Macau Business Daily July 21, 2016

Hainan Airlines buys share of Portugal’s public airline Aviation Page 5

Thursday, July 21 2016 Year V Nr. 1091 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Administration

Gov’t studying supplier database for public procurement Page 2

www.macaubusinessdaily.com

Law

Gaming

Local businessmen cautioned against intellectual property infringement Page 6

Imperial Pacific secures notice of intent on public land lease Page 7

CE Diffuses Ownership Issue Iec Long scandal

MSAR’s Chief Executive has moved to assure owners of units on disputed land plots. Pledging properties exchanged for former Iec Long Firecracker Factory lots will be safe from forfeiture. He reiterated that the Secretary for Transport and Public Works is following up on the case. While CCAC is digging into whether corruption was involved. Page 3

Top ten for tourism

Power expansion

CEM has been granted a 2,464 square metre plot in Cotai.

To build a new power station.

With land premium MOP1.8 mln and annual rent MOP44,352.

Tourism Macau was ranked 10th largest tourism earner in 2015. UNWTO reveals it received an estimated US$31.3 bln from international tourists.

The number, however, has plummeted by more than a quarter y-o-y from the US$42.6 bln posted in 2014. Page 5

CEM Page 2

Game on

HK Hang Seng Index July 20, 2016

21,882.48 +209.28 (+0.97%) Worst Performers

China Resources Power

+4.90%

Sino Land Co Ltd

+2.04%

China Shenhua Energy Co

-2.38%

China Overseas Land &

+0.00%

Wharf Holdings Ltd/The

+3.66%

Belle International Holdings

+2.00%

China Resources Land Ltd

-0.52%

PetroChina Co Ltd

+0.00%

Henderson Land Develop-

+3.24%

New World Development

+1.99%

CK Hutchison Holdings Ltd

-0.34%

Power Assets Holdings Ltd

+0.14%

+3.17%

MTR Corp Ltd

+1.89%

China Unicom Hong Kong

-0.25%

Kunlun Energy Co Ltd

+0.17%

Cheung Kong Property

+1.61%

Bank of Communications

+0.00%

China Petroleum & Chemical

+0.17%

Lenovo Group Ltd BOC Hong Kong Holdings

+3.09%

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

Source: Bloomberg

Best Performers

Fri

Sat

I SSN 2226-8294

Sun

Mon

Source: AccuWeather

Casino Kazuo Okada, Universal Entertainment Corp. chairman. And former Steve Wynn partner. The Japanese entrepreneur plans to woo Chinese gamblers to his Manila casino resort. Costing US$4 bln and scheduled to open in November. Page 7

2 Business Daily Thursday, July 21 2016

Macau Event

Light Festival organizer bids quality of each tender will be based on its fulfilment of criteria capped at MOP20 million The Macao Government Tourism Office (MGTO) has opened a public tender for the Macau Light Festival, set to run from December 4 to 31, with a bid cap of MOP20 million. The results of the public tender will be announced on August 17. The

– with 20 per cent attributed to price, 30 per cent to creativity, including light and 3D usage as well as new technology ‘including cultural and creative elements’, while a further 30 per cent will be attributed to the security and efficiency of service.

CEM

Land granted for CEM to build new power station A 2,000-plus square metre plot in Cotai has been granted to the city’s sole power distributor.

Annie Lao annie.lao@macaubusinessdaily.com

A

land plot occupying an area of 2, 464 square metres has been granted to Companhia de Electricidade de Macau (CEM), a private public utility company in Macau, to build a new power station, The plot is located in Avenue Marginal Flor de Lotus in Cotai opposite the natural gas pipeline network gate station, according to a dispatch signed

by Secretary for Transport and Public Works Raimundo Arrais do Rosário and published in the Official Gazette yesterday.

The valid leasing period runs until

Lower tariff

CEM has announced in a press release that starting from the third quarter the Tariff Clause Adjustment (TCA) will be 35 cents per kWh, 1 cent per kWh lower than the previous quarter according to the calculation under the concession contract.

The city’s sole power distributor continues to offer a subsidy to Tariff Group A customers, who account for over 99 per cent of the total customer base. TCA will be reduced from the contractual

December 31, 2025. The land premium is valued at around MOP1.8 million (US$230,000), with an annual lease fee of

2, 464 m2 Area of land in Cotai granted to CEM for new power station

MOP 44,352, the dispatch states.

In 2009, the Secretariat for Transport and Public Works approved a land plot occupying an area of 1,000 square metres to CEM, located at the

calculated value of 35 cents to 34 cents per kWh, representing a reduction of 1 cent per kWh. TCA for Tariff Group B, C and D customers will be at 35 cents per kWh, 1 cent per kWh lower than the previous quarter.

The company said that the reduction of TCA in these two quarters benefited from the continued low international fuel prices. CEM can take advantage of selecting the best energy mix and showcase the importance of local generation.

bottom of the Lotus Bridge to build the power station.

However, CEM found that the land granted could not meet the actual needs of the project. CEM requested the department be granted a larger area of land for the project.

The Secretary stated in the dispatch that the application by CEM for the land expansion met the conditions of the contract based on the urgency to build public utilities. As a result, the extra land has been granted to CEM in a leasing contract without a public tender.

Procurement

Gov’t studying supplier database for public procurement The government is planning to set up a database of suppliers and contractors for the procurement of public departments, the director of the Financial Service Bureau (DSF), Iong Kong Leong, said in a reply to legislator Kwan Tsui Hang’s written enquiry.

According to Mr. Iong, the financial bureau is now studying the feasibility of establishing such a database, in addition to the viability of uploading the information of tender openings to the website of public departments. “[The Bureau] has started to organise and gather instructions of procurement procedures, hoping to further improve the practical operations [of public servants],” the official wrote.

The directly-elected legislator queried in her interpellation whether the government has any measures

to ensure public departments do not violate any regulations when they procure [goods]. She also questioned whether the current infrastructure under construction will be subject to compensatory clauses if work is delayed.

The DSF director claimed his bureau would continue studying the city’s overall regulations of public procurement, adding the financial body had already finished drafting the amendments to the current laws regulating the public procurement amount that was implemented some 20 years ago.

He also quoted the department of public works as saying that they would urge contractors to complete infrastructure based on the scheduled progress, claiming any contractor would be fined if they could not catch up with the regulated progress without reason. K.L.

Business Daily Thursday, July 21 2016 3

Macau Land

CE: Homeowners unaffected Chui Sai On has pledged that owners of units in properties on plots involved in the Iec Long Firecracker land swap scandal will not be affected.

Annie Lao annie.lao@macaubusinessdaily.com

T

he l a n d s w a p o f I ec Long Firecraker Factory has been nullified. Chief Executive Fernando Chui On indicated that he has already dispatched the Secretary for Transport and Public Works, Mr. Raimundo do Rosário, to follow up and ordered the Commission Against Corruption (CCAC) to investigate in order to safeguard the pubic interest.

He spoke to reporters yesterday before departing for an official trip to Beijing, according to a report by local broadcaster TDM Chinese Radio.

Mr. Chui said that the SAR Government has collected feedback from the CCAC and the Public Prosecutor’s Office, based on which owners of residential units in

Business trip

The Chief Executive also commented that the government has noticed the different opinions on renovating the Grand Prix Museum with a budget of MOP300 million and promised that he would further study the case and instruct the Secretariat for Social Affairs and Culture to collect opinions; he might include the project in his Policy Address for next year.

properties on plots involved wouldn’t be affected.

“Since the purchase of the units has been registered with the government we have consulted the CCAC and the Public Prosecutor’s Office regarding this case. Based on our [the SAR Government’s] understanding, the final decision to be made will not affect the property owners’ interests.”

Mr. Chui said.

According to the CCAC report, the invalidated land swaps involves the premium property price of Kinglight Garden in Taipa building and the land of One Central Residences on the Macau Peninsula.

CCAC investigating

Concerns have also been raised about Li Canfeng, the incumbent director of Land, Transport and Public Works Bureau (DSSOPT) who

Chui Sai On is going to Beijing to meet with city leader Guo Jinlong, the Secretary of Beijing Municipal Committee, to discuss co-operation between the two cities.

He will also meet with officials from the Hong Kong and Macau Affairs Office of the State Council and the National Development and Reform Commission to discuss the first Five-Year Plan of the MSAR.

used to occupy a managerial post in the Bureau when the incident was unfolding. Some question whether he should be excused from the investigation.

Chui Sai On indicated that Li will serve in his current post, with Secretary Rosário supervising; meanwhile, CCAC will investigate whether any corruption took place in the case.

In the CCAC report, the anticorruption body has investigated

the deals surrounding a series of land swaps originating from 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 then-director of the Land, Transport and Public Works Bureau Jaime Roberto Carion, who was supposedly acting as a representative of the SAR Government.

4 Business Daily Thursday, July 21 2016

Macau Opinion

Ashley Sutherland-Winch Shopping Wins First It must have been a gamble for luxury brands like Chanel, Louis Vuitton and Yves Saint Laurent to establish brick and mortar shops in so many casinos in Macau but it seems that this bet may have paid off.

According to the latest report from the Tourism Research Centre of the Institute for Tourism Studies in Macau released last Friday, shopping is currently the most common reason for visiting our city.

Cuisine and visiting World Heritage attractions were second and third in the report followed by gambling in fourth place. It’s not surprising to hear that shopping is attracting tourists to the city, especially with the saturation of our market. You simply don’t have to look far from your hotel room to discover a gold mine of shopping destinations. Because the gaming areas of casinos are often protected by a fortress of shopping malls, a maze of sorts, it’s not earthshaking to learn that tourists may decide that purchasing a new designer handbag or watch could be a safer bet because you return home with an actual product instead of losing the money on an unfortunate card or slot bet.

The interesting part of the study is that shopping is the catalyst for tourists to visit Macau. In 2015, HSBC managing director Ewan Rambourg said, “Japanese people used to purchase luxury products to fit in whereas the Chinese are buying goods to stand out.”

Where better for Chinese tourists to find luxury goods that stand out than in Macau?

In the Peninsula’s 36 casinos, most have a variety of shopping outlets and many host luxury stores. Macau is truly a one-stop shop for tourists seeking high fashion or high-end goods. Our city’s luxury boutiques dwarf their Hong Kong counterparts in scale, profitability and range of exclusive products.

