Macau Business Daily, Aug 11th, 2014

Closing editor: Luis Gonçalves

MOP 6.00

SJM is new target

G

Publisher: Paulo A. Azevedo

aming workers have protested conditions at Sands and Galaxy. Now its SJM’s turn.

Academics believe that “skyrocketing prices” will fuel discontent for the foreseeable future. This summer promises to be tough and long for the Big Six operators. Stocks are plunging. There’s a record slowdown in revenues. The Occupy casino movement is spreading all over Macau. And the remaining operators have gone to pains to head off trouble. Margins are being squeezed 4

Year III

Number 601 Monday August 11, 2014

PAGE

CTM’s race to 4G starts

www.macaubusinessdaily.com

PAGE 3

5,000 expected at Insurance Forum in Macau PAGE 3

HK$1.5 million for a 16sq.m. flat?

It’s happening

Flagfall and fines up The Administration is reviewing the taxi licence system. With the help of a public consultation lasting until late September. Fares are to increase and so are fines for errant cabbies. Macau has one taxi per 600 inhabitants and 28,000 tourists.

Page 9

HSI - Movers August 8

PAGE 2

Building momentum

The Chinese economy seems to be picking up. Inflation data leaves the People’s Bank of China a wide margin for stimulating the economy as necessary page

Name

Sour and Sour Melco Crown Entertainment net revenues dropped 7 percent in Q2 to US$1.2 billion. Despite a solid mass market performance. The company also saw its branch office in Taiwan and four employees indicted on foreign exchange violations by Taipei authorities

10

PAGE 5

Interview

%Day

CNOOC Ltd

1.72

China Resources P

1.57

China Petroleum & Ch

1.21

PetroChina Co Ltd

1.19

Tencent Holdings Ltd

1.17

China Resources Ent

-1.27

China Unicom HK

-1.72

Belle International

-2.07

Cheung Kong Hold

-2.24

Henderson Land DEV

-2.87

Source: Bloomberg

I SSN 2226-8294

Running out of options Jiji Tu says the biggest job openings in Macau are in the service sector. The MD of MSS Recruitment Limited says university grads might not be interested, though. The economic boom is highlighting the lack of human resources, especially with Cotai opening more resorts soon. Today’s market enables too much job rotation, the HR expert tells Business Daily. And maybe foreign labour is an option PAGE 6 & 7

Brought to you by

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2

August 11, 2014

Macau

Public tenders for taxi licences to be revamped New regulations changing the rules for the public tender of taxi licences is under consideration. The new system will update fares and increase fines for cabbies who blatantly breach regulations João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he government of Macau is studying new criteria for the allocation of taxi licences, it was announced on Friday during the launch of a public consultation on taxi regulations. The public consultation will last for 45 days until 23 September.

“There is going to be a revision of the way licences are distributed. So far there is a public tender and the highest bid grabs the licences. But we want to increase the number of licences and it is an opportunity to improve the quality of the service,” Transport Bureau Director (DSAT) Wong Wan said. “We’re studying the possibility of taking into account other criteria that will improve the quality of the service.”

In the last public tender for taxi licences the highest bid reached 1.2 million patacas, while the average price of a licence was 961,000 patacas. The initial asking priced stood at 200,000 patacas.

During the press conference that launched the public consultation it was said that taxi regulations were being reformed because it is one of the sectors that people complain about most. Infractions by taxi drivers include misdemeanours such as refusing to accept clients, charging more than the actual fare for the route or driving via longer routes to increase the fare.

“The main problem to be solved is related to the serious insufficiency in the number of taxis in Macau and the unbalanced demand and supply relationship,” André Cheong Weng Chon, the director of the Legal Affairs Bureau, said.

According to July data, there are 1,080 taxis and 100 radio taxis in Macau. In the meantime, some 641,500 persons live in the city and last year the number of tourists was approximately 28 million.

The new regulations will increase penalties for taxi drivers who break the law and introduce new methods to gather evidence against offenders.

Changes in the system to update taxi fares are also expected.

“After listening to people in the sector we have decidesd to update fares. But we want to create a better system that will take into account factors such as inflation, drivers’ salaries, the price of oil and so on,”

Cheong explained.

As for the increase in offences, taxis are currently fined 1,000 pataca if their offences are considered serious.

“After listening to some opinion of the sector there is the suggestion to increase [the fines of] serious offences to 2,000 patacas. But, of course, that can change as there is an ongoing public consultation,” he said.

Undercover agents The new regulations will bring new methods to bear in the monitoring of taxi drivers, such as the introduction of Closed Circuit TV (CCTV) systems in taxis and the introduction of

Dual-currency credit cards storm Macau T

he number of credit cards in circulation increased by 3.8 percent quarter-on-quarter to 796,855 at the end of June. Of these, the majority were dual-currency credit cards in denominations of patacas and yuan, which witnessed a 22.7 percent increase at the end of June compared to the same period a year earlier.

According to the latest figures released Friday by the Monetary Authority of Macau, at the end of June there were a total of 148,770 dualcurrency credit cards in circulation, up from 143,895 at the end of June 2013. This was also a 3.4 percent increase when compared to that of the end of March.

In addition, the number of Macau pataca-credit cards issued by banks in the territory totalled 566,883 at the end of the second quarter of the year, up by 4.3 percent from that of a quarter earlier. In the same period, the number of Hong Kong

dollar-credit cards increased by 1.1 percent to 81,173, while the number of yuan credit cards was 148,799, up 3.4 percent.

When compared with that of a

year ago, the number of pataca-credit cards increased by 13.8 percent, that of Hong Kong dollars increased by 9.5 percent and that of yuan-currency credit cards increased by 22.7 percent.

undercover agents.

“Undercover agents are legal according to Macau law. This is going to be introduced now to monitor if taxis are breaching the law. However, this is not our only solution to solving the problems,” André Cheong Weng Chon explained. “We need to tackle the problem with other solutions because taxis may learn how to identify undercover agents as time goes by.”

The new law may also include a system to suspend or cancel the licence of taxi drivers who breach regulations.

In addition, the new law will increase the number of Public Security Police Force (CPSP) members so its agents can apply fines to taxi drivers.

The latter was mainly driven by an equal 22.7 percent increase in patacayuan dual-currency credit cards.

It was only in the third quarter of 2009 that Macau banks started issuing pataca-yuan dual-currency credit cards to its customers. These cards are also simultaneously regarded as patacacredit cards and yuan-credit cards.

The credit card limit granted by banks here reached 15.7 billion patacas in the second quarter of the year, up 7.3 percent compared with that of the end of March. ‘Credit card receivables amounted to 1.9 billion patacas, while the rollover amount totalled 546.9 million patacas, accounting for 28.8 percent of credit card receivables,’ the Monetary Authority said in its report.

In the second quarter of the year, credit card turnover increased by 1.5 percent quarter-on-quarter to 3.9 billion patacas. Cash advance turnover accounted for 5.2 percent of the total credit card turnover at 201.7 million patacas.

Credit card payments, however, dropped by 9.2 percent at the end of June over that of the end of March to 3.7 billion patacas.

3

August 11, 2014

Macau

Mega insurance forum to attract 5,000 experts

CTM to bid for 4G licence Sara Farr

sarafarr@macaubusinessdaily.com

M

acau telecommunications company Companhia de Telecomunicacoes de Macau (CTM) will be one of the bidders for the territory’s 4G licences, its parent company Citic Telecom International Holdings Ltd said in its interim report.

According to the report, filed with the Hong Kong Stock Exchange, ‘in the second half of the year, the group will further enhance its market development strategies . . . expanding the mainland China, Hong Kong, Macau and overseas markets through active development of new businesses and products.’

Data businesses planned for development by Citic Telecom include VPN, Internet access and data centre, group chairman Xin Yue Jiang said in the interim report.

Citic Telecom is also ‘making full preparations’ to bid for the fourth-generation licences to be issued by the government here. ‘CTM will

actively bid for Macau’s 4G licences and strive to advance the development of its 4G business to provide new-generation mobile communication services for the Macau community,’ Mr. Xin added in the report.

In the first half of the year, Citic Telecom recorded revenues of HK$4.1 billion, a 120 percent jump from the same period a year earlier.

Profit attributable to equity shareholders was HK$360.4 million, a 54.6 percent drop compared to that of the first six months of 2013. Excluding the one-off revaluation gain following the acquisition of CTM in the first half of last

year, profit attributable to equity shareholders increased by 100.9 percent year-on-year.

‘The group will exercise reasonable control over the size of its investments and time them in a prudent manner to avoid risks,’ the report reads.

