Business Daily #1230 February 9, 2017

Over half of Asia Pacific ad revenue earmarked for digital by 2019 Advertising Page 6

Thursday, February 9 2017 Year V Nr. 1230 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Elections

Legislative Assembly election budget could increase by 20 pct Page 2

Land

Gov’t to determine number of public land plots for auction this year Page 6

www.macaubusinessdaily.com

Protectionism

Goldman Sachs expert analyses possible outcome of U.S.-Sino trade war Page 8

Diplomatic meeting

Beijing invites UK Prime Minister to ‘One Belt, One Road’ summit Page 8

Jamboree Over For Junket

Diversification

Major local junket operator Iao Kun is relinquishing plans to ‘rebuild’ its VIP stable in the MSAR. The new focus: a Chinese tech company developing an agricultural-focused B2C platform.

The group won’t abandon its remaining two VIP rooms operating but ‘no further plans to expand’ are on the cards. Page 7

Exhausted

Coutinho calls for Secretary to step down Another slow march attempt. A failed meeting between protestors of increased transport fines and Secretary Rosário caught in the crossfires.

Legislator Coutinho called for the Secretary to resign, alluding to collusion between the government, entrepreneurs, and the MSAR’s most influential families.

Transportation New vehicle registration plunged in 2016.

Tax rate hikes saw registration fall nearly 30 pct y-o-y, to just under 14,000 vehicles. Light automobiles posted a 39 pct drop, while motorcycles fell 24 pct y-o-y. Regardless, the number of licensed motor vehicles hit a quarter of a million. Page 5

Temporary spike

Protest Page 6

HK Hang Seng Index February 8, 2017

23,485.13 +153.56 (+0.66%) Worst Performers

China Resources Land Ltd

+6.96%

Cathay Pacific Airways Ltd

+3.16%

Galaxy Entertainment Group

-1.73%

Hang Seng Bank Ltd

-0.62%

China Overseas Land &

+5.24%

Lenovo Group Ltd

+2.59%

Sands China Ltd

-1.56%

China Shenhua Energy Co

-0.37%

Kunlun Energy Co Ltd

+4.79%

CITIC Ltd

+2.28%

CNOOC Ltd

-1.24%

Cheung Kong Infrastructure

-0.31%

Hong Kong Exchanges &

+4.71%

Bank of China Ltd

+2.25%

Belle International Holdings

-0.98%

CK Hutchison Holdings Ltd

-0.27%

BOC Hong Kong Holdings

+3.43%

Link REIT

+2.07%

Tencent Holdings Ltd

-0.68%

PetroChina Co Ltd

-0.17%

10° 17° 12° 16° 12° 16° 14° 17° 15° 19° Today

Source: Bloomberg

Best Performers

Fri

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Prices Inflation in Asia is cooling. Following better than expected results in recent days. A year-end quarter marked by a strong dollar and a flat oil market could have helped spike the numbers. Page 11

2 Business Daily Thursday, February 9 2017

Macau Elections

Totting up democracy Electoral committee believes the budget for 2017 Legislative Elections could increase by as much as MOP56.4 million as number of registered voters grows by 30,000 from previous elections

We’re on it

Nelson Moura nelson.moura@macaubusinessdaily.com

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he budget for the 2017 L e g i s l at i v e As s e m b l y elections could increase by 20 per cent from the last elections, according to the chairman of the new Electoral Commission and judge of the Court of Second Instance Tong Hio Fong.

In statements made following the first Electoral Commission meeting of the year, it was revealed that this year’s elections budget could grow to MOP56.4 million (US$7 million) from the MOP47 million budget of the 2013 Macau legislative elections budget.

According to Mr. Tong, the budget increase could be necessary as the “number of registered voters has increased by 30,000” - making it necessary to increase the number of voting stations and personnel.

As at the end of December 2016, some 307,020 voters were registered in the MSAR - almost half of the city’s total population and a 10.7 per cent increase from the 277,153 voters registered for the last legislative elections, according to data published

by the Public Administration and Civil Service Bureau (SAFP).

The number of voting stations could then increase from 33 in the last elections to 36, plus two backup voting sites in case issues such as “bad weather and floods” affect the operations during election day, said the Commission chairman.

The increase of technical resources and advertising campaigns for the elections were also debated in the meeting and cited as reasons for possible budget growth.

“We plan to do advertising campaigns through online platforms in order to encourage more voters to attend the elections with different activities such as online games,” stated the Commission chairman.

However, the possible budget increase was said to only be in the discussion phase, with Mr. Tong

Property

Ung Choi Kun: Home prices unlikely to drop President of the Association of Property Agents and Realty Developers of Macau Ung Choi Kun expects the city’s home prices are unlikely to fall this year, while urging the government to update its current taxation measures on real estate transactions.

Speaking to reporters on the sidelines of the Association’s Chinese New Year celebrations event, the businessman and former legislator predicts demand will overshadow supply, with the lack of land, increased costs and other political factors driving the home market up this year.

On the other hand, the Association head urges the government to review whether it is necessary to update the city’s current Special Stamp Duty and

also passing the decision to the CE, who, according to the Electoral Law, has to provide a date up to 180 days before the elections.

its loan-to-value ratio, perceiving that the government could loosen the ratio and offer other tax benefits for self-use buyers and first time homebuyers in the city.

In October 2012, the government expanded the special stamp duty on the re-sale of homes to include offices, shops and car parking spaces but not industrial spaces. The special stamp duty is a levy of 20 per cent on the sale of a property if it is sold within a year of being purchased, or 10 per cent if it is sold between one and two years of being purchased.

Mr. Ung also suggests the government review the city’s regulations on affordable housing in order to prevent public housing units being transacted on the private market.

saying that the final decision lay with Chief Executive (CE) Fernando Chui Sai On. Yesterday’s meeting still didn’t provide an exact date for the election day - in September or October of this year - with the Commission chairman

Trade

With regard to the changes made to the new electoral law the Commission representative said that during the first meeting details concerning the mandatory deposit for prospective candidates was debated.

One of the amendments to the city’s current electoral law that passed its final reading in the legislature in December stated that candidates will have to pay a guarantee deposit of MOP25,000 with the amount being retained by the government if the candidate does not get a certain number of votes.

Mr. Tong said the deposit would have to be provided “through bank transfer or cheque” but that the government would not “just receive the money” only, keeping the deposit if the candidate failed to fulfill the new electoral law requirements.

The committee representative also said the Commission would meet “once a week” to discuss and clarify electoral law amendments, which include contentious measures such as requiring candidates to pledge loyalty to the MSAR and its Basic Law.

Frozen food products market could be moved to new wholesale market in Ilha Verde

Poultry cull prompts rethink The government is rushing to replace live poultry trade with frozen meat business due to Bird Flu outbreaks The government will ‘accelerate proceedings’ to start replacing the sale of live poultry for frozen poultry according to statements by the Secretary for Administration and Justice Sonia Chan Hoi Fan following a permanent sub-committee meeting.

With a previous public opinion consultation on the issue revealing that residents were mostly against the removal of live poultry from sales points, Ms. Chan commented that the ‘gastronomical habits of residents’ and the ‘restructuring of the live poultry trade sector’ would be considered before a decision was made.

No specific date for the replacement was established, with the Secretary saying the decision was brought up for consideration after several cases of Bird Flu-infected poultry were discovered in the city’s markets in recent weeks, with the Civic and Municipal Affairs Bureau (IACM) proceeding with prevention measures and culling.

Live poultry trade was suspended for three days at the end of January after an H7 strain of Bird Flu was detected, leading to the culling of 28,000 poultry.

Secretary Chan said communication would continue with the supply sector and with authorities in Mainland China to better reform the industry and health security measures for importing live poultry.

These measures include IACM taking members of the Advisory Council of Community Services to frozen meat supplying companies in Mainland China, in order to research methods used for food product conservation and assess the quality of products sent to the MSAR.

Changing venue

The Secretary also said that the new frozen products market could be transferred in the second half of the year to the wholesale market to be developed next to the Zhuhai-Macau border in Ilha Verde.

The new wholesale market is expected to start operations within the second quarter of this year; Secretary Chan announced that professionals from the trade sector were already shown the compound and that frozen products were expected to be moved to the location ‘as soon as possible.’ N.M.

Business Daily Thursday, February 9 2017 3

Macau

Trial

Free world trips Witness testifies that as long as the proposals were verified and approved by the directors and the head of the Prosecutor’s Office, payment was generally made unchallenged Cecilia U cecilia.u@macaubusinessdaily.com

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s the corruption case against the former Prosecutor-general of the Public Prosecutor’s Office, Ho Chio Meng, continued yesterday the current Director of the Personnel and Finance Department took the witness stand, stating that with regard to expenses submitted to the department by the former official, she would not normally question or verify their contents as they would later be verified by the Integrated Management Team (IMT).

Director Lei pointed out that the then-director of the IMT, surnamed Chan, upon being queried by Lei about the expenses, had reassured Lei that the expenses were in line with expectations.

The prosecutor of the case produced a receipt listing the expenses of Ho’s trip to Europe, which also included the name of Ho’s wife and his nephew, asking Lei if she was aware of the receipt.

The witness answered that she had never seen it, adding that she did not know Ho was planning to have his family members accompany him on the trip.

She also revealed that in most similar cases an official invitation would be attached with the proposal that she made for the expense claims, but that there was no such document for the 2005 trip.

Lei said that the IMT almost never sent related receipts to her department, saying that usually a stamp would be printed on the document by the team once expenses were verified.

Smoking law

Tips for smokers On average, 708 daily inspections were conducted in January, but only 44 in casinos The MSAR Government logged 601 smoking violations during 25,648 inspections conducted at commercial establishments and public places during the month of January, according to the Health Services Bureau (SSM).

A total of 597 cases were registered of people smoking in prohibited zones, while four cases involved label infringements on tobacco goods. The large majority of offenders were men, totalling 556 cases or 93.1 per cent.

Some 354 Macau residents (59.3 per cent of the total), 209 tourists (35 per cent), and 34 non-resident workers (5.7 per cent) were fined. In 20 cases, the Public Security Police Force (CPSP) was called to intervene.

The highest number of infractions was registered in parks, gardens, and

resting areas, at 119 cases, followed by cybercafés, at 88 cases, and shops and malls, with 67 cases.

The Health Services Bureau and the Gaming Inspection and Co-ordination Bureau (DICJ) conducted 44 inspections in casinos during the first month of the year. As a result, 31 people were caught violating the smoking ban, of whom 29 (93,5 per cent) were men. Some 24 of the individuals fined during the operations were tourists.

