Macau Business Daily, June 25, 2014

MOP 6.00 Closing editor: Alex Lee Year III

Number 568 Wednesday June 25, 2014

Publisher: Paulo A. Azevedo

Suddenly next summer

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aipa’s much-delayed Pac On ferry terminal may be fully operational next summer.

But not definitely. The Infrastructure Development Office announced yesterday that the expanded ferry pier is slated to open year-end. The 3.2 billion-pataca budget hasn’t changed but the completion date has Page 2

Stricter public tenders

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A Legislative Assembly sub-committee met with the government yesterday. Stricter procurement rules are now required to level the bidding process for public service purchases

HSI - Movers June 24

www.macaubusinessdaily.com

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Name

Fosun brings Hollywood to Macau Fosun is buying into new US media company Studio 8. It’s a rare investment by a Chinese firm in Hollywood.

The Shanghai-based conglomerate aims to distribute Studio 8 movies in Macau and Hong Kong

%Day

Power Assets Hold

1.92

China Merchants Hol

1.47

Li & Fung Ltd

1.47

China Resources Ent

1.44

Sands China Ltd

1.20

Sino Land Co Ltd

-0.48

China Petroleum & Ch

-0.83

Kunlun Energy Co Ltd

-0.94

China Mengniu Dairy

-1.29

CNOOC Ltd

-1.45

Source: Bloomberg

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Engineering a better deal

Free trade tango China and Australia are edging closer to a free trade zone agreement. The Aussie Finance Minister thinks the end of the year is a likely date

Hong Kong construction companies are short of staff. They’re offering fresh engineering grads HK$17,000. But that’s still not enough to tempt local university degree holders, says the president of the Macau Institute of Engineering. Accommodation costs are an important consideration

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Mid-July rebound?

Casinos in Macau could see gross gaming revenues rebound next month. Once the final whistle blows on the World Cup in Brazil. Analysts expect June gaming revenues to drop 6 percent, with SJM continuing to lead the market PAGE 5

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June 25, 2014

Macau

GDI: Pac On Terminal completed by year-end The Infrastructure Development Office (GDI) said that the budget for the long-delayed ferry terminal project can still be kept at 3.2 billion patacas Stephanie Lai

sw.lai@macaubusinessdaily.com

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he works at Taipa’s much-delayed Pac On ferry terminal are only expected to be completed by the end of this year, which implies the to-be-expanded ferry pier could only be operational by summer next year, the government announced to media yesterday.

“There is still, in fact, quite some distance between our expectation, and the actual progress of the Pac On terminal works,” Infrastrucutre Developmet Office’s Coordinator Chan Hon Kit told media on the sidelines of a Legislative Assembly subcommittee meeting yesterday.

“We’re now expecting that the construction works can be completed by the end of this year.”

The refreshed timeframe mentioned by Mr. Chan is at variance with what the Infrastructure Development Office told media in February,

when it mentioned that the principal constructions of the Pac On ferry terminal works would be completed within the second quarter of this year.

As early as 2005, the government decided to build a modest but permanent Taipa ferry terminal costing 583 million patacas (US$73 million). Three years later, the scale of the project has grown without any budget being established.

Last year, the cost of the Pac On Terminal project was estimated at about 3.28 billion patacas.

However, despite the apparent delays to the ferry terminal project, Mr. Chan told media yesterday that the cost for the project could still be kept at around 3.2 billion patacas “without much additional construction budget”.

“The contractor is partly responsible for the delay, and

we have also encountered weather factors that have contributed to the delay,” said Mr. Chan, who did not elaborate further upon the contractual penalties to be applied to the contractor for the delay in construction works.

Business Daily reached the contractor for the ferry terminal project, Zhen Hwa Harbour Construction

Company Co Ltd, for comment on the construction delays and budget changes but the company declined to answer.

The Marine and Water Bureau told us that about six months is required for ferry operators and other immigration department staff to move in once the ferry terminal expansion project is completed, implying that Pac On ferry terminal can

only come into use by summer next year if the project can meet the completion deadline this year.

Currently, only the city’s two major ferry operators – TurboJet and Cotai Water Jet – are using the Pac On ferry terminal. The Marine and Water Bureau said that it has received no new applications for ferry operators launching passenger shipping services.

Legislators urge improved procurement rules Ballooning budgets for public infrastructure projects have invited questions about how tender rules should be amended Stephanie Lai

sw.lai@macaubusinessdaily.com

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sub-committee of the Legislative Assembly met with the government yesterday and concluded that stricter procurement rules are required to ensure a fair bidding process for public service purchase, in particular for the open tender for public infrastructure projects. Until now there has been no clear direction regarding the procurement law amendment, legislator Mak Soi Kun said.

“The issue that we are most concerned about is that the competing company that can make the cheapest offer can usually win the bid [for public construction projects],” said Mr. Mak, also the president of the special committee of the Assembly on public finance.

He cited fellow committee members’ criticisms of the ballooning budgets of some public infrastructure projects, whose successful bidders have actually won with the lowest cost but often require supplementary budgets, which was a “waste of public money.”

Mr. Mak spoke to media following a closed-door meeting between the legislators and the government yesterday. The legislator said before in late May that the government aimed to convert a dispatch about the

procurement rules public bodies have to follow into a bill to accommodate the changes in society.

The bidding cost for Taipa’s Pac On ferry terminal expansion project and the reclamation for new urban zone E1 (adjacent to the Taipa ferry terminal) have been doubted and criticised by legislators, Mr. Mak claimed.

In 2009, the public tender for the expansion of the Pac On ferry terminal’s principal parts was launched, and was eventually won

by Zhen Hwa Harbour Construction

Co Ltd at nearly 1.58 billion patacas (US$200 million) - the cheapest offer compared with the other five competing candidates. However, the latest construction budget quoted by the Infrastructure Development Office yesterday is almost twice the initial concession cost at 3.2 billion patacas.

The Infrastructure Development Office is also facing delay in the reclamation works of the 53-hectare zone E1, following a cancellation of the public tender process due to a “rare instance” of two bidders quoting exactly the same cost for

the reclamation works. The cost - at 456 million patacas - was also the cheapest quoted amongst all the other competing companies.

However, the government has yet to set a clear direction for how the procurement rules governing public tender criteria or service contracts are to be amended, Mr. Mak noted.

During the meeting, the legislators also expressed doubts about the current equation for determining the optimum bid price for a service procurement and public infrastructure project, the legislator said.

Under current procurement rules, a discount of five percent on the average price quoted by the competing companies is the optimum price for a service to be purchased by the government, or for a public construction project.

Mr. Mak said clear explanation on how the discount is formulated have yet to be clarified.

“Our committee would like to follow up on how the bidding process for public projects can be improved in order to increase its fairness,” Mr. Mak said. “The progress with the procurement laws [amendment] should also be in lock step with the budget framework law revision.”

With Kam Leong

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June 25, 2014

Macau

Local engineering graduates baulk at HK salaries Hong Kong construction companies are increasing university graduate salaries to HK$17,000, more than the Macau average. The president of the Macau Institute of Engineering told Business Daily that such remuneration is still not attractive enough, however, for local engineers to move to the former British colony Alex Lee

Alex.lee@macaubusinessdaily.com

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ong Kong construction companies are increasing the wages paid to university graduates due to the shortage of skilled engineers. Hong Kong newspaper The Standard reports that company bosses are now offering a salary of HK$17,000 (17,500 patacas) per month to graduates who have just finished their studies.

These salaries, however, are not yet attractive enough to convince graduates from Macau to move to the former British territory, Mr. Tam Lap Mou, president of the Macau Institute of Engineering, told Business Daily yesterday.

“I don’t think that there is yet a trend of engineering graduates moving from Macau to Hong Kong because of the wages paid there. I think that construction companies in Macau are offering good wages and that they are also increasing the salaries paid to graduates.”

Mr. Tam admits that the Macau Institute of Engineering has followed the trend in the construction industry and also increased monthly salaries in order to retain workers.

“Wages have been increasing in Macau as well as in Hong Kong. In the Institute we also had to increase salaries in order to retain some of our engineers in order to ensure that the institute remains working.”

According to what Business Daily learned from industry sources, the starting monthly salary for a graduate in Macau can range from 13,000 patacas to 15,000. In the worst case scenario, Macau wages are 4,500 patacas (26 percent) less than in Hong Kong. Yet a move to Hong Kong is not likely to adequately compensate Macau graduates, as accommodation expenses are likely to increase significantly.

In Hong Kong, the growing volume of both public and private construction

projects has driven up the demand for engineers. This reality has reversed a trend of ten years ago when some Hong Kong-based construction companies were sending trainee engineers, as well as their more experienced employees, to work on projects in Macau.

Tougher competition for smaller companies This fierce competition is more likely to affect smaller companies as their capacity to afford better wages is more limited.

“The competition is tough at the moment. Graduates have a lot of different job offers and so smaller companies are more likely so suffer with such competition. The solution for them is to increase wages as well,” the president of Macau Institute of Engineering told Business Daily.

On the one hand, the lack of skilled staff may be negative for companies.

However, the opportunities are there for graduates who are able to make decisions based on the projects they consider more interesting.

“As wages are increasing and there are plenty of offers, graduates have to choose which projects they want to work on,” Mr. Tam concluded.

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June 25, 2014

Macau Brought to you by

HOSPITALITY Parallel Universe When we consider the recent evolution of tourism in Macau, the first trend that becomes evident is the sustained growth in the number of visitors. If we take a twelvemonth moving average of the total figures, in the last four years alone visitor figures increased by more than 21 percent. That is equivalent to a rise of 5 percent annually.

The second clear feature is the high share of mainland visitors. In the same period, their numbers rose by a rate that more than doubled the overall rate. The annual average growth rate for mainland visitors exceeded 10.6 percent. As a result, the share of mainlanders in the total number of visitors rose from just over 50 percent in early 2010 to almost two-thirds of the total in the first months of the current year.

