Macau Business Daily, April 24, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 525 Thursday April 24, 2014

Billions to Hengqin

Year III

The 33 projects recommended by the Macau government to Hengqin Island authorities - from a list of 87 - comprise a total value of more

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Visionary request www.macaubusinessdaily.com

than 140 billion yuan (181.45 billion patacas).

The more “mature” projects will be picked first and confirmed by the first half of this year

Requesting more land and water around Macau is a “visionary” way of resolving the land shortage conundrum, says Li Gang, director of the PRC Liaison Office in Macau Page 3

MICE bites into subsidy

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HSI - Movers April 23

Outdated baskets continue to underestimate the burden of rent on family pockets. Price increases for lowincome families went up 10 percent faster than those of the better off. And that was just in the first quarter

Name

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Local trade chambers received substantially more government subsidy in the first quarter this year. The money has mainly been allocated to their participation in MICE events Page 5

Industry off the pace

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Profits plummet Chow Tai Fook customers in Macau and Hong Kong are buying much less gold and jewellery than expected, and in only two months the biggest jewellery chain in the territory has lost 30 percent of its value on the stock market

%Day

China Resources Po

2.53

Sands China Ltd

2.45

Galaxy Entertainm

1.54

China Resources Ent

1.37

Tencent Holdings Ltd

0.86

Belle International

-1.99

China Shenhua Ener

-2.30

China Mobile Ltd

-2.57

China Overseas Land

-3.54

China Unicom Hong K

-4.94

Source: Bloomberg

I SSN 2226-8294

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Data isn’t smiling on China this year. Industry activity shrank for the fourth straight month although the decreasing pace is moderate Page 10

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April 24, 2014

Macau

Outdated baskets Surveying the issues masking real inflation opinion

José I. Duarte Economist

Inflation reached a two-year record of 6.36 percent in March but the real figure could be higher as authorities continue to underestimate the share of rent in household expenditure.

In the first quarter, price increases for low-income families went up 10 percent faster than those of the better off, official data shows Alex Lee

alex.lee@macaubusinessdaily.com

T

he Statistics and Census Department has just released a new Household Budget Survey. This document is the outcome of a laborious process and an important one to gauge the evolution of residents’ income and consumption over time. But saying that it is important does not mean that all its findings are unquestionable facts or that the collection of figures thereof somehow provide a full representation of reality.

The danger here is to believe that figures are facts and that many figures put together are a substitute for analysis and reasoning.

Reading HBS must be done critically, the figures must be tested against other sources and its conclusions should be judged against other possible explanations. As a matter of principle, therefore, one should be wary of swift conclusions.

As measured by its immediate impact on the media, two questions come to the fore: first, the increasing role of subsidies in income; secondly, the claim that income inequality is decreasing. Here are some preliminary thoughts on these topics.

Indeed, the amount of monetary transfers has clearly increased. The central role of subsidies, of one kind or another, in social regulation cannot be ignored. The ‘subsidy’ has become the primary policy, in lieu of all others. If anything, and this is my first reservation about the results, it is likely that the survey underestimates the contribution of direct (not to mention indirect) subsidies to the disposable income of residents. But government giveaways do not come out of thin air; governments can only provide here what they have taken there. If anything, the figures provided by the HBS should be a reminder that it is high time there is a serious reflection about the tax system and the uses and misuses of public money.

But why worry? The Gini index is going down; therefore we must be in the process of becoming a more egalitarian society. Well, not so fast! To reduce complex realities to single figures has always been a contentious affair for the social sciences. In this case, no matter how convenient the usage of a unique number may be its imperfections alone mean that prudence should prevail. Without going into the technical details of the matter, suffice it to say that different distributions of income may provide similar Gini indices; and that the same wealth distribution data may lead to different indices, depending on the way the data from individual households is combined. The Gini index alone cannot and should not be used to make definitive conclusions about wealth asymmetries and their evolution.

And a short sentence in the press release alone should ring other bells. There it is stated: “As regard property income, rising rentals spurred rent receipts from property leasing by 75.4% in real terms”. At the same time, we are told that the average income rose by 34 percent. Some basic arithmetic is called for here. If some four-fifths of the households live in premises they own then ignoring those that are not being used at most about 20 percent of properties are up for rental. The owners of these properties are likely to be a figure well below 20 percent of total households, as some, possibly many, of them will own several properties. Their incomes will therefore be rising faster than the average and they are likely to be found already among the top income earners. That is, the income at the top is rising faster than at the bottom. Unless we are to believe that the owners of most leased properties are among the poorer sections of society, it is difficult to square these findings with a decrease in income inequality.

M

acau inflation in March reached its highest value in almost two years but the real price hike in the territory could be much higher than official figures reveal as authorities continue to underestimate the burden of rent on family pockets and use an outdated basket.

Last month, prices climbed 6.36 per cent compared to one year ago and 0.58 per cent relative to February, the statistics and census office revealed Tuesday.

The 6.36 year-on-year jump was also the highest value recorded since May 2012, almost two years ago.

Over the last 12 months, there were price gains in eight of them, with only four drops.

If the upward trend is a given for inflation, a deeper look at the data reveals another story. First, the statistics bureau is using an outdated basket to calculate inflation, with a different consumption pattern than the reality of the territory.

The main point is the rental value, an item whose prices are increasing the most and at a rate two to four times more than others like food, education or transport. In March, for example, the rents (year-on-year) climbed 12.37 percent versus a 6 percent hike in food and 2 percent hike in transport costs, official data shows.

The basket used to calculate the inflation today suggests that families in Macau spend an average of 22 percent of their income in rental, a figure that is lower than the real one. According to most recent data

from the same statistics office – the household budget survey relative to 2013 – Macau households spend 25.7 percent in rent, almost 20 percent higher.

Another factor affecting the miscalculation of price variations is the overestimation of expenditure on food. For the inflation basket, local residents spend an average of 32.78 percent on food. But according to the most recent household budget survey their expenses reach 25.7 percent, a much lower figure at 30 percent less.

Using a smaller share, the effect of property price jumps in inflation is diminished. The same happens with the strategy of magnifying the share of food expenses on total consumption, an item whose price hike is running much slower – in fact, at half the speed – than rents.

Inflation approaching 7 percent for low income families The main result is that price appreciation in Macau is probably higher that the official values, which are already through the roof. At an almost 7 percent range, inflation in Macau is one of the highest in all Asia, double that of Hong Kong (3.9 percent) and triple that of China (2 percent).

The statistics bureau justified the new surge in inflation in March with more charges for eating out, rising rentals and dearer vegetable prices.

But one of the most worrying data came from the inflation addressing low income families in Macau, with monthly expenses between 6,000

Rents and food are leading the price surge, accounting for half of household expenses in Macau

patacas and 19,000 patacas per month. According to the March report, inflation for these households reached 6.95 percent, above the general index (6.36 percent) and for residents with an income between 19,000 patacas and 35,000 patacas (6.24 percent).

The less resourced families are suffering more than others because their share of expenses for housing and food, the items whose prices are going up the most by a large margin, is usually bigger than those who have more income.

In the first quarter of 2014, for example, costs for families with an income of less than 19,000 patacas per month expanded 6.77 percent compared to the same period last year, a rate higher than the 6.01 percent recorded for 19,000 patacaplus households. Since the beginning of the year, prices for poorer families have been increasing 10 percent faster than for the richer ones.

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April 24, 2014

Macau

Macau sinks over RMB140bln into Hengqin Investments from the 33 Macau-backed projects in the 4.5 square kilometre zone in Hengqin exceed 140 billion yuan (181.45 billion patacas) Tony Lai

tony.lai@macaubusinessdaily.com

S

ome of the investments from Macau investors are valued at tens of billions of yuan in a specific zone in Hengqin Island that can be confirmed by endJune, the administration there said.

The administration will also try to lower the threshold for Macau investors, which is deemed “high” by the companies here and Chief Executive Fernando Chui Sai On. Officials from the Administrative Committee of Hengqin met with representatives of the recommended Macau projects to develop the 4.5 square kilometre zone in Hengqin on Tuesday to brief the latter about relevant procedures.

The Macau Government announced earlier this month that it had recommended to Hengqin 33 of 87 Macau projects to invest in a zone reserved exclusively for Macau investors.

Niu Jing, director-general of the Hengqin committee, revealed for the first time in Tuesday’s meeting that the

total investment amount of the 33 projects exceeds 140 billion yuan (181.45 billion patacas), the semi-official agency China News Service (CNS) reported.

The administration will assign officials to follow up on each project and provide “one-stop services” for the Macau entrepreneurs, the agency quoted Mr Niu as

Hengqin just the tonic for Macau pharmacies

S

even local pharmacies have expressed interest in setting up factories and laboratories in the Guangdong-Macau Traditional Chinese Medicine Technology Industrial Park.

According to Macau Daily News, Wang Yan, deputy director of the China Science and Technology Exchange Centre, is quoted as saying that this would promote the local development of Chinese medicine training. In addition, trained personnel in Macau can work in the park following the completion of the project in two to three years. Ms. Wang also said she hopes to promote the Chinese medicine industry to other Portuguese-speaking countries through Macau.

saying.

He stressed that they considered the cooperation with Macau as the “first task” of the works they would handle this year.

The Hengqin administration will hold separate indepth talks with each of the 33 project investors starting next week, the agency said. “[The administration]

will prioritise in picking up the more mature projects to provide land and facilities first, ensuring a first batch of such projects in the zone can be confirmed by the first half of this year,” the agency quoted Mr Niu as saying.

Once a project is confirmed, it has to start construction within one year, the director-general

said, adding that the land premiums will be based on “market price”.

According to the Macau Government, the cultural and tourism industry account for 30.3 percent of the 33 projects, whilst the logistics and trade sector is the next biggest category occupying 24.2 percent.

CNS also quoted Mr Niu as saying, “We will strive… to lower the threshold for Macau investors to invest in Hengqin, creating a more open and convenient business environment for Macau investors.”

But the official did not offer further details.

Currently, any companies that want to purchase plots of land in Hengqin must prove registered capital of at least 100 million yuan. Many small-and medium-sized enterprises here complain that this threshold is too high for them, while Macau Chief Executive Mr Chui also concurred in a Legislative Assembly session on Tuesday that the current threshold for Hengqin investment is “high”.

