New residential mortgage loans plummet 35.1 pct y-o-y in April Property Page 2
Monday, June 13 2016 Year V Nr. 1063 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
Polytex
Tackling risks
Official meeting
Pearl Horizon homeowners seek help from Central Government Page 2
IMF official says China must act quickly to address corporate debt Page 8
Germany’s Angela Merkel visits China to deal with business concerns Page 10
Cultural creative
Interview
Bringing the city’s cultural creative artists out of their own places and gathering them in one location is the main aim for Window Lei, the boss of Village Ltd. who is planning to set up the city’s first cultural creative focused mall on Rua do Campo. Pages 6 & 7
Sports betting
As the Euro 2016 football cup begins, Macau police have stepped up efforts to tackle illegal sports betting Page 3
Global index
The final countdown Securities regulator pushes stock market changes in order to convince MSCI to include A-shares on one of its global benchmarks. The index provider will announce the final decision tomorrow. An affirmative move could attract US$400 billion into Chinese shares in the next decade. Page 8
Golden age no longer
Macau residents believe the city’s greyhound racing track or Canidrome has lost its glory since its ‘golden age’ in the 60s and 70s, and they can no longer justify its existence. Despite the nostalgia, local Macanese say the property is not financially viable and is getting a notorious reputation for alleged animal cruelty, which is damaging the SAR’s image. A global campaign led by a local animal concern group has been fighting to close the venue, while the license renewal is pending government review. The license is due to expire in six months.
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28° 31° 28° 32° 28° 32° 26° 31° 28° 31° Today
Source: Bloomberg
HK Hang Seng Index June 10, 2016
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I SSN 2226-8294
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Canidrome Page 5
2 Business Daily Monday, June 13 2016
Macau Property
Pearl Horizon property owners petition
A
group of Pearl Horizon property owners staged a protest and presented a petition at the Liaison Office yesterday, urging the Central Government to help solve their on-going dispute. This follows last week’s decision by the Court of Second Instance to reject a request filed by Polytex Corporation Ltd to overturn the government’s decision to take back the land plot where its high-end residence Pearl Horizon was to be built. The government declared Polytex’s land grant for the Pearl Horizon plot invalid in the Official Gazette this
January, stating that the company had failed to complete the residential project before the end of its temporary concession, which carried a term of 25 years and expired on December 25 last year. President of the Association of Pearl Horizon Properties Kou Meng Pok told local broadcaster TDM that the local authorities had not contacted them since the court’s verdict was announced, hence they are reaching out to the Central Government for help. A participant in the protest, Ms. Chan also told TDM that she contacted her bank two weeks ago, and they
agreed to deduct the monthly interest payments on her mortgage loan. Currently, she has to pay MOP16,000 every month and doesn’t dare stop paying the contribution. She added that the owners wouldn’t exclude the possibility of going to Beijing or to the Portuguese government to seek help. The temporary land concession for Polytex regarding the Pearl Horizon site was granted by the then-Portuguese Government in 1990. The plot, located on Lot P in Novos Aterros da Areia Preta, is designed to house 18 towers with a total of 5,000-plus residential units.
and 14.2 per cent, respectively. In addition, new residential mortgage loans collateralised by equitable mortgage amounted to MOP353.4 million, dropping by 52.4 per cent month-on-month, and 77.7 per cent year-on-year. Of these, 78.3 per cent were extended to residents. Th e o u t s t a n d i n g ba l a n c e o f residential mortgage loans was MOP174.9 billion as at the end of April, remaining unchanged from the previous month, or a 7.8 per cent increase year-on-year; 93.6 per cent of the total belonged to residents. Outstanding residential mortgage loans to residents remained stable while those to non-residents went up by 0.7 per cent month-on-month.
per cent was approved for residents. In terms of values, new commercial real estate granted to residents decreased by 33.6 per cent, while those to non-residents increased dramatically by 272.9 per cent, mostly due to new loans issued to businesses collateralised by commercial properties. The outstanding balance of commercial real estate loans amounted to MOP166.7 billion, falling by 0.4 per cent month-to-month but rising by 21.5 per cent year-on-year, with some 88.3 per cent of the total granted to residents. Outstanding commercial real estate loans approved for residents and non-residents went down by 0.1 per cent and 2 per cent month-on-month, respectively. At the same time, the delinquency ratio for residential mortgage loans remained virtually unchanged at 0.1 per cent, while that of commercial real estate loans dropped to 0.02 per cent.
Mortgage loans
New residential mortgage loans plummet 35.1 pct y-o-y in April Regarding outstanding balances, residential mortgage loans remained virtually unchanged from the previous month while commercial real estate loans decreased. Annie Lao annie.lao@macaubusinessdaily.com
Total residential mortgage loans of MOP2.8 billion (US$350 million) were granted in April by the city’s banks, representing a 4.7 per cent decrease compared to the previous month, according to the latest official
data released by the Monetary Authority of Macao (AMCM) on Friday. However, this figure represents a decrease of 35.1 per cent year-on-year. Some 94.1 per cent of the total was extended to residents. In terms of value, new residential mortgage loans approved for residents and non-residents fell by 4.1 per cent
Worse commercial market
New commercial real estate loans totalled MOP 2.2 billion, down by 26.4 per cent month-to-month, a fall of 75.7 per cent year-on-year, of which, 88.2
Trade
Macau trade exhibits in southwest China The Macau Trade and Investment Promotion Institute (IPIM) held the “Dynamic Macau Week” trade exhibition in Yunnan province in southwest Mainland China, after around 500 business people registered for the online trade and cooperation trade platform created to promote the territory as a platform between Portuguese-speaking countries and Mainland China, IPIM stated. Since 2009, IPIM has organised exhibitions in trade events across Mainland China. This year’s edition, which took place in Yunnan between June 4 and 6, featured more than 100 stands of madein-Macau products, with a section for Portuguese-speaking countries’ food products. One of the innovations described by IPIM was the possibility for exhibition visitors to directly buy the exhibited products online after scanning the product’s codes with their smartphones. IPIM also stated that around 500
business people from Mainland China and Portuguese-speaking countries registered on the Economic & Trade Co-operation and Human Resources Portal between China and Portuguese-speaking Countries (the Portal), during the event. The Portal, launched in 2015 by the Secretariat for Economy and Finance, was designed as an online information sharing platform for bilingual professionals to facilitate business co-operation, exchanges and interaction between China and Portuguese-speaking countries. The Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao) also held a networking session between delegates from Portuguese-speaking countries and Yunnan business people from a number of different industry sectors such as pharmaceuticals, biotechnology, renewable energies and agriculture, according to Forum Macao. N.M.
Business Daily Monday, June 13 2016 3
Macau Politics
U.S. appoints new Hong Kong and Macau Consul General and Charge d’Affaires in Tokyo, and as Counsellor for Environment, The Consulate General of the United States, Hong Kong and Macau announced that the U.S. Department of State has appointed a new Consul General for the region, according to a Consulate release. The dispatch stated that U.S. Secretary of State, John Kerry, has appointed former Principal Deputy Assistant Secretary for the Bureau of Economic and Business Affairs at the Department of State, Kurt Tong, to succeed the current Consul General, Clifford A. Hart, Jr., in the beginning of August. The Consulate General of the United States stated that Tong has previously served as the Deputy Chief of Mission
Science and Health in Beijing. Tong, who speaks and reads Mandarin and Japanese, was also the U.S. Ambassador to Asia-Pacific Economic Cooperation (APEC), while serving as Economic Coordinator for the Department of State’s Bureau of East Asian and Pacific Affairs, according to the U.S. Consulate information. The Consul General to Hong Kong and Macau is responsible for diplomatic relations with the two special administrative regions, and is not under the jurisdiction of the United States Ambassador to China, instead reporting directly to the U.S. Department of State, according to the Consulate. N.M.
Sports betting
Tackling illegal football betting As the Euro 2016 football cup begins, Macau police fight illegal sports betting Nelson Moura nelson.moura@macaubusinessdaily.com
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heEuro 2016 football cup in France kicked off on June 10. In order to prevent i l l e ga l f o o tba l l betting, the Judiciary Police (PJ), in cooperation with the Public Security Police (PSP), is organising a crime prevention activity in the NAPE district, according to local broadcaster TDM. “The police will be present in bars and establishments, where football fans gather, to raise awareness against this illegal practice,” PJ spokesperson Tam Veng K e o n g t o l d T DM . Th e PJ spokesperson added that police patrols will be reinforced around the establishments in order to
prevent any illegal sports betting activities, and that the authorities will work with the education sector to avoid betting in regards to football. The campaign comes after the SAR Government r e n e w e d i ts f i v e- y ea r contract with Macao SLOT Co. Ltd. for its instant lottery, football and basketball betting concession, Business Daily reported previously.
gamblers were involved in illegal football betting in the region, with almost 2,500 arrests being made in the first half of 2016, of which 1,500 involved the running of illicit betting schemes, according to gaming news
A regional joint effort
The prevention and awareness campaign, is a concerted effort between Hong Kong, Guangzhou and Macau police authorities to fight illegal sports betting, according to the PJ. Last week, the Guangdong Provincial Public Security D e p a r t m e n t ( GPP S D ) r ev e a l e d t h a t 4 0 , 0 0 0
Labour
Union petitions against imported labour Casino workers insist dealers be local residents only, as well as construction worker too. Annie Lao annie.lao@macaubusinessdaily.com
The Power of the Macao Gaming Association, a local labour union, submitted a petition letter to the Government Headquarters Office on Friday, urging the government to insist on not allowing the hiring of non-resident workers for dealer positions in the gaming industry, as well as the construction industry too. A lack of job security is the main concern for the older dealers, who fear that the government might decide to allow gaming operators to hire non-resident workers to
replace them. “If non-resident workers took the local dealers’ jobs, the gaming operators would then slowly lay off the older local dealers,” Stephen Lau, one of the leading members of the Power of the Macao Gaming Association told Business Daily. Mr. Lau added that more job promotion opportunities should be given to the experienced dealers to increase their job security. ‘Th e l o ca l d ea l e rs w h o hav e acquired eight to ten years of work experience should be promoted,’ Mr. Lau stressed. Currently, about 25,000 local residents are employed as dealers in the gaming industry and about 60,000 employees in total for the gaming industry. Mr. Lau revealed that some of the gaming operators have allowed their dealers to take unpaid leave and therefore believes there is no lack of human resources in that field, hence there is no need to hire non-resident workers.
website CalvinEyre. According to the website, Guangdong’s deputy director of the Criminal Investigation Bureau of the provincial Department of Public Security, Qian Bo, stated he was looking to expand
cooperation and information exchanges with neighbouring regions in order to launch more joint operations to fight organized cross-border crimes, as illegal betting is expected to surge during the football tournament.
