Macau Business Daily, Jan 5, 2014

MOP 6.00 Closing editor: Sara Farr

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www.macaubusinessdaily.com

Year III

Number 554 Thursday June 5, 2014

Publisher: Paulo A. Azevedo

Roll out the red carpet

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ainland Chinese visitors to Macau will increase 20 percent in the next five years. That’s a million a year. Business Monitor International estimates that more than 22 million mainlanders will visit the territory in 2018. The already huge market of 88.1 million mainland tourists travelling the world will balloon to 122.5 million that same year

ETG market to increase 60pct

Give me the money

There are around 5,500 electronic table games in service throughout Macau casinos. This figure is set to increase by 60 percent to 9,000 as the segment grows with the influx of new casino openings on Cotai

Loans granted in April totalled 292.1 billion patacas. Representing a 2.9 percent increase over that of the previous month, some 62.9 percent were Hong Kong dollar-denominated

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Hengqin rescinds registered capital restrictions for Macau investors Page 2

Okada faces another criminal complaint

Studio City sizzling

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The budget for Studio City has increased 15 percent to US$2.3 billion from US$2 billion. The cinematically-themed resort project – with retail and gaming - is slated to open mid-2015

HSI - Movers June 4

Name

Page 7

Remembering Tiananmen

%Day

Cathay Pacific Airwa

1.26

BOC Hong Kong Holdi

0.85

Want Want China Ho

0.75

Power Assets Holdin

0.67

Swire Pacific Ltd

0.58

Galaxy Entertainme

-2.00

China Overseas Land

-2.22

China Resources Lan

-2.29

Tencent Holdings Ltd

-2.50

Henderson Land Dev

-2.81

Source: Bloomberg

I SSN 2226-8294

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June 5, 2014

Macau

Hengqin: Registered capital restrictions for Macau investors rescinded The rule that firms would have to prove registered capital of at least 100 million yuan, to the chagrin of SMEs, has been rescinded Stephanie Lai

sw.lai@macaubusinessdaily.com

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he Hengqin authorities have rescinded the registered capital requirement of at least 100 million yuan (US$16 million) for any company wanting to purchase plots of land in a specific zone on the island reserved for Macau investors, Hong Kong-listed restaurant operator Future Bright Holdings Ltd – an investor in the zone – has revealed to Business Daily.

In April, the Macau Government announced that it had recommended 33 of 87 projects to Hengqin for investment in a 4.5 square kilometre space reserved exclusively for Macau investors, known as the ‘GuangdongMacau Cooperation Industrial Park’, comprising different zones designated for the tourism and leisure industry, cultural and creative industry, information technology and other trade services.

Chan Chak Mo, legislator and managing director of Future Bright, said that the Hengqin authorities are rescinding the requirement that any company that wants to purchase

land plots in the special zone must prove registered capital of at least 100 million yuan – a term that has previously provoked criticism by local small and medium-sized companies as being too high an investment threshold.

Corporate

MGM Macau supports Special Olympics Macau Golf Masters 2014 As before, MGM Macau participated in this year’s Special Olympics Macau Golf Masters 2014 by acting as one of the major sponsors of the three-day competition held at Caesars Golf Macau. More than eighty international golfers, descended on the territory from all over the world: Spain, Zimbabwe, South Africa, India, Israel, Malaysia, South Korea, Mainland China, Taiwan, Hong Kong and Macau, to swing into action for the competition.

Grant R. Bowie, chief executive officer and executive director of MGM China Holdings Ltd, and his management team took part in the competition as guardian players. He said: “It’s fulfilling to be part of this competition, which emphasises sportsmanship and respect among players. We’re proud to be one of the major sponsors of such a meaningful event this year, and we look forward to supporting it again next year.”

The company also extended a warm welcome to the Special Olympics delegation off the golf course. Guided by MGM Macau’s golden lion team, they visited the water-sky aquarium and watched a fish feeding show. The purpose of this activity was to increase awareness of marine conservation and protection.

“It’s during the talk that we had with the Hengqin authorities in mid-May that they mentioned the cancellation of the registered capital requirement for investors launching projects [in the Guangdong-Macau Cooperation Industrial Park],” Mr.

Chan told Business Daily.

Some of the investors of the 33 recommended projects investing in Hengqin, including Future Bright, are already in talks with Hengin authorities on land use terms and the land premium cost this month, Mr. Chan revealed.

“So the firms that are purchasing land plots in the zone will then only need to pay the land premiums, the corporate tax and professional tax to the Hengqin government,” Future Bright’s managing director said.

However, both the Hengqin authorities and the Macau Trade and Investment Promotion Institute – the unit that led the recommendation of Macau investors to the island have yet to confirm the news of the cancellation of the registered capital officially, Business Daily learnt.

Mr. Niu Jing, director-general of the Hengqin Administrative Committee, said in April that the total investment amount of the 33 projects recommended by the Macau Government exceeds 140 billion yuan.

A quarter of a century: Remembering Tiananmen D ozens gathered last night in Senado Square to hold a vigil marking the 25th anniversary of the Tiananmen massacre that killed hundreds of students and protesters in 1989, according to figures from NGOs. The Chinese central government, however, continues to deny such accusations.

This was the first time since 1999 that a vigil was allowed to be held in Macau’s main square. In previous years, a vigil was allowed downtown but only outside S. Domingos Church.

The annual vigil is usually organised by the United Citizens’ Association led by legislators Au Kam San and Ng Kuok Cheong, who are also members of the New Macau Association led by Jason Chao.

Senado Square is usually reserved

for International Children’s Day activities. However, the site this year was free after an association of students from Chong Wa school cancelled their request for the space in a document handed to the Civic and Municipal Affairs Bureau (IACM).

Jason Chao had previously requested holding the vigil there but was denied due to activities relating to Children’s Day. The students’ association, however, cancelled their activities there in memory of Ma Man Kei, whose funeral was held the same day. This left the Civic and Municipal Affairs Bureau without reason to reject a request to hold the annual vigil at Senado Square.

Macau and Hong Kong are the only places in the whole of China where the date of June 4, 1989 is publicly remembered.

China Guangfa Bank announces record profits T he Macau branch of China Guangfa Bank recorded a profit of 102 million patacas for the whole of 2013, according to the group’s annual results published yesterday in the Official Gazette.

These results mean that profit increased 27 percent in comparison to the previous year, while earnings

were 80.3 million patacas. In the annual results it is also mentioned that the Macau Branch of the Chinese bank - which counts Citigroup, China Life Insurance, CITIC and State Grid Yingda among its largest shareholders – had achieved its best result since opening in the former Portuguese enclave some 20 years ago.

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June 5, 2014

Macau

Macau to get 22 million mainland tourists in 2018 Chinese visitors to Macau will grow 20 percent in the next five years at a rate of a million new mainland tourists every year, according to Business Monitor International. The SAR will attract 20 percent of all Chinese tourists travelling abroad in 2018 Alex Lee

Alex.lee@macaubusinessdaily.com

41.6 million estimated for this year, BMI reports. Hong Kong will capture more than half of all Chinese tourists travelling outside the country in 2018, a number that will probably resonate in government’s ears today as the pressure for limiting visas for Chinese in the territory is a hot topic in the city.

On the other hand, Macau will attract 22 million mainlanders in the next five years, around 20 percent of all the Chinese outbound travelling market.

Macau, the world’s leading gaming mecca, pretends to also be a worldwide tourist destination in the next decade as casinos start to diversify their portfolio with entertainment, retail and new amenities. Last year, 29.3 million visitors arrived in Macau, with 60 percent of them mainlanders (17.5 million). In 2018, Macau will get more Chinese visitors than the eight biggest foreign destinations for mainlanders (including Thailand, Taiwan, South Korea and Japan), after Macau and HK,

Still risky

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he number of mainland tourists in Macau will increase 20 percent in the next five years strengthening the territory’s position as the second biggest foreign destination for Chinese travellers after Hong Kong, a report from Business Monitor International (BMI) reveals.

The UK-based research firm with clients in 140 countries, including half of the Fortune 500 companies, estimates that more than 22 million mainlanders will visit Macau in 2018, 20 percent more than expected for 2014 (14 million). Every year, Macau’s shops, casinos, hotels and historical sites will see Chinese clients growing by a million annually, BMI says.

Despite the recent slowdown and the unlikely scenario of another decade of annual two-digit growth, China’s economy is still set for strong expansion, boosting a middle class

with better income and willing to travel more.

BMI estimates that China’s nominal Gross Domestic Product (GDP) will expand 30 percent until 2018, matching the US economy that year. In the same period, household consumption will increase 8 percent annually, with unemployment steady at 5% and inflation at 2.75%, less than half of Macau’s. “These economic conditions mean that the burgeoning middle-class population will have increasing amounts of disposable income, which increases potential for domestic and outbound travel,” writes the research company in a report about China Tourism.

Asia dominates And potential is what is not lacking when you talk about travel

and mainlanders. BMI expects that Chinese tourists will rise 50 percent between 2014 and 2018, growing at a rate of 10 percent per year. The actual and already huge market of 88.1 million mainland tourists travelling abroad will stretch to 122.5 million in 2018. This means, 10 million potential new clients for the travel industry, especially Hong Kong and Macau, the major destinations for mainlanders.

Even with income and the will to travel far like Europe or the US, the Asia Pacific region will continue to be the preferred choice in the years to come, says BMI. And for the Chinese there’s no better place than Hong Kong and Macau, even if they still need a visa to enter the two SARs. In 2018, Hong Kong will receive more than 60 million mainland tourists, 50 percent more than the

Despite the booming casino and travel industry, BMI emphasised that Macau still has a higher risk as a destination than other famous areas like Hong Kong, Australia or Singapore. The market risk and excessive casino dependency is one of the points highlighted by the research company. The strongest suit of Macau is its tourism market with a wide range of choices from resorts, casinos, shopping and entertainment.

