Chui brothers named in new Panama Papers Politics Page 2
Monday, September 26 2016 Year V Nr. 1138 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Property
Popular Pharmacy to rent Holy House of Mercy property for MOP700,000 Page 2
www.macaubusinessdaily.com
Transportation
Gaming
Compulsory inspections for eight-year old vehicles from next July Page 3
Macau Legend talking with potential new buyer for Landmark deal Page 5
Tourism
DSEC data shows the number of overnight visitors increased by 3.7 per cent to 1.47 million in August, the highest single-month figure since January 2008, accounting for 51.2 per cent of total visitors, and with an average stay of 2.1 days. In total, the city welcomed 2.88 million visitors for the month. Page 2
Contracting sector
The city’s flag carrier inaugurated its Macau-Guiyang route, connecting the SAR to the Southwestern Chinese city. Air Macau management also reveals the company is considering a MacauBeijing-Lisbon route to better link the SAR to Portugal. Meanwhile, the local airport handled a record-breaking 630,000 passengers in August, the highest since its operations began. Aviation Page 4
Sweet expansion
Interview Many traditional local mobile food candy carts have closed down in the past few years due to the changing environment of the city and expensive rentals. In an interview with Business Daily, Kenny Yuen Ngan Chio, whose family owns Yu Kei Dragon Beard Candy, shares his new business plans that could help sustain and expand this candy business in the future. Pages 6 & 7
HK Hang Seng Index September 23, 2016
23,686.48 -73.32 (-0.31%) Worst Performers
China Unicom Hong Kong
+4.29%
Wharf Holdings Ltd/The
+0.78%
Industrial & Commercial
-2.98%
China Merchants Port Hold-
-1.59%
Cheung Kong Infrastructure
+1.99%
Hengan International Group
+0.69%
China Resources Power
-1.83%
Ping An Insurance Group Co
-1.54%
Tencent Holdings Ltd
+1.68%
Bank of Communications
+0.64%
Bank of China Ltd
-1.65%
Galaxy Entertainment Group
-1.52%
China Mengniu Dairy Co Ltd
+1.26%
PetroChina Co Ltd
+0.60%
BOC Hong Kong Holdings
-1.65%
China Shenhua Energy Co
-1.42%
AIA Group Ltd
+0.78%
Hong Kong & China Gas Co
China Life Insurance Co Ltd
-1.64%
AAC Technologies Holdings
-1.27%
+0.41%
28° 32° 28° 34° 24° 32° 22° 26° 22° 27° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Air Macau launches flight to Guiyang
Gaming Total receipts of enterprises engaged in gaming activities amounted to MOP233.23 bln (US$29.19 bln) in 2015, down by 34.1 pct y-o-y, DSEC data shows. Meanwhile, due to substantial reductions in spending, total expenditure by the gaming sector decreased notably by 32.5 pct y-o-y to MOP101.87 bln. Page 5
2 Business Daily Monday, September 26 2016
Macau In Brief Holy House of Mercy
Popular Pharmacy confirmed tenant
The ‘Popular Pharmacy’ (Farmacia Popular) is going to be the tenant of the ‘white house’ at a monthly rent of MOP700,000 (US$87,621) once the First Public Notary Office moves out of the premises by the end of the year, according to local newspaper Macao Daily News. António José de Freitas, President of the Holy House of Mercy (Santa Casa da Misericordia), said there were six companies interested in renting the organisation’s property in Senado Square, offering monthly rents as high as MOP1.2 million, but considering the cultural and historical value of the building, the board of the organization decided to choose the pharmacy as the new tenant. The design work is going to be carried out by local architect Carlos Marreiros and the new place is expected to be put into use next April.
Administration
E-service for Social Security Fund The Executive Council has finished discussing the draft on Electronic Declarations for Social Security Funds, according to a statement issued by the council last Friday. The service is expected to be launched in the fourth quarter of this year so that employers can file relevant forms online and make contributions through e-banking. The draft states that all materials can be optionally submitted online and the electronic files will have the same legal effect as the paper-based documents. The draft is expected to come into effect on 1 November 2016. Sports
Registration for GEG Marathon full Registrations for 2016 Macau Galaxy Entertainment International Marathon, organized by the Sports Bureau of Macau SAR Government and the General Association of Athletics of Macau and title sponsored by the Galaxy Entertainment Group, opened on Saturday with an overwhelming response. The Organizing Committee announced that all quotas for the Marathon, Half Marathon and Mini Marathon were filled within one day. The annual event will take place on 4 December (Sunday), with the start and finish both located inside the Stadium of the Olympic Sport Centre. Participants for the marathon and half marathon will start at 6:00 am, while those for the mini marathon will start at 6:15 am.
Tourism August sees the highest y-o-y increase in overnight visitor arrivals in 8 years
Falling visitors Visitor arrivals fell five per cent year-on-year in August, as Mainland China visitors decreased, but Taiwan and South Korea arrivals increased. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he total number of visitors to the city reached 2.88 million for the month of August, representing a five per cent decrease year-on-year, according to the latest data released by the Statistics and Census Services (DSEC) on Friday. The number of overnight visitors increased by 3.7 per cent to 1.47 million in August, the highest single-month figure since January 2008, accounting for 51.2 per cent of the total visits. The average stay of these visitors was 2.1 days. Despite the uptick in visit duration, the number of same-day visitors fell by 12.6 per cent to 1.40 million, with an average stay of 0.2 days, according to the DSEC data. The August visitor arrival data also represents a 3.1 per cent increase compared to July due to the summer holidays. In the first eight months of the year the city’s overall visitor arrivals totalled 20.44 million, a similar number compared to the same period last year, with the average length of stay of visitors increasing by 0.2 days year-on-year to 1.2 days.
also saw a yearly drop, decreasing 4.4 per cent. Overnight Mainland Chinese visitors totalled 991,500 during August – a 5.2 per cent increase year-on-year. The majority of tourists from Mainland China originated in neighbouring Guangdong province, amounting to 919,500. The second highest number came from Hunan province, totalling 89,400. In regards to the international market, August figures also indicate increased visitor numbers from South Korea and Taiwan of 3.3 per cent and 32.1 per cent respectively, reaching 94,400 and 57,700. However, those from Hong Kong declined to 591,900 – a drop of 7.6 per cent, according to the DSEC data.
The number of long haul visitors from the United States and Canada recorded a year-on-year increase of 0.7 per cent and 8.5 per cent, respectively, while the number of visitors from Australia and the United Kingdom saw decreases of 3.7 per cent and 1.1 per cent, respectively.
Border gate the main entry
The Border Gate remained the main entry point to the city, with the number of entries in August reaching 1.44 million, although registering a 3.7 per cent year-on-year decrease. Land entries in August registered the first decline after eight consecutive months of year-on-year increases, with a 2.7 per cent drop compared to the same month last year. Visitor arrivals by sea decreased by 11.7 per cent year-on-year to 993,518 with the Outer Harbour receiving 596,832 entrants and the Provisional Ferry Terminal in Taipa receiving 396,686 – drops of 10.4 per cent and 7.2 per cent respectively. On the other hand, arrivals by air saw a 15 per cent increase year-on-year to 217,214.
Diverse origins
Visitors from Mainland China represented 68.7 per cent of the total visitor numbers in August, followed by Hong Kong with 20.5 per cent and Taiwan with 3.3 per cent. Visitor numbers from Mainland China reached 1.97 million in August, indicating a 5.5 per cent year-on-year fall compared to August 2015. The number of travellers under the Individual Visit Scheme (IVS)
Politics
Chui brothers named in new Panama Papers Fresh reports on the Panama Papers have revealed that the MSAR Chief Executive and his brother Chui Sai Cheong were executives of an offshore subsidiary of Hong Kong-listed Hopewell Holdings Limited. Cecilia U cecilia.u@macaubusinessdaily.com
The Chief Executive Fernando Chui Sai On and his brother, legislator Chui Sai Cheong, were both found to have been executives of Yee Shing International Limited, an offshore subsidiary of Hong Kong property developer and investor Hopewell Holdings Limited (HHL), online news outlet HK01 reported last Friday.
According to the documents released by the Hong Kong-based media outlet, the city’s Chief Executive was appointed as a director of Yee Shing in July, 1997. He later resigned from the post on July 30, 1999, 12 days prior to his appointment as the Secretary of Social Affairs and Culture. Meanwhile, Chui Sai Cheong was also revealed to have been one of the founding directors of the offshore company.
The Hong Kong news outlet obtained the documents from the International Consortium of Investigative Journalists (ICIJ). The ICIJ documents related to Yee Shing cover a period from 1993 to 2010. According to the offshore leaks database of the ICIJ, Yee Shing was registered in the British Virgin Islands in 1993 through law firm Mossack Fonseca – the source of the leak of the Panama Papers. But the offshore company terminated its contract with the Panamanian law firm in 2010, with the related documents signed by Chui Sai Cheong and another director of the company, Thomas Jefferson Wu, the son of the founder of Hopewell Holdings, Gordon Wu Ying Sheung, HK01 reported.
Resignation
Chui Sai Cheong, an indirectly-elected legislator, told local Chinese language newspaper Macao Daily last Friday that he had quit as the director of the offshore company in July, 2012. Meanwhile, the Government Spokesperson’s Office also told Business Daily last week that the city’s top official has declared his property and assets in line with the Basic Law. ‘Since his appointment as the Secretary for Social Affairs and Culture, the Chief Executive Fernando Chui Sai On had quit all his private positions. In addition, he has been strictly following the Basic Law of the MSAR to declare his property,’ wrote the office in an email.
Business Daily Monday, September 26 2016 3
Macau
Transportation Gov’t plans to replace all parking meters with new ones accepting e-payments
Compulsory inspections for eight-year old vehicles from next July Tightened mandatory vehicle inspections will come into force next year as the new inspection centre is scheduled to open during the fourth quarter of this year. Nelson Moura nelson.moura@macaubusinessdaily.com
A
ll vehicles eight years and older in the city will have to undergo compulsory yearly inspections from July 1, 2017, the director of Transport Bureau (DSAT), Kelvin Lam Hin San announced last Friday. Speaking to reporters last week following the closed-door meeting of the Traffic Affairs Consultative Committee, the DSAT director said the city’s new vehicle inspection centre in Cotai would be operational from the fourth quarter of this year. The government plans to tighten its regulations on vehicle inspections in 2017 in order to control the growth in the number of vehicles, on the condition that the new vehicle inspection centre is completed first. The Transport Bureau is aiming to keep the annual vehicle growth rate within four per cent, and hopes to keep growth rates for the next five years within 3.5 per cent. Currently, local vehicles only need to begin undergoing compulsory yearly inspections when they reach 10 years of age. The new tightened regulations will also mandate that all 50-cc scooters need to have yearly inspections once they are five years old. The Bureau expects that the new inspection centre will be able to examine at least 650 vehicles per day.
