Business Daily #1257 March 20, 2017

Genting sees US$500 mln loss in 2016 Gaming Page 7

Monday, March 20 2017 Year V Nr. 1257 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Politics

CE pledges MSAR’s commitment to develop ‘One Belt, One Road’ and promote the patriotic spirit Page 2

Airline

New CambodiaMSAR twiceweekly flight takes off Page 3

www.macaubusinessdaily.com

Property

Real estate prices soar in Mainland despite countermeasures Page 8

Global trade

U.S. protectionism shakes commerce foundations of G20 meeting Page 14

They came, now build it Urban planning

Though the MSAR is being ‘ambitious’, bringing together government, private and public interests to plan the city’s development is key to a sustainable, effective city.

So says city planning expert Charles Landry. As tourism spots worldwide try to redirect visitors to be engaged in creative tourism and look to control visitor flow through passes and incentives, the ultimate responsibility lies with the city, not the state. Pages 4 & 5

Labour crunch

Over 70 pct of interviewed companies in the MSAR’s industrial exports sector had problems hiring workers in Q4 2016, a 21 pct increase q-o-q. Meanwhile 78 pct face increasing prices of raw materials. However 65 pct believe export levels will remain unchanged this quarter, while those with high expectations made up only 26 pct of respondents. The city saw increased demand for its exports from Mainland China and the U.S. in the quarter, with MSAR exports concentrated on electronics, tobacco and pharmaceuticals.

Gaming Revenue from VIP won’t be influenced in 2018 by the new smoking bill, say experts, but a 3 pct VIP revenue drop is expected in 2019 after the smoking ban’s implementation. Mass revenue should increase 14 pct next year, and 13 pct in 2019. The experts note the ban will ‘level the playing field’, but gaming operator Melco Crown could be negatively impacted. Page 6

In the mood to agree

HK Hang Seng Index March 17, 2017

24,309.93 +21.65 (+0.09%) Worst Performers

Lenovo Group Ltd

1.04%

Geely Automobile Holdings

China Resources Land Ltd

-1.10%

China Mobile Ltd

1.81%

China Life Insurance Co Ltd

1.01%

Bank of East Asia Ltd/The

-1.69%

Swire Pacific Ltd

-1.08%

Cathay Pacific Airways Ltd

1.44%

Sands China Ltd

1.01%

China Overseas Land &

-1.58%

Bank of China Ltd

-0.75%

2.39%

-10.08%

Galaxy Entertainment Group

1.13%

China Shenhua Energy Co

0.98%

CITIC Ltd

-1.23%

Hong Kong & China Gas Co

-0.66%

MTR Corp Ltd

1.07%

AAC Technologies Holdings

0.82%

New World Development

-1.21%

Industrial & Commercial

-0.58%

20° 22° 19° 24° 20° 21° 19° 23° 20° 22° Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Sino-U.S. ties President Xi Jinping met in Beijing yesterday with visiting U.S. Secretary of State Rex Tillerson, saying that cooperation is the only correct choice for both countries.

The positive tone of the meeting was somewhat overshadowed by a new ballistic missile test in North Korea however. Page 16

Exports Page 3

China Unicom Hong Kong

Blown away

2 Business Daily Monday, March 20 2017

Macau Politics

Accommodating the country’s needs Returning from the annual meetings of the NPC and CPPCC in Beijing, the city’s top officials advocate that Macau should take the initiative to get involved in national development by fully implementing the policies supported by the central government Cecilia U cecilia@macaubusinessdaily.com

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he MSAR’s Chief Executive (CE) is urging the city to remain proactive in its development by implementing proposed government policies to lead the growth of the MSAR. Speaking at Friday’s briefing session at the Chinese Liaison Office, Chief Executive Fernando Chui Sai On sought to summarise the new policies and aspirations set out at the annual meetings of the National People’s Congress and Chinese People’s Political Consultative Conference (CPPCC) held over the past week in Beijing, collectively known as the “Two Sessions”.

Hundreds of individuals from different social sectors, including government secretaries and legislators attended the meeting.

Reflecting upon the aspirations derived from the two sessions this year, the CE advocated that leaders of all sectors work together with concerted effort, to act in line with the

Constitution and the Basic Law so as to wholly perform the principle of “One country, Two systems” and contribute to the pursuit of further economic development.

Four routes

The four major aspects outlined by the CE for the MSAR to accomplish, include expediting the cultivation of Macau’s ‘Centre and Platform’ to diversify the city’s economy. In addition, the city will actively participate, with the co-operation of regions such as Fujian and Guangdong, in the development of the ‘One Belt, One Road’ strategy, as well as commencing the study of developing the Guangdong-Hong Kong-Macau Greater Bay Area.

The second aspect is to prioritise resolving housing and transport issues in Macau, and also to accelerate cross-boundary infrastructure projects in order to improve the city’s livelihood.

Meanwhile, the young population in the city will receive increased opportunities to obtain higher education

in Mainland China, to support their development as well as to promote patriotic spirit.

Intensifying public administration and legal reform is also on the agenda, with the CE pledging to boost efforts to simplify the a d m i n i st rat i v e p r o c ess es, t o promote anti-corruption measures and improve cross-departmental co-operation.

Stay optimistic

Also speaking at the briefing session last Friday, CPPCC standing committee member Liu Chak Wan proposed that the city should enhance its comprehensive ability, in particular the ability to participate in the country’s politics and offer advice and suggestions.

Vice Chairman of the CPPCC, Ho

Hau Wa, also attending the briefing session, remarked that the success of the coming Legislative Assembly Election, to be held in September, would be particularly important in confirming the city’s political environment and would serve as an example under the “One country, Two systems” principle.

Wang Zhimin, the director of the Chinese Liaison Office in the MSAR, urged the city to maintain its optimism about the development prospects of the country and of Macau, and to join hands for the sustainable development of the city.

Wang added that: “people from different sectors should continue to uphold a patriotic spirit toward the country and to Macau, and jointly build Macau as a better and more prosperous home for all.”

Business Daily Monday, March 20 2017 3

Macau Exports

Local exporters need more manpower The percentage of companies reporting a shortage of personnel in Q4 2016 significantly increased both q-o-q and y-o-y Cecilia U cecilia.u@macaubusinessdaily.com

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round 70.2 per cent of interviewed companies in the industrial exports sector said they had difficulty hiring workers during the fourth quarter of last year, according to the most recent industrial export industry survey released by the Macao Economic Services (DSE). This is a 21 per cent increase from that registered in the third quarter and a 14.8 per cent increase year-on-year.

The survey results indicated that the garment manufacturing industry had the greatest demand for manpower, with some 75.6 per cent of the survey respondents expressing a need for workers during the quarter.

Of all the factors affecting exports in the quarter, the DSE figures showed that 22 per cent of companies considered insufficient labour as their greatest challenge. Meanwhile, 77.7 per cent of respondents noted that increased prices of raw materials during the fourth quarter

were the major issue.

In regards to possible challenges in the coming three months, 75.3 per cent of exporters opined that they expect the rising price of raw materials to be their main concern.

Increasing wages (29.4 per cent), insufficient labour (25.7 per cent) and growing competitiveness in foreign pricing (20.6 per cent) were also noted as other primary concerns of the responding companies.

Declining orders

Industrial orders by local companies, meanwhile, saw a decrease in their waiting times, posting a 19.2 per cent drop both quarter-on-quarter and year-on-year during the fourth quarter.

The average waiting time for orders dipped from the 2.6 months registered in both the third quarter of 2016 and the fourth quarter of

2015, to 2.1 months.

The pharmaceutical products manufacturing sector registered the longest waiting times, at 3.3 months in the last quarter of 2016. Nonetheless, this figure represents declines of 32.7 per cent quarter-on-quarter and 34 per cent year-on-year, according to the data.

Exports to remain the same

As for performance prospects in the coming six months, 64.5 per cent of responding companies predicted that exports would remain unchanged, a drop of 6.9 percentage points when compared to 71.4 per cent in the previous quarter.

Meanwhile, the number of companies expecting better performances for exports saw an increase of 7.6 percentage points quarter-on-quarter to 26.1 per cent.

The interviewed companies

anticipating a less favourable outlook, according to the DSE figures, took up 9.4 per cent of the survey respondents, down 0.8 percentage points quarter-on-quarter and 19 percentage points when compared to the same period in 2015.

Good market in the mainland and U.S.

The DSE quarterly survey revealed that there was an increased demand for the city’s exports from Mainland China and the United States, with the general index of orders standing at 23.4 and 18.7, respectively.

In contrast, Japan posted the poorest performance in terms of the volume of orders, with an index of -14.3.

The report notes that locally-made electronic gadgets, tobacco and pharmaceutical products were among the most exported products in the fourth quarter of 2017.

Housing

House rules The Housing Bureau found 49 cases of suspected irregularities by owners of government public housing in 2016 From a total of 3,267 public housing units inspected by the Housing Bureau (IH) over the course of last year, a total of 49 suspected irregularities were found, according to a

release by the government body.

Of the total irregularities, 40 were for suspected non-compliance with the condition of permanent

residential occupation of the housing units, with seven owners having returned their housing units and three owners having already received a government refund.

Of the remaining nine cases, five involved the suspected free of charge handing out of the housing units, two were for suspected changes in the units for commercial purposes, and two were for suspected illegal renting of

Forum Macau

Rodrigo Brum new deputy secretarygeneral of Forum Macau Portugal has named Rodrigo Brum as its newest representative to the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macau), according to local broadcaster TDM. Brum will also serve as the deputy secretary-general of the group, one of three people in the position.

Brum, a self-described investment manager, was born in Mozambique and primarily educated in Lisbon, before spending a period of time in Macau serving as the first Chief of the Cabinet for Economy and Finance under the last Portuguese administration, prior to Macau’s handover back to Mainland China in 1999.

Aviation

JC (Cambodia) Int’l launches MSAR-Siem Reap flights JC (Cambodia) International Airlines commenced a new route between the MSAR and Siem Reap, Cambodia last Friday, according to a press release by the local airport operator, Macau International Airport Company Ltd

(CAM). The airline, founded in 2014 and based in the Cambodian capital Phnom Penh, is providing two services between the two cities per week, on Mondays and Fridays, respectively. According to the release, the carrier plans to launch Macau – Sihanoukville flight services on April 9. Earlier this month, another Cambodian airline, Angkor Air also launched charter flight services between Macau and the Cambodian coastal city, providing two flights per week.

the units.

According to the Public Housing Law, in the case of a purchase contract being revoked, the public housing owners are entitled to a refund of the payment made for the housing unit, after a deduction of the amount loaned to any bank entity, 1 per cent of the total purchase value of the fraction (to pay back administrative expenses), and any expenses for reconstruction of the

unit and outstanding living expenses such as electricity and gas.

According to the MSAR’s Governance Action Lines (LAG) for 2017, there are currently 47,774 public housing units in the MSAR, with the government pledging to build a total of 12,600 public housing units in the short and medium term, and 28,000 public housing units in the New Area Zone A in the long term. N.M.

4 Business Daily Monday, March 20 2017

Macau

Charles Landry, a worldwide leader in city planning based on imagination and creative change

Interview | Urban Planning

Is this the city you want?

