Business Daily #1328 June 28, 2017

EU punishes Google with US$2.7 billion fine Internet Page 16

Wednesday, June 28 2017 Year VI Nr. 1327 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Debts

Amax tries to place chairman and CEO as administrator of Greek Mythology to demystify group funds Page 6

Labour

Unemployment steady at 2 pct in March-May period Page 5

www.macaubusinessdaily.com

Luxury

Genting subsidiary cancels seven air cruises to make way for VIP 10-day Golden Week Holiday Page 6

Retirement

Mainland pension gap growing Page 9

Re-claim Land

The largest of the five new urban reclaimed land areas will be completed this year, says the gov’t. In sync with the new HKZM bridge completion, says the gov’t. Delivering the plan for housing to be developed on the new area this year, says the gov’t. Issue of sand supply for building new land is resolved, says the gov’t.

Confident it will meet all deadlines, says the gov’t. Page 2

A successful musician outside Macau, touring with bands King Ly Chee and Daggar in Asia and North America. Drummer / drum teacher Ivan Wing says rehearsal and recording space is available but restrictive sound laws and lack of venues are stunting musicians’ growth. How can the city become the World Centre of Tourism and Leisure, he asks.

Entertainment Page 4

HK Hang Seng Index June 27, 2017

Kings of the sea

Territorial waters Ten inspection boats have been recently purchased.

At a cost of over MOP310 mln. In order to protect the MSAR’s newly expanded territorial waters, say Customs. Ranging from 8-metre inspection boats to 19 and 35-metre boats, from a variety of suppliers. Page 3

Promises from the port

Premier Li comments Premier Li Keqiang said China remains on track to meet its main economic goals for the year. Li made the comments yesterday at the World Economic Forum’s Annual Meeting of the New Champions gathering in China’s northeastern port city of Dalian. Page 9

25,839.99 -31.90 (-0.12%) Worst Performers

Geely Automobile Holdings

+4.12%

CK Infrastructure Holdings

+0.90%

China Resources Power

-2.33%

Sino Land Co Ltd

-1.23%

AAC Technologies Holdings

+1.59%

MTR Corp Ltd

+0.68%

Want Want China Holdings

-1.92%

Kunlun Energy Co Ltd

-1.22%

BOC Hong Kong Holdings

+1.49%

Cathay Pacific Airways Ltd

+0.50%

New World Development

-1.37%

China Mengniu Dairy Co Ltd

-1.18%

Tencent Holdings Ltd

+1.41%

Belle International Holdings

+0.49%

Hang Lung Properties Ltd

-1.24%

Galaxy Entertainment Group

-1.14%

China Shenhua Energy Co

+1.24%

Power Assets Holdings Ltd

+0.14%

China Life Insurance Co Ltd

-1.23%

China Petroleum & Chemical

-0.97%

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

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Stage fright

2 Business Daily Wednesday, June 28 2017

Macau

Construction

New land, new life The largest of the five new urban reclaimed areas will be completed this year with the government also preparing to provide a plan for housing to be developed in Zone A Nelson Moura nelson.moura@macaubusinessdaily.com

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ew Area Zone A, the largest of the five new urban reclaimed areas occupying 1.38 square kilometres, will be finished this year in sync with the opening of the Hong Kong-Zhuhai-Macau Bridge, the government said after a meeting of the Follow-up Committee for Land and Public Concession Affairs.

The government will also deliver the project for the housing to be developed in the New Area Zone A to the Infrastructure Development Office (GDI) at the end of this year, Secretary for Transport and Public Works Raimundo Arrais do Rosário said yesterday.

Altogether the five new areas will add 3.5 square kilometres to the MSAR area, with Zone A to be connected to the Macau Peninsula and the artificial island of the Hong Kong-Zhuhai-Macau Bridge.

The government is planning to create 32,000 housing units in the

LRT

The Light Rail Transit (LRT) was also discussed during the meeting with the Secretary, who assuring that the Taipa segment would be finished in 2019.

With regard to the Barra segment of the Light Rail Transit (LRT) the chairman of the Committee, Ho Ion Sang, said “only after the

reclaimed areas, with 28,000 being public and 4,000 being private, and with the majority to be in Zone A. The housing units will be developed in phases, said Secretary Rosario, to be initiate in the North area of Zone A, but without specifying the amount and type of housing.

The Secretary also underlined that the sand supply for the city’s new urban reclaimed land Zone A, that led to a one-year delay on its completion, had been “completely resolved and stabilised”.

According to the chairman of the Committee, Ho Ion Song, the area “traffic system” was also being developed in parallel with the Hong Kong-Zhuhai-Macau Bridge opening.

Access routes between Macau Peninsula and the artificial island where the border gates administrated by the three regions will be located, are currently under construction “with public tenders having been initiated in 2016”.

“The government is confident it can conclude these deadlines and

public tenders [are] initiated and proposals are evaluated” could the government provide a date for the development of the itinerary and the station on the Macau side.

“Changes related to the station and the Macau line will have to take into consideration the new territorial waters and society’s needs,” he added.

Purchase

is awaiting Chinese central government confirmation for the inauguration date of the bridge, that’s the essential,” he added.

In regard to the public housing development on the reclaimed area, Mr. Ho said that after three public consultations were conducted the government is advancing “step by step” with the development plan for the North region of Zone A’s “lane map” and “sewer system” already defined.

“After the roundabout next to Pearl Horizon there will be a connection with six driving lanes to the central area of Zone A, with the constructions making an effort to be concluded soon,” he added.

From B to E2

Zone B has already been completed, with Secretary Rosario saying he hoped the projects for the judiciary and administrative area to be created on the land plot could start this year.

The judiciary area will occupy the area in front of the MGM Hotel, with a park area to be developed next to the Macau Sciences Centre, it was explained by the government.

According to the chairman of the committee, the government assured them any development in Zone B would follow “UNESCO height limit recommendations” that were yet to be defined.

No environmental study for Pac On Ferry Terminal

While not legally obligatory, the project for the Pac On Ferry Terminal was not preceded by an environmental impact study, according to Portugueselanguage broadcaster TDM. The information was provided by

The Committee chairman said the government is also currently preparing the project plans for Zone C, which can be finished this year, with Secretary Rosario saying the plan for Zone D could “maybe” be completed next year.

The government is currently studying the tunnel connection that would connect the Macau Peninsula and Taipa, with the tunnel connection potentially happening between Zone B and Zone D, on the east side of Nobre de Carvalho Bridge.

In 2016, Mainland China-based infrastructure design company CCCC Highway Consultants was hired to produce a feasibility study related to the development of two tunnels between Macau and Taipa, expected for the third quarter of the current year.

Of the two separate areas in Taipa, the reclamation of the Zone E1, close do Amizade Bridge, is expected to be concluded this year, with Zone E2 already completed.

“In Zone E1, the government will build police installations for Customs and a centre for helicopter repairs,” Mr. Ho said.

A study on the feasibility of constructing a fourth bridge between Zone A in Macau to Zone E1 in Taipa is still being evaluated by the central government.

“The government is making an ecological impact assessment. Only after its conclusion can it initiate a concrete project for the bridge,” the Committee chairman said yesterday.

the Marine and Water Bureau (DSAMA) to the broadcaster although not falling under the department’s responsibility. The study would have informed of any potential impact upon the white dolphins, which activists note tend to gather around the airport zone (next to the ferry terminal).

Appeal

Macao Foundation purchases CESL Asia, Focus Aqua appeal DSSOPT dispatch decision mansion in Lisbon The Macao Foundation has bought a mansion in Lisbon, Portugal, from one of its board of trustees, Liu Chak Wan, according to Portuguese language broadcaster TDM. The purchase, for MOP70 million, was proposed by Liu to Macao Foundation and finalised in 2016, having never been announced to the public.

The mansion occupies 2,634 square metres in the centre of Lisbon and was acquired by Liu with the intention of converting it into a boutique hotel, the broadcaster notes.

The price paid to Liu Chak Wan for

the establishment is within the range of what real estate agency Engels & Völkers valued the house at in 2013.

The Court of Final Appeal (TUI) has denied a plea from CESL Asia Investments and Services, S.A. and Focus Aqua, Limited to annul a dispatch from the Secretary for Land, Public Works, and Transport (DSSOPT) which defined the programme, specifications and other elements of the procedure of a public tender for the attribution of a contract of operation and maintenance of the Residual Water Treatment Station on the Macau Peninsula.

According to official information, TUI has denied the appeal on the

claim that the petitioners filed a demand to annul the regulatory norms of the procedure, with the High Court contending that the texts regulating the tender constitute administrative acts.

TUI concluded there was an error in the form of process.

The companies had previously requested of the Court of Second Appeal the annulment of a dispatch published on March 29, 2016 by the DSSOPT Secretary, which was rejected on February 16, 2017 on the same premise. S.Z.

Business Daily Wednesday, June 28 2017 3

Macau Government

Securing the waters The government purchased more than 10 inspection boats in the last two months for MOP318.8 million in order to protect territorial waters Nelson Moura nelson.moura@macaubusinessdaily.com

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he control of the new territorial waters has led the government to purchase more than 10 inspection boats at a total cost of MOP318.8 million (US$39.7 million) over the last two months, the Macau Customs Service told Business Daily yesterday.

“In order to effectively manage the maritime area of 85 square kilometres, it is necessary to increase and upgrade service vessels to respond to policing, maritime search and rescue and other department needs,” Customs told Business Daily.

Yesterday, the government announced in the Official Gazette that it had purchased a non-disclosed number of 8-metre long inspection boats from Agência Comercial Milano and Chong Koi Macau Sociedade Unipessoal Lda., for MOP74.6 million, having announced in May the first purchases of territorial water inspection boats by the MSAR Government since 2012, according to Official Gazette records.

Official dispatches of inspection boat purchases do not disclose the number of vessels purchased or if they already include any type of equipment.

At the end of 2015, the Chinese central government increased the MSAR’s territorial waters to 85 square kilometres, with Customs saying at the time it had ‘adequately’ strengthened its equipment, replacing old boats and renovating technical equipment, while ‘re-implementing the permanent maritime patrol work to respond immediately to unexpected incidents’.

It was also stated at the time that three maritime operations would be installed in the East and South of the New Zone A to be developed, to collaborate with inspection boats working 24 hours per day.

On May 22, releases were published in the Official Gazette that two 35-metre inspection boats had been purchased from ferry transport company Yuet Tung Shipping Co. for MOP107 million, that six 19-metre ships were bought from Taiwanese company Lung Teh Shipbuilding Co., Ltd. for MOP100.3 million, with two 23-metre boats from Zhongchuan Group Guangzhou Shipping Industrial Company for MOP36.7 million.

When Business Daily questioned

the government on why so many diverse contacts were awarded for so many diverse costs, the department only stated the purchases were made to the public tender applicants that filled the requirements demanded

by Customs.

According to Jerry Wallace, the General Manager of MayWall Corporation Zhuhai, a company that produces and sells luxury yachts, the information provided by the government is not enough to assess if the price accepted was adequate.

“It’s like cars: you can have one side by side with the same weight, and one might cost nothing and the other one more year of your salary than you’re willing to think about.

It’s the same with boats (…) All it takes to go fast is money,” Wallace told Business Daily.

The American businessman told Business Daily that he had

information about a bid from the Macau Government for three 8-metre boats, which would be around RMB1.8 million (MOP2.1 million) for each boat, but could not confirm if it was the same contract presented on Monday.

