China could delay full implementation of cyber security rules Legislation Page 10
Monday, May 22 2017 Year VI Nr. 1300 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm HKZM
Bridge linking SARs to Mainland estimated at US$19 bln, but critics warn it could ‘blur’ the boundaries between territories Page 4
Cross-border
New system for commercial registration for Macau companies investing in Guangdong shortens registration period to 7 days Page 2
www.macaubusinessdaily.com
Management fees
Funding
Secretary for Administration and Justice says building owners must take on responsibility for management fees if unpaid Page 2
Beijing to lift a suspension on foreign funds, raising money in the Mainland to invest abroad Page 10
Come on, keep spending Tourism
Total spending by tourists in Q1 hit MOP13.5 billion, a near 17 pct increase y-o-y, but a drop of 9 pct q-to-q. Overall MOP10.6 bln was spent by overnighters, rising almost 20 pct y-o-y. Mainland visitors had the highest per-capita spending at MOP2,002. Visitors spent most on shopping, accommodation and F&B, while MICE visitors had the highest per capita spending, at MOP3,286. Page 3
Coming off of a strong fiscal 2016, with eager expectations for H1 fiscal 2017 results, gaming machine manufacturer Aristocrat is on the lookout for new opportunities, after large growth in the last five years. Senior Manager of Product Strategy and Planning for Asia Pacific, Ben Attwood, sits down with Business Daily to talk about the company culture, investment in R&D and the potential of the Philippines.
Interview | Gaming Pages 6 & 7
HK Hang Seng Index May 19, 2017
Extensions?
Concessions Gaming concessions for Sociedade de Jogos de Macau and MGM China could be extended to line up with the expiration date of the other four operators, says analyst. Additional discretionary extensions could also be granted for one year periods up to five times, without any new legislation, however new laws won’t be drawn up under the current Chief Executive. Page 5
TPP wants to live
Trade deal The 11 remaining countries of the initial Trans-Pacific Partnership deal agreed yesterday in Hanoi to explore how they could still move ahead, partly in the hope that the United States would reconsider leaving, however so far, it has ruled out returning to the deal. Page 16
25,174.87 +38.35 (+0.15%) Worst Performers
BOC Hong Kong Holdings
+2.08%
China Resources Power
+1.05%
MTR Corp Ltd
-9.67%
Kunlun Energy Co Ltd
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Tencent Holdings Ltd
+1.67%
Galaxy Entertainment Group
+1.01%
Hengan International Group
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China Merchants Port Hold-
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China Overseas Land &
+1.36%
China Unicom Hong Kong
+0.98%
CLP Holdings Ltd
-1.37%
Cheung Kong Infrastructure
-0.67%
+1.19%
Henderson Land Develop-
+0.92%
Hang Seng Bank Ltd
-0.98%
Hong Kong & China Gas Co
-0.63%
Geely Automobile Holdings
+0.72%
PetroChina Co Ltd
-0.94%
Sun Hung Kai Properties Ltd
-0.61%
China Resources Land Ltd Wharf Holdings Ltd/The
+1.06%
25° 28° 26° 29° 23° 29° 24° 28° 24° 28° Today
Source: Bloomberg
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I SSN 2226-8294
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Market leading
2 Business Daily Monday, May 22 2017
Macau Guangdong
One-stop convenience The MSAR has been included in the experimental phase of a one-stop system allowing local companies looking to open businesses in Guangdong province to lodge their commercial registrations at China Guangfa Bank branches Nelson Moura nelson.moura@macaubusinessdaily.com
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simpler and quicker commercial registration process for Macau companies looking to invest in Guangdong province was officially announced on Friday at a ceremony held by the Macau Trade and Investment Promotion Institute (IPIM). Named the ‘Guangdong-Macau One-Stop Banking and Commercial Registration Service’, the project is a
joint initiative between the provincial government of Guangdong and China Guangfa Bank S.A. The new one-stop system will allow business people in the MSAR to register for a commercial licence electronic card named the ‘Bank-Government Pass’ and open accounts and transfer funds for the covered region in the province, at China Guangfa Bank branches in Macau. According to Chen Xingfei, Vice-Director of the China Guangfa Bank, the service will solve the problem of companies and individuals in Macau
having to travel to Guangdong to resolve complicated and “resource consuming” procedures to start a company and submit their commercial registration.
Extending the system
The system’s experimental phase, initiated at the end of last year, was made available in the Guangdong cities of Zhuhai, Hengqin, Foshan, Dongguan, Zhongshan and Jiangmen, and now includes the MSAR. As of now, five Macau companies have registered with the new service and the Guangdong Government expects to implement the new service for the whole province within this year, with Hong Kong expected to be included in the second half of this year. The system will reportedly reduce the commercial registration period from 30 days to seven working days.
“By reducing market access costs, and improving the efficiency and quality of the public service provided, we believe more outside entities will appear in the Guangdong market,” the Vice-Director of the Guangdong Province Commercial and Industrial Administration, Zhang Wenxian, said at the ceremony. According to Mr. Zhang, as at the end of April of this year, a total of 4,421 companies with investments in Guangdong had capital registered in Macau. The share capital in Guangdong by MSAR companies reached RMB101.78 billion (MOP118.51 billion/US$14.78 billion), representing 2.5 per cent of the almost RMB3.89 trillion of registered capital from companies outside the province, Mr. Zhang added. The representative also mentioned that a total of 1,059 startups have been founded in Guangdong by Macau residents, with a total level of investment of RMB75.4 million. “The new system will improve the investment environment between Macau and Guangdong, while reducing institutional costs for starting businesses for Macau companies, especially for SMEs,” the President of the Macau Chamber of Commerce, Mao Iao Lai, added. For the IPIM Executive Director, Gloria Ung, the system will promote economic growth in the Greater Bay Area. Ms. Ung stated that in 2016, the total value of imports and exports between Guangdong and the MSAR reached US$2.06 billion (MOP16.51 billion). “As of February of 2017, a total of 10,207 direct investment projects from Macau to Guangdong were seen, with the cumulative value of contractual direct investment originating from the city reaching US$18.28 billion,” she added.
Law
What complaints? Local lawyers tell Business Daily they’re unaware of abuse of power and misconduct by security officers mentioned in Macau Lawyers Association dispatch Local lawyers told Business Daily that they are unaware of any abuse of power or misconduct by security officers as mentioned in a Macau Lawyers Association (AAM) dispatch.
In a release sent by the AAM to local lawyers on May 4, the organisation mentioned ‘several complaints of misconduct by security officers’ who hadn’t allowed lawyers to properly defend
their clients’ rights. The complaints led the organisation to request lawyers to send information of any cases of abuse of power, infringement of residents’ and non-residents’ rights or obstacles created witnessed by authorities to the AAM by May 16. The detailed information will then be sent in a collective complaint to the government by the AAM. Several local lawyers contacted by Business Daily were either unaware of the release itself or the complaints it referred to. “I received the release but
I don’t think it was seen as a mandatory request, just an indication. In any case I haven’t witnessed any case of police officers obstructing
my work or defending my clients,” a local lawyer who preferred not to disclose their name told Business Daily. N.M.
Gaming
Property
Not only horse racing
Sonia Chan: property owners have a responsibility to pay management fees
The Macau Jockey Club (MJC) is planning to construct a hotel within its property, according to Thomas Li Chu Kwan, the executive director & chief executive of the Macau Jockey Club, local broadcaster TDM Radio News reported. The intention is to coordinate with the local government’s long-term development plan to build Macau as a World Centre of Tourism and Leisure.
The executive director said the Club is currently discussing the matter with the government. Meanwhile, Li affirmed that the franchise contract, which will expire after August of this year, should be able to be renewed, saying that the MSAR Government has been deliberating the matter. He revealed that the betting amount for the current racing quarter hit MOP330 million (US$41 million), while losses were around MOP50 million. Despite the notable declines in its business, the MCJ executive director believes that there is still a market for horse racing, although he also recognises that the industry requires more time to break even. He said that the Club is planning to gradually renew its race courses and to change its operational system. The Macau Jockey Club is expected to have recorded a loss of over MOP100 million (US$12.5 million) for the whole year of 2016.
The Secretary for Administration and Justice Sonia Chan Hoi Fan said over the weekend that the amendment of the law for the administration of common parts of condominiums is to resolve the issue of delayed management payments, stressing that owners will take on the responsibility if payments are not made on time. Speaking on the sidelines of an event on Saturday, the Secretary said that owners have to pay the management fees, even if the units are for sale. Currently the law for the administration of common parts of condominiums is undergoing deliberation by the second standing committee of the legislative committee. The aim of the law amendment is to allow buyers to check, via the system, whether the owners of a property have paid the management fees. In addition, lawyers or notaries are to provide related information
to buyers so as to allow both buyers and sellers to have a chance to consider this matter during a transaction process. C.U.
Business Daily Monday, May 22 2017 3
Macau DSEC
Visitor expenditure in Q1 increases y-o-y, but down q-o-q Visitor satisfaction with the city’s services and facilities dropped in Q1 Cecilia U cecilia.u@macaubusinessdaily.com
F
or the first quarter of this year, total spending by tourists, excluding gaming expenses, hit MOP13.46 billion (US$1.68 billion), a 16.6 per cent year-on-year increase, but a drop of 9 per cent compared to the last quarter of 2016, the latest Statistics and Census Service (DSEC) data shows. Of the total, MOP10.6 billion was spent by overnight visitors and MOP2.86 billion by same-day visitors, posting increases of 19.6 per cent and 6.7 per cent when compared to the same quarter last year. In particular, mainland tourists contributed a total of MOP10.65 billion in the first quarter, up 22.2 per cent year-on-year and amounting to nearly 80 per cent of total spending. In terms of per-capita spending, tourists spent an amount of MOP1,709 on average, registering an increase by 10.5 per cent yearon-year but a decrease of 6.6 per cent quarter-to-quarter. Among all tourists, mainland visitors had the highest per-capita spending, at MOP2,002, up 13.6 per cent year-on-year. The average per-capita spending by Guangdong visitors was MOP1,630, up 13.4 per cent year-on-year, whilst Fujian visitors spent MOP1,291 per tourist on average, down 8.7 per cent. The per-capita spending of mainland visitors travelling under the Individual Visit Scheme (IVS) rose by 5.4 per cent year-on-year to MOP2,154. Visitors from Singapore, Malaysia and Taiwan saw per-capita spending reach MOP1,825, MOP1,625 and MOP1,607, increases of 11.6 per cent, 0.4 per cent and 1.8 per cent
year-on-year, respectively. However, the average spending of tourists from Japan and Hong Kong fell by 8.7 per cent and 8 per cent year-on-year, respectively. The DSEC data shows that per-capita spending by tourists from outside Asia, such as Australia, the United States and the United Kingdom, also recorded decreases.