BMI calls the new Chinese tourists an ‘enormous potential market,’ a global opportunity that famous destinations like Europe or the US are already starting to compete for. But the road is long. The US, for example, is only the 10th most popular destination for mainlanders, attracting only 1.5 million visitors (3 percent of the total), while Europe stays in the Top 20, with a marginal presence.

KEY POINTS Chinese tourists in Macau will jump from 18 to 22 million between 2014 and 2018 Hong Kong and Macau will attract 70 percent of all mainlanders travelling abroad in 2018 Macau attracts more Chinese visitors than Taiwan, S. Korea, Thailand and Singapore combined

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June 5, 2014

Macau

No public consultation IPIM organises Maputo on southern LRT route business trip The Transportation Infrastructure Office is not planning to hold a public consultation session on the new Light Rail Transit (LRT) route serving NAPE, ZAPE, Nam Van, Sai Van and Barra

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public consultation open session on the new route for the Light Rail Transit (LRT) is not likely, the Transportation Infrastructure Office (GIT) told Business Daily yesterday.

However, GIT stressed that the route design has the tentative support of Legislative Assembly members.

GIT announced Tuesday a six-station route for the south LRT in the South of the Macau Peninsula. According to the information release, the new stations will be in Praca de Lotus, Jardim das Artes, the Science Museum Centre, Nam Van, Sai Van and Praia Grande. Instead of launching a public consultation on the issue, GIT has opted to organise a street exhibition, which started on Tuesday and will run until July, to showcase the route to Macau citizens.

The Office also denied that there was a consultation for

the opinion of such groups as casinos. “We haven’t received any particular suggestions or opinions from the casinos on the route,” a spokesperson from the Office told Business Daily, “And on this issue we’ll not be having talks with any particular groups.”

In order to speed up the process, GIT hopes that the public tender will be launched by the latest in the first months of next year. “We’ll

be targeting to launch the public tender for the route by the end of this year or early next year,” the Office spokesperson added.

The design for the southern Macau Peninsula is expected to be quite challenging and so GIT has opted to build an elevated metro for the part of the route that crosses Avenida 24 de Julho. “The construction for the LRT transit system in Macau will be much more complex due to the road conditions than in Taipa. It is fair to think that it may take a longer period for establishing the system on the Peninsula than in Taipa,” it was noted.

“We’ve already spent five years on the route construction system in Taipa,” the spokesperson added.

According to the government, the Macau LRT will cost at least 11 billion patacas and is expected to be operational in Taipa by 2016.

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he Macao Trade and Investment Promotion Institute (IPIM) is organising a business trip to Maputo, to be undertaken at the end of August, for a meeting themed on China and Portuguese-speaking countries cooperation.

According to Portuguese news agency Lusa, IPIM wants to create a delegation to be part of the ‘Meeting of Entrepreneurs for the Economic and Trade Cooperation Between China and Portuguese-Speaking Countries, Maputo – 2014,’ which will be held in the Mozambican capital city from August 17-24.

This year, the meeting will be organised by the Institute for the Promotion of Mozambique Exports (IPEX), China’s Council for the Promotion of International Trade (CCPIT) and IPIM. During the four days the event will last, there will be presentation sessions, networking opportunities, exhibitions and other activities.

The event seeks to ‘intensify cooperation between China and Portuguese-speaking countries and regions, to

explore new cooperation projects, as well as to strengthen economic and trade exchanges between all participants,’ according to IPIM’s press release.

The business meeting is part of the Trade Protocol signed by all nine trade promotion entities and chambers of commerce from China and Portuguesespeaking countries that participated in the Forum for Economic and Trade Co-operation between China and Portuguese-Speaking Countries (Macau), which was held in October 2003, adds IPIM. Following the meeting, IPIM and the Trade Department of the neighboring province of Guangdong will organise two seminars on economic cooperation, between 28th and 31st August, in Johannesburg and Dubai, in order to promote the economic situation and investment environment in Guangdong and Macau.

IPIM is preparing a business delegation to participate in the Mozambique, South Africa and United Arab Emirates events.

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June 5, 2014

Macau Gov’t inches away from closing Reolian takeover deal The government is also setting restrictive terms on how much a bus operator can make

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he government has only to announce the new operator that is to take over the bankrupted Reolian Public Transport Co Ltd, after which the public concession contract that will be inked will include profit control terms for the bus operator, Transport Bureau director Wong Wan and Legal Affairs Bureau director André Cheong Weng Chon told media in a press briefing yesterday.

Despite repeated queries on which company is going to take over Reolian, which announced its bankruptcy in October last year, Mr. Cheong stressed that the government would only announce the company’s name when all the terms for acquiring the bankrupted bus operator are finalised.

But Mr. Wong Wan noted that even if one of the existing bus operators – Transportes Urbanos de Macau SARL (Transmac) and Transmac and Sociedade de Transportes Colectivos de Macau SARL

(TCM) – were to take over Reolian’s assets and operation, it would have to establish a new firm to perform the role.

The government temporarily took over Reolian’s service and assets in October after the company announced bankruptcy, but the caretaker role ends on June 30, after which the government has requested an extension of the takeover from the court in March for another three months.

Both Transmac and TCM have been in contact with the government regarding the takeover of Reolian’s assets and operation, Mr. Wong Wan confirmed openly for the first time.

The new operator to take over Reolian should be “experienced in public transport” in Macau, which further restricts the pool of available investors that can take over the bankrupted firm.

Following Reolian’s takeover, the government is also signing a public

concession contract with the new operator instead of a public service contract. The change was prompted by a report released by the Commission Against Corrpution last year that pointed out that it was ‘illegal’ to sign public service contracts.

“We’ve also started talks with Transmac and TCM on switching the current public service contract to a public concession,” said Mr. Wong.

Along with the signing of the public concession contract, the bus operators are also to follow the implementation of a new payment plan, under which they will receive subsidies from the government as well as be able to keep bus fares that passengers pay.

For the current payment mechansim for the bus service, implemented in 2011, bus companies do not keep the bus fare but get a regular service charge from the government.

Under the new payment mechanism,

the government will impose a cap on the amount of subsidy it pays bus operators, a figure that will be pegged to the quality of their transport service. This service assessment will be conducted on a half-yearly basis.

“For the subsidies that the government will pay the operators [under the new mechanism], we’ll consider the operation cost of the bus companies, and the inflation level reflected in the cost of labour and fuel,” said Mr. Wong.

“Also, when the profit the company is making has exceeded a profit range we impose, the company will have to return the subsidies to us that it received in excess,” the Bureau director said, confirming that the profit range will be 3 to 9 percent, referencing the profit that bus operators or other public transport companies make in neighbouring regions.

compared to that of the previous month.

‘M1’ refers to that part of the money supply that includes physical coins and currency, as well as readily liquid assets such as on-demand bank deposits, and money held in cheque accounts. ‘M2’ is M1 plus all time-related deposits, savings deposits, and non-institutional money market funds.

In the 12 months leading to April, M1 grew 4.9 percent and M2 17.3 percent. The share of patacas in M2 was 24.3 percent, down slightly by 0.3 percentage points from a month

ago, or 0.4 percent from a year ago. The Hong Kong dollar share, however, grew by 49.3 percent, also down slightly by 0.5 percentage points month-on-month or 5.5 percentage points year-on-year.

The loan-to-deposit ration for the resident sector rose 0.5 percentage points at the end of April to 54 percent from a month earlier. The ratio for resident and non-resident sectors grew by 0.8 percentage points to 80.4 percent.

S.L.

Loans outpace deposits In April, combined domestic and external loans increased an average of 3pct, while total deposits increased 2pct

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omestic loans to the private sector increased 2.9 percent in April to 292.1 billion patacas from that of a month ago, the latest figures released yesterday by the Monetary Authority show.

Of these, 82.9 billion patacas were pataca-denominated accounting for 28.4 percent of the total, while the majority at 62.9 percent or 183.9 billion patacas were denominated in Hong Kong dollars.

External loans, however, rose by 3.5 percent to 306.5 billion patacas, of which the majority at 22.6 percent were denominated in Hong Kong dollars accounting for 69.2 billion patacas of the total, while just 1.8 percent or 5.4 billion patacas were pataca-denominated.

Meanwhile, deposits in the banking sector grew 2.2 percent from a month earlier to 743.9 billion patacas, with the shares of pataca-deposits accounting for 18.6 percent of the

total, while that of Hong Kong-dollar deposits accounted for a greater chunk at 40.2 percent.

In addition, resident deposits increased by 2.1 percent last month to 455.4 billion patacas from a month earlier. Foreign currencies accounted for the majority of resident deposits at 5.3 percent, followed by Hong Kong dollar deposits at 1.2 percent and Macau pataca-deposits at 0.7 percent.

Non-resident deposits rose 3 percent to 202.5 billion patacas in the same period, while public sector deposits in the banking sector increased 0.7 percent to 86 billion patacas.

More money Overall, there was more money circulating in Macau. According to official figures, currency in circulation grew 0.8 percent. However, demand deposits dropped 2.6 percent, leading to a 2.1 percent decrease in M1 in April

S.F.

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June 5, 2014

Macau Brands

Trends

La Dolce Vita in Macau Raquel Dias newsdesk@macaubusinessdaily.com

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njoying a good day at the beach or the swimming pool has become an international form of pleasure. However, different ways of enjoying that pleasure persist. It takes only a few moments in any of Macau’s nice swimming pools to understand that Asian women have a different approach when it comes to choosing the perfect swimwear. Unlike the majority of Western females, Asian ladies are more modest, preferring clothing that covers more skin.

There’s usually a preference for keeping the skin white, which highlights the necessity for covering it.