Since the enactment of the Law on Smoking Prevention and Control on 1 January 2012, inspectors conducted more than 1.31 million controlling actions, registering 35,549 cases of people smoking in forbidden areas.

S.Z.

In 2005, the former top official attended an annual meeting held by the International Prosecution Association (IAP) in Copenhagen, Denmark, allegedly accompanied by his wife and his nephew at the expense of the Prosecutor’s Office’s (MP) coffers, and including leisure travel.

Ho claimed that the documents shown during yesterday’s hearing were incomplete, claiming that the registration fee for the IAP meeting is in many cases paid separately, and can be paid upon arrival at the meeting.

Dubai for barbeque and museum tour

During the hearing, the prosecutor also showed an electronic receipt of expenses for a trip to Dubai in 2009, with two first class flight tickets as well as expenses for activities such as a barbeque and museum tour.

The ex-Prosecutor general is accused of using public coffers to pay for the ‘business’ trip to Dubai of a former

consultant to the Prosecutor’s Office.

Director Lei was then asked the reason for approving the aforementioned expenses, to which she replied that the former Director had confirmed the expense, stressing that the Personnel and Finance Department is only responsible for managing expenses.

However, the presiding judge of the case, Lai Kin Hong, pointed out the apparent issue of two first class flight tickets, indicating that the law only permits high officials to enjoy the privilege of one first class seat.

Judge Lai criticised Lei’s ignorance on the issue and accused her of dereliction of duty.

Meanwhile, Prosecutor Kuok Un Man enquired as to whether Director Lei could confirm whether the former consultant to the MP’s office was an official staffer of the MP during 2009, to which Lei assured that she was not yet a staff member at that time.

The bribery trial resumes tomorrow.

4 Business Daily Thursday, February 9 2017

Macau Opinion

Ashley Sutherland-Winch* Is Macau Vulnerable?

The United States’ recent immigration changes are causing discomfort worldwide. Have President Trump’s new executive orders on immigration and increased military pressure on the Islamic State in Syria and Iraq made Macau ultimately more vulnerable to a terrorist attack?

Last October, Jeremy Douglas, the representative for the United Nations Office on Drugs and Crime (UNODC) in Southeast Asia and the Pacific, told South China Morning Post’s ‘This Week in Asia’ that the threat posed by foreign terrorist fighter returnees was “real and imminent . . .

Increasing military pressure on Islamic State in Syria and Iraq is now expected to result in more returnees including many that will want to pursue violent jihad in the region.”

The UNODC estimates there are 516 Indonesians, 100 Filipinos, 100 Malaysians and two Singaporeans fighting in Syria and Iraq.

“Macau’s gaming sector offers a “nexus of Chinese, American and Jewish interests” that a terror group would find particularly appealing. Las Vegas Sands tycoon Sheldon Adelson and Wynn Resorts chairman Steve Wynn – two big players in Macau – are both Jewish,” Hong Kong-based risk consultancy firm, Steve Vickers and Associates stated in their 2016 Annual Asia Risk Assessment.

Vickers reiterated his concerns about Macau in his latest risk analysis report for 2017: “An understated threat is terrorism. Macau represents a unique agglomeration of Chinese, American and Jewish interests, engaged alongside triad societies [Chinese organised crime groups] in an activity [gambling] that Islamists deem sinful. Worse, the city is vulnerable.”

After reviewing Mainland China and other regional terror threats, Vicker’s report concluded that Macau will enjoy ‘relative political stability and a reviving economy’ in 2017, even if the slim chance of a terrorist attack on casinos persists.

No city, country or region is truly safe from terror today.

Regardless of geography or politics, if extremist organisations choose to target a specific city its people must rely on their cities’ efforts to maintain security and minimise risk. Last year’s attacks on Paris, Belgium and multiple cities in the United States only reiterated that we must all be grateful for the perceived safety that the region of Macau affords us, while never forgetting that safety is relative and can disappear in an instant.

We are an international gaming and cultural destination and we rely upon tourism for much of our financial success, thus terror threats go with the territory. Here in Macau, we must stay positive and hope that risk is being analysed and threats are being thwarted.

We must never forget; however, that anything can happen at any moment and that every city is vulnerable.

*Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Protest

Unruly ruling coalition The slow march against increased traffic fees is to be repeated. But local associations are less understanding, requesting the DSSOPT Secretary step down as their first demand Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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t a Macau Civil Servants Association (ATFPM) meeting yesterday, legislator José Perreira Coutinho called for the Secretary for Land, Transport, and Public Works (DSSOPT), Raimundo do Rosário, to step down and announced that the group would hold another slow march through the city, sparked once more by the traffic fine increases surprise-launched at the beginning of this year.

The legislator, speaking of the measures, demanded: “Who is benefiting?” pointing the finger at government and private sector collusion, he said: “In the first place, the coalition between the government representatives and big entrepreneurs and the traditional families of Macau. Right after the increase of these administrative taxes, the prices for rent and for parking lots followed suit. If this is not a coalition between people in the government, what is it?”

The comments were made to Business Daily on the sidelines of the meeting, arranged to inform the population about the next “slow march against the raising of traffic fees” recently proposed by the Traffic Affairs Bureau (DSAT). The march is being organised by a group of local associations, including legislators José Pereira Coutinho and fellow lawmaker Leong Veng Chai. It was tentatively scheduled for this Saturday, but suspended until a final route is agreed on with the authorities.

Bringing traffic to a stop

According to legislator Coutinho, the ATFPM president, the protestors first planned to begin the march in the Barra District, at Macau Tower, moving toward the Science Museum, then continuing to Sidónio Pais Avenue and Rua do Campo, reaching Praia Grande Avenue and ending at the Government’s Palace, where they will deliver a petition to the Chief Executive, however authorities did not accept the route.

“The government is stepping on

Macau residents, diminishing people’s quality of life. Life in Macau has become very difficult; things are too expensive, and now people also have to pay this [fee],” said Coutinho, highlighting the tone of frustration expressed in the first march on 8 January, and following a meeting deemed unsuccessful with the Secretary for Transport and Public Works, Raimundo do Rosário.

Speaking on the sidelines of the press conference, Mr. Coutinho explained that he was disillusioned by the meeting with the Secretary.

“He seemed to be in a hurry, and his body language suggested that he was not at all interested in talking to us.

Our main goal now is to request the Secretary step down and the Chief Executive withdraw the dispatch,” asserted Coutinho.

“We still don’t know how the government will react. But knowing, in the meantime, that, if the Secretary is fired, it solves part of the problem, there is still the withdrawing of the dispatch, which will be a continuous fight for us. We don’t accept, without explanation, the rising costs of traffic fees,” he maintained.

The recent increase in fees for services under the authority of the DSAT concerns, among others, the removal of vehicles and deposits when caught in infringement of parking laws.

Culture

Frequent funding for education The Macau University of Science and Technology Foundation received a third of the total MOP1.53 billion in funding disbursed by the Macao Foundation in 2016 The Macao Foundation granted MOP1.53 billion in funding for the whole year of 2016, of which almost one-third, or around MOP524.6 million, was awarded to the Macau University of Science and Technology (MUST) Foundation, according to an Official Gazette release.

More than half of the MOP727.5 million handed out by the Macao Foundation during the last three months of 2016 was granted to the

MUST Foundation.

During that period, MUST received almost MOP450 million, of which 65.6 per cent or MOP293.4 million went on the construction of one of the institution’s building complexes, making it the single largest disbursement by the Macao Foundation.

Education institutions received the largest amounts of funding from the Macao Foundation in the last three months of 2016, led by the City

University of Macau Foundation with MOP45 million in financing for university education expenses, followed by the Catholic Foundation for Higher Education with MOP19 million for financial support for the University of Saint Joseph. N.M.

Society

S. Lourenço service building phase II works in Q3 The government expects the superstructure construction of the new social services building in the area of Praia do Manduco will start during the third quarter of the year, providing 200 job opportunities.

According to a press release by the Land, Public works and Transport Bureau (DSSOPT) the public tender of the second phase of the project has

received 25 bids, of which 24 were accepted, proposing costs between MOP184 million (US$23 million) and MOP259 million.

According to DSSOPT, the project’s first-phase foundation works will be completed soon, while the maximum duration granted for the upcoming superstructure works would be 720 days.

The project, located near the S. Lourenço municipal market on the southern part of the Peninsula, will be a four-storey building occupying a total gross floor area of 2,500 square metres.

The building will house one new health centre and other nursing services, in addition to offering sports facilities. K.L.

Business Daily Thursday, February 9 2017 5

Macau

Transport

New vehicle registrations plunged in 2016 Number of total vehicles’ annual growth slowed to 0.6 pct Kam Leong kamleong@macaubusinessdaily.com

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he new registration of motor vehicles in the city plunged for the whole year of 2016 following the implementation of the motor vehicle tax rate hike at end-2015.

According to the latest official data of the Statistics and Census Service (DSEC) released yesterday, new registrations of motor vehicles dived 29.1 per cent year-on-year to 13,935 vehicles. Of the total, light automobiles plummeted 38.6 per cent year-onyear to 5,395 whilst motorcycles fell 23.8 per cent year-on-year to 7,784.

In December 2015, the government increased the tax rate for newly imported automobiles to between 40 per cent and 72 per cent, depending upon the imported price. This is up from the previous 30 per cent to 55 per cent rate, while that of motorcycles

and scooters also rose - to 24 to 50 per cent from the previous 10 per cent to 30 per cent, with the ultimate objective of slowing the city’s vehicle growth rate.

According to DSEC, the total number of licensed motor vehicles in the territory reached 250,450 as at the end of last year, a slight increase of 0.6 per cent year-on-year compared to the annual growth rate of 3.86 per cent seen at the end of 2015.

Of all licensed motor vehicles, 111,545 were light automobiles, marginally down 0.5 per cent, while the number of licensed motorcycles increased 1.2 per cent year-on-year to 131,139.

Cross-border traffic

Meanwhile, cross-border vehicle traffic posted an annual decrease of 1.2 per cent for last year, amounting to some 5.07 million trips, of which three-quarters of commuters’ trips

were between the city and the Mainland via the Border Gate.

Meanwhile, passenger ferry movements between the city and Mainland China and Hong Kong reached 138,164 trips for last year, down 5 per cent from a year ago.

