Macau Business Daily, July 28, 2014

MOP 6.00 Closing editor: Luís Gonçalves

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MF officials recently visited Macau. Its first mission in 15 years. It advises the Macau Government to set up a sovereign fund to shield the economy against possible headwinds. Faltering gaming revenues, possible external shocks from China and an ageing population are things to monitor. In an interview with Business Daily, Murtaza Syed, IMF Mission Chief for Macau, says forward planning is the watchword.

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www.macaubusinessdaily.com

Year III

Number 591 Monday July 28, 2014

Publisher: Paulo A. Azevedo

Get a sovereign fund, says IMF

Christine Lagarde, Managing Director of IMF

Foreign construction workers doubled in a year

Tale of the tourist Tourist satisfaction levels declined a tad in Q1.

Visitors are less enamoured with casinos. But events and retail shopping satisfaction is picking up, the Tourism Studies Research Centre found

Foreign construction workers have more than doubled in number in a year. Almost 40,000 by the end of June. Mainland workers account for 90 percent of the total, Human Resources Office data reveals.

Imported labour is also streaming into the hotel industry and F&B, with domestic help in great demand, too PAGE

Profit pause

Chui Sai On has formally thrown his hat into the ring. He received nominations from 82 percent of the Electoral College members for his re-election. This suggests that one more candidate could vie for Macau’s top job

DFS here turned in an ‘excellent performance’. But LVMH, the world’s largest luxury-goods company, reports a 5 percent drop in 1H profit. Management points at slower demand in Asia generally.

And unrest in Hong Kong PAGE 3

Interview

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Another may run

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Industry gains up

HSI - Movers July 25

Name

Chinese National Bureau of Statistics (NBS) has announced good news. National industrial business profits rose 11.4 percent Y-o-Y in the first half. All part of the plan Page 10

%Day

Belle International

4.87

China Shenhua Ener

2.52

China Resources Ent

1.99

Bank of Communic

1.86

Cheung Kong Holdin

1.64

China Mobile Ltd

-1.29

Power Assets Hold

-1.49

Tingyi Cayman Islan

-1.61

China Resources Land

-1.62

Henderson Land Dev

-1.79

Source: Bloomberg

Samuel Huang Associate Professor of Gambling Studies at Macao Polytechnic Institute

I SSN 2226-8294

Genuine diversification not on the cards Gaming revenue slowdown is linked to China’s economy. Samuel Huang is emphatic. He also says Macau lacks a clear definition of what constitutes the VIP market. The gaming expert is confident that Cotai will expand non-gaming entertainment elements. But genuine diversity? He doesn’t buy it

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July 28, 2014

Macau Macau should set up a sovereign fund, says IMF Despite the bright outlook, the International Monetary Fund has alerted the government here that it needs to prepare for future shifts in its economy triggered by issues such as the ageing population, less gaming revenues and spillover from reforms in China.

A 3 to 5-year budget and a sovereign fund to invest the large fiscal reserves in are the two main proposals it makes to sustain Macau’s success story Luis Goncalves

Luis.goncalves@hotmail.com

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he International Monetary Fund has suggested the government invest its large fiscal reserves in setting up a sovereign fund in order to protect Macau’s economy from future headwinds like slowing gaming revenues, increased costs arising from an ageing population and structural reforms in Mainland China. ‘Prepare and protect your future’ was the main advice given by the IMF to the government in its first mission in Macau since the handover, held in May. In their report on Macau, released Friday, IMF says that despite the bright outlook (economy should grow 10 percent until 2015), no public debt and huge fiscal reserves, the ‘traditionally healthy fiscal position may face pressures over the long term’.

First, government here is ‘heavily’ dependent upon gaming revenues, which are volatile and will slow as the casino sector matures in the coming years and also with the competition from online gaming and other venues in Asia. With revenues at stake, spending is also likely to jump in the next decade, imposing additional pressure on Macau’s public finances.

Macau’s traditionally healthy fiscal position may face pressures over the long term IMF

The ageing of the population here will triple the old-age dependency ratio in the next 15 years from 10 to 30 percent, forcing Macau to increase social spending. The need to diversify the economy beyond gaming also means more investment and costs in the future.

The IMF noted that the government strategy to address these issues has primarily been through ad hoc measures – like cash transfers to citizens and public injections into the pension fund – and not through a long-term strategy.

AMCM to manage sovereign fund In order to protect Macau’s economy against the expected headwinds the IMF asked the government to set up a sovereign wealth fund whereby it can allocate part of its fiscal reserves.

It is estimated they will top MOP350 billion patacas by the end of the year, around 90 percent of Macau’s GDP, according to the most recent

government data.

Sovereign funds are renowned among governments with large fiscal reserves, such as oil producers and big financial centres, because they seek to diversify investments, lower risk in the long term and act as a ‘financial pillow’ during hard times. Norway, the Gulf countries, Singapore and China hold some of the most famous ones, buying assets and companies all over the world.

‘This (a sovereign fund) would help build sustainable buffers that could be used to offset the impact of potential adverse shocks and set money aside to fund long-term aging expenditures,’ wrote the IMF. In Macau, the fund would be managed by the Monetary Authority of Macau, suggested the institution based in Washington.

Not so fast The government’s reaction to this proposal, however, has been less than enthusiastic.

The government told the IMF that it is ‘willing to contemplate further moves in this direction’ but ‘emphasized that these would need to be backed by a clear increase in risk tolerance and willingness to judge performance over a longterm horizon’.

Other major advice was to establish a medium-term budget with a horizon of 3 to 5 years in Macau to help transparency, support fiscal discipline and ‘ensure that growth in spending is consistent with development and fiscal objectives’.

Macau has relied solely on a oneyear budget with ‘limited forecasting of expenditure and revenue’, says the IMF, which have resulted in huge gaps between the budgeted and final figures, especially for gaming taxes and the fiscal surplus every year: “The main items are for the most part based on the previous year’s budget and there is no multi-year costing of expenditure programmes, such that outcomes tend to be significantly different’.

“Coping with external shocks should be Macau Government’s top priority” What’s the most urgent measure or issue Government here has to address?

Murtaza Syed

Mission Chief for Macau, International Monetary Fund

As you know, the United States is slowly beginning to withdraw from unconventional monetary policy. At some point, this will translate into higher interest rates, which will be mirrored in Macao due to the currency board regime. If this happens quickly, it may put some pressure on borrowers that have benefited from rapid credit growth and low interest rates in the last few years, notably households in Macao that have borrowed for mortgages as well as borrowers in Hong Kong, Portugal and China that have also benefited from rapid credit extension by banks in Macao. If these pressures are strong enough, they could lead to repayment difficulties that could have negative implications for the quality of bank lending and the property market in Macao. However, the Macao

Government’s strong track record of prudent macroeconomic management gives us full confidence that they will remain alert to such pressures and use the tools at their disposal to monitor and address such risks.

through the global crisis, preserving macroeconomic and financial stability through good economic policies.

What’s the major risk Macau’s economy faces in the future?

Over the longer term, there are two key issues. First, how Macao can more fully benefit from the ongoing change in the growth model in Mainland China to diversify its economy away from gaming towards other services demanded by Mainland residents. Second, how to make the best use of the government’s considerable fiscal savings in a way that ensures sustainable growth in Macao in the decades ahead by prudently investing in social sectors and infrastructure. We had very good discussions with the government on all these topics, which underpin our optimism about Macao’s prospects in the years ahead.

The outlook for Macau is very favourable, and we expect growth to remain close to 10 percent for the next few years as the global economic recovery strengthens and private investment remains strong.

That said, Macao is a highly open and narrowly-based economy, such that external shocks to major economies like the United States, Europe or Mainland China can quickly spill over through reduced tourism inflows. Coping with such shocks will have to remain a top priority of the government in the coming years.

It’s already done so very successfully

And the main challenges in the long term?

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Luxury goods giant LVMH posts dampened H1 results Although having seen an “excellent performance” from its sales via DFS here, LVMH has posted a declined group-wide H1 profit reflecting slower demand in Asia Stephanie Lai

sw.lai@macaubusinessdaily.com

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uxury goods giant LVMH Moet Hennessy Louis Vuitton SA (MC), which has sales points in the city, has registered slower business growth as its first-half earnings missed estimates amid weaker consumption in Asia. The company’s executives also cited Hong Kong’s political unrest as a factor dampening results.

LVMH - home to the flagship brand Louis Vuitton and other brands such as Fendi, Moët et Chandon and Bulgari - registered its first-half profit from recurring operations as having declined by 5 percent to 2.58 billion euros (US$3.5 billion or 27.6 billion patacas), the company said on July 24 after European markets closed. It was less than the 2.76 billion-euro median analysts had estimated.

The total sales of LVMH advanced 3 percent to 14 billion euros in the half year. Analysts estimated 14.2 billion euros. Excluding currency swings and acquisitions, revenue climbed 5 percent.

Asian demand weakened “quite

significantly” in the second quarter, led by slower Chinese spending at home and abroad, Chief Financial Officer Jean-Jacques Guiony said on a conference call.

Political unrest in Hong Kong caused business to slow markedly there, while the disappearance of a Malaysian airliner in March affected sales in Singapore and Thailand, Guiony said.

The group has registered a marked slowing of business in Hong Kong since May, especially in the sales of duty-free retailer DFS, because of the city’s bouts of demonstrations, Guiony claims. But he did not specify whether he was referring to Hong Kong’s ‘anti-locust’ campaign launched by disgruntled Hong Kong residents earlier in the year complaining against the influx of mainland Chinese tourists, or whether he was referring to the pro-democracy Occupy Central movement.

LVMH’s profit from recurring operations for selective retailing – the segment that comprises the group’s

own-label retailing activities – was down 3 percent to 398 million euros compared to the first half of 2013.

