damages in subsidy row P
ublic bus operator Reolian Public Transport Co is pursuing a claim for compensation from the government over a subsidy hike announced last year, a source told Business Daily. A subsidy increase was announced in June 2012 for all three of the city’s public bus operators but not implemented after a public outcry over service quality. In April this year two of the operators got their delayed subsidy hike. Reolian was left out over claims it was still below the required standard.
In June this year Reolian filed an urgent injunction asking the Administrative Court to order the government to make those payments. The company is still waiting for a decision. The company filed on July 22 a claim seeking a final decision on the issue. Reolian general manager Cédric Rigaud yesterday told Business Daily the firm is already owed “maybe 50 million patacas” (US$6.3 million) for the period since July 2012.
New rules could dent tour guides’ earnings Page 3
Solution for Coloane ‘silk paper’ deeds drags Page 5
Esprit not so lively but Macau biz shines Page 6
More on page 3
Number 368 Wednesday September 11, 2013
Editor-in-chief Tiago Azevedo
April 19, 2013
Macau Pass SIM cards for mobile soon
Residents could start using their mobile phones as Macau Pass cards for payment in some shops and on buses in the next quarter. SIM cards with stored-value card functions are almost ready for launch. “This new product can be out in either October or November and we are now in the final stage of preparation,” Macau Pass SA deputy general manager David Lao told Business Daily. Page 4
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Budget surplus close to new record high The government is making far more money this year than it expected. The budget surplus is likely to set a new record this month. In the first eight months of this year the budget surplus was 60.05 billion patacas (US$8.52 billion patacas), 30.2 percent more than in the equivalent period last year, according to data released yesterday by the Financial Services Bureau. Page 16
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CTM mulls bid for cable TV licence The city’s largest telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) plans to bid for the cable television service once the sector is liberalised. CTM “has the ability and interest” to obtain an operating licence if the government opens up the market, said chief executive Vandy Poon Fuk Hei. But he told media yesterday that “it is still too early” to talk about CTM’s proposal. Page 16
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September 11, 2013
Okada’s Universal claims ‘cleared’ of graft Quotes letter from a Philippines government agency as its evidence Michael Grimes
azuo Okada’s Universal Entertainment Corporation says it has received a letter from the Philippine Economic Zone Authority the firm claims is evidence it did not act corruptly in obtaining land for a casino resort at Entertainment City, Manila Bay. The Philippines Department of Justice has been investigating allegations that at various dates up to June 2010 money changed hands between entities linked to Mr Okada – a Japanese pachinko and casino game entrepreneur and former director of Wynn Macau Ltd – and Philippines officials, in order to receive favourable treatment regarding Universal’s plan for the US$2 billion (15.9 billion patacas) casino venue. PEZA, set up in 1995, is an office of the country’s Department of Trade and Industry. It aims to promote “export-oriented manufacturing and service facilities” inside special economic zones declared by the authority. The text of the authority’s letter – dated August 23, and signed by Tereso O. Panga, its deputy director general, policy and planning – has been released by Universal. Referring to Eagle 1 Landholding Inc – an entity of the casino resort developer Tiger Resort, Leisure and Entertainment Inc, which in turn is a unit of Universal Entertainment – the authority states: “Eagle 1 complied with all the necessary documents required by the Presidential Proclamation of the Okada Resorts as Tourism Economic Zone…
Local governments likely given some regulatory discretion, says Union Gaming
without any special favours or accommodations extended…” Universal Entertainment said in its statement: “The PEZA document proved that the allegations about illegal expenditure are totally unfounded.” It added: “However the company will investigate the facts, including the accusation against those involved in the spending.”
Criminality claim In August, Universal Entertainment Corp said it was pursuing criminal charges, including possibly “fraud, breach of trust and misappropriation of funds”, against company managers allegedly involved in “illegal flow of funds totalling [US]$40 million” relating to the Manila project. Rafael A. Francisco, a former president and chief operating officer of the gaming regulator there, the Philippine Amusement and Gaming Corporation, is listed on the PEZA letter quoted by Universal Entertainment as one of the officials issuing a ‘no objection’ letter regarding Eagle 1’s request for tourism operator status. In July last year the current management of PAGCOR filed graft and plunder charges against Mr Francisco, his former boss Efraim Genuino and other former PAGCOR officials as well as a coffee concessionaire called Carlota Manalo-Tan. It was alleged they had connived in a 258-million
Max 20 pct gaming tax for Japan casinos: analyst
Kazuo Okada – denies wrongdoing
pesos (US$5.9 million) contract to supply coffee at PAGCOR casinos at above market prices and that the deal resulted in a loss for the public coffers. “Respondents Genuino, Francisco, Figueroa acted with manifest partiality, evident bad faith and or gross inexcusable negligence by awarding the concession agreements to Promolabels,” read the complaint signed by current PAGCOR directors Jose Tanjuatco and Enriquito Nuguid. Those named in the complaint have denied any wrongdoing.
uture casino resort operators in Japan might be required to pay a national g overnment tax on gross gaming revenue of up to 10 percent, says a note from Union Gaming Research Macau. The paper adds that a further GGR tax at prefecture (local government) level might be levied at a rate between zero percent and 10 percent. Even if suggestedmaximum levels of national and local gaming tax were levied on the gross, the gaming tax burden on operators would – at 20 percent – still be only about half that imposed on Macau operators. “We could see an economically disadvantaged area attempt to draw higher levels of investment (and resulting employment) by offering a very low prefectural level GGR tax rate that, when combined with the national GGR tax, would suggest a total GGR tax barely over 10 percent,” says the research firm. Union Gaming also suggests that while the Tokyo and Osaka metropolitan areas are the most likely sites for casino resorts, it’s possible prefectures within those areas will compete among themselves to host one. “…Chiba prefecture (home to Tokyo Disney and Narita Airport) might take on Tokyo prefecture for the rights to host the one IR licence destined for the Tokyo metropolitan area. There is also talk of Chiba and Tokyo working together in some fashion due to the limited availability of land in Tokyo,” adds Union Gaming. The research house adds: “It is important to note that the national government is likely to give the prefectures certain leeway in determining the regulatory structure of the IRs.” Macau casino investors Las Vegas Sands Corp, MGM Resorts International and Wynn Resorts Ltd are scheduled to make presentations at a conference on Japan that Las Vegas-based Union Gaming Group is hosting in Tokyo from September 17 to 19. M.G.
Four Seasons Macao ‘premium mass’ plan, says Sterne Agee analyst
he Four Seasons Macao is likely to be turned into a premium mass table games venue with 40 percent more tables, says a note from David Bain of independent brokerage Sterne Agee following a meeting with Las Vegas Sands Corp management in Las Vegas. Mr Bain writes: “In order to
penetrate more premium mass on Cotai, it [management] will likely increase mass tables at its Four Seasons property to 100 from 59 today – leaving just a small handful of junkets at the facility (freeing up the property’s room and table base).” He adds: “Some Four Seasons junkets are being relocated to
the Sands Cotai Central or The Venetian, which recently remodelled several VIP rooms. In essence, the Four Seasons is transitioning to a full premium mass casino resort.” The report of the operational changes comes only a week after the resignation of David Sisk, chief operating officer of LVS’s local unit Sands China Ltd.
The national government is likely to give the prefectures certain leeway in determining the regulatory structure of the IRs Union Gaming Research Macau
September 11, 2013 April 19, 2013
Reolian adds damages to claims against govt The bus company bleeds red ink as the courts take their time Vítor Quintã
Reolian said in May it had been losing more than 4 million patacas each month this year (Photo: Manuel Cardoso)
eolian Public Transport Co is pursuing a claim for damages for the government’s refusal to increase what the company is paid to run its bus services, a source has told Business Daily. In June Reolian asked the Administrative Court to order the government to pay a promised increase urgently. The company is still waiting for such an order. While that injunction was only aimed at quickly making the extra money available, the company filed on July 22 a claim seeking a final decision on the issue. Reolian general manager Cédric Rigaud told Business Daily that his company was owed “maybe” 50
million patacas (US$6.3 million) for the period since July last year. A source with direct knowledge of the case told Business Daily that Reolian believed it was entitled to interest on that sum and damages, too. The company “lost a number of business opportunities”, the source said, because the government withheld an increase in what it pays the three bus operators to run their services. The government promised an increase of 23.3 percent in June last year, but the announcement of the increase provoked a public outcry over the quality of bus services. In April the government gave Transportes Urbanos de Macau
SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM) the increase it had promised, but not Reolian. Reolian’s claim for damages is likely to strain further its already tense relationship with the government.
