China’s major east-west high-speed railway begins operations Transport Page 9
Thursday, December 29 2016 Year V Nr. 1203 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Economy
Tourism
Vietnam suffers first economic slowdown in 4 years Page 11
November visitor arrivals stay flat Page 3
www.macaubusinessdaily.com
Gaming
Business
Junket debtor database operational next month Page 7
China Huarong launches entity in MSAR Page 2
Inflation rebounds slightly Consumer prices
Consumer prices in the MSAR increased 1.53 pct y-o-y on average for last month. The growth rate is higher than that of 1.33 pct for the month of October. Higher charges for eating out, parking spaces and property management fees contributed to the increase. Page 4
Fixing deficient parks
Two local hackers charged by U.S.
Two Macau residents, Iat Hong and Chin Hung, together with their boss Bo Zheng from the Mainland, have been charged by the U.S. for stealing data from at least two of seven American law firms they targeted for profits. Hong has been arrested in Hong Kong and is awaiting extradition.
Society IACM is spending MOP20 million to renovate two children’s playgrounds in Taipa Central Park. The park cost nearly half a billion patacas, and the Commission of Audit recently slammed it for its deficient playing facilities. IACM explained the major aim for the refurbishment is to combine the two playgrounds into one. Page 2
Renminbi and liquidity fears loom Crime Page 6
HK Hang Seng Index December 28, 2016
21,754.74 +179.98 (+0.83%)
China Construction Bank
Worst Performers
Hengan International Group
+1.27%
Li & Fung Ltd
-2.01%
Hang Seng Bank Ltd
-0.56%
AAC Technologies Holdings
+3.41%
China Shenhua Energy Co
+1.26%
BOC Hong Kong Holdings
-0.72%
Link REIT
-0.41%
China Mengniu Dairy Co Ltd
+2.65%
Bank of China Ltd
+1.19%
Swire Pacific Ltd
-0.68%
HSBC Holdings PLC
-0.40%
Tencent Holdings Ltd
+2.17%
Industrial & Commercial
+1.11%
Cheung Kong Property
-0.63%
Belle International Holdings
-0.23%
CNOOC Ltd
+1.36%
China Unicom Hong Kong
+1.11%
CLP Holdings Ltd
-0.56%
AIA Group Ltd
-0.23%
+4.80%
13° 17° 15° 19° 18° 21° 19° 22° 19° 23° Today
Source: Bloomberg
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MON
Source: AccuWeather
Monetary January may bring scant relief as lenders prepare for stronger cash demand before the Chinese Lunar New Year holidays. Only one month away from CNY, most of the banks in the Mainland may try to lock the money in a three-month cycle, says an analyst at PineBridge Investments. Page 8
2 Business Daily Thursday, December 29 2016
Macau Telecom
MTEL continues gov’t data centre contract
million, is installing the network and the IT equipment for the government’s database as well as working on cloud Local telecom company MTEL Limited has had its contract with the government solutions for the government. Earlier this extended for next year, bringing the total year the telecom company sold 30 per cent of its shares to Hong Kong-based two-year contract to MOP10.24 million (US$1.28 million) over 2016 and 2017, yet Elegant Way International Holdings, for an estimated MOP240 million, having falling under the budget for this year. evaluated its overall operations as being The service provider, whose 2016 worth MOP800 million. budget allocation was about MOP5.12
Society
Children’s playgrounds upgraded MOP20 million is to be spent on renovating two children's playgrounds in Taipa Central Park – which the Audit Commission previously pointed out is full of “deficiencies’ Cecilia U cecilia.u@macaubusinessdaily.com
T
he MSAR government has granted a contract worth MOP20 million (US$2.5 million) for the refurbishment project of two children’s playgrounds in Taipa Central Park, according to a dispatch released yesterday in the Official Gazette. The dispatch states that the Civic and Municipal Affairs Bureau (IACM)
will be in charge of the project. In response to Business Daily’s enquiries regarding the details of the refurbishment project, IACM explained that the works aim to make the two small playgrounds into one themed playground, given that they are getting more deteriorated. ‘Taipa Central Park currently has two children’s playgrounds. The playgrounds are becoming more crowded and due to being constantly used, the facilities have become
Expansion
China Huarong establishes new branch in MSAR China Huarong Asset Management Co., Ltd. yesterday officially established its first financial asset management company in the city, Huarong Macau, to develop a locallybased integrated financial services platform. The registered capital of Huarong Macau amounts to MOP233 million (US$29.2 million). Chairman of China Huarong, Lai Xiao Min said yesterday that the foundation of Huarong Macau is to seize the opportunity of the international advantages in Macau, as well as take advantage of the Hengqin Free Trade Zone policy to provide innovative and diversified financial services to further support economic development in the Special Administrative Region. The company yesterday also signed
a strategic co-operation agreement with Nam Kwong (Group) Co. Ltd, Asia Investment Finance Group Co., Ltd, Guangdong Namyue (Group) Co., Ltd and China Taiping Insurance (Macau) Co., Ltd. Huarong Macau will provide business financial services in i n v e s t m e n t h o l d i n g s, a s s e t restructuring, mergers and acquisition advisory, corporate management as well as economic trade and risk management consulting. China Huarong is a large stateo w n e d, n o n -f i n a n c i a l b a n k enterprise, which was set up by the Ministry of Finance and the China Life Insurance Company. Currently, the company has 30 branches across the Mainland. It was listed on the Hong Kong Stock Exchange in 2015. A.L. with Xinhua
worn out since they were opened,’ said the IACM spokesperson in the emailed reply. After the renovation works, the two playgrounds, one 2,300 square metres and the other 1,7010 square metres, will consist of large and auxiliary playing facilities, sign boards showing the rules of the facilities, a protection fence, safety mats, sinks, benches, LED lights and floor lamps, according to the Bureau. The IACM spokesman added in the email that the project also includes the adjustment of drainage and irrigation systems, in order to create green surroundings for the playground areas.
Targeted by Audit Commission
In May last year, the Commission of Audit (CA) slammed the Land, Public Works and Transport Bureau (DSSOPT) on its lack of management when constructing the park, pointing out in an audit report that the playing
Banking
Luso bank to launch branch in Guangzhou The MSAR government has given the green light to Luso International Banking Ltd to set up its branch in Guangzhou city, according to a dispatch in the Official Gazette yesterday. The branch in Guangzhou will be allowed to provide financial services to businesses that are approved in the MSAR. Currently, Luso bank runs some 13 branches in the city. The bank is also the first local Macau bank to set up a representative office in the Hengqin Economic Zone of Zhuhai. The bank is a subsidiary of Xiamen International Bank Co Ltd. C.U.
facilities and safety mats for kids in the park had many ‘deficiencies’ even after the opening of the park. ‘The climbing ladder was too high and the bulging angles of the safety mats in the kids playing area were easy for children to stumble on, all of which require modifications and replacements,’ the Commission said at that time. According to the report, the construction of the entire park cost MOP441 million, with further expenses of MOP48.8 million due to alterations of the project proposed by the construction company. In addition to the DSSOPT, IACM, who are now in charge of the refurbishment of the facilities, were also slammed by the CA in September this year for their negligence in monitoring other municipal parks, namely the Sai Van Lake Square and its surrounding areas, the park of Iao Hon Market and the Leisure Area of Edf. Nam Ou Garden.
Business Daily Thursday, December 29 2016 3
Macau Tourism
Visitor arrivals down 3.4 pct m-o-m 109 visitors entered the territory via the free yachting travel scheme in the month Annie Lao annie.lao@macaubusinessdaily.com
T
otal visitor arrivals to the city reached 2.59 million in November, down by 3.4 per cent month-on-month, however compared to the same period last year, the number stayed flat, according to the latest data released by the Statistics and
Census Service (DSEC) yesterday. With the city’s free yachting travel scheme with Zhongshan coming in to force from November 23, the MSAR saw a total of 109 visitors entering the territory via yachts. For the entire month, overnight visitors accounted for 53.1 per cent of the total, amounting to 1.37 million, an increase of 10.4 per cent year-onyear, while the number of same-day
visitors fell by 9.7 per cent year-onyear to 1.21 million. On average, overnight visitors stayed 2.1 days in the city while same-day visitors stayed for 0.2 days only. From January to November, the total number of visitors increased by 0.2 per cent year-on-year to 28.1 million.
Mainland Chinese down
Analyzed by point of origin, the number of Mainland Chinese visitors decreased by 1.2 per cent
year-on-year, to 1.7 million in November. However, those traveling to the MSAR under the Individual Visit Scheme went up by 2.1 per cent to 791,007. The majority of Mainland Chinese visitors were from Guangdong Province, totaling 716,282. Visitors from Hunan Province and Fujian Province totaled 80,061 and 68,247, respectively. M ea n w h i l e, t h e n u m b e r o f visitors from Hong Kong and Taiwan both declined by 1.4 per cent, amounting to 505,216 and 83,498 respectively. However, the number of visitors from the Republic of Korea and Japan recorded an increase of 34.6 per cent and 25.4 per cent to 62,009 and 34,142, respectively. The number of long-haul visitors from the United States, Canada and the United Kingdom also registered year-on-year increases, whereas visitors from Australia decreased by 5.9 per cent to 8,020.
Entry points
Analyzed by type of transport taken by visitors to the city, 1.4 million visitors came by land, of drop of 3.1 per cent year-on-year. Of this total, the majority arrived through the Border Gate, accounting for 1.2 million, down by 5 per cent. However, the number of those arriving through the Cotai Checkpoint increased by 12.5 per cent year-on-year to 182,650. Meanwhile, visitors travelling by sea rose by 2.3 per cent year-onyear to 961,480, of which the Outer Harbour and the Provisional Ferry Terminal in Taipa accommodated 576,332 and 385,148, up by 0.6 per cent and 12.0 per cent respectively. Visitors travelling by air rose by 13.3 per cent year-on-year to 199,927, of which 199,053 arrived at the Macau airport.