It was with this in mind that Italian designer Livia Meldolesi founded a brand of the same name.

A way of incorporating Eastern cultural elements and traditional Italian embroidery, along with handpainted design into her 2014 series of beach clothing, tailored for the Asian body type. The collection was presented last Friday in the Macpro Gallery and comprised many one-piece swimwear options as well as a few bikini designs: all very elegant and girly.

The models walked to the sound of 60’s Italian songs, showing off the beautiful patterns, some inspired by Chinese porcelain, others embroidered in navy blue fabric. Organised by the newly established contemporary art gallery Macpro Gallery together with the high-end Italian fashion brand Livia Meldolesi, the evening was a fusion of modern art exhibition and swimwear fashion.

Should you want to find out more about these designs, they’re easily available at Livia Meldolesi concept store at PMQ on Hollywood Road, Hong Kong.

Macau’s ETG market to grow 60 percent by 2016 Union Gaming expects the number of Electronic Table Games (ETG) in Macau to increase from 5,500 today to 9,000 in the next three years. The growth drivers are the opening of new resorts in Cotai and the operator’s bet on ETG’s attracting lower-end mass-market players Alex Lee

Alex.lee@macaubusinessdaily.com

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acau is ready to solidify its position as an Electronic Table Games (ETG) haven.

According to Union Gaming, the number of ETG’s here will increase from 5,500 today to 9,000 as the segment grows with the flow of new casino openings in the Cotai Strip and with gaming operators using ETG’s as a way to attract lower-spend gamblers.

‘With an increased focus on table game yields, and in the context of the market-wide tables game cap in Macau, we think all Macau operators will continue to look at ETGs as an increasingly attractive option,’ wrote the brokerage company in a note to clients yesterday.

The 3,500 new ETG’s expected for Macau by 2016 represent a 60 percent hike from the existing ones today. Union Gaming believes this new capacity will be distributed through 500 ETG’s for each of the six new large-scale resorts under construction in Cotai and new seats in other locations like Macau Fisherman’s Wharf.

The operator’s strategy shift to put more live tables available to higher income gamblers and offering electronic ones to lowerend mass market players is also pushing up ETG’s sales in Macau.

“We’ve noticed most operators embarking on efficiency exercises that ultimately pull traditional live table games from the lower-end mass market and reallocate them to VIP or higher-yielding premium mass market segments. In turn, and in order to accommodate lower-end mass market play, these customers are being pushed towards ETGs as the best option to play at lower stakes (less than HKD500 per hand on baccarat).’ says Union Gaming.

Macau ETG installed base by casino operator

SJM and Sands dominate Today, Macau’s ETG market is dominated by SJM and Sands China, with a share of 38 and 30 percent, respectively, in terms of number of tables available. They’re followed by Melco Crown with a 17 percent share.

Union Gaming adds that the operators more exposed to mass market are the ones with the largest number of ETG’s. Casinos with expected Cotai openings in the next years are also investing hard in electronic tables.

But ETG’s euphoria is not exclusive to Macau. The other new gaming destinations like Singapore, Cambodia and the Philippines also want to get a taste of the ETG frenzy.

Union Gaming estimates that in the next three years, between 1,500 to 2,000 new electronic tables will be demanded by other Asian markets, in addition to Macau. This growth will be driven by the three Manila Bay resorts (Philippines), a second Naga casino in Cambodia and three projects scheduled in South Korea.

In total, Asia market will have 5,500 additional ETG’s in the next three years.

Source: Union Gaming

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June 5, 2014

Macau

Studio City budget increased

by MOP2.4 bln Melco Crown Entertainment has announced its budget for the project will be increased and that the resort is expected to open in 2015 as construction works are progressing according to plan Alex Lee

alex.lee@macaubusinessdaily.com

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elco Crown Entertainment has announced that its Studio City project, located in Cotai, will have its budget increased by more than US$300 million (2.4 billion patacas) from US$2.0 billion to approximately US$2.3 billion.

This represents a 15 percent increase from the original plan of the cinematically-themed integrated entertainment, retail and gaming resort.

The budget includes the costs of construction, fit-out, design and consultancy fees.

In a press release it was also noted that the progress of the construction is going according to plan and that the resort will open by mid-2015.

“We are extremely excited about our newest integrated resort in Macau, which remains firmly on track to open in mid-2015.

The property’s cinematiclly themed and a vast array of

stop is one of the property’s key competitive advantages, given the anticipated growth and widespread development plan for Hengqin Island,” he said.

The document released on Tuesday also explains that the changes to the budget will be partially covered by ‘an available additional equity on a pro rata basis agreed’ by the shareholders of the project, Studio City International Holdings Limited (SCH).

‘The remaining amount of such budget increase will be paid for out of previously funded equity commitments from such shareholders,’ it adds.

Stalled project revitalised

unique entertainment and attractions will enhance Macau’s appeal as a leading tourist destination in Asia,” co-chairman and CEO of Melco Crown Entertainment,

Lawrence Ho, said.

James Packer, cochairman and a nonexecutive director of Melco Crown Entertainment, also commented on the advantages

of the proximity of the new resort to Hengqin Island.

“Studio City’s prime location directly adjacent to the Lotus Bridge immigration border and proposed light rail

Studio City was initially expected to open in 2009 as a joint venture by US investment firms Silver Point Capital LP and Oaktree Capital Management LLC and the Hong Kong entertainment company eSun. The investors, however, got embroiled in a three-year dispute that stalled the project.

In June 2011, Melco Crown gained control of the project by buying a 60 percent share of the Cotai resort developer and construction works resumed in the following year.

Macau Studio City will be a movie-themed resort primarily focusing on entertainment that will include pop star concerts, [professional] fights and gambling, Lawrence Ho has already revealed.

Japan casino debate to start next week Casino companies including Las Vegas Sands, MGM Resorts and Melco Crown have all been trying to position themselves in Japan Nathan Layne

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apan’s parliament will likely start discussing next week a bill to legalise casino gambling although proponents may hold off voting until the autumn in a strategic move to prevent opponents from killing it, a key supporter of the bill said yesterday.

Takeshi Iwaya, a member of the ruling Liberal Democratic Party (LDP) and a leading casino proponent, said he had some success in recent weeks in garnering support for the bill from a coalition partner and the main opposition party.

Prime Minister Shinzo Abe’s visit to two integrated resorts in Singapore last week, where he said casinos could help to revitalise the economy, also underlined growing support for opening up the Japanese market, Iwaya said.

“We are getting close to starting debate,” Iwaya told a gathering of business executives, later telling Reuters that a lower house committee could kick off debate next week. “It is best to strike while the iron is hot.”

With time running short, Iwaya acknowledged that lawmakers may fail to achieve their original goal

of getting the bill passed by both chambers of parliament during the current session ending on June 22.

As a fall-back strategy, Iwaya said proponents may look to kick off debate in the lower house - where backing for the bill is strong - but stop short of pushing for its passage during the current session.

This manoeuvre would ensure that the bill remains in discussion by the lower house and is carried over into an expected extraordinary parliament session in the fall, allowing proponents to “keep a grip” on the bill, Iwaya said.

The strategy reflects concerns that the bill could be scrapped if it were rushed into the hands of the relevant upper house committee, which is chaired by an opposition party member who is not keen on bringing casinos to Japan, Iwaya said.

A group of more than 200 lawmakers promoting the bill had originally hoped to start debate in late April or early May, but it has taken a backseat to other legislation.

The delayed debate has raised concerns the bill may not be adopted this year, which would make it

Prime Minister Shinzo Abe, pictured with Singapore’s Prime Minister Lee Hsien Loong, visited two integrated resorts in the city-state last week

difficult for developers to build resorts in time for the 2020 Tokyo Olympics.

Brokerage CLSA estimates that Japan could become Asia’s biggest gambling market after Macau, raking in revenues of at least US$40 billion annually and with many more years of growth before it starts to mature.

If the current bill passes, debate will move on to a second bill concerning concrete regulations,

which proponents hope can be passed in 2016.

International casino companies including Las Vegas Sands Corp, Genting Singapore PLC, MGM Resorts International and Melco Crown Entertainment Ltd have all been trying to position themselves in Japan in anticipation of legalised casino gambling.

Reuters

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June 5, 2014

Macau

Former Universal staffer files criminal complaint against Okada This marks the latest salvo in a long-running legal battle between the former Wynn Macau director and three former Universal employees over US$40 million in payments made in 2010 that have been the subject of separate investigations by the U.S.

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former employee of Universal Entertainment Corp filed a criminal complaint against Kazuo Okada, the Japanese firm’s billionaire founder and also former director of casino operator Wynn Macau Ltd, alleging he ordered the payment of bribes to advance a still-unfinished casino project in the Philippines.

Takafumi Nakano submitted his complaint to Tokyo District Public Prosecutor’s Office in late May, a copy reviewed by Reuters showed.

It was not clear if the prosecutors’ office, which declined to comment, would investigate his claims. Nakano has made similar claims in an ongoing civil defamation case against his former employer.

The criminal complaint marks the latest salvo in a long-running legal battle between Okada and three former employees over US$40 million in payments made in 2010 that have been the subject of separate investigations by the U.S. Federal Bureau of Investigation, the Nevada gaming regulator and the Philippine government.

If U.S. and Philippine authorities decide there is evidence of wrongdoing, Okada and his companies could face prosecution for violation of antibribery laws in those countries.

The Nevada regulator could impose sanctions impacting various licenses in the state, including to manufacture and distribute slot machines.

Okada and Universal Entertainment have filed lawsuits against the three former staff, accusing them of transmitting a portion of the money without proper authorization.

In court filings all three men have said they were acting on Okada’s orders.