In the Four Seasons Shoppes alone, customers can visit more than 700 prestigious brands in one location. Across the street, The Venetian and adjacent City of Dreams offer similar shopping delights and this is just a small piece of the Cotai Strip, not all of Macau.

As the number of tourists visiting Macau continues to decline and casinos report decreased profits, it has yet to be seen if our draw of shoppers will lead to a profitable year for retailers.

We can; however, feel confident that as we continue to search for the brand identity of Macau, successfully establishing ourselves as a shopping Mecca or luxury goods haven is a great place to start.

Ashley Sutherland-Winch is a Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Insurance

AXA posts MOP115.6 mln loss for 2015

T

he AXA Macau Branch, part of the French insurance service company AXA Group, has registered a negative result of MOP115.6 million (US$14.4 million) for 2015, according to the company’s official results.

Last year’s results continue a two-year negative streak for A X A i n M a c a u , h av i n g s e e n

losses of MOP103.5 million in 2014. However, in 2015 the gross premium amount generated by AXA in Macau, which only offers life insurance, increased 53 per cent to MOP748.1 million from MOP489.2 million in 2014.

Nevertheless, the performance of the company in the territory lags behind the overall market, as

total gross premiums from the lift insurance market increased 73.6 per cent to MOP12 billion from MOP6.93 billion in 2014, according to Monetary Authority (AMCM) data.

Overall, the AXA Group increased its net income by 3 per cent in 2015 to 5.6 billion euros (US$6.1 billion/ MOP49.2 billion) according to AXA Group’s financial reports.

Retail

L’Occitane sales plunge 20 pct in SARs French retailer of skincare products L’Occitane International S.A has posted a decrease of 19.8 per cent year-on-year in its sales in Hong Kong and Macau for its first fiscal quarter, amounting to 22.8 million euros (MOP175.3 million/US$21.9 million), according to its filing with

the Hong Kong Stock Exchange on Tuesday.

For the three months ended June 30, the retailer’s same-store sales in the two Special Administration Regions dropped by 11.7 per cent year-on-year. The company operated a total of 36 stores in the two cities

as at the end of June, of which three were located in Macau.

The total net sales of the company reached 268.5 million euros for the period, down 2.2 per cent compared to some 274.6 million euros one year ago.

O f th e t o ta l , s e l l - o u t-sa l es amounted to 200.4 million euros, which fell by 0.9 per cent yearon-year and accounted for 74.7 per cent of the total, while sell-in sales totalled 68 million euros, which also represents a year-on-year decline of 6 per cent.

The company explained in the filing that the soft performance was due to ‘lower sales to travel retail operations in Asia Region’ in addition to the global economic downturn and overall unfavourable foreign exchange impact.

Meanwhile, the company’s sales in Mainland China registered a year-onyear decrease of 5.3 per cent during the quarter, amounting to 24 million euros. Same-store sales in the country, however, were only slightly down by 0.4 per cent year-on-year.

The company had 195 stores in the Mainland as at the end of June, an increase of eight compared to the same period last year, according to the filing. K.L.

Aviation

Hainan Airlines buys share of Portugal public airline company The Chinese airline will obtain 23 per cent of economic interest in public Portuguese air company TAP. Chinese airline Hainan Airlines, owned by the HNA Group Co., Ltd. (HNA), has agreed to pay US$33 million (MOP263 million) for 25 per cent of convertible bonds of public Portuguese airline TAP from Brazilian carrier Azul, according to news agency Lusa.

Now Hainan Airlines will obtain 23 per cent of economic interest in TAP, occupying one board seat of the 12 seats of the board of directors of TAP with voting power.

Azul was founded by David Neeleman, one of the members of the

Atlantic Gateway consortium, which currently controls the Portuguese aviation company TAP. Earlier this year, Azul purchased US$132 million-worth of TAP’s convertible bonds in a transaction

financed by short-term loans from HNA. HNA is also planning to invest US$300 million in Azul in order to become a shareholder in the company.

The Chinese group, considered the fourth biggest in the airline sector in China, currently operates around 630 domestic and international routes per day, and sees this move as a way to expand its aerial connections to Europe and Africa. N.M.

Business Daily Thursday, July 21 2016 5

Macau

Tourism Total international tourism receipts only behind Mainland, HK in the region

MSAR ranked 10th biggest tourism earner worldwide The latest report by the World Tourism Organization shows the city’s tourist receipts fell in 2015, but still rank tenth highest in the globe.

Kam Leong kamleong@macaubusinessdaily.com

T

he Special Administrative Region was the 10th largest tourism earner in the world in 2015, having received an estimated US$31.3 billion (MOP250.4 billion) from international tourists in the year, reveals the 2016 edition of Tourism Highlights by the World Tourism Organization of the United Nations (UNWTO).

Th e r e p o r t, p u b l i sh e d th i s month, reveals that the number of international tourist arrivals (overnight visitors) increased by 4.6 per cent year-on-year to a total of 1.19 billion worldwide last year.

Meanwhile, total tourism receipts grew by 4.4 per cent year-on-year in real terms to US$1,260 billion worldwide.

According to the findings, the city’s receipts from international tourism plunged by 26.4 per cent

International tourist arrivals

1 2 3 4 5 6 7 8 9 10

France United States Spain China Italy Turkey Germany United Kingdom Mexico Russian Federation

(million) 2015 84.5 77.5 68.2 56.9 50.7 N/A 35 34.4 32.1 31.3

2014 83.7 75 64.9 55.6 48.6 39.8 33 32.6 29.3 29.8

Change (%) 2015/2014 0.9 3.3 5 2.3 4.4 N/A 6 5.6 9.4 5

for 2015, compared to the US$42.6 billion posted in 2014. In addition, the drop has much expanded visa-vis a year-on-year decrease of 1.1 per cent registered in 2014 – when it was ranked as fifth largest tourism earner by the organization.

For the year, the biggest earner in the global tourism industry was the United States, which generated some US$204.5 billion, followed by Mainland China, Spain and France, which generated tourism receipts of US$114.1 billion, US$56.5 billion and US$45.9 billion, respectively.

According to the report, these four largest tourism earners were also the most visited destinations in 2015 albeit in the different order of France, United States, Spain and China.

Neighbouring Hong Kong, which earned some US$36.2 billion from its tourism business in 2015, was ranked ninth biggest tourism earner worldwide. Nevertheless, its receipts, compared to some US$38.4 billion in 2014, represent a decrease of 5.8 per cent.

The non-profit organisation measures expenditure by international visitors on accommodation, food and drink, entertainment, shopping and other services and goods in the destinations.

*Source: World Tourism Organization (UNWTO) (Data as collected by UNWTO, July 2016)

Third largest earner in region

International tourism receipts

1 2 3 4 5 6 7 8 9 10

United States China Spain France United Kingdom Thailand Italy Germany Hong Kong Macau

(US$ billion) 2015 204.5 114.1 56.5 45.9 45.5 44.6 39.4 36.9 36.2 31.3

2014 191.3 105.4 65.1 58.1 46.5 38.4 45.5 43.3 38.4 42.6

Change (%) 2015/2014 6.9 9.8 4 -5.4 5.2 22 3.8 1.9 -5.8 -26.5

*Source: World Tourism Organization (UNWTO) (Data as collected by UNWTO, July 2016)

By region, Europe topped the global tourism business by generating some US$450.7 billion-worth of receipts in 2015, followed by Asia and the Pacific earning some MOP418.3 billion together.

The data suggests that the tourism receipts of Macau accounted for 7.5 per cent of the region total, the third highest in Asia and the Pacific.

Nevertheless, the proportion fell by 3.3 percentage points year-on-year from 2014.

Meanwhile, China’s tourism receipts occupied 27.3 per cent of

the region’s total, while Hong Kong and Australia accounted for 8.6 per cent and 7 per cent, being the second and the fourth largest earner in the Asian and Pacific tourism market.

On the other hand, Europe also led the market by receiving the highest number of tourists in 2015, some 607.6 million. The number accounted for 51.2 per cent of the worldwide total.

International tourist arrivals in Asia and the Pacific hit 279.2 million, occupying 23.5 per cent of the total, while he Americas accounted for some 16.2 per cent.

The UNWTO report explained that tourism flows last year were primarily influenced by the unusually strong exchange rate fluctuations, the decline in the price of oil and other commodities, and increased global concern about the safety and security of some destinations.

Mainland Chinese biggest spenders

The UNWTO report also reveals that Mainland China remained the biggest spender in the world’s tourism industry for 2015, expending US$292.2 billion, a jump of 26.2 per cent year-on-year.

The United States and Germany were the other two big spenders, with tourism expenditure of US$112.9 billion and US$77.5 billion recorded last year.

The newcomer to the top 10 spender list was South Korea, which spent some US$25 billion, surging 15.6 per cent year-on-year. The country’s spending on tourism thus propelled it to the eighth highest worldwide last year.

Looking forward, the tourism organisation forecasts that the world’s tourist arrivals may climb to 1.8 billion by 2030, with an annual growth rate of some 3.3 per cent.

In particular, the strongest increase by region will be seen in Asia and the Pacific, where arrivals are anticipated to reach 535 million in 2030, suggesting the market shares of the region would reach 30 per cent, an increase of 8 percentage points from 22 per cent in 2010.

6 Business Daily Thursday, July 21 2016

Macau

Law

Local businessmen warned to protect intellectual property in Mainland China

Copyright pirates Legal expert says early registration and careful preparation are key to avoiding intellectual property infringement.

Nelson Moura nelson.moura@macaubusinessdaily.com

M

acau businessmen planning to do business in Mainland China should first register their brands as quickly as possible and study intellectual property law extensively, experts stated yesterday in an advice session for local traders.

During the seminar, Ma Yongli, a patent expert from China Patent Agent (H.K.) Ltd., said Macau companies have to be careful when patenting products in different regions since different areas have different patent regulations.

“If Macau companies register a patent in China that is only effective in China, not in Taiwan or Hong Kong, the periods where a patent is protected varies. In China, patent protection is for 10 years, and in Hong Kong it can be eight years or 20 years,” the patent expert told participating businessmen.

The patent expert also warned that while in the US and other countries during intellectual property registration a company has to prove it has or will use a brand or product, in Mainland China intellectual property registration is on a “first come, first served basis” where no evidence of prior use or ownership has to be given during registration.

Don’t steal my idea

“We wanted to know more about patent and brand registration,” Philip Lao, responsible for products and marketing for local sports manufacturer BeeSports Co. Ltd., told Business daily.

