Business Daily #1209 January 9, 2017

Page 1

MSAR laments passing of former Portuguese President Mário Soares Mourning Page 6

Monday, January 9 2017 Year V  Nr. 1209  MOP 6.00  Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm  Hospitality

MGTO: Imperial Palace may not reopen, no request for repair works received Page 2

COURTS

Former Prosecutorgeneral Ho Chio Meng continues to deny accusations Page 3

www.macaubusinessdaily.com

Reserves

China’s foreign currency holdings exceed US$3 trillion in December Page 8

Business

Boeing US$10.1 bln order to expand foothold in India Page 12

New Year, New Concerns Protest

Discontent kicks off the year. With 1,600 citizens taking to the streets to protest new transportation penalties. Drastically increased since Jan. 1. Clamping and towing of vehicles should not be a “business,” says Legislator Coutinho. While Legislator Ng calls the scheme a “farce” concocted to distract from Administration failings. Page 2

MPO expands portfolio

iGaming gamble

Content and service provider for the iGaming industry. Inteplay tells Business Daily about its MSAR operations, the evolution of online gaming, possibilities for the territory and likely models. Currently serving as a sales and marketing hub, further options present themselves for Macau, says CEO Kevin Li. Assuming, that is, the city liberalises online gaming.

Real estate Macau Property Opportunities Fund. Managed by Sniper Capital, it posted 0.9 pct q-to-q jump in Q4 sales. With the company’s MSAR portfolio amassing US$398.3 mln. Its Senado Square development plans have been approved. With completion slated for 2019. Page 6

Look - No hands! Interview | Gaming Pages 4 & 5

HK Hang Seng Index January 6, 2017

22,503.01 +46.32 (+0.21%) Worst Performers

Hengan International Group

+2.24%

AAC Technologies Holdings

+1.35%

China Shenhua Energy Co

-1.78%

Cathay Pacific Airways Ltd

-0.76%

Wharf Holdings Ltd/The

+2.18%

PetroChina Co Ltd

+1.17%

BOC Hong Kong Holdings

-1.56%

MTR Corp Ltd

-0.65%

Hang Lung Properties Ltd

+2.00%

-1.33%

CK Hutchison Holdings Ltd

-0.61%

Tencent Holdings Ltd

+0.93%

Belle International Holdings

China Petroleum & Chemical

+1.93%

Link REIT

+0.86%

Sands China Ltd

-1.03%

Galaxy Entertainment Group

-0.58%

China Overseas Land &

+1.67%

AIA Group Ltd

+0.79%

China Resources Power

-0.81%

Lenovo Group Ltd

-0.40%

17°  21° 17°  21° 18°  20° 15°  20° 15°  18° Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Transportation Collaboration on telematics and autonomous driving. Baidu Inc. and state-owned Beijing Automotive Group Co. gear up for the big reveal. As industry and gov’t join hands for a self-driving vehicle push in China. Page 8


2    Business Daily Monday, January 9 2017

Macau Protest

Taking to the streets 1,600 protesters gathered to submit a petition demanding the government rescind the new transport regulations. Meanwhile, Legislator Ng expressed the launch of the new regulations is a conspiracy by the MSAR Government Cecilia U cecilia.u@macaubusinessdaily.com

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round 1,600 protesters attended a protest yesterday led by directly elect legislator José Pereira Coutinho, together with the Macau Worker Helper Union and other associations. The protest started at 3:00pm in Tap Seac Square, from which the crowd walked to Government Headquarters to submit a petition urging the MSAR Government to withdraw the new transportation regulations which came into effect on January 1. Coutinho told reporters prior to the protest that they wish to negotiate with the Secretary for Transport and Public Works in order to understand the intention of the government’s decision to drastically increase transportation fees; related in particular to parking, vehicle inspection and ‘illegal parking’ fines. “The government does not have enough resources or time and thus appointed a company to do the favour [of clamping and towing vehicles] and it is the Transport Bureau that is fining vehicles,” said Coutinho. “This [the loss experienced by the company due to unchanged fees by the government] should not be the reason for increasing the fees.”

The legislator again remarked that it is unacceptable to increase the fines by such an extreme extent. “The road is used by all of us,” said the legislator. “The action of towing and clamping illegally parked vehicles should not be seen as a business matter, calculating the loss and profit.” When asked whether the fees should be paid using the public coffers, Coutinho pointed out the different subsidies provided by the government. “If the [parking meter] company is experiencing a loss, the government can subsidise this company, as it usually and currently does – subsidies for electricity, water and buses,” Coutinho said. Meanwhile, most of the protesters expressed their dissatisfaction with the rocketing prices and insufficient number of parking places. “I only earn MOP10,000 per month and I’m fined several times a month,” said one of the protesters.

Complete farce

Another directly elected lawmaker, Ng Kuok Cheong, also attended the protest and expressed his support for the increase in transportation fees in general but not the government’s administrative procedure of this new

regulation. “The government’s administration is a complete farce,” said Legislator Ng. However, regarding control measures, such as “increasing the vehicle tax or prohibiting people from buying any vehicles at a certain time,” relating to the purchase of new vehicles, the measures remaining “confidential” until their implementation, is justified. However, relating to vehicles already in circulation, Ng said that the public sjould have been forewarned of the new regulations, calling them a conspiracy. “Since the government has been criticised for its inability to solve the city’s traffic issues, it seems the

Another protest

A protest led by the New Macau Gaming Professionals Association will be held today in Tap Sec at 4:00pm. The purpose of the protest is to

government is trying to create this to get people’s attention,” Ng said. “With the protest made by the residents, the government will claim that it is making efforts to improve the city while putting the blame on residents for not agreeing with the government’s efforts.” Legislator Ng also pointed out that many of the protesters are fighting against the increase of fees rather than the government’s administrative procedures, indicating that this phenomenon suited the government’s intention. “The government has succeeded in using this farce to provoke citizens in order to redirect citizens’ attention away from its failure in its administration as well as its inability to resolve the city’s traffic; my point of view is that these political means are despicable,” remarked Ng.

urge gaming operators to increase workers’ salaries, claiming that salaries have remained unchanged despite an increase seen in other expenses and inflation.

Hotels

Politics

MGTO may permanently shut down Beijing Imperial Palace

Guilherme Ung quits Cultural Affairs Bureau

The company’s deadline for correcting its irregularities at the hotel property is this Wednesday but the Tourism Office has received no application for improvement works so far Kam Leong kamleong@macaubusinessdaily.com

Director of Macao Government Tourism Office (MGTO) Maria Helena de Senna Fernandes said the government might consider permanently closing Beijing Imperial Palace Hotel given the operator has not conducted any work correcting its irregularities which led to its forced closure. Last July, the Office ordered the hotel property to be shut down for half a year as it had committed serious administrative irregularities and failed to conduct essential fire safety measures. Speaking to reporters last Friday, the MGTO Director announced that the Office had still not received any application from the hotel for renovation works, adding that the authorities would consider closing the hotel permanently and revoke the operator’s licence if no improvement was found after the expiration of the deadline. The hotel management was first given approval by the tourism body to dispatch workers to conduct cleaning and maintenance works inside the venue from August 12 to November 11 last year. In December, MGTO told Business Daily that the period had been extended to January 11 at the request of the hotel operator, indicating, however, that it had received no application from the operator for the works. Meanwhile, the Land, Public

Works and Transport Bureau (DSSOPT) told Chinese language news outlet Macao Daily last week that it had received requests from the hotel operator to alter its renovation plans, saying that the Bureau was still consulting legal advisors on the plans, given the situation of the property. Beijing Imperial Palace Hotel formerly New Century Hotel - is the first 5-star hotel in the city to be temporarily closed by the MSAR Government. The hotel property houses the Greek Mythology Casino, operated under the gaming licence of Sociedade de Jogos de Macau S.A. (SJM). However, the casino has also ceased operations since the beginning of last year for ‘renovation reasons’. Following the temporary closure order of MGTO, Hong Kong-listed Amax International Holdings - which holds 24.8 per cent interest in the casino and is chaired by hotel founder Ng Man Sun - said in a filing in July that the casino could continue to operate despite the closure of the hotel, as advised by its lawyers.

The official is stepping down from the presidency of the Bureau next month Incumbent president of the Cultural Affairs Bureau Guilherme Ung Vai Meng has announced he will step down from his position in the middle of next month, saying the resignation had been planned for a long time. Ung, who has been with the Bureau for over 34 years and headed the body since March 2010, told reporters on Friday that he had filed the request for resignation during the second half of last year. “I came from a world of arts to one of administrative work. I have (always) wished that I could return to the world of arts one day,” he said, as quoted by Chinese language newspaper Macao Daily. “Maybe you find my decision is sudden but I have planned it for years,” he added.

Asked by reporters whether his resignation was due to pressures from recent disputes related to the work of the Bureau, the official did not provide an exact answer, saying only it was an honour for him to have served in the position. He revealed that Secretary for Social Affairs and Culture Alexis Tam Chon Weng had tried to convince him to stay on numerous occasions following his resignation but he hoped to focus on his cultural research and creativity by having more freedom of time. He added that the timing was good for his departure as the operations of the libraries, museums, exhibitions and the cultural centre are all doing well. Describing the delay in the development of the new central library as one of his regrets, he urged the public to trust the Bureau’s work on the matter.

Leung Hio Meng reportedly successor

Guilherme Ung Vai Meng, president of the Cultural Affairs Bureau

Meanwhile, Secretary Tam said over the weekend that he respects the decision of the president despite his regrets about his departure. He believes that the successor of Mr. Ung would be one of the Bureau’s current deputy directors - Leung Hio Ming or Chan Peng Fai. A report from Portuguese-language broadcaster Radio Macau said on Saturday that Mr. Leung would be the next president of the Cultural Affairs Bureau. Leung, who has a doctoral degree in music from the University of Kansas in the U.S., has served the culture organ since 1995 and has been a vice head of the body since September 2012. K.L.


Business Daily Monday, January 9 2017    3

Macau

Courts

Denial of accusation Ho continues to deny all accusations of fraud and abuse of power, claiming no profits were illicitly gained Annie Lao annie.lao@macaubusinessdaily.com

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he city’s Court of Final Appeal continued the criminal bribery trial of former Prosecutor-general Ho Chio Meng on Friday. During the morning trial, the President of the Court of Final Appeal, Justice Sam Hou Fai, continued to go through accusations of contracts allegedly involving shell companies set up by Ho to benefit an alleged criminal group. According to the accusation, eight contracts were granted to provide remote monitoring services for the Prosecutor’s Office, but such services were never provided, with over MOP4 million (US$506,000) incurred. Ho responded that the allegation was untrue and that the facts presented were unclear, adding that the remote monitoring services were under another government department and the issue was not part of the normal duties of the Prosecutor’s Office. “I was not aware of these contracts,” Ho stated. Assistant Prosecutor-general Chan Tsz King questioned why Ho did not know about the contracts signed by Ho, given that the amount involved was large. Ho reiterated that his approval of such contracts was part of his duties and he did not know if the services were actually provided or not.

