Macau Business Daily, June 13, 2012

Clinics in red owners cross

Talking money: Macau-HK summit

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Year I - Number 53 Wednesday June 13, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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Macau’s got talent but not to spare PAge 7

www.macaubusinessdaily.com

Raking it in

CITy MAKING MorE THAN IT CAN SpEND M

acau amassed a budget surplus of 35.2 billion patacas (US$4.4 billion) in the first five months of the year thanks to the city’s booming gambling industry. With the SAR posting an average surplus of 231.6 million patacas per day, the government’s target for the whole of 2012 was probably passed in the first four days of this month. Nearly 40 cents of every dollar wagered in Macau’s casinos goes to the government in tax.

It’s one of the highest rates in any legal casino jurisdiction in the world.

At the current rate of accumulation, the territory would close the books for the whole year with a surplus of 86.4 billion patacas, 2.4 times higher than the official prediction.

But critics say that’s more a function of the poor quality of Macau’s budget forecasting than any unforeseen upward

fluctuations in demand for gambling among the city’s 25-million plus visitors per year.

“Nobody believes the budget anymore, especially when it comes to revenue. And certainly no one compares the budget to the actual results to check if the government is efficient,” economist Albano Martins told Business Daily.

In effect Macau is making more money than it can spend – the exact opposite of the economic problem facing european Union jurisdictions. With statistical full employment; shortages of imported labour; practical limitations on how many public works schemes can be conducted simultaneously without creating gridlock; and a limit on how many suitably-qualified managers are available to oversee public spending schemes, Macau couldn’t significantly reduce its surplus if it tried.

MorE oN pAGE 3

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HANG SENG INDEX 18910

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Lau’s office starts La Scala review

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The government has begun considering whether to take back five plots granted to the developer of the luxury housing project La Scala now the land has become embroiled in the Ao Man Long corruption scandal.

A Court of Final Appeal verdict two weeks ago in the third and final graft trial of former secretary for transport and public works Mr Ao didn’t make a specific recommendation on what should happen to the La Scala land.

Now the office of Lau Si Io, the current Secretary for Transport and Public Works, says it has taken on that adjudication role.

“After an in-depth analysis of the Court of Final Appeal verdict, the government has formally begun the procedures,” the statement adds.

Last month Mr Lau revealed that 16 land deals called into question by Mr Ao’s first two graft trials have already been revoked.

His cabinet again stressed it “does not exclude the possibility” of revoking the 2006 concession for La Scala. But the statement made no mention of a further eight plots granted to La Scala in March 2011 – an extra concession fiercely criticised by some legislators.

Joseph Lau Luen Hung, the head of La Scala’s developer Hong Kong-listed Chinese Estates Holdings, was named by the Court of Final Appeal judges as having bribed Mr Ao with HK$20 million (US$2.6 million) to secure the rights to the plots located near the airport.

V.Q.

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June 12

AirAsia wanted Macau base

HSI - Movers

Malaysia-based airline AirAsia Bhd had just started discussing “possible plans for cooperation” with Viva Macau when the carrier was grounded in 2010, AirAsia’s general manager in China told Business Daily. The negotiation was initiated by Viva Macau through a middleman. “Our company wants to build bases in different countries and Viva [Macau] gave us a possible chance to have one in Macau,” Liu Xiaoyuan said. pAGE 2

No inspection for one Grantai Buyers of units at luxury housing complex One grantai rantai face a further wait before they can move in. The Taipa project has been sitting idle for months after authorities rejected an initial request for building inspection, because the developer changed the project’s architectural plans ‘many times’. A so-called ‘need request’ was filed last month, the Land, Public Works and Transport Bureau said. pAGE 4

NAME

%DAy

CHINA RES LAND

2.22

CHINA OVERSEAS

1.42

SUN HUNG KAI PRO

1.36

SWIRE PACIFIC-A

0.83

POWER ASSETS HOL

0.81

TENCENT HOLDINGS

-2.42

BELLE INTERNATIO

-2.45

CHINA RES POWER

-2.57

WHARF HLDG

-2.73

CHINA RES ENTERP

-3.63

Source: Bloomberg

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business daily June 13, 2012

mACAU AirAsia wanted to establish a spin-off in the city through Viva Macau

AirAsia had an eye on Viva Macau Low-cost carrier AirAsia confirms that it discussed cooperation with now-defunct Viva Macau Tony Lai

tony.lai@macaubusinessdaily.com

M

alaysian budget airline AirAsia Bhd was in preliminary discussions about cooperation with low-cost carrier Viva Macau until Viva Macau’s sub-concession was revoked in 2010, according to Liu Xiaoyuan, the general manager of AirAsia in China.

Ms Liu told Business Daily that the airlines had talked only about the possibility of cooperation.

“The discussion was only at the beginning stage,” she said.

She herself attended just one meeting.

Ms Liu said Viva Macau had initiated the talks. She said a middleman had sounded out AirAsia.

She would not say how long the negotiations lasted or give any details.

“No agreement or deal had been reached between the two airlines,” she said.

Viva Macau went to court last year,

seeking to prove that Secretary for Transport and Public Works Lau Si Io rescinded its licence illegally.

Its lawyer, Henrique Saldanha, told the Court of Second Instance last week that AirAsia had been mulling buying 49 percent of Viva Macau.

He said the cash injection would have rescued Viva Macau from financial distress.

Mr Saldanha said the talks had been going on in the week before Viva Macau had been grounded. He said a meeting had taken place on March 24, 2010, just days before the airline stopped flying.

The sub-concession granted to Viva Macau by Air Macau was revoked because of the distress caused to passengers and damage caused to Macau’s image by the cancellation of flights or delays on the weekend of March 26 to 28, 2010.

Air Macau, which holds the exclusive

concession on all air routes out of the city, said it had received a letter from the Civil Aviation Authority before it had revoked Viva Macau’s sub-concession.

After the revocation, in September 2010, Viva Macau was declared bankrupt as it was unable to repay its debts.

Possible chance getting a partner could have given Viva Macau the money it needed to survive.

Maria Cristina Freitas gomes da Silva, the government representative in Air Macau at the time, told last week’s court hearing that the finances of Viva Macau had always been bad.

Ms Silva said she had been aware that Viva Macau had been “trying to find solutions” to its problems.

Paulo A. Azevedo Publisher & Founder

I

t is a problem with its origins in macau’s past: the government does not trust the Legislative Assembly to legislate.

Who can blame them?

While the Basic Law gives the assembly the task to legislate, the government’s bills are discussed for far too long in the chamber and consequently take too long to become law.

Of the 13 pieces of legislation scheduled to come before the assembly this year, so far, just three have been debated.

Last year, 15 bills were supposed to pass through the assembly. Six were delayed until this year because legislators ran out of time.

As soon as the government offers a new bill, the assembly should approve it on its

OUR COmPANy WANTS TO BUILD BASES IN DIFFERENT COUNTRIES AND VIVA GAVE US A POSSIBLE CHANCE TO HAVE ONE IN mACAU Liu Xiaoyuan, AirAsia general manager in China

business as usual

If only the legislators could legislate

The government lent it over 200 million patacas (US$25 million) in 2008 and 2009. The company tried to get another loan from the government, but Ms Silva said new credit had been impossible, as Viva Macau had been unable to say convincingly how the money was going to be spent.

first reading, before allowing its committees to analyse the details. The second time legislators see the bill is the chance for in-depth discussion and final passage.

The city’s legislators complain that the government takes too long before sending its bills. They will also complain that the government introduces changes to proposed laws even as they are being analysed.

How can we blame the government?

Everyone is aware of the assembly’s quality. To give them the power to change a bill is the legislative equivalent of Russian roulette. macau should be able to revamp the system and improve the quality of legislators – a problem exacerbated by direct nominations and indirect elections – and then offer the assembly the only right it has under the Basic Law: to legislate.

We appear to be very much stuck with the existing system.

Often it is better to legislate slowly but well, even if it irritates us. The problem occurs when the assembly legislates slowly and shoddily.

Ms Liu said that expanding into Macau by acquiring a stake in a Macau airline had been in line with AirAsia’s business strategy.

“New partnerships are always part of AirAsia plans,” Ms Liu said.

“Our company wants to build bases in different countries and Viva gave us a possible chance to have one in Macau.”

AirAsia, led by businessman Tony Fernandes, has established budget airline spin-offs in Indonesia, Thailand and, most recently, the Philippines and Japan.

The company is eyeing airline partnerships in South Korea, Vietnam and the Middle east.

Ms Liu said there had been no discussions with Viva Macau since its grounding.

June 13, 2012 business daily | 3

mACAU

Budget surplus close to 2012 goal The government’s surplus this year is piling up twice as fast as it had expected, and an economist criticises its ‘excessively conservative’ budget Vítor Quintã

vitorquinta@macaubusinessdaily.com

Last November secretary Francis Tam Pak Yuen (centre) admitted that the government’s forecast for 2012 was conservative

I

n the first five months of this year the government’s budget surplus reached 35.2 billion patacas (US$4.4 billion), close to the target it set for the whole year.

