Secretary says gov’t may start charging for public health services Health Page 3
Monday, December 5 2016 Year V Nr. 1187 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming
City set to continue recovery with potential double-digit growth in revenue in December Page 7
Border
New cash declaration requirement shouldn’t affect gaming industry, say experts Page 6
www.macaubusinessdaily.com
Diplomacy
China complains after Donald Trump directly speaks with the leader of Taiwan Page 10
Outflow
Bank of China limits forex sales to Shanghai companies Page 9
Studying abroad Diversification
In a further bet on start-ups and entrepreneurship, the MSAR’s Secretary for Economy and Finance visits Portugal for a brushfire trip, attending a committee meeting in the EU capital, and meeting with Portuguese administrators in Lisbon and venture capitalists during the two-day trip. The meetings, made by request of the Secretary, point towards increasing gov’t interest in entrepreneurship locally and abroad. Page 2
Prosecution delayed
Firm roots, but head in the Cloud
Court The delay in the trial of former Prosecutor-General Ho Chio Meng could be a stalling tactic, according to lawyers. With 10 days for the courts to decide whether or not there’s a conflict of interest in the case of the President of the Court of Final Appeal, decisions could be made quickly, hastening a trial initially slated to start today. Page 2
As more companies shift to the ‘Cloud’, IBM’s Craig McKenna, Director of Cloud and Cognitive Data Solutions for Asia-Pacific, sits down exclusively with Business Daily to discuss why companies, from start-ups to multi-nationals, are shifting to the ‘Cloud’, the advantages and disadvantages, IBM’s history in the region, data breaches and the future.
Tech connection on
Interview | Tech Pages 4 & 5
HK Hang Seng Index December 2, 2016
22,564.82 -313.41 (-1.37%) Worst Performers
China Shenhua Energy Co
+0.00%
Link REIT
-0.28%
Galaxy Entertainment Group
-4.67%
China Mengniu Dairy Co Ltd
-2.67%
Kunlun Energy Co Ltd
+0.00%
CNOOC Ltd
-0.39%
Sands China Ltd
-3.95%
CLP Holdings Ltd
-2.26%
Want Want China Holdings
+0.00%
China Merchants Port Hold-
-0.41%
China Unicom Hong Kong
-3.36%
Belle International Holdings
-1.99%
HSBC Holdings PLC
+0.00%
Lenovo Group Ltd
-0.41%
AIA Group Ltd
-3.31%
Wharf Holdings Ltd/The
-1.94%
Hang Seng Bank Ltd
-0.27%
Sun Hung Kai Properties Ltd
-0.49%
China Life Insurance Co Ltd
-2.69%
AAC Technologies Holdings
-1.93%
17° 25° 15° 21° 15° 21° 15° 20° 16° 21° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Shenzhen-HK link China’s stock connection between Hong Kong and Shenzhen starts today, allowing foreigners and locals to buy and sell shares on the tech focused bourse. With the opening, global investors will finally have access to some of the most attractive companies in the country. Page 8
2 Business Daily Monday, December 5 2016
Macau Crime Macau Lawyers Association President considers that the handling
of the former prosecutor’s court case has been “crooked” since the beginning
Time out Legal source believes the delay of ex-top official Ho Chio Meng’s first trial session could be a strategy by the defence to have more time to prepare for the trial case Nelson Moura nelson.moura@macaubusinessdaily.com
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he postponement of the first trial session of former Prosecutor-general Ho Chio Meng could be a strategy by the defence to better prepare their case, a local legal source has told Business Daily. “The defence has previously complained they haven’t had time to consult the case documents. Now all sides will have to be heard before any decision and it can take 10 more days for the first trial session,” a local lawyer who chose to remain anonymous told Business Daily. After the defence last Friday requested that the President of the Court of Final Appeal, Sam Hou Fai, excuse himself from the trial, the former prosecutor’s first court hearing scheduled for December 5 was delayed to an undisclosed date,
according to a release by the court. The judge had previously authorised a request by the Commission Against Corruption (CCAC) to access an asset declaration from Ho Chio Meng and his wife, and presided over a ruling that denied a request for habeas corpus by the ex-top official, an involvement the defence considers to affect the judge’s impartiality. The Former Prosecutor-General currently faces 1,970 charges of illegal activities covering 13 types of crimes, with the defence having previously contested that the 10 days granted to consult the case’s documents were insufficient.
A bad image
However the President of the Macau Lawyers Association (AAM) Jorge Neto Valente doesn’t consider that the request is a strategy to gain more time, stating to Business Daily that the court case has been “crooked”
since the beginning. “The whole process doesn’t give a good image to society of the court. It is not going very smoothly and it is not receiving the treatment it should have,” the AAM President told Business Daily. Although the court has a maximum of 10 days to respond to the request, Mr. Valente stated that the decision could be arrived at “today or tomorrow” since at the moment the Court of Final Appeal “only has one case to deliberate”, but since the decision won’t allow an appeal: “it should be pondered carefully,
so as not to worsen the image given already of the court”. In regards to statements made earlier this year by the court, cited by TDM, that it considers Sam Hou Fai to be fit for the trial, Mr. Valente stated that “something could’ve happened since that statement” and that it was still “hard” to predict if the court would accept or refuse the defence’s request. Lawyer Francisco Leitão stated to Business Daily that regardless of the grounds for the request, a decision by the Court of Final Appeal will “probably be fast, like most decisions by the court have been”.
Diversification
Study tour The Secretary for Economy and Finance will be in Portugal for about 24 hours to learn about start-ups and entrepreneurial innovation João Paulo Meneses, in Portugal newsdesk@macaubusinessdaily.com
The government of Macau seems to be betting on the development of new start-ups and entrepreneurship as a key to diversifying the local economy. It is with this single purpose that Secretary for Economy and Finance, Lionel Leong Vai Tac arrives in Portugal tomorrow to conduct at least two meetings with Portuguese administrators, Business Daily understands. The topic? Start-ups. This is a new policy goal for the MSAR and is still very recent, with October seeing the first StartUP Macau Forum organised in the territory. Since the beginning, Portugal was chosen as the main partner – and it was not a coincidence that the opening of the Forum was done by
Portuguese Prime Minister Antonio Costa. Macau is of the viewpoint that increased cooperation with experts from Portugal will help promote entrepreneurship in the territory. Secretary Lionel Leong will be in Brussels today to attend the 21st meeting of the European Union-Macau Joint Committee, leaving the European Union’s capital at the end of the day. Tomorrow in Lisbon he will separately meet with the Secretary of State of Commerce and the secretariat’s Assistant, as well as with the Secretary of State of Industry. After that, Secretary Leong will visit a business incubator that helps new and start-up companies to develop by providing services such as management training. At the second meeting, a delegation from Portugal Ventures, a Venture
Capital firm, “focusing its investments in innovative, scientific and technology-based companies as well as in companies from the more traditional Portuguese Tourism and Industrial sectors, with significant competitive advantages and export oriented to global markets,” will also be present. Portugal Ventures is the result of the merger of the three statebacked Venture Capital & Private Equity firms - AICEP Capital Global, InovCapital and Turismo Capital.
Seeking out change
As Business Daily understands, all of these meetings are at the Secretary’s request, envisioning this trip as a kind of study tour on the subject. The next day, the Secretary for Economy and Finance will return to Macau, but before that he will still have time to meet a representative of the Portuguese Ministry of Foreign Affairs (there is a vacant time slot on the agenda in the morning but there has been no confirmation of this meeting). The Macau government seems to be in a hurry to get information about this little known reality in the region and thus be able to achieve the “Memorandum of Understanding for the Promotion of Entrepreneurship
and Economic and Business Cooperation”, which was signed at the 5th Ministerial Conference of the Forum for Economic and Trade Cooperation between China and the Portuguese-speaking Countries. Yet little or nothing is known about the plans of the Macau government for this area. It is to be expected, however, that Macau could help local and Chinese start-ups to move to Lusophone countries, connecting entrepreneurs from the Portuguese-speaking world and China.
Basic Law
Consumer rights
Macau promotes Basic Law
Online shops to be certified
“The spirit of the city’s Basic Law needs to be rooted in the hearts of Macau people.” So says Chief Executive Chui Sai On, speaking at a forum held by the Macao Basic Law Promotion Association on Friday, as reported by Chinese broadcaster TDM Radio. The Chief Executive’s message in his dialogue was for local citizens to
safeguard their national sovereignty and security and to promote the development of the territory and its interests. The comments come in the wake of last week’s comments regarding loyalty oaths following the events in Hong Kong, for which four pro-democracy lawmakers will face legal challenges from the Hong Kong government. The CE stated that in the previous meeting held by the Standing Committee of the National People’s Congress, to interpret HKSAR Article 104 of the Basic Law, it was found to have the same guiding significance in the content of the MSAR Basic Law. “The implementation of the Macau Basic Law must take efforts to be integrated into the city’s development, in line with the national development. Strengthening the study of the Basic Law by the Macau people should be promoted,” the CE emphasized. A.L.
The MSAR Consumer Council is planning to establish a mechanism for certifying online stores in early 2017. Given the growth in online purchases in recent years, the Council has carried out related research into setting up a mechanism to ensure and protect the rights and interests of consumers regarding online outlets. Meanwhile, the Council will provide support to physical stores in the city to establish their online services. The Consumer Council recently
certified 1,152 physical stores in the city for the coming year, 12 of which were qualified as Grade A. According to the results so far this year, over 80 per cent of joined firms have passed the assessment for the entire year, with 863 stores being qualified at the levels of premier and excellent. The number of certified shops achieving a middle or upper level increased by 18 per cent year-on-year, the latest results show.
Business Daily Monday, December 5 2016 3
Macau
AL
MSAR gov’t considering charging for medical services With several criticisms made by lawmakers about the poor performance of the city’s public medical services, the Secretary for Social Affairs and Culture expressed his wish that the public should be more optimistic Cecilia U cecilia.u@macaubusinessdaily.com
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he government has appointed a Hong Kong research group to conduct research on whether to charge citizens for the use of public hospital services, according to the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng speaking during a plenary session at the Legislative Assembly. “If we don’t consider this [charging citizens for consuming public health services] we would definitely get criticized,” said the Secretary. Given that the neighbouring SAR, Hong Kong, charges citizens for medical services, the Secretary said the government is considering the possibility of following Hong Kong’s example, in order to help lower the budget. Secretary Tam emphasised that this consideration should be discussed with the public, adding that such a move would be in accordance with the law.
Medical budget
Meanwhile, several lawmakers enquired about the significant increase in next year’s budget for the city’s medical expenses. “In 2017 around MOP7.1 billion (US$835 million) will be used for medical expenses, which has
increased 1.2 times compared to the expense in 2010 (MOP3.2 billion) and (the division of how it will be spent) is not (exactly) as mentioned, as the (total) budget for next year is some MOP8 billion,” Director of Health Bureau, Lei Chin Ion said. Mr Lei explained that the increase in the budget would mainly be spent on personnel remuneration, medicine purchases and facilities and equipment, noting that the price for medicine and equipment has increased significantly compared to previous years. He added that the three aforementioned expenses would take up about 80 per cent of the total budget. Secretary Tam also emphasised that the government will always make good use of the budget, saying that the MSAR government has continued to follow the medical laws made by the Portuguese government regarding providing basic medical support to those who are in need. “We have to provide these benefits (basic medical support) to all citizens, and our work has in fact received approval by the World Health Organization,” said Secretary Tam. “We ensure free medical support for citizens aged 65 or above, students, teachers and patients with cancer […] we are also working on improving the service quality of our public hospital,” noted the Secretary.
