Sonia Chan: Electoral law amendments on the table by mid-August Politics Page 2
Wednesday, June 15 2016 Year V Nr. 1065 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
Rising funds
Pension The amount of pension fund assets managed by private companies reached MOP15 bln (US$1.88 bln) as of the end of March, surging 17.6 pct compared to MOP12.8 bln one year ago. Page 2
June dismay Gaming Gaming analysts are expecting Macau’s casino revenues to decline in June, despite some positive signs observed in the second week, boosted by the Dragon Boat Festival. Page 5
Are Theme Parks the future?
Extension to bids Melco The Cyprus Government has granted a three-month extension to bids for its casino license, to the dismay of the consortium of Florida Seminoles’ Hard Rock International and Lawrence Ho’s Melco International Development, local sources report. Page 7
Tourism
Shanghai Disneyland is set to officially open tomorrow. Tourism industry representatives believe it will have a minimal impact on Macau’s tourism market, as the SAR has its own unique charm and upcoming projects with characteristic features to attract tourists Page 5
Sitting on the dock
A consultancy firm commissioned to study the urban renewal plans in the Barra area 15 years ago, recently received a delayed payment from the government. However, the firm says the results of the study that would have benefitted the population and prevented flooding, were not adopted. Instead, it was dropped to develop what is now Ponte 16
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28° 32° 27° 31° 28° 31° 28° 31° 27° 31° Today
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Inner Harbour Page 3
2 Business Daily Wednesday, June 15 2016
Macau Pension Private pension assets soar by 18 pct y-o-y as of the end of the first quarter
MOP15-bln private pension fund assets at March-end More than half of the private pension fund assets were under the management of two companies – AIA International Ltd and Luen Fung Hang Life Ltd. Kam Leong kamleong@macaubusinessdaily.com
T
he amount of pension fund assets managed by private companies reached MOP15 billion (US$1.88 billion) as of the end of March, surging by 17.6 per cent compared to MOP12.8 billion one year ago. According to official data from the Monetary Authority of Macau (AMCM), a total of 984 private pension plans were registered in the territory as of the end of the first quarter, up by nearly 6 per cent year-on-year. The majority, 980, were open funds, while the remaining four were closed funds. The nearly one thousand pension fund plans were contributed to by a total of 138,785 members – covering 41.2 per cent of the city’s total workforce of 336,658. Meanwhile, the AMCM data indicated that the number of private pension funds remained at 57 as at the end of the quarter, the same compared to one year ago.
According to the data, the Hong Kong-listed fund manager or insurer was managing a total of MOP5.3 billion worth of private fund assets as of the end of March, accounting for 35 per cent of the total. Compared to the MOP4.39 billion it was overseeing one year ago, the amount has soared by 20.3 per cent. In addition, Luen Fung Hang Life Ltd saw the private fund assets under its management jump by 15.7 per cent year-on-year to MOP3.8 billion by the quarter-end, accounting for 25.2
per cent of the total. The other three major fund managers were ICBC (Macau) Pension Fund Management Co. Ltd, Macau Life Insurance Company and China Life Insurance (Overseas) Co. Ltd, which were managing some MOP1.9 billion, MOP1.7 billion and MOP1.2 billion worth of private fund assets during the period respectively.
Gaming sector the main contributor
Analyzed by sectors, nearly half of the private fund scheme members were working for the gaming industry, amounting to 64,978. The number also represents 80.6 per cent of the total gaming workforce in the territory.
In addition, other contributors to local private pension plans were primarily working for hotels, restaurants and similar activities, wholesale and retail trade and real estate as well as renting and business activities, amounting to 23,414, 11,726 and 9,636, respectively. In terms of coverage, 88 per cent of workers in the fields of electricity, gas and water supply, or a total of 880, were contributing to private pension plans as of the end of the month. Apart from the gaming industry, the financial intermediation sector also saw nearly 60 per cent of its manpower contributing to the private pension plans, followed by the health and social welfare sector, of which 56.4 per cent of its workers were private pension scheme members. However, only some 1.7 per cent, or 258, of the city’s 27,100 employees in the fields of public administration and public security have bought private pension plans, according to AMCM.
AIA the market leader
The city’s private pension fund assets were primarily managed by nine fund managers, with AIA International Ltd continuing to lead the market.
Politics
Electoral law amendments hopefully sent for discussion by mid-August Secretary for Administration and Justice Sonia Chan Hoi Fan expects the bill to amend the current Legislative Assembly Election Law could be submitted to the legislative body for discussion within the following two months. “We hope we could submit the draft of the bill to the Legislative Assembly before the body starts its break in August,” the Secretary told reporters yesterday. The city’s legislative body is in recess for two months every year between August 16 and October 15. Last month, the government launched a 30-day public consultation on the suggested amendments to the law, which ended on June 5. The chief official said yesterday that the collected opinions would be announced after the government has organised the files, adding the drafted bill would absorb constructive suggestions that benefit the future development of the city, and help it adapt to the current situation of society. Asked by reporters whether the government would revise the current regulations for the indirect elections, Ms. Chan claimed she did not see an urgent need to amend that section as the
government has been altering the related regulations, such as increasing the number of indirectly-elected seats and lowering the requirements for candidacies. “In my opinion, improving the electoral culture and enhancing the electoral quality are also ways to enhance democracy in Macau,” she said. Major revisions introduced to the electoral law for legislators include defining and clarifying meanings for promotional efforts and those associated with an electoral campaigning, introducing a legal scheme to monitor campaign expenses, enhancing supervision of electoral activities and updating the rules for candidacies. The government aims to have the bill in effect before the next elections for the Legislative Assembly (AL) next year. On the other hand, Secretary Chan also said yesterday that the bill to amend the city’s taxi regulations will be sent to the legislative body within this year as per the original schedule. She added that more details of the bill would soon be announced by the Secretary for Transport and Public Works, Raimundo do Rosario in the Legislative Assembly.
Sonia Chan Hoi Fan, Secretary for Administration and Justice
Business Daily Wednesday, June 15 2016 3
Macau
Inner Harbour Delayed payment for 15-year-old urban renewal study
Rising from the tides Commissioned consultancy firm believes a “golden opportunity” to renew the Barra area and prevent flooding problems has been lost. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he MSAR government paid a 14-year old debt of more than MOP600,000 (US$75,000) to construction consultant company Macau Professional Services Limited (MPS) for a study on ‘urban renewal and requalification project for the Inner Harbour and Barra area’, according to a dispatch published in Monday’s Official Gazette.
“To make decisions for territory recovery and organisation, clear objectives and political will are needed. When the latter is missing, decisions are always made to protect the financial interests in the equation” Miguel Campina, Director of Macau Professional Services Limited “I guess it’s better late than never, but this payment is a fraction of the amount of the initial contract. I don’t even know why they suddenly decided to award this amount. They must be trying to finish the issue,” Director of MPS and architect, Miguel
Sitting on the dock of a flooded bay
According to a study by Chinese scientists published in September of last year by the journal ‘Advances in Atmospheric Sciences’, the sea level in Macau is rising 20 per cent higher than the global average and could reach 1.2 meters by the end of the century. Last April, the DSSOPT, stated that a study on the feasibility of a tide control system, in cooperation with Zhuhai, to prevent flooding had been initiated, after a temporary engineering project was installed to prevent flooding, tides and saltwater intrusion in 2013 and
Campina, told Business Daily in a phone interview yesterday. MPS, a construction consulting firm part of CESL Asia, was awarded a contract in 2001 by then-Macau Chief Executive, Edmund Ho, for MOP5 million, which was recently adjusted to MOP3.4 million with the recent Official Gazette dispatch stating the value of the “finished works” had been reduced. An amount of MOP2.18 million was paid in 2001, but the last payment of MOP656,807 was made to the company in 2002. However, Mr. Campina, who was part of the project at the time, told Business Daily that more important than the delay in the payment, is the story of a missed “golden opportunity” to renew the Inner Harbour area of Macau. “What’s harder to understand for me is that the awarded contract study results weren’t taken into account, with no benefit for the administration and the local population from the effort made and the formulated proposals,” Campina told Business Daily.
Change in the road
The project intended to maintain sustainable growth in the area, with the preservation of some of the buildings considered at the time apt for recovery. However, according to the architect, the project was suddenly abandoned by the government. The exploration rights in the area were then given to Stanley Ho’s gaming group Sociedade de Turismo e Diversões de Macau (STDM), for the construction of the Ponte 16 Sofitel Hotel. “ Th e st u d y w as m a d e, a n d the first part was delivered, but meanwhile there was a government decision to suspend the study, with decisions being made at the time contradicting the stated direction for
2014. For Environmental Science and Engineering Professor Wang Zhi Shi of the University of Macau, solving the Inner Harbour flooding problem is a complicated issue with a “long history”, influenced by regional factors such as land reclamation upstream on the Pearl River, the professor told Business Daily. “We should make a systematic engineering project to resolve this problem, as heavy rain has occurred recently. There is no simple solution for the problem, but the government should consider more engineering and reconstruction in the area in order to control the floods,” Professor Wang told Business Daily.
the area recovery; namely when the administration decided to designate the area now known as the Ponte 16 to STDM. This decision was on a collision course with the proposed course for the Inner Harbour revitalisation,” the architect told Business Daily. Campina believes the value of the developed project was low when compared to the benefits of the study’s proposed objective, such as a temporary solution to resolving the issue of flooding in the Inner Harbour. However, competing financial interests led to the cancellation of the study by the government at the time. He added that “in 14 years nobody has made anything and the problem [of flooding] continues, with the government stating it will provide a solution” even though the solution was proposed at the time. “To make decisions for territory
recovery and organisation, clear objectives and political will are needed. When the latter is missing, decisions are always made to protect the financial interests in the equation. Therefore the ones with more chance to triumph are the entities with financial and lobbying capacity that can influence political decisions. I don’t think there’s anybody who can say with all honesty that the solution found for Ponte 16 serves the interests of Macau. It surely serves STDM’s interests and the people directly involved with the project and its operations,” Campina said to Business Daily. Business Daily sent a request for comment to STDM, the Land, Public Works and Transport Bureau (DSSOPT) and the Secretariat for Transport and Public Works, but no response was received at the time this newspaper went to print.
