Business Daily #1210 January 10, 2017

Zone A sand fill reaches 78 pct of total Land Page 2

Tuesday, January 10 2017 Year V Nr. 1210 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Contract

SJM dredging contract annual volume increases dramatically Page 6

Luxury

Rolls-Royce second highest yearly sales boosted by The 13 fleet purchase Page 5

www.macaubusinessdaily.com

Business

McDonald’s sells majority stake in China, HK businesses to CITIC, Carlyle for US$2.1 bln Page 9

Crimes

FBI arrests Volkswagen exec on fraud charges Page 16

Consumer Confidence Brittle MACAU ECONOMY

According to a local survey, confidence in the economy rose slightly in Q4. The only one of six indicators to do so. Employment was seen as stable. But confidence in consumer prices and living standards both fell as did confidence in investing in the stock market. Page 4

Hundreds of local gaming workers hit the streets yesterday.

Demanding increased employee remuneration. Workers asked to be treated like public servants, with yearly salary increases.

Signatures will be gathered from the industry if changes are not forthcoming

by Chinese New Year, say protestors.

Protest Page 7

HK Hang Seng Index January 9, 2017

Getting down to detail

Courts Former Prosecutor-general Ho Chio Meng partially admits leaving accounts, properties and purchases undeclared.

Because he “didn’t know” he had to. Countering allegations of money laundering and using shell companies, Ho railed against “presumptions and assumptions” lacking concrete evidence. Page 3

Balancing act

Finance This could be the year. China’s regulators have indicated that foreigners might be allowed to access commodity futures and bond derivatives.

But concerns remain about how open China’s markets will be.

Inviting investment whilst controlling the financial sector is the trick. Page 9 22,558.69 +55.68 (+0.25%)

Worst Performers

Galaxy Entertainment Group

4.26%

Sino Land Co Ltd

1.34%

Want Want China Holdings

-2.40%

Link REIT

-0.66%

Sands China Ltd

2.67%

Hong Kong & China Gas Co

1.30%

Li & Fung Ltd

-2.23%

China Merchants Port Hold-

-0.65%

PetroChina Co Ltd

2.32%

CITIC Ltd

1.24%

Industrial & Commercial

-1.06%

Bank of China Ltd

-0.57%

Power Assets Holdings Ltd

1.45%

AIA Group Ltd

1.23%

CNOOC Ltd

-0.90%

China Life Insurance Co Ltd

-0.47%

China Overseas Land &

1.41%

Lenovo Group Ltd

1.21%

Bank of Communications

-0.87%

China Shenhua Energy Co

-0.39%

18° 21° 18° 20° 15° 20° 14° 17° 15° 17° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Chip on the shoulder

2 Business Daily Tuesday, January 10 2017

Macau Reclamation

Smuggling

Customs crack tobacco Zone A sand filling 78 pct complete smuggling case MOP60,000-worth of illicit cigarettes and tobacco products seized

M

ore than 25,000 suspected illegal cigarettes and tobacco products which had been brought into the MSAR without Customs duties paid were seized by Macao Customs Service yesterday, according to a press release published by the Macao Customs Service and Customs of the People’s Republic of China.

The illicit tobacco products were worth more than MOP60,000 (US$7,511) on the black market, involving a payable tax of some MOP37,000.

Between January 4 and 6, Macao Customs Service, together with the city’s Health Bureau, inspected 18 premises selling cigarettes in the city.

The inspected premises are located

in the Central District and Northern District on the Macau Peninsula and in Taipa.

Four suspects were brought to Customs Headquarters for further questioning.

The Customs service will fine suspects between MOP5,000 and MOP10,000 if found guilty, based on a breach of the city’s Foreign Trade Law. At the same time, the Health Bureau will also impose penalties upon suspects based on breach of the city’s Smoking Prevention and Control System.

According to the investigation, the illicit cigarettes were carried by Macau residents into the MSAR having been on the Mainland. They then sold the smuggled cigarettes to the related premises below market price. A.L.

The city’s Infrastructure Development Office (GDI) revealed that the city’s new urban reclaimed land Zone A has reached about 78 per cent of its total sand fill, according to Chinese language newspaper Macao Daily yesterday.

In between the resumption of sand supply on December 9 last year to the end of 2016 the total amount of sand supplied amounted to some 600,000 cubic metres, GDI stated.

However, the reclamation works will still require about 4.5 million cubic metres of sand in order to be completed.

The MSAR Government signed a 90-day sand supply agreement with Guangdong Provincial Government on November 9 last year to ensure stable sand supply for Zone A. The reclamation works have now been delayed for more than one year from the originally scheduled completion date of end-2015.

The sand supply was interrupted by the construction work on the immersed tunnels of the Hong Kong-Zhuhai-Macau Bridge taking

place in early January 2016.

According to GDI, the Zone A project has been extended to 2017 and valued at MOP1.88 billion (US$235 million).

The new Zone A will occupy 138 hectares and be used for constructing 28,000 public housing units and 4,000 private units, according to the most recent plans announced. A.L.

Scholarship Grant

MOP7.85 mln granted for postgraduate scholarships

Politics

The sound of silence Content removal on music websites in the Mainland: censorship or copyright crackdown?

Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The work of several pop music artists from Taiwan and Hong Kong is reported to have recently disappeared from the directories of various Chinese online music platforms, according to the Global Times, an English language wing of the publication People’s Daily.

Over the weekend, names and songs from Taiwan and Hong Kong pop artists, such as Vivian Xu and Anthony Wong, were reported missing from major music streaming platforms such as NetEase Cloud Music, QQ Music, Kugou Music and Baidu Music.

Amongst the major online platforms, Xiami Music, owned by Jack Ma’s Alibaba, was still streaming music from Taiwan and Hong Kong artists as of Sunday, Sina English reported.

According to publication Sina English, some Chinese media outlets have suggested that the takedowns may be the result of increased government regulation – similar to the recent pull

down of other online content, such as psychological crime show Evil Minds 2 – connected to the artists’ political inclinations.

However, according to the publication, the ‘most likely culprit’ is music licensing agreements, as music streaming services on the Mainland are facing the enforcement of tougher copyright protection by the attendant authorities, which could have resulted in forced removal of content due to not owning the rights to distribute the artists’ music.

A total annual scholarship payment of MOP7.85million (US$982,670) will be granted for postgraduate and PhD scholarships during the 2017/2018 academic year, according to a government dispatch published yesterday in Macau’s Official Gazette and signed by Secretary for Social Affairs and Culture Alexis Tam Chon Weng.

Two scholarships have been granted for applicants enrolled in ongoing courses in Master’s degree programmes after their undergraduate studies, with an annual payment of MOP51,000.

A total of 100 scholarships have been approved for Master’s degree

programmes with an annual payment of MOP58,000.

Five scholarships have been granted for applicants enrolled in continuous courses of study for PhD doctorate degree programmes after their postgraduate studies, with an annual payment of MOP70,000.

Another 20 scholarships have been approved for PhD doctorate degree programmes, with an annual payment of MOP80,000.

The annual payment of such grants is only applicable to those who applied for renewal of their scholarships during the 2017/2018 academic year. A.L.

Local effect

Speaking to Business Daily, Ivan de Souza Wing, Macau local and drummer for Hong Kong hardcore band King Ly Chee, says they knew about the group being “blacklisted” in Mainland China last week. They received an email notification from Youku, an online video-sharing platform in China, informing them that their content had been removed.

“In our songs, we talk about social issues, about freedom and racism but I wouldn’t say that the content is politically sensitive,” he told Business Daily.

Ivan said that the band, which is based in Hong Kong but has toured China several times in the past, has been finding it more difficult lately to pass government controls to participate in Chinese music festivals.

Musician and Macau local Egas, member of hardcore music group Unik (pronounced ‘unique’), told Business Daily that his band has not been a target of the control action. He notes, however, that another group from Hong Kong he knows, LMF – a long-time popular hip-hop group who have performed in Macau had also been removed from online music streaming platforms in the Mainland.

Fuel Consumption

Unchanged fuel consumption limits on gov’t vehicles for 2017 The 2017 fuel consumption limits imposed upon MSAR Government-owned vehicles remains unchanged from the previous year, according to a government dispatch published yesterday in Macau’s Official Gazette.

In addition, the government vehicles for personal use by the Chief Executive and the top government officials continue to be exempted from limitations on fuel consumption paid for by the MSAR. For vehicles which have to traverse the Macau Peninsula and Taipa Island, double the original limits for personal vehicles are allowed (e.g.)

1,680 litres vis-a-vis 840 litres (for cars up to 1,300 cc) and three times the limit imposed are allowed for

those passing between the Peninsula and the University of Macau, Hengqin or Coloane (e.g.) 3,060 litres, as compared to 1,020 litres (for cars up to 1,300 cc). A.L.

Business Daily Tuesday, January 10 2017 3

Macau Crime Ho Chio Meng partially admits omissions on asset declarations and of transferring money

to his brother prior to investment in junket operator

Presumptions and assumptions Former Prosecutorgeneral Ho Chio Meng considers accusations of money laundering to be filled with “presumptions and assumptions” and no concrete evidence Nelson Moura nelson.moura@macaubusinessdaily.com

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he city’s Court of Final Appeal continued the criminal trial of former Prosecutor-general Ho Chio Meng yesterday in a session that only lasted throughout the morning.

The morning session saw the President of the Court of Final Appeal, Justice Sam Hou Fai, question the former top official on 56 accusations of money laundering and two crimes of failure to properly declare assets.

According to the prosecution the former prosecutor’s brother, brother-in-law and alleged associates had used different methods to transfer money obtained from over 1,300 contracts awarded by the Prosecutor’s Office and authorised by Mr. Ho. The prosecution stated that Ho’s alleged associates and familiars deposited from nine accounts created under the name of different shell companies some MOP32.7 million (US$4 million) to individual accounts of those persons.

The money was then allegedly mandated by the former prosecutor to be used in investments such as the purchase of a housing unit on the Nam Vam Peninsula, a parking lot in Rua de Aveiro in Taipa, and a MOP9.3 million investment in junket operator Sociedade de Promoção de Jogos Seng Ou Limitada.

Bad timing

The former Prosecutor admitted to transferring money to his brother prior to an investment in the brother’s name was made in the junket operator in 2015, in a period when Ho was already providing statements to the Commission Against Corruption (CCAC).

Former Prosecutor-general Ho Chio Meng

However, he stated that the transfer was intended for the purchase of an apartment in Avenida da Praia Grande that had belonged to his brother since 2006, and that he had no knowledge of the investment in Sociedade de Promoção de Jogos Seng Ou Limitada.

When asked if there was evidence of the purchase contract, the former prosecutor stated he didn’t manage to sign it, since he was under investigation at the time.