4 Business Daily Monday, June 13 2016
Macau Gaming revenue forecast Gaming revenues off to a slow start in June
Wells Fargo: remain neutral June gross gaming revenues started slow, as daily revenue registered below analysts’ estimates. Nelson Moura nelson.moura@macaubusinessdaily.com
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acau’s gaming sector registered a slow start in revenue in the beginning of June, according to Wells Fargo analysts, as the local government is maintaining its gross gaming revenue prediction of a 13.5 per cent decrease for the year. The analysts are keeping their predictions for a decrease in growth in June of between 3 and 8 per cent year-on-year, adding that they don’t expect a recovery soon, as the ‘huge
liquidity bubble of the past five years continues deflating’. Although the firm has seen stocks for gaming operators Las Vegas Sands Corp. (LVS), Melco Crown Entertainment (MPEL) and Wynn Resorts Limited (WYNN) increase 12 per cent this year, Wells Fargo believes it is still ‘too early’ to expect a stabilization of the territory’s economy. The analysts said that average daily revenue registered in the first five days of June was MOP510 million (US$63.7 million), below their estimates of returns of between MOP535 million and MOP560 million.
The same report also predicts junket volumes will remain ‘soft’ in 2016, but that the increase in credit could lead to growth in junket volume year-onyear, as happened at the end of 2015.
more dire prediction than the 4.5 per cent decline in 2016, and 10 per cent sequential decline the firm states as being the consensus for the year.
Conservative estimates
When it comes to room rates, the group saw a small 0.2 per cent growth month-to-month as Galaxy Entertainment Group and Melco properties showed a 12.7 per cent and 5 per cent decrease monthto-month respectively, while Sands’ properties registered a 3.3 per cent decrease. Wells Fargo expects to see 0.3 per cent growth in July to an average HK$1287 (US$165), and a more optimistic 3.3 per cent increase in August to HK$1287, the report stated.
Wells Fargo has dubbed the estimate of a decrease in gross gaming revenue of 13.5 per cent in 2016 by Macau’s Secretary for Economy and Finance, Lionel Leong Vai Tac, as being in line with the local government’s generally ‘conservative’ yearly forecasts. The analysts believe the government estimates for MOP200 billion total yearly revenue, are based on daily revenue of MOP507 million for the next seven months, after gaming revenues fell 12 per cent in May; a
Summer room rates to increase
Policy prediction Bernstein: gaming revenue to resume growth in August
Don’t give up yet The brokerage firm expects that the forthcoming government policies for the gaming industry “will be constructive”. Annie Lao annie.lao@macaubusinessdaily.com
Macau gross gaming revenue is expected to bounce back in August, analysts at brokerage firm Sanford Bernstein Ltd. Are predicting. “We expect Macau market gross gaming revenue to continue its ‘less bad’ trend in June and July,
and resume sustainable year-onyear growth starting August,” cited a report published by Bernstein last week. In a report subtitled “now is not the time to give up”, the analysts also expressed their belief that the Macau government’s forthcoming policies will be focusing on the mass market’s advantages.
“Now that the government has released its mid-term review report with emphasized intention to regulate the junket industry, we believe forthcoming government policies will be constructive (on a longer-term basis) and supportive as they relate to Mass market and non-gaming development,” stated analysts Vitaly Umansky, Simon Zhang and Clifford Kurz. The main factor that largely affects the growth of Macau gaming revenue is the VIP sector. As a result, there is an emerging shift away from the VIP sector towards the Premium Mass sector, according to the report. “We see numerous catalysts materializing over the next 12 months
(and more catalysts over the next 2 years) to fuel the growth in Mass market, which we believe is the structural driver of Macau market,” the report predicted. The city gross gaming revenue has dropped for 24 months consecutively. Gaming revenue was MOP18.3 billion (US$2.3 billion) in May, a decrease of 9.6 per cent from the previous year. However, this figure indicates an increase of 6 per cent compared to the previous month, according to the latest official data from the Gaming Inspection and Co-ordination Bureau (DICJ).
In transition
The Macau gaming industry will remain volatile over the near future, but the gaming industry will experience a transitional shift from the VIP sector to the Mass sector the report forecasted. Mainland China’s anti-corruption campaign continues to affect the high-end spending market in Macau, and stricter regulations of junket operations are affecting the gaming industry directly. On the other hand, the firm also states that with new transportation infrastructure opening and the opening of new large scale integrated resorts by 2018, these will in turn be the main drivers to boost the growth of Macau GGR for the coming future the report concluded. “Despite the uncertainties with respect to gross gaming revenue, Macau gaming industry’s EBITDA has already troughed in mid-2015. Overall we forecast 7 per cent growth rate in gross gaming revenue from 2015 to 2020,” reads the note.
Business Daily Monday, June 13 2016 5
Macau Canidrome
An unwanted and inconvenient Canidrome Economists, animal rights activists and community leaders unite in saying the Macau greyhound racetrack is no longer financially or culturally necessary. Nelson Moura nelson.moura@macaubusinessdaily.com
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acau e c o n o m i s t s, animal rights activists and community leaders unite in saying the Macau Canidrome is no longer financially or culturally necessary, and should be closed, Lusa news agency reports. In statements to Lusa, economist José Luís Sales Marques said greyhound races are a “completely extemporaneous activity” that “gives a bad image to Macau” and the Canidrome “shouldn’t be kept open.” The Canidrome, the only greyhound racetrack in operation in Asia, has seen its revenue decrease in recent years, falling 64 per cent from 2010 to 2014, and 13.7 per cent from 2014 to 2015, according to Lusa. Last year, total revenue from the Canidrome amounted to MOP125 million (US$15.63 million), only 0.05 per cent of Macau’s total gaming revenue, according to official data from the Gaming Inspection and Coordination Bureau (DICJ). In statements to Lusa, locals
expressed that the Canidrome’s golden age in the 1960s and 1970s, when gaming options in the city weren’t as diverse, has “already passed”, and there is now no justification for keeping the track open.
Last word
The 50-year Canidrome licence, owned by operator Macau (Yat Yuen) Canidrome Co., part of Stanley Ho’s gaming group Sociedade de Turismo e Diversões de Macau (STDM), expired last year, with the government choosing to extend it for another year. A final decision was postponed until a study by the University of Macau, focusing on the importance and influence of the Canidrome on the territory as a World Centre for Tourism and Leisure, was concluded. In May, the Director of the Institute for the Study of Commercial Gaming, at the University of Macau, Davis Fong Ka Chio said that the study commissioned by the government on the Canidrome had been completed, but that the government needed time
to consider it and decide its next step, with the ‘problem’ expected to be resolved before the deadline, Business Daily reported.
Out-dated cruelty
“Times have changed. The Canidrome doesn’t have a reason to exist anymore. It doesn’t produce profit, so it doesn’t make sense. We have different sensibilities now and it’s hard for us to see the abuse the animals there suffer. We should dismantle it,” lawyer and President of the community group Associação d o s M aca e n s es ( M aca n es e Association), Miguel Senna Fernandes told Lusa. With the Canidrome license set to expire in six months, a global campaign by international animal rights associations, led by local animal rights group Anima [the Society for the Protection of Animals], has vowed to force the track to close, labelling it as the “worst in the world”. According to Anima, between 260 and 280 greyhounds died at
the track last year, some only one month after arriving, due to cruel training and conditioning practices or being put down due to poor race performances. The local animal concern group also stated that since an international campaign succeeded in suspending the export of greyhounds from Australia to Macau in December last year, only nine greyhounds had arrived in the territory from Ireland. Since the beginning of the year, the international campaign has focused on blocking greyhound exports from Ireland, managing to convince Qatar Airways, Emirates and British Airways to refuse transportation of greyhounds to Macau. “We didn’t talk about [the abuses] at the time, we didn’t have that awareness,” the Macanese Association president told Lusa, remembering how the track in the 60s used to be a place where public administration employees like his father, a post office worker, used to go to bet, while greyhound race “betting tips” and information were openly discussed at the city’s coffee houses. For Macau local resident Jorge Fão, the Canidrome used to be a fun activity that just isn’t economically viable anymore. “It was fun. Betting on greyhounds is a bit like football. You need to study their weight, behaviour, and coach,” Fão told Lusa, remembering a time when the dogs were even eaten as “tradition and habit.” Nevertheless, Fão believes the racetrack has already “given everything it has” and that the space should now be used for other purposes.
6 Business Daily Monday, June 13 2016
Macau Cultural creative Founder of the city’s first cultural creative mall is confident in the new project
“We need to industrialize local cultural creative operations and vice versa” Bringing the city’s cultural creative artists out of their own places and gathering them in one place is the main aim for Window Lei, the boss of Village Ltd. who is planning to set up the city’s first cultural creative focused mall on Rua do Campo. Speaking to Business Daily, the businessman believes local cultural creative operations need to be industrialized for better development, and predicts the city’s economic downturn will bring opportunities as well as risks. Kam Leong kamleong@macaubusinessdaily.com Photos by: Cheong Kam Ka
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aving established a few incubator-like platforms for the city’s cultural creative industry in old industrial buildings, why did you decide to bring this new one to a commercial building and to operate it in a mall style this time? We wanted to bring the whole thing to the next level. Location is very important. This time, we chose this commercial building as it is located in the downtown area of the city, where a decent flow of customers can be guaranteed. We are also bringing the scale of the project to another level. We are not talking about a project occupying some 1,000 square metres anymore, but some 40,000 to 50,000 square metres. On the other hand, in terms of hardware, the problems of water leakage and mice are often seen in industrial buildings – which will not happen in this building. Hence, we can provide a very comfortable environment for our tenants to run their operations as well as for customers shopping here. The mall, which provides some 100 shops and studios, also offers opportunities to our tenants to get to know each other and to cooperate with each other.
