Alipay start Asian expansion with Thai services Mobile payment Page 9
Wednesday, November 2 2016 Year V Nr. 1164 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong
www.macaubusinessdaily.com
Start-ups
Aviation
Society
Public works
Labour Affairs
Lisbon bets on becoming Europe’s newest biz hub Page 16
Far Eastern Air to launch MacauKaohsiung flights in December Page 4
Fewer residency applications filed with IPIM
HK anticipates Delta Bridge link delay Page 7
Trade union urges gov’t to address local labourers’ rights Page 4
Page 2
Rebound gathers momentum Gaming
Three months in a row. Macau’s gaming revenue posted growth once more in October. Raking in MOP21.8 bln, the most in 21 months. Following a slump of 26 consecutive months. Despite the much-touted ‘negative events’ of naysayers revenues increased 8.8 pct y-o-y, beating estimates. Page 5
SJM Q3 results down
Gaming Adjusted EBITDA of casino operator SJM Holdings Ltd. fell 8.4 pct y-o-y in Q3. With total gaming revenue down 11.1 pct y-o-y. Declines in the VIP segment remain bigger than for mass gaming. Net profit, however, soared 80 pct y-o-y due to a recognised gain. Page 4
Construction workers’ wages narrow
Sort out public housing. The majority of residents are in no doubt about their expectations of the Policy Address for 2017. This, according to a survey conducted by the Association of Macao New Vision. Which finds society’s concerns are about livelihoods not politics. Society Page 6
HK Hang Seng Index November 1, 2016
Positive vibes
China manufacturing Factory activity in China expanded last month. At its fastest pace in more than two years. The official PMI came in at 51.2 for October, its highest since July 2014, figures from the National Bureau of Statistics reveal. Page 8 23,147.07 +212.53 (+0.93%)
Worst Performers
China Shenhua Energy Co
+6.44%
Galaxy Entertainment Group
Wharf Holdings Ltd/The
+2.83%
CITIC Ltd
Sands China Ltd
+2.81%
Li & Fung Ltd
China Petroleum & Chemical
+2.65%
Hong Kong & China Gas Co
Sun Hung Kai Properties Ltd
+2.25%
Bank of East Asia Ltd/The
-1.67%
China Mengniu Dairy Co Ltd
-0.27%
AIA Group Ltd
-0.92%
Belle International Holdings
-0.21%
BOC Hong Kong Holdings
-0.36%
Lenovo Group Ltd
+1.97%
Kunlun Energy Co Ltd
-0.34%
HSBC Holdings PLC
+0.17%
+1.92%
AAC Technologies Holdings
-0.34%
China Resources Land Ltd
+0.21%
+2.20% +2.15% +2.09%
Sino Land Co Ltd
+0.00%
20° 26° 20° 25° 22° 25° 24° 27° 24° 28° Today
Source: Bloomberg
Best Performers
THU
FRI
I SSN 2226-8294
SAT
SUN
Source: AccuWeather
Housing first, please
Construction Construction workers daily wages dipped 2.5 pct q-o-q to MOP768 in Q3. Due to the completion of casino-resort projects in Cotai, says the Statistics and Census Service (DSEC). But the salary cut was only experienced by local workers, whose daily wages went down by 2.1 pct q-o-q while non-resident workers’ rose 2.2 pct q-o-q. Page 2
2 Business Daily Wednesday, November 2 2016
Macau
Manpower
Daily wages of construction workers cut in Q3 But those of non-resident construction workers increased Kam Leong kamleong@macaubusinessdaily.com
T
he average daily wage of construction workers amounted to MOP768 (US$96) for the third quarter of the year, a drop of 2.5 per cent compared to the pervious quarter, the latest official data released yesterday by the Statistics and Census Service (DSEC) reveals. According to DSEC, the general decrease in construction workers’
daily wages is due to ‘reduction in overtime following the completion of large-scale entertainment construction projects in Cotai’. H o w e v e r, n o n - r e s i d e n t construction workers saw their daily wage rise 2.2 per cent quarter-toquarter to MOP687 for the three months, while local worker’s average daily wage was cut by 2.1 per cent quarter-to-quarter to MOP961. In terms of occupation, the average daily wage of skilled and semi-skilled workers posted a decrease of 3.5 per
cent quarter-to-quarter to MOP773. In particular, that of structural iron erectors, painters, bricklayers & plasterers all registered double digit declines, down 12 per cent, 10.8 per cent, and 10.6 per cent quarter-toquarter to MOP790, MOP719 and MOP651, respectively. Meanwhile, carpenters saw their average salary rise 2.9 per cent quarter-to-quarter to MOP1,142 in the three months, whilst unskilled workers recorded a quarter-toquarter increase of 2.5 per cent in their daily salary, amounting to MOP403. For the quarter, the wage index of construction workers fell 3 per cent
quarter-to-quarter to 100 in real terms, after discounting the effect of inflation, while that of local construction workers decreased 1.7 per cent quarter-to-quarter to 125.1. With regard to construction materials, the average price of concrete decreased 3.5 per cent quarter-to-quarter to MOP797 per cubic metre during the quarter whilst that of rebars dropped by 0.2 per cent to MOP4,410 per tonne. During the period, the price index of construction materials for residential buildings was 131.9, which is a decline of 1.1 per cent compared to the second quarter of the year.
application for major investment or investment plans was approved in the first half of this year, compared to five applications approved in the same period last year. According to IPIM, the grant of temporary residency for personnel or qualification holders is assessed on whether the academic qualifications possessed are beneficial to Macau, or taking into consideration shortage of staff with related qualifications. Meanwhile, applicants for residency
via major investments can be considerably eligible if their projects are considered to contribute to the development and diversification of the MSAR. In 2015, a total of 562 residency applications via the two programmes were submitted to IPIM, while the department approved 81 applications for managerial personnel, technical and professional qualification holders, in addition to 7 for major investment plans approved.
Society
Less interest in residence status Applications for both personnel residency and investment residency dropped in the first half Nelson Moura nelson.moura@macaubusinessdaily.com
Thenumberofapplicationsfiledwiththe Macao Trade and Investment Promotion Institute (IPIM) for temporary residency for managerial personnel, technical and professional qualification holders and for people planning major investments in the MSAR has dropped in the first half of 2016. IPIM received 190 applications via the two residency programmes between January and June, of which 93 per cent, or 176 applications, were filed for temporary residency via
non-resident managerial personnel, technical and professional, down 60 applications compared to the same period last year. For the period, IPIM also received 14 applications for temporary residency from those making a ‘major investment’ or committing to enact a ‘major investment plan’ here, which is a fall of 24 applications compared to the first half of 2015. Meanwhile, IPIM approved 46 cases for managerial personnel, technical and professional qualification holders, an increase of 23 from the same period of last year. But only one
Public project
Safety first for health project Health Bureau says a third party will monitor construction safety of the infectious diseases building project Director of the Health Bureau Lei Chin Iong says it will hire a professional body to monitor the safety of surrounding buildings once the construction of the city’s infectious diseases building begins. The health official revealed the information replying to legislator Si Ka Lon’s written enquiry. The legislative member questioned whether the Bureau would recruit any professionals to work on geological exploration in the area and disclose relevant information to the public. The government is planning to build an infectious diseases building close to Conde S. Januário Hospital.
Ac c o r d i n g t o M r . L e i , t h e authorities have hired the Civil Engineering Laboratory of Macau to undertake a geological exploration during the stage of preliminary a rc h i t e c t u ra l d e s i g n f o r t h e building. He added that in order to obtain more reference data the contractor has commissioned another local construction company, Kin Sun Construction & Engineering (Macau), Ltd., to conduct further geological exploration. The content of the geological survey reports will be published for public consumption, the official confirmed. A.L.
Business Daily Wednesday, November 2 2016 3
Macau Aviation
Far Eastern Air to commence cities. Currently, three airlines operate flights between the MSAR-Kaohsiung route Taiwan’s Far Eastern Air Transport will launch a new flight service between Macau and Kaohsiung, Taiwan from December 1, according to an announcement published on the carrier’s official website. The airline will offer two daily flights between the two
MSAR and southern Taiwanese city, including local flag carrier Air Macau and Taiwan’s EVA Air, which both provide daily services for the route. In addition, budget airline Tigerair offers five return fights for the Macau-Kaohsiung route per week. A.L.
Labour Affairs
FOAM urges gov’t to prioritise local workers The labour union and the MSAR Government discuss possible amendments to the current labour law Cecilia U cecilia.u@macaubusinessdaily.com
T
he MSAR Government should reinforce restrictions on the number of nonresident workers working in the city and encourage local employers to recruit skilltrained local residents, said the president of the Macau Federation of Trade Unions (FOAM), Ho Sut Heng, after the group’s meeting with the Secretary for Economy and Finance Lionel Leong Vai Tac yesterday. The FOAM president claimed her association had received many complaints from local workers, in particular from those in the construction industry, that they were assigned fewer working hours or replaced by non-resident workers. The vice-president of FOAM, Ella Lei Cheng I, perceives the cases related to the dismissal of local
workers and the decrease in the salary of construction workers were due to the decline in construction projects in the city. “It is impractical to cut the salaries and working hours of local workers to cope with fewer construction
projects,” said Ms. Lei. “We need non-resident workers when there is a shortage of labour but how come local workers are the ones whose salaries are being cut or even being sacked during hard times?” The FOAM vice president, who is also a legislator, added that similar issues have been raised by other industries such as gaming, noting many management positions in
casinos are still predominantly held by non-local workers. According to the trade union, Secretary Leong said in the meeting that the government has already set up policies urging employers to use local workers for certain positions, such as restricting the number of non-resident workers employed.
Labour law amendments
According to the FOAM president, the aim of yesterday’s meeting was to suggest the implementation of paternity leave and compensatory leave for workers working on mandatory holidays. Ms. Ho added that the government is planning to amend seven regulations of the current labour law. Meanwhile, in order to reduce conflicts between employers and employees, especially in SMEs, Ms. Ho said it is important to improve the knowledge of how the laws should be operated between parties. “Any revisions of the labour law, in principle, should not create any cutback to the current local workers’ rights,” Ms. Lei said.