Maintenance work

According to the accusation, 27 contracts were granted to six construction companies for maintenance and renovation work for Ho’s government residence. Of those total contracts, seven contracts were granted to one of the suspects involved in the corruption charge. The total contracts were valued at over MOP2 million, of which Ho was suspected to have obtained a profit of over MOP480,000. Ho denied that the six construction companies were shell companies, saying: “Shell companies could not provide

such services. They were the actual companies that provided the maintenance and renovation work”. Assistant Prosecutor-general Chan questioned why Ho did not review the contents of the contracts he had signed. “I did not assign these contracts to certain companies. I did not participate in profit seeking. Signing the contracts was to perform my duties so the maintenance and renovation works could be conducted,” Ho reiterated. In addition, under examination were a total of 18 contracts granted to provide microfilm services for the Prosecutor’s Office, for which the former official noted that he “saw the contract and laughed,” calling the content of the accusation “ridiculous”. The contracts were valued at MOP3.85 million, of which Ho was suspected to have gained over MOP2 million. Some 16 of the contracts were awarded without public tender to three companies. Ho claimed that the contracts were signed by the former office chief of the MP.

No shell companies

During the afternoon session, the trial continued reading through contracts signed by the ex-top official, noting in particular an allegation that Ho used two shell companies to arrange for air tickets, accommodation, meals and transportation costs for his ‘female friend’ and other non-government officials for a private trip to Dubai in 2009. A total of 339 contracts were granted by the ex-official to provide such services, of which 128 were awarded directly to the companies. The total contracts were valued at MOP13.25 million, of which Ho was suspected to have gained a profit of over MOP1.7 million. Ho said that the travel agents and other agents charging service fees were part of their normal business practice thus no fraud was involved in those contracts and the agencies were not shell companies, Ho argued.

“Ten per cent service fees for air tickets and 20 per cent for booking hotel rooms were charged. These are the service fees that you have to pay to any travel agent, anyway,” he stressed.

Work-related trip

In addition, Ho noted his opposition to the accusations, in particular relating to the use of the term ‘female friends’, when individuals in question were both male and female. Ho claimed that the ‘female friend’ accompanying him to attend an international conference held in Dubai was on the trip for work purposes to act as a translator. The ‘friend’ in question is Wang Xiandi, who works for the Liaison Office of the central government in Macau. “Representatives from the Supreme People’s Procuratorate of the People’s Republic of China and the Mainland provincial Prosecutors-general also attended the conference. At that time, Wang helped out the officials with the translation work,” Ho claimed. However, Lai Kin Hong, president of the court of second instance, questioned Ho whether the Supreme

People’s Procuratorate should have requested translators from the Ministry of Foreign Affairs to provide translation services instead. “In this case, why would you assign someone who was not even part of the Prosecutor’s Office to provide translation services?” Lai asked. In response, Ho said the reason he asked Wang to provide translation services was that at that time Wang had a close relationship with the Supreme People’s Procuratorate. “Wong was also invited to be the translator for the conference held by the Supreme People’s Procuratorate in Dubai,” Ho claimed. He admitted that the payment was made by the agents to cover all expenses during Wang’s stay. However, assistant Prosecutor General Chan presented evidence noting that the agenda for the trip in Dubai did not show anything that was related to work and only indicated it was a private trip. In response, Ho claimed that they did not actually follow the agenda listed when they were in Dubai. The court hearing is scheduled to continue today.


4    Business Daily Monday, January 9 2017

Macau

Interview | Gaming

Going online Legalising online gaming and liberalising sports betting using the Philippines or British legal frameworks would help the Macau gaming market retain more gamblers and increase revenues for the city’s coffers. So says Kevin Li, CEO of Inteplay, a Hong Kong based company with representation in Macau, Las Vegas, London and the Philippines that provides a platform and contents for online gaming operators Nelson Moura nelson.moura@macaubusinessdaily.com Photos provided by Inteplay

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ow did Inteplay come about and what does it provide? Previously, I was working at UBS Securities and started Inteplay in 2014, with operations in Macau starting the same year. Currently, we have three fulltime employees in the city. We provide gaming contents and systems for gaming operators, including mobile and online operators. Basically, we provide content and services for the iGaming industry. We create our own content or integrate the software into the platform and provide it to B2B operators like bet365 in Europe or larger Asian operators. The company is based in Hong Kong but since we provide these services to enterprises we have partners in Macau, Las Vegas and Europe who help sell our service solutions.

“Online businesses are more efficient and you have many tactics to reward and attract players who can play anywhere at any time without constraint” Kevin li, CEO of Inteplay

What is your largest market? At the moment the majority of our services are provided to Europe and Asia, with most of our business partners, around 45, being in the Philippines, as the only Asian market

that fully licenses online gaming. The second largest markets for us would be Thailand, Malaysia, Indonesia and other Southeast Asian countries. Do you currently provide services to Macau gaming operators? Now for us Macau is more a sales centre and meeting place for the business, especially for annual conferences and industry events such as G2E Asia and MGS. It’s a good city for people in the industry to gather. We used to have a sales office in Macau but don’t anymore because it just wasn’t efficient. Gaming operators and clients wouldn’t come to our office to discuss business and since online gaming is not allowed in the MSAR it’s not our main target. We have a sales office in the Philippines though. Looking at the Philippines market, was legalising online gaming and

Online gaming status United Kingdom

The first country to regulate online gambling, in 2005 the UK defined the sector as gambling operated remotely through methods such as the Internet and telephone. Operators are able to install operations in the UK to explore online gaming such as poker, sports and race betting, casino games, and online slots after obtaining a licence from the UK Gambling Commission with a 15 per cent consumption tax. According to UK Gambling Commission data, as of March 2016 remote gambling in the country generated £4.5 billion (MOP44.5 billion/US$5.6 billion) in revenue.

Philippines

The Philippines is the only country in Asia where online casinos are licensed with permits granted to online sports bookmakers, online casinos and bingo, with

sport betting profitable for the country? Yes, I’d say so since the online gaming business has made large contributions to the country’s gross domestic product (GDP). As the Philippines was the first Asian country to legalise online gaming they’re the number one portal for any gaming operator coming from Europe and other countries, and the first hub in Asia for the sector. Will recent statements by President Rodrigo Duterte about weeding out non-licensed online gaming operators affect the sector? In the country there are two types of online gaming: one targeting Filipino residents and another targeting overseas gamblers. The Philippines authorities want to tackle illegal gaming businesses that target Philippine residents but for legal licensed operators targeting

domestic websites licensed by the government-owned Philippine Amusement and Gaming Corporation (Pagcor) and Special Economic Zone Cagayan. However, in the Cagayan special area betting is only permitted for players from overseas with sports betting only allowed for offshore sporting events. According to Pagcor data, in the first nine months of 2016 the electronic gaming sector registered total revenues of 18.3 billion pesos (MOP3 billion/US$370.3 million)

Macau

The MSAR does not currently offer a legal framework for online gaming licences, with sports betting licences granted only to the Macau Jockey Club for horserace betting, and Macauslot - Sociedade de Lotarias e Apostas Mútuas de Macau managing bets on football and basketball. However, residents are not forbidden to use international gambling websites.

overseas gamblers there won’t be any effect. Can you see Macau legalising online gaming any time soon? Macau plays a heavy role in the gaming industry in Asia, but the majority of its business is land-based so currently there are no companies betting on online gaming since nobody is sure if it will be legalised. However, online is the current trend, and with countries like Japan legalising gaming there will be a push for it. But nobody can know the exact date for when it will be legalised. There is interest, I think, and the government knows that it could help increase revenues for its coffers, too, with taxation and hosting all the services from this industry. Another important impact would be to reduce the amount of illegal gaming businesses and better protect the players by setting certain rules and legislation for the operators who would join this new sector and would have to follow its rules. In conclusion, increased revenues and player protection would be some of the main positive effects (if it were legalised). With the amount of land-based casinos in Macau do you think online gaming has space in the market? I believe it would be a supplement and would help Macau retain certain players enjoy gaming in the city and come back more often. It doesn’t need to be direct cash payment for playing online; it could be a system based upon rewards and mix land-based and online components, which could help player retention. Currently, I’d say online sports betting and live dealer games are the most popular forms of online gaming. With sports betting only existing as a single licence in Macau, should the government liberalise this area to increase the market? Yes, breaking the monopoly is an obvious move to free the market and add competitors to provide much better services to target players. What are the advantages online gaming has for land-based casinos? Online businesses are more efficient and you have many tactics to reward and attract players who can play anywhere at any time without constraint. Do you think gaming addiction is more prevalent in online gaming? Actually, if the government can provide a clear regulatory framework, it’s easier to set certain restrictions on online gaming for the permitted


Business Daily Monday, January 9 2017    5

Macau age groups, the allowed time spent gambling, and blacklisted gamblers. It’s easier to control compared to land-based casinos.

“Japan’s gaming legalisation] could have a certain impact and effect upon Macau business but the city has obtained an important position in the Asian gaming industry that is hard to change” Kevin li, CEO of Inteplay

What is the future of online gaming? I think the age group of players will become younger and younger, and different age groups will want different gaming experiences. No matter if it’s online or offline you have to adapt your business to the necessities of the different age groups and provide a better service. The market is also technology driven, with augmented reality and virtual reality in the first stages in the industry. Skill-based gaming is also pretty promising in markets like Mainland China, Hong Kong and even Macau, since it’s player against player; and I can see these contents becoming more and more popular than player against machine. It can also attract a younger generation of gamers, hardcore players will always

be more attracted to traditional casino gaming but more casual gamers could also be attracted to this new form.

jurisdictions that try to regulate and make the system work. There are some weaknesses and breaches but the government can change that.

Some people have argued that skillbased gaming would give too much advantage to experienced players. Do you think that would be an issue? As long as a skill-based tournament is organised equally and fairly I think it would be normal for experienced players to have an advantage.

What country in the world would offer the best online gaming legislation model to emulate? I believe the United Kingdom since it was the first country to legalise online gaming and has a very adaptable and clear law and licence system.

Do you think the Philippines model could be a model for the f u t u r e l ega l i sati o n o f o n l i n e gaming in Macau? I think the Philippines model just follows the example of international

What country in Asia do you think is now closer to legalising online gambling? Probably Japan and South Korea. Does the recent legalisation of integrated resorts in Japan threaten

the Macau market? Th e e n t e r t a i n m e n t i n d u st r y competition is worldwide. There could be a certain impact and effect upon the Macau business but the city’s obtained an important position in the Asian gaming industry that’s hard to change. What are your predictions for how the gaming market in Macau will fare in 2017? I think the gaming market has already reached bottom and with Macau’s economy closely dependant upon Mainland China’s economy I believe it will slowly recover, with gaming operators betting more on mass entertainment for the mass market.


