Macau Business Daily July 4, 2016 by Business Daily

CCAC finishes investigation into Iec Long Firecracker Factory land swap Investigation Page 2

Monday, July 4 2016 Year V Nr. 1078 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming

Macau Legend plans US$222 million resort in Portugal while its Chief Financial Officer resigns Page 4

Legislation

SAR has no legal outline or framework for maritime related issues Page 2

www.macaubusinessdaily.com

Infrastructure

Downward pressure

Highest bid for Pac On construction tender at MOP317 mln

China’s manufacturing sector posted a slight drop in June Page 8

Page 2

Private poll

Mainland CEOs rely on innovation to spur growth Page 8

Gov’t: US Human Traffic report “not true”

Circling sharks

Human Rights Local Secretary for Security disagrees with US State Department report on human trafficking in the SAR, which ranks the city as Tier 2 due to significant numbers of trafficking victims and calls it a place of transit and a destination for sex trafficking. Page 4

June gaming revenues fall 8.5 pct y-o-y Gaming Analysts are divided on whether gross gaming revenue will pick up in the second half of the year, with June values seen as ‘slightly better’ than the 11 per cent decline predicted. Wells Fargo predicts July will decline between 8 and 10 per cent and Bernstein banks on a turnaround dependent on improvements in transportation and infrastructure as well as new resort openings. Page 5

Crime

Ten suspects have been arrested following a bust on a loan sharking ring that targeted casino workers. The group has been in operation for no less than five years accumulating an estimated MOP4 million, with at least 120 victims involved. Leading the loan sharks was a local female resident, joined by four other females and five males aged between 20 and 50 originating from Mainland China and the SAR. Page 3

The silver screen

Increasing competition in the entertainment industry is causing Cineteatro Macau to think strategically in order to stay relevant in an ever-shifting landscape. By diversifying offerings and studying the market for opportunities in daytime showings and concert screenings, the cinema plans for the show to go on, the theatre’s management tells Business Daily in an exclusive interview.

HK Hang Seng Index June 30, 2016

20,794.37 +358.25 (+1.75%) Worst Performers

China Overseas Land &

+6.29%

CNOOC Ltd

+2.89%

Link REIT

China Resources Land Ltd

+4.87%

Li & Fung Ltd

+2.75%

CLP Holdings Ltd

Power Assets Holdings Ltd

+3.57%

Galaxy Entertainment Group

+2.68%

Want Want China Holdings

China Mengniu Dairy Co Ltd

+3.37%

Sun Hung Kai Properties Ltd

+2.59%

Lenovo Group Ltd

AIA Group Ltd

+3.23%

Sands China Ltd

+2.57%

China Merchants Holdings

Hengan International Group

+0.31%

Wharf Holdings Ltd/The

+0.32%

Hong Kong Exchanges and

+0.64%

+0.21%

Tingyi Cayman Islands

+0.69%

+0.24%

Hang Seng Bank Ltd

+0.76%

-2.13% -0.32% +0.00%

28° 30° 27° 31° 26° 31° 28° 32° 28° 33° Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Cinema Pages 6 and 7

2 Business Daily Monday, July 4 2016

Macau Money

Cash handouts begin

The local government will start distributing its annual cash handouts to all permanent and non-permanent residents this month, according to a release by the Financial Services Bureau (DSF). The amounts of MOP9,000 (US$1,125) for permanent residents and MOP5,400 for non-permanent residents will cost public coffers a total of MOP5.946 billion. The scheme will include 685,582 residents and those holding resident cards as of December 31 of 2015, with payments being

made by bank transfer and cheques mailed through the post. Between July 4 and 6, cash handouts will be provided to residents already receiving retirement or disability pensions, with distribution made according to birth date from July 11 to September 16. Residents outside the territory are eligible for the scheme as long as they can prove their inability to renew their resident cards. Any requests for re-issue of the cash handout will be received between August 1 and October 5, according to the DSF release.

Investigation

CCAC to release report on Iec Long next Wednesday Joanne Kuai joannekuai@macaubusinessdaily.com

he Commission Against Corruption (CCAC) has stated that it has finished the investigation into the alleged land swap case involving Iec Long Firecracker Factory. The graft watchdog said that following the confirmation of additional materials, the report will be released on July 13.

This comes after a report by local media outlet ‘All About Macau’ revealed that the government is still in possession of six land plot debts covering a total of 30 hectares, which equates to an area as large as 36 standard football pitches, the local Chinese monthly newspaper reported. The report revealed that the government’s land exchange deal in 2001 for the Iec Long Firecracker Factory heritage site in old Taipa, had involved an area comprising 15.2

Legislation

Local maritime law to be drafted The deputy vice president of the Legal Affairs Bureau, Cheong Han has stated that Macau has no legal outline in regards to maritime issues, and that there are no principal guidelines or framework for this area. Mr. Cheong revealed that the SAR government has founded a taskforce to study the legislation of maritime related laws, and that members of the taskforce include staff from the Legal Affairs Bureau and the Customs department, as well as other relevant departments. He also added that the national maritime department has held seminars on maritime legislation issues, and that the local authorities wish to enhance communication with their peers in Mainland China and surrounding areas in order to learn from their experience in drafting

relevant laws. The central government granted Macau sovereignty over an 85-square-kilometer nautical area off the region’s coast last year. Under the new rules, the parcel of land connecting the northern checkpoint and Zhuhai falls under the administrative sovereignty of local authorities. Furthermore, part of the Canal dos Patos, a waterway separating the mainland from the north of the Macau Peninsula, will also come under local control. The administrable water area stretches down part of the waterway lying to the west of Macau Peninsula’s inner harbor, all the way along the coast of Taipa and Coloane before turning eastwards to cover a large portion of the sea off the region’s eastern coast. J.K.

hectares. However, the land debt generated from the deal is to date still unresolved, with 133,710 square meters still owed to the landholders. The newspaper cited an instruction (No. 87/2006) issued by the thenSecretary for Transport and Public Works, which revealed that the government had signed a letter of commitment in January 2001 with the landholder of the Iec Long Firecracker Factory. The landholder was a company headed by real estate mogul Sio Tak Hong, the founding chairman of the Macau Jiangmen Association. The deal saw the government agree to grant the company an equallysized land plot along the Baía de Nossa Senhora da Esperança near the Taipa Houses-Museum, in exchange for the firecracker factory area, in order to build a theme park. Creditors of the mentioned land debt

are also believed to include Shun Tak Holdings Limited, led by Pansy Ho. It is reported that Ms. Ho purchased the land title comprising 99,000 square meters from Sio Tak Hong in 2002. However, the land exchange plan was then stranded due to the government’s commitment to conservation of the wetlands in the Baía de Nossa Senhora da Esperança area. The report further suggested that Shun Tak Holdings later successfully exchanged its plot of land with the government, for an 18,363 square meter land plot in a prime location in downtown Macau, which was then used to build the Mandarin Oriental Hotel and the One Central Residences. Chief Executive Fernando Chui Sai On promised the public last year in August that: “the government would explain to the public the land exchange issues involving Iec Long Firecraker Factory, after a thorough investigation carried out by the Secretary for Transport and Public Works, Mr. Raimundo do Rosário.” The Secretary’s office most recently referred the case to the CCAC.

Former Iec Long Firecracker Factory

Infrastructure

Highest bid for Pac On Gov’t Building MOP317 mln Health

Fighting germs Local antibiotic sellers must now provide declarations of sales and use. The local Health Bureau will start demanding the territory’s pharmacies and other health facilities to provide declarations every three months detailing the quantities and types of antibiotics sold. The measure came into effect yesterday and aims to ensure the correct use of antibiotics and to reduce bacterial resistance to their effects, according to a Health Bureau release.

Any entity that provides antibiotics will now be required to submit a mandatory report to the Health Bureau every three months with information on the sale, consumption and inventory of oral and injectable antibiotics - to be held by the government for two years. These requirements will be applicable to hospitals, health centers, private clinics, community pharmacies, import and export firms, and medication bulk sales companies. The government decision is part of the 2016 Global Action for Fighting Bacterial Resistance by the World Health Organization (WHO), which aims to improve awareness and understanding of antimicrobial resistance and optimisation of the use of antimicrobial agents. N.M.

A total of 15 tenders have been submitted for the design and construction work for the Government Multifunction Building to be built on Pac On plot O1. All of the submitted bids have been accepted, according to a statement issued by the Infrastructure Development Office (GDI) last week. The GDI revealed that the bidding

amount ranged from MOP182 million (US$22.78 million) to MOP317 million, with the number of proposed construction days ranging from 398 to 445 working days. The reclaimed land plot O1 in Pac On, Taipa, occupies an area of 4,392 square meters. According to the GDI, the government building to be constructed is intended to be around 50 meters high. The ground floor and second floor will be used as workshops and office areas, with the third and fourth floors destined for parking lot space. The fifth floor and up will be warehouse space, including a 25,000 square meter area for storage.

Representatives of the GDI open proposals for the project

Business Daily Monday, July 4 2016 3

Macau

Crime

Police bust loan shark group targeting casino workers Ten suspects have been arrested. The police say the case is still under investigation and won’t rule out the possibility that more suspects will be caught. Joanne Kuai joannekuai@macaubusinessdaily.com

he police have busted a loan sharking group that was specifically targeting casino workers, mainly dealers. Ten suspects have been arrested so far. The police say the group has been running for no less than five years and there have been at least 120 victims. The amount of money involved in the case is around MOP4 million (US$500,000). The leader of the group is a female Macau resident, surnamed Ng, who claimed to be unemployed. The other five males and four females are from Macau and Mainland China, aged between 20 and 50, who also claimed to be unemployed, or working as dealers or construction workers. The police say the group allocated jobs in a very organized way, with some in charge of looking for customers, some in charge of receiving the clients and some accompanying the customers to gamble. The loan sharks would keep the employee cards of the clients and if the clients couldn’t repay their debt, they would go to the gambling tables that they were working at to cause

Casino-related crime on the rise

Data released by the Secretariat for Security shows that in the first three months of the year, the number of illegal detainment cases amounted to 89, a 33 per cent increase compared to the same period last year. Loan sharking cases totaled 106 in the first quarter, a 56 per cent increase year-on-year. The police said that the majority of the victims and suspects were not Macau residents. The reason for the increase in the number of crime cases was mainly due to the

disturbances. The ten individuals arrested are suspected of committing organized crime, loan sharking, illegally acquiring documents, forgery and other crimes. The case has been handed over to the Public Prosecutors Office.