4 Business Daily Wednesday, June 15 2016
Macau Opinion
José I. Duarte
Wish list The critical nature of the tourism industry for the development of Macau and the well being of its population is beyond question. For that reason, the discussion of the future of tourism development is a major policy matter, and the “Macau Tourism Industry Development Master Plan”, under public consultation for another week, deserves more attention than it has received so far. Four aspects seem to stand out when we discuss the future of tourism: the profile and number of visitors; the place or role of the casino industry in the sector; the expansion of non-gambling activities; and the implications of the sector’s evolution on urban planning and management. These topics are inter-related but distinct and are touched on in the document, although not necessarily in the exact way defined above. But that is not the main issue. The point is that the document somehow gives the impression that the analytical effort was less than comprehensive. Take, for example, the characterisation of visitors. They are mainly categorised by place of origin, with the bulk, not surprisingly, coming from Mainland China and, more broadly, Greater China. Nothing is new there; the concentration of Macau’s source markets is already well-established. However, very little effort is made to differentiate those source markets or to profile the visitors according to their interests and motivations, or their visiting and spending patterns. Can anyone disagree, in general terms, with the idea that “the tourism industry in Macau should co-develop with other industries and carve out a unique set of target segments”? And that doing so, is a challenge for the city? The issue is how to do this, how to define the targets, how realistic are they, and which tools are within our reach to achieve them. The document’s take on these issues is less obvious, to say the least. From that very general definition of challenges, we jump, without really building an argument, to a list of so-called strategies, which encompass short and mediumterm measures. That is all very well. They seem to imply a finer profiling of (desirable?) visitors. But whether welldefined approaches and criteria exist regarding the relative importance of those profiles and how to attract them is not clear. More should be done to substantiate the choices of objectives made and to define the proper tools to achieve them. Without these, the measures listed look more like a general wish list than a proper strategic development plan. José I. Duarte is an economist and permanent contributor to this newspaper.
Gaming
Wells Fargo: gaming revenues to slide a maximum of 7 pct for June
T
he city’s gross gaming revenues may only total some MOP16.1 billion (US$2 billion) for this month – which means the lowest monthly amount for this year so far, according to brokerage firm Wells Fargo’s latest estimates. “[We] expect around [a] 4 per cent to 7 per cent [negative] growth for June,” the firm wrote in its weekly updates on the local gaming market published yesterday. The latest forecast of the firm suggests local gaming revenues may amount to between MOP16.1 billion and MOP16.7 billion for this month, compared to the MOP17.4 billion for
the same month last year. Wells Fargo estimated that the average daily revenues generated by the city’s gaming sector were around some MOP565 million for the first twelve days of this month. “The past week (MOP607 million) was much stronger than the prior week (MOP510 million). The Dragon Boat Festival was a week earlier this year, which helped drive demand,” the report reads. “Our estimate implies daily revenues of roughly MOP520million to 550million for the rest of the month. Mass continues to be flattish with VIP volatile on a week-to-week basis,” it added.
The brokerage’s estimate for June revenues also represents a decline of 11 per cent compared to MOP18.4 billion in May this year, which, however, is in line with the usual pattern. “June’s fiveyear historical sequential growth trend is down 11 per cent month-on-month on average,” the investing firm remarked. In addition, Wells Fargo noted in the updates that it remains on the side-lines regarding Las Vegas Sands Corp, Melco Crown Entertainment and Wynn Resorts, due to the weak Chinese economy plus “a recovery that is likely to be flatter than prior rebounds, contributing to more muted revenue growth in Macau”. K.L.
Gross gaming revenue
Bernstein: Pick up seen in second week of June Dragon Boat Festival helped. However, analysts still expect decline. Macau gross gaming revenue picked up in the second week of June ahead of estimates. Channel checks by Sanford C. Bernstein Ltd indicate that Macau’s gross gaming revenues month-to-date are around MOP6.8 billion (US$850 million), implying an ADR (average daily rate) of around MOP607 million over the last week, versus around MOP510 million in the previous week and around MOP593
million in May, according to a note released by the brokerage firm on Monday. The analysts attribute the pick up in part to the recent Dragon Boat Festival holidays. Official data shows that the city recorded a total of 626,996 visitor arrivals during the four-day holiday for the Dragon Boat Festival between June 9 and 12, representing a year-on-year growth
of 10.4 per cent. However, the brokerage added there will be some slowdown in demand over the next few weeks. “Assuming an average daily rate of MOP530 million to MOP570 million for the remainder of this month, June gross gaming revenues would be MOP16.3 million to MOP17.1 billion, representing a year-onyear decline of 2 per cent to 6 per cent, versus a 10 per cent year-onyear decline in May,” said analysts Vitaly Umansky, Simon Zhang and Clifford Kurz.
Business Daily Wednesday, June 15 2016 5
Macau
Tourism Shanghai Disney set to open tomorrow
Mickey Mouse not a threat Industrial insiders expect the opening of Shanghai Disneyland will have a minimal impact on Macau’s tourism market Annie Lao * annie.lao@macaubusinessdaily.com
Shanghai Disneyland’s US$5.5 billion theme park is having its official opening on Thursday. Analysts have predicted that it is expected to boost the city’s gross domestic product by 0.8 per cent directly, and by double that amount once ancillary visitor spending is factored in. However, here in the SARs, minimal impact is expected by local tourism industry representatives. “I don’t think after the Mainland Chinese have visited the new Shanghai Disneyland, they will stop coming to Macau,” Andy Wu Keng Kuong, president of Macau Travel Industry Council told Business Daily. “Macau has its unique charm. Also people tend to visit theme parks over the weekends but they [Chinese tourists] will still use short-term holidays to visit the SARs.” Andy Wu also indicates that as each Disney park has its unique theme, Hong Kong’s Disneyland won’t experience much competition arising from the opening of the Shanghai property. As a result, the number of tourists coming to the SARs on package deals won’t see significant change.
Macau’s fight
In a drive to further explore massmarket and develop non-gaming attractions in line with SAR government’s initiatives, Macau gaming operators have some ideas for theme parks in the pipeline, from the Hello Kitty Park proposed by Angela Leong, to David Chow’s aspirations to build a dinosaur museum at Fishermen’s Wharf. Galaxy Entertainment Group Ltd.
chairman Lui Che-Woo has also revealed his idea for venturing into more family-friendly attractions. The next two phases of the HK$86 billion (US$11 billion) Galaxy Macau project will include “something special and high-tech” similar to the movie “Avatar,” said Lui in an interview given to Bloomberg this March. Compared with larger theme parks such as Walt Disney Co.’s US$5.5 billion Shanghai park, “our park will be smaller but unique,” he said in an interview in Hong Kong. “Nowadays you already see that all these theme parks all have different special ideas,” said 86-year-old Lui, who made his first fortune in construction before entering the casino industry in his 70s. “So we’re thinking of how to compete against them.”
For the long run
“Theme parks are a great idea and Macau is desperate for more non-gaming attractions,” said CLSA Ltd. analyst Aaron Fischer commenting to Bloomberg in March. “These investments are in line with government demands so this will further strengthen relations and reduce the risk of the license not being renewed.” Returns on theme parks are “quite low” however, Fischer said, adding he would also like to see Galaxy add another 6,000 hotel rooms and convention space to help improve its mid-week occupancy rates. “The shifting from the main economy on gaming and shopping to a more diverse economy such as family entertainment, which is growing now, helps to attract more different types of tourists to come
to Macau,” Chan Chi Kit, president of Macau Hoteliers & Innkeepers Association told Business Daily. With the opening of Studio City, which provides more diverse nongaming offerings to tourists, other gaming operators will do the same to attract different tourists to come to Macau. “Five new hotels are opening up soon and they will offer new features so these will attract more tourists to visit Macau,” Mr. Chan explained.
All the efforts
The move to attract more Chinese tourists comes as rising average wages over three decades in China have spawned a working and middle-class with more discretionary cash that’s more willing to spend on leisure and fun. G o i n g h ea d-t o -h ea d w i th Disneyland, China’s richest person
Wang Jianlin opened Dalian Wanda Group Co.’s first theme park in southern China last September, and is spending 50 billion yuan (US$7.7 billion) on a movie-plus-theme park in China’s eastern city of Qingdao. A l s o , o n th e n e i g hb o u r i n g island to the SAR, backed by the Central Government’s beneficial policies, Hengqin is developing at an astonishing speed. The island’s Chimelong Ocean Kingdom has the world’s largest aquarium and Mainland China’s two largest hotels. It’s presumed that once they are better integrated, Macau and Hengqin will make a compelling tourist destination, as soon as officials get their border policies aligned. Andy Wu reckons that with the increasing convenience of customs services, Chimelong can act as a ‘back up’ theme park for Macau. And after The Hong Kong–Zhuhai–Macau Bridge is completed, he predicts that the tourists coming to Macau and Hong Kong for theme parks will increase. * with agencies
6 Business Daily Wednesday, June 15 2016
Macau Politics
Awaiting action The city’s first Five-Year Plan may morph into yet another document of empty promises and sound bites, according to its many critics.
