Business Daily #1220 January 24, 2017 by Business Daily

Thu, 26 January 2017 | 6pm 8 pm | Terrazza, Galaxy Macau

Jack Lam could owe Pagcor US$280 mln Gaming Page 7

Tuesday, January 24 2017 Year V Nr. 1220 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Economy

Local economy could fluctuate in 2017, but more because of China than Trump Page 6

Legislative Assembly

Legislators dispute mandatory holidays, minimum wage, drivers and more Page 4

www.macaubusinessdaily.com

Market manipulation

China’s “Hedge Fund Brother No.1” sentenced to prison Page 10

Confrontation

Citibank report warns of confrontation mode in Trump’s ranks Page 10

Come on in

Tourism

The 2016 year welcomed 30.9 mln tourists to the MSAR, just 0.8 pct growth y-o-y, yet still a recovery from the 2.5 pct y-o-y drop seen in 2015. Mainland tourists made up over 63 pct of visitors, at over 20 mln, mostly hailing from nearby Guangdong, with about 9.6 mln using the Individual Visit Scheme. Tourism from South Korea boomed, increasing nearly 20 pct y-o-y, while Hong Kong saw a 2 pct drop. Page 3

Pulling at the thread

Working to stay

Limitations on how long non-resident workers can stay in the territory after contract termination have labour experts and migrant workers’ rights groups divided. The measures could cause migrant workers to stay silent and remain in abusive work environments, however the PSP says it’s just in ‘strict compliance’ with the law.

Court Expensive flight tickets and a lack of detailed information, presumably confidential or merely not provided, previously raised questions in the Public Prosecutor’s Office about the attribution of services and contracts by a group allegedly linked to former Prosecutor-general Ho Chio Meng. Hints of nepotism in the administration will come into question when the corruption trial continues. Page 2

Keep it alive

Non-resident workers Page 5

HK Hang Seng Index January 23, 2017

22,898.52 +12.61 (+0.06%) Worst Performers

China Merchants Port Hold-

+2.46%

Li & Fung Ltd

-1.76%

Cathay Pacific Airways Ltd

-0.76%

China Mengniu Dairy Co Ltd

+1.57%

Hang Seng Bank Ltd China Shenhua Energy Co

+1.02%

Swire Pacific Ltd

-1.47%

CNOOC Ltd

-0.71%

Hengan International Group

+1.36%

Hang Lung Properties Ltd

+0.88%

Lenovo Group Ltd

-1.18%

Cheung Kong Infrastructure

-0.65%

Want Want China Holdings

+1.20%

Galaxy Entertainment Group

+0.85%

Cheung Kong Property

-0.98%

Ping An Insurance Group Co

-0.49%

AAC Technologies Holdings

+1.17%

Sands China Ltd

+0.72%

PetroChina Co Ltd

-0.82%

China Life Insurance Co Ltd

-0.47%

+1.11%

16° 19° 15° 19° 15° 19° 16° 20° 17° 19° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

TPP Despite U.S. President Trump announcing that he would withdraw from the Trans Pacific Partnership deal, other members insist on searching for signs of life. Japan and New Zealand are resisting the idea that the pact is dead and are open to reshaping it in order to keep it alive. Pages 9 and 11

2 Business Daily Tuesday, January 24 2017

Macau Corruption Trial

Confidential orders Unknown persons coming from the resting area and expensive air tickets paid for without names or supporting documents Annie Lao annie.lao@macaubusinessdaily.com

he city’s Court of Final Appeal continued to hear the corruption trial of former Prosecutor-general Ho Chio Meng yesterday, first calling Chao Iao Cheng - former head of the judicial assistance department of the Prosecutor’s Office (MP) - as a witness in the morning session. Chao revealed that he had been to the resting area on the 16th floor of the Hotline Building one time, stating: “the former chief of the Public Prosecutor’s Office, Antonio Lai Kin Ian, took me to the area during the period of renovation”. Chao said he had seen that nothing was inside the resting area and that he thought the whole area on the 16th floor had been rented by the Prosecutor’s Office. After the renovation works had been completed, Chao stated that he did not visit the area again. Assistant Prosecutor Kuok Un Man asked Chao if he had ever seen any individual who was not part of the Prosecutor’s Office coming out of the resting area, with Chao replying that he had seen a female person who wasn’t wearing the uniform of the Office coming out from the resting area, and thought she was a colleague from the Office. Assistant Prosecutor Kuok queried Chao as to whether he had ever seen any visitors who had stayed overnight in the resting area before, with Chao replying that all the visitors assigned through his department were sent to stay in hotels. Chao further added that he had met Ho in person on the 16th floor inside the elevator one time previously and chatted with him.

Unknown area

The court later called Vu Ka Vai, a consultant at the Prosecutor's Office, to testify in the trial, with Vu revealing that the former chief of the Public

Prosecutor’s Office, Lai had taken him to the 16th floor and shown him around before he started working in the Office. However, Vu said Lai had only shown him the office working area and not the resting area. Judge of the Court of Final Appeal, Song Man Lei, asked Vu if he had known the other half of the 16th floor was under lease by the Office. “I didn’t know the other half of the floor was rented by the Office. I didn’t know the purpose of the other half space and I only saw someone going and coming out from that side,” Vu claimed. Assistant Prosecutor Kuok showed several photos of the defendants involved in the corruption case to the court and asked Vu if he could recognize any of them from the photos shown. Vu replied that he could only recognize businessman Wong Kuok Wai, Ho’s brother-in-law Lei Kuan Pun and Lam Hou Un, who is also allegedly accused of working for Ho’s shell companies. Later, the court summoned Prosecutor Chan Seak Hou, who works on the 16th floor, to testify. Prosecutor Chan said he could not recognize and did not know any of the people in the photos of the alleged defendants shown by Assistant Prosecutor Kuok in the court. Chan added that Ho had come to his office on the 16th floor twice for work related matters previously. Ho claimed before the morning trial ended that he had actually seen prosecutor Chan more than twice at this office, and met him once outside the elevator when Ho was accompanying his guests from the mainland at that time.

Up and down

During the afternoon session of the trial, Elsa Cheang Hang Chip, former deputy director of the Prosecutor's Office, was called to testify. Before the establishment of the fourth MSAR Government, both Lai

Former prosecutor-general, Ho Chio Meng

and Cheang were working in the Health Bureau as senior consultant technicians and later transferred to the Prosecutor’s Office with the same titles and positions. Ms. Cheang was promoted, in a dispatch signed by former chief of the Public Prosecutor’s Office, Antonio Lai Kin Ian, and ordered by Ho Chio Meng before the end of his mandate, a decision that was later revoked. Ho also commended Cheang in the dispatch as being “rigorous, disciplined, professional, serious and dedicated”. Not long after the government renewal and Cheang gaining her new position, the new Prosecutor General (at the time), Ip Son Sang, announced that Elsa Cheang’s promotion was invalid.

Disagreements

Assistant prosecutor-general Chan Tsz King showed the court that flight tickets purchased for an International Public Prosecutor’s Annual

Conference held in Denmark in 2005 did not detail the attendees’ names from the Prosecutor’s Office or places in the travel proposal, while former deputy director Cheang replied that the department would still pay for travel expenses when the proposals were presented to them. Assistant prosecutor-general Chan asked if it was an order from the former chief of the Public Prosecutor’s Office, Antonio Lai. Cheang replied that all the names of the attendees were treated in a confidential matter and thought Lai was under confidential instructions to not list the names. Cheang revealed that the procurement and asset management of the MP was originally the responsibility of the personnel and finance department, in which Lai was only in charge of procurement. According to Cheang, it was Lai’s suggestion to get an integrated management team of the office to coordinate works with the personnel and finance department. Due to the change of management, Cheang requested to withdraw from being involved in the integrated management team (allegedly that which allocated the contracts), with the permission of Lai and the former top official. Cheang revealed that she had pointed out a price difference in the cost of the flight tickets to London purchased by the office in 2014 and, according to Cheang, she together with her colleagues, sought out three travel agents to ask for the air ticket prices to justify that more cheaper air tickets could have been purchased by the integrated management team. Cheang said she had mentioned the price difference to Lai, but later received a response from Chan Ka Fai, former chief of the Group of General Administration of the MP, saying, “The price was like that because all the air tickets were purchased by the same travel agent.” Cheang claimed that Lai had told her that another colleague would deal with the purchase of the air tickets and asked her not to bother. Before the trial ended, Ho requested the court to call 14 witnesses to testify, alleging nepotism in their ascension in the administrative ranks, but did not mention the names of those witnesses, stating only their positions, alleging they could be secretaries, heads of departments and consultants from the MSAR Government. The trial is scheduled to continue on Wednesday.

Business Daily Tuesday, January 24 2017 3

Macau

Tourism

South Korean visitors saw the largest annual increase in 2016, up 19.5 pct y-o-y

The more the merrier The MSAR saw more than 30.9 million visitor arrivals in 2016, as visitation recovered from its previous drop, driven mainly by growth in the number of Mainland Chinese and South Korean visitors Nelson Moura nelson.moura@macaubusinessdaily.com

acau’s visitor arrivals for the full year of 2016 grew slightly by 0.8 per cent year-on-year to 30.9 million, as the number of Mainland Chinese and overnight visitors continued to grow,

the latest data from the Statistics and Census Service (DSEC) reveals. The data shows a recovery in the number of visitors last year, after 2015 registered a year-on-year 2.6 per cent decline to 30.7 million visitors, the first drop in visitation numbers seen since 2011. In 2016, the number of Mainland Chinese visitors - who made up 63.4

per cent of the total number of visitor arrivals - increased 0.2 per cent yearon-year to 20.45 million, according to official data, with most visitors hailing from the provinces of Guangdong, Hunan and Fujian. The number of Mainland Chinese visitors travelling to the MSAR under the Individual Visit Scheme (IVS) last year, mostly from Guangdong province, increased by 0.6 per cent to 9.58 million. Over the course of last year, the city saw its largest annual increase in visitor numbers originating from South Korea and Taiwan, with the number of visitors from South Korea increasing by 19.5 per cent to over 662,300 and visitors from Taiwan growing 8.8 per cent to 1.07 million. As Macau’s most important source of visitors outside of Mainland China, Hong Kong registered the only annual drop in visitor numbers, with a 1.8 per cent fall in 2016, down to 6.42 million. Meanwhile, the city experienced a rise in visitor numbers from Japan, growing 6.5 per cent to about 300,600; and from the United States, with visitor numbers growing 4.6 per cent to around 190,900.

