceedings, who is not authorised to talk to the media and didn’t want to be named.

A spokesman for Landwind declined to comment.

Despite widespread and often blatant copying, global automakers generally don’t take legal action in China as they feel the odds of winning against local firms are low. Also, a lawsuit can be bad for branding

if the Chinese public think a foreign company is bullying domestic competitors.

If JLR wins its case, it could prompt other automakers to also take legal action, said Chen Jihong, a Beijing-based lawyer at Zhong Lun Law Firm, speeding up a shift to stronger enforcement of intellectual property rights.

Close resemblance

Landwind unveiled a new version of its X7 SUV in November 2014, drawing criticism for its striking likeness to the Evoque, an imported version of which was already on sale in China.

The two SUVs have a similar shape, with the roof and windows tapering from front to back, and near identical

said the two automakers are also discussing what Landwind can and can’t do in any X7 design update.

JLR sales fell by a fifth in China in January-March of last year - when it launched its China-made Evoque - after rising 36 percent in the same 2014 period. In the same period this year, JLR’s China sales rose 19 percent.

A lawsuit could be a long and gruelling process.

It took Honda Motor, for example, 12 years to win a case in China against a little-known local automaker - for copying its best-selling CR-V SUV according to a report by the official Xinhua news agency, confirmed by a Honda spokesman.

Even then, the Japanese firm was awarded only 16 million yuan (US$2.43 million) in compensation.

It had sought 300 million yuan. REUTERS

Key Points Claims Chinese firm copied Evoque SUV - source JLR confirms filed copyright “actions” vs Jiangling Landwind X7 SUV looks very similar to Evoque X7 sells in China for a third of the Evoque price

Paulo A. Azevedo, pazevedo@macaubusinessdaily.com EDITORIAL COUNCIL Paulo A. Azevedo; José I. Duarte; Mandy Kuok NEWSDESK Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm GROUP SENIOR ANALYST José I. Duarte DESIGN Aivi Remulla WEB & IT Janne Louhikari PHOTOGRAPHY Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia CONTRIBUTORS James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani 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. ADDRESS Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau TEL. (853) 2833 1258 / 2870 5909 FAX (853) 2833 1487 E-MAIL newsdesk@macaubusinessdaily. com ADVERTISING advertising@macaubusinessdaily.com SUBSCRIPTIONS sub@macaubusinessdaily.com ONLINE www.macaubusinessdaily.com FOUNDER & PUBLISHER

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tail lights and character lines on the side panelling. The X7’s front grille is slightly more rounded than the hard edges of the Evoque.

The slight differences between the two cars can be virtually eliminated using widely available kits that allow a Range Rover grille, logo and Land Rover badges to be put on an X7. Kits on Alibaba’s Taobao shopping website cost around 128 yuan (US$19.43).

The X7 costs around a third of the price of an Evoque, and is some way behind in technology and performance, said Yale Zhang, managing director of Automotive Foresight.

The JLR spokesman said Jiangling has been barred by injunction from selling the X7 in Brazil, where it recently appointed an importer.

Separately, the source said with knowledge of the newly filed suit

Business Daily Monday, June 6 2016

13

ASIA BOOSTING MEASURES

Philippines may widen debt borrowings to fuel growth Finance minister is also planning to impose new taxes on products to compensate for a planned cut in income taxes.

Manolo Serapio Jr and Enrico Dela Cruz

T

HE Philippines’ incoming finance minister Carlos Dominguez says he is open to diversifying the country’s borrowings to fund infrastructure projects and will push for a cut in income taxes to keep the Southeast Asian country on track for growth.

Boosting infrastructure spending is among the priorities for the new government of Rodrigo Duterte, the firebrand mayor from Davao city in the south, who won the May 9 election by promising he will go hard against crime and corruption and improving basic government services.

That includes addressing the

Philippines’ horrific traffic jams that have weighed on economic growth, and Dominguez told Reuters he will ensure there are enough funds for new infrastructure projects.

Sukuk bonds “are certainly in the menu”, as well as yuan borrowings,

Key Points New finmin will push income tax cut, not keen to raise VAT May open up telecoms, power sectors to more foreign investment Supports lifting of bank secrecy law

in terms of fund-raising.

“It’s not diversification for diversification’s sake, it’s (getting) the best deal. It depends on who gives us a better deal, will it be the local market or the international market?”