Tourism
MGTO splashes MOP55.2 mln to promote the city overseas A total of MOP55.2 million (US$7 million) will be spent by the Macau Government Tourism Office (MGTO) on tourism promotions outside the MSAR, according to information provided by the Official Gazette yesterday. Of the total, the Bureau is spending MOP24.2 million to appoint tourism representatives in ten overseas markets, including South Korea, Japan, the United States, Hong Kong, Russia, Malaysia, the United Kingdom, Ireland, Australia, New Zealand, Thailand and India. Of all the contracts with these 10 international representatives, the one signed with Japanese tourism marketing company Mile Post Consultants, Inc. to promote the MSAR in Japan is the most costly at MOP4.8 million. The second largest contract for tourism promotion services was a MOP3.7 million agreement with Hong Kong advertising agency Urban Media Limited to promote Macau in Hong Kong, followed by a MOP2.8 million contract with Pacific World Travel Sdn. Bhd. for tourism promotion in the Malaysian market. In addition, a MOP2.7 million contract for promotions in South Korea was also signed with Glocom
Korea Inc. As at the end of November, Hong Kong remained the second largest source of the city’s visitor arrivals, while South Korea and Japan were also some of the major originating
countries for tourists. Aside from promotional service contracts, MGTO has also signed a MOP31 million contract with Hong Kong broadcasting company Television Broadcasts Limited (TVB)
for an MSAR tourism advertising campaign on the TV channels controlled by the group. The expenses of these promotional activities and advertisements will be supported by the Tourism Fund. N.M.
4 Business Daily Thursday, December 29 2016
Macau In Brief Cinema
Cut Ltd to operate Cinemateca Paixao Cut Ltd is to run the Cinemateca Paixao – a government-backed theater in Travessa da Paixã near the Ruins of Saint Paul’s – for four years for MOP25 million (US$3.1 million), a dispatch in the Official Gazette yesterday stated. The contract between the company and the government will run from 2017 until 2020, whilst the cost will be supported by the city’s Culture Fund. The theater was launched by the Cultural Affairs Bureau in 2015. Three-storeys high, the complex is dedicated to film collections and screenings, and the lending of books and magazines about cinema. S.Z Business
Waterleau contract renewed for wastewater treatment The government has awarded the consortium Waterleau–Beijing GSS a new service contract to operate and maintain the waste water treatment plants in Taipa and the Macau International Airport for MOP21 million, according to a dispatch in yesterday’s Official Gazette. The government will pay the joint venture in two installments, with MOP19.3 million to be paid next year. The consortium, in fact, also won the same contract for the year 2016/2017, worth a total of MOP52.3 million. Waterleau Macau Lda is a subsidiary of Belgium’s Waterleau Global Water Technology NV. The city’s disgraced former secretary Ao Man Long owned a 20 per cent stake in Waterleau previously. In 2003, the Financial Services Bureau confirmed that the stake of the former official had been transferred to the government. S.Z.
Consumer prices
Inflation rate grows by 1.53 pct in November Alcoholic beverages and tobacco saw the largest yearly increase in prices in the month Nelson Moura nelson.moura@macaubusinessdaily.com
T
he city’s consumer price index (CPI) grew by 1.53 per cent year-on-year to 108.67 for the month of November, the latest data released yesterday by the Statistics and Census Service (DSEC) shows. According to DSEC, the growth was attributable to higher parking space rentals, house management fees, increased charges for eating out, as well as rising prices of vehicles and vegetables. Food & non-alcoholic beverages, the largest section of domestic expenses, recorded a 2.09 per cent year-on-year increase in average prices compared to the same month last year, while alcoholic beverages &
tobacco, education and transport rose by 7.47 per cent, 7.38 per cent and 6.7 per cent year-on-year, respectively. However, the price indexes of communication and housing & fuels fell by 2.02 per cent and 1.36 per cent year-on-year. The CPI-A (108.76) and CPI-B (107.95) rose by 1.38 per cent and 2.76 per cent respectively year-on-year, according to the DSEC data. The CPI-A refers to households with an average monthly expenditure of MOP10,000 (US$1,251) to MOP29,999, about half of all households, while the CPI-B relates to households with an average monthly expenditure of MOP30,000 to MOP54,999, around 30 per cent of all households. On a month-on-month comparison, November’s consumer prices increased by 0.29 per cent, driven
by increases in the price indexes of clothing & footwear and health, up by 3.68 per cent and 1.24 per cent month-on-month, due to the arrival of winter clothing and higher charges for out-patient services, respectively. On the other hand, lower charges for package tours led the price index of recreation & culture to fall by 0.97 per cent month-on-month. For the first eleven months of the year, the average composite CPI recorded an increase of 2.46 per cent, compared to the same period last year. For the twelve months ended November, the average composite CPI grew by 2.56 per cent from the previous period. In particular, the price index of alcoholic beverages & tobacco surged by 24.25 per cent period-to-period, while those of education and transport also jumped by 8.53 per cent and 6.81 per cent period-to-period, respectively.
Public works
MOP110 mln for road and drainage networks in Zone E2
Public Works
Drainage works in Cotai road cost MOP290.4 mln A construction contract and a quality control contract for works on a drainage network on Estrada Flor de Lotus in Cotai were granted to Cheong Kong Construction Company Ltd, and Civil Engineering Laboratory of Macau, respectively. According to dispatches in the Official Gazette yesterday, the two contracts are worth a total of MOP290.4 million (US$36.3 million), of which the construction contract accounts for the majority, amounting to MOP286.4 million, while the quality control contract is worth MOP3.98 million. The government will pay both companies in three installments, according to the announcements. A.L.
The MSAR Government has awarded two contracts for the construction and oversight of road and drainage networks in Zone E2, worth a total of MOP110.4 million, according to two dispatches in yesterday’s Official Gazette. The larger of the two contracts, for the construction works, was awarded to Empresa de Construção e Obras de Engenharia Tak Fat Kin Ip, Limitada. It amounts to MOP107.67 million
(US$13.4 million), to be divided over two annual installments of similar value, in 2017 and 2018. The second contract, awarded to Pengest Internacional – Planeamento Engenharia e Gestão, Limitada, for oversight of the street and drainage works in the assigned area, amounts to MOP3.42 million, and is set to run from 2017 to 2018. Zone E2 is situated in front of Macau’s airport and the Pac On ferry
terminal. The construction project, which will cover an area of 30,000 square metres, is scheduled to start in the first quarter of 2017, announced the Land, Public Works and Transport Bureau (DSSOPT) in a statement from August 2016. The underground drainage network will include rainwater and wastewater pipes as well as a nodular cast iron pressure piping system. S.Z.
Business Daily Thursday, December 29 2016 5
Macau Manpower
Number of non-resident construction workers continues to fall
Fewer overseas hands There were 4,349 fewer foreign workers in the city in November compared to a year ago Nelson Moura nelson.moura@macaubusinessdaily.com
T
he total number of nonresident workers amounted to 177,897 as at the end of November, down by 4,349 workers or 2.4 per cent from the same month last year, the latest official data released by the Labour Affairs Bureau (DSAL) shows. Compared to the data for October, the number of non-resident workers in the city represents a decline of 318 workers. Hotels and food & beverage businesses hired the highest number of non-resident workers, amounting to 49,666 as at the end of the month, up by 220 workers month-on-month, or 3.2 per cent year-on-year. H o w ev e r, th e c o n st r u c t i o n industry continued to see its number of non-resident workers declining, down by 3.7 per cent monthon-month or 20 per cent yearon-year, to 35,465 in November. Nevertheless, the industry is still the second biggest recruiter of nonresident workers. In addition, according to the DSAL data, another 1,060 nonresident construction workers were directly employed by the city’s gaming companies, and were counted in the 13,520 foreign workers employed by the
recreational, cultural and gaming sector. Meanwhile, the third largest sector employing non-resident workers – domestic work services – saw an increase of 394 workers month-onmonth, or 6.5 per cent year-on-year, totaling 25,086 at the end of the month. Other primary sectors hiring non-resident workers included the wholesale and retail trade, and real estate, renting and business activities,
which were employing 19,773 and 18,693 non-resident workers as at the end of the month, respectively.
Majority from Mainland
In the month of November, Mainland China continued to be the largest source of non-resident labour for the city, amounting to 113,529 or 63.8 per cent of the total foreign workforce. However, compared to 114,223 in the previous month, the number represents a decrease of 694 workers.
The Philippines, on the other hand, contributed 14.9 per cent of the total non-resident workforce at the end of the month, amounting to 26,565, up by 388 month-on-month or 8.2 per cent year-on-year. Many of the Philippine workers in the city are engaged in domestic work services, accounting for 12,736 the total. Vietnamese workers remained the third largest group of non-resident workers in the city, totaling 14,859 as at the end of November.
6 Business Daily Thursday, December 29 2016
Macau Telecom
Opinion
Gov’t renews CTM’s Wifi Go contract
The local government will continue to rent out the assets of Companhia de Telecomunicações de Macau in order to continue the expansion and use of its WiFi Go network in 2017, according to yesterday’s Official Gazette. The 2017 CTM contract for the rental of assets will cost the government
Ashley Sutherland-Winch* Exit with haste The Christmas holidays are a time when people travel near and far to celebrate and often count blessings of family, finances, and employment. Macau is a city that brings migrant workers from all over the world, but with the new policy from Macau’s Immigration Services, the holidays may be a good time to evaluate Macau as a stable work environment for non-residents. The updated policy decrees that non-residents who leave their employment or are fired will have only eight days to depart from the MSAR. The revision is down from the previous 10 days. Furthermore, if non-residents have been working in Macau for less than six months, they will only be able to remain in the territory for two days after their employment is terminated. It is widely believed that most companies offer full relocation services to migrant workers, but this is incorrect. Specialized employment positions and the opportunity to work in our international city entice people to come to Macau even when companies offer only a small portion of relocation or none at all. For an individual or family to have only eight days to relocate following a dismissal, non-renewal of work visa or termination is an incredibly costly and emotional threat that is sure to cause great concern. According to a report from Televisao de Macau (TDM), the International Labor Organization (ILO) has expressed concern over the decision, warning that it might foster unequal employment relationships. The organization advocates that non-residents ought to receive the same treatment as local workers. Ten days was already too short a time to prepare to exit the country, especially if the non-resident worker wants to appeal or challenge an unfair dismissal, and shortening the time to eight days seems extreme. What benefit does cutting the policy by two days bring? I believe this policy change does not promote the benefits of choosing to move to Macau for work and further suggests the notion that non-resident workers are not embraced by our city. Macau should support and advocate training and hiring local workers over non-residents, but if we want to continue to excel as an international city in the future, we must be open to the practice of hiring the best worker for the role regardless of residential status. It is also vitally important that our city offers adequate time to prepare to exit our country post employment as well, and eight days is not enough. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
MOP18.59 million (US$2.3 million) and falls under the budget for the 2017 year. The service, which according to a government press release is ‘financed and constructed’ by the government, has so far been successfully accessed 36.9 million times, according to the press release, and the latest expansion, which came into effect yesterday, brings the total access points to 201.
