Business Daily #1310 June 5, 2017

Queen's Birthday Celebration Poolside BBQ Lunch Sat, 10 June 2017 │ 11:00am - 2:00pm │ The St. Regis Macao Join us in this relaxing and lighthearted get-together at a poolside BBQ lunch.

Bring your swimmers, and slip, slop & slap!

MSAR Belt and Road conference to take place this week Infrastructure Page 2

Monday, June 5 2017 Year VI Nr. 1310 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Construction

Local company seeks legal counsel over ‘misrepresentation’ on Saipan construction Page 7

Oil

Mainland’s Hengyi to start up US$3.4 bln Brunei refinery Page 10

www.macaubusinessdaily.com

Media

Australian media moguls join hands to compete with internet giants Page 11

Politics

S.Korea’s President struggles to form cabinet that meets tough ethical standards Page 12

Staying UNESCO Heritage

Construction near heritage sites, urban planning, transportation planning and creating jobs in this field, will all be necessary to preserve the city’s heritage classification. Otherwise, the city risks putting itself ‘in danger’ or being de-listed from UNESCO’s list, heritage expert Sharif Shams Imon tells Business Daily. Not only informing and encouraging public participation, but also counting on experts will be necessary measures to implement. Pages 4 & 5

Venetian has cut its ties with a subsidiary of Neptune Group, with Hao Cai gaming promotion group to cease its operations at the integrated resort by the end of this month. Hao Cai will leave with over HK$95 mln in receivables, pledging properties as ‘security’. The junket’s revenue comprised about 42 pct of Neptune Group’s revenue last fiscal year.

Gaming Page 6

HK Hang Seng Index June 2, 2017

Infrastructure A total of US$90 trln will be necessary in infrastructure investment over the next decade, with 40 pct directed towards Asia, says Manager at the Investment Operations Department of the Asian Infrastructure Investment Bank (AIIB), Ke Fang.

Nearly 70 pct of green infrastructure development will be for energy and transport, says the manager, speaking at the International Infrastructure Investment and Construction Forum in the MSAR. Page 7

Keeping tally

Oversight Regu­latory oversight of overseas transactions on bankcards will require Chinese banks to report daily on their bankcard holders’ overseas withdrawals, plus every bank transaction that ex­ceeds RMB1,000. This in continued efforts to fight money laundering, terrorist financing and tax avoidance, says State Administration of Foreign Exchange. Page 8 25,924.05 +114.83 (+0.44%)

Worst Performers

New World Development

+1.42%

China Mobile Ltd

-1.67%

Tencent Holdings Ltd

-0.44%

Hong Kong Exchanges &

+4.17%

Sands China Ltd

+1.30%

CLP Holdings Ltd

-0.76%

China Merchants Port Hold-

-0.44%

Want Want China Holdings

+3.82%

Cheung Kong Property

+1.27%

China Unicom Hong Kong

-0.71%

Belle International Holdings

-0.33%

Wharf Holdings Ltd/The

+2.01%

China Construction Bank

+1.07%

MTR Corp Ltd

-0.67%

China Resources Power

-0.25%

Industrial & Commercial

+1.89%

Hang Lung Properties Ltd

+0.98%

China Life Insurance Co Ltd

-0.59%

China Resources Land Ltd

-0.22%

+6.94%

28° 31° 27° 30° 27° 30° 26° 30° 27° 30° Today

Source: Bloomberg

Best Performers

Geely Automobile Holdings

Building the world

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Neptune out of orbit

2 Business Daily Monday, June 5 2017

Macau Infrastructure

A match made in heaven Multilateral development banks will play an essential role in filling the need for US$90 trillion worth of investment in infrastructure worldwide in the next decade, and Chinese companies should look for partnerships with these entities, according to representatives from the Asian Infrastructure Investment Bank and the United Nations Nelson Moura nelson.moura@macaubusinessdaily.com

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total of US$90 trillion (MOP722.35 trillion) in infrastructure investment will be required worldwide in the next decade, with 40 per cent being for Asia, the Manager at the Investment Operations Department of the Asian Infrastructure Investment Bank (AIIB), Ke Fang, said yesterday.

The statements were made at a forum held during the last day of the 8th International Infrastructure Investment and Construction Forum (IIICF) on Friday.

The AIIB manager highlighted that the two main needs for future infrastructure development were to promote affordable suitable solutions and the need to attract private capital.

According to Mr. Ke, in the next 15 years around 67 per cent of the demand for green infrastructure will be for energy and transport, with 52 per cent being for middle-income countries.

“The initial investment cost is quite high, but the future operational costs may be lower, therefore there is the

need for initial capital investment for integrated technology in order to promote green infrastructure development,” he added.

In terms of private participation in infrastructure development, the AIIB manager said there has been a considerable fall since 2012, going from more than US$1 trillion and over 200 projects five years ago, to less than US$200 billion and less than 50 projects in 2016.

With the retreat of private investment, the involvement of multilateral development banks (MDB’s) will be crucial for backing and supporting the financing of infrastructure developments, he said.

“There’s a huge need for organising the private sector with the infrastructure business, with private investments being very low compared to available funds managed by MDBs. In fact MDBs can play a very important role to bridge the missing link between supply and demand, using their advantages in clearing pathways and sharing investment risk,” he added.

According to Mr. Ke, since its founding in 2016, the AIIB has gathered 77 member countries, with the

Employment

bank having a specific focus on infrastructure investment.

Since 2016, the AIIB has approved a total of US$2.2 billion for 13 investment projects - all in Asia - with the organisation planning more than US$5 billion in investment in the next 18 months.

However the AIIB representative stated the bank’s investments in Asian infrastructure were planned taking into consideration economic factors, not political factors, stating the investments weren’t done out of strict compliance with the One Belt, One Road directives.

Fulfilling humanity’s needs

The same need for the involvement of MDBs and a focus on sustainable infrastructure development was reflected by Brent Anderson, Manager at the United Nations Development Business.

The UN Development Business is an organisation based in Washington that looks to publish information on tenders from MDBs, non-governmental organisations (NGOs) and government departments from 180 different countries.

“MDBs will play a significant role

in future infrastructure development.

They have poured US$200 billion into emerging economies, and besides financing, also provide consultancy to local government. Because of these two factors, they’ve been very effective in the last decades,” he added.

The UN representative added that Chinese companies have been very successful in partnering with MDBs and considers the timing to be right for further enhancing those partnerships.

“The One Belt, One Road initiative will open up a lot of opportunities for Chinese companies. We publish 10,000 procurement notices every year, a lot of opportunities there,” he added.

According to Mr. Anderson, in 2015 the United Nations set 17 sustainable development goals signed by 190 countries, with one of the goals focusing on industry, innovation and infrastructure.

The United Nations representative stated that in 2015 MBDs agreed to “pour US$400 billion” into the area until 2018 to achieve this sustainable goal.

“Around 1 billion people live without electricity, 2.4 billion lack adequate sanitation, and 1 billion lack all-weather roads (…) Any infrastructure investment is an investment in humanity,” Mr. Anderson stated.

OBOR

Non-resident construction Belt and Road conference to take place Thursday, Friday workers drop to 34,000 The number of non-resident workers in the construction industry dropped 20 per cent from 43,000 in January of last year to 34,000 last December, according to the official data produced by the Labour Affairs Bureau (DSAL).

Given that several significant construction projects in Cotai are coming to an end, unionist and legislator Ella Lei Cheng I expressed concerns about the future employment of local construction workers.

The legislator revealed that some job seekers had registered at the DSAL, but still had not found any jobs since Chinese New Year in February of this year.

In response to the interpellation, DSAL pledged to reduce the number of non-resident construction

workers in phases, affirming that local workers would be the last to exit projects.

With the eventual completion of the many construction projects in Cotai, DSAL will make contact with related workers in advance and will send staff to approach local workers for registration of pairing services with other companies.

DSAL reported that some 1,200 construction workers succeeded in transferring and were employed in other fields via the bureau during the fourth quarter of last year.

Meanwhile, additional training courses are being set up, with a paid on-duty course - Gaming industry professional training course - having had over 900 gaming workers take part as at the end of 2016. C.U.

Following Chief Executive Chui Sai On leading a Macau delegation to Beijing for the Belt and Road Forum for International Cooperation in May, the MSAR is set to hold its own iteration this Thursday and Friday, according to a release yesterday.

The event will mark the ‘International Conference of ‘Belt and Road’ and the Development of Macau as a Convention Centre’ and is to be held at the Macau Science Centre.

Four themes will be addressed during the conference including: Macau’s contribution to the construction of the ‘Belt and Road’ through cooperation with Fujian and Guangdong and Portuguese-speaking countries; ‘as

well as interpersonal relationships’ (according to the release); the Greater Bay Area relationship between Guangdong-Hong Kong-Macau and Southeast Asia; and the ‘Maritime Silk Road’.

Participants will include former government officials from China, Portugal, Thailand and Brazil, local and foreign commerce representatives and academics.

‘The holding of the conference also represents the strong support of the public for the strategies of the government of the MSAR in the sense of promoting the simultaneous development of Patriotism and of Macau,’ the release states.

Cars

12,804 vehicle registrations cancelled between Jan-May A total of 12,804 vehicles had their license plate registrations cancelled in the first five months of this year, a 76 per cent year-on-year increase from the same period last year, according to a release by the Transport Bureau (DSAT).

Of the total vehicle registrations cancelled, 10,946 were canceled by request of the vehicle owners, a 93.3 rise from the same period last year.

According to the release, a very small number of cancellations were due to vehicle theft.

The latest Statistics and Census Service (DSEC) data indicates that as of April this year, there were 244,094 registered vehicles in Macau, with new registrations in the first four months of this year having decreased

by 1.2 per cent year-on-year. Total vehicle numbers in April were also down 1.6 per cent year-on-year. N.M.

Business Daily Monday, June 5 2017 3

Macau IIICF

Coming to a close A total of 24 business contracts, memorandums and agreements for infrastructure development involving Chinese companies were signed at this year’s International Infrastructure Investment and Construction Forum (IIICF), involving a total of US$12.8 billion Nelson Moura nelson.moura@macaubusinessdaily.com

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development and renovation of historical city centres,” the Macau Trade and Investment Promotion Institute (IPIM) President, Jackson Chang, said.

The Portuguese-speaking country of Angola received the majority of the contracts, with four agreements with China Railway International Group Co. Lt for the construction of an industrial park, an agriculture centre, a fishery park and a food plaza; and a contract signed with China Tiesiju Civil engineering Group for the development of a touristic centre in Bengo province.

This year’s edition also saw the inauguration of the US$1 billion Fund for Development Co-operation between China and the

Portuguese-speaking Countries (CPD-Fund); and the launch of the ‘Index for the Infra-structure Development in the One Belt, One Road Countries’ for 2017.

The two-day forum gathered around 1,700 government, business and academic representatives; 57 government ministers; representatives from 32 international financial institutions together with 630 representatives from the infrastructure development sector.

In his closing speech, Vice-President of the World Bank, Hartwig Schafer, stated that the bank he represents would direct a total of US$86

billion to support projects included in the One Belt, One Road policy.

“There’s a global need for US$1 trillion in infrastructure development annually worldwide. This means that the future of infrastructure needs to be sustainable and innovative,” said Schafer.

This development would require strong partnerships between the private sector, world governments and financial institutions, for innovative projects with a focus on job creation and sustainable environmental impact, he added.

The 9th IIICF will be held in Macau again between June 7 and 8, 2018.

Applications for intellectual property rights grew y-o-y

For the first five months of 2017, a total of 5,125 applications were filed with DSE for intellectual property, of which 4,843 were for trademarks, 152 were for extension of invention patents and 70 were for industrial designs or models.