Helicopter flight movements between the city and Mainland China and Hong Kong also registered a notable decline - of 17 per cent to 11,657 for the whole year compared to one year ago.

Nevertheless, total commercial flight movements at the local

Telecom market steadily growing

As at the end of last year the city saw total mobile phone subscribers reach 1.97 million, an increase of 3.9 per cent, of which stored-value GSM card subscribers accounted for 64.4 per cent to 1.27 million.

In addition, the number of Internet subscribers increased

international airport jumped 2.7 per cent year-on-year to 53,617; in particular, those connecting the MSAR to South Korea surged 38.3 per cent year-on-year.

Cargo

In terms of cargo, the airport handled 32,891 tonnes last year, which represents an increase of 9.4 per cent year-on-year. Inward air cargo from Taiwan, which accounted for nearly 56 per cent of the total, dipped 21.2 per cent year-on-year, while outward air cargo occupied 45.8 per cent of the total, jumping 26.4 per cent from one year prior.

Total gross weight of seaborne containerised cargo, however, sank 28.8 per cent year-on-year to 179,557 tonnes, while that of containerised cargo by land declined 20.3 per cent year-on-year to 20,750 tonnes.

7.2 per cent year-on-year to 363,372 as at year-end, while the cumulative duration of Internet usage grew 9.7 per cent year-on-year to 1.17 billion hours.

By contrast, the number of fixed-line telephone subscribers decreased by 7.8 per cent yearon-year to 134,748 as at the end of last year, according to DSEC.

6 Business Daily Thursday, February 9 2017

Macau Advertising

The digital advertising age is here Spending on digital advertising is expected to surpass 50 pct of total budgets in 2019 for Asia-Pacific Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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igital advertising spending within the Asia Pacific region is expected to make up over 50 per cent of total media ad spending in the region by 2019, according to a report by eMarketer.

The report focuses on eight key regions within Asia Pacific; namely, Hong Kong, Singapore, Taiwan, Vietnam, Thailand, the Philippines, Malaysia and Indonesia.

Overall, Asia Pacific ad spending on digital for last year is estimated to have made up 39.4 per cent of the total, with expectations for this year of 44.4 per cent.

The trend for all of the countries and regions evaluated points to steady single digit growth until 2020, although certain regions like Taiwan show distinct leadership in their percentage so far, having already reached a 35.8 per cent proportion as at last year, with expectations for a 40.4 per cent proportion by the year-end.

and is expected to be essentially flat over the next few years, reaching US$3.11 billion in 2020.’

The main reasons cited are the slowing economy on the Mainland, with ‘weak tourism and falling retail sales’ - pointing out that the increase in digital spending is mainly ‘driven by the high level of smartphone adoption and the continued advancements in mobile advertising technology’ and advertisers having to ‘act cautiously and cut budgets,

especially with respect to traditionally dominant media such as TV and newspapers.’

Digital

Digital ad spending in the HKSAR is expected to reach US$616.8 million this year, and undergo year-on-year increases of 8 per cent, 7 per cent and 5 per cent in successive years, reaching US$748.5 million in spending by 2020.

Of this, US$597.4 is expected to be spent on mobile Internet ads in 2020.

Currently, about US$314.7 million is expected to be spent on mobile Internet ads this year, which is set to undergo a 45 per cent year-onyear change in 2018, and a 19 per

cent year-on-year increase in 2019.

‘Because mobile Internet ad spending is starting from a comparatively small base, it will see high annual growth rates over the forecast period,’ notes the report, pointing out that ‘Hong Kong’s sophisticated telecommunications infrastructure has made it possible for the island’s Internet users to experience some of the highest average Internet speeds in the world.’

Expectations are for about 78 per cent of the city’s population to ‘use the Internet regularly’ this year, which it points out is ‘one of the highest adoption rates in Asia Pacific’.

Figures were not provided for the Macau market.

Digital neighbour

Neighbouring Hong Kong is recorded as having spent 18.4 per cent of total media ad spending on digital last year, and predictions are for 2 per cent year-on-year growth in the figure.

The proportion, however, begins to slow in following years, reaching only 24 per cent of total spending by 2020, growing 1.3 per cent between 2018 and 2019 and just 0.7 per cent from 2019 to 2020.

‘Among the eight countries included […] Hong Kong will have the largest advertising market in 2017,’ notes the report, predicting it will reach US$3.02 billion during the year.

However, following this year’s peak, ‘spending will be down […]

Land

Gov’t planning new public land auctions Secretary Raimundo do Rosário said yesterday that the government would co-ordinate the issuance of occupancy permits for the other residential project of Polytex The MSAR Government is drafting law regulations for launching public land auctions again, said the Secretary for Public Works and Transport Raimundo do Rosário yesterday, local broadcaster TDM Radio reported.

According to the official, the MSAR Government is planning to determine

a few plots of land for public auction by the end of this year. He expects the related regulations, to be drafted based on the city’s new Land Law, will be completed by mid-year.

Asked whether Pearl Horizon developer Polytex Corporation Ltd. could have its land concession for

its Lots T+T1’s residential project become effective this July, the official said he hopes the developer can finish the construction of the building before the expiry of its temporary land concession terms.

He added that the government would co-ordinate the issuance of occupancy permits for the project, as the government does not want more problems.

The city’s new Land Law mandates a temporary or conditional land concession, which carries a validity of 25 years, can only become effective

when the property project of a site is completed and is eligible for the issuance of an occupation permit.

According to the Financial Services Bureau (DSF) a total of 620 units of the project units were transacted as at last November, with sales totalling MOP120 million (US$15 million) the news outlet reported.

Every effort

Polytec Asset Holdings Ltd., the Hong Kong-listed parent company of Polytex, said in its interim report released last September that ‘it is making every effort to ensure the construction work is completed and an occupation permit obtained by the middle of 2017.’

The expiry date of the company’s temporary land concession for the Lots T+T1 project is July 5 this year.

For a site with the conditional land concession not yet effective and expiry date arriving, the site will have to be taken back by the government, which has already happened on the Pearl Horizon project.

In January 2016, the government officially declared the land concession for Pearl Horizon invalid following the developer’s failure to complete the project before the expiry date of its temporary concession terms, on December 25, 2015.

Meanwhile, the Housing Bureau warned in a press release yesterday that local residents should be more cautious when planning to buy offsale property units, stressing that property agents are responsible for disclosing the related land concession information to possible buyers.

Business Daily Thursday, February 9 2017 7

Macau Gaming

yesterday. Wing Hing has Gov’t extends contract for Chinese lottery operator monopolised the city’s sale of The MSAR Government has renewed the licence contract with Chinese lottery company Sociedade de Lotarias Wing Hing Limitada to the end of this year, according to the extract of the two parties’ notarial contract published in the Official Gazette

Chinese lotteries since 1990. For 2016, the Chinese lottery business generated some MOP7 million (US$875,000) in gross revenue, which remains unchanged from 2015, according to the official data of the Gaming Inspection and Co-ordination Bureau (DICJ).

M&A

Iao Kun jumping into Chinese tech market Following a series of VIP room closures in the MSAR last year, the junket operator announced it is acquiring the majority share of a Chinese tech company that is developing an agricultural-focused B2C platform Kam Leong kamleong@macaubusinessdaily.com

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ocal junket operator Iao Kun Group Holding Company Ltd. announced on Tuesday that it is to step into China’s technology industry following an inability to find ‘a path forward toward rebuilding our VIP gaming portfolio’.

According to the company’s announcement, it has entered into an agreement to acquire 51 per cent of a Chinese software technology development company - Guangzhou LiNiu Network Technology Co. Ltd. - which is currently developing an electronic B2C trading platform focused on the Chinese agricultural industry.

“Over the last few months, we have conducted an extensive review of our operations and our business strategy in order to right-size [Iao Kun] and find a path where we believe we can create long-term value for our shareholders,” said company chairman Lam Man Pou in the announcement.

“After recently completing the review, we concluded that we did not see a path forward toward rebuilding our VIP gaming portfolio.”

Currently, the junket operator only operates two VIP rooms in the MSAR located in the City of Dreams in Cotai and L’Arc Macau on the Peninsula following a series of room closures last August and September.

These include one in Sands Cotai Central and two in Galaxy Macau and StarWorld Hotel for which Galaxy Entertainment Group has said that the operator was the one terminating the operations due to the junket’s ‘breach of the agreements.”

Nevertheless, the chairman said in Tuesday’s announcement that the company has no intention of redeveloping its gaming business in the city to its former glory.

“While we will continue to participate in the promotion of our VIP gaming room in Macau, we have no further plans to expand our gaming operations to additional VIP rooms,” he said.

Switching lanes

According to Iao Kun, LiNiu Network’s B2C electronic trading platform is expected to launch during the first half of this year, for which some 1,200 of over 10,000 suppliers that the Mainland company has contacted have already signed a letter of

intent to join.

“After appropriate due diligence, we made the determination to acquire a majority interest in LiNiu Network and will be focusing our near to mid-term efforts on successfully launching its trading platform and rapidly scaling the business,” Mr. Lam said, pointing out that the acquisition requires no upfront cash payment from the company.

But as consideration for the deal Iao Kun will issue some 12.5 million ordinary shares upon the transaction’s closure, as well as cash consideration contingent upon LiNiu Network achieving after-tax income targets,

the announcement reads.

The acquisition is expected to be finalised within this quarter.

Last year, the junket operator also attempted to expand its business footprint outside the MSAR, seeking to acquire Jeju Sun Hotel & Casino in South Korea from Philippine gaming operator Bloomberry Resorts Corporation for US$102 million (MOP816 million) although the deal eventually fell through.

The company is also running trial operations in two casinos in Australia at the moment; namely, Crown Perth Casino and Crown Melbourne Casino, according to its official website.

AML

Competition

Philippines to include casinos in AML Act

Vietnam sports betting could affect Cambodian casino revenues

The Philippines’ House of Representatives is moving towards including casinos under the Anti-Money Laundering Act, in line with recommendations made by the Financial Action Task Force, according to publication Philippine Star.

The move, as announced by Representative Ben Evardone - who commented that the committee on banks and financial intermediaries has “agreed in principle to endorse the inclusion of casinos in the law” - is pending the threshold amount mandating the filing of a suspicious transaction report (STR) with the Anti-Money Laundering Council.

Two mentioned proposals are considering a 500,000 peso amount

– the same as banks, insurance companies and other covered institutions – or a 5 million peso amount.