Target casino workers

The police said that they received a tip-off in February of this year that a loan sharking group, consisting of both Macau residents and individuals from Mainland China, had been targeting local casino workers, especially dealers. After some preliminary investigations, the police found that the group had been operating since 2011 and had locked down on several targets. The members took on different tasks, such as looking for targets, taking care of clients, accounting and chasing up debts. The group would keep the debtor’s employee card, bank-book and ID card. Initially the loan sharks charged ten per cent of the loan as interest. They would then accompany the debtor to gamble. Regardless of the result, a further ten per cent of the bet was charged as interest. If the debtor was not able to repay the loan, every

efforts by police in tackling these types of crimes, and the initiative on their behalf to investigate and open cases. The police said that most of these crimes took place in casinos, and stressed that these two types of cases have not created any impact on overall public security. The police added that they have not yet seen any irregular behavior of triads caused by the current adjustment period of the local gaming industry, and also stated that declining gaming revenues have not caused any impact on local security.

ten days an additional ten per cent interest was added to the amount. The debt could be repaid in cash or through a back transfer. If the debtor failed to provide payment, the group would arrange for at least four people to go to the gambling table that the debtor was working at to ask for the debt. The police said that after gathering all the information, on June 29, around 50 officers were dispatched

to the Central District, Northern District and residential units in Taipa to arrest the ten suspects. Among the evidence confiscated were computers, bankcards, booklets, debtors’ ID cards, and other materials. The police identified at least 120 debtors and the amount involved has been estimated to be at around MOP4 million. The police say most of the debtors are casino workers and they have successfully contacted 24 of them so far. The case is still under investigation and the police say that they are not ruling out the possibility that more individuals will be apprehended.

4 Business Daily Monday, July 4 2016

Macau Crime US State Department report claims a prevalence of human sex trafficking in Macau

Secretary for Security: US Human Trafficking report “not true” The Macau Secretary for Security disagrees with a US Department of State report on human trafficking in the SAR. Nelson Moura nelson.moura@macaubusinessdaily.com

he recent ‘Trafficking in Persons Report’ released by the State Department of the United States contains information that is “not true” regarding the status of human trafficking in the SAR, according to a release by the Macau Secretary for Security. This year’s Department of State report placed the SAR within the second tier of countries whose governments ‘do not fully meet the [Traffic Victims Protection Act] minimum standards but are making significant efforts to meet those standards.’ Tier 2 countries, according to the report, have a significant number of trafficking victims; have failed to improve or increase efforts to fight human trafficking since last year; or

have made a commitment to meet the minimum standards from last year. This is the fourth year that Macau has been considered as a Tier 2 country by the United States government body. In a release by the local Secretary for Security, the local government’s

position is that there was a ‘bad interpretation’ and ‘unfounded allegations regarding the situation in Macau,’ the release stated.

Destination and transit territory

The human trafficking report claims

Gaming

Paying up

to hotels, adding that both casinos had failed to prove that this was the case. ‘The only complimentary services excluded from the tax are those relating to communications and laundry services [...] all others are

taxable,’ the TUI release stated. The Venetian had argued that a limousine service included in the tax documents was provided by another company, with no profit for the hotel, while MGM made a similar argument related to transport services for guests. The TUI disagreed with both arguments. The court stated that the hotels: ‘haven’t managed to prove their arguments,’ and ‘that they haven’t charged any amount to their clients in relation to certain services and goods.’ N.M.

disagreements with the board of directors. The same filing reveals that after July 1, the positions previously held by Mr Chan were assigned to Laurence Yuen Chin Yau, former joint company secretary at Shanghai Jin Jiang International Hotels (Group) Company Limited, and former chief financial officer of Shanghai Golden Bund Real Estate Co., Ltd, a subsidiary of Bund Center Investment Ltd.

peninsula in the Sado river estuary, where a casino is located, while targeting the European tourist market. Macau Legend registered a first quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of HK$35.8 million (US$4.6 million/MOP36.87 million), representing a decrease of 52.2 per cent when compared to the first quarter of 2015, Business Daily reported previously. N.M.

Court of Final Appeal reaffirms decision for MGM Grand Paradise and Venetian to pay MOP20 million in tourism taxes. Despite an appeal, the decision for MGM Grand Paradise and integrated resort The Venetian to pay more than MOP20 million (US$2.5 million) in tourism taxes will go forward, according to a Court of Final Appeal (TUI) release. The gaming operators appealed the decision by the Court of Second Instance (TSI), arguing that the tax wasn’t applicable to them, however the TUI maintained the TSI ruling. The Venetian will have to pay a sum of MOP14 million in tourism taxes relating to operations in 2014, while MGM Grand Paradise will have to pay MOP6.7 million in taxes on its operations in 2009. In its release, the TUI reiterated that the tourism tax law is only not applicable to complementary services that don’t provide revenues

Gaming

Macau Legend Executive Vice President resigns The local gaming operator is also planning the construction of a US$222 million resort in the Portuguese city of Setubal. The Macau Legend Development Limited (Macau Legend) Executive Vice President, Chan Kin Man, has resigned from his position, a company filing to the Hong Stock Exchange on June 30 stated. Chan Kin Man was also the Chief Financial Officer and Company Secretary at Macau Legend. Macau Legend stated that Mr Chan resigned in order to pursue “other career aspirations” and not to cause

Portugal deals

Macau Legend’s CEO David Chow is allegedly planning the construction of a US$222 million (MOP1.7 billion) resort in the Portuguese city of Setubal, according to TDM Radio. The company will sign an agreement with the city’s government for the construction of a hotel, marina, residences and commercial spaces in the coastal town. The focus of the project will be to connect the city with the Troia

the MSAR is: ‘primarily a destination and, to a much lesser extent, a transit territory for women and children subjected to sex trafficking and forced labor, with victims being attracted with false advertisements for jobs, including in casinos in Macau, but upon arrival are forced into prostitution’. The report further claims that: ‘traffickers sometimes confine victims in massage parlors and illegal brothels, where they are closely monitored, threatened with violence, forced to work long hours, and have their identity documents confiscated,’. The sexual exploitation of children in the gambling world within the territory was also considered troubling in the study, with the report criticizing the government for not reporting any investigations or prosecutions related to child sex tourism ‘despite the majority (four of six) of identified trafficking victims being child sex trafficking victims’. The report considers that the local government hasn’t met the minimum standards in fighting the issue, but that it has made ‘significant efforts to do so,’ mentioning measures such as creating communication mechanisms for hotel employees to report potential trafficking situations directly to the police, and the allocation of MOP3.2 million (US$400,000) for human trafficking prevention. The report also recommends that the MSAR government implement measures such as ‘a minimum wage for foreign domestic workers’ or surveys of the migrant labour population to identify its vulnerabilities to trafficking.

Different perceptions

‘The government does not accept the report, in regards to the unfounded comments about Macau, mentioning the fight against human trafficking, labour exploitation, sex tourism involving children and illicit activities practiced by its employees,’ the Secretary for Security stated in a press release. The release also pointed to recent statistics related to human trafficking, stating numbers have ‘decreased regularly, keeping themselves low or almost zero’, thanks to government collaboration with civic associations and the tourism industry to fight the issue. The creation of a Commission to Accompany Measures of Human Traffic Prevention (CAMDTP) was also mentioned by the government as a significant measure for achieving positive results in regards to this issue.

Business Daily Monday, July 4 2016 5

Macau

Gaming Lowest monthly revenue figures since September 2010

June gross gaming revenues fall 8.5 pct y-o-y Analysts see decline of gross gaming revenue in June as a ‘slight improvement’, while predicting a decrease in July between 8 and 10 per cent. Nelson Moura nelson.moura@macaubusinessdaily.com

acau’s gross gaming revenue decreased by 8.5 per cent in June year-on-year, according to the latest Gaming Inspection and Co-ordination Bureau (DICJ) data. In total, revenue decreased from MOP17.4 billion (US$21.7 billion) i n J u n e o f 2 0 15 , t o M O P 15 . 9 bi l l i o n i n J u n e thi s y ea r, th e lowest monthly value seen since September 2010. In a first quarter yearly comparison, the first three months of 2016 saw an 11.4 per cent decrease to MOP107.8 billion, according to the DICJ data. For analysts at both Bernstein and Wells Fargo, the revenue figures in June were ‘slightly better’ than their predictions that the decrease could follow the general 11 per cent decline in the first half of 2016. Bernstein analysts remain ‘positive’ that gross gaming revenues will pick up in the second half of the year due to ‘improvements in transportation infrastructure and the opening of large scale integrated resorts between 2015-2018’. Wells Fargo on the other hand, predicts that July will see a decline of between 8 and 10 per cent, a more negative outlook than the general consensus of a 5.8 per cent year-onyear decrease. In terms of average daily revenues, Bernstein reported an 11 per cent decrease in June month-to-month - to MOP593 million. However it also noted a strong end of the month for June, with the last four days seeing a 23 per cent increase from the rest of the month - to MOP595 million. Wells Fargo now expects a 5 per cent growth in average daily revenues in July to MOP550 million.

Lawrence Ho keeps bet on Studio City

Wells Fargo took note of a statement by CEO of Melco Crown Limited Entertainment (MPEL), Lawrence Ho to the press – that he is in “no rush” to buy out the 40 per cent stake in Studio City. Ho had previously stated his lack of satisfaction with Studio City’s first quarter profits being below expectations of US$195 million.

Government not very positive

A more negative outlook was expressed in a release by the Secretary for Economy and Finance Lionel Leong Vai Tac, where it was stated that the ‘gaming sector adjustment would persist for longer, with high probabilities that the gross gaming revenues reported in the second semester of the current year continue their negative growth.’ However information within the release left open the possibility that the degree of decline could slow for the rest of the year. The release also stated that in the first semester of the year, the mass market represented 53.1 per cent of total gaming revenue, a 10 per cent increase from last year. VIP gaming revenues dropped 17.3 per cent year-on-year for the month of June. Reflecting the views of Bernstein and Wells Fargo, the release by Secretary Lionel Leong stated that the opening of Wynn Palace in August and The Parisian in September would be ‘beneficial for the increase of attractions in the tourism market in Macau.’ In terms of contributions to the government budget, the first semester of this year saw an average monthly contribution of MOP18 million, with the government predicting the gaming sector would contribute a total of MOP200 billion, around MOP16.6 billion per month, by the end of 2016.

New properties to the rescue

Both analyst firms see the new openings by gaming operators in the second half of the year as being crucial for an improvement in the general economic outlook. Analysts at Bernstein see the Wynn Palace opening in early August as a ‘game changer’ for the company,

“We just need to do a better job at marketing ourselves and bundling offers – it’s not rocket science,” Ho told Barron’s Asia website in regards to Studio City missing its target in the gaming mass market and promoting nongaming activities. Ho also sees the Macau market as becoming “super competitive” between the six gaming operators in the future.

predicting that if the VIP sector improves faster than expected, Wynn will be in a privileged position to explore their rebound. Regarding the September opening of Las Vegas Sands’ Parisian property with its 3,000 new rooms, the analyst firm believes it will ‘do well with Chinese customers.’

China at risk

Wells Fargo considers China’s economic downturn a major risk factor for the future of the gaming sector in the territory.

