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MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo

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new air service deal to be signed with the European Union next week could make Macau more attractive as a potential destination for European airlines. The news comes 15 years after Portuguese flag carrier TAP Portugal terminated the city’s first and last direct air route to Europe, a year before the handover. The deal will create “a new impetus for the aviation industry to look at Macau as a destination,” says Vincent Piket, head of the Office of the European Union to Hong Kong and Macau. But the final decision will be up to the carriers, he added. Meanwhile the European Union continues to pressure Macau to accept a mechanism for automatic tax information exchange, aimed at curbing tax evasion.

www.macaubusinessdaily.com

Patent dispute hits new gaming show Officials from Macau Customs covered the stand of casino equipment maker SHFL entertainment Inc during the final day of the Macao Gaming Show. Just like during G2E Asia 2012, the incident was linked to a trade dispute with Macau-based LT Game Ltd. LT Game sought an injunction to protect a patent for technology in a multi-game electronic table game product featuring a live dealer.

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Year II

Number 416 Monday November 18, 2013

Europe back on the radar with new aviation deal

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April 19, 2013

Brought to you by

Hang Seng Index

Continuing education revamp aborted

Mid-level jobs to mend income gap: Stiglitz

Residents will still be able to use public money to pay for the full cost of liberal art courses or of learning how to drive, after the government gave up on overhauling the scheme. Driving is an “important vocational skill” and recreational activities can help improve the quality of life of elderly residents, the Education and Youth Affairs Bureau says.

Galaxy Entertainment Group Ltd may consider investing more than US$5 billion (39.93 billion patacas) in Japan and Taiwan, if those governments open their markets to casino resorts, says Francis Lui Yiu Tung, the company’s vice chairman. Mr Lui also said that Galaxy plans to invest HK$10 billion to develop leisure and sports facilities on Hengqin Island next door to Macau.

Macau has been immune to the global financial crisis but the city must bridge its income gap and create more middle-class jobs, said Nobel Prize-winning economist Joseph Stiglitz. The city’s average income is much higher than the median income, the economist said, which hints at a wide wage inequality that must be tackled. The territory has to work on creating more mid-level jobs – in between entry-level positions and management roles – in order to diversify the economy, Mr Stiglitz suggested. The eurozone must be reformed and a banking union and euro-bonds created to boost the continent’s recovery efforts, said Mr Stiglitz in a seminar here.

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Galaxy readies budget for Japan, Taiwan push

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Casino flout copyright every day: authors The Macau Association of Composers, Authors and Publishers is ready to take a casino operator to court in a test case to stop gambling firms from infringing copyright every day, president Ung Kuok Iang said. Mr Ung told Business Daily in an interview that the association lacks resources to press for the payment of royalties for other intellectual property beyond music. Pages 6&7

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November 15

HSI - Movers Name

%Day

CHINA MERCHANT

4.98

LI & FUNG LTD

4.21

PING AN INSURA-H

3.67

HENGAN INTL

3.47

CHINA PETROLEU-H

3.17

HENDERSON LAND D

0.33

HANG SENG BK

0.32

BOC HONG KONG HO

0.20

WANT WANT CHINA

-0.18

CHINA RES ENTERP

-0.56

Source: Bloomberg

I SSN 2226-8294

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November 18, 2013

Macau

Aviation pact could brighten prospect of flights to Europe Education, tax information and cultural industries are new focuses of EU-Macau cooperation Stephanie Lai

sw.lai@macaubusinessdaily.com

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new air services agreement with the European Union could make Macau more attractive to European airlines as a place to fly, according to the head of the Office of the European Union to Hong Kong and Macau, Vincent Piket. The agreement will be clinched during the visit to Macau next week of European Commission President José Manuel Durão Barroso. “We very much hope that it will create a new impetus for the aviation industry to look at Macau as a destination,” Mr Piket said on Friday after a conference to mark 20 years of the EU-Macau trade and cooperation agreement. He said the introduction of direct flights from EU countries to Macau would be up to the airlines.

We very much hope that it will create a new impetus for the aviation industry to look at Macau Vincent Piket, head of the Office of the European Union to Hong Kong and Macau

There are no direct flights between Europe and Macau

The agreement will cover access for airlines to airports. “So it’s about access to landing slots, access to gates, rules for the services, and fees,” Mr Piket said. Mr Barroso will also sign an agreement to extend a cooperation programme meant to improve knowledge of the law in the civil service and judiciary here. Mr Piket said education and cultural and creative businesses would be new focuses of cooperation. He said these were areas “where Macau wants to complement the current economic profile, to create new opportunities for young people of the territory and to attract new investors in Europe”. Mr Piket said the EU-Macau joint committee had met on Friday and discussed an arrangement for automatically exchanging tax information.

“It’s a new area of cooperation that we would like to develop with the Macau government in light of the very high political priority that the EU attaches to this,” he said. “The Macau government made a clear commitment to study the issue and it was a positive discussion. I am quite hopeful that we can take it further.”

No complaints Mr Piket said the dispute between bus operator Reolian Public Transport Co Ltd and the government would not spoil the business climate here for foreign investors. The government took over Reolian’s operations last month after the bus operator sought bankruptcy because it ran out of money to pay its workers. Reolian had sued the government for refusing to increase what the

Govt drops overhaul of continuing education Subsidies for driving, liberal art courses will remain unchanged next year Tony Lai

tony.lai@macaubusinessdaily.com

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esidents will still be able to use public money to pay for the full cost of liberal art courses or driving lessons, after the government gave up on revamping the scheme. The Education and Youth Affairs Bureau said on Saturday the scheme subsidies will “remain unchanged” after the programme is renewed next year. Macau residents aged 15 or above are entitled to a maximum 6,000 patacas (US$750) to spend on government-approved courses or examinations in the next three years,

up from 5,000 patacas. “Considering that driving is one of the important vocational skills, we have decided to keep [subsidising] such courses,” Kong Ngai, acting chief of the bureau’s continuing education division, told media. The government is considering whether to allow non-residents to work as drivers here amid a labour shortage that has led to an increase in truck haulage rates. The administration had previously said it might cut driving courses from the scheme, as well as not fully

subsidise courses in recreational activities such as tai chi or cooking. The proposal came after the Commission of Audit released a report a year ago claiming that hundreds of courses and exams in the scheme had been wrongly approved. On Saturday Mr Kong said they would fully sponsor liberal art courses after all. “We think it is important to support the elderly to improve their health and quality [of life]; liberal art courses in particular are taken by many elderly,” he said.

company is paid to run its bus services. The two other bus operators got a 23.3 percent increase in April. France’s Veolia Transport RATP owns 65 percent of Reolian. “What companies look for much more when making investments is the general stability in the institutions, the rule of law and access to court,” Mr Piket said. “In an intensive trade and investment relation between partners, problems arise – and that is not the issue,” he said. “The issue is: how do you resolve the problem? There are mechanisms in place in Macau for this problem, and I very much trust the mechanisms can work here.” Mr Piket said European companies involved in other utilities here had not complained about being kept in the dark about concession terms or difficulty in talking to the government.

“Considering these factors, we maintain one of the directions of the first phase, which is to improve the quality of life of Macau residents.” This purpose and liberal art courses will only become more important as the territory’s population ages, he added. Despite criticism by the audit commission, the scheme continues to have the support from over 90 percent of residents and institutions, said Mr Kong, quoting an evaluation report on the scheme commissioned by his bureau. Latest data from the education bureau show there were over 90,000 openings for residents in more than 3,500 courses last month.

MOP 6,000

Allowance for eligible residents under the continuing education programme


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November 18, 2013 April 19, 2013

Macau

Stiglitz says more mid-level jobs will bridge income gap The Nobel prizewinning economist also calls for eurozone reform and banking union

opinion

Accountability, please

Stephanie Lai

sw.lai@macaubusinessdaily.com

Vítor Quintã

vitorquinta@macaubusinessdaily.com

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acau has been immune to the global financial crisis but the city must bridge its income gap and create more middle-class jobs, Nobel prizewinning economist Joseph Stiglitz says. “Macau is the exception to the economic instability we are experiencing in the world,” Mr Stiglitz told a seminar held by the Monetary Authority of Macau on Friday. But, in answering questions later, he added that this did not mean the city was free of challenges. He said Macau’s average income was much higher than its median income, which hinted at great inequality in income that must be tackled. Median monthly pay was 12,000 patacas (US$1,500) in the third quarter of this year, official data show. There are no official data on average pay. Average monthly pay in the dominant industry, gaming, was 18,900 patacas at the end of June. Mr Stiglitz said Macau had to work on creating more mid-level jobs – those between starting positions and management positions – to make the economy more diverse.

Total disaster Mr Stiglitz said the eurozone must be reformed, and a eurozone banking union and eurozone bonds created to boost Europe’s EU’s recovery efforts. “The euro was a major mistake,” he said. “The question is: when will they correct the mistake?”

Macau is the exception to the economic instability we are experiencing in the world Joseph Stiglitz, winner of the Nobel Prize for Economics in 2001

He said the main flaw in the euro was the lack of conditions for a diverse group of countries to share a common currency. “What they thought is that all you need is a low enough debt-to-GDP ratio and deficit-to-GDP ratio,” Mr Stiglitz said. “It’s just wrong. It is neither necessary nor sufficient,” he said. “Both Ireland and Spain had low debt-to-GDP ratios before the crisis. They had surpluses.”

Both countries thought they were going to be “successful” but instead were left “in total disaster”, he said. “The problem is, the productivity growth is very markedly different in these different countries,” Mr Stiglitz said. “And actually what was needed was policies that enabled the countries at the bottom to catch up,” he said. “But Europe actually said you couldn’t do those industrial policies that would have made the convergence possible.” Mr Stiglitz said the goal should be reform of the structure of the eurozone, instead of reform in individual countries. “They created a single market, but they did not create an institution that makes a single market work,” he said. He said the design of the eurozone had led only to flight of money to the stronger economies of Europe, such as Germany’s, which had further increased disparities in the zone.

