Macau Business Daily July 18, 2016 by Business Daily

No deadline for CTM - Mtel interconnection agreement Telecommunication Page 2

Monday, July 18 2016 Year V Nr. 1088 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm

www.macaubusinessdaily.com

Gaming

Reform hurdles

Wells Fargo: hotel room rates on the rise in July-August Page 5

Trade

CEPA agreement with Hong Kong by the end of this year Page 2

Construction sector

Mainland property investment loses momentum Page 9

Chinese provincial banks defy overcapacity cuts Page 10

Tourism

Gambling is not the main reason for people travelling to the SAR and events rank the highest in achieving tourist satisfaction, says the Macau Tourist Satisfaction Index 1st Quarter Report. Shopping ranks as the primary draw for tourists, while cuisine and visiting World Heritage sites also ranked higher than gambling, according to the IFT Tourism Research Centre data. Page 4

A local SME website and mobile application design company finds that working for large corporate clients can generate long-term opportunities. Steven Lei, from Blupurple Interactive Media talks about the company’s development, the business environment for SMEs and the advantages of being a small-sized IT company working with both large and small corporations. Interview | I.T. Pages 6 & 7

HK Hang Seng Index July 15, 2016

Housing prices fall, transactions rise

Real Estate The number of housing transactions for June jumped 32 per cent as prices fell 15 per cent for the month. A total of 794 transactions occurred, with prices ranging from MOP75,000 to MOP99,000 per square metre. Incomplete units made up only 9.3 per cent of sales, with completed unit sales surging 53.5 per cent y-o-y. Page 3

Secretary mandates follow-up report from IC Culture Secretary for Social Affairs and Culture, Alexis Tam has called for the Cultural Affairs Bureau to submit a follow-up report on its expenditure of over MOP5 million in preservation works for the Iec Long Firecracker Factory. The Director of the bureau says it will start procedures to recover the expenses and that the structures inside the factory might have collapsed if it hadn’t done the restorative work. Page 2 21,659.25 +98.19 (+0.46%)

Worst Performers

Cheung Kong Infrastructure

+3.74%

Hengan International Group

+1.79%

China Merchants Holdings

-6.22%

China Overseas Land &

-0.58%

Ping An Insurance Group Co

+3.68%

China Resources Power

+1.76%

China Construction Bank

-0.92%

Sands China Ltd

-0.37%

Sun Hung Kai Properties Ltd

+2.22%

China Shenhua Energy Co

+1.59%

Industrial & Commercial

-0.91%

China Petroleum & Chemical

-0.34%

Wharf Holdings Ltd/The

+2.02%

New World Development

+1.58%

Henderson Land Develop-

-0.78%

CITIC Ltd

-0.34%

China Life Insurance Co Ltd

+1.84%

Li & Fung Ltd

+1.36%

Bank of Communications

-0.58%

China Resources Land Ltd

-0.21%

28° 31° 27° 31° 28° 31° 27° 31° 27° 32° Today

Source: Bloomberg

Best Performers

Tue

Wed

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Knowing the system

2 Business Daily Monday, July 18 2016

Macau Culture

Cultural Bureau dispatched to follow-up on Iec Long case Kam Leong kamleong@macaubusinessdaily.com

he Secretary for Social Affairs and Culture, Alexis Tam Chon Weng has dispatched the Cultural Affairs Bureau (IC) to submit a follow-up report on the latest findings released by the Commission Against Corruption (CCAC) on the Iec Long

Firecracker Factory land swap case. Last week CCAC noted in a report on the issue that the Bureau’s expenditure of over MOP5 million (US$625,000) for the preservation works of the firecracker factory was “without any basis”. It added that the department had not attempted to recover the expenses. Speaking to reporters last Friday, Mr. Tam said the Cultural Affairs

Bureau would need to submit a report in the coming two months in order to follow up on the issue. According to the official, the report will focus on the implementation and execution of CCAC’s suggestions. Meanwhile, the director of the Bureau, Ung Vai Meng, told reporters that the department will start procedures to recover the expenses from the factory’s conservation works, in

5 Million MOP Amount spent by the IC on recovery works for the factory.

addition to initiating the cultural relics evaluation process for the factory as soon as possible, as suggested by the anti-graft body. The Bureau head also explained that all the structures inside the factory might have collapsed if the bureau had not done its past restorative works. The Commission noted in last week’s report that the initiation of the cultural relics evaluation process for the firecracker factory: “is not only necessary but also pressing to a certain extent”. In its report, the anti-corruption body details its investigation into the deals surrounding a series of land swaps originating from the Iec Long factory. These land swap deals were proposed by the Baía da Nossa Senhora da Esperança Development Company, a unit controlled by local businessman Sio Tak Hong, and dispatched by the then-director of the Land, Transport and Public Works Bureau, Jaime Roberto Carion, supposedly acting as a representative of the SAR Government.

Telecoms DSRT: no deadline for interconnection agreement between CTM, Mtel

Unanswered call The Bureau of Telecommunications Regulation (DSRT) has not set a deadline for the city’s two fixed-line telecommunications service providers to complete their negotiations for interconnecting their networks, its acting director Tam Van Iu said in a reply to legislator Kwan Tsui Hang’s written interpellation. “As the Internet is interwoven, the Internet users of Mtel and CTM are mutually connected. For the technical plans or routing schemes that the two operators apply, they could seek an appropriate resolution through negotiations. Hence, the DSRT did not identify a clear deadline for the two operators’ negotiations,” the DSRT deputy head wrote. In her enquiry, the directly-elected legislative member quoted the CEO

of MTel Telecommunication Company Ltd, Choi Tak Meng, as recently saying that his company had failed to reach a bilateral agreement with Companhia de Telecomunicações de Macau SARL (CTM). CTM held a monopoly in the local fixed-line telecommunications market until 2013, when MTel was granted a fixed-line license by the government, which also covers Internet services. “The details or charges for their peer agreement should be negotiated among themselves due to commercial considerations. Nevertheless, the failure in interconnecting their fixedline networks creates obstacles for the new operator to enter the market, [which also affects] the promotion of fair competition and the options for

consumers,” the legislator opined. Meanwhile, Ms. Tam also disclosed in her reply that that the Bureau is drafting a legal framework for the convergence of the city’s services,

Trade

Parking

Macau-HK CEPA to be reached by year-end

Bad spot

The Closer Economic Partnership Arrangement Agreement (CEPA) between Macau and Hong Kong will be finalised by the end of this year, the two parties announced following the ninth Hong Kong-Macau Cooperation High Level Meeting in the city last Friday. During the meeting, the two governments signed the main text of the initial agreement. The city’s Secretary for Economy and Finance, Lionel Leong Vai Tac and the Financial Secretary of Hong Kong, John Tsang both attended the meeting.

According to a press release by the Secretariat for Economy and Finance, the two parties have agreed to apply a zero-tariff policy to each other’s imports. Nevertheless, the two SARs are still discussing the final list of sectors to be opened for trade of services under the agreement. Meanwhile, the two governments have also agreed to form an economic co-operation group to leverage the opportunities brought about by the Hong Kong-Zhuhai-Macau Bridge, as well as the 13th Five-Year Plan and the One Belt, One Road policy of the central government. K.L.

DSAT: 170 cases of illegal parking in the first half of 2016. In the first six months of 2016 there were 170 cases of illegal parking in public parking lots, according to information released by the Transport Bureau (DSAT). According to current legislation, any vehicles exceeding an eightday limit when parking in public parking lots can be subject to fines, car removal and even public sale of infringing vehicles by DSAT. Those in violation of the eight-day limit, are required to pay the parking

adding that an advising company had previously completed a study on the convergence situation and related local telecommunications regulations. K.L.

fee and the removal and deposit fees, and can also be fined MOP150 (US$18). Payment for car removal is set at MOP450, while that of motorcycles is set at MOP50. According to the DSAT data, of the illegally parked vehicles in the first half of this year, seven were motorcycles. Ninety-one of the total cases saw their fines paid by their respective owners, while 46 of the cases resulted in removal of the vehicles by DSAT to its impound lot, and 22 of the cases resulted in the cancellation of license plates. Since March of this year, DSAT has implemented a new illegal parking detection system based on video surveillance at bus stops and parking lot entrances. N.M.

Business Daily Monday, July 18 2016 3

Macau Property Housing prices down 15.2 pct in June

A buyer’s market Compared to June of 2015, housing transactions jumped nearly 32 per cent last month, as prices fell. Kam Leong kamleong@macaubusinessdaily.com

he city’s average housing prices registered another year-on-year fall in June, driving up the total number of transactions throughout the month compared to one year ago, according to the latest official data released by the Financial Services Bureau (DSF). Last month, average home prices in the city decreased by 15.2 per cent year-on-year to MOP78,416 per square metre. Nevertheless, compared to the figure of MOP77,203 per square metre recorded for May, the amount increased slightly by 1.57 per cent. Meanwhile, a total of 794 home transactions were recorded in the territory in the month, an increase of 31.9 per cent compared to one year ago. On a month-on-month

comparison however, the number represents a decrease of 23.4 per cent, down from 1,036 transactions seen in May. Home units on the Macau Peninsula changed hands at an average cost of MOP75,516 per square metre last month, down by 10 per cent year-on-year, yet marginally up by 0.96 per cent month-on-month. The peninsula saw a total of 615 units sold and purchased during the month. In addition, average housing prices for residential units in Taipa dropped by 21.4 per cent year-on-year to MOP84,064 per square metre last month. Compared to the figure of MOP78,842 per square metre seen in May, this represents an increase of 6.62 per cent. Some 162 units were sold in the area. Housing prices in Coloane remained the most expensive for the month at MOP99,629 per square metre on average. However, this amount

Mostly completed units

properties went down by 8.9 per cent year-on-year, but climbed by 6.37 per cent year-on-year. In terms of districts, homes in the University area and Baía Pac On in Taipa showed the highest values, being transacted at an average price of MOP205,199 per square metre on average in June, while those in Patane and near the Ruins of St. Paul’s on the Peninsula were the cheapest, being sold and purchased at MOP58,104 per square metre in the month.

