Macau Business Daily September 6, 2016 by Business Daily

Tencent becomes China’s most valuable company Top biz Page 16

Tuesday, September 6 2016 Year V Nr. 1124 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Hospitality

Travel agents complain about Beijing Imperial Palace Hotel overselling hotel rooms Page 2

www.macaubusinessdaily.com

Infrastructure

Hangzhou meeting

Fourth MacauTaipa bridge design contract awarded for MOP75.2 mln Page 4

G20 attendees focus on economic hurdles despite North Korean missile test Page 9

TaxiGo: improving taxi service image Transport

Claiming to be a non-profit initiative, locally-based taxi-hailing application TaxiGo, which launched in Macau this month, is aiming to improve the image of the local taxi service industry. Founder and Chief Strategy Officer, Kyle Ho tells Business Daily that they are not affiliated with any organizations, political parties or government agencies, and they do not charge any extra fees for passengers or drivers. The company just wants to make its brand stand for “good taxi drivers”. Page 3

Stable asset quality

According to statistics released by the AMCM, money supply continued to grow in July. As total loans decreased at a faster pace than total deposits, the overall loan-to-deposit ratio of the banking sector dropped slightly from a month earlier. Concurrently, the non-performing loan ratio, an indicator of bank asset quality, remained virtually stable.

Waiting for a general plan

Urban Planning Urban Planning Committee members question whether the former Court House Building in Nam Van is the most suitable venue to house the proposed Central Library. They also criticized the relatively low height of the planned new multifunction government building, urging the government to make better use of the land. Page 5

Steady outlook for China

Monetary Page 2

HK Hang Seng Index September 5, 2016

23,649.55 +382.85 (+1.65%) Worst Performers

Sun Hung Kai Properties Ltd

+4.65%

New World Development

+2.87%

Belle International Holdings

-0.76%

MTR Corp Ltd

+0.35%

Tencent Holdings Ltd

+4.16%

Sands China Ltd

+2.33%

AAC Technologies Holdings

+0.00%

CK Hutchison Holdings Ltd

+0.39%

Sino Land Co Ltd

+3.64%

Cheung Kong Property

+2.28%

CLP Holdings Ltd

+0.19%

Cheung Kong Infrastructure

+0.60%

Li & Fung Ltd

+2.25%

Hong Kong & China Gas Co

+0.27%

China Mengniu Dairy Co Ltd

+0.66%

Bank of China Ltd

+2.24%

Hang Seng Bank Ltd

+0.29%

Power Assets Holdings Ltd

+0.73%

China Resources Land Ltd

+3.13%

Bank of Communications

+2.96%

26° 30° 26° 30° 27° 30° 27° 31° 26° 30° Today

Source: Bloomberg

Best Performers

Wed

Thu

I SSN 2226-8294

Fri

Sat

Source: AccuWeather

Data preview Reversing the negative forecasts populating reports recently, analysts now predict a steady pace on each and every economic front for the world’s second largest economy. Yesterday, a private poll confirmed the upward trend in the services sector. Pages 8 & 9

2 Business Daily Tuesday, September 6 2016

Macau In Brief Subsidy

Social bureau dispenses extra MOP24mln The Social Welfare Bureau is to disburse an extra oneoff subsidy to some 4,000 local families that are supported by government financial assistance from today, according to an announcement yesterday. The Bureau expects that the amount of this scheme will total some MOP24 million (US$3 million). The subsidies to the beneficiaries range from MOP4,050 for one-member families to MOP18,870 for families with eight or more members. The Bureau said this extra distribution aims to help these families to deal with the extra expenses for the new school year and Mid-Autumn Festival.

Social Welfare

Disability allowance increases Ordinary disability allowances and special disability allowances have both been increased, to MOP8,000 (US$1,002) and MOP16,000, respectively, starting from this year. The increased amount will be distributed to eligible disabled Macau residents on a yearly basis, according to a dispatch signed by Chief Executive Fernando Chui Sai On and published in the Official Gazette yesterday. Currently, about 8,000 people are eligible to receive the disability allowance, involving a total amount of more than MOP88 million, according to a press release published by the Social Welfare Bureau yesterday. Banking

CGD appoints new international operations manager Caixa Geral de Depósitos (CGD), the parent company of Banco Nacional Ultramarino, S.A. (BNU) has appointed a new representative for its international operations. Emídio Pinheiro will be responsible for the BNU and the CGD branches in Macau and Zhuhai, as well as all other CGD operations in Africa - excluding South Africa - and East Timor. The new appointment is part of the CGD new executive committee reshuffling that took place on August 31, with António Domingues being appointed as the new Executive Director. CGD registered losses of 205.2 million euros (MOP1.83 billion) in the first half of 2016, compared to a profit of 47.1 million euros for the same period in 2015, according to the bank’s financial information.

Banking Non-resident bank deposits increase 10.8pct y-o-y

Bank deposits fall 0.3pct m-o-m in July While residents’ deposits increased between June and July, a 5.8 per cent month-on-month decrease in deposits by non-residents led to a monthly fall of 0.3 per cent in total deposits in the city’s banking sector. Nelson Moura nelson.moura@macaubusinessdaily.com

otal deposits within Macau’s banking sector registered a slight decrease of 0.3 per cent monthon-month to MOP910.7 billion (US$114.0 billion) in July, due to decreases in deposits from non-residents, the latest monetary statistics released yesterday by the Monetary Authority of Macau (AMCM) reveal. The decline in total bank deposits was generated by a 5.8 per cent month-on-month decrease in the banking sector’s non-resident deposits, down to MOP275.6 billion for the month. Deposits from local residents saw an increase of 2.6 per cent between June and July, totaling MOP478.0 billion, with the average level of deposit per resident at MOP732,600. Despite the monthly fall in total deposits, nonresident deposits in July increased 10.8 per cent year-on-year, while resident deposits rose 0.9 per cent. In addition, deposits from the public sector increased by 1.5 per cent month-on-month to MOP157.0

billion in July, but registered a 12.8 per cent year-on-year decrease from last year. Of the total deposits with local banks, those denominated in Hong Kong Dollars (HKD) accounted for nearly half, or 47.4 per cent, while the local currency of Patacas (MOP), US Dollars (USD) and Renminbi (RMB) occupied 20.9 per cent, 20.2 per cent and 8.7 per cent of the total, respectively.

Loans

M ea n w hi l e, n e w l y a p p r o v e d domestic loans by local banks to the city’s private sector decreased 0.3 per cent month-on-month to MOP402.0 billion in July, with the average loan per resident at MOP616,000 according to AMCM data. Of total domestic loans, 64.9 per cent, or MOP260.8 billion, was denominated in HKD, while 29.3 per cent, or MOP117.9 billion, was MOP-denominated. Furthermore, approved external loans by local banks fell by 0.5 per cent month-on-month to MOP369.1 billion. Of the total, 50.7 per cent, or MOP187.2 billion, was USD-denominated, while those denominated in HKD and RMB

accounted for 26.8 per cent and 13.8 per cent of the total, respectively. As at the end of July, the loan-todeposit ratio for the resident sector fell 1.7 per cent from the previous month to 63.3 per cent. The ratio for both the resident and non-resident sectors remained almost stable, dropping 0.1 percentage points to 84.7 per cent.

Key Points Bank deposits and loans in July -MOP910.7 billion in total bank deposits -MOP478.0 billion in resident bank deposits -MOP275.6 billion in non-resident banking deposits -MOP402.0 billion in approved domestic loans to the private sector -MOP369.1 billion in approved external loans

Money supply

Currency in circulation grew 3.2 per cent month-on-month in July, while demand deposits rose by 3.6 per cent month-on-month. Money supply (M1) thus jumped by 3.5 per cent from June and quasi-monetary liabilities grew 2.5 per cent. Therefore, M2 - the sum of M1 and quasi-monetary liabilities - also increased, rising 2.6 per cent monthon-month to MOP491.3 billion as at the end of July. In yearly terms, both M1 and M2 in July increased 7.6 per cent and 1.2 per cent year-onyear, respectively, while currency in circulation increased 15.1 per cent year-on-year from the same period last year. According to the AMCM, the MOP accounted for 30.7 per cent of M2, while HKD made up 52 per cent. The other two major currencies in M2 were RMB and USD, which accounted for 6.1 per cent and 8.8 per cent of the total as at the end of July, respectively.

Infrastructure Nearly MOP20 mln on wastewater supervision until 2018

Flushing it down Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

A total of around MOP19 million (US$2.38) will be spent on two separate contracts for wastewater consulting and supervision until 2018, according to information published in the Official Gazette. The largest of the two contracts, signed with Aecom Macau Company Ltd., amounts to a total of MOP11.75 million, to be paid between this year and 2018, with the bulk of payment - MOP10.58 million - to be allocated this year and next. The second contract was awarded to a not-for-profit organisation the Institute for the Development and Quality, Macau (IDQ) - and amounts to MOP7.57 million, with MOP3.4 million to be paid this year and MOP4.16 million in 2017. The non-profit organisation will oversee installations for wastewater and solid waste.

No stranger

Both of the groups have worked closely with the government before, with the IDQ completing quality assurance works on the Macau Cultural Centre and Handover Ceremony Building, as well as inspection works on the Sai Wan Bridge. Aecom recently won a tender for construction supervision

on the Islands Hospital project totalling MOP197.6 million, to be paid in stages until 2019. In addition, its consultative works, costing the government MOP18.3 million, laid the groundwork for the Macao Tourism Industry Development Plan, which promotes increasing tourist visitation to 40 million by 2025. The

group is also one of the members of a consortium that has won multiple contracts for the Hong Kong-ZhuhaiMacau bridge. The information on the contracts comes less than a week after an announcement by the Environmental Protection Bureau that it had decided not to carry out a large-scale upgrade on the wastewater treatment plant on the peninsula, due to the plant’s current condition, space limitations and related construction costs.

Business Daily Tuesday, September 6 2016 3

Macau

Transport

TaxiGo: “We’re not here for profits” The new taxi-hailing application TaxiGo says they are here for the city’s own good. Kam Leong kamleong@macaubusinessdaily.com Photos by Cheong Kam Ka

s global ride-sharing application Uber gets ready to leave the Macau market, a new local-based taxi-hailing application, TaxiGo is now coming under the spotlight. The founder of the app, Kyle Ho, told Business Daily in an interview that the app aims to fulfill social responsibilities rather than chase after profits.

“We are not associated or affiliated with any taxi associations, any political parties, or any government agencies.” The app, which was launched on both iOS and Android platforms on September 1, saw over 3,500 users registered on the platform as of Sunday night. Meanwhile, some 100 local licensed taxi drivers have been admitted on to the platform. Mr. Ho, the chief strategy officer of TaxiGo Ltd, stresses that the app is a totally independent and non-profit project under its parent company, Ying Hai Group. “We are a self-invented application in Macau,” he says. “We are not

associated or affiliated with any taxi associations, any political parties, or any government agencies”. “We don’t charge any extra fees for passengers and drivers who use our platform. For now, we just want to contribute to society,” the young executive adds, indicating fees for the taxi rides via the app will be totally based on taxi-meters.