‘This time, we chose this commercial building as it is located in the downtown area of the city, where a decent flow of customers can be guaranteed.’ When do you expect this project will be officially operational? We hope to officially launch the project around this July or August. We will gradually put the first and the second floors into operation. But a promotional campaign will only be launched when the whole project is ready. After all, we are still looking for tenants. We don’t have any idea how the whole thing will turn out in the end. Yet, we hope there will be more sparks for this project as more tenants and partners joining. How many tenants do you expect to have when the project starts operations? We expect that the number will surpass a half the available shops. Do you see the concept for your mall as being similar to Taiwan’s Eslite Mall? I think such concepts are all around the world. I would say our project is similar to the concept of Eslite Mall.
But of course, we hope we are able to build our own characteristics and features. What is your cooperation model with the tenants? Our role is more like a pioneer for the industry, to gather different kinds of businesses. We will provide professional advisers to businesses that are joining us. After all, our tenants do different kinds of businesses and have different experiences in doing business. But I think our company is a very good example to show them what the journey is like. We’ve taken a very huge risk by expanding our business from industrial buildings to
this commercial building – in which our investment jumped from some MOP200,000 to the current MOP10 million. We will provide the support of our network and other hardware to our tenants. We also provide consultancy services for them to understand more about our project. Why do you think the Broadway Centre Building is suitable for a cultural creative mall? I’ve actually checked out nearly all the commercial buildings in Macau, plus industrial buildings. We eventually chose the Broadway Centre Building due to the fact that it is in an appropriate location for us
to start something new – we have a bookstore and a stationery store downstairs; it is in the city’s major shopping area, and at the end of a shopping route where people may come directly from Senado Square, then to Rua do Campo and visit our mall at the end. The number of incubator-like platforms for the cultural creative industry is growing. Your mall will provide some 100 shops and studios, but do we really have that many cultural creative people in the territory to meet the supply? One of our aims is to industrialize the city’s cultural creative operations, and vice versa – to inject cultural creative elements into different products. We focus on making cultural creative products to be launched and sold on the market, in terms of branding, packaging and marketing. I can tell you the number of people engaging in the cultural creative field is not low at all, but they all hide in their own places. Hence, we want to get them out of their places and to help them enhance their operations. Macau has
Business Daily Monday, June 13 2016 7
Macau many traditional products but we need to put some cultural creative elements in them. Does that mean commercializing the city’s cultural-creative products? It’s not fully about commercialization. After all, there are certain conflicts b et w e e n a rt a n d c o m m e rc e . Nevertheless, we need to note that artists need to survive in the market as well. So we need to think how we can help them to survive – part of which is to turn their creations into goods. Many artists do not just give up creating things when those things cannot earn money. But we need to help them to earn a basic living. The role of our company is like a combination of a businessman and an artist – to help artists to balance the two sides.
‘The mall, which provides some 100 shops and studios, also offers opportunities to our tenants to get to know each other and to cooperate with each other.’ How do you plan to attract people to visit your mall when the mall business is not as popular as it was a few years ago in Macau? We need to stick to our principles for cultural creative [elements]. Some people may promote their products by saying they are cultural creative products even though they lack these elements. We need to persist in our principle – which is the theme of our mall. Macau’s mall businesses are going down due to the worldwide change in consumption patterns moving to online shopping. Hence, in order to attract more customers, we need to stick to our principle, to tell our customers that you can’t buy our products anywhere else but here. We need to build the principle telling customers they must come here. Moreover, we will also hold different crossover events, such as music performances, fashion shows or art exhibitions etc. With these events, we believe we can attract a certain number of customers. This is our strategy – offering new things to attract people. What do you think about the government’s policies for the cultural creative industry such as the Cultural Creative Industries Fund that is designated to this sector? In fact, out project is also supported by [the second batch of subsidies of] the Fund. In my opinion, the government is not giving out its money for us to set up our project. The money it gives is aiding us to build our projects. I think the government is working on [helping the industry] at the moment. Frankly, if not for their help, we would not have had the courage to take such a big leap for our business. However, our investment is now low. Can you disclose how much you received in government subsidies? The government’s financial aid accounts for one fifth of our total investment. Our project is an incubator platform plus a project to streamline the industry. In addition to providing venues for local cultural creative people, we offer them other services, such as consultancy as well. At present, the government’s support of the industry is still limited to monetary aid. What more could the government do to support the industry?
‘The role of our company is like a combination of a businessman and an artist – to help artists to balance the two sides.’
In my opinion, the Cultural Creative Industries Fund, or the Cultural Affairs Bureau, or other related departments could act as a better medium between cultural creative operations and other government departments. It is because when we start a cultural creative operation, we need to face many complicated procedures involving different government departments. It would be good if cultural-related departments could help us to communicate with other public bodies. For example, some artists want to do street performances, but there are many problems relating to other departments restricting them from doing so. In addition to the administrative p r o c e d u r es, w hat a r e o th e r difficulties in relation to running cultural creative operations in Macau? It is about Macau people’s way of thinking. I’m 100 per cent local. The general characteristics of Macau residents are that they don’t quite like showing off [their talents] or making themselves prominent among others. Developers of cultural creative industries are in fact restricted by this kind of thinking. Many people may think Macau people cannot make something special or new. Our kind of project exists in Taiwan and in Hong Kong, but the reason it is not
in Macau is because we do not jump outside of the box. You are launching a MOP10-million project at a time when the city’s economy is facing a downturn. Do you see more opportunities or risks? I see both opportunities and risks. I see opportunities as residents start to think more about their future when the economy is bad. For example, gaming workers may feel insecure about their current jobs and they may now consider doing their own things with their savings – which is an opportunity for me. However, it is true that the economy is getting worse. We are businessmen and we have seen our business going down.
The Village Mall
The Village Mall, located on the first three floors of the Broadway Centre commercial building on Rua do Campo, is the sixth incubator-like platform launched by local businessman Window Lei for the city’s cultural creative industry. Investing some MOP10 million to bring the project to a commercial building, the businessman told Business Daily that the project offers around 100 stores and studios for the local cultural creative industry
But we still need to try our best to maintain our business for when better times return. After all, the economy has its ups and downs. It will be too late if you only start your business when the economy is growing. It’s like there will always be more people buying houses when the economy is bad. It is because they cannot afford to buy these when the economy is good. What other future plans do you have for your company? Our future development will follow the current direction. But first of all, we need to get this mall done well. For the future, I will keep looking for land resources, other malls, or other venues to expand our businesses.
– of which one third are already occupied. The three-storey cultural-creative mall is expected to provide trendy, lifestyle products on the first floor, and local fashion and cultural creative items on the second floor. The third floor, meanwhile, will serve as a hall for various kinds of events, in addition to an F&B area. The businessman’s company Village Ltd is currently operating five other cultural creative platforms in the city’s industrial buildings and on Hengqin Island.
8 Business Daily Monday, June 13 2016
Greater China New chairman direction
Securities regulator pushes fixes ahead of MSCI deadline Over the past four months though, the China Securities Regulatory Commission has stepped-up its efforts to woo global benchmark providers. Michelle Price
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hina’s securities regulator has rushed through stock market rule changes under its new chairman in a bid to persuade MSCI to include domestic Chinese shares in one of its global benchmarks. The New York-based index provider will announce if China has done enough to overcome investor concerns, which were heightened by its heavy-handed response last year to a stock market crash. A decision to allow yuan-denominated shares - or A shares - into its widely used Emerging Markets Index, could draw US$400 billion into Chinese shares in the next decade, MSCI estimates show. Still, while China has met some key requirements of the MSCI, other concerns remain unaddressed, investors and people familiar with the discussions said, making the widely anticipated decision far from certain. The MSCI told China last June that it needed to increase access to its equity markets and fix other rules to win foreign investor backing for inclusion in the benchmark, tracked by US$1.5 trillion in assets globally. Scepticism China could satisfy the requirements deepened owing to unprecedented intervention by authorities during last summer’s stock market crash. As shares slumped more than 40 percent in a few months, more than half of Chinese companies suspended their stocks to avoid the slide. Over the past four months though, the China Securities Regulatory Commission (CSRC) has stepped-up its efforts
to woo global benchmark providers under a new reform-focused senior management team led by Chairman Liu Shiyu, investors and people familiar with the discussions said. A CSRC spokesman said an MSCI Emerging Markets Index without A shares was a “shortcoming” and the regulator would be happy to see them included. Shiyu, a former chairman of the Agricultural Bank of China and former deputy governor of the People’s Bank of China (PBOC), was appointed to the top CSRC job in February, replacing Xiao Gang, who had been widely criticised for mishandling the stock-market crisis. Since Shiyu’s appointment, the CSRC has satisfied two of MSCI’s key demands; introducing restrictions on company share suspensions and clarifying the beneficial ownership rights of foreign investors under China’s cross-border investment schemes. “The CSRC had previously been pretty slow at working out liberalisation
issues,” said Ivan Shi, head of research at Shanghai-based investment consultancy Z-Ben Advisors. “Everyone is more on the same page regarding market opening and the CSRC has responded to many of MSCI’s requirements.” Last June, the MSCI and the CSRC said they would create a working group to address MSCI’s concerns. Neither party has provided details about the working group.
Key Points MSCI to announce on June 14 decision on A-shares inclusion CSRC has been amending rules to meet MSCI requirements Inclusion could pull US$400 bln into China in next decade-MSCI China regulator seen stepping up efforts to woo investors Many criteria have been met, some hurdles remain Discussions were slow to start as the CSRC dealt with the market crash, said people briefed on the matter. Key CSRC managers also left, making it difficult
to schedule meetings, and a CSRC road show to woo U.S. and European investors was postponed, they said. But they picked up gear from February, said people briefed on the matter. One source said Shiyu attended some of the meetings. MSCI also fielded top executives and its global chief executive, Henry Fernandez, visited regulators in Beijing in April, three people briefed on the matter said. MSCI declined to comment.