6    Business Daily Monday, January 9 2017

Macau Opinion

Sheyla Zandonai* In review 2016 was a challenging and surprising year for Macau. Gambling revenues oscillated, although they hit more highs than lows, reversing the declining pattern apparent since 2014. Tourism crossed new frontiers; with more visitors from Korea and Japan, although more longterm visitors also flooded the city. Justice affairs closed in December, opening a puzzling chapter for the year ahead. The LRT’s U-turn in planning made us slightly dizzy. And there has been no inaugural ride yet. The historic enactment of Macau’s territorial waters was also marked, opening exciting prospects that we hope might set sail and not remain becalmed. A new Central Library project. A controversial but case-closed plan (so far) after the initial proposal dragged on for nearly 10 years in the government’s lap. Checked. The Cultural Affairs Bureau renovated and reopened forgotten historical venues: the Patane Library, Dr. Sun Yat Sen’s Chong Sai Dispensary, the Maritime workshops, all in the Inner Harbour area. Beautifully restored buildings, highlighting cherished Chinese memories and personalities of Macau. Not all terribly famous moments regarding the leadership’s record, but not all terribly disappointing. The government has worked hard – or at least some officials have – although not always in the directions residents expected or judged sensible. Recent toughened penalties for drug use serve as an example of how legislation can go against successful international practices on decriminalization to favour an approach of the likes of Duterte and hard-line regimes in Southeast Asia and the Middle East. Even in terms of Confucian moral rectitude, it is difficult to make a cogent case for this one, when Sin City is rife with lax moral standards elsewhere. But the approval of the domestic violence law should be highly praised. Never mind New Year’s Eve going dark for the duly-noted absence of traditional fireworks display. Residents were, nevertheless, offered another, if rather low-key spectacle of light at the eponymous festival prior to the start of 2017. And the casinos diligently stayed bright enough all year long. But if, perhaps, the year has started off on the wrong foot there is still a chance to make it right again three weeks from now, when Chinese celebrations herald the arrival of Spring. Not every city is lucky enough to have two New Year celebrations on their calendar. So, we might as well start on a positive note. For a New Year ahead is as good as a whole year ahead. Rest assured, there will be time for fussing and fighting, my friend. *scholar and contributor to this newspaper.

Real estate

MPO Fund’s net asset value grows The company expects to receive approval from the government for the detailed plan for its Senado Square project during the third quarter of this year Kam Leong kamleong@macaubusinessdaily.com

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acauPropertyOpportunities Fund Ltd (MPO), managed by property investment company Sniper Capital, saw its total net asset value jump 0.9 per cent quarter-to-quarter to US$228.3 million (MOP1.83 billion) as at the end of September. According to its fourth quarter investor update to the London Stock Exchange last week, the total value of the company’s portfolio in the MSAR amounted to US$398.3 million as at the end of September last year, growing 1.2 per cent quarter-to-quarter. In the filing, the company said its retail development project in Senado Square ‘has made good progress during the quarter’. For the moment, the company maintains its expectation to submit a detailed plan for the project within this quarter whilst the green

light from the authorities is predicted during the third quarter of the year. Last month, the company announced that the architectural connect plan for the project had been approved by the MSAR Government, following the company’s acquisition of the land plot in 2007. The project - named ‘Senado Square’ - is slated for completion in 2019. The complex will provide 67,800 square feet of space divided into retail and food and beverage space, according to the company’s announcement in December.

The Waterside

Meanwhile, as at December 31, average rental rates at The Waterside - Tower Six of high-end residential project One Central Residences on the Peninsula - dropped 7 per cent quarter-to-quarter to HK$17.96 per square metre per month. ‘Rental rates at The Waterside were adjusted downward to more reasonable levels to ensure that our

MPO’s Senado Square project, slated for completion in 2019

property remains competitive with other developments,’ the firm notes in the filing. Nevertheless, the occupancy rate at the residence jumped 12 percentage points to 49 per cent as at the end of 2016 from the end of the third quarter. ‘The improvement in occupancy level was attributed to the return of junkets,’ the group remarked. ‘Tenant retention, however, remains a key challenge for the leasing team. Competitive rents offered by other developments have been a pull factor that has resulted in an increasing number of leases not being renewed.’

Other properties

In addition, the company said residential activity for its other property The Fountainside, a mid to high-end residence on Penha Hill, ‘remains muted’ referring to the fourth quarter of last year. ‘The mortgage caps placed on mid to high-end properties have resulted in potential buyers adopting a conservative approach in their purchase intention,’ the group said. For the group’s new luxury private residence on Estrada da Penha, it said it was still working with property agents to ‘identify the right buyer’. ‘It is important that we remain patient during this process as the quantum price for the property is significantly high, and we believe high net worth individuals are still waiting for a more favourable investment climate before committing,’ the group claimed. Industry-wise, the company is optimistic about the city’s residential property market. ‘Macau’s residential property market is expected to remain stable as home prices are still at an attractive level, currently 31 per cent below their peak in 2014, and the market is experiencing a trough in the current property cycle,’ the company wrote.

Appointment

Echo Chan returns to Forum Macau The advisor for the Office of the Secretary for Economy and Finance has been named Deputy Secretary-general, again Echo Chan Keng Hong is to return to the Permanent Secretariat of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries - Forum Macau - as Deputy Secretary-general. The reappointment was announced by the Office of the Secretary for Economy and Finance in a press release last Friday. It came some 14

months after Ms. Chan stepped down from the same position and from that of co-ordinator of the support office of the secretariat for personal reasons in November 2015, following a brief eight-month tenure. Meanwhile, the position of the co-ordinator for the supporting office is vacant and the Secretary’s Office told TDM Radio that it would

announce the related appointment when appropriate. Following her resignation, Ms. Chan was replaced by an official from the Macau Economic Services (DSE) - Cristina Gomes Pinto Morais - for one year, filling both the role of Deputy Secretary-general and of co-ordinator. Ms. Chan, who joined Macao Trade and Investment Promotion Institute (IPIM) in 1995, had been an Executive Director at IPIM since 2004. She is also a former co-ordinator of the Traditional Chinese Medicine Industrial and Scientific Park, a project invested in by the MSAR and located in Hengqin, born out of co-operation initiatives between the city and the Guangdong Government. K.L.

Obituary

MSAR laments passing of Mário Soares The MSAR’s Chief Executive laments the death of Mário Soares, “a leader of excellence . . . [who] . . . contributed to the impetus of dialogue between China and Portugal”. “It is with sincere respect that I express my sorrow for the passing of the former President of the Portuguese Republic, Dr. Mário Soares, and express my deepest condolences to his family,” said Chui Sai On in a note released yesterday. According to the Chief Executive, “aside from being an excellent leader . . . [he] . . . also maintained strong relations with Macau . . . [and] . . . contributed to the impetus of dialogue between China and Portugal in matters concerning Macau”. “In this way, after his passing, his absence will be profoundly noted,” reads the communiqué.

Mário Soares passed away in the Hospital de Cruz Vermelha in Lisbon where he had been since December 13. The Portuguese Government has declared three days of national mourning starting from today. Born December 7, 1924, in Lisbon, Mário Alberto Nobre Lopes Soares, lawyer, fought against the dictatorship of the Estado Novo and was the founder and first leader of the Portuguese Socialist Party. Following the Portuguese revolution, on April 25, 1974, he returned from exile in France to become Minister of Foreign Affairs and Prime Minister between 1976 and 1978, and 1983 and 1985, requesting that Portugal join the Comunidade Económica Europeia (European Economic Community) in 1977, signing the respective treaty in 1985.

In 1986, Soares won the presidential elections to become President of the Republic of Portugal for two terms, until 1996, three years before Macau’s handover to China. Lusa


Business Daily Monday, January 9 2017    7

Macau Gaming

Melco Crown reshuffling management and executive members

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ocal gaming operator Melco Crown Entertainment Limited has announced a new arrangement of its management team as well as the appointment of key executive members, in a press release. A total of four appointments were made regarding the group’s overall operations as well as specific properties. Gabriel Hunterton was appointed the group’s Property President of the City of Dreams complex, with 18 years in the gaming industry in both Las Vegas and Macau. Andy Choy, former Chief Gaming Officer for Melco International, was also appointed Property President, for the group’s Altira Macau and Mocha Clubs segments. In addition, the press release notes the appointment of Frederic Winckler

as Chief Marketing and Brand Officer for Melco, serving as a member o the executive committee of Melco Crown Entertainment (MCE). Jariath Lynch was appointed to the newly-created role of Senior Vice President of Hotels and Food & Beverage, also serving as a member of the executive committee of MCE. Chairman and CEO of MCE, Lawrence Ho, noted in the release that “these changes are part of the process to make MCE stronger and more efficient, and to better position the Company to fully exploit future growth opportunities”. Melco notified Business Daily that with regard to the details of the group’s Studio City property’s Phase II development, details can not yet be provided as the project is “still in the early stages of planning”. C.U.

Gaming

SJM anticipates Jai Alai re-opening by month-end In addition, the company said it has no plans for any overseas expansion Gaming operator SJM Holdings Ltd. hopes to reopen the Jai Alai complex prior to Chinese New Year, by the end of this month, according to executive

director of the group, Angela Leong On Kei, yesterday. The company executive told reporters that the reopening of the

Gaming

Imperial Pacific re-designates Judge Sullivan Hong Kong-listed Imperial Pacific International Holdings Limited announced the re-designation on Friday of retired federal Judge Eugene Raymond Sullivan from Independent Non-executive Director to Nonexecutive Director, with effect from the day of announcement. Judge Sullivan has also been appointed a Compliance Committee Member for the company. According to the company’s filing posted with the Hong Kong Stock Exchange, Judge Sullivan’s role as Non-executive Director will span one year and will automatically renew for successive terms of one year upon its expiration, subject to a mandatory retirement

by rotation ‘at least once every three years,’ according to the company filing. The Judge acted as a federal Judge under former United States President Ronald Reagan, and as Chief Judge of the U.S. Court of Appeals for the Armed Services under former President George W. Bush. In November, Imperial Pacific denied it had received any notification suggesting it was under investigation by U.S. federal authorities regarding cash flows in the casino, following a Bloomberg article stating that the U.S. Treasury’s Financial Crimes Enforcement Network ‘has taken notice of activities at Best Sunshine’. Best Sunshine is a subsidiary of Imperial Pacific and operator of the group’s temporary casino in Saipan. M o o d y ’ s has si n c e p u t th e group under review for a possible downgrade in its credit rating, and Bloomberg in December wrote that the bond the group was planning to use for funding construction of its new US$7 billion casino property was ‘off the table for now’ due to not offering a high enough yield to investors given potential fluctuations in the island’s gaming regulations. C.U.

casino complex is still awaiting government approval. In November, Ms. Leong said the gaming venue, which is near the ferry terminal on the Peninsula, would have around 30 to 40 mass gaming tables when it reopens, with several local restaurants including the group’s Grand Buffet that used to be at its flagship property, the Grand Lisboa. Meanwhile, the executive director

said SJM does not have any plans to expand its gaming business beyond the Special Administrative Region, including to Japan, which recently passed a casino legislation bill. Speaking on Macau Forum, hosted by broadcaster TDM Radio, the gaming boss expects Japan’s gaming legalisation will not have any significant impact upon the city’s gaming industry. She believes that the local casino industry will have developed to another level by the time the first casino in Japan opens between 2020 and 2022. K.L.


