Air Seoul commences daily flights to MSAR Aviation Page 2
Monday, October 24 2016 Year V Nr. 1157 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Infrastructure
LRT discussion praises monorail proposal Page 2
Gaming
MSAR may see ‘near-term’ impact of China arrests Page 6
www.macaubusinessdaily.com
M&A
AT&T buys Time Warner to create telecommedia giant Page 14
Diplomacy
President Duterte’s shift eases South China Sea tensions Pages 10 & 15
Gaming
A spokesperson for China’s Ministry of Foreign Affairs (MFA) is adamant. Claiming a Singaporean court ruling enabling the MSAR to be included in a bilateral investment treaty signed by China and Laos in 1993 is “incorrect”. The decision favours local company Sanum Investments. Pertaining to court proceedings vs. the Laos Gov’t regarding the seizure of a hotel complex in that country. Page 7
Raining on MIF parade
Smartening up start-ups
Macau Youth Entrepreneur Association VP Jorge Valente says it’s chicken and egg. Believing the local gov’t could better re-direct its funding of start-ups. And adding his voice to the clamour for a more flexible human resources policy. It’s not easy to spot a great idea, he says, but enthusiasm, diligence and hard work always shine through.
Trade fair Typhoon Haima caused a one-day closure of the Macau International Trade and Investment Fair. But ‘satisfactory results’ were obtained, say Macau Trade and Investment Promotion Institute. Citing a 50 pct increase in business matching compared to last year. Page 2
Co-operation park in the works
MOU MSAR CE Fernando Chui Sai On and Jiangsu Province Governor Shi Taifeng have inked a memorandum of understanding. To develop a co-operation park in the Changzhou prefecture. Intended to facilitate co-operation between China and Portuguese-speaking countries, enabling local entrepreneurs to set up businesses on the Mainland. Page 3
Bubble growing Interview | Entrepreneurialism Pages 4 & 5
HK Hang Seng Index October 20, 2016
23,374.40 +69.43 (+0.30%) Worst Performers
PetroChina Co Ltd
+2.97%
China Resources Power
+1.93%
Belle International Holdings
-2.00%
AAC Technologies Holdings
+2.69%
China Petroleum & Chemical
+0.87%
Hengan International Group
-1.71%
China Resources Land Ltd
-0.70%
Link REIT
-0.62%
China Mengniu Dairy Co Ltd
+2.45%
AIA Group Ltd
+0.86%
New World Development
-1.04%
Sino Land Co Ltd
-0.61%
BOC Hong Kong Holdings
+2.28%
Bank of Communications
+0.86%
CNOOC Ltd
+2.10%
Kunlun Energy Co Ltd
+0.84%
China Merchants Port Hold-
-0.95%
China Overseas Land &
-0.61%
China Mobile Ltd
-0.92%
Sun Hung Kai Properties Ltd
-0.52%
26° 28° 26° 28° 26° 29° 25° 28° 25° 29° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Real estate Mainland authorities believe the property bubble is expanding. Despite curbs imposed by the most affected cities. Other places are filling the leading position for rising prices. Mortgage lending has rocketed. Proving the sector continues unabated. Page 8
2 Business Daily Monday, October 24 2016
Macau Public Works
Macau LRT . . . or only Taipa? It would be difficult to implement the public transportation priority policy in the city if the Macau section of the Light Rail Transit system was abandoned, says Joe Wu Chou Kit, council president of the Macau Institution of Engineers Annie Lao annie.lao@macaubusinessdaily.com
I
n the wake of proposals by legislators Kou Hoi In, Cheang Chi Keong and Chui Sai in the Legislative Assembly to halt the construction of the Macau section of the Light Rail Transport system, to avoid increasing traffic on the Macau Peninsula, criticism and questions arose at local broadcaster TDM’s Macau Forum, held yesterday, when the main topic of the LRT project was discussed. Secretary General of the Macau Construction Association, Lo Chi Hou, complained that the LRT works had led to problems during the construction of the Taipa section of the transportation system, and urged the authorities to review these existing problems, rectify them and implement a comprehensive quality control system to avoid any significant problems happening in the future.
A local resident present at the forum proposed to the panel that the Macau side of the LRT project proceed, stating: “Macau has sufficient financial reserves. Compared to a complicated project like the Hong Kong–Zhuhai–Macau Bridge expected to be completed next year why is there such difficulty with the LRT project, which needs more time than the Bridge?” asked a resident, whose name was not mentioned. Secretary General Lo’s response indicated that the government should let the public know the time needed to complete the project as well as providing detailed explanation in terms of planning and design.
Transportation priority
Joe Wu Chou Kit, council president of the Macau Institution of Engineers said if the authorities decided to halt the construction of the Macau section of the LRT it would be difficult to
implement the public transportation priority policy. “Without the LRT, it’s hard to restrict local people from driving their private vehicles and motorcycles. Therefore, having the LRT completed is important to controlling the traffic in the city,” Wu said. The council president also suggested the authorities reconsider connecting the Mainland’s high-speed rail to the MSAR. “The high-speed rail systems in Hengqin, Zhuhai, and other neighbouring regions have developed rapidly. It would be beneficial for Macau
Trade Fair MIF arranged 380 business-matching sessions
Not blown away by MIF results Despite Typhoon Haima leading to the closure of the main Macau International Trade and Investment Fair (MIF) compound on Friday, the Macau Trade and Investment Promotion Institute (IPIM) announced that the fair was a success and had ‘satisfactory results’, according to a press release. Some 380 business-matching sessions were realised over the course of the Fair, which attracted 1,600 stands and representatives from over 50 countries and saw Portugal as partner-country and Beijing partnercity for the event. About 110 of the business-matching sessions were facilitated via the online self-service platform for negotiations developed by IPIM and more than 50 protocols were signed, notes the trade promotion group.
“As you know, we had the Forum a week before us […] we lost a lot [of people],” noted the IPIM head. With regard to the typhoon, Lau noted that there were comments, but not criticisms from participants regarding the typhoon, reflecting the overall opinion that “I can’t control the weather” but that “the typhoon had a big impact on our results”. With regard to results before the arrival of the typhoon, Lau noted about a 2 per cent increase in participants
in this year’s edition compared to the previous year but that for contacts and business-matching “we have over 50 per cent more”. Despite many of the business cooperation agreements taking place outside of the actual Fair, according to Lau, this was not a cause for concern. “Actually, I’m happy because our purpose is not to sign [contracts] in MIFl the purpose is that they [the companies] sign and have good business,” Lau told the broadcaster. The 22nd MIF is scheduled to run from October 19 to 21 next year.
to be connected as well,” Wu added. Secretary General Lo commented that he believes that the LRT construction project could provide an opportunity to nurture the next generation of technical personnel. With regard to a separately proposed monorail system for the Peninsula, Lo questioned whether it was necessary to use a different technical team in its development. “Not only [does] this LRT provide us with transportation convenience in the city, it also provides an opportunity for local technical personnel to work on building a rail system and gain valuable skills,” he said. “Macau is small. Does our city really need to have two separate rail systems with two separate teams? Society really needs to think about that,” he concluded.
Monorail system
Aside from the negative affects of the typhoon, carryover effects from the recent 5th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-Speaking Countries were felt, IPIM Executive Director Irene Lau told local broadcaster TDM.
Legislators Kou Hoi In, Cheang Chi Keong and Chui Sai had previously suggested in the Legislative Assembly (AL) that apart from the LRT the construction of a monorail system is needed for the Macau Peninsula. Monorail tracks in other regions can currently carry about 20,000 to 30,000 passengers per hour, Secretary General Lo commented. Council president Wu, agreeing with the idea, noted that the construction of the monorail train system could be undertaken in co-operation with the city’s gaming operators, linking casinos as destination stops and increasing the city’s tourism elements. “The building of a monorail system in the city can also be linked to the city’s casinos. I think it’s feasible to do it. First of all, the maintenance fees could be shared by the gaming operators as well as enhancing their transpiration services for their customers,” Wu added. Furthermore, Wu said that the construction of the monorail and LRT trains is more or less similar, although the capacity of monorail trains is less than that of the LRT.
Yachting scheme
Aviation
Carryover and outside signing
Yacht scheme sails into 2017 Individual visas for those arriving in the MSAR by yacht and originating from coastal cities in Mainland China should be implemented by June of next year, according to Director of the Macao Government Tourism Office
(MGTO), Helena de Senna Fernandes, in statements to local broadcaster TDM. “We need to wait for the final confirmation as to when we will launch the individual visa scheme.
A list of promotional events, which are related to this scheme and are aimed at attracting more visitors, will be created. Therefore, we’re continually preparing ourselves and will begin the promotional activities as soon as the implementation date is confirmed,” the MGTO Director told the broadcaster.
Air Seoul commences flights to MSAR Air Seoul, the low-cost South Korean carrier, inaugurated its daily Seoul-Macau flights on Saturday, according to a press release from the company. “Macau is the largest international market for South Korea and the city has good prospects for further development with South Korea as China and South Korea continue to develop and exchange in economic, cultural and tourism related areas with each other,” said Air Seoul Inc. director Cho Jin Man in the release. Cho added that increasing demand from the Pearl River Delta region to travel to South Korea has potential for sustainable development in the future.
Business Daily Monday, October 24 2016 3
Macau Economy The MSAR Government believes the project could benefit local young entrepreneurs
MSAR, Jiangsu to establish co-operation park in Changzhou The two governments will soon start planning for the park by recruiting a third-party consultant firm Kam Leong kamleong@macaubusinessdaily.com
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he MSAR Government is to build a co-operation park with Jiangsu Province, for which a memorandum of understanding (MOU was signed last Friday, and which Secretary for Economy and Finance Lionel Leong Vai Tac believes could help spark local young people’s ability to innovate. Last Friday, the city’s Chief Executive, Fernando Chui Sai On, inked the MOU for the cooperation park with the Governor of the province, Shi Taifeng. The two parties have agreed to build the park in the Changzhou Prefecture of the province. The park, according to a press release from the government, will be positioned as a platform for boosting co-operation between the two parties; promoting co-operation between China and Portuguesespeaking countries; allowing local young entrepreneurs to establish a business in the Mainland; and boosting exchanges and training initiatives involving civil servants from Jiangsu and the MSAR. The MSAR Government said in the release that it believes the park could further push the city’s economic diversification, in addition to bringing
new development opportunities for local residents - especially young people.
