Business Daily #1311 June 6, 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!

Preview of data for Mainland shows realistic optimism Forecast Page 10

Tuesday, June 6 2017 Year VI Nr. 1311 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Sino-luso trade

Rita Santos takes up position as representative for National Confederation of Services of Brazil in MSAR Page 4

Currency

Deposits by nonresidents drop 4.6 pct in May, external loans up 2.3 pct m-o-m Page 7

www.macaubusinessdaily.com

Forum Macao

Diplomacy

Teresa Mok new coordinator of the Supporting Office to the Permanent Secretariat to Forum Macao Page 3

Saudi Arabia and three other Arab countries cut ties with Qatar Page 16

Watchful eye Society

Still too early to tell. So says Secretary for Economy and Finance on the effect of the reduction of the ratio of mortgage loans.

Keeping an eye on the market is the current status quo, with no new measures to be introduced. Also, the six gaming operators will have to prepare a report on security and reinforce security measures in the wake of the Philippines attack, says Secretary Leong. Page 3

Making do with too little

A will and a way

Coupling gov’t support with more venture capital will be key to changing the city’s business environment, but hinges on the mindset and education of local entrepreneurs, says CEO of startup incubator Founder Space, Steven Hoffman.

Understanding the scalability of businesses and taking advantage of online education, will both be needed to grow the economy.

Culture Although plans are ready for phase two of the Macau Design Centre, it’s been tabled as ‘the gov’t thinks it is not the best time yet’, says member of the board of directors James Chu. Shortages of labour will hamper expansion, but without following international models, in which gov’ts finance design centres fully, studios will continue to be fully occupied, with those on the waiting list missing out. Page 2

Chinese services come back

Entrepreneurs Page 2

HK Hang Seng Index June 5, 2017

25,862.99 -61.06 (-0.24%) Worst Performers

China Shenhua Energy Co

+2.72%

China Mengniu Dairy Co Ltd

+0.63%

Hang Lung Properties Ltd

-1.69%

BOC Hong Kong Holdings

-1.13%

Wharf Holdings Ltd/The

+1.75%

Tencent Holdings Ltd

+0.59%

China Life Insurance Co Ltd

-1.58%

Industrial & Commercial

-1.11%

Geely Automobile Holdings

+1.55%

CNOOC Ltd

+0.56%

Want Want China Holdings

-1.40%

CK Hutchison Holdings Ltd

China Unicom Hong Kong

+1.43%

China Resources Power

+0.50%

CLP Holdings Ltd

-1.18%

Bank of China Ltd

China Resources Land Ltd

+0.66%

New World Development

+0.50%

Sands China Ltd

-1.14%

AAC Technologies Holdings

-1.08% -1.01% +0.00%

27° 30° 27° 31° 27° 30° 27° 30° 27° 30° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Private poll The PMI Services index rose to interrupt a four-month decline. It also supposed the highest reading since January. After disappointing data in the secondary sector last month, the results point to an increasingly strong sector. Page 8

2 Business Daily Tuesday, June 6 2017

Macau Economy

The power of the mind CEO of a startup incubator and accelerator based in the U.S. perceives that local entrepreneurs can make a difference by changing their mindsets, in addition to receiving support from the gov’t Cecilia U cecilia.u@macaubusinessdaily.com

C

hanging the education and mindset of local entrepreneurs, accompanied by increased venture capital and support from the government, will be key to changing the local business environment, according to Steven Hoffman, CEO of Founder Space, a company based

in the United States, which aims to educate and accelerate entrepreneurs and intrapreneurs.

“Macau is having the same challenge as in Las Vegas, with the gaming industry dominating the city’s economy,” said Hoffman, adding that many potential businesspeople in the city take up jobs in casinos, becoming less proactive in their own businesses, which could potentially benefit the MSAR.

Hoffman perceives that local SMEs are good for Macau, but the potential of transforming the economy is limited, given the culture in the city, as well as the thinking of young entrepreneurs currently being limited.

“The problem is that these entrepreneurs limit their thinking. They think small. They think ‘all around me is small business and this is all I can do, I can’t go beyond this’,” commented Hoffman.

Given his group’s experience in cooperating with entrepreneurs around the world, Hoffman indicated that a similar problem is present in many parts of the world, and that the most useful tool that can be used in growing a business, according to the CEO,

is the Internet.

“The Internet has all the knowledge everyone can have in the world, and is the same Internet we use in Silicon Valley, the same Internet used in Germany or in Japan [...] they have all of the knowledge in the world right here in Macau,” remarked Hoffman.

With support from the government and support from people like himself, who train entrepreneurs, opines the expert, small businesses have the potential to become big businesses.

“They just have to try”

The CEO remarked that entrepreneurs have to understand the type of businesses that will grow slowly, those that can be a small business, and the type that have the potential to grow rapidly and become large businesses, noting the importance of being aware of the opportunities that are available.

Regarding the city’s development, according to Hoffman, Macau would fall into a tier two or tier three city category, achieving tier one status for gambling and tier two or tier three for all other industries.

“If one wants to grow its economy, it has the same problems that a lot of the tier two and tier three cities in China have,” commented the CEO. Nonetheless, Hoffman believes that local entrepreneurs will be able to succeed, on the condition that “the government [can] provide the pathway to entrepreneurs to be trained to enter the Chinese market or U.S. market with their products, or Southeast Asia”.

He also suggested that education in the city needs to evolve, in addition to working to attract more venture capital and constructing relationships and pathways to bigger markets.

“Entrepreneurs can do that anywhere in the world, there’s no reason that they [Macau] can’t do it here, as opposed to any cities in China,” said Hoffman.

Culture

Fighting alone The Macau Design Centre is fully occupied, however even with a second phase under planning, a shortage of labour and funding is challenging the project housing the MSAR’s young entrepreneurs Cecilia U cecilia.u@macaubusinessdaily.com

“The government granted us less than MOP3 million (US$373,800) last year,” revealed James Chu, member of the board of directors of the Macau Design Centre (MDC), a four-storey rent-controlled building located in the Areia Preta district, and home to many of the MSAR’s young entrepreneurs.

Despite being the first innovative multi-functional building designed to promote Macau’s cultural and creative industries, Chu said the support offered by the government to the project is very limited.

“Governments outside of Macau would build and wholly support design centres. It is only in Macau that a design centre is operated by private entrepreneurs,” said Chu, adding that the amount given by the government for the entire year would only be able to support a few employees working at the centre.

Being revitalised into a multi-functional design centre, MDC offers various forms of business co-operation together with design galleries, an exhibition hall, design studios, a bookstore, performance venue, café and rooftop garden.

Approaching its third year of operations, Chu disclosed that the demand for studios in the centre, which are being rented out to companies to operate their businesses from, is constant.

“Our studios have high demand and are constantly occupied,” Chu said.

“Initially we offered 17 studios, but later expanded to 25, having 50 to 60 companies wanting to rent when the additional studios were introduced.”

The director said the centre had expressed to the government its desire to have a second location for a phase two, but lamented that: “the

government thinks it is not the best time yet”.

However, even with a plan for phase two, Chu said a shortage of labour would be a great challenge for its expansion.

Regarding the condition of the industry, Chu opined that the creative industry in Macau is experiencing positive growth, but with a ceiling.

“In the past two years we can see that our quality [of skills and products] is high,” said Chu, noting that the limited support from the government reduces the opportunities for local companies to compete with neighbouring regions, or to expand their businesses.

Safeguarding the industry

The director of the centre said the

establishment of the centre is to safeguard the industry and to create a healthy business environment.

“More often than not, clients would ask our companies to produce a design before paying, even the government always favours the provider who offers the lowest price, as well as the problem of intellectual property” indicated Chu. “We wish to create the environment that is healthy for the industry.”

Chu commented that services provided by the companies are professional, such as having photographers who are constantly working with integrated resorts, while remarking that most local small entrepreneurs are not aware of the high quality of services and products that are provided by these companies.

Local artists Ari Calangi (L) and Eunice Wong (R) perform at the Macau Design Centre for the launch of album Humanize

Business Daily Tuesday, June 6 2017 3

Macau Real estate

Keeping an eye on it New mortgage loan reductions for real estate purchases have not yet produced visible results in the market, says Secretary for Economy and Finance Nelson Moura nelson.moura@macaubusinessdaily.com

I

t is still too soon to say if the reduction of the ratio of mortgage loans has had a negative or positive impact on the market, the Secretary for Economy and Finance, Lionel Leong Vai Tac said yesterday.

“It has been a short time since the measure was implemented and we’re still gathering different information from the market. We will keep our eye on the market to see if the new measures are performing as we expected and to make sure the property market is going towards a healthy situation,” the Secretary said.

In May of this year, the government announced several reductions to the ratio of mortgage loans for residents looking to purchase real estate for the second time.

Lead by example

The new measures enforced changes such as reducing mortgage loan coverage for buyers of residential units costing up to MOP3.3 million (US$411,107) from 90 per cent to 70 per cent, while the coverage for purchasing a second residential property costing over MOP8 million was reduced from 50 per cent to 40 per cent.

According to Secretary Leong, so far no difficulties or obstacles have been registered in the implementation of the new measures.

“We will adjust the measures according to the market situation and the population capacity for purchasing real estate. For now, no new measures will be introduced” he added.

Gaming operators to reinforce security measures

Secretary Leong also stated that after the casino attack in the capital of the

The Secretary also said that he hoped other departments could implement the same measures his department has introduced to increase the transparency of service procurement contracts.

Previously, the Secretary announced that his department had started to publish online information pertaining to any service contract provided by his department for an amount

above MOP750,000 (US$93,526) and construction contracts over MOP2.5 million.

“We hope our colleagues from other departments can also apply these methods. We’re the pilot case and we will regulate this information to make it more transparent to the public. If making this information public is advantageous for service works, I think more departments will adopt this measure,” he added.

The Secretary for Economy and Finance also considered that the double digit gaming revenue increase in May wasn’t a real sign of the recovery of Macau’s economy, since the increase was primarily due to the low results registered last year.

Gross gaming revenues in May of this year went up by 23.7 per cent

year-on-year to MOP22.74 billion (US$2.83 billion), according to DICJ data.

“To see if Macau’s economy is entering a good phase or slowing down, we can’t just look at the gaming sector numbers. Our GDP has increased 10.3 per cent, while the service, tourism and export sectors have also increased,” he said.

Portuguese-speaking countries

Teresa Mok Iun Lei new coordinator of the Supporting Office to the Permanent Secretariat to Forum Macao Teresa Mok Iun Lei yesterday assumed her new role as the new coordinator of the Supporting Office to the Permanent Secretariat to the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao).

Ms. Mok will be responsible for assisting in Forum Macao activities such as commercial promotions, human

resources training, language, and cultural exchanges.

