Macau Legend renews MOP643mln in service contracts Gaming Page 7
Wednesday, November 9 2016 Year V Nr. 1169 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong
www.macaubusinessdaily.com
ISO
Pearl Horizon
Telecom
Finance
Customs
MSAR introduces new anti-bribery management systems Page 3
Gov’t lawsuits with Polytex still on-going Page 3
CK Hutchison completes Italian merger deal Page 4
Banks in Hong Kong face tougher environment Pages 9 & 15
Hengqin announces new facilitating policies for foreigners Page 2
‘In God We Trust’ US Election
Today is the day. The day we find out who will take over the Oval Office - Clinton or Trump? The results of the U.S. Election will be available at around noontime at the earliest. Business Daily talks to several Americans living in Macau, who share their perspectives on the election, in particular, their viewpoints on how the election results will affect the country’s relationship with China. Meanwhile, the Asian region sees its relationship with the U.S. changing, no matter which candidate wins. Pages 5 & 16
High-roller headaches
The VIP operations in the local gaming industry remain the biggest challenge, said the CEO of MGM China, Grant Bowie, during the company’s conference call on its Q3 results. MGM Cotai is not likely to target high-rollers when it opens its doors, he says, as it may only “dilute the market further”.
New rules for financial leasing on the way Finance The Monetary Authority of Macau says it will amend the current laws relating to financial leasing companies, in order to further develop the industry. The amendments will define companies in the field as financial institutions rather than the current credit institutions. Page 2
Chinese exports and imports shrink
Gaming Page 6
HK Hang Seng Index November 8, 2016
20,564.17 +108.07 (+0.47%) Worst Performers
China Mengniu Dairy Co Ltd
+2.82%
China Resources Land Ltd
+1.67%
China Shenhua Energy Co
-2.30%
Cathay Pacific Airways Ltd
-0.38%
Li & Fung Ltd
+1.87%
Sun Hung Kai Properties Ltd
+1.63%
Bank of East Asia Ltd/The
-1.45%
China Petroleum & Chemical
-0.35%
Belle International Holdings
+1.77%
Galaxy Entertainment Group
+1.54%
AAC Technologies Holdings
-0.83%
China Unicom Hong Kong
-0.33%
Hengan International Group
+1.70%
China Merchants Port Hold-
+1.50%
Cheung Kong Infrastructure
-0.61%
Henderson Land Develop-
-0.23%
Wharf Holdings Ltd/The
+1.69%
China Overseas Land &
+1.48%
CNOOC Ltd
-0.51%
Swire Pacific Ltd
-0.19%
17° 23° 18° 20° 22° 23° 24° 26° 23° 27° Today
Source: Bloomberg
Best Performers
THU
FRI
I SSN 2226-8294
SAT
SUN
Source: AccuWeather
Trade China’s exports in yuan-denominated terms fell by 3.2 pct y-o-y in October, while imports gained 3.2 pct, customs data shows. Machinery and electronic products, as well as goods in labour-intensive sectors like textiles and toys, posted lower growth in the first ten months, while private firms still lead the country’s exports. Page 8
2 Business Daily Wednesday, November 9 2016
Macau Finance
AMCM to amend financial leasing regulations The monetary authority said it is working on the amendments to the current laws relating to financial leasing companies in order to better develop the industry Cecilia U cecilia.u@macaubusinessdaily.com
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he Monetary Authority of Macau is drafting the amendments to the current regulations regarding financial leasing companies, according to its president Anselmo Teng Lin Seng’s reply to legislator Ho Ion Sang’s written enquiry. According to the AMCM president, the amendments to the current laws will include categorizing financial leasing companies as other financial institutions rather than credit institutions, as in the current regulations. Legislator Ho pointed out in his interpellation that the government’s current legal support for the development of financial leasing and asset management industries in the MSAR is not sufficient. He added that current policies are incapable of providing the best environment for financial development, in the wake of introducing featured financial industries in an attempt to reduce the dominance of the gaming industry in the economy. In terms of the development of the asset and wealth management industry, the AMCM president explained that local banks have been encouraged to provide wealth management services for overseas Chinese. The official added that the MSAR government is currently striving to
develop financial industries following policies announced by the central government, such as allowing Renminbi-related financial products to be provided by local banks and
promoting the distribution of Renminbi investment tools in the MSAR.
Macau as a platform
The legislator also queried how the MSAR government would make use of its role as a Sino-Luso platform to develop the city’s financial industries by importing suitable products and services. The AMCM head replied that, in
terms of financial leasing, the government will continue to support and encourage financial institutions to co-operate with local and overseas companies. Moreover, in order to encourage local financial participants to take part in national policy projects, the government is seeking co-operation with Guangdong’s financial institutions, the president said.
Anselmo Teng Lin Seng, President of the Monetary Authority of Macau
Housing
Customs
Online license application for realtors available early-2017
Hengqin opens gate to foreigners
The Housing Bureau is to implement an online service for new real estate agents and brokers to apply for their licenses early next year, the bureau announced yesterday. According to the head of the Bureau’s license and supervision division, Cheong Sek Lam, the new services are to be part of the policies for building e-government as stated in the city’s five year plan. “The introduction of the online s e rvi c es ai m s t o p r o vi d e a n alternative way for the application
[of licenses],” Mr. Cheong said during a press briefing yesterday. “People who don’t often use computers can still approach the bureau for applications, but we believe that more and more people will be using the online services”. In principal, the online service omits the steps of submitting the application form to the Bureau in person and paying the application fee to the bank, he stated, adding that other online services such as changing address and declaration of labour relations will also be provided at a later date. Mr. Cheong also remarked that the time to approve a broker’s application will take around 10 working days, while those for agents will take around 20 working days. Aside from online application services, Mr. Cheong revealed that the official website of the Bureau will also provide information such as the current number of brokers and agents in the city, adding that information will be updated once a month. According to the division head, there were 4,562 brokers and 1,456 agents approved as of October 31. Meanwhile, for the month of October, 95 brokers and 26 agents had been approved licenses by the Bureau. C.U.
The District Management Committee of Hengqin New Area has introduced 16 measures to improve the efficiency of border-crossings for foreigners, in addition to the establishment of the Hengqin Taxation Facilitation Index, local broadcaster TDM Radio reported yesterday. The 16 measures include improvements in the processes for visa and residence applications, which aim to attract more foreign investors and experts to invest in Hengqin. In addition, one of the measures allows senior management personnel from Hong Kong and Macau to hire
foreign domestic helpers to work on the Island. Meanwhile, the deputy director general of the Guangdong Provincial Local Taxation Bureau, Ou Weidong, said the establishment of the taxation index could improve the operations of taxation in the Mainland Chinese city. He added that the index is expected to assist in the creation of a better business environment in Hengqin. The index will cover 22 indicators such as the efficiency of taxation and the level of international information technology for taxation. C.U.
Business Daily Wednesday, November 9 2016 3
Macau Public administration
New ‘central recruitment’ attracts recruitment mechanism implemented in 21,368 candidates for 183 positions July, which is divided into two sections: The government’s recent opening of 183 senior-officer vacancies has attracted a total of 21,368 applicants, with the application period ending yesterday, according to an announcement by the Public Administration and Civil Service Bureau (SAFP). The hiring process adopted the city’s new central
a general ability test and departmental examinations. SAFP said yesterday that the general ability test is expected to take place during the first quarter of next year. All vacancies are offering a basic salary of MOP34,830 (US$4,354) based on the current salary point for public servants at MOP81.
ISO
CPTTM introduces new anti-bribery management system guidelines The new systems are expected to help ensure the neutrality of responsible entities Cecilia U cecilia.u@macaubusinessdaily.com
The Macau Productivity and Technology Transfer Center (CPTTM) introduced a new ISO37001 Anti-Bribery Management Systems and Certification Scheme, in a talk held yesterday
for management personnel of organisations and institutions in the city. According to the official website of the International Organization for Standardization, ISO 37001 ‘specifies requirements and provides guidance for establishing, implementing, maintaining, reviewing and
improving an anti-bribery management system’. The guest speaker, Edmund Fung, the Assistant General Manager of Hong Kong Quality Assurance Agency, explained that although the new management systems are similar to the old ones, they include the additional set up of an individual department or position in an entity, to deal with matters related to bribery or corruption.
Politics
Gov’t: lawsuits with Polytex still on-going The Office for the Secretary for Administration and Justice said the government has not been able to make any decisions related to the land plot designated for the Pearl Horizon residential project, since its lawsuits with the developer are still on-going. The statement from the Office was released yesterday after the city’s
Court of Final Appeal turned down an appeal made by the developer, Polytex Corporation Ltd, against the government’s reclamation of the land plot last week. Nevertheless, according to the Office, the latest ruling from the top court was only directed at the developer’s appeal on the preservative measures in the dispatch, not the
effectiveness of the whole dispatch. ‘This part of judicial appeal is still pending by local courts,’ the Office said, noting the government would only be able to carry out measures to deal with the current disputes after local courts have made a final ruling. At the beginning of the year, the government declared Polytex’s land grant for the Pearl Horizon plot invalid, despite some 3,020 units of the project having already been sold via off-plan sales.
“The reason for creating an individual entity to deal with [bribery] matters in a company is the assurance of neutrality,” said Mr. Fung. “The responsible entity is required to report to the highest management personnel of the company.” Mr. Fung said that the establishment of an individual entity would prevent intervention or influence from other companies or institutions over the results of an investigation. Moreover, the new anti-bribery management systems emphasise the training or education of employees relating to bribery matters, said Mr. Fung. Applicants are also requested to declare whether they have been involved in bribery cases in the past, before entering a company. According to Mr. Fung, risk-based thinking is one of the key components of the Anti-Bribery Management Systems, which monitors departments that are responsible for making decisions, in particular those related to money, that are considered to have a higher risk of bribery and corruption.