Study first
Nevertheless, detailed plans for the MSAR-Jiangsu co-operation will only be known following an initial study, Secretary Lionel Leong Vai Tac told reporters on Saturday morning after attending the opening ceremony of the Jiangsu – Macau – Portuguesespeaking Countries Business Forum that took place in this year’s Macao International Trade and Investment Fair (MIF). “Our next step will be hiring a thirdparty, international and professional consultant company to study the planning for the park, which is the most important task for the moment,” the official said. “Only after this is complete can we can plan the size or other details of the park”. In fact, for the construction of the co-operation park the MSAR Government and the Mainland Chinese province have already e st ab l i s h e d a j o i n t w o r k i n g framework, including an MOU for establishing a joint taskforce to study the planning for the park, as well as an MOU regarding exchange initiatives involving civil servants from the two parties. Secretary Leong claims the government is confident about the
project, given Jiangsu Province’s previous experiences in establishing international co-operation parks. “For example, they are very successful in their co-operation [park] with Singapore . . . while Changzhou houses the one and only co-operation park between China and Israel, as well as that between China and Germany,” he said. The official believes the project will help spark local innovation and creativity via regional cooperation, also one of the aims of the city’s Five-Year Plan. “Given their highly-efficient human resources,
by selecting Changzhou for building the co-operation park, we believe it will give great support to young people’s innovation and creativity. We are confident that we can work on this project well,” the Secretary commented. The Jiangsu – Macau – Portuguesespeaking Countries Business Forum has taken place in the city’s annual MIF since 2011. The Secretary said in his speech during the opening of the Forum that the new project between Macau and Jiangsu could provide new co-operation opportunities for the two parties.
Chief Executive Fernando Chui Sai On (R) and Jiangsu Province Governor Shi Taifeng (L)
4 Business Daily Monday, October 24 2016
Macau Entrepreneurialism The Vice-President of the Macau Youth Entrepreneur Association believes
that the local government has more than enough money to help start-ups, but misses the mark too many times
“The biggest disadvantage is probably human resources and the local laws that regulate them” Jorge Valente is president of the Macanese Youth Association (AJM) and has been vice-president of the Macau Youth Entrepreneur Association (AJEM) for four years. An entrepreneur himself, in September he helped organise a delegation of 17 local young entrepreneurs who travelled to Portugal for industry research and networking, with the trip giving him a sense of what lessons Macau can learn from Portugal in the way it helps its start-ups. In an interview with Business Daily he discusses what makes a good entrepreneur, the advantages and disadvantages Macau has for start-ups, and the ever-present issues SME’s face in hiring qualified personnel. Nelson Moura nelson.moura@macaubusinessdaily.com Photos by: Nelson Moura
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hat is your experience o f sta rt- u p s a n d entrepreneurialism? I started many. I studied programming and after finishing my studies I worked for Formula 1 team Williams which, although it’s a company with 20 years’ history, works like a startup. Everyone has a project, has to innovate independently and deadlines are very short. They also work a lot in a goal-based system, meaning the way you get to your goal doesn’t matter as much as completing the goal on time. After all, the cars have to be ready for the race on time and any mistake can lead to a fatal
accident. So I learned how to innovate on a tight deadline, which is normally something essential for start-ups. After returning to Macau I worked at The Venetian, a giant company, but after a year I saw it wasn’t the kind of work I wanted to do, so I left and started a software company and after that a trading company. It was during that period that I learned how to build up a company and now I also make seed and angel investments in start-ups in California and Portugal. Are entrepreneurialism and startups current global trends? Yes; and a good example of that is Portugal, which has adapted really well out of necessity since the country was facing an economic crisis and high unemployment rates. There was a lot of unemployed highly qualified
labour that would end up moving away from the country, but Portugal managed to create a good platform and some successful cases for startups that changed local mentalities. I only lived in Portugal for two years in the 1990’s and something that really surprised me coming back is how the crisis managed to change mentalities in such a short period. You see young people starting their own companies and projects, startup incubators like Beta-i and Fábrica de Startups and even foreigners who go to Portugal to create their own companies and hire local workers. So what parallels would you draw between the business scene in Portugal and Macau? I think Macau now is at the stage Portugal was 10 years ago, the crisis
Jorge Valente, Vice-President of the Macau Youth Entrepreneur Association (AJEM)
period before the evolutionary jump. Portugal’s new Industry Secretary of State João Vasconcelos, because of his background in business, knows what support local entrepreneurs need. In Macau, you see a lot of government funding that sometimes doesn’t go towards exactly what entrepreneurs need. The intention is good but it doesn’t reach its purpose. I think in Macau we have many funds but the government thinking goes like this: okay this is needed, let’s create this fund, appoint someone we think knows about entrepreneurialism to manage it. If it doesn’t work they open another and get a new person. Is there less risk in getting investments in Macau? Start-ups are a different process. Some entrepreneurs tell me banks don’t lend them money but of course they won’t do it because start-ups are a high-risk investment. Someone who invests in a start-up knows there are no assets to seize if the project doesn’t work. That’s why you need business angel and seed investors, because their business instincts normally tell them if an idea will work or not, regardless of whether it sounds like a stupid idea.
“Governments invest with public money; and all start-ups start with stupid ideas that have trouble attracting that kind of funding. When they started, Uber and Google probably sounded like a stupid idea: who’s going to need a platform to call rides? Who will need an online page just for searching?” The government invests with public money; and all start-ups start with stupid ideas that wouldn’t attract that kind of funding. When they started Uber and Google they probably sounded like stupid ideas: who’s going to need a platform to call rides? Who will need an online page just for searching? How do you make money from those ideas? I was in the house of the Airbnb founders in 2008 when they were only five people, and I still think that if I had given them US$1,000 (MOP7,990) I wouldn’t have to work now with US$10 million in the bank. I didn’t know what I know now at that time, and it didn’t seem like a sustainable business when the founder presented the idea to me. Therefore, any government funds
Business Daily Monday, October 24 2016 5
Macau with an appointed manager can’t just spend money with ease - and probably wouldn’t invest US$20 million for someone to do a search website. How can Macau create an ecosystem which enables start-ups to grow and succeed? Macau, of course, has advantages and disadvantages. It still has a lot of money, which if used in the right start-ups could provide big returns for the local economy and the people involved in that business.
“Not everyone has what it takes to be an entrepreneur and when I talk to young people from Macau I can’t see which ones will be successful but I can see immediately which ones won’t. Being an entrepreneur implies extra work, no holidays, having a dream and infinite perseverance.” The biggest disadvantage is probably human resources and the local laws that regulate them, which don’t favour start-ups. In any new industry there’s a chicken and egg problem; to start start-ups you need talent but there’s not enough talent in Macau. It takes time to create entrepreneurs and if there aren’t not enough in Macau we need to import them. But how can we do that if Macau law restricts the hiring of non-residents. If I want to build a Google here I need to bring someone in from outside with an idea to develop it, and that person will have to bring maybe a web designer and marketing people to develop an idea that might fail . . . If we block the first step already, they’ll just go to another place with more relaxed employment laws. So what changes should happen in the local labour law? The law is not very well defined. Let’s say we want to make an exception for a certain type of job; we have to decide from where we want the talented resources, and it’s better to focus on if we want talent from Asia or from Europe. Portugal is successful because of the European Community laws that allow country members’ residents to freely move and work. In the United States, they have a huge pool of talent but startups can have exceptions to hire one or two non-residents, normally highly specialised workers. In Macau, we don’t have local highly specialised workers and don’t allow start-ups to hire specialised nonresidents to come and help them develop. We can see the labour law we have was made for the construction sector and works very well for that, but when you use the same law requirements for office workers it doesn’t make sense. If you interpret the law, even people that come to Macau for work meetings can be arrested as illegal workers, which actually happened in some companies I know, even in banks and casinos office workers. Do you think the fact that Macau’s economy is still too focused on the tourism and gaming industries hampers the development of start-ups? The low unemployment rate is a bit misleading because the truth is that
there are more unemployed people [now] with the gaming operations and junkets that closed down, some of whom used to make a lot of money and are now Uber drivers. I think unemployment here will only get worse with time. How do you persuade Macau university graduates to create a startup instead of trying a safer job in the government, casinos or hotels? With the government jobs I don’t think you can fight it; they’re always well-paid safe jobs with lots of holidays. However, I think most government positions are already filled and I don’t think the government will open many more. I heard of many companies where almost everyone that left went to the government. I once hired a secretary and the first thing she told me was that her dream was to work for the government; then she spent the next four years trying until she got a public employee job. In terms of the private sector I think people need to change their mentality. I think there’s a larger acceptance now that working in casinos or hotels is not necessarily better, that the pay is good but that there are more demands.
“I think Macau is now at the stage Portugal was 10 years ago, the crisis period before the evolutionary jump.” What makes a successful entrepreneur? Not everyone has what it takes to be an entrepreneur, and when I talk to young people from Macau I can’t see which ones will be successful but I can see immediately which ones won’t. Being an entrepreneur implies extra work, no holidays, having a dream and infinite perseverance. In innovation and entrepreneurialism many times you’re trying to develop something that doesn’t exist, so there will be a lot of people saying it can’t be done and obstacles from laws not being prepared or maybe society not being ready. Adaptability is also important. Like Darwin said, you need to adapt to survive. For example, a lot of people forget that Amazon started like an online bookshop; they then realised that instead of only selling books and only competing with Barnes & Noble they
could sell everything. Now books are a very small part of their sales and actually what gives them more money is renting online cloud data storage. What advice would you give to Macau start-ups? A lot of people nowadays want to do platforms - they want to be the new Facebook. Start-ups going that way shouldn’t focus too much on the local market since it’s very small. If they try to target Hong Kong, Taiwan and Mainland China, at least they will expand their
market reach considerably and will have a common language. Macau also has advantages in connecting trade commerce and goods between Lusophone countries and Mainland China. The new Chinese laws for product import and export are very favourable for Special Administrative Regions in terms of trade of food and low cost products; that’s something that could help start-ups dedicated to this sector. It will probably be a better business to create a trade start-up than opening a cafe in ZAPE (Zona de Aterros do Porto Exterior).