The former Prosecutor-general stated the accusation was full of “presumptions and assumptions” without providing concrete evidence of his supposed connection to the individuals and companies mentioned.

Mr. Ho also requested that due to the “seriousness of accusations of crimes such as money laundering” the presiding judge should read each money laundering accusation individually - as done previously with public contract details - with judge Sam Hou Fai responding that more detailed accusations would be provided by prosecutors at further stages

of the trial.

Upon the refusal, the former prosecutor limited his responses to the prosecution’s questions with his usual ‘five denials’ response used during his defence on illicit contract accusations, saying he never committed the accused crimes, didn’t know the companies or the associates mentioned, didn’t receive any illegal gains and would not comment on the accusations.

Missing declarations

The former prosecutor was also heard on accusations that, together with his wife, he failed to properly declare bank accounts held between 2010 and 2015, with amounts totalling MOP45.9 million in accounts opened in Macau banks and RMB3.9 million (MOP4.5 million/US$562,607) in accounts opened in Mainland China.

In his defence, the former Prosecutor said he was being accused of failing to declare purchases with illicit gains he is “assumed” to have gathered with no concrete evidence

presented.

However, the former top official admitted he had failed to declare or explain some savings accounts in his name that he “didn’t know needed to be declared.”

Ho also stated that although his wife’s name was on the asset declarations she was not involved in their preparation, with the former prosecutor lamenting that his spouse was considered a defendant in his trial.

The accusation also stated the couple failed to declare property assets such as a HK$7.9 million (US$1 million) housing unit and parking space in Bairro Pérola Oriental in Areia Preta.

According to the defendant, the savings account was opened in his name with contributions from his brothers and inherited family money in order to support his father and purchase the Areia Preta housing unit in 2009 to offer the family patriarch.

The court trial was suspended after the morning session and will continue on Wednesday.

E-commerce

True blue The city’s latest campaign to promote e-payment enables local firms to savour the benefits of the O2O business model Blue flags fluttered outside hundreds of shops over the past few weeks in the city’s bustling tourist districts from the Ruins of St. Paul’s to Rua de Pedro Nolasco da Silva. Serving as more than decoration, the flags represented a new kind of payment customers can enjoy beyond traditional cash or credit cards – namely, e-payment solutions.

This project - named Blue Street - is the latest effort to promote e-payment in support of the city’s small and medium-sized enterprises, and has achieved a resounding success, say organisers.

“The event enriches the shopping experience of [Macau] residents and travellers, offering an alternative to traditional payment means,” said Lei Cheok Kuan, president of the Industry

and Commerce Federation of Macau Central and Southern District, key organiser of the Blue Street project.

The event, lasting for the entirety of December, offered discounts by 188 participating SMEs - mainly downtown retailers and eateries - via terminals enabling customers to settle transactions with Chinese third-party payment service Alipay, launched by e-commerce conglomerate Alibaba

Group Holding Ltd., or local stored value card Macau Pass.

The launch of the project followed the visits of Premier Li Keqiang and Jack Ma Yun, founder of Alibaba, to Macau last year. During his visit in October, the Mainland Chinese official announced 19 measures to support the development of the MSAR, such as facilitating the co-operation of Macau companies with third-party payment

companies in Mainland China.

“It enables local companies to have a taste of e-payment and the benefits of the O2O [online to offline] business model,” Mr. Lei said. “This boosts businesses in the community.”

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com

4 Business Daily Tuesday, January 10 2017

Macau

Surveys

Consumers more upbeat about economy The latest consumer confidence survey shows local residents were less pessimistic about the local economy’s last quarter. However, they were more cautious about local employment Kam Leong kamleong@macaubusinessdaily.com

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ocal residents began to have more positive sentiments about the city’s economy during the fourth quarter of 2016 despite the fact that a decrease was recorded in their overall consumer confidence for the same period, according to the latest survey on consumer confidence by the University of Science of Technology (MUST) released yesterday.

For the three-month period, the Macau Consumer Confidence Index registered 83.63 out of 200, which is down by 2.38 per cent from 85.67 of the third quarter of 2016, implying ‘a significant decline in local consumers’ overall confidence,’ said the surveyor.

According to MUST, the index is calculated based on six indicators; namely, ‘local economy’, ‘employment’, ‘consumer prices, ‘living standards’, ‘housing purchase’ and ‘stock investment.’ Index scores below 100 suggest a lack of confidence, while scores over 100 imply a positive outlook.

During the period, the sub-index of the ‘local economy’ jumped 1.56 per cent quarter-to-quarter to 99.55, extending the previous quarter’s upward trend - but was the only indicator to post an increase.

The findings indicate that the significant growth showed local consumers were less pessimistic about the overall performance of the local economy.

In addition, the report notes that people who were more confident in the local economy during the quarter tended to be those with primary or lower education as well as well as those whose monthly income was less than MOP15,000 (US$1,875).

Employment concerns increase

Meanwhile, even though local residents reckon employment was quite stable in the quarter - as their confidence level reached 100.28, and was

the highest among the six sub-indices in the survey - the points decreased by 2.15 per cent from the third quarter of 2016.

‘It dropped somewhat, but was still above the 100-point ‘having confidence’ level and the highest among the six sub-indices […] implying that Macau consumers had become cautiously optimistic about local employment,’ the survey explained.

“Focusing more on education and training as well as motivating and supporting citizens’ continuous learning and selfenhancement should be of fundamental importance for increasing Macau consumers’ confidence” Macau Consumer Confidence Index Q4 2016 results Moreover, local residents were more concerned with consumer prices in the quarter, which also increased their living pressures.

According to the survey, the sub index of ‘consumer prices’ fell 2.22 per cent quarter-to-quarter to 72.74 whilst that of ‘living standards’ fell 1.37 per cent quarter-to-quarter to 97.24 for the three months.

The decreases imply ‘a significantly increased concern of Macau

consumers in inflation in the near future . . . [and] . . . an increase in local residents’ living pressure due to local inflation,’ said MUST. On the other hand, the sub index of ‘housing purchase’ remained the lowest of the indicators, at 54.89, plunging 7.4 per cent quarter-to-quarter, showing ‘a further worsening of the negative sentiment among potential residential home buyers.’

In addition, amidst the fluctuations of the stock market, consumers’ confidence in ‘stock investment’ dropped 5.17 per cent quarter-to-quarter to 77.07 for the three months, which reflects ‘a big decrease in the willingness of local consumers to invest in the volatile stock market.’

Regional co-operation and education necessary

Given only the sub-index of ‘local economy’ posted an increase for the quarter, the surveyor suggests the MSAR Government further deepen its

regional co-operation with Mainland China and Hong Kong.

The surveyor added that the education level of consumers has played an important role in their confidence.

‘Since its launch in the fourth quarter of 2008 [the index] has shown a consistent pattern in the past 33 quarters that the higher the consumer’s education level the higher their confidence,’ it said. ‘So focusing more on education and training as well as motivating and supporting citizens’ continuous learning and self-enhancement should be of fundamental importance for increasing Macau consumers’ confidence.’

Furthermore, promoting moderate economic diversification, reducing the effect of external uncertain factors on the local economy, consolidating anti-inflation results, as well as improving the balance between housing supply and demand would also help increase residents’ overall consumer confidence, the institution opined.

Business Daily Tuesday, January 10 2017 5

Macau Border crossing

Expansion of Macau-licensed car entry to Hengqin

T

he Hengqin Government expects the island will be open for the second batch of Macau-licensed vehicles to enter its territory within the first half of the year.

Providing updated information about the measure implemented on December 20, a representative of Hengqin’s Bureau of Commerce, Zhang Jun, said on Saturday that the Hengqin authorities are discussing new measures for facilitating the current border crossing facilities and capabilities with the MSAR Government, aiming to make border crossing for Macau-licensed vehicles more convenient.

“We will try our best to launch in the first quarter of the year. If not, we would do it in the second quarter, so Macau residents need not worry about this at all,” said the official, as quoted by local broadcaster TDM English News. “We have been conducting tests and we will gradually loosen the requirements, allowing more residents to enter Hengqin as soon as possible,” Zhang assured.

Currently, the first stage of implementation allows those operating at least one company on the Mainland island to apply for an entry permit.

According to the Chinese official, to date the total number of registered local licensed vehicles is fewer than

one hundred.

Zhang explained this is due to many of the companies qualified to apply for entry permits already owning

dual-licence plates for travelling between the MSAR and the Mainland, thus current demand for the permits is not very strong. K.L.

Retail

Bauhaus sales dip 10 pct in SARs for fiscal Q3 But the group’s sales in Taiwan jumped for the same period

Photo courtesy of Rolls-Royce

Results

The 13 purchase ‘highlight’ of Rolls-Royce’s 2016 Amongst the Asia Pacific region sales in Japan saw a 51 per cent year-on-year increase, while China saw a 23 per cent year-on-year increase The completion of the 30 customised Rolls-Royce Phantom luxury cars for The 13 hotel in Macau was ‘a highlight of the year’ for Rolls-Royce, as mentioned yesterday in the group’s sales announcement for 2016.

The group notes that the 30 Extended Wheelbase, custom coloured, ‘designed and handcrafted’ order placed by billionaire Stephen Hung for the property was ‘the largest single commission ever undertaken

by Rolls Royce’. Estimations by the Financial Times place the value of the order at US$20 million (MOP160 million).

The group also notes that the model in question - the Phantom - has ‘retained its status as both the company’s pinnacle flagship product and the ‘best car in the world’’.

The group announced that for the 2016 year it saw its second highest sales results ever in the brand’s 113-year history. Sales results were up 6 per cent, with a total of 4,011 cars delivered to customers during the year, spread across 50 countries, ‘affirming the brand’s strength and resilience in a year of challenging market conditions for luxury goods worldwide,’ the group notes.

The highest selling dealership for the company was its Dubai distributor, while The Americas remained the brand’s top region, with

a year-on-year sales increase of 12 per cent. Europe saw a 28 per cent year-on-year sales increase for the period, while the Asia Pacific region rose just 5 per cent year-on-year.

Amongst the region sales in Japan saw a 51 per cent year-on-year increase, while China saw a 23 per cent year-on-year increase.

‘The only major region where conditions remained difficult was the Middle East where consumer demand for all luxury goods was dampened by economic and political uncertainty,’ notes the group.

Over the course of the year the group opened a further six dealerships, with the total at year-end of 136.

Th e g r o u p o p e n e d i ts n e w Technology and Logistics Centre this month ‘on schedule,’ adding 30,000 square metres with the ‘potential for future expansion’ including a nearly 10,000 square metre expansion this year ‘to meet growing demand and in readiness for future models.’

In addition, the group notes that all future models starting from ‘early’ 2018 and built on their new single line manufacturing system will be underpinned by its new aluminium ‘space-frame architecture’, the testing stage of which is ‘now approaching completion’.

