Macau Business Daily September 14, 2016

The Parisian Macao opens its doors Gaming Page 6

Wednesday, September 14 2016 Year V Nr. 1130 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Retail

Pension

Dispute over communal area in mall sparks controversy Page 2

Private pension assets surge 17 pct in June Page 6

www.macaubusinessdaily.com

Property

Meranti typhoon

Chinese investors fuel real estate sector performance Page 9

Taiwan battens down for supertyphoon Page 10

Inching Towards Anti-Monopoly Law Business

Local and Mainland China competition and anti-monopoly law experts side with the gov’t on the Uber decision. Whilst urging implementation of a general anti-monopoly law in the MSAR and its enforcement. The gov’t says it’s working on preliminary preparation of such a law but requires more feedback from various industries. Page 3

Mission Improbable

Creating a ‘Smart City’

Politics Opening this year was the fanfare. But no mention of IPIM’s new office in Portugal was made during the Chief Executive’s recent trip to the country. The Institute’s business support centre and conduit for Portuguese-speaking countries has most likely been pushed back another year. Page 2

Identifying and overcoming the challenges of turning the MSAR into a ‘Smart City’.

Using information and communications technology. It will require a long look at gov’t systems.

Described by Joe So, Chief Technology Officer of Huawei Enterprise Business Group, as ‘isolated islands’.

Turnaround tables

Gaming Analysts say the city’s gaming revenues may register a second positive y-o-y growth figure. Driven by the new projects in town, better than expected VIP performance, and two weekends so far this month. Some analysts, however, say September revenue is historically lower than that of August. Page 7

Economy responding to stimulus

Technology systems Page 4 & 5

HK Hang Seng Index September 13, 2016

23,215.76 -74.84 (-0.32%) Worst Performers

Want Want China Holdings

+2.10%

Tencent Holdings Ltd

+0.48%

Hang Lung Properties Ltd

-2.21%

Hong Kong Exchanges and

-1.49%

AAC Technologies Holdings

+1.77%

Wharf Holdings Ltd/The

+0.27%

Sands China Ltd

-2.03%

Bank of East Asia Ltd/The

-1.38%

China Mobile Ltd

+1.32%

China Unicom Hong Kong

+0.22%

Cathay Pacific Airways Ltd

-1.94%

PetroChina Co Ltd

-1.37%

China Mengniu Dairy Co Ltd

+0.54%

Kunlun Energy Co Ltd

+0.17%

China Resources Land Ltd

-1.81%

Hong Kong & China Gas Co

-1.24%

CNOOC Ltd

+0.53%

China Resources Power

+0.14%

Li & Fung Ltd

-1.71%

Henderson Land Develop-

-1.20%

28° 32° 27° 32° 27° 32° 26° 31° 26° 31° Today

Source: Bloomberg

Best Performers

THU

Fri

I SSN 2226-8294

Sat

Sun

Source: AccuWeather

China’s official data The Chinese economy stabilised last month. Courtesy of pro-growth measures propping up investment and industrial output. While new economic engines continued to gather steam. A slew of data released yesterday by the National Bureau of Statistics brought plenty of good news. Page 8

2 Business Daily Wednesday, September 14 2016

Macau Politics

IPIM office in Lisbon in 2017 only?

IPIM had announced a new office in Lisbon for this year. Chui Sai On said nothing on the subject. The Chief Executive is already on the way home.

João Paulo Meneses, in Portugal newsdesk@macaubusinessdaily.com

T

he Chief Executive did not seize on any of the three primary moments of his official trip to Lisbon to announce the timing of the opening of the new IPIM [Macao Trade and Investment Promotion Institute] office in Portugal.

The opening is a promise made by the Institute last year, when Glória Batalha Ung - executive member of IPIM - said it would become operational in the second or third quarter of 2016.

The opening of the first office of IPIM outside China would have been an excellent moment to be included

in the Chief Executive’s agenda or, at least, to announce whether it would still happen this year.

Nothing happened, which most likely means a delay in the project.

Two weeks ago Business Daily contacted IPIM to confirm the information but has yet to receive any confirmation.

In fact, the executive member of the Macau Trade and Investment Promotion Institute announced at the same time that a separate new office in Sao Paulo, Brazil, would also be opening this year.

The idea is that in the initial phase the two new offices would support local businesses - mainly small and medium-sized enterprises - to do

business in the Portuguese-speaking countries.

As far as we can tell, IPIM has not given up on the office in Portugal, it’s just failed to make the installation, including that of staff, on time: 2017 will now be the new forecast.

Numerous benefits

The office in Lisbon will be a kind of symbol of the good relations between Macau and Portugal and a sign to show how Macau bets on the idea of a platform between China and Portuguese-speaking countries.

These messages were transmitted several times in the Chief Executive’s meetings, last Monday. To the Portuguese President, Chief Executive Chui Sai On said there will be more room for co-operation with Portugal from now on.

Forum

As an example, the leader of the MSAR Government indicated that

the success of Forum Macau will bring more opportunities for co-operation between Macau and Portugal.

According to the Government Information Bureau (GCS) report, the Portuguese President also highlighted the 5th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries as a good example of the friendship between China, Portugal and Macau.

Before the meeting with Marcelo Rebelo Sousa, Chui Sai On received from the Portuguese Prime Minister confirmation of his trip to Macau, to assist in the 5th Ministerial Conference, saying that this meeting will bring numerous benefits to strengthen and fortify Portugal-China and Portugal-Macau relations.

Antonio Costa, the chief of the Portuguese Government, is quoted as having said that adequate diversification of the economy of Macau not only opens one more door to Portugal, in the area of co-operation, but will also promote the exchange with China and Macau in the fields of economics and technological innovation.

In the meeting with Mr. Costa, the GCS said Chui Sai On “welcomed the success of Portugal”, and stressed the commitment of Macau in the globalisation of science and technology. The Chief Executive said he believed in the increased co-operation between the two territories as reinforcement of the diversified development of Macau, adding that he plans to make efforts to promote exchanges between Chinese and Portuguese students, and will analyse a possible increase in scholarships.

The trip to Lisbon ended yesterday night with a dinner with young people from Macau studying in Portugal “in order to better understand their needs while living and studying overseas”.

Chui Sai On and his small delegation will board the airplane today in Lisbon and tomorrow they will be in Macau, after a trip of six days (four taken up by travel).

Conflict

No common ground in dispute Legislator Fong Chi Keong has urged the property management committee of Flower City Complex to remove all unauthorised installations from the ground floor mall area.

Cecilia U cecilia.u@macaubusinessdaily.com

regarding an argument between the two parties on September 9.

Legislator Fong Chi Keong has urged the property management committee of the Flower City Complex (Edfs. Lei Hong, Lei Tou, Lei Wai and Lei Ip) to remove all unauthorised installations from the ground floor mall area of the complex, according to his statement posted in local newspaper Macao Daily yesterday.

Mr. Fong is the Managing Director of Sociedade de Investimento Taipa (SIT) which is the developer of the complex. The developer and the property management company have been in dispute over the ownership of the mall area located in front of the Park ‘n Shop Superstore.

‘Unauthorised installation of advertisements, stalls and video surveillance in the mall area of the complex should be removed within five days after the statement is released,’ he wrote, noting his company may take legal action against the management committee if installations are not removed.

The statement responds to the recent press conference held last Sunday by the property management committee of Flower City Complex

Disputes

Last Friday, the developer attempted to remove the stalls that were placed in the mall area of the complex and the management committee refused to co-operate.

According to the president of the

management committee, Lao Kam Cho, he was pushed to the floor by Fong and later sent to hospital due to the conflict.

However, Fong perceives that Lao is misrepresenting the truth of what occurred and further emphasised their right to the ownership of the ground floor mall.

‘The first three floors of the complex are used for business operations and the entire mall area on the ground floor belongs to SIT. The mall area is now currently rented by Park ‘n Shop Superstore,’ Fong stated Fong in the announcement, affirming that the company will not permit any sort of unauthorised occupation of the privately-owned area.

Several conflicts have occurred in the past three years between the

developer and the property management committee with the two arguing over the ownership of the ground floor mall in front of the Hong Kong supermarket chain store.

The developer previously approached a separate store located on the mall area of the building in April in an attempt to regain ownership but the management committee refused to return ownership to the developer. The president of the management committee claimed that the ground floor mall is legally a communal area and can be used to increase the income of the complex, saying the income earned will be utilised for the expense of routine maintenance of the building, according to the report by local newspaper Exmoo News.

Business Daily Wednesday, September 14 2016 3

Macau

Business General competition law requested by law experts

Letter of the law Local and Mainland China competition and anti-monopoly law experts side with the government on the Uber decision whilst urging implementation of the general anti-monopoly law in the MSAR and its enforcement.

Nelson Moura nelson.moura@macaubusinessdaily.com

E

xperts on competition and anti-monopoly law are pushing for more general legislation locally and an increase in oversight of entities to ensure fair market competition. The experts, from Mainland China and Macau, also side with the local government on its decision regarding the Uber app.

“I think the Uber case is in the government’s hands to decide. Of course, consumers will always want more options but the government will have to take into consideration the possible unfair competition to taxi drivers and taxi companies,” Wang Xiaoye, a researcher for the Chinese Academy of Social Sciences (CASS), told Business Daily on the sidelines of an event held yesterday by the Macau Economic Services (DSE) on the competition and anti-monopoly law.

The event brought to Macau two experts on the Anti-Monopoly Law of China in order to explain the effects and changes the legislation has undergone since its enforcement in 2008, including problems and prospects for its improvement and the results of its implementation.

“The stable supply of necessary goods to residents, the supervision of price fluctuation tendencies, the guarantee of the interests and rights of consumers and the promotion of fair competition in the market are issues established in the MSAR Government programme,” the DSE director stated during the opening of the event.

Competition challenge

During the event’s Q&A session attendees asked the experts about the possible effects on the market of the announcement in August by Chinese car-hailing company Didi Chuxing that it would acquire Uber China and operate it as a separate entity.

Li Honglei, Co-ordinator of the Constitutional Right and Administrative Law at the CASS, stated that the merger could occupy 80 per cent of the market, creating possible

competition issues.

