Macau Business Daily, July 16, 2014

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One-horse race S

o far, he’s the only candidate. For Macau’s top job. Incumbent Chief Executive Chui Sai On said yesterday he would prioritise people’s livelihood during his second term in office.

Administrative reforms, long-term policies, housing, transport, medical services and social security are all on his to-do list

Year III

Number 583 Wednesday July 16, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

MOP 6.00

Still a bumpy ride for gaming | Ho’s new Russian casino to open by year-end |

www.macaubusinessdaily.com

Pages 2 & 3

HK leader compromising

HSI - Movers July 15

Name

Hong Kong’s Chief Executive seems to be listening to his citizens. Leung Chun-ying has submitted a report to China’s National People’s Congress. He says “There is a need to amend the method for selecting the CE in 2017” Page

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China Merchants Hol

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China Shenhua Energ

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Beijing’s efforts to nurture the economy is bearing fruit. Bank loans grew in June, beating all expectations.

New loans reached 1.08 trillion yuan (US$173.9 billion) Page

3.34

2014-7-16

Stimulating stimuli 5

CITIC Pacific Ltd

Brought to you by

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It’s that time of year again. Macau is preparing for the annual Grand Prix. The MGP committee has just revealed the sponsor of the event title. Junket operator Suncity Group will pay 16.6 million patacas for the honour

Macau is getting more expensive for locals. And tourists are feeling the pinch, too. Accommodation has increased by up to 12 percent in the second quarter. While dining out and clothing prices are creeping up

China Mobile Ltd

Source: Bloomberg

Suncity to sponsor GP event title

Tourist prices up 6pct Q2

%Day

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July 16, 2014

Macau

It’s official: Chui to run for top job Chui Sai On pledged in his re-election bid to prioritise livelihood issues, and to defend the high degree of autonomy here Stephanie Lai

sw.lai@macaubusinessdaily.com

M

acau’s Chief Executive, Fernando Chui Sai On, officially announced his candidacy for the fourth term of the territory’s top office yesterday, saying that the priorities of his political programme would revolve around “livelihood issues” – namely housing, transportation, social security and human resources.

In announcing his re-election bid for the 5-year tenure of the Chief Executive post, Mr. Chui also promised to speed up the reform of the current structure of the administration, but he was short on specifics on the political programmes briefed to media yesterday.

“If I am elected, I promise to continue defending the principles of ‘one country, two systems’ and the high degree of autonomy here,” Mr. Chui announced in his election manifesto yesterday, also noting that he was confident in the success of his candidacy.

“Apart from administrative reforms, building long-term policies is another focus,” Mr. Chui said.

“We’ve already built the fiscal reserve system [during the current term of government] and we’ll definitely form a long-term policy on other areas, which is not only on housing, but on transportation, medical services and social security as well.”

The election campaign period will start on August 16 and end on August 29, a time during which Mr. Chui says any urgent administration affairs would be prioritised over campaign activities. His current term as the city’s Chief Executive ends on December 19.

The election for the Chief Executive will take place on August 31.

At yesterday’s media briefing, Mr. Chui also noted that he would not accept any campaign donations.

Little innovation The incumbent Chief Executive told media yesterday that he would let the public know about his reflections on the comparison of the political programme laid out five years ago and the actual performance during the upcoming campaign period.

Mr. Chui was the only candidate to run for the Chief Executive election in 2009, at a time when he had noted to the Electoral College that increasing public housing supply, diversifying the local economy and establishing a transparent administration were the top issues that he

On renewal of gaming licences

T

hroughout the election manifesto, which Mr. Fernando Chui announced yesterday, there was no particular mention of gaming policy in his speech. But the incumbent Chief Executive told media that the review of the renewal of Macau’s six casino concessions, due to expire between 2020 and 2022, would be made “open” and “transparent” to the public. He declined to elaborate on the government’s approach to the renewal process.

Previously, the government had signalled that the renewal process for the gaming licences would start in 2015 and 2016.

When Mr. Chui launched his election bid for Macau’s top office in 2009, he promised to control the development pace of the city’s gaming industry and strictly monitor the business. At the time, he also pledged to protect the employment rights of local gaming workers.

In March 2010, the Secretary for Economy and Finance Francis Tam Pak Yuen first announced the gaming table cap policy. Mr. Chui’s administration has also fostered the public policy reserving live dealer posts for permanent residents only, a measure that the government has maintained up to the present.

would work on.

“In the past four years or so, you can see that many of Mr. Chui’s policies were a continuation of what former Chief Executive Edmund Ho did, such as the social welfare measures including the 19,000 public housing units supply and allowance for the unemployed,” commented University of Macau scholar Eilo Yu Wing Yat, who specialises in Hong Kong and Macau politics and public administration.

“Mr. Chui stressed innovation in his political programme in 2009, but there has not been much innovation seen in his policies so far,” Mr. Yu said.

“The fund that was freshly established a couple of months ago for the cultural and creative industry managed to be a breakaway from Edmund Ho’s policies but this is only a minor step that Mr. Chui has attempted to help

diversify the economy.”

The scholar also believes that the upcoming task for Mr. Chui and his governing team is to rebuild trust with the public as the lateMay demonstration against the welfare package targeted at departing top officials and the faulty public consultation on the political reform for electing the city’s legislators and Chief Executive in 2012 have proved to be a major challenge for the government.

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July 16, 2014

Macau On reforming electoral system and government structure

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hen asked of views on whether to make universal suffrage a goal, Mr. Chui did not make any promises about initiating another round of political reform of the city’s electoral system of the Chief Executive if elected to serve another five years in office.

“I’m willing to listen to any opinions on this issue [of political reform] or discussions on it,” said Mr. Chui. “As Chief Executive, I’m also willing to reflect these opinions to the central authorities.”

He stressed that amending the present electoral system was still subject to the authority of Beijing.

The last political reform that took place here was in 2012, in which the major amendment introduced to the Chief Executive electoral system was increasing the number of members of the Electoral College – the organ responsible for nominating and electing the Chief Executive – from 300 members to 400 members; but the electoral rules remain largely unchanged.

Mr. Chui also mentioned that modifying the government structure and enhancing the efficiency of its workings is one of his priorities if elected, but he did not elaborate much on what these reforms would be.

On regional cooperation

W On political challenges

M

r. Chui said yesterday that the previous demonstration in May against the bill offering a generous welfare package for the departing top officials “did not pose a huge impact” on his re-election bid.

The perks bill, which underwent a first reading by the Legislative Assembly in December last year, provoked two unprecedented protests in late May demanding the bill be withdrawn.

Mr. Chui reiterated yesterday that the welfare system for the city’s top officials, which he hoped to build to attract capable talent if elected, should be subject to public consultation.

hen asked about the political programme on regional cooperation with mainland China, Mr. Chui noted that he would like to proceed with the existing policy of leasing more land from Macau’s neighbouring island Hengqin, a complementary destination to the city’s tourism offerings.

“I hope that we can get more space in Hengqin,” said Mr Chui. “Previously, we got 5 square kilometres of land to promote local investments to settle there, and we are aware that many local companies would like to develop businesses there. We hope that gaining more land in Hengqin could help diversify our economy, and create more opportunities for the small and medium businesses here.”

Mr. Chui also reiterated yesterday that a 24-hour border crossing between Macau and Hengqin is a goal to strive for, but the city would need more discussion and analysis of border entry terms with the Guangdong government.

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July 16, 2014

Macau

Hong Kong leader unveils vote reform plan Three Macau associations have announced they will hold an unofficial civil referendum from August 24 to 30.

Participants will vote on whether Macau’s CE should be elected by universal suffrage in 2019. The government, however, has said any civil referendum is ‘illegal’

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ong Kong’s leader called yesterday for limited electoral change despite mass prodemocracy protests, saying in a report to China that voters want a “patriotic” chief executive.

Discontent has flared in the semiautonomous Chinese city over what is seen as increasing interference by Beijing, notably its insistence that it vet candidates before the next leadership election in 2017.

Chief executive Leung Chunying said in the report, submitted to China’s National People’s Congress (NPC) or parliament, that “there is a need to amend the method for selecting the CE [Chief Executive] in 2017 in order to attain the aim of universal suffrage”.

Currently, the leader is chosen by a 1,200-strong pro-Beijing committee.

China says voters can elect the next chief executive but candidates must be picked by a nominating committee – raising fears among democracy advocates that only pro-Beijing figures will be allowed.

Leung – saying he was citing the findings of an official public consultation period on reform – said “mainstream opinion” believed that a nominating committee should choose candidates, in line with the city’s mini-constitution known as the Basic Law. Reflecting another Chinese stipulation, he added that “the community generally agrees that the CE should be a person who ‘loves the Country and loves Hong Kong’.”

Pro-democracy activists are pushing for the public to select candidates, which China has ruled out. Campaign group Occupy Central and its allies have said they will take over the streets of the Central business district if public nomination is refused. An informal poll organised by Occupy in June saw almost 800,000 choose from three options, all of which included public nomination of candidates.

That poll was followed by a prodemocracy march on July 1, which attracted tens of thousands.

Pro-democracy lawmaker Frederick Fung said he felt “angry” about yesterday’s report. “It does not fully reflect the yearnings of the Hong Kong people,” he said.

The former British colony was handed back to China in 1997 under an agreement which granted rights such as freedom of speech and an independent judiciary.