Let’s go shopping
Regarding the type of spending, tourists spent most on shopping, accommodation and food and beverages, accounting for 43.7 per cent, 26.9 per cent and 21.3 per cent of total expenditure, respectively. In terms of shopping in particular, per capita spending averaged MOP2,468, up 19 per cent year-onyear for the first three months of 2017. Mainland tourists spent around half or 50.4 per cent of their expenses on shopping (MOP1,010), while visitors traveling to Macau under the IVS spent MOP1,265 per visitor or 58.8 per cent of their total spending on shopping. Local food products (MOP233) and cosmetics and perfume (MOP201) were the most popular products for tourists in the first quarter, with expenditure on both increasing by 4.5 per cent and 36.9 per cent year-onyear, respectively. According to the DSEC data, MICE (Meetings, Incentives, Conferences, and Exhibitions) visitors had the highest per-capita spending at MOP3,286, up 4.9 per cent year-on-year.
Not quite satisfied
The results of the Visitors’ Comments Survey showed a drop in the general visitor satisfaction with all aspects of services and facilities during the first three-month period. About 89.2 per cent of visitors surveyed stated that they were satisfied with the services and facilities of hotels, down slightly by 0.5 percentage points quarter-to-quarter. Declines were also seen in services related to gaming and retail, down 2.9 and 3.7 percentage points to 81.9 per cent and 81 per cent, respectively. In contrast, only 68.2 per cent of visitors stated that they were satisfied with public transport services, down 1 percentage point when compared to the previous quarter. The DSEC data also revealed that just 45.2 per cent of tourists perceived that the number of tourist attractions were adequate, posting a decrease of 6.1 percentage points compared to 51.3 per cent recorded in the fourth quarter of last year.
Cyber
CPTTM suggests ways to prevent “WannaCry” attack The Productivity and Technology Transfer Centre (CPTTM) has advised the public to make full backups of their cyber information in an attempt to prevent the recurrence of the recent worldwide cyber-attack by the blackmail virus “WannaCry”, local broadcaster TDM English News reported. CPTTM advised that the best way to counteract the blackmail virus is to make thorough preparations for updating computer operating systems, to set up an appropriate firewall and to maintain information backups. The manager of the centre’s IT Department, Ao Chi Vai, noted that the backup of the information has to be
saved separately on a different computer or a USB (flash drive). He said that the restoration of information can only be made after loopholes have been resolved. For users who have been locked out by the virus, Ao advised them to remove the operating system and reinstall it and download the patch program. According to Ao, as reported by the broadcaster, only small and medium-sized enterprises in Macau were affected by the “WannaCry” virus. CPTTM has posted an online tutorial to assist users to protect themselves against the invasion of the cyber-virus. C.U.
4 Business Daily Monday, May 22 2017
Macau Opinion
Sheyla Zandonai* Women play As the Global Gaming Expo (G2E) Asia drew to an end last Thursday in Macau, one point seems to be worth highlighting amongst the overwhelming flow of information that made the 11th edition of the show: opportunities emerging from a combination of gender and product design in regards to the target consumer public. As one strolled around the booths’ pavilions and the conference rooms, where talks for and by industry insiders were held, there were clear indications that gambling is still a man’s world. In addition to the fact that public visitors and exhibitors were mostly male, the expo’s atmosphere was also designed to attract the latter: women welcoming visitors in stands and performing gigs dressed in tight and bright dresses, or costumes emulating gaming-universe characters brought to real life. If the public is all suits, then, it may seem logical and, arguably compelling, to have female performers providing a touch of ‘feminine charm’ to the show. I am not a supporter of objectification – far from it – but we know it is more complicated than that when it comes down to male-centric milieus. And that’s the point I am trying to make. Having men, and a few women, already working to cater to a female audience in their strive to grasp new markets and demographics, so to speak, in gambling, is still a strategy the industry seems to be missing as a whole. While there may be several historical and cultural reasons for this, gaming itself is not gender-oriented. But the set up for gambling activity may be. I don’t have answers for this, at least not on a scientific basis. But, in general terms, women may be attracted to different things than those that appeal to men, and that may include features that range from design and ambiance to services and game offer. It is a recurrent trait in societies across the world that groups form and gather around shared interests and expectations. This holds true for culture, class, and profession. To a certain extent, it also holds true for gender. Men and women convene and tie, but they also have different topics of conversation, different ways of being in the world and interacting, different interpretations of excitement, safety, sociality, and, perhaps most importantly here, fun. Ultimately, the question the industry should keep asking at this point is: what is it that makes the experience of play and gambling entertaining for women? *scholar and contributor to this newspaper.
HKZM bridge
China-Hong Kong bridge to unity, or tentacle of Beijing control? James Pomfret
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s a 30-km (19-mile) bridge between Hong Kong and China across the Pearl River estuary nears completion, Chinese officials are hoping it will bring more than economic integration at a time of growing tension between the two sides. The bridge that snakes out over the blue estuary with soaring pylons, viaducts and towers using more steel than 60 Eiffel Towers, was first proposed in the late 1980s. But it was opposed at the time by Hong Kong’s British colonial government, which was wary of development that might draw the city closer to Communist China. Since Hong Kong returned to Chinese rule in 1997, however, there has been a flurry of projects integrating the port city with the Pearl River Delta’s manufacturing and urban sprawl, and stoking some unease in Hong Kong. Wei Dongqing, a Chinese Party official and the executive director of the Hong Kong-Zhuhai-Macau bridge Authority, one of the leaders of the project, sees the bridge, linking the former European colonies of Hong Kong and Macau with Zhuhai city, as promoting unity, both physically and mentally. “It’s psychological. It joins three places,” Wei told Reuters on a media-trip bus speeding along the half-finished, six-lane bridge, with the facades of Macau’s casinos glimmering in the distance. “We have confidence for the future ... a united market, a united people ... that’s the dream.” After nearly eight years of construction, the cost of the bridge and tunnel project has ballooned to some US$19 billion, at the last estimate.
Critics see it as a white elephant, that will struggle to become viable and be unlikely to draw the 40,000 or so vehicles a day as forecast. While most construction is expected to be finished by year-end to allow the first vehicles to cross, Wei said he “wasn’t sure” when full operations - including toll booths, customs and immigration facilities - would be ready. “We are facing new challenges after the bridge is completed ... how to operate it, make it efficient, and really benefit the whole area,” he said. The Hong Kong Transport Bureau, which oversees the Hong Kong end of the project, gave no specific response to questions on whether more delays and cost-overruns were expected, but said it was confident construction could be completed by the end of the year. Final arrangements were being decided by the three sides, it said in an email.
‘Blur the border’
Mainland and Hong Kong officials have long stressed the bridge’s economic importance at a time when tension in Hong Kong has escalated, with protests in 2014 over Beijing’s refusal to allow full democracy, and suspicion of creeping mainland interference despite a guarantee of autonomy. Some in Hong Kong, apart from questioning the huge sums that could have gone into health, housing and education, are worried about what they see as an erosion of Hong Kong’s independent identity in China’s increasingly extensive embrace. “You see a kind of network trying to blur the border between Hong Kong and China,” said pro-democracy lawmaker Kwok Ka-ki. “In the coming 10 to 15 years, when all these infrastructure projects are
completed, you will see Hong Kong is only part of China because you cannot see a clear border.” Another project - a multi-billion dollar high-speed rail link - sparked an outcry over plans to allow Chinese immigration facilities to operate on Hong Kong soil. Critics say that undermines Hong Kong’s autonomy under a “one country, two systems” formula, under which the city returned to Chinese rule. “I don’t think many Hong Kong people mind to be integrated ... but what we want is to do it democratically,” said Eddie Chu, who led protests against the rail link and is now an elected lawmaker.
Key Points Project leader sees 29.6 km bridge as unifier Still “unsure” when bridge fully operational - project leader Critics worry about erosion of Hong Kong’s autonomy Bridge seen as key to integrate HK into Pearl River Delta “Behind all the protests in the last 10 to 15 years, the core idea is democracy and it’s an extension of the democratic movement, whether we have popular control over the direction of economic development and town planning.” But project leader Wei, dressed in grey overalls and a white hard-hat, celebrates the integration that the critics decry. “It’s actually one bridge, three systems. It’s about the law, policy, transportation policy, customs policy,” said Wei. “The bridge is becoming a new icon.” Reuters
Business Daily Monday, May 22 2017 5
Macau Casinos
Concessions and misconceptions Union Gaming believes gaming concessions for SJM and MGM China will be extended by two years to 2022, while rejecting the possibility of any upcoming competitive public tenders for new gaming licenses Nelson Moura nelson.moura@macaubusinessdaily.com
T
he gaming concessions of Sociedade de Jogos de Macau (SJM) and MGM China Holdings Ltd will probably be extended by the MSAR Government by two years, to 2022, a release by market research firm Union Gaming opines. According to analyst Grant Govertsen, with the two gaming concessions set to expire in 2020, it is ‘likely’ that the local government will
extend these licenses by two years to ‘bring them to parity’ with the expiration deadline of the licenses granted to the gaming sector’s other four gaming operators.
The 20-year gaming licenses granted to Melco Resorts & Entertainment, Sands China Ltd. (Sands China), Wynn Resorts (Macau) S.A. and Galaxy Entertainment Group are all set to expire in 2022. ‘The government also has the option - at its own discretion - to extend the licenses by one year at a time for up to five times; this is without the need for new legislation,’ the note informed. Mr. Govertsen believes the license renewal process will
not be finalised within the term of the current Chief Executive (CE) Fernando Chui Sai On, which reaches its end in December of 2019. The release also stated that the next government could unilaterally extend the licenses by a year or two, while a new gaming law is drafted for the period after 2020.
Misunderstanding
The Union Gaming release mentions that some Chinese-language media reported that Macau’s gaming concessionaires would have to rebid for their gaming licenses in a sort of competitive public tender. However according to Mr. Govertsen, this misconception was reached after sideline statements made by the Director of the Gaming Inspection and Co-ordination Bureau (DICJ), Paulo Martins
Chan, after his keynote speech at G2E Asia last week. ‘[The questions on the sidelines] included a question about concession renewals. His response to this question was brief and did not include any sort of timeline nor any details on the process other than to note it would be dealt with at the appropriate time and - most importantly - that there are no new developments at this time,’ the note added. According to the note, Union Gaming’s position is that although the ‘Big 6’ gaming concessions will not be renewed automatically, there is no ‘upcoming competitive public tender process’. ‘The government is still studying the renewal process and has yet to come to any conclusions on how to best go about renewals at this point,’ the note added.