6 Business Daily Monday, October 24 2016
Macau Opinion
Sheyla Zandonai*
Jigsaw pieces
Last week, this newspaper reported on putative plans by the Macau SAR Government to expand the current facilities of the Lotus Border, which links the city to Hengqin Island. According to Macau Business Daily reporters, the reasons that have encouraged the government to toy with this idea purportedly include the relentless development of Cotai and the expectation of welcoming greater numbers of visitors to the city, especially following the changing profile of Macau’s gaming market – moving from higher to lower floors – which means that more people will cross the border to Cotai more often, though likely with less money to spend. Another important element underlying the yet-to-beapproved project was raised: the need to ease demographic pressure on the Gongbei Border Gate during peak tourist dates – which in Macau, let’s face it, could be almost every day. Similar to the Border Gate, the new Lotus checkpoint, if erected, would be able to deal with 300,000 visitors per day. That’s roughly half the population of Macau. On a single day. The new Pac-On ferry terminal falls neatly into the same logic: larger infrastructure is planned and built in order to manage larger flows – people, cars, and goods – which reciprocate broader economic and political ideologies that eventually materialise into a certain type of spatial grandeur, which, in Macau, is ambitious yet puzzling. To give all this the benefit of the doubt, it is thoughtful reasoning on the part of local and central authorities to consider channelling mass tourism to Cotai rather than continue to overload the busiest checkpoint between Macau and the Mainland, north of the Peninsula. Limiting human and car crossings back and forth across the Border Gate would improve its service to residents and visitors alike, matching flows to a degree more suitable to the Gongbei Border’s current capacity – recall that the facilities were already expanded in 2004 in view of the enactment of the Individual Visa Scheme in 2003. It would also allow the Peninsula to exhale, releasing residents from much daily trouble and, to be honest, unnecessary, pain, given the liberating possibilities other borders allow us to entertain. Having said that, there is as yet no confirmation that the Lotus Border has been earmarked for expansion. Just another of those now typical ways of dealing with development in Macau: behind-closed-doors processes of decision-making which force us to figure out the hidden aspects of policy for action, like jigsaw puzzle pieces slowly falling into place. *scholar and contributor to this newspaper.
Crown detentions
Wells Fargo: MSAR gaming revenue may be affected in near term Meanwhile, Crown’s market competitor, New Zealand-based SkyCity Entertainment Group, perceives the impact of the arrest to be ‘uncertain’ Kam Leong kamleong@macaubusinessdaily.com
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rokerage Wells Fargo Securities LLC estimates that th e a r r est o f 18 employees of Australian casino operator Crown Resorts Ltd. by Chinese authorities may have a ‘near-term’ impact upon the city’s gaming revenue following a meeting held by the local gaming regulator with the major six gaming corporations operating in the MSAR last week. The city’s Secretary for Economy and Finance Lionel Leong Vai Tac said Thursday that the Gaming Inspection and Co-ordination Bureau (DICJ) had met with the operators following China’s detention of the Crown employees. The Secretary indicated that the meeting sought to remind the operators to obey local laws in the MSAR and other jurisdictions in which they conduct their commercial activities, despite his claim that the arrest had no direct relationship with any local operator. However, analysts at Wells Fargo Securities LLC. believe the meeting may affect the city’s gaming revenue in the near term. “Following the incident, Macau gaming regulators reportedly met with all of the city’s operators. Our local contacts believe the news will have a five per cent to ten percent impact upon near-term gaming revenues”, wrote the firm’s analysts, led by Cameron McKnight, in its latest weekly research notes. Nevertheless, such near-term impact has yet to be apparent, the
firm’s analysts added.: “Our contacts suggest that we haven’t seen the impact yet from the Crown news”, they wrote. The brokerage estimates the city’s average daily revenues roughly halved to some MO490 million (US$61.3 million) last week from some MOP790 million to MOP800 million for the first 16 days of the month. “We remain on the sidelines on Macau gaming. We continue to believe that while the market is stabilising, we won’t see a v-shaped recovery like we did in 2010 and 2013”, the analysts indicated. “There are both macro and policy risks in the near term along with new supply. Longer term, we expect low to mid-single digit growth as the government targets ‘steady’ and ‘sustainable’ growth in line with the broader economy”, they added.
SkyCity: Impact “uncertain”
Last Monday, China confirmed that Crown personnel were being held in Shanghai for alleged gamblingrelated crimes, and Australia’s Foreign Minister Julie Bishop confirmed last Tuesday that two of them were Australian, including the company’s head of International VIP team, Jason O’Connor, along with one dual Australian-Chinese citizen. Following the arrest, global rating agency Rating agency Fitch warned that China’s detention of the Crown workers highlighted the risks that global casino operators face in their businesses related to Chinese high rollers.
M e a n w h i l e, N e w Z e a l a n dbased casino operator SkyCity Entertainment Group Ltd. said on Friday that the impact of China’s arrests of the employees of its Australian market rival ‘remains uncertain’. The New Zealand-listed company runs casino-resorts in Adelaide and Darwin in Australia, in addition to operating in its home country. Commenting upon the impact of the detention upon the company’s business, the CEO of SkyCity, John Mortensen, indicated that “the impact of recent events in China remains uncertain”. “SkyCity does not have any staff in China, but we do use independent contractors there,” said the executive in an address in the company’s business update filed with the country’s stock exchange last Friday. “We are very confident these contractors comply with all relevant laws and regulations”. Mr. Mortensen added that they had been in contact with their contractors over the weekend and “none have been detained or are involved in this situation . . . Like other Australasian casino operators, SkyCity is continuing to monitor developments closely,” he said. Acc o r di n g t o th e C E O , th e company’s business in Australia accounted for around 9 per cent of its total international business market, with around half of their customers from China. “ Ac c o r d i n g l y , w e c o n si d e r ourselves to be a relatively small player relative to our peers, and to have less exposure to economic conditions or changes of policy in China and broader Asia which may impact our International Business,” he claimed.
Business Daily Monday, October 24 2016 7
Gaming Gaming China Ministry of Foreign Affairs spokesperson says Singapore ruling is “incorrect”
What next? Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
“
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he ruling made by the Singaporean court on this question of fact is incorrect.” So said China’s Foreign Ministry Spokesperson, Hua Chunying, in an official press conference held on Friday. The statement comes in response to an enquiry regarding a ruling by the Singapore High Court enabling Macau to be included in a bilateral investment treaty (BIT) signed by Laos and China in 1993. The ruling came after local company Sanum Investments challenged the Laos Government with regard to claims of capital investment benefit losses brought about by taxes deemed unfair. Given that the MSAR reverted to China in 1999, the Singaporean authorities ruled that the ‘moving treaty frontier’ (MTF) rule applied to Macau, and as such the MSAR fell under China at the time of the arbitration proceedings between Sanum and the Laotian authorities.
My choice, not yours
“The Chinese central government decides whether or not the international treaties to which the People’s Republic of China is or becomes a party apply to the SARs based on the circumstances and their needs after seeking the views of the governments of the SARs,” said the state spokesperson. “The SARs can conclude agreements with foreign countries on their own in the appropriate fields, including economy, finance, trade and investment, in accordance with the
Basic Law or under specific authorisation of the central government.” With regard to two letters produced during the proceedings by the Laos Government, showing correspondence between the Laotian Ministry of Foreign Affairs and the Chinese Embassy in Laos, the spokesperson also validated these as representative of the Mainland Government’s position. “China has confirmed twice in diplomatic notes that the China-Laos investment agreement does not apply to Macao SAR,” said Hua, further noting that the “the geographical scope of application of the China-Laos investment agreement is a question of fact concerning acts of state, which is up to the contracting parties to decide.”
Sanum Investments launched three legal proceedings against the Laos Government and the orchestrator of the sale of the Savan Vegas Hotel and Casino complex in Laos, and formerly operated by Sanum
Macau Legend in Setubal
Following comments from the Minister of Sea from the Portuguese city of Setubal stating her “strong reservations” against the potential ownership of a marina by local gaming operator Macau Legend in the region, the company spokesperson has stated that the marina element of the property need not be “fundamental or vital” to the project and that the group may or may not participate in the public tender for the Setubal
until its seizure by the Laos Government due to an alleged retroactive assessment of over US$70 million (MOP560 million). The casino has since been sold to local gaming operator Macau Legend.
Marina. In statements to Diario da Regiao, Duarte Pinto Gonçalves, the local gaming operator’s representative in Portugal, notes that the project is not “confined” to the marina; however, the marina project could “contribute to the value of Setubal and the region”. Gonçalves commented that the marina project is only at the conceptual stage and Macau Legend is awaiting the “necessary conditions for the formal start of the project, namely with regard to the gaming law in Portugal.”
8 Business Daily Monday, October 24 2016
Greater China Real estate
Home prices rise at record rate, stretching affordability further September’s national price growth was the fastest since the series was started in 2011
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hina’s new home prices rose in September at the fastest rate on record as buyers rushed to close contracts before new restrictive measures took effect in October. The boom in sales and prices was evident in mortgage lending, with new housing loans to individuals totalling 475.9 billion yuan in September alone, some 76 per cent higher than the same month last year, central bank official Ruan Jianhong said in a news release. Prices in China’s 70 major cities rose 11.2 per cent in September from a year earlier, accelerating from a 9.2 per cent increase in August, as 64 of them saw year-on-year price gains, a National Bureau of Statistics survey showed on Friday. The property market, accounting for around 15 per cent of gross domestic product, contributed handsomely to third quarter economic expansion of 6.7 per cent. Hefei, capital city of Anhui province in central China, was the top performer, with prices surging 46.8 per cent from a year earlier, quicker than its 40.3 per cent rise in August. The coastal city of Xiamen in southeastern China, the top performer in August, came in second with a price rise of 46.5 per cent, accelerating from 43.8 per cent in the previous month.
Beijing and Shanghai prices rose 27.8 per cent and 32.7 per cent onyear, quickening from 23.5 per cent and 31.2 per cent in August. Price growth in Shenzhen, a long-time top performer that gave way to Xiamen to be the second highest in August, fell slightly to 34.1 per cent from 36.8 per cent last month. The house-prices-to-householddisposable-income ratio in first-tier cities has risen to be around 18 to 20 times in this year’s housing fever, putting housing affordability close
to Hong Kong’s and making it less affordable than London, UBS wrote in a report, citing notoriously expensive cities.
Cooling down a red-hot market
More than 20 cities have now adopted restrictive measures aiming to tame fast-rising prices, although 15 cities had implemented them in the first week of October. “Out of the 15 cities, probably half of them put out effective measures, such as raising the down payment ratio for second-home purchases to as high as 70 per cent,” Beijingbased Rosealea Yao of Gavekal Dragonomics said.