4 Business Daily Wednesday, November 9 2016
Macau Opinion
Telecom
CK Hutchison completes merger with VimpelCom
José I. Duarte* Virtue and law The Commission Against Corruption (CCAC) has issued a new report. It concerns the activities of the Transport Bureau (DSAT) and its practices in relation to the concessions for public car parking areas. A couple of conclusions stand out. First, the concession contracts did not conform to the applicable regulations. No matter how much one tries to put it in a more or less diplomatic way, the plain way is simple: CCAC is saying the type of contracts signed with the concessionaires is illegal. It is not for us to delve into the legal technicalities here. But we have to suppose there were several instances of such contracts, scheduled over a period. The obvious question pops up: nobody noticed? Aren’t there, inside and outside the department, mechanisms to certify that its actions, in general, and contracts, in particular, conform to the norms? Legal advisers at various administrative layers were not consulted or aware of those issues? There were opposing views or proposals that were ignored or discarded? Inspection, compliance, monitoring and auditing mechanisms, all failed? It defies imagination and suggests troubles with the integrity of the services and their working procedures that go well beyond some less than legal contracts on a somewhat minor matter. Second, there is no revenue control. Let us put this straight. Most contracts, we are told, assign the gross revenue collected at the parking lots to the administration. The income from each month must be conveyed to the public coffers before the tenth day of the immediately following month. Well, we know better now. One, there is no mechanism to control the total amount effectively collected by the concessionaires. That is, it is what they declare it to be. Second, it seems relatively common that payments are delayed by months. No consequences, not a cause for big worries, it appears. Moneywise, this state of affairs possibly reflects both a touching faith in human nature and a benevolent disposition of the administration; as public finance procedures, however, they are certainly beyond belief. The tale told here is, in many ways, familiar. The outcome of it is likely to also be the one we became accustomed to in the case of previous reports. A final thought yet: should it be surprising that last year, corruption charges were brought against on a couple of DSAT staff members, as they apparently received millions for giving a nudge in the assignment of parking contracts? *economist and permanent contributor to this newspaper.
H
ong K o n g - b a s e d conglomerate CK H u tchi s o n H o l di n gs Ltd and Amsterdambased VimpelCom Ltd. have completed the merger of their telecommunications operations in Italy, according to a press release from the company on Monday. The deal suggests two Italian telecom operators, namely, 3 Italia and WIND, are operating formally under the joint ownership of CK Hutchison and VimpelCom. ‘Not only will the transaction
create a strong new competitor in the Italian market, it will also provide significant additional investment to drive development of Italy’s digital infrastructure’, said Canning Fok, the co-managing director of CK Hutchison, in the press release. The parties added in the announcement that they would create a new telecom operator in Italy through the combined business, which is expected to serve over 31 million mobile customers and 2.7 million fixed-line customers. Jean-Yves Charlier, the chief
executive of VimpelCom, believes the merger will provide Italian customers with ‘real benefits in terms of call quality and strengthened data services as soon as 2017, as the two companies integrate their networks and combine their engineering prowess’. CK Hutchison also provides telecommunication and mobile services in Macau through Hutchison Telephone (Macau) Company Limited, which was granted a license by the local government to operate 4G mobile communication (LTE) network services in the MSAR. N.M.
Real estate
Yuexiu Group obtains land plot in Nansha Yuexiu Property Company Limited has purchased a land plot for commercial and residential development in Nansha, Guanzghou, it informed the Hong Kong Stock Exchange on Monday. According to the filing, Yuexiu Property Company acquired
Guangzhou Zhongjing Huifu Real Estate Development, the company that owned the development rights over the land plot, from its controlling shareholder Guangzhou Yue Xiu Holdings Ltd for RMB2.6 billion (MOP3.1 billion/US$387.5 million). The land plot occupies a total gross
Real estate
Logan property contracted sales jump 8.7 pct in October Chinese property developer group Logan Property Holdings Company Limited reached RMB3 billion (MOP3.5 billion/US$443.8 million) in contracted sales in October, 2016, an 8.7 per cent year-on-year increase from the same period of last year, according to a company filing with the Hong Kong Stock Exchange. In October, the group sold 247,000 square metres of gross floor area via contracted sales, with an average selling price of around RMB11,868. For the first ten months of this year, the group’s contracted sales reached RMB24.6 billion, a notable increase of 53.4 per cent year-onyear, with nearly two million square metres of contracted saleable gross floor area. The group’s business focuses on the Pearl River Delta Region, in particular, Shenzhen. It also operates in Zhuhai through its subsidiaries Zhuhai Logan Property Development Co, Ltd. and Zhuhai Bojun Property Development Co, Ltd. Last year, the group acquired a 15,876 square-metre land plot in Zhuhai for RMB978 million, according to a company release from last year. The land parcel is located in
Gongbei, near the Macau Border Gate and the entryway for the future Hong Kong-Zhuhai-Macau Bridge, and is destined for a residential project named Jiulong Garden Bay. N.M.
floor area of approximately 929,000 square metres and will be used for property development that include hotels, hospitals and schools. Yuexiu Property Company is one of the four listed companies of parent company Yuexiu Group, which operates in finance and securities, real estate, transport and infrastructure. The group operates in the real estate sector of the MSAR via a subsidiary, Yuexiu Property (Macau) Company Limited – which appeared in the Panama Papers leaks as having been registered in the British Virgin Islands in October,1992 under its former name of Guangzhou Investment Macau Property Company Limited. In addition, the group operates a branch of Chong Hing Bank Limited in the MSAR, in which it acquired a 75 per cent equity interest, purchased in 2014. N.M.
Business Daily Wednesday, November 9 2016 5
Macau
US Election
May you live in interesting times Americans in Macau share with Business Daily their viewpoint on the U.S. election, the results of which will be known today Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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he mood was sombre leading into this year’s United States presidential election, with comments such as that of Bloomberg’s Nick Wadhams querying whether to: “Preserve the U.S. political establishment or blow it up?” and CNN’s “End in Sight” reflecting on an election which has been, arguably, one of the most watched by both media, United States citizens and those in shock and excitement across the world. As the poll results come in today, Business Daily has asked Americans in Macau their viewpoints on what impact this has had on the public’s perception of the United States and its voters, and their opinions on the candidates: Hillary Clinton and Donald Trump.
An inconvenient truth
“The current U.S. political landscape, as is the case with many countries in Europe, Asia and elsewhere, is very much driven by what some would term populism, and others would call anti-establishment sentiments,” says the Chairman of the American Chamber of Commerce (AMCHAM) in Macau, Paul Tse. “Asians, Americans, Europeans and people everywhere are being forced to take a good look at themselves and at their neighbours and draw new perceptions of themselves and each other,” says Mr. Tse, reflecting on a situation of rebalancing that has become increasingly predominant over the course of this election. Unfortunately, many of the perceptions drawn are not an improvement on the status quo. “Given the behaviour of both major candidates and the manner in which each has run his or her respective campaigns, as well as the sometimes regrettable behaviour of the most enthusiastic supporters of each candidate, it is difficult for the U.S. to serve effectively as an international model for democratic processes, clean governance, or even peaceful transfer of power,” states Professor Tim Simpson, Associate Dean of the Faculty of Social Sciences at the University of Macau. These behaviours, particularly by Donald Trump, have echoed across the globe. “I believe the incredible support for someone as racist and bigoted as Trump, and the constant investigations into Hillary, have caused the
world view of America as a whole to decline significantly,” states Christopher Marion, a lighting and systems designer for show and architectural lighting design.
Candidates and ballots
“We are fortunate to vote for who we choose without fear of retribution. I am also grateful that my country allows me to vote from abroad so that my vote from Macau will count,” says Ashley Sutherland-Winch, a marketing and public relations consultant and contributor to Business Daily. Although votes can be e-mailed in, services such as those provided by the United States Consulate for Hong Kong and Macau still helped voters make their mark in this election. “In the last several months leading up to Election Day, the Consulate mailed back or faxed voter registration applications and ballots to state, local, and county election offices throughout the United States,” says Darragh Paradiso, a spokesperson for the U.S. Consulate General. The effect of these ballots, once counted, is to declare a clear winner, however there is still a chance that the outcome will be challenged by the losing party. “I think the final outcome may be a relatively close race among the two major candidates,” says Professor Simpson, “and I fear that regardless of how clear the victory may be for one candidate over the other, there may be a significant number of people who are not willing to accept the result.” And no matter the outcome, a contested election is not good for the country. “One can only hope that all Americans will rally around and support the new U.S. President,” states Mr. Tse.
Relationship with China
Regardless of the result, a shift will certainly come in terms of policy decisions, with concerns about trade protectionism, in particular given that both Trump and Clinton oppose the Trans-Pacific Partnership. However, regarding foreign policy, no matter who is in the Oval Office, hopes are still that the U.S. will maintain its ties with foreign powers and superpowers, such as China. “It would be inappropriate to speculate on the policy initiatives of any future administration, but it’s worth noting that there is an American tradition of non-partisanship in foreign policy,” says Ms. Paradiso from the Consulate General.
Professor Simpson also notes that foreign relations aren’t solely based on the actions of a country’s leader. “The U.S. and China will find a way to work together productively, because it is in the interests of both countries to do so. Regardless of who is president, there will still be a mid-level political infrastructure comprised of reasonable and experienced people who will know how to handle policy and international relations,” says the Professor. However, not everyone is so certain. “I think the two candidates have very different views on China. Trump is obviously very ingrained in China as he manufactures things there and has many business dealings with others who manufacture there,” says Mr. Marion. “I believe with Clinton we will see a more ‘put the foot down’ style of approach, but with an obvious understanding of the political and socioeconomic consequences of her actions.” Clinton’s approach to China could largely follow that of President Obama, although with some notable changes, notes Luke Lienau, a freelance English tutor and consultant living in the MSAR. “Though it is likely she will continue President Obama’s “Pivot to Asia”, I can’t imagine that there won’t be some significant disagreements and controversies particularly as China continues to become more assertive in the region,” states Mr. Lienau. In regards to a potential Trump policy towards China, Lienau expresses little faith, commenting: “He lacks the patience and the intelligence to work with other countries, particularly China.”
Merits
While Donald Trump’s lack of experience in the political field may make him appealing as an underdog-type figure to some voters, opinions on
Hillary Clinton expressed to Business Daily had a common theme. “Since Hillary Clinton is, by any measure, quite experienced in government and the international arena, she would bring that considerable experience to the presidency,” says Professor Simpson, a sentiment echoed by Christopher Marion, who notes: “Clinton is a long-time politician with a lot of experience in the game”. “Clinton […] does have the experience of working side by side with President Obama and she understands the office and what is required,” notes Ms. Sutherland-Winch, pointing out however that difficulties may arise from Clinton being a Democrat, given the make-up of the Senate and House of Representatives. This is a sentiment also noted by Luke Lienau. “Just like Bill (Clinton) did in the ‘90’s, she should be able to garner better respect and hopefully reach out as a cooperative leader on the international stage. However, at home I feel she may have a harder job, particularly if the Senate and the House remain in control of the Republican Party,” he says. A Trump presidency might not bring with it political background, but rather something else, notes Professor Simpson, stating: “given his lack of experience in government it is difficult to know what he might bring to the presidency, but he would surely attract a lot of global attention.” Global attention that doesn’t necessarily help the country’s citizens outside of its borders, notes Ms. Sutherland-Winch, stating: “Trump does not bring peace to many Americans who live abroad.” A sentiment also noted by Mr. Leinau, who states: “As for Mr. Trump, there are no positive qualities I can associate with him in this office.” Polling booths closed this morning and election results will be available today.