Legislator Chui Sai Cheong suggested during the Legislative Assembly session that the Escola Secundária Luso-Chinesa de Luís Gonzaga Gomes, located near Hotel Estoril and Tap Seac Square, should be relocated, in order to use the land for alternative purposes. Secretary Alexis Tam Chon Weng declined
the suggestion, pointing out the historical significance of the school. However, the government is planning to construct a car park under the playground of the school, the Secretary commented. He added that the bid for the car park construction is under preparation and will be launched next year.
President of the Administrative Committee of Social Security Fund, Iong Kong Io reported during the Legislative Assembly that around 59,000 residents had applied in advance to receive their pensions in the month of October, accounting for 64.1 per cent of the total number of pension recipients. The number
also indicates an 89 per cent increase in advance applications compared to 2015. The President emphasised the assurance of equity in the current pension system, with pensioners who are receiving the benefits in advance only being able to obtain a certain percentage of their pension.
The Director of the Health Bureau, Lei Chin Ion revealed at the plenary session on Friday that the additional regulations for the medical accident law
are currently going through the legislative processes and will hopefully be able to be completed by February of next year.
Secretary Tam also stated that the government supports non-profit medical institutions through constant purchases from these institutions, however noted that the available budget is limiting the government’s further purchases. He also remarked that medical vouchers will continue to be offered to citizens and affirmed that the government will sustain the city’s medical system and ensure the rights and interests of the three medical entities - non-profit, public and private medical institutions.
Poor medical services
In response to negative comments voiced by legislators about the quality of the city’s medical services, the Secretary pointed out that life expectancy in the MSAR is at a significantly high level by international
standards. However legislators raised other questions about the shortcomings of the system. Legislator Jose Pereira Countinho pointed out the severe shortage of specialised doctors in public hospitals, to which the Secretary replied that the government would train more specialised doctors and medical workers. The Health Bureau Director, Mr Lei added that patients would be sent to other cities to seek medical support if the medical services in the MSAR are incapable of providing adequate support. Secretary Tam also pointed out the limited number of medical cases in the city compared to cities with larger populations. He added that medical development is making progress, and this progress has been confirmed by the recent approval by the Australian Council of Healthcare Standards.
4 Business Daily Monday, December 5 2016
Macau Interview | Technology
All hail the Cloud Evolving growth markets, advantages of Cloud for SMEs as well as big business, security risks and data breaches, the advantages of Blockchain and challenging the Big Three cloud providers, were all hot topics as Business Daily sat down with Craig McKenna, Director of Cloud and Cognitive Data Solutions for IBM, Asia Pacific region. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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hat sort of growth do you see in the markets you cover? Australia/New Zealand is quite a mature market, highly competitive – every single vendor under the sun operates in it. Then we get into slightly less mature markets, both in terms of procurement processes as well as business maturity, in some of the other geographies. But we see more growth in those areas though. See for instance, India last year in particular, went through a massive growth curve because under Modi there was a big investment around ‘digital India’, which drove a lot of government spending, but also there’s often been commercial-spend associated with that. And just in the last two quarters we’ve started to see ASEAN, in terms of at least my results. India’s starting to slow a little bit again now, but it’s been the growth market for me for the last 18 months. Is that pace going to continue to accelerate? It will, and that’s where the benefit of things like Cloud come. Everybody wants the best infrastructure they can buy, but simply you can’t afford it. Cloud gives people the ability to tap into resources of that nature. For instance, a three person advertising company could hardly afford an IBM mainframe or an IBM power server running IBM flash systems underneath it and getting all those benefits. But they can subscribe to either a Cloud provider or a manual service provider who gives them access to a slice of that infrastructure. So they get the performance, they get the availability characteristics, they get all the benefits, without having to pay the flag fall on having their own infrastructure. In terms of security, what is the main difference between a small company’s use and the government or financial services side? Well a lot of it’s around legislation and or governing bodies like auditing bodies and so on, and associated penalties. Say for instance a data breach in the U.S. – if you have a data breach you actually have to tell the world that you had a data breach. It’s not mandated the fact that you have to report a data breach in most other countries in Asia. This is on the government and private sector side. So any financial services company, if they’ve had a hack and some of the customer data’s been released, they’ve got to tell the world. And they get big fines associated with that. But they’ve also got to inform the customers and inform the public in general that they’ve had a data breach. That’s not required in most other countries. I think you’ll find there’s been a lot more data breaches than you’d know about, simply because we haven’t historically had to report on it. Have you found that in recent years people have been tightening up security? I think that there’s a bit of scare tactics around the Cloud. People move to the Cloud and the first thing people say is ‘oh your data’s not secure’. And it actually is relatively secure if you’re going with a reputable
vendor. Is it invulnerable? No, it’s not invulnerable. And a large data breach on a huge global Cloud environment could expose a lot of information to people who shouldn’t get a hold of it. [In part that’s why] we’re seeing a huge uptick in interest in things like Blockchain. How did Blockchain gain importance? It actually came out of Bitcoin. Actually IBM now is working very heavily in it, particularly in financial services. Because what it creates is a shared immutable, secure, ledger. So anywhere where there’s a supplier-vendor relationship, or multiple suppliers as part of a value chain, it’s open for interpretation, it’s open for human error. There’s a lot of distrust and a lot of holes in the system where fraud and things like money laundering and so on can go undiscovered. So with things like Blockchain, you’ve actually got effectively a shared ledger. You can only see parts that you’re allowed to see, but you all have a shared view of the contract, the terms, the money flow, everything in the entire value chain is part of this single, immutable, and trusted point of truth. So it’s going to have a profound effect on a lot of industries, and I suspect things like credit card fraud and money laundering will become more difficult as the world adopts technologies like Blockchain. And there’s huge operational savings, billions and billions of dollars of operation savings as well as it being broadly applicable to anything – anywhere where there’s a consumersupplier relationship.
the books. It was never a rip and replace mentality. So most of the technologies we’ve dealt with and brought out in the last five or six years, are with that in mind. People don’t just rip and replace, they evolve, they make what they’ve got more efficient, drive as much efficiency as they can while setting themselves up for the future workload. And I think you’ll see in China now that their behaviour has completely changed. They’re starting to do a much more slow-paced refresh of technology, a little bit more of what we consider a more mature approach to evolving their infrastructure. If you talked about Cloud computing ten years ago, there would be very few people who knew what it meant. How about now? Yeah, they didn’t but a lot of them were using it. We called it something else at the time, we come up with cool terms, so the idea of aggregated, centralised, processing goes back about 60 years. It’s called a mainframe (laughs), so in a lot of respects people have been ‘Cloud-ing’ for a long time, but things are cyclical. Should everyone go ‘Cloud’? Three years ago it was all public cloud: ‘move to Amazon, move to SoftLayer, move to…move everything!’ And the reality is you can’t move everything, so the pendulum swung back to this
idea of hybrid-Cloud, where it makes sense to do some on-prem (onpremises hardware), some off-prem. But that doesn’t mean, and I hate this term, but it doesn’t mean you don’t ‘Cloudify’ your on-prem stuff. You still want the flexibility, the agility, the automation, on-prem – to drive efficiencies. It’s just that the workload itself is, for whatever reason, it doesn’t translate well to Cloud. So you need super-high performance computing and storage, which is hard to get on the Cloud. Or you’ve got privacy and security concerns and it needs to stay on-prem.
“Everybody wants the best infrastructure they can buy, but simply you can’t afford it” Is data more vulnerable when it’s in transfer? In storage we tend to have a lot of data which is at rest. So once it’s written to disk or tape it’s encrypted. So if you then read it off, if you read it back out through the same system, it’s not encrypted, you can read it. And data in transit, well it depends on the security of your network. If it’s not encrypted and it’s going across the network and the network’s not well secured then, yes, it’s much more vulnerable outside of a firewall than it is inside a firewall. How long has IBM been present within Cloud? In some respects we’ve been doing Cloud for a very long time. Clearly our acquisition of SoftLayer put our stamp on a public Cloud per se. But through our outsourcing and global
Have you noticed that there’s been more interest from countries with growing casino presences in products such as Blockchain? I’m not a Blockchain expert per se, but certainly the greatest level of interest has been in financial services. We’ve got a number of proof of concepts going with some large financial services institutions around Blockchain. People aren’t really deploying it in production yet. But most of those projects are on the distribution/logistics side or financial services today. But if you look at the sort of applications it can have, it is broad. It will be across any supplier relationship. How long before it will be mainstream? It’ll be mainstream in financial services I think within three years. And other industries will follow, pretty quickly I suspect. If they interact with that financial institution, they’ll be interacting with Blockchain effectively, but they may not necessarily be part of the Blockchain ecosystem, for awhile. What similarities do you see in the different markets in Asia-Pacific? They’re similar in a lot of respects. Customer demands are very similar. Now going back five, six years ago, it was very common in China that once they got to the end of a lifecycle of an asset they would just rip and replace absolutely everything. That was because times were good, growth was good, there was plenty of money in the economy. But we weren’t seeing that in mature economies where they would bleed assets, they would slowly turnover and roll out assets as they became a burden on
“I think you’ll find there’s been a lot more data breaches than you’d know about, simply because we haven’t historically had to report on it” Craig McKenna, Director of Cloud and Cognitive Data Solutions, Asia Pacific, IBM
Business Daily Monday, December 5 2016 5
Macau services organization, we’ve been offering private-managed or privatehosted Clouds under a different name, to be fair, for at least a decade. Who are the Big Three and is it advantageous to be known as one of the primary public cloud brands? Basically I’d say it’s Amazon, Azure and SoftLayer. They’re the three most well known public cloud brands. There are certainly other ones, but they’re the most well known. As a storage guy, I find it frustrating that we’re not particularly wellknown even though most of the storage technologies on the marketplace IBM actually invented. I find that a little bit frustrating, but I also understand the broader strategy here and I think there’s a tighter linkage now than there ever has been with storage, in particular in the Cloud and cognitive world. Which markets were more prone to jump quickly to the Cloud, the mature or less developed markets? It’s a bit of a mixed bag. Whilst those more mature economies, where some of these Cloud providers started up first, like Australia/New Zealand for instance, that’s the first place that they drop a point of presence. Because it has reliable networks, reliable power, mature economy, customers who want this. But there’s also a level of maturity in the clients, where they’ve been through hype cycles before: ‘let’s do an element of due diligence on this and I’m not going to throw everything at it, I’m going to throw a few workloads at it, learn about it and see how it works’. I think probably the ones who moved more aggressively were probably more the Small and Medium Enterprises, for a variety of reasons. Mainly because there’s far less legislation that prevents their moving, or makes it difficult for them to move, around privacy and so on. As well as they also have fewer IT skills themselves, so they see the utopia that ‘someone else runs that
for me’. And obviously also they’re relatively smaller infrastructures. So it’s not a 10-year exercise to move their data to a new Cloud provider. So I think it’s more of those medium size enterprises that might have gone a little bit too hard too fast and they’re now sort of in that position of saying ‘now how do I get back off it or how do I get the right mix’. How advantageous are Clouds to start-ups? Well, start-ups in a lot of respects, I mean if you don’t have legacy infrastructure then you need to go buy your own or you can run a virtual infrastructure on a Cloud, so a start-up sort of makes a lot of sense because laying out a massive amount of capital when you’re a start-up is kind of dumb. It might cost you more to do it as a model on a Cloud, but at least if the start-up doesn’t workout, at least you don’t have a white elephant sitting on your data centre floor. You just turn it off and stop paying for it. And that to an extent, I think that it’s an enabling technology for start-ups. Be you a software developer or running your own online business, the impediment or the barrier to entry, is gone. You literally just get on and put your credit card in and spin up a VM (virtual model). Are there more hacking attempts on some of the more-secure, bigger Cloud providers, or more-so the smaller more vulnerable systems? There are so many layers of intrusion detection and prevention that you’d have to be pretty talented (to hack a secure provider). And then if you did break in, how much could you actually glean? A lot of the data is actually distributed across multiple systems. So, can you reassemble the data from the fragments that you’d gain? And in some cases yes. They do have data breaches that go on even in robust financial institutions, they have issues. So I’m sure all those
things they’re certainly possible. I think, you’re a bigger target, but I also think you’ve got a level of maturity and capability that you should be more impervious to that increased threat. In most cases, the threat lies mostly on the employee side, is that true? Yes, disgruntled employees are probably the biggest data threat you have. Stealing data, or putting it on their laptop, or publishing it or taking it to the next business. That’s absolutely the biggest data breach issue out there. Which is why things like data at rest encryption is important, because you can take it, but you can’t do anything with it. Or you can’t actually read it or assemble it.