High price “They could create a banking union and euro bonds so that in some

ways they can share the risk,” he said. United States debt is about 73 percent of GDP and EU debt is 92.2 percent of GDP, official data show. “If Europe’s debt-to-GDP ratio was roughly the same as the United States, if they got together they could borrow at the same rate as the U.S.,” Mr Stiglitz said. “And if they could borrow at a negative interest rate, they would have money to spend on other things to help the economy to grow,” he said. The U.S. government benefits from negative interest rates, being able to borrow money at rates lower than the inflation rate. “It’s very clear that policy – banking union and euro bonds – will provide a basis for growth rather than decline,” Mr Stiglitz said. But he does not believe the eurozone will be reformed soon. He said that the price of reform for Europe, an important part of the global economy, would be high, but that leaving everything as it was would be worse. Mr Stiglitz won the Nobel prize for economics in 2001 and was formerly senior vice-president of the World Bank.

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et us not beat around the bush. It is time for Transport Bureau director Wong Wan to step down. The scathing report released by the Commission Against Corruption on how his bureau broke the law when setting up the new bus system was the last straw. It is extremely worrying to see how a government body applies the law: sticking to provisions that are useful and wilfully ignoring the ones that are troublesome. The law allows private companies to operate bus services only under public service concessions. The Transport Bureau ignored this and pushed forward with a service provider contract. Why? What were the advantages of such a contract, compared with a concession? According to the Commission Against Corruption there is no advantage. The commission stressed that the bureau signed away a big part of its power as regulator. “In general, both sides in a service provider contract are on an equal footing,” the report says. Ultimately bus operators could even refuse to provide services if they felt like it. This conclusion raises questions about the legitimacy of the government’s takeover of the operations of Reolian Public Transport Co Ltd after the company sought bankruptcy last month. On the other hand, the Transport Bureau decided to keep a useful provision of concession contracts: the power to approve or reject increases in what it pays for the bus services. It is not possible “in any way” to increase payments to public service providers during the term of their contracts, the commission says. The Transport Bureau squandered this power by acting like a bipolar patient, afraid of public criticism but not of choking off the finances of the bus operators. It approved an increase of 23.3 percent in what it pays them in June last year, backtracked, and approved it again in April, but only for two of the three operators. The Communist Party is used to applying or ignoring all laws at its own convenience. That is not what was promised to Macau residents in the Basic Law, at least until 2049. Legal issues aside, the awfulness of the bus service system should be more than enough to persuade the government to ditch Mr Wong. It started out all wrong when a contract put out to public tender in 2009 was turned into a direct contract after one of the bus operators, TCM, sued the government for rejecting its bid because it was allegedly four minutes late. Then newcomer Reolian had to ask for help because it was unable to find the thousands of drivers the Transport Bureau had promised would be available. There was a pathetic attempt to measure public satisfaction with the bus operators and link it with an increase in what they are paid, even though their original contracts had no such provision. Anyway, what are contracts worth these days? When it comes to government contracts, not much, it seems.

The Communist Party is used to applying or ignoring all laws at its own convenience. That is not what was promised to Macau residents in the Basic Law, at least until 2049


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November 18, 2013

Macau

Galaxy may invest MOP40 bln in Japan, Taiwan Casino company also spending HK$10 bln on ‘leisure and sports facilities’ on Hengqin Michael Grimes

michael.grimes@macaubusinessdaily.com

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alaxy Entertainment Group Ltd may consider investing more than US$5 billion (39.93 billion patacas) in Japan and Taiwan, if those governments open their markets to casino resorts, says Francis Lui Yiu Tung, the company’s vice chairman. The Hong Kong-based Macau casino developer would be willing to spend the equivalent of more than HK$20 billion in each of the other two Asian markets, Mr Lui said in an interview with Bloomberg News on Friday. “If we’re given the chance to build a casino in Japan or Taiwan, we would at least be spending HK$20 billion or HK$30 billion,” Mr Lui said. “We have the financial capacity to do that,” he added. Galaxy said in its unaudited third quarter earnings last week that the group’s cash on hand as of September 30, was HK$14.4 billion while net cash stood at HK$7.7 billion. All Galaxy’s Macau market competitors have expressed an interest in Japan, which is inching its way toward initial legalisation of casinos and then subsequently a system to regulate them. The two processes could take two years once initiated in the Japanese parliament The Diet, according to some sources in the country. Mr Lui on Friday also said that Galaxy plans to invest HK$10 billion to develop leisure and sports facilities on Hengqin Island next door to Macau. The investment would include the costs of land acquisition and construction. The Bloomberg report didn’t cite more details. Hengqin as a whole is being developed by local and international companies for family tourism and entertainment and as a destination complementary to Macau’s casino offer.

With Bloomberg News

Francis Lui, vice chairman of Galaxy Entertainment Group

In May during the Global Gaming Expo Asia trade show and conference in Macau, Bob Drake, Galaxy’s chief financial officer said the firm was considering a “golf course” or “some other non-gaming amenity” for Hengqin. A golf course for Hengqin has been mentioned previously – in

Land of rising opportunities Japan could be a big casino market, but opinions vary on exactly how big

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apan has long been touted as an attractive gaming market with a large and relatively rich population base. The country may generate US$10 billion (79.9 billion patacas) revenue a year if it opens up, Union Gaming Group LLC estimated. Sceptics on the operations side of the industry say that Japan – with its distinct culture and low penetration of English language skills – is likely to focus its casino offer mainly on domestic players. They also point out that Japanese VIP table players have not been seen in other Asian casino markets in any big numbers since the export-driven

Chime-Long Group, a conglomerate based in Guangzhou. Some industry analysts have questioned whether Hengqin – although more than three times bigger than Macau at 100 square kilometres – could support two new golf courses, given the land-intensive nature of such projects. A “golf course holiday resort area” was mentioned previously by the administrators of the mainland’s special economic zone on the island – known as Hengqin New Area. The possibility of a course designed by Tiger Woods was mentioned in regional media reports in 2009. Yesterday on the English-language version of Hengqin’s official website www.hengqin.gov.cn there was no mention of a new golf course for the island. A search of the word ‘golf’ does produce one hit on the opening page, but the word is hidden and only appears when the viewer runs the mouse over the page. Chimelong Ocean Park will definitely feature a 1,888-room hotel and China’s longest wooden roller-coaster. Shun Tak Holdings Ltd, a shipping and property group founded by former casino monopolist Stanley Ho Hung Sun, said earlier this year it had won a bid for a site in Hengqin and plans to build a hotel-to-office complex there. Among the six Macau operators Galaxy has the biggest supply of undeveloped Macau land at its disposal. Sean Monaghan an analyst at HSBC Ltd in Singapore, said earlier this year that Galaxy had the capacity to develop “18.2 million sq. ft of additional casino resort space over three phases on its existing Cotai land bank”.

boom of the 1980s. They add that pachinko – a machine-based game unique to Japan and highly popular there – is classified under Japanese law not as a casino game of chance but as a “speculative pastime’. Additionally, while pachinko produces very impressive turnover (i.e. ‘handle’), it doesn’t have the sort of house ‘hold’ rates (i.e. ‘win’ net of prizes paid out) seen in casino slot gaming. Optimists point out that in Japan there is currently an illegal and untaxed domestic market in Japan for casino-style table games played at what are known euphemistically

statements attributed by the media by the developers of Chimelong Ocean Kingdom. The latter is a huge 20 billion yuan (26.22 billion patacas) hotel complex and theme park on a 388,344 square metres (4.18 million sq. feet) site on Hengqin due imminently to have its first phase opening. It is being developed by

as ‘bridge clubs’. Last week Akiyoshi Tsuruoka, general manager of Tokyo-based Gaming Capital Management Inc, a consultancy, pointed out to Business Daily that in June the Japan Restoration Party proposed its own parliamentary bill for integrated resorts, independent of the one drafted on behalf of the government. JRP is a party keen to re-assert Japan’s sovereignty and nationalism following a long period of neutrality and national introspection since the Second World War. The party was founded by former Tokyo governor Shintaro Ishihara. As long ago as 1999 he proposed a casino resort in the Odaiba district of Tokyo. The capital and also Osaka – where the JRP’s co-founder Toru Hashimoto is mayor – are considered the favourites to gain casinos. Serious political debate on casinos began in 2002. But the matter came back into the spotlight following the massive earthquake and tsunami that

US$10 bln

per year Union Gaming revenue estimate for Japan casino market

devastated parts of eastern Japan in March 2011. At the Macao Gaming Summit during the Macao Gaming Show on Friday, Kazuaki Sasaki, assistant professor at Nihon University College of Economics told Business Daily on the sidelines of the event he didn’t think the emergence of the JRP’s alternative casino bill would slow down actual implementation of a casino policy. He said: “I think the differences are relatively minor. In Japan we take time to decide things, but once we decide, then we can act quickly.” A cross-party parliamentary group in Japan known as the Diet Member Alliance for Promotion of International Tourism Industry – or IR Alliance for short – plans to submit the JRP’s bill with “further modifications” as its version of the integrated resorts promotions bill. That will happen before the end of the current Diet session on December 6, suggests Mr Tsuruoka. M.G.


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November 18, 2013

Macau

Customs officers shutter SHFL display Action came on last day of Macao Gaming Show on Saturday Michael Grimes

michael.grimes@macaubusinessdaily.com

O

fficials from Macau Customs returned to casino equipment maker SHFL entertainment Inc’s stand on the morning of the final day of the Macao Gaming Show on Saturday – this time ordering the equipment to be switched off and covered. They then sealed the stand with red and white tape marked with the word ‘Customs’ in Chinese characters, Portuguese and English. The move came shortly before the show’s doors were due to open to the public at 10am. It meant that visitors on the third and ultimate day of the new trade show held at CotaiExpo at The Venetian Macao were unable to view SHFL’s Fusion Hybrid electronic multi-game product. At least until mid-afternoon. Agents from Macau Customs were back at 4pm on Saturday to remove the covers, a member of the legal team representing SHFL told Business Daily.