4 Business Daily Wednesday, November 2 2016
Macau Opinion
José I. Duarte*
Heritage and language skills In the wake of the visit of the Chinese Prime Minister, there was no dearth of declarations about the future of Macau. Unfortunately, when not (self-) congratulatory, a lot of them consist of the formulaic repetition of whatever is perceived as politically correct under the circumstances. If the past is any guidance, things will fast return to the customary ‘normal.’ We seem to be unable to develop a consistent approach for problems or ground them in solid foundations. Let us just focus briefly on two of the most singular (therefore, possibly valuable) features that the distinctive history of Macau has granted us. They include a unique cultural blend, reflected in customs, social relations and built heritage; and privileged access to the Portuguesespeaking countries and the Latin culture world. It is surely not by chance that some of the paths the central government keeps (patiently) open for us assume implicitly our willingness and ability to build upon those features. We cannot say we have been too successful on any of those accounts. Let us take heritage first. We seem to look at it as a ‘hardware’ issue, mostly a matter of buildings. Their historical meaning or relevance is often missing. The ignorance about Macau history, or any other for that matter, seems pervasive, even at decision levels where one would expect people to know better. So it turns out to be mainly about maintaining facades, both physically and metaphorically. A policy of keeping facades, destitute of context and history, and devoid of the people and social networks that gave them purpose and meaning, does not fit any satisfactory definition of heritage protection. It devalues and diminishes the social and economic worth of the legacy it was meant to protect. It is not essentially much different from running a thematic park – possibly entertaining, but not really highly symbolic or culturally meaningful. Then, let us look at language promotion: Portuguese in this case. It is almost possible to become lyrical when we hear so many professing their commitment to the development of Portuguese skills in both the population and the administration. But the opportunities have been there all along; the results less so. Year after year, we listen to complaints that there are not enough qualified speakers of Portuguese and, more to the point, of both official languages. If such is the case, maybe it is time to starting figuring out why. *economist and permanent contributor to this newspaper.
Gaming
SJM adjusted EBITDA falls 8.4 pct in Q3 Meanwhile, gaming revenue of the casino operator decreased 11.1 pct y-o-y Kam Leong kamleong@macaubusinessdaily.com
L
ocal casino operator SJM Holdings Ltd. posted HK$810 million (US$100.9 million) in adjusted EBITDA for the third quarter of the year, a decline of 8.4 per cent yearon-year, as total gaming revenue went down by 11.1 per cent year-onyear to nearly HK$10 billion. According to its latest quarterly results released to Hong Kong Stock Exchange yesterday, the company generated HK$513 million in profit attributable to owners of the company for the quarter, surging 80.2 per cent year-on-year. The operator explained that the increase in net profit is due to a
subsequent gain of HK$128 million being recognised in other comprehensive income and credited to investment revaluation, in addition to an impairment loss of HK$250 million for the same quarter of last year. For the period, the group’s total VIP gaming revenue accounted for HK$4.4 billion, plunging 19.1 per cent year-on-year. Sales of VIP chips totalled HK$152 billion for the period, whilst VIP gaming hold percentage was 2.89 per cent. Meanwhile, SJM’s mass market revenue went down by 3.8 per cent year-on-year to HK$5.3 billion. In addition, revenue derived from slot machines marginally fell by 0.1 per cent year-on-year to HK$272 million. As at the end of the quarter, the company operated an average of
323 VIP gaming tables, 1,311 mass market gaming tables and 2,748 slot machines. The group’s flagship property Casino Grand Lisboa generated HK$3.1 billion in gaming revenue, whilst the group’s 14 satellite casinos - those promoted by third parties - raked in some HK$5.5 billion gaming revenue. On the other hand, hotel occupancy at its flagship property reached 91.2 per cent for the quarter, an increase of 6.2 percentage points year-on-year, whilst average room rates fell 13.7 per cent year-on-year to HK$1,505 per night. For the first nine months of the year, the group’s adjusted EBITDA dropped 22.3 per cent year-on-year to HK$2.4 billion; total gaming revenue fell by 17.8 per cent year-on-year to HK$30.9 billion; while profit attributable to owners of the company totalled HK$1.6 billion, a decline of 22.4 per cent year-on-year.
Results
Citic net profit dips in first nine months Citic Corporation Limited, one of China’s largest conglomerates, has reported a net profit for the first nine months of the year of RMB47 billion (MOP55.4 billion/US$6.94 billion), according to a filing with the Hong Kong Stock Exchange. This translates as less than 1 per cent reduction yearon-year, from the RMB47.5 billion in profit recorded in profit during the same period last year. Citic Limited operates in the financial services, resources and energy, engineering contracting, manufacturing and real estate sectors through a variety of listed and unlisted companies. In Macau, the group operates in a variety of sectors including the telecom sector under CITIC Telecom,
parent company of Companhia de Telecommunicaçōes de Macau (CTM); and the banking sector under CITIC Bank, and the manufacturing sector under Macau Cement Manufacturing Ltd. As of September 30, the group held assets worth RMB309.8 billion, a 4.8 per cent increase compared to the same nine-month period in 2015. These assets were primarily concentrated in long-term equity investments, amounting to RMB210.1 billion. However, during the period, the group saw a RMB20.7 billion loss in net cash flows from its operating activities, despite receiving RMB198 billion in interest, fees and commissions over the nine-month period.
Overall operating income for the group during the period amounted to RMB179.44 billion, a 2.3 per cent year-on-year drop. Operating costs for the nine months, however, increased 4.7 per cent year-on-year, hitting RMB133.1 billion, compared to RMB127.1 billion in the same period last year. Currently, the group holds RMB542.87 billion in available for sale financial assets, RMB8.26 billion-worth of construction projects in progress and over RMB2.8 trillion in loans and advances to customers and other parties, offset only by RMB1.08 trillion in investments classified as receivables. Citic, as at September 30, had RMB648.2 billion in cash and deposits. K.W.
Business Daily Wednesday, November 2 2016 5
Macau Revenue MSAR sees highest gross gaming revenue in 21 months in October
Doubled down, rising up Analysts predict a continued rise in y-o-y results, estimating Q4 results will hit US$7.6 billion Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
G
ross gaming revenue in the MSAR for the month of October hit a record 21-month high, amounting to MOP21.81 billion (US$2.73 billion), according to the latest data released by the Gaming Inspection and Co-ordination Bureau (DICJ), yesterday. This is an 8.8 per cent increase year-on-year, continuing the three-month trend following a 26-month decline in revenues, starting June 2014. For analysts at J.P. Morgan this makes October the fourth consecutive month that gross gaming revenues beat estimates, with average daily revenues in the MSAR amounting to MOP704 million per day, also the highest figure seen in 21 months. The analysts, led by D.S. Kim, note that this increase arises ‘in spite of three seemingly negative events’ in the month: the visit by Chinese Premier Li Keqiang, Typhoon Haima and the detention of Crown staff on the Mainland. J.P. Morgan analysts predict ‘gross gaming revenue momentum to stay solid,’ forecasting a 5 per cent to 6 per cent increase year-on-year for November, with a further increase in December of 7 per cent to 9 per cent year-on year. Analysts at Union Gaming also noted that the results were ‘clearly above expectations’ and comment that the market is ‘poised to show
similar results in November’. The group states that despite the negative detractors from the month – with estimates that Premier Li Keqiang’s visit ‘nearly halved’ VIP volume and some premium mass during his time in the MSAR - ‘a strong Golden Week experiencing pent-up demand was also a big contributor to the month’. Analysts at Union Gaming, led by Grant Govertsen, did not see a negative impact upon VIP resulting from the ‘Crown situation’, commenting that the results are ‘inline with our view that this incident has nothing to do with Macau or its operators’ and is likely a ‘net benefit to Macau’. Expectations for November are for results to ‘largely mimic’ the results of mid to late September, although
influenced by a ‘traditional seasonal’ slowdown in the month. Forecasts are for MOP18.2 billion, 11 per cent yearon-year growth, notes Mr. Govertsen.
Normal luck
Despite previous comments regarding the third quarter results from Galaxy being influenced by a ‘luck factor’, analysts at J.P. Morgan noted that for October gross gaming revenue ‘VIP luck was within normal levels’ suggesting that the recovery was based upon volume and end-demand recovery in the market. The results further beat the median estimate of a seven-analyst survey conducted by Bloomberg, placing gross gaming revenue year-on-year growth at 5.5 per cent. Quoting gaming analyst Richard Huang of Nomura International, expectations are that the new casinos in the market will continue to boost the market for the rest of the year.
“The strong beat of the monthly gaming revenue is very likely due to the decent performance of both the mass market and the VIP business, and it will improve market sentiment”, says Mr. Huang. Analysts at J.P. Morgan expect this to materialise in a 7 per cent yearon-year increase in gross gaming revenue for the fourth quarter, as well as predicting a 7 per cent increase quarter-to-quarter – hitting US$7.6 billion. Mr. Govertsen, of Union Gaming, believes Macau is at an ‘inflection point’, also pointing out that October gross gaming revenue was ‘likely understated’ by 500 to 600 basis points, suggesting that the underlying growth rate for October was ‘closer to 14 per cent plus’. The analyst expects the positive gross gaming revenues to generate ‘further good news likely this week on select third quarter earnings calls’, in particular regarding Sands China due to the strong mass market presence seen since the opening of The Parisian Macao.
6 Business Daily Wednesday, November 2 2016
Macau Policy Address
Public housing policy cited as top priority A poll shows local residents hope most that the government address measures for speeding up the construction of public housing projects in the Policy Address for 2017 Annie Lao annie.lao@macaubusinessdaily.com
L
ocal residents sincerely hope the MSAR Government highlights public housing and public transport issues in its 2017 Policy Address, says an opinion poll conducted by the Association of Macao New Vision. The Policy Address for fiscal year 2017 will be delivered by Chief Executive Fernando Chui Sai On on November 15. According to poll results, 75.2 per cent of the 818 surveyed residents hope the Policy Address will highlight policies related to livelihood; 19.8 per cent hope for economic-aspect policies; while only 4.98 per cent expect policies related to politics and the legal field to be addressed. Meanwhile, ‘accelerating the construction of public housing’, ‘s t r e n g t h e n i n g b u s s e r v i c e supervision, relieving public transportation issues’, and ‘speeding up medical reform’ are the top three policies hoped for by interviewees for the upcoming Policy Address. These are followed by ‘the continuation of policies controlling and adjusting property,’ ‘controlling
the input of non-resident workers, protecting local employment,’ and ‘continuation of the medical allowance system,’ the survey said. The other four most wanted polices include ‘the continuation of the cash handout scheme,’ ‘improving education quality,’ ‘strengthening personnel cultivation and ‘increasing
spending on social welfare’. The surveyor noted that this is the first year ‘controlling inflation’ was not listed as part of the top ten wanted polices by local residents for the government’s Policy Address. The survey added that the majority of interviewees hope the government increases the amount of the cash handout scheme to MOP10,000 (US$1,252).