“But the rest of the cities are probably just going with the flow, as their measures are more half-hearted.” Yao said aggressive credit tightening, which is regarded as most effective in curbing prices, seems unlikely as the government looks to stimulate economic growth. But despite clear signs of destocking in some lower-tier cities as sales boom and new construction slips, many small centres still have a large glut of unsold homes. “The property boom has been a very good thing for destocking, but that doesn’t mean the government can just sit back and relax now,” she said. To “reflect changes in the market” and prove the effectiveness of official cooling measures, the NBS rushed in a new table on Friday, which compared price growth in the first half of October to September. It showed price growth in 15 first- and second-tier cities which implemented new measures during the holiday, including Beijing, Tianjin, Shanghai and Shenzhen, showed signs of cooling on a monthly basis. This early indication concurs with some analysts who are optimistic about China’s efforts to manage overinvestment in property. “We view China’s authorities as more like Singapore’s and we think it’s a matter of time before macro prudential policy slows sales growth,” Singapore-based Tim Condon of ING said in a note ahead of the data release. Reuters
Overcapacity
Steel mills defy capacity cutbacks Production dipped by far less than expected as mills sustained output even as they cleaned themselves up Ruby Lian and Manolo Serapio Jr
Chinese steel mills are becoming cleaner every month as Beijing pushes to curb its smoke-stack industries. But they’re not getting any leaner. D e s p i t e e f f o r t s t o st e p u p environmental checks and trim out excess capacity, steel output by the world’s top producer has risen yearon-year for the past seven months. As emissions cuts will mean steel mills are better able to meet stricter government standards, Beijing may find it more difficult to cut overcapacity in a sprawling industry. For now, domestic demand from infrastructure and construction has been robust, absorbing most of the extra supply. But a steeper slowdown in the world’s secondlargest economy could force mills to ramp up sales abroad. That could rekindle tensions with Europe and the United States, major trading partners which have for years accused China of dumping its excess steel overseas, hitting producers and hurting global prices. The issue took centre stage at a recent G20 summit in China when world leaders pledged to work to address excess output. China’s top steel producing city of Tangshan in Hebei province illustrates Beijing’s dilemma. Hosting a monthslong international horticultural show, Tangshan had a major six-month clean-up to ensure blue skies for visiting dignitaries, including the country’s president Xi Jinping. Industry experts predicted this would see a big drop in output in
a province that accounts for a fifth of national production, going some way to realising government goals on output and capacity cuts. But production dipped by far less than expected as mills sustained output even as they cleaned themselves up. They could do this largely because steel prices have risen 40 per cent this year, and strong domestic demand is expected to continue, underpinning those increases, though exports have fallen to their lowest since February. By end-September, China had completed more than 80 per cent of this year’s capacity reduction goals in coal and steel, said Huang Libin, an official at the Ministry of Industry and Information Technology. China has targeted a cut of 45 million tonnes from its surplus steel capacity this year.
But the battle to tackle excess capacity and curb pollution has failed to dent production. China’s annual crude steel surplus is estimated at around 300 million tonnes, three times the annual output of the world’s second-biggest producer, Japan. “If steel mills are profitable, there’s no reason for the government to order them to reduce production if they meet environmental criteria,” said Xia Junyan, investment manager at Hangzhou CIEC Trading Co in Shanghai.
Battleground in Tangshan
While many of Tangshan’s small mills have closed, bigger plants have installed or upgraded equipment since a nationwide environmental crackdown began in 2014, industry sources say. Some were forced to cut sinter production - processing iron ore fines into lumps - for a few days in September and October to clear the skies during the recent horticultural show. But the city’s about 150 blast furnaces only dropped output three times - in June, July and September
- and for only a couple of days during the six-month clean-up, according to a survey by industry consultancy Custeel.com. The biggest drop was in early June when operating rates fell below 65 per cent as leaders from central and eastern Europe gathered in Tangshan for talks on economic ties, followed by another fall in July as the city prepared to commemorate a 1976 earthquake that killed at least 250,000 people.
Key Points Despite pressure to clean up, mills producing more Making it harder for Beijing to push overcapacity cuts Mills buoyed by 40 pct steel price rise this year Domestic demand is soaking up output gains, exports lower Otherwise, mills have been operating at above 80 per cent of capacity this year, the Custeel.com survey showed. “Production can be flexible. Even if production at steel mills is hit temporarily by the environmental crackdown, they can increase production later to offset the losses,” said Xia at Hangzhou CIEC Trading. The government looks ready to keep targeting Tangshan’s mills in its war on winter smog, with Hebei province last week imposing what it calls “special emission restrictions” on local steel mills, according to a policy document. Last m o n th, th e Nati o n a l Development and Reform Commission, China’s state planner, said it punished hundreds of steel and coal companies nationwide for violating environmental and safety regulations. Some were forced to close or cut output Reuters
Business Daily Monday, October 24 2016 9
Greater China RMB week
In Brief
Domestic money market sharply tighter Today is the deadline for companies to submit their third-quarter tax payments China’s primary money rates rose from a week earlier on Friday, traders said, as companies sought funds for next week’s quarterly tax deadline and central bank foreign exchange sales drained yuan liquidity, offsetting the effect of open markets net cash injections. The People’s Bank of China (PBOC) injected a net 95.5 billion yuan into the market through open market operations last week, snapping two straight weeks of net drains. The central bank drained a net 415 billion yuan from the market last week. A slide in the Chinese currency and large net foreign exchange sales by the central bank in September have also contributed to overall tightness in money markets in recent weeks. On Tuesday, the PBOC injected 462 billion yuan to 20 financial institutions for six months and one year via its medium-term lending facility (MLF), more than triple the 132 billion yuan of loans maturing that day. Another 166 billion yuan of MLF loans mature next week. The MLF is a supplementary policy tool the central bank uses to manage conditions and medium-term interest rates in the banking system and money markets. “The latest MLF operation was an extension of matured loans for last week and the next. Although we also had some fresh funds injected through the open market operations,
the money could hardly meet the demand from companies for their tax payments,” said a trader at a Chinese bank in Shanghai, suggesting companies usually shore up cash position to make their quarterly tax payments, which drain liquidity from the market.
‘The slide in the yuan and uncertainties in the currency’s future movement have re-ignited the pressure on money outflows’ Today is the deadline for companies to submit their third-quarter tax payments. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was 2.54
per cent, 23 basis points higher the previous week’s closing average rate. The volume-weighted overnight rate was 2.3 per cent, up 17 basis points from last Friday. The impact from the central bank’s net foreign exchange sales has also been “huge”, traders said. China reported that the central bank sold a net 337.5 billion yuan worth of foreign exchange in September, the highest since January, according to Reuters calculations based on the bank’s data. “The base money supply in the entire system is falling. If the huge forex sales become a trend, liquidity will be further tightened,” the trader said. The slide in the yuan and uncertainties in the currency’s future movement have re-ignited the pressure on money outflows, another concern for the money market. With the dollar climbing to seven-month highs against a basket of currencies, China’s yuan weakened against the dollar to fresh six-year low on Friday. The Shanghai Interbank Offered Rate (SHIBOR) for seven-day tenor rose to 2.4010 per cent, 2.7 basis points from the previous week’s close. Reuters
Energy sector
National utilities beg for coal as supply expansions yet to kick in In a major break from the tradition of agreeing to monthly contracts, some small coal miners are only pricing on a daily basis Meng Meng and Josephine Mason
China’s electric power utilities are scrambling to get coal from anywhere they can, but are coming up short as efforts to boost supply take time to come into effect. China’s government in September ordered miners to boost thermal coal output by 1 million tonnes per day, but it will take months before new supplies from the recent reopening of mines hits the market. Additionally, new rules on trucking have caused logjams in deliveries and transportation price spikes while suppliers at home and abroad are digging in for ever-higher prices. Together this is causing a major headache for China’s power
“If coal prices continue to rise from the current level, the majority of power plants will turn into losses” Zheng Min, a coal analyst at China Sublime Information Group
companies as they rush to secure feedstock ahead of their highest demand period during the Northern Hemisphere winter. “A couple months ago, when prices are low, we have begged power plants to sign more long-term contracts, but they refused,” said a trader based in Shandong province, one of the nation’s top producing regions. “Now they begging us to give them more supply.” In a major break from the tradition of agreeing to monthly contracts, some small coal miners are only pricing on a daily basis and accepting cash upfront, said two analysts and a coal trader who have spoken to the utilities. That has added a major strain to the
Household economy
Beijing unveils steps to halt slowing incomes China’s cabinet has unveiled steps to support job creation, improve labour mobility and cut social insurance rates, in a bid to halt a slowdown in income growth that could hurt consumption. Consumption is driving China’s economic growth, but a further slowdown in income growth in the third quarter highlights the challenges to a transition away from manufacturing and heavy industry. “The downward pressure on the economy is transmitting to the area of income distribution,” the cabinet said in guidelines published on the central government’s website. Fraudulent data
Drug applications rejected due to data fabrication China’s drug safety watchdog has rejected 30 new drug registration applications due to fabrication of clinical trial data, it said. “As of the end of September, 117 registration applications had been verified, 30 of which were rejected due to defects with authenticity, accounting for about 2 per cent of the total registration applications for self-examination and verification,” an official with the China Food and Drug Administration told Xinhua Friday. In addition, 27 applications, 11 clinical trial institutions and Contract Research Organizations suspected of providing fraudulent data have been investigated. Maglev
electricity companies’ cash flow and eroded profits. Beijing’s steps to boost coal supplies have done little to derail the months-long price rally. South China coal futures prices hit record highs this week above US$85 per tonne, up by 21 per cent since the start of the month. The quickening pace of the gains has stirred speculation that the government may wade in again to try and calm the markets and soothe utilities’ concerns about tighter supplies and falling profits. “Some electricity producers (only) break even or are on the brink of losses. If the coal prices continue to rise from the current level, the majority of power plant will turn into losses,” said Zheng Min, a coal analyst at China Sublime Information Group.
Trucking
Adding to the tumult are new trucking rules that came into effect on Sept. 21 aimed at cracking down on lorries that were illegally converted to carry extra weight. The regulations have affected the transportation of commodities from petrochemicals to pigs but has hit coal the hardest given the race for raw materials. Since being introduced, truck rates have jumped some 30 per cent to 400 yuan (US$59) per tonne. Smaller players do not have access to rail freight as an alternative, although those prices are also rising, traders said. Analysts who have visited some mines in Shaanxi province, one of the largest producing coal regions, report seeing long lines of trucks in and out of plants as power companies rush to secure feedstock. “With buyers, a serious problem has been they cannot find enough trucks, not to mention the delay to port due to traffic,” said Xiaojing Zhang, an analyst at Everbright Futures. Reuters
Local firm launches R&D on 600 km/h train A Chinese firm will start researching and developing a magnetic levitation (maglev) train that can run 600 km per hour, which would be faster than any other maglev train currently in operation. CRRC Corp. Ltd., China’s largest rail transportation equipment maker, said it will build a maglev rail line no less than 5 km long to test the train. The company will also develop maglev trains that travel at 200 km/h, with the goal of establishing domestic technology and standard systems for new-generation medium- and high-speed maglev transportation that can be applied globally, said Sun Bangcheng, a CRRC official. Forged figures
Assa Abloy says Mainland executives inflated sales Sweden’s Assa Abloy, the world’s biggest lock maker, said on Friday it had fired several executives at acquired companies in China after discovering they had inflated sales figures for 2015. Assa Abloy corrected the irregularities in its third-quarter report published on Friday, taking a 260 million crown (US$29 million) hit to operating profit and sending its shares down as much as 8.6 per cent in its biggest one-day fall in eight months. “2015 was a tough year and I was standing here saying we did better than the market and unfortunately I was wrong,” Chief Executive said.
