Macau business daily, April 27,2012

Year I | Number 20 | April 27, 2012 Editor-in-chief | Tiago Azevedo Deputy editor-in-chief | José I. Duarte MOP $ 6.00 www.macaubusinessdaily.com

Tax haven money a blot on business Tax havens pose complicated problems for governments and industry, says Ronen Palan, professor of international political economy at the University of Birmingham in England. In an interview with Business Daily, Mr Palan says about half of the global stock of money runs through tax havens that in turn fuel the shadow banking system.

There are solutions to close the loopholes but political will is lacking. “It is very difficult, almost impossible, almost inconceivable” that the global financial system would act together, he says.

Pages 8 & 9

Chui Sai On to legislators

Social security needs bigger contribution

Govt to take back land granted by Ao Page 4

The current 45 patacas per month employee contribution for the social security fund is not enough, Chief Executive Fernando Chui Sai On said yesterday. The government will launch a review in midyear, after receiving the results from an academic study.

More on page 2

GALAXY MACAU PHASE 2 STARTS

Page 6 Brought to you by page 7

Pre-tax earnings ‘world record’ for Las Vegas Sands

L

as Vegas Sands Corp. achieved global pretax earnings of US$1 billion in the first quarter – an industry record – the company said. Nearly half of it was generated by the firm’s Macau operations, it added.

“No company in our industry has ever achieved US$1 billion EBITDA for a quarter. We’re very proud of that,” said Sheldon Adelson, the company’s chairman and chief executive in an earnings conference call with analysts.

The three Macau properties operational in Q1 2012

generated net revenues of US$1.42 billion and EBITDA of US$456.4 million.

Mr Adelson added the Macau part of the business was “cooking on all cylinders”.

“Our mass business is growing, our VIP efforts are working and our non-gaming revenue - the backbone of the IR [integrated resort] model – also increased significantly,” he said. The LVS chairman hit back at suggestions that his fourth Macau property – Sands Cotai Central, which opened on April 11 – might be taking business from his

existing Cotai properties The Venetian Macao and The Plaza at Four Seasons Macao, and from Sands Macao on Macau peninsula.

“I keep telling everybody the critical mass in a supplydriven industry brings in more people. It doesn’t cannibalise others.

We are trying to cannibalise our competitors and not cannibalise ourselves,” added the LVS chairman.

Last week Sands China, the company’s Hong Konglisted unit, issued the second dividend in its history.

P

board, led by managing director Pansy Ho Chiu King, mandates to buy back shares up to a maximum of 10 percent and to issue new shares up to 20 percent.

In addition, five directors are up for re-election, including Maisy Ho Chiu Ha. Both Ms Maisy Ho and Ms Pansy Ho are daughters of gaming tycoon Stanley Ho Hung Sun. The conglomerate had already raised HK$1.6 billion last month from a rights offering representing

37.5 percent of the company’s share capital.

A stock exchange announce-

Shun Tak’s managing director Pansy Ho Chiu King

HANG SENG INDEX 20850

20810

20770

20730

20690

20650

April 26

The half-year payment of HK$0.58 (US$0.075) per share took the dividend for the year to HK$1.16.

A.E.

Shun Tak seeks to increase capital to HK$1.5 billion roperty developer and ferry operator Shun Tak Holdings Ltd is set to increase its capital in a shareholders’ meeting scheduled for June 6.

It told the Hong Kong Stock Exchange that shareholders will vote on the creation of an additional 2 million shares of HK$0.25 each.

If this is approved, the company’s share capital will grow by 50 percent to HK$1.5 billion (US$193 million).

The meeting will also discuss whether to give the

Minimum wage for better growth: UN agency

ment said the proceeds of these would go towards the “general working capital and for financing new investment opportunities.”

In March Shun Tak reported a 10 percent drop in profit in 2011, mainly due to a decrease in revenue from the company’s real estate arm.

The conglomerate said it was still in discussions with the government about its proposal to build a hotel in Cotai and about its Harbour Mile project.

V.Q.

HSI - Movers Name

%Day

HOTAI MOTOR CO

1.62

MEGA FINANCIAL H

1.13

CHENG SHIN RUBBE

0.99

UNI-PRESIDENT

0.95

SYNNEX TECH INTL

0.88

SILICONWARE PREC

-2.88

DELTA ELECT INC

-3.26

FOXCONN TECHNOLO

-3.38

COMPAL ELECTRON

-3.41

HTC CORP

-3.72

Source: Bloomberg

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business daily April 27, 2012

MACAU

Chui Sai On flags increase in pension fund payments Monthly contributions to social security fund for employers and employees face a review this year, says chief executive Tony Lai

tony.lai@macaubusinessdaily.com

Photo by Manuel Cardoso

T

he chief executive has flagged an increase to monthly contributions towards the social security system.

Speaking in the Legislative Assembly yesterday, Chief Executive Fernando Chui Sai On said officials would start work on possible changes to the social security system after receiving a report on the size of contributions by the Standing Committee for the Coordination of Social Affairs.

The study should be ready by the middle of the year.

Currently, workers pay a monthly contribution of 15 patacas (US$1.90) while employers are required to pay 30 patacas and the government provides the remaining funds for a pension of 2,000 patacas a month.

“This (the retirement pension) is difficult to sustain a planned long-term retirement,” Mr Chui said, admitting that the present contribution amount was too low.

Several scholars have already warned that monthly contributions were not enough. Ricardo Siu Chi Sen, a professor of economics at the University of Macau, said last year the contribution should be at least 85 patacas. “Since the base is small, some share of the burden – say, 10 patacas more by employees and 20 patacas more by the employers – may be reasonable,” Mr Siu said.

Mr Chui did not disclose the exact figure for the increase yesterday.

He said any proposal could be considered and a consensus should be reached among the three parties: the government, employers and workers.

He added the government would take the initiative to launch

Chief Executive Chui Sai On was in the Legislative Assembly yesterday

discussions with employers and workers.

Cash added The government will inject 4 billion patacas into the social security fund this year and Mr Chui expects about 10 billion patacas will occur in the next two years, owing to high income from gaming taxes.

He predicts the economy will grow by no more than 9 percent this year as the Unites States recovery staggers.

But he stressed that the government has “more than enough” financial reserves at the moment.

Mr Siu warned last year that the fund

might not be sustainable if it relies only on the government’s cash. “For example, in 2009, the aggregation from this 45 patacas only contributed to around 26 percent of the total spending of the social security fund, or less than 10 percent of the fund’s source,” he said.

Another problem the fund faces is an ageing population.

Mr Chui admitted yesterday that the government had to consider a lot of factors, including pensions, social facilities and medical centres, to respond to population ageing.

According to an International Labour Organisation report released in 2010, there will be eight non-

active workers for every 10 acting working citizens in Macau by 2050.

“Based on the changing structure of population in Macau, the government should review and the adjust contribution rate periodically,” Chu Shun Ho, professor of finance at the Macau University of Science and Technology, said last year.

Mr Chui announced that the government would continue with a plan to offer a 10,000-pataca handout to eligible central provident fund accounts.

He also said the voluntary nature of the social security fund should be reviewed, to consider the possibility of turning it into a mandatory system.

Applications for public housing only next year The public still needs to wait for public housing applications to reopen, says Macau’s chief executive

T

he government will request applications for public housing as soon as possible, but only once it has a clear picture on the needs of the citizens, said Chief Executive Fernando Chui Sai On. Speaking at the Legislative Assembly, he said the government’s promise to build 19,000 public houses by the end of this year could be fulfilled after the gradual completion of the projects.

But when it comes to reopening applications for public housing, the chief executive said they must wait untill year end to evaluate the existing needs of the population.

He added that what authorities are facing now is how to handle a long waiting list and how to refine the process for the houses to be allocated to applicants.

Some candidates may lose their qualifications, namely if they have

already bought a flat, after such a long time, Mr Chui admitted.

The Taipa TN27 affordable housing project, which will provides about 2,700 flats, will be ready by the end of the year, he confirmed.

The government will conduct studies on sales of affordable housing and the results would provide a clearer picture on when to reopen applications, said Mr Chui, expecting the analysis to be ready by late 2012 or early next year.

The official mentioned the possibility of turning some affordable houses into social units if demand for social housing is not as high as expected. He stressed that affordable houses are only a complement to social houses in the public housing policy.

The Chief Executive also said any government policy is not used to “suppress the real estate market”, but to “keep the market

from soaring”.

If the local property market goes down, it will affect over 50 related industries, Mr Chui said, quoting a study that was not given to reporters.

The government also has land plots for a further 6,300 public residential units and over 3,000 flats would be open for tender this year, he said.

In addition, the government will consider building public houses as the priority on the occupied land they have recovered.

He added that among the over 40 undeveloped land plots, 10 plots have already undergone the procedures to cancel the land concession.

But Mr Chui warned that the procedures would take time and there may be legal disputes from land concessionaires.

T.L.

The government will conduct studies on sales of affordable

April 27, 2012 business daily | 3

MACAU

Airport traffic takes off in first quarter

Photo by Manuel Cardoso

T

he Macau airport handled more than 1 million passengers in the first quarter of this year, up by 9.5 percent on the same time last year, according to airport management.

Some 9,612 aircraft movements were recorded, representing a 2.2 percent growth from the same period of last year.

However air cargo throughout fell again, extending a six-year fall, dropping a further 24.3 percent in the first three months of last year to just 6,452 tonnes.

The Macau International Airport Co. Ltd. said in a statement that about 37 percent of all passengers came from Southeast Asia, followed by the mainland (33 percent) and Taiwan (30 percent).

The company, whose major shareholder is the government,

The airport handled more than 1 million passengers in the first quarter

said the figures “prove that Macau is becoming an international destination from many tourists all over Asia”.

The company believes passenger traffic will reach 4.3 million passengers this year and there

are more than 41,000 aircraft movements scheduled.

Taipei-based Mandarin Airlines launched last weekend a new route to the central Taiwanese city of Taichung.

Kuala Lumpur-based budget

carrier AirAsia will start flying once a day to Chiang Mai in Thailand from next month.

A third new route, to Da Nang in Vietnam, will be launched in May also, the company said.

K.C.

CEPA revision promises new boost for business

A

new revision of the Closer Economic Partnership Arrangement between the mainland and Macau will promote trade and boost economic development on both sides, the director of the Economic Services Bureau said.

During a public session held yesterday, bureau director Sou Tim Peng said there were currently

1,259 “made in Macau” products that have enjoyed zero export tariffs in the mainland since the agreement was first put into effect in 2004.

The Guangdong Province Economic and Information Commission said it was keen on helping Macau’s small and medium enterprises expand markets in the mainland in the

near future.

Guangdong and Macau will work together to introduce specific measures, including simplifying the goods inspection procedures.

The eighth and latest supplement to the agreement, which came into effect this month, allows Macau businessmen and companies to provide services in the mainland across other business sectors as well

as their own.

For instance, the 415 companies already certified as Macau Service Suppliers will be able to expand other areas.

During the session it was also announced that there will be a more convenient inspection regime for food and wine, and reciprocal recognition of electronic signatures.