F
ollowing in the footsteps of Mainland China that lays down forward-looking initiatives for economic and social development, the Special Administrative Region has recently unveiled its first fiveyear development blueprint, which, nevertheless, has been criticised for omitting quantitative targets and fresh content. In late April, the MSAR government announced the draft of the Five-Year Development Plan for 2016-2020, collecting public opinions for two months until late June. In this vision for the territory, the document sets out seven major targets for Macau to achieve in the next five years namely: maintaining stable economic development; i m p r o vi n g i ts ec o n o m i c a n d industrial structure; boosting the development of the leisure and tourism sectors; enhancing the qualify of life of residents; developing the cultural and education industries; environmental protection; and strengthening the efficiency of the government and the legal system. “I find the content of this document very familiar, similar to what has appeared in the annual Policy Address,” said legislator Au Kam San, adding that it was full of vague, slogan-like goals. “It said the development of Macau
into a World Centre of Tourism and Leisure should be divided into four phases: quickening its establishment, enhancing the quality, basic completion and full completion,” he mocked. “But what do they mean? And how [to achieve it]?” Meanwhile, legislator Ella Lei Cheng
I, who is from the city’s largest labour group Macau Federation of Trade Unions, also believes the five-year blueprint lacks any actual plans for the government to execute. “The administration already has many plans on hand but what it lacks is execution,” the legislator said. “The problem is the execution rate of these plans is low”. Another legislator, José Pereira Coutinho, the president of the Macau Civil Servants Association, has also joined the chorus of criticism. “It doesn’t propose any solutions to problems like budget overruns and graft in public bodies…If the government doesn’t respond to some
deep-rooted problems, the five-year plan is just a document of empty promises”. But the authorities did find some support in remarks by some academics. Speaking at a seminar organised recently by the University of Macau on the subject, Hao Yufan, Dean of the Faculty of Social Sciences at the university, said it was “a big leap” for the authorities to propose for the first time, a strategic document on the development of the city. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
Labour
Study hard More residents are rushing to strengthen their resumes amidst the economic downturn, says one of the largest adult education centres here. As the city’s economy has been in decline for two consecutive years, many r esi d e n ts hav e sta rt e d to worry about the local
employment situation and have thus decided to learn some new skills in order to remain competitive in the labour market.
O f t h e l a rg e s t a d u l t education institutions in the city, the Amateur Continuing Study Centre, is seeing more students enrolling in its courses as a result of the economic downturn. “Many courses, particularly the professional ones, have been popular in recent times,” said Wong Chon, principal of the study centre. “As gaming revenue has fallen for more than 20 months, while the economy is also undergoing an adjustment
period, many have started to prepare themselves for the adversity by picking up new skills.” In particular, the principal said the centre’s one-year teacher training diploma course for kindergarten and primary schools, which is co-organised with South China Normal University, has attracted a record-breaking number of applicants this year – totaling 632 people for only 100 places. “When the economy was
sound [in the past] we didn’t see such a high turnout from young people, but many now hope to learn more in this economic environment,” the principal said. “Does this mean they all want to become teachers? No. But those skills could become handy when needed.” O n t h e o t h e r h a n d, observing an increasing demand for talent in technology and the cultural creative industries, the study centre established iCentre in 2005, focusing on courses like filmmaking, multimedia design and music. “ W e h av e t h e l a t e st equipment and software to provide professional training [of different skills] for students so that they don’t only apply to what they’ve learned in the workplace but can also spread their skills within the company,” said Nelson Wong, technical advisor at iCentre. The advisor added that iCentre worked with the Cultural Affairs Bureau to host the Workshop for Architectural Audio-visual Mapping of World Heritage, in order to allow students to gain more practical experiences. The study centre, under the auspices of the Macau Federation of Trade Unions, was founded in 1982, offering a wide range of courses - from languages, vocational skills, computer soft-ware and interest classes to Bachelor’s and Master’s programmes in collaboration with other tertiary education institutions. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
Business Daily Wednesday, June 15 2016 7
Gaming
Melco
Cyprus puts brakes on gaming concession grants Local media reports that bidder Melco has informed the local government of its opposition to the casino license process deadline being extended to October. Nelson Moura nelson.moura@macaubusinessdaily.com
M
elco International Development (Melco) has questioned the three-month extension by the Cyprus government of the country's gaming concession deadline, Cyprus media reports. The company, owned by Lawrence Ho, made a joint bid with Hard Rock International and local conglomerate Cyprus Phasouri (Zakaki) Ltd to secure the lucrative 30-year gaming concession, with 15 years of monopoly rights in the Mediterranean country to be granted to the tender winner. However the local government has stated that after the two other remaining bidders, Filipino casino operator NagaCorp Ltd and Cambodia’s Bloomberry Resorts Corp, asked in writing for more time
to reach an agreement ‘regarding the land acquisition and time to overcome state bureaucracy’, the local government decided to extend the deadline, The Cyprus Weekly newspaper stated. Cyprus authorities will now extend the planned July 5 deadline to October, with local Cyprus media sources believing the extension by the local Legal and Audit Services department was made due to the assumption that, had the tenders stuck to the original deadline, ‘the casino licensing would have been left with just one bidder’.
Dismayed Melco
Melco has informed the government in writing of its opposition to the extension decision, insisting that the original timeframes should be followed. “There is certainly an issue of credibility over the procedure and questions regarding the length of
the extension,” an insider told The Cyprus Weekly. Questions were also raised in regards to the government’s removal of a ‘sightseeing’ clause in the request for the proposal document, which would force the selecting committee to visit the casinos run by the bidders as part of the selection process. This would give a clear advantage to the Melco-Hard Rock consortium, with ‘venues in 68 countries, including 162 cafes, 23 hotels and 11 casinos’, local media stated. “The clause was optional and we decided that it would have been safer for the procedure not to make use of it in order to avoid any conflict of interest. We already know the bidders’ experience and going there would have not added anything new,” a government source told The Cyprus Weekly. Business Daily sent a comment request to Melco, but hadn’t received a response when this newspaper went to print.
Controversy Cyprus style
This isn’t the first time the Cyprus gaming tender has been mired in
controversy. One of eight initial bidders, Goldenlady consortium, called for an investigation after its US$1.33 billion (MOP10.63 billion) bid was dismissed. At the time, the group claimed the three remaining candidates only intended to spend between US$282 million and US$479 million, Business Daily reported at the time. Melco International and Hard Rock are proposing a resort located in Limassol, the second largest city on the southern coast of the Greek controlled part of Cyprus. NagaCorp is focused on building a resort in Larnaca, while Bloomberry wants to develop in Paphos. The tender instructions allow for the successful bidder to build at least a luxury 500-room hotel, and install 1,000 gaming machines and 100 gaming tables, while most of the remaining areas, such as the location and amenities, are open to competition, Business Daily reported. If Melco's Cyprus bid is successful, it will be the third casino outside of Macau for Lawrenc Ho, adding to City of Dreams Manila and Tigre de Cristal casino in Vladivostok, Russia.
8 Business Daily Wednesday, June 15 2016
Greater China Trading platform
HKEx makes new bid to boost mainland metal market role While HK exchange is looking to develop its presence in China, bourses inside the country are looking outwards.
H
ong Kong Exchanges & Clearing Ltd., which bought the London Metal Exchange in 2012 for US$2.2 billion, plans to start a metals
trading platform in the first half of next year in southern China as it bids to secure a foothold in the world’s biggest consumer and producer of raw materials.
The LME has so far failed to extend its warehouse network to the mainland where the Shanghai Futures Exchange is dominant
Grappling with a slide in volumes after a fee increase, and shrinking profits from commodities, the bourse aims to provide a marketplace for physical metals that will eventually generate benchmark prices in China. Futures in the country have traditionally been dominated by day-trading speculators and the HKEx model is specifically targeted at physical users, producers and traders. The new trading platform will be based in Qianhai near Shenzhen, and the exchange sees it filling a gap in the mainland physical markets that it says are highly fragmented and where warehousing systems may not be reliable and financing hard to obtain. The LME has so far failed to extend its warehouse network to the mainland where the Shanghai Futures Exchange is dominant. While China has a vibrant futures market, real physical users are not well served by the existing system and financing is expensive, HKEx Chief Executive Officer Charles Li said in Hong Kong yesterday. The exchange eventually wants to create a credible warehouse and logistics system for metals in China and have a platform that will enhance the country’s position in setting prices globally, Li told an LME conference. The trading platform could also tap investment from the nation’s large domestic savings, Li said. Asked in a Bloomberg TV interview with Angie Lau whether there was any hesitation from the Chinese authorities over the plan, Li said: “No, I don’t think the Chinese government should have any issues because we’re doing exactly what the government has advocated, that is the financing sector should find safer assets and avenues of investment. Today Chinese savers can
only either invest in the stock market or the property market.” For others, though, it was not clear how China would respond. “The Hong Kong Exchange from a mainland Chinese perspective is a foreign player,” Tony Tanaka, a Tokyobased analyst at Haitong International Securities Group, said before the conference. “The Shanghai Futures Exchange or the Dalian Commodity Exchange are not going to like it, even if this is a spot exchange. It’s going to take a long time, and then if they are successful, what do you think the existing commodities exchanges are going to do?” His concerns were echoed by Richard Fu, London-based Asia Pa c i f i c m a n a g i n g d i r e c t o r a t Amalgamated Metals Trading Ltd. “The key questions are liquidity and how many clients would trade on a spot platform,” Fu said. “Would there be enough trading volume to make the prices on the platform acceptable in the market in general?” The Shanghai Exchange and the China Securities Regulatory Commission, which oversees mainland trading, didn’t respond to faxes requesting comment. While HKEx is looking to develop its presence in China, bourses inside the country are looking outwards. The Shanghai Futures Exchange and Dalian Commodity Exchange want their prices to be global benchmarks to reflect China’s importance as a user of everything from copper to crude and iron ore. “There’s political will in China to support China’s position in global markets,” Jeremy East, interim head of global commodities at Standard Chartered Plc, said by phone from Hong Kong June 10. He pointed to the opening of an international board at the Shanghai Gold Exchange, as well as to the long-expected dollar-priced oil futures proposed by the Shanghai Futures Exchange. “If you look ahead then you could see
IMF’s deputy director
Economy faces growing vulnerabiliti In addition to fiscal reform, Lipton said China needs to guard against growing risks in its increasingly complex financial system. China needs to implement reforms with more urgency as the economy faces growing vulnerabilities and there are fewer buffers to deal with any shocks, an International Monetary Fund (IMF) official said yesterday. “The near-term growth outlook has turned more buoyant due to recent policy support,” David Lipton said, according to a copy of his prepared remarks provided to Reuters. “ Th e m e di u m -t e r m o u t l o o k, however, is more uncertain due to rapidly rising credit, structural excess capacity, and the increasingly large, opaque, and interconnected financial sector,” Lipton, first deputy managing director of the IMF, said at the end of a visit to Beijing.