“DFS was buoyed by growth in sales to its Asian clientele amidst a drop in purchases by Japanese travellers hindered by a weak yen,” the group said in its highligts for the select retailing business segment, “Of note were the excellent performance turned in by both stores in Macao, one of which will be refurbished and expanded in 2015, and the growing success of the concessions at Hong Kong International Airport.”

LVMH’s share of net profit was

1.509 billion euros, down by 4 percent when compared to the first half of 2013.

Sales in most divisions missed estimates. Revenue growth of 4 percent at the fashion and leather goods unit – the biggest moneymaker of the group – trailed analysts’ projections by 3 percentage points.

Hong Kong, where wealthy Chinese have increasingly shopped to avoid the mainland’s luxury taxes, will remain fragile in the second half, Swatch Group AG Chief Executive Office Nick Hayek said on July 22 as the watchmaker posted its first drop in first-half earnings in five years.

Swatch posted first-half net profit down 11.5 percent to 680 million Swiss francs (US$757.24 million).

Of the result, Hayek said he was concerned about the situation in Hong Kong, where pro-democracy protesters clashed with police in July.

Hong Kong accounted for nearly a fifth of total Swiss watch exports in the first half of this year, worth about 2 billion Swiss francs. Last year, Swatch sales to Hong Kong, mainland China, Macau and Taiwan totalled 3.2 billion francs, 38 percent of the group’s sales.

“There’s a lot of uncertainty because of this . . . conflict. Fewer people visit Hong Kong and our stores there,” Hayek said. “But the main problem is with wholesale. Retailers are worried and buy fewer watches. This uncertainty will persist for some time.”

The watchmaker also said that the strong Swiss franc curbed sales in China and the U.S., but noted that it hoped margins and sales would recover in the second half of this year as the negative impact from the strong Swiss franc wanes and demand in the U.S. and Japan remain robust. with Bloomberg

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Macau Red Cross aids typhoon-hit areas

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Second CE candidate possible The incumbent Chief executive received nominations from 82 percent of the Electoral College members for his re-election, which suggests that there could be one more candidate to vie for Macau’s top job Kam Leong newsdesk@businessdaily.com

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hief Executive Fernando Chui Sai On submitted his candidate nomination form for his re-election bid for the fourthterm Chief Executive Election, with 331 Electoral Commission Members’ nominations, according to his election office representative Vong Hin Fai. Mr. Vong said Chui’s campaigners are satisfied with the number of nominations received. “During the period of getting commission members’ support, we talked to each of them. Some of them were not in Macau or [there were] other reasons, so the number [of nominations] we have now is satisfying,” he said.

Asked if the campaigners expect that there will be another candidate as 69 committee members did not nominate Mr. Chui, Mr. Vong said he would not speculate because Chui’s campaign had already tried its best to get the current nomination forms.

In addition, Mr. Vong said that

the number of nominations this time is similar to that of the last election.

However, when compared to the last Chief Executive Election in 2009, Mr. Chui’s nominations decreased by 10 percent this year. Five years ago, he was nominated by 286 of the 300-member committee, representing 95 percent. This year, however, despite the number of committee members having increased to 400, Mr. Chui only received 331 nominations, which is around 82 percent.

The current selection system shows that all candidates who join the election should be nominated by at least 66 committee members, which is around 16.5 percent. Each member may nominate only one candidate.

Mr. Vong also said that the campaign had introduced to all 400 members Mr. Chui’s determination as well as his direction for the future election platform, which will only be made public during the campaign

period next month.

As the incumbent Chief Executive of Macau, Mr. Chui did not submit his nomination form in person, choosing Mr. Vong, who is in charge of the election campaign, as his representative. During the campaign period, Mr. Chui will represent himself in person.

The election is to be held on August 31 while the nomination period ends tomorrow. The final list of candidates is to be released no later than August 15; the campaign period will run from August 16 to 29.

Mr. Chui recently announced that the ceiling of the campaign fund should be no more than 5.77 million patacas (US$721,250) for each candidate.

Currently, Mr. Chui is the only candidate to have publicly announced his candidacy and is also the only person to have submitted the candidate nomination form.

he Macau Red Cross has allocated a total of 200,000 yuan (257,845 patacas, US$ 32,300) to Hainan Province and Guangxi Zhuang Autonomous Region, both of which were seriously affected by super typhoon Rammasun.

Each of the provinces is to receive 100,000 yuan for emergency operations, according to Chinese state-owned news agency Xinhua.

A representative of Macau Red Cross said last week that the organisation is very concerned about the damage caused by the super typhoon.

The fund will be used to purchase rice and cooking oil in the two provinces, which will primarily be distributed to victims in the cities of Haikou and Wenchang in Hainan Province, and Qinzhou and Beihai in Guangzi Province.

Super typhoon Rammasun is the strongest typhoon on record to hit south China in the past 40 years. It brought gales, downpours and floods to the southern provinces of Guangdong, Hainan, Yunnan and Guangxi.

According to the latest figures from the Ministry of Civil Affairs released on Friday, 62 people died as a result of the typhoon and 21 are still missing.

Typhoon Rammasun affected over 11 million people in the four provinces, according to Xinhua.

Meanwhile, 862,000 people have been resettled, while some 261,000 still lack basic necessities.

In addition to affecting thousands of lives in mainland China, the typhoon caused direct economic losses of 38.5 billion yuan.

The Ministry of Finance of China is to provide 1.97 billion yuan to those affected while the Ministry of Civil Affairs has launched 15 emergency response programmes, Xinhua announced.

K.L.

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Tourists satisfied, sort of Tourists’ satisfaction levels declined in the first quarter of the year compared to that of a year ago. People who visit the territory are less satisfied with casinos in contrast to events and retail shops João Santos Filipe jsfilipe@macaubusinessdaily.com

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he satisfaction level of tourists visiting Macau declined during the first quarter of the year.

According to the Institute for Tourism Studies Research Centre, the tourist satisfaction index fell to 69.2 points, 0.5 point less than a year earlier (69.7 points).

This score is 4.5 points short of the best result ever registered by the Research Centre. In the last quarter of 2010, the satisfaction index peaked at 73.7 points. However, in the following quarter – the first quarter of 2011 – it scored the worst result ever (66.1 points). In the first quarter of 2011, which includes the period of Chinese New Year, the satisfaction index was 3.1 points less than in the first quarter of the current year.

The sector that most pleased tourists was events. However, the performance of the sector decreased by 3.3 points from 77.5 to 74.2 points in comparison to a year ago.

Retail shops managed to improve their performance in one year and are ranked second achieving a satisfaction level of 72.8 points, a growth of 1.3 from 71.3 points. The hospitality sector is the third most satisfying.

But there are reasons for concern as it decreased 0.2 points from 71.3 in 2013 to 71.1 points this year.

According to the study, casinos also have reasons to be concerned.

In just one year, tourists’ satisfaction rate with Macau’s greatest economic engine fell 2.5 points from 70.4 in 2013 to 67.9 points. The sector ranks only seven now.

Another sector whose performance has deteriorated is that of tourist guides and operators, registering the

biggest drop in satisfaction levels of tourists with a score of 66.2 points and ranking eighth. This means a fall of 3.4 points, as last year the sector achieved 69.6 points.

As for the ten sectors studied, tourists visiting Macau are less satisfied with restaurants and immigration services. However, there is good news for these sectors, in a scale ranging from 0 to 100, restaurants (10th) scored 65.4 points, an increase of 0.3 points year-on year (65.1). Immigration services ranked 9th scoring 65.8 points 0.5 more than last year (65.3).

Leisure and vacation was the main reason cited by tourists for visiting Macau, according to the study by IFT. Of the 1,000 individuals surveyed, 86.2 percent said they visited the Special Administrative Region of Macau for that purpose.

Visiting friends and relatives was the second main reason (9.4 percent) for tourists to come to the territory, followed by business (3.7 percent) and others (0.7 percent).

While Macau is known worldwide for its gambling industry, the majority of people visiting the territory for leisure and vacation said they were

attracted by the shopping (25.1 percent). Gambling was only indicated as the fourth reason to visit Macau (14.3 percent), following cuisine (20.3 percent) and World Heritage sites (18.5 percent).

Around 36 percent of the visitors surveyed were visiting Macau for the first time, a 3.5 percent decrease compared to last year. Returning visitors accounted for 64 percent of the total.

Mainland China was the main market source of tourists (66.2 percent), followed by Hong Kong (24.5 percent) and Taiwan (5.5).

AIA posts US$8.4 billion half-yearly revenue Low levels of social welfare have contributed to the group’s overall half-yearly performance, especially in the Asia Pacific region Sara Farr sarafarr@macaubusinessdaily.com

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IA Group Ltd’s revenue was US$8.4 billion (67.2 billion patacas) in the six months ended March 31, up 8.3 percent from US$7.8 billion in the same period a year earlier.

The group posted a 15 percent growth in operating profit of US$1.45 billion and a net profit of US$1.5 billion, according to AIA’s interim report released Friday. Net profit, however, dropped to US$1.6 billion in the six months to April from US$1.9 billion a year earlier.

New business registered a growth of 23 percent to US$792 million, while annualised new premium increased 11 percent to US$1.7 billion.

The pan-Asian life insurance group also declared a 15 percent increase in its interim dividend reflecting strong performance, the annual report reads. AIA Group’s chief executive and president, Mark Tucker, said ‘the Asia Pacific region offers one of the most attractive and resilient life insurance markets in the world.’ This is mainly driven by rapid urbanisation and increase in disposable income at a time when the population is more mobile. ‘Combined with low levels of social welfare support and existing private provision, these longterm structural trends provide the foundation for the large and growing need for AIA’s products and services

in the region,’ Tucker added.

AIA’s annualised new premium for Hong Kong was US$401 million between December 2013 and April 2014, up from US$326 million from the same period a year earlier. Market operations and results for Hong Kong and Macau are consolidated in the group’s annual and interim reports.