C.L.

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business daily April 27, 2012

macau Brought to you by

HOSPITALITY Services: a somewhat fuzzy picture We finish today a series on the satisfaction survey published quarterly by the Statistics and Census Service.

We focus here on satisfaction with things such as the quality of public transport, restaurants, commercial services, travel agencies and the more general notion of “environmental hygiene”.

The absolute values are not totally reliable indicators, possibly, as the survey is likely to be sensitive to timing and sample composition problems.

But changes may still provide useful pointers to aspects that may need attention and improvement.

The values shown correspond to the yearon-year changes, in percentage points, in the overall level of satisfaction with the things we are focusing on.

The resulting picture is ambiguous.

Q1

Q2

Land involved in previous Ao case taken back The government is allowed to take back a plot that Pedro Chiang received after bribing Ao Man Long

Q3

Q4 -10

The authorities had no choice but to annul a land swap deal that involved two plots near Largo do Lilau, the Court of Final Appeal said

-5

05

10

Hygiene

Restaurants

Travel Agencies

Public Transportion

15

Commerce

The results are volatile and the positives in one quarter tend to be compensated for by the negatives in another.

However, a couple of observations can be made on more solid ground.

Hygiene seems to be getting worse in the eyes of our visitors.

This may reflect increasing fussiness among visitors, but it most likely to be the outcome of crowded attractions, more intense traffic and many construction sites.

Public transport also seems to get a lower score than before.

Restaurants seem to be keeping up overall, as are travel agencies and commercial services.

But there are significant oscillations from quarter to quarter, which would probably require further analysis by the authorities.

Do they reflect an actual inconsistency in the provision of services or they are just some kind numerical fluke associated with data collection?

The usefulness of these surveys may well depend on the answer we get to this question.

J.I.D.

Vítor Quintã vitorquinta@macaubusinessdaily.com

T

he Court of Final Appeal has allowed the authorities to take back a Colina da Penha plot that was part of a land swap deal that was allegedly involved in the corruption scandal surrounding Ao Man Long.

Wednesday’s verdict, which was not unanimous and overturned a previous court decision, stressed that businessman Pedro Chiang and his wife, Leong Lai Heng, only got the land after bribing the former secretary for transport and public works.

A dispatch from Ao authorised the land swap in November 2006, which gave the administration two plots near Largo do Lilau, with a total area of 299 square metres and a premium of 2.8 million patacas (US$350,370).

“It would be desirable for the MSAR to buy these buildings,” the Cultural Institute said at the time, stressing that the Largo do Lilau area was classified as protected heritage.

Chiang paid just MOP608,400 for the swap and he received a much larger parcel of 669 square metres in Colina da Penha, where he was allowed to build a one-storey house, though the plot was classified as a forestation zone.

The Court of Final Appeal

verdict said in April 2009 Ao had only approved the deal after Chiang promised him the Penha plot ownership.

The disgraced former secretary was sentenced to a jail term of 28-and-ahalf years for corruption and money laundering in two separate trials. A third trial is now under way.

Ao’s successor as secretary for transport and public works, Lau Si Io, annulled the swap in early 2010.

However, last November, the Court of Second Instance said the verdict against Ao was “not enforceable” on the couple and, as such, the government could not take back the plot.

Inevitable decision Ms Leong was named as a suspect but was never accused of any wrongdoing. Chiang was sentenced to six years and 10 months in jail for active corruption last March.

But the 56-year-old – who fled Macau in 2007 and was last seen living in Portugal – was tried in absentia and, because he was not officially informed of the court’s decision, the sentence was not enforced.

Wednesday’s decision sees the Court of Final Appeal in agreement with a government appeal, saying

it was “entirely irrelevant” whether Chiang’s conviction would ever be enforced, because it was proven that the land swap was based on corruption.

Judges Sam Hou Fai and Song Man Lei also rejected the Court of Second Instance’s view that to annul the deal before hearing the couple was “very dangerous and could be a wrong sign, leading to the abolition of one of the fundamental guarantees of the citizens before the administration”.

The judges said Chiang and his wife should have been granted a prior hearing, but that this issue was not enough to overturn an “inevitable” decision.

In the end, they added, the administration would always have to annul the land swap because it was “hopelessly flawed”, even if Chiang was found to have nothing to do with the corruption case.

A third judge, Viriato Manuel Pinheiro de Lima, had a different view: whenever a law is enforced, all sides have the right to be heard.

“One does not know what contribution the interested parties might have (made) during the hearing and how that might have pushed the administrative act in another direction,” he wrote.

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business daily April 27, 2012

macau

ILO joins calls for a minimum wage

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A minimum wage and collective bargaining could help rebalance economic growth by increasing the income of workers, the International Labour Organization says Vítor Quintã

vitorquinta@macaubusinessdaily.com

Photo by Manuel Cardoso

Credit on wheels Rising income in a bigger population has contributed to greater demand and increased sales of all kinds of vehicles in Macau.

The city’s growth period is characterised by ever-more-common use of credit and easier access to it for that purpose. The figures for the amount of such credit have been available only since the third quarter of 2009. Not surprisingly, total credit has increased in line with car acquisition: they rose by 54 and 58 percent, respectively, in the period. But the interesting feature is that the growth of credit has been smooth and has followed a very predictable path, while the acquisition of cars shows distinct peaks and troughs.

Fastest job growth

160 150 140 130 120

In Macau, almost 19 percent of all employees earn less than 7,000 patacas

110

W

100 90 80 70

The changes in the average granting of credit, therefore, follow a very curious pattern.

The values used here were calculated using the number of new light cars registered in the period as a proxy, as they represent the bulk of credit given.

Then the average was simply calculated by dividing total credit by the number of cars.

The symmetry with the number of vehicles sold is striking. It suggests that either there are bouts of acquisition of lower-value cars that bring down the average amount of credit given, or a ceiling is set by the credit issuers, and when demand goes up, the allocations become thinner.

J.I.D.

University of Macau to study whether this can be extended to all employees in the cleaning and property management industries.

hile the government awaits the results of a study on whether to set a minimum wage for all employees of the cleaning and property management industries, the International Labour Organization has called for better pay-setting mechanisms in the city.

As the global economic recovery flags, growth in the Asia-Pacific region is slowing, highlighting the need “to rebalance economic growth towards greater household consumption”, says the ILO’s regional labour market update, released on Wednesday.

“Such rebalancing should be anchored in productive, quality employment and sustainable increases in incomes to drive aggregate demand,” the UN organisation says.

However, the proportion of employees earning low pay in the Asia-Pacific region remains high,

its report says.

In Macau, almost 19 percent of all employees, or 64,300 people, earn less than 7,000 patacas (US$876) a month.

“Wage-setting mechanisms, such as collective bargaining and minimum wages, can help to achieve more balanced and inclusive development by ensuring equitable sharing of the benefits of economic growth,” the report says.

“Sound wage policies (based on social dialogue in particular) can help reduce vulnerabilities and the risk of low-paid workers falling into poverty.”

Macau has no law on collective bargaining and trade unions, even though the Basic Law allows for one.

The city has a minimum wage for employees of cleaning and property management companies contracted by the government.

The government has asked the

Representatives of employers have been firmly against the introduction of a universal minimum wage, saying it would lead to higher unemployment and force many small and medium enterprises to close down.

But on Wednesday the Macau Federation of Trade Unions again called for the government to introduce a minimum wage as soon as possible.

“The income differences of various industries and work positions are getting bigger. The income of lowqualified workers tends to be low,” said the head of the federation, Ho Suet Hing.

Macau had the fastest rate of employment growth in the Asia-Pacific region in the year ended February.

At the end of February there were about 338,900 people working in the city, 6 percent more than a year before.

The next-fastest growth was in Singapore, which had 3.9 percent more people in employment than a year before, and in Hong Kong, which had had 3.3 percent more.

With more jobs being created, Macau also had the second-lowest unemployment rate in the region in February, just 2.1 percent, behind only Thailand, where the unemployment rate was 0.6 percent.

But the ILO warns that youth unemployment in Macau remains much higher.

At the end of last year 4.9 percent of workers aged between 16 and 24 were jobless.

Even so, this was still the secondlowest youth unemployment rate in the Asia-Pacific region, after Thailand’s 2.2 percent.

Weather Beijing 26/14o C Changchun 18/1o C

Harbin 17/4o C

Xian 27/12o C Shanghai 26/16o C Chengdu 30/20o C Kunming 27/17o C Haikou 31/23o C Sanya 32/26o C

Guangzhou 28/23o C

MACAU (23-28 April) Day

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Humidity

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85/95 %

04/26

20/27o C

70/95 %

04/27

21/27o C

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Shenzhen 25/21o C

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Hong Kong 29/25o C

Manila

Macau 26/22o C

TOKYO

Jacarta

35/27 C

31/25o C

22/12o C

32/25o C

Bangkok

SEOUL

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taipei

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April 27, 2012 business daily | 7

MACAU

Phase 2 is number one Galaxy has first mover advantage in new round of Cotai casino building Associate Editor

G

Galaxy Phase 2 with its 160-metre new tower in the foreground

hotel rooms and gaming space it can offer.

Market demand “The Phase 2 project is bringing online what the market needs,” says Grant Govertsen, an analyst at Union Gaming Group. The project “cements” Galaxy’s presence as the second-largest casino operator in

High-stakes baccarat is the traditional pastime of Macau, but it’s also a low-margin, politically exposed business that attracts negative publicity abroad because of the junket credit system. In addition it doesn’t offer as many opportunities to sell extra services to visitors. High rollers are given a lot of free perks in exchange for their business.

Photo by Manuel Cardoso

alaxy Entertainment Group – one of two Macau casino operators founded exclusively by local Chinese entrepreneurs – pulled off a coup yesterday. It confirmed it had won the race to be first of the six Macau concessionaires to start building work on the next round of development on the Cotai Strip.

First mover advantage for ‘Cotai 2.0’ is likely to be important. It involves expanding the highermargin mass-market segment, and it gives Galaxy first pick of workers to build and then staff the resort in a market currently constrained by labour shortages.

Galaxy - founded by Hong Kong building materials tycoon Lui Che Woo - plans to invest about HK$16 billion (US$2.1 billion) in the second phase of its Galaxy Macau resort. Phase one cost HK$16.5 billion and opened on Cotai in May last year. It helped more than triple the group’s profit in 2011.

‘Phase 2’ as it’s officially titled, will add as many as 500 gaming tables and offer 1,300 more hotel rooms, the company said in a statement to Hong Kong’s stock exchange.

It will nearly double the size of the property to one million square metres. It’s scheduled to open by the middle of 2015 and is timed to coincide with a raft of new infrastructure including Macau’s

Building work began at Phase 2 on Monday

Light Rapid Transit rail system.

The new phase will add luxury stores and 1,300 rooms from JW Marriott and Ritz-Carlton, taking Galaxy’s total hotel inventory to 3,600 rooms across five hotels in Macau.

Galaxy plans to fund the project through cash and debt, and doesn’t plan to issue fresh equity, it said.

