BNU opens Seac Pai Van Branch Banks Page 5
Friday, July 8 2016 Year V Nr. 1082 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
CCAC
Melco
IACM chiefs conceal absences of subordinates Page 3
MGTO
MOP27.6 mln budgeted for Fireworks Display Contest Page 6
EGT selling 824 gaming machines for US$3.25 mln Page 7
Loan sharking group busted Crime
The police have busted a major loan sharking group. Comprising around 60 members and operating for a year from its China base. Eight men, mostly from the Mainland, have been arrested. The case is still under investigation. With police pursuing other suspects still at large. Page 7
Up in the air
Firm stand
The government has stated its stance. And will strictly abide by the Land Law. ‘The government, as always, adheres to Macau’s laws and regulations when handling issues concerning land concessions,’ the gov’t says.
CTM Criticised for poor service. But monopoly CTM pleads it has complied with Macau’s laws and regulations. And is open to suggestions. Regardless, CTM’s CEO reveals he is not sure whether the telecommunications company’s contract will be renewed. Page 5
Flying the flag
HK Hang Seng Index July 7, 2016
20,706.92 +211.63 (+1.03%) Worst Performers
China Shenhua Energy Co
+3.67%
Bank of Communications
+2.08%
China Resources Power
-1.63%
Li & Fung Ltd
+0.00%
China Unicom Hong Kong
+2.92%
China Petroleum & Chemical
+2.04%
Cathay Pacific Airways Ltd
-1.23%
Ping An Insurance Group Co
+0.30%
China Mengniu Dairy Co Ltd
+2.62%
China Mobile Ltd
+2.02%
Kunlun Energy Co Ltd
-0.64%
Sino Land Co Ltd
+0.31%
PetroChina Co Ltd
+2.33%
Cheung Kong Property
+1.83%
CLP Holdings Ltd
-0.19%
Hang Seng Bank Ltd
+0.38%
Henderson Land Develop-
+2.20%
CNOOC Ltd
+1.69%
Cheung Kong Infrastructure
China Life Insurance Co Ltd
+0.49%
-0.08%
28° 34° 28° 34° 28° 32° 28° 32° 28° 32° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
Tue
Source: AccuWeather
Technology Portuguese IT company eyes Macau as its bridge to China. And more Portuguese-speaking countries. DOIS has been nominated by Huawei as one of its IT partners with better performance at the Huawei Western Europe Partner Summit. Page 2
Land Law Page 3
2 Business Daily Friday, July 8 2016
Macau Business Huawei Portuguese IT partner wants a presence in the city until the end of the year
The tech bridge Portuguese tech company DOIS sees Macau as its perfect link to Asia and Portuguese-speaking countries. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he Information Technology (IT) Portuguese company DOIS sees Macau as the “bridge” that will help it expand in Asia and to Portuguese-speaking countries. This week, the Portuguese company showcased its partnership with Chinese tech company Huawei in an event organised by the General Consulate of Portugal in Hong Kong and Macau. In the event Dois presented its plans for establishing an office or local partnership in Macau until the end of the year. “DOIS has a golden partnership with Huawei and is one of the few companies with an exclusivity contract with the Chinese company. We wanted to introduce the company
and our partnership to the city, with the objective of showing how Macau will be a strong platform to expand to Portuguese-speaking countries like East Timor. We also wanted to attract investors and business partners from the territory, and maybe strike some deals with SME’s,” DOIS International Relations Director Jose Silva told Business Daily. The DOIS representative also told Business Daily the company won’t “ignore” opportunities in Hong Kong, again using Macau as an advantage point for that market.
Unite and conquer
DOIS established a partnership with Chinese tech giant Huawei in 2015 as part of an international expansion plan that already saw the company dip a toe in the United Kingdom and Russian markets. This month, Huawei nominated
DOIS as one of its IT partners with better performance in 2015, at the Huawei Western Europe Partner Summit 2016. The Portuguese company sees the partnership with Huawei as a way to improve its data management cloud systems and Internet of Things (IoT) capabilities. IoT involves the network of physical devices, vehicles and buildings in order to collect and exchange data; while cloud computing is the storage, management, and processing of data using servers hosted by the Internet. “With the help of Huawei, we provide better services on data centres,
information security and nowadays IoT. We think the telecommunication and small business markets in Asia could be a good target for the services DOIS provides, such as cloud services,” Jose Silva told Business Daily. The Portuguese company also believes Huawei’s experience in data centre visualisation solutions in the Mainland China market could be a big advantage for exploring and expanding in the Asian market. Huawei, one of the largest smartphone manufacturers, has stated this year it intends to become one of Macau’s top three smartphone suppliers within the next two years.
Consumer Protection
Draft of Consumer Protection Act completed Trade Brazil still the biggest trade partner
Sino-Luso trade reached US$32.73 bln in May Trade between China and Portuguesespeaking countries in the first five months of 2016 fell 14.6 per cent year-on-year
from Portuguese-speaking Countries saw an increase of 15.89 per cent between April and May, rising to US$6.1 billion. China exports in May to those countries, on the other hand, went down 2.3 per cent month-to-month, at US$2.3 billion.
Nelson Moura nelson.moura@macaubusinessdaily.com
South American powerhouse Brazil was the biggest trading partner for China in the Portuguese-speaking world, seeing a total value of goods traded in May increase 15.4 per cent month-to-month to US$674.5 million. China saw its imports from Brazil increase 18.20 per cent to US$172.5 million, while exports to the South American country increased 2.63 per cent to reach US$502 million. In the first five months of 2016, trade between Brazil and China amounted to US$2.4 billion.
The level of trade between China and Portuguese-speaking countries has fallen 14.6 per cent in the first five months of 2016, according to data released by the China Customs published in the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao). The total trade in merchandise flowing between China and Portuguese-speaking Countries from January and May of this year totalled US$32.7 billion (MOP261.5 billion).
China export drop
The value of merchandise exports from China to Portuguese-speaking Countries saw a sharp decline of 36.9 per cent year-on-year to US$10.4 billion, while trade in the opposite direction increased 2.4 per cent to US$22.3 billion. In a month-to-month comparison total trade between the two markets in May went up by 10.4 per cent to US$8.4 billion compared to April. The value of imports by China
Brazil leads
Angola runner-up
The African country of Angola was China’s second biggest Portuguese-speaking trading partner; however, it saw a month-to month 21.4 per cent decrease in total trade value in May to US$111 million. In the first five months of 2016, trade between Angola and China reached US$580.8 million Exports from Angola to China increased 18.25 per cent from April to May, reaching US$14.42 million, but the amount of imports to the African country decreased 14.57 per cent to US$96.56 million.
The draft suggests enhancing the rights of consumers for product information and compensation. Annie Lao annie.lao@macaubusinessdaily.com
The draft of the Consumer Protection Law has been completed and is now waiting to be sent to the Legislative Assembly (AL) as soon as possible, stated Wong Hon Neng, President of the Executive Committee of the Consumer Council, in response to legislator Kwan Tsui Hang’s enquiry. Legislator Kwan Tsui Hang submitted a written enquiry to the government, asking when the bill of the Consumer Protection Law will be sent to the Legislative Assembly (AL) as the government recently set the target date in the first quarter of this year.
The legislator also questioned in the enquiry how the new Consumer Protection Law would specifically protect the interests of consumers through effective measures. The Consumer Council said that the draft recommends strengthening consumers’ rights for product information and compensation. Certified business operators are required to provide all necessary information, pricing labels and proof of purchase to their consumers based on a contract. The draft proposes the Consumer Council monitor the improper business conduct of the operators. When necessary, penalties are to be applied to any misleading or intimidating conduct for unfair business operation. In addition, the draft recommends business transactions conducted through pre-paid, online shopping or contracts that are set up outside the location of the business operators should entitle consumers to be able to cancel the business transaction within seven days.
Business Daily Friday, July 8 2016 3
Macau Land law Government: Follow the law for land concession issues
Rule of law The government is standing firm, saying it would follow the Land Law to deal with any issue relating to land concessions. Kam Leong kamleong@macaubusinessdaily.com
T
he MSAR Government said yesterday it would strictly obey the city’s new Land Law to deal with land concessions, following a seminar held on Tuesday by a major land
awardee in Zone C and Zone D of Nam Van calling for amendments to the law. ‘The government, as always, adheres to Macau’s laws and regulations when handling issues concerning land concessions,’ a statement released yesterday by the Government Spokesperson’s Office reads.
Graft
IACM chiefs conceal absences of subordinates Anti-graft watchdog Commission Against Corruption (CCAC) have uncovered a current chief and a former chief of the Civic and Municipal Affairs Bureau (IACM) covering up for their two subordinates being late to work and leaving early for four years, leading to a loss of half a million patacas to the government. According to an announcement by CCAC yesterday, two public servants of IACM were found to have had over 600 unjustified absences in total between 2011 and 2014. Due to the concealment of their acts by the two chiefs involved, the IACM improperly paid them the full remuneration, which resulted in a direct loss of some MOP550,000
(US$68,750) to the SAR Government, the anti-corruption body said. Under the Staff Regulations of the IACM and internal attendance officials, coming in late to work and leaving early should be considered unjustified absences. CCAC added that the two chiefs had known about the misconduct of the two subordinates from different sources. Nevertheless, they did not report the two public servants to their superiors, nor took any measures to regarding their continuous misacts. The Commission also pointed out that one of the two chiefs involved tried to conceal the illegal act for the subordinates by accepting several dozen absence records without proper evidence or explanation. The two chiefs are now alleged to have committed abuse of power under the Penal Code. According to CCAC, the case has been referred to the Public Prosecutor’s Office. K.L.
On Tuesday, a self-organised ‘seminar’ on the new Land Law was held by Nam Van Development Company Ltd., which is the concession holder of 13 land plots in the two reclamations zones. These land parcels, the concessions for which are expiring at the end of this month, are set to be reclaimed by the government due to their non-development. But the company argued at the discussion that the non-development of the plots was due to the authorities, slamming the government’s decision to take back the plots based on the new Land Law as the “wrong decision”. ‘Land concessions relating to [Zone] C and [Zone] D in the Nam Van district are being handled in line with the Urban Planning Law, which has been in place since 1 March 2014,’ the government, nonetheless, stated yesterday. The current Land Law mandates that no extensions are allowed for temporary or conditional land concessions, which carry a validity of 25 years, if developers fail to complete their projects.
Planning on the way
According to Nam Van Development’s official website, the company was
granted 11 of 17 land plots in Zone C; namely, C1, C3 to C6, C8 to C12 and C17, in addition to two of five plots in Zone D - D2 and D5. Meanwhile, the government is controlling three plots in Zone C – C2, C15 and C16 and two in Zone D - D3 and D4. Plot C2 has been planned for the temporary office of the Court of First Instance, the construction of which is progressing. “The government is analysing options for the use of the other four land parcels that are publicly controlled,” the Spokesperson’s Office wrote. It added that the land concession of another land plot in Zone C, C7, will expire on August 21 next year. Plot C7 - which was linked to the graft case involving disgraced ex-Secretary Ao Man Long - was once of interest for acquisition by Hong Kong-listed China Star Entertainment Ltd. in 2009, who later bowed out of the deal in 2012. The company explained then that the withdrawal was due to the MSAR Government not having any urban planning guidelines for the area.