Care more about livelihood
On the other hand, the survey reveals that local residents are least satisfied with ‘control and adjustment
of housing market & construction of public housing,’ ‘accountability of officials’ and ‘supervision of infrastructure’. But they are satisfied with ‘security,’ ‘healthcare,’ ‘development o f th e Si n o - L u s o p l at f o r m ’ , ‘cultural preservation,’ ‘ economic development,’ ‘talent cultivation’ and ‘employment protection’. Th e As s o c i a t i o n u rg e s t h e government to respond to the demands of local residents in the Policy Address, especially those related to housing and transport issues.
Construction
New Coloane rehab centre to cost MOP98 mln The estimated construction costs for the new treatment centre for gaming and substance addiction in Ka-Hó on Coloane for the Association of Rehabilitation of Drug Abusers of Macao (ARTM) amounts to some MOP98 million (US$12.2 million), reports Portuguese-language newspaper Tribuna de Macau. According to statements made by the Social Welfare Bureau to the newspaper, the estimated cost of the 1,800 square metre project in Coloane was made based on ‘the geological complexity of the terrain’, which requires extra protection work. The new centre will have the capacity to receive 80 patients, and will be the first initiative by ARTM
aimed at specific types of dependencies such as alcohol, drugs and gambling addiction. The two-storey building on Estrada
de Nossa Senhora de Ká-Hó will be divided into two blocks, for males and females, with both sections providing amenities such as study, training and
activity rooms. The centre will also hire 28 employees, some of whom have received intensive care training in Australia. According to the Bureau, the new centre is necessary due to the ‘dilapidation’ of the Association’s previous complex in Coloane Village, which had been in operation since 1993 yet ‘did not offer the conditions for longterm development of rehabilitation services’. Upon completion of the project, the government will increase its drug prevention policies and awareness campaign directed at young local residents, the Bureau said. The MSAR registered 617 cases of drug addiction in 2015, an 8.63 per cent increase compared to the previous year, according to data revealed in March by the Narcotics Control Commission. N.M.
Technology
UM scholars win award at hacking competition Scholars from the University of Macau (UM) won an excellence award at GeekPwn 2016 hacking competition held on October 24 in Shanghai, according to a release by the university on Monday. The event is a hacking contest focused on tackling security issues of smart devices with contests held at the same time in Shanghai and Silicon Valley, with Macau having held one on May 12 this year. The UM representatives were part of the ‘Phoenix Coder’ Team which included scholars from the Southeast University and the University of Massachusetts. During the event the team managed to develop a method to break Internet encryption technologies, demonstrating major security issues involving a well-known international brand in order to serve as a
’wake-up call’ to manufacturers of smart devices. In 2014, the team attracted media attention by revealing security flaws in smart devices such as the iPhone, Google Glass, and smart watches, in addition to demonstrating how even bank account passwords can be accessed by hackers on smartphones or tablets. On the other hand, Xiao Jianbo, an assistant professor from the Institute of Chinese Medical Sciences (ICMS) of UM, has been named on Thomas Reuters’ list of Highly Cited Researchers 2016 for the citation frequency of his papers in the area of agricultural science. Some 180 scholars in 18 fields whose affiliations are higher education institutions in Hong Kong, Macau and Mainland China have been
named on the list this year. Professor Xiao has published some 70 papers in Science Citation Index journals
as a first-author or corresponding author. Some 16 of his papers in the fields of nutrition and Chinese medical sciences have been listed as Essential Science Indicators Highly Cited Papers.
Business Daily Wednesday, November 2 2016 7
Macau Public works
HK anticipates Delta Bridge link delay But it says the completion of the main bridge won’t be affected Nelson Moura nelson.moura@macaubusinessdaily.com
T
he link connecting the Tuen Mun district of Hong Kong to its artificial island for the Hong Kong-Zhuhai-Macau Bridge (HZMB) will have its construction finish delayed, according to a press release by the Hong Kong Highways Department on Monday. The announcement indicated that the construction of the 9-kilometre link has faced a series of delays due to ‘challenges
in construction and in meeting the programme schedule’. According to authorities, the link will connect Hong Kong’s northwest New Territories with its boundary crossing facilities for the bridge, North Lantau and Hong Kong International Airport. According to the statement, the southern section of the link was initially scheduled to open at the same time as the main bridge in 2017, while the northern section was targeted for completion in 2018. ‘However, in view of the above technical difficulties, the
construction programme is very tight. Hence, it is believed that the project cannot be completed according to the above original plan’, the department said. Nevertheless, it added that the delays in the link would not affect the main project of the Delta Bridge. ‘As such, although the Southern Connection of [the link] could not be completed timely, the commissioning of the HZMB will not be affected’, the Hong Kong department wrote. The Highways Department also said the major challenges on the main bridge have been ‘overcome’, adding the construction of the tunnel sector for the main bridge is still ongoing. ‘As the placement of sub-sea tunnel segments can only proceed under prerequisite wind speed and underwater current conditions, challenges include overcoming inclement weather and sedimentation of the tunnel bedding conditions’, the department wrote. ‘It is anticipated that construction of the HZMB Main Bridge will enter the most critical stage next year’, it claimed. The Delta Bridge, initially slated for completion by the end of the year, was postponed to late 2017 following Hong Kong authorities’ estimate that the completion of its parts of the project could only be finished next year. The bridge, on which construction started in 2009, includes a 29.6-kilometre dual 3-lane carriageway and an immersed-tube tunnel of about 6.7 kilometres in addition to two artificial islands.
Tender
CLP bids to buy stake in Yangjiang Nuclear Power The Hong Kong-listed energy company is eyeing to expand its business in the Mainland H o n g K o n g-bas e d p o w e r supplier CLP Holdings Ltd has submitted a bid to acquire 17 per cent equity interest in Yangjiang Nuclear Power Co., Ltd, an Mainalnd Chinese operator of nuclear power plant, according to its filing to Hong Kong Stock Exchange on Monday. The tender was opened in early-October by CGN Power Co Ltd (China General Nuclear), one
of China’s largest nuclear power plant operators and generators. The Mainland-Chinese company was planning to sell its 17 per cent stake in Yangjing Nuclear for RMB5 billion (MOP6 billion/ US$750 million). ‘ W e h av e c o n s i s t e n t l y ex p r ess e d o u r i n t e r est i n further investment in nuclear power generation in [China] should the right opportunities
arise,’ the Hong Kong power supplier said in the filing. ‘Furthermore, an investment in nuclear power generation would be in line with our intention to progressively reduce the carbon intensity of our generation portfolio and our Climate Vision 2050’. The bid for CGN’s stake in Yangjiang Nuclear, commenced from October 8, ends today. CGN is the controlling shareholder of two nuclear generating units under c o n st r u c t i o n i n Ta i s h a n , Guangdong Province. The nuclear power station of the company in the Mainland Chinese city is some 67 kilometers west of the MSAR.
Real estate Country Garden eyes Bali and more
Developer expands to Malaysia and Indonesia Chinese property developer Country Garden seeks to further expand its reach beyond the Mainland market, with the primary focus of its Macau clients being Malaysia and Indonesia, according to Hong Kong publication South China Morning Post. The developer, which achieved contracted sales of RMB225.57 billion (MOP265.85 billion/ US$33.29 billion) in the first nine months of the year - with 29 per cent of its sales coming from the Guangdong Province and 82 per cent of which was high-rise residential apartments - has signed
a new project in Malaysia and its first on the island of Bali, in Indonesia. Projects such as its new ‘Central Park’ project in Tampoi, on the southern end of Malaysia focus on Southeast Asian buyers. The project, set to be developed over six to eight years and created through a partnership with Malaysian partner Damansara Realty, will ‘provide affordable quality housing’, according to a company statement. This will be the group’s fourth project in Malaysia, occupying 53 acres and costing roughly
MOP248 million just for the plot, with development to kick off this quarter. The group’s Bali operations are on a larger scale, conducted through a venture with Indonesian Credo Group, for a hotel, villa and apartment complex costing RMB4 billion for the 14-acre plot. The group states that it plans to look for more opportunities for expansion, in particular in Indonesia, and that its Southeast Asia expansion comes in response to the ‘One belt, one road’ policy of the central government. K.W.
Casino regulator to deliver keynote speech at MGS Entertainment Summit 2016
DICJ Director Paulo Martins Chan
T
he Director of Macao Gaming Inspection and Co-ordination Bureau, Paulo Martins Chan, will join the MGS Entertainment Summit 2016. The event, alongside the MGS Entertainment Show 2016, will take place at The Venetian Macao.
The Macao gaming regulator chief will deliver his keynote speech - titled Future Development of Macao’s Gaming Industry: Healthily and Orderly, with Integrity and Quality - on the first day of the three-day event. Mr. Chan indicates, in his speech, that he will be sharing the Macao Special Administrative Region Government’s continuing efforts in helping with the diversification of the gaming industry in terms of policymaking, so that the SAR can gradually achieve its goal to be a ‘World Centre of Tourism and Leisure. Mr. Chan adds, that Macao’s gaming industry is currently undergoing an adjustment period and that the SAR Government is focusing more on how the industry can develop sustainably so that the local economy can remain strong and stable in times of challenges.
“Healthily and Orderly, with Integrity and Quality” The Macao casino regulator chief says that only by developing healthily and orderly, as well as with integrity and quality, can Macao’s gaming industry sustain itself in an increasingly challenging regional and international market. Thus, the DICJ will continue its effort in pushing forward a series of measures in order to help the industry enrich its offerings as well as increasing the proportion of revenues brought in by the nongaming sector in the gaming operators’ overall revenues, Paulo Martins Chan adds. Mr. Chan indicates such policies will be conducted in accordance with the SAR Government’s FiveYear Plan. The SAR’s master development plan for the years 2016 to 2020 sets out comprehensive targets for the city, focusing on the livelihood of citizens and Macao’s diversified economy. In addition, the DICJ will continue revising legislations and regulations, introducing new technological standards so that the gaming industry may develop in a more regulated and stable manner, adds Mr. Chan.