The event will see the presence of representatives from China Patent Agent (H.K.) Ltd., Clt Patent & Trademark (H.K.) Ltd., and copyright law experts, who will debate issues of copyright registration and how to prevent infringements. According to the DSE, in the first six months of 2016 a total of 5,599 new brands and 24 patents were registered in the MSAR, a year-on-year decrease

of 4.7 per cent and 35.2 per cent respectively. An American Chamber of Commerce in China report on the country’s business climate in 2016 stated that although the effectiveness of Intellectual Property Rights in China was ranked as low by member companies, enforcement has improved in the last five years. N.M.

indicates a decrease of 18.3 per cent year-on-year, in addition to a fall of 1.67 per cent month-on-month. Transactions on the island only accounted for 17 of the total number of transactions for the month. In terms of unit types, nearly 92 per cent of the housing transactions in June were made on completed residential units, with a total of 726, surging by 53.5 per cent year-onyear yet falling by 23.8 per cent month-on-month. These types of properties were sold and purchased at an average price of MOP74,662 per square metre during the month, down by 11.8 per cent year-on-year compared to MOP84,620 per square metre a year ago. On a month-on-month basis, the price dropped marginally by 0.4 per cent. Meanwhile, transactions on units that are still under construction fell by 47.2 per cent year-on-year, or 17.07 month-on-month, totalling 68. The average cost of buying incomplete

Business

Raising awareness IPIM will host a seminar on intellectual property rights on July 20 for local SME’s interested in entering the Mainland Chinese market In a bid to raise awareness about intellectual property rights in Mainland China, the M aca o T ra d e a n d I n v est m e n t Promotion Institute (IPIM) is h o sti n g a s e m i n a r o n J u l y 20 for local small and medium enterprises (SMEs). The event will combine the forces of IPIM, the Macao Economic Services (DSE) and the Macau Lawyers

Association (AAM) in order to educate local SME’s interested in entering the Mainland Chinese market on how to protect their intellectual property rights. One of the aims of the seminar is also to help trade associations and other business offices in Macau to increase their knowledge in order to better protect their intellectual property.

Law

Lawyer against land law Lawyer Manuela António believes that the current Land Law should be changed and that the government is acting in “bad faith” regarding land issues. Lawyer Manuela António has stated in an interview with local broadcaster TDM that the administration is acting in “bad faith”, and questions the survival “of the rule of law in Macau”. “No one has doubts about the interpretation of this law,” the lawyer told the broadcaster, quoting the law as stating: “if provisional concessions are not approved they may not be renewed.” The lawyer quoted a further article stating: “when they are not renewed they will expire,” and “when expired there is no right to any

compensation,” António told TDM. According to the local lawyer, a revision of the Land Law “is a necessity” because the government “screwed up," also stating that the law “was poorly done,” and therefore “has to be corrected," she told the broadcaster. António also believes problems created by the current Land Law shouldn’t be resolved in court and that the Government cannot take “refuge and just say the courts will resolve these problems". N.M.

4 Business Daily Monday, July 18 2016

Macau Tourism IFT survey: Tourist satisfaction improved in Q1 compared to previous quarter

Gaming becoming less important Events score the highest in achieving tourist satisfaction, while heritage sites earned the lowest score.

ambling i s n o t th e major purpose for people travelling to Macau, the Macau Tourist Satisfaction Index 1st Quarter Report, released last Friday by the Tourism Research Centre of the Institute for Tourism Studies shows. The report reveals that the primary draw for those visiting Macau for leisure and vacations is shopping, which accounted for 25.9 per cent of the respondents. Cuisine and visiting World Heritage attractions accounted for 25.3 per cent and 18.4 per cent, respectively. Coming up in fourth was gambling, which accounted for only 10 per cent. Other reasons included travelling around hotels and casinos, visiting cultural, arts and historical attractions, as well as participating in events. In terms of method of travel, most

of the respondents, 90.7 per cent, said they had visited Macau as individual travelers, while the remaining 9.3 per cent came to Macau via tour groups. The number of respondents in the survey in the first quarter of this year amounted to 1,067. Most of them were from Mainland China, accounting for 68.5 per cent. Those from Hong Kong and Taiwan accounted for 22.9 per cent and 5.5 per cent, respectively. Respondents coming from other Asian countries accounted for about 3.7 per cent and the remainder were from outside Asia. While most of the Hong Kong tourists and more than half of those from Mainland China said they were repeat visitors, most tourists from overseas indicated that it was their first visit to Macau.

Improved overall impression

The overall tourism satisfaction level

in the first quarter of 2016 stood at 69.6 points on a scale ranging from zero to 100 points. This is an improvement when compared to the fourth quarter of 2015, when the score stood at 67.8, the second-worst score since the index began publishing results in the third quarter of 2009. The worst score was 66.1 points, recorded in the first quarter of 2011. The index is designed to represent the satisfaction level of visitors to Macau based on their experiences with ten tourism-related sectors or services including casinos, events, heritage attractions, hotels, immigration services, non-heritage attractions, restaurants, retail shops, tour guides/operators, and transportation services. In the first quarter of this year, events scored the highest in terms of tourist satisfaction, standing at 78.9 points. On the contrary, heritage attractions were least satisfying, scoring 63.6 points, declining from 67.4 points in the previous quarter.

69.6 points Level of overall tourism satisfaction in the first quarter of 2016

Transportation ranked the second most satisfying element, scoring 74.2 points, an improvement of four points from the previous quarter. Casinos ranked lower than transportation on the scale yet stood above the average, scoring 74.2 points, up from 70.2 points from the fourth quarter of 2015. The survey is conducted by the Tourism Research Centre of the Institute for Tourism Studies (IFT). The Macau Tourist Satisfaction Index is a year-round survey that monitors the satisfaction levels of visitors to Macau in respect of several key tourism service sectors operating in the SAR.

Better but less important gaming sector

The report also indicates that overall service improved in the first quarter of 2016. Compared with the previous quarter, casinos, transportation and non-heritage attractions performed considerably better, however, their relative importance in determining overall satisfaction declined. Respondents were more satisfied with immigration service but its importance remained the same as last quarter. Events and hotels improved in terms of both service performance and importance as viewed by respondents. Though tour guides or operators became more important, respondents were less satisfied with this sector. The performance of retail shops remained relatively stable though a slight increase in terms of relative importance was detected. Restaurants and heritage attractions were the two sectors that declined in both service performance and overall importance. The results are based on the analysis of a sector’s satisfaction score combined with relative contribution, which is an indicator of a sector’s importance toward determining overall visitor satisfaction with Macau as a destination.

Corporate Travel alert

Grand Coloane Resort Summer Open Day July 24

The Grand Coloane Resort will host a free-of-charge Summer Open Day on July 24 for children and families. For the event, hosted by the Grand Coloane Resort’s Kid’s Club, children must pre-register and will be able to use the resort's outdoor area between 11 a.m. and 5 p.m. Activities will include a slip & slide, bootcamp, fair games, arts and crafts, and cooking and science

workshops. Parents attending are eligible for a 50 per cent discount on day passes for The Club, as well as a 20 per cent discount on restaurants and bike rental. New signups for The Club will get one free month’s membership and a 10 per cent discount on monthly membership. Grand Coloane Resort is home to 208 suites and rooms and award-winning restaurants as well as the Macau Golf & Country Club – an 18hole tournament-style golf course.

GGCT: one request for assistance in Turkey The Tourism Crisis Management Office has received two requests for information and one for assistance from local residents after the military coup attempt in Turkey. After a failed military coup in Turkey that left 265 dead and 1,400 wounded, the Tourism Crisis Management Office (GGCT) has alerted local residents and Chinese citizens not to travel to the country until the situation stabilizes. Last Friday, a faction of the Turkish military tried to topple President RecepTayyip Erdogan’s government, an attempt thwarted by public reaction and armed forces loyal to the government. The GGCT has so far received two requests for information and one request for assistance from Macau residents, while China’s foreign ministry has stated that it has not

received any reports of Chinese citizens injured in the country, the office revealed in a press release. “Lately, the situation in Turkey has been agitated. Chinese citizens and institutions already in Turkey should remain on high alert, strengthen security precautions, be prepared for emergencies, avoid leaving their residences or going to areas with large concentrations of people. In case of emergency, contact immediately the police and the Chinese Embassy or Consulates for assistance,” stated the release from the Ministry of Foreign Affairs and the Chinese Embassy in Turkey. N.M.

Business Daily Monday, July 18 2016 5

Macau

Gaming Non-disclosure of Wynn Palace table numbers considered worrying

Climbing room prices Analysts estimate average hotel room rates will rise between 1.8 per cent and 3 per cent between July and August. Nelson Moura nelson.moura@macaubusinessdaily.com

survey by financial services company Wells Fargo estimates that the average room rate in Macau will increase between 1.8 per cent and three per cent between July and August. The highest average room rate is attributed to casino-resort operator Galaxy Entertainment Group properties, with a July to August predicted month-on-month increase of 12.5 per cent. Melco Crown Entertainment Limited properties are estimated to have an average room rate increase of 8.4 per cent between July and August. The Wells Fargo survey however predicts a seven per cent decrease in

the average room rate in September when compared to the period between July and August. It is also predicted that the month of September will see an average room rate decrease of eight per cent when compared to the average in the first half of 2016.

Investor angst

The financial services company also considers the non-disclosure by Wynn Macau of the concrete number of tables for the planned Wynn Palace project as a ‘source of angst among investors’. The analyst firm sees table allocations as ‘very important’ since the transition to a mass gaming market is ‘driving average table spend’ down. Last week the Secretary for Economy and Finance, Lionel Leong Vai

Tac said that Wynn Macau had not yet submitted a definite number when applying for gaming tables and slot machines, while the Sands China Parisian project hadn’t revealed a definite number of gaming tables either. Wynn Palace, scheduled to open on August 22, has predicted it can accommodate a total of 500 gaming tables, but so far hasn’t specified the exact number it actually wants.

Post Euro Cup pick up

Wells Fargo analysts expect revenues in Macau to decrease between eight per cent and 10 per cent year-onyear, higher than the 5.8 per cent consensus. Average daily revenues registered in the first 10 days of July were as high as MOP535 million (US$67 million), with analysts expecting a five per cent ‘pick-up’ after the end of the Euro Cup with a gradual increase of average daily revenue of between MOP540 million and MOP550 million. The firm states that even though many investors see a stabilising of

Macau revenues, it expects that ‘additional regulation’ and the new supply of rooms, with the Wynn Palace and The Parisian openings, could ‘weigh’ on the results for the second half of 2016.

Cooler credit growth

The analyst firm also chooses to ‘remain on the sidelines’ while watching the market adapt to the ‘new normal’: a weak Chinese economy and a flatter recovery than expected ‘contributing to more muted revenue growth for Macau.’ Credit growth is a leading market indicator for local VIP revenue growth. The firm notes that following a surge in early 2016, credit growth has ‘cooled’ and is now holding at around 10 to 11 per cent, and dollar credit growth has ‘ticked back down’. The group advises that the boom in revenues seen in 2010 and 2013 both saw a ‘significant and sustained increase and acceleration’ in year-onyear and dollar credit growth, which the current scenario doesn’t exhibit. ‘We don’t think the government is turning the stimulus tap on,’ opine the analysts.