The value of new business in Hong Kong totalled US$260 million, increasing the group’s margin for that market to 62.4 percent.

Overall, the group’s annualised new premium was up 11 percent to US$1.7 billion.

‘Asian economies continue to remain well-positioned as global

interest rates begin to normalise,’ the interim report reads.

AIA operates in 17 markets in the Asia Pacific region and has whollyowned branches and subsidiaries in some of these including Hong Kong, Macau, Indonesia, Australia and New Zealand.

Last December, AIA and Citibank entered into a 15-year ‘bancassurance’ partnership, which covers around 13 million customers in the Asia Pacific region alone.

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“We can never expect Macau

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HOSPITALITY Korean party Almost all visitors to Macau come from Asia. The statistics department publishes separate figures for twelve countries or territories. The top three sources of visitors - China, Taiwan, and Hong Kong - put together usually provide about nine-tenths of the total number of visitors. The figures for the first half of the year do not change that general pattern. Nine Asian countries follow, and are currently led by South Korea.

The country accounted for almost 270,000 visitors in the first semester of the current year. That figure is almost as big as the combined total of the next two countries, Japan and the Philippines. The last - and quite distant - country in this ranking is Vietnam, with about 7,500 visitors. Note that Vietnam accounted for some 45,000 visitors in 2010. The following year the figure dropped precipitously to just over 5,000; and the highest number recorded since was just over 8,500, in 2013. We leave the country out of the chart, as its figures are much lower than all the others and would affect its legitimacy.

The noticeable thing about the present year’s figures is that most countries posted a decline in the first semester, relative to the average for the previous four years. Vietnam aside, these decreases vary from 2.5 percent, in the case of Indonesia, to more than 20 percent, in the case of Malaysia. Japan and Thailand also show noticeable contractions, equivalent to about one-sixth of the 2010-2013 average. The two exceptions to this generalised contraction were India and South Korea. In the case of India, the number for the first half of the year was slightly above the average from the previous four years. South Korea gets the top spot here, with a 35 percent increase.

J.I.D.

1,471

daily South Korean visitors, first half of 2014

The fact that the mass market segment is outgrowing the VIP market seems to be solely related to the lack of a clear definition of the VIP market in Macau. In an interview with Business Daily, Associate Professor of Gambling Studies at Macao Polytechnic Institute Samuel Huang says that there is a lot of confusion about both concepts in the territory.

With the new wave of developments now underway, he says that there will be many more non-gaming facilities and entertainment options in the territory.

But given its size, he still finds it a tall order to believe that Macau can diversify its economy Luciana Leitão leitao.luciana@macaubusiness.com

What is the future of the gaming industry in Macau?

The gaming industry as a whole has experienced exponential growth in the past 10 to 15 years.

Recently, it has looked like it will slow down.

The Mainland Chinese, who use passports, will be limited to staying five days or so and there is a restriction on using UnionPay in casinos or gaming areas. It’s true that the growth of gaming revenues has slowed down, but I guess the growth and future of the gaming industry should be fine.

It’s true that growth will not be as high as before, but, still, it’s quite healthy.

Do you believe that the restrictions that the Central Government is imposing are signals that it’s not happy with what’s happening in Macau?

I don’t think so. The Monetary Authority of Macau has said that UnionPay has never been allowed in gaming areas, and cannot be used for gaming. It’s a violation of some sort of regulation. And the government is saying that it needs to enforce the related regulation or agreement that UnionPay cannot be used in casinos. I don’t think this means any change [of stance] by the Central Government.

Another thing is the visa restrictions for Mainland Chinese.

If they go through Macau to another country, they use their Mainland China passport. It seems to me, and at least one legislator has admitted, that some Mainland Chinese have been abusing the freedom they were offered — they could stay up to seven days if they had planned to go on to another city. So, this is not a change by the Central Government.

China’s economy is slowing down. Do you believe it’s already impacting Macau’s gaming revenues?

I agree. In my judgement, the slowdown in gaming revenue is

not because of the visa restrictions or UnionPay, it’s because of the slowdown in China’s economy.

If China’s economy worsens, how badly affected could Macau’s economy be?

I believe Macau’s economy — the gaming industry — will be negatively affected, if China’s economy gets worse.

Looking at the gaming industry’s current status in Macau, it seems that the mass market is outperforming the VIP market. Is the trend reversing?

It’s difficult to say. Frankly speaking, at the moment the Gaming Inspection and Coordination Bureau is working on the definition of VIP rooms — what do we mean by VIP rooms?

As to why the mass market is growing faster than the VIP rooms, my guess is that the casino operators have put more high-limit tables in the mass market [areas] or maybe the casino operators are using similar incentive schemes to attract gamblers to play in the mass market rather than in the VIP rooms. I’m not quite sure.

In my judgement, the slowdown of gaming revenue is not because of the visa restrictions or UnionPay restrictions, it’s because of the slowdown in China’s economy

To me, for any consumer market - restaurants, clothes or any particular brand of clothes or watches - maybe 20 percent of customers contribute to 80 percent of sales, this is some kind of general principle. It’s also the case for gambling in any market, including Las Vegas and Macau — 20 percent of gamblers contribute to 80 percent of revenues. So, when we talk about the change in VIP and mass market, maybe this means only a change in definition or a change of some kind of almost random classification.

In Macau, in the VIP rooms, they use non-negotiable chips, or dead chips, and based on these, gamblers are provided with various incentives. Also, junket operators are offered some incentives; this is only because of the definition of VIP. The VIP rooms business has slowed down by accident. It also means maybe we need to consider what regulations are necessary to help the VIP rooms work well.

Are the regulations controlling activities not effective?

As I mentioned, according to the news the government authorities have not provided a definition of VIP rooms. Also, some people have made so much money, which means there’s a lot of risk involved.

It also means that the government needs to be more involved in the operation of VIP rooms and

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Macau

to have a diversified economy” The new projects will provide more nongaming facilities, entertainment and attractions in Macau.

Maybe it will help Macau have more nongaming entertainment facilities

[relevant] regulations.

facilities.

Looking at the Cotai developments it seems the resorts are aiming at the mass market. Why is this happening?

I’m not sure whether they are targeting the mass market or the VIP rooms. When Sands, Venetian and Wynn were planning to open, we didn’t know which sector they were planning to focus on. The Venetian resort has the largest casino in the whole world; was it targeting the mass market?

Is that true? But when we talk about revenue, maybe the many VIP rooms are located outside of the main floor; it’s true that the VIP rooms area is not as big as the main floor but the revenue could be higher. So, it’s difficult to say that the new projects are more focused on the mass market, although we can expect the competition to become fiercer and as a result the new resorts will need more non-gaming attractions to attract people to visit their properties. Hopefully, the new projects will help Macau have more non-gaming and leisure facilities.

Do you believe that the mass market, as in Las Vegas, would be a better option for Macau, considering the need to develop the economy as a whole?

VIP versus mass market is only a classification rather than a market demand. For any market, 20 percent of customers contribute to 80 percent of sales — this applies to any market, including gaming.

This is only a classification; it’s not important to speak of the change of VIP versus mass market. I don’t think it’s very important.

On the other hand, the important thing is when the supply of gaming facilities increases and the casino investment becomes smaller and the non-gaming facilities become more attractive. Also, in the competition between casino operators Macau will have more non-gaming facilities, not because of changes in the VIP or mass market.

As there are several new projects in Cotai, when more and more facilities are developed, the competition between casinos will become fiercer; as a result, the non-gaming facilities investment will become more attractive, thus more non-gaming facilities will be developed together with the new projects.

Will something change in Macau with these new casinos?

Yes, the new projects will provide more non-gaming facilities, entertainment and attractions.

Maybe they will help Macau have more non-gaming entertainment

We can never expect Macau to have a really diversified economy

As a result, with the development of non-gaming facilities, do you believe they will contribute to a healthier economy, less dependent upon gaming?

I guess so. It will help Macau’s economy to be more diversified, but we can never expect Macau to have a really diversified economy.

Macau is too small — it’s a city with only half a million population; the gaming industry has been the pillar industry and will continue to be the pillar industry. It’s unavoidable.

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July 28, 2014

Macau Construction boosts imported labour numbers The size of the imported labour sector working in construction here more than doubled by the end of June compared to a year ago Stephanie Lai

sw.lai@macaubusinessdaily.com

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he size of Macau’s imported labour sector grew to more than 155,000 people by the end of June this year. The number of workers employed by the city’s construction industry has more than doubled, latest data from the Human Resources Office notes.

Some 155,310 imported workers worked in the city by the second quarter of this year, which is 9,618 more than the first quarter and over 17,000 more than the end of last year, official data shows.

The three major sectors that employ them are the hotels and restaurants, construction sector and local families hiring domestic helpers.

Of these three sectors, imported labour employed by the construction industry shows the most rapid quarterly and yearly growth:

by the end of June, 38,663 imported workers worked in the sector, which is 24 percent more than the first quarter and a staggering 113.8 percent more than a year before.

Mainland Chinese accounted for as much as 87 percent of the over 38,000 imported workers hired by the construction industry by the end of the second quarter, now busily engaged in the city’s ongoing works for Cotai casinos, the infrastructure of the light rapid transit (LRT) in Taipa as well as public housing on the Macau Peninsula.

The hotel and food and beverage business accounts for the largest chunk of imported labour compared with other sectors in the city, employing a total of 40,302 workers from outside Macau by the second quarter, up 1.75

percent compared to the first quarter and 11.7 percent more than a year ago.

By the end of June, some 20,618 families had hired domestic helpers, primarily from the Philippines, Vietnam and Indonesia, the Office’s data noted.

Only 52 families hired mainland Chinese as domestic helpers by the second quarter despite the MSAR Government already granting in early April a total of 267 applications for domestic helpers working here from Guangdong and Fujian Province.