The Philippines, which used to be one of Asia’s most active sovereign bond issuers, last went to the debt market in February selling US$2 billion of 25-year bonds that drew huge demand.

Tax plans

Dominguez is also planning to impose new taxes on other “unhealthy products” in addition to alcohol and cigarettes to compensate for a planned cut in income taxes as he vows to widen the tax base and make the revenue raising regime more equitable.

The income tax rate for individuals and companies should be slashed to “mid-20s” percent from as high as 32 percent, but he said he isn’t keen to raise the current 12 percent sales tax.

Filipino President-elect Rodrigo Duterte (2-R) speaking to supporters during a thanksgiving party at a park in Davao City, southern Philippines

“Almost half of your (income goes to) the government. You think that’s smart? I don’t think so,” the 71-yearold businessman and former classmate of Duterte said.

Dominguez, who is returning to the Cabinet after 27 years, plans to review the Philippines’ Real Estate Investment Trust regulations and to rid the internal revenue and customs agencies of massive corruption.

Dominguez served as minister of agriculture and head of the environment and natural resources from 1986 to 1989, during the presidency of the late Corazon Aquino.

The Duterte leadership is not shy about planning to copy and expand some of the reform measures instituted by the outgoing government of President Benigno Aquino, Corazon’s son, including a public-private partnership on infrastructure investment.

“We will change the focus on making the economy more inclusive,” Dominguez said.

He plans to open up more sectors to foreign ownership, except land, to increase competition and boost services in areas such as telecommunications and power.

At the same time, Dominguez said the unnecessary contractualisation of jobs by big Philippine companies will end.

“Our administration is not in favour of a system where people cannot plan their lives, cannot say whether or not they can send their kids to school after six months.”

Dominguez would also push for the lifting of the country’s bank secrecy law and put casinos under an anti-money laundering legislation to avoid a repeat of the Bangladesh Bank heist where stolen funds found their way to Manila. REUTERS

MONETARY POLICY

India’s central bank seen holding rates on June 7 A poll showed the RBI was expected to hold banks’ cash reserve ratio steady at 4 percent.

Shrutee Sarkar

India’s central bank is likely to keep its benchmark repo interest rate unchanged at a five-year low of 6.50 percent at a policy review on Tuesday, according to all but one of the 44 economists polled by Reuters this week.

The survey forecast just one more rate cut in the coming year, with most expecting the Reserve Bank of India to cut by 25 basis points to 6.25 percent in the July-September quarter, and thereafter hold steady until at least until the end of the third quarter next year.

The poll also showed the RBI was expected to hold banks’ cash reserve ratio steady at 4 percent, and also leave it unchanged until at least September 2017.

The RBI embarked on an easing cycle in January last year that had helped fuel consumer spending one of the factors behind India’s faster-than-expected 7.9 percent

year-on-year economic growth in the quarter through March.

The world’s fastest growing big economy is expected to benefit from good rains forecast for this year, after two successive years of drought.

That could boost consumption further, especially in rural areas, but it could also stoke inflation, making

“The RBI will remain focused on better liquidity management and quicker pass-through of previous cuts” Hanna Luchnikava, Senior Economist for Asia Pacific at research house IHS Global in Munich

the central bank more likely to stay cautious.

“Even if the monsoon is normal, there will be less room to cut beyond 25 basis points, as core inflation is unlikely to ease further,” said Hanna Luchnikava, senior economist for Asia Pacific at research house IHS Global in Munich.

Annual retail inflation rose to 5.39 percent in April from 4.83 percent in March.

A majority of economists - 23 of 34

who responded to an extra question - expect the tone of Rajan’s upcoming policy statement to be “neutral” compared to the previous statement.

Seven said it would be more dovish and 4 picked more hawkish.

While the inflation outlook will determine the RBI’s policy stance, Rajan is also expected to focus on monetary policy transmission, especially since banks have been reluctant to pass on to borrowers the full benefits of the central bank’s rate cuts so far.

“The RBI will remain focused on better liquidity management and quicker pass-through of previous cuts,” Luchnikava said. REUTERS

14 Business Daily Monday, June 6 2016

INTERNATIONAL IN BRIEF UN-INTERPOL STUDY

Environmental crimes may cost US$258 billion Environmental crimes are rising due to weak laws and enforcement, costing the global economy as much as a record US$258 billion, about a quarter more than previously estimated, the United Nations Environment Program and Interpol said.

