Farewell, Tombola? Gaming Page 7
Thursday, October 6 2016 Year V Nr. 1146 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Subsidies
Loans to SMEs, young startups down in Sept. Page 4
Trade
China’s foreign trade still under pressure Page 9
www.macaubusinessdaily.com
Golden Week
Trade
Visitor arrivals rebounding
MacauChina CEPA trade up 55 pct Page 5
Page 4
Economy
A 4.7 pct contraction. So says the International Monetary Fund regarding the MSAR economy. More positive than the 7.2 pct drop it forecast in April for the year. In the October edition of World Economic Outlook, the Fund predicts local consumer prices will increase, while employment will stabilise. Page 3
Saving Sino-Luso trade
Sports games virtually here
E-gaming system supplier Paradise Entertainment is planning to launch virtual sports games in the MSAR next year. In the wake of its exclusive deal with UK-based supplier Inspired.
Trade Forum Macau hopes to reverse slumping Sino-Luso trade. Via the upcoming ministerial conference to be held in Macau next week. Forum Secretary-General Xu Yingzhen puts a good spin on progress. But that was before. Page 6
Construction cash cow
Construction Receipts of the city’s construction industry up 18 pct y-o-y to MOP93.4 bln in 2015. Credited to the ongoing construction projects of casino-resorts in Cotai. Boosting the sector’s contribution to the local economy 29 pct y-o-y. Page 2
Braking bad Gaming Page 7
HK Hang Seng Index October 5, 2016
23,788.31 +98.87 (+0.42%) Worst Performers
CNOOC Ltd
+3.79%
AIA Group Ltd
+1.23%
Link REIT
-2.16%
Henderson Land Develop-
-0.64%
PetroChina Co Ltd
+3.08%
China Shenhua Energy Co
+1.05%
Power Assets Holdings Ltd
-1.25%
CLP Holdings Ltd
-0.57%
Kunlun Energy Co Ltd
+2.67%
Galaxy Entertainment Group
+0.99%
Li & Fung Ltd
-1.22%
Cathay Pacific Airways Ltd
-0.55%
China Petroleum & Chemical
+2.09%
China Mobile Ltd
+0.88%
Cheung Kong Infrastructure
-1.11%
China Resources Land Ltd
-0.48%
CITIC Ltd
+1.60%
China Overseas Land &
+0.79%
New World Development
Hengan International Group
-0.38%
-0.79%
26° 31° 26° 32° 25° 31° 23° 30° 24° 29° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
Mainland property Guangzhou and Shenzhen. The latest southern megacities imposing new home-buying restrictions and increasing mortgage down payments. Which may impose ever-rising debt and risks upon the country’s banking system. Pages 8 & 9
2 Business Daily Thursday, October 6 2016
Macau
Construction
Construction receipts up 18 pct in 2015 The growth was driven by construction casino-resort projects built in Cotai Annie Lao annie.lao@macaubusinessdaily.com
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otal receipts of the city’s construction industry increased 17.8 per cent year-on-year to MOP93.4 billion (US$11.7 billion) in 2015, according to the Construction Sector Survey 2015 released by the Statistics and Census Service (DSEC) yesterday. The increase in industry income was attributable to the ongoing construction of large-scale casino hotel resorts and entertainment facilities on Cotai, of which the
value of construction work done rose by 18 per cent to MOP92.2 billion whilst intermediate consumption (MOP69.83 billion) and labour costs (MOP14.52 billion) increased 14.4 per cent and 28 per cent year-on-year, respectively. The total gross surplus of the industry - which equals total receipts less intermediate consumption and labour costs - surged 31.1 per cent year-on-year to MOP9 billion. The Gross Value Added of the sector totalled MOP23.52 billion, up 29.2 per cent compared to 2014. Last year, some 2,750 establishments were operating in the city’s
construction sector, up 117 year-onyear. Of the total, 1,236 engaged in construction projects with permits, while 1,514 undertook simple renovation projects.
Increased private projects
In 2015, a total of 1,377 construction projects with permits were undertaken, up by 108 year-onyear. Of the total, 906 were private construction projects, while 471 were public works, indicating an increase of 133 and a decrease of 25 year-onyear, respectively. The value of construction work done by the private sectors was MOP79.2 billion, up 18.4 per cent year-on-year. Of the total, the construction value of hotels and entertainment facilities amounted to MOP60.7 billion, an
increase of 13.8 per cent year-onyear, whilst that of private residential buildings surged 47.6 per cent yearon-year to MOP15.7 billion following a decrease in 2014. On the other hand, the value of construction work done by the public sector grew by 25.4 per cent year-on-year to MOP10.2 billion, driven by the increase in the value of the construction of the Light Rail Transit (LRT) and roads, at MOP2.53 billion. M e a n w h i l e, t h e va l u e o f construction of public housing was MOP2.2 billion for the whole year of 2015, down 5 per cent year-on-year. In 2015, the number of persons engaged in the construction field reached 50,961, up 5,593 compared to 2014.
Infrastructure
Fourth estuary bridge to carry traffic during typhoons DSAT says the city’s new Macau-Taipa bridge will be equipped with windbreaks Annie Lao annie.lao@macaubusinessdaily.com
The city’s fourth cross-sea bridge connecting the Peninsula to Taipa would be equipped with windbreaks
enabling local vehicles to travel in typhoon conditions if necessary, said Director of the Transport Bureau (DSAT) Kelvin Lam Hin San in his response to legislator Si Ka Lon’s written enquiry. The legislative
Appointment
Wong Chi Fai named PSP deputy head Wong Chi Fai has been appointed Deputy Commissioner of the Public Police Security Force (PSP), according to a dispatch published yesterday in the Official Gazette. The dispatch - signed by Secretary of Security Wong Sio Chak - indicated the tenure of the new Deputy PSP
Commissioner, effective from yesterday, would be for one year. Mr. Wong has served in different departments of the local security bodies since 1996. He had been an Acting Deputy Commissioner to PSP before being promoted to official deputy head. A.L.
member queried whether the city’s future new bridge could remain open during a typhoon signal no.8. According to the transport official, his Bureau is still working on the initial design of the new bridge, which he stressed will include the installation of windbreaks and windresistance structure. He added that the Bureau would set up a model to test the windbreaks at different wind speeds, which would served as reference for the future windbreak design. The new bridge will occupy a sea area of 21.5 hectares and 367 metres of coastline, according to official information from the Infrastructure Development Office (GDI). The new bridge project will involve a 3.5 kilometer-long bridge connection between the eastern
side of the new land reclamation Zone A to the artificial port island of the Hong Kong-Zhuhai-Macau Bridge, and Taipa reclamation Zone E, with a total cross-sea section of 2.87 kilometers.
More research necessary
Meanwhile, the Bureau is undertaking a feasibility study of the construction of a new tunnel near Governador Nobre de Carvalho Bridge, which will serve as the city’s cross-sea passageway, the DSAT director said in his reply. The official explained that the selected location is due to it being the nearest point connecting the Macau Peninsula and Taipa. He added that the proposal of building a tunnel takes into consideration the city’s landscape and surrounding area of the existing bridge.
Business Daily Thursday, October 6 2016 3
Macau Economy
The international body narrows MSAR’s GDP drop from its April projections
IMF: Local GDP to contract 4.7 pct Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
The International Monetary Fund has forecast that Macau’s Gross Domestic Product will contract by 4.7 per cent year-on-year for 2016 but rebound to 0.2 per cent growth in 2017. The MSAR economy is predicted to contract for the rest of the year, seeing a 4.7 per cent year-on-year decrease in Gross Domestic Product (GDP) for 2016, according to the latest projections by the International Monetary Fund (IMF). However, this prediction shines a more positive light on the local GDP compared to the Fund’s April forecasts. The latest estimates were released in the IMF’s World Economic Outlook, October 2016 edition comprising a World Economic and Financial Survey conducted by IMF staff twice yearly on average. In April, IMF predicted a 7.2 per cent year-on-year reduction in the local GDP. In addition, IMF is projecting a lower GDP growth for 2017, adjusting from the initial forecast for a 0.7 per cent to a 0.2 per cent increase year-on-year.
Consumer
Meanwhile, the city’s consumer prices are expected to increase, according to the group’s projections, although not in line with the results seen in 2015, which hit annual average movements of 4.6 per cent. The Fund is now projecting local inflation of 2.6 per cent year-on-year for 2016 and an increase to 2.8 per cent in the following year.
According to the most recently released data by the Statistics and Census Service (DSEC) the Consumer Price Index for August was at its lowest recorded growth since January 2010, at 1.65 per cent - so far this year CPI has averaged 2.83 per cent.
this year, the same as in 2015, and increasing slightly in 2017, according to IMF predictions, to hit 2 per cent. If achieved, this would be the first time the unemployment rate had breached 1.9 per cent since the third quarter of 2012, according to DSEC data.
Employment
Accounts
The unemployment rate is expected to remain stable at 1.9 per cent for
In addition, according to IMF predictions, the current account
balance for the MSAR is set to increase to 28.4 per cent of GDP, reaching 29.2 per cent for 2017, with far-future predictions for 2021 reaching 30.4 per cent, from 28 per cent in 2015. These predictions are far higher than the 2016, 2017 and 2021 predictions for April, which hit 20 per cent, 17.2 per cent and 24.5 per cent, respectively. In the IMF classification of GDP the MSAR qualifies as an ‘Advanced Economy’ alongside countries such as Australia, Korea, Denmark and the SAR of Hong Kong.