6 Business Daily Monday, July 18 2016

Macau Interview Local SME website and mobile application design company finds that working for large corporate clients can generate long-term opportunities.

The code to success Blupurple Interactive Media Ltd., a local website and mobile application design and development company, first started off by offering tailor-made products and services to their clients, but now they have plans to offer standardized products and services to meet the needs of a variety of clients, while at the same time streamlining their operational processes. Steven Lei, project manager of Blupurple Interactive Media Ltd. talked to Business Daily about how the company has evolved and what sort of environment local Small and Medium Enterprises (SMEs) are currently facing. Annie Lao annie.lao@macaubusinessdaily.com

ow did the company start? Blupurple Design Ltd. was first established to do graphic design work in March 2012. Seeing the increasing popularity of Internet use, we spotted an opportunity. So in January 2015 Blupurple Interactive Media Ltd. was set up in a bid to capture the fast growing Internet market in the city, mainly in designing and developing Internet website platforms and mobile applications. Did you have any difficulties when you started out? From the beginning, there were so many things for us to learn which we had never experienced before. Gradually, when we got more clients, we also had to increase our number of employees from two to the current six staff we have now. How competitive is the IT industry in Macau?

As we are a small-sized enterprise, we don’t see others in the industry as competitors for us. We think it is better for everyone to help each other in the industry rather than to compete with one another.

we have created so far, now with more than 160,000 users.

Have you faced any difficulties in operating the company? The high cost of running the business and the lack of human resources are the major obstacles for local SMEs in Macau. However, the Macau SAR Government has supported local SMEs by offering loans, business assistance and funding.

Why do you think ‘Macau Movie’ has attracted so many users? When it was launched in 2010, the iPhone 4 had been out for about one year. During that time the iPhone 4 caused a major change in how people used their mobile phones. Also, back then our mobile phones did not have so many functions compared to the smart phones we use nowadays. As a result, more people wanted to download more mobile applications to their mobile phones.

What is the most popular mobile application you have created? Prior to the establishment of Blupurple Design Ltd., we started working for other companies in graphic design back in 2010. ‘Macau Movie’ [the app] was first created in 2010. ‘Macau Movie’ provided a listing of movies that were being screened in the city’s cinemas on a daily basis. This mobile application is the most popular mobile application

How do you increase the number of users of mobile applications? If our mobile application has problems users will not use it anymore. Therefore, we need to provide high quality products and services. In other words, our business model needs to coordinate with our marketing model. For example, the iPhone is a great invention, and at the same time, marketing for the iPhone is also very important in order to

attract users. When both models are working together effectively, the product itself will become successful and popular. How do you reach out to new clients? We participate in competitions in order to expand our network with different participants in the industry. We build up our client base by offering high quality products and services and as a result our clients refer us to their friends or new clients. Are more people using mobile applications than websites nowadays? In the past, more people were using Internet browsing websites on their desktops. But now, the increasing number of mobile application users is catching up with the amount of website users. For instance, people now have access to the Internet with their smart devices anytime they want. However, in the past, the peak hours for people getting online were from 7pm to 10pm only. Even after midnight there are still a lot of people using the Internet, which creates a lot of opportunities in the industry for us. How has technology changed the way people do business? More people than ever are using the Internet on their smart phones. This makes us think of other ways of doing things. Technology is a tool to assist businesses to operate more effectively and efficiently. For example, an online website can help companies do a lot of promotions and the operational costs are low. Therefore, online shopping has become a popular trend these days.

“We think it is better for everyone to help each other in the industry rather than to compete with one another.” What is the most difficult project you have worked on? We have noticed there are more companies seeking to create new online shopping websites. However, we find it more challenging to run an online shopping website due to the rigid safety regulations imposed by the local banks. When a user is making an online payment, safety issues need to be considered such as protecting the user’s credit card information. We need to be cautious when handling users’ personal information online. Therefore, we have to go through many detailed procedures for safety implementation to ensure the privacy of users’ personal information and that it is being protected online. We don’t ask our users to provide their personal information to us, including credit card numbers - their credit card information is only handled by the banks. H o w d o y o u p r o t e c t u s e r s’ information? We have specific servers installed for our websites and mobile applications to protect the security of our users. We treat this matter very seriously. All the personal and sensitive information from the users is encrypted and saved in a secure database. What projects are you working on now? We are now building an online

Business Daily Monday, July 18 2016 7

Macau

platform for designers in Asia to exchange their creative ideas. Each designer can upload up to ten items of their work to the website. In the long term, this website platform can build a communication bridge between the sellers and buyers.

“Working with big corporate clients, we have learned how to standardize and streamline our work processes to make our operational processes more efficient.” How did the project develop? At first, we built this for recently graduated designers to upload their work so that they would be able to search for jobs after graduating. But now, after considering the feedback, we are planning to revamp the website for the designers to share their work with each other as a communication platform. Right now, it is still under

testing. With this website, we aim to promote the creative industries in Macau by letting other designers comment on each other’s products and share ideas. What are the problems you faced in developing this project? Some users told us that only viewing other designers’ products and services on the website is not comprehensive enough. They hope the website can provide more functions such as searching for freelance designers in the city. Both for companies and designers, finding a designer or getting a design job in Macau is the most common problem they face, as designers are usually referred by their friends or old client to get jobs. Do you have a different approach when working with large corporate clients? F r o m o u r ex p e r i e n c e, l a rg e c o r p o r a t i o n s t e n d t o h av e standardized operational procedures for doing business. All the work procedures are fixed and planned with a targeted timeline clearly set out. Working with big corporate clients, we have learned how to standardize and streamline our work processes to make our operational processes more efficient. Working with a big corporate client can

Blupurple Design Ltd. was founded in March 2012 by two graduates of the Macao Polytechnic Institute. Steven Lei, the project manager, and Becky Lee, the senior designer, both studied design and used this as a foundation to create Blupurple and subsequently Blupurple Interactive Media, in January 2015, to take advantage of the growing Internet market.

This pushed the group into designing and developing online website platforms and mobile applications. The company, started by the two graduates, now has six employees, hailing from various educational backgrounds, with the group’s senior developer Vincent Lei an information technology graduate of the Macau University of Science and Technology.

The company’s products include ‘MO calendar’, a website and mobile application to promote activities and events in Macau; ‘Sun-Career’ - a local online

career matching platform for jobhunting; and Hot-Mover, a mobile application for placing take-away orders and providing delivery services in the city.

certainly help us to learn and grow. How is it different when working with local SMEs? Working for SMEs is more flexible. We can do the brainstorming sessions together with our SME clients as they have less layers of management to go through. They tend to be more receptive to new ideas, whereas, we need to go through many layers of management with large corporate clients in order to have our proposed ideas accepted. Through working with other local SMEs, we exchange ideas with each other, such as sharing our difficulties and experiences in doing business in Macau. How do large corporate clients provide opportunities for your company? When we propose our products and services to the large corporate clients, we first have to go through many layers of decision makers’ approvals. When our proposed ideas finally get accepted by them, it signifies to us that our products and services are up to a certain standard and recognized by them. In addition, they tend to give us more long-term projects to work on, which can also help us to build up our company’s brand name. Have you launched any products recently? We recently launched a new online website for Exmoo News over the weekend. Each day it updates more than 30 pieces of news online. This also provides us new opportunies to learn how to work with a relatively large team from Exmoo, and their marketing approach is different from other organizations we have worked with. Therefore, we needed to

Last week, Blupurple Interactive Media Ltd won the Procurement Platform Mobile App Design Competition Award, organized by Wynn Macau and the Macao Chamber of Commerce (MCC). The new SME mobile application provides an online platform for local SMEs to access information

design their online website platform differently. Are you going to have any projects that involve WeChat? We provide solutions built on WeChat. Previously, we worked with BCM bank to launch a lucky draw campaign on WeChat. The WeChat platform is a bit similar to Facebook, for things such as setting up company’s official account. You can also do a lot of marketing on WeChat and Facebook. The popularity of WeChat is growing at a very fast pace.

“Large corporate clients tend to give us more long-term projects to work on, which can also help us to build up our company’s brand name.” What are your plans for the future? We want to expand our network by working with large corporate clients for long-term business relationships. Also we would like to offer standardized package products and services or a one-stop service to our clients to diversify our products and service range. At the same time, this can make us become more efficient. For example, some clients only need a very simple website or just want to set up a business email account.

from casino operators. Users can view what items the casino operators are procuring so that SMEs can submit their price lists through the application to the procurement teams. The application will be launched to the public free of charge by the end of this year.

8 Business Daily Monday, July 18 2016

Greater China GDP

Government spending steadies economy but risks grow Consumption accounted for a greater amount of growth and retail sales and industrial output beat expectations. Elias Glenn and Kevin Yao

hina’s economy grew slightly faster than expected in the second quarter as a government spending spree and housing boom boosted industrial activity, but a slump in private investment growth is pointing to a loss of momentum later in the year. The world’s second-largest economy grew 6.7 per cent in the second quarter from a year earlier, steady from the first quarter but still the slowest pace since the global financial crisis, data showed on Friday. Analysts had expected it to dip to 6.6 per cent. While fears of a hard landing have eased, investors worry a further slowdown in China and any major fallout from Brexit would leave the world more vulnerable to the risk of a global recession. But signs of steadier headline growth in China may conceal an economy that is growing increasingly lopsided, as growth becomes ever more reliant on government spending and debt. An anaemic private sector and signs of fatigue in the property market point to the increasing possibility the government may need to provide additional stimulus this year to hit its growth target of 6.5 to 7 per cent. “We think GDP growth is likely to slow in Q3 and may rebound in Q4 driven by post-flood reconstruction activity. But the rebound will not last long,” said Nomura economist Wendy Chen.

Economists at ANZ also believe the second-quarter’s growth rate is unlikely to be sustained, pointing to cracks emerging in the property sector, whose recent revival has spurred demand for everything from cement and steel to appliances and furniture. “Property investment grew 6.1 per cent in the first six months, lower than 7.0 per cent in January-May. Therefore, the property-led recovery has ended,” ANZ said in a research note. Indeed, Zoomlion Heavy Industry, a major Chinese construction equipment maker, warned investors on Friday that its first-half net loss would more than double due to weak demand for construction machinery. There were some bright spots in Friday’s data, as consumption accounted for a greater amount of growth and retail sales and industrial output beat expectations. But in a sign that Beijing has doubled down on its stimulus efforts, first half bank lending hit a record and government spending jumped 20 per cent in June. At the same time, growth in investment by private firms fell to a record low in the first half, as businesses retrench in the face of the sluggish economic outlook and weak exports. This slowdown has alarmed investors and policymakers alike, as the private sector accounts for over 60 per cent of China’s total investment and 80 per cent of its jobs. “While there was a big pick-up in retail sales, the slowdown in fixed-asset

investment is a worry. Given the slide in fixed-asset investment growth, I’m inclined to keep my forecast of slowing growth over the course of the year,” said Tim Condon, chief economist for Asia at ING in Singapore.