According to company representatives further results will be announced soon. K.W.

Clothing retailer Bauhaus International (Holdings) Ltd. saw its samestore sales in the MSAR and Hong Kong drop 10 per cent year-on-year for the three months ended December 31, according to its filing with the Hong Kong Stock Exchange.

In addition, the company’s sales on the Mainland decreased 4 per cent compared to the same period last year.

The sales declines in Macau, Hong Kong and the Mainland drove down the company’s overall same-store sales by three per cent year-on-year for the period.

Nevertheless, the retailer’s samestore sales in Taiwan registered a growth of 12 per cent from one year ago.

The company did not release the related financial figures in last week’s filing.

For the first nine months of its fiscal year ended December 31, total sales of the group declined by 9 per cent year-on-year; in particular, those generated by the two SARs fell 14 per cent year-on-year.

The company operated 203 shops as at the end of 2016, of which 82 were located in Macau and Hong Kong, 93 in Taiwan and 28 in Mainland China.

For the first half of its fiscal year ended September 30, 2016, the company raked in some HK$501.4 million in turnover, of which that from Macau and Hong Kong plunged 18.5 per cent year-on-year, amounting to HK$348.1 million, according to its interim results released in November last year.

It also saw its interim net loss expand to HK$60 million from HK$26.6 million recorded one year ago for the same period, explaining the increased loss as due to ‘the adverse performance of the retail business in Hong Kong’. K.L.

Gaming

Enquiry into new casino application Legislator Au Kam San submitted a written enquiry to ask the MSAR Government whether it has received any new applications for new casinos to be built in Coloane, noting that the city’s gaming industry is now entering a period of deep adjustment, with many gaming businesses shrinking.

Au enquired whether the government will constrict the scope of the

city’s gaming industry or deny new casinos to be built and developed in other undeveloped areas of the MSAR, in territories such as Coloane, which, given that The 13 has yet to announce any gaming tables on the property, currently does not house any casinos.

Au expressed concern about casino developments in Coloane contaminating the last piece of green land in the MSAR - originally delineated as the city’s ‘green lung’ - given a lack of restrictions in existing urban planning regulations to indicate which areas could be used for the new casinos to be built in the territory.

Au further queried whether the government would consider establishing a new law to ensure that Coloane will remain a non-gaming area in the future, and urged the government to explain what specific criteria would be considered for the location of new casinos in the future. A.L.

6 Business Daily Tuesday, January 10 2017

Macau Infrastructure

SJM dredging obligation to increase dramatically The group is the only operator required to perform the service, receiving a discount on its gaming tax for the works conducted Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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ocal gaming operator Sociedade de Jogos de Macau (SJM) will have its obligations to the government under its gaming concession contract increase dramatically, regarding dredging services the company provides for the MSAR, as mentioned in a dispatch in the Official Gazette yesterday.

In response to Business Daily enquiries, the Gaming Inspection and Co-ordination Bureau (DICJ) said the alteration of the clause in the concession contract, authorised in

the dispatch, allows for a 77 per cent increase in the annual volume of dredging the company is required to conduct under the clause. The original amount was for 4.8 million cubic metres, while, according to the response, the ‘alteration’ to the clause ‘resides fundamentally’ in the increase of the value to 8.5 million cubic metres.

According to the DICJ response, given that the original amount in the 2002 concession contract was equal to the 4.8 million cubic metres referred to in the alteration, this is the first alteration to the obligatory amount in 14 years.

The dredging works are for nine

SMEs

DSE launches new SME mobile App and website A new mobile application as well as a website - ‘Have fun in Macau’ - was launched by Macao Economic Services (DSE) yesterday. The new application and website provide information about local SMEs (Small and Medium Enterprises) with the objective of helping promote local businesses.

Users are currently able to access information on some 1,800 SMEs. The new launch is co-organised by the

Macau Productivity and Technology Transfer Centre, with the support of the Industry and Commerce Association of Macau Northern District, the Industry and Commerce Federation of Macau Central and Southern District, the Industry and Commerce Federation of Islands of Macau, and the Federal General Commercial Association of Macau Small and Medium Enterprises. C.U.

defined areas as well as ‘other areas designated by the government, according to the practical necessities of the MSAR,’ according to the contract.

These zones include the Macau, Taipa and Coloane ferry terminals, access channels for the Outer Harbour and Inner Harbour, the access channels to the Companhia de Electricidade de Macau (CEM) electrical plant in Coloane and Ká Ho port, among others.

According to the DICJ response the alteration to the total annual dredging amount is due to the need to ‘respond to the sustainable development of the MSAR.’

Adding up

The special term of the concession contract with SJM, the only one of the concessionaires to have this clause, allows for the operator, in exchange for its dredging services, to get a one per cent gaming tax exemption, as previously published by Business Daily. The topic of this tax exemption

was raised by legislator Ella Lei in early 2015, who noted that the 1 per cent tax exemption was equal to more than MOP900 million in 2013, and about MOP806 million the previous year.

“If the gross gaming revenues continue to be at a high level, that means that the government is paying a huge chunk of public money for dredging services,” she said previously.

According to Business Daily calculations the discount could have been worth about MOP600 million in 2015, based upon the amount of tax paid by SJM to the ‘urban development, tourism promotion and social security’ fund, amounting to MOP1.5 billion, according to data from the DICJ. Business Daily contacted the DICJ and SJM to request whether the change in the concession contract clause would be accompanied by an additional tax break but no response had been received by the time this story went to press.

Business Daily Tuesday, January 10 2017 7

Macau Gaming

Gaming workers on the march Workers take to the streets to urge gaming operators to increase worker remuneration, claiming that salaries have remained unchanged for the past year Cecilia U cecilia.u@macaubusinessdaily.com

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undreds of gaming workers went out on the streets yesterday, urging the six local gaming operators to improve employee remuneration.

Organised by the New Macau Gaming Professionals Association (NMGPA), the President of the group, Cloee Chao, indicated that the protestors were seeking assistance from the MSAR Government to monitor local gaming corporations, voicing the desire for a salary increase of 5 per cent.

Chao said they are also seeking help from lawmakers in order to express their demands in the legislative assembly (AL).

“We wish the trade union law will be passed as soon as possible so we won’t need to go on the streets to demand our deserved benefits in future,” she said following submission of the petition to the government.

She revealed that signatures would be gathered from employees working under all local gaming operators if demands were not met by Chinese New Year – at the end of this month.

According to Chao, around 300 demonstrators participated in

yesterday’s protest, noting that the number had met their expectations, given that most are members of the NMGPA. When asked about the negative opinions within society that the remuneration of gaming workers should not be compared to those of civil servants, she said it is not reasonable.

“The penalties for gaming workers for stealing is the same as that for civil servants,” said Chao. “So if civil servants have their salaries increased every year, then dealers cannot have the same benefits?”

The vice head of Love Macau Association, Lei Man Chao, said that although gaming revenue has decreased in recent years, local gaming operators are still making profits.

“If they [gaming operators] could increase our salaries in 2015 when the revenue was lowest, I don’t see any reason why they shouldn’t improve the benefits now,” said Lei.

Dedication should be rewarded

Protesters who are currently working as dealers for Sociedade de Jogos de Macau (SJM) and Galaxy Entertainment Group said inflation is growing, while their salaries have been stagnant for the past year.

Cloee Chao, president of the NMGPA

“We did not receive the entire bonus, unlike other corporations,” revealed a dealer from Galaxy Entertainment. “At least they should add MOP1,000 more to our salaries according to the current rate.”

Another protester said their salary rate should be higher than the rate enjoyed by civil servants.

“The credit of making Macau prosper should be [attributed to] us,” opined the protester, surnamed Lao. “It’s really hard for us because our job has affected our family; we don’t even dare turn on the faucet once we get home because we don’t want to wake our family up in the middle of the night,” said Lao, lamenting the shift work gaming workers undergo.

Stay vigilant in times of peace

Directly elected legislator Au Kam

Differences over the past three years

Speaking to Business Daily prior to the protest, Chao (the NMGPA president) revealed that with the exception of some employees from Sands Macau workers for the other five local gaming operators did not receive any upward adjustment in their salaries in 2016.

Since the year 2014 other benefits had been cut by the corporations, she pointed out.

“Before, there were Christmas parties and gifts were given,” said Chao. “But now there are none of those benefits anymore.”

According to Chao, the gaming operators, with the exception of Sands, are reducing their expenses. She believes Sands Macau is comparatively more

successful in stabilising its operation in the mass market area, as well as its demand for labour operating non-gaming areas, with less impact on its employees’ remuneration.

Meanwhile, former Director of Forefront of Macau Gaming, Ieong Man Teng, remarked that in comparison with the year 2014 it is more prominent to find reductions in benefits rather than an unchanged salary rate.

“Things like meals for employees are becoming worse in some companies,” Ieong told Business Daily. “They reduce their expenses by deducting the benefits for workers they once had.”

With stabilised market growth, Ieong further opined that the positive results should be shared among the workers.

San delivered a speech prior to the protest in Tap Seac Square, saying that gaming workers should stay vigilant despite the fact that currently non-resident workers are not allowed to work as croupiers.

“There are a few industries in the city – construction, [public transportation] drivers and gaming. As one can see, the construction sector has perished since the allowance of non-resident workers working in the sector,” the legislator said. “We should protect the gaming and driving [public transportation] sectors from allowing non-resident workers.”

Chao also said non-resident workers occupy more than half of non-gaming positions, indicating that it is contradictory to what the government has always said: that it is prioritising local residents.

8 Business Daily Tuesday, January 10 2017

Greater China Monetary

Central bank advisor: fall in foreign reserves “good news” Fan Gang said the government’s moves to restrict capital outflows is to prevent rapid fluctuations in reserves

T

he decline in China’s foreign reserves is good news in the long-run, central bank advisor Fan Gang told Bloomberg News on Monday, describing the yuan as being at a “turning point” after possibly being overvalued in recent years.

Fang said in an interview that the government’s moves to restrict

capital outflows, which have fuelled a depreciation in the yuan, is to prevent rapid fluctuations in reserves, which hit near six-year lows in December.

“The yuan was maybe overvalued for the last three or four years ... it’s come to a turning point. This should be corrected,” Fan said.

“We have been talking about the inefficiency of US$4 trillion in foreign

reserves and the ridiculousness of a developing country financing a developed country,” Fan added.

The government does not like to see fast changes in the country’s foreign reserves, Fan said, and while China will not totally drop capital control measures, it is unlikely they will step them up.

China’s reserves shrank by US$41 billion to US$3.011 trillion in December, posting the sixth straight month of declines, data showed on Saturday, after a week in which Beijing moved aggressively to punish those betting against the currency

and make it harder to get money out of the country.