In the complaint, Nakano said Okada ordered that the bulk of the

money be paid to Rodolfo Soriano, a consultant with close ties to Efraim Genuino, then head of the Philippine gaming regulator, with the aim of securing tax and foreign ownership concessions for the US$2 billion casino Universal is building on Manila Bay. Universal did not respond to a request for comment. Soriano and Genuino, who have not been charged with any wrongdoing, could not be reached for comment.

“The only conclusion is that US$30 million was paid as bribes to Genuino or to other public officials” who could influence the relaxing of foreign ownership regulations and PEZA recognition, Nakano wrote in his complaint, referring to a tax-light economic zone in Manila.

The lifting of restrictions on foreign ownership of casinos and the approval to operate in PEZA were granted in 2010 around the time the payments were made to two companies controlled by Soriano.

Universal has denied any connection and says it has conducted its business in the Philippines lawfully.

The only conclusion is that US$30 million was paid as bribes to Genuino or to other public officials Takafumi Nakano, former Universal staff

Japan probe urged The complaint urges that Japanese prosecutors investigate and charge Okada under the country’s law against bribing foreign officials.

That law, which is the equivalent of the Foreign Corrupt Practices Act in the United States, has rarely been enforced in Japan, prompting the Organisation for Economic Cooperation and Development (OECD) to criticize the world’s third-largest economy for not doing enough to stamp out bribery.

Of the US$40 million, Universal has said US$10 million was improperly circulated through overseas affiliates

and back to the company to act as repayment of a non-performing loan. It has yet to determine how the remaining US$30 million was used.

On Friday, Universal disclosed that it would replace its sole independent director, Hiroyuki Sawada, who had overseen a third-party investigation by outside experts into the US$40 million in payments, as part of an annual reshuffling of its board. Universal did not give a specific reason for Sawada’s departure. Sawada could not be reached for comment.

In initial findings made public last year the outside experts concluded there was no evidence of bribery but said Universal’s governance practices had been flawed.

The expert panel investigated further and completed another report in March but the company has declined to make it public. In a statement last week, the panel said Universal had a responsibility to its stakeholders to make public that investigative report.

In his complaint, Nakano also recommended charges against Okada and three of his lawyers for criminal defamation. The lawyers named in the complaint include Yuki Arai, the co-head of Book Field Capital, a Tokyo-based asset manager and legal office, and Universal’s main lawyer on the Philippine matter.

Arai and the other two lawyers, Junichi Okuhisa and Yasuharu Otawa, did not respond to a request for comment.

Reuters reported last month that Arai had offered payment to Nakano in July to retract his claims that Universal had paid bribes and to stop providing information to investigative agencies. Responding to that report, Universal said Reuters distorted the facts of the settlement offer, which it claimed was the idea of Tamaki Katsube, Nakano’s lawyer. It said Katsube had asked for millions of dollars for his client to settle their legal dispute. Katsube said he never asked for such a payment and noted that the settlement offer, which he rejected, came from Arai.

Universal has sued Reuters in Tokyo for defamation in relation to its reporting on the US$40 million in payments. A Reuters spokesman said the company stands by its’ reporting.

Reuters

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Greater China

Loans’ evolution conditions housing market In China’s smaller third and fourth-tier cities, the mortgage lending market has long been both bizarre and secretive Zhu Shaobin and Zuo Wei

View of Hua Qiang Bei road (Futian District) in Shenzhen

S

luggish home sales, increasing market supply and declining property prices epitomize China’s cooling real estate market.

And there are worries that the decline may continue as banks become reluctant on mortgage lending.

In east China’s Nanjing, for example, a postgraduate surnamed Li is interested in buying a fourbedroom apartment. Li is able to pay a 70-percent down payment, but still needs to apply for bank loans to complete the payment. So far, the application remains unapproved.

The case is not unusual, prompting the central bank to act last month, by urging the country’s commercial banks to be quicker in approving and issuing loans to eligible home buyers, mainly first-time home buyers.

However, banks in different cities were not consistent in responding to the call. Chen Kaihe, an estate advisor at 5i5j.com, a leading Chinese real estate agent, said that most banks have accelerated their speed in granting loans, though the China Construction Bank in Shanghai was slower.

Most mortgage loans for first-time home buyers in Shanghai are charged at the benchmark rate, but in the adjacent city of Wuxi, certain banks are charging 10 percent more than the benchmark rate.

In China’s smaller third and fourth-tier cities, the mortgage lending market has long been both bizarre and secretive, as home buyers may be coerced to accept financial products offered by the banks, such as wealth management and insurance, before they are offered mortgage loans.

Meanwhile, cash-strapped property developers in small cities have also

been asked to fulfil requirements raised by the banks such as making deposits on fixed dates. Failing to do so may lead to down payment rises and lending delays, which will further slow developers from receiving sales money, according to Xu Jin, a credit lending expert at rong360.com, a financing information website.

Zhu Zhongyi, vice president of the China Real Estate Industry Associations, also said in a research note that the slowdown in mortgage lending and property development lending has exacerbated the general deceleration in the real estate market.

According to official data, sales of residential property slumped 7.7 percent during the first quarter of 2014 to 1.1 trillion yuan (about US$176.6 billion). Month to month, home prices have been falling in more of the 70-strong pool of major cities surveyed by the National Bureau of Statistics. Meanwhile, experts expect the cooling trend to continue.

Now the banks have to bear the downward risks of the property market. That’s why they have taken the conservative track Li Yujia, analyst, Shenzhen Real Estate Research Centre

Reluctant banks China’s commercial banks have been reluctant to lend to individual home buyers since the end of last year, leaving the central bank’s latest guidance with perhaps limited power.

Li Yujia, an analyst from Shenzhen Real Estate Research Centre, noted that commercial banks used to issue a large amount of credit in the heyday of real estate.

“Now the banks have to bear the downward risks of the property market. That’s why they have taken the conservative track,” Li said.

Individual housing loans used to be a quality source of business for banks, but the situation may have changed.

For banks, housing loans incur high management and labour costs, and are less attractive because profits are wearing thin, according to Li. Mortgage house loans took about 30 percent of new bank loans last year, but the percentage is declining this year, added Zeng Gang, a researcher at the Financial Research Institute under the Chinese Academy of Social Sciences.

Meanwhile, under the influence of interest rate liberalization and financial innovation, banks are also losing cash deposits and have fewer sources of funds at their disposal,

hence their rising reluctance to lend.

Experts believe banks are now quietly calibrating the balance of their business, after a decade of lucrative co-existence with the booming and then sizzling property market. In order to ease liquidity pressure, banks are resorting to inter-bank businesses and wealth management products.

Risks Tight credit also causes headaches among developers, especially smaller ones, as they see timely, low-cost cash flows as lifeblood.

They are usually not favoured by banks in terms of development loans, and are also strained by fewer home loan issuances. Data has showed that down payments and mortgage loans could account for as much as 40 to 50 percent of developers’ revenues on average.

According to a report on China’s real estate market by Bank of America Merrill Lynch Global Research, a further slowdown is inevitable in China’s real estate market and there will be a sharp rise in the number of small developers hit by financial troubles.

However, it ruled out a systemic crisis in the sector because it said that the real problem is misallocated supply due to the Hukou, or Chinese household registration system, and the rural land system, rather than overinvestment.

It noted that new urbanization, driven by reforms to land ownership and the Hukou system will help correct the distorted housing supply and demand in China.

Xinhua

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June 5, 2014

Greater China HSBC names AsiaPac heads The firm named yesterday Martin Haythorne and Che Ning Liu as co-heads of banking for Asia Pacific, according to an internal memo seen by Reuters.

Haythorne and Liu will take over formally on September 1 the role of Russell Julius, who is transferring to London. The two executives will report to Robin Phillips, global head of banking, and Gordon French, head of global banking and markets in Asia Pacific, the memo said. An HSBC spokesman in Hong Kong confirmed the moves.

House prices still facing upward pressures Home prices in China are still facing upward pressures in some cities, and the issue of a shortage of housing supply is difficult to solve in the short term, the country’s housing ministry said in a statement ahead of a news briefing yesterday. Private surveys showed China’s home prices fell slightly in May from the previous month, adding to fresh signs of cooling in a property market that has skirted bubble territory in recent months.

PBOC watchers see reverse repos Watchers of the People’s Bank of China are betting policy makers won’t allow a repeat of last year’s record credit crunch as they nurse an economic recovery. The seven-day repurchase rate, a gauge of interbank funding availability, will average 3.5 percent in June, 331 basis points lower than a year earlier, according to the median estimate of 21 analysts and traders surveyed by Bloomberg. Fifteen forecasters said the PBOC will grant loans to banks to allow them to extend credit, while 14 see the resumption of reverse repurchases, or securities- buying operations that were halted in January.

Hongqiao to buy African bauxite firm China Hongqiao Group Ltd., the nation’s largest non-state aluminium producer, agreed to buy a company developing bauxite deposits in Africa for about US$120 million. Hongqiao and Winning Logistics (Africa) Co. signed an accord to buy an unidentified company developing a mine in Guinea, Shandong-based Hongqiao said in an e-mailed statement late on Tuesday. The target company holds the right to develop and produce bauxite for 25 years from a deposit with a total resource base of 2.2 billion metric tons, it said.

Chinese solar industry taxed China’s Ministry of Commerce said the United States abused trade

T

he United States slapped new import duties on solar panels and other related products from China on Tuesday after the Commerce department ruled they were produced using Chinese government subsidies, potentially inflaming trade tensions between the two countries.

The U.S. arm of German solar manufacturer SolarWorld AG filed a petition complaining that Chinese manufacturers are sidestepping duties imposed in 2012 by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products. The new complaint seeks to close that loophole by extending import duties to also cover panels made with parts from Taiwan.

In a preliminary determination, the Commerce department imposed duties of 35.21 percent on imports of panels and other products made by Wuxi Suntech Power and five other affiliated companies, 18.56 percent on imports of Trina Solar and 26.89 percent on imports from other Chinese producers.