Hopes dashed “We expect either a hearing or a decision rather soon” on the injunction, Mr Rigaud said. “The claim will take longer to decide, maybe two years,” he said. A lawyer with no connection to the case told Business Daily that the process of dealing with an application such as Reolian’s “usually takes about
New rules could dent tour guides’ earnings About 800 guides leading shopping tours could feel the pinch as shop commissions banned Tony Lai
alf of the city’s tourist guides could be earning lower wages next month, fears the head of their trade body. The reason is a new law, banning travel agencies and agents from getting commissions from shops, coming into effect in mainland China. Angelina Wu Wai Fong, president of Macau Tourist Guide Association, told Business Daily that travel agencies – many of whom offer low or ‘zero-fare’ guided tours to Chinese visitors and make their money back
via commissions from shops – must bear the burden of the new rules. “If the agencies do not give us as much money as what we get from commissions now, it will surely have significant impact on our salary,” she said. But she declined to predict how big the impact might be. Business Daily reported yesterday that tour guides are still waiting for more information from the travel agencies on new pay rates that will apply after the rule changes come into effect on October 1.
‘Zero-fare’ group tours have been widely criticised for putting unfair pressure on tourists to shop in certain places and with a minimum spend. In 2010 a Hong Kong-based guide was forced to apologise after being filmed berating mainland visitors for not spending enough. Agencies and agents could face fines of up to 300,000 yuan (388,247 patacas) if they are caught trying to force tourists to shop at particular places, the new law states. Ms Wu estimates the change could
a month and a half”. Mr Rigaud played down the delay. “We believe the courts are independent. We are sure the judges are not dragging out the case for the sake of it,” he said. Our source said the process was taking “longer than usual” because the judge had several times asked for more information. The law gives the government just seven days to respond to an application such as Reolian’s. But the court gave the government more time because Reolian did not at first specify which organs of the government it was suing. Our source said the judge had also asked whether or not the Transport Bureau’s decision to withhold the increase was a “verbal administrative action”. The law permits verbal administrative action, but requires the government official or department concerned to give in writing the reasons for taking such action. The delay in dealing with its application has dashed Reolian’s hopes of using the money it has asked for to ease the financial pressure it is under. “We need this money to be able to sustain our operations,” Mr Rigaud said. Otherwise, he said, “We will not be able to have a long stay in Macau.” Reolian made a loss of about 58 million patacas last year. Mr Rigaud told Business Daily in May that the company had been losing more than 4 million patacas every month this year. Reolian is a joint venture formed in 2009 by Macau’s HN Group Ltd and France’s Veolia Transport RATP. The Transport Bureau confirmed a fortnight ago that in July HN Group had transferred its stake of 35 percent in Reolian to an unidentified “mainland Chinese individual”. Last month a former representative of HN Group on Reolian’s board, Stephen Chok, told Business Daily that HN Group “concluded that it was no longer able to support Reolian, as the bus operator has been recording losses and no one could see when the situation would end”. Mr Rigaud said he had no information on the identity of the new shareholder in Reolian.
impact half of the 1,600 licensed tour guides in the city. “Right now about half of the tour guides are responsible for the mainland shopping tours while the rest are in charge of the sight-seeing and MICE [meetings, incentives, conventions and exhibitions] tours” as well as groups from overseas, she said. Latest official data show the city received more than 4.6 million package visitors in the first half of 2013. Mainland tourists accounted for more than 75 percent of them. “The earnings for MICE tour guides are pretty stable as their income is made up of the basic salary the agencies give,” said Ms Wu. In contrast the guides for shopping groups “can earn more but with less certainty as they mostly rely on commissions,” said Ms Wu. An industry insider told Business Daily shop commissions paid to tour guides and agencies here can reach 40 percent of what tourists buy. Ms Wu thinks the new rules are “healthy” for the long-term development of tourism here. “It is a global trend that the tourist guide service should become more standardised and transparent,” she said.
September 11, 2013
Macau Pass SIM cards to reach market in Q4
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Macau people will soon be able to say: ‘Have phone, will travel’
Counting matters Accounting for meetings, incentives, conventions and exhibitions (MICE) here is tricky. The MICE industry puts on a wide variety of events for a wide variety of purposes, and these events are affected by many variables. At one extreme, meetings are held by all kinds of organisations, private or public. Meetings can be straightforward and comparatively easy to arrange, with limited numbers of people taking part. At the other extreme, exhibitions may require a long time to prepare and promote, and a lot of time and resources to put on. Incentives and conventions tend to fall somewhere between these extremes. Some events are combinations of these types. The Statistics and Census Service has published a good deal of figures on the MICE industry since 2009. About 90 percent of events are meetings. Over 870 meetings have been held each year, the most being almost 1,100, in 2010. Four or five exhibitions have been held each month, on average. But many more people attend exhibitions than meetings.
eople could start using their mobile phones as Macau Pass cards before the end of this year, Macau Pass SA says. The company says its SIM cards with the functions of a stored-value card are almost ready to be launched into the market. “This new product could come out either in October or November, and we are now in the final stage of preparation,” Macau Pass deputy general manager David Lao told Business Daily. “This technology has matured and the prototypes run well,” Mr Lao said. “There are just some commercial decisions left that we have to discuss with the two local telecommunications companies before the launch.” He declined to identify the telecommunications companies that are cooperating in the project. Almost 1.1 million Macau Pass cards were on issue in April, the company has said. Holders use Macau Pass cards mostly to pay bus fares or shop in convenience stores. The cards can store value of up to 1,000 patacas (US$125). “The investment in this is not high – about six digits – as this technology has already been developed elsewhere,” said Mr Lao. Macau Pass is not the only company set to launch a service for making payments with mobile phones in Macau.
Hong Kong’s Tradelink Electronic Commerce Ltd intends to introduce a service it calls “mobile e-wallet” in the fourth quarter. Tradelink said last week it would try out the service in collaboration with Joint Electronic Teller Services Ltd (Jetco), which has the biggest network of ATMs in Hong Kong and Macau. Mr Lao said his company would at first release only a small number of Macau Pass SIM cards, to gauge market reaction. “We have not decided the final figure, but the number will not be large, as it will take time for the public to accept this product, to be sure that it is safe,” he said. “One of the characteristics of the Macau market is that the public has more reservations about new things,” he said.
Less advanced An assistant professor of business information systems at the University of Macau who does research into user acceptance of technology, Tony Sam Kin Meng, thinks Asian markets need more time than Western markets to accept new technology. “Asians are more conservative in accepting this new technology because it usually involves issues of safety and privacy,” said Mr Sam told Business Daily. He said this was the main reason
The data available show almost 90 percent of people attending MICE events went to exhibitions. Fewer than 9 percent attended meetings. Fewer than 2 percent attended conventions and fewer than 2 percent were on incentives. These figures should be looked at with caution. Changes such as those shown in the chart may be due as much to changes in accounting methods as changes in attendance trends. A better understanding of the figures would require knowledge of details of the counting and survey methods used in compiling them. J.I.D.