“I think in future we need to regulate any similar activities, but should we refuse the company merger or create the necessary conditions for its merger?” professor Li queried.

According to Professor Wang, it is normal for car-ride companies to explore these services online and due to difficulties in hailing taxis consumers end up “having no choice”.

In separate statements to Business Daily University of Macau Competition Law expert Alexandr Svetlicinii said that in Uber’s situation in Macau the “rules state that you cannot provide this service without authorisation” opining that authorities are correct in not allowing the service to operate and that any issue of unfair competition with the legal taxi operations by these services “ends up being a matter of opinion” since local law is clear on the issue.

Searching for competition law

Currently, the MSAR Commercial Code includes some special provisions focusing on preventing unfair competition in the market; however, there isn’t a general department to oversee competition law such as that in Mainland China, an issue that was mentioned by the experts.

“From what I know, Macau has a commerce law and in it there are articles made to avoid unfair competition, but maybe it doesn’t have the powers to enforce and fine [individuals committing] any infractions,” Professor Wang stated.

The Chinese law expert stated that “if there’s a market there is competition” and therefore rules are needed to avoid unfair competition.

Competition law umbrella

According to Professor Svetlicinii the territory has general rules about competition in the commercial code but if consumers want to enforce them they have to go to court and initiate the case by themselves.

“The Consumer Council, the organisation that is supposed to protect the interests of consumers, doesn’t have any authority. They can do consultation

and advise but can’t help consumers in this end. We have the telecom bureau and they have some authority on monitoring competition in the sector, and we have financial and monetary authorities, too. However, we need general competition laws and specific government organisations enforcing these rules in different sectors,“ Svetlicinii told Business Daily.

“We need general competition laws and specific government organisations enforcing these rules in different sectors.”

Alexandr Svetlicinii, Competition Law expert at the University of Macau He also mentioned that the Consumer Council held a public consultation in 2015, questioning people and companies’ opinion about whether they wanted competition rules. However, after its conclusion, there was only an internal consultation on how to apply any possible legislation, with no decision being made on how to enforce it.

For Svetlicinii, the territory could follow Hong Kong’s example, with the neighbouring territory having enforced a Competition Ordinance last year in order to control

anti-competitive practices in all sectors of its economy.

In response to Business Daily enquiries the DSE commented that the government “is working on the preliminary preparation of the legislation of the competition law,” and since it “involves many different industries, it is necessary […] to listen to the opinions of the different stakeholders”.

State-owned vs. privately-owned

“In China there’re a lot of contradictory situations. We want a fair market but we have a lot of state companies, with water, electricity and telecommunications all being run by state companies. So how to oversee them?” Wang queried.

The Chinese competition law expert considers the Chinese market to be a special case but that the country’s market situation is improving, with sectors that used to be solely monopolised by state-owned companies like electricity - starting to see more penetration by private companies.

For Professor Wang, anti-monopoly laws prevent illegal acts and assure the just performance of the market, being very important for companies and consumers as they keep prices down and quality up.

“State companies also have more advantages getting bank loans so we’re creating legislation so there’s more equal treatment in different sectors. In the end, its proper application depends a lot upon the condition and efficiency of the authorities’ execution,” Wang concluded.

4 Business Daily Wednesday, September 14 2016

Macau Technology Leveraging technology to serve the people of Macau

Huawei: Making the city smarter consider putting more resources into developing its ICT (information and communications technology) infrastructure to begin the structuring process to reach its goal. ICT is the core of running a ‘Smart City’. Resources should be put in the development of a Data Centre and the cultivation of local talent to become ICT specialists.

I would say it is not always a good solution to solely invite foreign experts in when developing a ‘Smart City’, and developing a talent pool is the best way forward.

What do you think would be the biggest challenges for Macau to develop into a ‘Smart City’?

In general, many cities struggle on the budget for developing a ‘Smart City’. Given the large financial surpluses the government [has accumulated] money is not a hindrance for Macau.

One of the biggest difficulties for moving forward is to truly know what citizens’ needs are. But the most notable challenge is the complexity of the government system.

Although Macau is a small city, the systems of all government departments of the city are, very possibly, isolated islands; and so the biggest difficulty would be connecting all these isolated islands and making them into one big island. And it’s always hard to consolidate old and new information in the government systems when undergoing changes, and thus certain information might need to be forgone.

With Macau Government’s five-year plan to establish itself as a Smart City - and Huawei Enterprise Business Group leading the way in helping cities develop their information and communications technology (ICT) to do so - Business Daily sat down with the group’s Chief Technology Officer of Global Industry Solutions, Joe So, to ask about the MSAR’s development in the ICT area and the steps to becoming an interconnected World Centre of Tourism and Leisure.

Cecilia U cecilia.u@macaubusinessdaily.com

E

nvision driving to Rua do Campo to meet a friend for lunch and receiving realtime information on your phone to find a parking spot without any effort; waste collection companies knowing how full containers are and how to recycle goods accordingly so as to cut costs and the use of resources.

Imagine that in times of emergency a response team could be dispatched immediately after receiving an alert and remote monitoring could provide instant updates on the situation – these are just some of the possibilities of a ‘Smart City’ - achieved through the use of information and communications technology (ICT).

With the vision of developing

Global Huawei

Huawei is a global information and communications technology (ICT) solutions provider. Founded in 1987, it is a private company fully owned by its employees

‘Smart’ urban centres gaining momentum in recent years, spurred by rapid advances in technology, the Macau SAR Government has vowed to join the trend, as mentioned in last year’s Policy Address by the Chief Executive Fernando Chui Sai On. A core part of this is to modernise communication and information and interconnect them, providing the flow of information or data. However, this requires a framework. The first step, taken in the latest meeting of the Science Affairs Committee earlier this month, presided over by the Chief Executive, was to establish a task force to study the implementation of this ‘Smart City’.

Outside help

One way to achieve this implementation is through the use of outside expertise such as that of Huawei, which has helped build more

that utilises an end-to-end ICT solutions portfolio. The group’s focus is to provide a competitive advantage to telecom and enterprise networks as well as devices and cloud computing.

than 100 Smart Cities in 40 countries in the Middle East, Africa and Asia Pacific - and has also been overseeing business operations in Hong Kong, Macau and Taiwan since April 2000, gaining valuable knowledge about the interworking of the city.

The company has been working with Companhia de Telecomunicações de Macau S.A.R.L. (CTM) on the provision of 4G+ LTE network in Macau for almost a year now, and through contact and opinion exchange with both the public and the government Huawei is positive about the way forward for the Smart City development of Macau, as its representative, Joe So, Chief Technology Officer in Global Industry Solutions, tells Business Daily.

The Macau Government has been talking about building the SAR into a Smart City. As a service provider that has experience in helping over 100 cities, what would be your vision for Macau?

The development of a ‘Smart City’ for Macau, in my opinion, is positive.

Overall, in terms of the development itself, the city does not lag behind far but the MSAR Government should

“Although Macau is a small city, many government departments are acting like isolated islands. By using information and communications technology to connect them and utilise data, better planning can be achieved to make the city more efficient and liveable.”

Joe So, Chief Technology Officer, Huawei Enterprise Business Group

What kind of solutions/service/ help can Huawei conduct in cooperation with local government or business sectors to achieve this?

Huawei can provide the latest tech n ology in cludin g cloudcomputing services, Big Data, the Internet, flow network and ICT infrastructure to help solve the biggest issues in the city such as traffic.

Following many years of research, in a conference held in Suzhou this July, Huawei announced the ‘Smart City’ general solution structure – ‘One cloud, two networks and three platforms’. We aim to create the ecosphere where more companies are getting together. Also, Huawei has over 170,000 members of staff worldwide, providing fast responses to any immediate demands. We have also got very comprehensive training programmes and set up collaborative laboratories.

On the other hand, Huawei can

Business Daily Wednesday, September 14 2016 5

Macau provide a data platform for the government. Analytical data would then be able to be provided to business sectors - from the government, in order to plan more suitable market sales activities.

How can Macau’s hospitality and gaming industries be integrated with technology?

In Macau, hotels and casinos should be utilising cloud-computing services provided by CTM. As for Huawei, we have been in corporation with many telecommunication providers around the world to provide public cloud services, and in most cases Huawei provides technologies for providers to introduce the services.

Many casinos use cloud and I would opine that it would be a disadvantage if one doesn’t use the cloud system for their operation in the future.

Since cloud computing plays an important role in developing the ‘Smart City’ model, how secure is cloud technology?

There have been a number of scandals in which celebrities or models have had photos leaked, but many of these cases involved them having their passwords exposed rather than being due to any errors of the cloud computing system. In fact, cloud demand users provide multiple authentications and verifications for access. In terms of overall safety Huawei has established layers of security - from the level of Internet safety to the document itself. So, stolen information would be voided

Joe So

Joe So is Chief Technology Officer of Global Industry Solutions for Huawei Enterprise Business Group.

Since joining the company in 2005 as part of a Senior Management

if ever documents were taken.

Nevertheless, users shouldn’t depend entirely upon the provider for the safety and security side of data storage. We’re only one part of the whole scene; real overall security requires a lot of different sectors in the city to support, including the users themselves, the government and the entrepreneurs.

How do you perceive residents’ acceptance of this concept?

Team tasked with globalising the technical Service division, So has held a range of positions including Head of Solution Sales for Finance, Transportation, Utilities, and Government.

Many people have encountered this technology without even noticing it - like the Pokemon Go players since the game needs a cloud to operate.

One cloud, two networks, three platforms

‘One cloud’ is a term for the cloud data centre, where data is stored within one virtual cloud, providing more consolidated, open and secure data storage.

‘Two networks’ involve urban communication networks and the Internet of Things (IoT) with the provision of wired and wireless broadband network data services as well as platforms for IoT. ‘Three platforms’ include the platform for opening up ICT

The cloud computing system has been slowly integrating into people’s lives so I don’t really know how to encourage people to use the system.

capability, the platform for supporting Big Data services and the platform for enabling business application. Through the utilisation of ICT, application developers can be more efficient in creating solutions for the development of a ‘Smart City’.

The provision of Big Data services supports business application with other partners - enabling the automation of resource access, software development and operation management.

