Soft opening for Legend Palace by Chinese New Year Gaming Page 6
Tuesday, December 13 2016 Year V Nr. 1193 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm MICE
Development of city’s MICE industry faces barriers, say industry experts Page 4
Retail
Shopping edges out gaming in Singapore tourism industry Page 6
www.macaubusinessdaily.com
Lending
Millennials abandon Chinese money-saving culture Page 12
Hong Kong
Financial head resigns opening options for Chief Executive election Page 11
House of Cards Trial
It was the second day of his corruption trial. Former Prosecutor-general Ho Chio Meng denied involvement in a criminal association. Or that he had used a property rented by the Public Prosecutor’s Office for personal purposes. Although conceding using the house for a further year and a half after its contract had run out. Page 2
Tax havens under fire
Resident and commercial property loans down
Tax Neighbouring Hong Kong has made it. To the top 15 of the world’s corporate tax havens, according to Oxfam International. The group’s local representative says offshore money parks damage economies. And demands increased transparency and management standards. Page 3
New loans for residential mortgages plummeted 46 pct m-o-m in October. Posting MOP2.9 bln, despite a 16.3 pct y-o-y increase. Loan approvals for commercial real estate fell 31 pct, to MOP6.2 bln. A 32.6 pct y-o-y decrease vis-a-vis loans approved for commercial real estate.
One China, one policy
Loans Page 5
HK Hang Seng Index December 12, 2016
22,433.02 -327.96 (-1.44%) Worst Performers
Li & Fung Ltd
+3.21%
CNOOC Ltd
-0.39%
Belle International Holdings
-4.95%
Cheung Kong Property
-3.12%
PetroChina Co Ltd
+0.55%
Hang Seng Bank Ltd
-0.41%
China Merchants Port Hold-
-3.90%
China Mengniu Dairy Co Ltd
-2.74%
AIA Group Ltd
+0.23%
Power Assets Holdings Ltd
-0.55%
China Unicom Hong Kong
-3.81%
Hengan International Group
-2.63%
China Petroleum & Chemical
+0.18%
Cheung Kong Infrastructure
-0.69%
China Life Insurance Co Ltd
-3.60%
Sun Hung Kai Properties Ltd
-2.47%
Lenovo Group Ltd
-0.21%
Hong Kong & China Gas Co
-0.71%
China Shenhua Energy Co
-3.35%
CITIC Ltd
-2.36%
17° 24° 14° 21° 13° 18° 13° 16° 16° 17° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
US-China relations Officials and media commentators are adamant. Authorities won’t abandon the One China policy. Guiding relations with self-ruling Taiwan. Essential, says the PRC, for continuing carefully managed Sino-US relations. Page 16
2 Business Daily Tuesday, December 13 2016
Macau
Crime Former top prosecutor denies using a residence in Cheoc Van, maintained with public funds, for personal use
The case continues Former Prosecutor Ho Chio Meng denies being the ‘boss’ of an alleged criminal association and having a strong friendship with the businessmen involved Nelson Moura nelson.moura@macaubusinessdaily.com
A
t the second hearing of his trial, former Prosecutorgeneral Ho Chio Meng denied any criminal association charges and that a residence in Coloane with rent and maintenance paid for by the Public Prosecutor’s Office was for his personal use. The former top official currently faces 1,970 charges, with allegations of having diverted a total of MOP76 million (US$9.5 million) from the Public Prosecutor’s coffers. “This is a case of life and death for me (…) I spend most of my waking hours reading the process,” stated the former prosecutor during the hearing.
Boss, Captain, Tai Lou and Sio Choi
Yesterday’s trial session saw the prosecution attempt to show evidence of criminal association with the purpose of earning illicit gains through the granting of public contracts of services and procurements by the Public Prosecutor’s Office since 2000.
“This is a case of life and death for me (…) I spend most of my waking hours reading the process” Ho Chio Meng, former Prosecutor-general According to the accusation, Mr. Ho established a criminal enterprise with his brother, Ho Chio Shun, and brotherin-law as well as other associates. The alleged association operated from the 16th floor of the ‘Hotline’ building in NAPE which housed the former prosecutor’s office, and created a total of 10 shell companies between 2006 and 2014, receiving some MOP50 million in benefits from the Office’s public contracts. The accusation states that Wong Kuok Wai and Mak Im Tai and their wives opened bank accounts to operate from the companies’ funds, with the money being transferred to Ho Chio Shun’s accounts. Ho denied issuing instructions for the contracts to be delivered to the
network of companies and any strong friendships with the businessmen involved. As evidence, the accusation stated that wiretap information collected since 2015 showed that after Mak Im Tai believed himself to being ‘chased’ he only contacted Ho by phone. “Mak Im Tai worked in China as a junket operator debt collector so it could be normal he felt like he was being chased. I think it’s a natural instinct that kicked in for him to call me,” Mr. Ho stated. The prosecution also attempted to prove a connection through the alleged nicknames used by the defendants, with Mr. Ho referred to as ‘Boss’, Ho Chio Shun as ‘Tai Lou’, Wong Kuok Wai as ‘Captain’ and Mak Im Tai as ‘Sio Choi’. “It’s normal that employees treat their superiors as ‘boss’, although most called me Mr. Ho. My brother is the Tai Lou (Big Brother) so it’s normal to be called that,” Mr. Ho stated, adding that apart from some meetings he didn’t know the other businessman. The prosecution also presented two papers found in Mr. Ho’s residence in which he addressed the defendants by their known nicknames, also showcasing a police report that indicated the calligraphy demonstrated a ‘70 to 80 per cent’ chance of it being by the top prosecutor. Mr. Ho stated to “not have any idea who wrote the note” and that a calligraphy test is not accurate with “only 150 characters” for evaluation.
from Zhongshan, Zhuhai and Foshan who had stayed in the residence for official purposes. During the 14 years the house was in the public domain and, according to the accusation, changes made to the house revealed personal use, such as the installation of an aquarium, a sauna, and the garage area turned into a cabinet with a wine cellar. The former top official admitted changes were made but only after the house lease contract finished in December 2014, with Mr. Ho saying the rent remained unpaid for a year and five months, and that he intended to purchase the house. However, the former prosecutor
considered that he “had committed a mistake” by not informing the current prosecutor, Ip Song Sang, of the residence’s existence after his tenure had finished. “Some prosecution delegates saw the house and asked if I had bought it. Of course I said I hadn’t and said it was the property of the Prosecutor’s Office. Maybe I should’ve invited them for a barbecue there. That way maybe I wouldn’t now be accused,” said Mr. Ho during yesterday’s trial session. It was after the arrest of the former prosecutor that the house owner filed a complaint with the Prosecutor’s Office for an eviction order, after which Mr. Ho’s belongings were found in the property. The high profile trial continues on Wednesday.
Graft
Public Prosecutor’s image affected by predecessor’s trial The MSAR’s incumbent Prosecutor-general, Ip Song Sang, said that the ongoing trial of former Prosecutor-general Ho Chio Meng has had a negative impact upon the credibility, image and morale of the Public Prosecutor’s Office (MP) in the city, according to local Chinese broadcast media TDM Radio. Ip said that the MP would have to overcome difficulties in handling the trial, stressing that Ho’s case does not
involve any political persecution and that the MP only obeys the law of the MSAR, following all necessary legal procedures accordingly. Ip revealed that the renovation project for the new MP administrative office in the ‘Hotline’ Building located in NAPE has now been completed. The area had previously been in use by the former Prosecutor-general for his personal use on a lease contract. A.L.
A house in Cheoc Van
During the second hearing Ho stated that a residence in Cheoc Van was only used for receiving official MSAR guests and not for personal use but admitted not having paid rent on the property for one year and five months. The residence involved MOP46,000 monthly rent; according to the accusation the prosecutor used the residence since 2006 for his personal use, with total expenses of public funds for maintenance and rent amounting to MOP5 million, with three construction changes worth MOP710,000. Questioned why the house was used to receive Mainland China representatives, Mr. Ho stated a hotel room “wouldn’t have been proper” and that it “is common practice in Mainland China”. The former prosecutor presented a series of names of representatives
Memorandum
Anti-money laundering M.O.U in the works The Secretary for Economy and Finance, Lionel Leong Vai Tac, is to ink a memorandum of understanding with authorities from Morocco to help in the prevention of money laundering and terrorist financing activities by facilitating the exchange of financial information between the two territories, according to a dispatch posted in the Official Gazette yesterday. Apart from the Secretary
receiving authorisation to ink the deal from the Chief Executive, the dispatch reveals that the Financial Intelligence Office (GIF) could be commissioned by the Secretary to represent the MSAR as well. The local government has inked similar memorandums with Israel, China, Hong Kong, Japan, Singapore, Indonesia, Thailand, Malaysia, Fiji, Russia and Australia. C.U.