Provisional data released by the Financial Services Bureau on Monday show that the surplus was 21.4 percent bigger than a year before and amounted to 97.6 percent of the 36 billion pataca surplus the government was aiming for by the end of 2012.

With the government adding an average of 231.6 million patacas to its surplus every day, it would have hit its 2012 target just four days into June.

If this pace of growth is sustained then the government will close its books for the year with a surplus of 86.4 billion patacas, 2.4 times what it was aiming for.

In his 2012 Policy Address last November, Secretary for the economy and Finance Francis Tam Pak Yuen, in the face of criticism by legislators, admitted that the government’s forecast was conservative. economist Albano Martins told Business Daily: “The government has for a long time been pumping out budgets more conservative than anywhere else, so much that they lack the minimum quality in terms of forecast.”

Mr Martins said the government’s budgets had parted ways with reality when Macau had been under Portuguese administration, and that the divergence had increased since

the handover.

“It has become a useless public exercise,” he said of the annual budget.

“Nobody believes the budget anymore, especially when it comes to revenue.

NOBODy BELIEVES THE BUDGET ANymORE, ESPECIALLy WHEN IT COmES TO REVENUE. AND CERTAINLy NO ONE COmPARES THE BUDGET TO THE ACTUAL RESULTS TO CHECK IF THE GOVERNmENT IS EFFICIENT Albano Martins, economist

And certainly no one compares the budget to the actual results to check if the government is efficient.”

Revenue bonanza The main reason for the booming surplus is a 21.6 percent increase in revenue, which reached 50.6 billion patacas in the first five months.

This figure is almost half of the total revenue budgeted for.

The government remains as reliant as ever on gaming taxes, with direct taxes – 35 percent of gross gaming revenue – jumping by more than a quarter to 44 billion patacas, accounting for 86.9 percent of all revenue.

The government also levies indirect taxes on gaming equivalent to about 4 percent of gaming revenue.

“It’s true that authorities should cautiously underestimate revenue and overestimate spending. But not like this. The budget should be as accurate as possible,” said Mr Martins.

Not even a 21.9 percent jump in spending to 15.5 billion patacas was able to hold down the surplus.

The government has been able to spend less than a quarter of its budget.

Official data show that government spending tends to rise in the second half of the year, but to hit its target the government would have to spend a staggering 50.4 billion patacas in the remaining seven months of 2012.

Mr Martins said: “especially when it comes to spending, there should not be a big difference between the

forecast and the execution.

Things that are planned for should be implemented.”

On paper only Current expenditure, including the salaries and benefits of public servants, accounts for 13.4 billion patacas of what the gov-

ernment has spent so far.

An increase of 6.5 percent in the pay of civil servants came into effect in May. Nearly one-third of the money in the budget for current expenditure has been spent.

But little of the money in the budget for capital expenditure has been spent. economists say capital spending has a lasting effect and helps create a more efficient and productive economy.

But the 19.8 billion patacas the government plans to invest is practically frozen, just 1.4 million patacas or 7.2 percent of it having been spent.

Still, this figure is five times more than the amount spent in the first five months of last year.

The investment plan includes building the artificial island for the western end of the Hong Kong-Zhuhai-Macau Bridge, work on several public housing projects and work on the Light Rapid Transit system.

Mr Martins feels that the failure to spend money as fast as the budget for capital expenditure envisages is “a clear sign of inefficiency” and of “obvious flaws in the estimates” prepared by the various organs of government.

“The government should not accept it,” he says.

People’s Congress deputy polls begin

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reparations for electing 12 deputies from Macau to China’s 12th National People’s Congress (NPC) have begun. The city’s electoral council could get a further 50 members, the Congress said on Monday.

According to China’s state news agency Xinhua, the Congress’ standing committee said the number of Macau deputies will remain at 12. The legislative body is made up of 3,000 deputies from across China.

Chinese-language newspaper Macau Daily News said the election is expected to take place in December.

The current Congress will finish its five-year term next March.

The committee also announced the setting up of an electoral council for the Macau deputies. The number of qualified members will increase from over 330

to at least 380. The council members will vote for each other in secret ballot and the 12 with the highest number of votes will be elected.

Candice Chio Ngan Ieng, a current NPC deputy, told Macau Daily News she is planning to run again while fellow deputy Leong Iok Wa said she has not made up her mind.

Invitations were sent on Sunday to eligible council members. They can register next month. The Congress’ standing committee will then publish a finalised list of the council members.

Macau’s new NPC members will be selected from the city’s current deputies in the national congress and the Chinese People’s Political Consultative Conference, as well as the members of the chief executive election committee and the Legislative Assembly.

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business daily June 13, 2012

mACAU Photo by manuel Cardoso

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HOSPITALITY The rest of the world The number of visitors has reached extraordinary heights that would have been almost unthinkable a few years ago. We had almost 7 million in the first quarter of this year, about 8 percent more than a year before. We usually focus our attention on the big sources of visitors: mainland China, Hong Kong and Taiwan, which together send 89.3 percent of the total. Occasionally, we widen the focus to include other Asian countries. Altogether, Asia provides 97.4 percent of visitors. So what about the other 2.6 percent? Almost three-quarters of them are from the Americas or Europe.

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one Grantai stands empty

60000

40000

A high-end housing project in Taipa has yet to get an occupancy permit Tony Lai

tony.lai@macaubusinessdaily.com 20000

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The first thing to notice is that we are talking about very small figures, relatively. Together, visitors from the rest of the world number fewer than 1,500 per day, on average. That is about the number of mainlanders that enter the city every 40 minutes or so. Just the increase in the number of mainland visitors between this year and last, 550,000, is three times bigger than the total number of visitors from outside Asia. The table below shows the 10 biggest sources of visitors from the rest of the world.

50000

40000

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Not surprisingly, the United States and Australia lead in this league. Together they send exactly half the visitors from outside Asia. All the predominantly anglophone countries combined – Australia, Britain, Canada, New Zealand and the United States – account for about three quarters. The fastest-growing source of visitors from outside Asia is Russia, with a rate of 84.4 percent. Africa follows, with a doubling in their numbers, and visitors from Oceania, excluding Australia and New Zealand, rose by about 25 percent.

J.I.D.

T

he One grantai upmarket housing complex has been waiting for months for buyers to move in.

The authorities say the developer failed to submit the necessary paperwork and that the project still needs to be inspected.

Construction of the complex, on Big Taipa Hill, near Cotai, was completed in 2010, but no progress has been reported since.

The complex of six buildings has more than 850 flats, which have been for sale since 2007.

According to transaction records made available by Centaline Macau, seven flats in One grantai were sold between January and May at an average price of HK$5,700 per square foot. This is above the average price for Taipa.

In March a 3,041-square-foot flat was sold for HK$17.6 million.

The authorities have to carry out an inspection before issuing an occupancy permit, a document that certifies the building as safe and adequate.

Buyers can move in and developers receive the remaining payments only after the permit has been acquired.

The Land, Public Works and Transport Bureau told Business Daily that the developer had reapplied for government inspection only last month, after the authorities had turned down its first request last year.

The bureau had received a request for basic infrastructure inspection of One grantai last year, spokesperson Leong Hei Tong said.

“But the applicant had submitted

THE PROJECT THEN DID NOT qUALIFy FOR BUILDING INSPECTION, SO THE BUREAU REPLIED THAT ITS APPLICATION WAS NOT ACCEPTED Macau’s Land, Public Works and Transport Bureau

revised architectural plans many times during the period,” she said in a written reply.

“The project then did not qualify for building inspection, so the bureau replied that its application was not accepted.”

The developer of the housing complex, Sai Kei Hou Yuen (Kuok Chai) Real estate Development, and the project’s marketing firm, Dayfull group Ltd, were not available for comment.

Red-tape complaint For building inspection, the developer has to submit several documents, including the architectural plan and the water

and electricity supply plans.

The government did not say what changes were made to the One grantai plan.

According to Ms Leong, the authorities received a request last month for a complete building inspection and the project is now undergoing review.

“If the project satisfies all the building inspection conditions, the bureau will issue the occupancy permit,” she said, without giving a date for when the inspection might be completed.

Ms Leong said that there was no fixed period of time for building inspection and that it all depended on the condition of the building and whether there were changes in the documents submitted. gregory Ku, managing director of Jones Lang LaSalle Macau, said the government should manage the occupancy permit process better and say how long it will take.

The president of the Association of Building Contractors and Developers, legislator Tommy Lau Veng Seng, said last week that the government should speed up the process of approving new housing projects.

He said that if there was any change in or other problem with a document, administrative procedures usually took at least a month before inspection could begin.

He was quoted by the Chineselanguage Macau Daily News as suggesting that the bureau could divide project applications into categories based on size and complexity, and review requests accordingly.

June 13, 2012 business daily | 5

mACAU

Hospitals are hale while clinics ail Hospitals make profits but private clinics bleed red ink Kelsey Wilhelm

kelsey.wilhelm@macaubusinessdaily.com

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hile hospitals made If one includes hospitals and Chinese money in 2011, with an traditional medical services, medical average profit margin of consultations increased by 11 7.4 percent, primary health care percent, totalling almost 2.6 million. facilities were in the red, according to Hospitals had a 5 percent rise in data published by the Statistics and in-patient numbers to 44,186.