Government expected to do more

Policymakers have said the economy remains largely steady, but with private investment shrinking the government has had to do more of the heavy lifting, adding to worries about reforming the bloated and inefficient state sector. Chinese leaders are trying to support growth to prevent widespread job losses and debt defaults, but they are also facing pressure to push through painful

structural reforms such as reductions in industrial overcapacity that would put the economy on a more balanced and sustainable footing. While officials insist the risks from higher debt levels are manageable, some analysts believe a massive debt and bank restructuring is becoming increasingly likely. JPMorgan chief China economist Zhu Haibin expects continued government fiscal support in the second half of the year, and another interest rate cut by the central bank, likely in the fourth quarter. “We expect third quarter sequential growth will probably come down” from the second quarter’s 1.8 per cent, he said. Still, while better second-quarter and June data have dispelled forecasts of doom from China sceptics for now, the country’s long-standing problems have not gone away, PNC senior economist Bill Adams said.

Key Points Q2 GDP growth slightly better than expected, steady from Q1 But risks increasing as government bearing more of the load Gov’t steps in with record lending, infrastructure investment Construction boom, strong housing sales help factories But investment growth falls, private investment at record low Brexit adds to uncertainty, more stimulus measures seen

Construction sector

Domestic property investment growth slows Real estate investment directly affects about 40 other business sectors. Clare Jim

Growth of investment in China’s real estate sector slowed in first half of 2016, raising expectations that more stimulus may be injected over the rest of the year to boost sales - especially in smaller cities experiencing a persistent glut. “China’s property-led recovery based on government stimulus has ended, GDP will be slower in the second half because the property sector will not

be as hot and new starts won’t be as strong,” said ANZ Greater China Market Economist David Qu, who is based in Shanghai. Property investment in January-June rose 6.1 per cent from a year earlier, data from the National Bureau of Statistics (NBS) showed on Friday, slowing from an increase of 7 per cent in January-May, while property sales by floor area grew 27.9 per cent, down from 33.2 per cent.

For June alone, property investment was up only 3.5 per cent from a year ago, according to Reuters calculations, compared with 6.6 per cent in May. Real estate investment directly affects about 40 other business sectors in China and is considered to be a crucial driver for the economy. Machinery maker Zoomlion Heavy Industry Science and Technology Co Ltd issued a profit warning this week, citing a lack of significant improvement in demand for construction machinery in the first six months despite a yearly increase in property investment. “A slowdown in the property sector in the second half is bound to happen after a fast pickup in the first half, and the market expectation now is the Chinese government will ease credit to boost the sector,” said David Hong, head of research at Real Estate Information Corporation (CRIC).

“But if the loosening measures do not beat expectations, in the end there could be a bigger downside surprise, hurting (investment) confidence in the property sector.” A flurry of government stimulus measures introduced since late 2014 have turned the sector around from a downturn mid last year. Rapid price gains in some of the biggest cities fanned fears of a bubble and prompted some local governments to tighten home and land purchase requirements, cooling sales in the past few months. In many smaller cities, however, an overhang continued to weigh on sales and prices. New construction starts in June were up 4.9 per cent from a year ago, measured by floor area, Reuters calculations showed, slowing from 10.6 per cent in May. Inventory by floor area last month was 8.6 per cent higher than a year earlier, compared to 9.9 per cent in the previous month. It posted a fourth consecutive monthly decline. Reuters

Key Points China H1 property investment +6.1 pct y/y June only +3.5 pct y/y - Reuters calculations Property sales area +27.9 pct yr/yr vs 33.2 in Jan-May New starts and inventory growth both slow from May

Business Daily Monday, July 18 2016 9

Greater China In Brief “Growth is disquietingly dependent on the housing sector, and the country’s financial system will likely need to restructure bad debts created during the post-crisis credit boom eventually,” Adams wrote in a note. Without progress on such looming challenges, China’s long-term diagnosis isn’t good, according to economist Paul Krugman. “China, if you look at the macroeconomic picture, looks a lot like Japan in the late 1980s. A Chinese bubble burst is still my forecast but it was my forecast the year before and the year before last. But I still believe one of these days it will happen,” Krugman said in Singapore on Thursday. “An unsustainable situation can go on for longer than you can imagine and ends more quickly than you can imagine and I still think that’s the story for China.” Reuters

NPL

Bad-loans ratio reaches highest since 2009

People’s Bank of China headquarters in Beijing Forex

Central bank sales rise to highest in 3 months PBOC reported a surprise increase in June foreign exchange reserves, but analysts said they could fall again in coming months. Net foreign exchange sales by the People’s Bank of China (PBOC) in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Britain’s decision to leave the European Union. China’s central bank sold a net 97.7 billion yuan (US$14.6 billion) in foreign exchange in June, up 82 per cent from May’s 53.7 billion yuan, according to Reuters calculations based on central bank data released on Friday. The data showed that capital flight was largely under control, even as the yuan repeatedly broke through 5-1/2 year lows, and outflows were spurred by anxiety over Brexit. The central bank’s net foreign exchange sales hit a record high of 708.2 billion yuan in December. “This is related to financial market

volatility caused by Britain’s referendum to leave the European Union,” the Shanghai Securities News quoted Sheng Songcheng, director of the Survey and Statistics Department at the PBOC, as saying. The central bank “provided small amounts of foreign exchange liquidity in order to stabilise market expectations”, Sheng said, without elaborating. The central bank has reported a surprise increase in June foreign exchange reserves, but analysts said they could fall again in coming months if the weakening yuan triggers more capital outflows. The rise of US$13.4 billion in foreign exchange reserves in June was due to stronger prices of assets in which China has invested its reserves, as well as appreciation of some non-dollar currencies, Sheng said. Reuters

Automotive industry

Samsung said it has not finalised how much it would spend to buy the stake. South Korean technology giant Samsung Electronics Co Ltd on Friday said it is in talks to acquire a stake in Chinese automaker BYD to boost its chip business for electric cars. In December, Samsung Electronics, the world’s top maker of smartphones and memory chips, created a team to develop automotive-related businesses, seeking a new growth engine as the global smartphone industry is slowing.

Key Points Financial terms of stake purchase plan not finalised Investment worth US$449 million - Korea Economic Daily Tie-ups increasing between automakers, tech firms A u t o m a k e rs a n d t ech n o l o g y companies have formed a series of partnerships in recent years as the race to develop electric, self-driving, internet-connected vehicles has created demand for more electronics components and software. “The latest investment aims at strengthening electric vehicle parts and smartphone parts businesses for the two companies,” Samsung said in a statement. “We plan to discuss cooperation in various businesses going forward.” Samsung said it has not finalised how much it would spend to buy the stake, nor how big a holding it would take in BYD, which specialises in electric

Taxes

Fiscal revenue increased China’s fiscal revenue rose 1.7 per cent year on year to 1.563 trillion yuan (US$224 billion) in June, data from the Ministry of Finance showed on Friday. Revenue growth was down from the 7.3-per cent gain posted for May. Fiscal revenue grew 7.1 per cent to 8.55 trillion yuan in the first half of this year. The ministry expects revenue growth to be further affected by reform policies in the following months as downward pressure on China’s economic growth remains. China’s economy expanded 6.7 per cent year on year in the second quarter, stable from the first quarter. Currency use

Samsung seeks stake in national carmaker BYD

Hyunjoo Jin

Non-performing loans of China’s commercial banking sector rose to 1.81 per cent of total lending at the end of the second quarter, the highest since the global financial crisis in 2009, the country’s top bank regulator said. Shang Fulin, chairman of the China Banking Regulatory Commission (CBRC), urged banks to elevate risk management to a “more prominent” place and take measures to “rein in the rapid rise of non-performance loans” at the regulator’s half-year meeting, according to a statement on the CBRC’s website. At the end of March, non-performing loans (NPLs) were 1.75 per cent of commercial banks’ lending.

vehicles and is backed by Warren Buffett’s Berkshire Hathaway Inc. The Korea Economic Daily reported earlier on Friday that Samsung agreed to buy new shares worth 3 billion yuan (US$449 million) in BYD, which would give Samsung a 4 per cent stake in the automaker. BYD confirmed in a stock exchange filing that Samsung Electronics had participated in their non-public issuance, but did not disclose the amount of its investment as the offering had yet to close. The automaker,

however, denied Samsung Electronics would buy a 4 per cent stake as reported in the Korea Economic Daily. The Korean company’s shares firmed 1.2 per cent, versus the broader market’s 0.3 per cent rise, hitting their highest levels in more than three years and extending gains posted since it said last week it expected a 17.4 per cent rise in quarterly profit. Shares in the electronics firm’s affiliate Samsung SDI jumped more than 8 per cent in early trading in Seoul on hopes that it might be in line to supply electric vehicle batteries to BYD. But Samsung denied that battery supply was part of the BYD tie-up. Reuters

New yuan loans rise in June China’s new yuandenominated lending in June rose to 1.38 trillion yuan (about US$205.97 billion), up 104.4 billion yuan from a year earlier, official data showed on Friday. The figure, which surpassed market estimates of around one trillion yuan, was the second-largest this year after the 2.51 trillion yuan recorded in January. The M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 11.8 per cent year on year to 149.05 trillion yuan by the end of June, the People’s Bank of China said in a statement on its website. Internet services

Tencent in deal to combine music services Internet giant will take a majority stake in a new venture with leading musicstreaming company China Music Corporation that combines their digital music businesses. Financial terms were not disclosed but a person with knowledge of the matter said the new company would be valued at about US$6 billion. The biggest social network and online entertainment company in China could leverage its popular WeChat mobile payment system to promote value-added music services. WeChat had 762 million monthly active users at the end of March, while China Music Corporation has 460 million of those.