Gaps
While many foreign investors harbour worries over inclusion, investment banks are more bullish. Goldman Sachs, for example, said in May there was a 70 percent chance MSCI would add the shares to its major index, citing the steps taken by China to remove investment obstacles. Still, China has yet to address another MSCI concern, which is to remove rules that require foreigners get permission from the Shanghai and Shenzhen exchanges to launch A share hedging products. Nor does the CSRC have the power to address all of MSCI’s concerns. The PBOC and the State Administration of Foreign Exchange control the size of investment quotas and have played a central role in liberalising the country’s US$81 billion Qualified Foreign Institutional Investor (QFII) scheme and its yuan equivalent, RQFII. Neither the PBOC nor SAFE were immediately available to comment on Friday, a public holiday in China. Under the QFII scheme, China has yet to lift a 20 percent net monthly cap on capital repatriation, one of MSCI’s last remaining concerns. A Hong Kong-Shenzhen stock connect system has yet to be announced, a route that would allow two-way trade and which foreign investors expect to dramatically open up the market. “The problem is that there is not just one regulator involved,” said one person with direct knowledge of the discussions. “But I am convinced they are trying to meet our requirements.” Reuters
Risk management
IMF urges to tackle ‘high’ corporate debt immediately The lender also said China must fix balance sheets at companies as well as banks, and improve governance to prevent a new debt bubble. Scott Lanman
The International Monetary Fund’s No. 2 official urged China to take immediate steps to tackle rising corporate debt or risk “dangerous detours” during the country’s transition to a consumption-oriented economy. “Corporate debt remains a serious - and growing - problem that must be addressed immediately and with a commitment to serious reforms,” David Lipton, the IMF’s first deputy managing director, said in a speech to an economics conference on Saturday in Shenzhen, China. The comments build on other recent warnings from the global crisis lender about China’s debt, including an estimate of a possible US$1.3 trillion in loans extended to borrowers that don’t have sufficient income to cover interest payments. China has accumulated debt faster than any Group of 20 nation over the past decade, climbing to 247 percent of gross domestic product, according to Tom Orlik, an economist for
Bloomberg Intelligence. Premier Li Keqiang said in March that the country may use debt-to-equity swaps to cut the leverage ratios of Chinese companies. An IMF staff report in April said China’s plan to rid banks of bad loans could
backfire, allowing debt-laden “zombie” companies to stay afloat and creating conflicts of interest for bankers. China has made “limited progress” in addressing corporate debt and restructuring, Lipton said. He gave an estimate of total debt at 225 percent of GDP and corporate debt at 145 percent of GDP, “which is very high by any measure.”
Rapid increase
“With the rapid increase in
credit growth in 2015 and early 2016, and the continued high rates of investment, the problem is growing,” said Lipton, a former U.S. Treasury and White House official. “This is a key fault line in the Chinese economy. It is surely within China’s powers to address this problem. And it is important that China tackles it soon.” In addition to addressing the problem quickly, China must fix balance sheets at companies as well as banks, and improve
governance to prevent a new debt bubble, he said. Lipton and other IMF staff members are meeting with officials in China as part of an annual assessment of the nation’s economy. Macquarie Capital Ltd. said in a June 8 report that China’s debt is a concern but unlikely to result in a crisis. The borrowing is backed largely by bank deposits instead of other, more volatile funding, and the central bank could intervene quickly if needed, according to the report by Hong Kongbased analysts Larry Hu and Jerry Peng. Bloomberg News
“With the rapid increase in credit growth in 2015 and early 2016, and the continued high rates of investment, the problem is growing” David Lipton, the IMF’s first deputy managing director
David Lipton, the IMF’s first deputy managing director
Business Daily Monday, June 13 2016 9
Greater China Money laundering
In Brief
Spanish prosecutors detail accusations against ICBC The bank is also accused by the prosecution of trying to mislead investigators by providing receipts unrelated to the case and by inadequately identifying clients. Angus Berwick
The Madrid branch of Chinese bank ICBC received cash in rucksacks and boxes from Chinese criminal groups in Spain and wired the money to accounts in China under a US$100-million money-laundering scheme, Spanish prosecutors say. Details of the allegations against ICBC are made public for the first time in a court document summarising an investigation into the alleged scam, nearly four months after police raided the state-owned bank’s Madrid office and arrested six directors. In the document, which was drawn up by the prosecution but has attracted little attention since it was published last week, prosecutors describe ICBC, the world’s biggest bank by assets, as a “money laundering channel” between two criminal groups. They do not name the groups but say they operated both in Spain and China and were involved in smuggling and tax fraud. Their illegal transfers were limited to 50,000 euros at a time to reduce the risk of detection and involved a web of shell companies to mask the trail, the prosecution says. In the court document, the bank is also accused by the prosecution of trying to mislead investigators by providing receipts unrelated to the case and by inadequately identifying clients. According to the document, the bank transferred at least 90 million euros (US$102 million) between 2011 and 2014, more than twice the amount announced by European police force Europol at the time of the raid in February. Though this is a small portion of the US$3.6 trillion assets managed by ICBC, people familiar with the bank’s thinking said ICBC was worried the case
could threaten its growth in Europe by damaging its reputation and drawing more attention from regulators. In response to the charges, the chairman of the Industrial and Commercial Bank of China’s European division, which is based in Luxembourg, said it operated in accordance with the law and would continue to improve its capacity to tackle money laundering. “The investigation is still going on, a trial has not been opened, and no verdict has been issued, therefore there should not be references to the bank’s guilt,” ICBC Europe Chairman Chen Fei said in a statement issued by the Madrid office of public relations firm Kreab. A lawyer representing ICBC’s Spanish branch declined to comment when asked about the accusations.
Possible fine
If found guilty of failing to comply with international regulations on money laundering, ICBC could face an unspecified fine. The case could
also lead to a review of its Spanish banking licence. Three of the ICBC directors arrested in February, including Madrid branch chief Wei Liu and European head Liu Gang, were provisionally released from custody in April after a court decided there was no flight risk and dismissed concerns that they might destroy evidence. Three others paid bail of 100,000 euros at the time of arrest. None of the executives has made any comment on the case since it started. Reuters could not reach them for comment. The investigation was assigned to Spain’s High Court last month. Once completed, the court will decide whether to close the case or hold a trial. China’s foreign ministry has asked Spain to protect the rights and interests of Chinese companies and citizens there and handle the case in accordance with the law. ICBC opened its Madrid office in 2011 as part of a push into Europe. Its Spanish unit managed 813 million euros of assets at the end of 2015 with around 50 employees, according to Spain’s banking association. The prosecution’s accusations are based heavily on documents seized from the bank by police and from witness testimony provided by employees, said a source involved in the judicial investigation into ICBC’s Madrid branch. Reuters did not review those documents. Reuters
Hong Kong’s crucial shipping trade is hoping China’s overseas infrastructure plan and closer business ties with Iran will enable the city to tackle the downturn in the seaborne sector and tougher competition, officials said. The global container sector, which transports everything from bananas to iPhones, as well as the dry bulk shipping market hauling commodities including iron ore and coal, is struggling with a glut of ships, a faltering global economy and weaker consumer demand - pressuring freight companies as well as ports that handle the volumes. Hong Kong, one of the world’s biggest container ports, expects to benefit from China’s new silk road initiative aimed at developing trade and transport links across Asia and beyond. “You have a lot of building materials that will need to be transported. That will have demand for shipping,” said Jenny Koo with the Hong Kong Trade Development Council (HKTDC). “For Hong Kong, our priority markets will be Asia and the Middle East,” she told Reuters during Greece’s Posidonia shipping week in Athens. The plan to build land, sea and air routes also known as the “One Belt,
China’s insurance sector will continue to improve to meet demand from the swelling middle class and an aging population, the top insurance regulator said yesterday at a forum in Shanghai. China’s insurance sector saw its best performance in 2015 since the global financial crisis, with premium income reaching 2.4 trillion yuan (around US$366 billion), said Xiang Junbo, chairman of China Insurance Regulatory Commission (CIRC), at Lujiazui Forum in Shanghai. Profits rose to 282.4 billion yuan on top of 12.4 trillion yuan assets for the entire insurance sector last year, Xiang explained. Reverse repos
Central bank drains 40 billion yuan The central bank yesterday allowed 40 billion yuan (US$6.1 billion) to drain from the market. The People’s Bank of China (PBOC) put 70 billion yuan into seven-day reverse repos, a process by which central banks purchase securities from banks with an agreement to sell them back in the future. The reverse repos were priced to yield 2.25 percent, according to a PBOC statement. Reverse repos worth 110 billion yuan matured yesterday, so the central bank has effectively drained 40 billion yuan from the market. Yesterday’s interbank market, the benchmark overnight Shanghai Interbank Offered Rate (Shibor) was 2 percent.
COFCO Agri hiring grain traders Spanish police during raid at ICBC’s Madrid branch in February
Hong Kong eyes shipping boost from new silk road
Jonathan Saul
Insurance sector to expand on rising middle class
Expansion
Trade
The city is also targeting more shipping trade with Middle Eastern countries including Iran.
Regulator
One Road” was announced by Chinese 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. “There are a lot of new projects especially in the context that there is the ‘One Belt, One Road’ initiative being pushed out,” David Cheng, of the Hong Kong Maritime and Port Board, said separately. “We have a very strong shipping cluster and we have to attract more people in the industry to make Hong Kong as one of their operating bases.” Hong Kong handled over 20 million TEUs last year. The HKTDC’s Koo said global container throughput via Hong Kong was estimated to grow this year by 4.1 percent and intra-Asia trade by 4.4 percent. Trading and logistics account for 23 percent of Hong Kong’s gross domestic product and the city is targeting more
shipping trade with Middle Eastern countries including Iran after international sanctions on Tehran were lifted earlier this year.