“Our company is from Macau but the brand is registered in China, where we make and sell our products.

Lately, other people in China have started making similar products to the ones we have patented so we want to know how to protect ourselves,” Lao told Business Daily.

The legal expert from China, Mr. Ma, also stated he hoped more

inventions, new patents and property registrations could be evident in the city.

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-onyear decrease of 4.7 per cent and 35.2 per cent, respectively.

Last year, the number of trademark applications in Macau reached 13,140, with companies from Mainland China, Macau and the United States the top three sources of applications in the city in 2015.

For Mr. Ma more incentives for innovation for residents and mechanisms to prevent the migration of talented human resources could be made, while local businessman would have to pay close attention to intellectual property issues, something Mainland China businessmen have learned through experience.

“Just remember that the Nike CEO has said that if all Nike factories were

attacked by terrorists the company would still survive since its brand was its most valuable possession,” Mr. Ma said.

Do your homework

“More and more Macau businessmen are going to Mainland China for arbitration, and they might not know how to apply for intellectual property rights or how to face any problems that might arise,” Macau Trade and Investment Promotion Institute (IPIM) Executive Director Gloria Ung told Business Daily.

“In this event [local businessman] can learn the procedures for patents, and meet lawyers that can help them with any legal issues that might arise in Mainland China,” she said.

The IPIM Executive Director also told Business Daily that another seminar will be held at the Macau International Fair (MIF) on the topic of arbitration, with IPIM having signed a memorandum of understanding with the China Council for the Promotion of International Trade (CCPIT) to bring experienced intellectual property speakers to Macau.

Regarding local businessmen going to Mainland China the IPIM Executive Director suggested special attention

be paid to rules and regulations concerning intellectual property, saying “understand who their partners in the region are in order to not get cheated.”

“Just remember that the Nike CEO has said that if all Nike factories were attacked by terrorists the company would still survive since its brand was its most valuable possession.”

Ma Yongli, patent law expert from China Patent Agent (H.K.) Ltd.

The event was a joint effort by the Macau Trade and Investment Promotion Institute (IPIM), the Macao Economic Services (DSE) and the Macau Lawyers Association (AAM) with copyright law experts from China Patent Agent (H.K.) Ltd. and Clt Patent & Trademark (H.K.) Ltd.

Business Daily Thursday, July 21 2016 7

Gaming Gaming

Tycoon Okada’s Universal wages biggest bet in Manila casino Kazuo Okada, Universal Entertainment Corp. chairman and former Steve Wynn partner, plans to challenge Macau in wooing Chinese gamblers to his Manila casino resort that could cost US$4 billion and is scheduled to open in November.

K

azuo Okada, Universal Entertainment Corp. chairman and former Steve Wynn partner, plans to challenge Macau in wooing Chinese gamblers to his Manila casino resort that could cost US$4 billion and is scheduled to open in November.

Okada, 73, wants his casino featuring a 100 meter (328 feet) dancing water fountain and indoor beach “to compete with what is in Macau” and other parts of Asia, said Takahiro Usui, chief operating officer at Universal Entertainment’s Tiger Resort Leisure and Entertainment Inc. “This project will promote Manila as a destination in the region and the world.”

Universal Entertainment rose 9.6 per cent to 2,597 yen in Tokyo trading Wednesday, the biggest gain since June 2013. The benchmark Topix was little changed.

The Manila resort could cost US$3 billion in its first phase and reach US$4 billion when three more phases are built, making it the tycoon’s “biggest investment,” Usui said in an interview Tuesday in Manila.

That would be about twice the 208.3 billion yen (US$1.96 billion) market capitalization of Universal Entertainment, the Tokyo-based maker of gambling machines in which Okada Holdings controls a 68 percent stake.

after the company accused the Japanese tycoon of making improper payments to Philippine gambling regulators and forcibly redeemed his 20 per cent stake in the casino operator in 2012. Okada has denied the allegations, and the suit is on-going.

Okada Manila will be the third casino resort to open in Entertainment City and the largest with over 26,000 square meters of gaming space. It will compete with a project by Philippine billionaire Enrique Razon’s Solaire, and City of Dreams Manila, a venture between Melco Crown Entertainment Ltd. and the Philippines’ richest man, Henry Sy. The fourth property, a project by Philippine billionaire Andrew Tan and Malaysian tycoon Lim Kok Thay, is expected to open in the fourth quarter of 2020.

Traffic at Okada Manila, which is built on 44 hectares facing Manila Bay’s sunset, will initially be a mix of 30 per cent foreigners and 70 per

cent locals. The casino wants half of its clientele to be overseas visitors including Chinese, Japanese and Koreans after a year as the resort conducts marketing among travel agents and gambling promoters, Usui said.

Grim reminder

Shares of Bloomberry Resorts Corp., owner of Solaire, sank 4.5 per cent in Manila, heading for the biggest loss in three weeks. Travellers International Hotel Group Inc., operator of Resorts World Manila, slid 0.8 per cent, halting a five-day gain, while Melco Crown Philippines Resorts Corp. slumped 5 per cent to a threeweek low.

“Okada is coming to town, a grim reminder to investors of the oversupply facing an industry that is already competitive,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “This is a serious property and the question is who among the existing players will get hit the most. This is the time to capitalize on gains.”

The 500-gambling table Okada Manila will be a jump-off point for other resorts the Japanese businessman plans to build in other parts of the country, said Antonio Cojuangco, Okada’s Philippine

partner in the Manila project. Sites are being scouted in the provinces of Palawan and Davao, with development likely to start in the next two years, he said.

“The gaming industry in Philippines should have the best performance ever in the second quarter ended in June as more gamblers are leaving Macau amid its stricter gaming regulation” Marcus Liu, CLSA Ltd. analyst

Okada may recover his investments in as much as two years and could hold a public share sale in the Manila casino venture after 18 months should the expected revenue come in, Cojuangco said. Bloomberg

4 billion USD Intended investment in Okada’s Manila casino resort

Gambling hub

Manila is aspiring to become the next Asian gambling hub as highstakes Chinese gamblers increasingly abandon Macau amid the Chinese g o v e r n m e n t’ s c rac k d o w n o n corruption. Okada’s project is one of four casino resorts the Philippines wants built on a 120-hectare property along Manila Bay, dubbed Entertainment City, as the nation seeks a larger share of Asia’s gaming and tourist revenue.

“The gaming industry in Philippines should have the best performance ever in the second quarter ended in June as more gamblers are leaving Macau amid its stricter gaming regulation,” said CLSA Ltd. analyst Marcus Liu Tuesday. The large investment “underscores Okada’s commitment and confidence in the Philippines’ gaming market,” he said.

Entertainment city

Kazuo Okada, Chairman of Universal Entertainment Corp

Okada is embroiled in a high-profile lawsuit against Wynn Resorts Ltd.

Casino

Saipan expansion Imperial Pacific secures notice of intent on public land lease including Mariana Resort.

Imperial Pacific, the Hong Kongbased owner of Best Sunshine Resorts – operator of a temporary casino facility on the island of Saipan in the Northern Mariana islands - has secured a notice of intent to lease public lands including the Mariana Resort and Spa, notes the Saipan Tribune.

Th e n o t i c e, i s s u e d b y t h e Department of Public Lands (DPL), comes after Imperial Pacific was the

sole company to bid on lots used for racecar tracks, mini golf courses and the Mariana resort – including villas, facilities and golf course. Currently, the Mariana is owned by Kan Pacific Saipan, a Japanese company headed

by Yoshihiro Kitami.

Kitami and Mark Brown, CEO of Best Sunshine, announced in December their intent to ‘work together on a plan that would further our mutual interests and interests

of the Commonwealth’ in a press release issued to the publication.

The agreement allowed Kan Pacific to operate the resort for at least a year as well as Kan Pacific’s intent to establish another hotel on the island ‘on the same land or some other suitable location’.

Transition

The tender for the public land, notes the publication, arose despite an obligation by the DPL to provide a notice of intent to transition five years ‘before the expiration of the lease’ – according to the lease agreement signed in 2003 between the DPL and Kan Pacific.

The lease expiration date is April 30, 2018, notes the publication,

and Kitami’s formal letter to the department notes that in 2013 the DPL expressed a desire to grant an additional lease term and encouraged the company to continue investing in the leasehold beyond the termination.

“It is undeniable that at the time at which the DPL was required to give notice of any intention to transition the land […] back to the DPL […] the DPL indicated to Kan Pacific that it was not intending to transition the land back to the DPL and, instead, informed Kan Pacific that it was the intention of the DPL to enter into another lease with Kan Pacific [and] actually encouraged Kan Pacific to move forward accordingly – and we did,” the publication quotes Kitami as stating.

8 Business Daily Thursday, July 21 2016

Greater China WTO

EU launches WTO challenge to raw material duties Philip Blenkinsop and Michael Martina

T

he European Union launched a third legal challenge to restrictions on Chinese exports of 11 key metals and minerals, joining the United States in suing Beijing for unfairly favouring Chinese industry.

The bloc is seeking formal consultations with China, the first step in World Trade Organization dispute settlement procedures, over restrictions on graphite, cobalt, copper, lead, chromium, magnesia, talcum, tantalum, tin, antimony and indium.

The United States on Tuesday expanded its WTO challenge filed last week against Chinese export duties on nine raw materials to match the EU complaint. Washington’s trade agency added chromium and indium to its list

of materials and said it will challenge China’s export duties on all 11 as well as quota restrictions on five of them.

The European Union said the metals and minerals are among 20 raw materials that are critical to Europe’s economy. China is the biggest producer of most of the 20.

Speaking to reporters in a joint conference call with U.S. Trade Representative Michael Froman, EU Trade Commissioner Cecilia Malmstrom said the restrictions enable China to unfairly influence global market prices for essential raw materials, damaging the long-term competitiveness of European industries that depend on them.

The EU would “not sit on our hands seeing our producers and consumers being hit by unfair trade practices and we hope that this joint U.S.-EU action will motivate China to reconsider its

“[The EU will] not sit on our hands seeing our producers and consumers being hit by unfair trade practices and we hope that this joint U.S.-EU action will motivate China to reconsider its current policy.”

current policy,” she said.

The EU’s executive Commission said that China applied export duties to various forms of the 11 materials, with quantitative restrictions on five antimony, indium, magnesia, talc and tin.

Rejection

China’s Commerce Ministry rejected the EU challenge, arguing the measures are in line with WTO rules and intended to protect the environment.