New parking meters
Meanwhile, the government is planning to replace the city’s 110,000 parking meters with new models accepting e-payments in the following two years. “We think that the current parking meters have been used for quite a long time. It’s time to update them in order to serve the citizens better,” Mr. Lam told reporters last Friday. According to the DSAT director, the new model of parking meters will be able to accept e-payments such as credit cards and Macau Pass, in addition to coins of MOP1 and MOP5. The replacement, starting in October, will proceed in phases over a 24-month period, with the first phase to take place in areas with busier
traffic, the transport official said. In addition, the government is also planning to increase public parking fees. “Parking fees haven’t been changed since 1987, so we believe it is time for a change,” Mr. Lam said, without providing a concrete proposal on the change. The concession for studying the new model of parking meters has been granted to Macau Forehap Parking Management Ltd., which will also be responsible for replacing the old meters.
Illegal Uber
Meanwhile, the DSAT director reaffirmed that the operations of car-hailing application Uber violate local laws, despite the fact that the application obtained 20,000 signatures from local residents petitioning for it to stay in the local market. “We maintain our position that Uber is illegal,” he said.
Last year, Macau Forehap Parking Management Ltd. was involved in a contentious issue with DSAT after the department discovered the company had issued 390 unauthorised monthly parking passes in a parking lot where the government had not leased out any spaces for monthly rental, as reported by Business Daily.
More buses please
On the other hand, the DSAT director announced that 19 additional bus routes would be introduced in October. He added that the government would study which areas in the city will require buses with larger capacities, prior to increasing the current rate of bus frequency. According to the official, the number
“We are working on modifying our taxi laws. We will propose the amendments for further discussion once we finish the drafts”. The official added that 350 additional taxis will arrive in the local market “very soon”, while he expected the city’s new special taxis providing on-call services will be able to serve around 100 people.
of daily bus passengers recorded a year-on-year increase of 3.2 per cent to 580,000 between May and June this year. “Last year, bus companies were able to carry 550,000 passengers daily. But thanks to the increased efforts, they can now handle 610,000 passengers every day,” he said. It was also announced that the government would attempt to introduce 18-metre-long buses next year, in order to carry more passengers and avoid overlapping bus services.
Blocked Taipa roads
In regards to the current road works in Taipa, the DSAT head said priority would be given to draining works, electric-cable installations and the clearance of driving lanes, adding that some of these works will be completed within next month. According to DSAT, current road works in Taipa are primarily located at Rotunda do Estádio, Rotunda Dr. Carlos A. Correa Pães D’Assumpção, Rotunda Ouvidor Arriaga, Estrada Almirante Magalhães Correia, Avenida dos Jogos da Ásia Oriental and Estrada de Pac On. “The works at the three major roundabouts in Taipa are proceeding in line with the schedule while other carry-over projects are also progressing well,” the Bureau told Business Daily. “It is expected that the works at the Rotunda do Estádio will be finished around the end of September and the beginning of October, while the first phase of the works at the Rotunda Dr. Carlos A. Correa Pães D’Assumpção will be finished by the end of November. Besides, some other works are to be finished successively by the end of the year,” it added.
4 Business Daily Monday, September 26 2016
Macau Opinion
Sheyla Zandonai Keeping books In previous columns, I have tackled the question of the Macau government’s relentless – if sometimes hectic – efforts to formulate and accommodate the planning and development of new urban projects on the peninsula. I want to again raise the case of the Central Library, because I believe Macau is once more on the threshold of a moment that could redefine its identity. Last week left no doubt that the Central Library is a subject dear to Macau residents’ hearts. Local architects expressed their opinions on the administration’s decision to accept new proposals for renovating the old court building. Vice-President of the Cultural Affairs Bureau, Chan Peng Fai, talked to residents on the radio. And people voiced their concerns about the budget, the conditions for the new public tender, and just what it is that makes a library a library: its content. Mr Chan stated that there are plans to invest in the acquisition of more material, expanding the library’s existing collection. This is indeed a promising commitment among all the latest controversies, and it seems to be the only point that easily attracts consensus. The fact that residents and the government have been vocal in the media in order to expose and question the various steps involved in the process, is a sign of good will and citizenship, to use the precise word. In fact, this being good old Macau, residents have legitimate reasons – and history – for being concerned about the ways in which money will be allocated. It is only natural that they be vigilant and demand accountability from their representatives. Moreover, public participation suggests that people are interested in city affairs others than gambling. No doubt, gambling remains at the core of Macau’s economy, and so it matters. Residents understand and benefit directly or indirectly from this fact: an expansive job market, handsome revenues that enable ambitious projects such as the Central Library to materialize in the first place, and new exquisite facilities – restaurants, bars, and malls – that they have embraced. Benefits aside, however, casinos have also brought material excess to the city, or so I have been told, triggering a degree of displeasure with the state of the city and the powers that be. Whereas the number of lavish casino-hotels has become overwhelming, I believe there is no such thing as too much culture. This makes the library an excellent opportunity for the government to show what it is made of. Sheyla Zandonai is a scholar and contributor to this newspaper.
Aviation Air Macau launches Macau-Guiyang route
New record Macau International Airport handled over 630,000 Passengers in August this year, the highest number in nearly 21 years of operations. Joanne Kuai joannekuai@macaubusinessdaily.com
M
acau International Airport (MIA) recorded its busiest month ever in August, reaching over 630 , 000 p ass e n g e r movements and over 5,000 aircraft movements for the first time, the Macau International Airport Company Limited (CAM) announced last week. The local airport operator says that both these figures in August set new airport records for the highest single month passenger traffic and aircraft
Air Macau mulls Macau-Beijing-Lisbon route
On Friday, Air Macau launched the first flight for its MacauGuiyang route. There will be three round-trips between the SAR and the city in Guizhou province in Southwest China, every Tuesday, Friday and Sunday. The flight time will be around one hour and 50 minutes. Deputy General Manager of Air Macau Company Limited, Liao Hanxi, said at the route inauguration ceremony last Friday that Air Macau now flies to 25 destinations, covering Mainland China, Taiwan, Southeast Asia, and Northeast Asia, and he hopes that the opening of the MacauGuiyang route will bring new opportunities for economic and trade co-operation between the two cities, according to a Macao Daily News report. He added that during this
movements, increasing by 10 per cent and 2.8 per cent over last year respectively. In August, the airport also handled about 120,000 local resident travellers, a year-on-year growth of 11 per cent. Eric Fong, Director of CAM Marketing Department, told reporters that MIA has worked with all related departments to optimize slot allocations to cope with the growing number of passengers, as well as aircraft movements, and effectively used the airport facilities to serve clients, according to a report by local Chinese
summer, the passenger load factor for Air Macau flights reached 76 per cent, achieving their target. He said flights to Northeast Asia, Seoul, and Japan saw increases in load factors during the summer, with flights to Osaka and Tokyo experiencing increases of eight per cent yearon-year. The company will further study the demands of the market in order to see how to adjust the flights, Mr. Liao added. Chief Executive Fernando Chui Sai On commented earlier this month that the city would try to launch flights to Portugal. In response, the city’s flag carrier representative said, considering the history of China and Portugal, it is planning to launch an interline route of Macau-Beijing-Lisbon. Mr. Liao said that such a route is being designed and Beijing-Lisbon flight timetables would be the key reference for the interline route.
media Macao Daily News. Speaking at the launch event for Air Macau’s new Macau-Guiyang route last Friday, Mr. Fong said that CAM has been co-ordinating with the authorities in regards to arrangements for the sea-to-air express link at Pac On Ferry Terminal in Taipa, when it is completed. He added that the ferry terminal is equipped with flight check-in counters, and more facilities will be added once the terminal is in operation. The ferry terminal is expected to be in use by the beginning of next year, according to the SAR government.
Steady growth
The information released by CAM last week also shows that from January to September, Macau International Airport saw steady growth across all market sectors, with passengers from legacy and low cost carriers recording steady growth rates of 18 per cent and 10 per cent respectively. Passenger traffic from these two sectors increased to 530,000 and 130,000 respectively. In the same period, Macau International Airport handled over 4.8 million passengers and 42,000 aircraft movements, increasing by 16 per cent and five per cent compared to the same period last year. The three major markets of Mainland China, China Taiwan and Southeast Asia all recorded positive growth rates of 2.5 per cent, 21 per cent and 24 per cent respectively. Transit passengers through MIA increased by more than 50 per cent over last year, and now account for around 10 per cent of overall passengers. Up until September this year, Macau International Airport had handled more than 1,100 weekly scheduled flights, with about 27 airlines connecting Macau to more than 40 cities. MIA says it will continue to cooperate with each airport unit to provide safe, high quality and efficient services to passengers in order to ensure passengers comfortable and pleasant journeys.
Business Daily Monday, September 26 2016 5
Macau Statistics Gaming operators cut marketing expenses by 27.6 pct in 2015
Contracting gaming DSEC data shows total receipts of enterprises engaged in gaming activities plummeted 34.1 pct y-o-y to MOP233.23 bln in 2015. Joanne Kuai joannekuai@macaubusinessdaily.com
T
otal receipts of enterprises engaged in gaming activities amounted to MOP233.23 billion (US$29.19 billion) in 2015, down by 34.1 per cent year-on-year, according to the Gaming Sector Survey 2015, released last Friday by the Statistics and Census Service (DSEC). Specifically, gaming receipts d e c r ea s e d b y 34 . 3 p e r c e n t
year-on-year to MOP231.58 billion. Receipts from food & beverage totalled MOP548 million, dropping by 10.6 per cent. Receipts from currency exchange reached MOP76 million, a year-onyear decrease of 24.6 per cent. With a decrease in bank deposits in 2015, interest receipts from the gaming sector also dropped by 32.5 per cent year-on-year to MOP278 million.