Questioned if the ships were already equipped and as to what kind of equipment would be installed, Customs only said that due to issues of ‘internal security’ this information could not be revealed.

According to the Customs website it possesses two types of inspection boats, class A and class C, without specifying their characteristics.

Public tender notices published by the government about the boats’ purchase also do not include details of the ships’ characteristics.

This newspaper also contacted the companies involved about the ships involved in the deals but no response was provided by the time this newspaper went to print.

five companies submitted a proposal for the bid; namely, Arcadis Design & Engineering Limited, Aecom Asia Company Limited, Consulplano – Viatúnel, Estudos, Projectos, Planeamento e Fiscalização de Empreendimentos, S.A., and Consulgal – Consultores de Engenharia e Gestão, S.A. Mott MacDonald Hong Kong Limited did not present a proposal.

The most expensive proposal was

submitted by Arcadis, at MOP310.37 million.

The less costly proposal of Aecom Asia came in at MOP184.70 million.

According to Article 7, paragraph 2 of the law related to the acquisition of goods and services made by the Macau SAR Government (Law no. 30/89/M) a public tender is not compulsory for ordering or obtaining studies, projects, services of technical consultancy and oversight of works.

Price for equipment

Infrastructure

Public tender in the pipeline The Office for the Development of Infrastructure says it is preparing the public tender for the construction of the fourth Bridge between Macau and Taipa Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The Office for the Development of Infrastructure (GDI) announced yesterday that it ‘will soon launch the preparatory works for the public tender and elaboration of the budget of the fourth Macau-Taipa bridge.’

In the note published on GDI’s website yesterday, the office re-affirmed that the feasibility study for the construction of the fourth bridge was concluded and submitted for analysis and approval in 2016.

In previous communications with Business Daily, it said that the study was being evaluated by the central

government.

In reply to our enquiries of yesterday, the Office added that the study is still “awaiting approval.”

Oversight contract

The contract for the services of oversight and management of the project and budget awarded to Ove Arup & Partners Hong Kong Limited for a total consideration of MOP188.37 million, announced on Monday, was the second cheapest offer by the six companies invited to bid for the service. The total time allotted for completing the contract is 1,430 days.

According to GDI’s website, only

Cross-border transportation

Tender for HZMB shuttle buses around the corner The bidding process for the provision of shuttle bus services for the Hong Kong-Zhuhai-Macau Bridge (HZMB) will run from June 29 to July 12, according to information published in the Hengqin New Area official online portal.

Transportation authorities from the three areas – the Transport Bureau

(DSAT) of Macau, the Guangdong Provincial Communications Department, and the Transport Department of Hong Kong – jointly invited public bids for the service on June 15, according to information published on DSAT’s English website. The Portuguese language side of the website does not carry the same notice.

The authorities aim to select an operator for the shuttle bus provision serving the boundary crossing facilities of the HZMB. In particular, two kinds of shuttle bus service will be provided. One will run from the Hong Kong harbour to the port of Zhuhai, while the other will transport passengers from

Hong Kong Harbour to Macau Harbour (Zone A).

According to DSAT, the operator will be required to provide between 90 and 140 shuttle buses for daily operations, with some 30 vehicles reserved as backup. S.Z.

4 Business Daily Wednesday, June 28 2017

Macau Culture

Drumming away the music pain Local professional musician and drummer Ivan Wing believes that for Macau to create a true music industry, the government should be more open-minded with regard to noise restrictions and work licences for musicians, while increasing the amount of venues and concert locations Nelson Moura nelson.moura@macaubusinessdaily.com

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drummer since he was 16, Ivan Wing is a local professional musician and drumming teacher, having contributed to the percussion for hardcore bands such as King Ly Chee and Dagger in numerous concerts and tours of Asia and North America.

The musician spoke to Business Daily about the struggles to become a full professional musician in Macau, a city lacking in musical appreciation and with little help from the government.

“Just playing music in Macau, it’s somehow impossible. It’s possible, but you’ll have a low salary with the inflation and prices in the city. You’ll starve a bit,” he tells Business Daily.

Having started drumming in 2006, Wing started teaching almost two years ago, saying that: “basically 70 per cent of my income is teaching and 30 per cent live gigs”.

“I like to do both, with live concerts you have the pleasure of seeing the crowd’s reactions and with teaching you have the pleasure of seeing your student improve.” Although Wing says finding studios to record in or rehearsal areas is easy in Macau,

opportunities to play outside in real venues or shows are scarce.

The lack of proper venues to play legally, besides hotels, also restricts music professionals in the options they have to improve their skills, while removing entertainment options for residents and tourists, Wing believes.

“If the government wants to develop Macau as a World Centre of Tourism and Leisure, they should have more venues to keep people entertained when they come here, or [in which] local musicians can work more” Ivan Wing, professional drummer advertisement

“If the government wants to develop Macau as a World Centre of Tourism and Leisure, they should have more venues to keep people entertained when they come here, or [in which] local musicians can work more,” he says.

The lack of shows, coupled with the lack of flexibility in terms of work permits for artists and musicians coming for concerts also hinders the creation of a welcoming environment for non-resident musical talent, the musician believes.

“Even the Live Music Association (LMA) [a local live music venue] I don’t think it’s legal; people need to have permission from the government. They just arrive at night, play and leave,” he says.

He notes that the neighbouring city suffers from similar problems, with Hong Kong having arrested British band TTNG and U.S. musician Mylets in March of this year during a concert at a warehouse venue for working without the required permit.

Keeping the beat

For the musician, the local government has helped the music industry with measures such as the Continuing Education Development Plan, which assists local citizens aged 15 or above to participate in local or overseas educational programmes by disbursing MOP6,000 per person.

“It helped a lot of music business centres and local musicians, allowing them to give lessons. However, people think the money is free and maybe 60 per cent of the people are not really appreciating the opportunity to learn music. Paying students will practice a lot and appreciate the lessons. They just have extra money and want to use it,” he says.

Certain measures, such as the implementation of the current sound control law in 2016 did not help, allowing local residents to call authorities for noise over the permissible limit and with bands risking fines in the event of infraction.

“If you are 10 decibels over the established limit, people can call the police and report it. I saw an advertisement of the sound control law (…) It’s so stupid, the advertisement relates loudness to bands.

We’re making music not noise,” he says.

Born and raised in Macau, the drummer plays a lot of concerts in Hong Kong, a city he believes has a larger appreciation of music and the arts in general.

“I think people [in Macau] only see art as a hobby […] The culture is different between Hong Kong and Macau. In Hong Kong, there’re a lot of competitions which allow musicians to improve and get known,” he tells Business Daily.

New trends

For Wing, no musician is able to fully make a living in Macau, with the drummer not seeing a true music culture in the city, as free festivals like Hush even struggle to attract people, while paid festivals in Hong Kong and the Mainland never lose their fan following.

However, getting rights for the music his bands create is not a problem for Wing, since in the new music world musicians take their business into their own hands.

“We don’t have a record label: we just do it ourselves, record it ourselves, and release it ourselves. We put our music into Apple Music and Spotify so if people play it, the money comes straight to our pockets,” he says.

His bands even produces cassettes through a label in Singapore, with Wing saying “vinyl and cassettes” are the new trend, with CD’s coming out through the back door.

“Vinyls are collectible, you can see the artwork and the sound is better that CD. The vinyl scene is just starting in Macau, there are some places in the city selling them but it hasn’t arrived yet. It has to arrive in Hong Kong first,” he concludes.

Business Daily Wednesday, June 28 2017 5

Macau Workforce

Staying employed General unemployment rate remains stable at 2 per cent between March and May

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he unemployment rate was up 0.1 percentage points year-on-year in the MarchMay period, according to data from the Statistics and Census Service, the first time since 2012 that the unemployment rate has hit 2 per cent during the three-month period after dips to 1.8 per cent in 2013 and 2015 and 1.7 per cent in 2014.

Although the rate is the same as experienced since the 0.1 percentage point uptick of the November 2016 – January 2017 period, the unemployment rate of local residents actually fell 0.1 percentage point period-to-period, reaching 2.6 per cent.

The underemployment rate in the territory was down by 0.1 percentage points also, reaching 0.4 per cent, according to DSEC. The overall labour force participation rate was high, at 71.1 per cent, unchanged from the previous period, while that of women saw a slight uptick of 0.3 percentage points and men fell by 0.3 percentage points, period-to-period. Overall, the male labour force participation rate was 76.1 per cent, while that of females was 66.8 per cent.

Total employment was 381,800, of a total of 389,400, both undergoing rises of 0.1 per cent period-to-period.

Those employed in the construction industry saw the largest drop in employment period-to-period, with a 4.5 per cent drop, to 34,900, while those in restaurants and similar activities

also suffered a drop of 4.3 per cent, to 22,600.

Employment in the gaming and junket activity sector rose to 81,900, a 1.1 per cent increase, like hotels and similar activities, which saw a 1.7 per cent uptick, to 31,900.

Those employed in wholesale and retail reached 46,500, a 0.1 per cent increase period-to-period.

By industry, recreational, cultural, gaming and other services made up 24.5 per cent of the city’s total employment, with hotels, restaurants and similar activities occupying 14.3 per cent.

Public administration and social security made up just 7.3 per cent, while real estate and business activities were 8.1 per cent. Construction lagged the wholesale and retail trade at 9.1 per cent as compared to 12.2 per cent.

Domestic work made up 7.1 per cent of total employment by industry in the March-May period of this year.

Courtesy of DSEC

Courtesy of DSEC advertisement

6 Business Daily Wednesday, June 28 2017

Macau Air cruise

Golden week air cruise replaces seven VIP trips Air cruise marks the debut of a new 84-seat Boeing 777 by Genting HK subsidiary, later to be used for ‘other charters and special interest AirCruises’ Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

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fter cancelling a series of seven air cruises for VIP clients, travel group Crystal Cruises has replaced the trips with a Golden Week Holiday AirCruise, set to take off either from the MSAR or Hong Kong ‘depending on client preference’, according to a company release.

The trip, set for September 29 to October 8, will be run by the parent company of Crystal Cruises, Genting Hong Kong, which also holds a 45 per cent stake in Resorts World Manila, subject of the recent theft and arson attack in the Philippines.

The air cruise will mark the debut of the group’s recently purchased Boeing 777, with the plane going on to be ‘available for other charters and special interest AirCruises’ afterwards, according to the release, noting that the offering is a ‘distinct luxury option that is in great demand and is unmatched by any hotel, resort or cruise line in the world’.

To be delivered to Crystal Cruises on August 1, the jet offers 84 seats, a stand-up bar, a wine cellar and an executive chef, with the President

of Genting Cruise Lines, Kent Zhu, noting that the itinerary for the debut air cruise “will be attractive to all Asians, including three-generation families, who often travel together during this extended holiday period”.

With the detailed itinerary “set to be unveiled by the end of June,” the overall target of the offering is “guests and groups who wish to explore global destinations, events and culinary delights in multiple places, flying non-stop up to 19 hours between destinations,” points out Crystal CEO and President Edie Rodriguez.

The group cancelled seven other trips the jet was set to undertake both this year and next (see box). Business Daily contacted Genting Hong Kong and Crystal Cruises for comment, but had not received a response by the time this went to print. The release informs that ‘Travelers booked on all previously-scheduled Crystal AirCruises journeys in 2017 and 2018 will receive a full refund and a complimentary experience on a Crystal

Ocean or River cruise in either 2017 or 2018’.