China’s economy grew at its slowest pace in a quarter of a century last year, weighed down by weak demand at home and abroad, cooling investment and overcapacity, particularly in industries such as steel and coal. Analysts say continued government efforts to stimulate activity and hit growth targets are driving up debt levels, raising concerns about dangers to the country’s banking system, which has seen non-performing loans hit 11-year highs. “Corporate debt, though still manageable, is high and rising fast,” Lipton said, adding that China needed a comprehensive plan and concrete action - especially for state-owned enterprises - to avoid serious problems
David Lipton, first deputy managing director of the IMF
Business Daily Wednesday, June 15 2016 9
Greater China Recovery path
In Brief
Analysts say pressure remains despite firmer data Service sector has become one of the most potent economic drivers, accounting for 56.9 per cent of the country’s GDP in the first quarter. Encouraging data points to stabilization of China’s economy but challenges ranging from tepid private investment to sluggish global economy suggest a strong recovery is unlikely. China’s industrial output remained steady in May, and retail sales were also robust. Property activity moderated but was still strong. “The economy is holding steady thanks to pro-growth policies and it
[will hopefully] pick up in the second and third quarters,” said Jing Ulrich, managing director and vice chairman of Asia Pacific at J.P. Morgan Chase. Fiscal policies will likely maintain strong while monetary policies will gradually become neutral, she said, adding that she predicted the central bank would cut interest rates once this year. Likewise, UBS economist Wang Tao
China should count on the service sector and high-tech manufacturing for sustainable growth momentum under the current structural slowdown, Ulrich said.
the possibility of gold imports being priced on that benchmark, instead of being priced against London,” East said. That could “absolutely” be replicated in metals, given China’s role as the biggest producer and consumer and the exposure of the country’s companies to risk priced in their own currency. Bloomberg News
ies down the road. The IMF expects China’s economy to grow by around 6 per cent in 2017. Beijing has set a goal of at least 6.5 per cent growth over the next five years, though some analysts believe real growth levels are already much weaker than official data suggest.
Need for fiscal reforms
China also needs to align local government revenue and expenditure responsibilities, expand social security, implement new budget laws and make the tax system more progressive, Lipton said. The IMF suggested implementing a carbon or coal tax, which would significantly reduce China’s serious air pollution problem and could prevent 4-5 million premature deaths in 2030. In addition to fiscal reform, Lipton said China needs to guard against growing risks in its increasingly c o m p l ex f i n a n c i a l s y st e m b y increasing coordination between different regulators and markets and strengthening funding resilience for both banks and other financial institutions. Turning to China’s foreign exchange policy, which is high on global investors’ worry lists after a surprise yuan devaluation last year, Lipton said the exchange rate is becoming “more flexible and market-based”. The IMF encouraged China to set “a goal of achieving an effective float within the next couple of years.” Lipton also noted China had improved its data and communication of policies to markets and the public, and said further improvement would help China with its economic transition. Reuters
expects economic activity to hover around its current pace for another few months, with firmer growth in the April-June period on a sequential basis. Wang maintained her forecast for full year GDP growth at 6.6 per cent. Despite the warming signs, Ulrich does not expect a strong rebound due to the sluggish global economic recovery. “The U.S. economy markedly slowed in the second quarter and its employment data also fell short of market expectations, which will weigh on China’s exports and impact Chinese companies’ presence overseas,” Ulrich said. Besides, growth of private investment, which accounted for around two thirds of the country’s total investment, slowed to 3.9 per cent in the January-May period from an already weak 5.2 per cent in the first four months. China should count on the service sector and high-tech manufacturing for sustainable growth momentum under the current structural slowdown, Ulrich said. The service sector has become one of the most potent economic drivers, accounting for 56.9 per cent of the country’s GDP in the first quarter, with rapid growth in the Internet, entertainment and sports sectors. China’s GDP expanded 6.7 per cent year on year in the first quarter, the slowest growth since the global financial crisis in early 2009. Xinhua
Human Rights Action Plan
Beijing pulls 66 million rural people out of poverty Central government allocated 771.7 billion yuan to support affordable housing projects, a report said. The number of people living in poverty in rural areas was reduced by 66.63 million from 2012 to 2015, said a government report released yesterday. China formulated the 12th Five-year Plan for Poverty Reduction Village By Village. By 2015, poverty alleviation projects covering 30,000 villages had been implemented, according to the report assessing the implementation of Human Rights Action Plan, which was released by the State Council Information Office. Total Investment reached 144.569 billion yuan (US$22 billion), an average of 4.8 million yuan for each village, it said. From 2012 to 2015, the increase of residents’ per capita disposable income surpassed the growth rate of GDP of the same period. The annual growth rate of the per-capita disposal income of urban residents and per-capita net income of rural residents were 7.5 per cent and 9.2 per cent respectively, the report said. During the same period, the State Development and Reform Commission allocated 21 billion yuan from the central budget for relocation of
‘Total Investment reached US$22 billion’
impoverished residents, which brought about an additional more than 200 billion yuan in local government input and various other investments, the report said, adding that about 8 million people in poverty have been relocated. The central government also allocated 771.7 billion yuan to support affordable housing projects, the report said.
Employment
In 2012, 2013, 2014 and 2015, 12.66 million, 13.1 million, 13.22 million and 13.12 million new urban jobs were created respectively, according to the report. The registered urban unemployment rate was kept within 4.1 per cent, lower than the 5 per cent target. The basic medical insurance coverage has been extended to all citizens, with the rate of participation surpassing 95 per cent. It also underlined that an equal right to education for relocated children of migrant workers has been safeguarded. From 2012 to 2015, the central government allocated 34.6 billion yuan to enable nearly 90 per cent of relocated children of migrant workers in cities to obtain government support. Xinhua
Biz forecast
Alibaba expects to double transactions volume Chinese e-commerce giant Alibaba Group Holding Ltd said yesterday it expects to nearly double its transaction volumes by 2020, signalling it still expects rampant growth as Executive Chairman Jack Ma pledged to intensify a crackdown on fake goods. At an investor conference at its headquarters in Hangzhou, Zhejiang province, Alibaba said it expects to record 6 trillion yuan (US$912 billion) in gross merchandise volume in fiscal 2020, nearly double 3.09 trillion yuan in fiscal 2016. Echoing that growth, Ma said Alibaba expects to have 2 billion consumers on its books by 2036. M&A
Jianaguang to buy NXP standard products business NXP Semiconductors NV said it would sell its standard products business to a consortium of financial investors consisting of China’s Jianaguang Asset Management Co Ltd and private equity firm Wise Road Capital Management for about US$2.75 billion. Dwindling demand in computer and phone markets, once semiconductor industry mainstays, has fueled a yearlong merger wave as firms look to higher-margin areas like automotive electronics for sales growth. Chinese companies have shown particular interest in investing in foreign technology companies as Beijing seeks to become a global semiconductor powerhouse. Results
Baidu lowers revenue forecast Chinese online search giant Baidu Inc cut its revenue forecast for the current quarter, saying regulatory scrutiny into healthcare and related ads was hurting its advertising revenue. Chinese regulators imposed limits last month on the number of medical ads carried by Baidu after the death of a 21-yearold student who underwent an experimental cancer treatment, which he found using the company’s search engine. Baidu cut its revenue forecast for the second quarter to US$2.81 billion-US$2.82 billion from US$3.12 billionUS$3.19 billion, citing “a reduction or delay in spend from a significant portion of medical customers.” M&A
Midea seeking 49 percent Kuka stake China’s Midea Group Co Ltd is only seeking a 49 percent stake in German industrial robot maker Kuka, Handelsblatt reported on Monday, citing unnamed sources in the German government. Augsburgbased Kuka is the target of a takeover bid by the Chinese home appliance maker, which has fanned a furious debate over Chinese acquisitions in Europe, with some German politicians calling for tougher restrictions. “Midea has clearly stated that its intentions are to have a meaningful stake in KUKA above 30 percent,” a company spokesman said.
10 Business Daily Wednesday, June 15 2016
Greater China M&A
ChemChina, New Hope said to mull bids for McDonald’s franchise The U.S. fast-food company hired an adviser to help identify partners. Vinicy Chan, Cathy Chan and Jonathan Browning
C
hina National Chemical Corp. and New Hope Group Co. are among companies considering b i d s f o r M c D o n a l d’ s Corp. operations in the world’s most populous nation, people with knowledge of the matter said. B u y o u t fi r m K K R & C o . i s considering teaming up with a Chinese firm to make a joint bid for the mainland China franchise rights, which could fetch about US$2 billion, the people said, asking not to be identified because the information is private. Potential suitors were asked to submit first-round offers by next week, according to the people.
1,500 outlets to the more than 2,800 it has in mainland China, Hong Kong and South Korea over the next five years.