The SHFL entertainment stand was closed down on Saturday

Betty Zhao, sales and marketing manager for LT Game Ltd, confirmed to Business Daily that her company sought an injunction on Thursday, which led to a site inspection from customs officials. As we reported on Friday, up to six customs agents had

previously spent two hours at the stand on the first day of the show on Thursday. On that visit they took notes, photographs and video footage of the SHFL Fusion Hybrid product. SHFL – formerly known as Shuffle Master – has been in a long and at times bitter

trade dispute with a Macaubased company called LT Game and its Hong Konglisted parent company Paradise Entertainment Ltd. It concerns a patent claimed in Macau for technology in a multi-game electronic table game product featuring a live dealer. “The injunction was issued on Friday and customs officials went to the show to cover their [SHFL] products on Saturday morning,” Ms Zhao said. The lawyer representing SHFL said the Macaubased subsidiary – SHFL entertainment (Asia) Ltd – was not notified of any injunction. “We were informed, but the Macau Customs did not officially notify the company,” the lawyer said. LT Game is chaired by Jay Chun, who is also the chairman of the Macau Gaming Equipment Manufacturers Association, the organisers of last week’s trade event.

Asked if this could damage the new gaming event, Ms Zhao said that LT Game complaint was independent of the show. “I don’t think it matters. It would happen in any show or any other venue here, because we are trying to protect our patents and products,” she said. Notices on the exhibition floor final day of the Macao Gaming Show say it will return next year, although no firm dates have yet been confirmed. Mike Johnson, industry vice president for Global Gaming Expo Asia – the Macau-based casino industry show and conference jointly organised by Reed Exhibitions and the American Gaming Association – told Business Daily yesterday by telephone from the United States that his event is also “committed to Macau” and there are no plans to move the show elsewhere. G2E Asia 2014 will be held from May 20-22, 2014 at The Venetian Macao.


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Macau Brought to you by

HOSPITALITY Ocean waves Of Macau’s ferry terminals, the Outer Harbour terminal is by far the busiest. Twothirds of all arriving ferries use it. For the past seven quarters the number of vessels arriving at the Outer Harbour ferry terminal has been between 11,300 and 11,900 per quarter. The opening of the Cotai ferry terminal took a bite out of the proportion of arriving vessels using the Outer Harbour ferry terminal, but the Outer Harbour terminal remained preeminent. At the time, ferry traffic was growing. Now overall traffic is contracting. Once the new ferry terminal in Cotai opens, with its greater capacity, the proportion of arriving vessels using the Outer Harbour ferry terminal will probably shrink. The increase in the size and number of casinos and hotels in Cotai will make it more attractive for visitors that wish to use those casinos and hotels to land in Cotai.

The chart shows ferry arrivals at the Outer Harbour terminal from the various places of origin in Hong Kong. For most of the period represented in the chart between 55 percent and 60 percent of sailings from Hong Kong came from the Hong Kong Island ferry terminal. In 2008 the proportion was greater. Sailings from the Hong Kong Island and Kowloon ferry terminals together account for about 80 percent of all ferries arriving in the Outer Harbour. Sailings from Hong Kong International Airport account for less than 5 percent. Sailings from Shekou and Shenzhen account for the rest.

Casinos among big copyright infringers, MACA chief says The Macau Association of Composers, Authors and Publishers (MACA) presses for the payment of royalties for public performances of copyrighted music, but has insufficient resources to protect the copyright to other sorts of intellectual property (IP) such as books, plays or films. The president of the association, Ung Kuok Iang, says protecting music copyright is difficult enough in Macau. Mr Ung told Business Daily in an interview that casinos were infringing copyright every day. He said MACA was ready to take a casino operator to court in a test case meant to establish that Macau must follow international norms. He also said his association recently settled out of court a dispute over copyright with Teledifusão de Macau SA (TDM). He gave no details. Mr Ung said penalties for infringing copyright should be heavier. Luciana Leitão

Photo by Manuel Cardoso

3,898

Monthly average sailings arriving at the Outer Harbour in Q3

They will be paid their royalties. We are already getting royalties from Louis Vuitton and other big brands – and some government departments – for certain events. [They include brands like Gucci, Ferragamo, Prada, Luk Fook Jewellery, the Macau Government Tourist Office and

What does an author or composer have to pay to be a member?

Nothing. We work for the composers. If you’re a composer, there is no reason not to join MACA. It’s the only organisation here that fights to get benefits for local composers, and we are in an international association. Our colleagues support what we are doing.

How many members do you have?

leitao.luciana@macaubusiness.com

What advantages do members of your association have?

institutions, music workshops, awards and so on. Last year we gave 10 percent of royalties to up to 26 schools. We take care of the work of composers, not only in Hong Kong but also in the mainland, and all our associates in the International Confederation of Authors and Composers Societies (CISAC). For instance, some of our members’ songs were being played in concerts held in Shanghai last year and we’re guaranteed royalty payments for that. This is what we’re fighting for.

Air Macau.] Yet brands like LV are not using much local input for their events, so mostly we try to distribute royalties for foreign music. If we get 100 percent of a royalty payment, we will give 15 percent to local composers for each song they produce. It is an encouragement for them to produce more. And 10 percent we try to use to sponsor educational

We now have 45. These are all composers. They are all local artists, like L.A.V.Y. We also have some Japanese composers who are based here and also an Italian who’s a local resident.

You cover only performance royalties for music composers, which seems very limited. Why not extend your coverage to other artistic fields?

We don’t have enough resources to try and cover films and books, so for now we have to focus only on music. In future, if we get more resources, we will take in


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November 18, 2013 April 19, 2013

Macau films. CISAC takes care of poetry, film and other areas. We do not have enough budget. CISAC helps only with technicalities and with training. Sometimes the government supports our events. Before, we didn’t have the budget for events. This year we do. We are growing very slowly. Last year we had a budget of 2 million patacas [US$250,431] from royalty payments we collected. But after organising an event, we were left with half of that, and we had to disburse 800,000 patacas in royalty payments abroad and 100,000 patacas to artists in Macau. For the time being we don’t have room to take in any other area. But if we manage to have the casinos pay royalties, that will be another story, because they play music 24 hours a day.

In September your association said it would sue TDM for copyright infringement. Have you settled out of court? Yes, TDM’s chief executive agreed to pay royalties, so we will have an agreement very shortly.

How much will TDM pay?

I cannot tell you that – it’s part of our agreement terms. But I can tell you it’s extremely little. We are not extorting money. We just want the culture to move forward a bit.

How do you calculate royalty payments?

We have a calculation system online. We base ourselves on the Hong Kong tariff and judge the value of the music being played depending on the venue. For instance, in karaokes, the value is high, because they are selling music and drinks.

Has any karaoke ever paid any royalty?

MOP2 mln

MACA royalty collections in 2012

No. Macau is a bit different. We’re going to have a lot of trouble if we go into that area.

You are referring to underworld activity? Yes. It’s a completely different story. We are charging very little. We take into account the size of the companies.

Still, it’s a victory, that TDM is going to pay some royalties?

Are casino-hotels here big users of music without paying royalties?

Yes. Casinos are backed by big international corporations and, in some cases, they have a lot of tricks for not paying. I don’t know why, because we are not charging very much. Maybe it’s a question of strategy for them.

Is your association trying to come to an agreement on this with casino-hotels?

Casinos are infringing copyright every day. Some have signed up for concerts, yet they pay royalties only for some of those events. The casinos don’t really feel any pressure to pay because we have never taken any of the operators to court.

So if the government supported you more, you could do more, is that it? Yes, but the government won’t touch the casinos.

I hope so. TDM uses a lot of local composers’ songs, so this is good. Maybe we can distribute more than 15 percent of the royalties to local composers.

What resulted from that meeting with SJM? We will have a second meeting with the marketing department. Other casinos just ignore us.

So your main battle now is against casino operators?

Yes, in accordance with the strategy we have for the association. It’s quite difficult in Macau to work with small shops. I think it’s better to start with our big users, like casinos and also TDM.

You cannot. But, actually, if you join one, you join the world.

Only one association deals with copyright infringement here. Does this mean Macau is unaware of the importance of intellectual property rights?

We can read it like that. IP is very important. Macau is going to have a creative industries fund. And IP is at the base of the creative structure, so if you cannot protect IP how can you move forward? I hope the government will do more to in the IP protection field.

You have only 45 members. Isn’t it a low number?

Has anyone ever taken civil action against music copyright infringement? No, never.

Has anyone taken criminal action since the new law was enacted? Not yet. That’s why the casinos still don’t pay attention. It’s really hard for individual composers to sue a big corporation. The costs could be very high.

Other than that, how do you regard the law?

The provisions on penalties should be clearer. The penalties are not really that strong. If the penalties were stronger, our work would be easier.

No. Our sister association in Hong Kong thought we wouldn’t have so many. Macau is so small and they didn’t think there were 45 composers. I think we will have more as time goes by. CASH has 3,000 and something members, but they have been operating for 35 years.

What were the results of CISAC’s meeting in Macau?

What did the new copyright law change?

How much was your association able to pay to local composers last year?

This law is good because it goes more into the digital field. It protects more artists and authors in the digital world, better than before. For instance, by regulating the Internet, we will probably get more income from TDM. Also, now it’s possible to take action against copyright infringement in the criminal courts, not just the civil courts.

It helped a lot, because they shared their experience with us. The constituent associations all had the same problem in the early stages because people ignored them. After this meeting I think they understand our situation.

In 2011 we paid roughly 100,000 patacas and in 2012 it was about 150,000 patacas. This year we’ve had no increase in the royalties we’ve collected. It’s roughly the same amount as last year: 2 million patacas. While the amount of royalties we collected rose by about 90 percent in 2012, it has been generally steady this year.

One of the association’s goals is to promote new musical compositions. How do you do that? We have contests, live concerts and seminars. We have been recording music, all from local composers. We have one competition, the winner of which we take to professional studios in the mainland.

Among your members, who gets the most from royalty payments?

Probably Joe Lei, who is quite well known in Hong Kong. He was first in the Composers and Authors Society of Hong Kong (CASH) and he is now also in MACA. As a matter of fact, I have been a CASH member since 1996. In 2002 I came back to Macau and my music was being played in Macau. I sent a letter to CISAC, complaining. In 2004, they came to Macau to discuss it with me. And after that we established MACA, in 2009.

How do you plan to fight this?

CISAC discussed this for two days and we have a solution. We are going to take one case to court. CISAC will support us, technically, and they will find people to help us and work out the case. SJM [Holdings Ltd] is the only operator that has been willing to discuss it with us. Most of the casinos don’t want even to talk to us. Our association and all the directors of CISAC had a meeting with SJM.

Can a local composer join Hong Kong’s association?

Casinos are infringing copyright every day IP is at the base of the creative structure, so if you cannot protect IP how can you move forward?