4 Business Daily Thursday, October 6 2016
Macau Opinion
Ashley Sutherland-Winch* Pokémon has landed On Tuesday, the much sought after location-based mobile powerhouse Pokémon Go launched in Macau. For months since its original launch date, Macau locals have felt overlooked in the global rollout of the popular game but now the wait is over and Macau can finally participate in the Pokémon excitement. It was reported by game analysis firm Newzoo that an average of 700,000 people download Pokémon Go each day and that the game’s creator, Niantic Inc., brings in US$2 million (MOP16 million) every day thanks to in-app purchases. In total, the firm reports that the game has been installed on mobile devices over 550 million times - equalling over US$470 million in sales. An interesting outcome of the Pokémon Go phenomenon is that Newzoo’s report notes 43 per cent of players are women, which is ten per cent higher that the other top 100 mobile games. As mentioned in my article several weeks ago, it is important that local businesses strike while the proverbial iron is hot. Pokémon Go has incredibly lucrative opportunities for businesses. Companies can purchase a feature in Pokémon Go called a ‘lure’ which draws Pokémon creatures to a specific location. A lure module is a chip in Pokémon Go that a business can drop or place in a Pokéstop (any landmark that pops up on a map usually in public places) to attract or ‘lure’ wild Pokémons. Potential customers flock to the ‘lures’ location hoping to catch a Pokémon; in the meantime giving business the opportunity to offer promotions to sell their goods and services to the waiting gamers. Countries around the globe have found that lures work to bring Pokémon gamers into your business and if you have an incentive or special of the day waiting for them, increased revenue is sure to follow. Eric Neustadter, former head of Microsoft’s Xbox Live gaming service, wrote in a widely-shared tweet this Summer: “If you run a bar/restaurant and aren’t spending US$10/ day on lures and advertising, what are you even thinking?” Voyager Innovations, a wholly owned subsidiary of Smart Communications in Manila, has started hiring fulltime Lure Managers to place and monitor lures and build marketing campaigns around the game. Team affiliations within the game can also give businesses an edge if utilised to promote team specials on different days. Soon, Pokémon trainers will begin searching for Pokémon in Macau. Will your business and lures be ready? Because the Pokémon has landed. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Loans
Lending to SMEs, young start-ups hits MOP35.6 mln The Macao Economic Services disbursed the loans only through the SME Aid Scheme and the Young Entrepreneurs Scheme last month Nelson Moura nelson.moura@macaubusinessdaily.com
T
he city’s SMEs and young start-ups received a total of MOP35.6 million (US$4.5 million) in approved lending in September from two of the government’s financial aid programmes, according to the latest official data released yesterday by Macao Economic Services (DSE). This amount represents a 33.7 per cent month-to-month decrease compared to the total lending of MOP53.7 million in August. Although DSE offers three financial support programmes to local SMEs, it only lent MOP28.4 to SMEs solely through the SME Aid Scheme last month. This amount of loans jumped by 187.8 per cent month-to-month, benefiting 73 successful applicants. During the month, the government did not greenlight any application for loans through the SME Credit Guarantee Scheme or that for Specific Projects.
In fact, the SME Credit Guarantee Scheme - which provides each beneficiary with a credit guarantee equal to 70 per cent of the loan approved by the participating banks - had six applications filed in September. Meanwhie, the similar scheme for Specific Projects - offering credit guarantees of up to 100 per cent of approved bank loans for SMEs to finance special projects - didn’t receive any applications in the month.
Almost unchanged
For the first nine months of the year, the three SME supporting schemes have approved a total MOP264 million in lending, of which 65 per cent was disbursed through the SME Aid Scheme. The SME Aid Scheme – which grants loans of up to MOP600,000 per applicant for different financial purposes with a repay period of up to eight years – extended a total of MOP172.4 million between January
and September. Of that amount, 25.5 per cent, or MOP43.9 million, went to retail companies, whilst 16.1 per cent, or MOP27.8 million, was destined for firms engaged in construction. In the first nine months of 2016, the SME Credit Guarantee Scheme granted MOP89.6 million, with 25.5 per cent granted to wholesale commerce companies and 19.3 per cent to real estate firms, amounting to MOP22.9 million and MOP17.3 million, respectively. Meanwhile, the SME Credit Guarantee Scheme for Specific Projects only approved loans of MOP2 million to two companies, respectively engaged in the F&B b u si n ess a n d th e p r o c essi n g industry. In total, the three schemes have benefited a total of 443 SMEs between January and September, compared to MOP300 million benefiting 584 companies during the same period last year.
Young money
On the other hand, DSE has approved loans for 29 applications under the Young Entrepreneur Aid Scheme in September, amounting to MOP7.2 million. Cumulatively, the total amount of loans approved via the scheme reached MOP53.6 million for the first nine months of the year, benefiting some 41 young start-ups. Analysed by sector, 46.3 per cent of the approved lending for the nine months, MOP24.8 million, went to the retail industry. Meanwhile, startups in the F&B and hotel business were given MOP7.9 million, accounting for 14.7 per cent, followed by real estate firms that received MOP5.5 million, representing some 10 per cent of total. The Young Entrepreneurs Aid Scheme, implemented in August 2013, offers interest-free loans of up to MOP300,000 for young entrepreneurs aged between 21 and 44 for people to start their own business. Successful applicants are eligible for a loan for eight years, with repayments starting after 18 months.
Business Daily Thursday, October 6 2016 5
Macau Trade
CEPA trade up 55 pct in September Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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xports of zero-tariff goods under the Close Economic A r r a n g e m e n t ( C E PA ) programme between the MSAR and Mainland China jumped by more than half month-onmonth for September, according to the most recent data from the Macao Economic Services (DSE). Total exports under the programme between Macau and the Mainland reached MOP7.31 million (US$913.9 million) during the month, a 55.3 per cent increase when compared to the MOP4.71 million registered during the previous month. This marks the fourth highest amount registered under the agreement this year, trailing high-trade months April at MOP11.2 million, July at MOP10.7 million and January at MOP8.5 million. In addition, the increase comes after the lowest recorded month of CEPA trade value for the year, August. For the first nine months of the year the total amount of trade seen under the scheme amounted to MOP64.93 million and accumulatively, since the beginning of the scheme implementation in January of 2004, the value of exports has reached MOP732.23 million. At the end of September a total of 599 services and agencies had received certificates under the Macau Service Supplier arrangement. Local service providers under the
arrangement are allowed to operate their businesses in the Mainland with zero-tariff treatment. Nearly half of the certificate holders, some 298, provide transport services, including freight forwarding agencies, logistics, storage and warehousing. The closest second is the medical and dental services sector, which saw a total of 147 licensees. The
smallest numbers of certificate holding companies were seen in the construction and engineering sector, at 16, and the travel agency and tourism operators sector, at 19. Companies in the convention and exhibition sector made up 6.8 per cent of the certified companies while the real estate sector made up just 5.5 per cent of certificate holders under
the scheme. The scheme saw a total of 410 companies register in the 2004 to 2010 period, primarily in the transport services sector, while last year saw the highest yearly increase in certificates issued since the scheme’s inception, amounting to 148, and primarily concentrated in the medical and dental services sector, at 131.
F&B
Restaurant receipts jump 4.6 pct in 2015 The total expenditure of these local establishments also increased Local restaurants and similar establishment registered an increase of 4.6 per cent year-on-year in their receipts for the whole year of 2015, amounting to MOP10.4 billion (US$1.3 billion). The increase was attributable to the growth in the total number of establishments, reveals the latest data released yesterday by the Statistics and Census Service (DSEC). Last year, the Gross Value Added of the sector, which measures the sector’s contribution to the economy, rose slightly by 0.3 per cent year-on-year to MOP 3.62 billion, whilst Gross Fixed Capital Formation surged 30.3 per cent to MOP 512 million. Meanwhile, the total expenditure of these establishments increased 8.3 per cent year-on-year to MOP9.87 billion.
Tourism
Tourist numbers surge as Golden Week progresses The city saw visitor arrivals soar on the fourth day of the National Da y G o l d e n W e e k f o l l o w i n g an overall decrease for the first three days, the latest official data released yesterday by the Macao Government Tourism Office (MGTO) reveals. On Tuesday, the city welcomed 185,585 visitors, up 41.7 per cent vis-a-vis the same day one year ago. In particular, those from the Mainland jumped 43.1 per cent year-on-year to 162,560, accounting for 87.6 per cent of the total. The significant growth in the number of visitors on October 4 also boosted total visitor arrivals
by 6.1 per cent year-on-year to 670,298 for the first four days of Golden Week. Of the total, arrivals from the Mainland increased 4.4 per cent year-on-year to 564,503. Th e o v e ra l l t o u ri st n u m b e r posted a decrease of 3.3 per cent year-on-year for the first three days of the week-long holiday. But the Office noted that its data includes the arrivals of nonresident workers and students. As of 7:00pm yesterday, the Public Security Police Force said 186,448 border crossings were recorded at the city’s different checkpoints, of which 108,253 were registered at the Border Gate.
A total of 2,284 restaurants and similar establishment were operating in the Special Administrative Region as at the end of last year, up 172 yearon-year. Of the total, the number of restaurants plus eating and drinking places jumped by 166 year-on-year to 2,209. According to DSEC, the receipts and expenditure of these 2,209 establishments accounted for MOP10.01 billion and MOP9.85 billion, respectively. Of the total expenditure, MOP3.75 billion was spent on the purchase of goods, up 6.2 per cent year-on-year, whilst remuneration of employees jumped 10.1 per cent year-on-year to MOP3.42 billion. In addition, their operating expenses increased 9 per cent year-on-year to MOP2.68 billion. DSEC noted that 43.6 per cent of these operating expenses were for rent, which grew by 14.2 per cent year-on-year to MOP1.17 billion. As at the end of 2015, the number of persons engaged in the industry rose by 1,897 to 32,257, of whom 95.4 per cent were employees. K.L.
6 Business Daily Thursday, October 6 2016
Macau Business
China has disbursed US$270 mln in loans to the Lusophone world since the previous conference in 2013
Forum Macao seeks to arrest sliding Sino-Luso trade Forum Macao hopes the 5th Ministerial Conference will help reverse the falling bilateral trade between China and Portuguese-speaking countries Nelson Moura nelson.moura@macaubusinessdaily.com
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he 5 t h M i n i s t e r i a l Conference of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macao) slated for October 11 and 12 will attempt to reverse the decreasing trade between China and the Lusophone world, Forum Macao forecasts. The Secretary-General of the body, Xu Yingzhen, said at a press conference yesterday that the Forum is expected to continue the success it had achieved in past conferences. “Since we established Forum Macao, we have managed to increase Sino-Luso trade and achieved very satisfying results. These successes are considered resulting from the previous conferences,” Xu told the press.