Census Service.

However, the occupancy rate of the Private clinics saw a 19 percent 1,221 available beds dropped by 0.3 rise in consultations, which helped percentage point to 72.9 percent. their average revenue grow by close Hospital revenue came to 5.3 billion to a quarter to 886,600 patacas patacas, rising by more than a quarter, (US$110,930). owing mainly to a 27.2 percent jump But average spending increased in subsidies to 4.5 billion patacas. even more, by Hospital spend37.8 percent, ing grew at a simto a staggering ilar pace to over 902,400 patacas.

4.9 billion pataThe main reacas, more than son for the extra half of which spending was went on salaries a 40.5 percent and welfare. jump in employ- AVERAGE SPENDING By The average profit ees’ salaries and margin of hospitals PRIVATE CLINICS IN 2011 other benefits, was slightly above which reached 7.4 percent.

435,000 patacas.

In the field Private clinics also had to reckon of Chinese traditional medical with more staff: they hired 200 and therapy services, private more people, taking their total consultations rose by more than strength to 1,509. two-thirds.

Operating expenses also rose, by Purveyors of Chinese traditional 21.3 percent to an average of medicine saw an 11.7 percent drop in 324,200 patacas. consultations to fewer than 313,500.

With the business as a whole in the Average charges for general services red, it is not surprising to find that in Chinese traditional medical and 10 primary health care facilities therapy services rose by 8 percent, closed in 2011. but that figure doubles if one At the end of the year, there were includes medicine.

481 private clinics and centres Acupuncture prices increased by 5.9 for auxiliary diagnostics and percent but rehabilitative massage therapeutic examinations. therapy became 1.5 percent cheaper.

MOP902,400

Film fund for indie movies The Cultural Affairs Bureau wants to encourage budding Macau film directors through a movie fund Kelsey Wilhelm

kelsey.wilhelm@macaubusinessdaily.com

A

fund to support independent filmmakers from Macau will be available later this year, Cultural Affairs Bureau head guilherme Ung Vai Meng has announced.

TDM News quoted Mr Ung as saying on Monday that the fund was meant to be an incentive for making movies here, but was merely a first step.

The bureau said it had been working on developing the industry and had spoken with representatives about setting up the fund, but that the process could take time.

“We have found that it was not that easy,” Mr Ung said. “We have to take some time … but I believe we could activate the fund by the second half of this year.”

He was speaking on the sidelines of the opening of the Tsinghua Culture Industry Planning Design and Research Institute (Macau), which is linked to Tsinghua University.

The city has the annual Macau International Film and Video Festival and the Rush 48 competition, in which enthusiasts film and edit a five-minute film in 48 hours, with the winners

receiving a 5,000 pataca (US$626) prize, but it has few other filmrelated events.

Originally, Macao Studio City in Cotai was to have been a movie-theme resort with film production facilities.

The project, approved by the government in 2006, was taken over by casino operator Melco Crown entertainment Ltd last year.

A fund to support independent filmmakers from Macau may be available ‘by the second half of this year,’ says Ung Vai Meng

Private clinics hired 200 more people last year

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business daily June 13, 2012

mACAU

HK eyes macau fiscal reserve

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The HKSAR government wants Macau to invest its fiscal reserve through Hong Kong’s financial platform

Fuels rising prices Concern about the prices of fuel has been continuous in the past few years. Political instability in oil-producing regions has been foremost in people’s minds, rather than the pressure of demand, which the financial crisis reduced somewhat. Macau is wholly dependent on external supply for all the fuel required by the economic boom. Prices have risen considerably in the past few years. In the following table we have the import and retail prices of three kinds of fuel: liquefied petroleum gas (LPG) per kilogram, and unleaded petrol and diesel, both per litre.

16 14 12 10 8 6 4 2 0

Interestingly, import prices were very similar in 2009 and 2010, but started to diverge in 2011.

In the first two years, the import price as a proportion of the retail price was over 70 percent for LPG, noticeably higher than that for unleaded petrol (about 32 percent) and diesel (50 percent). In 2011 this was reversed, the import price as a proportion of the retail price of LPG falling by almost 20 percentage points and the import prices as a proportion of the retail prices of the others rising by 10 to 18 percentage points.

50 45 40 35 30

Xi Chen

xi@macaubusinessdaily.com

I

mportant issues such as financial cooperation, double taxation and environmental protection were discussed at the two-day Hong Kong Macau Cooperation High Level Meeting, which ended yesterday.

The Hong Kong SAR pressed Macau to capitalise its fiscal reserve through Hong Kong’s financial platforms.

“The outline of the National 12th Five-Year Plan emphasises the national support for enhancing Hong Kong’s status as an international financial centre,” the Hong Kong Financial Secretary John Tsang said, according to a press statement.

“Under the principle of mutual benefits, we proposed to the Macau SAR government and the Monetary Authority of Macau at the meeting to capitalise on the financial platform in Hong Kong to make long-term investment so as to maintain and enhance the value of the fiscal reserve of Macau,” he explained.

“The Macau side welcomed the proposal and indicated that they will actively consider the proposal,” Mr Tsang revealed.

Tabled – Hong Kong’s finance bosses meet with Macau Secretary for Economy and Finance Francis Tam Pak Yuen (right centre) to discuss bilateral issues

The two SARs also agreed to resume the discussion on a deal to prevent double taxation – and for the exchange of tax information – as soon as the relevant legal frameworks on both sides are ready. environmental protection was also on the agenda. Representatives from the two sides discussed ways to improve regional air quality and reduce the environmental impact of the region’s vital and busy ports.

They agreed to study an initiative to impose a requirement for oceangoing vessels to switch to lowsulphur fuel, as emissions from marine vessels have become one of the largest sources of air pollution in the region.

Hosted in Macau, the meeting was chaired by the Macau Secretary for economy and Finance Francis Tam Pak Yuen, with many senior officials participating.

Court upholds overpass delay fines Judges back the government’s decision to fine a contractor for a three-month delay in the building of an overpass

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Prices climbed neatly from 2009 to 2011. The import price of LPG rose by 45 percent, of unleaded petrol by 32 percent and of diesel by 20 percent. That growth was sustained in the first quarter of this year, except in the case of the import price of LPG, which fell slightly.

Curiously, the retail price of LPG rose by less than its import price, suggesting a compression of margins. Conversely, the retail prices of unleaded petrol and diesel rose by at least 10 percentage points more than their import prices, giving motorists cause to complain.

J.I.D.

Kelsey Wilhelm

kelsey.wilhelm@macaubusinessdaily.com

A

private contractor will have to pay a fines amounting to 375,900 patacas (US$47,030) for “unjustified delays” in completing a pedestrian overpass in Avenida dos Jardins do Oceano and poor supervision of its work.

The Court of Second Instance struck down an appeal by Long Chon Construction and engineering Co Ltd against the fines, imposed in 2010.

The contractor cited “adverse atmospheric conditions” – a 25-day spell of intense rain – as the main reason for the work taking longer than stipulated.

The court rejected Long Chon’s ex-

cuse, and said only 15 of the 25 days in question had had over 20 millimetres of rainfall.

Long Chon also argued in its defence that the government had changed the overpass design three times.

The judges were unimpressed, saying the contractor had been allowed a five–month postponement of the deadline for completion.

The contract required the project to be ready in 165 days, by December 31, 2009. But the government took possession of the finished structure only on August 30, 2010, eight months late.

The delay was due to “a wide range of attributable and recurring deficiencies, which, in our understanding, constitutes a ‘solid basis’ for the enforced sanction”, the court’s written judgement concludes.

The company was also found responsible for delays in delivery of materials, delays in creating the steel structure, errors in technical specifications, lacking specialised staff and shortcomings in the quality of its product.

The contractor will have to pay fines of 315,000 patacas for the delay in finishing the project and 60,900 patacas for flaws in the supervision of its work.

Weather Beijing 27/17o C Changchun 24/14o C

Harbin 24/14o C

Xian 37/20o C Shanghai 33/24o C Chengdu 28/22o C Kunming 26/17o C Haikou 32/26o C Sanya 32/27o C

Guangzhou 30/25o C

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Shenzhen 32/24o C

ASIA (today)

Hong Kong 30/25o C

mANILA

TOKyO

JAKARTA

31/26o C

31/25o C

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32/24o C

Macau 28/25o C

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31/24o C

June 13, 2012 business daily | 7

mACAU Finding, keeping talent the biggest headache Recruiting and retaining staff is a big challenge for most businesses, the chief of a headhunting group says Xi Chen

xi@macaubusinessdaily.com

Hotel, restaurant and manufacturing sectors had almost 7,300 job vacancies in March

T

he labour shortage and low employee retention rate are forcing businesses to hire whoever they can, the boss of a headhunting and outsourcing group says.

Alan Chan, managing director of Talent group Asia, sees no end to the labour shortage in the short term and advises employers to recruit and retain staff better.

“Macau’s labour market is very tight, and there are mega-projects under development,” Mr Chan said on the sidelines of a seminar yesterday.