VIP
Call me Suncity Group Holdings Limited Sun Century Group Limited, a junket operator presided over by chairman Alvin Chau Cheok Wa, announced in a filing with the Hong Kong Stock Exchange last Thursday that it has changed its name, in both English and Chinese. Suncity Group Holdings Limited is the company's new English name.
Effective on May 23, the English stock short names of the company will also be changed from SUNCENTURY GP to SUNCITY GROUP. The company further noted that the change of names will not affect any rights of its shareholders. Suncity was founded in Macau in 2007. The company
and its subsidiaries operate in the casino, entertainment, property, travel, and hospitality segments. Suncity also owns and operates its own VIP casino clubs in Macau, with the first one opened in 2007 at the StarWorld casino and hotel. The company has further investment interests
in Vietnam, where it has partnered with Hong Kong b i l l i o n a i r e Ch e n g Y u tung, owner of Chow Tai Fook Enterprises, and with
VinaCapital, to develop an integrated resort in Quang Nam province south of Da Nang, slated to open in 2019.
Global gaming
Money Laundering
Imperial Pacific integrating its resort in Saipan
New group to combat money laundering
The casino supporting the largest chunk of Saipan Island’s economy is set to open soon Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Imperial Pacific International Holdings Limited has received the green light to open the casino facilities planned to integrate its hotel in Saipan, as reported by the Marianas Variety. The development of the Imperial Pacific Resort had been delayed by protests from construction workers – coming mainly from China – over unpaid wages and unsafe working conditions, according to previous reports. After the Department of Public Works of the Government of the Commonwealth Northern Mariana Islands (CNMI) approved a conditional occupancy permit last week, Imperial Pacific has been allowed to commence with operations of phase one of the current project, the Commonwealth Casino Commissioner, Joseph Reyes, was quoted as saying. The temporary permit – valid until
November 16, 2017 – was issued to allow the development of the casino facilities and grand lobby, in addition to a bar (the Tapochau) and a couple of business offices. According to the company, phase one ‘is expected to be completed soon,’ with a total area of 140,000 square metres, which will include more than 200 gaming tables and roughly 350 slot machines. The permit will be revoked if Imperial Pacific does not comply with safety measures, or if it does not hold relevant parties accountable for matters such as work-related deaths, injuries, property damage, suits or debts.
Rich little island
Imperial Pacific, nearly two-thirds owned by Hong Kong billionaire Cui Lijie, operates its casino, hotel, and integrated resort segment in the CNMI under its subsidiary Best Sunshine International. According to another report from the Marianas Variety, the company – said to be the biggest contributor to the island’s economy and its largest private-sector employer – claims it has contributed roughly US$201.56 million (MOP1.61 billion/HK$1.58 billion) in taxes, fees, operation funds and donations since it began its activities in 2014. Between 2015 and the first four months of 2017, Imperial Pacific said it paid US$77.64 million in Business Gross Revenue Tax to the CNMI, ‘the largest payment in ten years made by a single investor in the commonwealth,’ according to a statement by Imperial Pacific in the publication.
A new authority to combat money laundering was set up in the MSAR last Friday. Named the Macau Anti-Money Laundering Specialists Association, Lao Chak Kuong has been appointed as the group’s director specialist in the banking field, local broadcaster TDM English Radio News reported. Lao stated, after his official appointment on Friday, that the label of Macau as a “haven for money laundering” was created by biased reports from foreign media. “It is hard to control foreign media. As for local media, you all should be
S.Z.
aware of the situation in Macau […] let’s polish the region’s anti-laundering image. A city with gambling as its main industry is not necessarily a money-laundering haven,” said Lao, as quoted by TDM. The Association consists of 400 members from 12 industries including gaming, finance and insurance. The group is accredited by the Association of Certified Anti-Money Laundering Specialists (ACAMS). The Legislative Assembly passed the bill for anti-money laundering measures and countering the financing of terrorism earlier this month. C.U.
6 Business Daily Monday, May 22 2017
Macau
Interview | Gaming machines
The Aristocratic way After a very strong fiscal year in 2016, the public and shareholders are eagerly awaiting Aristocrat’s first half-year results. Business Daily sat down with Ben Attwood, Senior Manager of Product Strategy and Planning for Australia and Asia Pacific, to get a feel for what the group is looking forward to and its philosophy on creating. Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
A
fter such a strong fiscal 2016, is there any worry about the company getting too big? The company has expanded quite significantly in the last five years, but we’ve got a great leadership team in terms of our CEO Trevor Croker, who has been in the business for over eight years. We’ve got a great executive team too. The actual structure that they’ve set up, I think we’re well positioned, with dedicated teams for each of the business units. Part of my role is the ANZ (Australia, New Zealand) and Asia Pacific product strategy, but each of the seven businesses across Aristocrat are very well structured.
“People and product is everything. I think culture has been a big thing, having the right people” Within the company’s fiscal 2016 results it noted that it’s looking for ‘organic and inorganic opportunities to accelerate growth’. How exactly? The inorganic will be 2020 and beyond, organic is what we do now – and that can be initiatives and strategies to take share in a particular market or to improve our product performance. So it could be efficiencies, but also could be improving
in segments where we are not the leader – we’re not the leader in every segment. So there’s a lot of potential in terms of us doing things a bit better, and obviously how our competitors are performing quite strongly. Profit was up 70 per cent. Are there any main obvious factors that may have driven that? People and product is everything. I think culture has been a big thing, having the right people. But we’ve been very fortunate to have a number of very talented studios throughout the company, some great creative people. So people and product has been key. How do you see Macau’s contribution to last year’s results, and how is it contributing to this fiscal year so far? It’s hard to say the exact numbers, but Asia Pacific has always been a flagship market for Aristocrat in terms of – it’s well known in other markets our position here – and it does play a part, but a lot of our revenue is in the U.S. and Australia. So although important, it’s been consistent and we have to just maintain our market share over the next twelve months to two years. Obviously casino openings play a big part in that fluctuation, so the challenge now will be how we maintain our position and product strategies to stay ahead. Given the speed and frequency of the recent casino openings over the past decade in Macau, does the slowdown in openings make your workload easier? Within the limited operators in Asia Pacific, it’s obviously a typically existing company. We have a relationship
with those operators and being already in the market and knowing our position, that’s helped us in gaining share in these new openings. Within the digital area, your last fiscal year saw revenue grow 80 per cent, but profit grew 127 per cent. How much of that was happening in the Asia Pacific area? A smaller percentage [than the main markets]. We have the FaFaFa application across Asia Pacific and Heart of Vegas, which is our main one for Australia and the U.S.
“We’re trying to build up our player base and in every market and every jurisdiction, it differs in some way” How does Facebook fit in? You can play the same version online, or on iOS or Android you can get it on Facebook. We are seeing some crossover of the land based player and the digital player. Will there have to be millennial oriented products? I think watching some of our competitors experiment in terms of skillbased [games] and other crossover to online products, I think there will be a time. What that is, it is hard to say. It’s such a wide choice in terms of forms of entertainment, it’s very, very difficult, very hard to say.
We’re trying to build up our player base, and in every market and every jurisdiction it differs in some way, relating to age group. We’re gathering feedback from our operators. They’re often our best insight into player behaviour. So we seek a lot of guidance from the operators. Research and development went up 25 per cent in annual terms last fiscal year. Do you think that’s necessary to maintain the increase in funding consistently? It’s hard for me to say what the makeup of that is. We do have product watchers, typically as R&D investment, but typically we retain talent. As our business expands and to stay ahead we need to continue to fund and innovate; product is the key and we got the people [to make it happen]. Some gaming manufacturers have said that up to 90 per cent of ideas get left on the research and development cutting room floor. Is that accurate for Aristocrat? I wouldn’t say it’s that high for our business, because definitely a lot of concepts that our creative teams put forward, not all of them see the light of day. But it’s the ones that are commissioned, that do go ahead, that have numerous, numerous reviews and innovations. So our creative teams take a lot of pride, because for them it’s very important to try and make the best product. The new Lightning Link unit that the company has introduced seems to be one of its star new products. Can you describe the release schedule? Lightning Link has been released in the last two months across Asia. It’s been in the Philippines, in Malaysia, in Vietnam, and in Macau has just gone into two venues. So early days, it’s only been in for a few weeks but Lightning Link has been the number one product in the last few years. Asia Pacific was the last region to receive it, so we’re optimistic. For that product in particular [we
Business Daily Monday, May 22 2017 7
Macau released in] Australia first two years ago, then to the U.S. and then last to Asia. It just depends on the development studio to see which region or market to hit first, but our team’s very excited and our customers as well. How long do you need to gather data on customer play? Typically, we like to say, a minimum of three months you get a great feel. And that’s when you choose whether the product will either stay on the floor or an alternative. So you’ve got three months typically – player acceptance, technical interface, is very important. How does the arrangement work to place the machine at the venue? Do you do any profit split? We don’t do any profit split across Asia Pacific. We do have lease models, so depending on the product, it’s available. Typically it’s just a straight out sale and then we have a warranty period, and if a particular game doesn’t perform to a certain level we have a catalogue of games and we can convert that game. So for example, I bought a new cabinet and it has to perform up to a certain level. If it’s below performance expectation, then we can convert the game. How much effort are you putting into Japan, and do you need to be focusing on it now or wait until the operators are installed? We have a team that’s been up to Japan for the gaming congress, so we’re staying very close to developments there. You do have to start preparing, you do have to take all the steps right now, so we have a team that’s assigned to that. Where else are you guys looking to expand operations to handle ongoing demand? Macau’s still our head office in Asia
Pacific, and the Philippines is going to be a big focus - the new openings that are going to be happening around Marina Bay over the next two years. The Philippines is bound to be a large gaming offer, so we’d expect to see a bit of growth in that market. And then we’ll see what happens in Singapore. There are other markets to kind of follow the Philippines, but the Philippines will definitely be the big one looking forward.
“The Philippines is going to be a big focus” Has the uncertainty around the legal environment had any effect on your operations in the Philippines? We’ve got local teams who’re based there, again, having relationships with the operators and getting the information first-hand, but I don’t think that it’s had any impact on the operations. Given the uncertainty, a lot of companies are shifting out to Vietnam, Cambodia and Laos. Are those attractive markets for you given that they’re not so large yet? Every customer is important. We have account managers dedicated to the Philippines, we have account managers dedicated to Malaysia and Cambodia, so we’re in touch with operators in most of the region and have seen a lot of growth, particularly from Vietnam recently. I think Vietnam has been a good market for us. We’ve got a great position and we’re dealing with a number of the smaller operators and I think it’s going to be an important market for us. Are you excited about the potential
for local gaming happening there? I haven’t heard too much about exactly when that’s happening. I have heard it’s been talked about. On the digital side, you saw daily average users hit 1.2 million during the last fiscal year, 16 per cent growth year-on-year. What does that mean for the next fiscal year? Digital’s mostly managed out of the U.S. It’s not a large part of our business here. Does being the market leader in Australia bring any challenges? You’ve got to be more creative because you have to support a bigger base. There’s very strong competition in Australia, with Scientific Games, IGT, so we’ve always been the leader, but we lost a bit of the leading
position for a while. So we remain focused on retaining our footprint and pushing growth.