Image transformation

The company revealed to Business Daily that the investment cost for the app amounted to “seven digits”. But Mr. Ho says the aim of the app is to turn around the image of the local taxi industry. “We want to transform the image of local taxis, not for taxi drivers, but for Macau as a whole, for local citizens and for people who speak English here to have smoother taxi rides,” he says. The young executive says the app will focus on Chinese-speaking residents for its first phase of operations, with an English-language service to be released “in the short term”, while a Portuguese-language service may also be added in the future. “I have been living in the United States for ten years. I’ve been hearing friends from Macau saying that ‘the taxi issue is growing and it is ridiculous’…This made me think that we should do something for the society and we came up with this idea,” he says.

Good drivers wanted

With a goal of providing good taxi services, the company has certain requirements for taxi drivers who want to join its platform. Taxi drivers cannot

have any record of taxi violations for the past two years; they cannot smoke inside their cars; and they are required to take the most convenient routes to their destinations. Mr. Ho notes that taxi drivers who have been admitted to the platform are primarily those who are willing to take more social responsibility and are active in taking care of passengers rather than only focusing on money.

“We don’t charge any extra fees for passengers and drivers who use our platform. For now, we just want to contribute to society.” “We have tried to make our app localized. Our focus is on whether the app is good for the Macau society and Macau people, especially the elderly who need to go hospitals or young mothers carrying their kids,” he claims. To ensure the services provided by their drivers are good enough, the platform is designed with a rating system for passengers to give feedback after their ride.

Transport Bureau: legal operations welcome

In a reply to Business Daily’s enquiry, the Transport Bureau (DSAT) said it had noticed the launch of TaxiGo, claiming it is trying to learn more about

“In addition, if passengers come across any problems with the drivers, they can always contact our customer service staff,” Mr. Ho says, claiming the company would block a driver from using the platform if similar complaints about the same driver are received more than once.

Competition welcome

Mr. Ho says that the company had not intentionally planned to launch the app at a time that coincided with Uber’s departure. “We started preparing for the application in March this year,” he states. Declining to comment on the operations of Uber, the app founder, however, admits the global ridesharing app did provide some inspiration to his company. “I’ve used Uber before and I agree we could learn something from that – such as on the user experiences and the feelings of passengers,” he says. In charge of the non-profit application, Mr. Ho welcomes other similar apps to join the local market. “In my opinion, this kind of application will only create a winwin situation for both drivers and passengers,” Mr. Ho believes. “As an international city, it is necessary for Macau to provide a more convenient transportation model”. Looking to the future, the company plans to make its brand stand for “good taxi drivers”. “When the current image of taxis is quite bad, we would like to re-brand the industry. When passengers think of TaxiGo, they can relate it to good taxi services,” Mr. Ho says.

the app’s operations. ‘The government welcomes any [operations] benefiting public transportation as long as they meet local passengertransportation laws,’ the Bureau wrote in its response yesterday.

4 Business Daily Tuesday, September 6 2016

Macau In Brief Infrastructure

Cotai drainage system project granted Cheong Kong Construction Company has been granted a drainage system improvement project contract for Estrada Flor de Lotus of Cotai, according to a dispatch signed by Chief Executive Fernando Chui Sai On and published in the Official Gazette yesterday. The contract is worth a total of MOP72.4 million (US$9.1 million). The payment will be divided into three installments over three years. An amount of MOP4 million will be paid in 2016, while MOP43 million and MOP25.4 million will be paid in 2017 and 2018 respectively. This expense will be classified under ‘Investment Plan’ in the MSAR financial budget. Public works

Design contract granted to HKS HKS, Inc., an American international architecture firm has been granted a project contract by the Health Bureau for design services for the Central Laboratory Centre of the Islands District Medical Complex, according to a dispatch signed by Chief Executive Fernando Chui Sai On and published in the Official Gazette yesterday. The contract is worth a total of MOP24 million (US$3 million). The payment will be divided into two installments over two years. An amount of MOP19.2 million will be paid in 2016 and MOP4.8 million in 2018. This expense will be classified under ‘Investment Plan’ in the MSAR financial budget.

Infrastructure

Fourth Macau-Taipa bridge design contract awarded

CCC Highway Consultants CO.,Ltd., an infrastructure design company in M a i n l a n d C h i n a, h a s been awarded an initial design contract for the fourth Macau-Taipa connection project, according to a dispatch signed by Chief Executive Fernando Chui Sai On and published in the Official Gazette yesterday. The contract is worth a total of MOP75.2 million (US$9.4 million). The payment will be divided into three installments over three years, with two installments each worth MOP33.8 million being paid in 2016 and 2017, respectively. The final installment of MOP7.5 million will be paid in 2019. This expense will be classified under ‘Investment Plan’ in the MSAR financial budget. The project for the new connection involves a 3.5 kilometer-long bridge running between the eastern side of the new land reclamation Zone A to the artificial port island of the Hong Kong-Zhuhai-Macau Bridge, and

continuing to the Taipa reclamation zone E1, with a total cross-sea section of 2.87 kilometres, notes information from the Infrastructure Development Office (GDI). The bridge is to be built with six lanes, three in each direction for vehicles and motorcycles, as well as windbreaks around the bridge. The new bridge is proposed to occupy a total sea area of 21.5 hectares and cover 367 metres of coastline, the GDI notes. CCCC is the state-owned China Communications Construction Company. It was previously hired by the Lands, Public Works and Transport Bureau (DSSOPT) to carry out a feasibility study on the construction of two tunnels either on the west side or east side of the old Macau-Taipa bridge, or a tunnel on either side of the bridge. The DSSOPT statement issued in July also said the study was expected to cost the public coffers MOP7.2 million. The feasibility study is to be completed within 260 days. A.L.

Construction

Two LRT consultancy contract values increased The values of two contracts related to consultation and security of the city’s planned Light Rail Transit (LRT) system have been increased due to ‘adjustment of some contractual work and the extension of working time’,

according to an Official Gazette dispatch published yesterday. A contract established in 2011 with TÜV Rheinland InterTraffic GmbH (TÜV Rheinland), for the provision of ‘Independent Security Advisory

(ISA) for the first phase of the Macau Light Rail Transit System’ was increased from an initial MOP22.8 million (US$2.8 million) to MOP29.6 million. The German company was hired to supervise the compliance of international safety criteria for the LRT automatic system manufactured by Japan’s Mitsubishi Heavy Industries. The contract payment will be divided over the next four years, with MOP2.9 million paid this year; MOP1.4 million in 2017; MOP4.5 million in 2018; and MOP12.1 million in 2019.

Seac Pai Van line contract

A MOP10.8 million payment value established with Ove Arup & Partners Hong Kong Limited in 2013 for a ‘Feasibility Study of the Seac Pai Van Light Rail line’ has also been increased to MOP11.4 million. According to the release, a final payment of MOP3.9 million will be made to the Hong Kong company this year. N.M.

Imperial Palace Travel agents complain about overselling hotel rooms

Troubled hotel Transport

Taxi violations up 8.6pct in August In August, a total of 353 cases were filed for taxi violations in the city, up by 8.6 per cent monthon-month, according to the latest data published by the Public Security Police Force (PSP). Some 152 and 129 cases were filed for overcharging and refusal to take passengers respectively, accounting for 37 per cent and 34.1 per cent of the total, respectively. Also, a total of 123 cases were filed for illegal taxi-like services in the month, unchanged from the previous month. Of these, 114 cases were related to the car-sharing service mobile application, ‘Uber’.

A group of claimed victims has reported suspected fraud by Beijing Imperial Palace Hotel involving more than MOP257.5 mln. Annie Lao annie.lao@macaubusinessdaily.com

A group of travel agents has reported a suspected fraud case conducted by the Beijing Imperial Palace Hotel. They say the hotel sold an excess number of rooms to the travel agencies before it was forced to temporarily close its doors for a period of six months by the Macau Tourism Office (MGTO), due to administrative irregularities and failing to comply with fire safety requirements. The group says they have reported the case to the Public Prosecutions Office, according to a report by local public broadcaster Chinese

TDM radio. A group convened by vice president of the Travel Industry Council of Macau, Wong Fai held a press conference yesterday. Mr. Wong said that about 30 travel agencies and individuals in Macau, Mainland China and Hong Kong had booked more than 700,000 hotel rooms at the hotel before its temporary closure, involving more than HK$250 million (MOP257.5 million/ US$32.24 million). “Based on their contracts with the hotel, about 700,000 hotel rooms

were booked, but the capacity of the hotel is 599 rooms. Even if they open 365 days a year, the amount of rooms that were sold was ridiculous… we suspect fraud in the case,” Mr. Wong explained. Mr. Wong added that in midDecember of last year, some agencies were notified by the hotel of a halt to room supply. The claimed victim group has now requested the hotel to explain the situation and resolve this issue by paying them compensation accordingly.

Business Daily Tuesday, September 6 2016 5

Macau Urban planning

Rosário: No detailed plan without a general plan Urban Planning Committee members doubt the former Court Building is the best location for the Central Library. Cecilia U Cecilia.u@macaubusinessdaily.com

he Urban Planning Committee members have a number of doubts as to whether the former Court Building on Praia Grande in the city centre is the best location for the Central Library. During the 9th Plenary Session of the committee yesterday, the members also questioned the low height of the government’s future multi-function building on land plots C15 and C16 near Nan Van, saying the government should make better use of the land. Members of the committee questioned the future usage of the Ho Tung Library, if the Central Library is to be located nearby at the former Court Building, as well as the exact function of the Central Library. There were also doubts regarding the estimate of 8,000 daily visitors to the library. Issues relating to the inconvenience of limited car parking space and the preservation of the interior of the building were also brought up during the meeting. Legislator Mak Soi Kun also pointed out that the humid environment of the location might affect the preservation of books, and voiced concerns over the limited space for possible future expansion. Despite the many doubts that were brought up by the committee members, in general, the committee agreed with the necessity

of building a central library in the city. Representative of the Cultural Affairs Bureau, Leong Wai Man responded that the Old Court Building is the most preferred location, especially after the establishment of the light railway in the future, since a stop will be located nearby. She also referenced the previous survey conducted in 2006, in which many people supported the building of a major library in the city. For the provision of car parks, Leong indicated that plans have been discussed in regards to connecting with the nearby Nam Van Car Park. In addition, Leong noted that the Ho Tung Library is only able to serve a small number of people.