Contacted by Business Daily, the Civil Aviation Authority of Macau stated that ‘up until now we did not receive any flight application from Crystal Air Cruises,’ to operate out of the MSAR. The air cruises will join Crystal’s two river yachts (with four more in the pipeline), two ocean vessels (both with capacity for about 1,000 guests), and a 12-guest jet.

“Our growing fleet of luxury vessels only increases the options available for these guests, as the standard of customized luxury and personalized service remains unparalleled throughout the Crystal fleet,” states Rodriguez.

Cancelled flights:

-Peninsula Grand Inaugural Crystal AirCruise - August 31, 2017 -Around the World: Iconic Sites - October 21, 2017 -Holidays Around the World - December 22, 2017 -Temples, Treasures & Safaris - March 31, 2018 -Savouring the Winelands - June 1, 2018 -Exotic Adventures - September 8, 2018 -South Pacific Explorer - October 13, 2018

Photo courtesy of Crystal Cruises

Court

Acquisition

Mythical finances

Neptune expands business

Amax tries to install chairman as administrator of Greek Mythology to access financials

Neptune Group Limited has announced the completion of the acquisition of a company in the hospitality business as well as a deal for the renewal of a lease on June 26, according to a filing with the Hong Kong Stock Exchange.

Upon the completion of the acquisition of 30 per cent of the equity interest in and the shareholder’s loan owing

by Ever Praise Limited, the company has become an associate of Neptune.

In addition, upon completion of the acquisition of the entire equity interest in and shareholder’s loans

In the most recent development of the case relating to the Beijing Imperial Palace Hotel, Amax International Holdings Limited, the company holding a 24.8 per cent stake in Greek Mythology, operator of the Greek Mythology Casino, has submitted an application ‘to the Court of Macau, SAR for a court order to appoint Mr. Ng Man Sun, the Chairman and Chief Executive Officer of the Company (Amax), as the administrator of the Associate (Greek Mythology)’.

Amax International has been unable to accurately calculate its financials ‘due to Greek Mythology’s refusal to provide the Company with its valid financial information since 2012’ according to Amax’s annual results filing, resulting in a series of legal procedures by Amax.

Greek Mythology casino is located in the Beijing Imperial Palace Hotel – the first 5-star hotel in the MSAR

to be temporarily closed by the local government.

While noting that Greek Mythology had turned over ‘what purported to be the management accounts of the Associate for the years ended 31 March 2013 and 31 March 2014, respectively,’ Amax did not receive ‘any notice from the Associate (Greek Mythology) to convene a general meeting to approve the annual accounts,’ noting that Greek Mythology ‘has failed to provide all documentation concerning the annual accounts necessary for the Company for audit purpose’.

To counter this, the group hopes that ‘if the Court Order is granted, the Company would be able to get access to the books and records of the Associate,’ the most recent filing announces. The application was submitted June 19, with confirmation received by Amax from its lawyer on June 22. K.W.

owing by Harbour Bay Hotels Limited, the latter has become an indirect wholly-owned subsidiary of the company.

The company also noted that Harbour Bay shall pay a rent at the rate of HK$544,500 (US$69,804/ MOP560,835) per calendar month to Ever Praise for leasing the Hotel Portion (except the fourth floor of the Hotel Property) of the Harbour Bay hotel, located in Tsim Sha Tsui, for an additional term of three years commencing May 1, 2019 and ending April 30, 2022. S.Z.

Property

Success Universe rents from itself Lottery business and Ponte 16 operator Success Universe has announced that it will be renting a new space in central Hong Kong in the Admiralty district, according to a filing with the Hong Kong Stock Exchange. The HK$465,348 monthly rental fee will be paid out by Success International Management Services, which is wholly owned by Chairman of the Board Sonny Yeung Hoi Sing, to

Good Sun Development Limited – a wholly owned subsidiary of Success Universe.

The current rental period is for two years with an optional two-year extension, ‘at the then open market rental’, with a rental exemption from July 2 until September 1 this year, due to current occupants, notes the filing. The intention of the space is for office use.

Business Daily Wednesday, June 28 2017 7

Gaming Tycoons

High returns don’t run in the family for Asia’s empires different from building something out of nothing,

The challenge of defending dominance in an increasingly competitive global environment is very different from building something out of nothing

Ho’s Macau gaming monopoly 1962-2002

Shelly Banjo

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hree of Asia’s wealthiest tycoons are stepping down from the empires they built, and investors shouldn’t assume their scions will carry the torch as effectively.

Gaming magnate Stanley Ho retired as chairman of Shun Tak Holdings Ltd. on Monday, ending a lifelong mission to build what was once Asia’s largest casino operator. Billionaire Shin Kyuk-ho stepped down from Lotte Group, the chewing gum maker he transformed into one of South Korea’s top conglomerates. And Li Ka-shing stirred the region after the Wall Street Journal said Hong Kong’s richest man would retire as chairman of flagship CK Hutchison Holdings Ltd. by next year.

Children of all three founders are set to take over the family businesses.

The story of Asia’s ascent can’t be told without tycoons like Li, Ho and Shin, who built skyscrapers, ports and manufacturing hubs, often from scratch. First-mover advantage and

Stanley Ho stepped down as Chairman of Shun Tak on Monday

strong political connections helped them consolidate power and build wealth in tandem with the region’s rising economic fortunes. Many investors, including institutions, have been loyal to these companies out of patriotism or sentimentality.

Yet, there’s little evidence the second generation can keep their parents’ businesses flourishing.

One study of more than 200 family-owned businesses in Hong Kong, Singapore and Taiwan found that, on average, a shareholder who invested US$100 in a Chinese firm five years before the founder’s departure would be left with an average US$44 at the

succession, according to Joseph Fan, co-director of the Institute of Economics and Finance at the Chinese University of Hong Kong. Following the succession, that lost value is rarely recovered.

Perhaps the biggest factor in value erosion can’t be analyzed from balance sheets.

Intangible assets, such as political connections and tightly intertwined networks, can disappear among a progeny that’s typically Western-educated and less used to traditional ways. And the challenge of defending dominance in an increasingly competitive global environment is very

Take Stanley Ho, who formed his Macau-based gambling empire with the help of a four-decade government monopoly in 1962. The island was closed to foreign gaming companies until 2002. His successor, daughter Pansy Ho, won’t enjoy the same monopolistic perks.

As markets in Hong Kong and China matured, Li Ka-shing, too, shifted much of his business elsewhere. His American-educated son and successor, Victor Li, is more adept at striking deals and managing assets in developed markets, where his Stanford University degree can serve him better.

In a study of 70 M&A transactions led by the younger Li between 2003 and 2013, another study by Fan found that shares in Li Ka-shing’s flagship businesses rose 1 per cent to 3 per cent following deals announced by Victor in developed markets like the U.K. or Canada. By contrast, they fell by 1 per cent to 2 per cent following deals in emerging markets including China and India.

Finally, the asset-heavy businesses like shipping and telecom that shaped the fortunes of the old guard are falling out of favor with investors drawn to the so-called new economy: technology, biotech and renewable energy. And entrepreneurial flair isn’t hereditary. Bloomberg Gadfly advertisement

8 Business Daily Wednesday, June 28 2017

Greater china Premier Li

Nation can control risks, hit 2017 growth target Premier stressed the importance of job creation

in May, but tighter monetary policy, a cooling housing market and slowing investment reinforced views that it will gradually lose momentum in coming months.

Kevin Yao and Tony Munroe

Financial risks

C

hina is capable of achieving its full-year growth target and controlling systemic risks despite challenges, Premier Li Keqiang said yesterday, adding that maintaining medium to high-speed long-term growth will not be easy.

Beijing targets economic growth of around 6.5 per cent in 2017, compared with the 6.7 per cent pace delivered in 2016 - the slowest in 26 years.

In a speech at the World Economic Forum (WEF) in the north-eastern city of Dalian, Li said the Chinese economy remains steady in the second quarter, as domestic demand has become a key pillar for the world’s second-largest economy.

“China’s economy in the seco n d- q u a r t e r m a i n ta i n e d th e first-quarter’s steady and improving momentum. We are fully capable of achieving the main economic targets for the full year,” Li said.

“Currently, China also faces many difficulties and challenges, but we are fully prepared,” he said.

China’s economy, which grew a robust 6.9 per cent in the first quarter, generally remained on solid footing

Beijing has been taking steps to identify and resolve financial risks, which remain generally under control, Li said.

Among those risks is high levels of debt, which recently prompted Moody’s to cut its sovereign credit rating on China. Li said that the capital adequacy ratios and provisions for bad loans at Chinese banks were at relatively high levels.

“There are indeed some risks in the financial sector, but we are able to uphold the bottom line of no systemic risks,” he said.

“We are fully capable of preventing various risks and making sure economic operations will be within a reasonable range.”

Li also said Beijing will facilitate foreign investment by relaxing restrictions on how much overseas firms can own of China ventures and making it easier for them to register new companies locally.

China will give foreign investors greater market access to services and industrial sectors as well as treat foreign and domestic firms equally, the premier said - pledges that the government has made before.

He added that China will encourage foreign firms to reinvest their profits

Premier Li Keqiang

in the country but will not restrict the cross-border movement of their earnings.

Driving demand

China is trying to bolster consumer-driven growth while curbing excess and out-dated capacity in industries such as steel and coal, cuts that Li said will continue.

Li stressed the importance of job creation, and noted that while new technologies such as artificial intelligence and robotics could cause job losses, those are offset by growth sectors such as e-commerce, mobile payments and bike-sharing.

Employment has remained stable, Li said, with the survey-based jobless rate at around 4.9 per cent in May – the lowest in many years.

China wants to maintain

medium- to high-speed economic growth over the long term, as “no development is the biggest risk for China”, Li said, noting that the economy’s sheer size made it harder to rack up high growth rates.

“It will not be easy for China to sustain a medium- to high-speed growth rate over the long term,” he said.

Global markets continue to fret about the outlook for China as policymakers have tightened financial conditions and cracked down on wanton growth in debt to defuse bubble risks.

Authorities have also taken steps to stabilize the yuan currency and reassure investors that Beijing remains committed to reforms of the capital markets, even as it puts up curbs to stem the outflow of funds. Reuters

Deleveraging

Debt squeeze has Moody’s awaiting first local default A Ministry of Finance circular dated April 26 barred municipal governments from giving ownership of public assets or land to their local financing companies China may finally be ready to cut the cord when it comes to the country’s troubled local government financing vehicles (LGFV).

Beijing’s deleveraging drive has seen rules impacting LGFV debt refinancing tightened, spurring a slump in issuance by the vehicles, which owe about RMB5.6 trillion (US$818 billion) to bondholders and are seen by some as the poster children for China’s post-financial crisis debt woes.

“The central government might need an LGFV default to send a clear signal to the market that it won’t always bail them out” Ivan Chung, , head of Greater China credit research at Moody’s Investors Service

Signs the authorities may be taking a less sympathetic view of the sector has ratings companies flagging the possibility that 2017 could see the first ever default by a local financing vehicle.

A Ministry of Finance circular dated

April 26 barred municipal governments from giving ownership of public assets or land to their local financing companies and prohibited the use of revenue from land sales to help the vehicles repay their debt.

This move “effectively closed the door” on Beijing’s support for the vehicles, as this was a key way for them to bolster their repayment abilities, said Ivan Chung, head of Greater China credit research at Moody’s Investors Service. “The central government might need an LGFV default to send a clear signal to the market that it won’t always bail them out.”