“Disgruntled employees are probably the biggest data threat you have” Irrespective of where the data lives, your security protocols need to be across the entire infrastructure. So that means you need to encrypt data in flight, or data at rest, or certainly encrypt the data on the network. Y o u r c o n s i d e ra t i o n s a r o u n d security don’t stop just because you outsource it to a Cloud provider. At the end of the day, you’ll find that most Cloud providers take no responsibility for your data. It’s your problem to secure it. So would that be applicable to Dropbox, the normal free version? Does that mean there’s not a requirement for them to protect the data? It’s more reputational. So is it a requirement in their contract? No. If they lost all my data, when I called them they’d probably say ‘I’m terribly sorry about that but we’re not
responsible contractually so there’s no legal obligation.’ But certainly the reputational damage would be astounding. What new technology is on the radar? Some of the technology, from IBM and others, that’s coming out is staggering. It’s human-like in terms of its ability to understand, ingest, learn, and apply almost critical thinking, but it’s really just going through a set of probabilities and figuring out what’s the most probable – which is what we call critical thinking. But it’s doing it in a computational sense, understanding a language. There’s a lot of applicability in a lot of industries, but will it actually ever, fully take over? (laughs). Some people are afraid that that may happen. For IBM at the moment, that’s a long way away. In our view, that’s still decades away from getting to that point. But having said that, they’re still setting up, making sure that we have a sort of governing body of various parties, government bodies as well as sort of private think tanks, as well as private corporations such as IBM are sort of establishing an oversight group. H av i n g s u c h a p o w e r f u l computational tool, do you think it will push people further away from the services sector and more into the primary sectors as things were before? Everything’s going to change. But every revolution has created problems. The industrial revolution created a whole bunch of issues with labour in that sense. But what it actually did it is created a whole bunch of new careers, new roles and so on. So as long as you retrain, you re-skill and you’re always building for the future, it’s something that – whilst it will certainly destroy a number of jobs - in some respects is also going to create a whole new industry around it.
6 Business Daily Monday, December 5 2016
Macau Opinion
Sheyla Zandonai*
Green economy What are the chances of China becoming a world leader in the fight against global warming and environmental destruction? High, if you consider the less-than-bright prospects set by American Presidentelect Donald Trump. Not that the U.S. has ever been a shining example, truth be told. But Mr. Trump is bound to set the stakes – though definitely not the standards – higher. For a long time, China declined to sign protocols, withdrawing from the debate on climate change or refusing to acknowledge there was anything wrong with its furious pace of development, but these are indeed affairs that cannot be treated as “internal matters of the PRC.” That said, we cannot really blame the CCP’s shortsighted vision on this, can we? One’s field of view is often cloudy in Beijing… Nevertheless, China, which for years sat in denial, may rise to being the world’s best hope on environmental issues. Talk about a role reversal. In these gloomy times, the heretic becomes the saint. Now China is investing in curbing air pollution, fighting global warming, and perhaps even adhering to some international norms – though detoxifying the environment is bound to prove a much tougher task. Devastation has already reached dire proportions and some regions of the country emulate post-apocalyptic science-fiction landscapes: sterile and depressed. But because China is China, “need for change” means two things: planning and opportunity. China has understood there is a green economy to be built, enhanced, or simply made an aim of sustainable development. During the 5th International Forum on Clean Energy, held last week in Macau, some clever ideas were debated in that sense. Ambrose So, Executive Director of SJM, who is also the DirectorGeneral of the International Forum for Clean Energy (one of the organizers of the event) advocated for casino operators to use electric-powered shuttle buses. No argument here. But Mr. So was quick to add that, obviously, the challenges are still numerous. Which is to say that it is unlikely anything will change in the near future. Meanwhile, Wynn Resorts and MGM Macau, as well as Galaxy and Venetian, have launched joint shuttle-bus routes aimed, they say, at alleviating traffic congestion and optimizing the use of available assets. This is a good step forward, but still a long way from what Macau’s wealth could and should enable. *scholar and contributor to this newspaper.
AML
J.P. Morgan: cash declaration bill not anti-gaming The brokerage opines the proposal is just to improve anti-monetary laundering measures in the city - a “rather non-event” for the gaming sector Kam Leong kamleong@macaubusinessdaily.com
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he city’s latest announced bill proposing a new cash declaration requirement for travellers entering or leaving the Special Administrative Region, will not have any meaningful impact on the gaming industry, according to brokerage J.P. Morgan in a research note last week. ‘We believe this is not a regulatory tightening for the gaming industry or Chinese capital outflow into Macau, unlike some investors may fear given its seemingly scary headline,’ the firm’s analysts wrote following the bill’s announcement. Last Thursday, the city’s Executive Council explained that the MSAR government is proposing to require that travellers going to and from the
city with cash or other negotiable monetary instruments of over MOP120,000 (US$15,000) be obliged to declare this to Customs authorities. The Council claimed that the proposal is a move to comply with the recommendations of the intergovernmental body, Financial Action Task Force (FATA)’s to the MSAR, to enhance local anti-money laundering measures. ‘The timing of this announcement is not too surprising as Asia/Pacific Group Money Laundering [of FATA] has just completed its [antimoney laundering] audit on Macau two weeks ago,’ J.P. Morgan analysts, led by DS Kim, note. The brokerage also believes the new measure to be taken by the city will not affect the current spending habits of the city’s gamblers. ‘VIP gamblers usually do not carry
cash across the border, as junkets or agents are facilitating [foreign exchange] transfer and providing credits,’ wrote the analysts. ‘We understand some (very) small junkets might move money through physical cross-border transportation, which however should account for a very small portion of industry volumes, in our view.’ Th e y a d d e d th a t h i g h- e n d premium mass gamblers primarily use UnionPay cash-back transaction at local pawnshops, whilst ‘most mid or low-end premium mass & grind-mass players would not spend US$15,000 per trip anyways’. ‘Mainland Chinese can legally bring only RMB20,000 (MOP362.5/ US$2,900) per overseas trip in any case; hence, this US$15,000 limit is already 5 [times] higher than the legal limit for Chinese travellers,’ the note reads. According to the Executive Council, the bill proposes a penalty for each violation of between MOP1,000 and MOP500,000, or equivalent to 1 per cent to 5 per cent of the amount required to be declared.
CSR
Greening up Six gaming operators presented ways to be sustainable and reduce their environmental footprint Annie Lao annie.lao@macaubusinessdaily.com
The city’s six gaming operators have gathered together to explain their efforts to reduce their environmental footprints and to encourage sustainable activities. Entitled the Macao Integrated Tourism and Leisure Enterprises and Corporate Social Responsibility: Green Initiatives and Sustainability Forum, the event took place on Friday and included the Macao Federation of Trade Unions as well as representatives of Sands China Ltd, Galaxy Entertainment Group (GEG), Melco Crown Entertainment, MGM, Sociedade de Jogos de Macau, S.A. (SJM) and Wynn Macau Ltd. Dr Hester Cheang, Director of Gaming Teaching and Research Centre of the Macao Polytechnic Institute (IPM) and present at a panel discussion during the forum, told Business Daily that the event aims to “help society better understand corporate social responsibility and the steps taken by the city’s gaming operators”. Each of the operators gave an overview of some of their efforts in conducting and promoting green approaches towards business operations, and explained how they are working to achieve sustainability through different environmental management approaches.
Green results
Representative for the Venetian’s Sustainability and MEP-Plant Operations, Director Syed Mubarak concentrated on the group’s efforts in an all-round sustainability model,
encompassing recycling, waste and resource conservation, and achievements made since the group’s 2011 establishment of its ECO 360 degree program. According to the group’s data to date, from 2010 until the present, the energy used by all of Sands China Ltd.’s properties has been reduced by 80 million kwh - equivalent to more than 16,000 households’ usage of electricity in the city. In addition, water conserved has reached 150 million gallons - equivalent to 250 Olympic-size swimming pools while the group’s waste recycling has increased 20 per cent, with an overall waste production reduction of 6 per cent. MGM’s Executive Director of Engineering, Peter Chan, highlighted how the group applies sustainability from the ground up, by making purchasing decisions that are better for the environment through its procurement of eco-friendly products. “Over 95 per cent LED lighting are used and over 90 per cent of cleaning products are biodegradable in our properties,” Mr Chan pointed out. Galaxy Macau’s sustainable and environmental efforts focus on four pillars, according to the group’s Assistant Vice President of Sustainability Life Cycle Management, Justin Ng. The four principles include: developing a conservation behavior at work; raising energy and water conservation awareness; creating an environmentally friendly workplace; and reducing wastage in the workplace. Wynn Macau pointed out its focus
on even the smaller details, with Stewart Jackson, Director of Engineering-Facilities of the property highlighting the group’s recycling and product reduction efforts. “Wynn Macau has recycled 5,070kg of soap since 2013 and sent to children and families in-need to prevent hygiene related illness. It also has recycled 7.1 million kilograms of materials as of October this year,” Jackson highlighted.
Support from top management
However, no sustainability effort is successful unless supported from the top down, pointed out Melco Crown Entertainment’s Vice President of Property Services, Joshua Ho. “The support of top management is crucial. Sometimes investment towards environmental technologies in hotels is not necessarily cost-effective for the company. Therefore, trying to invest in new technologies is essential in order to achieve green results and reduce our environmental footprint in the city,” Ho explained. SJM pointed out that it is setting its sights on the future, projecting reductions across the board. These include a 14 per cent drop in energy consumption, a 20 per cent decrease in water consumption and diversion of 50 per cent waste from landfill, remarked Jonas A. Schuermann, Managing Director of Hospitality Services of SJM. “Not only do we emphasize leadership in energy use and environmental design of our buildings and construction, but we also focus on operational sustainability to constantly upgrade the sustainability and cost-effectiveness in our SJM properties,” Mr Schuermann said. The forum was organized by IPM and supported by the Liaison Office of the Central People’s Government in the MSAR.