These are features that are also seen in most segments of the market: overall figures are growing, but those for mainland visitors are growing faster than the average

In the case of hotel guests and same-day visitors, the total growth in the period for mainlanders was more than twice the overall growth of the corresponding segments.

Only in the case of visitors on package tours, where the share of mainland visitors is currently already around two-fifths of the total, do we find a comparatively smaller difference between the two growth rates.

As a result of these trends, the weight of mainland visitors in all categories continues to rise. In the market segments above, mainlanders represented, in the first four months of this year, between two-thirds and three-quarters of the respective totals.

Those values were between five and ten percentage points above the corresponding averages for the previous three years.

J.I.D.

60.1%

proportion of mainlanders to total visitors, last four years to April

Authorities deport 17 illegal World Cup betting suspects

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eventeen of the 22 suspects arrested for illegal bets related to the World Cup have been deported to their countries of origin, the Public Prosecutor’s Office here said.

‘Following an investigation by the Public Prosecutor’s Office regarding the 22 suspects, the judge decided to bar five from leaving the territory and requires them to check-in periodically with authorities. The other 17 will be deported,’ the Office said in a statement released to media.

Of the 22 suspects – 10 men and two women from mainland China, Malaysia and Hong Kong – five were blue card holders and were caught in

three different hotel rooms where they had allegedly set up an illegal betting syndicate for this year’s Brazilian World Cup. More than HK$2 million (US$258,029) in cash was found during the raid on the rooms in a hotel in ZAPE that served as the ring’s operating base, along with computers, records and other items.

‘Three of the suspects confessed to having helped receive illegal bets while the rest of the suspects denied committing the crime,’ the statement from the Public Prosecutor’s Office reads.

Based on the investigation, prosecutors said that there was strong evidence of illegal betting but not

enough evidence of organised crime.

As a result, the five blue card holders will remain in Macau and have to report periodically to authorities, while the other 17 will be deported once the investigation is completed.

Last week, the Judiciary Police (PJ) dismantled an illegal betting network suspected of receiving 5.1 billion patacas (US$645 million) during the opening weeks of the FIFA World Cup. “Records showed that [betting] had reached HK$5 billion. It has already surpassed the biggest betting case in history,” Suen Kam-fai, a spokesman for Macau police, was quoted as saying last week.

Macau passport holders to get NZ visa-free entry

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olders of passports of the SAR here will no longer need a visa to travel to New Zealand for short visits from next month, New Zealand Immigration Minister Michael Woodhouse said yesterday.

A visa waiver agreement, which recognises growing links between New Zealand and Macau, would create opportunities for business, cultural and social exchanges, Woodhouse said in a statement.

“Macau’s growing business and tourism sectors present potential opportunities for New Zealand to develop export markets in food and beverages,” he said.

Currently, some 240 Macau residents visit New Zealand each year and tourism is expected to grow with the visa waiver in place.

New Zealand nationals already enjoy visa-free access to Macau with around 14,000 New Zealanders travelling here each year, he said.

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June 25, 2014

Macau

Post-World Cup revenues to score from mid-July Analysts say that while this month gross gaming revenue is likely to grow at a slower rate casinos could expect a positive influence once the month-long soccer tournament winds down next month Sara Farr

sarafarr@macaubusinessdaily.com

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asinos could see gross gaming revenues pick up again next month once the World Cup in Brazil winds down. Analysts have lowered their estimates for the month of June in the belief that more people will tune in to the soccer tournament than go to the casinos.

While casino gross gaming revenue estimates for June have been lowered to between -2 percent and -6 percent at Sterne, Agee & Leach, the brokerage firm said in a note to clients that its estimates for the full year remain at 11 percent. ‘We expect post World Cup pent up demand to positively influence the back half of July,’ the note to clients reads.

The month-long soccer tournament began on June 12 in Brazil, the headwinds of which, analysts say, have begun. Nonetheless, ‘this once-everyfour-years disruption to [Macau’s] gross gaming revenue does not change our long-term secular outlook and we would use any corresponding stock weakness as a buying opportunity,’ Sterne, Agee & Leach’s senior analyst David Bain said in his note.

Analysts say that four years ago during the World Cup casino revenues dropped 20 percent from that of the previous month in May. Based on such calculations and on the assumption that this year gross gaming revenues could decline 20 percent in June, too, from that of May, this month could see casinos rake in -8 percent from that of a year ago, according to analysts’ estimates.

However, monthly gross gaming revenues accelerated 18 percent in June 2010. ‘We believe post-World Cup pent up demand positively influenced the back half of July 2010

and we expect a similar trend this year,’ analysts say, noting that there may still be a ‘mitigating’ effect of an upcoming high-hold VIP comparison in July.

Revising estimates The World Cup has made many analysts revise estimates for this month, with the majority lowering estimated growth to between -4 percent and -6 percent. Wells Fargo Securities, LLC analysts say the World Cup has a particular effect on the VIP segment of the gaming market. This puts the weekly average daily rate of casinos between 800 million patacas and 860 million patacas for the rest of the month.

This average daily rate is considerably down compared to initial estimates of between 900 million patacas and 930 million patacas.

‘Currently, midpoint growth of -5 percent growth implies -20 percent

We believe post-World Cup pent up demand positively influenced the back half of July 2010 and we expect a similar trend this year David Bain, Sterne Agee

Gaming Operators Table-game Market Share Estimate Jun-14 May-14 SJM 25.5 23.6 LVS 22.6 22.9 MPEL 11.1 12.4 WYNN 9.8 10.2 MGM 11 9.1 GALAXY 20 21.6 Source: Wells Fargo Securities, LLC

year-on-year VIP and 28 percent mass growth,’ the client’s note reads.

The weekly average daily rate of 840 million patacas was down 3 percent in the week ending June 22, compared with 867 million the week prior. ‘We would expect levels of play for the rest of June to trend around or below current levels,’ a senior analyst at the American investment bank, Cameron McKnight, said in a note to clients.

McKnight reiterated in yesterday’s note to clients that this could be a ‘choppy’ year for casinos here mainly due to a potential slowdown in the VIP segment ‘driven by decelerating credit growth and a softer macroenvironment.’

Of the gaming operators here, Wells Fargo picks Las Vegas Sands Corp, that is down 4 percent yearto-date, versus Wynn Resorts Ltd +4 percent. ‘While we see some downside risk to street second quarter estimates for Las Vegas Sands following positive revisions in April, we see less risk to 2014 estimates if mass growth remains strong,’ McKnight wrote in the note.

The American investment bank also predicts that Sociedade de Jogos de Macau (SJM) will continue leading market share this month in terms of table games with 25.5 percent (compared to 23.6 percent in May) followed by LVS with 22.6 percent (22.9 percent in May), Galaxy Entertainment Group with 20 percent (21.6 percent in May), Melco Crown Entertainment with 11.1 percent (12.4 percent in May), MGM China Holdings Ltd with 11 percent (9.1 percent in May) and Wynn with 9.8 percent (10.2 percent in May).

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June 25, 2014

Macau

Fosun goes to Hollywood with Studio 8 investment Shangai conglomerate aims to distribute Studio 8 movies in Macau and Hong Kong as well as in mainland China and Taiwan

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hanghai-based conglomerate Fosun International said Monday it would take a stake in new US media company Studio 8, marking a rare investment by a Chinese firm in Hollywood.

The deal was signed on June 6, Fosun said in a statement, without elaborating on the size of the stake or the price paid.

Studio 8 was founded by Jeff

Robinov, a Warner Bros. executive for 17 years until he left after reportedly losing an internal competition to become its chief executive.

Privately-owned Fosun is a diversified conglomerate with interests ranging from pharmaceuticals to mining.

Cooperation would include bringing Hollywood-style filmmaking to China and introducing ‘Chinese

Corporate

MGM MACAU sponsors Biennal of the Lions MGM Macau is the exclusive sponsor of ‘Biennial of the Lions – Beyond the Roar’ exhibition, which features 50 lion sculptures in celebration of the 50th anniversary of the diplomatic relations between China and France. The exhibition, organised by the Civic and Municipal Affairs Bureau (IACM), the Macao Museum of Art (MAM), the Consulate General of France in Hong Kong and Macau, and La Biennale des Lions, runs from the end of June until October 12.

As part of ‘The Biennial of the Lions’ art initiative, in addition to French and Chinese artists, MGM MACAU has specially invited a number of community and academic organizations - including Alliance Française of Macau and Obra das Mães - to work on their own lion sculpture at Art for All Society (AFA) on June 20 and 21, with the help of Mr. Cai Guo Jei, an accomplished AFA artist acting as a tutor for this initiative.

The participating members of Obra das Mães, whose ages range from 60 to 83, all love painting and creating art. Mr. Nick Leong, Director of Obra das Mães, said, “We’re honoured to be part of this international art event. We’ve always supported and encouraged our members to be active in the community and social service. This art initiative provides a platform in which seniors can showcase their creative talents and artistic works.”

The participating members of Alliance Française of Macau are aged from 4 to 8. Their work is filled with a spectrum of colours, a reflection of boundless imagination. Mr. Xavier Garnier, Director of Alliance Française of Macau, said, “We’re delighted to participate in this initiative, which is a good way to promote French art. It is also nice that the kids can unleash their creativity and imagination. We’re definitely looking forward to more collaborations in the future.”

elements’ into co-productions with Studio 8, the statement said.

Fosun said it has previously invested in Chinese media firms, but the deal was its first with Hollywood.

In another Chinese investment in the movie industry, property group Wanda bought US cinema chain AMC Entertainment for $2.6 billion in 2012. Wanda chairman Wang Jianlin, China’s richest man

in 2013, later hosted Hollywood stars to unveil plans to build a film studio in eastern China.