Business Daily Tuesday, December 13 2016 3
Macau Employee Mobility
High mobility in local workforce A survey shows 60 per cent of local employees worked for less than three years for the same employer this year
I
n a recently released report by the Macau Management Association (MMA), entitled the 2016 Macau Residents’ Employment Mobility Survey, results indicate that about 60 per cent of respondents had worked in the same company for less than three years, according to local Chinese broadcaster TDM Radio. The survey results reflect that the city’s mobility in local employment is high on average, given the demographics of the respondents of the survey, comprising 1,308 local resident interviews of individuals aged 21 to 35. The survey indicates that more
respondents plan to change their current jobs than last year, an increase of 12.3 percentage points compared to the previous year’s study results. The main reasons mentioned by the respondents for changing their jobs were dissatisfaction with their pay and benefits as well as stress in the workplace, according to the survey results. The survey reveals that more than 60 per cent of respondents have not been promoted in the past two years and of this group about 30 per cent have never been promoted at work. The MMA explained that the lack of promotion in the workplace is mainly due to the downturn in
the economic situation in the city, causing many enterprises to suspend business expansion or reduce their size of operations. The survey shows that male respondents tend to change jobs more frequently than their female counterparts. The MMA recommended that
local companies regularly review and improve their remuneration and employee benefits as well as establishing communication channels for employers and employees to express their views in the workplace in order to improve retention. At the same time, the MMA suggested the government introduce a 12 hourschool lesson on career planning education for local high school students to develop an ability to set goals for their future career path. A.L.
Tax havens
Oxfam pinpoints world’s corporate tax havens Bermuda, the Cayman Islands and the Netherlands are the top three corporate tax havens, according to the latest research published by Oxfam International. The Head of the Hong Kong, Macau and Taiwan Programme for Oxfam, Kalina Tsang, voiced her thoughts on why governments should halt the abuse of tax havens by multinational corporations. “They transfer profits to places with little or no economic activity and
offer low or zero rates of corporate tax,” Tsang claimed. The research uncovers that some of the worst culprits are countries with reasonable nominal corporate tax rates. Following the aforementioned countries, Switzerland, Singapore, Ireland, Luxembourg, Curaçao, Hong Kong, Cyprus, the Bahamas, Jersey, Barbados, Mauritius and the British Virgin Islands are top the world’s tax havens, according to research
compiled by the watchdog. “To enhance transparency and management standards, Oxfam Hong Kong has been advocating the use of Environmental, Social and Governance criteria among listed companies,” said Tsang. “This includes publishing data on tax compliance and detailed tax information.” According to calculations by the United Nations, at least US$100 billion (MOP799 billion) is being diverted from poor countries every year by
multinational corporations via tax dodging activities. The latest Oxfam research also reveals that countries across the globe are cutting corporate tax bills for investment competition. The average corporate tax rate across G20 countries was 40 per cent 25 years ago whilst the rate is currently less than 30 per cent, according to data provided by Oxford University. With the cut in corporate tax bills, governments seek to reduce public spending or increase taxes, such as VAT, to balance government expenses. C.U.
4 Business Daily Tuesday, December 13 2016
Macau Opinion
Albano Martins*
Seeing beyond the end of our nose! With the transition, gaming exploded, in a city forced to make a reserve of MOP10 bil lion (almost a year of public expenses at the time), being in a continuous recession, with unemployment levels of 7 per cent. The real estate bubble, created by Chinese capital in the 1990s, had been ‘encouraged’ by public hardships, brought on by a dreadful lack of public revenue. It lasted until China closed the faucet a few years later. And just woke up, after the liberalization of the game! That made real estate explode by more than 16 times its real value. No healthy economy can grow in such an artificial way, against its population and against common sense. As it had happened in the 90s, with public hardships. When in June 2014, China decided to close the tap, the real estate bubble shivered. Today, at the end of 2016, the outlook for Macau’s economy is at a crossroads. Many cities in the world would like to be in the same situation as Macau. It was predictable that after so much exponential growth the market would be depleted in terms of human resources and the city strangled. With the option now taken, and well, of intending to guide the game to the slope of the masses, it was necessary that as a precaution everything be prepared for that desired volume of visitors. The infrastructure should have been designed in advance, the urbanism thought out and the solutions found before. A necessary adventure but not for today that will end the quality of life of local citizens . . . Everyone knew that the new bridge would knock on the door, that the light metro had to be completed prior to that, that parts of the city would have to be closed to traffic if the idea was to have mass quality and diversified tourism. Attached to fear, to the problems that may arise from any decision, it was chosen not to confront them, leaving the city hostage to a runaway concept that will never make it more friendly to its residents, environment and visitors. Solutions are shouted for more studies or for more public consultations. The streets are sometimes dug up several times a year, creating problems never quantified from a cost benefit analysis for the quality of life of our population, and no alternatives and definitive solutions discussed. But is it so hard to see a little bit more than the end of our nose? * an economist and contributor to this newspaper
MICE
Motivating MICE High costs of MICE events, the lack of human resources and the city’s transportation system are the major obstacles in the way of developing a local MICE industry. However, branding strategies and taking advantage of the city’s integrated resorts infrastructure can facilitate the development of Macau MICE industry further, suggest MICE experts Annie Lao annie.lao@macaubusinessdaily.com
T
he challenges faced by the city’s meetings, incentives, conferences and exhibitions (MICE) industry revolve mostly around a poor transportation system, the high cost of running MICE events in the city and a lack of human resources, says Lo Tak Chong, Managing Director of MACEEXPO Exhibition Co. Ltd. Lo made the comments on the sidelines of the Macao MICE Industry - Road to Innovation Forum held by the Macao Convention and Exhibition Association yesterday. “These issues need to be resolved in order to increase the competitiveness of the Macau MICE industry in the global market,” Lo said. However, according to the industry expert, Macau has a unique advantage given that it can accommodate thousands of people coming to the city due to the necessary availability of hotel rooms. Nevertheless, Lo says that one of the important things Macau needs to work on right now is the city’s transport system, which should be made convenient and simplify visitors’ arrival to Macau. “Although Macau is a small city with many places within walking distance, it’s still not convenient for outsiders to come to Macau. Once the Hong Kong– Zhuhai–Macau Bridge is completed it will be a development opportunity for the Macau MICE industry,” Mr. Lo explained. Mr. Lo also suggested that more venues be provided in Macau, especially venues for holding exhibitions, which Lo describes as currently lacking in number. “Currently, the city has sufficient venues for holding meetings but the availability of venues for running exhibitions is not enough,” he says. Lo further explained that holding exhibitions in Macau could bring in many economic benefits across many different industries for the local economy whilst holding meetings do not necessarily have the same positive effect as “only certain companies can gain these benefits.” According to Mr. Lo, the city recorded double the number of participants coming to Macau for MICE events in the third quarter of this year compared to last year. Aside from venues, the lack of human resources and high cost of employees in the city may make Macau less attractive for holding MICE events, Mr. Lo pointed out. “When compared to the rental prices of MICE venues in our neighbouring regions such as Beijing, it costs only about MOP19 (US$2.4) per square metre in a big city like Beijing with about 30 million people. However, Macau has only about 600,000 people and the rental price of venues already costs around MOP24 to 27 per square metre,” Lo said. Despite the challenges, he noted his support of the MSAR Government in emphasising the development of the local MICE industry in order to diversify the economy to achieve long-term sustainability.
Regional co-operation
Government involvement and regional co-operation are important to drive the development of the local MICE industry further, notes Kitty Wong, Vice President of the Taiwan Exhibition and Convention Association, one of the speakers at yesterday’s event. “Macau is a small region. Therefore, it is important for Macau to work with nearby regions such as the Greater Pearl River Delta zone and Taiwan,” she said. Wong suggested Macau look at what
its competitors’ weaknesses are and then start to promote its strengths in order to attract more participants and organisers.
Going green
One of these avenues could be in sustainability, as Wong points out, noting that going green in the MICE industry is essential and is an important niche given the importance attributed to it in the local government’s MICE promotions so far. “Going green in the MICE industry can be achieved by the MSAR Government setting up policies for recycling waste in the city [although] it will take time for Macau,” Ms. Wong concluded. Another speaker, Noor Ahmad Hamid, Regional Director (Asia Pacific) International Congress and Convention Association (ICCA), also agreed
with Ms. Wong that Macau could promote itself as a green city, given that Macau has integrated resorts, which can accommodate MICE events within walking distance of each other without resorting to public transport.
New branding
Hamid pointed out that Macau is still new to the MICE industry, suggesting a branding strategy to bring in more local professionals and leaders. The objective: hold forums sharing the professionals’ expertise and promote networking in order to attract participants and organisers from overseas. “Local experts and leaders from organisations in the local business community can also be the main attraction for Macau. It can help market the city as a new destination for holding MICE events in the world,” Mr. Hamid said. Gene Capuano, Vice President of Convention and Exhibition Operations Venetian Macau Ltd., and a speaker at the forum, revealed that Sands China Ltd. has planned a number of projects coming up over the next year, with special invites to local SMEs (Small and medium-sized enterprises) for their participation. “This is to show that we continue to provide support for the local SMEs to develop. More relevant information will be released soon,” Mr. Capuano added.
Business Daily Tuesday, December 13 2016    5
Macau
Property
Local property loans dip in October The latest AMCM data also reveals that outstanding values for residential mortgage loans remained unchanged whilst commercial real estate loans increased m-o-m Cecilia U cecilia.u@macaubusinessdaily.com
I
n the month of October, new approvals of residential mortgage loans and commercial real estate loans both saw decreases, according to the latest statistics data released yesterday by the Monetary Authority of Macao (AMCM). New loans for residential mortgages approved by local banks decreased 46.5 per cent in October to MOP2.9 billion (US$343 million) compared to the month of September. However, the overall number of new approvals had increased 16.3 per cent when compared to the same period last year. Of total new residential mortgage
loans, 97.9 per cent went to new loans for residents, which saw a 47 per cent drop from a higher comparison base in September to MOP2.8 million. Residential mortgage loans to nonresidents, meanwhile, saw a decrease of 5.2 per cent. AMCM’s latest data reveals that new loans for residential mortgages collateralised by uncompleted flats registered an increase of 6.6 per cent month-on-month to MOP269.5 million. On a yearly comparison basis, the number of new equitable mortgage approvals dropped 14.4 per cent. Local residents contributed 97.5 per cent of the total equitable mortgage, posting a 3.9 per cent increase monthon-month, according AMCM data. Meanwhile, the total number
of loan approvals for commercial real estate decreased 31.3 per cent from a higher comparison base in September, to MOP6.2 billion. When compared to the same period last year, new approvals of commercial real estate loans registered a decrease of 32.6 per cent.