“Having more labour is a unified request from all businesses.”

There were 6,900 people registered as unemployed at the end of April, according to the Statistics and Census Bureau.

Yet the hotel, restaurant and manufacturing sectors alone had almost 7,300 job vacancies just a month earlier.

Mr Chan asks companies to identity pivotal areas in their operations where they can improve service quality and focus on training staff accordingly.

He feels staff can be retained if career development potential is kept in mind.

He said a common problem with training is that employees tended to leave for another company after acquiring skills, making it wasteful for the employer to invest in training.

He believes employers should already have career paths in mind when investing in training, and that it would help employees to see room to grow within the organisation after training.

Mr Chan admits, however, that it is difficult for employers here to make smart investments in human capital. employee turnover is high and it is hard to quantify the associated costs.

Last year employee turnover reached 12 percent. The latest Macau Business quality of life report shows that the percentage of workers thinking of quitting their jobs in the next year is at least

three times higher than in most developed countries.

Hiring pains Mr Chan said industries such as retailing, hospitality and construction were all being hurt by the labour situation.

The shortage drives up labour costs, harming small and medium enterprises more than others.

“Small businesses can’t afford to spend half of their revenues on labour,” he said. “It is not viable,” The thirst for labour has led to an increase in non-resident workers, with the number of imported employees climbing above 99,500 in April for the first time in more than three years.

But hiring workers from outside is still difficult for most businesses.

Mr Chan said a lack of transparency in the law on hiring non-resident workers meant many employers were not confident about getting their quota and ended up looking only for residents.

In 2010 a committee for the recruitment of imported labour was created, but it has yet to establish a ratio of resident to nonresident workers for each economic sector – a longstanding wish of businessmen here.

The only ratio announced by the government is a minimum of one resident for every non-resident worker in the construction industry.

Mr Chan acknowledges that the government has taken some initiatives to improve the labour laws: conducting a salary survey to check the feasibility of a minimum wage for security and cleaning staff, and putting part-time work on the legislative agenda this year.

However, he believes more consultations with the public and business owners are needed for further improvement.

“Many companies recognise the opportunities in Macau and would like to register a business in the territory, but they soon realise they have problems hiring the right staff here,” he says.

City burdened by heavy worker injury claims Compensation claims for injured workers tend to exceed most other markets, seminar hears

T

he insurance payouts on property damage or liability claims may be in line with the rest of the world, but Macau pays out more employee compensation claims, a Hong Kong insurer says.

“Macau has a very tight labour market and there are many projects with a huge volume of people coming in and out, leading to more chances of employees getting injured or having accidents,” says Kurt Schreiber, the managing director of Willis Hong Kong. employee compensation provides wage replacement and medical benefits to staff injured at work, as long as the employer is not sued for negligence.

Workers can sue their employers for work-related injuries if they are not covered by compensation insurance.

International insurance broker Willis held a seminar on recognising and managing risks in the gaming and hospitality industries yesterday.

The seminar heard that Willis is focusing on data security and risks to reputation, two developing areas relevant to

hospitality and gaming sectors.

Casinos handling large cash transactions could face a loss if an employee operated a computer system incorrectly, for example.

To mitigate a hotel’s loss from negative publicity arising from an unexpected event, Willis launched a reputation protection insurance policy last year.

The policy provides cover for lost revenue, based on revenue per available room, a common performance metric in the hotel industry.

The policy also provides cover for the cost of hiring a crisis management consultant to assist during the first few weeks of an incident.

The Macau branch of Willis Hong Kong has served casino and hotel operators since 2006. The company intends on expanding further throughout Asia.

“We are extremely excited about Macau. This region represents great opportunities and we hope to spread our expertise from here to other Asian countries such as Vietnam and the Philippines,” Mr Schreiber said.

X.C.

8 |

business daily June 13, 2012

GREATER CHINA

InBrief China Southern jumps on stock sale Sinopec resists bargain Iran crude

Chinese refining giant Sinopec Corp. has no plans to raise its Iranian crude imports for the rest of this year so as to avoid falling foul of tough U.S. sanctions on Tehran’s oil trade. While China made big cuts in first-quarter imports, the U.S. is wary that Beijing might find it difficult to resist a cutprice offer if Iran tries to sell crude.

Sinopec has already resisted such offers, said the Beijing-based official who has knowledge of the refiner’s trading operations. “The economic benefits of filling some discounted Iranian oil into the national oil reserves would be too small a consideration for the state. The key concern for the Chinese government would be China-U.S. relations.”

Shrinking spread curbs yuan gains Chinese government bonds are offering investors the smallest yield premiums over U.S. Treasuries since 2010, discouraging capital inflows and reducing prospects for yuan gains. The difference for two-year notes shrank 53 basis points in the past month to 208 as the People’s Bank of China relaxed lenders’ reserve requirements and cut interest rates for the first time since 2008, according to data compiled by Bloomberg. The oneyear bond yield fell 56 basis points to 2.15 percent, narrowing the spread over Treasuries by a similar amount to 198. Comparable yield premiums are 767 basis points in Brazil, 673 in Russia and 783 in India.

Li Ning shares drop to 6-1/2 year low Chinese sportswear brand Li Ning Co Ltd warned of a “substantial decline” in profit for 2012 due to weaker sales and higher marketing costs, knocking its shares to a 6-1/2 year low. In a filing to the Hong Kong bourse late on Monday, Li Ning said trade fairs for 2012 had been completed and new product trade fair orders for the full year would show a high single digit percentage fall. Shares in Li Ning fell as much as 8.05 percent to their lowest level since January 2006, to close at HK$5.25. The drop took its loss for the year to 13 percent. Li Ning in March posted a 65 percent fall in 2011 profit to 386 million yuan (US$60.5 million).

Beijing to boost strategic sectors China will roll out a slew of fiscal measures in the second half of 2012 to support the development of new strategic industries, Chinese state media reported yesterday. The State Council approved a blueprint in late May to promote seven strategic industries by 2015. The industries cover energy-saving and environmental protection efforts, green vehicles, next generation information technology, biotech, industrial materials, advanced equipment manufacturing and new energy sources. “The next important direction for China’s fiscal policy is to actively support healthy development of the new strategic industries,” Economic Information Daily quoted an unnamed official at the Ministry of Finance as saying.

Hong Kong shares pare previous session’s rally

Stock sale could help the airline save 42 million yuan a year in interest costs

C

hina Southern Airlines Co., Asia’s biggest carrier by passengers, jumped the most in eight months after announcing plans to raise as much as 2 billion yuan (US$314 million) selling new shares to its state-owned parent.

The carrier climbed 6.7 percent, the most since October 27, to HK$3.45 at close of trading in Hong Kong. In Shanghai, the guangzhou, Chinabased airline fell 0.9 percent to 4.64 yuan.

China Southern plans to sell 465.1 million new Shanghai-listed shares at 4.30 yuan apiece to help pare debt and boost its finances, according to a statement late on Monday. Air China Ltd also announced a 1 billion yuan share sale to its state-owned parent in April as the government helps carriers withstand smaller currency gains and slower traffic growth.

“The recent capital injection to both China Southern and Air China indicates the government’s continuous support to the airlines,” Citigroup Inc. analysts Vivian Tao and Alan Wang, said in a note to clients. Still, the China Southern share sale isn’t big enough to have a material impact on the company, they said. They reiterated a sell rating.

The stock sale could let China Southern save 42 million yuan a year in interest costs and boost profit this year by 34 million yuan, Morgan Stanley analysts led by edward H. Xu said in a note.

The impact on earnings per share and the net-gearing ratio will be “insignificant,” they said.

China Southern’s net income dropped 74 percent in the first quarter to 319 million yuan. The company attributed the decline to higher fuel costs, smaller foreign-exchange gains and slower economic growth.

Fading optimism Hong Kong stocks fell, paring Monday’s biggest rally in five months, as rising Spanish bond yields fuelled speculation that a bailout for the nation’s banks won’t arrest the spread of europe’s debt crisis.

Following a global trend, uncertainty over the details of an eU bailout for Spanish banks kept investors away and turnover in Hong Kong slumped to one of the lowest levels this year.

The Hang Seng Index slid 0.4 percent to 18,872.56 at the close, paring Monday’s 2.4 percent gain.

Almost two stocks fell for each that rose. The Hang Seng China enterprises Index of mainland stocks dropped 0.6 percent to 9,519.53.

The benchmark gauge has retreated 13 percent from a February 29 high amid increased concern that europe’s debt crisis will spread beyond greece at time when slower economic growth in the U.S. and China is also weighing on global

demand.

Large-caps like HSBC Holdings and Tencent, which had led the previous session’s rally, were among the biggest drags on the benchmark. HSBC shares dropped 0.8 percent, while Tencent fell 2.4 percent. Oil major CNOOC was down 0.8 percent.

Low volumes and high levels of short-selling have left the benchmark susceptible to sharp moves and intra-day reversals, with investors unwilling to hold positions for very long. “europe remains the key. There are now concerns about Spain’s position and how that leaves Italy,” said a Hong Kong-based trader at an American brokerage.