MGS Summit 2016 DICJ head Paulo Martins Chan says this will be the first time he has joined a large-scale gaming and entertainment exhibition and convention held by a local enterprise. He says he looks forward to meeting all the participants coming from all around the world and getting to know more about the development of the gaming and entertainment industry in other jurisdictions. During the three days spanning November 15 to 17 at the MGS Entertainment Summit, the key question which will be tackled by representatives of the government, the global investment community and broad-based gaming and entertainment sector will be: how do you bring pioneering new technologies to vibrant new markets with a fresh and visionary political thinking? Featuring more than 15 sessions, the summit will gather together representatives from the Chinese Government, major casino and entertainment operators in Macao, Las Vegas and around the world, cultural and service industry experts, legal and international advisors, and the world’s major investment houses to explore the new business landscape plus legislation, technological innovation and financial co-operation necessary to maximise the vast opportunities that lie ahead for the gaming and entertainment industry.
8 Business Daily Wednesday, November 2 2016
Greater China Official data
Factory activity expands at fastest pace in over 2 years A business survey showed activity in China’s services sector expanded at the fastest pace since December 2015
A
ctivity i n C h i n a’ s manufacturing sector expanded at the fastest pace in over two years in October thanks to a construction boom, with smaller firms growing more upbeat, suggesting the world’s second-largest economy is stabilising and getting on steadier footing.
Key Points China Oct factory activity strongest since July 2014 Service sector growth accelerates to highest since late 2015
economist Zhou Hao at Commerzbank. Factory output accelerated in October, with the sub-index rising to 53.3 in October from 52.8 in September. Total new orders also showed solid improvement, rising to 52.8 from September’s 50.9. But new export orders contracted slightly, pointing to persistent sluggishness in global demand that has weighed on Asia’s export-reliant economies for nearly two years. A similar business survey showed activity in China’s services sector expanded at the fastest pace since December 2015, with the official reading picking up to 54.0 in October
from 53.7 in September.
Private sector picking up?
Both the official factory survey and a private survey by Caixin/Markit showed conditions were improving for smaller and medium-sized Chinese firms, which have struggled for traction as Beijing relies more on large state firms to spur activity. The Caixin survey showed output expanded at the quickest pace since March 2011. If the trend does not prove to be a flash in the pan, it may suggest that government efforts to revive weak private investment are starting to pay off. Private investment growth picked up to 4.5 per cent in September after falling to record lows in recent months. “I suspect the growth has more to do with a recovery in private investment,” said Capital
Economics’ Julian Evans-Pritchard in Singapore. “The government has been doing a lot to lower the borrowing costs for the private sector. But I doubt the strength will sustain as those measures are not fundamental reforms,” He said. Despite the apparent surge in domestic demand, manufacturers continued to cut jobs, the factory surveys showed. Signs are also growing that the housing boom which has helped support the economy this year may be peaking. A measure of construction activity remained robust at 61.8, little changed from September, but a property sector reading contracted. House prices and sales have cooled in recent weeks as more cities impose restrictions on purchases to curb soaring home prices. Reuters
Smaller firms seeing long-awaited improvement Readings suggest economy steadying, may be better balanced Construction booming but housing rally may be peaking Signs of a more broader-based recovery will be welcomed by the government amid growing views that a housing rally may have peaked. Much of China’s betterthan-expected growth this year has been highly reliant on spending by often inefficient state firms as private investment languished. The official Purchasing Managers’ Index (PMI) stood at 51.2 in October, much stronger than September and the highest reading since July 2014. Economists had expected a far more modest reading of 50.4, in line with the previous month. Levels above 50 indicate an expansion in activity on a monthly basis. “The significant improvement in PMI is largely driven by commodity prices,” said Singapore-based
Alipay
Ant Financial says expansion plans to focus on Asia The company said it has 450 million users, of which 40 million are outside China Sijia Jiang and Elzio Barreto
Ant Financial Services Group, the world’s biggest financial technology company, plans to focus its expansion plans in Asia before looking to go more global, a senior official said yesterday. Ant, Alibaba Group Holding Ltd’s online finance arm, will offer its insurance and investment management products outside of China, senior vice president Douglas Feagin said at an event to mark a tieup with Thai payment firm Ascend. The Thailand deal marks Ant’s first significant expansion effort into foreign payments in Asia since last year’s partnership with India’s PayTM, which raised over US$500 million in a round led by Alibaba in September. Ant’s payment platform Alipay has been tussling with major local rival Tencent Holdings Ltd, whose Tenpay has also been making an overseas push by targeting thousands of retailers particularly around Asia. Ant plans to replicate the Alipay model in Thailand, with a goal of reaching more than half of the
country’s internet users in five years, it said. “We are leading first with payments and related services but we may very well offer other products and services market by market,” Feagin said. The move extends a global push that has seen the firm move into the United States and Europe. Last month
Ant expanded its mobile payment app service into the U.S. market in a bid to reach Chinese consumers travelling abroad. Ant said in a statement that it has 450 million users, of which 40 million are outside China. It also has another 150 million when users of its PayTM tie-up are included. In August both Alipay and Tenpay secured licenses to operate their mobile payments services in Hong Kong.
Ascend, which allows users to deposit their cash into a digital wallet, and Ant Financial are counting on the huge number of people without bank accounts in Southeast Asia to turn to their payments, lending and other services. The region has nearly 370 million people without bank accounts and who use cash on a day-to-day basis, Ascend Group CEO Punnamas Vichitkulwongsa said.
Key Points Ant formalises tie-up with Thai payment firm Says 30 pct of Alipay users from outside China Fighting rival Tencent for users worldwide Feagin, a former Goldman Sachs banker who leads Ant’s international business, added there were no set plans currently for the timing or venue of a potential initial public offering, though there were benefits to going public. Ant Financial raised US$4.5 billion in a record funding round in April, valuing the company at about US$60 billion, the same as American Express Co or insurer Chubb Ltd and more than any other privately held fintech company. Reuters
Business Daily Wednesday, November 2 2016 9
Greater China Environmental protection
In Brief
Top official criticises Trump plan to exit climate change pact The candidate has threatened to reject the Paris Agreement Sue-Lin Wong
China yesterday rejected a plan by U.S. Republican presidential candidate Donald Trump to back out of a global climate change pact, saying a wise political leader should make policy in line with global trends, a rare comment on a foreign election. The world is moving towards balancing environmental protection
and economic growth, China’s top climate change negotiator told reporters, in response to a query on how China would work with a Trump administration on climate change... “If they resist this trend, I don’t think they’ll win the support of their people, and their country’s economic and social progress will also be affected,” Xie Zhenhua said. “I believe a wise political leader should take policy stances that conform with global trends,” China’s veteran climate chief said. Trump has threatened to reject the Paris Agreement, a global accord negotiated by nearly 200
governments to battle climate change that takes effect on Friday. Chinese officials are often hesitant to weigh in on foreign elections, although they will defend Chinese policies when attacked in candidates’ policy platforms. Xie’s comments come as China plans to launch a national carbon trading scheme in 2017. The scheme is on track and pilot programs have already traded 120 million carbon allowances with total transactions amounting to 3.2 billion
“I believe a wise political leader should take policy stances that conform with global trends” Xie Zhenhua, China’s top climate change negotiator
Economy Minister
Germany’s Gabriel begins Mainland tour German Economy Minister Sigmar Gabriel met China’s trade minister for talks in “a very good atmosphere” yesterday, his deputy said, on the first day of a trip to Beijing marked by tensions over corporate takeovers. Prior to his trip with 60 business executives from Germany, Gabriel ratcheted up tensions with Beijing by putting the brakes on the latest Chinese takeovers of German technology companies. Talks yesterday between Gabriel and Chinese Trade Minister Gao Hucheng overran, meaning the two ministers were not able to give the opening speeches at a German-Chinese Economic Committee, German officials said. Regulator
yuan (US$472.29 million), he added. “It will take time for the market to be fully operational, but once it’s operational, it’ll be the largest carbon trading market in the world,” said Xie. China’s coal consumption has declined as the world’s secondlargest economy slows, but Xie said it was too early to decide if it had peaked. China’s delegation of more than 80 negotiators began departing since yesterday for global climate change talks in the Moroccan city of Marrakesh set for November 7 to 18. Reuters
Debt
Credit-default swap trading said to have started on Monday Faced with mounting bond failures, China has started trading of credit-default swaps on the nation’s interbank market Trading began Monday, people familiar with the matter said, asking not to be identified because the authorities haven’t disclosed the information. The move comes after separate people close to the matter said in September that the nation’s central bank had approved such trading by financial institutions. The swaps, which provide insurance against non-payment on bonds, can help investors hedge against credit risks after 21 securities defaulted this year, compared with only seven in 2015. There is room for failures to rise after Premier Li Keqiang pledged to weed out zombie companies even after the economy grew at the lowest pace in a quarter century. Authorities issued rules on bond default hedging instruments called
credit risk mitigation warrants in 2010, with National Association of Financial Market Institutional Investors saying at the time that products must focus on specific underlying debt. Shi Lei, head of fixed-income research at Ping An Securities Co., said in June there was almost no trading of those tools because the instruments are linked to single bonds of issuers. Industrial Bank Co. and Bank of China Ltd. were among the first institutions that conducted CDS transactions on Monday, using China United Network Communications Ltd.’s bonds as underlying debt, said one of the people. Bank of Shanghai Co. and Bank of Communications Co. also completed a deal, said the people. The underlying securities for that deal were bonds issued by China
Petroleum and Chemical Corp., said one of the people. A public relations official at Industrial Bank said the bank had no immediate comment. Two calls to Bank of China’s press office went unanswered. A public relations official at Bank of Shanghai said the bank had no immediate comment. A press official at Bank of Communications couldn’t immediately comment.
‘Industrial Bank Co. and Bank of China Ltd. were among the first institutions that conducted CDS transactions on Monday’
Domestic insurers’ profits fall Profits for China’s insurance firms fell 35.7 per cent to 156.96 billion yuan (US$23.17 billion) in JanuarySeptember from the same period a year earlier, according to a memo circulated at a news conference by the insurance regulator yesterday. The China Insurance Regulatory Commission added in the memo that the total assets held by China’s insurance firms increased 18 per cent in JanuarySeptember, reaching 14.63 trillion yuan (US$2.16 trillion) at the end of the third quarter. Factory data
Taiwan’s manufacturing sector eases PMI for the manufacturing sector dipped two points from September to 54.5 in October as the growth of new orders lost momentum, data showed yesterday. It is the eighth consecutive month that the manufacturing sector has seen expansion, according to the Chung-Hua Institution for Economic Research (CIER). A PMI above 50 indicates expansion while figures under 50 reflect contraction. The sub-index for new orders fell 4.3 points to 55, and that for production lost 4.2 points to 55.7. The sub-index for employment was down 0.6 point to 56.3. Vice finmin
A press official at the China Foreign Exchange Trade System, regulator of interbank market trading, wouldn’t comment. Bloomberg News
Debt risks “controllable” but challenges remain The risks from debt in China are “totally controllable” but there are challenges that must be given serious consideration, such as the accelerating growth of corporate debt, state news agency Xinhua quoted Vice Finance Minister Zhu Guangyao as saying. The government had already adopted a number of measures to prevent and resolve corporate debt risk, particularly as it relates to state-owned enterprises, Zhu was quoted as saying on Monday. Publicly available data, including from the International Monetary Fund, “reflect the fact that China’s debt risk is totally controllable,” Zhu said.