“Visionary” to request more land, water: Li Gang Tony Lai

tony.lai@macaubusinessdaily.com

M

acau’s requests to Beijing for more land on Hengqin island and jurisdiction over its coastal waters has been positively received by the top central government official here.

Li Gang, director of the Chinese Liaison Office in Macau, yesterday praised the Macau administration as “visionary” for attempting to resolve its land shortage in this manner.

Macau Chief Executive Fernando Chui Sai On announced on Tuesday in a Legislative Assembly session that Macau has made a formal request to the Central Government to rent more land from Hengqin to drive economic diversification.

The administration has also asked Beijing for jurisdictional rights over its surrounding waters as a means of

boosting the territory’s land bank, the Chief Executive said.

Mr Li told reporters on the sidelines of a public event yesterday that Beijing “is already looking at” the request for maritime rights, adding that there would be rules governing land reclamation. In the absence of maritime jurisdictional rights Macau is obligated to apply to Beijing every time it wishes to engage in land reclamation.

The liaison office chief believes that Macau can “remain prosperous” if it can resolve its land and labour shortage issues.

Macau already has a 5 square kilometre land area set aside for its companies on Hengqin plus 1 square kilometre of land for the new University of Macau campus.

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April 24, 2014

Macau

Lawrence Ho increases stake in Russian casino

M

acau casino developer Lawrence Ho Yau Lung plans on raising his Russian casino stake as a consortium backed by him acquires more shares.

The Wall Street Journal reported yesterday that Mr Ho’s Russian partner, Oleg Drozdov, will sell part of his 30 percent stake in the project to Summit Ascent Holdings Ltd and Firich Enterprises Co. Once the deal is sealed, Summit Ascent’s stake in the overall project will increase to 50 percent from the current 46 percent. Mr Ho owns 33.8 percent of Summit Ascent.

A November filing by Mr Ho says Mr Drozdov was detained by Russian authorities over alleged “business malpractices” tied to the construction of a solid waste treatment facility.

While Mr Ho says the investigation wasn’t linked to the casino plans, the filing states that the company has the right to buy out any shareholder “deemed by any relevant gaming regulatory authority to be an unsuitable associate.”

The estimated investment for the first phase of the Primorye resort – next door to China’s Heilongjiang province – is about US$130 million, according to earlier filings.

It will feature a 119-room hotel, approximately 800 slot machines, 25 VIP gaming tables and 40 mass market gaming tables, according to earlier filings.

US$130 million

Estimated investment for the first phase of the Primorye resort

The Wall Street Journal quotes Dean Macomber, president of USbased Macomber International Inc, which has undertaken consulting work on the Russian casino industry, as saying that the success of Vladivostok as a gambling destination “depends upon the relationship between Russia and China, and to a much lesser extent other Asian countries like South Korea and Japan.”

May 26th to 31st 2014

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departures.

According to official numbers, the border gate was the busiest checkpoint, registering a total of 660,248 arrivals and 685,810 departures. The second busiest checkpoint was the Outer Harbour ferry terminal, with 133,184 arrivals and 122,642 departures, followed by the Taipa temporary ferry terminal with 71,851 arrivals and 52,131 departures.

Dining chain Xiao Nan Guo net profit slumps

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T

he number of visitors to Macau during the long Easter weekend jumped 27.2 percent over the same holiday period last year. Visitor arrivals totalled 624,588 during the four-day holiday.

Figures released yesterday by the Macau Public Security Police show that between April 18 and April 21, there were some 1.89 million border crossings. Of these, 948,895 were arrivals, while 936,982 were

hanghai-based Xiao Nan Guo Restaurant Holdings Ltd, which has a restaurant in Macau, registered a huge drop in net profits for the group in the past year, its 2013 annual report filed with the Hong Kong Stock Exchange reveals.

According to the report, the net profit for the group dropped 99.4 percent to 0.67 million yuan for 2013, due to a 10 percent decline in samestore sales and one-time write-downs for store closures in mainland China.

The gross profit for the group increased by 2.1 percent to 927 million yuan, while its revenue has grown by 4 percent to 1.386 billion yuan.

The economic slowdown on the mainland in the past year and the central government’s austerity measures targeting officials’ lavish banquets have exerted pressure on the catering industry at large, the

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group noted in its report. Demand for spending at medium and highend restaurants has been adversely affected on the mainland, including that for the group’s core brand Shanghai Min restaurants.

There is a single Shanghai Min outlet in Macau in the City of Dreams casino-resort, which contributed revenue of nearly 11.98 million yuan to the group in its first year of operation.

Xiao Nan Guo shifted focus to cater for the mass market this year: the restaurant chain said in the report that it was planning to open 10 to 12 The Dining Room restaurants, and 2 to 3 Shanghai Min’s Family Dining restaurants.

In an interview with Business Daily in February, the restaurant chain said it was considering the location for its first Dining Room in Macau.

SL.

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April 24, 2014

Macau Health fund increases 44pct in 2013 Q4 The health fund for financial assistance to individuals and private institutions increased by 44 percent to 313.8 million patacas in the fourth quarter of 2013 over the same period in 2012. Official figures were published in the official gazette yesterday by Macau Health Bureau (SSM). The fund totalled 653.4 million patacas for the whole of 2013. The funding agreement of the inpatient service in Kiang Wu Hospital with 176.4 milion patacas from March to November 2013 accounted for the largest portion of the fund in the forth quarter of last year.

Legislators greenlight 5.7pct pay increase for civil servants Over 29,000 civil servants are expected to see their salaries rise starting next month Tony Lai

tony.lai@macaubusinessdaily.com

T

he city’s 29,000-plus civil servants are on track to receive a 5.71-percent increase in their payslips next month after the Legislative Assembly gave the final nods to the appropriate bill yesterday.

The legislators approved the final reading of the bill, which will raise the value of each point in the pay index of civil servants to 74 patacas (US$9.25) from its current 70 patacas.

But assembly member José Pereira Coutinho said yesterday in an Assembly plenary session that he “regretted” that the government has still not set up a mechanism to allow low-paid civil servants to

have larger increases. He also criticised the fact that the seven increases in civil servants’ salaries since 1999 - including the one tabled yesterday - cannot cover accumulated inflation.

Secretary for Public Administration and Justice Florinda Chan responded yesterday that the government is “working” on studying the feasibility and possibility of grass-root civil servants having bigger payrolls. She stressed that the 5.71-percent rise is more than the annual consumer price index of 5.5 percent last year.

The government said it will strive to enable the bill to come into force next month, which will cost the government an

additional 550 million patacas this year.

Private to public Separately, the Assembly’s second standing committee discussed yesterday a bill about the welfare of incumbent, appointed, and outgoing principal officials.

Chan Chak Mo, president

of the committee, cast doubts yesterday on the government’s move to raise the on-off compensation for outgoing major officials.

The latest version of the bill the government submitted said that the on-off compensation for principal officials will be calculated based on 30 percent of their monthly salaries instead of 14 percent stated

in the previous version.

Mr Chan told media after the committee meeting that they acknowledged the intention of the government’s move to attract people to the private sector to serve major officials like secretaries and the Chief Executive.

But the major officials who have served as civil servants before will benefit from more compensation based on this new calculation, together with their compensation as civil servants, he said.

Thus, the committee proposes that individuals in the private sector should be entitled to a ratio of 30 percent while those from the public sector should remain on 14 percent, he added.

More victims Subsidies for trade chambers surge in Q1 fall foul of bankcard scam T L

Industrial and Commercial Development Fund sees surge in subsidy activity for the city’s trade chambers participating in MICE activities Stephanie Lai

sw.lai@macaubusinessdaily.com

wo new cases of people having their personal and banking details stolen and used in foreign transactions have come to light: this, only a week after police announced three similar cases.

According to Portuguese newspaper Jornal Tribuna de Macau, a local woman discovered that 19,633 patacas (US$2,454) had been withdrawn in mainland China, while a non-resident man had around 390 euros withdrawn from his Portuguese bank account there.

His information was used to withdraw money in Thailand, the report says.

In both cases, the two victims claim never to have given their personal and banking details to anyone and had never lost their bankcards.

Police suspect that their details were stolen from the two victims as well as the three reported last week.

Just days ago, Judiciary Police reported that three Macau residents had had their personal and banking details stolen and used in transactions in Russia and Thailand. These three victims were notified by their respective banks, with none claiming to have had their cards stolen.

ocal trade chambers have received much more subsidy from the city’s Industrial and Commercial Development Fund in the first quarter this year when compared with a year ago, with more than half of the beneficiaries using the money for their participation in conventions, exhibitions and meetings (MICE), a quarterly report of the fund gazetted yesterday shows.

The Industrial and Commercial Development Fund has subsidised local trade chambers to the tune of 55.28 million patacas, which is 47.9 million patacas more than a year ago, the subsidy record in the Official Gazette reveals.

More than half of the subsidy purposes shown in the gazette have gone to the trade chambers’ participation in MICE events, such as the 2014 Macao International Environmental Co-operation Forum & Exhibition.

The biggest beneficiary of the subsidy offered by the fund is Macao Convention & Exhibition

MOP55.3 million

funded to local trade chambers in Q1

Association, which received more than 41.9 million patacas in the first quarter. A majority of the subsidy has been used on their organising of the 2nd Macau Business Aviation Exhibition and 3rd China (Macau) International Yacht Import & Export Fair.

As disclosed in the Policy Address for 2014, the total budget the government has allotted for Industrial and Commercial Development is over 1.138 billion patacas. Last year, the budget for the fund was around 1.4 billion patacas, which included an additional budget allotted at over 358 million patacas approved by the Chief Executive in May. The fund has also been the monetary source for the city’s credit guarantee scheme for small and medium enterprises and interest-free start-up loan schemes. Along with China Development Bank Corp, the fund is the backer of the US$1 billion Cooperation and Development Fund for China and Portuguese-speaking countries.

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April 24, 2014

Macau Brands

Trends

Alexander Wang meets H&M

Sands China EBITDA tipped to rise most in Q1 Merrill Lynch says the earnings of company controlled

by Sheldon Adelson will rise by 41 percent y-o-y in the first quarter Tony Lai

tony.lai@macaubusinessdaily.com

Raquel Dias newsdesk@macaubusinessdaily.com

H

&M has just announced its next designer collaboration. The Swedish brand will team up with Alexander Wang, with the results expected to hit stores in November.