4 Business Daily Friday, July 8 2016
Macau Opinion
Pedro Cortés
Landed law This week, a company granted land rights back in 1991 organised a forum in order to put pressure on the Macau Government and Legislative Assembly to change the land law, which entered into force in 2013. Present were prominent colleagues of my profession, as well as members of the Legislative Assembly. Some of them voted in favour of the law that they now want to change. Back in October of last year, together with my learned colleague Marta Mourão, we had the opportunity to prepare an article for the specialised legal platform ‘International Law Office’ where we highlighted what had started to happen in December and is now bolder, as the concessions of the plots of land in Nam Van area are to expire very soon. The title of the article was ‘Land Law – problems ahead’ and the conclusion was “The Land Law should be amended to protect the rights of concessionaires who have submitted construction plans because of changes to urban plans and have therefore requested a revision of the concession contract. This would also prevent the government from being sued for inaction.” Since then, we have heard some voices defending the rights of the concessionaires of the land stating that we are in the presence of confiscation. I am not going to comment and discuss this legal term, as an infinite discussion would start. Nonetheless, in my view, this only happens when we talk about rights that are already established in the sphere of an individual or corporation and not provisional rights. In this case, and in my humble view, we are in the presence of a concession that will expire, as the concessionaire has not developed the land. Whether because of the inaction of the concessionaire of the land or of the government is another story. It is clear that in the last 10 years, in most of the cases, it was due to the inaction of the Macau Government, without any doubt. What I cannot understand is why we have well recognised members of the Legislative Assembly criticising a law that they have passed without any kind of reserve. Furthermore, they are raising their voices against a government and a specific Secretary who is only following the rules that he has not created or influenced. At that time, he was in a much better position than he is now. Maybe the problem is that the Macau forces were not used to someone who goes by the book and exercises his office strictly abiding by the laws in force and not looking to any special interests. This is what is new here. The good thing is that our system protects the rights of those who have seen and will see their concessions expire. Unfortunately, not the way they wanted – new concessions or extension of the concessions. But for that, they should not blame the plucky Mr. Rosário but themselves and the colleagues in the Legislative
Pedro Cortés is a lawyer and frequent contributor to this newspaper.
Tysan HNA Finance buys company and ejects four non-executive directors
HK$2.62 bln for foundation company Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
F
ollowing a recent profit warning from Tysan Holdings Limited, the group contracted for the Passenger Clearance Building of the Hong Kong-Zhuhai-Macau Bridge, the company has released the details of its June 30 mandatory unconditional cash offer for all of the issued shares of Tysan other than those already owned by the purchaser – HNA Finance I Co. Ltd, as announced yesterday on the Hong Kong Stock Exchange. The company is currently a ‘market leading company and ranked first, by revenue, in the foundation industry for three consecutive years’, in Hong Kong, completing 54 foundation projects in Hong Kong and Macau in the past three years for a sum of HK$11.28 billion (US$1.45 billion) as a contractor and subcontractor on foundation projects. Segment revenue from the Macau market amounted to HK$17.57 million so far this year and HK$324.7 million in 2015, due to construction on the bridge project. This comes as the conclusion of a deal struck in April, conducted via CCB International Capital Ltd., and represents 66 per cent of the issued
share for an ‘aggregate consideration’ of HK$2.62 billion, or HK$4.53 per share. The transaction is payable in cash and represents about 577.3 million shares. ‘HNA Finance I is required to make a mandatory unconditional general offer in cash for all the issued Shares other than those already owned or agreed to be acquired by HNA Finance,’ notes the report, citing the Takeovers Code relating to the transaction. The filing notes that any final dividend for the financial year ending March 31 ‘shall accrue to HNA Finance I’, however none was recommended for the fiscal year. The mandatory offer remains open until July 28. The group notes within the report that it values its entire share capital at HK$3.962 billion, while the ‘maximum cash amount to be paid to Independent Shareholders’ based upon the offer is approximately HK$990.56 million.
Same but different
The filing also notes that the company, which is engaged in ‘aviation, holdings, capital, tourism, logistics and ecological technology’ ranks 464 in Fortune magazine’s Global 500 ranking, with annual revenue of about US$25.6 billion, as well as
being held 70 per cent by Hainan Traffic Administration Holdings Co. whose ‘ultimate controlling shareholding is Hainan Province Cihang Foundation’. The group makes special note that the purchaser has ‘no intention to terminate any employment of the employees of the group or to make significant changes to any employment’. Consequences of the transaction extend as high as the board, noting that upon completion ‘it is intended that the resignation of Mr. Wang Tianbing, Mr. Stuart Morrison Grant, Mr. Justin Wai and Mr. Law Yiu Fat Richard from the Board would take effect on the date immediately after 28 July 2016,’ the closing date of the offer. The four members of the board are currently non-executive Directors and four new executive and non-executive directors will be elected upon completion of the transaction. HNA Finance I expresses that they wish to maintain the status quo and ‘intends that the Group will continue with its existing business,’ as well as to’ raise the number of projects, asset value and brand recognition to a higher level, including by actively seeking potential business investment and development projects in the PRC (People’s Republic of China) and overseas’.
Property
Agile property pre-sales surge 37 pct in H1 Mainland Chinese developer Agile Property Holdings Ltd. generated 28.5 billion yuan (MOP34.1 billion/ US$4.3 billion) from the pre-sales of its property projects in the Mainland for the first six months of the year, up 36.7 per cent compared to some 20.8 billion yuan one year ago. According to its filing with the Hong Kong Stock Exchange on Wednesday the company pre-sold a total gross floor area of 2.86 million square metres during the six months, which surged by 27 per cent, compared to some 2.26 million square metres pre-sold during the same period of last year. In addition, the average selling price per square metre of the company registered a year-on-year increase of some 8 per cent to 9,932 yuan for the period from 9,231 yuan. For June alone, the Guangzhou-based developer reached 6.79 billion yuan in pre-sales of residential
projects, which grew by 20 per cent year-on-year compared to 5.67 billion yuan one year ago. Total pre-sold gross floor area in the month amounted to 644,000 square metres, which expanded by 11.6 per cent compared to some 577,000
square metre pre-sold during the same month in 2015. The residential projects of the Chinese developer, primarily located in the Mainland, are popular among homebuyers and investors from Macau and Hong Kong. K.L.
Business Daily Friday, July 8 2016 5
Macau Telecommunications New CTM online shopping system operational in 30 days
CTM CEO: “Whatever we do, we comply with the regulations and the law” The CEO of CTM, Vandy Poon, says the telecommunications company hasn’t done anything wrong to see its concession terminated. Nelson Moura nelson.moura@macaubusinessdaily.com
E
verything the telecommunications operator has done has been compliant with Macau’s laws and regulations but the company isn’t certain if the government will
renew its concession for another five years, the chief executive of Companhia de Telecomunicacoes de Macau (CTM), Vandy Poon Fuk Hei, told Business Daily. “We work with the government every day, and not just because the issue was more laborious to us. So far we haven’t heard from the
government that they don’t intend to renew the concession, nor that they have unconditionally decided to remove the concession,” Vandy Poon told Business Daily on the sidelines of yesterday’s launch ceremony for the Tai Fung CTM Visa Signature Credit Card.
Listening carefully
Legislators of the Public Administrative Affairs Committee are currently discussing if the government should keep the public telecommunication service contract agreed in 2009 with CTM until 2021 or terminate the contract earlier. Terminating the contact would force the government to pay 2.5 times the value of the average profit that CTM made in the past three fiscal years before tax. Last week, Legislator Chan Meng Kam, President of the Public Administrative Affairs Committee, said in an interpellation in a Legislative Assembly (AL) plenary session that since the concession was signed CTM has held an unfair monopoly of the city’s communications market. The telecommunications company CEO told Business Daily that CTM has “listened and analysed” to some of
the legislators’ complaints but that it had also heard “supporting voices” among the legislators. “Whatever we do, we comply with the regulations and the law. We focus on telecom. As for political statements we listen with care, then we will try to improve our services based on the suggestions,” Poon told Business Daily.
Online shopping system coming
The CTM CEO also told Business Daily that the company’s new e-commerce platform ‘MacauGoodhands’ is in its “completion stages” and will “maybe be operational in 30 days”. The platform will include a search engine of the city’s varied information and an online shopping mall. According to CTM, the online shopping system will target local residents and tourists in addition to helping local SMEs in the economic adjustment phase “Macau hasn’t developed this kind of offline to online economy, so we’re actually creating something new. Therefore, we decided we wanted to get much better prepared; we still need to find two main field processors and take care of the logistics behind it,” said Vandy Poon.
Banks
BNU opens Seac Pai Van Branch Hengqin branch opening planned for year-end. Banco Nacional Ultramarino S.A. (BNU) has opened its latest branch at Seac Pai Van in Coloane, with the official inauguration ceremony held yesterday. The ceremony was officiated by Mr. Anselmo Teng, Chairman of the Executive Committee of Macau Monetary Authority, Ms. Ho
Teng Iat, Member of the National Committee of The Chinese People’s Political Consultative Conference, Mr. Mak Soi Kun, Member of The Macau SAR Legislative Council, Mr. Peter Lee Coker, Joint Chairman and Executive Director of The 13 Holdings Limited, and Mr. Pedro Cardoso, President of the BNU Executive Committee. The bank said in a statement that ‘as a commercial and issuing bank, BNU has strongly contributed over
Land
The Holy House of Banking First Public Notary Office at the Holy House of Mercy could become a bank. The space occupied by the First Public Notary Office at the Holy House of Mercy (Santa Casa da Misericordia) building could become a bank, the President of the Board of Trustees of the Macau Holy House of Mercy, António José de Freitas, told Portuguese language newspaper Tribuna de Macau. “We received a proposal from one of the city’s main banks and another from a private businessman. We will analyse the proposals but we prefer it would be the bank to occupy the space, regardless of the rent,” António José de Freitas told Tribuna. The First Public Notary Office will be moved to the Northern District
Integrated Services Centre Building by the end of this year, after the Legal Affairs Bureau (DSAJ) said the current monthly rental for the First Public Notary Office is MOP1.2 million (US$150,140) and that the lease will expire at the end of this year. According to Freitas, the building’s high rent mandates some moderation from interested parties, but that by contract the government will have to pay the rent for the next five months, even if it vacates the place before that time. The Holy House representative also told Tribuna that the government has shown “a lack of interest” in resolving the issue. N.M.
the past 114 years to the economic and social development of Macau. In order to meet the needs of both corporate and retail clients, BNU is expanding its branch network, providing more and better banking
services to its customers.’ The bank added that the expansion of BNU’s branch network will continue during the current year with the establishment of a branch in Hengqin.