“For Hong Kong, our priority markets will be Asia and the Middle East” Jenny Koo, Hong Kong Trade Development Council official Hong Kong officials said freight activity with Iran was expected to include multiple areas such as food products and consumer goods. “A lot of people have been dealing with Iran through third parties,” said Stephen Wong of the HKTDC. “Now that sanctions are taken away, Hong Kong will benefit ... I’m sure that the trade will grow.” Reuters
Chinese state-owned agricultural trader COFCO Agri, is opening a trading office in the Canadian grain hub of Winnipeg, adding to the aggressive expansion of its North American agriculture business. COFCO Agri is hiring three grain traders and an operations manager to expand export and domestic trading, according to the company’s postings on professional networking site LinkedIn. Efforts to reach COFCO spokespeople and the company’s U.S. human resources director for further details were unsuccessful. On its website, the company lists regional trading and asset offices in eight countries, but none in Canada.
M&A
Ant Financial buys stake in data firm Chinese e-commerce firm Alibaba Group Holding Ltd’s affiliate Ant Financial has bought a fifth of financial data provider Shanghai Suntime Information Technology for around US$35 million, a source with direct knowledge of the deal said. “The acquisition will provide Ant Financial with good financial products so that it can attract more clients,” the source told Reuters on Friday. Ant Financial Services Group, valued at close to US$60 billion, offers services like online payment, wealth management products and insurance. Its core Alipay online payment business was founded in 2004.
10 Business Daily Monday, June 13 2016
Greater China
Angela Merkel, Chancellor of Germany
Takeover wave
Merkel to press Beijing on business conditions More than any other European country, Germany has benefitted from the rapid expansion of the Chinese economy over the past decade. Noah Barkin and Andreas Rinke
A
fter a golden decade for economic ties between Germany and China, concerns are growing in Berlin over barriers to foreign firms in China, Beijing’s
more muscular foreign policy and its increased authoritarianism at home. German Chancellor Angela Merkel headed to Beijing on Saturday for the ninth time since taking office amid growing pressure from industry and rights groups to confront the Chinese more forcefully.
The trip comes as she faces criticism at home for failing to speak out more strongly about rights violations in Turkey. It also comes in the midst of a furious debate over Chinese takeovers in Europe, with some politicians calling for tougher restrictions following a recent offer by home appliance maker Midea for German robotics firm Kuka. “We have a proliferation and intensification of hidden and open conflicts in the German-Chinese relationship,” said Sebastian Heilmann, head of the MERICS think tank in Berlin. “We won’t be able to avoid tough conflicts with China in the next months and years. This will be a difficult trip.” Merkel is travelling to China with six of her ministers and a large industry delegation that is expected to include the CEOs of blue-chips like Volkswagen, BMW, Siemens, ThyssenKrupp, Lufthansa and Airbus. She dined with Chinese Premier Li Keqiang yesterday and President Xi Jinping today. In between, she and Li will attend a meeting with business leaders at which German firms are expected to openly voice their frustrations with conditions in the Chinese market. On Tuesday, Merkel is due to travel to the northern “rust belt” city of Shenyang to visit a BMW plant. More than any other European country, Germany has benefitted from the rapid expansion of the Chinese economy over the past decade. Between 2005 and 2014, German ex p o r ts t o Ch i n a m o r e tha n tripled to 74 billion euros. And German companies, notably the big carmakers, benefitted from a surge in Chinese demand that offset weakness in their home European market. In 2015, however, exports to China declined year-on-year for the first time in nearly two decades. And attention has shifted away from trade to the difficult conditions for German firms operating in a Chinese economy where growth has slowed.
“Fresh wave of pessimism”
At a briefing in Berlin on Friday, Merkel’s top advisers expressed concerns about a wide range of developments in China, from a new security law that would place restrictions on non-governmental organisations (NGOs) to Beijing’s actions in the South China Sea. Topping the list, however, was the situation for German firms. At a time when Chinese companies
are on an acquisition spree across Europe, foreign firms are limited to 50 percent stakes in joint ventures with their Chinese counterparts. Chinese leaders heard the same m essag e f r o m U . S . T r eas u r y Secretary Jack Lew this week. He said in Beijing that foreign businesses were beginning to question whether they were welcome in China. “We want a level playing field, the same conditions for both sides,” one senior Merkel adviser, who requested anonymity, told reporters, adding that Beijing’s drive to be recognised this year by the European Commission as an economy controlled by the market, rather than the state, faced obstacles.
Key Points German chancellor makes ninth trip to China since 2005 Trip comes amid debate over Chinese acquisitions in Europe Germans concerned about NGO crackdown Markus Kerber, managing director of the BDI Federation of German Industries, told Reuters: “We have a difficult situation in China. We’re in a transition phase.” The mood was summed up in the European Chamber of Commerce’s annual business confidence survey released this week. It spoke of a “fresh wave of pessimism” about an “increasingly hostile” business environment that was tilted in favour of domestic firms. China has repeatedly pledged to increase market access for foreign firms and carry out market reforms in its effort to revamp its slowing economy. But foreign critics accuse it of not following through on its reform agenda and introducing new regulations that are restricting market access even further. For example, Beijing’s Made in China 2025 plan calls for a progressive increase in domestic components used in priority sectors such as advanced information technology and robotics to 70 percent by 2025 from a target of 40 percent by 2020. The European Chamber’s survey showed that less than a quarter of its members were convinced by China’s pledged reform drive and that fewer than half currently planned to expand operations in the world’s second-largest economy. Reuters
Business Daily Monday, June 13 2016 11
Asia Islamic bonds
Philippines may join Asian sovereigns testing sukuk market The Philippines could avoid paying a premium for sukuk given it is a recurrent bond issuer, emulating dual issuers like Turkey and Indonesia. Umesh Desai and Bernardo Vizcaino
P
lans by the Philippines to sell Islamic bonds could open a new source of financing for the incoming government of Rodrigo Duterte, but its success may depend on how generous Manila is on pricing and Middle East investors’ response to new entrants in the market. Governments across Asia are increasingly viewing sukuk as a viable funding option, with Hong Kong open to tap the market for a third time while Sri Lanka and the Maldives consider debuts. The Philippines’ incoming finance
“Some Islamic accounts have looked at the Philippines for some time and they would be quick to jump in.” Mohamad Safri Shahul Hamid, deputy chief executive officer of Malaysia’s CIMB Islamic Bank
minister is looking at raising debt via sukuk and yuan borrowings to diversify its debt profile, but has yet to firm up plans. A sukuk from these debutante countries could help widen a market that is dominated in Asia by sovereign deals from Malaysia and Indonesia, with Gulf region investors traditionally favouring investmentgrade paper from familiar names. “The Philippines would be a welcome addition to the global sukuk universe, offering another investment grade opportunity with differentiated credit fundamentals from many of the oil exporting sovereigns active today,” said Dino Kronfol, chief investment officer of global sukuk at Franklin Templeton Investments. Hong Kong’s sukuk drew heavy demand due to its AAA credit rating, though lower commodity prices have impacted investor appetite from oildependent economies. But Sri Lanka and the Philippines are no strangers to sukuk, having discussed the format over the past few years and investor appetite remains, said Mohamad Safri Shahul Hamid, deputy chief executive officer of Malaysia’s CIMB Islamic Bank. Importantly, the Philippines could avoid paying a premium for sukuk given it is a recurrent bond issuer,
emulating dual issuers like Turkey and Indonesia that have priced their sukuk within or below their conventional curves, he added. In February, the Philippines sold US$2 billion worth of dollardenominated bonds at a record low rate of 3.7 percent. The 25-year bond attracted orders in excess of US$8 billion. The sukuk market could benefit from new names: Year-to-date issuance totals US$27.9 billion through 254 deals globally, down from US$33.7 billion through 310 deals a year earlier, according to Zawya, a Thomson Reuters company.
The Duterte government would have to work on a legal framework to facilitate sukuk, which could prove difficult in a busy agenda for the incoming government, said Vicky Muenzer-Jones, partner in the Singapore office of Norton Rose Fulbright. “Besides regulatory issues, the government will also have to decide what structure works best.” Despite such concerns, interest is growing in the region to use sukuk for infrastructure financing, said Ashraf Mohammed, Assistant General Counsel and Practice Leader of Islamic Finance at the Asian Development Bank. There are also new laws being drafted that would help promote Islamic finance domestically and this would further encourage sukuk issuance, said Mohammed. Reuters
Incoming government of Rodrigo Duterte could benefit from sukuk funding
Private poll
Bank of Japan to keep rate this week NLI Research Insitute said the BOJ was likely to move at its June 15-16 meeting to catch financial markets by surprise. The Bank of Japan (BOJ) will likely keep interest rates and its massive asset buying programme unchanged this week as it waits to see how the economy reacts to its surprise shift to negative rates earlier this year, a Reuters poll showed. Ten of 12 analysts surveyed forecast the central bank will keep the minus 0.1 percent interest it applied to some of the excess reserves that
financial institutions park with the central bank. And 9 of 11 analysts predicted the BOJ will maintain its annual target for base money, or deposits and cash in circulation, at 80 trillion yen (US$747.10 billion). “We expect the BOJ will wait and see the impact from its negative interest rate policy. But the pace of rises in prices without fresh food
and energy, which the BOJ focuses on, is slowing and downside risks have risen due to the impact from a stronger yen,” Takumi Tsunoda, senior economist at Shinkin Central Bank, said in the survey. Indeed, a separate Reuters survey looking at a slightly longer timeframe showed 70 percent of respondents see the BOJ easing policy in July, most likely through a combination of steps such as a deeper cut into negative rates and boosting purchases of bonds and some riskier assets. Kuroda has said the positive effects of negative rates would begin to spread to the economy before the end of the year.