Local ownership
Unlike in its other major markets - including the U.S. - most of its outlets in North Asia are companyowned. It aims to have 95 per cent of its restaurants in the region under local ownership, it said. C e r ta i n t e r m s o f th e Ch i n a investment, including 8 per cent royalties and a three-year ban on senior management changes, h av e a l r e a d y d e t e r r e d s o m e potential buyers, according to two of the people, who have seen deal terms. In developed markets, fees are usually about 4 per cent
to 6 per cent, they said. “We are making progress as we look for long-term strategic partners with local relevance who have complementary skills and expertise coupled with a strong understanding of McDonald’s Brand,” Regina Hui, a Shanghai-based spokeswoman for McDonald’s, said in an e-mailed response to Bloomberg queries. “As no decisions have been made, it would be premature to speculate further.”
Malan Noodles
ChemChina, the state-owned chemicals powerhouse that agreed to buy Syngenta AG for about US$43 billion in February, has experience in the restaurant industry through Beijing-based Malan Noodle Fast Food Chain Store Co. ChemChina Chairman Ren Jianxin founded Malan Noodle in 1995, according to the chemical company’s website.
New Hope Group, founded in 1982, is a Beijing-based conglomerate with businesses spanning from agriculture to dairy, food and real estate. Liu Yonghao, its billionaire chairman, said this year the company is interested in buying fish-farming assets in Southeast Asia as part of a 10 billion-yuan push to expand overseas. Representatives for ChemChina and KKR declined to comment. “Related departments in New Hope Group don’t know about this bid,” a spokeswoman for the company said in an e-mail. About 82 per cent of the more than 36,500 McDonald’s restaurants worldwide were franchised as of December 31, according to the company’s 2015 annual report. The franchise rate was 46 per cent in highgrowth markets such as mainland China and South Korea, the report said. Bloomberg News
“We are making progress as we look for long-term strategic partners with local relevance” Regina Hui, a Shanghai-based spokeswoman for McDonald’s McDonald’s is revamping its ownership structure in Asia as it pursues an international turnaround plan put in place after Chief Executive Officer Steve Easterbrook took the reins last year. The Big Mac purveyor said in March it is seeking franchise partners in mainland China, Hong Kong and South Korea to invest fresh capital and localize decision making. The U.S. fast-food company hired an adviser to help identify partners, it said in March. It also plans to add
M&A
Three Gorges to buy German wind park The agreement was signed on Monday in the presence of Merkel and Chinese Premier Li Keqiang China Three Gorges, which operates the world’s largest hydropower plant on China’s Yangtze river, will buy German offshore wind park Meerwind from U.S. buyout firm Blackstone, the c omp ani es said o n Monday. The terms of the sale were not disclosed but people familiar with the process have told Reuters that they expected it to be valued at around 1.6 billion euros (US$1.8 billion). The deal, signed during a visit by German Chancellor Angela Merkel to China, has German government approval despite growing controversy over Chinese takeovers of German businesses. China Three Gorges, which seeks to expand beyond hydropower as it faces a saturated domestic hydro market, will buy Blackstone’s majority interest in WindMW
GmbH, an offshore wind power joint venture. WindMW owns Meerwind, a 288 megawatt project in the North Sea and one of
Germany’s largest offshore wind farms. Reuters reported on Friday that China Three Gorges was closing in on a deal. The agreement was signed on Monday in the presence of Merkel and Chinese Premier Li Keqiang, the statement said. It was one of a number
German Chancellor Angela Merkel (R) watches a presentation on industry 4.0 at the Industry Museum in Shenyang yesterday
of deals expected to be signed during Merkel’s visit. Airbus agreed to sell 100 helicopters to a Chinese consortium on Monday, w hi l e Dai m l e r A G a n d its Chinese partner, BAIC Motor, pledged to jointly invest 4 billion yuan (US$607.53 million) to expand engine production. The German government has expressed concerns over foreign takeovers of strategic assets deemed key
to the German economy. Germany has been trying to co-ordinate a counter-offer for Chinese home appliance maker Midea’s controversial 4.5 billion euro buyout offer for robotics group Kuka.
‘China Three Gorges seeks to expand beyond hydropower as it faces a saturated domestic hydro market’ B r e m e r h av e n - b a s e d WindMW is 80 percent owned by Blackstone and 20 percent by Windland Energieerzeugungs GmbH, and provides electricity for up to 360,000 households. The present management team will continue to operate the business. Jefferies, PJT Partners and Bank of America Merrill Lynch acted as financial advisors to Blackstone. Xinhua
Business Daily Wednesday, June 15 2016 11
Asia Borrowing option
Indonesian builders may tap bank loans if public funding fails Indonesian authorities have been pushing banks to lower lending rates to spur the economy. Eveline Danubrata and Cindy Silviana
I
ndonesian state builders PT Wijaya Karya Tbk and PT Pembangunan Perumahan Tbk are exploring bank loans and bonds to secure hundreds of millions of dollars if a proposed plan for government funding fails, company executives said. The Indonesian parliament will debate the finance minister’s proposal to inject a total of nearly 54 trillion rupiah (US$4.1 billion) into 24 state firms. The government’s initial plan was rejected last year as some parliament members were not convinced that the huge cash injection would benefit the economy. President Joko Widodo has identified the infrastructure sector as a priority, but getting financing is an uphill task due to the state budget deficit and the reluctance of some private investors to put money into projects that may take a long time to take off. Under the government’s latest proposal, Wijaya Karya is slated to receive 4 trillion rupiah and Pembangunan Perumahan 2.25 trillion rupiah. It normally takes around a month for parliament to debate the
proposed budget before a vote on it. Wijaya Karya has allocated capital expenditure of 6 trillion rupiah this year to build infrastructure such as toll roads and power plants, Corporate Secretary Suradi told Reuters by phone. If parliament rejects the government’s proposed injection again, Wijaya Karya may tap local banks such as PT Bank Mandiri Tbk, PT Bank Negara Indonesia Tbk and PT Bank Rakyat Indonesia Tbk for loans.
director Agus Purbianto told Reuters. The trend of decreasing interest rates at Indonesian banks is favourable for potential borrowers such as Pembangunan Perumahan, Purbianto said. The company may also issue bonds but it is waiting for the right time, he added. Indonesian authorities have been pushing banks to lower lending rates to spur the economy. Southeast Asia’s
largest economy is expected to expand 5.1 per cent this year but lower than the initial 5.3 per cent target, as domestic consumption may not grow as much as expected. Tapping the capital market, such as via a rights issue, is an option for companies but the government has to subscribe for a certain portion to prevent ownership from being diluted, executives said. Reuters
‘The Indonesian parliament will debate the finance minister’s proposal to inject a total of nearly US$4.1 billion into 24 state firms’ “We have to be able to get our own funding,” Suradi said, adding that the company may utilise its internal cash. “Our deadline is quite tight.” Pembangunan Perumahan eyes a capital expenditure of more than 6 trillion rupiah over the next two years for projects that include toll roads, power plants and ports, finance
President Joko Widodo has identified the infrastructure sector as a priority
CPI
India’s May retail inflation hits near 2-year high Asia’s third largest economy grew 7.9 per cent in the quarter to March. Manoj Kumar
India’s annual consumer price inflation accelerated to a near two-year high of 5.76 per cent in May, driven by surging prices of food products such as pulses and sugar, which could dampen hopes of a rate cut at least during the next monetary policy review in August. After leaving rates unchanged last week, Governor Raghuram Rajan said the Reserve Bank of India, which has targeted inflation at 5 per cent by March 2017, was looking for room to reduce interest rates, but there were concerns over upward pressure on
food and commodity prices. Economists polled by Reuters had expected annual consumer prices, which the RBI closely tracks to set its interest rate policy, to be up by 5.52 per cent in May, compared with an upwardly revised 5.47 per cent in April. Food inflation picked up to 7.55 per cent in May from an upwardly revised 6.40 per cent in the previous month, as prices of vegetables, sugar and pulses rose between 11 per cent and 32 per cent from a year earlier. Retail inflation has more than halved since November 2013, thanks to a crash in global commodity prices
as well as subdued rural demand. It had hit 7.03 per cent in August 2014. Analysts fear an increase in the cost of petrol and diesel by more than 5 per cent since May 1, and in prices of foods such as sugar and milk in the last month, could further heat up prices.
Key Points Annual CPI inflation accelerates to 5.76 per cent in May Higher prices of pulses, vegetables, sugar drive food inflation Analysts see little hope of a rate cut in current fiscal year “While there are some seasonal factors at play, structural mismatches are also evident in the rise in protein inflation,” said A. Prasanna, economist at ICICI Securities Primary Dealership.
“We stick to our call of no more rate cuts in this financial year.” The government has also hiked taxes by 0.5 per centage point on services such as telecoms, travel and eating out from June 1. Monday’s data comes on the heels of a 0.8 per cent contraction in industrial production in April. Asia’s third largest economy grew 7.9 per cent in the quarter to March, outpacing China’s 6.7 per cent growth, and is projected to expand by around 7.75 per cent in the current fiscal year that started on April 1. New Delhi expects good rainfall between June and September, after two years of drought, to boost growth and tame prices of food items that account for nearly half of the consumer price index. The monsoon, which delivers 70 per cent of annual rainfall, is critical for India’s 263 million farmers and crops such as rice, cane, corn and cotton because nearly half of farmland lacks irrigation. Reuters
12 Business Daily Wednesday, June 15 2016
Asia South Korea
Land, property dominate household net assets However it was down 0.7 percentage points from a year ago
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on-financial assets, such as land and property, accounted for over twothirds of the total perhousehold net assets in South Korea, raising risks over negative impacts from the possible housing market slowdown, a government report showed yesterday. Net assets of households and nonprofit organizations averaged 361.52 million won (US$405,000 based on purchasing power parity) per household as of end-2015, according
to a joint press release by the Bank of Korea (BOK) and Statistics Korea. Non-financial assets, including land, buildings and intellectual properties, took up 75.6 per cent of the total per-household assets as of end-2015. It was down 0.7 percentage points from a year ago, but was much higher than 34.9 per cent in the United States, 44.3 per cent in Japan, 55.1 per cent in Canada and 57.4 per cent in Britain. The high rate indicated most of South Korean household assets are consisted of land and properties and possible slowdown in the property market could destroy the household economy and its consequent private consumption. Bank of Korea cuts its benchmark
interest rate by a quarter percentage point to an all-time low of 1.25 per cent last week, the first cut in a year. The unexpected rate cut could boost the lacklustre economy, but it also boosted worries about an increase in the already record-breaking household debts that had been mainly borrowed to purchase home. Some worried about the bubble-forming in the housing market. The country’s total housing valuations reached 3,519.5 trillion won (US$3 trillion) as of end-2015, 2.26 times the value of gross domestic product (GDP) in 2015. The ratio is higher than 1.4 times in the United States, 1.8 in Japan and 2.0 in Canada, while being lower than Italy’s 3.7, Australia’s 3.5 and France’s 3.1 each.