6 Business Daily Wednesday, November 9 2016
Macau Gaming
Grant Bowie: “VIP remains the greatest challenge”
The CEO of MGM China indicates the biggest challenge in the local gaming industry is still related to the junket businesses, noting the company will not open VIP rooms in its MGM Cotai just “for the sake of opening rooms”. Kam Leong kamleong@macaubusinessdaily.com
C
hief Executive Officer of MGM China Holdings Ltd, Grant Bowie, said that opening the company’s new Cotai property with junket operators would not “be a strong strategy” given that the junket
business remains “the greatest challenge” in the city. “I guess the greatest challenge for us, for all of us in the market at the moment, is we’re still not seeing really any growth in the junket business,” said the company executive during a conference call by MGM Resorts on the group’s third quarter results on Monday.
“So simply to open junket rooms and dilute the market further and further doesn’t seem to be a very strong strategy,” Mr. Bowie stated. For the three months ended September 30, MGM China reported US$150 million (MOP1.2 billion) in adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA), a surge of 17 per cent year-on-year, although its total net revenue for the period fell by six per cent year-on-year to some US$500 million. In particular, the company saw strong growth on its mass gaming floors, with turnover soaring by 22.2 per cent year-on-year to HK$2.1 billion, while VIP turnover decreased by 14.4 per cent year-onyear to HK$68.3 billion, according to the company’s filing with Hong Kong Stock Exchange on Monday evening. Mr. Bowie added in the conference call that the company is still in talks with junket operators since “it’s best that we build the momentum of the property and then we bring those participants into the business”. But one premise is to make sure the VIP promoters are “always profitable” rather than just opening VIP rooms “for the sake of opening rooms”. “We are working with our existing operators that we’re very comfortable with in Macau, and we want to continue to work with them in our peninsula property,” the executive added.
The opening of the HK$24 billion-MGM Cotai has been pushed back to the second quarter of next year, according to the CEO’s remarks on the quarterly results in a press release of the company. “We want to focus on the segments where we can drive traffic ourselves,” Mr. Bowie said during the conference call. “So the mass market is something which we have great strength in and we want to look at that, as well as opportunities that we may have for our other in-house VIP traffic”.
Analysts: Q3 results “encouraging”
Meanwhile, analysts at Wells Fargo remarked that MGM China’s third quarter results are “encouraging”. However, they added that it’s still uncertain how the company’s Cotai project will play out. ‘We still think it’s early to sound the all clear on supply growth, as [Wynn] Palace and [the] Parisian [Macao] will be ramping up when MGM Cotai opens later this year,’ the brokerage wrote, ‘and it remains to be seen whether the MGM and Wynn locations will remain challenged into 2017’. Nevertheless, analysts from J.P. Morgan reckon the potential of MGM China could be ‘unleashed’ following the opening of its new property next year. ‘MGM’s room count and footprint will nearly triple with MGM Cotai opening in June 2017, which would be the biggest incremental capacity growth among the six operators,’ the firm’s analysts, lead by DS Kim, wrote. ‘This, underpinned by strong execution and long-awaited access to Cotai, should bring disproportionately high and very profitable growth to the company,’ the note reads.
Business Daily Wednesday, November 9 2016 7
macau Contract extension
Investing in the future Macau Legend renews MOP643mln in service contracts for the next three years Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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ith new hospitality and, tentatively, gaming properties coming online, no fixed date on the sale of the Landmark Hotel and an expected increase in services relating to tourism and hospitality, Macau Legend has renewed a number of contracts for a further three years, according to a company filing on the Hong Kong Stock Exchange. The agreements in question relate to the Legendale Beijing Hotel property, Amigo Travel Service company, Macau Landmark building and the provision of construction services for the group’s local operations. The renewal comes amidst a predicted upturn in the market as well as new openings by the group. ‘The Company anticipates the actual transaction amounts […] will be an increasing trend year by year in view of the new hotels and entertainment facilities of the Group’.
was initially scheduled to complete construction in the second quarter, a feat yet to be accomplished.
Ready for the future
Despite noting that it has yet to receive approval for gaming elements in its new Legend Palace and Legendale Hotel properties - a fact confirmed to Business Daily by the Gaming Inspection and Coordination Bureau (DICJ) last Friday – the company is still positive enough to renew the contracts with annual caps amounting to MOP634.3 million (US$79.3 million) over the three-year period, according to Business Daily calculations. The group notes that its caps have yet to be surpassed, and they do not expect this to happen during the three-year period. Interestingly, even surpassing the MOP193.5 million cap allocated for construction and renovation works over the next three years, are the the cleaning, laundry and fruit and flower services. These receive the lion’s share of the tentative budget, at 59.5
per cent of the total, amounting to MOP377.6 million. Overall the prediction is for the group’s operations in Macau to continue ramping up, with the total cap for the four operations to hit MOP179.4 million in 2017, MOP198.3 million in 2018 and MOP256.6 million in 2019.
Landmark
The recipient of the smallest budget is the group’s Legendale Beijing Hotel and event services contract, which caps out at MOP7.1 million over the threeyear period. This is followed by the rental contract agreement for ‘various offices and premises’ at the Landmark, where the group is headquartered, capped at MOP9 million over the threeyear period. Over the first nine months of this year, the group paid MOP1.85 million under the rental contract to Landmark Management, a company owned by David Chow - CEO, Lam Fong Ngo vice chairman and an executive Director, and Li Chi Keung – a substantial shareholder of Macau Legend. No mention was made as to when the sale of the Landmark would be completed.
Down before up
However, this comes in contrast to the impact the current environment has had on the group’s operations: ‘the economic situation in China and Macau, the increase in new hotel and casino capacity in Macau and the changing profile of the visitors to Macau have negatively impacted the gaming and non-gaming business of the Group,’ notes the release. This is coupled with ‘a delay in the redevelopment of Macau Fisherman’s Wharf’, whose 229-room Legend Palace Hotel
Gaming
Evolve to survive The vice chairman of the Macau Gaming Information Association believes China’s anti-corruption policies and the MSAR’s ban on proxy betting have forced local junkets to evolve into other gaming markets Nelson Moura nelson.moura@macaubusinessdaily.com
Junket operators have had to extend their operations outside Macau in order to grow their profits, amid China’s antigraft campaign and the MSAR government’s ban on proxy betting, said the Vice Chairman of Macau Gaming Information Association (MGIA), Tony Tong. In his interview with gaming news website CalvinEyre, the vice chairman of the association said local junket operators’ revenues have suffered a
considerable impact from the crackdown on corruption initiated by Chinese President Xi Jinping in 2013. Mr. Tong claimed the campaign has reduced local VIP revenues by more than half and forced junket operators to search for alternative methods to generate profits. The ban on proxy betting implemented by the MSAR’s gaming regulator in May this year was another factor driving local junkets to look for overseas opportunities, the MGIA vice chairman added.
New life for “MGS Entertainment Show - Creativity and Innovation”
“If [junkets] sit still in Macau they will see declining revenues, but more aggressive junkets have the financial resources and they want to grow so they are going to Jeju Island, Saipan, and Southeast Asia,” said Mr. Tong as quoted by the media outlet. From the perspective of Mr. Tong, local junkets can take advantage of lower taxes or different betting systems such as telephone betting offered in other locations such as the Philippines, Vietnam, Cambodia, Australia, New Zealand or in Europe, to gain higher commissions or higher rebates for customers. As an example, he mentioned the official license to operate gaming business on the Island of Saipan, acquired by Hong Kong-listed Imperial Pacific International Holdings Ltd, has allowed the company to diversify its business. Meanwhile, Mr. Tong believes that Macau currently does not possess the infrastructure or related visa regulations to accommodate the increasing number of Chinese travelling abroad, with the number reaching 120 million last year. “Macau visitor visas are restricted to around 30 million per year, so that number is not going to move until the government finishes its infrastructure projects such as the Light Rail Train and the Hong Kong–Zhuhai–Macau Bridge,” Mr. Tong stated to CalvinEyre.
Jay Chun MGS Entertainment Show 2016 organiser says they have rebranded the event and injected more high-tech elements in order to boost the development of the industry.
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he MGS Entertainment Show 2016 will take place next week from November 15 to 17 at The Venetian Macao, alongside the Macau Entertainment Summit. Jay Chun, Chairman of Macau Gaming Equipment Manufacturers Association, the main the organiser of the event, says they’ve made an effort to rebrand the event. “This year, we are taking care of rebranding the name: we changed ‘Macao Gaming Show’ to ‘MGS Entertainment Show – Creativity and Innovation’,” says Mr. Chun. “We want to bring new technology to the MGS Entertainment Show. We want this show, in the future, to provide a new product launch place for companies. Also, we’ve created another ‘Macao Pavilion’ and there are a lot of local participants.” One of the new features of this year’s edition is an increasing focus on entertainment products, says Mr. Chun. The effort is in line with the initiative to make the event more family-friendly, as well as to make Macau a destination more attractive to the mass market. Social games will also be another highlight. “For example, we are bringing many movie productions this year. Certainly, some of the technologies are casinorelated, but some of them are just social games,” says Mr. Chun. “As technology goes forward, it’s getting hard to define which is casino industry or social gaming industry, because the same technology can have different applications. In the past years, the social gaming market has become much bigger than land based casinos, and I think many companies will be focusing on the social gaming market.”
What to expect: MGS Entertainment Show 2016 and the Summit
Th e att e n d a n c e o f r eg u l at o rs a n d government officials at the event is one of the highlights that the organiser attaches great importance to. Director of the Macao Gaming Inspection and Coordination Bureau, Paulo Martins Chan, will join the MGS Entertainment Summit 2016 and deliver his keynote speech, entitled “Future Development of Macao’s Gaming Industry: Healthily and Orderly, with Integrity and Quality”, on the first day of the three-day event. “Mr. Paulo Chan will tell us about the market as well as the future of the Macau gaming industry. These talks are very important for all the participants in this market. They will be able to understand the trends and the government’s plans for this market. And we also have industry analysts coming to this summit,” says Mr. Chun, “No matter whether they are investors, entrepreneurs or industry participants, they will all be able to see the global trends and how the gaming industry is growing; these are all very important for the companies in sketching their strategies,” he adds. “Therefore, the major function of the summit is to inform decision makers about what the trends of the global industry are.”