Men and women alike enjoy the occasional shopping spree at H&M as the so called fast-fashion brand is perfect for basic and extremely trendy clothes you will be wearing for one season only, as the price is always right.

Although not established in Macau, the store is probably a must-stop on the Hong Kong trips locals so often like to make. Although catering to a younger audience, the price and good design have transformed the brand into the equivalent of a fashion industry IKEA. Its popularity is such that even the Duchess of Cambridge, nee Kate Middleton, has been seen wearing it.

The list of designers who have collaborated with the brand over the past few years is extensive. It’s no shock that one of the biggest news snippets to come out of planet fashionista is the announcement of the impending collaboration between Alexander Wang and H&M. The cool and extravagant New York resident is the creative director for Balenciaga. He is also known for designs targeting the fashion elite, from supermodel Erin Wasson to sizzling songbird Rhianna.

The Alexander Wang x H&M collection will feature apparel and accessories for women and men who are hot to trot.

G

aming operator Sands China Ltd, controlled by US billionaire Sheldon Adelson, is tipped to post the most robust growth in its first quarter’s earnings vis-a-vis other Macau rivals.

All gaming shares rallied yesterday on the Hong Kong Stock Exchange after improved gaming revenue figures were reported for the third week of this month.

Bank of America Merrill Lynch released a research note yesterday stating that it expects Macau gaming operators to report better than expected rises in first quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) given the robust gaming revenue growth recorded so far this year.

Sands China EBITDA is tipped to rise the most, surging 41 percent from a year earlier in the January-March period, representing an increase of 6 percent from the fourth quarter of last year, said Merrill Lynch.

Sands China’s parent, Las Vegas Sands Corp, is due to announce the first quarter results of its operations in the United States, Macau, and Singapore today. Sands China reported an adjusted EBITDA of HK$4.86 billion (US$626 million) for 2013’s first quarter.

The operator has replaced SJM Holdings Ltd - founded by local gaming mogul Stanley Ho Hung Sung - as the biggest operator here in the first three months of the year, with a 23-percent market share, Barclays Plc says.

Figures from the Gaming Inspection and Coordination Bureau reveal that the city raked in 102.2 billion patacas in gross gaming revenue in the first quarter, up 19.8 percent year-on-year.

Merrill Lynch also said yesterday that the first quarter’s EBITDA of

Galaxy Entertainment Group Ltd will expand 35 percent year-on-year, while MGM China Holdings Ltd is expected to post 32 percent growth.

Wynn Macau Ltd earnings are forecast to go up by 12 percent year-on-year in the first quarter, with SJM registering the slowest growth at 8 percent, according to the investment bank. The note did not include the forecast for Melco Crown Entertainment Ltd, a venture

by Stanley Ho’s son Lawrence Ho Yau Lung and Australian tycoon James Packer.

Investment bank JP Morgan said earlier in the month that it believes that the EBITDA of the city’s six gaming companies will grow by 31 percent on average in the first quarter.

Their shares surged in the Hong Kong stock market yesterday, following a better than average daily run rate in casinos here was reported in the third week of this month. By contrast, the Hong Kong benchmark, Hang Seng Index, dropped 0.97 percent yesterday.

Wells Fargo & Co said in a research note this week that the average daily gross gaming revenue in casinos reached 1.15 billion patacas in the seven days ended April 21, up 15 percent from the week before. Weaker revenue figures were reported in the first two weeks of this month due to wet weather and sluggish VIP performance, gaming analysts say.

Sands China rose 2.46 percent to close at HK$62.6 yesterday while Galaxy jumped 1.54 percent to HK$69.1. Wynn Macau surged 3.23 percent to HK$33.6, SJM climbed 1.31 percent to HK$23.2, while MGM China remained flat at HK$30. Duallisted Melco Crown jumped most by rising 4.61 percent to close at HK$98.8 yesterday.

Macau’s revenue to double by 2018: CLSA Brokerage CLSA Ltd said the Macau gaming revenue can double by 2018, naming Melco Crown Entertainment Ltd as its top pick of the beneficiary.

The opening of new mega resorts in Cotai in 2015-17 will trigger a surge in Macau gross gaming revenue to US$90 billion (719 billion patacas) in 2018 from $45 billion last year, CLSA analysts said in a research note this week.

“Macau is an oasis in the parched global growth environment, delivering a constant stream of expansion,” CLSA said. “Its large mass-market exposure and strong premium-mass focus should continue to drive near-term growth.”

Dual-listed Melco Crown - joint-venture

by Macau’s Lawrence Ho Yau Lung and Australian tycoon James Packer - rose to a three-week high in New York on Tuesday, climbing by 4.7 percent to US$38.03. Its Hong Kong share also increased by 4.61 percent yesterday.

“Melco Crown has done a very good job of appealing to mass market,” Christopher Jones, managing director at Telsey Advisory Group in New York, said.

T.L. with Bloomberg News

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April 24, 2014

Macau HK downgrades travel alert to Philippines The Hong Kong government yesterday downgraded its travel warning to the Philippines from ‘black’ to ‘amber’, the lowest level in the three-tier system. The move came after the Philippine government officially offered “its most sorrowful regret and profound sympathy” for the bus hostage incident in the nation in 2010 that saw seven Hong Kong people killed. The Hong Kong victims also received confidential compensation from the Philippines, according to Hong Kong media. Macau does not have its own travel alert system and usually follows the system in Hong Kong.

Goldbugs desert leading jewellery chain Chow Tai Fook loses 30pct in two months with disappointing sales in Macau and HK Alex Lee

alex.lee@macaubusinessdaily.com

C

how Tai Fook shares continue their downward spiral and were yesterday quoted at a seven-month minimum, as investors become more pessimist about the company´s performance this year after signs that sales in

Hong and Macau stores are running behind estimates.

The expected 47 percent increase in sales for both regions in the first half now seems harder to achieve.

Yesterday, Chow Tai Fook, the biggest jewellery chain in Macau with 16

stores, closed at HK$10.8 dollars in the Hong Kong Stock Market, its worst performance since September of last year.

After reaching a one year record at the beginning of March, quoting at HK$ 14,2 dollars, the company went

into rapid descent, losing 30 percent of its value in less than two months.

For analysts, the reason is the disappointing sales in Hong Kong and Macau this year, two markets that represent around 40 percent of global sales of the world´s

biggest jewellery chain, according to official numbers.

47pct jump in sales In the fourth quarter of 2013, the stores open for at least 12 months in Macau and Hong Kong registered a 9 percent drop in sales, behind a 14 percent increase on the Mainland and a 4 percent gain in total sales. According to the most recent investor presentation in late March, Chow Tai Fook predicts a 47 percent jump in sales in the first half of this year for Macau, Hong and Taiwan, a goal that seems ever harder to reach. The slowdown in China exerts additional pressure on this year’s performance as customers could have less interest in buying gem-set, gold and platinum products.

HK Capital has already downwardly revised its expectations of global sales for 2014 to 4 percent, nine-fold less than the official value for the January-June period revealed by the jewellery chain (33 percent) to investors last month. Contacted by Business Daily, Chow Tai Fook’s press officer said, “Since we are entering the blackout period, the sales-related information will be provided in due course.”

Profits soar 33 percent for Automobile and Maritime Security Fund

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he Automobile and Maritime Security Fund, which covers compensation for vehicle and yacht owners under mandatory insurance, registered a net surplus of 8.4 million patacas (US$1.06 million) for 2013, which is 33.7 percent or 2.1 million patacas more than that of a year before, the fund’s annual report gazetted yesterday shows.

The profit jump was due to increased gains arising from the 2.5 percent surcharge every insured car owner has to pay every year, and represents the official revenue of the Fund. In addition, earnings transferred from previous exercises less costs for legal compensations boosted the financial results.

The revenue for the fund, which is

recorded at over 10.3 million patacas for last year, has risen by a yearon-year 33.1 percent – a rate faster than its expenses growth at 30.6 percent to 1.9 million patacas, the report noted.

The 2.5 percent charge revenue went up 20 per cent totaling 5.5 million patacas, adding 900,000 patacas more than in 2012. The

profits transferred from the previous year reached 3.3 million patacas, 60 per cent more than one year ago and 1.2 million more.

In the past year, the fund has covered compensation and lawyers’ charges for three lawsuits and another two dated to 2012; the fund was exempted, however, from meeting the compensation for two other lawsuits.

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April 24, 2014

Greater China HK regulator fines RBS Hong Kong’s securities regulator issued a reprimand to Royal Bank of Scotland Plc and fined the bank HK$6 million (US$774,000) after it failed to detect and prevent trading misconduct. The move follows an investigation into the Edinburgh-based lender’s systems and controls in 2011, after the discovery of unauthorized trading activities by former RBS trader Shirlina Tsang, Hong Kong’s Securities and Futures Commission said in a statement on Tuesday.

The bank had “significant weakness in its procedures, management systems and internal controls,” the regulator said in the statement.

Veolia apologises for water pollution The chairman of the Chinese unit of French utility Veolia Environment has apologised to the public after a cancerinducing chemical was found in tap water supplied by the company, the Xinhua news agency said. Benzene was found in tap water supplied by the Lanzhou Veolia Water Company in the north-western city of Lanzhou on April 10, forcing the city of 3.6 million people to turn off supplies in one district. Other residents were warned not to drink tap water for a day.

Yum Brands’ sales up KFC parent Yum Brands Inc on Tuesday said first-quarter sales at established restaurants in China, its top market, rose 9 percent, roughly in line with expectations, as it recovers from an avian flu outbreak and a food safety scare last year that pummelled demand for chicken. Yum’s restaurant sales in China included an increase of 11 percent at KFC and a rise of 8 percent at Pizza Hut Casual Dining.

Analysts polled by Consensus Metrix were expecting Yum’s China sales to rise 9.4 percent.

Maduro wants deeper cooperation Venezuelan President Nicolas Maduro said on Tuesday that Venezuela and China have taken new steps to deepen economic and social cooperation after Chinese Foreign Minister Wang Yi’s two-day visit to the South American country. In a radio program, Maduro said that he exchanged views with Wang on exploration of new areas for future cooperation. China and Venezuela have built a perfect and strategic alliance in areas such as economy, science and technology, culture, politics and diplomacy, said Maduro.

