Macau Business Daily, July 30, 2013 by Business Daily

Deputy editor-in-chief Editor-in-chief Tiago Azevedo Tuesday July 30, 2013 Number 337 Year II

Wynn says Cotai project US$4 bln ‘all in’ Wynn Resorts Ltd has negotiated a maximum price of US$4 billion (32 billion patacas) on its Wynn Cotai project, chairman Steve Wynn told analysts yesterday Macau time. “The guaranteed maximum price is…US$4 billion – maybe a little less, but no more than US$4 billion. And we have an early completion date of January [20]16, so we make Chinese New Year in 2016,” said Mr Wynn on a conference call.

Vitor Quintã

MOP 6.00

April 19, 2013

Page 5

Online shopping parcel service ups competition A

new parcel forwarding service could save Macau people money on shipping goods they buy on the Taobao or Tmall websites. Instead of having to negotiate who would deliver the goods, when and how much it would cost, customers can choose one of the Alibaba Group’s two logistics partners here. With Alibaba planning to create a delivery network that can reach any place in China within 24 hours, this may be bad news for forwarding agents. Local middlemen currently charge less than the new service. But they fear the competition will prevent them from raising their fees, which have remained unchanged since 2008.

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More on page 3

Five-star hotel room prices are close to record

Macau junket op buys China pawnbroker

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Laos direct flights will start next week Page 6

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I SSN 2226-8294

Hang Seng Index 21910

21878

21846

21814

21782

21750

July 29

HSI - Movers Name

Broken Tooth spots gap in junket system

Undisclosed local investor had finger on La Scala

Convicted gangster Wan Kuok Koi – also known as ‘Broken Tooth Koi’ – could be allowed to re-establish his career in the city’s gaming industry. In an interview a week ago, Mr Wan said he was planning to become a shareholder in a “new junket room” here. Industry people told Business Daily this is possible, because the government has allowed unregulated entities to operate in the VIP gaming business. No comment was available from the government by press time. Page 2

The defence in the La Scala trial claimed a “renowned” Macau businessman, who was not named, held an indirect stake in the high-end project’s developer. The city’s corruption watchdog believes Hong Kong developer Joseph Lau Luen Hung was behind the tender process and that fellow defendant Steven Lo Kit Sing pocketed HK$1.82 billion (US$234.6 million) for helping out. Mr Lo’s lawyer rejected the claim, accusing the Commission Against Corruption of singling out his client. Page 4

%Day

BELLE INTERNATIO

2.15

CHINA SHENHUA-H

1.32

CHINA COAL ENE-H

0.94

CHINA RES ENTERP

0.84

TENCENT HOLDINGS

0.63

BANK OF COMMUN-H

-1.75

NEW WORLD DEV

-1.87

CHINA PETROLEU-H

-1.88

CHINA RES LAND

-2.87

KUNLUN ENERGY CO

-6.15

Source: Bloomberg

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July 30, 2013

Macau

Broken Tooth spots gap in junket system Convicted gangster could get back in casino trade on creeping acceptance of legally fictitious ‘VIP rooms’, says a lawyer Michael Grimes

michael.grimes@macaubusinessdaily.com

loophole in the way Macau’s VIP gambling segment is overseen could allow convicted gangster Wan Kuok Koi – also known as ‘Broken Tooth Koi’ – to re-establish his career in the city’s gaming industry, says a person with knowledge of the situation. Under Macau law, there is a legal relationship between the government and entities known as ‘gaming promoters’. Approved gaming promoters are allowed to oversee the introduction of VIP players to the city’s casinos, and arrange credit facilities for their gambling independent of the casino management. But the promoters are themselves subject to oversight and conditions, including compulsory probity checks by government for any shareholder with five percent or more, and a ban on anonymous shareholdings. But two lawyers working extensively with Macau gaming law say over time the government has allowed several legally fictitious entities – typically referred to as ‘VIP rooms’, ‘VIP operators’, ‘VIP promoters’, or ‘junkets’ – to enter the market for VIP gaming services. Those entities they say, have been used in effect to circumvent the scope of the law, because they are not covered by any of the regulations. “Over the years, the Macau government has allowed countless ‘VIP rooms’ to operate inside the casinos,” says the first lawyer. Macau’s casino regulator, the Gaming Inspection and

Wan Kuok Koi on release from prison

Coordination Bureau – also known as DICJ –, said in March the city had 235 licensed ‘junket operators’. “The initial rationale was that it [the looser wording] was necessary to cover cases of entities sharing gaming revenue, as service providers, or through other kinds of joint ventures with casino concessionaires/

Legal background to ‘gaming promoters’ U

nder Administrative Regulation 6/2002 all the shareholders and directors of any company that applies for a licence as a ‘gaming promoter’ must be identified, and they can only hold ‘nominative’ shares. “These companies must have th e s ole cor porate purp ose of [casino] gaming promotion,” says the first lawyer. Nominative shares always have the name of the owner on them, preventing anonymous investment. By contrast so-called ‘bearer shares’ do not need to have the name of the owner on them, nor does the issuer track transfers of ownership. The company issuing the latter simply disperses dividends to bearer shares when a physical coupon is presented. The source added: “Several precepts of AR 6/2002 clearly state that in order for someone or some entity to be licensed as a gaming promoter, he, she or it needs to be ‘suitable’.” The word used in the Portuguese version of the regulation say both lawyers, is ‘idóneo’, which translates into English as ‘a person of integrity’.

The first source added: “Is it possible for a person convicted of serious crimes that has fully paid for it with time in prison, to be deemed ‘suitable’ to work with a junket? I think everyone would say ‘no’. This is not like a carpenter or a plumber that wants to resume his former trade or skill. “This is an activity that – by its relevance to Macau’s economy and the Macau government’s revenue and by the potential it has to damage the reputation of the overall local gaming industry – is restricted to persons about whom there must be no issue regarding their integrity.” M.G.

Is it possible for a person convicted of serious crimes to be deemed suitable to work with a junket? I think everyone would say no

sub-concessionaires. But it quickly evolved as a means to overcome the legal provisions with the government’s implicit or explicit blessing,” added the first person.

Credit rules The second lawyer told us that gaming credit is regulated under Law No. 5/2004, gazetted in July 2004. The second person said: “The law specifically forbids, in Article 5, the provision of credit through third parties i.e., anyone other than the authorised casino operator or the authorised gaming promoter.” The first lawyer stated: “Entities other than gaming promoters in fact exercise the activity of gaming promotion but, since they legally are not ‘gaming promoters’ they are not subject to the legal restrictions.” In an interview with Chineselanguage Next magazine published just over a week ago in Hong Kong, Wan Kuok Koi said he was planning to become a shareholder in a “new junket room” in Macau. “Is it likely that someone like Wan Kuok Koi creates a ‘VIP room’ or ‘junket room’ instead of a ‘gaming promoter’? Absolutely. Is there any legal requirement for the identification of its shareholders in the former cases? Of course not,” says the first source. “The whole rationale of the legislation was subverted by numerous junkets with the Macau government’s consent,” claims the person. Business Daily asked the gaming regulator for comment on the claims of a loophole that could allow Mr Wan to run a VIP operation in Macau. No response was available at the time we went to press. In May 1998 Mr Wan was arrested and later tried and sentenced to 15 years in prison for being a triad gang member and leader, money

laundering and loan sharking in relation to his activities inside casinos. He was released in December last year. Mr Wan was quoted saying in the magazine interview: “[I] will definitely be involved in the gaming industry. The point is how to do it. Next month there will be the opening of a new junket room. There will be no ceremony, keeping it low profile. The investors [of the junket room] come from everywhere… I will not manage it by myself [but] just let people know I have shares in it.”

Busted flush Initial reaction locally in the gaming industry was that Mr Wan might have overreached himself and that it would be impossible for a person of his proven background to be involved again in VIP gaming here. Security sources in the city told Business Daily prior to his release that mainland officials had visited the convicted gangster in prison. They were said to have warned him that any reprise of his previous methods in the 1980s and 1990s would result in Mr Wan being permanently removed from Macau to the mainland. After the Next magazine article, Business Daily asked Macau’s gaming regulator if it were theoretically possible for Mr Wan to return to the gaming industry. It told us in an e-mailed statement: “Shareholders holding shares equal to five percent or greater than five percent in a junket company will have to go through the same suitability check by the DICJ similar to a regular individual junket.” But the first expert countered: “The legislation does not speak of ‘junkets’. We can speak informally of them, the media may refer to them, but a government regulatory body should use the legal terminology enshrined in the law.”

July April30, 19,2013 2013

Macau

Taobao offers its buyers cheaper shipping option Taobao’s new logistics service covering Macau may put pressure on other forwarding agents Stephanie Lai

sw.lai@macaubusinessdaily.com

Taobao – making life easier for consumers

new parcel forwarding service could save Macau people money on shipping goods they buy on the Taobao or Tmall websites. Alibaba Group launched the service in Macau, Hong Kong and Taiwan on Thursday. Buyers and sellers using the

Taobao consumer-to-consumer or Tmall business-to-consumer websites used to have to thrash out who would deliver the goods, when they would be delivered and how much it would cost to deliver them. Now Macau buyers need only check the product description section to see

the Alibaba Group’s logistics partners here and how much they charge. The Taobao and Tmall logistics partners in Macau are SF Express and HOYOYO PRouter. The service alerts buyers by text message, if they wish, about the progress of their shipments. It also allows buyers to bundle several purchases in one package to save shipping costs. Alibaba reckons that the service will cost buyers in Greater China half what conventional shipping methods cost, on average. As Alibaba becomes a vital retail engine for mainland China, founder Jack Ma understands he can’t keep growing without adequate distribution of the goods sold on his sites. So his next big initiative is the creation of a delivery network that can reach virtually any place in China within 24 hours, Bloomberg News reported last week. To make that happen, Alibaba joined with five delivery companies and other partners to found Cainiao Internet Technology Ltd. Alibaba has said Cainiao will invest as much as 100 billion yuan within eight years to develop and manage a logistics network.