The inclusion of the yuan in the SDR basket made the yuan an international currency, which means China needs to hold less foreign reserves for the purpose of international credit, Fan said.

Last year, the yuan depreciated 6.6 per cent against the surging dollar, its biggest one-year loss since 1994, and it is expected to weaken further this year if the dollar’s rally lasts.

China’s monetary authorities, however, orchestrated a spike in yuan borrowing rates in offshore markets last week to stop speculators outside the country making a one-way bet on a fall in the Chinese currency.

Yu Yongding, a former advisor to the People’s Bank of China was quoted in media reports on Monday saying that China cannot let its yuan currency depreciate more than 25 per cent against the dollar in 2017.

Media reports did not specify what year Yu was using as a baseline comparison.

“If the yuan depreciates too much, China can step up capital controls, we have a large amount of foreign exchange reserves, and ultimately, we have a bottom line, we cannot allow the yuan to depreciate more than 25 per cent,” Yu, a former member of the central bank’s Monetary Policy Committee, said, according to a transcript posted on Chinese news portal Hexun.

China will continue to face pressures from capital outflows and currency depreciation in 2017, Yu added.

“We should not be afraid of depreciation, I believe the scale of the depreciation is not limitless, we can completely control it,” Yu said. Bloomberg

Trade

Guangzhou Auto seeks to be first Chinese carmaker to crack U.S. The company plans to start exporting its own brand of automobiles to the U.S. in 2018 Tian Ying

Guangzhou Automobile Group Co., which produces cars in China with Fiat Chrysler Automobiles NV, plans to start exporting its own brand of automobiles to the U.S next year and become the first Chinese carmaker to begin retail sales to American consumers.

GAC, which created its Trumpchi brand in 2010 after being a production partner for foreign carmakers for more than a decade, will start a research and development center in Silicon Valley in the first half of this year to prepare for the company’s entry to the U.S., the company’s President Feng Xingya said.

“Exporting to the U.S. is a key part of our efforts to become a global player and success in North America is a vital yardstick,” Feng said in an interview in Detroit on January 8.

“We won’t ship our cars here before we are fully confident that our cars would nail it.”

Chinese automakers have set their sights on breaking into the U.S. retail market with their own brands for a long time, with Warren Buffett-backed BYD Co. and Volvo Cars owner Zhejiang Geely Holding Group Co. declaring their American ambitions at least nine years ago. Neither have been able to meet that target, though BYD has begun to sell electric buses to fleet owners in the U.S. and Volvo Cars is exporting made-in-China vehicles to American showrooms.

For GAC, a successful entry will mark the culmination of at least five years of preparation. The Guangzhou, China-based company is working to develop models tailored for the U.S. market to ensure their cars will appeal to local consumers and meet all regulatory requirements, Feng said.

GAC’s export plan comes as competition in China intensifies, with demand expected to grow at a slower pace. While Chinese automakers like Great Wall Motor Co. and Chongqing

Changan Automobile Co. have been exporting to overseas markets, GAC would be the first to take a brand to developed markets with stricter emission and fuel-economy rules.

The company almost doubled its delivery of Trumpchi vehicles last year to more than 380,000 units on the popularity of its GS4 and GS8 sport utility vehicles. The automaker expects to have about 10 per cent of Trumpchi sales from overseas markets by 2020.

“Trumpchi’s success in China is giving them confidence to march into the U.S. market,” said Fu Yuwu, president of the Society of Automotive

Engineers of China. “Chinese automakers haven’t done enough to become global companies and they won’t have better understanding of markets overseas unless they actually sell cars there.”

GAC plans to use the research center in Silicon Valley to speed up research into connected cars, recruit talent and deepen its knowledge about local consumer preferences and government regulations, Feng said. The research center will also help the company identify acquisition targets that may help with the company’s development of advanced technologies, he said. Bloomberg

Business Daily Tuesday, January 10 2017 9

Greater China

Finance

Mainland's market push-and-pull highlights opening up tensions Whether China’s recent change in its market policy for foreigners is meaningful raises questions China’s recent policy of opening its markets to foreigners is expected to continue this year, but there are questions about how meaningful the change will be amid a clampdown on money leaving the country.

While China loosened restrictions on its interbank bond market and relaxed rules for offshore investors trading stocks, it also saw US$762 billion head overseas in the first 11 months of last year, according to Bloomberg Intelligence estimates, as investors sought safety in foreign assets. That helped push the yuan down 6.5 per cent against the dollar in 2016, the most since 1994. Seeking to stem the flow, mainland authorities tightened rules that contributed to MSCI Inc. refusing to add Chinese-listed shares to its global indexes.

“I’d describe China’s strategy as a pipeline strategy.

Essentially what they do is to create various pipelines of inflows and outflows” John Greenwood, London-based chief economist at Invesco Asset Management

China’s regulators have indicated that this year foreigners might be allowed to access commodity futures and bond derivatives, while MSCI will again consider adding mainland stocks. But concerns remain about how open China’s markets will be, especially on the issue of taking assets out of the country. The contrast highlights the tension authorities face between inviting more investment while keeping control of the financial sector.

“I’d describe China’s strategy as a pipeline strategy. Essentially what they do is to create various pipelines of inflows and outflows,” said John Greenwood, London-based chief economist at Invesco Asset Management. “The problem is the flows are always in the opposite direction of what they want.”

Among last year’s steps, Beijing lifted almost all quotas on China’s interbank bond market and scrapped some constraints under the Qualified Foreign Institutional Investor program, which governs how offshore funds invest in mainland markets.

The Shenzhen-Hong Kong stock exchange link, the second between the mainland and the former British

colony, opened in December.

Expectations then rose as an official with the People’s Bank of China said the central bank is committed to further opening the interbank market, including giving foreign investors access to foreign-exchange and interest-rate derivatives to hedge risks, and expanding trading hours.

Open and close

Even as China opens up to incoming funds, it has been clamping down on outflows. Officials have banned the use of friends’ currency quotas, made it more difficult to buy insurance policies in Hong Kong and prepared restrictions on overseas acquisitions

by Chinese companies. Grants of new quotas for domestic fund managers to invest overseas were frozen, according to data compiled by Bloomberg.

The tightening of outflow rules makes it hard for some to say that the country is fully embracing financial reform.

“We have already seen in China’s case, markets only work when they go up. You are not allowed to go down,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “If we do get any reforms this year, they are going to be Potemkin reforms. The veneer will look like they are moving to a market economy, and the reality will be anything but.”

China has studied possible scenarios for the yuan and capital outflows this year and is preparing contingency plans, Bloomberg News reported, citing people familiar with the matter.

Financial regulators have already encouraged some state-owned enterprises to sell foreign currency and may order them to temporarily convert some holdings into yuan under the current account if necessary, according to the report.

Concerns about the difficulty in taking assets out of the country were one of the reasons stated by MSCI in June when it declined, for the third straight year, to add China’s domestic stocks to its benchmark indexes. The decision was a blow to China’s hopes for better integration into the global financial system and came at a time when it needs funds to stabilize its currency. Analysts have estimated that inclusion could mean as much as US$30 billion of inflows from foreign fund managers.

The Shenzhen-Hong Kong link, which was accompanied by the removal of total aggregate quotas -though daily quotas remain -- is one way China is addressing the trading difficulties flagged by MSCI. “It’s still hard to predict at this stage what the MSCI decision would be this year,” said Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong. “The Shenzhen-Hong

Kong Connect helped a little, but issues remain on the trading limits and the constraints on moving money out of the country.”

Bad timing

Further easing of China’s market rules, and even MSCI inclusion, may come at a time when interest in the mainland has cooled. The benchmark Shanghai Composite Index fell 12 per cent in 2016, its worst annual performance since 2011.

In recent years, the shine has come off of China’s economy after decades of super-charged growth slowed to its weakest in a quarter of a century.

While the economy is on track to meet the government’s target for expansion, analysts warn that stability has come at the cost of a growing debt pile.

“Asset returns in China have been, and will be, declining amid the slowdown in economic growth,” said Chen Yalong, a Shanghai-based strategist with Northeast Securities

Co. “So the opportunities for foreign investors would be structural.”

Still, there may be hope for those who are willing to take advantage of the expected loosening.

The Shanghai Composite Index will climb to 3,800 by the end of the year, a 22 per cent gain, according to the median forecast in a Bloomberg poll of 12 strategists and fund managers.

A stabilizing economy, faster spending on infrastructure and recovering earnings growth were among factors seen driving gains in the nation’s shares, the survey showed.

Those hoping to benefit from that growth should enjoy this year’s expected easing of restrictions, though it may be some time before China’s markets are fully open.

“The liberalization of the capital markets in China is an aspiration rather than a concrete policy goal,” said Greenwood. “I think as long as you have controls on the balance of payments, they’re not going to have a fully open domestic market.” Bloomberg

Business

McDonald’s sells most of China, HK businesses to CITIC, Carlyle Elzio Barreto

McDonald’s Corp has agreed to sell a majority stake in its China and Hong Kong businesses to state-backed conglomerate CITIC Ltd and Carlyle Group LP for up to US$2.1 billion, part of its efforts to switch to a less capital-intensive business model.

The deal caps months of negotiations between the fast-food chain, private equity firms including Carlyle and TPG Capital Management LP as well as several Chinese suitors.

McDonald’s originally wanted to raise up to US$3 billion from the sale of the business, but later decided to keep a minority stake to benefit from exposure to future growth in China, a person with direct knowledge of the plans previously told Reuters.

Hong Kong-listed CITIC Ltd will own about 32 per cent of the business, with CITIC Capital, an affiliate company that manages private equity funds and other alternative assets, holding another 20 per cent.

Carlyle will control 28 per cent of the business, while McDonald’s will retain a 20 per cent stake, the companies said.

The fast food chain company operates owns most of its 2,400 restaurants in mainland China as well as roughly the 240 it has in Hong Kong. It plans to add 1,500 more over the next five years in both areas.

McDonald’s said in March it was reorganizing operations in the region, looking for strategic partners in China, Hong Kong and South Korea. Reuters

10 Business Daily Tuesday, January 10 2017

Greater China Securities

Morgan Stanley, UBS to raise stakes in China securities JVs The two brokerages are set to increase their stakes in Chinese securities joint ventures to 49 per cent Sumeet Chatterjee and Elzio Barreto

M

organ Stanley and UBS Group AG are set to raise their stakes in separate Chinese securities joint ventures to 49 per cent, people with direct knowledge of the moves said, betting on strong deals momentum in the world’s second-largest economy.

China allowed foreign banks to boost share holdings in securities joint ventures to a maximum 49 per cent in 2012 from the previous cap of a third to help modernise the country’s capital markets.

Foreign investments banks with securities joint ventures in China, however, have not as yet raised their stakes as most of the ventures were small or struggling to break even due to sluggish onshore deals.