Make best use

Meanwhile, members questioned the height of the future multi-function building for government’s administrative usage (offices, exhibition halls and a conference centre) at land plots C15 and C16 near the Legislative Building, since the building is comparatively short considering its intended purpose. The majority of the committee commented that the short height of the government building would not result in the best use of the land. Cheong Ion Man, a representative of the Public Works and Transport Bureau (DSSOPT) commented that the current height that has been introduced for the building acts as a

reference only until more opinions are collected, and the height may be subject to further changes. He also revealed local planning cannot be provided if the entire planning is not prepared first. The Secretary for Transport and Public Works, Raimundo Arrais do Rosário also emphasized that they

Zone B saved for administration and justice

When commenting on the recent Audit Report, the Secretary for Transport and Public Works, Raimundo Arrais do Rosário said that the government has decided that the reclaimed land for new town Zone B will be reserved as an administration and justice zone. The Commission of Audit issued a report last week, slamming the Land, Public Works, and Transport Bureau (DSSOPT) for its incompetence in failing to establish proper government office buildings, which were planned for Zone B

are following the Urban Planning Law and therefore they cannot make detailed planning decisions before the entire plan is approved. “The localized planning will not be approved officially by the Chief Executive if the whole planning is not provided […] the localized plans can only be used for references,” said the Secretary.

and authorized by the Central Government in 2009. The commission said this had resulted in the government paying hefty rents and renovation expenses amounting to more than MOP580 million from 2004 to 2014. The secretary commented that he has had two or three meetings with his colleagues since he took office in regards to the planned administration and justice zone, and such a project is still in the planning stages and there is no timetable yet, but it “won’t take as long as 10 years”. He added that a detailed plan would be laid out after the general urban plan for the city is released.

6 Business Daily Tuesday, September 6 2016

Macau Telecommunications

Citic registers 3.2 pct increase in profits y-o-y in H1

itic Telecom International Holdings Limited (Citic), the parent company of Companhia de T e l ec o m u n i ca ç õ es d e Macau, S.A.R.L. (CTM), registered a 3.2 per cent year-on-year increase in profit attributable to equity shareholders in the first half of 2016, to a total of HK$410 million (US$52.8 million), according to the

Gaming

company’s interim report released yesterday to the Hong Kong Stock Exchange. The increase in profit attributable to equity shareholders of the company was mainly the result of strong growth in Internet services and enterprise solutions revenue, the interim report stated. Citic registered an increase in profit despite a 12.1 per cent

year-on-year decrease in total revenue in the first six months of 2016, down to HK$3.8 billion, which the group attributed to a decline in mobile phone sales. In the release, Citic’s Chairman, Xin Yue Jiang stated that CTM - which Citic owns a 99 per cent equity interest in - had reported ‘rapid growth in its 4G customer base and was ranked first in Macau in terms

of market share,’ while CTM’s data and Wi-Fi services were extended to Mainland China and Hong Kong during the first half of 2016. The Citic chairman also underlined that the CTM optical fibre network had managed to obtain ‘100 per cent full coverage of all buildings during the first half of the year, while the number of residential optical fibre broadband users grew by 31.6 per cent as compared to the figures in the beginning of the year’. The company also revealed that, as of the end of June this year, the Group’s mobile market share in Macau was around 44.3 per cent, compared to 43.3 per cent at the end of December last year. The Group’s Internet market share in Macau was around 98.7 per cent, while broadband market penetration rate in Macau was around 87.5 per cent in June 2016, as compared to 86.4 per cent in December last year. The Group further revealed that certain property, plant and equipment that CTM had designated for the provision of basic infrastructure of public telecommunications services, ‘may need to be shared with other licensed telecommunications operators or the Macau Government with fair compensation, or, upon termination of the concession agreement, assigned in favour of the Macau Government,’ reads the interim report. N.M.

Sands China gets fewer gaming tables as Macau curbs industry

Bernstein: Better than nothing Gaming analysts say Sands' newly authorized 150 gaming tables is still “surprisingly good” as there had been concern that Sands might receive no new tables. Billionaire Sheldon Adelson joined Las Vegas rival Steve Wynn in receiving approval for fewer gaming tables at their new Macau casinos than they had hoped for, as authorities seek to keep the industry’s expansion under control. Macau’s gaming regulator authorized 150 new gaming tables, including 100 that will be available for the September 13 debut of Sands China Ltd.’s The Parisian resort, the casino operator said in a statement to the Hong Kong Stock Exchange on Monday. Wynn Macau Ltd.’s project, which opened August 22, received the same allocation.

The new resorts are coming online as Macau ended its 26-consecutive-month slump in gaming revenue in August, with the city’s government pushing casino operators to build projects to attract tourists and that are less dependent on gambling. The 82-year-old Adelson had said in December that he hoped to get 250 tables for The Parisian, although Sands China would like to get even more than that, its President Wilfred Wong had said earlier this year. It is still a “surprisingly good” number of tables for operations, as

there had been concern that Sands might not receive any new tables, Sanford C. Bernstein & Co. analyst Vitaly Umansky wrote in a note on Monday. The allocation is sufficient to run The Parisian as Sands has many tables at its other Macau casinos that

SMEs

Show me what you got Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

MGM Macau’s co-operation with local Small and Medium Enterprises (SMEs) has reached over MOP55 million (US$6.89 million) since the launch of its business matching program in November of last year, according to a company press release. The 145 vendors who have so far taken part have seen 1,798 cases of business matching via MGM’s cooperation with the Macau Youth Entrepreneur Association (MYEA). The most recent business matching session hosted by MGM focused on the Information Technology and Retail sectors. MGM notes that at previous matching sessions, the outcomes mostly involved wholesalers, while this session refocused on retailers. ‘Retail is one of Macau’s pillar industries; it is a great beginning for large corporations to make room for retailers to promote their products and services to its employees,” noted Mr. Chui Yuk Lum, Vice-President of

the Board of Directors of the Macao Chamber of Commerce and supporter of the business matching event, held on Friday. MYEA gathers all of Macau’s young entrepreneurs from all kinds of industries, including “Micro SMEs” and “Young Entrepreneurs”, key segments of MGM’s focus on local SMEs. The Association’s mission – creating business co-operation between local entrepreneurs, China

and overseas markets while serving the overall development of Macau’s community - is similar to many of the measures introduced by MGM Macau. Mr. Kevin Ho, Chairman of MYEA said, “The younger generation is eager to grow as entrepreneurs; however, they may be unsure about exploring business opportunities or how to begin partnerships with large corporations. This business matching session has opened up a door for them to learn the procurement procedures and criteria by discussing with MGM’s team. This builds a positive foundation for future cooperation.”

can be transferred to the project, he wrote. The Macau unit of Las Vegas Sands Ltd. gained 2.3 per cent at the close on Monday, the highest level in about two weeks. The Bloomberg Intelligence Macau index rose 1.6 per cent and the Hang Seng index advanced 1.7 per cent.

Limiting growth

Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau of Macau, approved an additional 25 tables for The Parisian for 2017 and another 25 for the following year. The new property has also been allocated 1,614 slot machines. The table allocations are much lower than the 250 tables that Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd. each received for their new projects last year. Macau wants to limit the growth in the number of new gambling tables to not more than three per cent per year through to 2023, and also plans to raise the contribution of non-gaming revenue to the casino industry to above nine per cent, up from 6.6 per cent in 2014, stated Lionel Leong, the city’s Secretary of Economy and Finance, earlier this year. “While the government says the number of new tables is determined on an individual basis by each project’s offerings, we cannot help but think the table grant might be driven more by the timing of opening and the industry’s then operating environment,” said DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong. Bloomberg

Business Daily Tuesday, September 6 2016 7

Macau

Junkets

The ‘Big 3’ and their stranglehold on small and medium-sized junkets

The way forward Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

n the wake of the recent announcement by Iao Kun Group Holdings that it would be undergoing a ‘Strategic Macau Restructuring Initiative’, including shutting down and relocating junket rooms, analysts are seeing signs that the market share held by the ‘Big 3’ junkets - Suncity, Neptune/ Guangdong and Tak Chun - has drastically increased over the past years, and that these bigger junket operators are eyeing their own casino operations. In recently published reports, analysts at Union Gaming stated that a ‘one-sided commission war’ has been underway for a number of years, resulting in the ‘Big 3’ ‘consolidating

their grip on the segment’ by pricing out small and mid-sized operators. This has yet to cause an impact to the six main gaming concessionaires in the territory, the analysts note, as their deals with the junkets are unaltered. However, they note that these increasingly powerful junkets are ‘attempting to transition from the agency model to the principal model’ by becoming casino operators themselves. Citing the model of the large-scale integrated resort project by Suncity in Vietnam, and Iao Kun Group’s acquisition of the Jeju Sun casino in Korea, the analysts point out that this ‘continues to represent a real and significant risk to Macau’s VIP story’ in the short, mid and longrun. They call Imperial Pacific’s Saipan operation a ‘guidepost’ in regards to potential future VIP

gross gaming revenue seeing double digit declines, as evidenced by its second lowest VIP rolling chip seen in August, even while the overall market recovers.

Exposure and leverage

For the analysts, led by Grant Govertson, the prediction is a market-wide VIP gross gaming revenue decline hitting 13 per cent year-on-year during the third quarter of the year for the MSAR, which is still ‘its best performance since early 2014’. The only group for which positive gross gaming revenue in the VIP segment is expected is Wynn Macau, while Sands China properties are expected to have ‘slightly more VIP exposure on a sequential basis following the opening of the Parisian’. ‘This helps form the view that

all VIP roads will continue to lead through the Big 3 in Macau,’ note the analysts, with the result being that in the long term, these three junkets could gain ‘some leverage to extract concessions from the Big 6 [casino] operators’. However the most likely prediction is ‘squeezing more economics from agents’ and ‘making it easier to take players to venues outside of Macau with less risk of them jumping ship to another junket’. The balancing act for Suncity, Neptune/Guangdong and Tak Chun, whose collective market share Union Gaming predicts as having gone from between 45 per cent and 55 per cent to in excess of 80 per cent, is whether to continue losing short-term profitability due to higher commissions paid to agents in an environment of ‘less worse’ declines in VIP gross gaming revenue for the rest of the year, and a predicted four per cent decline for all of 2017.