10 Business Daily Monday, July 18 2016

Greater CHINA China GREATER

OVERCAPACITY

Mainland’s provinces enlist banks to defy cuts China’s banking regulator has given lenders some latitude to manage their lending to over-capacity industries. Shu Zhang and Matthew Miller

HINA’S provinces are pushing back against Beijing’s efforts to restrict credit to loss-making enterprises with excess capacity, and are enlisting the support of local bankers to keep financing the targeted sectors, such as steel and coal. As part of China’s economic efficiency goals, the State Council earlier this year set capacity reduction targets for regional and central government enterprises in such sectors, and China’s banks have been ordered to slash lending to lossmaking and delinquent corporate borrowers. But local governments in China’s rust belt have been singing from a different hymn sheet in documents and speeches urging local lenders to keep funding firms central to the regional economy. In Shanxi province, China’s top coal producing region, the government told financial institutions to maintain coal sector lending at least at last year’s levels, increase awareness of the industry’s “pillar and strategic status” and not recall loans to seven local government-owned coal groups, according to a document released on the government’s website in May. Shanxi’s deputy governor Wang Yixin told banks at an industry event on Wednesday that it was in their mutual interest to support the seven, which at the end of 2015 reported total liabilities of more than 1 trillion yuan (US$150 billion) and an average liability-to-asset ratio

of about 83 per cent, according to Reuters calculations. “What Shanxi’s good coal companies need the most right now is the confidence of investors and the help from financial institutions - as we cross the river on the same boat,” Wang said, and urged banks to roll over the companies’ loans and buy their bonds. Three senior executives at China’s top coal producers all said they could secure loans at a rate equal to or lower than the central bank’s benchmark rate, suggesting banks were lending a sympathetic ear to that call. “In China, the most important thing is stability,” said a manager at the Shanxi branch of one of China’s big four state-owned asset management companies that help banks dispose distressed loans. He said banks had nothing to fear in lending to such state-owned companies and were not about to treat the coal companies’ debts as non-performing. “Actually, some of those loans are already non-performing, but banks can arrange new loans to repay old loans and interest,” he said. In Henan the provincial government has asked local bankers to help companies in coal, steel, metals and construction materials to switch industry classification so they don’t fall into categories covered by lending restrictions set by banks’ headquarters, according to a document published on the Henan government’s website in May. The document urged locally headquartered financial services companies, including Zhongyuan

Bank, Bank of Zhengzhou and rural commercial banks, to demonstrate their support for local companies. Zhongyuan Bank and Bank of Zhengzhou didn’t respond to requests for comment. At the end of June the Shandong government in eastern China warned lenders in a document on its website that they would be “denounced” or “sanctioned” by creditors’ committees and China’s banking association if they unilaterally recalled loans to key borrowers.

Key Points China targets capacity cuts in sectors such as steel, coal Liabilities for 6 such sectors 10 trln yuan in 2015 -UBS Coal and steel industry key to some local governments and banks Beijing wants banks to cut lending to overcapacity sectors Local governments urging banks to keep lending The China Banking Regulatory C o m m i ssi o n ( C B RC ) d i d n o t immediately respond to requests for comment.

Balancing act

Beijing has noticed the foot dragging. “Some regions’ determination t o r e m o v e o v e r-c a p a c i t y i s shaky,” Xu Shaoshi, head of the National Development and Reform Commission, China’s top economic planning body, was quoted by state media as saying last week. “The practical problem is that s o m e r eg i o n s a r e u n d e r b i g economic downward pressure and face difficult fiscal income and

employment situations,” Xu said on a teleconference that aimed to urge local leaders to cut over-capacity. Total liabilities for six over-capacity sectors amounted to 10 trillion yuan in 2015, including 4.9 trillion yuan in bank loans and 3.8 trillion yuan in shadow credit, according to UBS research. China’s banking regulator has given lenders some latitude to manage their lending to over-capacity industries. “It doesn’t mean there will absolutely be no new loans to the coal industry,” an official from the CBRC said. “Banks can decide for themselves from a risk management perspective how to change their loan structure, after taking into consideration the central government’s policy and local government arrangements,” the official said. That is proving a difficult balancing act. Last Wednesday, Hebei province, home to a quarter of China’s steel manufacturing, renewed its pledge to meet steel and coal reduction targets for 2016 following a central government environmental inspection, according to a notice on the province’s website. Just two weeks earlier, provincial party secretary Zhao Kezhi praised Yi Huiman, chairman of Industrial and Commercial Bank Ltd, the country’s biggest bank, for “thinking from the big picture” by strengthening lending to the heavily industrialised region, state media reported. “Those out of date steel mills, local governments and local banks are lingering in the last gasp,” said Xu Zhongbo, head of Beijing Metal Consulting, which advises Chinese steel mills, adding that they were doing all they could to delay the capacity cuts. “They live or die together,” he said. PROJECT SYNDICATE

2016 11 Business Daily Monday, July 18 2016

Asia ASIA INTEREST RATE

Malaysia’s monetary head leaves analysts puzzled Former governor Zeti changed interest rates only once in four years - in a move predicted by most economists. Chong Pooi Koon

FTER years of monetary policy stability and clear signalling on interest-rate moves, Malaysia’s new central bank governor has left economists scratching their heads. Governor Muhammad Ibrahim’s move to cut interest rates last week in only his second policy meeting since taking office in May - surprising all but one of the 18 analysts surveyed by Bloomberg - marked a departure

for Bank Negara Malaysia and the precedent set by his well-known predecessor, Zeti Akhtar Aziz. While the case had been building for an easing in policy, economists were caught off guard by the timing of the move, expecting the central bank to give a clear signal before adjusting interest rates, as had been past convention. Muhammad told Bernama news agency in an interview on Thursday that the central bank saw a window of opportunity given the slowdown in inflation and cut the benchmark rate by 25 basis

points to 3 per cent in a “pre-emptive” move. “We had thought that the new central bank governor would want to wait to avoid raising questions from investors about whether the new leadership is more dovish than the previous governor,” said Michael Wan, an economist at Credit Suisse Group AG. While a rate cut was on the cards, “the timing was a surprise to us and the market.”

Policy stability

Zeti, 68, had proven to be one of the policy makers least likely to surprise markets - she changed interest rates only once in four years in a move predicted by most economists. By contrast, Indonesia’s central bank has made five unexpected interest-rate adjustments in 10 moves in the same period. Last week’s rate cut was notable because there was no forewarning or hint of policy change in the prior monetary policy statement in May, said Ong Sin Beng, an analyst at JPMorgan Chase & Co. “The precedent had been for Bank Negara Malaysia to be clearer in its signalling of any imminent change in stance,” he said. The central bank cited lower inflation and risks to economic growth stemming from the U.K.’s decision to leave the European Union. It lowered its inflation forecast for this year to 2 per cent to 3 per cent from 2.5 per cent to 3.5 per cent. Consumer prices rose 2 per cent in May from a year ago. The rate cut “is intended for the degree of monetary accommodativeness to remain consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation,” Bank Negara Malaysia said in its monetary policy statement. Muhammad, who was born in 1960 and has a master’s degree from

Harvard University, joined the central bank in 1984 and had been deputy governor since June 2010. His appointment in May triggered a brief rally in the currency as it ended speculation at the time that Prime Minister Najib Razak may name a governor who was more politically aligned to the government. The last time the central bank changed interest rates was in July 2014, when it raised the benchmark by 25 basis points. It gave a signal to the market at the meeting prior to that by disclosing in its statement the need to adjust the degree of monetary policy accommodation.

“We had thought that the new central bank governor would want to wait to avoid raising questions from investors about whether the new leadership is more dovish than the previous governor” Michael Wan, an economist at Credit Suisse Group AG

Last week’s surprise cut “highlights dangers of over-reliance on explicit forward guidance, and may hint at a more aggressive policy reaction under” the new governor, said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. Muhammad told Bernama there’s no plan for a “series of rate cuts,” but the Monetary Policy Committee will assess available data and “keep an open mind” every time it meets. The bank is forward-looking on setting policy, he said. BLOOMBERG NEWS

ENVIRONMENTAL LAWS

Philippines says it suspends a nickel miner in Palawan The mine is the biggest of five slapped with suspension orders in the past two years. The Philippines has suspended a third nickel mine in less than two weeks and again warned miners not to violate environmental laws, the cabinet secretary overseeing mining told a radio station. Regina Lopez, secretary of the Department of Environment and Natural Resources, told the Manila station DZMM on Saturday a suspension order was slapped on Friday on Berong Nickel Corp’s mine on Palawan because of a spill that affected corals. Palawan, in the southwest Philippines, has become popular with tourists in recent years. Lopez said while the spill was not intentional, company authorities “really need to get their act together”.

She described Palawan as “the number one (tourist) island destination in the entire planet”. A top official of unlisted Berong’s stakeholder DMCI Holdings Inc said yesterday he was not aware of the suspension order and the spill incident. “Sorry, I am not aware. Will check tomorrow,” Isidro Consunji, chairman and CEO of DMCI, said in a text message to Reuters. DMCI owns Toledo Mining Corp, which has management control over the Berong project. Berong Nickel, which last year produced 868,000 tonnes of nickel ore, is a joint venture of Toledo Mining and another Philippines-listed firm, Atlas Consolidated

‘A one-month audit of all Philippine mines starting July 8 is under way’

and Mining Development Corp. The Palawan nickel mine is the biggest of five slapped with suspension orders in the past two years, including two early this month. The crackdown on miners by the government of President Rodrigo Duterte has sparked some concerns about ore supply to China, the world’s biggest nickel consumer. At present, the Philippines is the top supplier of

nickel ore to China. A one-month audit of all Philippine mines starting July 8 is under way and Lopez, a staunch environmentalist, said she was unhappy with the initial reports. “If they (miners) are not doing well and they are not following the law, we will withdraw the ECC (environmental clearance certificates),” she said on radio. REUTERS

12 Business Daily Monday, July 18 2016

Asia ASIA IN BRIEF COMMERCE

New Zealand seeks increased trade with Indonesia New Zealand Prime Minister John Key will be joined by Trade Minister Todd McClay in Indonesia this week as he seeks to boost trade between the two countries. McClay said he was traveling to Indonesia yesterday to join Key and a high-level business delegation for a two-day visit to New Zealand’s 11th largest export market. “Our two-way trade currently sits at NZ$1.6 billion (US$1.14 billion), and we’re keen to explore ways to meet the target set by the two countries last year to boost trade to NZ$4 billion by 2024,” McClay said in a statement. SAVINGS

S.Korea foreign currency deposits gain Foreign currency bank deposits in South Korea rose in June, central bank data showed on Friday, as some businesses appeared to stockpile dollars. Total deposits edged up US$2.8 billion to US$59.6 billion as of end-June, the Bank of Korea said in a statement, the highest in two months. Dollar deposits rose US$3.1 billion in June to US$50.0 billion while those denominated in the euro dropped US$0.9 billion to US$2.7 billion, the data showed. Euro deposits fell because some institutional investors withdrew funds, the central bank said.