Allowing one of the vehicles to default would be a shift for Beijing, whose support for local financing vehicles has been taken for granted by investors as a symbol of the lengths

the authorities will go to bubble wrap China’s economic recovery.

In 2015, officials created a new budget law and bond swap program to ease the debt burden of LGFVs, which were used by municipal governments after 2008 as a way of raising cash to meet funding shortfalls when local bodies themselves were prohibited from issuing debt on their own. Since then, provincial-level governments have been allowed to sell bonds of their own accord with the finance ministry setting a cap on outstanding debt each year.

Notoriously immune to negative news flow in the past, local financing vehicle yields have spiked this year as traders speculate about the central government’s support. China saw the first ever credit downgrade of an LGFV by an international ratings agency in April, and Moody’s flagged the sector as a source of increasing contingent liabilities when it reduced the Chinese sovereign’s rating last month.

While LGFVs face a record amount

of maturing debt this year, the finance ministry’s curbs saw sales slide 70 per cent in May from the previous month to RMB50 billion. This is down from an all-time high of RMB2.1 trillion in onshore sales last year, and the US$12.7 billion of debt raised offshore. The implicit guarantee that had been provided by the local financing vehicles’ municipal parents had encouraged borrowing.

The ministry has also asked for a nationwide check of debt guarantees by local governments by July 31.

“LGFVs will face a tougher second half,” S&P analyst Gloria Lu wrote in a research note in May. “The pressure to weaken their ties with local governments and market liquidity stress are likely to result in the credit crunch. The first LGFV default may emerge.”

Defaults ‘certain’

For China Lianhe Credit Rating Co. -- a Beijing-based agency 49-per cent owned by Fitch Ratings -- the appeal of local financing vehicle bonds has been the result of “excessive optimism” as investors scrambled for high yields. “The companies’ credit qualities vary greatly, so defaults will certainly occur,” Lianhe said in an email in response to questions.

Investors are already demanding additional returns, with the premium on AA rated five-year LGFV notes over sovereign debt climbing earlier this month to the most since July 2015, ChinaBond data show.

“Going forward, investors will pay more attention to the underlying credit quality and differentiate higher quality credits and lower ones more than before,” said Raymond Gui, who helps oversee US$1.7 billion at Income Partners Asset Management (HK) Ltd. Bloomberg News

Business Daily Wednesday, June 28 2017 9

Greater China Entertainment

In Brief

Hollywood auditing Mainland’s box-office for first time Ticket-sales growth slowed to less than 3.7 per cent in China last year The lobbying group for Hollywood’s top studios is auditing China’s box-office figures amid concern that ticket sales have been reported inaccurately, according to a person familiar with the matter.

The Motion Picture Association of America, which represents the six major studios, hired an accounting firm to audit sales of selected films for the first time, said the person, who asked not to be identified as the matter is private. The results may come as soon as the third quarter, the person said.

Results of the audit are important for major Hollywood studios such as Walt Disney Co. and Viacom Inc.’s Paramount Pictures because hundreds of cases of revenue misreporting have been documented in China.

In revenue-sharing deals, studios receive 25 per cent of box-office sales, so getting accurate figures is vital.

In addition to films shown in China under revenue-sharing agreements, Hollywood studios export movies to the country on a flat-fee basis.

Ticket-sales growth slowed to less than 3.7 per cent in China last year, compared with more than 35 per cent average growth in the previous five years. China’s still growing faster than the rate of about 2 per cent for North America last year, according to MPAA data.

Hollywood’s biggest studios have been counting on growth in China, where consumer spending on movies is expected to surpass that of the U.S. in coming years.

For example, Comcast Corp.’s Universal Pictures, Sony Corp.’s Sony Pictures and Paramount have struck deals with local partners to fund movies and help market them in China. Others such as Time Warner Inc.’s Warner Bros., in collaboration with mainland companies, have started local-language productions.

Yet, the figures don’t always add up.

In November, China approved new fines for falsifying box-office sales, in some cases as much as five times the illegal gains. China’s State

Administration of Press, Publication Radio, Film and Television penalized more than 300 theatres in March for under-reporting ticket sales, the regulator said at the time. The biggest penalties were 90-day suspensions of operations for exhibitors that understated revenue by more than RMB1 million (US$146,000). Theatres and distributors face revocation of licenses in “very severe” cases, according to the law, which took effect in March.

‘Hollywood’s audit is part of a market-access agreement Chinese officials reached with the Motion Picture Association of America almost two years ago’ Hollywood’s audit is part of a market-access agreement Chinese officials reached with the MPAA almost two years ago, details of which haven’t been disclosed to the public.

The audit would also fulfil a promise by the Chinese industry to American filmmakers in 2015, during Chinese President Xi Jinping’s U.S. visit.

China Film Group, the state-owned giant in charge of importation and distribution of Hollywood films in China, pledged at the time to allow international auditing of box office sales.

The box-office check-up also comes as the U.S. and China are set to revisit a 2012 World Trade Organization joint memorandum on film distribution rights and as the MPAA seeks to increase the number of U.S. films available to Chinese viewers.

Under the previous agreement, if this year’s consultations fail to produce a deal by Jan. 1, the U.S. could pursue procedural action against China in the WTO. Bloomberg News

Retirement

Pension gap growing as aging becomes economic risk Pensioners in Guangdong are supported by more than nine working people It’s no secret that China is an aging society facing a growing pensions bill.

Just how much of that bill is unfunded seems to be one though.

It’s an increasingly urgent question, as nearly a third of the inhabitants of the world’s most populous country will be over 60 years old by 2050, according to United Nations data. By 2015, the pension of each retired resident was borne by the contributions of fewer than three wage-earners, government estimates show.

When China set up the current pension system in early 1990s, a shortfall immediately emerged, as the government began making payments to the already-retired using the current contributions of the working population, without there being any cash pile from the previous generation.

The problem was exacerbated in the late 1990s, when millions of workers at state-owned enterprises were laid off and were offered pensions even though they haven’t reached retirement age.

There are a few unofficial estimates of the gap, such as that from Enodo Economics contributor Stuart Leckie, who has advised China’s government on the matter. Leckie projects the hole will expand to RMB1.2 trillion by 2019, weighing on public debt.

No official data is available.

Data on the gap isn’t available in the National Council for Social Security Fund’s annual report. The Ministry of Human Resources and Social Security used to publish a report on China’s social insurance in 2014 and 2015, which offered a glimpse into the nation’s pension burden, but stopped doing so since 2016. The ministry didn’t respond a request for comment.

“The lack of public information on the issue has made tackling it more difficult” Yang Yansui, a public governance professor at Tsinghua University in Beijing “The lack of public information on the issue has made tackling it more difficult,” says Yang Yansui, a public governance professor at Tsinghua University in Beijing, adding that the gap continues to widen and is more serious in places such

as northeast China where state-led enterprises take up a bigger share in the economy.

The dynamic migration triggered by urbanization has led to a noticeable regional diversification in terms of the pension burden.

Pensioners in Guangdong are supported by more than nine working people, as young Chinese rush into the prosperous coastal province, seeking better opportunities and, when they find them, making contributions to the local pension fund.

The ratio of pensioners-to-working is about 1:1.5 in Jilin and Heilongjiang, two provinces in China’s northeast rust belt, which has seen population outflows in recent years.

The pension burden adds to the fiscal stress in less-developed provinces and impedes their initiative to catch up with developed areas by improving public services and attracting outside investment.

The government appointed reform-minded official Lou Jiwei to head the National Council for Social Security Fund late last year, a sign that it’s serious about dealing with the issue. And this year Premier Li Keqianq committed to transferring some of the profit of state-owned companies to the fund to fill the gap, but so far no updates have been released.

Enodo says the main problem is that the pensioner population will grow rapidly as the workforce dwindles, and that a more structural response than just plugging the hole is needed. “The answer is to raise the low retirement age and let pension funds invest in higher yielding assets,” the report argues. Bloomberg News

Forex

State banks selling dollars to push yuan Chinese state-owned banks sold dollars in the onshore foreign exchange market to prop up the Chinese currency yesterday afternoon, traders said. “Major state-owned banks were selling dollars in the market to lift the yuan by more than 150 pips,” said a trader at a Chinese bank in Shanghai. A second trader at a Chinese bank also said he saw sales by state-owned banks. The yuan strengthened around 200 pips to a high of RMB6.8199 per dollar in afternoon trade, the strongest intraday level since June 19.

Public workers

Taiwan passes civil service pension reform bill Taiwan’s legislature passed a bill reforming pensions for civil servants yesterday, eliminating 18 per cent annual interest on savings, starting in 2018, as the population ages. Passage of the bill fulfils a campaign promise of Taiwan President Tsai Ingwen and is projected to delay the possibility of a default in payments to retirees by a decade. Instead of 18 per cent, pensions will receive nine per cent from July 2018 until the end of 2020, and then be reduced to zero starting in 2021.

The bill only covers civil servants. Additional legislation reforming the pension system for teachers and the military will be reviewed later.

Financing

Ofo says new funding round for rapid expansion nearly done China’s Ofo, one of the country’s leading bike-sharing firms, said it is close to clinching new funding that will help it more than triple its fleet of yellow bicycles to 20 million this year. The company, which currently has about 6 million bikes, also aims to break even by the end of the year, Chief Executive Dai Wei said. “Our profitability is, in fact, very strong,” he told Reuters on the side-lines of the World Economic Forum in Dalian.

More than a dozen Chinese bike-sharing firms have cropped up since the beginning of 2016. Ofo and rival Mobike have emerged as front-runners with valuations exceeding US$1 billion.

Co-operation

Fund for infrastructure, tech projects with Brazil A China-sponsored, US$20 billion fund is ready to receive investment pitches, the Planning Ministry’s foreign affairs secretary, Jorge Arbache, told journalists on Monday. The fund agreed on last year is expected to help finance the construction of railroads.

This will link Brazilian soyand corn-producing areas to ports, potentially boosting Brazil’s economy as it slowly emerges from a deep recession. China also stands to gain because it is a large buyer of Brazilian grains. The fund’s investment decisions will be made by a committee composed of Brazilian and Chinese officials, taking into account both countries’ priorities, Arbache said.

10 Business Daily Wednesday, June 28 2017

Greater China Energy projects

Beijing pumps cash into African floating LNG projects in strategic push This month, Chinese banks including Industrial and Commercial Bank of China, and Bank of China committed around 1.75 billion to project finance the Coral South FLNG project in Mozambique Oleg Vukmanovic and Colin Leopold

C

hina plans to pour almost US$7 billion into floating liquefied natural gas (FLNG) projects in Africa, betting on a largely untested technology in the hope that energy markets will recover by the time they start production in the early 2020s.

Western banks are wary due to the depressed state of the shipping and gas markets, as well as the technical difficulties of pumping gas extracted from below the ocean floor, chilling it into liquid form on a floating platform and transferring it into tankers for export.

China, however, is making a strategic push into FLNG, aiming to become the lowest cost seller of the complex floating plants and lead the global rollout of a technique that remains in its infancy, with only one project in commercial production so far.

The country needs gas as a cleaner alternative to coal under a drive to improve air quality in its cities, and has already lent US$12 billion to Russia’s conventional Yamal LNG project in the Arctic as U.S. sanctions scared away Western banks.

It has also lent or committed almost US$4 billion to three FLNG schemes off the African coast. In two more African projects costing a total of US$3 billion, it plans not only to provide the funding, but also build the production platforms.

“We see a real commitment to FLNG in China both from the construction side and from the LNG consumption side where decreasing costs mean potentially lower cost LNG,” said Steve Lowden, chairman of Jersey-based NewAge which is planning FLNG projects off Congo Republic and Cameroon.