8 Business Daily Tuesday, September 6 2016

Greater China Economic forecast

Nation’s data to hold mainly steady Consumer inflation is expected to remain weak.

igns of strength in China’s industrial sector should give Beijing room to push much-needed reforms through the end of the year, though trade and investment are expected to remain weak, according to Reuters polls ahead of a flurry of August data. Growth momentum from a housing recovery and government infrastructure spending, and evidence that companies are hoarding cash instead of investing, means China’s policymakers are unlikely to cut interest rates or bank reserve requirements any time soon, sources have told Reuters. The economy grew faster than expected in the second quarter, and strong July industrial profits and an official August factory survey last week

showed momentum is continuing into the third quarter. But analysts say the economy has become too reliant on higher government spending and a property rebound that may be running out of steam, even as debt piles up. Without a pick-up in demand and private sector investment, economists predict policymakers will have to choose between sticking to reforms or launching another round of stimulus as early as the first quarter of next year. With global demand subdued, Asia’s trade recession shows no sign of abating soon and economists polled by Reuters expected China’s August exports fell 4 per cent, a similar rate to July. Imports may have fallen 4.9 per cent, which would be a significant

improvement from July’s 12.5 per cent fall, likely due to higher commodity prices. China’s trade surplus is forecast to have expanded to US$58 billion in August. Consumer inflation is expected to remain weak, falling slightly from July to 1.7 per cent. Four-plus years of producer price deflation likely narrowed again in August, and may have declined at the slowest pace in 25 months as higher commodities prices have helped breathe life into the industrial sector. China’s leaders have vowed to meet targets for cuts in coal and steel capacity this year, which would provide further support for manufacturers, though progress has been slow as some steel mills and local governments resist Beijing’s prodding. New yuan loans in August likely rose to 750 billion yuan (US$112.32 billion) after a big decline in July. Growth in outstanding loans may have remained at 12.9 per cent, while M2 money supply is expected to have risen 10.4 per cent in August after falling to 10.2 per cent growth in July. Fixed asset investment growth for Jan-Aug is expected to have hit the lowest point since December 1999, cooling to 8 per cent, as investment from private firms falls. Beijing has repeatedly promised to push through market-based reforms to help boost confidence among private firms, which continue to face policy uncertainty and market-access issues. In a sign of the tension between reform and growth, President Xi Jinping again committed to market reforms and overcapacity promises in a meeting last week, but the country’s top planning official said it will take “arduous efforts”

to meet annual economic targets. Growth in industrial output likely ticked up marginally to 6.1 per cent in August, possibly due to stronger demand for building materials, while

Key Points Trade to continue to fall, import decline expected to eases Output growth seen picking up but only slightly CPI f’cast +1.7 pct y/y (July +1.8 pct); PPI -0.9 pct (July -1.7 pct) New yuan loan f’cast 750 bln yuan vs July’s 463.6 bln yuan Jan-Aug fixed investment f’cast +8.0 pct (Jan-July +8.1 pct) M2 money supply f’cast +10.4 pct y/y (July +10.2 pct) Forex reserves seen easing to US$3.19 trln from July US$3.20 trln retail sales growth may have also edged higher. Foreign exchange reserves for August likely dipped to US$3.19 trillion after falling slightly in July. China’s reserves have stabilised in the last few months despite downward pressure on the yuan, as analysts say the government has been successful with measures to limit capital outflows. Forex reserves data are expected to be released on Wednesday, with trade and inflation coming on Thursday and Friday, respectively. Industrial output, investment and retail sales will be released on September 13. Loan and money data will be released September 10-15. Reuters

Hangzhou Summit

G20 summit warned of risks to economy as N.Korea test-fires missiles Xi called on G20 countries to match their words with actions. Vladimir Soldatkin and Kiyoshi Takenaka

North Korea fired three ballistic missiles off its east coast yesterday in a defiant reminder of the risks to global security, as world leaders including U.S. President Barack Obama gathered at a G20 summit in China for the second day. North Korea has tested missiles at sensitive times in the past to draw attention to its military might. But yesterday’s launch risks embarrassing its main ally Beijing, which has gone to extraordinary lengths to ensure a smooth summit meeting in the eastern Chinese city of Hangzhou. The missile test was also an unwanted distraction for the United States, which has been trying on the side-lines of the summit to finalise a deal with Russia for a ceasefire in Syria. U.S. Secretary of State John Kerry and his Russian counterpart Sergei Lavrov met in Hangzhou, but failed to clinch a breakthrough. Obama later talked with Russian President Vladimir Putin, but there was no immediate word on the outcome. The South Korean military said Pyongyang launched the missiles at around 0300 GMT. The South’s Yonhap news agency said the medium-range missiles flew for about 1,000 km and landed inside Japan’s air defence identification zone. The test prompted a quick meeting between South Korean President Park Geun-hye and Japanese Prime Minister Shinzo Abe in Hangzhou, and they agreed to cooperate on monitoring the situation, a Japanese statement said. Earlier yesterday, the leaders of South Korea and China met on the sidelines of the G20 summit and Chinese

President Xi Jinping reaffirmed Beijing’s commitment to the denuclearisation of the Korean peninsula, state news agency Xinhua reported. Park said a fourth nuclear test by North Korea this year followed by a series of missile tests had “gravely damaged peace on the Korean peninsula and the region and posed a challenge to the development of South Korea-China ties”, Yonhap said. Xi said China opposed the U.S. deployment of the THAAD anti-missile system in South Korea to counter missile and nuclear threats from North Korea. Two years ago, the North fired two Rodong medium-range missiles just as Park and Abe were sitting down with Obama at the Hague to discuss a response to the North’s arms programme. In 2003, North Korea tested an anti-ship missile during an Asia-Pacific

Economic Cooperation (APEC) summit held in Bangkok. The G20 summit, bringing together leaders of the world’s major economies, had largely focused in its main sessions on spurring the global economy, countering protectionism and removing trade barriers. A communiqué is to be issued before the meeting wraps up later on Monday.

Abe’s warning

At the morning session, Japan’s Abe warned that the downside risks to the global economy were increasing, and the group need to respond with a sense of urgency, a Japanese spokesman said. While inaugurating the summit on Sunday, Xi said the global economy was being threatened by rising protectionism and risks from highly leveraged financial markets. With the summit taking place after Britain’s vote in June to exit the European Union and before the U.S. presidential election in November, observers expect G20 leaders to mount a

Chinese President Xi Jinping speaks during the opening ceremony of the G20 Summit in Hangzhou, China, 04 September 2016. Lusa

defence of free trade and globalisation and warn against isolationism. The global economy has arrived “at a crucial juncture”, Xi said, in the face of sluggish demand, volatile financial markets and feeble trade and investment.

Key Points North Korea test-fires three missiles off east coast Launch comes as G20 leaders meet in Hangzhou, China Obama meets Putin on side-lines of summit At G20, Japan’s Abe warns of increased risks to growth

“Growth drivers from the previous round of technological progress a r e g ra d u a l l y f a d i n g, w h i l e a new round of technological and industrial revolution has yet to gain momentum,” he said. G20 countries are set to agree in a communique at the end of the summit that all policy measures - including monetary, fiscal and structural reforms - should be used to achieve solid and sustainable economic growth, Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda said. “Commitment will be made to utilising all three policy tools of monetary and fiscal policies and structural reforms to achieve solid, sustainable, balanced and inclusive growth,” Hagiuda told reporters on the sidelines of the summit. Xi also called on G20 countries to match their words with actions. “We should turn the G20 group into an action team, instead of a talk shop,” he said. Reuters

Business Daily Tuesday, September 6 2016 9

Greater China Automotive industry

In Brief

Domestic carmakers urge foreign cap to remain for 5 years China requires overseas companies to set up joint ventures with domestic partners as part of an industrial policy. China should keep the 50 per cent cap on foreign ownership in local passenger-vehicle joint ventures for at least another five to eight years to ensure Chinese carmakers are ready for fullfledged competition, according to the state-backed auto association. The government can consider lifting the limit on different parts of the automotive industry according to their maturity, starting with the motorcycle industry in one or two years, followed by commercial vehicles in three to four years, Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers, said in an interview on Saturday in Tianjin. The cap on passenger vehicles should be the last to go, he said.

“While removing the caps is something that can’t be stopped, it should happen in a gradual and orderly manner and not all at one go”

“While removing the caps is something that can’t be stopped, it should happen in a gradual and orderly manner and not all at one go,” Ye said, adding that the association has communicated its position to the NDRC and Ministry of Industry and Information Technology, the industry’s two principal regulators.

Industrial policy

The policy has been criticized in recent years for shielding state-owned companies from competition and reducing the drive to build their own brands. Its supporters say the rule gives China’s automakers a chance to build enough scale and develop technology to withstand global competition. CAAM has been vocal in its opposition to lifting the ownership cap, arguing that local companies are too weak to be

able to compete with the likes of General Motors Co. or Volkswagen AG. In February 2014, the trade group warned that Chinese brands will be “killed in the cradle” if the government allows foreign automakers to become more independent from their domestic partners, after a commerce ministry official said that automakers should prepare for the day when the limits are relaxed. Even so, the central government has already begun relaxing the policy, saying in July that it’ll exempt foreign makers of motorcycles and batteries from ownership limits in their manufacturing operations in selected free trade zones. Manufacturers such as Yamaha Motor Co. and Samsung SDI Co. previously were required to partner with local companies and could own as much as 50 per cent of joint ventures. “If you open up fully now to foreign companies, those domestic brands and privately owned automakers won’t survive because the entire supply chain will be in foreign hands,” Ye said. Bloomberg News

Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers

Transportation

National freight growth eases The growth rate of China’s national freight volume, an indicator of economic activity, slowed in July, official data showed yesterday. Railways, highways and waterways carried a total of 3.63 billion tonnes of cargo in July, up 4 per cent year on year, 0.7 percentage points lower than the growth in June, Ministry of Transport data showed. Freight volume for the first seven months rose 3.2 per cent year on year to 23.36 billion tonnes, according to the ministry. In July, rail freight volume fell 6.7 per cent year on year to 260 million tonnes, it said. Debt

Dongbei Special Steel delays disclosing information Unlisted Dongbei Special Steel Group Co Ltd, having defaulted on several bonds earlier this year, said yesterday it would delay the disclosure of its interim financial information. The troubled Liaoning province-owned steelmaker was scheduled to publish its first-half information on August 31. “The company is accelerating debt restructuring, and will audit and disclose relevant financial information when the final restructuring plan is settled,” the company said in a statement published on website of China’s foreign exchange trade platform, or Chinamoney. Think-tank

Outbound investment to jump

China requires overseas companies to set up joint ventures with domestic partners as part of an industrial policy to ensure local carmakers gain technology and operational know-how. The debate over whether it’s the right time to revise the policy was reignited after Xu Shaoshi, chairman of the National Development and Reform Commission, said in June the government is looking into lifting the 50 per cent cap.

Caixin index

Service sector expands faster Companies were more optimistic about their business outlook for the next 12 months. Business activity in China’s service sector accelerated slightly in August, a private survey showed yesterday. The Caixin China General Services PMI (Purchasing Managers’ Index) came in at 52.1 in August, up from 51.7 in July, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co. Ltd. A reading above 50 indicates expansion, while a reading below 50 represents contraction. The surveyed companies partly

linked higher business activity to new projects. The sector’s staff numbers stabilized in August after a marginal reduction in July, as some service providers hired additional employees to help with new projects, the survey showed. Compared with the previous six months, service companies were more optimistic about their business outlook for the next 12 months, citing expectations of improving market conditions and new business development. The Caixin China General Services

PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 400 service companies. The Caixin General China Manufacturing PMI, an indicator of factory activity, dropped to 50 in August from 50.6 in July, according to data released last week.