Staying for the night Trial

Li Hua Bo sentenced to life imprisonment The former head of the Economic Development Unit of Poyang County in Jiangxi Province, Li Hua Bo, has been sentenced to life imprisonment, resulting from a hearing in Shangrao Intermediate People’s Court, Chinese media Xinhua News reports. The former official embezzled RMB94 million (MOP110 million/US$13 million) from pubic

coffers. According to Xinhua News, Li transferred HK$50 million to gamble during his 52 visits to the MSAR between 2007 to 2011, of which some HK$34 million was lost in gambling activities. The Chinese official absconded to Singapore in 2011 and was imprisoned for 10 months there prior to his repatriation to Mainland China. C.U.

For 2016, the number of overnight visitors registered a considerable increase of 9.8 per cent year-onyear to 15.7 million - accounting for more than half the total number of visitors - with an average length of stay of 1.2 days. The jump was mainly attributed to the 41.1 per cent year-on-year growth in overnight visitors from South Korea, and a 23.4 per cent rise in Mainland Chinese overnight visitors. On the other hand, the number of same-day visitors dropped by 7.1 per cent in 2016 to 15.24 million, with the decrease mainly attributable to a 6.7 per cent year-on-year decline in

Mainland Chinese same-day visitors in 2016.

Last but not least

In regards to the last month of December, visitor numbers grew 8.7 per cent month-to-month, reaching 2.8 million, the best December data registered since 2011. The month also fell in line with the trend seen throughout the year, with overnight visitors - who accounted for 55.5 per cent of total visitors - jumping 16.5 per cent year-on-year in December to over 1.5 million, and same-day visitors dropping 3.1 per cent yearon-year in the month. The number of visitors from Mainland China in December increased by 7.8 per cent year-on-year to reach 1.78 million, with travellers under the Individual Visit Scheme increasing by 15.4 per cent to 850,204. South Korea, Taiwan and the United States registered the largest monthly increases in visitation in December 2016, up 28.9 per cent, 11.2 per cent and 10.7 per cent year-on-year, respectively.

By air not by sea

In terms of mode of transportation, 57.3 per cent of all visitors in 2016 or 17.76 million - arrived by land, a 3.2 per cent year-on-year increase. The Lotus Bridge Border Checkpoint in Cotai saw a considerable increase in entries annually, up 12.7 per cent, while the Gongbei Border Gate continued to be the main entry point for visitors with total entries reaching 15.4 million, a 2 per cent year-onyear rise. Arrivals by air transport also saw a considerable 15.5 per cent yearon-year increase in 2016, reaching 2.41 million. On the other hand, entries by sea decreased by 5.6 per cent year-onyear to reach 10.77 million, with the Outer Harbour registering a drop of 6.5 per cent year-on-year to 6.5 million. However the Provisional Ferry Terminal in Taipa saw a 3.2 per cent growth in arrivals, year-on-year for 2016, to 4.2 million. Advertisement

4 Business Daily Tuesday, January 24 2017

Macau Opinion

Albano Martins* Good news and bad news 1. Good news may be on the way. The inflation rate in 2016 will stay at 2.37 percent! In the latest November figures, the annual inflation rate was 2.56 per cent! My last forecast was for inflation at between 2.38 and 2.47 per cent. However, this value is almost totally out of the question. At best, I think, it could slip to 2.38 percent! This is a sensible advance, the best result since 2010, when inflation reached 2.81, and always stayed above 5 percent until 2014, reaching a new peak in 2014 of 6.05 per cent! From then on, inflation began to come down. By 2017, it should get worse again! That should be the bad news! 2. The recovery of the gaming industry, coupled with the reclamation of land by the government, some not developed through the government’s own plans, will push the real estate sector to speculative values again. Those who have had investments in the real estate sector have been waiting for a good opportunity to sell right away, and those with aspirations to buy a home, have been waiting for better times. This “marriage” has triggered price increases in the market, as the DSF (Financial Services Bureau) figures show. In December 2016, the bubble was above the “good” times of August 2014, when housing prices per square metre were 16.33 times higher than in the second quarter of 2003! In December 2016, this ratio was 16.75 - versus 11.9 times in February of the same year! Foolishness! This scenario may continue to happen because the government is hampered by the indirect indexation of the pataca to the U.S. dollar. Bank deposits have been offering very low interest rates, so investors have been moving into the real economy, mainly real estate, with plenty of cheap money! If the Government does not move to penalize sales of apartments for a much longer period than two years and control those who have unoccupied apartments without rational reasons other than speculation, it will not be able to control the market! Economic policy must be used cleverly, as China knows so well how to do! A few people cannot destroy the life of the majority of the community only because they have the capacity to play games in the real estate housing market! Speculative behaviour and the resulting price increases destroy the economic fabric and the competitiveness of companies, and is an attack on the quality and safety of life of our community. Speculative prices are a very strong factor of instability in this election year!

* an economist and contributor to this newspaper

Never-ending consultations The DSAL announced its determination to revise several legal areas and revealed its preparations for beginning consultation on the bill regarding a minimum wage for security guards and property cleaning workers Cecilia U cecilia.u@macaubusinessdaily.com

uringyesterday’splenary session of the Legislative Assembly, the Director of the Labour Affairs Bureau (DSAL), Wong Chi Hong, revealed its preparations for the revision of the policy for the licensing and operations of employment agencies, the Labour Relations Act, and the establishment of an overall minimum wage. Legislator Lam Heong Sang enquired about the exact schedule for amending the Labour Relations Act, since the original mention of amendments was made in 2015. In response to the legislator, Director Wong stated that the DSAL is prioritizing the establishment of paid paternal leave as well as solutions for the overlapping of mandatory holidays, by carrying out consultations with both employers and employees. Regarding the establishment of a minimum wage for security guards and property cleaning workers, the DSAL Director expects open consultations to be undertaken within this year, claiming that the law could be launched in three years’ time. M o r e o v e r, D i r e c t o r W o n g highlighted the group’s efforts to support local labourers through the provision of training courses to assist workers in obtaining qualifications. Legislator Lam questioned when th e g o v e r n m e n t d e p a r t m e n t would obtain enough opinions and consultations, and pointed out cases in which the trained and qualified job seekers could not obtain related jobs due to a rejection of the qualifications by companies, enquiring whether the DSAL would offer any followup services after qualifications are acquired by job seekers. Meanwhile, pan-democratic

legislators Ng Kuok Cheong and Au Kam San criticized the government for not investigating the number of non-resident workers needed in each industry, noting that the absence of data means that determining a quota for the number of imported nonresident workers needed by the city will not be possible. Lawmaker Song Pek Kei also slammed the government for not informing the public about the progress of the consultation, stating that employers and employees have already come to a common consensus after years of negotiations. Legislator Kwan Tsui Hang, on the other hand, asked if there were any policies for pairing qualified job seekers with related companies. The DSAL Director revealed that there had been a decrease in the number of non-resident workers hired by the city’s six gaming operators, as well as a growing ratio of local workers taking up management positions with the operators. Online pairing services were in the process of being launched last year, the Director stated.

One-stop service

P r e si d e n t o f A d m i n i st ra t i v e Committee of the Macau Trade and Investment Promotion Institute (IPIM), Cheong Chou Weng, claimed in the assembly meeting that over 120 companies had succeeded in launching their businesses with the aid of one-stop service provided by IPIM, and further indicated that businesses with over MOP5 million (US$ 625,797) capital would be transferred to the Investment Committee, composed of 12 representatives from different government departments. He stated that the establishment of the committee is aimed at accelerating the start-up of new companies. In response to Cheong’s comments, Legislator Song Pek Kei agreed that there needs to be a shorter time

required for opening new companies, but pointed out that the application for a license takes comparatively more time. “It would definitely affect the intention of people to create their own businesses […] some of them even already have debts and they are still not able to operate their businesses because of the absence of licenses,” said Legislator Song.

Loopholes everywhere

Legislator Kwan Tsui Hang brought up the issue of non-resident drivers - in particular casino shuttle bus drivers - who obtain a special driving license that is approved by both the mainland and Macau, questioning the stalling of amendments to the law for special driving licenses. The Deputy Director of the Transport Bureau (DSAT), Luis Correia Gageiro, admitted there are loopholes in the current law, but he noted that the complexity of amending the law is related to the Road Traffic Law. Gageiro also pointed out difficulties, since it involves co-ordination with the neighbouring Mainland Chinese city. The Public Security Police Force provided data on the number of surprise inspections of the drivers, reporting that no violations had been found in the past years. Legislator Ng Kuok Cheong denounced the inspections of just the drivers and not passengers. “Many of these non-resident drivers [who have special driving licenses that can only transport passengers from Mainland China to Macau] simply stroll around Zhuhai and come back to Macau to pick up passengers at the Border Gate and transport them to the casinos,” said Ng. Gageiro replied that the DSAL will clearly define the irregularities and regulate violations of the special driving license law. In order to prevent license abuse, he added that the quota of license approvals will be included in the amendment. The legislative assembly will continue to meet tomorrow, discussing in particular, legislators’ concerns about nepotism in the administration.

Business Daily Tuesday, January 24 2017 5

Macau Labour

The right to stay longer Labour experts and migrant workers’ rights associations are divided on whether a reduction of the allowed stay period for migrant workers after contract termination is a breach of labour rights, and if it will have practical effects on the local labour market Nelson Moura nelson.moura@macaubusinessdaily.com

abour experts and local migrant worker’s rights groups have divided opinions as to whether new regulations reducing the number of days that non-resident migrant workers can stay in the MSAR after the termination of their contracts, breaches their labour rights, and is effective as a measure to reduce non-resident workers in the city.

