Business Daily #1360 August 14, 2017

No bad eggs in MSAR says gov’t Food Page 6

Monday, August 14 2017 Year VI Nr. 1360 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm SME

Tender

Approved credit limit by local banks to SMEs up 27 pct in H1 Page 2

www.macaubusiness.com Diplomacy

Sinogal makes sole bid for operating hazardous waste treatment plant Page 6

Internet

North Korean tensions reaching new heights Page 10

Mainland authorities probe social media Page 9

Holding on to history Heritage

More people are needed in the field of heritage protection in the private sector, and the gov’t is handling over a thousand requests for opinions per year regarding building projects, commercial signage and more, says head of the Cultural Heritage Department of the Macau Cultural Affairs Bureau, Deland Leong Wai Man. Meanwhile, the cultural heritage protection law doesn’t have to wait on the city’s overall master plan.

Pages 4 & 5

Policies to encourage the development of regional talent and facilitate the flow of people, goods and services in the Greater Bay Area are positive, as the current framework can be difficult to navigate, discouraging citizens of the SARs to live and work on the Mainland, say local citizens who have gone through the procedures.

Policy Page 3

HK Hang Seng Index August 11, 2017

Gaming The last of the Crown Resorts Ltd. employees serving jail time in China for illegally promoting gambling have been released, according to a statement from the company, closing the chapter on a saga that saw it retreat from international operations and halved its high-roller casino revenue. Page 7

Hong Kong GDP better than expected Growth The neighbouring SAR economy expanded faster than expected in the second quarter, with gross domestic product growing 3.8 percent in the June quarter from a year earlier. This has led the government to raise its forecast for full-year growth. Page 8 26,883.51 -560.49 (-2.04%)

Worst Performers

Swire Pacific Ltd

-0.12%

Tencent Holdings Ltd

-4.90%

Galaxy Entertainment Group

China Mobile Ltd

+0.80%

Bank of East Asia Ltd/The

-0.15%

Geely Automobile Holdings

-4.46%

Hong Kong Exchanges &

-3.12%

CLP Holdings Ltd

+0.79%

Hang Lung Properties Ltd

-0.40%

China Shenhua Energy Co

-4.40%

Industrial & Commercial

-3.11%

Hengan International Group

+0.57%

China Petroleum & Chemical

-0.51%

MTR Corp Ltd

-3.88%

China Life Insurance Co Ltd

-2.89%

Power Assets Holdings Ltd

+0.00%

Hong Kong & China Gas Co

-0.54%

AAC Technologies Holdings

-3.79%

China Merchants Port Hold-

-2.85%

+4.15%

27° 31° 27° 31° 27° 31° 27° 31° 27° 31°

-3.66%

Today

Source: Bloomberg

Best Performers

Want Want China Holdings

Last of Crown employees released

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Making it easier

2 Business Daily Monday, August 14 2017

Macau SME

Generous hands The amount of approved credit limit by local banks for SME’s went up by 26.8 per cent year-on-year to MOP12.61 billion in the first half of this year Nelson Moura nelson.moura@macaubusinessdaily.com

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pproved credit limits by local banks for new small and medium-sized enterprises (SME) in the first half of 2017 decreased 7.3 per cent compared to the second half of 2016, totalling MOP12.61 billion (US$1.56 billion), according to statistics released on Friday by the Monetary Authority of Macao (AMCM).

However, the amount represented a 26.8 per cent yearon-year rise.

The proportion of the credit limit to tangible assets pledged by the end of the first six months of this year, also referred to as the collateralised ratio, was 86.3 per cent, up 2.4 percentage

points when compared to the second half of last year and 4.7 percentage points yearly.

The outstanding value of total SME loans, meanwhile, went up by 4.3 per cent from the end of the second half of 2016 to MOP72.7 billion, also going up by 7.4 per cent when compared to the first half of last year.

By industry, loans to ‘restaurants, hotels and similar activities’ and ‘construction and public works’ grew by 28.4 per cent and 14.6 per cent year-on-year, respectively.

On the other hand, loans to ‘transport, warehouse and communications’, ‘manufacturing industries’ and ‘wholesale and retail trade’ decreased yearly by 14.4 per cent, 11 per cent and 3.5 per cent respectively.

The proportion of

outstanding credit balance to the credit limit granted, also known as the utilisation rate, was 68.5 per cent, an increase of 6.8 percentage points from the first half of last year.

Meanwhile, a fall of 11.1

per cent was recorded in the outstanding balance of delinquent SME loans halfon-half, totalling MOP514 million. However, the balance grew considerably by almost 67.8 per cent when compared to the same period

a year ago.

The ratio of outstanding delinquent loans to total outstanding SME loans, referred to as the delinquency ratio, went down by 0.12 percentage points half-on-half to 0.71 per cent.

Intellectual Property

Gathering of IP authorities and industry insiders Another chapter in the development of intellectual property rights’ co-operation on a trans-regional basis is set to take place at the end of the month in Zhuhai Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The local intellectual property department under the Macao Economic Services (DSE) will be attending the China Intellectual Property Rights (IPR) Hengqin Forum 2017 on August 29, with the theme of IPR Operations and Financial Innovation, according to an announcement by the Zhuhai government last Friday.

Relevant authorities and industry insiders from the World Intellectual Property Organization (WIPO) China Office, the intellectual property department of the Hong Kong SAR, and

free trade zones will be in attendance.

The thematic areas to be covered during the one-day event include China’s IPR operations and trends, opportunities and challenges faced

by IPR operations in the Greater Bay Area, advanced IPR operations and experience, and IPR-related financial innovations and cross-disciplinary operations.

Sponsors of the event include the China Intellectual Property News, the Hengqin Federation for International Protection of Intellectual Property, and Hengqin International Intellectual Property Trading Center Co Ltd, and the founder and operator

of HIPEX National Platform Agency, a.k.a Seven Stringed Lute National Platform.

The government of the city of Zhuhai further claims that a signing ceremony for related projects is on the agenda.

The Forum will be held at the Zhuhai International Convention and Exhibition Centre in the Shizimen Central Business District.

Trans-regional IP platform

In 2003, the governments of the Macau SAR, the Hong Kong SAR, and Guangdong province established the Intellectual Property

Database for Guangdong, Hong Kong, and Macao.

The database covers online information sources on intellectual property systems in the three regions, in which users can search for information including legislation, registration systems, and related government bodies in different intellectual property matters, such as copyrights, trade marks, patents, and registered designs.

The platform is one of the mechanisms to enable the sharing of information aimed at developing the Pearl River Delta as a knowledge-based economy.

Health

Housing

Doctors wanted

Online service for real estate brokerages

According to the Health Bureau, the MSAR will need 550 new medical professionals by 2020, with medical graduates currently having to wait as long as three years to apply for certification The Health Bureau considers that around 550 new medical professionals will be needed by 2020, with the department believing more than 100 medical graduates will come to the MSAR this year, local news broadcaster TDM reported.

This information was provided by the head of the Council of Medical Affairs, Leong Pui San, during a briefing session held on Saturday in regards to the medical certification system.

According to the Health Bureau representative, after completing an internship of five months, medical

trainees still have to complete a oneyear clinical medicine program, only being able to apply to become a general doctor after the Health Bureau opens job positions, in an overall process that can take up to three years.

“After six years of specialist training, they would become a specialist doctor, if they pass the exam […] And then, after another five years of work experience, they would become a doctor in charge if they pass an exam, and then a consultant doctor after another five years of work experience,” Ms. Leong told TDM. N.M.

The Housing Bureau (IH) has introduced an online service that allows real estate brokerages and agents to update their information or to make declarations via an online account.

Real estate brokerages can create their online account on the Bureau’s official website to make any updates and declarations, and applicants will receive receipts and e-notices after completing any registration online.

For updates on the company’s charter or declaration of contracts, applicants are requested to provide

necessary information including uploading related documents for evaluation. After documents are approved, the Bureau will notify the applicant via email to submit relative documents to the Bureau in person.

IH indicated that appointments to submit documents can be reserved online through the website.

The new service will be launched today.

According to IH data, there were some 4,939 licensed real estate brokerages and 1,554 agents in the city as at the end of July.

Business Daily Monday, August 14 2017 3

Macau

Policy

SARs residents like foreigners in mainland China Groups and individuals in general welcome the preferential policies that the central government is considering rolling out Cecilia U cecilia.u@macaubusinessdaily.com

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olicies for encouraging the development of regional talent and facilitating the flow of people, goods and services in the Greater Bay Area are good news, points out Assistant Dean of the Faculty of Social Sciences at the University of Macau (UM), Agnes Lam Iok Fong.

“I lived in the Mainland for half a year before when I was studying and we needed to register at the local police station because they consider us as foreigners and because we don’t have a ‘hukou’ (a governmental household registration system),”stated the academic and former reporter.

“Because of that status, we couldn’t enjoy the national medical benefits,” she pointed out, noting that improved policies to regulate how regional talents are integrated is a step forward.

A recent report from Chinese news outlet Xinhua revealed that some preferential policies are to be rolled out for residents of both SARs to work, live and study in mainland China, something that Lam perceives as another move by the central government to attract talent for the development, in particular, of the Greater Bay Area.

“In the past few years, the Mainland has rolled out policies to attract and recruit talents such as ‘the Thousand Talents Plan’,” noted Lam. “So to attract SAR residents to work in the Mainland, it is important to introduce policies that could make it more convenient for them.”

Regarding the current situation for Macau residents who wish to work in the Mainland, the university professor said information for career paths is limited.

“It is difficult to seek jobs in the Mainland if you don’t know anyone because [companies] don’t usually put up advertisements, so many people go to career expos,” said the professor, suggesting that increased information on the specifics of the work environment and available options would resolve a lot of uncertainties.

Ryan Lao Cho Chon, deputy executive-director of the Macau New Chinese Youth Association, also pointed out the need for more detailed information for Macau residents who want to work in the Mainland, given that there’s a lot of complex procedures involved.

“You might be able to access the country easily with the permit [Mainland Travel Permit for Hong Kong and Macau Residents] but it is a different story if you want to stay and work,” said Lao.

Lao welcomes the preferential policies, but he believes that the new policies will need time to better resolve the matters.

“The preferential policies will create a similar status for residents from both regions and will reduce contradictions [and] eliminate part of the obstacles,” remarked Lao. “I think the policies will not resolve all problems right away, they need time to readjust after being implemented for some time and receiving feedback.”

Meanwhile, a local resident surnamed Wu who is currently working in a digital advertising agency in Shanghai, similarly expressed the troublesome side of “unnecessary procedures” that they need to go through.

“Like my experience to rent a place.

They [the authoritative departments] need to examine your application,” revealed Wu. “For national residents they can rent a place easily in one day as long as you have money.”

Regarding the taxes and benefits, Wu notes that she is currently paying income tax, but that local residents also pay into the ‘five social insurance and one housing fund’ (FIOF).

FIOF includes insurance for endowments, medical treatment, unemployment, employment injury and maternity leave, plus a housing provident fund.

According to the report from Xinhua, an official with the Hong Kong and Macao Affairs Office of the State Council disclosed that equal access to housing providence funds will be granted to SAR residents working in the Mainland for more convenient settlement, providing low-interest housing loans and being applicable to rent, renovations and major illnesses.

However, Wu said the FIOF can only be accessed by paying into it with part of her salary every month.