“Conditions in the manufacturing and service sectors diverged again” Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group “Overall, the economy continued to expand in August at a pace similar to July, but conditions in the manufacturing and service sectors diverged again,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. Downward pressure on China’s economy remains and supportive policies must continue, Zhong said. China is counting on growth in services to offset weakness in manufacturing and exports. The country’s economy expanded 6.7 per cent in the second quarter, still within the government’s target range of 6.5-7 per cent for 2016. Xinhua

China’s rapidly increasing non-financial outbound direct investment (ODI) will jump at least 20 per cent in the second half of 2016 from a year earlier, a top government thinktank said in a research report published by a newspaper yesterday. Buoyed by an abundance of foreign exchange reserves and decreasing opportunities at home due to a sharp slowdown in the world’s second-largest economy, China’s ODI surged 58.7 per cent year-on-year to US$88.86 billion in the first half. China’s foreign exchange reserves, the world’s biggest, stand at around US$3.2 trillion. Overcapacity

Henan to close 62.5 mln T of coal capacity Central China’s Henan province will cut annual coal capacity by 62.54 million tonnes and crude steel by 2.4 million tonnes over the 20162018 period as part of efforts to tackle nationwide supply gluts in the sectors, Xinhua news agency reported. China has vowed to bring total coal capacity down by as much as 500 million tonnes in the coming three to five years, and also plans to close 100150 million tonnes of steel production by the end of 2020 in a bid to prop up prices and curb widespread losses in the two industries.

10 Business Daily Tuesday, September 6 2016

Greater China Poultry trade

Mainland faces chicken shortage as imports ban bites The situation is offering temporary benefits for domestic poultry firms. Dominique Patton

hina’s near two-year ban on U.S. imports of chickens used for breeding is threatening supplies of chicken meat in the world’s second-largest poultry market, leading to the first shortfall in at least a decade and potentially pushing up prices. China relies on imported breeding stock for production of white-feathered broiler chickens, the type used by fast-food chains, which account for more than half the country’s chicken supply. But Beijing banned poultry imports from the United States last year in response to a December 2014 bird flu outbreak. That, followed by a similar ban on imports from France late last year, has seen a sharp drop in the supply of white-feather “grandparent” stock. Grandparent birds are the progeny of pedigree stock bred largely by three global companies, Aviagen, Cobb-Vantress and Groupe Grimaud. China has so far been unsuccessful in developing its own white-feather pedigree lines. Imports of breeding chicks shipped in lots of 168 - fell to 720,000 units last year, around half the levels of 2013, said Fujian Sunner Development Co, a chicken supplier to Yum Brands’ KFC. Only 110,000 units have entered the market so far this year, it added in its first half-report, well below what is needed to produce enough broiler chickens for next year’s demand. The U.S. supplies about half of the world’s breeding chicks, followed by the United Kingdom. Only Spain and New Zealand, much smaller

producers, can currently ship chicks to China. “Even if the government lifts its bans by the end of the year, next year’s supply [of meat] wouldn’t recover,” said Pan Chenjun, senior analyst at Rabobank. The World Organization for Animal Health declared the U.S. free of bird flu in April but China is yet to lift its ban.

Price pressure

Poultry prices have already been rising following a recent surge in prices of pork, the country’s most popular meat. That has pushed some consumers, such as school canteens, to buy more

poultry, a cheaper substitute, helping the industry recover some demand after a protracted decline caused by food safety fears and China’s own outbreaks of bird flu. A shortfall next year, forecast by Rabobank at around 1 million tonnes or 8 per cent consumption, could push prices up by as much as 20 per cent from a current 19.8 yuan (US$2.96) per kg, added Pan. However, prices will be kept in check by alternatives such as duck meat and increased imports. China will import 480,000 tonnes of poultry meat next year, up 33 per cent from this year, from markets like Brazil, Argentina and Chile, said a recent report by U.S. agriculture department attaches in Beijing. “Next year’s chicken price will certainly be higher than this year, but it will definitely be at an acceptable

level,” said Huang Jianming, director of the China White Feather Chicken Alliance, adding that it wouldn’t rise high enough to spur substitution. The situation, meanwhile, is offering temporary benefits for domestic poultry firms. The price of parent stock, or birds bred from imported chicks that produce broiler chickens, has jumped tenfold in the past year to 45 yuan (US$6.74) a package. That helped Shandong Yisheng Livestock and Poultry, Asia’s top broiler breeder, generate first half profits of 270 million yuan, against losses of 192 million yuan a year ago. The situation could also drive more consolidation in the industry, pushing out smaller players unable to get their hands on sufficient parent stock. “In 2016 and 2017 supply in the white feather broiler sector is going to be damaged for quite a long period, and we expect the whole industry could see new opportunities in the next three years,” said Fujian Sunner. Reuters

Restrictions lift

Canada open to tweaking rules to spur Mainland’s investment Government announced the signing of 56 deals with China worth more than US$915 million. Canada’s Liberal government is open to the idea of fostering better trade ties with China by easing foreign investment restrictions, a senior legislator said on a national political talk show yesterday. “It’s something we would consider amongst a number of different things,” David Lametti, parliamentary secretary to International Trade

Minister Chrystia Freeland, said on CTV’s “Question Period.” Canada’s former Conservative government clamped down on takeover bids for energy companies by foreign state-owned enterprises. The restriction came after China’s CNOOC Ltd made a bid for Calgary-based Nexen in 2012, prompting fears of external control of the country’s oil reserves.

Lametti said the government has not formally explored changing the rules, but is open to all proposals that might enhance trade. He did not give details or a timeline but said Canada needs to rebuild its relationship with China before starting to consider trade matters. A spokeswoman from Global Affairs Canada, a federal department overseeing international trade, said only that Lametti also said his remarks do not mean the government has committed to changing the rules.

Chinese Prime Minister Li Keqiang (R) and Canadian Prime Minister Justin Trudeau (L) shake hands after a press conference at the Great Hall of the People in Beijing, China, 31 August 2016. Lusa

She referred further questions to another federal department, Innovation, Science and Economic Development Canada, which did not immediately respond to a request for comment.

‘Canadian government placed heavy restrictions on foreign investment after CNOOC bid for Nexen’ CNOOC’s bid for Nexen had prompted unrest among legislators in former Prime Minister Stephen Harper’s Conservative Party. While it was approved, the Canadian government then placed heavy restrictions on foreign investment, saying takeover bids will in the future be approved only on an “exceptional basis.” Canadian Prime Minister Justin Trudeau made an official visit to China last week, seeking deeper ties with the country. His government announced the signing of 56 deals with China worth more than C$1.2 billion (US$915 million). China, the world’s second-largest economy, has tried to sell Trudeau on a free trade treaty similar to pacts China has sealed with Australia and New Zealand. Reuters

Business Daily Tuesday, September 6 2016 11

Asia Employment

Japan real wage growth hovers at 6-year high While real wages growth was strong in July, activity in Japan’s services sector slipped back into contraction in August. Minami Funakoshi

apanese real wage growth in July remained around six-year highs, data showed yesterday, but the gain was boosted in part by the effect of falling prices. Real wages, which are adjusted for inflation, jumped 2.0 per cent in July from a year earlier, matching the pace in June - the highest since July 2010. Wage growth in June was revised to 2.0 per cent from a preliminary increase of 1.8 per cent, data from the labour ministry showed. Regular pay, which determines base salaries, increased 0.4 per cent. Overtime pay - a barometer

of strength in corporate activity - fell 1.8 per cent in July, deeper than a 0.1 per cent dip the previous month. “Real wages grew 2.0 per cent partly because the core consumer price index fell 0.5 per cent in July,” said a labour ministry official, adding that gains in nominal cash earnings also helped. Japan’s July consumer prices fell by the most in more than three years as more firms delayed price hikes due to weak consumption. Wage earners’ nominal cash earnings continued to rise, up 1.4 per cent in July, the same gain as in the previous month and the highest increase since March.

Special payments rose 4.2 per cent in July, compared with a revised 3.6 per cent gain in June. As special payments are generally small, even a slight change in the amount can cause big percentage changes.

While real wages growth was strong in July, activity in Japan’s services sector slipped back into contraction in August, with services firms cutting staffing for the third month in a row. “I don’t think employment is as weak as what the PMI services sector survey suggests and I don’t think wages are rising as strongly as what the data suggests,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. “It’s probably somewhere in the middle.” Prime Minister Shinzo Abe has struggled to pull the economy out of deflation and boost growth despite his recipe of bold monetary easing, fiscal stimulus and structural reforms. While pay rises and increased household spending are key to the success of the “Abenomics” strategy, wage gains inflated by low prices may not spur private consumption, which remains stubbornly weak.

Key Points Japan July real wage growth at 6-year high Real wages inflated by low prices Japan services sector back in contraction in Aug-PMI Low prices a headache for BOJ, Japan govt The table below shows preliminary data for monthly incomes and numbers of workers in July: The ministry defines “workers” as 1) those who are employed for more than one month at a firm that employs more than five people, or 2) those who are employed on a daily basis or have less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted at a firm that employs more than five people. Reuters

preliminary data for monthly incomes and numbers of workers in July

Japanese salary men

Payments Total cash earnings -Monthly wage -Regular pay -Overtime pay -Special payments

(amount) 373,808 yen 260,658 yen 241,518 yen 19,140 yen 113,150 yen

(yr/yr pct change) +1.4 +0.3 +0.4 -1.8 +4.2

Number of workers Overall -General employees -Part-time employees

(million) 49.029 mln 34.119 mln 14.910 mln

(yr/yr pct change) +2.1 +2.2 +1.5

Environmental review

Philippines to suspend more mines Miners have claimed that the government’s environmental crackdown is a “demolition campaign” against them. Manolo Serapio Jr

The Philippines will this week announce the suspension of more of the country’s mines for violating environmental regulations, the mining minister said yesterday, as the government wrapped up a seven-week review.