Crimes TWO HACKERS were from the MSAR and worked for the other man
U.S. charges three Chinese trading on stolen law firm data Christian Berthelsen
T
hree Chinese hackers made more than US$4 million (MOP36 million) in illicit profits after breaking into the servers of top corporate law firms in New York, the U.S. said in announcing charges and the arrest of one of the men. The three targeted at least seven major international law firms that had been retained by companies to advise on deals, and successfully got into the e-mail accounts of senior lawyers at two of the firms, according to the indictment unsealed Tuesday. They profited on deals and speculation involving the drug maker Intermune, chipmaker Intel Corp. and business services company Pitney Bowes Inc., the U.S. said. The U.S. Securities and Exchange Commission also sued and is seeking an asset freeze. The case places law firms among the widening group of targets for cybercriminals seeking to profit from insider information. Last year, the U.S. broke up an international ring of hackers who allegedly infiltrated the computer servers of PRNewswire Association LLC, Marketwired and Business Wire and stole marketmoving press releases before they were published. According to the SEC, the group, which included Ukrainians and a Georgian, made more than US$100 million from trading on the information. “This case of cyber meets securities fraud should serve as a wake-up call for law firms around the world,”
Manhattan U.S. Attorney Preet Bharara said in the statement. The three men - Iat Hong, 26 and Chin Hung, 50, of Macau, and Bo Zheng, 30, of China - worked at a robotics company that was started by Zheng, according to the government. Hong was arrested in Hong Kong on Christmas Day and is awaiting extradition. The SEC is also seeking to freeze an account registered in Hong’s mother’s name. In addition to the law firms, they also hacked other robotics companies, the U.S. said. They allegedly stole schematic designs of a robot vacuum cleaner made by a U.S. company. The three generally used the same tactics to get the information, according to the U.S. They would get the log-in credentials of an employee and place malware on a server that allowed them to access the e-mails of key people at the firms and companies, according to the indictment. In a one-day period in 2014, they took 10 gigabytes of confidential data from one law firm’s server, the U.S. said. They weren’t always successful, the U.S. said. During one six-month period in 2015, the three men allegedly tried on more than 100,000 occasions to break into the networks of five law firms. The law firms weren’t identified in the complaints. The Wall Street Journal reported in March that Cravath Swaine & Moore LLP and Weil Gotshal & Manges LLP were among the targeted law firms. Amy Fantini, a Weil, Gotshal & Manges spokeswoman, declined to comment
on the charges. Cravath Swaine & Moore didn’t respond to a request for comment.
Intermune buy
The three men allegedly bought shares of Intermune based on the information gleaned from the hacked data. Though the deal didn’t close, they still made money as shares rose on media reports that the company was seeking a tie-up, the U.S. said. Intermune was ultimately purchased by Roche AG. Cravath advised Intermune on the deal. In another deal, the group allegedly bought shares in chipmaker Altera Corp. after Intel had retained one of the law firms to advise on an acquisition. They scored US$1.4 million in profits on the trade amid media reports of the pending deal, and sold their shares before it was publicly announced, according to the indictment. Weil Gotshal was one of the law firms advising Intel on the deal. Using information gleaned from a second law firm, the trio also bought shares of Borderfree, an online commerce site that was an acquisition target of Pitney Bowes, the U.S. said. They made a profit of US$841,000 on the trades after the deal was announced on May 18, 2015, according to the indictment. Prior to the Borderfree takeover, Hong and Chin bought so much of the company’s stock that on certain days the two accounted for 25 per cent or more of the company’s trading volume, according to the SEC complaint. Bloomberg
Business Daily Thursday, December 29 2016 7
Macau Gaming
Debtor database on the cards Junket association expects the system to commence operations next month Cecilia U cecilia.u@macaubusinessdaily.com
K
wok Chi Chung, President of the Macau Association of Gaming and Entertainment Promoters, said the junket-proposed debtor database system has already passed its trials and is currently awaiting approval from the MSAR Government’s Office for Personal Data Protection (GPDP). The junket association head now expects the debtor database to be officially established next month. Mr. Kwok told Business Daily in a phone interview yesterday that the group has already declared to the GPDP that the system is in accordance with the city’s Personal Data Protection Laws.
To ensure the system abides by the instructions of the Office, all loan contracts for debtors issued by junket members will include a statement approving that the debtors’ information be saved in the database and be used for reference by members of the database, according to Mr. Kwok. Apart from the GPDP, the association president said the group has also reported the system to the Gaming Inspection and Coordination Bureau. The database is a shared blacklist of gaming players who are considered at high risk of defaulting. The President added that the association has been in constant contact with both the GPDP and DICJ, hence both government departments are well aware of the progress of the database system set up. Mr. Kwok mentioned earlier during
Kwok Chi Chung, President of the Macau Association of Gaming and Entertainment Promoters
a summit at the MGS Entertainment Show that the database can help VIP promoters prevent overlapping lending, thus reducing the risk of bad debts.
In addition, the shared database, supported by the DICJ, will be operated by the industry itself, said Mr. Kwok during the MGS Entertainment Show.
Gaming
Telsey: December revenue growth no higher than 5 pct Analysts at Telsey Advisory Group expect the year-on-year increase in the city’s gross gaming revenue for this month will be under 5 per cent. ‘According to our industry sources, based on gaming play for the first 26 days of December, [gross gaming revenue] in Macau for the month is estimated to be tracking at just under [a growth of ] 5 per cent
year-on-year, a deceleration from last week’s [growth of] 10 per cent estimate,’ the company’s analysts wrote in a note on Tuesday. ‘This assumes an electronic game estimate for December, which puts monthly gross gaming revenue at HK$18.6 billion (US$2.4 billion),’ stated the firm. Since August, local gaming revenue has been back on a track
to growth, posting four consecutive months of year-on-year increases so far. For November, gaming revenue registered a year-on-year increase of 14.4 per cent, amounting to MOP18.8 billion. ‘December [gross gaming revenue] is up against a comparison of a 21.2 per cent decline, which was more difficult than November’s 32.3 per cent decline comparison,’ the note
reads. Despite the possible lower yearon-year growth in November, the firm notes that: ‘overall indications, both anecdotal and quantitative, continue to suggest that the Macau market has been improving, with particular focus on the sustainability of the recovery in the VIP business, which we had expected to decline in 2017’. C.U.
8 Business Daily Thursday, December 29 2016
Greater China Stock
Big guns but no bright lights is Hong Kong’s IPO destiny Part of it is because the city doesn’t allow dual-class ownership structures Nisha Gopalan
E
ven if it doesn’t get to host the IPO of Saudi oil giant Aramco, potentially the biggest float of all time, Hong Kong should still be able to maintain its billing as the world’s No. 1 venue for share sales next year. But with limited tech deals on the horizon, and most in the listing queue rather staid Chinese state-owned enterprises, investors shouldn’t expect too much excitement. Hong Kong, it seems, just isn’t a magnet for sexy, new-economy stocks. Part of it is because the city doesn’t allow dual-class ownership structures, one reason why Alibaba Group Holding Ltd. plumped for New York. And for companies below a certain size, Hong Kong Exchanges & Clearing Ltd. requires evidence of at least a three-year track record, which some tech firms would find hard to fulfill. A thriving institutional investor base that understands the tech sector also helps New York, which continues to draw Chinese new-economy stars like ZTO Express (Cayman) Inc., a delivery service that gets much of its business from Alibaba. In light of Meitu Inc.’s disappointing debut earlier this month, Hong Kong’s standing isn’t likely to change anytime soon. Zhongan Online P&C Insurance Co., which is backed by Alibaba’s payments affiliate Ant Financial and Tencent Holdings
Ltd., has decided to try its luck back home in China and Baidu Inc.’s iQiyi. com video streaming service isn’t a sure thing. There could be peer-topeer lender Lufax, officially called Shanghai Lujiazui International Financial Asset Exchange Co., or even Ant Financial, but again, they aren’t certain. Fund raising
What Hong Kong can count on is Chinese state firms coming to the city to raise funds. Thanks to IPOs from the likes of Postal Savings Bank of China Co., the former British colony
tops Shanghai and New York as the global leader in taking companies public this year. On the IPO cards for 2017 are another two big Chinese state deals: the US$10 billion float of China Petroleum & Chemical Corp.’s retail business and a potential listing of China Tower Corp. But while they raise a lot of money, these government-backed company share sales are often packed with cornerstone investors, which means there isn’t much liquidity once they hit the market. Getting a shot at Aramco could give Hong Kong a lot more buzz. Saudi Arabia is planning to list its oil behemoth at home, as well as in an offshore centre such as New York, London or Hong Kong. If reports are
correct, it’s also considering Japan. With its more buoyant IPO market, Hong Kong surely stands a better shot than its northern neighbour - Japan has seen waves of international firms desert its exchanges over the past few decades. But many foreign listings in the city haven’t performed well. Prada SpA and United Company Rusal Plc are trading below their issue price while Brazil’s Vale SA pulled the plug on its secondary listing amid weak turnover. Valuations in Hong Kong tend to be low, too. With little to look forward to outside of a slew of Chinese stateowned enterprise IPOs, Hong Kong looks destined to attract the big guns but not the bright lights. Bloomberg Gadfly
Monetary
No Happy New Year in Mainland as currency, liquidity fears loom China bulls could be facing a grim New Year’s eve Justina Lee
The first day of 2017 is when an annual US$50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate
increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped. “You have Chinese New Year quite early, and because of that one-month window, most of the banks will try to lock the money in a three-month cycle,” said Arthur Lau, Hong Kongbased head of Asia ex-Japan fixed income at PineBridge Investments. “The current situation in the bond market is partly because of year-end and because of Chinese New Year.”
The week-long Lunar New Year holidays are traditionally a time when people give out cash gifts and companies pay employee bonuses.