“The company draws out some part of your salary to purchase this FIOF, like if you earn ten thousand per month, then they take three thousand from your salary,” said Wu. “I personally would not want to pay the FIOF because I don’t need that since I won’t be staying here the rest of my life.”

Wu also revealed that there are very few Macau residents working in the Mainland, while there are a lot from Hong Kong.

“Macau’s environment is so much better so no one wants to go to the Mainland where there are lower salary rates and less benefits,” said Wu. “For Hong Kong and Taiwan the conditions are different.”

She explained that for her, there are more opportunities to develop in the Mainland than in Macau, and

remarked that the salary rate can be higher when higher positions are reached, depending on the industry.

“The salary in Shanghai is low compared to Macau, but the rate could be favourable when you reach higher positions, especially in industries relating to finance and IT,” disclosed Wu. “For me, my salary increased almost 30 per cent in a year and a half although it is still lower than those in Macau.”

Regarding the conditions for Macau

residents who want to set up companies in the Mainland, Professor Lam said the situation is “worse than to work”.

“If you don’t know anyone in the Mainland, it is difficult since you won’t be able to understand the procedures,” said Lam. “Many industries in the Mainland require you to co-operate with a Mainlander and that’s why many would approach CEPA [Closer Economic Partnership Arrangement].” advertisement

4 Business Daily Monday, August 14 2017

Macau

Deland Leong Wai Man, Cultural Heritage Department of the Macau Cultural Affairs Bureau

Heritage affairs

On the job There is an urgent need for people in the field of heritage protection outside the government, says the head of the Cultural Heritage Department of the Macau Cultural Affairs Bureau, Deland Leong Wai Man. Pointing out the challenges of heritage conservation she has encountered since taking on the position, and following the call for action from the World Heritage Committee in July, she shares her vision and work in relation to ways – both available and being procured - to expand the scope of conservation by engaging citizens and professionals alike Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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hat are the main challenges you have faced since you became the head of the Cultural Heritage Department?

I became the head of the Cultural Heritage department more or less one year after the new Cultural Heritage Protection law became effective.

After the law was enacted in March 2014, it has actually been quite a lot of work. Our department work has evolved in different areas. We have to provide a lot of compulsory opinions to different departments, like the CPU [Urban Planning Committee], all the building projects, or the commercial signage, especially when they are heritage buildings, but not only. For other, normal, buildings within the buffer zone, they ask our opinion as well, sometimes, even [those] out of the buffer zone, and then we need to do the analysis work and provide our opinion. I think we can see the changes from the several hundreds up to now more than one thousand requests for opinions a year. So we need a lot of colleagues doing this work, because we need to go to the site to see the actual situation and do the analysing work and then provide

the opinion related to the protection of our heritage. This is one of the big changes.

What other challenges have ensued from the increased need to provide opinions?

Considering everything, there are more than 600 heritage buildings and sites. Most of them belong to private owners. The law states very clearly that those owners have to comply with building maintenance, and, from the IC point of view, we have to monitor them, to understand every single condition, so we need to establish a very good method to do building inspections. This is one of the very big challenges for us, because we are trying to do it regularly, and inspect all the buildings at least twice a year. If we do it at that pace, we need to do it more than one thousand times every year. But it is not enough, because for some buildings, we cannot only go there today and not go there tomorrow. That’s very challenging, because before we did not really have a very systematic way to do the inspection work, but now we have been building up a system to make it more systematic and regular.

We also need to set up a notification system to inform the owners, take pictures, record the conditions of

the buildings, and remind them that maybe it is time for them to do repair work. It is a good thing, because to inform them [the owners] is to help our promotion work as well.

So we also need to set up a follow up method, to keep every record, and a tracking system.

“I think that we need to have more people related to the heritage protection field in the market, not necessarily in the government departments” How do you go about the inspection and monitoring work, and what is your current priority?

For some very important heritage buildings, especially those listed as World Heritage, we need to keep monitoring the conditions, using technical devices to monitor if

there are any changes. But for the ‘normal’ heritage buildings, our colleagues would go out most of the time. One of the priority works is the Protection Management Plan [PMP] for the Historic Centre of Macau. At the moment, we are trying to organize a public consultation, hopefully, within this year. At the same time, we will start drafting the administrative regulations, because the management plan will be announced as a regulation, as it is foreseen in the Cultural Heritage Protection law. It means that it has law value, so it will have more power. We also plan to submit it to the World Heritage Committee [WHC] by December next year, in addition to the report [on the state of heritage conservation]. The report’s aim is to inform the WHC about the current situation for every different field they are concerned about, for example, the situation we are already in for the master plan, the urban planning, etc. We can combine them, or separate them and submit the draft of the management plan first.

How is the current work evolving and why the delay in the past?

We have been working on it. Our Cultural Heritage Protection law was effective in 2014 and at the end of that year we already had the first

Business Daily Monday, August 14 2017 5

Macau resources, maybe it will be changing.

I think it is the right direction, to get the private sector more involved in doing the protection work. After Tak Seng, there was the Watchmen house.

Of course, it is not as big, or important, or beautiful as Tak Seng, but it is a meaningful building, because it was abandoned for a long time.

We are planning to apply it for the Asia-Pacific Awards for Cultural Heritage Conservation, which has to be a project under public-private partnership. But the conservation work was only finished in 2015, and under the Awards’ regulation, the building has to have been finished for three years, because they want to see the effect or the benefits to the community. The group that is running it are even promoting some activities, tour guides for the community, for people to understand the history of the Inner Harbour area and their own history. So I think it quite fulfils what the award is, as long as we are counting the three years to submit the application.

One project that has sparked controversy is the hotel planned to be built at Fisherman’s Wharf, due to disagreements concerning its height limit. Any decisions on that yet?

We provided an opinion in which we said that it would be nice if it were kept at 60 metres above sea level.

The 83/2008 executive order, that is, the order to control the height for the protection of the Guia Lighthouse, also says that [the height limit for the] area is no more than 90 metres.

If I remember it correctly, the urban planning department provided a draft twice. In the first one, it was proposed 60 metres, and since there was a lot of discussion in the urban planning committee, they said they would re-consider it. So in the next draft, it was 90 metres. When they proposed it, there was a different opinion and a lot of discussion as well. Because there is not only one side, there are many sides and opinions about the height. At the moment, I think there is no final decision yet. framework consultation. The WHC expected we submit it to them in 2015, but practically it is a bit delayed. So, in 2014, we had the report and, of course, it is a framework. The aim for that framework is to make it less ‘heavy’ for all the people to understand what the management plan is. Some people may not know the difference between Macau heritage and World Heritage, or what the Historic Centre is. So I think it was really a chance to promote and to let people understand what the Historic Centre of Macau is, and what its value is. After the framework, what we are doing now is the full version of what the management plan is about.

The IC President said that you are going ahead with the PMP, even if the Master Plan for Macau is not ready.

Can you propose a management plan without having a Master Plan for the city in hand?

The law doesn’t really say that they have to come out at the same time.

Actually, because we have already started the work, and because we have to fulfil UNESCO’s request, I think that by the time we have the management plan, and also because in the urban planning law it is said that the master plan has to use our management plan as a reference, even for the new reclamation land, we might submit it first.

In regards to the time frame and the delays, how much of it is linked to a lack of personnel to conduct the work?

Well, it’s never been enough people.

I think it is not only for the management plan, but also for the heritage protection work, as I already said, for giving opinions, providing inspection work, and so on, because at the moment we only have some 40 people in our department. Every year, we not only provide more than a thousand

opinions, IC has sent out more than a 100 notification letters to the owners of the corresponding buildings since 2016. We also have more than 40 sites to do conservation work on every year, and it is not only for the conservation itself. We think it is very important for protecting heritage to make fully adoptive re-use for some of the buildings. Our department is in charge of some important re-use projects. Last year we had four reuse projects finished, the Chong Sai Pharmacy, the Treasure of Sacred Art of Saint-Joseph’s Seminary, the maritime workshop, and the library in Patane. I actually worked on the design of that building when I was not in this position. As an architect, I enjoy very much working on reuse projects.

“One of the priority works is the Protection Management Plan [PMP] for the Historic Centre of Macau.

At the moment, we are trying to organize a public consultation, hopefully, within this year” Is the department currently considering partnerships with the private sector to help develop adoptive re-use projects such as the one that was done in the past at the Tak Seng pawnshop?

I think that in the long-term it should be like this, because the government, for the human, or even the financial

Shouldn’t the opinion of the Cultural Heritage Department be binding in this case?

The executive order is also based on defining a better way to protect World Heritage by considering the relationship between the Guia Lighthouse and the sea view, so I think that in this order the visual corridor is already considered. If you say the building is 90 metres, it is still under the order, but of course our opinion says that lower would be better. So, I think we have to be close to what we already provided, and see how the OP [Land, Public Works, and Transport Bureau] is going to react first. We will continually provide our opinion if they need it. They are still analysing it, but they already understand our opinion.

IC was under pressure a few months ago when the Commission Against Corruption (CCAC) released a report detailing hiring procedures at the cultural bureau without proper tendering. How do you cope with the personnel shortage situation?

I think that we need to have more people related to the heritage protection field in the market, not necessarily in the government departments. We need their position to help in other ways, that’s what I think. Even for the re-use projects, for the design, in the future, if there are any cases like the library one [in Patane], we welcome architects from the outside to do the projects, rather than in-house. Even for the building inspection work, because there are so many, so our colleagues would go for those important parts and for those other buildings, we would tender out to professional institutions, companies, or engineering consultants.

They have the tools, the professional people, to help. We are already doing some, because we have so many heritage-classified buildings. We also have a co-operation [agreement]

with the OP to do inspection work as well. That’s a long-term and sustainable way for us. I mean, I cannot answer for the whole IC. But in our department, we are going in this direction.

What about the budget for all the activities you conduct at the department today? Has it decreased from last year?

It is rather stable. In 2016, we implemented more than 40 projects, including revitalisation, renovation, maintenance, etc. The total cost was about MOP25 million. We also inspected local heritage buildings more than 700 times in 2016. The budget is related to how many people, and how much work you can do. For example, some churches take more than half a year for conservation work. But before doing that, we have lots of document work to do as well. So, time, money, and people, are all related.

“Every year, we not only provide more than a thousand opinions, IC has sent out more than a 100 notification letters to the owners of the corresponding buildings since 2016” Would you say that pressure from private development is one of the biggest challenges facing heritage preservation in Macau?

I think it is challenging for every city with heritage. Before, we didn’t have so many developments, but now with many developments, I can only say that we are going to be busier because we have to respond very quickly to analyse situations and to provide opinions. But as long as we have a law, every government department and even the private sector, they have to obey the law, which is a very good tool for protecting heritage here.

Another work which I think is very important is the promotion work, because now some people, some property owners, they actually see there is no conflict between development and heritage protection. They are even the active ones to come up to you for co-operation, because they want to get better results, rather than arguing and fighting with you. So, hopefully, I think we will have a lot of promotion work, maybe starting from this summer.

Are there any plans to improve the overall situation of San Ma Lou [Senado Square]? Parts of it have been abandoned for some time now, and a new building appeared when the old teahouse collapsed.

That’s why the inspection work is so important. We sent out so many letters last year until now. San Ma Lou is very peculiar. Closer to Senado Square, it is very expensive, people make full use of the buildings. But if you go further, it seems that it is empty. So, we sent many letters, and we got responses from some of the owners, who approached us to ask how to do the repairing as we requested. It takes a bit of time, but with our inspection and notification works, it will be getting better.