Key Points Manila has halted 10 mines so far, 8 of them nickel producers Philippines is the world’s top nickel ore producer The Southeast Asian nation, the world’s top nickel ore supplier, launched a review of the country’s 40 metallic mines on July 8 and has so far suspended 10, eight of them producing nickel ore. The closures and the risk of more mines being shuttered lifted nickel prices to a one-year high last month. Environment and Natural

Resources Secretary Regina Lopez declined to say how many more mines will be suspended but told Reuters that “there will absolutely be more suspensions”. “All the suspensions are absolutely due to environmental reasons, and my particular interest is the wellbeing of the community, that’s my

benchmark,” Lopez said in a text message. Three-month nickel on the London Metal Exchange was trading just above US$10,000 a tonne yesterday. “We have had mining in this country for over a hundred years. And until now we don’t even have one rehabilitated mine site, not one,” Lopez said in the text message. “Just gaping open holes, destroyed rivers, children with brain disease, so very sad,” she said, referring to sick children in the province of Marinduque where a 1996 tailings

leak at Canadian-owned Marcopper Mining Corp’s copper mine contaminated rivers. Lopez’s agency finished its review last month. Her stance on mining is backed by President Rodrigo Duterte who has previously warned miners to strictly follow tighter environmental rules or shut down, saying the nation could survive without a mining industry. Miners have claimed that the government’s environmental crackdown is a “demolition campaign” against them and have sought a meeting with Duterte. The Philippines is the top nickel ore supplier to China, shipping 34 million tonnes in 2015. Reuters

12 Business Daily Tuesday, September 6 2016

Asia In Brief Forex

S. Korea foreign reserves rise to record high South Korea’s foreign exchange reserves in August hit a record high of US$375.46 billion from US$371.38 billion in July, central bank data showed yesterday. The rise was led by an increase in the value of foreign currencies when converted into dollars, according to the Bank of Korea. Securities, a major component of the overall reserves, increased by US$7.97 billion to US$344.80 billion from the previous month, while deposits saw a US$3.91 billion increase to US$21.5 billion. South Korea has the seventh largest stockpile of foreign exchange reserves in the world. Commerce

Australia says wants “very strong” UK trade deal Australian Prime Minister Malcolm Turnbull said yesterday he wants to negotiate a “very strong” free trade agreement with Britain after it leaves the European Union. Turnbull told reporters that UK prime minister May told the Australians she “remains very grateful for the assistance we are providing, both legislative and in terms of other resources”. “And of course, from our point of view, getting in to deal with the British early and making sure we can negotiate a very strong, very open free trade agreement once they are actually out of the European Union.” Steel overcapacity

Japan PM calls for structural reforms Japanese Prime Minister Shinzo Abe told the G20 summit yesterday that the issue of steel overcapacity should be addressed by pressing ahead with structural reforms based on market mechanisms, a senior Japanese government spokesman said. “Regarding overcapacity of steel and others, market distortion by subsidies and export credit is the fundamental problem... I would like to urge structural reforms based on market mechanisms, while maintaining transparency,” Abe was quoted by Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda as saying. Abe also urged that freedom of navigation and over flight be thoroughly observed according to law, Hagiuda said. Shipping giant

Hanjin to take legal action to prevent seizures South Korea’s Hanjin Shipping Co Ltd will take legal action in about 10 countries this week to prevent its ships from being seized, the country’s financial regulator said yesterday. The countries include Canada, Germany and the U.K., the Financial Services Commission said in a statement. Hanjin Shipping aims to expand the scope as soon as possible, with plans to pursue legal action in 43 countries, the regulator added. Shares in Hanjin Shipping slumped by the daily limit of 30 per cent in resumed trade yesterday.

Monetary policy

Australia central bank to sit on rates as economy jogs along Data out yesterday showed company profits handily topped expectations. Wayne Cole

ustralia’s central bank is overwhelmingly expected to keep interest rates on hold at its September policy meeting this week, the last to be chaired by long-standing governor Glenn Stevens before he retires this month. A batch of generally upbeat data out yesterday underlined the case for a steady outcome as vehicle sales and job ads both rebounded in August, while analysts nudged up predictions for economic growth last quarter. Having already pulled the trigger on easings in August and May, the Reserve Bank of Australia (RBA) is likely to pause and watch them percolate through the economy before deciding if yet more stimulus is needed. This is the modus operandi it followed last year when it cut in April and May, and then sat on the side-lines for 12 months. “After cutting twice in the past four months, unless the economy was clearly deteriorating dramatically, the Bank would likely enter assessment mode,” said Ivan Colhoun, head of

Key Points Reuters poll shows all expect RBA to hold at 1.5 pct Company profits, inventories add to Q2 GDP growth New vehicle sales, job ads rebound in August the first quarter of 2017. The recent rate cuts were driven largely by an unexpectedly sharp slowdown in inflation and a need to prevent the local dollar from rising too far in reaction to other policy easings around the globe. Activity in the domestic economy has been resilient overall, if not

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markets economics at NAB, in a view that was widely shared. All 33 economists polled by Reuters expected a steady outcome at Tuesday’s policy meeting, and financial markets are pricing in the smallest of chances for a cut. Most respondents looked for rates to stay on hold to the end of the year, though the median forecast favoured one final easing to 1.25 per cent during

barnstorming. Figures for gross domestic product due out on Wednesday are forecast to show modest growth of around 0.4 per cent in the second quarter, though mainly as payback for a very strong 1.1 per cent jump the previous quarter. Annual growth was still seen ticking up one tenth of a per cent to 3.2 per cent, the fastest pace in almost four years. Data out yesterday showed a build up in inventories added around 0.2 percentage points to GDP, while company profits handily topped expectations. Josh Williamson, an economist at Citi, is more bullish, predicting a quarterly increase of 0.7 per cent and 3.5 per cent for the year. “The RBA will likely be pleasantly surprised by today’s data, particularly the breadth of company profits growth across industries and the acceleration in wages and salaries.” Other figures from ANZ showed job advertisements bounced 1.8 per cent in August, while the motor industry reported new vehicle sales were up 4.6 per cent versus August last year. Notably, sales of light commercial vehicles to business customers surged by over 34 per cent for the year and sales of SUVs to business were up 31 per cent, auguring well for investment spending. Reuters

Business Daily Tuesday, September 6 2016 13

Asia Governor comments

Bank of Japan sees room for more easing For the first time, the central bank governor publicly acknowledged that negative rates could dampen public sentiment. Leika Kihara

a nk o f Ja p a n ( B O J ) Governor Haruhiko Kuroda (pictured) signaled his readiness to ease monetary policy further using existing or new tools, shrugging off growing market concerns that the bank is reaching its limits after an already massive stimulus program. H e a l s o st r ess e d th e B O J’ s comprehensive assessment of its policies later this month won’t lead to a withdrawal of easing.

drastic measures are warranted even though they could entail costs,” he said, adding that the BOJ should “always prepare policy options.” Under its current framework that combines negative rates with hefty buying of government bonds and some riskier assets, the BOJ has gobbled up a third of Japan’s bond market and faced criticism from banks for squeezing already thin profit margins. Sources have told Reuters the BOJ will consider making some modifications to its policy framework

and debate some of the unintended consequences of its ultra-loose policy. For the first time, Kuroda publicly acknowledged that negative rates could dampen public sentiment by hurting banks’ profits and the rate of returns on pension investments. But he said monetary policy has yet to reach its limit, stressing that the BOJ had room to deepen negative rates. “There is no free lunch for any policy. That said, we should not hesitate to go ahead with (additional easing) as long as it is necessary for Japan’s economy as a whole.” The BOJ eased policy in July and pledged to conduct a comprehensive assessment of the effects of its stimulus program at this month’s rate review.

Most analysts expect the BOJ to ease further this month, with economic growth having ground to a halt and inflation sliding further away from its 2 per cent target. “Kuroda’s message is that the BOJ would at least keep the option of deepening negative rates in case the yen spikes suddenly. But that doesn’t mean it would take such a step anytime soon given concerns about the costs,” said Yasunari Ueno, chief market economist at Mizuho Securities. “As for the next step, I expect the BOJ to ease either by cutting rates or boosting quantitative easing, or a combination of both.” Facing stubbornly weak prices, the BOJ has pushed back the timing of its inflation goal several times since it implemented aggressive policy easing measures in 2013 under Kuroda. Reuters

Key Points BOJ has room to deepen rates, boost asset buying-Kuroda Adds new ideas should not be off the table Kuroda admits negative rates may hurt sentiment But Kuroda acknowledged that the BOJ’s negative interest rate policy may impair financial intermediation and hurt public confidence in Japan’s banking system, a sign the central bank is becoming more mindful of the rising cost of its stimulus. “ Ev e n w i t h i n t h e c u r r e n t framework, there is ample room for further monetary easing ... and other new ideas should not be off the table,” Kuroda told a seminar yesterday. “There may be a situation where

Stock Exchanges

Emerging ASEAN ignore high valuations to lead share surge Indonesia, Thailand and Philippines have seen US$7.3 billion of foreign equity inflows this year. Nichola Saminather

The exuberant exchanges of Thailand, Indonesia and the Philippines are Asia’s best-performing stock markets this year, and investors believe this success can continue despite valuations at multi-year highs. Thailand’s SET index has risen 18 per cent in 2016, versus 8.8 per cent for the benchmark MSCI Asia ex Japan. The Jakarta Composite index is up 17.3 per cent and the Philippines’ PSEi has gained 12 per cent. Valuations have surged alongside. MSCI Thailand is trading at a 16-year high of 14.9 times earnings, compared with its 20-year average of 13.4. MSCI Indonesia is trading at 16.8 times earnings, its highest since July 1999. The Philippines is close to its 15-year price-to-earnings peak hit in February 2015. Many investors think further gains are in the offing. “While stock valuations are above historical averages, the earnings outlook for 2017 has become more positive, especially in Indonesia and Thailand,” said Jolene Seetoh, director for Asia ex-Japan equities at United Overseas Bank (UOB) in Singapore. “Improving economic fundamentals and growth in corporate earnings should drive positive market performance over the medium to long term,” she said. Fund flows support that view. Indonesia, Thailand and Philippines have seen US$7.3 billion of foreign equity inflows this year, compared with US$11 billion of outflows over the last three years, Sean Gardiner, equity strategist at Morgan Stanley Asia, wrote in a research note.

All three countries’ second-quarter gross domestic product growth beat forecasts. Thailand’s economy expanded 3.5 per cent from a year earlier, the best in 13 quarters. Indonesia grew 5.2 per cent, and Philippines rose by 7 per cent, the fastest year-on-year growth in three years. Thailand’s military government, which recently won public support in a referendum, is expected to distribute more wealth to the countryside, bolstering consumer spending and economic growth generally, said Mark Mobius, executive chairman of the Templeton Emerging Markets Group.

In the Philippines, “the new government’s strong stance on crime is receiving support from the countryside and particularly among the low-income segment where crime has been a major problem,” Mobius said. “This is going to feed into a general feeling of confidence and consumer spending and investment is picking up.” In Indonesia, President Joko Widodo’s reforms are finally progressing and confidence in his ability to implement reforms to attract investment is growing, Mobius said. A Federal Reserve interest-rate hike this year, however, could lead to some short-term stock volatility, UOB’s Seetoh said.

earnings estimates, Morgan Stanley data show. Indonesia was the laggard, with only 32 per cent of companies beating estimates and 44 per cent falling short.