‘GDP forecast erosion, loss of stock markets indexes, decline in real estate values, a decrease in consumer confidence and a decrease in disposable income,’ were all factors of the mainland economy that the analyst firm saw as having an effect on the number of visitors to the territory. Expansion of the smoking ban in casinos - with the elimination of smoking lounges - and an inadequate number of foreign labor visas were also considered as major factors in the economic downturn.

6 Business Daily Monday, July 4 2016

Macau Cinema

Cineteatro Macau continues to offer new services in a bid to stay competitive With increasing competition in the entertainment industry, Cineteatro Macau plans to launch an online ticketing system, and to offer elderly patrons 50 per cent discounts on movie tickets and to present screenings of live concerts, all in a bid to diversify the movie options for local audiences Francisco Lio, Deputy Director of the Macau Diocesan Social Communications Centre for Cineteatro Macau, told Business Daily in an exclusive interview. Annie Lao annie.lao@macaubusinessdaily.com Photos by Annie Lao

ow was Cineteatro Macau established? The Diocesan Social Communications Centre was established in 1975 by Sister Maria Pia Cantieri. The sister came to Macau on the invitation of D. Arquimínio Rodrigues da Costa - the Catholic Bishop of Macau at the time. In the past, the Centre mainly focused on public communication through radio, TV and movies. Later on, the

What types of movies were screened in the past? In the late 1970s, the major movies were about religion, arts and culture. The Cinema only had one to two movies on weekend mornings, offered at a low price – movies such as ‘Old Man and the Sea’ and ‘the Ten Commandments’.

In 1982, the cinema started operating as a 365-day commercial cinema. It started screening commercial movies, offering three to four sessions per day, with only one theatre at that time. Hollywood movies, Chinese movies and Hong Kong movies were the mainstream, especially due to the high volume of production of Hong Kong movies - with over 100 movies produced per year. In addition, western movies were frequently screened.

When did the theatre start screening more commercial movies?

How has Cineteatro Macau stayed competitive over the years?

sister decided that a movie theatre should be set up for local residents to be able to enjoy the cinema.

In the past, there were about eight to ten cinemas in Macau. But during the 90s, so many cinemas were closed, with only Cineteatro Macau and Cinema Alegria remaining open. Since the operating costs of the two small theatres in Cineteatro Macau were much lower than those of the big theatre, we used the small theatres to get through the recession period in the movie industry at the time. What is the top box office record so far? The highest box office record was for ‘Titanic’ in December 1997 - lasting for five months. The audience requested replays of the movie. It (Titanic) had a total of 230 sessions and the number of entries reached 21,000 – making it the longest movie screening in our history. Other popular movies were ‘Somewhere in Time’ and ‘E.T.’. Recently, the most popular movie was ‘You Are the Apple of My Eye’ from Taiwan in October 2010. However, the lowest recorded box office lasted only for a month with 28 sessions and 80 viewers. Do you see any major shift in the audiences coming to Cineteatro Macau? Our audience is mainly local residents. There has been no major change in the range of audience. Mostly young people come to the cinema to watch movies. Locals still like to go to a cinema within walking distance that is convenient for them.

“Regardless of how many competitors are here in the market, we are constantly finding ways to expand and grow in order to create a better movie watching experience for Macau audiences.’’ How are the movies selected? We select mainstream Hollywood commercial movies to screen. We have had partnerships with major film producers such as Walt Disney, 20th Century Fox, and Orange Sky Golden Harvest for many years. We prefer not to select movies that have too violent and sexual content. Also we try to select a wide variety of movies to screen for Macau audiences. What is the most controversial movie to be screened so far? ‘The Da Vinci Code’. We held a moviesharing seminar afterwards to let audiences share how they felt about the movie, and the Macau Diocesan Social Communications Centre also shared its perceptions on this movie as well.

Francisco Lio, Deputy Director of the Macau Diocesan Social Communications Centre for Cineteatro Macau

How does Cineteatro Macau deal with the low season? For example, one month before the Easter holidays we will experience low performance for about two to three weeks. So, in order to balance out the losses, those movie producers put all the mainstream movies to be screened in the high seasons, such

Business Daily Monday, July 4 2016 7

Macau as Christmas and New Year. The other three cinemas are screening similar movies such as ‘Batman’ and ‘Transformers’. Hollywood produces about 500 movies each year. The total number of movies from Hollywood screened in Macau is less than 200. Our cinema screens about 100 movies from Hong Kong, Hollywood and Taiwan each year. What is the revenue trend for the Cineteatro Macau? For the past three years, the revenue trend has been stable, with about two to three per cent growth each year. Does Cineteatro Macau intend to provide new offerings for its customers in the future? Regardless of how many competitors are here in the market, we are constantly finding ways to expand and grow in order to create a better movie watching experience for Macau audiences. Therefore, our online ticketing service will be launched by the end of this year. Why is Cineteatro Macau closed in the mornings? The cinema is not open until the afternoon. However, we want to launch a morning movie session for the elderly and offer them a 50 per cent discount on tickets to boost the amount of public coming to the cinema in the morning. We are planning to do it after successfully implementing the online ticketing because right now we don’t have enough human resources to do the ticket sales in advance at the counter. We know that the elderly don’t go to the cinema to see movies and thought it would be a good idea to offer them discounts by attracting them to watch movies in the morning. How has Cineteatro Macau tried to enhance the audience experience at the cinema? Theatre 2 was built in 1988 for adult audiences to enjoy high-quality

movies inside a quiet area. There was an intermission for 10 minutes in each movie so the audience could take a break at the mini bar next to the theatre. But since then we have found that overall, Macau residents prefer to watch the whole movie without any intermission, so we decided to close down the mini bar. Until now, eating is not allowed inside the theatre, as we want our audiences to have a clean and quiet area to enjoy watching movies.

“Our goal is to introduce more and different types of movies for Macau audiences to choose from.” Do you rent out your theatre venue to other organizations to hold events? Yes. In the past, most of the local schools did not have a large enough venue to hold events such as graduation ceremonies, so we would rent out Theatre 1 to them. How do you view locally-produced movies in the entertainment industry? From a business point of view,

Cineteatro Macau, originally named the Cinema da Diocese, is operated by the Macau Diocesan Social Communications Centre, located on the Rua de Santa Clara in Macau. It was established in June of 1982 with three theatres, the largest of which (Theatre 1) is located on the ground floor of the building, fitted with a stage and with a capacity of 693 seats. Two smaller theatres are located on the first and second floors

the locally-made movies have to compete with the commercial movies in the movie industry. We are planning to run a one-year course on movie production for local residents to learn how to make films from experienced filmmakers. We will invite international tutors here to teach them, but the timetable for this is not yet confirmed. And we are open to government support and partnership opportunities with any cultural and creative organizations. Has Cineteatro Macau seen any impact since the opening of the UAGalaxy Cinemas? Since the opening of the UA-Galaxy Cinemas, the cinema has seen a slight impact. But this hasn’t only been negative for us. It is good to have more cinemas established here so people can have more choices. Why doesn’t Cineteatro Macau provide a 24-hour service like the UA-Galaxy Cinemas do? We have found that local residents don’t usually go to the cinema after 11.30pm. But sometimes, we have late night movies from 11.30pm, especially in holiday seasons, for a few days. I think the UA-Galaxy Cinemas can offer 24-hour movies sessions because its targeted audience are tourists, which is different from us. What are the upcoming plans for Cineteatro Macau?

with respective capacities of 154 (Theatre 2) and 104 seats (Theatre 3). Theatre 3 was the first mini theatre to operate in Macau at the time of its establishment. The theatre first began screening 3D movies on 22 October 2011, becoming the first 3D cinema in Macau. Cineteatro Macau is currently one of four movie theatres in the city, including the Cinema Alegria, Macau Tower Theatre and UA-Galaxy Cinemas.

An additional new theatre (Theatre 4) will be built outside the Cineteatro Macau. It will target the screening of locally-made movies and nonmainstream movies focusing on subjects of culture and humanity. Right now, the cinema only offers a limited amount of non-mainstream movies. We want to have nonmainstream movies and commercial movies available at the same time in the cinema, so our audiences can have a more diverse selection of movies to choose from. Our goal is to introduce more and different types of movies for Macau audiences to enjoy.

5 months Length of screening for ‘Titanic’, with 230 sessions and 21,000 audience members

What is the most popular nonmainstream movie in Macau? ‘Din Tao: Leader of the Parade’. It is a Taiwanese movie, depicting a difficult son and father relationship. The movie conveys a message about family relationships and friendships in modern society. Are there other new features that Cineteatro Macau will implement to help it stay competitive? We previously held a test of the local market to judge the acceptability of recorded live concerts. We had three sessions of K-pop concerts screened in Theatre 2 and the sessions were all full. We also found that local young people liked it very much even though they were not where the concert was taking place. I was surprised to see they even brought their banners and LED lights to support the singers inside the cinema. When will concert screenings be made available? We need to have the right hardware, such as satellite reception to do so, but with the current technology, we can do it. A 3D World Cup screening can also be done here, but it all depends on the needs of the market in the city, so we are still doing market research on this before it can be launched into the market.

8 Business Daily Monday, July 4 2016

Greater China Official data

Factory activity stalls, more stimulus expected Companies shed jobs at a faster pace in June. Elias Glenn

rowth i n C h i n a ’ s manufacturing sector stalled in June, an official survey showed on Friday, adding to expectations that Beijing will have to roll out more stimulus soon to boost the sluggish economy. While output hit a 12-month high, nearly all other measures showed signs of weakening, suggesting a spring bounce in activity is fizzling. Export orders and inventories fell and factories shed workers at a faster rate. A similar survey showed activity in China’s services sector picked up in June, which if sustainable would indicate progress in the government’s bid to rebalance the economy. But strength in services is not expected to be strong enough to support growth if manufacturing continues to decline, and analysts are raising expectations of more government spending and policy easing by the central bank. The outlook for Chinese exporters, a major force in the manufacturing sector, has been clouded further by Britain’s vote last week to exit the European Union, which Premier Li Keqiang said “increased uncertainties in the global economy”. The Brexit vote and weaker economic growth globally have impacted exporters, China’s statistics bureau said in a statement with the data. The official Purchasing Managers’ Index (PMI) eased to 50.0 in June from 50.1 in May and right at the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters had predicted the reading would dip to 50.0, a four-month low. A private survey of manufacturers painted an even darker picture, showing activity shrank more than expected in June and for the 16th

month in a row. The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI), which focuses more on smaller to mid-sized firms, fell to 48.6 from May’s 49.2. In light of renewed weakness in the manufacturing sector and fresh risks posed by Brexit, analysts expect Beijing to take new measures to support growth, possibly as early as this month. “We believe the government will stimulate the economy by hastening infrastructure investment and urbanisation. The PBoC may also cut

interest rates or the reserve requirement ratio to boost business confidence,” ANZ said in a research note. Other China watchers agreed more stimulus is on its way. “We believe an overall easing bias will be maintained to counter the economic slowdown and mitigate the corporate debt burden,” said senior emerging market economist Zhou Hao at Commerzbank. “We maintain our view that the PBoC will cut policy rates by 25 basis points this month, and a few RRR cuts can be highly expected in the second half of this year as well,” he said, referring to reductions in banks’

reserve requirement ratio which would free up more money for lending.