The groups released a study on Saturday, that said the proceeds from crimes ranging from illegal logging to the trafficking of hazardous waste and illicit gold mining are funding rebel groups and criminal syndicates.

The scourge includes a rise in the poaching of elephants and rhinos, along with white-collar crimes, such as exploiting the carbon credit market.

RATING

Moody’s cuts Finland’s AAA Moody’s became the third rating agency to remove Finland’s top-flight AAA credit rating Friday, saying it sees no improvement in the country’s debt challenge over the coming five years. Moody’s cut the Nordic country’s rating by one notch to Aa1 following similar moves by rival rating agencies Fitch and S&P in 2014 and 2015. The Finnish economy faces weak growth over the coming years that will reduce its resilience to potential shocks, Moody’s said. Although Finland’s economy resumed growing slowly last year after three years of recession, Moody’s said it expects the country to expand only 1 percent per year over 2016-2017.

MANAGEMENT MOVES

Facebook’s Zuckerberg may lose voting control Facebook Inc’s board has proposed removing Mark Zuckerberg’s majority voting control in the event of the social media giant’s chief executive and founder deciding to exit management at some point in future. In a proxy filing with the U.S. Securities and Exchange Commission, Facebook’s board said it would ask shareholders to vote on a proposal that would convert Zuckerberg’s Class B shares into Class A shares if he is no longer in a leadership position. The move was first proposed in late April in a regulatory filing.

S&P REPRIEVE

South Africa’s investment rating still vulnerable Standard & Poor’s decision to maintain South Africa’s investment grade credit rating has taken some pressure off President Jacob Zuma ahead of elections in August, although analysts said the country is still vulnerable to a downgrade to “junk” status. S&P kept its negative outlook on South Africa’s BBB- rating after a review on Friday, warning a downgrade to “junk” status could be on the cards later this year, or the next if policy measures did not turn around an ailing economy expected to grow by 0.9 percent at most in 2016.

WEAK DATA

U.S. employment report dims prospect of Fed rate hike The chance of a rate increase in July fell to 37 percent from about 59 percent late on Thursday.

Lucia Mutikani

T

HE U.S. economy created the fewest number of jobs in more than 5-1/2-years in May as manufacturing and construction employment fell sharply, which could make it harder for the Federal Reserve to raise interest rates.

Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labour Department said on Friday. Employment gains were also restrained by a month-long strike by Verizon workers, which depressed information sector payrolls by 34,000 jobs.

Underscoring the report’s weakness, employers hired 59,000 fewer workers in March and April than previously reported. While the unemployment rate fell three-tenths of a percentage point to 4.7 percent in May, the lowest level since November 2007, that was because 458,000 Americans gave up the search for work.

The Fed has signalled its intention to raise rates soon if job gains continue and economic data remain consistent with a pickup in growth in the second quarter.

Fed Chair Yellen said last week that a rate increase would probably be appropriate in the “coming months,” if those conditions were met. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade.

Financial markets largely priced out a rate increase at the Fed’s June 14-15 policy meeting after Friday’s data, according to CME Group’s FedWatch program.

Economists had forecast payrolls rising by 164,000 in May and the unemployment rate falling to 4.9 percent.

The weak report bucks data on consumer spending, industrial production and housing that have indicated the economy was gaining momentum after growth slowed to a 0.8 percent annualized rate in the first quarter.

In separate reports on Friday, the Commerce Department said goods exports rebounded strongly in April and orders for manufactured goods

recorded their biggest gain in six months.

A survey by the Institute for Supply Management, however, showed a significant cooling in services sector activity in May.

Delayed response

Some economists said the sharp slowdown in employment last month was payback after unseasonably warm weather boosted hiring in February and March. They also viewed the weak payroll growth as a delayed response to tepid economic growth in the previous two quarters.

Despite the poor performance in May, job creation has averaged 150,000 a month this year. That is well above the 100,000 monthly employment increase that Yellen has said is needed to keep up with growth in the work-age population.

Last month, the goods producing sector, which includes mining, manufacturing and construction, shed 36,000 jobs, the most since February 2010. Even excluding the Verizon strike, payrolls would have only increased by just over 70,000.

The Verizon workers, who were considered unemployed because they did not receive a salary during the payrolls survey week, returned

Key Points Nonfarm payrolls increase 38,000 in May Unemployment rate falls to 4.7 percent Average hourly earnings rise five cents Verizon strike cuts 34,000 jobs from payrolls

to their jobs on Wednesday. They are expected to boost June employment.