‘Divergent views’ Leung admitted there were “divergent” opinions on how the next leader should be elected, including “considerable views” that civil nomination should be included. But he added that “professional bodies of the legal sector and other members of the public” had said that would not be in line with the Basic Law. Leung’s report has been sent to China’s NPC Standing Committee, which meets next month and must approve any reforms.

There were angry scenes in Hong Kong’s legislature yesterday

when the government’s number two, Carrie Lam, announced the findings of the public consultation which polled more than 120,000 individuals and groups. Protester and lawmaker Leung Kwok-hung threw an inflatable hammer and a birdcage with the words “civil nomination” written in Chinese inside it towards Lam. “I want civil nomination,” Leung shouted repeatedly as he was hauled out of the chamber. Another lawmaker Albert Chan ripped up a copy of the report, shouting “Fake report, fake consultation!” as he was removed.

The submission of Leung’s report is the first in a five-step process on electoral reform.

“The Standing Committee of the National People’s Congress has final say on whether to revise the election methods of Hong Kong SAR’s chief executive in 2017 and its Legislative Council in 2016” the website of state news agency Xinhua cited the NPC as saying yesterday, after receiving the report.

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July 16, 2014

Macau

Hotel prices continue to push up tourism inflation Tourist prices in Macau increased 6.14 percent in the second quarter of this year after accommodation expenses grew 12.3 percent. Hotel prices are growing two times faster than the cost of dining out or buying new clothes in Macau Alex Lee

Alex.lee@macaubusinessdaily.com

M

acau is not only getting more expensive for residents; tourists are also suffering the price hike of goods and services they buy when they visit the territory such as hotels, restaurants or clothing. But in the end, it’s all property related.

Locals complain about rents and housing prices, while tourists feel accommodation is too costly here.

And they’re right. In the second quarter, accommodation was by far the tourist service cost which rose most dramatically, according to the Statistics and Census Service Bureau.

The cost of accommodation increased 12.63 percent compared to the same period last year and 14.57 percent during the last 12 months ended June. These growth rates show that the cost of getting a room in Macau is increasing at double the pace of that of inflation and all the other tourist products.

Accommodation is also the biggest component of the tourist basket used

to calculate price variations in the industry here, with a weighting of 23 percent. Meaning that the Tourist Price Index (TPI) - a kind of ‘tourism inflation’ - is always highly correlated with hotel room prices.

The TPI reached 6.14 percent in the second quarter of 2014 from that of a year ago and 6.68 percent in the 12 months ended June. The increase in tourist prices was justified by the official statistics office due to ‘higher charges for hotel accommodation and restaurant services, as well as dearer prices of clothing and local food products’.

The cost of buying clothing and footwear in Macau was the second tourist product to grow most after accommodation, even though ‘only’ 7.08 percent year-on-year and 6 percent in annualised terms (the average of the last 12 months).

Dining out is also getting increasingly expensive here with prices climbing 5.36 percent year-

23pct

accommodation weighting of tourist basket

on-year and 5.63 percent in the last 12 months. Accommodation, clothes and restaurants represent the majority of the tourism basket price index, with a weighting of 56 percent.

According to second quarter TPI data the products that saw the biggest jump in prices in the previous 12 months in Macau were leisure goods such as books, computers and cameras, the prices of which increased 25

percent, two times more than hotels and four times the TPI growth rate.

On a quarter-on-quarter basis, the prices for tourist services and goods decelerated 7.29 percent between April and June. This was caused by the softer prices increase of hotels and restaurants in Macau during the Easter holidays (2nd quarter) compared to Lunar New Year, the most important tourism season here.

Suncity to pay MOP16.6mln for Grand Prix event title The junket operator was the winner of the open tender for the event title and will be responsible for 59 percent of the total money raised in sponsorship deals by the Grand Prix Committee Alex Lee

alex.lee@macaubusinessdaily.com

T

he Suncity Group will pay 16.6 million patacas for the rights to be the event title sponsor of the 61st Macau Grand Prix, it was announced yesterday during the presentation of the race weekend.

The junket operator landed the sponsorship deal following a public tender and will be its first ever title sponsor of the Macau Grand Prix.

“Following an open tender we are pleased to announce that the overall title sponsor for this year’s Macau Grand Prix is Suncity Group,” said Joao Manuel Costa Antunes, the coordinator of the Macau Grand Prix Committee.

The junket operator’s sponsorship is not limited to the event title. Suncity will also sponsor the Formula 3, FIA WTCC and Motorcycle races.

The agreement between the Macau Grand Prix Committee and the Suncity Group was signed during yesterday’s presentation of the race weekend. CEO and director of Suncity Alvin Chau Cheok Wa represented the junket operator company, which is based in Macau.

“This budget is around 190 million patacas. This represents an increase of roughly 14 percent in comparison to 2012’s edition of

through the sales of tickets,” Mr. Costa Antunes added.

Lesser impact

the Grand Prix,” Costa Antunes explained. “We cannot compare this year’s budget with the race of last year because it was the 60th edition and it took two weekends.

This year’s edition will be hosted over one weekend only.”

“As for the revenue from sponsors, there was an increase of 13 percent in comparison with 2012. This means that we expect the revenue to be 28 million patacas,” he said. The agreement with Suncity will account

for 59 percent of the total revenue gathered in sponsorships.

The list of sponsors of the Grand Prix include CTM – Companhia de Telecomunicacoes de Macau, which will invest 1.5 million patacas in the event. Other sponsors include Bentley, Yokohama and Air Macau.

The event will be held from November 13 to 16 and organisers expect to sell 10 percent more tickets.

“All in all, we are expecting to have a revenue of 43 million patacas

One of the points focused on by the coordinator of MGPC was the need to reduce the impact of the race on the lives of Macau residents. In order to accomplish this objective the resurfacing of the circuit will be done during the summer.

“Last year, we noticed that the track resurfacing works were done in September during the beginning of school time. So when parents were driving their children to school they were affected by the works. We do not want that to be repeated this year,” said Costa Antunes.

In addition, the installation of flyover hoardings will be arranged at weekends or after 9:00pm. Not only has the preparation of the circuit been planned to minimise the inconvenience to the people of Macau.

“For the first time in the history of the Macau Grand Prix there will be a cap on noise pollution in engine decibel levels,” the coordinator said.

“These measures were adopted after recommendation of the ruling body for motorsports, the FIA [Fédération Internationale de l’Automobile].”

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July 16, 2014

Macau Brought to you by

People’s man Legislator Chan Meng Kam is an influential businessman, with interests in industries ranging from hospitality to gaming to retailing. He also considers himself a man of the people

HOSPITALITY Converging rates The growth in the number of visitors to Macau has allowed the hotel sector to keep increasing the supply of rooms and, at the same time, to raise the occupation rates. These rates vary significantly according to the category of the hotel and throughout the year. Lower category facilities, namely those classified as guesthouses or 2-star hotels, display noticeably lower occupation rates. The characteristics and purpose of stay for their customers are also likely to be quite different from those guests staying in more expensive hotels and, especially, those associated with gambling facilities. Monthly figures show wide differences throughout the year, even if the seasonal peaks and troughs are mostly similar across the industry. The chart shows a 12-month moving average for the various categories of hotel, strongly smoothing the seasonal effects. The sector average is not displayed, as it trails very closely the figures for 5-star hotels. These hotels represent about two-thirds of sector capacity; its figures can be taken as a reliable proxy for the overall average.

The average occupation rate for the sector is usually 0.6 percentage points below the figure for that category.

L

ess people may have voted in Macau’s last elections in September 2013 but votes for directly-elected legislator Chan Meng Kam increased a dramatic 10,000 versus the previous election in 2009.

He has been a member of the Legislative Assembly since 2005. In an exclusive interview with Macau Business, Mr. Chan reveals the secret behind his electoral success. He also unveils his projects for this legislative term, particularly those targeting the gaming sector.

Unlike the territory’s ‘typical’ politician, Mr. Chan is not part of a family that wields power nor is he part of an important pro-establishment

association. As such, winning three seats in the last elections imposes more responsibilities, he admits. Not only did votes for his ticket increase by more than 50 percent in this election but he got one more seat.

The two newly elected candidates under Mr. Chan’s umbrella, Si Ka Lon and Song Pek Ke, come from a younger post-70s, post-80s generation. The energetic duo have long been involved in social work affairs.

Mr. Chan says there are some “incompetent officials” who do not fulfil their obligations and that “the government keeps facing many problems of its own making.” He

Better prospects?

The 3 and 4-star hotels usually have higher occupation rates; 4-star hotels have actually led in this indicator for a long time. However, that leadership, which has been a stable and distinctive feature of the sector, is now being challenged by 3-star hotels. The plots show the top three categories are following increasingly similar paths and, somehow, their values seem to be converging. Their differences dropped from typical values standing around 3 or 4 percentage points to values close or below one percentage point in recent months.

86.3 %

5-star hotel occupation rate in May, 8.4 pps above last year’s

Having a Masters degree, mainly an MBA, would probably mean better career prospects. That would be true if this were not Macau

I

t was the early 20th century when the United States first created the degree of Master of Business Administration. Soon enough, the whole world followed suit and an MBA is now a crucial asset for managers seeking promotion or a better job with another employer.

The same isn’t true in Macau.