“China regrets the EU request for consultations and will appropriately handle it according to WTO dispute resolution procedures,” the ministry said in a statement posted online.

The EU challenge sets it on a collision course with Beijing at a time when it is deciding whether to lower trade barriers to Chinese imports across all sectors and accede to Beijing’s demand

11 Key metals and minerals covered under export duties

Cecilia Malmstrom, EU Trade Commissioner Copper (pictured) and tin as well as graphite and cobalt are among the raw materials under restrictions.

that it be treated as a normal market economy.

Malmstrom and Froman insisted in the conference call that the WTO raw materials challenge was completely separate from the discussions on China’s market economy status.

Key Points EU challenges measures on graphite, cobalt, lead, tin China says measures to protect environment U.S. revises previous complaint to match EU challenge Both trade officials said China’s restrictions distorted the market and favoured Chinese industry at the expense of EU companies and consumers, and that Beijing could support the environment more effectively with other measures that would not hurt trade.

It said China’s total exports of these products are worth 1.2 billion euros (US$1.3 billion) per year, one-sixth of which comes into Europe. It said removing the export duties might allow supplies of the materials to the EU to rise by 9 per cent, with an even greater increase if other measures were removed.

The 11 raw materials are used in a variety of industries, from battery production to paints, chemicals, plastics and electrical circuits.

The EU challenge follows successful legal actions over rare earths and other materials including bauxite and zinc.

WTO rulings can take two to three years to conclude. China, a strong believer in the WTO system, has previously complied with rulings affecting its exports of rare earths.

The formal consultations between the EU and China, to be conducted in parallel to the similar procedure initiated by Washington, take place over 60 days. If there is no satisfactory solution, the EU can request the WTO to set up a dispute settlement panel. Reuters

Aviation

Air superiority - China’s express war takes off Hu Tao

Global logistics companies are battling in China’s skies, alongside the booming air express industries. And as the demand for speedier delivery grows, it is driving development across China to its smaller and more far-flung towns and cities.

Ready to take off

China’s civil aviation authority has approved the plans of an industry leader

to build an airport in Ezhou city, central China’ s Hubei province.

S. F. Express, established 23 years ago by Shun Feng Airlines, is planning the airport as the world’ s fourth international air logistics hub and the first in Asia.

The firm, which had set up a strong air cargo transport network by 2009, has 30 aircraft, including China’s first wide-body Boeing 767 imported last year.

And it has set to expand its fleet as

it aims to become a global logistics enterprise.

Both S.F. Express and Yuan Tong, the second Chinese private express firm to acquire an aircraft fleet are also facing competition from global giants such as the U.S.-based FedEx. According to the China Express Association, business volume last year hit 20.6 billion deliveries and total revenue was 276 billion yuan - year-on-year growth of 48 per cent and 35 per cent respectively.

Air freight has increased rapidly and now accounts for more than half the total volume - and sometimes up to 70 per cent of the total.

“The pursuit of speed is the mission of the express industry. So its

“The pursuit of speed is the mission of the express industry. So its development is tied to the development of air transport.”

Zhang Yuzhou, director of industry development China Express Association

development is tied to the development of air transport,” says Zhang Yuzhou, director of industry development at the association.

Gearing up for Chinese market

International giants, domestic enterprises, e-businesses, aviation companies and investors are targeting the China logistics market.

Since 2011, the express sector has grown at an average annual rate of more than 50 per cent.

But China’ s vast territory requires the industry to build air transport infrastructure to serve the more remote areas of the market.

The government has issued the guidelines on promoting the development of general aviation, which aim to enable the market to guide development.

The guidelines outline how China will

276 billion yuan Value of logistics business volume in the country last year

Business Daily Thursday, July 21 2016 9

Greater China In Brief Transportation

China to expand railway network to 150,000 km by 2020 China will expand its railway network to 150,000 km (93,200 miles) by 2020, the country’s top economic planner said at a news conference on Wednesday.

The National Development and Reform Commission (NDRC) said, as part of the country’s 13th five-year plan, China’s high-speed rail network will be increased to 30,000 km by 2020. The high-speed rail network will reach 38,000 km by 2025, it added. Reuters Gas

Sinopec cuts central China gas supply

Transportation

High-speed railway reaps 6.58 bln yuan A state-owned high-speed rail operator between Beijing and Shanghai reported net profits of 6.58 billion yuan (US$982 million) for 2015, a shareholder document showed.

Beijing-Shanghai High-Speed Railway Co. has never disclosed its earnings before. Its 2015 figures were made public after a shareholder released a document on Monday, revealing the firm’s profit data.

A bond prospectus released by Tianjin Railway Construction Co., a shareholder of Beijing-Shanghai HighSpeed Railway Co., showed that the total assets of the company amounted 181.54 billion yuan at the end of last year, with the total liabilities standing at 50.37 billion yuan.

In 2015, the gross revenue of the company was 23.42 billion yuan, and its total operating costs hit 16.74 billion yuan.

“The world’s most profitable high-speed rail” Nickname of the BeijingShanghai railway

Known as the “the world’s most profitable high-speed rail,” the BeijingShanghai high-speed railway covers more than 1,300 km within five hours.

It transported 130 million passengers in 2015, with the profit per customer coming to around 50 yuan.

Although the railway authority has said that the Beijing-Shanghai highspeed railway was the only profitable high-speed rail in China in the past five years, some believe that other lines in densely-populated and developed regions will likely become profitable soon.

High-speed train services are popular in China thanks to convenience and punctuality. More lines are being constructed as the government tries to bolster the economy with infrastructure investment and make travel more convenient.

build more than 500 airports by 2020 to ensure that all major and prefecture-level cities have general purpose air transport.

“China’s central and western regions and considerable second and third-tier cities are a rising market for short and medium-distance air express,” says Bill Schultz, senior vice president, business development China, for New York-listed aircraft maker Textron Aviation.

“Small and medium-sized general aircraft, especially multipurpose aircraft, are better for transporting cargo to these cities.”

Successful path of int’l express giant

The development of FedEx in the United States is often cited as an example for China, as both countries have vast territories.

Zhong Guoyi, vice-president of international express of FedEx China agrees, saying the logistics giant has a 24-hour North American air transport network with a well-serviced fleet of major aircraft and small and medium-sized cargo planes.

“We have fleets of aircraft and cooperate with independent operators to service different markets,” says Zhong.

FedEx has shown that success in logistics depends on an airport network among different regions, including different-sized airports for general aviation, says Professor Jeffery Towson, of the Guanghua School of Management at Peking University.

“The one who builds networks of airports and various aircraft matching runways will take the initiative,” says Towson.

“As a result, express will drive economic development with the improvement of air transport.” Xinhua

China Petrochemical Corp. has shut some natural gas operations in central China after a landslide caused a pipeline fire Wednesday that killed two people. A pipeline carrying natural gas from Sichuan province in western China to the eastern part of the country cracked and caught fire near Enshi city in China’s Hubei province around 6:25 a.m. local time after a landslide caused by days of heavy rainfall, according to a microblog post by the company, known as Sinopec.

The fire was contained and the company is halting some local supply after the incident. Bloomberg Retail

Apple drops to fifth spot as local smart phone sales surge in China U.S. smart phone magnate Apple suffered a waterloo in China’s mobile market in Q1 as the top-four handset makers - Huawei, Vivo, Oppo and Xiaomi - secured a 53-percent combined market share, statistics released

by Counterpoint Research shows. In a report quoted by Bloomberg Wednesday, the Hong Kong-based market researcher said iPhone shipments in May dropped by 1.2 percent year on year in China’s mainland, while its sales in Greater China fell 26 percent in Q1 compared to a year earlier. Statistics from research firm Strategy Analytics shows that Huawei shipped 16.6 million smart phones in Q1, taking the lion’s share of China’s smart phone market. Xinhua Construction

Asbestos in Yuanda building materials

Technology

Midea in US$4.4 billion bid for robot maker China’s Midea Group Co. said it has almost 86 per cent of Kuka AG’s shares, advancing a 4 billion-euro (US$4.4 billion) bid to buy the German robot maker that has seen opposition from German politicians.

A total of 72.18 per cent of the share capital was tendered in the offer that ended July 15 and Midea already held 13.51 per cent of the German robot maker’s stock, the Foshan-based company said Monday in a statement. Midea extended the acceptance period with investors still able to tender their shares from July 21 to August 3.

“Today we have reached an important milestone in the expansion of our partnership with Kuka, which offers great value-creation potential for both companies,” said Paul Fang, chairman and chief executive officer of Midea.

Midea’s offer has the backing of Kuka’s management and shareholders Voith GmbH and Friedhelm Loh have already tendered their shares. German politicians have been critical of the deal with Vice-Chancellor Sigmar Gabriel seeking but not finding an alternative buyer from Europe.

The Chinese company gave Kuka assurances that jobs and plants in Germany will be protected until the end of 2013. It also agreed not to pursue a domination agreement or de-listing of the Augsburg-based company’s shares.

“The investor agreement between Kuka and Midea sets out the future cooperation in detail,” Fang said.

“We want to help Kuka to grow and expand the business, especially in China.” Bloomberg

Australian authorities said on Wednesday they are investigating whether building materials supplied by Hong Kong-listed Yuanda China contain the banned mineral asbestos and have seized evidence related to the checks. The Australian Border Force (ABF), the agency responsible for screening imports, said it conducted several searches on Tuesday, during which it seized “digital and physical evidence”. All imports from Yuanda and its affiliates will be held at the border until the tests can be conducted to confirm no asbestos contamination is present, it said. Yuanda was not immediately available to comment at both its Australia and China offices. Reuters

10 Business Daily Thursday, July 21 2016

Greater China Film

State-backed China Film plans US$612 mln IPO Donny Kwok

C

hina Film Co Ltd, the country’s biggest film distributor, said on Wednesday it aimed to raise 4.09 billion yuan (US$612 million) in an initial public offering, in what would be the largest in the nation’s cinema business.

The state-backed movie distributor said the sale would help fuel its expansion in China’s booming film industry, a move that will see it compete with billionaire Wang Jianlin’s rapidly expanding entertainment empire.

The China unit of state-owned China Film Group Corp plans to issue up to 467 million shares in Shanghai, representing 25.01 per cent of its issued share capital, according to its prospectus filed with the Shanghai bourse.

Proceeds will be used to develop its digital cinema business, replenish working capital and repay loans.