Mobile services and equipment sales revenues increased by 4 percent in the first half of the year to HK$1.57 billion, primarily due to the increasing sales of smartphones.

In addition, the total number of the group’s ‘postpaid’ subscribers increased by 3.4 percent to 285,750 between June 2013 and June 2014, while the number of prepaid subscribers increased by 13.7 percent to 479,839.

‘The mobile market share of CTM,’ the report reads, was estimated to be around 45 percent compared with 46 percent in 2013, ‘mainly driven by the fluctuation in the number of prepaid subscribers in the Macau market.’

M

acau has been chosen to organise two of the most important events in the Chinese insurance calendar: The 11th Worldwide Chinese Life Insurance Congress and the 2016 Annual International Dragon Conference.

Both forums were founded by groups of insurance and financial service professionals more than 15 years ago with the objective of uniting Chinese insurance exponents from all over the world by facilitating a professional, international exchange platform.

The announcement was made during the 10th

Worldwide Chinese Life Insurance Congress and the 2014 Annual International Dragon Conference (IDA 2014) that took place last week in Xiamen.

The two events are expected to attract to Macao more than 5,000 elite Chinese insurance professionals from all over the world, the organisers said. Previous editions of both forums have been held in Mainland China, Australia, Singapore, Thailand, Hong Kong and Malaysia. It will be the second hosting of the event by Macau. In 2001, more than 1,000 Chinese insurance professionals attended the forums.

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August 11, 2014

Macau

Protesters seek another scalp MGM Resorts Although the numbers attending last Thursday’s protest assembly did not meet organisers’ expectations, the Forefront of Macau Gaming is nevertheless targeting SJM next. Academics believe that this phenomenon will not end any time soon Kam Leong

kamleong@macaubusinessdaily.com

T

he running battle between the gaming workers and their corporation employers is not showing any signs of abating.

Instead, academics believe that the current scenario of gaming workers complaining to the enterprises is likely to continue, causing operating costs to rise.

With the local gaming union Forefront of Macau Gaming (FMG) holding two protests and one assembly targeting Sands China Corporation and Galaxy Entertainment Group in the space of a fortnight, the union announced one more target on Friday.

Last Saturday, SJM (Sociedade de Jogos de Macau) workers were urged to sign a petition in the opening salvo against their employer prior to deciding on further action.

Worker dissatisfaction appears to be spreading, with the wave of protests not expected to be over in the near future, according to Carlos Siu Lam, Associate Professor for the Gaming Teaching and Research Centre at the Macao Polytechnic Institute.

“As dealers need to deal with various customers from different backgrounds and have to work on shifts, they have to control their emotions and endure much work pressure. Following this, their dissatisfaction might escalate if they compared their working situation with other casino workers, or if they felt mistreated,” Mr. Siu said.

He explained that the large number of tourists, together with local residents, have created very strong demands for housing and daily necessities and contributed to their “skyrocketing prices,” with most casino workers feeling the “brunt of

the pain of inflation.”

Another reason for the unrest is because Macau society does not appear to be confident in the imported foreign workers policy, he said, “As a result, some casino workers have always been on the alert to actions taken by casino management, such as asking for imported foreign workers.”

In response to the current situation, some casinos have allocated local staff from other departments to casinos as well, replacing them with imported foreign workers in their previous positions, according to Mr. Siu, who thinks that the situation may also impact increases in the operation costs of the gaming corporations.

Last week, Business Daily reported that Deutsche Bank Markets Research analyst Karen Tang also warned that the demands of the workers are pressuring casinos, and that the benefits the casinos distributed this year may double their labour costs over what they had initially estimated.

Actions against Sands suspended However, facing a sharp decline in workers participating in the assembly last Thursday, FMG announced that night that the strike involving Sands workers planned for last Friday would be put on hold.

Ieong Man Teng, who heads FMG, said that only around 500 to 700 workers joined the assembly held by the union in the plaza close to Sands Macau last Thursday. The number is an obvious decrease from the first action they held, marching around The Venetian, in which some 2,000 Sands workers participated.

“The number of participants today [last Thursday] did not meet our expectations. The number did not exceed 1,000, hence further actions will be paused,” said Mr. Ieong.

“We’re sorry that we weren’t able to unite the workers; however, we’re still going to walk along this path with everyone.”

Sands China, on the other hand, expressed regret again for the need for assembly and claimed in its statement that the benefits it has offered to its staff this year ‘represent a yearon-year salary increment of 13.3 per cent, which is more than double the inflation rate of 5.99 per cent in Macao and way above the growth rate in the local market.’

It also implied that the organising union is misleading its staff as well as society, ‘Sands China is a publicly listed company with a board of directors and a remuneration committee, and therefore any decisions regarding payrolls must go through this structure. Anyone from outside the company claiming credit for anything that happens in terms of the company’s compensation is simply trying to deceive team members and the Macao community.’

Meanwhile, Mr. Ieong said that workers should not blame their colleagues for not being united; instead, he blamed Sands China which he claimed had applied new measurements to prevent workers joining the movement, such as shifting staff between the Sands’ casinos, arranging training sessions for workers on morning shifts after work as well as adjusting the working hours on the night shift to earlier than usual.

anticipates New Jersey licence M

GM Resorts International said it expects to be allowed to operate in New Jersey within the next two months, four years after the casino operator agreed to leave the state amid questions over its business in Macau.

Regulatory approval could allow the company to participate more in the running of the Borgata Hotel Casino & Spa in Atlantic City, which it co-owns with Boyd Gaming Corp., Chief Financial Officer Dan D’Arrigo said in an interview last week.

“Borgata continues to be the market leader,” D’Arrigo said.

“We’re pretty excited to be able to regain our seat in the partnership.”

In 2010, MGM Resorts agreed to exit the state following a recommendation by New Jersey’s Division of Gaming Enforcement that the company end its joint venture in Macau with Pansy Ho, whose family has allegedly been connected to organised crime in the China gambling hub. MGM put its Borgata interest into a trust and found a buyer. The company never sold its half of the property and last year asked regulators to reconsider its ability to operate in the state.

The Gaming Enforcement division, which investigates casino licensees, plans to submit a recommendation on MGM Resorts’ status to the state’s Casino Control Commission by the end of the month, according to Kerry Langan, a spokeswoman for the division.

“It’s anticipated that a hearing will be held regarding the matter in September,” she said in an e-mailed statement.

Atlantic City has been pummelled by regional gambling competition in the U.S. Northeast and is enduring the closure of a number of casinos, including Caesars Entertainment Corp.’s Showboat. Regulators are trying to reinvigorate the industry by encouraging online gambling operations.

Earlier this week, MGM Resorts, based in Las Vegas, reported second quarter earnings that beat analysts’ estimates, helped by an increase in gambling on the Nevada Strip.

Bloomberg

5

August 11, 2014

Macau

Melco Crown posts 7pct drop in net revenue Sara Farr

sarafarr@macaubusinessdaily.com

M

elco Crown Entertainment Ltd posted net revenues of US$1.2 billion for the second quarter of the year, a 7 percent drop over that of the same period the previous year.

The company said in its report of unaudited results for the second quarter of 2014 that the main reason for the decrease in net revenue had been due to ‘lower group-wide rolling chip revenues, partially offset by improved mass market table games revenues.’

Studio City in Cotai and City of Dreams Manila in the Philippines were accountable for the company’s overall net loss attributable to noncontrolling interest of US$17 million in the second quarter of the year.

At its City of Dreams property alone, revenues increased by 38 percent to US$967.5 million at the end of June from US$967 at the end of March. The mass market segment at the group’s biggest property in Macau increased by 20 percent, generating revenues of US$1.33 billion in the second quarter of the year compared with US$1.19 billion in the first

three months. ‘The mass market table games hold percentage was 37.4 percent in the second quarter of 2014, an increase from 32.8 percent in the second quarter of 2013,’ the report filed with the Hong Kong Stock Exchange reads.

Lawrence Ho, co-chairman and CEO of Melco Crown Entertainment Ltd, said the group had delivered ‘solid underlying financial performance’ mainly driven by business at City of Dreams.

At Altira, net profits dropped by 54 percent to US$181.6 million at the end of June from US$278.8 million at the end of March.

The group’s Mocha Clubs also witnessed a 2 percent drop in revenue to US$36.5 million in the second quarter of the year. According to the company’s interim report, there were around 1,200 gaming machines in operation in its Mocha Clubs. That’s 800 less than that reported in the same period last year. The reason is the closing down of two clubs at the end of 2013 and earlier this year because of the government’s new policy restricting such venues from residential areas.