three years - compared to a just 21 per cent worldwide, according to a report from global accounting firm KPMG, which gathered responses from 1,268 CEOs worldwide, including 129 from China. In addition, 92 per cent of China respondents believed it was important to include innovation in their business strategy, with 47 per cent placing innovation at the top of their personal agendas - compared to 23 per cent globally. “In a rapidly evolving and vibrant market like China, CEOs need to think about adapting their business models to ensure their products and services are attractive to a growing consumer market,” says Honson To, co-chairman of KPMG China. The survey showed that about h a l f o f th e Ch i n a r e s p o n d e n t s viewed new products as the primary source of growth over the next three years. In addition, China’s CEOs identify “ n e w p r o d u c t d ev e l o p m e n t, ” “increasing data analysis capabilities,” a n d t h e “ I n t e r n e t o f T h i n g s, machine-to-machine technology, Industrial Internet or other aspects of technology” as the top three focus areas for further investment in the next three years. Meanwhile, about two-thirds of China CEOs regard China as the market with the greatest potential for growth, followed by ASEAN and the United States. Fifty-three per cent said they would pursue new partnerships and alliances to accelerate the execution of business strategy - a significantly higher percentage than their peers in other countries. China CEOs said emerging technology and strategic risks were the key issues

they were most concerned about, while worries over whether or not their products or services will be relevant three years from now also weigh heavily. Finding the right talent in the strategic areas of the Internet; data and analytics; digital; innovation; and corporate social responsibility is another pressing issue.

Job shedding intensifies

Both the official and private factory surveys showed companies shed jobs at a faster pace in June, which could weigh on consumer confidence and spending in coming months. Cost cutting was cited in the Caixin survey, but job losses also could be rising as the government has pledged broad capacity cuts across a range of industries. Both surveys showed further strains on smaller companies, a sign that the government will have to continue to lean more on big state firms to generate

Key Points Factory surveys suggest economy losing steam after spring bounce Official manufacturing PMI shows no growth in June Services show strength but may not offset weakness elsewhere Fallout from Brexit could put fresh pressure on exporters Analysts expect more government spending, rate cuts

KPMG survey

Mainland’s CEOs prioritise innovation to drive growth A poll showed that about half of the respondents viewed new products as the primary source of growth over the next three years. C E O s o f Chi n a-h ea d q u a rt e r e d companies are prioritizing innovation to drive growth and have highlighted it as one of their top priorities, a recent

report showed. Almost half of the China respondents placed “fostering innovation” as one of three strategic priorities for the next

“In a rapidly evolving and vibrant market like China, CEOs need to think about adapting their business models to ensure their products and services are attractive to a growing consumer market” Honson To, co-chairman of KPMG China The survey results underscored C h i n a’ s t r a n s i t i o n f r o m a n investment-intensive, export-led model of growth to one driven by consumption and innovation. The findings are also consistent with the 13th Five-Year Plan, which highlighted innovation as a key growth tenet. Xinhua

Business Daily Monday, July 4 2016 9

Greater China In Brief growth even as analysts warn of the risks of relying too much and too long on debt-fuelled stimulus. The Brexit vote has led at least two investment banks to lower their forecasts for China’s 2016 growth. Nomura trimmed its forecast to 6.0 per cent from 6.2 per cent and Bank of America Merrill Lynch cut its view to 6.4 per cent from 6.6 per cent. A sub-index of the official survey for the construction industry rose significantly as the government goes on an infrastructure spending free, while financial services and property sectors contracted as those markets begin to cool following strong activity earlier in the year. China will release June economic data in coming weeks and second-quarter GDP on July 15. Reuters

Customs

Beijing amends inspection law

Real estate

New home price increasing speed slows Year-on-year, new home prices in China were up 11.18 per cent last month. The cost of Chinese new homes rose at a slower rate in June from the previous month, figures showed Friday, as measures to tame prices in the world’s second-largest economy took hold. The average price for new houses in 100 major cities increased 1.32 per cent month-on-month in June to 11,816 yuan (US$1,776) per square metre, the China Index Academy (CIA) said in a statement, down from April’s 1.7 per cent. “The effect of tightening policies in some key cities gradually kicked in and transactions in the cities further fell in June,” said CIA, the research unit of real estate website operator Soufun. The once red-hot property market is a key driver of Chinese growth but has had a spell in the doldrums more recently, with new buyers priced out despite government borrowing restrictions reining in soaring costs. Beijing has introduced several policies to try and stabilise the real estate sector as economic growth weakened,

including lowering minimum downpayment requirements, cutting transaction taxes and providing incentives for migrant workers to buy homes. The policy loosening led prices in some big cities, including Beijing and Shanghai, to spike this year as pent-up demand was unleashed, but at the same time the country has a huge inventory of unsold new homes, mostly in thirdand fourth-tier cities. The government has vowed to take “specialised” measures to tackle diverging trends in different regions. Hefei, capital of the eastern province of Anhui and where property price rises have been among the fastest, has raised downpayment requirements on second homes and tightened mortgage policies from this month, Chinese media have reported. Year-on-year, new home prices in China were up 11.18 per cent last month, compared with 10.34 per cent in May, the CIA said. Entrenched by a slowing property market, a sluggish manufacturing sector and mounting debt, China’s economy grew only 6.9 per cent in 2015, its weakest rate in a quarter of a century, and concerns about its slowdown have roiled global markets. AFP

China unveiled a decision to amend regulations on customs inspections. The amendment includes measures to facilitate inspections, optimize inspection procedures and punish violations, according to the decision by the State Council posted on the official website of the Chinese government. Customs inspections are intended to supervise the authenticity and legitimacy of exports and imports after customs clearance. China first unveiled regulations on customs inspections in 1997. The amendment showed that customs authorities have the right to collect goods from industry associations, government organs and companies, as well as information on foreign trade activities from associations. Law making

Government approves first asset appraisal law China’s legislators have approved the nation’s first asset appraisal laws in an attempt to standardise an unruly and fragmented industry. The draft amendments were passed by 138 votes to 5, with 14 abstentions, Zhong Xuequan, spokesman for the National People’s Congress (NPC), China’s parliament, told a media briefing on Saturday. Certified appraisers who have passed national exams and those who have experience in asset evaluation will qualify as appraisers, the official Xinhua news agency reported. For state-owned or public interest assets, appraisal agencies should seek opinion from at least two certified appraisers, according to the new law. Energy sector

Capital markets

Green investment strong in first quarter Despite no IPOs occurring in Q1 2016 in China’s renewable energy and clean-tech industry. China’s renewable energy and clean technology industry saw strong investment momentum in the first quarter of 2016 as the government ramped up efforts to develop a green economy, according to a new report from PwC. A total of 31 private equity or venture capital investments were made in the period, up 106.7 per cent year on year. The disclosed investment sum reached US$657 million, increasing 425 per cent compared with Q1 2015, said the international accounting firm. Twenty of the investments were made in the environmental protection sub-sector. The majority were made in either expanding or mature businesses. The National Development and Reform Commission issued Guidelines

for Issuing Green Bonds in January, clarifying that green bonds will provide support primarily in 12 areas including energy conservation and emission reduction, as well as green urbanization. “Attention should be paid to the fact that China’s renewable and clean-tech investment is occurring at earlier stages. In Q1 2016, while most of China’s renewable and cleantech investments took place in the A and B rounds, activity in the Pre-A and angel rounds, though still minor, reflected investor optimism in these early investment rounds,” said Lisa Wang, PwC China power and utilities partner. As a consequence of fluctuations in China’s capital markets, no IPOs occurred in Q1 2016 in China’s

renewable energy and clean-tech industry. However, enterprises from various sub-sectors are lining up to list, and around a dozen have begun the pre-disclosure process, according to the report.

‘It said 46 renewable energy and clean-tech enterprises were listed on China’s over-the-counter exchange for small firms’ It said 46 renewable energy and clean-tech enterprises were listed on China’s over-the-counter exchange for small firms, the National Equities Exchange and Quotations (NEEQ), in Q1 2016. These firms selected the NEEQ because they are not qualified for IPOs due to their limited scale. Meanwhile, as the NEEQ acts as a valuable source for funding for renewable energy and clean-tech enterprises, it is popular with medium-and-small-sized firms in this sector, said Gavin Chui, PwC China energy, utilities and mining industry leader. “With the rise of the slicing scheme by the NEEQ, as well as other continuous improvements, we believe that an increasing number of promising renewable energy and clean-tech enterprises will list on the NEEQ,” Chui added. Xinhua

Saudi Arabia keen to expand mainland’s investments The Kingdom wants to expand its investments in China’s energy industry, its Energy Minister Khalid al-Falih said late on Friday, part of the world’s top oil exporter’s efforts to boost cooperation with a top customer. Falih’s comments were made in an emailed statement after discussions with China’s Vice Premier Zhang Gaoli and other officials in Beijing during a G20 ministerial meeting. “Saudi Arabia is very keen to elevate their partnership in the energy sector to the highest level,” he was quoted as saying in the statement. M&A

State Grid to control Brazil’s CPFL CPFL Energia SA, Brazil’s largest power distributor, said on Friday that the world’s largest utility, China’s State Grid International Development Ltd, will buy a controlling stake in the company for 5.85 billion reais (US$1.8 billion). Camargo Correa SA, a privately held Brazilian engineering, real estate, textile and shipbuilding company, is selling a 23 per cent stake, CPFL said in a securities filing. State Grid will pay 25 reais for each of Camargo’s 234 million CPFL shares. The deal is subject to approval by Brazilian antitrust regulators, Camargo Correa said in a letter included in the filing.

10 Business Daily Monday, July 4 2016

Greater China Overcapacity

Goldman says national iron imports to shrink Steel consumption in China is declining for the first time in a generation. Jasmine Ng

oldman Sachs Group Inc. is forecasting that steel consumption in China will shrink again from next year after a brief respite in 2016, and the nation’s iron ore imports will eventually start to decline too as policy makers shift the economy away from investment. Steel demand will contract 2 per cent in 2017 and a further 2 per cent in 2018 following a 1 per cent expansion this year, Goldman said in a report received on Friday that summarized results of new modelling. China’s

steel consumption may end up dropping as much as 20 per cent, according the bank. Asia’s top economy accounts for about half of the world’s steel production, and the prospect of weakening demand for the alloy, as well as lower imports of iron ore, represents a challenge for miners including Rio Tinto Group, BHP Billiton Ltd. and Vale SA. While the biggest low-cost producers have managed in recent years to expand seaborne sales into China as local mine output was displaced, Goldman’s outlook raises the prospect of a shrinking market.