The amount of imported labour working for ‘recreational, cultural, gaming and other services’ totalled 13,036 by the second quarter, almost 10 percent more than a year ago and up by a slight 0.17 percent more than the first quarter.

U.S. food processor OSI Group recalls Shanghai Husi products A

ll products manufactured by Shanghai Husi Food Co Ltd are to be withdrawn from the marketplace, the mainland food processor’s U.S.-based parent company OSI Group announced in a statement issued via its official website on Saturday amid reports of a food safety scandal that has affected McDonald’s in mainland China, Hong Kong, Macau and Japan. The reports about Shanghai Husi reprocessing and repackaging rotten meat with new expiry dates has prompted McDonald’s China to terminate supplying terms

with the Shanghai facility.

Quarantine authorities in Hong Kong and Macau have also suspended imports of all Husi products due to food safety concerns.

CORRECTION In Friday’s edition of Business Daily, we incorrectly referred to Li Penglin as assistant manager of UnionPay China in our story ‘Shopping addicts’ on page 5.

Li Penglin is, in fact, General Manager of UnionPay International, Hong Kong Branch. We apologise for any inconvenience caused.

9

July 28, 2014

Macau OCBC raised its investment in Wing Hang by almost 11 percentage points to 67.8 percent in the five days to July 22, filings with Hong Kong’s Securities and Futures Commission showed. OCBC had 56.9 percent on July 17, adding just 6.5 percentage points since July 4, filings showed.

Fair deal

A-okay

Wing Hang’s third-largest investor has accepted the OCBC takeover. Last month, the Singapore-based bank told Business Daily that Macau is a strategic piece for OCBC

A

berdeen Asset Management Plc, the third-largest shareholder of Wing Hang Bank Ltd, has agreed to sell its shares in the lender to Oversea-Chinese Banking Corp, moving the Singaporean buyer closer to a full takeover.

“We’ve tendered” the entire stake Aberdeen held in Wing Hang, Hugh Young, a Singapore-based managing director at the fund management company, wrote in an e-mail without saying when the sale took place.

Aberdeen owned 7.4 percent of the Hong Kong-based target as of July 1, data compiled by Bloomberg show.

The fund manager’s decision came as Hong Kong regulatory filings showed acceptances for the US$5 billion offer had accelerated in the past week. They had dragged earlier this month as Elliott Capital Advisors

Caesars wins Illinois officials’ support for refinancing C

aesars Entertainment has won approval for $1.75 billion-worth of refinancing from Illinois casino regulators over the objections of some bondholders.

A representative of several debt holders told the Illinois Gaming Board today that Las Vegas-based Caesars was putting the finances of its largest unit, Caesars Entertainment Operating, in jeopardy by shifting casino assets

LP boosted its stake in Wing Hang to 7.8 percent, which Mizuho Securities Asia Ltd. said at the time could put pressure on OCBC to raise its HK$125 per-share bid price.

“Elliott not increasing its stake beyond 8 percent and Aberdeen tendering should help the offer in a very significant way,” Wee Siang Ng, Singapore-based head of research at Maybank Kim Eng Research Pte, said by phone.

“Minority shareholders who wanted to hold back for a higher offer price initially would probably be more willing to surrender their shares.”

Shares of OCBC, Southeast Asia’s second-largest lender, gained 0.8 percent to S$9.73 at 4:19 p.m. in Singapore on Friday, poised for the highest close since June 16.

Wing Hang added 0.1 percent to

to other subsidiaries and stripping away a guarantee of their debt.

“The financing transaction will, in our view, ultimately pave the road for CEOC’s bankruptcy rather than forestall it,” said Sidney Levinson, a Jones Day attorney in Los Angeles who represents holders of more than $1 billion-worth of the unit’s second-lien notes. “The Illinois Gaming Board has a chance to stop the endless shell game that’s being played by Caesars.”

Caesars, the largest owner of casinos in the U.S., has two properties in Illinois, giving regulators there authority over some transactions. The company has struggled to cope with a slowdown in gambling and a debt load of more than $23 billion, the result of a 2008 leveraged buyout led by Apollo Global Management LLC (APO) and TPG Capital.

The refinancing will increase the interest burden at Caesars Entertainment Operating Co. and result in less investment in its casinos, Levinson said. He also predicted lower tax revenue for the state and possible casino closures.

HK$124.70 in Hong Kong.

Koh Ching Ching, a Singaporebased OCBC spokeswoman, declined to comment at the end of last week.

Aberdeen owned 6.8 percent of OCBC as of May 7, an investment worth about US$1.9 billion at today’s prices, data compiled by Bloomberg show. The 7.4 percent stake in Wing Hang tendered by the fund manager would have been worth about US$360 million.

“I thought Aberdeen would definitely support the offer as it has much to lose if OCBC shares don’t do well,” Maybank’s Ng said. “Their investment in OCBC is so much bigger than in Wing Hang.”

The Singaporean lender’s offer made in April has been accepted by shareholders, including the family of Wing Hang’s Chairman Patrick Fung and Bank of New York Mellon Corp.

“It’s nice to see this moving in the right direction,” Jim Antos, a Mizuho analyst based in Hong Kong, said by phone. For minority shareholders, “HK$125 is a more than fair price for Wing Hang Bank. Looking at the history of bank mergers in Hong Kong, it’s a fair deal.”

Hong Kong regulations allow OCBC to de-list Wing Hang once it owns 90 percent of the shares. Should it fall short, OCBC must ensure that at least 25 percent of Wing Hang stock remains in public hands, meaning it may have to sell stock to cut its stake.

The offer closes July 29.

Shares of the Hong Kong bank traded as high as HK$127 on July 7 after Elliott Capital said in a July 3 filing it had paid HK$125 a share – the same as OCBC’s offer price – to increase its stake. OCBC won’t increase its bid, its advisors, Bank of America Corp. and JPMorgan Chase & Co., said in a July 15 statement.

Greater China ‘We know that they’re there, but in terms of would it distract us or change us from what we’re currently doing, it will not,’ Chief Executive Officer Samuel Tsien said in a July 10 interview. ‘We’ll just proceed according to the general offer document and if we cannot get 90 percent, we’ll keep the company listed.’

The acquisition will give OCBC more access to the Greater China region and enable both banks to offer services to Chinese companies expanding in Southeast Asia, where it has a larger presence, Tsien said.

Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China.

The bid is the largest takeover of a Hong Kong bank since DBS Group Holdings Ltd, OCBC’s biggest competitor in Singapore, offered US$5.4 billion for Dao Heng Bank Group Ltd in April 2001.

Bloomberg

10

July 28, 2014

Greater China

Half year Alert to capital outflows of higher in Hong Kong the inflows will likely boost prices and increase industrial While liquidity, the HKMA’s deputy chief executive warned that the turmoil seen in emerging markets last year due profits to large-scale outflows showed that fund flows could quickly Total profits of industrial companies with annual business revenue of more than 20 million yuan reached 2.86 trillion yuan

C

hinese industrial businesses saw their profits rise by 11.4 percent year on year in the first half of this year, official data showed yesterday.

Total profits of industrial companies with annual business revenue of more than 20 million yuan (US$3.2 million) reached 2.86 trillion yuan, the National Bureau of Statistics (NBS) said in a statement.

The profits growth was markedly up from the less than 10-percent increase recorded in the first five months.

The faster-than-expected growth pace was due to strong growth in June, when industrial firms raked in 588 billion yuan in profits, up surprisingly by 17.9 percent from a year ago.

He Ping, statistician under the NBS, attributed the increase to rising sales and dropping costs of industrial firms in June and admitted that the low base in the same period last year also contributed to the high growth.

In the Jan-June period, profits of foreign-funded enterprises and companies with funds from Hong Kong, Macao and Taiwan rose the most by 15.3 percent year on year to 691.76 billion yuan.

State-owned and state-holding industrial enterprises amounted to 761.35 billion yuan in profits, up 5.6 percent from a year ago; profits of private firms climbed 13.5 percent year on year to 910.49 billion yuan; joint-stock enterprises took in total profits of 1.69 trillion yuan, up 10.8 percent year on year.

By sector, industrial enterprises in mining industry reached profits of 340.05 billion yuan in the first half, down 14.6 percent year on year. Companies in manufacturing sector saw 15.6-percent year-onyear growth to hit 2.3 trillion yuan in the period.

Of the total 41 industrial sectors, profits of 35 sectors rose, one remained flat and five dropped in the first half from the same period last year.

Xinhua

Yuan 691.76 billion Hong Kong, Macao and Taiwan funded companies value

change direction

H

ong Kong must stay alert to the possibility of large capital outflows even as its currency has had unusual strength recently due to inflows for acquisitions, sharedividends and related transactions, a senior official at its central bank said.

Since July 1, the local dollar has repeatedly hit the strong end of the currency peg to the U.S. dollar. That caused the Hong Kong Monetary Authority, the de-facto central bank, to absorb more than US$5.6 billion in inflows and inject more than 40 billion Hong Kong dollars into local money markets.

While the inflows will likely boost prices and increase liquidity, Peter Pang, the HKMA's deputy chief executive warned that the turmoil seen in emerging markets last year due to large-scale outflows showed that fund flows could change directions quickly.

"As the U.S. economy recovers and its monetary environment normalises, there remain considerable uncertainties in the future direction of fund flows," Pang said in an article posted on HKMA's website Saturday night.

Pang cited four reasons for the local dollar's recent strength: large dividend payments by local companies, a rise in cross-border deal activity, precautionary demand by banks due to the half-yearly close and likely investor positioning ahead of the launch of a cross-border stock exchange programme.