386,967 Attendance at exhibitions in H1
Almost 1.1 million Macau Pass cards were on issue in April
It will take time for the public to accept this product, to be sure that it is safe David Lao, Macau Pass deputy general manager
• Asians are more conservative in accepting this new technology because it usually involves issues of safety and privacy Tony Sam Kin Meng, University of Macau user acceptance of technology researcher
for Asia being behind the West in the development of technology for making payments with mobile phones. He said the services proposed for Macau used near field communication (NFC) technology, which several makes of smartphone supported. In June Hang Seng Bank and telecommunications company PCCW-HKT Ltd launched SIM cards that allow most Android smartphones in Hong Kong to be used to make payments. Apple Inc was due to launch its latest smartphone, the iPhone 5S, yesterday, after we went to press. Before its launch the new model was rumoured to support NFC technology. Mr Lao said Macau Pass would also launch an application for smartphones along with its SIM cards. “The users will be able to check the remaining credit in their Macau Pass only via the mobile app at first, but we will later include features like recharging,” he said. Macau Pass made a profit of 3.16 million patacas last year, the company’s highest ever, its annual report says.
September 11, 2013
Macau Grants of Coloane land leases grind to a halt Residents that wish to stake their claims are entangled in red tape Stephanie Lai
he government has approved no new leases of land in Coloane Village in the past 12 months, as longstanding residents that claim ownership of land there struggle with bureaucracy. The Land, Public Works and Transport Bureau says it has received 21 applications for land leases since 2010, seven of them in the past 18 months. The bureau says in a written statement issued on Monday that it has granted three leases since 2010 – the same number that it had granted a year ago. It says construction has begun on two of the plots of land. The bureau says is still considering 11 applications and close to approving two of them. The vice-chairman of the Coloane Residents Association is Ng Kun Cheong. “Quite a number of residents of Coloane Village have tried to apply for land leases,” Mr Ng told Business Daily. “But they say the approval process is complex and time-consuming,” he said. “Some of these Coloane homes are not inhabited by the original owners
No new Coloane Village land leases have been granted since September 2012
any more, but by their tenants.” Mr Ng said this made the process of proving ownership particularly lengthy because water and electricity bills, commonly used as evidence of ownership, were now issued to the tenants. The Land, Public Works and Transport Bureau statement says illegal structures and disputes over land use can delay the approval of applications for land leases. Business Daily asked the bureau
Corporate Run of Hope Macau to aid local charities The Canadian Chamber of Commerce in Macao is to work with the 2013 Run of Hope Macau to raise funds and awareness for cancer research and orphan care. The Run of Hope, originally known as the Terry Fox Run, is the corporate community programme of Canada-based Four Seasons Hotels and Resorts. This year’s run starts at 8.30am on Sunday, November 3, at the Four Seasons Macao on the Cotai Strip. Adults can join either a five-kilometre (3.1 mile) run or a 3km walk for a minimum 180-pataca donation. Children aged five to 12 can participate for a minimum 80 patacas. There are also pre-run and post-run meal events at the hotel. All proceeds will go to cancer research and orphanage care in Macau. The inspiration for the event is Terry Fox, diagnosed with bone cancer at 18 but who managed to run 5,373 kilometres across Canada for charity in just 143 days before he died aged 22.
Former Macau teacher holds art show Paintings by a former Macau teacher currently resident in Lisbon, Portugal, are on show at the Portuguese Bookshop in Macau from now until September 30. The exhibition – called ‘Latitude 21º 11” North, Longitude 113º 55” West. The sense of place’ is by Anabela Canas. The works can be seen at the bookshop in Rua de São Domingos a short walk from Senado Square. After graduating from the Fine Arts Faculty of Lisbon in 1987, Ms Canas worked as a teacher at Macau’s Infante D. Henrique Secondary School from 1987 until 1998, and also taught at the Macau Visual Arts Academy. Since 1998 she has been on the staff at Lisbon’s António Arroio Arts School, and in 2011 she gained a master’s degree in painting from her alma mater. She says the exhibition is inspired by an earlier show of her works in 2006 at the National Museum of Natural History in Lisbon.
for details of such disputes but we had received no reply by the time we went to press. The bureau promises in its statement to learn from the applications it has already considered and to try to improve the procedure it follows. “And that includes shortening the time needed for approval,” it says. Because the government does not recognise that many residents of Coloane own land there, they
cannot alter or even make repairs to their homes. The government regards any changes to a home made without its permission as illegal. The only proof of land ownership that many residents of Coloane can show are old deeds, which in Cantonese are called Sa Chi Kai, meaning silk paper. These deeds were issued during the Qing dynasty, and Macau’s Portuguese rulers refused to recognise them. Before the 1970s, some Coloane Village residents paid annual housing tax, and the tax receipts served as informal proof of land ownership. Two neighbourhood associations told Business Daily that most residents had failed to register their ownership of land as they did not know how or could not afford to. Since October 2009 the Land, Public Works and Transport Bureau has been taking applications from longstanding Coloane Village residents for 25-year land leases, which are renewable. The bureau suggested last year that it might begin taking such applications from residents of Ka Ho Village and Hac Sa Village, but has since said nothing more about this.
September 11, 2013 April 19, 2013
Macau Brought to you by
Financial Monitor Jobs for the young Macau’s economy is exceptional in many respects. In many other economies, concern about the employment prospects of younger generations is growing. The general perception here is that as long as one is willing to work, it is difficult to be both young and unemployed in the present economic circumstances. The quarterly data on unemployment suggest that the number of young jobless is small. This is a consequence of virtually full employment. The unemployment rate at the end of the second quarter was 1.8 percent, meaning some 6,500 people were jobless. So is Macau spared the problem of unemployment among the young? Esprit opened its fourth store in Macau in the first half of this year
Loss-making Esprit finds silver lining here Hong Kong-listed clothing retailer posted first annual loss in a decade Tony Lai
In the past 10 quarters between 43 percent and 61 percent of the unemployed were under 35 years of age. During that period workers under 35 years of age always made up under 40 percent of the labour force. So it seems there is some incidence of youth unemployment here. But there is a danger of stretching the point. Younger workers, in particular those looking for their first jobs, naturally add to the ranks of the unemployed at certain times of the year. One such time is summer, when many school leavers join the labour force. As the chart shows, the proportion of young workers among the unemployed tends to fall from its usual peak in the summer as each year draws on and gives way to the following year. J.I.D. The content of this column is the work of Business Daily’s journalists.
Proportion of Q2 unemployed under 25 years of age
acau was one of the few growing segments for Esprit Holdings Ltd in the last fiscal year, as the Hong Kong-listed clothing brand posted the first annual loss since its 1993 listing. Esprit’s Macau operations posted a 5.5-percent rise in turnover to over HK$615 million (US$79.3 million) in the year ended June 2013, the company told the Hong Kong Stock Exchange in a filing. The city was one of just four business segments that reported growth in the past 12 months whereas Esprit suffered a decline of 14.1 percent in its overall sales to HK$25.9 billion. Macau – which serves as a wholesale hub for the brand’s franchisees in Asia Pacific as well as in Colombia, Chile and the Middle East – accounted for 4.9 percent of the brand’s wholesale revenue, up from 3.9 percent a year earlier. Wholesale operations here grew 4.4 percent to HK$498 million in the past 12 months. Retail sales surged even faster by 11.4 percent to HK$118 million as Esprit opened a new store in Macau. The net sales area of Esprit’s
four stores here rose by 28.6 percent year-on-year to 2,187 square metres. The Macau market only accounted for 0.8 percent of the brand’s total retail sales, which topped HK$15.65 billion. The few positives were not enough to turn around Esprit’s first annual loss of HK$4.39 billion since it went public two decades ago.