Registrations for utility patents and names and emblems of establishments amounted to eight and four respectively during the five-month period. C.U.

he 8th International Infrastructure Investment and Construction Forum (IIICF) closed on Friday, with 24 business contracts, memorandums and agreements being signed, involving a total of US$12.8 billion (MOP102.7 billion).

The signed contracts were composed mainly of projects for infrastructure development between Chinese companies and African and Caribbean countries.

“Most of these projects are related to multifunction industrial parks, the service industry, agriculture, bridge

Trade

A total of 1,006 applications for intellectual property rights were made in May, posting an increase of some 27 per cent when compared to the 795 registered in the same period last year, the latest DSE (Macao Economic Services) data reveals.

However, on a month-on-month comparison, the number of applications

in May was 104 fewer than recorded in April.

Of the total registrations in May, 936 or 93 per cent, were applications for trademarks in the city.

This represents an increase of 28 per cent when compared to the same period last year, but is a decrease of 12 per cent from the 1,062 recorded in April.

The government department received 35 applications for extensions of invention patents, and 25 industrial design or model applications.

Meanwhile, there were five applications for utility patents, four for invention patents and one application for name and emblem of an establishment.

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4 Business Daily Monday, June 5 2017

Macau Interview | Heritage affairs

Be honest After a report by the World Heritage Committee on heritage conservation practices in Macau - in anticipation of their annual meeting in July - brought into question some of the MSAR’s practices, Business Daily sat down with Sharif Shams Imon, head of the Heritage Management Programme at the Institute for Tourism Studies (IFT) to shed light on the WHC’s remarks.

Drawing from a decade of hands-on heritage conservation experience, Imon spoke about tourism management and urban planning, the lack of heritage-related employment opportunities and public-private partnerships in conservation that have proven successful elsewhere Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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hat is your experience in heritage conservation?

Apart from academic functions, I am a member of ICOMOS [International Council on Monuments and Sites], UNESCO’s advisory body on cultural matters. I do regular evaluations of [World Heritage] nominations in other countries, such as India and North and South Korea, and monitoring missions. From time to time, I get involved in training for administrators, or professionals. I also advise governments to prepare nominations and help them prepare for the evaluation. These are my general activities related to heritage in UNESCO and ICOMOS. Then, I am involved in training programmes related to heritage in different places. One of the programmes that we run in IFT (Institute for Tourism Studies) with UNESCO is called the heritage specialist guides’ training programme. Guides play an important role in heritage sites, and it is important to ensure they actually communicate the value of the site properly, to encourage proper management and visitor management.

“When people get involved, and see what has been done or how it is being done, they understand these things better and with every round of this kind of public engagement, they become wiser, and start to make better decisions” Th e r e c e n t W o r l d H e r i t ag e Committee report criticises China and the local government’s performance on heritage preservation practices. This has happened a few times in the past, as with the Guia Lighthouse case, when several construction projects near the hill would have affected its visibility.

There was a problem with the Guia Lighthouse, and local people complained to UNESCO, so UNESCO sent a monitoring mission. Because of the [World Heritage] Convention, of which China is a signatory, that gives UNESCO the power to send a monitoring mission. You can say it is a diplomatic matter. They can’t force it if China refuses to accept the mission. But, say, if China does not bind to the request, then UNESCO can

take action, and the actions can be putting ‘in danger’ or de-listing it. In the case of Macau, they will try their best not to de-list it. But if at one point they realize that the effect is going to be irreversible, that it is going to have a negative impact on the site, they can put it on the ‘in danger’ list.

Everybody becomes aware that there is something negative happening, and if the main value is lost, then they can de-list it.

Following the first problems related to the Guia site in 2006-2007, UNESCO has been monitoring the situation here. In a follow-up, the Macau SAR Government was

supposed to send a Protection and Management Plan (PMP) to UNESCO, initially in 2013, then in 2015. None of this happened. Why? The government has to go through certain procedures and it has its own political environment. Urban planning law is a big issue in Macau, because it is going to affect many things that are developing. Even the [Cultural] Heritage [Protection] law was adopted almost at the same time, because they are related. UNESCO understands that different countries have different types of political situations, so they can’t be too strict. So they are flexible, as long as they see that the State Party is trying. I’ll give

you an example. Dresden [Germany] was on the World Heritage list. But they wanted to construct a bridge over a river, which would be affecting the site directly. So UNESCO alerted them, but the city decided to go ahead with the bridge. So UNESCO de-listed Dresden, because there was no other choice. But Macau is not doing that. China is not doing that.

They are trying to find a way to solve the problem. But it is difficult to set a strict deadline and force a country to do something.

What other reasons exist for the government taking so long to produce and deliver the PMP? I don’t know exactly why it is not done yet, because the process has been ongoing for quite a long time.

Maybe they have to co-ordinate with other departments - and that’s one possibility - and here the co-ordination is not really so good, so sometimes it is delayed just because other government departments have a slow response. Or there might be issues - and then again these are just assumptions - that require certain legal support, which are just not in place yet. So until that is resolved, they can’t really do anything about it, and of course, many things are tied to the urban planning development of Macau.

In the WHC report, it reads that ‘it is finally recommended that the Committee requests the State Party [China] to ensure that Heritage

Business Daily Monday, June 5 2017 5

Macau

Impact Assessments (HIAs) are carried out for all new major construction projects.’ Does that suggest that HIAs are not taking place regularly?

It has to be defined in the law. It cannot be ad hoc. You can always argue that HIAs cost money, but the contractor or the developer must be at the cost. And it is by law. Hong Kong has it. Macau doesn’t have it. I read an unofficial English translation of the heritage law, but it is not defined there, as far as I know. HIA must be enshrined in the law, that within a certain radius of a heritage site, an HIA must be conducted, and how it should be conducted must also be specified. It should explain who will pay, or who can be hired. So the law has to be very clear about that, how to ensure impartiality in a proper assessment.

Have you had a part, working at IFT, in the preparation of the PMP? We were hired as consultants for the IC [Cultural Affairs Bureau]. I, with some of my colleagues, developed one chapter of the plan, which is the tourism management plan. This is the property of the IC, so I can’t disclose details.

Which cases would be informative vis-à-vis tourism management as it applies to Macau?

Tourism management is a big topic.

It can work at the city level and at the site level. For instance, for tourism management at the Ruins of Saint Paul’s, you cannot deal with it without addressing the general tourism management assessment in the city, because it is a question of how you distribute people to different places, how buses are run, where they stop, and so on. [For the PMP] we looked at some examples in Europe and Southeast Asia, and, overall, tourism policies in other countries.

We looked at some places which have good management systems, and examined research papers published on tourism management practices to study how people carry out visitors’ research, for example, who comes, at what times, bottlenecks, visitor behaviour, those kinds of things.

Do you think that relocating the buses that park near the ruins to Tap Seac Square will be effective from the point of view of the population and the tourists?

It is a specific case, but you have to see how it ties to overall tourism movement in that area, because parking buses very close to the site is [a practice] discouraged everywhere.

Maybe it is a bit far and you have to climb a slope, and so it may not be convenient for the elders or people with some movement disabilities.

But in some places this is done for the sake of the site’s management. If buses are too close, of course, it is not convenient for the residents there.

Buses that keep their engines running create pollution. This is an issue of how you look into the overall positive and negative sides. There is no perfect solution. In some countries,

they may use a second set of transportation, which is less polluting and does not create noise, to move people in small groups. I think the Macau government is already discussing installing escalators at some places.

But again, they have to think about how it is going to impact [sites] and on how it is done, if it is sensitively done.

“Civic society, and intellectuals and professionals, should act like a check and balance body” The local government insists that public consultation be part of those processes. Do you believe that it is important to have the public consulted on such matters?

Public consultation is definitely important, but how it is done is also very important. It can be just an ‘eyewash,’ or it can be really empowering to the people. So there is a huge range of things that can be called public participation. In principle, it should be transparent, because public participation should be opened to everyone, if it is properly done, and a good method of public education.

When people get involved, and see what has been done or how it is being done, they understand these things better, and with every round of this kind of public engagement, they become wiser, and start to make better decisions.

But considering a matter such as height restrictions, as in the development of Zone B or Fisherman’s Wharf – which have also been raised

by WHC in its report – shouldn’t it be for specialists to decide upon?

Definitely. One thing is that it depends on transparency, but honesty is also an important issue. You can present a very technical and problematic matter nicely, because sometimes the public is not in a position to understand all the technical details. Then, we have to trust the government.

But civic society, and intellectuals and professionals, should act like a check and balance body. So if there is a thing that the government could do in a better way, they raise their voice and talk about it. They can also tell the public if there are any flaws. An active civic body is very important to really make public participation work. Sometimes, it is not about bad intentions. The government really has good intentions, but again, it is always good to have some balance mechanism, so that if they make a mistake, it can be pointed out and solved.

What about the private sector, is it cooperating with the local government in heritage preservation matters?

I think it is difficult to judge.

Everybody has his or her own interest. So business people also have their own interests. It is natural that they will try to protect their interests.

Normally, it is the government who needs to ensure that public interest is protected. [Companies’ involvement] usually stands under Corporate Social Responsibility (CSR). But if there is no law, the corporate bodies normally do not do anything. Normally. I am not saying that there are no exceptions.

A simple example is environmental protection. If it is required by law then everybody must follow it. But if there is no such law, they don’t mind polluting the rivers, or wasting energy.

Based on your international experience, are there ways to allow business to profit from heritage?

There are good examples in Penang, Malaysia. What they did, in the World Heritage area, George Town, is that some of the historic buildings have been ‘adopted’ by corporations. HSBC [bank] has one of their main offices there. But they do that under certain conditions. They have to make sure that the conservation work and maintenance are properly done. In another project in Penang that is a private initiative, Suffolk House, the many columns of the building could be ‘adopted.’ You can adopt one column, as an individual or organization, your name will be there, and you donate a certain amount of money which is spent for the conservation of the building. It is like a partnership. It is a tangible contribution they make, by putting money, and they get an intangible benefit, which is like ‘we are a good company, we care for cultural heritage.’

“In terms of talent, you can train people, but if there is no opportunity for them to work, then, nobody will be interested in that field”

Once businesses partner up with governments in the management of sites, they can get some publicity, as in the Penang case you mentioned.

But is it possible for the businesses to make money out of it?

I don’t know, because the main problem is the legal issue. If the government funds a project, and if somebody makes money out of it, it is a problem. There are different mechanisms, but it has to be done within the legal framework of that particular country.

In the case of Macau, the government can be a kind of facilitator, if it is a private property, so they can find another partner who is interested

in investing, but then it has to be some kind of agreement that doesn’t look like someone is just financing a private property. On the other hand, many museums, for example, are privately-owned and make money by organizing activities and selling souvenirs. There are also many heritage houses that are open to the public, and they charge visitors. It is done in many cases, like the places I mentioned in Penang, or in some other countries where these corporations own such properties. This confers on them a kind of prestige and that’s public image.

Do you think that Macau has enough people trained to carry out heritage conservation work, or is this still a field lacking local ‘talent’?

What Macau needs is more heritage management people. You treat a building because it has a problem, but once the treatment is over, then, rehabilitation can be very long in terms of ensuring survival, ensuring that people really understand its value, that they have a purpose in contemporary society. And that’s the domain of heritage management.

IFT is the only institution in Macau producing graduates in heritage management and many of our students are actually doing Master’s and PhD degrees after that, and some are coming back, but the problem is the employment in Macau. In the government department, I think it is very limited scope, while the private sector is not well developed. So, in terms of talent, you can train people, but if there is no opportunity for them to work, then, nobody will be interested in that field.