Outstanding balances and delinquency ratios
The outstanding value of residential mortgage loans, by the end of last October, reached MOP178.6 billion, which stayed virtually unchanged when compared to September. Nevertheless, the outstanding value in October saw an increase of 4.9 per cent year-on-year. The latest data also shows that the total outstanding value of residential mortgage loans to locals contributed 93.7 per cent of the total, indicating a slight growth of 0.2 per cent month-on-month. For the value of non-residents, the number dropped 2.1 per cent
compared to the number posted in September. On the other hand, the outstanding value of commercial real estate loans was MOP171.5 billion in October, posting a 1 per cent month-on-month or 7.3 per cent year-on-year increase. Of the total, residents accounted for 89.1 per cent of loans, up 1.2 per cent month-on-month. Foreigners, meanwhile, saw a decline of 0.4 per cent month-onmonth regarding contribution of the total outstanding value of commercial real estate loans. By the end of last October, the delinquency ratio for residential mortgage loans was 0.15 per cent, showing an unchanged pattern compared to a month ago but increased by 0.07 percentage points year-on-year. The ratio for commercial real estate loans was 0.09 per cent, posting a decrease of 0.02 percentage points month-on-month but increasing 0.08 percentage points compared to the same month last year.
6 Business Daily Tuesday, December 13 2016
Gaming Hotels
Soft opening for Legend Palace Hotel in January Cecilia U cecilia.u@macaubusinessdaily.com
L
egend Palace Hotel, the latest project by Macau Legend Development Ltd.’s Co-chairman, Executive Director and Chief Executive Officer David Chow, will start trial
operations in mid-January, taking advantage of the Chinese New Year period, according to statements by the gaming mogul, reported by local Chinese newspaper Macao Daily. Located opposite Oceanus - SJM’s newest property at the end of the Fisherman’s Wharf complex, near Macau Ferry Terminal - the Legend
Palace Hotel is currently undergoing inspections by various government departments. The Executive Director indicated that some 200 rooms will be provided by the new hotel, expressing that the hotel market on the Peninsula still presents opportunities. Chow commented that he perceives
a necessity for the new hotel to dovetail into the notion of the city as a World Heritage and Cultural Centre.
Applying for exhibition hall
Mr. Chow also affirmed his intention to obtain approval to include an exhibition hall in the new project, also within the group’s intentions to follow the city’s plan of developing conference and exhibition spaces. According to Macao Daily, the application - to obtain approval to build an 80,000 square foot exhibition hall - would be submitted next month.
Building breakwaters
Mr. Chow said that Fisherman’s Wharf will be applying for approval to build breakwaters within the week, noting that some 40 yachts will be able to dock once the construction of auxiliary facilities is completed. He also told Macao Daily that the wharf has inked friendly agreements with several companies based upon the development of the Free Yacht Travel Scheme. With the recent tourism promotion of the Chinese city of Qingyuan in the MSAR, Chow commented that the market potential of the yacht scheme could continue to grow if it extends its market from Qingyuan via Foshan, Gaoming and Zhongshan to Macau.
Competition
Singapore casinos are so 2015 as tourists go shopping instead by David Roman
Singapore’s casinos are so 2015. After luring tourists for half a decade, they’re now losing out to the mall. Shopping has overtaken gambling as the biggest earner in Singapore’s tourism industry for the first time since 2012, surging 44 per cent in the six months through June from a year ago, official data show. It’s most likely thanks to first-time Chinese visitors, according to HSBC Holdings Plc, as the nation’s travellers continue to fuel growth in Singapore’s tourism industry. Some 2.1 million Chinese visited Singapore last year, more than double that of 2009 -- the year before the city-state opened the first of its two casinos. Among all
visitors, those from China, Indonesia and India were the top three spenders in the second quarter of 2016, clocking up 40 per cent of all tourist receipts. Shopping comprised a quarter of total spending, from 18 per cent a year earlier. Devoting a large chunk
of one’s visit for shopping expenses is “what first time visitors do,” said Erwan Rambourg, global co-head of consumer and retail research at HSBC in London. Casinos have been a major draw-card for Chinese tourists to Singapore and it remains to be seen whether
shopping will continue to outpace gambling. They are still the biggest spenders, forking out US$1,205 (MOP9,630/HK$9,350) each in the city-state last year, just ahead of Thai visitors. Chinese travellers spent a whopping S$1.15 billion (US$807 million) shopping in Singapore last year, which compares with S$112 million for Japanese and S$175 million for Indians. They also spent the least on food and accommodation, a trend that’s little changed so far this year.
Not all good
Tourism is helping Singapore at a time of uncertainty for the trade-dependent country, whose economy grew at the slowest pace since 2009 last
year. However, the growth in overall receipts is coming at the expense of average spending per tourist, which declined slightly in the first half from a year earlier. That’s partly down to the growing crowds of Chinese traveling on the cheap. The number of them on budget tours who are entering Singapore by land from Malaysia is rising at an annual clip of around 55 per cent, said Deborah Aitken, an analyst with Bloomberg Intelligence. “This news is not all good. Some of these tourists are on overland tours and therefore taking in cheaper markets as well as Singapore’s highend malls, unlike the higherspending visitors who arrive by air,” Aitken said. Bloomberg
Editorial
Asia’s gambling binge looks fun, may end in tears A m i d m u ch p r o t est, Ja p a n ’ s lawmakers are considering a bill this week that would open their doors to opulent gambling houses. Analysts have dubbed it “manna from heaven” and the “holy grail.” Yet as any gambler will tell you, appeals to the divine are a sure sign of a weak hand. Japan’s casino project, like Asia’s gambling binge in general, is unlikely to end well. The current vogue in the casino business is for “integrated resorts,” or multibillion-dollar goliaths designed to lure out-of-towners and offer them a variety of ways to spend -- shows, shopping, baroque dining -- beyond gambling. This model generally makes casinos more profitable, less dependent on high rollers, and better able to withstand economic ebbs and flows. For governments, too, it’s an appealing prospect. In theory, foreigners will drop their cash, boost the local
economy and take their problems home with them. Developers can be prodded to improve local infrastructure and to include space for conferences and exhibitions. This is what Japan has in mind. It’s a hard dynamic to sustain.
So much supply
For one thing, the Asia-Pacific region is already brimming with such resorts, from Singapore to Saipan, Vietnam to Vladivostok. New ones are on the way in the Philippines and South Korea. Macau has some three dozen and counting. Studies show that increased regional competition can drive down revenue for established casinos, as you might expect, and drawing outof-towners becomes much harder when they have options closer to home. As the U.S. has lately learned, this leads to some very unhappy endings for areas that can’t compete. Another problem is that many of
these new resorts are pursuing the same customer: the Chinese tourist. With China’s economic growth sluggish and the yuan weakening, that’s not the sure bet it once was. The Chinese government is cracking down on foreign casino companies trying to recruit local gamblers. And it is keen to discourage capital flight, which means it may further tighten rules on spending overseas. Even under the best conditions, moreover, casinos rarely live up to the hype. Although they can produce a short-term economic boost, on average the effect dies out quickly. Taxing gambling might seem like a painless way to bolster budgets, but casinos can actually be a net drag on public revenue when social costs are factored in. What public income they do collect tends to be regressive. Without precautions, they can lead to a host of other ills, including lower property values, increased problem
by The Editors (Bloomberg View)
gambling, higher bankruptcy rates and more crime. Japan faces some distinctive risks of its own. Nearly 5 per cent of its adult population is addicted to gambling, according to government figures, a much higher rate than in other rich countries. A strong yen may discourage foreign tourists, and slots and craps are unlikely to alleviate the country’s chronic lack of demand, especially if they simply draw revenue from ubiquitous pachinko parlors. Not incidentally, most of the Japanese public opposes the measure. The best argument in favor of any casino is that gambling is fun. In many parts of Asia, it’s a way of life. If the public approves, and is fully informed about the social costs, it should be legal. But don’t be a sucker: The benefits of casinos are always oversold, just as the odds are always on the house. Bloomberg View
Business Daily Tuesday, December 13 2016 7
Macau
Door to the Chinese Film Industry
Toronto International Film Festival Director Cameron Bailey told Business Daily at IFFAM’s debut edition: “Any festival that can be a door to the Chinese industry is going to be hugely important”. Oscar-winning director Tom McCarthy said ‘Spotlight’ was the celebration of a craft at a masterclass that took place on Sunday at Wynn Macau. IFFAM’s Crouching Tigers Lab awarded four film projects seeking funding and distribution. The International Film Festival & Awards Macau Award winners are to be announced at tonight’s closing night gala at Macau Cultural Centre.