China already dominates the global market for solar panels and is a major supplier of coal-fired power plants, aided by easy money, cheaper labour and state support.

Now, with Beijing pushing President Xi Jinping’s “Belt and Road” vision of expanding trade links between Asia, Africa and Europe, it is turning to FLNG to bring high technology work to its shipyards and create jobs - a strategic priority.

FLNG is also attractive to resource-rich but debt-burdened African countries. Projects can sail into place, drop anchor, and begin exporting for much less than the cost of onshore plants, the price of which quadrupled in the decade to 2013.

That, at least, is the theory. The

reality is that the technology remains complex. Royal Dutch Shell’s mammoth Prelude FLNG plant, for example will be aboard the world’s biggest floating structure, but must squeeze the equipment into a quarter of the space occupied by an LNG plant on dry land.

Wave motion and ocean currents add to the difficulties.

The US$12.6 billion Prelude project, which is due to start operating off Australia in 2018, is typical of those conceived during the era of high energy prices. However, spot LNG prices have fallen 70 per cent since early 2014 and are expected to remain under pressure or drop further due to extra supply from new conventional plants in Australia and the United States.

Despite this, some producers and buyers are banking on the glut ending early in the next decade, although they don’t want to lock themselves into big projects, preferring smaller, more flexible ones like in Africa.

The only operational FLNG project launched in Malaysia last year, with construction of the floating platform costing around US$1.6-US$1.7 billion.

Bankers say this is still too expensive and if the Chinese can build one for US$1 billion, they would corner the market.

Established shipyards

With new investments in costly conventional LNG plants on hold, the only two production projects to advance this year are floating types, in Mozambique and Equatorial Guinea.

Both are largely backed by Chinese loans although the platforms are being built by more established Asian shipyards.

Lowden said the two NewAge projects will be wholly financed by Chinese companies and this time also built in Chinese shipyards. “They are more than fully able to handle such projects,” he said.

Still, Dutch offshore engineer SBM

and JGC of Japan will partner with the Chinese players, including China Offshore Oil Engineering & Construction Ltd.

Key Points Western banks wary of FLNG projects But well-capitalised Chinese players step up lending China aims to become lowest-cost seller of FLNG plants Its shipyards to build floating plants for African projects NewAge expects to sanction both the projects next year.

Last year, China’s Wison Offshore & Marine completed the first-ever FLNG ship but it remains unused following the cancellation of a project in Colombia it was intended for.

Very deep pockets

As typical Western sources of funding have slowed due to the weak state of the shipping business, highly-capitalised Chinese players believe the market has reached the bottom and are keen to step up lending before the cycle turns and pushes up costs.

“The difference is that in the West banks lend at the top of the market when they have most liquidity, but in China they’re smarter and put money in at the bottom,” a financier who advises Chinese lenders on LNG shipping deals said.

This month, Chinese banks including Industrial and Commercial Bank of China, and Bank of China committed around 1.75 billion to project finance the Coral South FLNG project in Mozambique, bankers said. ICBC declined comment while BOC did not respond to a request for comment.

By contrast Western commercial banks provided just US$200 million in uncovered debt to Coral, to be

developed by Italy’s Eni, instead of an originally proposed US$1.9 billion. They cited uncertainties around FLNG technology and a public debt crisis in Mozambique.

Adam Byrne, Managing Director at ING Bank, said Chinese lenders “have very deep pockets indeed”.

“If they decide to, they can support something for even a billion or a billion and a half dollars,” Byrne told a shipping conference earlier this month.

Africa and beyond

The next big African deal, in Equatorial Guinea, is being financed by China State Shipbuilding Corp with a US$1.2 billion loan for Fortuna FLNG, bankers say. This project - which is being developed by UK-listed Ophir Energy, shipping firm Golar LNG and oil services group Schlumberger - will produce 2.2 million tonnes of LNG a year and is expected to be sanctioned within weeks.

China State Shipbuilding Corp (CSSC) also lent US$960 million to Golar LNG in 2015 for the first-ever conversion of a conventional LNG tanker into an FLNG platform, which is set to enter operation this year in Cameroon. CSSC declined comment.

All these projects were awarded to established shipbuilders in South Korea, Singapore or Japan, but the experience sets up Chinese developers to take the lead on other projects in Africa and beyond, say consultants and industry sources.

Equatorial Guinea sees scope for another two FLNG projects, its petroleum minister has said, while BP and joint venture partner Kosmos Energy are also eyeing two in the waters of Senegal and Mauritania.

China also has plans for conventional LNG production in Africa. Chinese conglomerate Poly-GCL has begun construction of an onshore LNG facility in Djibouti which will export Ethiopian gas to China, according to Poly-GCL’s website. Reuters

Business Daily Wednesday, June 28 2017 11

Asia Budget

Moon’s stalled spending plan shows risk to Korea eco agenda Failure to push the supplementary package through would make it more difficult for the government to achieve its other objectives Jiyeun Lee and Hooyeon Kim

parliamentary election.”

espite his soaring approval ratings, South Korean President Moon Jae-in’s fiscal stimulus package has so far gone nowhere in parliament, underscoring the challenges he faces in enacting his economic agenda without a majority.

His 11.2 trillion won (US$9.9 billion) supplementary budget to create tens of thousands of public-sector jobs was submitted by the government almost three weeks ago but has yet to move past even the initial stage of the legislative process. With the main opposition Liberty Korea Party adamant that the spending is unjustified and two smaller parties opposing the focus on the public payroll rather than private industry, the bill is set to languish unless Moon makes some concessions.

How much he has to compromise may prove to be a litmus test for his ambition to be a “jobs president” and to bring changes to a labour market that he sees as the root of growing inequality in Korea. Failure to push the supplementary package through would make it more difficult for the government to achieve its other objectives, particularly a promised 7 per cent increase in the 2018 budget, said Oh Suktae, an economist for SG Securities in Seoul.

“It’s not easy for a minority government,” Oh said. “There’s another three years to go before the next

Improving economy

D

The finance ministry has projected that the supplementary budget would add 0.2 percentage points to growth if implemented without delay. The minister, Kim Dong-yeon, visited the parliament on Monday to meet with three opposition parties and plead for help in passing the bill.

Those against Moon in the parliament can point to an economy that is recovering, thanks in part to improving exports.

Bank of Korea Governor Lee Ju-yeol said growth for 2017 is likely to exceed the 2.6 per cent the central bank forecast in April.

Speaking during a cabinet meeting on Tuesday, Moon said the extra budget would help Korea return to 3 per cent expansion of gross domestic product, and was necessary to help solve the problem of slow growth.

“Now is a golden time for an economic recovery,” he said.

The Moon administration is concerned about weak conditions in the job market, especially the high youth jobless rate and widespread temporary employment, which weighs on wages and spending. The central bank has also emphasized the importance of stable job growth.

The finance ministry plans to use 4.2 trillion won of the spending package to create 86,000 new jobs, 71,000 of them in the public sector, including positions for police officers,

South Korean President Moon Jae-in

fire-fighters, assistant teachers and social workers. Other spending would go toward increasing pay, and providing welfare benefits and local subsidies.

Majority rules

Moon, who captured 41 per cent of votes in last month’s election, received a 79 per cent approval rating in the latest Gallup poll last week. In parliament, his Democratic Party of Korea holds 120 of the total 299 seats.

Opposition parties are also linking their objections to the spending package with their anger over some ministerial appointments. Moon pushed ahead with Foreign Minister Kang Kyung-wha and Fair Trade Commission’s Chairman Kim Sang-jo’s appointments without parliament’s endorsement. Parliament’s formal approval wasn’t required.

Moon will need to broaden his support in parliament to pass his

agenda. Other items include a bill to reorganize government organizations, which would pave the way for setting up a new ministry for smaller companies and venture companies.

That was also one of Moon’s primary electoral pledges.

The government could struggle to create new jobs and raise wages if the supplementary spending bill fails to pass, said Kim Cheon-koo, a research fellow at Hyundai Research Institute in Seoul.

It could also affect the Moon administration’s ability to gain opposition support for future initiatives, Kim said.

For the spending bill to be approved, it must be reviewed in the standing committees and then a special budget committee before it goes to a vote of the full parliament. So far the standing committees haven’t agreed on a date to consider it. Bloomberg News

Markets

NZX plans to scrap junior markets NXT and NZAX The NZX will begin a formal consultation process on its market structure in the third quarter New Zealand’s stock exchange NZX said yesterday it will likely fold its two junior equity markets into the main bourse after they failed to attract companies.

“The NXT Market hasn’t developed as quickly or effectively as we had hoped” Mark Peterson, NZX Chief Executive NZX said that feedback from the market indicated that NXT Market and its precursor, NZAX, were not meeting the needs of targeted smaller firms.

The indices, which are home to a combined total of just 22 companies, were designed to let smaller

companies raise capital amid less rigorous compliance rules than the broader market.

“The NXT Market hasn’t developed as quickly or effectively as we had hoped,” NZX Chief Executive Mark Peterson said in a statement. “NZX has been speaking with the market for some time about how we can look to simplify the structure and operation of our equities markets to ensure its design meets the needs of everyone.”

Only four firms are listed on the NXT, including manuka honey firm Oceania Natural and mobile phone advertiser Snakk Media. The market was launched in June 2015, targeting small to medium-sized businesses with a market capitalisation of NZ$10 million (US$7.3 million) to NZ$100 million.

The NZAX, or NZAX Alternative Market, has 18 companies. Launched in 2003, it closed to new listings with the launch of the NXT in 2015.

The NZX will begin a formal consultation process on its market structure in the third quarter, with consolidation the “likely outcome”, it said in its statement. It did not immediately set a date for a final decision.

The NZX said it may let smaller companies operate under different

disclosure rules on the main bourse, but did not specify how that might be possible.

“NZX is considering whether differential requirements for smaller companies should be part of the solution and if so how that may be achieved in the context of a simplified equity board structure,” it said. Reuters

12 Business Daily Wednesday, June 28 2017

Asia Environment

Philippines minister may decide on mining closure orders next month Cimatu, a former soldier, took over the environment ministry post on May 8, shortly after the dismissal of Lopez, who ordered the closure or suspension of 26 operating mines and revoked 75 mining contracts Enrico Dela Cruz

T

he new Philippines environment minister said yesterday he may decide next month on the fate of dozens of mining operations and contracts that his predecessor ordered closed, suspended or cancelled to protect watersheds and other natural resources.

Roy Cimatu said he plans to visit mines in the world’s top nickel ore supplier to see if they are operating responsibly as he takes a slow approach towards a sector that was the target of a 10-month crackdown led by the previous minister, Regina Lopez.

Cimatu, a former soldier, took over the environment ministry post on

May 8, shortly after the dismissal of Lopez, who ordered the closure or suspension of 26 operating mines and revoked 75 mining contracts in what she said was a fight against “greedy miners” threatening public heath and nature.

“Hopefully by next month we can come up with the decision on appeals regarding” the mining contracts, Cimatu told reporters at an industry forum.

“I am going slowly about these issues on mining, I will concentrate first on the environment. But that does not mean mining isn’t a priority.

That’s why I have plans to visit some mining companies.”

Many of the miners affected by Lopez’s orders filed appeals that have yet to be acted on with the office of

President Rodrigo Duterte or the environment ministry. But the appeals effectively stayed Lopez’s orders.