The company now has HK$7.7 billion cash on hand, chairman Lui said in a press conference, as well as HK$6 billion free cash flow generated from operations, chief financial officer Robert Drake said.

“We’re very very excited about the intermediate prospects for Macau – and as possessors of the largest land bank – the long-term prospects of Macau,” Mr Drake told Business Daily.

Galaxy Macau Phase 2 allows the company to be first to compete head-to-head on Cotai with Sands China in terms of the amount of

Macau’s Cotai Strip, he added.

“Phase 2 will help the first phase of the property, because we’ll be offering more amenities, more food and beverage, a lot more retail and a lot more MICE [meetings and conventions facilities],” says Mr Drake.

“And when you add the hotel brands Ritz-Carlton and JW Marriott that we’ll have in Phase 2, that’s a lot of horsepower not only from the brands but from their network – to bring people here. So we’re confident that Phase 2 will be accretive to Galaxy Macau’s earnings and will really propel our earnings at the group level,” added Mr Drake.

Analysts regard Cotai as the key driver of mass-market gaming and general tourism in Macau.

That’s important because the Macau government wants economic diversification away from VIP baccarat.

The Macau peninsula is identified primarily as the citadel of the high roller trade that has dominated the local casino industry since the days of Stanley Ho Hung Sun’s

monopoly under Sociedade de Turismo e Diversões de Macau.

Labour constraints The Macau government has been supportive of Cotai as a way of promoting general tourism. But it has also – for political reasons – linked to protecting local workers and also to cooling the growth of gambling – been reluctant to speed the pace of Cotai resort building.

It has instead operated a quota system for importation of building workers and of hotel and service staff from mainland China, Hong Kong and beyond.

Francis Lui Yiu Tung, deputy chairman of Galaxy, told Business Daily he was confident Phase 2 would get the workers it needs.

“I don’t think it’s fair to ask for construction labour guarantees from the government,” he explained. “Everybody has to work within the market and make sure they have their own fair share of the customers and of the labour forces. There are many ways to attract labour.

We claim we look after our labour forces much better. Even in StarWorld [Galaxy’s resort on Macau peninsula] we have 3,000 staff that have already been working for us continuously over five years. That’s basically a testimony to the fact we have a very stable workforce with us.”

Thumbs up – Galaxy management at yesterday’s press conference

8 |

business daily April 27, 2012

but, in a way, we can say that if you remove tax havens there is no sovereign [debt] crisis in the world.

Of course, things don’t work exactly like this – are not just that simple.

But that gives you an idea of the problem. The figures are of such magnitude that if you remove this facility, you remove, in a moment, the problem of sovereign debt. The sovereign debt globally is, therefore, a political issue.

and the same [happens] in Europe.

So we have a problem of demand and supply worldwide. Demand cannot keep up with supply. The gap can only be bridged buying credits, debts. Again, tax havens play a major role increasing the gap between the rich and poor. Who can use tax havens, really? The rich, the corporations… Of course, anyone can use it, everybody can, and it’s legal. But it is not worth it unless you have a lot of money. Once you start earning in the millions, well…

So it’s really a middle-class issue in the advanced countries. It’s not a poor-people issue. The poor don’t pay taxes. In the US, 40 percent of people do not pay taxes, in Europe, about 30 percent.

In third place, tax havens are also facilitating a lot of what we call the shadow banking system. Much of the more complex financial instruments, really at the core of the crisis, were rooted in the shadow banking system based on tax havens. [The] Cayman [Islands are] the fourth-largest financial centre in the world. These are complex issues that go to the heart of globalisation and society.

INTERVIEW

Not just pennies in tax havens José I. Duarte

jid@macaubusinessdaily.com

Ronen Palan is a professor of international political economy at the University of Birmingham in England. The co-author of “Tax Havens: How Globalisation Really Works” was in Macau last week for a series of five lectures under the Cooperation Agreement in the Legal Field between Macau and the European Union. In an interview with Business Daily, Mr Palan said the problem of tax havens was more serious than it appeared, but that he believed new solutions were starting to work.

Y

ou came here for a five-day seminar on tax havens.

The very first question: what’s the issue with tax havens?

The problem with tax havens is, in fact, much more complicated than it may appear. There are about 70 countries that can be considered tax havens in the world. About half of the global stock of money goes through them. One third of all foreign investment goes through them. A huge amount of money, we estimate about US$1 trillion dollars in tax, is evaded every year through tax havens. So it is complex, but it is not just about tax.

First we hear the European Union is in crisis. We hear about that crisis

But you think there is more to it?

Right. The second dimension of the crisis is deeper. They call it a financial crisis, but in my view it is more than that. The problem is the increasing gap between the rich and the poor. Real wages in the United States [have] stagnated since the 1970s. The people earn more simply because they work longer hours —

Photo by Manuel Cardoso

In your seminar, you also raised the issue of political representation, the relationship between taxation and representation that is historically very much at the heart of democratic systems. So, if the very rich and the very poor do not pay taxes, what are the consequences?

Well, it is a very Eurocentric view.

It’s an advanced countries view.

Developing countries have also problems with tax havens, but they have different ones. Developing countries are the main venues for transfer pricing, for capital flight, which I see as very problematic for them. At the advanced industrial countries it is really a middle-class issue. The middle class is squeezed and tax havens are part, a big part, of the problem.

Tax havens play a major role increasing the gap between the rich and poor. Who can use tax havens, really?

The rich, the corporations… So it’s really a middle-class issue in the advanced countries. It is not a poorpeople issue. The poor don’t pay taxes

April 27, 2012 business daily | 9

Let us focus now on the less developed countries. Do you see tax havens as an obstacle to their development?

Certainly, they face huge obstacles.

They don’t have advanced tax or financial systems… In fact, if you look at graphs, you see that the countries that have the highest taxes are also the richest in the world. The main problem for developing countries is transfer pricing. Companies use complex vehicles to ensure that they pay very little taxes in the countries where they operate. Secondly, the rich, the elite, [are] not paying taxes in those countries. They are using tax havens massively for capital flight.

They don’t trust their own financial system, for good reasons. So when you hear about a lot of investment in Brazil, for example, it’s Brazilians working through tax havens putting it back. The same happens in China, through Hong Kong, BVI [British Virgin Islands]… BVI is the second-biggest investor in China.

You have identified the problems.

What are the remedies, if there are any?

There are. The remedy is to close that loophole, finish it off – not an easy one. The reason is that offshore is really the way business operates today. Business [has] got used to it, it’s hooked … Every ship is registered in Liberia, Panama … Every plane is registered in Bermuda … You name it. All the world economy is operating like this, so to do it is very difficult, almost impossible, almost inconceivable.

But there are ways.

One way is to base the system on the approach being followed with flags of convenience. Basically, the European Union and the United States will allow them to dock. But before they dock they want to check that they really comply with the labour and safety regulations. The same principle can be used here. In a way, it is starting to be used by the US, and maybe by the EU. You can be registered in a tax haven and we may allow you to operate here. But you have to provide information [about your operations]. You are not obliged to, but if you don’t want to, then do not deal with us. They are saying: you can be registered in a tax haven. We cannot impose standards in tax havens, but if you want to have business in the United States, you are accountable there.

In a way, it is by imposing standards. But does it work?

Yes, it’s starting to. You can try to persuade tax havens to change the rules. It’s a very long process.

It’s very difficult to come to an agreement about what exactly is a tax abuse. The multilateral agreements are not working well. So the EU and US are trying a different system, really starting to follow the principles I was just mentioning.

Yes, there are remedies. They are very drastic, very radical. Until now there wasn’t a political will.

And you believe there is one now?

That’s a big question. You know, when I started studying this problem, the political will was not very strong, and you could understand why. But there is now a stronger operating civil society. I think it’s getting serious.

A couple of months ago, the Economist magazine raised the question of identity of the owners. Who’s behind the companies? It’s a question that doesn’t always get a clear-cut answer. How important is that?

Photo by Manuel Cardoso

INTERVIEW

‘We are moving to new world, where the US and the EU are taking the lead. The question is China. If China will cooperate with them, that will be very significant’

Key Points • The world has 70 tax havens • Half the global stock of money flows through tax havens • Tax havens handle one-third of foreign investment • Tax havens widen the gap between the rich and poor • Tax havens allow tax evasion •Tax havens facilitate shadow banking

That relates to the history of the fight against tax havens. The fight until late in the last century was not really serious. We talked about harmful tax competition. It failed.

It failed because, conceptually, it was difficult to tell what was really harmful. If the UK is supporting Wales, a poor region, is it harmful tax competition? And, of course, we had Switzerland and Luxembourg…

The issue moved to transparency.

Know your client identity. That was the issue of the Peer Review Programme. It is a global forum attached to the OECD, where countries are peer reviewing each other. This is really about tax information agreements around the principle: if it’s legal, why keep secret the identity? This is the

process at the moment, but it is only temporary. Now we are moving to another process that the US and the EU are pushing on a bilateral level.

Now they are more concerned with the tax revenue. You identify the American evading taxes in Jersey, and you want the tax now. You don’t want to wait.

And you think the EU has a leading role in that. Can you elaborate?

The European Union really devised two separate policies. One is called the business directive, basically forbidding members or dependencies to differentiate between domestic and non-domestic activities. You can charge whatever taxes you want, as long as everybody is paying the same. This is one big

pillar. The other policy involves withholding tax and exchanging information about income that people have in other countries.

It applies to all EU countries, but includes also Switzerland.

Of course, Luxembourg and Switzerland objected, but they came to a compromise. If a country does not participate in the automatic information exchange, then it will have to withhold taxes on all savings. Basically, there is no incentive today to put your money in Switzerland.

So essentially, the US and the EU are imposing their standards by saying: if you want to do business with us, these are the rules you must follow. Do you expect the new approach to be successful?

The EU was really a leader in this.

I think the Obama administration now overtook Europe. The big mystery is China. This will be an issue for China. Macau and Hong Kong are in a very vulnerable situation. As far as the EU cooperation is concerned, Macau is not an important offshore financial centre. We are talking about 50 percent of world money, about [the] Cayman Islands being [financially] about the size of Germany. Samoa is an investor in China almost as big as the United States … But we are moving to new world, where the US and the EU are taking the lead.

The principle can be applied. The key is in their internal politics. The US and the EU are in crisis, their businesses are always claiming they are going away … The question is China. If China will cooperate with them, that will be very significant.

10 |

business daily April 27, 2012

GREATER CHINA China to improve industrial efficiency China, the world’s top steel and copper consumer, has set its 2012 target to shut down inefficient industrial metals capacity, the industry ministry said yesterday, part of efforts to reduce pollution and improve efficiency.

The Ministry of Industry and Information Technology said in a statement that it aimed to shut 7.8 million tonnes of steelmaking capacity and 700,000 tonnes of copper smelting capacity this year, compared with shutting 27.94 million tonnes and 425,300 tonnes, respectively, in 2011.

About 270,000 tonnes of aluminium capacity and 10 million tonnes of ironmaking capacity will also be removed this year, both much lower than last year’s targets.