8 Business Daily Wednesday, November 9 2016
greater China
Weak demand
Trade figures fall more than expected In yuan-denominated terms, the trade numbers weren’t as bad, indicating that the currency’s slide to six-year lows has provided some support for exporters Elias Glenn and Kevin Yao
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hina’ s e x p o r t s a n d imports fell more than expected in October, with weak domestic and global demand adding to doubts that a pick-up in economic activity in the world’s largest trading nation can be sustained. October exports fell 7.3 per cent from a year earlier, while imports shrank 1.4 per cent, official data showed yesterday, raising fears that a broader recovery seen in recent months could falter. While recent data had suggested the world’s second-largest economy was steadying, analysts have warned that a property boom which has generated a significant share of the growth may be peaking, dampening demand for building materials from cement to steel. Indeed, China’s imports of iron ore, crude oil, coal and copper all fell in October, after its robust demand drove global prices of many major commodities higher this year. Though some analysts argued
the decline may be seasonal, data from industry consultancy Custeel. com suggested steel mills have been cutting output and even starting maintenance work earlier than usual as soaring costs for raw materials such as iron ore and coal squeeze profits. Analysts polled by Reuters had expected October exports to have fallen 6 per cent from a year earlier, compared to a 10 per cent contraction in September. Imports had been expected to drop 1 per cent, after falling 1.9 per cent in September. “Our conclusion is that external demand remains sluggish but it has not worsened significantly. Although both exports and imports have fallen short of expectations, they have improved on a year-on-year basis,” economists at ANZ said in a note, noting the rate of decline in October had moderated from September. Still, China’s exports in the first 10 months of the year fell 7.7 per cent from the same period a year earlier, while imports dropped 7.5 per cent. Exports have dragged on economic growth this year as global demand remains stubbornly sluggish, forcing
policymakers to rely on higher government spending and record bank lending to boost activity. Weak exports knocked 7.8 per cent off the country’s GDP growth in the first three quarters of this year. Imports fell for the second month in a row in October after rising for the first time in nearly two years in August.
“The on-going cyclical rebound in China’s economy should support imports for another quarter or two but is unlikely to last much longer” Julian Evans-Pritchard, Capital Economics’ China economist
That left the country with a trade surplus of US$49.06 billion for the month, versus forecasts of US$51.70 billion, and September’s US$41.99 billion. In yuan-denominated terms, the trade numbers weren’t as bad,
indicating that the currency’s slide to six-year lows has provided some support for exporters. Yuandenominated shipments have only fallen 2.0 per cent this year, with imports down 1.8 per cent. “ Y u a n d e p r e c i a t i o n sh o u l d be positive for exports, but it only provides some support for exporters when they convert dollar income into yuan, but cannot reverse the trend,” said Merchants Securities economist Liu Yaxin in Shenzhen.
Commodity imports slowing
China’s October iron ore imports were the lowest since February, while imports of copper, a key material used in building construction, fell to a 21-month low. Coal imports fell nearly 12 per cent from September despite worries that power companies have low inventories heading into winter. “The on-going cyclical rebound in China’s economy should support imports for another quarter or two but is unlikely to last much longer given that the boost to growth from earlier policy easing is set to fade before long,” Capital Economics’ China economist Julian EvansPritchard said in a note. Exports to the United States fell 5.6 per cent in October, compared to an 8.1 per cent decline in September, while shipments to the EU fell 8.7 per cent, a slight improvement from the previous month. China’s imports from Southeast Asia rose 18.4 per cent in October, while those from Australia increased 16.3 per cent, both significant improvements from recent months. Reuters
Auto industry
Car sales surge as consumers beat expiring tax cut Geely, which has raised its annual sales target twice, posted an almost doubling of deliveries to 96,158 units in October China’s passenger-vehicle sales climbed for an eighth consecutive month as consumers rushed to buy small-engine autos ahead of a tax cut due to expire at year-end, boosting deliveries at local carmakers including Geely Automobile Holdings Ltd. and Great Wall Motor Co. Retail sales of cars, sport utility and multipurpose vehicles increased 20 per cent to 2.22 million units last month, according to the China Passenger Car Association. Deliveries rose 15 per cent to 18.7 million units in the first 10 months. Over the past few months, consumers have brought forth their purchases to qualify for a tax cut on vehicles with smaller engines that’s expiring at the end of this year, even as the government said it’s looking at extending
the rebate. Chinese automakers such as Geely and Great Wall are among automakers that have benefited from the surge in demand for popular SUV models like the Boyue and H6. “Auto production was expected to accelerate in the fourth quarter in anticipation of an eleventh-hour sales surge as buyers rush to beat the tax cut’s expiration at year-end,” Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence, wrote in a note. Consumers have been advancing purchases to tap on the tax cut and incentives offered by dealers and automakers, the trade body said in the statement. Wholesales of cars with engines smaller than 1.6 litres rose 26 per cent in October, compared to 16 per cent for those with bigger capacity, according to PCA.
Geely, which has raised its annual sales target twice, posted an almost doubling of deliveries to 96,158 units in October, while sales for Great Wall increased 31 per cent to 104,844 units. Deliveries of Guangzhou Automobile Group Co. climbed 33 per cent
to 158,096 units, while Chongqing Changan Automobile Co.’s jumped 20 per cent to 293,902 units. General Motors Co.’s deliveries rose 5.7 per cent and Ford Motor Co. gained 14 per cent. Japanese automakers also saw a pickup in demand, with Nissan Motor Co. posting an increase of 16 per cent, while Honda Motor Co. reported a 40 per cent surge in sales. Bloomberg News
Business Daily Wednesday, November 9 2016 9
Greater China Price gap
National banks lose luster in Hong Kong Construction Bank and ICBC have now fallen more than 6 percent from their September highs, exceeding the 5 percent decline by the Hang Seng Index A rally for Chinese banks listed in Hong Kong has cut their price gap to mainland shares in half - and that seems about as much as investors are willing to tolerate. In the five months through September, a gauge of the big four lenders’ Hong Kong shares jumped 15 percent as southbound cash poured into the stocks, trumping the Hang Seng Index’s 11 percent advance. The banking stocks are now giving up some of their gains after the discount to their Shanghai valuations narrowed to the least in more than a year.
billion) of net southbound purchases in the five months through September, while Industrial & Commercial Bank of China Ltd. lured HK$17.8 billion of net inflows. That helped the two stocks to jump 12 percent in August alone. Other companies favoured by mainland buyers included HSBC Holdings Plc and Tencent Holdings Ltd. The rally has sapped the relative appeal of Chinese banks’s H shares. The big four traded at 5.3 times reported earnings on average in Hong Kong on Thursday, compared with 5.8 in Shanghai. Just six months ago,
the gap was 1.2 percentage points. The equities’ dividend yield in Hong Kong has dropped to 5.8 percent from as high as 7.1 percent in May. Caution over Chinese banks grew following Postal Savings Bank of China’s September initial public offering, the biggest worldwide since Alibaba Group Holding Ltd.’s in 2014. With the help of state companies that acted as cornerstone investors, the Hong Kong offering was priced at least 1 time book value, compared with the 0.87 average for H-share banks, fulfilling a requirement that state firms’ IPOs be priced above net assets. Despite having a larger retail client base and higher credit quality than most of its peers, the stock has since plunged 9.5 percent. While valuations are lower in Hong Kong than Shanghai, the city’s bourse
remains attractive for Chinese firms due to a long queue for mainland IPO approvals. Zhongyuan Bank Co. is planning a US$1 billion first-time sale in the city, IFR Asia reported on Monday. With mainland investors curbing their appetite for Chinese banks, global funds are unlikely to come to their rescue amid concern over the nation’s US$25 trillion pile of public and private debt. While the official bad-loan ratio is 1.75 percent, there’s scepticism about the veracity of the reported figures, given overdue loans are often not being recognized as non-performing loans. Charlene Chu, a partner at Autonomous Research and former Fitch Ratings analyst, has said her work suggests the NPL ratio may be at 20 to 21 percent, or even higher. Bloomberg News
“Based on fundamentals, the sector’s slowing and there’s no big catalyst” Pauline Dan, Hong Kong-based head of Greater China equities at Pictet Asset Management
The declines signal that price equilibrium between Hong Kong and mainland shares - a prospect that’s been burning arbitragers for years may still be a long way away. With inflows into the city’s shares via a link with Shanghai drying up and concerns over rising bad debt weighing on the sector, a revival of the rally in Chinese banks looks unlikely in the near term. China Construction Bank Corp. recorded HK$33.4 billion (US$4.3
Cash crunch
LeEco billionaire cuts salary to 15 cents His growing empire relies on a risky financing model The billionaire chairman of China’s LeEco has admitted his technology empire is running out of cash to sustain a headlong rush into businesses from electric cars to smartphones. In a lengthy letter to employees, company co-founder Jia Yueting apologized to shareholders and pledged to slash his income to 1 yuan (15 cents), slow LeEco’s madcap pace of expansion, and move the company toward a more moderate phase of growth. LeEco is the umbrella holding company for a sprawling family of businesses that includes sports media, automobiles, smartphones and TVs. The company known for its LeTV streaming service has aggressively pursued funding and placed bets on new ventures, from an electric car plant in Nevada to a US$2 billion acquisition of California TV maker Vizio Inc. “No company has had such an experience, a simultaneous time in ice and fire,” Jia wrote in a letter, obtained by Bloomberg News, describing LeEco’s rise and subsequent issues. “We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.” Jia’s memo circulated widely on social media Monday and prompted a testy exchange with rival smartphone maker Xiaomi Corp. Xiaomi
co-founder Lei Jun called attention to the opacity surrounding LeEco’s outstanding debt, according to a screen grab of his WeChat message account that LeEco posted. That prompted a sharp riposte from Jia’s company, which blasted Xiaomi and Lei for spreading rumours. An hour later, one of Xiaomi’s official Weibo accounts fired back, asking Jia to focus on LeEco’s debt rather than distract the public. Jia highlighted measures to lessen the company’s burden in his memo. LeEco will immediately begin cost-cutting programs, decrease subsidies for customers and focus on existing businesses instead of new ones, he added, apologizing to shareholders of Leshi in response to criticism that he hasn’t paid them enough attention.
A self-made billionaire who got his start working in IT at a local tax bureau, Jia founded Leshi Internet Information & Technology in 2004, one of the first companies in China to stream TV shows and movies to paying subscribers. He entered the smart TV businesses in 2013 and the smartphone market in 2015. But his growing empire relies on a risky financing model. Leshi is publicly listed on the Shenzhen Stock Exchange and the only profitable entity, according to Winston Cheng, LeEco’s head of corporate finance. Jia has borrowed against his shares in Leshi for cash that he invested into his other companies, regulatory filings show. That practice has invited scrutiny in the U.S., where Jia is trying to get electric car-making venture
Faraday Future off the ground. LeEco’s envisioned car plant in Nevada needs government support for power lines, water mains and roads. That in turn requires investment by the state, but Nevada treasurer Dan Schwartz balked at issuing the necessary bonds. Jia’s reliance on loans backed by Leshi equity could leave taxpayers vulnerable to the whims of China’s volatile stock market, and he expressed doubts Jia could raise the billions of dollars needed to bankroll the project.