November issue


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November 18, 2013 April 19, 2013

Macau

Outside staff benefits from banking boom

Chimelong to lure SMEs next month Hengqin Island’s Chimelong Ocean Resort will “hopefully start” carrying out promotion activities next month to attract investments from Macau smalland medium-sized enterprises, said Jackson Chang, president of Macau Trade and Investment Promotion Institute. The plan for this zone – a promise made in last week’s Policy Address for 2014 – was “almost completed,” Mr Chang said on Friday. He declined to disclose any details. Part of the Chimelong resort is slated to begin operations by year-end. Developer Guangdong Chimelong Group Co Ltd is looking to draw over 20 million visitors a year.

Growth in bankers’ earning still pales in comparison to lenders’ profit jump Tony Lai

tony.lai@macaubusinessdaily.com

O

utside workers in Macau banks are getting a bigger return from their employers’ banner year than resident staff, though not by much, official data show. Wage hikes have been particularly fast for non-resident managers but they are still far behind the profit growth posted by the city’s banks in the same period. The Statistics and Census Service said on Friday the average monthly earnings of non-residents in the banking industry, excluding bonuses, rose by 1.8 percent from a year earlier to 24,160 patacas (US$3,020) in the third quarter. Residents also working in the industry experienced slower growth of 1.3 percent to 21,220 patacas. The wage gap between local and imported bankers was widest for directors and managers.

MOP 51,390

Average wage of a non-resident bank manager

Court snubs ‘Cotai Arena’ trademark

There were more than 5,500 people working for banks last quarter

Non-resident managers earned 8 percent more than a year earlier or 51,390 patacas a month in the JulySeptember period. In contrast local managers earned 39,570 patacas, 3.6 percent less than a year earlier. The industry’s more than 5,500 employees earned in average 21,470 patacas in the three months to September, up by 1.5 percent year-on-year. In the same quarter Macau’s 28 banks raked in 2.13 billion patacas in combined profits, up by 40.1 percent year-on-year, data from the Monetary Authority of Macau show. Bankers’ earnings growth was dampened by the inflation, which grew about 5.6 percent year-on-year

in the three months to September. The human resources of the banking sector “remained stable” in the last quarter, the statistics bureau said. The turnover rate was down by 0.3 percentage points year-on-year to 5.4 percent, with 293 workers leaving the sector. The recruitment rate also dipped by 0.4 percentage points to 6.9 percent thanks to 376 new recruits. Most bank employees worked as clerks, namely as bank tellers, accounting for nearly two-fifths of the employee size, or over 2,160. Technicians (over 30 percent) came next while managers and directors represented nearly a quarter of the workforce.

The Court of Second Instance has again prevented gaming operator Las Vegas Sands Corp from registering a trademark that uses the word ‘Cotai’. In on October 31 judgement but made public late last week, the judges said LVS cannot register “CotaiArena”. The court sided with the objections raised by rival operator Melco Crown Entertainment Ltd. The brand could confuse consumers, the judgement stresses, given that it would cover “a variety of services that have no connection”. The judges criticised LVS for its “concern with taking over the ‘Cotai’ name,” while “overlooking” other gaming companies operating there.

Kidnapping, drug smuggling soars

Pataca hits two-year low T

he pataca has hit a two-year low against the currencies of the territories’ main trading partners, the Monetary Authority of Macau says.

The city’s de-facto central bank said on Friday that the index of the pataca’s trade-weighted effective exchange rate had fallen to 96.51 points in October, 0.97 point less than in September. After strengthening slightly during the course of the first half, the index slumped to the lowest since November 2011. It remains far below the 105-point mark it reached in June 2010. The yuan has appreciated by

4.5 percent against the pataca since November 2011, data from the Monetary Authority show. A stronger yuan makes imports more expensive, the mainland being Macau’s biggest trading partner. The pataca has lost ground in the past two years against the currencies of Macau’s other main trading partners, including the European Union. V.Q.

More Lunar New Year coins in 2014

Corporate

Business Awards finalists announced on Wednesday The 42 finalists of the 2013 Business Awards of the Year will be announced on Wednesday, a week before the winners are unveiled at a gala event. From more than 140 candidates across nine categories, the 27 independent members of the jury have selected the companies and individuals that have

The number of kidnappings and drug trafficking crimes reported to the police increased fast in the first nine months of 2013. Secretary for Security Cheong Kuoc Va (pictured, left) said on Friday kidnappings increased by more than two-thirds year-on-year to 108. The perpetrators of kidnappings here are usually acting on the orders on loan sharks trying to recover unpaid debts connected to gambling. The number of cases of drug trafficking and drug dealing almost doubled to 63. Mr Cheong said the increase was due to stepped-up efforts against illegal drugs. “The police has managed to bust more cases,” he said.

displayed outstanding excellence. The 42 finalists were picked as the best examples of those who are contributing to promoting the entrepreneurial spirit here, and advancing and increasing awareness of best industry practices and standards. All finalists will be winners, with 33 of them receiving Excellence Awards. Nine

finalists will ultimately emerge as the overall winners in nine categories. The categories range from leadership to non-profit organisation, corporate social responsibility and small and medium enterprise. The award presentation event, a black tie gala dinner, will take place at Grand Lisboa’s Grand Ballroom on November 27.

The Monetary Authority of Macau will be allowed to print more special Lunar New Year coins starting next year due to “great demand,” the Executive Council said on Friday. Until 2019 the city’s de-facto central bank will print up to 2,000 coins with a face value of 100 patacas (US$12.5) per year, four-times more than this year. The authority will also print 5,000 250-pataca coins, up from 3,000, and 8,000 20-pataca coins, up from 6,000. A maximum of 20 million special Lunar New Year notes are also issued each year.


November 18, 2013 April 19, 2013

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November 18, 2013 April 19, 2013

Greater China

Beijing unveils boldest reforms in decades Leaders vow biggest expansion of economic freedom since ’90s Kevin Yao and Ben Blanchard

C

hina unwrapped its boldest set of economic and social reforms in nearly three decades on Friday, relaxing its one-child policy and further freeing up markets in order to put the world’s second-largest economy on a more stable footing. The sweeping changes helped dispel doubts about the leadership’s zest for the reforms needed to give the economy fresh momentum as three decades of breakneck expansion shows signs of faltering. However, the reforms may take years. A document released by the Communist Party following a fourday conclave of its senior leaders promised land and residence registration reforms needed to boost China’s urban population and allow its transition to a western-style servicesand consumption-driven economy. The government will give farmers rights to share, profit from, sell, collateralize and inherit ownership in collective assets, the document said, adding that a rural property market will be established. The hukou system will be gradually relaxed in medium-sized cities, while the sizes of mega-cities will be strictly controlled. Pricing of fuels, electricity and other key resources – now a source of major distortions – would be mainly decided by markets, while Beijing also pledged to speed up the opening of its capital account and further financial liberalisation. “The reforms are unprecedented,” said Xu Hongcai, senior economist at the China Centre for International Economic Exchanges, a well-connected Beijing think tank. “Reforms in 1990s were limited to some areas, now reforms are all-round.” Analysts suggested the plans are the most significant since Deng

Xiaoping led a series of reforms in the late 1970s and the early 1980s. Those changes eventually opened up the country to the outside world and set it on course to become the champion economy of emerging markets.

2020 deadline President Xi Jinping and Premier Li Keqiang, appointed in March, announced several breakthroughs in social policy, pledging to unify rural and urban social security systems and to abolish controversial labour camps. The 60-point plan, more comprehensive and specific than initially thought, also eased concerns that Mr Xi would need months if not years to take full charge of China’s vast party and government bureaucracy. China-watchers took the establishment of a working group to lead economic reform and a new State Security Council as further signs of how effectively Mr Xi had managed to consolidate power just eight months after he officially took over.

KEY POINTS Document provides detail missing from initial outline Scope of proposed changes show Xi’s firm grip on power Much stress on social reforms alongside economic overhaul

“This is much more of a top-down, systemic leadership compared to the 1980s and 1990s. Compared to previous generations, this is a remarkably robust leadership,” said Dali Yang, a political science professor at the University of Chicago. Still, Mr Xi and his team gave themselves until 2020 to achieve “decisive” results – a tacit acknowledgement of the risks involved in Beijing’s balancing act between letting market forces eventually take over and preserving financial and social stability and the Communist Party’s political monopoly. The experience of the past decade is also a reason why many economists and international observers view Beijing’s bold reform plans with guarded optimism. Just like Mr Xi and Mr Li, the previous leadership promised to overhaul China’s economy and kick its addiction to rapid, investment and credit-fuelled growth, but left it saddled with more debt, industrial overcapacity, pollution and financial strains. U.S. Treasury Secretary Jack Lew echoed that caution during a stopover in Beijing on his Asian tour, describing the plans as “ambitious” and noting that key was how soon they would become reality. “The direction is significant, but the character and the pace of change matters,” Mr Lew told reporters. The initial brief reform outline published on Tuesday triggered a stock market sell-off, with investors taking its scant details as a sign of a lack of commitment on Mr Xi’s part or his failure to overcome resistance of vested interests, such as powerful state-owned companies. But a raft of specific policy plans ranging from interest rate and currency

regime liberalisation to residence registration and land reforms and the pledge to allow more competition seemed to put such concerns to rest. According to the document, the government had decided to work toward an independent judiciary – courts would be “appropriately” separated from local governments. Under government reform, it relaxed the need for government approval on projects and said the performance of local officials would be rated on measures other than just economic growth, such as in environmental protection. The commitment to abolish reeducation through labour camps was also remarkable, given that several political sources had told Reuters this was an area where Mr Xi was facing much resistance. Few commentators had also expected any significant attempts to take on powerful state monopolies, even though many economists argue that loosening the stranglehold of big state-owned firms’ on markets from banking to energy was key to success of other reforms. The initial outline of the plans on Tuesday had affirmed those firms’ strategic role in the economy. But the longer report on Friday raised state firm dividend payments, allowed private firms to enter some of the protected sectors and encouraged them to take part in reforming the state-owned firms. All in all, the proposed reforms are part of China’s grand transformation design: retooling the economy towards greater reliance on consumption, services and moving up the manufacturing value chain, while tackling deepening inequality and discontent, a source of great anxiety for a leadership that prizes stability over everything else. “The bottom line is that there’s a sweeping reform plan,” said Wang Tao, a Hong Kong-based economist for UBS AG who formerly worked for the International Monetary Fund. “At least from the blueprint, it seems very exciting.” Chinese leaders are acutely aware of what is at stake as years of rapid growth come to an end. Having been the factory to the world, they want to avoid the so-called middle-income trap, where wealth creation stagnates as market share is lost to lower-cost rivals. Reuters