10 Business Daily Monday, October 24 2016
Greater China
Philippines President Rodrigo Duterte (L) shakes hands with Chinese Premier Li Keqiang (R) ahead of their meeting at the Great Hall of the People in Beijing, China, 20 October 2016. Lusa Diplomatic shift
Philippines’ Duterte says didn’t really mean “separation” from U.S. U.S. Defence Secretary Ash Carter said Washington intended to keep to its alliance commitments to the Philippines. Neil Jerome Morales
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hilippi n e P r e s i d e n t Rodrigo Duterte said on Friday he was not severing ties with his country’s long-time ally the United States, but merely pursuing a more independent foreign policy by strengthening relations with China. A day after he provoked fresh diplomatic alarm by announcing his “separation” from Washington, Duterte struck a more conciliatory tone as he arrived back in the Philippines after a four-day visit to Beijing. “It is not severance of ties. When you say severance of ties, you cut diplomatic relations. I cannot do that,” the Philippine leader told reporters at a midnight news conference in his southern home city of Davao. “It’s in the best interest of my countrymen to maintain that relationship.” On Thursday, Duterte had told Chinese and Philippine business people at a forum in Beijing’s Great Hall of the People that America had “lost now”, as he sought what he calls a new commercial alliance with China. “I announce my separation from the United States,” he had said, to sustained applause, adding he would also seek closer ties with Russia. Clarifying his comments on Friday, he said that what he meant was that Manila’s foreign policy need not always “dovetail” with Washington. “As in separation, what I was really saying was separation of foreign
policy,” he said. “In the past, and until I became president, we always follow what the United States would give the cue.” The White House, which had responded to the “separation” speech by saying there had been “too many” troubling statements from Duterte recently, was quick to welcome the apparent shift in tone. “Based on his extensive, colourful previous comments, there is greater clarity that we would like to get about the intent of President Duterte and his government,” White House spokesman Josh Earnest told a daily news briefing. “But based on what you’ve read me that seems to be a change in tone that is more consistent with the seven decade-long alliance between the United States and the Philippines.”
“What the president meant...”
Earlier officials in Manila were left scrambling to explain the latest comments from Duterte, whose broadsides against the United States have grown increasingly frequent. “In terms of economic (ties), w e a r e n o t s t o p p i n g t r a d e, investment with America,” Trade Minister Ramon Lopez told CNN Philippines. He said the Philippines was “breaking being too much dependent on one side”. Duterte’s spokesman, Ernesto Abella, said the president had been making a “restatement” of his bid to chart an independent foreign policy. Duterte wanted to “separate the nation from dependence on the
U.S. and the West, and rebalance economic and military relations with Asian neighbours” like China, Japan and South Korea, Abella said in statement. Underscoring that, the Chinese and Philippines defence ministers met in Beijing on the sidelines of Duterte’s visit, and pledged to restore security ties, China’s Defence Ministry said.
Anti-U.S. protest
Duterte’s efforts to engage China - months after a tribunal in the Hague ruled that Beijing did not have historic rights to the South China Sea in a case brought by the previous administration in Manila - mark a reversal in foreign policy since the 71-year-old former mayor took office on June 30. It has also been in stark contrast to the language he has used against the United States after being infuriated by U.S. criticism of his bloody war on drugs. He has called U.S. President Barack Obama a “son of a bitch” and told him to “go to hell”. On Wednesday, about 1,000 anti-U.S. protesters gathered outside the U.S. Embassy in Manila calling for the removal of U.S. troops from a southern Philippine island. H u n d r e ds o f l eft- w i n g demonstrators burned a replica of the U.S. flag at a rally in Manila on Friday as they called for an end to U.S. military agreements. The United States, a former colonial power, has seen Manila as an important ally in its “rebalance” to Asia in the face of a rising China. The U.S. Embassy press attache in Manila, Molly Koscina, said Duterte’s statements were creating uncertainty. U.S. Defence Secretary Ash Carter said Washington intended to keep to its alliance commitments to the Philippines.
“Obviously any relationship is one of mutuality and we will continue to discuss that with our Philippine counterparts,” he told reporters on a flight to Turkey. Chinese Foreign Ministry spokeswoman Hua Chunying, asked in Beijing about Duterte’s comments, said countries should not resort to win-lose mentalities. “We should not have Cold War thinking; it’s either you or me, you win I lose, that kind of zero-sum game,” she told a regular press briefing.
Key Points Philippine President says doesn’t want to cut ties with U.S. Duterte had announced “separation” from the United States Leader says merely wants more independent foreign policy Duterte seeks new alliance with China and Russia White House welcomes change in tone Wrangling over territory in the South China Sea, where Brunei, Malaysia, Taiwan and Vietnam also have claims, has consumed China-Philippines relations in recent years. China claims most of the waters through which about $5 trillion in ship-borne trade passes every year, and in 2012 it seized the disputed Scarborough Shoal and denied Philippine fishermen access to its fishing grounds. Arriving home, Duterte said he had discussed Scarborough Shoal with the Chinese, but did not elaborate. Reuters
Business Daily Monday, October 24 2016 11
Asia Public spending
Malaysia’s Najib delivers budget amid opposition protests Ratings agencies have warned of a possible downgrade if the budget deficit is too large Joseph Sipalan and Emily Chow
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alaysia’s Prime Minister Najib Razak courted voters with perks and subsidies on Friday but was greeted by angry protests from opposition leaders unhappy with his handling of a corruption scandal at state fund 1Malaysia Development Berhad (1MDB). Najib, eyeing possible early elections next year, also pledged in his budget to cut a large fiscal deficit to keep the economy on track for strong growth. Southeast Asia’s second-largest oil producer was left reeling from the slump in global crude prices late last year, forcing it to slash its 2016 budget in January and lower its growth target to between 4 and 4.5 per cent. Najib said the outlook was improving and expects growth to pick up marginally in 2017 to between 4 and 5 per cent. Spending will rise 3.4 per cent to 260.8 billion ringgit (US$62.3 billion) next year, but the budget deficit would be cut to 3 per cent of GDP from a target of 3.1 per cent this year, he said. Ratings agencies have warned of a possible downgrade if the budget deficit is too large. “We are now on the right track, as we have and are taking firm, bold and right decisions despite the measures being unpopular,” the prime minister said in his speech in parliament.
Malaysia’s stock market and ringgit currency were unmoved. Najib was widely expected to present a populist budget to shore up support ahead of elections he could call in 2017. He announced an allocation of 6.8 billion ringgit to the government’s annual cash hand-outs programme, with 10 billion ringgit to be set aside for subsidies next year. Th e g o v e r n m e n t’ s h o u si n g programme for first time homebuyers would be expanded, while a special fund of up to 3 billion ringgit would be allocated for investment in smalland mid-cap companies. Najib also announced tax relief on consumer items and relief for working mothers and parents of pre-schoolers. “In our view, it remains a fine balancing act to maintain fiscal prudence and growth, with oil as the wild card,” said Weiwen Ng, an analyst at ANZ Research.
misappropriated funds flowed into the accounts of “Malaysian Official 1”, who U.S. and Malaysian officials have identified as Najib. The prime minister was booed by opposition lawmakers throughout his speech. The speaker then asked lawmakers not interested in listening to the budget to leave. About 80 per cent of the opposition bench walked out, describing the budget as unrealistic, said opposition lawmaker Tian Chua. “The government should be honest and responsible to the people,” said Muhyiddin Yassin, the former deputy
premier who now leads a new party chaired by Malaysian strongman Mahathir Mohamad. O n c e a hi gh-f l y i n g “ ti g e r ” economy, Malaysia struggled in recent years as low oil prices, the slowdown in China, and weak demand in developed nations have all weighed on its economy, pressuring finances. Ratings agency Moody’s said the budget’s focus on near-term fiscal consolidation supports Malaysia’s A3 rating, but said it expects government debt to continue to climb. A government economic forecast released ahead of the budget said petroleum revenue would decline to under 15 per cent in 2016 from nearly 36 per cent in 2011, and the country’s current account surplus would shrink further. Reuters
Opposition walkout
Najib has been under fire over allegations of corruption at 1MDB, the indebted state fund whose advisory board he chairs. Lawsuits filed by the U.S. Justice Department in July seek to seize more than US$1 billion of assets allegedly siphoned off from 1MDB, a fund Najib established in 2009. The lawsuits do not name Najib but say more than US$700 million of
Malaysian Prime Minister Najib Abdul Razak (R) speaks to members of parliament during the 2017 Budget presentation at Parliament House in Kuala Lumpur, Malaysia, 21 October 2016. Lusa
Central bank head
Thailand’s economy is ‘recovering gradually’ Growth has been slow for years, due to weak exports and domestic demand Kitiphong Thaichareon
Thailand’s economy is recovering gradually but is stronger than that of many countries, the central bank governor said on Friday, amid concerns that a year of mourning for revered King Bhumibol Adulaydej could affect tourism and consumption. “Although the Thai economy today is recovering gradually, it is more stable than many other industrialised and emerging countries because it has good buffers,” Bank of Thailand Governor Veerathai Santiprabhob told an economic seminar. Tourism accounts for about 10 per cent of Thailand’s economic output and has been a rare bright spot. The central bank has forecast Southeast Asia’s second-largest economy will grow 3.2 per cent this year and again in 2017. Last year’s growth was 2.8 per cent. King Bhumibol died on Oct. 13 at age 88. He was the world’s longest reigning monarch. Veerathai said the central bank would ensure that the Thai financial market supports the economy during the “transition” to a new monarch.