China was the world’s second largest box office worth $3.6 billion last year, behind only North America, according to the Motion Picture Association of America.

Authorities limit foreign films to a quota of just 34 a year. While coproductions can escape the limit, they are still subject to censorship that excises content deemed politically sensitive or obscene.

Fosun said it would be involved in the distribution of Studio 8 movies in mainland China and Taiwan, as well as Hong Kong and Macau -- both of which are Special Administrative Regions of China.

“Our partnership will combine the resources of China and Hollywood to build a global platform not only focusing on movie and entertainment investment, but also aiming to integrate our resources around the world,” Fosun chairman Guo Guangchang - who ranked 31st on Forbes’ China rich list last year - said in the statement.

Investors, however, are unimpressed by the deal. Fosun’s Hong Kong-listed shares were down 0.58 percent to HK$10.32 ($1.33) on Monday afternoon.

The Wall Street Journal reported last week that negotiations had failed for another Chinese company, Huayi Brothers Media Corp., to help fund Studio 8.

Huayi had originally pledged to pay as much as $150 million, which would have made it the largest investment to date by a Chinese company in US film production, the newspaper said.

Bloomberg

7

June 25, 2014

Macau

Hong Kong’s financial centre status under threat?

The former Monetary Authority chief of Hong Kong, Joseph Yam Chi Kwong, fears that Hong Kong will lose its importance as a financial centre for Shanghai as political developments in the City may upset the Beijing government

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he former Monetary Authority chief of Hong Kong, Joseph Yam Chi Kwong, has warned politicians and leaders of the former British territory that the city may face the danger of losing its status as China’s top financial centre if political developments upset the Beijing government, the Hong Kong newspaper South China Morning China reported yesterday.

Now adviser to the People’s Bank of China, Yam penned the warning in the preface to his new book ‘In Prosperity, Think of Adversity,’ in which he looks back on his time as chief executive of the Hong Kong Monetary Authority from 1993 to 2009.

“The politics of finance is already complex… It may well be that political developments in Hong Kong are eroding the willingness of the leadership to rely too much on Hong Kong as a venue for the conduct of international financial activities of the mainland. If so, this would be regrettable,” he wrote.

The warning appears while tensions over electoral reform take place in the Special Administrative Region of Hong Kong. Pro-Democrats expect the city’s Chief

Executive to be chosen by open election rather than by a 1,200-member committee.

Since Sunday, an unofficial pro-Democracy referendum in Hong Kong has asked citizens to vote on how the city’s leadership should be elected. As at yesterday, nearly 720,000 people had cast their votes.

THERE ARE THINGS WE DON’T DO

Joseph Yam Chi Kwong points out that Hong Kong is already losing ground to Shanghai and Singapore as the interests of the city are “being pushed aside”.

He also considers that local leaders should guard against the risk of Hong Kong being marginalised as a result of financial liberalisation in

Mainland China.

“It is unrealistic to expect that a significant proportion of the international financial activities between the future largest economy in the world, now with 1.3 billion people, and the rest of the world be conducted using the currency of merely seven million people,” South China Morning

BUT WE DO•••

Post quotes Mr. Yam. For Yam the challenge for Hong Kong now is to enhance its utility as a global financial centre for the Mainland and create a critical mass of financial activities that will consolidate the city’s position as the middle man in transactions, rather than being marginalised.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

Those people and their actions are our inspiration.

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Caesars bondholders said pressing Illinois to block loan

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Caesars Entertainment Corp. bondholder group will ask Illinois officials to block the casino company from obtaining a new loan that strips them of guarantees used to back their debt, according to people with knowledge of the matter.

Caesars operates two casinos in Illinois, giving regulators there some say in whether the company can proceed with a $1.75 billion refinancing it announced in May. First- and second-lien bondholders are scheduled to testify when the Illinois Gaming Board meets June 26, according to the agenda.

The bondholders are turning to Illinois after failing to get help from other states in unwinding casino sales that they say diminished the value of their bonds, according to the people, who asked not to be named because the dispute may end up in court. Caesars is still burdened by debt from a $30.7 billion leveraged

buyout in 2008 led by Apollo Global Management LLC (APO) and TPG Capital.

“We believe there’s no legitimate basis to challenge the steps we have taken to improve the long-term financial health of Caesars,” Steve Cohen, a company spokesman, said yesterday by phone.

Caesars Entertainment Operating accounts for the bulk of the casino company’s debt, which stood at more than $23 billion as of March 31.

Caesars said in March it would sell the Bally’s, Quad and Cromwell casinos in Las Vegas, along with Harrah’s in New Orleans, to Caesars Growth Partners.

The $2.2 billion transaction was designed to facilitate new investment in the properties and increase liquidity at the operating company, Chairman and Chief Executive Officer Gary Loveman said on a conference call at the time.

Bondholders also met with staff of the Nevada Gaming Control Board, which likewise approved the transaction, according to A.G. Burnett, chairman of the board. They met with the Ohio Casino Control Commission, though Caesars didn’t need approval there, according to John Barron, the panel’s general counsel..

William Hardie, a managing director in New York for the investment bank Houlihan Lokey, which is advising the second-lien holders, told Louisiana regulators on April 24 that assets Caesars has or is transferring, including the four hotels and earlier deals, were worth as much as $2.2 billion more than what Caesars Entertainment Operating Co. received.

Hardie said the investors intended to bring a legal action seeking to reverse the deals.

“Whether this board likes it or not, it is likely to get dragged back into

this big mess,” he said at the hearing.

Caesars Entertainment Operating Co.’s $3.6 billion of 10 percent notes maturing in December 2018 fell three-quarters of a cent to 38.75 cents on the dollar yesterday, an all-time low, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Arrowgrass Capital Partners LLP, a $4.5 billion hedge fund that owns secured bonds of Caesars Entertainment Operating Co., is in talks with law firm Brown Rudnick LLP to see if those securities have a more senior claim than others on cash from asset sales, said two people with direct knowledge of the matter.

Nick Lord, a spokesman for London-based Arrowgrass, and Marcia Brier, a spokeswoman for Brown Rudnick at MCB Communications, declined to comment.

Bloomberg

8

June 25, 2014

Macau

Casino debate litmus test for Japanese economy

F

or trainee dealer Taichi Yahagi, the odds of making a better living turning cards at a baccarat table in Tokyo are looking up.

The 41-year-old tutor paid about US$5,000 for a three-month course at the Japan Casino School, betting Prime Minister Shinzo Abe will succeed in his push to allow gaming houses to be built in time for the 2020 Tokyo Olympic Games. Discussions on the bill to legalise casinos started last week, with debate to resume in the parliament’s next session this year.

“I probably wouldn’t have enrolled in the casino school unless the Olympics were coming,” said Yahagi, whose work teaching kids has dwindled given Japan’s low birth rate. “We need foreigners to visit for the Games and spend money at casinos. Otherwise, Japan’s economy won’t pick up at all.”

Foreign investors view the debate as a litmus test for Abe’s ability to revitalise the economy, and successful passage of the bill would boost the equity market, according to Mizuho Securities Co. Japanese gaming stocks have rebounded after pricing in the measure’s failure to progress to a vote in the session ended on June 22.

Anti-gambling groups say Japan’s obsession with pachinko parlours and horse racing causes enough trouble already.

Just getting to the floor of the parliament is a breakthrough in the decade-long effort to legalise table gaming, with the bill on course for passage by year-end, says Takeshi Iwaya, a lawmaker from the Liberal Democratic Party. The measure would set the legal framework for casino resorts. A subsequent law detailing

rules of operation would also need approval.

Gaming Stocks Sega Sammy Holdings Inc., a maker of gaming machines, jumped 2.6 percent on June 17 when lawmakers said they’d begin discussing the bill. The Tokyo-based company rebounded 15 percent through yesterday after falling to a 15-month low on May 19 amid concern the legislation had stalled.

It added 0.8 percent as of 11:10 a.m. in Tokyo today.

Konami Corp. rose 2.1 percent on June 17, while Japan Cash Machine Co. surged 8.4 percent.

The benchmark Topix index, the worst performer this year among the 24 developed markets tracked

by Bloomberg, added 0.3 percent that day.

The jobs, revenue and taxes generated by betting houses elsewhere in Asia show what’s at stake for Abe. Macau casinos generated $45 billion in revenue last year, seven times that of the Las Vegas Strip, according to data compiled

by Bloomberg. Singapore’s Marina Bay Sands, operated by Las Vegas Sands Corp., and Genting Singapore Plc’s Resorts World Sentosa directly employ 22,000 people, trade ministry figures show.

“Integrated resorts will be a key feature in our growth strategy and consideration should proceed from the standpoint of how to best draw visitors from across the world,” said Abe, 59, after visiting Singapore’s gaming venues on May 30, according to a Kyodo News report.

Abe is seeking to triple the

number of tourists visiting Japan each year to more than 30 million by 2030. Foreign arrivals reached a record 10.4 million in 2013 as a weaker yen made visits cheaper, according to Japan National Tourism Organization.

Japan’s casino market could be worth as much as $40 billion, according to CLSA Ltd., a Hong Kong-based brokerage. MGM Resorts International and Las Vegas Sands Corp. said in February they would invest as much as $10 billion each.

MGM and Wynn Resorts Ltd. said last month they may even list shares in Japan to raise their profile.

Casinos could be ready before the Olympics if the momentum is maintained, according to Eiji Kinouchi, a senior strategist at Daiwa Securities Co. in Tokyo.

“We have six more years,” Koichi Hagiuda, a lawmaker from the ruling Liberal Democratic Party, said in parliament on June 18. “We should make efforts to make it happen in time.”

Hidden Costs Previous efforts to build casinos have failed because the industry is commonly associated with social ills, said Kazuaki Sasaki, assistant professor at Nihon University College of Economics in Tokyo.