Evardone explained that the inclusion “aims to protect the gaming industry from illegal activities so it can grow and attract more gamers and investors.”

Under discussion, by Representative Josephie Sato, was the cybercrime case of the Bangladesh Bank heist, which he described as having “exposed the vulnerability of these gaming establishments to illegal activities,” pointing in particular to a “need to amend the law to protect our casinos from money laundering by crime syndicates.” K.W.

A government official says Cambodia’s gaming industry could face increasing competition in the wake of a decree by the Vietnam Government, with whom Cambodia shares a border, allowing Vietnamese citizens to bet on regulated sporting events.

The news, from the Phnom Penh Post, notes that Ros Phirun, Deputy Director of the finance industry department in Cambodia’s Ministry of Economy and Finance, opines the change could affect the flow of Vietnamese nationals crossing the border to gamble in the neighbouring country, stating: “[it] will lead to increased

competition for Cambodia’s casinos and will likely affect local businesses . . . Cambodia’s casinos have been typically operating without much immediate regional competition.”

The Deputy Director said the larger threat to the country’s gaming industry would be the easing of restrictions on online gaming, noting that “it is still a relatively new market,” pointing out how Cambodian casinos allow “all types of games online and that includes live betting, sports and lottery,” while Cambodia’s current offering “attracts a lot of Vietnamese gamers.”

8 Business Daily Thursday, February 9 2017

Greater china In Brief E-commerce

Shanghai reports record transaction volume Shanghai’s booming e-commerce industry saw another year of robust growth in 2016. The transaction volume of e-commerce hit a record high of more than RMB2 trillion (US$290 billion) in 2016, up 21.9 per cent year on year, according to data released by Shanghai Municipal Commission of Commerce. Of that amount, e-commerce for enterprises accounted for 72 per cent, reaching about RMB1.4 trillion, an annual increase of 17.3 per cent. The surge was attributed to trade growth in steel, petrol chemicals, non-ferrous metals and automobiles.

Currency

Global trade settled in yuan drops Cross-border trade settled in the Chinese currency plunged to the lowest levels in more than three years in December as stricter capital controls and fears of further weakness in the yuan dampened global interest in the currency. The decline could mark a major setback for Beijing, which has tried to foster greater usage of the yuan in cross-border trade to expand its global clout.

The yuan, also known as the renminbi, fell 6.6 per cent against the dollar last year, its worst annual drop since 1994, reducing its attractiveness to both trading companies and investors.

Capacity cut

ChinaCoal to divert workers to new jobs China’s second-largest coal producer plans to divert around 9,300 coal workers, about 10 per cent of its workforce, to new jobs, the company’s spokesperson said yesterday. Part of a plan to reduce mining capacity by 17 million tonnes a year in 2017, ChinaCoal will offer the coal mine employees training and help them look for jobs with other companies, Jiang Chun, spokesman for ChinaCoal said. ChinaCoal’s current annual capacity is 277 million tonnes from 44 mines. ChinaCoal’s total workforce will drop to around 95,000 from 100,000 by the end of 2017, he said.

Results

Yum China restaurant sales flat in fourth quarter Yum China Holdings Inc , reporting for the first time as a standalone company, on Tuesday said its profit beat expectations for the fourth quarter despite just missing Wall Street’s target for sales at established restaurants. Shares in the company, which is China’s largest publicly held restaurant operator with 7,562 units, were up 1 per cent at US$28.40 in thin after-hours trading.

Same-store sales were flat after a 3 per cent increase at KFC shops were offset by a 7 per cent drop at Pizza Hut Casual Dining. Analysts polled by Consensus Metrix expected a 0.1 per cent uptick in same-store sales.

US President Donald J. Trump gestures while speaking in a White House meeting. Lusa GDP forecast

How Goldman sees a Trump trade war hurting U.S.-China growth Trump’s combative trade stance threatens to derail growth in export-dependent economies around the globe

G

oldman Sachs Group Inc. analysts are looking at how a trade war between the U.S. and China would hurt growth in the world’s biggest economies, and the outlook isn’t pretty.

If President Donald Trump imposes punitive tariffs against China of up to 10 per cent, the country’s exports to the U.S. will fall as much as 25 per cent, Ha Jiming, a China vice chairman at Goldman in Hong Kong, said in an article published by China Finance 40 Forum, a non-government research organization. Under that scenario, the Asian nation’s annual economic growth would decrease by as much as 1 per centage point, he wrote.

Should Beijing retaliate, trade with the U.S. would also suffer and its economic growth could fall by as much as a quarter per centage point, Ha, who is also an investment strategist, said in the article dated Feb. 7. The US$18 trillion U.S. economy expanded 1.6 per cent last year, compared with 6.7 per cent for China’s US$11 trillion of output.

“To prevent such a trade war, China could take measures including promoting outbound tourism or opening service industries such as business and finance to the U.S.,” wrote Ha “That will help the U.S. export services to China and ultimately to reduce its trade deficit.”

Trump’s combative trade stance threatens to derail growth in export-dependent economies around the globe, with the president threatening punitive tariffs on China, Mexico and other nations he blames for the loss of American manufacturing jobs. China, the U.S.’s biggest creditor and trading partner, has been criticized by Trump for manipulating its currency.

In the near term, Trump’s administration is likely to act on China’s currency policy and impose targeted tariffs on products that face heavy competition from Chinese imports, such as steel, large appliances, machinery or auto parts, according to a separate Feb. 6 report by Goldman’s Chief Asia-Pacific Economist Andrew Tilton and Senior U.S. Political Economist Alec Phillips. Trump may threaten blanket tariffs as an additional measure if needed, they said.

China is likely to respond proportionately, particularly as it undergoes a twice-in-a-decade political transition later this year, according to

the report from Tilton and Phillips.

Instead of tariffs, China could reallocate reserves out of U.S. Treasuries, or fix the yuan weaker against the dollar, or facilitate regional trade deals -- something already underway, the report said.

The Goldman economists also suggested that the U.S. could seek to

reduce its trade deficit with China with other measures, including protecting intellectual property and enhancing services exports. America’s trade deficit with China narrowed to US$347 billion in 2016, down 5.5 per cent from 2015, according to data from the U.S. Commerce Department.

Besides the damage to the U.S. and China, a trade war would very likely hurt smaller open economies in Asia such as South Korea and Taiwan that are closely linked to global supply chains, the report said. Bloomberg News

Business Daily Thursday, February 9 2017 9

Greater China Diplomatic meeting

Beijing invites Britain to attend new Silk Road summit Sri Lanka has already confirmed its Prime Minister is coming, and China says Philippine President Rodrigo Duterte is also attending Ben Blanchard and Elizabeth Piper

China has invited British Prime Minister Theresa May to attend a major summit in May on its “One Belt, One Road” initiative to build a new Silk Road, diplomatic sources told Reuters, as London said she would visit China this year.

“One Belt, One Road” is Chinese President Xi Jinping’s landmark programme to invest billions of dollars in infrastructure projects including railways, ports and power grids across Asia, Africa and Europe.

China has dedicated US$40 billion to a Silk Road Fund and the idea was the driving force behind the establishment of the US$50 billion China-backed Asian Infrastructure Investment Bank.

China has so far given few details about who will attend the summit, to be held in Beijing.

The country’s top diplomat, State Councillor Yang Jiechi, told the official China Daily last week that leaders from about 20 countries have confirmed their participation, representing Asia, Europe, Africa and Latin America, though he did not give names.

One Beijing-based diplomatic source with direct knowledge of the invite list told Reuters that May was among the leaders who had been invited.

“China is choosing the countries it sees as friends and who will be most influential in promoting ‘One Belt, One Road’,” said the source, speaking on condition of anonymity.

Two other diplomatic sources confirmed May was on the invite list.

“It’s China’s most important diplomatic event of the year,” one of the sources told Reuters.

Chinese Foreign Ministry spokesman Lu Kang said plans for the summit are proceeding smoothly, and that details of the participants will be announced at a later date.

“China welcomes Prime Minister

May to visit China at the appropriate time,” Lu told a daily news briefing.

Sri Lanka has already confirmed its prime minister is coming, and China says Philippine President Rodrigo Duterte is also attending.

Foreign leaders often combine attendances at important multilateral events China is hosting with official state visits to China.

May to discuss trade

Speaking in London, May’s aides confirmed she would visit China this year to discuss trade ties, the latest in a series of foreign trips to cement relations with major powers as she negotiates Britain’s divorce from the European Union.

May’s aides gave few details about the trip, but she is keen to strengthen her hand by securing foreign support before launching Brexit talks, which are set to be among the most complicated Britain has ever

undertaken.

“It would be a renewed expression of the close relationship between Britain and China, something that you have seen obviously develop over the past few years,” May’s spokesman told reporters on Tuesday.

“I would imagine that trade would form some part of the discussions that we have.”

Key Points “One Belt, One Road” summit key 2017 diplomatic event for China China says more than 20 leaders have confirmed participation British aides say PM May to visit China this year The Commerce Ministry has said China has an open attitude towards a free trade deal with Britain once it leaves the EU and was willing to study it, but Chinese officials have otherwise said little publicly about the subject.

May attended a summit in China of the G20 leading economies last

September, shortly after she became prime minister following June’s referendum vote to leave the EU, and was invited by Xi to visit again.

With May having made clear she plans for Britain to leave the EU’s single market, trade has dominated her talks with foreign leaders in recent months.

She has secured assurances from U.S. President Donald Trump, Indian Prime Minister Narendra Modi and other world powers that they are keen to start talks on boosting links.

But her attempts to up the stakes in talks with the EU, which she is due to launch before the end of March, have also drawn criticism.

Some opposition lawmakers have accused May of ducking difficult issues to win promises for trade - a charge repeated when she became the first foreign leader late last month to meet Trump, who has since been criticised over his immigration curbs.

She also came under fire for strengthening ties with Turkish President Tayyip Erdogan, who has been criticised by rights groups for jailing tens of thousands of people after a failed coup in July. Reuters

British Prime Minister Theresa May

M&A

Syngenta sees ChemChina takeover closing in Q2 Singenta Chief Executive Erik Fyrwald told Reuters he was confident the deal would win approval from China’s MOFCOM regulator Swiss pesticides and seeds group Syngenta expects its US$43 billion takeover by ChemChina to close in the second quarter of 2017 as it makes progress in winning regulatory approval for the deal, it said yesterday.

The transaction is important for China, the world’s largest agricultural market, which is seeking to secure the food supply for its huge population.