The government has reassured on a smooth royal succession, and said that the king’s death would not upend plans for a return to democratic rule, which include a general election in late 2017. Investors still have confidence in Thailand, Veerathai said. “Our financial and capital markets
have returned to stability very quickly, reflecting Thailand’s strong economic and financial fundamentals,” he said. “That also reflected that both Thai and foreign investors are still confident in Thailand’s economic fundamentals... The exchange rates are also stable at the moment,” he said. However, some businesses, such as entertainment, could be affected, and the central bank will closely monitor, Veerathai said. “But investment
should not slow as much,” he said. The government has announced a year of mourning, and is urging people to curtail festivities during the first 30 days after the king’s death. Bangkok’s bustling bars and the country’s famous holiday resorts could go unusually quiet. The number of foreign arrivals at five main airports during Oct. 13-19 was 397,452, or 10,561 fewer than in the previous week, Department of Tourism data showed. Tropical Thailand, with its beaches, Buddhist temples and infamous night life, had been expecting a record of 33 million visitors this year. Reuters
Thai mourners hold candles as they take part in a mass singing of the royal anthem in honour of the late Thai King Bhumibol Adulyadej near the Grand Palace in Bangkok, Thailand, 22 October 2016. Lusa
12 Business Daily Monday, October 24 2016
Asia In Brief Japan regulator
Banks urged to take on more risk Japan’s financial services regulator has urged banks to boost lending to promising, albeit riskier, businesses as it seeks to push the sector away from low-margin competition centred on established borrowers with good credit records. Efforts to get banks to lend more freely to companies with growth potential are part of a broader push to help revitalise a lowgrowth economy, and the new guidelines represent a major change from the traditional regulatory focus on containing bad loans. Financial Services Agency warned lenders against relying too much on collateral or third-party guarantees in making loan decisions. Competition
Indian regulator recommends fining telcos India’s telecoms regulator on Friday recommended the top three network operators be fined a combined 30.5 billion rupees (US$455 million), saying they were denying new entrant Reliance Jio sufficient interconnection points. Jio is part of Reliance Industries Ltd, controlled by India’s richest man, Mukesh Ambani. It began offering 4G services in September, triggering a war over network points that connect Jio customers with Bharti Airtel Ltd, Vodafone Plc’s India subsidiary and Idea Cellular Ltd. The Telecom Regulatory Authority of India recommended a fine of 500 million rupees per telecom zone for each of the three operators. Regional tour
Myanmar president to pay state visit to Vietnam Myanmar President U Htin Kyaw is scheduled to pay a state visit to Vietnam and attend international conferences in days, official media reported Saturday. It will be U Htin Kyaw’s first official visit to Vietnam after he became the president in April this year. U Htin Kyaw will also attend the 8th Cambodia-LaosMyanmar-Vietnam Summit, the 7th Ayeyawaddy-Chao PhrayaMekong Economic Cooperation Strategy, and the World Economic Forum on the Mekong Region to be held in Hanoi between Oct. 24 and 26. Australia’s environment
Group wins challenge against depot
An Australia court overturned on Saturday government approval of a A$130 million fuel depot and port at Port Melville, off the country’s north coast, handing a major victory to environmental activists. The facility, being developed by a unit of Singaporebased AusGroup, includes a 30-million-litre oil depot on Melville Island, one of the Tiwi Islands, 120 km north of Darwin, the capital of Northern Territory. Justice Richard White ruled in favour of the Environment Centre Northern Territory, a non-profit group that challenged a decision by former environment minister Greg Hunt to approve the project without an environmental impact statement, the court said.
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Monetary challenge
Inflation outlook rises everywhere but Japan Bond investors globally see more inflation on the horizon than at any time since May 2014 - except in Japan Kevin Buckland and Shigeki Nozawa
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apanese five-year inflation swaps remain mired below 0.3 per cent, resisting pressure from rising oil and commodity prices. Equivalent swaps in the U.S have surged to near 2 per cent, while those in Germany are approaching 1.2 per cent. Mitsubishi UFJ Kokusai Asset Management and State Street Global Advisors say the Bank of Japan’s (BOJ) failure to revive a stuttering economy will keep yen bond yields low, even as crude rebounds and an improving jobs market gives the U.S. Federal Reserve room to raise interest rates. BOJ Governor Haruhiko Kuroda has indicated he hasn’t been able to sustain inflation expectations among Japanese businesses and consumers because their views are relatively more “adaptive,” or influenced by prevailing prices. “Monetary easing coupled with fiscal spending have been adopted to boost prices, but there are doubts if they would actually lead to growing the economy,” said Masayuki Koguchi, the chief yen-bond fund manager at Mitsubishi UFJ Kokusai Asset Management in Tokyo. “As long as the actual inflation rate remains low, expectations will struggle to rise.”
Longer-term debt that is more sensitive to inflation has dropped 2.6 per cent in October in the U.S., on track for its worst month since June 2015. Equivalent Japanese securities have lost just 0.5 per cent. Kuroda has failed to break the deflationary mindset in his 3 1/2 years as BOJ governor. While he has cited the slump in oil prices as the main reason for not reaching his 2 per cent inflation goal, his own policy choices may have added to the challenges. The announcement of adoption of negative interest rate in January preceded a 17 per cent gain in the yen against the dollar, cutting import costs. Stimulus policies have failed to
Kuroda has failed to break the deflationary mind-set in his 3 1/2 years as governor
cure decades of economic malaise amid the most challenging demographics worldwide, State Street says. “Various fiscal policies and monetary policies have been tried but didn’t quite give the kind of results they would like to see,” even as the U.S. economy is turning around, said Ng Kheng Siang, Singapore-based Asia-Pacific head of fixed income at the $2.3 trillion money manager, which holds JGBs. “In that sense, even if U.S. yields go up a bit, upside in Japanese bond yields should be quite limited.” Rising crude prices should have only a limited effect in pushing up inflation globally as the rally has been driven by the prospect of lower supply rather than greater demand, Ng said in an interview in Tokyo last week.
Inflation Expectations
A bond market measure of inflation expectations called the break-even rate -- calculated by subtracting the yield on nominal bonds from those on inflation protected securities -- is the highest since April 2014 at 1.68 per cent for global sovereign debt excluding Japan, according to Bank of America Merrill Lynch indexes. The equivalent measure for Japan is 0.67 per cent. A key measure of Japanese consumer prices declined 0.5 per cent for a second month in August, the same pace of decline as the month before Kuroda launched his stimulus program in April 2013. Bloomberg News
Gas production
Indonesia reconsiders request to boost Masela LNG output Questions remain on how quickly Indonesia can develop infrastructure to absorb gas from these projects Wilda Asmarini
Indonesia expects to decide within “one or two weeks” on a plan by Inpex Corp to increase proposed output from the Masela natural gas field to nearly four times the level originally slated, a senior energy official said on Friday. “We are still discussing the capacity of Masela - between 7.5 mtpa (million tonnes per annum) and 9.5 mtpa,” said Coordinating Maritime Minister Luhut Pandjaitan, referring to discussions between the government and Inpex along with its partner Royal Dutch Shell PLC. The minister, who oversees resources, said that a decision would likely come in the next couple of weeks. A spokesman for Inpex in Jakarta confirmed the discussions. “There are several conditions we need for this project to be investable,” he said, though he did not confirm the proposed output increase. This would be the second time Inpex, Japan’s biggest energy developer and Shell, the world’s top LNG trader, have proposed an increase in output from the deep sea field in eastern Indonesia that was initially expected to produce 2.5 million tonnes per
year (mtpa) of LNG. President Joko Widodo in March rejected a US$15 billion plan by Inpex and Shell to develop the world’s largest floating LNG facility to process gas from Masela, saying an onshore plant would benefit the local economy more. The move was a blow to both companies and pushed the anticipated start of production from the field into the late 2020s. An onshore LNG plant will now be developed on either the islands of Aru or Saumlaki, Pandjaitan said, which is hoped will spur construction of petrochemical and fertilizer plants
in the eastern province of Maluku, an impoverished area with little development. “One of these two locations will be chosen,” he said. “We don’t just want to develop petrochemicals there. We also want to develop the fishing industry and tourism.” Indonesia gets priority on a large portion of domestically produced liquefied natural gas (LNG), but development of infrastructure to absorb the fuel has been slower than hoped both locally and abroad, putting pressure on gas prices. Inpex is also working with BP, Mitsubishi Corp , China Natinoal Offshore Oil Co and other companies on an US$8 billion expansion of the Tangguh project in West Papua province that will boost the project’s annual LNG production capacity by 50 per cent. Questions remain on how quickly Indonesia can develop infrastructure to absorb gas from these projects, with at least 60 uncommitted cargoes this year and next. Reuters
‘President Joko Widodo in March rejected a US$15 billion plan by Inpex and Shell to develop the world’s largest floating LNG facility’
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 Monday, October 24 2016 13
Asia
Privatization
Foreign firms eye up Vietnam’s state brewers The government said two companies would be listed in the first three months of 2017 and would be open to local or foreign bidders Jenny Vaughan
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loshed back at rowdy open-air “bia hoi” day and night, beer is Vietnam’s tipple of choice and now its cash-strapped government is drawing on the nation’s penchant for lager to raise billions of dollars by selling stakes in state-owned brewers. The unprecedented divestments in two state crown jewels, the makers of the much-glugged Saigon and Hanoi beers, are expected to net as much as US$2.2 billion. The sale comes as part of longpromised reforms to privatise bloated state firms, which official figures show contributed about one third of the country’s GDP last year. It is hoped the reforms will set the communist country back on track to meet its ambitious economic targets and jumpstart growth which has slowed this year. For Vietnam’s government, beer is a logical place to start. With a population of 93 million people, the country is one of Asia’s leading swillers of beer. Vietnamese consumed more than three billion litres of the cold stuff last year, according to Euromonitor marketing firm. That thirst has piqued interest from foreign brewers, eager to tap growth markets at a time when sales in many developed markets in Asia are forecast to plateau. “Vietnam has one of the fastest growing beer consumption markets in the world, and that’s obviously an appeal,” said Kevin Snowball, CEO of PXP Vietnam Asset Management in Ho Chi Minh City.
Down it, down it
The government said this month the two companies, Habeco and Sabeco, would be listed in the first three months of 2017 and would be open to local or foreign bidders. For the Vietnamese who crowd into the open-air bia hoi markets during lunch, dinner and for some, in between, privatisation promises to keep the good times rolling - as long as the buyouts don’t mess with flavour. “I don’t want beer Hanoi to be affected by the taste of Carlsberg, I
don’t want beer Saigon to become so similar to a Sapporo... the key is to keep the distinctive taste of the beer,” said Duc Thang, 48, speaking over a glass of cold brew. Like millions of others across the country, Thang comes to the bia hoi to unwind. “At a bia hoi you can talk about so many things - you can chit-chat, talk business, family problems. It’s easier to talk when you have one or two beers.” Some major names already have a foothold here - Heineken has about 17 per cent of the market, competing with other players like Carlsberg and Sapporo - and reports say Thailand’s ThaiBev and Singha Beer may now be ready enter the fray too.