However, Beijing will continue to keep industry consolidation among its top tasks for the 2011-2015 period as it tries to curb pollution and energy waste, as well as to encourage the development of high-tech sectors.

The ministry has ordered local governments to fulfil the targets.

China is the world’s top producer and consumer of steel, aluminium, lead and zinc and the largest consumer of copper.

In addition, the government is targeting to close 320,000 tonnes of zinc capacity and 1.15 million tonnes of lead capacity this year.

TSMC expects earnings to bounce back‎ TSMC, the world’s biggest contract chipmaker, will increase capital spending by up to some 16 percent this year, joining South Korean rivals in beefing up operations in the latest sign of optimism among global chipmakers.

Taiwan Semiconductor Manufacturing Co Ltd’s (TSMC) yesterday reported first quarter net profit falling by 7.7 percent year-over-year, but the company expects to see profit growth later in the year, as a result of better economic conditions and chip orders exceeding projections.

It plans to spend between US$8 billion and US$8.5 billion this year, compared to the US$6 billion planned at the beginning of the year and US$7.3 billion spent last year.

“TSMC has stated that the added capex will be used on 28nm and 20nm expansion and we believe is in response to customers demand exceeding its initial conservative build plan,” said CS analyst Randy Abrams in a recent report.

“The news in the last quarter has ranged from encouraging to exciting,” TSMC Chairman Morris Chang told a results briefing yesterday.

“Encouraging was macroeconomic news from the U.S. and China, which is our largest end market.

And also encouraging is the world semiconductor trend, which now looks like it will exceed our earlier forecast of 2 percent growth from last year.”

Reuters

Beijing to set US$10 billion credit line for Eastern Europe China ready to lend US$10 billion for infrastructure projects while boosting trade ties with the region, Premier Wen Jiabao said

Wen Jiabao says global recovery ‘uncertain’ after some improvement

C

hina and Europe need to “face challenges together” as the global economic recovery remains “uncertain” even as the situation improved from the start of the year, Premier Wen Jiabao said in Warsaw yesterday.

“The global economy has begun to perform better since the beginning of the year but the recovery is still uncertain,” Mr Wen said in a speech to a regional economic forum. “We have to face this challenge together.”

Beijing is also ready to sign “currency exchange agreements” with Central and Eastern European nations to boost trade flows with the region, China’s Premier added.

Mr Wen announced a US$10 billion special credit line for central and eastern Europe to support cooperation projects mainly in the infrastructure sector.

“To boost practical cooperation with

central and east European countries, the Chinese government has decided to set up a US$10 billion special credit line,” Mr Wen told thousands of delegates at a major China-Central Europe economic forum.

They will include “a certain amount of concessional loans to support cooperation projects in infrastructure, high and new technologies and green economy.”

The Chinese leader, who is winding up a four-nation European tour with earlier stops in Iceland, Germany and Sweden, also announced plans for a US$500 million fund to help Chinese business ventures in the region.

“China will set up a China-Central and Eastern Europe fund for investment cooperation and our goal is to raise US$500 million for the fund in the first stage,” Mr Wen added in a joint address with Polish Prime Minister Donald Tusk.

Analysts in Warsaw say the cashladen Chinese are eager to capitalise the region’s stability, growth and competitive prices to gain “perfect access to the West European market” - still Beijing’s top export destination.

Pointing out that China’s two-way trade with central and eastern Europe “rose from only US$4.3 billion in 2001 to US$52.9 billion in 2011, growing at an average annual rate of 27.6 percent,” Mr Wen said Beijing wanted to see bilateral trade to reaching US$100 billion by 2015.

“China is aware of the concerns about trade imbalances expressed in Europe and is prepared to increase its imports from the region,” Mr Wen told the business gathering.

Yesterday’s trade forum gathered three hundred Chinese firms and 450 companies from across the region in Warsaw.

Moody’s confirms China AA3 rating Rating agency says mainland’s real economic growth rate to ease to a range of between 7.5-8.5 percent in 2012

C

hina’s sovereign rating outlook remains positive, supported by favourable medium-term growth prospects and strong government debt dynamics, Moody’s Investors Service said in a report yesterday.

The ratings agency made no change to its Aa3 foreign and local currency bond ratings in the report, but said Beijing must retain tight control over local government finances and make reforms in the financial system to ensure rapid and stable economic growth for the rest of the decade.

“Rapid economic growth, coupled with low deficits and debt of the central government, have provided ample fiscal headroom to manage contingent risks in local government finances, or in the banking system,” Moody’s said in a statement accompanying the report.

Moody’s said it expects China’s real

economic growth rate to ease to a range of between 7.5-8.5 percent in 2012 and 2013 from the more heady 10.3 percent pace of the last decade.

Economists polled by Reuters earlier this month expected the economy to grow 8.4 percent this year. After a sluggish patch in the first quarter, growth is expected to rebound and steadily tick up to reach 8.7 percent

by April-June 2013.

Moody’s also said China’s trade and financial exposures to the continuing problems in the euro zone were moderate to low.

The report said China’s large scale provided stability against shocks and offsets institutional weaknesses associated with the relatively low per capita income level in the world’s second-biggest economy.

But it cautioned that institutional strength was moderate in comparison with most other

highly-rated sovereigns and that more needed to be done to develop transparency.

“Political, economic, and financial event risks, which could prompt an abrupt, multi-notch downgrade, are considered as low and manageable, but not unimaginable,” the Moody’s statement said.

China took a milestone step in turning the yuan into a global currency this month by doubling the size of its trading band against the dollar to 1 percent, pushing through a crucial reform to further liberalise its financial markets.

China’s cabinet has also approved a pilot project in the coastal city of Wenzhou that could form the cornerstone of national financial sector reforms, with a plan to create a clutch of new institutions to bring private sector funds into China’s state controlled banking system.

Reuters

April 27, 2012 business daily | 11

ASIA

InBrief Thai exports fall on weak demand Export outlook far from positive because of the slow recovery after the floods Suttinee Yuvejwattana

Hyundai profits rise as sales grow Hyundai Motors has said profit rose 31 percent in the first quarter as strong sales in the US and Europe helped to offset lower demand in its domestic market, driving quarterly net profit up to US$2.15 billion, its highest since changing accounting methods a year ago. The US$54 billion South Korean carmaker, which with affiliate Kia Motors is the world’s fifth largest, said it expects to beat an aggressive sales target for Europe - of an increase of 15.4 percent to 465,000 vehicles this year - even though the market is seen falling 5 percent. After a period of breakneck growth, Hyundai’s engine is slowing, but not stalling. Net profit is expected to grow 9 percent to a record 8.85 trillion won this year.

OECD chief supports forex reserves Countries like South Korea should secure more foreign exchange reserves when global economic conditions are as uncertain as they are now, the head of the Organisation for Economic Cooperation and Development said yesterday. OECD Secretary-General Angel Gurria told a press conference on the OECD’s report on the South Korean economy that holding large amounts of dollars could lead to greater costs due to interest rate differentials the central bank may have to pay. But he said having significant foreign-exchange reserves during times of economic uncertainty can preserve investor confidence, leading to lower debt costs and making it easier to access markets.

“In today’s time of high uncertainty, when you’re given the choice, perhaps the best choice is to go for more prudence,” he said.

Thai exports for March fell 6.5 percent year-on-year, the fourth decline in five months

T

hai exports fell in March, the fourth decline in five months, as a growth slowdown in China and Europe’s debt crisis sapped demand and factories struggled to resume full production after last year’s flood crisis.

Overseas sales dropped 6.5 percent from a year earlier to US$19.87 billion, the Ministry of Commerce said in Nonthaburi province outside Bangkok yesterday. That compares with 0.9 percent growth in February reported earlier. The median of 12 estimates in a Bloomberg News survey was for a 0.5 percent rise.

Taiwan’s export orders fell in March for a third time in four months, and the International Monetary Fund warned last week an escalation of the euro-area crisis may reduce output in Asia’s emerging markets.

Thailand’s export promotion department indicated this week

shipments will probably contract for the first three months of the year because of the lingering impact of last year’s deluge and a high base from a year earlier.

“The export outlook is not that good because of the slow recovery after the floods, coupled with weakening global demand,” Usara Wilaipich, a Bangkok-based economist at Standard Chartered Plc, said before the release. “When the factories resume and complete their old orders, we may see that new orders are weak. The slowdown in Europe and China will hurt.”

Imports surged 25.6 percent in March from a year earlier as fuel prices increased and companies replaced machinery damaged in the floods, contributing to a record US$4.59 billion trade deficit, Deputy Commerce Minister Poom Sarapol said at a media briefing yesterday.

In February, imports gained 8.3 percent and Thailand reported a US$530 million trade surplus.

The country’s worst floods in almost 70 years disrupted the supply chains of companies from Apple Inc. to Toyota Motor Corp. Honda Motor Co. resumed output at its Thai factory late last month after halting production in October and aims to run at full capacity to meet demand, the company said March 31.

“We think second-quarter exports will be better than the first quarter and will be positive,” Mr Poom said.

“That’s why we are still keeping our export target at 15 percent growth.”

Shipments to Europe fell 15.3 percent and sales to Japan dropped 3.6 percent in March, Poom said.

Exports to the U.S. increased 5.3 percent and shipments to China gained 1.1 percent.

Bloomberg

Asian markets up after Bernanke comments Stocks across the region edged up yesterday after a cautiously upbeat assessment of the US economy by the Federal Reserve

Nintendo posts first annual loss Nintendo, the Japanese game giant, has reported its first annual loss after disappointing sales of its Wii game console and a strong yen hit revenues.

The net loss for the year ended March 31 was 43.2 billion yen ($458 million).

Analysts expected a 58.1 billion-yen loss, according to estimates. It was the first loss since the company went public, Senior Managing Director Yoshihiro Mori told reporters yesterday.

“What went wrong was that sales of the 3DS didn’t take off as we expected,” Nintendo President Satoru Iwata said. “The stronger yen against the euro was also another reason.” The company plans to introduce the 3DS in South Korea this week and in remaining Asian markets this fiscal year, Iwata said. The company expects to return to profit in 2012 as the yen weakens.

A

sian stocks rose, with the regional benchmark index gaining for a second day, after Federal Reserve Chairman Ben S. Bernanke said he’s prepared to do more to stimulate U.S. growth if needed.

Samsung Electronics Co., South Korea’s biggest consumer electronics maker, climbed 2.7 percent. Hitachi Chemical Co. jumped 6.7 percent in Tokyo on a rating boost by Credit Suisse Group AG after the semiconductor materials supplier forecast higher earnings. Fanuc Ltd. sank 6.1 percent after the maker of factory robots said operating profit will fall.

“The Federal Reserve didn’t rule out the possibility of additional monetary easing,” said Mitsushige Akino, who oversees about US$600 million in Tokyo at Ichiyoshi Investment Management Co. “That’s leading to confidence among investors.”