“Every customer is important” Some of the other competition around you has grown through mergers and acquisitions. How does that keep you on your toes? There are some big companies that have come together and you can understand that they’ve got great creative, and bringing their creative talent they’re going to have a lot more efficiency, so no doubt they will have to get through all the hurdles, but we’re always watching out.
8 Business Daily Monday, May 22 2017
Macau
Project Asia Corporation 13th Anniversary Cocktail Party
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o celebrate its 13th anniversary, Project Asia Corporation held a cocktail party at The Vista at MGM Macau last Friday. The pioneer media group is the publisher behind leading local business and lifestyle news publications Macau Business, Business Intelligence, Essential Macau, newspaper Business Daily, MB NewsLetter and online TV MB.tv.
The event saw the presence of several distinguished guests from different industries who came to celebrate the group’s big night. The guests enjoyed a warm reception in a relaxed evening that included complementary wine, champagne, food, cigars, and pleasant live jazz music from local band The Bridge. The evening also included a lucky draw with prizes provided by the event sponsors.
To sum up 13 years of hard work and success, Project Asia CEO Paulo A. Azevedo said in the speech that “13 years ago, there were only Chinese and English publications in Macau. To develop with the fast growing city, we decided to publish the first English business magazine: Macau Business. Nowadays, there are a lot of English magazines in Macau, proof that our group became a meaningful pioneer”.
Director of DICJ, Paulo Martins Chan
Vice-President of the Board of Directors of the Macao Chamber of Commerce, Vong Kok Seng
Senior Vice President of Strategy & Corporate Responsibility of MGM China, Sarah Rogers
Operations manager of Aruze Gaming, Joji Kokuryo receiving the Turbo Jet lucky draw prize from the Turbo Jet Director of Macau Services Division, Alfred Ng
Manager of Marketing Communication of Banyan Tree Macau, Aaron Wong, receiving the St. Regis lucky draw prize from the Director of Public Relations of St.Regis, Karen Kang
Sales and Marketing Executive of Longines, Orlando Kuan receiving the Banyan Tree lucky draw prize from Manager of Marketing Communication of Banyan Tree Macau, Aaron Wong
President of the France Macau Business Association, Rutger Verschuren, receiving the Hotel Okura lucky draw prize from the Hotel Okura public relations manager, Nattiya Chowdee
Assistant Director of Marketing Communications, Grace Tong, receiving the SJM lucky draw prize from the Vice President of Destination Marketing & Brand Strategy of Grand Lisboa, Ada Chio de la Cruz
The Turbo Jet Director of Macau Services Division, Alfred Ng, receiving the CTM lucky draw prize from the CTM Director of Corporate Communications, Eliza Chan
The Associate Director of Vigers Asia Pacific Ltd., Kris C.Y Leung, receiving the Mandarin Oriental Macau lucky draw prize from the Mandarin Oriental Director of Communications, Cheryl Lum
The adviser of the Office of the Secretary for Social Affairs and Culture of Macau, Rafael Gama, receiving the Louis Vuitton lucky draw prize from the Editor-in Chief of Business Intelligence, Mandy Kuok
The Hotel Okura public relations manager, Nattiya Chowdee, receiving the Sofitel Ponte 16 Hotel lucky draw prize from the Editor of Essential Macau, Edwina Liu
Business Daily Monday, May 22 2017    9
Macau
Paulo A. Azevedo, CEO of Project Asia Corporation and company team
The Director of Vigers Appraisal and Consulting Ltd., Franky C.H. Wong, receiving the DFS lucky draw prize from the CEO of of Project Asia Corporation, Paulo A. Azevedo
Vice Administration Manager of Vang Kei Hong Trading Co.Ltd, Dominic Chan, receiving the Melco Crown Entertainment, Ltd lucky draw prize from the CEO of Project Asia Corporation, Paulo A. Azevedo
Paulo A. Azevdo, Paulo Martins Chan, Creative Director of Shidu Art Consultants, James Chu, Rutger Verschuren and secretary to the Managing Director of STDM, Constance Chan
10 Business Daily Monday, May 22 2017
Greater China Overseas capital
Beijing to lift curbs on foreign fund offshore investments The opening-up of the QDLP quota will also expand the range of investment options global private banks can offer their wealthy clients in China Sumeet Chatterjee and Michelle Price
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hina will lift a two-year suspension on foreign funds raising money in the country to invest overseas as early as June, people familiar with the matter said, a sign that Beijing is getting less anxious about capital outflow pressures. Some industry executives said the expected resumption of the Qualified Domestic Limited Partnership (QDLP) programme may mean that an official crackdown on capital outflows and a weakening of the dollar have provided the authorities with more policy flexibility.
The Shanghai Municipal Government Financial Services Office, which runs the QDLP scheme, did not respond to requests for comment, while the State Administration of Foreign Exchange (SAFE), which controls the capital account, did not immediately respond to a request for comment. The QDLP programme allows foreign fund managers to raise money within a set quota from high networth Chinese investors through a wholly-owned onshore fund management company and invest the cash overseas. Launched in 2013, QDLP was one of a handful of controlled schemes that allowed Chinese to invest money
overseas. It was subsequently informally suspended in 2015 after the stock market crashed and lost around 40 per cent of its value. The licences and accompanying quota had previously been issued in batches, with authorities expected to issue the long-awaited next round in coming weeks, said two people briefed by regulators on the matter. One of these people said authorities will, however, be a “little cautious” granting only around half a dozen licences, these people said. The quota will also be lowered from US$100 million per manager during the previous batches to between US$50 million and US$75 million this time round, one of these people and a third individual briefed on the matter said. That could amount to between US$300 million to US$450 million in fund flows abroad. The sources said SAFE must ultimately sign-off on lifting the suspension. But SAFE may be more comfortable doing so after the yuan rose 1 per cent against the dollar this year after falling 6.5 per cent in 2016. China’s foreign exchange reserves also rose in April for a third straight month, as stringent capital controls and a pause in the dollar’s rally helped staunch outflows. On Friday, SAFE said China’s cross-border capital flows were stabilising and improving. Some foreign managers such as insurance giant Allianz and Dutch manager Robeco have positioned for the relaxation in curbs since late last year. The opening-up of the QDLP quota, though small, will also expand the
range of investment options global private banks can offer their wealthy clients in China, industry officials said. Reuters reported in 2015 BlackRock Inc became the first traditional asset manager to receive the QDLP licence, joining a handful of other global funds, including Man Group Plc and Och-Ziff Capital Management Group.
Key Points Launched in 2013 QDLP allows Chinese to invest overseas Authorities likely to grant half a dozen QDLP licences Allianz, Robeco among others positioned for curb relaxation QDLP funds are private, meaning data is not publicly available on assets or performance, but industry insiders say they have seen strong demand as wealthy Chinese scrambled to hedge their exposure to the falling yuan by investing offshore. A growing number of foreign financial institutions, including Aberdeen Asset Management, U.S. hedge fund Bridgewater Associates and Vanguard, have recently set up standalone money-management firms in China as Beijing further deregulates the Mainland fund industry. Previously, foreign asset managers looking to distribute investment products in China had to operate through minority-owned joint ventures with domestic firms, but Beijing has been gradually loosening the reins. Reuters
Legislation
Amid industry pushback, authorities offers changes to cyber rules Business groups have lobbied Beijing to delay or water down the law mandating strict data surveillance and storage for firms working in China Michael Martina and Cate Cadell
China may delay full implementation of controversial new cyber security rules, giving companies more time to prepare, two people who attended a meeting on Friday between the country’s internet regulator, businesses and diplomats told Reuters. The Cyberspace Administration of China (CAC) called the meeting - with around 100 participants, including representatives from global technology firms - to present last-minute changes to implementation rules for China’s new Cyber Security Law which is due to come into effect on June 1. One of those changes was a new 18-month phase-in period from June, two attendees said, suggesting the law would not be fully implemented until the end of 2018. The new law aims to meet growing threats such as terrorism and hacking. Chinese officials say the law applies equally to both domestic and foreign companies. The CAC did not immediately respond to a faxed request seeking comment on what was a closed-door meeting. Business groups have lobbied Beijing to delay or water down the law mandating strict data surveillance and storage for firms working in China. Concerns are that the law would lead to uncertainties and compliance risks.
In a letter to the CAC earlier this week, seen by Reuters, more than 50 industry bodies covering 11 countries and sectors from financial services to healthcare said there were significant concerns the new law could negatively impact billions of dollars in cross-border trade. Some attendees said Chinese officials had made some concessions, but Reuters was unable to ascertain specifics. “They have made some revisions, and most are positive. But there are still some issues,” said a third person who attended the meeting, which lasted around three hours. The second attendee said the changes were “modest” and the law was “still plagued by overreach”.
Stricter rules
China’s data industry has been governed by loosely defined laws, but no overarching data protection framework. The new law codifies much stricter controls than in Europe and the United States. On top of internationally common standards, such as requiring user consent before moving data beyond country borders, China’s new cyber law also mandates companies store all data within China and pass security reviews. This fits China’s ethos of “cyber sovereignty” - the idea that states should be permitted to govern and monitor their own cyberspace,
controlling incoming and outgoing data flows. The meeting, arranged in recent days, was led by Zhao Zeliang, the director general of the CAC’s cybersecurity bureau, and included people from companies, business groups and diplomats, including some from the United States. Reuters could not reach Zhao for comment. Last week, Beijing and Washington touted the first results of 100 days of trade talks that began in April after a summit between Presidents Donald Trump and Xi Jinping, which included openings for U.S. financial firms and beef. Some U.S. critics complained the results were mostly low hanging fruit that ignored structural issues in bilateral trade and Chinese industrial policies targeting advanced industries, such as semiconductors and internet services.