But the prospect of China moving soon to allow global banks to own majority stakes in securities joint ventures and growing volumes of equity issuance and trading businesses have motivated

some foreign banks to explore raising their holdings.

“The China securities market is ripe for growth, and foreign investment banks will look to put more money there when it comes to boosting revenue. It’s a long-term bet,” said Benjamin Quinlan, CEO of consultancy Quinlan & Associates.

Morgan Stanley and its Chinese joint venture partner, Huaxin Securities, have agreed to a proposal to raise the U.S. investment bank’s stake in the venture to 49 per cent from 33.3 per cent, two people with knowledge of the plan said.

The stake increase by Morgan Stanley is awaiting approval from the Chinese securities regulator, one of the sources said.

Swiss bank UBS, which registered its Chinese securities joint venture in 2006, is also in talks to raise its stake in UBS Securities to 49 per cent from 25 per cent, two separate sources told Reuters.

One of the sources with knowledge of the UBS plans said the bank expected the process to be completed later this year.

All the people declined to be named as the details of the stake hikes were not public yet. Spokesmen for Morgan Stanley and UBS declined to comment. News of the plans was first reported by the Wall Street Journal.

Growing deals

Morgan Stanley Huaxin Securities’ offerings include underwriting and sponsoring of stocks and bonds. UBS China securities joint venture businesses include fixed income, equity underwriting

and financial advisory.

Morgan Stanley China securities joint venture posted a net profit of RMB30 million (US$4.33 million) in 2015, according to the latest data on the website of the Securities Association of China, compared with a loss of RMB470,000 in 2014.

The net profit at UBS China securities joint venture in 2015 was RMB296 million, up from RMB118 million a year ago.

Reuters reported in June last year that Credit Suisse

was also planning to boost its stake in its Chinese securities joint venture to 49 per cent, up from 33.3 per cent now.

The foreign banks’ bigger push in China comes at a time when a pickup in onshore equity and bond issuance in China is helping the nation’s home-grown investment banks to grab a bigger share of the fee pool.

Equity capital market deals in Shanghai rose 2.8 per cent in 2016, while volumes at Shenzhen’s SME board and its tech-heavy ChiNext board surged by 74 per cent and 64 per cent respectively, buoyed by follow-on share sales, Thomson Reuters data showed. Reuters

Co-operation

Coal

China, Zambia to step up co-operation in industrialization, capacity building

Shanxi sets out consolidation plan

Visiting Chinese Foreign Minister Wang Yi said here Sunday that China will continue strengthening industrial co-operation with Zambia and helping the country improve the capacity of independent development.

During his talks with his Zambian counterpart Harry Kalaba, Wang described Zambia as an “all-weather” friend of China, noting that China is now Zambia’s second largest trading partner as well as the country’s main source of foreign investment.

Since the Johannesburg Summit of the Forum on China-Africa Co-operation in December 2015, investment and trade co-operation between the two countries has registered rapid growth amid a sluggish global economic recovery, said Wang.

Wang said that China is ready to focus its efforts on implementing the important consensus reached by and between the two countries’ heads of state, and will help Zambia realize industrialization, agricultural modernization as well as modernization of its national governance capacity.

China will also strengthen industrial capacity co-operation with Zambia, the Chinese minister said, adding it will also continue to help transform the landlocked country into a transport hub and logistics center, and help improve its capacity of independent development.

Wang added that China and Zambia have similar positions on major international and regional issues, and that the two countries should continue to strengthen coordination and co-operation through bilateral and multilateral channels so as to safeguard the common interests of both countries and other developing nations.

Kalaba, for his part, expressed his country’s gratitude for China’s assistance, saying Zambia regards China as a most reliable strategic partner.

The minister also expressed satisfaction with progress in pragmatic co-operation between the two countries in recent years.

He said Zambia looks forward to working closely with China to revamp and revitalize the Tanzania-Zambia Railway, which was built with Chinese assistance in the 1970s, so as to make it play a vital role in the process of Zambia’s industrialization and the regional economic integration.

He added that Zambia firmly adheres to the one-China policy and supports China’s efforts in safeguarding its national sovereignty, territorial integrity and maritime rights and interests.

The two foreign ministers also exchanged views on international and regional issues of common concern in an in-depth way.

China’s Shanxi province, the country’s top coal producer, plans to cap output and consolidate the industry around big producers over the next four years in a bid to boost effiency, according to a blueprint by the provincial government.

Major producers will be set up with a separate focus on thermal coal, coking coal and anthracite, while smaller producers will be merged into larger ones, the local authority said on its official website (www. shanxi.gov.cn).

The province’s annual coal output would be capped by 2020 at 1 billion tonnes and capacity at 1.2 billion tonnes annually by 2020. Shanxi produced nearly 1 billion tonnes of coal in 2015.

Shanxi, in the country’s north, accounts for about a quarter of coal production in China, which has been working to curb overcapacity and a supply glut of the fossil fuel as part of a longer term plan to shift to cleaner

fuels.

For thermal coal, which is used in power generation, Datong Coal Mining Group and China Coal Pingshuo Group will become the top hubs, each with an annual capacity of 100 million tonnes, the province said.

Shanxi’s central region was expected to become a coking coal base.

Shanxi Coking Coal would be the top producer, operating 107 mines with an annual capacity of 181 million tonnes.

It also has coal washing capacity of 120 million tonnes.

The province currently supplies coking coal to China’s top steel mills and also exports to Japan and Korea.

Shanxi’s eastern regions will focus on anthracite, a high quality coal with fewest impurity and highest calorific value. Yangquan Coal Industry Group, Lu’an Mining Industry Group and Jincheng Anthracite Mining Group will be the top three producers tapping the province’s largest mine Qinshui, the report said. Reuters

Business Daily Tuesday, January 10 2017 11

Asia Bonds

Indonesia bars JPMorgan from next dollar sukuk issuance

policy office at the ministry of finance.

The comments come after a November Indonesia has barred investment bank downgrade by the U.S. bank in its JPMorgan Chase & Co from submitting Indonesian stocks recommendation to “underweight” from “overweight”. an underwriting proposal for its next The government has asked other U.S. dollar sukuk issuance, a finance banks to submit proposals by ministry official said on Monday.

“The point is (JPMorgan) will no longer Thursday for a planned U.S. dollar sukuk offering, IFR, a Thomson Reuters do business with the government,” said Suahasil Nazara, head of the fiscal publication wrote on Monday. Reuters

Investment

AIIB: Bank’s door still open to Trump after Obama snub President of the China-led Asian Infrastructure Investment Bank said the firm remains open to the participation of the U.S.

O

ne year after opening with 57 charter members, the China-led Asian Infrastructure Investment Bank remains open to the U.S. joining, President Jin Liqun said.

“The door will remain that way,” Jin said in a Bloomberg Television interview, when asked whether he expects the U.S. would reconsider becoming a member. “We maintain a consistent policy. The AIIB is a multilateral development institution.”

About 30 countries are waiting to join, Jin said at the bank’s headquarters in Beijing. The lender with US$100 billion of pledged capital, part of Chinese President Xi Jinping’s push to expand the nation’s global influence, backed nine projects in seven countries last year.

Before it opened last January, Barack Obama rejected joining, only to see several of the closest American allies sign up. Now Beijing is preparing for the incoming U.S. administration of Donald Trump, who’s already straining ties before taking office January 20.

Jin, a former deputy finance minister who also has worked at the World Bank and the Asian Development Bank on China’s behalf, is still optimistic despite recent tensions.

“We can work very well together,” Jin said, adding that senior officials in the U.S. government, including Democrats and Republicans, have shared with him their praise for the new institution. “I’m very much encouraged by the very positive comments on AIIB.” The AIIB got a boost last year when the U.K., Germany, France and Italy became members. Other American allies such as Australia, South Korea and Canada also joined, leaving the U.S. and Japan as the only Group of Seven holdouts.

The AIIB’s inaugural projects ranged from a slum upgrade in Indonesia to

a new pipeline linking gas fields in Azerbaijan to markets in Southern Europe, via Turkey. The bank lent US$1.73 billion last year, exceeding an earlier target of US$1.2 billion.

Jin said 75 per cent of the bank’s projects so far are proposed and co-financed with existing lenders, including the Washington-based World Bank, Manila-based ADB and London-based European Bank for Reconstruction and Development, while AIIB staff selected the remainder.

The AIIB will continue to collaborate closely with those other multilateral lenders while beefing up its own capability and working to increase its disbursements, according to Jin. “The pipeline is getting bigger,” and the bank’s priority is to “have a better balance across the regions, countries and sectors,” he said.

Jin, one of the first post-graduate students to study English literature after China’s Cultural Revolution, is fluent in English and French and translated The House of Morgan, a book on the J.P Morgan empire by American author Ron Chernow, into Chinese in 1996. He also served as supervisory chairman of the country’s sovereign wealth fund.

Now, he said, he’s confident the country’s economy will fare well during its transition to new drivers of growth.

“China is faced with a number of challenges, particularly restructuring the economy, moving from excessive dependence on external sectors to domestic consumption, and improving the efficiency of the Chinese economy, not aiming at simply the numbers of the growth,” he said.

Factories and services activities capped a year of strengthening across several indicators. But under the hood, risks remain: Increasing pressure on the yuan, rising capital outflows and concern Trump may

make good on threats of punitive measures against China’s exports.

“China is a very much resilient country,” Jin said. “Leadership is also capable to deal with very tough issues.”

Foreign reserves fell for a sixth month in December, bringing the 2016 drop to US$320 billion. Capital outflow pressures have intensified as the yuan posted its steepest annual drop in more than two decades. To prevent capital flight, authorities have recently announced new measures, including extra requirements for citizens converting yuan into foreign currencies.

“Some measure to address this issue in my view probably is necessary,”

Jin said. “I hope things would stabilize very soon, and some kind of panicking on part of investors would disappear.”

Jin said the global economic outlook this year is more positive than last year.

“If you look at the short-term cyclical recovery, and long-term trend, these two factors seem to be doing pretty well,” Jin said. “That would in my view favour infrastructure investment both in emerging market economies and in developed countries, which in turn will help sustain the growth. It is gratifying to learn that even in the U.S., they would like to spend more money in the infrastructure.” Bloomberg

Banking

ADB operations reach record high in 2016 The Asian Development Bank (ADB) said on Monday that its operations for Asia and the Pacific reached an alltime high of US$31.5 billion in 2016, a 17 per cent increase from US$26.9 billion in 2015.

The Manila-based bank said approvals of loans, grants, technical assistance, and co-financing have been growing steadily over the years as development needs in the region continue to rise.

“The increase in our development financing to Asia and the Pacific is reflective of our strong commitment to reducing poverty and improving people’s lives in the region,” said ADB President Takehiko Nakao.