The MSCI Asia Pacific Index increased

0.6 percent to 124.26 as of 5:12 pm in Tokyo, with almost three shares rising for every two that fell. Asian stocks extended a global rally spurred by better-than-estimated earnings at companies from Boeing Co. to Corning Inc. South Korea’s Kospi Index gained 0.1 percent after the economy expanded at the fastest pace in a year. Australia’s S&P/ASX 200 Index added 0.3 percent as it resumed trading after yesterday’s holiday.

Exporters gain Japan’s Nikkei 225 Stock Average closed little changed, erasing gains of as much as 0.7 percent, after ruling party power broker Ichiro Ozawa was found not guilty of violating campaign finance laws, raising concern this will embolden him to oppose Prime Minister Yoshihiko Noda’s plan to raise the consumption tax.

“Foreign investors are looking at this and thinking, ‘this will mean more chaos in government and less progress in the debate on taxes,’” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. Futures on the Standard & Poor’s 500 Index rose 0.3 percent yesterday. The gauge gained 1.4 percent in New York on Wednesday as Bernanke said the Fed stands ready to add to its stimulus if necessary even after leaving its policy unchanged and upgrading its view of the U.S. economy for this year.

Asian exporters advanced after Fed policy makers said they expect growth will gradually accelerate, while refraining from new action to lower borrowing costs. Central bankers upgraded their forecasts for economic growth and unemployment while repeating their view that borrowing costs are likely to remain “exceptionally low” at least through late 2014.

Bloomberg

12 |

business daily April 27, 2012

MARKETS Ticker NAME

Hang SENG INDEX Ticker NAME

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

13

HUTCHISON WHAMPO

1398

IND & COMM BK-H

494

LI & FUNG LTD

PRICE

Day %

VOLUME

(H) 52W

(L) 52W

74.85

0.8760108

4255588

93.1

53.6

5.15

0.3898635

197898553

6.75

3.46

16.84

1.568154

18346092

20.15

10.82

1299

AIA GROUP LTD

27.15

-0.5494505

23734698

29.9

19.84

66

MTR CORP

27.3

0.7380074

1067079

28.8

22.45

2600

ALUMINUM CORP-H

3.79

0.7978723

16655541

7.45

3.2

17

NEW WORLD DEV

9.36

3.311258

17382922

12.675

6.13

3988

BANK OF CHINA-H

3.24

0.9345794

205714980

4.43

2.2

857

PETROCHINA CO-H

11.3

1.436266

38603825

11.92

8.59

3328

BANK OF COMMUN-H

5.86

1.384083

14126005

7.7

4.15

2318

PING AN INSURA-H

63.75

2.491961

12907228

86.85

37.35

23

BANK EAST ASIA

1880

BELLE INTERNATIO

2388

BOC HONG KONG HO

293

CATHAY PAC AIR

28.7

0.7017544

1942537

34.45

21.85

6

POWER ASSETS HOL

57.3

0.3502627

1381133

64.8

52

15.08

0.9370817

10321900

17.54

11.38

83

SINO LAND CO

13.32

-0.2994012

5267270

14.16

8.482

23.5

1.075269

16546646

24.7

14.24

16

SUN HUNG KAI PRO

94.75

0.1585624

5329858

124.4

85.45

13.16

1.857585

5165591

20.15

11.8

19

SWIRE PACIFIC-A

89.85

1.525424

1733434

102.539

69.321

1

CHEUNG KONG

101.7

1.395813

4370145

127

79.1

700

TENCENT HOLDINGS

233.4

2.54833

3790131

241

139.8

1898

CHINA COAL ENE-H

8.62

0.9367681

13420614

11.66

6.59

322

TINGYI HLDG CO

19.88

0.1007049

7768300

26

17.84

939

CHINA CONST BA-H

5.94

0.3378378

187151252

7.55

4.41

151

WANT WANT CHINA

9.5

-0.1051525

18544035

9.58

6.03

2628

CHINA LIFE INS-H

20.8

1.463415

47215150

29.4

17.04

4

WHARF HLDG

45.7

0.660793

2394755

59

33.15

144

CHINA MERCHANT

24.85

-0.2008032

1780000

37.5

19

941

CHINA MOBILE

84.65

-0.2357101

11040588

87.6

68.05

688

CHINA OVERSEAS

16.5

1.97775

25660411

17.86

9.99

386

CHINA PETROLEU-H

8.19

0.4907975

37256808

9.67

6.22

291

CHINA RES ENTERP

27.8

2.205882

2492575

35.5

24

1109

CHINA RES LAND

14.92

1.496599

11920000

15.6

7.28

836

CHINA RES POWER

13.8

0.729927

2186831

16.2

10.82

1088

CHINA SHENHUA-H

33.7

0.1485884

7477804

40.2

27.1

762

CHINA UNICOM HON

13.54

3.993856

49980506

17.68

12.6

267

CITIC PACIFIC

12.66

0.1582278

2053230

23.85

10.26

2

CLP HLDGS LTD

66.2

0.4552352

751637

75.2

62.1

883

CNOOC LTD

16.3

0.9913259

30844209

20.1

11.2

1199

COSCO PAC LTD

11.2

1.083032

3164000

17.16

7.52

330

ESPRIT HLDGS

16.12

-0.2475248

3703545

33.95

7.55

101

HANG LUNG PROPER

28.85

0.3478261

3124158

35.3

20.85

11

HANG SENG BK

105.1

0.4780115

1322208

125

84.4

12

HENDERSON LAND D

44

-1.234568

7268105

54.25

33.2

1044

HENGAN INTL

82.05

2.690864

2320260

83.45

56.8

3

HONG KG CHINA GS

19.84

-0.5015045

5291065

20.65

16.68

388

HONG KONG EXCHNG

124.5

-0.7177033

5150505

182.5

99.15

5

HSBC HLDGS PLC

69.8

1.086169

15254142

85.35

56

INDEX 20809.71 52W (H) 24260.76 (L) 16170.35 MOVERS 39 9 0

IN FOCUS Major Asian indices - Year-to-date performance, % variation NIKKEI 225 HANG SENG INDEX CSI 300 INDEX TAIWAN TAIEX INDEX KOSPI INDEX

Shanghai Shenzhen CSI 300 NAME

0

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.73

-0.3649635

48934619

AIR CHINA LTD-A

6.25

0

7971215

NAME CHINA SOUTHERN-A CHINA STATE -A

3 NAME

6

9

12

15

PRICE

DAY %

VOLUME

PRICE

DAY %

4.9

1.659751

54377167

NINGBO PORT CO-A

2.65

-0.7490637

VOLUME 22042512

3.34

-1.183432

60952439

PANGANG GROUP -A

8.1

0

84489235

ALUMINUM CORP-A

7.18

2.425107

34164604

CHINA UNITED-A

4.38

0.228833

112778345

PETROCHINA CO-A

9.91

-0.1008065

9593083

ANGANG STEEL-A

4.39

0

10551610

CHINA VANKE CO-A

8.95

0.7882883

67000017

PING AN INSURA-A

41.19

0.9558824

22400438 42212434

ANHUI CONCH-A

17.65

-0.5633803

23567318

CHINA YANGTZE-A

6.48

-0.7656968

19975375

POLY REAL ESTA-A

12.31

0

BANK OF BEIJIN-A

10.4

-0.09606148

30350712

CITIC SECURITI-A

13.13

-0.2279635

105584972

QINGHAI SALT-A

33.62

0.4181601

4842743

BANK OF CHINA-A

3.05

0

19811061

CSR CORP LTD -A

5.04

0

46529357

SAIC MOTOR-A

15.2

-1.041667

10664232

BANK OF COMMUN-A

24446702

4.86

0

49822406

DAQIN RAILWAY -A

7.45

-0.1340483

37841143

SANY HEAVY INDUS

14.52

1.184669

BAOSHAN IRON & S

5

0.2004008

21934077

DATANG INTL PO-A

5.09

-0.5859375

2914155

SHANDONG GOLD-MI

34.81

-0.1720677

9760403

BBMG CORPORATI-A

8.59

-0.4634994

35037823

DONGFANG ELECT-A

22.35

0.2242152

9486483

SHANG PUDONG-A

9.37

0.2139037

53826936

BYD CO LTD -A

26.39

-3.686131

5903028

4.52

-0.4405286

21422819

CHINA CNR CORP-A

4.53

-0.8752735

CHINA COAL ENE-A

9.41

0.8574491

CHINA CITIC BK-A

EVERBRIG SEC -A

13.59

0.0736377

24024884

SHANGHAI ELECT-A

GD MIDEA HOLDING

13.34

0.9077156

25363225

SHANXI LU'AN -A

57022550

GD POWER DEVEL-A

2.56

0

36261802

20531116

GF SECURITIES-A

31

0.7147498

9141991

CHINA CONST BA-A

4.79

-0.4158004

22525582

GREE ELECTRIC

21.57

0.1857873

12546598

CHINA COSCO HO-A

5.39

-1.282051

14335251

GUIZHOU PANJIA-A

31.74

-0.5639098

5422837

CHINA CSSC HOL-A

37.86

6.109865

21074869

HAITONG SECURI-A

10.02

1.212121

87758593

46.6

2.507699

2127031

3

-0.6622517

19440261

CHINA EAST AIR-A

4.04

2.278481

30908339

HANGZHOU HIKVI-A

CHINA EVERBRIG-A

2.98

-0.6666667

35472199

HEBEI IRON-A

CHINA HAINAN-A

8.01

10.02747

75101032

HENAN SHUAN-A

64.35

-1.045671

2105901

CHINA INTL MAR-A

15.5

3.471295

23843263

HUATAI SECURIT-A

10.71

3.478261

55212345

5.67

-0.5263158

3775125

27.58

0.2909091

13544370

SHANXI XISHAN-A

17.63

0.8581236

51606121

SHENZ DVLP BK-A

16.58

-1.660735

28341442 46980552

7.54

0

SINOVEL WIND-A

SHENZEN OVERSE-A

15.79

-1.127113

1872823

SUNING APPLIAN-A

10.42

-0.8563273

39336252

TSINGTAO BREW-A

33.9

-0.4112808

1998656

WEICHAI POWER-A

33.59

0.1490757

6636305

WULIANGYE YIBIN

35.3

2.407891

20765045

XCMG CONSTRUCT-A

15.1

-0.06618134

13317857

CHINA LIFE INS-A

18.32

-1.079914

18406594

HUAXIA BANK CO

11.26

0.1779359

20677545

XINJIANG GUANG-A

24.85

0.6072874

9432388

CHINA MERCH BK-A

12.22

-0.407498

36400008

IND & COMM BK-A

4.39

-0.678733

38186475

YANGQUAN COAL -A

19.86

-0.4511278

22583735

CHINA MERCHANT-A

13.15

-0.2276176

25751724

INDUSTRIAL BAN-A

14.24

-0.1402525

87479022

YANTAI CHANGYU-A

91.51

-1.091656

1514788

CHINA MERCHANT-A

22.81

0.5288673

10087823

INNER MONG BAO-A

69.49

-1.236498

27889646

YANZHOU COAL-A

23.66

1.807229

7840963

CHINA MINSHENG-A

6.6

0.1517451

112711209

INNER MONG YIL-A

21.91

-1.217313

11923217

YUNNAN BAIYAO-A

50.61

0.8368201

3502513

CHINA NATIONAL-A

6.8

3.658537

30225326

INNER MONGOLIA-A

6.03

-2.11039

76443052

ZHONGJIN GOLD

23.04

-0.7324429

11702891

CHINA OILFIELD-A

17.26

0.817757

7782938

CHINA PACIFIC-A

21.81

-0.5018248

17412277

JIANGSU YANGHE-A JIANGXI COPPER-A

161

2.202755

739818

4.38

-0.4545455

54521862

26.01

1.641266

17457591

ZOOMLION HEAVY-A

10.09

1.102204

57577508

ZTE CORP-A

17.19

-2.385009

20191270

CHINA PETROLEU-A

7.28

0

26793212

JINDUICHENG -A

14.47

1.54386

20510461

CHINA RAILWAY-A

2.76

0

68327172

JIZHONG ENERGY-A

19.96

-0.2997003

15083279

CHINA RAILWAY-A

4.46

-0.8888889

35286352

KWEICHOW MOUTA-A

216.69

1.770618

3501976

CHINA SHENHUA-A

26.81

0.7894737

14263274

LUZHOU LAOJIAO-A

42.95

0.9400705

4874004

CHINA SHIPBUIL-A

6.19

1.309329

36994395

METALLURGICAL-A

2.69

0

26524336

CHINA SHIPPING-A

3.08

-1.282051

32355980

NARI TECHNOLOG-A

20.01

2.091837

8797152

NAME

Hang SENG CHINA ENTErPRISE INDEX NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.62