U.S. business had been concerned that there was little political pressure from Washington on Beijing to make changes to the cyber law. The European Union Chamber of Commerce in China wrote to the CAC last week saying the new rules were “fraught with weaknesses.” In early May, a group of U.S. senators sent a letter to the Trump administration urging it to press China on restrictions on U.S. cloud service providers. Michael Clauss, German Ambassador to China, told Reuters on Friday the “law in its current form and without clear implementation guidelines narrowing its scope will most likely obstruct cooperation” in the market. “Indiscriminately requiring businesses to hand over source codes has caused widespread alarm among European companies that business secrets and customer data might no longer be safe,” he said. Reuters
Business Daily Monday, May 22 2017 11
Greater China Diplomacy
In Brief
Duterte says Xi threatened war if Philippines drills for oil His remarks came the same day that China and the Philippines held their first session in a two-way consultation process on the South China Sea Manuel Mogato
Philippine President Rodrigo Duterte said on Friday Chinese counterpart China Xi Jinping had warned him there would be war if Manila tried to enforce an arbitration ruling and drill for oil in a disputed part of the South China Sea. In remarks that could infuriate China, Duterte hit back at domestic critics who said he has gone soft on Beijing by refusing to push it to comply with an award last year by the Permanent Court of Arbitration in The Hague, which ruled largely in favour of the Philippines. Duterte said he discussed it with Xi
when the two met in Beijing on last Monday, and got a firm, but friendly warning. “We intend to drill oil there, if it’s yours, well, that’s your view, but my view is, I can drill the oil, if there is some inside the bowels of the earth because it is ours,” Duterte said in a speech, recalling his conversation with Xi. “His response to me, ‘we’re friends, we don’t want to quarrel with you, we want to maintain the presence of warm relationship, but if you force the issue, we’ll go to war.” Duterte has long expressed his admiration for Xi and said he would raise the arbitration ruling with
Chinese President Xi Jinping (back R) and Philippines’ President Rodrigo Duterte (back L) attend a signing ceremony prior to their bilateral meeting during the Belt and Road Forum for International Cooperation at the Great Hall of the People in Beijing, China, 15 May 2017. Lusa
him eventually, but needed first to strengthen relations between the two countries, which the Philippines is hoping will yield billions of dollars in Chinese loans and infrastructure investments. The Hague award clarifies Philippine sovereign rights in its 200-mile Exclusive Economic Zone to access offshore oil and gas fields, including the Reed Bank, 85 nautical miles off its coast. It also invalidated China’s ninedash line claim on its maps denoting sovereignty over most of the South China Sea. Duterte has a reputation for his candid, at times incendiary, remarks and his office typically backpeddles on his behalf and blames the media for distorting his most controversial comments. Duterte recalled the same story about his discussion with Xi on oil exploration in a recorded television show aired moments after the speech. He said Xi told him “do not touch it”. He said Xi had promised that the arbitration ruling would be discussed in future, but not now. Duterte said China did not want to bring up the arbitral ruling at a time when other claimant countries, like Vietnam, might also decide to file cases against it at the arbitration tribunal. It was not the first time the firebrand leader has publicly discussed the content of private meetings with other world leaders. They exchanged views on “the importance of appropriately handling concerns, incidents and disputes involving the South China Sea”, the Chinese Foreign Ministry said in a statement that gave few details. Reuters
Think tank
Q2 GDP growth seen at around 6.8 pct China’s economy will likely expand around 6.8 per cent in the second quarter of 2017, the State Information Centre said in an article published in the state-owned China Securities Journal on Saturday. The State Information Centre is an official think tank affiliated with the National Development and Reform Commission, the country’s top economic planning agency. It forecast consumer inflation in the world’s second largest economy of around 1.4 per cent and expected an increase of about 6.5 per cent in producer price inflation in the second quarter from the same period a year earlier. Property
Changsha restricts housing purchases The central city of Changsha on Saturday became the latest place in China to restrict housing purchases in an effort to try to cool the property market, the state news agency Xinhua reported. From Saturday, residents of Changsha, in Hunan province, will be allowed to own a maximum two homes, and non-local people will be restricted to one, so long as the buyers provide evidence of at least 12 months of income tax and social security payments in the city, Xinhua said. In addition, property may not be re-sold within two years, it added. Wealth fund
Taiwan
Kuomintang elects Wu Den-yih as chairman Wu, first premier then vice president in former President Ma Ying-jeou’s administration, aims to create a peaceful and stable relationship with Beijing Adela Lin
Taiwan’s main opposition Kuomintang elected Wu Den-yih as chairman, and the former vice president immediately pledged to lead the century-old party back to power and called for peaceful relations with China. “We have to be united in this difficult time,” Wu, 69, said Saturday in a
“There won’t be any chance for us if we are not united” Wu Den-yih, Kuomintang chairman victory speech. “There won’t be any chance for us if we are not united.” His election was welcomed by China’s President Xi Jinping, who said in a letter to Wu that he hoped the two parties will keep in mind the well-being of people on both sides of the Taiwan Strait, adhere to the 1992 Consensus and firmly oppose “Taiwan independence.” The winner received 52.24 per cent of the vote, avoiding a runoff in defeating incumbent Hung Hsiuchu, former Taipei City Mayor Hau Lung-bin and three other candidates. Turnout was 58.05 per cent of eligible voters, election committee head Hsu Shui-teh said. Wu’s four year term
will begin Aug. 20, KMT spokesman Tang Te-ming said. Wu, first premier then vice president in former President Ma Yingjeou’s administration, aims to create a peaceful and stable relationship with the Beijing government based on the so-called 1992 Consensus, in which both sides across the Taiwan Strait agreed there is one China while allowing each its own interpretation of what that means.
2020 elections
“We have to prepare in order to seek opportunities to win legislature and presidential elections in 2020,” Wu said. He said he will build youth confidence and trust in the party. C u r r e n t Chai r w o m a n H u n g
Hsiu-chu, who backed signing a peace treaty with China, finished second with 19.2 per cent. Hung was the first woman elected party chief, in March 2016, after the more China-friendly party lost its legislative majority when Tsai Ing-wen’s independence-leaning Democratic Progressive Party won the presidency in a landslide. Wu faces a demoralized membership after the election loss last year along with internal splits among party leaders. The party’s finances also could weigh on the new leader as Tsai’s administration seeks to confiscate more than US$500 million from KMT. The DPP-led legislature last year passed a law seeking the return of Kuomintang-held state assets. “I thank fellow members for being willing to shoulder responsibilities at this difficult time,” Hung said after the election results. “The new chief will lead our party to reform in the coming years in order to return to power.” Bloomberg News
A 30 March 2012 file photo reissued 20 May 2017, showing Taiwan’s former vice president Wu Den-yih addressing a news conference in Taipei, Taiwan. Lusa
CIC plans more direct investments in U.S. China’s sovereign wealth fund has opened a New York office and plans to make more direct investments in the United States, with its head of the fund saying foreign investment can help advance U.S. President Donald Trump’s economic agenda. At an opening ceremony for China Investment Corporation’s (CIC) New York office on Friday, fund president Tu Guangshao was optimistic China and the United States would expand cooperation on investment “as the two countries are in mutual need of closer bilateral ties”, according to the Chinese state news agency Xinhua. Theft charges
IBM employee from China pleads guilty A former software engineer for IBM in China pleaded guilty on Friday to stealing proprietary source code from the company, federal prosecutors announced on Friday. Jiaqiang Xu, 31, pleaded guilty to economic espionage and theft of a trade secret before U.S. District Judge Kenneth Karas in White Plains, New York, prosecutors said. He is scheduled to be sentenced on Oct. 13. Leanne Marek, Xu’s attorney, declined to comment. Xu was arrested in December 2015 after meeting with an undercover officer at a White Plains hotel, where authorities said he was recorded saying he used the code to make software to sell to customers.
12 Business Daily Monday, May 22 2017
Greater China Trade
Beef talks with U.S. accelerate China banned U.S. beef in 2003 after a U.S. scare over mad cow disease
represents Tyson, Cargill and other meat companies. China’s embassy in Washington could not immediately be reached for comment.
Tom Polansek
Brazil woes
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alks on restarting U.S. beef exports to China are moving fast and final details should be in place by early June, the U.S. Department of Agriculture said on Friday, allowing American farmers to vie for business that has been lost by rival Brazil. As part of a trade deal, U.S. ranchers are set to halt the use of growth-promoting drugs to raise cattle destined for export to China and to log the animals’ movements, according to the USDA. The two sides are negotiating to meet a deadline, set under a broader trade deal last week, for shipments to begin by mid-July. Finalizing technical details in early June should mean beef companies, such as Tyson Foods Inc and Cargill Inc , can sign contracts with Chinese buyers to meet the deadline, the USDA said. China banned U.S. beef in 2003 after a U.S. scare over mad cow disease. Previous attempts by Washington to reopen the world’s fastest-growing beef market have fizzled out. But now, the quick progress of the latest talks is raising hopes of U.S. farmers. “Both sides feel the urgency to get it done by the deadline,” said Joe Schuele, spokesman for the U.S. Meat Export Federation, which
The timing of the new deal allows U.S. producers to benefit as Brazil, the world’s top beef exporter, is struggling with scandals and rival shipper Australia is suffering from a drought that is hurting production, analysts said. China accounted for nearly onethird of the Brazilian meat packing industry’s US$13.9 billion in exports last year. But in March, Beijing briefly banned Brazilian imports after Brazilian police accused inspectors of taking bribes to allow sales of rotten and salmonella-tainted meat. JBS SA, the world’s largest meatpacker, was involved in the probe and in separate allegations this week that Brazil’s president conspired to obstruct justice with the company’s chairman. The food-safety probe hit Brazil’s beef exports, which fell by 24.6 per cent to US$378 million in April from March, according to Abiec, an industry group that represents meat processors accounting for about 90 per cent of Brazil’s exports. “This is a very opportune time for the U.S. to step up,” said Derrell Peel, an agricultural economist at Oklahoma State University. Chinese appetite for beef has climbed due to its expanding middle class. In 2003, its imports totalled just US$15 million, or 12,000 tons,
including US$10 million from the United States, according to the USDA.