“It’s the right time for the government to consider selling a number of state-owned companies to get more for the budget” Pham Chi Lan, economist But the sales could instantly transform a foreign buyer into a top brewer: Sabeco enjoys about 45 per cent market share, while Habeco has 17 per cent, according to Euromonitor. The government says it will sell its 90 per cent stake of Saigon Beer Alcohol Beverage Corp (Sabeco) for US$1.8 billion, and its 82 per cent stake in the Hanoi Beer Alcohol and Beverage Joint Stock Corp (Habeco) for US$400 million. Both companies declined to speak to AFP.
‘The right time’
Economists say the government is selling the stakes because it is thirsty for cash. Public debt hit 62 per cent of GDP this year according to official figures, and is climbing closer to the government-sanctioned debt ceiling of 65 per cent of GDP.
“It’s the right time for the government to consider selling a number of state-owned companies to get more for the budget,” economist Pham Chi Lan told AFP. Selling off controlling stakes is also expected to help clean up corporate governance and boost productivity, which have not happened with piecemeal selloffs in the past.
“Many of these benefits will only come if there’s a strategic investor that really takes on a majority stake,” said Sebastian Eckardt, lead economist for the World Bank in Vietnam. Some credit a new regime of communist leaders in power since April with making good on promises to privatise, but will wait to raise a glass until the deals are done. “We’re very positive on this, as long as it happens, because it’s been talked about for a very long time,” said Snowball. AFP
14 Business Daily Monday, October 24 2016
International In Brief Brexit
May revives meetings with U.K. nations Prime Minister Theresa May is reviving regular meetings with devolved U.K. governments as she prepares for negotiations to leave the European Union. May convenes her first Joint Ministerial Committee today with the leaders of Scotland, Wales and Northern Ireland to discuss how they can work together to get the best deal from Brexit, the prime minister’s office said in a statement. The JMC hasn’t met since December 2014. Scottish First Minister Nicola Sturgeon is already preparing legislation for another referendum on independence if May strikes a Brexit deal. Corruption
Argentina to battle graft with new laws The Argentine government sent to Congress last week a series of proposed laws that would heavily sanction businesses found guilty of corruption involving the public sector, according to a document seen by Reuters on Saturday. Currently, Argentine law punishes individuals involved in such corruption cases, but not companies. Under the proposed laws, companies could be fined heavily or suspended temporarily from doing business, among other measures. The proposed laws allow for decreased punishments for companies that collaborate in on-going investigations or adopt internal policies that make future corruption unlikely. Commodities
Peru protests risk halting huge copper mine Supplies needed to keep operating one of the world’s biggest copper mines, Las Bambas, are running out as access roads remain blocked by protesters in Peru, Chinese-owned miner MMG Ltd said on Friday. Protests against the company’s use of local roads in the highland province of Challhuahuacho have expanded since a protester was shot dead in clashes with police a week ago. “Community roads are currently blocked and supplies for operating and subsisting are about to run out,” MMG’s Chief Executive Andrew Michelmore said in an emailed statement in Spanish. Weak growth
Fitch cuts Italy outlook Ratings agency Fitch cut its outlook for Italy on Friday, saying weak growth, high debt and the uncertain outcome of a planned referendum posed risks to the euro zone’s third-largest economy. Fitch said political uncertainty ahead of the vote on constitutional reform which could decide Prime Minister Matteo Renzi’s future had increased since its last review, with polls now suggesting its outcome is too close to call. The agency left unchanged Italy’s BBB+ rating, but said downside risks had increased, noting that Renzi has indicated he could resign in the event of a “no” vote.
M&A
AT&T strikes US$108.7 billion deal to buy Time Warner Even before the announcement, US consumer groups called for regulators to consider the impact of the tie-up.
A
T&T on Saturday announced a deal worth US$108.7 billion for Time Warner that would create a powerhouse with control over a vast array of media and entertainment assets and the means to deliver them. The stock-and-cash deal values Time Warner - with HBO, CNN and Warner Bros studios - at more than US$85 billion, and calls for AT&T to absorb the media group’s debt. It would give the big US telecom firm “the world’s best premium content with the networks to deliver it to every screen, however customers want it,” a statement from the companies said. “This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said AT&T chairman and chief executive Randall Stephenson. The tie-up makes AT&T a strong rival to Comcast, which owns NBCUniversal, and aims to counter the growing threat from online rivals
such as Netflix and Amazon. It also positions AT&T - which recently acquired satellite TV group DirecTV - against long-time telecom rival Verizon, which has acquired internet group AOL and is in the process of buying Yahoo, and against new delivery platforms expected from Google and others. But the deal is likely to face tough scrutiny from antitrust regulators, and Republican presidential nominee Donald Trump said he would block it if elected.
But some analysts said the deal makes sense given the changing media landscape. AT&T is the second-largest US wireless carrier and third-largest cable TV provider in the United States, while Time Warner controls a valuable stable of entertainment content suppliers, including Warner Bros. film and TV studios, the HBO television production group, cable news giant CNN, and the TNT and TBS cable channels. AT&T had US$147 billion in revenues in 2015 while Time Warner reported US$28 billion. AT&T has pursued an aggressive expansion, paying almost US$50 billion to buy satellite television provider DirectTV in 2015. AFP
Global commerce
Canada-EU failure signals more bad news for free trade deals Europeans especially say the proposed treaty will erode environmental and health standards to the benefit of multinational businesses Jeremy Tordjman
The collapse of free trade talks between Canada and the European Union Friday is yet another sign of increasingly stiff resistance to economic globalization. Despite seven years of talks between Ottawa and Brussels, the CETA Treaty crashed into a wall Friday after being rejected by the Belgian region of Wallonia, making it impossible for the European Union to approve the deal. That was an ominous sign for another ambitious treaty, the Transatlantic Trade and Investment Partnership between the United States and the EU, which also faces strident opposition on both sides of the Atlantic. And one huge deal already struck, the Trans Pacific Partnership between the United States and 11 other Pacific Rim countries, is foundering because of the refusal so far of the US Congress to ratify it. And now, both candidates for the White House, Democrat Hillary Clinton and Republican Donald Trump, say they do not support the treaty. It is a sharp reversal of a quartercentury since the fall of the Berlin Wall of support in the world’s leading economies for freer trade and globalization. Now, the enthusiasm for breaking down borders appears to be fizzling out. “We are seeing the results of several decades of failures by political leaders to take the concerns over trade seriously,” said Edward Alden of the Council on Foreign Relations in Washington. For many years accusations have mounted that the progressive
breaking down of trade barriers and removal of import duties in advanced economies has caused deindustrialization and huge job losses to developing countries. “We’re seeing a backlash caused by that neglect for the losers from trade,” said Alden, author of the book “Failure to Adjust: How Americans Got Left Behind in the Global Economy.” Debra Steger, a former Canadian negotiator at the World Trade Organization, sees a rising tendency to blame a country’s economic problems on foreigners.
“We are seeing the results of several decades of failures by political leaders to take the concerns over trade seriously” Edward Alden, Council on Foreign Relations in Washington “People are blaming it all on immigrants or goods coming into the country,” she told AFP. “They want to blame it on something that’s coming from outside, not on technological changes or on bad national policies.” Frightened by Britain’s vote in June to withdraw from the European Union and the success of Donald Trump’s protectionist speeches, the
world’s economic leaders have in recent months sought to blunt the attack on globalization. Meeting in Washington earlier this month, the finance ministers of the G20 leading economies admitted as a group that economic growth has not been “equitable” and that more needs to be done to spread the benefits of lowered borders. A different kind of globalization is needed than the one of the recent past, they said. It’s not clear if their message is going to convince European and US opponents of TTIP. Another key issue is that the trade deals - TTIP, TPP, CETA - all propose to include an extraterritorial dispute settlement mechanism for companies to litigate complaints against countries where they invest. That was a particular complaint in the CETA case. Wallonia enjoyed support in fighting the deal from activist groups like Greenpeace which charged that the deal risked satisfying “corporate greed” and trampling on people’s rights and health standards on both sides of the Atlantic. Another problem is that the proposed treaties - which gained momentum after the most recent round of global free trade talks under the WTO failed - have been carried out with little transparency for the hugely important and complex issues involved. For TPP and TTIP, talks were to produce a final deal without interference before the details were revealed for ratification as a whole. “There’s been a lack of transparency, a lack of explanation, and a lack of consultation with the public,” said Steger, now a economics professor at the University of Ottawa. She said the process often leaves legislators and the public with a fait accompli. “At the end of the negotiations, when the agreement is all finished, that’s the first time that the public is told: ‘oh, we have an agreement. It’s 2,000 pages long and you have to approve it.’” “It can’t work this way,” she said. AFP
Business Daily Monday, October 24 2016 15
Opinion Business Wires
The Times of India In the wake of a spurt in public spending, finance minister Arun Jaitley (pictured) on Saturday asked the private sector to loosen its purse strings to make the most of the demand uptick following a good monsoon and softer rates due to controlled inflation. India became the world’s largest fastest-growing major economy on the back of a spurt in public spending, and private sector joining the bandwagon will create more engines to spur growth, he said at the Madhya Pradesh Global Investor Summit in Indore on Saturday.
The Korea Herald The International Monetary Fund put the estimated cost of South Korea’s ongoing corporate restructuring drive at 31 trillion won (US$27 billion), saying it will be offset by various benefits in a decade, according to a recent report. It used loss given default data for corporate debts and employment impact assumptions under a scenario that corporate restructuring in Asia’s fourth-largest economy will proceed in the most effective manner. South Korea is currently engaged in fullfledged restructure of its shipbuilding and shipping industries amid mounting debts attributable to fierce industrywide competition.
Philstar The Philippines lacks the capability to verify eligible traders, making corruption in its borders rampant and helping proliferate illicit trade that take away revenues, a new survey found. According to the latest Illicit Trade Environment Index, the country scored 50.4 out of 100, below the average of 57 for 17 countries surveyed by The Economist Intelligence Unit. It ranked 12th in the list, which uses four gauges namely intellectual property, transparency in trade, customs environment and supply and demand. Under customs environment, the country scored zero – which means “worst” – in terms of customs corruption and having a trusted trader and client accreditation program.
Bangkok Post Eleven SET-listed banks delivered a 16 per cent year-on-year increase in net profit for the three months to September, thanks largely to lower impairment charges. Banks reported a combined net profit of 54 billion baht during the July-to-September quarter, up from 46.6 billion posted over the same period last year, according to their filings to the Stock Exchange of Thailand (SET). They set aside a total of 39.1 billion baht for the third quarter, down significantly from 50.3 billion in the corresponding period a year ago.