The service may be bad news for forwarding agents that specialise in online purchases. These forwarders act on behalf of Alipay, the world’s largest online payment company, which handles payments for Taobao and Tmall. The owner of the Kam Ieong forwarding agency, Bautista Tan Chong Yan, told Business Daily the new service would keep a lid on his agency’s charges. Kam Ieong usually charges Macau customers 18 patacas (US$2.30) per kilogram for purchases made on Taobao. “If the client is to pick up his purchase in Zhuhai, we will normally charge them 10 yuan [13 patacas] as that is pretty much the freight expenses for a product delivered to Zhuhai from other mainland cities,” said Mr Tan. Kam Ieong has a branch in Zhuhai. Most items for sale on Taobao and Tmall that Business Daily checked are listed with a parcel forwarding charge of “up from 20 yuan per kilogram”. The tariff of SF Express, one of Alibaba’s logistics partners here, shows that it charges 30 yuan per kilogram. “It looks like we still have a price advantage over Taobao’s shippers,” Mr Tan said. “But the new logistics service that Alibaba offers will influence us a bit, too,” he said. “Since 2008 we have been keeping the delivery charges at 18 patacas, and now we are under much more pressure to maintain that price level,” he said. “The main competitive edge of our service is that clients can pick up their Taobao purchase at our store anytime they want, instead of being tied down at home waiting for the parcel and having to pay at least 30 patacas in freight charges.”

2G users vanish as transition looms More people using the faster 3G networks and subscribing Internet services Vítor Quintã

vitorquinta@macaubusinessdaily.com

he number of people using the slower second-generation mobile phone network has dropped by almost half in just one year, even after the government extended the network’s life until 2015. By the end of June there were 5,085 2G users, down from 10,092 a year earlier, according to data published on the website of the Telecommunications Regulation Bureau yesterday. Most of them – 4,919 – had a postpaid contract with one of the city’s three mobile telecommunications operators while just 166 had a prepaid SIM card. The drop in the number of subscribers is not surprising given that the operators stopped selling new 2G mobile phones or service plans in the second half of 2010, Brendan Sio Weng Weng, head of the Telecommunications Regulation Bureau’s competition promotion department said in December 2011. The goal was to prepare the market for a full transition to the faster 3G networks in June 2012, in order to make room for the new 4G networks. While 2G only covers phone calls

There were less than 5,100 2G mobile phone users left by the end of June

and SMS text messages, 3G allows for mobile Internet access, video calls and even mobile TV. At the time of the announcement, in December 2011, there were still more than 152,200 2G subscribers

and users in Macau. But after public outcry and a damning report from the city’s ombudsman the government dropped the idea and extended the life of the 2G networks until June 2015.

With the bureau pledging to instruct the network operators to promote the free-of-charge switch away from 2G services, the number of people using the 3G networks has boomed. By the end of June there were a whooping 1.5 million 3G subscribers and users, which means there were more than two SIM cards for each person living in Macau. However most of those – over 954,200 – were pre-paid users. This figure is boosted by visitors buying pre-paid SIM cards. Last month the regulator awarded a second fixed-line telecommunications licence to Companhia de Telecomunicações de MTEL, Ltda. The business prospects look gloomy, though, considering that the number of fixed-line users fell below 160,000 for the first time since 2008. The outlook seems much more interesting for the Internet access services, which set new records last month. The number of subscribers was close to 148,900 in June. MTEL applied for an Internet licence to compete with incumbent Companhia de Telecomunicações de Macau SARL (CTM) last month.

July 30, 2013

Macau

‘Renowned’ Macau investor linked to land for La Scala The defence says the businessman controlled a company with a stake in the land at the centre of the corruption trial Tony Lai

tony.lai@macaubusinessdaily.com

Steven Lo a minority shareholder in Moon Ocean, says lawyer (Photo: Jornal Tribuna de Macau)

he legal defence in the La Scala trial has alleged that a “renowned” Macau businessman once held an indirect stake in the company that owned the land for the high-end project. Documents presented to the Court of First Instance yesterday show Best Express, a British Virgin Islands company, had two shareholders in 2007. Best Express was one of two big shareholders in Moon Ocean Ltd, which in 2005 won the bidding for five plots of land near Macau airport where La Scala was to be built. Tycoon Joseph Lau Luen Hung and fellow-businessman Steven Lo Kit Sing, both from Hong Kong,

have been charged with bribing Ao Man Long, then a Macau government secretary, with HK$20 million (US$2.5 million) to ensure that Moon Ocean won the bidding. Mr Ao has already been convicted of corruption and money laundering and sentenced to more than 29 years in prison. Leong Weng Pun, counsel for Mr Lau, told the court that the controlling shareholder in Best Express was “a renowned local businessman”. Mr Leong did not identify the businessman. He said Mr Lo was the minority shareholder. Commission Against Corruption chief investigator Lei Tong Leong

told the court last week that Mr Lau’s Hong Kong-listed developer, Chinese Estates Holdings Ltd, had adopted a convoluted way to get the land in order to let Mr Lo pocket HK$1.82 billion. Yesterday Mr Leong challenged Mr Lei’s testimony, saying the majority shareholder in Best Express was a “very famous” businessman in Macau, and asking rhetorically how Mr Lo could have control over the majority shareholder. Directing his remarks at Mr Lei, Mr Leong said: “Then, how can it be said somebody pocketed HK$1.8 billion? It is you who has not done enough investigation.” The Commission Against

Corruption has said Mr Lo fully controlled Moon Ocean through several British Virgin Islands companies and trusts. Chinese Estates did not bid for the land for La Scala, but it gradually bought up all the shares in Moon Ocean. A subsidiary of Chinese Estates bought a 70-percent stake in Moon Ocean for HK$1.6 billion in December 2005. Six years later Chinese Estates paid a further HK$1.6 billion for a non-voting stake of 30 percent from Best Express, turning Moon Ocean into a wholly owned subsidiary. Moon Ocean paid just HK$1.3 billion for the land for La Scala. Mr Lei suggested last week that Mr Lau was behind these purchases. Mr Leong argued that the purchase of Moon Ocean by Chinese Estates “strictly” followed all relevant regulations and had the approval of the company’s lawyers. He also questioned the watchdog’s interpretation of socalled “friendship notebooks”. In previous trials it Mr Ao was said to record his working agenda and bribes he took in these notebooks. “The term ‘airport land’ has been mentioned several times in the notebooks with the names of other businessmen,” said Mr Leong. He accused the graft buster of singling out his client. “We did not only used the notebooks as basis to put charges against [Mr Lo and Mr Lau],” Mr Lei replied. “It only serves as the starting point for us to investigate.” “At the beginning we thought this was related to Ho Meng Fai (…) but at last we found this was linked to Lau Luen Hung,” he said. Mr Ho, a prominent Macau contractor, was a business partner of the now-jailed secretary and has been sentenced in other cases related to Mr Ao. He fled Macau. The hearing was adjourned and Mr Lei will testify for the fifth time in September 9 after the summer break. But two “simple” sessions will be held tomorrow and on August 29 to prevent the trial from being suspended for over 30 days – something banned by law –, said presiding judge Mário Silvestre.

Defendant absent from watchdog report T

he name of one of the defendants accused of corruption over wastewater treatment plants did not appear in the final report of the corruption watchdog, the Court of First Instance heard yesterday. Alexandre Morais Correia, lawyer for Chan Ying Lun, stressed the report prepared by the Commission Against Corruption (CCAC) on the case did not name his client as one of the those that should be charged by the Public Prosecutions Office. “So [does this mean] CCAC did not have enough evidence and suggested no charges be raised against Chan Ying Lun?” asked Mr Morais Correia. Mr Chang, manager at China Overseas Civil Engineering Ltd, is accused of bribing Ao Man Long,

Corruption tainted public contracts linked to the Cross-Border Industrial Park

then government secretary, to obtain contracts for the treatment plants in Coloane and in the Zhuhai-Macau Cross-Border Industrial Park. Lei Tong Leong, investigation division chief at the watchdog, testified he had “a blurred memory” of the issue, even though he signed the report. He said one of his colleagues, also a witness in the trial, might know more about it.

Mr Lei show documents in court yesterday that, he claimed, proved that Mr Ao had full control over the bank accounts of two British Virgin Islands (BVI) firms that received the alleged bribes. The investigator admitted the defendants might not know who was behind the accounts as “it is difficult for people to fetch information about BVI” companies. “But it is known in the previous

trials of [Mr] Ao it is not important for [the defendants] to know who is behind the bank accounts,” said Mr Lei. “They only received instructions” to deposit the bribes, he added. The graft official also mentioned that Mr Ao signed documents for one bank account with a special name, “Camilbon” – a combination of the first names of his wife, Camila Chan Meng Ieng, and his son. T.L.

July 30, 2013

Macau

Wynn says Cotai project US$4 bln ‘all in’ Should open in time for Chinese New Year 2016, adds chairman Michael Grimes

michael.grimes@macaubusinessdaily.com

ynn Resorts Ltd has negotiated a maximum price of US$4 billion (32 billion patacas) on its Wynn Cotai project. It should be finished in January 2016 “in time for Chinese New Year,” the firm’s chairman Steve Wynn told analysts yesterday. “The guaranteed maximum price is…US$4 billion – maybe a little less, but no more than US$4 billion. And we have an early completion date of January [20]16, so we make Chinese New Year in 2016,” said Mr Wynn on a conference call. “And if they [the contractors] miss the early date; which they don’t think they will, it’s April [for completion],” he added. A note from an analyst last week suggested the project might creep into 2017. “It’s not 2017,” stressed Mr Wynn yesterday. “A lot of people quote various numbers for construction costs for projects on Cotai. Our US$4 billion is all in,” added Matt Maddox, Wynn Resorts’ chief financial officer. In the second quarter of 2013,

Wynn Macau – chairman happy with performance

net revenues for Wynn Macau Ltd were US$930.9 million, a 2.6 percent increase from the US$907.6 million generated in the second

quarter of 2012, said Wynn Macau in a statement. Adjusted property earnings before interest, taxation, depreciation and amortisation in

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the second quarter of 2013 were US$290.1 million, down 4.0 percent from US$302.2 million in the second quarter of 2012. But Mr Wynn said there was a “one time only credit adjustment” in Wynn Macau’s favour last year of US$21 million that upped the Q2 2012 numbers. Globally Wynn Resorts’ total revenue for the quarter increased 6.3 percent to US$1.33 billion, compared with US$1.25 billion a year earlier. Analysts had on average estimated US$1.34 billion. “With the earnings I’m happy with it for the year [to date]. I tend to look at things on a broader brush stroke than perhaps some of you will in your questions,” Mr Wynn told analysts, referring to Wynn Resorts global results for Q2. “Between Las Vegas and Macau we’re about US$100 million ahead of where we were this time last year; and that’s pretty good when we were pushing US$1.6 billion last year,” he added. Market wide, Macau’s overall casino revenue rose 15.8 percent in the second quarter to US$10.8 billion, with the strength coming from both the mass market and the VIP segments. Wynn Macau closed down 1.65 percent in Hong Kong at HK$20.85 ahead of the results announcement in the evening yesterday Macau time, early Monday morning U.S. West Coast time. Excluding items, group wide profit totalled US$1.51 a share, Las Vegas-based Wynn Resorts said in a statement. Analysts had projected US$1.57 a share, the average of 23 estimates compiled by Bloomberg. With Bloomberg News