‘Contagion concern’ Spanish bond yields surged the most in four months after the government sought a bailout of 100 billion euros (US$125 billion) for its banks.

Investors are waiting on a greek election on June 17 that could determine whether the nation remains in the euro.

“Contagion concern is still pretty much alive,” eddie Tam, chief executive officer of Central Asset Investments, said on Bloomberg Television. “We’re staying on the sidelines at least until the greek election results.”

China’s main stock index closed down 0.7 percent yesterday as weak oil prices pushed down energy

Dim Sum sales leap to back export credit

S

ales of yuan-denominated bonds in Hong Kong by China’s policy banks jumped 187 percent this year as the government moves to arrest stalling growth and the lenders seek funds to help boost exports.

China Development Bank Corp. led 15.2 billion yuan (US$2.39 billion) of Dim Sum sales by policy banks this year, almost three times the 5.3 billion yuan of notes issued in the same period of 2011, according to data compiled by Bloomberg. export-Import Bank of China sold 2 billion yuan of Dim Sum bonds

on Monday while Agricultural Development Bank of China hired six banks to manage an offering, two people familiar with the matter said.

China’s economy expanded 8.1 percent last quarter, the slowest pace in almost three years, and the government cut interest rates for the first time since 2008 last week.

China eximbank plans to use the proceeds from its sale to fund yuan export credits and for general corporate purposes, one of the people said today. China eximbank and Agricultural Development Bank

raised a total of 9 billion yuan in Hong Kong this year, the data show.

“I expect these policy banks to come to this market more frequently, similar to onshore, where it’s a monthly thing,” said Jeffrey

June 13, 2012 business daily | 9

GREATER CHINA Vehicle prices drop most analysis in almost two years Automakers overstocking cars; dealers pessimistic about sales prospects

C

stocks, while property shares outperformed. The Shanghai Composite Index closed at 2,289.8 points, led by the energy sub-index, which fell 1.9 percent on falling crude prices.

Telecoms also dragged on the index, with the telecom sub-index falling 1.3 percent.

Bloomberg/Reuters

KEY POINTS AIrlINE PlANS TO SEll 465.1 mIllION NEw ShANghAIlISTEd ShArES mOvE mAY bOOST PrOFIT bY 34 mIllION YuAN IN 2012 NEw ShArES vAluEd AT uS$314 mIllION

hina passengervehicle prices fell the most in about two years because of a worsening glut at auto dealerships, the nation’s top economic planning agency said.

Average retail prices in May fell 1.1 percent from April, the steepest sequential drop since June 2010, Cheng Xiaodong, head of autoprice monitoring at the National Development and Reform Commission, said yesterday.

Automakers are overstocking cars at a time when dealers are pessimistic about their sales prospects, he said.

The deepening price drops add to signs that Chinese consumer demand for cars is lagging behind the rising wholesale vehicle deliveries that automakers are reporting. China’s biggest dealer association said last week that carmakers need to scale back sales targets or sweeten incentives because the worsening glut across the nation’s showrooms is unsustainable.

“The market is deteriorating quickly,” said Vivien Chan, an analyst with SinoPac Securities Asia Ltd in Hong Kong. “Price declines are no doubt adding more pressure on auto dealer stocks.”

Zhongsheng group Holdings Ltd, a Beijingbased luxury car dealer, fell 3.6 percent in Hong Kong yesterday, and Baoxin Auto group Ltd declined as much as 2.2 percent to a record low of HK$5.26.

In the auto industry, monthon-month comparisons better reflect the health of vehicle demand than yearon-year data, NDRC’s Mr Cheng said. Prices in May dropped 1.7 percent from a year earlier, deepening from

April and in line with the drop in March, according to NDRC data.

Rising inventory Average inventory carried at Chinese showrooms exceeded two months of sales by the end of May, compared with more than 45 days at the end of April, Luo Lei, deputy secretary general of the state-backed China Automobile Dealers Association, said in an interview on June 6.

Three days later, the state-backed China Association of Automobile Manufacturers reported that wholesale deliveries of passenger vehicles in May climbed 23 percent from a year earlier to 1.28 million units, defying an economic slowdown that’s forced China to cut interest rates, loosen lending restrictions and pursue stimulus measures.

“We think this is a very dangerous strategy of the OeMs channel stuffing the dealers in the hopes of selling more,” Ole Hui and Jeremy Yeo, Hong Kongbased analysts at Mizuho Financial group Inc., wrote in a report yesterday. “We think OeMs are due for payback time and we may see production cuts and thus weaker wholesale sales in” the second half of 2012, they wrote.

The automakers association sees the rebound as reflecting an industry recovery from a slump that had kept Januaryto-April shipments down from a year earlier, Deputy Secretary general Yao Jie said in the association’s briefing last Saturday.

hANg SENg INdEx SlId 0.4 PErcENT TO 18,872.56 SPAIN bAIlOuT OPTImISm FIzzlES OuT

Yap, the Hong Kong-based head of Asia fixed-income trading in Hong Kong at Mizuho Securities Asia Ltd. “It’s good for building a curve of maturities and increasing liquidity in the offshore market.”

“Policy banks are rushing to the market as the new issue window re-opens and before the Ministry of Finance visits the market,” said Suanjin Tan, a Singapore-based Asian fixed income portfolio manager at BlackRock Inc. Bloomberg

China’s high oil imports are all about Iran

Vehicles average retail prices fell 1.1 percent in May from the previous month

Bloomberg

Clyde Russell

T

he gain in China’s crude oil imports in may to a record high is a reflection of increased stockpiling rather than a sign of rising demand and economic strength.

Imports surged 14.5 percent from April to 25.48 million tonnes, equivalent to about 6 million barrels a day, the first time daily imports have started with the number six.

At the same time domestic oil output was steady around 4.12 million barrels a day, making total oil available in may at just over 10 million barrels a day.

However, refineries only processed 9.03 million barrels a day, a modest 0.4 percent gain from April’s figure, meaning about 1 million barrels a day appears to have headed into storage.

At first glance this appears counter-intuitive, as cargoes for may delivery would have been booked in late march and April, a time when Brent crude prices were at their highest.

Brent reached its intraday high for the year above US$128 a barrel in early march and traded above US$120 the whole month and for most of April, ending that month at US$119.47.

Chinese crude buying patterns in recent years have tended to show that purchases ramp up when prices are relatively cheaper, and slow closer to the base level of demand when prices rise.

Looking at last year, when Brent traded above US$126 a barrel in early April, Chinese crude imports dropped below 20 million tons in June and July, which were the weakest two months of 2011.

However, when Brent started to drop rapidly from August as concern over the European sovereign debt crisis mounted, Chinese imports started to increase, rising to what was at that time the second strongest level on record in November, and then posting fresh records in the first quarter of 2012.

It would have been reasonable to expect that given Brent was trading at its highest for this year in march and April, again on European debt woes, that Chinese imports would have eased.

But the slowing in April may have been a false dawn, given may’s strong recovery.

So the question remains: why are the Chinese continuing to buy crude for storage even though the price increased sharply, conditions that have in the past resulted in less oil flowing into strategic reserves.

The answer may be in what is different this time around – namely the concern about Iran.

In 2011 China was buying more than 500,000 barrels a day from Iran, a tenth of its own imports and more than a fifth of the Islamic republic’s exports.

While this has slipped to an average of 385,000 barrels a day for the first four months of 2012, China is still a major buyer of Iranian crude.

China has also yet to receive a waiver from the United States exempting it from the financial

sanctions, starting at the end of this month, that target Iran’s oil trade as part of Western efforts to force Tehran to open its nuclear programme to international scrutiny.

While a compromise with Washington may well be in offing, it seems the Chinese have decided that it’s best to be prudent and cautious and make sure they have enough oil in reserves just in case they have to cut off imports from Iran altogether.

While the market is comfortable now that any lost Iranian output can be sourced from other suppliers, mainly Saudi Arabia, there wasn’t this level of confidence in late march and April, when China would have been securing may cargoes.

If the Chinese were worried about Iran and boosting storage for that reason, despite the high Brent price, then it’s also reasonable to assume this process likely continued for June’s imports, which would have been booked late April and early may.

The 23 percent drop in the Brent price since mid-march to current levels around US$97.50 a barrel may also encourage the Chinese to continue filling strategic storage, as well as commercial inventories for new refining capacity scheduled to come on line in the second half.

There is also the possibility that actual demand increases in the second half as the authorities stimulate economic growth.

Taken together, it seems that China’s crude imports will remain robust, with any expected weakness not happening because of the Iran issue.

Like many analysts, I had expected the jump in Brent prices in the first quarter and a softer economy to temper gains in crude imports, but it appears the Iran issue and the resulting need to boost storage has come up trumps.

On January 12, I wrote that the bullish case for China’s oil demand depended on ongoing stockpiling, and this still holds true.

In the January-to-may period, crude imports have averaged 5.68 million barrels a day, an 11.1 percent gain over the 5.11 million from the same period in 2011.