“Demand for imported iron ore has benefited from the closure of domestic mines and the strength of Chinese steel exports earlier this year,” analysts Hui Shan, Amber Cai and Christian Lelong wrote in the report dated June 30. “But neither of those trends is sustainable and falling steel consumption will eventually lead to a decline in iron ore imports,” it said.

Ore price

Ore with 62 per cent content delivered to Qingdao was at US$54.33 a dry ton on Friday, according to Metal Bulletin Ltd. Prices have gained 25 per cent in 2016 after dropping for three years. Goldman Sachs left its long-run forecast unchanged at US$35 a ton.

‘The bank forecasts China would import 971 million tons of iron ore this year’

China imported a record 953 million tons of iron ore in 2015, up from 933 million tons in 2014 and 619 million tons in 2010, according to customs figures. In a separate June 15 note, Goldman forecast China would import 971 million tons this year, then see shipments little changed at 975 million tons in 2017, before dropping through 2020, when they would total 904 million tons. Australia’s government has signalled it expects China’s iron ore imports will plateau from next year as steel output declines, while the country’s top miners have said they see steel production still rising. Overseas iron ore purchases may climb to 1.03 billion tons in 2017 and hold at about that level over the next five years, according to the Department of Industry, Innovation & Science.

Rio’s view

Rio, Australia’s largest exporter, has said it expects China to be churning out about 1 billion tons of steel by 2030, while BHP, the second-biggest, projects that output will peak at between 935 million and 985 million tons in the mid-2020s. Last year, China produced 804 million tons of steel, official data show. It takes about 1.6 tons of iron ore to make 1 ton of steel. Steel consumption in China is declining for the first time in a generation as growth slows and policy makers seek to steer the economy toward consumption. Faced with declining local sales, Chinese mills have shipped record volumes overseas, helping to prop up purchases of seaborne ore. This year’s uptick in steel demand came after China added stimulus. “The on-going growth deceleration and rebalancing away from the old economy implies a secular downward trend in steel demand,” the bank said in the latest report. “At the same time, economic activity and steel consumption respond to periodical policy shifts that generate credit impulses and mini-cycles.” Bloomberg News

Copy-cat products

Alibaba launches new anti-fake drive At an intellectual property conference the company unveiled a new online system to help track and remove fakes. John Ruwitch

Chinese e-commerce giant Alibaba Group Holding Ltd on Friday went public with a new drive to display its determination to stamp out fake goods, urging brands to help its antipiracy campaign rather than trade rebukes on the issue. The U.S.-listed online shopping powerhouse has been dogged by accusations its sites are flooded with copy-cat products, culminating with its ejection this year from a U.S.based anti-counterfeiting alliance only weeks after being admitted. At an intellectual property conference it’s hosting in Hangzhou, Alibaba on Friday unveiled a new online system to help track and remove fakes as its top anti-piracy official called for more cooperation with makers of branded goods. “In the face of such a complex problem we can’t be complaining about each other, or criticising each other...We have to have everybody involved and work together to do it,” said Jessie Zheng, Alibaba’s chief platform governance officer, speaking at its conference on intellectual property (IP) protection. “In this battle it’s you and me,” said Zheng. “It can’t be you doing the work and me watching, or me doing the work and you talking. Our only

choice is to join forces.” Alibaba took an embarrassing hit in its fight against fakes earlier this year when it was forced out of the Washington-based International AntiCounterfeiting Coalition. This came after a mutiny by members

“We have to have everybody involved and work together to do it” Jessie Zheng, Alibaba’s chief platform governance officer

of the group, including U.S. luxury goods maker Michael Kors Holdings Inc and French group Kering SA’s Gucci brand, against the Chinese firm. Friday’s conference and the launch of the new online system for controlling fakes come about two months before Alibaba’s hometown of Hangzhou hosts the annual summit of the G20. Several state leaders, including U.S. President Barack Obama, may visit the company’s college-like campus

when they are in town, people with knowledge of the preparations said. The “IP Joint-Force System” launched on Friday is an online platform designed to streamline IPrelated communications between brands and Alibaba, the company said. It expands an existing “good faith takedown” scheme started last year and is designed to simplify the removal of listings of suspected counterfeits. Reuters

Business Daily Monday, July 4 2016 11

Asia

Australian Prime Minister Malcolm Turnbull addresses party members at the Liberal Party election night event at the Sofitel Wentworth Hotel

Down under election

Australia sinks into limbo as voters erase Turnbull majority Both major parties suffered from a lesser version of the backlash against mainstream politics that has swept through Western Europe and the U.S. Jason Scott and Michael Sin

ustralia’s Prime Minister Malcolm Turnbull said he was confident of forming a majority government, even as a national election failed to deliver a clear winner and counting won’t be completed until later this week. “This is a time where we must come together,” Turnbull told cheering supporters in central Sydney early yesterday, as the outcome hung on a handful of marginal seats. “We can succeed, because without that, my friends, there is a road to debt, to deficit, higher taxes and stagnation.” Turnbull’s Liberal-National coalition was ahead in 66 of the districts that make up the 150-seat lower house and Bill Shorten’s Labour led in 72, according to the Australian Electoral Commission. The result won’t be known until at least Tuesday when counting resumes. The Australian Broadcasting Corp. put the coalition just behind with 65 seats to Labour’s 67. It predicted five would go to independents or smaller parties and said 13 remained in doubt. At least 76 seats are needed to form a majority government. The tight result is a blow to Turnbull, who was seeking a mandate from voters nine months after seizing the leadership from unpopular predecessor Tony Abbott. Instead, both major parties suffered from a lesser version of the backlash against mainstream politics that has swept through Western Europe and the U.S. Some commentators predicted the 61-year-old former banker may be unable to form government without the help of independent

lawmakers - a result that could jeopardize his political future and prolong uncertainty in a nation that has churned through six prime ministers in eight years. “This is a bad election result for the government and Turnbull’s leadership is now tarnished,” said Zareh Ghazarian, an author and lecturer at Monash University’s School of Social Sciences. “This has undermined the prime minister’s credibility and he’s in a much weaker position.” Shorten, 49, said Turnbull had failed to deliver the stability he had pledged the Australian public and had lost his mandate to govern.

“This has undermined the prime minister’s credibility and he’s in a much weaker position.” Zareh Ghazarian, an author and lecturer at Monash University’s School of Social Sciences Saturday’s election reflects to a lesser extent the unhappiness with mainstream political parties that has sent a populist shiver through Western Europe and the U.S. The primary vote for the coalition and Labour fell to its lowest level since 1943. “We are seeing Australia join the international trend toward populist politics,” Resources Minister Josh

Frydenberg told the ABC Sunday. That shift resulted in a stronger showing by a new party formed by South Australian Senator Nick Xenophon, and the probable re-emergence of anti-Muslim immigration campaigner Pauline Hanson in the upper house. That will make it difficult for the next g o v e r n m e n t t o e n ac t p o l i c y reforms, including reining in a fiscal deficit, without potentially lengthy negotiations and compromises. “People feel neglected,” said Xenophon, who supports greater protection for Australian industry. “People are sick of this toxic politics where the major parties throw mud at each other, where they don’t sit down and solve the nation’s problems.” ‘Isn’t normal’

Turnbull’s address to the Liberal headquarters at a Sydney hotel came only in the wee hours of yesterday. Meredith Pogson, 29, was among the party faithful watching the results on television monitors as the festive mood soured. “The fact that we were waiting so long, we figured something’s not right, this isn’t normal,” Pogson said, of the lag in Turnbull’s appearance. Asked what went wrong in the campaign she replied: “Not understanding his people.” Markets typically don’t respond to Australian elections, as there are limited differences between the major parties on fiscal issues and the central tenets of economic policy. However, uncertainty around the result may exacerbate volatility stemming from global events including Britain’s vote to leave the European Union. Australia, the world’s most Chinadependent developed economy, is seeking new drivers of growth after prices for its iron ore and coal exports plunged, cutting government revenue. While annual growth has accelerated toward its 30-year average of 3.2 per cent and unemployment has fallen to 5.7 per cent, Australians don’t feel

richer, with wage growth at a rate last seen a quarter century ago and core inflation slowing to the weakest pace on record. Income inequality is above the OECD average and widening. Turnbull’s pitch to voters included cutting taxes for small businesses and cracking down on union corruption. Yet business leaders have accused the government of dithering on economic reform. Some voters were also frustrated that he didn’t steer a more socially progressive path, including allowing same-sex marriage. Shorten promised increased funding for health and education, along with stripping tax perks for landlords that have pushed house prices out of reach for some citydwelling Australians. “Three years after the Liberals came to power in a landslide, they have lost their mandate,” Shorten said in a speech to jubilant supporters late Saturday. “Mr. Turnbull’s economic program, such as it was, has been rejected by the people of Australia.” Despite picking up at least a dozen seats for Labour, there is no guarantee Shorten will survive as leader. Under party rules, the leadership is declared vacant following an election loss, and lawmaker Anthony Albanese is expected to contest the position, Sky News reported, citing senior Labour sources it didn’t identify. Once it’s clear who will form government, attention will turn to the Senate. Since 2013 a group of independents and micro-parties have held the balance of power, blocking A$13 billion (US$9.7 billion) of budget savings and complicating government efforts to rein in a deficit forecast to reach A$37.1 billion next year. Despite Turnbull amending voting laws the Senate may remain eclectic, with populist firebrands including former soldier Jacqui Lambie, and controversial broadcaster Derryn Hinch tipped to win upper-house seats. Xenophon’s party is forecast to pick up as many as four spots. “Even if Turnbull’s government is returned, it may find his legislative agenda is again frustrated in the upper house,” said Australian National University political analyst Andrew Hughes. Bloomberg News

12 Business Daily Monday, July 4 2016

Asia Economic impact

Bangladesh garment industry trembles after Dhaka attack Industry figures said heightened security fears could be managed and that manufacturers could hold more meetings with Western customers outside Bangladesh. Ruma Paul and Promit Mukherjee

ome leaders of Bangladesh’s US$26 billion garment industry expect Western fashion retailers to review their ties with the world’s second-largest garment exporter after Islamist militants killed at least 17 foreigners in an attack on a Dhaka restaurant. Bangladesh, one of the world’s poorest countries, relies on garments for around 80 per cent of its exports and for about 4 million jobs, and ranks behind only China as a supplier of clothes to developed markets like

Europe and the United States. Islamist militants killed 20 people, including at least nine Italians, seven Japanese and an American, inside an upmarket restaurant in Bangladesh’s capital, before security forces stormed the building and ended a 12-hour standoff on Saturday. Islamic State said it was responsible for one of the most brazen attacks in the South Asian nation’s history, but that claim has yet to be confirmed. It marks a major escalation in a campaign by militants over the past 18 months that had targeted mostly individuals advocating a secular or

liberal lifestyle in majority-Muslim Bangladesh with 160 million people. “An incident like this will definitely impact us, in as much as our importers from places such as (the) U.S. and China will be wary to visit because of the security concerns,” said Shahidul Haque Mukul, managing director of Ananta Garments. The industry had been recovering strongly from a major tragedy three years ago, when a factory building collapsed, killing more than 1,100 people, prompting safety checks that led to many factory closures and the loss of exports and jobs. It had also seemed little touched by a spate of recent murders on liberals, gays, foreigners and religious minorities in sporadic attacks claimed by Islamic State and al Qaeda. Between October and January, its exports surged 14 per cent from a year earlier.