Europe slumps The loss, wider than the average HK$3.4 billion loss projected by 14 analysts surveyed by Bloomberg, was due to sales declines, store closures and a drop in the value of China investments. Esprit, which gets more than 78 percent of its sales from Europe, has seen sales slump in the region on weaker consumer demand as well as competition from Gap Inc and Uniqlo, the flagship of Japan’s Fast Retailing Co Ltd. The brand aims to improve its business and distribution by cutting money-losing retail stores, unproductive product lines, unprofitable wholesale business and exiting countries where it is incurring
losses, chief executive José Manuel Martínez Gutiérrez said in May. Esprit will return to profitability by the end of the current fiscal year ending June 2014, Mr Gutierrez told reporters in Hong Kong. Francis Lun, Hong-Kong based managing director at Lyncean Securities Ltd, was, however, cautious: “It is hard for the company to turn around its operations once the brand has lost its appeal.” But the recovering European economy could be helpful to the fast-fashion brand. “They [investors] are now betting on Europe. They have high hopes that Esprit can benefit if its major markets in Europe do turn around in 2014,” said Alex Wong, a director at Hong Kong-based brokerage Ample Finance Group. Esprit forecasts continuous “slight” declines in revenue and gross profit margins for the current fiscal year ended June 2014. Its stock closed 7.2 percent lower yesterday at HK$11.66, the biggest decline since October 2012, in Hong Kong. It had risen as much as 5.6 percent ahead of the earnings report. With Reuters/Bloomberg News
September 11, 2013 April 19, 2013
September 11, 2013 April 19, 2013
Greater China Aggregate financing up in August China’s broadest measure of new credit was more than forecast in August as money-supply growth quickened, data from the People’s Bank of China showed yesterday. Aggregate financing was 1.57 trillion yuan (US$256 billion), the central bank said in a statement on its website. That compared with the 950 billion yuan median estimate of 10 economists surveyed by Bloomberg News and 1.25 trillion yuan a year earlier. M2, the broadest gauge of money supply, rose 14.7 percent from a year earlier, compared with the 14.6 percent median estimate of analysts and 14.5 percent in July. New yuan loans were 711.3 billion yuan, compared with the 730 billion yuan median estimate and 703.9 billion yuan in August 2012. That represented a 45 percent share of aggregate financing after about 87 percent in July, which was the highest in almost two years following a government crackdown at shadow banking aimed at limiting risks in the financial system.
Factory output jumped 10.4 percent in August
Govt data point to economic rebound Industrial output and investment both strengthening Alibaba’s Ma says partnership not aimed to ‘exert control’ Alibaba Group Holding Ltd founder Jack Ma (pictured) said a partnership system is the best way to protect the company’s value, and it is “not concerned” about where to hold potentially the largest initial share sale since Facebook Inc. Mr Ma said that the current 28 partners are most likely to create value for customers, employees and shareholders. The partnership system “is not a mere profit sharing mechanism, nor is it a vehicle of power to exert greater control over the company,” he said. Alibaba, China’s biggest e-commerce company, asked Hong Kong’s stock exchange to allow a partnership to nominate a majority of board members, a person with knowledge of the matter said last month. That would enable Mr Ma, with a 7.4 percent stake, and his management team to maintain control after an IPO. Hong Kong doesn’t allow new listings to have dual-class shares, as New York does. “We are not concerned about where to go public, but we do care that wherever we end up going public must support this type of open, innovative, responsible culture that values longterm development,” Mr Ma said in his e-mail dated yesterday.
Beijing cracks down on Internet Chinese Internet users who post comments deemed defamatory by authorities could go to jail for three years if the statements are read by more than 5,000 people, the Supreme Court said, as leaders tighten control on information following several high-profile corruption cases. Users also may be accused of defamation if the “rumours” they post online are reposted more than 500 times or cause the target to mutilate themselves, commit suicide or experience mental disorders, the state-run Xinhua news agency reported. The new rules step up the ruling Communist Party’s campaign against what it calls online rumour-mongering as authorities seek to exert greater control over the nation with the world’s most Internet users. China passed a law in December requiring people to identify themselves when signing up for Internet and phone services. “With the backing of the law, this Internet crackdown campaign will no longer be a tiger without teeth,” Zhao Jing, an activist in Beijing for Internet Freedom in China, said in an interview. “For a long time the Internet was a place to expose corruption. Now the local government can use this defamation law as a tool to crack down on such activities.” Bloomberg News
hina’s industrial output grew at the fastest pace in 17 months in August, adding to signs of a rebound this quarter that include a pickup in export gains. Factory production rose 10.4 percent from a year earlier, the National Bureau of Statistics said in a statement yesterday. Retail sales advanced 13.4 percent, while fixedasset investment excluding rural households increased 20.3 percent in the January-August period, both topping estimates. Yesterday’s data suggest Premier Li Keqiang’s measures from tax cuts to extra spending on railways have helped halt a two-quarter slowdown as he seeks to defend the year’s 7.5 percent expansion goal. That may ease pressure for additional steps as Mr Li and Communist Party leaders prepare for a November meeting to discuss policy reforms for sustaining long-term growth in the world’s second-biggest economy. “The government growth target appears within reach, which reduces the chance of stimulus and allows the government to focus on reform,” said Ding Shuang, senior China economist at Citigroup Inc in Hong Kong. Thirty-nine of 41 industries reported growth, including a 13.6
Hong Kong’s H shares enter bull market H
ong Kong stocks advanced, with a gauge of China shares rising more than 20 percent from a June 25 low, as mainland factory output accelerated at the fastest pace in 17 months and retail sales beat estimates. The Hang Seng China Enterprises Index, also known as the H-share index, climbed 1.6 percent to 10,697.44 at the close in Hong Kong, rebounding 21 percent from its lowest level this year and meeting some
percent gain in ferrous metals and 12.3 percent in chemicals, according to the statistics agency. Steel production rose 15.6 percent in August, up from 10.9 percent in July, and electricity output expanded 13.4 percent, compared with 8.1 percent the previous month. The median estimate for retail sales was a 13.3 percent advance after 13.2 percent in July. Fixedasset investment was projected by
The government growth target appears within reach, which reduces the chance of stimulus and allows the government to focus on reform Ding Shuang, Citigroup Inc
economists to rise 20.2 percent in the January-August period, after a 20.1 percent gain in the first seven months of the year. China’s exports rose 7.2 percent from a year earlier, the General Administration of Customs said on Sunday. That exceeded the 5.5 percent median estimate of analysts. At the same time, imports rose a less-than-estimated 7 percent from a year earlier, leaving a trade surplus of more than US$28 billion. Consumer prices rose 2.6 percent in August, the statistics bureau said on Monday, leaving room for extra stimulus if needed. The producerprice index fell 1.6 percent, the least since February. Premier Li, in an opinion article published Monday in the Financial Times, said the economy “will maintain its sustained and healthy growth,” with expansion around a 7.5 percent “lower limit” intended to ensure steady growth and employment. “The better-than-expected figures showed the recovering momentum of China’s economy is stronger than market expectations,” Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai. Reuters/Bloomberg News
traders’ definition of a bull market. The Hang Seng Index added 1 percent to 22,976.65 after on Monday erasing this year’s loss. “Confidence is being boosted by better-than-expected China data,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “The H-share index is stronger, showing investors are more skewed towards China since it’s been depressed for some time and we are seeing signs of recovery.” Yanzhou Coal Mining Co, China’s fourth-largest producer of the fuel, led gains on the H-share index after its parent bought more shares. Airlines climbed on steadier mainland growth and optimism for Shanghai’s planned free-trade zone, according to China Minzu Securities Co. The Hang Seng China Enterprises Index traded at 7.9 times estimated earnings, compared with a five-year