Cutting expenses
DSEC data also shows that due to
substantial reductions in spending, total expenditure by the gaming sector decreased notably by 32.5 per cent year-on-year to MOP101.87 billion. Purchase of Goods, Commission Paid & Customer Rebates, which accounted for 55.9 per cent of total expenditure, plunged by 45.1 per cent to MOP56.99 billion, while Operating Expenses declined by 13.5 per cent to MOP21.24 billion. I n a d di ti o n , N o n - o p e rati n g Expenses of the gaming sector amounted to MOP3.70 billion, up by 4.6 per cent year-on-year. With an increase in loans to enterprises, interest paid went up by 19.0 per cent year-on- year to MOP832 million. Meanwhile, depreciation
rose by one per cent to MOP2.87 billion. Within Operating Expenses, expenditure on complimentary goods & services provided to customers accounted for the largest share, or 46.2 per cent of total, at MOP9.81 billion, down by 14.1 per cent year-on-year. Enterprises reduced their spending on marketing & publicity by 27.6 per cent year-on-year to MOP3.91 billion. Meanwhile, expenditure on materials acquired dropped by 10.1 per cent to MOP1.0 billion.
Valuable workers
The survey also shows that by the end of 2015, the number of full-time employees in the gaming sector was 56,217, a decrease of 2.7 per cent year-on-year, while Compensation of Employees rose by 5.1 per cent to MOP19.93 billion. Remuneration in cash amounted to MOP18.16 billion or 91.1 per cent of Compensation of Employees, up by 4.2 per cent yearon- year. Contributions to pension funds, provident funds & social security soared by 34.1 per cent, while payments-in-kind dropped by 6.6 per cent. Expenditure on contractual services, such as cleaning services, rose by 4.3 per cent year-on-year to MOP1.13 billion. Meanwhile, expenditure on rent totalling MOP890 million, water & electricity charges totalling MOP601 million and rent of chauffeur-driven vehicles of MOP439 million, all also registered year-on-year increases. In general, Gross Value Added, which measures the sector’s contribution to the economy, amounted to MOP154.74 billion, down by 31.3 per cent year-onyear. Gross Surpluses of the gaming sector decreased by 34.6 per cent to MOP134.80 billion. The Gross Surplus Ratio dropped slightly by 0.4 percentage points to 57.9 per cent, owing to an increase in the acquisition of machinery and other equipment, while Gross Fixed Capital Formation of the gaming sector increased by four per cent yearon-year to MOP2.75 billion.
Macau Legend
New potential buyer for Landmark deal Macau-based casino services firm Macau Legend Development Ltd has announced that the planned deal for the sale of the Landmark Macau casino hotel did not go ahead, according to a company filing with the Hong Kong Stock Exchange after trading hours last Friday. Macau Legend had previously signed a letter of intent with the buyer, Wide Power Enterprises Limited, in relation to the proposed sale of the hotel, dining, conference
and casino complex, together with its car parks, located at 549–567 Avenida da Amizade, Macau. The casino at Landmark Macau, named Pharaoh’s Palace Casino, operates under the casino licence of Macau gaming operator SJM Holdings Ltd. Th e a n n o u n c e m e n t s i g n e d by David Chow Kam Fai, Cochairman, executive director and chief executive officer indicates the company and the buyer had not concluded or entered into any
Corporate
Mediterranean flavours at Grand Coloane
To give the autumn season a festive welcome, Grand Coloane Resort is offering diners a feast of Mediterranean cuisine in a stylish and contemporary setting by the sea, amidst the unique green landscape of the resort. Led by Western Chef Miguel Covas, Café Panorama promises to satisfy the curious palates of diners with
a sophisticated Mediterranean buffet menu. “The beauty of the Mediterranean is that so many of the ingredients are similar, no matter whether you’re in Spain, Italy, Turkey or Greece,” says Chef Covas. “The seafood, the spices, the grains…it’s the combination, the emphasis and the amounts that change, giving each region its own uniqueness and distinction.”
definitive investment agreement before the expiry of the letter of intent on 23 September 2016. ‘At present, the Company has been approached by and is in negotiation with a potential buyer,
an independent third party, on the potential disposal of the Property and remains positive on the disposal,’ the filing reads. It adds that completion of the sale is expected to occur soon after the potential buyer completes its due diligence and receives the necessary regulatory approvals in Macau and Hong Kong.
6 Business Daily Monday, September 26 2016
Macau Food business
Traditional candy maker eyes expansion Many traditional local mobile food candy carts have closed down in the past few years due to the changing environment in the city and expensive rentals. In an interview with Business Daily, Kenny Yuen Ngan Chio, whose family owns Yu Kei Dragon Beard Candy, shares his new business plans that could help sustain and expand this candy business in the future. Annie Lao annie.lao@macaubusinessdaily.com
H
ow did your father start running the mobile candy cart 40 years ago? He always wanted to open his own business. He had worked in many different jobs in Hong Kong such as a cook and even a painter for advertising billboards. At that time, he had to share a metal-cage home with others. One of his housemates was a dragon beard candy maker, so my father was inspired to learn how to make dragon beard candy. He learnt it by himself and started his business in Hong Kong first. A few years later, he moved back to Macau as it was difficult for him to find a job in Hong Kong. Why do you think quite a number of mobile food carts in Macau have disappeared? There used to be a lot of mobile food carts near the Red Market, but not anymore. Many mobile food carts have been closed. In the past, there were two other mobile candy carts selling dragon beard candy in the city, but
they could not find people to do the job so they had to close down their businesses. In addition, most of the generation from the 80s are working for the city’s casinos. Perhaps, some of them don’t want to take over the traditional businesses, as it requires a lot of hard work to run. So why did you decide to take over your father’s business? At first, I wasn’t interested at all. In 2001, I moved to the UK to study biology. One day, my father called me and asked me to come back to Macau to learn how to make dragon beard candy. I listened to my father and I came back to learn it for one year. In 2011, I decided to move back to Macau for good, especially because my father had an injury with his hands from overworking at that time. Seeing that my father did not want to give up his business, I decided to help him and look after the candy cart. Why did you move the business to the Village Mall? I always wanted to have a bigger store for my business. As a mobile candy
cart does not always have enough facilities or space for us to work in, especially now we have added new flavors, we needed to have a fridge for that. As a result, we decided to move to a new location. Was it difficult when you were looking for new places? Rental is very expensive in Macau. It is impossible to rent a store to sell candy, which may only cover the operating costs. But luckily, in June this year, the manager of the Village Mall, Window Lei, asked me if I was interested in opening a store in the mall to sell candy. The rental he offered was a lot cheaper than any other places in the city. So we accepted the offer. In fact, the location of the mall is good as it is situated in a busy area of the city, where I see there is potential to grow the business.
Operational challenges Have you faced any challenges so far? Before we moved into the Village Mall, we had moved to outside the Red Market and to a market area in the Three Lamps District. Both
of these locations had insufficient space for us to have a demonstration room, as I wanted to show people how I make the candy from scratch. Previously, I had to make everything in advance at home. Fortunately, we can now do it all inside the Village Mall. Who are your major customers? Most of my customers are from Hong Kong, besides local regular customers. We have some young people too. Most of the tourists order our candy by placing orders on the phone and coming to pick it up at our store. Hong Kong customers tell me they don’t like the taste of dragon beard candy made in Hong Kong, so they come to Macau to buy my candy in bulk. How do you ensure the quality of your products? The quality of the ingredients we use is important for our business. Our main ingredients were imported from Mainland China in the past. One time, we forgot to check the ingredients we bought and later on we found that the shredded coconut we used had a problem. We did not notice this until our customers complained to us. After this incident, some of our customers lost trust in us, so the quality of the products is extremely important. As a result, we cannot afford not to test the ingredients before using them. We then changed to another supplier for better ingredients.
“If the business grows as we plan, we will start positioning the candy as souvenirs for tourists” Re-branding the product How do tourists know about your candy? A lot of travel magazines introduce the Three Lamp District. Even though it is a local area, you can see many tourists going there and being interested in eating local food. They know my number from the magazines so they can call me to order the candy. However, we have had fewer Mainland Chinese visitors since 2015. We used to receive so many orders that we did not even have enough human resources to handle the demand. How have you re-branded your products? We registered our brand name in August this year to avoid others from copying it. Also, we don’t want to limit ourselves by selling only traditional dragon beard candy. Therefore, we designed a new logo for our brand name to diversify our product range. Previously, my brother wanted to commercialize the candy business, so he partnered with his friend and tried to open a candy business for two years in Rua da Felicidade. However, due to the expensive rental at that location, he closed down the business. Do you have a marketing strategy for the business? We don’t put much effort into promoting our products. In the past, we did not do any promotions at all, when we were still a mobile food cart on the street near the Red Market. Right now, the Village Mall
Business Daily Monday, September 26 2016 7
Macau
is helping us promote our products on social media such as Facebook. Suncity Group, Sands Cotai Central and Macau Group invited us in the past to do candy making demonstrations at their spring banquets. Do tourists tend to spend more than locals? Definitely, on average they spend ten times more than locals. Locals tend to come here to buy one box of candy only. For instance, I used to have one Hong Kong visitor coming here to buy 200 boxes of candy at one time.
Future goals Are you aiming to develop your business into a large-scale food souvenir chain? For us, it is impossible to rent a store in a tourist location due to the expensive rental. My goal of course is to have a similar business model like Koi Kei [Bakery]. But it takes time for us as we are now just in the beginning stage of development. Do you have any future plans? One major obstacle is that our products are all handmade, which means that when we have more orders, we need to hire more workers to meet the demand. Due to this constraint, I have thought of investing in a machine to replace the hand making process, which would also help to decrease human resource costs and even grow the business faster. However, there is no machine that can do this job so far.
We need more capital and human resources in order to grow our business. We cannot just do all the things on our own like my father did in the past. What is the alternative plan then? Opening a factory to hire 50 to 100 workers is also a solution to increase the production of candy in order to deal with the growth of business in the future.
“We need more capital and human resources in order to grow our business. We cannot just do all the things on our own like my father did in the past” We are still thinking about new ideas to expand our business. We may try to open a café and combine it with selling the candy, so people can eat inside the Mall or take away. This idea also matches the theme of the Village Mall for people to come and enjoy. Secondly, if the business grows as we plan, we will start positioning the candy as souvenirs for tourists.
The Candy Successor
traditional candy, re-branding it and relocating the business could help his father’s business to expand from a mobile candy cart to an independent store. In August, he successfully opened a store inside the city’s first cultural creative focused mall, the Village Mall in Rua do Campo.
Dragon Beard Candy
of dragon beard candy dates back to the Chinese Han Dynasty. At that time, the candy was made and shown in demonstrations as a form of entertainment for the Emperor. In the past, the candy was only made for the nobility to eat, but the sweet has now become a significant local street food in the city.