6 Business Daily Friday, July 8 2016
Macau Legal
Trademark battles on the Mainland The first challenge of local firms hoping to develop opportunities across the border may be registering their trademarks in China.
G
uangdong-based entrepreneur Zhan Baosheng registered the trademark of ‘Tesla’ in both Chinese and English in Mainland China in 2006, but he was not a representative of the eponymous automotive firm that was incorporated in the United States three years prior. Holding the brand name, the
Guangdong businessman subsequently sought to sell the label to the U.S. carmaker. As the talks collapsed, Mr. Zhan threatened to take the manufacturer to the courts. Tesla settled nearly a decade later in 2014. The Tesla case is only one of the recent examples of overseas firms caught up in trademark turmoil raging on the Mainland – the same
hurdle Macau firms have to overcome when entering the market across the border. More of them are subsequently taking proactive steps to protect themselves. Jaman Wong, president of the Macau Chain Stores and Franchise Association, says many time-honoured brands here have faced trademark squatting on the Mainland, referring to the act of a third party registering another’s brand name. “It [trademark squatting] has become a business for some people in the Mainland for profiteering,” he said.
As it is difficult to get back the labels via the legal process given the lengthy procedures, it has been more common for Macau companies in recent years to settle with ‘the squatters’ for using their trademarks across the border, Mr. Wong said. “As the registration system in the Mainland is different from Macau, it usually takes at least a year for the company to trademark its name in the Mainland if there’s no opposition or other difficulties,” the association president added. Opening its first outlet in the Mainland in Shanghai in 2004, Seng Fung Jewellery Co. Ltd., one of the largest jewellery chains in Macau, had a relatively smooth path getting their name trademarked on the Mainland. The key, according to Lee Koi Ian, the company’s general manager, was to plan ahead. “We [prepared] so long before we came up with a plan to enter the [Mainland] market,” he said. “You need to envisage your future business scale; namely, which classes of product or service you will engage in because others could get [the identical] trademark in other business segments,” Mr. Lee explained. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
and knowledge,” he noted. Civil engineer Albert Lai Kwong Tak, convenor of Hong Kongbased think tank Professional Commons, is also pessimistic on the plan. “The supervision of nuclear energy in [Mainland] China is like a black box operation with a lack of transparency,” said the observer of
nuclear energy development on the Mainland. “[The nuclear operation] remains a risk to tens of millions of people in the Pearl River Delta region,” he added. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
Society
Nuclear fear China’s intention of building up to 40 nuclear reactors in nearby Guangdong might endanger the lives of Macau residents given the supervision of nuclear plants in the Mainland lacks transparency. Thousands of destroyed homes and buildings, and people wearing white protective clothing wandering across a ghost town are the scenes Macau resident Lily Lei still recalls that she associates with a major earthquake and nuclear disaster in Fukushima Prefecture in Japan in 2011. “It’s not like I don’t eat or buy Japanese food any more but I try to know which [Japanese] prefecture the food comes from whenever possible,” the mother of one son said more than five years after the incident. The recent controversies surrounding the nuclear power station in Taishan, Guangdong Province continue to keep people like Ms. Lei vigilant where nuclear energy is concerned.
Although the authorities try to assuage the fears in Macau and Hong Kong that the Taishan plant is safe and sound, apprehensions persist as up to 40 nuclear reactors could be located in Guangdong in the future even though its nuclear supervision is often criticised for its lack of transparency. This May, a report by Hong Kong news agency FactWire indicated that the construction of the Guangdong plant has continued and the two reactors sealed, while the works of similar units in Finland and France have been halted for further evaluation. The report quotes engineers saying that the Taishan facility could only be operational in 2018, but the Chinese authorities want it online next year as scheduled so that it would be the world’s first nuclear power plant using third generation nuclear technology. However, experts have flagged safety concerns, following defects found in a nuclear plant in France using the same technology as Taishan in April last year. Hong Kong-based nuclear energy expert Woo Chung Ho has been quoted as saying he is not confident Mainland China has good operational management, which is critical to the safety of the nuclear plants. “It’s all about the risk awareness of the people in charge, which in turn shapes the corporate or working culture of a place. This relates to their culture
Fireworks Contest
MOP27.6 mln budgeted for pyrotechnic extravaganza Fireworks teams from Canada and Rumania mark their debut this year. Annie Lao annie.lao@macaubusinessdaily.com
This year’s 28th Macao International Fireworks Display Contest budget has been set at MOP27.6 million (US$3.45 million), a 10.5 per cent increase compared to the previous year, according to TDM Chinese Radio yesterday. The Fireworks Display Contest will take place from September 3 to October 1 in front of the Macau Tower on September 3, 10, 15 and 24 and October 1, according to a press release published by Macao Government
Tourism Office (MGTO) yesterday. A total of ten contesting teams from Thailand, Portugal, the United Kingdom, Switzerland, Japan, Korea, Italy, Canada, Rumania and China will participate for this year’s honours. The fireworks companies from Rumania and Canada will make their debut at this year’s event, according to MGTO. The themes of this year’s competition are ‘Pyro Fantasia’, ‘Tribute to Bond’, ‘Mid-Autumn Harmony’, ‘Stars from afar’ and ‘Celebration in the Sky’. The event seeks to promote Macau as a World Centre of Tourism and Leisure. MGTO has partnered with different public departments, entities and non-governmental organisations in order to attract residents to participate in this event. The General Union of Neighbours Association of Macau will again hold a Fireworks Carnival this year, at the invitation of MGTO. Applications are now open for the Trophy Design Contest, Photo Contest and Student Drawing Contest of this event.
Business Daily Friday, July 8 2016 7
Macau Junket
Suncity to set up in Studio City
would only be announced at a later stage. On Wednesday, Bloomberg, quoting an unidentified source, Local junket operator Suncity reported that Melco Crown is Group is to set up a VIP room in Studio City – part of Melco Crown planning three VIP rooms in its Entertainment Group - online news new property as early as this outlet GGRAsia reported yesterday. quarter, while Suncity and fellow junket Tak Chun Group are among The media quoted a Suncity the promoters running the new spokesperson as saying that gaming rooms for high-rollers. further details on the VIP room
Crime
Police bust loan sharking group targeting gamblers Eight Mainlanders have been arrested for offering high interest loans to casino gamblers. Annie Lao annie.lao@macaubusinessdaily.com
J
udiciary Police (PJ) uncovered a loan sharking group and arrested eight males from Mainland China on Wednesday, according to a press conference held at Judiciary Police (PJ) headquarters in Avenida da Amizade yesterday. The suspects lured casino gamblers outside the large casinos in the ZAPE (Zona de Aterros do Porto Exterior) district on the Macau Peninsula in an attempt to offer them high-interest loans. “The suspects mainly walked around the casinos and asked people near the casinos to see if they needed to borrow money to pay off their losses from betting at the casinos, and then they would refer the borrowers
back to their leader in Mainland China,” the PJ spokesperson said. The interest rate of the loans would be around 10 to 20 per cent, according to the PJ. The arrested men, aged between 21 and 35 years old, assisted the Mainland Chinese to come to Macau to gamble in the casinos. With each successfully issued loan, they received 10 per cent as a reward based upon the amount of the loan issued to borrowers. The loan sharking group had been operating for about one year, with an estimated 60 members, mostly from Mainland China, working for the group, according to the PJ spokesperson. The leader of the loan sharking group would send ten members from the Mainland to Macau each time.
EGT
Melco Int’l subsidiary gaming machine sales on a roll Melco International Development Ltd., a company controlled by local gaming entrepreneur Lawrence Ho Yau Lung, said its non-wholly owned Entertainment Gaming Asia Inc. (EGT) is selling a total of 824 gaming machines for US$3.25 million (MOP26 million) in two deals. According to the company’s filing with the Hong Kong Stock Exchange on Wednesday night a wholly-owned subsidiary of EGT is to sell 670 electronic gaming machines located in the NagaWorld Casino for US$2.5 million, as well as 154 machines located in the Leisure World VIP Slot Club in the Philippines for US$750,000. Melco International, holding some 64.8 per cent of the issued shares of EGT, expects the two deals will bring in some US$1.89 million.
Prior to the sales agreements, the electronic gaming machines to be sold were respectively rented to the owners of the NagaWorld Casino and the Leisure World VIP Slot Club, the rental agreements of which were both terminated on June 30. The Hong Kong-listed company did not name the purchasers in the two deals. But it indicated the sales of 154 gaming machines is to a company ‘principally engaged in the gaming, recreation and leisure businesses,’ while the other deal involving 670 machines was reached with ‘an individual’. EGT, listed on NASDAQ, is primarily engaged in slot operations, development and operation of regional casinos and gaming clubs in the Indo-China region. K.L.
These suspects then came to Macau on a tourist visa. The PJ caught the suspects confining borrowers in their rented apartment located in Avenida 24 de Junho if the borrowers did not replay their loans on time. The PJ also seized some retractable sticks, offensive weapons and
receipts of issued loans inside the apartment. The amount involved is still unknown. Police say the investigation is ongoing into the rest of the suspects in the loan sharking group. The case has been handed to the Public Prosecutor’s Office.
8 Business Daily Friday, July 8 2016
Greater China
China’s currency has depreciated 1.6 per cent over the past two weeks to the lowest level since 2010
Outbound deals
Deal-Hungry Chinese buyers hit a wall after record M&A spree Chinese companies have gone big game hunting this year. Yet that record run is threatened by a rising set of challenges.
I
t took less than six months for the volume of announced Chinese outbound deals to surpass last year’s total of US$120 billion -- itself a milestone. But now, Chinese buyers are facing tougher
regulatory opposition abroad, while at home they must grapple with a government keen to stabilize a yuan pressured by outflows from US$148 billion of overseas deals this year. “Chinese outbound M&A is likely
to slow down in the second half of the year,” said Zilong Wang, head of mergers and acquisitions at China International Capital Corp., which is advising China National Chemical Corp. on its proposed purchase of Syngenta AG. “Mainland companies may face greater scrutiny in transferring funds offshore for acquisitions.” Would-be Chinese acquirers are being hindered by government opposition in Europe, which until now had remained friendlier territory than the U.S. On top of that, there are sceptical target boards and difficulties getting funds offshore. For bankers and lawyers, the plateauing in China deals threatens one of the few bright spots in global dealmaking, which is down 13 per cent from this time last year and reeling from a number of high-profile blowups. The trend illustrates the bind facing President Xi Jinping’s government, which continues to encourage Chinese companies to use acquisitions to gain know-how while seeking to limit the currency moves that could accompany a string of big-ticket purchases.