Other details of the employment report were not encouraging. Average hourly earnings rose five cents, or 0.2 percent. That was a slide from April’s 0.4 percent increase and left the year-on-year rise at 2.5 percent.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment held steady at 9.7 percent.

The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.6 percent. That drop unwound about two-thirds of the rise seen between last September and March of this year.

The weakness in the May employment data was broad-based.

The private sector added only 25,000 jobs, the smallest number since February 2010. Manufacturing employment fell by 10,000 jobs and construction payrolls dropped by 15,000, the most since December 2013.

Mining employment maintained its downward trend, shedding 10,000 positions. Mining payrolls have dropped by 207,000 since peaking in September 2014, with three-quarters of the losses in support activities.

Retail payrolls rose 11,400 after losing jobs in April for the first time since December 2014. Wholesale trade employment fell by 10,300 jobs.

Temporary-help jobs, a harbinger for future hiring, dropped by 21,000.

There were declines in utilities and transportation and warehousing employment. Government payrolls increased by 13,000 and healthcare jobs jumped by 55,400. REUTERS

FISCAL POLICY

Pakistan budget targets tax rises to shore up finances Fewer than one percent of Pakistan’s 190 million people pay income tax Pakistan is targeting a near 16 percent rise in tax revenues in the fiscal year ending June 2017, Finance Minister Ishaq Dar said on Friday as he unveiled a budget aimed at shoring up the South Asian country’s finances.

Dar said Pakistan would cut its fiscal deficit to 3.8 percent of gross domestic product for the coming financial year, down from the 4.3 percent envisaged for this year, and helped by a planned rise in tax collection to 3.95 trillion rupees (US$37.8 billion).

“The dangers to the economy are now far behind us. Economic growth has hit an eight year high.

This would have been even better if it had not been for a 28 percent fall in the cotton crop,” Dar told parliament.

Still, the economy remains structurally weak, hamstrung by poor infrastructure, struggling exports, the threat of militant violence and a very narrow tax base.

The GDP growth rate of 4.7 percent in the year to June 2016 was less than the

government’s 5.5 percent target, and a contraction in the agricultural sector this year meant many Pakistanis do not feel much better off.

Dar said Prime Minister Nawaz Sharif’s government’s priority in the year ahead was to push Pakistan’s persistently low

Key Points Targets lower fiscal deficit in 2016/17 Aims to lift tax-to-GDP ratio Finance minister says economy has stabilised Economy still vulnerable; growth moderate

tax-to-GDP ratio to above 10 percent and raise taxation revenues. Pakistan’s financial year runs from July to June.

Fewer than one percent of Pakistan’s 190 million people pay income tax.

The low level of collection and the hefty cost of funding its military has left Pakistan with insufficient money to spend on modernising its schools and hospitals, to the dismay of donors who end up financing much of the social infrastructure.

Dar said total spending for the 2016/17 year was estimated at 5.08 trillion rupees, while the defence budget would rise 11 percent year-on-year to 860 billion rupees. REUTERS

Business Daily Monday, June 6 2016

15

OPINION BUSINESS WIRES

The Korea Herald South Korea’s top 10 conglomerates have suffered a drop in their market capitalization this year as a protracted slump in domestic and overseas markets continued prodding investors to take to the side-lines, data showed on Saturday.

According to the data compiled by industry tracker FnGuide, the combined market value of Samsung, Hyundai and eight other business groups stood at 633.91 trillion won (US$534 billion) as of Friday, down 10.94 trillion won, or 1.7 percent, from the end of last year. No. 1 conglomerate Samsung Group suffered a 1.86-percent drop in its market capitalization.

Confronting the global threat to democracy

A The Straits Times Singapore firms saw a slight improvement in operating conditions in May, with the headline Nikkei Singapore purchasing managers’ index (PMI) rising to 50.1 from April’s 49.4. But while conditions were broadly stable, the index was just barely above the neutral 50 mark separating expansion from contraction.

The rate of output expansion quickened to a moderate pace, but total new work fell for the second month in a row, albeit marginally, noted Markit, the financial information services provider which compiles the index. Inflationary pressures appeared to cool across the sector in May, said Markit.