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July 30, 2013 April 19, 2013

Macau

Five-star room rates tipped to hit ceiling High-end hotel rooms cost more, but guests still stay in them Vítor Quintã

vitorquinta@macaubusinessdaily.com

The price of five-star hotels is already quite similar to other places in the region, like in Hong Kong Amy So Siu Ian, University of Macau

The average cost of a night in a five-star hotel was 1,687 patacas in the first half

oom rates have been rising fastest in hotels with fewer stars so far this year, as the cost of staying in high-end hotels inches closer to its ceiling, an academic says. In the first half of this year the average rate for a five-star hotel room was 1,687 patacas (US$211), 0.2 percent more than a year earlier. In contrast, the cost of a night in a four-star hotel rose by 4.4 percent and the cost of a night in a three-star hotel rose by 5.5 percent, according to data released yesterday by the Macau Hotel Association. Last month the average room rate in a five-star hotel was 3.8 percent higher than year earlier, while the average room rate in hotels with fewer stars was over 12 percent higher. The coordinator of the gaming and hospitality management

programme at the University of Macau, Amy So Siu Ian, believes high-end hotels are unlikely to raise their rates much higher. “The price of five-star hotels is already quite similar to other places in the region, like in Hong Kong,” Ms So told Business Daily. In the first quarter the average room rate in a Hong Kong hotel was HK$1,472 and the average room rate in a Macau hotel was 1,476 patacas, consultancy HVS Global Hospitality Services says in its latest Greater China hotel review. Ms So said five-star hotels might find it difficult to increase their rates further. “You can’t increase room prices all the time without a reason,” she said. At the end of May Macau had 99 hotels and guesthouses, official data show. Five-star hotels contained

two-thirds of all rooms. The Grand Waldo hotel has since closed. Although it costs more to stay in a five-star hotel, the first-half average occupancy rate of five-star hotels rose by 1.5 percentage points to 86.4 percent. Ms So said this showed that the market for high-end hotels was not yet saturated. In contrast, the first-half average occupancy rate of three-star hotels fell by 0.6 percentage point and the first-half average occupancy rate of four-star hotels fell by 1.2 percentage points. “Price is one of the factors” in the drop in occupancy rates, Ms So said. “Even though there are people that are willing to pay a higher price, others may choose to go to two-star hotels or guesthouses instead,” she said. But she said the cost of staying in a

hotel was not the main consideration when visitors decided whether or not to spend the night in Macau. It is cheaper to stay in Zhuhai, where the average hotel room rate is 322 yuan (419 patacas), according to HVS. “There are some mainland Chinese that definitely prefer to stay in Zhuhai,” said Ms So. She said they were usually package tourists. Mainlanders travelling independently preferred to stay the night in Macau because their visas allowed them to enter the city only once, she added. Ms So believes hotels with fewer stars have some leeway to increase their room rates, given the growth in the number of visitors. In the case of five-star hotels, “the market automatically adjusts to demand”, she said. The Macau Hotel Association gathers its data from its 41 members, comprising 21 hotels with five stars, 11 with four stars and nine with three stars.

Dore completes purchase of mainland pawnbroker M

acau junket room investor Dore Holdings Ltd says in a Hong Kong filing it has completed its purchase of a mainland China pawnshop business and will “expand into other financing related businesses”. “The company has acquired Yuenqian Investment as an indirect subsidiary and has gained control over Lido Pawnshop through the structural agreements,” added Dore. Diversification of investment by junket investors beyond the walls of casino VIP rooms is a trend that has accelerated recently. “Competition in the gaming section in Macau has been more

intense following the opening of more casinos and VIP gaming rooms,” said Dore in its 2012 results published in June. Macau junket firms were in the past typically founded and managed by entrepreneurs from Macau and Hong Kong. But given that most of the junket customers are now coming from the mainland, and the amount of revenue in the Macau gaming market has risen more than fivefold since 2005, it may make good political and business sense for the junkets to recycle the money into the mainland economy, creating jobs and goodwill there. Diversification also provides

alternative sources of capital for the junkets to help cover the market risk of high stakes baccarat players having big wins. As Business Daily reported recently, Suncity Group Ltd – which

in 2007 began as a gaming promoter at Wynn Macau Ltd – has developed into a conglomerate with interests including mainland real estate and iron ore mining in Indonesia. M.G.

July April30, 19,2013 2013

Macau

Direct flights to Laos launched next week Aviation regulator still waiting on SpiceJet’s reported interest in starting an India route Vítor Quintã

vitorquinta@macaubusinessdaily.com

aos’ national carrier will launch charter services to Macau on August 8, a Civil Aviation Authority spokesperson told Business Daily. The city’s aviation regulator confirmed in an e-mailed reply it has approved the application of Lao Airlines for operating five round-trip flights per week. Even though Lao Airlines is based in the capital Vientiane’s Wattay International Airport, the new route will link Macau to the western city of Savannakhet. Savannakhet, the country’s second biggest city, is home to the Savan Vegas Hotel and Casino, which was until last November run by Macaubased Sanum Investment Ltd. The complex was then seized by the Laos government as part of a legal dispute with a local partner, ST Group. Sanum Investment has filed for arbitration at the World Bank’s International Centre for Settlement of Investment Disputes. Macau and Laos signed a deal opening up their aviation market a month ago.

SpiceJet plans to launch flights to Macau during its summer schedule, sources said

Both sides agreed to set no capacity or destination restrictions on any airline interested in launching future passenger or cargo routes linking the two jurisdictions. In contrast, the Civil Aviation

Authority says it “did not receive any flight application from any airlines for operation between Macau and India”. On Sunday sources from SpiceJet Airlines Ltd, quoted by news agency Press Trust of India, said the budget

carrier plans to launch flights to Macau during its summer schedule. Airlines’ summer schedule in India typically begins from late March and lasts until October, the agency says. In November the Indian minister of civil aviation, Ajit Singh, said SpiceJet, India’s third-largest airline by market share, had been granted permission to fly between New Delhi and Macau. At the time both the Indian ministry and Macau’s Civil Aviation Authority said they were looking to amend a 14-year-old agreement that allows only two flights a week. “With the increase of Indian tourists to Macau, the present bilateral air services agreement provisions should be renewed so the future air transport market between the two places has room to develop,” the authority said in November. The regulator said it was waiting for a reply from their Indian counterparts “on their schedule for the negotiation date”. Despite no direct flights, almost 84,000 Indian visitors came to the territory in the first half of 2013, up by 2.3 percent year-on-year, official data show.

Corporate CESL credit card with a social twist CESL Asia Group yesterday launched a branded credit card in partnership with one of the city’s two noteissuing banks, Banco Nacional Ultramarino SA (BNU). The card makes financial benefits available, including a perpetual waiver of annual fees, a bonus points scheme and year-round offers from a range of companies and retailers. “We wanted to present to the market not only a product with very attractive credit facilities and other financial services provided by BNU, but also with the best offers and discounts,” António Trindade, CESL Asia’s chief executive, said in a statement. A portion of the income generated from the CESL Asia credit card sales will be donated by BNU to be invested in CESL Asia Social Development Programmes, aimed at improving the lives of Macau’s youth. Each year, CESL Asia devotes part of its corporate revenue, expertise and other resources to investments into education, culture, and charities.

MGM finalist for CSR award Condé Nast Traveler, a United States travel magazine, has named MGM Resorts International Inc a finalist for the 2013 World Savers Awards. The contest annually recognises travel and hospitality companies that demonstrate strong leadership and exceptional achievements in corporate social responsibility. MGM Resorts is the only company in the integrated resort industry to be named a finalist. “We count it a true honour to be named a finalist (…) and recognised among so many other companies,” said Jim Murren, chairman of MGM Resorts, in a statement. With a record of 174 applicants, the 2013 edition has proven to be the most competitive in the programme’s six-year history. Finalists were selected by an expert panel according to five areas: education, environmental and cultural preservation, health, poverty relief, and wildlife conservation. Condé Nast Traveler will announce the winners in its September issue.

July 30, 2013 April 19, 2013

Greater China China Molybdenum pays US$820 mln for Rio copper mine China Molybdenum Co Ltd, the nation’s second-biggest producer of the steelmaking material, agreed to pay US$820 million to Rio Tinto Group’s Northparkes mine to gain its first overseas copper asset. The sale should be completed by the end of the year, Rio said yesterday in a statement. Londonbased Rio owns 80 percent of the mine with the balance held by Sumitomo Metal Mining Co Ltd and Sumitomo Corp, which have the right to match the offer. Buying the stake gives China Molybdenum control of a mine in New South Wales that provided 43,100 metric tons of mined copper for Rio in 2012 as well as a specialist underground training centre. The purchase ranks as the third-largest by a Chinese company of a mining asset announced this year as the number and value of the nation’s deals in the sector slides from last year. “The acquisition is part of China Moly’s diversification to boost profit as molybdenum has been weak over the past few years in line with China’s sluggish steel market,” said Kevin Guo, a Shenzhen-based analyst with Guotai Junan Securities Co. “Production of copper enjoys a higher premium than other base metals such as zinc and lead.”

Govt-debt audit to begin as growth risks rise First step to know how big the problem is, analysts say

Poly Real Estate offers dollar debt Poly Real Estate Group Co Ltd is marketing the first sale of U.S. dollar-denominated bonds by a Chinese company in almost eight weeks as bond risk falls. Poly Real Estate, based in the southern city of Guangzhou, plans to sell five-year notes at about 340 basis points more than similarmaturity Treasuries, according to a person familiar with the matter, who asked not to be identified because the terms aren’t set. China Huaneng Group Corp was the last company from the world’s second-biggest economy to raise debt in the U.S. currency, pricing US$400 million of bonds on June 4, Bloomberg data show. Issuers from China haven’t sold dollar bonds since a clampdown on risky lending onshore and signals the U.S. Federal Reserve may taper record stimulus this year sent yields surging to 6.59 percent last month, according to JPMorgan Chase & Co indexes. Rates have since moderated to 6.21 percent, while the cost of insuring Asian corporate and sovereign bonds against nonpayment has fallen, credit-default swaps show. “Poly Real Estate was already in the pipeline so they can come now the market is more stable,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. “If sentiment stays as good, we’ll see more deals, but the primary market won’t be as robust as in earlier the year.”