Here, when two candidates for a job are equally suitable in all other respects, experience will outweigh academic qualifications and tip the scales. The primary reason, according to recruitment experts, is that there is virtually zero unemployment in Macau, which means employers

have difficulty finding experienced workers. However, an MBA obtained abroad – a rarity here – does not carry much more weight than an MBA obtained at any of Macau’s institutions of higher education.

cites the budget of the Taipa Ferry Terminal which increased from 500 million patacas (US$62.5 million) in 2005 to its current 3.3 billion patacas as an example. Another example he gives is the budget increase of the Hengqin underwater tunnel that rocketed from 500 million patacas to 2 billion patacas. “This kind of chaotic budgeting variation is seldom seen anywhere in the developed world,” he says. These are only some of the serious problems here, according to the legislator.

Read the full story in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.

An authority on human resources, Zenon Udani, agrees that experience outweighs academic qualifications, but says an MBA obtained abroad does carry more weight because it signifies exposure to the world outside Macau. He argues that most MBA programmes here fail to give students what they need because they are too ‘generalist’ instead of being more ‘specific’ in supplying the necessary knowledge pertinent to local industry.

However, some recruitment agents say academic qualifications are decisive in Macau only when the candidates for a job are otherwise equally suitable. But it isn’t the key factor, and the requirements here differ from that of Hong Kong. In the neighbouring SAR, an MBA can be decisive because the economy there is ‘more mature’ than Macau’s, experts argue. Experience is important for candidates for management positions because employers look for skills in managing staff expectations and making strategic decisions.

Read the full story in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.

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July 16, 2014

Macau

‘Right to be forgotten’ not forgotten here The Asia Pacific Privacy Authority is now studying the EU’s ‘right to be forgotten,’ which could see that right expand globally Kam Leong

newsdesk@macaubusinessdaily.com

observing the development of such cases [of the right to be forgotten] as although it is a European case it has a global impact,” he said.

Personal data transfer and safety

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he Asia Pacific Privacy Authority (AAPA) decided upon a work group study, followed up by the possibility of applying the European Union’s new ruling of the ‘right to be forgotten’ during a recent meeting in South Korea. Macau was one of the members of the group, the deputy coordinator of the Office for Personal Data Protection (GPDP) Yang Chongwei said yesterday.

The ‘right to be forgotten’ ruling by the European Court of Justice

(ECJ) of the European Union allows information holders to execute the right to oppose the posting of personal data or related information on search engines, suggesting people have the right to make themselves ‘disappear’ from such engines.

“Macau is one of the members of this group. The group is seeing if we have to request the related search engines to provide a better [privacy] service and promote such service to different regions,” Mr. Yang said.

“We [the Office] are now

At a talk about personal data information being transferred cross-border and safety measures enacted by the GPDP, Mr. Yang said yesterday that the Office had investigated 16 such cases, seven of which were prosecuted.

Mr. Yang said that the numbers of complaints of personal data being used improperly had increased by 1.5 percent year-on-year during the first half of this year. Of these, 2 percent were related to marketing promotion, while consultation increased by around 2.5 percent year-on-year.

Mr. Yang believes that complaints or consultation of personal data have been increasing in recent years due to citizens becoming “more sensitive” to protecting their personal data.

He also said that the Office has analysed the personal data collected from local organizations’ applications based on an activity held by Global Privacy Enforcement Network earlier

this year, the results of which will be announced in September.

According to this analysis, Mr. Yang thinks that most of the local organisations emphasise the protection of personal data although improvements are still necessary.

Meanwhile, he said the fact that many mobile applications people download and use actually belong to foreign organisations.

He urged that organisations inform the public beforehand about what kinds of personal data would be collected and what the data would be used for, or if they would pass the data on to third parties.

Currently, articles 19 and 20 of the Provisions in the Personal Data Protection Act limit Macau’s public and private organisations’ freedom to transfer data they have collected freely across the border, according to Mr. Yang. To transfer data cross-border, the countries or areas where the receiver is located has to have certain protection measures for the data. If not, permission from the controller or agreement between the parties on the contract is needed before the Office judges whether the data can be transferred.

Pataca increases in value for fourth consecutive month The competitiveness of Macau’s exports was again damaged in June, after the pataca appreciated 0.2 points against the currencies of its major trading partners like the US, mainland China, Japan and Europe. The currency here has been getting more expensive since March Alex Lee

Alex.lee@macaubusinessdaily.com

M

acau’s exporters saw their life get a bit more complicated last month after the pataca once again became more expensive compared to the currencies of major trade partners here, damaging the competitiveness of the territory’s firms that sell products in foreign markets.

It’s the fourth consecutive month that the value of the pataca has increased against currencies from mainland China, Japan, the US and Europe.

According to data revealed by the Monetary Authority of Macau (AMCM) yesterday, the tradeweighted exchange rate for the pataca reached 97.45 points, a 0.2 point hike from May. June was also the fourth consecutive month in which the pataca valued against its major export markets currencies. In May, the exchange rate grew 0.14 points, in April 0.34 points and March 0.14 points, AMCM data shows. Between March and June, the pataca jumped 0.82 points in value.

The increase in the exchange rate of the pataca is an added headache for Macau’s exporters, as they see

their products losing competitiveness in international markets.

Despite the increasing monthly valuation, the pataca exchange rate is still trading below last year’s performance. The trade-weighted exchange rate of the pataca dropped 0.31 points compared to June 2013 and is still lower than the 2013 and

2012 averages (97.53 and 97.65 points, respectively) AMCM said.

AMCM also announced yesterday that Macau’s foreign exchange reserves totalled 125.9 billion patacas (US$15.76 billion) last month. This represents an increase of 2.6 percent from the revised value of 122.7 billion patacas (USD15.37 billion) in May.

Source: AMCM

The amount of exchange reserves here last month also reached the highest value since February.

Foreign exchange reserves in June represented 13 times the currency in circulation.

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July 16, 2014

Macau

Still a bumpy ride for gaming Fitch lowered its Macau gaming revenues growth estimates to 10 percent this year, while Wells Fargo expects revenues to move from flat to 5 percent in July.

Investor’s expectations are at their lowest level for several quarters, says Telsey, adding that choppiness in gaming stocks will persist Alex Lee

Alex.lee@macaubusinessdaily.com

F

itch, the company with the most cautious outlook on Macau’s economy of all the rating agencies that follow the territory, has decided to lower its forecast for gaming revenue growth in 2014 from 12 to 10 percent. The volatility of the VIP segment that led to the first drop in gaming revenue in five years last month and had some impact on the mass market due to the full prohibition of smoking on casino floors in October were some of the reasons for the downgrade.

Uncertainty will probably continue in the gaming sector this year. Brokerage Telsey believes that investors’ expectations are at their lowest level in several quarters, and believes that some choppiness will persist. Wells Fargo slightly upwardly revised its expectations for July with revenues set to grow from 0 to 5 percent. Previously, it predicted from flat to 10 percent.

The inconsistency of the VIP sector

this year continues to pressure the gambling market performance in Macau, even with a solid growth in the 20 to 30 percent range coming from mass and premium mass tables.

In a report published yesterday, Fitch referred to it as the VIP weakness: a weakness that prompted the rating agency to revise down its gaming revenue growth predictions this year to 10 percent from a previous 12

Shun Tak puts CitizenM on hold S hun Tak Holdings Ltd is open to the possibility of bringing the European hotel chain CitizenM to Macau through its Hengqin project but no decisions will be made until the Hong Kong-based group secures a land grant.

“We do not know yet if CitizenM will be in our Hengqin resort. There is a possibility. But now we need to focus just on the construction. We are in the process of making the application to the local government for securing the land grant,”

said Pansy Ho, managing director of Shun Tak. “After we know exactly the programme, how much we can do and what sort of functionally we will be able to develop in Hengqin we will determine it,” she added.

As for the application process initiated in 2013 for a land grant in Cotai for a hotel development project, the company has not received a decision from the Macau Government.

“We are still waiting for the outcome of the process,” Ms. Ho added.

A.L.

percent. Still, this is a more optimistic figure than the ones advanced recently by several brokerages following the gaming sector here (they expect a consensus of 8 percent hike for revenues this year).

Fitch says that the World Cup in Brazil and low hold in June were the main factors for the deceleration of revenues in the VIP segment. But also the reallocation of tables from the segment to the low-yield, high margin mass market gamblers.

The 10 percent hike from Fitch’s prediction is based on the assumption that the VIP sector will decline in the low single digit range (0 to 5 percent) while mass will grow 25 to 30 percent.

Choppy H2 In a note to clients yesterday, Wells Fargo also undertook an estimation review, but regarding this month.

The US bank now expects gaming

revenues in July to drop from 5 percent to flat against the previous consensus of a decrease from 0 to 10 percent. With the World Cup over, Wells Fargo says that the average daily gaming revenue in the last two weeks of July could reach first half average levels (around MOP1 billion).

During the tournament, revenues were running 30 percent behind as gamblers stopped playing to watch the matches and bet on them.

It still remains to be seen what the market reaction will be to the expected recovery from gaming revenues during summer. Telsey says investors’ expectations are at their lowest level in several quarters, pointing to an increased sensibility to headwinds and some underperformance by gaming stocks: ‘The choppiness in Macau gross gaming revenues will persist for the coming months and will continue to produce choppy equity performance well into the second half of 2014.’

Ho’s new Russian casino to open by year-end M acau casino developer Lawrence Ho Yau Lung’s new casinos project in the Integrated Entertainment Zone (IEZ) in the eastern Russian city of Vladivostok is slated to open by the end of this year, targeting local Russian gamblers.