A final question about the two buildings that have recently been affected by neighbouring constructions - the listed Moorish Barracks and the Lou Kau Mansion. Could these problems have been avoided?

Management. This is not the scope of preservation. It is the scope of management. For the case of Lou Kau mansion, if it was in another country, there would be an HIA. If I start a construction, will the vibration affect this building? If I dig into the ground, is it going to affect the foundations of the building? If the studies show that there might be an impact, then, the developer has to have mitigation measures in place and the government has to be satisfied with that. That’s why regular monitoring is so important.

In some countries, they have local people as the first respondents or informants. They have a community body who lives there, and they walk around, maybe once a week or once a month, and if they notice something – because they know the place more intimately than an outside expert – they can inform.

And then you have more longerterm [measures], once a year or once every five years, when experts would come and check. Without any measurement, you cannot really tell.

6 Business Daily Monday, June 5 2017

Macau Opinion

Sheyla Zandonai* Tail eater The World Heritage Committee has recently claimed that Macau is underperforming in the protection of its heritage ensemble. The Committee, which has published online several documents forming the basis of its annual meeting this summer, pointed out a couple of areas of concern in Macau.

Overall, these relate to the slow response in tackling the question of urban planning in the city.

The first name that comes to mind is Public Works (DSSOPT). But it is not alone on that one. Planning is also lacking on the part of the Cultural Affairs Bureau (IC) regarding a comprehensive framework on heritage management, the so-called Protection and Management Plan (PMP).

The bureau has been working on the task. But it is taking too long, some five years now.

Maybe more. Why so long?

Because it is tied to urban planning. So we are back to the start. Ouroboros.

It is expected that CAB should integrate in its plan, information such as height restrictions for certain areas of the city. But these are Public Works’ scope.

Yet, wouldn’t it be sensible for the IC to define such limits and recommended them to the DSSOPT, instead of the other way around?

Such an approach would solve two problems. First, IC would get the PMP done – considering that is the only matter holding it up. Secondly, it would ensure that risks to heritage sites – as the one cast over Guia Lighthouse roughly ten years ago – be minimized.

If any public body can claim knowledge and authority on technical issues related to heritage, it is the cultural bureau.

All things considered, that leaves us with the always-tricky part of the deal.

Development.

Real estate and construction are powerful forces here that should not be underestimated.

But they are not to be confounded with government, even if there are signs pointing otherwise.

For all that matters, governments should govern. While that does not exclude accommodating business’ interests, it should not mean bending to them, especially in a domain such as heritage, which is larger than private agendas and the present itself.

So IC’s continuous work to restore and classify new buildings is encouraging.

World Heritage-wise, however, there is a fundamental flaw in the way the Macau Historic Centre was designed: breaking down the ensemble into two zones, and not including large parts of the old Chinese town in the overall proposition.

So China, the State Party, and UNESCO are also partly to blame for endorsing such a design.

But it is never too late to amend it.

*scholar and contributor to this newspaper.

Gaming

Analysts stay prudent over city’s future performance Despite the significant rise in the city’s gross gaming revenue last month, analysts are cautious about Chinese government’s moves Cecilia U cecilia.u@macaubusinessdaily.com

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aming analysts remain cautious about the city’s coming months’ results, given the recent, more stringent, regulations imposed by the Chinese government, despite the notable 23.7 per cent year-on-year increase in Macau’s gross gaming revenue for May, as announced last Thursday by the Gaming Inspection and Co-ordination Bureau (DICJ).

The Chinese State Administration of Foreign Exchange announced a new policy on Friday, in which the central government will start collecting information on overseas transactions on Chinese domestically-issued card holders, including debit and credit cards, in particular UnionPay cards.

The new policy includes the reporting of card-holder information on overseas transactions that exceed RMB1,000 (MOP1,178/US$147) and the reporting of every overseas cash withdrawal to the Chinese department on a daily basis.

The new policy will come into effect on the first day of September this year.

Although the new policy will not pose any significant or direct impact on the city’s gaming industry, given that the national foreign exchange policy remains unchanged, analysts at J.P. Morgan perceive that the stricter measures on overseas card usage and cash withdrawals will cause ‘at least a modest negative on player psychology’, adding that the gross gaming revenue effect ‘is difficult to estimate, but it can’t be good.’

Similar views are held by analysts at Morningstar Asia Ltd, who forecast

the city’s gaming revenue growth for the whole year of 2017 at mid-single digit growth.

Morningstar analyst Chelsey Tam points out that the firm’s China banking team saw ‘the central bank taking a stronger stance in reining in broad credit growth and encouraging financial deleveraging’, as well as the launch of facial recognition technology at ATM machines for Chinese bankcard holders in Macau, as reasons for leaving unchanged the group’s mid-single-digit growth forecast for 2017.

Carlo Santarelli, a senior analyst with Deutsche Bank, meanwhile, predicts that the second half of 2017 will post double-digit growth, though with slowing speed when compared to May’s performance, estimating a year-on-year growth of 14.7 per cent for whole-2017.

‘Despite recent seasonal sequential outperformance’, the analyst group from Deutsche Bank predicts June’s gaming revenue to hit 26 per cent year-on-year growth.

Ratings agency Telsey Advisory Group, points out that the new properties opened in Cotai - the Parisian and Wynn Palace – continue to be ‘growing the market rather than cannibalizing the existing properties’, contributing to positive growth in the city’s revenue for the past two months.

As such, Telsey Group anticipates a year-on-year increase of 20 per cent for the Sands properties and a drop of 20 per cent for Wynn.

With the management teams suggesting the less transient toward Cotai which are practised by peninsula customers, David Katz from Telsey Group believes that relevant properties - Sands, MGM and Wynn - could post ‘upward revisions’ in the second quarter this year, should the results in June begin in a similarly strong manner as in April and May.

VIP

Venetian cuts loose Neptune’s junket business Sands China’s casino terminates its agreement with one of Neptune’s strongest subsidiaries, without providing further explanation Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Venetian Macau Limited has terminated its gaming promotion agreement with Hao Cai Sociedade Unipessoal Limitada, a subsidiary of junket Neptune, currently operating 14 VIP tables in the Venetian.

In a filing with the Hong Kong Stock Exchange, Neptune Group Limited informed that Venetian Macao – a Sands China Ltd. operation – had issued a written notice to Hao Cai on May 31, 2017 to terminate the agreement dated December 30 of last year between the two parties, effective June 30, 2017.

Contacted by Business Daily, a Sands China spokesperson said that ‘the company is unable to provide additional information in relation to [the] matter.’

The termination leaves Neptune with only two main junket operations in casinos in the city, comprising a total of ten VIP tables in Sands Macao and a total of eight tables in Grand Lisboa, according to information provided in the filing.

In 2015, Hao Cai’s parent company closed its VIP table business in StarWorld, a casino of Galaxy Entertainment Group, following the slump of

the VIP business.

Neptune also noted that the aggregate account receivables – comprising the amount of debts, unsettled transactions, and monetary obligations owed to the company by its debtors or customers – in respect of the junket business of Hao Cai, amounted to approximately HK$95.1 million (US$12.20 million/MOP97.95 million).

The group informed that it ‘obtained the pledges of certain properties in Macau in favour of the group

as security for part of the outstanding account receivables in relation to the junket business of Hao Cai’ in November of last year.

The parent company also noted in the filing that, for the year ended June 30 2016, revenue generated by Hao Cai’s junket business amounted to HK$115.1 million, representing roughly 41.3 per cent of the total revenue of the group.

It added that as at the end of December 2016, Hao Cai’s assets totalled some HK$220.9 million, or nearly 14.6 per cent of the total assets of the Group.

At the end of last year, Neptune entered into the lending money business in order to diversify its portfolio.

Business Daily Monday, June 5 2017 7

gaming Gaming

‘Misrepresentation’ in Saipan CMC Trading Engineer (International) Limited is to seek legal counsel after accusations by workers involved in the construction of the new Imperial Pacific resort in Saipan, relating to missing payments and missing reimbursements for work injuries Nelson Moura nelson.moura@macaubusinessdaily.com

G

aming material supplier CMC Trading Engineer (International) Limited (CMC Macau) told Business Daily that it is seeking legal counsel, following accusations made by workers involved in the construction of Imperial Pacific International Holdings Ltd’s new resort in Saipan.

Last week, a total of 35 workers, mostly Chinese nationals, held a protest demanding compensation for their services and reimbursement for medical fees resulting from injuries sustained in the workplace, newspaper Saipan Tribune reported.

According to the newspaper, two workers claimed they had been offered US$5,000 (MOP40,100) each by CMC Macau to waive responsibility

for them, an offer they allegedly refused.

In a response sent to Business Daily, CMC Macau said ‘there was a misrepresentation’ of the company, adding the matter had been placed ‘in the hands of our lawyers’.

However the company didn’t confirm if any legal action was being taken against the workers in question or the Saipan Tribune.

Under investigation

In a previous report by the publication, it was stated that the Commonwealth Casino Commission executive director, Edward Deleon Guerrero, revealed its department had added CMC Macau as one of the contractors that were being investigated for committing labour violations.

“We’re checking on that. We’re looking at some questions whether

or not they were involved in some of those labour issues,” Mr. Guerrero was quoted by the newspaper as saying.

Currently three other contractors involved in the resort development are also under investigation for the same infractions: Suzhou Gold Mantis Construction Decoration; MCC International; and Beilida Overseas (CNMI) Ltd. After delays caused by the protests,

Imperial Pacific recently received an approval from the Department of Public Works of the Government of the Commonwealth Northern Mariana Islands (CNMI) to start phase one of its project development.

The first phase involves the construction of 140,000 square metres, to include the grand lobby area of the property, as well as the casino, with more than 200 gaming tables and roughly 350 slot machines.

Attack

Philippines to probe casino security breach after deadly attack The Manila gunman entered from a parking area with a rifle and carrying gasoline but wasn’t stopped by a female guard at the entrance, says police chief Clarissa Batino and Andreo Calonzo

Philippine security forces and its gaming regulator will investigate possible security lapses by Resorts World Manila after a gunman set fire to its casino in the capital and fumes choked at least 36 people to death on Friday.

The government is concerned about “a possible negligence by Resorts World not only in casino security but also in building design and safety protocols,” presidential spokesman Ernesto Abella told government radio on Saturday. The Philippine Amusement & Gaming Corp., which regulates and also operates some casinos, will do a full audit of all gaming companies, he said. Resorts World Manila spokesman Owen Cammayo didn’t immediately reply to a mobile-phone call and message seeking comment.

The Philippines will also tighten anti-terror measures, Abella said, even as he maintained that based on police evidence, the attack on the casino wasn’t carried out by a terrorist

as Islamic State has claimed, but by “an emotionally disturbed person who was apparently engaged in a criminal action.”

The attack on the Manila casino near the city’s international airport terminal came after a group of militants linked with Islamic State

occupied Marawi City in the southern Philippines, prompting President Rodrigo Duterte on May 23 to place the Mindanao region under martial law. The death toll in Marawi has risen to 177 and the government is seeking to end the crisis in the south, Abella said.

Lone Gunman

The Manila gunman, whom police said acted alone and whose identity is unknown, entered from a parking area with a rifle and carrying gasoline

Philippines police walk outside the Resorts World Manila hotel and casino complex in Pasay City, south of Manila, Philippines. Lusa

but wasn’t stopped by a female guard at the entrance, according to Metro Manila police chief Oscar Albayalde. The perpetrator burned gaming tables, fired shots and stole 113 million pesos (US$2.3 million) worth of casino chips before setting off fires on upper floors. He was found in Room 501 at 7 a.m. Friday, burned beyond recognition after setting himself alight, police said.

Casinos run by Bloomberry Resorts Corp. and Okada Manila said they have intensified security.