Chinese spearhead NZ immigration New Zealand saw its highest net gain in migrants a decade in the year ending March, led by arrivals from China, the New Zealand government statistics agency announced yesterday. New Zealand had 3,800 more migrants arriving than departing last month, the second-highest gain on record after 4,700 recorded in February 2003, when a large number of overseas students arrived to study at New Zealand universities, said a statement from Statistics New Zealand. The increasing trend since September 2012 had been mainly due to fewer New Zealand citizens leaving for Australia

Military institutes to become Currently, the institutes are fully funded by the government and

C

hina plans to fold developers of military hardware into listed state-owned companies, people familiar with the matter said, giving them access to capital markets as the country prioritizes high-tech defence capability.

The plan would allow military research institutes to be incorporated into state-owned enterprises, said the two people, who asked not to be identified because they weren’t authorized to discuss the plans publicly. The policies, being drafted by the Ministry of Finance and other agencies, could be released as soon as next month, they said.

The changes fit with the Communist Party’s pledge to give markets a bigger role in the allocation of resources. By weaning the weapons developers off state funding, China may also be able to cultivate more innovative defence companies that can fill the military’s technology gaps, said Jon Grevatt, Asia Pacific Defence Industry analyst at IHS Jane’s in Bangkok.

“China has recognized that that protection of the state has led to a state where innovation has not always been encouraged,” Grevatt said by phone. “That encouragement of accountability will prompt innovation and capability development.”

President Xi Jinping has made a modern, combat-ready military a priority. After the government announced a 12.2 percent rise in defence spending for this year, Premier Li Keqiang said last month

that China will boost research on the development of new and high technology weapons. The Ministry of Industry and Information Technology said in December that China will promote the two-way transfer of military and civil technologies and overhaul the shareholding system of military enterprises.

The Ministry of Finance didn’t immediately respond to faxed questions seeking comment on the policy proposals.

The institutes, which develop products including electronics, aircraft, ships and weapons for military use, would be transformed into companies before being put under the umbrella of listed enterprises, the people said.

Currently, the institutes are fully funded by the government and don’t seek to make profits.

Still, military institutes working on highly sensitive technologies are unlikely to see their assets injected into listed state-owned companies, Grevatt said.

China is prohibited from importing military technology from the European Union or the U.S. due to arms embargoes imposed after the 1989 crackdown on protesters in Tiananmen Square.

Aviation Industry Corp of China, which makes fighter jets for the military, has units listed on the country’s stock exchanges. One such unit, AVIC Aero-Engine Controls Co., said in March it plans to raise as much as 3.2 billion yuan (US$513

A modern army implies a new structural approach

million) from a private placement of as many as 275 million shares, to finance expanded production.

Competing offshore In September, China Shipbuilding Industry Co. said it planned to raise funds through a private share placement to buy assets from affiliates for designing and building battleships and submarines.

The policy may also promote the formation of higher-quality

TWSE wants stock market to Taiwan’s bourse is also in talks with its Shanghai counterpart

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aiwan Stock Exchange (TWSE) is seeking to create a crossborder stock-trading platform with Singapore by this year to boost overseas access to the island’s listed shares, Chairman Lee Sush-der said in an interview.

“Opening access to our shares can benefit us with an active market and dynamic economy,” he said yesterday in his office in Taiwan’s tallest building, Taipei 101. Fundraising in the market stood at NT$654.8 billion (US$21.6 billion) in 2013, Lee said, which allowed companies “to enhance research, expand capacity and eventually bolster the economy.”

The trading platform, for which the Taiwan bourse and Singapore Exchange Ltd. are discussing technical issues such as settlement rules, would lower costs for investors, Lee said. Taiwanese investors in Singapore stocks currently must buy through both local brokerages and securities firms based in the citystate. Overseas trading through the current mechanism amounted to at least NT$800 billion last year, he said.

“The cross-border platform can provide more choices and help reduce costs for investors, particularly for individuals,” Lee said.

The benchmark index advanced 12 percent in 2013. The economy grew at 2.11 percent in the same period, with private consumption rising 1.77 percent, according to government data. Foreigners, which

Singapore trade market facilities

have been were net buyers over the past 22 trading days, hold about 35 percent of domestic equities.

Formosa index “Easier access to overseas markets will benefit local brokerages, while

foreign investors may be attracted to the domestic market that is poised to gain more ground,” said Tu Jinlung, chairman of KGI Securities Investment Advisory Co. Efforts to establish a cross-border trading platform coincide with another internationalization push

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April 24, 2014

Greater China

enterprises

Carbon results swallow green energy funds

don’t seek to make profits

Since 2006, Chinese companies have been issued 873 million carbon credits, nearly two-thirds of the total

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defence companies that can compete internationally in markets such as Sri Lanka and Bangladesh as they increasingly require more high-tech equipment, according to James Hardy, Asia Pacific editor of IHS Jane’s Defence Weekly.

“There has been a trend to streamline originally fully- state owned enterprises and make them a lot more competitive internationally,” Hardy said. “Generally these research institutes are where a lot of the high end, high-tech stuff like missiles tend

to get designed and road-tested.”

China will stop short of allowing defence hardware providers to function as “truly marketized firms,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies who analyses Chinese military modernization.

“Foreign companies will be restricted from investing, many parts of these companies’ production, especially the military side, will continue to be restricted and controlled,” he said.

Bloomberg News

link Singapore

evenues for China’s biggest sellers of U.N.-issued carbon credits shrunk last year to a tenth of 2012 values, choking off billions of dollars flowing to clean energy projects in the world’s top carbon-emitter.

China will now have less money to put into a stepped-up campaign to cut greenhouse gas emissions, clean its air and raise the share of fossil-free energy in its total mix to 15 percent by the end of the decade, from a current 8 percent.

The U.N.’s Clean Development Mechanism (CDM) is part of the 1997 Kyoto Protocol, an international effort to limit global climate change. The CDM allows projects in developing countries that can prove they reduce greenhouse gas emissions to earn credits, known as Certified Emissions Reductions (CERs).

The projects then sell the CERs to governments and companies in rich nations to help them meet emissions targets. Many of the projects also help fight local air pollution, such as when wind, hydro or other renewable energy replaces coal-fired power.

Since 2006, Chinese companies have been issued 873 million carbon credits, nearly two-thirds of the total.

These have been sold in Europe and

Japan to bring in at least US$8 billion in profits that can be reinvested in new projects.

“The CDM has played an extremely significant role in the development of China’s renewable energy and energy efficiency targets by helping kick-start the deployment of ... projects across China,” said Jeff Swartz, policy director at investor group the International Emissions Trading Association (IETA).

The carbon offsets generated in China had offered lucrative low-cost compliance options for emitters when European Union allowances traded at above US$25. But after the financial crisis a slowdown in EU industry caused emission levels to drop, creating a huge oversupply of tradable carbon permits.

As the EU allowances fell below US$5 each, historical fixed-price contracts for Chinese credits in the US$10-US$20 range brought huge losses to European carbon buyers.

CERs are now valued at just 23 cents versus contract values tens of times higher.

That price difference has led many European buyers to delay issuing carbon credits or to try to renegotiate contracts, and Chinese project owners are threatening lawsuits.

Reuters

WH IPO reduced The firm plans to use much of the funds raised in the IPO to pay back debt

by the exchange, the introduction of an index comprised by all companies listed on the main board and on the GreTai Securities Market exchange, which has a market capitalization of NT$2.68 trillion compared with the NT$25.5 trillion of the Taiwan Stock Exchange.

Sub-indexes and other related products are being planned for this gauge, called the Formosa Index, to be introduced on May 5, Lee said.

The benchmark will start trading at a level based on prices at the end of 2013.

“It will provide a whole picture of the local equities market,” Lee said.

The cross-border platform can provide more choices and help reduce costs for investors, particularly for individuals Lee Sush-der, Taiwan Stock Exchange Chairman

Asean link Taiwan’s bourse is also in talks with its Shanghai counterpart to sign a cooperation pact as a prelude to a potential cross-strait link. Hong Kong and China announced a plan on April 10 allowing purchases of Hong Kong-listed shares via the Shanghai stock exchange and the purchase of Shanghai- listed shares through Hong Kong, furthering China’s pledge to reduce capital controls. Hong Kong Exchanges & Clearing Ltd. surged the most in five years on April 11.

“The links may start with Singapore and hopefully extend to Asean and Shanghai,” Lee said.

Bursa Malaysia, Singapore Exchange and the Stock Exchange of Thailand led the formation of a

platform offering cross- border stock transactions in Southeast Asia called the Asean Trading Link.

Taiwan also has a separate futures exchange. TAIFEX, as the derivatives market is called, is linked with Germany’s Deutsche Boerse AG, which operates both the Frankfurt stock exchange and the Eurex derivatives market.

Taiwan and mainland China have been separately governed since Nationalist forces fled to the island during a civil war over six decades ago. The feasibility of an index consisting of Taiwan, China and Hong Kong shares is being studied in Taiwan, Lee said.

Bloomberg News

W

H Group Ltd has cut the number of shares in its Hong Kong initial public offering, reducing the size of the deal to up to US$1.88 billion from the US$5.3 billion originally planned, according to a term sheet seen by Reuters yesterday.

The company is offering 1.299 billion new shares, down from the 3.65 billion new and existing shares in its original plan. The price range of HK$8.00 to HK$11.25 per share (US$1.03-US$1.45) remains unchanged.

The IPO is slated to be priced on April 29, with the shares debuting on the Hong Kong stock exchange on May 8, according to the term sheet.

The company added that if it did, it would publish a supplementary prospectus, resulting in a short delay to its original timetable.

It also warned that if conditions for the deal laid out in prospectus, which includes conditions related to pricing, were not met, the IPO could lapse.

The downsizing caps a string of difficulties for the deal and is an embarrassing setback for the Chinese company that bounded onto the international stage last year with its US$4.9 billion purchase of U.S.based Smithfield Foods Inc. It plans to use much of the funds raised in the IPO to pay back debt incurred in that acquisition.

KEY POINTS WH to issue fewer new shares Shareholders to no longer cash out WH says reduce size of the IPO Deal had no cornerstone investors, wide indicative range Executive share awards raised corporate governance concerns

Shareholders in WH Group who had hoped to partly cash out of their investments, such as China private equity firm CDH Group, Singapore sovereign wealth fund Temasek Holdings and Goldman Sachs Group, will now no longer do so under the revised plan, the sources added. WH Group will also sell fewer new shares than initially planned, IFR reported.