6 Business Daily Wednesday, September 14 2016

Macau Opinion

José I. Duarte

Unsettled plots The topic of land usage has acquired a prominent place in the press presentation of Macau’s five-year plan. It is a subject bound to be close to the top of the list of concern for most residents. One way or the other, it impacts everybody. The recent controversy surrounding the recovery of undeveloped land plots give it additional visibility. The Commission of Audit reproaches concerning the high rental costs of public services’ premises, and the absence of a plan for construction of the buildings the administration apparently needs, has added a further dimension to the issue.

Clarity of purpose and policy on land matters and, more generally, urban development, are much needed. The comments made during the press presentation did not elucidate what the government’s exact plans or their scheduling are. We were told that the newly reclaimed land plots would be used in the first place for public housing and government warehouses, following which the installation of public services could be considered. These statements answer less than they seem to, less than was expected, and raise more questions than they answer.

First, the debate about hosting the public services does not depend only upon the construction of new buildings in the newly reclaimed areas.

Are all the currently rented spaces, which prompted such strong comments from the Audit Commission, truly needed or fully utilised? Does the administration own or have access to other buildings that are not being used, and could be occupied or adapted for public services? We don’t know.

Second, public housing is only one aspect to consider when addressing the residential problems of Macau. However, even within this limited scope things such as the analytical underpinnings of the policy, or the justification for the specific figures put forward, are not obvious. What are the extension and urgency of the anticipated social needs?

What are the suitable housing profiles and their construction timeframe? No hard scrutiny of social and demographic trends seems to underpin the successive promises on additional public housing.

Third, land reclamation is an expensive business and the location of the newly reclaimed land plots is often privileged.

Should new plots include public warehouses, as the statements to the press seem to imply? Isn’t it already an inordinate misallocation of public funds to be using the inevitably expensive plots located next to Kun Ian statue, in NAPE, for parking, several years after their completition?

José I. Duarte is an economist and permanent contributor to this newspaper.

Over 77 pct of the total manpower in the gaming sector contributed to pension schemes Pension

Private pension assets surge 16.7 pct in June The major contributor to the private pension plans is the gaming sector.

Kam Leong kamleong@macaubusinessdaily.com

A

total of MOP15.7 billionworth (US$1.96 billion) of pension fund assets were under the management of private firms as at the end of June, which represents a year-on-year growth of 16.7 per cent, according to the official data

of the Monetary Authority of Macau (AMCM).

The city had a total of 58 registered pension funds as at the end of the second quarter, up one year-onyear. Of the total, 54 were open funds whilst the other four were closed funds. Meanwhile, the number of registered pension plans increased by 4.5 per cent year-on-year to 991.

These private pension fund assets

Retail

Le Saunda sales fall 10.2 pct in fiscal Q2 Footwear manufacturer and retailer Le Saunda Holdings Ltd. said its total retail sales dropped by 10.2 per cent year-on-year during its second fiscal quarter ended August 31, according to its filing with the Hong Kong Stock Exchange.

During the three months the retailer also registered a decrease of 9.9 per cent in same store sales, an increased loss of 3.6 percentage points when compared to its results for the same quarter of last year, which registered a 6.3 per cent dip in sales.

The group did not disclose its related financial results in the filing.

Meanwhile, its e-commerce business recorded a total sales fall of 7.2 per cent when compared to the same period last year.

As at the end of August, the company had a total of 836 retail outlets in Hong Kong, Macau and Mainland China, down 47 year-on-year. The group’s two stores in the Special Administrative Region are located on Rua S. Domingos on the Peninsula and in Sands Cotai Central.

For its last fiscal year, ended February 28, the shoe retailer’s net profit fell 17.4 per cent year-on-year to HK$237.1 million (US$29.6 million) from HK$287.2 million, despite total revenue jumping 3.4 per cent yearon-year to HK$2.1 billion compared to HK$2.04 billion one year ago. K.L.

were primarily managed by nine companies - led by AIA International Ltd. The global insurer was managing a total of MOP5.5 billion-worth of pension fund assets as at end-June, increasing 18.2 per cent year-onyear. The amount of assets under its management accounted for 35.06 per cent of the total.

Meanwhile, Luen Fung Hang Life Limited was the second biggest player in the market. The company’s managed amount of pension fund assets increased by 14.7 per cent year-on-year to nearly MOP4 billion, accounting for 25.3 per cent of the total.

The other three major pension fund asset managers were ICBC (Macau) Pension Fund Management Co. Ltd., Macau Life Insurance Company and China Life Insurance (Overseas) Co. Ltd., which respectively oversaw assets valued at MOP1.97 billion, MOP1.73 billion and MOP1.19 billion.

Gaming contributor

In fact, the number of participants in pension schemes also posted an increase of 3.9 per cent to 138,352 as at the end of the quarter, accounting for 41 per cent of the city’s total workforce of around 337,368, according to AMCM. Analysed by economic sector, 64,460 of pension scheme contributors worked in the gaming industry, which accounted for 77.1 per cent of the total manpower of 83,600 in the sector. Meanwhile, some 23,451 scheme members were employed by hotels, restaurants and similar, occupying 42.6 per cent of the segment’s total of 55,100.

In terms of coverage, 97.3 per cent of the manpower in the fields of electricity, gas and water supply contributed to private pension funds as at the end of the quarter, amounting to 876, whilst 67 per cent of those engaged in financial intermediation, 6,366, had purchased private pension schemes.

Nevertheless, only some 1.7 per cent of the city’s 47,100 construction workers had bought their own private pension fund. In addition, some 468 of 27,700 public servants in the city were contributing to private pension schemes as at the end of June.

Gaming

The Parisian Macao opens Sands China Ltd.’s new Cotai property The Parisian Macao officially opened its doors to the public yesterday at 8:18 pm. The US$2.9 billion (MOP23.1 billion) project, operated by the Macau subsidiary of Las Vegas Sands Corp. (LVS), will add 3,000 hotel rooms and suites, shops, a themed water park and a half-scale replica of the Eiffel Tower to the company’s current Cotai Strip offerings. According to Sands China President Wilfred Wong, 410 gaming tables will be available upon opening at LVS’s latest Macau integrated resort, with 49 allocated to VIP gaming, Business Daily recently reported. N.M.

Business Daily Wednesday, September 14 2016 7

Macau Gaming Bernstein predicts more positive growth in casino revenue this month

Light at the end of the tunnel Telsey Group, however, forecasts a year-on-year one per cent dip in gaming revenues in September.

Kam Leong kamleong@macaubusinessdaily.com

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he city’s gaming revenues may register a second positive year-on-year growth figure following a slump of 26 consecutive months, driven by the new projects in town as well as better than expected VIP performance, says brokerage Sanford C. Bernstein.

According to the firm’s research note on Monday, the local gaming industry raked in some MOP7.3 billion (US$912 million) in casino revenues for the first eleven days of the month, implying an average daily rate (ADR) of around MOP663 million – up 3 per cent year-on-year. In addition, the ADR for the eleven days is higher than the MOP608 million of August.

‘Assuming an ADR of MOP590 million to MOP620 million for the remainder of this month, September gross gaming revenue would be MOP18.5 billion to MOP19.1 billion.

This would represent a year-on-year increase of 8 per cent to 11 per cent, or [a decrease of] 2 per cent to [a growth of] 1 per cent month-on-month,’ analysts led by Vitaly Umansky wrote.

‘The stronger than expected monthto-date result seems to be driven by slightly higher VIP hold rate and volume. Gross gaming revenue has also benefited from having two weekends in the reporting period through September 11,’ they stated.

Last month, casino revenue rose 1.1 per cent year-on-year to MOP18.8

billion, reversing the downward trend evident since May 2014. However, Secretary for Economy and Finance Lionel Leong Vai Tac has said that the recovery for the local gaming industry would depend upon September’s revenue – which historically is lower than that of August.

But the Bernstein analysts estimate that the casino revenue for this month will perform better than that in the same month of the past few years.

‘Due to a ramp-up of new projects and better than expected VIP, September gross gaming revenue will be

better than previous years compared to an historical average month-onmonth decrease in September of 6 per cent,’ they wrote, indicating the month-on-month range in September over the previous five years ranges from a decrease of 11 per cent to 1 per cent growth.

The analysts also expect gaming revenue to post a year-on-year growth of three per cent for the second half of the year, with that from the mass market up 15 per cent yearon-year and that in VIP down 9 per cent year-on-year.

Opposition

Nevertheless, analysts at Telsey Group held the opposite position,

anticipating gaming revenue in the city to register a year-on-year decrease of 1 per cent. ‘This assumes an electronic game estimate for September, which puts monthly gross gaming revenue at HK$16.5 billion,’ its analysts, led by David Katz, wrote.

‘The results are ahead of previous year-to-date trends (-9.1 per cent) but below August (+1.1 per cent) trends,’ they added, indicating the numbers could be affected by seasonality and ‘some softness’ due to the opening of The Parisian Macao.

‘However, gross gaming revenue results could be positively influenced by the remainder of September due to The Parisian’s premium mass target base,’ the group noted.

8 Business Daily Wednesday, September 14 2016

Greater China Official data

Factory output, retail sales beat expectations Investment by state firms surged 21.4 per cent in the first eight months of the year.

Kevin Yao

C

hina’s industrial output grew the fastest in five months in August as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.

China’s steel industry, in particular, has perked up in recent months as capacity cuts and production curbs have boosted prices and profits, while a government infrastructure spree and housing boom have spurred demand for building materials from steel to cement.

Improvements in August, while only slight, suggest China’s third-quarter economic growth is holding up better than expected just a few months ago and likely remains within the government’s 2016 target range of 6.5-7 per cent, despite an alarming drop in private investment which is leaving the economy more dependant on government spending.

“In general, today’s activity data are in line with the (upbeat) trade data and inflation figures released last week,” Commerzbank economist Zhou Hao wrote in a note.

“It is a good time for China to deliver on structural reform, especially on the SOE side, to restore confidence in China’s economy,” he said, referring

to a long-promised overhaul of the country’s often bloated and inefficient state-owned enterprises.

Industrial output rose 6.3 per cent in August from a year earlier, the National Bureau of Statistics said yesterday, surprising analysts who

had expected it to pick up only slightly to 6.1 per cent.

China’s biggest listed steelmaker, Baoshan Iron & Steel (Baosteel) said earlier yesterday it has raised its prices for October.