8 Business Daily Tuesday, December 13 2016
Greater China
1st International Film Festival and Awards Macau
Asia “The most exciting film region in the world” Toronto International Film Festival Director Cameron Bailey spoke with Business Daily on the sidelines of Oscar-winning director Tom McCarthy’s masterclass Cláudia Aranda
“
M
acau is uniquely situated, being a part of China, but owning its unique identity. This is the region in the world that the entire global film industry wants to get closer to and understand better and to work with. I think any festival that can be a door into the Chinese industry is going to be hugely important”, Toronto International Film Festival Artistic Director, Cameron Bailey, told Business Daily on the sidelines of Oscar-winning director Tom McCarthy’s masterclass on Sunday in Wynn Macau. The Canadian film critic and festival programmer considers Asia “the most exciting film region in the world” and suggested the Macau Film Festival could be a door to the Chinese industry and to a world that everybody wants to understand.
“I spend a fair amount of time in this region; I’m in Beijing or Shanghai every year, I go to Hong Kong most years, and I go to other parts of Asia, too. I don’t know Macau very well; I’m getting to know it. I actually like the difference the Portuguese heritage provides because, you know, I spend some time in Lisbon, in Brazil, and it’s interesting to see the mix of an Asian culture and the Portuguese culture. I’m interested to see how that might affect filmmaking here as well”, he said. Toronto’s festival is well known as an Oscar launch pad, hosting as it has debuts of ‘The King’s Speech’ in 2010, ‘Slumdog Millionaire’ in 2009, ‘Room’ in 2015, ‘The Imitation Game’ in 2014, and ‘12 Years a Slave’ in 2012. Cameron Bailey is not expecting to find new films in Macau to launch at the Toronto festival held in September. “Most of our films are premieres, so what there is here
will be a bit too old by the time September comes around. But I am here because I was invited and I’m always curious to see what new festivals look and feel like in the first year - and I’m very interested in this region as well”.
Toronto, where audiences embrace the festival
He told Business Daily that he was here for the opening night. “I saw ‘Polina’, and I’ve seen a couple of other films so far, but I’m here mostly to meet colleagues in the film industry so I’m having meetings here with people who are making films and might be ready for our festival next September or just colleagues I know from the film industry. It’s been a good opportunity to see people as well”. The Canadian film festival director added that from the films he watched before coming to Macau and in the festival, the event is “well programmed . . . I had no doubt about the ability of the organisers to find very good films. Marco Müller’s [former IFFAM festival director] is one of the top festival directors in the world. Lorna Tee, [IFFAM head of management] is someone I’ve
known for many years, and she’s really professional”, he said. “The thing I’m always concerned about in the first years is the local audience, if there is a need or a demand for a film festival”, Bailey stressed. In the case of Toronto International Film Festival what makes the festival special and unique is the public audience. “There are roughly 500,000 attendees at the festival every year; the whole city really embraces the festival and people come from very far away to see the films there. And that’s what filmmakers like as well; people like Tom McCarthy come to our festival because they want to present their films to a public audience and theatres are full and they’re excited about that”. Each film festival has its own particular and unique characteristics: “In some cases it’s more the industrial element, where the sales happen; some focus more on certain kinds of cinema. I noticed [for example] that genre cinema is a key part of Macau’s festival. It really depends upon the curatorial - in terms of the audience, the media, the industry what is going to be the distinguishing characteristic”, he concluded.
Business Daily Tuesday, December 13 2016 9
Greater China
Industry Hub
Crouching Tigers, hidden benefits IFFAM’s Crouching Tigers awarded four film projects for their quality, with the new lab presented 12 projects seeking funding and distribution Cláudia Aranda
C
rouching Tigers Project Lab announced the winners of four cash awards of US$10.000 each, sponsored by Fox International Productions, which donated US$20.000, and Ivanhoe Pictures and China’s Huace Media, which each donated US$10,000 to outstanding projects.
The winners were announced on Sunday at the International Film Festival and Awards Macau’s Industry Hub that took place at Macau Science Center. The winning projects were ‘270 San Ma Lo, Macau’, set in the territory, by directors and producers João Pedro Rodrigues and João Rui Guerra da Mata, from Portugal; ‘Pintakasi’ by director Erik Matti
and producer Ronald ‘Dondon’ Monteverde, from the Philippines; ‘River Town’ by Chinese director Lu Chuan, considered one of the most talented of his generation, and producer Jamie Gordon, from the USA; and ‘Inspector Lou’ by director and producer Djo Munga, a project from Belgium and the Democratic Republic of the Congo. Philippines Director Erik Matti and producer Ronald ‘Dondon’ Monteverde, told Business Daily that this prize “really boosts the confidence in the project. Because of this recognition we are inspired to start the film as soon as possible
. . . We are half way in terms of investment and the reason why we are here is because we’re looking for potential partners. “It was nice when the opportunity came for us to present the project, and having recognition like this gives us a lot more courage to pursue it”, Matti stressed. The project is about a wanted terrorist hiding in the Philippines and the contentious highrisk mission of local soldiers [tasked with] capturing him”. ‘River Town’ producer - American Jamie Gordon – revealed that this is her first film in China, and that the experience of having meetings over the three-day run of the IFFAM Industry Hub was mostly like an “education process, to learn about the Asian film community and how things work in China and other countries”. Based upon New Yorker writer Peter Hessler’s memoirs of teaching in the remote Yangtze town of Fuling in the mid-1990s, Gordon said: “We’re thrilled to have a Chinese director of this stature. Lu Chuan obviously knows a lot of people in China, but for me this event has been very helpful”. The quality of the projects was “quite high”, the jury spokesperson, former artistic director of Locarno Film Festival Olivier Père, said, which is why the panel decided to award four instead of three projects, as previously announced, by splitting the total US$40.000 into four US$10.000 cash awards “. The new lab presented 12 projects seeking financing and distribution. Between 9th and 11th December filmmakers were able to interact with potential investors and distributors whilst pitching their projects.
Despite the current crisis within the media sector, McCarthy believes there is still room for good journalism and appealed to the public’s involvement, by selecting the information it consumes. “We the citizens really have to work to realise what’s going on there; we cannot be lazy, we have to do our part”, he said. McCarthy also spoke about the growing difficulties of the industry, in which superhero films are proliferating. “The market is shrinking”, he said.
“It’s getting harder and harder. I cannot blame anyone for making Marvel movies. All the actors I know are in [such films] at this moment, everyone I know is a superhero. I have resentments about that, but I hope we can continue to make films that are a little more adult in complexity”. McCarthy has received critical acclaim for his writing and direction work, and also for the independent films ‘The Station Agent’ (2003), ‘The Visitor’ (2007), and ‘Win Win’ (2011).
Masterclass with Hollywood filmmaker
Spotlight on Tom McCarthy Academy award winning director Tom McCarthy says his film ‘Spotlight’ is a celebration of the journalist’s craft Filmmaker Tom McCarthy underlined the importance of journalism, which figures strongly in the film ‘Spotlight’ (2015). It won the Academy Award for Best Picture, secured McCarthy the Academy Award for Best Original Screenplay, and was nominated for the Academy Award for Best Director. ‘Spotlight’ is a celebration of a
craft. [Today] there are many online experts, but they do no research, don’t interview people, they’re just publishing things online. That’s why we have to pay true journalists with experience to do their job”, the Hollywood movie director said at a masterclass held on Sunday at Wynn Macau. The film about a team of Boston Globe journalists who reveal the sexual abuse of children by the Catholic church, was not McCarthy’s first experience with the press world. In 2008, he starred in David Simon’s television series ‘The Wire’, playing Scott Templeton, a journalist of doubtful ethics. “David Simon was a journalist for 15 years, he loved writing, he loved newspapers, he loved the power of the press, he had great respect for what he represented”, the director recalled. It was from there that the respect for the profession arose: “It’s a vocation, [journalists] don’t get rich, most don’t get famous, they don’t have films made about them. But it’s something in their DNA; they have to know the truth, they have to - I think this is unbelievably noble”.
10 Business Daily Tuesday, December 13 2016
Greater China
International Film Festival & Awards Macau (IFFAM) photo gallery
Highlights from the six-day IFFAM debut edition
Business Daily Tuesday, December 13 2016 11
Greater China Chief executive election
Hong Kong’s finance chief resigns, signalling run at top job Tsang enjoys the highest approval ratings among the city’s top officials David Tweed
H
ong Kong’s financial chief John Tsang resigned, signalling that he’ll run to become the city’s chief executive in the first leadership contest since mass pro-democracy protests two years ago. Chief Executive Leung Chunying said yesterday that he received Tsang’s resignation and submitted it to authorities in Beijing. Tsang’s office didn’t immediately respond to a request for comment. K C Chan, secretary for financial services and the treasury, will be acting financial secretary when Tsang goes on leave on Tuesday, the statement said. Leung unexpectedly announced last week that he wouldn’t seek a second term because of pressure on his family. His departure cleared the field for rivals who might have been
reluctant to challenge the incumbent chief executive in March, when a committee of political insiders meets to select his successor. Leung’s tenure has been marred by escalating protests against China’s stewardship over the Asian financial hub, which guaranteed independent courts and a free press under a “one country, two systems” framework. Tsang, 65, has served as finance secretary since 2007. He has long enjoyed the highest approval ratings among the city’s top officials, scoring 63.1 out of 100 according to a Dec. 7 survey by the University of Hong Kong’s Public Opinion Program.
‘Common ground’
In recent comments on his blog, Tsang said values such as freedom, openness, diversity and rule of law were the foundation of Hong Kong’s success and should be defended. He
called on Hongkongers to bridge escalating social and political divisions. “If we have a peaceful atmosphere and a harmonious environment, we can seek common ground while reserving differences on the basis of mutual trust and honesty,” he wrote. The chief executive will be selected by a committee of 1,200 electors. The winner will be subject to approval by the National People’s Congress in China. Other potential candidates include Carrie Lam, Leung’s chief deputy, who said Saturday she would reconsider her decision to retire when her current term ends in June. Her office wasn’t immediately available for comment.