Philippine President Rodrigo Duterte (L) shakes hands with Chinese President Xi Jinping (R) after a signing ceremony in Beijing, China, 20 October 2016. Lusa
The Philippines just blew up Obama’s Asia pivot
D
oes anyone remember President Barack Obama’s pivot to Asia? The plan was to focus diplomatic and military assets in East Asia to contain a rising China. It was one of the reasons Obama said he was shrinking the American footprint in the Middle East. Well, the pivot is failing. On Thursday, the president of the Philippines, Rodrigo Duterte, announced to an audience at the Great Hall of the People in Beijing a “separation” with the U.S. “America has lost now,” he said. “And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It’s the only way.” Two things should be said here. First: Duterte is a crude vulgarian. He has called Obama a “son of a whore,” and picked a fight with the pope. As a politician he is often compared to Donald Trump. As a president, he has acted like an authoritarian, waging a paramilitary war against his nation’s drug users and drug dealers. S e c o n d : D u t e r t e’ s o w n government appears to have been kept out of the loop about this new alliance. On Friday, Duterte himself said he did not mean to imply that he would cut diplomatic ties with the U.S., but he has not backed away from his pledge to end military cooperation with the U.S., though others in his government have suggested he will back down. Regardless, this is a big story. The Philippines has been an important U.S. ally since the beginning of the cold war. What’s more, the Obama administration has invested in the country as part of its pivot to Asia. In 2014 the two countries signed an enhanced defence cooperation agreement. When the Philippines brought a case against China at the Hague over China’s artificial islands in its territorial waters, the U.S. supported the Philippines diplomatically. In July, the Hague’s Permanent Court of Arbitration ruled in favour of the Philippines. This would have been an opportunity for the U.S. to turn the screws on China. But instead the Obama White House encouraged China and the Philippines to resolve the matter themselves after the ruling of the international tribunal. At the end of August, Secretary of State John Kerry
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Eli Lake a Bloomberg View columnist
told reporters that the U.S. was not interested in “fanning the flames of conflict but rather trying to encourage the parties to resolve their disputes and claims through the legal process and through diplomacy.” Duterte has now taken Kerry’s advice. After announcing his country’s new alignment with China, Duterte signed a series of trade agreements worth US$13.5 billion, along with a promise to continue bilateral negotiations over the South China Sea. Dan Blumenthal, the director of Asia studies at the American Enterprise Institute, told me Friday that the Obama administration had fumbled. “After the tribunal decision, our response was to tell Duterte to tamp down tensions and talk bilaterally with China, and there was no evidence of follow-up by us in terms of our own military exercises or diplomatic initiatives to enforce the findings of the tribunal,” he said. “There has been next to nothing on this. We still haven’t had a Freedom of Navigation mission that actually challenges the Chinese artificial islands.” Is it any wonder then that Duterte concluded Obama wasn’t serious about defending the rule of law in the South China Sea? Close watchers of the Filipino leader could have predicted this kind of thing. Before his campaign for the presidency in August 2015, he told supporters, “If America cared it would have sent aircraft carriers and missile frigates the moment China started reclaiming land in contested territory.” Of course America didn’t do that. It didn’t even send the Navy into Filipino territorial waters claimed by China in the South China Sea after an international tribunal ruled that those waters were Filipino. Instead, the Obama administration acted as if international law would implement itself. But it never works that way. The rule-based system Obama endorses requires a great power to defend it. Bloomberg View
The Philippines has been an important U.S. ally since the beginning of the cold war.
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16 Business Daily Monday, October 24 2016
Closing Food production
Taiwan beekeepers battle to cash in on pure honey buzz Production has been unstable since 2011, when it peaked at 15,000 tonnes Laura Mannering
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nder a shady star fruit tree Taiwanese beekeeper Jiang Hwan-bin tends his hives, pumping out pure honey for a rapidly growing market of health-conscious consumers. Jiang’s family has been keeping bees for 80 years and he now manages 500 hives in the northwest county of Hsinchu. In total his family run around 2,000 across northern Taiwan. A string of food safety scandals in Taiwan has driven demand for clean, traceable produce, with pure honey seen as particularly beneficial - whether stirred into water as a summer thirst-quencher or used as a sugar substitute in desserts. But although domestic appetite is voracious and outstrips supply, which keeps prices high, beekeepers say it is hard to fully capitalise as climate change and disease hamper expansion. This year alone saw a series of typhoons and an unusually cold January affecting early blossoms. Jiang, 54, who sells most of his produce through his shop in Hsinchu city under the name “Ah-bin Pure Honey”, says his production fell 30 per cent due to the adverse conditions.
The situation for the whole family is even worse: overall production across the thousands of hives they run has dropped by two thirds, he says. The unpredictability of the seasons is reflected in island-wide honey output over the past five years. Taiwan produced 11,726 tonnes of pure honey in 2015, more than doubling in a decade, with the number of bee farms going up by over a fifth to 860. The industry is worth T$2.7 billion (US$85.9 million) annually. But production has been unstable since 2011, when it peaked at 15,000 tonnes, with extreme weather a major factor. Jiang says his fundamental focus is now disaster prevention. “We prepare for everything as much as we can,” he told AFP. “What we can do is manage the bees well and do our best to keep more bees. The rest depends on the weather.”
Hard lessons
Disease problems troubling beekeepers around the world have also taken their toll on Jiang’s stock. In 2005 he saw half his bees wiped out by a bacterial infection. He quarantined his queens, burned the infected frames from his hives, and started again, sharing those hard lessons with other local beekeepers.
The government says it is also giving bee farmers advice on disease prevention and violent weather swings. “In Taiwan, climate change has been huge,” says Wu Tzu-hsien, a senior apiculture expert for the government’s agriculture ministry. “If the changes are too extreme, bees cannot control their body temperature and die.”
Brand building
In rural Yilan county in the northeast of Taiwan the “Bee Farmer” cafe and education centre sits against a backdrop of misty mountains. Giant bee statues greet visitors, who buy everything from royal jelly to pollen sachets at the store inside. There is a honey museum and active hives to teach the public about bees. Visitors come mainly from Taiwan, although some from Hong Kong and Singapore also drop in. The business belongs to Huang Tung-ming, a fourth generation bee farmer who manages 300 hives in the area, producing a variety of honeys, including longan, lychee and melon. He has diversified to prosper, selling produce from other local bee farmers as well as his own. There are 10 “Bee Farmer” shops around Taiwan but the company sells mostly online through its Chineselanguage website, a more modern approach than most traditional beekeeping families. The business brings in T$50 million each year.
“In the past, farming villages were isolated. When you produced honey you didn’t know where the customers were,” says Huang. “Now with the internet, with branding, packaging and a corporate image, it’s much easier than before.” Building a bee brand has helped Huang offset the challenges of bad weather and bee health, both of which have affected his farms. Eight years ago, many of Huang’s bees deserted their hives, unable to find their way home after going out for nectar.
“What we can do is manage the bees well and do our best to keep more bees. The rest depends on the weather.” Jiang Hwan-bin, beekeeper Huang, 61, believes inbreeding affected the bees’ sense of direction and has since developed a method of isolating the best pairs. That has meant his hives have not succumbed to illnesses that have killed so many bees worldwide, he says. Despite the pressures, his son Huang Chun-yen, 33, who helps run the business, says there are still keen young bee farmers who consider it a good option in the face of Taiwan’s economic stagnation. “Young people can’t find jobs that pay well,” he says. “As the value of bee products is high, young people go to farming villages to learn to keep bees and develop their careers.” For Jiang in Hsinchu, looking after bees means more than just business. He sees it as a global issue, key to environmental protection and food provision. “Almost one third of human food relies on bee pollination. Bees play an important role in the eco-system,” he says. Meanwhile, he does his best to defend his own hives against whatever nature throws at them. “We believe we have to work hard first, and then heaven will help us,” he says. AFP
Logistics
Tag
Banks
China-Belarus cargo route begins service
Australia’s largest private trade Indonesia’s Mandiri sees 2016 delegation to visit Mainland provisions of up to US$1.5 bln
Workers are performing final checks on the chassis and railcars of a train that will depart next week from Lanzhou, capital of northwest China’s Gansu Province, to Minsk in the Republic of Belarus. The trip will mark the second chartered service via the 7,000 km rail line after cargo service began on September 23. The direct link connects the logistics hub of Lanzhou and the China-Belarus Industrial Park, which is under construction in Minsk. The train service will become regular once the industrial park opens. Statistics from the Gansu provincial government showed that 63 cargo trains made trips from Lanzhou to Europe and Central Asia during the first nine months of 2016, with goods totaling 108.463 million U.S. dollars in value. The goods for export include building materials, machinery equipment, home furnishings and drilling rig accessories. Xia Hongmin, vice governor of Gansu, said that the international cargo trains have tightened connections between China and countries along the ancient Silk Road while deepening foreign trade. Xinhua
Australia’s largest ever private trade delegation arrives in China yesterday, just over a week after 18 employees from Australian gaming giant Crown Resorts Ltd were detained there for alleged gambling crimes. More than 200 delegates, including Queensland state ministers, agricultural producers and exporters will be on the visit to Shanghai aimed at building on the A$160 billion (US$120 billion) trade relationship between Australia and China. “We have brought together businesses from banks to exporters and freight companies,” Ben Lyons, the group’s leader, said in a statement. The 18 employees of Crown Resorts, Australia’s top casino operator, including three Australians, have been held by Chinese authorities since last weekend. As of yesterday, no charges had been laid, but the arrests have raised fears of a wider crackdown. Among the high profile members of the “AccessChina” delegation are Qantas Airways Ltd and both National Australia Bank and Australia and New Zealand Bank’s agribusiness units. Reuters
Indonesia’s PT Bank Mandiri Tbk will raise its provisions to 18-20 trillion rupiah (US$1.4US$1.5 billion) for 2016 from 11 trillion rupiah a year earlier, as bad loans spread beyond the commodities sector, its CEO told Reuters yesterday. Non-performing loans rose to 3.86 per cent of total lending at the end of the second quarter, from 2.43 per cent a year ago, and will likely start recovering significantly only towards the end of 2017, said Kartika Wirjoatmodjo, CEO of Indonesia’s biggest bank by assets. “In the next two, three, four quarters, our provisions would indeed be quite big,” Wirjoatmodjo said on the side-lines of a Mandiri event. “For existing creditors who have a high level of debt, their cash flow is not enough yet to repay it.” Mandiri is “proactively” restructuring loans that it considers to be at the risk of default, and expects provisions to dip to 14-16 trillion rupiah next year, said Wirjoatmodjo, a former CEO of Indonesia Deposit Insurance Corp. Reuters