Business Daily Monday, December 5 2016 7
Gaming Gaming
Fitch: ‘Macau appears poised for a long recovery’ The rating agency believes the MSAR has better prospects in relation to the rest of Asia despite competition in the region intensifying Kam Leong kamleong@macaubusinessdaily.com
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he Special Administrative Region is ready for a long recovery now that it has hit bottom, rating firm Fitch said in a press release last
week. “Macau gaming, now firmly at the bottom of the cycle, has better longterm prospects given investments in new supply, improvements in mass market indicators and under-penetration of gaming throughout the rest of Asia,” says Alex Bumazhny, Senior Director, U.S. Corporates. For November, the city’s gaming revenue experienced its fourth consecutive and best growth following a slump of 26 months, up 14.4 per cent year-on-year to MOP18.8 billion (US$2.4 billion), while accumulated gross gaming revenue for the eleven months of the year still saw a decrease of 4.3 per cent year-on-year, reaching MOP203.4 billion. ‘Fitch forecasts Macau’s gaming revenues will finish 2016 down 4 per
cent before rebounding to mid-single-digit growth in 2017,’ the agency wrote. ‘That assumes the revenue improvements seen recently stick and then increase slightly when the MGM Cotai opens.’ The firm notes the recent new openings of casino resorts have seen mixed results, indicating the existing properties of gaming operator Las Vegas Sands – which saw its Parisian Macao open its doors in September have shown no signs of experiencing cannibalization. ‘The mass-market segment appears to be responding well to new supply so far, with year-on-year gaming revenue for this segment increasing 4 per cent in third-quarter 2016,’ the release notes, adding: ‘Macau operators’ commentary on their long beleaguered VIP segments started to turn positive this fall.’ In addition to Fitch, other analysts are also viewing the current upturning trend of gaming revenue as being sustained. Analysts at Telsey Group wrote in their latest note that ‘Overall
indications, both anecdotal and quantitative, continue to suggest that the Macau market has been improving, with particular focus on the sustainability of the recovery in the VIP business, which we had expected to decline in 2017’. J.P. Morgan had estimated November’s gross gaming revenue derived from the VIP market would jump more than 15 per cent year-on-year in the month, whilst Bernstein also believes the VIP market posted midteen growth in the month. Bernstein analysts are now projecting the city’s gaming revenue will grow between 13 per cent and 15 per cent year-on-year, with that for the whole of the fourth quarter expanding by 11 per cent to 13 per cent year-on-year, driven by increases in both VIP and mass. Meanwhile, Wells Fargo is expecting a year-on-year growth of between 6 per cent and 12 per cent for December.
China’s economic slowdown appears to be benign to tourism throughout [the Asia Pacific], spurring casino developments in South Korea, Vietnam, and the Philippines,” notes Vicky Melbourne, Senior Director, Head of APAC Industrials. “This will lead to increased competition among [Asia Pacific]’s regional markets as new integrated resorts come online.” However, the agency adds that gross gaming revenues in Singapore will stall on weakness in its VIP segment, making it unlikely that the country will issue further casino licenses. In addition, the group comments that the prospects for the legalization of Japan’s gaming market remain unknown as ‘social concerns like problem gambling and organized crime present hurdles’. ‘However, if casino gaming becomes legal, Japan would likely have the largest gaming market in APAC outside of Macau,’ the firm notes in the release.
Regional competition
U.S. to see flat growth in 2017
Nevertheless, the Fitch release also notes that the city may see more extensive competition in the region as casino developments in other jurisdictions are benefiting from China’s economic slowdown. “With Macau on an upswing,
The same release also expects that the U.S. market, in contrast to the local sector, will experience flat samestore gaming revenue and only modest new gaming supply throughout next year. “With several years of major [capital expenditure] in the rear-view mirror, many U.S. gaming companies will look to optimize their capital structures. However robust growth just is not an available avenue for deleveraging,” says Bumazhny. The rating agency notes the traditional American gaming market is facing a turning tide, cannibalised by ‘video lottery terminals, social gaming and instant-ticket lottery, and constrained by secular demographic headwinds, but buoyed by growing employment and median wages’. ‘Additionally, Fitch is negative on slots and believes suppliers will bifurcate by leverage in 2017,’ the firm wrote, adding that ‘REITization of gaming assets will take a back seat in 2017 as [Internal Revenue Service] guidance makes spin-offs less likely and higher interest rates dampen financing’.
Gaming
Japan’s baby steps to casino gaming A committee from the Japanese House of Representatives has approved legislation that could lead to enabling casino gaming in the country, but gaming analysts predict a long road ahead until full approval and implementation Nelson Moura nelson.moura@macaubusinessdaily.com
Japan took another step towards allowing casino gambling in the country, as a committee of the country’s House of Representatives passed the Integrated Resort Promotion Bill on Friday, according to Japanese publication Yomiuri Shimbun. The bill was approved in the lower house committee with support from a coalition between the ruling Liberal Democratic Party and the opposition party Nippon Ishin no Kai, with some opposition by legislators from the Komeito party, a member of the ruling party coalition, according to the newspaper. The proposed legislation - which could legalise land-based casinos in
Japan - will now have to pass through examination by the Japanese House of Representatives. Although Japan’s Prime Minister Shinzo Abe has described integrated resorts as a way to maintain inbound tourism after the 2020 Summer Olympics, some legislators have criticised the speed of the legislation, which went through in two days after just six hours of discussion, reported the Nikkei Asia Review. Opposition parties have also opposed the proposed bill on the grounds that legalised casino gambling could lead to an increase in gaming-related criminal activities and gaming addiction, in a country where 8.7 per cent of all adult males are said to be addicted to gaming, reported the Yomiuri Shimbun, citing
data from the Japanese Health, Labour and Welfare Ministry. However analysts from Sanford C. Bernstein consider it might be ‘too early to get excited’ since even though the bill could potentially pass without full support in the house, Prime Minister Shinzo Abe could be ‘reluctant’ to pass legislation that didn’t have full support. The brokerage firm also considers that even in the case of the bill passing in the House of Representatives,
it will still have to go to the upper chamber of the Japanese legislative system, with both chambers having to approve the bill before the end of the current legislative session on December 14, and with further legislation having to be ‘fully drafted and debated in 2017’. ‘The devil will be in the details of what the industry structure would be: number of casinos, locations, locals-limitation rules, junket usage, tax rates, investment size and criteria ownership structure and foreign ownership, etc. Full clarity would likely not be evident until 2018,’ the Bernstein note adds.
8 Business Daily Monday, December 5 2016
Greater China Stock markets
Shenzhen-HK link lets foreigners access Mainlnad’s tech firms There are daily limits of RMB13 billion on the Shenzhen leg and RMB10.5 billion on the Hong Kong leg
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long-awaited link between China’s booming Shenzhen stock market and neighbouring Honk Kong goes live today, allowing foreign investors first-time access to some of the fastest growing technology companies in the world’s second biggest economy. The link comes two years after regulators approved the Shanghai-Hong Kong stock connect scheme and extends China’s efforts to open up its vast capital markets even as it struggles to enforce curbs on speculative money that was blamed for triggering last summer’s stock market crash. The Shenzen opening - hobbled by delays of almost a year - will finally connect all of China’s stock markets, which with a combined market cap of over US$5 trillion serves up plenty of investment opportunities for foreigners and speculators. Pauline Dan, head of greater China equities at Pictet Asset Management Ltd in Hong Kong which manages US$168 billion in assets as of end-September 2016, said investors will need time to “gauge and assess the opportunities in the Shenzhen market.” “However, Shenzhen market has more smaller cap, technology
plus Shenzhen universe are from the Shenzhen stock exchange, according to Francois Perrin, portfolio manager at East Capital. The predominance of privately listed companies on the Shenzhen bourse - about three fourths of the companies listed here are privately held compared to a quarter to Shanghai - make them relatively more profitable. By sector, tech is the biggest and accounts for a fourth. Still, some investors say from a valuation perspective, investment flows might initially favour Hong Kong as the Chinese currency remains weak after slipping to 8-1/2-year lows last week.
“Yuan devaluation has encouraged outflows from the Mainland and that could heighten volatility in Hong Kong” companies which are not well covered and their disclosure level is lower than HK listed companies.” The pipeline will offer foreign investors 881 stocks in the Shenzhen’s US$3 trillion stock exchange and 417 counters on the Hong Kong side to Shenzhen-based investors, according to Macquarie Research. Aggregate quota limits were scrapped in August but there are daily limits of RMB13 billion on the Shenzhen leg and RMB10.5 billion on the Hong Kong leg, according to a stock exchange notification. Shenzhen Stock Exchange and its
boards - the main board, the SME index and the Chinext, which is the U.S. equivalent of the Nasdaq have very distinctive features related to size, liquidity and private ownership which some investors are excited about. The Shenzhen market has more small-cap stocks than China’s other bourse, with an average market cap of about half of that of Shanghai listed shares but they are more liquid than some of their bigger counterparts in Hong Kong and Asia. Almost 75 per cent of the most liquid names in an aggregated Asia ex-Japan
Nicholas Yeo, head of China and Hong Kong equities at Aberdeen Asset Management
The Shenzhen stock market trades at a price to earnings multiple of 35 times while the Hang Seng small cap index trades at a third of that. Daily flows under the existing Shanghai - Hong Kong stock connect scheme has diverged in recent weeks with the Hong Kong leg seeing a greater usage rather than the China-bound traffic. Reuters
Business Daily Monday, December 5 2016 9
Greater China Outflows
In Brief
Bank of China sharply limits forex sales to Shanghai firms The measures appeared to be an escalation of the government’s war on outflows
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ank of China, one of the country’s “Big Four” state banks, has begun to sharply limit corporate customers’ ability to purchase foreign currency in Shanghai, in what sources said on Friday was a bid to help stem capital outflows and ease depreciation pressure on the yuan. Under the unwritten new policy, described by two sources familiar with the details, bankers at China’s fourth-biggest lender began this week to discourage companies wishing to change yuan into dollars.
Key Points Sources say preferential forex policies cancelled Bankers are attempting to dissuade companies from selling yuan Those that do deals are being limited to US$1 mln
forex purchases... and have imposed restrictions on forex purchases worth US$1 million or more”, the second source said. One source described the policy as “voluntary”, while the other said it had come from SAFE. Either way, the measures appeared to be an escalation of the government’s war on outflows after SAFE earlier last week started vetting transfers abroad worth US$5 million or more and increased scrutiny of major outbound deals.
Closing loopholes
While limited in scope, the bank’s S h a n g h a i f o r e i g n e xc h a n g e restrictions are more than just a symbolic step. Bank of China was once the only Chinese bank authorized to conduct foreign exchange transactions, and remains the country’s biggest trader of foreign currency. It has more overseas branches than any other Chinese bank.