China can speak with one voice: Xi C

Couples can have two children if either parent is an only child

hina’s new national security commission will enable the government to speak with a single voice when it comes to dealing with crises at home and abroad, state media cited President Xi Jinping as saying. Details of how the commission would operate had been left unclear when it was announced in a government communique on Tuesday after a four-day conclave to map out reforms, and China had hinted it would have a domestic focus. On Friday, Mr Xi said it would deal with both domestic and international security challenges. “Currently, our country faces external pressures on safeguarding sovereignty, security and development interests, and internal pressure on safeguarding political security

and social stability,” Mr Xi said in comments carried by the official Xinhua news agency. The “predictable and unpredictable” risks facing China are increasing dramatically and the country’s existing systems are incapable of handling them, Mr Xi said. “Establishing the national security commission strengthens the concentration and unified leadership of our national security operations and is a top priority,” he added. Experts say the commission is based on the National Security Council in the United States and would increase coordination among the various wings of China’s security bureaucracy, split now among the police, military, intelligence and diplomatic services. Reuters


November 18, 2013 April 19, 2013

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November 18, 2013 April 19, 2013

Greater China HK plans to re-auction part of 3G spectrum Hong Kong’s plan to auction parts of the third-generation mobile-phone spectrum when current licences expire has angered existing operators, who say it will lead to higher prices and worse service. The government will auction a third of the spectrum, Communications Authority chairman Ambrose Ho said at a briefing yesterday. The auction may clear the way for China Mobile Ltd to compete with HKT Ltd, CSL Ltd, Hutchison Telecommunications Hong Kong Holdings Ltd and SmarTone Telecommunications Holdings Ltd, whose licences expire in 2016. The auction is expected to take place in the fourth quarter of 2014, the government said in a statement. Existing operators will get priority to retain the rights to the rest of the airwaves, Mr Ho said. “This could increase costs for the carriers by hundreds of millions of Hong Kong dollars,” Victor Yip, an analyst at UOB- Kay Hian Ltd, said by phone before the announcement. “Operators facing such a dramatic increase in costs will try to pass on the cost directly or indirectly to customers.” Telecommunication services generated HK$57.3 billion (US$7.4 billion) of revenue in Hong Kong in 2010, according to the latest figures on the website of the Office of the Communications Authority.

Sweden’s Tele2 luring Hutchison Tele2 AB, Sweden’s second-largest telecommunications carrier, may be tempting Asia’s richest man with the chance to expand in Europe as the company’s controlling shareholder concentrates on faster-growing Internet investments. Sweden’s Stenbeck family, which controls Tele2 through Investment AB Kinnevik, has been investing more this year in online companies such as fashion retailer Zalando GmbH and e-commerce incubator Rocket Internet GmbH. After the sale of Tele2’s Russian carrier and Tele2’s unexpected loss and forecast reduction last month, Kinnevik chairman Cristina Stenbeck may be warming to the idea of divesting one of her family’s largest holdings, said Kepler Cheuvreux, which estimates Tele2 may fetch as much as 42 billion kronor (US$6.3 billion) in a sale. Hutchison Whampoa Ltd, owned by Hong Kong billionaire Li Ka Shing, could gain critical size in Sweden and reduce costs by buying Tele2’s business there and combining it with Hutchison’s fourth-place Swedish carrier 3 Scandinavia, said Swedbank AB. The combined entity would control about 37 percent of the market, narrowing the gap with state-owned TeliaSonera AB’s 46 percent grip, according to data compiled by Bloomberg.

China to build power plants in Yemen China will build power plants in Yemen with total output capacity of 5,000 megawatts and expand the Arab country’s main container ports, the Yemeni president said after his return from a visit to China, state news agency Saba reported. Saba news agency cited Yemeni President Abd-Rabbu Mansour Hadi as saying that he has agreed with his Chinese counterpart during the visit to “work to set up power plants… using gas and coal and with production capacity that will reach 5,000 MW.” A government official, who asked not to be named, told Reuters China will be building two power plants. China will also work to expand two container ports in the southern cities of Aden and Mokha at a total cost of US$508 million, the agency cited Mr Hadi as saying. The projects will be funded through a soft loan from the Chinese government, an official at the Yemeni Transportation Ministry told Reuters.

Hong Kong GDP growth slows in third quarter Grace Li

H

ong Kong’s economic growth slowed slightly to a seasonally adjusted 0.5 percent in the third quarter over the previous three months, weighed down by weak export numbers and a drop in retail sales, the government said on Friday. On a year-on-year basis, economic growth was a weaker-than-expected 2.9 percent, compared with 3.2 percent in the second quarter. A Reuters poll of eight banks had estimated third-quarter growth of 3.1 percent from a year earlier. “The external sector, with the notable exception of inbound tourism, was still constrained by the weak global economic conditions,” the government said in a statement. In the second quarter, economic growth in the former British territory had risen 0.7 percent from the previous three-month period. Despite what it called challenges in the global economy, uncertainties from the U.S. Federal Reserve’s monetary policy and a fragile eurozone recovery, Hong Kong’s full-

Economic growth weighed down by drop in retail sales

year GDP growth was expected to reach 3 percent, given “that a further moderate growth is likely attainable in the fourth quarter”. Hong Kong authorities had previously forecast full-year GDP

in a range of 2.5 to 3.5 percent. The economy expanded 1.5 percent in 2012. Exports climbed 6.2 percent year-on-year in the third quarter, the same gain as in the second quarter. The government, however, said merchandise exports, not including so-called non-monetary gold including gold used for jewellery, had stayed weak. “Hong Kong’s merchandise trade performance may continue to see some fluctuations in the near term,” the statement said. Hong Kong’s exports and imports are predominantly re-exports to and from China, where the economy grew at its quickest pace this year between July and September by 7.8 percent from a year earlier. Retail sales slowed down after being the main driver of the economy in the first half of the year. Total volume decreased 6.5 percent in the three months ended September over the preceding quarter. Reuters

Stocks surge on policy optimism Reform plan ‘unprecedented’ and changes expected soon

C

hina’s stocks advanced, capping the benchmark index’s biggest gain in a month, while borrowing costs rose amid speculation the government will unveil detailed changes in economic policy as soon as this week. The Shanghai Composite Index climbed 1.7 percent to 2,135.83 at the close, erasing a weekly decline, as Citic Securities Co and Haitong Securities Co led a rally in brokerages. Yields on the nation’s 10-year notes increased eight basis points to 4.60 percent, the highest level since 2007, and the benchmark money-market rate rose the most in five months. Optimism that the government will elaborate on plans to elevate the role of markets in the world’s second-largest economy has revived investor confidence, after the ruling Communist Party stopped short of unveiling detailed policy shifts on Tuesday, according to Dragon Life Insurance Co. Bond yields increased as the central bank drained cash from the financial system and investors speculated the government will loosen its grip on interest rates. “The market is expecting that some important decisions from the plenum will be implemented soon and some additional details to be

announced will exceed market expectations,” said Wu Kan, a money manager at Dragon Life. “Investors had overreacted by panic selling when the plenum concluded.” Chinese shares listed in Hong Kong posted their biggest daily gain in three months on Friday. The Hang Seng Index ended up 1.7 percent at 23,032.2 points, while the China Enterprises Index of the top Chinese listings in Hong Kong spiked 3 percent in its biggest single-day gain since August 12. Rises helped both indexes swing into gains on the week. They rose 1.3 percent and 3 percent, respectively.

Going ‘all out’ A document approved at the plenum lays out 15 areas of reform and 60 “concrete tasks”. The document referred to topics such as requiring state-owned enterprises to pay larger dividends, encouraging more private investment in state projects, and offering farmers more property rights. Policy changes may be announced over the next seven to 10 days, Jonathan Garner, the Hong Kongbased chief Asia and emergingmarket strategist at Morgan Stanley, said in an interview from Singapore.

Investors will regain some confidence in China’s structural reforms next week, Lu Ting, a Hong Kong-based economist at Bank of America Corp, wrote in an e-mailed note. The nation will probably ease controls on interest rates and energy prices after policymakers assigned markets a “decisive” role in allocating resources this week, according to Wang Tao, the chief China economist at UBS AG who formerly worked at the International Monetary Fund. China’s central bank will make a big push on financial reforms to help sustain economic growth, governor Zhou Xiaochuan said on Friday, after a party meeting that set a reform agenda for the next decade. “We will pull out all stops to deepen financial sector reforms and open up to promote sustained and healthy development of the economy,” Mr Zhou said in remarks published on the central bank’s website. Citic Securities and Haitong Securities, China’s biggest listed brokerages, jumped at least 6 percent after the Shanghai Securities News cited Xiao Gang, chairman of the securities regulator, as saying the capital markets will “usher in” new opportunities. Bloomberg News/Reuters

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, 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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November 18, 2013 April 19, 2013

Asia Singapore home sales fall 48pct in October Singapore’s home sales fell 48 percent in October from a year ago, signalling that the government’s efforts to cool the property market are working. Home sales slid to 1,009 units last month compared with 1,949 in October 2012, according to data from the Urban Redevelopment Authority. From the previous month, sales decreased 19 percent, the data showed. Home sales have been declining in the past four months compared with figures last year after the government imposed new rules in June governing how financial institutions grant property loans to individuals.

Japan lowers emissions goal Japan, the world’s fifth-largest producer of carbon dioxide, watered down its target to cut greenhouse gas emissions. The new target reverses course from the goal set four years ago by allowing a 3.1 percent increase in emissions from 1990 levels rather than seeking a 25 percent cut. “As one of the world’s largest CO2 emitters, Japan has a responsibility to help lead the world in reducing emissions,” Kelly Dent, climate change spokeswoman at U.K. charity Oxfam, said. “Instead their actions may well further erode trust in current negotiations, which must deliver a global climate deal in 2015.”