The new appointee has worked for the MSAR public sector for almost 30 years, having held management positions at the Statistics and Census Service (DSEC) between 1995 and 2007, and at the Macau Productivity and Technology Transfer Centre (CPTTM) from 2007 until now. N.M.

Philippines, the Public Security Police Force (PSP) and the Judiciary Police (PJ) consider that local casinos require a reinforcement of security measures.

The attack on Sunday involved a lone gunman and was carried out on Resorts World Manila integrated resort in the Philippines capital, resulting in 36 casualties.

Initially believed to be a religiously motivated terrorist attack, Philippine authorities later revealed the attacker was a heavy gambler with a considerable level of debt, according to the New York Times.

“The security situation in casinos is not that serious, but the recent events will demand that casinos and gaming operators reinforce their security measures,” the Secretary said yesterday.

After meeting with gaming operators on Sunday, the PJ suggested security equipment and inspections should be reinforced, while advising that communication between casinos and authorities should be improved for faster response times in the event of incidents.

According to the Secretary, the territory’s six main gaming operators will have to prepare a report on their security situation, which will be sent to the Gaming Inspection and Co-ordination Bureau (DICJ) and police authorities, to analyse if their properties and operations fulfill all the security requirements.

Although not specifying what security measures could be implemented, the Secretary admitted installing metal detectors was a possibility being considered. advertisement

4 Business Daily Tuesday, June 6 2017

Macau Opinion

Albano Martins* The Macau's GDP has grown again!

Macau’s GDP statistics for the first quarter of 2017 reflect the expected growth trend.

In the same quarter of last year the economy fell almost in the same way.

In nominal terms, it has decreased 10.6 per cent, to now grow 10.9 per cent.

Comparing the value of the first quarter of 2017 with the value of the previous quarter, the economy contracted by about 5.6 per cent.

So it grew a lot because the base had fallen immensely.

In real terms, the economy grew practically the same (10.3 per cent), with an implicit deflator, that is, the ratio between nominal and real GDP, practically equal to one hundred (101.7).

When this value is 100, it means that the price effect was not felt and therefore the real value was equal to the nominal.

I do not like the change in the process of calculating GDP from a fixed base of reference applied over many years to a mobile base (chained base).

This began to happen in Macau from the moment the gaming figures started to be deflated in statistics in real value.

In the past, the value of the gaming figures was the same in nominal and real figures.

Which was, of course, wrong!

This change happened after my criticisms about the calculation process used.

The gaming figures were, and are, the variable that weighs most in GDP! From then on, the chained base was used and every two years the base of comparison changed.

I have many doubts about these deflators.

It is not about the honesty of the Statistics Service (DSEC).

For sure, it is not!

I just do not get it!

My recommendation is: someone should stop a little and check the meaning of the numbers, before publishing them.

Too many publications can jeopardize the quality of the data collection and its treatment.

The government has to pay more attention to the Statistics Department!

Higher real growth than nominal growth in normal periods is difficult to explain, and in this first quarter this happened in four of the eight GDP variables.

And this “phenomenon” happened in 16 groups or variables taken individually!

You see, just to give an example, the real growth of the export of transport services was 46.5 per cent and the nominal growth was only 2.6 per cent.

These exports were worth MOP1.258 billion in nominal value and MOP1.681 billion in real value!

What has happened?

Anyway, let’s stop to think.

I cannot understand! * an economist and contributor to this newspaper

Sino-luso trade

Bringing the samba Appointing Rita Santos as their Representative in Macau, the National Confederation of Services (CNS) of Brazil is seeking to strengthen the country’s foothold in China Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he decrease of manufacturing’s participation in China and other countries’ GDPs, and the rise of services’ contribution over the last years, is a trend to be closely scrutinized according to Luigi Nese, President of the National Confederation of Services (CNS) of Brazil.

“In Brazil, it is not more than 10 per cent of the total,” said Mr. Nese on the sidelines of the event marking the nomination of Rita Santos as the Official Representative of CNS in Macau, held yesterday.

In her pronouncement, Mrs. Santos explained that, while performing her functions in the Forum Macau, she realized that “the relationships between Macau and Brazil were not very developed, and we started developing some contacts already in 2010.”

In reply to press enquiries, she said that she does not believe that CNS’s mission and her new role within the confederation will overlap with Forum Macau.

“These are two different things.

The Forum is an official entity. My role with this nomination is to act as a facilitator for Brazilian entrepreneurs who wish to contact Macau and mainland Chinese businesses, and vice-versa,” she commented.

The confederation’s relationship with Macau and China started in 2012, with its participation in the China

Beijing International Fair for Trade in Services (CIFTIS). That same year, CNS signed a protocol with the Macau Trade and Investment Institute (IPIM).

“Rita Santos introduced us to IPIM, and we signed a protocol with them, and we want to implement more initiatives. For the moment, we work more with prospects, but with time, we hope these translate into effective business,” said Mr. Nese.

The confederation, which has regularly participated in CIFTIS since 2012, has signed ten new protocols this year, according to its president.

Previously signed protocols were with a technology institution in Shenzhen, and another similar institute in Beijing.

Brazil-Macau-China business

The main sectors of activity represented by CNS are IT companies,

events promotion, telemarketing, tourism, and cultural activities.

“We are trying to establish a stronger relationship in services with companies in Beijing, but we would like it to be done more regularly through Macau,” explained Mr. Nese.

He also believes that one of the strongest relationships that they can implement quickly is in the field of tourism.

“We would like to enable the tourism sector in Brazil to receive more Chinese, and improve the quality of services in Brazil to cope with Chinese visitors. […] We also want to advertise Brazilian culture in China, such as samba, and soccer, which are important elements to attract people to Brazil.”

According to Mr. Nese, no Macau companies are yet involved in the initiative. He argued, though, that there is a will to seek through Macau, easier access in business relations, since Portuguese and Chinese are official languages in the MSAR. The confederation, created in Brazil in 2008, brings together six federations and 60 unions from different service sectors, representing more than 400,000 companies.

Elections

CCAC recruits teenagers to promote clean elections The city’s anti-graft body, the Commission Against Corruption (CCAC), is recruiting students from form 3 to form 6 to help in CCAC activities

relating to the election. The recruitment, entitled “Volunteer Team for Clean Elections 2017” aims to ‘promote the teenagers’ concern about

CCAC Commissioner André Cheong Weng Chon

the community and enhance their awareness of clean elections,’ according to a release by the group.

In total, 80 volunteers will be recruited to assist ‘to organise seminars, participate in outdoor promotional activities and promote clean elections information to the public’.

CCAC notes that if the number of applicants exceeds the available places, a selection will be made ‘and those who are shortlisted will be notified individually’.

Applicants can sign up on the group’s website: www.ccac.org.mo Aside from informing the teenagers themselves, the group notes that ‘they are also expected to bring the relevant messages to their family members, friends and classmates’ to promote a ‘fair, just and honest atmosphere for the Legislative Assembly Elections this year’.

Business Daily Tuesday, June 6 2017 5

Macau Entrepreneurship

Housing Portuguese startups A new Macao Young Entrepreneur Incubation Centre space is currently under development in a building near MGM Macau, and will host Portuguese entrepreneurs looking to create startups in the city

A

n ew sta r t u p c e n t r e able to accommodate as many as 70 startups will be inaugurated towards the end of July in a building near MGM Macau, a source from the Portuguese government

told Business Daily.

According to the source, a new Macao Young Entrepreneur Incubation Centre (CINJ) area is currently being developed. The space was agreed-upon by the Portuguese and Macau government, as being

the venue to receive Portuguese entrepreneurs looking to develop their startups in Macau and enter the Chinese market.

Created in 2015 by the Macau Economic Services (DSE), CINJ is currently located at the China Civil Plaza building in Alameda Dr. Carlos d’Assumpção.

The centre provides support to local entrepreneurs looking to initiate their businesses, offering training courses, consultations, free temporary offices, and business

matching.

Business Daily questioned the DSE on the new centre’s development, but no response had been received by the time this newspaper went to print.

During his visit to the MSAR last week, the Portuguese Secretary for Industry, João Vasconcelos, announced that a centre would be created in Lisbon for Macau entrepreneurs looking to explore the European market.

It was agreed that Second Home - a startup workplace in Lisbon - would receive the Macau entrepreneurs, with the new area to open in November. N.M.

19; and having at least 50 per cent of the company’s capital held by local residents.

Local companies that submit recommendation letters from institutions or organisations stating that they promote young entrepreneurship

will be able to get a six-square-metre booth for MOP2,000.

This year’s MIF will also offer total coverage for the use of credit cards and consultancy services by local banks to advise local SMEs on fund management. N.M.

SME’s

Getting the square Local SME’s wanting to take part in this year’s Macao International Trade and Investment Fair can submit their application until June 16 Local small and medium enterprises (SME’s) looking to take part in the 22nd Macao International Trade and Investment Fair (MIF) to be held between October 19 and 21, can now submit their applications until June 16, the Macau Trade and Investment Promotion Institute (IPIM) announced.

According to the release, the Macau SME’s Pavilion at the event will feature approximately 100 exhibitor stands, dedicated solely to promoting Made in Macau products and Portuguese-speaking countries’ products promoted by local

companies.

The original cost for a nine-squaremetre booth at the event is set at MOP9,000 (US$1,121), however local companies taking part in the MIF could receive a price reduction to MOP2,800, the release informs.

In order to receive the incentive, local SMEs will have to fulfill three requirements: proving their products are produced in Macau or that they are distributors of products from lusophone countries; having been a registered company at the Financial Services Bureau (DSF) for at least two years before October

6 Business Daily Tuesday, June 6 2017

Macau Animal Protection

Please, let the dogs out Anima’s President, Albano Martins, aims to finally implement the adoption programme for the greyhounds at the Canidrome, and is expecting the government will let them use the facilities for a year Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he Society for the Protection of Animals (Anima) is expecting a response from Legislator and Sociedade de Jogos de Macau (SJM) Managing Director Angela Leong, regarding its demand to release all the dogs racing at the Macau Yat Yuen Canidrome, in anticipation of the termination of the group’s land contract in July 2018.

The request was made in a letter delivered to Mrs. Leong, who also holds the position of Canidrome Chairperson, on May 26, with TDM news reporting on the matter on Sunday.

In the letter that Anima’s President, Albano Martins, shared with Business Daily, the association requests that Mrs. Leong release all the dogs to Anima. Speaking with Business Daily, Mr. Martins notes that he expects Mrs. Leong to cooperate with them.

“I think [Leong] would be interested in donating the dogs to Anima. I even think it would be a good gesture for someone who is a candidate for a seat at the Legislative Assembly. Because a person who treats animals badly does not treat people nicely. This is a message that I would like to pass on,” he said.