At least one other bank was adopting similar measures to curb foreign exchange sales. A n o f f i c i a l at a m i d-si z e d shareholding bank in Shanghai, who declined to be identified, said the lender had suspended all forex purchases. It was also preventing individuals from transferring foreign currency to their relatives, taking aim at a common workaround to take money overseas. C h i n e s e r e g u l a t i o n s g ra n t individuals a foreign exchange quota of US$50,000 a year. Many have moved larger sums abroad by tapping relatives’ quotas. Last week, a senior central bank researcher warned that the fall in the yuan’s exchange rate was shaping market expectations of further losses and triggering capital flight, and that it was necessary to “break this feedback loop”. Underscoring the risks, China’s foreign exchange reserves fell US$45.7 billion - the most in nine months - in October and by far more than expected to the lowest since March 2011, indicating further capital outflows despite recent signs that the world’s second-largest economy was stabilizing. On Friday, state banks sold dollars in the market for a fifth straight day on Friday, helping keep the yuan steady at around 6.88 to the dollar. Reuters
Those firms which insisted on doing so were told they would be restricted to exchanging a maximum of US$1 million. Previously, there had been no restrictions on companies’ forex purchases. The policy comes as China’s government adopts increasingly aggressive measures to control movements of yuan out of the country and snuff out expectations that the currency would continue to spiral lower. A source said the rules only applied to Bank of China’s Shanghai operations, but that other locations were free to set their own corresponding policies. Neither Bank of China nor the State Administration of Foreign Exchange (SAFE), which oversees China’s forex policy, had an immediate comment. Bank of China’s Shanghai operations were “starting to strictly control
Aixtron, Fujian to explore what is left of deal after U.S. veto German semiconductor equipment maker Aixtron will explore with its Chinese suitor what can be salvaged of the planned takeover after a U.S. presidential order ruled the deal posed a national security risk, the company said on Saturday. U.S. President Barack Obama blocked China’s Fujian Grand Chip Investment Fund (FGC) from acquiring Aixtron’s U.S. business, the Treasury Department said on Friday. It added the presidential order was limited to Aixtron’s U.S. business and did not per se prohibit the acquisition of Aixtron shares and American depositary shares FGC. Direct funding
Authorities aims to support investment standard China aims to increase direct funding for companies through financial instruments such as stocks by implementing a national investment standard, a senior official at the People’s Bank of China (PBOC) said on Saturday. The majority of China’s loans still come from bank deposits, while funds raised via direct channels such as equity are insufficient, limiting the scope for firms to borrow, Vice Governor Fan Yifei was quoted as saying on online portal Sina. Fan told a forum in Beijing that China has a significant number of private investors with sufficient capital and the appetite for risk taking, citing data from the Boston Consulting Company. Markets
Regulator condemns “barbaric” stake acquisition
Poverty relief
Cabinet issues five-year plan for alleviating poor zones The plan is critical to achieving the country’s ambitious goal of stamping out poverty by 2020 China’s cabinet, the State Council, released a poverty alleviation plan for the 13th Five-Year Plan period (2016-2020). Poverty alleviation is the most difficult task for China to realize the goal of building an all-round moderately prosperous society, of which rural poverty is the weakest link, said the document released Friday. The plan maintains the nation’s precision-poverty relief measures while implementing regional development strategies, with a focus on old revolutionary bases, as well as ethnic minority and border areas. The plan featured a number of poverty-relief projects under the coordination of the government, the market and society, which aim to break the development bottlenecks of poverty-stricken areas and help the poor boost their abilities to achieve self-sustained development. China plans to lift all of its poor out of poverty by 2020, especially those who live in the nation’s 128,000 poor villages and 832 poor counties, where poverty has become a regional issue, according to the document.
M&A
Major tasks for the next five years include ensuring people have enough to eat and wear, and that they have adequate education, health services and housing, it said. The plan is critical to achieving the country’s ambitious goal of stamping out poverty by 2020. Poverty relief is high on China’s
agenda. Since the start of reform and opening-up in 1978, an economic boom has helped lift more than 700 million people out of poverty. By the end of 2015, China still had 55.75 million people below the national poverty line of RMB2,800 per year. The document said China will take precise, targeted and differentiated measures to ensure effective poverty relief. Poor areas will be encouraged to develop competitive industries, such as agriculture, tourism and e-commerce, said the document.
‘China plans to lift all of its poor out of poverty by 2020’ Some people living in impoverished regions will be relocated, with a variety of support measures to increase their incomes. A series of special programs will be launched to create more jobs for the poor, and improve education, health care and ecological environment in poverty-stricken areas, said the document. Besides, the government will guarantee basic living standard for people unable to work, it added. Xinhua
China’s top securities regulator Liu Shiyu slammed Saturday the practice of leveraged acquisition with “questionable” funds, calling the buyers “barbaric.” Liu, chairman of the China Securities Regulatory Commission, made the remarks during a meeting of the Asset Management Association of China, a self-regulatory body that oversees private funds. Any attempt to acquire a majority stake in a listed firm using funds from questionable sources is crossing the line, Liu said. Acquisition backed by insurance funds will inevitably affect the target company’s share price, and could threaten the corporate governance structure. Law enforcement
108,000 piracy, counterfeit cases busted Chinese law enforcement agencies handled 108,000 piracy and counterfeit cases in the first three quarters, the Ministry of Commerce (MOC) said. Building on the latest progress, the country will launch more campaigns featuring strengthened international cooperation in 2017, it said in an online statement Friday. Considering the challenges of cross-region and transnational cases, China still has a long way to go before it fully solves the problem of fake goods in high-street and online outlets, MOC said. The ministry called for stronger market supervision, better prevention measures and a consolidated legal framework to fight brand fraud.
10 Business Daily Monday, December 5 2016
Greater China
Taiwanese President Tsai Ing-wen having a phone conversation with U.S. President-elect Donald Trump in Taipei. Lusa Diplomatic protest
Beijing lodges protest after Trump call with Taiwan president Chinese state media downplayed the possibility of a major blow-up in Beijing’s relations with Washington as Trump prepares to assume office Ben Blanchard
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hina lodged a diplomatic protest on Saturday after U.S. President-elect Donald Trump spoke by phone with President Tsai Ing-wen of Taiwan, but blamed the self-ruled island Beijing claims as its own for the “petty” move. The 10-minute telephone call with Taiwan’s leadership was the first by a U.S. president-elect or president since President Jimmy Carter switched diplomatic recognition from Taiwan to China in 1979, acknowledging Taiwan as part of “one China”. China’s Foreign Ministry said it had lodged “stern representations” with what it called the “relevant U.S. side”, urging the careful handling of the Taiwan issue to avoid any unnecessary disturbances in ties. “The one China principle is the political basis of the China-U.S. relationship,” it said. The wording implied the protest had gone to the Trump camp, but the ministry provided no explanation. Speaking earlier, hours after Friday’s telephone call, Chinese Foreign Minister Wang Yi pointedly blamed Taiwan for the exchange, rather than Trump, a billionaire businessman with little foreign policy experience. “This is just the Taiwan side engaging in a petty action, and cannot change the ‘one China’ structure already formed by the international community,” Wang said at an academic forum in Beijing, China’s Foreign Ministry quoted him as saying. “I believe that it won’t change the longstanding ‘one China’ policy of
the United States government.” In comments at the same forum, Wang noted how quickly President Xi Jinping and Trump had spoken by telephone after Trump’s victory, and that Trump had praised China as a great country. Wang said that exchange had sent “a very positive signal about the future development of Sino-U.S. relations”, according to the ministry’s website. Taiwan was not mentioned in that call, according to an official Chinese transcript. China’s Taiwan Affairs Office also called the conversation a “petty” move by Taiwan that does not change the island’s status as part of China. Beijing is resolute in opposing independence for Taiwan, it added. Trump said on Twitter that Tsai had initiated the call he had with the Taiwan president. “The President of Taiwan CALLED ME today to wish me congratulations on winning the Presidency. Thank you!” he said. Alex Huang, a spokesman for Tsai, said: “Of course both sides agreed ahead of time before making contact.”
Wayward province
Trump and Tsai noted that “close economic, political and security ties exist between Taiwan and the United States”, the Trump transition team said in a statement. Taiwan’s presidential office said the two discussed strengthening bilateral interactions and establishing closer cooperation. China considers Taiwan a wayward province and has never renounced the use of force to bring it under its control. Relations between the two sides have worsened since Tsai, who heads the pro-independence
Democratic Progressive Party, was elected president in January. Chinese state media downplayed the possibility of a major blow-up in Beijing’s relations with Washington as Trump prepares to assume office. Influential state-run tabloid the Global Times said in an online editorial that if Trump really overturned the “one China” principle upon assuming office it would create such a crisis with China he’d have little time to do anything else. “We believe this is not something the shrewd Trump wants to do.” China’s official Xinhua news agency said Trump needed to know Beijing can be a “cooperative partner” as long as Washington respects China’s core interests, including the issue of Taiwan.
Key Points Trump talks to Taiwan president by phone First such contact between the two sides in nearly 40 years China blames “petty action” on Taiwan Beijing doesn’t think relations with U.S. will change “China and the United States are not destined rivals,” it said in an Englishlanguage commentary. Washington remains Taiwan’s most important political ally and sole arms supplier, despite the lack of formal diplomatic ties, the irony of which was not lost on Trump. “Interesting how the U.S. sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call,” Trump said in another tweet. Trump has eschewed tradition in other calls with foreign leaders since he won the U.S. election, prompting
the White House to encourage him to make use of the diplomatic expertise and counsel of the State Department. Trump adviser Kellyanne Conway said on CNN that Trump was “well aware of what U.S. policy has been” on Taiwan. Administration officials said Trump’s team did not alert the White House about the call ahead of time. The White House also said after Trump’s call that “longstanding policy” on China and Taiwan had not changed. Advisers to the Republican president-elect have indicated that he is likely to take a more robust policy towards China than Obama, a Democrat, and that Trump plans to boost the U.S. military in part in response to China’s increasing power in Asia. However, details of his plans remain scant. Trump lambasted China throughout th e U . S . e l ec t i o n ca m p a i g n , drumming up headlines with pledges to slap 45 per cent tariffs on imported Chinese goods and label the country a currency manipulator on his first day in office. Earlier last week, Trump spoke to Pakistani Prime Minister Nawaz Sharif and praised him, according to the Pakistani leader’s office, as a “terrific guy”. Islamabad and Washington have seen relations sour in recent years over U.S. accusations that Pakistan shelters Islamist militants who kill U.S. soldiers in Afghanistan, a charge denied by the South Asian nation. Trump also invited Philippine leader Rodrigo Duterte to the White House next year during what a Duterte aide said was a “very engaging, animated” phone conversation. Duterte has openly insulted Obama, who cancelled a planned meeting with him in September. A statement issued by Trump’s transition team made no mention of the invitation. Reuters
Business Daily Monday, December 5 2016 11
Asia Shopping data
Australia retail sales jump in welcome relief for economy Sales of clothing, footwear and personal accessories dipped 0.4 per cent, likely in part due to falling prices amid intense retail competition Swati Pandey
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ustralia’s retailers enjoyed another jump in sales in October, an outcome that augers well for momentum in consumer spending going into the allimportant Christmas shopping period.
