H&M to extend e-commerce services to MSAR in 2017 Retail Page 6
Thursday, February 2 2017 Year V Nr. 1225 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Education
Tourism
University of Macau falls off international diversity list Page 2
www.macaubusinessdaily.com
Trade
MSAR 6th most visited city in the world Page 6
Currencies
South Korea exports shine, beating expectations Page 10
Japanese authorities defend monetary policy Page 11
Gaming Revenue Recovers Gaming
Gross gaming revenues in the MSAR posted a 3.1 pct increase y-o-y for January. Dampening analysts’ expectations of an 8.5 pct increase. The MOP19.3 bln results caused stocks to fall as cannibalization begins to pose threats. But all is not lost until full-CNY results come in after February, say the gurus. Page 7
Green shoots appearing
Grooming the business
Wedding services businesses in the MSAR are experiencing a downturn. With increased regional competition and unlicensed online competitors chipping away at market share. But a ‘one-stop’ service – from dresses to photography, and an international perspective – is keeping everything in focus.
Economy The MSAR will return to sustainable growth in 2017. So says the monetary authority, pointing to improvements in net trade values. The IMF forecasts economic growth of 0.2 pct this year, and 0.4 pct next year. With hopes pinned on mega infrastructure projects like the Hong Kong-Zhuhai-Macau Bridge and maritime terminal. Page 3
Against the wind
Interview | SMEs Pages 4 & 5
HK Hang Seng Index February 1, 2017
23,318.39 -42.39 (-0.18%) Worst Performers
Belle International Holdings
+1.89%
Sino Land Co Ltd
+1.09%
Want Want China Holdings
-3.06%
Kunlun Energy Co Ltd
-1.45%
Hang Lung Properties Ltd
+1.77%
Tencent Holdings Ltd
+1.08%
Galaxy Entertainment Group
-2.69%
PetroChina Co Ltd
-1.45%
Power Assets Holdings Ltd
+1.54%
China Mobile Ltd
+0.91%
AAC Technologies Holdings
-2.62%
Lenovo Group Ltd
-1.37%
China Resources Land Ltd
+1.34%
MTR Corp Ltd
+0.63%
Sands China Ltd
-2.17%
CK Hutchison Holdings Ltd
-1.34%
China Overseas Land &
+1.09%
Hang Seng Bank Ltd
+0.63%
China Mengniu Dairy Co Ltd
-1.78%
Ping An Insurance Group Co
-1.25%
16° 20° 17° 19° 17° 19° 17° 22° 16° 20° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
PMI Chinese factory activity expanded last month. With data showing the world’s second largest economy is stabilising. And the service sector performing well. But analysts warn of headwinds caused by emerging US protectionism. Page 8
2 Business Daily Thursday, February 2 2017
Macau Education
UM plummets down rankings University of Macau falls off the World’s Most International Universities list Sheyla Zandonai sheyla.zandonai@macaubusiness.com
T
he University of Macau has fallen off the list created by the Times Higher Education (THE) group ranking The World’s Most International Universities 2017. The institution, located on Hengqin island, had previously ranked 6th on the list of 150 worldwide institutions praised for their international focus. The neighbouring SAR’s University of Hong Kong topped the list of other universities in Asia, scoring third position overall in the ranking – the same position received last year – followed by the National University of Singapore (NUS) according to the London-based THE ranking. The top two ‘most international universities,’ according to the ranking, are located in Switzerland: the ETH Zurich – Swiss Federal Institute of Technology Zurich and the École Polytechnic Fédérale de Lausanne. Of all the countries ranked – of which the top ten include only the United Kingdom and Australia in addition to those already mentioned – the Swiss universities have the greatest average proportion of international staff and publications co-authored by international peers, both at 62 per cent, as noted by Ellie Bothwell of Times Higher Education.
Hong Kong climbed a great deal in the ranking - moving up from the 108th to 28th position from last year’s ranking - the University of Macau, which made 6th position in the previous annual list, was out this time from the list of 150 institutions that scored on the 2017 ranking. Dramatic variations noted year-onyear can be attributable to the fact that the ranking methodology has factored in, for the first time, a university’s ‘international reputation,’ which accounts for 25 per cent of the total score. The international reputation is ‘a measure of the ratio of international votes to domestic votes that the
institution achieved in THE’s annual invitation-only Academic Reputation Survey, which asks leading scholars to name the world’s best universities for teaching and research in their field,’ notes Bothwell. South China Morning Post quotes Phil Baty, THE’s world university rankings editor, as saying that the survey was conducted with 10,000 scholars around the world. The other three factors accounting for the ranking were proportions of the number of international students hosted by the university, of its international staff, and academic staff’s journal publications with at least one international co-author. Although the National University of Singapore had a higher score for
international reputation (95.9) than HKU (88), the latter had the highest score on the list for international staff, students, and co-authors, at 99.4. The University of Macau came in at 88th position under the ‘150 under 50 Rankings 2016,’ a ranking noting the top 150 universities around the globe les than 50 years old, and ranked 401–500 in THE’s flagship ‘World University Rank 2017.’ Both rankings use the same 13 performance indicators measuring institutions on their teaching, research, citations, international outlook and knowledge transfer. Another of THE’s rankings, the ‘Asia University Rankings 2017,’ will be launched on March 15 during the THE Asia Universities Summit at the University of Ulsan in South Korea.
the depot development, after an initial MOP555 million contract signed in 2009 with a consortium, comprising Mei Cheong and Top Builder, was terminated at the beginning of 2016. The initial contract was cancelled following multiple delays in the depot’s construction that led to the government paying an extra MOP700 million to Mitsubishi for storing the carriages for a longer period. Despite the cancellation, the Mei Cheong and Top Builder joint venture still received an MOP85 million payout for work done on the depot,
with the government announcing it would be enforcing a new system based on private contracts as a model after the fiasco, with premiums for early or on-time work completion and fines for works delayed. Secretary for Transport and Public Works Raimundo do Rosário announced previously that the GIT will be dissolved this year, with the government creating a public company responsible for the LRT metro system and its future management. The depot completion deadline is slated for 2019.
Regional competition
Changes
While the Chinese University of
LRT
Mark the calendar The Transportation Infrastructure Office says the Light Rail Train depot parking area construction will be finished in 2017 Nelson Moura with Cecilia U newsdesk@macaubusinessdaily.com
Construction on the Light Rail Train depot parking area will be wrapped up in 2017, the Transportation Infrastructure Office (GIT) Co-ordinator, Ho Cheong Kei, said while appearing on TDM Radio programme Macau Forum. Mr. Ho also stated that the construction of the parking area - serving as a docking and storage area for LRT trains in Taipa – will not result in any further increases in payment to be provided to LRT cabin supplier
The greater good
During the same Macau Forum programme the Director of the Transport Bureau (DSAT), Lam Hin San, said that the intention to adjust street parking meter fees had the purpose of reducing the price differences with public car parks. The objective of the
Mitsubishi. However, no date was provided by the government for when the carriages will arrive in Macau. The superstructure of the depot comprises three sections: the main building and auxiliary building accommodating maintenance areas and other operational facilities, in addition to a parking garage to be used as a docking area for the trains. In October of last year a MOP1.07 billion (US$133.8 million) four-year contract (until 2019) was granted by the government to China Construction Engineering (Macau) Co. Ltd. for
adjustment is to stimulate the turnover of vehicles parking on the street, with Mr. Lam adding that the Bureau will consider the progress of meter instalment, market environment, and social acceptance, with adjustment being established according to feedback.
Transportation
231 taxi violations prosecuted during CNY holiday The Public Security Police Force (PSP) revealed yesterday that it had prosecuted a total of 231 taxi violations during the Chinese New Year holiday - from January 26 to 31. Of these, 164 cases were related to drivers overcharging, with 33 cases related to drivers refusing to take passengers.
During the six-day holiday, PSP also prosecuted 41 cases of unlicensed taxi services, of which 27 were related to car-hailing applications. The Force emphasised that it will continue to combat taxi violations and unlicensed taxi services in the city during the Chinese New Year holiday. C.U.
Business Daily Thursday, February 2 2017 3
Macau Economy Local economy expected to grow by 0.2pct this year and 0.4pct in 2018
Back on track A study by the Monetary Authority of Macau forecasts that the local economy will continue to grow in the next two years sustained by newer gaming resort openings, internal demand growth, a strong labour market and stable inflation
M
acau’s economy should return to sustainable growth in 2017 after two years of contraction and after having returned to growth in the second half of last year, according to a study by the Monetary Authority of Macau (AMCM). ‘Macau’s economy is susceptible to a comeback to sustainable growth after eight quarters of negative adjustment. Economic growth started in the second half of 2016, mainly due to an improvement in net trade,’ announced the AMCM Monetary Studies Bulletin. AMCM cited estimates by the International Monetary Fund (IMF) that Macau’s economy will grow 0.2 per cent this year and 0.4 per cent in 2018, following a 4.7 per cent contraction in 2016.
Seeing the light
The stumble in the local economy was associated with the reduction of casino revenues, which fell continuously between June 2014 and 2016, dragging down the city’s gross domestic product (GDP). Macau casinos closed 2016 with revenues of MOP223.2 billion (US$27.93 billion) a 3.3 per cent drop in revenues posted the previous year. This was the third consecutive year
of falling casino revenues, but the year’s end showed signs of recovery in an industry that constitutes the city’s main economic motor, with December being the fifth consecutive month of revenue increases in terms of yearly comparison. The AMCM report underlines how gaming industry revenues regained their growth trajectory, pointing also to new integrated resort openings predicted for this and next year. Besides that aspect, it mentions that ‘inter-border infrastructure projects such as the Hong Kong-ZhuhaiMacau Bridge and the new maritime terminal in Taipa will be finished, sustaining the economic growth’. The study also mentions that although ‘weak internal demand (…) could still persist in 2017’ it ‘probably won’t continue in 2018’ when ‘private demand growth is expected to parallel the economic recovery’. ‘However, the risks associated with the adjustment of United States monetary policies, the shift of valuation of the pataca (MOP) in relation to currencies not indexed to the U.S. dollar, the economic performance of commercial partners in the region, and the direction of the real estate market’s pricing, will all have an important role in influencing Macau growth perspectives in the
short term,’ said the monetary authority.