Glaxo’s Reilly to return to assist in bribery probe GlaxoSmithKline Plc said former China head Mark Reilly will assist police in a bribery probe after returning to the country, where government radio reported authorities detained another 18 of the drugmaker’s employees. Mr Reilly, replaced as China head by Herve Gisserot, “will be returning to China shortly,” Glaxo’s Melbourne-based spokeswoman Lisa Maguire said in an e-mail yesterday, without giving a more specific timeframe. Glaxo’s former China chief left the country last month after four of his colleagues were detained as part of a government probe that has produced allegations of 3 billion yuan (US$489 million) in spurious travel and meeting expenses as well as trade in sexual favours. Government scrutiny has extended to other foreign drugmakers and local hospitals since China’s Ministry of Public Security detailed the Glaxo allegations on July 15. Police in the central city of Zhengzhou are holding 18 Glaxo employees and some medical personnel, China National Radio reported on July 26. The report didn’t give details about when or why the workers were detained.

Confidence in the Chinese economy abating

hina will start a nationwide audit of government debt this week as the new Communist Party leadership investigates the threats to growth and the financial system from a record credit boom. The State Council, under Premier Li Keqiang, ordered the review, the National Audit Office said in a statement on Sunday. The office suspended other projects for this “urgent” work requested on Friday and will send staff to provinces and cities this week, People’s Daily reported on its website, citing sources it didn’t identify. The first full audit in more than two years underscores the International Monetary Fund’s concern about risks to the economy from borrowing by local governments and an expansion of non- traditional sources of credit. The new leadership oversaw a showdown with state-owned lenders last month as the People’s Bank of China engineered a cash squeeze to pressure banks to better manage their operations. “Local-government debt has become a focus in recent years and is a source of concern about China’s growth,” said Ding Shuang, senior China economist at Citigroup Inc in Hong Kong, who previously worked for the IMF. “The new leadership is trying to give a clear answer.” Last week, China announced what Bank of America Corp called a “small stimulus,” expanded a crackdown on wasteful government spending and ordered cuts in manufacturing overcapacity, as new leaders grapple with a slowing economy and public concerns ranging from house prices to corruption. Efforts to sustain growth include small-company tax breaks and speeding up railway construction, while frugality measures include a five-year ban on building government offices.

Initial audit The first audit of local-government debt found liabilities of 10.7 trillion yuan (US$1.75 trillion) at the end of 2010, the National Audit Office said in June 2011. The audit’s urgency may be because “confidence in the Chinese economy from all sides has weakened recently,” Mr Ding said. Mr Ding estimated China has

at least 12 trillion yuan of localgovernment debt. The review may pave the way for future fiscal reforms, including changes to rules on local governments’ roles and responsibilities, he added. The Shanghai Composite Index ended down 1.7 percent at 1,976.3 points on the debt concern and a report on Saturday showing Chinese industrial companies’ profit growth slowed to 6.3 percent in June from a year earlier, compared with a gain of 15.5 percent in May.

Bond sales Separately, China’s government has decided to cap the ratio of the fiscal deficit to gross domestic product at 3 percent in a bid to avert a downgrade of China’s credit rating by international rating companies, China Business News reported yesterday, citing an unidentified person familiar with the matter. The government must be on “high alert” to the dangers of rising borrowing, Vice Finance Minister Zhu Guangyao warned on July 5, after central bank Governor Zhou Xiaochuan said in March that about 20 percent of local government debt is risky. Local-government financing vehicles (LGFVs) need to repay a record amount of debt this year, prompting Moody’s Investors Service to warn that Premier Li may set an example by allowing China’s first onshore bond default. Regional governments set up more than 10,000 LGFVs to fund the construction of roads, sewage plants and subways after they were barred from directly issuing bonds under a 1994 budget law. A 4 trillion yuan stimulus plan during the 2008-09 financial crisis swelled loans to companies, which they have been rolling over or refinancing with new note sales. LGFVs may hold more than 20 trillion yuan of debt, former Finance Minister Xiang Huaicheng said in April. Refinancing will be a challenge after corporate bond sales slumped to a two-year low in the second quarter and policy makers cracked down on shadow-banking activities that bypass regulatory limits on lending. An audit is the “first step to solve

the local-government debt problem – you have to know the details and then you’ll know how big the problem is,” Zhu Haibin, chief China economist at JPMorgan Chase & Co, said in a media briefing yesterday. While local government debt may have increased to 13 trillion yuan or 14 trillion yuan, the amount as a proportion of GDP hasn’t changed much, Mr Zhu said. Societe Generale SA estimates that the debt servicing cost of non-financial companies and local government investment vehicles was about 39 percent at the end of last year, based on an average interest rate of 6.3 percent and an average maturity of 4.4 years. Their debt burden was 145 percent to 150 percent of gross domestic product, economist Yao Wei estimated in May, citing “rough” calculations made more difficult by limits on lending data, especially for shadow banking. Charlene Chu, an analyst at Fitch Ratings in Beijing, has flagged the broader risks to the financial system from total lending by banks and other financial institutions in China that Fitch estimates grew to 198 percent of GDP last year from 125 percent four years earlier. Fitch cut the nation’s long-term local-currency debt rating in April, in the first downgrade by one of the top three rating companies in 14 years. Bloomberg News

KEY POINTS Nationwide audit of govt debt to begin this week First full review in more than two years Shows concern about borrowing by local govts 2010 audit found liabilities of 10.7 trillion yuan Review may pave the way for fiscal reforms – analyst

July April30, 19,2013 2013

Greater China

Chinese leaders seen playing safe on reforms Recent policy changes to have modest impact on growth Kevin Yao

or all the strong rhetoric, China’s latest policy actions suggest a shift in focus on the economy to mix relatively painfree reforms that burnish Beijing’s credentials for change with measures to prop up sagging growth. While Premier Li Keqiang provides a drip-feed of easy reforms, he will avoid more radical moves for fear of tipping the world’s secondbiggest economy over the edge. Analysts from top government think-tanks say there is no reason to doubt the government’s commitment to rebalancing China’s economy away from an investment- and credit-driven growth model to one that relies more on consumption and innovation. But the leaders are aware they are walking a fine line and the economy’s weaker-than-expected performance this year has underlined the need to tread carefully. Reform may well secure future growth, but if they push too hard now they could cause an economic shock that forces Beijing to resort to old-school pump-priming, prolonging the very economic model they are trying to dismantle. “The government has to safeguard its bottom line in growth, while

restructuring the economy. It’s very difficult to balance,” said He Qiang, an economist at the Central University of Finance and Economics in Beijing and an adviser to parliament. “Economic restructuring can not be achieved overnight and it should be a gradual reform, not a revolution.” Since President Xi Jinping and Mr Li were appointed in March to lead China they have pressed the reform message to wean the country off a diet of breakneck expansion and easy credit that fuelled double-digit growth for three decades and catapulted China to the top table of global economies.

Small steps Just last week Mr Xi was quoted by the official Xinhua news agency on the need “to deepen reforms in all aspects” although he also acknowledged the line between “being courageous and walking steadily”. In a nod to growth concerns, Beijing has unveiled a series of small steps in recent weeks that analysts say are geared to providing quick help to the economy. That means radical reforms, such as full interest rate liberalisation, are

off the table for now although they may be tackled in October, when the Communist Party holds a key meeting that will set its economic agenda for the next decade and which may also include some political reform. Un t i l t h e n a u t h o r i t i e s w i l l reach for low-hanging fruit: uncontroversial reforms that move in the right direction and could have some, even if only modest, impact on growth, but which are limited in scope and ambition. The central bank’s decision earlier this month to remove the floor on bank lending rates is an example. It was welcomed as a largely symbolic prelude to removing caps on deposit rates, a much more difficult task that will take time. The central bank says a deposit insurance scheme and other preparations are needed before a move on deposits and economists said besides concerns it would squeeze banks’ profits there is also concern about its near-term economic impact. “They dare not to liberalise deposit rates now as that could push up borrowing costs,” said Liang Youcai, an economist at State Information Centre, a government think-tank. The working assumption

China’s slowdown ‘won’t derail’ U.S. recovery: Biden Haslinda Amin and Sharon Chen

.S. Vice President Joe Biden said the country’s economic recovery is on track even as China’s growth has slowed. “It won’t derail it,” Mr Biden said in a Bloomberg Television interview in Singapore. “But obviously, slowing of growth in the secondbiggest economy of the world is just like if our economy slowed: it will affect the world.” China’s gross domestic product rose 7.5 percent in the second quarter from a year earlier, down from 7.7 percent in the previous period, extending the longest streak of sub-8 percent expansion in at least two decades. China is the biggest trading partner for the U.S. after Canada, with two-way trade last year reaching US$536.2 billion. Bilateral commerce favours China, with the deficit on the U.S. side at US$315 billion in 2012, more than any other country. The nation is also the biggest foreign owner of U.S. Treasuries, with its holdings rising to a record US$1.316 trillion in May, according to Treasury Department data. “I would agree with that 100 percent,” said Geoffrey Lewis, global market strategist at JPMorgan Asset Management in Hong Kong, referring to Biden’s comments. “We’re not talking a really, really hard landing in China, we’re just talking about growth of maybe 6.5 percent rather

than 7.5 percent – that absolutely will not derail U.S. economic recovery.” Mr Biden spoke about U.S.-China ties as he wrapped up a six-day trip of Singapore and India. He also met with Japanese Prime Minister Shinzo Abe in the city-state. “China’s slowdown is unlikely to have a meaningful impact on U.S. growth,” said Song Seng Wun, an economist at CIMB Group Holdings Bhd. in Singapore. “U.S. growth is determined more by domestic consumption. The U.S. has seen fairly steady growth.”

to develop rules to avoid conflict in the waters. “We’re doing everything to encourage that to be done, but it has to be done,” Mr Biden said. “It’s in everyone’s interest, including China’s, to have it happen that way, through negotiating a settlement.” China, however, rejects U.S.