Changes
China’s 10-year government bond yield has surged 21 basis points in December, poised for its biggest monthly increase since August 2013, and its first annual gain since that same year. The yuan’s 6.6 per cent decline in 2016 puts it on course for its worst year since 1994, while the Shanghai Composite Index is headed for its largest drop in five years. The three-month interbank rate known as Shibor rose for a 50th day, its longest streak since 2010, to an 18-month high on Wednesday. The
overnight repurchase rate on the Shanghai Stock Exchange jumped to as high as 33 per cent the day before, the highest since Sept. 29. As banks become more reluctant to offer cash to other types of institutions, the latter have to turn to the exchange for money, said Xu Hanfei, an analyst at Guotai Junan Securities Co. in Shanghai. Bond and money markets may stabilize after Lunar New Year holidays -- which start Jan. 27 and end Feb. 2 -- though they’re unlikely to return to levels before the latest rout owing to yuan weakness and tighter monetary policy, said Lau. The People Bank of China’s yuan position -- a gauge of capital flows -- dropped the most in 10 months in November amid expectations for faster U.S. rate increases. The onshore yuan’s surging trading volume suggests outflows are quickening, according to Harrison Hu, chief greater China economist at Royal Bank of Scotland Group Plc. The daily average value of transactions in Shanghai climbed to US$34 billion in December as of Monday, the highest since at least April 2014, according to data from China Foreign Exchange Trade System. “In the new year, the new foreignexchange purchase quota starts, so we expect yuan positions in January to drop significantly,” Liu Dongliang, an analyst at China Merchants Bank Co., wrote in a note this month. “Within the foreseeable future, the market will be pessimistic about funding conditions. It happens to be near year-end now, where money markets are tight, and after New Year’s Day it’s almost Chinese New Year.” Bloomberg
Business Daily Thursday, December 29 2016 9
Greater China In Brief M&A
China Cinda sells insurance unit to Shenzhen Investment for US$607 mln
Livestock
Fat herds, leaner profits For China’s pig farmers, New Year feasts bring cold comfort Hallie Gu and Dominique Patton
With China’s Lunar New Year festivities fast approaching, pig farmers in the world’s biggest pork market have little to cheer. As they fatten herds to meet peak demand, a slump in retail prices and a spike in feed costs are grinding up profits. A wave of imports has squeezed pork retail prices 10 per cent since they hit record levels in June on a domestic supply shortage. Meantime, the price of soymeal has hit a 2-1/2 year high in Sichuan as farmers buy up stock to feed up pigs for the New Year “golden season”. As Chinese consumers tuck into cured pork and stews for the holidays - starting in late January this year - farmers will have to soak up profit margins that have halved in six months during a buying spree that accounts for a quarter of annual pork consumption. While profits are still close to historically high levels, the fall comes on top of food safety scandals and belt-tightening as economic growth stalls. China’s pig farmers also face a growing concern: appetite for what is traditionally the country’s favourite meat is waning in favour of cheaper alternatives like mutton and poultry. “We’re in the hottest season for pork consumption...but the scale of the increase (in demand) is lower compared with previous years,” said Fang Yonghui, analyst with pork consultancy Soozhu.com.
In Sichuan, China’s largest pig farming province, accounting for 10 per cent of national pork production, profit margins slumped 45 per cent to RMB650 per pig since May, when they touched their highest on records going back to 2009. Fang expects profit margins ntionwide to average RMB300-400 per pig next year. That’s well up from the average of the past five years, but down from bumper levels earlier this year. In the eastern province of Shandong, meanwhile, some are bracing for things to get worse. “2016 was a money-making year,” said one Shandong farmer with 1,000 breeder pigs, speaking on condition of anonymity. “And in 2017, it’s likely going be loss-making. Many dare not expand the herds even if they are making profits now.”
Expensive rations
An estimated 140 million pigs will be slaughtered in the two months leading up to the week-long New Year holiday, making that period the busiest months of the year accounting for 20 per cent of the annual average total. Yet that comes as weekly average national pork prices hover around RMB28 (US$4.03) per kilogramme, close to their weakest levels in calendar 2016. Higher costs of feed compound the headache for breeders like Guangdong Wens, the nation’s largest, in
the months before herds head for slaughter. On average, the nation’s pigs will gobble up about 90 kilograms of feed apiece in the two months leading up to the Lunar New Year, costing farmers a whopping RMB38 billion (US$5.47 billion) in rations based on a 50:50 mix of soymeal and corn, according to Reuters’ calculations. As demand climbed ahead of the winter, depleting supplies, national soymeal feed inventories have dropped to their lowest in three years at 363,500 tonnes.
Key Points Retail prices slide amid wave of imports... Pre-holiday demand brings surge in feed costs Profit margins shredded, down 45 pct in Sichuan ’2017 likely will be loss-making’ - Shandong farmer World’s no. 1 pork market losing taste for favourite meat? Farmers can switch to other feed mixes, but the cost of possible replacements like sorghum, distiller’s grain and rapeseed meal have also risen lately. Analysts expect pork prices to remain under pressure well beyond the new year holiday as meat supplies grow, with farmers replenishing herds and imports rising. “This spring festival (Lunar New Year), farmers can still get a relatively good price for their herds, but maybe not next year,” said Soozhu. com analyst Fang. Reuters
Transportation
China’s major east-west high-speed railway starts operation China on Wednesday put into operation one of the world’s longest high-speed railways, linking the country’s prosperous eastern coast to the less-developed southwest. The Shanghai-Kunming line - 2,252 kilometres in length - traverses the five provinces of Zhejiang, Jiangxi, Hunan, Guizhou and Yunnan and cuts travel time from Shanghai to Kunming from 34 to 11 hours, according to China Railway Corporation. The maximum speed is 330 km/ hour, said Wang Jinda, a train driver. The line is also the longest east-west high-speed railway in China. A longer rail line stretching north to south is the 2,298-kilometre Beijing-Guangzhou line, put into operation in 2012. China has built more than 20,000 kilometres of high-speed rail lines. According to the government’s plan, the mileage will increase to 45,000
kilometres by 2030. The launch of the Shanghai-Kunming line means the country’s high-speed rail grid
has taken shape, connecting almost all provinces on the Chinese mainland. Xinhua
China Cinda Asset Management Co, one of the country’s four state-backed bad-debt managers, said on Wednesday it would sell 41 per cent of Cinda Property and Casualty Insurance Co Ltd to Shenzhen Investment Holding Co Ltd for RMB4.22 billion (US$606.8 million). Shenzhen Investment placed the highest bid in a public sale via the Beijing Financial Assets Exchange for the 1.23 billion Cinda Property and Casualty shares held by China Cinda, the Hong Kong listed firm said in a filing to the stock exchange. The listing price of the stake was RMB2.45 billion. China Cinda held 51 per cent of the insurance unit prior to the deal, which is part of a drive to reform state-owned enterprises by introducing competent shareholders and achieving synergies. The deal is subject to regulatory approval. Stock
China stocks fall on new regulatory measures; HK little changed China stocks fell on Wednesday morning, with any optimism generated by strength in commodities overshadowed by the regulator’s latest measures to rein in aggressive stock investments by insurance companies. Hong Kong stocks held their ground on the first trading day following the Christmas break, but trade was thin and many operators were not yet back from holiday. Sentiment soured on Wednesday following media reports that the vice chairman of China’s insurance regulator said insurers were not platforms to enrich speculators. Also on Wednesday, the regulator said it had suspended two insurers from online insurance business and ordered them not to apply for new product approvals for three months the latest move to put insurers under stricter supervision. E-commerce
China’s e-commerce transaction value to exceed RMB38 tln by 2020 China said on Tuesday it aims to expand e-commerce transactions to more than RMB38 trillion (US$5.5 trillion) by 2020, up from RMB21.8 trillion in 2015. By 2020, China’s online population will pass 1 billion, growing by 7.8 per cent a year from 2015, according to a State Council fiveyear informatization plan. Information industry revenue is expected to grow by an average of 8.9 per cent each year from 2015 to hit RMB26.2 trillion by 2020. By then 90 per cent of villages in poverty will be covered by internet services, 12 per centage points more than that in 2015. Online retail sales will more than doubled from RMB3.9 trillion recorded in 2015 to RMB10 trillion by 2020.
10 Business Daily Thursday, December 29 2016
Asia In Brief Electricity
Sri Lanka faces threat of power crisis in 2017 Sri Lanka’s electricity regulator, on Tuesday, informed the Power and Energy Ministry that urgent steps must be made to buy new power plants, postpone maintenance work at the available power plants and increase contribution from rooftop solar generation to avoid a power crisis in the first quarter of 2017. The Public Utilities Commission of Sri Lanka (PUCSL) said that a successive failure of monsoon had caused very low hydro reservoir storage, less than 500 GWh, and the Commission’s recommendations were made to mitigate the impact of power shortages during the period from January to April 2017. The PUCSL said that the full availability of Lakvijaya coal plant, the country’s only coal power plant, was a key factor in January 2017. The PUCSL suggested to looking into the possibility of shifting any maintenance at the available power plants to avoid shutting down during the critical period January to April. M&A
Japan Inc could claim edge in overseas deals as China faces restraints Japan Inc may become a more important force in deal-making next year as its cashedup companies seek to buy growth prospects elsewhere in the world and as Beijing’s crackdown on capital outflows prevents some Chinese companies from making foreign acquisitions, bankers and lawyers said. Facing tepid prospects at home after decades of stagnation amid a shrinking population, Japanese companies had spent US$93 billion overseas this year, up to Dec. 19, little changed from a record US$96 billion in all of 2015, but up from just US$51 billion in 2013, Thomson Reuters data shows. Chinese companies have spent US$217 billion so far in 2016. With Japanese companies hoarding a record US$3.2 trillion in cash, according to government data, outbound acquisitions are expected to maintain a fast pace next year, the bank and law firm sources said. Growth
Laos aims for 3-4 pct growth of agriculture, forestry sector by 2020 Lao Ministry of Agriculture and Forestry aims for three to four per cent growth of the sector by 2020, according to information released at the sector’s annual meeting on Tuesday. Despite the previous cold winter, the late onset of the rainy season, locust outbreaks and flooding, the sector had seen 3.2 per cent growth in productivity and now comprised 23 per cent of gross domestic product (GDP), Lao Prime Minister Thongloun Sisoulith addressed the meeting. As many as 4.2 million tons of rice have been produced across the country in 2016. Meanwhile, livestock and fish farms are now able to provide an average of 55 kg of meat and fish to every citizen each year, reported Lao state-run Vientiane Times.
President Park Geun-hye Arrest
South Korea pension fund chief detained by special prosecutor Authorities are looking into whether Moon pressured a pension fund to support the USUS$8 billion merger last year of two Samsung Group affiliates Ju-min Park
S
outh Korean prosecutors put the chairman of the world’s third-largest pension fund under emergency arrest on Wednesday in a widening influence-peddling scandal that has led to parliament voting to impeach President Park Geun-hye. The special prosecutor’s office did not provide further details on the arrest of National Pension Service (NPS) Chairman Moon Hyung-pyo. Officers on Monday raided his home on suspicion of abuse of power. The special prosecutor has been looking into whether Moon pressured the pension fund to support the US$8 billion merger last year of two Samsung Group affiliates while he was head of the Ministry of Health and Welfare, which runs the NPS. Investigators are also examining whether Samsung’s support for a business and foundations backed by the president’s friend, Choi Soonsil, who is at the centre of the influence-peddling scandal, may have been connected to NPS support for the merger, a prosecution official told Reuters last week. Moon said on Tuesday, as he arrived at the prosecutor’s office, he would cooperate and did not comment when asked if he pressured the NPS to vote for the merger. On Dec. 9, the NPS dismissed as “groundless” a media report that Moon had coerced the NPS to support the merger. The NPS had 545 trillion won (US$451.35 billion) under management at the end of September and was a major shareholder in Samsung
Group affiliates Cheil Industries Inc and Samsung C&T Corp when they merged last year. Some investors criticised the tieup for strengthening the founding family’s control of Samsung Group, South Korea’s largest “chaebol”, or conglomerate, at the expense of other shareholders. The NPS voted in favour of the merger without calling in an external committee that sometimes advises it on difficult votes. A spokeswoman for the NPS said on Wednesday it was “watching the situation” and declined to comment further. TV footage showed Moon arriving in a detention centre van at the office of the special prosecutor, escorted by guards and wearing a prison uniform. He declined to answer reporters’ questions.