In 2013, Kenny Yuen Ngan Chio, the son of the owner of Yu Kei Dragon Beard Candy, decided to move back from the UK to his home city Macau, to take over his father’s 40-year-old candy business. He believed that creating new flavors for the
The name of the candy comes from its appearance, which looks like the beard of a dragon. The candy is made from corn syrup that is stretched into many white silky-like threads. These threads are used to wrap fillings that include shredded coconut, peanuts and sesame. The history
8 Business Daily Monday, September 26 2016
Greater China In Brief Legislation
Regulator publishes rules on FOF China’s securities regulator said on Friday it had published rules on the fund of funds (FOF) business and would strengthen supervision of the market. FOF, also referred to as multi-manager investment, is a strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. According to the rules, an FOF must invest at least 80 per cent of its assets in mutual funds, while management and custodian fees must not be charged twice, the regulator said on its official microblog. Internationalization
ICBC Moscow to be yuan clearing bank in Russia China’s central bank said it has authorized the Moscow subsidiary bank of Industrial and Commercial Bank of China (ICBC) to be a yuan clearing bank in Russia. The People’s Bank of China announced the authorization in a statement posted on its website on Friday. It provided no details. ICBC is the biggest of China’s “Big Four” state-owned banks. The Kremlin has sought to deepen its relationship with China following the imposition by the United States and European Union of sanctions on Russia over its annexation of Ukraine’s Crimean peninsula two years ago. The Kremlin maintains that Crimea was Russian land and its status non-negotiable.
Tackling debt
Beijing rules on default swaps get sceptical response Investors questioned how effective or popular credit default swaps would be when defaults are still rare. Nathaniel Taplin and Umesh Desai
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ew rules published in China on Friday on credit default swaps were met with scepticism about how effective the hedging tool would be in addressing the country’s growing debt risks. The market provides insurance against debt defaults and is the latest indication of China moving to find tools to help manage what the IMF has described as an “unsustainable” rise in credit. The rules were published on the website of the National Association of Financial Market Institutional Investors (NAFMII), which supervises the issuance of commercial paper and
some other types of debt in China’s interbank bond market. Reuters reported on Thursday that NAFMII had approved the launch of a CDS market. Investors said that credit default swaps (CDS) could help bond investors better manage risks. But they questioned how effective or popular they would be when defaults are still rare, legal frameworks are largely untested and other Asian markets already struggle for liquidity. Widespread pricing distortions in China’s bond market mean risk premiums between higher- and lowerrated corporate bonds are narrow, which in turn makes it difficult to effectively price CDS, these investors said.
Defaults
China has cautiously allowed some bond issuers to default since 2014, although doubts remain about how far the government is really willing to go when so many companies are state linked and when policymakers are highly sensitive to the risk of financial instability. But China’s debt load has ballooned since the global financial crisis to sit around 250 per cent of GDP. The
Official tour
Premier Li’s Havana visit strengthens ties Chinese Prime Minister Li Keqiang met with Cuban President Raul Castro on Saturday during a two-day trip to Havana, and the two leaders oversaw the signing of around 30 agreements on economic cooperation in various sectors, Cuban state media reported. Li is the first Chinese premier to visit Cuba since the two countries established diplomatic relations 56 years ago, although President Xi Jinping visited in 2014. China is Cuba’s second largest trading partner after Venezuela. The two countries traded US$1.6 billion in the first nine months of 2015, a 57 per cent increase on the same period the previous year. Cards bonus points
IBM, UnionPay complete block chain pilot project IBM said on Friday it completed a pilot project with Chinese credit card company China UnionPay that will facilitate the sharing of loyalty bonus points among banks using block chain technology. Bonus points earned through purchases on bank cards have long been an effective tool to attract and encourage customers to use specific cards. But since bonus points cannot be freely exchanged among different banks, offering various rewards, many go unused. IBM’s collaboration with China UnionPay will enable consumers worldwide to exchange bonus points from their various banks in less than a minute to select rewards they want.
“This is a really big market, there will always be some people who are interested in protection,” said a Singapore-based portfolio manager who invests in Chinese onshore debt, but who declined to be identified in the absence of authority to speak to the media. “But foreign investors will want to know what the legal framework is, who the market makers are, etc.” Thomas Drissner, investment manager at Aberdeen Asset Management in Singapore, said the Asian dollar bond market lacked the liquidity to hedge credit risk efficiently. “Hence, I have my reservations what liquidity in a yuan instrument will look like. Hedging only makes sense if you can trade in and out whenever you want,” Drissner said. “You have to have a very strong view to make this work from an economic point of view.” Integration with other CDS markets will be difficult because of different documentation and laws, cutting off another avenue of potential liquidity, said Keith Noyes, Asia director at International Swaps and Derivatives Association, a global derivatives trade body that sets industry standards for the biggest CDS markets. “That makes standardisation and product fungibility difficult,” he said. “Its prospects would be enhanced by integration and access to offshore liquidity. That is constrained by differences in documentation and choice of law.” NAFMII had no immediate comment.
Property
Hong Kong’s Leung pledges more land for low-income housing The government faces opposition to plans to rezone rural green-belt sites for housing. Aibing Guo
Hong Kong Chief Executive Leung Chun-Ying pledged to provide more land to build apartments for low-income people in a bid to lower housing prices in the world’s least-affordable city. Less than 25 percent of Hong Kong’s land has been developed, according to government figures. That is the reason housing is expensive and land supply is short, Leung said Friday at a banquet hosted by the Bauhinia Foundation Research Centre think tank, according to a statement on the government’s website. “Every piece of our land could be used for building houses, as long as we, the Hong Kong people, want to do it,” Leung said. “We should have a clear sense on what matters most and what matters little, and it looks to me making sure Hong Kong people have a place to live is the absolute No. 1 priority.” The government faces opposition to plans to rezone rural green-belt sites for housing, or build new apartments in already overcrowded areas. Increased housing density in certain areas may cause traffic jams, “but it’s only a matter of inconvenience,” Leung said in the speech. Addressing
sub-divided apartments in Hong Kong is a matter of safety, which should override inconveniences, he said.
Second term
Leung’s speech came just a few days after the Hong Kong leader defended his decision to postpone two phases of a large public housing project in the city’s northern outskirts. Leung, who must decide soon whether to seek a second five-year term as chief executive, has spent much of his
tenure struggling to subdue housing costs. Hong Kong’s housing supply will reach 93,000 apartments in the next three to four years, the highest since 2004, Leung said. The extra supply will help reduce prices by HK$1 million (US$129,000) per apartment, saving buyers HK$93 billion in total, he said. “We cannot be satisfied with what we have managed to achieve,” Leung said, referring to the new apartments available. The only way to solve Hong Kong’s housing problem “is to continue to provide more land and build more apartments,” he said. Bloomberg News
Business Daily Monday, September 26 2016 9
Greater China Trade
central bank and some international authorities including the IMF have raised concerns about the fast pace of growth in corporate credit in particular. The CDS market is one option put forward to help investors hedge against debt risk. Others include securitising bad debt and swapping non-performing loans for equity. The formal launch of CDS has been in the works for a while, but gained steam earlier this year when stresses in the nation’s corporate bond market led to a sharp sell-off in April and in turn prompted firms to delay or cancel over US$15 billion of new bond financing that month.
Key Points Provides a tool to hedge against debt risks China’s debt load growing, especially in the corporate sector Doubts raised by some investors CDS market will be effective Regulators had begun allowing other forms of credit risk hedging in recent months. Earlier this month, China Securities (CSC) sold credit protection for the senior tranche of Agricultural Bank of China’s recent securitisation of non-performing loans, Reuters IFR reported. CSC provided protection in the form of credit-risk-mitigation warrants (CRMW), one of the two credit-risk management tools first introduced to domestic investors in 2010 under a pilot scheme. It was the first deal of its kind since March 2011 and the first time the hedging tool had been used in China’s asset-backed market. Reuters
Government slaps duties on U.S. animal feed ingredient The two countries are also embroiled in disputes over China’s exports of steel and aluminium. China on Friday slapped antidumping duties on a U.S. animal feed ingredient known as distillers’ dried grains (DDGS) amid an intensifying spat between the world’s two largest economies over agricultural trade which totalled over US$20 billion last year. Beijing’s preliminary decision calls for duties of 33.8 per cent, effective immediately, the Ministry of Commerce said. The move comes after a monthslong probe following complaints by China’s ethanol producers that the U.S. industry was unfairly benefiting from subsidies. China is the world’s top buyer of DDGS, a by-product of corn ethanol used by feed mills as a substitute for corn and soymeal. China imports almost all of its needs from the United States, the largest exporter, and trade was worth US$1.6 billion in 2015. But buying has slowed dramatically this year because of concerns over the outcome of the probe. DDGS exports from the U.S. to China slid more than 60 per cent to 1.7 million tonnes in the first seven months from a year ago, worth US$347 million. The two countries are also embroiled in disputes over China’s exports of steel and aluminium. The U.S. industry is “deeply disappointed” with the decision, a trio of trade associations including two biofuels groups and the U.S. Grains Council said, reiterating their stance that the industry is not dumping.
The decision affects some of the biggest players in the U.S. ethanol industry, including global traders Archer Daniels Midland Co (ADM) and Louis Dreyfus, along with Poet LLC, oil refiner and ethanol producer Valero Energy Corp and grains group Andersons Inc. “We’ve developed strong relationships with Chinese customers. They’ve become great customers of ours. We value their business,” said Neal Kemmet, president of ACE Ethanol in Wisconsin, which is involved in the probe. He declined to give more details about specific volumes shipped to China. A spokeswoman for Louis Dreyfus Commodities said in an emailed statement that the decision was largely within expectations and was not of
“significant concern” given the size of the company’s exports to China. The head of Green Plains Inc, a top U.S. ethanol producer which was not involved in the case, said that trade flows to the country would continue. A U.S. trader said the duties were higher than he had been expecting, while in China, some traders said they had feared duties would be higher, between 40 per cent and 60 per cent. “The problem is this is just the preliminary result. People are worried that the final one could be even higher,” said one Shanghai-based trader. China did not give a timing for a final decision. Beijing previously launched an antidumping investigation into DDGS imports from the United States in late 2010, later extending the probe before dropping it in mid-2012. The earlier investigation slowed China’s imports of the feed ingredient but did not stop them entirely. U.S. farm cooperative CHS Inc was excluded from the ruling because the information submitted by the company to the government was inconclusive, the ministry said. Reuters
10 Business Daily Monday, September 26 2016
Greater China Restructuring
Goldman Sachs said to plan cut to Asia investment jobs Chinese securities firms are mounting a challenge to western banks like Goldman Sachs and Morgan Stanley in Asia. Cathy Chan
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oldman Sachs Group Inc. plans to cut about a quarter of its investmentbanking jobs in Asia, excluding Japan, because of a slump in deal-making in the region, according to a person with knowledge of the matter. The New York-based bank plans to make the cutback of about 75 jobs in the region later this year, the person said, asking not to be identified because the matter is confidential. The job reduction comes as the bank faces its worst Asia ranking in equity issuance since 2008, according to data compiled by Bloomberg data. A Goldman Sachs spokesman said he was unable to comment.
bond sales for 1MDB, the Malaysian government fund at the centre of several international investigations into suspected corruption and money laundering. Chinese securities firms are mounting a challenge to western banks like Goldman Sachs and Morgan Stanley in Asia, with mainland companies occupying seven of the top 10 positions in advising on Hong Kong initial public offerings this year, data compiled by Bloomberg show.