8    Business Daily Monday, January 9 2017

Greater China Transportation

Baidu joins BAIC as Mainland pushes for home-grown driverless cars China is seeking to shed its image as a cheap manufacturer of products with little value-added content

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aidu Inc. and state-owned Beijing Automotive Group Co.’s collaboration on telematics and autonomous driving is almost ready for its coming-out moment, as industry and government join hands for a self-driving vehicle push within China.

A BAIC-built model equipped with Baidu tech will debut in April at the Shanghai auto show, BAIC Chairman Xu Heyi said in interview Friday at the trade show CES 2017 in Las Vegas. The two companies also plan to conduct road testing of a car that will be autonomous in limited environments by the end

of this year. China has set a goal for 10 per cent to 20 per cent of vehicles to be highly autonomous by 2025 in the world’s biggest auto market, and for 10 per cent of cars to be fully self-driving in 2030. State broadcaster China Central Television began airing a five-part series this month on one of its prime time programs to highlight the country’s efforts in autonomous vehicles and related technology. “It’s a smart move for both to team up,” said Bill Russo, managing director of Gao Feng Advisory Co.

“BAIC can bring manufacturing and Baidu can bring technology capability to solve mobility problems.” The cooperation with BAIC is Baidu’s most comprehensive, though the internet giant also is working with other automakers on joint development of self-driving cars, Baidu President Zhang Yaqin said Friday. The Beijing-based company is close to setting up a new research center near Seattle that will focus on artificial intelligence and cloud computing and security, he said.

Start your engines

Baidu formed a self-driving car team in Silicon Valley in April that it said would employ more than 100 researchers and engineers by the end of last year. It’s partnered with chip maker Nvidia Corp., has been testing its autonomous vehicles in eastern Chinese cities including Wuhu and Shanghai and earned a permit from California to test in the state last year. BA I C, o w n e d b y t h e l o c a l government of Beijing, has made progress of its own. The automaker whose joint-venture partners include Daimler AG and Hyundai Motor Co. in April let customers ride in selfdriving cars on a test track. China is seeking to shed its image as a cheap manufacturer of products with little value-added content. The government is pushing its technology and manufacturing industries to create more sophisticated products and services in line with the global trend toward digitization and internet connectivity. Bloomberg News

Reserves

China reserves hover above US$3trln on gov’t support The decline of foreign exchange reserves in December was mainly because the central bank supplied funds to maintain balance in the foreign exchange market and the depreciation of non-U.S. dollar currencies China’s foreign currency holdings remained above US$3 trillion in December even as the yuan capped its steepest annual decline in more than two decades. Reserves fell US$41.08 billion to US$3.01 trillion, the People’s Bank of China said in a statement Saturday. That matched a US$3.01 trillion estimate in a Bloomberg survey of economists. China may take measures to keep its foreign-currency stockpile from slipping too far below the key US$3 trillion mark to avoid hurting investor confidence and spurring further declines in the yuan, according to economists at major banks. Policy makers have recently rolled out extra requirements for citizens converting yuan into other currencies after the annual US$50,000 quota for individuals reset Jan. 1. “China’s government is well positioned to control outflows more effectively if it wants to, though it may not want to be seen as reversing China’s ‘opening’ strategy,” Wang Tao, head of China economic research at UBS Group AG in Hong Kong, wrote in a recent note. “In the long run, it may not have much choice if FX reserves fall more sharply on the back of intensifying capital outflow pressures.”

Central bank

The decline of foreign exchange reserves in December was mainly

because the central bank supplied funds to maintain balance in the foreign exchange market and the depreciation of non-U.S. dollar currencies, the State Administration of Foreign Exchange said in a separate statement on Saturday. For the full year of 2016, the SAFE said the central bank’s effort to stabilize the yuan was the key reason for the drop in reserves. “The combination of policy-induced yuan stabilization and higher reporting requirements for households

buying FX will buy the PBOC a little breathing room, preventing escalating outflows in the first month of the year,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a note. Policy makers intensified new measures at the beginning of the new year to choke capital outflow including extra requirements for citizens converting yuan into foreign currencies. Last week, the currency posted greater volatility, with the offshore rate notching up its biggest two-day gain on record just days after completing its worst yearly performance against the dollar. The yuan fell 0.9 per cent last month, capping a 6.5 per cent drop over the year. Policy makers now may prefer using capital controls instead of burning through foreign exchange reserves to

defend the yuan, said Gao Yuwei, a researcher at the Bank of China Ltd.’s Institute of International Finance in Beijing.

Dollar rally

There are still uncertainties facing the yuan as to whether the resurgent dollar will continue its rally in January and the Federal Reserve’s future U.S. interest-rate hikes, said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. China’s gold reserves stood at US$67.9 billion by the end of December, compared with US$69.8 billion a month earlier. The nation kept gold reserves unchanged at 59.24 million troy ounces for a second month in December, the first time it halted purchases for two consecutive months since disclosing holdings as of June 2015. Bloomberg News


Business Daily Monday, January 9 2017    9

Greater China Economy

In Brief

China is confident economy grew 6.7 pct in 2016 China is confident to have reached an economic growth of 6.7 per cent in 2016, within a targeted range set earlier in the year, Vice Finance Minister Zhu Guangyao said on Sunday. China’s economy expanded at a steady 6.7 per cent in the first three quarters last year, and Zhu said he was confident the growth rate would have reached the same level or more in the fourth quarter of 2016. Zhu’s remarks were made at a forum held by Tsinghua University in Beijing. China, which had been aiming for a 6.5-7 per cent economic growth for 2016, boosted government spending, saw a housing rally and record high levels of bank lending last year, which, however, also led to an explosive increase in debt. Many analysts believe growth was lower than official data suggests, but acknowledge that the construction boom significantly underpinned the economy.

A government-run think tank said earlier this month that China’s economic growth could slow to 6.5 per cent in 2017 from about 6.7 per cent in 2016. Zhu also said the global economy would face some uncertainty this year amid worries about U.S. policy

changes after President-elect Donald Trump takes office on Jan. 20. During his campaign, Trump threatened to declare Beijing a currency manipulator and levy a 45 per cent punitive tax on all Chinese goods to reduce a massive U.S. trade deficit with China. Reuters

Watchdog

CSRC stresses risk prevention in steadier market China’s securities watchdog said it will attach greater importance to risk prevention in the stock market in 2017. The China Securities Regulatory Commission (CSRC) will keep a close eye on financial conditions both at home and abroad and be prepared, said its assistant chairman Xuan Changneng. He made the remarks Saturday at the 21th China Capital Market Forum

on financial regulation, saying the CSRC has a bottom line of risk control. The stock market in 2016 was much steadier compared with a year earlier, he said. Only seven trading days registered changes beyond two per cent from March to December last year, and the benchmark Shanghai Composite Index gained 15 per cent in the period, he said. The two stock exchanges both saw

fluctuations of less than 10 per cent in the second, third and fourth quarters, he added. IPOs and refinancing by cash raised RMB1.33 trillion (US$190 billion) last year, up 59 per cent. IPOs hit a fiveyear high, Xuan said. The bond market also flourished, with non-financing enterprises issuing RMB2.87 trillion of bonds last year, up 170 per cent, he said. Xuan said last year’s progress was marked by action against wrongdoing as well as a vibrant market. Lai Xiaomin, president of China Huarong Asset Management Co., a major state-owned asset management company, said financial risks were generally controllable, but challenges remain. Lai, attending the same forum, highlighted the buildup of non-performing loans, a slower economy, shortage of liquidity and squeezed profit space as major risks. He called for better corporate governance structure to hold directors and supervisors responsible, while stepping up regulation and granting greater authority to regulators. Xinhua

Real estate

Shanghai suspends sales of commercial office projects Housing developers used “false propaganda to seriously mislead housing buyers” for such projects Municipal authorities in Shanghai suspended sales of commercial office projects from Jan. 6, in the latest move to crack down on irregularities in the property market amid concerns about soaring prices. The suspension came after the municipality’s housing and urbanrural development committee received increasing complaints about “illegal sales and unauthorized alterations” to commercial housing projects, it said in an online statement published over the weekend. “The committee, along with other relevant departments, has launched the focused clean-ups and verifications starting Jan. 6, and signing contracts online for such projects would be suspended during the period,” it said. The committee added that it had found “relatively serious

unauthorized changes” to commercial office projects in the city, with some privately installing gas pipelines to change the nature of the use of the housing. Housing developers used “false propaganda to seriously mislead housing buyers” for such projects,

according to the statement. Media reported in late December that the city had suspended planning and management approvals for apartment-style office buildings that have residential function. The country’s first- and secondtier cities have rolled out a slew of measures over the past few months, including higher mortgage down payments and tighter real estaterelated loans, in an attempt to cool their housing markets after a rally in housing prices. Reuters

Jobs

Digital economy to create 400 mln jobs in China: report China’s digital economy is predicted to create over 400 million jobs by 2035, a new report has said. Internet-based economy could be worth US$6 trillion by then, according to a Boston Consulting Group report, released at a new economy summit sponsored by Alibaba Group on Saturday. Alibaba, China’s biggest online trader, is expected to generate over 100 million of those jobs, according to the report, with 30 million created last year. As jobs are created, digital technology like cloud computing and artificial intelligence will replace more and more manpower, the report said. Meanwhile, 20 per cent of the world’s population will become self-employed or freelance via the Internet in the next decade, Alibaba Vice President Gao Hongbing said at the summit. The digital economy will surpass the manufacturing sector in scale and account for a quarter of the world’s economy, Gao said. Pollution

Weeklong smog in Beijing clears A cold front on Sunday dispersed the smog which had been hovering over Beijing for the past week. Beijingers saw blue sky again on a sunny weekend. People with children who had been cloistered indoors for the week took to parks and streets for the first time since the beginning of the year. Beijing lifted its orange alert for air pollution on Saturday night and emergency measures such as vehicle restrictions and the suspension of factory production ended and construction work recommenced, according to the city pollution response headquarters. Beijing has a four-tier alert system for pollution, with red the highest, followed by orange, yellow and blue. The orange alert means the air quality index is forecast to exceed 200 for three consecutive days. Recall

Volkswagen to recall nearly 50,000 vehicles in China Volkswagen China will recall 49,480 vehicles due to brake design defects starting Feb. 6, according to China’s quality watchdog. The recall involves imported Beetles produced between July 1, 2012 and Aug. 6, 2015, and imported Golf Variants produced between July 1, 2012 and July 6, 2013, according to a statement from China’s General Administration of Quality Supervision, Inspection and Quarantine. Due to a defective noise filter on brake boosters, the brake system may malfunction after cruising. Volkswagen China advised affected car owners to stop using the cruise control system and will fix the brake booster for free.