Protests and raids
Park, 64, whose father ruled the country for 18 years after seizing power in a 1961 coup, is accused of colluding with her long-time friend, Choi, who has been indicted and is in custody, to pressure big businesses to make contributions to non-profit foundations backing presidential initiatives. Park has denied wrongdoing but apologised for carelessness in her ties with Choi, a friend for four decades, who has also denied wrongdoing. Choi is in detention pending trial. Parliament voted to impeach Park over the scandal on Dec. 9, a decision that must be upheld or overturned by the Constitutional Court within 180 days. In the meantime, she has been
stripped of her powers, which have been assumed by the prime minister, although she remains in the presidential Blue House. Big street protests have been held every Saturday for the last nine weeks to demand that she step down immediately. Another rally is expected this weekend. At a parliamentary hearing this month, Samsung Group scion Jay Y. Lee denied allegations from lawmakers that Samsung lobbied to get the NPS to vote in favour of the merger, or that it made contributions seeking something in return.
Key Points Head of South Korea’s pension fund placed under emergency arrest NPS is world’s third-largest pension scheme Investigators examining NPS support of Samsung units’ merger President impeached in widening influence-peddling scandal (Recasts, adds details, background) A Samsung Group spokeswoman declined further comment on Wednesday. Investigators raided NPS offices last week and in November. Under South Korean law, a suspect can be held under emergency arrest without a warrant for up to 48 hours. If the Constitutional Court affirms Park’s impeachment, she would be the country’s first democratically elected leader to be ousted from office, and would lose immunity from prosecution. Her early departure from office would trigger a presidential election, to be held in 60 days. Reuters
Business Daily Thursday, December 29 2016 11
Asia Industry
Singapore Defaults Seen as Bellwether for 2017 Asia Distress Five companies in the city defaulted on nearly S$1 billion (US$691 million) of bonds in 2016 Denise Wee
S
ingapore’s commodities-related defaults could turn out to be the canary in the mine. Despite a modest rebound in resource prices, restructuring specialists including KPMG and Hogan Lovells Lee & Lee see more Asia-Pacific commodities and shipping companies being pushed into delinquency. Law firm DLA Piper said there could be choppy waters ahead on rising interest rates and President-elect Donald Trump’s overhaul of trade with China. Regional non-bank borrowers face US$76.4 billion of dollar bonds maturing in 2017, 24 per cent more than this year, Bloomberg-compiled data show. While oil prices have jumped 17 per cent since Trump was elected, they are about half what they were in 2014. Resource prices as a whole are down 64 per cent from their peak before the 2008 global financial crisis, the Bloomberg Commodity Index shows. Singapore, whose economy relies on shipping and oil service firms, was exposed first because the companies were smaller and less able to tap government support. “Singapore is a bellwether for the larger Asean and Asian region,” said Andy Ferris, Singapore-based partner at Hogan Lovells Lee & Lee. “Some of the fundamental problems those industries face won’t go away. Many of the companies in the commodities sector have high levels of debt and
depressed revenues.” Five companies in the city, including oil services firms Swiber Holdings Ltd. and Swissco Holdings Ltd., defaulted on nearly S$1 billion (US$691 million) of bonds in 2016. KPMG said defaults could widen to include Singapore’s developers after home prices dropped by the most in more than seven years in the three months ended Sept. 30. China’s overheated housing market cooled in November as authorities rolled out renewed buying curbs.
Payments due
planning to add headcount in Jakarta. Mark Fairbairn, Hong Kong-based head of restructuring and special situations for Asia at DLA Piper, counters that Singapore’s issues could turn out to be a “cluster of problematic companies” that do not appear to be of the best quality, he said. He added that the defaults in Singapore may still be a bellwether for more to come in the oil services sector.
Weak commodities
He also expects more work across the region as rates rise and Trump disrupts trade. “Across Asia, we could see more corporates getting into difficulty with their bank or bond debt,” said Fairbairn.
China’s top policy makers said after a Beijing meeting in mid-December that controlling financial risk to avoid asset bubbles will be a priority for 2017. Hogan Lovells’ Ferris said “inherent government support” may be gradually withdrawn. At least 28 onshore bonds have defaulted this year, compared with seven in 2015. “I definitely think we will see further distress out of China,” said Ferris. “We have seen a move to allow trading of credit-default swaps and that suggests that the government could allow certain companies just to fail. It’s a fair bet to say we’ll see a sustained level of distress in the bond market throughout Asia next year.” Bloomberg
Real estate firms in the Asia-Pacific region face US$8.7 billion of dollar bonds due 2017, while energy-related companies including coal miners and oil services firms must repay US$12 billion, Bloomberg-compiled data show. Commodities trader Noble Group Ltd.’s dollar bonds maturing 2020 traded at 84.2 cents on the dollar on Monday, while oil producer MIE Holdings Corp.’s dollar notes due 2018 traded at 83.3 cents, Bloomberg-compiled data shows. Graham Martin, head of restructuring at KPMG in Singapore, said he expects more defaults among oil services and shipping firms throughout Asia including countries like Malaysia and Thailand, with rising stress in Indonesia where coal miners face low prices. “We think Indonesia will be one of the top markets for restructuring work in 2017,” said Martin, who is
Economy
Vietnam suffers first slowdown in economic growth for 4 years The slower annual growth this year left the country ranked behind India, China and the Philippines Mai Nguyen
Vietnam’s economy expanded an estimated 6.21 per cent this year, slightly behind 2015 and marking the first slowdown in four years, but a fourth-quarter surge to 6.68 per cent was the best for a year, keeping it among Asia’s fastest-growing economies. Drops in agriculture and mining dragged full year growth below last year’s 6.68 per cent and the government’s target of 6.3-6.5 per cent, the General Statistics Office (GSO) said on Wednesday. “2016 GDP has not reached target or had any major breakthroughs but in general the economy has had good growth except for the agriculture and mining sectors,” GSO head Nguyen Bich Lam told reporters. In 2015, Vietnam’s economy had expanded at its fastest pace since 2007 having maintained growth momentum since 2012. The slower annual growth this year - the first deceleration since 2012 - left Vietnam ranked behind India, China and the Philippines. The Statistics Office put the drop
in pace down to adverse weather, a marine environmental disaster and an unfavourable global economy. “The 6.21 growth this year is actually not too bad given the outside factors like weather and the international markets,” said Tran Minh Hoang, chief economist at Vietcombank Securities. “Next year growth may improve slightly to 6.3-6.5 per cent as the oil market stabilises and public spending increases,” Hoang added. Severe drought in the Central Highlands coffee growing region, salination in the paddy fields of the Mekong Delta, a cold spell in the north and floods in the central region also trimmed farm sector growth to 1.36 per cent in 2016, the statistics office said. Vietnam is the world’s second largest coffee producer after Brazil and ranks third behind India and Thailand in rice exports. Other key foreign exchange earners include mobile phones, textiles, footwear, fish and shrimp. Vietnam’s mining sector fell 4 per cent this year on low prices of coal and crude oil, after an increase of
6.5 per cent in 2015, while an environmental disaster in April that was blamed on the local steel-making unit of a Taiwanese conglomerate devastated fisheries.
Fourth quarter growth cushions slows
On the bright side, October-December GDP growth was the best this year as agriculture rebounded during the main rice harvest season, and there was solid growth in manufacturing, construction and services, which benefitted from a record 10 million foreign visitors this year, the statistics
Drops in agriculture and mining dragged down full year growth
office said. Retail sales grew 9.1 per cent in 2016, while domestic credit growth quickened to 18 per cent as bank lending rose toward the year-end, with construction firms active borrowers. Attracted by cheap labour and tax incentives inflows of foreign direct investment (FDI) struck a record US$15.8 billion this year. FDI was up 9 per cent on last year. South Korean investors pledged the most funds in 2016, including US$1.5 billion for LG Display’s OLED screens plant and by LG Innotek’s US$550 million camera plant. Despite the chill in the global economy, exports grew a respectable 8.6 per cent in 2016 to total US$175.94 billion, while imports growth was a more modest 4.6 per cent, totalling US$173.26 billion. That left Vietnam, with an estimated trade surplus of US$2.68 billion for this year, compared with a deficit of US$3.63 billion in 2015. GSO’s Lam noted, however, that Vietnam’s increasing exposure to international trade meant it was more vulnerable to any threats of protectionism that might arise out of the election of Donald Trump as U.S. president, and Britain’s vote to leave the European Union. Reuters
12 Business Daily Thursday, December 29 2016
Asia Fine
S.Korea fines Qualcomm US$854 mln for violating competition laws For abusing its dominant market position and forcing handset makers to pay royalties for an unnecessarily broad set of patents Se Young Lee and Stephen Nellis
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outh Korea’s antitrust regulator fined Qualcomm Inc 1.03 trillion won (US$854 million) for what it called unfair business practices in patent licensing and modem chip sales, a decision the U.S. chipmaker said it will challenge in court. The fine, the largest ever levied in South Korea, marks the latest antitrust setback for Qualcomm’s most profitable business of licensing wireless patents to the mobile industry, at a time when the business is facing headwinds from a cooling smartphone market. The Korea Fair Trade Commission (KFTC) ruled on Wednesday Qualcomm abused its dominant market position and forced handset makers to pay royalties for an unnecessarily broad set of patents as part of sales of its modem chips. Qualcomm also restricted competition by refusing or limiting licensing of its standard essential patents related to modem chips to rival chipmakers such as Intel Corp, Samsung Electronics Co Ltd and MediaTek Inc, the regulator said, hindering their sales and leaving their products vulnerable to lawsuits. The regulator ordered Qualcomm to negotiate in good faith with rival chipmakers on patent licensing and renegotiate chip supply agreements with handset makers if requested - measures that would affect the U.S. firm’s dealings with major tech companies including Apple Inc, Intel, Samsung and Huawei Technologies Co Ltd if upheld. The KFTC said it began its investigations into Qualcomm’s practices in 2014 following complaints from industry participants, but did
not name specific companies. Foreign companies including Apple, Intel, MediaTek and Huawei expressed their views during the regulator’s deliberation process, KFTC Secretary General Shin Young-son told a media briefing in the country’s administrative capital. “We investigated and decided on these actions because Qualcomm’s actions limit overall competition,” Shin said, adding that the ruling was not about protecting domestic companies such as Samsung and LG Electronics Inc but about improving market competition for all players. Qualcomm said it will file for an immediate stay of the corrective
order and appeal the decision to the Seoul High Court. The firm will also appeal the amount of the fine and the method used to calculate it. “Qualcomm strongly disagrees with the KFTC’s announced decision,” it said in a statement.