A worldwide leader in city planning based on imagination and creative change, Charles Landry points out the shortcomings in the MSAR’s development, it’s segmentation of purpose and steps to overcome it, and proposes shaping a resilient and sustainable urban framework that is both profitable and provides adequately for its citizens’ needs and happiness.

Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

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ow do you see the current situation in Macau?

Macau of course is being ambitious, as we well know. It’s trying to create a metro, it’s creating a university, doing all the casino stuff and so on. But I’m just saying: is that a big enough ambition for a city that wants to be on the global stage?

Is making casinos the same as making a city? So for example one of my phrases is ‘a strip is not a street’.

Casinos by definition want to sort of get you in there into a timeless zone and absorb you completely in that; which is very different from how we normally define a city, which is a place of interaction and where streets and micro-parks and all of that become very important, because you’re trying to encourage civic life.

What are the steps necessary for Macau to evolve?

The issue they should ask themselves – and you can’t just sort of get a white knight to come out of the sky and do it – is really to put on the agenda simply a question – What makes a great city? What are the qualities of a great city?

We’ve [last year] had the UN summit called Habitat III on this question, and they produced a document called ‘The City We Need’.

Now that was agreed on by 15,000 people around the world, including commercial people – the businesses were involved – all types of entities were involved in these meetings that

involved 15,000 people and I moderated the one in Germany.

If you’ve got a city where rich and poor are too divided, that tends to create a problem. All of this we know.

So finding ways of mixing populations, even though people might want to always be in their enclaves, it’s better to go in that direction. So my view on the steps is initially, there needs to be an advocacy process, and the fact that you are interviewing me now is part of that advocacy process.

How does inclusion create sustainability?

Now the importance is the population's inclusion in the planning process. Of course we can exclude them, but the point is – does that create a problem later? Now that raises an issue from the political point of view for a politician and others – do you want to make your citizens happy or do you just want to treat them like subjects?

Now all over the world, because of the way capitalism is developing, it tends to divide rich and poor. All you’re doing is storing up problems if you don’t get some sort of involvement. And involvement of people and organizations tends to make the result more sustainable. If someone was involved in the decision it’s less an issue for them, then, to complain.

So over the world in general, people are finding it more resilient-making to involve people in the way that the city is shaped.

I’ve [recently] been to the Biennale in Venice, which was the architectural Biennale. The whole Biennale in Venice is vast and it was all about

this theme – that we need innovative solutions to that.

This is a movement that is happening worldwide because people think that a very limited process of, let’s say, only letting the property developer decide how a city should work, is seen not to be good enough. So you can ask the question: Are property developers good city makers?

“One of the things that Macau needs is a greater start-up culture, incubation-type places. I know everybody says there’s no space.

When I wandered around from the Portas do Cerco back into town, you could see lots of spaces that could be re-thought” They know how to make money out of a project because it’s very easy to make money out of a project if you’ve got the sky, if you can just build into the air and nobody’s costing the air.

So the point I’m making is that getting partnerships between the different

actors that tend to get solutions that ultimately are better, is more difficult than just saying: ‘Well who cares about these people’ and just doing it.

But the point is you can make a profit in one building – that’s capital - but if the capital – social capital, creative capital, heritage capital – is being lost, then you could say the balance of the project might be negative. It might be very profitable in terms of the physical structure, but a loss on all the other things. So this wider definition of capital might be quite important.

Would you put property developers and business owners in the same category within that?

No, because I think that they’re different. There are of course enlightened property developers and enlightened businesses. What one needs to get them on to is a higher agenda, a sort of agenda which I’m saying is a bigger ambition. What makes Macau a great city? If you start with that point – what makes a great city and what could you contribute to making a great city that is fit for all – then you begin to open up a debate about things like – which areas should be protected and how high should we go?

So I’m always trying to get them to see, and this is one of my slogans - is this a city of projects or is the city the project? Because once you say the city is the project and my development within that fits that, you’re priorities might shift.

What are the elements that create a sustainable, efficient urban area?

Perhaps some of the streets in old Macau need pedestrianizing in some way, so people can interact.

Historically the street is really where people connect with each other – some people they know well, some they know less well.

But that creates the weft and woe of the city. Which comes back to my

Business Daily Monday, March 20 2017 5

Macau point about the casino area, which is not a city – it’s a series of isolated projects that, from a visitor’s point of view might look pretty spectacular.

The Venetian is obviously a spectacular thing in its own way. But ‘is there more to a city than shops and gambling?’ is what one is really asking.

So one of the things I said is – you’ve already got some nice green lungs in the city, these micro-parks and so on – the more of those the better sort of thing.

If you think of the cities you like, anywhere in the world, you’re partly answering that question about elements that create a sustainable, efficient, urban area. It’s places to hang out.

The world is changing dramatically – we don’t want to be in corporate offices, we want to work in third spaces – so lots of third spaces. And what I’ve noticed in Macau is there’s hardly anywhere where you can sit semi-outside and semi-inside. It’s as if it’s forbidden to have seating outside a building.

How does the tourist factor affect everything?

In Venice we precisely discussed that – that point about what is the vision for Venice, where there are 27 million tourists and 50,000 inhabitants.

What they were saying there is – it’s so difficult.

In the case of Venice, you have to manage them. Now what does management mean? It’s quite difficult.

In the Venice case it’s slightly easier – you try to deflect them to other areas of interest. So one of the things is trying to create more areas of interest so they are not all focusing on the same point.

That’s one thing.

In the end, this is one of the biggest dilemmas of city making around the world, which there’s no simple solution to.

“I feel that that sector, the gambling sector, should have a commitment to feedback, so that the learning system can make much more richer possibilities, because everything we know is about experience, but experience isn’t only about consumption” In terms of Venice, what people were saying is talking about creative tourism. So getting tourists to be more engaged during activities with locals, being more involved with them.

Like in the case of Venice, learning various things and skills that Venice is famous for. So you’re trying to get them to get involved with the residents in some way – getting to know them, somehow creating a connection with them.

Also, in a way – you know A-Ma Temple – I went there, you couldn’t really get in. There are in other places – in Japan when you visit Kyoto gardens sometimes you have to, before you visit a place like that, they force you to get your mind focused on it, so that you’re going into what is essentially a spiritual place with the right attitude.

So there’s one of the best gardens in Kyoto called Saihō-ji which is the moss garden. When you go in, you have to register for a start, and when you go in, you have to do a sort of mental exercise for half an hour before you then go into the garden.

Whereas up in A-Ma you just go in

– and I obviously watched people – take a photo within three seconds, walk past, then go up, then rush down back into the carriage.

You’re limiting the audience and you’re forcing them, to some extent, to respect the essence of what this place is about.

So Saihō-ji, it might be extreme, but it’s leading the way in that sort of thinking. But basically you’ve got to deflect the tourists and get them more engaged and actually perhaps limit. And it’s going to be quite difficult in public spaces, but in A-Ma it’s probably easier.

Is it feasible to actually limit the amount of tourists – either in each venue or in Macau as a whole?

It’s going to be very difficult because obviously the casinos want more and more people to come in. The debate in Venice was that, to some extent, they have to pay more to come in.

Obviously they’re paying for stuff in the casinos, but in the Venice case there was getting beyond tourism taxes in the sense of hotel taxes, and effectively giving them a pass. And that pass would do various things, so it doesn’t feel like you’re going into a theme park, but you might get free transport for it, and other services.

Just finding more sophisticated ways of getting a contribution from the tourist to help regenerate the city. So it’s trying to create an income stream.

One of the things that Macau needs is a greater start-up culture, incubation-type places. I know everybody says there’s no space. When I wandered around from the Portas do Cerco back into town, you could see lots of spaces that could be rethought. There’s lots of opportunities.

In the worst case, you could have about 50 containers which people work in. There’s a place called Container City in London, and I think there’s one in New York.

Within the start-up culture and development of young entrepreneurs, do you think that the tech focus is a good thing, or should there be more diversity?

I think there needs to be more diversity. My own view is that I find it astonishing when the Wynn casino [was built] - I don’t know what it cost, US$3 billion or whatever it cost to build – there should be a commitment from the casino world where there are apps obviously to do with gaming and tourism; but there’s also a hell of a lot of their stuff that is sophisticated animation which has wide potential. That could go from an invention that could also be applied to health, or something.

Many of the experiential things that they’re creating.

Now I feel that that sector, the gambling sector, should have a commitment to feedback, so that the learning system can make much more richer possibilities, because everything we know is about experience, but experience isn’t only about consumption.

Lots of resources should come from the gaming sector because they’re buying most of their stuff from, I don’t know, Silicone Valley and China.

There should be some sort of interaction between the local population and the innovation system, which should not only be focused on apps for the gaming industry.

In regards to building a ‘smart city’, how close to that are we, based upon your 1.0, 2.0, 3.0 framework?

1.0 was very much hardware focused – let’s get the basic infrastructure in.

Then 2.0 was more consultative and a bit more glamorous, star architects and so on.

I think that Macau obviously has features of 2.0 because whatever you think of the casino strip, it’s sort of, at one level, incredibly interesting in a mad way. In some way it’s sort of quite spectacular, we have to admit that. So I don’t want to say it’s not spectacular, because every time I go I’m always trying to look at the latest casino etc. But obviously it’s

an enclosed world.

So I would say Macau is basically 1.0 thinking, but with strong elements of 2.0, less the element of 2.0 which is being a bit more consultative, the 2.0 that is more about understanding the creative economy and all of that.

3.0 is more a sort of city that is co-created, interactive, blending in a modern way the participatory side.

“If you want to become a more green city, it’s much easier to do that at a city level than at a state level.

So the city is a better implementer of the things that we require” So I think the question is really having an ambition, and I don’t like using the word ‘vision’, but just having a picture of the city that you want: What is this picture? What does it look like? What does it feel like for the different actors in there?

And in that, you might only be able to say ‘we need to raise this debate, we need to really think about this’, because collectively you in Macau, if you were open about it all, could come up with some solutions.

In Macau and Hong Kong we have a very unique situation, relating to one of the main relationships you have spoken about for urban development – balance of power between city and state. How do you perceive

the balance of power between city and state that we have here?

That’s a difficult question because you are both city and state. Your state is probably the Chinese government in that sense, because in reality that is the state, even though you’re a city-state.

In relation to European cities or the rest of the world, this thing I’m talking about was one of the central issues of Habitat III in the UN summit. The states have the authority, the legal system and all of that and global relations, but the city has more legitimacy to make the changes that we might need. If you want to become a more green city, it’s much easier to do that at a city level than at a state level. So the city is a better implementer of the things that we require. So the city is a better actor because a city mayor has to deliver normally. With the mayor of New York or wherever the city is, the citizens are asking: ‘Have you cleaned up the garbage? Have you done this, have you done that?’

I think that in the case of Macau, Macau having a vision - again I don’t like the word – but a picture of ambition to make a great city, is something that could help the Chinese government. Macau trying to be a bit of a model.

Macau has so much money in comparison to European cities, so it could really be a green model, it could be a testing ground, it could be all of those things – at least it has the resources.

But what you need is property development and ownership and all of these people to understand that this is something that ultimately benefits them.