Growing pains
The AMCM also anticipates that ‘inflation should remain at low levels in 2017, mainly due to diverse external and internal factors, including the stability of real estate and rent prices, and the appreciation of the pataca.’ ‘However, the expected recovery in aggregated demand should lead to a slight rise in inflation,’ the department said. It also estimates that ‘the labour market should stay robust,’ with little room for growth of the unemployment rate, which finished 2016 at 1.9 per cent. ‘The large proportion of foreign workers in full employment gave the government enough room for policy
adjustments, with the authorities having a clear position focused on the preservation of employment for local residents,’ stated the AMCM study. Aside from mentioning the contribution of financial and monetary stability to the economy’s resilience, the report mentions that Macau ‘maintained its competitiveness thanks to a continuous appreciation of its main touristic markets’ currencies,’ namely Mainland China, Hong Kong, Taiwan, South Korea and Japan. The Authority also notes that regional co-operation with Mainland China and Hong Kong will be ‘a factor for the successful development’ of Macau and that ‘small and medium enterprises and young entrepreneurs should actively participate’ in this process. Lusa
4 Business Daily Thursday, February 2 2017
Macau
Jess Lau executive director and founder of V-Wedding Photo International Group SMEs
Wedding belles In order to stay competitive in the wedding industry local SME wedding companies have started launching high-end services targeting customers willing to spend more for better services Annie Lao annie.lao@macaubusinessdaily.com
I
ncreasing competition from regional companies based in Hong Kong, Taiwan and Korea is pressuring the wedding photo industry in the MSAR, the executive director and founder of V-Wedding Photo International Group, Jess Lau, tells Business Daily, pointing out that the industry has undergone a shift in both target audience and strategy. As many local clients have begun to choose to shoot their wedding photos outside of the MSAR, Ms. Lau notes, local companies have to heavily promote the city as a high-end international destination for wedding photos – a strategy conveniently in line with that of the integrated resorts in their diversification attempts. The majority of V-Wedding Photo’s clients, both for wedding photography and for wedding-related services, are split between local and Mainland Chinese clients, notes Lau, who says the company also has two branches operating in the neighbouring city of Zhuhai. Despite the increasing trend for local couples to take their wedding photos overseas, the business founder claims most local clients still prefer to have their wedding photos snapped on a ‘one-stop service’ basis in the MSAR – with wedding photography, make-up artists, dinner arrangements, hotel arrangement and wedding preparation increasingly packaged by integrated resorts. Lau’s business is, however, not the only group in town competing in the industry. Wedding service provider Romantic House Wedding Studio - which also offers a similar ‘one-stop service’ comprising mainly make-up artists, dress leasing and wedding decoration - has also noted a falling trend in the sector.
JoJo Liu Ching Nam, owner of Romantic House Wedding Studio, says: “When I started my business in 2012, there weren’t many competitors at that time and I received a lot of orders. But now, more wedding service-related companies have opened up so the competition in the industry is stronger than before.” Liu said that competition has pushed her company to provide ever-increasing quality in customer service in order to stay competitive.
Competition
V-Wedding founder Ms. Lau does not ignore others in the sector, but comments that overall competition in the wedding service industry in Macau is not fierce. Although Macau has seen other wedding service providers from Hong Kong, Korea and Taiwan joining the industry over the past two years they are not running their businesses on a large scale, she notes. However, she says many wedding photographers started operating their businesses online about two years ago, mainly through promotional channels including social media sites and apps such as Facebook and WeChat. “We don’t have many newcomers entering the industry. But online wedding studios are a new trend. This kind of business is increasing in the city,” Lau said, a development that has begun to segment the market for her services. Lau adds that some of her clients prefer to go for the cheaper service that the online wedding studios can offer, lamenting: “We cannot compete with the low prices offered by the unlicensed wedding service studios that operate online.” The wedding services shop owner believes that local companies still have an advantage relative to their competition in that they own physical shops, which are more reliable, as well as the companies being able
to provide insurance to their clients for outdoor wedding photo-shoots. “We buy insurance for our clients when doing wedding photo-shooting outdoors to cover any accidents that may occur,” Lau explained. Her company also outsources the production and administration teams in Zhuhai because of cheaper labour costs and stable retention of the Mainland Chinese employees compared to the local employees, she points out.
Challenges
From a business perspective, Ms. Lau revealed that it is not easy to provide the ‘one-stop service’ in the city as it requires a large number of personnel and creates scheduling difficulties. “Many couples like to choose the ‘big day’ to get married on the same day. But we don’t have the amount of personnel to handle the workload when we have many clients getting married or having their wedding photo-shooting done on the same day,” Lau said. The lack of human resources is the biggest obstacle for her company to grow in Macau, she declares. “Many wedding service-related companies cannot expand their businesses here mainly because it is hard to hire professional photographers and the operational costs are getting more expensive every year,” Lau said.
Consumer behaviour
Regarding client breakdown, Ms. Lau points out that her company draws attracts 50 per cent of its clients from Macau locals and the other half from across the border in Zhuhai. “Many local clients like to do their wedding photo-shooting overseas such as Japan and Korea, so they don’t necessarily have to do it in their own city nowadays,” she says. Another reason for the behavioural shift, she notes, is that local clients prefer to have their wedding photos customised rather than being taken in a traditional way - such as going to major tourist attractions for their photo-shoot. “Many local clients like to do their wedding photo-shooting on yachts, football fields and even in helicopters,” she notes.
Due to the changes in local consumers’ spending behaviour, the V-Wedding founder revealed that her company’s revenue has fallen significantly over the past two years. “In 2014, one couple would spend over MOP30,000 (US$3,754) on average. However, when compared to last year their average spending has dropped to about MOP22,000,” she pointed out.
“We have heavily promoted our wedding photo shooting services in Macau to the Mainland Chinese” Jess Lau, executive director and founder of V-Wedding Photo International Group In order to attract more clients last year, during the continuing downturn in the sector, Romantic House’s Ms. Liu even dropped the service price to about MOP20,000 per couple. Liu notes, however, that last year’s price reductions and alternative strategies were a must, given that it was a ‘bad year’ – causing both wedding service companies to reap lower revenues. “According to the Chinese Lunar Calendar, we had a ‘bad year’ last year,” noted Liu. “Therefore, we had less profit in the previous year as less couples chose to get married last year,” she explained. Nevertheless, Liu expects more orders for this year, given that 2017 is marked down as a ‘good year’ for getting married, according to the Lunar Calendar.
Diversification
V-Wedding’s founder Ms. Lau opines that for business owners operating in the wedding segment it is not sustainable just to target local clients in Macau, and reaching further abroad - and offering wedding service arrangements for Mainland Chinese customers to come to Macau for their wedding photo shooting - has been a major focus.
Business Daily Thursday, February 2 2017 5
Macau “Last year, we had about 8,000 couples from the Mainland come to Macau for their wedding photo-shooting,” she said, opining that the MSAR has the potential to grow the sector by focusing on the growth of its Mainland clients “Macau has many beautiful attractions for photo-shooting, especially with the new casino resorts opening such as The Parisian Macao. We have heavily promoted our wedding photo-shooting services in Macau to the Mainland Chinese,” she said. Promoting Macau on the Mainland as one of the high-end international destinations for wedding photos and partnering with local hotels to achieve synergy between accommodation and wedding services will be a major, continuing, focus in the coming year, notes Lau, for simple reasons. “Mainland Chinese clients tend to spend more money than local clients,” she said. Other ways to diversify are also being explored by Romantic House Wedding Studio, which has started to launch a high-end wedding dress line designed by the company as a way of diversifying the company’s range of services. “We have many local clients who are buying their wedding dresses on Taobao (a Chinese online shopping website) at a cheaper price,” notes Ms. Liu. “So we have started to launch this high-end wedding dress line, that provides high quality dresses that the locals cannot buy on Taobao.”
Promotion
Apart from the challenges, the bright side of operating in the MSAR wedding services market is that the territory is small and promoting the business can be done easily, undertaking even small activities such as participating in wedding exhibitions and using social media on Facebook,
notes the V-Wedding founder. “We join events such as film festivals - sponsoring dresses and photography services to models,” says Lau.
“We have many local clients who are buying their wedding dresses on Taobao (a Chinese online shopping website) at a cheaper price. So we have started to launch this high-end wedding dress line that provides high quality dresses that locals cannot buy on Taobao” JoJo Liu Ching Nam, owner of Romantic House Wedding Studio
V-Wedding also partners with local jewellery retail Seng Fung Jewellery in organising wedding exhibitions to increase her company’s exposure. Romantic House Wedding Studio also follows the same promotional avenues as V-Wedding: participating in wedding exhibitions in the city, as well as advertising on social media, including Facebook.
JoJo Liu Ching Nam, owner of Romantic House Wedding Studio
For the future, however, both local wedding companies hope the government can provide more subsidies or assistance for promoting the local wedding service industry.
“Macau is a potential place to develop as an international tourism centre and a great destination for taking wedding photos,” concludes Ms. Lau.
6 Business Daily Thursday, February 2 2017
Macau Opinion
Ashley Sutherland-Winch* Social media clones The Year of the Rooster is here and social media has documented many of the celebrations in Macau. Instagram is a favourite for locals and tourists alike who tag #Macau in their posts. Since June 2016, #Macau has grown from 1.6 million tags to over 1.97 million on Instagram, demonstrating that in our local community Instagram is flourishing. Late Tuesday afternoon, Instagram - the social media platform owned by Facebook - announced two new features, ‘go live’ and ‘send disappearing photos and videos.’ This announcement now begs the question: are social media platforms racing to stay competitive or are they cloning themselves? Social media platforms have gone from having unique and interesting qualities to platforms that have become more similar with each new feature. Live stream video technology started with Facebook Live in August 2015, while Twitter Live launched this past December and now Instagram Live joins the pack. Snapchat became popular and is still favoured by the younger demographics due to its ability to send photos and videos that play for 8 seconds and then disappear forever. This allowed app users to feel more comfortable with their sharing practices because it gave the illusion that content shared on the Internet will not last forever. Instagram’s new addition of sending disappearing messages directly replicates Snapchat and may be the final blow to the company at a quite inopportune time. Snapchat is set to go public in March and now critics wonder if the company will be able to sustain consistent earnings. In Asia, WeChat has mastered the ability to keep users inside an app for a long time by meeting all of their needs from messaging friends to making financial transactions and ordering takeaways from restaurants. Facebook is the closest platform to mimic WeChat but still falls short and may never crack the Chinese market. Last week, China’s Ministry of Industry and Information Technology announced a 14-month ‘clean up’ of Internet access services, including a crackdown on virtual private networks, or VPNs. Regardless of app cloning in the Western world, WeChat will most likely continue to reign supreme if other platforms continue to be blocked by China’s firewall. Luckily, here in Macau we can choose from all of the platforms and with new features being added frequently we can truly master social media and stay connected here in Macau and around the globe. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Tourism
Macau sixth most visited city in world
T
he MSAR is the sixth most visited city in the world, according to the 2017 ranking created by market research company Euromonitor International. The research result also shows that the annual number of tourists had declined some 1.8 per cent from 2014 to 2015. This varies slightly from the local Statistics and Census Service (DSEC), which posted a 2.6 per cent year-on-year drop in tourism numbers in 2015, with 30.7 million tourists visiting the MSAR that year. Neighbouring SAR Hong Kong topped the list of most visited cities. Following Hong Kong are Bangkok,
London, Singapore and Paris, as the five most visited cities in the world. The research company points out that the large number of Chinese tourists
(which made up 68 per cent of sameday visitors and 65 per cent of overnight visitors in the MSAR in 2015) contributed primarily to the number of arrivals in both SARs. Euromonitor further explained that the Chinese authorities’ crackdown on corruption and illegal activities at gaming tables helped drive the 1.8 per cent decrease in arrival numbers. C.U.