Mr. Martins further said that this is the first time the association has reached out to Angela Leong in

her position as Chairperson of the Canidrome. Previous requests have been made to the Macau Government, but Anima’s President said these requests have always been met with “silence” on the part of public authorities.

In the letter, Anima further

requests the local government to enable them ‘to run the Canidrome premises for one year, after it finishes its activity or whenever it decides to close the business.’

Their aim in requesting this is to allow an adoption programme to be put in place, Mr. Martins explained.

Anima’s president states that the Canidrome currently owns some 650 dogs, over 500 of which are indirectly owned by gamblers.

“Some of the owners of these dogs have already said that they would like the animals to be delivered to us,” Mr. Martins said.

Above all, he added, “we don’t

HKZM

Travel

Over 200 concrete specimen tests falsified on HKZM bridge

Extending visas

More than 200 tests on concrete for the Hong Kong-Zhuhai-Macau Bridge were falsified by the contractor, according to Hong Kong media reports. Highway officials, speaking with legislators from the neighbouring SAR, pointed out that 210 samples could be fake, with 203 locations on the bridge confirmed. Those relating to stress-critical locations number 159, notes The Standard. Of these, 29

are in tunnels, 28 are on the bridge and 10 are in buildings, while 47 relate to other structures. Those in pylons underwater or on land amount to 45.

Speaking with the legislators, the Director of Highways Daniel Chung Kum-wah noted that, considering the 170,000 reports relating to the bridge, 210 falsified reports was a low figure, given the scale of the project.

want that the possibility of having those dogs racing illegally in China is created. And at the same time, we wish to avoid that they end up in a cooking pot. The picture that it would create for the image of Macau is very bad if the greyhound dogs are sent to China.”

In the written letter delivered to the Canidrome Chairperson, Anima further claimed that ‘the transfer of all those dogs to Anima, free of any charge for [the] organization, will be made also without any future costs for Canidrome, as [Anima] will keep all animals and pay all future bills.”

This newspaper made enquiries to the Canidrome on this matter but had not received any reply by the time this story went to print.

Local passport holders can now get visas-on-arrival when visiting Iran, Guinea-Bissau and Palau MSAR passport and travel permit holders will now be able to obtain visa-on-arrival treatment in Iran, Guinea-Bissau and Palau, the Identification Services Bureau (DSI) announced yesterday.

According to the release, Macau passport holders will now be able to obtain a visa upon arrival for a maximum of 30 days when visiting the Islamic Republic of Iran; a 30-day visa upon entering the Republic of Palau with a possibility of extension to 90 days; and a 90-day visa upon

arrival when entering the Republic of Guinea Bissau.

As of now, a total of 132 countries and territories have agreements to grant visas-on-arrival to MSAR passport holders, while 14 countries and regions have agreements to grant visa-free access to local travel permit holders.

The Macau passport currently ranks at 34th in the Global Passport Power Rank 2017 created by Arton Capital, which compares visa and passport information from 199 countries. N.M.

Corporate

MGM first MSAR company to win Asia Responsible Entrepreneurship Award Event

Environmental rights talk at Rui Cunha Foundation at 6:30pm The Rui Cunha Foundation will host professor Ana Sofia Barros at 6:30pm today as she presents a talk on ‘Hazardous industries and protection of environmental rights’. The professor holds a PhD in Public International Law from the University of Leuven in Belgium, and a Master's Degree in Human Rights from the European Inter-University Center for Human

Rights and Democratization in Italy, as well as being an author of several books on international law and human rights. Professor Barros will speak on sustainable development practices, legal obstacles preventing the protection of these practices and the concept of environmental rights.

Admission is free. The talk will be held in Portuguese.

MGM Macau became the first company in the MSAR to win the ‘Asia Responsible Entrepreneurship Award’ from Enterprise, according to a company filing. The group took home the award in the ‘Investment in People’ category, due to its ‘Unleashing Greatness – Employee Development and Employee Work-Life Balance’ programs.

CEO and Executive Director of MGM China, Grant Bowie noted that “these honours renew our efforts in promoting the philosophy of work-life balance, as well as caring for family and community among our team members.”

He further pointed out that “great people are the true foundation of

successful enterprises”.

So far this year the group has received four regional corporate social responsibility awards, with the responsible entrepreneur award following the Outstanding Social Caring Organization Award, the Outstanding Corporate Social Responsibility Award and the Outstanding Contribution in the Field of CSR award.

Business Daily Tuesday, June 6 2017 7

Macau Economy

Local deposits down but loans increased in April

D

eposits b y n o n - r esi d e n ts saw a 4.6 per cent drop during the month of April, compared to March, reaching MOP260.6 billion, according to the latest data released yesterday by the Monetary Authority of Macau (AMCM).

Total deposits fell by 1.6 per cent month-on-month, as resident deposits dropped 0.7 per cent, reaching MOP529.4 billion and MOP973.9 billion, respectively.

Hong Kong Dollars and U.S. Dollars were the favoured currencies, at 50.5 per cent and 22.6 per cent of total deposits, respectively (see Table 1).

Currency in circulation rose 0.7 per cent, while

demand deposits fell 3.4 per cent, together adding to a 2.6 per cent drop in M1. Adding in quasi-monetary liabilities, M2 fell 0.7 per cent, reaching MOP543.5 billion.

However both measures grew when compared to the same month last year,

up 17.2 per cent and 15.5 per cent, respectively.

The majority of money in circulation was denominated in Hong Kong Dollars, at 53 per cent (see Table 2).

Domestic loans to the private sector were up 0.5 per cent month-on-month,

Table 1 - Deposits Currency HK$ MOP RMB US$

As at the end of the month, the loan-to-deposit ratio for the resident sector increased from 58.6 per cent at the end of March to 59.2 per cent. In addition, the non-performing loan ratio was unchanged from one month earlier at 0.2 per cent.

Table 2 - Money Supply % of Total Deposits 50.5 21.1 3.6 22.6

% of loans 64.9 29.8 0.4 4.3

Currency HK$ MOP RMB US$

% of M2 53 31.9 3.9 9.1

Table 4 - Loans - External

Table 3 - Loans - Domestic Currency HK$ MOP RMB US$

reaching MOP422.3 billion, the majority of which was also Hong Kong Dollar denominated (see Table 3).

External loans saw a 2.3 per cent month-on-month increase, reaching MOP401.8 billion, denominated primarily in RMB (see Table 4)

Amount (MOP billion) 274.1 126 1.6 18

Currency HK$ MOP RMB US$

% of loans 27.1 1.8 10.9 53.3

Amount (MOP billion) 7 108.9 44 214.1

Gaming

Imperial Pacific to withhold disclosure of VIP rolling Imperial Pacific International Holdings Ltd. (IPI) revealed that it will only announce monthly unaudited results for its VIP rolling chip for its casino in Saipan when amounts total less than US$2.5 billion, according to its latest filing with the Hong Kong Stock Exchange.

The company noted that VIP table games rolling in the Best Sunshine Live casino it operates in the Pacific Island topped US$2.5 billion

(HK$19.48 billion/MOP20.06 billion) in May 2017.

The amount is similar to results posted a year ago, when VIP rolling chip turnover reached US$2.52 billion, and slightly higher than April 2017, when it totaled US$2.15 billion.

IPI further said that ‘the company will review its business circumstances from time to time and consider publishing monthly gaming net wins in due course.’ S.Z.

8 Business Daily Tuesday, June 6 2017

Greater China Caixin PMI

Services sector expands at fastest pace in 4 months in May A similar Caixin survey last week showed the manufacturing sector unexpectedly contracted Yawen Chen and Ryan Woo

A

ctivity in China’s services sector expanded at the fastest pace in fourth months in May thanks to a surge in new orders, a private business survey showed, helping to offset worries about unexpected weakness in manufacturing.

The Caixin/Markit services purchasing managers’ index (PMI) rose to 52.8 in May from April’s 51.5, breaking a four-month decline and marking the highest reading since January. There was no breakdown by business segment in the survey.

low in April.

That bodes well for a government that is counting on services, particularly high value-added services in finance and technology, to lessen the economy’s traditional reliance on heavy industry and investment.

A similar Caixin survey last week showed the manufacturing sector unexpectedly contracted in May as demand ebbed and shrinking factory prices dented profits.

That contrasted with slow but steady growth shown in official data, but the weaker-than-expected private survey underlined investors’ nervousness about the outlook for the

rest of the year. Most China watchers are expecting the economy to cool in coming months after a strong first quarter, but believe the loss of momentum will be gradual.

“The improvement in the services sector bolstered the Chinese economy in May,” said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group in an accompanying note to the data.

“However, the rapid deterioration in the manufacturing industry is worrying.”

Caixin’s composite manufacturing and services PMI, also released on Monday, rose to 51.5 in May from 51.2 in March.

Despite stronger increases in activity and new work, however, services companies raised their staffing levels

only slightly in May, with the rate of job creation falling to its lowest in nine months.

China’s small and medium-sized companies employ about 80 per cent of the country’s working population.

Profit margins also remained under pressure, with services companies only able to pass on a marginal portion of their rising input costs to consumers.

A flurry of official measures targeting financial deleveraging is expected to further squeeze financing costs and erode profits in the coming months.

Most economists expect China’s quarterly economic growth to slow in the coming months from 6.9 per cent in January-March. The government has set a GDP growth target of around 6.5 per cent for this year. Reuters

“The rapid deterioration in the manufacturing industry is worrying” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group

The findings are in sync with an official survey last week which also pointed to accelerated growth and stronger demand in services. The sector accounts for more than half of China’s gross domestic product.

The new orders sub-index rose to 53.5 in May from April’s 53.0, signalling the strongest customer demand since December.

The 12-month business outlook among the mostly small and medium-sized services providers in the survey also rose from a five-month

M&A

Parents of Shenhua Energy, GD Power in asset merger talks The government is in the middle of a programme of rejuvenating state-owned enterprises Meng Meng and Adam Jourdan

The parents of Chinese energy giants China Shenhua Energy Co Ltd and GD Power Development Co Ltd are in talks to merge some of their assets, sources told Reuters, as part of a broader shake-up of debt-ridden state-owned sector.

The listed units of China’s largest coal miner, Shenhua Group Corp Ltd, and top-five state power producer, China Guodian Corp, suspended trading of their shares on Monday citing an unresolved “important” matter.

A person with direct knowledge of the matter said GD Power would be taken over by the Shenhua Group.

No other assets would be involved in the take over deal, the person said, who was not authorised to speak with media on the matter and so declined to be identified.

“After merging Guodian’s GD Power into Shenhua, Shenhua will consider acquiring coal-fired power assets from the remaining top power firms,” the person also said.

Shenhua Group, China Shenhua Energy, China Guodian and GD Power could not be immediately reached for comment.

China Guodian is one of five state power producers formed in 2002 after the restructuring of the country’s

monopoly. The other four - China Huadian Corp, State Power Investment Corp, China Huaneng Group and China Datang Corp - have also been the subject of restructuring speculation.