“We non-resident workers should be treated the same as local workers. We’re contributing to the economy of Macau and the eightday visa is very discriminatory since it’s not enough for us to look for another employer, while the employer has plenty of time to find a replacement employee” Emer de Lina, chairperson of Filipino migrant association Migrante Macau

In December of last year, the Labour Affairs Bureau (DSAL) and the Immigration Services Department of the Public Security Police Force (PSP) announced to local broadcaster TDM that the allowed stay period for non-resident migrant workers who leave their employment or have been

Not that effective

From the perspective of governance, the current tightening of control is the government’s response to residents’ long-term demands to reduce the number of migrant workers. “A more effective way to reduce non-resident workers would be to tie the worker’s contract to an employer. In other countries the blue card is tied to only one employer and if they want to change their job they have to fly back to their home

Neighbours not much better

An Amnesty International dispatch from 2014 previously criticised a similar immigration policy implemented in Hong Kong, the New Condition of Stay also known as the Two-Week Rule, which mandates migrant domestic workers are required to ‘find new employment and obtain an approved work visa within two weeks of the expiration or premature termination of their

fired, would be reduced from 10 days to 8 days. In the case of non-resident temporary workers who have resided in the MSAR for less than six months, only a two-day stay period will be allowed. The decision to reduce the stay period was contested by different migrant worker’s groups who consider that the previous stay time was already insufficient, and stated that they weren’t consulted before the decision was taken. “We non-resident workers should be treated the same as local workers. We’re contributing to the economy of Macau and the eight-day visa is very discriminatory since it’s not enough for us to look for another employer, while the employer has plenty of time to find a replacement employee,” Emer de Lina, chairperson of Filipino migrant association Migrante Macau, told Business Daily. In a response sent to Business Daily, the DSAL commented that the matter could only be commented on by the PSP, with the police authorities responding that: “the application of the deadline of not less than 2 or 8 days after the cancellation of his residence permit is only due to strict compliance with the provisions” of the Law regulation on Illegal Immigration and Expulsion.

Breach of rights

“The shortening of the period of stay for migrant workers after a termination of contract will certainly worsen their conditions. It is quite unimaginable that you are just allowed two days, if it is really the case, to pack up and leave. In some situations, you might not even be able to buy an air ticket in two days’ time,” Alex Choi Hang Heung, Assistant Professor of the Department of Government and Public Administration at the University of Macau (UM), told Business Daily. Under the Law for the Employment of Non-residential Workers, migrant workers who voluntarily quit their jobs are subjected to a six month ban from the MSAR, during which time a work permit can’t be

country,” notes Ms. Lu. “However this measure ends up being only good for the government and not good for employers or employees, so I don’t think employers would go for it,” she states. The total number of non-resident workers in Macau amounted to 177,897 as at the end of November 2016, down by 4,349 workers or 2.4 per cent from the same month last year, the latest official data released by the Labour Affairs Bureau (DSAL) shows. employment contract’ after which they are required to leave the city. According to the report, the two-week limit ‘leaves migrant domestic workers with little choice but to remain in abusive and/or exploitative conditions or accept jobs with unfavourable work conditions in order to maintain their immigration status’ while not leaving them enough time to challenge termination decisions in court.

provided, except if they can prove a legitimate reason for their decision to terminate their contract such as non-payment of wages or abusive treatment by employers. According to Mr Alex Choi: “the shortening of the stay period will make [migrant workers] even more unwilling to report and leave an abusive work environment,” an argument already mentioned by Amnesty International as a critique to a similar policy implemented in Hong Kong. For Anita Chan, Professor at the Australian National University and expert in labour issues in China, similar policies act as a “kind of control” of migrant workers, and would especially harm workers who reside in Macau under ‘broker schemes’. “Usually these kind of migrant workers have to pay huge sums of money to be able to come to Macau, so if I have to pay US$2,000 (MOP16,000) to get a job in Macau, they will deduct that wage every month from my salary until I pay back the deposit. That binds them and allows mistreatment since they owe the agents money, and it’s very common all over the world,” stated Ms Chan.

Not that bad

For Melody Lu Chia-Wen, an Assistant Professor of the Department of Sociology of UM, migrant worker groups should contest the decision more on “moral grounds” than “employment rights grounds” since the right to residency after the termination of employment and the right to change employers are not recognized as basic human rights of migrants under the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families. “I don’t think they should contest it as a labour rights issue. Labour

Not migrant workers’ rights groups

The decision to reduce the stay period was contested by different migrant workers groups who considered they weren’t consulted before the decision was taken. In its response to Business Daily, the Public Security Police Force (PSP) stated that four of the ‘most popular associations’ of Macau participated in the consultative meetings with the ‘majority’ of the representatives ‘agreeing with the idea’. According to the PSP, the associations present at the

rights are always tied to the contracts. If their contract terminates they’re no longer residents and not entitled to the same rights, which is a gap in the law unfortunately. I think it’s more of a moral issue. Employers should take into consideration these people already have social and family ties in Macau and that the awarded period is not enough to prepare before departing,” stated Ms Melody Lu. For the sociology expert, of the countries that still practice guest worker schemes, the MSAR government is already “quite flexible” and “laissez-faire” since it allows migrant workers to enter with tourist visas and find work in certain sectors and change employers. She also considers that in practical terms, termination tends to not be “unpleasant” with employers and employees tending to reach an agreement beneficial for both parties. “The employer will negotiate with the worker to not terminate the contract immediately, which is advantageous for the employer too because it gives him more time to find a replacement. In some instances the employer has to pay the worker’s airfare to go back to his country so it’s advantageous for him if the worker stays in Macau,” notes Ms Lu. “In practice, migrants and employers have developed many ways to bypass the current regulation and cutting short of the days would not make much difference,” she told Business Daily. In fact, the UM professor points out that if the government intends to actually reduce the number of non-resident workers in the MSAR, reducing their stay after contract termination is “not an effective method of migration control” and could even be counter-productive and increase clandestine migration.

consultative meeting were the Association of Employment Agencies of China (Macau), the Macau Overseas Worker Employment Agency Association, Macau Myanmar Human Resources Agency Federation and Macau Domestic Service’s Employer Union. However labour experts have stated to Business Daily that most of the mentioned associations seem to be ‘broker(s)’ or agencies specialising in bringing foreign labour to the MSAR, and not migrant workers’ rights associations.

6 Business Daily Tuesday, January 24 2017

Macau

Economy

Tensions and expectations Threats to the MSAR economy based on rising U.S.-China tensions are mostly on the gaming front Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

ith the recent inauguration of U.S. President Donald Trump, the local economy is on high alert to see what effects the proposed protectionist measures will have on local companies. As an Asia Risk Assessment report by Steve Vickers & Associates (SVA) points out regarding the MSAR’s position: ‘a more protectionist Beijing may wish to cultivate a national champion, a stance in line with Chinese industrial policy, or

refuse to countenance the renewals for foreign businesses – particularly if tensions with the U.S. rise’. The group further notes that a ‘rising economic nationalism in China […] could seep into a debate about the renewal of the six existing gaming concessions that expire in 2020 and 2022’. Without specifying any time frame, the Gaming Inspection and Coordination Bureau (DICJ) has previously confirmed that they would consider adjusting the current taxation rate on casinos in the territory, but have not given any indication of whether licences would

Health

Lei Chin Ion: insurance purchase as a society or community Lei Chin Ion, the Director of the city’s Health Bureau (SS), has suggested that the healthcare sector purchase compulsory medical insurance as a society or community after the implementation of the medical error law next month, according to local broadcaster TDM Radio News. The SS currently offers compensation of no more than MOP3 million (US$375,443) for issues relating to medical errors, and the insurance

amount is thus set to no less than MOP2 million from private clinics. Member of the Macau Monetary Authority, Maria Luisa Man, noted that the insurance rate is determined based on the risks of respective professions, and is referenced to the current commercial insurance price. She added that the new insurance rate would be readjusted in the future according to the review mechanism. C.U.

be renewed or not. Clearly however, the U.S.-based operators would be exposed to more risk than their local counterparts if tensions between the U.S. and China rise, despite all operators facing a potential upwind if the taxation rate is lowered.

Trade

As noted by the Oxford Economics U.S. Jobs and China Trade Report, ‘countries with the biggest increase in openness (the sum of exports and imports as a share of GDP) with China – particularly neighbouring Hong Kong and South Korea – had the highest growth since 2001’. Having an open policy towards China, not only brings direct benefits to the U.S. and indeed the whole North American continent, but as the Oxford report reveals, China’s growth and rising consumer demand ‘also influences how much China’s neighbours purchase from the United States, as their increased trade with China assists their expansion as well’. On the flip side, notes the International Monetary Fund’s World Economic Outlook, ‘the slowdown and rebalancing in China […] had a notable impact on prospects for advanced Asian economies (Hong Kong SAR, Korea, Singapore, Taiwan)’. Cumulatively in 2016, up until (and including) the month of November – the most recent data available from the Statistics and Census Bureau (DSEC) – imports to Macau from the Mainland made up 36.6 per cent of the total, while those from the U.S. made up just 4.8 per cent of the total in the same period. Total value of imports from the U.S. in the first eleven months of 2016 equalled MOP35.55 billion, which, when compared to the same period in 2015, saw a 31.6 per cent decline. Interestingly, 34.2 per cent of the import value from the United States was derived from imports of vegetables and fruit.

Economy

However, Macau, given its reliance on the gaming industry, could still remain insulated from slowdowns in trade between China and the U.S. The city’s annual inflation rate for 2016 slowed to its lowest level since 2009, hitting 2.37 per cent, and the city’s real gross domestic product turned positive in the third quarter of last year compared to the previous year, following two quarters of year-on-year declines, according

to government statistics and those from the University of Macau (UM). Estimates by UM’s Department of Economics project a 3.2 per cent growth in gross domestic product (GDP) for this year, to reach MOP342.2 billion, and note that ‘Macau’s economy will continue its steady growth in 2017,’ according to a report by the department. H o w ev e r, esti m at es b y th e International Monetary Fund (IMF) predict the MSAR’s real GDP declined by 4.7 per cent year-on-year in 2016, while expecting just 0.2 per cent yearon-year growth for the current year. For 2021, the IMF’s year-on-year growth estimates are still 0.6 per cent below UM’s estimates for this year, at a 2.6 per cent year-on-year increase. The University of Macau data notes that it leaves room for a range of possible adjustments, estimating that GDP could decline as much as 6.9 per cent or grow all the way up to 13.2 per cent, year-on-year - a wide margin of error due to the GDP being ‘highly influenced by government policies’, which the SVA report points out could mostly come from Beijing. The bottom line: although the ‘economic outlook shows some signs of improvement,’ according to the SVA report, ‘weakening growth, rising debt and a falling currency mean Beijing views outflows of funds as a threat to economic security’. Recently miscommunicated plans to limit each UnionPay individual withdrawal amount to MOP5,000 caused casino operator stock prices to decline in double digits, despite the fact that the casino operators made MOP223.2 billion in gaming revenue last year. ‘Revenues of US$44 billion in 2014 came about thanks to Chinese acquiescence in breaches of capital controls, a wilful blindness that made sense when the yuan was strong and inflation high,’ notes the SVA report – situations which have since reversed as the U.S. dollar – which both the pataca and the Hong Kong dollar are pegged to – gains in value, while the yuan depreciates. Altogether, the primary threats to the city’s economy when it comes down to U.S.-China relations lie mainly in the possibility that the government might not renew the gaming concession contracts due to Mainland-U.S. tensions – while changes in trade, given their current percentage as compared to trade with China, might not imply drastic disruptions.