Code of conduct Mr Biden also sought to ease tensions in the region on his visit, pushing China to negotiate quickly with Southeast Asian nations on a code of conduct for the South China Sea, an area he said is a “major, major, major highway of commerce”. The U.S. is seeking to compete with China economically, while also collaborating in areas such as the environment, Mr Biden said. “We see a China that’s made up of competition and cooperation,” he said. “There’s nothing inevitable about there being conflict with China.” Beijing agreed during an Association of Southeast Asian Nations-hosted forum in Brunei late last month to meet with the 10-member group in September

We see a China that’s made up of competition and cooperation Joe Biden, U.S. Vice President

is that lending rates would rise to pay for the higher cost of deposits. The 7.5 percent annual growth of the second quarter marked the ninth slowdown in the last 10 quarters and also shows the economy is cutting close to the bone of the government’s 2013 growth target. Economists familiar with policymakers’ thinking though say that splashing out on big infrastructure projects now in the way China did during the global financial crisis is out of question. “The direction of reform is clear. There are no differences on whether we need reforms, but the key question is how to implement them,” said Zhang Bin, an economist at the Chinese Academy of Social Sciences, a top government thinktank in Beijing. “What we see so far is a random pattern in reforms – or reforms that face limited resistance,” he said. Reuters

What we see so far is a random pattern in reforms – or reforms that face limited resistance Zhang Bin, Chinese Academy of Social Sciences

involvement in South China Sea matters. While it has said it wants a code of conduct in the waters, it also seeks to resolve territorial disputes on a bilateral basis. It views the other countries as aggressors, accusing them of breaching a previous agreement on operating in the area. Mr Biden didn’t offer specifics on how the U.S. would prod China for a quick resolution of a code of conduct. “It is in China’s interest to drag out as long as possible any legallybinding document” that could be seen to diminish its claims on the South China Sea, said Terence Lee, an assistant professor of political science at National University of Singapore. “It’s very unlikely the code of conduct will be agreed on this year.” Bloomberg News

10 10

July 30, 2013 April 19, 2013

Asia

Economy can handle sales tax increase: Kuroda Japan PM orders study of impact of sales tax alternatives The BOJ’s expanded quantitative easing, which it launched in April, is making great progress towards pulling Japan out 15 years of deflation, Mr Kuroda said. Inflation was likely to approach the central bank’s 2 percent target as Japan’s economic growth exceeds its potential, which would narrow a negative output gap, he said. Overseas economies posed the biggest risk to this outlook, with Europe’s debt crisis unresolved and China shifting its economy away from excessive fixed-asset investment, he said. “We consider a downturn in overseas economies to be the largest risk factor to the outlook for economic activity and prices.”

New options

Haruhiko Kuroda sees Japan weathering sales-tax rise

ank of Japan governor Haruhiko Kuroda said a planned increase in the sales tax rate would not hurt the economy and was needed to repair public finances, amid growing signs yesterday the prime minister could delay or even water down the policy. Mr Kuroda, appointed by Prime Minister Shinzo Abe earlier this year, said fiscal discipline was important because long-term yields could rise if investors thought the central bank’s purchases of government debt were aimed at financing spending. Mr Abe has ordered a study of

alternatives to a plan to double the sales tax to 10 percent, government sources said, raising concerns that a rise in bond yields could undermine efforts by the government and central bank to escape deflation. “I do not think that raising the sales tax as currently planned will do any great harm to the economy,” Mr Kuroda said in a speech in Tokyo. “The BOJ is purchasing debt for price stability. If people think this is financing government spending, long-term yields could raise, rendering monetary policy less effective.”

The sales tax is due to rise to 8 percent in April 2014 and then 10 percent in 2015, and Mr Abe has said he will decide in autumn whether to go ahead with the first increase. His finance minister last week supported the tax increase, saying it was needed to show Japan was serious about fixing its finances. “The BOJ wants sales tax increases as it views them as a stabilizer for long-term yields,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co in Tokyo. “Kuroda is mindful that his massive easing will be meaningless if the market loses faith in Japanese government bonds.” Three sales tax scenarios will likely be reviewed by the Council on Economic and Fiscal Policy, a panel of top government and private sector

Malaysia pension fund eyes properties in Europe Fund aims to lift overseas investments

alaysia’s state pension fund will invest half a billion euros (US$660 million) in industrial property in Germany and office space in France, according to sources familiar with the deals, signalling growing appetite for high-yielding property assets as Europe’s main economies show signs of recovery. The Employees Provident Fund (EPF), the world’s sixth-largest pension pool with about US$160 billion in assets, has been expanding its foreign portfolio as it seeks to maintain high dividends for Malaysian savers in the face of limited opportunities in the small Southeast Asian nation. The EPF will expand an existing partnership with Australia’s Goodman Group Pty Ltd to start a 250 million euro (US$330 million) fund to buy seven industrial properties in the German cities of Berlin, Munich and Frankfurt, the sources said. The pension fund will spend another 250 million euros to buy prime office space in Paris and

capitalise on high rental yields there, said one of the sources, who asked not to be identified because he was not authorised to speak to the media. New York City properties are also being actively targeted, the source said. “The EPF has been watching the European market for the past three years,” the source told Reuters. “They have bought up London properties and are familiar with the laws. So the natural choice is to get into Europe itself. At the same time, New York City is definitely on the radar with its trophy properties.” The deal will mark the EPF’s first foray into the euro zone. Demand for industrial real estate is surging among global investors because of the relatively high yields on offer versus the bond market or offices and shops. The rapid growth of online retail has also helped put the sector in the spotlight as retailers and distributors become increasingly reliant on small and large warehouses. An EPF official said: “It is our policy not to reveal our business strategy in public and not to comment

on speculative news.” The EPF-Goodman deal would be the latest in a string of tie-ups focused on industrial property in Europe including a venture between Prologis and Norway’s sovereign wealth fund, a venture between Segro and a Canadian pension fund, and Brookfield’s acquisition of Gazeley. U.S. private equity giant Blackstone

KEY POINTS Tax hikes necessary step for fiscal discipline Doubts growing whether PM will go through with hikes BOJ battling to end 15 years of deflation

officials, and possibly by a separate, newly established panel of experts as well, the sources said. Their discussions will include an examination of second-quarter GDP data, due for release on August 12. The three scenarios include: the plan under current law to raise the sales tax rate to 8 percent from 5 percent in April 2014 and further to 10 percent in October 2015; to raise the rate by 2 percent in the first step, and in increments of 1 percent thereafter; and, to raise it 1 percent annually. Any jump in concern about the sustainability of Japan’s public debt burden – the world’s largest – would add to pressure on a government debt market already facing the prospect of the end of sustained consumer-price declines. Reneging on fiscal reform could hit investor confidence, which has allowed Japan to borrow money cheaply even though its debt burden is the worst among major economies at more than twice the size of its US$5 trillion economy. Even with a tax rise, the central bank expects real gross domestic product to expand 1.3 percent in the fiscal year starting in April, according to the median estimate of the nine policy board members released earlier this month. Reuters

has also bet heavily on the sector and rapidly become one of Europe’s largest owners of industrial property. The EPF has invested at least 565 million pounds (US$858 million) in Britain, including a 20 percent stake in the US$12 billion redevelopment of London’s Battersea power station that was inaugurated by Malaysian Prime Minister Najib Razak this month. The fund aims to lift overseas investments to 23 percent of total assets from 18 percent now within two years. Currently, 5 percent of the EPF’s investments are channelled into real estate, including in Australia and Britain, with about 35 percent in equities and 55 percent in bonds.

The fund puts only 5 pct of its investments into real estate

Reuters

11 11

July April30, 19,2013 2013

Asia

Cambodian opposition rejects Hun Sen election win

Belle Grande investor ok’d for Korean junkets

Ruling party says it has won by 68 seats to the opposition’s 55

ambodian Prime Minister Hun Sen appeared set to extend his 28-year rule in one of Asia’s poorest countries with a much smaller majority, as opponents rejected the results and called for an investigation. The ruling Cambodian People’s Party, or CPP, won 68 seats in the 123-member parliament, compared with 55 seats for the opposition Cambodia National Rescue Party led by Sam Rainsy, government spokesman Phay Siphan said. The country’s closest election in two decades slashed the CPP’s majority to 13 seats from more than 60. “There are too many irregularities with far-reaching implications that has distorted and reversed the will of the people,” Sam Rainsy told reporters today in Phnom Penh at a briefing broadcast on his party’s website. He called for a broad investigation of the results to determine if a recount or another election is necessary. The tight outcome may heighten pressure on Hun Sen to allow greater political freedoms after the opposition gained traction by focusing on forced evictions, landgrabs and workers’ rights. Sam Rainsy ended a four-year exile earlier this month after receiving a royal pardon for charges he says were politically motivated, and was barred from standing in the election. Sam Rainsy called for the creation of a committee with representatives from political parties, civil society, the United Nations and “friendly countries” to investigate the outcome. The results

Hun Sen – Asia’s second-longest serving leader

The opposition and rights groups say the election was not free or fair

would determine what action the opposition takes next, he said. “We are asking this not in order to bargain a position in the government,” Sam Rainsy said. “What we are interested in is to render justice to the Cambodian people to ensure that the will of the Cambodian people will not be distorted.”

Gaining support Hun Sen’s government called for calm and pledged to take a “mild” response to protesters, Phay Siphan said. The government needs “to work hard,” he said, adding the numbers were based on party tallies and weren’t official results. The outcome “gives us an opportunity to reconcile and strengthen democracy in Cambodia.” Opposition supporters in one area of Phnom Penh overturned military police trucks and set them on fire after saying their names didn’t appear on voter lists. Others complained of being told they’d already cast a ballot when they arrived at a polling booth, according to Thun Saray, a board member of the Committee for Free and Fair Elections in Cambodia, a local poll monitor. “Even so, the trend of the country now is that the opposition party is

gaining a lot of support,” Thun Saray said. The group said the CPP won 67 seats, while the opposition took 56, with gains coming in all areas of the country. The CPP has run the country since Vietnam ousted the Khmer Rouge in 1979. Hun Sen, 60, has served as prime minister in various coalitions since 1985, making him Asia’s second-longest serving leader in one of the region’s youngest countries, where more than half the 15 million people are under the age of 24.