Three other listed units of China Guodian - Guodian Changyuan Electric Power Co Ltd, Yantai LongYuan Power Technology Co Ltd and Ningxia Younglight Chemicals Co Ltd - also suspended share trading on Monday.

The listed firms said in statements that they had been informed by their

parent companies about an important matter that involved major uncertainties and required regulatory approvals.

Guodian Technology & Environment Group Corp Ltd also mentioned a “significant event” in a filing, though it did not suspend trading of its shares.

The shares’ price hit a seven-month high on Monday morning.

Statements from each of the listed firms did not mention the potential of a merger or refer to asset restructuring.

A second person with knowledge of the matter told Reuters that merger talks were at a preliminary stage, and that the option of complete merger

of the two parents was likely to be tabled at a later stage.

The government is in the middle of a programme of rejuvenating stateowned enterprises, including those in the energy sector, with the aim of building larger, globally competitive firms through mega-mergers and the creation of huge state-owned conglomerates.

Key Points Firms suspend shares citing unresolved “important” matter Shenhua Group to take over GD Power -source Merger talks at preliminary stage -source Shenhua Group, China Guodian merger to be tabled later -source With China trying to transition towards cleaner fuels, there has been widespread speculation in the industry that Shenhua Group would aim to ease dependence on coal mining by merging with major state power providers, including nuclear power firms.

China Shenhua Energy’s Hong Kong-listed shares, which continued to trade, touched a two-year high on Monday after the firm suspended trading of its Shenzhen shares. Reuters

Business Daily Tuesday, June 6 2017 9

Greater China In Brief M&A

Foxconn says Apple, Amazon to join its bid for Toshiba business Apple Inc and Amazon.com Inc will join Foxconn’s bid for Toshiba Corp’s semiconductor business, the Nikkei business daily quoted Foxconn Chairman Terry Gou as saying yesterday. The two U.S. technology giants plan to “chip in funds”, Gou said, according to the interview with the newspaper. It was not immediately clear if this would take the form of a direct investment in the semiconductor unit or would be financing for the deal.

Taiwan’s Foxconn, formally known as Hon Hai Precision Industry Co Ltd, has also partnered with its Japanese unit Sharp Corp in its bid.

Illegal mining

Authorities say 31 nationals detained in Zambia Strategy

HNA to tap M&A brake after US$50 bln deal splurge Political uncertainty in the United States and Europe and China’s broad crackdown on capital flight from the country have changed the climate for HNA’s unbridled growth Matthew Miller

After two years of aggressive deal-making - from buying stakes in Deutsche Bank and Hilton Worldwide Holdings Inc to taking over electronics distributor Ingram Micro - Chinese conglomerate HNA Group intends to slow the pace, or at least the size, of its acquisitions overseas.

A sprawling aviation-to-financial services group, HNA has emerged as China’s most active non-government player in global markets, with deals worth more than US$50 billion equal to the annual GDP of Bulgaria.

“This year, the merger and acquisition pace will slow a little for sure,” Adam Tan, HNA Group CEO, told Reuters in a rare media interview.

Political uncertainty in the United States and Europe - such as the upcoming negotiations on Britain’s departure from the European Union - and China’s broad crackdown on capital flight from the country, have changed the climate for HNA’s unbridled growth.

“It’s a bit more complicated than before,” Tan said by phone.

Tensions between China and the United States are the biggest risk, said Tan, who received an MBA from St. John’s University in New York and studied at Harvard Business School.

His comments come amid increasing debate about the United States expanding its vetting process on foreign investment, and tensions over its trade deficit.

“This is a critical relationship,” Tan said. “No good can come from fighting. We can disagree, we can talk, we can negotiate - that’s a family issue.

We’re not enemies.”

For HNA, which has accumulated assets even as other Chinese companies find it more difficult to acquire overseas, any pivot in strategy may bring the group more into line with government policy aimed at reducing the amount of money leaving China.

It would also give it more opportunity to digest and rationalize the assets it has bought using often complex bank borrowing and debt arrangements.

Tan spoke to Reuters at a time when HNA’s financing and ownership structure has come under intense scrutiny.

In three years, the group has more than quadrupled its assets, to RMB1.2

trillion (US$176.12 billion) at the end of last year from RMB266 billion at the end of 2013.

“The scope of their ambition, the speed of these acquisitions, the enormity of the credit resources at their disposal has put HNA in a different league, where the normal rules of business don’t seem to apply,” said William Kirby, a professor at Harvard Business School who has authored a case study on the group.

Wet market

Fuelling HNA’s expansion has been the ambition of its founding Chairman Chen Feng, at the cost of rising debt.

The group had around US$89 billion in credit lines from domestic banks at the end of May. Separately, the group and its subsidiaries have issued more than US$10 billion in outstanding onshore and offshore debt.

Key Points HNA acquisition pace to slow this year More than US$50 billion in deals since 2015 Some group companies wrestling with pace of growth Focus on key sectors, including financial services Over 50 pct of revenue, 30 pct of assets outside China Chen, a former aviation official, told Reuters in 2015 that the global financial crisis had left many assets undervalued, and the way to growth was through deals. It was, he said then, like the wet market: “You see so many fresh vegetables, you eat here, pick this and that.”

HNA’s top backers include China Development Bank, whose Hainan office in 2012 provided the group with a RMB100 billion line of credit, along with other Chinese stateowned lenders.

After two significant HNA acquisitions closed in the first quarter of this year, however, some group companies are wrestling with the pace of growth.

At Bohai Capital, a subsidiary responsible for HNA’s leasing assets,

loans and bonds outstanding at endMarch totalled RMB232.62 billion more than 600 per cent of net assets.

HNA says it currently has debts totalling RMB710 billion.

Launched in 1993 as a fledgling airline in partnership with the Hainan provincial government, HNA today comprises a tangled cross-shareholding web of more than 400 companies, including over a dozen listed on the stock market.

The group remains heavily tied to aviation, holding a key stake in Hainan Airlines, China’s fourth-biggest carrier, and helps operate another 18 airlines, including U.S. business aviation firm Deer Jet and Paris-based Aigle Azur. It also owns a substantial airports and airport servicing business, and Avolon, another subsidiary, is one of the world’s leading aircraft leasing companies, with a fleet of 850 planes.

Slowing, not stopping

HNA won’t, though, stop making offshore acquisitions entirely. International assets are better priced, compared to Chinese domestic assets, and low-cost capital is still available, Tan said.

He refuted any notion that HNA’s deal-making flurry exposed an absence of strategic focus. HNA, he said, is scouting for “undervalued assets”.

So far this year, it has announced equity and asset acquisitions of more than US$12 billion, indicating it will remain active in key sectors, including financial services.

Among the deals is an offer to buy New Zealand’s UDC Finance from ANZ Banking Group for about US$460 million and the acquisition of a 25 per cent stake in Old Mutual’s U.S. fund management arm for US$446 million. . HNA also has accumulated a 9.9 per cent stake in Deutsche Bank.

Earning over half its revenues with more than 30 per cent of its assets offshore, HNA is big enough to undertake transactions outside China utilizing offshore structures, Tan said.

It has utilised increasingly complicated leveraged finance and foreign currency credit facilities, raising over US$17 billion in loans over the last four years to complete global deals, according to Thomson LPC data.

“Our own cash flow, our own standalone credibility outside China is big enough to support this merger and acquisition (activity),” said Tan, who noted HNA’s debt-to-asset ratio dipped to below 60 per cent at the end of December. A year earlier, it was around 75 per cent. Reuters

Zambia has detained 31 Chinese nationals for illegal mining in the African country’s copper belt but has failed to provide strong proof of their crimes, a senior Chinese diplomat said as he lodged a complaint. Lin Songtian, the Chinese Foreign Ministry’s director-general for African affairs, told a Zambian diplomat in Beijing that China understands and supports actions to crack down on illegal mining, the ministry said in a statement late on Sunday. However, Zambia had not only not provided strong proof of the crimes of the 31 detained but had also detained a pregnant woman and two others with malaria, Lin said.

Markets

Guangzhou Rural Bank launches IPO Guangzhou Rural Commercial Bank Co Ltd (GRCB) launched a Hong Kong initial public offering worth as much as US$1.1 billion yesterday, seeking funds for potential M&A and to open new branches as it expands its lending and investment businesses. The IPO for China’s fifth-largest rural commercial bank by assets consists of 1.58 billion shares offered in an indicative range of HK$4.99HK$5.27 each, according to a term sheet of the deal seen

by Reuters. That would be equivalent to around 16.5 per cent of the lender after the offering, valuing it at as much as US$6.7 billion.

Diplomacy

Tillerson says Beijing must do more to rein in North Korea U.S. Secretary of State Rex Tillerson again urged China to do more to rein in North Korea, saying it should use its growing clout responsibly. “China is a significant economic and trading power, and we desire a productive relationship,” Tillerson said in Sydney yesterday after security talks with Australian counterparts.

“But we cannot allow China to use its economic power to buy its way out of other problems, whether it’s militarizing islands in the South China Sea or failure to put appropriate pressure on North Korea.”

10 Business Daily Tuesday, June 6 2017

Greater China

Forecast

May data to show stable growth as exports stay solid China’s industrial output in May is expected to rise 6.3 per cent Yawen Chen and Ryan Woo

C

hina’s economy is likely to have remained on a stable footing in May, buoyed by solid gains in trade and investment as economic ties with the United States take a positive turn and infrastructure spending cushions domestic growth.

A Reuters poll of indicators from trade and industrial output to loans and property investment, is expected to show that economic growth held up nicely into the second quarter, defying worries of a sharp slowdown. Beijing has curbed lending to avert bubbles and debt risks, but tougher regulations have raised concerns the measures could go too far and hurt growth.

Economists, however, said they felt reassured by positive signals from the top leaders of China and the United States that a trade war between the two economic power-houses was avoidable.

“We used to be worried about the negative impact of possible trade frictions on China’s exports to the United States, but now that fear has eased,” said Yan Ling, a Shenzhen-based analyst with China Merchant Securities.

“We now think it will be more about increasing U.S.

imports to China.”

In sign of progress, China and the United States agreed in May to take action by mid-July to increase access for U.S. financial firms and expand trade in beef and chicken among other steps as part of Washington’s drive to cut its trade deficit with Beijing.

The value of Chinese exports was seen rising 7.0 per cent in May from a year earlier, and imports by 8.5 per cent, slower than April’s growth rates of 8.0 per cent and 11.9 per cent, respectively. But the pace is relatively positive given declines in commodity prices and bodes well for China’s trade outlook.

China’s trade surplus for May was expected to rise to US$46.32 billion, compared with US$38.05 billion in April.