Taking average imports for the first five months of 2012 together with average domestic output of 4.1 million barrels a day, and subtracting off the 9.26 million barrels a day of refinery throughput, and this leaves an average 520,000 barrels a day that is likely to have been stockpiled.

This is roughly half the daily rate of what appears to have been put in storage in may, which probably makes last month a bit of an outlier.

But even an average above 500,000 barrels a day is an enormous number, and if maintained would result in 183 million barrels of storage being filled over 2012.

This would seem unlikely, but if stockpiling does ease, an acceleration in second half demand could result in oil imports maintaining an increase of about 10 percent over 2011.

Reuters market analyst

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business daily June 13, 2012

ASIA

IMF urges Japan to raise sales tax Plays down case for South Korea rate cut

Japan should reform its welfare system to demonstrate a commitment to fiscal reform, the IMF says

T

he International Monetary Fund urged the Japanese government yesterday to raise the country’s sales tax and reform its welfare system to demonstrate a commitment to fiscal reform.

Prime Minister Yoshihiko Noda has staked his political life on the plan’s fate, aiming to pass the tax and social security bills during the current session that ends on June 21.

Japan’s ruling and opposition parties launched talks on tax and welfare reforms last week, aiming to strike a deal by Friday to secure parliamentary approval of a plan to raise the sales tax to 10 percent by 2015 to fix tattered public finances.

“Passage of legislation to double the rate to 10 percent in stages by 2015 is crucial to demonstrate a commitment to fiscal reform and sustain investor confidence,” the IMF said in a statement following its annual review of Japan’s economy and economic policies.

Investors and rating agencies see progress on the tax hike plan as a test of Tokyo’s resolve to tackle its public debt that is twice the size of its US$5 trillion economy, the highest among

industrialised nations.

Ratings agency Fitch cut Japan’s credit rating last month, citing scant progress in coping with ballooning social security costs and describing Tokyo’s fiscal consolidation plans as “leisurely”.

The IMF also said the yen is moderately overvalued, and the chance of further yen appreciation due to europe’s sovereign debt crisis poses a risk to Japan’s outlook.

The government will need to take additional measures to reduce public debt and the Bank of Japan could easy policy further by increasing asset purchases to help end deflation, it said.

S.Korea growth cools South Korea’s economic growth is likely to slow more than expected this year but will not be weak enough for the central bank to cut interest rates, the IMF also said yesterday. growth in Asia’s fourth-largest economy may pick up towards the end of the year and Bank of Korea may actually need to tighten rates by early 2013 to keep inflation in check, the IMF said, adding that policy rates are already fairly low.

KEY POINTS JAPAN gOvT TrYINg TO PuSh ThrOugh PlAN TO hIKE SAlES TAx bANK OF JAPAN cOuld dElIvEr mOrE EASINg TO bATTlE dEFlATION S.KOrEA gdP SEEN +3.25 PErcENT IN 2012 ImF SAYS bANK OF KOrEA mAY NEEd TO rESumE TIghTENINg NExT YEAr

The fund expects South Korea’s economy to grow 3.25 percent this year, lower than the 3.5 percent it projected in April. Bank of Korea had in April also forecast economic growth this year at 3.5 percent.

“Reflecting the weakening global outlook, Korea’s growth is likely to

be weaker than the 3.5 percent in our baseline forecast and we expect growth for this year is likely to be reduced by about 1/4 percentage point,” the IMF said, in a statement after an annual consultation meeting with officials.

It said the downgraded forecast was still vulnerable to more modifications, citing “substantial uncertainty” related to the ongoing crisis in europe.

“The monetary policy stance is still accommodative, and when growth strengthens from its current moderation, some increase in the policy rate may be needed in early 2013 to ensure that inflation remains within the target range,” it added.

The Bank of Korea kept its base rate on hold at 3.25 percent for 12 months running after five raises and has maintained direction of the next change would still be up, saying inflation pressure remains a threat.

The fund in April forecast South Korea’s economic growth would edge down to 3.5 percent this year from 3.6 percent last year but would pick up to 4 percent next year. It saw inflation slowing to 3.4 percent this year from 4.0 percent last year.

Reuters

June 13, 2012 business daily | 11

ASIA

India’s industrial output almost stalls

InBrief

Indonesia’s Saudara bank sells stake to South Koreans

Shares snap winning streak on S&P’s worries

Woori Bank, a unit of South Korea’s biggest financial group, plans to buy a 33 percent stake in small Indonesian lender PT Bank Himpunan Saudara 1906, it said in a joint statement on Tuesday. Woori unit PT Bank Woori Indonesia said it signed an acquisition agreement on June 8 to buy 764.4 million shares in the Indonesian group, pending regulatory approval. It did not give a value for the deal.

I

ndia’s industrial output growth almost stalled in April compared with a year earlier, reinforcing expectations the central bank will cut rates next week to try to combat a slowdown in the economy.

The government data showed that output rose just 0.1 percent in April, lower than expectations in a Reuters poll for a 1.7 percent increase.

Output fell in March from a year earlier by 3.5 percent.

“The data clearly points to industrial growth being extremely weak,” said Abheek Barua, chief economist at HDFC Bank in New Delhi. “It is in clear need of monetary as well as fiscal support.”

High inflation and interest rates, a lack of government initiative and the euro area debt crisis have weighed on Asia’s third-biggest economy for more than a year. Annual gDP growth hit its weakest pace in nine years in the first three months of calendar 2012.

Market reaction to the data was muted. The rupee was changing hands around 56 per dollar, little changed from before the data.

The yield on benchmark 10-year bonds was flat at 8.31 percent compared with pre-data levels and stocks pared mild losses to trade flat on the day.

The slump in January-March gDP growth to 5.3 percent sparked alarm in industry and calls for the government and the central bank to take action to revive the fortunes of an economy that was expanding closer to 10 percent a year before the global financial crisis.

That has spurred expectations the Reserve Bank of India will cut its repo rate by 25 basis points to 7.75 percent next Monday, adding to a 50 bps cut in April. However, those expectations will be further moulded

The country’s output rose just 0.1 percent in April, lower than expectations

tomorrow by May wholesale inflation data.

Finance Minister Pranab Mukherjee forecast last Monday a turnaround in India’s growth prospects after Standard & Poor’s said India could be the first BRIC member to lose its investment-grade credit status.

“Slowing gDP growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investmentgrade rating,” S&P said.

India’s main stock index fell yesterday, snapping five days of gains, after the S&P update. Indian stocks reversed earlier gains of nearly 1 percent after the S&P statement, and the falls contrasted with the relief rally seen in global shares after the euro zone’s rescue package for the Spanish banking sector.

“S&P scare is created by media only, but definitely more efforts are also required on fiscal discipline to turn around growth in India” said Deven Choksey, MD, K R Choksey Securities.

“Cutting down rates coupled with measures facilitating foreign flows are required to boost the economy”.

Reuters

qantas takes off as shares nudge higher Airline stocks ended up 10.8 percent

Singapore asks oil firms to stop Iran trade Singapore is putting pressure on oil companies operating in the city-state to cut their dealings with Iran as it seeks to be exempted from U.S. sanctions on Iran’s oil trade, sources said on Tuesday. U.S. ally Singapore was absent from a list of countries that Washington this week declared exempt from sanctions after they reduced Iranian oil imports. The sanctions aim to cut the flow of petrodollars that fund Iran’s nuclear programme, which the West believes Tehran is using to develop weapons. Iran says it needs reactors to supply electricity.

S. Korea casino must part repay gambler losses A South Korean court has ordered a casino to repay about half the losses suffered by two problem gamblers who lost a total 2.47 billion won (US$2.1 million) over two years, a court official said Tuesday. The Seoul Central District Court ruled on Monday that the unidentified casino in Seoul – which is supposed to cater only to foreigners – was partly responsible for helping the two Koreans to play. The plaintiffs, both surnamed Kim, accused the casino of giving them the opportunity to gamble by issuing free Bolivian residency cards.

A Prime Minister Yoshihiko Noda has staked his political life on the plan’s fate

ustralian shares eked out a 0.2 percent gain yesterday, as a firmer banking sector helped offset weaker resource stocks weighed down by a slide in oil and copper prices. gains were capped due to sluggish Asian markets, which slipped after a european bailout for Spain’s debtstricken banks failed to convince investors that the euro zone debt crisis can be contained.

“The market outperformed the region today after missing out on yesterday’s rally,” said Ig Markets analyst Stan Shamu.

Opening after a market holiday on Monday, shares in Qantas surged as much as 16 percent after the embattled airline took steps to defend against a possible hostile takeover and ruled out a capital raising.

Qantas shares ended up 10.8 percent at A$1.075 after it confirmed it had enlisted Macquarie group to help defend against potential private equity bids, after the shares lost one-third of their value last week.

The big four banks all gained more than 0.3 percent, led by Australia and New Zealand Banking group with a gain of 10 percent.

The benchmark S&P/ASX 200 index closed up 9.2 points at 4,072.9.

BlueScope Steel, Australia’s largest steelmaker, surged 9.6 percent to A$0.285, after it said that its plan to slash its hefty debt levels was on track, while adding it had no plans to raise extra funding.