Business Daily Tuesday, January 24 2017 7

Macau Retail

Chow Sang Sang expects yearly profit to slump

he annual net profit of Jeweller Chow Sang Sang Holdings International Ltd is expected to plunge by between 30 and 40 per cent year-on-year for the year of 2016, according to the company’s filing with the Hong Kong Stock Exchange last week. The company said the drop in net profit is due to declining turnover resulting from ‘weakened consumer demand in Mainland China and Hong Kong,’ in addition to a one-off gain of some HK$246 million (US$30.6 million) recorded for the 2015-year. For the whole of 2015, the company

saw its net profit jump by 4 per cent year-on-year to HK$1.14 billion. On the other hand, the jewellery retailer saw its net profit halved in the first half of 2016, when compared to the same period the previous year - from HK$729 million to HK$364 million. In addition, total turnover decreased by 16 per cent year-onyear to HK$6.9 billion. The company said in its interim report, released last August, that its shops located in the MSAR’s shopping arcades were affected more ‘by a dearth of visitors’ compared to its main street shop, located on Avenida de Almeida Ribeiro. K.L.

Gaming

Jack Lam owes Pagcor US$280 mln Founder of Jimei Group, gaming mogul Jack Lam reportedly owes the Philippine Gaming Corporation (Pagcor) about P13.9 billion in debts, according to Philippine media reports. The figure was released during the Blue Ribbon Committee hearing held yesterday, regarding a P50 million bribery scandal, which involved officials of the Philippine Bureau of Immigration relating to over 1,300 workers of Chinese origin detained during a raid on Lam’s Fontana

Leisure Parks and Casino, in Clark, Philippines. The estimate comes from Pagcor Assistant Vice President Arnel Ignacio, who noted that Lam only paid up 1 per cent of the junket earnings from his operations in the country. Ignacio also noted that the authority had only issued licenses for Lam’s casino, junket operations and phone betting operations, but not for online gaming. When questioned about the exact figure that Lam derived from his

illegal online gaming operations, the Pagcor official could not immediately quote a figure but said that he would provide it later. “His online operations are not licensed by Pagcor,” noted the official, also stating that he was unable to provide an estimate as to how long Lam’s online operations might have been in effect. Ignacio noted that Jack Lam has been operating in the gaming business in the Philippines since 1999.

8 Business Daily Tuesday, January 24 2017

Macau CHINA GREATER

TEMPORARY LIQUIDITY SUPPORT

Central bank introduces new monetary tool The central bank has avoided cutting banks’ required reserve ratios too frequently

MOVE by China’s central bank to provide temporary liquidity support marks the creation of a new policy tool designed to ease seasonal cash shortages, while sending the signal that monetary policy remains stable and neutral, the Financial News said in a front-page commentary yesterday. The use of the “Temporary Liquidity Facility (TLF)”, announced by the central bank last Friday, is expected to inject several hundred billion yuan into the banking system, according to the publication, which is affiliated with the People’s Bank of China (PBOC). The PBOC made the funds available to the country’s five biggest banks after short-term funding costs spiked to near 10-year highs heading into

the long Lunar New Year holiday starting on Jan. 27, sparking fears of a cash squeeze. The central bank has avoided cutting banks’ required reserve ratios (RRRs) too frequently, because the move would inject a large amount of liquidity into banking system, pushing down yields, fuelling expectations of monetary policy loosening, and increasing depreciation pressure on the yuan, the newspaper said. TLF is a another gadget in the central bank’s expanding toolkit and will continue to play an important role in the future, according to the article. On Friday, the central bank said it would provide temporary liquidity support for several major commercial banks for 28 days, with funding cost under TLF about the same as the open market operations rate over the

same period. The move came after the PBOC had injected a record weekly amount of funds. “This action is new and unusual, and perhaps ad hoc,” economists at ANZ said in a note on Friday afternoon. “Given a stable GDP and rising inflationary momentum, we do not see a macroeconomic reason for a

broad-based monetary policy easing which would have sent the wrong policy signal to the economy....They may also launch other tools if certain segments of the economy require their support in the future.” China’s economy grew a faster-than-expected 6.8 per cent in the fourth quarter, boosted by higher government spending and record bank lending. REUTERS

PROPERTY

Good times seen coming to end for domestic real estate bonds Some investors believe the government won’t permit a slump in real estate Steps to cool China’s property market are stoking speculation the good times are about to end for developer bonds offshore. The hangover would be big. Yieldstarved fund managers around the world have piled into the US$65 billion market for dollar-denominated notes sold by Chinese builders. There is plenty of scope for pain after yield premiums for lower-rated U.S.currency securities from the nation, the majority of which are from real estate borrowers, dropped to the lowest level since 2007 this month, according to a Bank of America Merrill Lynch index. “We are not optimistic about prices and sales in the property market,” said Xu Cheng, who will be fund manager for Franklin Templeton Sealand Fund Management Co.’s new overseas bond fund, which finished raising money on Jan. 19. The Shanghaibased joint venture of the San Mateo, California-based group oversees RMB20.1 billion (US$2.9 billion) of assets. “We estimate there will be a correction in Chinese developers’ dollar bonds. The near-record low yield premium isn’t big enough to cover credit risks.” Regulators concerned about a bubble have succeeded in taking some of the froth out of housing prices. China Bond Rating Co. estimated property sales volume may suffer a “substantial decline” this year as local governments step up buying restrictions and down-payment requirements. A government report showed home prices fell in Beijing,

Shanghai and Shenzhen in December and increased in the fewest Chinese cities since January 2015. The nation’s onshore real estate securities may be the riskiest part of the local yuan-denominated debt market in 2017, according to the largest number of respondents in a survey of domestic analysts and traders conducted Dec. 22 to Dec. 26. Some investors believe the government won’t permit a slump in real estate. “The property industry has been and is still one of the pillars of the Chinese economy,” said Wu Xiangjun, an overseas bond fund manager in Shanghai at Guotai Asset Management Co., which oversees RMB77.7 billion of assets. The government probably won’t loosen controls on property bond financing in the first half, according to Christopher Yip, an analyst at S&P Global Ratings in Hong Kong. Onshore note offerings by the sector shrank 94 per cent in January from the year-earlier month to RMB2.3 billion. GF Fund Management Co., which oversees RMB304.9 billion of assets, said curbs on property financing may increase cash-flow pressures. “Property bond yield premiums may widen,” said Li Yaozhu, a Guangzhou-based overseas bond fund manager at the firm. “Smaller developers may have liquidity problems and those with bad credit profiles may even go bankrupt.” BLOOMBERG NEWS

2017 9 Business Daily Tuesday, January 24 2017

GREATERMacau CHINA POVERTY REDUCTION

IN BRIEF

Philippines agree to cooperate on 30 projects The deal is the first announcement from a two-day visit by a Philippine cabinet delegation to China

HINA has agreed to cooperate with the Philippines on 30 projects worth US$3.7 billion focusing on poverty reduction, the two countries said after a meeting in Beijing yesterday. Chinese Commerce Minister Gao Hucheng announced the deals without giving details, saying it was an “initial batch” of projects that still needed to be finalised and paperwork still needed to be processed by the banks involved. Philippine Finance Secretary Carlos Dominguez said he had a “very productive” meeting with Gao and they had discussed large projects in rural areas, as well as some smaller projects. The deal is the first announcement from a two-day visit by a Philippine cabinet delegation to China that comes three months after President Rodrigo Duterte visited Beijing to pave the way for new commercial

alliances. China has welcomed Duterte’s foreign policy shift away from traditional ally the United States and towards doing more regional deals for loans and business under his “pro-Filipino” policy. Chinese officials pledged US$15 billion of investment to the Philippines during Duterte’s visit in October, according to the Philippine finance department. Asked whether U.S. President Donald Trump’s economic policies would affect commercial ties between China and the Philippines, Dominguez said: “It’s better to be with good friends.” “I’m not sure at this moment exactly what the new U.S. policies, but I believe that the reorientation of our president to our neighbours really was very smart,” Dominguez told reporters. The Philippine delegation is due to meet Vice Premier Wang Yang at Zhongnanhai, the Beijing complex

that houses China’s central government, later on Monday. The Philippine team on the trip includes Duterte’s finance, budget, economic, public works and transport secretaries.

“I believe that the reorientation of our president to our neighbours really was very smart” Carlos Dominguez, Philippine Finance Secretary

The two sides will also discuss the Philippines’ chairmanship of the 10-member Association of South East Asian Nations (ASEAN) this year. Foreign Affairs Secretary Perfecto Yasay said on Jan. 11 he was confident a code of conduct in the South China Sea between ASEAN and China could be finished by mid-2017. REUTERS

EMPLOYMENT

Taiwan jobless rate lowest in 14 months Taiwan’s jobless rate in December improved to 3.82 per cent on a seasonally adjusted basis, its lowest level in more than a year, the government said yesterday. The rate was the lowest since 3.81 per cent was recorded in October 2015, government data showed. However, for 2016, the average seasonally-adjusted unemployment rate was 3.92 per cent, worse than the 3.78 per cent of 2015, according to the Directorate General of Budget, Accounting and Statistics. OIL INDUSTRY

LNG imports hit record in December China’s liquefied natural gas (LNG) imports hit a record high in December, customs data showed yesterday, driven up as the country pushes towards cleaner fuels. The world’s No.2 economy shipped in 3.73 million tonnes of LNG in December, topping the previous record of 2.66 million tonnes in November and up from 2.10 million tonnes a year ago, the General Administration of Customs said. China’s government in 2014 launched a “war on pollution” to reverse the damage done by decades of untrammelled growth. Trade flow data on Thomson Reuters Eikon shows that Australia and Qatar exported the most LNG to China in December. SHARES

COSCO to boost stake in Qingdao port operator Three months ago President Rodrigo Duterte (L) visited Beijing to pave the way for new commercial alliances. Lusa

TRADE DEAL

New Zealand PM open to Beijing involvement in TPP alternative Trade Minister Todd McClay would probably visit Washington “before too long” New Zealand is working on a “Plan B” to the 12-nation Trans-Pacific Partnership (TPP) trade deal and China’s involvement is possible, Prime Minister Bill English said yesterday. United States President Donald Trump’s decision to withdraw from the still-unratified TPP would not necessarily stop the other 11 nations working on a modified version of the deal, English told Radio New Zealand.