It might seem initially – ‘hey this all costs money’ – but in the end it will make the city more profitable if you see it in a wider sense; particularly if you’re looking at the happiness, or the self-satisfaction of people as a whole.

6 Business Daily Monday, March 20 2017

Macau Opinion

Sheyla Zandonai* Common good The opening of Macau’s gambling sector to foreign competition fifteen years ago has catapulted the city into the global financial economy. The liberalization’s impact over the urban fabric, and Macau’s demographics and industry, has been both overwhelming and unsettling. At first, capital inflows were so large that it took the city’s political body a while to devise a development plan, if any.

Disconnected urban projects, rather than a comprehensive city planning strategy have been the rule. Another problem, epitomized early on by (former Secretary for Transport and Public Works) Ao Man Long’s corruption misdemeanors, is that abundant financial resources have not been systematically converted into forms of wealth that would more faithfully reciprocate a general, yet increasingly more difficult-to-define, idea of the common good. If Ao’s case is a closed chapter, at least formally, the common good is not.

Eventually, I am not sure if that is what the Chinese central authorities had in mind for Macau while promoting the notion “becoming rich is glorious.” But the city’s development and economic growth have worked out for quite a few people. Ask around.

No doubt, there is always the wide, though arguably narrower, bottom of the pyramid, which have not benefitted comparatively from the fact that Macau became a wealthy city nearly overnight – a fact that has entertained quite a long lifespan. Just a couple of weeks ago, Macau ranked the third wealthiest jurisdiction in the world, behind only Qatar and Luxembourg, with the local GDP per capita currently set at US$87,845 (MOP702,385).

Take an example. The average monthly earnings of a dealer in a local casino today hits roughly MOP19,000 (US$2,700/Euro 2,200). That is close to the amount an early career professor would earn in France. Yet the fact that a dealer in Macau would pay nearly as much as a professor in Paris to rent an apartment, makes it perhaps less interesting and much less attractive. While the real estate market is pairing up with Macau’s economic bonanza, it does not seem the city is pairing up with higher quality of life standards.

It is, though, a fact of economic orthodoxy that a global rise in revenue has an impact on per capita income, through wage increases, drops in unemployment rates, or more inclusive social welfare benefits, reallocated by governments according to the size of public coffers and the political ideology that drives bureaucratic intelligentsia.

The public coffers are full.

But is there a driver at the wheel? *scholar and contributor to this newspaper.

Gaming VIP revenues in 2019 expected to decrease by 3 pct if smoking bill is enforced

Levelling the smoking field Gaming analysts consider that if the new smoking bill is approved, the difference in market competitiveness between casinos where smoking at VIP and premium mass tables is allowed and those where it is not, will be eliminated Nelson Moura nelson.moura@macaubusinessdaily.com

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he new smoking bill will ‘level the playing field’ between gaming operators, since VIP/Premium Mass smoking is only allowed in casinos that opened before 2012, according to gaming analysts Morningstar.

The analyst firm also revised its estimates for gaming revenues in the next two years, taking into account the effect of the bill. While the firm predicts VIP revenue growth in 2018 will stay the same, with mass gaming revenue growing by 14 per cent, it predicts VIP revenues in 2019 - the first year of full implementation of the bill - will decrease by 3 per cent, while mass gaming revenues will rise by 13 per cent.

‘Smoking premium mass customers will have to walk to nearby lounges or outdoors to smoke, reducing the time of play and thus premium mass gaming revenue,’ stated the report Nevertheless, the expected decrease in VIP revenues in 2019 is still lower than the estimated 16 per cent decrease that was predicted to occur in the case that initially proposed total smoking ban in gaming areas had been enforced.

Level playing field

Last week, it was announced that if the newly proposed smoking bill is passed by the Legislative Assembly (AL) gaming operators will have until January 1, 2019 to install new smoking

lounges, or update their current ones to meet the new standards set by the authorities.

With smoking currently allowed at gaming tables in VIP rooms and premium mass rooms, a possible approval of the smoking bill would mandate that gaming operators install smoking lounges in these areas by the deadline given.

According to analysts from Morningstar, at the moment, premium mass customers can only smoke while betting at VIP tables located in properties that were inaugurated before Sands Cotai Central’s Phase Two opened in September of 2012, which gives an edge to properties that opened prior to that year.

‘For example, smoking is permitted in City of Dreams’ entire premium mass gaming area, which accounts for approximately one third of the mass tables of the property on our estimate.

This has offered an advantage to the more recent resort openings (Sands Cotai Central Phase 2, Galaxy Phase Two, Studio City, Wynn Palace, and the Parisian) in the region’s Cotai area, as many Chinese gamblers enjoy smoking,’ stated the report.

According to a previous report by JP Morgan, gaming operator Melco Crown Entertainment Ltd. could suffer the largest impact from the smoking bill, since 35 per cent of its 2019 EBITDA was estimated to be derived from premium mass smoking tables, especially in its integrated resort City of Dreams.

The Morningstar report points out that under the proposed smoking

bill, newer casinos will be able to establish smoking lounges in VIP gaming areas, while ‘older casinos’ will ‘lose’ their premium mass and VIP smoking areas.

‘Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos,’ states the report.

Case studies

The report also mentions a series of worldwide case studies where full implementations of smoking bans have affected gaming revenues.

According to the report, a smoking ban enforced in the U.S. state of Delaware in 2002 led to a 13 per cent yearly loss in gaming revenues in the year of enforcement, while a smoking ban enforced in the U.S. state of Illinois in 2008 led to a 20 per cent decrease in revenues the year after it came into effect.

However, since the predicted smoking ban in the MSAR is only partial, Morningstar analysts believe the impact on VIP revenues will be less drastic.

‘We believe casino operators have designed their new Cotai properties to minimise the damage brought by a future VIP smoking ban by constructing balconies off betting rooms that would allow for smoking breaks.

Also, VIP play should experience some benefit from infrastructure improvement in 2019,’ the report stated.

With gaming operators having until 2019 to enforce the changes, the analyst firm report also believes there is ‘abundant time for casino operators to redesign their gaming floor and layout of smoking lounges to minimize revenue impact’.

Therefore, properties such as MGM Cotai - expected to open in the second half of this year - and Grand Lisboa Palace - expected to open in the first half of 2018 - will have enough time to enact the changes.

Business Daily Monday, March 20 2017 7

Macau Economy

No infrastructure, no diversification While the MSAR Government is addressing the importance of diversification, it should first develop a solid plan for the city’s future, and enhance its infrastructure, say gurus

G

urus in the city believe the MSAR needs detailed planning and improved infrastructure in order to diversify its economy away from its core gaming industry.

On a talk show produced by Singaporean news channel Channel NewsAsia, locally-based economist Albano Martins pointed out that infrastructure is one of the key obstacles preventing the city from diversifying.

“If we want to do that, we need to invest a lot on infrastructure,” said Mr. Martins on the show. “We have had a huge amount of growth in our GDP (gross domestic product), but the city itself hasn’t grown at all…the infrastructure is almost the same.”

Criticising that the city’s five-year plan lacks targets – such as GDP growth, inflation rates or quantity of housing to be provided - the economist suggested that the MSAR Government needs to be clever in order to lead the city towards economic diversification.

“The government still has a lot to improve in order to be capable of being the leader of all these diversifications. Without this leadership, it will be very complicated for us to go ahead,” Mr. Martins said.

A similar perspective was shared

by Glenn McCartney, Associate Professor in International Integrated Resort Management at the University of Macau (UM).

The academic noted on the show that all tourist destinations in the world have well-planned development, perceiving that the MSAR Government’s lack of forecasting is one of the major issues the city is facing, and one it will continue to.

The scholar also called for more collaboration between the private and public sectors in order to achieve the goal of diversification. “The collaboration of Macau’s private and public sector was very minor in the past years,” he remarked.

Managing Director at Union Gaming Securities Asia, Grant Govertsen

implement diversification in Macau.

Everything has been done [by China] to support the Macau gaming industry and Macau people, because we have the one country two systems,” he said.

Japanese competition

meanwhile believes that diversification should be developed within the resort industry.

“If you look at Vegas, the revenue story, it will take more than decades for Macau to have a majority of revenue from non-gaming. But we’re moving in the right direction,” he opined.

Nevertheless, legislator José Pereira Coutinho does not believe it is necessary for the territory to diversify in order to sustain its economic development.

“I don’t see there’s a real need to

Even though Japan passed its own gaming legislation last December and is expected to see its first casino-resort open for operation after 2021, the MSAR market is not likely to be affected significantly.

“Yes, Japan is going to be fascinating as we see – Macau may lose a bit in revenue as a result, but I think ultimately you’ll never see Macau duplicated,” said Mr. Govertsen, who is also a gaming analyst.

He believes there will always be a demand for the MSAR given its unique connection to Mainland China compared to other gaming markets out there.

José Pereira Coutinho echoed this point of view.

“We’ve been hearing a lot of comparisons between Macau and Las Vegas. But they’re two totally different markets,” the local legislator said. “The people who come over to Macau, they come just for gaming… This is the structure of Macau’s business. I don’t think Macau could be challenged by anyone. Not even Japan.”

no one was reported injured, said the news outlet.

Business Daily enquired of the casino operator as to whether the fire would affect the project’s construction progress, however no reply had been received from the company

before this story went to print.

According to its annual results at February-end, SJM expects construction of the Grand Lisboa Palace to be completed by the end of this year, with the opening expected in the first half of next year.

Accident

Grand Lisboa Palace on fire There was a fire at the construction site of the Grand Lisboa Palace – the new casino-resort project of SJM Holdings Ltd in Cotai – last Friday evening, with authorities saying the incident likely involved foul play.

According to local broadcaster TDM

English News, the fire broke out at a storage facility for paint and other construction materials of the project, and the situation was only brought under control two hours after the fire began.

A total of 522 people were evacuated from the construction site and

Images and recordings of the blaze circulated on social media

Results

Genting HK goes into the red Casino cruise operator Genting Hong Kong Ltd dived into the red for the year of 2016, posting a net loss attributable to owners of the company of US$502.3 million (MOP4.02 billion), compared to a net profit of US$2.1 billion one year earlier.

According to the company’s filing with the Hong Kong Stock Exchange last week, its revenue from cruise and cruise-related activities jumped 39.1 per cent year-on-year to US$908.1 million, while that from non-cruise

activities surged 192.5 per cent to US$108.6 million.

Meanwhile, total net revenue registered an increase of 38.8 per cent to US$689.6 million, as compared to US$496.8 million for 2015, driven by year-on-year increases in capacity days and net yields of 18.7 per cent and 17 per cent, respectively.

Meanwhile, the company’s share of profit from Philippine casino operator Travellers International Hotel Group Inc, dropped by 3.5 per cent year-on-year to US$32.7 million for the whole year.

The company said the decrease was due to ‘unrealised foreign exchange losses on the outstanding US$300 million bond resulting from the depreciation of Philippine peso’.

For the year, Resorts World Manila – the casino operated by Travellers – saw its net profit decrease by 15.4 per cent year-on-year to some 3.4 billion pesos (MOP571.2 million), while total revenue fell slightly by 0.8 per cent year-on-year to 27.5 billion pesos. K.L.