Syngenta’s portfolio of top-tier chemicals and patent-protected seeds would boost its potential output. “ Ch e m Ch i n a a n d S y n g e n ta have made significant progress towards achieving the necessary regulatory approvals and closing the transaction,” Syngenta said in announcing 2016 results, noting it had won approvals from 13 regulatory authorities.

It was awaiting approvals from Brazil, Canada, China, the EU, India, Mexico and the United States.

“ChemChina and Syngenta remain fully committed to the transaction and are confident of its closure,” it said.

Chief Executive Erik Fyrwald told

Reuters he was confident the deal would win approval from China’s MOFCOM regulator without causing any delay. The deal was making good progress with U.S. and EU regulators as well, he said.

ChemChina is set to secure conditional EU antitrust approval for

its bid, the largest foreign acquisition by a Chinese company, two people familiar with the matter told Reuters last week.

Bridge financing to close the deal was in place and irrevocable, finance chief Mark Patrick said, while the partners were working on the structure of longer-term financing.

Syngenta said it planned to push its annual meeting to June given that it was close to completing the deal.

“With the first settlement of the transaction expected to take

place before the AGM, there will not be a proposal for payment of a regular dividend. As previously communicated, a special dividend of 5.00 Swiss francs will be paid conditional upon and prior to the first settlement of the transaction,” it said.

Syngenta reported 2016 earnings before interest, tax, depreciation and amortisation (EBITDA) of US$2.66 billion on sales of US$12.79 billion.

“ChemChina and Syngenta have made significant progress towards achieving the necessary regulatory approvals and closing the transaction” Syngenta’s results announcement Analysts polled by Reuters had on average expected EBITDA to fall 5.9 per cent to US$2.61 billion on sales down 4.2 per cent to US$12.85 billion. They had expected it to boost its dividend to 11.60 Swiss francs from 11.00. Reuters

10 Business Daily Thursday, February 9 2017

Greater China Report

EU proposes shorter extension of solar duties to Beijing A majority of EU countries last month opposed the Commission’s initial plan to extend anti-dumping duties for another two years Philip Blenkinsop

T

he European Commission has softened a proposal to extend anti-dumping duties on Chinese solar panels, a document seen by Reuters showed, after opposition from a majority of EU countries that want lower import prices.

The Commission, which oversees EU trade policy, presented four options, with a recommendation to limit the extension of measures to 18 months, instead of an original 24,

and making clear that this period represents a final phasing out of duties that have been in place since 2013.

The Commission faces a delicate balancing act between the interests of EU manufacturers and those benefiting from cheap imports while also being concerned about the response from Beijing, seen as a possible ally in the fight against protectionism.

But Luc Triangle, general secretary of trade union federation industriAll Europe, expressed his concern.

“Bowing to China against the Commission’s own assessment would

create a fatal precedent also for other industries,” he said.

The EU and China came close to a trade war in 2013 over EU allegations of dumping by Chinese solar panel exporters.

To avoid that, both sides agreed to allow limited tariff-free imports of panels at a minimum price of 0.56 euros per watt, anti-dumping duties of up to 64.9 per cent for those outside the agreement and anti-subsidy duties capped at 11.5 per cent.

A majority of EU countries last month opposed the Commission’s initial plan to extend anti-dumping duties for another two years, putting pressure on the EU executive to soften its position.

The EU governments did back a separate two-year extension of tariffs

designed to counter subsidies. Under the new recommendation, they would also only be extended for 18 months.

The Commission has also proposed cutting the minimum price for panels to 0.46 euros/watt. In its new proposal this price could be steadily

Key Points New recommendation for 18-month extension vs initial 24 months Majority of EU countries voted in January against extension Measures include duties and minimum price agreement reduced.

The EU executive said in a paper sent in December to EU members that ending the measures would likely lead to a significant increase in dumped imports of solar cells and modules and job losses.

EU ProSun, a group of manufacturers including Germany’s SolarWorld, said the measures had allowed the EU industry to invest and recover and condemned the document’s recommendation.

“It’s a clear signal to China that in 18 months it could take over the industry,” said EU ProSun president Milan Nitzschke.

S o l a r P o w e r E u r o p e, w h i ch represents those in the solar industry opposed to duties, has said the large majority of players wanted the removal of trade barriers, which would hinder the development of the European solar power generation industry.

The case is due to be settled by March 3. Reuters

Livestock

Government urges cornbelt regions to offer subsidies Analysts questioned the impact of the move as the bulk of feed-making industry is located in the country’s south Hallie Gu and Josephine Mason

Beijing is urging regional authorities in the nation’s top four corn producing regions to offer subsidies to livestock feed companies, the latest move to boost demand for a bumper crop, according to a source briefed on the matter.

The country’s State Administration of Grains and the Ministry of Finance issued a joint document dated Jan. 13 outlining the recommendations to north-eastern regions of Heilongjiang, Inner Mongolia, Liaoning and Jilin, according to the source and local media.

Only feed producers that produced more than 50,000 tonnes in 2015 and have local operations can apply for the subsidy. The corn must also be bought by end-April and processed by end-June, according to the source.

Other stipulations are that they must only use the funds to buy local corn harvested in 2016 and store it in their own facilities, the source said citing the document.

The size of the subsidies, which would effectively make corn cheaper for feed producers, was not disclosed.

Analysts also questioned the impact of the move as the bulk of China’s vast feed-making industry, the top user of the grain is located in the country’s south and would not be eligible for

the subsidies.

Industry websites, including Shanghai JC Intelligence Co. Ltd (JCI) and cofeed.com, have also reported the details of the release without citing sources and photos of the document were circulating on Wechat, China’s mobile social platform. Their authenticity could not be verified.

A spokeswoman for the Grains

Administration declined to comment.

The Ministry of Finance had not responded to requests for comment.

It’s not known if the provinces, which are home to most of the country’s corn farmers, have complied with the recommendation.

The move comes after China announced a strategy at the end of December to tackle its corn glut following a decade-long stockpiling programme, including a push to use more grain as livestock feed.

It reflects an intensifying effort by Beijing to force regional authorities to bear the financial burden of buttressing their corn industries.

In October last year, Heilongjiang, Liaoning and Jilin doled out subsidies to corn processors, the secondlargest users of the grain who make products such as corn starch, sugars and alcohol.

‘Hopes of central government measures to spur consumption have triggered a months-long rally, with prices hitting 18-month highs on Monday’ But analysts said more corn processors had benefited from the subsidies and the impact of subsidies for only a few feed producers was likely to be limited.

“This won’t help increase the demand for corn unlike the subsidies to corn processing companies,” said Cofco Futures analyst Meng Jinhui.

Still, it could give sentiment and prices a further boost.

Hopes of central government measures to spur consumption have triggered a months-long rally, with prices hitting 18-month highs on Monday. Turnover and open interest hit all-time highs, eclipsing soymeal, typically the country’s largest agricultural derivatives market. Reuters

Business Daily Thursday, February 9 2017 11

Asia Prices

Asia’s inflation surge fuelled by currency rout that’s fading But a stronger U.S. dollar can feed inflation both by driving up the price for imported goods, and by boosting incomes for exporters Garfield Reynolds and Yumi Teso

T

he past week’s surprising pickup in Asia-Pacific inflation gauges may be fleeting.

The New Zealand dollar jumped to a threemonth high Tuesday after a central bank index of price-pressure expectations climbed to the highest since 2015. That came after January inflation readings for South Korea, Indonesia and Thailand exceeded expectations. Taiwan’s figures also beat expectations, while Philippine price gains accelerated too, though by less than economists had been expected.

A key question is how much of the price gains can be traced back to last quarter’s foreign-exchange rout, with every major Asian currency weakening against the dollar in the three months through December.

This year’s recovery in local exchange rates, along with a plateau in crude oil markets, raises the prospect consumer price gains will slow as a result.

“There’s some inflationary pressure from weaker domestic currencies

in recent data, along with rising oil prices,” Koji Fukaya, chief executive officer of FPG Securities Co. in Tokyo, said in an interview. “As the dollar pares some of its gains this month, that part of inflationary pressure will be reduced from here.”

‘Investors in most Asian markets don’t expect much of a response from central banks’ The pictured chart highlights how last quarter’s weakness for Asian currencies has been followed by an acceleration in costs for the economy.

A stronger U.S. dollar can feed inflation both by driving up the price for imported goods, and by boosting incomes for exporters -- adding to the money that can be spent locally.

New Zealand is another example.

Inflation expectations there have

tended to accelerate soon after the local currency slumps, as the locals face higher prices for things they don’t make at home, like cars and computers, and get more money from the products they send abroad, led by dairy products.

With the exception of the kiwi, markets haven’t been shaken up by the trend. After all, the story of 2017 so far has been a recovery in bonds as the global reflation trade spurred

by Donald Trump’s U.S. presidential win has ebbed with the rising tide of political uncertainty emanating from Washington to Europe.

Investors in most Asian markets

don’t expect much of a response from central banks. Malaysia and Thailand rate swaps have shifted up since the end of 2016, but peers in Australia, New Zealand and India have moved down and South Korea’s curve is still pricing no hikes for at least a year.

That may be partly because all emerging Asian currencies except the Philippine peso have climbed at least 0.8 per cent versus the dollar in 2017, with the won surging more than 5 per cent to lead the group. The Aussie and the kiwi are also each up more than 5 per cent. That sort of flip flop may see a reversal in inflation in the coming months. Bloomberg News

Official data

Japan logs biggest current account surplus since 2007 For the whole of 2016, Japan posted a trade surplus of 6.8 trillion yen Tetsushi Kajimoto

Japan attained its second-biggest current account surplus on record in 2016, Ministry of Finance data showed yesterday, just days before the U.S. and Japanese leaders meet for talks with trade surpluses and currency valuations expected to be high on the agenda.

Key Points 2016 c/a surplus at 20.6 trln yen, 2nd largest on record -MOF Trade, currencies in focus as Abe meets Trump this week Japan’s c/a surplus mostly stems from income from investment The 20.6 trillion yen (US$183.63 billion) surplus reflected the trade balance swinging into surplus on cheaper oil, rising foreign tourists arrivals creating a record travel surplus, and hefty foreign income from overseas investments.

Trade surpluses and currency valuations are in focus as U.S. President Donald Trump pursues an “America First” campaign in which he

has accused big exporters such China, Germany and Japan of deliberately weakening their currencies to gain a competitive advantage.