Govt confirms partial Air New Zealand sale The New Zealand government confirmed yesterday the partial sell-off of national flag carrier Air New Zealand to local and offshore institutions. It did not say how much it expected to raise from the long-expected sale but market analysts have previously forecast about NZ$400 million (US$330 million). The government will reduce its holding from 73 percent to 53 percent in the sale which will commence today, Finance Minister Bill English said. “We expect the transaction to be completed by Tuesday evening,” added Mr English, without saying who might buy the shares.

S.Korean steelmaker POSCO CEO resigns South Korean steelmaker POSCO said chief executive Chung Joonyang is leaving, the second major management change in the country’s private sector in less than a month. KT Corp, South Korea’s biggest fixedline operator, announced last week its CEO, Lee Suk-chae, was resigning after prosecutors raided its headquarters amid a widening corruption probe. POSCO and KT Corp have often seen CEOs quit before their terms expire when a new government takes office because the companies were once state-owned and the government retains a large amount of influence over their operations.

Exports turned around, rising 1.7 percent in the third quarter

Malaysian growth quickens before fiscal tightening Driven by resilient domestic demand and recovery in exports

M

alaysia’s economy expanded at the fastest pace in three quarters as exports recovered and domestic demand held up before Prime Minister Najib Razak raised fuel prices in September. Gross domestic product rose 5 percent last quarter from a year earlier, after gaining a revised 4.4 percent in the second quarter, the central bank said in a statement. Exports rose in the three months through September after declining in the first half of the year, as the nation benefited from a global recovery the central bank described as “moderate” on November 7. Bank Negara Malaysia held its benchmark interest rate at 3 percent for a 15th meeting this month to support growth, predicting domestic demand will ease as the government restrains public spending. “We’ve seen some improvement in the export numbers and that’s really a bigger driver of growth,” Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc, said before the report. In the coming months, “external demand is not going to be that strong. Also, domestic demand seems to be slowing because of fiscal consolidation and the government policy to try and reduce investment spending,” he said. Malaysia’s current-account surplus widened to 9.8 billion ringgit (US$3.1 billion) in the third quarter from 2.6 billion ringgit in

the preceding three months. Mr Najib has cut fuel and sugar subsidies in recent months to contain the budget deficit and shore up the current account after Fitch Ratings lowered Malaysia’s credit outlook to negative in July. Inflation accelerated to a 20-month high of 2.6 percent in September, raising the risk that higher living costs will damp consumer spending. Central bank Governor Zeti Akhtar Aziz said in October that over the next six months to a year, she would focus “mostly on growth” rather than inflation, because global expansion will remain “subdued.”

2014 forecast Southeast Asia’s No. 3 economy may expand 5 percent to 5.5 percent in 2014 from an estimated 4.5 percent to 5 percent this year, the government said last month. “For the Malaysian economy, the gradual recovery in the external sector will support growth,” the central bank said in a statement. “Domestic demand from the private sector will remain supportive of economic activity amid the continued consolidation of the public sector. The economy is therefore expected to remain on its steady growth trajectory.” Services rose 5.9 percent in the July-to-September period from a year earlier after climbing 5 percent in the second quarter, the report showed.

Construction gained 10.1 percent last quarter, after a 9.9 percent increase the previous period. Manufacturing grew 4.2 percent from 3.5 percent. Exports of goods and services climbed 1.7 percent in the third quarter from a year earlier, after falling 5.2 percent in the second quarter, according to the report. Private consumption increased 8.2 percent, accelerating from 7.2 percent even as public consumption growth slowed. “We need that external pickup to keep growth up,” Edward Lee, a Singapore-based economist at Standard Chartered Plc, said before the report. “On the external demand side we do expect further improvement.” Bloomberg News/Reuters

KEY POINTS Q3 growth tops forecast at 5 pct Current account surplus widens Domestic demand seen as key drivers

Thai unrest seen curbing recovery T hailand’s biggest bout of political unrest under the current government has increased economic risks, threatening to crimp a rebound from recession as protests damp local consumption and investment while weakening the currency. Gross domestic product will rise an average 3.6 percent this year, according to the median estimate in a Bloomberg survey of 26 economists, lower than a forecast of 4 percent in August. GDP probably expanded last quarter from the previous three months after contracting in the first half of the year, a separate survey showed ahead of a report due today. Prime Minister Yingluck

Shinawatra has struggled to contain weeks of anti-government protests against a bill that would have provided amnesty for political offenses stretching back to the nation’s 2006 coup, allowing her exiled brother Thaksin’s return. Concern that the lower house will reconsider the bill after a rejection this week by the Senate has hurt investor confidence. “The current political environment is a headwind to an already weak growth outlook,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc. “This will not only hurt sentiment but will also have a direct negative impact on real economic activity. The longer this persists, the higher

the downside risks to growth.” The baht is among the worst performers in the last three months of 11 Asian currencies tracked by Bloomberg. The currency will fall to 32 per dollar by December 31, according to Australia & New Zealand Banking Group Ltd, the most accurate forecaster over the last four quarters. Southeast Asia’s second-biggest economy grew 2.8 percent in the second quarter from a year earlier after an expansion of 5.4 percent in the preceding period. Third-quarter growth was probably 2.9 percent from a year earlier and 1.5 percent from three months earlier, according to two Bloomberg surveys. Bloomberg News


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November 18, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 58.4

90.30

58.3

90.15 27.2

58.2

90.00

58.1

average 58.135

Max 56.7

Min 57.9

average 56.372

57.9

Last 58.35

Min 55.5

Max 90.3

average 89.872

PRICE 93.84

WTI CRUDE FUTURE Dec13

average 27.156

Min 27

Last 27.25

27.0

56.4

24.6

29.6

56.1

24.4

29.4

55.8

24.2

29.2

Max 24.8

average 24.325

DAY %

YTD %

(H) 52W

Min 24.1

Last 24.15

(L) 52W

0.085334907

0.503373675

109.6999969

85.51999664

108.5

0.203176949

3.897347506

113.3099976

96.13999939

GASOLINE RBOB FUT Dec13

265.77

-0.968811715

4.452916208

290.3199911

241.5999889

GAS OIL FUT (ICE) Dec13

911.25

0.275103164

1.081530782

973

837

3.66

1.525658807

-7.294832827

4.744000435

3.378999949

293.89

0.283218454

-1.508093435

321.1599827

276.4999866

1290.18

0.5111

-22.4866

1754.46

1180.57

NATURAL GAS FUTR Dec13 NY Harb ULSD Fut Dec13 Gold Spot $/Oz Silver Spot $/Oz Platinum Spot $/Oz

20.805

0.0794

-30.9034

34.3838

18.2208

1440.57

-0.5852

-5.0852

1742.8

1294.18

733

-0.5711

4.7652

786.5

626.95

LME ALUMINUM 3MO ($)

1791

0

-13.60347323

2184

1758

LME COPPER 3MO ($)

7010

0.257437071

-11.61265919

8346

6602

LME ZINC

1899

0.689289502

-8.701923077

2230

1811.75

Palladium Spot $/Oz

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan14

13830

1.318681319

-18.93317702

18770

13205

15.765

-0.473484848

2.270515731

16.80999947

14.91500092

430.5

-1.374570447

-29.3683347

654.75

426.75

WHEAT FUTURE(CBT) Mar14

654.5

-0.11446013

-21.31048993

904.75

647.75

SOYBEAN FUTURE Jan14

1280.5

-2.512371526

-2.17723453

1406

1169

COFFEE 'C' FUTURE Mar14

109.1

3.26549929

-31.96133458

173.25

104.1499939

SUGAR #11 (WORLD) Mar14

17.55

-0.510204082

-14.72303207

20.71999931

16.69999886

Mar14

COTTON NO.2 FUTR Mar14

78.2

0.955331784

-1.523737565

90.61000061

76.58999634

World Stock Markets - Indices NAME

Max 27.25

29.8

BRENT CRUDE FUTR Jan14

CORN FUTURE

89.70

24.0

Max 29.8

average 29.506

Min 29.15

Last 29.35

29.0

Currency Exchange Rates

NAME

METALS

Last 89.85

24.8

Commodities ENERGY

Min 89.75

56.7

55.5

Last 56.7

27.1

89.85

58.0 Max 58.35

27.3

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

15961.7

0.5384153

21.80655

15962.98047

12471.49

NASDAQ COMPOSITE INDEX

US

3985.968

0.3329692

32.00695

3985.968

2810.8

13.49026

6875.62

5605.589844

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9368 1.6118 0.9148 1.3496 100.19 7.9862 7.7539 6.0925 63.12 31.59 1.2467 29.591 43.66 11623 93.857 1.2347 0.83742 8.196 10.7407 135.21 1.03

0.8288 0.6997 0.3607 0.4989 -0.1597 0 -0.0026 0.0016 0.3169 -0.0158 0.1524 -0.0101 -0.229 -0.6711 -0.9717 -0.1498 0.1923 0.0878 -0.1397 -0.6508 0

-9.7321 -0.3586 0.0656 2.3199 -14.0633 -0.0376 -0.0426 2.2667 -12.8723 -3.1972 -2.0294 -1.8857 -6.0811 -15.7446 -4.8265 -2.2046 -2.6271 0.2623 -1.958 -16.0047 -0.0097

1.0599 1.6381 0.9839 1.3832 103.74 8.0111 7.7664 6.2566 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 11.0434 135.51 1.032

0.8848 1.4814 0.8891 1.273 81.09 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9590 83.979 1.20302 0.80059 7.8281 10.1705 103.26 1.0289