8 Business Daily Monday, March 20 2017

Greater China Property

Home price gains spread amid stepped up battle against speculators Guangzhou’s city government on Friday said unmarried people and non-local residents will only be allowed to buy one home in the city Elias Glenn

C

hina’s red-hot property market picked up pace in February after price gains had slowed in the previous four months, with average new home prices in 70 major cities edging up in spite of a raft of new government curbs aimed at tempering speculative demand.

Compared with a month earlier, new home prices rose 0.3 per cent, quickening from January’s 0.2 per cent increase, according to Reuters calculations from data issued by the National Bureau of Statistics (NBS) on Saturday.

The monthly gain in price growth suggested speculation has yet to be contained even with more local governments rolling out restrictive

measures amid fears that a furious rally over the past year end in a crash.

China’s property sales unexpectedly surged in the first two months of the year despite government measures to cool the market, though growth in real estate investment eased slightly, according to official data released on Tuesday.

Raising the bar, again

Recent weeks have seen the biggest wave of tightening of home purchase and lending rules since October, a sign that prices remains strong as investors gamble the measures so far won’t contain prices.

On Friday, Beijing’s municipal government announced new steps to rein in its housing market, increasing the minimum down payment for second home purchases in the city to

at least 60 per cent from 50 per cent.

Prices for new homes in Beijing were flat month-on-month in February, while second-hand home prices rose 1.3 per cent.

Guangzhou’s city government on Friday said unmarried people and non-local residents will only be allowed to buy one home in the city from Saturday. The minimum down payment on second homes will also be raised to 50 per cent.

Hot markets Hangzhou and Nanjing were among other major cities to step up their fight against property speculators, as authorities fret over resurgent price growth that has shown only modest signs of abating.

Speculators also appeared to be venturing into smaller markets that have more relaxed housing purchase policies. Surging price growth in satellite cities near some of the country’s sprawling metropolises have prompted authorities in those areas to impose purchases bans.

Shi ji azh u a n g, f o r exa m p l e, capital of Beijing neighbour Hebei

province, on Saturday imposed home purchase restrictions for the first time since 2014, according to a post on the website of the Shijiazhuang government.

Non-local residents will be limited to one house in the city, and the minimum down payment for residents on second homes was raised to 40 per cent.

Shijiazhuang home prices rose 18.2 per cent year-on-year in February and 0.2 per cent from January.

Big cities slowing

New home prices rose 11.8 per cent from a year ago, compared with January’s 12.2 per cent gain, according to NBS data. That was the slowest in five months as gains in the biggest cities dropped off.

Shenzhen, Shanghai and Beijing prices rose 13.5 per cent, 21.1 per cent and 22.1 per cent, respectively, in February from a year earlier, all slower than January’s annual growth rates.

Key Points Feb new home prices +0.3 pct m/m vs +0.2 pct in Jan Yearly growth in Feb +11.8 pct, while Jan was +12.2 pct Govt curbs on housing markets fail to contain home prices On a monthly basis, Shenzhen prices fell 0.6 per cent and Shanghai gained 0.2 per cent.

Home prices in the smaller market of Hefei, capital of eastern Anhui province, rose the fastest among the 70 cities surveyed at 40.5 per cent year-on-year, though still falling 0.2 per cent on-month.

China’s policymakers have vowed to keep the property market stable and stem speculation this year, with the government adding to its work report after the annual parliament closed on Wednesday a pledge to contain fast-rising home prices. Reuters

PBOC’s Governor

Growth prospects improved, policy still prudent Zhou Xiaochuan said efforts will be made to contain debt levels, including restructuring of firms with heavy debt burdens Chinese central bank governor Zhou Xiaochuan said growth prospects have improved in the world’s second-largest economy, but its monetary policy remains prudent and neutral.

Earlier last week, China published upbeat data showing its economy got off to a strong start to 2017, supported by bank lending, a government infrastructure spree and a long-sought resurgence in private investment.

“China’s economic growth rate is stable overall, with growth prospects improving,” Zhou said, according to a post on the People’s Bank of China’s website on Saturday.

“China will continue to implement active fiscal policy, and prudent and neutral monetary policy.”

The People’s Bank of China (PBOC) on Thursday raised short-term interest rates for the third time in as many months, in what economists saw as a bid to curb capital outflows and keep the yuan currency stable after the Federal Reserve raised U.S. interest rates this week.

The PBOC has said specifically that

Thursday’s action should not be seen as full-blown policy tightening like the Fed’s. The Chinese central bank has left its benchmark lending rate unchanged since an October 2015 cut.

The government has promised to contain debt and property market

risks in 2017 following years of credit-fuelled expansion.

Efforts will be made to contain debt levels, including restructuring of firms with heavy debt burdens, alongside a push to reduce excess industrial capacity, Zhou said in Beijing last week.

“In terms of macroeconomic policies, China is currently focused on structural adjustments to the economy and pushing forward supply-side reform,” Zhou said.

He was speaking to other central bank governors and finance ministers from BRICS economies in Baden-Baden, Germany, during G20 meetings.

“China will continue to implement active fiscal policy, and prudent and neutral monetary policy” Zhou Xiaochuan, People’s Bank of China Governor

Chinese central bank governor Zhou Xiaochuan

Zhou also met U.S. Treasury Secretary Steven Mnuchin at the G20 meetings on Saturday.

China’s Finance Minister Xiao Jie, who was also in Baden-Baden, said BRICS countries should strengthen macroeconomic coordination and jointly promote growth, according to the PBOC post on Saturday.

“And at the same time, unwaveringly support free trade and investment, and oppose protectionism,” Xiao said.

The annual BRICS summit will be hosted by China in the coastal city of Xiamen in September. Reuters

Business Daily Monday, March 20 2017 9

Greater China Energy forecast

In Brief

Government needs to accelerate nuclear power development to meet target Beijing will need to approve six to eight new reactors a year between 2018 and 2020, to accelerate post-2020 development, said ex-chairman of China National Nuclear Corporation Chen Aizhu

China needs to speed up building planned nuclear reactors and make quick new approvals over the next few years to meet a target for 2020 and keep projects rolling beyond that, an ex-chairman of China National Nuclear Corporation (CNNC) said.

CNNC aims to start up around November this year - nearly four years behind an original timeline - the world’s first Westinghouse AP1000 reactor, said former chairman Sun Qin in an interview this week.

China currently operates 35 nuclear reactors, which supply 3 per cent of China’s total power use, and it is building another 31 units as part of an ambitious programme to put a total of 58 gigawatts into operation by 2020.

Several former top nuclear powers, including Germany and Switzerland, announced plans to withdraw from the sector in the wake of Japan’s Fukushima nuclear disaster of 2011, the world’s worst since Chernobyl.

With Japan and the United States also scaling back on nuclear, China could emerge in the next decade as the most significant developer of nuclear-fired power if it accelerates its building schedules.

“The successful start-up of AP1000 will boost industry morale ... and will be replicated along the coast as we’ve planned a series of both AP1000, and (Areva’s) EPR reactors,” Sun said.

D e l a y s a t s o -c a l l e d t h i r dgeneration reactors, both the Westinghouse AP1000 and French stat e f i r m A r eva’ s E u r o p ea n Pressurised Reactor (EPR), have dragged on China’s pace of nuclear power development for the past few years, after Beijing had already suspended new project approvals for three years following the Fukushima meltdowns.

At the world’s maiden AP1000 project in the eastern province of Zhejiang, developed by Westinghouse and its struggling Japanese parent Toshiba, delays for the fine-tuning of designs have inflated costs of the

first two reactors by at least 10-20 per cent, said Sun, who retired last December after working in the industry for over 30 years.

Sun didn’t give the initial cost estimates, but state media reported in 2009 the first two reactors then cost RMB40 billion (US$5.8 billion).

Beijing will need to approve six to eight new reactors a year between 2018 and 2020, to accelerate post-2020 development, said Sun, adding that another slowdown would waste China’s recently developed nuclear equipment manufacturing capacity.

The European Pressurized Reactor (EPR) developed by French Areva and being built in South China’s Guangdong province has also seen delays, similar to EPR projects in Finland and France, said Sun. China, however, is not relying on foreign technology alone to develop its nuclear power sector. CNNC and domestic rivals China General Nuclear Power Group (CGN) and State Power Investment Corp all aim to export their own technologies after proving them at domestic plants.

Sun said China’s own third-generation reactor Hualing-1, jointly developed by CNNC and CGN, was progressing smoothly in the south-eastern city of Fuqing, where first operations are expected in 2020.

China is building an identical Hualong-1 unit in Pakistan and is waiting for Argentina to finalise another Hualong-1 deal.

State Power Investment is also developing an enhanced version of AP1000, called CAP1400 with a pilot project planned in eastern Shandong province.

Sun also said CNNC remains in talks with French nuclear fuel group New Areva - a unit being spun off from parent Areva - over a potential stake of at least 10 per cent and a board membership. Reuters

Logistics

Jack Ma to launch Alibaba’s regional distribution hub in Malaysia Ties between Malaysia and Beijing have blossomed in recent months with a surge of investments from China Liz Lee

Chinese e-commerce giant Alibaba Group Holding Limited plans to set up a regional distribution hub in Malaysia to cater to its fast-growing business in the region, two sources aware of the discussions said.

The hub would be sited within KLIA Aeropolis, a 24,700-acre development led by airport operator Malaysia Airports Holdings Bhd (MAHB) that is expected to generate more than 7 billion ringgit (US$1.58 billion) worth of domestic and foreign investments.

Alibaba executive chairman Jack Ma and Malaysian Prime Minister Najib Razak are expected to announce the plans at an event in Kuala Lumpur this week, the sources said.

The hub will be set up with the help of Malaysian state-linked agencies. It was not clear whether Alibaba would invest any funds in the project.

“Kuala Lumpur International Airport (KLIA) has existing facility for Alibaba Group to pilot their distribution services here, and if (Alibaba) decide to expand in the future, there is the option to build more on other (undeveloped) sites in KLIA Aeropolis,” one source said.

Alibaba and the Malaysian prime minister’s office did not respond immediately to requests for comment.

Naji b a p p o i n t e d M a as h i s

government’s digital economy adviser during an official trip to China in November.

Malaysian media reported that Ma, whose Alibaba owns Chinese online shopping business Taobao, would help steer Malaysia’s e-economy development with the implementation of online payment and banking.

“Many people see Malaysia as an emerging hub next to Singapore. Malaysia may not be able to take all of Singapore’s business but it is a good choice (logistically),” one source said.

This would mark Alibaba’s first investment in Malaysia. The company invested US$1 billion last year to control Singapore-based e-commerce platform Lazada, Southeast Asia’s largest online shopping platform. It also increased its

Alibaba executive chairman Jack Ma

shareholding in Singapore Post to 14.4 per cent from the 10.2 per cent acquired in 2014 and bought a 20per cent stake in Thai e-payment service, Ascend Money.

Ties between Malaysia and Beijing have blossomed in recent months with a surge of investments from China.

China agreed to buy assets of troubled state fund 1MDB for US$2.3 billion in December 2015.

Najib returned from November’s Beijing visit with 14 agreements amounting to US$34.4 billion, which included an agreement to buy four Chinese naval vessels and collaboration to build rail projects in Malaysia.