“Although we expect the BOJ will keep monetary policy unchanged this time, a chance has risen for further stimulus measure soon.” Takumi Tsunoda, senior economist at Shinkin Central Bank But at the BOJ’s last meeting in April, it once again pushed back the timing for hitting its 2 percent inflation target, to March 2018 at the latest. Bucking the consensus, NLI Research Insitute said the BOJ was likely to move at its June 15-16 meeting to catch financial markets by surprise, a tactic that BOJ Governor Haruhiko Kuroda has employed before, most recently in January with the move to negative rates. “Our main scenario is that the BOJ aims to surprise the markets next week by adopting a wide range of measures before the markets force the central bank to ease,” said Tsuyoshi Ueno, senior economist at NLI Research Institute. But he added that BOJ policymakers may prefer to hold off on acting until they see the outcome of Britain’s June 23 referendum on whether to remain in the European Union. Reuters
12 Business Daily Monday, June 13 2016
Asia In Brief Industry data
Malaysia’s factory output up Malaysia’s industrial production in April grew 3.0 per cent from a year earlier, supported by strength in the manufacturing and electricity sectors, government data showed on Friday. April’s factory output growth picked up slightly from the previous month’s pace of 2.8 per cent but was below the 3.5 per cent rise forecast by economists. Malaysia’s exports in April also grew 1.6 per cent from a year earlier, on higher shipments of manufactured goods and palm oil. However, a private manufacturing purchasing managers’ index showed Malaysian factory activity in May contracting for the 14th straight month. Commodities
Cambodia’s rubber exports down The nation exported 28,953 tons of dry rubber in the first quarter of 2016, down 8 per cent from 31,476 tons over the same period last year, according to figures of the Ministry of Commerce out Saturday. The Southeast Asian country earned total revenue of US$31 million from dry rubber exports during the January-March period this year, down 26 per cent from US$42 million over the same period last year, the figures said. A ton of the best quality rubber goes for about US$1,543 on the international market this week.
Government securities
India’s cash-rich firms may deepen bond market Companies could become bigger players as they confront the problem of what to do with growing cash stockpiles Suvashree Choudhury
I
ndia’s largest information technology company, Tata Consultancy Services (TCS), has become the third conglomerate to invest large cash holdings in government bonds, a trend that could boost the young debt market but also stir volatility. TCS ploughed US$3 billion into the market from January to March, its annual balance sheet showed last month, shifting funds that totalled 80 percent of its surplus cash position. Previously the company had largely invested in mutual funds. TCS is the third company to have meaningful investment in government securities after Reliance Industries and construction firm Larsen & Toubro, which traders say is diversifying a US$665 billion market dominated by banks and could portend a new investment trend for the country’s conglomerates. “I expect more cash-rich companies to invest in government bonds as these are more liquid and carry a much better credit risk,” said Anindya Das Gupta, head of local markets trading at Barclays in India.
However, this trend could create new risks, namely the volatility that a conglomerate selling a large amount of government bonds at once could create. When contacted by Reuters, TCS declined comment. While many banks have larger holdings, the Reserve Bank of India (RBI) regulates both banks and the bond market and thus can ensure that banks sell their holdings in a way that does not disrupt the market. The central bank has no sway over conglomerates as it does not regulate them. The RBI is happy for the investor base in government bonds to diversify, a senior policymaker said, and will monitor the market for any instances of manipulation or volatility tied to these investments. “There is nothing as of now which raises any alarm from such large purchases but we will monitor these entities closely as they are not the regular investors in this market,” said the policymaker, who declined to be identified as he is not authorised to speak to the media. Indian companies could become bigger players in the government securities market as they confront the problem of what to do with growing
Factory figures
India’s industrial output shrinks in April India’s industrial output unexpectedly fell in April, its first contraction in three months, dragged down by a sharp plunge in production of capital goods and a contraction in consumer wares. Production at factories, mines and utilities shrank 0.8 per cent from a year earlier, government data showed on Friday. The fall compared with a 0.5 per cent annual rise predicted by economists surveyed by Reuters and a revised 0.3 per cent year-on-year growth in March. Capital goods output plunged about 25 per cent on year in April. The sector, a proxy for capital investments, has been falling since October. 1MDB
NY regulator seeks details from Goldman New York state regulators have asked Goldman Sachs Group Inc for details about probes into billions of dollars it raised in a bond offering for a scandal-hit Malaysian fund, a person familiar with the matter said on Friday. The New York State Department of Financial Services, in a letter sent late Thursday, asked Goldman for a report on its in-house investigation into the matter, as well as others by U.S. and foreign regulators, said the person, who was not authorized to publicly discuss the matter. The letter to Goldman concerns state investment fund 1Malaysia Development.
Reserve Bank of India regulates both banks and the bond market and thus can ensure that banks sell their holdings in a way that does not disrupt the market
Administrative jam
Myanmar’s new investment commission to tackle backlog The go-ahead from the commission does not guarantee investments will always progress smoothly. Timothy Mclaughlin and Aung Hla Tun
Myanmar’s newly reformed investment commission will this month start scrutinizing some US$2.3 billion in proposed foreign investment projects that have been held up since April, a senior official said on Friday. Since the new government took over in April, no proposed investments have been signed off on by the Myanmar Investment Commission (MIC), a powerful body that decides which projects get the green light, as it awaited word on its reworked structure from the President’s Office. President Htin Kyaw announced the new make-up of the group only on Tuesday.
Aung Naing Oo, who was re-appointed as the secretary of the commission, said 102 projects had been submitted since April and were awaiting approval. About a half of these proposals are foreign investment projects, whose total worth is around US$2.3 billion. The delay, he said, happened because the ruling party National League for Democracy (NLD) wanted to choose the proper people for the commission, but the long wait also raised concerns among the business community, fuelling speculation on how the NLD, made up of many activists and former political prisoners, would handle investment. “There were some concerns from the business
community. There were some rumours in the business community saying that there would be no MIC at all,” Aung Naing Oo told Reuters. “Plus, some investors who had already submitted their proposals to MIC were also concerned about the delays at MIC because, for them, time is money. The delay means they have to spend more money.” Aung Naing Oo said the first meeting of the revamped, 11-strong body headed by the planning and finance minister was likely to take place towards the end of June. Aung Naing Oo said it would take around eight weeks to work through the proposals but that the MIC was still waiting on a list of investment sectors to prioritize from the NLD. The go-ahead from the MIC does not guarantee investments will always progress smoothly, however. In May, lawmakers
decided to scrap a US$70 million private hospital in Yangon backed by Malaysian group IHH Healthcare Berhad, which broke ground in January On Wednesday, lawmakers terminated a proposed extension to a port terminal on the Yangon river citing environmental concerns. Both projects had been approved by the MIC. These decisions violated investment laws and risked undercutting investor confidence in the commission, said Aung Naing Oo. “According to the law, the government guarantees there will be no termination of the projects approved by the MIC,” said Aung Naing Oo. “As an official responsible for investment promotion, it is not so good for the image of the country... If we really want to promote investment, we also need to consider (investor) protection.” Reuters
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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cash stockpiles. The country’s top six cash-rich companies have amassed around 1.7 trillion rupees (US$25.5 billion) worth of cash holdings, according to Reuters calculations, at a time when private capital spending is weak and bad loans are on the rise. As with TCS, most companies put their money in mutual funds, corporate bonds and bank deposits, which are losing their appeal versus government bonds in terms of both returns and safety. Investing via mutual funds entails an average fee of about 100 basis points of assets under management, according to debt fund managers and bankers. One-year bank deposits, at the country’s largest lender State Bank of India which holds the largest amount of corporate deposits, yields 7.257.50 percent compared with nearly 7.5 percent for benchmark 10-year governments bonds. Das Gupta of Barclays said the narrower spread between bank deposits and 10-year bonds could be one reason companies buy “liquid and safe” government bonds. “On a risk-adjusted basis, the total return from a sovereign security has been much better than any other asset class like fixed deposits, mutual funds,” saidAshishVaidya,executivedirectorand head of trading at DBS Bank in Mumbai. Government bonds have rallied in the past year as the RBI has cut interest rates by 150 basis points to a five-year low of 6.50 percent. Further gains, however, may now be capped given that the RBI is expected to cut the repo rate only once more this year and inflationary risks have risen. Reliance Industries, India’s biggest energy firm, has outstanding government bond investments worth 79.21 billion rupees as of March 2015, according to its 2014/15 annual report. Larsen & Toubro held 14.7 billion rupees of government bonds as of March 2015. It has yet to publish its annual report for 2015/16. Reuters
Business Daily Monday, June 13 2016 13
Asia Troubled going public
Lotte says difficult to modify hotel unit’s IPO document Earlier last week Hotel Lotte cut the size of the IPO and pushed back the listing from June to July. Tony Munroe and Joyce Lee
South Korea’s Lotte Group, whose hotel unit faces a July deadline to complete an initial public offering (IPO) worth up to US$4.5 billion, said yesterday that it is “difficult” for it to modify the listing document. The statement came two days after prosecutors raided the offices of Lotte
Group and several companies in the conglomerate, including Hotel Lotte. Three people with direct knowledge of the matter said the raids were part of an investigation into a possible slush fund, dealing a new blow to the hotel unit’s planned IPO, which could be the world’s biggest this year. Earlier last week, Hotel Lotte
cut the size of the IPO and pushed back the listing from June to July, in a revision to its listing document, after prosecutors launched a bribery investigation into a director. “Carrying out procedures such as a modified filing to protect investors are currently physically difficult,” Lotte Group said in a statement yesterday. According to stock exchange rules, the deadline for Hotel Lotte to list is July 27, six months from the preliminary approval for the IPO. If it needed to refile its prospectus to warn investors about risks from Friday’s
probe, which appeared likely, it would probably not be able to meet that deadline, an exchange official told Reuters on Friday.