‘The country’s total housing valuations reached 3,519.5 trillion won as of end-2015’ Meanwhile, the country’s combined national wealth, including those from households, companies and the government, amounted to 12,359.5 trillion won as of end-2015, up 5.7 per cent from a year earlier. It was 7.9 times more than the country’s nominal GDP worth 1,558.6 trillion won last year. Xinhua
Economy’s report
Australian think tank identifies 10 areas vital to growth The report said that durable future-proof economic policy has allowed Australia to maintain a good economic position through extreme circumstances Australia needs to focus on 10 key areas to ensure continued economic growth, according to a report released yesterday. The report, from the Committee for Economic Development of
Australia (CEDA) - the country’s leading independent economic think tank - identified the 10 areas as innovation, competition policy, education, workforce participation, infrastructure, fiscal resilience, tax
“Australia needs a genuine growth agenda to improve our competitiveness” Stephen Martin, CEO Professor of Committee for Economic Development of Australia
sometimes hostile circumstances,” it said. “The country has also managed to digest the most sustained and pronounced mining boom in its history through appropriate economic incentives and effective management of fiscal monetary policy.” Australia’s gross domestic product (GDP) as of 2013 is US$1.56 trillion compared to a gross debt of US$300 billion as of January 2016. Xinhua
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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reform, federalism, workplace relations and climate change. It comprises the second part of CEDA’s 2016 series on repairing Australia’s economy. CEDA CEO Professor Stephen Martin said with Australia’s federal election fast approaching it was vital that both parties provide sustainable plans for Australia’s economic growth. “ E n c o u r a g i n g i n n o va t i o n , i m provi ng ove ra l l education outcomes and introducing competition reform to previously protected areas are other key areas explored,” Martin said in a media release issued yesterday. “To maintain Australia’s economic prosperity and ensure we continue to create high paying jobs of the future, Australia needs a genuine growth agenda to improve our competitiveness, increase economic flexibility and drive investment in economic infrastructure and our people. “Australia is well positioned economically but with the right reform it can do better and increase the likelihood of continuing success in a highly competitive global economy.” The report said that durable
future-proof economic policy has allowed Australia to maintain a good economic position through extreme circumstances. “The nation’s economic expansion has not occurred by chance alone but due to robust policy settings that enabled and incentivised the nation to respond to a range of extreme and
Business Daily Wednesday, June 15 2016 13
Asia In Brief South Korea
Ministry to deregulate apps foreign currency transfer South Korea’s finance ministry yesterday announced a revision of the foreign exchange transaction law to deregulate the transfer of foreign currencies through smartphone applications. Foreign currency transfer businesses, which had been operated only by banks, will be permitted to non-financial companies, such as mobile messenger Kakao Talk’ if they meet certain requirements and are registered with the regulator, according to the Ministry of Strategy and Finance. The revised law would reduce transfer costs as fin-tech companies don’t need to send foreign currencies to banks for transfer orders from app users.
Agus Martowardojo, Bank Indonesia governor
Inc mood
Monetary authority
Indonesia central bank gains credibility decades after crisis The inflation outlook is now for consumer-price gains to taper to just 4 per cent over the coming half decade. David Roman and Herdaru Purnomo
When inflation pressures began surging just as he took the helm of Indonesia’s central bank, Agus Martowardojo didn’t hesitate to plant his flag on the side of price stability. The newly installed Bank Indonesia (BI) governor proceeded to raise interest rates five times in the second half of 2013 - each time surprising economists accustomed to less-hawkish leadership. A former loan officer who rose to head the nation’s largest bank, Martowardojo demonstrated he was ready to sacrifice growth to shore up the rupiah and quell inflation. Three years on, it’s becoming clear that Martowardojo has championed a deeper set of changes designed to strengthen the effectiveness and credibility of Bank Indonesia, an institution that had presided over a currency collapse in the 1990s. That bodes well as Southeast Asia’s biggest economy grapples with the risk of a re-eruption of emerging market turbulence amid Brexit, China’s slowdown and U.S. interest-rate hike dangers. Bank Indonesia under Martowardojo, 60, is adopting a new main monetary-policy tool tied more closely to actual borrowing costs, with a roll-out in August. BI has new mechanisms to monitor risks surrounding foreign debt, and is setting up a department charged with growing a stunted currency market, where traders used to get browbeating phone calls from the central bank when they set the rupiah at unfavourable levels.
Confidence rising
“Investors are now much more confident that Indonesia can manage episodes of instability in global financial markets that spill over into emerging markets,” Benedict Bingham, the International Monetary Fund’s resident representative in Jakarta, said by phone. “They moved to a more flexible exchange-rate regime and underpinned it with a firmer, more credible monetary policy” in recent years, he said. In 2013, Indonesia was one of the markets walloped by the prospect of the U.S. Federal Reserve tapering off
its liquidity injections. By contrast, its stocks and currency this year have been relatively stable. Indonesia, with the world’s fourthlargest population, punches below its weight on a number of fronts, with the foreign-exchange market no exception. The most recent triennial survey of the foreignexchange market by the Bank for International Settlements showed that daily currency trading in the country was less than half of Thailand and Malaysia.
Market development
A more liquid market offers greater confidence to investors that they’re receiving a competitive rate, and can enter into a purchase of Indonesian rupiah assets with fewer concerns about being able to exit. Another priority under Martowardojo, who was appointed by the predecessor to current President Joko Widodo, is monitoring companies that have sold debt in foreign currencies. Indonesia ran up private-sector debt in dollars and other foreign currencies amid the developed world’s liquidity surge after the global credit crisis, leaving the economy vulnerable should the rupiah sink.
“Not moving now is part of their credibilitybuilding exercise.” Wellian Wiranto, economist in Singapore at the Oversea-Chinese Banking Corp When it comes to monetary policy, Martowardojo, who served as finance minister under former President Susilo Bambang Yudhoyono, has shown a more hawkish predisposition than predecessors. One of his former teachers, who previously lectured in economics at the University of Indonesia, even says he raised rates too much in 2013. After the central bank shifted to easing mode - it cut the current benchmark reference rate three times in the first quarter to address slower
growth - it encountered weakness in the policy framework, said Iwan Azis, now a professor of economics at Cornell University in New York state.
Purchasing power
“The ineffectiveness of Bank Indonesia policy is vindicated by the fact that the BI rate failed to translate into lower lending rates needed to boost growth,” he said. Martowardojo was unavailable to be interviewed for this story, according to a spokesman for the bank. Where the central bank has been successful is in holding down inflation, which is currently running at the slowest in more than six years. That helps preserve purchasing power in a country where about 40 per cent of the population remains clustered around the poverty line of 330,776 rupiah a month, according to the World Bank, equivalent to US$24.80 at the current exchange rate. “If they hadn’t tightened, the economy would be too hot and they would lose control of inflation,” said Steve Hanke, who served as an adviser to former President Suharto during the Asian financial crisis and who is now a professor at Johns Hopkins University in Baltimore. He said the central bank had restored the credibility ruined amid the turmoil almost two decades ago; in 1998, prices climbed more than 77 per cent and the economy shrank in excess of 13 per cent.
Rate outlook
The inflation outlook is now for consumer-price gains to taper to just 4 per cent over the coming half decade, a lower sustained pace than seen in IMF data back through 1980. Bank Indonesia has stepped up its communication under the Amsterdam-born Martowardojo, who has been known to ban officials from checking their smartphones during meetings that can sometimes stretch well into the night. Officials hold regular calls with analysts and investors to keep them informed of new initiatives, such as the adoption of the new benchmark rate. The central bank next decides on policy on Thursday. Most economists anticipate no change, as has been the case since March, amid the preparation for the adoption of the new benchmark in August. “Agus Martowardojo has built a solid reputation in the market,” said Wellian Wiranto, an economist in Singapore at the Oversea-Chinese Banking Corp., who previously worked at the IMF. “They gained credibility because there was a bit of pressure to cut rates but they kept them unchanged” last year, he said. “Not moving now is part of their credibility-building exercise.” Bloomberg News
Australia business conditions stay elevated Australian firms reported a notable improvement in sales and profitability last month, highlighting an on-going recovery in the non-mining sectors of the economy that supports the case for the central bank to hold off on any cuts in interest rates. National Australia Bank’s monthly survey of more than 500 firms showed its index of business conditions held steady at +10 in May, above the long-run average. Its business confidence index slipped two points to +3, perhaps reflecting uncertainty over the July 2 general election. Philippines summit
ASEAN forestry meeting kicks off A three-day regional forestry conference opened yesterday in western province of Palawan, the Department of Environment and Natural Resources (DENR) said. The agenda of the 10th ASEAN (Association of Southeast Asian Nations) Social Forestry Network (ASFN) meeting include discussions on ASEAN Cooperation in Forestry, and Promoting Policy and Practice of Social Forestry, said DENRForestry Management Bureau Director Ricardo Calderon. There will also be reports by ASEAN Member States and Implementing Partners and development of Strategic Plan of Action of ASFN to support ASEAN and Global objectives, he said. Malaysia fund
IPIC takes 1MDB dispute to court Abu Dhabi’s state-owned International Petroleum Investment Co (IPIC) asked a London court to arbitrate in a dispute with Malaysian state fund 1MDB, in which it is claiming about US$6.5 billion, IPIC said yesterday. The submission to the London Court of International Arbitration alleges that 1MDB and Malaysia’s finance ministry failed to perform their obligations under a debt restructuring agreement involving the companies last June. Malaysia’s finance ministry dissolved 1MDB’s board of advisers and took over its remaining assets last month. The fund is the subject of money-laundering investigations in at least six countries.