“It is a strong slap to our image. It will put pressure on our business, but we cannot say to what extent at the moment.” Mohammad Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association Members of the Rapid Action Batallion behind tape to restrict media and others in the streets close to the Holey Artisan Bakery in Dhaka, Bangladesh July 2, 2016.

But Friday’s attack signalled a more chilling threat to foreigners. The militants targeted a building housing two upmarket eateries popular with foreigners, and several of those killed were Italian garment entrepreneurs. “Bangladesh has never seen such a horrific incident,” said Mohammad Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association. A Bangladesh-based executive for a French-based garment buyer said he feared a deep slump in business in the coming days. But other industry figures said heightened security fears could be managed and that manufacturers could hold more meetings with Western customers outside Bangladesh, in Asian cities such as Singapore or Hong Kong, a trend that had begun some time ago. “Concerns on visiting our factories, holding meetings, etc, by foreign nationals will be there for a few months but I believe within six months, the intensity will thaw and things will be back to normal,” said Abdullah Hil Rakib, head of exporter Brothers Fashion Ltd. At least two European retailers which source clothes from Bangladesh, Sweden’s H&M Hennes & Mauritz AB and Britain’s Marks and Spencer Group PLC, say their operations in the country are not immediately affected. Both said their workers are unaffected and that they have no plans to change their sourcing, but are monitoring the situation. H&M’s spokeswoman said the company has “safety routines” for workers, though she did not elaborate. The industry owes its resilience to some of the world’s lowest wages, the right skills and the fact that China has become less competitive as a producer in recent years. The minimum monthly wage for garment workers in Bangladesh is US$68, compared with about US$280 in mainland China. Reuters

Trade

South Korea exports fall for 18th month The trade ministry said it expects exports to improve further this year. Christine Kim

South Korean exports fell for an 18th straight month in June, and though they declined by the slowest pace in a year, the potential impact on world growth after Britain’s messy divorce from the EU has analysts and policymakers urging caution over the outlook. The external risks have already prompted Seoul to unveil an US$8.7 billion extra budget as Asia’s fourth-largest economy struggles to pick up momentum in the face of weak exports and consumption. Shipments from the world’s sixth-largest exporter fell 2.7 per cent in June on-year to US$45.3 billion, the smallest decline since June last year, data from the Ministry of Trade, Industry and Energy showed on Friday. Exports of three offshore plants mainly contributed to the improvement, along with computer parts for offshore production. In June, ship and computer-related exports jumped 29.6 per cent and 19.8 per cent in annual terms, respectively. “It’s premature to be too optimistic right now as global uncertainties will persist in the wake of the Brexit vote.

I doubt exports will turn positive by year-end,” said Park Ok-hee, an economist at IBK Securities in Seoul. “China may see momentum softening in the second half of the year, so this may just be temporary,” she added.

Key Points June exports -2.7 pct y/y (Reuters poll: -8.3 pct, May exports -6.0 pct) Exports fall at slowest pace since June 2015 June CPI +0.8 pct y/y (Reuters poll: +0.8 pct) Government working on stimulus package Brexit-related issues pose downside risk for trade Britain’s vote last week to leave the European Union sparked a two-day selloff in global markets, and despite a semblance of calm in the past few days analysts and policymakers are worried about the longer term impact of Brexit on the global economy.

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 N. 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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The trade ministry said it expects exports to improve further this year, but Brexit-related issues remain a downside risk to trade. “There are still so many uncertainties (from Brexit) it’s difficult to say when exports will embark on a firm rebound,” said Cheong Seung-il, deputy minister at the trade ministry in a briefing. South Korea’s exports to key markets of China, the U.S. and the EU all fell in June, suggesting strong headwinds as the country is the first major exporter in the world to publish trade numbers each month. Exports to China suffered on lagging

production of semiconductors and flat panel displays while those to the U.S. fell on machinery and oil-related products, the data showed. South Korea’s imports dropped 8.0 per cent to US$33.7 billion last month, producing a record trade surplus of US$11.6 billion. The Bank of Korea (BOK) last month unexpectedly cut interest rates for the eighth time in its current easing cycle to bring the base rate to a record low 1.25 per cent, and some analysts see another cut in coming months to spur growth. The BOK is also expected to trim its GDP growth forecast of 2.8 per cent for 2016 at a quarterly review in July. Earlier on Friday, data showed consumer prices rose 0.8 per cent in June on-year, steady from May. Reuters

Business Daily Monday, July 4 2016 13

Asia Monetary policy

In Brief

Sri Lanka appoints new central bank chief

Sri Lanka’s central bank headquarters

Analysts said Coomaraswamy should bring in some welcome certainty to the conduct of monetary policy. Ranga Sirilal and Shihar Aneez

Sri Lankan President Maithripala Sirisena has appointed former central banker Indrajith Coomaraswamy as the new central bank chief, moving to quell uncertainty after the previous governor declined to seek reappointment. The appointment was delayed after some disagreement between Sirisena, who has the power to appoint a governor and Prime Minister Ranil Wickremesinghe. “After consulting all parties relevant, I appointed Dr. Indrajit Coomaraswamy to head the Central Bank of Sri Lanka,” President Sirisena said in a message posted on his twitter feed

on Saturday. The 66-year old Coomaraswamy, a senior economist, was a former director of economic affairs at the Commonwealth Secretariat. In a text message, the government information department said the new governor will assume office on Monday. Analysts said Coomaraswamy, who is well regarded locally and internationally, should bring in some welcome certainty to the conduct of monetary policy and other vital functions of the central bank following the relatively brief and controversial tenure of the previous governor. “With this appointment, all the uncertainties which prevailed during the past few months over the

previous governor’s issue will be sorted out,” said Danushka Samarasinghe, an economist and research head at Softlogic Stockbrokers. The incoming governor faces stiff challenge, including stabilising a faltering rupee, averting a balance of payments and debt crisis and boosting a sluggish economy. Arjuna Mahendran, the former central bank chief since January 2015, ended his term on Thursday amid a corruption investigation that embroiled his son-in-law in a bond scam. Mahendran, who replaced Ajith Nivard Cabraal following a change of government, denied any wrongdoing, but the accusations had perturbed markets. He did not respond to telephone calls from Reuters. The central bank is known to frequently intervene in the market to arrest sharp movements in the rupee currency, and the vacancy created after Mahendran declined reappointment raised concerns over a potential leadership vacuum. The coalition government of Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) and Wickremesinghe’s centre-right United Nation Party (UNP) had disagreed over the choice of Mahendran’s replacement, leading to a delay in announcing the new governor, sources told Reuters on condition of anonymity. Coomaraswamy said he will consult government and central bank officials before making any comment on operational and policy matters at the central bank. “I am unable to comment on anything at the moment. I will have to meet the government leaders and central bank officials to put my head together before any comments,” he told Reuters over the phone. Coomaraswamy worked at the Central Bank of Sri Lanka since 1973, serving in the economic research, statistics and bank supervision divisions as a staff officer until 1989, before moving to the Commonwealth Secretariat. Reuters

The Monetary Authority of Singapore

Lawsuit

U.S. funds sue dozens of banks for Singapore rate rigging In 2013, Singapore’s central bank censured a record 20 banks, saying 133 traders had tried to manipulate the rates, including the benchmark bank-to-bank SIBOR rate. Two U.S.-based investment funds have filed a lawsuit in New York against dozens of banks accusing them of conspiring to rig derivative prices incorporating Singapore interest rate benchmarks, a court filing showed. The suit was filed by Greenwich, Connecticut-based FrontPoint Asian Event Driven Fund and New Yorkbased Sonterra Capital Master Fund and traces back to the 2013 scandal in Singapore when the central bank found more than 100 traders in the city-state tried to rig key borrowing and currency rates. Among the banks being sued are Citigroup, Bank of America, JPMorgan Chase, RBS, UBS, ING, BNP Paribas, Oversea Chinese Banking Corporation, Barclays, Credit Agricole, Credit Suisse, Standard Chartered, DBS,

Mitsubishi Ufj, HSBC, Macquarie and Commerzbank. A Citigroup spokesman said “it is without merit and we will defend ourselves vigorously.” Credit Suisse declined to comment. The other banks did not immediately respond to requests for comment outside business hours. In 2013, Singapore’s central bank censured a record 20 banks, saying 133 traders had tried to manipulate the rates, including the benchmark bank-to-bank SIBOR rate, the Swap Offered Rate and derivatives. It did not fine the banks involved, but instead directed 19 of them to set aside additional reserves for a year and to adopt measures to address deficiencies. The Monetary Authority of Singapore has since returned all of the

around US$9 billion it took from the banks as penalties, saying they have taken steps to prevent a recurrence of attempts to rig rates. Authorities in the United States and Europe have also been investigating rate manipulations, most notably Libor, slapping fines of billions of dollars on banks, including Barclays, RBS and UBS. FrontPoint said it engaged in transactions from within the U.S. for SIBOR-based derivatives at “artificial prices proximately caused by Defendants’ unlawful manipulation and restraint of trade.” Sonterra said it engaged in U.S.based transactions for SIBOR-based derivatives, including Singapore Dollar foreign exchange forwards. “As a consequence of Defendants’ manipulative conduct, Sonterra was damaged when it was overcharged and/or underpaid in transactions for Singapore Dollar foreign exchange forwards,” the filing said. The two investment companies seek compensation for “treble the damages” incurred. Reuters

New government

Philippines to review all mines The Philippines will review all mines operating in the country, the new mining minister said on Friday, as the committed environmentalist vowed to determine whether the industry is hurting the Southeast Asian nation. Regina Lopez’s appointment to head the Department of Environment and Natural Resources has sent shockwaves through the mining sector, which fears a nationwide crackdown. “I’m not against the mining industry but I’m against suffering,” Lopez told reporters on her first day in office as part of the administration of Rodrigo Duterte. Co-operation

India to remove Cyprus from tax blacklist India will soon remove Cyprus from its tax blacklist as a non-cooperative jurisdiction for income tax purposes, local daily Business Line said on Saturday. The proposal followed the finalization of a double taxation avoidance agreement between the two countries, said the newspaper. This would facilitate Indian taxpayers transacting with Cyprus, which faces higher withholding taxes and their consequences of transfer-pricing provision. The Mediterranean island nation is the only country to have been blasted by India as a non-cooperative jurisdiction because of lack of effective exchange of information. Defence industry

India, Vietnam step up talks on arms sales India and Vietnam are stepping up talks on Hanoi’s procurement of Indian missiles, gunboats and torpedoes in near future, said local media Saturday. The Economic Times said India is “firming up” several military contracts with Vietnam, including selling the Brahmos short-range missiles, modernizing two Russiamade Vietnamese frigates for anti-submarine roles, and building 10 new patrol boats for Vietnamese Coast Guard, besides discussing the provision of a high speed heavyweight torpedo “Varunastra”, which was inducted to Indian Navy this week. Both India and Vietnam have been traditionally the receivers of Russiamade arms, sharing similar defence equipment systems. Energy contracts

Indonesia plans to develop blocks in Iran The Indonesian state-owned Pertamina company will sign a contract with the National Iranian Oil Company (NIOC) next month to develop two oil and gas blocks in Iran, Press TV reported on Saturday. There are four blocks that will be evaluated based on the initial study, and out of the four, there are two blocks that will be our priority, Pertamina’s upstream director Syamsu Alam was quoted as saying. Pertamina hopes to boost production from each block by 30,000 barrels per day as part of its upstream development plans, the report said without specifying the blocks under consideration.