Citic Pacific's acquisition of its parent's assets and the purchase of local lender Wing Hang Bank by Singapore's OCBC totalled nearly HK$100 billion (US$12.90 billion) while dividend distributions by locally-listed companies are set to hit HK$200 billion, according to

As the U.S. economy recovers and its monetary environment normalises, there remain considerable uncertainties in the future direction of fund flows Peter Pang HKMA’s deputy chief executive

The IFC building in Hong Kong where the HKMA has 14 storey headquarters

the HKMA. The Hong Kong dollar is pegged at US$7.8 to the American currency, but can trade between US$7.75 and US$7.85. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits either end of the band.

Hong Kong introduced the peg in 1983, amid evaporating confidence as China and the UK negotiated the future of what was then a British colony. The peg has helped Hong Kong become a major financial centre and trade hub.

Reuters

U.S. to extend solar protectionism The United States on Friday set new import duties on solar products from China and Taiwan after the Commerce Department found that the solar panels and cells are being sold too cheaply on the U.S. market

P

reliminary anti-dumping duties as high as 165.04 percent for Chinese goods would come on top of antisubsidy levies imposed last month, as the U.S. arm of German solar manufacturer SolarWorld AG seeks to close a loophole allowing Chinese producers to sidestep duties imposed in 2012.

China's Trina Solar Ltd faces total import duties of nearly 30 percent and Suntech Power nearly 50 percent as a result of Friday's decision.

Taiwanese producers face antidumping duties of up to 44.18 percent, with the highest rate applying to Motech Industries Inc , Commerce said. There will be no doubling-up of

duties with those from the 2012 case.

The new duties, which must still be confirmed, are likely to inflame U.S.China tensions already exacerbated by recent accusations that Chinese military officers were cyber-spying on U.S. companies involved in trade disputes, including SolarWorld.

SolarWorld said the new duties would average 47 percent for most companies, compared with 31 percent in the 2012 case.

"Today's actions should help the U.S. solar manufacturing industry to expand and innovate," said SolarWorld Industries America President Mukesh Dulani. "We should

not have to compete with dumped imports or the Chinese government."

But the Coalition for Affordable Solar Energy, which represents mainly installers, said the duties would hinder the deployment of clean energy by raising the prices of solar products and hurting consumers.

The solar industry has been battered over the last four years by a glut of products from China, falling prices and a withdrawal of consumer subsidies in Europe, which has pressured solar companies' margins and sparked a rash of trade cases.

India has slapped levies on panels from the United States and China.

11

July 28, 2014

Greater China

Shenyin & Wanguo to buy Hong Yuan

Small enterprises get more bank credit

Chinese securities firms are seeking to bolster capital and market share through acquisitions and equity sales as profitability dwindles

China’s financial institutions lent more money to small and micro companies in the first half of 2014 as the country promised small businesses better financial services. The People’s Bank of China said in a semi-annual report that the outstanding loans to small and micro enterprises stood at 14.17 trillion yuan (US$2.3 trillion) at the end of June, up 15.7 percent year on year.

The growth in loans to small businesses was faster than to medium-sized and large companies from January to June, according to the report.

S

henyin & Wanguo Securities Co. agreed to acquire Hong Yuan Securities Co. for 39.6 billion yuan (US$6.4 billion) in stock to create the nation’s fifth-largest brokerage by assets.

Shenyin & Wanguo will issue 2.049 shares for each Hong Yuan share, the target company said in filings with the Shenzhen Stock Exchange. In total, the acquirer will issue 8.14 billion shares at 4.86 yuan apiece and plans to assume Hong Yuan’s listing in Shenzhen, according to the filings.

Chinese securities firms are seeking to bolster capital and market share through acquisitions and equity sales as profitability dwindles. The Hong Yuan purchase is the biggest takeover in mainland China’s financial industry, surpassing Ping An Insurance Group Co.’s US$4.3 billion acquisition of Shenzhen Development Bank Co. in 2011, data compiled by Bloomberg show.

“Deals such as this one are what regulators and management like to see happen,” Chen Xingyu, a Shanghaibased analyst at Phillip Securities Research, said by phone yesterday.

“Creating large firms through mergers and acquisitions will give these Chinese brokerages an edge when facing foreign competitors as China further liberalizes its capital markets.”

Total assets of the nation’s 115 securities firms -led in revenue by Citic Securities Co.- climbed 20 percent last year to US$334 billion, according to the Securities Association of China. That’s about one-third of the US$912 billion at New Yorkbased Goldman Sachs Group Inc.

Investor disenchantment Shenyin & Wanguo and Hong Yuan had total assets of 91 billion yuan in 2013, Securities Association of China data show. Citic Securities is the nation’s largest brokerage with assets of 193 billion yuan.

Central Huijin Investment Ltd.,

Fast food firm withdrawing all products The parent company of a scandal-hit Chinese food supplier said it is withdrawing all products made by the subsidiary.

Shanghai Husi Food Co Ltd, owned by Illinois-based OSI Group LLC, is at the centre of a major food safety scandal, which has spread from China to Hong Kong and Japan, over allegations it mixed fresh and expired meat. In a statement posted on its website late Saturday, OSI Group said it would “withdraw from the marketplace” all products made by Shanghai Husi, and that it was conducting an internal investigation into current and former senior management.

Beijing in search of decentralization Shenzhen stock market witnessed the acquisition

the sovereign investor that holds stakes in China’s biggest banks and other financial institutions, controls both Shenyin & Wanguo and Hong Yuan. The merger plan was part of Huijin’s strategy to integrate its holdings in the companies, Shenyin & Wanguo Chairman Li Jiange said in April.

Chinese brokerages, which make most of their money executing trading orders for individual investors, have seen profitability plunge to about one-eighth of 2007 levels as trading

commissions drop amid investors’ disenchantment with equities.

IPO backlog Founder Securities Co., Credit Suisse Group AG’s Chinese partner for an investment banking joint venture, this month won approval from the China Securities Regulator Commission for its planned acquisition of smaller rival China Minzu Securities Co. The regulator had earlier approved Guotai Junan Securities Co.’s plan to purchase 51 percent of Shanghai Securities Co. for 3.57 billion yuan, Xinhua News Agency reported July 6.

Guotai Junan, China’s thirdlargest brokerage by revenue, is also among six securities firms awaiting approval for initial public offerings, according to filings posted on the regulator’s website.

Shares of Shenyin & Wanguo’s Hong Kong-listed unit jumped 25 percent this year, outpacing a 3.9 percent gain in the benchmark Hang Seng Index.

Trading in Hong Yuan’s shares has been suspended since October 30.

Bloomberg News

Beijing forbids new universities and large hospitals from being built or expanded around the Forbidden City in an effort to decentralize the capital’s functions and population. Manufacturing and building industries, as well as wholesales businesses are strictly banned from being located in the core districts of Xicheng and Dongcheng which embrace the Forbidden City, according to a catalogue jointly constituted by 10 departments including Beijing municipal committee of development and reform. Hotels, office buildings, and exhibition halls are restricted to be built in the core districts.

SOEs report assets growth China’s state-owned enterprises (SOE) administered by the central authority posted growth in assets, revenue and profits in 2013, the state-owned assets regulator said on Saturday. The combined assets of 113 such enterprises stood at 35 trillion yuan (US$5.7 trillion) at the end of 2013, up 11.7 percent year on year, the State-owned Assets Supervision and Administration Commission said in a report. They raked in 24.4 trillion yuan in operating revenue last year, up 9.1 percent. Their profits rose 3.6 percent to 1.3 trillion yuan in 2013.

Tibet transport to be improved

The European Union also has targeted Chinese panels and China has moved against imports of U.S. polysilicon, solar's key raw material.

Meanwhile, the United States is challenging India's solar program at the World Trade Organization.

The WTO found irregularities in the previous U.S.-China anti-subsidy case.

U.S. imports of solar products from China were worth US$1.5 billion

in 2013, half the level of 2011, while imports from Taiwan more than doubled to US$657 million over the period, according to Commerce data.

Commerce will make its final decision by December 15. The U.S. International Trade Commission is due to make a decision on whether the imports pose or threaten injury to U.S. producers by January 29.

Reuters

Deals such as this one are what regulators and management like to see happen Chen Xingyu analyst , Phillip Securities Research

China has decided to promote the development of transport infrastructures in Tibet to make travels on “the roof of the world” much easier. The Ministry of Transport (MOT) said in a guideline that China aims to expand highways in the autonomous region to 110,000 kilometres by 2020. China plans to complete a primary network of railways by then with 1,300 kilometres of rails in operation. The country will also build more airports in Tibet. To that end, the MOT will make specific plans to ensure the accomplishment of these targets.

12

July 28, 2014

Asia

Jokowi’s challenge Indonesia’s new president will have to face a public service dogged by corruption and tangled in a web of bureaucracy, amid a weak parliamentary advantage Angela Dewan

President-elect Joko Widodo (2-L), his running mate Jusuf Kalla (L), Indonesian Democratic Party – Struggle leader Megawati Sukarnoputri (2-R) and Indonesian politician Puan Maharahi (R) pose for journalists during a press conference in Jakarta, Indonesia, 22 July 2014

A

fter his resounding victory in Indonesia's presidential race, Jakarta governor Joko Widodo now faces the daunting task of taking the world's third-biggest democracy forward as resistance to reform lingers.

The softly-spoken former furniture exporter was declared Indonesia's next president by election officials Tuesday, and although his rival, Prabowo Subianto, is contesting the result in court, Widodo is widely expected to prevail.

He is the country's first president to come from outside the political and military elite, and millions are eager to see him deliver on promised reform.

The challenges are enormous: Indonesia's public service is dogged by corruption and tangled in a web of bureaucracy. Around half the population of 250 million people are poor, while persistent weaknesses in the economy threaten growth.

"I'm not going to sugar-coat it, it will be a really difficult job," Indonesian Defence University's Yohanes Sulaiman told AFP. "He will have to cut fuel subsidies and red tape - a lot of people have financially benefited from red tape for a long time."