Bloomberry said it has “direct links to police authorities should an untoward incident arise,” and security measures are implemented around the clock.

Resorts World Manila followed emergency protocols to ensure the safety of guests and employees, it said on its official Twitter account. Stephen Reilly, chief operating officer of Travellers International Hotel Group Inc., which owns the casino, said Friday that its guards didn’t engage the gunman to avoid escalating the situation. Reilly also said the hotel’s sprinkler system functioned as it should have, with the deaths caused by smoke inhalation. A casino security guard shot the attacker before he committed suicide, Reilly said. Bloomberg

Gaming

Analysts: US$25 bln opportunity with 20 pct ROIC for casinos opening in 2024 As long as no other restrictions on local gambling arise, analysts at Morningstar are predicting a US$25 billion opportunity in Japan for integrated resorts, with those opening facilities in 2024 able to profit off a predicted 20 per cent return on invested capital (ROIC).

The analysts note the division would be US$19 billion worth in gaming and US$6 billion in non-gaming.

Given its strong balance sheet and strong track record of managing global resorts, the analyst group believes that Las Vegas Sands is best

positioned to win a gaming concession, most likely towards the middle of 2019.

Meanwhile, although the group is uncertain about the number of IR locations, which it estimates will be announced during the second half of 2018, the analysts perceive that four IRs could be approved, creating some 20 per cent in ROIC, assuming US$10 billion in capital expenditures for the urban locations with gaming tax and EBITDA (earnings before interest, taxation, depreciation and amortization) margins close to that of Singapore.

Morningstar does not expect much impact on Macau’s industry forecast, given that the territory has already been involved in competition with

other Asian gaming regions.

The group further believes that Macau would benefit from the growing middle-income class in nearby

regions, while also perceiving that Macau would have a higher-risk of losing clients from areas that are closer to Japan. C.U.

8 Business Daily Monday, June 5 2017

Greater China Regulator

Beijing to bolster oversight of overseas transactions on Chinese bank cards Transactions made by Chinese bank card holders overseas exceeded US$120 billion in 2016

C

hina will strengthen regulatory oversight of overseas transactions on Chinese bank cards, as it fight money laundering, terrorist financing and tax avoidance, its foreign exchange regulator said on Friday.

From Sept. 1, Chinese banks will be required to report daily their bank card holders’ overseas withdrawals, plus every bank transaction that exceeds RMB1,000 (US$146.7), the State Administration of Foreign Exchange (SAFE) said in a notice.

Key Points

cracking down on underground banks, which have been accused of being a major channel used for money laundering and illegal cross-border transfer of funds.

Last year, Chinese police busted more than 380 underground banks, involving more than RMB900 billion, and arrested more than 800 suspects, according to the Ministry of Public Security.

Transactions made by Chinese bank card holders overseas exceeded US$120 billion in 2016, raising the need to “improve statistics quality and

maintain trading order”, SAFE said.

It added that it will continue to support legitimate use of bank cards overseas and the new rules don’t change China’s foreign exchange management policy.

The rules will be applied to all kinds of Chinese bank cards, including debit and credit cards.

The stepped up regulatory interest in overseas account activities coincided with a clampdown on capital outflows, as authorities sought to relieve downward pressure on the yuan currency and stop the depletion of China’s foreign exchange reserves.

China tightened its grip on moving funds out of the country late last

year with a flurry of curbs as the yuan fell to eight-year lows. Capital outflows have since ebbed in recent months, but some analysts say there are signs of an uptick in the second quarter.

French investment bank Natixis said in a report its capital flow tracker for China shows capital outflows for the second quarter will rise somewhat, reversing the recovery in the first quarter.

Banks’ compliance of the rules will be measured as part of their foreign exchange management assessment, and failures to comply will result in “regulatory measures and punishment” according to the law, SAFE said. Reuters

China asks banks to report daily overseas transactions on all Chinese bank cards from Sept.1 Cites need to fight money laundering, terrorist financing, tax avoidance Reported information to include overseas withdrawals, bank transaction exceeding RMB1,000 each Under previous rules, China only measured the total amount of overseas transactions on Chinese bank cards.

“Statistics on cross-border transactions need to be improved in terms of trading transparency and data quality, as there are more requirements to fight money laundering, anti-terrorist financing and tax avoidance in global co-operations,” the SAFE said.

Chinese authorities have been

Auto industry

Government agrees to delay electric car quota by a year The concession followed an auto industry lobbying effort before this week’s Germany-China summit Andreas Cremer and Ilona Wissenbach

China agreed to delay an 8 per cent quota for electric and hybrid vehicles by a year until 2019, an auto industry source said on Friday, in a major concession for German carmakers seeking to expand in the world’s

largest auto market.

In a draft in September, Chinese policymakers proposed that 8 per cent of automakers’ sales be battery-electric or plug-in hybrid vehicles by 2018, sparking protests from domestic and international carmakers.

After a meeting with German

Chancellor Angela Merkel in Berlin on Thursday, Chinese Premier Li Keqiang said a “solution” for implementing the quotas had been found, though he gave no details.

As part of a compromise deal, German carmakers who fail to fulfil the quota in the near term will be able to offset penalties by ramping up electric vehicle deliveries at a later date, the industry source said.

Daimler Chief Executive Dieter

Zetsche said earlier on Friday that China had agreed to adjust the pace of introducing stringent domestic quotas for electric car sales.

The concession followed an auto industry lobbying effort before this week’s Germany-China summit.

Key Points Daimler says China agreed compromise on electric car quota Daimler CEO says pace of introducing quotas adjusted Daimler CEO says compromise discussed at Germany summit Asked what had been agreed between Germany and China, Zetsche told Reuters: “What we talked about was the timeline, the pace of this transition. I think we reached a result which is satisfactory for everybody.”

Zetsche said that he could not give further details given that the Chinese and German participants in the negotiation had also not divulged details of the compromise.

Maintaining and extending its current strong position in China is crucial for Germany’s auto industry, led by Volkswagen, Daimler and BMW, and its broader economy.

Handelsblatt, citing industry sources, said China had agreed to delay the introduction of the rule by a year and allow firms to make up for inadequate electric sales volumes later. Measures were also being investigated to allow German firms to limit their transfer of technology to China, Handelsblatt said. Reuters

Business Daily Monday, June 5 2017 9

Greater China Investors

In Brief

State giants are only stock winners in divided market Insurers and lenders led gains in the past month on the SSE 50 Emma Dai

In China’s struggling stock market, it’s easy to pick a winner. Back the state.

The SSE 50 Index comprising some of China’s largest companies has surged 6.4 per cent in the past month, climbing to its highest level versus the broader Shanghai Composite Index in four years. Outside of the state giants, the rest of the market looks blighted: more companies on the Shanghai measure were at 52-week lows last week than at any time since 2013.

The outperformance is being driven by government policy: a regulatory campaign to curb leverage is driving up funding costs for smaller, privately-run firms, while also prompting an exodus by individual investors from equities. To avoid a deeper selloff, state-backed funds -- known locally as the national team -- are shoring up the market through purchases of large-cap shares, according to CIMB Securities Ltd. Last week’s sovereign rating cut by Moody’s Investors Service only added to the impetus.

“The national team is likely supporting the market again after Moody’s downgraded China in order to prevent panic selling,” said Zhang Haidong, a Shanghai-based fund manager at Jinkuang Investment Management. “Blue chips such as banks are their favorite since the sector is cheap and has a relatively big weighting in index. Meanwhile, as individual investors have turned defensive in a bearish market, some of them have adjusted their strategy to sell small caps and follow the national team.”

Insurers and lenders led gains in

the past month on the SSE 50, with Ping An Insurance Group Co., New China Life Insurance Co. and China Merchants Bank Co. surging more than 18 per cent. That’s helped the index rise to its highest level since December 2015. Compare that with the dismal performance of small caps, with the ChiNext gauge sinking to its lowest in more than two years.

Even without government support for the stock market, large-cap shares had already been benefiting in a relative sense from the regulatory campaign to cut risk in the financial sector. With the state’s backing, they have a better chance of maintaining access to funding at attractive rates than smaller private firms.

Regulatory Storm “Under China’s deleveraging campaign, funding cost has raised more for small companies than for the big ones,” said Hao Hong, chief strategist at Bocom International Holdings Co. “The decline of small caps is far from an end. The divergence will continue to widen until the regulatory storm stops.”

The lead by large companies only widened early last month, when an international summit in Beijing attended by President Xi Jinping spurred intervention in equities, according to ICBC International Research.

The nation’s equity exchanges told brokerages to notify clients that regulatory scrutiny would increase through May 16 as China hosted the Belt and Road Forum for International Cooperation, according to people with direct knowledge of the matter.

State-backed funds stood ready to buy shares if needed, they said.

“Investors have been panicking and escaping from small caps,” said Qiu Zhicheng, strategist at ICBC International Research. “The national team’s recent support to the big caps, especially around the time of the Belt

and Road Summit, has accelerated the transition.”

The May 24 surprise downgrade

by Moody’s added to the buy case for large state-owned enterprises.

With the move casting doubt on China’s ability to prevent the buildup of debt and threatening to undermine already brittle investor sentiment, the government was quick to defend the nation’s equity and currency markets.

The large-cap index staged its biggest weekly rally in 15 months, jumping 4.6 per cent. That compares with a 0.6 per cent gain by the Shanghai Composite and a 2.3 per cent drop by the ChiNext gauge of smaller companies. The yuan climbed the most since January offshore, jumping 0.7 per cent against the dollar, as surging interbank rates in Hong Kong hobbled bearish bets and Chinese banks were said to be hoovering up the currency.

The SSE 50 dropped 0.8 per cent at the close on Friday, with Ping An falling from a two-year high.

While valuations on the smallcap gauge have crumbled from their giddy peaks during the 2015 stock market bubble, they’re still elevated relative to large SOEs. The ChiNext trades at 37 times earnings, more than three times the level of the SSE 50.

That’s still too expensive for Ben Bei, director of Hong Kong and China strategy at CIMB Securities, who says the outlook for the nation’s largest companies remains more positive than the rest of the market amid likely state intervention.

“Given there is limited downside for these stocks, retail investors will follow suit and turn to these defensive stocks as the direction of the market is uncertain,” he said. “If the PBOC continues to tighten, small cap valuations would decline further.”

Bloomberg News

Currencies

Change to midpoint formula a pre-emptive move for a Fed hike The adjustment to the mechanism China’s central bank uses to set the daily yuan midpoint was a pre-emptive move to offset the effects from expectations of a U.S. interest rate increase this month and the stresses of seasonal dollar demand, the Financial News said on Friday. The newspaper, owned by the People’s Bank of China, said the risks from pressure wrought by “internal and external contradictions” would have been too much. “Stabilising the foreign exchange risks would leave room for the deleveraging campaign,” the newspaper said.

Monetary policy

Beijing to maintain stable liquidity China will maintain a monetary policy that is “neither too tight or too loose”, ensuring basically stable liquidity, a senior central banker told a financial conference in Beijing on Saturday. Chen Yulu, deputy governor at the People’s Bank of China (PBOC), also said that economic structural reform would play an increasingly important role in the government’s policy toolkit, according to domestic media reports of his comments.

Chen’s remarks echo statements made by the central bank and its advisers in recent months. In its first-quarter monetary policy implementation report released in May, the PBOC said it would maintain a prudent and neutral monetary policy and keep liquidity basically stable.

Insurers

M&A

Alibaba’s Jack Ma invited to join bid for L’Oreal’s The Body Shop L’Oreal said in February it was reviewing its strategy for The Body Shop Pamela Barbaglia and Martinne Geller

European private equity firm Investindustrial has invited the investment vehicle of Alibaba’s founder Jack Ma to submit a joint bid of more than 800 million euros (US$900 million) for L’Oreal’s The Body Shop, sources familiar with the matter said on Friday, just days before a deadline for final bids.