Before, we didn’t have that system to inform them. We spend a lot of effort in doing this because when we send the notification, they sometimes approach us, and we have to meet them, and tell them how to do the work. If they don’t understand, we have to keep telling them how to do it. So, it will be difficult in the beginning, but hopefully it will become smoother with time.

6 Business Daily Monday, August 14 2017

Macau Opinion

Sheyla Zandonai*

Cloud ties A couple of weeks ago, the Macao Trade and Investment Promotion Institute (IPIM) announced that it plans to launch an evaluation service in the third quarter of this year to speed up temporary residency application procedures for foreigners with some education and specialization.

A few days later, the Macau SAR Government and Alibaba Cloud announced that the service was coming to town to assist with implementing the Smart City programme announced during the fiveyear plan.

There is more. Before IPIM and Alibaba Cloud made their respective announcements, this newspaper reported that Alibaba Group has had several applications for trademark protection approved in the city, for products including media, e-payment systems, nautical instruments, and file sharing software.

The correlation between these three different events might have been overlooked, but they are an indication of a fullfledged set up to enable the cloud infrastructure to be built and operated onwards from within, while being an outside fabrication, channelling ‘foreign’ workforce, technology, and design to the city.

Once the decision has been made to implement cloud computing technology to run things here, there is little room to contest that the city needs a giant such as Alibaba to fulfil the task.

The question is, does Macau need Internet-based computing to be a more efficient city?

The short answer to that is yes.

The long answer remains to be seen.

Cloud computing, which basically means storing and sharing resources, software programmes and information over the Internet, is controversial, notably in regards to personal data protection.

It might take a while for the government to issue a clearer stance on that front, but in other matters, the cloud might yield more immediate applicability.

Transport, for one. Here is the cloud as hope for better integration and co-ordination of the public transportation system. Perhaps one day there will no longer be a need for drivers. Which, truth be told, is a bit tempting given the current offer available. But automation replacing human beings is a trend often perceived as a threat.

For other matters, such as improving healthcare access, it is unclear how the cloud will operate. The main problem in Macau today is a lack of infrastructure, trained personnel, and equipment. A cloud won’t solve that, unless it is linked to the task of bringing talent, medical in this case, to the city.

But at this point, that’s just speculation.

The cloud isn’t. * Journalist.

Contracts

Easy guess Sinogal makes sole bid for the operations and maintenance of the Macau Special and Hazardous Waste Treatment Plant, and is expected to renew the service contract the company has held since 2010

S

inogal – Waste Services Co. Ltd. & Sino Environmental Services Corporation was the only company to apply for the public tender to operate and maintain the Macau Special and Hazardous Waste Treatment Plant opened by the Environmental Protection Bureau (DSPA) on Friday, a release by the department revealed.

According to the release, the service contract will be valid for two years and involves providing service and maintenance equipment and manpower to the treatment plant, with Sinogal having proposed to provide

the service for MOP58.9 million (US$7.3 million).

Sinogal was created in 2008 when Sino Environmental Services Corp., (SESC) - part of Taiwanese management group CTCI Corporation - partnered with Portuguese companies Consulgal and Consulasia to apply for the operation and maintenance service contract for the Macau Refuse Incineration Plant, managing to obtain a 10-year contract.

Sinogal has been responsible for the operations and maintenance of the Macau Special and Hazardous Waste Treatment Plant since 2010. N.M.

Food

Hold the Dutch eggs As Hong Kong authorities tighten controls on eggs originating from Europe due to the discovery of contaminated eggs imported from the Netherlands, MSAR authorities guarantee no eggs from the country have been imported this year Local authorities confirmed that no eggs have been imported from the Netherlands this year, after the discovery of two batches of contaminated eggs from the European

country led authorities in Hong Kong to tighten health controls on imported eggs from Europe.

The Civic and Municipal Affairs Bureau (IACM) also guaranteed it would continue to follow up on developments on the case, while maintaining contact with the relevant departments and importers, and reinforcing control and inspection procedures on eggs and avian products.

Last Friday, the Hong Kong Centre for Food Safety revealed that two batches of eggs originating in the Netherlands were discovered on August 4 to have high levels of a toxic pesticide called Fipronil.

Although Hong Kong authorities stated that no other cases had

been detected since that date, eggs originating in the Netherlands have been removed from supermarkets, while tighter health controls on eggs imported from Europe have been enforced.

Europe currently provides 20 per cent of eggs sold to Hong Kong, with the European Commission having confirmed this Saturday that contaminated eggs were detected in 15 countries from the European Union and Switzerland.

The European Commission announced it would meet with authorities and representatives from all countries where contaminated batches had been discovered, on September 26. N.M. with Lusa

Hengqin

CY Leung visits TCM Vice-chairman of the National Committee of the Chinese People’s Political Consultative Conference [CY] Leung Chun-ying paid a visit to the Guangdong-Macau Traditional Chinese Medicine Science and Technology Industrial Park (TCM) in Hengqin last Wednesday, to study the progress of TCM’s development.

Yuki Lu Hong, president of Guangdong-Macau Traditional Chinese Medicine Technology Industrial Park Development Co. Ltd (GMTCM), reported that the seven projects of TCM, which include facilities such as a testing and research centre and a GMP (Goods Manufacturing Practice)

Pilot Plant, will be launched for use in September this year, while the construction of the incubator, accelerator and the headquarters office will be

completed in 2018.

With the advantage of Macau being a Sino-Luso platform, TCM, an MSAR Government-backed project in Hengqin, has selected Portugal and Mozambique as the first pilot batch of countries for cooperation in developing the market of Traditional Chinese Medicine. Cooperating with Portuguese-speaking countries will provide a point of entry to expand cooperation with Europe and Africa in international registration, trade of services as well as the promotion of Chinese medicine technology and products, states the press release from GMTCM.

Investment

SARs investment in Dongguan up 30 pct y-o-y As at the end of October last year, the number of investments from Macau and Hong Kong that had been registered in the Chinese city of Dongguan, had recorded yearon-year growth of 30 per cent for 10 consecutive months, China News reported.

The official data also disclosed that a total of 6,666 SARs enterprises have currently set up businesses in Dongguan, accounting for 60 per cent of the city’s total foreign investment.

In addition, 991 self-employed

entrepreneurs from the SARs were registered in Dongguan.

With the prominent growth in the number of SARs investments in Dongguan, the Chinese city has launched a Bank Securities Link, which will allow investors from Hong Kong and Macau to register for business licenses online via China Gaungfa Bank for Macau investors and Bank of China for Hong Kong investors.

The new policy is supported by The Guangdong Administration Bureau for Industry and Commerce (GABIC).

It allows a one-stop service for business registration, which will significantly reduce the required registration time period from 32 working days to 11, and as such produce great benefits for the development of the Greater Bay Area Co-operation between regions.

Deputy researcher of the Dongguan Administration For Industry & Commerce, Zhang Zhiyun said related parties will continue to further expand to other banks for Bank Securities Links, as well as exploring more benefits from the policy.

Business Daily Monday, August 14 2017 7

Gaming Release

Crown closes China chapter as jailed Australian employee freed The last of Crown Resorts Ltd. employees serving jail time in China for illegally promoting gambling was released, according to a statement from the company, closing the chapter on a saga that saw it retreat from international operations and halved its high-roller casino revenue

A

ustralian Jason O’Connor, Crown’s head of international high-roller operations, is the last of three Australian Crown employees to be freed after serving their sentences, the company said in a statement Saturday.

“We’re very pleased that our employees are being reunited with their families,” John Alexander, executive chairman of Crown, said in a statement. “Crown is deeply appreciative of the support provided by our legal counsel over the last few months and thanks the Department of Foreign Affairs and the Australian Government for their professionalism and assistance,” he added.

In addition to O’Connor, three Chinese nationals and a Malaysian national were sentenced to 10 months in prison, which took into account time they had already spent in detention since October. August 14 would be the 10-month mark since their detainment. Eleven others had been sentenced to nine months and were released last month. They could have faced a maximum of three years under Chinese law.

The arrests last October roiled the Melbourne-based company controlled by billionaire James Packer, and highlighted the fine line foreign

casinos walk in courting customers from mainland China, where it’s illegal to gamble or promote gaming.

The Chinese government wants to curtail hundreds of billions of dollars worth of outflow, some of which exit the mainland via betting operations.

“This is the end of a long and arduous journey for Crown,” said Sudhir Kale, the Gold Coast, Australia-based founder of GamePlan Consultants.

“The company has well and truly paid its dues by way of fines, huge legal costs, drop in market capitalization, and the emotional trauma experienced by its employees while in prison.”

The impending release of Crown staff was first reported Friday by the Australian Financial Review, which did not cite a source.

Office closures

Since the crackdown, the company has sold out of its Macau venture and closed most of its offices across Asia. Its VIP program-play turnover in the year ended June 30 slumped 49 per cent to A$33.3 billion (US$26 billion), dragging down revenue at its Melbourne and Perth resorts.

Packer, who quit as chairman in August 2015 and left the board the

following December, returned this month as a director as Crown focuses on its domestic resorts, and the construction of a A$2 billion luxury hotel and casino in Sydney.

“Other operators have learnt from Crown’s example, and their marketing efforts in China will be a lot more sedate,” said Kale.

Crown’s shares fell 1.9 per cent on Friday. After tumbling last year on news of the detentions in China, the stock recovered all its losses by June, only to slump again. Crown is now down 11 per cent since mid-October.

Bloomberg News advertisement

8 Business Daily Monday, August 14 2017

Greater China GDP

Hong Kong raises 2017 growth outlook after solid Q2 Total exports of goods grew 5.6 per cent on year in real terms in the second quarter Anne Marie Roantree and Donny Kwok

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ong Kong raised its growth outlook for 2017 after a surprisingly strong performance in the second quarter helped by a pick-up in consumption and buoyant stock and property markets.

Second quarter growth was also underpinned by a moderate expansion in the global economy and strong growth on the mainland, although the government warned of headwinds from rising U.S. interest rates and geopolitical tensions.

It revised the full-year estimate for 2017 economic growth to 3-4 per cent from 2-3 per cent.

“External demand improved further in the second quarter, with downside risks to the global economic outlook

receding. This continued to render support to Asia’s regional trading and manufacturing activities,” the government said in a statement.

The economy grew a seasonally-adjusted 1.0 per cent in the second quarter, compared with 0.7 per cent growth in the January quarter. Three analysts surveyed by Reuters had an average estimate of 0.8 per cent.

From a year earlier, the economy expanded 3.8 per cent in the second quarter compared with 4.3 per cent in the previous quarter, which was its fastest annual pace in six years.

The average estimate of six analysts surveyed by Reuters had forecast average growth of 3.48 per cent in the April-June quarter from a year earlier.

“Local demand was still the engine behind the growth with the help

from rising retail sales and personal spending, while growth in exports and imports also aided the (GDP) growth,” said Thomas Shik, acting chief economist of Hang Seng Bank.

Hong Kong’s long-term regional rival Singapore on Friday reported economic growth of 2.2 per cent for the April-June quarter, with a rebound in services suggesting a broader and more balanced recovery after a stumble early in the year.

The former British colony’s private consumption expenditure grew 5.3 per cent in real terms in the second quarter from a year earlier, underpinned by favourable labour market conditions and stronger wealth effects.

Record high property prices, in spite of a series of tightening measures, and a strong stock market have

contributed to making Hong Kong residents feel more wealthy and in turn boosted consumer sentiment.