A preliminary decision on the antidumping section of the complaint is due by July 25. That section covers panels assembled in China from Taiwanese inputs or third-country cells made from Chinese inputs.

The anti-subsidy duties will hurt the Chinese solar industry, although the overall impact should be limited given the U.S. accounted for just

has been scrambling to boost domestic demand to offset declines in orders from Europe - previously the dominant buyer of Chinese solar products - yesterday expressed its “strong dissatisfaction” with the U.S. decision.

In a notice posted on its website, China’s Ministry of Commerce said the United States had “ignored the facts” and abused trade rules in order

The U.S. arm of German solar manufacturer SolarWorld, headquarters in U.S., filed a petition complaining that Chinese manufacturers are sidestepping duties imposed in 2012

Rare earth policy to foster extraction abroad Shutting down unregulated mines was a major aim of China’s campaign that began four years ago to constrain rare earth production

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he toxic time bomb set by China’s rare earths mining boom is set to boost the prospects for some of the US$12 billion of projects being developed outside the world’s biggest supplier.

As part of its pollution clean-up, China, which controls 90 percent of the global market, is studying the introduction of new taxes and regulations for rare earths in the

Closer cooperation with Kuwait Chinese Premier Li Keqiang held talks with Kuwaiti Prime minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah on Tuesday and they pledged to cement friendship and boost cooperation between the two nations. Li said the Chinese side stands ready to increase high-level interactions and enhance political mutual trust with the Kuwaiti side, and support each other with Kuwait on issues involving their core interests and major concerns to lead the bilateral relationship to a new height. The Chinese premier proposed the two countries expand cooperation in trade, investment, finance and infrastructure construction and other areas.

about 10 percent of Chinese solar shipments last year, industry officials and analysts say.

“The import duties, which are in line with our expectations, will wipe out the price competitiveness of Chinese products in the U.S. market,” said Zhou Ziguang, analyst at Chinese investment bank Ping An Securities in Beijing.

The Chinese government, which

A rare earths sample in an exhibition

second half that are forecast to drive prices higher.

The measures will add to pressures loosening China’s stranglehold on the production of rare earths, 17 chemically similar elements used in products from Apple Inc.’s iPods to Toyota Motor Corp. hybrid-electric cars and Tomahawk cruise missiles made by Raytheon Co. “Higher prices may spur the

development of overseas rare earths’ mining projects,” said Chen Huan, a rare earth analyst with Beijing Antaike Information Development Co., a research unit of the state-backed China Nonferrous Metals Industry Association, who forecasts prices may rise more than 20 percent because of the flagged new rules.

The proposed changes come after the World Trade Organization ruled

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June 5, 2014

Greater China

by U.S.

SFTZ could allow yuan gold trade

rules in order to protect its own industry

35.21 pct duties on solar panels imports to U.S. from China

to protect its own industry, adding that the use of trade measures “would not solve the development problems of the U.S. solar industry.”

China retaliated against the original U.S. duties by introducing anti-dumping and anti-subsidy duties on imports of U.S. polysilicon, the key raw material in solar cells, and has accused the United States of trying to curb Chinese imports.

In the United States, the complaint has pitted SolarWorld Industries America, which makes crystalline silicon solar panels at its factory in Hillsboro, Oregon, against U.S. solar companies that mainly focus on installation and who say imposing import duties will only push up the cost of solar power.

“The ruling is a major setback for the entire U.S. solar industry because it will immediately increase the price of solar power and cost American jobs in one of fastest-growing sectors of the U.S. economy,” said the Coalition for Affordable Solar Energy.

The Solar Energy Industries Association said SolarWorld and Chinese manufacturers should try to settle the dispute before the industry was hurt.

But SolarWorld said it is not fair that Chinese solar producers benefit from government aid from their own country, including discounted loans and free utilities, making it hard for U.S. firms to compete.

Reuters

Global stocks of rare earths were depleted after China, which consumes about 70 percent of global supplies, cut exports from 2010.

Higher prices may spur the development of overseas rare earths’ mining projects Chen Huan, analyst, Beijing Antaike Information

in March that the Asian nation already had violated global trade rules by imposing export restrictions such as quotas and duties on rare earths.

Illegal production “They’re clamping down on illegal production, have environmental concerns and there are countries which require rare earths who don’t particularly want to be beholden to China,” said Kevin Schultz, deputy chairman of Northern Minerals Ltd., developing the Browns Range project in Australia. “There’s an opportunity.”

Customers are now returning to the market as stockpiles become depleted, meaning prices will advance, said Toronto-based analyst Luisa Moreno at broker Euro Pacific Canada Inc. Neodymium oxide, used to create magnets contained in wind turbines to headphones, rose 26 percent in the year to May 29, according to Shanghai Steelhome Information prices.

Unregulated mines At least 18 companies are seeking to begin production outside China by the end of the decade with combined development costs of about US$12 billion, according to Bloomberg calculations based on Euro Pacific figures.

Shutting down unregulated mines was a major aim of China’s campaign that began four years ago to constrain rare earth production. It can create waste gas, including deadly fluorine, and wastewater laced with cancer-causing heavy metals such as cadmium. The industry’s problems are part of a larger green crusade in China, which in April saw the passing of the biggest changes to its environmental protection laws in 25 years.

Bloomberg News

Gold imports in China are controlled through a quota system administered by the central bank

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he world’s largest bullion consumer and producer, is considering allowing the use of offshore yuan in gold trading in the Shanghai free-trade zone.

The Shanghai Gold Exchange, the country’s biggest physical bourse for the metal, is proposing to let holders of offshore yuan accounts trade the three contracts it will offer, including bullion of 99.99 percent purity, according to a draft of the plan obtained by Bloomberg News. It stipulates that gold may be physically delivered into a warehouse in the zone. Gu Wenshuo, a spokesman at the Shanghai Gold Exchange, wasn’t available for comment when contacted by phone, text message and e-mail.

China started a free-trade zone in Shanghai this year as a testing ground for liberalizing interest rates and currency usage. The gold contracts will expand the range of investment options for yuan deposits around the world, which reached at least 1.5 trillion yuan (US$240 billion) in March, according to Standard Chartered Plc estimates as of last month.

“While it’s convenient for a foreign entity to use offshore yuan to trade in the zone, it’s the ability to deliver onshore that matters,” Wallace Ng, a Shanghai-based trader at Gemsha

Shanghai Free Trade Zone entrance

Metals Co., said in an interview today.

“It’s good that they’re trying to open the market to more people but it’s still limited for physical traders in terms of the import quotas.”

Gold imports in China are controlled through a quota system administered by the central bank.

HSBC Holdings Plc and Australia & New Zealand Banking Group Ltd. last year became the first foreign banks to be granted licenses by the People’s Bank of China to bring bullion into the country, according to the World Gold Council.

SGE wants to establish an international gold trading platform as part of the liberalization of China’s gold markets and to attract foreign institutional and private investors, according to the proposal.

Bloomberg News

Grave shortage deeper than housing A private graveyard with a plot available can cost up to US$386,900

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here’s one thing even Hong Kong’s more than 40 billionaires will struggle to buy - a final resting place on their home turf.

Land shortages in the late 1970s forced Hong Kong to ban construction of new permanent burial sites, and public cemeteries were ordered to ensure the remains of the deceased be exhumed and cremated after six years to make way for newcomers.

The policy has done little to alleviate the grave shortage in a city where more than 40,000 people die each year.

Some can get lucky if relatives choose to have the remains of a loved one removed from a public burial site to be cremated, opening the prized permanent space to a lottery system, but plots may only come available every few years.

The only other way is if the deceased is a member of a church that has a private graveyard with a plot available, a very rare instance that can cost up to HK$3 million (US$386,900).

“In Hong Kong, people cannot buy a final resting place even if they have all the money in the world,” said Hoi Pong Kwok, funeral director at Heung Fok Undertaker. “The government doesn’t just have to settle housing needs for the living. It also needs to

The government doesn’t just have to settle housing needs for the living. It also needs to address those of the dead Hoi Pong Kwok, Heung Fok Undertaker

address those of the dead.”

In land-hungry Hong Kong, where more than 7 million people are packed into just 30 percent of the territory, failure to vacate a plot after six years means bodies will be exhumed by the government, cremated and put in a communal grave.

While the funeral policy has resulted in a surge in the number of people being cremated - 90 percent of the city’s dead were cremated in 2013, up from 38 percent in 1975 cremation is by no means the answer for those seeking a resting place.

Reuters

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June 5, 2014

Asia India services activity takes off Activity in India’s huge services industry expanded for the first time in nearly a year in May, driven by a surge in new business, a survey showed yesterday. The HSBC Services Purchasing Managers’ Index, compiled by Markit, rose to 50.2 in May from 48.5 in April, the first rise above the 50 mark that divides growth from contraction since June last year. A landslide win for Narendra Modi and his Bhartiya Janata Party -which created India’s first majority government in three decades- has fuelled expectations for key economic reforms after years of policy paralysis.

Vietnam plans to build more IT parks Vietnam plans to build 19 information technology (IT) parks by 2020, against the current seven ones, local media reported yesterday. The country now has seven IT parks spreading over an area of 700,000 square meters. They house 200 enterprises who employ 35,000 engineers and programmers, sources from the Master Plan for Information Technology Parks Development until 2020 was quoted

by Vietnam News daily as reporting yesterday. Quang Trung Software City (QTSC), based in southern Ho Chi Minh City, is considered the country’s leading IT park with 108 companies.

Cambodia’s rice export increases Cambodia had exported 148,260 tons of milled rice in the first five months of 2014, up only 1 percent from 146,840 tons over the same period last year, an official data showed yesterday.