Reuters

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April 24, 2014

Greater China

Factories deepen economy slowdown Annual growth in China’s economy slowed to 7.4 percent in the first quarter from a year earlier Many economists still expect a cut in the reserve requirement ratio for all banks later this year, as protracted economic weakness fuels capital outflows, raising the pressure on the central bank to pump more liquidity into the economy.

The government has already unveiled steps to quicken construction of railways, affordable housing for the poor, and cut taxes for small firms to underpin growth.

Signs of a slowdown in the first quarter had been evident in a series of economic indicators, prompting the government to unveil a series of measures to promote growth, although it has ruled out major stimulus.

It has also said that its main focus will be on job creation, and that it did not matter if growth in 2014 came in a little below the official target of 7.5 percent.

New export orders slip

The Haier Industrial Park in Qingdao, China

C

hina’s factory activity shrank for the fourth straight month in April, signalling economic weakness into the second quarter, a preliminary survey showed yesterday, although the pace of decline eased helped by policy steps to arrest the slowdown.

Analysts see initial signs of stabilisation in the economy due to the government’s targeted measures to underpin growth, but believe more policy support may be needed as structural reforms put additional pressures on activity.

The HSBC/Markit flash Purchasing Managers Index (PMI) for April rose to 48.3 from March’s final reading of 48.0, still below the 50 line separating expansion from contraction.

“It’s generally in line (with expectations), reflecting that the growth momentum is stabilising,”

said Zhou Hao, China economist at ANZ in Shanghai, who expected economic growth to pick up slightly to 7.5 percent in the second quarter.

Annual growth in China’s economy slowed to 7.4 percent in the first quarter from a year earlier, its slowest pace in 18 months, but the pace was just ahead of market expectations and seemed to soothe fears of a sharp downturn.

China’s central bank will cut the amount of deposits rural banks must hold as reserves by between 0.5 and 2 percentage points, it said on Tuesday, the latest in a series of measures to help combat a slowing economy.

CICC estimated that the reserve cut could release 110 billion yuan (US$17.64 billion) of bank liquidity, while Nomura put the amount at 80-90 billion yuan, which was small given the size of the economy.

KEY POINTS RBI cuts policy repo rate by 25 bps to 7.75 pct Flash PMI ticks up to 48.3 in April from 48 in March Offers early signs of stabilisation as govt supports growth Analysts expect more targeted policy measures

China Mobile profit drops The push is raising costs for everything from new equipment to smartphone subsidies

Reuters

Sales in the first quarter rose about 7.8 percent to 154.8 billion yuan, from 143.6 billion yuan a year earlier. That compared with the 142 billion-yuan median of five analysts’ estimates in a Bloomberg News survey.

4G network

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et income at the world’s largest phone company by users fell 9.4 percent to about 25.24 billion yuan (US$4 billion) in the first quarter, the Beijing-based company reported yesterday. Profit was expected to be 27 billion yuan, based on the median of five analysts’ estimates compiled

by Bloomberg News.

Chief Executive Officer Li Yue is counting on a rapid shift to fourth-generation networks and the introduction of popular devices like the iPhone to stem a market share decline and to boost data sales. The push is raising costs for everything from new equipment to smartphone subsidies.

The survey showed contractions in new orders and output moderated somewhat, though new export orders slipped back below the 50 line after a pick-up in March, suggesting that the external environment remains difficult for Chinese firms.

“Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted,” said Qu Hongbin, chief economist for China at HSBC, in a statement accompanying the PMI. He added that he expected more government support measures in coming months, which was echoed

by ANZ’s Zhou, who believed policy support would be targeted and measured.

Analysts believe that China’s property market could threaten Beijing’s plan to manage a slowdown in growth, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the world’s second-largest economy.

China Mobile nano sim card

Subsidies for all phones will rise 29 percent to 34 billion yuan this year, with introduction of the iPhone being part of the reason, Chief Financial Officer Xue Taohai said in March.

China Mobile’s share of the nation’s 1.2 billion wireless accounts fell to 62 percent at the end of February from 72 percent in October 2009, when China Unicom introduced the iPhone.

To curb the decline in share, China Mobile last year started building a 4G network in advance of receiving a license for commercial service, which was awarded in December.

The company expanded

total customers 1.8 percent to 781 million at the end of March, it said yesterday. Still, monthly average revenue per user fell to 62 yuan, from 68 yuan.

Fee reduction The decline reflects “continued accelerating substitution effect” from instant messaging applications, Xi said in the statement. Tencent Holdings Ltd.’s free WeChat application allows users to send voice and text greetings, which many subscribers use in place of traditional calls or texts.

China Mobile also suffered from a reduction in fees paid by the smaller carriers to connect to its infrastructure. Effective January 1, the charges China Telecom Corp. and China Unicom paid to connect a call to China Mobile’s network dropped to 0.04 yuan per minute from 0.06 yuan, the companies announced in December.

Bloomberg News

11

April 24, 2014

Asia

Toyota still king of the road Production outside Japan climbes more than 8 percent to 5.89 million

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oyota Motor Corp. outsold General Motors Co. and Volkswagen AG for a third straight quarter, helped by rising demand in Japan and China.

Sales at Toyota, including its Hino Motors Ltd. and Daihatsu Motor Co. units, rose about 6 percent to 2.58 million units in the January-to-March period, the Japanese automaker said yesterday. Second place is too close to call as GM and VW said they sold about 2.4 million each, and the German company hasn’t disclosed deliveries for the MAN and Scania heavy truck brands.

For President Akio Toyoda, last quarter capped what the company estimates to have been its most profitable fiscal year as Toyota projects a record 1.9 trillion yen profit (US$18.5 billion), mainly because of a weaker yen. Still, the maker of the Camry is facing a growing challenge from Wolfsburg, Germany-based VW as both carmakers forecast they’ll sell more than 10 million vehicles in 2014.

The Prius model has become an essential part of Toyota’s future strategy

some of those gains this year after recall-related costs mounted and the yen’s depreciation slowed. They fell 0.2 percent to close at 5,549 yen in Tokyo as the benchmark Topix Index climbed 1 percent.

2.58 million

Toyota’s moves

January-March 2014 Toyota cars sold “We expect Toyota to hold the No. 1 title in the industry until 2016 or 2017,” said Masatoshi Nishimoto, an analyst at IHS automotive in Tokyo.

“For Toyota to maintain the title beyond that, they may need to grow more in China.”

Toyota, whose shares jumped 60 percent last year, has surrendered

The grandson of Toyota’s founder has cleared out the remnants of top management he inherited when he took the helm in 2009, laid out a greater focus on emerging markets and appointed three outside directors to join the board for the first time.

Toyota’s production outside Japan climbed more than 8 percent to 5.89 million in the fiscal year ending in March, outpacing the 1.6 percent gain in domestic output, the company said.

At the Beijing motor show that opens to the public this week, Toyota showed new Corolla and Levin compact cars that the automaker

plans to offer with locally sourced hybrid components starting next year.

Localizing development of hybrids in China allows Toyota to avoid 25 percent tariffs that the country levies on imports of key auto components, including parts that go into the gasoline-electric Prius. Of the 315,500 Priuses sold globally last year, only about 1,400 went to China.

The hybrid strategy is part of Toyota’s push to pass Nissan Motor Co. and become the top Japanese automaker in China, where it ranks sixth among foreign automakers, and behind GM and Volkswagen.

China spending GM is spending US$12 billion in China from this year through 2017 to add manufacturing capacity and offer new and refreshed models.

Volkswagen has said its Chinese joint ventures will invest 18.2 billion euros

(US$25.1 billion) through 2018 to expand in the world’s largest auto market.

GM, which sat atop the auto industry in 2011, slipped to third last year behind Toyota and VW. While deliveries are rising this year -- even outselling VW in China -GM Chief Executive Officer Mary Barra is under fire because the company took years to recall millions of vehicles for faulty ignition switches linked to at least 13 deaths.

Barra was grilled at U.S. congressional hearings this month about what GM knew and when.

Her performance became the butt of jokes on NBC’s “Saturday Night Live,” which mocked her elusiveness in answering questions.

Last year, GM deliveries increased percent to 9.71 million units, while VW’s sales, which includes MAN and Scania, reached 9.73 million units.

Bloomberg News

Business money clouds India’s campaign Kejriwal said the parties had spent around US$2.5 billion on adverts

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irebrand anticorruption champion Arvind Kejriwal accused his rivals in India’s elections yesterday of selling out to big business by accepting hundreds of millions of dollars to bankroll their campaigns.

As he arrived in Varanasi to file his nomination papers and line up a contest against frontrunner Narendra Modi, Kejriwal said India’s democratic future was at stake in the on-going elections.

“The people of India have to decide what kind of democracy they want,” Kejriwal, who is leader of the Aam Aadmi (Common Man) Party, told hundreds of supporters in the holy city on the banks of the Ganges.

“Do you want a democracy of neighbourhoods, streets and villages or a helicopter

Candidate Kejriwal is a former tax inspector

democracy?”, he said in a jibe at Modi who is due to fly in today to file his nomination and Rahul Gandhi, the ruling Congress party’s frontman.

Both Modi’s Bharatiya Janata Party (BJP) and Congress have assembled massive war chests for the six-week election, filing the

airwaves and dominating newspaper front pages with advertisements.

While there have been no official figures, Kejriwal said the parties had spent around 150 billion rupees (around US$2.5 billion) on adverts.

“You turn on the TV or you look at the papers or the

billboards and you see the political adverts everywhere,” he said.

“My friends, where are they getting this money from?

“Whoever gives them (the money), after the elections they will want their money back and more. And where will this money come from?

From the pockets of you and me. We have to end this kind of democracy, and establish the rule of the people.”

Kejriwal, a former tax inspector, stunned Indian politics in December when he came to power in Delhi’s state elections on a wave of growing voter anger over levels of corruption.

However his decision to quit as the capital’s chief minister after only 49 days is seen as having undermined much of his popularity and few analysts expect him to

We have to end this kind of democracy, and establish the rule of the people Arvind Kejriwal, Aam Aadmi Party

beat Modi in the most highprofile contest of the election which wraps up on May 12.

Results of the world’s largest elections are due four days later.