Retail sales also handily beat expectations, with growth accelerating to 10.6 per cent from 10.2 per cent the previous month. Analysts had forecast an increase of 10.3 per cent.

Car sales in particular have been strong in China this year, hitting a 3-1/2 year high in August as buyers rushed to get new wheels before a tax cut expires at year-end.

Fixed asset investment was unchanged at 8.1 per cent over the first eight months of the year, marginally better than expected.

Still, the rate of growth in investment remained the slowest since December 1999, and details showed a growing imbalance between public and private spending that raised questions about China’s longer-term growth prospects.

Highlighting Beijing’s increasing reliance on government spending to drive the economy, investment by state firms

Real estate

Property investment growth quickens New construction starts in August were up 3.3 per cent from a year ago Yawen Chen and Kevin Yao

Investment growth in China’s real estate quickened slightly over January-August, suggesting investors still have confidence in a booming market even as more local governments tightened restrictions on home purchases in a bid to check rapid price rises.

Property investment in January-August rose 5.4 per cent from a year earlier, the National Bureau of Statistics (NBS) figures showed yesterday, quickening from an increase of 5.3 per cent in January-July, while property sales by floor area grew 25.5 per cent, slowing

from 26.4 per cent.

In August alone, property investment was up 6.2 per cent from a year ago, according to Reuters calculations, compared with 1.4 per cent in July.

“A property investment rebound means it will continue to contribute positively to gross domestic product this year, albeit probably not as significantly as seen in the first half,” said Ma Xiaoping, economist at HSBC. Real estate investment directly affects about 40 other business sectors in China and is considered to be a crucial driver for the economy.

A robust recovery in home prices

and sales, thanks to a flurry of government stimulus measures, gave a stronger-than-expected boost to the world’s second largest economy in the first half of the year.

But rapid price gains in some of the biggest cities fanned fears of a bubble and prompted some local governments to tighten home and land purchase requirements, with cities such as Xiamen, Suzhou, Naning and Wuhan being the latest to implement such measures.

“Rises in property prices have initially been contained,” NBS spokesperson Sheng Laiyun said at a news conference.

A housing glut continued to take its toll in smaller centres such as rustbelt city Shenyang, which implemented looser buying conditions in an effort to ramp up demand.

“Micro policies at the local level are expected to be implemented to help grow sales in these cities, but a broad policy by the central government to encourage that is unlikely,” said HSBC’s Ma. China’s central bank has become increasingly concerned at the severity of the country’s debt problem, with the high concentration of capital in property identified as a major problem.

“We should take a lot of measures to curb excessive bubbles in the real estate sector, curb the flow of excessive financial resources into the real estate sector,” Ma Jun, chief economist at China’s central bank, said in a recent interview.

The debt ratio of property developers is now nearly 80 per cent and climbing, according to a commentary published in the official Xinhua news agency’s Economic Information Daily.

The commentary warned of “irrational increases in leverage” as more home buyers rushed to invest in the overheated real estate market through borrowing. Household loans, which are mainly mortgages, made up over 90 per cent of new loans in July, according to official data.

The commentary said volatility in house prices may cause either a deterioration in financial assets or soak up more capital to prop up the leverage that was threatening to undermine economic policy.

New construction starts in August were up 3.3 per cent from a year ago, measured by floor area, Reuters calculations showed, slowing from 8.1 per cent in July.

Growth in inventory floor area last month was 6.9 per cent higher than a year earlier, compared to 7.7 per cent in the previous month. Reuters

Business Daily Wednesday, September 14 2016 9

Greater China Monetary stance

surged 21.4 per cent in the first eight months of the year, though the pace did ease slightly from 21.8 per cent in January-July.

China’s fiscal spending rose 12.7 per cent in January-August from the same period last year, and was up 10.3 per cent in August alone.

Cooling private investment a worry

Private investment grew just 2.1 per cent over the first eight months of the year, the same pace as in January-July and remaining at record lows.

However, on a monthly basis, private firms boosted spending 2.3 per cent, reversing a two-month slide.

Key Points Activity data suggests economy is sustaining momentum August industrial output, retail sales beat expectations Government spending, housing boom largely driving growth Private investment remains weak China says downward pressure on economy still large Chinese policymakers have focused on improving conditions for the private sector this year, including calling for better access to credit and fair market access. But private firms still complain of unfair competition with state firms and restricted market access, especially in key parts of the services sector.

Trade data last week showed stronger domestic demand as imports rose for the first time in nearly two years, while exports fell less than expected.

While economic activity in China has cooled this year, it appears less at risk of a hard landing than feared in 2015.

The broader economy remains relatively stable, albeit sluggish, despite continued weakness in the massive export sector and overcapacity plaguing many industries.

However, analysts say China may face a renewed slowdown as previous policy support fades and the government holds off on further easing over concerns of rising debt and housing bubbles.

“We think that momentum behind the economy will fade in 2017, when the property market will be on a downward cycle and the automotive sector likely to be facing overcapacity issues,” Tom Rafferty, Asia Economist at the Economist Intelligence Unit, said in a note. Reuters

In Brief

Domestic money market liquidity tightens After tapering in mid-2016 from record late 2015 levels, capital outflows have strengthened in recent weeks, analysts say.

Nathaniel Taplin

China’s money rates rose sharply for the second straight session yesterday as the central bank kept campaigning against short-term leverage and the prospect of higher U.S. rates raised the spectre of renewed capital outflows.

The volume weighted average of the 14-day and one-month bond repurchase agreement (repo) rates were up 19 basis points and nine basis points respectively.

Yesterday’s moves came after the central bank conducted 28-day reverse repos in the interbank market for the first time since February, and lowered its 28-day guidance rate.

The seven-day average rate stood at 2.38 per cent, up six basis points on the day, while the overnight rate was 2.15 per cent, up two basis points.

Analysts say the People’s Bank of China (PBOC) is in the tricky position of trying to combat rising financial risks by encouraging longer tenor money market lending without impacting credit to the real economy - all while renewed signs of capital outflows make cash scarce.

China’s overnight repo benchmark notched its highest average close since January on Monday, after reports of heavy foreign exchange sales by state banks raised trader suspicions they were acting to support the yuan.

Selling dollars and buying yuan supports the value of the currency but also tends to tighten yuan liquidity.

Added pressure

After tapering in mid-2016 from record late 2015 levels, capital outflows have strengthened in recent weeks, analysts say, adding pressure on the central bank to keep the currency from falling too fast.

Capital left China in August at the fastest pace since January, Singaporebased Capital Economics says.

Julian Evans-Pritchard, its China economist, said the August drop in reserves “points to continued intervention” by the PBOC and suggests outflows remain sizable, so the yuan “will stay under pressure in the coming months”.

Also pressuring money markets, traders say, is the PBOC’s campaign to push interbank lending into longer, higher interest rate tenors to combat growing leverage in the bond market.

In late August, Reuters reported that the central bank asked banks to spread the tenor of money market lending to reduce concentration in the cheaper overnight segment.

With the PBOC determined to squeeze the short-term leverage out of bonds, the Federal Reserve likely to raise rates and cash demand strong before China’s National Day holiday begins October 1, the stars have aligned for tighter money market liquidity.

“The 28-day reverse repo volume isn’t small, but right now cash truly is a little tight, and this kind of longer term cash is necessary,” a Shanghai bank trader said. Reuters

China will streamline legal proceedings by sorting between complex and simple legal cases, according to a circular issued by the Supreme People’s Court (SPC) yesterday. The SPC called for elaborate processes on complicated cases, and emphasized simplified procedures for simple or self-evident cases for optimal allocation of judicial resources. The circular listed several measures to improve efficiency, including simplified paperwork, pre-trial conferences for out-of -court settlement and online servicing of legal instruments.

The circular also advocated smart case handling, for example, holding hearings via remote video.

Aircraft industry

Boeing lifts long-term outlook for Mainland demand Chinese airlines are likely to purchase planes worth US$1.025 trillion over 20 years as they expand fleets to cater to robust growth in domestic and overseas tourism, Boeing Co said in a more bullish forecast of Chinese aviation demand. Saying China as a market continued to exceed expectations, Boeing estimated 6,810 aircraft purchases in the period to 2035, up 7.6 per cent from its previous prediction of demand until 2034. Boeing has stayed bullish on China even as other U.S. companies have expressed concern over the country’s slower economic growth.

CEFC acquires stake in Chad oil blocks

Postal Savings Bank IPO mostly covered by cornerstone investors Large investments by cornerstone investors hurt liquidity for IPOs once the shares start trading, as the stock is locked up for a minimum of six months.

S

Authorities to streamline legal proceedings

Energy business

Going public

tate-owned Postal Savings Bank of China (PSBC) yesterday launched an initial public offering in Hong Kong worth up to US$8.1 billion, with the vast majority of the deal covered by cornerstone investors.

The group of six cornerstone investors will buy as much as US$5.86 billion worth of stock on offer, or about 72 per cent of the IPO, underscoring tepid demand for Hong Kong offerings from retail investors and fund managers in the city.

That would put it near the record 77 per cent cornerstone tranche for the US$810 million listing of China Development Bank Financial Leasing Co Ltd in July.

Large investments by cornerstone investors hurt liquidity for IPOs once the shares start trading, as the stock is locked up for a minimum of six months.

The cornerstone money can also pressure the stock as the expiration of the

Judicial resources

lock-up period nears.

PSBC, China’s largest bank by number of branches, is offering 12.1 billion new shares in an indicative range of HK$4.68 to HK$5.18 each, according to a term sheet seen by Reuters.

The two largest cornerstone investors, CSIC Investment One Limited and

Shanghai International Port Group, agreed to invest US$2.2 billion and $2.1 billion respectively. Victory Global Group, a unit of aviation conglomerate HNA Group, will buy US$1 billion of shares, while other cornerstone investors will buy smaller stakes.

PSBC did not immediately reply to a Reuters request for comment on the IPO terms.

The IPO is slated to be priced on September 20, with its debut on the Hong Kong stock exchange set for September 28. Reuters

The IPO is slated to be priced on September 20, with its debut on the Hong Kong Stock Exchange set for September 28.