“Our fundraising ability isn’t strong... The scale of our external fundraising had trouble satisfying the demands of our rapid expansion.” Jia Yueting, LeEco co-founder
Leshi’s stock has plummeted by almost a third since the start of 2016. Jia has showed off an electronic concept car dubbed the LeSee, and in September raised more than US$1 billion from a consortium of Chinese investors to make it. But in his memo on Monday, Jia singled out the car division for its profligacy, saying it had already spent 10 billion yuan in early development. Bloomberg News
10 Business Daily Wednesday, November 9 2016
Greater China Renewables
Mainland green ambitions dispelled as boom cools The rapid growth in capacity has left China struggling to integrate power supplies from renewable sources
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hina, the world’s biggest clean-energy investor, lowered its solar and wind power targets for 2020, a reflection of how record installations of renewables have overwhelmed the ability of the nation’s grid to absorb the new electricity. China is now aiming for 110 gigawatts of solar power by 2020, a 27 per cent reduction from an earlier target, according to a webcast posted on the website of the National Energy Administration that cited the agency’s chief engineer, Han Shui. The nation reduced its goal for wind power by 16 per cent to 210 gigawatts.
While China has poured billions of dollars into clean energy in recent years, the ability to deliver the newly-generated electricity from where it’s produced to where it’s needed has lagged. The mismatch has left solar and wind capacity sitting idle in some parts of the country, hurting companies such as China Longyuan Power Group Corp. and China Datang Corp. Renewable Power Co. The Global Large Solar Energy Valuation Peers index, which counts many Chinese manufacturers among its 20 members, has slumped 42 per cent this year. “The target reduction, which was
largely expected by the solar industry, comes at a time when concerns about oversupply are pressuring solar stocks,” analysts Ben Kallo and Tyler Frank of Robert W. Baird & Co. wrote in a Nov. 7 note. “Utility-scale projects will likely be most affected, and rooftop remains a potential source of upside.”
Earlier target
The government earlier expected to have 150 gigawatts of solar power and 250 gigawatts of wind by 2020, PVnews.cn reported last year, citing Zhu Ming, deputy director of renewable energy department at the NEA. The lower targets were immediately criticized by some environmental groups who said the new goals aren’t good enough. The “wind power capacity targets do not reflect the reality of the sector’s
growth and solar targets fail to expand the sector beyond its record 2015 growth,” Greenpeace East Asia said in an e-mailed statement. Since 2012, solar capacity has surged more than seven-fold, while wind has almost doubled amid a push by China to generate 15 per cent of its power from renewable energy and nuclear by 2020, according to data compiled by Bloomberg. The rapid growth in capacity has left China struggling to integrate power supplies from renewable sources even as the government continues to promote clean energy as an alternative to more polluting fuels like coal and natural gas.
“Given the urgency of combating air pollution and climate change, we would expect the government to accelerate investments in clean energy, rather than stabilize or slow down” Ethan Edwards, Greenpeace statement
China idled 33.9 billion kilowatt-hours of wind power last year, up 69 per cent from a year earlier, the NEA said in August. Idled capacity at solar farms has also begun to appear, especially in the nation’s northwest, it said. Still, even with the lowered ambitions, China is due to see a surge in new clean-energy capacity. Solar will more than double by 2020 from 2015 levels, while wind will increase by 50 per cent, according to Bloomberg New Energy Finance data. Bloomberg News
Outflows
Authorities plugs capital loopholes as evaders get more creative China’s policy makers are playing catch-up as investors get more creative in evading capital controls. The authorities are taking a series of steps to plug loopholes, such as a potential plan to curb transactions that use the bitcoin digital currency to take funds out of the country, as well as a statement from UnionPay Co. limiting mainlanders from using its cards to buy insurance in Hong Kong. These add to more traditional measures, including an order seen as asking mainland banks to reduce foreign-exchange sales. These measures, all reported in the past two weeks, follow a period during which Chinese officials and state media stepped up efforts to talk up the yuan even as the currency fell to six-year lows at home and overseas. While the exchange rate received some relief last week as the dollar dropped on concern over the U.S. presidential election, the onshore yuan is still down about 4.2 per cent for the year in Asia’s worst performance. The yuan’s accelerated declines - it fell 1.53 per cent last month in the biggest drop since a surprise devaluation in August last year - have worsened outflow pressures. This has prompted investors to find innovative ways to move their wealth overseas by bypassing a range of curbs set in place after the devaluation. The PBOC didn’t reply to two faxes seeking comment. A record US$44.7 billion left the
nation in September in yuan payments rather than in foreign exchange, official data show. Also, regulators have recently noticed that some investors bought bitcoins on local exchanges and sold them offshore, evading rules on foreign exchange and cross-border fund flows, according to people familiar with the matter.
“The People’s Bank of China is doing this now because data show capital outflow pressures remain significant and there are no signs of a reversal” Ken Cheung, a currency strategist at Mizuho Bank Ltd. in Hong Kong Mainland investors have flocked to Hong Kong to buy insurance policies, which offer a way to skirt money controls. A Bloomberg News report
in March this year cited an example from Hong Kong insurance agent Raymond Ng, who said he swiped the credit cards of a mainland Chinese client 800 times for the purchase of HK$28 million (US$3.6 million) of insurance policies. Chinese firms have also accelerated overseas acquisitions, with spending on international acquisitions and investments reaching US$222.8 billion so far this year, more than double last year’s amount. A recent favoured target has been Hong Kong property. HNA Group Co. paid HK$8.84 billion for government land in the former Kai Tak airport area, the highest price tag in threeand-a-half years, while Evergrande
Real Estate Group Ltd. and China Life Insurance Co. bought Hong Kong office blocks in separate transactions worth a combined HK$18.35 billion to break previous price records. A Chinese buyer is set to buy The Center building in Hong Kong’s Central district for HK$35.7 billion, according to a Hong Kong Economic Journal report. The yuan dropped to a record low of 93.74 against a trade-weighted currency basket on Monday. This was a surprise for market watchers, with a Bloomberg survey of 21 analysts and traders last month predicting that the PBOC will keep the gauge at 94 the rest of this year. Bloomberg News
Business Daily Wednesday, November 9 2016 11
Asia Political crisis
S.Korea’s Park indicates willing to relinquish some power South Korean prosecutors raided the offices of Samsung Electronics earlier yesterday as part of a probe over the scandal Jack Kim and Ju-min Park
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outh Korean President Park Geun-hye said yesterday she will withdraw her nominee for prime minister if parliament recommends a candidate and is willing to let the new premier control the cabinet, seeking to defuse a crisis rocking her presidency. Park’s comments at a meeting with the speaker of parliament indicated she was willing to relinquish some control over state affairs - a key demand by opposition parties to resolve the scandal stemming from allegations that her friend improperly wielded influence using her ties to the president. “If parliament recommends a good person with an agreement between the ruling and opposition parties, I will appoint that person as prime minister and allow him to essentially take control over the cabinet,” Park told the speaker, Chung Sye-kyun. The position of prime minister is usually a figurehead in South Korea, with most power concentrated in the presidential office. Park has been severely bruised by the scandal involving her friend, Choi Soon-sil, who is alleged to have used her closeness to the president to meddle in state affairs and wield influence in the sports and cultural communities. Choi has been charged with abuse of power and fraud while a former aide has been charged with abuse
of power and extortion after they helped raise 77.4 billion won (US$68 million) from dozens of the country’s biggest conglomerates on behalf of two foundations. Park nominated Kim Byong-joon, a former cabinet minister under a liberal ex-president, as premier last week but the move, which requires a parliamentary approval, drew anger from the opposition as a bid to divert
attention from the crisis and yet another example of her heavy-handed approach. Park’s visit to parliament was brief and she did not meet the leaders of opposition parties despite news reports that said she had hoped to do so. Instead she was met with some opposition members inside the building who held signs that said she should relinquish authority and even some that called on her to step down. Park has publicly apologised twice for the scandal but her approval rating has plunged to 5 per cent according to a Gallup poll released on Friday, the lowest since such polling began
South Korean President Park Geun-hye (C) arrives at the National Assembly in Seoul yesterday. Lusa
in 1988. No South Korean president has failed to finish their five-year term, but Park has faced growing pressure from the public and some hard-line political opponents to quit. Park’s term is due to end in early 2018.
Samsung raided
South Korean prosecutors raided the offices of Samsung Electronics earlier yesterday as part of a probe over the scandal involving Choi, a prosecution official told Reuters but declined to comment further. South Korea’s Yonhap News Agency reported prosecutors are looking into whether Samsung improperly provided financial assistance to Choi’s daughter. Prosecutors have been investigating an allegation that Samsung provided 2.8 million euros (US$3.1 million) to a company co-owned by Choi and her daughter, who was previously a member of the South Korean national equestrian team, Yonhap reported. Park Sang-jin, a Samsung Electronics president for corporate relations, is currently head of Korea Equestrian Federation. Yonhap said his office was part of the prosecutor’s raid yesterday morning. Park Sang-jin could not be reached for comment. Prosecutors have already questioned a Samsung executive as part of the probe, according to a prosecution source. Yonhap reported prosecutors were also raiding the offices of the Korea Equestrian Federation and the Korea Horse Affairs Association. The Korea Equestrian Federation declined to comment on Yonhap report, and the Korea Horse Affairs Association did not immediately comment. Reuters
Private survey
Australia business conditions falter National Australia Bank’s survey showed renewed price weakness that could be of concern to the central bank Australian business conditions faltered in October as sales growth slowed while weakness in retail prices pointed to still-low inflation and the chance interest rates may yet have to be eased further. National Australia Bank’s (NAB) monthly survey of more than 500 firms showed its index of business conditions dipped 2 points to +6 in October, more than reversing September’s one-point gain. The index remains above its long-run average, however. The survey’s measure of business confidence held also lost 2 points to stand at +4 in October. Sales and employment slipped in the month while profits held steady. “The recent moderation in some survey indicators is a concerning trend that warrants close monitoring, but our assessment is that the deterioration to date is not yet enough to
warrant a significant change in the outlook,” said NAB chief economist Alan Oster. Oster noted he was less confident about the economic outlook than the Reserve Bank of Australia (RBA) which had recently sounded upbeat
on the prospects for sustained growth. The central bank has been on hold since cutting rates in May and August and financial markets have priced out much chance of another easing for the next few months. NAB’s October survey also showed renewed price weakness that could be of concern to the RBA given it was surprisingly low inflation that directly led to this year’s cuts. Final product prices grew at just a 0.1 per cent quarterly pace having
fallen 0.3 per cent from the September survey, while wage costs and input prices remained very subdued. Fierce competition in the retail sector saw prices there fall 0.3 per cent at a quarterly rate.