10    Business Daily Monday, January 9 2017

Greater China

Technology

China chip policy poses risk to U.S. firms, White House says The warnings about China could give ammunition to President-elect Donald Trump two weeks ahead of his swearing in David McLaughlin and Ian King

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hina’s push to develop its domestic semiconductor technology threatens to harm U.S. chipmakers and put America’s national security at risk, the Obama administration warned in a report that called for greater scrutiny of Chinese

industrial policy. China’s goal to achieve a leadership position in semiconductor design and manufacturing, in part by spending US$150 billion over a 10-year period, requires an effective response to maintain U.S. competitiveness in the industry, according to the report released Friday. “We found that Chinese policies

Finance

Baidu, CITIC approved to set up China’s first independent direct bank Chinese Internet giant Baidu has been approved to open a direct bank, finally joining its tech counterparts in offering banking services. The country’s top banking regulator has approved the establishment of Baixin Bank, which has joint investment from China CITIC Bank and Baidu to offer direct banking services. This is the first time for an independent legal entity in China to run a direct banking business. Direct banks are those without any branch networks, offering services remotely via online and telephone banking. China CITIC Bank, one of the country’s largest lenders by assets, will

hold a controlling stake in the new bank, which will combine cloud computing, artificial intelligence, mobile Internet and other leading technologies to offer financial services. China started piloting private banks in 2014, and Baidu’s counterparts Alibaba and Tencent have already successfully gained private banking licenses by forming similar alliances with partners. Robin Li, Baidu’s board chairman and CEO, expects the new team will make full use of Baidu’s leading technology, huge data and expertise in online operations. Xinhua

are distorting markets in ways that undermine innovation, subtract from U.S. market share, and put U.S. national security at risk,” the President’s Council of Advisors on Science and Technology said in the report. The warnings about China could give ammunition to President-elect Donald Trump two weeks ahead of his swearing in. Since winning the election, Trump has backed up fiery campaign rhetoric toward China with a series of pronouncements on Twitter and the appointment of China hawks to key roles. Trump’s attacks have stoked fears of a trade war between the world’s two biggest economies.

Chinese scrutiny

China is prepared to step up its scrutiny of U.S. companies in the event Trump takes punitive measures against Chinese goods, according to people familiar with the matter, Bloomberg News reported Thursday. The options include subjecting well-known U.S. companies or ones that have large Chinese operations to tax or antitrust probes, the people said, asking not to be identified because the matter isn’t public. Other possible measures include the launch of anti-dumping investigations and scaling back government purchases of American products, according to the people. “China has gained from global openness but has been less committed to sustaining it - and, in some cases, has worked against it,” the White House report said. “Now, globally, more countries are questioning the benefits of economic openness - a trend that will shape, and be shaped by, how the United States responds to challenges in the semiconductor arena.” U.S. industry leaders don’t want Trump to engage in a standoff with China. Giving corporate tax breaks to U.S. companies is the way Trump advocates bringing back jobs to this country, according to Intel Corp. Chief Executive Officer Brian Krzanich. “The real answer is not a trade war, it’s not restrictions, it’s really about making the U.S. more competitive,” Krzanich said on CNBC Friday. “Lowering the tax rates, making it easier for people to do manufacturing here, that’s what will bring manufacturing back to the U.S.”

Working group

Krzanich attended the recent meeting between the president-elect and leaders of technology companies. The Council of Advisors on Science and Technology’s semiconductor working group includes several industry executives such as Paul Otellini, the former chief executive officer of Intel, and Paul Jacobs, the chairman of Qualcomm Inc. Foreign acquisitions of U.S. businesses are routinely reviewed for national security risks by a panel of officials led by the Treasury Department. That panel - the Committee on

Foreign Investment in the U.S. - has frustrated some Chinese investment in the U.S. semiconductor industry. In December, President Barack Obama blocked a Chinese company from buying the U.S. business of Germany’s Aixtron SE, a semiconductor-equipment supplier. The White House report recommends a strategy for U.S. policy makers that includes countering “innovation-inhibiting” Chinese industrial policy and improving the business environment for U.S. chipmakers. It suggests broadening what is considered a national security risk as part of CFIUS reviews in certain circumstances, while also cautioning against blanket opposition to China’s advancement in the industry. U.S. officials should also work with allies to strengthen global export controls, according to the report.

Industry leaders

The U.S. has led the semiconductor industry since it took off in the 1960s. Companies such as Intel and Qualcomm have pushed the technical bounds of innovation in the US$300 billion market. In 2015, China didn’t have one company among the top 10 industry suppliers. China, the world’s most populous country, is nonetheless the biggest buyer of the electronic components. The main rivals to the U.S.’s dominance are in South Korea and Taiwan, where companies such as Samsung Electronics Co., the second-largest chipmaker by revenue behind Intel, and Taiwan Semiconductor Manufacturing Co. have gained ground over the last decade.

Chinese subsidies

To strengthen its position in chip manufacturing, China relies on subsidies for domestic suppliers, according to the White House report. That can harm U.S. firms by allowing Chinese companies to sell below cost and reduce U.S. market share, the report says. China also encourages domestic customers to buy only from Chinese suppliers and requires technology transfer to China in exchange for access to its market, the White House said. A representative of the Chinese embassy in Washington didn’t respond to an e-mail seeking comment about the report. Underlining some of the difficulties that U.S. chipmakers have faced gaining unfettered access to their largest market, in February 2015, Qualcomm announced it had paid US$975 million to settle a case brought by China’s National Development and Reform Commission accusing the company of abusing its dominant position in the chip market for mobile phones. Under the settlement, Qualcomm agreed to lower its licensing fees for phones sold in China to rates that are lower than it charges in other countries, but it’s still striving to get Chinese handset makers to pay up. Bloomberg


Business Daily Monday, January 9 2017    11

Asia Profit

Samsung proves its business remains sound despite Note 7 fiasco The world’s largest maker of mobile devices posted a 50 per cent surge in quarterly operating profit Jungah Lee

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amsung Electronics Co. underscored the resilience of its business when it reported its best operating profit in three years, weathering the death of its fire-prone Galaxy Note 7 with the help of its workmanlike chip and display divisions and cheaper smartphones. The world’s largest maker of mobile devices posted a 50 per cent surge in quarterly operating profit after demand from Chinese smartphone brands pushed up memory chip prices and buoyed the unit that makes organic light-emitting diode screens. Samsung also touched up an older phone line-up with new colors and features, helping tide it over in the Note 7’s absence. Samsung is emerging from its biggest corporate crisis, when reports of

incendiary Note 7s forced the Korean company to kill its most profitable gadget. It still hasn’t revealed the results of a subsequent investigation into an episode that cost Samsung more than US$6 billion and assured Apple Inc. of the lead in premium devices over the holidays. It’s now counting on its next marquee phone to repair its reputation. “Despite the Note 7’s vacuum, Samsung acquitted itself well on the back of sound S7 sales,” said Lee Seung-woo, an analyst with IBK Securities Co. in Seoul. “After a softer landing in the first quarter, Samsung is on track for record June quarter profit with the new S8 coming to market.” Operating income rose to 9.2 trillion won (US$7.8 billion) in the quarter ended December, its biggest profit in three years, the Suwon, South Korea-based company said

in preliminary results Friday. That compares with the 8.29 trillion-won average of analysts’ estimates compiled by Bloomberg in the past four weeks. The stock surged 43 per cent in 2016, snapping a three-year losing streak. Samsung, which settles most component sales in U.S. dollars, also got a lift from a weaker Korean won. The U.S. dollar appreciated to 1,157.4 on average in the fourth quarter compared with 1,121.4 won in the previous three months, according to Bank of Korea data. Samsung is counting on its flagship Galaxy S line this year to fire up a beleaguered mobile division. The next iteration of the phone is said to feature a bezel-less display and voice-enabled digital assistant. But the company’s also warned of slowing key markets and growing uncertainty around trade protectionism and currency fluctuations. Sales were 53 trillion won in the quarter, the company said, compared with the 52.1 trillion won analysts expected. It won’t provide net income or break out divisional performance until it releases final results later this month. While it awaits the next Galaxy S, Samsung should be able to rely on its components divisions to pick up some of the slack.

Best performer

Samsung’s semiconductor division was probably its best performer in the fourth quarter on the back of stronger prices, lifting its shares to new highs in past weeks despite the company’s challenges. Operating income from the chip business probably came to 4.5 trillion won in the quarter, according to the average of six analysts surveyed by Bloomberg, which would mark a record high.

DDR3 4-gigabyte dynamic random access memory chips averaged US$2.48 in the fourth quarter, compared with US$1.75 in the previous three months, according to data from InSpectrum Tech Inc. Samsung’s main U.S. semiconductor competitor painted an optimistic outlook for the industry last month. Micron Technology Inc., the largest U.S. maker of memory chips, predicted stronger-than-expected sales on demand for phone and computer parts. Greg Roh, an analyst at HMC Investment Securities Co., expects chip prices to rally another 30 per cent or more in the first three months of 2017. The company’s display division probably posted a profit of 1.1 trillion won. The proliferation of OLED screens should help in coming quarters: Apple is said to be planning to adopt the technology in at least one new iPhone later this year. Earnings at the consumer electronics unit, which encompasses TVs and appliances, probably fell to 800 billion won because of rising panel prices, according to the analysts surveyed. The most publicly visible mobile arm continues to struggle. Operating income from the unit was probably 2.3 trillion won in the quarter, bouncing back from a record-low 100 billion won profit in the preceding three months, according to the analysts’ survey. Expectations are so low however, it may work in Samsung’s favor. “Many in the market no longer expect a great job from the mobile business, and even with zero gains from mobile, Samsung’s semiconductors and displays will perform better this year,” said Lee Do-hoon, an analyst at CIMB Securities. “Given the lowered expectations, if that business does well, it’s a nice plus.” Bloomberg

Politis

S. Koreans take to streets to participate in 11th weekend candlelit vigil On the other hand, supporters of President Park gathered in the capital city’s southern district, marching towards the office of an independent counsel team Business as usual, hundreds of thousands of South Koreans took to the streets in central Seoul at a cold night to participate in the 11th weekend candlelit vigil. Since a scandal involving President Park Geun-hye and her long-time confidante, which led to Park’s impeachment, emerged in late October, protest rallies have been held every Saturday night. This year’s first demonstration was dedicated to over 300 victims, mostly teenagers, of the Sewol ferry sinking on April 16, 2014. Survivors and demonstrators expressed grief and sorrow for the deceased, pledging themselves to get down to bedrock after permanently removing the impeached

leader from office. On the other hand, supporters of President Park gathered in the capital city’s southern district, marching towards the office of an independent counsel team tasked with investigating solely into the presidential scandal. Park has been branded by prosecutors as a criminal accomplice, the first for a sitting South Korean president, and the team is seeking to find a smoking gun. The supporters have condemned the investigation as lop-sided. In the pro-Park march, the participants, largely elderly voters, protested against the impeachment motion that was passed by an overwhelming majority in the

parliament on Dec. 9. Rallies for Park’s reinstatement have been held since the passage. According to local media reports, Park’s loyalists identified themselves as “patriots” who love their homeland and held a national flag in one hand when marching on the streets.