Shortly after he assumed the job, Cimatu told Reuters it was possible to strike a balance between mining and protecting natural resources, signalling his intent to settle a bitter dispute that has been one of the biggest economic conundrums of Duterte’s presidency.

Since then, Cimatu has been careful in framing his stance towards mining. Earlier this month, he said he will “strictly enforce mining and environmental regulations, and mining operations found violating laws,

rules and regulations shall be subject to penalties, suspensions and/ or cancellation.”

Global nickel prices have fallen nearly 20 per cent from this year’s peak after Lopez’s dismissal raised the prospect of increased supply from the Philippines. Prices have also been pulled down by more mines in Indonesia being allowed to export ore.

Cimatu said among mines he will inspect next month are those in nickel-rich areas in the southern Mindanao region and in Palawan province.

“I will go visit every mining company,” he said. Reuters

Official visit

Trump urges India’s Modi to fix deficit, but stresses strong ties The President of the U.S. did not mention differences with India on immigration and the Paris climate accord Steve Holland and David Brunnstrom

U.S. President Donald Trump urged Indian Prime Minister Narendra Modi to do more to relax Indian trade barriers on Monday during talks in which both leaders took great pains to stress the importance of a strong U.S.-Indian relationship.

At a closely watched first meeting between the two, Trump and Modi appeared to get along well. Modi pulled in Trump for a bear hug on the stage as the cameras rolled in the Rose Garden.

“I deeply appreciate your strong commitment to the enhancement of our bilateral relations,” Modi told him. “I am sure that under your leadership a mutually beneficial strategic partnership will gain new strength, new positivity, and will reach new heights.”

Trump was also warm but made clear he sees a need for more balance in the U.S.-India trade relationship in keeping with his campaign promise to expand American exports and create more jobs at home. Last year the U.S. trade deficit with India neared $31 billion.

Trump said he would like a trading relationship that is “fair and reciprocal.”

“It is important that barriers be removed to the export of U.S. goods into your markets and that we reduce our trade deficit with your country,” he said.

Trump said he was pleased about an Indian airline’s recent order of 100 new American planes and that the United States looked forward to exporting more energy, including major long-term contracts to purchase American natural gas.

These energy contracts “are being

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negotiated and we will sign – trying to get the price up a little bit,” Trump said.

Modi came to Washington looking to revitalize a relationship that thrived under former President Barack Obama but has appeared to flag as Trump courted India’s rival China in an effort to persuade Beijing to do more to rein in North Korea.

Modi effusively praised Trump, hailing his “vast and successful experience in the business world” and “great leadership” for U.S.-India ties, which he said should “lend an aggressive and forward looking agenda to our relations.”

Trump accepted Modi’s invitation to visit India, the White House said in a statement, but no time frame was given for the trip.

Modi harked back to Trump’s “Make America Great Again” campaign slogan to stress that his agenda for his country was little different than Trump’s.

“I am sure that the convergence of my vision for “New India” and President Trump’s vision for making

U.S. President Donald J. Trump (R) and Indian Prime Minister Narendra Modi (L) walk from the Oval Office to deliver remarks during a ceremony in the Rose Garden of the White House in Washington, DC, USA, 26 June 2017. Lusa

America great again will add new dimensions to our cooperation,” he said.

Trump did not mention U.S. differences with India on immigration and the Paris climate accord.

“The future of our partnership has never looked brighter,” Trump said as both leaders underscored the importance of the defense and security relationship.

Aviation deals

As they met, a Pentagon agency said the U.S. State Department has approved the possible sale to India of a Boeing C-17 transport aircraft with an estimated cost of US$366 million.

The United States also has offered to sell a naval variant of the Predator drone made by U.S. defence contractor General Atomics Aeronautical Systems, the White House said in a statement, a deal that would be worth more than US$2 billion.

The United States has become the leading supplier of defence equipment to India, signing contracts worth more than US$15 billion since 2008.

On Monday evening, Trump and Modi had a working dinner, the first time Trump has played host to a foreign dignitary at a White House dinner.

Trump administration officials have

pointed to both leaders’ impact on social media - each has more than 30 million Twitter followers - as proof they are cut from the same cloth.

“If the chemistry is good, everything else gets sorted,” said an Indian official. “The only way is up. How much up we go depends on the leaders. If they click, we go up higher.”

Trade, however, remains an irritant, and on Saturday, leading U.S. congressmen complained in a letter to Trump that high-level engagement had failed to eliminate major barriers to U.S. imports and investment and had not deterred India from imposing new ones.

Indian officials reject suggestions that Modi’s “Make in India” platform is protectionist and complain about the U.S. regulatory process for generic pharmaceuticals and rules on fruit imports.

They stress the future importance of the huge Indian market to U.S. firms and major growth in areas such as aviation which will offer significant opportunities for U.S. manufacturers.

Among the Indian business executives in Washington for Modi’s visit was Ajay Singh, chairman of Indian budget airline SpiceJet, which in January announced a deal to buy up to 205 aircraft from Boeing, worth up to US$22 billion at list prices.

Singh told Reuters that according to the U.S. Department of Commerce, the deal would sustain up to 132,000 jobs.

“The market is growing 20-25 per cent a year. Even at today’s pace you need 100 more planes a year just to keep pace with the market and we are not getting anywhere close to that number.”

“As our economy grows ... we can potentially create a lot of jobs for Americans in the United States,” he said.

Boeing has estimated India will need 1,850 new aircraft worth US$265 billion by 2036 to meet demand for air travel. 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 Wednesday, June 28 2017 13

Asia M&A

In Brief

Singapore state fund to address complaints about GLP sale The litany of complaints about the biggest Asian buyout deal became so bad that Singapore’s sovereign wealth fund decided to act Joyce Koh and Jonathan Browning

A bidding process for Global Logistic Properties Ltd., the US$9.7 billion warehouse developer, has been running since the start of the year. In May, representatives of GIC Pte, the company’s largest shareholder, called the GLP working team managing the sale into their offices, according to people familiar with the matter.

The Singaporean fund instructed the assembled group to be more responsive to bidders’ questions and share information transparently in the auction, the people said, asking not to be identified because the discussions were confidential.

Potential acquirers including Warburg Pincus, Blackstone Group LP and RRJ Capital had been pressing for months to get increasingly detailed financial information on GLP as they compete with a rival consortium that includes the company’s chief executive officer. At the heart of the issue for the bidders is whether the management-backed group, which also includes Chinese private equity firms Hillhouse Capital Management and Hopu Investment Management, has an advantage over other buyers with privileged access to information.

“Everyone has to be on a level playing field,” Justin Tang, a director of global special situations at Religare Capital Markets in Singapore, said by phone Monday. GIC “can step in as an ombudsman and ensure it’s run according to generally accepted principles.”

Some bidders had told GLP that documents they needed were trickling in too slowly and important details were blacked out, the people said. The information they were looking for related to the company’s joint ventures, fund management performance, employment agreements and appraisals of certain assets, they said.

Warehouse network

The May discussion was held in a closed meeting room to prevent uninvolved parties from observing the conversation, one of the people said.

For GIC, calling the meeting followed multiple conversations with the parties running GLP’s strategic review, including the bankers and lawyers advising a special board committee.

GLP had already been taking steps to address the concerns raised by bidders, according to one person.

GLP ended up extending the deadline for final offers to June 30 to give buyers more time to vet its network of warehouses, which sit at the centre of the burgeoning logistics sector in China, Japan, Brazil and the U.S. Additional documents have gradually been added to the physical data rooms and online document repositories being run by GLP, according to the people. As that date approaches, GIC has become comfortable that information access for all shortlisted bidders has improved, one of the people said.

“The strategic review has always been undertaken independently in the interest of all shareholders,” GLP Chairman Seek Ngee Huat said in an emailed statement Monday in response to Bloomberg queries.

“The special committee is focused on ensuring that the process is fair and transparent in order to maximize value.”

As a shareholder with a large stake, GIC works with all parties in this process, a spokeswoman for the sovereign fund said Monday in an emailed response to Bloomberg queries, adding that GLP and its board are responsible for the process. As the situation is competitive, it is “not surprising to have noises and excitements around the process,” according to the statement.

Long history

“GIC, GLP and its board need to exercise great care in our respective purviews,” GIC said in the statement. “We will continue to monitor carefully the developments and decide our next course of actions accordingly.”

GIC, which owns 37 per cent of the company, has a long history with the assets: The company traces its roots back to the sovereign fund’s 2008 purchase of Asian industrial properties from Prologis Inc., a portfolio later rebranded as GLP and listed on the Singapore stock exchange in advertisement

2010. It was a request from GIC that prompted the developer to start a strategic review at the end of last year.

The strategic review is being handled by a special committee of GLP independent directors, which is receiving advice from JPMorgan Chase & Co. Representatives for Blackstone, JPMorgan, RRJ Capital, Warburg Pincus and the management consortium declined to comment.

If an agreement is reached, a takeover of GLP would become the largest-ever private equity buyout of an Asian company by enterprise value, surpassing last year’s takeover of Qihoo 360 Technology Co., data compiled by Bloomberg show.

Since Bloomberg News first reported takeover interest in November, the company’s shares have soared about 62 per cent, valuing it at US$14.2 billion including debt.

“It’s taken a long time, and there’s no surprise that the process has been complicated by an internal bidder,” said David Smith, the Singapore-based head of corporate governance at Aberdeen Asset Management Asia Ltd., which owns GLP shares. “But we took comfort in the presence of GIC as a substantial shareholder, and one that is interested in getting the right outcome.”

Prologis alumni Singapore’s takeover code requires that information passed to one potential bidder be promptly furnished to other suitors requesting it. In management buyouts, rival bidders must be given material information that the executives have, as long as it doesn’t constitute business or trade secrets.

Board members who are involved in a bid must also cooperate with independent directors in the gathering of information.

The involvement of competitors in this auction makes disclosure a tricky balance. Warburg Pincus is considering a joint offer with its own logistics business E-Shang Redwood Ltd., which like GLP is run by former Prologis executives, people with knowledge of the matter said earlier.

Their main competition is GLP CEO Ming Mei, who leads a group of Chinese investors bidding for the business. E-commerce operator JD.com Inc. and an arm of Ping An Insurance Group Co. of China are in talks to join the consortium, along with property developer China Vanke Co., one person said.

Representatives for JD.com and Ping An declined to comment, while a representative for Vanke said the company has no information to disclose. Blackstone was also among suitors selected to proceed in the bidding, while RRJ Capital had been considering a joint offer with Temasek Holdings Pte unit Seatown Holdings Pte, people with knowledge of the matter said earlier.

“If there’s no competitive tension, then they’re not going to get the best price for the asset,” Religare’s Tang said. “We never thought it was going to be a slam dunk for management.”

Bloomberg News

Gauge

S. Korean consumer sentiment soars South Korea’s consumer sentiment improved for a fifth straight months in June, reaching a six and a halfyear high, a central bank survey showed yesterday, as respondents became more optimistic about the economy. The Bank of Korea’s composite consumer sentiment index (CCSI) stood at 111.1 in June, the highest level since January of 2011.

A reading over 100 means that there are more consumers who expect economic conditions to get better in coming months than those who expect deterioration. All sub-indices for June, except for future household financial standing, showed a rise.

Commodities

Australia backs lithium mine to spur battery push The Australian government will invest in a lithium mine for the first time, as part of a wide-ranging effort to shore up power stability in a market increasingly dependent on variable wind and solar power. The government said yesterday it would invest about A$20 million (US$15 million) into Pilbara Minerals Ltd’s Pilgangoora project in Western Australia, which will produce lithium concentrate, a key component in electric vehicles and batteries. Environment and Energy Minister Josh Frydenberg said it represented the conservative government’s first investment in a mining project of its kind and demonstrated a commitment to clean energy technologies.