‘The chief executive will be selected by a committee of 1,200 electors’ Regina Ip, a lawmaker who more than a decade ago led a failed effort to pass a strict national security law, is expected to announce her candidacy Thursday. Former judge Woo Kwok-hing, 70, threw his hat into the ring in October.
‘China’s favourite’
Hong Kong Financial Secretary John C. Tsang. Lusa
Lam actively campaigned to get China’s electoral reform package through the Legislative Council in 2014, a move that would’ve earned her goodwill in Beijing despite its failure to pass, according to Danny Gittings, an associate law professor at HKU Space and author of “Introduction to the Hong Kong Basic Law.” Her refusal to consider running while Leung was weighing his decision showed her loyalty, he said. “She would be China’s favourite because she is perceived as being tough but also reasonably popular, whereas John Tsang might be popular, but not considered hard line enough,” Gittings said. Bloomberg News
Debt obligations
Mainland’s bond default risks set to rise in 2017 Shu Zhang and Matthew Miller
China’s bond market will see more defaults next year even as the government steps up support for state firms struggling with high debt obligations, domestic rating firm China Chengxin Credit Management Co Chairman Mao Zhenhua said. “Next year, the risk (of bond defaults) will be even greater than this year,” Mao told Reuters over the weekend. He said that while many companies would eventually pay their obligations, they may require a “restructuring or government rescue”. More than RMB4.3 trillion (US$621.9 billion) worth of bonds will mature in 2017, China Chengxin said earlier this month. Alongside short-term debt expected to be issued next year, the total size of maturing bonds may reach RMB5.5 trillion. Since the first bond default by a corporate issuer in 2014, there have been 85 defaults totalling more than RMB37 billion, the rating agency said. Investors are concerned about the creditworthiness of Chinese companies who have financed their operations with cheap loans and debt and are now struggling to repay as profits fall. Mao dismissed criticism that domestic ratings firms were too
“optimistic” and provided higher ratings to domestic companies than some investors believed they deserved. “Credit ratings are about accuracy,” he said. “It doesn’t mean the lower (the ratings), the better (the risk assessment).” China’s credit ratings market has been dominated by big domestic players, led by China Chengxin, China Lianhe Credit Rating Co and Dagong Global Credit Rating Co.
Key Points More firms may need restructuring or govt bailout next year Total size of maturing bonds may reach RMB5.5 trln in 2017 Low foreign ratings of Chinese property developers proven wrong
International firms, including Moody’s Investors Service and Fitch Ratings, are only allowed to operate onshore through minority stakes in joint-venture operations. That may be changing as Beijing recently published draft foreign investment guidelines that could lead to fully opening its credit rating
market to foreign participants and raise investment in the US$7 trillion bond market. Mao said foreign rating agencies have held a poor view on China, reflected in the ratings of local property developers. “For more than 10 years, they gave domestic real estate firms very low ratings. It’s become a miracle in the world of bond ratings. Those firms paid high interest for a long time but never defaulted. It proves those ratings were wrong.” Mao, a former policy researcher working for the State Council, China’s cabinet, left his government job and founded the country’s first credit rating agency, China Chengxin, in 1992. Moody’s acquired a 49 per cent stake in its subsidiary China Chengxin International Credit Rating Co in 2006. China Chengxin has a 35 per cent to 40 per cent share of the domestic market, Mao said, with annual revenue estimated at about RMB700 million. Mao is not daunted by rising foreign competition. “If they were allowed to independently operate in China, their ratings capability would not be as great as ours. After all, we have been in the market for 25 years,” Mao added. Reuters
In Brief Monetary policy
C.bank adviser see no need to raise rates There is no need to raise interest rates in China, nor is it likely, at the current time, an adviser to the People’s Bank of China said in an interview with the financial newspaper China Business News yesterday. The urgent priority now is to stabilise yuan expectations and break the currency’s one way downward trend, Sheng Songcheng was quoted as saying. A depreciating yuan may prompt firms to pre-emptively purchase FX for short-term foreign debt repayment, adding to the yuan’s downward pressure, Sheng said, according to the newspaper. Think tank
Government should target 6.5 pct growth in 2017 China should set an economic growth target of around 6.5 per cent for 2017, although it is very likely that it will be able to exceed that level, the State Information Centre said yesterday. The State Information Centre is an official think tank affiliated with the National Development and Reform Commission, a powerful economic planner. It suggested the growth target in an article carried in the China Securities Journal. Its recommendation comes as top leaders prepare to meet this month to map out an economic and reform agenda for 2017 during an annual Central Economic Work Conference. Auto industry
Vehicle sales up in November China auto sales in November rose 16.6 per cent from a year earlier to 2.9 million vehicles, the sixth consecutive month of double-digit growth, the China Association of Automobile Manufacturers said yesterday. That compares with an 18.7 per cent rise in October and a 26.1 per cent rise in September. In the first 11 months of 2016, sales grew 14.1 per cent compared with the previous year, the association said at a briefing in Beijing. In October, the association raised its forecast for full-year 2016 growth to 7 per cent, from 6 per cent previously. Water supply
87 mln people in north drink “southern water” Water diverted from the Yangtze River in southern China has helped ease thirst in northern China for more than 80 million people, a senior official said yesterday. Water transported northwards from the Yangtze in the South-to-North Water Diversion Project has enabled 87 million people in Beijing, Tianjin and 33 cities in provinces including Hebei, Henan, Shandong and Jiangsu to get access to “southern water,” said E Jingping, director of the Office of the South-to-North Water Diversion Project Commission of the State Council.
12 Business Daily Tuesday, December 13 2016
Greater China
Borrowing habits
Meet the Ma family: How millennials are changing the way the Mainland thinks about money Consumer credit is up nearly 300 per cent over the last six years alone Engen Tham and Adam Jourdan
M
a Yiqing, 24, is typical of China’s younger generation - he uses his credit card frequently and borrows from online platforms to fund his shopping habits. In a pinch, he is happy to fall back on a lender closer to home - his mum and dad. Interviews with Ma, a single-child, his mother and grandmother, show how rapidly attitudes towards credit are changing as the millennials generation - roughly those aged between 18 and 35 - embraces debt like never before. The frugal attitude of previous generations produced the bedrock of China’s credit worthiness - household savings equal to some 50 per cent of GDP, one of the highest levels globally. Ma and his cohorts are changing that equation. Their willingness to borrow has driven up household lending - the fastest growing area of China’s debt. They are among the most indebted of their peers in Asia, taking on debt 18.5 times their income, significantly higher than their parents’ generation, a report from insurer Manulife shows. While their spending and borrowing is an opportunity for lenders, brands and economic growth, it is also a risk as they add to China’s fast-growing debt. Right now, Ma has a safety net - well-heeled and doting parents who can pick up the tab. He lives in a one-bed flat in Lhasa, the capital of China’s Tibet region. His parents
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are in nearby Shannan. “I’ll generally turn to mum and dad. They’ve always been able to help me financially,” said Ma. In May, he asked his parents for financial support to open a restaurant. “I just need to ask and they’ll give me (money).”
Clear gap
Parents paying off the credit card bills of their millennial children is not unusual in China, but it could have ramifications, said Rui Yao, an associate professor in personal finance at the University of Missouri. “They don’t see the consequences of not paying. The thinking is ‘my mom has it covered’”, she said. “They’re not prepared for an economic downturn for sure.”
Key Points New generation of young adults embrace debt like never before China’s millennials among most indebted of their peers in Asia For next generation, liabilities set to rise further Millennials often borrow beyond means Boost consumption, economy, but a risk for China’s debt
The next generations may not be so lucky either. They will have to support longer-living parents and potentially more children as China relaxes its one-child policy. China’s ageing population is already shrinking, which means greater financial pressure on those working to support those who are not. Ma says he is more frugal than his friends. He uses his bank card and Ant Check Later, a popular online
lending platform owned by tech giant Alibaba Group Holding Ltd. This is a far cry from his parents’ generation. Ma’s mother, who is 49, only started using a credit card three years ago. “They couldn’t spend on overdraft, so they really didn’t squander any money,” he said. The gap is clear: consumer credit is up nearly 300 per cent over the last six years alone, hitting around 23.5 trillion yuan (US$3.41 trillion) in October. This is set to more than double over the next five years to nearly 53 trillion yuan, according to consultancy Mintel. While mortgages are the lion’s share of household debt, credit card and consumer loans have shot up from just 4.6 per cent of household debt in 2015 to 16 per cent now, BMI Research shows. “The young generation today has a totally different attitude to my generation,” said Ma’s grandmother, Wei Chunyin, 76. She grew up in the 1960s and said she was in debt just once for 100 yuan, the equivalent today of US$14.50. “We were very economical and hardworking,” she said. “Clothing was just to wear, and we wouldn’t even really eat snacks, just food from our unit,” she said, referring to her workplace.