14 Business Daily Wednesday, June 15 2016
International In Brief Angola employment
New wave of jobs in hypermarket expansions Three distribution and retail groups have begun investment projects in recent months in Angola worth about US$2.5 billion to build around 40 hypermarkets and create more than 12,000 direct jobs. In late 2015, breaching the partnership with Portuguese group Continente, Isabel dos Santos, the president’s daughter, opened the Candando hypermarket. The first of 10 costing an estimated total of US$400 million, opened in Luanda in May, creating 750 direct jobs. A second store is expected to open also in Luanda within a year. Electricity saving
Venezuela eases power rationing Venezuela’s socialist government on Monday eased a nationwide energy-saving program, bringing to an end a controversial twoday work week since April for nearly 3 million public sector workers. Electricity Minister Luis Motta said that thanks to rising waters at the Guri reservoir, which supplies two-thirds of the OPEC nation’s electricity, state workers would return to work until 1 p.m. on Wednesdays, Thursdays and Fridays. Weekend electricity rationing would also end, and schools, which had been closing on Fridays as another energy-saving move, would return to opening for the whole week, the minister said.
Oil forecast
IEA sees global market returning to surplus in early 2017 The Energy Agency said output fell by 590,000 bpd year-on-year to 95.4 million bpd in May. Amanda Cooper
O
il supply and demand will balance in the second half of 2016 after a series of unplanned production outages, but the market is expected to tilt into surplus in the first half of next year, the International Energy Agency said yesterday. The agency said demand growth in 2017 is likely to be flat at around 1.3 million barrels per day (bpd), the same level at which it estimates growth for this year, having revised up its May 2016 forecast of 1.2 million bpd. “Again, on the planning assumption that OPEC oil production grows modestly in 2017, we expect to see global oil stocks build slightly in the first half of 2017 before falling slightly more in the second half of 2017. For the year as a whole, there
will be a very small stock draw of 0.1 million bpd,” the IEA said in its monthly report.
Key Points Oil demand growth to reach 1.3 mln bpd in 2017, same as 2016 Market to balance in H2 2016, stocks to build in H1 2017 Non-OECD nations to drive demand growth “At halfway in 2016, the oil market looks to be balancing; but we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya, that could return to the market, and the strong start for oil demand growth seen this year might not be maintained,” the Paris-based
agency said. Most of the anticipated demand growth this year and in 2017 is expected to come from nations that are not part of the Organisation for Economic Cooperation and Development, the agency said. On the supply side, the IEA said output fell by 590,000 bpd yearon-year to 95.4 million bpd in May, the first significant decline since the start of 2013, as spending cuts and outages cut non-OPEC production by 1.3 million bpd from a year earlier. Crude output from the Organization of the Petroleum Exporting Countries fell by 100,000 bpd in May to 32.61 million bpd, after a spate of attacks on oil infrastructure in Nigeria offset higher output from the Middle East. Production was still 500,000 bpd higher than in May last year, however. “Iran has clearly emerged as OPEC’s fastest source of supply growth this year, with an anticipated annual gain of nearly 700,000 bpd,” the IEA said. Reuters
M&A
Microsoft to buy LinkedIn Microsoft Corp will buy LinkedIn Corp for US$26.2 billion in its biggest-ever deal, a bold stroke by Microsoft CEO Satya Nadella in his efforts to make the venerable software company a major force in next-generation computing. The US$196-per-share price tag represented a premium of almost 50 percent over LinkedIn’s stock market value as of Friday, but was still well below the social media company’s all-time high of US$270. Analysts said the price was rich. For Microsoft, the LinkedIn deal is a chance to reverse a terrible track record with acquisitions, including paying US$9.4 billion for phone maker Nokia. Libya case
Goldman exec paid for prostitutes A Goldman Sachs executive footed the bill for prostitutes and the bank paid for a lavish trip to Dubai for the brother of a decision-maker at Libya’s sovereign wealth fund, a lawyer for the fund alleged on Monday, in a case it has brought against Goldman in London’s High Court. The Libyan Investment Authority (LIA) is attempting to claw back US$1.2 billion from nine trades it carried out with Goldman Sachs in 2008. In the suit, the US$67 billion fund argues that the U.S. investment bank took advantage of its financial naivety.
Weak sales growth
U.S. small business confidence rises modestly Worries about anaemic sales ranked high among small business owners. U.S. small business confidence edged up in May amid growing concerns about weak sales growth, which are hurting spending on capital goods and inventory investment. The National Federation of Independent Business (NFIB) said yesterday its small business optimism index rose 0.2 point to a reading of 93.8 last month. Although it was the second straight monthly increase in the index, it remained below the 100 reading in December 2014 and its 42-year average of 98. About 700 small business owners participated in the survey. Weak spending on capital goods such as machinery, and a slow pace of inventory accumulation, have been a drag on economic growth. Four components of the NFIB index rose last month, while another four fell and two were unchanged.
Worries about anaemic sales ranked high among small business owners. Fourteen per cent of owners said weak sales were their main business problem, up three points from April. The share of owners reporting an increase in sales in the past three months fell two percentage points compared to the prior quarter. The share of owners expecting higher sales was unchanged.
‘The share of owners planning capital spending in the next 3 to 6 months also fell’ Given the pessimism over sales, businesses remained hesitant to increase inventory. There was a decline in the share of owners reporting an increase in inventory as well as those planning to build stocks. “These weak inventory investment
readings are consistent with the rather poor performance of consumer spending in the first quarter, leaving owners with excessive stocks and no incentive to add to them,” said the NFIB. Fifty-eight per cent of small business owners reported capital investment, down two points from April. The share of owners planning capital spending in the next 3 to 6 months also fell two points. Small businesses continued to report difficulties finding qualified workers for open positions. Fifty-six per cent of owners reported hiring or trying to hire, up three points, but 48 per cent reported few or no qualified applicants for the positions they were trying to fill. While the share of all owners saying they had job openings they could not fill fell two points, it remained at higher levels. Fifteen per cent of owners reported using temporary workers, up two points from April and five points from March. “Overall, it appears that labour markets are tightening,” the NFIB said. Reuters
Business Daily Wednesday, June 15 2016 15
Opinion Business Wires
THE TIMES OF INDIA The RBI (central bank) has allowed lenders to carve out the “unsustainable” portion of their loans to troubled corporates and convert them into equity. The new restructuring scheme will help public sector banks in cleaning up large chunks of their bad loans, which amount to Rs 4.76 lakh crore. The extent of loans which cannot be supported by cash flows are termed unsustainable. What separates this scheme from earlier steps is that instead of leaving it to banks, an overseeing committee of eminent persons will be constituted by the Indian Banks Association in consultation with the RBI to identify loans eligible for restructuring.
Rethinking Robin Hood THE KOREA HERALD South Korea’s home transactions continued to shrink from a year earlier in May, the government said yesterday, in an apparent sign of a slowdown in the property market. The number of home transactions came to 89,267 last month, down 18.8 per cent from the same month last year, according to the Ministry of Land, Infrastructure and Transport. May marked the sixth consecutive month of on-year drop following a 28.4 per cent plunge in the previous month. The May tally, however, marks a 3.4-per cent rise from the previous month.
PHILSTAR President-elect Rodrigo Duterte (pictured) has chosen the people who will lead the Health, Tourism and Trade departments. Health Assistant Secretary Paulyn Ubial will be promoted to secretary once Duterte assumes office on June 30. Ubial handles the Department of Health’s Office for Health Regulations. Meanwhile, Wanda Corazon Teo, the owner of Mt. Apo Travel & Tours, has been named Department of Tourism secretary. Businessman Ramon Lopez will serve as secretary of the Department of Trade and Industry. Lopez is the executive secretary of Go Negosyo, a non-stock, non-profit organization that seeks to promote entrepreneurship in the country.
BANGKOK POST The state-owned Export-Import Bank of Thailand (Exim Bank) projects the number of small and medium-sized enterprise (SME) exporters to rise by 10% this year, 15% next year and 20% in coming years. SME exporters now account for 80% of Exim Bank’s 1,200 active customers. Their borrowing represents 40% of the bank’s 73 billion baht in outstanding loans. Profitgeneration is not Exim Bank’s main focus, though it is the best performer in terms of profit to total assets among specialised financial institutions, said Pisit Serewiwattana, the bank’s newly appointed president.