“The outlook for the retail sector is certainly better than it was six months ago and the Reserve Bank will be quite comfortable with these results”
a run of disappointing figures last week suggested the economy had all but stalled in the third quarter. The robust numbers will help allay concerns about the risk of a more marked slowdown, or even recession, following weak numbers on business investment and construction. Friday’s data should also provide comfort to the Reserve Bank of Australia (RBA), given the retail sector has annual sales of A$290 billion (US$220 billion) and is the country’s second-biggest employer
with 1.25 million workers. “It’s a very solid result. It highlights that there has been a lift in overall activity. It’s positive for inflation and for the economy as a whole,” said Savanth Sebastian, economist at CommSec. The Australian economy grew a brisk 3.3 per cent in the year to June, but faces the risk of a contraction last quarter for the first time in almost six years. Data from the Australian Bureau of Statistics (ABS) out on Thursday showed sharp cutbacks in business investment while other indicators of domestic activity such as wages growth and employment have been feeble. Core inflation is already at a record
low of 1.5 per cent and looks like staying under the RBA’s target band of 2-3 per cent for some time. “This retail sales data is probably more forward looking than the recent indicators we’ve had. From that perspective, it looks like the economy is still doing relatively okay,” Sebastian added. Friday’s data showed household goods were driving sales with electrical and electronic goods retailing climbing 1.7 per cent while hardware, building and garden supplies gained 0.5 per cent. Th e AB S a l s o p r o d u c es a n experimental measure of online retail sales which was very strong in October, surging 12.6 pct to top A$1 billion for first time since the series began. The dollar value of sales has in part been undermined by very low inflation with prices for some goods, including food and electronics, falling over the past year. Reuters
Savanth Sebastian, economist at CommSec
The 0.5 per cent rise for October beat market forecasts for a 0.3 per cent uptick and marked the best three month period for sales since mid2014. That was welcome news after
Monetary policy
Malaysia announces new measures to boost liquidity The policy states that all payments among resident exporters should only be made in ringgit Joseph Sipalan
Malaysia’s central bank announced new measures on Friday to boost liquidity and encourage more domestic trade of the ringgit, as it looks to stem the currency’s recent slide against a surging U.S. dollar. Bank Negara Malaysia (BNM) said in a statement that exporters could only retain up to 25 per cent of export proceeds in a foreign currency, while the remainder must be converted into ringgit. Higher balances would need BNM approval, it said. Exporters are also able to hedge and unhedge up to 6 months of their foreign currency obligations. “Foreign currency arising from conversion of export proceeds will be used to ensure continuous liquidity of foreign currency in the onshore market,” the bank said. The new measures will take effect today. As a sweetener to keep more cash at home, the bank said all ringgit proceeds from exporters can earn a higher deposit rate of 3.25 per cent per year. Speaking to reporters, Assistant
Governor Adnan Zaylani said exporters were free to convert currency to meet up to six months of loan obligations not denominated in ringgit. The new measures also state that all payments among resident exporters should only be made in ringgit. “Although reserves rose last month, the central bank seems to want to ensure it can boost them further through retaining 75 per cent of exporters’ foreign currency,” said
Central bank headquarters
Trinh Nguyen, senior economist for investment bank Natixis based in Hong Kong. “This is to ensure it can boost its reserve buffer through domestic sources.” The ringgit skidded to 13-month lows last month as the U.S. dollar surged after Donald Trump’s U.S. presidential election win on Nov. 8. Malaysia and other emerging economies have seen a rise in capital outflows as foreign investors sell local stocks and bonds in expectations of higher returns in U.S. markets if interest rates rise under Trump.
Last month, the central bank attempted to clamp down on offshore trade of the ringgit, which has plunged nearly 7 per cent against the dollar over the last two weeks and is Asia’s worst-performing currency. While the central bank said the measures did not amount to capital controls, markets have remained jittery and its moves have had little impact, traders and analysts said.
More liquidity
Adnan said seven banks had said they wouldexitthenon-deliverableforwards (NDF) market, and had discussed with BNM how to manage any impact on their investment portfolios. “We are providing liquidity to the (onshore) market and will continue to do so as far as necessary. We do need to maintain liquidity in our markets,” Adnan said. Among other measures, it said residents could hedge and manage foreign exposure with onshore banks subject to prudential limits. Resident and non-resident fund managers can also freely and actively manage foreign exchange exposure up to 25 per cent of invested assets. It would enhance secondary bond market liquidity via commitments of market makers and rebalance demand of foreign currency. Malaysian ringgit NDFs added to gains after the central bank announcement. Reuters
12 Business Daily Monday, December 5 2016
Asia Corporate rules
Japan regulators working to prevent leaks by company execs Regulators are also planning new rules to improve standards in the auditing profession
J
apanese authorities are set to recommend new fair disclosure rules that aim to prevent company executives leaking insider information, part of Prime Minister Shinzo Abe’s push to improve corporate governance and encourage foreign investment. Marking the first time that Japan will adopt statutory rules on corporate disclosure, the move will likely broaden the scope of current requirements put in place by the Tokyo Stock Exchange and clarify what constitutes material and insider information. While the extent of corporate leaks in Japan is hard to gauge, the government is keen to shake up a business culture that has often been criticised for prioritising the interests of executives over shareholders. The measures are also a response to recent scandals involving Deutsche Bank’s and Credit Suisse Group AG’s local securities units leaking corporate earnings information to clients. The Financial Services Agency censured the brokers but invited criticism when the companies behind the original leaks weren’t named or punished. Even so, in a nod to concerns of small firms worried about the burden of compliance, the FSA is expected to take a ‘soft’ approach and executives that break the rules will not face
criminal penalties such as fines unlike the United States. That approach has won the backing of investors and companies alike. “ T h e r e’ s a c o n c e r n a b o u t
enforcement. Many small and midsized firms wouldn’t be able to respond to those rules,” said Shota Watanabe, fund manager at Rheos Capital Works which manages assets of around US$1.8 billion, adding that overall he supported the rules. An FSA panel discussing the rules met for a final time on Friday,
and the agency will likely submit legislation to parliament next year after details on what the rules will say are hammered out. Currently, Tokyo bourse rules for companies cover how they release information such as share offerings, changes in capital or major shareholders as well as earning results or revisions to performance estimates.
Key Points Rules will define material and insider information Heavy punishments for infractions unlikely- FSA panel Investors and companies welcome ‘soft’ enforcement approach Areas that might be covered by the new FSA rules include unpublished information on companies or financial products that could influence share prices if made public. The plans come amid a slew of other reforms to boost corporate governance under Abe’s administration. In October, Japan’s securities industry body introduced guidelines on how analysts should gather information from listed companies in a bid to prevent leaks. Last year, the Tokyo bourse also introduced a new governance code that while not legally binding, aims to secure equal treatment of shareholders, big and small, by companies. Reuters
National legislation
India fails to break deadlock on new sales tax For the GST to come into operation from April 1, Indian parliament as well as state legislatures must pass, in all, four legislations before the end of this year Indian Finance Minister Arun Jaitley’s plan to launch a new national sales tax next April got a jolt on Saturday after a two-day meeting with state officials ended without the resolution of a deadlock on who would administer the tax.
“All states are deeply concerned about their revenues falling”
taxpayer as he reckons multiple authorities could end up acting at cross-purposes. But states are reluctant to cede their turf. While federal and state finance officials will meet again on Dec. 1112 to discuss the issue, the possibility of a breakthrough at the meeting was not bright. “I will keep my fingers crossed,” Jaitley told reporters after meeting his state counterparts. “The day we
resolve it, I would say it’s a done deal.” For the GST to come into operation from April 1, Indian parliament as well as state legislatures, must pass, in all, four legislations before the end of this year. Parliament’s winter session is due to end on Dec. 16, but the bills can be brought before it only after the council approves them. Adding to the uncertainty, some states in the council raked up the issue of compensation for revenues they fear losing following the GST launch as well as Prime Minister Narendra Modi’s crackdown on the cash economy. Modi’s decision last month to scrap
500 rupee and 1,000 rupee banknotes at a stroke as part of a crackdown on tax dodgers and counterfeiters has left companies, farmers and households all suffering. Jaitley has agreed to compensate loss-incurring states in the first five years of the new tax regime. But states are now equally worried about the economic fallout of the so-called “demonetisation” drive which could hurt their finances. “All states are deeply concerned about their revenues falling,” said West Bengal’s finance minister Amit Mitra. “Compensation in future may become huge.” Under a constitutional amendment that enabled the GST, India needs to roll out the new sales tax by mid-September when the old system of indirect taxation is due to lapse. Reuters
Amit Mitra, West Bengal’s finance minister The long-awaited Goods and Services Tax (GST) would transform Asia’s No.3 economy into a single market, could boost revenues through better compliance and make life simpler for businesses that now pay a host of federal and state levies. But a council of federal and regional authorities has been struggling to forge a consensus on how to collect the new tax that will have federal and state elements. Jaitley doesn’t favour dual agencies auditing and scrutinising each
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Business Daily Monday, December 5 2016 13
Asia Commodities
In Brief
More Philippine mine suspensions on the way Fourteen of the 20 mines facing suspension are nickel producers Manolo Serapio Jr
T
he Philippine government will suspend more mines in a fight against environmental degradation, the minister in charge of mining said, a move that could put future supply from the world’s top exporter at risk and lift nickel prices. Nickel on the London Metal Exchange recovered nearly 1 per cent from Friday’s lows on the potential for supply disruption after the minister’s comments. The Southeast Asian nation has already halted 10 of its 41 mines in a campaign backed by President Rodrigo Duterte against what the government says is irresponsible mining. Twenty more are facing possible suspension and the agency in charge of the review may issue a ruling next week. “There will definitely be suspensions, but we have to go over the list,” Environment and Natural Resources Secretary Regina Lopez told Reuters by phone on Friday. Lopez said the list will be finalised “very soon, next week at the latest.” Fourteen of the 20 mines facing suspension are nickel producers, and along with the eight of 10 already halted, they accounted for more than half of the Philippines’ nickel ore output last year. Nearly all of the output is shipped to China, where shipments of nickel
ore and concentrate from the Philippines have dropped 12.5 per cent over January-October. The clampdown began shortly after Duterte assumed office on June 30. He had warned miners to strictly follow tighter rules or shut down, saying the country could survive without a mining industry.
Philippines the only impetus
Manila’s crackdown drove nickel to a then one-year high of US$11,030 a tonne in August. Last month the metal briefly pierced US$12,000 a tonne for the first time since July 2015 in a broad-based rally in industrial metals. The environment agency has pored over responses from the 20 mines facing suspension after they were given show cause letters in
October, said Lopez, a passionate environmentalist. “Our commitment is to the common good,” she said, declining to give more details of the review.
Key Points May announce ruling on 20 mines facing suspension next week Philippines is world’s top nickel ore supplier Mines involved produce more than half of Philippine nickel On top of the audit of mines in operation, Lopez said in October that all environmental permits previously granted to mines will be reviewed. Reuters
Japan’s Asics takes shoes off Adidas to sponsor IAAF Japanese sportswear giant Asics was unveiled as IAAF’s new official partner on Saturday, a day after the athletics’ world governing body parted ways with Adidas three years early. No financial details were released as Asics signed a multiple-year partnership that will cover the 2017 and 2019 world championships respectively in London and Doha. “As part of the agreement, Asics will kit the officials and volunteers at all IAAF World Athletics Series events with Asics’ footwear and apparel that will ensure the smooth running of these events. Debt
Mongolia says bank bondholders will be repaid in full Development Bank of Mongolia bondholders can expect their debts to be repaid in full when they fall due next year, a senior finance official said on Friday, even as the statebacked bonds traded below par just three months before maturity. The International Monetary Fund is predicting zero growth this year for Mongolia’s once promising economy, as a result of years of declining foreign investment, slower growth in China, and a softer market for its abundant coal resources. The country pinned between China and Russia is reeling from a balance of payments crisis.