“Mainland companies may face greater scrutiny in transferring funds offshore for acquisitions.” Zilon Wang, head of mergers and acquisitions at China International Capital Corp.
Domestic Scrutiny
China’s dealmaking ambitions face increased scrutiny at home. The commerce ministry, one of several regulators with a say in acquisitions, last month publicly warned of the pressure of outbound investment on the country’s foreign exchange reserves. The currency supervisor, no longer the rubber stamp it once was, has also held up some landmark transactions including the US$9.3 billion buyout of Qihoo 360 Technology Co. A key concern for Chinese authorities is the stability of the yuan, which is on track for a third annual loss versus the dollar, even after central bank support that’s led to an US$800 billion decline in the nation’s foreign-exchange reserves over the past two years. China’s currency has depreciated 1.6 per cent over the past two weeks to the lowest level since 2010. China’s State Administration of Foreign Exchange is scrutinizing deals to ensure they fit into a strategic priority
for the country, according to Chen Lin, a finance professor at the University of Hong Kong. The Qihoo buyout consortium, leading the largest ever take-private of a U.S.listed Chinese firm, is among investors bearing the brunt of the supervisor’s scrutiny. The group eventually agreed to the Chinese regulator’s request to transfer the buyout funds offshore in several batches, after trying unsuccessfully for approval to send the money overseas in a single go, people with knowledge of the matter said earlier. That further delayed a deal that’s still pending more than a year after an initial announcement.
21 Billion USD In announced deals from Chinese buyers this year have been terminated
Coming Home
Another source of Chinese deals is set to dry up as the nearly US$50 billion wave of attempted privatizations runs into trouble. Online-chat platform YY Inc. said in June that a group of executives pulled a US$2.5 billion takeover proposal. 21Vianet Group Inc., a Beijing-based data center operator, announced the same month that a potential bid for the company valued at US$1.7 billion wouldn’t proceed. Chinese investors planning to acquire overseas firms and then relist them on the Shanghai or Shenzhen exchanges have been given pause following moves by the securities regulator to restrict their route back to the domestic market. The government is planning new curbs on backdoor listings as it seeks to discourage more buyouts, people familiar with the matter said in May. And that’s just at home. Chinese acquisitions this year have become increasingly high-profile, drawing the attention of officials in the U.S. and Europe too. ChemChina has resubmitted its US$43 billion Syngenta purchase to the Committee on Foreign Investment in the U.S., which can recommend transactions be blocked if they pose a risk to national security, people familiar with the matter said last month. At least two other recent China deals have unravelled amid CFIUS reviews. “We could be close to the peak in outbound Chinese deals,” said Severin Brizay, head of European M&A at UBS Group AG. “But I expect activity will continue, until a major deal gets blocked.”
Government Attention
Such stumbles threaten the bonanza for investment banks, which earned a record US$230 million in fees from Chinese buyers of overseas assets in the first half of the year, according to
Business Daily Friday, July 8 2016 9
Greater China deal by Midea Group Co., with funding from Industrial & Commercial Bank of China Ltd., has triggered concerns from the German government about the longer-term intentions of statebacked Chinese investors. “No matter if it’s a U.S. or European regulator, it’s become more and more likely that they will challenge these deals,” said the University of Hong Kong’s Lin. Chinese companies “are going for technologies. And that means they’re on their way to becoming direct competitors with European and U.S. firms.”
“We could be close to the peak in outbound Chinese deals.” Severin Brizay, head of European M&A at UBS Group AG New York-based consultancy Freeman & Co. Goldman Sachs Group Inc. was the No. 1 adviser on China outbound deals with a 49 per cent market share, followed by Beijing-based CICC and Credit Suisse Group AG, data compiled by Bloomberg show. Even China’s foray into Europe has faced opposition, with an offer by the nation’s biggest appliance manufacturer for a stake in German industrial robot maker Kuka AG drawing criticism. The
Sudden collapse
Companies must also contend with wariness from boards that have seen a number of large Chinese acquisitions collapse -- sometimes with scant warning. Beijing-based Anbang Insurance Group Co. had topped a rival bidder, Marriott International Inc., for the owner of the Sheraton and Westin hotel brands before it abandoned its offer with little explanation. At least
US$21 billion of announced deals from Chinese buyers this year have been terminated, the most since the first half of 2009, according to Bloombergcompiled data. Some Chinese firms saw deals fail when they stumbled near the finish line. Health-care investor Luye Group Ltd. lost the bidding for French drugmaker Ethypharm despite offering a higher price than the eventual winner, people with knowledge of the matter said. Luye left out a crucial clause in its financing documentation that would have offered stronger payment security, according to one of the people, who asked not to be identified as the information is private. China’s KingClean faltered in its bid for German coffee machine maker WMF when it couldn’t transfer enough funds offshore by a deal deadline, according to people with knowledge of the matter. Though KingClean was one of the final two bidders, KKR & Co. decided to sell the business to France’s SEB SA in a deal valued at about 1.6 billion euros (US$1.8 billion) because it wanted greater certainty of closing the sale, one of the people said. Representatives for Astorg Partners, the private equity firm that was selling Ethypharm, and KKR declined to comment. A spokeswoman for Luye Group said she doesn’t have any relevant information on the matter. A representative for KingClean’s Shanghai-listed arm, KingClean Electric Co., said the bid was pursued by the chairman’s private company and declined to pass on a request for comment.
Franchise rights
McDonald’s said to narrow bidders for US$2 bln China franchise McDonald’s Corp. selected bidders i n c l u d i n g C h i n a C i n d a As s e t Management Co., the nation’s secondbiggest bad-loan manager, and dairy producer Beijing Sanyuan Foods Co. to make binding offers for its operations in China and Hong Kong, people with knowledge of the matter said. Sanpower Group Co., the Chinese owner of U.K. department store House of Fraser, and GreenTree Hospitality were also invited to submit secondround bids in September, according to the people. McDonald’s is selling 20-year mass franchise rights in China and Hong Kong, which could fetch about 2 billion, the people said, asking not to be identified as the information is private. M c D o n a l d’ s i s r eva m p i n g i ts ownership structure in Asia as it pursues an international turnaround plan put in place after Chief Executive
Officer Steve Easterbrook took the reins last year. The fast-food chain said in March it is seeking franchise partners in mainland China, Hong Kong and South Korea to invest fresh capital and facilitate local decision-making. Unlike in its other major markets -including the U.S.-- most McDonald’s outlets in north Asia are companyowned. The fast-food chain aims to eventually have 95 per cent of its restaurants in the region under local ownership, it said in March.
Joint Bids
China National Chemical Corp., known as ChemChina, didn’t proceed to the second round, the people said. The state-owned enterprise, which agreed to buy Swiss pesticide maker Syngenta AG for about 43 billion in February, was among companies considering bids for
the Chinese operations of McDonald’s, people with knowledge of the situation said last month. A representative for Sanyuan Foods said she couldn’t immediately comment, while spokesmen for McDonald’s and Sanpower declined to comment. Representatives for Cinda and GreenTree didn’t immediately respond to e-mailed questions. A spokeswoman for ChemChina didn’t immediately answer a phone call and e-mail seeking comment. Cinda is bidding together with a Chinese company, two of the people said. Sanpower said last month it had submitted a joint offer with Beijing Tourism Group. Shares of Sanyuan Foods have risen 10 per cent in Shanghai trading this year, giving it a market value of about 1.8 billion. The company’s largest shareholder is state-owned Beijing Capital Agribusiness Group, known in Chinese as Sunlon, which has a joint venture with McDonald’s that runs some of the fast-food chain’s restaurants in the Chinese capital. Bloomberg News
In Brief Steel
Steel plants bounce back after destocking The mainland’s large steel plants saw improved profits and narrowed losses in the first five months of this year thanks to their destocking efforts, according to a national steel association. Major iron and steel enterprises raked in 8.736 billion yuan (1.31 billion U.S. dollars) in the Jan-May period, up over 700 per cent year on year while fewer firms reported losses, according to the China Iron and Steel Association (CISA). The improvement is a result of the firms’ rational response to overcapacity in the sector, as most large iron and steel plants reduced their output in the first five months and tried to stabilize product prices, CISA head Liu Zhenjiang said. Energy
Chinese energy use at 17-year low: report China’s energy consumption last year grew at its slowest pace since 1998 and its carbon dioxide emissions also posted a first negative growth in 17 years, according to an industry report released on Thursday. Chinese energy consumption only grew 1.5 per cent in 2015 year on year, the lowest growth in 17 years, while remaining the world’s largest growth market for the 15th consecutive year, showed BP Statistical Review of World Energy. The world’s largest energy consumer, producer and net importer saw its carbon dioxide emissions falling by 0.1 per cent in 2015 year on year, with coal consumption dropping to 64 per cent of primary energy consumption. Public-private
World Bank member partners with Chinese city World Bank member International Finance Corporation (IFC) signed an MOU with central China’s Yichang City for a public-private partnership (PPP) on Wednesday to boost the city’s economy and provide essential public services. This partnership is the IFC’s first PPP infrastructure advisory with a Chinese city, and it will hopefully support growth in Yichang by helping businesses improve productivity and tap new markets, according to Philippe Le Houerou, IFC Executive Vice President and CEO. The partnership will focus on projects such as healthcare, transportation, the environment and sanitation. Bad debt bank
New Chongqing bank for state-owned assets A new “bad debt bank” has been created from an existing state-owned assets management firm in the southwestern municipality of Chongqing to tackle bad debts and other questionable assets from local companies. The new firm, Chongqing Yukang Assets Management Company Ltd., will inherit the assets and debt restructuring arm of the stateowned Chongqing Yufu Assets Management Group Co., Ltd., the company said over the weekend. The new firm has registered capital of 5 billion yuan (around 750 million U.S. dollars) and has signed deals with 21 banks to secure a credit line of 160 billion yuan.
10 Business Daily Friday, July 8 2016
Greater China Airlines
HNA extends Gategroup takeover offer, scraps minimum buy-in HNA Group Co. extended its 1.4 billion-franc (US1.4 billion) offer for Switzerland’s Gategroup Holding AG and said it would scrap a previously set minimum acceptance level for the world’s secondbiggest airline caterer.
G
ategroup shareholders can tender their stock until July 21 after counting at the end of the initial acceptance period showed HNA garnered 63.6 per cent of the Swiss company, the Chinese conglomerate said in statement Thursday. In April, HNA said the deal for the European company required a 67 per cent buy-in. “HNA is pleased about this interim result and remains confident that more shareholders of Gategroup will recognize the benefits of accepting the offer and therefore tender their shares into the offer during the additional acceptance period,” the company said in the statement Thursday. Under the agreement, the airlines-to-supermarkets group controlled by Chinese billionaire Chen Feng had the option to walk away from the deal or drop the condition for minimum acceptance and extend the offer period through July 21. Hainan-based HNA said Thursday it expects the settlement to occur toward the end of the third quarter or the beginning of the fourth quarter of this year.