In regulatory crosshairs
The fine is the latest in a series of antitrust rulings and investigations faced by Qualcomm from regulators across the globe. In February 2015, Qualcomm paid a US$975 million fine in China following a 14-month probe, while the European Union in December 2015 accused it of abusing its market power to thwart rivals. Stacy Rasgon, an analyst with AB Bernstein, said the fine itself was large but also said the KFTC’s orders for Qualcomm to alter its business practices have bigger future
implications for the chipmaker. A major challenge for Qualcomm, he said, would emerge if the ruling forces the company to license patents for some of its chips to rivals such as Intel, which has been competing hard to land its modem chips in mobile phones. “How can they force you to license to a competitor? That’s what I never understood. I guarantee Qualcomm won’t want to do that,” he said, adding that the dispute could take years to play out in South Korean courts. The KFTC fined Qualcomm 273 billion won in 2009 for abusing its dominant position in CDMA modem chips, which were then used in handsets made by Samsung and LG. Regulators in other jurisdictions, including the United States and Taiwan, are also investigating Qualcomm. Reuters
Rebound
Japan November industrial output rises most in five months Unexpected strength in exports last month point to output gaining traction Yoshiaki Nohara
J
apan’s industrial output rose the most in five months in November as export volumes rebounded sharply, pointing to an expected economic expansion in the fourth quarter.
Key Points
Industrial production increased 1.5 per cent in November from a month earlier (forecast +1.7 per cent). Output is forecast to rise 2 per cent in December and 2.2 per cent in January. Retail sales rose 1.7 per cent in November from a year ago, the first gain since February (forecast +0.8 per cent).
Big picture
Rising production bodes well for Japan’s economy, and unexpected strength in exports last month point
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to output gaining traction. Export volumes rose by 7.4 per cent in November from a year earlier, with
those to China jumping 16 per cent. The yen’s slide following Donald Trump’s election victory is expected to fuel further export gains.
Economist comments
Overseas demand, including from
developing nations, is recovering and production is growing to meet their consumption needs,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Inventories are down and shipments are up, lifting production,” Minami said. “Production is getting a lift as the overall economy gets somewhat better,” said Junko Nishioka, chief economist for Japan at Sumitomo Mitsui Banking Corp. in Tokyo. Caution is warranted on consumer spending, despite the upbeat retail sales data, said Nishioka, who pointed to a decline in household spending last month. “The labor market continues to be tight and improving conditions point to higher wages, but that’s not smoothly translating into higher spending.”
Details
Industrial output rose 4.6 per cent from a year earlier (forecast +4.7 per cent). Retail sales rose 0.2 per cent from a month ago (forecast -0.5 per cent). Bloomberg 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 Thursday, December 29 2016 13
Asia Autmotive
End of lockup for subsidised Thai cars fuels hope of sales boost Domestic sales are projected at 800,000 cars in 2017 After years of falling domestic sales, Thailand’s auto industry is hoping 2017 will be a year of recovery with the end of a five-year restriction on people selling cars bought under a government subsidy scheme. About 1.1 million vehicles were bought under the first-time buyer scheme introduced in September 2011 by then-Prime Minister Yingluck Shinawatra. Sales jumped 81 per cent to a record 1.44 million cars in 2012, the year the subsidy ended. While that was a welcome boost for an industry badly dented by massive flooding in late 2011, its ban on people transferring ownership for five years depressed demand. Car sales have fallen each year since 2012. “We expect up to 20 per cent of those car buyers to replace their cars once the lock-in period ends,” Tanit Petra, managing director of Mazda Petra, a major dealer for the Japanese carmaker. Domestic sales are projected at 800,000 cars in 2017, up from this year’s forecast 750,000 units, said Surapong Paisitpattanapong, spokesman of the auto sector division of the Federation of Thai Industries. “Sales next year should get a boost from first-time car buyers, by 30,000 cars,” he said. But the one-year mourning period for King Bhumibol Adulyadej, who
died on Oct. 13, and record household debt mean the recovery may not be as strong as many had hoped.
No buying mood?
“There is demand from first-time car buyers. But with the mourning Thailand is a regional production base for global carmakers. The auto industry accounts for about 10 per
cent of Thai GDP and employs 10 per cent of workers in manufacturing. A pick-up in domestic demand would help counter softer car exports. After hitting a record 1.2 million cars in 2015, exports are expected to miss this year’s 1.22 million target due to tepid global demand and stronger competition, Surapong said. Dhammatouch Thongaram of TMB Analytics said 5-10 per cent of first car buyers should seek new vehicles, “but that will depend on their income
and the economy, too.” The Bank of Thailand predicts GDP growth of 3.2 per cent this year and next, up from 2.8 per cent last year. High household debt is one reason why it has not cut rates since April 2015. Consumer debt levels should fall as households repay car loans, Don Nakornthab, a central bank senior director, told Reuters. “That should be good for consumption,” he said. Bloomberg
Metals/Energy
Miners unearth a profit bonanza with rally set to last into 2017 David Stringer
Miners had been digging in one of Australia’s oldest collieries for almost a century until operations wound down a year ago, the victim of plunging global commodity prices. Now owner Glencore Plc is resuming output at the Queensland site, the latest sign of a profit bonanza bringing the world’s top metals and energy producers back from the brink. Everything from coal to iron ore to zinc soared in 2016, rebounding from multiyear lows as output cuts and stronger demand trimmed surpluses. The rallies erased losses that sent the industry reeling from 2015. The biggest companies -BHP Billiton Ltd., Rio Tinto Group, Vale SA and Glencore - may earn a combined US$26 billion in the six months through December, a twoyear high and 40 per cent more than the first half, forecasts compiled by Bloomberg show. The windfall won’t end there. Analysts predict more income gains in 2017, which would bolster balance sheets and allow mining companies to pursue acquisitions, raise dividends and cut debt. If construction remains strong in China, the top metals consumer, the pickup in demand may endure, according to Macquarie Group Ltd. Banks including Morgan Stanley have boosted their forecasts for metals prices and earnings by producers. “There’s an underlying demand that’s driving the pickup, and that’s probably sustainable,” said Edward Smith, Melbourne-based chief investment officer at LegalSuper Pty, which manages AUS$3 billion (US$2.3 billion) and holds BHP shares. “It is a recovery from those historic lows.” As recently as January, commodity prices had sunk to the lowest in a quarter century, forcing companies to shut operations, sell assets and cut dividends to reduce debt as their shares tumbled. Since then, markets have tightened and metals have been boosted by China’s credit-backed
expansion of infrastructure spending. Prospects also improved with speculation that the election of Donald Trump as U.S. president will revive growth in the world’s biggest economy.
Metals advance
The London Metal Exchange index of six industrial commodities, including copper and aluminium, is headed for its first annual advance in four years and the largest since 2010. According to the average of analyst forecasts compiled by Bloomberg, many prices will move higher next year. Goldman Sachs Group Inc. expects the gains to continue as global economic growth improves. “We are in this sweet spot for free cash flow,” Colin Hamilton, a London-based commodities analyst at Macquarie, said by telephone Dec. 15, adding that the profit-fuelling conditions for the mining industry will persist into the first half. “Free cash flow will remain pretty strong, and they will be giving money back to shareholders.”
Earnings outlook
In February, Melbourne-based BHP, the world’s biggest mining company, will report earnings before interest,
taxes, depreciation and amortization of US$8.5 billion for the six months to Dec. 31, about 35 per cent more than the previous half, according to the average of three analysts’ estimates compiled by Bloomberg. Profit at Baar, Switzerland-based Glencore will advance about 24 per cent to US$4.9 billion, while London’s Rio Tinto will report earnings up 20 per cent to US$6.4 billion, the forecasts show. The gains probably will continue. The top four mining companies will report another US$27 billion of combined earnings in the first six months of 2017, according to the forecasts. BHP rose 3.3 per cent in Sydney Wednesday, while Rio gained 2.4 per cent. Morgan Stanley says base metals are a better bet next year than coal or iron ore. The bank forecasts copper will rise to US$5,346 a metric ton from US$4,854 this year, and aluminium will advance to US$1,786 a ton from US$1,603. Zinc will reach US$2,728 a ton next year from US$2,085 in 2016, it said. Citigroup Inc. says most raw materials will perform strongly next year. Goldman Sachs urged investors last month to bet on higher prices as global manufacturing picks up, the
first time the bank has recommended an overweight position for the asset class in more than four years.