AFP

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April 24, 2014

Asia UMW Oil & Gas might expand rigs The Malaysian oil and gas services provider, may buy more jack-up rigs to tap rising demand as it bids for US$1.1 billion worth of contracts in Southeast Asia this year. The company has four drilling rigs, which will be doubled to eight by 2015, President Rohaizad Darus said in a Bloomberg interview yesterday. It expects delivery of its fifth as early as next week, he said. UMW Oil & Gas completed a 2.36 billion ringgit (US$722 million) initial public offering, the biggest in Malaysia last year, to finance its rig expansion.

ISS to add ROE to guidelines Influential proxy advisory firm Institutional Shareholder Services (ISS) said it is likely to include return on equity to its voting guidelines for Japan next year amid efforts to change a corporate culture long criticised for neglecting shareholders. Japan’s government has been calling for more companies to adopt outside board members and is promoting a stock index that weighs ROE, in an attempt to lure more individual and foreign investors to its equities market. It has also launched a stewardship code aimed at holding institutional investors more accountable and encouraging communication between shareholders and corporate boards.

Australia orders F-35 fighters Australia will announce plans on Wednesday to order 58 more F-35 fighter jets built by Lockheed Martin Corp for A$12 billion (US$11 billion), sources in Washington and Canberra told Reuters. Prime Minister Tony Abbott will make the announcement of the purchase around midday local time in the Australian capital, Canberra, the sources said. The total cost of the F-35 Joint Strike Fighter program is now seen at US$1.42 trillion, including research, development, procurement and operations through 2065.

Australand rejects Stockland proposal Australian company said yesterday it had rejected a proposal from bigger rival Stockland Group to buy all the shares that Stockland does not yet own, an offer that valued the company at around A$2.43 billion (US$2.28 billion). The Australand board said the proposal, which offered 1.111 Stockland shares for every Australand share, was not compelling and decided not to provide Stockland with access to due diligence. Stockland bought a 19.9 percent stake in Australand in March after Singapore’s CapitaLand Ltd said it had sold its remaining 39.1 percent stake in Australand for about A$849 million.

Kuroda missing annual prices His remarks suggest the BOJ will revise up the previous fiscal year’s

B

ank of Japan Governor Haruhiko Kuroda said consumer inflation may exceed the central bank’s projection in the fiscal year that ended in March, voicing confidence the world’s thirdlargest economy continues to make headway in meeting its price target.

Deputy Governor Hiroshi Nakaso added to the optimism, stressing that Japan can withstand the pain from a sales tax hike that kicked off this month as companies are increasing hiring and wages due to brighter prospects for the economy.

“I think consumer inflation was actually slightly higher in fiscal 2013 than our current projection of 0.7 percent,” Kuroda told a parliamentary session yesterday. “For now, we can say Japan is making steady progress toward achieving 2 percent inflation.”

His remarks suggest the BOJ will revise up the previous fiscal year’s price forecast and maintain its bullish projections for subsequent years in its twice-yearly outlook report due out next week.

But both Kuroda and Nakaso reiterated the BOJ’s readiness to “adjust policy” with additional monetary stimulus should risks threaten achievement of the price target.

“There are various ways to adjust policy. We will decide what among these measures is appropriate depending on economic and price developments at the time,” Kuroda said.

Bank of Japan Governor Kuroda thinks the data fits the strategy for the 2 percent inflation target

Japan’s economic growth has slowed since late last year and analysts warn of further weakness in coming months as exports lack momentum and the sales tax hike cools household spending.

But the BOJ has maintained its view Japan’s economy will recover moderately despite the pain from the sales tax increase, suggesting that no immediate easing was on the horizon.

Many market players expect the

LG to acquire Elizabeth Arden Korean brand has expanded its overseas operations in recent years through acquisitions in China and Japan

L

G Household & Healthcare Ltd said yesterday it is considering a bid for U.S.-based cosmetics company Elizabeth Arden, a move that would boost the South Korean firm’s line-up in perfume and add a luxury brand.

Elizabeth Arden, which has a market value of US$845 million, has like other cosmetics firms been hit by a broad slowdown in the North American beauty market that has hurt earnings.

Shares in LG Household, the No. 2 South Korean firm in the domestic market with brands Whoo and O Hui, climbed 3 percent on the news of the potential bid.

LG Household has expanded its overseas operations in recent years through acquisitions in China and Japan and has said it would consider additional acquisitions to boost its existing operations.

Florence Nightingale AKA Elizabeth Arden

LG Household has yet to decide on whether to make a formal bid for Elizabeth Arden, a spokeswoman for the company said, responding to a report in the Maeil Business Newspaper. She added that bidding

for the company was one of several options but declined to elaborate further.

“Elizabeth Arden gets 78 percent of its sales from perfume, which is a product area where local companies are weak,” said Meritz Securities analyst Song Kwang-soo. “Acquiring Elizabeth Arden would also add a luxury brand to the line-up, which would be positive.”

Elizabeth Arden’s net income attributable to shareholders fell to US$34.95 million for the fiscal quarter than ended Dec. 31, down from US$44.81 million a year earlier as sales in its key North America market slowed.

The U.S. company’s product lineup includes celebrity brand perfumes such as those of Taylor Swift and Justin Bieber, as well as skin care brands like Ceramide and Prevage.

Reuters

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April 24, 2014

Asia

forecast

Aussie inflation tamed

KEY POINTS

price forecast

FY2013 CPI may exceed BOJ’s 0.7 pct forecast - Kuroda

Prices fell in the cost of clothing, furniture, holiday travel and car maintenance

Adds Japan on track to meet BOJ’s price target Deputy governor says Japan can withstand tax hike pain Kuroda repeats BOJ will act if risks threaten price goal

BOJ to ease policy around July on the view economic growth will not be strong enough to push inflation to 2 percent any time soon.

The BOJ now expects core consumer inflation to accelerate to

1.9 percent in the fiscal year ending March 2016 from 1.3 percent in the current business year to March 2015, excluding the impact of the sales tax hike.

In the new projections due on April 30, the BOJ will likely keep its inflation forecast for fiscal 2015 roughly unchanged from the current 1.9 percent. The central bank is also set to estimate fiscal 2016 inflation close to 2 percent, signalling that it is optimistic of achieving sustained price rises over a longer time frame, sources have told Reuters.

The BOJ has stood pat on policy since delivering an intense burst of stimulus in April last year, pledging to double base money via aggressive asset purchases to accelerate consumer inflation to 2 percent in roughly two years.

Japan’s core consumer prices rose 1.3 percent in February from a year earlier, the ninth straight month of increase, as the weak yen inflated import costs and a recovering economy allowed more companies to pass on higher costs to consumers.

Reuters

T

he datum was surprisingly restrained last quarter showing a moderation that greatly lessened the pressure for a hike in interest rates this year and sent the local dollar sharply lower.

A key measure of underlying inflation rose by only 0.5 percent in the first quarter and 2.6 percent for the year, well below forecasts of 0.7 percent and 2.9 percent respectively.

That was a big relief following a high reading the previous quarter and supported the Reserve Bank of Australia’s (RBA) confidence that inflation would stay consistent with its long-term target of 2 to 3 percent.

“The coast is relatively clear on the inflation front for the RBA to keep rates low,” said Ben Jarman, and economist at JPMorgan. “On the inflation front itself, things look relatively benign still.”

Investors reacted by paring back the risk of a hike in the 2.5 percent cash rate at least until very late in the year.

That in turn knocked the Australian dollar down over half a U.S. cent to US$0.9303, though local yields still remain high by rich-world standards.

Yesterday’s anxiously awaited

report from the Australian Bureau of Statistics showed the headline consumer price index (CPI) rose 0.6 percent in the first quarter, from the previous quarter when it climbed 0.8 percent.

The annual pace did edge up to 2.9 percent, the highest since late 2011, but that was well below forecasts of 3.2 percent.

The quarterly increase was driven in part by seasonal increases in some sectors such as healthcare, transport and school fees, and by a large hike in tobacco duties.

Education costs have been one of the main drivers of inflation, climbing by 5.1 percent in the year to March.

That was balanced by falls in the cost of clothing, furniture, holiday travel and car maintenance.

The RBA had argued the pick up in inflation seen last year was temporary and that sluggish wage growth would keep it consistent with the target band over time.

“That high Q4 reading just never fit with weak wage growth and rising unemployment,” said Michael Turner, a strategist at RBC Capital Markets.

Reuters

Obama and Abe face decisive trade discussions An agreement between the United States and Japan is crucial for setting the tone for other countries engaged in the TPP

A

meeting between U.S. President Barack Obama and Japanese Prime Minister Shinzo Abe this week in Tokyo may not seal one of the world’s biggest trade pacts, but it could give it a much-needed boost.

A central element of Obama’s strategic shift towards Asia, the TransPacific Partnership (TPP) would connect a dozen Asia-Pacific economies by eliminating trade barriers and harmonizing regulations in a pact covering two-fifths of the world economy and a third of all global trade.

After four years of talks and missed deadlines, negotiators from several TPP countries say they hope Thursday’s summit will lay the groundwork for tough concessions, including a possible easing in Japan’s protectionist stance on beef, sugar, dairy and wheat - a step that could breath life into the struggling TPP. “Hopefully this will provide some clarity about the level of ambition we can expect in a hopefully successful TPP,” New Zealand Trade Minister Tim

Groser said.

The White House had hoped to complete the deal last year but has faced disagreements over barriers such as Japanese import duties on agricultural products. Tokyo is fighting to maintain import tariffs in five agricultural categories: rice, wheat, dairy, sugar, and beef and pork products.

Washington, meanwhile, has sought ways to protect U.S. carmakers from their Japanese rivals.

Experts are looking for signs of concessions, especially from Japan given its staunch protection of its beef, sugar, dairy and wheat industries. Under one optimistic scenario, the leaders could announce they expect concrete outcomes soon, perhaps next month, when TPP negotiators meet in Vietnam.

A senior U.S. official said the summit would likely produce a statement giving a nudge for the negotiations to move to the next stage, a view shared by some industry groups.

“I think it will be something artfully worded to say we have made significant

progress and our negotiators continue to work on this with a goal of concluding,” said James Fatheree, senior director for Japan and Korea at the U.S. Chamber of Commerce in Washington and president of the U.S.Japan Business Council.

High stakes The stakes are high for both Obama and Abe. Failure to unveil a significant advance could stall the ambitious pact, undermining the tradepolicy arm of Obama’s so-called “pivot” of U.S. military, diplomatic and trade resources to the AsiaPacific region.