Sources said the distribution hub would be part of Malaysia’s Digital Free Trade Zone (DFTZ), also slated to be launched during Ma’s visit next week.

“KLIA Aeropolis includes many components and the DFTZ is likely a new component to be added into the development,” one source said.

Plans to establish the DFTZ were announced in the national budget last October. Reuters

Anti-corruption

Official says anti-graft drive to target govt-enterprise ties The head of one of China’s top graft-busting agencies has said Beijing’s anti-corruption drive will clean up the relationship between government officials and enterprises, the official Xinhua news agency reported. President Xi Jinping has waged war on corruption since assuming office more than four years ago, leading to a one-third jump in graft court cases in 2016. The head of the Ministry of Supervision, Yang Xiaodu, said there was still a long way to go before relations between the government and enterprises were “clean”, Xinhua reported on Saturday.

Official trip

Premier Li to visit New Zealand, Australia Chinese Premier Li Keqiang will travel to New Zealand for talks with government and business leaders next week, New Zealand Prime Minister Bill English announced yesterday.

Li’s visit comes as international attention centres on China’s role in promoting free trade and globalisation amid a turbulent start by new U.S. President Donald Trump. The Chinese premier will travel to New Zealand after visiting Australia for talks with Prime Minister Malcom Turnbull. He and his wife, Professor Cheng Hong, will lead a delegation of business and government representatives to New Zealand from March 26-29.

Financial sector

Beijing loosens some licence requirements for foreign banks China’s banking regulator scrapped licence requirements for foreign and joint-venture lenders in the country for treasury bond underwriting, custody and advisory services among other services on Friday. The move comes as President Xi Jinping seeks to project China as a world leader in fighting protectionism and defending globalisation, repeatedly maintaining that the country will keep its door wide open.

The China Banking Regulatory Commission said in a notice posted on its official website that foreign and joint-venture lenders can co-operate with foreign headquarters to provide financial services to assist customers issuing bonds, managing IPOs and engaging in acquisitions and finance abroad.

M&A

Chairman of Anbang bullish on Europe’s “cheap assets” The chairman of China’s privately-held Anbang Insurance Group said at the China Development Forum on Saturday he is bullish on investing in Europe despite great uncertainty over issues including refugees, economic challenges and rising populism. Europe has “very cheap assets” and Chinese investors can take advantage of cheap funding to acquire companies with good technology, said Anbang Chairman Wu Xiaohui.

Anbang, established in 2004 as an auto insurer, has emerged as one of China’s most aggressive buyers of overseas assets in the past two years, spending more than US$30 billion buying luxury hotels, insurers and other property assets.

10 Business Daily Monday, March 20 2017

Greater China Strategy

LeEco to sell Silicon Valley site amid cash crunch The company has seen headcount reduction in various units of its business in China since its financial problems deepened Sijia Jiang

C

hinese technology conglomerate LeEco is looking to sell a 49-acre U.S. Silicon Valley property less than a year after buying it from Yahoo Inc, sources said, in what is the latest effort by the firm to ride out a cash crunch.

LeEco, one of China’s most ambitious companies that grew from a Netflix-like video website to a business empire spanning consumer electronics to cars within 13 years, is struggling to support its goals that include beating Elon Musk’s Tesla Motors in premium electric vehicle making.

LeEco’s billionaire founder and CEO Jia Yueting admitted in a letter to staff in November that the firm was facing a “big company disease” and battling a cash crunch after expanding at an unprecedented rate.

But less than a month prior to the letter, amid much fanfare at LeEco’s official U.S. launch at the Palace of Fine Arts in San Francisco, Jia had outlined plans to build its North America headquarters at the Silicon Valley site.

“This property will be an EcoCity that houses 12,000 employees,” Jia said at the time.

Now cash-strapped and struggling to repay a pile of debts to suppliers and business partners, LeEco plans

to sell the U.S. site to little-known Chinese developer Genzon Group for US$260 million, US$10 million more than what the firm paid for it in June, said a source with direct knowledge of the deal who did not want to be named due to rules on talking to media.

Genzon confirmed it was in talks to buy the site, but declined to comment on the deal size or whether it was teaming up with any partners as the discussions were still ongoing.

Genzon also declined to elaborate on why it was interested in the property, but according to its website, the Shenzhen-based firm founded in 2003 is erecting a 140,000-square metre office building in Silicon Valley in a project called Burlingame Point - its first in the United States.

LeEco, in an emailed response to Reuters on the sale talks, said it was “working on securing a development partner” but that it was unable to share any further details.

“We are not yet ready to share plans for the land as we are still in the initial planning phase.”

Headcount changes

According to sources in and outside the company, workforce has been downsized across LeEco US, with some estimating numbers had at least halved in its current Silicon Valley office alone. Jia, in October, said LeEco US employs “more than 500”.

LeEco was cited by Chinese media as saying in May last year that the company had 1,000 employees in the United States, including research personnel for its “super car”.

The firm on Friday declined to

comment on these reports or its current employee number. It is company policy not to quote numbers upon request as “headcount changes routinely due to additions and/or departures”, LeEco said.

LeEco has seen headcount reduction in various units of its business in China since its financial problems deepened. The company said earlier this month that it had also cut almost 80 per cent of its workforce in India.

Key Points LeEco in talks to sell land to ease cash crunch -sources Plans to sell land to China’s Genzon for US$260 mln -source Chinese developer Genzon confirms in talks to buy land LeEco says “working on securing a development partner” Significant downsizing at LeEco US -sources

Jia in January said LeEco’s financing problems would be solved in three to four months, before the firm got a much-needed capital injection of US$2.2 billion from property developer Sunac China Holdings.

But the Sunac investment was for LeEco’s entertainment units and not its car-making business, which analysts say is very expensive to sustain.

LeEco is developing luxury electric vehicles with Faraday Future in the United States, a startup Jia funds and controls.

However, the outlook remains unclear after Faraday said it was scaling back production plan at a factory it has yet to build in Nevada.

Shares of LeEco’s flagship unit Leshi Internet Information and Technology Corp Beijing have plunged around 25 per cent over five months. Reuters

M&A

Sinopec nears deal to buy Chevron’s South African assets Chinese oil companies and merchant traders have become more visible in chasing refinery assets that come on the market as oil majors reshape asset portfolios Jessica Resnick-Ault and Florence Tan

China’s Sinopec is nearing a deal to buy Chevron’s South African oil assets for up to US$1 billion to secure

Key Points Chinese giant now lone bidder, auction near end -sources Assets estimated to be worth US$1 billion -sources Chevron S. African assets include Cape Town refinery Deal would give Sinopec first refinery in Africa its first major refinery on the continent, several people familiar with the matter said.

China Petroleum and Chemical Corp, or Sinopec, Asia’s largest oil

refiner, was the last bidder remaining, and close to a deal with Chevron after an auction that spanned more than a year for its refinery, retails business and storage terminals.

French oil firm Total and commodity traders Glencore and Gunvor looked at the assets, Reuters reported last year.

The South Africa government’s desire to keep the refinery operating has nevertheless proven to be a major stumbling point for buyers who would prefer to convert the site into a more profitable storage terminal, sources said.

Sinopec is in discussions with the government on ways to keep the 110,000 barrels per day refinery in Cape Town running, but talks could still fail, sources said.

The sources declined to be identified because they were not authorised to discuss the matter publicly.

Chinese oil companies and

merchant traders have become more visible in chasing refinery assets that come on the market as oil majors reshape asset portfolios.

Sinopec declined to comment.

Chevron spokesman Braden Reddall said “the process of soliciting expressions of interest in the 75 per cent shareholding is on-going”. Plans to sell the stake in the South African business, including the Cape Town refinery, were first announced in January 2016.

Besides the refinery, Chevron has interests in a lubricants plant in Durban on the east coast, storage tanks and a network of Caltex service stations, making it one of South Africa’s top five petroleum brands.

Financial advisor Rothschild & Co is helping Chevron on the sale of the assets.

The remaining 25 per cent interest is held by a consortium of Black Economic Empowerment shareholders and an employee trust. Reuters

Business Daily Monday, March 20 2017 11

Asia Trade

Singapore exports strongest in 5 years Shipments to China soared 65.1 per cent from a year earlier Fathin Ungku

S

ingapore’s February nonoil domestic exports (NODX) grew at their fastest pace in five years, fuelled by demand for the city state’s tech products and a sharp jump in shipments to China.

The stronger-than-expected data adds to optimism of a manufacturing revival for Asian exporters as concerns over trade protectionism and geopolitical risks rise.

February from January.

A Reuters poll had forecast February exports would expand 12.8 per cent from a year earlier and grow 0.8 per cent from January.

“The strong numbers were being helped by a favourable base effect because of Lunar New Year,” said ANZ economist Weiwen Ng. The holiday fell in February last year but was celebrated in January this year.

Singapore’s electronics sector was also a factor driving exports, helping the trade-dependent economy avert

a recession in the fourth quarter. Integrated circuits made up a bulk of the export growth of the electronics sector.

“The bright spot effectively is still electronic NODX which continued to expand in double digits”, Ng said.

Petrochemical exports also jumped 45.3 per cent from a year earlier.

However, despite the stellar numbers, Ng said he remains cautiously optimistic in his outlook which is dependent on “on-going trade recovery in the region and the reflationary fiscal policy under the Trump

administration”.

February’s annual rise was the biggest since February 2012, when exports jumped 32.2 per cent, Thomson Reuters data showed. Exports in January rose 8.6 per cent, buoyed by strong shipments to China as well as Taiwan and South Korea.

In February, shipments to China soared 65.1 per cent from a year earlier, while exports to Europe rebounded, up 28.7 per cent, and exports to the United States grew 1.4 per cent.

Singapore’s economy has been on the ropes in the last two years with growth slipping to a seven-year low of 1.8 per cent in 2016, as exports slowed amid sluggish global growth.

Most analysts now expect Singapore’s central bank to keep monetary policy unchanged at its next policy review in April, after exports and factory activity picked up momentum from late last year. Reuters

Key Points Feb non-oil domestic exports +21.5 pct y/y vs +12.8 pct f’cast Feb NODX +1.4 pct m/m sadj vs +0.8 pct forecast Exports to China +65.1 pct, Europe +28.7 pct, U.S. +1.4 pct Exports in February rose 21.5 per cent from a year earlier, data from trade agency International Enterprise Singapore (IE Singapore) showed on Friday.

Non-oil domestic exports rose a seasonally adjusted 1.4 per cent in

Singapore’s port

Philippines

Duterte and Chinese Vice premier prioritises deals over disputes They signed a six-year development programme to work together on trade and investment Chinese Vice Premier Wang Yang met Philippine President Rodrigo Duterte’s in his home city on Friday, becoming the most high-profile visitor from Beijing since two countries long at odds sought to chart a new course in relations.

Wang went to Davao City, where Duterte was mayor for 22 years before he became president in 2016 and sought a dramatic change in approach towards China at the height of a row over South China Sea sovereignty and amid the fallout of a bitter legal dispute that went to international arbitration.

The vice premier signed a six-year development programme to work together on trade and investment, part of Duterte’s strategy to engage China as a buyer of Philippine farm and fisheries produce and a builder and financier of its much-needed infrastructure.