Tracking cattle
Brazilian exporters hope China’s trade deal with Washington will not inflict more pain on meat companies in the country because U.S. exporters will be targeting different, higher-end customers, said Abrafrigo, an association representing Brazil’s small meatpackers. To reopen U.S. trade, Beijing has accepted a U.S. proposal in principle that would require producers to document the locations where cattle raised for beef exported to China are born and slaughtered, the USDA said. The system would be less onerous than tracking cattle throughout their entire lives, during which they can be kept at up to four different locations. Peel, a livestock expert, estimated that U.S. producers trace the movements of less than 20 per cent of the nation’s cattle. Under another rule, U.S. beef exported to China must be raised
without a class of growth-enhancing drugs known as beta-agonists that includes Elanco’s Optaflexx, according to the USDA. Elanco, owned by Eli Lilly and CO, declined to comment. A trade group for veterinary drug companies, the Animal Health Institute, said China should accept beef from cattle raised with beta-agonists because they are safe. U.S. beef shipments to China also will have to come from cattle under the age of 30 months, according to the USDA. Most U.S. cattle will meet that requirement, the U.S. Meat Export Federation said. The terms of the deal are a win for the United States over Canada, which is approved to ship only frozen beef to China. China already bans meat from Canadian cattle fed with Optaflexx, according to the Canadian Meat Council. It also requires that Canadian beef be produced from cattle that are less than 30 months old and can be tracked to the farm where they were born. Reuters
Surplus
Taiwan current account narrows, but still above U.S. threshold The surplus was around 11.8 per cent of nominal GDP in the first quarter J.R. Wu and Liang-Sa Loh
Taiwan’s current account surplus for the first quarter narrowed to 12 per cent of its gross domestic product, data from the island’s central bank showed Friday, remaining above a U.S. threshold used to monitor possible currency manipulators. A Taiwan senior central banker said it would be tough to further narrow the surplus in the short term, highlighting how difficult it will be for central bank chief Perng Fai-nan to get Taiwan completely removed from the U.S. watch list. In the first quarter, the current account surplus totalled US$16.39 billion, lower than a revised US$19.45 billion in Q4 2016 and US$19.58 billion a year ago, based on the central bank’s latest figures. That put the surplus at around 11.8 per cent of Taiwan’s nominal GDP of US$138.68 billion in the first quarter, according to government figures. That was down from 14 per cent of
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nominal GDP in Q4 2016 and 15.3 per cent a year ago. “This is the characteristic of small and open economies,” deputy central bank governor Yang Chin-long said at a news briefing. But at nearly 12 per cent, the island’s
current account surplus remained well above the 3 per cent threshold set by the U.S. Treasury Department to monitor potential currency manipulators among major trading partners. Taiwan appeared again alongside China, Japan, South Korea, Switzerland and Germany on the latest list published in April of countries that the United States would monitor. The Taiwan dollar has been one of
the best performing currencies in Asia this year so far as the central bank, keen to get Taiwan off the watch list, has refrained from intervening against any appreciation. Yang said that a large amount of net foreign inflows into Taiwan’s stock and bond markets have been behind the strength in the local dollar against the greenback.
‘The Taiwan dollar has been one of the best performing currencies in Asia this year’ He warned that foreign investors may be “stir frying” the local dollar by parking funds in the domestic bonds, which currently have low yields. The central bank will maintain order in the forex market if excessive volatility is not beneficial to economic and financial stability, the central bank said. Reuters Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, May 22 2017 13
Asia Government
In Brief
S.Korea’s Moon names top ministers and security adviser Kim, the president’s pick for the finance portfolio, is known for his attention to detail and humble personal background Christine Kim and Ju-min Park
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outh Korea President Moon Jae-in named the finance minister, foreign minister, and top security advisor for his new government yesterday, as it faces challenges nurturing economic recovery, soothing ties with China and dealing with North Korea. Moon told a media briefing that he had nominated former vice finance minister Kim Dong-yeon as deputy prime minister and finance minister, while a United Nations senior adviser on policy Kang Kyung-wha was tapped as the next foreign minister.
Key Points Former vice finance minister appointed deputy PM and finance minister New security adviser has already met U.S. officials Elected earlier this month after a graft scandal brought down his predecessor, Moon stressed the need to improve conditions for ordinary people, with his government needing to put more life into a sluggish economic recovery. “Our new government has begun work amid unprecedented low growth, economic polarisation and economic hardships for the working class,” Moon said. Kim, the president’s pick for the finance portfolio, is known for his attention to detail and humble personal background. Two finance ministry officials told Reuters his appointment would be well received in the ministry.
The new administration also faces diplomatic challenges, soothing ties with China, the biggest buyer of South Korean goods, after they became strained by the deployment of U.S. THAAD anti-missile system, as well as increased tensions over North Korea’s missile and nuclear threats. Kang, the woman chosen to be foreign minister, has an extensive career in the ministry and at the United Nations, said the president. Moon said her appointment gave “great meaning” to gender equality among his cabinet. His nominees for ministerial posts have to attend a parliamentary hearing before they can officially take up their posts. Chung Eui-yong, a top foreign policy adviser during the presidential election campaign, was named as the president’s national security adviser. Chung met with U.S. President Donald Trump’s security advisers last week to discuss an upcoming summit and North Korea’s nuclear issues. Chung told Reuters earlier that although the alliance of U.S. and South Korea is crucial, the process
to deploy U.S. anti-missile system THAAD should be reviewed under Moon’s government. THAAD has been deployed in South Korea since April and its presence has spurred diplomatic rifts with China and the United States. “I believe one of the most important aspects the country’s security adviser should have is a firm mind on security and diplomatic abilities when we face diplomatic and economic issues tied together, including North Korea’s nuclear programme, THAAD and free trade agreements,” said Moon. “Chung is the right man.” The South Korean president also named Moon Chung-in, a leading advocate of engagement policies on North Korea, as a special aide on diplomacy and security. Moon, a professor at Yonsei University in Seoul, accompanied former presidents Kim Dae-jung and Roh Moo-hyun on their summits with North Korea’s then-leader Kim Jong Il in 2000 and 2007. The president has said if conditions are ripe he can meet North Korea’s current leader Kim Jong Un. Moon’s special envoy to Washington Hong Seok-hyun, a former ambassador to the United States, was also named as a special presidential aide on diplomacy and security. Reuters
Malaysia growth rises strongly on solid exports, domestic demand But the current account surplus narrowed in the first quarter Malaysia’s economy grew at a better-than-expected 5.6 per cent the first quarter, easily beating expectations, as buoyant exports and solid domestic demand produced the fastest growth in two years. January-March growth, announced by the central bank on Friday, was well above a Reuters poll forecast of 4.8 per cent and the previous quarter’s 4.5 per cent expansion. “We expect growth to be sustained,” Bank Negara Malaysia (BNM) Governor Muhammad Ibrahim told at a news conference. He said the central bank was keeping its full-year growth forecast at 4.3-4.8 per cent. In the first quarter, he said, it saw “strong growth in private investments and exports”. March exports surged 24.1 per cent from a year earlier in ringgit terms, and those in February 26.5 per cent. But the current account surplus, which has generally been decreasing, narrowed in the first quarter to 5.3 billion ringgit from 12.5 billion ringgit in 2016’s last period, due to lower goods surplus and larger services deficit. “A recovery in commodity prices
Thai junta pushes for speedy spending Thailand’s military government on Friday asked stateowned companies to accelerate investment spending after having disbursed just a quarter of the budget allotted for this fiscal year, the junta’s latest effort to sustain economic momentum. Southeast Asia’s second-largest economy grew slightly more than expected in the March quarter, up 1.3 per cent on the quarter and 3.3 per cent on the year, led by exports and consumption. But it has lagged regional peers in recent years. Government spending is crucial to driving the economy because private investment has yet to recover, Deputy Prime Minister Somkid Jatusripitak told reporters. Regulation
Japan passes law to tighten high-frequency trading Japan tightened regulations on high-frequency trading (HFT) last week, passing into law measures that will require HFT firms to register with regulators. Other nations in Europe and elsewhere in Asia are looking to tighten the leash on high-frequency traders who program ultra-fast computers to trade in milliseconds without human intervention. Some major U.S. exchanges want to introduce speed limits on trading. The growing presence of HFT on the Tokyo Stock Exchange has raised concerns highspeed trading could destabilise markets and leave retail investors at a disadvantage. Rating
South Korean President Moon Jae-in (C) announcing his appointments for new foreign and finance ministers and chief security officials yesterday. Lusa
GDP
Joseph Sipalan
Investment
should help bolster the current account surplus in the coming quarters, though the surplus is still likely to remain low by past standards,” Capital Economics said in a note. Portfolio investments saw a big net outflow of 31.9 billion ringgit, compared to a 19.1 billion outflow in the fourth quarter. Capital outflows hit a record in November-January, when foreign investors divested holdings of government bonds to the tune of 27.9 billion ringgit (US$6.46 billion). In early 2016, tepid demand for Malaysia’s oil and other commodity exports pulled full-year growth down to 4.2 per cent, the lowest since contraction in 2009, from 5.0 per cent in 2015.
Stronger ringgit
The ringgit, one of the region’s worst performing currencies, in 2016, hit a 19-year low of 4.9880 on Jan. 4 but so far this year has strengthened about 3.7 per cent against the dollar. The BNM governor said that stability measures have reduced volatility in the ringgit and the domestic forex market. “We think the ringgit will further reflect the strength of the Malaysian
economy,” Muhammad said. The central bank has said inflation averaged at 4.3 per cent in Q1. Annual consumer price inflation hit an eight-year high in March at 5.1 per cent, though it slowed to 4.4 per cent in April. “The spike (in inflation) was largely due to higher oil prices. We still expect inflation to come in at 3-4 per cent. Again, there is some uncertainty in global markets, but what is important is its cost driven and not due to demand,” Muhammad told reporters.
Key Points Q1 GDP rises 5.6 pct y/y, beating forecast and Q4’s 4.5 pct Q1 current account surplus narrows to 5.3 bln ringgit C.bank governor: Stability measures have cut ringgit volatility Growth should be sustained, governor says Rising living costs could eat into support for Malaysia’s long-ruling political coalition led by Prime Minister Najib Razak, who is widely expected to call for early polls later this year to take advantage of a weak and divided opposition. Najib, whose popularity took a hit from a corruption scandal involving state-owned fund 1Malaysia Development Berhad (1MDB), also needs a strong economy to bolster his electoral chances. Reuters
S&P upgrades Indonesia’s sovereign status Rating agency Standard & Poor’s (S&P) upgraded Indonesia’s sovereign bond ratings to investment grade on Friday, saying the move reflected its assessment of reduced risks to the country’s fiscal position. A rating upgrade usually means an economy can get cheaper cost of borrowing for its bonds. S&P has upgraded Indonesia’s sovereign credit outlook to BBB-, which is an investment grade, up from BB+, junk status. Southeast Asia’s largest economy already obtained investment grade status from two other major rating agencies, Fitch and Moody’s more than five years ago. Regulation
India’s new sales tax leaves service providers worried India on Friday unveiled four rate bands under a new sales tax for services such as telecoms, insurance and restaurants, a move experts said could complicate compliance and leave businesses at the mercy of an intrusive tax bureaucracy. The Goods and Services Tax (GST), set to be launched from July 1, will have rates of 5, 12, 18 and 28 per cent for services, in line with those applying to goods. It is a big departure from the current regime, where a single rate of 15 per cent is applied on most services.