According to Hong Kong newspaper Apple Daily, which quotes the deputy chairman and executive director of Summit Ascent Holdings Ltd Eric Landheer, VIP gaming rooms will start to attract high rollers from northern parts of mainland China in the second quarter of next year.

Corporate H&M store to open in The Venetian H & M Hennes & Mauritz AB (H&M), one of the world’s largest fashion retailers, is gearing up to open its first Macau store in The Venetian in 2015, the company said in a statement. The Swedish fashion brand said ‘the entry to Macau, which clasps the momentum of the announcement to enter the Taiwan market, shows that H&M continues with its rapid expansion and global presence.’ A statement released by Sands China Ltd says the two-storey store will occupy an area of 21,000 square feet. “H&M is a perfect fit to our retail strategy at Shoppes at Venetian. We know that consumers now prefer creating their own style, and the fashion offering by H&M enables them to be ‘fashioncreative’ in every season,” said David Sylvester, the company’s senior vice president of global retail. H&M is currently present in 54 markets worldwide, with over 3,200 stores and employs more than 116,000 people.

Landheer said that Summit Ascent is targeting different customers’ sources of Chinese high rollers from Macau. Apple Daily quoted him as saying that the source of Macau is mainly from Southern China, especially from Guangdong Province, while Summit Ascent is looking at the northern part of China, from where not many people go to Macau.

Asked if Summit Ascent will cooperate with Macau’s Suncity Group, owned by local businessman Chau Cheok Wa, and as rumoured, Mr. Landheer refused to reveal anything but said “[Summit

Ascent] will cooperate with one of the biggest betting agents in Macau,” according to Apple Daily.

Lawrence Ho is the son of Macau gaming tycoon Stanly Ho Hung Sun. In addition to being chairman of Summit Ascent, he is co-chairman and chief executive officer of casino operator Melco Crown Entertainment Ltd.

9

July 16, 2014

Greater China

Bank loans beat expectations The central bank has pledged to keep credit and money supply growth at a reasonable level to meet the needs of the real economy

B

eijing stepped up efforts to re-energise China’s economy in June and avert a sharper slowdown, pumping more money into the system and pressing banks to extend more loans, but analysts say more stimulus will be needed to ensure a sustained recovery.

Data over the last week offered some signs that the world’s secondlargest economy steadied in the second quarter as a raft of government stimulus measures kicked in, though exports remained sluggish, putting greater pressure on Beijing to stoke domestic demand.

A cooling property market also points to continued risks in the second half and could well determine the scope and extent of further policy easing, after Premier Li Keqiang vowed recently that the economy would grow by at least the targeted 7.5 percent rate this year.

Chinese banks, which are used

by Beijing as a policy tool, made a much stronger-than expected 1.08 trillion yuan (US$173.9 billion) of new yuan loans in June, nearly 20 percent more than market expectations, data yesterday showed.

Broad M2 money supply jumped 14.7 percent last month from a year earlier - the highest in 10 months, the People’s Bank of China said in a statement on its website, also higher than a forecast of 13.5 percent in a Reuters poll of economists.

“While a fall in short-term lending rates hinted at a higher supply of funds during the month, the money swirling in the market reflects the urgency of the authorities to ramp up economic activity,” said Chester Liaw, an economist at Forecast Pte in Singapore.

Outstanding yuan loans grew 14 percent from a year ago, slightly better than expectations, while the total social financing aggregate, a broad measure of liquidity in the economy, swelled to 1.97 trillion yuan in June from 1.4

trillion yuan the month before.

Central bank aims for a 13 percent annual rise in M2 this year.

The strong growth in money supply in June “is an explicit loosening of (monetary) conditions. Some of this is seasonal. At the end of the quarter there was demand for cash. And evidently, the authorities supplied it,” said Tim Condon, economist at ING Bank in Singapore. But other economists were more cautious.

Upbeat on export outlook After a shaky start to the year, China’s economy has recently shown signs of turning the corner thanks to a series of government stimulus measures, including reserve requirement cuts for some banks and

more spending on railways and public housing.

Government spending surged 26.1 percent in June from a year earlier to 1.65 trillion yuan, further reflecting Beijing’s determination to revive growth momentum.

However, many economists stress that the rebound looks patchy and believe more policy support may still be needed to counter the broader economic downdraft from the slowing property sector.

China’s Commerce Ministry said yesterday that export growth should show marked improvement in the second-half of the year compared to the first six months, making it likely that China will achieve its 7.5 percent trade growth target for 2014.

Reuters

KEY POINTS Loans, money supply stronger than expected June new loans 1.08 trln won vs 915 bln forecast Total social financing also sharply up from May Adds to signs economy may be steadying, turning the corner C.bank seen loosening monetary conditions to support growth

Alibaba to bring Hollywood to Chinese TV The firm and its affiliates have aggressively pushed into the entertainment industry since the beginning of the year, with more than US$3 billion invested since March

C

hinese e-commerce giant Alibaba Group Holding and Lions Gate Entertainment Corp, the studio behind the ‘Hunger Games’ films, will launch a subscription streaming service in China, the firms said in a statement yesterday.

The service, to be known as Lions Gate Entertainment World, will be exclusive to Alibaba’s Internet television set-top boxes and is expected to launch in August.

It will give users access to Lions Gate content, including several titles from the ‘Twilight Saga’ and ‘The Hunger Games’ series, as well as television series ‘Mad Men’.

The Hangzhou-based firm is looking to move beyond traditional e-commerce, offering more digital products like films, games

Alibaba is making a big effort to develop the media division.

New set top boxes will bring Hollywood to China in August

and television.

“This cooperation signals our on-going commitment to advance our vision of making digital media entertainment available to our customers anywhere, anytime,” Patrick

Liu, Alibaba’s president of digital entertainment, said in yesterday’s statement.

Alibaba is preparing for its U.S. listing later this year, potentially the biggest ever tech offering, even as it

maintains a steady stream of investments that has seen the firm and its affiliates invest more than US$7.5 billion since the beginning of the year.

In March, Alibaba

bought a controlling stake in ChinaVision Media Group, a film and television content producer, for US$804 million.

It followed this up in April by buying an 18.5 percent stake in Chinese online video streaming site Youku Tudou Inc in partnership with affiliated private equity company Yunfeng Capital.

Among Yunfeng Capital’s founders is Jack Ma, cofounder of Alibaba.

Also in April, Ma and other partners paid US$1.05 billion for a 20 percent stake in Wasu Media Holding Co, mostly funded with a loan from Alibaba. At the same time, Alibaba and Wasu Digital TV Media Group signed a cooperation agreement for online content and Internet TV. Reuters

10

July 16, 2014

Greater China Power consumption rises China’s power consumption rose 5.3 percent year on year in the first half of 2014, picking up slightly from the 5.2 percent growth in the January-May period, official data showed yesterday. Total power use, an important indicator measuring economic vitality, stood at 2.63 trillion kwh, according to the National Energy Administration. During the period, electricity use by the primary industry dropped 4.6 percent year on year. Power consumption by the secondary industry rose 5.1 percent while that by the tertiary industry went up 6.9 percent.

Controversial yuan remittance scheme suspended

WTO condemns U.S. import duties Many other members of the organisation, declared themselves interested parties in the disputes

W

orld Trade Organisation judges said the United States broke its rules in imposing hefty duties on Chinese steel products, solar panels and a range of other goods that Washington argues enjoyed government subsidies.

In a similar case involving U.S. methods in deciding when foreign

imports are unfairly priced, another WTO panel ruled in support of some claims by India against tariffs on steel exports from three of its major firms.

Trade diplomats said the two cases, both under scrutiny for nearly two years by the separate panels, reflected a widespread concern in the 160-member WTO over what

many see as illegal U.S. protection of its own producers.

In the US$7.2 billion Chinese case, the panel found that Washington had overstepped the mark in justifying the so-called countervailing duties it imposed as a response to alleged subsidies to exporting firms by China’s government.

Major Chinese banks have temporarily suspended a yuan remittance service after a state broadcaster accused the country’s fourth biggest lender Bank of China (BOC) of allowing wealthy Chinese to launder money offshore through the scheme, the Wall Street Journal reported yesterday. The paper, citing unidentified sources, said Bank of China, Industrial and Commercial Bank of China Ltd (ICBC) and China CITIC Bank Corp had halted the service which had been approved by the central bank about two years ago. A Bank of China source with direct knowledge of the matter said the bank had temporarily halted the service.

FX reserves hit $3.99 trln China’s foreign exchange reserves, the world’s largest, rose to US$3.99 trillion at the end of June from US$3.95 trillion at the end of March, central bank data showed yesterday. The central bank also said China’s total social financing aggregate, a broad measure of liquidity in the economy, was 1.97 trillion yuan in June versus 1.4 trillion yuan the month before.

Export growth to pick up in H2 China’s export growth should show marked improvement in the second-half of the year compared to the first six months, the trade ministry said yesterday. Shen Danyang, the spokesman at the Commerce Ministry, also said China is likely to achieve its 7.5 percent growth target for trade if it invests some effort. Shen made the remarks at a press briefing. China’s trade performance improved in June but still missed market forecasts, reinforcing expectations that Beijing will have to unveil more stimulus measures to stabilise the economy and meet its 2014 economic growth target.