“There are other vehicles for China if they’ve got an interest in free trade in the Asia-Pacific”

would argue it’s not in America’s interests in the long run either, but they’ve made a pretty clear policy decision.” “So we’re working on Plan B. It was promising that last week the Prime Minister of Japan, when he was in Australia, made quite a positive statement about trying to proceed with a version of the TPP without the U.S. in it, if it comes to that,” said English. “We don’t believe it’s dead, but Plan B could be a bit tricky.” Asked if it was possible the TPP

could be scrapped and replaced with something else, possibly involving China, English said, “That’s possible.” “There are other vehicles for China if they’ve got an interest in free trade in the Asia-Pacific, but the TPP’s a fairly original, a fairly unique kind of trade agreement and there are real benefits in it for New Zealand if we can just get everybody organized,” said English. New Zealand Trade Minister Todd McClay would probably visit Washington “before too long” and begin talks with his counterparts in other TPP countries over the next couple of months about an alternative to the current agreement. XINHUA

Bill English, New Zealand Prime Minister New Zealand passed legislation late last year allowing the government to ratify the agreement, which was signed in Auckland in February last year. English said the Trump administration’s “America first” trade policy was “not in our interests and we

Bill English, New Zealand Prime Minister

COSCO Shipping Ports will acquire a 16.82 per cent stake in Qingdao Port International (QPI), operator of China’s sixth busiest port, the company said on Sunday, expanding COSCO’s port network. Under the agreement, Shanghai China Shipping Terminal Development, a subsidiary of COSCO Shipping Ports, will pay RMB5.8 billion (US$844 million) for the shares in QPI. The deal, to be settled through a combination of equity and cash, will boost COSCO’s share in the Qingdao firm to 18.41 per cent, added the company in a statement. COSCO has been extending its port network with several large deals around the world in recent years. GAMING

Lottery sales up 7.3 pct China’s lottery sales rose 7.3 per cent year on year to RMB394.64 billion (about US$57.53 billion) in 2016, official data showed yesterday. Welfare lottery sales increased by 2.5 per cent to RMB206.49 billion, and the sports lottery rose 13.1 per cent to RMB188.15 billion, the Ministry of Finance announced. In December, lottery tickets worth RMB36.59 billion were sold, a year-onyear increase of 7.2 per cent. Welfare lottery sales rose 4 per cent to RMB19.98 billion and sports lottery sales rose 11.4 per cent to RMB16.61 billion.

10 Business Daily Tuesday, January 24 2017

Greater China Market manipulation

Beijing gives ‘Hedge Fund Brother no.1’ prison Between 2010 and 2015 he colluded with the chairmen or the “actual controlling shareholders” of 13 listed companies to trade on insider information

hina sentenced former hedge fund manager Xu Xiang to five-and-a-half years imprisonment for market manipulation, in one of the most high-profile cases following the 2015 market rout, a court in the eastern city of Qingdao said in its official Weibo account.

‘Zexi Investment Management Co. ran four of the country’s top ten performing hedge funds between June and August in 2015’

Between 2010 and 2015, Xu -- either alone or with Wang and Zhu -- colluded with the chairmen or the “actual controlling shareholders” of 13 listed companies to trade on insider information on topics such as dividends, according to the statement. Xu controlled almost 100 trading accounts opened by his relatives, employees and employees’ relatives, the court said last year. The

executives and owners have been charged separately. The money involved and illicit gains from their manipulation were “especially huge, and the circumstances specially serious,” the court said without disclosing the amounts. The three hedge fund executives were also fined, the court said, without providing details. They won’t appeal their sentences, according to the court. Xu’s Zexi Investment Management Co. ran four of the country’s top ten performing hedge funds between June and August in 2015, the period of the share market collapse, according to independent ratings

company Shenzhen Rongzhi Investment Consultant Co. Zexi’s five funds returned an average 249 per cent in the first nine months of that year, when the Shanghai Composite Index fell 6 per cent, Shenzhen Rongzhi said. Xu was detained by police in November 2015 on the highway between Shanghai and Ningbo, in an arrest that was captured in photographs and widely circulated on social media. Police later froze over US$1 billion of shares in listed companies with connections to Xu’s investments, according to exchange filings by those firms. Xu, born in 1976, started investing at high school in the eastern city of Ningbo, according to the official People’s Daily. Skipping university, he instead became a professional investor, accumulating over RMB4 billion in personal wealth and managing tens of billions of yuan, the People’s Daily reported in 2015. Bloomberg News

Xu, known as “hedge fund brother No. 1” for his winning record in the stock market, was charged with colluding to manipulate share prices in an operation from 2010 to 2015, the court said in a statement yesterday. Wang Wei, another defendant that Xu collaborated with, was sentenced to three years in jail while Zhu Yong, a third, was given two years with a three-year reprieve on the same charges.

Citigroup report

Trump set for ‘antagonistic’ relations with Beijing He has pledged to use “every lawful presidential power to remedy trade disputes” with China, including tariffs Donald Trump’s administration may be on course for a fraught relationship with China amid disputes over trade policy, according to Citigroup Inc., which warned the new U.S. government could introduce more protectionist measures against manufactured goods from Asia’s top economy. “There are growing signs that the Trump administration is heading for antagonistic relations with China,” the bank said in a report that examined how commodities including

metals and farm goods may fare in the upcoming lunar year. While the bank stuck with its view that a trade war could be avoided, it did anticipate “increasing trade frictions” between the two. Trump made trade relations a central theme of his election campaign, maintaining that the U.S. was getting a raw deal from agreements ranging from Nafta to the putative Trans-Pacific Partnership. The new president hammered on an “America First” message in his inauguration speech,

and his administration immediately vowed to withdraw from the Pacific deal. “We are more likely to see the U.S. aggressively targeting China in sectors where the U.S. runs a large deficit with China or with significant SOE presence,” Citigroup said, using initials for state-owned enterprises. China has options to react, including bringing cases to the World Trade Organization, using countervailing measures and possibly banning exports of strategically important commodities such as rare earths, it said.

Playing field

Trump has nominated billionaire investor Wilbur Ross for commerce secretary. In testimony on

Wednesday in Washington before the Senate Commerce Committee, Ross called China the most protectionist of the world’s major economies and vowed to level the playing field with the Chinese on trade, especially in reducing overcapacity in its steel industry. Trump has pledged to use “every lawful presidential power to remedy trade disputes” with China, including tariffs. He once broached a tax of 45 per cent on Chinese imports, then denied bringing it up. Still, the president has already walked back from some criticisms and so far hasn’t followed up on a pledge to label China a currency manipulator on his first day in office.

“We are more likely to see the U.S. aggressively targeting China in sectors where the U.S. runs a large deficit with China” Citigroup report

There have been mixed signals from China’s media. After the inauguration, the Global Times, a Chinese newspaper run by the Communist Party, said the speech signalled a “high possibility” of trade frictions. Still, the official Xinhua News Agency congratulated Trump on his inauguration and said it hoped for “win-win” cooperation between the two nations, and an editorial run by state-backed newspaper China Daily took a similar tone. Bloomberg News

Business Daily Tuesday, January 24 2017 11

Asia National security

Australia forms infrastructure agency to oversee sensitive assets The government said foreign investment in critical assets would be assessed on a “case-by-case basis” Jamie Freed

he Australian government announced a new infrastructure body yesterday that will, among other functions, check whether foreign-led bids for key assets, including power grids and ports, pose any national security risks. The Critical Infrastructure Centre will assess risks, advise on transactions and help prevent sabotage, espionage and coercion, the government said in a statement. The centre, which will also draw up a list of key assets, is meant to improve coordination between the various agencies that might have concerns over asset sales. Its creation follows a series of controversial foreign investment rulings last year, when the government blocked Hong Kong and Chinese firms bidding for Ausgrid, the biggest power grid in the nation’s most populous state, New South Wales, on national security grounds. The Chinese government subs e q u e n t l y l ab e l l e d A u st ra l i a “protectionist”. Australia has since imposed foreign investment restrictions on the sales process for a smaller power grid, Endeavour Energy. In a statement yesterday, the Australian government said foreign

investment in critical assets would be assessed on a “case-by-case basis”. Peter Jennings, the executive director of the Australian Strategic Policy Institute, said significant parts of Australia’s critical infrastructure were owned by foreign entities and he expected the new body would look at the aggregate effects. Currently, the Foreign Investment Review Board is considering whether to approve the US$5.5 billion acquisition of DUET Group by a consortium led by Hong Kong’s Cheung Kong Infrastructure Holdings (CKI).

DUET’s assets include the Dampier-to-Bunbury gas pipeline in Western Australia, which transports fuel for half of the power generation in the country’s biggest export state. It also owns electricity distributors in the state of Victoria. “I would see DUET’s sale as being something you would expect this centre to look at very closely,” Jennings said. A source involved with the DUET transaction, who was not authorised to speak publicly, said it was unclear if the creation of the new government body would put the deal at risk. CKI did not respond immediately to a request for comment. Greg Austin, a professor specialising

in cyber security at the University of New South Wales, said the new centre would be in line with similar bodies set up by other nations, like the United States and United Kingdom.