They held a U.S. flag in the other hand. In the past two Saturdays, the supersized Stars and Stripes was carried by the “patriotic” protestors. Honouring the U.S. flag and the “blood alliance” between South Korea and the United States had often been found in the past demonstrations. Xinhua


12    Business Daily Monday, January 9 2017

Asia Aeronautics

Boeing’s US$10.1 bln order to expand foothold in India Boeing would expand its footprint in India, where Airbus dominates narrow-body fleets after a string of order victories Anurag Kotoky and Julie Johnsson

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ndian budget airline SpiceJet Ltd. is poised to order at least 92 Boeing Co. 737 jetliners, giving the plane maker a stronger toehold in the world’s fastest growing aerospace market. The US$10.1 billion transaction, which would more than double SpiceJet’s 49-plane fleet, may be closed within weeks, after lengthy talks that pitted Boeing against rival Airbus Group SE, people with direct knowledge of the decision said. The order would be a record for SpiceJet, which was forced to shut down operations for a day two years ago after it ran out of money, prompting co-founder Ajay Singh to bail out the low-cost carrier. The airline may boost the total order if final talks yield substantial discounts and favourable maintenance contracts, one of the people said. Boeing would expand its footprint in India, where Airbus dominates narrow-body fleets after a string of order victories. IndiGo, Go Airlines India Pvt. and the local unit of AirAsia Bhd. all fly variants of the Airbus A320. The deal includes firm orders for at least 50 of Boeing’s 737 Max, and renegotiated terms for 42 of the single-aisle jets that SpiceJet originally ordered in 2014, said the people, who asked not be identified because the discussions are private. The 92 Max jets would be valued at about US$10.1

billion at current list prices, before the discounts that are customary for large purchases. “We expect to complete these negotiations and place the order this financial year,” the airline said in an e-mailed statement. A Boeing spokesman declined to comment.

Crucial market

The order would help SpiceJet, India’s second-biggest budget carrier, compete with market leader IndiGo, which has ordered hundreds of Airbus jets to tap surging air-travel demand from a fast-growing middle class. While IndiGo controls about

42 per cent of a market that has seen local carriers almost double to 11 in the past four years, SpiceJet’s share is about 13 per cent. India is crucial for Boeing and Airbus, and both offered aggressive discounts to SpiceJet, Bloomberg News reported in July.

Close ties

Boeing, whose jets dominate the current SpiceJet fleet, has the advantage of close financial ties. As the carrier’s financial condition worsened, Boeing provided assistance with payments to help it cope with the situation. That earlier deal, which is still on the manufacturer’s books, will now become a part of the new order, the people said. SpiceJet operates a fleet of 32 Boeing 737 jets and 17 Bombardier Q400 turboprops, according to the company.

IndiGo, operated by InterGlobe Aviation Ltd., in 2015 ordered 250 Airbus A320neo jets. That order followed a 2006 deal for 100 A320 planes, and 180 A320neos ordered in 2011. IndiGo has 126 jets in its fleet. The South Asian country has been among some of the toughest markets for airlines, with some carriers failing due to fuel taxes, tariffs and low fares. As many as 17 airlines in India have shut down in the past two decades, according to consulting company KPMG and the Associated Chambers of Commerce and Industry of India. Indian airlines posted a combined profit of US$122 million in the year through March 31, 2016, the first time in a decade, according to CAPA Centre for Aviation. However, the industry is set to post losses for two more years hurt by excess capacity and low fares, CAPA said in a report in December. Bloomberg

Oil

Iran capitalises on OPEC oil cut to sell millions of barrels Iran lacks enough land storage facilities for its oil and, to enable it to keep pumping crude, has relied on its tanker fleet to park excess stocks until it can find buyers Jonathan Saul

Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea, capitalising on an OPEC output cut deal from which it is exempted to regain market share and court new buyers, according to industry sources and data. In the past three months, Tehran has sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market.

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The amount of Iranian oil held at sea has dropped to 16.4 million barrels, from 29.6 million barrels at the beginning of October, according to Thomson Reuters Oil Flows data. Before that sharp drop, the level had barely changed in 2016; it was 29.7 million barrels at the start of last year, the data showed. Unsold oil is now tying up about 12 to 14 Iranian tankers, out of its fleet of about 60 vessels, compared with around 30 in the summer, according to two tanker-tracking sources. The oil sold in recent months has

gone to buyers in Asia including China, India and South Korea and to European countries including Italy and France, according to the sources and data. It was unclear which companies bought the oil.

New frontiers

Iran is also looking to use the opportunity to push into new markets in Europe, including Baltic and other central and eastern European countries, said separate oil industry sources, though it was not clear if any oil had been sold there. The state-run National Iranian Oil Company (NIOC) could not be reached for comment. Tanker group NITC, which operates most of the country’s fleet, could also not be reached. Tehran scored a victory when it was exempted from the OPEC deal agreed in November to reduce production by 1.2 million barrels per day for six months, an accord aimed at addressing the global oversupply and bolstering low oil prices. The country successfully argued it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year. While the deal did not come into effect until the beginning of 2017, industry sources said Tehran had already been offering aggressive discounts, aiming to coax buyers globally into stocking up for winter

in anticipation of the OPEC cut.

No space

Iran lacks enough land storage facilities for its oil and, to enable it to keep pumping crude, has relied on its tanker fleet to park excess stocks until it can find buyers. The tankertracking sources said it was unclear how much of the oil stored at sea was condensate, a very light grade of crude. In another sign of the rising activity, Iran’s oil ministry news agency SHANA reported in late December that the number of tankers able to berth at major terminal Kharg Island had reached a record in 2016 of 10 vessels at the same time. “Iran got its way at OPEC and the Saudis agreed not to limit their capabilities. Iran will go ahead and look to export whatever they can for winter demand (globally),” said Mehdi Varzi, a former official at NIOC who is now an independent global industry consultant. “This is a commercial policy of trying to get rid of a lot of their crude oil on tankers as holding oil on tankers is very expensive.” Many foreign ship insurers have resumed providing cover for Iranian vessels in recent months, which has also given Iran more scope to use its tankers to make deliveries or carry out ship to ship oil transfers rather deploying them for storage. Reuters

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Business Daily Monday, January 9 2017    13

Asia In Brief City planning

Vietnam’s HCM City to relocate 10,000 production bases

Hub

Pakistan army chief sells China investment deal in remote Baluchistan

Vietnam’s Ho Chi Minh City has just decided to move over 10,000 production bases out of its residential areas in the 2016-2020 period, local media reported Friday. Currently, too many production bases in residential areas not only are unsuitable to the city’s planning, but also cause environmental pollution, and pose fire and explosion risks, daily newspaper Tuoi Tre (Youth) quoted the municipal People’s Committee as reporting. The city will relocate them, especially those operating in the fields of construction materials, dyeing, chemicals, engineering, and cattle and poultry slaughtering, to industrial parks, export processing zones, hi-tech zones or industrial complexes. In Binh Tan district alone, there are over 36,000 production bases, including some 17,000 enterprises and 19,000 business households, many of which are not in line with the city’s planning, the media reported. Economy

Infrastructure investment worth US$57 billion planned

of natural gas, copper and gold, has long complained that the national government takes far more from the province than it gives back. Ire over this has contributed to a long-running ethnic separatist rebellion. A study late last year by the Applied Economics Research Centre (AERC) estimated CPEC would create 700,000 jobs in Pakistan and a Chinese newspaper recently placed the number at more than 2 million. But in Khuzdar, questions about how many jobs would come to Baluchistan from CPEC went unanswered. “I want to know what share Baluchistan will get and what the other provinces will get and on what basis?” a female student asked during a question and answer session.

Some Pakistanis sceptical about benefits of deal

Where’s the gas?

Baluchistan, which has rich reserves of natural gas, copper and gold, has long complained that the national government takes far more from the province than it gives back Saad Sayeed

The dusty desert city of Khuzdar in south-western Pakistan has no hospital and no commercial flights into its tiny airport, but government officials who visited recently spoke in glowing terms of its future as a hub of commerce. Pakistan’s new army chief, General Qamar Javed Bajwa, was among a flock of dignitaries who descended upon Khuzdar, a city of 400,000, to tout the benefits of the China Pakistan Economic Corridor (CPEC) for the south-western province of Baluchistan. How much the US$57 billion network of energy projects, roads and a deep-water port linking western China with Pakistan’s south-western coast will benefit ordinary Pakistanis has been debated in recent months, with critics saying Chinese banks and companies will gain most. Pakistani officials, however, assured students, officials and citizens at a seminar in Khuzdar that CPEC would bring new prosperity to Pakistan’s largest, least-populous and poverty-plagued province. “Baluchistan unfortunately had

been neglected in the past, for a host of reasons, but not anymore,” Bajwa told the gathering at Khuzdar’s Baluchistan University of Engineering and Technology.

Key Points Economic corridor will link SW Pakistan with China

Baluchistan rich in reserves of gas, copper, gold Province dogged by long-running separatist insurgency The head of the army is one of the most powerful positions in Pakistan, where the military not only controls security but also operates a vast business empire and often dictates key areas of foreign policy. Students in the audience were sceptical about whether CPEC would benefit the province. Baluchistan, which has rich reserves

Concerns over how much Baluchistan will benefit were even voiced by a national official, Minister for Ports and Shipping Hasil Khan Bizenjo. “We just want to make sure that under CPEC the same thing does not happen to us as 1952, when gas was found in Baluchistan and yet in 2017 there is no gas in Khuzdar,” said Bizenjo, originally from Baluchistan and a speaker at the conference. Other speakers, however, envisioned Khuzdar as a centre of trade and industry. Baluchistan Chief Minister Sanaullah Zehri said that Khuzdar would be one of 29 Special Economic Zones under CPEC that would “greatly benefit the people of the city”. Khuzdar does not connect the provincial capital, Quetta, to the port city of Gwadar, but state representatives at the conference highlighted its significance as the second-largest city in the province and a potential transit point between Quetta and Karachi, Pakistan’s biggest city and economic hub. “We believe that Khuzdar has the ability to attract a great deal of local and foreign investment,” said Anwar Ul-Haq Kakar, a spokesman for the Baluchistan government. The Khuzdar university’s vice chancellor, Mohammad Amin, said he hoped CPEC could bring investment and jobs, because the city’s location four hours’ drive from Quetta had made it difficult to attract even faculty at the school. “No one is coming because there is no infrastructure here as yet,” Amin said of the university. “We will offer any PhD who accepts a job here a brand new Toyota Corolla and a 100 per cent pay increase.” Reuters

Philippine gross int’l reserves down to US$81 bln in December The Philippine gross international reserves (GIR) declined to US$81.05 billion in December compared to the level a month ago, the local central bank said Friday. Citing the preliminary data, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the end-December GIR level was US$0.4 billion lower than the November GIR of US$81.45 billion, but higher by US$0.38 billion compared to a year ago figure of US$80.67 billion. “The decline in the GIR from November to December was due mainly to outflows arising from payments made by the national government for its maturing foreign exchange obligations, foreign exchange operations of the BSP, and revaluation adjustments on the BSP’s gold holdings resulting from the decrease in the price of gold in the international market,” he said. These were partially offset by the national government’s net foreign currency deposits along with the central bank’s income from investments abroad. Politics

Riyadh due to host SaudiLebanese summit to mend ties Saudi Arabia hosts a SaudiLebanese summit today with the first ever foreign visit of the Lebanese president, Michel Aoun since his election in October 2016, according to Sunday news reports. The two-day visit might overcome the rifts that effected years of friendly ties between the two countries. After his election, Saudi Arabia sent in November a high profiled delegation to meet Aoun and other top officials. Saudi Arabia stopped its military assistance to arm the Lebanese defence forces in February 2016 because of what the country cited as Lebanese political stances against Saudi Arabia. The decision includes stop to provide arms worth US$3 billion to the Lebanese army through France , and the remaining unpaid US$1 billion assistance to the Lebanese security forces.