FISCAL RULE NEGOTIATION

India’s govt reaches out to opposition for support on tax bill Finance Minister Arun Jaitley told reporters the government was trying to resolve differences with the Congress party. Manoj Kumar

NDIA’S government held talks with its main political rival to settle differences over tax reform legislation on Friday, and sources in the two groups with direct knowledge of the matter said a consensus appeared possible in a parliament session starting this week. The proposed reform, India’s biggest revenue shake-up since independence in 1947, seeks to replace a slew of federal taxes and levies in 29 states, transforming the nation of 1.2 billion people into a customs union. Prime Minister Narendra Modi’s party, which lacks a majority in the upper house of parliament, has reached out to the Congress party to

end its opposition to the Goods and Services Tax (GST) bill which has stalled in parliament for years. Finance Minister Arun Jaitley told reporters the government was trying to resolve differences with the Congress party, which include its demands to cap the tax rate at around 18 percent in the proposed bill. The government has said it does not want to be bound to a particular rate written into the law as any future changes would require a further amendment of the constitution. “We are trying to build a consensus,” Jaitley said after meeting top Congress leaders ahead of the monsoon session of parliament beginning today, where the government plans to discuss the bill.

Under pressure to deliver on economic growth and jobs, the government is hoping that the tax reform legislation would make the country an easier place to do business and fuel investment. The GST bill could add 0.8 percentage point to India’s economic growth in 3-5 years, HSBC said in a research note. Congress leader Anand Sharma said discussions had been held with the finance minister and parliament affairs minister on the bill but declined to go into specifics. A source in the Congress party, however, said the party was ready to support the bill if the government committed to capping the tax rate later even if it did not make it part of the law immediately. Despite deep-seated political differences, the Congress party gave the government its support to a landmark bankruptcy bill at the last session. REUTERS

“We are trying to build a consensus” Arun Jaitley, Finance Minister

COMMERCIAL SERVICES

Reliance says telecoms launch in coming months India’s Reliance Industries Ltd said it will launch fourth-generation wireless services commercially in the coming months as the energy-to-telecoms conglomerate reported a forecast-beating 18 percent rise in first-quarter profit. Reliance, controlled by India’s richest man Mukesh Ambani, has invested about US$20 billion on building what will be India’s biggest 4G network. Its Jio unit currently has 1.5 million users including the group’s employees and others testing the network. Investors as well as rivals in the telecoms industry are keenly waiting for the services to be launched as Reliance seeks to reshape the Indian telecom market with low-priced offerings. FISCAL BOOST

Krugman calls for higher Japan inflation target Japan should raise its inflation target to 4 percent and embark on a large but temporary fiscal stimulus to boost prices in the economy, Nobel laureate Paul Krugman said. Speaking at a conference on Thursday in Singapore, Krugman called for “a big burst of government spending and maybe also cash donations,” though authorities don’t necessarily need to adopt a strategy that involves “helicopter” money, he said. “Japan needs to get that inflation rate convincingly high,” Krugman said.

Finance Minister Arun Jaitley

1MDB PROBE

UBS, DBS, Falcon face Singapore scrutiny Singapore faces pressure to show that banks in the city-state are complying with increasingly tough anti-money laundering rules around the world. A. Ananthalakshmi and Saeed Azhar

S i n ga p o r e’ s c e n t ra l ba n k i s scrutinising several banks, including UBS and DBS Group Holdings, to see if they broke anti-money laundering rules in handling transactions linked to scandal-hit Malaysian state fund 1MDB, three people with knowledge of the matter said. The Monetary Authority of Singapore (MAS) is looking at several aspects of the banks’ operations including whether they were diligent enough in knowing who their customers were and what the source of their funds was, and whether they were particularly careful in screening politically-exposed persons such as government officials, banking and legal sources aware of the review said. The probe could lead to fines and

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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other penalties if lapses are found, said the sources who declined to be identified due to the sensitivity of the matter. It is unclear which transactions by the banks are being examined. Switzerland’s Falcon Private Bank and Coutts International, which is owned by Geneva-based Union Bancaire Privee, are also among the banks under review, they said. UBS, Coutts, and DBS, which is Singapore’s top lender, all declined to comment. When asked about the MAS review, a Zurich-based spokesman for Falcon said: “We have transparently shared our view and have nothing to add.” Falcon, which is owned by one of the world’s leading sovereign wealth funds - Abu Dhabi’s International Petroleum Investment Company

(IPIC) - has previously said it is in contact with Singapore’s central bank and cooperating with authorities. T h e M AS i s i n t a l k s w i t h several banks and will make an announcement on any punitive action against them after the review is completed, sources said. The full details are not known at this stage. Singapore faces pressure to show that banks in the city-state are complying with increasingly tough anti-money laundering rules around the world. While the United States has imposed hefty fines on banks for lapses related to money laundering, tax evasion and international sanctions, Asian regulators have been generally slow to act, some lawyers said. “It is also important for Singapore to be seen to be taking action against any abuse of its private banking sector for money laundering,” said Nizam Ismail, Singapore-based partner at RHTLaw Taylor Wessing LLP, where he advises clients on financial services regulation and compliance.

Business Daily Monday, July 18 2016 2016 13

a Asia ASIA

FAKE VACCINE SCANDAL

Indonesia orders overhaul of drug agency

health facilities in Jakarta and the island of Java. No illnesses or deaths have been directly linked to the fake vaccines. “We can’t be half-hearted with this vaccine problem, and yesterday the president decided to immediately restructure the (food and drug agency)” Cabinet Secretary Pramono Anung said in a statement. “With this we hope that this kind of thing won’t be repeated.” The Food and Drugs Agency (FDA) has come under particular fire after officials said they were aware of the fake vaccine problem as early as 2013. But little was done until a police investigation earlier this year

Under pressure from parliament, the health ministry on Thursday published the names of 14 more health facilities around Jakarta that

administered the fake vaccines, prompting crowds of parents at hospitals demanding information on whether their children were victims. Health authorities have sought to reassure parents that the fake vaccines were not harmful and their children could get re-vaccinated under a government programme to be launched next week. Police uncovered the syndicate after a pharmacist in Bekasi, near Jakarta, was arrested in May for selling medicine without a licence. The drugs turned out to be fake and led to the arrest of more than a dozen distributors and makers of the fake vaccines. Investigators said they were also questioning doctors and hospital managers in the case. “In some cases, directors signed the purchases of these vaccines, which means we need to evaluate management,” Health Minister Nila Moeloek told MetroTV. “We must be thorough. We have to finish this.” REUTERS

misconduct by some of BSI’s staff and poor management oversight of the bank’s operations. Though the MAS did not specifically say this related to 1MDB-related transactions, though the Swiss Financial Market Supervisory Authority (FINMA) said at the time that BSI had committed serious breaches of money laundering regulations through business relationships and transactions linked to the corruption scandal surrounding 1MDB. The MAS also imposed a S$13.3 million (US$9.9 million) fine on the bank, and on the same day in May, the Swiss authorities said they would seize 95 million Swiss francs (US$97 million) of BSI’s profits. In response, BSI announced that group CEO Stefano Coduri had stepped down and that it had undertaken steps to strengthen management, including introducing a new chief

risk officer and appointing a new group legal counsel. Malaysian companies and banks linked to 1MDB are at the centre of corruption and money laundering probes that have led investigators to look at transactions and financial relationships across the globe from Malaysia to Singapore and the Seychelles, from Abu Dhabi to offshore companies in the Caribbean, and from the United States to Switzerland. Probes are being conducted by authorities in the United States, Switzerland, Luxembourg, Singapore, and the United Arab Emirates. One of the sources said DBS had identified certain questionable financial activities and had voluntarily reported them to the relevant authorities. Reuters couldn’t determine what those activities were. A Malaysian parliamentary

investigation made public earlier this year found that US$4.2 billion of 1MDB’s money was unaccounted for or went to overseas bank accounts whose owners could not be ascertained. 1MDB was founded by Malaysian Prime Minister Najib Razak in September 2009 to invest in strategic property and energy projects. Najib was the chairman of 1MDB’s advisory board until recently. Malaysia’s Attorney-General Mohamed Apandi Ali cleared Najib in January of any corruption or criminal offences. He said that US$681 million, deposited into Najib’s personal account in March 2013 before a Malaysian general election, was a gift from a member of Saudi Arabia’s royal family and most of it was returned. Najib has repeatedly denied any wrongdoing. REUTERS

The Food and Drugs Agency has come under particular fire after officials said they were aware of a fake vaccine problem as early as 2013. Randy Fabi

Indonesia on Friday ordered an immediate overhaul of the food and drug monitoring agency, a month after police uncovered a syndicate selling fake imported child vaccines to hospitals, pharmacies and clinics over the past decade. The scandal sparked a public uproar and exposed major government deficiencies in ensuring drug safety amid a boom in Indonesia’s health industry. Investigators continue to unravel how widespread the reach of a drugmaking ring that sold fake booster vaccines for hepatitis B, diphtheria, tetanus and whooping cough to

exposed the syndicate, leading to at least 18 arrests so far.

“We can’t be half-hearted with this vaccine problem, and yesterday the president decided to immediately restructure” Pramono Anung, Indonesia’s Cabinet Secretary

“It is also important for Singapore to be seen to be taking action against any abuse of its private banking sector for money laundering” Nizam Ismail, Singapore-based partner at RHTLaw Taylor Wessing

An MAS spokeswoman referred Reuters to its statement in March when it had said that “as part of its investigations into possible moneylaundering and other offences in Singapore, it has been conducting a thorough review of various transactions as well as fund flows through our banking system.” 1MDB referred Reuters to its earlier statements. In May, it had said it hadn’t been contacted by any foreign lawful authority on matters relating to the company, and that it remains committed to fully cooperating with the authorities. The latest probes follow MAS’s decision in late May to close down the operations of Swiss private bank BSI AG in Singapore for serious breaches of anti-money laundering rules, the first time in 32 years it has taken such action against a bank. MAS said then that there had been gross

14 Business Daily Monday, July 18 2016

International In Brief Commerce agreement

EU and U.S. seek trade deal this year EU and U.S. negotiators said on Friday that they still needed to overcome large differences for a transatlantic free trade deal to be sealed this year, and factor in the impending exit from the European Union of Britain, one of the United States’ biggest export markets. The two sides are trying to agree on the Transatlantic Trade and Investment Partnership (TTIP), which supporters say could boost each economy by some US$100 billion at a time when growth in China and emerging markets is slowing. Cabinet

Peru President-elect reveals technocrat-filled cabinet Peru’s President-elect Pedro Pablo Kuczynski listed his incoming ministers on Friday, in a cabinet stacked with technocrats but thin on experienced politicians who might help him broker deals with an oppositioncontrolled Congress. The 77-year-old former investment banker, who was prime minister under expresident Alejandro Toledo, shrugged off concerns that his first cabinet lacked savvy political operators and said it would aim to deliver results. “We’re turning the page. What we want is modern politics based on qualified people,” Kuczynski, a centrist, said in his first press conference.