14 Business Daily Monday, May 22 2017
International In Brief Policy
ECB needs to show backbone when price pressure rises The European Central Bank will need to “show backbone” when inflationary pressure rises in the eurozone although an expansive policy remains justified for now, ECB Governing Council member Jens Weidmann told an Austrian newspaper. The victory of centrist, pro-Europe candidate Emmanuel Macron in France’s presidential election has reduced political uncertainty but does not automatically give the ECB a green light to start tightening policy, Weidmann told Der Standard. With inflation now well in positive territory, the ECB has come under pressure from more conservative countries to dial back stimulus, even as underlying inflation remains weak and wage growth is muted. GDP
World Bank sees Pakistan growth at 5.2 pct The World Bank on Saturday forecast Pakistan’s GDP growth in fiscal year 2017 to climb to 5.2 per cent, the highest expansion rate in nine years, boosted by consumer confidence and fiscal reforms. Growth is expected to accelerate to 5.5 per cent in FY18 and 5.8 per cent in FY19, according to a World Bank report released on Saturday. But it warned that weakening trade and fiscal balances made it crucial to continue reform efforts and to develop skills to find jobs for the country’s growing youth population.
Trump’s visit
U.S., Saudi firms sign tens of billions of dollars of deals Saudi officials said they aimed to prepare new, streamlined rules covering direct investment by foreign firms within 12 months Reem Shamseddine and Katie Paul
U
.S. and Saudi Arabian companies signed business deals worth tens of billions of dollars on Saturday during a visit by U.S. President Donald Trump, as Riyadh seeks help to develop its economy beyond oil. National oil firm Saudi Aramco said it signed US$50 billion of agreements with U.S. firms. Energy minister Khalid al-Falih said deals involving all companies totalled over US$200 billion, many of them designed to produce things in Saudi Arabia that had previously been imported. Business leaders on both sides were keen to demonstrate their talks had been a success, so there was an element of showmanship in the huge numbers. Some deals had been announced previously; others were memorandums of understanding that would require further negotiations to materialise. Nevertheless, the deals illustrated Saudi Arabia’s hunger for foreign capital and technology as it tries to reduce its dependence on oil exports. Low oil prices in the past couple of years have slowed the economy to a crawl and saddled the government with a big budget deficit. “We want foreign companies to look at Saudi Arabia as a platform for
exports to other markets,” Falih told a conference attended by dozens of U.S. executives. In March, Saudi Arabia’s King Salman toured Asia and his delegation signed similar agreements worth tens of billions of dollars there, including deals worth as much as US$65 billion in China.
Funds
Even as it sought U.S. investment on Saturday, Riyadh made two announcements on plans to deploy its own financial reserves for projects that would cement economic ties with the United States. The Public Investment Fund, Riyadh’s main sovereign wealth fund, and U.S. private equity firm Blackstone said they were studying a proposal to create a US$40 billion vehicle to invest in infrastructure projects, mainly in the United States. The vehicle would obtain US$20 billion from the PIF and with additional debt financing, might invest in over US$100 billion of infrastructure projects - a political boon to Trump, who has said he wants to rebuild crumbling U.S. infrastructure. Meanwhile the world’s largest private equity fund, backed by the PIF, Japan’s Softbank Group and other investors including U.S. firms Apple Inc and Qualcomm, said on Saturday it had raised over US$93
billion to invest in technology sectors such as artificial intelligence and robotics. Much of the Softbank Vision Fund’s money is likely to be invested in the United States, helping Riyadh obtain access to technology that it could use to diversify its economy. Top Saudi economic policy makers, including the finance minister and head of the kingdom’s main sovereign wealth fund, described investment opportunities in Saudi Arabia to the conference on Saturday. Saudi officials said they aimed to prepare new, streamlined rules covering direct investment by foreign firms within 12 months. Among the deals signed on Saturday, GE said it reached US$15 billion of agreements involving almost US$7 billion of goods and services from GE itself. They ranged from the power and healthcare sectors to the oil and gas industry and mining. Jacobs Engineering will form a joint venture with Aramco to manage business projects in the kingdom, and McDermott International will transfer some of its ship fabrication facilities from Dubai to a new shipbuilding complex which Aramco will build within Saudi Arabia. Riyadh, one of the world’s biggest military spenders, is keen to develop a domestic arms industry rather than import weapons, so several deals were in military industries. Lockheed Martin said it would support the final assembly and completion of an estimated 150 S-70 Black Hawk utility helicopters in Saudi Arabia. Reuters
WTO
Russia asks to look into sanctions by Ukraine on Moscow Russia has sent a request to the World Trade Organisation asking to hold consultations over Ukraine’s sanctions against Moscow, in place since 2014, Russian Economy Minister Maxim Oreshkin was quoted as saying by Russian news agencies on Saturday. He added that the request was regarding restrictions on Russian goods, services, transit and other issues imposed by Ukraine in response to Russia’s role in the Ukraine crisis, the reports said. “There are serious grounds to believe that by all these measures taken, Ukraine is violating its obligations towards WTO,” Oreshkin said. Peru
Economy grew 2.1 pct in first quarter Peru’s economy grew by 2.1 per cent in the first quarter versus the same 2016 period, its lowest rate in two years due to floods that weighed on construction activity, according to data released Saturday. The government had warned that growth was negatively affected by severe flooding during the first three months of the year, which led to a 5.3 per cent decline in construction. Growth was supported during the quarter by a 2.2 per cent rise in private consumption and a 13.1 per cent increase in export demand, according to the INEI statistics office.
U.S. President Donald J. Trump (3-R) with King of Saudi Arabia Salman bin Abdulaziz Al Saud (3-L) during a welcome ceremony with traditional sword dancers at Murabba Palace, in Riyadh, Saudi Arabia. Lusa
Brexit
UK threatens to quit talks if it faces massive bill European Commission President Jean-Claude Juncker has said the UK will have to pay about 50 billion pounds Joe Mayes
The UK will quit Brexit talks unless the European Union drops its demands of a divorce payment of 100 billion euros (US$112 billion), Brexit Secretary David Davis said. Britain’s negotiations on leaving the EU would otherwise be plunged into “chaos,” and even a 1 billion-pound settlement would be “a lot of money,” Davis said in an interview published in the Sunday Times. The size of Britain’s exit bill, and which types of negotiations can begin before it has been agreed, has been a
source of debate for weeks. European Commission President Jean-Claude Juncker has said the UK will have to pay about 50 billion pounds, while Luxembourg’s Prime Minister Xavier Bettel has signaled a figure between 40 billion euros and 60 billion euros. The Financial Times estimated the cost could balloon to 100 billion euros, while a study by the Institute of Chartered Accountants in England and Wales put the cost at as little as 5 billion pounds (US$6.5 billion). Prime Minister Theresa May’s government has said it will meet its commitments to the EU, but has questioned how the EU’s preliminary estimates have been reached. “We don’t need to just look like we can walk away, we need to be able to walk away,” Davis said. “Under the circumstances, if that was necessary, we would be in a position to do it.” In an interview with the Sunday
Telegraph, May said that “money paid in the past” by the UK into joint EU projects and the European Investment Bank ought to be taken account in the final divorce bill.
“We don’t need to just look like we can walk away, we need to be able to walk away” David Davis, U.K. Brexit Secretary “There is much debate about what the UK’s obligations might be or indeed what our rights might be,” she said. “We make it clear that we would look at those both rights and obligations.” Bloomberg News
Business Daily Monday, May 22 2017 15
Opinion Business Wires
Philstar New York-based Global Source Partners cut its inflation forecast for this year to 3.4 per cent from 3.6 per cent after Malacañang (presidential house) allowed the National Food Authority (NFA) to import rice from the private sector to augment the country’s buffer stock for the lean months. In its latest quarterly report on the Philippines titled “Setting in,” the think tank said it is more confident of a benign inflation outlook as President Duterte changed his view on rice importation. The NFA earlier approved the importation of rice via government to private sector scheme.
Moon Jae-in, South Korea’s new president. Lusa
Can J-nomics save South Korea’s economy?
S Viet Nam News Vietnam's first oil refinery operator Bình Sơn Refinery and Petrochemical Co Ltd (BSR) has planned its domestic initial public offering (IPO) with 5-6 per cent of its capital in the fourth quarter of the year. BSR, which owns the US$3billion Dung Quất Oil Refinery, added that the remaining shares would be offered to strategic investors. Trần Ngọc Nguyên, BSR’s general director, said it has selected a consultancy firm to implement divestment plans at the three capital contribution units of PV Building, PMS and PVOS to prepare for the IPO.
The Korea Herald South Korea’s central bank is expected to hold its key rates steady this month due to weak domestic spending, a report by Moody’s Analytics said yesterday. The Bank of Korea (BOK) kept its policy rate at an all-time low of 1.25 per cent for the 10th consecutive month in April to bolster Asia’s fourth-biggest economy. The leading provider of economic analysis, said the BOK will “likely stand pat” on rates at the monetary policy meeting set for Thursday, noting further easing is off the cards as it would spur demand for credit.
The Times of India Commerce minister Nirmala Sitharaman said on Saturday that the rollout of the Goods and Services Tax (GST) will help improve exports and assured exporters that they would get their tax refunds within 6 to 10 days under the new regime. “I feel the GST is only going to help in improving our exports and also since the input credits have been very well worked out the inputs for exporters is going to cost less and they are going to be far more competitive. Exports are zero rated will be refunded. There will be an ease of refund in the system,” Sitharaman said.
outh Korea’s new president, Moon Jae-in, a former human-rights lawyer representing the centre-left Democratic Party, has his work cut out for him. Though North Korea’s increasingly provocative behaviour will likely continue to dominate headlines, the success of Moon’s presidency will hinge largely upon his economic policies. The good news for Moon is that both the global and South Korean economies are showing signs of recovery. Korean exports, led by semiconductors and petrochemicals, have recorded positive growth for sixth consecutive months. In April, total exports were 24 per cent higher than a year earlier. The main stock price index has returned to its alltime high. Of course, North Korea’s behaviour, beyond its obvious security implications, has an impact on South Korea’s economy. But an easing of regional tensions – a process that could begin in meetings with U.S. President Donald Trump and Chinese President Xi Jinping and possibly progress to the resumption of talks with North Korea – would lead to recovery in consumer and business sentiment. That recovery, however, would be constrained by the deeply embedded structural problems that continue to beset South Korea’s economy. Far from fostering new and innovative enterprises, the country’s economic system remains dominated by giant politically connected, family-owned conglomerates, the chaebol. Stagnant productivity in the services sector has hampered overall productivity growth, while the skills mismatch has worsened, with the education system failing to prepare students for a rapidly evolving labour market. So far, government policies have done little to increase growth potential and jobs. Policymakers have also failed to boost the efficiency of the public and financial sectors, or to address mounting d e m o g ra p hi c p r ess u r es caused by low birth rates and rapid population aging. Moon hopes to change that with a threeprong strategy he calls “J-nomics.” The first prong is public-sector job creation. Specifically, in order to lower the youth unemployment rate, which currently stands at 11.2 per cent, Moon pledges to create 810,000 jobs in the public sector – including 174,000 civilservice positions in national security and public safety and 340,000 in social services – over the next five years. He has also promised to convert 300,000 irregular public-sector workers into permanent employees. The second prong of J-nomics is an expansion of the social safety net for Koreans of all ages. Moon has pledged to provide monthly subsidies worth 100,000 won (US$88) to parents with a child up to five years of age. Unemployed young people (aged 18-34) would receive 300,000 won per month, as would anyone 65 or older who is in the bottom 70 per cent of the income distribution. Moon also plans to expand state-run day-care centres and extend parental leave, thereby easing the burden of childcare on families. The third prong of J-nomics is chaebol reform, aimed at limiting the conglomerates’ dominance. To this end, Moon has vowed to separate politics from business, including by ending the longstanding practice of granting government pardons to convicted chaebol bosses – a move that most immediately affects Samsung Group Vice Chairman Lee Jae-yong, who is currently jailed and standing trial for bribery and embezzlement.