China Securities is the sponsor of the issue.

Moviegoers

Fuelled by a growing urban middle class, China’s movie industry saw box office revenue increase 49 per cent last year and exceeded 40 billion yuan (US$6.1 billion) for the first time, according to the State Administration of Press, Publication, Radio, Film and Television.

In May, tycoon Wang’s Wanda Cinema Line Corp, the country’s biggest cinema operator, said it planned to acquire movie-making affiliate Wanda Media for 37.2 billion yuan (US$5.7 billion) in cash and shares.

Overseas interest

Chinese companies are also ramping up investment in the foreign entertainment industry.

Earlier this month, Wanda’s AMC Entertainment Holdings Inc said it was buying its European peer Odeon and UCI Cinemas for 921 million pounds (US$1.2 billion) including debt.

Wanda Cinema’s parent, Dalian Wanda Group, acquired U.S. film

studio Legendary Entertainment in January for about US$3.5 billion.

China Film will set the issue price for its offer on July 26, with the trading debut expected in early August.

The company said it had distributed 790 local movies and 223 imported movies in the past three years, accounting for 58.27 per cent of the market. It controls three cinema

chains in the mainland, and invests in four others.

Animation has also been a key focus in Chinese companies’ drive to develop the film industry.

One such effort is Oriental DreamWorks, set up as a joint venture between DreamWorks Animation SKG, China Media Capital, Shanghai Media Group and Shanghai Alliance Investment Ltd. China’s fast-growing box office is also a lure for overseas studios eager to tap into the market despite a cap on imported films, censorship concerns and a rising challenge from locally made movies. Reuters

40 billion yuan Revenue from the nation’s box office last year

Film industry expansion driven by growing urban middle class

Economy

StanChart: Labour shortages challenge economy Michelle Chen

Persistent labour shortages, narrowing profit margins and weak orders pose big challenges to Chinese

manufacturers and a risk to the government’s economic growth target if no additional stimulus is provided, Standard Chartered said on Wednesday.

“Lingering high costs, weak orders, narrowing margins and widespread pessimism mean tougher times ahead for an already over-leveraged China Inc, keeping the recovery ‘L-shaped’ at best.”

The bank surveyed 290 Hong Kong-based and Taiwan-based manufacturing companies with operations in China’s Pearl River Delta in February and March.

Eighty per cent of the respondents expected labour shortages to be at least as bad as last year despite China’s slowing economy, while wages were expected to rise 7.7 per cent this year.

Wages on average account for more than 20 per cent of the total cost base of the respondents, who expected margins to fall by an average of 6.1 per cent this year, compared with 0.4 per cent last year.

“Lingering high costs, weak orders, narrowing margins and widespread pessimism mean tougher times ahead for an already overleveraged China Inc, keeping the recovery ‘L-shaped’ at best,” the bank said.

Agai n st thi s bac k d r o p , th e government’s aim to reach above an annual 6.5 per cent economic growth rate in the next five years looks ambitious in the absence of

more policy stimulus, the bank said.

China’s working-age population has been declining since 2012 and is likely to keep falling in the coming decades, even with the relaxation of the one-child policy. Reuters

about 160,000 yuan (US$24,000), saving about 14,000 yuan in tax.

“An ordinary fuel car costs about 0.7 yuan per km to run; a hybrid costs only about 0.4 yuan,” Dai said.

In Changchun, more than 300 such hybrid EVs are running on the city’s roads every day, he added.

Many home-grown brands are competing for a share of the market.

Guo Ai, regional representative of JAC Motors, said the company’s new energy cars are “doing quite well” in cities like Beijing, where government subsidies help. A low-configured model costs around 70,000 yuan.

China started subsidizing green cars in 2010, with up to 50,000 yuan for each hybrid and 60,000 yuan for a pure EV. The subsidies have gradually decreased since 2014. Xinhua

Standard Charter

Electric vehicles

Subsidies drive energy car sales Favorable policies are driving new energy car sales in China.

Figures released by the China Association of Automobile Manufacturers (CAAM) show that green car production and sales r each e d 177 , 000 a n d 170 , 000 units in the first half of 2016, up 161 per cent and 162 per cent, respectively.

Of all these vehicles, pure electric vehicles (EV) have shown a particularly impressive performance, with production of 134,000 units, according to the association.

In Changchun, a northeastern city, green cars are already on the road. At the city’s ongoing international expo, visitors crowded the green car booths to inquire about prices, subsidies and vehicle specifications.

“Currently, you don’t have to pay taxes when you buy a new energy car in China,” said Dai Dali, General

Manager of China FAW New Energy Vehicle Branch.

One of the company’s hybrid cars, which can run 50 km per charge, costs

170,000 units Green car sales in the first half of 2016

Business Daily Thursday, July 21 2016 11

Greater China Economy

Taiwan’s Tsai urges structural overhaul to jumpstart economy Taiwan President urges co-ordination of financial and industrial reform.

Adela Lin and Benny Kung

T

aiwanese President Tsai Ing-wen said monetary and fiscal policy have limited impact and that structural reforms were the best way to fix Taiwan’s slowing economy.

“If there were only conventional monetary and fiscal policies, that would have very limited impact on improving the economy, and may even further worsen the structural problem,” Tsai said at a financial forum Wednesday in Taipei organized

by Bloomberg LP, the parent company of Bloomberg News. She said financial and industrial reforms must “go hand in hand for a fundamental change in the domestic economic structure.”

The former law professor and trade negotiator cited excessive savings, falling corporate investment and decreasing interest rates on time deposits among the indicators of the current state of the economy. Tsai said Taiwan needed to improve the function of capital markets and increase domestic investment. She reaffirmed her effort to boost innovation in five key industries: defense, green energy, biotechnology, smart machinery and the Internet of Things.

Road ahead

Tsai, 59, who assumed leadership of the export-dependent island in May, faces

the task of reversing three consecutive quarters of economic contraction while following through on pledges to cap debt and balance the budget. Her challenges include a slower iPhone sales, weak petrochemical prices and strained ties with China, which has cut off communications over her refusal to accept both sides are part of “one China.”

While the government projects Taiwan’s economy to expand 1.06 percent this year, a state-funded research institution warned last month that growth could slow to less than half that pace. After cutting rates for the fourth straight meeting, the central bank cautioned that reductions in government spending risked “serious consequences” for the already weak economy.

Tsai said she supported Taiwan’s development of its financial technology, or fin-tech, industry, but said the government must give the sector close oversight. “We can’t refrain from reform because we’re afraid of risk,” Tsai said. “We should do all the preparation, so as to minimize the risk brought by the reform.”

International trade

At the forum, Tsai reaffirmed Taiwan’s desire to join multilateral trade deals such as the Regional Comprehensive Economic Partnership and the

“Taiwan has to actively link-up with international society.”

Tsai Ing-wen, President of Taiwan

President Tsai Ing-wen

U.S.-led Trans-Pacific Partnership.

She must contend with China’s diplomatic and economic clout as she seeks to expand ties elsewhere, including the 10-member Association of Southeast Asian Nations.

Although China still considers Taiwan a province and remains a military rival, the two saw ties improve under former President Ma Ying-jeou. Tsai, whose Democratic Progressive Party officially supports independence, has pledged to uphold relations, but angered the Communist Party by not accepting its one-China negotiating framework.

“Taiwan has to actively link-up

with international society,” Tsai said.

“Apart from signing bilateral freetrade agreements and fighting to join TPP and RCEP, the government will also initiate the New Southbound policy, deepening Taiwan’s economic connection with Asean and South Asian countries.”

Taiwan Stock Exchange Chairman Shih Jun-ji said at the forum that the bourse operator planned to ease rules on listings and trading to expand its market and help local companies.

Shih also said TWSE planned to strengthen ties with exchanges across the region, including those in Singapore, Japan and Korea.

Asia Growth

Vietnam PM: country may miss growth target A crippling drought in Vietnam will probably cause the government to miss its 6.7 percent growth target this year, adding to pressure on new Prime Minister Nguyen Xuan Phuc as he seeks to reassure investors of his economic reforms.

The economy will need to expand 7.6 percent in the second half of the year to achieve its full-year goal, Phuc said in a prepared speech he is due to deliver to lawmakers in Hanoi next week and obtained by Bloomberg News. The target “will be hard to reach,” he said.

Growth was little changed at 5.6 percent in the second quarter.

Rising food prices are also pushing up inflation, which may exceed the government’s 5 percent target this year, Phuc said in the speech. Exports may decline in some European markets after slowing to 5.9 percent in the first half of the year, according to the speech.

Hope

“There is still some chance” for the economy to reach its growth target this year if government ministries and

provinces redouble efforts to boost output in industries from agriculture to manufacturing and construction, Phuc said in the speech.

Phuc’s warning is a signal that Vietnam won’t repeat past mistakes of growth at all costs that led to inflation soaring to 23 percent inflation in 2011, said Trinh Nguyen, a senior economist for emerging Asia at Natixis SA in Hong Kong.

“He accepts the impact of adverse weather events and subdued global demand for not achieving growth targets,” she said. “This means that

at least Vietnam is not returning to its fast growth at all costs approach, which caused inflation to spike massively, the currency to weaken, sharp economic slowdown and inefficient allocation of resources.”

The government will intensify measures to help businesses, including steps to spur domestic demand, tourism and industries that provide inputs to manufacturers, according to the speech. Policy makers will also closely monitor the fallout from the U.K.’s vote to leave the EU, and make timely changes to monetary policy to limit the negative impact on Vietnam’s money market, it said. Bloomberg

Key Points Phuc took office in April Worst drought in 30 years Inflation may exceed gov’t 5 pct target Phuc took office in Communist Party-ruled Vietnam in April amid the worst drought in 30 years and falling oil revenue. That’s putting the brakes on an economy that’s otherwise benefited from a booming export industry as companies such as Samsung Electronics Co. opened factories to build and ship smartphones.

State Bank of Vietnam

12 Business Daily Thursday, July 21 2016

Asia

Japan’s Prime Minister Shinzo Abe urges more high-yield investments

Japan Economy

No retiree left behind Minami Funakoshi

W

hen Saori Ito went on maternity leave last year and stopped getting a regular pay check from her cosmetics company, she became worried about her future - and wondered if this kind of anxiety is what awaits her after retirement.

The 34-year-old married mother of a one-year-old girl had doubts about the government’s ability to fund retirement for Japan’s growing ranks of elderly in the world’s oldest population.