Sixty-four companies have brokered Cambodian rice for 51 countries around the world, said the report compiled by the Secretariat of One Window Service for Rice Export. Major buyers are France, Poland, the Netherlands, Malaysia, Belgium and China. He said the price of Cambodian fragrant rice cost US$860 a ton yesterday, down 6.5 percent from US$920 earlier this year.

Surge in New Zealand construction Activity in New Zealand’s construction sector surged by 16 percent in the quarter to the end of March, the government statistics agency announced yesterday. The surge followed rises of just 0.5 percent in each of the two previous quarters, according to Statistics New Zealand.

Non-residential building activity volume grew by 17 percent, while residential buildings saw growth of 15 percent. The value of all building activity in the March quarter was 3.5 billion NZ dollars (US$2.95 billion), comprising 2.2 billion NZ dollars (US$1.85 billion) of residential building work and 1.3 billion NZ dollars (US$1.09 billion) of non-residential building work.

Aussie economy reaches Gross domestic product in the first quarter was 3.5 percent higher

A

ustralia boasted its fastest growth in two years last quarter as exports surged by the most since 1999, though the longawaited revival may have already been endangered by a government crusade for fiscal rectitude.

The year certainly started well enough, as the economy expanded by 1.1 percent in the first quarter, up from 0.8 percent in the last three months of 2013.

That topped already bullish forecasts of 1.0 percent growth and seemed to sit at odds with the insistence by Tony Abbott’s Liberal National government that a tough budget was needed to fix the country’s finances.

Reserve Bank of Australia, headquarters pictured, policy had an important role in the economy’s success

KEY POINTS GDP expands 1.1 pct in Q1, 3.5 pct for year to March Exports drive growth with biggest increase in nearly 15 years Consumer mood remains brittle in wake of tough budget

A trillion yen development before Olympics The government has designated strategic zones that will offer lower corporate taxes

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ori Building Co., Japan’s biggest closely held developer, plans projects in central Tokyo worth an estimated 1 trillion yen (US$9.7 billion) with partners as the city prepares for the Olympic Games in 2020.

Mori, which is opening Tokyo’s second-tallest building next week, plans to develop about 10 projects over the next decade in Minato ward, Shingo Tsuji, president and chief executive officer of the developer, said at a press conference in Tokyo yesterday.

Japanese developers are boosting investments in the lead up to the Tokyo Olympics in six years, as vacancy rates decline and rents climb, and as they bet on a strategic zoning plan announced in March as part of the government’s plan to stimulate economic growth. Mori’s announcement follows the biggest share sale plan in 32 years by Mitsui Fudosan Co., the nation’s biggest

publicly traded developer, last week.

The government has designated strategic zones, including the region around Tokyo that will offer lower corporate taxes and looser building restrictions to lure investment, according to a proposal announced March 28.

The 52-story Toranomon Hills, which will open on June 11, is Mori’s biggest project since the developer’s US$2.2 billion Roppongi Hills in downtown Tokyo in 2003.

Tenants of the skyscraper, whose floors are in a quadrilateral shape,

include Andaz Hotel under Hyatt Hotels Corp.; Asatsu-DK Inc., Japan’s third-largest advertising company, and Nishimatsu Construction Co., according to Mori Building.

Tokyo’s office vacancy rate fell to 6.6 percent in April from 8.5 percent a year earlier and is at the lowest since March 2009, according to Miki Shoji, a closely held office brokerage company. Average office rents gained for the fourth straight month in April, the longest run of increases since the period to June 2008, it said.

Bloomberg News

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Asia

record

Frasers bids for Australand S KEY POINTS

than the year before Consumer surveys have shown a steep fall in confidence, the froth has come off the property market and retailers complain of suddenly frugal shoppers.

“I do think the budget is a negative for growth in Australia,” said Tom Kennedy, an economist at JPMorgan.

“A key consequence has been confidence has been very soft, we saw that decline sharply in May and we’re probably going to see some decline in the next few months also.

That should translate to probably softer domestic activity.”

Most analysts still expect the A$1.6 trillion economy to grow around 3.0 percent this year, slightly under the long-term trend of 3.25-3.50 percent.

The budget drama has come just as the economy was finally responding to record low interest rates. The Reserve Bank of Australia (RBA) cut rates to 2.5 percent back in August and intends to keep them there for some time yet, in part to help offset the strength of the local currency. The Australian dollar was up at US$0.9280 yesterday having climbed a third of a cent on the growth data.

The report from the Australian Bureau of Statistics showed gross domestic product (GDP) in the first quarter was 3.5 percent higher than the year before, a marked pick up from the 2013 trough of 2.1 percent.

Adding most to growth was international trade as the mountains

of money spent on mining expansion boosted export volumes by 4.8 percent, the largest increase since late 1999.

While the long boom in mining investment is on the wane, rising resource production is fuelling the strong growth in shipment volumes.

Much of this output headed for China, where demand for resources has remained strong despite all the talk of a slowdown. Goods exports to China topped A$100 billion in the year to March, up almost a third on the previous 12 months.

As a result, net exports added a whopping 1.4 percentage points to Australia’s GDP last quarter, and no less than 2.7 percentage points for the year. That was just as well since growth elsewhere in the domestic economy was patchy, a feature highlighted by Hockey himself.

“So our miners are exporting their socks off and thank god because it’s having a positive impact on our economy,” the Treasurer told a news conference. “But one swallow doesn’t make a summer.”

Household consumption did continue to grow, but businesses met demand by running down inventories rather than producing more goods.

Likewise, home building looked to be finally gathering momentum, yet investment by businesses was still flat overall.

Reuters

ingapore-listed Frasers Centrepoint Ltd made a surprise A$2.6 billion (S$2.41 billion) cash takeover bid for Australia’s Australand Property Group, trumping an offer from Australian firm Stockland Corp Ltd. Backed by Thai beer billionaire Charoen Sirivadhanabhakdi, Frasers Centrepoint made its offer less than a week after Stockland upped its bid to A$2.5 billion, Australand said in a statement yesterday.

The Singapore firm is 59 percent owned by Sirivadhanabhakdi’s investment company TCC Assets Ltd and 29 percent owned by his Thai Beverage PCL. The move sets the scene for a showdown for control of Australand, which has been regarded as a takeover target since Singapore’s CapitaLand Ltd announced plans to sell what was a 59 percent stake in early 2013.

Stockland, Australand’s biggest shareholder with 15.7 percent, has been seen as a likely buyer in its quest to become one of Australia’s biggest property companies.

In April, Australand rejected Stockland’s original bid as undervalued and said it would refuse Stockland access to due diligence. A month later when Stockland increased its offer, Australand agreed to open its books to the No. 2 Australian property player.

Australand again changed its stance following the Frasers bid, saying it expects to recommend the higher offer and will grant the Singapore company exclusive access to conduct due diligence for four weeks.

Thai billionaire Sirivadhanabhakdi backs new bid Offer trumps rival Australian bid Sets the scene for ownership showdown

The about-face was “based on the board’s conclusion that the (Frasers) proposal provides a superior value outcome for Australand security holders relative to Stockland’s conditional proposal”, Australand said in a statement to the Australian Securities Exchange.

If the Frasers offer became binding, Australand “intends to recommend the proposal in the absence of a superior proposal” and subject to an independent expert declaring it fair and reasonable, Australand added.

On top of the A$2.6 billion cash bid, Frasers is offering a distribution of A$0.1275 a share, Australand said, adding another A$74 million to the deal.

Reuters

Indonesian employers seek to cap wage About two million workers held a strike across 22 provinces at the start of November to demand the government increase wages by 50 percent for 2014

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ain employer group is seeking to cap wage gains well below what authorities and unions have sought in recent years, raising the risk of labour disputes that would test the country’s next leader.

The association, known as Apindo, wants to limit increases in the minimum wage next year to 1 or 2 percentage points above inflation, as a new social security program will add to costs for employers, Chairman Sofjan Wanandi said in an interview on Tuesday. The government said last year it planned to set a cap of 10 percentage points above price gains, and the minimum pay in the capital rose 11 percent this year.

The country’s next president will take the reins of Southeast Asia’s largest economy in October, with annual wage negotiations usually due to be concluded in the final quarter. Jakarta Governor Joko Widodo, who approved a 2014 minimumwage gain below the 50 percent level demanded by local workers, is the poll favourite to win the leadership election in July.

Last year saw minimum wage gains of 44 percent in

Presidential candidates Prabowo Subianto (2-L) accompanied by his running mate Hatta Radjasa (L),candidate of the Gerindra Party, pose to journalists with their opposite Joko Widodo (2-R) accompanied by his running mate Jusuf Kalla (R) candidate of the Indonesian Democratic Party of Struggle (PDIP).

Jakarta, leading employers to cut 200,000 jobs, Wanandi said. Some investors from South Korea and Taiwan relocated textile and shoe factories to Bangladesh and Cambodia, while the

electronics industry moved some jobs to Vietnam, he said.

Apindo takes part in annual wage negotiations together with regional governments and unions.

About two million workers held a strike across 22 provinces at the start of November to demand the government increase wages by 50 percent for 2014, labour groups said.

Indonesia has experienced increased industrial action in the past two years as unionized workers seek a greater share of Southeast Asia’s largest economy and better pay to cope with inflation, which has exceeded 7 percent for 11 straight months.

In Jakarta, the capital city around which commerce and industry is concentrated, minimum monthly wages are 2.44 million rupiah (US$206). Malaysia set its first minimum wage levels in 2013 at 900 ringgit (US$278) a month for workers in the more industrialized peninsular states.

Indonesia’s new national social security plan for workers will be implemented from January 1 to cover health, occupational injuries, provident funds, pension and death benefits.