“Asia is growing at a steady pace, but more needs to be done to achieve development that is both sustainable and inclusive,” Nakao said.

Nakao said that the region continues to face many challenges such as implementing the Sustainable D ev e l o p m e n t G o a l s, c l i m at e change, increasing inequality, rapid urbanization, aging, and disaster risk management.

For the period 2017-2020, a successful Asian Development Fund

(ADF) replenishment, concluded in May 2016, would allow ADB to substantially increase support to the region’s poorest countries, the bank said.

“Total disbursements of ADB loans and grants reached US$12.5 billion in 2016 - the highest ever. This strong performance is tied to the reforms ADB has implemented to fast track procurement and implementation processes,” the bank said.

It said co-financing also expanded, reaching US$13.9 billion in 2016 from US$10.7 billion in 2015, a growth of 29 per cent.

“Some of the strong partnerships ADB undertook in 2016 include co-fin an cin g w ith th e Asian Infrastructure Investment Bank for a road project in Pakistan and natural gas project in Bangladesh,” the bank said.

Agreements were also signed with other development partners including an innovative guarantee agreement with the Swedish International Development Cooperation Agency to increase ADB financing by US$500 million over the next 10 years, among others. Xinhua

12 Business Daily Tuesday, January 10 2017

Asia Finance

India: tax figures show little disruption from cash crackdown

I

ndian Finance Minister Arun Jaitley on Monday flaunted robust tax receipts to dismiss reports of economic disruption following Prime Minister Narendra Modi’s decision to abolish high-value currency bills.

Jaitley said indirect tax receipts grew by an annual 14.2 per cent in December, helped by a surge in excise and service tax collections.

counterfeiters, leaving companies, farmers and households all in pain.

The shock decision prompted most private economists to slash growth forecasts for Asia’s thirdlargest economy to 6.3 to 6.4 per cent for the fiscal year 2016/17 from over 7.5 per cent, citing the impact of the demonetisation, which they said would linger for one more year.

Jaitley called those concerns unfounded.

“All the stories about job losses or businesses suffering losses are anecdotal,” he told reporters. “This data is real.”

The tax data comes days after the federal statistics office predicted strong economic growth in the current fiscal year that ends in

March.

G r o s s d o m e st i c p r o d u c t i s estimated to expand by an annual 7.1 per cent in the current fiscal year, slower than a provisional growth of 7.6 per cent in 2015/16.

The statistics office’s estimate, however, didn’t fully account for the economic fallout of the demonetisation drive. Reuters

Key Points Dec indirect tax receipts up 14.2 pct y-o-y Apr-Dec indirect tax receipts up 25 pct y-o-y Apr-Dec direct tax collections up 12.01 pct y-o-y In the first three quarters of the fiscal year that ends in March, overall indirect tax collections were up 25 per cent from a year earlier. Direct tax receipts during the same period were up 12.01 per cent year-on-year.

In early November, Modi scrapped 500- and 1,000-rupee notes as part of a crackdown on tax dodgers and

Politics

Singapore calls on HK to return seized military vehicles Sterling Wong and Chris Blake

Singapore Defence Minister Ng En Hen called on Hong Kong to return nine armoured personnel carriers seized by customs officials late last year, saying the equipment was sovereign property and could not legally be held.

Ng told parliament that Singapore had shipped troop carriers commercially for 30 years without incident, and that Singapore and Hong Kong had long enjoyed good and friendly relations.

“The Hong Kong authorities have responded that the investigation is on-going and will take some time to complete,” Ng said. “Adherence to the rule of law has been the fundamental basis for peace and stability in the last half century in Asia.”

Singapore has been left seeking answers for almost six weeks, with no word from Hong Kong customs as to why the SAF Terrex Infantry Carrier Vehicles were seized en route from Taiwan on a commercial ship after being used in training exercises. The shipment prompted a formal protest from Beijing, which warned Singapore to follow Hong Kong law and the One-China principle that China uses to guide its affairs with Taiwan, which it considers a province.

Foreign Affairs Minister Vivian Balakrishnan told parliament that

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Singapore’s relations with China should not be seen as a zero sum game. “We must also maintain our emphasis on upholding international law and scrupulously respecting agreements entered into with other countries,” he said.

Asia not to have to pick a side.

Singapore, a tiny island-nation that regularly trains its troops overseas, has strong historical and cultural ties to China. Many residents are descendants of traders from the mainland, and in late 2015 Singapore

hosted the first summit between the presidents of China and Taiwan since their civil war. At the same time, it has strengthened military ties with the U.S., allowing Poseidon surveillance aircraft and littoral combat ships to operate out of its territory. Bloomberg

Raised tensions

The seizure raised tensions between the two nations, with China in recent months bristling at Singapore’s perceived alignment with the U.S. against Beijing’s actions in the disputed South China Sea. While any spat with its largest trading partner threatens to distract Singapore from its preferred focus on trade and investment, failure to get the vehicles released could also risk a backlash at home, especially after the U.S. secured the return of a drone seized by China in the South China Sea within a matter of days.

China’s foreign ministry said in a regular briefing last week that Hong Kong was “handling the issue in accordance with relevant laws and regulations.”

The dispute highlights some of the potential pitfalls for smaller Asian nations as they seek to stay neutral amid a regional battle for influence between China and the U.S. Singapore’s Prime Minister Lee Hsien Loong has spoken previously of the importance for countries in Southeast Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Tuesday, January 10 2017 13

Asia Stocks

In Brief

Resurgent Asean stocks may weather any Trump-China trade spat Anuchit Nguyen and Choong En Han

A rally in Southeast Asian stocks may persist even if a Trump-induced trade spat with China erupts, as strategists see the region offering shelter from any global fallout.

After taking a dive as expectations for faster U.S. interest-rate hikes damped their appeal, Asean’s emerging share markets have rebounded sharply in the past couple of weeks.

The Philippine Stock Exchange Index has led the way, surging 10 per cent since December 23, followed by a 6.1 per cent increase in the Jakarta Composite Index. Thailand’s benchmark gauge rose to the highest since March 2015, while Malaysian shares reached a two-month high.

President-elect Donald Trump’s appointment of China hawks to key positions in his administration has investors bracing for rising trade tension between the world’s two biggest economies. With large domestic markets and less reliance on exports, strategists and fund managers see Southeast Asian economies and companies as better placed to cope than their north Asian counterparts.

“The tension between China and the new U.S. administration should benefit Southeast Asian countries” Win Phromphaet, the Bangkok-based chief investment officer at CIMB-Principal Asset Management Co. “The tension between China and the new U.S. administration should benefit Southeast Asian countries,” said Win Phromphaet, the Bangkok-based chief investment officer at CIMB-Principal Asset Management Co., which oversees around US$3 billion of Thai assets. “Foreign investors may choose to shift their investments in the region from China to avoid trade barriers.”

Win said he had been advising clients to add to equity holdings in Southeast Asia because of the region’s strong economies and corporate earnings growth. Indonesia,

which has a population of 258 million, looks like a good place to take shelter from the turbulence to Clive McDonnell, the Singapore-based head of emerging-markets equity strategy at Standard Chartered Plc. “Given the uncertainties over President-elect Trump’s policies on trade, we would like to be in markets that are more defensive,” he said. Indonesia stands out as it has a lower export-to-GDP ratio and a higher weight toward domestic-oriented industries in its stock market, he said.

McDonnell said he was most positive on the country, along with India, in developing Asia.

Fed minutes

The MSCI South East Asia Index, which also includes Singaporean stocks, fell more than 6 per cent in the four sessions after Trump’s shock victory on November 8. It then recouped around half of those losses before dropping again in the two weeks through December 23.

The gauge has rebounded 5.5 per cent since then. U.S. Federal Reserve minutes released last week showing the U.S. central bank may be more dovish than previously thought are also improving sentiment toward the region.

While thin trading over the holiday period may have exacerbated the stock moves, it looks like a relief rally based on a more dovish Fed, said Sean Quek, the head of equity research at Bank of Singapore Ltd. in the city-state. The impact from U.S.-China trade tension might be less severe on Southeast Asia but it still wouldn’t be positive, he said.

The trade issue, along with rising

U.S. borrowing costs and currency vulnerability, were the main reasons Bank of Singapore was maintaining the underweight call it put on Asia ex-Japan stocks shortly after the U.S. election, said Quek.

“If things do get very negative on the trade front, I think it’s hard to see anyone in the region not being affected,” he said.

Foreign funds pulled almost US$4 billion from the Indonesian, Thai, Malaysian and Philippine share markets in November and December, according to exchange data. The flows have started to reverse with US$226 million of inflows so far this year as a Bloomberg gauge of the dollar’s strength had its first back-to-back weekly decline since September.

“It’s all about the pullback in the dollar” and robust economic growth rates in Southeast Asia, said Frederico Ocampo, the Manila-based chief investment officer at BDO Unibank Inc., the largest money manager in the Philippines.

The declining share prices pushed the 12-month price-to-earnings ratio on the MSCI South East Asia Index to as low as 14.2 on December 23 from a high of 15.3 in August. The gauge is now trading at the smallest premium to the MSCI World Index since 2008.

“The fundamentals of many companies in Asean remain solid and valuations are getting more attractive,” said Voravan Tarapoom, the Bangkok-based chief executive officer at BBL Asset Management Co., which oversees around US$16 billion. “If the U.S. economy fails to meet market expectations, there would be a good chance that capital could flow back into Asean.” Bloomberg

Economy

Australia job ads fall 1.9 pct m-o-m in December Australian job advertisements fell in December to end four straight months of gains, a survey showed on Monday, perhaps hinting at some moderation in labour demand as the year came to a close.

A monthly survey by Australia and

New Zealand Banking Group showed total job advertisements fell 1.9 per cent in December, from November when they rose 1.6 per cent.

That saw the annual pace of job ads growth slow to 3.7 per cent, from 6 per cent in November. ANZ no longer

provides a breakdown between internet job ads and those in newspapers, as the latter are now a tiny share of total ads.

“While a disappointing outcome, we see the labour market as losing some of its previously strong momentum, not stalling,” said ANZ senior economist Jo Masters. “Indeed, ANZ job ads rose by 0.5 per cent over Q4 and in trend terms continue to rise.”

While the official jobless rate is relatively low at 5.7 per cent, employment growth slowed markedly last year and hiring was skewed toward part-time positions.

Masters noted business and consumer confidence remained elevated, capacity utilisation appeared to be on the rise, and retail sales had strengthened in the last few months.

“As such, we continue to expect conditions in the labour market to support an ongoing, albeit gradual, decline in the unemployment rate this year,” she added. Reuters

Co-operation

Fiji, Ethiopia to strengthen ties Ethiopia is happy to strengthen ties with Fiji in many areas, said a visiting Ethiopian special envoy here on Monday.