14 Business Daily Monday, July 4 2016

International In Brief Monetary policy

Brazil to reduce FX swap stock Brazil’s central bank aims to reduce its stock of currency swaps and does not rule out direct intervention in the forex market to reduce volatility, central bank governor Ilan Goldfajn said in an interview published by newspaper Valor Economico on Friday. Goldfajn, who took over the bank’s presidency in June, said the objective of the bank’s currency policy is to have a free-floating exchange rate and reduce the currency swaps stock that stands at a little over US$60 billion. Over the last three years the bank had built up a stock of more than US$100 billion worth of currency swaps. Brexit

Osborne drops 2020 budget surplus target Finance minister George Osborne on Friday gave up his centrepiece policy of turning Britain’s budget deficit into a surplus by 2020, faced with potential economic stress following the country’s shock decision to leave the European Union. It was the latest setback for Osborne who was once considered a future British leader but who has not put himself forward to succeed Prime Minister David Cameron after the two men failed in their campaign to keep Britain in the EU. Even before the referendum, many economists had questioned the ability of Osborne to deliver the surplus by the end of the decade. Oil contract

Uganda switches bidder in talks over refinery Uganda has begun negotiations with a consortium led by South Korea’s SK Engineering for the building of a crude oil refinery after ending talks with a group led by Russia’s Rostec Global Resources, the energy ministry said on Friday. Uganda wants to build the US$2.5 billion refinery to process some of its crude so it can earn more from its oil resources, which it discovered in 2006. Wrangling over taxes and the viability of the refinery have delayed commercial production, which is now expected to start between 2019-2020. Consolidation

Libya’s rival oil companies to unify sector Once-rival leaders of Libya’s National Oil Corporation have agreed on a structure for the group that aims to put to rest squabbles over who has the right to export the country’s oil, according to a statement. Oil industry leaders in OPEC-member Libya have said they could quickly double production to over 700,000 bpd if conditions stabilized. Before a 2011 revolution, Libya was producing 1.6 million bpd. The rival oil officials agreed in principle to unify the oil sector in May, but the agreement on the structure and leadership of a joint group took weeks of meetings to iron out.

Better figures

U.S. factory data, auto sales improve The employment index rose to 50.4 in June from 49.2 in May.

.S. factory activity expanded at a healthy pace in June as new orders, output and exports rose, new industry data showed on Friday, providing another sign that U.S. economic growth was regaining its footing after weakness early this year. Automakers reported higher June sales amid strong demand for pickup trucks and sport utility vehicles, but on an annualized basis, the June industry selling rate came in at 16.66 million units, well below May’s sales pace of 17.45 million. Some analysts say that industry sales may have peaked in 2015 at 17.45 million units, but GM chief economist Mustafa Mohatarem still held out hope for another record year. But the positive for manufacturing and autos was dampened by a second straight monthly drop in construction spending in May. The weaker construction data could prompt some economists to trim back their second-quarter growth estimates and could help reinforce the Federal Reserve’s view that there is currently too much uncertainty

over global and U.S. growth to raise interest rates in the near term. The Institute for Supply Management (ISM) said its national factory index rose to 53.2 in June, the highest since February last year, from 51.3 in May. A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 per cent of the U.S. economy. The ISM new factory orders index in June showed a reading of 57.0 compared with 55.7 in May, while export orders showed 53.5 versus 52.5. The order backlog index rose to 52.5 from 47.0, while production rose to 54.7 from 52.6. The employment index rose to 50.4 in June from 49.2 in May, for its first reading over 50 since November. While the International Monetary Fund anticipates that uncertainty over Britain’s departure from the EU will dampen near-term global growth, it remains unclear how much Brexit might affect U.S. demand. In addition to its factory index, ISM on Friday released a survey that showed 61 per cent of businesses saw a negligible impact from Britain’s EU vote for the remainder of this year. It

showed only six per cent forecasting a negative impact, and there was little difference between manufacturing and non-manufacturing firms. Manufacturing remains constrained by the lingering effects of the dollar’s surge and the oil price plunge between June 2014 and December 2015. The sector has also been hurt by business efforts to reduce an inventory glut, which has curtailed orders.

Construction slowdown

The Commerce Department said on Friday that May construction spending fell 0.8 per cent after a downwardly revised 2.0 per cent drop in April. The revised April drop was the largest since January 2011. Economists polled by Reuters had forecast construction spending rising 0.6 per cent after a previously reported April drop of 1.8 per cent. May construction outlays were up 2.8 per cent from a year earlier. May construction spending was held down by a 2.3 per cent drop in public construction spending. Outlays on state and local construction projects, the largest of the public sector segment, tumbled 3.0 per cent, while federal construction spending rose 7.5 per cent. Private construction spending fell by 0.3 per cent after a downwardly revised 1.9 per cent fall in April. Outlays on private residential construction were flat, while spending on private non-residential construction was down 0.7 per cent. Reuters

Key Points ISM manufacturing index rises to 53.2 in June New orders, export and employment indexes rise Construction spending slips 0.8 pct in May

Automakers reported higher June sales amid strong demand for pickup trucks and sport utility vehicles

M&A

National Bank of Abu Dhabi and First Gulf Bank agree to merge The bank merger will be completed via a share swap agreement. The boards of directors at National Bank of Abu Dhabi and First Gulf Bank have recommended merging the two lenders, a joint statement said yesterday, with the deal expected to be completed in the first quarter of 2017. The tie-up is one of two significant consolidation efforts currently underway in the emirate as it reacts to the lower oil price environment: last week, the government ordered the merger of state investment funds

Mubadala and International Petroleum Investment Company. Retaining the brand name National Bank of Abu Dhabi, the merger will create one of the largest banks in the Middle East and Africa, with assets of 642 billion dirhams, a return on equity of 14.1 per cent and a market value, as of June 30, of US$29.1 billion. “The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions at

home and drive the country’s growing international business relationships,” the statement said. The bank merger will be completed via a share swap agreement which would result in shareholders of FGB receiving 1.254 new NBAD shares for every one FGB share they currently hold. FGB shareholders will control around 52 per cent of the combined bank, with the Abu Dhabi government and related entities holding 36.9 per cent in total. Abdulhamid M. Saeed, a board member and managing director at FGB, has been named chief executive designate for the combined lender, with FGB chairman Sheikh Tahnoon bin Zayed al-Nahayan named as chairman designate. A new board and management will take over once the merger has been completed, while the existing CEOs - Alex Thursby of NBAD and Andre Sayegh of FGB - will continue to run the independent banks up until the merger completes. There was no reference to their future roles in the combined bank. The merger will deliver cost savings of around 500 million dirhams annually, with the benefits to be realised over three years. There will be one-off integration costs of around 600 million dirhams, the statement added. Credit Suisse and UBS are acting as financial advisers to NBAD and FGB respectively. Reuters

Business Daily Monday, July 4 2016 15

Opinion Business Wires

The Korea Herald South Korea’s major lenders saw their home-backed loans rise sharply last month amid the record-low borrowing costs and a boom in the local housing market, industry data showed yesterday. The outstanding amount of mortgage loans extended by five commercial banks - Kookmin Bank, Shinhan Bank, Woori Bank, KEB Hana Bank and Nonghyup Bank - reached 364.15 trillion won (US$317.2 billion) as of end-June, up 4.84 trillion won from a month earlier, according to the data. The on-month gain marked the fastest gain in the first six months of 2016.

The anti-globalization Brexplosion Philstar DBS Bank Ltd. of Singapore sees inflation increasing to 1.8 per cent last month from 1.6 per cent in May due to higher food prices. “Expect inflation to have ticked up more markedly in June as effects from low oil price dissipate. Food prices have also ticked up quite a bit, similar to what’s seen in the region, partly due to the weather,” DBS economist Gundy Cahyadi said. The inflation forecast of DBS for June is slightly below the two to four per cent target set by the Bangko Sentral ng Pilipinas.

Thanh Nien News Despite the (Vietnamese) government’s determination to sell its stakes in 10 major companies, including dairy giant Vinamilk and information technology leader FPT, things are moving too slowly for frustrated investors, who are showing strong interest in Vietnam. The State Capital Investment Corporation (SCIC), Vietnam’s sovereign fund, recently announced a list of 120 companies in which it would sell the government’s stakes worth more than VND6.3 trillion (US$278.06 million) this year. But it includes only FPT and Sa Giang Import and Export Corporation of the major companies, in which SCIC holds 6 and 50 per cent stakes.