“
Lee Jong-Wha Professor of Economics and Director of the Asiatic Research Institute at Korea University
Moon also promises stricter regulations to prevent chaebols from entering financial businesses and recklessly expanding into sectors better suited to smaller firms. And, in order to give minor shareholders more influence, he plans to introduce a cumulative voting system for electing companies’ boards of directors. But, after nine years of conservative rule, Moon will not be able simply to swoop in and implement his agenda. In fact, with his Democratic Party holding only 40 per cent of the 299 seats in the National Assembly, he will have to win support from centrist parties and even the conservative opposition. Moreover, he will need broader public backing. To succeed, Moon will have to re-examine carefully the effectiveness and feasibility of his campaign promises, identify the most promising measures, and avoid the most obvious pitfalls. When it comes to public-sector job creation, for example, the main problem to consider is the long-term financial burden that such large-scale hiring could create. A better approach might be for the government to create fewer jobs in the public sector and work harder to encourage private companies to hire more young people, such as by providing financial incentives. Moon’s government can also contribute to privatesector job creation by easing regulations, helping smalland medium-size businesses to thrive, and ensuring a flexible labour market, in which full-time employment is not excessively protected and performance-based wage increases are applied. Yet youth unemployment is far from South Korea’s biggest employment-related challenge. After all, in just six years, the number of young people (aged 20-29) in South Korea is expected to decline sharply, by as much as 390,000. The bigger challenge is the labour shortage that will emerge when the “baby boomers” retire in a few years. To overcome it, South Korea will need a comprehensive plan for the continued development of its human resources, including expanded vocational education and training for young job seekers. It will also need a strategy for raising the birth rate, including by promoting more flexible working environments, affordable and quality childcare, and paid parental leave. As for the expansion of the social safety net, J-nomics is not very clear on how to finance it. The government plans to raise the top rate of personal income tax; reduce most deductions, especially for large enterprises; and perhaps even increase the corporate-tax rate. But such tax reforms are likely to face strong resistance: about half of all South Korean households and businesses paid no income or corporate tax in 2014. Finally, there are real doubts about how far Moon can go on chaebol reform. Previous administrations have failed to reform chaebol ownership structures or curb their market power. With his party holding far less than a majority in the National Assembly, Moon may have a hard time breaking the mould. After the political scandal that led to the impeachment of Moon’s predecessor, there is growing public momentum for reform in South Korea. One hopes that Moon makes the most of it. Project Syndicate
South Korea will need a comprehensive plan for the continued development of its human resources
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16 Business Daily Monday, May 22 2017
Closing Demonstration
Thousands march against corruption in Madrid
The alleged illegal financing of Rajoy’s party is already under investigation in the trial Thousands of Spanish people marched through surrounding the on-going “Gurtel” cash for favours scandal. the centre of the Spanish capital of Madrid Meanwhile the arrest of former president of to protest against the People’s Party (PP) the Madrid autonomous community Ignacio government of Prime Minister, Mariano Rajoy. Gonzalez in April as part of another scandal The march organized by the left wing party named “Operation Lezo” revealed further Unidos Podemos, who on Friday presented corruption in the Madrid branch of the PP. a no-confidence vote against Rajoy in the Podemos party Secretary Pablo Echenique Spanish Congress, and other left wing claimed that not only supporters of Unidos organizations, under the hashtag “#We have Podemos were present in Madrid, but also to kick them out”, following the revelations of “supporters of other parties”. Xinhua further corruption scandals involving the PP.
Trade deal
Pacific Rim nations fight to save TPP pact Trump’s newly-appointed trade chief Robert Lighthizer poured cold water on the prospect of a U.S. return Jenny Vaughan
A
sia-Pacific trade ministers agreed yesterday to try to revive a massive free trade pact, even though the U.S. reaffirmed its decision to pull out, as fears grow of a new global era of protectionism. The 12-nation Trans-Pacific Partnership covered 40 per cent of the global economy before Trump abruptly abandoned it in January to meet a campaign pledge to save American jobs which he says have been sucked up overseas. Japan, Australia and New Zealand are leading efforts by the so-called TPP 11 to resuscitate the agreement, convinced it will lock in future free trade and strengthen labour rights and environmental protections. After an early-morning huddle in the Vietnamese capital Hanoi, New Zealand Trade Minister Todd McClay told reporters the TPP 11 “are committed to finding a way forward to deliver” the pact. Trade representatives agreed to help the United States to rejoin the deal at any time, pinning hopes on
a U-turn in American policy. The TPP was in part crafted as a counterweight to the burgeoning economic might of China. But Trump’s newly-appointed trade chief Robert Lighthizer poured cold water on the prospect of a U.S. return, saying Washington “pulled out of the TPP and it’s not going to change that decision”. “The TPP 11 can make their own decisions, the United States makes its decisions, that’s what sovereign nations do,” Lighthizer told reporters, adding his nation will “stay engaged” in the area, albeit on a bilateral basis. Spearheaded by then-U.S. president Barack Obama, the far-reaching TPP -- which notably excludes China -would have rewritten the rules of 21st century trade. After seven years of negotiations the finalised proposal was signed in February last year, but cannot go into force until it is ratified by six countries with a combined 85 per cent of the bloc’s total GDP. The deal goes further than most existing free trade pacts, with labour laws, environmental protections and
Migrants
intellectual property rights touted as a new gold standard for global trade. It promised to transform smaller economies such as Vietnam by offering unprecedented access to the world’s top economies.
Balance of power
The deal was also seen as a way to counter Beijing’s regional economic dominance. Reviving the TPP, even without the heft of the world’s biggest economy, would still provide ballast against China, analyst Alex
Capri told AFP. “The Chinese would not be particularly pleased to see the TPP go ahead even without the United States,” said Capri, a senior fellow and professor at the National University of Singapore. He did not rule out the eventual return of the United States to the TPP, noting that Trump has “flip-flopped” on other campaign positions in a headline-grabbing first few months in office. The TPP ministers met on the side-lines of a gathering of trade ministers from
the Asia-Pacific Economic Cooperation (APEC) forum in preparation for their November summit. Lighthizer was also scheduled to meet one-on-one with several ministers, including those from China, Canada and Mexico. The Reagan-era trade veteran has been tasked with renegotiation of the North American Free Trade Agreement (NAFTA) -- another deal Trumped promised to pull out of, though he later backpedalled after speaking to the leaders of Canada and Mexico. The Trump administration has said it is seeking bilateral agreements rather than sweeping free trade pacts, and is pushing for fair trade with partners and not just free trade. AFP
The TPP ministers met on the side-lines of a gathering of trade ministers from the Asia-Pacific Economic Cooperation (APEC) forum in preparation for their November summit. Lusa
Crime
Inequality
Australia sets deadline for immigrants Chinese victims of visa to seek refugee status fraud scheme file lawsuit
Iran’s Rouhani to seek unity after election underscores divides
Australia has set a deadline of Oct. 1 for about 7,500 people who arrived in the country by boat to apply for refugee status or face deportation. The asylum seekers, many of whom arrived without identity documents, must prove they are refugees and are owed protection by Australia, Immigration Minister Peter Dutton said in an emailed statement. About 50,000 asylum seekers arrived in five years under the previous Labor administration, according to the statement. While the government will continue to provide medical cover, allow employment and school services, it would not provide income support until the application processes were finalized, Dutton said. Income support for asylum seekers cost Australia A$250 million (US$186 million) last year, he said. “The expectation is, if people can’t make their claim for protection then they need to depart our country as quickly as possible,” Dutton told reporters in Brisbane, according to a transcript. Prime Minister Malcolm Turnbull last month announced tougher Australian citizenship rules and a tightening of temporary skilled migration visas in a further crackdown on immigration.
President Hassan Rouhani promised to reach across Iran’s ideological and social divides after his successful campaign for re-election was dominated by arguments over deepening inequality. The 68-year-old moderate cleric won a resounding victory in Friday’s presidential poll, as voters endorsed his efforts to steer the nation out of isolation through its landmark nuclear deal with world powers. Yet in the weeks leading up to the ballot debate had grown increasingly bitter as his conservative rivals castigated Rouhani for presiding over what they called an elitist administration that had failed to deliver real gains for ordinary Iranians. “I need the help of every single person in Iran, even those who opposed me and my policies,” Rouhani said. The result strengthens Rouhani’s domestic mandate to integrate Iran with the global economy. But the extent of his success will depend on the cooperation of the Iran’s conservative establishment, led by Supreme Leader Ayatollah Ali Khamenei. He was widely seen as supporting Rouhani’s chief rival, fellow cleric Ebrahim Raisi, during the campaign. It will also depend on actions taken by U.S. President Donald Trump, who arrived on Saturday in Saudi Arabia for talks expected to focus on ways to contain the Islamic Republic’s regional influence. Bloomberg News
Bloomberg News
Four Chinese victims of a US$50-million visa fraud scheme filed a lawsuit to Los Angeles Court. The scheme involved as many as 100 Chinese citizens, which led to a federal investigation followed by lawsuit by the alleged victims. Federal authorities raided a business called California Investment Immigration Fund located in San Gabriel Valley, Los Angeles, on April 6. The business sought over US$50 million in total from 100 Chinese investors and claimed to help them obtain permanent U.S. residency through an EB-5 program, through which each foreigner invests at least half a million dollars in a U.S. business that creates American jobs. Four of the victims claimed that they signed the contract in 2011. However, those projects were not even built and they never got their green cards as promised. “Most of the investors heard about these EB5 projects through agencies in China. But most of them did not really know about details of the projects, aside from pretty-looking presentations,” attorney Jing Wang said. “As far as I know from my clients, they did not even know who was their project attorney nor what legal files they have signed.” Xinhua