Passing the peak
Since its foundation 13 years ago, Forum Macao has organised four Sino-Luso ministerial Conferences - in 2003, 2006, 2010 and 2013. According to Ms. Xu, total bilateral trade between China and Portuguesespeaking countries has shown growth in these years, from US$11 billion
in 2003 to US$131 billion in 2013 to US$132.6 billion in 2014. “In 2003, the amount of investment from China in Lusophone countries was only some US$55 million, but it reached US$4.5 billion by the end of 2015,” she added. “Also, there are around 400 Chinese companies currently showing their presence in Portuguese-speaking countries. These include important companies like the State Grid Corporation of China, China Three Gorges Corporation, Hainan Airlines and the Bank of China”. In 2015, Sino-Luso trade decreased to US$98 billion. In addition, as of July this year, the trade amount between
the two parties dipped 12.3 per cent year-on-year to US$51.5 billion. Ms. Xu said yesterday that the decrease is due to the overall downward trend in the international trade market and consumer prices.
Getting out
The Secretary-General of Forum Macao believes the trade level between the parties will rebound once commodity prices increase again. Meanwhile, she considers Brazil one of the most promising markets for further Sino-Luso developments. “ O f th e s ev e n P o rt u g u es espeaking countries present at the conference, Brazil is the one that receives more investment from China. [But this] doesn’t mean Chinese companies don’t set their sights on other countries such as Portugal,” Xu added.
For Vicente de Jesus Manuel, the Assistant Secretary-General of Forum Macao, one of the solutions to reversing the downturn is to diversify the economy of the Portuguesespeaking countries and use the conference to help countries identify, plan and explore plans for expanding productive capacity.
Credit co-operation
Questioned whether the previous ministerial conference was set to provide more favourable loans to Portuguese-speaking countries, Ms. Xu stated that a total of RMB1.8 billion (US$270 million/ MOP2.2 billion) in loans had been granted by China to develop Lusophone countries in Africa and Asia since 2013. The Forum Macao SecretaryGeneral indicated that the scope of Sino-Luso co-operation had diversified from seven fields in the first ministerial conference to 17 in the last conference. She expects the next conference to focus on increasing investment. “Based on the agenda decided for this conference, we hope to introduce more concepts of ‘One Belt, One Road’, such as promoting more infrastructure development,” Ms. Xu stated. The 5th Ministerial Conference will be attended by representatives from Lusophone countries such as Portugal, Cape Verde, Guinea-Bissau, Mozambique, Brazil, Angola and East Timor, with the presence of Chinese Premier Li Keqiang.
Business Daily Thursday, October 6 2016 7
Gaming
Sports games DICJ says it has not approved any virtual sports games
Paradise plans to launch virtual sports games next year Paradise has inked an agreement with UK-based virtual sports supplier Inspired to launch virtual sports games in the MSAR Cecilia U cecilia.u@macaubusinessdaily.com
E
lectronic g a m i n g system supplier Paradise Entertainment Ltd. has revealed plans to launch virtual sports games in local casinos next year, Business Daily has learned. O n T u e s d a y , th e c o m p a n y announced that its subsidiary LT Game Ltd. had signed an exclusive
agreement with Inspired Gaming (UK) Ltd. to supply the latter’s virtual sports games to LT Game’s electronic table game terminals (ETG). In a reply to Business Daily’s enquiry, the Gaming and Inspection Bureau said it had not approved any applications related to the operation of virtual sports games in the city. The Investor Relation Manager of Paradise, Brian Wu, declining to comment upon whether the company had filed an application
with the gaming regulator, told Business Daily that they will start demonstrating virtual sports games to the city’s gaming operators during the first half of 2017. He added that further information would be announced at the upcoming Macau Gaming Show, slated for November 11 to 17 at The Venetian Macao.
New concepts
According to the press release, ‘Virtual Horse Racing’ would be the first game to be released by the company in the local market. “We continuously strive to bring in new gaming concepts to casino operators, to drive play with
captivating content, and to offer our players the most cutting-edge gaming experiences,” the Chairman and Managing Director of Paradise, Jay Chun, said in the release. As at the announcement, LT Games has installed 4,500 Live Multi Gaming terminals in 22 land-based casinos in the city. Inspired, a London-based company, currently supplies its virtual sports products in over 30,000 venues and 200 websites worldwide. “This deal is an important one for Inspired as we continue to grow our global footprint in Virtual Sports deployment,” said Steve Rogers, Inspired’s chief commercial officer of Digital Games.
Gaming
Gaming Melco Int’l sole bidder for Cyprus tender
SJM to halt Tombola operations
Local gaming operator submits final proposal for Mediterranean island casino licence
Local gaming operator Sociedade de Jogos de Macau, S.A. (SJM) is to suspend operations of Tombola hall from November 1, local Chinese newspaper Macao Daily News reported. Tombola is a game similar to bingo, which requires players to buy a 5 x 5 grid game card, and prizes are offered when five numbers have been called on the same vertical, horizontal or diagonal row. According to the news report, the operator has posted a notice in its Tombola hall that operations would cease from November 1 due to the expiration of its tenancy contract. SJM’s Tombola hall is located on
Avenida do Dr. Rodrigo Rodrigues on the Macau Peninsula. According to the official data of the Gaming Inspection and Co-ordination Bureau, the gross revenue generated by Tombola games amounted to only some MOP800,000 (US$100,000) for the first half of the year. The annual revenue from the game, meanwhile, has hovered at between MOP1.4 million to MOP1.7 million for the past five years. The closure of the Tombola hall may suggest this particular game, with decades of history in the local gaming industry, may disappear in November. C.U.
Melco International Development Ltd., controlled by local gaming mogul Lawrence Ho Yau Lung, announced yesterday its joint venture with Hard Rock Group and Cypriot conglomerate Cyprus Phasouri (Zakaki) had submitted their final bid for a gaming concession in Cyprus. ‘The consortium submitted its detailed proposal for the development and operation of the [integrated casino resort] to the [Cyprus Government],’ the company said in a filing with the Hong Kong Stock Exchange yesterday. According to the announcement, the Cypriot Government will announce its decision this quarter. The consortium involving Melco was hitherto competing with
Cambodian casino operator NagaCorp Ltd. and the Philippines’ Bloomberry Resorts Corp. before the two dropped their bids last month. Being the sole bidder, Melco, however, stated in the filing that there is ‘no assurance’ the Cyprus Government would accept its offer. Melco and its partners, if successfully landing the licence, would be granted a gaming concession valid for 30 years, including the right to a monopoly in Cyprus for the first 15 years, in addition to being permitted to build an integrated casino resort with 500 rooms, 1,000 gaming machines and 100 gaming tables. The joint venture is planning to develop the casino-resort in Limassol, the second largest city on the southern coast of Cyprus. N.M.
8 Business Daily Thursday, October 6 2016
Greater China Fuel
China rushes to boost coal as rally warns: winter is coming China’s efforts to shrink its bloated coal industry may have worked too well, too fast
P
rices have surged more than 50 per cent this year after the government ordered miners to cut output to ease a glut and help lift the industry out of crisis. Now, as winter looms and fuel demand peaks, the consumer and producer of about half the world’s coal is having to relax some of those controls, or face even higher fuel costs, according to analysts at Citigroup Inc. and ICIS China, as well as China Coal Transport and Distribution Association. “The extent of the production cuts earlier this year has been too severe,” David Fang, a director with the CCTD, said by phone. “Now the government is trying to fix the problem by relaxing some controls on output, but there is only limited time now before the winter arrives.” The government earlier this year unveiled efforts to revitalize the coal industry and throw a lifeline to miners, many of them government-controlled, who struggled to repay debts as prices of the fuel used in power stations fell to the lowest in about a decade amid excess supply. President Xi Jinping’s administration ordered miners to lower output to the equivalent of 276 days of production, from the standard 330 days. And as part of the country’s broader “ supply side structural reform,” regulators went after the industry’s massive overcapacity, cutting about 150 million tonnes of
unneeded capacity as of August, out of a target of 500 million tonnes by 2020.
Fine Tuning
The reforms may be a victim of their own success. Output fell more than 10 per cent in the first eight months of this year, pushing up domestic prices and helping imports, including coking coal used to make steel, rise to the highest
since December 2014. Now, policy makers are trying to fine tune the approach and have intensified efforts to bring some production back. One week after allowing some miners to raise output by 500,000 metric tonnes a day last month, the National Development Reform Commission, the country’s top planner, met again to discuss the possibility of increasing it to 1 million tonnes. “We need to balance our efforts in cutting overcapacity and ensure stable supply,” the NDRC said in a statement
Sept. 23. “The severe overcapacity in the coal sector hasn’t changed. We shouldn’t weaken our efforts in reducing the glut. Otherwise, it will be hard to get the coal industry out of difficulty.”
Getting It Right
The policy of capping mining output at the equivalent of 276 days of production has also been relaxed for some producers. The NDRC is also allowing selected “ advanced” and “high efficiency” miners to raise
Real estate
Mainland’s southern megacities roll out measures to cool property m Kevin Yao and Sue-Lin Wong
China’s southern megacities of Guangzhou and Shenzhen are the latest centres to impose new measures to cool their overheated real estate markets, including higher mortgage downpayments and home purchase restrictions. A property boom has given a welcome boost to China’s economy this year, fuelling demand for everything from construction materials to furniture, but a growing buying frenzy is adding to worries about ever-rising debt and risks to the banking system. The new measures are the latest steps to tighten credit flowing into the property sector as the government tries to balance the need to prevent bubbles while stimulating economic growth. Prices for new homes in the booming tech centre of Shenzhen rose 36.8 per cent from a year ago in August, while
Guangzhou’s new home prices rose 21.1 per cent over that period, National Bureau of Statistics (NBS) data showed. Other cities including Chengdu, Jinan, Wuhan and Zhengzhou have already announced new restrictions on property purchases as the government tries to dampen prices stoked by property speculators in second- and third-tier cities across the country. The average new home price in 70 major cities climbed an annual 9.2 per cent in August, up from 7.9 per cent in July, according to the National Bureau of Statistics.