Key Points New centre will identify critical assets Will vet bids by foreign firms for national security risks China cried “protectionist” after earlier deals blocked “Everyone is alert to the threat of terrorism against aviation assets - that alertness is part of the defence,” he said. “Now the government is saying, like the British and Americans have, we need to have similar levels of alertness to other threats, especially cyber threats.” Last September, the British government approved a £18.1 billion (US$22.49 billion) nuclear power plant project backed by Chinese cash despite having put in place more stringent oversight of critical infrastructure. Leigh Duthie, a Brisbane-based partner at law firm Baker & McKenzie, said the new body would give investors more clarity about which assets Australia considered sensitive. “Chinese investors want to play by the rules and want certainty as to where they can invest,” Duthie said. Reuters

Trade deal

Japan’s PM says will keep seeking Trump’s understanding on TPP Abe also said Tokyo wanted to explain how its companies have contributed to the U.S. economy Japanese Prime Minister Shinzo Abe (pictured) said yesterday he believed U.S. President Donald Trump understood the value of free trade and that he would keep pitching a multinational trade pact that Trump’s administration has vowed to exit. “I believe President Trump understands the importance of free and fair trade, so I’d like to pursue his understanding on the strategic and economic importance of the TPP (Trans-Pacific Partnership) trade pact,” Abe told a session of parliament’s lower house. Abe also said he wanted to strengthen the U.S.-Japan security alliance, based on mutual trust with Trump. “When we met last time, I believed him to be trustworthy, this belief has not changed today,” Abe added, referring to his November meeting with then-president-elect Trump. Abe also said Tokyo wanted to explain how its companies have contributed to the U.S. economy, a stance the Japanese government has adopted to try to fend off threats of a “border tax” on imports into the United States. Japanese Chief Cabinet Secretary

Yoshihide Suga said separately that Tokyo would closely monitor any impact of the new U.S. administration’s policies on its companies and that he wanted to deepen economic ties between the two countries.

“When we met last time, I believed him to be trustworthy, this belief has not changed today” Shinzo Abe, Japan’s Prime Minister Trump took office as the 45th president of the U.S. on Friday and pledged to end what he called an “American carnage” of rusted factories and crime in an inaugural address that was a populist and nationalist rallying cry. The new Trump administration said on Friday its trade strategy to protect American jobs would start

with withdrawal from the 12-nation Trans-Pacific Partnership (TPP) trade pact. The trade deal, which the United States signed but has not ratified, was

a pillar of former president Barack Obama’s pivot to Asia, and Abe has touted it as an engine of economic reform, as well as a counter-weight to a rising China. Reuters

12 Business Daily Tuesday, January 24 2017

Asia Reuters poll

Majority of Japan firms plan no wage hike Wage gains have so far been insufficient to offset higher costs of living Tetsushi Kajimoto

early two-thirds of Japanese companies do not plan to hike their workers’ wages this year, a Reuters poll showed, a blow to Prime Minister Shinzo Abe’s campaign for higher pay to spur a recovery and a way to end two decades of deflation. The Reuters Corporate Survey, conducted Jan. 4-17, also found that most wage gains over the past four years since Abe came to power have been minimal and that nearly one-quarter of firms have implemented none at all.

“Manufacturers’ profits may expand this year given the current yen weakening, but that could change depending on what Trump says and does,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute, who reviewed the survey results. As such, companies appear to opt to reward employees with one-off bonus payments after profits are secured, rather than promising a base pay raise. “Without base pay rise, wage growth is unlikely to accelerate. On the other hand, prices may increase

as oil prices rebound, which will curb (inflation-adjusted) real wages and hurt households’ purchasing power,” Tokuda said. The monthly poll of 531 big and mid-size firms, in which about 240 responded, found 63 per cent said they were not planning a base pay hike. In Japan, an increase is pivotal for sustainable wage growth as the base salary accounts for the bulk of monthly wages. Base pay rises had been virtually frozen for over a decade since the early 2000s, until Abe swept to power in late 2012 with a pledge to reboot the moribund economy. Prices as measured by core consumer inflation excluding fresh food

have risen roughly 3.5 per cent over the past four years. But much of that came from the 2014 sales tax hike to 8 per cent from 5 per cent. But wage gains have so far been insufficient to offset higher costs of living, with real wages down 0.9 per cent in 2015, sliding four straight years and undermining private consumption. The Corporate Survey also asked companies how much they have raised wages since 2012. Some 23 per cent said they have kept overall wages unchanged, while 51 per cent have raised them around 0.5-1.5 per cent. Only 26 per cent said wages had risen by about 2 per cent or more. “We cannot afford to raise base salaries, but we have no choice but to do so given government policy,” wrote a manager of a transport equipment firm, who intends to offer a smaller raise than last year. Managers answered on condition of anonymity in the survey, which was conducted for Reuters by Nikkei Research. Reuters

Key Points 63 pct see no 2017 base pay hike, only 37 pct to raise salaries Japan Inc cautious about global outlook under Trump - analyst Wage growth lags behind rising costs of living Pay rise is key to sustainable growth, success of Abenomics In each of those four years, just before labour and management kick off their annual “shunto” talks - which set the tone for broader wages - Abe has urged companies to raise wages to boost households’ purchasing power and stimulate spending. But Japan Inc has generally resisted Abe’s plea. Although the yen has weakened recently, many companies were hurt badly by last year’s spike in the currency and are loath to commit to higher wages in the face of uncertainty amid threats about trade barriers by new U.S. President Donald Trump.

Growth

South Korea GDP growth seen slowing Economists pointed to political uncertainties as a major factor that dimmed consumption South Korea’s economy was expected to grow at its slowest rate in two years in the final quarter of 2016, a Reuters poll found yesterday, as weak consumption and investment dragged on economic recovery. The economy was expected to have expanded 0.3 per cent in sequential terms, the poll found, compared to a 0.6 per cent rise in the third quarter. A 0.3 per cent rise would be the slowest since the fourth quarter of 2014, when quarterly economic growth was 0.3 per cent. On-year, gross domestic product likely grew 2.2 per cent in the fourth quarter. From July to September, it rose 2.6 per cent on a yearly basis. “Construction probably propped up growth in the fourth quarter, but capital investment likely extended falls. Private consumption growth was slower than the third quarter,” said Park Ok-hee, an economist at IBK Securities. Economists pointed to political uncertainties stemming from an influence-peddling scandal involving

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President Park Geun-hye as a major factor that dimmed consumption. Consumer sentiment in December fell to the worst level in more than 7-1/2 years, a central bank survey showed last month, as confidence weakened on the political scandal.

Companies in South Korea have been pushing back their plans for investment and hiring while Park has been stripped of her powers as the Constitutional Court reviews a parliamentary vote to impeach her. A presidential election will be automatically triggered if the court upholds the impeachment and South Koreans will vote on a new president within 60 days of the court’s decision.

“Political issues will likely remain the focus in the first half of 2017, which would continue to weigh on public sentiment and drag the implementation of government policies,” said Ma Tie-ying, an economist at DBS Bank.

Key Points Q4 GDP seen at +0.3 pct s/adj q/q, +2.2 pct y/y Consumption, capex likely ate into growth Advance estimate due at 8 a.m., Jan 25 (2300 GMT Jan 24) “Given the prospect of an early election, GDP growth would regain momentum in the second half along with sentiment recovery and policies getting back on track.” Meanwhile, exports were seen likely to pick up modestly in the fourth quarter and contributed to growth as global commodity prices continued to rise, the Reuters poll showed. The Bank of Korea, which has said fourth quarter growth managed a modest rise, will publish the preliminary growth figures on Wednesday. Reuters

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Business Daily Tuesday, January 24 2017 13

Asia In Brief Board of directors

Indian regulator may bolster rules on management India’s market regulator is looking to tighten regulations related to the appointment and removal of directors from company boards amid an on-going spat between the Tata group and its ousted chairman Cyrus Mistry, CNBC-TV 18 cited sources as saying on Sunday. The news channel did not provide much detail on the steps it said were being considered by the Securities and Exchange Board of India (SEBI). The bitter boardroom battle between Tata Sons and Mistry has also seen the ousting of Nusli Wadia, one of the group’s outspoken independent directors, after he publicly backed the former chairman. Results

Budget

India’s PM may put consumers before taxes to spur demand Net revenue from corporation and income taxes rose 15.1 per cent April-November from a year earlier Jeanette Rodrigues and Debjit Chakraborty

Taxes are anything but certain for Indian Prime Minister Narendra Modi. Faced with a slump in demand after his shock clampdown on cash, he’s expected to lower taxes in the Feb. 1 budget to spur consumption. The risk is that a cut will rob Modi of a short-term revenue spurt, which his administration had been touting as proof of success of the currency policy change. “Economic growth is unlikely to accelerate in the near term on its own so the situation for the government is such that in order to improve their own credibility, the government will have to improve demand for goods and services,” said Nihal Kothari, executive director at tax firm Khaitan and Co. in Mumbai. “So the personal income tax slabs or rate may be reduced in the budget to give higher purchasing power to consumers.”

Indirect taxes

Net revenue from customs, excise and service taxes rose 25 per cent in April-December from a year earlier, meeting 81 per cent of the government’s budgeted target for the year through March 31. The bulk of this however came from a surge in excise collections, underpinned by nine increases in the levy on gasoline and diesel since Modi came to power in 2014. Imposing this tax was relatively simple while global oil prices were low, but could become politically difficult as crude costs rebound. “The government may be forced to roll back some of the excise increases on fuel as this could feed into inflation,” Kothari said. “So additional tax revenues will come from greater

compliance as we near the GST regime and the threat of scrutiny rather than economic growth.” For instance, net indirect tax collection through November 2016 grew 26.2 per cent due to higher tax rates and other special measures and just 8 per cent after you strip out these effects. Service tax numbers too are flattered by an increase in the rate to about 15 per cent last year from 12.4 per cent in April 2015. Customs collections may dip as Modi’s cash ban crimps demand for gold, one of India’s biggest imports. Lobby group Associated Chambers of Commerce in India has sought cuts in customs duty rates on aluminium and iron to boost local production of machinery while raising the levy on basic electronic goods such as microwave ovens and air conditioners. Assuming the government doesn’t announce special measures, growth in tax collections will settle between 12 per cent to 14 per cent compared with about 17 per cent to 18 per cent in the past years, according to Edelweiss Financial Services Ltd.

Direct taxes

Net revenue from corporation and income taxes rose 15.1 per cent April-November from a year earlier, helping meet about 49 per cent of the government’s budget goal. Collections rose to 65 per cent of the target in December, the government said Jan. 9. What’s unclear, though, is how much of this came from two amnesty programs offered to citizens, implying a one-time gain in collections. Another distortion is the government’s decision to allow corporations to collect tax payments in invalidated bills, which may have prompted early

payments. From the budget, Assocham’s seeking a road map for the government’s promised reduction in corporate tax rates to 25 per cent from about 30 per cent. Tax breaks may be offered to those who invest in funds that contribute to building crucial roads, ports and highways. Lowering the personal income tax rate would boost compliance and since less than 1 per cent of the population pays this tax, revenue losses would be limited, according to

“The government may be forced to roll back some of the excise increases on fuel as this could feed into inflation” Nihal Kothari, executive director at tax firm Khaitan and Co.