Buying assets
HNA’s purchase of Gategroup amid a boom in Asian air travel will add to the clutch of aviation assets that the acquisitive Chinese group has bought around the world. Inflight caterers are struggling with a tougher operating
environment as consolidation in Europe and the U.S. boosts carriers’ bargaining power, and a switch to low-cost flights means fewer passengers take meals. The Chinese group had offered Gategroup 53 francs a share plus a previously declared 30 centimes a share dividend. Shares of the Swiss company climbed 2.3 per cent to 52.15 francs as of 12:49 p.m. in Zurich, giving it a market valuation of 1.4 billion francs. Should HNA proceed with its acquisition, RBR Capital Advisors would sell its stake in Gategroup, Rudolf Bohli, the chief executive officer of
RBR, told AWP, a Swiss newswire. RBR, which owns 10.88 per cent of Gategroup, doesn’t want to be a minority shareholder, Bohli said, adding he considers the deal “done and dusted.” Gategroup had a loss of 63.4 million francs on sales of 3 billion francs last year, when the company said it would cut 300 jobs in locations such as Zurich and London. The caterer’s 24.5 per cent negative return on equity compared with a plus 10.1 per cent return at Hainan Airlines Co., HNA’s flagship carrier, according to data compiled by Bloomberg. Bloomberg News
63.4 million francs Loss on sales for Gategroup on sales of 3 billion francs last year
Property
Risks to China property market increasing The country’s property prices and real estate investment are poised for slower growth even as home sales may rise to a record this year, according to a top government think tank. Real estate is due for a “short-term adjustment period” after heating up since 2015, the Chinese Academy of Social Sciences said in a report
50 million square metres Drop in total housing inventory from a year ago
Wednesday. Price increases and investment will slow down in the second half of 2016 and the first half of 2017, with the divide between big cities and smaller ones continuing to widen. Property has been one of the few bright spots in a slowing economy this year. The real estate industry contributed 0.37 per centage point to economic growth in the first half of 2016, while total housing inventory has fallen by 50 million square meters from a year earlier, according to CASS. The economy expanded 6.7 per cent in the first quarter and is forecast
by economists to grow 6.6 per cent in the second. Sales growth slowed slightly in May, as did investment, and a two-speed growth trajectory of housing prices in big and smaller cities became more apparent. A mismatch between supply and demand in different regions is a “very big problem” as there are simultaneous supply shortages and surpluses, said Ni Pengfei, director of the National Academy of Economic
Strategy at CASS and the main author of the report. Surging prices for housing and land in big cities led to an explosion of credit and high leverage in the industry, together with an increasing default risk facing real estate developers, according to Ni. In smaller cities, inventories are huge, and developers may soon feel the pinch of inadequate cash flow, he said. Bloomberg News
Retail
China’s large retailers report slower growth in 2015 The mainland’s large retailers registered slower growth last year, with brick-and-mortar stores under continuous pressure due to booming e-commerce, a report showed Thursday. The sales volume of the country’s top 100 retailers topped 4.13 trillion yuan (613.6 billion U.S.dollars) in 2015, up 22.4 percent year on year, down by 3.8 percentage points
Alibaba was top seller last year
compared with 2014, according to a report released by China General Chamber of Commerce, a retail industrial guild and retail market data provider. Among them, brick-and-mortar stores posted a continuous slowdown in growth, with sales only rising 3.2 percent year on year. Chinese Internet giant Alibaba’s T-mall e-commerce platform was the top seller last year, followed by JD.com and Suning.com. The report pointed out that foreign retailers saw their market share in China decrease further last year, with fewer foreign players making it into the top 100, and slower sales growth. Xinhua
Business Daily Friday, July 8 2016 11
Asia “Robots are becoming better at assembly, cheaper and increasingly able to collaborate with people.” International Labour Organization
About 137 million workers fall under the high-risk category
Employment
Millions of SE Asian jobs may be lost to automation in next two decades-ILO More than half of workers in five Southeast Asian countries are at high risk of losing their jobs to automation in the next two decades, an International Labour Organization study found, with those in the garments industry particularly vulnerable.
A
bout 137 million workers or 56 percent of the salaried workforce from Cambodia, Indonesia, the Philippines, Thailand and Vietnam, fall under the high-risk category, the study showed. “Countries that compete on lowwage labour need to reposition themselves. Price advantage is no longer enough,” said Deborah FranceMassin, director for the ILO’s bureau for employers’ activities. The report said workers have to be trained to
work effectively alongside digitalised machines. Southeast Asia is home to more than 630 million people and is a hub for several manufacturing sectors, including textiles, vehicles and hard disk drives. Of the 9 million people working in the region’s textiles, clothing and footwear industry, 64 percent of Indonesian workers are at high risk of losing their jobs to automation, 86 percent in Vietnam, and 88 percent in Cambodia.
Ga r m e n t m a n u f a c t u r e rs i n Cambodia, who take orders from retailers such as Adidas, Marks and Spencer and Wal-Mart Stores Inc, employ about 600,000 people. Neighbouring Vietnam is seeing record investment in its footwear and textiles industries, due to new free-trade pacts with major markets, including the U.S.-led Trans-Pacific Partnership. It is the second-largest garment supplier behind China to the United States. The United Nations agency said technologies including 3D printing, wearable technology, n a n o t ech n o l o g y a n d r o b o t i c automation could disrupt the sector. “Robots are becoming better at assembly, cheaper and increasingly able to collaborate with people,” the ILO said. The textiles, clothing and footwear sector is at the highest risk of
automation out of five industries analysed in the study, including automotive and auto parts, electrical and electronics, business process outsourcing and retail. In the automotive and auto parts industry, more than 60 percent of salaried workers in Indonesia, and over 70 percent of those in Thailand face the risk of their jobs being displaced. Southeast Asia’s automotive sector, the seventh-largest producer of vehicles in 2015 globally, employs more than 800,000 workers, the report said. Known as the “Detroit of Southeast Asia”, Thailand is a regional production and export hub for the world’s top carmakers. The auto sector accounts for around 10 percent of Thai GDP and employs a 10th of its workers in manufacturing. Reuters
Tropical storm
Taiwan Shuts Eastern Counties Early as Typhoon Approaches Taiwan told schools and offices along its eastern coast to close early Thursday as Typhoon Nepartak threatens to unleash strong winds and heavy rain across the island through Friday. Airlines canceled or rerouted flights in and out of Taiwan. The first typhoon to form in the northwest Pacific Ocean this year recorded sustained winds of 198 kilometers an hour (123 miles per
hour) gusting to 245 kilometers an hour, the Central Weather Bureau said. As of 4:15 p.m., the storm was 300 kilometers off the coast of eastern Taiwan’s Hualien. Wind and rain is expected across the whole island tonight and Friday, the agency said. Schools and government offices in Hualien and Taitung were closed from 4 p.m. today, the Directorate-General of Personnel Administration said in a
statement posted on its website. The capital city of Taipei said it would announce any Friday closures before 10 p.m. local time. Financial markets won’t be open if Taipei offices are closed, the Taiwan Stock Exchange and Taipei Exchange said. Strong winds are likely to lash the island in the early morning of July 8, Wu Wan-hua of the Central Weather Bureau said in a broadcast shown on cable news channels. Cathay Pacific Airways Ltd.
cancelled or rerouted 41 Taiwan flights scheduled on Thursday and Friday. Taiwan’s largest carrier China Airlines Ltd. cancelled flights into or out of southern Taiwan’s Kaohsiung between 7 p.m. Thursday and before 2 p.m. Friday. High speed rail service will be suspended Friday until 5 p.m. In China, the meteorological administration forecast Nepartak to make landfall on the coast of Fujian province Saturday morning. Bloomberg News
Foreign investment
India said to consider raising foreign investment limit in media
245 kilometres per hour Wind gusts from first typhoon this year
India is considering a proposal to increase the limit on foreign direct investment in local newspapers and magazines, two government officials said. Shares jumped. The Finance Ministry recommended raising the cap to 49 per cent from 26 per cent, bringing it on par with that on news television channels, the officials said, asking not to be identified citing rules for speaking with the media. The Department of Industrial Policy and Promotion will decide on the matter, they added.
Since taking power in 2014, Prime Minister Narendra Modi has raised investment limits in sectors including airlines, railways and defense. Asia’s third-largest economy is now one of the most open in the world, the government said last month. Jagran Prakashan Ltd., publishers of one of India’s most-read Hindi newspapers, jumped as high as 5.1 per cent and the stock closed at a record 182.4 rupees after the news. HT Media Ltd. surged up to 6.3 per cent and DB Corp Ltd. briefly pared losses. Bloomberg News
12 Business Daily Friday, July 8 2016
Asia Asia markets
Asian Equities Climb With European Futures as Oil, Kiwi Advance Asian stocks rose from a one-week low and European equity index futures rallied with oil before data that’s forecast to show a U.S. crude stockpiles fell. The yen advanced with gold as the fallout from Britain’s vote to leave the European Union continued to support haven assets.
E
nergy shares led gains on the MSCI Asia Pacific Index as crude climbed toward US$48 a barrel. New Zealand’s dollar rose versus all of its G-10 peers as the central bank damped speculation interest rates will be cut. Australia’s currency fell after S&P Global Ratings cut the outlook on the country’s debt rating. Gold neared a two-year high after minutes of the Federal Reserve’s last policy meeting showed officials were losing confidence in the economy’s ability to withstand an interest-rate hike even before the U.K. referendum. Investor sentiment took a knock in the wake of the so-called Brexit vote and demand for haven assets got a boost this week as seven U.K. property funds froze withdrawals amid a surge in redemptions. Fed policy makers kept rates on hold at the June 14-15 meeting amid concern that job creation was faltering, the minutes showed. Officials said they were also awaiting the outcome of the British referendum, which roiled global markets in its immediate aftermath and continues to weigh on risk appetite. Business confidence in the U.K. is the weakest it’s been since 2011, a report showed Thursday. “Ripple effects from the U.K.’s decision to leave the EU continue,” said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. “The wait-and-see mood will continue with investors trying to gauge the impact.” While services data Wednesday signaled the U.S. economy may have been gaining speed before Brexit, payrolls figures on Friday will be key to investors’ perceptions of where the Fed stands on its original plan to potentially raise rates twice this year. Germany reported an unexpected drop in industrial output for May, while U.K. figures on factory production and home prices are also due on Thursday. Financial markets in Indonesia and Malaysia are closed for holidays.
advanced 0.8 per cent and South Korea’s Kospi gained 1.1 per cent. New Zealand’s S&P/NZX 50 Index climbed for a ninth day, its longest winning streak since March. Samsung Electronics Co. gained 2 per cent in Seoul after the world’s largest maker of phones and memory chips reported better-than-estimated earnings. Geely Automobile Holdings Ltd. rose the most in a month in Hong Kong after the company reported a 41 per cent jump in June sales and UBS AG upgraded its stance on the stock. Futures on the S&P 500 Index were little changed following a 0.5 per cent advance in the U.S. benchmark on Wednesday. Economists predict Friday’s jobs report will show American employers added 180,000 workers to payrolls in June, following an unexpectedly small increase of 38,000 in May, the least in almost six years.