1.40056

123570565

AIR CHINA LTD-H

5.12

0

0

ALUMINUM CORP-H

3.79

0.7978723

25.85

BANK OF CHINA-H BANK OF COMMUN-H

ANHUI CONCH-H

BYD CO LTD-H

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

6.12

0.990099

5395727

PETROCHINA CO-H

11.3

1.436266

38603825

CHINA MERCH BK-H

16.54

1.847291

9433713

PICC PROPERTY &

9.63

0.5219207

8437167

CHINA MINSHENG-H

7.71

2.663116

64864862

PING AN INSURA-H

63.75

2.491961

12907228

SHANDONG WEIG-H

NAME

10.4

-0.1919386

33457182

8.9

5.325444

4852080

CHINA OILFIELD-H

11.92

0.1680672

4156558

SINOPHARM-H

19.84

-0.6012024

3983528

16655541

CHINA PACIFIC-H

25.85

0.7797271

5474874

TSINGTAO BREW-H

45.65

0.219539

659704

0.3883495

10666657

CHINA PETROLEU-H

8.19

0.4907975

37256808

WEICHAI POWER-H

36.05

-0.9615385

3876539

3.24

0.9345794

205714980

CHINA RAIL CN-H

6.03

4.145078

11784453

YANZHOU COAL-H

16.42

1.233046

7231832

5.86

1.384083

14126005

CHINA RAIL GR-H

3.09

4.040404

24039680

ZIJIN MINING-H

2.9

-0.3436426

29490469

11.5

3.417266

18477184

19.28

-1.632653

15054110

CHINA NATL BDG-H

20.05

-4.976303

10133953

CHINA SHENHUA-H

33.7

0.1485884

7477804

4.77

0.4210526

14207189

CHINA TELECOM-H

4.11

0

26442634

CHINA COAL ENE-H

8.62

0.9367681

13420614

DONGFENG MOTOR-H

15.2

1.333333

14567615

CHINA COM CONS-H

7.82

0.2564103

9932344

CHINA CONST BA-H

5.94

0.3378378

187151252

CHINA COSCO HO-H

4.51

-1.528384

CHINA LIFE INS-H

20.8

1.463415

GUANGZHOU AUTO-H

8.33

0.6038647

4435485

HUANENG POWER-H

4.41

-1.342282

23136129

18901942

IND & COMM BK-H

5.15

0.3898635

197898553

47215150

JIANGXI COPPER-H

18.52

1.870187

9421119

NAME

PRICE DAY %

FTSE TAIWAN 50 INDEX ACER INC

INDEX 2631.487 52W (H) 3325.45 (L) 2254.567 MOVERS 141 134 25

CHINA LONGYUAN-H

CHINA CITIC BK-H

NAME

ZIJIN MINING-A

PRICE DAY %

Volume

Volume

ZOOMLION HEAVY-H ZTE CORP-H

INDEX 10911.55 52W (H) 13721.26 (L) 8058.58 MOVERS 30 8 20

PRICE DAY %

Volume

FAR EASTERN NEW

33.15

0.4545455

1750231

NAME SINOPAC FINANCIA

9.94 -0.5005005

9357117

FAR EASTONE TELE

63.6

-1.700155

3979096

SYNNEX TECH INTL

69.1

0.8759124

5493429

FIRST FINANCIAL

17.5 -0.2849003

9217693

TAIWAN CEMENT

34.3 -0.5797101

7327894

FORMOSA CHEM & F

84.2

0.2380952

1948846

TAIWAN COOPERATI

17.7

0.5681818

3480071

TAIWAN FERTILIZE

70.8

0.2832861

2026021

33.45

-1.327434

20130437

FORMOSA PETROCHE

88.3

0.6841505

979228

ADVANCED SEMICON

28.3

-2.076125

11624353

FORMOSA PLASTIC

83.9

0.5995204

7639449

TAIWAN GLASS IND

29.85

0

1322473

ASIA CEMENT CORP

36.5

0.1371742

4944897

FOXCONN TECHNOLO

100

-3.381643

8478580

TAIWAN MOBILE CO

92.5

0.5434783

2039673

ASUSTEK COMPUTER

288

0.3484321

8600079

FUBON FINANCIAL

30.75

-1.284109

15039089

TPK HOLDING CO L

380

-1.298701

5888605

AU OPTRONICS COR

13.65

-2.5

36237397

HON HAI PRECISIO

104

-1.886792

31249413

TSMC

84 -0.2375297

21066491

CATCHER TECH

HOTAI MOTOR CO

188

1.621622

1702077

UNI-PRESIDENT

42.5

0.9501188

4601342

HTC CORP

453

-3.719447

7173399

UNITED MICROELEC

14.95

0.3355705

53612076

43.25 -0.8027523

192.5

-1.785714

9224632

CATHAY FINANCIAL

30.8

-1.123596

10685259

CHANG HWA BANK

16.15

0.310559

9480665

HUA NAN FINANCIA

16.4 -0.3039514

4013400

WISTRON CORP

CHENG SHIN RUBBE

71.3

0.9915014

4455608

LARGAN PRECISION

536 -0.1862197

1502440

YUANTA FINANCIAL

CHIMEI INNOLUX C

12.75

-2.671756

12382999

LITE-ON TECHNOLO

35.3

-1.396648

3379893

YULON MOTOR CO

7.52 -0.1328021

59406725

MEDIATEK INC

257

-2.281369

7624389

CHINA DEVELOPMEN CHINA STEEL CORP

29

0.5199307

9676069

MEGA FINANCIAL H

22.4

1.128668

26845043

17.95

0.5602241

19261097

NAN YA PLASTICS

60.1

0

3088501

CHUNGHWA TELECOM

90.6

0.1104972

7750954

PRESIDENT CHAIN

159

0

978223

COMPAL ELECTRON

32.6

-3.407407

8980117

QUANTA COMPUTER

74.9

-1.056803

6017727

89

-3.26087

7504556

SILICONWARE PREC

33.7

-2.881844

21145677

CHINATRUST FINAN

DELTA ELECT INC

4847709

13.9

0

26304224

46

0

4836687

INDEX 5223.31 52W (H) 6265.48 (L) 4643.05 MOVERS 19 26 5

April 27, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) galaXy eNtertaINMeNt