Many analysts had expected Beijing’s intensifying crackdown on unscrupulous lending and a cooling property market to hit growth hard after a surprisingly optimistic first quarter.

Indeed, growth in the world’s second-largest economy was more muted in May, as fading government stimulus and financial regulatory controls have increased financing costs and weighed on profitability for firms.

China’s industrial output

in May is expected to rise 6.3 per cent, easing slightly from 6.5 per cent growth in April, while producer prices were forecast to rise 5.7 per cent from a 6.4 per cent gain in April.

Producer prices have been cooling since March as iron ore and coal prices tumbled, pressured by fears that Chinese steel production is outweighing demand as the authorities rein in the redhot property sector that has sparked fears of a market collapse.

Annual fixed asset investment in May likely grew 8.8 per cent, moderating from 8.9 per cent in April, as policymakers continued their efforts to cool the property sector, showing no intention of relaxing harsh administrative curbs that many market observers say have effectively frozen the frothy markets.

Retail sales were expected to be stable at 10.6 per cent, down from 10.7 per cent in April, likely due to weaker auto sales.

Inflation is expected to accelerate in May, with consumer prices predicted to rise 1.5 per cent, a modest pick-up from April’s 1.2 per cent.

However, that is still well below Beijing’s official inflation target of 3 per cent in 2017, suggesting policymakers still have room to tighten the screw on credit and patch holes in the financial system after years of debt-fuelled stimulus.

To be sure, while China’s central bank has cautiously shifted to a tightening policy bias by raising shortterm interest rates in recent months, the authorities have reiterated their support for the real economy, pledging to keep liquidity sufficient to avoid financial stress while carefully engineering reforms in its bubbly financial sector.

Key Points Data expected to show solid momentum, but pace of growth slows May PPI f’cast +5.7 pct (April +6.4 pct) May CPI f’cast +1.5 pct (April +1.2 pct) Exports in May seen +7.0 pct y/y (April +8.0 pct) Imports seen +8.5 pct y/y (April +11.9 pct) New May loans f’cast RMB900 bln (April RMB1.10 trln) FX reserves due June 7, trade June 8, inflation June 9 Money supply, loan data expected around June 10-15 Thirty-nine economists polled by Reuters predicted Chinese banks had extended RMB900.0 billion (US$132.32 billion) in new loans in May, a still-solid figure versus

RMB1.10 trillion in April.

The growth rate in outstanding loans was expected to slow to 12.8 per cent in May from 12.9 per cent in April.

M2 money supply growth was also seen down a touch at 10.4 per cent in May, from 10.5 per cent in April, the slowest since July 2016, reflecting the moderately tighter policy stance by the People’s Bank of China (PBOC).

Investors will also be keen to watch if China managed to retain its grip on capital outflows in an effort to safeguard its foreign reserves that fell rapidly in 2016.

The poll showed foreign exchange reserves edged up in May to US$3.04 trillion from US$3.03 trillion in April, during which a weakening in the greenback aided Beijing’s efforts to contain capital outflows.

Analysts say volatility in currency valuations could also have given the reserves figure a boost.

“The fall in the dollar was pretty big while the euro appreciated visibly against the dollar, so those changes will lead to a more bullish figure,” said Wang Lianqing, an analyst with Industrial Securities.

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

Reuters

Business Daily Tuesday, June 6 2017 11

Asia Budget

South Korea launches US$10 bln fiscal package to boost jobs The government estimates the extra spending will boost economic growth by 0.2 percentage point this year Cynthia Kim

S

outh Korea’s new government announced a 11.2 trillion won (US$10 billion) fiscal stimulus package yesterday, increasing social welfare subsidies and taking steps to deliver on President Moon Jae-in’s election promise to create 810,000 public sector jobs.

But Moon’s ruling Democratic Party faces a challenge passing the extra budget bill as it only holds 40 per cent of the 299 seats in the National Assembly and would need the support of more than 30 opposition lawmakers.

Both parties in the conservative opposition - the Bareun Party and the Liberty Korea Party - have said the increased welfare spending could become unsustainable and that the plan does not meet legal requirements.

The stimulus package allocates 5.4 trillion won to create public sector and social services jobs, including places for fire fighters, teachers and postal workers, the finance ministry said.

Another 2.3 trillion won will be used to provide subsidies for maternity leave and for elderly people needing medical care.

The government estimates the extra spending will boost economic growth by 0.2 per centage point this year, which may raise its 2017 outlook from current 2.6 per cent.

It expects to the extra budget to add 71,000 jobs to the public sector workforce and 15,000 jobs to the private sector.

“This is the first supplementary

budget for jobs purposes,” Park Chunsup, South Korea’s chief of budget, told a news conference. “There are concerns over mass job losses...10 years ago youth unemployment used to be double the overall jobless rate of 3.5 per cent, but now it is three times as high,” Park said.

Unemployment among those aged 15-29 soared to 11.2 per cent in April, even though the economy posted the fastest growth in six quarters in the January-March period.

Addressing a widening income gap and sluggish domestic demand is a major challenge for policymakers, especially as exports have only just begun to turn around after falling for almost two years.

South Korea’s average disposable household income fell by 1.1 per cent in the fourth quarter, the fastest rate since the 2009 global financial crisis, while private consumption grew just 0.4 per cent in the first quarter - well below overall economic growth at 1.1 per cent.

“Regarding weak consumption, we believe adding jobs will boost income and affect consumption eventually,” Park said.

The supplementary budget will add to the 400.5 trillion won budget for 2017 that was approved by the National Assembly late last year.

The government plans to submit its supplementary budget proposal to the National Assembly on June 7.

About 8.8 trillion won of the extra budget will be financed by excess tax revenue expected for this year, while another 1.1 trillion won will come from government revenue left over from 2016.

Park Chun-sup (R), deputy finance minister for budget affairs, gives a briefing at the Sejong government complex, south of Seoul. Lusa

The remaining 1.3 trillion won will be financed from public funds managed by state-owned companies, according to the ministry.

“As we propose this supplementary budget, our intention is to best maintain fiscal soundness and we’re not issuing more debt,” budget chief Park said.

Cheon Jong-ryeol, a 30-year old job seeker, agrees with the government’s plan to create more public sector jobs.

“Everybody wants to get a civil service job, I mean everybody. I want to take a look at what becomes available from this policy and want to apply,” said Cheon, who recently returned from an English language programme in Canada.

Like many others, he is still looking for work, having postponed graduation from college by two years to complete compulsory military service, before going to Canada.

“All jobs are really competitive, and my friends have told me that public

sector jobs have less late-night work and office dinners, so I see competition for public servant jobs becoming tougher.”

Although the proposed extra budget is only for this year, the government is under pressure to raise taxes to sustain expanded welfare programmes and to meet the growing needs of an ageing population.

On Thursday, Lee Yong-sup, the head of President Moon’s jobs committee, said South Korea needed to raise taxes in order to pay for more jobs and welfare.

Calls for government subsidies will only increase as more than 35,000 workers are expected to be laid off by the end of this year from the shipbuilding industry alone.

About 41,000 workers lost their jobs at shipbuilders between December 2015 and February this year, according to the labour ministry, as a broad global downturn in demand and plunging commodity prices sapped the industry. Reuters

Trade

Malaysia’s April exports surge, slightly below forecast Exports to China jumped 50.6 per cent from a year earlier Malaysia’s export growth surged again in April, though at a slightly slower pace compared to the previous month, government data showed yesterday.

April’s exports rose 20.6 per cent from a year earlier, the fifth straight month of double-digit growth. The pace was just below the 22.3 per cent growth forecast in a Reuters poll and down from 24.1 per cent in March.

Shipments of manufactured goods, which account for about four-fifths of total exports, grew by 17.3 per cent from a year earlier in April, data from the International Trade and Industry Ministry showed.

Exports of mining goods jumped 51.8 per cent on higher fuel prices and volumes, while shipments of agricultural goods, led by palm oil products, rose 20.9 per cent.

Imports in April rose 24.7 per cent from a year earlier, down from March’s 39.4 per cent growth, the highest annual increase in seven years.

Key Points April exports +20.6 pct y/y vs Reuters poll +22.3 pct April imports +24.7 pct y/y vs poll f’cast +32.6 pct Trade surplus 8.8 bln rgt vs poll f’cast of 6.7 bln rgt Exports to China +50.6 pct y/y, U.S. +11 pct, EU +26.5 pct The trade surplus in April widened to 8.8 billion ringgit (US$2.06 billion),

from March’s 5.4 billion ringgit.

This year, the currency has strengthened about 5 per cent against the dollar.

Exports to China jumped 50.6 per cent from a year earlier, on higher demand for Malaysia’s

commodities, and electrical and electronic goods.

Exports to the United States rose 11 per cent on higher shipments of electrical and electronic goods, while those to the European Union grew 26.5 per cent. Reuters

12 Business Daily Tuesday, June 6 2017

Asia In Brief Currency

Thai c.bank chief says to ease FX rules Thailand’s central bank said yesterday it would relax foreign exchange rules, including allowing more Thais to directly invest abroad, as policymakers try to hold down the baht’s strength. The central bank will allow investors with assets of at least 50 million baht (US$1.47 million) to directly invest in securities abroad, it said in a statement. Commercial banks will also be allowed to lend baht to non-residents for investment in Thailand and the Greater Mekong sub-region, it said. The baht appreciated further to 33.98 against the dollar, a near 23-month high, after the announcement, from 34.05 in early trade.

Conglomerates

S.Korea’s finance minister nominee looks to chaebol with tax hikes South Korea’s nominee for finance minister plans to focus on tax increases on conglomerates (chaebols), to broaden tax revenue amid increasing demand for welfare, he said yesterday. In a written statement prepared for his nomination hearing on Wednesday, Kim Dongyeon said he planned to restructure the government’s tax base by cutting exemptions for big businesses and collecting more taxes from conglomerates’ financial income. Plans to broaden tax revenue were flagged by the jobs panel of President Moon Jae-in’s government this month, as households and businesses in South Korea currently pay low levels of tax relative to economic size, it said.

Auto industry

Australia new vehicle sales rebound in May Australian new vehicle sales rebounded in May to reach a record high for that month, a promising omen for consumer demand after a run of soft results.

The Australian Federal Chamber of Automotive Industries’ VFACTS report out yesterday showed 102,901 new vehicles were sold in May, up 6.4 per cent on the same month last year. May this year had one more selling day than in 2016. The report noted business purchases of sport utilities climbed 14.9 per cent in May, while light commercial purchases by government rose 31.7 per cent. Sales to rental fleets also returned strongly during May.

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Financing

Indonesian companies step up moves to get funds after S&P’s upgrade In the five months, 39 Indonesian companies issued debt and equity worth a total of US$8.5 billion Eveline Danubrata and Umesh Desai

I

n do n esia n c o m p a n i e s are striving to utilize a window of opportunity to raise funds on better terms that has opened after Standard & Poor’s long-awaited upgrade of the country’s credit rating to investment grade.