Economic boost

Soccer success helps Portugal plug the gap - a little Portugal’s triumph in Paris netted them not just US$25.5 million in UEFA prize money but has also bolstered the national economy by boosting tourism. Brigitte Hagemann

ortugu e s e Fi n a n c e Minister Mario Centeno pinned his colours to the mast, donning a green and red scarf as his countrymen lifted the European Championship trophy. EU c o l l e a g u e s i n B r u s s e l s congratulated him as he lauded the Seleccao’s final win over tournament hosts France in Paris. But the Lisbon government had two reasons to celebrate - not just a maiden win at senior level but also one that will give tourism in the cashstrapped nation a much-needed shot in the arm. Portugal is currently along with neighbouring Spain lobbying Brussels to spare both Iberian nations, hit amidships by the eurozone debt crisis, swingeing fines for overshooting official budget deficit targets. The European Commission, the EU’s executive arm, must decide on sanctions of up to 0.2 per cent

“The Portugal brand has gained in stature, the name of the country has been mentioned countless times”

Re-Brexit

Most Britons oppose second referendum on EU exit The majority of Britons are opposed to a second referendum on membership of the European Union and almost half believe new Prime Minister Theresa May should carry on without calling a general election, according to a poll published on Saturday. A survey by ComRes for the Sunday Mirror and Independent newspapers found that 57 per cent of those asked didn’t support a second referendum on Brexit against 29 per cent who did. A total of 46 per cent thought May should not call an election. Rating

Fitch affirms Poland at A- with stable outlook Fitch affirmed Poland’s A- rating with a stable outlook on Friday, saying reduced policy predictability under the Law and Justice (PiS) party government was offset by the country’s robust economic fundamentals and improving external finances. Most analysts polled by Reuters ahead of the decision expected Fitch to keep the rating unchanged, but cut the outlook to negative due to fiscal risks. “Poland’s ‘A-’ rating reflects its solid macro fundamentals, government debt close to its rating peers median and improving external finances from a weak starting point,” Fitch said in a statement.

of GDP over the next fortnight after Lisbon and Madrid were found not to have taken “effective action” to bring deficits back under the bloc’s limit of 3.0 per cent of gross domestic product (GDP). In Portugal’s case, the fine could top 360 million euros (US$400 million) a tough ask in a country that racked up a budget deficit of around 8 billion euros last year. That was 4.4 per cent of GDP, down from the near 10 per cent of GDP the deficit hit in 2010, the year before Portugal was forced to seek a 78-billion-euro international bailout. Star player Cristiano Ronaldo whose overall income Forbes put at US$88 million last season - and his teammates may not be able to turn the economic ship around on their own. But Portugal’s triumph in Paris netted them not just US$25.5 million in UEFA prize money, but has also bolstered the national economy by boosting tourism, to say nothing of the feel-good factor.

Daniel Sa, director of the Portuguese Marketing Institute (IPAM)

Portugal national team supporters cheer their team at Alameda D. Afonso Henriques, Lisbon, a week ago.

“The Portugal brand has gained in stature, the name of the country has been mentioned countless times. The government could never have afforded such an advertising marketing campaign,” Daniel Sa, director of the Portuguese Marketing Institute (IPAM), told AFP.

Boost but no miracle

IPAM puts the potential boost to the economy on the back of footballing glory at 609 million euros. Hotels, restaurants, cafes, travel agents, advertisers, media, betting sh o p s, s u p e r m a r k e ts, s p o r ts boutiques - all have gained a slice of the action as business boomed. “People eat, drink, move about that’s consumption which wouldn’t have existed without the Euros,” said Sa amid celebrations which made the 2011 bailout in order to stave off national bankruptcy seem like ancient history. “This is a turning point in our country’s history,” said Nuno Brito, a jobless 39-year-old who turned out to cheer the team on their arrival home. Sa cautioned that while the win will bolster investor confidence “it won’t by any means resolve the country’s problems.” Domingos Amaral, a sports business professor, said “the country is groaning under financial problems there won’t be any economic miracle thanks to the football”. The International Monetary Fund forecasts Portugal’s economy will manage just 1.0 per cent growth this year. Economics professor Joao Cesar das Neves warned that after Greece won the Euros at Portugal’s expense in 2004 that “Greece then suffered one of the worst financial disasters in history.” But success on the pitch is still good news - and not just for the 23 players who will each pocket a 300,000-euro bonus. Sports shops are doing a roaring trade, not least in 140-euro replica shirts which have sold out. Not everyone is happy, though. “I was ready to pay even more for a Portugal shirt - but they’ve all gone,” said Ali Kabli, a Kuwaiti tourist visiting the Nike Store in the historic Lisbon district of Chiado. AFP

Privacy challenge

Obama administration seeks to ease data sharing The United Kingdom is the first country the United States is seeking to enter into such a bilateral agreement with. The Obama administration on Friday released a legislative proposal intended to provide foreign governments with a streamlined process for asking U.S. tech companies to share email data and conduct wiretaps for criminal investigations. The framework comes one day after a federal appeals court said the U.S. government could not compel Microsoft to turn over customer emails stored on servers outside the United States. The proposal would require the U.S. Congress to change decades-old electronic communications law. It would also require the consent of any foreign government because it is designed to be reciprocal. The United Kingdom is the first country the United States is seeking to enter into such a bilateral agreement with. A technology industry group said it was encouraged by the U.S.-British talks.

“A strengthened legal framework must value privacy and human rights while ensuring law enforcement can do its important work,” Reform Government Surveillance, an industry group that represents major tech firms, said in a statement. Some privacy advocates have been sceptical of adopting such bilateral agreements due to concerns other countries do not possess sufficient judicial oversight for warrant use. Current agreements used to allow law enforcement access to data stored overseas are known as mutual legal assistance treaties, or MLATs. But MLATs, which involve making a formal diplomatic request for data and having authorities in the host country obtain a warrant on behalf of the requesting country, are considered overly cumbersome by law enforcement officials who say the process often takes several months.

“The current situation is unsustainable,” Assistant Attorney General Peter Kadzik wrote to Vice President Joe Biden, who also holds the title of president of the U.S. Senate, in a letter proposing the new framework.

“A strengthened legal framework must value privacy and human rights while ensuring law enforcement can do its important work” Reform Government Surveillance statement “If foreign governments cannot access data they need for legitimate law enforcement, including terrorism investigations, they may also enact laws requiring companies to store data in their territory,” Kadzik said. Reuters

Business Daily Monday, July 18 2016 15

Opinion Business Wires

Viet Nam News The Department of Information and Communications of Hà Nội (DIC) has worked with several agencies to develop an information technology business incubator scheme to promote start-ups. The aim is to develop Hà Nội as a startup city, Director of the DIC Phan Lan Tú said at a briefing held this week to review the performance of the department in the first six months. He said the Government had talked a lot about Việt Nam becoming a start-up country and Hà Nội was eager to become a start-up city.

The Korea Herald South Koreans’ direct trading of foreign stocks fell considerably in the first half of the year due to a sharp drop in investment in the Chinese market, data showed yesterday. The total transaction volume of foreign shares by South Koreans came to US$6.23 billion, or around 7 trillion won, during the January-June period. It marks a 15.96 per cent decline from US$7.41 billion recorded a year earlier and 7.74 per cent decrease from US$6.75 billion in the latter half of 2015. In particular, the trade volume of Chinese stocks plunged 70.43 per cent to US$550,000 from US$1.86 million in the July-December period last year.

Global cooperation as a life-and-death issue

Philstar Multilateral lender International Monetary Fund (IMF) said the unauthorized transfer of US$81 million from the Bangladesh Bank to entities in the Philippines through Rizal Commercial Banking Corp. (RCBC) has highlighted the need to tighten the country’s anti-money laundering laws. Chikahisa Sumi, head of the IMF mission to the Philippines, said there was also a need to ease the bank secrecy law in the country to be at par with international standards. RCBC of taipan Alfonso Yuchengco was dragged into the money laundering scandal after it was used as a conduit by hackers.

Taipei Times In an opinion piece on Saturday published by the Chinese-language United Daily News, former President Ma Ying-jeou presented 10 pieces of advice “for President Tsai Ing-wen’s reference” on ways to uphold Taiwan’s rights in the South China Sea and the status of Itu Aba Island (Taiping Island). Tuesday’s ruling by the Permanent Court of Arbitration in The Hague, the Netherlands, over a case the Philippines brought against China said all high-tide features in the Spratly Islands (Nansha Islands), including Itu Aba Island, are “rocks” rather than “islands” and are not entitled to 370.4 km exclusive economic zones.

he uncertainty generated by the United Kingdom’s recent vote to leave the European Union – which has sent shockwaves through global markets – has been dominating headlines. But, as we prepare to face new political trials, we must not lose sight of the challenges we already face, especially global health challenges like the rise of antimicrobial resistance (AMR), which has no regard for economic performance or political stability. As it stands, an estimated 700,000 people are losing their lives to drug-resistant infections each year. By 2050, this figure could skyrocket to ten million per year, at a cumulative cost to world GDP of US$100 trillion. To avoid that outcome, in May the Review on AMR that I lead published its strategy for tackling such infections, laying out proposals to ensure the development of the necessary new antibiotics, and to use existing antibiotics more efficiently in humans and agriculture. Of the ten major interventions we proposed, four are particularly important: Launch a global campaign, tailored for different regions, to improve public awareness of AMR. Address the market failure in the development of new antibiotics by introducing lumpsum market-entry rewards to developers of successful new drugs, while ensuring global access. Advance innovation and improve use of diagnostic technology to support more efficient use of antibiotics. Implement country-level targets focused on reducing unnecessary use of antibiotics in agriculture and humans.