In addition, Mr. Ho said, ‘the company’s board of directors has approved the implementation of a US$500 million stock repurchase programme, complementing our ordinary dividend policy announced earlier this year.’ This, he said, will ‘provide us with the mechanism to return surplus capital opportunistically and efficiently, while maintaining flexibility to fund our current operations and future development pipeline.’

Melco’s Taiwan branch indicted Kam Leong

kamleong@macaubusinessdaily.com

M

elco Crown Entertainment’s branch office in Taiwan Li Ying International, and four of its employees – were indicted on foreign exchange violations last Thursday by the Taipei District Prosecutors Office.

The branch, which had offered underground foreign exchange by allowing Taiwanese high rollers to settle their bets in Taiwan whilst gambling in Macau, was involved in illegal transactions valued at some TWD 5.4 billion (1.4 billion patacas / US$180 million) according

to Chinese newspaper China Times.

The prosecutor has detained and seized more than TWD 2.9 billion from different bank accounts of the branch, based on foreign exchange regulations.

Melco Crown stated last week that it had not received any formal indictment document from the prosecuting party and said, ‘We will defend vigorously any indictment brought against us, as based on Taiwanese legal advice received, we believe our operations in Taiwan are in compliance with Taiwan’s laws.’

Melco Crown also believes that there will be no immediate material impact on their operations or financial position, according to their statement.

The indictment shows that the branch office was registered in Taiwan in June 2009 and authorised

by Melco Crown to attract Taiwanese gamblers to the group’s casinos, namely City of Dreams and Altira.

According to the regulations in Taiwan, an individual arriving at or departing from the region with more than TWD60,000 or US$10,000

must declare such to Customs. The office established an underground foreign exchange service for its customers’ convenience, the Taiwanese newspaper reported.

Last year, the Judicial Police Office in Kaohsiung revealed that the branch was operating illegal foreign exchange activities. The case was later passed to their office in Taipei. The branch was founded with only TWD500,000 in 2009 and is believed to have handled some TWD5.4 billion during its three-year operation.

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August 11, 2014

Macau

“As a recruiter, we don’t like employees who change jobs very often”

Brought to you by

HOSPITALITY China packages In the first half of this year, the number of visitors arriving in Macau on packaged tours reached its highest level ever at 5.3 million people. This figure seals, as it were, a set of remarkable achievements in the last couple of years. The total number of visitors on packaged tours last year had already more than doubled the corresponding value of 2009. The last full semester score is 75 percent higher than in the same period in 2010, implying an average annual growth, in all the period shown here, close to 15 percent. The last full year to June also marks the first time that the 10 million score was reached for a period of two consecutive semesters. As the vast majority of visitors come from Asia, the corresponding growth values for the region are very similar, give or take one or two percentage points.

The overall growth is increasingly driven by visitors from the mainland. Their numbers increased by 20 percent relative to the first semester of 2013, pushing up again their share of the total number of visitors. That share was close to 79 percent in the first half of the year, up by 14 percentage points relative to just two years before. Average annual growth since 2010 has remained over 17.5 percent. If that rate is sustained, it is likely that this year’s results will roughly double those of 2010. The figures for both Hong Kong and Taiwan, the next biggest sources of visitors, were also up in the period. Packaged tours from Taiwan posted growth very close to the average, while Hong Kong trailed well behind with a growth rate of slightly below 5 percent.

J.I.D.

10.49 mln

total visitors on packaged tours, for the 12 months ending June

Given the constant growth of Macau’s economy, supply cannot meet demand.

In an interview with Business Daily, the managing director of MSS Recruitment Limited, Jiji Tu, says that it is especially true for some positions.

She also says that, considering the biggest job openings are in the service field, Macau’s university graduates might not be interested in such positions, creating a mismatch between supply and demand. With the Cotai developments expected to create further job openings, Ms. Tu believes the future of the labour market will continue to be challenging with a lack of human resources and high turnover rate.

Luciana Leitão leitao.luciana@macaubusiness.com

Is the major problem of the labour market in Macau the restrictions on the employment of overseas labour?

It’s a fact that local supply cannot meet the demand for some positions. For example, the university graduates may prefer office work but then a large number of positions created are service [positions] — it can be waiter, cleaner, dishwasher: so there’s a mismatch, as well as supply not meeting demand.

There’s a high turnover rate.

Still, do you believe if there were more flexibility in hiring overseas labour, that problem would be partly solved?

That would solve some of the problems.

I guess in future that overseas labour will be needed for the type of position I just mentioned because it’s difficult to find this large number of employees for this type of position. So, it will help.

And for other positions, because Macau has only been developing in the recent 10 years, there aren’t enough people who have the required skills or experience.

What are the major complaints from companies?

Lack of human resources and everything related to lack of human resources. Lack of quality in human resources in some positions, not for all — can be senior level, management level.

In Hong Kong or Singapore, for management level, they look for someone that has held a similar position in the past five years, but in Macau they’ve reduced the requirement to two years.

You mentioned high turnover rate.

Is it still difficult to keep people in the same job in Macau?

It’s challenging, because there are many opportunities, so they can choose what they want and

When big casinos start hiring, then you will see the employees change jobs between casinos and the smaller companies will also be affected

be more selective. Some of them leave for an increment in salary; some are simply not happy and quit their job because they can find another job very easily.

What kind of advice do you give companies about keeping staff?

For smaller companies, of course, salary and benefits are definitely the most important factor, but put that aside; smaller companies should really provide a really good working environment. This is something Macau people actually do value. So, in addition to salary and benefits, this is one of the most effective ways to keep an employee.

Is it easier for big companies or big resorts to retain employees or are they also fighting other casinos?

They’re fighting other casinos and have different initiatives.

For instance, Wynn gave out stock options. So, they’re trying to create ways to maintain their staff. Instead of looking for

staff from other casinos, they’re trying to see if they can retain their current staff, so it’s very competitive.

The Cotai Strip What will happen with the new Cotai developments? There won’t be enough labour for all the existent vacancies.

Yes. The turnover rate will be very high. When big casinos start hiring, then you’ll see employees change jobs between casinos and the smaller companies will also get affected. It will affect the whole market because it’s the main industry and they hire a lot of people. In the smaller companies and in the bigger companies staff will start changing jobs.

Will the government by then be forced to open up their overseas employment restrictions?

For overseas quota, the

In Hong Kong or Singapore, for management level, they look for someone that has had a similar position in the past five years, but in Macau they’ve reduced the requirement to two years

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August 11, 2014

Macau fundamental policy is that if they hire foreigners if they can’t find such employees locally you also need to comply with a certain local employee ratio. So, there will always be guidelines on how you’re going to approve the overseas quota. It’s a matter of evaluating their future manpower needs and what type of position will be allocated more quota.

Given the high turnover rate, do you believe this is good for their career development?

In the long term, no. By changing too frequently, for us, as a recruiter, when we read the resumes, we don’t like employees who change jobs very often.

Actually, no employer does. But the duration, if they stay one year in a company, probably in Macau they will consider it’s OK. If it’s in another country, they need to stay at least two years. In Macau, if they stay one year, it’s already acceptable. For some positions, in casinos, lower level positions, I guess if you want to join, they sign you up on the spot.

If the locals want to work in a Hong Kong or Singaporean or foreign company, outside of Macau, will they have any opportunities, considering a resume with a short duration time?

[One year] is definitely considered very short.

Do you give advice to employees stating that?

Because we work for our clients who engage us to look for candidates, when we’re looking

Local supply cannot meet the demand for some positions

for candidates and if we have five resumes that are relevant, if one or two of them are extremely jumpy, and change jobs every eight or nine months, normally we won’t give to the clients, even if the resume is relevant.

The clients engage us to look for good employees, a career fit, and also they want someone who is more loyal because they pay us as an agency. As a result, we will shortlist a few candidates with relevant skills and screen out the ones who are [job-hoppers] and won’t give it to the clients.

Where do you see the future of the labour market heading?

It will continue to be quite challenging in the next few years.

What do you mean by challenging?

Challenging in terms of shortage of manpower.

8

August 11, 2014

Macau Majority of jobseekers’ previous contracts terminated

U

p to 45 percent of jobseekers in the first half of the year were looking for a new job following the termination of their work contract. The latest employment figures released by the Labour Affairs Bureau show that 3,002 jobseekers registered with the Bureau. Of these, the majority had ceased to work at their previous company, the reasons for which are unspecified in the report.

In addition, 38 percent said they sought a different work environment, while 7 percent had newly arrived in Macau,

and 5 percent were looking for their first job. By the end of June, 1,779 candidates still had valid application forms for a job placement through the Labour Affairs Bureau.