Before its May 19 upgrade of Indonesia’s sovereign credit outlook to ‘BBB-’ from ‘BB+’, S&P had held out for more than five years from matching the ratings awarded by its peers, Fitch and Moody’s, to Southeast Asia’s biggest economy.

S&P’s move, which reflected what it saw as reduced risks to Indonesia’s fiscal position, now gives the country access to a wider pool of funds as some money managers make portfolio allocations based on the U.S. agency’s rating.

A rating upgrade favourably impacts the market for government bonds. But the increased liquidity it generates can drive down yields, thus also helping corporate borrowers. And the S&P upgrade comes after some Indonesian companies have benefited from a rebound in

commodity prices and stronger infrastructure spending in the country.

At least a dozen companies such as state-controlled port operator PT Pelabuhan Indonesia III (Pelindo 3) and petrochemical producer PT Chandra Asri Petrochemical Tbk are seeking fresh funds. Companies that are issuing debt such as Pelindo 3 are hoping to get a lower borrowing cost, while those like Chandra Asri aim to get attractive pricing for selling more shares.

Already this year, Indonesian borrowers have been active.

In the five months, 39 Indonesian companies issued debt and equity worth a total of US$8.5 billion, Thomson Reuters data showed. That compares with 14 companies that raised US$2.45 billion during the same period a year earlier.

Pelindo 3, one of seven Indonesian companies that S&P also upgraded last month, is planning to issue up to 5.5 trillion rupiah (US$413.4 million) in bonds this year to expand ports, said corporate secretary Faruq Hidayat.

“We want to take advantage of the momentum,” Hidayat said. “With the lifting of our rating, hopefully we

will be more competitive.”

Demand for Indonesian corporate bonds, especially those that mature in 1-3 years, has picked up as they offer more attractive yields than government bonds, said ANZ strategist Jennifer Kusuma.

Reform story?

Fund managers also say an improvement in Indonesia’s economic fundamentals and a rise in foreign-currency reserves are expected to cushion it from any outflows when the Federal Reserve again raises U.S. interest rates.

“The inflows into Indonesia started even before the upgrade because Indonesia has been a good reform story these past few years,” said Mark Baker, Hong Kong-based investment director at Standard Life Investments, which is overweight on Indonesian government bonds.

“The government has recognized the need to ramp up investments, particularly in infrastructure and lift revenues which are low relative to GDP,” he said.

However, some potential investors are holding back due to concerns about political stability and other obstacles for foreign direct investment in Indonesia, such as red tape.

Some funds are also becoming pickier due to the increased supply of share and debt sales.

“I am being selective because not all companies that are doing IPOs (initial public offerings) are good and the timings are also close together,” said Andry Taneli, a portfolio manager at Jakarta-based Ciptadana Asset Management.

“So we have to wisely allocate our funds,” he said, adding that he prefers the consumer, banking and infrastructure sectors. Reuters

GDP

Australia seen limping to the finish line for global growth record Some analysts had feared the economy might actually have gone backwards in the first quarter Wayne Cole

Australia likely equalled the world record for the longest stretch of uninterrupted economic growth last quarter, yet celebrations will be muted as miserly wage growth saps the spending power of its citizens.

Analysts estimate Australia’s A$1.7 trillion (US$1.27 trillion) annual gross domestic product (GDP) grew a slim 0.2 per cent in the first quarter, a setback from the previous quarter’s brisk 1.1 per cent.

The GDP report, due out yesterday, is also forecast to show annual growth slowed to 1.6 per cent from 2.4 per cent.

That would still mark 103 quarters without a recession, a feat only matched by the Netherlands in modern history, but workers will be wondering where the rewards are going.

Government figures out yesterday showed wages and salaries paid by businesses across the country bounced just 0.3 per cent in the first quarter, after a 0.5 per cent drop the previous quarter.

Wage growth for the year to March

was only 0.9 per cent, well below consumer price inflation of 2.1 per cent.

“Spare capacity in the labour market is expected to continue to weigh on wage growth over the next year,” said David Plank, head of Australian economics at ANZ. “This in turn, is likely to have implications for consumption growth given the high levels of household debt and expected moderation in house price growth.”

The danger is all the greater as household debt is at all-time highs and red-hot housing markets in

Sydney and Melbourne are vulnerable to a major correction.

The heat in housing has made the Reserve Bank of Australia (RBA) reluctant to cut interest rates further, even as consumers struggle.

The central bank holds its June policy meeting today and is considered certain to keep rates at 1.5 per cent, where they have been stuck since May last year.

Some analysts had feared the economy may actually have gone backwards in the first quarter following disappointing readings on retail sales and home building.

The risk of an outright contraction did look to have diminished slightly yesterday as data showed inventories held by firms jumped a surprisingly large 1.2 per cent in the quarter.

That alone should add around 0.4 percentage points to GDP, when analysts had expected next to nothing.

Businesses also seemed to be doing better than their workers when it came to making money. Company gross operating profits rose 6.0 per cent in the March quarter to be up no less than 40 per cent for the year.

Profits in the mining sector more than doubled in the year as prices for iron ore and coal spiked, though much of those gains evaporated in the last couple of months. Reuters

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

Business Daily Tuesday, June 6 2017 13

Asia Stock exchange

Bitcoin mania infects Japanese stock market’s smaller listings It’s probably not a coincidence that Japan’s stock market is being seen as a proxy for bitcoin investments Yuji Nakamura

The speculative frenzy in bitcoin is spilling over into the Tokyo Stock Exchange.

Remixpoint Co., Infoteria Corp. and Fisco Ltd., have all seen volatile swings in their share prices after announcing businesses related to digital currencies.

Remixpoint has more than doubled since tying up with Peach Aviation Ltd. to let customers pay for tickets with bitcoin. Infoteria, up 58 per cent in the past month, is testing ways to let shareholders vote by proxy using blockchain, bitcoin’s underlying technology. Fisco, a financial information services provider, began operating a

bitcoin exchange last year and is up 26 per cent since early May. All of these gains coincide with bitcoin’s rally, with the value of the virtual currency doubling against the U.S. dollar since early May. That has made the stocks of these small-cap companies an attractive way for speculators to invest in cryptocurrency markets without buying them directly. That’s because investors can make bets via their brokerage accounts instead of taking risks with bitcoin exchanges, according to Naoki Murakami, a wellknown day trader in Japan.

“From about a month ago when all these virtual currencies started spiking

like crazy, we began seeing the so-called ‘stocks of the virtual currency bubble,”’ said Murakami, a frequent speaker at investor conferences. “Not everyone is sure they can trust bitcoin exchanges. And some don’t have accounts there. That’s why they’re using the stock market to speculate.”

It’s probably not a coincidence that Japan’s stock market is being seen as a proxy for bitcoin investments. In April, Prime Minister Shinzo Abe’s government legalized digital currencies as a form of payment and placed rules around audits and security.

That lent credibility to digital currencies, leading to some

Japanese companies seeking partnerships with bitcoin startups.

Remixpoint is the biggest of the bunch, with a market value of 31.3 billion yen (US$283 million). Remixpoint was the second-biggest gainer in the TSE Mothers Index over the past month, helping the gauge soar to the highest level in a year.

Remixpoint is trading at 514 times earnings, the highest among all Japanese technology companies worth more than 30 billion yen.

Another reason why these stocks can become proxies for bitcoin is due to Japan’s relatively loose listing laws, some of which require no income and a market value of as little as US$10 million before a company can go public.

That’s made the Tokyo Stock Exchange home to hundreds of small companies.

“It’s pure frenzy,” Murakami said. Bloomberg News

Legislation

Economy must play role in verdicts, India’s top court rules The loss of productivity while attending court hearings amounts to 0.5 per cent of Indian GDP Upmanyu Trivedi

India’s judiciary must consider the interests of the economy and examine the impact of its verdicts on jobs, the country’s top court said in a judgment that could help reduce stalled projects in Asia’s third-largest economy.

“The court needs to avoid that particular outcome which has a potential to create an adverse affect on employment, growth of infrastructure or economy, or the revenue of the state,” Supreme Court Justices A.K. Sikri and A.M. Sapre said in a ruling last month, overturning a high court decision that shut down a sugar factory because it was too close to another.

India is ranked 130 out of 190 in ease of doing business by the World Bank and 172 in enforcing contracts. The top court’s judgment sets a precedent as projects worth billions of rupees remain stuck for years in a judicial system that has more than 24 million pending cases, including commercial and criminal.

‘India is ranked 130 out of 190 in ease of doing business by the World Bank and 172 in enforcing contracts’ The observations of the Supreme Court will usher in an era where the interplay “between law and economics would be considered by the courts on more a sustainable basis” especially where technical irregularities withhold economic development, Sandeep Chilana, a partner at Shardul Amarchand Mangaldas & Co, said in an email.

More than half of the 24 million cases in India are pending for at least two years and more than 9 per cent have been unresolved for more than 10 years, according to government data.

A spokesman from the office of Prime Minister Narendra Modi did not respond to phone calls or text

messages.

The loss of productivity while attending court hearings amounts to 0.5 per cent of Indian GDP, according to a report on the judiciary in 2016 by DAKSH, a Bengaluru-based organization that seeks to promote better governance and accountability in India.

‘Huge impediment’

The economic implications of India’s judicial backlog are hard to miss, a study on delays in the Indian Supreme Court by Simi Rose George of Harvard University’s John F. Kennedy School of Government found.

“A growing pool of empirical studies suggests that slow court systems discourage the growth of new businesses,” according to the study. Speedy disposal of civil suits reduced breaches of contract, encouraged investment, and facilitated access to finance and foreign direct investment, it found, citing research papers.

“The judicial process has now become a huge impediment in the implementation of very many large projects,” said Mohan Guruswamy, who heads the Centre for Policy Alternatives, a New Delhi-based research group.

Not only are judicial processes “extremely slow,” the courts increasingly had a tendency to pass comments and orders that require technical expertise. “Our courts are increasingly encroaching on the domain of the executive often giving the constitution a go-by,” Guruswamy said.

Sugar case

Even in cases where economic interest competes with the rights of people, the courts need to take a balanced approach, the top court said.

The “first duty of the court is to decide the case by applying the statutory provisions,” the court said.

“However, on the application of law and while interpreting a particular provision, economic impact/effect of a decision, wherever warranted, has to be kept in mind.”

In the judgment, the supreme court overturned a high court ruling which shut down Shivashakti Sugars Ltd.’s factory in the southern state

of Kanartaka, after a challenge from Shree Renuka Sugars Ltd. under a government mandate that stipulated there must be at least 15 kilometres between two sugar factories.