Business
H&M goes online in Macau H&M includes Macau in its online market expansion in the year ahead Cecilia U cecilia.u@macaubusinessdaily.com
Swedish multinational fashion retailer H&M - Hennes & Mauritz AB - is to extend its e-commerce operations to Macau, the company has stated in its annual report. Other regions included in the expansion agenda are Turkey, Taiwan, Hong Kong, Singapore and Malaysia,
and will involve the company taking its online markets to a total of 41 regions. Aside from online expansion, H&M is planning to open approximately 430 new stores around the world, notes the group’s report. In the fourth quarter of the group’s 2016 financial year, September 1 to November 30, the two H&M shops in Macau aggregated sales of SEK41
million (MOP37.5 millionUS$4.7 million) notes the report, posting a decline of 16 per cent compared to the SEK49 million recorded for the same period in 2015. However, the performance for the entire 2016 fiscal year registered an increase of 87 per cent year-on-year of SEK166 million vis-à-vis the sales of SEK89 million recorded in 2015. Meanwhile, the company posted SEK233 billion in sales for the last fiscal year, up 7 per cent year-on-year. Profit earned in 2016, nonetheless, registered a decrease of 10.8 per cent year-on-year to SEK18.6 billion compared to SEK20.9 billion in 2015. In terms of regional sales performance, Germany outperformed the rest of the world, contributing SEK37.2 billion in 2016 through its 459 stores in the country. Sales in Mainland China, meanwhile - listed as the fifth-top market - hit SEK10.1 billion. The company stated that the strong U.S. dollar had made its purchases more expensive, which produced a ‘negative impact on its profit development for the full year.’ “The year was characterised by the shift in the industry towards an ever-growing online market and by digitalisation,” stated Karl-Johan Persson, Chief Executive Officer of the fashion retailer.
Markets
All in the brand Coach’s last quarter results for 2016 saw sales in Macau and Hong Kong drive up the company’s earnings in Asia Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Coach, Inc., the New York-based design house of luxury accessories and lifestyle brands, has noted a ‘a significant improvement in the quarter from previous trends’ in the group’s sales in Macau and Hong Kong regarding Coach Brand, one of the brands under the design house’s wing, according to a filing by the group with the Hong Kong Stock Exchange. Overall, the company reported double digit earnings growth during the final quarter of 2016, enhanced by positive comparable store sales in North America, overall gross margin expansion, and continuous expansion of business in international markets, notably in Europe and in Mainland China, notes the filing.
Results
Net sales of the company totalled US$1.32 billion (MOP9.5 billion) for
the second fiscal quarter of 2016, a 4 per cent increase year-on-year, with gross profit earnings of US$906 million (MOP7.2 billion), up 5 per cent compared to the same period in 2015. Operating income for the same reported period totalled US$277 million (MOP2.2 billion), representing an increase of 6 per cent year-on-year. Selling, General and Administrative
Expenses (SG&A) also increased by 5 per cent to US$629 million (MOP5 billion), representing 47.6 per cent of sales, as compared to 47 per cent in the same quarter of 2015. Net income for the quarter hit US$200 million (MOP1.6 billion). The Coach brand itself reported net sales of US$1.2 billion (MOP9.6 billion) for the second fiscal quarter, an increase of nearly 2 per cent, with gross profits of US$830 million (MOP6.6 billion), representing an increase of 4 per cent year-on-year. Total Coach brand sales in North America improved 2 per cent yearon-year to US$744 million (MOP5.9 billion), while international sales rose 3 per cent to US$448 million (MOP3.6 billion).
Business Daily Thursday, February 2 2017 7
Macau
Results
Gaming growth misses estimate with slow holiday start Lisa Pham
C
asino revenue in the MSAR increased in January, extending the industry’s recovery to a sixth consecutive month, while falling short of analysts’ estimates. Gross gaming revenue rose 3.1 per cent to MOP19.3 billion (US$2.4 billion), according to data from the local Gaming Inspection and Coordination Bureau (DICJ). That compares with the median estimate of an 8.5 per cent rise by eight analysts surveyed by Bloomberg and follows an 8 per cent increase in December. Casino stocks fell on the news, with Wynn Macau Ltd. dropping as much as 4.5 per cent and Sands China Ltd. losing as much as 2.8 per cent in Hong Kong trading. SJM Holdings Ltd. decreased 2.6 per cent and MGM China Holdings Ltd. slipped 2.4 per cent. The Bloomberg Intelligence index of Macau gaming shares dropped 2.6 per cent, paring this year’s gain to 1.5 per cent.
New challenges
The world’s biggest gaming hub is switching gears to woo tourists and casual gamblers with family-friendly resorts, including Wynn Macau’s US$4.4 billion Palace casino featuring a synchronized fountain show and Sands China’s US$2.9 billion Parisian with its Eiffel Tower replica. While a recovery has been gathering momentum, the new casinos have been drawing visitors at the expense of some older properties.
“Macau’s latest wave of new resorts poses the classic gambler’s risk-reward dilemma,” wrote Bloomberg Intelligence analysts Brian Egger and Margaret Huang in a note Monday. “Additions are key to Macau revenue recovery and long-term growth, yet entail challenges.” Those challenges include new resorts posing a cannibalization threat to other peninsula properties and margin pressure as a hotel surplus increases room rate cuts, according to the analysts.
than expected, the monthly gross gaming revenue estimate could fall short of our current expectation.” Still, there are signs high-stakes players are coming back to the tables in Macau. VIP gaming, measured by revenue from the baccarat card games favoured by high-stakes gamblers from China, rose 13 per cent in the last three months of 2016, marking a turnaround since the first quarter of 2014. Bloomberg
New kids on the block
Las Vegas Sands Corp. President Rob Goldstein said last week that its US$2.9 billion Parisian casino gained traffic and posted net revenue in its full quarter of operation while denting patronage at its Sands Cotai Central property. Betting volume from high-stakes players was softer than initially expected during the first few days of the Chinese New Year holiday, while the “luck factor has been unkind” to some casinos in January, said Macau-based analyst Grant Govertsen of Union Gaming Group. “The reality is that we’ll need to wait for the February results to get a better picture of current trends on the ground given Chinese New Year straddles both January and February,” he said Monday after the release. Gaming revenue in Macau might also have been hit slightly harder by seasonal factors. The average daily revenue at Macau’s casinos in the week ahead of Chinese New Year
Crime
What are you waiting for? As the probe into the activities surrounding Jack Lam’s Philippine casino closure, raid and detainment of over 1,300 illegal Chinese workers and subsequent corruption investigation, deepens, one of the former Philippines Immigration Bureau’s officers accused of extorting Macau businessman Jack Lam questioned why the country’s authorities hadn’t yet filed corruption charges against the gaming tycoon, as reported by CNN Philippines.
slowed more than had been anticipated, analysts led by Vitaly Umansky at Sanford C. Bernstein & Co. wrote in a note on Jan. 23. “The first two days of the Chinese New Year holiday are generally slower, especially in high end play, than the remainder of the week long holiday period,” the analysts led by Umansky wrote. “If the slow down leading into Chinese New Year over the next week is more pronounced
According to Justice Secretary Vitaliano Aguirre, the Philippines authorities have only filed an illegal gambling case via the Justice Department’s cybercrime division, relating to the undocumented workers at the illegal online gaming business set up at Lam’s casino-resort in Clark, Philippines, with no bribery charges yet filed. During a Senate hearing, former Immigration official Al Argosino continued to deny accusations made against him and fellow official Michael Robles of extorting 50 million pesos (MOP8 million/US$1 million) from Mr. Lam for the release of the 1,300-plus undocumented Chinese workers arrested last year at his Fontana Leisure Parks and Casino property in Clark on Luzon Island. Video evidence was also shown in the Senate audit of the two officials receiving 15 million pesos in paper bags from Mr. Lam’s alleged middlemen, Wally Sombero, at City of Dreams Manila. However, Argosino is sticking to his version that it was Lam who proffered a bribe to the two officials, with part of the money kept as evidence of the investigation made against the businessman. N.M.
Gaming
Shake hands Steve Wynn nominated finance chairman of the Republican National Committee Steve Wynn - Chairman and Chief Executive of local casino operator Wynn Macau Ltd. and U.S. based Wynn Resorts - has been appointed by United States President Donald Trump as the finance chairman of the Republican National Committee,
according to a release by the Republican Party institution. The recent appointment is the result of a growing collaboration between the gaming tycoon and President Trump after Mr. Wynn started the U.S. primaries supporting Republican candidate Marco Rubio. Following the elections Mr. Wynn was appointed vice-chair of President’s Trump inauguration ceremony committee, raising around US$100 million (MOP799.1 million) according to newspaper Las Vegas Review. The American gaming mogul also announced last week that its US$1.5 billion new Las Vegas integrated resort Paradise Park is to begin construction in 2017. N.M.