Money laundering breaches
Singapore slaps penalties in 1MDB-related probe The central bank said it was nearing the end of its 1MDB-related investigations and will provide a final update early next year Singapore’s central bank imposed penalties on the local units of U.K.based Standard Chartered and private bank Coutts for money laundering breaches related to Malaysia’s scandal-tainted 1MDB fund and said it was nearing the end of its probes. The penalties - of S$5.2 million (US$3.65 million) and S$2.4 million, respectively - were the latest punitive measures taken by the central bank in its crackdown on money laundering, having ordered the closure earlier this year of the local units of Swiss banks BSI and Falcon. The Monetary Authority of Singapore (MAS) is also in the process of issuing a prohibition order against Tim Leissner, Goldman Sachs’ former Southeast Asia chairman. “These actions send a strong signal that we will not tolerate the abuse of Singapore’s financial system for illicit purposes,” said Ravi Menon, the managing director of MAS. The inspection at Standard Chartered “revealed significant lapses in the bank’s customer due diligence measures and controls for ongoing
Marketing
monitoring,” MAS said. While the 28 breaches were “serious”, the central bank did not find “wilful misconduct.” Standard Chartered said in a statement it is taking action to strengthen controls and surveillance systems. “We regret that 1MDB-related transactions passed through Standard Chartered Bank Singapore accounts from 2010 to early 2013,” it said. “We reported the suspicious transactions, both before and at the time we exited the accounts in early 2013, and have been fully cooperating with the authorities investigating this matter.” Malaysia’s 1MDB, once a pet project of Prime Minister Najib Razak who chaired its advisory board, is the subject of money-laundering investigations in at least six countries, including Switzerland, Singapore and the United States. At Coutts, the investigation revealed 24 breaches of AML (anti money laundering) requirements in relation to customer due diligence measures
for politically exposed persons. This was the result of actions or omissions of officers who have since left the bank, including Yak Yew Chee and Yvonne Seah, who had left Coutts to join BSI Bank in late 2009. Coutts International was sold by Royal Bank of Scotland to Union Bancaire Privee (UBP) in March 2015 and is in the process of winding down its Singapore operations. UBP said the acquisition of Coutts International was an assets-only transaction and therefore UBP does not inherit Coutts’ “legal issues or liabilities.”
Sanctions against former Goldman Sachs banker
Banker Leissner was responsible for managing the relationship with 1MDB when Goldman Sachs was engaged by the fund to arrange three bond issues from 2012 to 2013. MAS’s investigation found he had made false statements on behalf of his bank without its knowledge or consent. “Today’s announcement refers to a matter we discovered in January of this year and identified as a clear violation of the firm’s standards,” Goldman Sachs said in a statement. “At that time we promptly took steps to separate Leissner from the firm and reported the matter to regulatory authorities in several jurisdictions, including Singapore. We continue to cooperate with the MAS.” The proposed order will prohibit Leissner for a period of 10 years from performing any regulated activity under the Securities and Futures Act or taking part, directly or indirectly, in the management of any capital market services firm in Singapore. Leissner’s lawyer Marc Harris from Scheper Kim & Harris LLP said in a statement that Leissner will accede to a request by MAS to response to the allegations. Reuters
M&A
SK Holdings submits initial bid for Daesung Gases SK Holdings Co said it submitted a non-binding bid to buy South Korea’s second-biggest producer of industrial gases that has been put up for sale by Goldman Sachs and others, in a deal a source said could be valued at around US$2 billion. Shareholders in Daesung Industrial Gases, including Goldman and Daesung Group Partners, put up for sale the 100 per cent stake in the firm earlier this year. Besides SK, Blackstone, KKR and Carlyle also submitted non-binding bids, South Korean online media Money Today reported on Friday, citing unnamed industry sources. Deals signed
India, Qatar improve links India and Qatar have inked four key pacts in the field of visas, cyberspace, investments and better bilateral ties. The agreements were signed between the two countries after Indian Prime Minister Narendra Modi held bilateral talks with visiting Qatar Premier Sheikh Abdullah bin Nasser bin Khalifa Al Thani in the national capital Saturday. The agreement on visas will give visa exemption to diplomatic, special and official passport holders of both countries, while the one on cyberspace is an addition to the existing framework agreement in the field of security signed on Nov. 10, 2008.
14 Business Daily Monday, December 5 2016
International In Brief Private poll
UK companies still growing steadily British companies continued to grow modestly in the three months to November and are expected to keep up that pace into 2017, a survey showed yesterday, chiming with a resilient picture for the British economy so far since June’s EU referendum vote. The survey by the Confederation of British Industry’s (CBI) showed private sector growth gathered a little bit of speed compared with the three months to October. Retailers and consumer-facing firms said sale volumes edged higher, reflecting how many British households have continued to spend after the Brexit vote in June. Africa-Europe link
Nigeria and Morocco sign gas pipeline deal Nigeria and Morocco have signed a joint venture to construct a gas pipeline that will connect the two nations as well as some other African countries to Europe, Nigeria’s minister of foreign affairs said on Saturday. The agreement was reached during a visit by Morocco’s King Mohammed to the Nigerian capital Abuja, Geoffrey Onyema, the minister, said, adding that the pipeline project would be designed with the participation of all stakeholders. Onyema said the project aimed to create a competitive regional electricity market with the potential to be connected to the European energy markets.
Employment
U.S. jobless rate falls to 9-year low Wages slipped for the first time in nearly a year though after two straight months of increases
T
he U.S. unemployment rate fell to a nine-year low of 4.6 per cent in November, as employers added another 178,000 jobs, making it almost certain that the Federal Reserve will raise interest rates later this month. The unemployment rate hit its lowest level since August 2007 because more people found work but also because the labour force shrank as more people retired, lowering the number of working-age people in the labour force to 62.7 per cent. U.S. nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October, the Labour Department said on Friday. Economists had forecast payrolls rising by 175,000 last month and the unemployment rate remaining unchanged at 4.9 per cent. Wages slipped for the first time in nearly a year though after two straight months of increases. Economists partially blamed the drop in average hourly earnings on a calendar quirk, which they expect Fed officials will overlook at their Dec. 13-14 policy meeting. Average hourly earnings fell three cents, or 0.1 per cent, after rising 0.4 per cent in October and gaining 0.3 per cent in September. Average hourly earnings fell for workers in mining, manufacturing and utilities in November. Last month’s drop in wages lowered the year-on-year gain to 2.5 per cent in November from October’s 2.8 per cent increase, which was the largest
rise in nearly 7-1/2 years. A broad measure of unemployment, that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell two-tenths of a per centage point to 9.3 per cent, the lowest level since April 2008. After a rally of about 6.0 per cent in the past three weeks, U.S. stocks ended little changed in the wake of the jobs data on Friday.
Broad gains
Job gains have slowed from an average of 229,000 per month in 2015 to an average of 180,000 this year as the labour market nears full employment. Still, the monthly increases are more than enough to absorb new entrants into the labour market. Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population. The jobs report added to data on consumer spending, the housing market and manufacturing in suggesting the economy continued to gain momentum in the fourth quarter after output rose at its fastest pace in two years in the third quarter. About 226,000 people dropped out of the labour force last month. As a result, the labour participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.1 per centage point to 62.7 per cent.
The participation rate is near multi-decade lows, partly reflecting demographic change. Economists believe that the low participation rate is hindering faster wage growth. Job gains last month were broad, though manufacturing shed another 4,000 jobs. Manufacturing payrolls have now dropped for four straight months. Construction employment increased by 19,000 jobs last month after rising by 14,000 in October.
Key Points Unemployment rate falls to 4.6 per cent Nonfarm payrolls increase 178,000 in November Average hourly earnings fall 0.1 per cent Employment report seen cementing Fed December rate rise The retail sector shed 8,300 jobs in November, which could reflect a shift toward online shopping that has forced department stores such as Macy’s Inc to close several stores. Retail jobs have declined for two straight months. Professional and business services payrolls increased by 63,000 last month. Healthcare and social assistance employment increased by 34,700. Temporary-help jobs, a harbinger for future hiring, rose by 14,300. Government employment gained 22,000 jobs. There was a surge in local government hiring, which could have been driven by the Nov. 8 U.S. election. Reuters
South Africa
President Zuma reassures investors President Jacob Zuma moved to reassure foreign investors on Saturday after all three major rating agencies kept South Africa’s investment-grade status, granting the scandal-prone leader a reprieve after prolonged political turmoil. S&P Global Ratings downgraded the local debt of Africa’s most industrialised country by one notch on Friday but retained its sovereign credit rating at one level above “junk” status, meaning Pretoria still holds investment-grade status with all three major agencies, including Fitch and Moody’s. With the economy seen growing by only half a per cent this year and unemployment near record levels, pressure is mounting on Zuma. Cyber attack
Russian central bank loses US$31 mln Hackers stole more than 2 billion roubles (US$31 million) from correspondent accounts at the Russian central bank, the bank said on Friday, the latest example of an escalation of cyber attacks on financial institutions around the globe. Central bank official Artyom Sychyov discussed the losses at a briefing, saying that the hackers had attempted to steal about 5 billion roubles. Sychyov was commenting on a central bank report released earlier in the day, that told about hackers breaking into accounts there by faking a client’s credentials. The bank provided few other details in its lengthy report.
Trade Commissioner
EU may fill “void” in global trade left by U.S. under Trump Trump argued international trade deals hurt U.S. workers and the country’s competitiveness The European Union might fill a void in global trade left by the United States if the world’s biggest economy becomes more inward-looking with Donald Trump as president, EU Trade Commissioner Cecilia Malmstrom said. “Now it is possible that the United States will be more inward-looking over the coming years. Less prone to negotiate trade agreements, but also to engage on the international scene,” Malmstrom said. “I think the EU has a possibility to fill the void,” she told a congress of the Alliance of Liberals and Democrats for Europe (ALDE) party in Warsaw. “We can show that walls, that protectionism are not what the world needs right now,” Malmstrom said. Trump said during his election campaign he would dump the NAFTA trade agreement with
Mexico and Canada. EU and U.S. officials have for more than three years been negotiating the Transatlantic Trade and Investment Partnership (TTIP). Brussels and Washington have recognised it will not now be completed during President Barack Obama’s term. Trump has argued international trade deals hurt U.S. workers and the country’s competitiveness, but it is not clear to what extent Trump the president will resemble Trump the campaigner. “The signals that come are rather that he’s not the most pro-trade administration, rather more protectionist,” Malmstrom said, adding Trump’s comments could mean the end of TTIP talks and probably a renegotiation of the NAFTA agreement. “Once at that point, there would be a question if it does not make sense
to do a trade agreement between the two biggest economies of the world? We are there,” she said. “He wants to do good deals. Well, Europe does good deals. So we are ready.”
“We can show that open borders and trade are compatible with sustainable development and high standards” Cecilia Malmstrom, EU Trade Commissioner But Malmstrom said it was realistic to expect that any such talks would not be on the agenda for the coming year at least. Reuters
Business Daily Monday, December 5 2016 15
Opinion Business Wires
The Times of India Demonetisation will lead to a spurt in economic activity, which will in turn push GDP growth to 10 per cent, Union minister Arjun Ram Meghwal has said. “Some economists predicted that demonetisation would dampen economic activity over the next two quarters. But I believe that the decision to scrap highvalue banknotes would push GDP growth up by two per cent,” he said. “There are many types of financial transactions that are not considered as an economic activity. As a result of demonetisation, the ambit of economic activity will grow and add to the GDP,” the Minister of State for Finance said.
Philstar Inflation likely remained steady for the second straight month in October, falling within the central bank’s own forecast as domestic demand becomes more fuelled by investment than consumption, Singapore-based DBS Ltd. said. DBS economist Gundy Cahyadi said the pace of investment growth would play a role in supporting the consumption story in the nearer-term. Investment growth, he added, has now averaged 25 per cent over the past year, an unprecedented feat. This, despite the fact it eased to 23.5 per cent in the third quarter.