Current President Susilo Bambang Yudhoyono, who is required to step down after two terms, will pass to his successor challenges including rising labour costs, onerous bureaucracy, legal uncertainty and increasing fuel subsidy bills that weigh on the state’s ability to overhaul infrastructure, Wanandi said.

Bloomberg News

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June 5, 2014

International Eurozone business growth slows Euro zone business growth eased in May and firms cut prices for the 26th straight month, a survey showed yesterday, likely underpinning expectations for the European Central Bank to loosen policy. While output across the region remained solid, supported once again by Germany and pointing to euro zone GDP growth of 0.4-0.5 percent this quarter, French business activity slipped back into contraction after just two months of growth. Similarly, accelerating growth in the service industry was offset by an easing in manufacturing.

Pemex sells Repsol stake Mexico’s national oil company Pemex has sold the bulk of its stake in Spain’s Repsol for 2.09 billion euros (US$2.9 billion), ending a more than 25 year partnership and freeing up cash to invest in its own energy sector. Pemex sold 7.86 percent of Repsol to unspecified private investors yesterday at 20.10 euros each, a 3.7 percent discount to the Spanish company’s closing price on Tuesday, in a placement handled by book runners Citigroup and Deutsche Bank. Pemex’s exit as one of Repsol’s top three shareholders ends a relationship that had become increasingly fractious in recent years, due to disagreements on policies ranging from top management to the handling of Repsol’s investments in Argentina.

Tesco’s British sales slide worsens Britain’s biggest retailer posted the worst quarterly drop in underlying sales in its key home market since Chief Executive Phil Clarke took the helm in 2011, raising further questions over his trading strategy. Clarke is two years into a multi-billion pounds turnaround plan for its British business that contributes two-thirds of sales and profit for the group, the world’s third-largest retailer after Wal-Mart and Carrefour. Tesco said yesterdaysales at UK stores open over a year, excluding fuel and VAT sales tax, fell 3.8 percent in its fiscal first quarter.

Drought leads coffee futures down Coffee futures entered a bear market after rains eased drought damage for plants in Brazil, the world’s top producer and exporter. Growers are facing less severe crop losses than estimated after showers last month reduced the impact of the worst dry spell in 50 years, Brazil’s Agriculture Minister Neri Geller said on June 2. Next year, farmers may collect a “bumper” harvest, he said. Futures have tumbled 23 percent from a two-year high in April, partly as rising American stockpiles helped cushion the impact of production declines after Brazil’s drought.

French e-commerce expands to Africa Casino Guichard-Perrachon SA, the French owner of Monoprix and Big C supermarkets, will extend its Cdiscount e-commerce platform to Africa in a joint venture with freight company Bollore SA. The first branded website is planned in the Ivory Coast this summer, the companies said today in a statement. The partnership draws on “the expertise of the leaders of e- commerce in France and the skills of the logistics leader in Africa,” they said. Financial details weren’t disclosed.

S&P loses ratings lawsuits legal tactic Consolidating the state cases in one federal court would have allowed S&P to obtain one ruling as opposed to a score of potentially conflicting court decisions across the country Bob Van Voris and Edvard Pettersson

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cGraw Hill Financial Inc.’s Standard & Poor’s unit lost its bid to consolidate state claims that it lied about the objectivity of its ratings in the run-up to the 2008 financial crisis, forcing it to fight lawsuits in 18 state courts.

U.S. District Judge Jesse Furman in Manhattan ruled the suits were properly filed in state courts under local consumer-protection laws. S&P argued federal laws should govern the claims.

“With few exceptions, the doors to federal court do not swing open merely because a party has a national presence or is alleged to have committed wrongdoing that is national in scope, or merely because litigation in federal court might be more efficient,” Furman said on Tuesday in his decision.

Most of the state lawsuits were filed last year, after the U.S. Justice Department sued New York-based S&P for allegedly defrauding investors that relied on its ratings of residential mortgage-backed securities and collateralized debt obligations. The U.S. has said it may seek as much as US$5 billion.

Consolidating the state cases in one federal court would have allowed S&P to obtain one ruling as opposed to a score of potentially conflicting court decisions across the country.

Additionally, multiple lawsuits under state laws may cost more to defend in legal fees and expenses.

Not ‘substance’ “This ruling concerns only whether these matters will be litigated in federal or state court and not the substance of the claims,” Ed Sweeney, a spokesman for S&P, said in an e-mailed statement.

“We are committed to fully defending against these meritless claims upon their remand to the state courts.”

U.S. Justice Department

With few exceptions, the doors to federal court do not swing open merely because a party has a national presence or is alleged to have committed wrongdoing that is national in scope, or merely because litigation in federal court might be more efficient Jesse Furman,

U.S. District Judge in Manhattan

The claims by the states mirror those of the Justice Department that S&P’s ratings were not independent and objective, as it told investors, but motivated by the desire to win business from issuers of the securities. S&P has denied the allegations and has argued the U.S. lawsuit was retaliation by the government for S&P’s downgrade of the U.S. debt in 2011.

The Justice Department’s lawsuit against S&P in Santa Ana, California, federal court isn’t affected by Furman’s ruling. One case transferred on Tuesday, filed by Mississippi, also named Moody’s Investor’s Service Inc. as a defendant. Mississippi had sued S&P and Moody’s in 2011, two years before the other lawsuits.

Michael Adler, a spokesman for New York-based Moody’s, declined to comment on Tuesday’s ruling.

S&P and Moody’s last month lost a bid to overturn a California court ruling that they must face a lawsuit by the state’s Public Employees Retirement System. In that case, the fund alleged the firm’s inaccurate risk assessments on investments led to US$800 million in losses.

Bloomberg News

UK service sector grows Britain’s economy posted its fastest annual growth in more than six years

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ritain’s dominant services sector expanded faster than expected in May and hiring matched a 17-year high, according to a survey published yesterday that could add to debate at the Bank of England about when to raise interest rates.

The Markit/CIPS services purchasing managers’ index (PMI) ticked down to 58.6 in May from 58.7 in April, which was its strongest reading in 2014 so far.

Economists in a Reuters poll had expected a reading of 58.2 in May, still well above the 50 mark that denotes growth.

Britain’s economy posted its fastest annual growth in more than six years in

the first quarter and is expected to grow about 3 percent in 2014, outpacing other big, industrialized nations.

Markit chief economist Chris Williamson said the economy looked set to grow again by 0.8 percent in the second quarter, finally pushing it back above its size before the financial crisis in 2008.

“With every strong PMI reading, the more lively the discussion will become among the Bank of England’s Monetary Policy Committee that a preemptive early hike in interest rates is warranted,” Williamson said.

There were signs of higher wage growth in the services sector PMI, which led to the sharpest rise in operating

costs for four months. But overall inflation pressure looked subdued.

“The chances are that the Bank of England will keep its foot firmly on the accelerator pedal to help keep the economy booming,” Williamson said.

The BoE’s interest rate-setting committee meets these days. Markets expect a first rate hike only in 2015 but some economists see a growing chance of a move in late 2014.

A composite index combining PMIs for manufacturing and construction, plus the services sector, showed growth in output across the economy eased slightly to 59.1 in May from 59.4 in April.

Reuters

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June 5, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Creating a learning society

Joseph E. Stiglitz

Nobel laureate in economics and University Professor at Columbia University

BANGKOK POST The economy is showing signs of recovery because people have started to spend more after the political unrest eased with the coup on May 22, say top executives of Saha Group, the country’s largest consumer conglomerate.

Chairman Boonsithi Chokwatana said lengthy political tensions had severely dampened the economy in a similar way to the 1997 economic crisis. But the military’s seizure and its various economic plans have sent positive signs and are expected to drive economic growth this year by 2-3%.

THE STAR The oil and gas (O&G) and automotive sectors, which had been attracting strong investor interest of late, were among the sectors that posted disappointing first-quarter results, analysts said. In the O&G space, KAF Research pointed out that aggregate normalised earnings were down 11% year-on-year (y-o-y), mainly dragged by Petronas Chemicals Group Bhd’s operations being affected by residual plant shutdowns scheduled from last year, while Petronas Dagangan Bhd’s margins continued to remain depressed due to higher operating costs. The research house pointed out that Bumi Armada suffered poor performances.

THE KOREA HERALD South Korean lenders are reaching out to wealthy Chinese customers as they seek new growth engines amid ultra-low interest rates and lacklustre demand on their home turf.

Local banks have been providing Chinese-language banking services to mostly blue-collar labourers in southwest Seoul.

However, recent moves highlight their efforts to tap affluent Chinese who have already emerged as a major force in the retail sector. Woori Bank said yesterday it has opened a section solely dedicated to Chinese customers at one of its branches in Jeju.

PHILSTAR In a statement, the BSP said it had approved a new framework that makes it easier for banks to extend their banking hours. “The new framework recognizes the evolving needs of financial consumers, especially those who require banking services beyond current regular business hours,” the central bank said.

The central bank currently requires banks to open for business for a minimum of six hours a day, and five days a week, except for holidays. The BSP said this is different from their provision of e-banking services and automated teller machine operations.

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EW YORK – Citizens in the world’s richest countries have come to think of their economies as being based on innovation. But innovation has been part of the developed world’s economy for more than two centuries.

Indeed, for thousands of years, until the Industrial Revolution, incomes stagnated. Then per capita income soared, increasing year after year, interrupted only by the occasional effects of cyclical fluctuations.

The Nobel laureate economist Robert Solow noted some 60 years ago that rising incomes should largely be attributed not to capital accumulation, but to technological progress – to learning how to do things better. While some of the productivity increase reflects the impact of dramatic discoveries, much of it has been due to small, incremental changes. And, if that is the case, it makes sense to focus attention on how societies learn, and what can be done to promote learning – including learning how to learn.

A century ago, the economist and political scientist Joseph Schumpeter argued that the central virtue of a market economy was its capacity to innovate. He contended that economists’ traditional focus on competitive markets was misplaced; what mattered was competition for the market, not competition in the market.