The strong start to the year bodes well for Hong Kong’s new leader, Carrie Lam, although she still faces the daunting task of reining in sky-high home prices which have triggered protests in recent years amid calls for more affordable housing.

Key Points Q2 GDP beats forecasts thanks to strong domestic demand Govt revises up full-year GDP to 3-4 pct from 2-3 pct HK private consumption expenditure expands 5.3 pct y/y Hong Kong’s benchmark index closed down 2 per cent ahead of the data, capping a turbulent week in financial markets in the wake of ramped up tensions between the United States and North Korea.

Hong Kong had been grappling with weaker retail sales and a slump in cash-rich mainland Chinese streaming across the border on shopping sprees, but retail sales in June rose for the fourth straight month after two years of decline, while the drag from tourism receded.

Total exports of goods grew 5.6 per cent on year in real terms in the second quarter, with exports to Asian markets providing the main growth impetus, the government said on Friday.

Other indicators also show the city is holding up well. The private sector grew at its fastest rate in nearly 3-1/2 years in July, driven by stronger output and new orders, an industry survey showed.

Hong Kong’s June exports also rose 11.1 per cent on year, marking the fifth consecutive month of growth. Reuters

Industry association

Vehicle sales up in July Sales of so-called new energy vehicles increased 55.2 per cent in July from a year earlier Lusha Zhang and Norihiko Shirouzu

China’s overall vehicles sales grew 6.2 per cent in July from a year earlier to 1.97 million vehicles, showing that the world’s largest auto market continues to rebound from the weakness it saw in April and May, the China Association of Automobile Manufacturers (CAAM) said on Friday.

In June, vehicle sales volume rose 4.5 per cent from a year earlier. It was down 2.2 per cent and 0.1 per cent respectively in April and May. In the first seven months of the year, sales grew 4.1 per cent from the same period last year to 15.3 million vehicles, the association said at a briefing in Beijing.

Analysts and company officials attributed the relatively strong sales last month in part to higher incentive levels.

“We’re losing a bit of steam in basic demand, but incentives are giving the market some support,” said James Chao, Shanghai-based Asia-Pacific chief of consultancy IHS Markit Automotive.

Still, individually some car brands tried their best to keep from relying

on discounts and other incentives, which sap margins.

A senior Toyota sales executive who oversees both Toyota and Lexus brands noted that market fundamentals are still “sound” in smaller or lower-tier inland markets.

“We’re shifting our focus more and more on lower-tier, smaller markets, and that effort seems to be working for us,” said the executive, who

declined to be named because he is not authorized to speak to reporters.

Toyota’s sales in July rose 11.4 per cent from a year earlier to 108,900 vehicles.

In January, CAAM predicted sales would rise 5 per cent this year, slowing from 13.7 per cent in 2016, citing the rollback of a tax incentive for small-engine cars and economic pressures.

Green cars saw brisk sales in China last month.

“We’re losing a bit of steam in basic demand, but incentives are giving the market some support” James Chao, Shanghai-based Asia-Pacific chief of consultancy IHS Markit Automotive Sales of so-called new energy vehicles – all electric battery cars and plug-in hybrid vehicles – increased 55.2 per cent in July from a year earlier to 56,000 vehicles. New-energy vehicles sales totalled 251,000 vehicles during the first seven months of 2017, up 21.5 per cent from a year ago.

CAAM forecast sales of new-energy vehicles at about 700,000 vehicles this year. Reuters

Business Daily Monday, August 14 2017 9

Greater China Commodities

In Brief

COFCO shakes up European operations

Fiscal spending pace slows, but revenues rise

It trades more than 78 million tonnes of grain a year Jonathan Saul and Gus Trompiz

Chinese food commodities trader COFCO International is restructuring operations in Europe which will involve relocation and job cuts, as the state owned firm continues to integrate businesses it bought three years ago, sources say.

COFCO group, which owns trading arm COFCO International, agreed in 2014 to acquire Rotterdam-headquartered grain trader Nidera and the agribusiness of Singapore-listed Noble Group for more than US$3 billion, but has struggled to integrate them.

The overall aim of the integrated COFCO International is to directly challenge the “ABCD” quartet of agricultural commodity traders - Archer Daniels Midland , Bunge, Cargill and Louis Dreyfus Company - that have long dominated the global business.

COFCO International was inaugurated in April 2017, bringing together Nidera and its Swiss-based grain arm COFCO Agri, under new Chief Executive Johnny Chi. Sources with knowledge of the matter say COFCO International is in the process of scaling down the Rotterdam office and re-focusing much of the division’s overall activities at its Geneva headquarters. The overall number of job cuts expected is unclear although the sources said they were likely to be significant.

“The focus is on cost cutting,” one of the sources said.

A spokesman for COFCO International confirmed on Friday that a “restructuring is in progress”, but could not say how many job cuts were expected.

“The function of Geneva office will

be the global headquarters, and that of Rotterdam will be the EMEA headquarters. There should be some staff/ functions transfers according to this change,” the spokesman said.

The company has already increased staff numbers in Geneva, home to COFCO International’s headquarters and the centre of its grains and oilseeds business. Its Rotterdam office has separately played a core role in trading activities.

Company memos seen by Reuters showed there had already been a string of departures in recent months from Nidera. These included head trader Wolfgang Stiehler, who had joined Nidera only in January this year to provide strategy. Others who have left included regional managers and office staff.

Sources have told Reuters that COFCO International is also overhauling its activities in South America especially in Brazil.

Appointments

In a sign of further change, COFCO International has appointed Fernando Barreiro as its new global head of wheat and barley, who will be based in Geneva, following the departure

Public spending

of predecessor Gergely Novak.

The company added separately that Pierre Lorinet, former chief financial officer with trade house Trafigura, had joined the board of COFCO International as an independent director.

Serge Schoen, a former chief executive of Louis Dreyfus, is also an independent director on COFCO International’s board.

COFCO International’s chairman Patrick Yu said in a statement it was pleased to have Schoen and Lorinet joining.

“They bring deep knowledge of the industry as well as valuable experience in managing a global business, and help the company to enhance its corporate governance,” Yu said.

One of about 100 conglomerates controlled by China’s central government, COFCO Group has interests that include hotels, real estate and some of China’s leading food and drink brands including GreatWall wine.

It trades more than 78 million tonnes of grain a year, according to state media.

The acquisition deals have given COFCO assets in some of the top grain, vegetable oils, sugar and coffee producing regions.

China’s fiscal spending rose at a slower pace in July due mainly to larger expenditure earlier, but a government-led infrastructure push has kept spending brisk this year. Fiscal spending in July rose 5.4 per cent from a year earlier while revenue increased 11.1 per cent, the Ministry of Finance said in a statement on its website on Friday. July’s growth rate dropped sharply from 19.1 per cent in June, although revenue growth rose from 8.9 per cent in that month, the ministry said. The government attributed the slowdown in July spending mainly to significant expenditure earlier.

Enterprise

Toutiao raising funds at over US$20 bln valuation Chinese news aggregator Toutiao, backed by Sequoia Capital and CCB International, is raising at least US$2 billion at a valuation of over US$20 billion in its latest funding round, people familiar with the matter told Reuters. The fundraising comes after the start-up raised US$1 billion at an US$11 billion valuation towards the end of 2016, according to two of the people.

U.S.-based private equity firm General Atlantic is among potential new investors and could be leading the round, one of them said. Toutiao and General Atlantic declined to comment on the fundraising.

HR

Internet

Beijing investigates top local social media sites In recent months, regulators have taken severe and unprecedented moves to shutter content and media across a variety of platforms Cate Cadell

China is investigating its top social media sites, including WeChat and Weibo, for failing to comply with cyber laws, the latest step in the country’s push to secure the internet and maintain strict Communist Party control over content.

President Xi Jinping has made China’s “cyber sovereignty” a top priority and has also reasserted the ruling party’s role in limiting and guiding online discussion. Surveillance is being further tightened ahead of the 19th National Congress of the Communist Party later this year, when global attention will be on news coming from the world’s No.2 economy.

Key Points Regulator says targeting false rumours, violence Follows earlier calls for “cleaning and rectification” Names popular social media platforms WeChat, Weibo Apart from Tencent Holdings Group Ltd’s WeChat and Weibo Corp, China’s Cyberspace Administration said it was also investigating Baidu Inc’s forum site Tieba over failing to comply with strict new laws that ban content which is obscene, violent and deemed offensive by the Communist Party.

“Users are spreading violence, terror, false rumours, pornography and

other hazards to national security, public safety, social order,” the regulator said on its website.

Baidu said it felt “deep regret” over the content and will “actively cooperate with government departments to rectify the issue and increase the intensity of auditing”.

Tencent and Weibo did not respond to requests for comment.

Shares of the Hong Kong-listed firm were in the red after the news, down almost 5 per cent. Investors will now be waiting to see how shares of the U.S.-listed firms react.

Just last month, all three were asked to carry out immediate “cleaning and rectification” at a meeting with authorities who cited examples of illicit content, including rumours about party officials and misrepresenting Chinese military history.

Prior to the meeting, Weibo was asked to partly close its video site over violations, wiping out a total US$1.3 billion worth of stock between

Weibo and parent firm Sina Corp.

In recent months, regulators have taken severe and unprecedented moves to shutter content and media across a variety of platforms. In May, it released regulations for online news sites and network portals that expanded curbs on content and required all services to be overseen by party-sanctioned editorial staff.

It has taken down popular celebrity gossip social media accounts and there has also been a sweeping campaign to remove virtual private network apps that allow users to circumvent China’s so-called ‘Great Firewall’ and access foreign websites.

Western social media websites like Facebook and Twitter are banned by the country’s censors, which in turn has helped drive up the popularity of home-grown messaging app WeChat and microblogging service Weibo.

WeChat and Weibo have about 940 million and 350 million monthly active users, respectively. Reuters

UBS names new APAC investment banking head UBS Group’s former senior banking executive David Chin is returning to the Swiss group as the new head of its Asia Pacific corporate client solutions business, which covers investment banking, according to an internal memo seen

by Reuters. Chin, who joined UBS in 1994 and left in 2015 to pursue academic interests, will take over from Sam Kendall who will be relocating to New York as the head of the bank’s global equity capital market (ECM) business, the memo said. Chin’s return to the bank comes against the backdrop of some high-profile exits from its Asia investment banking business in the last year.

Internet

Facebook OKs local firm’s launch of app in Mainland Facebook Inc, whose social media platform is blocked in China, authorized a local company to launch a photo-sharing application in the country in May, the New York Times reported, citing a person with knowledge of the company’s plans. The app, called Colorful Balloons, is similar to Facebook’s Moments application in function and feel, but does not carry the Facebook name, the Times said on Friday.

The app was released in China by a company called Youge Internet Technology and without any hint that Facebook is affiliated with the company, the Times said, citing a post in Apple’s app store.

10 Business Daily Monday, August 14 2017

Greater China

B-1B strategic bombers sit on the tarmac at Andersen Air Force Base near Yigo, Guam, 10 August 2017. Source: Lusa Diplomacy

In call with Trump, Xi urges restraint over North Korea South Korea’s presidential Blue House said in a statement on Saturday the United States and China were working to resolve the North Korea crisis James Oliphant and Ben Blanchard

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hina’s President Xi Jinping said there needs to be a peaceful resolution to the North Korean nuclear issue, and in a telephone call with U.S. President Donald Trump he urged all sides to avoid words or action that raise tensions.