Key Points Hotel Lotte IPO faces July 27 listing deadline Listing was already delayed, downsized after bribery probe Hotel Lotte’s US$4.5 bln IPO would be world’s largest of 2016 “Hotel Lotte’s listing is a key issue to improve Lotte Group’s governance structure, including lowering Japanese shareholders’ stakes and diversifying shareholders, so we will closely discuss with advisors and regulators on what to do in the future,” Lotte Group said. The Lotte Group, South Korea’s fifth-largest family run conglomerate, or chaebol, has grown from its founding in Japan 68 years ago as a maker of chewing gum. But last year’s highly public power struggle within the founding Shin family fuelled resentment at the grip the chaebol hold over the Korean economy. Some Koreans also criticised the group’s close ties with former colonial ruler Japan. Late on Friday, the group’s Lotte Chemical Corp unit said it withdrew from the bidding for U.S.-based Axiall Corp, which went to a rival suitor for US$2.33 billion, citing “the difficult situation Lotte has faced in Korea recently and heated competition”. Reuters
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International In Brief U.S. Treasury
Lew sees ‘negative’ impact on Brexit U.S. Treasury Secretary Jacob J. Lew warned that the global economy would be damaged if the U.K. votes to leave the European Union on June 23. “It’s in the best interest of Europe, the U.K. and the global economy and for geopolitical stability for the U.K. to stay in,” Lew said in an interview to be broadcast yesterday on CNN’s “Fareed Zakaria GPS,” according to a transcript provided by the network. Lew added his voice to a chorus of leaders from within the EU about the risks of pulling out of the European union. Lawsuit
Businessman sues RBS for alleged conspiracy The former CEO of a software company is suing RBS for allegedly conspiring to push the business into administration to benefit from its sale, court filings show, in the latest case to allege misconduct by the bank’s restructuring division. Scottish businessman Neil Mitchell is seeking 128 million pounds (US$184 million) in damages on claims that Royal Bank of Scotland (RBS) conspired in 2007 with co-defendants KPMG and U.S.-based fund Cerberus Capital Management to sell assets of his company, Torex Retail plc, for below their value.
Energy market
Coming wave of gas puts focus on finding new shores Global output capacity is expected to rise by half by 2020, potentially adding some 150 million tonnes of LNG to the market. Ron Bousso and Oleg Vukmanovic
E
nergy giants such as Royal Dutch Shell and Total are looking to build terminals and power plants in new markets to soak up the industry’s rapidly burgeoning supply. Companies have invested billions in plants to produce liquefied natural gas (LNG) in places such as Australia and the United States. But gas demand growth is slowing, prices are down and the LNG volumes companies are set to produce will exceed those even major buyers such as China and Japan can absorb. That has turned attention to the downstream market and opportunities to create new markets from Ivory Coast to remote Indonesian islands by building gas-fired power plants, pipelines, regasification and storage terminals. “We are ready to go downstream as much as it takes to unlock gas demand,” said Laurent Vivier, president for the gas division at Total. “We need to be present in downstream ourselves, to create demand and unlock bottlenecks along the chain including regasification, pipelines and power plants.” Total aims to triple the number of its gas and power markets and raise
its annual LNG output to 20 million tonnes and its trading to 15 million tonnes by 2020. The company is taking part in LNG infrastructure tenders, including several gas-fired power plants, in countries including Indonesia, Chile, Ivory Coast, Ghana and Morocco, Vivier said. Shell believes the number of markets buying LNG could double, according to its chief financial officer, Simon Henry. “From around 20 to 30 ...we can see potential for around 50 different markets if you look out to 2030,” Henry said. “Our aim is to capture the best share of those who are looking now to start or grow.” The focus on downstream mimics a model that companies such as Shell, Total, Exxon Mobil and Chevron have used for decades in the oil sector where their operations span oil wells, refineries and service stations. But some analysts question how easily that model can be reproduced. “Whether they succeed in this is another story, whether they have the mind-set for this type of work is also another story,” said Thierry Bros, senior gas analyst at French bank Societe Generale. “It will be a painful test for these companies who are not that experienced in building small downstream demand,” he said.
Technology
New technologies are helping speed development, with floating terminals, for example, offering a cheaper alternative to onshore units that cost more than US$1 billion. “We are looking at multiple
markets around the world in terms of potential to regas,” said Shell’s Henry. “Quite a lot of it is floating regasification because it is quick and you can develop (a market) in stages.”
Key Points Total, Shell hunt plant, terminal projects LNG output capacity could rise by 150 mln tonnes by 2020 Surging capacity spurring hunt for new markets Oversupply allowing smaller buyers to tap LNG spot market Technology helping speed expansion Shell, the world’s top LNG trader after buying BG Group, expects to produce around 30 million tonnes of LNG this year and trade nearly 50 million tonnes, accounting for about a sixth of global trading volume. Global output capacity is expected to rise by half by 2020, potentially adding some 150 million tonnes of LNG to the market. However, overall gas demand growth is expected to slow to 1.5 percent a year to 2021 from the 2.5 percent rate seen recently, the International Energy Agency has forecast. In step with oil and gas, LNG prices have also struggled in the last two years. That has prompted traders to offer more single cargoes for immediate delivery on the spot market, making it easier for smaller buyers to find supply. Reuters
Public spending
Peru’s Kuczynski tightens target for fiscal deficit Incoming Peruvian President Pedro Pablo Kuczynski has scratched his proposal to widen the fiscal deficit to 3 percent of gross domestic product after credit rating agencies expressed concern, his pick for finance minister Alfredo Thorne said on Friday. Thorne, who like Kuczynski is a former investment banker and World Bank economist, said the plan is now to run a 2.82.9 percent deficit in 2017 before leaving it at 1 percent in 2021. Kuczynski had proposed a 3 percent deficit in 2017-2019, up from the 2.5 percent target for this year. Tourism
U.S. approves flights to Cuba The United States has approved flights on six U.S. airlines to Cuban cities other than Havana, linking the former Cold War foes closer together, the U.S. Transportation Department said in a statement on Friday. The green light lets airlines schedule flights to the communist-ruled island for the first time in decades. Until now, air travel to Cuba has been limited to charter services. Flights will begin as early as the fall, the department said. American will have nonstop service from Miami; Southwest, JetBlue and Silver Airways will fly from Fort Lauderdale; Frontier will add flights from Chicago and Philadelphia; and Sun Country will serve Minneapolis.
Fiscal record
Brazil’s accounts were a nasty surprise to Temer’s team A spending bill is expected to be presented at Congress this week. Mario Sergio Lima
Brazil’s fiscal accounts were in worse shape than initially thought after the suspension of Dilma Rousseff, underscoring the challenge facing the country’s new economic team, acting President Michel Temer said. “It was surprising, in a negative way, what we encountered,” Temer told the Folha de S. Paulo newspaper in an interview published Saturday on its website. “The fiscal accounts were worse than we imagined, Petrobras was broken, the Postal
Office broken, Eletrobras broken, and I still have faced an aggressive campaign against me.” The forecast for this year’s budget gap, revised by Finance Minister Henrique Meirelles to a record 170 billion reais (US$49.7 billion), forced Temer’s team to propose a cap on the increase in spending for next year to control Brazil’s growing debt. The spending bill is expected to be presented at Congress this week. The size of the deficit was the worst surprise Temer found when he took over, he told Folha.
Brazilian Interim President Michel Temer speaks during a press conference
The interview marked Temer’s first month in office, a period he said “has been a war,” albeit one successful in restoring relationships with Congress and re-establishing investors’ confidence in Latin America’s largest economy. His first days in charge were also marked by crisis as two ministers left their posts after allegations that they planned to thwart Brazil’s long-running Carwash corruption probe, which has implicated state-run oil company Petrobras, large construction companies and politicians in kickbacks. Rousseff was suspended on May 12 and faces an impeachment trial in the Senate. To be fully removed, Brazil’s first woman president must have at least 54 of 81 senators vote against her when the final impeachment ruling is set. The vote is expected to happen by mid-August. If less than 54 senators vote for her removal, Rousseff could be returned to office. Bloomberg News
‘The forecast for this year’s budget gap was revised by Finance Minister Henrique Meirelles to a record US$49.7 billion’
Business Daily Monday, June 13 2016 15
Opinion Business Wires
The Times of India India’s second-largest drug maker Dr Reddy’s Laboratories Ltd said it agreed to buy eight generic drugs from Teva Pharmaceutical Industries and Allergan Plc for US$350 million in cash to bolster its US business. The deal is among Dr Reddy’s biggest acquisitions, and comes at a time when the company has been facing slowing growth in the United States, its largest market, due to regulatory troubles and fewer new drug approvals. Some formerly lucrative emerging markets have also taken a hit over the past year, and caused the company’s March quarter profit to slump 86 percent.
IMF go home The Korea Herald Line Corp., a Tokyo-based mobile messenger platform owned by Korean Internet giant NHN Corp., will go public on the main stock markets in New York and Tokyo next month, the company said. In a regulatory filing, the company said it will begin trading its shares on the Tokyo stock market on July 14th and in New York on 15th. The company will issue 35 million new shares offered at 2,800 yen (US$26.20) per share. Goldman Sachs, JPMorgan, Morgan Stanley and Nomura Securities are the lead advisers on Line’s initial public offering, the company said.
T
he curtains are up on another act of the Greek debt drama. Eurozone finance ministers and the International Monetary Fund have agreed with Greece to begin, per the IMF’s demands, providing some debt relief to the country, and to release €10.3 billion (US$11.6 billion) in bailout funds. Greece, for its part, has agreed to another round of austerity and structural reform. Until recently, the IMF insisted that it would participate in the next Greek rescue program only if it deemed Greek debt to be sustainable. Based on the IMF’s most recent debt sustainability analysis, that is not the case. Germany, however, insisted that the IMF remain on board – and, with the latest deal, it seems to have prevailed, in exchange for agreeing to debt relief that it opposed. The victory may well not have been worth the sacrifice. In fact, it would have been better to let the IMF pull out, for two reasons. First, the IMF’s assessments of debt sustainability in Greece are undermined by a deep conflict of interest. Second, and more important, IMF credits are too expensive. In a normal bailout procedure, the IMF acts as an impartial judge of the troubled country’s debt sustainability; then, if it so chooses, it can step in as the lender of last resort. This is what happened in 2010, when the private sector wanted to flee from Greece and a systemic crisis loomed. But today Greece has only a few private-sector obligations. Eurozone governments are the ones offering large amounts of funding. For its part, the IMF has a large volume of credits outstanding. Of course, if Greece’s creditors accept a haircut, the IMF’s credits would become more secure – hence the conflict of interest. Indeed, the IMF’s debt sustainability analysis can hardly be considered neutral, and would surely be rejected by private-sector actors. A neutral judge – not one of the creditors – usually sets the terms in insolvency proceedings. This is not to say that the IMF’s conclusion is necessarily wrong. In fact, one could debate the question of Greece’s debt sustainability endlessly. Some might suspect that Greece’s debt is sustainable, since the Greek government has to pay less in interest than Portugal or Italy, both of which have much lower debt levels. The IMF, however, argues that, despite these low interest payments, the refinancing needs of Greece will surpass 15% of GDP (an arbitrary threshold, to be sure) at some point – perhaps as soon as 15 years. What the IMF fails to highlight is that, if that happens, it will be primarily because of the IMF itself – or, more precisely, the high cost of its loans. The IMF is charging a much higher interest rate (up to 3.9%) than the Europeans (slightly above 1%, on average), largely because it has surcharges of up to 300 basis points on its own funding costs, compared to less than 50 basis points for the European lenders. Moreover, IMF loans are to be repaid in just 5-7 years, on average, compared to up to 50 years for the European funding.