The majority, at 48 percent of registered candidates, were aged between 45 and 59, while candidates with ages ranging between 25 and 44 accounted for 32 percent of the total. Also, as many as 54 percent said that their level of education was secondary school, while 30 percent said that they had completed elementary school or below.

As many as 15 percent said that they had completed a Bachelor’s degree and one percent a Masters or Postgraduate degree.

The majority of jobs sought was ‘administrative worker’ with an expected monthly salary of 9,695 patacas, ‘casino worker’ with an expected monthly salary of 14,513 patacas, ‘security and building management’ with a salary of around 9,092 patacas, ‘cleaning staff’ with a salary of 9,287 patacas and ‘vendor’ with an expected salary of 7,419 patacas. These are well above the actual monthly salaries paid by employers for such job positions, the salaries for which range between 7,688 patacas a month for an ‘administrative worker’ and 6,062 patacas for a ‘vendor’.

Waiters, cleaners, labourers, vendors and electricians were the main five types of job opening in the first half of the year with employers offering monthly salaries of between 6,734 patacas for a waiter and 11,692 patacas for an electrician. Jobseekers’ expected salaries for such jobs ranged between 9,002 patacas for a waiter and 15,390 patacas for an electrician per month.

S.F.

Nevada Supreme Court rejects Sands appeal

T

he American Group will have to present unredacted documents in the case against Steven Jacobs, despite its assertion that showing such documents violates the laws of Macau The Nevada Supreme Court has rejected an appeal by casino operator Las Vegas Sands Corp against a lower court’s order that it turn over unredacted documents with bearing on a civil case pursued

by Steven Jacobs, the former boss of the company’s Macau subsidiary, Sands China, the Associated Press reported.

Before, Sands attorneys had argued that turning over documents without redacting personal information would violate Macau law. However, the Nevada Supreme Court ruled last week that the parties involved in a lawsuit could not

cite foreign countries’ privacy laws to avoid complying with a Nevada court order.

Steven Jacobs was fired from his position in Sands China in July 2010, since when there has been a fouryear legal battle between the former employee and the American group. Mr. Jacobs claims his contract was terminated unjustly but Sands says it fired its then-top executive with cause, saying he was dismissed because he worked on unauthorised deals and multiple violations of company policy, according to a court filing.

Jacobs denies the accusations, claiming that disputes with Sheldon Adelson, CEO and Chairman of Las Vegas Sands, involved him being ordered to commit illegal acts.

9

August 11, 2014

Macau

High-end ‘micro-flats’ latest Hong Kong trend

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t a glitzy show booth for a new residential development in Hong Kong, property agents with loudspeakers are promoting the latest trend in the overcrowded city - highend ‘micro-flats’ which nevertheless come with an eye-watering price tag.

Hong Kong’s poorest residents are used to making their homes in cramped accommodation but now developers are touting minuscule upmarket apartments to reel in young middle-class buyers.

Although they are part of swish modern complexes, some of the newly-built studio flats measure as little as 16 square metres (177 square feet) and are on sale for HK$1.5 million - almost US$200,000.

Single entrepreneur Mike Ko is typical of the buyers that developers are targeting: aspiring home owners who are priced out of the overheated Hong Kong housing market.

“I’m 33 years old and I really need my own place,”

says Ko. “Studios are good enough. They’re quite hip and cool as well.”

Ko currently lives with his parents in public housing and has been saving to buy but says that current price tags mean he can only afford a tiny property.

“The market is too expensive, so buying a studio flat is a good first step to home ownership,” he said.

Agents are selling the pintsized flats on the basis that the market boom will only continue.

“You want to buy now because prices will just go up,” said one agent at the new Mont Vert development in the suburban neighbourhood of Tai Po. “You’re saving, in a sense.”

Mont Vert boasts a clubhouse, seaviews and surrounding greenery - but at 16 square metres, its smallest units are only three times larger than cells in Hong Kong’s most populous prison.

The main space doubles as both bedroom and living room, with a kitchen and

bathroom tucked away in the corners.

Developer Cheung Kong says that 10 percent of the 1,000 apartments on offer are studios but could not confirm how many of those had been sold.

The development is not yet completed, and - despite being a massive investment for potential buyers - there were no show flats, models, or pictures of the interiors of the studio units immediately available.

‘Inhumane’ conditions While some prospective buyers are desperate enough to snap up the tiny flats, there are those who are outraged by the conditions Hong Kong residents are having to bear.

“They are not only small, they’re repressive. You’re paying that much to be living there, it’s ridiculous,” Kenneth Tong, a spokesman for local NGO ‘No Flat Slaves’ told AFP. The organisation believes that the government is to blame for a lack of affordable

homes and being slow to build more public rental housing.

“People have no other choice,” says Tong.

There is a “surging need” for cheaper homes in the city, vice-chairman of Hong Kong’s pro-democracy Labour Party Fernando Cheung told AFP. “As a result, you see these very small flats that I think could be described as inhumane if you compare (them) . . . with units that would be used to house refugees, or even earthquake victims, in other places.”

With many larger and pricier flats bought by wealthy mainland Chinese buyers, the smaller homes are targeted at young professionals, university graduates and newly married couples, among others, who are seeking to live independently from their parents and are looking for more reasonable prices, he added.

“It’s really mind-boggling to see how the private residential market in Hong Kong has developed to such an extent,” Cheung said.

The overcrowded southern Chinese city suffers from a serious housing shortage, with property prices doubling since 2009.

The dearth of new affordable homes has spurred protests and sentiment against the city’s big developers.

Now micro-flats are seeking to fill the gap although they will remain well beyond many househunters’ budgets.

Half of the apartments in the new Le Riviera tower project, in a quiet neighbourhood in the east of Hong Kong Island, measure less than 300 square feet and are priced around HK$5 million. But developers say they will attract single ‘yuppies’ and young families.

“A lot of people who have studied overseas and return love this kind of lifestyle,” says David Fong, managing director of the tower’s private developer Hip Shing Hong. “In London, even in metropolitan New York, the flat size is both small and old. We are small but beautiful.”

Fong says that the apartments offer a “European continental lifestyle” with balconies, and interiors decorated by a group of Spanish designers.

“It’s a compromise.

Everyone would love to live in much bigger flats if they could afford it,” he said.

But campaigner Tong says that the demand for tiny apartments is “twisted,” a product of the city’s entrenched desire for home ownership.

“You lose your dignity even though you have the bricks and mortar,” he said.

AFP

10

August 11, 2014

Greater China

Below-target inflation gives room for easing The government’s goal is to keep consumer-price increases within about 3.5 percent this year

C

hina’s consumer inflation remained b e l o w t h e government’s goal in July and factory-gate deflation persisted, suggesting policy makers still have room for monetary easing amid a lack of pressure on prices.

The consumer price index rose 2.3 percent from a year earlier, the National Bureau of Statistics said in Beijing, the same pace as in June and also the median estimate in a Bloomberg News survey.

Factory-gate prices fell 0.9 percent, matching

projections and extending the longest stretch of declines since 1999.

Subdued inflation gives Communist Party leaders leeway to roll out more measures to support the economy after authorities expedited railway spending and freed up money for loans to counter a slowdown earlier in the year. The unexpected decline in imports in July reported August 8 partly reflects sluggish investment, Royal Bank of Scotland Group Plc. said.

“July inflation data

should ease any concerns policy makers and investors may have had about rising sequential inflation amid the economic growth rebound,” Goldman Sachs Group Inc. economists led by Beijingbased Song Yu said in a note after the report. “The downward trend shown by food and non-food CPI will leave room for policy makers to maintain relatively supportive policy in the near future.”

Analysts’ estimates for consumer inflation ranged from 2 percent to 2.6 percent.

Projections for the decline in producer prices ranged from 0.6 percent to 1.4 percent, with a median of 0.9 percent, following June’s 1.1 percent drop.

Improving trend Producer prices fell for the 29th straight month, the longest run of declines since 31 months from 1997 to 1999. At the same time, the July drop was the smallest since April 2012, a trend that the statistics bureau said yesterday shows an improving supply-demand situation in industrial markets.

The Shanghai Composite Index rose 0.4 percent last week, the fourth straight gain, after export growth unexpectedly accelerated in July. The yuan strengthened 0.38 percent against the dollar during the week, the biggest advance in almost two months, as China reported a record monthly trade surplus.