An agreement between the United States and Japan is crucial for setting the tone for other countries engaged in the TPP: Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

An official from a developing country involved in the negotiations said failure to move talks forward during Obama’s trip would make it difficult to clinch a TPP deal.

It would probably be worse for Obama because he would be seen as not able to deliver, whereas Abe would be seen as defending national interests Aurelia George Mulgan, Japanese politics professor, University of New South Wales

“We all want to be optimistic about reaching a deal, but the reality is on the basis of the declarations made by officials from one country or the other, there are still important differences to be resolved.”

Some countries such as Malaysia are still a long way from signing up to a TPP pact. “We are not ready and I think some of the other countries are also not ready,” Paul Low, a minister in the Malaysian Prime Minister’s Department, was quoted as saying by The Edge financial daily.

Failure would also hurt Abe’s ‘Third Arrow’ plan to kick-start Japanese economic growth through structural reforms.

“It would probably be worse for Obama because he would be seen as not able to deliver, whereas Abe would be seen as defending national interests,” said Aurelia George Mulgan, Japanese politics professor at Australia’s University of New South Wales. “However, internationally, failure could be bad because the ‘Third Arrow’ looks even floppier.”

Reuters

14

April 24, 2014

International

Pharma industry reshapes

Fiscal watchdog dampens French optimism

Drug makers anticipate drug combinations will become the future of cancer care

France’s independent fiscal watchdog said yesterday the government’s growth forecasts for 2016 and 2017 were “optimistic”, while the 1.7 percent target for 2015 was attainable but dependent on favourable circumstances. The High Council for Public Finances, weighing in on the government’s three-year budget plan ahead of its submission to the European Commission later, said the government’s forecast for 1.0 percent growth in 2014 was “realistic.” The government’s budget outline, which is partly based on these growth forecasts, is under close scrutiny from Brussels, which has already given Paris two extra years to bring the deficit to below 3 percent of output by end-2015, in line with EU rules.

N

ovartis and GlaxoSmithKline agreed to trade more than US$20 billion worth of assets on Tuesday to bolster their best businesses and exit weaker ones as the drug industry contends with healthcare spending cuts and generic competition.

The deals, which include Novartis’ purchase of GSK’s cancer drugs and GSK’s acquisition of Novartis’ vaccines business, came just after a newspaper report that AstraZeneca Plc. had turned down a US$101 billion bid approach from Pfizer Inc., a story that sent shares up across the sector.

In addition, Novartis is selling its animal health arm to Indianapolisbased Eli Lilly for about US$5.4 billion in cash. That would make Lilly’s Elanco unit the world’s secondlargest animal health business when that deal closes early next year.

A flurry of deal making has overtaken the global pharmaceutical industry recently as most large companies try to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale.

Deal values have almost doubled since the start of 2014 to US$77.9 billion from a year earlier, according to Thomson Reuters data.

The overhaul at Novartis marks the end of a yearlong review of its sprawling portfolio after the departure of long time Chairman and Chief Executive Officer Daniel Vasella, the architect of the merger of Ciba-Geigy and Sandoz that led to the company’s formation in 1996.

The Swiss drug maker said it would buy London-based GSK’s oncology products for US$14.5 billion plus another US$1.5 billion that depends on the results of a trial in melanoma.

The deal will strengthen Novartis’s world No. 2 position in cancer behind crosstown rival Roche Holding AG. Novartis said GSK was buying its vaccines, excluding flu, for US$5.25 billion plus potential milestone payments of up to US$1.8 billion and on-going royalties. The companies

Peru central bank slashes GDP growth Variety of pills one of the most profitable strategies for pharmaceutical companies

also will form a joint venture in consumer healthcare.

Lilly’s Elanco animal health unit will acquire about 600 animal health brands from Novartis, including vaccines and anti-parasite medicines that will allow it to enter the aquaculture, or fish farming, market.

This would be the eighth and largest acquisition since 2007 for Elanco, which by global sales would trail only Zoetis Inc , which also specializes in products for farm animals and pets.

“With this transaction, we’ll go from being No. 5 to No. 3 on the pet side globally and become a top 2 or 3 player in every segment” of products for farm animals, Jeff Simmons, Lilly’s head of animal health, said in an interview.

Last year Elanco had sales of US$2.15 billion, compared with US$1.1 billion for Novartis Animal Health.

Fighting fit Novartis CEO Joe Jimenez said the revamp would help make the

company “fighting fit” to meet the challenges of the global healthcare industry over the next 10 years.

He told reporters the deals would lower overall sales by about US$4 billion but result in higher profits as the company swaps lower-margin vaccines for higher-margin oncology drugs.

Cancer is a particular focus for some drug makers as novel medicines show promise by boosting the body’s immune system.

Analysts at Swiss broker Notenstein were also upbeat, saying the new cancer drugs would help Novartis to navigate patent expiries on top-selling medicines more easily.

However, analysts at Barclays described the price tag of as much as US$16 billion for the oncology assets as “rather hefty.”

Drug makers are stocking up their oncology pipelines as they bet that combinations of drugs will become the future of cancer care. A desire to boost its oncology business is seen as a key factor behind Pfizer’s reported interest in AstraZeneca.

Bloomberg News

Germany results better than forecast French composite measure of both services and manufacturing declines

G

erman manufacturing and services strengthened more than economists forecast this month, adding to signs that the euro area’s largest economy is underpinning the region’s recovery.

A factory index based on a survey of purchasing managers rose to 54.2 from 53.7 in March, Markit Economics said in London yesterday.

Economists had forecast 53.8, based on the median of 27 estimates in a Bloomberg News survey. A reading above 50 indicates expansion. A separate services gauge jumped to 55 from 53, also exceeding forecasts.

The Bundesbank has said Germany’s economy probably strengthened at the start of the year and European Central Bank President Mario Draghi predicts an “ongoing recovery” for the 18-nation currency bloc. At the same time, the crisis in

Ukraine and low inflation pose risks, with Markit’s surveys showing price pressures eased this month.

The Purchasing Managers’ Index indicates that the economy “is set to build on the foundation of last quarter’s solid growth,” said Oliver Kolodseike, an economist at Markit.

“Price data meanwhile point to an increasing risk of deflationary pressures in the euro zone’s largest economy.”

Composite index A composite index of both manufacturing and services in Germany rose to 56.3 in April from 54.3 in March, Markit said.

According to that survey, input costs were unchanged in April, ending a nine-month period of rising prices.

Costs at service companies increased

the slowest in 44 months, while manufacturers saw input prices fall the most since July.

Separately, a French composite measure of both services and manufacturing declined to 50.5 in April from 51.8 in March. The report also showed that service providers and manufacturers both cut selling prices at faster rates this month.

Euro-area inflation slowed to 0.5 percent in March from 0.7 percent in April. That compares with an ECB target of below but close to 2 percent.

The European Union’s statistics office is due to publish inflation for this month on April 30 and the ECB will hold its next monetary-policy meeting on May 8. The central bank has kept its benchmark rate at a record-low 0.25 percent since November.

Bloomberg News

The central bank slashed its forecast for this year’s economic expansion to 5.5 percent from 6 percent on dimmer expectations for the country’s crucial mining sector, the bank’s president said. The new growth forecast, scheduled to be published in a quarterly report on Friday, points to a less dramatic economic rebound in 2014 after last year’s slowdown than the central bank and government had previously estimated. The central bank and finance ministry said late last year that the economy would likely grow around 6 percent in 2014.

Citigroup needs to simplify The two men at the top of Citigroup Inc, the third-biggest U.S. bank and the most international, acknowledged on Tuesday that the company must do more to simplify itself. Asked at an annual meeting of shareholders whether Citigroup is too big to manage, Chairman Mike O’Neill said the task “is certainly harder” for its size and that the company has more years of work in a drive to reduce risk and complexity that started when the company was bailed out in the financial crisis.

Egypt to pay back oil debt The African country will pay about $1 billion of the money it owes to foreign oil companies within the next two months, the state’s MENA news agency said, quoting Oil Minister Sherif Ismail. Egypt says it owes some $6.3 billion to those companies.

It last year said it paid $1.5 billion of the money it owes the international firms as part of a repayment scheme seeking to revive confidence in the economy after years of turmoil.

Businessman Wyly takes stand in trial Texas businessman Sam Wyly took the stand in his civil trial in New York on Tuesday and denied U.S. Securities and Exchange Commission claims that he and his brother used a complex network of offshore trusts to conceal years of stock trades and net US$550 million in undisclosed profit.

The SEC has accused Wyly and his brother of hiding stock trading from 1992 to 2004 in four companies on whose boards they sat. It alleges the brothers hid the transactions within a complicated structure of more than a dozen trusts and 40 offshore entities.

15

April 24, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The Second Opening of Japan Shinzo Abe

Prime Minister of Japan

THE TIMES OF INDIA Reports that L&T Finance was eyeing a deal with YES Bank created a flutter late Tuesday evening with no confirmation or categorical denial from either side. L&T Finance was at one time seen as a front-runner in the race for a banking licence.

However, its aspirations remained unfulfilled with the Reserve Bank of India choosing to award a licence to IDFC and Bandhan Microfinance.

Television channel ET Now reported late Tuesday that L&T Finance was eyeing the promoters’ stake in YES Bank, which is held by two family groups.

THE NEW ZEALAND HERALD The Easter weekend trading laws aren’t working and need an overhaul, Prime Minister John Key says.

His comments come after 18 complaints were made about businesses flouting Easter weekend trading laws this year, but none will be prosecuted. “I don’t think the law is working terribly well, but I’ve always voted in favour of liberalisation of trading laws when it comes to Easter weekend,” Mr Key said. He said that if the Easter trading laws were to be changed it would come from a shift in the majority of Parliament.

PHILSTAR Market optimism pushed the Philippine Stock Exchange index (PSEi) past the 6,800 level for the first time this year before profit taking tempered gains in yesterday’s trading.

The main composite index gained 0.26 percent or 17.44 points to 6,784.95, marking its fourth straight day in the green. It was the PSEi’s best since closing at 6,800.11 on July 25, 2013. The main index hit an intraday high of 6,815.26 before some investors opted to pocket gains. The string of good news here and abroad encouraged investors.

THE JAPAN NEWS Finance Ministry statistics have cast a dark cloud over government strategy to conquer deflation and improve the balance of trade through depreciation of the yen. The figures show that the weak yen has so far failed to spur Japan’s exports as much as expected. According to the ministry’s statistics released Monday, Japan incurred a record ¥13.75 trillion trade deficit in fiscal 2013, a 70 percent increase from the previous record posted in fiscal 2012. In fiscal 2013, imports totaled ¥84.6 trillion, the largest since fiscal 1979.