average of 10.6. The H-share gauge slumped 27 percent from February through June 25, dragging its priceearnings ratio to the lowest since 2008. Shares rebounded on stronger China factory activity after a twoquarter slowdown and a tightening of credit to curb speculative lending. “I’m not overly positive that this bull market can be sustained,” said Kelvin Wong, a Hong Kong-based analyst at Bank Julius Baer & Co., which manages about US$325 billion. “The earnings quality for Chinese companies is not that good. We’re seeing some economic stability but we’re not sure the improvement will continue.” Chinese stocks rose to the highest level in three months. The Shanghai Composite Index rose 1.2 percent to 2,237.98 at the close, the highest level since June 6. Bloomberg News
September 11, 2013 April 19, 2013
PetroChina mulling Russia gas investment P
Auto sales up 11 pct in August
hina’s passengervehicle sales gained the most in four months in August, led by sales of sport utility vehicles, as the world’s second-biggest economy rebounds from a two-quarter slowdown. Wholesale deliveries of cars, multipurpose and sport utility vehicles climbed 11 percent to 1.35 million units last month, the biggest gain since April, according to the state- backed China Association of Automobile Manufacturers yesterday. The auto association is predicting total vehicle sales in the country to exceed 20 million units this year for the first time. “We are confident that SUV sales are on a structural uptrend in China,” said Cheam Tze Shen, a CIMB analyst in Hong Kong. “The penetration rate is low.” Total sales of vehicles, including buses and trucks, gained 10 percent to 1.65 million units last month, the association said. In the first eight months of the year, 13.9 million vehicles were delivered, putting sales on track to reach the 20
million units estimated by the association. Sales of SUVs jumped 46 percent to 240,100 units last month, while deliveries of multipurpose vehicles surged 162 percent to 105,600 units. Sedan deliveries gained 4 percent to 899,100 vehicles. Ford Motor Co’s Focus was the best-selling sedan last month, with Great Wall Motor Co’s Haval line remaining the nation’s topselling SUV. General Motors Co, the largest foreign automaker in China, reported sales growth accelerated in the country last month, helped
by demand for its Wuling and Buick vehicles. Total sales in August climbed 11.2 percent, after expanding 11.1 percent the preceding month, the Detroit-based company said last week. Japanese automakers continued to lag behind other foreign automakers. Next week marks one year since demonstrations erupted across China against Japan’s purchase of a group of disputed islands. Toyota Motor Corp’s sales in the country fell 4.2 percent, while Honda Motor Co declined 2.5 percent. Bloomberg News
etroChina Co Ltd is seeking to invest in Russian gas fields as part of efforts by the two countries to conclude gassupply negotiations that have dragged on for almost a decade, four people with knowledge of the matter said. PetroChina, the publicly traded unit of state-owned China National Petroleum Corp, is interested in spending at least US$10 billion for a minority share of eastern Siberian gas fields operated by OAO Gazprom and OAO Rosneft, said three of the people, who asked not to be named as deliberations are private. “PetroChina is willing to promote all-round cooperation with Russia’s oil companies, and hopes to invest in Russia’s upstream oil and gas exploration and development businesses,” spokesman Mao Zefeng said in an e-mailed response to questions from Bloomberg News. The two countries are seeking to complete a deal that would see Russia
supply as much as 68 billion cubic metres of gas a year, helping to meet the energy needs of Asia’s biggest economy. A US$10 billion acquisition would mark PetroChina’s biggestever purchase abroad, data compiled by Bloomberg show. “Investing in the gas fields is a key step to concluding gas supply deals with Russia,” said Neil Beveridge, a Hong Kongbased analyst at Sanford C. Bernstein. “China is a large gas market and Russia holds the world’s biggest reserves, so it’s an ideal deal for both.” Bloomberg News
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September 11, 2013 April 19, 2013
Banks eye Shanghai free trade zone plan Standard Chartered to HSBC seeking a presence in the new area
SBC Holdings Plc and Standard Chartered Plc, the two British banks that make most of their profits in the Asia-Pacific region, signalled interest in a proposed free trade zone for Shanghai. Standard Chartered is “committed to contributing to the further development” of the zone, it said in an e-mailed statement yesterday. HSBC is interested in establishing a presence there, Gareth Hewett, a Hong Kong-based spokesman, said by telephone. Bank of East Asia Ltd, based in Hong Kong, plans to set up an institution in the area, it said yesterday. Attracting international lenders will help China achieve its goal of making Shanghai, a port city with more people than Greece and Portugal combined, a global finance hub by 2020. The zone, which in addition to foreign trade will feature looser rules on matters such as interest rates and business licences, is part of Premier Li Keqiang’s drive to sustain growth by shifting the economy toward services and consumption. “The Shanghai free trade zone has to be a place that allows banks to operate on an equal footing with banks in Hong Kong, London, or New York,” Jim Antos, a Hong Kong-
based analyst at Mizuho Securities Asia Ltd, wrote in an e-mail. “We hope that the authorities will stick to less risky types of trading activities, at least at first, in the Shanghai free zone. Risk controls in the mainland banking sector seem flimsy enough at present.” China announced last month its cabinet had approved the plan to set up the nation’s first such zone on 29 square kilometres (11 square miles) in Shanghai, calling it a crucial move in adapting to global economic and trade development, while further opening up the world’s second-largest economy.
Capital account Policy makers may allow free conversion of the yuan under the capital account and market-oriented interest rates on a trial basis in the zone, according to a draft plan seen by Bloomberg News. Qualified foreign banks may be allowed to set up branches or joint ventures with local lenders in the area, while some Chinese banks may offer offshore services, according to the draft. HSBC has been approached by the China Banking Regulatory Commission about offering banking services in the zone, according to a person with knowledge of
the matter. A press official at the Shanghai branch of the CBRC declined to comment. The regulator approached foreign banks including HSBC and Standard Chartered for feedback on how they want to open operations in the area, the South China Morning Post reported yesterday.
The Shanghai free trade zone has to be a place that allows banks to operate on an equal footing with banks in Hong Kong, London, or New York Jim Antos, Mizuho Securities Asia
The project could have broader implications for the structure of China’s economy, according to Wendy Tang, a Shanghai-based analyst at Northeast Securities Co. “You can’t separate financial development from the free trade zone,” she said. “Apart from making it a trial zone for interest rate liberalisation and private investment in the financial industry, probably the entire Yangtze Delta region led by Shanghai will see faster growth in sectors such as trade and shipping.” Shanghai’s economy has expanded by about a third since 2009 to more than 2 trillion yuan last year, larger than any other Chinese city and ranked No. 10 in the world, according to the local government. Still, its GDP growth has lagged behind the national rate since 2009, when the country grew at a rate of 7.7 percent to 10.4 percent. The project will “upgrade Shanghai’s core competitiveness and boost its status as a global financial, trade, shipping and logistics center,” Barclays Plc’s Hong Kong-based economist Chang Jian wrote in a note on September 6. The zone will be built on the basis of the city’s four existing bonded trade zones, according to the government. Bloomberg News
International lenders to support Shanghai as global finance hub
Former top rail official on trial for bribes Former deputy chief faces charges of bribery worth 47.55 mln yuan
senior official from China’s disgraced railways ministry went on trial yesterday for bribery, state-run media said, the latest to be prosecuted as authorities carry out a high-profile anticorruption campaign. Former deputy chief engineer Zhang Shuguang faces charges of 13 cases of bribery altogether worth 47.55 million yuan (US$7.8 million), the China Youth Daily said, citing the prosecution. The now-dismantled railways
ministry was linked with widespread corruption, with former minister Liu Zhijun given a suspended death sentence in July for taking 64.6 million yuan in bribes to help 11 people secure contracts and promotions. He and Mr Zhang, whom the report called a “trusted aide” of Mr Liu, were both sacked in 2011. Mr Liu had been heralded as the “father” of China’s vastly expanded high-speed rail network, now the world’s longest and a flagship
development project of the ruling Communist Party. The ministry was disbanded in March, with its administrative functions handed to the transport ministry and its commercial role given to a new China Railway Corporation. The charges against Mr Zhang involve far more money than the 26.8 million yuan fallen political star Bo Xilai was accused of accepting or embezzling at his trial last month. Another high-ranking railway