For the whole of 2016, Japan posted a trade surplus of 6.8 trillion yen (US$59.95 billion) with the United States, down 4.6 per cent from 2015, with U.S.-bound car shipments rising for a second straight year, the Ministry of Finance said.

Trump and Japanese Prime Minister Shinzo Abe are scheduled to meet for talks later this week. Trump said he and Abe would play a round of golf, with Abe as his partner in the game, rather than a competitor.

Yesterday’s data showed the vast bulk of Japan’s current account surplus was generated by Japanese direct and portfolio investment abroad, accounting for 18.1 trillion yen of the 20.6 trillion current account surplus for 2016.

The trade surplus was 5.6 trillion yen in 2016, from the 630 billion yen

deficit seen in 2015, earned in part as declining oil prices curbed import costs.

The travel balance logged a record 1.3 trillion yen surplus last year as a record number of foreign tourist visits took Japan’s services deficit to the smallest on record.

Japan’s current account surplus was 1.11 trillion yen in December, a seventh straight month of annual increases, the ministry data showed.

That compared with economists’ median forecast for a surplus of 1.29 trillion yen seen in a Reuters poll. Reuters

12 Business Daily Thursday, February 9 2017

Asia Monetary policy

Thai central bank holds key rate The monetary committee said monetary conditions were still conducive to Thailand’s economic recovery in the face of global risks Orathai Sriring and Kitiphong Thaichareon

T

hailand’s central bank left its key interest rate unchanged yesterday, near record lows, saying monetary policy was still supportive but a strong baht was not good for the economy.

The Bank of Thailand’s Monetary Policy Committee voted unanimously to keep the one-day repurchase rate at 1.50 per cent, where it has been since April 2015.

Policymakers are counting on

a strong dose of spending to keep economic engines firing at a time of rising global trade protectionism and capital outflow risks as the U.S. Federal Reserve prepares to raise rates again this year.

“The economy started to gain more traction, but uncertainties remained at large, particularly those pertaining to the fragile global economic recovery and to the economic and monetary policy directions of major advanced economies,” the MPC said in a statement.

“Public expenditure remained an important growth driver, while

private consumption and private investment continued to recover at a gradual pace,” it said.

The committee said monetary conditions were still conducive to Thailand’s economic recovery in the face of global risks.

Analysts said the export-dependent economy would be buffered to some extent from improving manufacturing and exports.

“We think this year Thai exports will see better growth than market expectations,” said Charnon Boonnuch, senior economist at TIsco Securities. “We should also see some private investment recovery, but at a slow and gradual pace.”

Growth in Southeast Asia’s second-largest economy has lagged its peers since the army seized power in May 2014, as exports, a growth

driver, has been sluggish despite a recent improvement. High household debt remains a drag on consumption.

The junta has ramped up infrastructure projects and approved an extra budget of US$5.4 billion in a bid to spur domestic activity.

ANZ said the BOT was unlikely to use interest rates to address their concerns about the baht being too strong.

Key Points BOT keeps policy rate at 1.50 pct, as widely expected Says rates still accommodative; strong baht not good for economy Recovery better than f’cast, economy faces uncertainties -c.bank “We still see room for the central bank to keep its policy rate accommodative at 1.50 per cent through 2017,” it said.

The baht has risen 2.2 per cent against the dollar so far this year.

All 23 economists polled by Reuters had forecast no policy change at the MPC’s first review of the year. Most analysts expect the BOT to hold rates through 2017 but some predicted a rate hike.

The central bank in December maintained its GDP growth forecast at 3.2 per cent in 2017, with no export growth. It will review the projection at its next policy meeting in March.

The commerce ministry, however, said Thai shipments could still rise 2.5-3.5 per cent this year after registering growth in 2016 for the first time in four years. Reuters

Property

NZ to canvass debt/income limits as real estate rockets House prices rose 11.8 per cent in the year to December The Reserve Bank of New Zealand (RBNZ) will undertake a cost-benefit analysis of imposing debt-toincome (DTI) limits aimed at cooling down a red-hot housing market, New Zealand’s finance minister said yesterday, though it is unlikely DTI measures will be used this year.

The RBNZ has been lobbying the government for months to get permission to add DTIs to its macroprudential arsenal to combat the country’s “excessive” house price growth in a low interest rate environment - while simultaneously attempting to meet a minimum inflation target.

“I have discussed DTIs with the Reserve Bank Governor, who remains concerned about the levels of debt in some households in the context of recent increases in house prices,” Finance Minister Steven Joyce said in an emailed statement.

Despite this latest step towards convincing the government to sign off on debt-income limits, there was uncertainty over if, when and how DTIs would be implemented.

“There are lots of unknowns and then you throw in the fact there’s a changing government, changing governor, it looks like a stretch we’ll see anything this year,” said Phil Borkin, senior economist at ANZ.

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New Zealand’s national elections were scheduled for Sept 23 with RBNZ Governor Graeme Wheeler announcing this week he would step down three days later at the end of his five-year term, leaving deputy governor Grant Spencer temporarily at the helm while the bank searches for a new chief.

Wheeler said in November when the central bank cut interest rates to the current record low of 1.75 per cent that he was lobbying the government for permission to set DTI

limits, although he said at the time he had no immediate plans to use them.

The RBNZ’s signalling that there were to be no further rate cuts and cooling house prices in Auckland made it unlikely the bank would use DTIs in current market conditions, economists said.

But record levels of migration have kindled fears that modest growth in Auckland could be temporary.

“They’ll have it in their toolkit for that rainy day, the bank wants that option,” said ANZ’s Borkin.

New Zealand house prices rose 11.8 per cent in the year to December, though the red-hot market of Auckland saw some cooling, the Real Estate Institute of New Zealand (REINZ) reported last month.

Joyce said that a public consultation for views on DTI measures would begin in March and continue through the first half of the year.

The RBNZ will meet on Thursday to set monetary policy and is widely expected to keep rates on hold at 1.75 per cent. Reuters

But record levels of migration have kindled fears that modest growth in Auckland could be temporary Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Thursday, February 9 2017 13

Asia Oil industry

In Brief

Sri Lanka ramps up fuel imports as drought hits hydropower Demand will likely grow by about 14 per cent year-on-year Jessica Jaganathan and Shihar Aneez

Sri Lanka’s fuel imports in January jumped to double typical monthly levels, with the country rushing to plug an energy shortfall as severe drought hits its hydropower output, industry sources said.

The South Asian nation is suffering its worst drought in over 40 years, dragging hydro’s share of Sri Lanka’s power mix to below 11 per cent in 2016 from an annual average of about 35 per cent, said Senthil Kumaran, senior oil analyst at energy consultancy FGE. “As a result, fuel oil and diesel

in the spot market, traders said.

It has bought about 260,750 more barrels of diesel in January than December and around 260,000 more barrels of fuel oil, said a source close to the matter, speaking on condition of anonymity.

Sri Lanka typically imports 26,000 to 32,000 barrels per day (bpd) of diesel and 6,000 to 10,000 bpd of fuel oil, Kumaran said.

A delay in awarding term oil contracts also caused a spike in spot imports, traders said.

“We have decided to increase

imports of fuel oil mainly and more diesel as well because the Ceylon Electricity Board needs more for power generation,” a senior Ceylon Petroleum official said, declining to be named as he was not authorised to speak with the media. “(Ceylon Petroleum) is also going to maintain additional stocks of fuel and diesel due to the drought. So both these products will be maintained at more than required levels.”

Sri Lanka’s fuel oil demand will likely grow by about 14 per cent yearon-year to 24,000 bpd in 2017 and diesel demand will increase by 7 per cent year-on-year to 53,000 bpd, FGE’s Kumaran said.

An improving housing market, lower interest rates and government efforts to speed up infrastructure projects will keep supporting diesel demand in the next two or three years, Kumaran added. Reuters

Key Points

Malaysia’s exports grew for a second consecutive month in December on strong demand for electrical and electronic goods, and commodities, government data showed yesterday. Exports in December expanded 10.7 per cent from a year earlier, faster than the 9.4 per cent growth forecast in a Reuters poll.

Exports grew 7.8 per cent in November. The growth was were led by manufactured goods that accounted for 80.9 per cent of total outgoing shipments, according to data from the country’s International Trade and Industry Ministry. Imports in December rose 11.5 per cent, following November’s increase of 11.2 per cent.

S.Korea, Australia to extend currency swap deal

Stokes imports of diesel, fuel oil -sources

South Korea’s and Australia’s central banks said yestrday they will extend an existing currency swap agreement while roughly doubling it in size in a move aimed at strengthening trade and financial stability. The agreement between the Bank of Korea and the Reserve Bank of Australia will allow either country up to swap up to 9 trillion won (US$7.84 billion) for A$10 billion (US$7.62 billion), double the amount of an earlier swap agreement signed in February 2014. The new agreement will be valid until Feb. 7, 2020.

Infrastructure push could also support demand for diesel consumption in thermal power plants increased, partly to offset the hydropower deficit,” Kumaran said.

“High fuel oil imports should continue amidst range-bound crude prices.”

Ceylon Petroleum Corp, the country’s state-owned oil importer, has been requesting bigger-thanusual volumes of diesel and fuel oil

Recovery

Bank of Japan warns of inflation expectations Board members express concerns over uncertainty surrounding the Trump Administration’s policies

Bank of Japan (BOJ) board members saw improvements in exports, consumer spending and capital expenditure but warned that it may take time for inflation expectations to pick up, a summary of opinions from their Jan. 30-31 meeting showed yesterday.

Members also believed it was appropriate for the BOJ to maintain its current ultra-easy policy, with one member even arguing that the central bank should not change policy

Malaysia’s exports beat forecast

FX-swap

Severe drought curbs hydropower in Sri Lanka

Stanley White

Trade

hastily.

“Since the second half of 2016, Japan’s economic recovery has strengthened,” one of the nine board members was quoted as saying.

“Positive synergy effects are being produced by improvement in overseas economies, economic stimulus measures by the government, and enhanced monetary easing.”

However, there was a sense of caution in the summary of opinions as members expressed concerns over uncertainty surrounding the Trump administration’s policies and about

Britain’s exit from the European Union.

The BOJ kept policy on hold and raised its growth projection and, but warned that its 2 per cent inflation target remained elusive.

Consumer spending struggled for the first half of last year, but policymakers were encouraged by the fact that consumer spending has since started picking up, the summary of opinions showed.

Key Points Board members said economy on recovery path BOJ policymakers said need to stay course on policy Some uncertainty about Trump, Brexit A turnaround in exports is also encouraging because Japan relies on trade demand for growth.