T

OKYO – US President Barack Obama is visiting Tokyo at a unique moment in my country’s history, with Japan’s economy moving onto a stable new growth path that will take full advantage of its geographic position. Japan no longer considers itself the “Far” East; rather, we are at the very centre of the Pacific Rim, and a neighbour to the world’s growth centre stretching from Southeast Asia to India.

There can be little doubt that this growth centre will continue to propel Japan’s economy for the foreseeable future. Japanese direct investment is expanding in Vietnam and India, for example, which will boost demand for Japanese machine tools and capital goods.

But, to maximize its opportunities, Japan must open its economy further and become a country that actively incorporates capital, human resources, and wisdom from abroad. Japan must be a country capable of growing by channelling the vitality of a growing Asia.

To this end, we have sharply accelerated the pace of negotiations on economic partnership agreements, or EPAs, with various partners around the world. Earlier this month, Australian Prime Minister Tony Abbott and I reached agreement in principle on a Japan-Australia EPA. Next in line is the Trans-Pacific Partnership (TPP), which would unite 12 countries in the world’s largest trading area.

Both Japan and the United States attach great importance to rules, uphold the principles of freedom and democracy, and possess the most advanced technologies and

Japan must open its economy further and become a country that actively incorporates capital, human resources, and wisdom from abroad

industries. We intend to overcome our differences and together forge, in the form of the TPP, a twenty-first-century economic order for Asia and the Pacific that will serve as an unshakable foundation for growth.

My government is also pushing hard to realize an EPA with the European Union.

Given that the US and the EU already are engaged in trade talks, an EPA between Japan and the EU, coupled with the TPP, will give rise to a truly immense market – a single enormous growth engine that will benefit the entire global economy.

But Japan’s economic frontiers extend well beyond Asia and the Pacific, to Latin America and Africa – more reason to abandon our long-held inwardlooking perspective. A large number of highly motivated and ambitious young people

have already come to Japan from around the world, especially from neighbouring Asian countries, to study or work. Japan must remain their hope. We must not be disrespectful of them, and our arms must always be wide open towards them. Japan, I believe, is that kind of country.

In the near future, we will designate six National Strategic Economic Growth Areas – Tokyo, Kansai, Okinawa Prefecture, and the cities of Niigata, Yabu, and Fukuoka – to serve as models for the rest of the country.

In health care, education, agriculture, and employment practices, we are identifying policies and practices that have fallen out of step with today’s needs, and we will move quickly to reform them. The National Strategic Economic Growth Areas will insert the probe of reform down into our regulatory system, which has hardened into bedrock.

Another habit that Japanese must change is our pervasive male-oriented thinking. We have already resolved to ensure that at least 30% of all personnel hired by the national government are women. I am also now urging publicly traded companies to add at least one woman as a board member.

Once we reach the point at which it is no longer news to have a woman or a nonJapanese serving as a CEO, Japan will have reinvented itself and recovered its true spirit of risk-taking and innovation.

“Womenomics” tells us that a society in which women are dynamically engaged will also have a higher birth rate.

My government intends to address, urgently, the need

to expand day-care facilities and other such infrastructure as the foundation for a society that benefits from all of its members’ skills and talents.

We are fully capable of change; indeed, we relish it, as the world will see in the months and years to come.

But some things about Japan are unchanging, and some must not be changed.

One of these is our track record, which supports our ambition to be a “proactive contributor to peace.” Japan has made more than its fair share of financial contributions to the United Nations and its organizations, both historically and today. And our embrace of our global responsibilities extends to Japan’s Self-Defence Forces.

Members of the Self-Defence Forces displayed exemplary cooperation with the US and Australian armed forces in the wake of the Great East Japan Earthquake in 2011, and they have earned deep appreciation and respect everywhere they have been deployed, including Haiti, Indonesia, and most recently, the Philippines.

To make a proactive contribution to peace means that Japan will bear its own share of responsibility for assuring the security that supports global prosperity and stability. Working alongside countries with which we share common values and interests, we will safeguard and cultivate international public goods, ranging from space and cyberspace to the skies and the seas.

As the world will see during Obama’s visit, Japan is back and thriving. And its return is indispensable for global stability and prosperity.

The Project Syndicate 2014

16

April 24, 2014

Closing U.S. backing to take on “aggressors”

Boeing profit beats estimates Boeing Co. posted a first-quarter profit that beat analysts’ estimates, buoyed by rising commercial-jet deliveries as the world’s largest plane maker stepped up the production tempo. Earnings excluding pension expense were US$2.1 billion, or US$1.76 a share, Boeing said yesterday. Boeing raised its 2014 forecast for so-called core earnings per share to a range of US$7.15 to US$7.35, a 15-cent boost on both ends, citing a tax settlement.

Ukraine’s government relaunched a security operation to crack down on pro-Russian armed groups after an Easter pause and said it had the backing of the United States. Prompted in part by the discovery of the body of a Ukrainian politician who appeared to have been tortured, officials in Kiev decided to renew what they call an “anti-terrorist operation” against separatist militias who have seized control of about a dozen public buildings in eastern Ukraine.

Drier season

Prediction Centre said this month, boosting the odds to 65 percent from 52 percent. The weather pattern may develop

by July, Australia’s Bureau of Meteorology said on Tuesday.

El Ninos occur irregularly every two to seven years and are associated with warmer than average years. They tend to lead to abnormally dry conditions over parts of Australia, the Philippines and Indonesia, and to more intense storms in the Gulf of Mexico. Their counterpart, La Ninas, are associated with cooler years.

Monsoon in South Asia less likely as El Nino approaches Pratik Parija

S

outh Asia, home to a quarter of the world’s population, will probably get less monsoon rainfall than normal this year as odds of emergence of an El Nino that previously caused droughts in the region increase.

Farmlands in India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, Myanmar and Afghanistan are most likely to get “belownormal to normal rainfall” amid consensus among experts about the possibility of the El Nino during the June-September monsoon season, the South Asian Climate Outlook Forum said in a statement in Pune yesterday. Rain is seen below normal in western, central and southwestern parts of South Asia, it said.

The monsoon showers are critical to crops from sugar to rice and cotton in South Asia as more than 50 percent of the region’s farmland is rain-fed. The rainfall is the main source of irrigation for India’s 235 million farmers and less than normal precipitation can curb farm output, lower rural incomes and hamper a rebound in economic growth

Sugarcane, Soybeans

from near the lowest level in a decade.

El Nino intensity “There is strong consensus among the experts about the possibility of evolution of an El Nino event during the

summer monsoon season,” the forum said. “However, it is recognized that there is uncertainty in the intensity of the El Nino. There is also consensus about the potential for adverse impacts of El Nino on the monsoon rainfall over the region.”

Signs have been detected that El Nino is imminent, presaging changes to global weather patterns in the months ahead, the World Meteorological Organization said last week. The chances that an El Nino will develop are growing, the U.S. Climate

India received normal or more-than-normal rains during only three El Nino years out of the past 10 occurrences while the remaining were drought years, according to data from the meteorological department. Monsoon rainfall was the least in almost four decades in 2009, when El Nino occurred last, data show.

Rice and oilseed harvests fell 10 percent, according to Agriculture Ministry data.

An El Nino has not always resulted in weak monsoons in India and mitigating factors this year may include comfortable reservoir water levels and excess food grain stockpiles, Rohini Malkani and Anurag Jha, Mumbai-based analysts at Citigroup, said in a report recently.

The South Asia Climate Forum, set up in 2009, issues annual monsoon forecasts for the region as the season accounts for 75 percent to 90 percent of the precipitation.

Bloomberg

Portuguese public sector deficit at 4.9%

Groundwater is poor or worse in China

China to allow private investment in 80 projects

P

A

C

ortugal’s public sector budget deficit in 2013 shrank to 4.9% of gross domestic product while public debt continued its rise to end the year at 129% of GDP, the European Union’s statistical office, Eurostat, confirmed yesterday.

The figures are in line with data released by the National Statistics Institute three weeks ago.

In its report, Eurostat said the 2013 deficit represented a decrease of 1.5 percentage points on the 2012 figure, while the debt swelled by 4.9 points over the year.

Portugal is one of 10 EU member states whose deficit in 2013 was above the 3percent limit. The others are Slovenia, Greece, Ireland, Spain, the UK, Cyprus, Croatia, France and Poland.

There are 15 other EU members whose debt is above the 60 percent limit.

Portugal is preparing to exit the euro-zone bailout it sought three years ago. The 2013 deficit is within the range agreed with international lenders.

Lusa

lmost 60 percent of the groundwater at 4,778 sites monitored across China has been found to be of poor or extremely poor quality, contaminated with pollutants that exceed acceptable standards. About 16 percent of the sites saw water quality worsen from the previous year, the Ministry of Land and Resources said in the 2013 annual report posted on its website. Excesses were found of manganese and fluoride, with some monitored sites showing high lead, chromium or arsenic levels. China has become more vocal about trying to curb water, air and soil contamination in the nation of 1.3 billion people. More than 2 percent of the country’s arable land, an area the size of Belgium, is too polluted to grow crops, Vice Minister of Land and Resources Wang Shiyuan said in December. China leads in global coal consumption, the dirtiest of fossil fuels.

A clean-water action plan is being readied to protect drinking sources, Premier Li Keqiang said in March, declaring “war” on smog in a speech and vowing to shut coal-fired furnaces among other measures.

Bloomberg

hina will allow private investment in 80 projects spanning the energy, information and infrastructure sectors as part of reforms to increase privatisation, Premier Li Keqiang said yesterday. The 80 projects involving solar energy, hydro power, wind power, and oil and gas pipelines, previously areas monopolised by the state, will be open to public tender, Li said. In future, other sectors such as utilities, airports and oil and gas exploration will also be open to more private investment, he told a weekly cabinet meeting. His comments were posted on a government website and no further details were provided. Allowing more private investment in China’s centrally planned economy is part of government’s plans to reduce state intervention and let market forces play a bigger role in the world’s second-biggest economy. Investment by state-owned companies and provincial and city governments, which have combined outstanding debt of US$3 trillion as of June last year, have been criticised by some analysts for being inefficient.

Reuters