Restarting mine
Glencore, the world’s biggest exporter of coal, said in October that it was hiring people for its Collinsville mine in northeast Australia. The site, which began production in 1919, is preparing to restart early in the New Year, buoyed by rising demand from South-East Asia. There’s no consensus on the duration of the rebound. Demand growth for commodities is likely to slow in 2017, while materials including copper, coal and iron ore are trading well above their marginal costs of production, according to Morningstar Inc., which forecasts weaker iron-ore prices next year and in 2018. While mines are generating more cash, “the question is looking further out,” according to Michelle Lopez, a Sydney-based investment manager at Aberdeen Asset Management Ltd., which globally manages US$403 billion, including BHP and Rio shares. She questioned whether the price gains are sustainable given that China may reverse its policy on using less coal and because new iron-ore mines are expanding capacity. But with more cash rolling in now, mergers and acquisitions have rebounded and dividends are back. The number of mining deals in 2016 is the highest in six years, according to data compiled by Bloomberg. BHP and Rio altered policies to tie dividend payouts directly to profit, while Glencore and Rio de Janeirobased Vale said they will resume payments that were halted amid the price collapse. “The Chinese economy still has a long way to go before it’s built out,” Nev Power, the chief executive officer at Fortescue Metals Group Ltd., the world’s fourth-biggest exporter of iron ore, said in a Dec. 16 telephone interview. The Asian country will need more raw materials as it expands cities and transport networks to accommodate its growing population, he said. “We should expect to see that continue for perhaps a few decades to come.” Bloomberg
14 Business Daily Thursday, December 29 2016
International In Brief Bonds
Government bonds boosted by unease over Italian bank rescue plan Euro zone bond yields fell across the board on Wednesday as concerns about the strength of a rescue plan for Italian banks pushed investors to the safety of government debt. Germany’s 10-year yields hit their lowest in seven weeks and other euro zone equivalents were also in demand. On Monday, the European Central Bank told ailing Italian lender Monte dei Paschi di Siena that its capital shortfall had risen to 8.8 billion euros (US$9.2 billion), from 5 billion euros indicated previously. This raised questions about whether the 20 billion euros earmarked by the Italian government would be enough to cover the funding requirements of all the country’s banks. An Italian Treasury source told Reuters this week that the amount would be enough, but investors are still concerned, said DZ Bank strategist Andy Cossor. Renewable energy
Icahn sees doubts about ethanol mandate among Trump’s advisers Billionaire Carl Icahn, a special adviser to Donald Trump and a sceptic of the U.S. ethanol mandate, said there are others on the president-elect’s team who have even deeper criticisms of the program. Icahn repeated criticism of the credit trading program that regulators and refiners use to track compliance with federal biofuel consumption quotas. While he hasn’t expressed opposition to renewable fuel use, “there are people on the Trump team that believe ethanol itself does very little” in helping the environment, Icahn said Tuesday in a telephone interview, while declining to provide further details. “It’s a black cesspool of trading if there ever was one,” Icahn said. Last week, Trump said he tapped Icahn as a special adviser on regulations. Icahn, 80, owns a majority stake in CVR Energy Inc., an independent oil refiner, and has dubbed trading in biofuel credits, known as Renewable Identification Numbers, or RINs, the “mother of all short squeezes.” Corruption
Argentina’s ex-president Kirchner prosecuted for embezzlement Argentina’s former president Cristina Fernandez de Kirchner (2007-2015) was prosecuted on Tuesday for embezzlement and organized crime. Federal Judge Julian Ercolini initiated the prosecution proceedings, and ordered the embargo of one billion pesos (US$625 million) in assets belonging to the former head of state. Fernandez “was prosecuted today as a member of a criminal organization that committed the crime of aggravated embezzlement,” state news agency Telam quoted Ercolini as saying. Three others were also prosecuted for the same charges, including former Planning Minister Julio De Vido, former Secretary of Public Works Jose Lopez and businessman Lazaro Baez. The judge’s decision springs from an investigation into the “assignation of 80 per cent of public works projects,” mainly road building, in Argentina’s southern Santa Cruz province to companies which belong to Baez. The judge also ordered all bank accounts belonging to the four to be frozen, except for accounts to which pensions or salaries are paid. In Argentina, organized crime carries a penalty of up to 10 years in prison.
Aircraft
Airbus’s A380 woes deepen as top buyer Emirates delays jets The announcement caps a year of negative news for Airbus’s flagship model Deena Kamel Yousef and Benjamin Katz
A
irbus Group SE’s struggles with its A380 superjumbo jet are deepening as the plane maker delays deliveries of a dozen aircraft over the next two years to Emirates, the double-decker’s biggest customer. To make up for the financial drag from the tardier handovers, Airbus will accelerate cost cuts, according to an e-mailed company statement late Tuesday. The delay stems from an agreement between Emirates and engine supplier Rolls-Royce Holdings Plc, the manufacturer said. Handovers of six A380s apiece that were originally planned for 2017 and 2018 will be shifted to a year later following a subsequent agreement with Emirates and Airbus, the plane maker said, adding it still plans to deliver about 12 A380s per year as of 2018. Emirates and Rolls-Royce reached a settlement earlier in December over the airline’s A380 engine performance and maintenance concerns, after the carrier had revealed technical shortcomings a few weeks earlier. The delays compound Airbus’s efforts to turn around the fortunes of the A380, the world’s largest commercial jetliner, which lists for US$433 million before the discounts customary in the industry.
announced purchases from Airbus in mid-December, meaning the company hasn’t received any advance contracts on the model this year. As a consequence of slack demand, Airbus cut its delivery target for the A380 in July. U.S. competitor Boeing Co. is also having trouble selling its competing 747-8. Emirates is by far the biggest buyer and operator of the A380, with orders for more than 140 of the plane. The Dubai-based carrier switched to Rolls-Royce engines for its latest batch of A380s, after relying on General Electric Co.’s Engine Alliance joint venture with Pratt & Whitney for the four powerplants that propel
the airliner. Winning Emirates as a customer for its Trent 900 engine to power the A380 was a major commercial victory for Rolls-Royce when it was announced in 2015, and the contract for a total of 50 aircraft remains the largest in the history of the U.K.’s prime manufacturer. In November, Emirates President Tim Clark revealed that feedback on the powerplants indicates “technical issues” that needed to be resolved before the first plane was handed over to Emirates. That delivery will take place this week, according to the engine maker and the airline on Wednesday. Rolls-Royce said in an e-mailed response to questions that it will “continue to work with Airbus and Emirates to meet their requirements.” Bloomberg
Bad year
The announcement caps a year of negative news for Airbus’s flagship model. An order for A380s from Iran never materialized when that country
Energy
Trudeau’s energy boss turns to electricity after oil decisions It was a tumultuous autumn for Jim Carr Josh Wingrove
Canada’s pipeline point man was a key player in decisions by Prime Minister Justin Trudeau’s government to approve a major liquefied natural gas project in September and a pair of crude-oil proposals from Kinder Morgan Inc. and Enbridge Inc. last month, preceded by a string of regulatory and environmental concessions to quell opposition. That cleared the deck for Carr, Canada’s minister of natural resources. Now preparing for President-elect
Donald Trump’s administration with Rick Perry as his U.S. counterpart, Carr, 65, is shifting his attention in 2017 to two fresh endeavours: overhauling the country’s National Energy Board and pushing for new transmission lines, potentially funded by both government and pension funds. An advisory panel will submit its recommendations on the NEB in May and the government will then go about rewriting Canada’s environmental review laws for major projects, Carr said. He also plans to champion a push to link provinces
Jim Carr, Canada’s minister of natural resources
rich with green energy to those that instead burn coal or gas for electricity. “The way you start approaching that possibility is by looking at ways in which provinces can cooperate,” he said in a recent interview at his Ottawa office. “That’s certainly a long term goal, and you begin long-term goals by taking short-term steps.”
Pipeline approvals
Energy projects have been a major focus since Trudeau took power last year, as he seeks to stoke economic growth while satisfying pledges made to environmentalists and indigenous communities. Last month, Carr and Environment Minister Catherine McKenna approved Kinder Morgan’s Trans Mountain pipeline along with Enbridge’s Line 3, while rejecting Enbridge’s Northern Gateway proposal. The only other major pipeline in front of Canadian regulators is TransCanada Corp.’s Energy East, which is in its early stages of review. Conservative lawmakers, who governed from 2006 to 2015, criticized Carr for approving Trans Mountain, with its potential legal barriers, and not Northern Gateway. Nonetheless, Carr said he felt a sense of accomplishment for how government stick-handled the file. “I’m proud of being able to approve major projects while respecting our climate change goals, and while meaningfully accommodating indigenous peoples,” said Carr. “We knew ultimately the decision we took had to be in the national interest, and our explanation for why had to be persuasive.”
Business Daily Thursday, December 29 2016 15
Opinion Business Wires
Taipei Times The government’s business monitoring system last month flashed “green” for the fifth consecutive month, reflecting a moderate, but continued improvement in the economy, the National Development Council said yesterday. The council’s composite monitoring indicators seek to measure growth or decline in nine areas of the economy. “The performance came on the back of improving exports and local manufacturers’ increasing shipments,” council research director Wu Ming-huei told a news conference in Taipei yesterday. The council uses a five-color system to categorize Taiwan’s economic health, with “blue” signaling a recession, “green” steady growth and “red” overheating, while “yellowblue” indicates a transition between recession and growth, and “yellowred” a transition between growth and overheating. The customer-cleared exports and producers’ shipments for manufacturing readings both shifted from “yellow-blue” to “green” last month, while seven other business gauges remained unchanged.
The Plant-Based Solution to Hunger
T Bangkok Post Thailand’s border trade is expected to continue growing by at least 3 per cent next year, driven by the growing economies of Cambodia, Laos, Myanmar and Vietnam and the popularity of Thai products in those markets. Adul Chotinisakorn, deputy director-general of Foreign Trade Department, said border trade prospects remain strong and promising, while the economies of the four neighbouring countries are expected to continue growing by 6-7 per cent a year. “Next year, the department vows to come up with new strategic plans to drive border trade, including new border checkpoints [...] to link Thailand’s Chanthaburi to Cambodia’s Battambang province and Pailin province, Prachuap Khiri Khan’s Sing Khon border pass to Myanmar’s Myeik and Loei’s Tha Li border pass to Laos,” he said. “Business networking and partnership between Thai entrepreneurs along the border provinces and neighbouring counterparts will be also be beefed up to maximise distribution of Thai products.”
Philstar The Bangko Sentral ng Pilipinas (BSP) has lifted the additional 25 per cent lending cap for single borrowers undertaking major infrastructure projects under the public private partnership (PPP) program. The BSP is no longer extending the effectivity of the additional 25 per cent single borrowers’ limit (SBL) specifically available to banks and quasi banks as temporary regulatory relief to jump-start financing for PPP projects. The relief launched in 2010 for a period of three years and has been extended for another three years is set to expire today. With the lifting of the regulatory relief, the BSP would again restrict each bank’s exposure to a single borrower to only 25 per cent of its capital.