8 Business Daily Thursday, February 2 2017
Greater china In Brief Results
Insurance security fund exceeds RMB90 bln China’s Insurance Security Fund Co., Ltd said on Tuesday its fund had totalled RMB94.2 billion (US$13.7 billion) by the end of 2016, up 33.75 per cent year on year. The security fund for property insurance accounted for 64.69 per cent of the total, while the rest were for life insurance, the company said. In 2017, the company will put more efforts to guard against risks and ensure the safety of the fund asset against the backdrop of low interest rates, according to Ren Jianguo, president and also general manager of the company. Electricity
Power use expected to grow by 3 pct in 2017 China’s power use is expected to grow by 3 per cent in 2017 due to a slowing economy, the China Electricity Council has said. The growth marks a slow down from 2016, when the nation’s power consumption grew 5 per cent year on year to stand at 5.9 trillion kilowatt hours boosted by increased consumption from the service sector, the Council said in an annual report. Power consumption is used to measure economic activity, confirming the growth momentum and on-going restructuring of the world’s second largest economy. Supply
Beijing draws water from Yangtze Beijing has received more than 2 billion cubic meters of diverted water from the Yangtze River, benefiting 11 million residents, authorities have said. As of yesterday, the south-to-north water diversion project has pumped over 2 billion cubic meters of water into Beijing since it began operation in December 2014, according to the capital’s office for the diversion project. Water supply companies in Beijing have taken in 1.37 billion cubic meters of Yangtze water, or 68 per cent of the total received volume. In addition, 284 million cubic meters were stored in reservoirs, with the rest used for groundwater, rivers and lakes. Airline
Nepal airline adds new aircraft to fleet Himalaya Airlines, a ChinaNepal joint venture airline, has took delivery of its second brand new Airbus 320-214 into fleet. The aircraft, made in Germany with the registration number 9N-ALV, flew from Hamburg to Kathmandu on Tuesday and was welcomed by a ceremonial water cannon salute at Tribhuvan International Airport (TIA) after it landed at 11:04 a.m. local time. With the arrival of new aircraft, the company plans to add two destinations, Kuala Lumpur and Yangon, in its scheduled flights. Currently, the Airlines conduct scheduled flights operations to Doha and Colombo from Kathmandu since last year with its one aircraft.
PMI
Factory activity maintains expansion A breakdown of key PMI indexes reveals production and new order growth remained solid last month Norihiko Shirouzu and Elias Glenn
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hina’s manufacturing sector expanded for the sixth month in a row in January as the world’s second-largest economy continued to benefit from record bank lending and a construction boom. The improvement in the industrial sector could give the government more room to tackle high debt levels in many parts of the economy this year, though analysts are not sure if current growth levels can be sustained amid growing risks at home and abroad. U.S. President Donald Trump and a top economics adviser on Tuesday unleashed a barrage of criticism against China, Germany and Japan, saying the three key U.S. trading partners were engaged in devaluing their currencies to the harm of American companies and consumers. On the election campaign trail, Trump had threatened to slap heavy tariffs on U.S. imports of Chinese goods. A slowing property market could also dent China’s industrial activity this year, dampening demand for building materials from glass to steel. The official Purchasing Managers’ Index (PMI) released yesterday stood at 51.3 in January, dipping marginally from 51.4 in December but slightly better than economists had expected. The reading remained well above the 50 level which separates expansion from contraction on a monthly basis, indicating that China’s factories had carried solid momentum through from a rebound in the second half of 2016, which helped fuel a global manufacturing revival. “Today’s PMI readings suggest that China’s economy continued
to perform well last month,” Julian Evans-Pritchard, Singaporebased China economist for Capital Economics, said in a research note. “China’s recent recovery appears to remain largely intact for now.” Still, “the more important question is whether or not the current strength will be sustained. We doubt that it will be given how reliant the recent recovery has been on support from monetary and fiscal policy that is now being withdrawn,” Evans-Pritchard said.
Key Points China Jan factory activity expands for 6th month Output still robust but export orders still sluggish Rise of US protectionism, slowing property market key risks Growth in services sector accelerates A breakdown of key PMI indexes showed production and new order growth remained solid last month, though the pace of expansion eased for both from December. Production remained fairly robust, with the output index at 53.1 compared with 53.3 in December. However, export orders grew at only a marginally better pace, with the index edging up to 50.3. Even as Trump ramps up his criticism of China, it has lagged an export recovery which is being seen by some of its North Asian neighbours. South Korea on Wednesday reported its shipments rose in January for a third consecutive month and at the fastest pace in nearly five years. Persistent export weakness has forced Beijing to rely on higher
infrastructure spending to boost growth, which along with a housing frenzy has boosted demand for building materials. Rising commodity prices and stronger demand have in turn boosted profits for industrial firms, and helped revive inflation expectations worldwide. However, some analysts question whether the growth rate can be maintained once the impact of earlier stimulus measures begins to wear off and as the property market starts to cool, which is widely expected. Indeed, economists at ANZ noted that growth in construction services seems be faltering, though at 61.1 the index remained above last year’s average of around 60. The factory PMI figures were seasonally adjusted, but economists and investors are generally cautious about China data early in the year due to the timing of the long Lunar New Year holidays, when many factories and offices shut. If the economy remains on solid footing, China’s leaders are expected to turn their attention to containing financial risks this year, accepting slightly lower growth of around 6.5 per cent compared with 6.7 per cent in 2016. The central bank is also moving very gradually to a tightening policy bias, raising the prospect of higher borrowing cots later in the year. A separate reading on the services sector showed the pace of growth picked up in January from the previous month. The official non-manufacturing PMI stood at 54.6 in January, up from 54.5 in December, and well above the 50-point mark. The services sector accounted for over half of China’s economy last year and for the majority of growth, as rising wages give Chinese consumers the opportunity travel and eat out more. Policymakers are counting on growth in services to offset the stubborn weakness in exports that is dragging on the economy. Reuters
Business Daily Thursday, February 2 2017 9
Greater China Forex
Yuan’s gain surprises Trump, says incoming ambassador China’s central bank last month diluted the role of the dollar in a trade-weighted foreign exchange basket by adding a further 11 currencies Mario Parker
Donald Trump probably hasn’t followed through on campaign pledges to label China a currency manipulator because the yuan’s been stronger than he anticipated, the U.S. President’s pick as ambassador to China said Tuesday. “I think it’s been going the opposite direction than he thought it was going to be going,” Iowa Governor Terry Branstad said in an interview at an ethanol industry conference in Altoona, Iowa. “Obviously, there’s always going to be some issues with regard to currency. There’s a lot of issues there.” The yuan gained 0.9 per cent against the dollar in January, its steepest advance since March, after sinking 13 per cent in the three years through 2016. While Trump has criticized Asian policy makers for keeping their currencies weak to aid exports, Chinese authorities have been burning through foreign reserves to support the yuan amid an economic slowdown and capital outflows. Tensions between the world’s two largest economies have heightened in recent months. On the campaign trail last year, Trump blasted trade deals with China that generated U.S. deficits. After winning the presidential election, Trump abandoned almost four decades of diplomatic protocol on Dec. 2 by speaking directly with the leader of Taiwan, which Beijing
considers a province. In early January, China moved to slap tariffs on an ethanol byproduct that’s fed to animals, worth about US$2 billion to America’s agricultural sector.
“Hopefully we can find a way to do what’s good for America, but can also be a win-win situation that’s beneficial for China” Terry Branstad, U.S. state of Iowa Governor
‘Bunch of dummies’
China’s central bank last month diluted the role of the dollar in a trade-weighted foreign-exchange basket by adding a further 11 currencies. Officials have vowed to maintain stability against the basket as capital outflow pressures mount. The offshore yuan slipped 0.1 per cent to 6.8335 against the greenback in late afternoon trading in Hong Kong yesterday, with mainland markets closed for a week-long holiday.
China and Japan “play the money market,” Trump said Tuesday at a meeting with drugmakers. “We sit there like a bunch of dummies.” Branstad has a long-standing relationship with Chinese President Xi Jinping. They met in 1985 on Xi’s first trip to Iowa, when he was a young agricultural official from Hebei province, working as director of the Feed Association of Shijiazhuang Prefecture. Iowa is America’s biggest corn, soybean and biofuel producer. The Iowa governor said he sees himself as a “go-between” between Trump and Xi, and that he’s optimistic the two countries can find common ground on trade, including agricultural commodities.
Win-win situation
Trump’s “a strong leader and China’s got a strong leader, and I know them both very well,” Branstad said.
“Hopefully we can find a way to do what’s good for America, but can also be a win-win situation that’s beneficial for China.” Last week, Trump signed an executive order to withdraw the U.S. as a signatory to the Trans-Pacific Partnership accord with 11 other nations. Those types of pacts are likely to be replaced with bilateral trade agreements between America and other countries, according to Branstad. He declined to share further details, saying he’s been advised to not get into the minutiae of foreign policy until after he’s confirmed by the U.S. Senate. Separately, he said Trump’s actions toward Mexico are “the beginning of the negotiations” between the two countries on trade. He characterized the trade deficits that the U.S. has with both China and Mexico as “bad.” Bloomberg News
10 Business Daily Thursday, February 2 2017
Asia Trade
South Korean exports surge at fastest rate in nearly 5 years However, manufacturing activity contracted again Cynthia Kim
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outh Korean exports rose in January for a third consecutive month and at the fastest pace in nearly five years, preliminary data showed yesterday, handsomely beating expectations. The news will offer some hope for policymakers struggling with uncertainties ranging from U.S. President Donald Trump’s proposed trade policies to political risks at home. Yesterday’s news was not all good, however, with a survey showing South Korea’s manufacturing activity contracted for a sixth straight month in January on quickening declines in output and new orders. The Nikkei/Markit Purchasing Managers’ Index (PMI) for South Korea’s manufacturing sector fell to 49.0 in January from 49.4 in December. Production at South Korean manufacturers also declined for a sixth straight month due to unstable economic conditions and weak demand, prompting some companies to cut back further on staffing. Although January’s headline reading stayed below 50, it was not far from December’s reading which was the highest since July last year, mainly thanks to global demand for exports. (The 50-point mark separates contraction from expansion in manufacturing activity during a month.)