Cooling
Nomura analysts said the new measures were expected to help cool frothy prices in the biggest cities and should prevent the market frenzy from spilling over into smaller cities. “We also believe it unlikely that the latest tightening measures will cause
Business Daily Thursday, October 6 2016 9
Greater China Trade
production from Oct. 1 to Dec. 31, the China Economic Herald reported Thursday, citing an NDRC official whom it didn’t identify. Benchmark coal prices are soaring. The cost of deliveries at the port of Qinhuangdao rose last week to about RMB565 (US$84.70) a tonne, the highest since Jan. 2014, while Bohai Rim prices are up more than 50 per cent from the beginning of the year. Australia’s Newcastle coal, a benchmark in Asia, rose 2.5 per cent to US$83.15 a tonne on Tuesday, up 64 per cent for the year. And the rally may not be done. Thermal coal could rise 10 per cent more by the end of the year because of winter demand, Deng Shun, an analyst with ICIS China, said before the latest efforts were unveiled to ease supply restrictions. The new policies may add as much as 1.4 million tonnes extra to the daily coal production boost, Citigroup analyst Jack Sheng wrote in an Oct. 2 report. Prices may “normalize” this quarter and average RMB475 a tonne in 2017, he wrote. The NDRC didn’t respond to a faxed request for comment on Wednesday. Government offices are closed all week for a public holiday. If supply isn’t allowed to expand over October and November as it normally does, China may have to suspend loss-making coal-fired power generating capacity because of high prices or a lack of coal, Morgan Stanley analysts including Tom Price wrote in a Sept. 26 report. A prewinter supply surge will be bearish for prices, they wrote. “China will allow enough mines to operate at higher utilization rates to rebalance the market,” Andrew Driscoll, head of resources research at CLSA Ltd., said by phone. “Production quotas don’t usually work, but I think China will get this right. You don’t want to bet against Beijing.” Bloomberg News
In Brief
China’s foreign trade remains under pressure: official China’s foreign trade remains under heavy downward pressure due to increasing uncertainties, despite improved export and import data in August, an official has said. The difficulties are not shortterm problems, with uncertain and unstable factors increasing, Shen Danyang, spokesman for the Ministry of Commerce, said. Foreign trade improved markedly in August, customs data showed in September, with exports and imports rising 5.9 per cent and 10.8 per cent respectively, the first time since November 2014 that the figures have both risen on a monthly basis. However, in the first eight months, foreign trade was down 1.8 per cent from a year earlier, with exports dropping 1 per cent and imports falling 2.9 per cent, official customs data showed.
Citing the figures, Shen said it is no time for complacency and the situations is still complicated and daunting. Increasing trade frictions concerning Chinese exports are partly to blame. From January to August, 20 countries or regions launched 85 trade remedy probes against Chinese products, up 49 per cent and worth 10.3 billion U.S. dollars, almost doubled the amount for the same period last year, Shen said. In those eight months, the United States launched 15 trade probes under the Section 337 of the 1930 Tariff Act against Chinese products, he said. Section 337 investigations focus on allegations of patent or registered trademark infringement, and also involve misappropriation of aspects such as trade secrets, false advertising and violation of antitrust laws. Xinhua
‘The average new home price in 70 major cities climbed an annual 9.2 per cent in August’ Downpayments for second-home buyers in China’s southern Guangdong province near Hong Kong will be increased to no less than 70 per cent, Xinhua said without giving further details. China’s southern city of Guangzhou has limited local residents to purchasing a maximum of two properties, according to a statement posted late on Tuesday on the Guangzhou government’s website. Non-local residents will be allowed to buy one property, if they can prove they have paid appropriate levels of tax or social security. Separately, local media reported on Tuesday that Suzhou in China’s eastern Jiangsu province had unveiled fresh measures steps, including higher downpayment requirements, to cool the housing market.
China’s largest developer by assets announced a plan to inject some of those into a property company listed in Shenzhen. That way, Evergrande will be able to raise equity in China without having to go through the lengthy and increasingly difficult process of getting approval for a stock offering. It’s especially good news, however, for all the other Chinese firms that have recently expressed an interest in selling shares domestically and have run into a regulatory brick wall. If Evergrande succeeds, maybe they will too, opening up a whole new way to access liquidity onshore. The result may be a wave of similar backdoor listings, which is ironic considering Chinese companies are renowned for reversing into shells in Canada, the U.S., Singapore and Hong Kong. Stocks
Hong Kong stocks climbed to a onemonth high, led by energy companies, as an advance in oil prices overshadowed concern that global central banks will rein in stimulus. Cnooc Ltd. and PetroChina Co. paced the Hang Seng Index’s advance, surging more than 3 per cent each as crude futures approached US$50 a barrel in New York. Oil prices have jumped since OPEC last week agreed to cut production for the first time in eight years. The Hang Seng China Enterprises Index rose 0.6 per cent, while the yuan came off a three-week low. “There’s a positive signal for the oil industry from OPEC and share prices are going up,” said Tony Liu, a Hong Kong-based energy analyst at Bocom International Holdings Co.
Shenzhen Qianhai said to near US$1 bln purchase of ACR Capital Joyce Koh and Jonathan Browning
the bubble to burst, sparking a collapse of home prices. We envision a more likely scenario to be a mild retreat or prolonged flattening of home prices in tier-1 cities,” they said in a note on Tuesday. First-time home buyers in Shenzhen will face minimum downpayments of 30 per cent, but deposits for others will be raised to no less than 50 per cent, state news agency Xinhua quoted a government document as saying.
Evergrande may hold key to China’s IPO back door
HK stocks on one-month high
M&A
market
Property
Shenzhen Qianhai Financial Holdings Co. is close to an agreement to buy ACR Capital Holdings Pte, a reinsurer backed by Singapore’s Temasek Holdings Pte, for about US$1 billion, according to people with knowledge of the matter. A deal may be announced as soon as Wednesday, the people said, asking not to be identified because the process is private. The agreement would be subject to regulatory approvals, including from the Monetary Authority of Singapore, they said. Chinese buyers have stepped up purchases of assets abroad as domestic demand for short-term insurance policies soars. Led by Fosun International Ltd. and Anbang Insurance Group Co., mainland firms have announced
overseas acquisitions of insurance companies totaling US$10.7 billion since the beginning of last year, according to data compiled by Bloomberg. A spokeswoman for ACR declined to comment in an e-mailed response to Bloomberg queries, while a representative for Shenzhen Qianhai said the company had no immediate comment. Singapore-based ACR, led by Chief Executive Officer Hans-Peter Gerhardt, was established in 2006. Besides Temasek, the state investment firm, ACR’s major shareholders include Marubeni Corp., 3i Group Plc and Khazanah Nasional Bhd., according to its website. Its unit Asia Capital Reinsurance Group Pte serves clients in Asia from China to the Middle East, across business lines from property and marine to medical and agriculture. Bloomberg News
Global indexes
Mainland bonds could enter global indexes before shares China’s bond market could be included in global indices before its stocks because government interventions have dented foreign investor confidence in Beijing’s commitment to equity market reform, the global CEO of index provider FTSE Russell said. Mark Makepeace told Reuters on Wednesday it was “possible” global bond index providers would move ahead of the major equities index firms to include China, after the government threw open its bond market to foreigners earlier this year. “I see no reason why the Chinese bond indices can’t be included in the global indices, and I would expect that to happen over the next year. That market has opened up an awful lot, so that will happen,” Makepeace added. Metals
China continues leading in gold production, consumption China is set to continue to lead the world in production and consumption of gold, Song Xin, head of the China Gold Association (CGA) said. China produced 516 tonnes of gold in 2015, up 0.6 per cent from 2014, more than any other country. Increasing demand for gold jewelry and bars made the country consumed 986 tonnes of the precious metal in 2015, up 3.7 per cent, also the highest in the world. Until the end of 2015, China had been the world’s leading gold producer for nine years and consumer for three. For the first half of 2016, China produced 229 tonnes of gold and consumed 529 tonnes, the CGA data showed. In April this year, China launched a yuan-denominated Shanghai gold benchmark price, a move which Song said showed China’s increasing sway in the global gold market.
10 Business Daily Thursday, October 6 2016
Greater China Investment
Billionaire Li looks at Siri-like software, 3-D printed cars The billionaire takes a particular shine to artificial intelligence Young-Sam Cho
L
i Ka-shing, the billionaire who made early investments in the likes of Siri and Facebook Inc., is examining startups involved in artificial intelligence and 3-D printing to find the next company that could shake up the technology world. Through his charity, Hong Kong’s richest man has most recently been looking at investing in the field of carmaking via 3-D printing, Li Ka Shing Foundation Director Frank Sixt said in an interview in Hong Kong on Tuesday. Li is also keen on startups involved in artificial intelligence, big data and high-tech food such as the meatless “ Impossible Burger,” he said.
big theme in choosing investments,” said Sixt, 64, who aside from his role at the foundation has a bigger day job in being finance director at CK Hutchison.