“Many studies on casinos’ ties with organized crime and gambling addiction will now be conducted,” Sasaki said. “Only research can quell the opposition.”

About one in 10 adult males is addicted to gambling in Japan, where betting on horses, cycling and boating is legal, according to a 2008 study

funded by the health ministry.

Pachinko, Japan’s version of pinball, pushes the addiction rate higher than other nations, the study said. The industry had 19 trillion yen ($186 billion) in revenue in 2012, according to the most recent data from the Japan Productivity Centre.

The consequences of legalisation will cost taxpayers, said Kiyohito Wada, an attorney and member of the Japan Federation of Bar Associations that issued a statement against the bill last month.

Company Plans “Supporters tend to separate the social costs, but when you take them into account, they will be huge,” Wada said.

Japanese companies are cheering Abe on. Sega Sammy is trying to build a casino in South Korea and said it’s interested in doing so in Japan. Konami, a maker of pachinko machines, has plans to set up a casino subsidiary. Also poised to benefit is Japan Cash Machine, a company that manufactures coin-counting terminals used in casinos and arcades.

Besides lifting gaming stocks, legalisation will have a broader market impact by boosting sentiment among foreign investors, said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.

Yahagi is learning English phrases such as ‘banker wins’ and getting to grips with baccarat, the game favoured by superspy James Bond.

Now he just needs Abe’s bet to pay off.

“We’ve got to start building casinos soon, or we won’t make it in time for the Olympics,” he said.

Bloomberg

9

June 25, 2014

Greater China

Ma Jun urges China to join TPP Joining the talks may help China counter an economic slowdown without resorting to large-scale stimulus

C

hina would add about 2 percentage points to annual economic growth by joining a Pacific trade pact in the view of the central bank’s chief research economist, according to presentation slides seen by Bloomberg News.

The country should join negotiations on the Trans-Pacific Partnership as soon as possible to reap the benefits, Ma Jun of the People’s Bank of China said in an internal presentation in mid-June.

South Korea and Vietnam would also add more than 2 percentage points to their gross domestic product growth rates as part of the TPP, the presentation showed.

While joining the talks may help China counter an economic slowdown without resorting to large-scale stimulus, the 12 nations currently negotiating the TPP are expected to wrap up an initial agreement before new members are admitted. The U.S. and Japan said in April that there’s “still much work to be done” on outstanding issues.

The pact would link an area with about US$28 trillion in annual economic output, or 39 percent of the world total, and would be the biggest trade deal in U.S. history. In addition to the U.S. and Japan, nations seeking the deal are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Ma, who came to the PBOC earlier this year from Deutsche Bank AG, sees the benefits from joining the TPP talks

is paying close attention to the TPP talks and hopes that others can be open and inclusive on the accord.

Ma’s projection is based on the assumption of having 16 countries in the TPP including the additions of China, South Korea, Thailand and Indonesia, according to the presentation.

The TPP goes beyond usual deals that focus on tariffs and traditional goods such as agriculture. It would establish rules for digital commerce and include environmental standards and protection for companies that compete against government-backed businesses.

Textiles benefit

Ma Jun, from the PBOC, is positive about joining the TPP

to China’s GDP expansion accruing over several years to eventually reach 2 percentage points, the presentation showed. It didn’t give forecasts for China’s actual pace of growth.

The PBOC didn’t immediately respond to a faxed request for

comment. Ma didn’t respond to an e-mail seeking comment.

Paying attention China’s Commerce Minister Gao Hucheng said in March that the nation

If China joins the TPP, Ma sees industries including textiles, apparel and electronic equipment benefiting the most, while those including petrochemicals, mining and autos would be hurt the most, the presentation showed.

The trade pact is unlikely to be reached this year and the opportunity to sign it is more likely in the first half of 2015, Australian Trade Minister Andrew Robb said June 18 at a conference in Canberra.

U.S. Trade Representative Michael Froman said in November, after South Korea expressed interest in joining the TPP, that the “possible entry of any new country would be expected to occur after the negotiations among the current members are concluded.”

Bloomberg News

China Ting says borrowers default on entrusted loans Entrusted loans are part of China’s shadow banking system that regulators are seeking to rein in

C

hina Ting Group Holdings Ltd., a garment maker, said two borrowers defaulted on entrusted loans it made through Ningbo Bank Corp. and Bank of Communications Ltd. The stock fell.

Zhongdou Group Holdings Ltd. and Hangzhou Zhongdou Shopping Centre Co. failed to make interest payments on schedule on loans worth 160 million yuan (US$26 million), China Ting said in a Hong Kong exchange filing on Monday.

Entrusted loans, advances between companies arranged through banks, are part of China’s shadow banking system that regulators are seeking to rein in. Some of the entrusted funds, which totalled 8.2 trillion yuan as of the end of 2013, were being directed to industries that face lending curbs from the government, according to the People’s Bank of China.

“Ningbo Bank Corp. confirms that they have commenced legal proceedings in respect of their loan arrangements with Zhongdou Group,” and Bank of Communications is prepared to take action, China Ting said.

Yang Dingguo, owner of the two companies that had borrowed the funds, couldn’t be contacted, China Ting said, citing media reports it didn’t identify.

Overdue loans China’s 10 largest lenders reported overdue loans reached 588 billion yuan at the end of 2013, a 21 percent increase from a year earlier to the highest level since at least 2009. The rise in late payments portends more losses on soured loans for banks in coming months as China’s slowing economy crimps companies’ earnings.

The number of entrusted loans made by publicly traded companies rose 43 percent from 2012 to 397 cases in 2013, the central bank said in its 2014 financial stability report.

China’s aggregate financing, the broadest measure of new credit that includes bank lending and lessregulated products like entrusted loans, fell to 1.4 trillion yuan in May from 1.55 trillion yuan in April, according to the central bank.

Bloomberg News

yuan 8.2 trillion 2013 entrusted funds’ value

Bank of Communications (Shanghai headquarters pictured) managed the creation of the failed entrusted loan

10

June 25, 2014

Greater China

Vice premier demands new credit rating system During a meeting with international personages attending an Asian credit system forum in Beijing

C

(Pictured) Australian Trade and Investment Minister Andrew Robb

Free trade deal with Australia by end of year Prime Minister Tony Abbott’s expressed intent to seal an agreement before November

C

hina and Australia, which have been trying to set up a bilateral free trade agreement for years, are determined to sign a deal by the end of this year, Australia’s trade chief said yesterday after talks with Chinese leaders.

But there has been little sign of a breakthrough despite Prime Minister Tony Abbott’s expressed intent to seal an agreement before November.

Australian Trade and Investment Minister Andrew Robb said the deal with China was on track, but declined to give details of talks, saying he didn’t want to “put his cards on the table”.

“The conclusion was that it was doable this year. It could be completed, and that both governments are determined to bring it to completion later this year,” Robb said after meeting with Xu Shaoshi, the chairman of China’s powerful economic planning agency, the National Development and Reform Commission.

“There is a negotiation, so anything can happen. But we’re both confident and we went through in some detail what ground had to be covered, including agriculture,” Robb told reporters.

Free trade talks have been stymied

by Beijing’s concerns over opening markets to Australian food. There are fears in Australia that an influx of cheap Chinese goods could threaten domestic producers facing a strong local currency and high costs.

China has expressed worries over Australia’s stringent approval process on foreign investment by

state-owned enterprises. Canberra, like many of China’s trading partners, wants Beijing to improve access to key industries in which foreign investment is currently restricted.

Nonetheless, China’s thirst for minerals has fuelled more than 20 years of unbroken economic growth in Australia.

Robb was in China with Australian Treasurer Joe Hockey for the country’s first annual Strategic Economic

There is a negotiation, so anything can happen. But we’re both confident and we went through in some detail what ground had to be covered, including agriculture Andrew Robb Australian Trade and Investment Minister

Dialogue with China, Australia’s largest two-way trading partner.

Trade in goods and services between the two countries reached about US$150 billion in 2013, according to the Australian government.

Abbott had said he hoped a deal could be reached before November, in time for Chinese President Xi Jinping’s scheduled visit to Australia.

But some have criticised the prime minister for setting a timeline for clinching the deal, arguing that it gives China leverage in the negotiations, which began in 2005.

Since then, Australia has started and finished deals with both Japan and South Korea.

Robb also expressed optimism about concluding the Trans-Pacific Partnership (TPP) free trade deal with the United States and 10 other Pacific Rim economies in 2015.

“My assessment of U.S. politics ... is that it won’t pass this year no matter what happens. I think the best window and the best opportunity will be in the first half of next year,” he said.

Central to U.S. President Barack Obama’s strategic shift toward Asia, the TPP would cut trade barriers and harmonise standards in a deal covering two-fifths of the world economy and a third of global trade. Many countries had hoped to complete the TPP last year, but talks stalled over Japanese tariffs on agricultural imports.

Beijing has painted Obama’s “pivot” to Asia as an effort to contain the rising Asian power, which is not party to the TPP negotiations.

Reuters

hina supports the development of a new international credit rating system that is objective, just, rational and balanced, Chinese Vice Premier Zhang Gaoli said on Monday.

During a meeting with international personages attending an Asian credit system forum in Beijing, Zhang said China is ready to work with all other countries to push for the perfecting of the existing credit rating system and the establishment of an Asian credit rating system and standards that suit regional characteristics.

Present at the meeting were former French Prime Minister Dominique de Villepin, former Pakistani Prime Minister Shaukat Aziz, former Australian Prime Minister Kevin Rudd and former Russian Foreign Minister Igor Ivanov. The international guests are members of the newly founded International Advisory Council for the Universal Credit Rating Group (UCRG), a Hong Kong-based rating organization co-sponsored by China, Russia and the United States.

Zhang said during the meeting that China is accelerating the development of its social credit system, pushing forward sharing of government information and promoting credit in the administrative, business and social sectors.