Widodo has pledged to eventually scrap energy subsidies that eat 20 percent of the state budget. Cutting subsidies is

politically sensitive, and has met with fierce resistance from the masses and opportunistic opposition parties.

Prabowo's coalition has more seats in parliament than Widodo's, and even though some parties may jump ship in coming weeks, pushing legislation through will be an on-going challenge.

Parliament is one of the most corrupt public institutions, attendance by lawmakers is dismal and just a small fraction of bills are made into laws each year.

"The parliament is very hostile - if Jokowi wants good government, he would have to imprison half the lawmakers. He could easily be blocked by them," Sulaiman said, referring to Widodo by his widely used nickname.

Resistance could also come from within Widodo's own Indonesian Democratic Party of Struggle (PDI-P), known to be split down several lines.

Legions of PDI-P members are loyal to Puan Maharani, daughter of former president and party leader Megawati Sukarnoputri and granddaughter of Indonesia's first president, Sukarno.

Some have painted Megawati as Widodo's puppet master, raising fears among those who remember her 200104 presidency as aloof and indecisive as militancy and corruption flourished.

Indonesia's economy has begun

to bounce back after a woeful 2013 -when the rupiah dived, inflation soared and the current account hit a record deficit- but fundamental weaknesses are still hampering growth, economists say.

"It's a huge challenge because of two things. First we're too dependent on commodity exports, we need to ramp up our non-commodity export base," Kenny Soejatman, portfolio manager at Manulife Asset Management Indonesia, told AFP. "Second, we're facing competition from other emerging countries.

We're facing a weakening global economy and wage pressures. We need to improve our human capital and infrastructure to improve competitiveness."

To make good on some of his economic policies, Widodo will have to better engage the labour unions, according to University of Sydney's Michele Ford.

In the campaign period, Prabowo had the support of major unions that have been able to mobilise millions of protestors and last year spearheaded the huge wage hikes that hurt Indonesia's competitiveness in manufacturing.

"If Widodo can bring unions into the fold, he has a much better chance of being able implement the reform agenda," Ford said.

"Take his plan to cut the fuel

subsidy. This will be deeply unpopular with workers," she said, adding he would need to work out trade-offs with unions to avoid massive protests.

But what tens of millions of poor Indonesians are hoping for is a sturdier social safety net.

Widodo has promised to upscale his popular Jakarta health and education card programme to the national level. In the capital, residents received cards that guaranteed free medical treatment and schooling.

Widodo was commended for the smooth distribution of the cards, but many complained of bed shortages and long waits in hospitals that were overwhelmed with patients.

Giving all children an education will also require more than cards.

Schools around the country are grossly underfunded. Buildings have collapsed and even killed students in recent years, while teachers often refuse to work, complaining of unpaid wages.

But his first challenge may be keeping the people's hopes in check -- millions are betting on Widodo's fresh man-of-the-people approach to work wonders.

"Managing those expectations in the early weeks and months will be vital for Widodo if he is to bring the country with him," Ford said.

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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AFP

13

July 28, 2014

Asia

Pacific summit to urge action on climate change The Pacific Islands Forum (PIF) nations regard themselves as the frontline of climate change, an issue they say threatens their very existence

P

acific island leaders will renew calls for meaningful action on climate change at a regional summit opening in Palau on Tuesday, amid fears rising seas will swamp their low-lying nations.

Many of the 15 nations represented at the Pacific Islands Forum (PIF) lie barely a metre (three feet) above sea level, and regard themselves as the frontline of climate change, an issue they say threatens their very existence.

While emissions controls and carbon footprints can seem like abstract concepts in the climate debate, Palau President Tommy Remengesau said Pacific island nations were already facing the reality of global warming.

"Climate change is causing the seas to rise at unprecedented rates, increasing the intensity of storms and threatening to wipe entire states off the map," he told the United Nations earlier this year.

This week's meeting seeks to maintain momentum from the 2013 summit in the Marshall Islands, where Forum nations signed the Majuro Declaration, committing them to ambitious targets for cutting greenhouse gas emissions and adopting renewable energy.

While such a move is largely symbolic, Pacific leaders said they wanted to set a "moral example" to major emitters.

They have followed up with a diplomatic push to reinvigorate the stalled climate debate, emphasising the need for immediate action at numerous international forums.

Major emitters such as the United States, China and India will attend the Palau meeting as observers.

Marshall Islands President Christopher Loeak said it was an opportunity to drive the message home once again ahead of a special UN summit on climate change in New York on September 23.

"Are we willing to let another decade slip away, standing idly by as the world's most vulnerable countries and people, including my own, fight a losing battle against the king tides and typhoons of a warmer world?" he said.

"Or will we instead stand together and say we are ready to embrace a carbon-free future, and to do it today?"

While climate change is the central theme of the four-day summit, a raft of other issues will be discussed including sustainable development, managing the US$4.0 billion a year tuna industry and protecting marine life in the vast ocean territories belonging to PIF members.

The fate of Fiji, which was expelled from the PIF in 2009 after its military regime reneged on a pledge to hold elections, is also likely to be discussed, although readmission is unlikely before elections scheduled for September.

AFP

Fujitsu to post first profit in 4 years Fujitsu Ltd is expected to post its first April-June operating profit in four years, due to restructuring and revenue stemming from IT service-related capital investment, the Nikkei business daily reported yesterday. The company is seen logging an operating profit of slightly more than five billion yen (US$49.11 million) for the period, according to the report. That compares with a loss of about 20 billion yen for April-June in each of the past three years. Fujitsu will likely leave unchanged its projection for an operating profit of 185 billion yen in the fiscal year that ends March 2015.

Hyundai to build plant in Czech Republic South Korea’s Hyundai Mobis Co Ltd yesterdaysaid it will build a 95.65 million euro (US$129 million) factory in the Czech Republic to make car lamps for the local operations of compatriots Hyundai Motor Co and Kia Motors Corp. Hyundai Mobis said it will sign an agreement on Tuesday with the Czech government to build its second plant in the country by 2017 near the city of Ostrava. The factory will have the capacity to make head and rear lamps for 750,000 vehicles a year made primarily at Hyundai’s local plant and Kia’s plant in neighbouring Slovakia.

Maori agribusiness showcased

Then U.S. Secretary of State Hillary Rodham Clinton and delegates to the Pacific Islands Forum pose for a family photo at the Cook Islands National Auditorium in 2012

Freeport set to resume Indonesian copper exports

Abe’s Mexican power trip Peña Nieto’s office released a statement saying Mexico expects greater trade and cooperation with Japan in coming years

J

apanese Prime Minister Shinzo Abe wrapped up a two-day visit to Mexico Saturday, taking a break from sealing energy deals to tour pyramids with President Enrique Peña Nieto.

Abe and Peña Nieto visited the preColumbian city of Teotihuacan with their wives Akie Abe and Angelica Rivera de Peña, donning palm-leaf hats and posing for pictures.

The couples did not speak with the press.

But Peña Nieto’s office released a statement saying Mexico expects greater trade and cooperation with Japan in coming years.

Abe struck a series of energy deals Friday with Peña Nieto at the start of a five-country Latin American tour.

Abe, whose visit to the region comes on the heels of one by Chinese President Xi Jinping, inked a deal between Mexican state oil firm Pemex and Japan's development

bank, and another between Pemex and the Japan Oil, Gas and Metals National Corporation.

With Japan on the lookout for new power sources after the Fukushima disaster forced the shutdown of its nuclear reactors, energy is high on the prime minister's trip agenda.

Mexico is undergoing sweeping changes in its energy sector, with Congress poised to end struggling

US$19.3 billion Japan-Mexico 2013 total trade

New Zealand Ministry for Primary Industries (MPI) organized APEC delegations to visit Maori agribusiness programs to share their experiences for rural economic development during a workshop in Northland.

Delegates from Peru, Indonesia, Japan, China, China’s Taiwan, Thailand, Vietnam and the Philippines attended APEC PPFS (Policy Partnership on Food Security) Rural Development workshop from 22-25 July 2014, hosted by MPI and the Northland Mori agribusiness partners. Through case studies and on-farm visits, the MPI shared experiences while helping to build capability of New Zealand’s rural development.

Pemex's 75-year monopoly and open up the oil and gas sectors to foreign investment.

Japan is Mexico's fourth trade partner, with total trade of US$19.3 billion last year. There are some 800 Japanese companies that have investments in Mexico, especially automobile giants like Nissan, Mazda and Honda.

Abe is the first Japanese leader to visit Mexico since Prime Minister Junichiro Koizumi did in 2004.

Abe's nine-day trip -which will also take him to Trinidad and Tobago, Colombia, Chile and Brazil- comes just days after China's Xi wrapped up his own four-country tour of the region.

With its emerging economies, Latin America holds promise as a relatively untapped market for Japanese exports, in addition to its coveted raw materials.

AFP

Freeport-McMoRan Inc clinched a deal with the Indonesian government on Friday allowing the miner to resume copper concentrate exports from the country, effectively ending a six-month tax dispute and paving the way for more miners to follow suit. Freeport, which is expected to export 756,000 tonnes of copper concentrate in the second half of this year, received its permit from the trade ministry on Friday after signing a memorandum of understanding (MoU) with the government, Freeport Indonesia CEO Rozik Soetjipto said.

Nissan expands U.S. recall of cars Nissan Motor Co has expanded by 226,326 vehicles a recall of older models equipped with defective air bags made by Japan’s Takata Corp, Nissan said in an amended filing posted Saturday by U.S. safety regulators. At least nine automakers, including Nissan, have recalled more than 12 million vehicles worldwide over the past five years because air bag inflators supplied by Takata could rupture and send shrapnel into vehicle occupants.

In April 2013, Nissan told the National Highway Traffic Safety Administration that it would recall 438,302 cars.