The sub-index on new export orders stood at 50.2 in January, slowing from 51.6 in December, while overall new orders from home and abroad contracted for an eighth straight month, albeit at a marginal pace. Shipments from South Korea leapt 11.2 per cent in January from a year earlier to US$40.33 billion, the biggest jump since a 20.4 per cent increase in February 2012, data from the Ministry of Trade, Industry and Energy showed. Imports rose at a faster 18.6 per cent to US$37.13 billion, resulting in a trade surplus of US$3.2 billion. The surplus for January was smaller than December’s US$6.8 billion because of robust growth in imports. Economists polled by Reuters had forecast South Korea’s exports to rise 8.7 per cent last month, while imports were seen rising 8.5 per cent. “With a rebound in international oil
prices, (South Korea’s)export prices have been rising,” Stephen Lee, an economist at Meritz Securities said after the data was released. “There is a need to see if exports volume also expanded accordingly, for incidence from chemical sectors, to see if overall (trade) growth is set to continue,” Lee said. Shipments to China and the European Union expanded by 13.5 per cent and 13.4 per cent each, while exports to the United States declined by 1.8 per cent year-on-year. Shipments of petroleum products and semiconductors surged 67.4 per cent and 41.6 per cent from a year ago respectively. Higher prices for memory chips and growing use of semiconductors in smartphones boosted export earnings. Samsung Electronics Co Ltd, the world’s biggest maker of smartphones
and memory chips, reported a 50 per cent jump in fourth quarter operating profit last month, thanks to record earnings in its chips business. Sh i p m e n t s o f s e m i c o n d u ctors reached a monthly record of US$6.41 billion, Chae Hee-bong, a trade ministry official, told a news conference. Factory output for December, released an hour before the trade data yesterday, showed production unexpectedly fell by a seasonally adjusted 0.5 per cent, short of the median forecast of a 0.3 per cent increase seen in the Reuters survey. November’s output reading was revised to a 3.6 per cent increase from a provisional 3.4 per cent jump reported earlier. Production of electronic components and transportation equipment fell 5.5 per cent and 6.2 per cent respectively from a month earlier, pulling down the overall index. Consumer sentiment has plunged to multi-year lows as the country grappled with a political scandal involving President Park Geun-hye, who was impeached by parliament in December. Wednesday’s data showed retail sales fell 1.2 per cent that month from November to mark the fastest drop since September 2016. A finance ministry official noted December’s fall in output followed an unusually steep jump in November when output rose at its fastest clip in more than seven years. Services sector output in December posted a mild increase, rising 0.3 per cent from a month earlier after a similar gain in November. From a year earlier, industrial output rose 4.3 per cent in December after a revised 5.3 per cent jump in November. The reading was above a 3 per cent rise forecast in the Reuters survey. Reuters
Currency
Japan’s policymakers reject Trump devaluation claims The yen has fallen 20 per cent against the dollar since 2013 Takashi Umekawa and Leika Kihara
Japanese policymakers hit back at U.S. President Donald Trump’s accusation of currency manipulation yesterday, stressing that Tokyo was abiding by a Group of 20 agreement to refrain from competitive currency devaluation. The dollar was on the defensive after Trump and trade adviser Peter Navarro criticised China, Germany and Japan, saying they were devaluing their currencies to the disadvantage of the United States. Senior Japanese government officials, worried about the pain a rise in the yen could inflict on Japan’s export-reliant economy, scrambled to contain damage as the dollar slid to a two-month low of 112.08 yen on Tuesday in the wake of Trump’s remarks. Japan’s top government spokesman told reporters it was “absolutely not the case” Tokyo was devaluing the yen to gain an unfair trade advantage. “Japan is guiding policy in line with agreements made by the G7 and G20 countries. There will be no change to
that stance,” said Chief Cabinet Secretary Yoshihide Suga, one of premier Shinzo Abe’s closest aides and the point-person on Japan’s economic policy. Japan would “seek to communicate closely” with the new U.S. administration on trade, economic and currency matters, Suga added. Masatsugu Asakawa, Japan’s top currency diplomat, also told reporters that exchange-rates are determined by markets and were not being manipulated. “As Bank of Japan Governor (Haruhiko) Kuroda has said repeatedly, Japan’s monetary policy aims to achieve the domestic purpose of ending deflation. It’s not aimed at currency rates,” Asakawa, vice finance minister for international affairs, told reporters. “If (Trump) is talking about currency intervention, Japan hasn’t done any lately,” he added.
Won’t bind BOJ?
Japan has not intervened directly in the currency market since November 2011. However, the weak yen has been considered as one of the few successes of Abe’s “Abenomics” stimulus policies aimed at pulling the economy out of two decades of deflation. As one of the three arrows of Abenomics, the BOJ adopted a massive
asset-buying programme in 2013 praised for boosting exporters’ profits and brightening business sentiment through a weak yen. The yen has fallen 20 per cent against the dollar since then, but is off its lows of around 125 yen to the dollar in 2015.
Key Points Japan abiding by G7, G20 agreements - Japan govt spokesman BOJ not targeting foreign exchange - top currency diplomat Japan govt sees no reason to be criticised by Trump Trump remarks won’t bind BOJ’s hands on policy - ex-BOJ’s Momma While the yen spiked mid-last year as investors bought it as a safe have against global risk events like Britain’s decision to leave the European Union, it slid versus the dollar again as U.S. bond yields rose on market expectations of Trump’s inflation-stoking policies. Finance Minister Taro Aso will explain Japan’s stance on currencies and monetary policy when he joins
Abe at next week’s meeting with Trump, a senior government source told Reuters. Japanese policymakers have argued that the BOJ’s ultra-easy monetary policy is solely aimed at beating deflation and did not go against a Group of 20 agreement to refrain from using monetary policy for currency devaluation. “There’s no reason for the U.S. to criticize our currency and monetary policies,” said a Japanese government official with knowledge of Japan’s currency policy. “As for currency intervention, everyone was saying it was hard to do even under (former U.S. president Barack) Obama’s administration, so I don’t know if that will be made even tougher under Trump.” Trump’s comments are unlikely to bind the BOJ’s hands on monetary policy, said Kazuo Momma, a former senior BOJ official, adding that central bank policymakers won’t ponder easing unless the yen spikes well above 100 to the dollar. “Trump’s comments could continue to create short-term market volatility, but the BOJ shouldn’t respond to each and every remark he makes,” Momma, who retains close contact with incumbent Japanese policymakers, told Reuters. Reuters
Business Daily Thursday, February 2 2017 11
Asia Real estate
In Brief
Australian home prices off to flying start in January Home prices posted yet another jump in January, starting the New Year on a high note for the sizzling markets of Sydney and Melbourne Property consultant CoreLogic said its index of home prices for the combined capital cities climbed 0.7 per cent in January, slowing from December’s 1.4 per cent gain, but faster than the readings for October and November. Annual growth in overall prices stood at 10.7 per cent, not far from 2015’s lofty peaks atop 11 per cent. The trend will be a worry for the Reserve Bank of Australia (RBA) which had been hoping the market would cool after regulators imposed tighter lending rules on banks. After cutting interest rates to a record low of 1.5 per cent last year, the central bank has appeared reluctant to ease further in part because it could encourage more borrowing by already heavily indebted households.
The CoreLogic data showed home prices in Sydney kept up their blistering run with a rise of 1 per cent in January from December. The annual pace of growth also spurted to 16 per cent, from 15.5 per cent. In contrast, Melbourne prices rose 0.8 per cent, from a sharp 3.1 per cent in December. Annual growth slowed to 11.8 per cent, from 13.7 per cent. Home values in Sydney have almost doubled since January 2009, while Melbourne’s have increased by 85 per cent. Price growth was more mixed elsewhere in December, with Hobart seeing an annual rise of 7.8 per cent and Brisbane 4.4 per cent, but Perth suffering a fall of 3.2 per cent. Growth outside the major cities was also modest at 2.8 per cent.
There has also been a divergence of growth between houses and apartments, with the latter expanding more slowly. Capital city house values rose an annual 11.1 per cent, compared to 8.0 per cent for units. The inexorable price rise in the major cities has taken homes out of the reach of most first-time buyers and has become a political hot potato.
‘Home values in Sydney have almost doubled since January 2009’ The conservative government of Malcolm Turnbull has blamed a lack of supply for the problem, while the opposition Labour Party has pointed the finger at favourable tax treatment for property investment. Reuters
Politics
New Zealand PM calls national election for September New Zealand’s next general election will be held on Sept. 23, Prime Minister Bill English said yesterday, outlining his hope of maintaining the current partnership of governing parties. “As we have done in previous election years I am announcing the election date early as I believe it’s important to provide the country with some certainty and that it’s in everyone’s best interest to have plenty of notice,” English said in a statement. His centre-right National Party currently holds 59 seats in the 121-seat parliament. Prices
Indonesian inflation rate picks up Indonesia’s annual inflation rate accelerated in January, mainly due to increases in the prices of processed food and drinks as well as cigarettes, the statistics bureau said yesterday. January’s annual headline rate was 3.49 per cent, the bureau said, higher than the 3.11 per cent expected in a Reuters poll and December’s 3.02 per cent. The consumer price index rose 0.97 per cent on a monthly basis. Core inflation, which strips out administered and volatile food prices, also picked up in January, to 3.35 per cent from 3.07 per cent the previous month. Green audit
Philippine minister says some mines need to be shut
Job market
New Zealand jobless rises, wage growth low Key to this moderation has been record levels of migration Charlotte Greenfield
New Zealand’s jobless rate jumped and wage growth stayed sluggish as more people flooded the workforce in the fourth quarter, suggesting interest rates can remain at record lows even as the economy hums along. Unemployment rose to 5.2 per cent, up from an eight-year low of 4.8 per cent the previous quarter, as participation grew to record levels, Statistics New Zealand said yesterday.
“It appears employment opportunities are not able to quite keep up with the increasing demand for jobs”
chief economist. “Hikes still look more likely to be a 2018 story.” Wage growth was very muted with 0.4 per cent quarterly growth and an annual rise of 1.6 per cent. That could weigh on the RBNZ’s inflation outlook. The consumer price index has only just made it back into the central bank’s target band of 1 to 3 per cent after undershooting for two years. Key to this moderation has been record levels of migration which has expanded the workforce faster than jobs could be created. As a result the
participation rate rose 0.4 percentage points to its highest-ever level of 70.5 per cent. Employment climbed 0.8 per cent as 19,000 jobs were added to the economy, largely driven by the booming tourism and construction sectors. “People are entering the labour force at a faster pace than the increase in population, and it appears employment opportunities are not able to quite keep up with the increasing demand for jobs,” said Kiwi Bank chief economist Zoe Wallis. The RBNZ’s next policy announcement is on Feb. 9 and it is considered certain to keep rates at 1.75 per cent given economic growth has been among the highest in the developed world. Reuters
Zoe Wallis, Kiwi Bank chief economist “The figures are certainly not weak - labour demand remains strong. But until clearer evidence of stronger wage growth emerges we doubt the RBNZ [Reserve Bank of New Zealand] will want to front-run a tightening cycle,” said Cameron Bagrie, ANZ
Reserve Bank of New Zealand headquarters
Some Philippine mines need to be shut given the environmental harm they have caused, the minister in charge of sector said yesterday, a day before the government announces the results of a months-long review of the country’s mineral producers. “We’ll be really, really strict,” Environment and Natural Resources Secretary Regina Lopez told radio station DZMM. “There’s some really that have to be closed,” Lopez said, without identifying which mines she meant in the review to be published today. “That’s what I see, because it’s too much, it’s extreme,” Lopez said on the destruction some mines have caused. Inflation
Thai consumer prices up Thailand’s January headline consumer prices in January rose on an annual basis at their fastest pace in more than two years, driven by higher food and retail oil prices, commerce ministry data showed yesterday. But the inflation rate remains relatively low, giving the Bank of Thailand leeway to keep monetary policy loose to support sluggish economic growth. The headline CPI index increased for a 10th straight month in January, up 1.55 per cent from a year earlier after December’s 1.13 per cent rise. A Reuters poll of 13 economists had forecast a 1.53 per cent increase in January.