Artificial intelligence, in particular, has been on Li’s mind. In a wide-ranging interview earlier this year with Bloomberg Television’s Angie Lau, the tycoon mentioned the topic at least four times. The surge in computing power, the amount of memory available and falling costs have led to a “rebirth in
every type of artificial intelligence endeavor,” Sixt said. For example, it’s possible that within a decade, people will no longer need to call customer-service representatives because they’ll be able to sort everything out via their devices or through a virtual agent powered by AI, he said. Bloomberg News
Empire
Providing seed money may only be a small part of Li’s empire -- the 88-year-old runs telecommunications-to-infrastructure giant CK Hutchison Holdings Ltd. -- but his interests provide a rare glimpse into the views of a man who’s known as “Superman” by the local media for his business acumen. Other tech investments he’s made in include Spotify Ltd., Airbnb Inc. and Google’s DeepMind. “Trying to understand what investments have the potential to be very disruptive, but also in a very good way, to sort of transform the way we all live our lives in the future is a
M&A
MBK consortium agrees to acquire Wharf T&T for US$1.2 bln Largest Hong Kong telecom deal in about two years to be all-cash Jonathan Browning, Prudence Ho and Cathy Chan
A consortium of MBK Partners and TPG Capital agreed to acquire internet provider Wharf T&T Ltd., owned by billionaire Peter Woo’s Wharf Holdings Ltd., for HK$9.5 billion (US$1.2 billion), in the largest Hong Kong telecom deal in about two years. The all-cash deal for the business, which provides fixed-line services to mostly corporate clients in Hong
Kong, should be completed by Nov. 23, the Hong Kong conglomerate said Tuesday in a statement. Woo is offloading a telecom businesses he started in the run-up to the dot-com bubble in the 1990s to raise funds as his main property business slows. Wharf T&T had also drawn interest from suitors including HKBN Ltd. and SmarTone Telecommunications Holdings Ltd., people with knowledge of the matter said earlier.
Wharf said in March it was reviewing businesses including Wharf T&T and pay-TV operator i-Cable Communications Ltd. In a separate Hong Kong exchange statement Tuesday, Wharf said a strategic review of i-Cable hasn’t been completed and it’s continuing to assess proposals for the unit from various independent third parties.
Track Record
Shares of i-Cable fell as much as 13 per cent in Hong Kong trading Wednesday morning, the biggest decline since July 2015. The benchmark Hang Seng index was unchanged, while Wharf Holdings fell as much as 1.4 per cent. MBK, led by former Carlyle Group executive Michael Kim, has sought to amass telecom, media and cable
assets across North Asia. The buyout firm has spent at least US$3.3 billion on such acquisitions in Taiwan and South Korea, according to data compiled by Bloomberg. The Wharf deal is the firm’s first Hong Kong investment, the data show. The deal for Wharf T&T is the biggest acquisition in the Hong Kong telecom industry since billionaire Richard Li’s HKT Ltd. bought wireless carrier CSL New World Mobility Ltd. from Telstra Corp. for US$2.4 billion in 2014, the Bloomberg-compiled data show. “We are very impressed with Wharf T&T’s successful track record of establishing a client base of over 50,000 enterprises in Hong Kong,” MBK partner Teck Chien Kong, said in a separate statement by MBK and TPG.
Business Daily Thursday, October 6 2016 11
Asia Airline
TPG, BlackRock show early interest in SriLankan Airlines stake Anshuman Daga and Shihar Aneez
P
rivate equity firm TPG and fund company BlackRock Inc are among half a dozen firms which have shown preliminary interest in a 49 per cent stake in loss-making SriLankan Airlines Ltd, people familiar with the matter said. They said Sri Lanka is looking to sell the stake in the national carrier along with management control. The restructuring is part of a broader move by the government to reduce support for state-owned firms and cut debt.
Key Points
evaluated. “The government is looking at someone to solve the airline’s struggles,” said another source familiar with the matter, who declined to be identified as they were not authorised to speak to the media. BlackRock and TPG declined to comment. It was not immediately clear who the other bidders were. BNP Paribas and KPMG are the financial and transaction advisors on the airline’s restructuring.
Subsequent mismanagement left the airline saddled with debt of around US$3.25 billion, according to Prime Minister Ranil Wickremesinghe. “The expectation from the partner is capital. If you keep the debt out, it will have a positive valuation,” Suren Ratwatte, CEO of SriLankan Airlines told Reuters on Wednesday. He declined to go into details. According to the sources, the government has indicated it would take on a substantial portion of the debt.
Profit to debt
They said the government is expected to draw a shortlist and pick a final bidder in the next couple of months. It was premature to estimate
the potential value of any deal, they added. SriLankan Airlines has attractive routes to India and analysts have said potential investors could be drawn to the prospect of turning around the carrier, which has about 21 leased Airbus planes. Srilankan Airlines reported a net loss of 16.33 billion rupees (US$112 million) for the year to March 31, narrower than its 31.4 billion rupees a loss year earlier on lower oil prices. It last made a profit in 2009, a year after Emirates sold its stake. Ratwatte said the partner will have to decide on any lay offs among the 7,000-strong staff. Reuters
has drawn a bold line around more than four-fifths of the South China Sea using a decades-old old map. It has created islands to assert its ownership, spurring the Philippines to challenge it before an international tribunal, which ruled in Manila’s favour this summer. “The award is null and void and has no binding force” was Beijing’s response. The Chinese planes performed surveillance and sudden assault and aerial refuelling exercises, as
well as “routine warning patrols” in China’s Air Defence Identification Zone in the East China Sea, an Air Force spokesman said. Japan doesn’t recognize the zone. Meanwhile, in the South China Sea, the Philippines’ brand new president, Rodrigo Duterte, has appeared to tilt toward China. After calling for an end to joint patrols with the U.S. in the strategic waterway, he has acknowledged that his country needs American troops. Bloomberg News
SriLankan Airlines was a profitable 10-year joint venture with Emirates Airline until the pair split in 2008.
Sri Lanka aims to sell 49 pct stake in loss-making airline Buyer would have management control Sources say government indicated it would take big chunk of debt In July, a unit of state-run National Savings Bank, the lead manager overseeing SriLankan Airlines’ revamp, invited offers from strategic investors who would assume responsibility for turning around the airline and its budget subsidiary Mihin Lanka. A senior Sri Lankan finance ministry official said TPG and BlackRock were the two top international firms among the bidders. He declined to be identified as the bids are still being
Conflict
Could tug-of-war turn to war? A fleet of Chinese aircraft thunders into a strategically vital strait. Japan scrambles fighter jets. In other words, business as usual in the waters off China, where peace and US$5 trillion of annual trade hang in the balance. Only now it’s even more worrying than before. Analysts warn of the
possibility of armed conflict if tensions rise any higher and somebody misreads an intention — or reads it all too well. Seven nations have staked conflicting claims to a smattering of islands off China. They are Vietnam, Brunei, Malaysia, the Philippines, Japan, Taiwan, and China itself. China
12 Business Daily Thursday, October 6 2016
Asia
Development
India slow to expand Iran port as China races ahead at rival hub Indian bureaucracy taking its time could lead to port losing out to Chinese-built rival Golnar Motevalli and Iain Marlow
W
hen th e l ea d e rs of India, Iran and Afghanistan gathered in Tehran in the spring for a ceremony marking India’s development of a strategic Iranian port, they recited Persian poetry and said their partnership would “alter the course of history.” On a recent visit, roughly 13 years after India first agreed to develop the port of Chabahar, a single ship floated at the main jetty. Most of the cargo containers scattered in an asphalt lot bore the logo of the state-owned Islamic Republic of Iran Shipping Lines. In an adjacent harbor, a dozen wooden dhows, or traditional fishing boats, bobbed in the water. Months after the ceremony in May and pledges by India to inject $500 million into the project, the muchheralded port of Chabahar remains a sleepy outpost – as well as a shadow of the Chinese-built port of Gwadar, 100 kilometers (62 miles) to the east across Iran’s border with Pakistan. “What you’re seeing is the problem with many of the Indian commitments abroad,” said Sameer Patil, an analyst at Gateway House, a research organization in Mumbai. “Once a prime minister makes that commitment, the parties find it difficult to move the process forward. The Indian bureaucracy takes its sweet time.” Chabahar was supposed to be an easy win: India would bankroll a hub to rival the China-Pakistan partnership at Gwadar, Iran would get a major ocean port outside the Strait of Hormuz and spur growth in its poor eastern region, and Afghanistan
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would gain road and rail links to a deep-water port that could boost its war-ravaged economy. But more than a decade on, the strategic asset is languishing, even as China sinks $45 billion into the China Pakistan Economic Corridor that winds down to Gwadar. “They should’ve given the contract to the Chinese,” said Zheng Ke, a 37-year-old businessman from China, speaking in Persian at his supermarket in Chabahar’s free trade zone as Iranian customers snapped up Chinese-made clothes and kitchen utensils and streamed through checkouts staffed by Chinese workers.
Key Points 13 years after initial development agreement Chabahar sits 100km away from Chinese-built Gwadar port Chinese commitments in the region up and running Chabahar crucial for Afghanistan “They’d get the port done in no time.” Despite the project’s importance, Indians and Iranians haggled for two years over who would pay $30 million of excise duties on port equipment imported into Iran, according to Iranian diplomat Hamid Mosadeghi. “The slowness comes from these small things,” said Mosadeghi, who heads the economic section at Iran’s embassy in New Delhi. “Both sides want to expedite this.” For Prime Minister Narendra Modi, Chabahar could aid his goals of integrating South Asia’s economies and boosting India’s stature in the
region. However, the slow pace of its development has drawn criticism. “ Wi t h Ch i n a a n d Pa k i st a n developing Gwadar just a few kilometers away, India cannot afford either delay or inattention to this vital port,” said Shashi Tharoor, a lawmaker with India’s opposition Congress Party and chairman of a parliamentary committee on foreign affairs. Chabahar could be a linchpin for the region’s economy. It’s close to the western Indian ports of Kandla, Mundra and Mumbai and could help India’s farmers get cheaper access to fertilizers and other commodities from central Asia and beyond.
European Union tightened sanctions in 2012, could cash in on the gradual re-opening of the Islamic Republic’s $400 billion economy. Beijing is also expanding its footprint elsewhere in the Gulf: A unit of China’s biggest shipping group, Cosco Shipping Co., signed a deal on Sept. 28 to build and operate a container terminal in the United Arab Emirates. “There is a race,” said Patil, the Gateway House analyst. “But the ground reality is that the Chinese commitments in the region are already up and running, while Indian’s proposals remain proposals.”