Hong Kong-based Blue Pool Capital has been asked to team up with Investindustrial and Brazil’s GP Investments, one of Latin America’s largest private equity firms, in making a bid for the British-based cosmetics retailer, the sources said.

European private equity investor CVC Capital Partners is also planning to submit a rival offer ahead of a June 7 deadline for final bids, the sources said, adding that another buyout firm, Advent, has decided to drop out of the contest.

L’Oreal has asked prospective bidders to table offers of no less than 800 million euros, said the sources.

L’Oreal, Investindustrial, GP Investments, Advent and CVC all declined to comment while no one at Blue Pool Capital was available for comment outside of regular business hours.

Investindustrial’s Italian founder Andrea Bonomi told Reuters earlier this month that the buyout firm, which also has investments in luxury carmaker Aston Martin and shoemaker Sergio Rossi, was in the race

for The Body Shop.

The firm worked with GP Investments on an eventually unsuccessful joint bid for French holiday resorts operator Club Med back in 2014.

L’Oreal said in February it was reviewing its strategy for The Body Shop, which it bought for 652 million pounds (US$840 million) in 2006.

Founded in 1976 by British entrepreneur Anita Roddick, the company was a pioneer in the ethical beauty industry but has since fallen victim to increased competition from newcomers also offering similar products based on natural ingredients and no animal-testing.

Last year The Body Shop, which has

more than 3,000 stores worldwide, saw its revenue drop 4.8 per cent to 920.8 million euros and its operating profit fall 38 per cent to 33.8 million euros.

L’Oreal’s advisor, Lazard, was originally hoping for a valuation close to 1 billion euros for the business, but the sources said such a price was challenging given the chain’s recent struggles and poor performance.

The Body Shop has also drawn interest from a handful of industry players including Brazilian makeup firm Natura Cosmeticos, which took part in the initial stages of the auction, the sources said.

A spokesperson for Natura said, “The company is constantly looking for business opportunities and it is indeed participating in several of the phases of the process for The Body Shop transaction.” Reuters

Anbang denies report that chairman not able to leave country Wu Xiaohui, the chairman of Anbang Insurance Group Co Ltd, is free to travel, a spokesman for the Chinese insurer said on Friday, denying a report that Wu had been prevented from leaving China.

The Financial Times reported that Wu had been stopped from leaving the country, citing four sources who have had business dealings with him. Anbang has emerged as one of China’s most aggressive buyers of overseas assets in the past two years, spending more than US$30 billion acquiring luxury hotels, insurers and other property assets.

Lawsuit

Huishan Dairy facing fresh legal action China Huishan Dairy Holdings Co Ltd is facing fresh legal action over money it owes to creditors, ramping up pressure on the indebted firm whose finances are coming under intense scrutiny. The dairy company, already facing legal action from creditor Gopher Asset Management, said late on Thursday it was aware of “16 additional legal proceedings”, with a total amount claimed under the new proceedings of RMB421.8 million (US$61.90 million).

Huishan’s stock has been suspended from trade since March 24, when it plunged 85 per cent.

10 Business Daily Monday, June 5 2017

Greater China Oil industry

Mainland’s Hengyi to start up US$3.4 bln Brunei refinery That comes as new refineries are also due to come online in Vietnam and Malaysia Chen Aizhu and Jessica Jaganathan

P

rivately-run Chinese company Hengyi Group expects to start operating a US$3.4 billion refinery in resource-rich Brunei in 2019 after completing building work in October next year, two industry executives briefed on the matter told Reuters.

Hengyi had previously delayed the start up of the 160,000 barrels-perday facility in Southeast Asia from an initial 2015 target, partly blaming delays in local infrastructure.

the final investment for the US$3.445 billion refinery at Pulau Muara Besar island in Brunei, the largest of its kind run outside China by a private Chinese firm.

The facility will primarily provide feedstock for Hengyi’s massive Chinese production of pure terephthalic acid, or PTA, an intermediate for making polyester. But it will also churn out fuel, competing with supply from the region’s oil hub, Singapore.

That comes as new refineries are also due to come online in Vietnam

and Malaysia.

“There’s already an oversupply so any delay is good. Nghi Son (in Vietnam) is coming up in 2018 and the Refinery and Petrochemical Integrated Development (RAPID) project (by Malaysia’s Petronas) is in 2019,” said Nevyn Nah of Energy Aspects.

Hengyi agreed in 2012 with Royal Dutch Shell, long active in exploring for oil and gas in the kingdom, to supply the refinery with crude oil over a 15-year term.

It was unclear if that deal remained valid. Shell said it would not comment on commercial matters.

One of the two industry sources said Hengyi may explore a swap deal with

Shell, with the major supplying some crude in return for refined products.

China’s Lanzhou LS Heavy Equipment Co Ltd has been contracted to build key production units at the refinery including a 1.5 million tonne per year aromatics facility and a 2.2 million tpy hydrocracking unit.

Kunlun Construction and Engineering Corp, a unit of state energy group China National Petroleum Corp, has previously said it won a deal in late 2016 to build a 15-million-barrel tank farm at the development.

Started as a small sock-weaving factory in 1994, Hengyi recorded RMB79.4 billion (US$11.68 billion) sales revenue in 2015. Reuters

Key Points Expects to complete construction next year -sources Will be years behind original target date To provide feedstock for Chinese operations Will also churn out fuel, competing with regional suppliers

East China-based Hengyi, a leading manufacturer of synthetic fibre, declined to comment this week, while the Brunei government did not respond to an email seeking comment.

The company in March signed off on

Trade

Beijing plans U.S. visits, spurring hopes for more poultry trading Last month, the farm sector cheered as China agreed to resume U.S. beef imports, after blocking most shipments since 2003 Tom Polansek

Chinese agricultural delegations are set to visit the United States in the coming months, raising hopes that Beijing may lift a ban on U.S. poultry imports.

A decision by Beijing to cancel the ban would benefit U.S. farmers nervous about trade policies under U.S. President Donald Trump, who pulled out of the 12-nation Trans-Pacific Partnership in January and pledged to renegotiate NAFTA. China has blocked American poultry imports since the United States suffered its worst-ever outbreak of avian flu in poultry in 2015, frustrating U.S. producers who have detected only a handful of highly lethal cases of the virus in birds since last year.

The ban cut off a major market for U.S. chicken companies including Tyson Foods Inc and Sanderson Farms Inc , particularly for chicken feet, which Americans generally do not eat.

Next month, representatives of China’s agriculture ministry and animal

quarantine and inspection service will visit U.S. poultry facilities and learn how producers fight avian flu, Jim Sumner, president of the USA Poultry & Egg Export Council, a trade group, said this week.

It will be the first such visit since China imposed its ban and precede the arrival of another Chinese delegation in September, he said.

“We’re hoping that after the visit that they lift the ban entirely,” Sumner said about the September trip.

In 2014, U.S. poultry exports to China totalled US$315.4 million, including US$94.6 million worth of feet, according to the export council.

Resuming U.S. exports could support demand for feed, benefiting U.S. grain farmers who have suffered from falling incomes due to massive global harvests.

Tyson Foods, the biggest U.S. chicken company, said it had spoken with representatives from China about visiting its operations and hopes the ban is lifted soon.

Last month, the farm sector cheered as China agreed to resume U.S. beef imports, after blocking most shipments since 2003. At the same time, the United States said

it would issue a proposed rule to allow cooked Chinese chicken to enter U.S. markets.

‘China has blocked American poultry imports since the United States suffered its worst-ever outbreak of avian flu in poultry in 2015’ Sanderson Farms, the third-largest U.S. poultry producer, doubts Beijing will lift its U.S. poultry ban until Washington fully approves cooked Chinese chicken imports, Chief Financial Officer Mike Cockrell said.

Before the ban, Sanderson earned about US$4.3 million of operating income per month by selling chicken feet to China.

“For the first time really since January 2015, when they put the avian influenza ban in place, we’re starting to see movement,” Cockrell said. Reuters

Business Daily Monday, June 5 2017 11

Asia Government drive

Japan sets stage for watering down of fiscal discipline The change simply reflects Abe’s recent comments in parliament that he wanted to focus on the stock of debt as well as fiscal spending flows

J

apan’s government has agreed to make lowering the ratio of debt to gross domestic product a new fiscal discipline target, which makes it easier to avoid spending cuts as long as the economy keeps growing.

The government said it was not abandoning its previous target of reaching a primary budget surplus in fiscal 2020, but many economists have written this off after repeated delays in raising the nationwide sales tax.

The new target is a subtle shift in policy that poses large risks. The government has more freedom to spend big and avoid raising taxes, but this could eventually complicate the Bank of Japan’s (BOJ) government debt purchases for quantitative easing.

“If you focus on the debt-GDP ratio, you can just talk about expanding the denominator, but it is not that easy to raise trend growth,” said Hiroshi Shiraishi, senior economist at BNP Paribas Securities.

“The BOJ may not be able to exit when the time comes if the fiscal situation is not in order.”

The new fiscal discipline target is part of Prime Minister Shinzo Abe’s annual roadmap for fiscal and economic policy, which his top advisory

panel approved after a meeting on Friday.

Abe’s cabinet is likely to formally sign off on the roadmap at the end of next week.

In this year’s roadmap, lowering the debt-GDP ratio has been elevated to the same status as achieving a primary budget surplus, which excludes debt servicing costs and income from bond sales.

“The goal is to achieve a primary budget surplus and lower the debt-GDP ratio at the same time” Shinzo Abe, Japan’s Prime Minister

“The goal is to achieve a primary budget surplus and lower the debtGDP ratio at the same time,” Abe said at the end of the advisory panel’s meeting.

Shinzo Abe, Japan’s Prime Minister

In comparison, last year’s roadmap mentioned the debt-GDP ratio merely as a footnote.

The change simply reflects Abe’s recent comments in parliament that he wanted to focus on the stock of debt as well as fiscal spending flows, said government officials who briefed reporters on the roadmap.

Since last year, Abe, some of his advisers and some cabinet ministers, have made comments suggesting that returning to a primary budget surplus is not such a high priority.

Japan’s debt burden is the worst among major countries at more than twice the size of its GDP due to decades of public works spending to pump-prime a listless economy.

However, some economists say the debt-GDP ratio is likely to improve

because the economy has been growing in nominal terms since Abe took office in December 2012.

Indeed, the International Monetary Fund expects Japan’s debt-GDP ratio to peak at 239.4 per cent in 2018 and then fall to 232.4 per cent in 2022.

Other economists are not as sanguine because of the potential impact on the BOJ. The central bank has been slowing its government debt purchases recently, stirring speculation the BOJ could be looking for an exit from quantitative easing that has been in place since April 2013.

If investors start to expect a big increase in fiscal spending, that could cause yields to spike, making it difficult for the BOJ to stop purchasing government debt altogether. Reuters

Competition

Australia’s old media moguls unite to fight online giants The industry and government agree on removing caps on how many assets a single traditional media firm can own Byron Kaye

Bosses of Australia’s media companies, including an arm of Rupert Murdoch’s News Corp , have formed an unprecedented front to lobby for changes they say will allow more consolidation and help them compete with internet giants.

Last week, in a show of unity, chief executives of companies from radio broadcasters to newspaper publishers joined Prime Minister Malcolm Turnbull in Canberra, in a last-ditch effort to swing the upper house, controlled by recalcitrant independent lawmakers.

Like rivals globally, Australia’s media companies have been squeezed by new arrivals and digital advertising.

But they have also been unable to join forces or expand into markets that are off limits because of restrictions on what assets they can own, as they battle online giants like Netflix and Google.