official, Su Shunhu stood trial last week for allegedly taking 24 million yuan in bribes, the China Daily reported. In recent days a businesswoman linked to the ministry, Ding Shumiao, also faced charges of illegal activities worth 180 billion yuan. She was said to have given Mr Liu 49 million yuan and arranged sexual favours for him, while successfully pointing him to 23 companies for more than 50 rail projects. China’s leaders have vowed to crack down on rampant official corruption, which has fed popular anger. Their campaign has targeted a former senior economics policy maker, executives from a top stateowned oil firm and many low-level officials, but not yet introduced systematic reforms. AFP
September 11, 2013 April 19, 2013
BOJ board urged fiscal reform Japan’s central bank confident its stimulus working Leika Kihara
Deutsche Bank in Japan anti-bribery probe Watchdog examines if too much was spent entertaining clients
Shinzo Abe has decided to go ahead with sales tax hike, media says
ank of Japan policy makers expressed confidence their aggressive monetary stimulus was working and urged the government to promote fiscal reforms to keep unwelcome bond yield rises in check, minutes of the central bank’s August rate review showed. Prime Minister Shinzo Abe is expected to decide in early October whether to proceed with a planned two-stage hike in the sales tax from next year, seen as a key first step to rein in Japan’s ballooning public debt. The Asahi newspaper said, without citing sources, that Mr Abe has decided the economic recovery is robust enough to withstand the tax increase, pointing to the strong upward revision in second-quarter GDP on Monday. Critics of the plan have argued that raising the tax now could delay an end to chronic deflation, although Japanese media reported yesterday the premier has decided that recent data has shown the economy is strong enough to withstand the tax hike. At the August 7-8 rate review, the BOJ policy makers said the world’s third-largest economy was starting to recover with initial signs that wages and household incomes were improving, boding well for personal consumption, according to minutes of the meeting released yesterday. The central bank’s massive government bond purchases are restraining long-term interest rates even amid such positive signs in the economy, many of the BOJ’s nine board members were recorded as saying. “Many members said it was important to maintain credibility of fiscal management to keep interest
rates stable. They expressed hope that the government steadily promote steps to achieve fiscal consolidation,” according to the minutes. One of the nine board members warned that while the bond market remained stable now, there was potential instability that could take effect if there were unrealistic expectations the central bank’s massive bond purchases could keep yield rises in check. “One member said if the government’s efforts towards restoring fiscal health weaken ... long-term interest rates may rise on eroding market confidence in Japanese government bonds and hurt the effect of the central bank’s policies,” the minutes said. The BOJ injected an intense burst of stimulus in April, pledging to double the supply of money to meet its 2 percent inflation goal in roughly two years via massive asset purchases. It has stood pat on policy from that date. But since then, central bank has urged the government to take steps to restore Japan’s fiscal health, and BOJ Governor Haruhiko Kuroda has repeatedly called for the sales tax hike to proceed. At the August meeting, the BOJ kept monetary policy steady and held off on revising up its assessment of the economy, preferring to wait for more clues on whether increasingly positive data would encourage companies to ramp up spending. The central bank revised up the assessment at a subsequent meeting in September to say the economy is recovering moderately, reflecting brighter signs in capital spending. Reuters
Failure to raise sales tax may cause selloff Failure to increase Japan’s sales tax as planned could lead overseas investors to unload their Japanese assets and “blow away” the market benefits of Abenomics, a lawmaker ally of Prime Minister Shinzo Abe said. Kozo Yamamoto, a ruling Liberal Democratic Party tax panel member whose pro-monetary easing stance Mr Abe has cited as an influence, said he urged the premier to go ahead with the scheduled increase to 8 percent from 5 percent next April. Raising the tax will not affect the battle to escape deflation, he said. Abe will decide on October 1 whether to stick with the current plan, Economy Minister Akira Amari said on Monday. “The tax increase has nothing to do with deflation,” Mr Yamamoto said. “Deflation is a monetary phenomenon. The Bank of Japan is dealing with this actively and it should continue to do so.” Mr Yamamoto called for an extra spending package of 4 trillion yen (US$40.2 billion) to 5 trillion yen to offset the tax increase.
apan’s securities market watchdog is investigating whether Deutsche Bank AG employees provided excessive entertainment to Japanese pension fund executives in breach of regulations, sources with knowledge of the matter said. The Securities and Exchange Surveillance Commission (SESC) found evidence of potential infractions during a regular audit of Deutsche Securities Inc, the German bank’s investment arm in Tokyo, said the sources, who spoke on condition they not be identified because the investigation is ongoing. The employees had booked large expenses for entertainment involving pension fund executives, they said. This raised red flags for the regulators because the pension fund executives involved are legally considered public employees, subject to anti-bribery statutes, since they handle part of the national pension scheme. Deutsche had already started its own investigation into the matter before the SESC began its audit in May, and has stopped marketing directly to such pension funds as part of a review of its sales and compliance practices, sources said. The bank’s efforts to address the problem could be a mitigating factor when the SESC makes a decision in coming weeks on what action to take. It is possible the regulator will not pursue public sanctions, which could range from an order to improve compliance to harsher penalties, the sources said. Details of the alleged expenses, including the amounts spent and the identities of the pension fund executives, were not immediately available. The sources said the expense reports of a handful of Deutsche employees who market products and strategies to pension funds are being scrutinised as part of the probe. The SESC has put employee pension funds under the spotlight since Tokyo-based money manager AIJ Investment Advisors was shut down by regulators and its top executive arrested for defrauding pensioners out of more than US$1 billion in 2012. The scandal triggered an industry-wide review by regulators of companies that manage pension money that is continuing. Deutsche Bank declined to comment. The SESC said it was its policy not to comment on individual cases under investigation. Reuters
September 11, 2013 April 19, 2013
Asia Hyundai union approves wage deal Workers at Hyundai Motor Co have voted in favour of a wage deal, ending a series of strikes at the South Korean firm. The firm had offered to raise basic pay by 5 percent, pay a one-time bonus of 5 million won (US$4,615) plus three-and-a-half months of salary per worker. The walkouts have cost Hyundai 1 trillion won in lost production. South Korea’s car industry has been plagued by industrial action. Hyundai has suffered a strike in 22 years of its 26 year history. Last year, workers at Hyundai and its affiliate Kia Motors Corp walked out for four months resulting in production losses worth US$1.5 billion.
Pressure builds on Rudd to quit Pressure was building yesterday on defeated Australian Prime Minister Kevin Rudd to quit politics, with senior figures within his Labor Party saying he would be a destabilising influence. Mr Rudd’s popularity came crashing down on Saturday when he was soundly defeated by conservative Tony Abbott and he announced he would resign as Labor leader. But several highprofile Labor figures want him to stand down from parliament and exit politics altogether. “Kevin should seriously contemplate leaving the parliament,” former minister Brendan O’Connor told Sky News.
Petronas exiting crude project Malaysian oil company Petroliam Nasional Bhd said it is exiting one of the biggest petroleum projects in Venezuela’s Orinoco belt, after what sources said were disagreements with Venezuelan authorities and staterun Petroleos de Venezuela. The flagship project, called Petrocarabobo, has planned investments of about US$20 billion over 25 years and calls for building a 200,000 barrel per day upgrader to convert heavy crude into light crude oil. Petronas holds an 11 percent stake in the project and it said the decision had been conveyed to Venezuela’s government on August 27.
India output likely shrank India’s factory output likely shrank for the third straight month in July, albeit at a slower pace than the month before as production in the country’s core industries picked up, a Reuters poll found. The poll showed output at factories, mines and utilities shrank an annual 0.8 percent, after contracting 2.2 percent in June, according to the median consensus of 22 economists. “Underlying industrial production momentum is expected to remain weak, despite a slight improvement in the infrastructure index,” economists at Barclays said in a note to clients.