Kotak Securities Ltd., which calls for a cut. Currently individuals earning more than 1 million rupees a year pay the top rate of 30 per cent tax plus surcharges. There’s also speculation that the government may raise the threshold before income tax is charged to as high as 500,000 rupees from 250,000 rupees. “One of the main reasons for India’s stunted tax base is the lack of trust between the government and taxpayers,” analysts at Kotak, including Sanjeev Prasad in Mumbai, wrote in a Jan. 17 report. “We expect the government to gradually deliver on its vision of moderate tax rates and a broad-based taxation system over the next one or two years with a start in the union budget on Feb. 1, 2017.” Bloomberg News

Australian realtor McGrath warns on profit McGrath Ltd, Australia’s only listed residential realtor, warned annual profit would fall below analysts’ estimates, hit by what it called an unprecedented dearth in home listings and stoking concern that the perennially buoyant market is peaking. Shares at one point slid to a record low as McGrath also noted its pain had been exacerbated by an unusually large number of sales agents quitting - 36 out of roughly 260 extending a difficult run for the company that has never seen its stock trade at its December 2015 issue price. Investment

FDI to Cambodia reaches over US$2 bln The foreign direct investment (FDI) to Cambodia jumped 25 per cent in 2016 to US$2.15 billion, the Khmer Times reported yesterday, citing a report from the National Bank of Cambodia (NBC). The NBC report said US$539 million went to the banking sector, while US$390 million was directed to the manufacturing sector, US$370 million to real estate and US$232 million to agriculture. FDI flow into sectors like food and accommodation was US$228 million, US$19 million for mining operations, US$15 million for information and communications technology, US$15 million for the electrical sector and US$278 million for other sectors.

14 Business Daily Tuesday, January 24 2017

International In Brief Summit

G20 farm ministers seek to protect water supplies Greater global efforts should be taken to safeguard precious world water supplies to secure food production, the agriculture ministers of the group of 20 leading economies (G20) said on Sunday. “We commit to approaches that improve sustainability of water use in food and agricultural production while ensuring food security and nutrition in accordance with our multilateral trade commitments,” they said in a statement after meeting in Berlin. Climate change, the growing world population and demands for industrialisation have put a strain on global water supplies, with the impact felt on rich and poor nations. ECB’s Coeure

Protectionism is a “bad idea” European Central Bank Executive Board member Benoit Coeure said yesterday that economic protectionism was a bad idea, as he commented on new U.S. President Donald Trump, who has backed protectionist policies. “Protectionism, at this current moment, is clearly a bad idea,” Coeure told France’s Radio Classique, while adding it was too early to comment more specifically because the newly inaugurated U.S. head of state had yet to clarify his precise economic policies. Coeure also reiterated that it was too early for the ECB to change its ultra-loose monetary policy.

Candidates

French Socialists set to surrender centre to rival Macron Whoever emerges from next Sunday’s final vote faces an uphill task Gregory Viscusi and Mark Deen

rench Socialists made onetime Education Minister Benoit Hamon the frontrunner in their party’s p r e si d e n t i a l p r i m a r y , suggesting independent candidate Emmanuel Macron’s campaign may be in for a boost. Having wooed his party’s base with a promise of a guaranteed universal income, Hamon won about 36.4 per cent of the vote in the first round of the Socialist contest Sunday, compared with 31.1 per cent for former Prime Minister Manuel Valls. Arnaud Montebourg, who placed third with 17.5 per cent of the vote, endorsed Hamon for the Jan. 29 runoff, saying current results show the party base wants less austerity and more traditionally Socialist policies. Four other candidates divided up the rest. “By turning to the left the Socialists are opening a big space for Emmanuel

Macron,” said Yves Marie Cann, a pollster at Elabe in Paris. “Hamon now has the advantage in the primary and if he doesn’t make a mistake, if there isn’t an upset, that’s good for Macron. This is the moment that some Socialist lawmakers are waiting for to defect.” Whoever emerges from next Sunday’s final vote faces an uphill task, with polls showing that the Socialist candidate will finish a distant fourth or fifth in the first round of the presidential election on April 23. The campaign directors of Hamon and Valls both said on Europe1 radio Monday that their candidates are ready to support the winner if they lose out on the nomination. The promise of a guaranteed income of 750 euros (US$803) a month was Hamon’s signature issue during the primary campaign. All six of his rivals condemned it as too expansive in a country struggling to revive economic growth and battle

an unemployment rate of 10 per cent. He’s also called for banning diesel cars and decriminalizing cannabis. “The desire of the French is clear: to turn the page and head into the future with new and consistent solutions,” Hamon said on France Inter radio. “I don’t want a left that thinks it’s acceptable to show weakness when confronted with our opponents and special interests.” Almost every poll taken over the past month has shown that nationalist Marine Le Pen and Francois Fillon from the center-right Republicans would contest the May 7 presidential runoff. Valls would take 10 per cent in the first round, according to a major Ipsos Sopra Steria poll, limiting Macron’s score to 19 per cent. Hamon would take just 7 per cent, allowing Macron to garner 21 per cent, just four points behind Fillon, the survey showed. Jean-Luc Melenchon -- a former Socialist now backed by the Communist Party -- has support of between 14 and 15 per cent, the same poll showed. Bloomberg News

Cyber breach

U.S. SEC probing Yahoo The U.S. Securities and Exchange Commission is investigating a previously disclosed data breach at Yahoo Inc, the company said in a filing. Yahoo said in a November 2016 quarterly filing that it was “cooperating with federal, state and foreign” agencies, including the SEC, that were seeking information and documents about a “security incident and related matters.” The SEC is investigating whether two massive data breaches at Yahoo should have been reported sooner to investors, the Wall Street Journal reported on Sunday, citing people familiar with the matter. Commerce

Chile looks to update EU trade accord Chilean President Michelle Bachelet said her administration is looking to update its 2002 trade pact with the European Union, rather than prioritize a free-trade agreement with the post-Brexit U.K. “We were the first country in Latin America to sign a free-trade agreement with the European Union and following agreements with other countries have incorporated positive advances,” Bachelet said in an interview in Santiago Friday. “So our fundamental effort right now is to update it.”

French former Education minister Benoit Hamon delivers a speech after the results of the first round of the party primaries in Paris. Lusa

Trade

Trump to begin renegotiating NAFTA pact soon Trade experts say any renegotiation would likely take several years Ayesha Rascoe

U.S. President Donald Trump said on Sunday he plans talks soon with the leaders of Canada and Mexico to begin renegotiating the North American Free Trade Agreement (NAFTA). “We will be starting negotiations having to do with NAFTA,” Trump said at a swearing-in ceremony for his top White House advisers. “We are going to start renegotiating on NAFTA, on immigration and on security at the border.” Trump pledged during his presidential campaign that if elected he would renegotiate the NAFTA trade pact to provide more favourable terms to the United States. NAFTA, which took effect in 1994, and other trade deals became lightning rods for voter anger in the U.S. industrial heartland states that swept Trump to power this month. Canada’s ambassador to the United States said it was clear the Trump team were concerned above all about trade deficits with Mexico and China.

“I don’t think Canada is the focus at all,” David MacNaughton told reporters in Calgary, Alberta, ahead of a two-day government retreat focused on how to handle the new Trump administration.

‘Critics of Mexico’s Peña Nieto say he lacks a clear plan to counter Trump’s calls to limit trade and deport illegal immigrants’ Trade experts, academics and government officials say Canada and Mexico will also seek tough concessions and that NAFTA’s zero-tariff rate would be extremely difficult to alter.

Any renegotiation would likely take several years, they say. Trump said he would be meeting with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto to begin work on overhauling the deal. He praised Peña Nieto, who has faced low popularity in Mexico due to corruption scandals and rising inflation. “The president has been really amazing,” Trump said. “I think we are going to have a very good result for Mexico, and the United States, and everybody involved.” Critics of Peña Nieto say he lacks a clear plan to counter Trump’s calls to limit trade and deport illegal immigrants. Trump has said little about what improvements he wants, apart from halting the migration of U.S. factories and jobs to Mexico. Since winning the Nov. 8 election, Trump has singled out and threatened to impose tariffs on U.S. companies that move any production to Mexico. He also intends to build a wall along the U.S. southern border to deter illegal immigration and insisted that Mexico will pay for it. Reuters

Business Daily Tuesday, January 24 2017 15

Opinion Business Wires

Taipei Times Wistron Corp, one of Apple Inc’s iPhone assemblers, expects business growth to continue this year, after posting a record revenue for last year, company chairman Simon Lin said. “This year’s business will be driven by demand for smartphones, Internet of Things [IoT] devices, servers and desktops,” Lin said. Wistron expects capacity expansion to meet client demand after the board approved a combined investment of US$208.67 million to expand production capacity at its plant in Kunshan, China, which analysts say is to support capacity expansion for 5.5-inch iPhones.

U.S. President Donald J. Trump speaks during a swearing in ceremony of White House senior staff in the East Room of the White House in Washington, on 22 January 2017. Lusa

Don’t expect the Oval Office to change Trump

The Jakarta Post The government plans to revise 20 regulations pertaining to logistics in the planned 15th economic stimulus package. Transportation Minister Budi Karya Sumadi said the regulations would mainly address capital, non-tax state revenue and dwell activities in domestic logistics. “We are still reviewing the regulations,” he said as quoted by kompas.com. Earlier, Coordinating Economic Minister Darmin Nasution said the 15th economic stimulus package would aim to ease domestic logistical activities and reduce dwell time in seaports. Among the reforms is the improvement of data processing through the Indonesia National Single Window.

The Korea Herald South Korea is pushing to revise its national health insurance program to halve the fees for low income earners in an effort to make health care more affordable, officials said yesterday. The Ministry of Health and Welfare released a revision to the national health insurance system, subject to parliamentary endorsement, that will be adopted in three stages for a total of nine years. The ministry said 80 per cent of the total subscribers to the state-run health insurance, or 6.06 million households, will be paying almost half of what they are paying now.