He said China is ready to make positive contributions to reform of regional and international credit systems on the basis of building its own domestic credit system.

The international guests are in Beijing to attend the Summit Forum on UCRG and Construction of Asian Credit System held on Monday.

De Villepin said the establishment of UCRG will help change the state of the international credit rating system and promote its improvement. He said the UCRG is ready to play an active role in economic development of China and the whole Asian region.

The UCRG was officially founded in Hong Kong in June 2013. It is aimed at constructing a “dual rating” system in parallel with the current one dominated by the Western “Big Three,” namely Standard and Poor’s, Moody’s and Fitch Ratings.

Xinhua

(Pictured) former French Prime Minister Dominique de Villepin attended the credit systems forum in Beijing

11

June 25, 2014

Greater China

Metalor to join new China gold exchange

World Cup boosts Chinese sports lottery sales

Private-equity controlled Metalor is one of the first companies to confirm participation in the new exchange

P

recious metals refiner Metalor Technologies SA will join the upcoming international bullion exchange in Shanghai, the Swiss company’s chairman said, in a boost for China as it tries to open up its market to foreign players.

Private-equity controlled Metalor is one of the first companies to confirm participation in the new exchange, which will be launched by the statebacked Shanghai Gold Exchange (SGE) in the city’s pilot free trade zone later this year.

“We are interested in actively participating in the Chinese market,” Chairman Scott Morrison told Reuters in an interview ahead of an industry conference in Singapore. “ We ar e join ing the n ew exchange in the free trade zone as a founding member.”

China - the top gold consumer and producer - has approached foreign banks and producers to participate in a global gold exchange in Shanghai, sources told Reuters last month, as it seeks a greater influence over pricing of the metal.

SGE has asked bullion banks such as HSBC, Standard Bank, Standard Chartered and Bank of Nova Scotia to take part in the global trading platform, the sources said.

Australia and New Zealand Banking Group has said it is seeking a role in the exchange.

Currently, foreign banks and entities have limited opportunities to participate in the local market. China is slowly opening up the market, and last year granted gold-import licenses to two foreign banks for the first time.

“China will have a bigger say in pricing of the metal in their domestic market, but because of structural limitations in the marketplace now and in the foreseeable future, they cannot immediately influence global prices,” Morrison said.

China’s sports lottery sales have been boosted by the FIFA World Cup. Daily sales were less than 100 million yuan (US$6.39 million) before the World Cup but more than 400 million since the event started on June 12, according to the China Sports Lottery Administration Centre in an article in Tuesday’s China Securities Journal.

Leading online lottery agent 500.com is making more lottery sales every day, roughly three to five times the daily average before the World Cup, according to Pan Zhengming, CFO of 500. com Ltd.

Ministries form vocational education development plan

KEY POINTS Metalor to join new exchange as founding member-chairman Exchange seen as another step in opening up China market Company has explored IPO, nothing planned for now

“It’s still not a market comparable to Hong Kong, Zurich or New York but the new exchange is a step in that direction.”

Oil trader pioneer dies The Chinese oil trader brokered the delivery of more than US$500 million in gasoline to Iran between July 2010 and January 2011, contravening U.S. sanctions law

L

egendary Chinese oil trader “Crazy Yang” Qinglong, who started China’s oil business with Iran in the 1990s and was renowned as a hard-drinker who bear-hugged Iranian officials, has died, said company officials and former acquaintances.

“He’s a legend, a tough man, a man of perseverance,” said an oil industry executive who plans to attend Yang’s funeral at his hometown in south-western Yunnan province.

“You can hardly find a second such Chinese official who achieved what Yang has achieved.”

Yang, 62, who died of cancer on Sunday, set up China’s state trader Zhuhai Zhenrong Corp around 1995 after “high-level military friends” wanted someone to formally import crude oil from Iran. At the time, Iran was supplying oil to China to pay for arms supplied by Beijing during the 1980-88 Iran-Iraq war.

By 2001, Yang’s state trader was supplying 16 percent of China’s crude imports, importing 11 million tonnes of Iranian crude or 220,000 barrels per day.

A decade later Zhuhai Zhenrong was the biggest supplier of refined petroleum products

Metalor is also expanding in other parts of Asia, with the Neuchatelbased company officially launching its refinery in Singapore this week, adding to existing facilities in Switzerland, the United States, Hong Kong and mainland China.

The 150-tonne refinery is the first ever refinery in Singapore, whose efforts to change the city-state into a precious metals trading hub began in 2012 with the scrapping of sales tax for investment-grade gold.

The company will start silver refining in Singapore before the end of the year, Morrison said.

Metalor is also eyeing acquisitions across all of the company’s businesses, he said.

The company’s majority shareholder is Paris-based private equity fund Astorg Partners.

Reuters

back to Iran, according to the U.S. State Department. The Chinese oil trader brokered the delivery of more than US$500 million in gasoline to Iran between July 2010 and January 2011, contravening U.S. sanctions law.

“Some (Chinese) officials scoffed at Yang for his not totally refined behaviour like hard drinking, but I respect Yang as oil industry person who did something to serve the country’s political needs, not just in pursuit of commercial gains,” said an executive who plans to attend Yang’s funeral.

Yang was the person who connected China’s current state energy majors CNPC, Sinopec and CNOOC with Tehran, sources said.

“Crazy Yang’s superb networking skills and his unusual personality are the valuable assets that few Chinese officials of his position can match,” said a former Zhenrong trader.

Yang retired in 2011 to become Zhenrong’s advisor.

“China’s Iranian oil business has been carried on till today largely because of Yang’s heritage,” said the former Zhenrong trader.

Reuters

Six Chinese ministerial-level departments have jointly produced a plan to develop vocational education over the next six years. By the end of 2015 a vocational education system should be in its initial form. The number of students at vocational high schools should reach 22.5 million, with 13.9 million at vocational colleges, said the plan posted on the Ministry of Education (MOE)’s website late on Monday. The document was jointly issued by the MOE and five other departments including the National Development and Reform Commission and the Ministry of Finance.

Crude oil stocks up, refined falls China’s commercial crude oil inventories at the end of May rose 4 percent from a month earlier as crude imports remained high, the official Xinhua news agency said yesterday. But refined fuel stocks fell 5.48 percent from end-April, Xinhua reported in its oil and gas newsletter China OGP. Of the total, diesel stocks slumped 11.4 percent, gasoline stocks rose 0.93 percent and kerosene stocks increased 0.16 percent, it said. The fall in diesel stocks came as industrial activity accelerated and the summer harvest started in May.

‘Transformers’ dispute solved Movie studio Paramount Pictures and a Chinese company have resolved a dispute over a sponsorship deal that had threatened to disrupt the release of big-budget action movie “Transformers: Age of Extinction,” the studio said on Monday. Beijing Pangushi Investment Co Ltd last week demanded changes to the film because it said Paramount did not meet its obligations to feature its property in the movie.

A Paramount spokeswoman said the issues had been resolved without any edits to the film and the movie will debut worldwide as scheduled on Friday.

Harbour Engineering subsidiary to build new port in Israel Israel said on Monday it has selected a subsidiary of China Harbour Engineering Company to build a 3.3 billion shekel (US$950 million) port in southern Ashdod on Israel’s Mediterranean coast. Under the terms of the tender, the company, Pan-Mediterranean Engineering Ltd., will build new docks, warehouses and jetties, extending deep-water berthing capacities at the site, the Israel Ports Company said in a statement. Israel also plans a second port further north in the city of Haifa but has not yet awarded the contract to build it.

12

June 25, 2014

Asia

Philippines may ease rice-import curbs Policymakers will consider a proposal next month to adopt a free market

Moving to a free market allows the government to plug its cash leaks stemming from rice subsidies Jonathan Ravelas chief market strategist BDO Unibank Manila

rice from overseas.

Consumer prices climbed 4.5 percent in May from a year earlier.

Retail prices of well-milled rice rose 20 percent from a year earlier to a record as of the second week of June, according to the Philippine Statistics Authority.

That’s in contrast to prices of Thai 5-percent broken white rice, an Asian benchmark, which have tumbled 26 percent in the past year as the Thai government accelerated sales of stockpiles to make payments to farmers. Thai reserves have more than doubled to almost 14 million tons from 5.6 million tons in the 2010-2011 crop year prior to the start of the government’s rice purchase program, according to data from the U.S. Department of Agriculture.

Better access

T

he Philippines is considering easing rice-import curbs as Asia’s second-biggest buyer battles record-high domestic prices and seeks to limit losses at a state agency, Economic Planning Secretary Arsenio Balisacan said.

Policy makers will consider a proposal next month to adopt a free market and allow private traders to import as much rice as they want, Balisacan said in an interview in his office in Manila yesterday. The government would instead collect tariffs on the imports, he said.

“We need to get our trade policy right to address rising rice prices,” Balisacan said. “Our approach in

restricting rice imports without an adequate assurance that local rice production would be sufficient to meet demand was the main factor” that led to higher prices, he said.

President Benigno Aquino is seeking to curb inflation running at the fastest pace since November 2011, boosted by the higher cost of rice, a staple in the Southeast Asian nation. Debt at the National Food Authority, which subsidizes farmers by buying their rice at higher prices, will probably climb to 180 billion pesos (US$4.1 billion) by end-2016 without any changes to the program, Aquino said, or twice the nation’s defence budget this year, according

to Bloomberg calculations.

“Moving to a free market allows the government to plug its cash leaks stemming from rice subsidies,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “It also provides more market access for people to buy rice.”

Record prices The government had planned to import 1 million metric tons of rice this year, including 200,000 tons secured last year after Super Typhoon Haiyan struck in November.

Separately, it allowed private traders in February to buy 163,000 tons of

“While we want to provide sufficient protection for our rice farmers, we also want to ensure that consumers, particularly the poor, would have access to inexpensive rice,” said Balisacan. “Instead of the government deciding, let the private traders and players decide that.”