Thanh Nien News Vietnamese fuel traders on Saturday increased gasoline prices again after two weeks, as global fuel prices rose by nearly 6 percent during the period. The retail price of 92-RON, the country’s most popular gasoline grade, went up 4.3 percent to VND16,509 (74 US cents) a litre, while its bio alternative E5 rose to VND15,938 a litre. Diesel price increased 5.3 percent to VND11,908 a litre and kerosene rose to VND10,297 a litre. Gas prices in Vietnam have increased for three consecutive times since May 5.

Philstar The tourism industry continued its upward trend as it breached the two million mark in international arrivals for the first four months of the year. Latest data from the Department of Tourism showed that foreign visitors in the country hit 2.07 million from January to April 2016, up 15 percent from 1.8 million in the same period a year ago. The country’s tourism industry has consistently grown by double digit in the past four months – 13 percent in January, 20 percent in February, 12 percent in March and 11 percent in April.

CROSS THE WORLD, POPULISTS ARE attracting votes with their promises to protect ordinary people from the harsh realities of globalization. The democratic establishment, they assert, cannot be trusted to fulfil this purpose, as it is too busy protecting the wealthy – a habit that globalization has only intensified.

For decades, globalization promised to bring benefits to all. On an international scale, it facilitated the rise of the Asian tigers and the BRICS countries (Brazil, Russia, India, China, and South Africa), produced rapid growth across Africa, and facilitated the boom in developed countries through 2007.

It also created new opportunities and augmented growth within countries. But since the 2008 crash, many rich countries have been locked into austerity; the Asian economies have been slowing; the BRICS’ progress has been stalling; and many African countries have fallen back into debt.

All of this has contributed to rising inequality, which is now fuelling discontent. Emmanuel Saez and Gabriel Zucman calculate that in the United States, the wealth gap is already wider than at any time since the Great Depression, with the richest 1% of households now holding almost half the country’s wealth.

In the United Kingdom, the Office for National Statistics reports that in the period from 2012 to 2014, the wealthiest 10% of households owned 45% of total aggregate household wealth. Since July 2010, the top decile’s wealth has increased three times faster than that of the bottom 50% of the population.

In Nigeria, astonishing economic growth, averaging 7% per year since 2000, may well have reduced poverty in the southwest of the country; but in the northeast (where the extremist group Boko Haram is most active), shocking levels of wealth inequality and poverty have emerged. Similar trends are apparent from China to Egypt to Greece.

Alongside inequality, declining public trust fuels the revolt against globalization and democracy.

Across the developed and developing worlds, many suspect that the rich are getting richer because they are not held to the same rules as everyone else.

It’s not hard to see why. As the global economy slows, breaches of trust by those at the top become more apparent. In the United Kingdom, Amazon, Starbucks, and Google attracted public outrage in 2013 for using loopholes to pay almost no tax, prompting the UK government to lead a G8 tax announcement aimed at reducing tax evasion and avoidance. In 2015, an audit of the state-owned Nigerian National Petroleum Corporation revealed that about US$20 billion in revenue was never remitted to the authorities under the previous administration.

And the problem appears to be systemic. This year, the Panama Papers exposed how the global rich create secretive offshore companies, permitting them to avoid financial scrutiny and taxation. And the world’s largest banks have faced unprecedented fines in recent years for brazen violations of the law.

But, despite the negative publicity generated by such cases, the public has seen virtually no one held to account. Almost a decade after the global financial crisis of 2008, only one bank executive has gone to prison. Many bankers instead followed a path similar to Fred Goodwin, the head of Britain’s Royal Bank of Scotland, who racked

“

Ngaire Woods Dean of the Blavatnik School of Government and Director of the Global Economic Governance Program at the University of Oxford.

up £24.1 billion (US$34.2 billion) in losses, then resigned with a huge pension. Ordinary people – like the father of three who was imprisoned in the UK in September 2015 for accumulating £500,000 in gambling debts – do not enjoy such impunity.

All of this helps explain why anti-establishment movements are gaining momentum around the world. These movements share a sense of disenfranchisement – a sense that the “establishment” is failing to give ordinary citizens a “fair shake.”

They point to election results “bought” by special interests, and to arcane legal and regulatory frameworks that seem rigged to benefit the rich, such as banking regulations that only large institutions can navigate and investment treaties negotiated in secret.

Governments have permitted globalization – and peripatetic wealth-holders – to outpace them.

Globalization requires regulation and management.

It requires responsible business leaders. And it requires deep and effective global cooperation.

When governments failed to cooperate in the 1930s, globalization came to a crashing halt.