Bankruptcy

Takata apologises to victims of faulty air bags Japanese auto parts maker Takata Corp apologised yesterday to victims of its faulty air bags linked to at least 16 deaths and 180 injuries around the world.

Executives offered the apology at the firm’s last annual shareholder meeting as a listed company. Takata has filed for bankruptcy protection in Japan and the United States and agreed to be largely acquired for US$1.6 billion by the Chineseowned U.S.-based Key Safety Systems.

Energy

S.Korea to suspend construction of 2 nuclear reactors South Korea’s government said yesterday it would suspend construction of two partially-completed nuclear reactors while it gathers public opinion on the facilities and decides whether they should be scrapped. The government said in a statement that it would form a committee that would spend about three months deciding whether or not construction of the plants should continue. The move comes after the country’s new president, Moon Jae-in, said South Korea would stop building new nuclear power plants and not extend the lifespan of old reactors to address public concerns over atomic safety.

14 Business Daily Wednesday, June 28 2017

International In Brief Environment

Germany to set up new emissions testing body The German transport ministry announced plans yesterday to set up a new institute to test vehicle emissions to restore consumer confidence after the Volkswagen scandal as it said two models had produced more carbon dioxide than allowed. The ministry said an Opel Zafira car and a Smart For Two produced by Daimler - both discontinued - had produced more carbon dioxide than they should, although the Smart model still needs to undergo further tests. The ministry ordered tests of 29 models as a result of the Volkswagen emissions scandal.

Telcos

Mexico’s President fetes telecom law President Enrique Peña Nieto and industry executives praised a three-year-old overhaul of Mexico’s telecommunications sector on Monday as it faces a major challenge from billionaire Carlos Slim in the Supreme Court. The number of Mexicans with cell phones surged by 20 million to 81 million in 2016 since the constitutional reform, while the number of Internet users has expanded to 65 million from 41 million, Peña Nieto said in an apparent bid to increase public support for the law. He held the event as the Supreme Court considers whether to undo parts of the reform that tilted the playing field against Slim’s long-dominant America Movil SAB de CV.

Draghi

ECB needs to keep policy adjustment gradual He said inflation was still being held back by commodity price shocks and labour market slack Balazs Koranyi and Francesco Canepa

T

he European Central Bank should adjust policy only gradually as the euro zone still needs “considerable” monetary support despite a stronger recovery in growth and inflation, ECB President Mario Draghi said yesterday.

Draghi also hinted at possible tweaks to ECB policy, which includes massive bond purchases and ultra-low interest rates, but said any change would depend on favourable global financing conditions.

“As the economy continues to recover, a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments – not

in order to tighten the policy stance, but to keep it broadly unchanged,” Draghi told an ECB conference in Sintra, Portugal.

He said inflation was still being held back by commodity price shocks and labour market slack so ECB stimulus was still needed and would only lead to a gradual rise in prices.

The comments support market expectations that the ECB will continue to adjust its guidance in the coming months but only by the smallest of increments, preparing the way for an eventual exit from stimulus.

Fighting ultra low inflation, the ECB has kept interest rates deep in negative territory for years and buys 60 billion euros (US$67.4 billion) worth of bonds each month, all in the hope of inducing spending to generate growth and eventually inflation.

“All the signs now point to a strengthening and broadening recovery in the euro area. Deflationary forces have been replaced by reflationary ones,” Draghi said.

“However, a considerable degree of monetary accommodation is still needed for inflation dynamics to become durable and self-sustaining,” he added.

Draghi pointed out that commodity price weakness is keeping inflation low, while residual labour market slack, not accurately reflected in jobless data, is keeping wage growth anaemic, also capping consumer price growth.

“While these various reasons might delay the transmission of our monetary policy to prices, they will not prevent it,” Draghi said.

The ECB’s asset buys are set to run until the end of the year and the bank will have to decide in the third quarter whether to extend the purchases or wind them down. Reuters

Health

Brazil meat inspection flaws flagged in new blow to sector Brazil’s meat industry lacks enough inspectors to ensure the product is safe, a health inspectors union said on Monday, blaming government cutbacks for what the United States has called system-wide sanitary issues.

The ANFFA union renewed its longstanding criticism about budget cuts and understaffing after the United States blocked Brazilian fresh beef shipments late last week, saying it found abscesses in the meat and signs of systemic failure of inspections. The ban was the latest black eye for a key sector of the country’s sprawling farm economy.

Protectionism

U.S. slaps dumping duties on Canadian wood Escalating a trade dispute with Canada in the run-up to talks on renegotiating NAFTA, the U.S. Commerce Department on Monday imposed preliminary anti-dumping duties on Canadian softwood lumber of up to 7.72 per cent. When combined with preliminary anti-subsidy duties issued in April, the new measures will bring total duties on Canadian lumber to between 17.41 per cent and 30.88 per cent. The announcement, which was largely expected, prompted an angry reaction from the Canadian government against what it called unfair and punitive duties. “We will vigorously defend Canada’s softwood lumber industry, including through litigation,” the government said in a statement.

President of the European Central Bank (ECB), Mario Draghi (C) poses with the Governor of the Portuguese Bank, Carlos Costa (L), and President of ISEG Mario Caldeira (R), during a meeting at Higher Institute of Economics and Management for a youth dialogue event in Lisbon, Portugal, 26 June 2017. Lusa

Energy

Asserting ‘dominance,’ Trump seeks boost for U.S. exports U.S. domestic energy prices have plunged in recent years because of the natural gas boom Roberta Rampton

President Donald Trump on Thursday will lay out his plan for reducing regulations to boost already-abundant U.S. production of oil, natural gas and coal and export it around the world, creating American jobs and helping allies.

Trump will deliver an address on his administration’s new mantra of “energy dominance” at the Energy Department, officials told reporters. They declined to give details on how he would tweak existing regulations that have not stopped a surge in exports.

“We’ve gone from the age of scarcity now to the age of abundance when it comes to American energy,” Mike Catanzaro, a White House energy policy aide, told reporters.

“We want to use those abundant resources for good here at home and for good abroad as well,” Catanzaro said.

Trump’s speech comes a week before he meets in Warsaw with leaders of a dozen central and eastern European nations who are eager to see more U.S. liquefied natural gas (LNG) in their markets as an alternative to Russian gas.

Trump is stopping at the summit on his way to the G20 in Hamburg, Germany, where he is expected to meet face-to-face for the first time in his presidency with Russian President Vladimir Putin.

“We’ve gone from the age of scarcity now to the age of abundance when it comes to American energy” Mike Catanzaro, a White House energy policy aide Shipments of LNG will play a big part in the “energy dominance” strategy, Energy Secretary Rick Perry told reporters, but so will exports of coal and U.S. technology that helps reduce emissions from coal-fired plants, he said.

Perry said he discussed the potential for U.S. coal exports to Ukraine

with President Petro Poroshenko during his visit to Washington last week.

The Trump administration believes in an “all-of-the-above” approach to energy, Perry said - borrowing the energy catch-phrase of the Obama administration.

U.S. domestic energy prices have plunged in recent years because of the natural gas boom, crowding out competing sources of power, including coal and nuclear. Dozens of nuclear power reactors are in danger of shutting down over the next several years as a result.

The Trump administration wants to make sure the United States remains “technologically and economically engaged” in the nuclear industry, Perry said. “If we do not, then China and Russia will fill that void,” he said.

But he said the administration would not be “wildly supportive” of subsidizing any sectors of the energy industry. Perry said energy supports in the tax code would be examined as the administration and Congress look at tax reform later this year.

“I think we’ll have a good healthy conversation about the energy sector and tax incentives, subsidies - all of that needs to be on the table and we need to have a conversation about it,” Perry said. Reuters

Business Daily Wednesday, June 28 2017 15

Opinion Business Wires

Jakarta Globe Coordinating Economic Affairs Minister Darmin Nasution said he expects the economy to grow between 5.1 and 5.3 per cent from April-June amid strong global consumption rates that could spur increased Indonesian exports. “People in Europe and the United States are entering summer when economic activity is rather high […] I really believe our economy might grow at above 5 per cent, maybe between 5.1 per cent to 5.3 per cent,” Darmin said. The economic minister also said local consumer spending likely rose during the Islamic holy month of Ramadan, helping to further bolster the economy.

New Zealand Herald New Zealand’s hospitality industry is set for “good times ahead” following the America’s Cup win according to industry bosses. The 2000 and 2003 America’s Cup events which were held in Auckland brought in NZ$115 million and NZ$92m respectively in both hospitality and accommodation according to the government. Hospitality NZ Auckland president Russell Gray said the country was well and truly on the international stage with events such as the America’s Cup continuing to boost overseas interest in New Zealand. “I think the hospitality industry is looking forward to some pretty good times ahead,” Gray said.

Bangkok Post Thailand’s household debt was the third highest in Asia-Pacific in the third quarter of 2016, driven by the heavy load of firstjobbers’ personal loans, say researchers at the central bank’s think tank. “Thailand’s [debt-to-GDP] ratio was recorded as one of the highest in Asia-Pacific, and at the same level of developed countries, but the ability to repay back might not be at similar levels,” said Sommarat Chantarat, head of the financial systems section at the Puey Ungphakorn Institute for Economic Research. Mrs Sommarat said Thais have low access to mortgages, with only 4 per cent of the Thai population having taken out a mortgage.

Phnom Penh Post Cambodia’s capital market regulator will meet soon to discuss a proposal to permit market orders for trading stocks on the Kingdom’s bourse, a move that would give investors more flexibility when buying or selling shares, officials have said. Lamun Soleil, director of market operations at the Cambodia Securities Exchange (CSX), said investors currently only have the option to trade stocks on the exchange using a limit order, where instructions are given to execute the trade within a specified price band. However, if the market price of the stock does not fall within that band, or there is not enough liquidity in the stock to fill the order, the limit order is not executed.

Another lesson from Japan

Y

et another in a long string of negative inflation surprises is at hand.

In the United States, the so-called core CPI (consumer price index) – which excludes food and energy – has headed down just when it was supposed to be going up. Over the three months ending in May, the core CPI was basically unchanged, holding, at just 1.7 per cent above its year-earlier level. For a U.S. economy that is widely presumed to be nearing the hallowed ground of full employment, this comes as a rude awakening – particularly for the Federal Reserve, which has pulled out all the stops to get inflation back to its 2 per cent target.

Halfway around the world, a similar story continues to play out in Japan. But, for the deflation-prone Japanese economy, it’s a much tougher story.

Through April, Japan’s core CPI was basically flat relative to its year-earlier level, with a similar outcome evident in May for the Tokyo metropolitan area. For the Bank of Japan (BOJ), which committed an unprecedented arsenal of unconventional policy weapons to arrest a 19-year stretch of 16.5 per cent deflation lasting from 1994 to 2013, this is more than just a rude awakening. It is an embarrassment bordering on defeat.

This story is global in scope. Yes, there are a few notable outliers – namely, the United Kingdom, where currency pressures and one-off holiday distortions are temporarily boosting core inflation to 2.4 per cent, and Malaysia, where the removal of fuel subsidies has boosted headline inflation, yet left the core stable at around 2.5 per cent. But they are exceptions in an otherwise inflationless world.