Australia’s “two out of three” rule, which has restricted deals, does not allow one organisation to own all

three media in any given city - newspapers, television and radio.

“The whole competitive landscape in which we operate has changed,” said Hugh Marks, chief executive officer of Nine Entertainment.

“Everyone’s kind of had to accept, well, this is all for the good of the industry, as well as being good for our businesses,” he said, referring to the united front.

Peter Tonagh, chief executive of News Corp’s half-owned cable TV company Foxtel, said the proposed changes “aren’t optimal for any of us”, but the industry had embraced compromise because of “what would previously have been unimaginable competition”.

Yet their last-minute push, as Turnbull tries to persuade non-government lawmakers to vote for his package of changes, is not guaranteed to succeed.

The industry and government agree on the package of changes - removing caps on how many assets a single traditional media firm can own, letting cable television bid for some

sports rights and cutting broadcast license fees owed by stations to the government.

But they face significant opposition, including from a populist bloc in parliament that wants less funding for the national broadcaster, the Australian Broadcasting Corp.

Too little, too late?

A spokesman for Pauline Hanson’s One Nation, which has four of the Senate’s 76 seats, told Reuters the group is “not convinced that the challenges facing media operators justify the abolishment of the two out of three rule”.

The government has also said it will

not split up the package of reforms.

Still, the overhaul may come too late.

Newspaper publisher Fairfax Media is considering takeover offers from two private equity firms below A$1.25 per share, a quarter of its price a decade ago. Television station Ten Network Holdings has warned it may collapse by the end of the year if it does not secure a new bank loan.

“Those kinds of synergies (enabled by the changes) may be able to prolong your useful life, but is that really sustainable in the face of these little things called Google and YouTube and Facebook? I’m not sure,” said Brian Han, a Morningstar analyst.

Australian advertising spending is increasing more than 6 per cent a year, twice as fast as the economy, and is forecast to reach US$12 billion this year. Yet most of the growth is seen going into online advertising, while print, radio and television advertising is either flat or down.

Since 2015, Australian traditional media companies have written down the value of their assets by US$4 billion in total, according to Thomson Reuters data.

A spokeswoman for Communications Minister Mitch Fifield said he still hoped to win over crossbenchers. Reuters

12 Business Daily Monday, June 5 2017

Asia Politics

S.Korea’s President struggles to form a cabinet meeting his ethics standards On Thursday, the appointment of a senior Blue House aide was withdrawn due to problems discovered during the vetting process Se Young Lee and Christine Kim

S

outh Korean President Moon Jae-in’s quest for a squeakyclean government is leading to delays in forming his cabinet more than three weeks into office, as efforts to find candidates free of even the slightest of ethics issues have proved challenging.

In an attempt to make a clean break with his predecessor Park Geun-hye, impeached and ousted over a corruption scandal in March, Moon vowed to bar, “without exceptions”, those who abused their powers to benefit themselves or family members from public jobs.

But the push has come at a cost: Key jobs including defence and unification ministers remain unnamed, while opposition lawmakers have raised ethics issues over several nominees soon after they were named and promised a tough grilling in parliament. Prime Minister Lee Nak-yon remains the only cabinet member confirmed so far to start the job.

That is frustrating an administration that wants to jump on major crises, such as a growing threat from North Korea, as it is being forced to extend an uneasy cohabitation with holdovers from Park’s former administration.

A sign of stress emerged on Wednesday, when Moon’s office accused the defence

ministry, headed by a Park appointee, of deliberately not telling the new administration that four more launchers for a controversial U.S. anti-missile system had already been deployed.

“Considering eight months’ worth of political vacuum created by the (corruption scandal), further delays in the appointments will be problematic,” a senior government official said, declining to be identified as he was not authorised to speak publicly on the matter.

‘Excessive standards’

Kim Man-heum, head of the Korea Academy of Politics and Leadership, said Moon’s administration “hamstrung itself because the candidates can’t meet the excessive standards that were set.”

“In comparison with the past, the current slate of candidates put forward by Moon is less problematic: aside from personal ethics, there is no case of a friend of the president or some clearly unqualified person being named,” Kim said.

On Thursday, the appointment of a senior Blue House aide was withdrawn due to problems discovered during the vetting process. Officials of the presidential office declined to elaborate.

Prime Minister Lee narrowly won parliamentary approval earlier last week after he admitted and apologise for his wife - a former

Moon Jae-in, President of South Korea

teacher - for falsifying her place of residence in order to work at a preferred school district in Seoul.

Kim Sang-jo, the nominee to head the Korea Fair Trade Commission and a key architect of Moon’s policy to reform South Korea’s family-run conglomerates, as well as foreign minister designate Kang Kyung-wha, also face accusations of falsely registering a place of residence for family members.

Both Kim and Kang have said they are fully ready to explain their actions during hearings.

Parliament gauntlet

Though parliament only has the right to confirm or reject a prime minister, other cabinet

nominees have mandatory hearings at which lawmakers can try to knock them out by digging up improper or illegal practices involving them or family members.

During the Park presidency, her first defence minister nominee withdrew after being accused of real estate speculation, improper lobbying over defence contracts and underreporting his assets. An education minister nominee also took himself out of consideration after allegations of plagiarism emerged.

An ethics controversy also tripped up former UN chief Ban Ki-moon in his quest for the presidency. Ban bowed out of the race in February following bribery scandals

involving his brother and a nephew in the United States.

Moon pledged to avoid such problems by not hiring anyone who is linked to one of what he called five major improprieties: tax evasion, real estate speculation, falsifying residence, plagiarism and draft-dodging.

The main opposition party is using Moon’s own words against him.

“We will be more thorough and strict in the upcoming hearings for senior public officials; when we need to fight, we will fight.” Chung Woo-taik, acting chairman of the conservative Liberty Korea Party, said on Thursday.

The party, which controls 107 seats at the 299-member National Assembly, opposed Lee for prime minister and boycotted his confirmation vote last week.

Moon made a public apology for the controversies surrounding his early nominees, saying his administration started without a proper transition period and did not have time to thoroughly vet candidates. He pledged to stick by his ethics principles for future hiring.

But experts say high ethics standards will have to be balanced with ability in order to break the appointment gridlock. Most potential candidates likely lived through years when many of the practices now scorned by the public were common or accepted, said Kim Sang-jin, a political science professor at Konkuk University.

“I am not certain whether anyone in public office today can actually meet all the criteria being required,” Kim said. Reuters

Oil industry

Asia gasoline outshines jet fuel, diesel as supply shrinks Indonesia’s state-owned Pertamina is seeking 280,000 barrels of 88-octane and 98-octane grade gasoline for June loading from Singapore or Malaysia Seng Li Peng

Asian gasoline profit margins have recently surged to overtake diesel and jet fuel margins as upcoming refinery maintenance in Indonesia and Vietnam will cut supply in the region.

Gasoline’s premium to benchmark Dubai crude oil averaged US$11.22 a barrel in May, outpacing the May average premiums for jet fuel at US$10.50 and gasoil at US$10.08, according to Reuters calculations using data on Thomson Reuters Eikon.

The strength in gasoline should continue at least until the middle of the third quarter, said oil analyst Nevyn Nah of consultancy Energy Aspects.

This is due to the refinery maintenance in Indonesia and Vietnam,

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Asia’s two largest gasoline importers, as well as the prolonged shutdown of a gasoline unit in Ruwais refinery in United Arab Emirates (UAE) after a fire in January.

As a result of Ruwais shutdown, Abu Dhabi National Oil Co (ADNOC) had to seek more than 1.5 million tones of gasoline for March to December delivery to plug the supply gap.

“Gasoline is the strongest product now in Asia in terms of crack and time spreads. After lackluster Indonesian buying in second-quarter, they are back for June spot barrels,” said oil analyst Nevyn Nah of consulting firm Energy Aspects.

Indonesia’s state-owned Pertamina is seeking 280,000 barrels of 88-octane and 98-octane grade gasoline for June loading from Singapore or Malaysia.

This came shortly after it had

concluded a term deal for up to 6.25 million barrels of 88-octane gasoline per month for July to December delivery.

Gasoline may rise and fall relative to its oil product peers but it should perform well overall for refiners for the next few years.

“We expect Asian demand (gasoline) growth to continue with higher grades of motorization, in particular in key countries such as China and

India, while refineries will struggle to cope with the demand growth,” said Cuneyt Kazokoglu, Head of Oil Demand at consulting firm FGE. “Until 2022, we expect total Asian gasoline consumption to rise by 1.2 million barrels per day (bpd) while refinery production will grow by about 700,000 bpd only.”

“By 2025, Asia will be net short of 1 million bpd (of gasoline),” he added. Reuters

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Business Daily Monday, June 5 2017 13

Asia In Brief Survey

Japan LNG buyers boost trading operations Japan’s biggest buyers of liquefied natural gas (LNG) are boosting trading offices for the fuel at home and overseas as they deal with excess supplies, a Reuters survey showed. Japan is the world’s biggest buyer of LNG and takes in about one-third of global shipments. Many of the country’s buyers have too much supply under contract but have won more flexible terms that allow them to resell cargoes to third parties. Japanese trading houses are also boosting their operations in anticipation of more supplies flowing into Asia as Australian and U.S. LNG projects start up in the coming years.

Central bank

Bank of Japan’s balance sheet tops 500 trillion yen It almost matches the US$4.51 trillion held by the U.S. Federal Reserve Hideyuki Sano

The Bank of Japan (BOJ) hit a new milestone as its balance sheet topped 500 trillion yen (US$4.48 trillion), roughly the same size as that of the Federal Reserve, having more than tripled since it started aggressive stimulus in 2013.

The massive size of the BOJ’s money printing, however, has barely moved it nearer to its ultimate policy goal of lifting inflation to 2 per cent, highlighting the difficulty the central bank is facing as the pace of its bond buying appears unsustainable.

The BOJ’s bloated balance sheet would also complicate a future withdrawal of stimulus as any rise in bond yields sparked by expectations of monetary tightening could expose its huge bond holdings to losses, some analysts say.

Data from the BOJ showed its total assets rose to 500.8 trillion yen at the end of May, compared to 425.7 trillion yen a year earlier. It was 164.8 trillion yen when Governor Haruhiko Kuroda took the helm in March 2013.

The BOJ’s balance sheet almost matches the US$4.51 trillion held by

the U.S. Federal Reserve and amounts to more than 90 per cent of Japan’s gross domestic product (GDP), by far the highest ratio among the world’s top four central banks.

Nonetheless even with years of massive liquidity support and signs of labour shortages in recent months, inflation stood at 0.3 per cent and is expected to remain well below 2 per cent for the foreseeable future.

Key Points BOJ balance sheet on par with Fed, more than 90 pct of Japan GDP Increase in JGB holding slows to 71 trln yen, below 80 trln yen target Huge balance sheet to make future exit difficult Slowly improving economic growth has been largely reliant on a recovery in exports and global demand, with domestic consumer spending remaining stubbornly weak.

“At the moment, the world’s advertisement

economy is in pretty good shape.

As long as they have that tailwind, maybe there will be some progress little by little. But if the wind stops, there’s no traction,” said Takehiro Noguchi, senior economist at Mizuho Research Institute.

“In a way, the BOJ is a like a yacht without an engine. It can advance only when there is a wind.”

Bond-buying limits

After three years of heavy asset buying failed to drive up inflation, the BOJ revamped its policy framework last year to one capping long-term interest rates from that targeting the pace of money printing.

BOJ chief Kuroda has repeatedly said the central bank still had plenty of bonds to buy, and that it was premature to openly debate an exit strategy from the stimulus programme.