Philstar More international cruise companies have started to express interest to dock in the Philippines, further strengthening the government’s bid to make the country a major hub for international cruise ships. Tourism Secretary Wanda Teo revealed the agency was in discussions with cruise giants Carnival Cruise Line and the Genting Group. “I’ve been meeting with the executives of Carnival Corp. and Genting. Both agreed that the Philippines has great potential to become one of Asia’s cruise hubs,” Teo said. Star Cruises, a subsidiary of Genting Hong Kong, earlier announced its fleet flagship, Superstar Virgo, was set to establish Manila as its new home port this summer.

he hope of the many people who harbour reservations about Donald Trump is that the presidency will change him. That’s also what his hard-core supporters fear. Trump’s inaugural address showed why those hopes and fears won’t materialize. It was harsh, nationalistic, lacking in civility or generosity, reflecting his dark view of politics. It had some of the same themes that Ronald Reagan offered 36 years earlier, but with none of the uplift that the 40th president radiated. Presidents don’t grow to become new people. They can rise to occasions, alter perspectives, turn to different advisers for counsel. But the Oval Office hasn’t changed the basic compass or persona of any modern president. “The character of the president remains the same as it was before he was president,” said Shirley Anne Warshaw, a political science professor at Gettysburg College. “The values, personalities and character do not change. What changes is the awesome responsibilities they will face. And how they will handle that, we don’t know.” R eaga n - w atch e rs l i k e th e journalist and historian Lou Cannon, for example, didn’t know what the ex-California governor would face or how he would react. But they knew he would be an optimist whose conservatism was tempered by pragmatism, whose oratory often was to the right of his policies and who generally enlisted capable people. He was that way in Sacramento and would be the same in Washington. Bill Clinton’s voracious appetites, political brilliance and roguish personality were evident before and after he entered the White House on Jan. 20, 1993. It was no surprise that he was able to turn critics like the Republican congressional firebrand Newt Gingrich inside out, or that he simultaneously embraced curfews and midnight basketball as government policies to help poor communities. Barack Obama 10 years ago was a cerebral, sometimes inspiring, policy-centric progressive, far more pragmatic than his conservative critics charge. As president it has been the same. Obamacare is not a government-run, singlepayer health insurance plan. He didn’t nationalize banking in the financial crisis or push massive new spending programs. Throughout, he was no-drama Obama. This isn’t to suggest that the job doesn’t affect the occupant. Sometimes it happens in small ways, as with the greying of Obama’s hair. Sometimes the change is bigger -- Lyndon Johnson and Richard Nixon left their troubled presidencies in torment. There is no way to predict how Trump would react if the North Korean dictator, Kim Jong-Un, acts provocatively, hoping to go mano a mano with

“

Albert R. Hunt Bloomberg View

the president of the United States. Nor is it clear how far he will try to pull the Republican party into a protectionist and isolationist posture. An angry populist speech is only the roughest guide to policy priorities after promises to cut taxes, rebuild infrastructure and replace the Affordable Care Act with an undefined substitute that covers everyone at lower cost. What we do know are the values and character traits he’ll bring to the table: a bullying bluster that he considers central to his success, a compulsion to strike back when criticized, a reliance on gut instincts, little regard for protocol or propriety, an elastic view of ethics and few ideological moorings. For clues to the way Trump makes decisions, watch to see where he turns for advice and whom he consults last. Too much focus has been put on policy differences between the new president and his designated cabinet members. Focus instead on the White House staff. In the modern presidency, power gravitates to those who work at 1600 Pennsylvania Avenue. At times, this influence has been constructive: Reagan relied heavily on the decisive and capable White House Chief of Staff James Baker and his deputy Michael Deaver. National Security Adviser Brent Scowcroft was a trusted and experienced guide for George H.W. Bush. John Podesta was a steadying influence as staff chief in the turbulent final Clinton years. Others have caused problems. George W. Bush’s confidant Karl Rove pursued a failed Republican realignment strategy that left the administration in tatters. Hillary Clinton hurt her husband politically in his first few years with a secretive style and flawed approach to health-care reform. Nixon’s Chief of Staff H.R. Haldeman and domestic-affairs aide John Ehrlichman played to their boss’s worst instincts, eventually going to prison for obstructing justice during the Watergate scandal. Who will be Trump’s most important confidant? Maybe his daughter, Ivanka, and her husband Jared Kushner. Or possibly his alt-right consigliere Steve Bannon, whose fingerprints were all over the inaugural address. It could turn out to be Chief of Staff Reince Priebus. None have any governing experience. The belligerent Michael Flynn, a retired general who is national security adviser, is another contender. One safe bet: There won’t be calls to let Trump be Trump. As he showed on Friday, Trump is already Trump. And always will be. Bloomberg View

For clues to the way Trump makes decisions, watch to see where he turns for advice and whom he consults last

”

16 Business Daily Tuesday, January 24 2017

Closing HR

Xiaomi’s Barra leaves phone maker to return to Silicon Valley

Xiaomi Corp. Vice President Hugo Barra (pictured) has quit after four years with the Chinese smartphone maker and will return to Silicon Valley. The former Google executive was hired with much fanfare to be the up-and-coming Chinese brand’s international face, becoming a fixture on the global conference

circuit and Xiaomi’s main pitchman to foreign audiences. In a Facebook post yesterday, Barra said it was time for him to return to the U.S., though he didn’t say in what capacity. During his time at Xiaomi, the company briefly rose to become China’s biggest smartphone vendor with high-end components packed into inexpensive devices. It has since been dethroned by local brands such as Oppo, Vivo and Huawei. Bloomberg News

Inflation

Singapore CPI rises for first time in 2 years Headline CPI in December edged up on the back of higher private road transport costs Fathin Ungku and Masayuki Kitano

ingapore’s annual headline consumer price index in December rose for the first time in more than two years, but weak consumption and a subdued labour market suggest that inflation will remain modest for some time. The all-items consumer price (CPI) in December rose 0.2 per cent from a year earlier, official data showed yesterday. That marked the first yearon-year rise in headline CPI since October 2014, when the all-items CPI also rose 0.2 per cent.

trend for the first time in two years. Headline CPI in December edged up on the back of higher private road transport costs, which rose 1.7 per cent from a year earlier due to higher petrol prices and car park fees, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry said in their monthly CPI statement. “A return to positive headline CPI inflation disguises underlying softness, given the absence of more

generalised demand-induced pressures,” Weiwen Ng, an economist for ANZ, wrote in a research note. “Domestic cost pressures will be muted, owing to a subdued labour market which will put a lid on wage growth. Furthermore, a moderation in commercial rentals will exert a strong disinflationary drag,” he said. Upward pressure on core inflation is likely to be held firmly in check, Ng added. The MAS core inflation measure in December rose 1.2 per cent from a year earlier, down from November’s 1.3 per cent rise.

The MAS and MTI kept their 2017 forecasts for both headline CPI and core CPI unchanged. All-items CPI is expected to rise 0.5-1.5 per cent this year from minus 0.5 per cent in 2016, while core inflation is expected to average 1-2 per cent in 2017 compared with 0.9 per cent in 2016, they said. The central bank has said that core CPI is the most relevant indicator for monetary policy. The MAS core inflation measure excludes changes in the price of cars and accommodation, which are influenced more by government policies. Singapore’s economy rebounded at the end of 2016, data showed this month, reinforcing expectations the central bank will stand pat at its semiannual policy review in April after earlier taking steps to support growth. The MAS, which kept policy unchanged at its October review, eased policy in April 2016. Reuters

Key Points Dec all-items CPI +0.2 pct y/y vs +0.1 pct forecast Headline CPI turns positive for first time in over 2 years Dec core CPI +1.2 pct y/y vs +1.3 pct forecast Headline CPI had been dragged down over the past two years by lower global oil prices as well as falls in housing rents and private transport costs. The downward pressure on allitems CPI has become less acute in recent months, however, helped by a rise in global oil prices. Headline CPI in November was flat from a year earlier, coming off a deflationary

Auto industry

Internet

Investment

Approved list of green cars for subsidies in Mainland

Beijing cracks down on bids Blackstone readies to bypass censorship new Asia real estate fund

China released yesterday this year’s first list of “recommended” green energy vehicles, paving the way for 185 car models to receive government subsidies. Beijing has spent billions of dollars promoting electric and plug-in hybrid cars to help the domestic auto industry develop the technology to leapfrog global competitors, while also reducing frequent bouts of heavy urban air pollution. But the discovery of widespread cheating in the subsidy programme has prompted the government to step up oversight, cap subsidies, and raise technical standards for applicants. As a result, all models previously approved for government subsidies are required to reapply this year. The list issued by the Ministry of Industry and Information Technology (MIIT) included vehicles from BAIC Motor Corp Ltd , Geely Automobile Holdings Ltd, BYD Co Ltd , Chongqing Changan Automobile Co Ltd , and Chery Automobile Co Ltd. Beijing is expected to approve more car models later this year. The government published five lists last year, giving the green light to 2,193 car models. The ministry yesterday also approved several vehicles that use “ternary” lithium-ion batteries. Reuters

China has announced a 14-month campaign to “clean up” internet service providers and crack down on devices such as virtual private networks (VPNs) used to evade strict censorship. The ruling Communist party oversees a vast apparatus designed to censor online content deemed politically sensitive, while blocking some Western websites and the services of internet giants including Facebook, Twitter and Google. It passed a controversial cybersecurity bill last November, tightening restrictions on online freedom of speech and imposing new rules on service providers. But companies and individuals often use VPNs to access the unfettered internet beyond China’s “Great Firewall”. Telecom and internet service providers will no longer be allowed to set up or rent special lines such as VPNs without official approval, the ministry of industry and information technology said Sunday. Its “clean up” campaign would last through March 2018, it said in a statement on its website. China is home to the world’s largest number of internet users, which totalled 731 million as of December, the government-linked China Internet Network Information Centre said Sunday. AFP

Blackstone Group LP is readying a new Asia-focused real estate fund that aims to raise a record US$5 billion or more, betting on strong returns from property investments in the region, people familiar with the plans told Reuters. The world’s biggest alternative asset manager will likely launch the fund in the next 12-16 months, the people said. It has invested more than 70 per cent of the US$5.08 billion it raised in its first Asia-focused property fund, a threshold when buyout firms typically start considering and preparing for follow-up capital raising. New York-based Blackstone intends to boost investments in assets such as warehouses and shopping malls in China, India, Southeast Asia and Australia, one of the people said. Global investors have shown robust appetite for shopping malls, warehouses and other property assets in Asia as they have sought the relative safety and stable returns of real estate, buoyed by growing urbanization and rising incomes in its two most populous countries of China and India. Underscoring this trend, 22 Asia-focused property funds raised a total of US$10.6 billion in 2016, data provider Preqin said. There’s already US$33 billion of unused capital, or dry powder, in such Asia-focused real estate funds, it said. Reuters