Currencies
The yen strengthened 0.5 per cent to 100.79 per dollar, taking its post-Brexit rally to more than 5 per cent. Bank of Japan Governor Haruhiko Kuroda said in a speech to his bank’s branch managers Thursday that the country’s consumer-price index is likely to remain slightly negative for the time being. He also said he is monitoring risks and will add stimulus should it be required. “The yen is gaining because it is the world’s preeminent safe-haven currency, and dipping below 100 per dollar again is only a matter of time,” said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia.
“The yen is gaining because it is the world’s preeminent safe-haven currency, and dipping below 100 per dollar again is only a matter of time.” Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia
New Zealand’s dollar strengthened 0.7 per cent after central bank Deputy Governor Grant Spencer said further interest-rate cuts could pose a risk to financial stability. Australia’s dollar fell 0.3 per cent after S&P cut the outlook on the nation’s credit rating to negative from stable following an inconclusive general election result at the weekend. The ratings company said that “without remedial action the government’s fiscal stance may no longer be compatible with the country’s high level of external indebtedness.” The British pound added 0.3 per cent to US$1.2976, after sinking to a 31-year low of US$1.2798 on Wednesday. South Korea’s won rose 1 per cent versus the dollar, gaining for the first time this week. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell for a second day, declining 0.1 per cent following a 0.2 per cent drop on Wednesday. Futures put the probability of the Fed raising interest rates by December at 12 per cent, down
from 50 per cent at the time of the U.K.’s June 23 referendum. The Fed minutes “play into our core view that the Fed will now delay a further rate hike until December, at the earliest,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients. “The market is certainly pricing in ‘gradual’ rate hikes.”
Commodities
Gold rose 0.2 per cent, climbing for a seventh straight session and nearing US$1,370 an ounce. The price reached US$1,375.71 on Wednesday, its highest since March 2014. Holdings in bullion-backed exchange-traded funds topped 2,000 metric tons on Wednesday for the first time since July 2013, according to data compiled by Bloomberg. Crude oil rose 0.3 per cent to US$47.57 a barrel in New York, building on Wednesday’s 1.8 per cent rebound. U.S. oil inventories fell 6.7 million barrels last week, the American Petroleum Institute was said to have reported ahead of government data Thursday that’s forecast to show supplies declined by 2.5 million barrels. Corn, which entered a bear market on Tuesday, rose for the first time in seven days. The price climbed 0.3 per cent to US$3.42 a bushel in Chicago.
Bonds
Japan’s two-year bond yield fell one basis point to an all-time low of minus 0.345 per cent. The nation’s 10-year rate was minus 0.28 per cent, near the record of minus 0.285 per cent reached on Wednesday. The yield on U.S. Treasuries due in a decade declined one basis point to 1.36 per cent, after sinking to an unprecedented 1.32 per cent in the last session. Billionaire bond investor Bill Gross said Wednesday that sovereign bonds are “too risky” with yields in many developed markets near alltime lows. Bloomberg News
“The wait-and-see mood will continue with investors trying to gauge the impact.” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co.
Stocks
Futures on the Euro Stoxx 50 Index rose 0.8 per cent as of 7:27 a.m. London time, while contracts on the U.K.’s FTSE 100 Index rallied 0.9 per cent. The MSCI Asia Pacific Index added 0.3 per cent, with a gauge of energy stocks rising 1.1 per cent. Benchmarks fell in Singapore and Tokyo, while Hong Kong’s Hang Seng Index
Gold rose 0.2 percent, climbing for a seventh straight session and nearing US$1,370 an ounce.
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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Business Daily Friday, July 8 2016 13
Asia In Brief Real estate
NZ bank considers tighter lending on housing
Smartphones
India’s US$4 smartphone seems too good to be true
picked by lottery. Other details were not available and e-mails, phone calls and text messages to Goel and his representatives in the past days went unanswered.
In the next few weeks, the world’s cheapest smartphone will meet the world’s fastest-growing smartphone market. In theory, at least.
Inquiries
A little-known Indian company called Ringing Bells Pvt is set to start shipping the Freedom 251. The prototype touts a quad-core processor, a 4-inch screen and front and back cameras - at the astonishingly low price of 251 rupees (less than US$4). While global brands Samsung Electronics Co. and Lenovo Group Ltd. sell devices for less than US$100, the US$4 smartphone is the one stirring up the internet-hungry, app-crazy hordes in a country where Apple Inc. has been unable to make a dent. With iPhones costing upwards of US$700, Apple commands a mere 2 per cent market share in a country where the World Bank puts the per capita income at US$5,630. Brands can’t make money even on US$50 smartphones, so profiting from a US$4 device is a ludicrous idea, say experts like Tarun Pathak, a senior analyst at Counterpoint Technology Market Research. While Micromax sells millions of cheap devices every month in smaller cities - it profits by taking advantage of economies of scale.
Ringing Bells’ managing director Mohit Goel isn’t counting on a profit from device sales, conceding that the company will lose hundreds of rupees on each unit, and is instead planning to recoup money through advertising and marketing deals. Goel has said the company is importing kits from Taiwan and assembling the phones in a factory in Haridwar near Delhi. While India has the world’s second-largest smartphone base with 222 million users according to Forrester Research, that’s only 17 per cent of the population. The real prize is the hundreds of millions of potential buyers as the base is expected to grow to 517 million by 2021, with the market for sub-US$150 smartphones forecast to grow at 44 per cent rates this year, according to a CMR report. Even at US$4, the smartphone could still be out of reach for most because of scarcity. When Goel first announced Freedom 251 in February, the company said over 70 million jostled to register, crashing its website. Last week he said Ringing Bells will soon start shipping 200,000 smartphones to buyers
Selling such a cheap device has attracted scrutiny along with the publicity. The prototype Freedom 251 presented to the media turned out to be produced by another manufacturer with its logos covered. Thwarted buyers protested outside the company’s headquarters, setting off inquiries by the police and tax officials. Pankaj Mahindroo, president of the Indian Cellular Association, with members including Apple and Samsung, said “We are concerned and keeping a close watch.” Goel, who doesn’t have a technology background, denied allegations that the company was misleading customers as Ringing Bells refunded deposits and delayed the launch date. A la carte production means just about anyone, not just household technology names, can get into the smartphone business by heading to China and ordering direct with factory owners for budget devices, said Satish Meena, a New Delhi-based analyst at Forrester. It’s become such a commodity that even “a cement maker can get into making smartphones overnight,” he said. Still, the price of the Freedom 251 is far below what anyone else has promised. “A US$4 smartphone is nothing but a gimmick,” said Meena. Bloomberg News
Commerce
Myanmar annual jade and gem emporium sale nets US$592 mln Proceeds from Myanmar’s annual sale of jade, gems and pearls totalled 533.49 million euros (US$592.12 million), down nearly 10 pct from 2015, government data showed. More than 2,000 gem merchants, many from neighbouring China, attended the sale in the capital Naypyitaw from June 24 to July 6, the official Myanmar Alin Daily reported. Nearly all of the proceeds came from the sale of 3,647 lots of jade, which accounted for 527 million euros of the total. Jade in Myanmar is mainly found in the Hpakant area in the war-torn northern Kachin State, where activity is dominated by mostly Chinese-led ventures. Much of the jade is being smuggled into China each year, local residents say. Jade is a status symbol in China widely believed to bring fortune, wealth and longevity. According to official data, China - the world’s biggest jade market imported only about US$540 million of Myanmar jade in the first nine months of 2015. Global Witness, a non-governmental organization, estimated the value of Myanmar’s jade production at US$31 billion in 2014. Local villagers complain they are being forced off their land because
of increased mining activity. Scavengers who in the thousands scour mountains of loose earth and rubble for nuggets of jade are sometimes buried alive, including 114 killed in a landslide in November. On the other hand, jade production has been dropping due to long running sporadic fighting between
major Kachin ethnic armed group KIA and government forces. Total jade production in the 2014/15 (April/March) fiscal year was over 16.684 million kg, compared with 43.185 million kg in 2011-2012 and 46.810 million kg in 2010-2011, according to data from the State-run Central Statistical Organisation (CSO). Total jade production from April to November in fiscal 2015/2016 fiscal was 18.047 million kg. Myanmar’s gem emporium has been held annually since 1964 and provides a rare glimpse into its largely opaque jade trade. Reuters
An overheated housing market continues to pose a risk to New Zealand’s financial stability, with the central bank now contemplating making its mortgage lending rules even more stringent. The Reserve Bank of New Zealand (RBNZ) said it was considering tightening its loan-to-value ratios further, possibly by the end of the year. It was also examining whether it should limit debt-to-income ratios, but said “further investigation of this option will be undertaken.” New Zealand’s housing prices, spurred by low interest rates, high levels of immigration and supply shortages, are the second fastest-growing in the world after Qatar, according to the International Monetary Fund. Steel outlook
Japan sees July-Sept crude steel output rising Japan’s crude steel output for the July to September quarter is expected to rise 0.6 per cent from a year earlier, helped by a recovery in local demand for automobiles and civil engineering, the government said on Thursday. That comes as a bright spot in Japan where there have been signs of an economic slowdown, clouding the outlook for Prime Minister Shinzo Abe’s drive to reflate the economy and spurring calls for more monetary stimulus. The Ministry of Economy, Trade and Industry (METI) estimated crude steel output would increase to 26.36 million tonnes in July to September. Budget deficit
Duterte’s team cuts Philippine growth target The economic team of Philippines’ newly installed President Rodrigo Duterte lowered growth targets and projected a wider budget deficit as tax revenue disappoints. Growth will probably reach 6 per cent to 7 per cent this year, Budget Secretary Ben Diokno told reporters in Manila Tuesday following a meeting of Duterte’s economic team. That’s down from a projection of 6.8 per cent to 7.8 per cent made by the previous administration. Duterte has focused his attention on fighting crime and corruption, leaving economic management to his Finance Minister Carlos Dominguez, a childhood friend of the president, and Diokno. State investment
Singapore’s Temasak portfolio falls first time since 2009 Singapore state investor Temasek Holdings (Pte) Ltd said the value of its portfolio fell 9 per cent in the year ended March, the first decline since 2009, as its investments were hit by weak markets in China and the rest of Asia. Temasek also said it expects more volatile markets and an increasingly challenging business environment, and that it had the financial flexibility to pursue investment opportunities that arise. Temasek is a major global investor with stakes in Standard Chartered PLC, Chinese banks and Singapore’s top companies.