The top court noted that the Shivashakti Sugars had spent 3 billion

rupees (US$47 million) on setting up the unit, which employed 377 people directly and 7,000 indirectly.

“Public purpose demands that the appellant’s factory remain in operation and continue to function,” the ruling said. Bloomberg News advertisement

14 Business Daily Tuesday, June 6 2017

International In Brief PMI

Inflation squeeze, election jitters take toll on UK services UK services activity cooled more than economists expected in May, as election uncertainty and tightening household budgets weighed on demand.

IHS Markit’s Purchasing Managers Index fell to 53.8 from 55.8 in April.

That’s the weakest since February and below the reading of 55 forecast in a survey, though still above the 50-mark dividing expansion from contraction.

The report contrasts with stronger-than-expected surveys on construction and manufacturing last week. Markit said the three snapshots together point to the economy expanding at a 0.5 per cent rate after growth slumped to 0.2 per cent in the first three months of the year.

Eurozone

Germany and France keep growth pace at six-year high Growth in Germany was led by manufacturing while France’s expansion was driven by services Piotr Skolimowski

E

uro-area manufacturing and services continued to expand at the fastest pace in six years, powered by growth in the region’s two biggest economies -- Germany and France.

A composite Purchasing Managers’ Index held at 56.8 in May, unchanged from the previous month, IHS Markit said yesterday, confirming a May 23 estimate. A gauge for services slipped slightly, while one for manufacturing that was published on June 1 remained unchanged.

“The final PMI readings add to mounting evidence that the euro zone is enjoying a strong second quarter,” Chris Williamson, chief business economist at IHS Markit, said in a statement, adding that they point to a growth rate of 0.7 per cent. “The outlook for the euro-zone economy

therefore seems to be tilting to the upside.”

The European Central Bank is unlikely to adopt such optimistic language at its Thursday meeting in Tallinn. So far, President Mario Draghi has accompanied every mention that the recovery is becoming increasingly robust with a warning that risks remain tilted to the downside and argued that stimulus is still needed to boost inflation.

Input costs and selling prices eased somewhat in May but remained elevated and close to highs reached earlier in the year, IHS Markit said.

Service providers saw a strong increase in costs, often linked to wage pressures as staffing levels continued to increase.

“With the rate of job creation rising to one of the highest seen over the past decade, the recovery is also becoming more sustainable, as the improved labour market should feed

through to higher consumer spending,” Williamson said.

Output growth was fuelled by new orders, according to the report.

Optimism about the outlook for the year ahead jumped to its highest level since data collection started in 2012.

“The final PMI readings add to mounting evidence that the euro zone is enjoying a strong second quarter” Chris Williamson, chief business economist at IHS Markit Growth in Germany was led by manufacturing while France’s expansion was driven by services. Reuters

Parliamentary elections

Macron factor set to leap from presidency to parliament Bastions are crumbling and loyalties shifting ahead of France’s parliamentary elections. Emmanuel Macron (pictured), fresh from becoming the youngest French leader since Napoleon, now looks set to redraw the political map with a party he only formed a year ago. The ballots take place on June 11 and 18 and opinion polls predict Macron’s centrist Republic On the Move (LREM) party will comfortably win the majority that will be crucial to his ability to push through his ambitious reform agenda.

Such an outcome appeared uncertain before Macron’s presidential victory a month ago.

World Bank

Angola/Mozambique need fiscal consolidation The World Bank said in its Global Economic Outlook report that the Angolan and Mozambican governments must implement fiscal consolidation policies to ensure macroeconomic stability and speed up the recovery of their economies. According to the World Bank report published yesterday in Washington, on the domestic front, countries like Angola, Mozambique and Nigeria need to implement significant fiscal adjustment policies to sustain macroeconomic stability and fuel economic recovery. According to World Bank analysts’ forecasts, Angola is expected to have stagnated in 2016 and accelerate to 1.2 per cent this year, further reducing economic growth next year to 0.9 per cent.

Outlook

World Bank sees improving global economy but risks remain Advanced economies are continuing to grow but at a more modest pace The global economy is set to post solid growth this year, amid improving world trade and better performance by large emerging markets, but key risks could still threaten the outlook, the World Bank said Sunday.

Rising trade protectionism and policy uncertainty, primarily in the United States under President Donald Trump, pose important cautions for the outlook.

For the first time in four years, the latest edition of the World Bank’s Global Economic Prospects has not downgraded the growth forecast even as new problems have emerged.

The report said that “despite substantial policy uncertainty,” the global economy still is expected to grow by 2.7 per cent for 2017, rising to 2.9 per cent in 2018 and 2019.

“Global growth is firming, contributing to an improvement in confidence,” the report said. “A recovery in industrial activity has coincided with a pick-up in global trade, after two years of marked weakness.”

The seven largest emerging market economies -- China, Brazil, Mexico, India, Indonesia, Turkey and Russia -- remain the key engine for the world economy.

As a group, emerging market and

developing economies are expected to grow 4.1 per cent this year, led by India, which is expected to expand by 7.1 per cent, and China, at 6.5 per cent.

Meanwhile, Russia and Brazil are expected to return to growth after contracting for the past two years.

“A recovery in industrial activity has coincided with a pickup in global trade, after two years of marked weakness” World Bank report

Advanced economies are continuing to grow but at a more modest pace, with the United States expected to expand by 2.1 per cent this year, the euro area by 1.7 per cent and Japan by just 1.5 per cent.

However, “Substantial risks cloud this outlook,” the World Bank

cautioned.

“Increased protectionism, persistent policy uncertainty, geopolitical risks or renewed financial market turbulence could derail an incipient recovery.”

Although the report does not mention Trump by name, it notes that proposed tax cuts and infrastructure spending could boost the U.S. economy but were not factored into the forecast since they remain undefined.

“In contrast, should substantial changes in trade policies emerge, they might trigger retaliatory measures, damaging activity in both the United States and its trading partners,” the report warned, and they “could derail a fragile recovery in trade.”

In addition, restrictive U.S. immigration policies could reduce growth.

Just the suggestion by the Trump administration of “major shifts” in these areas can have an impact.

“Even without concrete changes, uncertainty about the direction and scope of U.S. policies could affect prospects for the U.S. economy and its main trading partners.”

The UK exit from the European Union also poses risks to the outlook, especially given the unknown outcome.

“A further increase in policy uncertainty from already high levels could dampen confidence and investment and trigger financial market stress,” the World Bank said.

Meanwhile, rising debt and deficits in emerging market economies remain a concern, making them “more vulnerable to financing shocks.” AFP

Business Daily Tuesday, June 6 2017 15

Opinion If corporations are people, they can be real jerks Satyajit Das a Bloomberg View columnist

C

ritics of globalization have named their enemies: those citizens of the world who, in British Prime Minister Theresa May’s scornful phrase, are really “citizens of nowhere.”

Populist leaders are championing policies to combat such cosmopolitanism -- restricting migration, rethinking regional trade deals, pressuring companies to create jobs at home.

Yet while it contains some truths, the populists’ diagnosis is incomplete. And that means their remedies are wrong, too.

The problem isn’t globalization per se, but the rise of what Henry James called a “hotel civilization.” Today’s multinationals lack a deep connection with the countries in which they operate. They’re as transient as hotel guests.

Thus, they seek short-term gains and ignore long-term costs. Many exploit natural resources and labour, taking advantage of low wages, favourable tax or regulatory regimes and weak environmental and labour protections.

They shift around profits in order to minimize taxes or other payments due to their host countries. Few are concerned about the collateral damage of their operations or display any interest in a lasting legacy.

Google Inc., Amazon.com Inc., Apple Inc. and Microsoft Corp. have all found themselves under investigation or in court on charges of evading taxes in countries where they have operations. Several U.S. companies are holding trillions of dollars offshore in part to avoid paying tax on repatriated profits. Globe-spanning resource giants have scarred the environments of many emerging nations.

A new superclass of entrepreneurs and executives -- as well as their supporting cast of financiers, consultants, lawyers and others -- flit between locations and employers with little allegiance to individual firms or local cultures. They’re often substantially removed from the communities in which they live -sometimes physically, in special economic zones or gated compounds. They avoid responsibility by making use of complex legal structures, hiding behind the corporate veil of limited liability or legal treaties.

It’s little surprise that companies have gotten away with this for so long.

Consumers in advanced countries are wilfully ignorant of or untroubled by how their cheap products and services are generated. Governments compete fiercely to attract investment and commerce; they can’t afford to be too stringent in their oversight. Ireland, Singapore and others tempt companies with low taxes.

Great Britain famously used its light-touch regulation to underpin the position of the City of London as a global financial centre.

The answer isn’t to reverse globalization, however, raising barriers so that companies hire and produce at home only. There are better, more targeted ways to enforce greater corporate responsibility.

The OECD’s “base erosion and profit shifting” initiative, for instance, combats efforts to move profits to low- or no-tax jurisdictions. The Trans-Pacific Partnership, if implemented, would raise environmental and labour standards in member countries. Allowing cross-border regulation and enforcement of claims against businesses would deter the worst corporate excesses. Global agreement on climate change, use of scarce resources such as water and geopolitical tensions would encourage companies to play by clear rules.

Ironically, all these measures require more cooperation and harmonization of policies, not less. Railing against elites and encouraging mistrust between winners and losers only distracts from this work and, indeed, makes finding consensus even more difficult. The disunity on display at the recent G7 meeting is, in this light, deeply worrying.

Reviving faith in globalization, which has contributed significantly to higher living standards around the world, requires radical and brave changes. Countries and corporations need to address issues of equity between different groups -- both within and between nationstates. The critics aren’t wrong to sound the alarm. They should only be careful that their “solutions” don’t do more harm than good. Bloomberg View

“Consumers in advanced countries are wilfully ignorant of or untroubled by how their cheap products and services are generated”

To lead on climate change, China should think small

I

t’s a common sight in rural China: rows and rows of low-rise apartment buildings, often topped by solar water heaters the size of kitchen tables. By one estimate, 30 million Chinese households rely upon the devices for hot water. They’re served by 3,000 companies that sell around one million of the devices annually.

Neither subsidies nor environmental guilt account for the sales, or for China’s place as the renewable hot-water capital of the world. Folks in rural areas have been buying them for two decades because they’re cheap to own and operate.

Ever since U.S. President Donald Trump announced the U.S. would withdraw from the Paris climate treaty, there’s been lots of overheated talk about how China will now seize leadership of the global fight against climate change. It’s easy to see why: Chinese leaders face pressure to address rampant pollution and have the resources to implement massive clean-energy projects, such as the world’s largest floating solar array, launched on a Chinese lake last week.

But if China truly is to lead th e w o r l d i n p r o m o ti n g renewables, it’s going to have to think small as well as big.

The real opportunity is in pushing innovative greentech -- especially the type that fits on a rooftop.