It took a series of careful, highly managed efforts after World War II to open up the world economy and permit globalization to take off again. Still, while many countries liberalized trade, capital controls ensured that “hot money” could not race in and out of their economies. Meanwhile, governments invested the returns on growth in high-quality education, health care, and welfare systems that benefited the many. As the business of government grew, so did the resources put into it.

By the 1970s, wealthy countries’ leaders in both government and business had become complacent. They took on faith the promise of self-equilibrating, self-restraining markets that would deliver continued growth.

By the time this new orthodoxy spread to the leveraged financial sector, the world was on a crash course. Unfortunately, many governments had already lost the capacity to manage the forces they had unleashed, and business leaders had lost their sense of responsibility for the welfare of the societies within which they were flourishing.

In 2016, we are re-learning that, politically, globalization needs to be managed not just to permit the winners to win, but also to ensure that they do not cheat or neglect their responsibilities to their societies. There is no place for corrupt politicians pandering to corrupt business leaders.

Restoring confidence will be difficult. Business leaders will need to secure a “license to operate” from society at large, and contribute visibly to sustaining the conditions that support their prosperity. They can start by paying their taxes.

Governments will need to distance themselves from the companies that fail to do their part.

Moreover, they must overhaul their own operations, to prove their impartiality. Robust regulation will require significant investment in government capacity and the legal services that support it.

Finally, global cooperation will be crucial.

Globalization cannot be undone. But with a strong, shared commitment, it can be managed. PROJECT SYNDICATE

GOVERNMENTS WILL NEED TO DISTANCE THEMSELVES FROM THE COMPANIES THAT FAIL TO DO THEIR PART

”

16 Business Daily Monday, June 6 2016

CLOSING ECO-AWARD

China inaugurates environmental prize

A total of 19 groups and 33 individuals became the first winners of China’s environmental prize, the ecological civilization award, on World Environment Day yesterday.

The winners were from provinces and regions including Sichuan (pictured), Xinjiang, Zhejiang and Tibet. The award event will be run by the Ministry of Environmental Protection every three years. Also yesterday, a symposium was held in Beijing to promote ecological conservation aimed at building a beautiful

China. Shen Yueyue, vice chair of the Standing Committee of the National People’s Congress, China’s top legislature, said the award showed that the central government highly valued ecological conservation.

While calling for determination and confidence in all endeavours, Shen urged the nation to learn from the winners and create a favourable environment for pursuing ecological conservation. According to the ministry, 133 Chinese cities and counties have won the title of ecology-friendly cities (counties). XINHUA

M&A

As Inter deal nears, Chinese retail giant Suning eyes soccer empire The company will also look to become a leader globally in sports media and online.

Adam Jourdan

C

HINESE retail giant Suning Commerce Group Co Ltd, set to tie up a deal for Italian soccer club Inter Milan, is already eyeing bigger ambitions: controlling a global sports empire stretching from soccer clubs to online broadcasting.

Suning and Inter Milan are due to make an announcement in the eastern Chinese city of Nanjing today, widely expected to confirm that Suning will buy a majority stake in the Italian soccer club.

Amid a wider push by China to increase its standing in the game, Suning’s deal for the 2010 European champions is just the start.

The Chinese electronics retailer is seeking deals to help create a global sporting “ecosystem”, according to a Suning Sports Group document seen

by Reuters.

This network would include club ownership, sports media rights, player agencies, training institutions, broadcast platforms, content production and sports-related e-commerce, the document shows.

“Suning Sports aims, through strategic expansion and acquisitions, to establish a sporting ecosystem along the whole supply chain,” it said in a roughly 20-page presentation outlining its ambitions for the sports business.

A majority stake in Inter Milan would be a big step towards this.

It would be a watershed moment for China’s investment in the game, making Suning the first mainland

Chinese business to control a major European soccer power.

Suning will also look to become a leader globally in sports media and online, including “creating high-quality sports content” and “establishing a professional broadcast platform”, it said in the presentation.

Suning declined to comment.

National champion

Suning, which has annual revenues topping US$20 billion, already has some blocks in place: it owns local club Jiangsu Suning and has splashed millions of dollars on players such as Brazil’s Alex Teixeira and former Chelsea midfielder Ramires.

It also has ties with Spanish champions FC Barcelona, England’s Liverpool FC and a stake in Chinese online content platform PPTV, with sporting content including the Chinese Super League as well as Euro 2016 starting later this month.