But buying large amounts of Japanese government bonds is expected to become increasingly difficult as the central bank already owns more than 42 per cent of the entire JGB market.

Indeed the data also showed the pace of the increase in BOJ’s JGB has slowed considerably in recent months.

At the end of May, its holding was up 70.7 trillion yen from a year earlier, more than 10 per cent below the BOJ’s official guideline of an annual increase of 80 trillion yen and the slowest pace of increase in more than two years.

Most analysts expect the BOJ to slow the pace further to around 60 trillion yen by the end of year and to omit its pledge to increase its JGB holding by 80 trillion yen a year from its policy statement at some point.

BOJ officials say any slowdown in the bank’s bond buying won’t constitute monetary tightening as its dominance in the market allows it to cap bond yields with fewer purchases.

But removing the bond-buying pledge could face resistance from advocates of aggressive money printing in the nine-member board, including from the likes of Yutaka Harada, who stressed on Thursday the need to maintain a commitment on bond purchases.

“Maintaining the guidance is important as it instils confidence among markets” that the BOJ will keep buying bonds heavily when a negative shock hits the economy, he said. Reuters

Health

South Korea raises bird flu alert South Korea said on Saturday it will raise the bird flu alert level to the second highest after small flocks of farm birds tested positive for the H5N8 virus, the first in the country since early April.

Asia’s fourth-largest economy has been hit hard by the spread of the highly contagious avian influenza since the first case in the recent outbreak was confirmed in November last year, prompting the country to cull nearly 38 million farm birds, or over a fifth of its total poultry population.

M&A

State Bank of India head says Essar-Rosneft deal to close in June A US$13 billion takeover by Russian oil major Rosneft of India’s Essar Oil should close this month after delays caused by debts to Indian lenders, the head of State Bank of India (SBI) said on Friday, adding she had “more or less” approved the deal. “There is a very real possibility this deal will close shortly and we expect to see this happening very soon,” Arundhati Bhattacharya, the chairman of India’s largest bank by assets, told Reuters on the sidelines of the St Petersburg International Economic Forum.

Tourism

Indonesia’s April foreign arrivals up Indonesia attracted 966,936 foreign tourists in April, up 19.2 per cent from a year earlier, the statistics bureau said on Friday. That was a faster pace than the 12.8 per cent annual rise in arrivals in March. The total number of visitors in April, including those passing through Indonesia’s borders from neighbouring countries and foreign workers with permits for less than one year, was 1.14 million, up 26.75 per cent from the same month of 2016.

14 Business Daily Monday, June 5 2017

International In Brief OPEC

Saudi’s Falih says more oil output cuts possible Saudi Energy Minister Khalid al-Falih said further oil output cuts could be needed in the future but that OPEC and other leading producers would assess the market situation in July, Russia’s TASS news agency reported on Saturday. The Organization of the Petroleum Exporting Countries (OPEC) and other nations led by Russia agreed last week to extend a deal to limit global oil output for a further nine months, until March 2018. A committee set up to monitor the cuts is set to meet in Russia in July.

U.S. biz

Trump administration concerned about financial “lifeline” to Venezuela The Trump administration is concerned about any action by U.S. companies that provides a financial lifeline to Venezuela’s government, senior White House officials told Reuters, after Goldman Sachs Group Inc came under fire for purchasing US$2.8 billion of state oil company bonds at a steep discount.

Venezuela’s political opposition and some U.S. lawmakers have condemned the purchase of so-called “hunger bonds” as a way to prop up President Nicolas Maduro’s cash-strapped government, accused of being behind food shortages affecting millions of Venezuelans in a worsening crisis.

Survey

British PM May’s election gamble in doubt British Prime Minister Theresa May’s gamble on a June 8 snap election was thrust into doubt after a Survation poll showed her Conservative Party’s lead had dropped to a new low of just one percentage point.

While British pollsters all predict May will win the most seats in Thursday’s election, they have given an array of different numbers for how big her win will be, ranging from a landslide victory to a much more slender win without a majority.

Some of the polls indicate the election could be on a knife edge that would throw Britain into political deadlock just days before formal Brexit talks on June 19.

Protectionism

Egypt tightens rules on importers Egypt’s Trade Ministry has issued tough new regulations on importers by sharply raising the minimum capital they need to operate, the government’s latest effort to curb foreign-made goods and spur local manufacturing. Under the ministry’s executive regulations, the minimum capital required for the smallest companies to register was hiked to 500,000 Egyptian pounds (about US$28,000) from 10,000 pounds previously. For limited companies, the minimum threshold was raised to two million pounds from 15,000 pounds previously.

Environment

World pledges to save ‘Mother Earth’ despite Trump’s snub to climate pact China and EU leaders committed to full implementation of the Paris deal Thomas Escritt and Philip Blenkinsop

C

hina and Europe pledged to unite to save what German Chancellor Angela Merkel called “our Mother Earth”, standing firmly against President Donald Trump’s decision to take the United States out of the Paris climate change pact.

Trump’s move was “a big mistake”, said Donald Tusk, one of the European Union’s top officials.

Other countries, including India, signalled their commitment to the accord. Russian President Vladimir Putin said that while the United States should have remained in the 2015 deal, he would not judge Trump.

Trump announced the withdrawal on Thursday, tapping into his “America First” campaign theme. He said participating in the pact would undermine the U.S. economy, wipe out jobs, weaken national sovereignty and put his country at a permanent disadvantage.

Members of his administration, including Vice President Mike Pence and Environmental Protection Agency chief Scott Pruitt, said on Friday that the Paris deal put an extraordinary burden on the United States.

“It was a transfer of wealth from the most powerful economy in the world to other countries around the planet”, Pence said on television.

There was a mix of dismay and anger across the world.

France said it would work with U.S. states and cities to keep up the fight against climate change. The governors of New York, California and Washington State have announced creation of a “climate alliance” committed to the Paris goals.

Germany’s powerful car industry said Europe would need to reassess its environmental standards to remain competitive after the “regrettable” U.S. decision.

The World Meteorological Organization estimated that U.S. withdrawal from the emissions-cutting accord could add 0.3 degrees Celsius to global temperatures by the end of the century in a worst-case scenario.

Germany’s Merkel, a pastor’s daughter who is usually intensely private about her faith, said the accord was needed “to preserve our Creation”.

“To everyone for whom the future of our planet is important, I say let’s continue going down this path so we’re successful for our Mother Earth”, she said to applause from lawmakers.

In Paris, French President Emmanuel Macron turned Trump’s “Make America Great Again” campaign slogan on its head, saying in a rare English-language statement that it was time to “make the planet great again”.

China and Europe together

At a long-planned meeting on Friday between Chinese Premier Li Keqiang and European Union officials in Brussels, the leaders pledged full implementation of the Paris deal.

They committed to cutting fossil fuels use, developing more green technology and raising funds to help poorer countries reduce emissions.

China, the world’s largest polluter, has emerged as Europe’s unlikely partner in this and other areas as Trump has isolated the United States on many issues.

Tusk said Europe was “stepping up our cooperation on climate change with China... We are convinced that yesterday’s decision by the United States to leave the Paris Agreement is a big mistake.”

Earlier, European Commission President Jean-Claude Juncker said: “There is no reverse gear to energy transition. There is no backsliding on the Paris Agreement”.

Warm words

The vast majority of scientists believe global warming is mainly the result of human activities including power generation, transport, agriculture and industry.

A small group of sceptics, some of them in the White House, believe the Paris pact threatened business.

Trump once called climate change a hoax. Pruitt declined to tell reporters at the White House whether Trump now believes it is real and threatens the country. Pruitt’s own view, he said, is that human activity contributes to climate change, but measuring how much is “very challenging”.

Secretary of State Rex Tillerson, former CEO of Exxon Mobil Corp, had supported staying in the pact. He said the United States will continue efforts to reduce its emissions.

“It was a policy decision and I think it’s important that everyone recognise the United States has a terrific record on reducing our own greenhouse gas emissions,” Tillerson told reporters.

A number of figures from U.S. industry expressed their dismay at Trump’s move.

Jeff Immelt, chief executive officer of U.S. conglomerate General Electric, tweeted: “Climate change is real. Industry must now lead and not depend on government.”

Tesla Inc CEO Elon Musk, and Walt Disney CEO Robert Iger said they would leave White House advisory councils after Trump’s move.

German industry associations warned that Trump’s decision would harm the global economy and lead to market distortions.

Key Points Global dismay at Trump’s pullout of U.S. from Paris accord Putin more nuanced in support of pact China and EU agree to join forces against global warming France will work with U.S. states, cities to preserve pact Germany’s Merkel says “Mother Earth” must be saved

Germany’s DIHK Chambers of Commerce and VDMA engineering industry group said U.S. companies could gain short-term advantages by Trump’s decision.

“Climate protection can be pushed forward in an effective and competition-friendly way only by all states,” said DIHK President Eric Schweitzer.

Trump’s top economic adviser, Gary Cohn, said on television the withdrawal would help keep U.S. energy markets competitive, allowing for a potential for coal. But coal industry officials have said the sector hopes only to slow the economic bleeding that has come with a glut of cheaper and natural gas.

On Thursday, the Sierra Club, an environmental group, was scathing about Trump’s endorsement of what he regards as clean coal.

It tweeted: “Clean coal, you can find that next to the unicorns and leprechauns.” Reuters

Business Daily Monday, June 5 2017 15

Opinion Business Wires

The Times of India As part of its efforts to keep prices under check after the introduction of the goods and services tax (GST), the finance ministry is working out the possible price of 2,000-2,500 commonly used goods and services after the launch of the new regime and comparing them with current prices. Sources told TOI that the data is expected to be released later this month and will cover major cities. “We cannot go down to the level of small towns and rural areas, but the price chart will be indicative,” a senior officer told TOI.

Juana Vasquez (R), of New York, holds a sign supporting U.S. President Donald J. Trump and his administration’s recent decision to drop out of the Paris Climate Accord during a rally on Fifth Avenue near Trump Tower in New York on Saturday. Lusa

Trump’s rogue America

Bangkok Post More than 360 events and trade shows are scheduled to be held in Thailand in the second half of the year, attracting 180,000 business visitors, says the head of the bureau for meetings, incentives, conventions and exhibitions (MICE). Of the total, 75 per cent will be international conferences and trade exhibitions, said Chiruit Isarangkun Na Ayuthaya, president of the Thailand Convention and Exhibition Bureau (TCEB). Over 60 per cent of them will take place in Bangkok and the rest in Pattaya, Phuket and Chiang Mai. “We expect to welcome 180,000 business travellers for 360 events in the second half,” Mr Chiruit said.

The Korea Herald South Korea’s latest economic gains do not indicate that the country’s financial condition is on a firm track, as the increases can be attributed to investment in the construction sector and not improvements in private consumption, a research showed yesterday. Hyundai Research Institute said in a report that South Korea’s economic growth depends excessively on construction, while private consumption, which takes up 50 per cent of the country’s gross domestic product, only had a limited impact on the growth in the first quarter.

D

onald Trump has thrown a hand grenade into the global economic architecture that was so painstakingly constructed in the years after World War II’s end.

The attempted destruction of this rules-based system of global governance – now manifested in Trump’s withdrawal of the United States from the 2015 Paris climate agreement – is just the latest aspect of the U.S. president’s assault on our basic system of values and institutions.

The world is only slowly coming fully to terms with the malevolence of the Trump administration’s agenda. He and his cronies have attacked the U.S. press – a vital institution for preserving Americans’ freedoms, rights, and democracy – as an “enemy of the people.” They have attempted to undermine the foundations of our knowledge and beliefs – our epistemology – by labelling as “fake” anything that challenges their aims and arguments, even rejecting science itself. Trump’s sham justifications for spurning the Paris climate agreement is only the most recent evidence of this.