Macau Related Stocks NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

ARISTOCRAT LEISU

4.73

0

50.15873

5.12

2.6

1044557

CROWN LTD

16.7

1.581509

56.51359

17.38

9.79

2265092

AMAX HOLDINGS LT

1.12

1.818182

-20

1.72

0.75

1430225

BOC HONG KONG HO

25.4

0.1972387

5.394189

28

22.85

10813170

CENTURY LEGEND

0.46

-4.166667

73.58492

0.56

0.24

312000

CHEUK NANG HLDGS

7.11

0.1408451

18.69783

7.28

4.13

148051

CHINA OVERSEAS

23.5

2.844639

1.7316

25.6

17.7

22796003

CHINESE ESTATES

21.9

2.816901

94.74373

22.25

9.698

218000

CHOW TAI FOOK JE

12.88

2.711324

3.536981

13.4

7.44

8269600

EMPEROR ENTERTAI

4.04

-0.9803922

113.7566

4.66

1.6

982000

FUTURE BRIGHT

3.22

0

165.6708

3.41

1.103

1086000

58.35

1.478261

92.257

63.75

27

7323769

HANG SENG BK

125

0.3210273

5.307501

132.8

110.6

1001485

6950.53

HOPEWELL HLDGS

25.9

0.5825243

-22.10526

35.3

23.2

365674

15942.6

8898.33

HSBC HLDGS PLC

85.6

0.5875441

5.289049

90.7

73.9

6538417

1.656141

23944.74

19426.35938

HUTCHISON TELE H

3.14

0.6410256

-11.79775

4.66

3.12

5700000

2.006204

-6.826052

2791.303

2023.171

LUK FOOK HLDGS I

29.95

8.909091

22.7459

30.05

16.88

7703700

MELCO INTL DEVEL

26.2

1.945525

190.788

26.45

7.58

5520000

8177.12

0.5188748

6.203261

8476.63

7061.87

MGM CHINA HOLDIN

27.25

1.113173

105.2224

30

12.426

2142734

2005.64

1.935392

0.4301327

2063.28

1770.53

MIDLAND HOLDINGS

3.22

0

-12.97297

4.29

2.68

252000

NEPTUNE GROUP

0.29

-1.694915

90.78948

0.4

0.131

168620000

NEW WORLD DEV

10.68

1.328273

-11.14809

15.12

9.98

9891893

SANDS CHINA LTD

56.7

2.34657

67.01031

60.5

30.35

13478376

FTSE 100 INDEX

GB

6693.44

0.409683

DAX INDEX

GE

9168.69

0.2079859

20.44431

9193.980469

NIKKEI 225

JN

15165.92

1.946101

45.89377

HANG SENG INDEX

HK

23032.15

1.691013

CSI 300 INDEX

CH

2350.734

TAIWAN TAIEX INDEX

TA

KOSPI INDEX

SK

GALAXY ENTERTAIN

S&P/ASX 200 INDEX

AU

5401.671

0.8634602

16.1912

5457.3

4334.3

JAKARTA COMPOSITE INDEX

ID

4335.448

-0.7309432

0.434621

5251.296

3837.735

FTSE Bursa Malaysia KLCI

MA

1789.87

0.3177895

5.975313

1826.22

1590.67

SHUN HO RESOURCE

1.62

0

15.71429

1.92

1.22

0

NZX ALL INDEX

NZ

1036.091

-0.2804606

17.46357

1048.998

858.253

SHUN TAK HOLDING

4.46

1.133787

6.443913

4.8

3.18

2353754

PHILIPPINES ALL SHARE IX

PH

3869

0.1102273

4.596403

4571.4

3440.12

SJM HOLDINGS LTD

24.15

-1.428571

36.07429

28

16.762

6424380

8.98

0.3351955

-36.22159

15

8.83

2966212 25304042

Euromoney Dragon 300 Index Sin

SI

619.44

0.68

-0.27

NA

NA

STOCK EXCH OF THAI INDEX

TH

1420.66

0.3510656

2.064039

1649.77

1260.08

HO CHI MINH STOCK INDEX

VN

501.34

0.7010144

21.17564

533.15

Laos Composite Index

LO

1283.94

0.5568478

5.694075

1455.82

SMARTONE TELECOM WYNN MACAU LTD

29.35

0

40.09546

32.6

19

ASIA ENTERTAINME

N/A

N/A

N/A

N/A

N/A

0

374.15

BALLY TECHNOLOGI

72.52

-0.1101928

62.20085

78.03

43.57

231679

1196.44

BOC HONG KONG HO

3.24

-1.818182

5.537462

3.6

2.99

26800

GALAXY ENTERTAIN

7.57

1.107238

90.6801

8.11

3.471

6100

17.84

0.3374578

25.89979

21.2

12.63

2870880

INTL GAME TECH JONES LANG LASAL

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

96

0.5130353

14.3674

101.46

75.53

218901

LAS VEGAS SANDS

71.22

-0.2241524

54.28943

73.49

40.3151

4340917

MELCO CROWN-ADR

34.88

0.9113265

107.1259

37

13.95

2471996

MGM CHINA HOLDIN

3.54

2.608696

102.252

3.88

1.703

2600

MGM RESORTS INTE

19.45

-0.5623722

67.09622

20.98

9.47

5875879

SHUFFLE MASTER

23.16

-0.08628128

59.72414

23.25

12.98

378846

3.14

0

37.86345

3.6

2.1494

12300

166.39

-1.258086

47.91537

173.38

104.92

1412047

SJM HOLDINGS LTD WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

38.6

1.445466

16597054

CHINA UNICOM HON

11.88

1.538462

14017408

ALUMINUM CORP-H

2.82

2.545455

19967960

CITIC PACIFIC

10.64

0.9487666

4771864

SANDS CHINA LTD

BANK OF CHINA-H

3.59

3.16092

467585217

SINO LAND CO

5.5

2.996255

34781188

SUN HUNG KAI PRO

33.75

0.7462687

1258733

BELLE INTERNATIO

9.69

2.866242

29866352

BOC HONG KONG HO

25.4

0.1972387

10813170

15

0.536193

2617338

BANK OF COMMUN-H BANK EAST ASIA

CATHAY PAC AIR

121.1

1.169591

2991978

CHINA COAL ENE-H

CHEUNG KONG

4.79

2.7897

52622522

CHINA CONST BA-H

5.97

2.226027

343680230

CHINA LIFE INS-H

21.25

3.15534

54062571

CHINA MERCHANT

28.45

4.98155

6595106

CHINA MOBILE

NAME

PRICE

DAY %

61.75

0.4065041

3563012

56.7

2.34657

13478376

10.68

1.136364

3585976

101.5

0.9950249

5583427

SWIRE PACIFIC-A

89.85

0.5033557

932058

TENCENT HOLDINGS

419.6

2.142162

4791436

POWER ASSETS HOL

CLP HLDGS LTD

61.45

0.7377049

2065538

CNOOC LTD

15.28

2.00267

51732840

COSCO PAC LTD

11.24

3.119266

4118371

ESPRIT HLDGS

16.86

0.3571429

10831466

HANG LUNG PROPER

25.4

0.7936508

3044964

TINGYI HLDG CO

HANG SENG BK

125

0.3210273

1001485

WANT WANT CHINA

45.45

0.3311258

3602786

WHARF HLDG

92.4

3.471445

1820747

HONG KG CHINA GS

17.96

0.4474273

6439080

HONG KONG EXCHNG

HENDERSON LAND D HENGAN INTL

125.1

1.377634

2812250

HSBC HLDGS PLC

85.6

0.5875441

6538417

81

1.060512

13247566

HUTCHISON WHAMPO

94.7

0.6376196

3087085

23.5

2.844639

22796003

IND & COMM BK-H

5.33

2.697495

381420764

CHINA PETROLEU-H

6.5

3.174603

125124749

LI & FUNG LTD

10.9

4.206501

41540722

CHINA RES ENTERP

26.85

-0.5555556

3093318

MTR CORP

29.65

1.367521

CHINA OVERSEAS

NAME

MOVERS

23313.61

2905184

22839.82

52W (H) 23944.74

21.4

2.63789

5599131

NEW WORLD DEV

10.68

1.328273

9891893

18.8

1.731602

6290905

PETROCHINA CO-H

8.83

2.793946

110592846

CHINA SHENHUA-H

24.5

3.157895

34055459

PING AN INSURA-H

63.5

3.673469

22061628

1.395349

6325284

-0.1841621

10426562

65.2

2.435192

3462713

2

0 23050

LOW

CHINA RES POWER

21.8 10.84

INDEX 23032.15 HIGH

CHINA RES LAND

48

VOLUME

22460

(L) 19426.35938 13-November

15-November


15 15

November 18, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Taipei Times President Ma Ying Jeou was caught by surprise last week when Gambian President Yahya Jammeh abruptly announced that the nation was severing ties with Taiwan. However, the government was quick to state that China was not behind the move, as it faced a barrage of questions about its much-touted “flexible diplomacy”. “This was an isolated case. As things stand now, there seems to be no relation between the incident and mainland China,” Premier Jiang Yi Huah said at a question-and-answer session at the legislature.

Korea Herald Leaders from business and political circles in South Korea agreed to set up a consultative body to deal with pending economic issues including the passage of bills aimed at boosting the sagging economy. It is the first time that chiefs of the ruling and opposition parties have met leaders of the nation’s five business organisations to discuss the passage of economic bills. Business leaders urged the political party leaders to move forward in passing the pending business-friendly revision bills aimed at boosting the sluggish economy.

Asahi Shimbun Tokyo Electric Power Co’s main creditor banks agreed to provide 500 billion yen (US$5 billion) in loans after the utility forecast a fiscal 2014 profit based on assumptions it can restart two nuclear reactors. The creditors will extend 300 billion yen in new loans to the operator of the crippled Fukushima No. 1 nuclear plant in addition to 200 billion yen in refinancing at the end of this year, sources in both TEPCO and the banks said. Tepco, which posted losses in fiscal 2011 and 2012, is expected to return to the black in fiscal 2013, thanks partly to cost reductions and an increase in electricity rates.

Inquirer Business The Philippine economy may slow down in the fourth quarter because of the devastation caused by typhoon Haiyan. The National Economic and Development Authority said that GDP growth could settle at only 4.1 percent in the fourth quarter, citing not only the loss of lives but also the destruction of property mostly in central Philippines. The agency now expects GDP growth for the full year to settle at a range of 6.5 percent and 7 percent, slower than the earlier forecast of 7.3 percent.