New U.S. President Donald Trump has suggested he will adopt protectionist trade policies, and some economists say this poses a threat to Japan because it exports large numbers of cars and car parts to the United States.

One BOJ board member said traders could start to question the central bank’s ability to control the yield curve during a bout of heightened uncertainty and the BOJ’s market operations desk would need more flexibility.

In September, the BOJ revamped its policy target to interest rates from the pace of money printing and is buying government debt to keep the 10-year bond yield around zero per cent.

However, 10-year bond yields have faced upward pressure from a rise in overseas yields. Reuters

Consumption

Indonesia retail sales grow Indonesia’s retail sales in December grew 10.5 per cent from a year earlier, a slightly stronger pace than in November, a survey by Bank Indonesia (BI) showed yesterday. November annual retail sales growth was revised to 9.9 per cent from the previously reported 10 per cent. The central bank said increased buying of food items bolstered the growth rate in December’s retail sales. The survey of 700 retailers in 10 major cities predicted that January annual retail sales growth would be 9.5 per cent from a year earlier, weakened by sales of food items.

State figures

Vietnam’s budget revenue up Revenue hit 97.4 trillion dong (US$4.37 billion) in January 2017, up 3.9 per cent year-on-year, according to Vietnam’s Ministry of Finance yesterday. The domestic revenues were estimated at 87.9 trillion dong (US$3.94 billion), accounting for 8.9 per cent of the yearly estimate, increasing 4 per cent compared to January last year. Meanwhile, the revenues from crude oil reached 2.3 trillion dong (US$103.14 million), making up 6 per cent of the yearly estimate, down by 25 per cent year-on-year while that from import and export activities hit 7.2 trillion dong (US$322.87 million), accounting for 4 per cent of the whole year’s estimate, up 15.8 per cent year-on-year.

14 Business Daily Thursday, February 9 2017

International In Brief Forecast

French GDP growth seen at 0.3 pct France’s economy will expand by 0.3 per cent in the first quarter, the Bank of France said yesterday in its first forecast for the period, showing a slight deceleration from the 0.4 per cent growth posted in the final quarter. The Bank of France added that the business sentiment indicator for the manufacturing industry had edged down to 101 points in January compared to 102 in December, but the central bank said business leaders expected production to increase in February. The business climate indicator for the dominant services sector rose to 101 points in January, it added.

Portugal

PM says country a ‘friend of foreign investment’ Portugal is a “friend of foreign investment” said the country’s Prime Minister António Costa, giving the example of Brazilian aeronautical company Embraer investing in Portugal, in OGMA, as “a good example against protectionism.” “At a time, when in so many parts of the world, there are thoughts of closing borders, limiting international trade, making foreign investment more difficult, this is a good example of how we can gain from open borders, from foreign investment, in a logic of partnership and free. It is therefore a good example against protectionism, against closing borders and against an aversion to foreign investment,” Costa said.

OPEC president

Oil market ‘responding positively’ to output cut The organization head said he was confident that ultimately prices would adjust

Q

atar’s energy minister, the current OPEC president, said yesterday that world oil markets were “responding positively” to output cuts implemented by the cartel and some non-cartel producers.

The move to tighten the taps is aimed at reducing a glut of oil on world markets that has depressed prices and taken a heavy toll on the finances of many energy producing nations.

OPEC and non-OPEC producers led

by Russia agreed in December to cut output by nearly 1.8 million barrels per day, initially for six months, starting from the beginning of this year.

“I think the market is responding positively and you can see the drop

in supply,” Mohammed Saleh al-Sada told reporters.

“As you know, what we are after is the rebalancing of the market.”

Global oil prices fell from more than US$100 a barrel in June 2014 to near 13-year lows of less than US$30 in early 2016. They have since bounced back above US$50 following the OPEC output deal.

Sada, who was speaking to reporters as part of a Qatari-government organised press trip with international journalists in Doha, said he was happy with the level of compliance with the agreed cuts shown by individual producers.

“The degree of adherence is very high,” he said.

And he said the output curbs needed

more time in place so officials could judge their effectiveness.

“It is too early to make a judgement because the agreement is for six months, extendable for six more months.”

Sada said that a scheduled OPEC meeting in May would give a “better picture” about the state of the market.

However, the minister added he was confident that ultimately prices would adjust.

“Once we get the market in a rebalanced situation, then the mechanism of determining the price is going to work automatically and we are not manipulating the price,” said Sada.

The OPEC president’s comments helped pare back a slide in prices following a reading showing US stockpiles soared last week.

Benchmark West Texas Intermediate fell more than one per cent on Tuesday. AFP

Privatization

Saudi hires advisor to sell soccer clubs Saudi Arabia’s Jadwa Investment, one of the country’s largest privately owned investment banks, has been appointed to advise on the privatisation of as many as five soccer clubs in the Saudi Professional League, sources told Reuters yesterday.

Banks had been asked to apply for the role last month, one of the sources said, declining to be named because the matter is not yet public.

Spokespeople for Jadwa and the government’s General Authority of Sports were not immediately available to comment. Last November, the government approved plans to turn state-owned sports clubs into private companies.

Wages

UK employers expect to offer smaller pay rises British employers expect to offer less generous pay deals this year compared with 2016 despite rising inflation, probably putting pressure on consumer spending as the year goes on, a Bank of England survey showed yesterday. The BoE said firms expected the average pay deal would offer staff a 2.2 per cent rise, down from 2.7 per cent in 2016, reflecting difficulties passing on rising costs after last year’s Brexit vote and a slowdown in the rate of increase in Britain’s minimum wage.

Dodd-Frank siege

White House to target ‘conflict minerals’ rule The conflict minerals rule is one of several disclosure regulations that was tucked into Dodd-Frank legislation Sarah N. Lynch and Emily Stephenson

President Donald Trump is planning to issue an executive order targeting a controversial Dodd-Frank rule that requires companies to disclose whether their products contain “conflict minerals” from a war-torn part of Africa, according to sources familiar with the administration’s thinking.

Reuters could not learn the precise timing of when the order will be issued, or exactly what it will say.

However, the 2010 Dodd-Frank law explicitly gives the president authority to order the Securities and Exchange Commission to temporarily suspend or revise the rule for two years if it is in the national security interest of the United States.

The sources spoke anonymously because it is not public and they were not authorized to speak on the record.

The plan for the executive order comes on the heels of another order issued by the White House last week that takes aim more broadly at the Dodd-Frank rules put into place after the 2007-2009 financial crisis.

That order did not single out any one particular rule, but it called on the Treasury Secretary to consult with other regulators, including the SEC, and to come back with a report outlining possible regulatory changes and legislation.

The conflict minerals rule is one of several disclosure regulations that was tucked into Dodd-Frank that are unrelated to the financial crisis itself.

A s ec o n d D o d d- F ra n k S EC disclosure rule that required oil, gas and mining companies to disclose payments to foreign governments, meanwhile, was repealed by the Republican-controlled Congress last week.

‘The conflict minerals rule was pushed by human rights groups in the hopes it will help curb the funding of armed groups in Congo’ The conflict minerals rule was pushed by human rights groups who want companies to tell investors if their products contain tantalum, tin, gold or tungsten mined from the Democratic Republic of Congo, in the hopes it will help curb the funding of armed groups.

But business groups have staunchly

opposed the measure, saying it forces companies to furnish politicallycharged information that is irrelevant to making investment decisions.

They have also complained it costs too much money for companies to trace the source of the minerals through the supply chain.

In 2014, a U.S. appeals court struck down a part of the conflict minerals law after the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Manufacturers sued the SEC over the rule.

The court found part of it violated the free speech rights of companies by forcing them to publicly state that their products are not conflict free.

The rest of the rule, however, remained intact and companies are still required to carry out due diligence and report the details of those inquiries in public reports filed with the SEC. The SEC cannot permanently repeal the rule without a law passed by Congress. However, it can use its broad exemptive powers to scale back some of the requirements or stop enforcing the rule entirely.

Last week, Acting SEC Chair Michael Piwowar took steps toward doing just that, by announcing he has asked SEC staff to reconsider how companies should comply with it and whether “additional relief” is warranted.

Piwowar did not explicitly ask Trump to utilize his powers under Dodd-Frank to temporality suspend the rule; however, in his statement, he spoke about how he had travelled to Africa to study the rule’s impact and raised concerns about its effect on national security. Reuters

Business Daily Thursday, February 9 2017 15

Opinion Business Wires

Inquirer.net Citing health issues, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. (pictured) has declined to serve a third term taking charge of the country’s monetary policy. “As far as I’m concerned, I thought Governor Tetangco’s term should be extended. But he has begged off, saying he has health issues,” Finance Secretary Carlos G. Dominguez III told reporters. Dominguez said Tetangco might really need to take a break after serving the BSP for 43 years.

“Even I would get tired of doing the same job,” the finance chief said.

The private sector and the SDGs

A The Korea Herald Members of families that control South Korea’s corporate titans are on the fast track as they usually get promoted to the executive level in less than five years after entering the company, a corporate tracker said yesterday. Announcing a survey on 208 members of families controlling the top 50 business groups, CEO Score said it took an average of 4.9 years for them to get promoted to executive-level positions after admission.

In contrast, it took an average of 24 years for ordinary employees of chaebol to rise to an executive position.

Taipei Times The manufacturing purchasing managers’ index (PMI) stood at 53.4 last month, marking its 11th consecutive month of expansion, although growth decelerated from December’s reading of 55.9, the Chung-Hua Institution for Economic Research said. The PMI gauges the health of the local manufacturing industry, with scores above 50 representing an expansion and those below the threshold suggesting a contraction. The month-onmonth decline in PMI last month could be mainly attributed to the slower growth of local companies’ new orders and slower production, the Taipei-based think tank said.

The Straits Times The Budget will likely focus on the mid- to long-term goals of transforming Singapore businesses and workforce for the years ahead. Economists expect the Government to keep spending on initiatives that help companies automate and innovate, with a strong emphasis on worker up skilling as well. DBS senior economist Irvin Seah believes that the Budget on Feb 20 will be “business friendly” - a continuation of last year’s emphasis on enterprise development rather than the social safety net enhancements seen in previous years.

chieving the ambitious global Sustainable Development Goals (SDGs) – which include ending poverty, improving global health, ensuring universal education, and mitigating climate change by 2030 – will cost a lot of money. The total will be far more than governments can make available, and the gap cannot be closed by official development assistance, now at US$132 billion per year. The private sector, as well as updated financial markets, will be essential.