“Wang Yang noted the need to focus on common interests that bring more benefits than differences,” presidential spokesman Ernesto Abella said after the closed-door meeting between Duterte and Wang.

“The president said bilateral ties are

found stronger, particularly in trade and commerce, and reaffirmed the importance of peaceful settlement of disputes.”

The relationship has for years been characterised by disputes, with the Philippines repeatedly opposing China’s island-building in parts of its exclusive economic zone and its repelling of fishermen from the disputed Scarborough Shoal.

Though Duterte has persuaded China to end the blockade and let fishermen operate around the shoal, China has continued to fortify some of its artificial islands with military hardware.

It was unclear, however, if Wang and Duterte discussed China’s decision to start preparatory work this year for an environmental monitoring station on Scarborough Shoal.

The Philippines has recently said it was assured China would not carry out any building work there.

The six-year business deal covers loans, support with feasibility studies, grants for bridge construction, a proposed Philippines-China industrial park, dams, railways and agribusiness training.

China last week committed to finance at least three Philippine infrastructure projects worth US$3.4 billion, two of which could be rolled out in the first half of this year. .

Wang’s visit to Davao comes two months after that of Japanese Prime Minister Shinzo Abe, who was the first foreign leader to visit the Philippines under Duterte, signalling Tokyo’s intent to bolster its influence amid a changing geopolitical landscape.

Abe brought with him a 1 trillion yen (US$8.77 billion) aid package.

Wang’s trip was more business-like than that of Abe, who has a close personal bond with the firebrand Philippine leader and had breakfast

in his humble Davao home.

Duterte was also visited on Friday by Australian Foreign Minister Julie Bishop, who announced a A$90 million (US$69.2 million) programme to support education and policy development in Mindanao, an impoverished Muslim region in the predominantly Catholic nation.

Mindanao has been plagued by decades of separatist rebellion and the Philippines is concerned it could become a hotbed of extremism if Islamic State gains a foothold.

“Both underscored that terrorism and violent extremism are serious threats,” spokesman Abella said of their meeting. Reuters

Chinese Vice Premier Wang Yang (C) takes pictures during a visit of an infrastructure project at a seaport in Davao city, Philippines, 18 March 2017. Lusa

12 Business Daily Monday, March 20 2017

Asia In Brief Steel production

POSCO offers to surrender land for India project South Korean steelmaker POSCO has asked the eastern state of Odisha in India to take back land it acquired for a US$12 billion steel project as it has not been able to start work, two senior state officials said on Saturday.

The move could be a sign that the world’s fourth-biggest steelmaker is scrapping the proposed 12 million-tonnes-a-year steel plant in the Indian state. In a letter to the Odisha Industrial Infrastructure Development Corporation (IDCO), a state government agency that arranges to make industrial plots available to companies, POSCO has offered to surrender the land.

M&A

Singapore M1’s biggest shareholders evaluating stake sales Singapore telecom firm M1 Ltd’s three biggest shareholders, who own about 60 per cent in the company, are evaluating selling their stakes, in the first recent sign of M&A activity in the local sector which is set to see increased competition. Singapore Press Holdings Ltd (SPH), Keppel Telecommunications & Transportation Ltd and Axiata Group Berhad are undertaking a strategic review of their respective shareholdings in M1, the firms said in separate statements.

The three companies did not give a reason for the move. M1 has a total market value of about S$2.05 billion (US$1.5 billion).

Nuclear disaster

Japan court rules government liable over Fukushima A court in Japan on Friday ruled that Tokyo Electric Power (Tepco) and the government are liable for negligence in a case involving compensation for the Fukushima nuclear disaster, the first time the judiciary has ruled the state has liability, Japanese media reported. The district court in Maebashi, north of Tokyo, ruled in favour of 137 evacuees seeking damages for the emotional distress of fleeing their homes as radiation spread from the meltdowns at Tepco’s Fukushima Daiichi plant after an earthquake and tsunami six years ago, the Mainichi newspaper and other media reported.

Vice trade minister

S.Korea’s exports to rise in March South Korea’s March exports are expected to rise despite growing economic and political uncertainties, its vice trade minister said on Friday. “Exports are expected to rise for the fifth consecutive month thanks to March exports growth and our export recovery is strengthening,” Vice Trade Minister Jeong Marn-ki said. “However, we are facing a serious situation of a leadership vacancy while uncertainties are growing amid global trade protectionism and trade issues with the United States and China,” the minister said. In February, Asia’s fourth-largest economy posted its best export growth in five years due to improving global demand.

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Legislation

India hunts hidden cash in corruption blitz Holding real estate in someone else’s name has been a particularly popular avenue for those seeking to legitimise black money and dodge their tax dues Megha Bahree

M

ansions owned by maids, gardeners and drivers until now have aroused little suspicion in India, where the wealthy have long hidden fortunes in the names of lowly-paid staff to avoid paying tax.

But as the government broadens its crackdown on corruption, a new law promises to end the widespread practise and hundreds of suspicious bank accounts are under investigation.

“There’s been an overnight change in the system,” real estate lawyer Naresh Gupta told AFP, describing the new rules as “very draconian”.

“Investigators can question anyone and ask any government department for information about suspects.”

Th e l a w ba n n i n g s o -ca l l e d “benami” transactions, making it illegal for assets to be hidden in another’s name, came into effect in November as part a twin strike by the government to flush out undeclared “black money” hoarded by tax evaders.

It followed a shock decision by Prime Minister Narendra Modi to withdraw high-value bank notes from circulation, compelling millions to join the formal banking sector for the first time. Previously, around 90 per cent of everyday transactions in India were in cash.

Holding real estate in someone else’s name has been a particularly popular avenue for those seeking to legitimise black money and dodge their tax dues.

Those caught out could have their

wealth seized, face a seven-year jail term and pay hefty fines equivalent to 25 per cent of the asset’s value.

Government officials say 235 suspicious accounts were under investigation for alleged benami activity in mid February, with more than half frozen and properties seized.

“Even within families, people want to hide their assets from others so will purchase it in someone else’s name” Abhishek Goenka, PwC India

But Modi, who was elected in 2014 on a pledge to wipe out corruption and kick-start the economy, has promised more scalps as the dragnet widens.

“It has some very tough provisions.

Those holding such property should start consulting their (accountants),” he said in a February speech.

‘They will go after everything’

The law was in step with November’s controversial “demonetisation”, which forced Indians to turn in their old, devalued banknotes in exchange for new ones.

Those declaring suspiciously-large sums were red flagged for audit by the tax department, which often

uncovered complex and implausible webs of benami holdings.

In one case, the department said 33 million rupees (US$500,000) were hidden in the name of a woman who wasn’t even aware the account existed.

In another instance, US$9 million was spread across 20 fictitious accounts.

A network of jewellers, meanwhile, was busted spiriting black money into shell companies ostensibly owned by a day labourer, local media reported.

“Even within families, people want to hide their assets from others so will purchase it in someone else’s name,” said Abhishek Goenka from tax and audit firm PwC India.

One businessman bought a sprawling mansion in a swish Delhi postcode and registered the deed under a company whose CEO also happened to be his maid.

A young couple meanwhile purchased a US$1.2 million house under someone else’s name to avoid explaining how two civil servants could afford such a place, a person close to the transactions told AFP. “By registering the property in someone else’s name, unaccounted income gets accounted for,” said Goenka.

“If at a later date it’s then sold on to a benami buyer, the cycle perpetuates.”

There is no hard data on what per centage of transactions in India are benami and could fall foul of this law. But experts agree the practice is rife and long overdue for scrutiny.

“After the note ban, this was the natural next step,” said Uday Ved, a Mumbai-based tax advisor and former KMPG head of tax, in reference to the Modi government’s anti-benami blitz.

“Now the law is in effect they will go after cash, real estate, gold, everything.” AFP

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Business Daily Monday, March 20 2017 13

Asia Regulator

Australian banks must boost adviser oversight The industry has collectively paid out A$30 million to customers who suffered losses from poor advice Emily Cadman

Australia’s big banks still need to improve oversight of their financial advisers, the nation’s security regulator said Friday, in a blow to the industry’s attempts to move on from a series of scandals that has cost the lenders millions of dollars.

An Australian Securities & Investments Commission (ASIC) report into how large financial firms have dealt with poor advisers concludes that while they have improved their practices, a number of problems remain. The review highlights repeated failures to notify the regulator about breaches of conduct, “significant delays’’ in reporting problems and inadequate background checking and information sharing within the industry.

The review covers the conduct of the financial-advice arms of Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, Westpac Banking Corp., National Australia Bank Ltd. and AMP Ltd.

The industry has collectively paid out A$30 million to customers who suffered losses from poor advice between 2009 and 2015, ASIC said.

Public disquiet over the scandals in banks’ insurance and wealth divisions was one of the main drivers behind a series of parliamentary hearings with

the heads of the four biggest banks.

At the most recent set of hearings, the bank chiefs sought to stress the work they have done to improve both systems and culture.

“There is a lot of room for improvement and a long way to go,’’ ASIC Deputy Chair Peter Kell said on a media call. The report should serve as a “wake-up call,” he said, promising “more action” if banks didn’t shape up.

ANZ head of wealth Alexis George said in an emailed statement that the bank is “surprised” by the findings relating to internal audits, adding it takes a “hard-line approach” with any advisers who do the wrong thing.

National Australia chief customer officer Andrew Hagger said in a statement on its website that the regulator has not yet shared with it any findings that relate specifically to National Australia. “When we do find issues, we will say sorry to customers and make things right,” he said.

“There is a lot of room for improvement and a long way to go” Peter Kell, Australian Securities & Investments Commission Deputy Chair “The industry is driving its own reforms to improve the quality of financial advice,” said Diane Tate, a spokeswoman on retail policy for the Australian Bankers’ Association.

Bloomberg News

Trade

Japan exports seen rising at fastest pace since 2015 Long-stagnant economy has shown signs of life in recent months, with exports and factory output benefitting from a global economic recovery Kaori Kaneko

Japan’s exports probably rose at the fastest pace in two years in February thanks to a softer yen and improving global demand, a Reuters poll showed on Friday.

But uncertainty over possible trade protectionist moves by the United States is still clouding recovery prospects for the world’s third-largest economy.

Key Points Feb exports seen +10.6 pct yr/yr vs +1.3 pct in Jan Imports likely +0.6 pct, trade surplus seen at Y822 bln Trade data due 2350 GMT Tue Exports are expected have jumped 10.6 per cent in February from a year earlier, which would be the biggest gain since January 2015 when they rose 16.9 percent.

The number were likely flattered by a rebound in Asian demand, after Japan’s shipments slowed in January due to the long Lunar New Year holidays in China and other parts of the region. Shipments had edged up

1.3 per cent in January.

Imports likely rose 0.6 per cent from a year earlier, slowing sharply from growth of 8.5 per cent in January, which marked their first increase in two years.

That is expected to produce a trade surplus of 822.0 billion yen (US$7.25 billion), compared with a deficit of nearly 1.09 trillion yen in January, the poll of 20 analysts showed.

“You need to average out exports in January and February to assess the trend considering the impact from the Lunar New Year holidays,” said Yoshiki Shinke, chief economist at Dai-ichi Research Institute.