Indonesia seeks more bilateral swap deals Jakarta may extend agreement with China
ndonesia said it is seeking bilateral swap agreements with two more central banks to protect its sliding currency. The country may sign accords this quarter that will allow it access to more than US$30 billion from new and existing swap lines, Finance Minister Chatib Basri told reporters in Jakarta yesterday, declining to name the central banks. Indonesia may extend a bilateral swap agreement with China, Bambang Brodjonegoro, head of fiscal policy at the Finance Ministry, said yesterday. Indonesia extended a US$12 billion swap line with Japan last month as policy makers try to bolster a rupiah that has fallen 11 percent this quarter, the worst performer among 24 emerging-market currencies tracked by Bloomberg. Officials join counterparts in India, Brazil and Turkey to support their exchange rates as the prospect of reduced U.S. monetary stimulus fuelled a selloff in emerging-nation assets. “It certainly helps,” said Fauzi Ichsan, an economist at Standard Chartered Plc in Jakarta. “It doesn’t mean Indonesia is out of the woods yet.” If the swap tenors are long enough, the central bank can borrow dollars and repay when there is more certainty over U.S. stimulus plans and the Indonesian economy, Mr Ichsan said. Mr Chatib added that the bilateral swap agreements were crucial in the face of a potential crisis as it would assist the
Two Koreas hold talks on industrial complex N
orth and South Korea held a second round of talks yesterday on reopening their Kaesong joint industrial zone – five months after it was shut down during soaring military tensions. The newly formed Kaesong joint committee first met last week but was unable to reach any agreement on the timing for resuming operations at the complex. One apparent stumbling block was a South Korean request for North
If there is a surprise quantitative easing measure in the future, we will be prepared with a solid request package Chatib Basri, Finance Minister
government if it faced financial difficulties and would guarantee a fiscal anticipation measure. “So, if there is a surprise quantitative easing measure in the future, we will be prepared with a solid request package,” Mr Chatib said. Indonesia’s foreign-exchange reserves were US$93 billion last month, little changed from US$92.7 billion in July, Bank Indonesia said on September 6. The level of reserves in July was the lowest since October 2010, according to data compiled by Bloomberg. The reserves level, combined with slowing economic growth, accelerating inflation and a record currentaccount gap, have contributed to the
weakening of the currency. The rupiah was unchanged at 11,160 per U.S. dollar yesterday in Jakarta, according to prices from local banks. The central bank extended the Japan agreement because it expects more volatility in international markets, it said last week. India also reached an agreement with Japan this month to more than triple its bilateral currency-swap line as it seeks to stem a record slide in the rupee. Indonesia and China in 2009 agreed on a three-year 100-billion yuan (US$16 billion) currency swap to ease foreign-exchange shortages and aid bilateral trade and investment.
Korea to provide compensation to those companies hurt by the park’s closure. Yesterday’s second round of talks began at 10:00am in Kaesong, which lies 10 kilometres (six miles) over the border in North Korea. “We will pick up where we left off last time, and focus on ensuring that our businessmen can engage in their activities in a free and comfortable atmosphere,” South Korean chief delegate Kim Ki-woong told reporters in Seoul before leaving for the meeting. He added that the restoration of the military hotline on the west coast last Friday is a sign of steady progress toward full normalisation. Seoul’s Ministry of Unification, which is in charge of the negotiations, said more detailed talks related to such areas as safety, communication, customs, travel and dispute arbitration will be discussed with the goal of reaching an understanding. There have been speculation that if talks make headway, partial reopening of the Kaesong complex
could take place before the threeday Chuseok holiday that falls next week, newspaper Korea Herald reported yesterday. Established in 2004 as a rare symbol of inter-Korean cooperation, Kaesong had come through a number of crises on the Korean peninsula unscathed. But in April, as tensions escalated following the North’s third nuclear test, Pyongyang effectively shut down operations by withdrawing the 53,000 North Korean workers employed at the 123 South Korean plants. The two Koreas agreed last month to work together to resume operations at the zone, which is an important source of hard currency for the cashstrapped regime in Pyongyang. As part of the agreement, the North accepted the South’s demand that Kaesong be opened to foreign investors – a move seen by Seoul as a guarantee against the North shutting the complex down again in the future.
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September 11, 2013 April 19, 2013
Philippine exports add to signs of pick up Exports in August grew 2.3 percent on-year
hilippine exports climbed for a second month in a row, joining regional peers showing similarly strong shipments in recent months in another encouraging sign of an uptick in global demand. Analysts said the recovery in exports in the Philippines, one of Asia’s fastest growing economies, looks set to continue in coming months as major economies appear to be on the mend. Exports in August grew 2.3 percent on-year, led by electronics shipments rising 11.2 percent to an eight-month high, the National Statistics Office said yesterday. The Southeast Asian nation provides about 10 percent of the world’s semiconductor manufacturing services, including for mobile phone chips and micro processors. Yesterday’s data underscores evidence of a pick in demand globally, with the recent run of upbeat factory activity data from China, United States and Europe suggesting the world economy was on a firmer footing. Closer to home, Japan’s
economy has been growing strongly over the first half of this year on the back of the government’s aggressive stimulus policies. The positive growth signs globally has been reflected in a rebound in exports in the region. Taiwan and South Korea posted big jumps in August exports, while Malaysia saw its exports climb the most in over a year in July amid signs of stabilisation in advanced economies. Singapore’s non-oil domestic exports fell slightly in July, but it expects a modest pick up in coming months in tandem with the projected gradual recovery in global demand. “Domestic demand from the U.S. and Japan is recovering, a good sign for export growth in the region,” said Jeff Ng, economist at Standard Chartered Plc in Singapore. A sustained recovery in exports bodes well for the Philippine economy, which is targeting growth of as high as 7 percent this year. The nation’s economy expanded by a fasterthan-expected 7.5 percent
US$4.84 bln Value of Philippine exports in August
in April-June, matching China’s expansion for the second consecutive quarter as domestic spending and investments buttressed it from capital outflows and weak exports. The rebound in the electronics and semiconductor shipments, the country
top export item, suggests consumption demand from the likes of the United States is starting to pick up. “The electronics sector was also likely boosted by stronger demand from the U.S., given the book to bill ratios for the past few months have been hinting
at increased orders already,” Mr Ng said. The electronics industry group has said it was sticking to its 5 percent to 6 percent growth for the sector this year, with expectations of a pick-up in global demand for smartphones and tablets. Reuters
September 11, 2013 April 19, 2013
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0.6956 0.1978 0.2783 0.3638 -0.5597 0.005 0.0052 0.0082 1.6554 0.0902 0.1811 0.1548 0.9585 1.3262 -1.2416 -0.0849 -0.1649 -0.4784 -0.3612 -0.9208 0
-10.7246 -2.9179 -2.0019 0.3867 -13.9516 -0.0501 -0.0516 1.7989 -14.3146 -4.9011 -3.8116 -2.2918 -6.424 -12.8349 -3.6397 -2.3785 -3.29 1.3268 -0.4293 -14.2803 -0.0097
1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3443 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032
0.8848 1.4814 0.9022 1.2662 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20302 0.79235 7.8281 10.1113 99.52 1.0289
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September 11, 2013 April 19, 2013
Leading reports from Asia’s best business newspapers
Emerging markets’ Euro nemesis Daniel Gros
Director of the Centre for European Policy Studies
Japan is seeking bilateral summit meetings with South Korean President Park Geunhye and Chinese President Xi Jinping, with whom Prime Minister Shinzo Abe chatted for the first time on the sidelines of the G20 summit in St. Petersburg last week. “We’ve been saying that the distance [between Japanese and Chinese leaders] has narrowed, with [the brief dialogue between Abe and Xi] being one example,” Chief Cabinet Secretary Yoshihide Suga said. “With Xi meeting Abe, it will be easier to hold a meeting between the two governments’ lower-level officials,” he added.
Taipei Times Taiwan’s exports totalled US$25.64 billion last month, an increase of 3.6 percent from a year ago and 1.3 percent from the previous month, the Ministry of Finance said. For the first eight months of the year, exports totalled US$201.39 billion, up 2.5 percent from a year ago, the report showed. “Demand from major export markets remained steady last month,” Yeh Maan Tzwu, director of the ministry’s statistics department, said. The trade surplus widened to US$4.51 billion last month, up US$1.15 billion from a year earlier.
Jakarta Post Finance Minister Chatib Basri said that Indonesia was in negotiations with three countries regarding Bilateral Swap Agreement (BSA) as a precautionary measure the government may take if it needs unexpected liquidity assistance. “The countries include Japan but I cannot reveal the others,” Mr Chatib said. He added that the BSA was crucial in the face of a potential crisis as it would assist the government if it faced financial difficulties and would guarantee a fiscal anticipation measure.