So she set up a private, self-managed pension account.

“How I see it is that the government won’t be able to pay that much in pensions anymore, so it’s telling us, ‘Go take care of it yourself. We can’t do it for you,’” Ito told Reuters at a Tokyo cafe.

Japan’s government loosened laws on pensions in May, allowing almost all working-age Japanese to join private defined-contribution retirement plans - similar to individual retirement accounts (IRAs) in the United States that allow workers to make regular contributions to an investment fund with tax breaks.

Ito has invested half her money in foreign stocks and bonds and half in domestic stocks and bonds - she said she learned about diversifying her assets at a personal finance seminar.

That’s good news for Japan’s Prime Minister Shinzo Abe, who wants Japan’s risk-averse savers to pour more of the country’s huge financial assets into higher-yield investments.

Despite the Bank of Japan’s decision in January to slash interest rates below zero to boost investment, more than half of the US$16 trillion in Japanese household assets are still either in bank deposits or cash, compared with 13.8 per cent for the United States.

Boost to equities

Starting next January, 27 million Japanese, including housewives and civil servants, will be newly eligible to

set up private defined-contribution pension accounts. Currently, only the self-employed and workers who don’t have corporate-sponsored pension plans can set up private pension accounts.

It’s already proven something of a hit with the public. Since the law reform passed parliament in May, monthly web access to the 401k Educational Society, a non-profit that promotes defined-contribution pension plans, has surged seven-fold to 42,000, said Kayo Oe, the group’s chief researcher.

The change has the potential to attract as many as 9.4 million new users over time from 257,000 now, and generate an annual capital flow of up to 1 trillion yen (US$9.46 billion) into the private-pension sector, according to Nomura Research Institute (NRI).

“The welfare ministry is in a difficult position - it will not and cannot say, ‘public pensions are in trouble and you won’t be receiving much.”

Hideyuki Morito, member of a government panel on pensions

Financial institutions such as Nomura Securities Co , SBI Securities Co, the Bank of Tokyo-Mitsubishi UFJ, and Sumitomo Mitsui Banking Corp now offer private pension plans and could benefit from a significant expansion in this market.

Around 18 per cent of private-pension money was invested in domestic and foreign equities, and 39 per cent in savings and deposits as of March 2015, according to the Japan Defined-Contribution Pension Plan Administration. By contrast, Japanese households during the same period

Demographic dilemmas

Japan’s demographic data reinforces her concerns.

Just over a quarter of Japan’s population is aged 65 and over and that number is projected to rise to a third by 2035, according to Japanese government data.

Japan’s birth rate has been declining for years and hit a record low of eight births per thousand in 2014.

That means fewer workers to support the ever-expanding population of elderly: The number of people in the workforce is expected to decline by about 20 per cent to 63.4 million in 2035.

Those under 40 will pay far more into the state pension scheme over their lifetimes than did their elders, according to data from Japan’s Ministry of Health, Labour and Welfare.

Current 70-year-olds will receive five times more in benefits than what they paid into the system. Current 20- and 30-year-olds, however, will receive only around twice the amount they will have paid the state.

This is fuelling concerns among working-age Japanese they could

Key Points Worries about gov’t finances pushing some to self-manage pensions Self-managed pension investors more risk-taking than households Up to 1 trln yen annually seen flowing into private pensions A quarter of that likely to be invested in stocks and bonds Rise in private pensions a mixed blessing for the government Narita set up a private pension account last December, in part because she discovered she would receive just 100,000 yen per month in retirement benefits, even after working for 20 years at an insurance company, she said.

A typical retired couple today receives around 220,000 yen a month, and over 80 per cent of the population thinks state retirement benefits already are not enough to live on, according to a survey by Japan Institute of Life Insurances.

“I can’t live on just 100,000 yen,” Narita said.

Trusting public pensions

To be sure, government pensions will remain the backbone of retirement funding. Only those who pay state pension fees are eligible to set up private pension accounts.

“The welfare ministry is in a difficult position - it will not and cannot say, ‘public pensions are in trouble and you won’t be receiving much,’” said Hideyuki Morito, a member of a government panel on pensions and professor of law at Keio University.

“The government needs to sustain trust in public pensions, although it’s clear people will no longer be fine if all they have is public pensions,” he added. Reuters

Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi 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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invested just under 10 per cent of their assets in equities and kept over 50 per cent in cash and deposits, according to Bank of Japan data.

“I know the risk isn’t zero,” said a 37-year-old Japanese businesswoman who is applying for a private pension account. “But if I don’t take a risk, my money won’t increase. I need to take some level of risk and I accept that.”

The woman, who works at a company in eastern Tokyo, said she plans to invest more in stocks than in debt, with a focus on foreign equities including those from emerging markets. She is new to investing, and reads blogs and articles on personal finance and attends seminars about investment to decide what assets to choose, she said.

“I’m more at ease taking care of my own money than doing nothing and leaving it all to the government,” she added. “Doing nothing is much more risky.”

be left high and dry once they hit retirement.

“I can’t rely on the country for my well-being. That’s impossible,” Yuko Narita, a 48-year-old mother and housewife, told Reuters.

Business Daily Thursday, July 21 2016 13

Asia E-payments

In Brief

Thai junta offers million baht raffle Orathai Sriring and Pairat Temphairojana

“Want to win a million baht? Go for e-payment,” says Thailand’s junta, offering a lucky draw as an incentive to use a new online payment scheme for business, in an effort to bring some of the massive informal economy onto the books and boost tax revenues.

As Southeast Asian economies struggle and tax income misses budget targets, Thailand’s finance minister is hopeful a nationwide e-payment scheme will add tax revenue of 100 billion baht (US$2.9 billion) a year to the coffers.

Finance Minister Apisak Tantivorawong has estimated the move will save banks and businesses a combined 75 billion baht a year though other policymakers expect it could take some time for businesses to change their habits. Cash and cheques now make up 80 per cent of transactions.

A coup in May 2014 ended months of political unrest, but the generals have struggled to revive Southeast Asia’s second-largest economy as exports and consumption remain weak.

Lucky draw

To promote the scheme, the junta will next year offer consumers and merchants a monthly lucky draw of cash awards worth 7 million baht (US$200,400) for a year. Transactions made through the system will qualify for a chance to win.

Some 5.5 million baht will be for e-payment customers, with the biggest prize of one million baht and the rest for business operators that install electronic data capture (EDC) machines.

“This should make people go for e-payment quickly,” Apisak said, adding the junta aimed to bring big and small businesses into the e-payment system.

7 million baht (US$200,400) Amount in monthly lucky draw cash awards the junta will offer next year

Under the system, transaction information is sent to the revenue department, so the government “can see all trade flows, making tax avoidance more difficult,” said Krisada Chinavicharana, head of the ministry’s fiscal policy office.

Tax evasion in Thailand is a major problem for the government. Former Finance Minister Sommai Phasee estimated evasion may have cost Thailand 30 per cent of VAT revenue.

In the fiscal year ended in September 2015, tax revenue was about 2.3 trillion baht, down 9 per cent from the budget target, with VAT at 709 billion baht. Thai tax revenue is equivalent to about 17 per cent of GDP.

SMEs

The junta is also urging small- and medium-sized enterprises (SMEs) to register a single accounting book by giving them tax incentives and no tax retroactive checks, which will help expand the tax base and prevent firms from avoiding taxes by keeping two books - one for tax authorities and the other for banks.=

Key Points E-payments to bring informal economy online, boost tax revenue Will add estimated tax revenue of 100 bln baht a year to coffers Gov’t aims to get small and big business into e-payment system From 2019, banks will have to use the same accounts companies’ submit to the tax authorities as the basis for lending decisions.

“We think this policy is a good step, and it will tend to decrease the informal sector,” said Kiatipong Ariyapruchya, senior country economist of the World Bank for Thailand,

Nuclear power

adding Thailand’s informal economy accounted for half of GDP between 1999-2007.

Thailand has about 2.7 million SMEs - some 700,000 are registered and only about 450,000 pay taxes, according to the Office of Small and Medium Enterprise Promotion.

PromptPay

Under the master plan, a new money-transfer system, PromptPay, will enable people to transfer money and make e-payments using a mobile phone or national identification card linked to a bank account from October.

The scheme will later be widened to include complete electronic tax services and all government payments.

Electronic payments will be more convenient but some expressed concern about privacy.

“It will be good in a sense that it will prevent employees from taking money from the cash register, but it won’t be good because the tax man will know everything,” said Panisa Boonchaiwattana, a coffee shop manager in Bangkok, who said she would use an EDC machine.

“The idea of the government monitoring your bank account is kind of intimidating,” said Raweeras Poochareon, owner of tie-dye textiles shop in Chiang Mai. “I feel like I lose my privacy. I refuse. I wouldn’t win the lotto anyway.”

Bank of Thailand Governor Veerathai Santiprabhob expects it may take some time before the scheme gains general acceptance as it requires a change in behavior.

“I think Thai people are quite receptive to new technology. For smaller businesses, there will be a challenge,” he said.

“But it will take time, it won’t be that one day we have this proper system, push the button and people will switch.” Reuters

Local governor to seek shutdown of Japan’s only operating nuke plant A newly elected local governor will ask Kyushu Electric Power Co for a temporary shutdown of Sendai nuclear plant, Japan’s only operating facility, as early as August, Asahi newspaper said on Wednesday. Antinuclear advocate Satoshi Mitazono told the paper that he wanted the shutdown for checks on the impact of a series of strong quakes that struck neighbouring Kumamoto earlier this year. Mitazono, who will become the governor of Kagoshima prefecture on July 28, will have no legal power to shut down operating reactors, but his consent will be required to restart Sendai after the reactors are stopped for scheduled maintenance starting in October. Reuters Investment

India’s Sensex climbs for second day Indian stocks advanced for a second day, led by banks and utilities, as overseas investors extended purchases of local shares. HDFC Bank Ltd., the most valuable lender, climbed to a record. Power Grid Corp. surged to an all-time high, while GAIL India Ltd. increased for the first time this week.

Motorcycle makers Hero MotoCorp Ltd. and Bajaj Auto Ltd. headed for records. Wipro Ltd., the third-biggest software maker, dropped the most in three months after its firstquarter profit and revenue missed estimates. Global funds have bought $741 million of local stocks since July 1. Bloomberg Oil

Total unlikely to fight ExxonMobile Total SA is unlikely to take on ExxonMobil in a bidding war for explorer InterOil Corp, the French giant’s partner in a rich gas field in Papua New Guinea, analysts said on Wednesday.