New Zealand shares slipped 0.8 percent to 3,425.6, tracking a slide in Asian share markets. Rio Tinto fell 1.7 percent, while BHP Billiton was down 0.6 percent.

Domestic investors also sold shares in the resources sector in a belated reaction to Chinese data at the weekend showing sluggish retail sales and industrial and lower-than-expected inflation in May.

Rhinos poached for Asia potion trade The slaughter of rhinos driven by the soaring illegal Asian trade in their horns continues at a record pace with 245 killed in South Africa since January, authorities said on Tuesday. With roughly 20,000 animals South Africa is home to between 70 and 80 percent of the world’s rhino population, increasingly being targeted by poachers despite heightened security. The animals’ distinctive horns are hacked off to be smuggled to the lucrative Asian black market, where the fingernail-like substance is falsely believed to have powerful healing properties.

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business daily June 13, 2012

OPINION Too much faith in markets denies us the good life (part I)

J

Robert Skidelsky

Edward Skidelsky

Emeritus professor at the University of Warwick

Lecturer at the University of Exeter

ohn Maynard Keynes’s generation of economists assumed that as people became more efficient at satisfying their wants, they would, and should as rational agents, work less and enjoy life more. Yet power relationships and the insatiability of human wants are such that we have maintained an ethic of acquisitiveness.

International rivalries add fuel to the acquisitive fire.

We are constantly being told to gear up to face further challenges, particularly from the Chinese and other poor but industrious peoples.

But why, if we already have enough, should we strive for a larger presence in emerging markets?

It is worth recalling that the ideal of economic growth as an end without end is of fairly recent origin. When British Prime Minister Harold Macmillan told the voters in 1959 that they had “never had it so good,” he was echoing the widely

held view at the time that the capitalist countries of the West were rapidly approaching a consumption plateau, and the main problem of the future would be to ensure that the fruits of the new abundance were democratically distributed.

Nevertheless, the perception of imminent bliss in the 1960s led to the restoration of Darwinian capitalism in the 1980s. And economic growth quickly and decisively came to trump all other objects of economic policy.

market faith Margaret Thatcher (elected prime minister of the U.K. in 1979) and Ronald Reagan (elected president of the U.S. in 1980) added an essential ingredient to the philosophy of growth: an ideological faith in the market system. Faster growth would come from markets freed of red tape, lighter taxes and weaker trade unions. The ThatcherReagan philosophy also

viewed increasing income inequality as acceptable insofar as it improved the incentives of the “wealth creators”: There would be a “trickle down” from rich to poor.

It was the shift to a marketbased philosophy of growth that inflamed the insatiability of wants – by abandoning

THE mARKET WAS BOUND By THE RULE OF LAW, BUT THERE WAS NO LONGER ANy mORAL, POLITICAL OR CULTURAL RESTRAINT ON THE INDIVIDUAL PURSUIT OF WEALTH

any interest in the social outcome of growth. The market was bound by the rule of law, but there was no longer any moral, political or cultural restraint on the individual pursuit of wealth.

Keynes’s notion of satiety had no place.

Such a system cannot work according to plan. It is both economically and morally inefficient.

The AngloAmerican system of the past 30 years, dominated by the financial-services industry, has been retained for the benefit of a predatory plutocracy that creams off the riches in the name of freedom and globalisation.

So, what intellectual, moral and political resources still exist in Western societies to reverse the onslaught of insatiability and redirect our purposes toward the good life?

In many ways, the political economy of the first half of the 20th century was admirably tailored to realising the good life. The problem was

that it lost the language for describing itself in these terms. This is the main reason why it failed to survive the economic and social troubles that beset Western societies in the 1970s.

The historian Peter Clarke has usefully distinguished between “moral” and “mechanical” reformism. Moral reformism saw improvements in material conditions as ways of elevating the moral condition of the people; mechanical reformism simply aimed to increase their prosperity.

Deprived of their ethical language by the collapse of religion and the strongly individualist fashion in economics and political philosophy, by the second half of the century, “moral” liberals were forced back on purely “mechanical” arguments. They stressed the positive effect on productivity of a better-fed, better-housed, better-clothed, healthier and better-educated workforce. This was almost certainly true. However, once the commonly accepted language became one of efficiency, the moral reformers were vulnerable to the charge that their reforms had created inefficiency by lessening the incentives to work and save, and by stealing resources from the productive sector.

The social liberalism of the 1950s and ’60s had nothing left to put in place of the profit motive, no defences to offer against the philosophy of untrammelled self-interest. Tax rates tumbled, the welfare state was reined in, state industries were privatised, and the financial sector was set free.

The coup de grace was delivered by the fall of communism. In the Cold War era, the West had to proclaim its own concept of the good life to counter the appeal of communism.

This necessity was now gone. Market individualism remains the only game in town.

Bloomberg View

(For editorial reasons this article is published in two parts. The second part will be published in tomorrow’s edition)

EDITORIAL COUNCIL Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, emanuel graça, Cris Jiang FOUNDER & PUBLISHER Paulo A. Azevedo | pazevedo@macaubusinessdaily.com EDITOR-IN-CHIEF Tiago Azevedo DEPUTy EDITOR-IN-CHIEF José I. Duarte CHIEF REPORTER Vitor Quintã NEWSDESK Cláudia Aranda, Kristy Chan, Kelsey Wilhelm, Cherry Lee, Terina Cao, Tony Lai CREATIVE DIRECTOR José Manuel Cardoso DESIGNER Janne Louhikari PHOTOGRAPHy Carmo Correia, John Si, Manuel Cardoso ASSISTANT TO THE PUBLISHER Laurentina da Silva | ltinas@macaubusinessdaily.com OFFICE mANAGER elsa Vong | elsav@macaubusinessdaily.com AGENCIES Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate PRINTED in Macau by Welfare Ltd.

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June 13, 2012 business daily | 15

OPINION

Living europe’s nightmare WIReS BUSINeSS Leading reports from Asia’s best business newspapers

Christopher T. Mahoney Former vice chairman of moody’s

TAIPEI TImES Taiwan’s securities transaction tax revenue may fail to reach its budgeted allocation of NT$126.5 billion (US$4.23 billion) this year after posting a 20 percent year-onyear decline in the first five months, the Ministry of Finance was quoted as saying on Monday. Revenue from the securities transaction tax totalled NT$33.2 billion in the first five months, down NT$8.3 billion from the same period the previous year, marking the sharpest fall among all tax revenues, the ministry said in its monthly report.

“Turnover on the nation’s stock market has been slowing, further dragging down revenue from the securities transaction tax,” Hsu Raylin, deputy director of the ministry’s statistics department, said.

GERmANy CANNOT GUARANTEE THE EUROzONE’S DEBT WITHOUT CONTROL OVER THE

JAKArTA glObE Mandala Airlines will start running daily flights between Jakarta and Bangkok on August 10 as the Indonesian low-cost airline expands its international network. Bangkok will be the airline’s third international destination after Singapore and Kuala Lumpur. “To meet Indonesians’ desire for travel we will continue to seek opportunities to expand our network in Indonesia and the region and to share with our customers the benefits of connectivity to the rest of Asia,” Mandala’s chief executive Michael Coltman was quoted as saying. Travel industry data show that the number of Indonesians traveling overseas increased 20 percent to 7 million in 2011, up from 5.1 million the year before.

dAIlY YOmIurI The 2020 summer Olympic Games would create a nationwide economic ripple effect of about 3 trillion yen (US$37.8 billion) if Tokyo were to host the event, according to the Tokyo metropolitan government.

Demand totalling about 1.22 trillion yen would be created in Japan through construction of related facilities, such as the Olympic village and competition sites, as well as through spending on accommodation, entertainment and shopping by visitors, the government said. The preliminary estimate was calculated based on the assumption the economic impact of the Olympics would last from 2013 through 2020, which includes the preparation period.

buSINESS INquIrEr The Philippine automotive industry has started recovering from last year’s slump as vehicle sales in the first five months of the year inched up by 0.6 percent to 59,177 units from 58,847 units a year ago. The month of May showed a much stronger performance with a 30.7-percent growth in vehicle sales to 14,265 units from the 10,913 units sold in the same month last year, according to a joint report by the Chamber of Automotive Manufacturers of the Philippines and the Truck Manufacturers Association. Toyota Motor Philippines continued to lead the industry with a 39.7-percent market share followed by Mitsubishi Corp., with a 23.9-percent share.

EUROzONE, WHICH NO ONE HAS OFFERED, AND NORTHERN EUROPE WILL NOT PERmIT THE ECB TO BE HIJACKED By ‘CLUB mED’ AND TURNED INTO A CHARITy ORGANISATION

L

osing a long war is always hard to accept.

Hemmed in by the Americans and the Russians in the final days of World War II, Hitler convinced himself that he had two armies in reserve to mount a counter-attack and win the war. Meanwhile, having lost the entire Pacific, Japan’s Imperial Cabinet believed that no enemy could set foot upon the country’s sacred soil. When the truth is unimaginable, human psychology finds an alternative reality in which to dwell.