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July 28, 2014

International Argentine “vulture” default looms Latin America’s No. 3 economy has for years fought the holdout hedge funds which snapped up its junk bonds after its US$100 billion default in 2002

Fox open to giving Time Warner board seats Rupert Murdoch’s 21st Century Fox is open to giving Time Warner Inc. shareholders seats on the new company’s board if its takeover bid succeeds, Bloomberg reported on Saturday, citing people familiar with the situation. Board representation could appear in a revised proposal, Bloomberg cited one of the people as saying. It did not say how many board seats were being considered and added the two sides are not currently in negotiations.

Time Warner’s board rejected Murdoch’s US$80 billion takeover offer earlier this month, but the Fox chairman and chief executive officer is expected to continue the pursuit.

Swiss banks face lower fines than feared About 80 of the 106 Swiss banks that signed up for a deal with U.S. tax authorities could be fined less than they had feared for their role in helping wealthy Americans cheat on their taxes, but must widen their cooperation, a Swiss newspaper reported. The banks, which include Geneva-based Lombard Odier and Zurich firm EFG International, came forward under a programme brokered by the Swiss and U.S. governments, after criminal investigations of roughly a dozen Swiss banks including Credit Suisse in the United States.

Ferrovial to buy Australia’s John Holland Spanish infrastructure and services company Ferrovial is preparing a A$1.5 billion (US$1.4 billion) offer for Australian firm John Holland, Spanish business daily Expansion reported on Saturday without citing sources. John Holland, a wholly owned subsidiary of Australia’s largest construction firm Leighton Holdings Ltd, provides contracting and services to the transport, energy and resources sectors. Leighton said in June it was considering selling the business as Spanish-controlled majority owner Hochtief tries to cut debt and potentially fund a bid for full ownership.

Fertilizer makers blame Texas city for deadly blast Two fertilizer manufacturers sued following a deadly plant explosion in a small Texas city last year are seeking to blame the city and its volunteer firefighters for the disaster, local media reported Saturday. El Dorado Chemical Co. and CF Industries, two of the four companies named as defendants in the case, argued in a recent motion that the city of West failed to properly train the first responders and had insufficient protocols in place to battle the April 17, 2013 blaze at West Fertilizer Co. that triggered the explosion, according to the Waco-Tribune Herald.

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rgentina looks set to default on its debt for the second time in 12 years next Thursday as negotiations with “holdout” investors seemingly go nowhere and neither side shows signs of blinking first, though a last minute deal can’t be discounted.

Latin America’s No. 3 economy has for years fought the holdout hedge funds which snapped up its junk bonds after its US$100 billion default in 2002 and then refused the restructuring terms, suing for repayment in full.

But time is up. After a slew of legal setbacks for Argentina in U.S. courts, the country has just days to comply with a 2012 ruling by U.S. District Judge Thomas Griesa to pay US$1.33 billion plus interest to the funds it calls “vultures.”

If the deadlock persists, Griesa will prevent Argentina from making a July 30 deadline for a coupon payment on exchanged bonds, triggering a new default just as the economy struggles with recession, dwindling reserves and soaring inflation.

“The outcome is still uncertain, with just days before a technical default is triggered,” said analyst Mauro Roca of Goldman Sachs. “A deal now seems unlikely.”

Unlike Argentina’s 2001-2 debt crisis when it was broke and could not pay its civil servants, this time around the country is solvent but prevented by Griesa from servicing its bonds until the battle with the holdouts is resolved.

Argentina’s combative stance has upped the odds of a default.

Efforts to find a solution through a mediator have made scant progress, with one of the lead holdouts saying the government had made clear “it will be choosing default”.

Argentina’s president, Cristina Fernández, has not minced words, branding the holdouts extortionists and lambasting the judge for a ruling she says is unjust.

The government argues a deal with the holdouts would leave it at risk of

President Fernández of Argentina, with U.S. President Obama

breaking the so-called RUFO clause which bars it from voluntarily offering better terms to investors than what it gave in the bond swaps accepted by 92.4 percent of creditors. RUFO stands for “rights upon future offers.”

With the RUFO clause set to expire on December 31, Argentina wants a stay on Griesa’s ruling to allow negotiations without risking claims from exchange bondholders that the government estimates could hit US$400 billion. So far, the judge has refused.

Messy or clean A high-stakes game of poker is playing out. Griesa’s ruling prohibits Argentina from servicing its restructured debt until it settles

with the holdouts.

If neither side flinches, Argentina will default as of July 31. Although it will have sufficient finances to service its foreign currency restructured debt, worth US$35 billion, it will be unable to get payments to creditors outside Argentina.

A default won’t send shockwaves through the global economy: Argentina is already isolated from international capital markets. How much pain it causes at home will depend on how quickly Argentina can extricate itself from the mess.

That will largely be determined by whether Argentina persuades bondholders it is ready to negotiate a swift settlement after the December 31 expiration of the RUFO clause.

Reuters

Germany rejects EU-Canada trade deal Berlin objects to clauses outlining the legal protection offered to firms investing in the 28-member bloc

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ermany is to reject a multibillion free trade deal between the European Union and Canada that is widely seen as a template for a bigger agreement with the United States, a leading German paper reported on Saturday.

Citing diplomats in Brussels, the Sueddeutsche Zeitung said Berlin objects to clauses outlining the legal protection offered to firms investing in the 28-member bloc. Critics say they could allow investors to stop or reverse laws.

The German government could not sign the agreement with Canada “as it has been negotiated now”, reported the paper quoting German diplomats in Brussels.

It also said the clauses in the Canada deal were similar to those

in the U.S. agreement, which is still under negotiation.

“The free trade treaty with Canada is a test for the agreement with the United States,” said one senior official at the Commission in Brussels, according to the paper.

If the deal with Canada is rejected “then the one with the United States is also dead”, added the official.

Asked about the report, a spokesman for Germany’s Economy Ministry referred to correspondence that outlined Germany’s concerns about investor protection in talks with both countries.

“The German government does not view as necessary stipulations on investor protection, including on arbitration cases between investors and the state with states that guarantee a

resilient legal system and sufficient legal protection from independent national courts,” wrote Deputy Economy Minister Stefan Kapferer.

In the letter, dated June 26, Kapferer took a similar position on investor protection in the stillto-be-agreed Transatlantic Trade and Investment Partnership (TTIP) agreement with the United States.

Brussels argues that without these clauses, companies from Canada will not invest in Europe.

Canadian Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso signed a deal in principle last October, leaving officials to work out the final details.

Sources said last month that the lowerlevel talks had run into trouble.

Reuters

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July 28, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The real raw material of wealth Ricardo Hausmann

THE NEW ZEALAND HERALD

Former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is a professor of economics at Harvard University

Banks are once again wooing first-home buyers to apply for a mortgage, even if they do not have a 20 per cent deposit. Loan-to-value ratio (LVR) restrictions were introduced last year reducing such lending to no more than 10 per cent of new mortgages.

However, banks pulled back more sharply than the Reserve Bank anticipated. New lending to low-deposit borrowers dropped from more than 25 per cent of loans last August to less than 4 per cent in January through March this year.

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THE JAPAN NEWS The minimum price in planned bidding for the right to manage two international airports in the Kansai region has been set at about ¥2.2 trillion, the operator of the airports said. In June 2015, New Kansai International Airport Co. will select a bidder to grant preferential negotiating rights. The final sales deal is expected in September 2015, conditional on approval by the transport minister. The management right for Kansai International Airport and Osaka International Airport will be transferred in January 2016.

The winning bidder will be granted the right to operate the two airports for 45 years.

THE TIMES OF INDIA For the first time since its inception, commercial vehicle maker Ashok Leyland hasn’t declared dividends this year, and no prizes for guessing how shareholders reacted at the company’s 65th annual general meeting (AGM) on Saturday. From repeatedly attacking the managing director for taking home a hefty salary and accusing the board of directors for having a “lackadaisical” attitude, to giving the top management advice on the importance of appointing consultants and the need to sell off unprofitable subsidiaries, shareholders of the company gave the management a earful.

THE PHILSTAR The Social Security System’s (SSS) innovative micro-savings program has attracted more than 74,000 members from 748 informal workers groups as of the end of May. A total of 180 informal sector groups (ISGs), representing over 17,000 members, joined the program within the first five months of the year with the transport industry accounting for about half of the AlkanSSSya enrolees.

Among the participants in the transport sector are operators and drivers of tricycles, jeepneys, trisikad, vans, shuttle buses and habal habal; motorboat and pumpboat operators; airport service providers; and bus dispatchers.

IRANA – Poor countries export raw materials such as cocoa, iron ore, and raw diamonds. Rich countries export – often to those same poor countries – more complex products such as chocolate, cars, and jewels. If poor countries want to get rich, they should stop exporting their resources in raw form and concentrate on adding value to them.

Otherwise, rich countries will get the lion’s share of the value and all of the good jobs.

Poor countries could follow the example of South Africa and Botswana and use their natural wealth to force industrialization by restricting the export of minerals in raw form (a policy known locally as “beneficiation”). But should they?

Some ideas are worse than wrong: they are castrating, because they interpret the world in a way that emphasizes secondary issues – say, the availability of raw materials – and blinds societies to the more promising opportunities that may lie elsewhere.

Consider Finland, a Nordic country endowed with many trees for its small population.

A classical economist would argue that, given this, the country should export wood, which Finland has done.

By contrast, a traditional development economist would argue that it should not export wood; instead, it should add value by transforming the wood into paper or furniture – something that Finland also does. But all wood-related products represent barely 20% of Finland’s exports.

The reason is that wood opened up a different and much richer path to development. As the Finns

were chopping wood, their axes and saws would become dull and break down, and they would have to be repaired or replaced. This eventually led them to become good at producing machines that chop and cut wood.

Finnish businessmen soon realized that they could make machines that cut other materials, because not everything that can be cut is made out of wood. Next, they automated the machines that cut, because cutting everything by hand can become boring.