Privately run CEFC China Energy has agreed to acquire a 35 per cent stake in oil blocks in Chad from Taiwan’s stateowned Chinese Petroleum Corp for about US$110 million, according to CEFC company executives. The deal, although small, marks CEFC’s first completed transaction in upstream oil exploration and production as it aims to build a vertically integrated energy business that also includes oil refining and fuel retailing, two company officials told Reuters.

Production from the three oil blocks in Chad is expected to start by end-2017 or early 2018.

Financing

China Railway Corp to issue bonds China’s state planner has approved plans by national operator China Railway Corporation (CRC) to issue 300 billion yuan (US$44.91 billion) of bonds, as the country looks to ramp up infrastructure investment to support a slowing economy. Its fundraising comes as Chinese local governments have embarked on a massive new round of off-balance sheet debt financing with the blessings of Beijing, prompting China sceptics to warn of a potential debt bust. Two-thirds of the funds raised by CRC will be used for railway construction purposes while the remaining will be used towards debt restructuring.

10 Business Daily Wednesday, September 14 2016

Greater China Logistics disruption

Taiwan’s commodities companies brace for another super typhoon Meranti typhoon is forecast to hit China’s east coast later today Florence Tan and Melanie Burton

T

aiwan’s commodities industry was preparing yesterday for heavy wind and flooding as Typhoon Meranti hurtled towards the south of the island, threatening to disrupt grain and oil shipments from its major port and a lead refinery.

‘In 2009, Typhoon Morakot cut a swathe of destruction through southern Taiwan, killing about 700 people and causing up to US$3 billion-worth of damage.’

As the storm strengthened in the Pacific, Taiwan’s national weather forecasters predicted it would make landfall in the Hengchun Peninsula today.

Preparing for their second super typhoon in as many months, stateowned Taiwanese oil refiner CPC Corp and Formosa Petrochemical Corp closed their ports in Kaohsiung in the south and Mailiao in the west as a precaution, officials at both companies said.

Their refineries on the island were operating as normal yesterday. Formosa has a 540,000 barrels per day (bpd) refinery while CPC has an existing capacity to produce 500,000 bpd.

CPC’s 220,000 bpd refinery closest to the storm’s path in Kaohsiung was mothballed in November last year.

Kaohsiung at the southern tip of Taiwan is the island’s second most populous city and home to its largest port and the world’s 13th largest

container terminal.

It handled 110 million tonnes of cargo last year, almost half of Taiwan’s total, according to the port operator’s annual report.

The island is a major importer of corn, wheat and soymeal for animal feed, as well as iron ore and crude oil. Rice and pig farming are among Taiwan’s main agricultural sectors.

Metals industry players were not expecting major disruption, despite the port being a major storage site for metals in the region. LME warehouses there hold more than 42,000 tonnes of nickel, 25,000 tonnes of copper and 28,000 tonnes of aluminium.

But a warehouser with operations there said he was not expecting any disruption to activities.

Thye Ming Industrial Co was ready to adjust shifts at its lead refinery in Kaohsiung if the typhoon hit, said a source familiar with the matter. It sells some 120,000 tonnes of lead and lead products per year.

Heavy rainfall is more devastating for crops and industrial plants than strong winds, the source said.

Typhoon Meranti comes just over two months after the deadly typhoon Nepartak cut power, grounded flights and forced thousands to flee their homes across central and southern areas.

In 2009, Typhoon Morakot cut a swathe of destruction through southern Taiwan, killing about 700 people and causing up to US$3 billion of damage. Reuters

Business Daily Wednesday, September 14 2016 11

Asia Environmental protection

Philippine miners question review process The mining industry has powerful opponents in the Phillipines, led by the influential Catholic Church Manolo Serapio Jr

P

hilippine miners facing more mine suspensions under an environmental review backed by President Rodrigo Duterte have stepped up their criticism of the process, questioning the inclusion of anti-mining activists in the review teams.

The world’s top nickel ore supplier has halted operations of 10 mines, eight of them nickel, for environmental infractions, and the government has said more suspensions will be announced this week.

The crackdown is aimed at enforcing stricter environmental protection measures, with Duterte warning the nation could survive without a mining industry. But miners have labelled the review a “demolition campaign”.

The Chamber of Mines of the Philippines, which groups 21 of the country’s 40 metallic miners, said it had “trouble appreciating” the inclusion in mine audit teams of groups such as Alyansa Tigil Mina (ATM), which translates to Alliance To Stop Mining.

“Why are they part of the audit team when they can hardly be expected to be impartial?” said Chamber spokesman Ronald Recidoro.

“Our members are fairly confident that they have complied with the technical and legal requirements.”

ATM groups non-governmental organisations, church groups and

academic institutions working to protect Filipino communities and natural resources threatened by large-scale mining operations, according to its website.

The mining industry has powerful opponents in the Phillipines, led by the influential Catholic Church, following past environment disasters and the displacement of local communities.

‘Unacceptable’

Environment and Natural Resources Secretary Regina Lopez, who has said open-pit mining is madness, said she had committed to involving civic groups in the audit teams along with government experts.

“Miners need to upgrade their operations so that people don’t

suffer,” Lopez told Reuters, adding that issues such as silt build-up on rivers, fishponds and rice fields around mining sites were “unacceptable.”

“The problem is that mining here has not followed rules.”

Key Points Anti-mining groups represented in government audit teams Civic groups needed as communities’ welfare paramount - minister Govt to announce more mining suspensions this week ATM’s partners in local communities took part in the audit across the country, said Jonal Javier, advocacy officer for the organisation. They told the audit team what to look into and

submitted the public’s complaints against mines, he said.

The suspension of nickel mines in the Philippines and the risk of more closures lifted global nickel prices last month to a one-year high above US$11,000 a tonne, although the metal has since eased to just above US$10,000 a tonne.

Nickel is used to make stainless steel.

The Chamber’s Recidoro said four of its members had been affected and the operations of all four remained suspended despite having addressed environmental violations.

“How long is this suspension?

Because an indefinite suspension is tantamount to a cancellation,” he said.

The Philippines’ top gold mine, run

by Australia’s OceanaGold Corp’s, expects a positive outcome from the audit, chief executive Mick Wilkes told Reuters in an email. Reuters

Trade

Indonesian President opens Priok port expansion in Jakarta He has taken a special interest in reducing port dwell times.

Hidayat Setiaji

Indonesian President Joko Widodo inaugurated an expansion of the country’s main seaport in Jakarta yesterday, a facility upgrade that will cut the time container ships must spend waiting to load or unload.

“We cannot delay the development of modern ports any longer. This supports trade flows and investment in this country,” President Widodo said at the opening of New Priok Container Terminal (NPCT) 1 in Kalibaru, the first of five phases of an expansion of Priok port that are to be completed in 2019.

Tanjung Priok port in North Jakarta, which handles the bulk of international shipments into Southeast Asia’s biggest economy, has been plagued with bottlenecks and long handling times due to years of under investment.

Logistics costs in Indonesia are up to 2.5 times higher than in neighbouring countries, Widodo said.

“If we’re slow we’ll be left behind,” he said.

Widodo has taken a special interest in reducing port dwell times, part of his government’s broad efforts to improve the nation’s infrastructure to drive economic growth.

Dwell time at Priok is now between

3.2 and 3.7 days, down from up to a week in 2014, Widodo said, adding that he has asked for the wait to be reduced to less than three days.

Bringing Priok in line with global standards will depend on how quickly it can move cargo away from the docks, and whether it can alleviate congestion problems that slow the movement of ships and cargo, increasing costs for exporters and importers, shipping experts said.

“The expansion of Tanjung Priok may encourage shipping lines to launch more direct ship calls to Jakarta, but I do not see it as a major

threat to Singapore’s transhipment status,” said Jonathan Beard, head of transportation and logistics in Asia for design and consultancy firm Arcadis.

Key Points Upgrade cuts dwell times to less than 4 days Expansion raises Priok port capacity by more than 20 pct The new terminal adds 1.5 million twenty-foot equivalent units (TEU) to Priok’s existing 7 million TEU annual capacity, said Elvyn Masassya, CEO of Pelabuhan Indonesia (Pelindo) II, Indonesia’s state-owned port company that operates NPCT 1 in a consortium that includes Singapore’s PSA International and Tokyo-listed Mitsui.

With 8 cranes that can move 30 containers per hour and berths that can dock ships with a draft of as much as 16 metres, the new terminal will allow Priok to accommodate vessels carrying 10,000 TEUs from Europe and East Asia for the first time, Masassya said.

According to senior maritime consultant Jakob Sorensen, this depth would be adequate to meet Priok’s “current and near future requirements for container vessels.”

Reuters

12 Business Daily Wednesday, September 14 2016

Asia Business sentiment

Australian business confidence rises The major service and construction industries stayed strong in the month

A

ustralian business conditions softened for a second month in August though confidence picked up following a cut in interest rates early in the month, a survey showed yesterday.

National Australia Bank’s monthly survey of more than 500 firms showed its index of business conditions dipped 2 points to +7 in August, though that was still above its long-run average.

Its index of business confidence rose 2 points to +6 in August, after dipping one point in July. Sales and profits edged back in the month but the survey’s employment index held above average at +4.

“The Survey still gives us confidence in the near-term outlook for the economy, even though things may have cooled a bit,” said NAB’s chief economist Alan Oster.

“It is particularly encouraging to see that firms demand for labour remains quite solid, which will hopefully have some positive flow on effects to households.”

The major service and construction industries stayed strong in the month, while wholesale and retail were weaker.

Services and home building have been underpinned by easy monetary

policy, with the Reserve Bank of Australia (RBA) cutting rates to a record low of 1.5 per cent early last month.

The survey’s measure of forward orders held steady at an above average +2, having been in positive territory for nine of the past 10 months.

“This outcome suggests good

near-term prospects for activity,” said Oster.

Oster was more cautious on the longer-term outlook, predicting h o m e b u i l d i n g a n d r es o u rc e exports would eventually cool as the benefits of a past decline in the local currency faded.

“All of these factors are expected to come to a head around 2018, and the economy will likely require additional policy support from the RBA,” said Oster, who expects two more rate cuts by mid-next year. Reuters

Derivatives

Banks add leverage to spice up ‘masala’ bonds for expatriate Indian Any sudden plunge in the rupee, or a sudden fall in value of the masala bonds from which they are derived, could wipe out returns.