Xi’s comments came hours after Trump warned North Korea that the U.S. military was “locked and loaded” as Pyongyang accused the U.S. leader of driving the Korean peninsula to the brink of nuclear war.

The Pentagon said the United States and South Korea would proceed as planned with a joint military exercise in 10 days, an action sure to further antagonise North Korea.

China’s foreign ministry said in a statement that Xi told Trump a peaceful resolution to the North Korean nuclear issue was essential, and urged calm.

“Concerned parties must exercise restraint and avoid remarks and actions that escalate tensions on the Korean peninsula,” it cited Xi as saying.

In their phone call, Trump and Xi “agreed North Korea must stop its provocative and escalatory behaviour,” the White House said in a statement, and reiterated their mutual commitment to denuclearize the Korean peninsula. It added the relationship between Trump and Xi was “extremely close” and “will hopefully lead to a peaceful resolution of the North Korea problem.”

Trump, vacationing at his Bedminster, New Jersey, golf resort, earlier took to Twitter to warn North Korean leader Kim Jong Un that U.S. “military solutions are now fully in place, locked and loaded, should North Korea act unwisely”.

Again referring to Kim, Trump added, “If he utters one threat ... or if he does anything with respect to Guam or any place else that’s an American territory or an American ally, he will truly regret it, and he will regret it fast.”

In remarks to reporters on Friday

after a meeting with U.S. Secretary of State Rex Tillerson and U.S. Ambassador to the United Nations Nikki Haley, Trump said the situation with North Korea was “very dangerous and it will not continue”.

He added, “We will see what happens. We think that lots of good things could happen, and we could also have a bad solution.”

Despite the tough rhetoric, Trump insisted that “nobody loves a peaceful solution better than President Trump.”

South Korea’s presidential Blue House said in a statement on Saturday the United States and China were working to resolve the North Korea crisis, and it hoped the two leaders’ phone call “will be able to resolve the peak of tension and act as a catalyst for the situation to move on to a new dimension.”

Trump to Guam: “You’re safe”

Guam, the Pacific island that is a U.S. territory and home to a U.S. air base, a Navy installation, a Coast Guard group and around 6,000 U.S. military personnel, posted emergency guidelines on Friday to help residents prepare for any potential nuclear attack.

North Korean state news agency KCNA said on Thursday the North Korean army would complete plans in mid-August to fire four intermediate-range missiles over Japan to land in the sea 18 to 25 miles (30 to 40 km) from Guam.

Japan’s government decided to deploy its Patriot missile defence system to four locations in the west of the country, media reported. No one at Japan’s defence ministry was available to comment on Saturday.

The governor of Guam, Eddie Baza Calvo, posted a video on Facebook of himself speaking with Trump. “We are with you a thousand per cent. You are safe,” Trump told Calvo.

Washington wants to stop Pyongyang from developing nuclear missiles that could hit the United States.

North Korea sees its nuclear arsenal

as protection against the United States and its partners in Asia.

Trump said he was considering additional sanctions on North Korea, adding these would be “very strong.”

He gave no details and did not make clear whether he meant unilateral or multilateral sanctions.

U.S. officials have said new U.S. steps targeting Chinese banks and firms doing business with Pyongyang are in the works, but these have appeared to be put on hold to give Beijing time to show it is serious about enforcing new UN sanctions.

Back channels

Trump said he did not want to talk about diplomatic “back channels” with North Korea after U.S. media reports that Joseph Yun, the U.S. envoy for North Korea policy, had engaged in diplomacy for several months with Pak Song Il, a senior diplomat at Pyongyang’s UN mission, on the deteriorating ties and the issue of Americans imprisoned in North Korea.

Key Points Trump, Xi in phone call to discuss North Korea crisis Russia, Germany alarmed at heated rhetoric South Korea hopes tensions will be diffused Japan deploys Patriot missile defence system - media Joint U.S.-South Korean exercise to proceed - Pentagon

But Daniel Russel, until April the top U.S. diplomat for East Asia, said this so-called New York channel had been a relatively commonplace means of communication with North Korea over the years, and was not a forum for negotiation.

“It’s never been a vehicle for

negotiations and this doesn’t constitute substantive U.S.-DPRK dialogue,” he said, using the acronym for North Korea’s formal name, Democratic People’s Republic of Korea.

Both Moscow and Berlin expressed alarm over the rise in rhetoric over North Korea, and Russian Foreign Minister Sergei Lavrov urged Pyongyang and Washington to sign up to a joint Russian-Chinese plan by which North Korea would freeze missile tests and the United States and South Korea would impose a moratorium on large-scale military exercises. Neither the United States nor North Korea has embraced the plan.

German Chancellor Angela Merkel said there is no military solution, adding that “an escalation of the rhetoric is the wrong answer.”

The French presidency said North Korea was engaged in a “dangerous escalation” of tensions.

President Emmanuel Macron “calls for all parties to act responsibly and prevent any further escalation in tensions,” the Elysee palace said in a statement.

Trump and Macron spoke on Saturday. The White House said Trump reiterated the U.S. commitment to stop the “North Korean nuclear menace” and said Washington was ready with diplomatic, economic and military measures. British Foreign Secretary Boris Johnson said blame for problems lay with North Korea, and that the international community was “shoulder to shoulder” in efforts to stop North Korean aggression.

“We are working with the U.S. and our partners in the region to bring this crisis to a diplomatic end,” he tweeted.

As the rhetoric has ratcheted up, South Koreans are buying more ready-to-eat meals for emergency use, and the government aims to expand nationwide civil defence drills planned for Aug. 23. Hundreds of thousands of troops and huge arsenals are arrayed on both sides of the tense demilitarized zone between the two Koreas. Reuters

Business Daily Monday, August 14 2017 11

Asia GDP

Singapore’s economy healthier than expected Services producing industries grew 3.3 per cent from the previous quarter Masayuki Kitano

S

ingapore’s trade-reliant economy grew much faster than initially estimated in the second quarter and more than analysts had expected, with a rebound in services suggesting a broader and more balanced recovery after a stumble early in the year.

The city-state’s economy grew 2.2 per cent in April-June on an annualised and seasonally adjusted basis, rebounding from a revised 2.1 per cent contraction in the preceding quarter, data showed on Friday.

The reading was far stronger than the government’s advance estimate last month of 0.4 per cent growth and well above the highest estimate in a Reuters economist poll. Analysts had expected the final reading to pick up only slightly to 0.5 per cent.

“For the second half of this year, we should see services momentum improving in line with the greater confidence about global growth prospects and domestic sentiments,” said Selena Ling, head of research and strategy for OCBC Bank.

Singapore and other Asian economies which are highly dependent on trade have gained a big boost this year from an improvement in global demand, particularly for electronics products and components such as

semiconductors.

But exports and their resulting boost to manufacturing had been the main bright spot for Singapore, while services, which accounts for roughly 70 per cent of the economy, had lagged.

The latest GDP data suggested the economy was better balanced than first thought, with strength seen in other sectors which had been considered sluggish.

Services producing industries grew 3.3 per cent from the previous quarter, after shrinking 3.0 per cent in January-March.

Within the services sector, wholesale and retail trade grew 6.2 per cent,

while finance and insurance expanded 3.9 per cent.

“The key change at the margin is that some of the domestic oriented components are doing better,” said Michael Wan, an economist at Credit Suisse.

While exports may cool in the second half, given the possibility of a slowdown in China’s economic growth, Singapore’s economy should draw more support from private consumption, Wan added.

Full-year growth should come in at around 2.5 per cent, the Ministry of Trade and Industry (MTI) said in a statement. It revised its official

2017 forecast to a range of 2.0 to 3.0 per cent from 1.0 to 3.0 per cent previously.

Still, given lingering external risks such as a possible flare-up in trade protectionism, Singapore’s central bank is seen as being in no hurry to tighten its exchange-rate based monetary policy.

This is all the more so since the domestic labour market remains sluggish.

Moreover, there is little sign of a pick-up in demand-led inflationary pressures despite stronger economic growth, a situation that is vexing central bankers around the world.

Most economists expect the Monetary Authority of Singapore (MAS) to keep its policy settings unchanged at its next policy decision due in October.

“I don’t think there is any impetus or any rush to move,” said OCBC Bank’s Ling, referring to the MAS’ policy outlook.

The central bank kept policy unchanged at its last review in April, saying a “neutral” stance is appropriate for an extended period.

Speaking after the release of the latest GDP data, MAS Deputy Managing Director Jacqueline Loh said the central bank’s current policy settings remained appropriate. Reuters

Monetary policy

Australia’s central bank governor signals steady rates for a while yet Annual wage growth is inching at its slowest ever pace of 1.90 per cent Swati Pandey and Wayne Cole

Australia’s central bank aims to keep interest rates at record lows for a while yet, governor Philip Lowe said on Friday, with any tightening “quite some time away” and likely to be gradual as households try to whittle down a mountain of debt.

The Reserve Bank of Australia (RBA) has left interest rates at an all-time low 1.50 per cent after last easing in August 2016 as it balances lukewarm inflation with skyrocketing household debt.

“It was a reasonable assumption that the next move in interest rates was up rather than down but it is quite some time away,” Lowe said at the RBA’s semi-annual testimony to parliament’s economics committee in Melbourne.

Futures market implies steady rates until early 2018 with a hike fully priced in only by next Christmas.

But the tightening cycle, when it begins, will be slow as policymakers are aware of the impact higher interest rates would have on households saddled with a mountain of debt, Lowe said. The household debt-toincome ratio is at a record high 190 per

cent and rising faster than incomes.

Annual wage growth is inching at its slowest ever pace of 1.90 per cent. Together, that has weighed on consumer confidence and spending in recent months.

Key Points Policy tightening is “some time away” - RBA governor Futures market pricing imply a hike late 2018 RBA aware of impact of higher rates on debt-laden households RBA has tools to intervene in forex market “The governor’s comments today provided more clarity and reinforced our view that interest rates are likely to remain on hold over the next 12 months,” said Craig James, chief economist at CommSec. “There are no signs of imminent action on rates.”

Aussie dlr woes

Lowe said he would like to see annual wages growth of 3.5 per cent

or more as economic growth picks up. The RBA has said it is confident that the A$1.7 trillion economy will accelerate over the next two years to around 3 per cent.

Lowe also expects inflation to edge higher over time, as utility prices in the country are surging - another reason households are fretting over their finances.

A risk to its forecasts is a further appreciation in the Australian Dollar,

Lowe added.

The Aussie is up about 6 per cent since June as it climbed to a two-year peak of US$0.8066 last month, largely as the U.S. dollar has tumbled due to expectations of a gradual pace of rate increases by the Federal Reserve.

When asked if the RBA would intervene in the forex market to tame the Aussie, Lowe said “we have the tools” but would deploy them only in an extreme scenario. Reuters

12 Business Daily Monday, August 14 2017

Asia Currency

Philippine central bank tries to calm FX market Despite a weaker dollar, the peso has now fallen 2.5 per cent so far this year

T

he Philippine central bank yesterday sought to soothe frayed nerves in the foreign exchange market after the peso hit an 11-year low, saying it was not in a freefall and assuring it would be on guard against excessive volatility.

“Let’s calm down,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla said in a statement, downplaying the peso’s slump to 51.08 to the dollar on Friday, its weakest since August 2006.

Most emerging Asian currencies fell on Friday as investors dumped riskier assets amid a sharp escalation in tensions between the United States and North Korea.