Postal Savings Bank of China Co. raised US$7.4 billion in a Hong Kong initial public offering this week, the world’s biggest first-time share sale this year.
Trim costs
Global investment banks have reduced headcount to trim costs after reporting declines in profit this year. UBS AG trimmed senior management ranks in the region, removing an Asia investment banking co-head position in July. The bank’s pre-tax profit at its investment bank slumped 48 percent in the second quarter, which the bank partly blamed on a slowdown in its Asia-Pacific equities business. Nomura Holdings Inc. and
Macquarie Group Ltd. also cut jobs this year. Goldman Sachs last month told U.S. regulators it plans to eliminate 15 positions in New York before the end of this year to reflect slower trading and investment-banking activity. Goldman Sachs has cut jobs at least four times this year, with prior announcements informing New York officials of 408 dismissals. The bank has also extended cutbacks in its fixed-income division to roughly 10 percent of staff, double what it normally culls every year. Reuters earlier reported Goldman is cutting almost 30 percent of the investment-banking jobs in ex-Japan Asia. Reuters
‘The bank’s pre-tax profit at its investment bank slumped 48 percent in the second quarter’ Asia ex-Japan equity offerings have declined 29 percent this year, and Goldman’s ranking plummeted to 11th from second in 2015, its worst showing in about eight years, the data show. The company also has come under scrutiny by authorities for its role in underwriting US$6 billion of
Entertainment deal
Sony unit, Dalian Wanda in tie-up to tap Mainland’s huge movie market Wanda’s owner, Wang Jianlin, has said he wants to bring Hollywood technology and capabilities to China through acquisitions. Jackie Cai and Brenda Goh
Chinese conglomerate Dalian Wanda Group will market Sony Pictures’ films and co-finance some upcoming movie releases of Sony Corp’s film unit in China, which is forecast to become the world’s top movie market as soon as next year. Wanda, owned by China’s richest man, Wang Jianlin, and Sony announced a deal on Friday under which Sony Pictures will utilise China’s biggest theatre chain owner Wanda to better access a rapidly growing yet restricted movie market. The alliance will help Wanda extend its Hollywood footprint and further Wang’s goal of making the group a global entertainment powerhouse. Wanda said in a statement on its website the tie-up would use its consumer-facing infrastructure to bolster Sony Pictures’ presence in China, which is on track to surpass the United States as the world’s biggest probably by next year, according to industry executives. “This partnership makes a lot of sense for both parties. Sony will benefit from smoother distribution and playback of its films in China and Wanda will be able to further integrate into the content development side of the business,” said Ben Cavender, Shanghai-based principal
of China Market Research Group. “We are going to see more cooperation going forward...Tie ups make sense because a lot of Chinese companies are also becoming interested in film financing as a form of investment,” he said. This would be Sony Pictures’ first partnership with Wanda, which has previously invested in movies made by Viacom Inc’s Paramount Pictures unit, such as “Teenage Mutant Ninja Turtles” sequel, and would give Wanda a step into movie marketing.
Despite an economic slowdown and dipping ticket sales, China showed how it could still be a saviour for Hollywood producers in June after Universal’s US$160 million blockbuster “Warcraft” managed to chalk up US$156 million in China in the first five days despite flopping in the United States. But the country’s regulator restricts the number of imported films that theatres can show to 34 a year, a limit that films which qualify as co-productions and meet other criteria are exempt from. These films also have an easier time navigating censorship issues with notoriously picky industry watchdogs. Profits at Sony’s film unit fell 34 per cent over the year to March after it
struggled to achieve hits at the box office over that period. Wanda declined to provide further details on the deal. Sony was not immediately available to comment.
Key Points Companies may also co-finance upcoming movies Will give Sony Pictures inroad into restricted market A boost for Wanda’s Hollywood dreams
Hollywood dreams
Started by Wang as a property developer in China’s northeast, Wanda now owns theatres, massive shopping malls and amusements parks around the country. The billionaire has said he wants to bring Hollywood technology and capabilities to China through acquisitions, telling Reuters in August that he was keen to buy Hollywood’s “Big Six” studios and was close to sealing two billion-dollar film related deals. Wanda already owns Legendary, co-producer of hits such as “Jurassic World” and “The Dark Knight”, which was the biggest U.S.-China movie deal when it was sealed in January, and U.S. cinema chain AMC Entertainment Holdings. Besides Wanda, Chinese companies that have invested in Hollywood include Fosun International and Huayi Brothers Media Corp. Reuters
Business Daily Monday, September 26 2016 11
Asia Taxes
India sets enforcement rules for GST More than 1.1 million existing service companies will come under the single control of the federal tax authorities. Manoj Kumar
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ndian federal and state officials have resolved key issues on enforcing a planned sales tax, Finance Minister Arun Jaitley said on Friday, and will meet next month to decide the main tax rate and those for different sectors. Implementation of the long-awaited goods and services tax (GST), planned for April 2017, is expected to boost revenue through better compliance while making life simpler for businesses that now pay a host of federal and state levies.
without a vote,” Jaitley told reporters after the two-day meeting, adding the council would meet again on October 17-19 to finalise rates under the new tax law. The meeting’s upshot failed, however, to fully address the concerns of companies and their tax advisers about so-called “dual control” in which both federal and state tax inspectors would oversee compliance. Jaitley said businesses with annual turnover of less than 15 million rupees
would be responsible towards state authorities only. For businesses with higher turnover, one authority - either state or federal - would have primary but not exclusive responsibility for assessing a company’s tax liability. “There will be some dual control,” Jaitley said. Industry and tax experts were concerned that their demand for single control was not fully accepted. “It is not in the best interest of industry,” said Rajeev Dimri, a tax expert with consultancy BMR & Associates LLP. More than 1.1 million existing service companies will come under the single control of the federal tax authorities, providing important relief for sectors like telecoms and giving regional tax inspectorates time to get
up to speed on the GST. Firms with annual turnover below 10 million rupees (US$150,000) in eight north-eastern states and 20 million rupees in other parts of the country would be exempted from the tax, Jaitley said. Tough bargaining on the rate and scope of the tax continues as many states want an average tax rate of 22-23 per cent compared with the federal government suggestion of 18-19 per cent. Both federal and state legislatures must pass three laws setting the rate and scope of the GST before the tax comes into effect. Jaitley hopes for passage in the winter session of parliament scheduled for November. Reuters
Key Points Businesses with US$225,000 turnover face “dual control” States to administer businesses with lower turnover Some states pushing for 22-23 pct average GST rate The GST Council, comprising federal and state finance ministers, agreed at its first meeting that all businesses with annual turnover of 15 million rupees (US$225,000) or more would be chiefly administered either by federal or state tax officials, depending on risk parameters. “All decisions have been taken
Private poll
Bank of Japan survey to show business mood mixed Industrial production is expected to have risen 0.5 per cent in August Kaori Kaneko
Japanese manufacturers’ mood improved for the first time in five quarters while service sector confidence worsened to the lowest since 2014, a Reuters poll showed, as the effects of a strong yen filtered through the economy. The Bank of Japan’s quarterly tankan business sentiment survey will likely show the headline index for big manufacturers’ sentiment improving by 1 point to plus 7 points in September from plus 6 points three months ago, the poll of 16 economists showed. It would be the first time the index improves since the June survey in 2015. The poll found the sentiment index for big non-manufacturers worsened slightly to plus 18 from plus 19 three months ago. It would be the third straight quarterly deterioration and the lowest since the December 2014 survey when the index stood at plus 16. “A significant improvement in sentiment among big manufacturers is unlikely because of the adverse impact of a strong yen - a real body blow,” said Tsuyoshi Ueno, senior
economist at NLI Research Institute. “Although there will probably be a small improvement in sentiment, there is a lack of momentum.” He also said a slight improvement in sentiment among big manufacturers was likely led by the auto sector, which recovered its production losses following earthquakes in southern Japan and firms’ receding concerns about fallout from Brexit. “Public works probably supported non-manufacturers’ sentiment but a slowdown in spending by foreign tourists and bad weather had a negative impact.” Sentiment of big manufacturers is expected to improve slightly in the
next three months supported by the government’s economic stimulus steps, while that of non-big manufacturers will probably stay the same, according to the poll. Big firms are expected to raise their capital spending plans by 6.8 per cent for this fiscal year to March, compared with 6.2 per cent planned previously, the poll found. “Some big manufacturers could delay their capex plan due to worries about a strong yen and corporate profits,” said Takayuki Miyajima, senior economist at Mizuho Research Institute. “On the other hand, non-manufactures likely develop their capex plan on domestic infrastructure building and inbound demand. Thus, overall firms’ capex plans will probably show a solid tone.”