Suvashree Choudhury and Krishna Merchant

Bankers are finding new ways to sell India’s “masala” bonds by structuring this rupee-denominated debt issued abroad into derivatives, and then sweetening the deal with leveraged returns of 12 to 13 per cent after fees and hedging.

Unveiled in 2015, masala bonds are not simply a way to borrow overseas, they are also an attempt to make the tightly-controlled rupee more widely available in global markets, similar to the way in which China has moved to sell more yuan debt to overseas investors.

So far four Indian issuers have sold a combined 78 billion rupees (US$1.18 billion) of the debt. Non-resident Indians (NRIs) living in financial centres such as Hong Kong and Singapore are ideal target investors as they are

comfortable with rupee debt.

Some banks, including Credit Suisse and Nomura, are now adding their own ingredient to the mix after turning about 12 billion rupees worth of the debt from HDFC Ltd and Adani Transmission Ltd into “credit-linked notes” derivatives, according to several sources involved in the sales.

Under this arrangement a bank provides funding of 80 per cent and the investor puts in only 20 per cent to buy the derivative. After paying for the dollar funding rate of about 1.5 percent, a bank fee of 50 basis points, and short-term rupee hedging, the eventual landed return for the investor comes to 12-13 percent, thanks to the heavy leverage ratio.

The return is much higher than the nominal 8 per cent or so offered by unleveraged masala bonds and the highest for similarly-rated debt, bankers said. These derivatives were

‘New baby’

Non-resident Indians are an ideal target for the masala derivatives, given the high proportion of market-savvy NRI finance professionals living in centres such as Singapore or Hong Kong.

“The immediate interest is from offshore investors who see the good yields available, and the opportunity to participate in the India story through a company that demonstrates strong governance,” said Anand Natarajan, head of strategy and business execution at Fullerton India Credit Company Ltd which is owned by Temasek, Singapore’s sovereign wealth fund.

The timing works in bankers’ favour as well, given the NRIs are keen for an investment that can replace the high-yielding dollar deposits they were offered by Indian lenders under a central bank programme initiated in 2013 to raise dollars when India suffered a currency crisis.

Many institutional investors have shied away from masala bonds because of concerns the premiums on offer are not high enough to compensate for the lack of secondary trading. That has made it important for bankers to tap new potential buyers.

Among companies lined up to sell masala debt are housing finance company Dewan Housing Finance Corp, Shriram Transport Finance Co Ltd, and Fullerton India.

Bankers estimate about a third of these bonds could potentially be turned into derivatives, helping to further boost the young product.

“The masala bond is a new baby, and I am sure that with time it will grow into a vibrant and strong adult one day,” said Jingdong Hua, vice-president and treasurer at IFC. Reuters

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then sold in tranches to non-resident Indians.

“The extent of leverage provided to the investor by the private bank varies and can go up to as high as 5 to 1,” said Shantanu Sahai, executive director and co-head of debt capital markets at Nomura.

“This serves to significantly improve the returns for these investors.

As a result the majority of private banks use this route to place such products with their clients.”

Using the leverage to attract high net-worth individuals hungry for yield in a world of zero and negative interest rates could help promote this key initiative from Prime Minister Narendra Modi, at a time when institutional investors are wary because of the lack of secondary trading in the debt.

The key incentive for an issuer is the entire currency risk is borne by the investor apart from credit and market risks. Any sudden plunge in the rupee, or a sudden fall in value of the masala bonds from which they are derived, could wipe out returns.

Still, bankers say the risks are

probably contained, given the rupee has traded in a relatively narrow range over the past few years due to India’s rapid economic growth and the central bank’s efforts to contain inflation.

Bankers also say borrowers with higher ratings will be able to issue masala bonds, making the debt relatively safer.

Business Daily Wednesday, September 14 2016 13

Asia In Brief Capex

Japanese manufacturing mood Big Japanese manufacturers turned optimistic in the third quarter and companies revised up their capital expenditure plans in a sign the economy is gaining momentum. The business survey index (BSI) of sentiment at large manufacturers stood at plus 2.9 in July-September, compared with minus 11.1 in April-June, according to the joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office.

The BSI measures the percentage of firms that expect the business environment to improve from the previous quarter minus the percentage that expect it to worsen.

Receivership

Hanjin Shipping secures US$36 mln

Local confectionary

Global chocolatiers dwarfed in Indonesia The chocolate confectionary market is likely to jump 42 per cent to 19.5 trillion rupiah (US$1.49 billion) in the next three years.

Glenys Kirana and Eveline Danubrata

Multinational chocolatiers have spent almost 20 years trying to crack Indonesia’s booming confectionary market, only to build a share that pales in comparison with other emerging economies as longestablished local producers fend off foreign incursions.

Nestle SA, Cadbury’s owner Mondelez International Inc, Mars Inc and Ferrero SpA together hold just one-tenth of a US$1 billion market led by home-grown darlings Delfi Ltd and PT Mayora Indah Tbk. In neighbouring Malaysia, the foursome commands almost 60 per cent.

Key Points Big four global chocolatiers hold 10 pct market share Local makers set benchmark taste in 1950s Hurdles include complex distribution, fragmented retail Market likely to grow 42 pct to $1.5 bln in three years -Mintel “The market leader is very strong because it was the first to set the taste for chocolate in Indonesia,” Nestle Indonesia confectionary business manager Rully Gumilar told Reuters.

“It’s like David fighting Goliath,” he said. “It’s very big and has huge power, while we are small even though we are a multinational.”

Such struggle against a local incumbent is not uncommon among global consumer firms in the world’s fourth most-populous country - a tropical archipelago with complex distribution channels, run-down infrastructure and a retail sector dominated by family stores that lack air conditioning to keep goods cool.

But the rewards are potentially huge considering consumption accounts for more than half of a steadily expanding economy, while an increasingly affluent middle class promises ample room for growth.

The chocolate confectionary market is likely to jump 42 per cent to 19.5 trillion rupiah (US$1.49 billion) in the next three years, data from researcher Mintel showed.

That compared with 11.7 per cent in the United States where, as in other developed markets, growth has slowed over the past five years.

Local cocoa

Nestle entered Indonesia in 1971 and in the 1990s embarked on a major push in chocolate products, expanding to three brands. Mars and Mondelez began selling chocolate in the early 2000s and, with Ferrero, the four’s market share reached 10 per cent last year - 1.4 per centage point more than a year prior.

But Delfi set the benchmark taste in the 1950s with its SilverQueen chocolate bars and Ceres chocolate sprinkles, which still feature in the firm’s broad line-up. Last year, its market share by sales volume

reached 52.7 per cent from 48.2 per cent.

Such local offerings often cost less to make and so are priced lower.

For instance, they tend to contain a greater proportion of cocoa powder, which can be two to three times cheaper than cocoa butter, said Ahmad Zaky Amiruddin, secretary general of the Indonesian Cocoa Industry Association.

Mayora said buying cocoa beans and making chocolate locally also keep prices competitive. In contrast, production at foreign rivals may be part of a more complex, multi-market strategy. Nestle, for instance, imports from its regional halal factory in Malaysia, which sources ingredients from countries including the Ivory Coast.

Indonesians are “very price sensitive”, preferring to buy the cheapest of similar products, Amiruddin said.

Delfi’s Take-it chocolate fingers, for example, retail at a Jakarta minimarket for 5,500 rupiah (US$0.42), around 8 per cent less than Nestle’s KitKat. Delfi did not respond to requests for comment.

To fight back, Mondelez is strengthening its marketing and focusing on quality, its Indonesia chocolate brand manager Dini Anggraeni told Reuters. Mars declined to comment; Ferrero did not respond to requests for comment.

Nestle’s Gumilar said his firm is trying to find a recipe that balances its global quality standards with local preferences - “the holy grail of the chocolate category” - as well as stepping up product launches and marketing.

“We still want to win,” he said. “But it’ll be step by step.” Reuters

The chairman of Hanjin Group transferred 40 billion won (US$36 million) to Hanjin Shipping yesterday to help unload cargo stranded on the troubled shipper’s vessels, a spokesman said, but regulators warned securing further funds could take “considerable time”.

Hanjin Group, the parent of Hanjin Shipping, pledged last week to raise 100 billion won to help rescue cargo in the wake of the collapse of the world’s seventh-biggest container shipper, including the 40 billion won from Chairman Cho Yang-ho.

Around US$14 billion of cargo has been tied up globally as ports, tugboat operators and cargo handling firms worried about being paid refused to work for Hanjin.

M&A

Renesas pushes into autos with Intersil buy Renesas Electronics Corp yesterday said it has agreed to buy U.S. chipmaker Intersil Corp for US$3.2 billion, an all-cash deal that bolsters the Japanese group’s efforts to refocus the company around automotive chips. Slowing growth in computers and smartphones - the traditional mainstays of the chip industry - has fuelled a wave of mergers globally as chipmakers turn to areas such as auto electronics for sales growth.

Renesas, created from the semiconductor units of several Japanese companies, has amassed a significant war chest since a state fund and key clients bailed it out.

Financing

Evergreen says plans share issue Indonesian textile materials trader PT Evergreen Invesco Tbk plans to raise around US$2.3 billion in an equity rights issue to pay off debt and settle obligations, in what would be the country’s biggest stock offering in eight years. Evergreen said in an announcement to the Jakarta stock exchange it plans to raise about 30 trillion rupiah (US$2.28 billion) by issuing up to 150 billion new shares at an as yet undetermined price.

A Reuters calculation shows that would mean the shares will be priced at around 200 rupiah each, a 7 per cent premium to the stock’s 187 rupiah closing price on Friday.

14 Business Daily Wednesday, September 14 2016

International In Brief Angola

Debt service responsible for almost a third of all spending Angola’s revised state budget, which is going to be put to a vote on Friday and that increases public borrowing because of the oil crisis, now estimates that servicing the debt is going to cost €32.4 million a day. The government decided to alter the budget because of the drop in oil revenues from its exports in the first half of the year and makes public debt service cost 2.213 billion kwanzas (€11.8 billion) this year, equivalent to 31.8 per cent of all spending. At the current exchange rate, the debt service is costing €32.4 million a day.