Growing force
Ma’s generation is the first in China’s modern history to be raised in relative prosperity and social stability. They are better educated and already more affluent than their elders. Boston Consulting Group and AliResearch said they are expected to drive 65 per cent of consumption growth until 2020, when they will make up around 53 per cent of total consumption spending, up from 45
per cent now. “Understanding their mind-set is critical and anybody ignores them at their peril,” Yum China Holdings Inc head Micky Pant said in an interview. Their potential has not been lost on the banks, with some specifically targeting them for loans. “Internally our appraisals are skewed towards the young consumer groups. For example, front-line sales staff get a bonus 1.3 times the normal level if they sign a young customer,” said a banker in the credit card department of China Merchants Bank, a leading credit card provider. “So everyone is out looking for youngster to sign up.” When asked about the strategy, CMB said it has many credit card products that are welcomed by young people. Bankers said lenders often know millennials have doting parents to fall back on in a pinch. “Taking a darker read on it, the parents of the post-90s generation - who were born in the 60s or 70s - haven’t yet retired, and are financially pretty secure,” said a debt collector in the credit card department of a listed city bank. Like other parents in China, Ma’s mother and father, a nurse and government officer at the local Meteorological Administration respectively, are resigned to supporting their son financially for now - even if he defaults. Ma’s mother, Zhen Yinchun, said that when she was young she saved around one-third of her income because there was little to spend it on, in contrast to her son. It is a running joke in the family whether Ma will return any money he has borrowed, she said. “I’ll say it’s a loan and he’ll agree. But up to now he’s never paid anything back,” she said. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Tuesday, December 13 2016 13
Asia Positive data
In Brief
Bank of Japan likely to upgrade economic view next week Service-sector sentiment is hitting a nearly three-year high Leika Kihara
T
he Bank of Japan is likely to give a more upbeat view of the economy at next week’s rate review, sources say, as a pick-up in emerging Asian demand and positive signs in private consumption improve prospects for a solid, export-driven recovery. Any upgrade would reinforce market expectations that the central bank, after failing to jolt Japan out of deflation with years of massive monetary easing, will hold off on expanding stimulus measures in the coming months. At the previous meeting on Nov. 1, the BOJ said the economic trend was for moderate recovery, but slowing emerging market demand was weighing on exports and output.
Key Points BOJ leaning toward brighter economic view at Dec. 19-20 meeting BOJ officials think global trade emerging from doldrums -sources Encouraged by signs of recovery in Japanese private consumption Markets already expect BOJ to hold off on more stimulus Since then, four sources familiar with the bank’s thinking said BOJ officials were becoming increasingly confident that global trade was emerging from the doldrums, as factories across Asia and Europe ramped up activity in November. They also see initial signs of recovery in private consumption, a perennial weak spot in Japan’s economy, with service-sector sentiment hitting a nearly three-year high. At the Dec. 19-20 meeting, the BOJ will thus consider upgrading
its language to signal that it is more confident the world’s third-largest economy is headed for a steady recovery, the sources said. “Global economic conditions are improving, and consumption appears to be picking up,” said one of the sources. “All in all, we’re seeing more bright signs for the economy.” Another source echoed that view, pointing out that recent economic indicators had been “mostly positive”. The BOJ’s nine-member board will reach a final decision after scrutinising its closely watched “tankan” quarterly business sentiment survey, due on Wednesday, the sources said. The meeting will not address GDP growth forecasts, which are currently 1 percent for the year ending March 2017, and 1.3 percent for the following year.
Hands-off approach?
Premier Shinzo Abe’s “Abenomics” stimulus policies deployed in 2013 initially succeeded in brightening public sentiment and boosting exports, but growth petered out as soft global demand and stagnant wages weighed on exports and consumption. Though policymakers have topped up fiscal and monetary stimulus, growth and prices have remained stubbornly flat, and critics say the policies are storing up problems for the future. The BOJ has already revamped its policy framework in September, adopting an approach better suited to a long-term battle against deflation. It is likely to use a more positive view of the economy to justify standing pat on policy at next week’s meeting. It may also offer a slightly brighter view on overseas economies and private consumption, the sources said. But BOJ officials are by no means complacent on the outlook. “There is still a lot of uncertainties in global developments, with
“How will he solve the housing crisis? Will he build houses and crack down on speculators?” Little highlighted differences between English and new Finance Minister Steven Joyce, who both say tax-cuts are on the table ahead of next year’s general election, and early contenders for the leadership, Police Minister Judith Collins and
New Zealand Deputy Prime Minister and Minister for Finance, Bill English. Lusa
South Korea’s prime minister is expected to keep incumbent Finance Minister Yoo Il-ho for policy continuity, Yonhap News reported yesterday citing an official from the PM’s office, instead of replacing him with Yim Jong-yong, current head of the financial regulator. In early November, Yim was designated as the next finance minister by President Park Geun-hye, who handed over her power to Prime Minister Hwang Kyo-ahn following her impeachment by parliament on Friday.
Vietnam considers doubling overtime limit big elections in France and Germany coming up in 2017,” BOJ Governor Haruhiko Kuroda said last week. The BOJ is thus likely to reiterate that risks to the economic and price outlook were skewed to the downside, and warrant close attention, the sources said. Since the BOJ’s previous policy meeting on Nov. 1, the yen has weakened roughly 12 percent against the dollar, and Tokyo’s Nikkei stock average has gained more than 10 percent. Japanese manufacturers’ confidence rose to a 16-month high in December, a Reuters poll showed, as the weak yen brightened prospects for exporters. Factory output is also showing signs of life, with Japanese firms’ order books rising in November, masking concerns about the protectionist leanings of U.S. President-elect Donald Trump and an oil price rally. Private consumption, which makes up 60 percent of Japan’s economic activity, edged up in the third quarter and winter item sales rose in November on unusually cold weather. The recent stock market rally, triggered by hopes over Trump’s policies, may lift sentiment, analysts say. Reuters
New Zealand lawmakers lay out problems facing leaders
Opposition lawmakers yesterday wasted no time in reminding New Zealand’ new government leaders of the challenges they now face. The country’s bourgeoning housing crisis was the top priority for new Prime Minister Bill English and Deputy Prime Minister Paula Bennett, who were elected earlier Monday, according to the Labour and Green parties. Labour Party leader Andrew Little said the “right-wing rump” of the ruling centre-right National Party was reasserting itself with the election of English to replace John Key, who resigned last week after eight years as Prime Minister. “We have pressing problems facing New Zealand right now, and we need to see solutions urgently,” Little said in a statement. “Is the change in leadership really going to make this government understand that thousands of New Zealanders don’t have a roof over their heads, or can’t get the hospital care they need, and that parents worry that their kids are not getting the education they deserve,” said Little.
Prime Minister to retain finance minister
Labour conditions
New government
The Reserve Bank of New Zealand has repeatedly warned that the overheated housing market poses a threat to the country’s financial stability
S.Korea
Health Minister Jonathan Coleman. “Will he have the courage to listen to Judith Collins and agree to put more police on our streets to keep communities safe?” asked Little. “How will he deal with Jonathan Coleman who wants health spending to be prioritized over tax cuts that he and new Finance Minister Steven Joyce favour?” The Green Party also called on English to build more affordable homes, close tax loopholes for property speculators, and end homelessness. “Bill English needs to make fixing the housing crisis a top priority and he should start by committing his government to building tens of thousands of affordable homes,” Green Party co-leader Metiria Turei said in a statement. “I think Bill English knows that one of the most effective ways to fix the broken housing market and address property speculation would be a capital gains tax (excluding the family home) - he just hasn’t had the guts to follow through with implementing it.” The Reserve Bank of New Zealand has repeatedly warned that the overheated housing market poses a threat to the country’s financial stability and has implemented lending controls, but these have had minimal impact in curbing prices. Xinhua
Vietnam’s Ministry of Labour, Invalids and Social Affairs has proposed an amendment to the country’s Labour Code that would sharply increase the country’s overtime limit. Under the proposal, an employee may work a maximum of 600 extra hours per year, doubling the overtime limit currently imposed on some specific areas, according to a statement on Vietnamese government’s e-Portal yesterday. According to the Labor Code, an employee can work a maximum of 200 extra hours per year. In some specific areas like textiles and garments, leather, aquaculture processing, telecommunications, water and power supplies, overtime is capped at 300 hours per year. Infrastructure
Green light to Sydney’s second airport The Australian government approved a second international airport for Sydney yesterday, opening the way for construction to begin in Australia’s largest city on a project mired in political squabbling for 70 years. Sydney Airport Holdings Ltd has first right of refusal to build the A$5 billion (US$3.7 billion) airport, which the government hopes will boost inbound air passenger numbers to Sydney by about a quarter, or 10 million people per year. The new airport is the centrepiece of Prime Minister Malcolm Turnbull’s A$30 billion national public works drive. GST
India likely to miss deadline for sales tax India is likely to miss a self-imposed deadline to launch a new national sales tax from April after a meeting of federal and state officials ended on Sunday without deciding who would administer the tax. Federal and state finance officials failed to resolve their differences amid acrimony over Prime Minister Narendra Modi’s shock decision last month to abolish high-value banknotes in an attempt to combat tax evasion, forgery and corruption. The officials agreed to meet again on Dec. 22, Finance Minister Arun Jaitley said, pushing back a possible deal beyond the current session of parliament, which ends next week.
14 Business Daily Tuesday, December 13 2016
International In Brief Tax breaks
LuxLeaks whistle-blowers appeal jail sentences Two whistle-blowers and an investigative reporter in the “LuxLeaks” tax scandal return to court yesterday for leaking thousands of documents that exposed Luxembourg’s huge tax breaks for major international companies. Protestors from across Europe are expected in Luxembourg as the three men begin the appeal to a verdict that saw two of the defendants receive jail sentences last June. The LuxLeaks scandal sparked a major global push against generous deals handed to multinationals that grew even stronger after the Panama Papers revelations earlier this year. IEA
Growth in global coal demand to slow Growth in global coal demand will slow over the next five years due to lower consumption in China and the United States and as renewable energy sources gain ground, the International Energy Agency (IEA) said yesterday. The IEA said last year that the world’s top coal consumer, China, could be facing peak coal demand for the first time due to measures to cap coal use to tackle air pollution and curb excess supply. “In China, coal demand is in structural and slow decline driven by a new economic growth model and diversification of coal,” the IEA said.