Downward pressure on some prices will continue amid antitrust investigations by the nation’s top economicplanning agency. Toyota Motor Corp. and Honda Motor Co.’s Chinese ventures last week joined Bayerische Motoren Werke AG, Daimler AG’s Mercedes-Benz, and Volkswagen AG’s Audi brand in announcing a cut in prices of spare parts after the National Development and Reform Commission said it was probing whether automakers manipulated prices.

Government goal The government’s goal is to keep consumer-price increases within about 3.5 percent this year while

July inflation data should ease any concerns policy makers and investors may have had about rising sequential inflation amid the economic growth rebound Song Yu Goldman Sachs Group Inc.

achieving economic growth of about 7.5 percent, Premier Li Keqiang announced in March.

The housing component of the CPI, which includes rental costs, utilities and building materials, rose 2 percent from a year earlier in July, the smallest increase in two years.

“Domestic demand is still fairly weak, especially with property in a down cycle, so for the rest of this year I’m not really worrying about inflation pressure,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong.

Bloomberg News

On track to meet 2015 energy targets Beijing’s intention in setting the targets was to slow emissions of climate-changing greenhouse gases and cut expensive fuel imports

M

ost of China’s provinces are ahead of schedule or on track to meet 2015 energy savings targets, the government said on Friday, with Beijing and Shanghai among the frontrunners as the world’s No.2 economy seeks to reduce its impact on the environment.

China has pledged to reduce its energy intensity - the amount of energy it uses to add a dollar to its gross domestic product (GDP) - to 16 percent below 2010 levels by 2015.

Beijing’s intention in setting the targets was to slow emissions of climate-changing greenhouse gases and cut expensive fuel imports, but they have won new relevance with the pollution crisis that has enveloped the nation the past two years.

The central government has distributed the cut targets in a 10-18 percent range across the provinces.

Data released by China’s top economic planner the National Development and

Reform Commission (NDRC) showed that 26 of 30 regions had achieved more than 60 percent of their targets by the end of last year. No overall number for China was given.

Yang Fuqiang, an environmental expert with U.S.-based nongovernment agency Natural Resources Defense Council, said China would meet its 2015 target.

“But for the (following) five-year period, there is not much that can be done to improve end users’ efficiency, other than clean up the entire energy mix,” he said.

Amid a slowing economy and rising public anger over pollution, China has in recent years closed down thousands of old, inefficient coal plants and stamped out overcapacity in iron, steel and cement production.

The north-eastern province of Jilin had already achieved more than its 16-percent target, while Sichuan (96.5 pct), Chongqing (94.5 pct) and Beijing (91 pct) were also

For the (following) five-year period, there is not much that can be done to improve end users’ efficiency, other than clean up the entire energy mix Yang Fuqiang Natural Resources Defense Council

over-achieving, according to the NDRC data.

Shanghai and manufacturing hub Hebei,

both with 82 percent of their targets met, were also ahead of schedule, along with Henan and Hunan. Most others had achieved 60-80 percent.

The data also confirmed concerns that some of China’s pollution is being moved to the poor, western interior.

Energy intensity in the troubled Xinjiang province worsened by 200 percent over the period, a trend NDRC attributed to a boom in new energy-intensive projects.

Qinghai and Ningxia, also western provinces, were trailing far behind their targets as local economic development relies heavily on coal.

“Those regions are given looser investment restrictions in building new coal-burning generators ... (to) give room for economic growth to catch up with the richer regions in the east,” said Li Yan, a climate and energy expert with Greenpeace.

Reuters

11

August 11, 2014

Greater China

Activists push for safer factories after blast

Consumer confidence rebounds again

Concerns about safety conditions in factories across the country rise after last week’s explosion

M

ore than a dozen Chinese labour rights groups are circulating a petition pushing for safer factory working conditions, in a bid to capitalize on public anger over the worst industrial accident in more than year.

A room filled with metal dust exploded on Saturday at the Kunshan Zhongrong Metal Products Co Ltd factory that polishes wheel hubs for carmakers, including General Motors Co, killing 75 people and injuring 185.

It was the worst industrial accident in China since June last year when a fire engulfed a poultry slaughterhouse and has once again thrust concerns about safety conditions in factories across the country to the fore.

“The reasons for the accident lie fundamentally with long-neglected labour rights,” says the petition, which is circulating on Chinese social media.

“China is the ‘world factory’ in the production of wealth - but also in the production of injury.” ‘Made in China,’ it says, “bears a heavy

moral shadow.”

Labour activism has surged in China over the past year as slowing economic growth and rising costs have squeezed companies in industrialized areas and mired some of the world’s

China is the ‘world factory’ in the production of wealth - but also in the production of injury Labour activists petition

biggest firms in hundreds of strikes and other work stoppages.

After Saturday’s blast, President Xi Jinping demanded a full inquiry and punishment for those responsible for the accident.

With anger building, Chinese authorities this week took the unusual step of suspending work at 268 factories for safety inspections in two centres of the eastern Jiangsu Province.

The petition, launched yesterday by university professors, lawyers and non-profit organizations, outlines plans for workers to take part in factory safety checks and to use collective bargaining to set labour and occupational safety standards.

The petition also calls for better compensation and shorter working hours and has garnered more than 1,600 signatures in a few days. While a small number in a such vast country, citizens are often hesitant to put their names to campaigns which could be viewed as industrial unrest, for fear of retribution.

Reuters

Chinese consumer confidence rebounded for a second straight month on a monthto-month basis in July, the official Xinhua news service reported on Saturday evening, citing the results of a survey.

The Bankcard Consumer Confidence Index (BCCI), compiled by Xinhua News Agency and electronic transaction service provider China UnionPay, rose 0.06 points from June to 85.33 points in July. The Xinhua report attributed the rise to positive macroeconomic data and increased spending on tourism in the summer months. It also noted pro-growth policies enacted in recent months as supporting confidence, including accelerated spending on affordable housing.

New companies surge after registration reform China saw a surge in new companies registration after the country took steps to streamline the process for starting a business in March, official data has showed.

About 1.6 million new companies have been registered since the registration reform, rising 64.48 percent from the same period last year, statistics from the State Administration for Industry and Commerce showed. Registered capital of these new companies totalled 8.22 trillion yuan (US$1.33 trillion), up 69.09 percent year on year. China lifted restrictions on minimum registered capital, payment deadlines, down payment ratio and cash ratio of registered capital on March 1.

Tasly Pharm H1 profit up The leading pharmaceutical company in China, said Saturday that its net profit in the first half of the year rose 24.04 percent year on year to 744.5 million yuan (US$120.9 million). Business revenues rose 13.07 percent from a year earlier to 6.1 billion yuan, according to the company’s interim report. Earning per share for the period stood at 0.72 yuan. Tasly is one of China’s largest producers of traditional Chinese medicines. Its business scope also includes chemical and biological drugs, healthcare products, and functional foods.

Wal-Mart joins the probed list A video says that they sold meat that had passed its sell-by date, and rice infested with insects

C

hinese regulators are investigating a Wal-Mart store in the southern city of Shenzhen for food safety violations, the official Xinhua news service reported, based on videos it said were taken by a Wal-Mart employee at one branch.

The U.S. retail giant told Reuters that it had launched its own investigation in response to the video and found no evidence to support its claims, nor had multiple visits by authorities uncovered any wrongdoing.

“We are comfortable saying, based upon this inspection, that none of the alleged activities exists in the store today,” Wal-Mart said in a statement.

The voiceover to the video - made by an anonymous person who claimed to have worked for Wal-Mart for seven years - said employees in the store’s deli section, operating under the principle of “don’t change for a month,” would often use cooking oil so old it had turned “black as soy sauce” to cook items like fried

chicken for sale to customers.

They would also fry and sell meat that had passed its sell-by date, and sell rice infested with insects, the narrator said, showing footage of black oil in a fryer, expired meat, and worms crawling on rice.

The Xinhua article said no conclusions from the investigation by the Shenzhen Municipal Market Supervisory Administration had been made. Xinhua said Shenzhen authorities were testing samples of oil and meat from the store but results were not yet available.

The statement from Wal-Mart said the company was cooperating fully with local authorities and would take “immediate actions” to deal with any issues uncovered.

The Xinhua report said that reporters had accompanied law enforcement officers to check on the operations of the Honghu branch of Wal-Mart, and found that managers had used hand-written methods to specify the shelf-lives of some

ingredients.

“Handwritten expiration dates can be changed at will, leaving supermarkets plenty of room to use expired ingredients,” the report said.