The BOJ will announce the tankan quarterly survey at 8:50 a.m. on October 3 (2350 GMT on Oct 2)
Core CPI down again, factory output rebounds
The poll also found core consumer prices (CPI), which includes oil products but excludes volatile fresh food prices, fell 0.4 per cent in August from a year earlier. It would be the sixth straight monthly fall but the pace of decline likely slowed from a 0.5 per cent drop in July. Analysts say price falls in energy-related items narrowed but a strong yen weighed on price gains in food and daily necessities. Industrial production is expected to have risen 0.5 per cent in August from the previous month helped stronger exports to Asian nations, according to the poll, following a slip of 0.4 per cent in July. The poll found the jobless rate to be steady at 3.0 per cent in August and the jobs-to-applicants stayed at 1.37 in August - the same level in July and June and the highest since August 1991 when the ratio was at 1.40. And household spending fell an annual 2.5 per cent in August, it showed. Japan’s internal affairs ministry will announce August core CPI, household spending and labour market data at 8:30 a.m. on September 30 (2330 GMT Sept. 29) and the trade ministry will release industrial output at 8:50 a.m. on the same day. Reuters
12 Business Daily Monday, September 26 2016
Asia In Brief UN session
Vietnam pledges efforts to implement sustainable development Vietnam has committed itself to the implementation of the Sustainable Development Goals (SDGs), said Vietnamese Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh Saturday. Minh made the remarks at the annual high-level debate of the 71st session of the UN General Assembly. “I believe that achieving the Sustainable Development Goals is within our grasp,” Minh said, “we are indeed expected by our people, our children and our grandchildren to deliver on our commitments.” Reform, innovation, creativity and economic restructuring are setting countries on a prosperous path, he added. Indonesia
Smelter investors fret over rule changes Indonesian nickel smelter investors fear the government of President Joko Widodo will change rules that have supported prices of the metal, and put up to US$12 billion in its budding smelting and mineral processing industry at risk. Indonesia banned metal ore shipments in 2014 to push firms to build smelters and shift exports from raw materials to higher-value semi-finished and finished metals. The ban cost Southeast Asia’s largest economy billions of dollars in lost revenue. Indonesian government officials have several times said they are studying export rules and the possibility of a policy revision. Debt reorganization
Japanese PM wants to deepen ties with Cuba Japanese Prime Minister Shinzo Abe said on Friday that his visit to Communist-ruled Cuba, the first ever by a Japanese leader, had turned a new page in bilateral relations and the two countries would now deepen their economic relationship. Abe, who met on Thursday with Cuban President Raul Castro and his predecessor and older brother Fidel Castro, said the issue of unpaid debt had long constrained this relationship. Yet this was no longer an obstacle, he told a news conference in Havana, as the two countries had agreed on a plan to reorganize that debt. Results
BASF to continue to invest in Asia Germany’s BASF, the world’s largest chemicals maker by sales, will continue to invest in Asia, albeit at a slower rate, as it weighs a recent slowdown against long-term growth prospects that remain well above the global average. “Planned investments of around 3.5 billion euros (US$3.9 billion) between 2016 and 2020 will focus on areas where BASF is technologically leading, has a competitive advantage and expects robust market growth,” BASF said. The 700 million euros to be invested on average per year are less than the 750 million euros spent per year over the 2012-to-2015 period, presentation slides posted on BASF’s website showed.
Expats survey
How Singapore beat New Zealand to be top place to live China, in seventh place, and India, in ninth, are the only two other Asian countries within the best career prospects top 10. Livia Yap
S
ingapore has done it again. The city-state beat New Zealand to rank first in a survey of expat destinations for the second year running. Among nearly 27,000 expats in 190 economies, Singapore is the best place to live, work and raise a family abroad, according to the latest and ninth edition of HSBC Holdings Plc’s annual Expat Explorer report. While New Zealand came close to Singapore in most areas, what dragged down its ranking was economics the category covering earnings and career prospects. New Zealand was rated 41st for personal finances in the survey, far behind Singapore’s eighth place under this metric. No other Asia-Pacific economy made it to the top 10 overall ranking of expat destinations, with Australia, Hong Kong, Taiwan, Vietnam and Japan rounding up the top 20. The U.S. placed 30th overall. Here’s a breakdown of why Singapore is the favourite:
Money and economy
Quality of life
Here is where New Zealand beats Singapore - in overall experience. New Zealand tops the category, which includes quality of life and ease of social integration, with Singapore coming in at fourth place. Almost three-quarters of expats in New Zealand say they’ve achieved the goal of improving their quality of life, beating the global average of 52 per cent. Expats consider Japan to be the world’s safest country, followed by Singapore and South Korea. More than eight in 10 expats living in Singapore feel safer than back home, compared with 52 per cent globally.
Career prospects
More than six in 10 expats working in Singapore believe it is a good place
Family, education
Sweden remains the best place in the world for families abroad, taking the top spot in the overall family category including school and childcare quality and cost of bringing up kids. Singapore is in third place and New Zealand in fourth. Taiwan, Thailand, Hong Kong and Australia round up the Asia-Pacific entries in the top 20. Singapore’s quality of education is rated the best in the world. Among expats in Singapore, 75 per cent consider the quality of education there better than in their home country, compared with 43 per cent overall in the survey. New Zealand ranks eighth, followed by Japan in ninth place and Hong Kong in 11th. Bloomberg News
Expats in Singapore earn on average about US$139,000 annually, 43 per cent more than the global average. Expats in Hong Kong are paid even more, at US$170,000. Switzerland is the top country for personal finances, with annual incomes averaging US$188,000. The highest-paid expats live in Zurich, where more than two in five
Stake selloff
Australia grid sale draws local bid after foreigners barred Central bank governor’s knock back of the State Grid and CKI bids in August sparked a warning from China that the move will hurt bilateral ties. Perry Williams
The controversial selloff of a majority stake in an Australian state-owned power network has been revived with a proposal submitted by local investors one month after offers from two separate foreign bidders were blocked. The New South Wales government, which owns the asset, said in an e-mailed statement Friday that it received an unsolicited bid from pension fund AustralianSuper and IFM Investors, Australia’s largest infrastructure fund. It didn’t reveal the value of the offer, although the 50.4 per cent stake the government is looking to offload was previously expected to fetch more than A$10 billion (US$7.6 billion). IFM Investors said it moved with an early offer for Ausgrid in keeping with the state government’s desire to bank the proceeds of a sale by the state’s budget in June 2017. “It’s a quality asset. They want to get something approved by the end of the year,” said IFM Investors Chief Executive Officer Brett Himbury in
a phone interview with Bloomberg. “We believe our bid is unique because we represent an all-Australian consortium.” The move by IFM and AustralianSuper follows a decision by federal Treasurer Scott Morrison to scupper separate offers from State Grid Corp. of China and Cheung Kong Infrastructure Holdings Ltd., whose bids were deemed to be against Australia’s national interest.
‘Unsolicited proposal’
New South Wales Premier Mike Baird said on Friday a cross-agency panel would “thoroughly assess” the proposal. “The government can receive unsolicited proposals at any time and has a thorough process in place to assess such proposals,” he said. State Treasurer Gladys Berejiklian said the Ausgrid sales process has yet to be formally restarted and a final decision on the Australian bid would be made later this year. She said the latest proposal indicates there is “strong market interest” in the asset which supplies power to 1.6 million homes and businesses in and
around Sydney. IFM indicated it may consider an offer for Ausgrid in August shortly after the two foreign bidders were knocked back by the Australian government.
Ausgrid suitor
A consortium including IFM Investors unsuccessfully bid for the A$9.7 billion Port of Melbourne deal. The Victorian government last Monday handed the contract to an alternative group of investors including QIC Ltd, which has also been linked as a suitor for Ausgrid. IFM and AustralianSuper hold a raft of major infrastructure assets in Australia and partnered in 2013 to buy Port Botany and Port Kembla from the NSW government in a A$5.07 billion deal. Australia has been balancing the need for foreign investment to drive economic growth against mounting public opposition to sales of farmland, real estate and strategic infrastructure, particularly to Chinese investors. Bloomberg News
Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com Founder & Publisher
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earn over US$200,000, compared with almost one-third in Shanghai. Expats in Singapore are the most assured about the economy of their adopted country, with almost three-quarters saying they feel confident, compared with 52 per cent in the Asia-Pacific region.
to advance their careers. Singapore ranks second behind Hong Kong. China, in seventh place, and India, in ninth, are the only two other Asian countries within the top 10. New Zealand is in 18th place. About 58 per cent of expats in Singapore say it is a good place to start a business, beating the global average of 38 per cent. London and New York attract executives looking to boost their careers. More than 70 per cent of expats in both cities say working there will improve their job prospects when they return home, surpassing the 46 per cent globally.
Business Daily Monday, September 26 2016 13
Asia Antitrust move
Japan’s watchdog considers action against Apple, carriers The U.S. company accounts for almost one in every two smartphones sold in Japan, its largest share in a major market. Yoshiyasu Shida
Japanese regulators are considering taking action against Apple Inc over possible antitrust violations that may have helped it dominate the nation’s smartphone sales, government sources said, a move that could hit the company’s profit margins in one of its most profitable markets. In a report published last month, Japan’s Fair Trade Commission (FTC) said that NTT Docomo, KDDI Corp and Softbank Group were refusing to sell older surplus iPhone models to third party retailers, thereby hobbling smaller competitors.
Key Points Regulators poised to take action on Apple, carriers-sources Apple controls nearly half of the Japanese smartphone market Top 3 carriers control iPhone supply, hobbling smaller rivals
Apple was not named in that report, but two senior government sources told Reuters that regulators were also focusing on Apple’s supply agreements with all three carriers. Under those deals, surplus stock of older iPhones is kept out of the market and sent to overseas markets,
such as Hong Kong, according to industry sources. The carriers, locked in a costly battle to win consumers who covet iPhones, also bulk purchase the Apple smartphones and sell them at a discount, which gives the U.S. company an advantage over rivals such as Samsung Electronics Co, according to the two government officials and an industry source. Both iPhone 7 and Samsung’s Galaxy S7 edge model sell for 93,960 yen (US$932) under Docomo’s main service package without any contract, but the cost for the iPhone drops sharply to 38,232 yen with a twoyear contract, while the Galaxy falls to 54,432 yen. When asked about the antitrust concerns, Apple forwarded a link to a webpage published at the time of the August 2 FTC report that says it has created or supports 715,000 jobs in Japan with Japanese-based developers raking in more than US$9 billion in revenue from Apple apps since 2008. It did not comment further.