Global warming fight
Bill Gates, other rich individuals, back US$1 billion energy fund Investors include Jack Ma, the executive chairman of Alibaba Ashlee Vance, Bloomberg news
B
ill Gates and more than a dozen of the world’s wealthiest individuals revealed a new US$1 billion investment fund late Sunday to foster major advances in clean energy production. Dubbed Breakthrough Energy Ventures, the 20-year fund is backed by a mix of technology luminaries and heavyweights from the energy industry. The goal is to pump money into risky, long-term energy technology that could dramatically reduce greenhouse gas emissions, according to a statement. The investments will likely go into areas such as electricity generation and storage, agriculture and transportation. Investors include Jeff Bezos, founder and chief executive officer of Amazon.com Inc., Richard Branson, the founder of Virgin Group Ltd., Jack Ma (pictured), the executive chairman
of Alibaba Group Holding Ltd., John Arnold, a billionaire natural gas trader, and Prince Alwaleed Bin Talal, the founder of Kingdom Holding. Last year, a number of these investors joined Gates in announcing the Breakthrough Energy Coalition - a group of wealthy investors who pledged to aim a large portion of their fortunes toward energy technology. The arrival of the fund marks a more concrete step by this group toward their stated goals. “I am honoured to work along with these investors to build on the powerful foundation of public investment in basic research,” Gates said in a statement. “Our goal is to build companies that will help deliver the next generation of reliable, affordable, and emissions-free energy to the world.” Gates, co-founder of Microsoft Corp., spent much of the last year stumping for advances in energy production. He maintains that things like solar plants, nuclear power and
“The dearth of venture funding for clean energy technologies threatens to create a valley of death for the industry, with emerging ideas unable to find the necessary capital to reach commercialization,” Arnold said in a statement. “As an investor led effort, Breakthrough Energy Ventures is designed as a source of patient capital to spur innovation to meet the growing demand for low-cost, clean energy solutions.” Two venture capitalists who have invested in clean energy startups John Doerr and Vinod Khosla - are among the backers of the new fund.
Moscovici sees no threat of Italian banking crisis
M&A
Philips to sell Lumileds stake to U.S. investor Philips will sell an 80.1 per cent stake in Lumileds, its LED components and car lighting business, to U.S. investor Apollo, receiving US$1.5 billion in cash, it said yesterday. The deal values Lumileds at around US$2 billion including debt, Philips said, and is expected to close in the first half of 2017, pending regulatory approval. The sale of Lumileds is the final step in Philips’ two-part sell off of its lighting businesses, after the IPO of Philips main lighting business, Philips Lighting in May. An earlier attempt to sell the Lumileds components business at a valuation of US$3.3 billion to a group of Asian investors failed after it was blocked by the U.S. government due to undisclosed national security concerns.
“Our goal is to build companies that will help deliver the next generation of reliable, affordable, and emissionsfree energy to the world” Bill Gates, Microsoft co-founder
EU
Italy is not facing the threat of a banking crisis as the country and Europe have the means to prevent that from happening, EU Economics Commissioner Pierre Moscovici said yesterday. “There is not and there will not be a banking crisis in Italy, there will not be a European financial crisis coming from Italy,” Moscovici said on France Info radio. “We have the capacity to deal with the situation and it will be dealt with from both in Italy and at the European level.”
electric cars will do little to solve global warming in the relatively nearterm. The only way to halt global warming is to find an energy source that produces no greenhouse gases, Gates has said. He has personally backed a number of radical energy start-ups and has encouraged other wealthy individuals to follow suit. Clean energy was a hot niche of venture capital investing several years ago, but many of those investments didn’t pan out and some VC firms pulled back.
Bloomberg News
Currency
Inflation-hit Venezuela to pull largest bill from circulation Central bank data showed that in November there were more than six billion 100-bolivar bills in circulation Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill, worth two U.S. cents on the black market, from circulation this week ahead of introducing new highervalue notes, President Nicolas Maduro said on Sunday. The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank. Critics slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48 per cent of all bills and coins.
Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than US$5 on the streets.
‘Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500 per cent’ No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500 per cent. The oil-producing nation’s bolivar currency has fallen 55 per cent against the U.S. dollar on the black market in the last month.
Maduro previously has said that organized crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidized Venezuelan goods and sell them for vast profits in Colombia. While smuggling of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions hungry and doctors crying out for help. “I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,” Maduro said. “We must keep beating the mafias.” Paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash. However, getting cash in recent months has proven difficult, and the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer. Strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists. Maduro has blamed an “economic war” being waged against his government by the opposition and the United States. Money supply, the sum of cash and checking deposits as well as savings and other “near money” deposits, was up a staggering 19 per cent in the three weeks to Dec. 2 and the curve has been exponential since Maduro’s predecessor Hugo Chavez came to power in 1999. Reuters
Business Daily Tuesday, December 13 2016 15
Opinion Business Wires
The Phnom Penh Post MQ Technology Bhd, a Malaysian investment holding company, is looking to form a joint venture with a newly formed entity, Cambodian Resorts and Entertainment Co Ltd, to build a US$30 million casino and theme park in Prey Veng province near the Vietnamese border, according to Malaysian media reports. A spokesman for MQ Technology declined to confirm or provide details of the joint venture proposal. The original report projected that the joint venture could be linked to NagaCorp Ltd, the operator of Phnom Penh’s NagaWorld casino and hotel complex.
Viet Nam News The steel industry is likely to enjoy 10-12 per cent growth next year, said the Việt Nam Steel Association (VSA) at a workshop in HCM City last week. According to Chu Đức Khải, VSA General Secretary, steel consumption depends on the country’s gross domestic product (GDP) growth. With expected GDP growth of 6.2 per cent this year, and the operation of 10 steel projects in 2017, the sector’s growth is expected to further expand, Khải said. However, he warned of challenges ahead as cheap steel from China would continue to flood the domestic market.
Jakarta Globe The government plans to replace a cost recovery scheme in Indonesian oil and gas profit sharing contracts with gross profit sharing scheme by January in an attempt to simplify procedures for new investors in the country’s declining sector. In Indonesia, the government owns oil and gas resources but companies work to find the reserves and exploit it as contractors under profit sharing contracts. Under existing contracts today, contractors are eligible for reimbursement of their exploration costs as long as they find reserves suitable for commercial exploitation and use some local resources and labour in doing so.
Taipei Times The central bank is confident it can keep the New Taiwan dollar stable even if the US Federal Reserve raises its key interest rates at a meeting scheduled for tomorrow and Wednesday. The bank said that a stronger US dollar resulting from a rate hike by the Fed has more or less been factored in by global financial markets, but it would monitor the markets’ response to the Fed’s decision. While the value of the NT dollar is determined by the market, the bank said it is capable of maintaining the stability of the currency.