“We don’t expect it to do a free fall because our economic fundamentals now, unlike before, are solid and very strong. This is reflected in our investment grade (credit) rating,” Espenilla said.

He said it was natural for the peso to show volatility as it adjusts to market conditions and all the “short-term uncertainties” such as heightened geopolitical tension.

The peso was “capable of correcting itself as the market calms down and digests the relevant information,” he said.

Espenilla said the BSP could use its huge pile of foreign exchange reserves to play a stabilising role in the market.

“The BSP stands vigilant....We’re on the right track,” he said.

Espenilla also sought to downplay

worries about the Philippines running a current-account deficit, which may widen to US$1.6 billion in 2018, from an estimated US$600 million shortfall this year, according to the central bank.

For the Philippines to sustain growth, he said it needs to catch up on high quality investments, especially infrastructure.

“We don’t expect it to do a free fall because our economic fundamentals now, unlike before, are solid and very strong. This is reflected in our investment grade (credit) rating” Nestor Espenilla, Bangko Sentral ng Pilipinas Governor “It’s natural for it to run moderate current account deficits. In fact, it’s sub-optimal for it to be persistently running current account surpluses,” he said.

Nestor Espenilla, Bangko Sentral ng Pilipinas Governor. Source: Bloomberg

“That’s like the equivalent of deploying our own savings to the world instead of using those internally to finance our own investment needs.”

A construction boom in the Philippines, fuelled by President Rodrigo Duterte’s US$180 billion “Build, Build, Build” infrastructure campaign, has contributed to the peso weakening amid a recent surge in capital goods imports, including excavators, road rollers and dump trucks.

With this trend expected to continue, the central bank last week said the peso was likely to “show continued depreciation.”

Duterte has already approved the auction of 21 projects worth US$16 billion, including the overhaul of

Manila’s shabby airport and a railway line on Mindanao island in the south.

Yesterday, the Department of Finance said the government has approved six new big-ticket projects worth a combined 57.5 billion pesos, including construction of bridges intended to ease traffic congestion in the capital Manila.

Despite a weaker dollar, the peso has now fallen 2.5 per cent so far this year while most other Asian emerging currencies have racked up solid gains.

A Reuters poll show showed investors likely retained bearish bets on the peso, though they may have trimmed them slightly in the last two weeks. In contrast, investors were optimistic other Asian currencies would see further gains. Reuters

Inflation

Indian gov't flags growth risks, pushes for monetary easing Disinflationary pressures allowed the Reserve Bank of India last week to cut its main policy rate Manoj Kumar

India called on Friday for more monetary easing as it flagged risks to economic growth and budget targets, citing a series of disinflationary impulses weighing on Asia’s third-largest economy.

In its mid-year economic survey, the finance ministry said “tighter” monetary policy meant real interest rates in India were substantially higher than in comparable emerging economies, further clouding the economic outlook.

Faster monetary easing, the ministry argued, would help deleverage corporate balance sheets and restore banks’ profits, helping the economy realise its full potential.

While it retained an official growth forecast of 6.75 per cent to 7.5 per cent for the fiscal year to March 2018, the report highlighted a stronger rupee, deepening farm distress and a disruption in business activity following the launch of a new sales tax, as headwinds.

“There has been an across-theboard deceleration,” said Chief Economic Adviser Arvind Subramanian, the survey’s author. “It is less likely than before that we will reach the upper end of the range.”

Growth slowed to 6.1 per cent in the March quarter, its lowest in more than two years, following monetary

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reform ordered by Prime Minister Narendra Modi last November to purge high-value banknotes from circulation.

The subsequent launch of a national Goods and Services Tax (GST) has caused chaos on the ground as ambiguous rules have left firms confused on how to price their products.

In a sign of things to come, business surveys showed both services and manufacturing contracting at their fastest rate in years in July, the month that the GST was launched.

Scope for monetary easing

Disinflationary pressures allowed the Reserve Bank of India (RBI) last week to cut its main policy rate - the first easing by an Asian central bank this

year - by 25 basis points to 6 per cent, the lowest since November 2010.

Yet Subramanian, Finance Minister Arun Jaitley’s top economic adviser, said the policy repo rate was still 25-75 basis above the neutral rate.

Although he didn’t fault the RBI’s new inflation-targeting framework, he did question the approach of its Monetary Policy Committee.

“Both expected inflation and GDP are subdued relative to their equilibrium levels,” the survey said.

“The conclusion is inescapable that the scope for monetary easing is considerable.”

Even as the RBI resumed cutting rates, it warned inflation could accelerate to as high as 4.5 per cent in

October-December. The economic survey, however, took the view that India’s inflation, which cooled to a record low of 1.54 per cent in June, is undergoing a “structural shift”.

Key Points Finmin report retains 6.75-7.5 pct growth forecast for 2017/18 Sees stronger rupee, GST, farm distress as headwinds Expects headline inflation to be below 4 pct by March 2018 Says considerable scope for monetary easing It expects headline inflation to remain below the RBI’s medium-term target of 4 per cent through to the end of March 2018 on the back of normal summer rains and the deflationary impact of farm loan waivers.

Four Indian states including Uttar Pradesh, which has a population bigger than Brazil’s, have agreed to waive billions of dollars in farm loans to offer relief to farmers reeling from losses caused by bad weather.

Subramanian said the loan waivers were likely to be deflationary as the states would have to either raise taxes or cut spending to keep their budget deficits in check. Reuters

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; 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 Monday, August 14 2017 13

Asia Money laundering

In Brief

How money launderers used Commonwealth Bank of Australia The country’s second biggest mortgage lender failed to detect suspicious transactions nearly 54,000 times Byron Kaye

In a run-down mall in one of Sydney’s biggest Chinese neighbourhoods in 2015, 29-year-old Jizhang Lu showed up at the top-floor offices of a meat export company carrying a carrier bag stuffed with hundreds of thousands of dollars in cash.

According to police documents filed in court and reviewed by Reuters, Lu said he made the trip to the shopfront of CC&B International Pty Ltd eight times over three weeks. Each time a CC&B employee would hand him a receipt showing a different company had bought tens of thousands of kilograms of meat.

The cash - as much as A$530,200 (US$416,840) at a time - was then deposited at a Commonwealth Bank of Australia (CBA) branch, according to the police statement of facts agreed by Lu. But the apparent purchases were fake, and last year Lu was jailed for two years after pleading guilty to helping launder A$3.2 million of what police allege were proceeds from an unidentified international drug syndicate.

The court records reviewed by Reuters did not name Lu’s lawyer. Lu could not immediately be contacted directly because he was in custody.

The police case against Lu is now one of several being cited by financial intelligence agency AUSTRAC in its statement of claim against CBA, the largest civil court action of its kind in Australian corporate history.

AUSTRAC has accused CBA of

“serious and systemic” breaches of money-laundering and counter-terrorism financing rules, alleging the country’s second biggest mortgage lender failed to detect suspicious transactions nearly 54,000 times. It faces fines potentially amounting to billions of dollars.

CBA has said it will fight the AUSTRAC lawsuit, saying it would never deliberately undertake action that enables any form of crime. CBA said a coding error with new automated teller machines was behind most of the breaches but that it recognised there were “other serious allegations” in AUSTRAC’s claim were unrelated to that software problem. It declined to comment specifically about the police case against Lu.

Proceeds of crime

AUSTRAC’s lawsuit against CBA asserts that, in total, A$17.7 million was advertisement

deposited at the bank from February to August 2015 on behalf of a company identified in the earlier criminal case as CC&B. “These funds were the proceeds of a drug importation syndicate and were proceeds of crime, within the meaning of the Criminal Code Act,” AUSTRAC’s statement of claim says, referring to CC&B only as Company 1.

Lu was identified in AUSTRAC’s statement of claim against CBA, which also specified the time and length of Lu’s sentence. A subsequent Reuters search of the criminal case against Lu produced the police “facts sheet” which provided further detail of his operation, including the name of CC&B. The records of Lu’s criminal case, provided to Reuters by a communications officer for the court which convicted Lu, showed that he pleaded guilty.

A call to the phone number listed on CC&B’s website went unanswered. A Reuters visit to the address where Lu said he dropped off bags of money, at Lemon Grove shopping centre, showed no sign of CC&B - other than a mention in an old store guide for shoppers.

Calls over two days to Lemon Grove also went unanswered.

Australian company filings showed CC&B’s corporate address as “Sunnyside Accountants”. A woman who answered the phone at that firm said CC&B was a former client but that she could give no further information because the organisations had parted ways. Sunnyside hasn’t been named in AUSTRAC’s suit.

“Can you help?”

Lu, a Chinese national on a business visa, described himself as a “net engineer”, according to the police document filed in court. He had no involvement in the meat export industry and earned RMB60,000 (US$9,000) a year in his home country, he told police.

Lu said he met another Chinese man while grocery shopping in the Sydney suburb of Chatswood, where CC&B was based.

“After some chatting, he say, ‘can you help me do this please?’,” Lu told police, according to the document.

Lu agreed to help “because the man asked him”, the police statement said, without elaborating.

He told police he didn’t understand the receipts because they were written in English.

Australia’s Joint Organised Crime Group charged two CC&B employees with dealing in criminal proceeds about the same time as Lu, in August 2015.

The Australian Federal Police could not immediately provide an update on the two CC&B employees identified as being charged.

The police statement said a third CC&B person, company director Ka Chun Leung, was a “potential co-accused” but has left the country. Efforts by Reuters to contact Ka were unsuccessful. Reuters

Public accounts

Indonesia’s Q2 current account deficit widens Indonesia’s current account deficit widened in the second quarter, the central bank said on Friday, but still inside a range that Bank Indonesia (BI) considers healthy. Southeast Asia’s largest economy had a deficit of US$5.0 billion in its total foreign trade in goods and services in April-June, equal to 1.96 per cent of gross domestic product, BI said. In the previous quarter, the deficit was 0.98 per cent of GDP. Inflows recorded in the financial and capital accounts were enough to cover the deficit and brought Indonesia’s balance of payments to a US$739 million surplus in the second quarter.

The first quarter’s surplus was US$4.5 billion.

Debt deal

Malaysia’s 1MDB says US$350 mln paid to Abu Dhabi State fund 1Malaysia Development Berhad (1MDB) on Friday said it had remitted the equivalent of US$350 million to Abu Dhabi’s government-owned International Petroleum Investment Co (IPIC). Earlier last week, Abu Dhabi once again extended a deadline for troubled Malaysian fund 1MDB, the subject of allegations of fraud and money-laundering, to make a US$603 million debt payment, provided at least US$310 million was paid by Aug. 12. The rest of the money plus interest would be payable by Aug. 31. “All funds paid to IPIC are from proceeds of the on-going rationalisation programme,” 1MDB said.

GPS

Japan satellite launch postponed due to glitch Japan on Saturday postponed the planned launch of an H-2A rocket tasked to put a geo-positioning satellite into orbit due to possible helium gas leakage, Mitsubishi Heavy Industries Ltd (MHI) said. MHI, commissioned by the government to carry the satellite into space, postponed Saturday’s launch after detecting a decline in pressure levels inside a tank containing helium gas, which is used to operate valves for cooling rocket engines. The company is looking into what specifically caused the pressure decline, and the rocket is now likely to be launched as early as Aug. 17, a MHI spokesman said.