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Taipei Times The Ministry of National Defence’s Electronic and Information Warfare Forces has set in action a new initiative to hire information technology experts from the civilian sector in hopes of bolstering the military’s cyber attack and defence capabilities, sources said. The ministry has been putting advertisements in the various human resources Web sites under “Internet security analysts,” sources said. While the advertisements might seem similar to those of civilian companies, the location of the job, the Ji Hsin Camp, is an indication the positions are with the military, a source said.
Philstar Financial institutions and financial technology firms are expected to drive growth and address financial inclusion gaps in the country, the PLDT Group said. Lito Villanueva, CEO of FINTQ, said more opportunities for collaboration are opening up for banks and other financial institutions with Fintechs. “Fintechs in emerging markets are not the enemy, but a strategic ally of financial institutions. I call it finbiosis, or a mutual co-existence that leverages on each of our strengths – technology and innovation for fintechs and financial expertise and capacity for banks,” Villanueva said.
Daniel Gros Director of the Centre for European Policy Studies
The IMF assumes that its loans will be substituted by private-sector loans at even higher interest rates (over 6%). This would cause Greece’s debt to snowball, given that its GDP growth is highly unlikely to achieve such a rate in the foreseeable future. The good news is that there is a simple way to avoid this outcome: replace the IMF’s expensive short-term funding with cheap long-term European loans. With that switch, Greek debt may well become sustainable, even by IMF standards. Of course, this would require more funding from the European Stability Mechanism, the eurozone’s rescue fund. But the ESM would face lower risks, because the IMF has “super-senior status,” meaning that its loans are supposed to be repaid first, anyway. (It should be noted that the most senior creditor usually charges the lowest, not the highest, interest rate, as the IMF does.) The savings for Greece would be huge. Given that the average surcharge on the IMF’s Greek loans is about 250 basis points, and the IMF has more than €14 billion in outstanding credits, the IMF is extracting huge profits from Greece – more than €800 million annually since 2013, nearly the equivalent of the Fund’s yearly operating costs. The IMF is a valuable global institution, but it should not be financed mainly by Greek taxpayers (and pre-financed by eurozone taxpayers). By sending the IMF packing today, Greece might save several billion euros over the next decade, with a commensurate reduction in risk for European creditors. Add to that the IMF’s inability to provide impartial analysis of Greece’s debt sustainability, and it is hard to see how anyone can argue that the Fund can make a contribution to the Greek negotiations today. There is a broader point as well. Greece is not the only country suffering from the high cost of IMF loans. The outstanding IMF loans held by Ireland and Portugal, which amount to another €23 billion, should also be re-financed. If IMF loans are replaced with ESM financing, eurozone taxpayers will save hundreds of millions of euros per year. The IMF’s participation in the rescue programs for Greece, Ireland, and Portugal has already cost taxpayers in those countries nearly €9 billion in excess charges. While that mistake cannot be reversed, it can be rectified. If it is handled quickly enough, some €4 billion could still be saved. A few years ago, European bodies may not have had the expertise to manage adjustment programs without the IMF’s guidance. That is no longer true. There is no good reason to keep the IMF around today – and there are billions of good reasons to send it home. Project Syndicate
The IMF’s participation in the rescue programs for Greece, Ireland, and Portugal has already cost taxpayers in those countries nearly €9 billion in excess charges
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16 Business Daily Monday, June 13 2016
Cinema industry
Mainland’s box office to top world in 2017
China’s box office is anticipated to surpass the United States in 2017 and claim the title of the world’s largest, according to a report by international accounting firm PwC yesterday. The report forecasts that China’s box office revenue will hit US$10.3 billion next year, while the United States is expected to ring up US$10.14 billion. With a compounded average annual growth of 19.1 per cent, China’s box office takings are expected to hit US$15.08
billion by 2020, the report said. The report estimates a whopping US$49.3 billion of box office earnings across the globe in 2020, with nearly one third of it to be generated in China. Jiang Xiaoping, a PwC China partner, said the robust expansion of China’s film industry is driving the global development. According to predictions, revenue from advertising in the Chinese film industry will exceed US$161 million by 2020, and the average ticket price will climb to US$6.04 from US$5.44 currently. Xinhua
Sewol disaster
South Korea begins operation to lift sunken ferry Officials say lifting the 145-metre-long vessel from the seabed without causing it to break up will be the main challenge.
A
salvage firm yesterday began a difficult and costly operation to raise a sunken South Korean ferry which capsized at sea more than two years ago in a disaster that shocked and enraged the country. The Sewol was carrying 476 people when it sank off the south-western island of Jindo in April 2014, with the loss of 304 lives - most of them schoolchildren.
Bringing the ferry to the surface has been a key demand of some victims’ families, who hope nine bodies still unaccounted for may yet be recovered. The Seoul government last year announced plans to salvage the 6,825-ton ship and selected a Chinese consortium led by state-run Shanghai Salvage Co. to spearhead the US$72 million project. “The operation began at 2 p.m.,” Jung Seong-Wook, a bereaved family
Once the bow is lifted, work to place 18 lifting beams beneath the ferry will begin. If the lifting operation goes announced smoothly, the Sewol may be brought to the surface by late July.
member who acts as a families’ representative for the salvage project, told AFP. Jung was one of dozens of family members watching the work anxiously from fishing boats in foggy weather. Preparatory work was completed early in the morning, with the salvage firm’s main crane positioned near the bow and several cables attached to the ferry. The lifting of the bow section which will be conducted over the next two days - is seen as the most challenging part of the operation. “This operation takes up about 70 percent of the overall salvage project,” Jung said.
‘The Seoul government last year announced plans to salvage the ship and selected a Chinese consortium led by state-run Shanghai Salvage Co. to spearhead the US$72 million project’ The Sewol lies more than 40 metres beneath the surface, and officials say lifting the 145-metre-long vessel from the seabed without causing it to break up will be the main challenge. A naval architect involved in the project put the success rate at 80 percent at a press briefing in April, saying lifting a wreck in one piece from such a depth had never been done before. The disaster was mainly due to human error - an illegal redesign of the ship, an overloaded cargo bay, inexperienced crew and a questionable relationship between the ship operators and state regulators. Ca p ta i n L e e J u n -S e o k w as sentenced to life in prison for “murder through wilful negligence” and sentences ranging from two to 12 years were passed on 14 other crew members. AFP
Mourning demonstration after the Sewol tragedy
Employment rate Explosion injures four for Chinese college graduates stable at Shanghai airport
Saudi Arabia’s state electricity utility is seeking bids from international developers to build two solar-power plants in the kingdom’s northern region. The plants will each generate as much as 50 megawatts using photo-voltaic technology, which produces power directly for solar cells, according to a tender announcement that Saudi Electricity Co. posted on its website. The utility is asking international companies to submit expressions of interest for the projects by June 20. The plants will be located at Al-Jouf and Rafha, Saudi Electricity said. The tender is the first by Saudi Arabia to seek international partners to cooperate in building and operating renewable-energy facilities, according to the Middle East Solar Industry Association. The country is scaling back its ambitions for renewable energy and currently seeks to generate 9,500 megawatts by 2030 from sources such as solar and wind power. An earlier proposal called for more than US$100 billion in spending through 2040 to build 41,000 megawatts of capacity. Saudi Arabia is developing renewable energy to take advantage of its ample sunlight and to diversify energy supply amid rising demand. Bloomberg News
The employment rate for Chinese college graduates remains stable, with more graduates employed by private enterprises, a recent survey shows. The employment rate of college graduates in 2015 was 91.7 per cent, basically flat compared with 92.1 per cent in 2014 and 91.4 per cent in 2013, according to a survey by education research company MyCOS Institute released yesterday. Breaking the numbers down, 92.2 percent of university graduates and 91.2 per cent of graduates from junior colleges and higher vocational schools found jobs, according to the survey. Some 250,000 college graduates in 30 provinciallevel regions on the mainland were interviewed six months after they graduated last year. Of that number, 59 percent were employed by private firms, up 5 percentage points than two years before, while the employment rates in stateowned enterprises, foreign-owned companies and joint ventures dropped, according to the survey. More graduates are starting their own businesses, with 3 percent registering as self-employed in 2015. Most graduates secured start-up funding from their parents, relatives, friends or personal savings, said the survey. Xinhua
yevruS
Saudi electricity plans two solar plants
An explosion injured four people and sparked a major security alert at the main international airport in China’s commercial hub of Shanghai yesterday, according to the operator. The blast at Pudong Airport occurred near the check-in counter of Terminal Two, according to a statement on the operator’s official microblog. It said three passengers were injured and police had sealed off the immediate area. The official Xinhua news agency, citing the Shanghai Airport Authority, said an apparent “home-made explosive” blew up. The agency earlier reported that the blast was caused by fireworks. The Xinmin Evening News said there were two explosions within five seconds. They originated from two pieces of luggage placed about 15 metres (49 feet) apart, the local paper said. Online video clips showed dense grey smoke rising to the ceiling of the cavernous terminal, and paramilitary security forces rushing into the building immediately after the incident. Photos posted online by those claiming to be witnesses showed police keeping people back from the scene and abandoned luggage littering the floor. AFP & Xinhua