China’s new reforms in theory and practice

William H. Overholt

Senior fellow at the Fung Global Institute and the Harvard University Asia Centre

O

n November 12, the Third Plenary of the 18th Central Committee of the Chinese Communist Party (CCP) announced a major turn to market-oriented policies: interest-rate and currency liberalisation, reform of banks and state enterprises, clearer land ownership for rural inhabitants, and a better deal for urban migrants. Behind this landmark decision was a potential crisis. China’s success has been driven by cheap exports based on cheap labour, infrastructure built by state enterprises with low-cost bank funding, and government budgets funded by land sales. But labour is no longer cheap, road construction to connect major cities has given way to building large shopping malls in small towns, and land sales based on rezoning are reaching both economic limits and the limits of villagers’ tolerance. Cheap money with limited investment outlets now risks fuelling property bubbles and industrial overcapacity. Without fundamental change, China faces slower economic growth, inadequate job creation and innovation, and popping bubbles. The solution is a rapid shift from China’s export-based growth model to one based on domestic demand; from infrastructure to consumption; from the dominance of large state-owned enterprises (SOEs) to that of small and medium-size private enterprises; from industry to services; and, more broadly, from bureaucratic control to market control. All successful Asian countries have made this shift; South Korea and Taiwan are models. But rapid change entails immense pain. SOEs will lose their lowinterest loans, subsidised land, monopoly protection, and privileged housing. Party and state bureaucracies will lose power (and income). Local governments are particularly desperate. They have huge debts, which they amortise by rezoning and selling land. Already squeezed by exorbitant property prices and popular resistance to land takings, they now face higher interest rates, property taxes, villagers empowered by stronger rights, and expensive new requirements to provide social services to migrants. The desperation of local potentates and SOE executives has created powerful resistance to reform.

Reform happening At a plenary reportedly marked by acrimony, China’s

political leaders sided with reform. As one economic planner said, when asked about resistance before the decisive meeting, “In the end, all of our leaders understand numbers. The implications of the numbers are clear.” The Third Plenum’s announcement of its decisions took the form of a statement of broad principles, leaving many observers concerned by the lack of detail. But the CCP’s role is to set the direction of policy; executing the Party’s decisions is the government’s job. And the Plenum did establish a toplevel group to coordinate and enforce implementation of its decisions. While implementation will be a long struggle, with occasionally fierce resistance, key reforms are already underway.

The desperation of local potentates and SOE executives has created powerful resistance to reform

The current 12th Five-Year Plan calls for annual wage increases to average at least 13.4 percent; this year, wages are rising at an average rate of 18 percent, which will squeeze out industries characterised by obsolescence or overcapacity. Moreover, the government’s anti-corruption campaign is targeting some of the most

powerful industry groups, such as the petroleum faction, thereby weakening their resistance to reform. Most important, economic outcomes are becoming increasingly aligned with the authorities’ goals. Services already account for more output and employment than industry – the Internet company Alibaba, for example, is empowering both consumers and smaller companies on a previously unimaginable scale – and recent growth has been driven by domestic demand rather than net exports.

Political risk Reform is not just a plan; it is already happening. Economic openings to Central Asia and to ASEAN (specifically to Vietnam) are well underway, and reform will include further international opening. The Third Plenum’s decisions follow the launch in September of the Shanghai Free-Trade Zone, which will open new sectors to foreign investment and permit largely market-based financial transactions and capital flows. The liberalisation of capital flows is intended to be a gradual national policy, channelled through trusted institutions in Shanghai. For trade in goods, the new free-trade zone is intended to compete directly with Singapore and Hong Kong. China fears dependence on those entrepôts in the event of conflict. For foreign investors, the policy will be to expand greatly the range of opportunities while curtailing foreign control; foreign companies, for example, may hold minority stakes in the telecoms sector, while dominant foreign companies like Monsanto will face constraints. President Xi Jinping faces the politically risky task of pushing the CCP’s reform agenda

against fierce opposition while the economy slows. By emphasising Party control – through a crackdown on SOEs, government opponents, and critics in the media and academia – Xi seeks to maximise his ability to impose economic reforms while minimising the risk of a challenge from conservative forces. Above all, he is determined to avoid the fate of previous Chinese leaders like Hu Yaobang and Zhao Ziyang, who lost their jobs after a critical mass of their opponents came to believe that economic and political reform jeopardised Party control. So, at least for now, China will focus on another great wave of economic reform, whereas political reform will mostly be limited to reorganisation of government agencies to boost efficiency and strengthen efforts to reduce corruption. (There have been some steps toward reform, including a decision to remove judges from local political control.) And yet China will find it increasingly difficult to postpone stronger measures that would appease popular demands for fairness, including the establishment of an independent judiciary, which could prove to be no less an imperative than structural economic reforms. Likewise, the leaders must either accept much of the information revolution’s swamping of controls or engage in far more costly repression. Hopes for political reform rest on the possibility that Xi’s second term will see the accession to top leadership of reformers like Politburo member Wang Yang and Vice President Li Yuanchao. For now, however, China will focus on another great wave of economic reform. © Project Syndicate


16 16

November 18, 2013 April 19, 2013

Closing JPMorgan agrees US$4.5 bln settlement Grand Prix revenue beats expectations Investment bank JPMorgan Chase & Co has agreed to pay US$4.5 billion to investors who lost money on mortgage-related securities during the financial crisis. The settlement is with 21 major institutional investors. The securities in question were issued between 2005 and 2008 by JP Morgan and Bear Stearns – a bank which it took over during the financial crisis. Mortgage-related investments were a major factor in the crisis, which began in 2007 with the collapse of the U.S. housing market. Last month JP Morgan agreed a separate, preliminary US$13bn deal with the U.S. government over mortgage securities.

The 60th edition of the Macau Grand Prix posted record-breaking revenue of 65 million patacas (US$8.1 million), above expectations, said the head of the organising committee João Manuel Costa Antunes yesterday. Quoted by Radio Macau, Mr Costa Antunes said ticket sales rose “about 50 percent” to 15 million patacas. The revenue forecast made last month was of 50 million patacas, which would be 11 million patacas more than last year’s record. Tickets were sold out for yesterday’s races, with 30,000 people witnessing Alex Lynn’s victory in the main event, the Formula 3 race, said Mr Costa Antunes.

Aquino visits typhoon area as damage costs jump Cost of the damage now estimated at US$236 million

P

It was the first time the Commission has seen budgets before they are submitted to national parliaments

EU warns Spain, Italy on budgets Commission says budgets may not comply with new debt and deficit rules

T

he European Union confronted the euro area’s biggest economies over their spending plans for next year as austerity demands restrain the bloc’s recovery from the longest recession in its history. The EU said that Germany, Europe’s largest economy, has made “no progress” in following recommendations to spur domestic demand, that Spain’s budget risked missing deficit targets and that Italy’s 2014 plan was in danger of breaching debt-reduction rules. The budget plans of euro-area countries “still do not pay sufficient attention” to fiscal consolidation, EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels. “Continued progress with sound public finances should be supported by growth-friendly structural measures.” The assessments reveal EU officials’ determination to ensure that governments do not become complacent following forecasts that the euro-area economy will grow next year for the first time since 2011. While the bloc came out of a recession with a 0.3 percent expansion in the second quarter, growth slowed

to 0.1 percent in the three months through September, with France’s gross domestic product shrinking and Germany’s economy slowing, data showed last week. The EU is “turning up the heat” because it is worried about the pace of reform around the euro area, and particulary in Italy and France, said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. While the German budget meets the debt and deficit rules, the EU reiterated its concern that the nation’s trade surplus is hindering other euroarea economies. “Our recommendation obviously to Germany is please implement or decide on these kind of economic reforms that would further reinforce domestic demand” and boost public and private investment, Mr Rehn said. “We have recommended to Germany to address this for the sake of the Germans themselves and the euro zone in its entirety,” he said.

Deficit target The warnings represent the first use of new powers that governments have given the European Commission

to review nations’ budget plans before they go to national parliaments. While countries are under no obligation to heed the advice, the opinions are intended to warn governments to remain committed to policies to cut debt and deficits as the euro area tries to shake off the legacy of the turmoil. With unemployment at a record 12.2 percent and inflation at its lowest level in four years, the EU is eager that governments do not waver in their efforts to boost growth. Euroarea finance ministers will meet in Brussels to discuss the commission opinions on November 22. The commission said that, while Spain had taken effective action in reducing its deficit in 2013, the draft budget for next year is “at risk of noncompliance” with EU rules “as the headline deficit target may be missed and the recommended improvement in the structural balance is currently not expected to be delivered”. There is “a risk that the adjustment envisaged in the budgetary plan may fall short,” Mr Rehn told reporters. “This risk arose from somewhat favourable growth assumptions.” The Spanish government, led by Prime Minister Mariano Rajoy, is targeting a deficit of 5.8 percent of GDP next year. The commission forecasts it to be 6.5 percent this year, down from 10.6 percent in 2012, which was the widest in the EU. The commission said the draft budget for Italy, which has the second-highest debt level in the euro area after Greece, was at risk of breaching EU rules. “In particular, the debt-reduction benchmark in 2014 is not respected,” it said. Bloomberg News

hilippine President Benigno Aquino faced survivors of Typhoon Haiyan yesterday as progress in reaching more remote parts of the hardest-hit region led to a surge in the estimate of the damage caused by the deadly storm. Mr Aquino, in his second visit to the region in the central Philippines since Haiyan slammed into the country on November 8, toured hard-hit Guiuan and Tacloban where he met with local officials and some of those left homeless by the storm. Thousands of survivors are seeking to flee the area, with many complaining food and water remain scarce in remote reaches. “They must be prepared, because it’s not a normal typhoon, they have to put the relief in the heart of the storm area so that it is very convenient for them to distribute the relief,” said Pelagio Bustillo whose family lives in Guiuan. “The relief was in Manila, and Manila was not affected.” The government now estimates more than 3.9 million people have been displaced by the storm, twice the number published on Saturday morning. The number of damaged homes surged to 543,127, almost twice the initial estimate. About half of those houses were destroyed, the bulletin said. The cost of the damage rose 9.3 percent to 10.3 billion pesos (US$236 million.) “Can we rise again? We can,” Mr Aquino told local officials in Guiuan town. “If everyone in the affected areas has the initiative, the process will be faster.” Mr Aquino, who presides over an economy that has matched China’s pace as the fastest growing in the region for two quarters, has seen his popularity suffer over the government’s response to Haiyan. Even with Philippine and foreign relief supplies pouring into the area, efforts to deliver the aid remain hampered by gridlock and damaged roads, with large swaths of territory still suffering power outages and a lack of running water. The typhoon killed at least 4,460 people, making it one of the deadliest in Philippine history, according to the United Nations. The storm left 12,544 people injured and 1,186 missing, according to the National Disaster Risk Reduction and Management Council. Bloomberg News


Macau Business Daily, November 18, 2013