Straits Times As Singapore developers start gearing up for a subterranean future, experts have warned of the pitfalls of going underground. They say plans for a possible network of tunnels, malls and research labs could fall foul of the island’s patchy soil formations and built-up landscape. These factors could push up costs and make life difficult for planners, who would need to get even more businesses on board. On the other hand, burrowing into the earth could provide valuable room to build in space-scarce Singapore. “Our land boundary is finite,” said professor Yong Kwet Yew of the National University of Singapore.
merging markets’ currencies are crashing, and their central banks are busy tightening policy, trying to stabilise their countries’ financial markets. Who is to blame for this state of affairs? A few years ago, when the U.S. Federal Reserve embarked on yet another round of “quantitative easing,” some emerging-market leaders complained loudly. They viewed the Fed’s openended purchases of longterm securities as an attempt to engineer a competitive devaluation of the dollar and worried that ultra-easy monetary conditions in the United States would unleash a flood of “hot money” inflows, driving up their exchange rates. This, they feared, would not only diminish their export competitiveness and push their external accounts into deficit; it would also expose them to the harsh consequences of a sudden stop in capital inflows when U.S. policymakers reversed course. At first sight, these fears appear to have been well founded. As the title of a recent paper published by the International Monetary Fund succinctly puts it, “Capital Flows are Fickle: Anytime, Anywhere”. The mere announcement that the Fed might scale down its unconventional monetarypolicy operations has led to today’s capital flight from emerging markets. But this view misses the real reason why capital flowed into emerging markets over the last few years, and why the external accounts of so many of them have swung into deficit. The real culprit is the euro.
expect from economic theory: in conditions approaching a liquidity trap, the impact of unconventional monetary policies on financial conditions and demand is likely to be modest. Indeed, the available models tell us that, to the extent that an expansionary monetary policy actually does have an impact on the economy, its effect on the current account should not be large, because any positive effect on exports from a weaker exchange rate should be offset by larger imports due to the increase in domestic demand. This is what has happened in the U.S., and its recent economic revival has been accompanied by an expansion of both exports and imports.
The impact of the various rounds of quantitative easing on emerging markets (and on the rest of the world) has thus been approximately neutral. But austerity in Europe has had a profound impact on the euro zone’s current account, which has swung from a deficit of almost US$100 billion in 2008 to a surplus of almost
Quantitative easing in the U.S. cannot have been behind these large swings in global current-account balances, because America’s external deficit has not changed significantly in recent years. This is also what one would
Emerging-market leaders should have complained about European austerity, not about U.S. quantitative easing
US$300 billion this year. This was a consequence of the sudden stop of capital flows to the euro zone’s southern members, which forced these countries to turn their current accounts from a combined deficit of US$300 billion five years ago to a small surplus today. Because the externalsurplus countries of the euro zone’s north, Germany and Netherlands, did not expand their demand, the euro zone overall is now running the world’s largest current-account surplus – exceeding even that of China, which has long been accused of engaging in competitive currency manipulation.
Made in Europe This extraordinary swing of almost US$400 billion in the euro zone’s current-account balance did not result from a “competitive devaluation”; the euro has remained strong. So the real reason for the euro zone’s large external surplus today is that internal demand has been so weak that imports have been practically stagnant over the last five years (the average annual growth rate was a paltry 0.25 percent). The cause of this state of affairs, in one word, is austerity. Weak demand in Europe is the real reason why emerging markets’ current accounts deteriorated (and,
with the exception of China, swung into deficit). Thus, if anything, emergingmarket leaders should have complained about European austerity, not about U.S. quantitative easing. Fed chairman Ben Bernanke’s talk of “tapering” quantitative easing might have triggered the current bout of instability; but emerging markets’ underlying vulnerability was made in Europe. The fickleness of capital markets poses once again the paradox of thrift. As capital withdraws from emerging markets, these countries soon will be forced to adopt their own austerity measures and run current-account surpluses, much like the euro zone periphery today. But who will then be able – and willing – to run deficits? Two of the world’s three largest economies come to mind: China, given the strength of its balance sheet, and the euro zone, given the euro’s status as a reserve currency. But both appear committed to running large surpluses (indeed, the two largest in the world). This implies that, unless the U.S. resumes its role as consumer of last resort, the latest bout of financial-market jitters will weaken the global economy again. And any global recovery promises to be unbalanced – that is, if it materialises at all. © Project Syndicate
September 11, 2013
Closing Raymond Tam suspended until trial
Govt blames development for Taipa floods
The head of the Sports Development Board, Alex Vong Iao Lek, will remain in charge of the Civic and Municipal Affairs Bureau (IACM) for a further 90 days starting September 17, government spokesperson Alexis Tam Chon Weng (pictured) told media yesterday. Bureau president Raymond Tam Vai Man was suspended on June 18 for breaching civil servants’ discipline. The probe report has been completed and Mr Tam will remain suspended until his trial in relation to the cemetery probe begins on December 5, the government said.
Taipa’s rapid development has reduced the amount of water that the island’s soil can absorb, leading to floods after heavy rains on September 4, said the government in a press conference yesterday. Jaime Carion, director of the Land, Public Works and Transport Bureau, said they were studying whether ongoing works for the Light Rapid Transit railway and public housing were a factor in the flooding. Works to divert rainwater from the Macau Stadium area will be completed by year-end while a similar project near Pac On will start next year.
Budget surplus close to new record high Govt revenue increased faster than expected in first eight months Vítor Quintã
Gaming tax continues to drive growth in government revenue
he government is making far more money this year than it expected. The budget surplus is likely to set a new record this month. In the first eight months of this year the budget surplus was 60.05 billion patacas (US$8.52 billion patacas), 30.2 percent more than in the equivalent period last year, according to data released yesterday by the Financial Services Bureau. With four months yet to be counted, the surplus so far has already eclipsed the surplus of 41.1 billion patacas envisaged in the budget for the whole year. The government should easily top last year’s surplus – 72.8 billion patacas – before the end of this month, according to Business Daily calculations. The surplus is ballooning mainly because the government is taking in much more money than it did last year and more than initially forecasted. Revenue in the first eight months
rose by 21.1 percent to 99.18 billion patacas. The government had budgeted 115.07 billion patacas in revenue for the whole year. This windfall for the public coffers is largely due to growth of 16.1 percent in revenue from direct taxes on gaming. Casino taxes amounted to 81.79 billion patacas, making up 82.5 percent of government revenue. The government pockets 35 percent of takings from gaming directly. It collects another four percent indirectly. The surplus is also being inflated by much slower government spending. Expenditure in the first eight months reached 31.13 billion patacas – only 41.7 percent of the spending budgeted for the whole year. Almost all was current spending, which includes the pay and benefits of civil servants. In contrast the government spent just 9.9 percent of the 17.9-billionpataca budget for its ambitious public investment programme.
CTM mulls bid for new TV licence Cheaper leased-line fares for rival operators within this year Tony Lai
CTM wants to offer more television options to the public, says Vandy Poon
he city’s largest telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) plans to bid for the cable television service once the sector is liberalised. CTM “has the ability and interest” to obtain an operating licence if the government opens up the market, said chief executive Vandy Poon Fuk Hei. But he told media yesterday that “it is still too early” to talk about CTM’s exact plan as the government is yet to release any details on the liberalisation.
Mr Poon was speaking to reporters on the sidelines of a charity event, in which CTM donated 300 fixed-line telephones to Peng On Tung home emergency support service for the elderly. Macau Cable TV Ltd’s exclusive concession on cable television services will expire next April. The government pledged to start looking into how to open up the sector by the end of this month. It is not the first time that CTM shows interest in providing television services. The operator carried out
tests on a service that included television, Internet and telephone access in 2010. Mr Poon stressed yesterday that CTM “has no intention to replace any current provider in the [cable television] market” but just to offer “another choice” to the public. The executive also said they were working with the government on further reducing tariffs for leased line services. There will be news “within this year,” he added.
The company announced in July a cut of up to 42 percent on existing tariffs for international leased circuits benefits for businesses and other telecommunication operators. The government has been pressuring CTM to lower these fees in order to “create room for other operators, other players in the industry, to expand,” the director of the Telecommunications Regulation Bureau, Lawrence Tou Veng Keong, said in May.