Reuters

KEY POINTS Anonymous employee’s video alleges violations at deli Shows images of black fryer oil, worms crawling in rice Shenzhen authorities investigating Wal-Mart: Internal, gov’t probes uncovered no evidence

Thailand waives visa fees for Chinese tourists Thailand waived visa fees for tourist visa applicants from the Chinese mainland and Taiwan from Saturday to boost tourism, according to the Tourism Authority of Thailand’s Beijing Office. The political situation in Thailand has stabilized and the country wants to attract more Chinese tourists in the coming months, said the office. The initiative will last for three months. China was Thailand’s largest source of tourists last year. In the first five months of 2014, the number of Chinese visitors to Thailand reached 1.47 million.

China to boost barter trade China is seeking to establish a legalized system of barter trading to help companies reduce inventories and boost profits, an official with the China National Excess Inventory Association has said. China has launched its first regulations for barter trading in a bid to promote its sound development, said Mao Deshu, vice president of the association, on Saturday.

Bartering is business by which goods or services are directly exchanged for other goods or services without using money.

Companies will gradually find that bartering is a good way to move surplus inventories.

12

August 11, 2014

Asia

Rajan prepared to tame inflation The governor will need to tread carefully in pushing the government into action

I

ndia’s central bank governor Raghuram Rajan has set himself a target of lowering consumer inflation and is even ready to raise rates to achieve it, risking friction with the new government if he is seen as overstepping.

Rajan, well known within the Reserve Bank of India (RBI) for pragmatism, now must work with the government of Prime Minister Narendra Modi, which understands the need for - and wants - lower inflation, but doesn’t see the value in hard targets.

The governor’s people skills may be tested when Finance Minister Arun Jaitley attends RBI board meeting in Delhi, representing a government that is equally keen on boosting an economy that has just had two consecutive years of sub-5 percent growth.

The meeting comes after Rajan, the star economist appointed by the previous Congress government, surprised markets after the RBI’s policy review on Tuesday by establishing in clear terms that the RBI would get consumer inflation

down to 8 percent by January 2015 and 6 percent one year later.

Officials familiar with RBI’s stance warn that Rajan is committed to those goals, even if he has yet to receive explicit political backing.

No easy feat Meeting that target won’t be an easy feat in a country with unpredictable monsoon rains and dependent on oil imports. The consumer price index spiked to 11.2 percent in November before three interest rate hikes from Rajan helped bring inflation down to 7.3 percent in June.

8 pct

2015 January inflation target

Rajan will need to tread carefully in pushing the government into action, according to analysts.

Although the RBI is not statutorily independent from the finance ministry it has long enjoyed wide latitude in policy-making.

But failure to act on Rajan’s pledge to bring down inflation would hurt the central bank’s credibility.

Rajan has already displayed some of his pragmatic streak by cutting the mandatory bond reserve requirements for lenders in a bid to help the government accomplish its goal of unleashing credit.

RBI governor Raghuram Rajan

Limited action so far Jaitley, in public comments, has acknowledged the importance of bringing down inflation, and said he is committed to working with the RBI while taking limited action such as curbing hoarding of food staples.

But the Modi government has yet to unveil any substantial reforms even after Jaitley surprised markets by committing to meet an ambitious fiscal deficit target of 4.1 percent of gross

domestic product set by the previous Congress-led government.

Nor has the government yet endorsed the inflation targets first unveiled in January by a central bank panel led by deputy governor Urjit Patel.

With less than 1-1/2 years until January 2016 - when inflation is supposed to be maximum 6 percent - analysts warn the government must work faster to tackle the supply

Japan gets ready for the shock Everyone expects this week’s data will show contraction trend

T

Bank of Japan governor Haruhiko Kuroda

he Bank of Japan offered a bleaker view on exports and output a week before data is expected show the biggest contraction in economic activity since the global financial crisis, heightening concerns a rebound may be delayed and increase pressure for further monetary easing.

But BOJ Governor Haruhiko Kuroda remained upbeat about the outlook for the world’s third-biggest economy, underscoring the central bank’s conviction that no fresh nearterm stimulus is required to shake off the effects of a sales tax hike in April.

“Japan’s economy is likely to continue recovering moderately with the effect (of an April sales tax increase) seen gradually subsiding,” Kuroda told a news conference on Friday.

“Exports and output have been weakening,” he said. “But a positive economic cycle remains in

place as job and income conditions steadily improve.”

Kuroda said exports are set to recover as U.S. and Chinese growth picks up, adding that geo-political risks, such as escalating tensions in Ukraine, will not force the BOJ to alter its upbeat outlook of the global economy at least for now.

He also said Japan’s economy was likely to expand above its potential, deemed at around 0.5 percent or lower, in the current fiscal year from April despite an expected contraction in the April-June quarter blamed on the tax hike.

“The output gap will continue to narrow, so inflation will accelerate from around the latter half of the current fiscal year,” Kuroda said, stressing that Japan is on track to hit the bank’s 2 percent inflation target some time next year.

Some analysts, however, remained

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13

August 11, 2014

Asia

Thailand considers benefits for poor Ministry will propose plan to military government to make supplementary payments

Japan has pledged to provide 10.5 billion yens (US$105 million) in loan to Myanmar to help the country improve communication network linking major cities of Yangon, Mandalay and Nay Pyi Taw, state media reported yesterday.

The low-interest loan, aimed at meeting the growing demand for mobile phones and Internet in the country, was offered

by Japanese Foreign Minister Fumio Kishida during talks with his Myanmar counterpart U Wunna Maung Lwin on the side-lines of ASEAN-related meetings in Nay Pyi Taw Saturday, the report said.

Orathai Sriring

T

bottlenecks and food production problems that have so long burdened millions of India’s poor.

Meeting the January 2016 target will be “a big challenge as that will need food inflation to fall below 6 percent,” said Soumya Kanti Ghosh, chief economic adviser at State Bank of India, the country’s largest lender.

Reuters

unconvinced given exports have so far failed to offset the hit from the tax hike.

“Kuroda sounded bullish on prices, but he didn’t explain what mechanism could see prices rise while economic growth slows,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“If consumer inflation fails to pick up pace from later this year towards 2 percent next year, the BOJ would come under pressure for further easing,” she said, adding that the bank may ease policy again in October.

The BOJ downgraded its assessment of exports - which it has been counting on to support the economy as the tax hike crimps consumption. “Exports have shown some weakness,” the bank said, revising last month’s assessment they were moving sideways.

It also acknowledged “some weakness” in industrial output.

As widely expected, the BOJ maintained its policy framework, under which it has pledged to increase base money by 60-70 trillion yen (US$580-690 billion) per year through aggressive asset purchases to reflate the moribund economy.

Reuters

KEY POINTS BOJ keeps massive stimulus programme intact BOJ maintains view economy recovering moderately Cuts view on exports, output reflecting weak data Governor Kuroda remains upbeat on outlook

hailand is considering paying benefits to low-income earners as the military government seeks to spur an economy battered by months of political turmoil.

Southeast Asia’s second-largest economy was left on the verge of recession by six months of antigovernment protests, which dented consumer confidence, crippled the government and set the stage for a military coup on May 22.

The benefit payments would cost about 56 billion baht (US$1.7 billion) a year and lift economic growth by 0.2 percentage point annually, Kritsada Jinavijarana, the head of the Finance Ministry’s fiscal policy office, said on Friday.

The ministry will propose the plan to the military government to make supplementary payments of as much as 20 percent of the income of people earning less than 80,000 baht (US$2,500) a year, Kritsada said.

The scheme, if approved, would benefit 18.5 million people, or 27.5 percent of the population, he added.

Junta leader General Prayuth Chan-ocha has said the junta would avoid populist policies or costly projects that might burden a future administration. Protests against the government of former Prime Minister Yingluck Shinawatra focused on populist policies her critics said were used to buy votes.

Still, the military administered what was effectively a swift cash injection into the rural economy shortly after taking power by paying

India probes IDBI loan to Kingfisher

Thai army chief and junta head General Prayuth Chan-ocha (C) and 197 members during opening ceremony of the inaugural meeting of the militaryappointed National Legislative Assembly

billions of dollars in arrears owed to rice farmers through a failed subsidy scheme that was one of Yingluck’s flagship policies.

The junta has also extended tax breaks and subsidies for some fuel and public transport.

Rungson Sriworasat, the ministry’s permanent secretary, recently said the ministry would also propose a plan to raise salaries of government officials by as much as 8 percent per year from the current average increase of 6 percent.

The increase is expected to cost the government more than 20 billion baht a year, Rungson said.