Largest share
The strategy has helped Apple sustain demand for new iPhones, making Japan one of its most profitable markets. The U.S. company accounts for almost one in every two smartphones sold in Japan, its largest share in a major market. It also kept new mobile service
providers such as messaging app firm Line Corp and online retailer Rakuten Inc from selling iPhones, and helped the top three carriers control more than 90 per cent of the mobile phone market. Any government order for corrective measures may crimp demand for more profitable new iPhone models that compete against well-reviewed Android phones such as the Galaxy S7. The officials said the watchdog hoped pressing the carriers would get them to solve the antitrust issue, which could include renegotiating contracts with Apple. They asked not to be identified because they are not authorized to speak to the media. The FTC did not give a deadline or say what penalties, such as fines, it would impose if the companies did not act. In the past, FTC has issued cease and
desist orders, and imposed a “surplus charge” to recoup profits resulting from antitrust violations. The biggest surplus charge to date for a case, which involved five companies, is 27 billion yen (US$269 million). Fines on companies judged to be operating cartels or monopolies, however, can be higher. NTT Docomo said it did not believe it was blocking new entrants. “We have always strived to conduct sales and services appropriately and we will take the FTC’s report on board and consider our response,” a spokesman said. A spokeswoman for KDDI said her company had operated its business in an appropriate manner and followed guidelines. A Softbank spokesman also said it would work with regulators. “Up to now we have never had any issues with competition laws over our sales practices and pricing,” he said. Reuters
14 Business Daily Monday, September 26 2016
International In Brief Rating
Moody’s cuts Turkey’s credit to ‘junk’ Ratings agency Moody’s cut Turkey’s sovereign credit rating to “junk,” citing worries about the rule of law after an attempted coup and risks from a slowing economy, in a move that could deter billions of dollars of investment. Turkey depends on investment flows to fund its current account deficit one of the biggest in the G20 - and service its foreign debt. Ratings downgrades could force it to pay more to borrow money in international markets. The downgrade followed a two-notch cut to below investment grade by Standard and Poor’s right after the attempted military coup in July. Banks’ capital
France, Germany warn against stricter rules France and Germany warned on Friday against the introduction of new rules that would force banks to set aside more capital, saying this could choke off private lending and hurt growth prospects. Speaking after a meeting of the GermanFrench economic council in Berlin, German Finance Minister Wolfgang Schaeuble and his French counterpart Michel Sapin said it was critical that new Basel III rules did not put European banks at a disadvantage. The Basel Committee made up of regulators from nearly 30 countries has come under intense pressure to rein in the reforms it is now completing.
PMI
Euro zone business growth near two-year low PMI pointed to the bloc’s GDP expanding around 0.3 per cent this quarter. Jonathan Cable
Euro zone business activity has expanded at its weakest rate since the start of 2015 this month as growth paths diverged and firms stopped discounting for the first time in a year, surveys showed on Friday. M a r k i t’ s c o m p o si t e s u r v e y showed a big split between buoyant manufacturers and a struggling service sector, and a similar divide in growth rates among members of the currency union: French business activity hit a 15-month high, while Germany’s private sector growth slowed to a 16-month low. The euro zone flash composite Purchasing Managers’ Index, seen as a good overall growth indicator, fell to 52.6 from August’s 52.9. Readings above 50 indicate growth, but it was still the lowest figure since January 2015. A Reuters poll of economists had predicted only a slight dip to 52.8. “They (PMIs) rather confirmed the expectations that moderate but stable growth in the euro area has continued in the autumn,” said Tuuli Koivu at Nordea. Markit said the PMI pointed to the
bloc’s GDP expanding around 0.3 per cent this quarter, in line with a Reuters poll earlier this month that suggested economies stuck in low gear need fiscal policies rather than more monetary easing. The European Central Bank has unleashed extraordinary stimulus in recent years but interest rates are probably close to the bottom, even though the bank had hoped the euro zone economy would respond better, two top policymakers said on Friday. Those years of ultra-loose policy have so far failed to get inflation anywhere near the European Central Bank’s 2 per cent target ceiling so policymakers may take some cheer from firms halting price discounting for the first time in a year. The output price index rose just above the breakeven mark to 50.1 from 49.3. “It does seem to be a very tentative hint at rising inflation though, meaning that it can still be a while to come before meaningful price growth will return,” said Bert Colijn at ING. Consumer confidence rose in August, official data showed on
Thursday, and manufacturers had a much better September than expected. Their PMI climbed to 52.6 from 51.7, beating all forecasts in a Reuters poll, while an index measuring output rose to a ninemonth high of 54.0 from 53.3. The rally could continue into October, as new orders came in at a much faster rate. The sub-index leapt to 53.0 from 51.4. A PMI covering the bloc’s dominant service industry slumped to 52.1 from 52.8, however, its lowest reading since late 2014 and below all forecasts in a Reuters poll which had predicted no change. Optimism among businesses in the industry also continued to slide with the expectations index falling to a 21-month low. It was a similar mixed picture from Germany and France, the bloc’s two biggest economies and the only members to issue single-country flash PMIs. Services lifted French business activity to a 15-month high while growth in Germany’s private sector slowed to a 16-month low, suggesting the powerhouse of the currency union may have lost momentum in the third quarter. “It clearly throws a shadow on the so-far strong growth of the German economy,” Koivu said. Reuters
Revolving doors
Barroso says Goldman is “no drug cartel” Former European Commission President Jose Manuel Barroso on Friday put up a spirited defence of his right to work for U.S. bank Goldman Sachs, after the commission opened an ethics probe into his move, and he accused it of acting arbitrarily. “Why would I not have the right to work where I choose, if it is a legal entity, obviously, not a drug cartel?” a visibly agitated Barroso, who is a former Portuguese prime minister, said. Wall Street
Federal Reserve proposes new limits on energy bets The Federal Reserve outlined a plan to limit Wall Street bets on the energy sector by forcing companies like Goldman Sachs and Morgan Stanley to hold more capital against such investments. Under current law, Goldman Sachs Group Inc and Morgan Stanley may invest in energy storage and transportation in ways that other banks cannot, but the U.S. central bank’s new plan would make such bets more costly. Banks would have to hold more capital against energy and commodity investments under the plan. The Fed also contemplated other limits like banning Wall Street control of power plants and prohibiting bank holding companies from owning copper.
Monetary board
Fed’s internal split tied to duelling views on jobs outlook The Fed will have three monthly government reports on the state of the U.S. labour market in hand before its meeting in December. The split at the Federal Reserve over when to next raise interest rates appears to hinge largely on disagreements over the labour market outlook, comments from policymakers on Friday suggest. When the Fed earlier this week decided to stand pat on rates, Fed Chair Janet Yellen said she felt the labour market had more room to run before it could overheat. Three of 10 voting policymakers dissented, saying they preferred an immediate hike rather than the deferral until later in the year that most saw as appropriate. On Friday one of the dissenters, Boston Fed chief Eric Rosengren, explained that his vote turned on his view that sharply falling unemployment could create a spike in inflation and actually trigger a recession. “Unemployment this low may well have the desirable effect of bringing more workers into the labour force - but, unfortunately,
only temporarily,” said Rosengren. Raising rates slightly and gradually, said, could prevent overheating in the labour market and allow the recovery to continue longer than otherwise. Two other dissenters, Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester have not comment on their decision to dissent as of Friday. C o m m e n ts f r o m o th e r F e d policymakers on Friday, however, underscored that a deep wedge in views on the labour market outlook is driving differences of opinion on when to raise rates. Minneapolis Fed President Neel Kashkari, responding to questions from the public on Twitter, said he believed the labour market continues to have slack and that he wanted to see the unemployment rate, now at 4.9 per cent, to come down. The bigger worry for him, he said, was that the Fed will raise rates too soon rather than too late. The view that the labour market
is not close to overheating is also central to Dallas Fed President Robert Kaplan’s view that the Fed should be patient and cautious in raising rates. “We don’t think the economy is overheating,” said Kaplan, who like Kashkari will rotate into a voting slot on the Fed’s policy-setting panel next year. “We are not as accommodative as people would think.”
‘Comments from Fed policymakers underscored that a deep wedge in views on the labour market outlook is driving differences of opinion on when to raise rates.’ The Fed will have three monthly government reports on the state of the U.S. labour market in hand before its meeting in December, when many traders and economists expect it to finally pull the trigger on a rate hike. Reuters
Business Daily Monday, September 26 2016 15
Opinion Business Wires
Taipei Times Chinese Nationalist Party (KMT) Vice Chairman Steve Chan denied that “one China, with different interpretations [of what ‘China’ means]” has been scrapped in the party’s policy platform, contrary to what some KMT lawmakers have said. Chan made the remarks in response to reporters’ questions about a dispute at Friday’s KMT caucus meeting, at which some KMT lawmakers voiced discontent over the party’s new policy platform, which was said to omit “one China, with different interpretations,” keeping only the so-called “1992 consensus.”
The Times of India Wine sale in the country is likely to double to 3 crore litres by the financial year 2020-21 considering the year-onyear growth of 20 per cent for the next five years, according to All India Wine Producers Association (AIWPA). Speaking to TOI, Yatin Patil, president, AIWPA, said, “The wine sales in the country have increased by 21 per cent during the last financial year 2015-16. Awareness, promotion, education and popularity of wine cocktails were the major factors that led to rise in sales of wine.”
The Korea Herald Hyundai Merchant Marine Co., a South Korean shipping line, has begun work to acquire key assets of the troubled Hanjin Shipping Co., according to industry sources and creditors yesterday. Creditors led by the state-run Korea Development Bank have recently taken control of Hyundai Merchant from Hyundai Group, as part of restructuring of the debt-heavy No. 2 South Korean shipper. Under the restructuring program, Hyundai Merchant has received business consulting from A.T. Kearney, IBM and a local consulting firm. A.T. Kearney is providing consulting on which of Hanjin Shipping assets are healthy.
Philstar Economic managers and monetary authorities are assuring investors the country’s macroeconomic fundamentals remain solid amid the tirades made by President Duterte against US President Barack Obama, UN Secretary General Ban Ki-moon, and the European Union over his all-out war against illegal drugs. Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. (pictured) said in a speech before bankers, traders, brokers, fund managers, and underwriters the Philippines is in a relatively strong position compared with many advanced economies and emerging market economies. He pointed out the Philippines have had 70 consecutive quarters of positive gross domestic product (GDP) growth since 2009.
Can South Korea make more babies?
S
outh K orea is facing major demographic challenges. The total fertility rate (the number of children per woman), at 1.24, is one of the lowest in the world, and well below the level – 2.1 children per woman – needed to sustain a population without immigration. As a result, the population is aging fast, and the government, despite its best efforts, seems to have no answer. A low birth-rate is common in industrialized countries. Before South Korea’s economic boom – a time when having more children was viewed as a source of security in old age – the fertility rate was much higher, averaging more than six until 1960. But, as South Korea’s economy advanced, child-rearing costs rose, and female labour-force participation increased, the fertility rate declined dramatically, dropping below two in the 1980s. At first, falling fertility rates were an economic blessing, as households saved more and invested in children’s development. In 2015, the college enrolment rate for women hit 81 per cent, compared to just 6 per cent in 1980. But the decline of the prime working-age population has lately been undercutting economic growth, and threatens to place excessive pressure on the public pension system down the road. South Korea’s government has attempted to address these challenges with a series of measures aimed at boosting fertility rates. A recent package includes more paternity leave, priority enrolment in public childcare facilities for third children, and subsidies for infertility treatment. But whether these measures will lead to higher fertility rates is dubious, for a simple reason: they fail to tackle sufficiently the high economic hurdles that are causing South Koreans to delay or forego having children. One of those hurdles is the cost of education. South Korean parents are willing to invest heavily in giving their few children the best chance of prospering. In 2015, they spent almost 7 per cent of their disposable income on private tutoring for their children in primary and secondary education. They also pay an absurdly high price for their children’s college education, which no longer guarantees prosperity in life. In fact, South Korea’s share of private spending for college education is the highest among OECD countries, even ahead of the United States. That limits how many children parents may feel they can afford to raise. For many young South Koreans, even marriage is economically unfeasible nowadays, owing to factors like high housing costs and youth unemployment, even among university graduates. The number of weddings in South Korea plunged from 435,000 in 1996 to 302,800 in 2015. In a country where only 2 per cent of children are born outside marriage, this trend has a powerful impact on fertility rates. Women confront the highest barriers to increased fertility. Pervasive gender inequality, together with a lack of affordable, high-quality childcare, causes many South Korean women to withdraw from the labour market after marriage or childbirth. While men work long, inflexible hours, women assume the lion’s share of the responsibility for family care. A 2014 survey indicated that South
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Lee Jong-Wha Professor of Economics and Director of the Asiatic Research Institute at Korea University.