New Jetties
For Iranians, the new investment can’t come soon enough. Sanctions, which were eased in January, exacerbated poverty in Sistan-Baluchestan, Iran’s poorest province, where security forces are fighting insurgents and face a threat from Islamic State militants across the border in Pakistan and Afghanistan. Once developed, Chabahar will be able to handle large cargo ships and will no longer need U.A.E. ports to act as intermediaries by off-loading goods on to smaller boats. The project will also lessen Iran’s vulnerability to possible disruptions in the Strait of Hormuz, said Abdolrahim Kordi, deputy head of economic affairs at the Chabahar Free Trade Zone. If the Strait, a shipping bottleneck at the mouth of the Gulf, were to be blocked due to regional hostilities, Chabahar would be “the only point that can connect Iran to open seas,” he said. At Zheng’s supermarket overlooking the port, any payoff from Chabahar’s development remains a distant prospect. “It’ll bring more goods here of course, but who knows when it’ll be done,” Zheng said. Bloomberg News
“We are dependent substantially on urea, ammonia and fertilizers, and given Chabahar’s geographic proximity, the transport costs are negligible,” India’s ambassador to Iran, Saurabh Kumar, said in an interview in Tehran. Chabahar is also crucial for landlocked Afghanistan. The deal includes a north-south railroad that could help the country exploit an estimated $1 trillion of untapped mineral wealth and reduce its reliance on aid. India will invest $85 million in equipment and lend $150 million for the first phase, which includes two terminals and five jetties, according to Kumar. Transport ministers from Iran, India and Afghanistan met last week in New Delhi to assess progress. “We have not fallen behind in the Chabahar port development plans,’’ Iranian Transport Minister Abbas Akhoundi said after the meeting on Sept. 28. “This plan is being carried out at the appropriate speed.”
Geopolitical ‘Race’
Chabahar may even benefit China. The country, which deepened trade ties with Iran after the U.S. and
Islamic Militants
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U 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
Business Daily Thursday, October 6 2016 13
Asia M&A
In Brief
Sompo to buy Endurance for US$6.3 bln in its biggest deal Komaki Ito and Kathleen Ch
S
ompo H o l d i n g s I n c . agreed to buy Bermudabased insurer Endurance Specialty Holdings Ltd. for about US$6.3 billion, the company’s biggest acquisition as it expands further outside of Japan. The Tokyo-based insurer offered US$93 a share in cash for Endurance, 43 per cent more than Monday’s closing price of US$64.96. The acquisition is subject to the approval of Endurance’s shareholders and Sompo plans to complete the purchase by March 2017, the Tokyobased company said in a statement Wednesday.
Sompo, which largely sat out a multi-billion-dollar acquisition spree by its peers in the past two years, is now joining other Japanese insurers in expanding abroad to counter slowing growth at home. Dai-ichi Life Insurance Co. bought Protective Life Corp. last year, and Sumitomo Life Insurance Co. agreed to purchase Symetra Financial Corp. for about US$3.8 billion.
High end
The offer price “is on the high end of the range because you usually pay a 30 per cent to 40 per cent premium on a regular M&A,” said Steven Lam, a Hong Kong-based analyst at Bloomberg Intelligence. “Japanese
insurers don’t seem to be good at bargaining.” Endurance shares surged 35 per cent in New York Tuesday after the Nikkei newspaper reported a deal was imminent and the insurer confirmed it was in talks with the Japanese firm. Sompo closed 2.7 per cent higher in Tokyo trading Wednesday. Endurance, which has operations in the U.S., the U.K. and Bermuda, writes property-casualty policies for risks such as agriculture, marine and energy. The company also has reinsurance units, which help provide coverage for primary insurance carriers. Led by Chief Executive Officer John Charman, Endurance has been expanding through acquisitions after going public in 2003, including last year’s purchase of Montpelier Re Holdings Ltd. Bloomberg News
Electricity
Tepco falls after President highlights Fukushima cost Tokyo Electric Power Co. Holdings Inc. closed at the lowest in more than two weeks after its president said it may face insolvency if it recognized at one time the cost of decommissioning the wrecked Fukushima nuclear plant and that it’s asked the government to help eliminate the risk. “As it becomes possible to estimate the Fukushima decommissioning cost, we will have the problem of recognizing the liability at once. That means there is a possibility Tepco becomes insolvent,” President Naomi Hirose told reporters in Tokyo Wednesday after meeting with a Ministry of Economy, Trade and Industry commission charged with reforming the company. “We are requesting institutional measures to remove such risk.” Weather
Typhoon Chaba batters South Korea
Supply shortage
High palm stearin prices causing a stink on slower soap demand Emily Chow
Prices of palm stearin have soared to a two-year high on supply shortages, causing oleochemical manufacturers - who use the ingredient as a feedstock to make soap - to face tightening margins and slower demand for their products. Prices of refined, bleached and deodorized (RBD) palm stearin have soared by nearly 40 per cent this year, according to assessment prices by Thomson Reuters. Stearin is a solid fat produced when refined palm oil is broken down to extract palm olein, or the liquid form of palm oil used for cooking and baking. It usually trades at a discount to crude palm oil (CPO) but surpassed benchmark prices of the tropical oil in June. Stearin’s spread over CPO reached US$87 a tonne in late August, the widest since 2011. Stearin prices were at US$700 a tonne on Tuesday, versus crude palm oil at 2,587 ringgit (US$625) a tonne at the midday break on Wednesday. Oleochemical manufacturers say it is not easy to pass on higher stearin prices to their price sensitive customers, resulting in compress margins.
Making soap
Palm stearin is widely used in Malaysia to make soap noodles, a basic form of soap bought by manufacturers who use it to produce their own branded end product. “Demand is more subdued now, people are not committing far in advance and mostly go on a handto-mouth basis,” said a Malaysian oleochemical manufacturer. “We are also affected. We don’t have forward orders, we don’t dare to ramp up the plant to produce
materials.” Malaysia is the world’s second-largest palm oil producer after Indonesia, but output fell this year because of the effects of the El Nino weather pattern, which brings scorching heat across Southeast Asia and impacts crop yields. Lower production results in less availability of palm oil to process, said three traders and a biodiesel producer, while higher Indonesian biodiesel mandates means more palm
stearin is consumed as a feedstock. Indonesia has raised the minimum bio content for diesel fuel to 20 per cent this year and 30 per cent in 2020. Sahat Sinaga, the chairman of the Indonesian Vegetable Oils Association, counters that the biodiesel mandate is not the sole reason for the increase in palm stearin, “because Indonesia’s biodiesel consumption this year wouldn’t be as high as targeted.” He estimates that Indonesia’s biodiesel consumption this year will be 1.8 million kilolitres versus a targeted 5 million kilolitres. “But stearin’s price increase will affect the industry as a whole in terms of end product prices,” he said. Reuters
Typhoon Chaba battered southern parts of South Korea with violent wind and heavy rain on Wednesday, killing at least three people and flooding the country’s main port and industrial sites and disrupting production at some factories. The storm hit the island of Jeju overnight and one person was reported missing amid widespread power outages and damage to homes and other buildings. Twentysix flights linking the holiday island to the mainland and to China were cancelled. The port in the city of Busan was shut for a second day as Chaba whirled past and headed east towards Japan. An official at the country’s biggest port said it was expected to reopen later in the day. Real estate
PropertyGuru invests in Vietnam’s biggest real estate website PropertyGuru Pte, Southeast Asia’s largest real estate website, is investing in Vietnam’s Batdongsan to gain a foothold in one of the fastest growing countries in the region. PropertyGuru will gain two board seats at Vietnam’s largest real-estate site, according to a statement Tuesday that didn’t disclose financial details. Batdongsan is used by 2 million people a month in Vietnam and has about 500 employees in seven offices. Growing internet use by the country’s young population, where there are more mobile phones than residents, provides an attractive option for PropertyGuru, offsetting slumping regions such as its home market of Singapore. Vietnam’s economic growth accelerated to 6.4 per cent in the third quarter from 5.8 per cent in the previous quarter.
14 Business Daily Thursday, October 6 2016
International In Brief Trade
Kazakhstan, Russia vow to deepen cooperation Kazakh President Nursultan Nazarbayev and his Russia counterpart, Vladimir Putin, said Tuesday that their countries should enhance cooperation in transport and logistics, taking advantage of their geographic locations. Sitting at the crossroads of main trade routes between Asia and Europe, the two countries should jointly develop transport and logistic systems, Nazarbayev told a business forum in Astana. “The transport sector must turn into one of the drivers of economic development,” he said. He said the two countries have great potential in transit transportation as the two countries handle only 100,000 out of 22 million containers shipped every year between Asia and Europe. Putin said his country is poised for closer collaboration with Kazakhstan in transport and will take measures to boost trade. “We have a common customs border. We are able to provide a high level of traffic safety,” he said. Fuel
BHP says oil, gas markets rebounding BHP Billiton Ltd. sees oil and gas markets rebounding faster than its mined commodities as it considers potential acquisitions and weighs as much as $5 billion in project spending. The world’s biggest miner, which booked writedowns of $7.2 billion against its U.S. shale unit earlier this year, said recovering oil prices and efforts to lower costs are making investment opportunities more attractive. BHP’s board will decide within six months on its investment in the BP Plc-operated Mad Dog 2 oil and gas project in the Gulf of Mexico, it said Wednesday in a statement. The company earlier flagged its share of the project at $2.5 billion. Additional investments of as much as $2.5 billion in existing project options are also being considered, Steve Pastor, the producer’s petroleum operations president, said in the statement. Uncertainty
Euro area economy loses momentum The euro-area economy is losing steam as political uncertainty looms large over the 19-nation region. A Purchasing Managers’ Index for the manufacturing and services sector slid to 52.6 in September from 52.9 in August, London-based IHS Markit said on Wednesday, confirming a Sept. 23 estimate. That’s the lowest level since January 2015. A reading above 50 signals expansion. Policy makers are struggling to shore up growth and inflation in a region increasingly beset with populist political movements. Ahead of national votes in some of the bloc’s largest economies, challenges from how to deal with the U.K.’s decision to leave the European Union to integrating migrants into a workforce strapped by high unemployment need to be met.