14    Business Daily Monday, January 9 2017

International In Brief Transportation

Qantas named world’s safest airline 4th year running Australia’s flag carrier Qantas Airways Ltd’s fatality free record in the jet age means it is the world’s safest airline, for the fourth year running. Ratings website AirlineRatings. com announced the carrier atop its Top 20 list on Friday, ahead of Cathy Pacific, Middleeastern giant Etihad Airways, Singapore Airlines and local rival Virgin Australia. While those in the Top 20, which are only listed alphabetically, are always leaders in safety, the website’s editor Geoffrey Thomas said Qantas remains the leader in safety enhancement sand operational excellence. “Over its 96-year history Qantas has amassed an amazing record of firsts in safety and operations and is accepted as the world’s most experienced airline,” Thomas said in a statement. Retail

Eurozone retail sales in November falls after surge in October The Eurozone seasonally adjusted retail sales in November fell monthon-month after a surge in October, taken down mainly by falls for non-food products, according to estimates released by Eurostat on Friday. Retail sales in the eurozone fell by 0.4 per cent in November from October, the European Union(EU)’s statistics office Eurostat said. In contrast, the retail trade volume in October increased by 1.4 per cent in the 19-country bloc, which is by far the largest in the year. On a yearly basis, the eurozone retail sales increased by 2.3 per cent in November, after a 3.0 per cent rise in October. Eurostat said the drop in the monthly data was mostly due to falls of 0.9 per cent for non-food products and of 0.4 per cent for “food, drinks and tobacco”, while automotive fuel rose by 1.0 per cent. Power

UAE nuclear power plant 75 per cent complete The United Arab Emirates (UAE) first nuclear energy complex is 75 per cent complete, said Emirates Nuclear Energy Corporation (ENEC) on Saturday. The government controlled ENEC in Abu Dhabi said that units three and four of the nuclear energy complex are half completed, marking the 75 per cent completion of the total complex. All four units will deliver safe, clean, reliable and efficient nuclear energy to the UAE grid, pending regulatory reviews and licensing, said ENEC in an e-mailed statement. The Barakah nuclear energy plant, in the UAE’s south-western region AlGharbia, is scheduled for completion in 2020, which started construction in 2012. With four reactors online, the facility will deliver up to a quarter of the electricity needs of the UAE. The Gulf Arab state, a major oil supplier, aims to save up to 12 million tons in carbon emissions every year through the nuclear plant which will be the first in the Arab world.

Politics

Trump plans to meet U.K.’s prime minister May, reaffirming ties May has started a behind-the-scenes charm offensive to build bridges with the incoming president John McCluskey

P

resident-elect Donald Trump says he will meet with U.K. Prime Minister Theresa May in spring as the British leader tries to ease a frosty start to their relationship and expand trade with the U.S. after her country withdraws from the European Union. “I look very much forward to meeting Prime Minister Theresa May in Washington in the Spring. Britain, a long-time U.S. ally, is very special!” Trump said on Twitter. May has started a behind-thescenes charm offensive to build bridges with the incoming president.

She plans to travel to Washington in the spring, her office said in an e-mailed statement late on Thursday, though no firm timing had been agreed. In an effort to improve her links with Trump, May sent her two most senior aides, Nick Timothy and Fiona Hill, on a secret trip to the U.S. in mid-December to meet members of his team, her office said. The premier’s joint chiefs of staff, Hill and Timothy, are regarded in London as May’s most powerful advisers, holding huge influence over the government of the U.K. That May chose to send them both together to meet Trump’s team demonstrates the importance she places on building

UK Prime Minister Theresa May

links with the new White House as the U.K. looks to expand trade with the U.S. after it withdraws from the European Union.

Double time

May is attempting to recover lost ground. The prime minister suffered the personal embarrassment of being outflanked by her political rival Nigel Farage, the former U.K. Independence Party leader, who met Trump within days of his victory in November. She was then forced to reject Trump’s controversial suggestion that Farage - who is close to key members of the president-elect’s team - should be made U.K. ambassador in Washington. In December 2015, May, who was then Britain’s home secretary, criticized Trump’s proposed ban on Muslims entering the U.S. as “divisive, unhelpful and wrong.” Timothy and Hill had their own work to do on the trip. Before they took up posts in May’s new government in July, Timothy said on Twitter that he did not want “any ‘reaching out’ to Trump,” while Hill tweeted: “Donald Trump is a chump.” U.K. officials are said to be concerned at their poor links with the incoming U.S. administration at a time when Britain is looking to expand trade after Brexit. There are signs Trump, who has a Scottish mother, may be a willing partner. Whereas Obama said Britain would be “at the back of the queue” to secure a trade deal with the U.S., Trump told Farage Britain would be “at the front.” Bloomberg

Economy

South Africa’s economy needs radical transformation, Zuma says Zuma has faced calls to resign since the Constitutional Court ruled in March that he violated his oath of office Mike Cohen

South Africa’s ruling party pledged to ensure the country’s black majority secures a bigger stake in the economy and do more to create jobs, as it seeks to claw back support lost in the wake of a succession of scandals implicating its leader, President Jacob Zuma. The African National Congress, which has led the country since white-minority rule ended in 1994, marked the 105th anniversary of its founding at a rally on Sunday at the Orlando stadium in Soweto, near Johannesburg, where it outlined its policy priorities for the year. The party packed out the 40,000-seat venue. “Radical economic transformation remains at the core of our economic strategy,” Zuma said in his keynote address. “More decisive steps must and will be taken to promote greater economic inclusion and to advance ownership and control and real leadership of the economy by black people.” The ANC’s support slipped more than 8 percentage points to a record low of 54.5 per cent in local government elections in August, with the party ceding control of Johannesburg, the capital Pretoria and the southern port city of Port Elizabeth to opposition coalitions. Voter disenchantment has centred around Zuma,

a 74-year-old former intelligence operative whose second five-year term as ANC leader is due to end in December this year.

Resignation calls

Zuma has faced calls to resign since the Constitutional Court ruled in March that he violated his oath of office by refusing to repay taxpayer money spent on his private home. A campaign to remove him gained impetus on Nov. 2, when the graft ombudsman released a report suggesting that he may have breached the code of ethics in his relationship with members of the wealthy Gupta family, who are his friends. It detailed allegations that the Guptas may have influenced the appointment

South African president Jacob Zuma

of cabinet members and received special treatment for a coal business linked to the family and Zuma’s son, Duduzane. While Zuma has denied ever intentionally breaking the law, disgruntlement with his leadership is rife within the ANC. In November, a number of members of the party’s National Executive Committee, its top leadership structure, joined scores of party veterans in calling for his ouster. Zuma didn’t directly refer to his travails in his speech, saying only that the media should report fairly and factually. He also highlighted plans to implement a national minimum wage, improve working conditions in the nation’s mines and improve access to land, education and health services. “Too many of our people continue to suffer from the historic injustice perpetrated by the horrendous land dispossession,” Zuma said. “This year we shall begin to utilize the expropriation of land act to pursue land reform and land redistribution with greater speed and urgency, following the prescripts of our constitution.” Bloomberg


Business Daily Monday, January 9 2017    15

Opinion Business Wires

The Straits Times Banks and other financial firms now have to establish the tax residency status of all their clients under new rules to fight tax evasion. The move comes as Singapore began complying with the Common Reporting Standard (CRS) from Jan 1. The international standard, endorsed by the Organisation for Economic Cooperation and Development (OECD), allows countries that have agreements with each other to automatically exchange financial data for tax purposes. PwC Singapore tax partner Brendan Egan said the “CRS is a global standard designed to detect and deter tax evasion through non-reporting of income from offshore accounts”. Financial institutions must also report to the Inland Revenue Authority of Singapore (Iras) the financial account information of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange the information. Singapore has so far signed CAAs with Australia, Britain and Japan, among others.

Free speech and fake news

A Philstar The Philippines’ foreign exchange buffer in December narrowed to its thinnest level in 11 months amid strong outflows as well as the revaluation adjustments on the gold holdings of the Bangko Sentral ng Pilipinas (BSP). BSP Governor Amando Tetangco Jr. said the country’s gross international reserves (GIR) thinned for the third straight month to US$81.04 billion in December from the revised US$81.45 billion in November. The level was the lowest since January last year when the GIR amounted to US$80.69 billion. The foreign exchange buffer has declined for the third straight month after hitting a record high US$86.14 billion in September. The amount was also slightly lower than the US$80.66 billion booked in December 2015. The BSP also missed the revised GIR target of US$83.7 billion.