10 10 Business Business Daily Daily Wednesday, Wednesday, November November 2 2 2016 2016
GREATER Macau CHINA
New J-20 stealth fighter flies during an air show at the China International Aviation & Aerospace Exhibition in Zhuhai yesterday
ZHUAHAI AIRSHOW
J-20 stealth jet debuts in show of strength Notably absent from the airshow schedule is the 150-seater COMAC C919 passenger jet Tim Hepher and Brenda Goh
C
HINA showed its Chengdu J-20 stealth fighter in public for the first time yesterday, opening the country’s biggest meeting of aircraft makers and buyers with a show of its military clout. Airshow China, in the southern city of Zhuhai, offers Beijing an opportunity to demonstrate its ambitions in civil aerospace and to underline its defence ambitions. China is set to overtake the U.S. as the world’s top aviation market in the next decade. Two J-20 jets, Zhuhai’s headline act, swept over dignitaries and hundreds of spectators and industry executives gathered at the show’s opening ceremony in a flypast that barely exceeded a minute, generating a deafening roar that was met with gasps and applause and set off car alarms in a parking lot at the site. Experts say China has been refining designs for the J-20, first glimpsed by planespotters in 2010, in the hope of narrowing a military technology gap with the United States. President Xi Jinping has pushed to toughen the armed forces as China takes a more assertive stance in Asia, particularly in the South China and East China seas. “It is clearly a big step forward in Chinese combat capability,” said Bradley Perrett of Aviation Week, a
veteran China watcher. It was China’s second successive display of a new stealth jet at the biennial Zhuhai show, following the 2014 debut of the J-31.
Questions unanswered
After arriving as a pair at low-level, one of the J-20s quickly disappeared over the horizon, leaving the other to perform a series of turns, revealing its delta wing shape against bright sub-tropical haze. But analysts said the brief and relatively cautious J-20 routine the pilots did not open weapon bay doors, or perform low-speed passes
- answered few questions. “I think we learned very little. We learned it is very loud. But we can’t tell what type of engine it has, or very much about the mobility,” said Greg Waldron, Asia Managing Editor of FlightGlobal. “Most importantly, we didn’t learn much about its radar cross-section.” A key question whether the new Chinese fighter can match the radarevading properties of the Lockheed Martin F-22 Raptor air-to-air combat jet, or the latest strike jet in the U.S. arsenal, Lockheed’s F-35. The F-22 Raptor, developed for the U.S. Air Force, is the J-20’s closest lookalike. But the mere display of such a newly developed aircraft was a revealing signal, others said. “It’s a change of tactics for the
Chinese to publicly show off weapons that aren’t in full squadron service yet,” said Sam Roggeveen, a senior fellow at the Sydney-based Lowy Institute, “and demonstrates a lot of confidence in the capability, and also a lot of pride.” It remained unclear whether or how the J-20 would be displayed at the airshow after the flypast.
Key Points 2 stealth fighters open show with brief flypast ‘Big step forward in China combat capability’ - expert Too early to say if J-20 matches U.S. F-22 jet - analysts Aircraft that are officially scheduled to be on display alongside the latest Chinese weapon systems, radar and drones include the Xian Y-20 strategic airlifter, and what organisers say is the largest amphibious plane now in production - the AG600. REUTERS
COMAC
Nearly 40,000 new airliners needed Brenda Goh
State-owned Commercial Aircraft Corporation of China (COMAC) yesterday forecast the global airline industry will need almost 40,000 new planes worth US$5.23 trillion over the next 20 years, with Chinese buyers taking almost a fifth of that. The aircraft maker said it expected the industry to deliver 39,948 new planes over 2016-2035 on the back of 4.45 per cent annual growth in revenue per kilometre flown by passengers, a standard industry measure. COMAC’s forecast assumes the global economy maintains an average annual growth rate of 3 per cent. The Chinese market - expected to see annual passenger traffic growth of 6.1 per cent over 20162035 - will need 6,865 new aircraft worth US$930 billion over the period, with passenger revenue from
China to account for 18 per cent of global revenue by 2035, COMAC said. Earlier yesterday, COMAC said it had clinched 23 new firm orders for its long-delayed C919 passenger jet, from two Chinese leasing firms who also took out options to buy 33 more. COMAC said it has now received a total of 517 firm orders for C919s, mainly from Chinese lessors. The Shanghai-based company is eager to challenge dominant plane makers Airbus Group and Boeing Co in the lucrative narrow-body jet market, but has yet to send its C919 jet out on its first flight. The C919 is now scheduled to reach its first buyers in 2018 after a series of production delays pushed deliveries back four years. COMAC said separately yesterday that China Eastern Airlines will be the launch customer for the C919, which may take its first test flight later this year or early 2017. REUTERS
Business Business Daily Daily Wednesday, Wednesday, November November 2 2 2016 2016 11 11
ASIA Macau
TRADE
South Korea exports down but Samsung woes tempered Most economists expect the Bank of Korea to possibly lower rates again early next year to boost private consumption and inflation Christine Kim
South Korea’s exports in October fell at a slower pace as shipments of semiconductors and ships helped offset fallout from the cancellation of Samsung Electronics’ fire-prone Galaxy Note 7 and a strike at the nation’s biggest carmaker.
Key Points Oct exports -3.2 pct, imports -5.4 pct y/y Oct inflation 1.3 pct y/y (Reuters poll 1.2 pct)
of key export products like displays, p e t r o ch e m i ca l p r o d u c ts a n d computers, exports are likely to keep improving until year-end,” Chae Hee-bong, a trade ministry official told a press conference. However, Chae said trade faces downside risks from a pending U.S. Federal Reserve rate hike and sluggish handset sales. As expected, Samsung’s smartphone crisis saw handset exports plummet 28.1 per cent in October on-year to record their worst fall in over four years. Car shipments fell 11.8 per cent
over the same period, less worse than a 24.0 per cent decline in September when the strikes at Hyundai Motor ended. Shipments to China, South Korea’s biggest trading partner, slumped 11.3 per cent, suggesting overall exports might struggle to mount a solid recovery. Sales to the next biggest market the United States also fell, while those to the European Union rose. South Korea’s trade surplus stood at US$7.2 billion, up from US$6.9 billion in September. Ship exports rebounded from September, jumping 49.4 per cent in annual terms as orders for 23 vessels were completed. Moon Jung-hui, an economist at KB Investment & Securities, said exports have been improving since July, but
there is still a chance the central bank may lower rates early next year to give the economy a boost. “Inflation from the demand side isn’t strong yet, but when you look at energy prices rising, the Bank of Korea is likely to use its rate cut card very slowly,” Moon said. Separate data yesterday showed South Korea’s annual inflation in October accelerated to 1.3 per cent, an eight-month high, led by a spike in fresh food costs, but analysts like Moon said it’s too early to determine how much of the broad price gains are demand-driven. Most economists expect the Bank of Korea to stay on data-watch mode and meet market consensus for another cut in rates early next year. REUTERS
is stuck at a record low of 1.5 per cent and seems likely to remain below the RBA’s 2 to 3 per cent target band for another year or more. Employment growth has also disappointed in recent months, while being heavily skewed toward parttime jobs.
October from a year earlier, while Melbourne boasted a 9.1 per cent gain. Prices rose for the 10th month across all the major cities to be up 7.5 per cent for the year. The inexorable ascent of prices has taken homes out of the reach of many first-time buyers and fuelled concerns about excessive borrowing by property investors. “With on-going strong value growth and the debate around affordability gathering some momentum, there is
Inflation highest since February this year Semiconductors, ships boost exports Recent trade data from Asia’s fourth-largest economy - seen as a barometer for exports from the region - have pointed to signs of pick up in global demand even though a slowdown in China remains a concern. Exports fell 3.2 per cent on-year in October and imports were down 5.4 per cent, preliminary data from the trade ministry showed yesterday. In September, exports and imports fell 5.9 per cent and 1.7 per cent, respectively. “Thanks to the firm performance
MONETARY STABILITY
Australia’s central bank holds rates Low inflation and a lacklustre labour market could open the door to further easing Wayne Cole
Australia’s central bank held rates steady for a third month yesterday, with markets wagering a windfall from surging export prices and concerns over a hot housing market could mean its five-year easing cycle was all but done. The local dollar firmed after the Reserve Bank of Australia (RBA) ended its monthly policy meeting with rates unchanged at a record low of 1.5 per cent and offered no explicit easing bias. Instead, Governor Philip Lowe provided a balanced statement. “Over the next year, the economy is forecast to grow at close to its potential rate, before gradually strengthening,” he wrote. Inflation was expected to remain low for some time, but would “pick up gradually over the next two years.” The steady decision was widely expected given policy makers had sounded optimistic on the economic outlook amid higher prices for key commodity exports. The jump in coal alone could be worth an extra A$25 billion in annual revenue if sustained.