“The recent moderation in some survey indicators is a concerning trend that warrants close monitoring” Alan Oster, National Australia Bank chief economist Official measures show underlying inflation was already at a record low of 1.5 per cent in the third quarter and any further slippage could reignite pressure for a rate cut. NAB has, for a while, predicted that further easing would come next year as building and resource exports cooled. Reuters
12 Business Daily Wednesday, November 9 2016
Asia Jewellery
Gold council cuts India demand forecast Imports are said to have advanced in October to the highest this year Swansy Afonso
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levated gold prices and India’s push for more transparency on purchases and income disclosure will cut the nation’s demand for bullion in 2016 to its lowest in seven years, before consumption recovers in 2017, according to the World Gold Council (WGC).
Weak monsoons have subdued farm incomes in recent years, also keeping buyers away. But the biggest factor damping purchases is the government’s policy on financial transparency, including a push to ensure that citizens declare all of their taxable income, according to the council, an industry-funded group that promotes gold. “This is a one-off thing. This year has been exceptional from various points of view,” P.R. Somasundaram, managing director of the WGC in India, said by phone from Mumbai, ahead of the council’s quarterly report.
“Next year we can see a recovery to normal levels,” which he pegged in the range of 800 to 1,000 tons.
Diwali boost
A drop in prices during the Diwali festival at the end of last month was good for demand, Somasundaram said, and the fourth quarter should show consumption recovering to more typical levels and even improving on the 237 tons bought in the last three months of 2015. Imports are said to have advanced in October to the highest this year as jewellers stocked up ahead of Diwali,
according to people familiar with provisional Finance Ministry data. Inbound purchases more than doubled to 96.7 tons compared with 45.3 tons a year earlier, the people said, asking not to be identified as the data isn’t public. Finance Ministry spokesman D. S. Malik didn’t respond to calls seeking comment. India imported 99.6 tons in the third quarter, the smallest amount in three years, according to WGC data. Consumption fell 29 per cent to 441.2 tons in the nine months to September from a year earlier, while imports dropped 49 per cent to 347.3 tons, the council said. In addition to its clampdown on undeclared income, the government has levied a 1 per cent duty on gold jewellery manufacturing and made identity cards compulsory for purchases above 200,000 rupees ($2,997). Bloomberg News
‘In addition to its clampdown on undeclared income, the government has levied a 1 per cent duty on gold jewellery manufacturing’ The WGC trimmed its demand estimate for a second time this year to between 650 and 750 metric tons, after lowering its forecast by 100 tons in August. Those would be the weakest figures for India since the 578.5 tons consumed in 2009. Demand last year was 858.1 tons, according to council data. Gold prices are up about a fifth this year and that has helped keep a lid on demand in world’s biggest consumer of the metal after China.
Commodities impact
Malaysia Q3 growth seen picking up The economy grew 5 per cent in 2015 and the government has forecast 4.0-4.5 per cent for this year Malaysia’s growth is expected to steady in the third quarter, breaking a five-quarter sequence of declines, with analysts reckoning on domestic demand offsetting weak global demand for the Southeast Asian country’s oil, gas and commodity exports. The median forecast in a Reuters poll of 14 economists was for annual growth to hit 4.1 per cent in July-September, a slight improvement on the second quarter’s 4.0 per cent growth. Though it was the weakest performance since a 1.2 per cent contraction in the third quarter of 2009, the bright spots for the second quarter were strong growth in domestic demand and private investment. The gross domestic product data will be released on Friday. “We are expecting domestic demand to continue supporting economic growth which will be mainly led by private expenditure,” AmInvestment Bank’s research arm said on Monday. The economy grew 5 per cent in 2015 and the government has forecast 4.0-4.5 per cent for this year. Exports contracted 3.0 per cent in September from a year earlier on
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weak oil prices and a slump in demand for manufactured goods. Exporters have struggled despite the ringgit’s fall of more than 20 per cent against the dollar last year, when the Malaysian currency laboured
due to a slump in earnings from oil and gas, slowing demand from toptrade partner China, and negative sentiment generated by a financial scandal at state-owned 1Malaysia Development Berhad (1MDB). The Royal Bank of Scotland said the ringgit could lose some of the ground recovered in the first half of this year if the current account balance slips into a deficit in the third quarter. The current account data will also
be released on Friday. In the second quarter the surplus shrank to 1.9 billion ringgit (US$452.49 million) from 5 billion in the first quarter.
Political pressures
Prime Minister Najib Razak has faced sustained calls to quit over 1MDB’s missing funds - the subject of a money laundering probe in at least six countries including the United States, Singapore and Switzerland.
Key Points Q3 GDP growth seen at 4.1 pct y/y, up from 4.0 pct in Q2 Q3 data due on Friday, Nov 11 at 0400 GMT Growth buoyed by domestic demand - Ambank Research
Petronas Towers, a Malaysian icon in capital Kuala Lumpur
Najib has since actively reached out to China, which came to the rescue in December with a US$2.3 billion deal to buy 1MDB assets. Just last week, the two countries agreed to a raft of deals estimated to be worth some US$34 billion. There is speculation that Najib could take advantage of the disarray among the opposition parties, by calling a snap election early next year. Meantime, Najib’s critics have called for a mass rally on Nov. 19 to call for his resignation and for an independent investigation into 1MDB. Reuters
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Business Daily Wednesday, November 9 2016 13
Asia Cyber heist
In Brief
Bangladesh central bank team in Manila to retrieve funds A Bangladesh central bank team arrived in Manila on Monday to work on moving back part of the US$81 million stolen from its account in the New York Federal Reserve in February and sent to the Philippines, a Bangladeshi official said A Philippine court in September adjudged that Bangladesh Bank was the rightful owner of around US$15 million surrendered by casino boss Kim Wong and his Eastern Hawaii Leisure Company, according to a court order seen by Reuters.
that the process on this US$15 million is more or less completed, we will go for the rest.” A source close to Bangladesh Bank confirmed the visit by the Dhaka officials to retrieve the money.
Bangladesh Bank spokesman Subhankar Saha did not respond to calls seeking comment. In the Philippine capital, the central bank, Bangko Sentral, directed Reuters to the Anti-Money Laundering Council, which, in turn, deflected the query to the department of justice. Ricardo V. Paras, the Philippine justice department official who represented the Bangladesh government in court, did not return telephone calls to seek comment. Reuters
Key Points Bangladesh team seeks to transfer some of seized heist funds Bangladesh looks to recover rest of $81 mln -official
U.S. leadership race
Japan’s Aso: may respond to yen spikes Finance Minister Taro Aso said yesterday that Japan will need to respond to currency market moves if results of the U.S. presidential election cause a sudden spike in the yen. Aso made the remarks when asked about market speculation that the safe-haven currency could spike if Republican nominee Donald Trump won the presidential race due on Nov. 8. “I won’t comment on results of other country’s elections. But if it were to affect currencies, we would need to watch and respond, as stability in currencies is always important,” Aso told reporters after a cabinet meeting. Tourists
Sri Lanka records strong growth in arrivals
Wong, who returned US$4.63 million and 488.28 million pesos (US$10.05 million) to Philippine authorities from the millions of dollars he took from two Chinese high-rollers, has denied any role in one of the world’s biggest cyber heists. The US$15 million recovered from the total heisted is now secure in the vaults of the Philippine central bank, said John Gomes, Bangladesh’s ambassador to the Philippines, who attended a count of the money last week. “The writ of execution that the money be handed back to Bangladesh has already been done by the court,” Gomes said. “The good thing is now
Payments
Cash still king in Japan and that pose problem One problem with this preference for notes and coins is that it limits the central bank’s policy options James Mayger and Chris Anstey
As anyone who has visited Japan knows, cash is still king. Even though many places now take credit cards, Apple Pay and other forms of cashless technology, the actual amount of notes and coins circulating in the country has doubled in 20 years. And that’s while the economy and population has shrunk.
More than 101 trillion yen (US$966 billion) of cash was circulating at the end of October. It was used for more than 80 per cent of transactions by value in 2014. One problem with this preference for notes and coins is that it limits the central bank’s policy options. The tendency of Japanese to prefer cash means that any attempt to further lower negative interest rates
or to impose them on private bank accounts might push people to take their money from the banking system and add it to their stash under the mattress. The decision in Europe to stop printing the 500 euro note prompted concerns that governments were trying to make it harder to hold cash, and thus make it easier to impose deeper negative interest rates.
‘Any attempt to further lower negative interest rates or to impose them on private bank accounts might push people to take their money from the banking system’ In Sweden, where the vast majority of payments don’t use cash and many bank branches won’t even accept cash deposits and withdrawals, the central bank argued last year that negative rates function better in a cashless society. Rates are minus 0.5 per cent in Sweden, but that isn’t an option in Japan, which “is a cash-based economy,” according to former Bank of Japan board member Sayuri Shirai. The BOJ could maybe cut the negative interest rate to minus 0.2 per cent or minus 0.3 per cent at most, she said earlier this month. It’s currently minus 0.1 per cent. Bloomberg News
Tourist arrivals to Sri Lanka rose by 13.7 per cent in October year-on-year with Indian and Chinese markets recording a commendable growth, statistics from the Tourism Department showed yesterday. More than 20,000 Chinese tourists arrived in Sri Lanka last month, up 19.8 per cent from the same period last year. Indian tourist arrivals were 36,471 in October, a 19.3-per cent increase year-on-year. Overall, Sri Lanka received 150,419 visitors last month and tourist arrivals in the first 10 months of this year have risen 14.6 per cent to over 1.65 million. M&A
NZ competition set to block media takeover New Zealand’s competition regulator yesterday said it was inclined to oppose APN News & Media’s takeover of Fairfax New Zealand, saying it would concentrate 90 per cent of the country’s print media in one company. The companies say they cannot separately compete with international tech giants and social media, but the Commerce Commission said the deal would make the sector more concentrated than in any country except China. That would be an “unacceptable concentration of editorial power,” the regulator said in its draft decision, adding that it would make a final decision on the issue in March. Bankruptcy
Most Hanjin container ships completed unloading South Korea said yesterday that 94 out of 97 Hanjin Shipping Co Ltd’s container ships have completed unloading as of Nov. 7. Of the remaining 3 ships, two ships will be unloaded as soon as possible while relevant authorities are in talks with Shanghai port authorities to unload one seized ship in Shanghai, the country’s finance ministry and the Ministry of Oceans and Fisheries said in a joint statement. Hanjin filed for court receivership on Aug. 31 after its creditors cut off financial support for the firm.