China’s investors aren’t worried about Trump
T
heworldcanonlywonderwhether President-elect Donald Trump will fulfil his campaign promise to impose a 45 per cent tariff on Chinese-made goods bought in the U.S. What’s already clear, though, is that investors inside the No. 2 economy, unlike their American counterparts, are undaunted. Even after Trump’s upset victory last month, their appetite for the country’s favourite companies is growing, as long as they can trade shares of them in U.S. dollars. That’s a big bet that the financial glue sealing a decades-old symbiotic relationship isn’t dissolving just yet. No nation does as much business with the U.S. as China, accounting for almost 17 per cent of total American trade, according to data compiled by Bloomberg. The stock market benefiting most from this booming commerce is the Guangzhou-based E Fund Hang Seng China Enterprises Index, one of 265 global exchange-traded funds focused on China and holding the shares of 40 major companies also trading in Hong Kong dollars, which track U.S. dollars. For Chinese investors, the E Fund HSCEI ETF is the closest thing to owning American currency. They poured US$549 million into the fund this year, or 67 per cent of its total assets, the most of any Sino ETF. Their investment is paying off with a return of 10 per cent, rivalling the performance of the Standard & Poor’s 500 Index. As China’s economic growth rate slowed from 10.6 per cent in 2010 to 6.7 per cent this year, money flowed out of the country. The renminbi depreciated 6 per cent to an eight-year low through 11 months of 2016. That helps explain the Chinese preference for publicly-traded equity in dollars amid forecasts that the renminbi will weaken almost another 3 per cent in 2017. Trump’s election on Nov. 8 accelerated the trend. A day later, the flow of money into the E Fund HSCEI ETF was the most since June 24, when Trump toured his Turnberry golf course in Scotland and celebrated the British vote to leave the European Union as “a great thing.” Brexit caused the pound to plummet as much as 19 per cent by the middle of October while the euro lost almost 5 per cent of its value between May and late July. Such volatility increased demand for dollars as a refuge for investors. Across the Pacific, American investors are showing nothing but disdain for Chinese shares. Slowing growth, a relatively opaque economy and Trump’s threat to declare China a currency manipulator helped make the San Francisco-based iShares China Large-Cap ETF, which holds 50 companies also traded in Hong Kong dollars, the least popular among the 265 China-focused ETFs. So far this year, more than US$1.7 billion, or 32 per cent of its total assets, have fled the fund. On Nov. 9, the same day the Chinese rushed into the Guangzou ETF, the iShares China suffered its biggest withdrawal since June 13. Where Americans see peril, Chinese see opportunity in the nation’s bellwether companies. Consumer staples, the best-performing industry with a yuanbased total return (income plus appreciation) of 15
“
Matthew Winkler a Bloomberg View columnist
per cent this year, remain the favourite measured in dollars. They returned 8 per cent compared to a 0.03 per cent gain for the MSCI World/Consumer Staples Index. These Chinese companies are a bargain because investors still are paying a 10 per cent discount on a price to earnings basis in 2016 compared to their global peers. During the past five years ending in 2015, the same companies sold at an average premium of 20 per cent, Bloomberg data show. The outlook brightens for the 20 Chinese firms that make up the consumer staples industry amid forecasts for world-beating average revenue growth of 3.3 per cent in 2016 and 13.3 per cent next year. The 123 companies in the MSCI World Staples Index, by comparison, will see sales increases of 2.2 per cent this year and 5.1 per cent in 2017, according to Bloomberg data. Energy companies, which returned 0.4 per cent as China’s top-performing industry this year, have a similar relative value. Since June 2014, when the price of oil declined 50 per cent, China energy firms and their global competitors became less profitable, measured by their ebitda margin, or how much a company can turn revenue into earnings before interest, taxes, depreciation and amortization expenses. Chinese profitability held at 13 per cent while the rest of the world’s ebitda margin declined to less than 7 per cent. When measured on a priceto-cash flow basis, an indicator of value commonly used by the energy industry, Chinese firms are trading at a 45 per cent discount to their peers - meaning they’re likely to go up reasonably soon. To be sure, many analysts say Chinese energy is owned by the government and therefore more resistant to oil’s falling value and less likely to profit when the oil price increases. But energy companies outside China already are expensive based on their cash flow ratios, so China remains cheap by comparison. Chinese investors can rest assured that even during the country’s slowdown, China’s growth will remain at the top of the Group of 20 nations this year and will be No. 2 during the next two years, according to data compiled by Bloomberg. The estimated 6.7 per cent gross domestic product growth in 2016 is about US$730 billion, or equivalent to the Netherlands economy. If China grows 6.4 per cent in 2017, the average of forecasts compiled by Bloomberg, it will be US$670 billion larger next year, an amount greater than the economy of Switzerland. For all the anxiety outside China about what a President Trump may do during the next four years to alter the relationship between the No. 1 and No. 2 economies, there is the confidence inside China that comes with a 5,000-year-old civilization. Bloomberg View
Where Americans see peril, Chinese see opportunity in the nation’s bellwether companies
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16 Business Daily Tuesday, December 13 2016
Closing Environment
Cows and rice paddies boost methane emissions
Global methane emissions from agriculture and other sources have surged in recent years, threatening efforts to slow climate change, an international study has found. Researchers led by French Laboratoire des Sciences du Climat et de l’Environnement (LSCE) reported that methane concentrations in the air began to surge around 2007 and grew precipitously in 2014 and 2015. In that two-year period methane concentrations shot up by 10 or more parts per billion (ppb)
annually, compared with an average annual increase of only 0.5 ppb during the early 2000s, according to the study released by the Global Carbon Project, which groups climate researchers. Methane is much less prevalent in the atmosphere than carbon dioxide (CO2) - the main man-made greenhouse gas - but is more potent because it traps 28 times more heat. The report did not say to what extent methane contributes to global warming. CO2 emissions are expected to remain flat for the third year in a row in 2016, thanks to falls in China, the Global Carbon Project said last month. Reuters
Cross-strait policy
China warns Trump against using Taiwan for leverage on trade Policymakers in Beijing are losing patience with the real estate mogul’s attacks
C
hina w a r n e d U . S . President-elect Donald Trump yesterday against using the One-China policy regarding Taiwan as a bargaining chip in trade talks. “Adherence to the One-China policy is the political bedrock for the development of the China-U.S. relationship,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing at a regular briefing. “If it is compromised or disrupted, the sound and steady growth of the China-U.S. relationship as well as bilateral cooperation in major fields would be out of the question.”
against China since election day, telling a crowd in Iowa last week that China would soon have to “play by the rules.” The swift reaction to Trump’s latest comments signals that policy makers in Beijing are losing patience with the real-estate mogul’s attacks. The initial response had been more subdued after Trump broke with decades of protocol earlier this month in speaking by phone with Taiwan’s president.
“For China, there is no balancing of trade and Taiwan,” said Wang Tao, head of China economic research at UBS AG in Hong Kong. “Taiwan is considered the utmost core interest of China, not for bargaining.”
‘Make a deal’
“I fully understand the One-China policy, but I don’t know why we have to be bound by a One-China policy unless we make a deal with China having to do with other things, including trade,” Trump said in interview with “Fox News Sunday” that was taped on Saturday.
“Taiwan is considered the utmost core interest of China, not for bargaining” Wang Tao, head of China economic research at UBS AG in Hong Kong
Trump said in an interview broadcast on Sunday that his support for the policy - which has underpinned U.S. behaviour toward Taiwan for decades - will hinge on cutting a better deal on trade. He has repeated his accusations
US President-elect Donald Trump makes an appearance in the lobby of Trump Tower to address reporters in New York last week. Lusa
“I don’t want China dictating to me,” he added, echoing his comment a week ago on Twitter. Trump’s 10-minute phone call with President Tsai Ing-wen in early December was the closest a Taiwanese leader has come to getting formal recognition from Washington since the U.S. established ties with the Communist government in Beijing almost four decades ago. Trump threatened during his campaign to brand China a currency manipulator immediately upon taking office, and to slap 45 per cent tariffs on its exports to the U.S. The One-China policy is an acknowledgment that Taiwan and China are part of the same China, even if they disagree on what that means. Chinese leaders define Taiwan as a so-called core interest, with the view the island belongs to China and will never be independent. “We urge the new U.S. Administration and its leadership to fully recognize the sensitivity of the Taiwan question and stick to the One-China policy,” Geng said. The policy was worked out in the 1970s as President Richard Nixon switched formal diplomatic recognition to Beijing from Taiwan’s Kuomintang government, which fled to the island during a civil war three decades earlier. At the same time, China has been willing to allow Taiwan almost complete unofficial sovereignty. The U.S. has sold billions of dollars in weapons to the Taiwan government over the years, while China’s own trade with the island has risen steadily. Bloomberg News
Money laundering
Legal frame
International ties
India’s top gold import bank suspends dealers accounts
Sri Lanka parliament to debate new constitution
EU, Cuba sign pact to normalise relations
Axis Bank Ltd, India’s top importer of gold, has suspended the bank accounts of some bullion dealers and jewellers after two of its executives at a branch were arrested over alleged money laundering. The move is likely to curtail imports by the world’s second-biggest gold consumer this month and could weigh on global prices already near their lowest level in ten months. “We have temporarily suspended transactions in a few current accounts as a part of a larger enhanced due diligence exercise being conducted on transactions post-demonetisation,” the bank said in an e-mailed reply to questions from Reuters. Prime Minister Narendra Modi scrapped 500-rupee and 1,000-rupee banknotes on Nov. 8 in a bid to flush out cash earned through illegal activities, or earned legally but never disclosed to tax authorities. There have also been reports of people rushing to buy gold by paying as much as a 50 per cent premium above official prices using their unaccounted money to skirt the note ban. Axis did not directly comment on the arrests. The bank said the suspended gold dealers’ accounts will be restored over the next few days after an “enhanced due diligence process”. Reuters
Sri Lanka parliament will have a three-day debate in January on the proposals for constitution making, Leader of the House Lakshman Kiriella said yesterday. Sri Lanka sponsors the resolution adopted by the United Nations Human Rights Council (UNHRC) in September last year to work out a political solution to the country’s Tamil national question. The country ended its 30-year war in May, 2009, and since then there has been demands for power devolution. Kiriella told Xinhua that six subcommittees had worked out proposals and they would be debated in parliament on January 9-11. “This is the first time in Sri Lanka that a constitution making process has been underway under the glare of media. Earlier, it was not open to the media. The general public can see what we do,” he said. After the debate, the views of respective political parties will be taken up for consideration in drafting the new constitution. In the UNHRC session scheduled for March next year, Sri Lanka’s case is listed to be taken. Therefore, the government is bent on showing some progress in constitution making this year. Xinhua
The EU and Cuba yesterday signed a deal to normalise ties that had been blocked for decades by human rights concerns under revolutionary icon Fidel Castro. Cuba had been the only Latin American country that did not have a so-called “dialogue and cooperation” deal with the EU covering issues such as trade, human rights and migration. But EU ministers last week agreed to drop a policy in place since 1996 which stated that Cuba first had to improve its human rights standards before getting closer links with the bloc. The new agreement was signed by Cuban Foreign Minister Bruno Rodriguez Parrilla, European Union foreign affairs chief Federica Mogherini and representatives from the 28 EU member states at a Brussels ceremony capping years of difficult negotiations. “Economic links with Europe will continue to be a priority for Cuba as we build a socialist economy,” Parrilla said. Castro died last month after more than 50 years at the helm of a self-styled Socialist paradise reviled by the West, with Cuba gradually opening up to the world, including bitter foe Washington. In 2003, the EU had imposed sanctions on Cuba and suspended cooperation over a crackdown on journalists and activists and it took until 2008 to get talks going again. AFP