“Still, there is a chance that an average of exports in January and February surpassed that of October-December.

And data next week will be something to confirm exports stayed on a recovery trend as the manufacturing sector is picking up globally.”

The finance ministry will release the trade data at 8:50 a.m. JST on Wednesday (2350 GMT Tuesday.)

Japan’s trade surplus with the United States has been declining. But if it starts rising again, it could become a flashpoint after President Donald Trump singled out Japan, China and Germany for their high exports into the U.S. market.

In April, Japan and the United States will start a high-level economic dialogue chaired by Finance Minister Taro Aso, who also serves as deputy prime minister, and Vice President Mike Pence.

Japan hopes to use the dialogue to seek ways to avoid trade frictions on issues like autos and agriculture

sectors by proposing an agenda focused on infrastructure investment and energy.

Japan’s long-stagnant economy has shown signs of life in recent months, with exports and factory output benefitting from a global economic recovery. But consumer spending has remained sluggish. Reuters

14 Business Daily Monday, March 20 2017

International In Brief Ratings

S&P lifts Russian sovereign outlook to positive Standard and Poor’s said on Friday it has raised Russia’s sovereign outlook to positive from stable, expecting growth to improve as the country emerges from a two-year recession. “We expect GDP growth in Russia will pick up, averaging about 1.7 per cent in 2017-2020, and we see a lower risk of large capital outflows, therefore moderating external pressures”, said S&P, which currently rates Russia BB+. The agency said it might raise its ratings if the Russian economy continued to adapt to the relatively low oil prices.

Trade deal

Mexico says rules of origin in NAFTA unacceptable Country-specific rules of origin within the North American Free Trade Agreement (NAFTA) would be “totally unacceptable”, and a U.S. border adjustment tax would likely violate global trade rules, Mexico’s economy minister said on Friday. Under the trilateral trade deal between the United States, Mexico and Canada, rules of origin can specify that products must meet minimum regional (NAFTA-wide) content requirements to be tariff-free, but there are no national content requirements.

“In no trade deal, whether bilateral, trilateral or multilateral, has there ever been any precedent treaty of rules of origin by country. It would be totally unacceptable,” Mexican Economy Minister Ildefonso Guajardo said.

Global summit

G20 financial leaders acquiesce to U.S., drop free trade pledge They also removed from their statement a pledge to finance the fight against climate change Balazs Koranyi and Gernot Heller

F

inancial leaders of the world’s biggest economies dropped a pledge to keep global trade free and open, acquiescing to an increasingly protectionist United States after a two-day meeting failed to yield a compromise.

Breaking a decade-long tradition of endorsing open trade, G20 finance ministers and central bankers made only a token reference to trade in their communiqué on Saturday, a clear defeat for host nation Germany, which fought the new U.S. government’s attempts to water down past commitments.

In the new U.S. administration’s biggest clash yet with the international community, G20 finance chiefs also removed from their statement a pledge to finance the fight against climate change, an anticipated outcome after U.S. President Donald Trump called global warming a “hoax”.

In a meeting that some said was at times 19 against one, the U.S. did not yield on key issues, essentially torpedoing earlier agreements as the G20 requires a consensus. Still, the dialogue was friendly and non-confrontational, leaving the door open to a future deal, officials who attended

the meeting said.

“This is my first G20, so what was in the past communiqué is not necessarily relevant from my standpoint,” U.S. Treasury Secretary Steven Mnuchin said in the German resort town of Baden Baden.

“I understand what the president’s desire is and his policies, and I negotiated them from here,” Mnuchin said. “I couldn’t be happier with the outcome.”

Seeking to put “America first”, Trump has already pulled out of a key trade agreement and proposed a new tax on imports, arguing that certain trade relationships need to be reworked to make them fairer for U.S. workers. “We believe in free trade, we are in one of the largest markets in the world, we are one of the largest trading partners in the world, trade has been good for us, it has been good for other people,” Mnuchin said. “Having said that, we want to re-examine certain agreements.”

International trade makes up almost half of global economic output and officials said the issue could be revisited at a meeting of G20 leaders in July.

While some expressed frustration, like French Finance Minister Michel Sapin, others played down the dispute.

Positive mood

U.S. factory, consumer sentiment data boost outlook U.S. factory output increased for a sixth straight month in February while consumer sentiment rebounded in early March, underscoring the economy’s resilience even as growth appears to have slowed significantly in the first quarter. That was supported by other data on Friday showing a gauge of future economic activity rose in February to its highest level in more than a decade. The improving outlook backs the Federal Reserve’s decision last week to raise interest rates.

“First-quarter growth is likely to disappoint, but that is not the full economic story,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Rating

Moody’s cuts Turkey’s outlook to “negative” Ratings agency Moody’s on Friday cut its outlook for Turkey to “negative” from “stable”, citing continuing erosion of its institutional strength - the latest hit for an emerging market struggling to win back investor favour. Once seen as one of the world’s most promising emerging markets, Turkey has been hurt by deepening investor concerns about political uncertainty following last year’s failed coup, as well as central bank independence and slowing growth.

More than 100,000 people have been sacked or suspended from the police, judiciary, civil service and private sector since the attempted putsch, and tens of thousands jailed.

United States Secretary of the Treasury Steven Mnuchin speaks during a news conference after the G20 Finance Ministers and Bank Governors meeting in Baden Baden, Germany, 18 March 2017. Lusa

“It is not that we were not united,” German finance minister Wolfgang Schaeuble said. “It was totally undisputed that we are against protectionism. But it is not very clear what (protectionism) means to each (minister).”

He added that some ministers did not have a full mandate to negotiate since they were not fully in charge of trade issues.

Others suggested that the G20 leaders’ meeting in Hamburg this July could be the real opportunity to bring the U.S. on board.

“It is not the best meeting we had, but we avoided backtracking,” EU Economic Affairs Commissioner Pierre Moscovici said. “I hope in Hamburg the wording will be different. We need it. It is the raison d’etre for the G20,” Moscovici said.

Climate pledge dropped

The communiqué also dropped a reference, used by the G20 last year, on the readiness to finance measures against climate change as agreed in Paris in 2015, because of opposition from the United States and Saudi Arabia.

Trump has suggested global warming was a “hoax” concocted by China to hurt U.S. industry and vowed to scrap the Paris climate accord aimed at curbing greenhouse gas emissions.

Trump’s administration on Thursday proposed a 31 per cent cut to the Environmental Protection Agency’s budget as the White House seeks to eliminate climate change programmes and trim initiatives to protect air and water quality.

Asked about climate change funding, Mick Mulvaney, Trump’s budget director, said on Thursday: “We consider that to be a waste of money.”

The G20 did, however, show continuity in its foreign exchange policies, using past phrases on currency markets.

“We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes,” the G20 said.

Leaders also upheld their commitments to financial sector regulation, supporting the finalisation of bank rules known as Basel III, provided they do not significantly raise overall capital requirements. Reuters

Social media

EU authorities demand changes from Facebook, Google, Twitter The authorities and the Commission sent letters to the companies in December saying that some of their service terms broke EU consumer protection Julia Fioretti

Social media companies Facebook Inc, Alphabet Inc and Twitter Inc will have to amend their terms of service for European users within a month or face the risk of fines, a European Commission official said on Friday.

U.S. technology companies have faced tight scrutiny in Europe for the way they do business, from privacy to how quickly they remove illegal or threatening content.

The Commission and European consumer protection authorities will “take action to make sure social media companies comply with EU consumer rules,” the official said.

The comments confirmed a Reuters report from Thursday.

Germany, the most populous EU

state, said this week it planned a new law calling for social networks such as Facebook to remove slanderous or threatening online postings quickly or face fines of up to 50 million euros (US$53 million).

The authorities and the Commission sent letters to the companies in December saying that some of their service terms broke EU consumer protection law and that they needed to do more to tackle fraud and scams on their websites.

The companies proposed some ways to resolve the issues and discussed them with the authorities and the Commission on Thursday, a source familiar with the matter said, adding that the meeting was constructive.

According to the letters seen by

Reuters, some of those contested terms include requiring users to seek redress in court in California, where the companies are based, instead of their country of residence.

Other issues include not identifying sponsored content clearly, requiring consumers to waive mandatory rights such as the right to cancel a contract, and an excessive power for the companies to determine the suitability of content generated by users, according to the letters.

Key Points Commission gives social media companies month to act Constructive meeting held on Thursday Follows German plans for tighter regulation In the case of Alphabet’s Google unit, the concerns were about its social network Google+.

Google and Facebook were not immediately available for comment. A spokesman for Twitter declined to comment. Reuters

Business Daily Monday, March 20 2017 15

Opinion Business Wires

The Times of India India has organised a meeting of Chinese businesses and government officials in Xiamen city to highlight investment and tourism opportunities in India. Over 200 officials and businessmen attended the ‘Go India: India Business, Investment and Tourism Promotion’ event in Xiamen, where this year’s Brazil, Russia, India, China and South Africa (BRICS) summit would be held in September. The meeting was organised by the Indian Consulate in Guangzhou. Chinese companies which have successfully invested in India shared their experiences and encouraged others to look at the opportunities in India, the consul said in a statement.

Bangkok Post Competition for bank deposits is expected to intensify in the second half of the year, prompted by stronger loan demand from state investment in infrastructure projects and the broader economic recovery, says a senior official at Thanachart Bank (TBank). Banking loans will grow this year, underpinned by the government’s hefty investment in infrastructure megaprojects, with most lending to occur in the latter half of the year, said TBank executive vice-president Teranuj Koomsap. The country’s sixth-largest bank aims for 10 per cent growth in deposits to 677 billion baht by year-end, Mrs Teranuj said.

The Korea Herald Corporate tax payments made by South Korea’s 10 biggest business groups rose slightly in 2016 from a year earlier due mainly to robust earnings by Samsung Electronics Co. amid surging semiconductor and display panel sales, data showed yesterday. The business groups, which encompass 87 companies, paid 9.82 trillion won (US$8.68 billion) in corporate taxes last year, up 2.5 per cent, or 239 billion won, from 9.58 trillion won the previous year, according to the data by market researcher Chaebul.com.

Samsung Group paid 4 trillion won last year, up 39.1 per cent from a year earlier.

Philstar Barcelona-based FocusEconomics expects the growth of the Philippines' merchandise exports to remain in single-digit this year amid soft global demand. Massimo Bassetti, economist at FocusEconomics, said exports would expand just 3.7 per cent this year before rising to 8.1 per cent in 2018. Data from the Philippine Statistics Authority (PSA) showed the country’s total merchandise exports inched up 4.4 per cent to US$56.23 billion last year. The country’s exports grew only in the months of September with 5.1 per cent, October with 7.6 per cent, and December with 4.5 per cent.

Former South Korean President Park Geun-hye. Lusa

Soul searching in South Korea

T

he impeachment, and removal from office, of South Korean President Park Geun-hye on charges of corruption and abuse of power has rocked the country’s political establishment and divided the electorate. Not since the Asian financial crisis of 1997, rooted partly in the flawed economic policies of Park’s father, Park Chung-hee, have South Koreans faced such an impasse.