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Jim O’Neill a former chairman of Goldman Sachs Asset Management, is Commercial Secretary to the UK Treasury

message, they will mean nothing if we do not manage to translate the current momentum into concrete action, beginning at the G20 and UN meetings this September. And while my most recent discussions suggest that agreements are likely to be reached at both of these meetings, it is far from certain that they will match the scale of the problem. At the G20, the needed agreement should focus on developing a global mechanism to re-invigorate the market for new antibiotics that are globally affordable, accessible, and used as efficiently as possible. At the UN, the goal should be to turn the mantra of “access, not excess” into a reality, with an agreement to reduce the unnecessary use of antibiotics in agriculture, and to spearhead a global awareness campaign. Increased funding for research and development of new antibiotics and diagnostics to fight AMR is also vital. Crucially, the agreements must have teeth. Countries should set their own objectives to fit their particular circumstances and needs, but there must be some provisions to ensure that all are pulling their weight. For starters, efforts to fight AMR should be incorporated into broader economic-development st ra t e g i e s, i n c l u d i n g t h e implementation of the UN Sustainable Development Goals. Moreover, progress should be measured, not only so that policymakers, companies, and health systems can be held accountable, but also so that others can emulate their successes. To this end, we may need new metrics for calculating the impact of AMR. While this sounds technical (and it is), the reality is that top AMR scientists think that agreeing on common measurements could change the way individual countries set their own targets and improve our capacity to measure progress in the coming years. Finally, to account for changing political priorities and personalities, we need a constant champion in the fight against AMR. For example, a UN envoy on AMR could be appointed, to continue making the international case for addressing the issue and to challenge countries to meet their targets. Without such a consistent reminder of the need to tackle AMR, not to mention transparency about progress, the world could become side-tracked and miss the rapidly closing window of opportunity to deliver the changes needed to stop the rise of drug-resistant infections. Over the last couple of years, governments, industry, and international organizations have made important strides in meeting the AMR threat. But the really hard decisions must be taken now. If we are to prevent the slow-motion car crash of rising AMR, our leaders must take evasive action now. We know what we have to do; now we must get on with doing it. Project Syndicate

For starters, efforts to fight AMR should be incorporated into broader economicdevelopment strategies, including the implementation of the UN Sustainable Development Goals.

With our final report complete, the Review will now continue to make the international case for action directly to political leaders. For example, in my capacity as the Review’s Chairman, I recently discussed our recommendations at the World Health Assembly in Geneva, and with United Nations and United States policymakers in New York and Washington, DC. In these discussions, policymakers’ growing awareness of the danger posed by AMR stood out. Just two years ago, the topic of drug-resistant infections would usually be met with questions like “What is AMR?” or, “Why would a finance minister take charge of a health crisis?” Few understood the scale and multifaceted nature of the challenge, and thus the need for a comprehensive approach. I asked myself similar questions when British Prime Minister David Cameron first asked me to lead the Review on AMR. The situation has changed considerably since then. Policymakers from countries with a wide variety of economic and political systems are engaging on the AMR problem, with some countries already taking steps to tackle it. All of this provides grounds for hope that 2016 may be the year when real change gets underway. But hope is one thing; action is another. While highlevel meetings and speeches about AMR send the right

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16 Business Daily Monday, July 18 2016

Closing Pollution

Air quality of Chinese cities improves

The air quality in 338 Chinese cities showed improvements in the first half of this year, said the Ministry of Environmental Protection yesterday. Beijing, Tianjin and 11 main cities in north China’s Hebei Province, an industrial zone troubled by air pollution, saw cleaner skies with about 57.4 per cent of the January-June period having “good air quality”, 11 percentage points higher than the first half of 2015, said Luo Yi, head of the ministry’s environment monitoring division. In Beijing, the rate was 58.8 per cent, an year-onyear increase of 10.2 percentage points, while the

density of PM2.5, fine particulate matter causing smog, stood at 64 micrograms on average, down 17.9 per cent year on year. However, six out of the 10 cities with the worst air quality were still in Hebei. The top 10 cities with the cleanest air were mostly along the southeast coast, except Lhasa in Tibet. The 25 cities along the Yangtze River Delta recorded 72.9 per cent of days with good air quality, an year-on-year increase of 3.8 percentage points, while the ratio in nine cities along the Pearl River Delta was 94.7 per cent, an increase of 4.1 points. Xinhua

Overhauling ‘couture’

Back to basics: The HK start-up taking on fashion giants Hong Kong, the world’s biggest cargo hub, is well suited for Grana’s global audience. Liz Thomas

uke Grana arrived in Hong Kong with no contacts, coldcalling ‘angel investors’ he’d found on LinkedIn armed with only his CV, a business plan, and some big ideas to overhaul fashion. In little more than two years, his eponymous clothing store amassed US$6 million in seed funding and has become the go-to shop for under35s seeking quality staples for their wardrobe. And yet Grana is not a designer, has little fashion experience, and his inspiration came from a business brainstorming session rather than a passion for couture. What he does have are plans to shake things up. “The way we shop for clothes is going to change,” the 32-year-old says. Global fashion sales currently total around US$1.8 trillion a year, with online accounting for five per cent, he says, citing a Euromonitor report. “That is forecast to grow to 30 per cent by 2030,” he adds suggesting Grana, which has no physical stores - only a fitting room space where customers can try the clothes before buying online - is well placed to take advantage of this shift. The current system, with its reliance on expensive shop space, middle men, and vast inventory, he insists is “hopelessly inefficient” and results in opaque pricing. “Gen Y is more focused on transparency,” the Australian entrepreneur - part of Generation Y himself - says.

“I made things simple. So if a t-shirt costs US$7.50 to produce, we’ll sell for US$15 - a straight forward mark-up.”

Ahead of the curve

Quality is his other pillar. The brand uses world renowned material such as Chinese silk from Huzhou or Peruvian Pima cotton, sourced from the same mills that work with luxury brands such as Ralph Lauren and Lacoste. “We deal direct with the mills and factories, items are then shipped to our warehouse and then shipped to the customer,” he explains. Hong Kong, the world’s biggest cargo hub, is well suited for his global audience - the U.S., Australia and Singapore are also key markets. Of the hundreds of cold-calls he made in late 2013, just one replied: banker Pieter Paul Wittgen. Wittgen, now the company’s COO, was impressed enough by both Grana and his ideas that he introduced him to a wider network of ‘angels’. The firm now has backing by big name investors including BlueBell Group, distributors for the likes of Christian Dior in Asia, and Golden Gate Ventures, a leading backer of start-ups in the region. Grana’s head of design, Anthony Hill, worked for Paul Smith. On average Grana’s customers now spend US$120 per order, while sales are above expectations - rising 25-40 per cent each month - he says. Earnings are currently being reinvested in expansion to Japan, Korea and eventually China but Grana expects to be in profit by late 2017. It may seem an overnight success

but for Sydney-born Grana this has been a long time coming. In his teens, he read company annual reports and business books. Aged 21 and still at university he set up his first business - a coffee shop - using US$15,000 of life savings. After nine months he sold for $145,000 and went on to launch and sell - at profit - two similar ventures. At 24, he set up Charge Point, an electric car charging infrastructure but sold up in 2012 when he realised the concept was “ten years ahead of the industry”. He took time off to “surf and brainstorm” with his profits. “I wasn’t demotivated, I was really hungry,” he insists. “During brainstorming I realised there was a disruption coming in fashion.” But his next start-up Coachy was a webcam teaching service - an “Airbnb for tutoring” in his words. Again he found his ideas were

“I made things simple. So if a t-shirt costs US$7.50 to produce, we’ll sell for US$15 - a straight forward mark-up.” Luke Grana, entrepreneur

ahead of the curve: internet speeds then could not support his idea, so he closed up. “I learned the importance of being in the right market at the right time.”

‘Do things differently’

Grana’s eureka moment came during a holiday in Peru, where he came across Pima Cotton. Within the week he had visited mills and bought samples for friends and family. “Based on their reaction I knew I had found my product. But I didn’t know about styles, pricing or how to merchandise,” he adds. So he went and got some shop floor experience working at Zara and French Connection. Grana seems assured this is his moment. Certainly the focus on “timeless wardrobe essentials” is prescient: British design house Burberry announced a move to ‘seasonless c o l l ecti o n s’ as th e t r e n d f o r decluttering sees fast fashion falling out of favour. At Grana they focus on timeless colours and run a limited number of seasonal ones. “There are no sales, just one standard price year round.” Social media presence has helped spread the word quickly. Grana’s adverts pop up regularly on Facebook, 17,000 follow the Instagram account, and it uses Snapchat to give a glimpse into the mills and factories it uses. Grana concedes “fashion has a bad reputation” for exploitation but is confident his firm does not use child labour, adding independent safety audits of production will begin this year. “I don’t want to copy anything from the traditional model,” he says. “We are doing things differently.” AFP

Tax probe

Overcoming Brexit

Results

Google CEO defends Europe practices

Australia keen on early free trade deal with Britain

Mainland’s real estate giant sees profit grow

Google CEO Sundar Pichai hit back yesterday at accusations that the global internet giant failed to pay enough taxes in Europe, and warned of the potential fallout from Britain leaving the EU. As Google faces a raft of fiscal probes across the continent, Pichai told Germany’s Welt am Sonntag newspaper that the US company invested “very heavily” in Europe and employed 14,000 people there. “As a global company, we find ourselves between the conflicting priorities of international tax law,” he said, in remarks published in German. “Based on the structure of existing tax law, most companies pay the bulk of their taxes in their home countries.” He said that Google respected the laws on the books, and that governments would have to take action if they wanted to ensure more revenues stayed at home. “Only the further development of the global tax system by politicians can lead to better results,” he said. Asked about a Brexit or British exit from the EU following last month’s watershed referendum, Pichai underlined the importance to Google of a “unified digital market” in Europe. AFP

Australian Prime Minister Malcolm Turnbull told his British counterpart Theresa May he would like to see the two countries strike a free trade deal as soon as possible following Britain’s vote to leave the EU, May’s office said yesterday. The two leaders had spoken on Saturday to discuss their priorities after May took office on Wednesday and Turnbull retained power a week ago in a national election. Turnbull had congratulated May, her office said in a statement, and “expressed a desire to strike a free trade deal as soon as possible”. While acknowledging that legal obligations prevent Britain from signing deals while still an EU member, May had replied she would be very keen to complete an agreement as soon as possible, the statement said. “I have been very clear that this government will make a success of our exit from the European Union,” it quoted her as saying afterwards. “One of the ways we will do this is by embracing the opportunities to strike free trade deals with our partners across the globe.” Turnbull confirmed in Sydney yesterday that he had discussed a free trade agreement with May, describing their conversation as constructive. Reuters

Poly Real Estate Group, one of China’s leading real estate companies, saw revenue and profit both grow in the first half of 2016 (H1), despite headwinds in the property sector. Poly posted total profits of 9.79 billion yuan (about US$1.46 billion), up 21.3 per cent from the same period last year, according to a statement on the Shanghai Stock Exchange yesterday. The Beijing-based company generated total revenue of 55.17 billion yuan, up 30.3 per cent year on year, said the company. The developer said the surge in its revenue was mainly due to the completion and sale of more estate projects during the six months. Slower profit growth was mainly caused by declining gross profit rate, the company said. The company’s new performance sheet came amid a wider slow down in the real estate sector in China. Investment in China’s property sector and property sales in the first half lost momentum from the first five months, but destocking has achieved progress, official data showed Friday. Property sales also slowed during the period, but the unsold property around the country continued to drop, showing positive results for China’s destocking efforts. Xinhua