There are too many irregularities with farreaching implications that has distorted and reversed the will of the people Sam Rainsy, opposition leader

Myanmar-China gas pipeline starts operation G as has started flowing to energy-hungry China through a pipeline from Myanmar, Beijing’s official media reported, in a major project that highlights their economic links even as political ties come under pressure. The 793-kilometre (492-mile) pipeline runs from Kyaukpyu on resource-rich Myanmar’s west coast, close to the offshore Shwe gasfields, and across the country. It enters southwest China at Ruili, near areas where heavy clashes between the rebel Kachin Independence Army and the Myanmar military were reported earlier this year. As well as diversifying China’s sources of fuel, by supplying energy to the vast and less developed west

Leisure and Resorts World Corp – a minority investor in a Manila casino project backed by Macau gaming resort developer Melco Crown Entertainment Ltd – has been told by Philippines regulators it can work with overseas junkets. LRWC will do so initially at another casino it controls in Pasay City – a district of Metro Manila – well ahead of the opening for the US$1 billion Belle Grande Manila Bay scheme, due in mid-2014. In November LRWC bought a 51 percent stake in the Midas Hotel – which has a small Pagcorlicensed casino – from a company controlled by Filipino Chinese retail entrepreneur Lucio Co. According to a new filing, Midas will be allowed to work with LRWC’s wholly owned South Korean unit Prime Investment Korea Inc to bring in VIP players from that country. In a March filing to the Philippine Stock Exchange, LRWC confirmed its unit AB Leisure Global, Inc will fund 30 percent of Belle Grande’s development costs and get 30 percent of Belle’s share in either casino win (which is net of taxes and Pagcor’s cut) or EBITDA, less royalty payments.

it could help Beijing’s attempts to promote economic growth there. It went into operation on Sunday at a ceremony in Mandalay, the official Xinhua news agency reported yesterday. But the controversial project is the fruit of Beijing’s long allegiance with the military junta that ruled Myanmar for decades, a bond that is weakening as the reforming government opens up to the West. Construction began in June 2010, according to China National Petroleum Corp, the key investor. A parallel oil pipeline is also part of the project. According to Xinhua, the gas pipeline will be able to carry 12 billion cubic metres annually, while the crude oil pipeline has a capacity

of 22 million tonnes per year. Myanmar plans to renegotiate billions of dollars of natural resource deals as it imposes tougher environmental standards and clamps down on corruption, the U.S.-based Asia Society said in a report last month. AFP

Tokio Marine targets Asean for expansion Tokio Marine Holdings Inc, Japan’s secondlargest non-life insurer, is seeking to expand in Southeast Asia as Japan’s shrinking population erodes its domestic market. The insurer plans to expand in life insurance, automobile coverage, reinsurance and asset management, president Tsuyoshi Nagano (pictured) said. The Tokyo-based company will increase its presence both organically and through possible takeovers, he said, declining to elaborate. Japanese insurers are being lured by the region’s growth potential as they grapple with an ageing society and shrinking population at home. Tokio Marine is expecting premium income from casualty and life insurance businesses in Asia to increase 19 percent and 9.2 percent respectively this business year, according to its business plan released in May. “Asia definitely has potential for growth, given the region’s economic outlook,” Mr Nagano, who became the president in June, told Bloomberg in an interview. “Asean nations will be the place we will be focusing.” “It’s important for a Japanese insurer like us to lay eggs in different parts of the world given the potential for natural disaster risks at home,” he added.

Indonesian coffee exports seen slumping Coffee shipments from Indonesia, the third-largest producer of the robusta variety, will probably drop the most in six years as wetter-than-usual weather rots beans and cuts the harvest. Sales may plunge 19 percent to 6 million bags this year, according to the median of estimates from seven exporters compiled by Bloomberg. That’s the biggest drop since at least 2007, according to data from the Central Statistics Agency. Output may slide to 9.58 million bags from 11.04 million, the median of eight shipper estimates shows. Exports were forecast at 6.42 million bags and output at 9.92 million bags in a June survey. A bag weighs 60 kilograms (132 pounds). Reduced supplies from Indonesia, where the harvest began a month later than usual in May, comes at a time when farmers are slowing sales in Vietnam, the top grower of robusta beans. That could extend a rally in prices from a 32-month low in June. Deliveries from farms in Indonesia are down 28 percent from last season because of the wet weather, according to Amsterdam-based trader Nedcoffee BV.

April 19, 2013

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HONOUR COMMISSION MEMBERS

José Braz-Gomes

Paul Tse

Vong Kok Seng

Franklin Willemyns

Amber Li

Albano Martins

Frederico Rato

Filipe Cunha Santos

Paul Tse

Vong Kok Seng

Henry Brockman

Oscar Chan

James Chu Cheok Son

António Conceição Júnior

Alexandre Correia da Silva

Pedro Cortés

Lau Pak Hung Lionel Leong Vai Tac

Amber Li

Albano Martins

João Rodrigues Monteiro

João Francisco Pinto

Larry So Man Yum

Paul Tse

Vong Kok Seng

Franklin Willemyns

Henry Brockman Lionel Leong Vai Tac

ADVISORY BOARD

Paulo A. Azevedo

Lau Pak Hung Lionel Leong Vai Tac

JUDGING PANEL MEMBERS

Bruno Ascensão

Paulo A. Azevedo

José Braz-Gomes

José I. Duarte

António Félix Pontes

Lucius Lai

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13 13

July April30, 19,2013 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 61.30

40.1

21.8

39.9

21.7 61.25

39.7

21.6

39.5

Max 40.1

average 39.706

Max 40.75

Min 39.35

average 40.516

Last 39.9

Min 40.3

Last 40.7

39.3

21.5 Max 61.25

average 61.25

19.10

40.65

19.05

40.50

19.00

40.35

18.95

40.20

Max 19.08

average 19.018

Min 18.9

Last 19.02

PRICE

WTI CRUDE FUTURE Sep13

103.91

DAY %

YTD %

-0.754536772

(H) 52W

(L) 52W

10.87281263

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

106.65

-0.485210413

0.35757975

114.3699951

96.65000153

GASOLINE RBOB FUT Aug13

303.61

-0.272631717

9.141563017

316.3199902

264.1299963

GAS OIL FUT (ICE) Sep13

908.75

-0.356359649

0.11016249

980

832.5

3.47

-2.390998594

-3.342618384

4.525000095

3.354000092

300.33

-0.225906116

0.206866638

320.449996

273.759985

NATURAL GAS FUTR Aug13 NY Harb ULSD Fut Aug13 Gold Spot $/Oz

1325.7

-0.5596

-20.3525

1796.08

1180.57

Silver Spot $/Oz

19.816

-0.9324

-34.188

35.365

18.2208

Platinum Spot $/Oz

1427.3

-0.1937

-5.9595

1742.8

1294.18

Palladium Spot $/Oz

724.06

-0.2919

3.4874

786.5

566.88

LME ALUMINUM 3MO ($)

1794.5

-1.590348231

-13.43463579

2200.199951

1758

LME COPPER 3MO ($)

6862

-2.181040627

-13.47875426

8422

6602

LME ZINC

1855

-1.19840213

-10.81730769

2230

1779

13850

-2.258292167

-18.81594373

18920

13205

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep13

COUNTRY MAJOR

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

ASIA PACIFIC

CROSSES

15.905

0.125904942

3.245699448

16.47500038

14.60000038

473.5

-0.525210084

-21.05043768

665

473

WHEAT FUTURE(CBT) Sep13

650.5

0.038446751

-19.39281289

905.75

648

SOYBEAN FUTURE Nov13

1215.5

-1.058201058

-6.697370946

1409.75

1186.5

COFFEE 'C' FUTURE Sep13

121.8

-0.36809816

-20.10495244

196.75

117.0999985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

CORN FUTURE

Dec13

SUGAR #11 (WORLD) Oct13

16.46

COTTON NO.2 FUTR Dec13

85.4

-0.060716454 0.328947368

-17.94616152

22.54999924

8.458216916

89.55999756

World Stock Markets - Indices NAME

18.90

Max 21.8

average 21.660

Min 21.45

Last 21.7

21.4

21.3

21.1

20.9

Max 21.25

average 20.864

Min 20.75

Last 20.85

20.7

Currency Exchange Rates

NAME

METALS

61.20

Last 61.25

40.80

Commodities ENERGY

Min 61.25

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9249 1.5394 0.9283 1.3284 97.95 7.9897 7.757 6.1324 59.3913 31.19 1.2663 29.931 43.31 10270 90.591 1.23308 0.86294 8.1458 10.6127 130.12 1.03

-0.108 0.078 0.0108 0.0377 0.2654 0.0013 0.0026 -0.013 -0.5873 -0.1603 -0.1658 -0.0768 -0.0924 0.2045 0.436 -0.0284 0.0151 0.016 -0.0971 0.2306 0

-10.8788 -4.8343 -1.3896 0.7127 -12.098 -0.0814 -0.0825 1.6013 -7.4023 -1.9558 -3.5458 -3.0002 -5.3221 -4.6446 -1.3953 -2.0761 -5.5068 0.8802 -0.7755 -12.719 -0.0097

1.0625 1.6381 0.9899 1.3711 103.74 8.0111 7.7664 6.3811 61.2125 31.65 1.286 30.228 44.181 10330 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8999 1.4814 0.9022 1.2134 77.13 7.9818 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.77907 7.7531 9.6926 94.93 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.23