To help farmers who may be hurt by cheaper imports, the government could take steps to boost irrigation, develop higher- yielding rice varieties, provide better access to credit and improve the supply chain, said Balisacan. The former World Bank economist oversees agencies including the Public-Private Partnership Centre and the Philippine Statistics Authority, and is also in charge of approving infrastructure projects.

Bloomberg News

Singapore tries to reverse dip of Chinese tourists Road shows will be held in major Chinese cities to sell Singapore and its attractions

S

ingapore is carrying out a 1 million Singapore dollars (US$800,000) campaign to woo back the Chinese tourists following dips in the number of their arrivals in recent months, local newspaper reported yesterday.

Changi Airport Group said it has joined hands with Singapore Tourism Board, two casino resorts and other travel partners in the five-month marketing drive that runs through October, the Straits Times said.

Road shows will be held in major Chinese cities to sell Singapore and its attractions, with goodie bags given to those who buy travel packages.

The monthly number of tourist arrivals from China at Singapore’ s

Changi Airport jumped by 14.5 percent year on year in January, but has been dipping in the following four months.

Between January and May, Changi handled 1.87 million passengers flying to and from China, down 1.7 percent year on year.

Tourism experts said the slowdown has been on the back of political instability in Thailand as well as the disappearance of Malaysia Airlines Flight MH370 which was carrying mainly Chinese travellers.

Singapore has been hit because Chinese tourists who visit Southeast Asia typically cover all three countries, they said.

No monthly data was provided, but the decline is easing, according

to an airport spokesman.

For the first time, the 1.24 million Chinese who visited Singapore in the first half of last year overtook Indonesian visitors as the biggest spenders. Statistics from the Singapore Tourism Board show they spent almost 1.52 billion Singapore dollars (US$1.22 billion), excluding spending on sightseeing and entertainment.

The Singapore Retailers Association said that retailers have felt the impact, especially on the prime-shopping belt.

While Chinese tourists were the biggest spenders last year, “ this may not be the case in 2014,” said a spokesperson of the association.

1.24 million

Chinese visited Singapore 1H 2013

Xinhua

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari intern Aries Un Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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13

June 25, 2014

Asia Direct financing in S.Korea reduced Corporate direct financing, including bond and stock sales, in South Korea reduced in May as lack of demand for corporate bond and equity issuances, financial watchdog data yesterday.

Corporate debt financing, including debt and equity funding, reached 10.74 trillion won (US$10.54 billion) in May, down 3.4 percent from a month earlier, according to the Financial Supervisory Service (FSS). It was attributable to a drop in rights offering and corporate bond sales by industrial companies, the FSS said.

Equity financing such as rights offering and IPO plunged to 119.8 billion won in May.

Myanmar, Japan to establish education centre Myanmar and Japan have signed a memorandum of understanding on establishing Asia Specialty Education Centre (ASEC) in Nay Pyi Taw, state media reported yesterday.

The ASEC centre will be jointly set up by the Department of Technical and Vocational Education under Myanmar’s Ministry of Science and Technology and the Institute for Environmental Technology Promotion in Asia of Non-Profit Organization of Japan.

The establishment of the ASEC is aimed at promoting cooperation in technological training between Myanmar and Japan. Meanwhile, the Japan International Cooperation Agency (JICA) will fund 2.5 billion yens (US$24.51 million) to help improve Myanmar’s education status.

Suntory to hire outsider as president Family-owned Suntory Holdings Ltd will appoint an outsider as president for the first time in its history, a source familiar with the matter said, as the century-old Japanese drinks maker steps up global expansion plans. Takeshi Niinami, currently chairman of convenience store operator Lawson Inc., will become president of Osaka-based Suntory Holdings on Oct. 1, the source said. Current president and chairman Nobutada Saji, grandson of the firm’s founder, will remain chairman with representative rights, the source added. Suntory earlier this year bought U.S. drinks company Beam Inc. for 1.6 trillion yen (US$15.7 billion).

Aquino leaves for Japan to attend peace forum

Salomon Lew changes Aussie retailers panorama Lew career is defined by shrewd, audacious investments

A

ustralian billionaire Solomon Lew effectively ended a 17year standoff with South Africa’s Woolworths Holdings Ltd yesterday with a deal that will have the department store firm buy him out of two investments at a massive profit.

With a A$200 million (US$188 million) gamble, Lew positioned himself to block the South African firm’s A$2.2 billion takeover of Australian rival David Jones Ltd by amassing almost 10 percent of the target’s stock in little more than two weeks.

The David Jones gambit gave Lew a huge bargaining chip to negotiate an exit from another Australian investment, clothes retailer Country Road Ltd, in which he held an 11.88 percent stake alongside controlling shareholder Woolworths.

Woolworths yesterday offered to buy Lew out of Country Road at a massive premium of A$17 a share, handing the Melbourne-based businessman a A$188 million profit and removing his implied threat to the David Jones takeover.

Lew bought the Country Road shares for about A$2.00 each in 1997 in a successful effort to frustrate Woolworths’ attempted takeover of that company. And he bought his David Jones shares for an average A$3.90 each, compared to Woolworths’s A$4.00 offer price.

If he accepts Woolworths’s A$213 million offer for his Country Road stake, worth just A$59 million in January, and sells into its David Jones offer, Lew will not just pocket a tidy profit but prove once more he is one of Australia’s wiliest and most patient investors.

“He had them where he wanted

Woolworths market at West Ryde, Australia.

them and if they wanted David Jones they had to pay up,” said Lonsec senior client adviser Michael Heffernan.

The offer, if Lew accepts it, marks another remarkable chapter

KEY POINTS Lew ends 17-year showdown with healthy profit Woolworths gets David Jones and Country Road Lew has built fortune on wily retail investments

in a career defined by shrewd, audacious investments.

Most notable, he bought into David Jones rival Myer in the 1980s at what was reported to be a bargain price.

He then gradually built his stake so that he had about 6 percent of retail conglomerate Coles Myer when it sold supermarket chain Coles Group to Wesfarmers for A$20 billion in 2007.

Newly minted Lew then established retail-focused Premier Investments, which quickly paid A$821 million for Just Group Ltd, owner of several well-known clothing brands like Just Jeans, Jay Jays, Portmans, Dotti and Smiggle.

That company is now worth an estimated three times that amount, according to Australian media.

Reuters

BHP to cut more jobs at Aussie iron ore unit The firm said it was not possible to put a number on how many jobs would be targeted James Regan

Philippine President Benigno Aquino III left Manila yesterday for a one-day visit to Japan where he will meet Japanese Prime Minister Shinzo Abe and address a peace conference.

Aquino, in his departure message, said he would discuss ways to achieve a lasting peace and development in southern Philippines with Abe. He will also thank Japan for its assistance to the peace process resulting to the signing of a comprehensive peace deal between the Philippine government and the Moro Islamic Liberation Front (MILF), the largest Muslim rebel group in the country.

Air bag flaw forces 3 mln vehicles recall Honda Motor Co and other Japanese automakers on Monday recalled almost 3 million cars with potentially explosive air bags supplied by Takata Corp, bringing the total recall so far to about 10.5 million vehicles over the past five years. The series of recalls cover both passenger-side and driver-side air bags, which the world’s second-biggest automotive safety parts maker manufactured in 2000-02.

The total ranks it among the five biggest recalls in the industry’s history. Honda said it was recalling about 2.03 million vehicles globally over potentially flawed Takata air bag.

B

HP Billiton is planning to cut more jobs at its flagship Australian iron ore division as it seeks to reduce costs, following a slump in iron prices.

A BHP spokeswoman said it was not possible to put a number on how many jobs would be targeted, and declined to confirm an Australian Broadcasting Corp radio report that the number could reach 3,000.

The world’s biggest miner, which employs about 16,000 people in its iron ore division, announced earlier this year that 170 jobs would go at its Whaleback mine in the Pilbara iron ore belt. A further 100 people have been let go at the division’s Perth headquarters.

Iron ore prices have fallen more 31 percent this year due to slowing demand growth in China, the main market for Australian ore.

“This is about continuing to safely improve our business and ensuring we are a competitive, world-class operation,” BHP’s spokeswoman said,

Whaleback iron ore mine (pictured) saw job cuts early this year

adding that reducing the payroll was part of a wider focus to contain costs.

BHP is currently expanding its iron ore operations after late last year commissioning its Jimblebar mine in the Pilbara iron ore belt.

However, Chinese buyers are being offered discounts by Australian miners to maintain sales as increased supply from major miners has overwhelmed demand growth.

The sharp drop in iron ore prices could force China to close up to a

fifth of its domestic mine production, which could eventually benefit BHP and other Australian producers, which can mine higher-grade ore and ship it to Chinese steel mills for less cost, according to an analysis by consultancy Wood Mackenzie.

Profit from iron ore, BHP’s biggest business, rose 60 percent in the firsthalf of fiscal 2014, while petroleum earnings fell 16 percent and copper rose just 0.4 percent.

Reuters

14

June 25, 2014

International Schaeuble against new EU debt issue Running up new debt would be “the worst possible” thing to do, German Finance Minister Wolfgang Schaeuble said yesterday as a debate resurfaces over an easing of EU fiscal rules.

“Running up new debt would be the worst possible mistake we could make,” Schaeuble told German public radio InfoRadio in an interview. EU members should “stick to the rules we jointly drew up. Nothing more, nothing less,” the minister said, amid a growing debate on whether countries such as France and Italy should be given more time to get their finances in order.

German business morale falls German business sentiment fell more than expected in June, signalling that Europe’s largest economy is taking a breather and companies are concerned about political crises in Ukraine and Iraq. The Munich-based Ifo think tank’s business climate index, based on a monthly survey of some 7,000 firms, decreased to 109.7 from an unrevised 110.4 in May. Expectations in a Reuters poll of 40 economists had been for a fall to 110.2.