The Bangkok Post The government has launched a major review of an ongoing study into the need for mass transit systems in densely populated areas of Thailand with the aim of getting projects underway as quickly as possible. The ambitious multi-billionbaht undertaking covers major urban areas in cities like Hat Yai and Khon Kaen and popular tourism destinations like Phuket and Chiang Mai. Transport Minister Arkhom Termpittayapaisith said the transit plans for Phuket were likely to get off the ground first as the project has been included in the 2017 budget and the design is under way. The Mass Rapid Transit Authority of Thailand (MRTA) last year authorised a multiple feasibility study for rail projects in Chiang Mai, Nakhon Ratchasima, Hat Yai, Phuket and Khon Kaen, where traffic gridlock has worsened. The projects are also designed to serve the needs of industry and tourism.

bout a week before the United States presidential election last November, someone posted on Twitter that Hillary Clinton was at the centre of a paedophilia ring. The rumour spread through social media, and a right-wing talk show host named Alex Jones repeatedly stated that she was involved in child abuse and that her campaign chairman, John Podesta, took part in satanic rituals. In a YouTube video (since removed), Jones referred to “all the children Hillary Clinton has personally murdered and chopped up and raped.” The video, posted four days before the election, was watched more than 400,000 times. Emails released by WikiLeaks showed that Podesta sometimes dined at a Washington, DC, pizza restaurant called Comet Ping Pong. Apparently for that reason the child-sex-ring accusations focused on the pizza restaurant and used the hashtag #pizzagate. The allegations were frequently re-tweeted by bots – programs designed to spread certain types of messages – contributing to the impression that many people were taking “Pizzagate” seriously. The story, amazingly, was also re-tweeted by General Michael Flynn, who is soon to be President-elect Donald Trump’s national security adviser. Even after Trump’s election – and despite debunking by the New York Times and the Washington Post – the story continued to spread. Comet Ping Pong was harassed by constant, abusive, and often threatening phone calls. When the manager approached the DC police, he was told the rumours were constitutionally protected speech. Edgar Welch, a Christian who has Bible verses tattooed on his back, was one of Jones’s listeners. On December 4, he drove 350 miles from his home in North Carolina to Comet Ping Pong, armed with an assault rifle, a revolver, and a knife. He allowed guests and staff to leave while he searched for enslaved children supposedly hidden in tunnels. He fired his rifle at least once, to open a locked door. After finding no children, he surrendered to police. Fake news – “active misinformation” that is packaged to look as if it comes from a serious news site – is a threat to democratic institutions. There have been less absurd examples, including a fake report of a nuclear threat by Israel’s defence minister that misled his Pakistani counterpart into re-tweeting the report and warning Israel that Pakistan, too, is a nuclear power. President Barack Obama acknowledged the danger to democratic freedoms when speaking to the press in Germany shortly after the U.S. election. Whether or not fake news cost Clinton the presidency, it plainly could cause a candidate to lose an election and upset international relations. It is also contrary to one of the fundamental premises on which democracy rests: that voters can make informed choices between contending candidates. The First Amendment to the U.S. Constitution states that. “Congress shall make no law… abridging the freedom of speech, or of the press…” By 1919, the Supreme Court’s interpretation of those words had

Peter Singer Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne

led to the doctrine that Congress could prohibit speech only if it posed “a clear and present danger” of serious harm. That position was further refined in what is perhaps the greatest defence of freedom of speech by an American judge: Louis Brandeis’s concurring opinion in the 1927 case of Whitney v. California. Brandeis described freedom of speech and assembly as “functions essential to effective democracy.” He appealed to “courageous, self-reliant men, with confidence in the power of free and fearless reasoning applied through the processes of popular government.” On that basis, for speech to pose a clear and present danger that could justify prohibiting it, the harm the speech would cause must be so imminent that it could preclude any opportunity to discuss fully what had been said. If, Brandeis insisted, there is “time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence.” Today, it is difficult to have so much confidence in the power of “free and fearless reasoning,” especially if it is supposed to be “applied through the processes of popular government” – which presumably requires that it influence elections. Similarly, Brandeis’s belief that “more speech, not enforced silence” is the remedy for “falsehood and fallacies” looks naïve, especially if applied in an election campaign. What, though, is the alternative? What Jones said about Clinton is surely defamation, and she could bring a civil suit against him; but that would be costly and timeconsuming, most likely taking years to move through the courts. In any case, civil defamation lawsuits are effective only against those who have the assets to pay whatever damages are awarded. What about criminal libel? In the United Kingdom, “defamatory libel” was for many centuries a criminal offense, but it fell into disuse and was abolished in 2010. In the U.S., criminal libel is not a federal offense. It continues to be a crime in some states, but few cases are brought. A report in 2015 by A. Jay Wagner and Anthony L. Fargo for the International Press Institute describes many of the recent cases as “petty” and regards the civil libel law as a better recourse for “personal grievances.” The report concludes that criminal libel has become “redundant and unnecessary.” Recent examples of fake news suggest that Wagner and Fargo’s conclusion was premature. To accuse, during an election campaign, a U.S. presidential candidate of personally murdering children is not petty, and civil libel law provides no adequate remedy. In the Internet age, is it time for the legal pendulum to swing back toward the offense of criminal libel? Project Syndicate

Whether or not fake news cost Clinton the presidency, it plainly could cause a candidate to lose an election and upset international relations


16    Business Daily Monday, January 9 2017

Closing Cut

Hebei vows to meet capacity reduction targets in 2017

Hebei Province, a leading iron and steel producer, pledged on Sunday it will make every effort to achieve the 2013-2017 targets of cutting steel, cement and glass capacity. Iron and steel capacity will be cut by 32 million tonnes this year, said governor Zhang Qingwei at a session of the provincial legislature on Sunday. Capacities of coal, cement and flat glass will be reduced by 7.42 million tonnes, 1.1

million tonnes and 5 million weight cases in 2017. “2017 will be our toughest year in capacity reduction. No matter how difficult it is ,we are determined to succeed,” said Zhang. Hebei produces one fourth of China’s iron and steel and has more than half of the ten most polluted cities in the country. The average PM2.5 density in Hebei dropped 9.1 per cent last year and further fall of over 6 per cent is required this year. Hebei’s “blue sky” action plan promotes use of electricity and gas instead of coal. Xinhua

Pollution

China environment minister feels “guilty” about air pollution The public feel anxious about the smog problem, he says

C

hina’s environment minister said he “felt guilty” and “wanted to reproach himself” as widespread air pollution has harassed people’s lives, an official statement said Saturday. Chen Jining, minister of environmental protection, made the remarks when holding a press conference late on Friday in Beijing, introducing China’s efforts on air pollution prevention. Since the beginning of last winter, heavy air pollution has happened repeatedly in many places in China, covering large area and lasting long, which disrupted production activities and harassed people’s everyday lives, Chen said. The public felt anxious about the smog problem, he said. Detailed analysis showed emissions from automobiles have became the primary source of urban atmospheric fine particles in major cities, accounting for 31.3 per cent in Beijing, 29.2 per cent in Shanghai and 28 per cent in Hangzhou, according to the environment minister.

Fine particles are defined by the U.S. Environmental Protection Agency as compounds that have a diameter of less than or equal to 2.5 micrometres. Substances that may form these particles come from power plants, industrial facilities, agricultural practices, motor vehicles, among others. Chen said the ministry was evaluating 20 cities’ emergency plans in dealing with heavy air pollution, hoping to improve their response ability. The cities include Beijing, Tianjin and 18 other cities in Hebei and surrounding provinces. Inspections had found some cities failing to take effective measures following alerts, or their measures were impracticable, Chen said. The ministry will enhance supervision on whether local governments have practiced its precautions, according to the minister. Chen vowed to take concrete steps and employ more stringent and effective measures to deal with outstanding environmental problems and improve environment quality.

China has been cleaning its environment and will continue to improve the response of local governments to pollution, Chen said. China has made improvements in environment despite strong headwinds, such as an economic structure burdened by heavy industry, an energy mix reliant on

fossil fuels, and environmentally unfriendly lifestyles, according to Chen.

Red alerts

China’s national observatory last Tuesday issued a red alert for fog in a number of northern and eastern regions, the first ever national red alert for fog. Meanwhile,

north China has been under high-level smog alerts since late December. The Beijing-Tianjin-Hebei region and neighbouring provinces, the area hit hardest by smog, are major coal consumers and are home to a large share of China’s steel, coke and cement production facilities as well as automobiles, according to Chen. “The root cause of the region’s smog problems, from a long-term perspective, is the unclean industrial and energy mix, which require big changes,” Chen said. He said that monitoring results in the Beijing-Tianjin-Hebei region show that the government’s efforts have paid off in the past few years as the average concentration of PM 2.5 fell by about 30 per cent in 2016 compared with 2013. However, there seems to be little winter air quality improvement. Unfavourable weather conditions and inefficient winter heating have also contributed to the lingering smog, Chen added. To address the problems in winter, China will phase out unclean and inefficient coalfired boilers, encourage offpeak industrial production and enhance scrutiny and punishment for violations of the rules. Xinhua

Probe

Airline

Brexit

Samsung executives to be questioned by Korean prosecutors

Iran takes ownership of first jet under sanctions deal

May pledges Brexit details in weeks, denies ‘muddled’ thinking

Samsung Electronics Co. executives have been summoned by South Korean special prosecutors amid a widening influence-peddling scandal that brought about South Korean President Park Geun-hye’s impeachment. The company’s Co-Vice Chairman Choi Gee-sung and President Chang Choong-ki were asked to come in for questioning, Hong Jung-seok, a spokesperson for the special prosecutors office, told Bloomberg News via text message on Sunday. Choi and Chang are expected by 10 a.m. on Monday and they will come in as testifiers, meaning they have not been accused of wrongdoing. This status may change, Hong said. The summons follows last month’s parliamentary grilling of Jay Y. Lee, de-facto head of Samsung Group, and a co-vice chair of Samsung Electronics, the world’s largest maker of mobile devices. Lawmakers fired questions to Lee on whether the country’s biggest conglomerate received political favours in return for donations to foundations controlled by Choi Soon-sil, the president’s friend at the centre of the scandal. Lee had denied allegations during the hearing. A Samsung Group spokeswoman declined to comment when contacted by the Bloomberg News. In preliminary results posted last Friday, operating income rose to 9.2 trillion won (US$7.8 billion) in the quarter ended Dec. 31, its biggest profit in three years, the Suwon, South Korea-based company said. Bloomberg

Airbus said on Sunday Iran’s state airline IranAir had accepted its first new jet, marking a key step in opening up trade under a nuclear sanctions deal between Iran and major powers. The Airbus A321 jetliner has been painted in IranAir livery and is expected to be delivered later this week. “The technical acceptance has been done with formal delivery still to be done,” a spokesman for the European plane-maker said. Iranian regulators said the aircraft had been placed on the country’s aircraft register, indicating IranAir had taken ownership of the aircraft: the first of around 200 Western aircraft ordered since sanctions were lifted. “The registration has been done, and the delivery should be by the end of the week,” Reza Jafarzadeh, a spokesman for Iran’s Civil Aviation Organization, told Reuters by telephone. The 189-seat jet was assembled in Hamburg, Germany. From there, it is expected to be transferred to Airbus headquarters in Toulouse, France, for a formal handover on Wednesday. IranAir has ordered 100 passenger jets from Airbus and 80 from its U.S. rival Boeing under the nuclear deal, which called for the lifting of most international sanctions in exchange for curbs on Iran’s nuclear activities. Reuters

U.K. Prime Minister Theresa May said she will unveil details of her plan to negotiate Britain’s departure from the European Union in the coming weeks after pressure has mounted for her to show the government isn’t “muddled” in its planning. May said no plan for Brexit was drawn up by her predecessor David Cameron and she needed to assess the situation and work out the correct way to act once Article 50 of the Lisbon Treaty is invoked by the end of March, starting two years of divorce talks. “There hadn’t been any plans made for Brexit so it was important for us to take some time to look at the issues, look at the complexity of the issues,” May said Sunday in an interview with Sky News. “Our thinking on this isn’t muddled,” she said, “I will be setting out some more details in coming weeks as we look ahead to triggering Article 50.” Asked about the trade off between single-market membership and free movement of people, which will be at the heart of the negotiations, she said it will be about “getting the right relationship, not about keeping bits of membership.” “We will be outside the European Union but we will get the best possible deal for the U.K.,” she said. Bloomberg


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