Max 24.00

average 23.54

Melco croWN eNtertaINMeNt

Min 23.00

24.0

43

14.50

23.8

42

14.45

23.6

41

14.40

23.4

40

14.35

23.2

39

14.30

23.0

last 23.75

SaNDS cHINa ltD

Max 31.70

average 31.16

Max 40.10

average 40.10

Min 40.10

last 40.10

38

Max 14.44

SJM HolDINgS ltD

Min 30.80

last 31.05

average 14.39

Min 14.32

14.25

last 14.44

WyNN Macau ltD

31.8

17.10

24.0

31.6

17.05

23.9

31.4

17.00

23.8

31.2

16.95

23.7

31.0

16.90

23.6

30.8

23.5

16.85 Max 17.06

average 16.99

Min 16.90

IN FOCUS

last 17.02

Max 24.00

average 23.75

Min 23.55

last 24.00

CURRENCY EXCHANGE RATES

Indian Rupee - US Dollar exchange rate

27-Apr-2011

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

AUD

1.0389

0.5225

1.7632

1.1081

0.9388

GBP

1.62

0.6399

4.227

1.6747

1.5235

0.022

CHF

0.9074

0.2425

3.3833

0.9596

0.7071

EUR

1.3241

0.2119

2.1603

1.494

1.2624

0.021

JPY

81.1

0.185

-5.1665

84.18

75.35

MOP

7.9916

0

0.1001

8.0449

7.9823

0.020

HKD

7.7588

0.0052

0.1108

7.8113

7.7529

CNY

6.3057

-0.0222

-0.1697

6.5098

6.2846

0.019

INR

52.5813

-0.069

0.9199

54.305

43.855

THB

30.85

0.2593

2.269

31.96

29.63

0.018

SGD

1.2413

0.282

4.455

1.3199

1.1992

0.023

26-Apr-2012

MAJORS

ASIA PACIFIC

MACAU RELATED STOCKS NAME

MgM cHINa HolDINgS

PRICE

DAY % YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

ARISTOCRAT LEISU

3.13

-0.3184713

42.27272

3.25

1.88

2718012

CROWN LTD

9.06

1.116071

11.99011

9.2

7.45

1742786

AMAX HOLDINGS LT

0.091

4.597701

4.597704

0.143

0.06

16678000

BOC HONG KONG HO

23.5

1.075269

27.71739

24.7

14.24

16546646

CENTURY LEGEND

0.26

0

13.04348

0.41

0.204

0

CHEUK NANG HLDGS

3.15

-0.9433962

12.5

4.79

2.3

136000 25660411

CHINA OVERSEAS

16.5

1.97775

27.11865

17.86

9.99

CHINESE ESTATES

10.78

0.7476636

-13.76

14.8

10.2

116500

CHOW TAI FOOK JE

11.66

0.5172414

-16.23563

15.16

11.46

2010800

EMPEROR ENTERTAI

1.38

-0.7194245

24.32432

2.09

0.97

240000

FUTURE BRIGHT

0.92

0

119.0476

1.04

0.3

7272000

GALAXY ENTERTAIN

23.75

3.71179

66.78371

24.35

8.69

27139179

HANG SENG BK

105.1

0.4780115

14.05317

125

84.4

1322208

HOPEWELL HLDGS

21.05

2.682927

5.99194

24.903

18.56

845449

HSBC HLDGS PLC

69.8

1.086169

18.30508

85.35

56

15254142

HUTCHISON TELE H

3.46

0

15.71906

3.6

2.13

1738005

LUK FOOK HLDGS I

20.65

0.9779951

-23.80074

46.15

19.2

2153001

CROSSES

AUD HKD

TWD

29.368

0.395

3.102

30.716

28.48

PHP

42.49

0.4119

3.1772

44.35

41.879

IDR

9192

0.0762

-1.3381

9367

8458

AUDJPY

84.245

-0.3347

-6.9001

89.601

72.057

EURCHF

1.20149

0.0216

1.2734

1.29654

1.00749

EURGBP

0.81731

0.4356

1.9674

0.90835

0.81444

EURCNY

8.3554

-0.304

-2.6474

9.6769

7.9674

EURMOP

10.5809

-0.2013

-2.1633

11.9509

10.1031

EURJPY

107.38

-0.0279

-7.1894

121.84

97.04

1.03

-0.0097

0.0097

1.0311

1.0288

HKDMOP

World Stock MarketS - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

NAME

US

13090.72

0.6857639

7.146764

13297.11

10404.49

NASDAQ COMPOSITE INDEX

US

3029.63

2.297069

16.29388

3134.17

2298.89 4791.01

FTSE 100 INDEX

GB

5743

0.4215853

3.063741

6103.73

DAX INDEX

GE

6688.26

-0.2422254

13.39205

7600.410156

4965.8

JN

9561.83

0.0085765

13.08616

10255.15

8135.79

8.08

0.4975124

40.03466

10.76

4.3

5704002

NIKKEI 225

MGM CHINA HOLDIN

14.44

-0.1383126

50.53971

17.183

7.6

1909700

HANG SENG INDEX

HK

20809.71

0.7915224

12.88527

24260.76953

16170.35

MIDLAND HOLDINGS

4.02

1.005025

-0.4950486

5.976

2.95

756002

CSI 300 INDEX

CH

2631.487

0.2093306

12.18144

3257.8

2254.567

NEPTUNE GROUP

0.11

-0.9009009

-0.9009022

0.157

0.08

60000

NEW WORLD DEV

9.36

3.311258

49.52076

12.675

6.13

17382922

TAIWAN TAIEX INDEX

TA

7521.35

-0.5530742

6.352728

9099.75

6609.11

SANDS CHINA LTD

31.05

-2.358491

41.45785

33.05

14.9

21370154

MELCO INTL DEVEL

KOSPI INDEX

SK

1964.04

0.104996

7.575014

2231.47

1644.11

S&P/ASX 200 INDEX

AU

4375.201

0.3383598

7.854946

4930.6

3765.9

SHUN HO RESOURCE

1.19

-0.8333333

19

1.32

0.82

0

SHUN TAK HOLDING

3.17

-0.6269592

23.8703

4.686

2.241

1056784

JAKARTA COMPOSITE INDEX

ID

4180.306

0.4002024

9.375065

4232.923

3217.951

SJM HOLDINGS LTD

17.02

0.7100592

34.22713

21

10.22

8422359

SMARTONE TELECOM

16.06

-0.1243781

19.49405

18.5

9.8

2654456

FTSE Bursa Malaysia KLCI

MA

1579.69

0.02152784

3.198471

1609.33

1310.53

24

1.910828

23.07692

27.48

14.807

3711356

NZX ALL INDEX

NZ

785.197

-0.03170173

7.59067

814.431

700.441

ASIA ENTERTAINME

5.96

3.114187

1.360542

10.8692

4.72

128453

2695.06

BALLY TECHNOLOGI

47.43

1.259607

19.89383

48.5

24.74

887692

BOC HONG KONG HO

3.01

0

25.56381

3.16

1.81

13050

WYNN MACAU LTD

GALAXY ENTERTAIN

2.95

1.724138

57.75401

3.09

1.08

18746

INTL GAME TECH

16.23

2.075472

-5.639539

19.15

13.38

11395543

JONES LANG LASAL

80.77

1.380695

31.84787

107.77

46.01

272930

LAS VEGAS SANDS

58.78

4.219858

37.56143

62.09

36.08

12465193

MACAU CAPITAL IN

0.11

0

9.999998

0.11

0.11

500

MELCO CROWN-ADR

15.78

4.572565

64.03327

16.15

7.05

6538633

MGM CHINA HOLDIN

1.78

0

49.36731

2.21314

1.00254

1500

MGM RESORTS INTE

13.35

2.220521

27.99616

16.05

7.4

8673225

SHUFFLE MASTER

16.91

2.051901

44.28327

18.77

7.35

324172

2.2

0

34.96933

2.64

1.28

8880

128.9

3.359795

16.66214

165.4931

101.02

2838127

SJM HOLDINGS LTD WYNN RESORTS LTD

USD

PHILIPPINES ALL SHARE IX

PH

3481.94

0.2793586

14.34792

3499.2

HSBC Dragon 300 Index Singapor

SI

579.9

0.57

16.84

na

na

STOCK EXCH OF THAI INDEX

TH

1212.39

0.9181261

18.24504

1214.31

843.69

HO CHI MINH STOCK INDEX

VN

470.21

-0.5625225

33.75338

488.02

332.28

Laos Composite Index

LO

1021.07

-1.080196

13.52033

1340.97

876.33

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

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business daily April 27, 2012

Opinion

A World adrift

Jeffrey D. Sachs

Professor of Economics and Director of the Earth Institute at Columbia University

T

he annual spring meetings of the International Monetary Fund and the World Bank have provided a window onto two fundamental trends driving global politics and the world economy. Geopolitics is moving decisively away from a world dominated by Europe and the United States to one with many regional powers but no global leader. And a new era of economic instability is at hand, owing as much to physical limits to growth as to financial turmoil.

Europe’s economic crisis dominated this year’s IMF/World Bank meetings.

The Fund is seeking to create an emergency rescue mechanism in case the weak European economies need another financial bailout, and has turned to major emerging economies – Brazil, China, India, the Gulf oil exporters, and others – to help provide the necessary resources. Their answer is clear: yes, but only in exchange for more power and votes at the IMF. As Europe wants an international financial backstop, it will have to agree.

Of course, the emerging economies’ demand for more power is a wellknown story. In 2010, when the IMF last increased its financial resources, the emerging economies agreed to the deal only if their voting share within the IMF was increased by around 6 percent, with Europe losing around 4 percent. Now emerging markets are demanding an even greater share of power.

The underlying reason is not difficult to see. According to the IMF’s own data, the European Union’s current members accounted for 31 percent of

the world economy in 1980 (measured by each country’s GDP, adjusted for purchasing power). By 2011, the EU share slid to 20 percent, and the Fund projects that it will decline further, to 17 percent, by 2017.

This decline reflects Europe’s slow growth in terms of both population and output per person. On the other side of the ledger, the global GDP share of the Asian developing countries, including China and India, has soared, from around 8 percent in 1980 to 25 percent in 2011, and is expected to reach 31 percent by 2017.

The US, characteristically these days, insists that it will not join any new IMF bailout fund. The US Congress has increasingly embraced isolationist economic policies, especially regarding financial help for others.

This, too, reflects the long-term wane of US power. The US share of global GDP, around 25 percent in 1980, declined to 19 percent in 2011, and is expected to slip to 18 percent in 2017, by which point the IMF expects that China will have overtaken the US economy in absolute size (adjusted for purchasing power).

A complex power shift But the shift of global power is more complicated than the decline of the North Atlantic (EU and US) and the rise of the emerging economies, especially the BRICS (Brazil, Russia, India, China, and South Africa). We are also shifting from a unipolar world, led mainly by the US, to a truly multipolar world, in which the US, the EU, the BRICS, and smaller

The weaknesses of global policy cooperation are especially worrisome in view of the gravity of the challenges that must be met

powers (such as Nigeria and Turkey) carry regional weight but are reticent to assume global leadership, especially its financial burdens. The issue is not just that there are five or six major powers now; it is also that all of them want a free ride at the others’ expense.

The shift to such a multipolar world has the advantage that no single country or small bloc can dominate the others.

Each region can end up with room for maneuver and some space to find its own path. Yet a multipolar world also carries great risks, notably that major global challenges will go unmet, because no single country or region is able or willing to coordinate a global response, or even to participate in one.

The US has shifted rapidly from global leadership to that kind of free riding, seeming to bypass the stage of global cooperation. Thus, the US currently excuses itself from global cooperation on climate change, IMF

financial-bailout packages, global development-assistance targets, and other aspects of international collaboration in the provision of global public goods.

The weaknesses of global policy cooperation are especially worrisome in view of the gravity of the challenges that must be met. Of course, the ongoing global financial turmoil comes to mind immediately, but other challenges are even more significant.

Indeed, the IMF/World Bank meetings also grappled with a second fundamental change in the world economy: high and volatile primary commodity prices are now a major threat to global economic stability and growth.

Commodities markets Since around 2005, the prices of most major commodities have soared. Prices for oil, coal, copper, gold, wheat, maize, iron ore, and many other commodities have doubled, tripled, or risen even more.

Fuels, food grains, and minerals have all been affected. Some have attributed the rise to bubbles in commodities prices, owing to low interest rates and easy access to credit for commodity speculation. Yet the most compelling explanation is almost certainly more fundamental.

Growing world demand for primary commodities, especially in China, is pushing hard against the physical supplies of global resources. Yes, more oil or copper can be produced, but only at much higher marginal production costs.

But the problem goes beyond supply constraints. Global economic growth is also causing a burgeoning environmental crisis. Food prices are high today partly because foodgrowing regions around the world are experiencing the adverse effects of human-induced climate change (such as more droughts and extreme storms), and of water scarcity caused by excessive use of freshwater from rivers and aquifers.

In short, the global economy is experiencing a sustainability crisis, in which resource constraints and environmental pressures are causing large price shocks and ecological instability. Economic development rapidly needs to become sustainable development, by adopting technologies and lifestyles that reduce the dangerous pressures on the Earth’s ecosystems. This, too, will require a level of global cooperation that remains nowhere to be seen.

The IMF/World Bank meetings remind us of an overarching truth: our highly interconnected and crowded world has become a highly complicated vessel. If we are to move forward, we must start pulling in the same direction, even without a single captain at the helm. © Project Syndicate

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April 27, 2012 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Iran’s nuclear grass eaters Shlomo Ben-Ami

Former Israeli foreign minister, vice president of the Toledo International Center for Peace

Straits Times Layoffs increased slightly in 2011, with some 9,990 workers dismissed, Singapore’s annual report on redundancy and reentry into employment shows. This means 5.5 workers were dismissed for every 1,000 employees. In 2010, 9,800 workers were laid off, the report by the Ministry of Manpower’s research and statistics department says. The report shows that workers in the manufacturing sector remained the most vulnerable.

Asahi Shimbun The majority of the board of Japan’s Hitachi Ltd will be directors from outside the company, the company announced on Wednesday.

The 13 candidates for seats, including two new foreigners, are expected to be approved at the shareholders meeting in late June.