14 Business Daily Wednesday, November 9 2016
International In Brief Official data
German industrial output drops Production fell at its fastest rate in more than two years in September while the trade surplus shrank, data showed, denting expectations of a strong end to the year for Europe’s biggest economy. Industrial output dropped a bigger-than-expected 1.8 per cent on the month, Economy Ministry figures showed yesterday. That was the biggest drop since August 2014. For the third quarter, output edged up 0.3 per cent from the second, driven by an 0.9 per cent increase in construction. The ministry said high order levels in construction and improved sentiment indicators “point to a certain revival ... in the coming months.” Steel
U.S. probe finds dumping from nine exporters The U.S. Commerce Department said o it had made a preliminary finding of dumping of certain imports of carbon and alloy steel cut-to-length plate from Austria, Belgium, China, France, Germany, Italy, Japan, South Korea and Taiwan. The department said in a statement it established preliminary antidumping duties of up to 130.63 per cent, on an Italian company. The finding followed an investigation prompted by a petition from Nucor Corp and U.S. subsidiaries of ArcelorMittal SA and SSAB AB, it said. Oil and gas
Egypt intends to be net exporter by 2021 Egypt’s Minister of Petroleum and Mineral Resources Tarak El-Molla said yesterday that his country’s decision to float the pound will help the most populous Arab country become a net exporter of oil and gas by 2021. The floating of the pound was a very good step, but we cannot say when it will boost our oil exports, he told reporters at the on-going Abu Dhabi International Petroleum Conference (ADIPEC). “We are working hard to transform ourselves to a net energy exporting nation and we target this for the year 2021,” the minister added. Employment
UK hiring pick up pace British companies hired permanent staff at the fastest pace in eight months in October as the country’s labour market kept on growing despite the decision in June by voters to leave the European Union, a survey showed yesterday. The Recruitment and Employment Confederation (REC) also said pay for permanent hires rose at the fastest pace in five months in October. Placements and pay for temporary staff also picked up although at a slower pace, it said. “Despite on-going uncertainty the UK jobs market is thriving again in most areas of the UK,” REC Chief Executive Kevin Green said.
Oil industry
OPEC sees rival supply down, but not out A report supports the view that OPEC’s market share will rise in the long run as rival supply growth fades Alex Lawler
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lobal demand for OPEC’s crude oil will rise in the next three years, the group forecast, suggesting its 2014 decision to let prices fall to curb costlier rival supplies such as U.S. shale is delivering higher market share. The Organization of the Petroleum Exporting Countries, which in 2014 refused to cut supply despite a glut, said in its 2016 World Oil Outlook that demand for its crude would reach 33.70 million barrels per day in 2019, up 1 million bpd from 2016.
Key Points Demand for OPEC crude to rise in next three years Sees higher long-term tight oil output despite price drop OPEC seen gaining oil market share in long run
2021,” OPEC Secretary-General Mohammed Barkindo said in the foreword to the report. Oil at US$46 a barrel has more than halved since mid-2014 due to oversupply. With producer income cut and the supply glut sticking around, OPEC has shifted back to a supply-limiting strategy to try to boost prices. Only a gentle recovery in oil prices is seen. OPEC’s basket of crude oils is assumed in the report at US$65 in 2021. Last year, it was assumed to reach US$80 by 2020.
Higher forecast for tight crude
While lower prices will subdue nonOPEC supply for the next few years, the report raised its longer-term global forecasts for tight oil, which includes U.S. shale. Global tight oil output will reach 4.55 million bpd by 2020 and peak at 6.73 million bpd in 2030, the report said, as Argentina and Russia join North America as producers.
Last year’s estimates were 5.19 million bpd by 2020 and 5.61 million bpd by 2030. Years of high prices - supported by OPEC output restraint - helped boost non-OPEC supply and make nonconventional oil such as shale viable. Despite the lower prices foreseen, efforts to lower costs will help shale to expand, OPEC said. “North America tight crude remains a major source of nonOPEC supply growth until 2030,” the report said. OPEC revised up its 2040 North American tight crude forecast by 1.20 million bpd, citing “reduced costs and productivity improvements”. OPEC increased its medium-term world oil demand forecast, expecting oil use to reach 99.20 million bpd by 2021 - 1 million bpd more than in last year’s report. The report supports the view that OPEC’s market share will rise in the long run as rival supply growth fades. OPEC crude demand is expected to reach 41 million bpd in 2040, accounting for 37 per cent of world supply, up from 34 per cent in 2016. Reuters
Oil price assumption trimmed to $65 in 2021 The report shows that the market outlook for the next few years from OPEC’s point of view as the supplier of a third of the world’s oil - has improved. In the 2015 edition, demand for OPEC crude was expected to fall to 30.70 million bpd by 2020. However, expected demand for OPEC crude in 2019 is only 300,000 bpd more than it is pumping now, based on OPEC’s relatively conservative figures. Demand for OPEC crude - although rising longerterm - is seen flat from 2019 to 2021. “The lower oil price environment is expected to see overall non-OPEC supply decline in the period 20162017, before slowly rising again to
Experts commission
Monthly cost of providing key drugs could be US$1-2 per person Global spending on medicines in 2017 was predicted to be US$1.2 trillion Magdalena Mis
Essential medicines could be provided for as little as US$1-US$2 a month per person in developing countries, experts said on Monday as they called on governments to boost efforts to ensure everyone can access basic healthcare. Although global spending on medicines is about eight times this amount, one in five countries spends less than US$1 per month per person, according to the first analysis of the cost of providing key drugs by The Lancet Commission on Essential Medicines. The commission, comprising 21 international experts, said lack of access to affordable, quality medicines was threatening progress towards universal health coverage, one of the targets under the new global development goals adopted by world leaders at a U.N. summit last year. The list of essential medicines contains 201 drugs needed for a basic healthcare system and includes HIV, malaria and cancer drugs, vaccines and contraceptives. The list is
updated by the World Health Organization every two years. “The affordability of essential medicines is a core challenge and is a challenge to ... our ability to deliver universal health coverage,” commission co-chair and pharmacist Andy Gray told a telephone media briefing. Gray, a senior lecturer at South Africa’s University of KwaZulu-Natal, called for additional financing to meet basic healthcare needs and said low-income countries that struggle to meet them should receive support from the international community. Based on disease prevalence, consumption of medicines and the price of drugs, the commission estimated the cost of providing essential medicines to the populations of lowand middle-income countries to be between US$77 billion and US$152 billion a year. It said 41 countries were spending less than US$1 per person per month on medicines while global spending on medicines in 2017 was predicted to be US$1.2 trillion. The experts said “massive inequities
and inefficiencies” in financing and governance were restricting access to drugs for many people. They said persistent problems with the quality and safety of medicines in many low- and middle-income countries must also be addressed with better regulation. For example, over 120,000 children in sub-Saharan Africa are estimated to have died in 2013 because of substandard anti-malarial medicines, the commission said.
“The affordability of essential medicines is a core challenge and is a challenge to ... our ability to deliver universal health coverage” Andy Gray, The Lancet Commission on Essential Medicines co-chair and pharmacist The experts also called for urgent reforms in the way essential drugs are developed and patented to improve affordability and access. Reuters
Business Daily Wednesday, November 9 2016 15
Opinion
Radical realism about climate change Double trouble embroils Hong Kong banks as city simmers Christopher Langner a Bloomberg Gadfly columnist
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anks in Hong Kong ought to be worried. While they may have averted an even bigger crisis, as my colleague Andy Mukherjee argued Monday, they’re facing twin threats, with property prices set to drop and the flow of money into deposits looking like it could reverse amid heightened political instability. Some analysts are predicting home prices could decline by 5 per cent after new rules increased the stamp duty to 15 per cent for all residential purchases. For banks, that could mean higher capital costs, given that besides mortgages, a lot of individual and commercial lending is also backed by real estate. The more concerning issue, however, per cent Yuan’s depreciation may be on the poagainst the dollar, YTD litical front. Deposits in Hong Kong have shown an unmistakable relationship with moves in the yuan against the dollar. China’s currency is seen as a proxy to flows in and out of the mainland. As it has tended to drop, coffers in the city have filled. The yuan doesn’t look set to rise any time soon, so in that sense, the bonanza should continue. But Hong Kong depositors are renowned for being jittery. Whenever there’s any hint that Beijing could be getting tougher on its special administrative region, new deposits seem to freeze, or even drop. That happened during the Occupy Central movement in the third quarter of 2014. Anyone worried about a Chinese backlash then would be pacing the cage now. On Monday, China’s top legislative body ruled that Hong Kong people who advocate independence can’t hold public office, a rare intervention designed to prevent two elected “localists” from taking their posts in a case that threatens to spark further unrest. As the city falls further into the embrace of its neighbouring giant, those trying to create some distance may feel compelled to travel that little bit further. If that does turn out to be the case, banks in Hong Kong would have to compete more fiercely for deposits, which usually means paying customers more for their money. That, in turn, could reduce profitability. Worse, it would come just as Hong Kong looks at adopting even more stringent liquidity risk management rules, making deposits even more valuable. Lenders’ fate is often intertwined with political events. Right now, it looks like Hong Kong could be about to throw a tantrum, and banks certainly won’t be immune. Bloomberg Gadfly
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ainstream politics, by definition, is ill equipped to imagine fundamental change. But last December in Paris, 196 governments agreed on the need to limit global warming to 1.5°C above pre-industrial levels – an objective that holds the promise of delivering precisely such a transformation. Achieving it will require overcoming serious political challenges, reflected in the fact that some are advocating solutions that will end up doing more harm than good. One strategy that has gained a lot of momentum focuses on the need to develop large-scale technological interventions to control the global thermostat. Proponents of geo-engineering technologies argue that conventional adaptation and mitigation measures are simply not reducing emissions fast enough to prevent dangerous warming. Technologies such as “carbon capture and storage” (CCS), they argue, are necessary to limit damage and human suffering. The Intergovernmental Panel on Climate Change seems to agree. In its fifth assessment report, it builds its scenarios for meeting the Paris climate goals around the concept of “negative emissions” – that is, the ability to suck excess carbon dioxide out of the atmosphere. But this approach ignores serious problems with the development and deployment of geo-engineering technologies. Consider CCS, which is the process of capturing waste CO2 from large sources like fossilfuel power plants and depositing it in, say, an underground geological formation, thereby preventing it from entering the atmosphere. It sounds good. But what makes it economical is that it enables enhanced oil recovery. In other words, the only way to make CCS cost-effective is to use it to exacerbate the problem it is supposed to address. The supposed saviour technology – bioenergy with carbon capture and storage (BECCS) – is not much better. BECCS begins by producing large amounts of biomass from, say, fast-growing trees which naturally capture CO2; those plants are then converted into fuel via burning or refining, with the resulting carbon emissions being captured and sequestered. But bioenergy is not carbon neutral, and the surge in European demand for biomass has led to rising food commodity prices and land grabs in developing countries. These realities helped persuade the scientists Kevin Anderson and Glen Peters recently to call carbon removal an “unjust and high-stakes gamble.” What about other geo-engineering proposals? Solar Radiation Management (SRM) aims to control the amount of sunlight that reaches the Earth, essentially mimicking the effect of a volcano eruption. This may be achieved by pumping sulphates into the stratosphere or through “marine cloud brightening,” which would cause clouds to reflect more sunlight back into space. But blasting sulphates into the stratosphere does not reduce CO2 concentrations; it merely delays the impact for as long as the spraying continues. Moreover, sulphate injections in the northern hemisphere could cause serious drought in the Africa’s Sahel region, owing to dramatic reductions in precipitation, while some African countries would experience more precipitation. The effect on the Asian monsoon system could be even more pronounced. In short, SRM could severely damage the livelihoods of millions of people.