Confidence retreat

Flat German investor sentiment disappoints German investor sentiment remained unchanged in September, the ZEW economic institute said yesterday, disappointing analysts who had expected a bigger bounce as the Brexit shock wears off. The institute’s closely-watched headline investor confidence index stood at 0.5 points, exactly the same value it reached in August after recovering slightly from a massive post-Brexit slump in July.

Analysts surveyed by Factset had predicted an increase to 2.5 points. “It is worrying that sentiment has not recovered as worries about the effects of Brexit have eased,” analyst Jennifer McKeown of Capital Economics said.

IEA

Global oil glut set to last at least until mid-2017 The Energy organisation had earlier seen the oil oversupply disappearing in the latter part of 2016.

Kate Millar

A

global oil glut that has hurt producers but means cheaper pump prices for consumers looks set to go on at least six months longer than previously thought, the International Energy Agency said yesterday.

The IEA said demand growth was slowing while supply was rising, meaning the glut was now due to linger “at least through the first half of next year”.

The timing of the world oil market’s return to balance is “the big question”, the IEA said in its monthly report, adding that current prices above US$45 - would suggest supply falling and strong demand growth.

“However, the opposite now seems to be happening,” it said. “Demand growth is slowing and supply is rising.”

The trend may fuel speculation of a possible production freeze - aimed at supporting prices - being agreed between OPEC and non-OPEC member Russia at a meeting in Algeria later this month.

China and India, which had been key drivers recently of demand

growth, are “wobbling”, it said, while a slowdown in the US and economic concerns in developing countries have also contributed to the surprise development.

Global oil demand is now expected to grow by 1.3 million barrels per day (mb/d) in 2016, to 96.1 mb/d, from its original forecast of 1.4 mb/d growth.

The IEA also trimmed its demand growth forecast for 2017 by 200,000 barrels per day, to 97.3 mb/d.

Saudi Arabia jumps US

On the supply side, output fell in August, led by producers outside of the Organization of the Petroleum Exporting Countries (OPEC) cartel.

After gains in June and July, global oil supplies dropped by 300,000 barrels per day last month, to 96.9 mb/d.

Non-OPEC supply is expected to rebound next year, after declining this year.

But, said the IEA, OPEC production edged up last month to a near-record supply level, which “just about offset steep non-OPEC declines”.

Producers Saudi Arabia, Kuwait, the United Arab Emirates and Iraq are all at, or near all-time highs, the report said.

“Saudi Arabia’s vigorous production

Corruption

Brazil’s former speaker stripped of seat Two weeks after the removal of Dilma Rousseff as Brazil’s president, the lower house of Congress on Monday expelled the lawmaker who engineered her impeachment for lying about secret bank accounts in Switzerland. The once powerful former speaker Eduardo Cunha, who has been charged with corruption by the Supreme Court, was banned from politics for eight years and faces arrest now he has lost his congressional prerogatives. The chamber voted overwhelmingly 45010 to strip him of his seat.

Cunha’s downfall has many politicians worried because he has threatened to bring down others.

Protectionism

U.S. trade panel affirms steel duties The U.S. International Trade Commission handed another victory to American steelmakers on Monday, affirming most of the recent anti-dumping and anti-subsidy duties on hot-rolled flat steel imports from Australia, Brazil, Britain, Japan, the Netherlands, South Korea and Turkey. The commission rejected anti-subsidy duties of about 6 per cent against hot-rolled steel from Turkey, but affirmed anti-dumping duties of about 6 to 7 per cent against Turkish-made hotrolled steel. The vote locks in import taxes on the affected products for five years. The duties are among a series of U.S. actions aimed at fighting a glut of steel imports.

has allowed it to overtake the US and become the world’s largest oil producer,” it added. The US had held the spot since April 2014.

In late 2014, OPEC shifted its strategy to defend market share, rather than price, a move which has hit high-cost non-OPEC producers especially hard.

Among them, the US, formerly the engine of non-OPEC supply growth, has particularly suffered.

‘Non-OPEC supply is expected to rebound next year’ Iran, meanwhile, has been “swift” to ramp up its production after the lifting in January of years of nuclear-linked sanctions.

Production by the 14 members of OPEC rose slightly in August to 33.47 mb/d.

OPEC ‘trapped’

The IEA, which advises oil consuming nations on energy issues, said its latest data indicated that the “supply-demand dynamic may not change significantly in the coming months.”

“As a result, supply will continue to outpace demand at least through the first half of next year,” it said.

“As for the market’s return to balance - it looks like we may have to wait a while longer,” it added.

As a result of the stubborn supply glut, producers have been hurt by a plunge in crude prices from around US$100 in mid-2014 to 13-year lows of below US$30 at the start of this year.

Analyst Olivier Jakob, of Switzerland-based Petromatrix, said OPEC was “trapped” as non-OPEC supply had been able to adapt to lower prices better than expected.

“The IEA data is also suggesting that an OPEC ‘freeze’ will not be enough to rebalance the market in 2017,” he said in a note to investors. AFP

Private survey

UK jobs market showing “cracks in the ice” after Brexit vote Britain’s unemployment rate has fallen sharply over the past three years but it is expected to rise in the coming months.

Lower hiring by British companies in financial and business services, construction and utilities could be “cracks in the ice” of the country’s labour market, a survey of employers showed yesterday, two-and-a-half months after the Brexit vote.

Manpower Group’s quarterly survey of more than 2,000 employers - its first since voters decided to leave the European Union in June - also showed that poorer areas such as Northern Ireland and Wales faced weakening employment prospects.

Overall, employers intended to hire more people than they will fire in the fourth quarter. An increase in hiring intentions in London and northwest England and in the agricultural, hotel and retail businesses kept the hiring outlook index unchanged at +5 per cent.

But business and finance services, construction and utilities - described as bellwether sectors - all reported four-point falls in employer optimism from the third quarter.

Britain’s unemployment rate has fallen sharply over the past three years but it is expected to rise in the coming months and years as the economy slows due to uncertainty caused by the Brexit vote.

Manpower said hiring intentions in manufacturing fell two points to the weakest level in three years despite a fall in the value of the pound that should make exports more competitive.

Manpower Group said the survey showed “vital warning signs that the UK jobs market could be in for a rough ride.”

“After the initial shock of Brexit, we’re entering a new phase of

prolonged economic uncertainty,” the head of Manpower’s British unit Mark Cahill said in the statement.

A British exit from the EU’s single market may impose new barriers for UK companies doing business with the continent.

“After the initial shock of Brexit, we’re entering a new phase of prolonged economic uncertainty” Mark Cahill, head of Manpower’s British unit

The survey also showed a weaker outlook for the labour market in the UK’s poorer regions. Hiring intentions in Wales and Northern Ireland fell 6 per cent from the third quarter, while in Scotland the index fell 2 per cent. Reuters

Business Daily Wednesday, September 14 2016 15

Opinion Business Wires

Viet Nam News Many commercial banks have recently raised their deposit interest rates in an attempt to satisfy new State Bank of Việt Nam’s regulations that are due to take effect in 2017. Under Circular 06/2016/ TT-NHNN, commercial banks will have to lower the ratio of short-term funds used for medium and long-term loans from 60 per cent to 50 per cent from January 1, 2017 to December 31, 2017. In the past, many lenders used short-term funds for medium and long-term loans.

Because of this, they are now forced to increase the interest rate of Vietnamese đồng deposits to attract more capital to meet the requirement.

World Bank President Jim Yong Kim

Inquirer.net Additional revenue to be generated under the Duterte administration’s proposed tax reform program will fund projects that will foster peace, according to the Department of Finance (DOF). Increased taxes on sugar products and other fatty food, luxury cars and gambling, among other things would allow the government to provide subsidies to poor families in war-torn regions like the Autonomous Region in Muslim Mindanao, Finance Secretary Carlos G. Dominguez III said in a statement on Sunday. The comprehensive tax reform package being firmed up by the DOF is targeted to generate P600 billion in revenue by 2019.

Bangkok Post The country’s leading media groups oppose a draft law that proposes setting up a central media council, arguing it would invite undue media interference and could result in biased news coverage.

The groups met Monday to discuss a push by the military regime’s National Reform Steering Assembly to have its sponsored bill on the regulation of media practitioners enacted into law. In a joint statement, the six organisations - the National Press Council of Thailand, the News Broadcasting Council of Thailand, the Thai Journalists Association, the Thai Broadcast Journalists Association, the Online News Providers Association, and the Thailand Cable TV Association dismissed the proposal.

The Star Malaysia Airlines Bhd (MAS), which has gone back to the aviation market after a two-year restructuring, is seeing a recovery in its share of the travel business by between 3 per cent and 4 per cent. Chief executive officer and group managing director Peter Bellew said the airline has regained a higher percentage in some popular routes such as the Kuala Lumpur-London market. “We have about an 8 per cent market share on the London route and have seen a general increase in market share of 3 per cent and 4 per cent in other routes generally,” said Bellew.

The World Bank’s recipe for irrelevance

W

orld Bank President Jim Yong Kim’s nomination for a second term is inexorably moving forward with a lack of transparency that has become all too typical.

Many observers are once again gnashing their teeth at the United States’ continued monopoly over the top post, despite the poor performance of past US nominees. As the late Yogi Berra once put it, “It’s like déjà vu all over again.”

The US has been particularly brazen in subverting the nomination process to ensure Kim’s reappointment. For starters, despite having another ten months left in his first term, Kim – surely with the US government’s blessing – asked the Bank’s Executive Board to accelerate the appointment process. The Board agreed – with no notable dissent – and even shortened the selection process to a mere three weeks.

A compressed schedule makes it difficult for World Bank members to rally around an alternative candidate. And Kim already had a head start, after quietly lobbying member governments at the G7 summit in Japan this May and in personal visits to China and India in recent months.

Moreover, as the incumbent, Kim can grant favours to win support: make loans that play to influential shareholders’ pet preferences, promise certain countries spots on the leadership roster, and stamp the Bank’s imprimatur on particular governments’ own domestic initiatives. Given the contents of Kim’s political toolkit, this match was never going to be played on a level field.