ExxonMobil this week trumped an offer from Oil Search, which was backed by Total.

Oil Search is due to declare on Thursday whether or not it will match ExxonMobil’s $2.2 billion bid. ExxonMobil and Total both want to simplify the ownership of the Elk-Antelope gas field by taking out InterOil’s 36.5 percent stake.

This would clear the way for the majors to tie together their rival gas export projects, PNG LNG and Papua LNG. Reuters Patent

Asahi to settle court battle with Suntory over zero-alcohol beer patent Asahi Group Holdings Ltd said on Wednesday it has settled a dispute with Suntory Holdings Ltd after Suntory accused its rival of infringing a patent for non-alcohol beer. The terms of the settlement were not disclosed. The Tokyo District Court in October rejected a request from Suntory for an injunction to stop Asahi from selling Dry Zero beer, ruling there was no patent infringement. Suntory then appealed the decision in the Intellectual Property High Court. Suntory has withdrawn its appeal and Asahi will continue making and selling the Dry Zero brew, Asahi said in a statement. Reuters

14 Business Daily Thursday, July 21 2016

International In Brief G20

Schaeuble to meet Hammond for bilateral talks German Finance Minister Wolfgang Schaeuble will meet his newly appointed British counterpart Philip Hammond for bilateral talks at the sidelines of a G20 meeting in China on Saturday, a senior government official in Berlin said on Wednesday. Germany expects the meeting of financial leaders from the Group of 20 major economies to focus on creating conditions for sustainable growth and strengthening the resilience of economies, the official said on the condition of anonymity. “The issue of structural reforms will be paramount... we won’t have a debate about more stimulus or not,” the senior government official said. Reuters Economy

IMF cuts global growth forecast The International Monetary Fund (IMF) on Tuesday revised down its forecast for global growth in 2016 and 2017 in view of the uncertainty surrounding the United Kingdom’s exit from the European Union. The IMF expects the global economy to grow 3.1 percent in 2016 and 3.4 percent in 2017, both 0.1 percent lower than its forecasts in April.

“The outcome of the U.K. vote, which surprised global financial markets, implies the materialization of an important downside risk for the world economy. As a result, the global outlook for 2016-2017 has worsened, despite the better-than-expected performance in early 2016,” the IMF said. Xinhua

Investment

ADIA: long-term gains fell The Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, said its long-term gains dropped in 2015.

T

he fund’s 20-year annual rate of return slowed to 6.5 per cent at the end of 2015, from 7.4 per cent a year earlier, it said in its annual review. Over three decades, annual returns fell to 7.5 per cent from 8.4 per cent. The sovereign wealth fund doesn’t disclose how much money it manages for the government.

“ADIA put in a creditable performance in 2015 despite volatile market conditions that saw equity markets end the year little changed from where they began.”

Sheikh Hamed bin Zayed Al Nahyan, managing director of ADIA

ADIA, as the fund is known, is bringing more investment management in-house and putting less assets in index-tracking funds as it seeks higher returns. The portion

of the fund’s assets managed by external managers fell to 60 per cent at the end of 2015, from 65 per cent a year earlier, while assets invested in index-replicating strategies fell to 50 per cent from 55 per cent. About 80 per cent of assets were managed externally in 2009. “ A D I A p u t i n a c r e d i tab l e performance in 2015 despite volatile market conditions that saw equity markets end the year little changed from where they began,” managing director Sheikh Hamed bin Zayed Al Nahyan said in the review. Longterm investment gains fell in 2015 as a result of “strong returns from the mid-1980s and 1990s falling out of the rolling averages,” he said.

The government will probably take billions of dollars out of ADIA to help finance the emirate’s 2016 budget amid a slump in oil prices, Fitch Ratings said in February. Assets will drop to US$475 billion at the end of the year, from an estimated US$502 billion at the end of 2014, Fitch said, adding that it expects them to rise again in 2017. The prospectus for Abu Dhabi’s US$5 billion bond sale in April said the 2016 budget deficit would mostly be financed through debt issuance.

“Lackuster returns”

Most global markets delivered “lackluster returns” in 2015, Sheikh Hamed said, with emerging markets under-performing developed ones.

Investors should prepare for a slower pace of expansion in the developed world over the medium term and look to commodity-consuming emerging markets, including China and India, for growth, he said.

The MSCI ACWI Index, a free-float weighted equity index that includes both emerging and developed world markets, fell 4.3 per cent in 2015, according to data compiled by Bloomberg. ADIA invests a minimum of 10 per cent of its assets and maximum of 20 per cent in emerging market equities, with a range of 32 per cent to 42 per cent in developed market equities.

Budget Deficit

Abu Dhabi -- holder of about six per cent of global oil reserves -is cutting spending and tapping cash reserves to help plug a budget deficit after the slump in crude. It is merging two of its largest banks -- National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC -- to better compete in size with regional rivals such as Qatar National Bank SAQ and bolster its ability to lend and secure funding as it grapples with lower oil prices. Last month the government announced plans to merge its two biggest stateowned investment companies, International Petroleum Investment Co. and Mubadala Development Co. The emirate’s 40 year-old fund, which invests the government’s budget surpluses, also said it started looking to co-invest in “special situations” through its Alternative Investments unit in 2015 and had expanded its real estate and infrastructure portfolio. Bloomberg

France attacks

State of emergency not permanent French government spokesman Stephane Le Foll said the state of emergency isn’t meant to be permanent after parliamentarians voted to extend the measure for another six months. “The attack in Nice called for a response,” Le Foll said in an interview with the France Info radio station on Wednesday. “It’s because there’s a threat, an exceptional threat, that we’re focused on finding ways to fend it off, that we’ve set up certain tools, that we’ve put together more means to fight against terrorism.” Le Foll added that Defense Minister Jean-Yves Le Drian is currently in Washington. “He’s preparing with the U.S. a coordinated attack of the coalition forces against Mosul,” the French government spokesman said. Bloomberg Election

SA censorship storm When the acting boss of South Africa’s public broadcaster stepped down this month, he said he had deliberately limited reporting on one of the main opposition parties. Jimi Matthews’ comments added to concerns among opposition politicians, activists and the public that the South African Broadcasting Corporation (SABC) was being used as a state propaganda tool less than four weeks from local elections that are expected to be the most closely-contested in two decades. The SABC denies Matthews’ assertions, while the ruling African National Congress (ANC) denies seeking to influence the broadcaster’s coverage. Reuters

Abu Dhabi, capitol of the United Arab Emirates

Automotive

VW profit tops forecast, but takes another hit Volkswagen said on Wednesday its first-half operating profit beat expectations, helped by cost cutting at its core VW brand and rising European car sales, but announced another 2.2 billion euro (US$2.4 billion) provision related to its emissions scandal.

Europe’s biggest carmaker said its operating profit for the six months ended June, excluding one-off items, rose 7 per cent to 7.5 billion euros.

In an unscheduled update ahead of interim results on July 28, it said this was ahead of analysts’ expectations, although it did not say what those expectations were.

At 0950 GMT, Volkswagen (VW) shares were up 5.1 per cent at 122.35 euros.

Including the one-off items, however, VW said its operating profit dropped 22 per cent to 5.3 billion euros.

VW admitted in September it installed illegal software that deactivated pollution controls on more than 11 million diesel vehicles worldwide, sparking the biggest business crisis in its history.

It has already set aside 16.2 billion euros to pay for technical fixes for cars that violate clean air standards, buybacks of vehicles and legal costs.

VW said an improvement in European car markets as well as the return of orders from large corporate fleets had bolstered earnings at its namesake brand.

Key Points H1 adjusted operating profit up 7 pct at 7.5 bln euros But that excludes another 2.2 bln euro provision Sets aside further funds to cover emissions scandal Shares up 5.1 per cent The company said it still expected 2016 sales revenue to decline as much as 5 per cent f r o m 2 0 15 , a n d a n o p e ra t i n g return on sales of 5 to 6 per cent.

Reuters

Business Daily Thursday, July 21 2016 15

Opinion Business Wires

The Times of India Making a strong pitch for financial inclusion, Reserve Bank of India governor Raghuram Rajan (pictured) said that the apex bank is trying to make it attractive for financial institutions to offer services to everyone. Though the country has come a long way in the process of financial inclusion, it still has a long way to go, Rajan said at a national seminar on ‘Equity, Access and Inclusion’. “We are steadily moving from mandates, subsidies and reliance on public sector banks for inclusion to creating enabling frameworks that make it attractive for all financial institutions to target the excluded...,” he said.

More Europe, Less Brussels

Bangkok Post A package of measures to deal with the growing greying population, including reverse mortgages and mandatory provident funds, will go before the cabinet early next month. The Finance Ministry is reviewing the proposed measures and an adjustment of the current living allowance for elderly people, Finance Minister Apisak Tantivorawong said. All senior citizens aged 60 and over are still entitled to the living allowance, but those with sufficient funds to live a comfortable postretirement life can opt not to receive the allowance, he said. The unclaimed sum would then be passed on to recipients who cannot afford living costs, he added.

Philstar The country’s foreign exchange buffers climbed to an all-time high US$85.28 billion in June amid the steady increase in the central bank’s gold holdings and gains from foreign exchange operations, data from the Bangko Sentral ng Pilipinas (BSP, pictured) showed. BSP Governor Amando Tetangco Jr. said the revised data showed the gross international reserves (GIR) level last month exceeded the previous record level of US$85.27 billion recorded in January 2013. The central bank initially reported the June GIR level at $83.97 billion.

The New Zealand Herald Oil giant Mobil has escaped a NZ$10 million bill for the clean-up of a heavily contaminated area of Auckland’s Wynyard Quarter after winning an appeal in the Supreme Court. Publiclyowned Waterfront Auckland must now also pay Mobil close to NZ$1 million in court costs for its failed attempt to get the oil company to foot the bill. Mobil Oil leased two properties in Auckland’s waterfront ‘tank farm’ for more than 50 years. When Mobil’s lease for the two sites ended in 2011, it was found the land they were on had been heavily contaminated. But that court in 2014 decided that Mobil was not contractually obliged to decontaminate the subsurface of the land.

T

he failed coup in Turkey has reminded us – as though a reminder was needed – of the once-inconceivable stability that the European Union has brought to Europe.