Until recently, international organizations and governments had relatively well-defined roles in the global development and sustainability agenda, whereas the private sector’s participation in the process was often viewed through the lens of its contributions to economic growth, job creation, and tax revenue. That must now change, with the private sector taking on a broader, more integrated role in the development agenda.

The private sector can become a financier, shifting trillions of dollars of capital toward developing economies. And it can play an important role as an implementer, translating profits into sustained economic growth, social inclusion, and environmental protection. The principles underpinning such measures are anchored in SDG target 12.6, which encourages “companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.”

F i n a n c i a l a n d a s s e tmanagement institutions can provide positive incentives to such companies – those that incorporate sustainability, long-term thinking, and environmental, social, and governance (ESG) performance criteria in core business models – by allocating assets accordingly.

Such a move would go a long way toward promoting longterm progress on the SDGs. Fortunately, many companies already fit this description. A 2016 survey of CEOs, conducted by the United Nations Global Compact and Accenture showed that many business leaders already view solving “societal challenges as a core element in the search for competitive advantage.” And almost half of all CEOs surveyed believe that “business will be the single most important actor in delivering the SDGs.” According to a recent report published by Moody’s, interest in investments relating to climate change and sustainable development by institutional investors has grown rapidly in recent years.

Now, institutional investors with long histories of ESG investments, such as the California Public Employees’ Retirement System (CalPERS), are being joined by a growing number of their peers.

Some are even opting to divest from any company with exposure to industries or business practices that present sustainability challenges.

This trend toward sustainable investment will undoubtedly accelerate. But, even without the agreement, the appeal of such investments stands: evidence indicates that integration of ESG considerations – when implemented intelligently and measured and reported transparently – could help investments outperform expectations, for both companies and investors. Add to that financialmarket incentives, and huge amounts of capital could be attracted to ESG investments.

Nonetheless, significant challenges remain, including uncertain performance expectations and

“

Mahmoud Mohieldin a the World Bank Group’s Senior Vice President of the 2030 Development Agenda, UN Relations, and Partnerships

Svetlana Klimenko a Lead Financial Management Specialist at the World Bank Group

evolving disclosure regimes. Despite innovation in the financial products channelling ESG investment, the supply of ESG instruments, such as green bonds, remains insufficient.

Another challenge relates to data. Good data on ESG investment are indispensable, as they enable investors and companies to determine whether their outlays in this area will promote or impede the achievement of the SDGs. To this end, we need to develop a robust, transparent reporting framework that allows companies to report on financial and non-financial performance. That framework must also support the private sector and investors in their effort to combine profit maximization with the pursuit of long-term economic, social, and environmental objectives. Integrated corporate reporting and disclosure of material ESG information can facilitate the creation of an efficient financial system that advances sustainable economic growth, while supporting achievement of the SDGs. The development of such an integrated reporting framework currently is being led by a few national and international organizations, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the International Integrated Reporting Council (IIRC). Their main objectives are to enable companies and organizations to set sustainability targets and key performance indicators; to monitor, prepare, and disclose comparative data measuring their economic and ESG performance; and to integrate sustainable production and consumption practices in company business strategies and models.

Global awareness of this topic is growing. Recently, Mark Carney, Governor of the Bank of England and Chairman of the G20’s Financial Stability Board, and Michael Bloomberg, a former New York City mayor and CEO of Bloomberg LP, issued an announcement regarding market data on climate.

Given the magnitude of the task, however, it is important also to ensure effective coordination and harmonization of these efforts with the relevant standard-setters, regulators, and professional organizations. The US Securities and Exchange Commission, for one, is already discussing these issues, as it analyses options to respond to investor and business needs regarding ESG. New ESG reporting frameworks can help to attract billions of dollars from institutional investors to support the effort to achieve the SDGs. But that is only one example of how the public and private sectors can work together to identify opportunities to advance the SDGs. If we take advantage of these possibilities, public-private cooperation can enable millions of people to lift themselves out of poverty and help to build a more peaceful, prosperous, and secure world. Project Syndicate

We need to develop a robust, transparent reporting framework that allows companies to report on financial and non-financial performance

”

16 Business Daily Thursday, February 9 2017

Closing Forex

Chinese regulator says outflow risks under control

China’s foreign exchange regulator said yesterday that risks from cross-border capital flows will be generally under control in 2017, a day after the country reported that its forex reserves had fallen to near six-year lows.

“International payments will remain basically balanced, and risks from cross-border capital flows are generally controllable,” the State Administration of Foreign Exchange (SAFE) said in a

statement.

The regulator also said that China’s capital and financial account deficit will narrow somewhat this year, while it will maintain a current account surplus.

Preliminary data from SAFE showed China had a US$210.4 billion current account surplus and a US$47 billion deficit on the capital and financial account in 2016.

China’s current account in 2016 was equivalent to 1.9 percent of gross domestic product (GDP), the regulator said, down from 2.7 percent in 2015. Reuters

Piracy

Philippines seeks US, China help to combat sea pirates Indonesia has warned a Philippine region could become the “next Somalia”

T

he Philippines is seeking US and Chinese help to guard a major sea lane as Islamic militants shift attacks to international shipping, officials said yesterday.

Manila does not want the Sibutu Passage between Malaysia’s Sabah state and the southern Philippines to turn into a Somalia-style pirate haven, coast guard officials said.

The deep-water channel, used by 13,000 vessels each year, offers the fastest route between Australia and the manufacturing powerhouses China, Japan and South Korea, they added.

Philippines are becoming increasingly dangerous.

“If ship owners will skirt that area just to avoid kidnap at sea activities by these terrorists, for sure, it will have an additional cost,” Philippine Coast Guard chief Commodore Joel Garcia told AFP. “It’s not just the concern of the Philippines or Indonesia and Malaysia, but of the international shipping community.”

Manila plans to ask its longstanding defence ally the United States to hold joint exercises in waters off the southern Philippines to address the problem, Defence Secretary Delfin Lorenzana told AFP yesterday.

And Philippine President Rodrigo Duterte last week urged China to launch patrols off the piracy-plagued waters, citing Beijing’s dispatch of a naval convoy to the Gulf of Aden in 2009 to protect Chinese ships from Somali pirates.

Duterte made the comments a day after meeting a special envoy from Indonesia who wanted to know what Manila, which has one of the weakest naval forces in the region, plans to do to address the threat.

Garcia said details of the possible sea patrol cooperation with China would likely be discussed at a meeting between the two countries’ coast guards in Manila next week.

Lorenzana said Manila plans to “talk to the ministry of defence of China on how to operationalize this joint patrol” off the southern Philippines.

Garcia said rising incidents of piracy around the 29-kilometre-wide Sibutu Passage threaten to push up overall shipping costs, including insurance for vessels, cargo and crew.

Diverting ships to Indonesia’s Lombok Strait would be more expensive and voyages would take longer, said Filipino coast guard spokesman Commander Armando Balilo.

The Filipino coast guard recorded 12 piracy or kidnapping incidents in the passage in the last six months alone, on top of four unsuccessful attempts by gunmen to board vessels.

“It (a Somalia-like situation) has not happened, but if it escalates into a full-blown piracy area, that would be scary because they will avoid that route. They will use other routes and shipping costs will rise,” Balilo said.

AFP

‘Philippine President Rodrigo Duterte last week urged China to launch patrols off the piracy-plagued waters’ In the past year Abu Sayyaf gunmen from the southern Philippines have boarded ships and kidnapped dozens of crewmen for ransom in waters between Malaysia, Indonesia and the Philippines, raising regional alarm.

Indonesia has warned the region could become the “next Somalia” and the International Maritime Bureau says waters off the southern

Red tape

Employment

Monetary policy

Chinese regulator announces Mainland to issue preferential delegation in transport approval policies for Taiwanese

Indian c. bank keeps policy rate on hold, with eye on inflation

China’s top economic planner announced yesterday that it will pass down most of its authority to approve transport investment to local officials.

Provincial governments will be authorized to examine and approve feasibility reports for new expressways, some bridges and tunnels, and normal-speed regional railways, according to a statement from the National Development and Reform Commission (NDRC).

The projects will still need to be recorded by the central government.

The construction of academies and research institutions concerned with transportation will also enjoy the new policy. Rail lines, if mainly funded by China Railway Corp., the country’s railway operator, can be determined by the company itself.

The move is the latest effort by the NDRC to simplify administrative procedures in infrastructure investment, a significant sector for the slowing economy.

China’s fixed-asset investment in transportation last year was RMB2.85 trillion (US$413.95 billion), with more capital expected to be pumped into the sector in the next few years. Xinhua

India’s central bank kept its policy rate on hold for a second meeting in a row, opting to wait for more clarity on the trend for inflation and on how a radical crackdown on “black money” would impact economic growth.

The Reserve Bank of India (RBI) also changed its stance to “neutral” from “accommodative”, saying it would monitor inflation, despite calls for the central bank to support an economy dealt a major blow when Prime Minister Narendra Modi in November abolished high-value notes in a bid to target unaccounted cash, or “black money.”

The RBI monetary policy committee yesterday voted 6-0 to keep the repo rate at 6.25 per cent, marking its third straight unanimous decision since being established in September.

A Reuters poll last week showed 28 of 46 participants saw the RBI cutting the rate by 25 basis points to its lowest since November 2010 yesterday, but analysts warned it could be a close call.

“The committee decided to change the stance from accommodative to neutral while keeping the policy rate on hold to assess how the transitory effects of demonetisation on inflation and the output gap play out,” said the RBI in a statement. Reuters

A Chinese mainland spokesperson said yesterday that Beijing will issue policies to support and attract Taiwanese to work and live on the mainland.

The policies are currently being drawn up, An Fengshan, spokesperson of the Taiwan Affairs Office of the State Council, said at a regular press conference.

An said the policies cover employment, social insurance and living needs, adding that the policies will not only facilitate Taiwanese to live and work on the mainland, but aim to boost the social and economic integration of the two sides.

In response to a question concerning remarks by the Taiwan administration about Taiwanese enterprises that operate on the mainland, An said the Chinese mainland had always encouraged and supported Taiwanese enterprises and set great store by safeguarding their legitimate rights and interests.

An said huge business opportunities had been created by the reform and opening up of the mainland.

The Chinese mainland will continue to encourage Taiwan businessmen to develop on the mainland, and provide more convenience and opportunities for them. Xinhua