Many people can stomach questionable means if they consistently generate positive ends, but this has not been the case with Kim, who is among the worst presidents in World Bank history. His administration has been marked by authoritarianism and capriciousness, and he has forced out senior managers at unprecedented rates, sometimes requiring the Bank to reach quiet settlements with those affected.

In four years, the president’s office has had five chiefs-of-staff, and several of the Bank’s senior women have left, hinting at a capricious leadership culture.

Last month, in a letter to the Bank’s board warning of a “crisis of leadership” under Kim, the World Bank Staff Association wrote, “We preach principles of good governance, transparency, diversity, international competition, and meritbased selection. Unfortunately, none of these principles have applied to the appointment of past World Bank Group Presidents.”

Kim has set such a low bar for the Bank presidency that it would not be difficult to find a better candidate. A short list would include Ngozi Okonjo-Iweala, a former finance minister of Nigeria; Nandan Nilekani, an entrepreneur who led an impressive bio-identification program in India; and Tharman Shanmugaratnam, Singapore’s deputy prime minister.

But even if Kim were to go, America’s problematic role would remain. The US has long insisted that the Bank’s president be a US national, and yet it has repeatedly nominated unsuitable candidates to run the institution. For example, former US Deputy

“

Devesh Kapur Professor of Political Science at the University of Pennsylvania.

Secretary of Defence Paul Wolfowitz’s World Bank stint, from June 2005 to July 2007, was a disaster, but the US faced no consequences (such as losing the right to choose the next nominee).

The US has chastised China for rejecting the Permanent Court of Arbitration’s ruling against Chinese territorial claims in the South China Sea. And yet, in supporting Kim for another term – in the face of objections from the World Bank’s own staff – the US is showing itself to be no less defiant when its own interests are at stake.

There is nothing new or surprising about great powers making and breaking rules as it suits them. The surprise has been emerging economies’ apparent nonchalance regarding America’s roughshod reign at the World Bank. While other member governments often express outrage at the US monopoly over the Bank’s leadership, and at Europe’s similar monopoly over the International Monetary Fund’s leadership, they, too, are willing participants in the charade.

One reason is that countries are happy to strike their own side deals to ensure generous lending. This fact is reflected in the World Bank Group’s official leadership, where the first three people listed after the president – hailing from Brazil, China, and India, respectively – are carefully distributed by nationality.

A second reason is that, while emerging-economy members dislike the US monopoly, they are even more worried about the prospect of a president from a rival emerging economy. The Europeans and Japanese have their own monopolies – over the IMF and the Asian Development Bank, respectively – and the Chinese have created their own with the Asian Infrastructure Investment Bank.

These arrangements amount to a cabal of mutual complicity, whereby world powers designate economic spheres of influence through regional governance institutions. Each major power knows that if monopoly control is threatened in one sphere, then it is threatened in all spheres, so they hang together to avoid being hanged separately.

But, perhaps most important, the world’s emerging powers no longer need the World Bank as much as they once did. Having found their own alternatives for most of what the Bank does, their indifference to a second term for Kim suggests that they simply don’t think the Bank matters much anymore.

Indeed, it is the US, whose global influence is waning, for which maintaining control at the World Bank matters the most.

So, because US President Barack Obama’s administration has not bothered to follow credible procedures in making its nomination, much less select a better candidate, a failed World Bank president will get another crack at the job. By the time he leaves, his successor may well be welcomed with a collective shrug. Project Syndicate

The world’s emerging powers no longer need the World Bank as much as they once did

”

16 Business Daily Wednesday, September 14 2016

Closing Job data

Eurozone employment figures improve

The number of people employed increased by 0.4 per cent in 19-country Eurozone in the second quarter of 2016 compared with the previous quarter, reaching the highest level in seven and a half years, official data showed yesterday.

In the wider European Union (EU), the employment also saw a quarterly increase of 0.3 per cent, according to Eurostat, the statistical office of the EU. A total of 153.3 million people in the single currency bloc were employed from April to June, and the number reached the highest level ever

recorded in the EU of 232.1 million, Eurostat said in a press release.

Compared with the same quarter of the previous year, employment increased by 1.4 per cent in euro area and by 1.5 per cent in the EU, Eurostat said.

Among EU members, there was a notable improvement in Estonia, where the employment rose by 1.7 per cent, compared with the previous quarter. Ireland and Lithuania followed, rose by 1.1 per cent and 1.0 per cent respectively.

A decrease was only observed in Croatia, down by 0.4 per cent. Xinhua

States dispute

Modi urges calm in Indian tech hub over water protests India suffers severe water shortages that cause frequent tensions between states.

Gulab Chand

P

rime Minister Narendra Modi appealed for calm yesterday in the Indian tech hub of Bangalore which has been placed under curfew after deadly violence erupted over a long-running dispute with a neighbouring state over access to water.

Around 15,000 police officers were deployed on the largely deserted streets of the southern city to enforce a curfew, after rampaging, stonepelting mobs set buses and cars ablaze on Monday.

One protester was killed overnight after police fired on a mob which was trying to torch a police car, T.R. Suresh, deputy police commissioner for the city’s north, told AFP. Prime Minister Narendra Modi called the violence “distressful” and urged restraint in the city, which is home to Indian IT companies and offices of international tech giants such as Microsoft and Dell.

“This dispute can only be solved within the legal ambit. Breaking the law is not a viable alternative,” Modi said in a series of Tweets.

“The violence and arson seen in the last two days is only causing

loss to the poor, and to our nation’s property.”

Protests erupted over a Supreme Court order for Karnataka state, of which Bangalore is the capital, to release water from a river to ease a shortage in Tamil Nadu until later this month.

India suffers severe water shortages that cause frequent tensions between states and the row over the Cauvery River stretches back decades.

A curfew was imposed in 15 areas of the city for the next three days “to maintain peace and prevent untoward incidents” during the Muslim holiday of Eid, Bangalore police commissioner N.S Megharikh told reporters.

Some 200 protesters have been arrested on rioting on other charges

Pro-Karnataka activists take to the streets and shout slogans, during a protest in Bangalore, India, 12 September 2016. Lusa.

in a bid to quell the violence, which has forced shops, offices and schools to close.

Whi l e Ba n ga l o r e w as ca l m yesterday, angry protests were staged along the 150-kilometre highway from the capital to the city of Mysore.

“A grave injustice is being done to us as the state is forced to release more water for growing crops in Tamil Nadu when we don’t have sufficient water for even drinking because of deficit rains,” Pravish Shetty, who heads a group campaigning for the rights of Karnataka people, told local TV. Cable operators in Karnataka have also blocked scores of Tamil Nadu television channels in a bid to defuse tensions, while bus services between the two states have also been suspended.

Karnataka chief minister Siddaramaiah warned yesterday of tough punishments for anyone involved in fresh violence.

V e h i c l e s w i t h Ta m i l Na d u registration plates were attacked on Monday and protesters blocked roads by burning tyres and torching effigies of politicians.

“A group of unidentified miscreants barged into our bus yard and set 30 of our coaches on fire with kerosene or petrol,” Rajesh Natarajan, managing director of KPN Tours & Travels, a company based in Tamil Nadu, told local television.

Earlier this year the government was forced to deploy troops to secure a canal supplying water to New Delhi after it was sabotaged by protesters in neighbouring Haryana state, causing days of shortages in the capital. AFP

Diplomatic approach

Expansion

Taxes

Cuba, U.S. hold talks on economic co-operation

Ikea takes aim at China, India to meet targets

Thai cabinet keeps VAT unchanged

Cuba and the United States held in Washington their first meeting on long-term bilateral economic ties despite the U.S.-led financial and commercial embargo, said the island country’s Ministry of Foreign Affairs.

“Both delegations discussed commerce and future investments as well as other issues on economic and financial cooperation,” according to a statement published on the Ministry’s official website.

A year after re-establishing diplomatic relations, both countries held talks on banking and trade issues within the limitations the embargo imposes on Havana.

The U.S. Department of State said the talks covered a wide range of topics, such as air and maritime transport, migration, claims, telecommunications, health and agriculture. Officials from both governments agreed to create working groups on bilateral interests.

The progress on rapprochement would require an end to the U.S. sanctions that have hit Cuba for over five decades, said the statement.

The U.S.-led economic embargo has caused Cuba financial losses of over US$4.6 billion in 2015. Xinhua

Ikea Group laid out plans to accelerate its expansion in China and open its first store in India as the world’s largest furniture retailer seeks to boost sales by almost 50 per cent over the next four years.

In China, where the company opened its first store almost two decades ago, sustained growth will enable an accelerated pace of expansion, Chief Executive Officer Peter Agnefjaell said in a telephone interview yesterday. Ikea plans to open its first outlet in India next year and aims to have 25 there by 2025, he said.

The retailer has a goal for revenue of 50 billion euros (US$56 billion) by 2020. Sales in the 12 months through August rose 7.1 per cent to 34.2 billion euros, it said yesterday. The expansion in China and India, the world’s two most populous countries, may help the company achieve the target as sales growth stalls in Russia amid an economic slowdown.

Ikea will accelerate the pace of its Chinese expansion to four-to-five stores a year from the three it opened in the past year, Agnefjaell said. It has 21 stores in China.

In India, the company has started construction of its first store in Hyderabad, has bought land in Mumbai and is also looking at cities such as Delhi and Bangalore. Bloomberg News

Thailand’s cabinet agreed yesterday to leave the existing value added tax rate at 7.0 per cent until September 2017 to support the economy’s recovery, a senior government official said.

“This is to sustain economic momentum...and to help people with costs of living,” Kobsak Pootrakool, vice minister at the Prime Minister’s Office, told reporters.

The decision to keep the VAT at the present level will cost the government about 257 billion baht (US$7.37 billion) in lost revenue in the next fiscal year starting October 1, he said.

The government has kept the VAT rate unchanged since 1999, when it was reduced to 7 per cent from 10 per cent following the 1997/98 Asian financial crisis.

The cabinet also approved a budget worth 19.8 billion baht (US$567.8 million) to boost the local economy through various projects, including transport and tourism development.

The army took power in May 2014 to end months of political unrest but has been unable to revive Southeast Asia’s second-largest economy as exports and domestic demand remain weak.

It has introduced stimulus measures and ramped up investment in a bid to lift domestic activity. Reuters