he way we eat in the industrialized w o r l d i s u n h e a l t h y , u n j u s t, a n d unsustainable. Far too much of the meat we consume is produced under questionable ecological, ethical, and social conditions. And now our industrial model for meat production is being exported to the global south – especially India and China – where meat consumption is rising among these countries’ emerging middle classes. Worldwide, 300 million tons of meat are produced each year, and the United Nations Food and Agriculture Organization estimates that the annual amount will increase to 455 million tons by 2050 if demand continues to grow at the current rate. Such large amounts of meat can be produced only on an industrial scale, and at high social, political, and ecological costs. Meat production is a tremendously inefficient use of agricultural land, because considerably more plant-based food is needed to feed livestock than we would need to feed ourselves directly through a plant-based diet. For example, producing one kilogram of chicken meat, pork, or beef requires 1.6, three, and eight kilograms of animal feed, respectively. This pits farmers and animal-feed producers against one another in a fierce competition over land. Meanwhile, the production of soy – the world’s most important animal-feed grain – rose from 130 million tons in 1996 to 270 million tons in 2015, with 80 per cent of output going to meat production, especially in China (70 million tons) and Europe (31 million tons). This expansion of soy agriculture, as a result of the growing demand for meat, is driving up land values. Consequently, in the global south, common land is being privatized, rainforests are being destroyed to make room for agricultural cultivation, and international agribusinesses are expropriating the land that one-third of the world’s people still rely on for their livelihoods. Animal-feed production, and the intensive cultivation of agricultural land that it requires, is not only destroying ecosystems and reducing biodiversity; it is also fuelling climate change. Worldwide, our industrial agriculture system produces an estimated 14 per cent of the world’s greenhouse-gas emissions; including emissions indirectly linked to deforestation, and those associated with fertilizer production, increases that share to 24 per cent. Moreover, the extensive use of fertilizers and pesticides – 99 per cent of the world’s soy is genetically modified, and is routinely treated with pesticides – is also contaminating ground-water sources, destroying biodiversity, and eroding the soil. We can no longer ignore the external costs of this system. If we are serious about addressing climate change and securing every human being’s right to proper nutrition and food security, we must challenge the presumption that an industrial agricultural model, let alone meat, is necessary to
“
Barbara Unmüßig President of the Heinrich Böll Foundation
feed the world. In fact, that presumption has little merit. The UN Environment Programme estimates that, by 2050, an area between the size of Brazil and India will have to be repurposed into cropland if current food-consumption trends continue. But if the 9.6 billion people expected to inhabit the planet by then were to have a plant-based diet, industrial meat production could be abandoned and all of them could be fed without the need for any additional agricultural land. For many people, the competition for land is a fight for survival. Land access, which is more unevenly distributed than incomes, is a deciding factor in whether someone suffers from malnutrition: 20 per cent of households that experience hunger do not own land, and 50 per cent of people who experience hunger are small-scale farmers. The industrial agriculture system’s production chains must be replaced with local, decentralized, and sustainable production chains. It is incumbent upon governments to prioritize people’s right to food and nutrition above private economic interests. People should not lose their livelihoods and food security for the benefit of agribusiness profits. To move toward an ecologically sustainable and socially equitable agricultural model, we can leverage existing political frameworks, such as the European Union’s Common Agricultural Policy. As it stands now, large-scale industrial meat producers are profiting extensively from EU subsidies; but these subsidies c o u l d b e r e di r ect e d as investments in decentralized meat and grain production chains that adhere to a more sustainable model. Doing so requires recognizing that realistic alternatives to industrial agriculture do exist. For example, “agroecology” – a system based on traditional and indigenous knowledge that is passed down through the generations – is easily adaptable to all geographic circumstances. In fact, in 2006 Jules Pretty of the University of Essex found that this mode of production can increase harvest yields by 79 per cent. But, to implement this shift, governments must ensure that all people have guaranteed access to land and potable water, and they need to create political frameworks to promote ecologically and socially just agricultural models – which, by definition, excludes industrial agriculture. The challenge of feeding every human being should not be viewed in opposition to – or as somehow ruling out – questions of social justice and the future of the planet. Poverty, malnutrition, and hunger are a result of politics, not scarcity. Project Syndicate
If we are serious about addressing climate change and securing every human being’s right to proper nutrition and food security, we must challenge the presumption that an industrial agricultural model, let alone meat, is necessary to feed the world.
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16 Business Daily Thursday, December 29 2016
Closing Bank
Xiaomi-backed online bank to launch services soon - bank investor
by Chinese tech companies, who are hoping to tap the country’s underserved market of small enterprises and consumers. WeBank, backed by Tencent Holdings A Chinese online bank backed by smartphones and Ltd, became China’s first operational online-only bank home appliances maker Xiaomi Inc is set to launch in 2015, followed by MYBank, a venture controlled services soon, after being officially established by Alibaba Group Holding Ltd affiliate Ant Financial and rebranded recently, according to one of the Services Group. The new venture comes as Xiaomi has venture’s investors. New Hope Group Co Ltd said in a statement on Tuesday shareholders and regulators seen its smartphone sales shrink, raising doubts about the worth of the company, which was valued at US$46 had approved the name Sichuan XW Bank for the billion in its last fund-raising in 2014. It is now pinning lender. “This is an important step in the process, marking (the bank’s) the official establishment,” said profit growth hopes on sales from smart home devices as well as revenue from its software eco-system. On the statement, citing an unnamed person in charge Tuesday, Xiaomi CEO and Chairman Lei Jun revealed at the new bank. “(The bank) will be officially open the rebranding with a picture of the new bank’s logo to users in the near future.” posted on Twitter-like social media site Weibo. Reuters It is the latest in a string of new online banks backed
M&A
BP buys Woolworths Australian gas stations for US$1.3 billion BP already owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners
B
P Plc will pay A$1.785 billion (US$1.3 billion) for Woolworths Ltd.’s network of Australian gas stations in a deal that will cement the London-based oil company as one of the nation’s biggest fuel providers. The British energy company will acquire 527 fuel outlets that are currently supplied by rival Caltex Australia Ltd., as well as 16 development sites, according to a statement Wednesday from Sydney-based supermarket owner Woolworths. BP already owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners, according to a separate statement from the oil company. BP and Woolworths also agreed to a partnership that includes the continuation and expansion of a scheme providing fuel discounts for supermarket customers. BP has previously struck deals with retailers including Marks & Spencer Plc in the U.K. and REWE in Germany. For Woolworths, the sale is part of Chief Executive Officer Brad Banducci’s strategy to reverse the supermarket chain’s declining fortunes. Since being named as CEO in February, Banducci has cut jobs,
written off assets and slowed store openings, while sales at its Australian food division have started growing again.
Positive deal
The sale is “positive at the margin” for Woolworths, according to Michael
Ban
McCarthy, chief market strategist at Sydney-based CMC Markets Asia Pacific Pty. “Woolworths’ management were just keen to do any deal. While it is good that there’s movement, this was probably the easiest to do and probably the one that makes the least difference.” BP’s proposal met Woolworths’ “strategic and broader commercial imperatives,” Banducci said. The proceeds will be reinvested in Woolworths’ main business and the deal isn’t expected to have a material
impact on earnings, the company said. Caltex, which has been the exclusive supplier of petrol and diesel to the Woolworths outlets, had also expressed an interest in purchasing the business. Caltex Chief Executive Officer Julian Segal said in a statement that while the Sydney-based refiner and distributor is “disappointed that the successful fuel alliance will come to an end, it is important that we exercise financial discipline in pursuing growth.”
Bucking the trend
The purchase by BP represents a departure from the trend of recent years that’s seen a smaller proportion of Australia’s retail fuel operators being owned by major oil companies. There are about 6,400 outlets Down Under and while about 52 per cent were affiliated with one of the four major oil companies operating ion Australia as of January this year, only 9 per cent were directly controlled by them, according to a report from the Australasian Convenience and Petroleum Marketers Association. Woolworths’ stock is up 19 per cent from the almost 10-year low it reached in July. Caltex is down 19 per cent this year. BP has risen 42 per cent this year. Completion of the transaction is not expected before Jan. 2, 2018, and is subject to regulatory approvals. Bloomberg
Finance
Negotiation
Cuba passes law barring naming China banking official urges Trump names his company public sites after Fidel Castro cut to reserve ratio lawyer as special negotiator Cuba’s National Assembly on Tuesday approved a law that bars naming streets, squares and any public monuments after Fidel Castro, in line with the wishes of the revolutionary leader who passed away in November. The law also bans erecting statues in his honour. Prior to his death on Nov. 25, Castro told his brother and successor, Raul Castro, he did not want to be immortalized in that way. At a public tribute to Fidel four days after his death, Raul Castro said: “The leader of the revolution rejected any display of cult of personality and ... until his final hours insisted that once he was dead, his name and his person never be used to name institutions, plazas, parks, avenues, streets or other public sites, and that no monuments, busts, statues and other similar types of tributes be erected in his memory.” The law was unanimously approved by the more than 600 lawmakers. Addressing the year’s last session of congress, Homero Acosta, secretary of the State Council of Cuba, said the request reflected the “humility and modesty” that characterized the Cuban leader. “In the spirit of the will expressed by Fidel,” the law also prohibits the use of his name or image, thoughts or references of any kind as a trademark or logo, domain name or design for commercial or advertising purposes, said Acosta. Xinhua
China’s requirement for how much cash banks must hold as reserves is “very high” and should be reduced at an “appropriate time,” a senior banking regulator said, according to a media report. Other financing tools can be used to manage the money supply after easing the required reserve ratio, China Banking Regulatory Commission official Yu Xuejun said at an event in Beijing, Shanghai Securities News reported Wednesday. New monetary tools such as the medium-term lending facility are best used after a cut, not before, Yu was cited as saying. The People’s Bank of China has held the RRR at 17 per cent since February after four cuts last year. It will be decreased to 16.5 per cent in the fourth quarter of 2017 then 16 per cent in the first quarter of 2018, according to a Dec. 9-15 Bloomberg survey of economists. The PBOC started to use MLF in 2014 to channel low-cost funds into banks while avoiding conditions that would fuel asset bubbles. It also introduced the pledged supplementary lending tool, which steers cheap credit to state-backed policy lenders such as the China Development Bank to support efforts such as shanty-town renovation and water projects. Frequently reducing the ratio can reinforce expectations for monetary easing, which would add to downward pressure on the yuan, the PBOC said in its second quarter monetary policy execution report. Bloomberg
U.S. President-elect Donald Trump has tapped Jason Greenblatt, the Trump Organization’s executive vice president and chief legal officer, as his “special representative for international negotiations”, Trump’s transition team said on Tuesday. “He has a history of negotiating substantial, complex transactions on my behalf, as well as the expertise to bring parties together and build consensus on difficult and sensitive topics,” Trump said in a statement, praising Greenblatt as one of his “closest and most trusted advisers”. “His talents lend themselves perfectly to the role I have asked him to play, assisting on international negotiations of all types, and trade deals around the world,” Trump said. It was not clear whether Greenblatt’s new position would clash with the United States Trade Representative (USTR), a Cabinet-level position that has traditionally served as the president’s principal trade advisor and negotiator. Trump last week picked Peter Navarro, an economist and a professor at University of California, Irvine, to head the newly-created National Trade Council at the White House, but he has not yet named his pick for the USTR. Trump had made trade as a centrepiece of his presidential campaign, trying to appeal to angry and frustrated blue-collar voters who have seen manufacturing jobs lose in an increasing global economy. He had vowed to renegotiate the North American Free Trade Agreement (NAFTA) and pull the United States out of the controversial Trans-Pacific Partnership (TPP) trade deal. Xinhua