Obama wants to manage differences constructively President Barack Obama told Chinese President Xi Jinping on Monday he wants U.S.-Chinese relations defined by more cooperation and a constructive management of differences, during a phone call in which Iran and North Korea were discussed. The conversation between the two leaders came after two days of talks in Beijing, called the Strategic and Economic Dialogue, that was an opportunity for the world’s two biggest economies to dial down tensions after months of bickering over a host of issues. Obama told Xi he looked forward to seeing him at an Asia-Pacific summit in Beijing in November.

U.S. Trade Representative Michael Froman at the World Trade Organization Public Forum last year

Mini IMF creation starts The summit comes as the economies of some BRICS countries are

L

eaders of the BRICS group of emerging powers meet from yesterday to launch a new development bank and a reserve fund seen as counterweights to Western-led financial institutions.

Brazilian President Dilma Rousseff hosts the leaders of Russia, India, China and South Africa in Fortaleza from yesterday before talks with South American leaders the next day in Brasilia.

The summit will mark the first face-to-face meeting between India’s new Hindu nationalist Prime Minister Narendra Modi and Chinese President Xi Jiping.

The summit comes as the economies of some BRICS countries, which together represent 40 percent of the world population and a fifth of the global economy, are cooling down.

Russia and Brazil are expected to see growth of just one percent this year.

The five emerging nations unveiled in 2013 their plans to create the bank, which aims to rival the Washingtonbased World Bank while the reserve is seen as a “mini-IMF.”

40 pct of world population (BRICS)

Brazilian Minister of Development, Industry and Foreign Trade, Mauro Borges, speaks during a press conference on the sidelines of the 6th BRICS Summit

The creation of the bank will give a backbone to the BRICS, which is not a formal international organization, said Marcos Troyjo, Brazilian director of BRICLab research centre at New York’s Columbia University.

“They are only taking their first steps towards a platform for building consensus on international agenda items such as rules for international

trade, joint action at the UN or the WTO,” he told AFP, referring to the World Trade Organization.

The bank will have initial capital of $50 billion with each country contributing an equal share, while the reserve will have $100 billion at its disposal.

The bank is “key to foster growth for the BRICS countries,” Brazilian

11

July 16, 2014

Greater China KEY POINTS Panel says U.S. broke WTO rules in deciding tariffs But Washington sees bright side of findings Cases reflect wider concern over U.S. trade measures

Under the 1964 Marrakesh accords, which also set up the WTO, these duties can only be levied when there is clear evidence that stateowned or partially state-owned enterprises passing on the subsidies are “public bodies.”

The panel found that Washington had produced insufficient evidence for this, and was also at fault in its calculations of the value of the subsidies to Chinese firms producing items like kitchen shelving, grass cutters and even citric acid.

And it told the United States it should adapt its measures to bring them into line with the WTO’s agreement on subsidies and countervailing measures, dubbed the SCM in trade jargon.

Some comfort The ruling, which gave the United States some comfort in rejecting some

aspects of the Chinese complaint, was welcomed in a statement from China’s Ministry of Commerce distributed by Beijing’s trade mission in Geneva.

“China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises,” the statement said.

The United States said it was weighing its options.

U.S. Trade Representative Michael Froman said the decision to reject many of China’s challenges was a victory for American businesses and workers.

“With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that U.S. remedies against unfair subsidies remain strong and effective.”

Many other members of the organisation, including the European Union and Japan, declared themselves interested parties in the disputes, although they did not say if their sympathies lay with the United States or its challengers.

The ruling in the Indian case which involves steelmakers like Tata, Jindal and Essar who are supplied by the state-run iron-ore mining firm, NMDC - was not so clear-cut.

It said the United States had “acted inconsistently” in terms of some provisions of the SCM agreement and had unfairly reduced Indian trade revenue. Washington should bring its measures into line with the pact, the panel said.

But it rejected many of the technical aspects of the Indian case.

Reuters

Foreign investment rises Chinese outbound investment hit US$90.17 billion last year, and officials have said it could overtake FDI this year

F

oreign direct investment (FDI) into China rose 2.2 percent to US$63.33 billion during the first six months of this year, the government announced yesterday.

For the month of June alone, FDI -which excludes investment in financial sectors- inched up 0.2 percent year-on-year to US$14.42 billion, the commerce ministry said.

But it was a substantial jump on May’s US$8.6 billion, according to previous figures.

The ministry also announced that for the first six months China’s overseas investment in non-financial sectors fell 5.0 percent year-on-year to US$43.34 billion.

Foreign investment into China rebounded in 2013 to US$117.59 billion, after declining in 2012 for the first time in three years.

China’s economy expanded 7.7 percent in 2013, the same as 2012 -- the worst pace since 7.6 percent in 1999. China’s official growth target for this year is 7.5 percent, also the same as last year’s.

Gross domestic product (GDP) grew 7.4 percent in the first quarter of this year.

FDI into China from South Korea rose 45.6 percent to US$2.8 billion, while that from Britain jumped 76.4 percent to US$700 billion, the ministry said.

US$14.42 billion June FDI

But investment from Japan declined 48.6 percent in the first six months of the year, while that from the European Union fell 11.2 percent, the figures showed.

There was also a drop in cash from the Association of Southeast Asian (ASEAN) countries, down 19.2 percent, and the United States, which was off 4.6 percent.

Beijing has encouraged Chinese companies to “go out” to seal supplies of crucial resources as well as make overseas acquisitions to gain market access and international experience.

Chinese investment to the US rose 12.8 percent to US$2.46 billion during the first half of the year, the ministry said, and to ASEAN countries it climbed 14 percent to US$2.52 billion.

AFP

Step forward for India-China relations Modi stressed the need to address a trade imbalance between the two countries, which is heavily skewed in China’s favour

cooling down

20 pct of world economy (BRICS) Industry and Commerce Minister Mauro Borges said.

For the fund, China will make the biggest contribution, $41 billion, followed by $18 billion from Brazil, India and Russia and $5 billion from South Africa.

Despite their agreement on the need for a bank, the five countries are split on where it should be headquartered.

Shanghai is seen as the frontrunner to host the bank but South Africa insists on having it in Johannesburg.

New Delhi and Moscow are the other candidates.

The five nations are also negotiating who should hold the bank’s rotating presidency first and the make-up of the board.

The talks in Fortaleza will open a series of marathon summits and bilateral meetings in Brazil.

After the BRICS meet with South American presidents in Brasilia on Wednesday, Xi will launch the ChinaLatin America forum, highlighting Beijing’s growing interests in a region historically tied economically to the United States. Xi will then travel to Argentina, Venezuela and Cuba.

AFP

Before going to Brazil, President Xi paid a visit to Greece

I

ndian Prime Minister Narendra Modi and Chinese President Xi Jinping agreed on the need to resolve a decades-old border dispute during talks before the BRICS summit in Brazil, a statement said yesterday.

The leaders also pledged to strengthen trade and diplomatic ties during the 80-minute meeting in Fortaleza, their first since nationalist hardliner Modi won landslide elections in May. “Both sides emphasised on the need to find a solution to the Boundary Question,” the Indian government said in a statement in New Delhi.

“The Prime Minister stressed the importance of strengthening mutual trust and confidence, and maintaining peace and tranquillity on the border.”

Modi said in a tweet he had “a very fruitful meeting” with Xi and they had discussed a wide range of issues.

Ties between the nuclear-armed giants have long been soured by border disputes and competition for influence in their neighbourhood.

Soon after coming to power, Modi invited Xi to visit India later this year, while China’s foreign minister has travelled to Delhi for talks with the prime minister.

Leaders of the BRICS group of emerging powers met yesterday in Fortaleza to launch a new development bank and a reserve fund seen as counterweights to Western-led financial institutions.

During the bilateral talks, Modi accepted Xi’s invitation to visit Beijing

later this year, Indian foreign ministry spokesman Syed Akbaruddin said.

Xi also invited Modi to attend the Asia Pacific Economic Cooperation forum in Beijing in November, although India is not a member, Akbaruddin told reporters in Fortaleza, in a briefing shown on Indian TV. Modi, whose new government has pledged to boost road, rail and port projects, called for enhanced Chinese investment in Indian infrastructure, the Delhi statement said. Xi agreed the need for balanced trade and said “enhanced services exports from India to China could be one way to address the issue”. China is India’s biggest trading partner.

AFP

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July 16, 2014

Asia N. Zealand to join G20 business New Zealand Finance Minister Bill English will lead a delegation of business people as special guests at the B20 forum in Sydney this week to help finalize policy recommendations to the G20 leaders summit later this year. More than a dozen New Zealand business leaders would attend as guests of Australia and join about 300 counterparts from G20 nations, English said in a statement yesterday.

The forum, which runs from today, Wednesday, to Friday, would focus on driving growth and jobs and on maximizing global investment.

Bali trade deal implemented despite India The BRICS group of emerging market nations is confident a global trade reform pact will be implemented despite concerns by India over its food security, Brazil’s trade minister said yesterday. India has criticized the pact for putting trade facilitation ahead of a compromise on agricultural subsidies, a crucial issue for a country that needs to stockpile food for its poor.

That disagreement over subsidies has raised fears that the Asian nation would not ratify the pact reached in Bali and derail the latest effort to free up to US$1 trillion in global trade flows.

Australian financial system sets priorities A government-backed review of the Australian financial system said yesterday it has performed “reasonably well” in facilitating economic growth, but highlighted a number of looming challenges, including fiscal pressures, slowing productivity growth and technological change. The panel chaired by the former head of the Commonwealth Bank of Australia is tasked with laying out a blueprint for the financial system over the next decade. It identified a several priority issues in a 460-page interim report, including superannuation efficiency, regulatory architecture and technology risks.