Improving earnings

Analysts expect Thai earnings per share (EPS) in 2016 to be 10.7 per cent higher than 2015, after a 1.4 per cent decline in 2015, according to data from Nomura. In the Philippines, EPS are expected to be 7.6 per cent higher than in 2015, when they rose 5.8 per cent. Indonesian EPS are forecast to rise 7.2 per cent in 2016 from an 8.2 per cent decline in 2015. Of the three markets, Indonesia’s ability to sustain such rapid share price growth has raised the most doubt, particularly because its recent gains have been fuelled by a tax amnesty bill meant to encourage Indonesians to repatriate money held offshore, and those inflows have been disappointing, John Woods, Credit Suisse Asia Pacific chief investment officer, wrote in a note. “The market rally appears to be riding on irrationally high hopes,” he said. “The economic recovery has... been subdued and could face challenges in the second half as a rising fiscal deficit limits government spending, leading to potential earnings downgrades.” Reuters

Half of all Philippine and Thai companies beat second quarter

“The market rally appears to be riding on irrationally high hopes,” John Woods, Credit Suisse Asia Pacific chief investment officer

14 Business Daily Tuesday, September 6 2016

International In Brief Private poll

Euro-area growth slows to weakest in 19 months The euro-area economy lost momentum in August, with a gauge of private-sector growth falling to the lowest level since early 2015. A Purchasing Managers Index for manufacturing and services slid to 52.9 from 53.2 in July, below an earlier estimate of 53.3, IHS Markit said yesterday. The drop was largely due to a weaker rate of expansion in Germany, the region’s largest economy, the London-based company said in a statement. The report comes just days before the European Central Bank holds its first policy meeting after the summer break. Emissions scandal

EU finds Volkswagen broke consumer laws The European Commission has found that Volkswagen broke consumer laws in 20 European Union countries by cheating on emissions tests, German daily Die Welt reported, citing Commission sources. Among them are the Consumer Sales and Guarantees Directive which prohibits companies from touting exaggerated environmental claims in their sales pitches - and the Unfair Commercial Practises Directive, both of which apply across the EU, the paper said. The European Commission said Industry Commissioner Elzbieta Bienkowska has repeatedly invited Volkswagen to consider compensating consumers voluntarily.

Markit survey

UK services PMI rebounds, economy still set to slow A survey from the EEF manufacturers body showed the weakest outlook for investment since late 2009. David Milliken

ritain’s services industry bounced back strongly last month from a slump triggered by June’s vote to leave the European Union, a closely watched survey showed yesteday, reducing the likelihood of a recession. The survey echoed the upbeat tone of numbers released last week on the manufacturing and construction sectors in August. But overall economic growth still looks set to slow sharply, keeping alive the prospect of another Bank of England (BoE) rate cut before the end of the year. The Markit/CIPS Purchasing Managers’ Index (PMI) for the services sector jumped to 52.9 in August from July’s seven-year low of 47.4, the biggest one-month gain in the survey’s 20-year history and one which beat all forecasts in a Reuters poll. “The survey data is very useful in giving us a feel for how the economy is doing in the short term, but in this case I think it might pay to be a bit more cautious,” RBC economist Sam Hill said, adding the PMI data seemed volatile and he would look for official output data for July later this week. Last week, PMIs for the much smaller manufacturing and

construction sectors showed similar gains to the services PMI, boosting August’s all-sector PMI to a fivemonth high of 53.2. However, given the weakness in July, economic growth in the third quarter overall was likely to be just 0.1 per cent, survey compilers IHS Markit said. “It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery,” IHS Markit economist Chris Williamson said. “But there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.” Overall the figures suggested “an imminent recession will be avoided”, Williamson added. A mild recession was the central forecast in a Reuters poll of economists conducted last month after the BoE cut rates for the first time since 2009 and restarted quantitative easing to help protect the economy from a Brexit shock. The BoE did not forecast a recession and instead predicted growth of 0.1 per cent for the third quarter. “Now that we’ve seen some resilience in the UK economy, many are questioning whether last month’s ... decision was the right one. We believe the Bank of England has taken the correct course of action and expect them to ease further before the

year is out,” UBS Wealth Management economist Dean Turner said. Britain’s new finance minister Philip Hammond will also pay close attention to the figures as he considers how decisively he will break with his predecessor’s austerity plans later this year. Part of August’s gains were linked to sterling’s slump against the dollar and the euro, with more demand for exports and a higher number of Britons holidaying at home. Separate figures from the car industry showed sales up 3.3 per cent in August, driven by sales to company car fleets, after stagnation in July. But the weaker pound also pushed up prices at the fastest rate in over two years while business confidence remained near its lowest in four years, despite some improvement from July. “Many companies remain worried about the outlook and how the economy will fare in the event of Brexit, suggesting that political and economic uncertainty is likely to prevail in coming months, subduing growth,” Williamson said. New Prime Minister Theresa May has not decided when to start formal exit talks with the EU which are likely to lead to years of uncertainty about how much access British firms will retain to European markets. Markit’s services PMI only covers about half of the sector that makes up 80 per cent of Britain’s economy, as it does not include retailers or public services. Reuters

Reform

Saudi state fund plans stake in big industrial zone Saudi Arabia’s top sovereign wealth fund is negotiating to buy a stake in one of the kingdom’s most ambitious real estate projects as Riyadh restructures the economy to cope with low oil prices, a source familiar with the plan said. The Public Investment Fund aims to invest in King Abdullah Economic City (KAEC) on the Red Sea coast near Jeddah, the source said. That would inject capital into the business zone, now being developed by Emaar the Economic City (EEC), a Saudi consortium affiliated with Dubai’s Emaar Properties Group, developer of the Burj Khalifa, the world’s tallest building.

British Prime Minister Theresa May (R) during the G20 Summit in Hangzhou. She has not decided when to start formal exit talks with the EU. Lusa

Logistics security

European raiders target whiskey and salmon as cargo thefts jump

G20

Lew, Schauble discuss importance of supporting growth In a meeting yesterday, U. S. Treasury Secretary Jack Lew and German Finance Minister Wolfgang Schauble discussed the importance of the G20 making robust use of all policy levers -monetary, fiscal and structural - to achieve strong, sustainable and balanced growth, according to a Treasury statement. Lew emphasised the importance of ensuring continued economic stability as Britain and the European Union work through the results of the British referendum to leave the grouping, in the meeting held on the side-lines of the G20 summit in the Chinese city of Hangzhou.

The value of cargo stolen in Europe amounted to 11.6 billion euros in 2013. Richard Weiss

Criminals are stealing a wider range and higher value of goods from trucks and warehouses across Europe than ever before, with foodstuffs, alcohol and clothing now more common targets than cash and electronics. Cargo thefts in Europe, the Middle East and Africa have jumped almost three-fold in five years, with 85 per cent of 2015’s incidents occurring in Britain, Germany, Belgium and the Netherlands, the leading hubs for distribution and cross-border trade, Transport Asset Protection Association data shows. Tighter security at logistics centres has prompted thieves to increasingly target vehicles, slashing through

trailer curtains at truck stops or even locking themselves inside before emerging mid-journey to toss out goods to accomplices, a method dubbed the “Trojan horse” by crime fighters. In recent months felons have stolen salmon worth 100,000 euros (US$112,000) from a trailer in Norway, 80 cases of whiskey from a vehicle in Grays, near London, and truckloads of nuts worth US$10 million in more than 30 incidents, according to Tapa, which was founded to protect shipments of electronic goods. Among warehouse thefts, Champagne worth 2 million euros was taken last year in Basingstoke, England, after thieves tunnelled through a wall.

Clothes and shoes are also now more commonly stolen than laptops and computers. “While they probably have a frown on their faces when they open a trailer with things like nuts or frozen fish, on the black market and the Internet everything can be sold,” said Marcel Saarloos, a director at Tapa, which has its European base in the Netherlands.

‘Champagne worth 2 million euros was taken last year in Basingstoke, England’ The value of cargo stolen in Europe amounted to 11.6 billion euros in 2013, according to a study this year from FreightWatch International, a unit of United Technologies Inc. that provides security services for the logistics industry. Bloomberg News

Business Daily Tuesday, September 6 2016 15

Opinion Business Wires

Bangkok Post The land development tax (in Thailand) would be a one-off levy imposed on owners selling or transferring real estate whose value has been boosted by nearby infrastructure projects, a source at the Finance Ministry says. The tax will not be implemented retroactively, so land along infrastructure projects that are completed before the tax comes into effect will not be subject to it, the source added. Property owners will only have to pay the tax when the real estate is sold or changes hands, the source said.

Securing the UN’s future

A The Japan News Yesterday marked one year since the lifting of an evacuation order for Naraha, Fukushima Prefecture, that was imposed following the accident at Tokyo Electric Power Company Holdings, Inc.’s Fukushima No. 1 nuclear power plant. However, less than 10 percent of the town’s registered population has returned. The number of new housing built in the town this year reached 296 in June, 4½ times more than last year’s total. However, among Naraha’s registered population of 7,300, only 681 people had returned to live there as of Friday, according to the municipality.

Viet Nam News Việt Nam has gained good results in the development of enterprises for the first eight months of this year, according to the Ministry of Planning and Investment (MPI). During the first eight months, there were 73,404 newly registered enterprises, an increase of 19.7 per cent compared with the same period last year, said the MPI’s General Statistics Office (GSO). The total registered capital of those enterprises for production and business reached VNĐ567.9 trillion (US$25.5 billion), 50.9 per cent higher than the same period last year, reported the office.

The Jakarta Post The government hopes the revised 2009 Mining Law permits companies that have made significant progress in smelter development to continue exporting semi finished mineral products, although miners say such a move will instead create another policy flip-flop. Prevailing law prohibited the export of unprocessed mineral ore in 2015 in hopes that it would push development of the downstream sector. However, the ban was pushed back until January 11, 2017, due to complaints from the mining industry that the ban was a hasty move. However, smelter development remains sluggish even with the clock ticking until full implementation four months later and the government seems to be under pressure once more.

s the existing international order becomes more fragmented, strong globalgovernance institutions are crucial for addressing the world’s strategic, economic, and sustainability challenges. And yet rarely have our existing institutions – including, above all, the United Nations – been frailer. The UN is not broken, but it is in trouble, particularly as more countries treat it as a polite diplomatic afterthought and seek solutions to major global problems elsewhere. We’ve seen this on issues ranging from Syria to Iran, North Korea, terrorism, cyber security, asylum-seekers and refugees, migration, Ebola, and the emerging crisis in humanitarian-aid funding. While the UN still has many strengths, it also has clear structural weaknesses. The gap between what it aspires to do and what it actually does is growing. But the world needs a UN that not only deliberates on policy, but also delivers in the field. The UN matters – a lot. It is a deeply embedded component of the post-World War II order. If its relevance declines – if it slowly becomes “just another NGO” – countries will change their fundamental assumptions about how to deal with one another in the future. Unilateralism and the law of the jungle – the hallmark of a now-distant past – would return to international relations. The UN has shown that it is capable of reinventing itself. But now it must do so out of necessity, not convenience. It must urgently re-design its functions, structure, and finance mechanisms to maximize the delivery of measurable results in all areas within its purview, from peace and security to sustainable development, human rights, and humanitarian engagement. In particular, the next UN secretary-general should consider taking several key steps. For starters, he or she should convene a summit-level meeting – a sequel to the 1945 San Francisco Conference, where delegates agreed to the UN’s founding charter – at which member states would reaffirm their commitment to multilateralism as a fundamental principle. The summit should be designed to highlight the critical advantages of cooperation and rebuff the emerging view that multilateralism is simply a burden to bear. Moreover, the new secretary-general should emphasize the UN’s role in building bridges between the great powers, particularly during tense times, and the great powers’ role in enabling the UN to benefit the wider international community. Third, the secretary-general should make use of Article 99 of the UN Charter. This means introducing new initiatives to address globalleadership challenges, even when an existing initiative may fail. This means establishing a comprehensive doctrine of prevention, one that emphasizes robust long-term policy planning so that the organization can prevent, or at least prepare for, future crises, rather than merely reacting to situations as they emerge. Specifically, this agenda should include countering terrorism and violent extremism; enhancing cyber security; limiting the proliferation of lethal autonomous-weapons systems; enforcing international humanitarian law in the context of war (an absolute priority); and developing a comprehensive approach to planetary boundaries and humanity’s ecological footprint, particularly in our oceans. The new leadership must also introduce effective processes and the organizational machinery to implement current major initiatives, including the Sustainable Development Goals. Failure to