The Times of India India’s rapidly growing pharmaceutical market is expected to grow to US$55 billion by 2020 and emerge as the sixth largest globally by size, said Indian ambassador to the US Arun Singh. Formally inaugurating the 34th annual convention of the American Association of Physicians of Indian Origin (AAPI) in New York on Friday, he outlined the rapid growth of the health sector in India, particularly in pharmaceuticals. He said that the Indian sector had a competitive edge over others because its productions costs were significantly lower than that of the US and almost half that of Europe.

opulism , nationalism , and xenophobia all contributed to the victory of the “Leave” campaign in the United Kingdom’s recent referendum on membership in the European Union. But these forces float on the surface of a larger sea change: a fundamental shift worldwide in the relationship between the state and the market. Since the birth of modern capitalism, these two frameworks of human activity have generally been at odds. While the market tends to expand geographically as its participants pursue economic benefits, the state seeks to keep orderly everybody and everything within the territory it controls. A merchant may recognize market opportunities in a foreign country, but he will run into the state – most immediately, that country’s immigration authorities – if he pursues them. How to reconcile the tension between the market and the state is the central concern of political economy today, just as it was for Adam Smith in the eighteenth century, Friedrich List and Karl Marx in the nineteenth century, and John Maynard Keynes and Friedrich von Hayek in their long debate on the topic through the middle decades of the twentieth century. Let’s consider two hypothetical extremes in the state-market relationship. The first is a seamless global market in which individuals can maximize their material benefits without any state intervention. The problem with this scenario is that you may live in a country that is vulnerable to all the negative consequences of no-holds-barred globalization, such as currency devaluation, labour exploitation, the flouting of intellectual property laws, and so forth. The other extreme is a world comprising entirely isolated autarchic states, where individuals are protected from external economic forces and the state has full autonomy over domestic affairs. In this scenario, you will have to forgo all the well-known economic benefits of the global division of labour. Between these two extremes lies most of the world as it is, characterized by regional integration projects like the EU or the North American Free Trade Agreement. We can identify important swings during the history of capitalism over the last two centuries, either toward the market or the state. For example, the repeal of the Corn Laws in the UK in 1846 favoured a free market in international trade and accelerated globalization until the outbreak of World War I. After WWI, the pendulum swung back toward the state. Financial capital in the West was weakened politically, and a mobilized working class took the opportunity to demand jobs and social-welfare programs that ran counter to the logic and rules of a globalized market. In the run-up to World War II, beggar-thy-neighbour policies and rampant protectionism ensued – with Britain leaving the

“

Yoon Young-kwan former Minister of Foreign Affairs of the Republic of Korea, is Professor Emeritus of International Relations at Seoul National University.

gold standard in 1931 in response to a run on the pound. The Economist declared that Monday, September 21, “the definite end of an epoch in the world’s financial and economic development.” After the passage of Brexit, the same journal warned, “Britain is sailing into a storm with no one at the wheel.” The 1944 Bretton Woods conference marked another swing back toward the market, but this time allowed for some degree of national autonomy. Until the late 1960s, a harmonious balance of international openness and national autonomy allowed for widespread prosperity. Turbulence returned in the 1970s, however, as the slow growth and high prices of “stagflation” and a global energy crisis pushed the pendulum back toward fully liberalized markets – a shift from the Keynesian to the Hayekian world, helped along by Margaret Thatcher in the UK and Ronald Reagan in the United States. This brings us to the present. The economic crisis of 2008, and the global economy’s failure to recover from it fully, put an end to the project begun by Thatcher and Reagan. As in the post-WWI period, workers came to see themselves as left behind by globalization, with political leaders favouring financiers and big business at their expense. In the case of Brexit, the “Leave” camp voted for more national autonomy, even though it will have a clear material cost. An American version of Brexit may not be far behind if the next US president scraps the Trans-Pacific Partnership trade deal with 11 Pacific Rim countries, signed in February of this year. At a time when global trade negotiations are almost dead, the TPP should seem like a reasonable approach to boosting multilateral trade. And yet both presumptive US presidential candidates say they oppose it, promising what would be tantamount to an “Amexit” from the global trading system. We are at an interregnum. Social and political discontent will continue to bubble up around the world until we return the state-market relationship to a healthy equilibrium. The problem is that no one knows how best to do this. Some propose re-harmonizing international markets with national autonomy, as occurred under Bretton Woods. But the post-war international economic order was built for the pre-globalization age, and we cannot put the genie back in the bottle, even if it were possible to do so. Brexit marks the beginning of the end of the latest era of globalization. What comes next is anyone’s guess, but we can be certain that it won’t be the final destination. Project Syndicate

Social and political discontent will continue to bubble up around the world until we return the statemarket relationship to a healthy equilibrium

”

16 Business Daily Monday, July 4 2016

Closing Stock markets

Vanke to resume trading

China Vanke Co., Ltd. said it will resume its A-share trading today July 4, according to a statement on the Shenzhen Stock Exchange. The real estate giant said it plans to acquire a subsidiary company of Shenzhen Metro Group for 45.6 billion yuan (US$6.9 billion) via a new share issue, making the subway operator its largest shareholder. Shenzhen Metro will account for 20.65 per cent of China Vanke’s total shares, according to the plan. The property company unexpectedly suspended trading

in December 2015, saying that it was planning to issue new shares for capital restructuring and assets acquisition. The trading halt came after Vanke’s chairman Wang Shi openly opposed the Baoneng Group’s acquisition of shares that would make Baoneng the biggest shareholder of Vanke. Baoneng Group is a Shenzhenbased conglomerate with real estate and finance businesses. “Our management does not welcome Baoneng as our biggest shareholder,” said Wang at an internal meeting in December last year. Xinhua

Illegal betting

China soccer boom sparks online gambling craze Public Security Ministry said it had detained 236 people across four provinces involved in the activity. Tris Pan

n China’s eastern city of Hangzhou, Mr Li could barely watch as Portuguese striker Cristiano Ronaldo lined up a penalty kick in a finelybalanced Euro 2016 group match against Austria. Li had reason to be nervous: he had bet tens of thousands of yuan on Portugal to win. With 10 minutes to go in the game in Paris, Real Madrid star Ronaldo hit the post, the game ended in a draw, and Li lost the money he had bet using Tencent Holdings Ltd’s popular messaging app WeChat.

“There are so many gamblers, groups and platforms during the European Cup, though, that I think it’s really hard to find all of them,” said Li, who asked only to use his surname as most gambling online in China is illegal. Li said he used a private chat group on WeChat, where most of the betters were friends. Winnings were distributed via bank transfer, Alibaba-linked Alipay, WeChat or ‘red packets’, digital versions of traditional envelopes stuffed with cash. In the run-up to the UEFA European Football Championship final in

Paris next Sunday, Chinese police say they have seen a surge in illegal gambling online. In a single bust last week, police in southern Guangdong arrested 147 people and froze funds worth nearly 100 million yuan (US$15 million). Yesterday, the Public Security Ministry said it had detained 236 people across four provinces involved in illegal online betting on the championship. Alibaba and Tencent acknowledge the issue and have anti-gambling systems in place to spot illegal behaviour. Ant Financial, the Alibaba affiliate which operates Alipay, has a threetiered system to spot gambling, with computer systems analysing user behaviour and a line of human checks. “If we find suspicious accounts, then we are going to freeze the

Key Points Record spike in illegal online gambling in China Millions of yuan placed in bets on Euro 2016 - punters Tencent, Alibaba step up crackdowns on illegal gambling online Amid a surge of Chinese interest in global soccer, a side-effect has been a record spike in illegal gambling online, prompting multi-million dollar busts by police on betting rings, and tech giants like Tencent and Alibaba Group Holding Ltd cracking down on gambling activity on their apps.

People watching the UEFA EURO 2016 quarter final match between Germany and Italy

account directly. It only takes a few hours from the first to the last step,” said spokeswoman Miranda Shek, adding the firm was looking to add more anti-gambling staff. Reiterating a previous statement, Tencent said it is doing more to stamp out gambling on its platforms like WeChat, including restricting groups suspected of gambling behaviour and punishing individual account holders. It said it has put limits on more than 8,000 WeChat groups, and has limited the payment and ‘red packet’ capabilities on more than 6,000 accounts.

Soccer boom

A soccer investment boom in China has helped propel interest in the game. Chinese firms have invested in overseas clubs, player agencies and media rights firms, and global soccer stars have moved to China in multi-million dollar deals. “With the European Cup everyone’s betting on soccer, but also over the last couple of years China’s soccer market has developed rapidly. Big investments and star names create a real lure,” said Hu Naijun, an assistant professor at the University of Science and Technology Beijing. The organizer of an online gambling group, who only gave his name as Bao, said he and four other organizers had a pot of 5 million yuan (US$750,706) and that dozens of people would join for each game. “In one night there will be millions placed in bets,” he said, adding it had become a lucrative business. “For the final, we’ll probably go to Macau or Hong Kong and spend the whole week in the presidential suite.” Li says he’s still backing Portugal who are through to the semi-finals - for Euro 2016 glory. “I often can’t watch, my heart just can’t take it, I feel nervous at every chance. Especially when Ronaldo missed the penalty - I almost passed out,” he said. Reuters

GDP

Official visit

Presidential candidates

Saudi economic growth slowest in 3 years

Indian PM to embark on 5-day tour in Africa

FBI interviews Hillary Clinton in email probe

Saudi Arabia’s economy expanded at its slowest rate in three years during the first quarter of 2016 as low oil prices forced the government to cut spending and raise costs for industry, official data showed yesterday. Some analysts said the data pointed to a risk of growth in the world’s top oil exporter slowing to near zero this year, which would be its worst performance since the global financial crisis of 2009. Gross domestic product (GDP), adjusted for inflation, grew 1.5 per cent from a year earlier between January and March, down from a revised growth rate of 1.8 per cent in the fourth quarter of 2015, the state statistics office said. It was the slowest growth since 0.3 per cent in the first quarter of 2013. The oil sector expanded 5.1 per cent in the first quarter of this year as the world’s biggest oil exporter increased its production of crude and exported more refined products. But the non-oil sector shrank 0.7 per cent, its worst performance in at least five years. This may be a source of concern to Saudi policy makers because an ambitious reform plan to help the economy cope with an era of cheap oil, announced last month, assumes rapid growth in non-oil businesses. Reuters

Indian Prime Minister Narendra Modi will embark on a five-day tour of four African nations Thursday, sources said yesterday. “Modi will begin his African tour on July 7. He will visit Mozambique, South Africa, Tanzania and Kenya, a tour aimed at bolstering and reinvigorating India’s ties with Africa,” the sources said. The Indian prime minister’s first stop is Mozambique, where he will have bilateral talks with the country’s President Nyusi, the sources said. “From Mozambique, he will fly to South Africa. During his two-day stay there, Modi will hold talks with President Jacob Zuma and other senior leaders,” the sources said. Modi’s nest destination is Tanzania, where on July 10, he will have meetings with Tanzanian President John Pombe Joseph Magufuli on a range of areas to enhance mutual cooperation, they said. He will go to Kenya on the final leg of his tour, where he will hold bilateral discussions with President Kenyatta, before wrapping up his African visit. India’s current trade with Africa stands at US$75 billion and it has implemented 140 projects in 41 African countries. Xinhua

Democratic U.S. presidential candidate Hillary Clinton met with the Federal Bureau of Investigation for three and a half hours as part of a probe of her use of a private email server while serving as secretary of state, her campaign said. The interview at FBI headquarters in Washington followed a week of intense public focus on the investigation and on the question of Clinton’s viability as a presidential candidate, which her campaign has tried for months to downplay as a distraction. “Secretary Clinton gave a voluntary interview this morning about her email arrangements while she was Secretary,” campaign spokesman Nick Merrill said in a statement. Clinton would not comment further on her interview, he said. Clinton is expected to be formally nominated as the Democratic candidate for the November 8 presidential election at the party’s convention in less than four weeks. She is currently the frontrunner for the White House with polls showing her leading presumptive Republican nominee Donald Trump. The FBI is investigating whether anyone in Clinton’s operation broke the law as result of a personal email server kept in her Chappaqua, New York, home while she was secretary of state. Reuters