From here, they went into other automated machines, because there is more to life than cutting, after all.

From automated machines, they eventually ended up in Nokia. Today, machines of different types account for more than 40% of Finland’s goods exports.

The moral of the story is that adding value to raw materials is one path to diversification, but not necessarily a long or fruitful one. Countries are not limited by the raw materials they have. After all, Switzerland has no cocoa, and China does not make advanced memory chips.

That has not prevented these countries from taking a dominant position in the market for chocolate and computers, respectively.

Having the raw material nearby is only an advantage if it is very costly to move that input around, which is more true of wood than it is of diamonds or even iron ore. Australia, despite its remoteness, is a major exporter of iron ore, but not of steel, while South Korea is an exporter of steel, though it must import iron ore.

What the Finnish story indicates is that the

more promising paths to development do not involve adding value to your raw materials – but adding capabilities to your capabilities.

That means mixing new capabilities (for example, automation) with ones that you already have (say, cutting machines) to enter completely different markets. To get raw materials, by contrast, you only need to travel as far as the nearest port.

Thinking about the future on the basis of the differential transport-cost advantage of one input limits countries to products that intensively use only locally available raw materials. This turns out to be enormously restrictive.

Proximity to which particular raw material makes a country competitive in producing cars, printers, antibiotics, or movies? Most products require many inputs, and, in most cases, one raw material will just not make a large enough difference.

Beneficiation forces extractive industries to sell locally below their export price, thus operating as an implicit tax that serves to subsidize downstream activities. In principle, efficient taxation of extractive industries should enable societies to maximize the benefits of nature’s bounty. But there is no reason to use the capacity to tax to favour downstream industries.

As my colleagues and I have shown, these activities are neither the nearest in terms of capabilities, nor the most valuable as stepping-stones to further development.

Arguably, the biggest economic impact of Britain’s coal industry in the late seventeenth century was that it encouraged the development of the steam

engine as a way to pump water out of mines. But the steam engine went on to revolutionize manufacturing and transportation, changing world history and Britain’s place in it – and increasing the usefulness to Britain of having coal in the first place.

By contrast, developing petrochemical or steel plants, or moving lowwage diamond-cutting jobs from India or Vietnam to Botswana – a country that is more than four times richer – is as unimaginative as it is constricting. Much greater creativity can be found in the UAE, which has used its oil revenues to invest in infrastructure and amenities, thus transforming Dubai into a successful tourism and business hub.

There is a lesson here for the United States, which has had a major beneficiation policy since the 1973 oil embargo, when it restricted the export of crude oil and natural gas. As the US increasingly became an energy importer, its leaders never found any reason to abandon this policy. But the recent shale-energy revolution has dramatically increased the output of oil and gas in the last five years. As a result, the domestic natural-gas price is well below the export price.

This is an implicit subsidy to the industries that use oil and gas intensively and may attract some inward foreign investment. But is this the best use of the government’s capacity to tax or regulate trade? Would the US not be better off by using its capacity to tax natural gas to stimulate the development of the contemporary technological equivalent of the revolutionary engine?

The Project Syndicate 2014

Countries are not limited by the raw materials they have. After all, Switzerland has no cocoa, and China does not make advanced memory chips. That has not prevented these countries from taking a dominant position in the market for chocolate and computers, respectively

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July 28, 2014

Closing Largest amphibious aircraft starts trial production 300,000 lack drinking water in north China Trial production of the TA600 aircraft, intended to be the world’s largest amphibious aircraft, has started in China following completion of the design process, a company executive said yesterday. The aircraft, with a maximum takeoff weight of 53.5 tons and a maximum range of more than 5,000 kilometres, is larger than a Boeing 737 and could be used for fire fighting and air-sea rescue, said Fu Junxu, general manager of China Aviation Industry General Aircraft Co. Ltd’s Zhuhai branch. China began developing the aircraft five years ago. Its maiden flight is expected to happen in late 2015, said Fu.

Lingering drought in north China’s Inner Mongolia Autonomous Region has left about 300,000 people short of drinking water, local authorities said yesterday. About 600,000 people in seven prefectures and cities have been affected by the drought since April, with half of them lacking drinking water, according to the regional civil affairs department. Some 150,000 hectares of farmland and 16.4 million hectares of pastures have been affected in the worst drought in three years. About 1.34 million heads of cattle also lack drinking water. The drought has caused direct economic losses of 229 million yuan (US$37 million).

China and Latin America’s win win Brazilian President Dilma Rousseff said her meeting with Xi had yielded “exciting” results

Brazilian President Dilma Rousseff (R) and her Chinese counterpart Xi Jinping observe an official welcome ceremony at Alvorada Palace in Brasilia, Brazil, 17 July 2014. Both met within the scope of the BRICS Unasur summit taking place from 15 to 17 July

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hinese President Xi Jinping’s recent trip to Latin America, the second in 13 months, demonstrated the important role Latin America plays in China’s overall diplomacy and brought new opportunity to the bilateral ties.

During Xi’s trip on July 15-23, he attended the sixth summit of BRICS nations Brazil, Russia, India, China and South Africa - and a conference with Latin American and Caribbean leaders. He also paid state visits to Brazil, Argentina, Venezuela and Cuba.

Brazilian President Dilma Rousseff said her meeting with Xi, nearly three hours long, had yielded “exciting” results, stressing that bilateral

trade between China and Brazil surpassed US$90 billion in 2013.

China, Brazil and Peru will cooperate to construct a railway running from the Peruvian Pacific coast to the Brazilian Atlantic coast.

The transcontinental railway will play an important role in promoting Brazil’s economic growth and lifting regional development, Rousseff said, pledging to “work together with China and Peru to build this project into a satisfactory one.”

Against the backdrop of the global economic downturn, enhancing economic exchanges between China and Brazil is extremely important, Rousseff said, adding that the two economies are

developing in a stable, bright and strategic fashion through Chinese investment in Brazil and deepening cooperation in a wide range of areas.

She said the increasing diversified investment from China will bring Brazil and other Latin American countries a promising future.

Francisco Mauro Brasil de Holanda, director of the East Asia Department in the Brazilian Foreign Ministry, said the great amount of Chinese investment has turned from areas of mining, soybean and oil in the beginning to high technology, car manufacturing and heavy equipment.

The most anticipated cooperation with China is in infrastructure, especially

railways and ports, Mauro said.

China owns a mature technological system in infrastructure construction and has achieved great accomplishments in the area, which is exactly what Latin American countries including Brazil long for, he added.

Murilo Ferreira, CEO of Brazil’s Vale, the world’s largest producer and exporter of iron ore, is optimistic about the China-Brazil cooperative relations in the new era.

At the Annual Meeting of China-Brazil Entrepreneurs Committee in July, Ferreira said China is a long-term strategic partner, whose economic development has provided Brazilian mining exports with great

opportunity.

Severino Cabral, director of the Brazilian Institute for China and Asia-Pacific Studies, said Xi’s trip was beneficial for Latin America’s politics, diplomacy and economy in 2014.

The consensus reached between Chinese and Latin American leaders will help coordinate concerned parties to build a democratic, multipolar new political and economic order in the world, Cabral said.

It will also help solve thorny issues in security and economic development that developing countries have encountered since the beginning of this century, he said.

Thai military junta gains majority support

Commodity fair opens in Kashgar

Air quality tops public environmental complaints

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majority of Thais have agreed to an interim charter provision that allows the military junta to remain to coexist with a forthcoming interim government, an opinion poll released Sunday showed.

The interim charter, which took effect last Tuesday, stipulates that the coup-making National Council for Peace and Administration (NCPO) stay on after an interim government takes shape and be tasked with handling security affairs while overseeing and consulting with the government.

The majority, or 79.94 percent, of 1,256 respondents surveyed on July 24 and 25 voiced support for the continued existence of the NCPO, according to NIDA Poll by the National Institute of Development Administration.

About 11 percent of the respondents, who were from various educational and occupational backgrounds, expressed disagreements and the rest gave no comments, the poll showed.

Meanwhile, more than 66 percent said they had been happier since the May 22 coup because of diminished political turmoil, according to the poll.

Xinhua

he 10th Kashgar Central and South Asia Commodity Fair kicked off yesterday in Kashgar, an ancient Silk Road town in northwest China’s Xinjiang Uygur Autonomous Region.

As the largest trade event in south Xinjiang, the three-day fair has attracted 1,600 businessmen and delegates of trade and commerce associations, including 446 from six foreign countries, including Pakistan, Tajikistan and Kyrgyzstan, according to the organizers.

A total of 1,480 indoor and outdoor stands will showcase the latest products, technologies and investment opportunities in agriculture, textiles, light industrial machinery, culture, tourism and other fields.

An international forum on the Silk Road Economic Belt and sessions will be held in an effort to upgrade the fair.

Long Yongtu, China’s former chief negotiator for WTO entry and former secretary general of the Boao Forum for Asia (BFA), Thomas J. Sargent, a winner of the Nobel Prize in Economics, and many government officials, scholars and experts will attend the forum and give speeches.

Xinhua

Xinhua

ir pollution is still public enemy number one in China’s war against pollution, according to the country’s environmental watchdog.

Among the 696 complaints received by the Ministry of Environmental Protection in the first half of this year, 558 of the total, or 80 percent, were related to air quality, an 8.4-percent year-onyear increase, according to a ministry statement.

All the complaints were lodged through the telephone hotline “12369.” Other major reasons for complaints were water and noise pollution.

The ministry said 474 of the complaints have been investigated, with problems confirmed in 382 cases, or 80.6 percent.

Companies found responsible for the problems received punishments ranging from warnings to suspension, closure and fines.

“Some enterprises became involved in disputes because of a lack of planning in how industrial parks and residential quarters are located,” said the statement.

In one case, it said, the Foxconn Industrial Park in Taiyuan City in Shanxi Province is located just across the street from a residential quarter.

Xinhua