A Reuters poll of 60 analysts had found all but five tipped no change this week. A majority saw scope for one more easing next year, but investors were lengthening the odds on a move. Interbank futures imply a onein-three chance of a cut next year, compared to one-in-two previously, lifting the Australian dollar up a third of a cent to US$0.7655. Low inflation and a lacklustre labour market could open the door to further easing. Underlying inflation
Housing heats up
A chief argument against the need for further stimulus is a recent acceleration of house price gains in Australia’s two largest cities, Sydney and Melbourne. The trend was highlighted by Lowe who said prices in some markets “have been rising briskly” over the past few months. Figures from property consultant CoreLogic out yesterday showed values galloped 10.9 per cent higher in
Key Points RBA holds rates at 1.5 pct at Nov meeting, as expected Says economy to grow near potential, inflation slowly rise A$ firms as lack of explicit easing bias lessens chance of cut
likely to be further caution by the Reserve Bank around future rate cuts,” said CoreLogic research director Tim Lawless. Some feared prices must eventually deflate, particularly as there was a huge pipeline of new apartments coming on stream. Lawless noted building approvals in Brisbane, for instance, suggested the existing stock of units could expand by more than a quarter over the next two years. REUTERS
12 Business Daily Wednesday, November 2 2016
Asia In Brief CPI
Thai consumer prices rise for 7th straight month Thailand’s October headline consumer prices rose on an annual basis for a seventh straight month, but the rate remained benign, Commerce Ministry data showed yesterday, giving the central bank leeway to keep interest rates low to support growth. The headline CPI index increased 0.34 per cent in October from a year earlier after September’s 0.38 per cent increase. A Reuters poll had forecast an annual rise of 0.43 per cent in October. October’s annual core inflation rate, which strips out raw food and energy prices, was 0.74 per cent, compared with 0.75 per cent seen in the poll. Prices
Indonesia’s inflation rate picks up Indonesia’s annual inflation rate in October rose more than expected to the fastest in four months, the statistics bureau said yesterday. October’s annual inflation rate picked up to 3.31 pct from September’s 3.07 per cent, data from the bureau showed. A Reuters poll had expected a rate of 3.29 per cent. The consumer price index rose 0.14 per cent on a monthly basis due to rising chilli prices. However, on an annual basis, the core inflation rate, which strips out administered and volatile food prices, cooled to 3.08 per cent in October, versus September’s 3.21 per cent. Smartphone market
Samsung CEO says firm must learn from crisis Samsung Electronics Co Ltd Chief Executive Kwon Ohhyun yesterday said the South Korean tech giant must improve, as it reels from the costly withdrawal of its Galaxy Note 7 smartphone. Without referring directly to the failure of the fire-prone Note 7s, Kwon said in a statement Samsung employees should look back and ask whether they had been complacent in their work. “We have a long history of overcoming crises,” Kwon said. “Let us use this crisis as a chance to make another leap by re-examining and thoroughly improving how we work, how we think about innovation and our perspective of our customers.” Govt investment
Krung Thai Bank sees first loan contraction in a decade Krung Thai Bank said lending in the first nine months of the year fell 6 per cent with Thailand’s second-largest lender forecasting loans to decline in 2016, the first drop in a decade, mainly due to a slowdown in government investment. The country’s largest state bank, the first major Thai bank to forecast loan contraction this year, was expected to benefit from financing the government’s infrastructure investments, but government spending is likely to delay further and pick up in 2017, analysts said.
Business Daily is a product of De Ficção – Multimedia Projects
Monetary stance
Bank of Japan keeps policy steady The central bank pushed back the timing for hitting 2 per cent inflation to “around fiscal 2018” Leika Kihara and Stanley White
T
he Bank of Japan (BOJ) held off on expanding stimulus yesterday despite once again pushing back the timing for hitting its inflation target, signalling that it will keep policy unchanged unless a severe shock threatens to derail a fragile economic recovery. The BOJ maintained its view that the world’s third-largest economy will expand moderately as exports and consumption emerge from the doldrums. But it also warned that risks to the outlook were skewed to the downside and that price momentum was weakening, an unusually bleak assessment that underscored its waning conviction of achieving the elusive inflation target. “It’s true it’s taking a significant amount of time to eradicate the deflationary mindset that beset the economy during 15 years of deflation,” Governor Haruhiko Kuroda told reporters. In a quarterly review of its forecasts released alongside its policy decision, the BOJ pushed back the timing for hitting 2 per cent inflation to “around fiscal 2018” - admitting that the target won’t be achieved before Governor Haruhiko Kuroda’s tenure ends in April 2018. In July, it had said inflation will hit 2 per cent during the fiscal year 2017, which ends in March 2018. The central bank also cut its inflation
forecasts for fiscal 2017 and 2018, blaming weak overseas demand and waning public conviction that prices and economic activity will pick up. In a widely expected move, however, the BOJ maintained its minus 0.1 per cent short-term interest rate target and a pledge to guide 10-year government bond yields at around zero per cent. “The BOJ has settled down for a long-drawn-out war to achieve its inflation target, so a delay in meeting the timing alone would not force it into action,” said Yasunari Ueno, chief market economist at Mizuho Securities. “The only trigger for easing could be a sharp rise in the yen. The BOJ is likely to stand pat for the coming months, barring a yen spike to 90-95 to the dollar.” While no longer an official target, the BOJ also kept a pledge to buy bonds at the current pace so its holdings rise at an annual pace of 80 trillion yen (US$764 billion).
Price outlook gloomy
In the quarterly report, the BOJ warned that global uncertainties could discourage companies from raising wages, which in turn would boost consumption and prices. Japan’s core consumer prices fell for a seventh straight month and household spending slumped in September, endorsing the central bank’s view that it will take some time for inflation to accelerate to its 2 per cent target as the economy stagnates.
Analysts had not expected a back-to-back policy move after the BOJ switched its policy target to controlling interest rates from the pace of money printing in September. The overhaul came after years of massive asset purchases failed to revive economic activity, raising fresh doubts about the central bank’s ability to engineer a revival as it ran out of policy ammunition.
Key Points BOJ keeps yield curve targets steady BOJ cuts inflation forecasts, warns of risks Maintains pledge to buy bonds at current pace Decision had been expected after policy overhaul in Sept Under its new “yield curve control” (YCC) framework, the BOJ’s main means for monetary easing would be to cut negative interest rates even deeper and accompany it by a cut in the 10-year bond yield target if needed. Japan’s economy expanded for the second straight quarter in April-June but many analysts expect growth to remain modest for the rest of this year, with exports and output weak on sluggish global demand. Slow wage growth has also hurt consumption, further undermining the chance of a strong near-term revival in the world’s third-largest economy. Reuters
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 Wednesday, November 2 2016 13
Asia FDI
Indonesia’s investment enjoys good relations with China The U.S.’s share of FDI to Indonesia has declined to 2 per cent from 8.3 per cent in 2013 China’s investment in Indonesia has more than doubled since 2015 as President Joko Widodo’s five meetings with Xi Jinping in the past two years start to pay off. Foreign direct investment (FDI) from China stood at US$1.6 billion in January to September, up from about US$600 million for the whole of last year, according to figures from the Indonesia Investment Coordinating Board. Chinese investors pledged US$6.1 billion in investment in Indonesia in the nine-month period. China is now the No. 3 investor in Indonesia behind Singapore and Japan, overtaking the U.S. this year, as the world’s second-largest economy looks to shift more of its excess manufacturing capacity offshore. It reflects China’s deepening ties with Indonesia after becoming the nation’s biggest trading partner five years ago and is a win for Widodo as he pushes ahead with an ambitious program to build roads, ports and railways. “ Th e p o t e n t i a l o f r ea l i z e d investment from China will remain high in the coming years and it will remain in the top five,” said Azhar Lubis, the board’s deputy chairman for investment supervision. “The
Chinese FDI in the nine-month period went to 1,205 projects
biggest challenge is how that interest or those plans can be realized soon.” The U.S.’s share of FDI to Indonesia has declined to 2 per cent from 8.3 per cent in 2013, despite President Barack Obama pledging stronger ties with Asia. China, on the other hand, has increased its push in Southeast Asia with its “One-Belt, One Road” policy, investing in infrastructure across the region to revive an ancient trading route stretching from Asia to Europe. The project was discussed by Xi and Jokowi, as the Indonesian president is known, when they met in Beijing in March last year.
South Korea
Central bank board members warn of rising household debt Some members also said that corporate restructuring should be closely monitored as it could have a temporary effect on economic sentiment South Korea’s central bank board m e m b e rs w a r n e d o f s o a ri n g household debt and possible economic headwinds in their October 13 policy meeting, when they unanimously agreed to keep the benchmark rate unchanged, minutes showed yesterday.
Key Points Majority of board members cite household debt as risk to growth Some see inflation reaching BOK’s target of 2 pct in 2017 Pace of household debt growth seen unlikely to wane in Oct, Nov A majority of the seven board members pointed to record household debt levels as a risk to future economic growth as the Bank of Korea faces calls to further cut its policy rate from 1.25 per cent, already a record low. “(The BOK) needs to be careful in its consideration for any rate
Bank of Korea Governor Lee Ju-yeol
adjustments. Making efforts to ease growth in household debt and the current construction boom seems like an urgent task to stabilise the economy,” said one board member. An unnamed official at the central bank said the pace of growth in household debt was unlikely to slow significantly in October or November due to sales of new apartments, among other factors. In the June quarter, household credit grew an annual 11.1 per cent to a record high of 1,257.3 trillion won (US$1.10 trillion). Some members also said that corporate restructuring should be closely monitored as it could have a temporary effect on economic sentiment. At least two board members said the nation’s headline inflation would reach the central bank’s target of 2 per cent sometime in 2017 with rebounding oil prices. All of the seven board members, including Governor Lee Ju-yeol, voted to hold the policy rate unchanged at a record low 1.25 per cent in October. Reuters
Neighbouring Philippines is also seeking more investment from China, with President Rodrigo Duterte announcing an easing of ties with the U.S., a military ally, after meeting Xi in Beijing in October. The Philippine government said the trip would yield US$24 billion of state and business deals.
Growth forecast
Lubis said Chinese investment was mainly directed to mineral smelters, such as nickel and bauxite, as well as in the cement, automotive and steel industries. Chinese FDI in the ninemonth period went to 1,205 projects. Singapore remains the top investor in Indonesia, with US$7.1 billion in the first nine months of the year, compared to US$5.9 billion in 2015. FDI from the U.S. slumped to about
US$400 million from US$2.4 billion in 2013. Jokowi is seeking to boost growth to 7 per cent by 2019, a pledge he made when he came to office in 2014. Last week, Finance Minister Sri Mulyani Indrawati said the economy will probably expand 5 per cent this year. “We need investment and China they have excess capacity,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “The two countries need each other.” The growing economic ties comes at the same time that political tension between the two nations intensifies over lucrative fishing grounds in the South China Sea. Indonesia’s Fisheries Minister Susi Pudjiastuti has said tensions with China are now manageable. Bloomberg News
14 Business Daily Wednesday, November 2 2016
International In Brief Portugal
Moody’s keeps outlook for banking sector “stable” Credit rating agency Moody’s said on Monday it was keeping its outlook on the Portuguese banking sector at “stable,” according to the agency’s latest report. The “modest economic recovery will continue to support the country’s banks,” Moody’s said in relation to the outlook for the solvency of Portuguese banks in the next 12 to 18 months. Moody’s said the Portuguese economy’s main weakness remained the high levels of debt of companies, families and the state, which continues to weigh upon economic activity and requests for loans. Mozambique
Business leader blames fighting for economic crisis The chairman of the confederation of Mozambique’s economic associations, Rogério Manuel, said on Monday that the military and political crisis is the main reason for the bad business environment in the country and called for a quick end to the hostilities. Mr Manuel spoke in reaction to the disclosure last week of the World Bank “Doing Business” report that shoved Mozambique three places further down its ranking on business environment to 137th place. Mozambique has tumbled eight places in just two years in the study which said in its last report that the country had fallen in almost every aspect.