US named watchdog for BNP Paribas New York state financial regulators appointed a corporate monitor within the US offices of BNP Paribas late last year to keep an eye on its activities, the New York Times reported yesterday.

That quietly designated monitor is Shirah Neiman, a former deputy United States attorney in Manhattan, the Times said, quoting people briefed on the matter. The French bank is suspected of violating a US embargo by allowing transactions with blacklisted countries such as Sudan, Iran and Cuba. The bank could be hit with a fine of up to nine billion dollars and other sanctions.

KKR buys stake in energy arm Private equity firm KKR is to buy a onethird stake in the energy arm of Spain’s Acciona for 417 million euros (US$567 million), the companies said yesterday, as they move to develop one of the world’s largest renewable energy portfolios. It was the latest asset sale by a Spanish renewables energy firm after regulatory changes in Spain to cut costly subsidies. The government measures have particularly hurt profit at Acciona’s wind farms. The deal is one of the world’s biggest-ever deals in the renewable energy sector.

Cuba edges towards unified currency The Cuban government was working to abolish a dual-currency system, the official Granma daily said Monday.

Progress on monetary and exchange rate unification topped the agenda of a cabinet meeting presided over by Cuban leader Raul Castro Saturday.

Vice President Marino Murillo said the authorities were continuing “to work in compliance with the approved timetable” to scrap the dual currencies, but he did not provide details. At present, most Cubans are paid in the Cuban peso or CUP, but most goods in the country are sold in the convertible peso or CUC, which is pegged to the U.S. dollar and is worth about 25 CUPs.

Denmark scales back stimuli The Social Democratic-led government has raised spending to the limit to drag the country out of a slump triggered by a 2007-2008 housing crash

Danish government (pictured) headed by Helle Thorning-Schmidt, in a light blue jacket, and Bjarne Corydon behind her to the left

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inance Minister Bjarne Corydon is preparing to scale back stimulus as consumer optimism stokes an expansion in Scandinavia’s weakest economy.

“We can slowly take the foot off the accelerator,” Corydon said last week in an interview in Copenhagen.

“The economy is approaching being self-sustaining.”

Reports last week showed retail sales are at the highest in two years and consumers the most optimistic since before the financial crisis erupted in 2008. The central bank last week raised growth estimates for the US$340 billion economy, home to toymaker Lego A/S, and warned it’s monitoring declining unemployment that for some professions is at the

We can slowly take the foot off the accelerator Bjarne Corydon, Danish Finance Minister

same level as when the economy was “overheating” in 2006.

The Social Democratic-led government, which faces an election before September 2015, has raised spending to the limit to drag the country out of a slump triggered by a 2007-2008 housing crash. The deficit will reach 3 percent of gross domestic product next year, testing the limit under European Union rules, the Finance Ministry said last month.

Budget talks, due to start after the summer holiday, will concern “specific target policies,” rather than the complete framework, according to Corydon.

‘Bad idea’ The economy expanded 0.9 percent in the first three months of this year, the most since the third quarter of 2010. Danish unemployment at 3.9 percent is close to pre-crisis levels. The central bank last week raised growth forecasts, predicting an expansion of 1.5 percent in 2014, 1.8 percent in 2015 and 2 percent in 2016.

The crisis has left its mark on Denmark, which like all Nordic countries has an extensive welfare and social safety net. Providing either social benefits or tax cuts without first finding the financing is “per default a bad idea,” Corydon said this month.

The government is seeking to uphold a budget law it introduced in 2012 and keep the structural deficit

within the 0.5 percent EU limit. The government in May raised its domestic borrowing need to 116 billion kroner (US$21.2 billion) from a December estimate of 84 billion kroner.

Bond sales Increased spending prompted the country’s debt office yesterday to raise its bond borrowing estimate for this year by 33 percent 100 billion kroner.

“The government will go very far to stay within these rules,” Jan Stoerup Nielsen, an economist at Nordea Bank AB in Copenhagen, said by phone.

“It’s extremely important to stay within the rules. There’s no reason to jeopardize the credibility that’s been built by Denmark by having a healthy economy and sound public finances.”

Still, the largest Nordic lender also predicts it’s unlikely the government will pare spending too much as it faces an election. Cutting government investments to pre-crisis levels could reduce spending by as much as 10 billion kroner annually from about 40 billion kroner currently, according to Nordea.

“The only place the government can reverse spending is public investments and infrastructure projects,” said Stoerup Nielsen. “They will be very reluctant to take anything away from anyone going into an election year and investments have been very high.”

Bloomberg News

S.African platinum mines strike solved Workers represented by the militant Association of Mineworkers and Construction Union accepted the wage offer by Anglo American Platinum

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wage agreement to end a fivemonth strike at the world’s biggest platinum mines in South Africa was signed yesterday, a union official said.

Workers represented by the militant Association of Mineworkers and Construction Union (AMCU) accepted the wage offer by Anglo American Platinum, Impala Platinum and Lonmin on Monday.

The producers gave no details about the signing ceremony, which the union said was held in Johannesburg.

The stoppages, the longest in South Africa’s mining history, hit platinum production in the world’s top exporting country, with companies reporting a combined loss of 23.8 billion rand

(US$2.24 billion) in earnings.

AMCU leader Joseph Mathunjwa said Monday the companies had “agreed to the bulk of our demands”, with the deal expected to increase wages for the lowest paid workers at Impala platinum by some 1,000 rand (US$95) a month for two years and by 950 rand in the third year.

The increases offered by the three companies differ according to various worker categories and full details of the agreement were expected to be revealed after the signing.

Workers had demanded that their basic wages be almost doubled to 12,500 rand (US$1,180).

Mathunjwa acknowledged that not all workers would reach that level within

three years, but added that “many will easily reach it”.

The demand for 12,500 rand was at the centre of a deadly strike at Lonmin in 2012, where 34 mineworkers were shot dead by police in one day at Marikana.

On January 23, more than 70,000 workers downed tools for the same demand and better benefits, with government intervention last month failing to yield results.

The strike helped push the country’s economy into contraction in the first quarter of this year for the first time since the global economic crisis five years ago.

Workers are expected to return to work today.

AFP

15

June 25, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE PHNOM PHEN POST The Cambodian government is drafting a series of changes to the Kingdom’s gaming laws in a bid to draw major players from Macau and the US to the market and potentially create a new tax base from the growing, if currently illegal, online betting industry, officials say. Ros Phirun, spokesman for the Ministry of Economy and Finance’s gaming and casino department, said the government is in the process of drafting stricter, more transparent regulation and investigative requirements, with an eye towards eventually regulating the now-underground online gambling scene.

THE AGE Consumers are recovering from the shock of the federal budget, the ANZ-Roy Morgan consumer confidence index shows. Consumer confidence has improved a further 2.4 per cent over the past week, bringing the total improvement in confidence to 6 per cent over the past four weeks, and staving off the risk of “contagion” into business confidence. “We are starting to see a slow grind higher,” ANZ Research senior economist Felicity Emmett said.

But consumer confidence still remains 10 per cent lower than at the end of April.

THE JAKARTA POST State-run construction firm Waskita Karya is looking to strengthen its toll road portfolio as it has established a new subsidiary, PT Waskita Toll Road, to manage the company’s future toll road projects. Waskita corporate secretary Haris Gunawan said the publicly listed firm had injected Rp 300 billion (US$25 million) for the subsidiary’s paid-in capital. Waskita Toll Road would kick off operations with Rp 1.2 trillion in initial capital to finance this year’s projects. “Waskita Toll Road will handle Waskita’s toll road projects by establishing its own subsidiaries to manage each project,” he explained.

THE BANGKOK POST The Revenue Department will launch an investigation into whether owners of residential properties worth 40 million baht or more have understated their income and require those who own cars worth more than 3 million baht to report their possessions as part of measures to prevent tax evasion. Director-general Sutthichai Sangkamanee said residences on golf courses were the department’s main focus.

Investigations of the owners of expensive houses will begin next month. The department earlier said it planned to … make tax collection more efficient.

The limits of climate negotiations

Jeffrey D. Sachs

Special Adviser to the United Nations Secretary-General on the Millennium Development Goals

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EW YORK – If the world is to solve the climatechange crisis, we will need a new approach. Currently, the major powers view climate change as a negotiation over who will reduce their CO2 emissions (mainly from the use of coal, oil, and gas). Each agrees to small “contributions” of emission reduction, trying to nudge the other countries to do more. The United States, for example, will “concede” a little bit of CO2 reduction if China will do the same.

For two decades, we have been trapped in this minimalist and incremental mind-set, which is wrong in two key ways. First, it is not working: CO2 emissions are rising, not falling. The global oil industry is having a field day – fracking, drilling, exploring in the Arctic, gasifying coal, and building new liquefied natural gas (LNG) facilities. The world is wrecking the climate and food-supply systems at a breakneck pace.

Second, “decarbonising” the energy system is technologically complicated.

America’s real problem is not competition from China; it’s the complexity of shifting a US$17.5 trillion economy from fossil fuels to low-carbon alternatives. China’s problem is not the US, but how to wean the world’s largest, or second largest economy (depending on which data are used) off its deeply entrenched dependence on coal. These are mainly engineering problems, not negotiating problems.

To be sure, both economies could decarbonise if they cut output sharply. But neither the US nor China is ready to

sacrifice millions of jobs and trillions of dollars to do so.

Indeed, the question is how to decarbonise while remaining economically strong. Climate negotiators cannot answer that question, but innovators like Elon Musk of Tesla, and scientists like Klaus Lackner of Columbia University, can.

Decarbonising the world’s energy system requires preventing our production of vast and growing amounts of electricity from boosting atmospheric CO2 emissions. It also presupposes a switchover to a zero-carbon transport fleet and a lot more production per kilowatt-hour of energy.