WTO backs key Indian claims against U.S. The World Trade Organization yesterday backed some key claims

by India against countervailing duties imposed by the United States on certain steel products, but rejected others. The WTO panel, ruling on the April 2012 case, said the United States had acted wrongly in claiming some Indian subsidy programmes had given steelmaker Tata an unfair advantage. It called on Washington to bring its measures into conformity with WTO rules, specifically the WTO agreement on subsidies and countervailing measures.

BOJ keeps stimuli policy A recent slew of data has cast doubt on that scenario

T

he Bank of Japan maintained its stimulus programme yesterday and stuck to its forecast that inflation will approach its 2 percent target next year, unfazed by recent data casting doubts over its scenario of an investment-led economic recovery.

The central bank slightly cut its economic growth projection for the current fiscal year to March 2015 as exports remain weak and household spending tumbled more than expected after a sales tax hike in April.

But the BOJ’s nine-member board maintained its optimistic inflation projections and stuck to its view the world’s third-largest economy will continue a moderate recovery as the pain from the tax hike subsides.

As widely expected, the BOJ maintained its policy framework, under which it has pledged to increase base money by 60-70 trillion yen (US$592-US$691 billion) per year via aggressive asset purchases, largely of Japanese government bonds.

“Japan’s economy is likely to continue recovering moderately as a trend” with the effect from the sales tax hike seen subsiding gradually, the central bank said in a statement after the decision.

Bank of Japan Governor Haruhiko Kuroda

Infrastructure projects become key to Modi The budget cleared the way for dedicated investment trusts and eased infrastructure lending rules toward that goal

I

ndian Prime Minister Narendra Modi is pledging US$25 billion to unclog India’s choked transport links, spur power output and build cities. His plans include ferrying cargo on the Ganges and expanding gas pipelines.

The 42 billion-rupee (US$700 million), 1,620-kilometer freight route on India’s best-known river was among the most eye-catching projects in Modi’s first budget on July 10. Others included 523 billion rupees for roads and 500 billion rupees for urban infrastructure funding, part of 1.48 trillion rupees for everything from highways and ports to housing.

“The measures to boost infrastructure investment amount to a significant down payment on a key policy priority, although they still amount to only a modest step towards meeting India’s enormous needs,” Eswar Prasad, who teaches economics at Cornell University in Ithaca, New York, said in an e-mail. Modi’s task is to channel private domestic and foreign investment into such assets, he said.

The budget cleared the way for

The measures to boost infrastructure investment amount to a significant down payment on a key policy priority, although they still amount to only a modest step towards meeting India’s enormous needs Eswar Prasad, economics professor, Cornell University

dedicated investment trusts and eased infrastructure lending rules toward that goal, steps that Fitch Ratings said may spur long-term capital investment. Modi must now ensure implementation of his agenda following a landslide election victory in May, after gridlock under the previous government stalled about US$255 billion of projects.

The more he succeeds, the better the outlook for companies that build and power India, whose infrastructure ranked below China and Indonesia in a World Economic Forum survey.

Specific beneficiaries may include engineering company Larsen & Toubro Ltd., roads specialist IRB Infrastructure Developers Ltd., Tata Power Co. Ltd., Cummins India Ltd. and Container Corp. of India, Citigroup Inc. said in a July 11 note.

Finance Minister Arun Jaitley said in the budget speech for the 12 months started April 1 that the government will minimize the amount of reserves that must be set aside for funds earmarked for infrastructure lending.

Bloomberg News

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 interns Aries Un, Kam Leong 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

July 16, 2014

Asia KEY POINTS BOJ keeps policy steady, as widely expected BOJ slightly cuts GDP forecast for current fiscal year Adds impact of tax hike seen subsiding gradually Board maintains its inflation projections

The BOJ has stood pat on policy since unleashing an intense burst of stimulus in April last year, when it pledged to pull Japan out of chronic deflation and accelerate consumer inflation to 2 percent in roughly two years.

BOJ Governor Haruhiko Kuroda has stressed that Japan is making steadily progress in hitting the price goal, and that the economy can ride out the sales tax hike as brighter economic prospects nudge companies into boosting wages and capital expenditure.

A recent slew of data has cast doubt on that scenario. Household spending and machinery orders, a leading indicator of capital spending,

both tumbled in May, underscoring the fragile state of a recovery which so far has been driven by domestic demand as exports fail to pick up.

The BOJ revised down its economic growth forecast for the current fiscal year to 1.0 percent from 1.1 percent projected three months ago, which is still higher than a 0.9 percent rise forecast in a Reuters poll.

But it left unchanged its growth projections for fiscal 2015 and 2016, as well as its price forecasts that see consumer inflation hitting 1.9 percent in the next fiscal year and 2.1 percent the following year.

The central bank also kept intact its assessment that capital expenditure is “increasing moderately” as corporate profits improve, and that household spending remains firm.

The upbeat assessments reflect the view held by many BOJ officials that the economy will rebound after an expected contraction in the second quarter, pointing to upbeat capital spending plans in the central bank’s “tankan” survey and a low jobless rate that is seen gradually leading to higher wages.

But such optimism has failed to shake off doubts held by privatesector analysts that consumer inflation will accelerate as quickly as the BOJ projects.

Core consumer inflation hit 1.4 percent in the year to May, excluding the effect of the sales tax hike, but is seen slowing in coming months as the boost from a weak yen -which inflates import costs- fades.

Reuters

Singapore home sales declining Home sales fell to 482 units last month from 1,488 units in May, according to data released yesterday by the Urban Redevelopment Authority

H

ome sales fell 68 percent in June as developers marketed fewer projects amid cooling demand in Asia’s second-most expensive housing market following a slew of property measures.

The sales in June were the lowest since March when developers sold 480 units, the data showed.

The government began introducing housing market curbs in 2009 with some of the strictest measures implemented in 2013, including a cap on debt at 60 percent of a borrower’s income, higher stamp duties on home purchases and an increase in real estate taxes. Home prices in the Southeast Asian city slid for a third consecutive quarter in the three months to June, the longest losing streak in five years, the URA said earlier this month.

“The new project launches were few as developers seem to be monitoring the market,” said Donald Han, managing director of Chesterton Singapore Pte, a real estate consulting company. “I don’t see too many new

launches in July either so we may see another muted month.”

Among the developers that began sales of their projects was Hong Realty (Private) Ltd., which sold 55 of 100 units marketed at its Coco Palms project in the east of the city-state, according to the URA. RH Tampines Pte started selling its condominium project with 19 out of 80 units sold, the data showed.

Under the current new loan framework, mortgages shouldn’t push a borrower’s total debt-servicing ratio above 60 percent and those that do will be considered imprudent, the Monetary Authority of Singapore said in June 2013. Mortgage loan growth at 7.6 percent in May was the second-slowest pace since June 2007, data compiled by Bloomberg based on MAS figures showed.

Singapore was the most-expensive city to buy a luxury home in Asia after Hong Kong, property broker Knight Frank LLP said in an annual wealth report.

Bloomberg News

Financial inquiry raises fears between Aussie banks The inquiry is the first major investigation into the finance sector since 1997 and follows the global economic crisis

A

n inquiry into Australia’s financial system highlighted in a report yesterday the risks its booming housing sector has on economic stability and perceptions its major banks are “too big to fail”.

The inquiry is the first major investigation into the finance sector since 1997 and follows the global economic crisis, which revealed the risks and damage caused by banking collapses.

“The financial crisis has changed the way we think about vulnerabilities,” inquiry chairman David Murray, a former chief executive of the Commonwealth Bank, said in a speech.

“Sustaining confidence in the Australian financial system has been central to the work of our inquiry.”

The 460-page interim Financial System Inquiry report comes ahead of the release of the final review in November.

It did not make any recommendations but canvassed a wide range of options to address possible concerns, including the effectiveness of financial regulators.

One of the regulators -corporate watchdog the Australian Securities and Investments Commission- has been criticised by consumer

The financial crisis has changed the way we think about vulnerabilities David Murray, inquiry chairman

advocates for its perceived friendliness to big business.

The inquiry warned that the housing sector, which boomed as interest rates fell to record lows following the global crisis, was “a potential source of systemic risk for the financial system and the economy”.

“A large enough disruption to the housing market could have significant implications for household balance sheets, financial stability, economic growth, and the speed of recovery in household spending and broader economic activity

A Commonwealth Bank branch in Australia

following a shock,” the report said.

But the inquiry did not support macro prudential tools such as tougher housing lending rules, which are already in place in New Zealand and Britain, to reduce risks to financial stability.

Competition in Australia’s banking sector, which is dominated by the big four of ANZ, Commonwealth, National Australia Bank and

Westpac, was given a tick of approval, although Murray added the industry had become “more concentrated”.

The inquiry said perceptions that some financial institutions were “too big to fail” could be tackled by stronger regulations, including higher capital requirements, and the “ring-fencing” of banks’ retail and investment divisions.

The report also focused on the country’s growing

Aus$1.8 trillion (US$1.7 trillion) superannuation, or pension, sector, which it said was significant to the overall financial system.

It criticised the high fees people have to pay for superannuation - a mandatory retirement fund for Australians, saying it was among the highest in the Organisation for Economic Co-operation and Development.