Listing

Vietnam’s VPBank to list on Aug 17 Vietnam Prosperity Joint Stock Commercial Bank (VPBank) will list its shares on the Ho Chi Minh Stock Exchange on Aug. 17 with an expected market value of US$2.3 billion, the bank said on Friday. VPBank will list 1.33 billion shares with a reference price of 39,000 dong (US$1.72) each, likely giving it a 51.97 trillion dong (US$2.29 billion) market value, which would be the ninth biggest on the exchange. In Vietnam, an IPO and listing are separate processes.

Foreign institutional investors currently hold 22.34 per cent of VPBank, according to the lender. Foreigners are allowed to own a maximum of 30 per cent in a Vietnamese bank.

14 Business Daily Monday, August 14 2017

International In Brief Oil industry

Russia nominates German ex-chancellor to Rosneft board Russia has nominated former German chancellor Gerhard Schroeder to the board of its biggest oil producer Rosneft as an independent director, according to a government decree published late on Friday.

Chancellor from 1998 to 2005, Schroeder is currently the chairman of the shareholders’ committee of Nord Stream AG, a Gazprom-led consortium established for construction of pipeline carrying Russian natural gas across the Baltic. Rosneft, in which Russia has a 50 per cent plus one share, is under Western sanctions over Moscow’s role in the Ukraine crisis.

South Africa

President rebukes lawmakers who backed his ouster South African President Jacob Zuma indicated that ruling party lawmakers who backed an opposition attempt to oust him should face disciplinary action and said he may consider firing his higher education minister, who has criticized his leadership.

More than two dozen members of the ruling African National Congress backed a motion of no confidence in the president on Aug. 8, which the main opposition Democratic Alliance filed after he unilaterally fired his respected finance minister and two ratings companies responded by downgrading the country’s debt to junk. While the motion was defeated by 198 votes to 177, Zuma said “anything could have happened.”

Inflations

Modest rise in U.S. consumer prices may delay Fed rate hike The Fed has a 2 per cent inflation target and tracks a measure that has been stuck at 1.5 per cent since May

U

.S. consumer prices rose slightly in July as higher food costs were partly offset by falling prices for a range of other goods, suggesting benign inflation that could persuade a cautious Federal Reserve to delay raising interest rates until December.

But with the labour market near full employment and economic growth accelerating, analysts expect the U.S. central bank will announce a plan to start unwinding its massive bond portfolio at its policy meeting next month.

The Labor Department said on Friday its Consumer Price Index edged up 0.1 per cent last month after being unchanged in June. That lifted the year-on-year increase in the CPI to 1.7 per cent from 1.6 per cent in June.

Economists had forecast the CPI rising 0.2 per cent in July and climbing 1.8 per cent year-on-year.

Stripping out the volatile food and energy components, consumer prices gained 0.1 per cent for the fourth straight month. The so-called core CPI rose 1.7 per cent in the 12 months through July and has now increased

by that margin for three consecutive months.

Despite the modest gain in consumer prices, which came on the heels of a drop in producer prices in July, many economists continue to share the Fed’s conviction that transitory factors were holding back inflation.

Fed’s conundrum

The Fed has a 2 per cent inflation target and tracks a measure that has been stuck at 1.5 per cent since May. Inflation remains tame despite a tightening labour market, a conundrum for the central bank as it contemplates tightening monetary policy further.

The Fed is expected to outline a program to start offloading its US$4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its Sept. 19-20 policy meeting.

It is expected to raise interest rates in December, though such a move would depend on future inflation data. The Fed has raised borrowing costs twice this year.

Food prices rose 0.2 per cent last month, driven by a surge in the cost of meat, fish, eggs, fruits and vegetables.

Food prices were unchanged in June.

The cost of food consumed at home increased 0.2 per cent.

Consumers also paid more for prescription drugs, whose prices jumped 1.3 per cent after increasing 1.0 per cent in June. Prices for apparel rose 0.3 per cent after four straight monthly declines. While gasoline prices were unchanged after tumbling 2.8 per cent in June, electricity prices rose 0.4 per cent.

Rental costs maintained their upward trend last month. Owners’ equivalent rent of primary residence rose 0.3 per cent after advancing by the same margin in June.

The cost of new motor vehicles fell 0.5 per cent, the biggest drop since August 2009 and the sixth consecutive monthly decline, amid slumping demand.

Low inflation is a relief for many Americans who have seen their pay checks barely increase in recent years. In another report, the Labor Department said inflation-adjusted average hourly earnings increased 0.7 per cent in the 12 months through July, slowing from June’s 0.9 per cent gain. Reuters

Car industry

Merkel rejects electric car quota German Chancellor Angela Merkel on Saturday rejected a proposal made by her Social Democrat rivals to introduce quotas for electric cars in Europe, arguing the implementation of such targets would prove too complicated. Social Democrat leader Martin Schulz, Merkel’s main challenger in the Sept. 24 national election, on Friday called for such a quota - both in Germany and across the European Union, saying it would encourage industry to innovate. “I don’t think that the quota for E-cars - for this technology - has been well thought out,” Merkel said.

Energy

Brazil launches first corn-only ethanol plant With a record corn crop in the silos and Brazil’s president on hand, FS Bioenergia on Friday inaugurated the country’s first ethanol plant processing only corn in the heartland of the South American grains powerhouse. President Michel Temer was joined at the inauguration by Agriculture Minister Blairo Maggi, who pledged the government’s support for corn-based ethanol - an innovation in a country that has long made ethanol more efficiently from sugarcane. Privately owned FS Bioenergia said the plant will produce about 240 million litres of ethanol from corn each year, along with 6,200 tonnes of corn oil and 60,000 megawatts of power.

Oil industry

IEA says strong demand growth helping market rebalance The overall global oil supply rose by 520,000 bpd in July to stand 500,000 bpd above year-ago levels Dmitry Zhdannikov

World oil demand will grow more than expected this year, helping to ease a global glut despite rising production from North America and weak OPEC compliance with output cuts, the International Energy Agency said on Friday.

The agency raised its 2017 demand growth forecast to 1.5 million barrels per day (bpd) from 1.4 million bpd in its previous monthly report and said it expected demand to expand by a further 1.4 million bpd next year.

“Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought,” said the Paris-based IEA, which advises industrialised nations on energy policy.

“There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said.

The Organization of the Petroleum Exporting Countries is curbing output by about 1.2 million bpd, while Russia and other non-OPEC producers are

cutting a further 600,000 bpd until March 2018 to help support oil prices.

The IEA said OPEC’s compliance with the cuts in July had fallen to 75 per cent, the lowest since the cuts began in January.

It cited weak compliance by Algeria, Iraq and the United Arab Emirates.

In addition, OPEC member Libya, which is currently exempt from the output cuts, steeply increased output.

Key Points Weaker OPEC compliance with cuts, Libya output buoy supply Non-OPEC production to grow strongly in 2017-2018 IEA says stocks draw could slow after historic data revision As a result, the overall global oil supply rose by 520,000 bpd in July to stand 500,000 bpd above yearago levels.

Adding to the challenges of oil producers to support oil prices is rising non-OPEC output, which is expected to expand by 0.7 million bpd in 2017 and by 1.4 million bpd

in 2018 on strong gains in the United States, which is not participating in the output caps.

Still, strong global demand growth is helping to clear excess barrels with the IEA registering a decline in stocks in industrialised nations in both June and July.

Stocks remain 219 million barrels above a 5-year average - a level that OPEC is targeting with its output cuts.

The IEA also revised historic demand data for 2015-2016 for developing countries, cutting it by 0.2-0.4 million bpd.

As a result of those historic revisions, the IEA cut baseline demand figures for 2017-2018 by around 0.30.4 million bpd and hence lowered demand for OPEC crude by the same amount.

“The impact of carrying this lower demand base into 2017 against unchanged supply numbers is that stock draws later in the year are likely to be lower than first thought,” the IEA said.

Changes mainly happened as the IEA revised down historic demand data for Indonesia, Malaysia and Iran while revising up India and keeping China largely unchanged. Reuters

Business Daily Monday, August 14 2017 15

Opinion Business Wires

The Korea Herald South Korea’s corporate watchdog said yesterday that it will introduce a punitive damages system to the local distribution industry as part of its efforts to root out unfair business practices and strengthen consumer protection. The Fair Trade Commission said it will revise related laws to impose punitive damages of up to three times the actual damage from business practices such as an unfair payment cutback of supplied goods and returns that occur between large shopping mall operators and small shops.

The Times of India The (Indian) government on Friday said speedy steps are being taken against shell companies, but a balance needed to be maintained between ease of doing business and ensuring that wrongdoing is stamped out. Finance minister Arun Jaitley (pictured) told the Lok Sabha that there is no definition for shell companies under the Companies Act but such entities are used for round tripping of money. The real owners behind such entities need to be identified and steps are being taken under the benami and income tax laws, said Jaitley, who’s also the corporate affairs minister, during Question Hour in Parliament.

We need to put the patent trolls out of business Noah Smith a Bloomberg View columnist

I Philstar Credit Suisse sees the Philippine peso weakening further to 52 to US$1 over the next 12 months as the country is expected to book its first current account (CA) deficit in 14 years amid surging imports. The investment bank has revised its US dollar – peso targets to 51 to US$1 instead of 49.5 to US$1 in three months and to 52 to US$1 instead of 50.5 to US$1 in 12 months. Credit Suisse said it has underestimated the extent of peso weakness in the past month despite its bearish view on the local currency this year.

Taipei Times The (Taiwanese) government is to continue efforts to enact sweeping judicial reform, President Tsai Ing-wen said, adding that she would personally oversee that the proposed changes are implemented by requesting the Judicial Yuan and the Executive Yuan to report on their progress every six months. Tsai addressed members of the National Congress on Judicial Reform upon its conclusion, where she outlined five main tasks for her government to set up timetables and take charge of judicial reform. “We shall change the justice system into one the people can rely upon,” she said.

n a recent episode of HBO’s sitcom “Silicon Valley,” a lawyer tries to extort money from a struggling start-up by threatening to sue it for patent infringement. The troll, who understands nothing about the underlying technology, owns a patent so broad as to be unenforceable, but knows that the victims of his perfectly legal extortion scheme lack the financial resources to fight him in court.

A recent research paper by economists Ian Appel, Joan Farre-Mensa and Elena Simintzi shows that the show’s humorous scenario isn’t that far from real life. Appel et al. note that patent infringement lawsuits have increased by a factor of 10 since 2000, and that so-called non-practicing entities (NPEs) -- basically, companies that own patents but don’t use them to produce anything -- account for more than two-thirds of the increase. The cases that go to court obviously represent just a fraction of the times that NPEs put pressure on tech companies -- their more typical mode of operation is to send threatening letters. Small businesses are the most common targets. Most of the time, companies cough up the cash, viewing the trolls as merely one more cost of doing business.

This could be very bad for the economy. Start-ups -- small, fast-growing businesses -- are engines of job creation. New businesses tend to create a lot more jobs than established ones, and their employment levels tend to hold up better in recessions. But since 2000, the U.S. economy has been creating fewer and fewer start-ups: NPEs, or patent trolls, could be one of the forces crushing dynamism in the U.S. A large body of research documents the potential harm that they can do to young, growing companies.

But state governments are fighting back. As of 2016, 32 states had passed laws aimed at limiting NPEs’ use of demand letters. Typically, if courts decide a patent holder’s demand letter was unreasonable, it can impose penalties on the person or company making the threats.