For millennia before the middle of the eighteenth century, standards of living stagnated. It was the Enlightenment, with its embrace of reasoned discourse and scientific inquiry, that underpinned the enormous increases in standards of living in the subsequent two and a half centuries.

With the Enlightenment also came a commitment to discover and address our prejudices. As the idea of human equality – and its corollary, basic individual rights for all – quickly spread, societies began struggling to eliminate discrimination on the basis of race, gender, and, eventually, other aspects of human identity, including disability and sexual orientation.

Trump seeks to reverse all of that. His rejection of science, in particular climate science, threatens technological progress. And his bigotry toward women, Hispanics, and Muslims (except those, like the rulers of Gulf oil sheikhdoms, from whom he and his family can profit), threatens the functioning of American society and its economy, by undermining people’s trust that the system is fair to all.

As a populist, Trump has exploited the justifiable economic discontent that has become so widespread in recent years, as many Americans have become downwardly mobile amid soaring inequality. But his true objective – to enrich himself and other gilded rent-seekers at the expense of those who supported him – is revealed by his tax and healthcare plans.

Trump’s proposed tax reforms, so far as one can see, outdo George W. Bush in their regressivity (the share of the benefits that go to those at the top of the income distribution). And, in a country where life expectancy is already declining, his health-care overhaul would leave 23 million more Americans without health insurance.

While Trump and his cabinet may know how to make business deals, they haven’t the slightest idea how the economic system as a whole works.

If the administration’s macroeconomic policies are implemented, they will result in a larger trade deficit and a further decline in manufacturing.

America will suffer under Trump. Its global leadership role was being destroyed, even before

“

Joseph E. Stiglitz a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute

Trump broke faith with over 190 countries by withdrawing from the Paris accord. At this point, rebuilding that leadership will demand a truly heroic effort. We share a common planet, and the world has learned the hard way that we have to get along and work together. We have learned, too, that cooperation can benefit all.

So what should the world do with a babyish bully in the sandbox, who wants everything for himself and won’t be reasoned with? How can the world manage a “rogue” U.S.?

Germany’s Chancellor Angela Merkel gave the right answer when, after meeting with Trump and other G7 leaders last month, she said that Europe could no longer “fully count on others,” and would have to “fight for our own future ourselves.” This is the time for Europe to pull together, recommit itself to the values of the Enlightenment, and stand up to the U.S., as France’s new president, Emmanuel Macron, did so eloquently with a handshake that stymied Trump’s puerile alpha-male approach to asserting power.

Europe can’t rely on a Trump-led U.S. for its defence. But, at the same time, it should recognize that the Cold War is over – however unwilling to acknowledge it America’s industrial-military complex may be. While fighting terrorism is important and costly, building aircraft carriers and super fighter planes is not the answer. Europe needs to decide for itself how much to spend, rather than submit to the dictates of military interests that demand 2 per cent of GDP. Political stability may be more surely gained by Europe’s recommitment to its social-democratic economic model.

We now also know that the world cannot count on the U.S. in addressing the existentialist threat posed by climate change. Europe and China did the right thing in deepening their commitment to a green future – right for the planet, and right for the economy. Just as investment in technology and education gave Germany a distinct advantage in advanced manufacturing over a U.S. hamstrung by Republican ideology, so, too, Europe and Asia will achieve an almost insurmountable advantage over the U.S. in the green technologies of the future.

But the rest of the world cannot let a rogue U.S. destroy the planet. Nor can it let a rogue U.S. take advantage of it with unenlightened – indeed anti-Enlightenment – “America first” policies. If Trump wants to withdraw the U.S. from the Paris climate agreement, the rest of the world should impose a carbon-adjustment tax on U.S. exports that do not comply with global standards.

The good news is that the majority of Americans are not with Trump. Most Americans still believe in Enlightenment values, accept the reality of global warming, and are willing to take action. But, as far as Trump is concerned, it should already be clear that reasoned debate will not work. It is time for action. Project Syndicate

The rest of the world cannot let a rogue U.S. destroy the planet

Philstar The Philippine Exporters Confederation Inc. (Philexport) has lauded an “enhanced value-added tax (VAT) refund system” for export sales as proposed in the comprehensive tax reform package approved at the Lower House. In a statement, the umbrella organization of Philippine exporters said it is pleased with the system as provided under House Bill 5636 which was approved on third and final reading in the House of Representatives last week. Under this refund scheme, Philexport said exporters must be given their actual refund or informed of the denial of their application for refund within 90 days of the filing of the VAT refund application.

”

16 Business Daily Monday, June 5 2017

Closing Security

Southeast Asian defense chiefs sound alarm on terrorism threat Australian Prime Minister Malcolm Turnbull and U.S. Defense Secretary James Mattis each called for greater anti-terror efforts in speeches otherwise preoccupied by regional strategic competition David Tweed and Jason Koutsoukis

S

outheast Asian defense officials are urging greater regional security cooperation to counter what they say is the growing threat of Islamic State-linked extremists.

The need to contain terrorist activity in the region was a common refrain among the defense ministers and top brass at the three-day Shangri-La Dialogue in Singapore, Asia’s most high-profile security conference. The host country’s defense chief, Ng Eng Hen, warned yesterday that terrorism was the region’s “biggest security concern” and said the potential of Islamic State fighters returning was growing as they lose ground in the middle east.

The warnings came amid condolences for the UK as news reports rolled in about the latest terrorist attack in London. Philippines Defense Secretary Delfin Lorenzana was not at the summit, electing to stay home after President Rodrigo Duterte declared martial law to fight Islamic State-linked militants in the southern city of Marawi.

“Even as this conference ensued, events are unfolding in Marawi and London,” Ng said. “The ferocity of attacks in the UK, as recently as yesterday, and European countries, even when conducted by single individuals or small groups, are a grim reminder

of the harm our citizens are exposed to, if ISIS-related or -inspired attacks occur here.”

At least 31 regional groups have pledged alliance to the Islamic State, Ng said, and there was evidence of growing transnational cooperation between them.

“Even as this conference ensued, events are unfolding in Marawi and London” Ng Eng Hen, Singapore’s defense chief

Fierce debate

The agreement on the need for new action to fight terrorism stood in contrast with fierce debate at the Shangri-La Hotel over how to handle things like the Trump presidency, China’s rise and North Korea’s nuclear weapons program. Australian Prime Minister Malcolm Turnbull and U.S. Defense Secretary James Mattis each called for greater anti-terror efforts in speeches otherwise preoccupied by regional strategic competition.

Those sentiments were echoed

by defense officials from Indonesia, Malaysia and the Philippines, who worry militants might use the southern Philippine island of Mindanao as a springboard. Philippine Undersecretary for Defense Policy Ricardo David said 250 to 400 foreign fighters were believed to be operating in the country.

“The terrorism threat in this region has evolved into an unprecedented immediate level of emergency,” said Ryamizard, whose capital, Jakarta, was struck last month by twin suicide attacks that killed three police officers. “The death group’s area of operation has gone global.”

Ryamizard called for expanding anti-piracy patrols initiated in August by Indonesia, Malaysia and the Philippines near Mindanao to include

Singapore and Thailand and focus on terrorism. President Joko Widodo has called on lawmakers to expedite the passage of revised anti-terrorism laws to give police more power.

While Ryamizard estimated there were as many as a million Islamic State sympathizers in the world’s most populous Muslim-majority nation, he said he believed that fewer than 700 were a “real problem.”

The broader Southeast Asian region is home to about 15 percent of the world’s 1.57 billion Muslims. “ P o r o u s b o r d e rs a n d d e n s e jungles provide easy access and safe havens for terrorism training camps,” Ng told the conference.

“If these groups further entrench themselves in our region, more attacks will occur.” Bloomberg News

Environment

South Korea plans energy U-turn away Asia’s fourth-largest economy gets 70 per cent of its electricity from thermal coal and nuclear reactors Jane Chung

A proposed energy U-turn

by South Korea’s new government would put the environment at the centre of energy policy, shifting one of the world’s staunchest supporters of coal and nuclear power towards natural gas and renewables.

If implemented, the ambitious plans by the world’s fourth biggest coal importer and No.2 liquefied natural gas (LNG) buyer will have a big impact on producers.

South Korea’s LNG imports could jump by more than 50 per cent by 2030, while coal shipments could peak as early as next year.

But experts warn that any move to halt construction of a raft of new coal and nuclear plants, many of which are already being built, could threaten energy security, spark claims for massive compensation and push up electricity prices.

The plan by the new administration of left-leaning President Moon Jae-in which took power in early May would move a notable laggard in renewables towards green energy, responding to public concerns over air

pollution and nuclear safety.

“The government can’t neglect people’s demands and in the long term it’s right to pursue clean and safe energy. But there will be many challenges,” said Sonn Yang-Hoon, Economics Professor at Incheon National University.

S o u t h K o r e a , A s i a’ s fourth-largest economy, gets 70 per cent of its electricity from thermal coal and nuclear reactors, and offers tax benefits to both sectors to ensure abundant electricity at affordable prices.

While Moon’s energy roadmap is still being hashed out, his staff say that care for the environment will play a central role in forming policy.

“Currently taxes are imposed on gas for power generation, and we plan to correct the skewed tax system by seeking to levy environmental taxes on coal and nuclear,” said Paik Ungyu, an energy engineering professor at Hanyang University who advises Moon on energy policy.

The government hopes to boost gas-fired generation from about 18 per cent now to 27 per cent by 2030 and boost the use of renewables, now

mainly hydro, from roughly 5 per cent to 20 per cent, said Paik.

At the same time, coal’s contribution would fall from about 40 per cent to 21.8 per cent and nuclear from 30 per cent to 21.6 per cent, based on power demand growth of 2.2 per cent.

Dramatic shift

A key short-term option is to boost the operating rates of gas-fired power stations from 40 per cent to 60 per cent through the reduction or removal of tariffs on gas imports. Coal and nuclear power are exempt from import tariffs.

The price of gas-fired electricity in March was 129.51 won (US$0.1160) per kilowatt-hour (kWh), 40 per cent

more than coal and nearly double the cost of nuclear power, according to data from Korea Electric Power Corp (KEPCO).

Long-term energy economics favour policy change, with renewable costs falling sharply due to improved technology and LNG prices sliding over 70 per cent from their 2014 peak on a huge supply increase, especially from Australia and the United States.

“If there are no new nuclear and coal plants, the potential LNG imports could be 46-49 million tonnes per annum depending on the success of the renewable targets,” said Chong Zhi Xin, principal Asia LNG analyst at energy consultancy Wood Mackenzie.

Moon this month ordered a temporary halt on 10 old coal-fired power plants and outlined plans to bring

forward their permanent closure.

More controversially, he pledged during his campaign to review existing plans to build nine coal power plants and eight nuclear reactors, including the part-completed Shin Kori No.5 and No.6, citing safety concerns.

Experts estimate up to US$2.7 billion has already been committed on Shin Kori No.5 and No.6 by state-run Korea Hydro & Nuclear Power Corp. Work has also started on the coal plant projects, although all are less than 10 per cent complete.

If forecasts suggest that not building the new plants means South Korea will be unable to meet projected electricity demand, then the government’s pledges won’t be feasible, said Kim Namil, senior research fellow at the Korea Energy Economic Institute The Independent Power Producer Association, which represents the coal and gas industries, estimates that nearly US$2 billion has also been spent on the nine coal-fired plants under threat, raising the issue of compensation.

“The government can’t unilaterally push cancellations as private companies have already invested in the projects. If the government scraps a plan, it would have to compensate properly,” said Yoo Seung-Hoon, energy policy professor at Seoul National University of Science & Technology. Reuters