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International In Brief Banking
JPMorgan could move thousands of staff out of UK JPMorgan Chase & Co could be forced to move thousands of staff out of Britain if the country loses its automatic right to sell financial services to the European Union after last month’s Brexit vote, bank CEO Jamie Dimon told an Italian newspaper. Currently, banks based in the UK can sell services freely across the EU under a “passporting” system, considered the most significant feature of the EU single market for financial firms. JPMorgan has 16,000 employees in Britain. Its European headquarters are in London and the bank has offices in the English coastal city of Bournemouth as well as in Scotland. Cybersecurity
EU’s first cybersecurity law greenlighted The European Union approved its first rules on cybersecurity, forcing businesses to strengthen defences and companies such as Google Inc. and Amazon. com Inc. to report attacks. The European Parliament endorsed legislation that will impose security and reporting obligations on service operators in industries such as banking, energy, transport and health and on digital operators like search engines and online marketplaces. The law also requires EU national governments to cooperate among themselves in the field of network security. Networksecurity incidents resulting from human error, technical failures or cyber attacks cause annual losses of 260 billion euros ($288 billion) to 340 billion euros, the EU Parliament said.
Smoking
Obamacare’s tobacco surcharges slowed universal health care in study
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he Affordable Care Act was meant to have a particular impact on smokers when it was enacted: It would shift the burden of high healthcare costs from smoking ailments to the smokers themselves—17 per cent of American adults in 2014. At the same time, the ACA would keep making progress toward the goal of universal health care, even for smokers. It fell short on both goals in its first year, a study released Wednesday by the Yale School of Public Health found. The ACA lets insurance companies charge tobacco users up to 50 per cent more for premiums, depending on state regulations. The Yale researchers found that smokers facing surcharges were slower to enroll in health-care plans. If surcharges had been removed for smokers, the study found, smokers with insurance coverage in the sample would have risen from 70 per cent in 2013 to 80 per cent in
2014. With surcharges, the share of insured smokers rose to 76 per cent. For people under the age of 40, 65 per cent of smokers had coverage in 2014, a figure that would have been closer to 75 per cent with no additional charges. Without a bigger jump in enrolment, smokers did not ease the burden of smoking-related health-care costs on nonsmokers, as intended. Previous research suggests many smokers lack affordable coverage “You can’t shift the cost to [smokers] if they don’t take up and then pay,” said Abigail Friedman, the study’s first author and an assistant professor of public health at Yale. “I would think the policy makers didn’t realize the surcharges were going to have this substantial effect in terms of reduced take-up.” As an incentive to quit smoking, surcharges had no effect, researchers found, because those in the zero-surcharge group were as likely to quit smoking as those facing extra charges. The researchers combined data
Key Points 17 pct of American adults in 2014 were smokers ACA lets insurance companies charge smokers 50 pct surcharge With surcharges the share of insured smokers rose to 76 pct Smokers did not ease the burden of smoking-related health-care costs on nonsmokers
Yogurt
Danone in US$12.5 bln deal to buy WhiteWave France’s Danone, the world’s largest yogurt maker, said on Thursday it would buy WhiteWave Foods Co in a deal that values the U.S. organic foods producer at US$12.5 billion, including debt. Danone said it was offering US$56.25 per share in cash in a deal that would double its U.S. business and was its largest acquisition since the purchase of Dutch group Numico in 2007. The deal will boost the French company’s pursuit of affluent consumers by adding WhiteWave’s popular health food offerings such as Silk almond milk and Earthbound Farm Organic salad to its portfolio, as it struggles with setbacks in more challenging markets such as Brazil and Russia. Industrial production
German output in May unexpectedly drops German industrial production dropped the most in 21 months in May in a sign that the headwinds from a global economic slowdown and political uncertainty in Europe damped activity. Production, adjusted for seasonal swings, fell 1.3 percent from the previous month, when it rose a revised 0.5 percent, data from the Economy Ministry in Berlin showed on Thursday. Output fell 0.4 percent from a year earlier. The report underscores the challenges facing German manufacturers, with signs of fragility in the global economy now likely to be exacerbated by the U.K.’s decision to quit the EU.
from the Centers for Disease Control and Prevention with premium and surcharge information for each state. They focused on adults in child-free households who would be eligible for tax credits to help cover the cost of health insurance plans under the ACA. To measure how insurance plans related to quitting smoking, the study considered people who had smoked at some point in the six months before they were surveyed by the CDC. Using the CDC survey to collect self-reported data allowed researchers to avoid the potential pitfall that many smokers deny the habit when purchasing federal health insurance plans to avoid hefty surcharges. Even if smokers had under-reported their habits on the survey, the study’s findings about lower insurance enrolment for smokers would have been dramatic, Friedman said. The finding about people under the age of 40 was particularly striking because of the potential for major health care savings if that demographic quits smoking, said Dr. Benjamin Toll, chief of tobacco cessation and health behaviours at the Hollings Cancer Center and the Medical University of South Carolina, who was not involved with the study. Toll said he hopes that states and insurance companies reconsider how they implement tobacco surcharges. Smokers under 40 might have been less likely to get health insurance because they are particularly price-sensitive and have lower health-care costs than the older group, regardless of tobacco use, Friedman said. Friedman said states should adjust their surcharge guidelines for insurance plans. Several states, including California, New York, New Jersey, and Massachusetts, have eliminated the surcharges, and others have capped them at 15 per cent to 40 per cent of the original premium cost. Bloomberg News
Drought
UN body sees US$4 Billion aid need as El Nino hurts 60 million Almost US$4 billion is needed to meet the humanitarian demands of countries facing food shortages because of an El Nino-induced drought, the United Nations said. About 60 million people, including 40 million in eastern and southern Africa, face a lack of food because of El Nino, which has scorched crops, the UN’s Food and Agricultural Organization said in a statement on its website Wednesday. With scientists forecasting an increasing likelihood of the opposite rainand flood-inducing La Nina taking place, the number of those affected by the combined impacts of the events may reach 100 million, it said. The El Nino-induced drought damaged crops from palm oil, rice and sugar in Asia to grains in southern Africa and robusta coffee in South America. Storms spurred by the phenomenon have wiped out harvests in Fiji and some of its neighbouring island states, the FAO said. The agency, together with the UN’s World Food Programme and International Fund for Agricultural Development, is “redoubling efforts to mitigate the negative impacts and capitalize on the opportunities of a likely La Nina phenomenon in the coming months,” it said. “Acting now will ensure that farmers have
sufficient levels of agricultural inputs for upcoming planting seasons.”
Opportunity Window
There is a three-month window before the start of southern Africa’s corn-planting season in which interventions such as distributing agricultural inputs “are urgently needed to avoid the dependence of millions of rural families on humanitarian assistance programs well into 2018,” the FAO said.
The organization is on standby to provide emergency seeds and tools in Vietnam, where drought and saltwater intrusion are threatening farmers’ livelihoods, where IFAD is also supporting growers. More than 7.6 million people have received food assistance from the WFP in Ethiopia and a further 260,000 have been helped in Papua New Guinea. The organization is on standby to provide emergency seeds and tools in Vietnam, where drought and saltwater intrusion are threatening farmers’ livelihoods, where IFAD is also supporting growers. More than 7.6 million people have received food assistance from the WFP in Ethiopia and a further 260,000 have been helped in Papua New Guinea. Bloomberg News
The livelihoods of farmers in Vietnam are threatened by drought and saltwater intrusion
Business Daily Friday, July 8 2016 15
Opinion Business Wires
The Taipei Times After cutting rates for the fourth consecutive meeting, the central bank on Thursday last week warned that monetary policy was shouldering too much of the burden for reviving growth. Reductions in government spending could result in “serious consequences” for the struggling economy, the central bank said. However, that is exactly what the administration of President Tsai Ingwen (蔡英文) has in store. It plans to cap debt growth and promises a balanced budget, including an overhaul of generous civil-servant pensions. In contrast to the administration’s plans, the central bank recommended the government have the power to raise the debt limit “as needed.”
From Brexit to the future
D The Straits Times Singapore has come up tops in a survey that looks at how ready economies are for the coming digital revolution. It is one of seven economies that the World Economic Forum (WEF) said is leading the race in the next industrial revolution, which is likely to be dominated by digital technologies and innovation. Finland, Switzerland, Sweden, Israel, Singapore, the Netherlands and the United States are leading the world when it comes to generating economic impact from investments in information and communications technologies (ICT). In particular, Singapore was tops for providing the right environment for business and innovation.
The Japan News Toyota Motor Corp.’s Prius hybrid topped Japan’s new car sales rankings in the first half of this year, thanks to the popularity of a fully remodelled version launched last December, industry data showed Wednesday. Sales of the Prius totalled 142,562 units in the January-June period. Honda Motor Co.’s N-Box minivehicle ranked second, with sales of 95,991 units, followed by Toyota’s Aqua compact hybrid vehicle, with 89,409 units. Nissan Motor Co.’s Dayz mini-vehicle ranked ninth, with sales of 51,370 units. The company halted sales of the Dayz and the Dayz Roox, also a mini-vehicle model, from April 20 to the end of June, following the revelation of fuel economy data cheating by Mitsubishi Motors Corp., which supplied the two models to Nissan. But the Dayz made it into the top 10 as its sales were robust before being suspended.