It’s still too early to know who will succeed her in the Blue House (the presidential seat); a special election has been called for May 9. But this much is clear: with Park’s unceremonious departure, a change in South Korea’s ruling party is all but assured. And with new blood must come renewed vigour to tackle governance problems – from dirty money in politics to incoherent foreign policy – that have plagued South Korea for far too long.

South Korea’s current political crisis began in October 2016, when allegations emerged that Park had pressured the chaebols – the country’s giant family-owned conglomerates – to funnel huge sums of money into two foundations controlled by her close personal friend, Choi Soon-sil. Word of Park’s cronyism left many South Koreans feeling betrayed by a president who had vowed to lead differently.

Park, whose authoritarian style resembled that of her father, routinely disregarded basic norms of liberal democracy. She scoffed at the rule of law and separation of government powers. After being accused of corruption, she simply ignored calls to appear before the Constitutional Court to testify. Prosecutors have issued another summons for her to appear in court on March 21; it is still unclear if she will, even though she has now lost her immunity from prosecution.

Park’s removal from office almost certainly means that political power will shift from the formerly Saenuri, or “New Frontier” (now the Liberty Korea) Party to opposition forces. At the moment, candidates from the centre-left Democratic Party of Korea are leading in an effort to end nine years of conservative rule. Moon Jaein, a former Democratic Party of Korea leader and the runner-up to Park in 2012, is the opposition’s front-runner by a wide margin.

Whoever becomes South Korea’s next president will be greeted by profound political, economic, and foreign policy challenges.

On the domestic front, the president will inherit a political system in need of significant reform.

Aside from calls to solidify the separation of powers by establishing a more robust system of legal checks and balances, there is near-consensus on the need to overhaul the current five-year, single-term presidency. Established in 1987 during South Korea’s transition to democracy, the short timeframe hampers the incumbent’s ability to devise, implement, and sustain long-term policies.

Park, like many of her predecessors, pushed to change the term limits, but her efforts were stymied by bad timing.

These and other changes will require democratic leadership, based on active communication with various segments of society. South Koreans are

“

Yoon Young-kwan former Minister of Foreign Affairs of the Republic of Korea, is Professor Emeritus of International Relations at Seoul National University

hopeful in this regard, believing that anyone will be better than Park. (According to one opinion poll, her approval rating before leaving office was a dismal 4 per cent).

The next president’s biggest economic challenge will be to untangle the ties between politicians and chaebol owners. At the moment, the chaebols’ proximity to political power reduces the transparency of corporate governance, discourages competition, and weakens the innovative potential of small- and medium-size enterprises. The arrest in February of the Samsung heir Lee Jae-yong, on bribery charges, indicates the scope of the problem. With all major presidential candidates emphasizing the importance of fixing the chaebol problem, changes on this front are possible.

Finally, and perhaps most important, the next president will face a foreign-policy puzzle that perplexed Park for most of her tenure. Her successor will need more diplomatic acumen to stabilize relations with Japan, China, and Russia, while simultaneously working to denuclearize North Korea and thus reduce the threat Kim Jong-un’s regime poses to the region.

Here, the wildcard is U.S. President Donald Trump, who is creating his own brand of uncertainty in Asia. How Trump chooses to deal with North Korea, in particular, will be an early test for South Korea’s next leader. If, as I suspect, the Trump administration turns to tightened sanctions (including secondary boycotts) and dialogue, leaders in Seoul will be able to adjust accordingly.

There will still be scope for agreement if political leaders on all sides are willing to listen. The United States’ deployment in South Korea of an advanced anti-missile system is a case in point. While the move has angered China’s leaders, there remains room for compromise, especially if the system’s deployment is made temporary and linked to North Korea’s denuclearization.

South Korea has experienced – and survived – political and economic upheaval before. After all, it was Park’s own father who, in the 1960s and 1970s, helped to build a system that did little to discourage the corrupting links between politicians and chaebols. The weak financial institutions and shady corporate sector that grew from his legacy conspired to make the pain of the 1997 financial crisis even worse.

Then, as now, failure at the top prompted voters to demand a new direction. Conservative leaders’ collective inability to insulate South Korea from the events of 1997 cleared the way for a liberal opposition leader, Kim Dae-jung, to assume the presidency in 1998.

South Korea is very likely on the cusp of another political housecleaning. But, regardless of who arrives at the Blue House in May, their job – and the job of their party – will be to tackle the challenges that Park was so ill equipped to address. Project Syndicate

South Korea has experienced – and survived – political and economic upheaval before

”

16 Business Daily Monday, March 20 2017

Closing F&B

Mainland’s online catering revenue exceeds US$50 billion

To regulate the sector, China Food and Drug Administration published a draft supervision document, stipulating that China’s online catering revenue “restaurants that offer online catering exceeded RMB350 billion (US$50.7 services should have real stores with billion) in 2016, about 10 per cent of business permits.” the country’s total catering revenue, according to figures from China Cuisine Bi Jingquan, head of the administration, also urged third party platforms to be Association. more diligent when recruiting caterers.

Online catering benefited from the Zhu Yi, an associate professor with growth of third party platforms, China Agricultural University, said that while loose supervision of third party the draft will ensure all outlets are platforms has been attributed to poor qualified and well regulated Xinhua quality of some services.

U.S.-China meeting

Xi, Tillerson vow to work toward closer ties Despite Trump Trump repeatedly accusing China of unfair trade practice Dan Martin

C

hinese President Xi Jinping and U.S. Secretary of State Rex Tillerson pledged in talks yesterday that the two powers would work to strengthen a relationship that has been unsettled by disputes over North Korea and trade.

Xi met Tillerson in Beijing just hours after nuclear-armed North Korea tested US-China unity anew with a provocative rocket engine test, and with negotiations under way for a potential Xi summit next month with President Donald Trump in the United States.

Xi said told Tillerson that he and Trump had resolved in a phone call last month “to make joint efforts to advance China-U.S. cooperation, and we believe that we can make sure the relationship will move ahead in a constructive fashion in the new era.”

“I’m confident that as long as we can do this the relationship can surely move in the right direction,” Xi said.

En route to Beijing, Tillerson visited U.S. allies Japan and South Korea where he declared Washington would drop the “failed” approach of strategic patience diplomacy with Pyongyang -- a sharp break with China, which favours careful diplomacy over heated rhetoric.

Relations have also been strained

by China’s fierce opposition to a U.S. anti-missile defence system being deployed in South Korea, and Trump’s Twitter accusation on Friday that China was not doing enough to control its neighbour and historic ally Pyongyang.

Trump also has repeatedly accused China of unfair trade practice.

But Tillerson has made nice while in Beijing.

“We know that through further dialogue we will achieve a greater understanding that will lead to a ... strengthening of the ties between China and the United States and set the tone for our future relationship of cooperation,” Tillerson told Xi. Earlier yesterday, North Korean state media said the isolated regime had tested a powerful engine hailed

Chinese President Xi Jinping (R) meets U.S. Secretary of State Rex Tillerson (L) at the Great Hall of the People in Beijing, China, 19 March 2017. Lusa

Commerce

Corruption

by leader Kim Jong-Un as a “new birth” for its rocket industry, which experts view as cover for developing intercontinental ballistic missiles.

Rocket ‘rebirth’

The announcement’s timing appeared intended to sour the visit to China by Tillerson, who warned on Saturday after talks with his counterpart Wang Yi tensions on the Korean Peninsula had reached a “dangerous level.”

Tillerson and Wang pledged China and the United States would work together toward denuclearising Kim’s rogue regime, but did not offer clear details on how.

It was not immediately clear whether Xi and Tillerson discussed North Korea’s latest thumb in the eye.

The North’s state news agency KCNA said Kim had overseen the rocket engine test and “emphasised that the whole world will soon witness what eventful significance the great victory won today carries” -- a possible veiled warning to Pyongyang’s adversaries.

The report hinted the new engine could be used to put a satellite in orbit, but rocket engines are easily re-purposed for missiles.

North Korea is banned by the international community from pursuing nuclear and missile programmes but has defiantly ploughed ahead.

It staged its two latest nuclear tests last year and recently fired off missiles that it described as practice for an attack on U.S. bases in Japan.

“The leader (Kim) noted that the success made in the current test marked a great event of historic significance as it declared a new birth,” of North Korea’s rocket industry, KCNA said.

The Xi-Tillerson meeting came as delicate negotiations are under way for a Xi-Trump summit, possibly next month in the United States.

Trump has been a frequent China critic, and the summit could be crucial in setting a lasting tone in the relationship between the world’s two largest economies. Reuters

Trade

China’s Industry Minister says country Chinese police boss jailed for buying Vice premier says China right to limit market access property with graft money opposes protectionism A senior minister said yesterday China’s policy of restricting market access is important for domestic growth, even as President Xi Jinping seeks to project the country as a world leader in fighting protectionism.

The comment came as Xi painted China as a defender of globalisation, while repeatedly maintaining that it would keep its trade door wide open.

“In some areas, we determine that a certain percentage of the market share must be controlled by domestic players, this is a last resort,” Miao Wei, who heads China’s Ministry of Industry and Information Technology, said at the China Development Forum in Beijing.

Other countries have policies restricting the import of some of China’s equipment and products, while there is demand for those products in China, said Miao.

“So we must resolve this on our own, or else it will have a major impact on our growth,” Miao said.

More than 80 per cent of members of a U.S. business lobby in China say foreign companies are less welcome than in the past, a survey released in January showed, with most saying they have little confidence in China’s vows to open its markets. Reuters

A Chinese court has sentenced a senior police officer to 17 years in prison for his part in a bribesfor-projects scandal, proceeds from which were used to buy two homes in Australia, according to court documents.

The corruption case comes amid an Australian government crackdown on foreign investors who have skirted overseas investment rules.

The 59-year-old police boss of Guta district of Jinzhou City in the north-eastern Chinese province of Liaoning accepted a total of RMB6.8 million (US$985,510) in bribes for contracts, according to the court documents published in early March.

He used part of the money to buy two Australian properties for his family.

In 2009, Wang accepted a bribe of RMB2.36 million from a developer to buy a property in Australia for his eldest daughter. He accepted a second bribe of RMB4 million from the same person in 2013 to buy a second house for his second daughter, the court said. Wang doled out construction projects in return for the bribes, it said. Reuters

China opposes various forms of trade protectionism and supports free trade, Vice Premier Zhang Gaoli said yesterday, reaffirming Beijing’s stance amid worries over weak global demand.

“China is willing to work with other countries to oppose various forms of trade and investment protectionism,” Zhang told the China Development Forum in Beijing.

“We should unwaveringly push forward economic globalisation ... we cannot stop our footsteps because of temporary difficulties.”

Zhang said world policymakers should make the globalisation process more “inclusive” by putting more emphasis on equality.

“The world economy is in a deep adjustment, growth is weak and trade protectionism is rising,” Zhang said.

Beijing is struggling to cope with weak global demand and faces risks from growing U.S. trade protectionism as the administration under new President Donald Trump shows an aversion to globalisation.

In January, Chinese President Xi Jinping, as a keynote speaker at the World Economic Forum in Davos, Switzerland, offered a vigorous defence of globalisation and signalled Beijing’s desire to play a bigger role on the world stage. Reuters