AFP

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July 16, 2014

International Troika reviews Cyprus economy A delegation from the troika of international lenders yesterday began its fifth assessment of Cyprus’s economy and troubled banking system, focusing on the threat of bad loans.

Some 45 percent of all loans at Cypriot banks are classified as non-performing - 27.1 billion euros from total lending of 60 billion euros, according to Cyprus Central Bank figures. Non-performing loans (NPLs) represent 43 percent of bank loans and 51.7 percent of loans in cooperative banking. The IMF said earlier this month that the level of NPLs in Cyprus is the highest in Europe at almost 140 percent of GDP.

German investor confidence declines The gauge has dropped every month since reaching a seven-year high in December

Juncker calls for investment programme Designated European Commission President Jean-Claude Juncker called yesterday for a 300 billion euro ($409 billion) publicprivate investment programme to revive the European economy, create jobs for the young and stimulate growth over the next three years. The money should be mobilised from existing budget resources, the European Investment Bank and the private sector, without changing the bloc’s strict rules on budget deficits and debt reduction, he told the European Parliament during a debate on his confirmation to head the EU’s executive.

FSB launches consultation FX fixing reform Global regulator the Financial Stability Board is looking into deep-rooted changes to the foreign exchange market’s system of fixing benchmarks in response to allegations now being investigated that dealers at major banks manipulated rates. The FSB, the G20’s proxy on financial regulation, on Tuesday published a consultation paper asking for views on a number of recommendations that included changes to market infrastructure, systems and how the benchmark is calculated. Those went far deeper than many in the banking sector had expected just weeks ago. The FSB said banks and other market participants have until August 12 to respond.

Microsoft expected to announce job cuts Microsoft Corp is planning its biggest round of job cuts in five years as the software maker looks to integrate Nokia Oyj’s handset unit, Bloomberg reported, citing people with knowledge of the company’s plans.

The reductions, expected to be announced as soon as this week, could be in the Nokia unit and the parts of Microsoft that overlap with that business, as well as in marketing and engineering, Bloomberg reported. Since absorbing the handset business of Nokia this spring, Microsoft has 127,000 employees, far more than rivals Apple Inc and Google Inc.

Main Brazilian bank gets millionaire loan Itaú Unibanco SA borrowed a combined US$480 million from a U.S. governmentrun lender and Wells Fargo & Co, as Latin America’s largest bank by market value is increasingly using loan markets to finance clients in Brazil, its home turf.

Itaú obtained US$400 million in a six-year term loan from Washington, D.C.-based Overseas Private Investment Corp, in the largest deal that the development agency, known as OPIC, ever carried out in Latin America. Wells Fargo, which also helped arrange the loan for OPIC, extended the remaining US$80 million loan.

Bad results caught German Chancellor Angela Merkel during a Latin America tour. Pictured with Peruvian president Ollanta Humala

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erman investor confidence declined for a seventh month in July as slower growth and geopolitical risks weighed on the outlook for Europe’s largest economy.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, dropped to 27.1 from 29.8 in June. Economists forecast a decrease to 28.2, according to the median of 36 estimates in a Bloomberg News survey. The gauge has dropped every month since reaching a seven-year high in December.

Industrial production fell for a third month in May and factory orders slid more than economists expected, in a sign that growth slowed in the three months through June. While the Bundesbank predicts a stronger expansion in the current quarter, political tensions in the Middle East and Ukraine pose downside risks to the global economy Germany relies

on as an export nation.

“There’s even a chance that the economy stagnated in the second quarter, and an escalation in the Middle East would of course affect Germany,” said Stefan Schneider, chief German economist at Deutsche Bank AG in Frankfurt. “But such an escalation is an unlikely scenario and generally speaking, the German economy is still solid.”

Current conditions ZEW’s measure for current conditions fell to 61.8 in July from 67.7. The survey was conducted between June 30 and July 14 among 238 analysts and institutional investors, the institute said.

The euro dropped after the report and traded at $1.3599 at 11:02 a.m.

Frankfurt time.

“Germany has experienced a slight dent in economic activity recently,” said ZEW President Clemens Fuest.

“The current decrease of the ZEW

indicator of economic sentiment reflects this sobering development.

On a general note, however, the medium-term economic outlook remains favorable.”

At 0.8 percent, growth in the first quarter was the strongest in three years, and Market Economics has said that its gauges of manufacturing and services activity point to an economic expansion of as much as 0.7 percent in the previous period.

Companies’ assessment of their business outlook diverges. While Porsche, the unit of Volkswagen AG making the 911 sports car, plans to increase headcount by 1,000 employees annually over the next five years, Bilfinger SE said on July 1 that full- year profit will decline as European investment in the oil and gas sector slows.

The Bundesbank predicts the German economy will grow 1.9 percent this year, 2 percent in 2015 and 1.8 percent in 2016.

Bloomberg News

Gowex files for bankruptcy Former CEO could face a 10-year jail term

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panish wireless networks provider Gowex filed for bankruptcy on Monday, a week after an accounting fraud at the firm was revealed, while the High Court said its founder could face a jail sentence of more than 10 years.

Law firm Velez & Urbina said Gowex had decided to file for bankruptcy because it was in a state of “imminent insolvency” and faced a “financial standstill” after a high number of contracts were ended and new projects were cancelled.

Former Chief Executive and Chairman Jenaro Garcia Martin said on July 6 that he had misrepresented the financial accounts for at least the last four years. Last week he was charged with false accounting, distortion of economic and financial information, and insider trading.

US$818,400 bail value for former Gowex CEO

Following his testimony before the High Court on Monday, Garcia Martin was given 15 days to pay a 600,000 euro (US$818,400) bail or face jail.

High Court examining judge Santiago Pedraz said the ruling was justified because Garcia Martin might attempt to flee as he faced a jail sentence of more than 10 years and had at least 3 million euros in a

Luxembourg-based bank account.

Pedraz did not rule out taking further measures against Garcia Martin but decided not to seize his passport, ban him from leaving Spain or require him to report to a court every week, as requested by the public prosecutor. He said Garcia Martin was collaborating with judicial authorities.

Gowex started insolvency proceedings last week and had a maximum of four months to reach a deal with creditors or enter into administration - a formal bankruptcy process in which a judge takes over the company and appoints who should run it, often leading to it being wound up or radically restructured.

A judge now has to rule on whether Gowex was correct to file for bankruptcy.

Reuters

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July 16, 2014

Opinion Business

wires

The Blatterball diaries

Leading reports from Asia’s best business newspapers

THE NEW ZEALAND HERALD

Lucy P. Marcus

CEO of Marcus Venture Consulting

Z Energy says margins on petrol and diesel have risen in recent months because fuel retailers who also own the Marsden Point oil refinery are trying to recoup up to US$40 million they’ve had to pay to top up losses at the refinery caused by intense global competition and a prolonged shutdown. Z’s chief executive, Mike Bennetts, told BusinessDesk the impact of a global collapse in refining margins, exacerbated by the costs associated with a longer than anticipated shutdown at the refinery in March and April, would cost the NZX-listed fuel distributor between US$10 million and US$15 million.

THANH NIEN NEWS Vietnam National Textile and Garment Group (Vinatex), Vietnam’s top textile manufacturer, said on Monday it will delay for two months its initial public offering originally scheduled for next week to give investors more time to assess the company’s performance.

The decision was made after Hanoi-based Vinatex held two road shows this month, the state-run company said in a statement, adding the delay has been approved by the government. The IPO of Hanoibased Vinatex was initially set for July 22. It is widely seen as one of the more attractive in the communist country.

THE JAKARTA POST Indonesia is assessing the viability of creating a voluntary partnership agreement (VPA) on the timber trade with Australia to boost exports of forestry products. Trade Minister Muhammad Lutfi said on Monday that the government aimed to propagate the benefits that Indonesia had received from a similar deal with the European Union (EU).

“Complying with sustainability principles is a trend to maintain trade in the future,” he said.

“I consider this as part of what we should do to meet the trend of responsible and sustainable global trade.”

THE AGE The Reserve Bank of Australia has indicated it will leave interest rates unchanged for some time, although there are on-going concerns about non-mining growth and the high Australian dollar. In the minutes of its July 1 board meeting, released yesterday, the RBA says the most prudent course to follow “was likely to be a period of stability in interest rates.” It left the cash rate unchanged at 2.5 per cent after that meeting.

The subtle change in language from the June minutes has already been factored in to the markets.

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ONDON – The World Cup has concluded with its usual flourish, and much of the world, as usual, couldn’t help but get caught up in the excitement of it all – which is exactly the outcome that Sepp Blatter wants. Blatter, the president of FIFA, the Cup’s organizing body, wants the afterglow of an exciting month of play to blot out the corruption and backroom deals –and, most recently, a ticket scandal– that have roiled his tenure.

Times were very different in 1998, when Blatter took up his role. Social media did not exist, and the Internet had not yet become a means of spreading the views of the voiceless and disenfranchised. Nor was the culture of shareholder activism and corporate social responsibility as strong as it is today. As BP, GM, and Royal Bank of Scotland have discovered, the world is watching, talking, and no longer willing to accept the old way of conducting business.

FIFA has two problems.

One is a straightforward lack of compliance with accepted business practices.

Allegations of wrongdoing range from match-fixing and bribery among members of FIFA’s Executive Committee to questions about how Qatar was chosen to host the World Cup in 2022.

The second problem is arguably more serious, for it is epiphenomenal: the damage that unethical behaviour has done to the ideal of fair play.