12 Business Daily Thursday, February 2 2017
Asia In Brief Insurance
NZ businesses claim insurance after earthquake New Zealand businesses have made insurance claims of more than NZ$900 million (US$653.49 million) for losses from the earthquake that rocked the capital city of Wellington in November, the country’s insurance association said yesterday. The figure, which excludes residential claims, includes more than 2500 commercial material damage and business interruption claims, the Insurance Council of New Zealand said in a statement. It does not include claims made where assets have been insured directly with offshore insurers. New Zealand’s central bank has estimated that repairs in the aftermath of the Nov. 14 quake will cost up to NZ$8 billion. Monetary policy
S.Korea’s central bank board member warns against debt A board member of South Korea’s central bank warned yesterday the country’s financial stability could be at risk if financial debt continues to grow. Bank of Korea board member Lee Il-houng said monetary policy can spark financial instability, especially when it only results in financial borrowing and not an increase in income. “The increasing debt in South Korea after the last global financial crisis is, along with income imbalances, constraining our consumption,” Lee told reporters at the central bank. “In this situation, growing debt without resolving structural problems can threaten financial stability.” Fintech
Japan Exchange Group invests in UK startup Japan Exchange Group Inc (JPX), the operator of the Tokyo Stock Exchange, has taken a minority stake in UK-based fintech company OpenGamma Limited, as corporate investors account for a growing share of venture funding in fintech. OpenGamma, which provides software to help derivatives traders better calculate risk, said that the strategic investment will help it expand in the Japanese market. The companies did not disclose the size of the investment. The JPX funding round follows a US$13.3 million investment in OpenGamma in October by venture capital firm Accel Partners, Euclid Opportunities and ex-SunGard chief executive Cristóbal Conde. Strategy
Nintendo to release 2-3 mobile games per year Japan’s Nintendo Co Ltd yesterday said it plans to release two or three smartphone games every year in the hope of stabilizing earnings still highly dependent on its volatile games console business. “We believe we can build a stable profit structure by aggressively leveraging our intellectual properties,” such as the Super Mario Bros. characters, Nintendo President Tatsumi Kimishima said at an annual business strategy briefing. The remarks came a day after the games maker disappointed investors with a one-third cut to its full-year operating profit outlook, blaming fewer-than-expected downloads of console games and slower sales of “amiibo” character goods.
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Indian Finance Minister Arun Jaitley (C) holds his briefcase with Union Budget documents as he leaves the Ministry of Finance for the Parliament House to present the 2017-18 General Budget in New Delhi. Lusa Public spending
India budgets for recovery, and for the poor, after cash crunch The finance ministry forecasts that growth could dip to as low as 6.5 per cent in the current fiscal year to March Suvashree Choudhury and Swati Bhat
I
ndia is a “bright spot” in the world economy, Finance Minister Arun Jaitley said as he unveiled his annual budget yesterday, adding the impact on growth from the government’s cash crackdown would wear off soon. Delivering his fourth budget address to parliament, Jaitley vowed to spend more on rural areas, infrastructure and poverty alleviation in what he called a budget for the poor. Yet he also said the government would pursue prudent fiscal management to preserve India’s economic stability. “We are seen as an engine of global growth,” Jaitley said in his opening remarks. But he cautioned that the prospect of U.S. interest rate hikes, rising oil prices and signs that globalisation is in retreat could adversely affect India. Prime Minister Narendra Modi’s surprise decision last November to scrap high-value banknotes worth 86 per cent of India’s cash in circulation has hit consumer demand, disrupted supply chains and hurt capital investments. The worst of the cash crunch is now over, however, and Jaitley said he expected it would not have spillover into the fiscal year starting on April 1. A private manufacturing survey yesterday showed business was slowly returning to normal. Still, the finance ministry forecasts that growth could dip to as low as 6.5
per cent in the current fiscal year to March, before picking up slightly in the coming fiscal year to between 6.75 and 7.5 per cent. That is below the target rate of 8 per cent or more that Modi needs to create enough jobs for the 1 million young Indians who enter the workforce in India each year. Half the population in the nation of 1.3 billion is below the age of 25.
Key Points India a “bright spot” in world economy - finance minister To spend more on rural areas, infrastructure, poverty reduction Impact of cash crunch to wear off in 2017/18 - Jaitley Govt to pursue prudent fiscal management to preserve economic stability While opinions vary on how long the disruptions caused by Modi’s crackdown on untaxed and illicit wealth will last, there is near unanimity among economists that Asia’s third-largest economy needs a helping hand.
Deficit dilemma
Arvind Subramanian, Jaitley’s chief economic adviser, on Tuesday advocated slashing personal income tax and accelerating cuts in corporate tax rates. He cautioned, however, against
pursuing debt-fuelled fiscal expansion. Economists are pencilling in a federal fiscal deficit of 3.3 per cent of GDP for 2017/18. That would be higher than the 3 per cent pledged earlier but lower than 3.5 per cent that the government has budgeted for the year soon to end. The rollout of a nationwide Goods and Services tax (GST), expected in July after years of delays, could also weigh on economic growth. Countries that have introduced GST in the past have often faced a relative economic slowdown before the benefits of a unified tax regime feed through. Jaitley’s fiscal largesse will not only boost consumer spending, but may also shore up the fortunes of Modi’s nationalist party in five regional elections for which voting begins on Saturday. The electoral outcome, particularly in the battleground state of Uttar Pradesh that is home to one in every six Indians, would play a big part in determining whether Modi can win a second term in 2019. Busting the deficit target, however, would worry ratings agencies at a time when oil prices - India’s most costly import - are on an upswing. Standard & Poor’s has already warned that, at 68.5 per cent, India’s public debt-to-GDP ratio is still too high. A slowdown in fiscal consolidation would also limit the room for monetary easing. Investors are betting that the Reserve Bank of India would lower its policy rate by another 25 basis points (bps) as early as next Wednesday. The central bank has cut interest rates by 175 bps since January 2015 to 6.25 per cent. Reuters
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Business Daily Thursday, February 2 2017 13
Asia PMI
Japan’s final manufacturing data shows faster expansion Recent data have suggested that Japan’s sluggish economy may be slowly regaining traction Japanese manufacturing activity expanded in January at the fastest pace in almost three years as export orders surged, a private survey yesterday, suggesting that overseas demand has rebounded strongly. However, some economists may temper their optimism due to concerns that growing U.S. trade protectionism could threaten Japan’s export-focused economy. The final Markit/Nikkei Japan Final Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 52.7, slightly below a flash reading of 52.8 but still above the final reading of 52.4 in December.
gain in 12 months. The index for total new orders, which measures both domestic and external demand, was 54.0, versus a flash reading of 54.1 and a final 53.2 in December. The data confirmed that new orders grew at the fastest in 13 months. In a quarterly review of its forecasts, the Bank of Japan on Tuesday raised its growth estimates for the fiscal year beginning in April and the following
year, nodding to brightening prospects for exports. But the central bank left unchanged its already optimistic inflation forecasts for the coming years, despite external factors that push up prices, such as a rebound in oil prices and rising import bills from a weak yen. “Risks to both economic activity and prices are skewed to the downside,” it said. The PMI survey showed input prices accelerated to a 22-month high due to higher costs of raw materials stemming from weakness in the yen and higher fuel costs. But Japanese
firms were only able to pass on only modest increases in the prices of their goods. Some economists have expressed concern about Japan’s economic outlook because its exports could suffer if U.S. President Donald Trump adopts protectionist trade policies. Japan is hammering out plans to show U.S. President Donald Trump its firms are ready to create U.S. jobs, according to a document whose contents were revealed to Reuters, as Prime Minister Shinzo Abe prepares for a summit where automotive trade will be high on the agenda. Reuters
‘The PMI survey showed input prices accelerated to a 22-month high due to higher costs of raw materials’ The index remained above the 50 threshold that separates expansion from contraction for the fifth consecutive month, and showed that activity expanded at the fastest since March 2014. The index for new export orders was 53.1, just below a preliminary 53.2 but still indicating the fastest
Deputy finmin
South Korea may tolerate greater FX volatility The Korean won, which fell nearly 3 per cent against the dollar in 2016, has jumped 4.7 per cent on the greenback so far this year Christine Kim
South Korea should look to tolerate greater two-way moves in its won currency as volatility spikes in the wake of the election of U.S. President Donald Trump, shifting expectations around the outlook for U.S. monetary policy and the growing threat of U.S. protectionism, the country’s top currency official told Reuters. South Korea’s won and stocks have been caught in a tide of global markets volatility since Trump’s stunning victory in November, with the new U.S. administration’s policies raising uncertainty about world trade and economic growth. “In the past, 1 per cent moves were thought of as big but now I believe that kind of perception needs to change,” said Song In-chang, deputy
minister at the Ministry of Strategy and Finance. In an interview with Reuters yesterday, Song said Korean authorities may have to re-think their intervention strategy to take into account sharply wider average daily movements in the won since Trump’s win and the Federal Reserve’s interest rate hike in December last year. However, the government will continue to intervene in the currency market to smooth any extreme one-sided moves, he said. The deputy minister’s comments came as global markets were jolted by the spectre of currency wars after the Trump administration took aim at Germany, Japan and China, saying the three key U.S. trading partners were engaged in devaluing their currencies. South Korea, which exports heavily
to the American market and maintains a big trade surplus with the U.S., has been keeping a close eye on how Trump’s policies evolve as his new administration moves to becoming more protectionist and inward-looking. “We do not think that we will be added to the United States’ list of currency manipulators,” said Song, whose comments preceded the latest U.S. government stance on the currencies of its trading partners. Song said South Korea will try and avoid being dragged into a trade spat with the United States. “Now is not the time for us to criticise or blame the United States, but if there is unfairness we can exercise our basic rights and state our opinion
based on international rules,” he said. The Korean won, which fell nearly 3 per cent against the dollar in 2016, has jumped 4.7 per cent on the greenback so far this year, and was last fetching 1,153.23.