Monetary meeting
Fed to hold rates steady, put December hike firmly in view Investors have all but ruled out a move at this week’s meeting given it takes place only a week before the U.S. presidential election Lindsay Dunsmuir
The U.S. Federal Reserve is expected to keep interest rates unchanged tonight but set the stage for a hike in December amid signs the economy is picking up steam. The central bank has grown increasingly confident about raising rates and Chair Janet Yellen said in September that a move before the end of the year was likely should employment and inflation continue to strengthen. Data since then has shown payrolls still growing solidly while consumer prices are showing some signs of ticking higher, putting both employment and inflation close to the Fed’s long-run estimates. Growth too has improved, with the economy accelerating at a 2.9 percent annual pace in the third quarter after a fairly sluggish first half. Investors have all but ruled out a move at this week’s meeting given it takes place only a week before the U.S. presidential election. A number of Fed officials have recently said a December rate hike would be preferable.
An ABC News/Washington Post poll released on Sunday showed Democratic candidate Hillary Clinton with a 1 percentage point national lead over Republican rival Donald Trump, within the margin of error. This week’s Fed policy decision is due to be released at 2 p.m. EDT (1800 GMT) today at the conclusion of a two-day meeting. Yellen is not scheduled to hold a press conference.
of the three voting policymakers who called for an immediate hike in September. With investors already expecting a December move, the Fed probably won’t feel like it needs to lock in its intentions any more than necessary, said Lewis Alexander, chief U.S. economist at Nomura and a former Fed staffer.
“It’s widely understood that it would be politically treacherous for the Fed to hike just before a very heated election”
How strong a signal?
At the meeting prior to raising rates last year, the Fed firmly signalled its intentions by including a reference to possibly raising rates “at its next meeting.” This time around it could take a softer approach. In September, policymakers already put markets on notice by saying they decided to stand pat “for the time being, to wait for further evidence” employment and inflation were progressing. The Fed could lower the bar more to “some further evidence” being required, which may also serve to assuage the concerns of at least one
Michael Feroli, JPMorgan economist
“They will probably want to do something like have Yellen give some relatively high-profile speech a couple weeks before the meeting,” he said. “That’s probably a better way than putting something in the statement that inevitably is going to be pretty cryptic.” Reuters
Angola
Central Bank releases €213.2 m The amount of foreign currency injected into the Angolan banking system rose by 2 per cent last week to €213.2 million, more than half of which was to ensure food imports, the National Bank of Angola said on Monday. The information was included in the BNA’s weekly report issued on Monday, on developments in the Money and foreign Exchange markets from 24 to 28 October. The amount of currency injected into the country’s bank’s last week compared to €209.7 million a week before and rises for the first time in three weeks. Trade embargo
US extends sanctions on Sudan President Barack Obama has extended US sanctions on Sudan for another year, saying Khartoum’s policies remained an “extraordinary threat” to the national security of the United States. Sudan has been subject to a US trade embargo since 1997 for its alleged support for Islamist groups. Al-Qaeda leader Osama bin Laden was based in Khartoum from 1992 to 1996. In recent years, the Sudanese government’s scorched earth tactics against ethnic minority rebels in Darfur have been cited as a reason not to lift the sanctions. On Monday, Obama ordered the sanctions extended for one year starting from November 3.
PMI
UK factories keep up strong growth Markit said the inflationary impact of the weaker currency was also becoming increasingly evident William Schomberg
Britain’s factory sector maintained most of its robust growth last month after a weaker pound boosted exports, though this also fuelled inflation, according to a survey that underscored the impact on the economy of June’s Brexit vote. The Markit/CIPS Purchasing Managers’ Index (PMI) slowed slightly to 54.3 from an upwardly revised 55.5 in September, which was its highest level in more than two years. “The UK manufacturing sector remained on a firm footing in October and should return to growth in the fourth quarter,” Rob Dobson, an economist at compiler Markit said. Data has already shown that Britain’s economy fared much better than expected by the Bank of England and economists in the three months after the June 23 decision to take the country out of the European Union. The BoE is widely expected to hold off from a fresh interest rate cut on Thursday, in view of the economy’s resilience so far since the vote and the
nearly 20 per cent fall in the value of the pound against the dollar. “It looks as if the manufacturing sector’s fortunes improved at the beginning of the fourth quarter,” Capital Economics analyst Paul Hollingsworth said, saying the figures pointed to quarterly growth for the sector of 1 per cent versus a 1 per cent contraction in the previous quarter. Markit said the slump in sterling had boosted exports by manufacturers in October, although they showed a little bit less growth than in September and domestic demand was also strong. Others were less upbeat. “We continue to expect manufactures to struggle to capitalise on the weak pound in the near term, given the usual delays involved in finding new business, renegotiating contracts and investing in extra capacity,” Pantheon Macroeconomics’s Samuel Tombs said. Markit said the inflationary impact of the weaker currency was also becoming increasingly evident. Import prices showed one of the steepest
rises in purchasing costs in the near 25-year history of the survey. Around 90 per cent of companies offering a reason for increased costs made some reference to the sterling exchange rate, Markit said. Factory gate prices rose at the steepest pace since mid-2011.
Key Points UK factory PMI points to robust growth at start of Q4 Weak pound pushes up costs by most in over 5 years Analyst sees sector growing at quarterly rate of 1 pct “If signs of on-going solid output expansion and rising price pressures are also experienced elsewhere in the economy, the chances of a further cut in interest rates before year-end are virtually nil,” Dobson said. The fall in sterling is expected to push the BoE to raise its inflation forecasts on Thursday to show a bigger overshoot of its price target than at any time since it gained independence in 1997. Reuters
Business Daily Wednesday, November 2 2016 15
Opinion Business Wires
Taipei Times Taiwanese firms should spend more on research and development (R&D) to boost their profitability, as global companies are shifting resources away from physical products to software and services and the change is paying off, accounting firm PricewaterhouseCoopers LLP (PwC) said in a report. Thirty-two Taiwanese firms made this year’s Global Innovation 1000 Study - two fewer than last year’s report - with R&D spending totalling NT$392.8 billion (US$12.44 billion), or 3 per cent of their combined revenues, PwC Taiwan said. The figure represents a 0.1 per cent year-on-year increase in R&D investment, the report said.
The Korea Herald The global price of dynamic random access memory chips surged in October from a month earlier, data showed yesterday, boding well for South Korea’s leading chipmakers. According to the data compiled by market tracker DRAMeXchange, the average contract price of the DDR3 4GB, mostly used for PCs, rose 25.3 per cent on-month to US$1.88 in October, marking the highest gain since March of 2013 when the prices advanced 18.52 per cent on-month. The DRAM prices have risen sharply since July this year advancing 7.2 per cent onmonth in July, 2.99 per cent in August and 8.7 per cent in September, the data showed.
The Times of India The Confederation of All India Traders (CAIT) has claimed that there was a 60 per cent dip in the sales of Chinese goods this Diwali as a result of the massive social media campaign urging people to boycott Chinese products. “Even the traders showed lack of enthusiasm in selling Chinese products,” a CAIT spokesperson said. Instead of Chinese goods, people preferred earthen lamps and decorative items made from paper, clay and plastic to decorate their houses, and some households even used last year’s material for decoration purposes.
The Phnom Penh Post The central bank released its first-ever national study on perceptions and usage of the riel and foreign currencies in Cambodia, which aimed at not only understanding existing trends, but also at steering future financial legislation to boost the circulation of Cambodia’s national currency. The year-long study, commissioned by the National Bank of Cambodia and undertaken by the Japan International Cooperation Agency, surveyed 856 enterprises, over 2,000 households and 15 financial institutions across the country to build a comprehensive snapshot on the usage and confidence levels of various currencies.
Investment for sustainable growth
T
he big disappointment in the world economy today is the low rate of investment. In the years leading up to the 2008 financial crisis, growth in high-income countries was propelled by spending on housing and private consumption. When the crisis hit, both kinds of spending plummeted, and the investments that should have picked up the slack never materialized. This must change. After the crisis, the world’s major central banks attempted to revive spending and employment by slashing interest rates. The strategy worked, to some extent. By flooding capital markets with liquidity and holding down market interest rates, policymakers encouraged investors to bid up stock and bond prices. This created financial wealth through capital gains, while spurring consumption and – through initial public offerings – some investment. Yet this policy has reached its limits – and imposed undeniable costs. With interest rates at or even below zero, investors borrow for highly speculative purposes. As a result, the overall quality of investments has dropped, while leverage has risen. When central banks finally tighten credit, there is a real risk of significant asset-price declines. As monetary policy was being pushed to its limits, what went missing was an increase in long-term investments in high-speed rail, roads, ports, lowcarbon energy, safe water and sanitation, and health and education. With budget austerity restraining public investment, and major uncertainties concerning public policy and international taxation hampering private investment, such spending has generally declined in the high-income countries. Despite US President Barack Obama’s promises of investment in high-speed rail and other modern infrastructure, not one mile of fast rail was built during his eight years in office. It is time to translate words into action, in the United States and elsewhere, and usher in a new era of high investment in sustainable development. There are three challenges faci n g s u ch a st rat eg y : identifying the right projects; developing complex plans that involve both the public and private sectors (and often more than one country); and structuring the financing. To succeed, governments must be capable of effective longterm planning, budgeting, and project implementation. China has demonstrated these capabilities in the last 20 years (though with major environmental failures), whereas the US and Europe have been stymied. The poorest countries, meanwhile, have often been told by the International Monetary Fund and others not even to try. Today, governments will have some help in overcoming at least one of the key challenges. The Sustainable Development Goals (SDGs) and the Paris Climate Agreement will help to guide them toward the right projects. The world needs massive investments in lowcarbon energy systems, and an end to the construction of new coal-fired power plants. And it needs massive investments in electric vehicles (and advanced batteries), together with a sharp reduction in internal combustion engine vehicles. The developing world, in particular, also needs major investments in water and sanitation projects in fast-growing urban areas. And low-income countries, in particular, need to scale up health and education systems. China’s “one belt, one road” initiative – which aims to link Asia to Europe with modern infrastructure networks – will help to advance some of these goals, assuming the projects are designed with a low-carbon-energy future in mind. That initiative
“
Jeffrey D. Sachs Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University
will boost employment, spending, and growth, especially in the landlocked economies across Eurasia. It should even deliver new dynamism to economic and diplomatic relations among the European Union, Russia, and China. A similar program is needed urgently in Africa. Although African countries have already identified priority investments for electrification and transport, progress will remain slow without a new wave of investment spending. African countries’ combined spending on education alone should increase by tens of billions of dollars per year; combined infrastructure spending should surge by at least US$100 billion per year. These needs should be covered mostly by long-term, low-interest-rate loans from China, Europe, and the US, as well as by mobilizing African countries’ long-term savings (through, for example, the introduction of new pension systems). The US and Europe also need major new infrastructure programs. The US – where the last big infrastructure project, the national highway system, was concluded in the 1970s – should emphasize investment in low-carbon energy, high-speed rail, and the mass uptake of electric vehicles. As for Europe, the European Commission’s Investment Plan for Europe – dubbed the “Juncker Plan,” for Commission President JeanClaude Juncker – should become the EU’s SDG program. It should focus, for example, on creating a Europe-wide transmission grid for low-carbon energy, and on a massive increase in renewable-power generation. To help finance such programs, the multilateral development banks – such as the World Bank, the Asian Development B a n k, a n d t h e A f r i c a n Development Bank – should raise vastly more long-term debt from the capital markets at the prevailing low interest rates. They should then lend those funds to governments and public-private investment entities. Governments should levy gradually rising carbon taxes, using the revenues to finance low-carbon energy systems. And the egregious loopholes in the global corporate-tax system should be closed, thereby boosting global corporate taxation by some US$200 billion annually, if not more. (American companies are currently sitting on nearly US$2 trillion in offshore funds that should finally be taxed.) The added revenues should be allocated to new public investment spending. For the poorest countries, much of the needed investment should come through increased official development assistance. There are several ways to generate that extra aid money via a reduction of military spending, including by ending the wars in the Middle East; deciding firmly against a next generation of nuclear weapons; cutting back on US military bases overseas; and avoiding a USChina arms race through enhanced diplomacy and cooperation. The resulting peace dividend should be channelled toward health care, education, and infrastructure in today’s impoverished and war-torn regions. Sustainable development is not just a wish and a slogan; it offers the only realistic path to global growth and high employment. It is time to give it the attention – and investment – it deserves.