When people see an institution that relates to something that they feel passionate about failing so publicly to abide by simple rules, they lose faith not only in that institution, but also in the idea that good governance is achievable at

all. The message sent, and understood, is that some institutions –of all kinds– are immune from scrutiny and can play by their own rules.

The code of conduct on the field –where we expect players to give their all under clear rules that are swiftly enforced by independent referees– is fundamentally the same as what we expect from governing bodies off the field.

In this sense, FIFA is not a special case: All non-profit and for-profit organizations around the world are expected to abide by this code of conduct.

And that is why FIFA’s problems are unlikely to fade from view. They must be addressed head-on, with a clean sweep of its leadership and a complete overhaul of its governance structures.

FIFA is as complex as any large multinational private or public organization; how it is governed must reflect that.

For starters, FIFA must introduce truly independent board members to the governance process – people who will ask hard questions and challenge the organization’s executives.

Governance solely by association members has not worked– and, by encouraging a lack of transparency, may have made FIFA more vulnerable to the problems it now faces.

No organization that holds so much public influence and importance should be able to operate as a black box.

Likewise, FIFA must introduce and adhere to clearer term limits for its president and board members, starting with Blatter –and with immediate effect. More effective checks and balances will not come easily; but they will not come at all without champions.

Before the World Cup began,

For starters, FIFA must introduce truly independent board members to the governance process –people who will ask hard questions and challenge the organization’s executives

some representatives of FIFA member associations spoke up in opposition to the status quo.

It will now be seen whether their actions reflect their words.

There are other glimmers of hope. In the world of forprofit companies, investors are increasingly demanding better corporate-governance standards and more diverse boards that include independent members. They are taking a much more active and public role in speaking out against bribery, corruption, and excessive pay packages, and in favour of corporate social responsibility and fair labour practices. If their calls go

unheeded, they vote at the annual general meeting – or with their feet.

FIFA’s sponsors must hold FIFA similarly to account, and there are signs that some are finally beginning – albeit tentatively – to speak out.

If they don’t, sponsors will leave themselves exposed to a consumer backlash as FIFA’s poor reputation rubs off on their brands. Customers are savvier than ever before, and they, too, can vote with their feet.

Ultimately, however, change starts at the top. Consider what a change in leadership has done for the Roman Catholic Church: Pope Francis is transforming an institution that was thought to be so byzantine, opaque, and intractable that change was all but impossible. If the Catholic Church can change, so can the church of football.

There is another lesson here: good leadership also consists in knowing when to step down. If Blatter genuinely cares about FIFA, he knows that remaining there would mean dragging the organization further into disrepute, damaging whatever positive contributions he has made, and quite possibly being forced to leave under a cloud.

The caption to a picture of Blatter on page six of FIFA’s 2013 financial report reads: “We have reached very high levels of accountability, transparency, and financial control.” The problem is that no one believes it.

FIFA desperately needs to restore its public credibility.

That can happen only after the necessary changes at the top and throughout the organization have been achieved.

The Project Syndicate 2014

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July 16, 2014

Closing Volkswagen plans millionaire investment in India China taps six state-owned firms for reforms German carmaker Volkswagen AG plans to spend 15 billion rupees (US$250 million) in India over the next five to six years, a senior company executive told reporters yesterday. Mahesh Kodumudi, president and managing director of Volkswagen India Pvt. Ltd., also said the company could increase its India plant capacity to 200,000 cars a year from 130,000. Volkswagen is evaluating manufacturing engines in India, Kodumudi said. The company yesterday launched a revamped model of its Polo hatchback. Volkswagen’s market share in India fell to 2.1 percent for the fiscal year ended March 31 from 2.46 percent a year ago.

A Chinese government agency overseeing stateowned firms yesterday identified six of them that will be part of a reform process aimed at giving private capital a bigger role in China’s massive state sector. The six named companies are China National Building Materials Group; China National Pharmaceutical Group Corporation (Sinopharm); State Development & Investment Corp; China National Cereals, Oils and Foodstuffs Corp (COFCO); China Energy Conservation and Environmental Protection Group; and Xinxing Cathay International Group.

Yesterday’s move is the latest by Beijing, which is carrying out its biggest overhaul of the bloated and debt-laden state-owned sector since the late 1990s.

A photo made available 15 July 2014 of Russian President Vladimir Putin (2-L) talking to Xi Jinping (R), President of the People’s Republic of China and General Secretary of the Communist Party of China, during their meeting in the city of Fortaleza, Brazil, 14 July 2014

Brick by BRICS These countries’ economies are very dynamic and can become a more important pole in the global economy

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he BRICS countries of Brazil, Russia, India, China and South Africa can build interconnected economies to overcome asymmetries among its members in order to advance in cooperation and succeed in their joint endeavour for growth, Brazilian experts told Xinhua.

According to Leonardo Valente, a professor at the Rio de Janeiro Federal University and coordinator of the University’s Asian Studies Laboratory, said that the BRICS is a mixed group and some member economies are stronger than others.

“China has a very powerful economy; it is already in another level, being the second largest economy in the world, and the first when it comes to do business. It is a highly technological economy,” he said.

Echoing Valente, Elias Jabbour, a researcher at the Mauricio Grabois Foundation and author of two books on China’s infrastructure and development, also highlighted China’s economic heft.

Both experts believed that the group’s internal asymmetries must be mitigated in order to advance in BRICS integration.

According to Valente, BRICS economies are very dynamic and can become a more important pole in the global economy, even surpassing the alliances of the North, if only the member countries manage to reduce the asymmetries within the group.

“Economies like China, which are already in another development level, need a largest interchange with countries which have great potential, like Brazil, and which are not yet in that technologic level, in order to prevent increase of those

asymmetries,” Valente said.

According to him, in order to overcome those asymmetries, it is essential for BRICS to diversify trade and make sure the member countries have interconnected economies.

Both experts said that the idea of using a common currency for the trade between members is an excellent move.

“Stopping the use of the U.S. dollar for the financial transactions between those countries is something very interesting, and getting the BRICS Development Bank out of the project phase is even

more strategic,” Jabbour said.

It is also essential that the five countries cooperate in the science and technology and education fields, Valente said.

According to him, it is necessary to have more connections between member countries’ universities, as well as increased exchanges among students and researchers in order to break barriers and increase knowledge.

“A good share of knowledge exchanges between BRICS countries occurs through Europe and the United States.

A more direct exchange needs to be encouraged,” he said.

Integration in other fields such as finance, trade, infrastructure, logistics, defense and innovation is also considered essential.

“The BRICS countries must build a common logistics infrastructure to facilitate the integration of their economies.

That means integration in such fields as ports, navigation and airports,” Valente said. “That is extremely important.”

Despite the diverse characters of the BRICS countries, Valente believed the group is solid and has all conditions to strengthen their influence and participation in the global stage.

And for him, the BRICS agenda is already a state agenda in Brazil, going beyond administrative preferences or policies, which means things will not change with the upcoming presidential election in early October.

Japan’s GDP forecast downgraded

Philippines is the next Asian ‘miracle’

Laos to readjust import taxes

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W

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he Bank of Japan (BOJ) yesterday lowered its forecast of the country’s real gross domestic product (GDP) growth rate for fiscal 2014 to 1.0 percent, mainly due to the impact of the tax hike since April 1, local media reported.

The central bank slightly cut the economic growth forecast from 1.1 percent projected three months ago as export remain weak and household spending tumbled more than expected after the sales tax hike.

But it left unchanged its growth projections for fiscal 2015 and 2016, which log 1.5 percent rise and 1.3 percent rise respectively, as the BOJ believed that the effect of tax hike would be temporary.

In a statement released after a two-day meeting that ended yesterday, the BOJ’s Policy Board also said the country’s economy remains on a recovery track under the aggressive monetary easing policy, maintaining its basic assessment for the 10th straight month.

Xinhua

orld Bank president Jim Yong Kim yesterday described the Philippines as the next “Asian miracle” and a global model in fighting corruption, as it emerges from decades as a regional economic laggard.

Kim said President Benigno Aquino should take much of the credit for the turnaround, highlighting his anti-corruption campaign, efforts to build transparency in government and focus on “inclusive growth”.

“Can the Philippines be the next Asian miracle?

(After) coming here, I think there is no question that is the case,” Kim, who was on a two-day visit, told a forum at the presidential palace.

Kim heaped praise on Aquino’s anti-graft fight, which has seen the president’s predecessor and three sitting senators charged with corruption, as well as the impeachment of a Supreme Court chief justice.

“Among the most important things you can do is tackle corruption and... that is one of things that the (Aquino) government is doing frankly better than any government in the world,” Kim said.

AFP

Xinhua

he Lao government is moving to abolish reference prices used to calculate import tax aiming to integrate with the ASEAN Economic Community (AEC) in 2015, according to state-run daily Vientiane Times, yesterday.

The move is also one of the country’s main obligations to the World Trade Organization (WTO) since it joined in February, 2013.

According to Vientiane Times, the Lao Ministry of Finance is currently in the process of drafting regulations to readjust import duties and taxes.

Last week, financial officials met with vehicle importers and representatives of the sales industry to discuss the issue. The failure to pay or tendency to underpay vehicle import duties has been a significant factor in the ministry’s inability to meet annual revenue collection targets.The meeting between importers, sales representatives and financial officials was chaired by Lao deputy Prime Minister Somsavat Lengsavad and sought to find arrangements which would be beneficial to all three sides.

Xinhua