The new-look board is meant to improve corporate governance and demarcate management responsibility for business operations, the company said.

Taipei Times Taiwan business leaders urged their government on Wednesday to rein in electricity price increases and adjust the tariff gradually to soften the impact on the public and industry. Leading figures in the Chinese National Association of Industry and Commerce made the plea in a written statement they issued after a meeting with Premier Sean Chen and other ministers. On May 15 electricity prices will rise by an average of 16.9 percent for households, 30 percent for commercial establishments and 35 percent for industrial users.

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fter long years of failed international efforts to end Iran’s cunning drive to develop nuclear weapons, the question today is no longer whether the West can prevent the nuclearization of Iran’s military arsenal, but whether the Islamic regime collapses first.

Unfortunately, if it does not, the only option for stopping Iran is war – and war is a very bad option.

Pakistan is worth invoking when assessing whether the sanctions now imposed on Iran will force it to surrender its nuclear program.

In 1965, Pakistani Foreign Minister Zulficar Ali Bhutto famously declared that if India, its sworn enemy, went nuclear, his country would “eat grass and even go hungry” in order to develop a nuclear bomb of its own. Today, Pakistan, a near-failed state on the verge of disintegration, possesses more nuclear warheads than India.

Iran’s theocratic regime, immersed in a momentous struggle for survival against what it regards as an unholy alliance of Israel, the American “Great Satan,” and a surrounding Arab world that abhors its hegemonic ambitions, will not surrender its nuclear ambitions easily.

Indeed, nuclear weapons appear to be the regime’s only real route to self-preservation.

The French and the Soviet revolutions taught us that exporting the revolution is one way to protect it. Iran tried that, and failed. The almost inevitable fall of Iran’s closest ally in the region, the Baath regime in Syria, only adds to the regime’s paranoid anxieties – and makes developing a nuclear capability seem all the more necessary for its survival.

Iran’s leaders might be ready to let their people “eat grass

and even go hungry” for the sake of their nuclear ambitions, but Iran’s squeezed middle class, one hopes, will not submit to such degradation. Social unrest has been building up in Iran for years, and certainly began well before the West became serious about imposing economic and financial sanctions. In fact, the popular revolts in Tunisia and Egypt were directly inspired

by Iran’s Green movement, which emerged during the massive post-election protests in 2009, before succumbing to a brutal government crackdown.

The sanctions against Iran have undoubtedly bitten hard. But the truth is that the severe economic hardships suffered by ordinary Iranians mainly reflect the regime’s economic mismanagement, and the widespread fear that the threat of war from both Israel and the United States, sometimes abetted

by Iran’s own war rhetoric, has unleashed.

An economy in disarray Indeed, Iran’s economy is now firmly in the grip of a war panic. When a national currency loses 50 percent of its value in a matter of weeks, economic collapse is at hand. Businessmen find it impossible to use the rial even for domestic transactions, because inflation is spiraling out of control. Commodity prices, moreover, are skyrocketing, and the cost of small and mid-size apartments has become prohibitive for a middle class severely hit by unemployment.

Iran’s backward economy, a third of which is controlled by the Revolutionary Guard, is simply incapable of offering job opportunities to Iran’s growing cohorts of university

The almost inevitable fall of Iran’s closest ally in the region, the Baath regime in Syria, only adds to the regime’s paranoid anxieties – and makes developing a nuclear capability seem all the more necessary for its survival

graduates – the same segment of society that toppled the Shah. The problem has become increasingly acute, because 60 percent of Iran’s population was born after 1979. Moreover, rapid population growth and bungled economic policy have made Iran excessively dependent on food imports.

Yet, however crippling the effect of sanctions might be, they will not bring the regime to surrender its nuclear program. The most for which one can hope is that sanctions enhance the chances of regime change by reawakening popular protest, thereby triggering an Iranian version of the Arab Spring.

This might be wishful thinking, however. And, even if social unrest does erupt, repression might succeed again.

Rhetoric and memory But an attack by either Israel or the US on Iran’s nuclear installations would be a calamitous mistake, or, as Meir Dagan, a former chief of Israel’s Mossad intelligence service, put it, “the stupidest idea” possible. So it is to be hoped that Israeli Prime Minister Binyamin Netanyahu’s war rhetoric and vulgar manipulation of the memory of

the Holocaust are nothing more than a ploy to divert the world’s attention from the Palestinian problem that he has done nothing to resolve.

Alas, one cannot rule out a scenario in which nothing – diplomacy, sanctions, or the push for a regime change – works. In that case, one should not underestimate the pernicious effects of Israel’s Holocaust complex. What led Israel to war in 1967 was not a sound assessment of Egypt’s intentions to attack, but fear of a second Shoah.

An attack on Iran might, however, produce precisely the effect that Netanyahu seeks to avoid. Post-war global diplomacy might have to promote, perhaps more robustly than ever, the creation a nuclear-weapons-free zone in the Middle East, and thus address Israel’s nuclear capabilities, as well as the Palestinian problem – issues that Netanyahu has worked hard to ignore.

But if the path of war is finally taken, and, in its aftermath, the international community fails once again to pacify the world’s most dysfunctional region, the Middle East would devolve into an unruly chaos far more dangerous than the threat of an Iranian bomb. © Project Syndicate

16 |

business daily April 27, 2012

CLOSING Deutsche Bank hit by euro crisis Deutsche Bank has reported a sharp fall in profits, in part due to weaker performance in investment banking during the eurozone debt crisis. Net income for the first three months of the year was 1.4 billion euros (US$1.9 billion), down 35 percent on the 2.1 billion euros the bank made a year earlier.

Revenue was down 12 percent at 9.2 billion euros. The bank said although the business environment was “more stable” than at the end of last year, it was “far less favourable” than a year earlier.

Bo Xilai brother leaves HK firm Bo Xilai’s brother has resigned as vice chairman and executive director of China Everbright International because of his ties to the disgraced Chinese leader, the investment firm said. Bo Xiyong, who also goes by the pseudonym Li Xueming, stepped down “to minimise any possible adverse impact on the company of certain reports recently published by the media on his family background,” the firm said.

China Everbright International is the Hong Kong-listed division of a state-owned Chinese conglomerate.

Bo Xilai was ousted recently in a scandal that has shaken Chinese politics to its core.

President Hu Jintao

A gauge of consumer sentiment in the euro region slumped to minus 19.9

Euro economic confidence slides Economic confidence in the euro region declined more than economists’ forecasts in April, as the slump showed signs of deepening

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n index of executive and consumer sentiment in the 17-nation euro-area fell to 92.8 from a revised 94.5 in March, the European Commission in Brussels said yesterday. Economists had forecast a drop to 94.2 from a previously reported 94.4, the median of 29 estimates in a Bloomberg News survey showed.

Europe’s economy is faltering as spending cuts across the region undermine hiring and consumer confidence.

“With more austerity in the

pipeline and the debt crisis still unresolved, any significant pickup in economic confidence in the remainder of this year might fail to occur,” said Martin van Vliet, an economist at ING Group in Amsterdam. “This could jeopardize a return to modest positive growth later this year.”

The euro-area economy probably continued to shrink in the first quarter after contracting 0.3 percent in the previous three months. The region’s manufacturing industry contracted for a ninth straight

Spain needs austerity to access markets, says Rajoy Angeline Benoit

Spanish Prime Minister Mariano Rajoy said austerity is needed for Spain to cover its funding needs and avoid needing a bailout.

“What if the same thing happens to us as to those that haven’t been able to fund their debt on the markets or find money to cover their deficit? This is what is at risk at the moment,” Rajoy told reporters following a meeting in Madrid with NATO Secretary General Anders Fogh Rasmussen.

Rajoy raised the threat of Spain’s losing access to the financial markets after yields on 10-year Spanish bonds surpassed 6 percent on seven trading days this month, reflecting investors’ concern that the nation’s borrowing costs may

reach levels that prompted bailouts for Greece, Ireland and Portugal.

“We have made a budget, which is the most austere in the history of democracy, I know, because we have to, because the deficit is unmanageable,” he said.

Rajoy is implementing the deepest budget cuts in at least three decades including tax raises and cuts in education and healthcare to shrink the budget deficit to 5.3 percent of gross domestic product this year from 8.5 percent last year.

month in April and unemployment rose to 10.8 percent in February.

A gauge of sentiment among European manufacturers dropped to minus 9 from minus 7.1 in March, yesterday’s report showed.

An indicator of services confidence slipped to minus 2.4 from minus 0.3, while a gauge of consumer sentiment slumped to minus 19.9 from minus 19.1. Sentiment in the construction industry also declined this month.

It “is a thoroughly depressing survey all around,” said Howard Archer,

haven’t been funded, and that’s why we are taking these decisions and making these reforms,” Rajoy said.

“We are asking the regions the same as the European Union is asking Spain and I’m convinced all will collaborate,” Rajoy said, referring to the 17 regional governments that contributed to most of Spain’s overspending last year.

The International Monetary Fund forecast on April 17 that the nation’s budget shortfall will reach 6 percent of GDP this year and 5.7 percent in 2013 as it is harder hit by the recession than euro zone

Find the money “We have to find that money outside, and it may be funded or not, and there are already countries that

Mariano Rajoy is implementing the deepest budget cuts in at least three decades

chief European economist at IHS Global Insight in London. “Indeed, April’s marked drop in euro-zone consumer and business confidence means that the gains in sentiment made in the first two months of the year have been wiped out.”

While governments from Ireland to Spain have toughened austerity measures to contain the fiscal crisis, investors remain unconvinced.

Spanish 10-year yields breached 6 percent last week and the cost of insuring the country’s bonds against default advanced to a record.

The crisis is also hurting European companies and stocks. Deutsche Bank AG and Banco Santander SA declined the most among financial share. Alcatel-Lucent tumbled 14 percent after reporting an operating loss.

The Stoxx Europe 600 Index dropped 0.2 percent to 256.41 at 12.42 pm in London, after earlier rising as much as 0.6 percent. The benchmark gauge has advanced 4.9 percent this year as the European Central Bank disbursed more than 1 trillion euros (MO10.6 trillion) to the region’s lenders to spur credit and boost the economy.

Europe may add an annex to its budget treaty spelling out how countries can boost growth as the bloc shifts its emphasis on tackling the debt crisis, a German government official said yesterday, The change in tack was signalled on Wednesday by European Central Bank president Mario Draghi, whose call for a “growth compact” was quickly endorsed by German Chancellor Angela Merkel.

Francois Hollande, the French Socialist presidential election front-runner, welcomed Draghi’s remarks as evidence of the need for treaty changes to boost growth, while questioning the means of getting there.

Bloomberg

peers. Debt will reach 84 percent of GDP next year.

Rajoy also dismissed criticism that he’d bowed to German demands in making deficit cutting his top priority.

“The austerity policy is not Angela Merkel’s, it is the policy of the European Union, of the euro zone, of a project we are part of voluntarily,” Rajoy said.

“We and all the countries that entered the euro assumed certain commitments, and one of them is to have healthy public finances, which is reasonable.”

Bloomberg