Xinhua

Time to change for Malaysia Airlines Malaysia’s state investment fund Khazanah will undertake the rebirth operation

F

ast forward a year, and Malaysia Airlines may have a new CEO, new logo, new livery, maybe even a new name, and fewer employees, airline insiders and brand experts said as the government signalled a “complete overhaul” of the loss-making carrier that has suffered two recent jetliner disasters.

MAS management has been working on a plan that could cut the national airline’s over 19,000, largely unionised workforce, freeze pay, speed up retiring older planes and retrofit some of its current fleet to add seats, people close to the airline said.

As part of the restructuring, there have been calls from the airline’s unions and others for CEO Ahmad Jauhari Yahya, or AJ as he’s more popularly known, to go. People close to MAS said Ahmad was already planning to stand down before the two disasters - and that could happen by the year-end.

Managers are also reviewing the carrier’s route network, given that

Japan pledges loan to help Myanmar

its load factor - a measure of how full its planes are - fell sharply after Flight MH370, a Boeing 777 airliner, disappeared on March 8 en route from Kuala Lumpur to Beijing with 239 passengers and crew. That load factor is expected to have worsened since another Boeing 777 was brought down over eastern Ukraine last month on a flight from Amsterdam to Kuala Lumpur, killing all 298 on board.

Malaysia’s state investment fund Khazanah, which owns more than 69 percent of MAS, has stepped in to take the airline private with MAS looking certain to post a fourth straight year of losses. Khazanah should come out with a detailed restructuring plan by the end of this month, Prime Minister Najib Razak said in a statement late on Friday.

“If you paint over the rust, the rust is still there,” said Shakeel Adam, managing partner of airline consultancy Aviado Partners, who specialises in airline restructuring and start-ups.

Reuters

Top crime fighting agency is investigating a loan made by state-run IDBI Bank Ltd to debt-laden Kingfisher Airlines worth 9.5 billion rupees (US$155.38 million), a police spokeswoman said on Saturday. The Central Bureau of Investigation (CBI) is looking into why the loan was approved when the airline has a negative net worth and a negative credit rating, Kanchan Prasad said.

“The CBI has registered a preliminary inquiry to inquire into the role of IDBI and Kingfisher Airlines,” she said. A preliminary inquiry is usually the first step before a formal case is filed.

Tata Steel shuts Odisha plant India’s Tata Steel Ltd has shut down one of its ferro alloys plants in the eastern Indian state of Odisha due to a raw material shortage linked to the suspension of a mining license, the company said in a statement. Tata Steel sourced ore for the 50,000 tonne-per-year Bamnipal plant from its captive chromite mine in Sukinda, operations of which were suspended in May. The plant was run with available inventory before being shut on August 4. The suspension of operations at Sukinda and Bamnipal would mean more than 6,000 job cuts, the company said.

Tiger Airways and Scoot win immunity Singapore’s competition watchdog has cleared a proposal from struggling budget airline Tiger Airways Ltd and Scoot Pte Ltd to extend their partnership in a move that is expected to help both carriers boost traffic. As part of the anti-trust immunity, the two airlines will be able to collaborate on pricing, sales, scheduling and other matters, a tie-up that analysts said could make it easier for Singapore Airlines Ltd (SIA) to restructure both companies.

GPIF gives investment board control Japan’s public pension fund has given its investment board control over key portfolio decisions - sharply limiting the powers of the institution’s president - as the world’s largest pension fund prepares to invest more in stocks and other risk assets and pull back from Japanese government bonds. Under GPIF’s previous governance rules, basic portfolio allocation decisions were left to the fund’s president, Takahiro Mitani.

The change means that the institution’s eight-member investment board will have the power to review and approve any such changes to the model portfolio that guides investment decisions for over US$1.2 trillion in assets.

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August 11, 2014

International ExxonMobil starts drilling at Russia U.S. oil giant ExxonMobil began drilling in Russia’s Arctic, despite Western sanctions imposed on its Russian partner Rosneft, and was hailed by Russia’s president as an model of “cooperation”. Although U.S. sanctions over the crisis in Ukraine are not designed to halt joint projects by Russian and U.S. companies, they nevertheless aim to starve Rosneft of dollar financing and ban access to modern technology.

“Today, commercial success is driven by efficient international cooperation,” Vladimir Putin told Rosneft CEO Igor Sechin and Glenn Waller, ExxonMobil’s lead manager in Russia.

Ireland to reverse cuts policy Ireland’s government will start talks next year with trade unions on the gradual reversal of public sector pay cuts that helped it overcome financial crisis, the spending minister was quoted. Ireland’s coalition government won praise in Europe for meeting all major targets under the 85 billion euro (US$113 billion) EU-IMF aid programme it completed last year, but is under pressure at home to ease austerity measures. Public spending minister Brendan Howlin said talks would begin next year on reversing some elements of the Financial Emergency Measures in the Public Interest Acts.

Petrobras profit slumps Profit at Brazilian state-run oil company Petrobras slumped 20 percent in the second quarter from a year earlier, the company said, as rising fuel imports, debt costs and operating expenses offset higher output and prices. Net income at Petroleo Brasileiro SA, as the company is formally known, fell to 4.96 billion reais (US$2.18 billion) in the three months ending June 30. That compares with 6.20 billion reais a year earlier. The profit was nearly a third below the 7.04 billion-real average estimate of 10 analysts surveyed by Reuters.

Boeing tops Airbus on orders At mid-year, Boeing Co is crushing Airbus in the wide body jetliner market.

Boeing has 273 net orders through July compared with a negative 27 for Airbus due to cancellations. The tally underscores the fierce battle between the world’s two largest plane makers to dominate sales of the lucrative market for wide body planes, a market Boeing values at US$2.5 trillion over the next 20 years. Earlier in the week, Airbus said it topped Boeing in unadjusted orders for all types of planes so far in 2014, saying it won 980 new orders through July, compared with just 837 for Boeing.

Judge rejects Apple, Google settlement Four Silicon Valley companies including Apple and Google failed to persuade a U.S. judge to sign off on a US$324.5 million settlement to resolve a lawsuit by tech workers, who accused the firms of conspiring to avoid poaching each other’s employees. In a ruling on Friday, U.S. District Judge Lucy Koh in San Jose, said the class action settlement was too low, given the strength of the case against the companies. Intel and Adobe were also part of the proposed deal.

Wages jam at UK recovery road Weak pay growth has been partly offset by growing tax-free allowances for earners

Bank of England

A

fter years in the doldrums following a severe 2008-09 recession, Britain’s economy recently clawed its way back to where it was before the financial crisis. This year it is likely to grow more than 3 percent and by almost as much in 2015.

But stagnant wages have so far confounded forecasts that this year would see the start of a turnaround in living standards - a phenomenon that may be decisive in delaying interest rate hikes by the Bank of England.

Real wages are still about 6 percent below their 2009 level, according to the National Institute of Social and Economic Research, which does not expect the lost ground to be recovered until around 2018.

It’s not just in Britain that wages have been weak. U.S. wages rose by 2 percent over the past year, a touch less than inflation. German workers endured a decade of wage restraint before getting above-average pay hikes in the past year, and Germany’s central bank has taken the highly unusual step of calling for higher wage settlements.

But in Britain, pay has been particularly stubborn, giving Prime Minister David Cameron a problem ahead of a national election in May next year.

Late last year, the opposition Labour party briefly toned down its

criticism of falling living standards central to its claim that the recovery is not helping ordinary Britons - because it was sure that wages were finally about to rise.

In fact, average weekly earnings the most widely watched measure of pay - did not grow at all in cash terms between January and May, the latest month for which data is available.

Data this week could show earnings actually fell in the April-June period, partly because a cut in income taxes last year had distorted the comparison by changing the timing of bonus payments.

In the face of such weak numbers, the Bank of England looks set to

KEY POINTS UK economy back to precrisis level, wages still below BoE looks set to cut pay growth forecasts next week Also complicates BoE’s judgement on interest rates

revise down its forecasts for pay growth on Wednesday, raising fresh questions about when it will start to raise record-low interest rates.

At the finance ministry, officials point out that weak pay growth has been partly offset by growing tax-free allowances for earners. They also say different, private sector surveys might paint a more accurate picture than the official numbers.

Those surveys have suggested that earnings are picking up for some workers, especially those with skills in short supply in areas such as engineering, construction and catering.

It’s not just workers who are anxious to know when their pay will start to rise.

The Bank of England is increasingly focused on earnings growth as it weighs up whether the British economy is strong enough to cope with an interest rate hike.

It said as recently as May that average weekly earnings would grow by 2.5 percent in 2014, a figure that now looks too optimistic and is likely to be lowered on Wednesday when the BoE publishes its latest projections for the economy.