The Korea Herald The Korean government on July 7 said that it will work with concerned organizations to ensure that Hanwha Q CELLS’ plant expansion project is completed on schedule. Hanwha Q CELLS is currently expanding its plant producing materials for solar panels in Jincheon, North Chungcheong Province. Due for completion in July 2017, the lack of infrastructure in the area is expected to pose hurdles. The expanded plant requires 154 kilovolt electricity supply lines, but the process of replacing the current 22.9 kilovolt lines is expected to take 26 months. As such, the government plans to work with concerned organizations to replace the electricity lines in 11 months, and to ensure that the plant has sufficient water supply.
igesting the full implications of the United Kingdom’s “Brexit” referendum will take Britain, Europe, and the world a long time. The most profound consequences will, of course, depend on the European Union’s response to the UK’s withdrawal. Most people initially assumed that the EU would not “cut off its nose to spite its face”: after all, an amicable divorce seems to be in everyone’s interest. But the divorce – as many do – could become messy. The benefits of trade and economic integration between the UK and EU are mutual, and if the EU took seriously its belief that closer economic integration is better, its leaders would seek to ensure the closest ties possible under the circumstances. But Jean-Claude Juncker, the architect of Luxembourg’s massive corporate tax avoidance schemes and now President of the European Commission, is taking a hard line: “Out means out,” he says. That kneejerk reaction is perhaps understandable, given that Juncker may be remembered as the person who presided over the EU’s initial stage of dissolution. He argues that, to deter other countries from leaving, the EU must be uncompromising, offering the UK little more than what it is guaranteed under World Trade Organization agreements. In other words, Europe is not to be held together by its benefits, which far exceed the costs. Economic prosperity, the sense of solidarity, and the pride of being a European are not enough, according to Juncker. No, Europe is to be held together by threats, intimidation, and fear. That position ignores a lesson seen in both the Brexit vote and America’s Republican Party primary: large portions of the population have not been doing well. The neoliberal agenda of the last four decades may have been good for the top 1%, but not for the rest. I had long predicted that this stagnation would eventually have political consequences. That day is now upon us. On both sides of the Atlantic, citizens are seizing upon trade agreements as a source of their woes. While this is an over-simplification, it is understandable. Today’s trade agreements are negotiated in secret, with corporate interests well represented, but ordinary citizens or workers completely shut out. Not surprisingly, the results have been one-sided: workers’ bargaining position has been weakened further, compounding the effects of legislation undermining unions and employees’ rights. While trade agreements played a role in creating this inequality, much else contributed to tilting the political balance toward capital. Intellectual property rules, for example, have increased pharmaceutical companies’ power to raise prices. But any increase in corporations’ market power is de facto a lowering of real wages – an increase in the inequality that has become a hallmark of most advanced countries today. Across many sectors, industrial concentration is increasing – and so is market power. The effects of stagnant and declining real wages have combined with those of austerity, threatening cutbacks in public services upon which so many middle- and low-income workers depend. The resulting economic uncertainty for workers, when combined with migration, created a toxic brew. Many refugees are victims of war and oppression to which the West contributed. Providing help is a moral responsibility of all, but especially of the ex-colonial powers. And yet, while many might deny it, an increase in the supply of low-skill labor leads – so long as there are normal downward-sloping demand curves – to lower equilibrium wages. And when wages can’t or won’t
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Joseph E. Stiglitz University Professor at Columbia University and Chief Economist at the Roosevelt Institute.
be lowered, unemployment increases. This is of most concern in countries where economic mismanagement has already led to a high level of overall unemployment. Europe, especially the eurozone, has been badly mismanaged in recent decades, to the point that its average unemployment is in double digits. Free migration within Europe means that countries that have done a better job at reducing unemployment will predictably end up with more than their fair share of refugees. Workers in these countries bear the cost in depressed wages and higher unemployment, while employers benefit from cheaper labor. The burden of refugees, no surprise, falls on those least able to bear it. Of course, there is much talk about the net benefits of inward migration. For a country providing a low level of guaranteed benefits – social protection, education, health care, and so forth – to all citizens, that may be the case. But for countries that provide a decent social safety net, the opposite is true. The result of all this downward pressure on wages and cutbacks in public services has been the evisceration of the middle class, with similar consequences on both sides of the Atlantic. Middle- and working-class households haven’t received the benefits of economic growth. They understand that banks had caused the 2008 crisis; but then they saw billions going to save the banks, and trivial amounts to save their homes and jobs. With median real (inflation-adjusted) income for a full-time male worker in the US lower than it was four decades ago, an angry electorate should come as no surprise. Politicians who promised change, moreover, didn’t deliver what was expected. Ordinary citizens knew that the system was unfair, but they came to see it as even more rigged than they had imagined, losing what little trust they had left in establishment politicians’ capacity or will to correct it. That, too, is understandable: the new politicians shared the outlook of those who had promised that globalization would benefit all. But voting in anger does not solve problems, and it may bring about a political and economic situation that is even worse. The same is true of responding to a vote in anger. Letting bygones be bygones is a basic principle in economics. On both sides of the English Channel, politics should now be directed at understanding how, in a democracy, the political establishment could have done so little to address the concerns of so many citizens. Every EU government must now regard improving ordinary citizens’ wellbeing as its primary goal. More neoliberal ideology won’t help. And we should stop confusing ends with means: for example, free trade, if well managed, might bring greater shared prosperity; but if it is not well managed, it will lower the living standards of many – possibly a majority – of citizens. There are alternatives to the current neoliberal arrangements that can create shared prosperity, just as there are alternatives – like US President Barack Obama’s proposed Transatlantic Trade and Investment Partnership deal with the EU – that would cause much more harm. The challenge today is to learn from the past, in order to embrace the former and avert the latter. Project Syndicate
On both sides of the Atlantic, citizens are seizing upon trade agreements as a source of their woes. While this is an over-simplification, it is understandable.
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16 Business Daily Friday, July 8 2016
Closing Harassment
Prosecutor seeks France Telecom trial over wave of suicides -sources
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aris prosecutors want France Telecom, the former monopoly now known as Orange, and its former boss Didier Lombard to go on trial for psychological harassment in connection with a wave of staff suicides in 2008-2009, sources said on Thursday. Lombard was head of the firm when more than 30 employees committed suicide during that period, a decade after privatisation. Unions said forced relocations and impossible performance targets were behind the deaths. Two sources close to the investigation and a judicial source said the Paris prosecutor had recommended magistrates send Lombard and the firm to trial to face accusations of psychological harassment.
They said six other executives, three of them still with Orange, should face either the same harassment charge or lesser charges including aiding harassment. A judge will now decide whether to follow the prosecutor’s advice or dismiss the case. The judicial source said the executives were suspected of creating a “climate of extreme stress” with the aim of making employees want to leave, constituting a “dangerous degradation of working conditions”. Lombard, who has denied any wrongdoing during the investigation, stepped down as CEO of Orange in early 2010 amid criticism of his handling of the crisis. If convicted, he could be sentenced to up to one year in jail and a 15,000 euro (US$16,600) fine. Reuters
Oil
Libya to resume oil exports from biggest ports within a week Libya will resume crude exports from two of its biggest oil ports within one week after clashes that forced Islamic State militants to pull out of the area, according to the commander of the petroleum guards in the region. Crude exports will resume from Es Sider, the country’s biggest oil port, and Ras Lanuf, the third-largest, and which have been closed since 2014, Ibrahim al-Jedran, a regional commander of Libya’s Petroleum Facilities Guard, said in a phone interview. The exports will be under the authority of the Tripoli-based Government of National Accord, which is seeking to reunify the divided country, he said. Some “minor technical problems” related to the transportation network between the oil storage tanks and the Es Sider and Ras Lanuf oil ports due to damage, inflicted during clashes since last year, will be fixed within a few days, al-Jedran said. “The oil ports are now safe after
Islamic State pulled back away from them toward Sirte,” he said. “The petroleum guards are now capable
of guaranteeing the safety and security of oil tankers seeking to use the ports.” News of the reopening of the ports that had been exporting more than two thirds of Libya’s oil comes after the Petroleum Facilities Guard captured towns from Islamic State militants last month. Rival leaders of Libya’s National Oil Corp., reached an agreement last week to unify the state company under a single management, a step meant to help end the conflict over who can control the divided country’s crude exports and revenue. Libyan oil officials have made multiple predictions over the past
330,000 barrels a day Average Libyan oil production in 2016
few years that crude production or exports were poised to climb only for those increases to fail to materialize. The nation pumped an average of about 330,000 barrels a day this year, on course for the smallest annual supply in decades, data compiled by Bloomberg show.
Oil Production
Libya, with Africa’s largest proven crude reserves, split into separately governed regions in 2014, leading to the establishment of rival NOC administrations. The Government of National Accord is trying to extend its authority over the country. In the five years since the ouster of the country’s longtime ruler, Moammar Al Qaddafi, Libya’s oil installations have been attacked and its crude output has slumped. The NOC competing administrations also reached an agreement that allowed crude exports to resume from the port of Hariga in the east in May, easing a bottleneck and allowing for oil production to increase slightly to about 320,000 barrels a day. Libya pumped about 1.6 million barrels a day before Qaddafi was ousted from power in 2011. It’s now the second-smallest producer in the Organization of Petroleum Exporting Countries. Bloomberg News
Eastern Europe
Electric energy
Beverages
Merkel: Russia unsettles NATO’s eastern members
GE, Senvion prepare bids for wind group Adwen
PepsiCo lifts earnings forecast
German Chancellor Angela Merkel said Russia has “deeply unsettled” countries in eastern Europe, underscoring the need to strengthen NATO’s presence in the region. Addressing parliament in Berlin a day before she’ll join fellow leaders of North Atlantic Treaty Organization countries in Warsaw, Merkel defended the alliance’s decision to deploy four battalions to rotate through the Baltic nations and Poland. At the same time, lasting security in Europe is only possible in cooperation with Russia and NATO still has an “outstretched hand” for dialogue, she said. “Russia’s actions in the Ukraine crisis have deeply shaken our eastern allies,” Merkel said in her speech on Thursday. “That has deeply unsettled our alliance partners. They therefore require the unequivocal reassurance by the alliance.” At the two-day meeting in the Polish capital, NATO’s 28 members plan to sign off on the troop deployment to bolster defenses in the east in a sign it’s committed to the defense of the former Soviet-bloc countries. In May, Russia announced the deployment of three new divisions in European Russia, citing NATO actions. Bloomberg News
General Electric and German wind turbine maker Senvion are preparing bids for French wind power group Adwen, which is jointly owned by Spain’s Gamesa and France’s Areva, people familiar with the matter said. German industrials group Siemens is due to take over Gamesa’s 50 per cent stake in Adwen as part of its 1 billion euro (US$1.1 billion) deal to buy a majority stake in Gamesa. It has also made an offer for Areva’s stake in Adwen. However, under the terms of a side-deal agreed in connection with Siemens’s buyout of Gamesa, Areva has until mid-September to look for an alternative buyer. The companies declined to comment. Siemens Chief Executive Joe Kaeser said last month he believed his company’s offer for Adwen was compelling. “We took a lot of time to discuss the offshore projects in France with customers, where the risks are, where benefits could be, on so-called legacy projects that obviously have their challenges,” he said. “If we get the 50 per cent that is fine, and if we don’t, if someone puts a better offer there, they maybe deserve it.” Reuters
PepsiCo Inc. posted second-quarter profit that beat analysts’ estimates and raised its full-year forecast as sales of snacks and soft drinks in North America helped overcome weaker results abroad. Earnings rose to US$1.35 a share, excluding some items, the Purchase, New York-based company said in a statement Thursday. Analysts estimated US$1.29, on average. PepsiCo boosted its forecast for annual earnings growth to 9 per cent from 8 per cent. Chief Executive Officer Indra Nooyi has benefited from the relative strength of the U.S. market as well as cost-cutting measures that have supported profitability. She also has worked to expand PepsiCo’s presence in emerging countries, but the shaky global economy and stronger dollar have hurt results in those regions. Sales fell 3 per cent to US$15.4 billion, meeting analysts’ average projection. PepsiCo has increased its “better-for-you” offerings in light of declining soda consumption in the U.S. and other markets. The company announced a partnership with smoothie maker BarFresh Food Group Inc. in October and introduced a line of healthy vending machines in December. The company also attempted to appease drinkers wary of the artificial sweetener aspartame by removing the substance from its flagship diet soda in August. BloombergNews