The International Monetary Fund’s latest forecasts bear this out. Notwithstanding a modest firming of global economic growth, inflation in the advanced economies is expected to average slightly less than 2 per cent in 2017-2018.

The first chapter of this tale was written many years ago, in Japan.

From asset bubbles and excess leverage to currency suppression and productivity impairment, Japan’s experience – with lost decades now stretching to a quartercentury – is testament to all that can go wrong in large and wealthy economies.

But no lesson is more profound than that of a series of policy blunders made by the BOJ. Not only did reckless monetary accommodation set the stage for Japan’s demise; the country’s central bank compounded the problem by taking policy rates to the zero bound (and even lower), embracing quantitative easing, and manipulating long-term interest rates in the hopes of reviving the economy.

This has created an unhealthy dependency from which there is no easy exit.

Though Japan’s experience since the early 1990s provides many lessons, the rest of the world has failed miserably at heeding them. Volumes have been written, countless symposiums have been held, and famous promises have been made by the likes of former U.S. Fed chairman Ben Bernanke never to repeat Japan’s mistakes. Yet time and again, other major central banks – especially the Fed and the European Central Bank – have been quick to follow, with equally dire consequences.

The inflation surprise of 2017 offers three key insights. First, the relationship between inflation

“

Stephen S. Roach a faculty member at Yale University and former Chairman of Morgan Stanley Asia

and economic slack – the so-called Phillips curve – has broken down. Courtesy of what the University of Geneva’s Richard Baldwin calls the “second unbundling” of globalization, the world is awash in the excess supply of increasingly fragmented global supply chains. Outsourcing via these supply chains dramatically expands the elasticity of the global supply curve, fundamentally altering the concept of slack in labour and product markets, as well as the pressure such slack might put on inflation.

Second, today’s globalization is inherently asymmetric. For a variety of reasons – hangovers from balance-sheet recessions in Japan and the U.S., fear-driven precautionary saving in China, and anaemic consumption in productivity-constrained Europe – the demand side of most major economies remains severely impaired. Juxtaposed against a backdrop of ever-expanding supply, the resulting imbalance is inherently deflationary.

Third, central banks are all but powerless to cope with the moving target of what can be called a non-stationary liquidity trap. First observed by John Maynard Keynes during the Great Depression of the 1930s, the liquidity trap describes a situation in which policy interest rates, having reached the zero bound, are unable to stimulate chronically deficient aggregate demand.

Sound familiar? The novel twist today is the ever-expanding global supply curve. That makes today’s central banks even more impotent than they were in the 1930s.

This is not an incurable disease.

In a world of hyper-globalization – barring a protectionist relapse led by the America Firsters – treatment needs to be focused on the demand side of the equation.

The most important lesson from the 1930s, as well as from the modern-day Japanese experience, is that monetary policy provides no answer for a chronic deficiency of aggregate demand. Addressing it is a task primarily for fiscal authorities. The idea that central banks should consider making a new promise to raise their inflation targets is hardly credible.

In the meantime, Fed Chair Janet Yellen is right (finally) to push the Fed to normalize policy, putting an end to a failed experiment that has long outlived its usefulness. The danger all along has been that open-ended unconventional monetary easing would fail to achieve traction in the real economy, and would inject excess liquidity into U.S. and global financial markets that could lead to asset bubbles, reckless risk taking, and the next crisis. Moreover, because unconventional easing was a strategy designed for an emergency that no longer exists, it leaves the Fed with no ammunition to fight the inevitable next downturn and crisis.

We ignore history at great peril. The latest disappointment for inflation-targeting central banks is really not a surprise after all. The same is true of the related drop in long-term interest rates.

There is much to be gained by studying carefully the lessons of Japan. Project Syndicate

Though Japan’s experience since the early 1990s provides many lessons, the rest of the world has failed miserably at heeding them

”

16 Business Daily Wednesday, June 28 2017

Closing Markets

Hong Kong small cap stock plunge wipes out US$6.1 billion

A string of Hong Kong stocks suddenly plunged yesterday, with traders pointing to links between some of the companies and a brokerage that’s under regulatory investigation.

Seventeen firms tumbled by more than 40 per cent at the close, losing a combined HK$47.8 billion (US$6.1 billion) in market value. China Jicheng Holdings Ltd., an umbrella maker, and GreaterChina Professional Services Ltd. sank more 90 per cent. Lerado Financial Group Co.,

whose shares were halted by Hong Kong’s securities regulator this month, has previously disclosed an investment in China Jicheng and an underwriter role on a GreaterChina share placement in 2015.

“We’re seeing a domino effect; all the companies in the same network got cut,” said Francis Lun, the Hong Kong-based chief executive officer of Geo Securities Ltd. These shares are “owned by the same group of people so they must be experiencing a liquidity crunch and they don’t have the money to support the share prices,” he said. Bloomberg News

Internet

Google gets record US$2.7 billion EU fine for skewing searches The EU said Google has been pushing its own comparison shopping service since 2008, systematically giving it prominent placement when people search for an item Aoife White

G

oogle lost its biggest regulatory battle yet, getting a record 2.4 billion euros (US$2.7 billion) fine from European Union enforcers who say the search-engine giant skewed results in its favour to thwart smaller shopping search services.

Alphabet Inc.’s Google has 90 days to “stop its illegal conduct” and give equal treatment to rival price-comparison services, according to a binding order from the European Commission yesterday. It’s up to Google to choose how it does this and it must tell the EU within 60 days of what it’s planning to do. If it doesn’t comply, it risks fines of up to 5 per cent of its daily revenue.

“Google’s strategy for its comparison-shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” said Margrethe Vestager, the EU’s antitrust chief. “It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services.”

Vestager’s decision marks the end of a lengthy seven-year probe fuelled by complaints from small shopping websites as well as bigger names, including News Corp., Axel Springer SE and Microsoft Corp. European politicians have called on the EU to sanction Google or even break it up while U.S.

critics claim regulators are targeting successful American firms.

Google has been pushing its own comparison shopping service since 2008, systematically giving it prominent placement when people search for an item, the EU said. Rival comparison sites usually only appear on page four of search results, effectively denying them a massive audience as page one attracts 95 per cent of all clicks.

“As a result of Google’s illegal practices, traffic to Google’s comparison-shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis,” the EU said, citing figures of a 45 per cent increase in traffic for Google’s service.

Yesterday’s fines could just be the

first in a series of EU antitrust penalties for Google, which is fighting on at least two other fronts, including its Android mobile-phone software and the AdSense online advertising service.

The decision follows Russia’s US$7.8 million antitrust fine and penalties from Italian, German and French privacy authorities. Europe has proved a tough jurisdiction for Google which fell foul of the region’s top court, losing a high-profile right-to-be-forgotten case three years ago.

“Vestager is proving she means business,” said Thomas Vinje, a lawyer who represents FairSearch, a group of companies that complained to the EU. “This decision will mean that consumers receive comparison shopping results that offer genuinely the best purchasing options.”

While the penalty is a record, it will do little to faze a company whose parent has more than US$90 billion in cash. Of graver concern is the way regulators called on Google to change the way it handles online shopping

searches, one of its biggest sources of sales growth and strongest weapons against rivals Facebook Inc. and Amazon.com Inc. The EU says that Google doesn’t subject its own service to its algorithm, which ranks search results on quality and relevance to the user.

The EU’s allegations strike at the heart of a type of online advertising known as Product Listing Ads, or PLAs, that is growing at almost three times the rate of traditional text-based Search ads, according to digital marketing firm Merkle Inc. The format lets a marketer place an ad for an item with large images and price information in the prime digital real estate at the top of search results.

Vestager doesn’t fear big numbers.

She has ordered Apple Inc. to repay some 13 billion euros in tax advantages and hit truck makers with a record cartel fine of nearly 3 billion euros.

The Google fine tops a 1.06 billion euro penalty eight years ago for Intel Corp., which is still waiting for the final outcome of a court appeal.

Her move against Google risks attracting further criticism that she’s unfairly singled out U.S. companies.

While she’s said U.S. firms are “under no specific fire because of their nationality,” transatlantic tensions are already on the rise after President Donald Trump’s decision to pull the U.S. out of the Paris climate accord, adding to concerns over global trade.

Even so, any backlash against the Google decision from American industry is likely to be reduced. U.S. companies played a big part in lobbying the EU to take action after U.S. regulators ended their investigation into Google search. Bloomberg News

MSCI inclusion

Poll

Cryptocurrency

Hong Kong’s biggest yuan ETF sees strong inflows

U.S. image plummets under G20 watchdog says fintech doesn’t Trump administration pose threat to financial stability

Hong Kong’s biggest yuan-denominated exchange-traded fund (ETF) that invests in China’s “A-shares” saw its largest inflow this year yesterday following index publisher MSCI’s decision to include mainland stocks in its emerging market benchmark sparked foreign investor interest.

The CSOP FTSE China A50 ETF, which invests in China shares under the so-called RQFII scheme, attracted inflows of roughly RMB1.5 billion (US$220.16 million) yesterday from long-only capital and some hot money, fund manager CSOP Asset Management said in a statement.

The RQFII, or RMB Qualified Foreign Institutional Investors scheme, helps channel offshore yuan into China’s stocks and bonds.

“Investors are seeking investment instruments with very good liquidity to play on the inclusion,” CSOP Asset Management Co said, noting also that the FTSE China A 50 Index is highly correlated to MSCI’s A-share inclusion plan.

MSCI said last week that under the plan, it will start including 222 China big-caps into the MSCI Emerging Market Index starting June next year.

Of the 222 stocks, the top 30 by market capitalization are covered by its RQFII ETF, CSOP Asset Management said. Reuters

Donald Trump has been U.S. president for less than six months but it’s been enough time to send opinions of American leadership plunging.

According to a Pew Research Center public survey of 37 countries, a median of just 22 per cent of respondents have confidence in Trump to do the right thing in international matters, compared with 64 per cent at the end of Barack Obama’s presidency. As a country, the U.S.’s favourable rating fell in the same period to 49 per cent from 64 per cent.

Israel and Russia were the only countries surveyed where the public prefers Trump to Obama.

According to Pew, the steepest slides in the view of Trump came in European allies such as Sweden, Netherlands and Germany, and in South Korea. The decline was less pronounced in some majority-Muslim countries such as Turkey, Tunisia and Jordan, partly because approval for Obama was already low. For instance, only 14 per cent of Jordanians had trust in Obama at the end of his tenure, compared with 9 per cent for Trump. By comparison, 93 per cent of Swedes had confidence in Obama and only 10 per cent feel the same way about Trump. Bloomberg News

The rise of fintech does not pose any compelling risks to financial stability, according to a review by global regulators, but this may change as the sector grows.

While financial technology is changing how financial services and information are being delivered, there is no evidence that services like crowdfunding, “robo” advice and cloud computing will fundamentally change underlying activities such as lending, the Financial Stability Board (FSB) said in a report published yesterday.

The findings of the FSB, which coordinates regulation for the Group of 20 Economies (G20), signal no immediate rush to bring in new rules at the global level to mitigate financial stability risks.

Regulators have taken a relatively relaxed approach to fintech, given its tiny size compared to banks with investment totalling $21 billion in the first nine months of 2016, but the FSB said it would keep monitoring the sector.

Apart from potential risks, fintech offers potential benefits as well, such as greater efficiency, transparency, competition and resilience of the financial system, and economic growth, it said.

“The FSB will continue to monitor and discuss the evolution of the potential financial stability implications of fintech developments,” it said. Reuters