In fact, while China’s now the world’s biggest producer of renewable energy, its giant, utility-scale wind and solar installations have started to run up against serious problems. Thanks to the remote locations needed for such massive projects and the lack of sufficient transmission infrastructure to get the power back to major cities, as much as 17 per cent of all wind power and 20 per cent of all solar power generated in China goes to waste -- enough to power Beijing for a year.

The problem has become so acute that in February, China banned the construction of new wind power projects in six provinces for the rest of the year, lest more wasted capacity be added to the system.

Worse, some utility-scale generators are being forced to curb power production.

Moving major wind and solar projects closer to China’s biggest cities is virtually impossible. Given the rapid growth in the size of urban populations and ensuing sprawl, the vast acreages necessary simply don’t exist anymore. What land is available is far too expensive to justify devoting to windmills.

Developers would rather invest in glossy condos.

Yet other opportunities abound. At the end of 2014, for instance, rooftop solar accounted for just 17 per cent of China’s installed solar capacity.

“

Adam Minter a Bloomberg View columnist

In Germany, by contrast, rooftop accounts for at least 70 per cent. That gap should soon start to close: Bloomberg New Energy Finance forecasts that China will install 7 to 8 gigawatts of rooftop solar in 2017 -- an amount equal to the cumulative installed rooftop solar base up to 2016.

Anywhere but China, that would seem an overambitious target. But the same resources China’s brought to bear on megaprojects will help with smaller ones as well. For example, China’s National Energy Administration is piloting a program in rural areas to boost the incomes of two million poor Chinese, using rooftop solar. Villagers will become shareholders in cooperatives that manage local power substations and sell any excess power to the grid.

Making the scheme work will require overcoming some steep technical challenges, including developing the infrastructure to transmit energy from often remote villages to the grid.

Fortunately, State Grid Corporation of China, a power monopoly that dominates 26 of China’s 32 provinces, has awakened to the business opportunity that rooftop solar presents and is working to make it technically and financially feasible for households and businesses. In April, the company announced the launch of a cloud platform to serve the emerging rooftop market. It has several components, including an online marketplace where prospective users can purchase custom turnkey rooftop solar arrays and obtain the financing and subsidies to pay for them.

Most critically, State Grid is developing a system to meter and collect payments on behalf of customers with rooftop arrays. That shouldn’t be too hard: Nearly 96 per cent of State Grid’s customers already have smart meters. As China moves forward on planned utility deregulation measures in coming years, those systems will enable peer-to-peer sales of solar power -- and further encourage investments in small-scale renewable energy projects.

It can’t happen too soon. China is rapidly urbanizing, and each new building offers an opportunity to deepen its commitment to clean energy. If it really wants to be a leader in the fight against climate change, it should start on those roofs. Bloomberg View

Villagers will become shareholders in cooperatives that manage local power substations and sell any excess power to the grid

”

16 Business Daily Tuesday, June 6 2017

Closing Diplomacy

Saudi, Egypt lead Arab states cutting Qatar ties, Iran blames Trump A split between Doha and its closest allies can have repercussions around the Middle East Noah Browning

S

audi Arabia, Egypt, the United Arab Emirates and Bahrain severed their ties with Qatar yesterday, accusing it of supporting terrorism and opening up the worst rift in years among some of the most powerful states in the Arab world.

Iran -- long at odds with Saudi Arabia and a behind-the-scenes target of the move -- immediately blamed U.S. President Donald Trump for setting the stage during his recent trip to Riyadh.

Gulf Arab states and Egypt have already long resented Qatar’s support for Islamists, especially the Muslim Brotherhood which they regard as a dangerous political enemy.

The coordinated move, with Yemen and Libya’s eastern-based government joining in later, created a dramatic rift among the Arab nations, many of which are in OPEC. Announcing the closure of transport ties with Qatar, the three Gulf states gave Qatari visitors and residents two weeks to leave. Qatar was also expelled from the Saudi-led coalition fighting in Yemen.

Oil giant Saudi Arabia accused

Qatar of backing militant groups -some backed by regional arch-rival Iran -- and broadcasting their ideology, an apparent reference to Qatar’s influential state-owned satellite channel al Jazeera. “(Qatar) embraces multiple terrorist and sectarian groups aimed at disturbing stability in the region, including the Muslim Brotherhood, ISIS (Islamic State) and al-Qaeda, and promotes the message and schemes of these groups through their media constantly,” Saudi state news agency SPA said.

It accused Qatar of supporting what it described as Iranian-backed militants in its restive and largely Shi’ite Muslim-populated Eastern region of Qatif and in Bahrain.

Qatar said it was facing a campaign aimed at weakening it, denying it was interfering in the affairs of other countries.

“The campaign of incitement is based on lies that had reached the level of complete fabrications,” the Qatari foreign ministry said in a statement.

Iran saw America pulling the strings.

“What is happening is the preliminary

result of the sword dance,” Hamid Aboutalebi, deputy chief of staff of Iran’s President Hassan Rouhani, tweeted in a reference to Trump’s recent visit to Saudi Arabia.

Trump and other U.S. officials participated in a traditional sword dance during the trip in which he called on Muslim countries to stand united against Islamist extremists and singled out Iran as a key source of funding and support for militant groups.

U.S. Secretary of State Rex Tillerson told reporters in Sydney on Monday that the spat would not effect the fight against Islamist militants and that Washington has encouraged its Gulf allies to resolve their differences.

A split between Doha and its closest allies can have repercussions around the Middle East, where Gulf states have used their financial and political power to influence events in Libya, Egypt, Syria, Iraq and Yemen.

Fallout

The economic fallout loomed immediately, as Abu Dhabi’s state-owned Ethihad Airways, Dubai’s Emirates Airline and budget carrier Flydubai said they would suspend all flights to and from Doha from Tuesday morning until further notice.

Qatar Airways said on its official website it had suspended all flights to Saudi Arabia.

An aerial view of high-rise buildings emerging through fog covering the skyline of Doha. Lusa

Qatar’s stock market index sank 7.5 per cent with some of the market’s top blue chips hardest hit.

The measures are more severe than during a previous eight-month rift in 2014, when Saudi Arabia, Bahrain and the UAE withdrew their ambassadors from Doha, again alleging Qatari support for militant groups. At that time, travel links were maintained and Qataris were not expelled.

The diplomatic broadside threatens the international prestige of Qatar, which hosts a large U.S. military base and is set to host the 2022 World Cup. It has for years presented itself as a mediator and power broker for the region’s many disputes.

Kristian Ulrichsen, a Gulf expert at the U.S-based Baker Institute, said if Qatar’s land borders and air space were closed for any length of time “it would wreak havoc on the timeline and delivery” of the World Cup. “It seems that the Saudis and Emiratis feel emboldened by the alignment of their regional interests - toward Iran and Islamism - with the Trump administration,” Ulrichsen said. “(They) have decided to deal with Qatar’s alternative approach on the assumption that they will have the (Trump) administration’s backing.”

Qatar used its media and political clout to support long-repressed Islamists during the 2011 pro-democracy “Arab Spring” uprisings in several Arab countries.

Muslim Brotherhood groups allied to Doha are now mostly on the backfoot in the region, especially after a 2013 military takeover in Egypt ousted the elected Islamist president.

The former army chief and now president, Abdel Fattah al-Sisi, along with the new government’s allies in Saudi Arabia and the UAE, blacklist the Brotherhood as a terrorist organisation.

Egypt, the Arab world’s most populous nation, said on its state news agency that Qatar’s policy “threatens Arab national security and sows the seeds of strife and division within Arab societies according to a deliberate plan aimed at the unity and interests of the Arab nation.”

Oil prices rose after the moves against Qatar, which is the biggest supplier of liquefied natural gas (LNG) and a major seller of condensate - a low-density liquid fuel and refining product derived from natural gas.

Reuters

Infrastructure

Real estate

Overcapacity

Nepal, China sign mega hydropower agreement

Kushners hunting hard for a loan Tangshan starts new campaign to pay back Chinese investors to implement steel cuts

Nepal has signed an agreement with a Chinese company to build the largest hydroelectric plant in the impoverished landlocked country, which suffers from a chronic energy shortage.

Nepal’s energy minister Janardan Sharma on Sunday signed the agreement for the China Gezhouba Group Corporation (CGGC) to build the long-mooted 1,200 megawatt Budhi-Gandaki hydroelectric project.

Estimates put the project cost at US$2.5 billion. A financing agreement will be signed later, ministry spokesman Dinesh Kumar Ghimire told AFP. Water-rich Nepal has a mountain river system that could make it an energy-producing powerhouse, but instead it imports much of its electricity from neighbouring India.

Experts say it could be generating 83,000 megawatts, but its total installed generation capacity currently stands at less than two per cent of that.

Demand for electricity has long outstripped supply in Nepal due to chronic under-investment and inefficiencies in the power network.

India and China have vied for influence in the small country, with both pumping money into Nepal through large-scale infrastructure projects. AFP

The Kushner family real estate company is seeking a US$250 million loan to pay back Chinese investors in a New Jersey luxury tower but finding some major U.S. banks wary of the controversies around its White House links and the visa program used to attract the investors.

Kushner Cos. is sending out feelers for the loan against its 50-story Trump Bay Street in Jersey City. It would keep US$50 million and use the rest to repay the investors and pay off a mortgage on the building, according to a person familiar with the negotiations who asked not to be identified because the talks are private.

The company, which belongs to the family of Jared Kushner, President Donald Trump’s son-in-law and senior adviser, funded about a quarter of the US$194-million development through the EB-5 visa program that grants wealthy foreigners green cards in exchange for investing in U.S. projects.

Some large U.S. banks are shying away from the transaction because of the property’s connection to Kushner and the visa program, the person said.

Unregulated lenders and non-U.S. banks will probably step into the breach. A Kushner Cos. spokesman declined to comment. Bloomberg News

The major Chinese steel city of Tangshan has launched a fresh crackdown on mills that illegally restart production or violate industry overcapacity rules, according to a notice published by the China Iron and Steel Association yesterday.

Tangshan, in Hebei province, produced 88.3 million tonnes of steel last year, up 6.8 per cent on the year and more than the entire United States, putting it on the front line of the central government’s efforts to curb overcapacity in the sector. It aims to close around 8.6 million tonnes of annual production capacity this year.

But the city was the subject of a central government investigation earlier this year amid concerns that firms continued to raise steel output despite mandatory capacity cuts.

New guidelines drawn up by the Tangshan planning commission promise to put grassroots government departments under greater pressure to comply with anti-pollution and overcapacity guidelines, and identified the names of officials tasked with ensuring that shuttered plants do not reopen, power and water supplies are cut off and equipment dismantled.

The guidelines also cover illegal new capacity expansions in the steel, cement and coking coal sectors, as well as the closure of coal mines in the province. Reuters