“

Kevin Rudd former Prime Minister of Australia, is President of the Asia Society Policy Institute in New York and Chair of the Independent Commission on Multilateralism

achieve the SDGs – which comprise 17 goals and 169 specific targets – would amount to an indictment of the UN’s raison d’être. Avoiding such an outcome will require a new global compact between the UN, global and regional development banks, and private finance sources to fund SDG efforts. The same goes for implementing the 2015 Paris climate agreement, which will require ample investments in energy efficiency and renewable-energy sources to keep global temperatures from rising more than 2º Celsius. The UN’s manifold agendas – peace and security, sustainable development, human rights, and humanitarianism – must be structurally integrated into one strategic continuum, rather than remaining rigid, self-contained institutional silos. Multidisciplinary “Team UN” groups could be deployed in the field to break down departmental barriers and confront appropriate challenges. The groups would operate under a common mandate across all UN agencies, and be led by UN operations directors in each country. A fifth step should be to integrate women fully and equally into all parts of the UN agenda, not just in discrete areas pertaining to “women’s” issues. Failure to do this would further undermine peace, security, development, human rights, and alreadyflagging global economic growth. According to a 2015 McKinsey report, improving worldwide gender equality could add $12 trillion to global GDP by 2025. Likewise, young people should be better included in UN decision-making – not simply as a paternalistic afterthought, but in a way that enables them to help shape their own future. Global youth (those under the age of 25) now represent 42% of the world’s population, and their numbers are growing. In particular, we need new policies to address youth unemployment, given that current approaches are failing. M o r e b r o a d l y , th e U N culture must change – perhaps with a new reward structure – to give priority to operations in the field, rather than to operations at headquarters; to implement reports’ recommendations, rather than just writing more reports; and to measure results on the ground, rather just counting the number of UN conferences held. Finally, the next secretary-general must think practically, understanding that the UN’s capacity to act efficiently, effectively, and flexibly will always run up against budgetary constraints. There is no sense in hoping that the fiscal heavens will one day magically reopen. They won’t. Looking beyond these specific items, two core questions loom in the UN’s future: Given the twenty-first century’s global-governance deficit, can the UN’s deliberative bodies step in and make the big decisions appropriate for the situation? And can the institutional machinery of the UN itself effectively implement policies once they are decided? With sufficient political will, strong leadership, and a clear, goal-driven reform program, the UN can still be a pillar of a stable, just, and sustainable global order. The alternative is benign neglect, institutional decay, and impotence in the face of the great challenges of our time. That would mean an increasingly unstable world for us all. Project Syndicate

The UN has shown that it is capable of reinventing itself. But now it must do so out of necessity, not convenience.

”

16 Business Daily Tuesday, September 6 2016

Closing Official report

Natural disasters cost Vietnam over missing in natural disasters each year. Over the past five years, the figure has reduced US$1 billion “Natural disasters cost Vietnam over US$1 billion each year,” Tran Quang Hoai, deputy head of the General Irrigation Department under Vietnam’s Ministry of Agriculture and Rural Development, said yesterday. Hoai made the remarks at a seminar on climate change held by the United Nations (UN) in Vietnam, reported local Tuoi Tre (Youth) online newspaper. According to the official, some 500 Vietnamese people were killed or went

to around 223 people. Nguyen Van Tue, head of Department of Meteorology, Hydrology and Climate Change under the Ministry of Natural Resources and Environment, said at the seminar that more and more natural disasters have been reported in Vietnam in the past few years. According to the UN, over 70 percent of Vietnamese population is forecast to suffer from impacts of natural disasters. Xinhua

Corporate value

Tencent now China’s top company in private economy triumph State-backed funds and enterprises are championing some of the biggest private investment rounds in companies such as Ant Financial and Didi Chuxing. Lulu Yilun Chen

encent Holdings Ltd. has surpassed China Mobile Ltd. to become the country’s most valuable corporation, underscoring the growing importance of a vibrant private economy over lumbering state-owned enterprise. Tencent rose 4.2 per cent to HK$210.20 in Hong Kong yesterday, reaching a market value of HK$1.99 trillion (US$256.6 billion), edging past China Mobile’s HK$1.97 trillion and putting the tech company in the ranks of the world’s 10 largest public companies, including Apple Inc. and Alphabet Inc. Tencent’s shares have jumped four-fold in as many years by building a lead in mobile gaming and online advertising, surpassing a roughly 20 per cent advance in the Hang Seng Index. The company’s rise exemplifies the new realities of the world’s second largest economy, where smokestack industries prepare to lay off workers while younger companies such as e-commerce giant Alibaba Group Holding Ltd. make inroads into everything from finance to media. Private businesses, marginalized for decades by a state sector that enjoyed easy funding from government-owned banks, now play a pivotal role in hiring and innovation, and the best performers are spearheading China’s shift toward a consumption-led economy. “China’s economic restructuring

is happening faster than many have expected,” said Shen Jianguang, chief Asia economist for Mizuho Securities Asia Ltd. Services accounted for more than half of output last year for the first time, while consumption made up more than 70 per cent of the expansion in the first half of this year. The rise of companies such as Tencent shows China can unlock still more of its growth potential by giving more market access to private companies and rolling back state monopolies, he said. Since 2006, the title of China’s most valuable company has been held mainly by government-controlled industrial heavyweights such as

Real estate

China Mobile, Industrial & Commercial Bank of China Ltd. or PetroChina Ltd., according to data compiled by Bloomberg. Tencent arch-foe Alibaba also briefly held the title just after its 2014 debut. Chinese internet sector stocks have been buoyed by the strategic importance the country now places on the sector. State-backed funds and enterprises are championing some of the biggest private investment rounds in companies such as Ant Financial and Didi Chuxing. President Xi Jinping, recognizing the sector’s importance to both political and economic control, has designated its top entrepreneurs key targets for party outreach. It wasn’t always like this. For years, China’s private companies operated in the long shadow of the gargantuan state sector, deprived of capital and support. Early entrepreneurs founded nationwide brands from Wahaha mineral water to Haier appliances, paving the way for today’s captains

“China’s economic restructuring is happening faster than many have expected” Shen Jianguang, , chief Asia economist for Mizuho Securities Asia The company has designs to build a Disney-like entertainment empire. It’s splurging on content from anime to Hollywood movies to generate ad sales, which rose 60 per cent in the June quarter. Popular titles including Cross Fire and Naruto Mobile helped Tencent more than double smartphone gaming revenue to 9.6 billion yuan in the period. “When it comes to intellectual property, you have to serve the chicken many ways,” Tencent’s Ma, China’s third-richest man, said of his aspirations during a rare press conference earlier this year. “It should be viewed as cross-platform entertainment and be developed from multiple dimensions.” Bloomberg News

Opening markets

New Zealand tightens mortgage Beijing eases quota deposit requirements restrictions for foreign institutional investors The Reserve Bank of New Zealand, as part of an effort to cool the hot housing market, raised deposit requirements yesterday for home buyers taking out a mortgage, unless the loan was being taken for a newly built house. As of October 1, new rules mean residential property investors will generally need a 40 per cent deposit for a mortgage loan while owneroccupiers will need a 20 per cent deposit. The new rules also no longer distinguish between the nation’s largest city of Auckland and the rest of New Zealand. The central bank also broadened an exemption on newly built homes from the higher deposit requirement to avoid dampening supply. Previously borrowers would have needed high deposits for new homes once the build had progressed beyond “ground work” or laying the initial foundation. As of Oct 1 first homes that have been built within the previous six months and were bought from a developer are exempt from the new rules. New Zealand house prices have soared on the back of strong immigration, low mortgage interest rates and restrained housing supply. Reuters

of industry like Alibaba’s Jack Ma and Tencent’s own Ma Huateng. Hungry to expand, they sought out overseas money: Alibaba gained investment from SoftBank Group Corp. and Yahoo! Inc.; Tencent won the backing of Naspers Ltd., a South African media company; Baidu Inc.’s early investors included IDG Capital Partners, according to Crunchbase. Along with Alibaba, Tencent has now advanced to the vanguard of the private sector. Its strategy of driving revenue growth via advertising and gaming through messaging applications WeChat and QQ have brought more than 1 billion users into the fold. The company has beaten revenue and earnings estimates in all but one of the past six quarters.

China’s regulators yesterday issued revised rules on foreign institutional investments in the country’s domestic securities using the yuan currency, another step forward in opening up its markets and encouraging more fund inflows. Renminbi Qualified Foreign Institutional Investors (RQFII) will be given quotas no greater than a certain proportion of their asset sizes after registration with the State Administration of Foreign Exchange (SAFE), the regulator said on its website. If the desired investment quota surpasses the base quota, investors will need to gain approval from SAFE. Foreign sovereign funds, central banks and monetary authorities are not restricted by asset size and can obtain quotas based on their investment needs. The rules were jointly issued with the People’s Bank of China (PBOC). Individual RQFIIs needed to previously seek approval from SAFE for any quota to buy stocks and bonds in China and the amount of quota was given on a case by case basis. Reuters

Brokerage sale

Citic Securities said to have mulled selling CLSA Citic Securities Ltd., which bought CLSA Ltd. three years ago for about US$1.2 billion, considered selling the Hong Kong-based brokerage earlier this year, people with knowledge of the matter said. Citic Securities isn’t currently pursuing a sale, in part because executives didn’t think they would get an attractive price, according to the people. The state-controlled firm didn’t want to sell CLSA at a loss, the people said, asking not to be identified because the information is private. The acquisition of CLSA, known for its independent and sometimes irreverent research, ushered in an era of overseas expansion for Chinese securities firms. Yet analysts said at the time that integrating a company with a markedly different culture could prove a challenge for Beijing-based Citic Securities. “The rumour has no basis,” a Hong Kong-based representative for Citic Securities International Co., which owns 100 per cent of CLSA, said in an e-mailed response to questions. “Our business integration and cooperation with CLSA have achieved and will continue to demonstrate good momentum.” Bloomberg News