Korean women spent, on average, three hours and 28 minutes daily on household activities and family care, compared to just 47 minutes for men, who also accounted for only 5.6 per cent of those who took parental leave in 2015. Though the new measures aim to boost this share, it will not be enough. After all, women are not just struggling to cope with uneven parental leave; many are leaving their jobs altogether after childbirth. And many of them do not wish to do so. In a recent survey by the Federation of Korean Industries, 38 per cent of the single female respondents said that they do not want children, mostly because they fear that they will struggle to keep up at work or lose their jobs. Only onethird responded positively to the government’s program for promoting fertility. South Korea’s government must pursue a more comprehensive policy package aimed at lowering some of the barriers to childbirth. Women, in particular, need greater support, in order to eliminate the binary choice between career and family. The key is to provide more flexible work arrangements, to build a more accepting corporate culture, and to ensure accessible childcare, both public and private. To this end, allowing the migration of foreign housekeepers and caregivers could be very helpful. South Korea remains conservative about offering permanent residency to foreign nationals. But the reality is that, in advanced economies where market services for childcare and households are available, highly educated women tend to have more children, especially at older ages. Japan, for its part, has managed to boost its ultralow fertility rate – which bottomed out in 2005 at 1.26 – to 1.46 in 2015, through consistent efforts to reduce childrearing costs and change the corporate culture. To sustain this recovery, it has recently decided to take initiatives to attract more foreign housekeepers. These changes reflect Prime Minister Shinzo Abe’s commitment to prevent the population from falling below 100 million. Even where foreign household workers do not raise the fertility rate, they enable more women to continue working after having children. In Singapore, for example, families often hire livein maids from neighbouring countries, including the Philippines and Indonesia, to take care of the housework and childcare. Though Singapore’s fertility rate stands at just 1.3 – one of the lowest in the world – this policy enables the country to attract foreign talents to fill the population gap and sustain the economy. To some extent, demographic change is inevitable, as is its transformative economic impact. But there are steps that governments can take to shape demographic trends and blunt their negative effects. If South Korea creates an environment in which families can live and work happily, those families will grow larger. Project Syndicate
South Korea’s government must pursue a more comprehensive policy package aimed at lowering some of the barriers to childbirth.
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16 Business Daily Monday, September 26 2016
Closing Environment
Northern China hit by smog
The national observatory forecast yesterday that light to medium smog will continue to shroud northern China over the next two days. Parts of northern China and provinces along the Yangtze, Yellow and Huaihe rivers will experience light to medium smog from Sunday through Monday, according to a statement on the National Meteorological Centre (NMC) website. The NMC suggested people avoid outdoor activities and take precautions during the period.
Starting Tuesday, rain and a cold front will disperse the smog, said the NMC. According to the Beijing Environmental Protection Monitoring Centre, Beijing (pictured) experienced serious smog on Saturday despite showers over the past two nights. The Air Quality Index (AQI) reading was 229 at 6 p.m. Saturday, indicating serious pollution, with the major pollutant being PM2.5, or particulate matter measuring less than 2.5 microns in diameter, according to the center. Xinhua
Allies clash
US-EU economic relations in for stormy weather The rise of protectionist views in the United States with the candidacy of Donald Trump and in Europe, with the British vote to secede from the EU, has electrified talks. Jeremy Tordjman
W
ith spats over Apple and Deutsche Bank and squabbles about Airbus and Boeing, approaching elections on both sides of the Atlantic are exacerbating strains in US-European economic relations. The recent controversy over taxing the iPhone maker surely epitomizes the situation best. European authorities’ decision in late August to force the American giant Apple to pay US$14.5 billion in taxes to Ireland infuriated officials in Washington and is still ruffling feathers. US Treasury Secretary Jacob Lew has repeatedly expressed his astonishment and openly accused the Europeans of “disproportionately” focusing on US corporations. On the other hand, the US Justice Department’s US$14 billion proposed settlement with Deutsche Bank over trading in mortgage-backed securities derivatives has rattled nerves in Europe, where some accuse Washington of coming down particularly hard on foreign banks. Add to this the US victory at the World Trade Organization this week in the battle over Europe’s purportedly illegal public subsidies to Airbus. The matter is not yet concluded but the United States could in theory claim billions of dollars in compensation from Europe. And to top it off, negotiations on
the Transatlantic Trade and Investment Partnership, which are to resume in a week in New York, are also foundering - not only because of divergent positions but also because of the calendar. The Americans still insist the agreement could be signed before the end of the year while President Barack Obama is still in office. The Europeans now say this is “not realistic.”
Friction
There has always been friction among the two allied sides, but this time things are worsened by the uncertainty from the coming presidential elections, set for November 8 in the US and for April in France. General elections are due to be held in Germany before the end of 2017. “In normal times, both sides would easily reach a compromise on these
Safety collaboration
issues but the problem is that it is coming in this incredibly uncertain environment,” said Edward Alden of the Council on Foreign Relations, a New York think tank. The rise of protectionist views in the United States with the candidacy of Republican presidential nominee Donald Trump and in Europe, with the British vote to secede from the EU, has electrified talks and complicated reactions from current governments. “The danger is that what should be routine disputes become harder and harder to deal with in this environment,” said Alden, adding that both Europe and the United States are now “disoriented” by the rejection of trade liberalization. Assailing trade partners then becomes tempting. And so France took the gloves off recently, decrying the purported stubbornness of the United States in trade talks. “The Americans offer nothing or crumbs.... This isn’t how allies should negotiate,” French Foreign Trade Minister Matthias Fekl said last month.
Markets
He then drove home the point, saying it would be “inconceivable” to continue talks so long as the Americans persisted in applying their laws in supposedly extraterritorial manner on European companies. The French bank BNP Paribas was a case in point, settling with the Americans for US$8.9 billion in 2014 over alleged sanctions violations. But some experts express doubts about such head-butting.
“The danger is that what should be routine disputes become harder and harder to deal with in this environment” Edward Alden of the Council on Foreign Relations
“I don’t think you can really score points in the coming elections in the United States or Europe by attacking trade partners,” said Sebastian Dullien of the European Council on Foreign Relations in Berlin, adding nevertheless that “some populists may think so.” Others point out that past transatlantic troubles have been overcome without too much difficulty. At the time, the penalties imposed on BNP Paribas by the United States did cause pronounced tension. But in the light of day, things look a little different, said Jacob Kirkegaard of the Peterson Institute for International Economics in Washington. “Who today could argue that the US-EU economic relationship was really badly damaged by this case?” he asked. AFP
Penalty proposal
Chinese police, banks cooperate Fifty SMEs debut on Ex-Thai Prime Minister to fight telecom fraud Mainland’s New Third Board should pay US$1 billion fine Chinese police, banks and banking regulators are working together to fight telecom fraud and protect citizens’ rights. The Ministry of Public Security (MPS) and the China Banking Regulatory Commission have jointly issued a document on the freezing and return of money involved in telecom and online fraud. Last year, the MPS authorized local police in Beijing to establish an information platform on telecom and online fraud crackdown. According to police sources, the platform has worked with the banking sector and frozen more than 400,000 fraud-related bank accounts involving over 1.1 billion yuan (US$165 million). Many Chinese banks have strengthened training of their staff to identify and intervene in risky transactions. Ma Xudong, a fraud risk management official with the Industrial and Commercial Bank of China (ICBC), said the ICBC is working with police and other banks in establishing a blacklist of suspicious accounts to identify risky transactions in a more effective manner. “Most of the transactions involving the blacklisted accounts can by successfully managed,” Ma said, noting that, as of the end of last month, the system had helped the bank intervene in more than 100,000 cases of fraud-related remittance, saving its clients from economic losses of over 1.46 billion yuan. Xinhua
A total of 50 small and medium-sized enterprises (SMEs) were added to China’s New Third Board, marking further expansion in China’s over-thecounter market since the board was officially established three years ago. The move brings the number of companies listed on the New Third Board to 9,073 and represents China’s effort to encourage the development of SMEs amid downward economic pressure. The market value of the 9,073 companies is about 3.48 trillion yuan (US$about 527 billion). Turnover on the New Third Board reached 3.73 billion yuan last week. The New Third Board, or National Equities Exchange and Quotation (NEEQ) system, serves as a national share transfer system for SMEs to transfer shares and raise funds. It was founded in 2006 as an experimental platform to facilitate financing for China’s non-listed small and promising high-tech enterprises in Beijing’s Zhongguancun Science Park. The present system was officially established on January 16, 2013 after years of trials in cities including Shanghai, Wuhan and Tianjin. It complements the existing stock exchange, the SME board and the ChiNext board. Xinhua
Former Thailand Prime Minister Yingluck Shinawatra, whose government was ousted in a military coup in 2014, should be fined about 35 billion baht (US$1 billion) for overseeing a program to buy rice from farmers above market rates, a state-appointed committee recommended. The proposed penalty amounts to about 20 per cent of the 178 billion baht that the rice-purchase programs in 2012 and 2013 cost the country, Manas Jamveha, director general of the Comptroller General’s Department, told reporters Saturday. The committee appointed to look into the issue ruled it was an abuse of power and that Yingluck was negligent in overseeing the program while she was in power, said Manas, the committee’s chairman. A report will be submitted to the Prime Minister’s Office and the Ministry of Finance, which are both responsible for claiming damages from Yingluck before the case expires next February, Manas said. The office of National Anti-Corruption Commission or another related agency will decide who is responsible for the remaining damages, he said. Junta leader and Prime Minister Prayuth Chan-Ocha said the government has to proceed with the case in accordance to the law and before it expires. Bloomberg News