Technology
Behind the Pixel: Google’s first real threat to the iPhone Google’s Pixel signals debut into US$400 bln smartphone hardware business Mark Gurman
G
oogle is embarking on a wholesale revamp of its mobile phone strategy, debuting a pair of slick and powerful handsets that for the first time will go head-to-head with Apple Inc.’s iconic iPhone. Alphabet Inc.’s Google on Tuesday unveiled the Pixel and larger Pixel XL, the first phones that were conceptualized, designed, engineered and tested in-house. The Pixel handsets feature a Siri-like virtual assistant, flashy camera features and are the first to boast Android’s new Nougat 7.1 operating system. Their debut signals Google’s push into the $400 billion smartphone hardware business and shows that the company is willing to risk alienating partners like Samsung Electronics Co. and LG Electronics Inc. that sell Android-based phones. “Google is now the seller of record of this phone,” said Rick Osterloh, chief of the company’s new hardware division. He notes that the company is now managing inventory, building relationships with carriers, sourcing components, making supply chain deals and managing distribution. Google is even making accessories, including cases and cables. Until now, Google had satisfied itself with dipping a toe into the smartphone hardware business with the six-year-old Nexus program, a co-branding effort that outsourced the vast majority of development to other smartphone makers. While well regarded, Nexus handsets were mostly a way for Google to experiment. But along the way, executives began to see the benefit of the Apple approach: a unified portfolio of consumer electronics products that show off its services better than partners can. A Home speaker device, a virtual reality headset, a Wi-Fi router system and an updated video streaming stick were also unveiled on Tuesday at an event in San Francisco. Getting into the hardware business is a big, risky financial and operational commitment. But Google needed its own handset to ensure distribution for its web services, and more
complex offerings like virtual and augmented reality. So in the summer of 2015, Chief Executive Officer Sundar Pichai approved the Pixel project; development began last fall. “The difference with this device is that we started from the beginning,” says Dave Burke, who runs Android engineering. By contrast, Google’s contributions to Nexus phones typically didn’t happen until they were 90 percent done.
Custom Silicon
When Osterloh, 44, came on board in mid-April, he brought Google’s hardware groups into one division, shuttering projects he didn’t see contributing to Google’s future. Now the engineers and designers from Google Glass, Chromecast and Pixel all work together. Keeping them separate, he says, made it “hard to drive toward the goal of portfolio strategy and focus.” Reflecting long-held ambitions to build an Apple-style supply chain, the hardware division now has a supply-management team, drawing on the expertise of the Nest smart-home unit acquired by Google nearly three years ago. Google declined to say how much it’s spending on the effort. However, Jason Bremner, a former Qualcomm Inc. executive who works on Google’s hardware products, put it in context. “Part of being the seller of record means that inventory, that supply chain risk -- you know, hundreds of millions of dollars on the line on any given day -- that’s on Google now,” he said. Now that Google is designing phones itself, the company can at long last put together a product roadmap going out several years. For example, last month Burke was able to see a photo taken by a Google handset that won’t debut until next fall. That “would have never happened with Nexus,” he says. Going forward, more and more of the phones’ guts will be developed in-house. Burke says the company will eventually be able to ship its own custom “silicon,” a buzzword for customized processors that make devices work better. It’s a very different setup from
Osterloh’s previous Google gig, when he ran the Motorola division. “While we were part of Google, we were very arm’s-length,” he says. Now his team gets early access to the company’s advances in machine learning and innovations from the Assistant group. The Pixel phones will also be the first to run the next version of Android, Nougat 7.1, complete with Google tie-ins like pro camera effects, instant chat support, and a service that automatically frees up phone storage via the cloud. Still, Google has deliberately built a firewall between the hardware and Android divisions so other phone makers’ proprietary technology doesn’t leak. Hiroshi Lockheimer, who runs the Android unit and is a longtime Osterloh pal, says his group will treat the hardware team like any customer. “Samsung is a very important partner, as is LG, Huawei and so on,” he says. “Rick is an important partner. Samsung tells us confidential information about their product line, their plans. We won’t tell LG that, and vice versa. That continues. Everyone is treated the same, including Rick’s team.”
Osterloh Show
When Osterloh demonstrated the Pixel phones at Google’s Mountain View, California, headquarters recently, it was immediately clear the craftsmanship is light years ahead of the flimsy $1,500 Google Glass headsets and plastic Chromecast media players of yore. With their metal frames and precisely honed bezels and edges, the Pixels (which come in silver, black and limited-edition blue) have more in common with the elegant gear from Nest. The phones feature cameras that can snap photos quicker than the blink of an eye, app speeds once reserved for laptops and battery life that bests last year’s non-Google made Nexus phones. Osterloh proudly showed how one can twist the phone mid-air to activate the selfie-camera. “That’s pretty cool,” he says. Also notable is a fingerprint scanner that doubles as a trackpad (other Android phone makers will get to enable this, too) and software-enhanced gyroscopes that reduce shakiness in recorded video, stabilization that Osterloh calls “out of this world good.” The new phones are made up of off-the-shelf components from several suppliers, including a Snapdragon processor, and are assembled in Taiwan by HTC. But there is still custom work inside this first version, including wireless modem technology that has evolved from earlier experiments with Nexus. The Pixel also has chipsets optimized by Google that makes photo-taking and touchscreen response times much faster than any Android device yet built, Burke says. The Google Assistant was developed separately from Android and offers suggestions based on previous queries. For example, it can list San Francisco landmarks after being asked earlier about the local weather. While Google has contracted HTC to assemble the Pixel phones, Osterloh says the approach is no different than Apple’s partnership with iPhone builder Foxconn. Flip the Pixel over and you’ll see “Made by Google,” another tip of the hat to Apple, which has long made much of the fact that its phones are “Designed by Apple in California.” Osterloh says Google will never say the Pixel is co-engineered with anyone else. He proudly proclaims, “It’s ours.”
Business Daily Thursday, October 6 2016 15
Opinion Business Wires
Korea Herald Rival party lawmakers gave clashing forecasts of the country’s economy and the government’s economic policies during a parliamentary audit Wednesday. While lawmakers from opposition parties stressed that expansionary policies to bolster the property market resulted in rising housing expenses for the ordinary citizen and snowballing household debt, those from the Saenuri Party noted the Korean economy is in better shape in some areas compared to that under former President Lee Myung-bak. Korea’s GDP growth rose to 2.6 per cent in 2015 from 2.3 per cent in 2012, according to Bank of Korea’s data. Gross national income per capita also rose to US$27,340 from US$24,696 during the same period. Unemployment rose to 3.6 per cent from 3.2 per cent over the cited period.
The Japan News Firms expect an inflation rate of 0.6 per cent a year later, according to a quarterly Bank of Japan survey released Tuesday. The average inflation forecast as measured by the consumer price index in the September survey dipped 0.1 percentage point from the June survey, down for the fifth straight quarter. Many companies now foresee falls in prices of petroleum and coal products due to crude oil price drops, as well as prices of business-use machines, such as office and medical equipment, central bank officials said. The survey also found that firms have cut their forecasts for inflation rates three and five years ahead by 0.1 point to 1.0 per cent, respectively.
Jakarta Globe Tax dodgers and taxpayers who have underreported their wealth in the past and who now seek to rectify the situation should join the tax amnesty program as they will not be able to hide once a system for the automatic exchange of financial information between states comes into effect in 2018, Vice President Jusuf Kalla said. “Why do we have to do [the tax amnesty program] now? Because if we do it in the next two years, the tax dodgers will become a global enemy,” Kalla said. The Automatic Exchange of Information (AEOI) framework is a single global standard for financial account information that will allow the government to have greater access to its taxpayers’ financial records in other countries. At least 101 jurisdictions have committed to the automatic exchange of financial information by 2018.
Philstar Investors continue to bet big on the Philippines despite the negative publicity the country has been getting from the spate of drug-related killings and President Duterte’s controversial pronouncements. Investment pledges approved by the Board of Investments (BOI) in the nine months ending September 2016 soared 49 per cent year-on-year to P286.44 billion, the agency’s managing head Ceferino Rodolfo said yesterday. BOI-approved investments for the month of September alone tripled to P51 billion this year from P17 billion in the same month in 2015.
Boris Johnson, Foreign Secretary of the U.K.
Direct democracy strikes again
O
nce again, a referendum has turned a country upside down. In June, British voters decided to take their country out of the European Union; now, a narrow majority of Colombians have rejected a peace agreement with the Revolutionary Armed Forces of Colombia (FARC). Colombians have taken a leap in the dark – and perhaps a leap back into the violent abyss of never-ending war. Populists everywhere are no doubt celebrating the outcome as another clear rebuke to self-interested elites who have “rigged” their governments against the people. And the people, they say, should have a direct voice in the important decisions affecting their lives – apparently even decisions about war and peace. But if there really is a “democracy deficit,” as populists claim, the increased use of referendums is no cure for it. On the contrary, referendums tend to make matters far worse, and can undermine democracy itself. It’s an old story: Napoleon III, for example, used such a vote to reconstitute his elected presidency into the imperial title his uncle, Napoleon Bonaparte, had held. After the rise of fascism and during the Cold War, the world’s democracies seemed to recognize that referendums and plebiscites are the handmaidens of autocrats seeking to concentrate power. Adolf Hitler used plebiscites in the Sudetenland and Austria to consolidate the Third Reich. And, after Hitler, Joseph Stalin used referendums to incorporate Eastern Europe into the Soviet bloc. More recently, Russian President Vladimir Putin organized a snap referendum in Crimea that supposedly justified his annexation of the territory. In the tradition of Napoleon III, Hitler, and Stalin, he used direct democracy to pursue dictatorial ends. To be sure, not all recent referendums have been instruments of dictatorial power. But mendacity and deception worthy of the dictators of the 1930s was certainly on display in the United Kingdom’s “Leave” campaign, and in the opposition to a Dutch referendum in April to approve an EU-Ukraine free-trade and association agreement. In the UK, Boris Johnson cynically helped lead the Leave campaign with an eye toward unseating, and potentially replacing, Prime Minister David Cameron. But, when Cameron resigned in July, Johnson’s fellow Brexiteers betrayed him, so he had to settle for becoming Foreign Secretary in Theresa May’s new government. In the Dutch case, Euroskeptics, seeking to drive a wedge between the Netherlands and the EU, exploited the 2014 tragedy of Malaysia Airlines Flight 370, which departed from Amsterdam and was shot down over Ukraine by Russian-backed separatists, leaving a deep wound in the Dutch public psyche. The British, Dutch, and Colombian referendums all required that complex issues be radically simplified, which played to populist leaders’ strengths. In the Netherlands, voters were asked to approve or reject an agreement that runs to more than 2,000 pages, which surely no more than a handful of voters have actually read. Instead, most voters relied on populist leader Geert Wilders’ glib talking points, which provided a less-than-candid assessment of the issue. Similarly, the Brexit referendum posed a question with so many ramifications that no voter could possibly have considered them all. And in the Colombian plebiscite, voters would have needed
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Nina L. Khrushcheva Professor of International Affairs and Associate Dean for Academic Affairs at The New School and a senior fellow at the World Policy Institute.