Political turmoil
Commenting on an influence-peddling scandal that has engulfed the presidency of Park Geun-hye, Song said it is unlikely to impact financial markets in the near-term. However, the scandal could exacerbate market turmoil sparked by other uncertainties over policy direction or other issues, he said. The Constitutional Court will make a decision soon on whether to uphold a parliament vote to impeach Park. “In the mid-to long term it could weaken the momentum of policies the government is trying to push,” said Song. Reuters
14 Business Daily Thursday, February 2 2017
International In Brief Angola
International reserves down 12 per cent Angola’s international reserves fell by about 12 per cent in 2016, the equivalent of € 2.65 billion because of the financial, economic and currency crisis, to the lowest level in at least six years. According to preliminary figures from the country’s central bank seen by Lusa, the Net International Reserves had fallen at the end of last year to €19.89 billion. At the end of 2015, these reserves, which are essential to import food, raw materials and machinery, stood at more than €22.54 billion. Mozambique
Foreign investors in gas projects ‘hold nerve’ The on-going financial and economic crisis in Mozambique is not likely to influence investment decisions by multinationals intent on exploiting the country’s natural resources, according to UK-based consultancy Business Monitor International (BMI), which is part of the Fitch group. In its latest ‘Oil and Gas in Mozambique’ report, which Lusa has seen, the consultancy’s experts argued that although public finances are under pressure, major multinationals are in a position to maintain their investment in the country. They cite the Final Investment Decision made late last year by the consortium led by Italy’s ENI for the Coral Sul project, in the Rovuma basin. Bonds
French borrowing costs rise on election risk The gap between French and Belgian government borrowing costs hit its widest since at least April 2008 yesterday, with French bonds under pressure from rising political risks before presidential elections in April and May. On Tuesday, France’s far-right National Front said it would put leaving the euro at the heart of its economic platform, while police searched conservative candidate Francois Fillon’s office in parliament as an inquiry into alleged fake work by his wife threatened his campaign. The presidential election is shaping up as a major risk event for markets. Think tank
UK’s 2017 growth outlook raised Britain’s economy now looks set to slow only slightly in 2017 after its resilient response to last year’s Brexit vote, but growth is still likely to be a lot weaker than if the country had decided to stay in the European Union, a think tank said. The National Institute of Economic and Social Research said on Wednesday its latest forecasts pointed to growth of 1.7 per cent this year. That would be only a moderate slowdown from 2.0 per cent in 2016 when Britain outgrew its big rich country peers around the world despite the Brexit shock.
Mood survey
U.S. consumer confidence eases off 15-year high Mortgage rates have risen above 4 percent, while wage growth remains moderate
U
.S. consumer confidence retreated from a 15-year high in January likely as some of the election euphoria fizzled, but households remained upbeat about the labour market, suggesting that the economy would continue to grow this year. Other data on Tuesday showed an acceleration in house prices in November, which should further boost household wealth and support consumer spending even as wage growth remains moderate. Consumer sentiment surged in the aftermath of Donald Trump’s election as president last November. The jump was in tandem with a stock market rally as both consumers and investors focused on Trump’s pledge to cut taxes and reduce regulations, policy proposals that have been viewed as pro-business and favourable for economic growth. The Conference Board said its consumer confidence index fell to 111.8 this month from a downwardly revised reading of 113.3 in December, which was still the highest since August 2001. The index was previously reported at 113.7 in December. While consumers’ assessment of
current business conditions improved sharply this month, they were less confident about the outlook. Some economists said consumers were likely opting for caution until the Trump administration offers more details on the fiscal stimulus, especially tax cuts.
Key Points Consumer confidence slips to 111.8 in January Wages increase 0.5 percent in fourth quarter House prices rise 5.3 percent in November from year ago The survey’s so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, rose to 5.9 percentage points from 3.3 points in December. This measure, which closely correlates to the unemployment rate in the Labour Department’s employment report, suggests that the jobless rate and labour market slack could decline further this year. Other data on Tuesday showed the
S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 5.3 percent in the 12 months to November after rising 5.1 percent in October. While the acceleration in house prices offers a boost to households, it could restrain home sales. Mortgage rates have risen above 4 percent, while wage growth remains moderate. In a third report, the Labour Department said wages increased 0.5 percent in the fourth quarter after a similar gain in the previous period. That slowed the year-on-year rate of increase to 2.3 percent from 2.4 percent in the year to September. While the quarterly data continues to show moderate wage growth even as the labour market tightens, anecdotal evidence points to an acceleration amid efforts by companies to retain and attract skilled workers. Minimum wage increases being implemented by some states are also boosting wage growth. The Fed’s latest Beige Book showed wages in some districts were being pushed up “a bit” by increases in the minimum wage and that most districts reported that wage pressures had increased. The Fed said information from many districts indicated that labour markets were expected to “continue to tighten in 2017, with wage pressures likely to rise.” Reuters
Telecoms
EU clears final hurdle for end of roaming charges Caps for making calls will decrease from 5 euro cents per minute to 3.2 euro cents per minute Julia Fioretti
The European Union clinched a preliminary deal early yesterday to cap wholesale charges telecom operators pay each other when their customers use their mobile phones abroad, paving the way for the abolition of roaming fees in June. The caps on wholesale roaming charges were the last piece of the puzzle needed for the abolition of retail roaming charges as of June 15, 2017, crowning a decade of efforts by Brussels to allow citizens to use their phones abroad without paying extra.
Key Points EU states, lawmakers agree wholesale mobile roaming caps Last piece of legislation needed for abolition of roaming fees Roaming fees to be abolished June 15, 2017 Wholesale charges for data - which were the most controversial given the exponential use of mobile internet - will be capped at 7.7 euros per gigabyte from June 2017, going down to 2.5 euros per gigabyte in 2022. Caps for making calls will decrease from 5 euro cents per minute to 3.2 euro cents per minute, while those for sending text messages will halve to 1 euro cent from 2 euro cents as of June, said a spokesman for Malta, which holds the rotating EU presidency and steered the talks on behalf of national governments. “Goodbye roaming,” tweeted Miapetra Kumpula-Natri, the EU
lawmaker who steered the law on behalf of the European parliament. The European Commission - the EU executive - will review the wholesale caps every two years and propose new ones if necessary. Yesterday’s deal still needs to be confirmed by the full European Parliament and member states. The battle against roaming charges took on an added significance after Britain voted to quit the bloc last year in a surge of anti-EU sentiment and Brussels has sought to show it works for ordinary citizens. “Today we deliver on our promise,”
said Andrus Ansip, European Commission vice president. But after the agreement to abolish retail roaming charges in June this year, policymakers grappled with the challenge of who would foot the bill as telecom operators still need to pay each other to keep their customers connected abroad. The quandary was compounded by wide differences in domestic prices and consumption patterns across the bloc, making a wholesale cap that suited all national markets extremely hard to find. Countries in northern and eastern Europe where consumers gobble up mobile data at low prices favoured lower wholesale caps to avoid companies raising prices in their home markets, effectively making poorer customers subsidise frequent travellers. However countries in the tourist-magnet south worried that their operators could be forced to hike domestic prices to recover the costs of accommodating the extra tourist traffic. Reuters
Business Daily Thursday, February 2 2017 15
Opinion Business Wires
The Phnom Penh Post An amendment to the tax code gives (Cambodian) government auditors clearer authority to access individual and corporate financial data, providing a tool to identify tax evasion and a deterrent to prevent it, tax professionals said yesterday. Article 99 of the 2017 Law on Financial Management, which went into effect on January 1, updated the language of a provision that allows the General Department of Taxation (GDT) to request financial data from various financial institutions during the audit process instead of relying on documentation submitted by the taxpayer.
The Bretton Woods (resort that hosted the meeting pictured) organizations, instituted after World War II to maintain stability, risk losing their influence
An unstable economic order?
T The Japan News Rakuten Inc. President Hiroshi Mikitani vowed on Monday to back Muslim workers at the major Japanese online shopping mall operator, while denouncing U.S. President Donald Trump’s immigration ban for passportholders from some Muslim-majority countries. “It is wrong as a human being” to “discriminate based on religion and nationality,” Mikitani wrote in English on Twitter. “We will support our Muslim staff members as a company and personally as well. “I am very sad to see what is happening now” in the United States, he also tweeted. “I really respect big American big heart,” he stressed.
Philstar The proposed tax reform package of the Department of Finance (DOF) will have a positive impact on the country’s economic growth, according to a senior official of the Bangko Sentral ng Pilipinas. BSP Deputy Governor Diwa Guinigundo expressed support for the DOF’s proposed Comprehensive Tax Reform Program. “The BSP supports very strongly the enactment of the DOF proposed tax measures,” Guinigundo said during a Senate hearing on the proposed tax reform program. Guinigundo said the implementation of the first package of the CTRP would contribute an additional 0.6 percentage point to the country’s GDP growth in 2017.
The Straits Times It’s time for the Government to consider “thawing” property cooling measures, according to consultancy JLL. The firm said in a report that one reason to reconsider the measures is the significant fall in property prices. Overall prices of private homes have fallen by about 11.2 per cent since the third quarter of 2013, it said, citing Urban Redevelopment Authority data. JLL said the luxury market has been most affected, with values declining by about 18 per cent from 2013, while those of mass market homes are down by 11 per cent.
he retreat of the advanced economies from the global economy – and, in the case of the United Kingdom, from regional trading arrangements – has received a lot of attention lately. At a time when the global economy’s underlying structures are under strain, this could have far-reaching consequences. Whether by choice or necessity, the vast majority of the world’s economies are part of a multilateral system that gives their counterparts in the advanced world – especially the United States and Europe – enormous privileges. Three stand out. First, because they issue the world’s main reserve currencies, the advanced economies get to exchange bits of paper that they printed for goods and services produced by others. Second, for most global investors, these economies’ bonds are a quasi-automatic component of portfolio allocations, so their governments’ budget deficits are financed in part by other countries’ savings. The advanced economies’ final key advantage is voting power and representation. They command either veto power or a blocking minority in the Bretton Woods institutions (the International Monetary Fund and the World Bank), which gives them a disproportionate influence on the rules and practices that govern the international economic and monetary system. And, given their historical dominance of these organizations, their nationals are de facto assured the top positions. These privileges don’t come for free – at least they shouldn’t. In exchange, the advanced economies are supposed to fulfil certain responsibilities that help ensure the system’s functioning and stability. But recent developments have cast doubts on whether the advanced economies are able to hold up their end of this bargain. Perhaps the most obvious example is the 2008 global financial crisis. The result of excessive risk-taking and lax regulation in the advanced economies, the financial system’s near-meltdown disrupted global trade, threw millions into unemployment, and almost tipped the world into a multi-year depression. But there have been other lapses, too. For example, political obstacles to comprehensive economic policymaking in many advanced economies have undermined the implementation of structural reforms and responsive fiscal policies in recent years, holding back business investment, undermining productivity growth, worsening inequality, and threatening future potential growth. Such economic lapses have contributed to the emergence of anti-establishment political movements that are looking to change – or are already changing – long-established crossborder trade relations, including those within the European Union and the North American Free Trade Agreement (NAFTA). Meanwhile, a prolonged and excessive reliance on monetary policy, including direct central-bank involvement in market activities, has distorted asset prices and contributed to resource misallocation. And the advanced economies – particularly Europe – have shown little appetite for reforming out-dated elements of governance and representation at the international financial institutions, despite major changes in the global economy.