Competition for the market drove innovation. A succession of monopolists would lead, in this view, to higher standards of living in the long run.

Schumpeter’s conclusions have not gone unchallenged.

Monopolists and dominant firms, like Microsoft, can actually suppress innovation.

Unless checked by anti-trust authorities, they can engage in anti-competitive behaviour that reinforces their monopoly power.

Moreover, markets may not be efficient in either the level or direction of investments in

Markets may not be efficient in either the level or direction of investments in research and learning. Private incentives are not well aligned with social returns: firms can gain from innovations that increase their market power, enable them to circumvent regulations, or channel rents that would otherwise accrue to others

research and learning. Private incentives are not well aligned with social returns: firms can gain from innovations that increase their market power, enable them to circumvent regulations, or channel rents that would otherwise accrue to others.

But one of Schumpeter’s fundamental insights has held up well: Conventional policies focusing on shortrun efficiency may not be desirable, once one takes a long-run innovation/learning perspective. This is especially true for developing countries

and emerging markets.

Industrial policies – in which governments intervene in the allocation of resources among sectors or favour some technologies over others – can help “infant economies” learn. Learning may be more marked in some sectors (such as industrial manufacturing) than in others, and the benefits of that learning, including the institutional development required for success, may spill over to other economic activities.

Such policies, when adopted, have been frequent targets of criticism. Government, it is often said, should not be engaged in picking winners.

The market is far better in making such judgments.

But the evidence on that is not as compelling as free-market advocates claim. America’s private sector was notoriously bad in allocating capital and managing risk in the years before the global financial crisis, while studies show that average returns to the economy from government research projects are actually higher than those from privatesector projects – especially because the government invests more heavily in important basic research.

One only needs to think of the social benefits traceable to the research that led to the development of the Internet or the discovery of DNA. But, putting such successes aside, the point of industrial policy is not to pick winners at all. Rather, successful industrial policies identify sources of positive externalities – sectors where learning might generate benefits elsewhere in the economy.

Viewing economic policies through the lens of learning provides a different perspective on many issues.

The great economist Kenneth Arrow emphasized the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have

industry. And that may require either ensuring that one’s exchange rate is competitive or that certain industries have privileged access to credit – as a number of East Asian countries did as part of their remarkably successful development strategies.

There is a compelling infant economy argument for industrial protection. Moreover, financial-market liberalization may undermine countries’ ability to learn another set of skills that are essential for development: how to allocate resources and manage risk.

Likewise, intellectual property, if not designed properly, can be a two-edged sword when viewed from a learning perspective. While it may enhance incentives to invest in research, it may also enhance incentives for secrecy – impeding the flow of knowledge that is essential to learning while encouraging firms to maximize what they draw from the pool of collective knowledge and to minimize what they contribute.

In this scenario, the pace of innovation is actually reduced.

More broadly, many of the policies (especially those associated with the neoliberal “Washington Consensus”) foisted on developing countries with the noble objective of promoting the efficiency of resource allocation today actually impede learning, and thus lead to lower standards of living in the long run.

Virtually every government policy, intentionally or not, for better or for worse, has direct and indirect effects on learning.

Developing countries where policymakers are cognizant of these effects are more likely to close the knowledge gap that separates them from the more developed countries. Developed countries, meanwhile, have an opportunity to narrow the gap between average and best practices, and to avoid the danger of secular stagnation.

The Project Syndicate 2014

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June 5, 2014

Closing Maldives tourism grows on Chinese arrivals

Lithuania passes euro entry test

Overall tourist arrivals to Maldives in April increased 16 percent in annual terms, recording 105,309 guests, helped by a healthy 24 percent growth in Chinese arrivals, latest data showed yesterday. The Maldives Monetary Authority’s (MMA) latest monthly economic review showed the annual increase in tourist arrivals was due to the rise in the number of Chinese tourists, which offset the decline in arrivals from Europe. According to statistics from the Tourism Ministry for the first quarter of 2014, Europe retained the largest market share despite the continuing growth of the Chinese market.

The country passed a key hurdle to adopting the euro yesterday, winning the backing of the European Commission (pictured) to become the 19th state to use the currency from next year. The European Union’s executive praised the Baltic state’s “longstanding support for prudent fiscal policies and economic reforms.” “The Commission is therefore proposing that the EU Council of Ministers decide that Lithuania can adopt the euro on 1 January 2015,” it said in a statement.

A CRH2 model like the one pictured took on the tests on the new railway line

High-speed rail to pacify Xinjiang The line intends to turn Xinjiang into a transportation hub along the Silk Road Economic Belt

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he trial run for the first high-speed railway in Xinjiang Uygur Autonomous Region started on Tuesday, marking a countdown to formal operations by the end of the year and a confidence boost to the region.

A CRH2-061C high-speed train ran through the 300-km Urumqi-Shanshan section at speeds of 160 km to 277 km per hour. The designed speed is 250 km per hour, but the train must slow down when passing through windy areas.

The train is part of the Second Double-track Line of the Lanxin Railway, which links Lanzhou City in northwestern Gansu Province and Urumqi.

The 1,776-km line crosses a vast expanse of the Gobi Desert and windy areas -a major technical feat- and will be Xinjiang’s first highspeed railway when it begins operation by the end of 2014.

With the new railway, travel time between Lanzhou and Urumqi will be cut from the current 21 hours to 8 hours or less.

During the test run, Adi Turdi, 34, became the first Uygur man to operate a bullet train. He normally operates the train from Urumqi to Hami at a speed of 140 km per hour.

The trial run included tests on dynamic response, rails, communications and aerodynamics, and all results

India to allow foreign investment in e-commerce

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rime Minister Narendra Modi’s government could allow foreign direct investment in India’s e-commerce sector as early as next month, paving the way for global online retailers such as Amazon to expand their business, four people with knowledge of the matter told Reuters.

A more robust online retail sector will spur manufacturing and help an economic revival, said the people, who are privy to discussions within the new government. An announcement is expected in next month’s budget. India currently bans global online retailers from selling goods directly to customers but allows them to own 100 percent of a marketplace business, where third-party suppliers can use their platform. Both Amazon and eBay use such a platform to operate in the country.

India’s commerce and industry ministry declined to comment.

Reuters

were within safety limits, said Fu Lianzhu, chief engineer of the line’s trial run project.

Since the railway passes four major windy areas in China, a 462-km windshield was built to prevent any damage caused by gales, said Fu. The Lanxin Railway is currently the only railway connecting Xinjiang with other provincial regions.

The operation of the new line will complement the current railway networks and serve more of the population, said Erkin Tuniyaz, vice chairman of the regional government.

The line will greatly improve Xinjiang’s transport capabilities to Central Asian and European countries and

strengthen its role of being the transportation hub along the Silk Road Economic Belt, he said.

In a speech in Kazakhstan last September, Chinese President Xi Jinping proposed the construction of a “Silk Road Economic Belt” as a way of developing political and economic ties with China’s neighbours and accelerating the development of China’s western regions.

Insufficient transport capacity has long restricted the region’s development as lots of raw materials and products have to be sent to the inland regions by trucks, which take more time and are more costly, said Lai Xin, a senior official with

the region’s development and reform commission.

The new line is solely a passenger line, which will spare railway transport capacity and make it more convenient for bulk commodities to be sent out of Xinjiang, he said.

The high-speed railway will also prompt the concentration of talent, goods and capital and boost economic development along the line, said Lai. Xinjiang is a remote region, and more than half of its population is made up of ethnic minorities who hold Muslim beliefs. Violence in the name of “jihad” has been increasing since 2009 and represents the biggest threat to the region. The far western region saw its bloodiest day in five years on May 22 when 39 innocent people were killed in a terrorist attack in Urumqi.

Affected by the terrorist attacks, inbound direct investment in the region was cut by half and tourism revenues were reduced by 40 percent this year, said Lai. Li Wenqing, an official with the regional tourism bureau, pins hopes on the high-speed railway to revive tourism, which has been hit hard by recent attacks.

Xinjiang received 52 million domestic tourists and 1.1 million foreign tourists in 2013. Li is still optimistic about reaching the target of receiving 57 million tourists this year.

Xinhua

HK to enhance city’s competitiveness China’s smog plan faces challenges

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he government is committed to enhancing Hong Kong’s competitiveness, and will continue to explore new markets, support the development of pillar industries, and seek to diversify the economy, HK’s Secretary for Commerce and Economic Development Gregory So said.

So commented the city’s pillar industries of trading and logistics, financial services, tourism, and business and professional services have been driving forces of Hong Kong’s economic development, adding that there is still room for growth as they move up the value chain.

He said the government will also continue to invest in education to nurture talent and promote social mobility, while examining population policy to address the impact of the aging population on the labour market in the long run.

He added Hong Kong’s simple tax regime and low tax rates are among the essential factors underpinning the city’s success.

Xinhua

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hina still faces major challenges in improving its air quality nationwide, said Li Ganjie, vice minister of environmental protection, at a press conference yesterday.

Only three cities, or 4.1 percent, of the 74 major Chinese cities subject to air quality monitoring met the national standard for good air in 2013, Li said.

The 10 most polluted cities in 2013 included seven in north China’s Hebei Province, Jinan of east China’s Shandong Province, Xi’an of northwest China’s Shaanxi Province and Zhengzhou of central Henan Province. Most of these are located near Beijing.

Li urged addressing the key areas of industrial structure, energy efficiency, vehicle emissions and dust from construction sites in improving air quality.

Accumulation of air pollutants such as sulphur dioxide and nitric oxide also led to acid rain which mostly affected areas along the Yangtze River and southern side of its middle and lower reaches, accounting for 10.6 percent of the nation’s land.

Xinhua