I
nternational development aid is based on the Robin Hood principle: take from the rich and give to the poor. National development agencies, multilateral organizations, and NGOs currently transfer more than US$135 billion a year from rich countries to poor countries with this idea in mind. A more formal term for the Robin Hood principle is “cosmopolitan prioritarianism,” an ethical rule that says we should think of everyone in the world in the same way, no matter where they live, and then focus help where it helps the most. Those who have less have priority over those who have more. This philosophy implicitly or explicitly guides the aid for economic development, aid for health, and aid for humanitarian emergencies. On its face, cosmopolitan prioritarianism makes sense. People in poor countries have needs that are more pressing, and price levels are much lower in poor countries, so that a dollar or euro goes twice or three times further than it does at home. Spending at home is not only more expensive, but it also goes to those who are already well off (at least relatively, judged by global standards), and so does less good. I have thought about and tried to measure global poverty for many years, and this guide has always seemed broadly right. But I currently find myself feeling increasingly unsure about it. Both facts and ethics pose problems. Huge strides have undoubtedly been made in reducing global poverty, more through growth and globalization than through aid from abroad. The number of poor people has fallen in the past 40 years from more than two billion to just under one billion – a remarkable feat, given the increase in world population and the long-term slowing of global economic growth, especially since 2008. While impressive and wholly welcome, poverty reduction has not come without a cost. The globalization that has rescued so many in poor countries has harmed some people in rich countries, as factories and jobs migrated to where labour is cheaper. This seemed to be an ethically acceptable price to pay, because those who were losing were already so much wealthier (and healthier) than those who were gaining. A long-standing cause of discomfort is that those of us who make these judgments are not exactly well placed to assess the costs. Like many in academia and in the development industry, I am among globalization’s greatest beneficiaries – those who are able to sell our services in markets that are larger and richer than our parents could have dreamed of. Globalization is less splendid for those who not only don’t reap its benefits, but suffer from its impact. We have long known that less-educated and lower-income Americans, for example, have seen little economic gain for four decades, and that the bottom end of the US labour market can be a brutal environment. But just how badly are these Americans suffering from globalization? Are they much better off than the Asians now working in
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Angus Deaton the 2015 Nobel laureate in economics, is Professor of International Affairs and Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs and the Department of Economics at Princeton University.
the factories that used to be in their hometowns? Most undoubtedly are. But several million Americans – black, white, and Hispanic – now live in households with per capita income of less than US$2 a day, essentially the same standard that the World Bank uses to define destitutionlevel poverty in India or Africa. Finding shelter in the United States on that income is so difficult that US$2-a-day poverty is almost certainly much worse in the US than US$2-a-day poverty in India or Africa. Beyond that, America’s much-vaunted equality of opportunity is under threat. Towns and cities that have lost their factories to globalization have also lost their tax base and find it hard to maintain quality schools – the escape route for the next generation. Elite schools recruit the wealthy to pay their bills, and court minorities to redress centuries of discrimination; but this no doubt fosters resentment among the white working class, whose kids find no place in this brave new world. My own work with Anne Case reveals more signs of distress. We have documented a rising tide of “deaths of despair” among white nonHispanics – from suicide, alcohol abuse, and accidental overdoses of prescription and illegal drugs. Overall death rates in the US were higher in 2015 than 2014, and life expectancy has fallen. We can argue about the measurement of material living standards, whether inflation is overstated and the rise in living standards understated, or whether schools are really that bad everywhere. But deaths are hard to explain away. Perhaps it is not so clear that the greatest needs are on the other side of the world. Citizenship comes with a set of rights and responsibilities that we do not share with those in other countries. Yet the “cosmopolitan” part of the ethical guideline ignores any special obligations we have toward our fellow citizens. We can think about these rights and obligations as a kind of mutual insurance contract: We refuse to tolerate certain kinds of inequality for our fellow citizens, and each of us has a responsibility to help – and a right to expect help – in the face of collective threats. These responsibilities do not invalidate or override our responsibilities to those who are suffering elsewhere in the world, but they do mean that if we judge only by material need, we risk leaving out important considerations. When citizens believe that the elite care more about those across the ocean than those across the train tracks, insurance has broken down, we divide into factions, and those who are left behind become angry and disillusioned with a politics that no longer serves them. We may not agree with the remedies that they seek, but we ignore their real grievances at their peril and ours. Project Syndicate
Globalization is less splendid for those who not only don’t reap its benefits, but suffer from its impact
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16 Business Daily Wednesday, June 15 2016
Closing Overcapacity
Mainland’s coal production plummets in May
said, without providing further details. Since April, major coal-producing provinces and regions reported sharp output declines as China’s coal production declined sharply in the industry moves to address overcapacity. May as measures to cut capacity began to Coal output in Shanxi Province, the take effect, official data showed yesterday. Total output of coal mining companies with country’s largest coal-producing region, was annual revenue of more than 20 million yuan down 21.3 per cent year on year in April. (US$3.04 million) dropped 15.5 per cent year However, the price of coal picked up slightly in May as power plants consumed more coal on year in May, according to the National to meet increasing electricity demand from Development and Reform Commission. Output accumulatively decreased by 8.4 per households tuning up the air conditioning as cent in the first five months compared with a respite from the summer heat, according to the commission. Xinhua the same period last year, the commission
Local suppliers
Labour groups criticise Disney over Chinese workers conditions Advocacy group SAMOC said it has found that the supplier companies withheld full overtime payments, fined workers for taking leave, and often employed staff without an official contract.
C
hina-based labour groups have criticised Walt Disney Co over conditions at a small number of its local suppliers, highlighting issues such as low wages, high rates of injury and health risks from exposure to chemicals and dust. Disney, set to open a US$5.5 billion
theme park in mainland China on Thursday, said it took any violation of labour regulations “seriously” and that it would investigate any allegations against its suppliers. A report from Hong-Kong based advocacy group Students & Scholars Against Corporate Misbehaviour (SACOM) said some workers at eight
Disney suppliers it had investigated were forced to work long hours and paid wages below the minimum legally allowed. Injury levels were also high because of old machinery and a lack of training or protective equipment. In a separate report, China Labour Watch cited issues at two other factories, including low wages, exposure to chemicals and ineffective audits of working conditions by clients. A Disney spokeswoman said in emailed comments that the firm takes “seriously claims of labour standards
Shanghai’s Disney park during the latest test with visitors
violations against the independent facilities producing Disney-branded products”. “It is our practice to thoroughly investigate those allegations and assist facilities in remediation efforts and comply with local regulations.” Disney is not the first global name to come be criticised for worker conditions in China: iPhone maker Apple Inc has been singled out on several occasions over supplier issues in the country. Both SACOM and China Labour Watch pointed out their investigations, which involved working undercover at the factories, had only covered a fraction of suppliers to Disney, which raked in US$52.5 billion last year worldwide, including US$4.5 billion from consumer products. SACOM said it has found that the supplier companies withheld full overtime payments, fined workers for taking leave, and often employed staff without an official contract, which it said was a “breach of law”. The group also criticised Disney for lax oversight of the supplier factories and for third-party inspections being flagged in advance. The factories made products such as branded bags, hair clips and mugs. “Knowing the time and subject of the audit, the factories were able to hide things in advance, and the genuine labour conditions could not be uncovered,” SACOM said. Disney is making a big bet on China with its Shanghai park, its first in mainland China, and already contends with challenges from popular local cartoons to a sometimes hostile reception from Chinese business rivals and state media. Reuters
Football
Stimuli
Natural gas
Bayern eyes Asia growth with office in China
Beijing moves to halt Gazprom expects mainland’s slowing private investment consumption to double
Bundesliga champions Bayern Munich said yesterday they would open an office in China, their second such setup abroad, in a bid to tap into the massive Asian market. TheGermangiants,thefirstclubtowinfourback-to-back Bundesliga titles, will open their office in Shanghai on September 1, with six employees led by Rouven Kasper, who has a decade’s experience in sports marketing. “We will do everything to expand the previously decided direction on site, and thereby bring about the internationalisation of the club in Asia,” said Kasper in a statement. Bayern opened their first overseas office in April 2014 in New York. But beyond looking at the Americas for growth, the Bundesliga is now also seeking to tap into the Asian market. China is showing an insatiable appetite for football, as the country is seeking to raise its game to a level commensurate with its growing economic and military might. Clubs, players, coaches, media assets and high-profile sponsorships have been eagerly snapped up by Chinese teams and investors, with Italy’s Inter Milan last week becoming the most prestigious club to come under Chinese ownership. AFP
China will take targeted measures to counter the slowdown in private investment, the top economic planner said yesterday, including reducing fees and relaxing market access. The economic planner’s remarks follow a drop in private investment growth data, which rose 3.9 per cent year on year in the first five months, slowing from a 5.2 per cent rise in the January-April period. Poor implementation of government policies; high operational costs; house rent and taxes; and pressure from the de-capacity drive have been blamed for the falloff, according to Li Pumin, spokesperson for the National Development and Reform Commission. To help reverse the trend, the government must take strong measures, Li said. “We should make all-out efforts to promote innovation and entrepreneurship, and encourage private enterprises to start new businesses and explore investment opportunities,” Li said. He also encouraged private firms to make good use of the opportunities afforded by mixed ownership reform and the public-private partnership (PPP) push. Private investment accounted for 62 per cent of all investment in the first five months, data from National Bureau of Statistics data showed. Xinhua
Russia’s top gas producer Gazprom expects China’s gas consumption to more than double, deputy CEO Alexander Medvedev said yesterday, suggesting the company is still counting on robust growth in demand in China even as the economy slows. As part of Russia’s strategic shift eastwards prompted by rows with the West, Gazprom will supply China with gas via the Power of Siberia pipeline to be built in eastern Russia, raising volumes gradually to make China one of the biggest customers for Russian gas. Gazprom’s officials said yesterday they still aimed to start those supplies in 2019. China has pledged to reduce its coal dependence, a major source of air pollution and greenhouse gas emissions, and aims to raise gas consumption to 360 billion cubic metres by 2020 from 193.2 bcm in 2015. Sources close to Gazprom told Reuters in January that Russia is likely to scale back the volume of gas it plans to ship to China later this decade, due to the dive in global energy prices and uncertainty hanging over the Chinese economy. “Gas consumption (in China) will double and rise further,” Medvedev told reporters, without giving a timeframe. Reuters