Tedros Adhanom Ghebreyesus, special advisor to the prime minister of Ethiopia, told the government-owned Fiji Broadcasting Cooporation (FBC) that Fiji made a wise decision in establishing a diplomatic mission in Addis Ababa.

The opening of Fiji’s mission in Ethiopia will help strengthen relationships with the member states of the African Union, the Ethiopian official said.

“Starting from trade and investment which is central for the strategic partnership - that’s why I said Fiji really have done the right thing because through its mission in Addis Ababa, it will strengthen its ties with African mission and that can prepare us for a long partnership,” Ghebreyesus told the FBC. Ghebreyesus, on a goodwill visit to Fiji, met Prime Minister Voreqe Bainimarama, who said that with an established mission in Addis Ababa, Fiji is committed to strengthening bilateral relations with Ethiopia.

Ghebreyesus assured Bainimarama of Ethiopia’s support for Fiji’s presidency of the 23rd session of the Conference of Parties in Bonn, Germany later this year, according to Fiji’s Department of Information.

Fiji and Ethiopia established diplomatic relations in January 2011.

Politics

Korean parliament to push extension of presidential scandal trial South Korean parliament’s special committee separately investigating a scandal involving impeached President Park Geun-hye decided Monday to push the extension of its hearings, which most of major witnesses have refrained from attending.

The seventh parliamentary hearing on the presidential scandal was held in the National Assembly, but only three out of 20 witnesses, whom the special committee requested to attend the last hearing, were in attendance.

Rep. Kim Sung Tae, head of the committee, said in the nationally televised hearing that lawmakers will push the extension of the parliamentary investigation, which is originally scheduled to end this week.

The extension requires the agreement between four major political parties, which have over 20 legislators to form a floor negotiation body.

Refraining from the Monday parliamentary hearing were two former presidential secretaries, who had assisted the impeached leader for nearly two decades, the current sports and culture minister and former senior presidential secretary in charge of controlling spy agency, prosecutors and police.

14 Business Daily Tuesday, January 10 2017

International In Brief France

Central bank reaffirms 0.4 pct Q4 GDP France’s economy will expand by 0.4 per cent in the fourth quarter, the Bank of France said on Monday, reaffirming an earlier GDP growth forecast made last month. The Bank of France added that the business sentiment indicator for the manufacturing industry rose to 102 points in December compared to 101 in November - its highest reading since May 2011.

“Business leaders expect industrial production to rise slightly in January,” the Bank of France said in a statement. The business climate indicator for the services sector dipped to 99 in December compared to 100 in November, it added.

Germany

Strong industry output, exports point to Q4 rebound German exports jumped more than expected in November, posting their steepest monthly rise in four-and-half years and pushing up overall industrial production which drove growth in Europe’s biggest economy in the final quarter.

The data, released by the Federal Statistics Office and the Economy Ministry on Monday, reaffirmed expectations for a strong rebound in the fourth quarter of 2016 after the economy halved its quarterly growth pace in the third due to weaker exports.

Industrial production rose for the second consecutive month in November, edging up 0.4 per cent on the month, the Economy Ministry said. This was slightly weaker than the consensus forecast in a Reuters poll for a rise of 0.6 per cent.

The increase was driven by a 1.5 per cent jump in construction output, the strongest monthly gain since February. Manufacturing production was up 0.4 per cent while energy output fell 0.4 per cent.

UK Prime Minister Theresa May

Brexit

May signals U.K. to quit single market to curb immigration The country’s Prime Minister said on Sunday that Brexit will be about “getting the right relationship” Thomas Penny

U

.K. Prime Minister Theresa May signaled regaining control of immigration and lawmaking are her Brexit priorities even if that means quitting Europe’s single market. The pound fell to a 10-week low.

In her first televised interview of the new year, May told Sky News on Sunday that leaving the European Union will be about “getting the right relationship, not about keeping bits of membership.”

“We are leaving. We are coming out. We are not going to be a member of the EU any longer, so the question is what is the right relationship for the U.K. to have with the European Union when we are outside,” she said. “We will be able to have control of our borders, control of our laws, but we still want the best possible deal for U.K. companies to be able to trade in and within the EU and European companies to operate and trade in the U.K.” The comments suggest that with time running out before her own March 31 deadline to file for divorce, May is willing to gamble Britain’s trading relationship with its biggest market in return for greater sovereignty. Being part of the EU requires the U.K. to allow free movement of labor and to accept the jurisdiction of the European Court of Justice.

No prior planning

Venezuela

President unveils 50 pct minimum wage hike Venezuelan President Nicolas Maduro on Sunday announced a 50-percent increase in the minimum wage to help public-sector workers cope with runaway inflation.

“I have decided to increase the minimum wage...of civil servants, as of January,” Maduro said during his weekly radio program.

The decision raises the basic monthly income from 27,091 bolivares (US$41.04) to 40,638 bolivares (US$61.57).

The fifth increase since January 2015 aims to tackle high prices driven by inflation, whose rate hit 180 per cent in 2015.

Workers’ salaries are further boosted with food subsidies and other benefits.

With the premier’s remarks signaling a so-called “hard Brexit” is more likely, the pound on Monday fell to its lowest against the dollar since the end of October, dropping by 0.9 per cent to $1.2178.

May’s EU counterparts have repeatedly warned that she will not be allowed to “cherry pick” and that membership of the tariff-free single market requires her maintaining free movement of goods, services, capital and labor. May’s hope will be that they will still be willing to strike a free trade deal with the U.K. to safeguard their own economies.

May used the interview to deny the government’s plan to exit the bloc is “muddled,” saying she’ll unveil details of her strategy in the coming weeks. In doing so, she defended herself against an allegation by Ivan Rogers, Britain’s envoy to the EU who quit last week, that her government lacks an effective strategy for leaving the bloc.

She 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, starting two years of 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. “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.”

Free movement

Steve Baker, who leads a grouping of about 60 Euroskeptic lawmakers from May’s Conservative Party, said the premier’s comments were “great news for the U.K.” “This is welcome clarification of a sensible position by the prime minister,” Baker said in an e-mail.

“The best outcome for the U.K. is an ambitious trade deal plus control of our laws, trade policy and borders.”

While Baker’s support will be welcomed by May, it will fuel allegations from opposition parties that the prime minister’s attempts to balance the competing factions in her party mean she is not acting in the interests of the rest of the country.

“My worry is that Theresa May, instead of behaving like a prime minister should, is putting the leadership of her own deeply divided party ahead of her responsibilities as prime minister,” Scottish First Minister Nicola Sturgeon told the BBC. May is “trying to appease the increasingly right wing Brexiteers in her own party instead of prioritizing what would be a sensible solution for the U.K. to stay in the single market

for example,” Sturgeon said. “The interests of the country in these next few months have to come to the fore.”

Worked methodically

Education Secretary Justine Greening offered a glimpse of the intense work being done by the prime minister as she seeks to refine the strategy for leaving the 28-nation bloc.

May, who has a growing reputation among ministers and civil servants for her eagerness to be involved in policy detail, has personally overseen discussions on the issues, Greening said. “She’s worked through methodically with cabinet colleagues the many, many areas we have to have clear thinking in place on,” Greening said in an interview with BBC TV. “The prime minister will take her own decision about how much she wants to disclose.”

May pledged to use the Brexit vote to drive a change in the relationship between people and the government, saying the state should be willing to step in to solve “burning injustices.”

Writing in the Sunday Telegraph of her vision for a “shared society,” she said there is “more to life than individualism and self-interest” and rejected the idea that government should get out of the way.

“When the British people voted in the referendum last June, they did not simply vote to withdraw from the European Union; they voted to change the way our country works -- and the people for whom it works -- forever,” she wrote. “It was a quiet revolution by those who feel the system has been stacked against them for too long - and an instruction to this Government to seize the opportunity of building a stronger, fairer Britain that works for everyone, not just a privileged few.” Bloomberg

Business Daily Tuesday, January 10 2017 15

Opinion Business Wires

The Star Malaysia-China Kuantan Industrial Park Sdn Bhd (MCKIP) opened its new office here on Monday where its sales and marketing gallery will showcase developments in the East Coast Economic Region (ECER).

Located on the sixth floor of Wisma Selangor Dredging (South Block), the office will also be the first point of contact for potential investors here.

The office, which was officially opened by the International Trade and Industry (MITI) Minister II Datuk Seri Ong Ka Chuan, will also enhance MCKIP’s service offering to potential investors.

It will offer investors support and information on investment opportunities, facilitation of sale and lease of industrial land, as well as advice and guidance on regulatory and compliance matters, including local business environment.

Bangkok Post Tourist arrivals to Thailand rose 8.9 per cent to 32.6 million in 2016, generating 1.6 trillion baht in revenue, up 12.6 per cent, according to Tourism and Sports Minister Kobkarn Wattanavrangkul.

Swedish tourists stayed the longest, at 19.4 days on average, while Israelis were the biggest spenders, at 84,827 baht per trip.

Overall, tourists stayed longer, at 9.6 days average, and spent 3.2 per cent more to 5,268.4 baht a day.

From December 31 to January 3, foreign and local tourists generated revenue of 30.2 billion baht, up 8.7 per cent from the same period in the previous year.

Of the total receipts, 19.6 billion baht came from foreign tourists, up 5.4per cent year-on-year, while Thais made up 10.6 billion baht, up 15.4per cent.

A factor contributing to the growth was chartered flights and additional flights during the holidays, totalling 16,389 seats.

Bangkok, Phuket and Chiang Mai were the most popular destination.

Democracy’s broken promises

L

iberal democracy is under siege.

Populists of the right and left are not only lashing out at globalization or stagnating middle-class incomes; they are calling into question the legitimacy of the institutions of liberal democracy and of the political elites who manage those institutions.

It’s facile to blame the politics of post-truth practiced by populists. Lies and exaggerations would not work if current democratic practice were without problems. We must re-examine and, if possible, redress what the Italian democratic theorist Norberto Bobbio called the “broken promises of democracy.”

Anyone who has ever campaigned for office has heard voters’ familiar refrain: “We only see you politicians at election time.” Politicians seem distant and untrustworthy, citizens tell pollsters. Populists exploit that gap.

Modern democracy is representative. When elected representatives spend more time in Parliament than they do interacting with citizens, they are not neglecting their duties; they are doing their job. But the rhetoric of modern democracy claims otherwise: it emphasizes closeness to voters and their concerns. When the contrast with reality is too glaring, political leaders’ credibility suffers.

In democratic systems, politicians are agents acting on a mandate from the principals (the voters).

And, as in economics, democracies’ principalagent problem is a problem because the principal may not be able to distinguish capable agents from inept ones. And agents may have interests of their own that clash with the principal’s. As a result, citizens have plenty of reasons not to trust politicians.