-0.4705882

34.28571

4.49

2.29

857520

12.59

-0.8661417

17.99438

13.75

8.33

988225

AMAX HOLDINGS LT

1.13

0.8928571

-19.28571

1.72

0.75

297400

BOC HONG KONG HO

24.4

-0.204499

1.244812

22.85

5936270

CENTURY LEGEND

0.35

11.11111

32.07548

0.42

0.22

48000

CHEUK NANG HLDGS

6.07

-0.3284072

1.335563

6.74

13000

CHINA OVERSEAS

21.9

-0.9049774

-5.194807

25.6

17.28

14215765

CHINESE ESTATES

16.42

-2.145411

35.37335

16.86

8.272

291000

CHOW TAI FOOK JE

9.83

-1.007049

-20.9807

13.4

7.44

1674350

EMPEROR ENTERTAI

2.58

-0.7692308

36.50794

3.07

1.35

105000

FUTURE BRIGHT

2.08

-0.4784689

71.61346

2.76

0.993

2046000 7916386

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15558.83

0.02069993

18.73218

15604.22

12471.49

NASDAQ COMPOSITE INDEX

3613.165

0.2212645

19.6605

3624.538

2810.8

FTSE 100 INDEX

6565.09

0.157137

11.31403

6875.62

5550.9

DAX INDEX

8264.76

0.2407546

8.569839

8557.86

6513.97

HOPEWELL HLDGS

NIKKEI 225

13661.13

-3.318122

31.41793

15942.6

8488.14

HANG SENG INDEX

21850.15

-0.5407632

-3.560809

23944.74

19076.78906

CSI 300 INDEX

2175.97

-2.159974

-13.75301

2791.303

2023.171

TAIWAN TAIEX INDEX

8084.5

-0.7963776

5.000325

8439.15

7045.31

MGM CHINA HOLDIN

21.7

KOSPI INDEX

1899.89

-0.5714854

-4.865178

2042.48

1770.53

MIDLAND HOLDINGS

3.08

S&P/ASX 200 INDEX

5046.327

0.08530301

8.54767

5249.6

4147.7

NEPTUNE GROUP

0.171

4587.854

-1.524403

6.281831

5251.296

3978.078

NEW WORLD DEV

FTSE Bursa Malaysia KLCI

1799.8

-0.4320622

6.563255

1826.22

1590.67

SANDS CHINA LTD SHUN HO RESOURCE

1.43

NZX ALL INDEX

976.87

-0.168724

10.74958

998.487

777.987

SHUN TAK HOLDING

3.36

-2.040816

PHILIPPINES ALL SHARE IX

4086.05

-0.7032824

10.46424

4571.4

3411.69

SJM HOLDINGS LTD

19.02

-0.5230126

12.4

-0.1610306

20.85

-1.650943

JAKARTA COMPOSITE INDEX

HSBC Dragon 300 Index Singapor

616.57

0.13

-0.73

STOCK EXCH OF THAI INDEX

1453.57

-1.566997

4.428376

1649.77

1173.89

HO CHI MINH STOCK INDEX

485.69

-1.668253

17.39298

533.15

372.39

Laos Composite Index

1318.54

0.07741818

8.542359

1455.82

1003.17

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

VOLUME CRNCY

GALAXY ENTERTAIN

39.9

-0.9925558

31.46623

44.95

18.1

118.8

-0.08410429

0.08424857

132.8

106.7

443278

-1.768173

-24.81203

35.3

21.616

1984750

HSBC HLDGS PLC

87.6

-0.5675369

7.749073

90.7

64.65

5619068

HUTCHISON TELE H

4.44

0.4524887

24.7191

4.66

2.98

1436000

LUK FOOK HLDGS I

22.3

-0.8888889

-8.606556

30.05

16.88

708500

MELCO INTL DEVEL

66.48168

18.18

5.43

1781502

0.9302326

63.42479

9.679

1097600

-0.6451613

-16.75676

2.68

608000

-2.840909

12.5

0.23

0.131

6418000

11.54

-1.870748

-3.993348

15.12

9.38

7751989

40.7

0.4938272

19.88218

43.7

22.25

11453951

2.142859

1.67

1.03

-19.80907

4.65

2.62

9375249

7.169071

22.382

13.311

2576950

-11.93182

17.38

12.28

369557

-0.4773306

26.5

15.98

3047211

HANG SENG BK

SMARTONE TELECOM WYNN MACAU LTD ASIA ENTERTAINME

4.18

1.703163

48.50696

4.7647

2.2076

58281

BALLY TECHNOLOGI

70.58

-0.9403509

57.86178

71.53

41.74

474575 1000

BOC HONG KONG HO

3.13

1.9544

3.6

2.99

GALAXY ENTERTAIN

5.13

-1.156069

29.21914

5.77

2.37

228

INTL GAME TECH

18.42

-0.7543103

29.99294

20.25

10.92

1998172

JONES LANG LASAL

96.26

-0.8650875

14.67715

101.46

61.39

456553

LAS VEGAS SANDS

54.96

1.029412

19.06413

60.54

34.0781

3850466

MELCO CROWN-ADR

23.77

0.126369

41.15202

25.2

9.62

2840170

MGM CHINA HOLDIN

2.78

50.27027

2.85

1.36

9015

MGM RESORTS INTE

15.94

0.6948831

36.94158

16.5

8.83

5179810

SHFL ENTERTAINME

22.82

-0.08756567

57.37931

23.08

12.35

570941

SJM HOLDINGS LTD

2.48

-1.195219

8.885781

2.9481

1.8043

2150

130.98

0.6299939

16.43702

144.99

86.7893

1140616

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME AIA GROUP LTD

PRICE

DAY %

VOLUME

35.95

0.27894

23656432

ALUMINUM CORP-H

2.54

-2.681992

6247723

BANK OF CHINA-H

3.24

-1.219512

205334758

BANK OF COMMUN-H

5.04

-1.754386

28397194

BANK EAST ASIA

28.95

-0.1724138

2542237

BELLE INTERNATIO

11.42

2.146691

14076449

24.4

-0.204499

5936270

CATHAY PAC AIR

BOC HONG KONG HO

14.04

-0.4255319

988701

CHEUNG KONG

109.6

-0.2729754

2498374

4.28

0.9433962

26722998

CHINA COAL ENE-H CHINA CONST BA-H

NAME CHINA UNICOM HON CITIC PACIFIC

PRICE

DAY %

VOLUME

11.36

0.1763668

18356764

8.6

-1.601831

3775491

CLP HLDGS LTD

64.35

1364014

CNOOC LTD

14.06

-1.540616

31585117

10.9

-0.1831502

12.26

HANG LUNG PROPER

24.75

HANG SENG BK

COSCO PAC LTD ESPRIT HLDGS

CHINA MERCHANT

24.45

0.4106776

2569061

CHINA MOBILE

83.3

-0.1797484

10033204

HUTCHISON WHAMPO

CHINA OVERSEAS

21.9

-0.9049774

14215765

IND & COMM BK-H

CHINA PETROLEU-H

5.74

-1.880342

94327212

LI & FUNG LTD

HONG KONG EXCHNG HSBC HLDGS PLC

11453951 2543945

2793214

SWIRE PACIFIC-A

92.55

-1.068947

1447306

-0.1628664

4237871

TENCENT HOLDINGS

349.6

0.6332758

4946486

-0.2016129

2710652

TINGYI HLDG CO

118.8 -0.08410429

443278 945607

HONG KG CHINA GS

1206814

0.4938272

2158864

1200071

17838926

0.2886003

40.7

-1.073345

223187016

69.5

SANDS CHINA LTD

0.1934236

-1.250744

-1.284797

POWER ASSETS HOL

103.6

82.9

-1.038062

19.7

-1.203611

4289048

121.1

-0.4111842

1496948

87.6

-0.5675369

5619068

87.55

0.4013761

4800447

5.06

-0.9784736

203408765

10.52

-0.754717

10763619

WANT WANT CHINA WHARF HLDG

MOVERS

19.2

-0.4149378

1126504

10.56

-0.5649718

11709876

67.7

-1.670298

1867245

2 22020

INDEX 21850.15 HIGH

22018.01 21766.1

0.8403361

1716975

MTR CORP

-0.172117

1671572

LOW

20.3

-2.870813

7468951

NEW WORLD DEV

11.54

-1.870748

7751989

52W (H) 23944.74

CHINA RES POWER

18.46

-1.388889

8916947

PETROCHINA CO-H

9.14

-1.082251

41107203

CHINA SHENHUA-H

23.05

1.318681

16792260

PING AN INSURA-H

49.8

-1.092354

9182013

CHINA RES ENTERP CHINA RES LAND

VOLUME

11.06

49.5

5.72

DAY %

SINO LAND CO

HENGAN INTL

18.44

PRICE

SUN HUNG KAI PRO

HENDERSON LAND D

CHINA LIFE INS-H

NAME

(L) 19076.78906

21760

25-July

29-July

14 14

July 30, 2013 April 19, 2013

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15 15

July April30, 19,2013 2013

Opinion Business

wires

Why Buffett bailed on India

Leading reports from Asia’s best business newspapers William Pesek

Financial Review

Bloomberg View columnist

A board member of the Reserve Bank of Australia has warned the federal government against “cutting spending dramatically or increasing taxes dramatically” as the economy was growing below trend. RBA board member John Edwards said in response to reports that the federal government was set to announce a pre-election budget statement that would see further cuts to cope with revenue downgrades. “The stance of fiscal policy is always a consideration for monetary policy,” Mr Edwards said. “We’re talking about an economy in which growth is below trend, and on the most recent numbers, employment is not very strong.”

In 2007, the Newbury, England-based carrier acquired the Indian unit of Hong Kongbased Hutchison Whampoa Ltd. Since then, a retroactive clause placed in the nation’s laws have thrown the deal into chaos, creating a US$2.2 billion tax dispute, delaying an initial public offering and further denting India’s reputation.

Squandered potential

Jiji Press Prime Minister Shinzo Abe suggested that the government’s coming medium-term fiscal programme will not be premised on a consumption tax hike from the current 5 percent to 8 percent planned for April 2014. “The fiscal programme will not decide that the consumption tax increase will be implemented [as planned],” Mr Abe told a press conference. The remark can be taken as leaving room for flexibility about the timing and size of the consumption tax increase.

Taipei Times The government is considering changes to the rules of the so-called “luxury tax” following two years of the levy, Minister of Finance Chang Sheng-ford said. “Current rules have flaws, for example, we are unable to tax those deep-pocket investors, who can wait for more than two years to sell properties,” Mr Chang said. In addition, the current tax rules do not apply to land located on nonurban zoning areas and those reserved for industrial use, leaving room for speculators and developers to manipulate prices, he added.

The Star China’s seventh largest property developer Country Garden (Holdings) Ltd expects to launch its maiden project in Malaysia on August 11, just eight months after purchasing the land. Country Garden Danga Bay (CGDB), with a gross development value of 10 billion ringgit (US$3.1 billion), is the company’s first self project outside China. It will be developed via unit Country Garden Danga Bay Sdn Bhd. The project is expected to have more than 9,000 condominium units.

ndia has long been viewed as a value investor’s dream: rapid growth, 1.2 billion people pining for a taste of globalisation, and underdeveloped industries ripe for turnarounds. So it surprised few when the genre’s guru, Warren Buffett, placed a bet on the world’s ninth-biggest economy. What did come as a surprise, though, was last week’s decision by the billionaire’s Berkshire Hathaway Inc to give up on India’s insurance market after just two years. Adding to the drama, the withdrawal came the same week India unveiled plans to open the economy as never before to foreign-direct investment. Buffett isn’t alone in voting with his feet. Wal-Mart Stores Inc, ArcelorMittal SA and Posco are pulling back on investments in India that they had announced with great fanfare. What’s scaring foreigners away? A rampant political dysfunction that has stopped India’s progress cold. Headwinds from New Delhi are contributing to the slowest growth rates in a decade, a record current-account deficit and a 7.9 percent plunge in the rupee this year. Fiscal neglect has bond traders demanding higher yields for government debt than India wants to pay. But the most devastating no-confidence vote is coming from the big, long-term money India needs to boost its competitiveness. Foreigndirect investment slid about 21 percent last fiscal year, and this one doesn’t look promising.