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Lili Fuhr Ecology and Sustainable Development Department at the Heinrich Böll Foundation head
If geo-engineering can’t save us, what can? In fact, there are a number of steps that can be taken right now. They would be messier and more politically challenging than geo-engineering. But they would work. The first step would be a moratorium on new coal mines. If all currently planned coal-fired power plants are built and operated over their normal service life of 40 years, they alone would emit 240 billion tons of CO2 – more than the remaining carbon budget. If that investment were re-allocated to decentralized renewable-energy production, the benefits would be enormous. Moreover, with only 10 per cent of the global population responsible for almost 50 per cent of global CO2 emissions, there is a strong case to be made for implementing strategies that target the biggest emitters. For example, it makes little sense that airlines – which actually serve just 7 per cent of the global population – are exempt from paying fuel taxes, especially at a time when ticket prices are at an historic low. Changes to land use are also needed. The 2009 International Assessment of Agricultural Knowledge, Science and Technology for Development charts the way to a transformed agricultural system – with benefits that extend far beyond climate policy. We must apply this knowledge around the world. In Europe, the waste sector could make a significant contribution to a low-carbon economy. Recent research, commissioned by Zero Waste Europe, found that optimal implementation of the European Commission’s “circular economy package” waste targets could save the European Union 190 million tons of CO2 per year. That is the equivalent of the annual emissions of the Netherlands! Available measures in the transport sector include strengthening public transportation, encouraging the use of railways for freight traffic, building bike paths, and subsidizing delivery bicycles. In Germany, intelligent action on transport could reduce the sector’s emissions by up to 95 per cent by 2050. Another powerful measure would be to protect and restore natural ecosystems, which could result in the storage of 220-330 gigatons of CO2 worldwide. None of these solutions is a silver bullet; but, together, they could change the world for the better. Geo-engineering solutions are not the only alternatives. They are a response to the inability of mainstream economics and politics to address the climate challenge. Instead of trying to devise ways to maintain business as usual – an impossible and destructive goal – we must prove our ability to imagine and achieve radical change. If we fail, we should not be surprised if, just a few years from now, the planetary thermostat is under the control of a handful of states or military and scientific interests. As world leaders convene for the 22nd United Nations Framework Convention on Climate Change to bring the Paris agreement into force, they should repudiate geo-engineering quick fixes – and demonstrate a commitment to real solutions. Project Syndicate
Instead of trying to devise ways to maintain business as usual – an impossible and destructive goal – we must prove our ability to imagine and achieve radical change.
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16 Business Daily Wednesday, November 9 2016
Closing Elections outcome
Asia sees changed U.S. relationship, whoever wins Both Clinton and Trump oppose the TPP deal, which would set up a free trade zone among 12 countries that excludes China
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in or lose, Donald Trump’s campaign has changed the way countries in Asia view their relationships with Washington. Even Clinton, an architect of the U.S. strategic pivot to Asia, has some work ahead of her in rebuilding trust, analysts and former officials in Asia said. “With or without Trump, this marks the end of U.S. leadership, in particular, moral leadership,” said a former Japanese diplomat, who asked not to be identified because of the sensitivity of the topic. “I don’t think it’s a question of Trump as an individual, but a question of the U.S. society that produced this man as the Republican candidate.” Trump upended U.S. democratic traditions during his White House campaign, drawing enthusiastic crowds where people cheered his often provocative and outrageous remarks. Critics labelled him ignorant, uncouth, a racist, hypocrite, demagogue and a sexual predator, all accusations he denied. He described a dark America, knocked to its knees by China, Mexico and the Islamic state. Trump’s harnessing of a populist backlash against immigration and global trade has challenged the ideal of benevolent American power that helped shape the global economy and the forces of globalisation - since the fall of the Soviet Union in the early 1990s.
which would set up a free trade zone among 12 countries that excludes China. Former Indonesian finance minister Chatib Basri told Reuters the TPP “is an important instrument for the U.S. pivot to Asia”. “There is some kind of a rivalry between America and China, and the way America can get into Asia is with TPP,” said Basri, now a visiting professor at Australian National University. With U.S. allies such as Japan, South Korea, Taiwan and Singapore among the biggest winners of an open trade regime, a more isolationist and protectionist stance will cost Washington influence in Asia. Ironically, it would be China, the subject of many of Trump’s tirades, that could emerge the big winner as uncertainty over Washington’s future commitment to Asia pushes countries into dealing more closely with Beijing. “If the U.S. pulls out of TPP, that will certainly increase China’s influence in Asia,” said Kanti Bajpai, Professor of Asian Studies at the Lee Kuan Yew School of Public Policy in Singapore. “Already, U.S. criticism of domestic issues in Thailand, the Philippines, and Malaysia has alienated those
countries and caused them to lean towards Beijing. Pulling out of the TPP will help China geopolitically.” Philippine President Rodrigo Duterte has been particularly hostile towards Washington over its criticism of his lethal anti-drugs campaign, announcing a “separation” from the United States during last month’s visit to China. Malaysian Prime Minister Najib Razak came back from a visit to China last week with US$34 billion worth of deals and an agreement to buy four Chinese naval vessels.
Security worries
China has long been in Trump’s sights, with promises to declare it a currency manipulator and impose punitive tariffs on imports. But any such moves could also hurt Asian exporters who ship components there for assembly and export to the United States, at a time when global trade is already weakening. Gareth Leather, senior Asia economist at Capital Economics, said the Philippines, Taiwan and South Korea were the emerging Asia economies most vulnerable to a Trump presidency. “Perhaps the biggest risk to the region’s economies, however, stems not from Trump’s trade policies, but from his foreign policy,” Leather said. Trump has created doubts over his commitment to security alliances, suggesting Japan and South Korea need to pay more for a U.S. military
presence and that they should even develop their own nuclear capability to counter China and North Korea. Clinton, who was secretary of state when the Obama administration launched its Asia pivot, is expected to maintain Obama’s foreign policy, with some seeing her as being more hawkish. The divisive U.S. presidential campaign has already done a lot of damage to the reputation of the United States in Asia, regardless of the election outcome, according to some analysts.
“U.S. criticism of domestic issues in Thailand, the Philippines, and Malaysia has alienated those countries and caused them to lean towards Beijing” Kanti Bajpai, Professor of Asian Studies at the Lee Kuan Yew School of Public Policy in Singapore “The broader question is whether the United States can assert global leadership,” said Jesper Koll, CEO at fund manager WisdomTree Japan. “All my Chinese friends say, ‘We thought we would run the world in 20 years. Now it’s going to be in January’. This is not a joke. It’s the natural state of development,” Koll said. Reuters
Trans-pacific partnership
Asia is most worried about trade protectionism - exports make up a quarter of Asia’s GDP and a fifth of them go to the United States. The Trans-Pacific Partnership (TPP) trade deal, championed by Barack Obama in part to increase U.S. influence in Asia, was to be an essential feature of Washington’s strategic pivot to Asia - an “economic NATO”. It now looks dead in the water. Both Clinton and Trump oppose the deal,
Democratic presidential candidate Hillary Clinton (2-L) and her vice presidential nominee Tim Kaine (L) on stage in Philadelphia, and Republican presidential candidate Donald Trump (2-R) with his vice presidential nominee Mike Pence (R) in Cleveland. Lusa
Composite index
E-commerce
Transportation
Japan’s key economic gauge rises
China regulator warns Dubai signs deal to evaluate on ‘Singles Day’ sales tactics world’s first hyperloop
Key gauge of the current state of the economy increased in September, a reverse from decrease in the previous month, with growing shipments of automobiles, the government said yesterday. The composite index of coincident economic indicators, Japan’s broadest indicator of economic health including industrial output, retail sales and new job offers, inched up 0.2 points in September from a month earlier to stand at 112.1 against the 2010 base of 100, the Cabinet Office said in a preliminary report. The increase was supported by rising shipments of durable goods, particularly automobiles to North America, a Cabinet Office official was quoted as saying by local media. The Cabinet Office maintained its recent assessment based on the coincident index. The index of leading indicators, an economic indicator which predicts conditions over the next several months and consists of 12 indexes such as account inventory ratios, machinery orders, stock prices and other leading economic indicators dropped 0.4 point to 100.5, showed the report. The Cabinet Office also reported the index of lagging indicators, which reflects economic conditions in the recent past, edged up 0.2 point at 113.2, an increase for the first time in three months. Xinhua
China’s business regulator said it has warned leading online shopping companies, including Alibaba Group Holding and JD.com, against adopting dodgy sales tactics at the upcoming “Singles Day” festival, China’s biggest shopping day of the year. The stakes are high in the one-day event, held annually on Nov. 11, which sees billions of dollars of goods sold online at steep discounts, and is watched as a barometer for the e-commerce industry and consumer economy in China as a whole. Alibaba’s transactions alone exceeded US$14 billion last year and are expected to grow this year. The State Administration for Industry and Commerce (SAIC) said it met with Alibaba, JD.com, Amazon.com Inc, Baidu Inc, Tencent Holdings and several others on Monday and warned them against selling fakes, falsifying sales figures and engaging in other fraudulent practices. “The SAIC will strengthen market supervision ... monitor and manage online marketplaces according to law, and together with the majority of industry players jointly create an online market environment of fair competition and an environment for online consumption that is safe and secure,” it said in a statement posted on its website yesterday. Reuters
Hyperloop One signed an agreement with Dubai yesterday to “evaluate” the building of the world’s first near-supersonic hyperloop transport system in the Gulf emirate. “We are here today to sign a historic agreement with our partners from (the Dubai) Road and Transport Authority... and we begin to evaluate the delivery of the world’s first hyperloop system across the country,” the company’s CEO, Rob Lloyd, said. “We will initially focus on the value that Hyperloop One will deliver in Dubai and across the (United Arab) Emirates,” he told reporters. Lloyd did not provide further details or figures. Hyperloop is a futuristic passenger and freight transportation system that its promoters say offers the promise of near supersonic speeds. Earlier this year, Hyperloop One held a first public test in the desert outside Las Vegas, trying out engine components designed to rocket pods through reduced-pressure tubes at speeds of 1,125 kilometres per hour or more. Last month, ports colossus DP World Group of Dubai announced it was investing in the concept, joining backers who already include the French national rail company SNCF, General Electric and Russian state fund RDIF. AFP