Appel et al. study the impact of these laws on small businesses. The results look encouraging. States that adopted these laws saw a 2 per cent increase in employment at small, high-tech companies, and a 14 per cent increase in the number of companies receiving venture-capital funding. In states with a larger VC presence -- for example, California -the increase in the number of tech start-ups was particularly pronounced. Information-technology companies -- just the kind depicted in “Silicon Valley” -- were particularly helped by the laws.

This suggests that anti-troll laws are working as designed. That’s good news, but it raises a larger question. If patent trolls have this large of an impact, what about other patent holders? The chilling effect of trolls on start-up formation doesn’t seem like it would depend on the claimants being NPEs -- an infringement claim by a large company such as

“

Apple Inc. or Microsoft Corp. would probably be just as deadly for a struggling start-up.

Take Apple, the world’s largest company by market capitalization -- a behemoth among behemoths.

The company is most famous for creating beloved consumer products like iPhones and iPads, but it’s also known for persuading courts to grant it some pretty questionable patents. In 2012, the company patented the use of rounded corners on rectangular electronic devices -- hardly a brilliant technological breakthrough. Apple has patented the design of its packaging, the glass staircases in its stores, its 60 per cent recyclable bag, and the shape of the icons in its operating system. It has even patented the design of its music icon -- just two eighth-notes on a blue or white background.

But Apple is far from unique in its intellectual property adventurism. Amazon.com Inc. patented the practice of taking product photos on white backgrounds. IBM recently patented the “out-ofoffice” email system, despite the fact that everyone has seemingly been using similar systems forever.

Alphabet Inc. (Google) patented a baseball cap with a camera on it.

Lots of these patents might not hold up in court. A variety of existing patent laws are set up to prevent unreasonable patents -- for example, if you can prove that you were implementing an idea long before someone else patented it, you’re often safe. But these laws have a lot of uncertainty in their application. A big company has the deep pockets and existing legal infrastructure to take a gamble on a patent lawsuit, while a small start-up typically doesn’t. Patents have gotten so important in the tech business that multibillion dollar corporate acquisitions are made just so big companies can get more patents.

That’s a game that small start-ups just can’t play.

The spread of intellectual property could be stifling not just job growth, but innovation. The rise of design patents and software patents has greatly increased the number of things corporate giants can lay claim to. Design patents, for example, have increased by more than a factor of six since 1980.

Meanwhile the size of the economy has grown by less than a factor of three, and productivity growth has slowed down in recent years. All this patent activity doesn’t seem to be giving innovation much of a boost.

Intellectual-property reform needs to happen.

There have been some encouraging signs in recent years -- for example, courts seem to be less willing to enforce patents on business methods, one of the most egregiously abused categories. The state antitroll laws are another good move. But the health and dynamism of the U.S. start-up ecosystem might require larger-scale action. Intellectual property in the U.S. has probably gone past the point of encouraging innovation, and both courts and legislators should think about how to further curb the patenting craze. Reuters

The spread of intellectual property could be stifling not just job growth, but innovation

”

16 Business Daily Monday, August 14 2017

Closing Markets

Korean stocks selloff on geopolitics brings out bargain hunters

A South Korean dealer works in front of monitors at the KEB Hana Bank in Seoul, South Korea, 11 August 2017. Source: Lusa

rallied 5.1 per cent. The index itself slid 3.4 per cent.

While South Korean stocks suffered their worst week since February 2016 as Trump dialled up his The escalating war of words between President Donald Trump and North Korea’s Kim Jong-un has warning to North Korea on threats to U.S. allies, spurred demand for haven assets globally. In Seoul, investors including Shinyoung Asset Management and Korea Investment Management said the bargain-seeking investors have turned bullish on sell off is an opportunity to snap up consumer consumer stocks. companies as President Moon Jae-in takes steps to Eight of top 10 gainers on the Kospi 200 Index stoke demand. since Trump’s “fire and fury” comment on Aug. 8 The MSCI Korea Consumer Discretionary Index include the cosmetics maker Cosmax Inc., which of 18 companies is at a three-month low even soared 11.5 per cent over the next three days, Hansae Co., a garments producer that rose 6.7 per as consumer confidence remains buoyant amid cent, and furniture maker Hyundai Livart Co., which Moon’s pledge to boost spending. Bloomberg News

M&A

China tames ‘grey rhinos’ after foreign shopping sprees As the pioneers of Chinese soft power overseas, HNA, Fosun, Wanda and Anbang were considered untouchable because of their political connections Julien Girault

“

G

rey rhinos” have become a hunted species in China, where government regulators are clamping down on powerful private conglomerates amid fears they are racking up dangerous debt levels.

Coined by an American policy analyst, the rhino reference points to long-visible threats that can charge suddenly and wreak havoc, as opposed to unforeseen “black swans”.

In China, it refers in particular to four huge companies with diverse global empires: HNA (aviation, tourism, finance), Fosun (tourism, entertainment), Wanda (real estate, cinema, amusement parks) and Anbang (insurance, luxury hotels).

These are the crown jewels of China’s private sector but are now viewed as a threat to financial stability.

Their voracious acquisitions include Fosun’s takeover of Club Med, HNA’s stakes in Deutsche Bank and Hilton hotels, Anbang’s purchase of New York’s historic Waldorf Astoria, and Wanda’s control of Hollywood studio Legendary Entertainment and 20 per cent of the Atletico Madrid football club.

According to data provided to AFP by analytic firm Dealogic, they spent a combined US$83.3 billion on overseas mergers and acquisitions since 2013.

China had long encouraged the buying frenzies but has reversed course, and it emerged in June that regulators were investigating potentially risky loans to these companies.

“It was absolutely predictable.

The debt level was growing way too rapidly,” Christopher Balding, an economics professor at Peking University, told AFP. “We expected these problems to pop up even if we didn’t know the specific companies they were going to pop up with.”

He adds that the investments were “putting a lot of pressure on the currency,” even if the debts remain difficult to evaluate.

Other analysts concur that the change of tack can be attributed to currency trends.

“When they were encouraging outward investment, the renminbi (yuan) was appreciating at that time,” Anne Stevenson-Yang, the head of J Capital Research, told AFP. “Now there is depreciation pressure, and that changes things.”

Political connections

As the pioneers of Chinese soft power overseas, HNA, Fosun, Wanda and Anbang were considered untouchable because of their political connections.

For example, Wanda CEO Wang Jianlin, one of the country’s wealthiest men, is a past delegate to the Communist Party congress, China’s most important political event,

while Anbang president Wu Xiaohui married a granddaughter of former Chinese leader Deng Xiaoping.

But the winds have shifted. Authorities now appear to be concerned about the influence of these conglomerates, their mazes of subsidiaries and debt, and their capacity to trip up the Chinese economy.

Grey rhinos are “creatures of the 2009 expansion” fed by government stimulus measures in response to the 2008 financial crisis, Stevenson-Yang said.

“They didn’t really have core competencies. They fed off the stimulus and connections with all-important political figures to make that happen,” she said.

“In other words, these companies are seen as diverting the nation’s hard currency money supply and threatening to impair the nation’s global prestige, the currency’s value sustainability and monetary policy flexibility.”

There have been indications since July of mounting government pressure.

Wanda has announced the sale of 77 of its hotels and 13 tourism projects to Chinese real estate developers Sunac and R&F properties for a whopping US$9.3 billion.

Beijing has also ordered Anbang to sell all of its overseas assets, according to Bloomberg.

Falling investments

Late last year, Beijing warned of “irrational” acquisitions abroad,

particularly in sports, entertainment and real estate.

The entire private sector has suffered the consequences. The only companies still permitted to make overseas investments are firms “supporting the real economy” or working with new technologies.

“How do you define irrational?

No one knows,” Ivan Han, a Shanghai-based analyst for the financial information provider Morning Whistle, told AFP. “The government is basically approving the deals one by one. It is like we are back in the period of planned economy.”

Accordingly, Chinese non-financial sector overseas investment plummeted 46 per cent in the first half of 2017.

“This is going to be a long-term turnaround,” especially because “few companies have demonstrated their ability to effectively manage these international acquisitions by creating synergies,” said ACAPITAL founder Andre Loesekrug-Pietri.

Private companies have “become more cautious and conservative and most of them are taking a watchand-see attitude,” Han said.

“It’s a period of chaos.”

Against this backdrop, state-run groups may fare better, Balding said.

Yet these companies may suffer from the same vices -- illusions of grandeur and colossal debt -as “even Chinese regulators don’t know what debt level most companies have.” AFP

Environment

Investigation

EU

Emergency teams battle oil spill off Kuwait

Trump to ramp up trade Wales joins Scotland in opposing pressure with call for probe UK government over Brexit

Emergency workers are battling to contain an oil spill near a joint Kuwaiti-Saudi oilfield in the Gulf, an official said yesterday.

“Emergency oil teams are still struggling to put an oil spill near Kuwait’s southern Ras Al-Zour area under control,” said Kuwait Petroleum Corporation spokesman Talal al-Khaled in a statement carried by the official KUNA news agency.

There were no official reports on the source or size of the spill in the waters off Kuwait’s southern coast, near the joint Kuwaiti-Saudi offshore Al-Khafji oilfield.

Kuwaiti media however yesterday quoted local oil experts as saying the spill originated from an old 50-kilometre pipeline from Al-Khafji.

The experts estimated that as many as 35,000 barrels of crude oil may have leaked into the waters off Al-Zour, where Kuwait is building a massive US$30 billion oil complex that includes a 615,000-barrelper-day refinery.

Saudi Arabia and Bahrain, located south of Kuwait along the Gulf coast, said the spill had not reached their waters.

Saudi Arabia said that it had put into action a “crisis management plan” and was conducting an aerial survey of its oil plants along the coast in a statement published by the official SPA news agency. AFP

President Donald Trump today will order his top trade adviser to determine whether to investigate Chinese trade practices that force U.S. firms operating in China to turn over intellectual property, senior administration officials said on Saturday.

The move, which could eventually lead to steep tariffs on Chinese goods, comes at a time when Trump has asked China to do more to crack down on North Korea’s nuclear missile program as he threatens possible military action against Pyongyang.

Trump will direct U.S. Trade Representative Robert Lighthizer to determine if an investigation is warranted of “any of China’s laws, policies, practices or actions that may be unreasonable or discriminatory, and that may be harming American intellectual property, innovation and technology,” an official said.

Any investigation that may be launched could take as long as a year to conclude, a third official said.

Trump, who will interrupt a 17-day working vacation to make a day trip to Washington for the trade announcement, had been expected to seek a so-called Section 301 investigation earlier this month, but an announcement was postponed as the White House pressed for China’s cooperation on North Korea. Reuters

The Welsh nationalist party accused the UK government of being ill-prepared for Brexit as it vowed to fight a landmark bill to take Britain out of the European Union.

Ministers either don’t know or won’t say how much departments are spending preparing for leaving the EU, Plaid Cymru said in a statement yesterday. Its Brexit spokesman, Hywel Williams, asked 20 government departments how many staff are working on Brexit. In response, five gave a figure and only three departments were able to estimate the cost of Brexit-related work.

The criticism underscores the continuing tensions between Prime Minister Theresa May and the semi-autonomous administrations in Wales and Scotland. The Scottish government said last week that it will not back the repeal bill needed to transfer EU legislation into UK law, accusing Westminster of a power grab. The Welsh assembly is also planning to oppose the legislation.

“A majority of members in our National Assembly believe that the bill should be rejected because it would weaken our democratic powers,” Plaid Cymru leader Leanne Wood said in emailed comments. “It is critical that other opposition parties join us” in challenging it, she said. Bloomberg News