The Korea Herald The state-run National Pension Fund (NPF), South Korea’s largest institutional investor, holds at least a 5 per cent stake of nearly 70 per cent of the listed affiliates of the country’s top 10 business groups, giving the firm voting power, financial data showed yesterday. Out of the 89 affiliate companies of the 10 conglomerates, including Samsung Group and Hyundai Motor Group, NPS holds a 5 per cent or more stake in 62 firms, according to the data compiled by the Financial Supervisory Service. The NPS is registered as a major shareholder in 16 affiliates.
Viet Nam News Ten leading Thai exhibition organisers went to Hà Nội for a business-to-business forum to meet Vietnamese enterprises, trade promotion organisations and associations. The forum, organised by the Thailand Convention and Exhibition Bureau (TCEB), is a new form in the Connect Business campaign of TCEB. The bureau expects the campaign to attract Vietnamese businesses to Thailand to attend exhibitions by strengthening relationships with organisations, associations, chambers of commerce, unions and non-profit corporations. Thailand expects to welcome 208,000 international trade visitors this year.
Training for gender equality
F
or centuries, women around the world have struggled for even the most basic rights. The fight for equality has been an uphill climb – one that is far from over. This is certainly the case in the Middle East, where the challenges women face are typically rooted in social norms, cultural systems, and religious doctrine, and can be enshrined in law. In some Middle Eastern countries, women may not travel, work, or register to vote without permission from a man in her family. Even if it is not explicitly prohibited, joining the workforce is often very difficult for women, not least because of widespread resistance among the men who dominate these societies. Any woman who has sought to apply for a job knows just how vehement that opposition can be. The result of these norms and structures is that women in the Middle East are often subject to discrimination, isolation, and frustration. They are unable to participate freely in their societies or contribute to their countries’ economic development. But the world is changing fast. At a time of ever-deepening interconnectedness, people are more aware than ever of what is possible, and more motivated than ever to seek reforms – whether educational, economic, or political – that improve their lives. So which reforms are needed to advance gender equality? A central area of focus must be education. First and foremost, schools give girls the knowledge they need to fulfil their potential in the future. But it is also vital to instil in both girls and boys an understanding of the need for social and economic equality, to reflect the fundamental equality of opportunity that all deserve. Advancing gender equality also requires changes to policies and regulations. Beyond ensuring equal rights under the law, countries should work to boost the representation of women in politics and government. Women need to know that they can reach positions of genuine authority, even in domains from which they have historically been excluded – and they need encouragement to get there. The same is true for the economy. Women need opportunities and support to develop and run their own businesses, to innovate, and to become financially independent. This would benefit not
“
Arib Ali Al-Mandhari a senior official at the Ministry of Education, Sultanate of Oman
only women, but also their families, communities, and the economy as a whole. Even women who do not own or run businesses would have much to offer, if given the chance to enter the workforce and earn their own living. To this end, training is crucial. Women need access to guidance, workshops, and longer-term training programs that prepare them to participate in the labour market, while ensuring that they know – and can defend – their rights. An important initiative that could provide a useful model for such efforts is the Springboard Women’s Development Programme, developed by the British Council. The program aims to give women the confidence and capabilities they need to make a better life for themselves, both professionally and personally; to expand their role and influence in public life; and to help support open, stable, and inclusive societies across the Middle East and North Africa. The key to the program’s success is its focus on empowering women to fulfil their potential. It helps participants explore and develop their abilities, and then apply them in practical settings, such as acquiring funding to start or expand their own businesses. It also prepares women to confront – and overcome – the obstacles they will inevitably face as they gain independence and influence. Delivered by a network of licensed trainers, the Springboard Women’s Development Programme has already been used by over 230,000 women in more than 40 countries. In just four years, the program has trained more than 700 women in my country, Oman, through the Ministry of Education. And many more women are clamouring to participate. Achieving gender equality in the Middle East will be a long process, requiring fundamental educational, social, and economic reforms. But giving women the right training now can kick-start the process, enabling half the population finally to reach their potential – to the benefit of all. Project Syndicate
Women need opportunities and support to develop and run their own businesses, to innovate, and to become financially independent
”
16 Business Daily Monday, December 5 2016
Closing Mainland’s austerity rules
Nearly 200,000 punished in four-year frugality campaign
more than 146,400 cases in the past four years, about a quarter of which involved A total of 196,947 Party and government use of public vehicles and eating and drinking with public funds, the CPC staff had been punished for violating Central Commission for Discipline austerity rules since late 2012, China’s Inspection (CCDI) said on Saturday. top anti-graft body announced. Lavish weddings and funerals, public The Communist Party of China (CPC) money spent on travel and gift-giving central leadership launched a frugality were also included in the violations. campaign in December 2012, adopting CCDI statistics showed that 33,532 the “eight-point rules,” which aimed to curb extravagance and improve officials’ violations were reported from January to October in 2016, nearing the number work style. The disciplined people were involved in of violations dealt with in 2015. Xinhua
Protectionism
Trump threats may not stop U.S. offshoring of jobs Some companies said his broadside was not sufficient to compel a change in plans Luc Olinga
P
resident-elect Donald Trump’s threats to retaliate against U.S. companies planning to shift operations overseas constitute a new risk for multinationals, but may not sway those already planning to offshore jobs. Trump laid down the gauntlet on Thursday at a campaign-style rally after striking a deal with Carrier to keep about 1,100 jobs in Indiana in exchange for US$7 million in state tax incentives over 10 years. “Companies are not going to leave the United States any more without consequences. Not going to happen,” Trump told the cheering crowd. “They can leave from state to state, and negotiate deals with different states, but leaving the country will be very, very difficult.” The president-elect did not offer details on how he planned to pressure companies to keep jobs in the United States, but one obvious lever includes the removal of government contracts. That could make companies that work in defence, public works and public services especially vulnerable to retribution. “Boeing, for example, would have to play ball if it wants its government contracts renewed,” said one expert who requested anonymity. Trump coupled the threat with a promise to make the U.S. a better place for business by cutting taxes and streamlining regulations. “There are a lot of plans already in place,” said Hal Sirkin, a
manufacturing expert at the Boston Consulting Group. “CEOs are following the news closely and trying to figure out what all of this could mean for their businesses.”
Will threats work?
Some companies said Trump’s broadside was not sufficient to compel a change in plans. Caterpillar announced in March 2015 it plans to shutter a plant in Joliet, Illinois that makes oil pumps and valves, and move 230 jobs to Mexico. “We are continuing to execute on the previously announced plan on the stated timeline,” said Matt Lavoie, a spokesman at Caterpillar. Food giant Mondelez International also signalled it would proceed with plans to relocate hundreds of jobs from an Oreo cookie plant in Chicago to Mexico. “We have not had any contact with the new administration,” said Mondelez spokeswoman Laurie Guzzinati, adding that the Chicago
baker remains an “important part of our manufacturing network” and that it continues to make Oreos at three U.S. factories. Not far from Trump’s victory celebration at Carrier in Indiana, the industrial companies Rexnord, CTS Corp. and Manitowoc Foodservice all plan to shift activities overseas from the Indianapolis area. Manitowoc opted to close a plant in Sellersburg, Indiana due to a decline in demand for soda-drink dispensers, which had been made there, a spokesman said. Most of the 87 jobs are being moved to Tijuana, Mexico. “The wind down of the plant is proceeding according to our original schedule,” Manitowoc spokesman Rich Sheffer said. “Yesterday’s speech did not include anything specific enough for us to reconsider our plans.” Trump’s plans drew mixed reviews, with United Auto Workers Union President Dennis Williams offering accolades. “We should use this opportunity to start running a commercial: If it’s not built in America, don’t buy it,” Williams said.
But the Alliance for American Manufacturing, an industry-labour alliance, offered tempered praise. It noted that Friday’s jobs report showed a decline of 4,000 manufacturing jobs in November and called for a crackdown on “unsavoury” policies of trade partners. “While on balance, I believe this week’s Carrier deal was worth doing, it isn’t a practical job creation policy moving forward,” alliance president Scott Paul said.
“(Trump) has signalled to every corporation in America that they can threaten to offshore jobs in exchange for businessfriendly tax benefits and incentives” Bernie Sanders, U.S. Senator Senator Bernie Sanders said Trump’s plans were a losing proposal, in part because Carrier will still transfer 1,000 jobs to Mexico. Trump failed to save all 2,100 jobs, as he promised, Saunders said. Carrier “took Trump hostage and won,” Sanders said in an op-ed he wrote for The Washington Post. Trump endangered other U.S. jobs, Sanders said, “because he has signalled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives.” AFP
Airlines
M&A
Cyber theft
Australia, China agree to open aviation market
Li Ka-Shing is said to offer US$5.4 billion for Duet
Philippines seeks Bangladesh help on US$81 million heist
Australian and Chinese governments have settled arrangements to open up the aviation market between the two countries, the Australian Minister for Infrastructure and Transport Darren Chester and Minister for Trade, Tourism and Investment Steven Ciobo said in a statement yesterday. The statement said the new arrangements will remove all capacity restrictions between Australia and China for each country’s airline, allowing Australian tourism businesses to take advantage of the largest and fastest growing consumer market in the world. “We have also liberalised traffic rights and code share arrangements, which are important for Australian airlines. This will enable Australian and Chinese airlines to service destinations between and beyond both countries, and will allow them to take full advantage of their cooperative arrangements with their commercial alliance partners,” said Chester. The two countries have seen a boom of direct flights in recent months. Air China, China’s national flag carrier, started its Chengdu-Sydney in November this year, while China Southern Airline is expected to begin its Guangzhou-Adelaide service in December. Australia’s flag carrier Qantas also announced to relaunch its daily service from Sydney to Beijing in January. Xinhua
Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. has offered to buy Duet Group at a premium of about 28 per cent in a bid to win control of the Australian infrastructure company’s pipeline assets, according to people familiar with the matter. The Hong Kong-based company made a conditional offer of A$3 a share for Duet last week, said the people, asking not to be identified as the details are private. The offer values Duet at about A$7.3 billion (US$5.4 billion), according to data compiled by Bloomberg. The board of the Australian company plans to consider the offer, the people said. Duet shares closed at A$2.35 in Sydney on Friday. The bid for Duet would be the latest attempt by Li to bolster his Australian business this year. The tycoon experienced a setback in August when the Australian government blocked CKI and State Grid Corp. of China from buying a majority stake in state-owned power network Ausgrid. Expanding his business in Australia would also help Li diversify away from the UK, the biggest profit generator for his flagship firm CK Hutchison Holdings Ltd., as Britain’s decision to split off from the European Union threatens to undermine the economy. Bloomberg News
The Philippines has asked Bangladesh to share details of its investigation into an US$81 million cyber-heist from the Bangladesh central bank after the proceeds ended up in Manila, the finance department said yesterday. Finance Secretary Carlos Dominguez and other Philippine officials “strongly recommended that Bangladesh share with the Department of Justice and the Anti-Money Laundering Council the results of their investigation into the cyber-heist,” a statement said. This would help speed up recovery efforts in the courts, it added. Last month the Philippines said it had launched criminal proceedings against six Filipino bankers accused of failing to stop the laundering of the money. The complaint also cited the Filipino respondents’ alleged “deliberate refusal to know the unlawful origins of the funds”. No one has been arrested in the Philippines over the heist but the government has recovered US$15 million, some of it from a Manila-based casino operator who has pledged to cooperate with the criminal enquiry. Philippine law exempts casino transactions from scrutiny by the country’s anti-money laundering council unless a case has been filed in court. AFP