Democracies endeavour to ensure by institutional means that the interests of politicians and voters are aligned. In Britain, the constituencies that elect members of Parliament are relatively small, and in the United States, members of the House of Representatives must seek re-election every two years. But these solutions are not without their own problems, including parochialism and the risk that the frequency of elections will make politicians beholden not to voters, but to the special interests that finance their campaigns.

Democratic politicians also try to persuade voters that their own interests are aligned with those of the electorate. Such efforts can be healthy, as when officials disclose the sources of their campaign funds and possible conflicts of interest. But they can also be unhealthy, as when candidates pander to voters’ fears and resentments.

Indeed, two fascinating recent papers by researchers at Harvard and MIT explain the emergence of populism in terms of politicians’ efforts to signal to voters that they are not beholden to powerful interests. Thus, although populist policies reduce overall economic welfare, rational voters choose them because they are the price of distinguishing between different types of politicians. As one of the papers puts it: “once leaders are not necessarily honest, it may be worth hiring those that are incompetent.”

Bobbio emphasizes that lack of trust in democratic politicians also arises from two additional difficulties.

One is that modern societies are pluralistic, with many interests vying to be represented; there is no general will for a politician to represent. The

“

The Korea Herald In terms of imported foods and pharmaceutical products, the ministry will adopt a new policy, active from November, which will immediately ban the entry of items that contain harmful substances without going through the customs clearance review. The ban will only be lifted with additional safety documents submitted by the country of export.

It will adopt another policy that postpones customs clearance review of food and drug products which cannot be confirmed for production safety.

The ministry also announced plans to strengthen regulations regarding the use and sales of medical sedatives such as morphine and propofol - which were allegedly abused by President Park Geunhye and her confidante Choi Soon-sil, key figures at the centre of Korea’s roiling political scandal.

Andrés Velasco a former finance minister of Chile, is Professor of Professional Practice in International Development at Columbia University

other is that in a representative democracy there is no binding mandate for the elected politician to act in a certain way. Once she is elected, it is up to her to decide what the good of society is and which policies will advance it.

The potential for conflict is obvious. Even in the unlikely event that the interests a politician represents do not conflict with one another, there will be no easy agreement about the best policies.

Worse, an able and honest politician may indeed choose the best policies; but, in an environment of imperfect information, she may be unable to persuade voters that she did the right thing.

Suppose that the goal is to create jobs, and that the politician chooses the best policy to achieve that goal.

Then, an external shock causes employment to fall.

Voters can never be sure of what the correct policy was, but they suspect the politician of exaggerating the size of the shock to explain away lost jobs. All voters know is that they cannot get a job when they want one, and they blame the politician for this.

As societies become more complex and the difficulty of evaluating and choosing policies grows, so will the potential for this kind of tension. Technocrats endowed with the knowledge needed to make complex policy decisions will rise in social importance but fall in public esteem. Recall former UK justice minister Michael Gove’s remark in the midst of the Brexit debate: “people in this country have had enough of experts.” Or, as Bobbio puts it, “technocracy and democracy are antithetical: if the expert is the protagonist of industrial society, this rules out a central role for ordinary citizens.”

Add one final complicating factor: technology vastly increases the speed at which citizens transmit multiple demands. A town’s mayor will know almost instantly from Twitter and Facebook if rubbish is not collected from a street corner. And yet modern checks and balances slow down any response. Suppose the mayor wants to institute a new rubbish collection and disposal system.

Detailed environmental impact assessments and lengthy citizen consultations will be required. In the years that it will take for the new system to be up and running, rubbish will occasionally go uncollected, sharpening – almost by the day – the potential for conflict between what citizens expect and what democracy can deliver.

Perhaps the fault lies not only with the current practice of democracy, but also with the expectations raised by some of democracy’s advocates.

Democracy’s promises have indeed been broken.

“But,” Bobbio asks, “were they promises which really could have been fulfilled? I would say no.”

The old Churchillian dictum may apply here: democracy is the worst system of government except for all the others. Under modern representative democracy, people enjoy more personal freedom and more material prosperity than at any other time in human history. We are closer than ever to fulfilling the values of liberty and dignity for all.

Are those not sufficiently powerful advertisements for liberal democracy?

Populists are doing all they can do to undermine liberal democracy.

But liberal democracy’s current troubles may also reflect the widening gap between its practice and the expectations raised by some of its advocates.

”

16 Business Daily Tuesday, January 10 2017

Closing Crimes

FBI arrests Volkswagen exec on fraud charges

The Federal Bureau of Investigation has arrested a Volkswagen AG executive on charges of conspiracy to defraud the United States, the New York Times reported on Monday. Oliver Schmidt, who headed the company’s regulatory compliance office in the U.S. from 2014 to March 2015, was arrested on Saturday by federal investigators in Florida, the newspaper said, citing people familiar with the matter. VW admitted in September 2015 to installing secret software known as “defeat devices” in 475,000 U.S. 2.0-liter diesel cars to cheat exhaust emissions tests and make them appear cleaner in testing. In reality, the vehicles emitted up to 40 times the legally allowable pollution levels.

Volkswagen declined to comment on the reported arrest.

“Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States. It would not be appropriate to comment on any on-going investigations or to discuss personnel matters,” it said. The FBI was not immediately available for comment. Schmidt is expected to be brought before court in Detroit on Monday, the NYT said. Senior VW officials are not attending this year’s Detroit auto show, which is taking place this week. The news comes as Volkswagen was nearing a deal to resolve criminal and civil allegations over its diesel cheating, crucial steps toward moving past the scandal, which has cost it billions of dollars and its reputation. Reuters

Banking

SNB expects bumper 2016 profit after record loss a year earlier The group expects its annual profit for 2016 to reach 24 billion francs Catherine Bosley

T

he Swiss National Bank expects a 2016 full-year profit of 24 billion francs (US$23.6 billion), enabling it to shell out money to the federal government and municipalities.

Foreign-currency holdings contributed more than 19 billion francs, and valuation gains on its gold holdings added 3.9 billion francs, the central bank said on Monday, citing an initial estimate. Last year’s result is set to be the second-best in the last decade and follows a record loss for 2015.

The SNB will distribute a dividend of 15 francs per share and give at least 1 billion francs to the government and the cantons. A supplementary payout to the confederation and the cantons of “about half a billion francs” will also be made, judging by the preliminary figures, it said. Final results are due March 6.

The vast majority of the SNB’s assets are foreign-currency reserves, accumulated by intervening in financial markets to stop the franc from appreciating. Because the SNB can’t hedge the risk of those reserves, it is exposed to currency fluctuations.

This in turn means that its annual earnings also are volatile.

While the central bank doesn’t need a profit to conduct monetary policy, Switzerland’s 26 cantons have come to rely on its munificence to pad their budgets. In the past, big annual losses

have landed the SNB in political hot water.

“The SNB’s bonanza isn’t unimportant for the cantons,” UBS economists Alessandro Bee and Elias Hafner said in a note last week. For the cantons Glarus, Lucerne, Obwalden, Schwyz, Solothurn, Thurgau and Uri, the payout was particularly important, while

Terrorism

Geneva and the city of Basel are less reliant on it, they said.

The central bank is a joint-stock entity, with the majority of its shares held by the cantons and cantonal banks. There are also private investors. For 2013 the SNB didn’t make its payout to the cantons after the price of gold declined, though it made that up the following year and also managed a payment last year despite its loss.

The SNB has accumulated 645.3

Appointment

billion francs worth of foreign currencies due to its interventions.

Economists say it has allowed the currency to strengthen against the euro somewhat in recent months, given that an interest rate rise in the U.S. has caused it to slip against the dollar.

The franc depreciated roughly 1.7 per cent against the dollar last year and it rose about 1.6 per cent against the euro, data compiled by Bloomberg shows. Bloomberg

Trade

Brutal IS ideology believed Saudi Arabia to hire to have reached Philippines PwC for cost-cutting

Taiwan exports shrink for second straight year

Philippine President Rodrigo Duterte said Monday that the brutal and violent ideology of the Islamic State (IS) has reached the Philippines.

“We are now of the opinion in the cabinet that the IS ideology is here to stay,” said the president at a ceremony in the Malacanang Palace.

He said terrorist groups are using illegal drugs to fund their organizations on Mindanao island in the southern Philippines.

Also on Monday, Philippine national police chief Ronald dela Rosa told a news conference that security forces are monitoring the possible presence of five to 10 foreign terrorists in the country.

He said the Philippine authorities have received information that foreign terrorists are training in the Philippines before their deployment in Syria.

Dela Rosa said a foreign man was killed Saturday morning along with his wife during a police operation in Sarangani, Mindanao.

Identified as Abu Naila, the slain suspect was found to be a Sudanese national and member of jihadist group Ansar Al-Khilafa.

President Duterte confirmed last November 28 that IS militants have connected with a Philippine Islamic group, called Maute, in the southern Philippines. Xinhua

Taiwan’s export growth in December hit a fouryear high boosted by demand for technology goods, but was not enough to keep full-year shipments from contracting for the second year in a row and clouding the outlook for the trade-reliant economy.

The island’s tech-dominated manufacturers are nervous about the protectionist policies of incoming U.S. President Donald Trump, who has made trade a centrepiece of his campaign and has threatened to raise import tariffs when he takes office on January 20.

“We cannot assess the exact impact. It is only after he takes office that we will know exactly how he will implement (his policies),” Beatrice Tsai, an official with Taiwan’s finance ministry, told a news conference on Monday.

Exports in December rose 14 per cent from a year earlier, better than the 10.4 per cent median forecast in a Reuters poll and accelerating from 12.1 per cent in November.

It was the fastest year-on-year pace since January 2013’s 21.9 per cent gain.

Exports to China - where many Taiwanese operate factories to export goods for processing before sending them onwards to consumer markets leapt 21.4 per cent in December from a year earlier, finance ministry data showed. Reuters

Saudi Arabia is working with PricewaterhouseCoopers on plans to cancel about US$20 billion of projects as the kingdom seeks to shore up its finances, two people familiar with the matter said.

The Ministry of Economy and Planning hired the consultancy firm to review US$69 billion of government contracts with a view to cutting about a third of them, the people said, asking not to be identified as the discussions are private. Projects under review include contracts awarded by the ministries of housing, transport, health and education, they said, adding that PwC’s role also includes advising on ways to cut project costs or privatize them.

Under Deputy Crown Prince Mohammed bin Salman, the world’s biggest oil exporter is seeking to rein in spending to narrow a budget shortfall that reached nearly 300 billion riyals (US$80 billion) last year after oil prices slumped. The kingdom set up an office to limit government spending, according to this year’s budget that was announced in December.

Authorities also set up the National Project Management Office last year to control capital spending and ensure that government projects are carried out efficiently.

PwC declined to comment, while a spokesman for the Ministry of Economy didn’t immediately respond to requests for comment. Bloomberg