Biggest democracy In theory, no Western executive or investor can ignore the vast potential of Indian consumers, 29 percent of whom are under age 15. India’s geopolitical importance is rising in step with China’s ambitions. U.S. Vice President Joe Biden, visiting

New Delhi last week, is hoping to deepen Washington’s bond with a possible bulwark against Beijing’s influence, as well as increase bilateral trade. The problem is an Indian government that won’t get out of its own way. The long debate over foreign-investment limits says it all. In September 2012, Prime Minister Manmohan Singh’s government passed a law allowing big retailers to open stores directly in India, yet no one has. Reasons are legion: too many pre-requisites; constraints on whom goods can be purchased from; a raft of regulations limiting franchise models and factory construction; and the hair-pulling need to negotiate separately with each of India’s 28 states. India has fallen into a self-destructive pattern of relenting on the big issues, then killing would-be investors with the details. Take the experience of furniture retailer Ikea of Sweden AB, which in January won approval to open outlets in India. Not content with the Swedish icon investing about US$2 billion, the government played hardball. It tried to bar Ikea from selling food in its stores; Ikea stood its ground. But the damage was done. Executives fully expect to have to navigate India’s notoriously bad infrastructure, rigid and often unskilled labour markets, red tape and official corruption. They’re less keen on tripping over the fine print of vaguely written laws and local power brokers with agendas at odds with New Delhi. Headline-making disputes involving household names like Ikea, Wal-Mart and Berkshire don’t help India’s image. Worse, the uncertainty is breeding a huge trust deficit. On July 17, India moved to open important sectors such as defence, power and

telecommunications to foreign investment. It’s being heralded as the nation’s “big bang.” Big fizzle is more like it, as big inflows are likely to continue eluding India. Any major foreign investor cannot ignore the experience of Vodafone Group Plc, which is still wondering if it will take a multibillion-dollar loss on a deal thanks to tax-policy changes.

India has fallen into a selfdestructive pattern of relenting on the big issues, then killing would-be investors with the details

It’s time for the government to stop squandering India’s potential. The lack of transparency and reliability makes it virtually impossible to consider longterm investments there. And even if a foreign executive has faith in the sober-minded Singh, there’s no guarantee his ruling Congress party will be in power after elections next May. The opposition Bharatiya Janata Party, normally a pro-business crowd, has threatened to roll back India’s new investment laws. What should India do? Pass clear and strong investment laws that will survive the change of government and offer a code of conduct for state leaders. India must strengthen the rule of law as it applies to foreigners so they’ll trust their money is safe. Finally, India must think long-term. Today’s motivation for inviting more foreign money is to narrow the current-account deficit. The goal should be to raise competitiveness, gain fresh knowledge and create betterpaying jobs for the future. Along with politics, India often lets scale get in its way. There’s a sense in New Delhi that India’s sheer size, vast supply of cheap labour and clear potential should have China looking over its shoulder – that companies should rush there regardless of the political tangle. Yet India is proving that size doesn’t guarantee its inevitable rise. Only true economic reform, political openness and more proactive leadership will do that – and get the Buffetts of the world to come to India and stay. Bloomberg View

July 30, 2013

Closing Beijing agrees to talks on wine dispute

Apple in China worker abuse claims

China and the European Union have agreed there is a “window for discussions” to try to resolve accusations that Europe is dumping wine in China, the EU’s trade chief said yesterday. The agreement is part of a deal announced at the weekend to defuse a row over dumping of Chinese solar panels in Europe, the biggest trade dispute yet between the two economies. “There is a window for discussions between the European Union and Chinese [wine] producers,” EU Trade Commissioner Karel De Gucht (pictured) told a news conference. “The Chinese government has promised to facilitate such discussions,” he said.

Technology giant Apple Inc is facing fresh allegations of worker rights violations at Chinese factories of one of its suppliers, the Pegatron Group. China Labor Watch has alleged that three factories of Pegatron violate a “great number of international and Chinese laws and standards”. These include underage labour, contract violations and excessive working hours. Both Apple and Pegatron said they would investigate the allegations immediately. “Apple is committed to providing safe and fair working conditions throughout our supply chain,” the firm said. “We will investigate them fully and take immediate actions,” Pegatron’s chief executive said.

Bids for Thai govt rice fall way short of offer

EU bank-capital rules face compliance probe

Ministry to negotiate better prices before announcing results

he Thai government received bids from exporters for just 90,000 tonnes of rice in its first effort to sell grain from its huge stockpiles, far below the 350,000 tonnes on offer in the tender, a Commerce Ministry official said yesterday. The prices offered also fell well short of the price the government paid farmers to amass the stockpile in an intervention scheme to boost farm incomes, according to exporters who joined the tender. The government, which has spent up to 600 billion baht (US$19.3 billion) in buying rice since the intervention programme started in October 2011, has built up massive stockpiles and needs to sell some to make way for the next crop as well as to finance the scheme. Moody’s Investors Service said last month the subsidies hamper Thailand’s goal of achieving a balanced budget by 2017 and are negative for the nation’s sovereign ratings. “There was one exporter who offered to buy 30,000 tonnes of broken grade rice and three exporters who offered to buy a total 60,000 tonnes of 5 percent grade white rice,” the government official said, asking not to be named. The official declined to give details of the prices the exporters offered, but said the offers for the milled rice were below the 15,000 baht (US$480) per tonne the government paid to farmers for their unmilled paddy. Exporters said they offered prices

Xinhua urges probe on foreign luxury carmakers F

oreign carmakers are reaping exorbitant profits selling imported luxury cars in mainland China and should face an anti-trust investigation, the official Xinhua news agency said, in what

The government has spent US$19.3 bln buying rice since 2011

European Union bank-capital rules, already criticised by global regulators, face another international probe just months after they start to take effect next year. The Basel Committee on Banking Supervision will review how well the EU has applied its standards, Wayne Byres, the group’s secretary general, said in an interview. An earlier investigation, based on a draft version of the EU plans, pointed to loopholes and triggered a rebuttal from Michel Barnier, the bloc’s financial services chief. The EU emerged bruised from last year’s process that cast doubt on its claims to be fully in line with a global pact to beef up banks’ defences against financial crises. While the Basel group has also indicated that the U.S. will face a follow-up review, the chances that the EU will be judged noncompliant are much higher, said Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc. “The EU will fare far less well under Basel scrutiny because of the tremendous flexibility afforded banks” in measuring their capital requirements, Ms Petrou said by e-mail. The EU is set to phase in its version of the Basel accord starting in January, and the rules will fully apply as of 2019. Basel III requires banks to hold capital equivalent to at least 7 percent of their risk weighted assets, while also meeting an indebtedness limit and liquidity requirements. In last year’s scorecard, published in October, the committee concluded that the EU’s proposals were not specific enough in limiting the range of instruments banks may count as core capital and also said lenders were given too much scope to label government debt as risk free – so escaping holding capital against it.

ranging between 11,500 baht and 12,500 baht per tonne, equivalent to US$380 to US$420 per tonne, free on board. The Thai export price was quoted yesterday at US$465 per tonne, which compares with US$395-US$400 for the equivalent grade from Vietnam. Pranee Siriphan, head of the Commerce Ministry’s Department of Foreign Trade, said the ministry would spend a few days negotiating for better prices before announcing tender results later this week. The government is offering 200,000 tonnes of unmilled rice in a tender today and Mr Pranee said there would be another tender for milled rice next week. The government has said it would

offer up to 1.5 million tonnes of rice a month in tenders but traders said it was unlikely to sell anything like that, even at a big loss, because demand is thin at the moment. “If the government failed to sell that much via tenders, it would have to try harder to release it via government-to-government deals,” said Chookiat Ophaswongse, a honorary president of the Thai Rice Exporters Association. The Thai government said last week it had sold 250,000 tonnes of rice to Iran in a government-togovernment deal, but traders said that was quite small, compared with the around 1.2 million tonnes that Iran normally bought.

may amount to a shot across the bow of foreign auto firms. Xinhua said that in the wake of investigations into how foreign companies in other sectors price their goods, the question of imported cars had become a contentious topic. Foreign milk formula makers and pharmaceutical companies have come under intense regulatory scrutiny in recent weeks, especially over pricing. Analysts, however, said they did not expect foreign carmakers to become the latest target of China’s focus on prices. “Milk powder pricing is a more imperative problem, as it’s baby food and concerns … families,” said Yale Zhang, managing director of

Automotive Foresight (Shanghai) Co Ltd, a consultancy and industry research firm. “Luxury cars are different. Some people in China have plenty of money and are indifferent to high pricing.” China has become a key market for the makers of luxury cars, with 2.7 million expected to be sold each year by 2020, overtaking the United States as the world’s leader in the segment. The Xinhua report said some imported cars were twice as expensive in the mainland than in overseas markets. Selling imported cars in China was 30 percent more profitable than the global average, Xinhua said, citing Rao Da, secretary general of the China Passenger Car Association.

German Finance Minister Wolfgang Schaeuble said Europe must keep up pressure on Greece to stand by its austerity pledges as he rejected the notion that the upcoming election has put debtcrisis management on hold. Greece’s progress will continue to be monitored after euro-area governments last week approved the latest bailout transfer to keep the government in Athens funded through the September 22 election in Germany. German lawmakers yesterday approved their country’s share of rescue aid to Greece after the government there agreed to fulfil all terms tied to the help. “The pressure remains, so this has nothing to do with the election schedule,” Mr Schaeuble told Deutschlandfunk radio in an interview yesterday. “They’re far from being over the mountain,” he said. Mr Schaeuble, in a separate interview with the Bild am Sonntag, ruled out another writedown for Greek debt even as he committed euro governments to standing by the country. “Greece will certainly be helped beyond 2014 as much as is needed, as long as the nation fulfils its obligations,” he told the newspaper. As euro-region governments on July 26 cleared the release of 2.5 billion euros (US$3.3 billion) for Greece, a European Union official identified a 3.8 billion-euro gap expected in 2014. Options for plugging that include tapping unused funds earmarked for banks, having Greece venture back into the short-term bond market, or having putting in more money, the official said.

Reuters

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Pressure on Greece must remain: Schaeuble