As monetary policy was being pushed to its limits, what went missing was an increase in long-term investments in high-speed rail, roads, ports, low-carbon energy, safe water and sanitation, and health and education.
”
Project Syndicate
16 Business Daily Wednesday, November 2 2016
Closing Start-ups
Lisbon entrepreneurs aim to create Berlin-style “tech buzz” Prime local prices are only a little lower than the 22 euros in Berlin, but start-ups are avoiding the centre in favour of cheap, former industrial neighbourhoods along the Tagus River
N
ear a former red-light district around Lisbon’s old Cais do Sodre docks, scores of young entrepreneurs are trying to leave depressing economic times behind and turn Portugal’s capital into a hive for tech start-ups. Just a few years after Portugal’s debt crisis and bailout, their aim is to become the next Berlin in generating a cool ‘tech buzz’, offering talented young people and costs way below those in more established European centres.
Key Points Portuguese capital offers low start-up costs Venture capital shortage created tech brain drain But now Lisbon aims to copy Berlin’ success Government co-financing scheme draws big interest
small, data is still scanty. However, there are signs of rapid growth, albeit from a low base, including plans to create office spaces for up to 3,500 tech workers. Also, when the government offered to co-finance start-ups this summer, venture capitalists pledged over 500 million euros (US$550 million). The government is still evaluating the proposals and it is unclear how many will bear fruit, but the sum far surpassed official expectations.
Running for their lives
Portugal did not lack the expertise and energy to create tech start-ups, but the capital shortage meant that talent had to head abroad in search of funding. Britain benefited from the brain drain. In 2009, Portuguese entrepreneur Jose Neves founded online luxury clothing retailer Farfetch in London; today it is Britain’s second-most valuable start-up, according to research firm CB Insights. Another company - Seedrs - which
was co-founded by Portuguese entrepreneur Carlos Silva in the British capital, is Europe’s largest online crowdfunding firm. However, the outflow is beginning to bring benefits: both Farfetch and Seedrs now have large operations back in Portugal. Investors willing to take the plunge are finding they can hire talented engineers who speak English, the language of tech start-ups, at relatively low cost. Wages in Lisbon are roughly a third of those in Berlin, which itself offered lower costs than wealthier German cities to the west such as Munich or Hamburg. According to Eurostat figures, the estimated hourly labour cost in Portugal in 2015 was 13.2 euros, compared with a European Union average of 25 euros and 32.2 euros in Germany. The same goes for accommodating the bright young people. Monthly rents for prime Lisbon offices averaged 18.50 euros per square metre in 2014, compared with 66 euros in Paris, according to real estate firm Cushman & Wakefield.
Lower burn rate
This is starting to show up in official data such as new company registrations in Portugal, which rose sharply
Hopes pinned on Europe’s biggest tech conference
One in two jobs
There are no estimates yet of how big the impact of start-ups could be on Portugal’s economy, but the Socialist government is throwing resources at them now for a simple reason: they create masses of jobs. For instance, about half of Farfetch’s 1,000 staff work in Portugal; its current job listings have 140 openings, 81 of which are at home. “We want to embrace start-ups, not just because one in two new jobs now being created are by companies younger than five years, but because they bring innovation to traditional sectors of the economy,” said industry secretary Joao Vasconcelos, who previously headed one of Lisbon’s main incubators. Vasconcelos said his priority is to help start-ups to thrive by attracting foreign funding through incentives and the right regulation. Government measures include tax breaks of up to 100,000 euros for investments in the sector. Reuters
Already Lisbon has earned the right to host Europe’s biggest tech conference, Web Summit, this month. Now hopes are high that this will accelerate investment in new ventures, and reverse a brain drain of young entrepreneurs following Portugal’s deepest economic slump in 40 years. Lisbon is a small speck in the universe of Europe’s start-up giants like London and Berlin, not least due to an acute shortage of venture capital in the Portuguese economy, which remains slow growing and heavily indebted five years after the EU/IMF bailout. “Lisbon is exciting,” said German investor Simon Schaefer, who has decided to build office space for 400 tech workers in the city, hoping to replicate a similar project he founded in Berlin in 2012. Because the start-up sector is so new and most companies remain
Job market
to 35,555 last year from 29,216 in 2012. Lisbon has jumped on the trend by launching a number of incubators and business accelerators, operations that foster new companies. Lisbon’s easygoing life-style and historic charm, which has ignited a tourist boom, have added to the mix. A study by the European Start-up Initiative, a non-profit organisation, found this year that Lisbon is Europe’s fifth most attractive start-up hub, after Berlin, London, Amsterdam and Barcelona. The findings were based on responses from 689 start-up founders who were asked where they would move to found their companies, if they could start again. About 500 companies have gone through training programmes at Beta-i, a Lisbon-based business accelerator, in the past few years. Those new firms received a total of 60 million euros in funding. A Microsoft-backed study identified 40 Portuguese ‘scale ups’ companies that have raised at least 1 million euros in funding - over the past five years. They raised a total of 166 million euros, although this is far behind neighbouring Spain which had 106 scaleups that raised US$1.6 billion and Germany’s 208 companies that attracted US$6.6 billion in investment.
Investment
Stock exchanges
Vietnam needs Everbright to establish Mainland’s listed firms 1 million IT workers by 2020 China’s first PPP sports fund show remarkable turnarounds Vietnam needs approximately 1 million information technology (IT) workers by 2020, according to the national workforce master plan yesterday. The country is facing a serious shortage of high-quality IT workers, which poses challenges to the country as digitalization, the fourth scientific revolution, is taking place worldwide. According to a popular local recruitment website Vietnamworks, the demand for IT workers increases 47 per cent annually but Vietnam meets only eight per cent of demand. Nguyen Thanh Tuyen, Deputy Director of the Ministry of Information and Communications’ Information Technology Department, said Vietnamese students can quickly grasp IT but lack soft skills and teamwork ability. Most software companies are small and medium sized without professional marketing staff so products are often distributed via foreign partners, Tuyen said. A survey of more than 50 IT firms carried out by the Hanoi University of Science and Technology’s Faculty of IT showed that some 70 per cent of IT graduates had good grades. However the IT workforce is weak in English proficiency, selfstudy and negotiation skills. Xinhua
Everbright Securities Co Ltd said its investment unit would set up China’s first sports-focused publicprivate partnership fund, hoping to capitalise on what is expected to be rapid growth in the nation’s sports market. The fund, to be established with Zhejiang Kunlun Holding Group, will start with an initial cash injection of 10 billion yuan (US$1.5 billion). Projects that the fund may consider investing in include infrastructure projects for the Beijing 2022 Winter Games Olympics, the construction of pavilions for the 2022 Asian Games in Hangzhou and a sports park in Beijing, Everbright said. China is keen to see its sports market grow to be worth more than 5 trillion yuan (US$738 bi l l i o n ) b y 2025 , u p f r o m a n esti m at e d 1.5 trillion yuan currently. On Friday, Beijing released guidelines to speed up the development of the country’s fitness and leisure industry. In May, Everbright Securities and internet entertainment company Beijing Baofeng Technology bought a majority stake in Italianowned MP & Silva, valuing the sports media rights firm at over $1 billion. Reuters
Almost 3,000 companies listed on the Shanghai and Shenzhen stock exchanges have posted their financial performances for the first nine months, with total net profits up 1.9 per cent year on year, according to the “Shanghai Securities News.” Among them, 2,622 made a total net profit of RMB2.1 trillion (US$310 billion) in the first three quarters, outperforming the same period of 2015, led by the banking, insurance and property sectors. Steelmakers are particularly noteworthy. Only six of the 35 listed reported losses in the period, compared with 22 last year. Total profits of RMB9.3 billion compare very favourably with a loss of RMB20 billion in the same period last year. Gansu Jiu Steel Group Hongxing Iron & Steel Co. Ltd., the biggest loser in the first three quarters of 2015, made a net profit of RMB415 million this year. The company attributed the turnaround to adapting to new market conditions, rising steel prices and improved productivity and efficiency. Emerging sectors are making even bigger strides. Listed firms on the small-and-medium-sized enterprises board made 21.3 per cent more than last year, while profits on the Nasdaq-style ChiNext rose 44.1 per cent. Xinhua