But if the post-Brexit EU is to survive, it will need to change the way it thinks about itself.

So far, sad to say, this isn’t happening. Immediately after the Brexit vote, for example, the six founding countries of what used to be the European Economic Community (EEC) – Belgium, France, Germany, Italy, Luxembourg, and the Netherlands – gathered to discuss what to do. To no one’s surprise, the other 21 EU member states felt offended at being left out.

This incident points to the larger challenge that the EU must overcome if it is to secure its postBrexit future. Simply put, the idea of the Union must resonate with all Europeans, not just those who get invited to exclusive meetings.

The EEC was established in 1957, and the official aspiration then, as it is now for the EU, was to recreate the Europe of Charlemagne that existed more than a thousand years ago.

Since then, European leaders have gathered time and again by Charlemagne’s ancient throne in Aachen, in the German state of North Rhine-Westphalia, to deliver visionary speeches announcing that the time has finally come to build a truly integrated Europe. Aachen has turned into the Mecca for true believers in the EU’s founding myth.

While I agree that Charlemagne is an intriguing historical personality, I do not find him particularly inspiring. He was an impressive warrior, but probably an illiterate one, and the empire he created fell apart soon after his death. The rise of Europe and the West certainly did not start with Charlemagne.

The Europe that inspires me is not the Europe of old warriors; it is the Europe of the thinkers and the traders. It is their contributions that, over the centuries, transformed Europe from the global backwater it had become after the fall of Rome into a hub of intellectual progress and innovation that created the West and changed the course of humanity.

This is the Europe of Copernicus and Erasmus, Henry the Navigator and Isaac Newton, and all the other pioneers who unshackled the human mind from the superstition and prejudice of the immediate past. Their Europe was wide and borderless, far larger than the Europe of Charlemagne. Immanuel Kant’s treatises on how republics could achieve “perpetual peace” were written in Königsberg, in what today is a part of Russia. And the great trading cities of Gdansk, Seville, and Venice maintained links far beyond the borders of today’s EU. The European project can be renewed only if

“

Carl Bildt a former prime minister and foreign minister of Sweden.

those who support it move away from the limited Charlemagne-inspired vision, stop talking about “old” and “new” members, and demonstrate in words as well as deeds that they are open to ideas from every part of Europe. The EU will not work unless all member states are regarded as equals in determining a common future.

In 2004, when the EU added ten new members (including eight ex-communist countries), I half-jokingly suggested that the Union move its headquarters from “old-EU” Brussels to a more geographically central, “new-EU” location, such as Bratislava, the capital of Slovakia. The idea behind this fanciful thought was to symbolize the abandonment of a conceptual model that I saw hindering a more open, diverse, and inclusive Union.

The move from Brussels obviously did not happen, but neither did the mental transformation from that old Aachen paradigm.

Unfortunately, there can be little doubt that the conclaves held by the Aachen brotherhood within the Brussels bubble provided much fodder for the ruthless, and ruthlessly dishonest, proBrexit campaigners. Unless it is overcome, the Aachen mind-set will continue to serve a similar purpose for nationalist campaigners in other member states.

It is, of course, a dangerous myth that Brussels has been grabbing power from EU member states. In reality, the gradual erosion of national powers in an increasingly interdependent world has made it necessary for member states to forge, by agreement, common solutions to common challenges.

Common solutions require inclusion and a spirit of cooperation. When the leaders of all 27 remaining EU member states gather in Bratislava in September, they should begin to return Europe to its members – and that means to all of them.

The post-Brexit EU must be a Union that is much more closely linked to the political realities of its member states.

Although a new building for such gatherings is rising in Brussels, perhaps we should go back to having at least some EU summits in different parts of Europe. The Bratislava summit could be the start of a new effort to connect the European endeavour with all of Europe.

The era of Aachen is over; the age of Bratislava has arrived. We need more Europe – and less Brussels. If we embrace this new model – and stick to it – the EU will not only survive; it will thrive. Project Syndicate

The EU will not work unless all member states are regarded as equals in determining a common future.

”

16 Business Daily Thursday, July 21 2016

Closing Tax

China’s H1 tax revenue up 9.4 pct

China collected 6.5 trillion yuan (US$985 billion) in taxes in the first half of 2016, up 9.4 percent year on year, data from the State Administration of Taxation (SAT) showed on Wednesday. Taxes collected from tertiary industry rose 10.9 percent year on year, accounting for 58.2 per cent of the total, said the SAT. The surge in tax revenue from tertiary industry

reflected an adjustment in China’s economic structure and rising consumption demand, said Zheng Xiaoying, a senior SAT official.

Meanwhile, tax revenue from high-end manufacturing also increased rapidly thanks to the country’s innovation drive. Tax collected from auto manufacturing, pharmaceuticals and aerospace equipment manufacturing in the first half rose 7.2 percent, 12.2 percent and 11.1 percent, respectively.

Banking

EU banks must sell US$517 billion in funds Boris Groendahl

E

uropean banks need to sell hundreds of billions of euros in loss-absorbing liabilities over the next few years to meet European Union rules designed to protect taxpayers from the cost of bank failures.

The European Banking Authority estimates as much as 470 billion euros (US$517 billion) of financing is needed under the most conservative assumptions for what qualifies as “loss-absorbing.”

Excluding senior unsecured debt could bring the amount to 790 billion euros, the regulator said in its first quantitative impact study on the EU’s minimum requirement for eligible liabilities and own funds, or MREL.

“These findings are subject to several methodological caveats and must be treated with caution,” the EBA said. “In the absence of MREL decisions for institutions to date, and given the limited information on authorities’ MREL policy approach, assumptions had to be made as to the scope and calibration of MREL. These assumptions are by definition different from the actual levels of MREL that will ultimately be determined for each institution and group.”

The requirement to have sufficient eligible liabilities to absorb losses and recapitalize a bank is the cornerstone of the EU’s bank-failure legislation.

MREL requirements will be set for each bank individually by authorities such as the Single Resolution Board and the Bank of England. It is similar

to the global total loss-absorbing capacity standard set by the Financial Stability Board for the world’s biggest banks, including HSBC Holdings Plc and Deutsche Bank AG.

Big Banks

Elke Koenig, head of the Brusselsbased SRB, has said that the euro area’s resolution authority will “cover the main TLAC requirements when setting MREL.” The FSB has given banks until 2019 to meet the initial TLAC requirements. “In practice we think a three- to four-year period will be needed for banks to build up the required MREL in many cases,” she said.

Koenig’s SRB is busy setting MREL requirements this year. For the “big banks” -- those of global and national systemic importance -- Koenig said

“In practice we think a three- to fouryear period will be needed for banks to build up the required MREL in many cases.”

Elke Koenig, head of Single Resolution Board

she’s “convinced” the minimum level will be at least 8 per cent of total liabilities including own funds, even though efforts have been made to water down the standard.

The EBA studied a sample of 114 banks from 18 EU member states, covering about 70 per cent of total EU banking assets, including 13 globally systemically important banks based in the bloc. They have average MRELeligible liabilities and own funds of 13 per cent of total liabilities and own funds, or 34 per cent of assets weighted for risk, according to the study. If deposits not covered by insurance schemes for consumers are excluded, the ratio is about two percentage points lower, it said.

Large Variations

As MREL requirements haven’t been set on an individual bank level yet, the study makes simplified assumptions for how it will be calibrated, causing large variations in the result depending on those assumptions.

In the most conservative scenario, MREL was assumed at the greater of twice the current capital requirement including buffers and systemic risk charges, or 8 per cent of total liabilities and own funds, the EBA said. Under this scenario for all banks in the sample, and excluding all deposits, banks would have to add 470 billion euros in funds. If large and corporate deposits are included in MREL, this amount falls to 290 billion euros.

One of the key goals of European lawmakers was to share the losses of failing banks with senior creditors, to make a bigger pool of securities eligible for MREL. If, contrary to that intention, only subordinated debt was eligible, the shortfall would rise to 790 billion euros. EU members including Germany, Italy and France have started legislation to make sure senior bonds can be included in MREL, and EU finance ministers are working to harmonize those efforts.

Profit decline

Oil rig

Investment

Morgan Stanley profit falls 5 pct

Halibutron expects uptick

Myanmar calls for investment performance reporting

Morgan Stanley, Wall Street’s biggest equitytrading firm, posted a decline in that business as companywide profit dropped 5 per cent.

Net income fell to US$1.58 billion, or 75 cents a share, from US$1.67 billion, or 79 cents, a year earlier, the New York-based company said Wednesday in a statement. Twenty-one analysts surveyed by Bloomberg estimated 60 cents on average.

Chief Executive Officer James Gorman, 58, is cutting costs and trying to boost trading and wealth-management returns. He scaled back the firm’s struggling bond-trading division last year, and in January set a US$1 billion cost-cutting goal. The firm’s target for return on equity is 9 percent to 11 percent by the end of 2017.

“Our results this quarter reflect solid performance in an improved but still fragile environment,” Gorman said in the statement.

Halliburton Co, the world’s No.2 oilfield services provider, reported a smaller-than-expected quarterly loss and said it expects to see a “modest uptick” in North American rig count in the second half of the year.

Shale oil companies have started putting rigs back to work, encouraged by a near 70 percent jump in U.S. benchmark oil prices since hitting a 12 year-low of US$26 in February.

The rig count in North America has improved by 26 over the last several weeks, Halliburton said on Wednesday.

“We believe the North America market has turned,” Chief Executive David Lesar said in a statement.

“With our growth in market share during the downturn, we believe we are best-positioned to benefit from any recovery, including a modest one.”

Halliburton, which derives about 40 percent of its revenue from North America, is more exposed to the region than rivals Schlumberger NV and Baker Hughes Inc. Reuters

The Myanmar Investment Commission (MIC) Wednesday called for submission of performance reports of permitted investments for the first quarter of fiscal year 2016-2017 within 10 days starting July 17.

Under the current Foreign Investment Law and Myanmar Citizens’ Investment Law, all permitted investment businesses in Myanmar are required to forward their performance reports to MIC every three months.

According to MIC statistics, new foreign investment in the first three months after the new government took office hit US$3.13 million, while total foreign investment in the country reached up to US$63.721 billion as of the end of June since late 1988.

Meanwhile, the new Myanmar Investment bill is expected to be submitted to the parliament later this month, according to U Aung Naing Oo, MIC secretary and director general of the Directorate of Investment and Company Administration.

Bloomberg

Xinhua