That describes the global situation today. The entire planet seems to be in denial about what is about to occur in the eurozone. Pundits keep expecting Germany to pull a rabbit out of the hat and flood the continent with Eurobonds, or that Mario Draghi will mount a coup at the European Central Bank and buy up every deadbeat country’s bonds.

Either could happen, but both are extremely unlikely. Germany cannot guarantee the eurozone’s debt without control over the eurozone, which no one has offered, and Northern Europe will not permit the ECB to be hijacked by “Club Med” and turned into a charity organisation. It is not just a matter of politics; it is also – as the Germans keep pointing out – a matter of law.

Europe has a Plan A, whereby each country would reform its economy, recapitalise its banks, and balance its budget.

But Plan A is not working: its intended participants, most notably France, are rejecting it, and there is an emerging southern European consensus that austerity is not the solution.

Greece’s recent election has put it in the anti-austerity vanguard. Italy and Spain (which does not have enough money to bail out its banking system), have similarly called for an end to austerity, and Ireland will be voting on it soon. All have lost

access to the bond market, and Portugal is so far beyond hope that its sovereign debt is trading for cents on the euro.

There is no well-thought-out plan for the orderly exit of the eurozone’s insolvent countries.

There are no safeguards, no plans, no roadmap – nothing.

The Maastricht Treaty, like the United States Constitution, did not provide for an exit mechanism. So, instead of realism and emergency planning, we get denial and more happy talk.

But, just because something is “unthinkable” doesn’t mean that it can’t happen.

In fact, it already is happening.

Greece is rapidly running out of money; its residents are withdrawing their deposits and have stopped paying their taxes and utility bills. Even if the country can stay afloat until the June 17 election, a disorderly eurozone exit, default, and currency redenomination will follow. Greece will be dependent upon foreign aid for essential imports such as petroleum and food. Civil order will be difficult to maintain, and the army may be forced to step in (again).

Once Greece goes, runs on bank deposits are likely to follow in Spain and Italy. There is nothing to stop Spanish and Italian depositors from wiring their euros from their local bank to one in Switzerland, Norway, or New York. At that point, the only thing still standing between the eurozone and financial chaos will be the ECB, which could buy government bonds and fund the bank runs.

The scale of such an operation would be enormous, and would expose the ECB to huge credit risk. But it could, in principle, step in – if Northern Europe permitted.

Exit rush If the ECB does not step in, Italy and Spain, too, will be forced to exit the eurozone, de-

fault on their euro-denominated sovereign and bank obligations, and redenominated into national currency. Massive losses would be imposed on the global financial system. Given the opacity of banks’ exposures, creditors would be unable to discriminate between the solvent and the insolvent (as was the case in September 2008).

The US banks most likely to be affected by such a scenario would be the globalists: Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley.

They would require a rescue package similar to the US Troubled Asset Relief Program, created after Lehman Brothers’ collapse in 2008. The US can afford a second TARP, but it would require Congressional legislation, which is not guaranteed (though the US Federal Reserve can, of course, keep the system funded no matter what).

Massive wealth destruction, combined with global financial chaos, would pose a challenge to monetary policymakers worldwide. Central banks would be tasked with preventing deflation, implying a major round of quantitative easing.

But, since banks are the transmission mechanism for monetary stimulus, this presupposes functioning banking systems.

Each country would need to restore confidence in its banks’ solvency, which would most likely require a blanket bank guarantee and a recapitalisation scheme (such as TARP).

The US financial system can withstand any shock, because the US can print the money that it needs. The Fed can maintain nominal prices, nominal wages, and growth if it acts heroically, as it did in 2008. The stock market will react negatively to the level of uncertainty caused by the collapse of the European financial system (as it did in 1931), and the dollar, yen, and gold should benefit. The fate of the British pound and Swiss franc is impossible to say; they could benefit as safe havens, but their banks are highly exposed to the eurozone.

It is bad enough that the world is utterly unprepared for the future that can be foreseen. The unanticipated financial, economic, and political consequences of the coming crisis could be even worse. © Project Sindicate

16 |

business daily June 13, 2012

CLOSING NZ ‘accidental millionaire’ guilty

Apple new offerings

A New Zealand man who took millions of dollars that were accidentally credited to his bank account has pleaded guilty to theft. He fled to China in 2009 after Westpac Bank mistakenly gave him a NZ$10 million (US$7.5 million) overdraft facility. He was extradited from Hong Kong last year. His partner was found guilty of money laundering, attempted fraud and theft last month. She pleaded not guilty, saying she was told it was lottery money. Both are due to be sentenced in August.

Apple Inc. unveiled the next version of its mobile software, adding maps and integration with Facebook Inc. to ratchet up pressure on Google Inc. in the market for handheld devices and online applications. Apple’s iOS 6 will have more than 200 new features, including map navigation and tools to make it easier to access Facebook from iPhones and iPads.

The company also upgraded its MacBook computers, adding faster chips and sharper displays to the high-end Pro model.

Former HKmA chief suggests changes in HKD peg Current financial secretary dismisses possibility

T

he Hong Kong government vowed yesterday to stick to its near 30-year currency peg to the U.S. dollar after a former central bank chief recommended possible changes to the Chinese city’s monetary system and suggested a fixed exchange rate cannot be an end in itself.

“We all agree that the linked exchange rate is most suitable for Hong Kong and there’s no need whatsoever to make any change,” Financial Secretary John Tsang told a news conference after word of the former official’s recommendations sparked a jump in the local dollar. “I see no need, nor do I have any intention to change the peg.”

Joseph Yam, an adviser to China’s central bank and a former Hong Kong Monetary Authority chief, suggested in a paper released earlier in the day that Hong Kong may want to consider doing away with an exchange rate target. He also added that the Chinese yuan may have a role in the future of the Hong Kong dollar.

The recommendations sparked fresh speculation about how much longer the global financial centre will stick to its currency peg to the U.S. dollar, which was adopted in 1983.

The Hong Kong dollar was the eighth most traded currency in the world in 2010, according to euroMoney magazine. economists and market watchers doubted any change was imminent, though some traders noted that

A peg for the rainy days

maintaining a commitment to a linked exchange rate did not preclude a change in the actual level of the pegged rate.

“The U.S. dollar peg has served the country well for 30-odd years and we see the peg remaining in place for the foreseeable future,” said Dominic Bunning, forex strategist at HSBC. Yam, who retired as head of Hong Kong’s de facto central bank three

years ago, was speaking in his private capacity as a professor at the Chinese University of Hong Kong. Yam is an executive vice president at the China Society for Finance and Banking at the People’s Bank of China.

The last major change to the city’s currency regime was in 2005, when the trading band for the Hong Kong dollar was widened to 7.75/7.85 per U.S. dollar.

Since it was adopted, the peg has survived a number of speculative attacks as well as regional and global financial crises.

However, speculation that the currency peg’s days may be numbered has grown in recent years as China allowed its yuan currency to appreciate, widening its premium over the Hong Kong dollar.

Reuters

Tokyo overtook Luanda as most costly city for expatriates

Asian cities most costly for expats Five ranked in top 10 most expensive cities in the world

T

okyo advanced past the Angolan capital Luanda to become the world’s most expensive city for expatriates of 214 ranked by Mercer, while Moscow remains the most costly place to live in europe.

“Recent world events, including economic and political upheavals, have affected the rankings for many regions through currency fluctuations, inflation, and volatility in accommodation prices,” Mercer said yesterday in its annual Worldwide Cost of Living Survey.

The analysis uses New York as a base city and measures the comparative prices of more than 200 items in each location, such as transport,

clothing, food, household goods and entertainment. Housing costs, which are also included, are critical in the ranking as they are often the biggest expense for expatriates.

A pair of blue jeans costs US$174 in Luanda while expats in Moscow pay about US$9.60 for an international newspaper, Mercer said. In Tokyo, a cup of coffee including service averages US$8.15 and the monthly rent on a luxury twobedroom unfurnished apartment runs US$4,766, according to the consulting company. geneva retained its ranking as the world’s fifth most expensive city for expats, while Zurich moved up one place to sixth and the Swiss capital,

Bern, gained two spots to 14 following the strengthening of the franc against the dollar. Karachi is the least expensive city for expats, less than a third as costly as Tokyo, Mercer said.

Most european cities dropped in the ranking, mainly due to what Mercer called a “considerable weakening” of local currencies against the dollar.

“Despite some marked price increases across the region in the first half of last year and widespread increases in VAT charges, most european cities dropped in the ranking,” said Nathalie ConstantinMetral, who compiled the data.

“This is mainly due to the unstable economic situation across europe,

which has led to the depreciation of most local currencies against the dollar.”

Osaka, Japan’s third-largest city, advanced three places to No. 3, followed by Singapore at 6 and Hong Kong at 9. Higher prices for goods and a stronger yuan pushed Chinese cities including Shanghai, Beijing, Shenzhen and guangzhou up in the rankings, ConstantinMetral said.

Along with Karachi, the cheapest cities for expatriates are Islamabad, Pakistan; Managua, Nicaragua; Bishkek, Kyrgyzstan; La Paz, Bolivia; Tunis; and Kolkata, India, according to Mercer.

Bloomberg