Zero-carbon electricity is within reach. Solar and wind power can deliver that already, but not necessarily when and where needed. We need storage breakthroughs for these intermittent clean-energy sources.

Nuclear power, another important source of zerocarbon energy, will also need to play a big role in the future, implying the need to bolster public confidence in its safety.

Even fossil fuels can produce zero-carbon electricity, if carbon capture and storage is used.

Lackner is a world leader in new CCS strategies.

Electrification of transport is already with us, and Tesla, with its sophisticated electric vehicles, is capturing the public’s imagination and interest. Yet further technological advances are needed in order to reduce electric vehicles’ costs, increase their reliability, and extend their range.

Musk, eager to spur rapid development of the vehicles,

made history last week by opening Tesla’s patents for use by competitors.

Technology offers new breakthroughs in energy efficiency as well. New building designs have slashed heating and cooling costs by relying much more on insulation, natural ventilation, and solar power. Advances in nanotechnology offer the prospect of lighter construction materials that require much less energy to produce, making both buildings and vehicles far more energy efficient.

The world needs a concerted push to adopt to low-carbon electricity, not another “usversus-them” negotiation.

All countries need new, low-carbon technologies, many of which are still out of commercial reach. Climate negotiators should therefore be focusing on how to cooperate to ensure that technology breakthroughs are achieved and benefit all countries.

They should take their cue from other cases in which government, scientists, and industry teamed up to produce major changes. For example, in carrying out the Manhattan Project (to produce the atomic bomb during World War II) and the first moon landing, the US government set a remarkable technological goal, established a bold timetable, and committed the financial resources needed to get the job done. In both cases, the scientists and engineers delivered on time.

The example of atomic bombs might seem an unpleasant one, yet it raises an important question: If we ask governments

and scientists to cooperate on war technology, shouldn’t we do at least the same to save the planet from carbon pollution?

In fact, the process of “directed technological change,” in which bold objectives are set, milestones are identified, and timelines are put into place, is much more common than many realize. The informationtechnology revolution that has brought us computers, smart phones, GPS, and much more, was built on a series of industry and government roadmaps. The human genome was mapped through such a government-led effort – one that ultimately brought in the private sector as well. More recently, government and industry got together to cut the costs of sequencing an individual genome from around US$100 million in 2001 to just US$1,000 today. A dramatic cost-cutting goal was set, scientists went to work, and the targeted breakthrough was achieved on time.

Fighting climate change does depend on all countries having confidence that their competitors will follow suit. So, yes, let the upcoming climate negotiations spell out shared actions by the US, China, Europe, and others.

But let’s stop pretending that this is a poker game, rather than a scientific and technological puzzle of the highest order. We need the likes of Musk, Lackner, General Electric, Siemens, Ericsson, Intel, Electricité de France, Huawei, Google, Baidu, Samsung, Apple, and others in laboratories, power plants, and cities around the world to forge the technological breakthroughs that will reduce global CO2 emissions.

There is even a place at the table for ExxonMobil, Chevron, BP, Peabody, Koch Industries, and other oil and coal giants. If they expect their products to be used in the future, they had better make them safe through the deployment of advanced CCS technologies. The point is that targeted and deep decarbonisation is a job for all stakeholders, including the fossilfuel industry, and one in which we must all be on the side of human survival and wellbeing.

The Project Syndicate 2014

Fighting climate change does depend on all countries having confidence that their competitors will follow suit.

So, yes, let the upcoming climate negotiations spell out shared actions by the US, China, Europe, and others

16

June 25, 2014

Closing HSBC sells Swiss asset portfolio

Nissan CEO was paid US$9.8 million in last fiscal year

Global bank HSBC announced yesterday the sale of a portfolio of private banking assets in Switzerland for an undisclosed amount to Liechtenstein’s LGT Bank. HSBC added in a statement that the portfolio had assets under management of US$12.5 billion at the end of 2013. The deal, which remains subject to regulatory and other approvals, is expected to be completed in the final quarter of this year.

HSBC stressed however that it “remains fully committed to Switzerland as a key international centre for its global private banking business and a priority market for the group.”

The company’s chief executive Carlos Ghosn, one of the highest-compensated executives in Japan, said he was paid 995 million yen (US$9.8 million) in the financial year that ended in March, up 0.7 percent from the previous year. The slight rise in Ghosn’s pay, which excluded stock options, came as profitability in Nissan is being squeezed by the cost of a rapid expansion drive. Japan’s second-biggest automaker has forecast an operating profit margin of 5 percent for this financial year, the lowest among Japanese rivals including Toyota Motor Corp and Honda Motor Co.

“Third Arrow” reforms take aim Private economists surveyed by Reuters forecast that the plan could boost Japan’s potential growth rate by 0.2-1.5 percentage points

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rime Minister Shinzo Abe unveiled a package of measures on Tuesday aimed to boost Japan’s longterm economic growth, from phased-in corporate tax cuts to a bigger role for women and foreign workers, but applause from investors is likely to be muted after Tokyo backpedalled on bolder reforms.

Abe took office 18 months ago pledging to end deflation and generate sustainable growth with a three-pronged strategy of monetary easing, fiscal spending and reform.

Experts say the latest instalment of his so-called “Third Arrow” of long-term economic policies, most of which had been trailed in advance, is a step in the right direction, but want to see how they are fleshed out and implemented.

Private economists surveyed

by Reuters forecast that the plan could boost Japan’s potential growth rate by 0.21.5 percentage points from its current level of around 0.5 percent. But they noted that it would take time.

“Even after the government growth strategy is announced, various legislation must be enacted and it will take time for companies to begin to act.

Therefore, it will be 10 to 20 years before the potential

Japanese Prime Minister Shinzo Abe in a press conference yesterday

growth rate rises,” said Kenji Yumoto, vice chairman of the Japan Research Institute.

Yumoto said it was possible, but very difficult, for Japan to hit the 2 percent growth level the government says is needed to reduce its mammoth public debt.

Among the steps outlined so far is a future cut in Japan’s effective corporate tax rate among the highest in the world - to below 30 percent over the next several years, and a promise to reform the US$1.26 trillion Government Pension Investment Fund in ways likely to reallocate more money to the stock market.

Abe’s reform package is a welcome move for the Bank of Japan, which has called for bold government to help sustain the current recovery fuelled in part by its massive monetary stimulus.

But many BOJ officials say the key now is implementation and Abe’s commitment to meet words with action, so that companies feel confident enough to boost investment for the future.

BOJ Governor Haruhiko Kuroda, a former senior finance ministry bureaucrat, has also warned against cutting Japan’s corporate tax rate without securing an alternative source of

tax revenue, given the country’s massive public debt.

Balancing act, details omitted In a nod to that need for balance, the tax plan will seek to offset the cuts by broadening the tax base.

But tough, key details of many steps have been left to be worked out later and several bold but politically contentious proposals were watered down or omitted.

By dribbling out key elements of the package in recent weeks, the government hopes to avoid the disappointment that led to a sharp drop in Tokyo share prices when Abe announced the first instalment of his “Third Arrow” last June.

Earlier in the day, Abe urged the nation’s business leaders to do more to boost the role of working women, a key plank in the growth strategy and seen as vital to address the shrinking workforce in one of the world’s most rapidly ageing societies.

In a meeting with business executives, Abe urged companies to set targets for promoting female workers to senior jobs and disclose information on progress in annual earnings reports.

Reuters

Italy demands end to austerity

China has to struggle for fiscal target

French controllers strike disrupts European flights

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talian Prime Minister Matteo Renzi called yesterday for a change of course in Europe, saying that austerity policies on their own could not guarantee fiscal stability in the face of rising unemployment and economic stagnation.

Speaking in parliament ahead of this week’s European Union summit, Renzi said Italy was not asking for a relaxation of EU budget rules but for existing rules to be flexibly applied in exchange for commitment to a package of domestic structural reforms that Italy would achieve by 2017.

“It is obvious that the trade-off between the reform process and the use of the margins for flexibility which already exist and which are available to member states is what has always happened,” he said.

Renzi said that when Italy takes over the rotating EU presidency next month, he would outline a “1,000 day” programme for which he would seek parliamentary approval and that would be achieved by May 2017.

Reuters

overnment may struggle to make this year’s fiscal revenue target, the finance minister warned yesterday.

The central treasury received 2.9 trillion yuan (US$472 billion) from January to May, an yearon-year growth of 6.3 percent and 0.7 percentage points lower than the budgeted target, said Lou Jiwei, when briefing lawmakers on the final accounts for 2013. This year’s budgeted growth of central fiscal revenue is 7 percent. The government is “under heavy pressure”, Lou said. Difficulties lie in the downward pressure on the economy and the program to replace business tax with valueadded tax (VAT) in some service sectors, which will reduce tax revenue by some degree, Lou said.

Despite the poor central performance, total national fiscal revenue has reached 6.12 trillion yuan, up 8.8 percent and higher than the 8 percent budgeted for. “Economic growth is stable and performance remains in a reasonable range,” Lou said. “The general situation has met expectations.”

Xinhua

irlines were forced to cancel dozens of flights to and from Paris’s main airports and several cities in southern France yesterday as air traffic controllers kicked off a six-day strike.

The work stoppage comes at the height of the tourist season in a nation that attracts more foreign visitors than any other country in the world, and follows a rail protest that affected services abroad and domestically and is still continuing in some areas.

The country’s civil aviation watchdog said around one in five flights going to and from several big cities in southern France, or taking off from Paris to the south, Spain, Portugal, Morocco, Tunisia and Algeria, were cancelled and passengers were experiencing delays on other services.

Ryanair, which was forced to cancel 96 flights, slammed the strike and “called on the EU Commission to remove the right to strike from Europe’s air traffic controllers, who are once more attempting to blackmail ordinary consumers with strikes.”

AFP