The drive tallies with Chinese

President Xi Jinping’s own goals, which includes ambitious plan to create a domestic sports industry worth US$850 billion by 2025. Xi is a keen soccer fan and wants China to one day host, and win, the World Cup. “Suning is definitely now seen as a bit of a national champion, on par with the likes of Alibaba Group Holding Ltd and Dalian Wanda,” said Mark Dreyer, Beijing-based founder of sports information website China Sports Insider.

“I wouldn’t be surprised to see more investments into the game from

Key Points China’s Suning set to buy major stake in Inter Milan Retailer Suning wants to set up global sports “ecosystem” China, under President Xi, making broader soccer push

Suning in the near future, as it looks to piece together assets in various key areas of the business.”

Chinese investors already have minority stakes in England’s Manchester City, Spain’s Atletico Madrid and New York City FC, while smaller Spanish club Espanyol and England’s Aston Villa are Chinese-owned. Inter’s city rival AC Milan is also in talks to sell a majority stake to a group of Chinese investors.

Reuters reported last week that Suning’s deal for Inter was imminent and that the firm was amongst the front-runners to buy UK-based Stellar Group, one of the world’s leading soccer agencies.

Inter is currently controlled by Indonesian tycoon Erick Thohir with former owner Massimo Moratti owning just under 30 percent.

Italian media have reported Suning will buy 70 percent of the club, valuing it at 750 million euros (US$853 million). REUTERS

Inter Milan’s stadium

PROJECTS FUNDING

ENVIRONMENTAL ACTIVISM

JAPAN POLITICS

World Bank approves loan for Bangladesh

Vietnam breaks up protests LDP’s chairwoman says Abe as anger seethes over fish deaths may still be PM for 2019 tax hike

The World Bank has approved US$213 million for two projects in Bangladesh to improve weather and climate information services and to strengthen college education provided through affiliates of the National University.

According to a statement of the bank received yesterday, the US$113 million Weather and Climate Services Regional Project will help Bangladesh provide reliable weather, water and climate forecasts and enable communities, especially farmers, to access weather information services easily.

It said the US$100 million College Education Development Project will help improve the teaching and learning environment of government and non-government colleges affiliated with the National University.

The Weather and Climate Services Regional Project will strengthen hydro-meteorological monitoring and forecasting, and improve early warning systems. The project will help develop agro-meteorological services to farmers and provide tailored weather and climate data.

The project will also support community level early warning systems for extreme weather events in the districts of Netrakona, Sunamganj Rajshahi and Naogaon. XINHUA

Dozens of activists were detained in Vietnam’s two biggest cities yesterday as they tried to hold protests calling for greater government transparency over a recent spate of mass fish deaths.

Tonnes of dead fish and other marine life began washing up on central Vietnamese shores two months ago and continued to appear for two to three weeks, sparking widespread anger.

Frustration has been further fuelled by a perceived lack of clarity from the communist leadership about what caused the deaths.

Major streets in central Hanoi and Ho Chi Minh City were temporarily deserted yesterday morning as security forces blanketed the area.

Activists used social media accounts to document many arrests, saying people had been detained in both cities either before or while they joined protests.

Another 30 people were detained after launching a brief protest in front of Hanoi’s cathedral.

Activists posted pictures showing the protesters holding banners with slogans like “Fish dead, people dead” and “No Formosa”.

Taiwanese conglomerate Formosa, which runs a steel mill in the area where the fish have died, is widely suspected of being the cause. AFP

Japanese Prime Minister Shinzo Abe could still be leading the country in October 2019, the delayed date he last week set for increasing the nation’s consumption tax rate, Tomomi Inada, chairwoman of the Liberal Democratic Party’s policy research council, said on a talk show on Fuji Television yesterday.

While Abe’s current nomination as party leader expires in September 2018, Inada said it was “quite possible” that he could be leader when the tax hike is scheduled to take place. Inada stressed that the LDP would go through with increasing the rate to 10 percent from the current 8 percent, “no matter who is prime minister.”

Abe had vowed repeatedly that he would not delay the increase in tax rate unless there was an economic shock on the scale of the financial crisis or 2011 earthquake and tsunami that devastated northern Japan. Abe said on Wednesday that the risk of damaging domestic demand and long-term stagnation in global demand prompted him to delay the increase as long as possible.

Inada said that the October 2019 date “absolutely cannot be extended” because it is just before the leading party’s promise of achieving a primary budget balance in 2020. BLOOMBERG NEWS