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Mohamed A. El-Erian Chief Economic Adviser at Allianz, was Chairman of US President Barack Obama’s Global Development Council
The result of all this is a multilateral system that is less effective, less collaborative, less trusted, and more vulnerable to ad hoc tinkering. Against this background, it should not be surprising that globalization and regionalization no longer command the degree of support they once did – or that some rising political movements on both sides of the Atlantic are condemning both concepts to win more support for their own causes. It is not yet clear whether this is a temporary and reversible phenomenon or the beginning of a protracted challenge to the functioning of the global economy. What is clear is that it is affecting two important relationships. The first is the relationship between small and large economies. For a long time, small, wellmanaged, and open economies were the leading beneficiaries of the Bretton Woods system and, more generally, of multilateralism. Their size not only made them crave access to outside markets; it also made other market actors more willing to integrate them into regional pacts, owing to their limited displacement potential. Membership in effective international institutions brought these countries into consequential global policy discussions, while their own capabilities allowed them to exploit opportunities in cross-border production and consumption chains. But, at a time of surging nationalism, these small and open economies, however well managed, are likely to suffer. Th eir tradin g relationships are less stable; the trade pacts on which they depend are vulnerable; and their participation in global policy discussions is less assured. The second relationship is that between the Bretton Woods institutions and parallel institutional arrangements. For example, while they pale in significance to, say, the World Bank, China-led institutions have proved appealing to a growing number of countries; most US allies have joined the Asian Infrastructure Investment Bank, despite American opposition. Similarly, bilateral payment agreements – which, not long ago, most countries would have opposed via the IMF, owing to their inconsistency with multilateralism – are proliferating. The concern is that these alternative approaches could undermine, rather than reinforce, a predictable and beneficial rules-based system of crossborder interactions. The Bretton Woods organizations, instituted after World War II to maintain stability, risk losing their influence, and the countries with the clout to bolster them seem unwilling at this stage to press ahead boldly with the needed reforms. If these tendencies continue, developing countries will probably suffer the most; but they won’t be alone. In the short term, the world economy would face slower economic growth and the risk of greater financial instability. In the longer term, it would confront the threat of systemic fragmentation and proliferating trade wars. Project Syndicate
It is not yet clear whether this is a temporary and reversible phenomenon or the beginning of a protracted challenge to the functioning of the global economy
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16 Business Daily Thursday, February 2 2017
Closing S.K. election
Ex-UN chief drops in presidential bid
Former UN chief Ban Ki-moon’s (pictured) unexpected renunciation of his presidential bid in South Korea may benefit Prime Minister Hwang Kyo-ahn, who is serving as acting president following the impeachment of President Park Geun-hye. In the absence of any proper candidate from the ruling Saenuri Party, Ban has long been viewed as the best hope among conservative voters in an early presidential election, which is widely forecast to be held in April or May.
Ban, however, held an unscheduled press conference in the parliament yesterday, saying he will give up his pure will to lead his home country’s political change as his intention was distorted by media reports and slanders. Ban’s drop on his run for presidency embarrassed the political sphere as the newcomer showed no signs and did normal activities until right before the emergency press briefing. He met with key politicians earlier in the day and discussed political affairs. Xinhua
Religion
‘Rent-a-monk’ biz thrives as Japan loses temple ties A firm has a roster of about 700 monks nationwide with business on track to grow by 20 per cent this year Natsuko Fukue
I
n a quiet room thick with the smell of incense, Buddhist monk Kaichi Watanabe chants sutras to commemorate the one-year anniversary of a woman’s death. The 41-year-old may look like a traditional holy man in Japan -- but he wasn’t dispatched by a temple. Instead, the family ordered him through a fast-growing renta-monk business that has angered traditionalists who warn it is commercialising the religion. Watanabe’s employer, Tokyobased firm Minrevi, said demand for its monk delivery service has spiked since it started in May 2013, as more and more Japanese lose their ties to local temples -- and lose faith in an opaque donation system. The monk later rings a small traditional bell and bows to relatives as the 30-minute ceremony winds down at the grieving family’s home near Tokyo. “There are many temples in the neighbourhood, but I didn’t know where to call,” said the deceased woman’s middle-aged son, who asked not to be named. “Also, I have no idea how much I should donate. But this has a clear pricing system.” At the click of a mouse, customers can hire a monk from Minrevi from 35,000 yen (US$300) depending on the ceremony. Retailing giant Aeon sent shockwaves through Buddhist circles
in 2010 when it started a service that had a price list for introducing customers to temples for funeral services. The open pricing flew in the face of longstanding system in which monks collect donations, known as ofuse, in return for performing ceremonies. But there has been growing unease about the murky system which leaves the amount up to families, who have to make several more donations after a funeral for more than a decade.
‘Commodified donations’
Japan’s Buddhist temples count on donations to do renovations, which can cost several million dollars, but there has been criticism that they’re more interested in raising revenue than offering spiritual guidance.
Chiko Iwagami, an executive member of the Japan Buddhist Federation, acknowledged that some monks have improperly demanded specific amounts of money at memorial services, hurting public trust. “ That i g n o r es th e s p i ri t o f donations,” Iwagumi said, noting that monks are not supposed to expect financial rewards for performing their duties. Aeon’s fledgling operation outraged the federation, which demanded it take down the price list. The company complied but still runs its service. Earlier this year, the federation also blasted online retailer Amazon for listing Minrevi’s monk-renting service. “They have commodified donations. This is extremely unfortunate,” Iwagami said. But Minrevi’s vice-president Masashi Akita brushed off the criticism, saying the company is
As the population rapidly ages and small rural communities shrink, some 30 per cent of Japan’s 75,000 Buddhist temples are at risk of closing by 2040
just offering a “platform” to connect customers with monks. The firm has a roster of about 700 monks nationwide with business on track to grow by 20 per cent this year, he added. Akita, who grew up in rural community where his neighbours regularly visited a temple, said the business is just a sign of the times. “I was shocked when I first learned that some people didn’t know how to contact a monk,” he said. “So I wanted to be that bridge.”
Community ties
The Japanese government does not keep track of the religious identification of citizens, but participation in rituals related to both Buddhism as well as native Shintoism -- the two major religions in the country -- is common across the nation. Some firms also offer Shinto priests’ services. But attachment to religion has fallen into decline. As the population rapidly ages and small rural communities shrink, some 30 per cent of Japan’s 75,000 Buddhist temples are at risk of closing by 2040, said Kenji Ishii, a professor of religion at Kokugakuin University in Tokyo. “Japanese have maintained ties with temples because of funerals and other types of community-related events, not for religious reasons,” he added. “Buddhist leaders now have to think how they’re going to run their sects with shrinking revenues. But it seems like they don’t want to look at the reality.” Watanabe, who conducted the service near Tokyo, doesn’t see a clash between the business and spiritual aspects of his job. “I want to spread the teachings of Buddhism,” he said. “This service gives us more opportunity to visit homes. I think it’s meaningless if we cannot be there to help.” AFP
Legislation
Innovation
Prices
India mulls law to seize assets of financial crooks
Singapore cuts filing fees for intellectual property protection
Euro-area manufacturing picks up
India is considering new measures to seize the assets of “big time offenders” who flee abroad, the finance minister said yesterday, after tycoon Vijay Mallya left for Britain last year owing over US$1 billion. Arun Jaitley flagged a proposal to confiscate the domestic holdings of criminals and financial offenders who have escaped the jurisdiction of Indian authorities. “In the recent past there have been instances of big time offenders -- including economic offenders -- fleeing the country to escape the reach of the law. We have to ensure the law is allowed to take its course,” he told parliament. “The law will have constitutional safeguards and the assets in India would stand confiscated until the person submits himself or herself to the law.” Jaitley did not expand on the proposal or refer to specific cases. Mallya has refused to return home from exile in England despite repeated efforts by India’s financial crimes agency to question him. An Indian court in January ordered a consortium of banks to start the process of recovering roughly US$1 billion in loans from Mallya, known for his flamboyant lifestyle. AFP
Singapore lowers filing fees for intellectual property protection, said the Intellectual Property Office of Singapore (IPOS) in a statement yesterday. The promulgation, which will take effect from April 1, aims to drive innovation in Singapore and allows businesses and entrepreneurs to enjoy substantial cost savings when they file for patent and trade mark protection with the IPOS. IPOS said brand owners applying for trade marks using a pre-approved list of goods and services will be able to enjoy a substantial 30 percent discount. Patent owners who are willing to offer their patents for licensing will also continue to enjoy a 50 percent discount in patent renewal fees, according to the statement. Chief Executive of IPOS Daren Tang said that the fee revisions make it easier and cheaper for companies to protect their brands and technology. “We hope that more of our creative enterprises and inventors will be encouraged by these changes to have a strong foundation for taking their ideas to the world,” Tang added. Xinhua
Euro-area manufacturing expanded at the strongest pace in nearly six years, with firm order growth signalling a build-up of underlying price pressures. A Purchasing Managers’ Index climbed to 55.2 in January, IHS Markit said yesterday. The reading compares with a flash estimate of 55.1 and is up from 54.9 in December. A weaker euro and more expensive global commodities raised companies’ input costs, while high demand drove price growth to the fastest pace in five-and-a-half years. With “signs of demand running ahead of supply,” there are hints of a “tentative build-up of core inflationary pressures,” said Chris Williamson, chief business economist at IHS Markit. “If current growth of manufacturing activity and the associated rise in prices is sustained, rhetoric at the ECB is likely to become more hawkish.” The report follows data on Tuesday showing euro-area inflation accelerated to 1.8 percent last month, effectively reaching a level the European Central Bank defines as price stability. The pickup is unlikely to assuage concerns expressed by ECB President Mario Draghi that underlying cost pressures remain weak amid downside economic risks in a politically tumultuous year. Bloomberg News