a deep understanding of faraway South Africa’s truth-and-reconciliation process, and postapartheid history, to assess the peace agreement properly. Representative government was created to manage these types of complex issues. We vote for representatives – either individually or as part of a political party with a relatively predictable platform – to advocate public policies that we support. But, as Edmund Burke famously pointed out, “Your representative owes you, not his industry only, but his judgment, and he betrays, instead of serving you, if he sacrifices it to your opinion.” The populist campaigns in the major referendums this year have differed in important respects. For example, Colombian opponents of the peace deal appealed to universal norms of justice for war crimes committed by the military and the FARC, not to national particularism, as in the UK and the Netherlands. Nonetheless, they have all been motivated by a desire to scuttle governments and institutions that they oppose. And they have all been willing to follow the tradition of dictators, and to resort to smears, distortions, and fantastical claims. In the real world, messy compromises are a fact of democratic life; and the only thing messier than a negotiated peace is war itself. As long as compromises do not violate individual rights, citizens in democracies accept them as necessary for the sake of functioning governance. When we reduce a peace agreement, a trade treaty, or EU membership to a single sentence or sound bite, genuine democratic debate gives way to the political noise of opt-outs, logrolling, and side deals. This is arguably a particularly ill-advised time to hold r e f e r e n d u m s, b e c a u s e democratic malaise has taken hold in many countries since the 2008 financial crisis. In the EU, mainstream politicians must accept some responsibility for expediently blaming “Brussels” for every problem, or for fudging the truth about what EU membership or association agreements with neighbours actually mean. Mainstream leaders, to some degree, set the stage for the populist demagogues who are now trumping reasoned argument with angry, nativist appeals. Plebiscitary governance has little to recommend it. In the decades since California introduced statewide “ballot initiatives” – which can be proposed by any voter and require a simple majority to pass – the state became practically ungovernable. Current California Governor Jerry Brown has spent the last eight years cleaning up the fiscal mess the state’s voters created back in 1978, when they passed Proposition 13, lowering property taxes by 57%. Europe could soon become as dysfunctional as California. This month, Hungary’s increasingly autocratic prime minister, Viktor Orbán, held a referendum to oppose a common EU migration policy. If more EU countries resort to such initiatives, European integration could be thrown into reverse. One need only listen to the politicians calling for referendums to know where direct democracy can lead. Project Syndicate
After the rise of fascism and during the Cold War, the world’s democracies seemed to recognize that referendums and plebiscites are the handmaidens of autocrats seeking to concentrate power.
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16 Business Daily Thursday, October 6 2016
Closing PPP
China spends 500 mln yuan to support public-private partnerships
transportation, water conservation, environmental protection, civil engineering, health, culture and education. China will support the “preliminary stages” of public-private partnerships (PPP) with 500 million Since 2015, the NDRC has given out 500 million yuan each year to support the “preliminary yuan (about 75 million U.S. dollars) in subsidies stages” of PPPs. this year. The funding will be spent on planning, evaluation, China has explored funding infrastructure and formulating implementation programs, preparing public works through the PPP model since 2013 amid concern over rising local government debt. bids and contracts, financial consultation, legal Since May 2015, the NDRC has announced two counsel, and asset evaluation for over 700 PPPs, rounds of PPP projects worth 4.23 trillion yuan. said the National Development and Reform Of which, contracts for 619 PPPs worth one trillion Commission (NDRC). The projects, worth 1.2 trillion yuan, cover energy, yuan had been signed by the end of July 2016. Xinhua
Partnership
Once rivals, Honda, Yamaha Motor announce scooter tie-up Naomi Tajitsu
J
apan’s Honda Motor Co Ltd and Yamaha Motor Co Ltd on Wednesday said they were joining forces to develop scooters for the domestic market, burying the hatchet on a decades-old rivalry and consolidating production in response to a shrinking motorcycle market. Honda, the world’s largest motorcycle brand by sales, said it would start producing Yamaha’s 50-cc engine scooter models for the domestic market at its plant in southern Japan by the end of 2018, based on the manufacturing platform for Honda’s small scooter models. The two companies said that pooling resources would be a way to mitigate increasing costs to develop new scooter technologies and keep pace with ever-tightening emissions regulations in the face of falling domestic scooter sales. “The slowdown in the scooter market seen in the past few years has made business in the sector very difficult for both companies, so partnering will have merits,” Honda operating officer Shinji Aoyama told reporters. Both companies said they would continue to market scooters separately, and that the partnership was limited to Japan. By far the largest market for both companies is Asia ex-Japan, where a growing demand for scooters from an expanding middle class has created their biggest battleground. Yamaha managing executive officer Katsuaki Watanabe said having Honda manufacture Yamaha models
on contract would likely be more cost efficient than Yamaha’s current arrangement of producing the vehicles in Taiwan and exporting them back home. The two companies said they would also jointly update their respective delivery scooter models, which Honda may also manufacture for Yamaha, while also considering collaboration on electric scooter projects. The partnership stands in contrast to a bitter rivalry between Honda,
the top seller of scooters in Japan, and second-ranked Yamaha which dates back to around 1980, when both companies released dozens of motorcycle models and competed over distribution and pricing to increase market share. “There’s absolutely no bad feeling or ill will left over from that period,” Yamaha’s Watanabe said. Since then, overall domestic sales of motorcycles and scooters have fallen sharply due to a slump in demand
from a rapidly growing elderly population and falling interest in vehicle ownership among younger consumers particularly in the past few years. Sales fell 10.6 per cent to 373,000 motorcycles in the year ended March 2015, their second year of decline and a drop from the 1.2 million motorbikes sold in 1995. Motorcycles are a key part of both companies’ product line-ups, although domestic sales contribute little to global revenue. Reuters
Real estate
Jobs
M&A
Kerry Properties to pay US$940 mln for HK land
Unemployment hits 11.8 pct in Brazil
McDonald’s in talks to sell Southeast Asia rights
Kerry Properties Ltd. outbid Hong Kong giants Cheung Kong Property Holdings Ltd. and Sun Hung Kai Properties Ltd. with a HK$7.3 billion (US$940 million) offer for government land in the territory’s Kowloon district, the highest price in three-and-a-half years. The price works out to about HK$21,206 per square foot of saleable area, according to calculations by Bloomberg News based on figures released by the Hong Kong Lands Department on Wednesday. It’s the most that a piece of land has fetched in a government sale since March 2013, when Kerry Properties paid HK$11.7 billion for a parcel in the Ho Man Tin district of Kowloon. The site in the exclusive neighbourhood of Beacon Hill attracted Hong Kong’s biggest property developers, while smaller local players didn’t participate, property records show. Units of Cheung Kong and Sun Hung Kai bid for the property, as did affiliates of Henderson Land Development Ltd. and Wheelock Properties Ltd. “All the big guys were there,” said Victor Lai, chief executive officer for valuation at Centaline Property Agency, who had expected the site to fetch about HK$22,000 per square foot. “It’s a big investment and not suitable for small and medium-sized developers.” Bloomberg
Brazil’s unemployment rate reached 11.8 per cent in the June-July-August quarter of 2016, up from 11.2 per cent from the previous three months and 8.7 per cent in the same period last year, governmental statistics agency IBGE said on Friday. According to IBGE, the figures are the highest since March 2012 when IBGE started calculating quarterly unemployment rates instead of a monthly rate. The IBGE report says the number of unemployed people (people over 14 actively seeking work) in Brazil reached 12 million in the quarter ending in August, up 5.1 per cent from the previous three-month period. The figures also represent a staggering 36.6 per cent rise from the number of unemployed people registered in the same period last year. The number of employed people totalled 90.8 million, stable from the previous quarter and down 1.5 per cent from the same period last year. The average earnings of Brazilian workers in all sectors were 2,011 reais (US$616.9), remaining stable both from the quarter ending in May 2016 and the quarter ending in August 2015. Xinhua
McDonald’s Corp. is in advanced talks to sell Southeast Asia franchise rights to a group of investors including Saudi Arabia’s Reza Group, people with knowledge of the matter said. The sale of 20-year McDonald’s franchise rights in Malaysia and Singapore could fetch more than US$400 million, one of the people said, asking not to be identified because the information is private. McDonald’s is seeking local partners to run its restaurants in Malaysia and Singapore as it pursues an international turnaround plan put in place after Chief Executive Officer Steve Easterbrook took over last year. The Big Mac maker, which has a US$97 billion market value, is revamping its ownership structure throughout Asia, including plans to sell operations in China, Hong Kong and South Korea. The Alireza family, which calls itself one of the oldest trading families in Saudi Arabia, owns and operates McDonald’s restaurants in the western and southern parts of the kingdom through Reza Food Services Co., according to the company website. The group has about 20 businesses across sectors like manufacturing, construction, chemicals, logistics and partners with companies including Exxon Mobil Corp. Unlike in its other major markets, including the U.S., most McDonald’s outlets in Asia are company-owned. Bloomberg