A Reuters poll published on Friday showed economists expect earnings to rise 1.4 percent this year, followed by 2.9 percent in 2015.

Reuters

Merkel’s substitute wants to control arms export He wants the authorities to be much more watchful when awarding export licences

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erman Economy Minister Sigmar Gabriel is raising hackles among conservatives in the coalition government with plans to tighten rules on arms exports, amid tit-for-tat sanctions between the West and Russia.

“If you’re not very careful, (selling arms abroad) can very quickly become a deal with death,” Gabriel, who is also vice chancellor, warned recently on public television.

Normally, the position of deputy chancellor is largely a symbolic one.

But Gabriel, a Social Democrat, is taking advantage of the absence on holiday of conservative Chancellor Angela Merkel to lobby publicly for a topic close to his heart.

Exporting arms was already an

issue for his Social Democratic Party (SPD) during last year’s general election campaign, but with the crisis in Ukraine, it has taken on added currency.

Gabriel believes that European sanctions against Moscow do not go far enough, and last week he blocked a major contract for German company Rheinmetall to provide a fullyequipped training camp to Russia.

The minister is not looking to change Germany’s current laws on arms exports.

But he wants the authorities to be much more watchful when awarding export licences, particularly with regard to the country buying the weapons and their record on human rights.

In 2013, Merkel’s previous administration authorised 5.8 billion euros’ (US$7.8 billion) worth of arms exports, 62 percent of which were destined for non-NATO countries such as Algeria, Qatar and Saudi Arabia, with Gabriel particularly concerned about the latter.

But the minister’s plan, seen by some as an attempt to reach out to the opposition Greens and far-left Linke party in the distant eventuality of a post-Merkel alliance, is rattling some conservatives.

The head of the Christian Social Union (CSU) party, Horst Seehofer, accused Gabriel of acting “without a concept and without a compass” and of endangering jobs.

AFP

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August 11, 2014

Opinion Business

wires

The tricks of China’s trade

Leading reports from Asia’s best business newspapers

PHILSTAR Despite steadily increasing their share in the country’s economic output, regions will have to be equipped with better infrastructure in order to raise growth further, the research arm of Metropolitan Bank & Trust Co. (Metrobank) said. “While growth seems to be more dispersed on a regional scale, improvements to infrastructure and connectivity to metropolitan hubs are still needed in order to raise outputs and income levels,” Mabellene Reynaldo, research analyst at Metrobank, said in a report.

“Agro-industrial infrastructure should also be developed in order to raise poverty levels in less-urbanized regions,” she added.

TAIPEI TIMES As an opposition legislator demanded a new minister of economic affairs, Premier Jiang Yi-huah (江宜樺) on Saturday said he would continue urging current Minister of Economic Affairs Chang Chia-juch (張家 祝) to reconsider his request to leave the Cabinet due to his “disappointment about the current political environment.”

Chang tendered his resignation on Thursday, issuing a press release attributing the decision to his dismay over a political environment in which “many people from the opposition parties obstructed [the ministry’s policies] without a sense of right and wrong or consideration for people’s welfare.”

THE NEW ZEALAND HERALD Labour leader David Cunliffe has announced those aged over 65 will be added to the groups who get free doctors’ visits and prescriptions under a major boost of funding for primary health care. Speaking at Labour’s campaign launch today, Mr Cunliffe unveiled Labour policy to fund free GP visits for about 700,000 people aged over 65, as well as pregnant women. Labour will also maintain National’s policy of extending free GP visit to children aged under 13 from next year.

THE JAPAN NEWS The balance of the government’s debts stood at ¥1,039 trillion as of the end of June, rising ¥14.46 trillion from three months before to hit a record high, the Finance Ministry said Friday. Based on the country’s estimated population of 127.1 million as of July 1, per-capital debt stood at about ¥8.18 million. The government’s debts kept increasing as it continued issuing bonds to cover soaring spending on pensions, medical costs and social security. The Finance Ministry estimates that the government’s debts will reach ¥1,143.9 trillion at the end of March 2015.

Zhang Monan

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Fellow of the China Information Centre, a fellow of the China Foundation for International Studies, and a researcher at the China Macroeconomic Research Platform

EIJING – Last year, China ostensibly reached another milestone in its meteoric rise, surpassing the United States to become the world’s largest trading country, with its total trade turnover valued at CN¥25.83 trillion (US$4.16 trillion). But this achievement is largely illusory – and should not be allowed to obscure China’s need to transform its trading model.

Since the 1990s, China’s has been building up its “processing trade” – whereby it imports intermediate inputs from other countries, processes or assembles them, then exports them – causing the ratio of intermediate-product trade to overall external trade to grow rapidly. Intermediate inputs comprise around 28% of global exports, but 40% of China’s total exports. Given that traditional trade accounting is based on country of origin, the resulting global segmentation of value added and the multilayered international division of labour can distort trade figures.

For example, the “triangular trade” model – whereby China imports significant quantities of intermediate inputs from East Asian countries like Japan and South Korea, then exports the assembled products to the US – allows for substantial redundancy in trade records. In 2010, more than one-quarter of the world’s US$19 trillion in exports was counted more than once.

China’s dependence on low valueadded activities like processing and assembly is rooted in its historical lack of capacity to invest in research and development.

For a long time, the country was able to overcome this deficiency by capitalizing on its abundant labour force to become a global leader in low-cost, labour-intensive manufacturing.

But China’s low-cost advantage in manufacturing is diminishing rapidly, owing to rising wages and a declining demographic dividend. And its low position in global value chains means

that its actual profits on exports remain far lower than those of advanced countries like the US, which specializes in hightechnology, high-value-added production.

This combination of rising labour costs and low value added is clearly unsustainable. If China is to transform itself from a large trading country into a powerful one, it must raise its productivity, with the manufacturing sector adding more value to exports (and, increasingly, to goods for domestic consumption).

To be sure, China’s enduring comparative advantage in processing and assembling industrial products has enabled it to retain its status as the world’s largest exporter.

As massive quantities of labourintensive processing and assembly work have been transferred to China from Japan, South Korea, Singapore, Taiwan, and Hong

If China is to transform itself from a large trading country into a powerful one, it must raise its productivity, with the manufacturing sector adding more value to exports (and, increasingly, to goods for domestic consumption)

Kong, so have these economies’ trade surpluses. Moreover, this has contributed to large – and widely criticized – trade imbalances with the US and the European Union, the primary end markets for Chinese-processed industrial products.

But, again, the data may not be what they seem. Consider China’s growing re-import trade, whereby goods that have been exported to nearby countries, particularly Hong Kong, return to the mainland. China’s re-imports have increased more than 12-fold since 2000, and now dwarf those of other re-importing leaders as a share of total trade.

Given Hong Kong’s advanced logistics and infrastructure, it is a relatively inexpensive and efficient conduit through which products can be shipped. In 2011, Hong Kong handled about 14% of mainland China’s exports and 13% of its imports, with more than 60% of Hong Kong’s total re-exports originating from the Chinese mainland. Meanwhile, by exporting products through designated export-processing zones, companies gain access to export-tax refunds and, once the intermediate cargo is imported and processed, advantageous export tariffs.

Re-imports from China’s trading partners are counted as part of total imports – and, in this context, China treats Hong Kong as a trading partner, rather than as a free-trade zone. In this way, reimports serve to inflate China’s trade data, meaning that the trade imbalance between China and the advanced countries has been exaggerated significantly.

Furthermore, model simulations show that the Chinese export sectors that have greater ratios of value added abroad are concentrated in the manufacturing industry – the industry upon which China’s economy is most dependent.

Indeed, 26% of the value added by the primary manufacturing sector is not created by China.

Taking this into account, China’s

trade surplus with the US declines by 36%. China’s surpluses with Europe and India also fall considerably, and its deficit with Japan grows even larger. These figures carry the unmistakable message that the amount of “filler” in China’s total trade volume should not be underestimated.

Given the importance of moving up the value chain to China’s future industrial competitiveness – not to mention the challenge posed by “reindustrialization” in advanced countries like the US – China’s leaders must act now to give the economy a new edge that can replace abundant, low-cost labour. To this end, they should promote investment in research and development, as well as in the health and education of the labour force.

Likewise, China should cultivate its own transnational corporations to engage in worldwide manufacturing and sales. While these activities may seem like the simple crossborder export of intermediate products, they amount to the deployment and extension of domestic production, enhancing the home country’s role in shaping global value chains.

Finally, China should participate actively in the global movement toward bilateral, trilateral, and regional free-trade agreements, accelerating negotiations for agreements with Japan and South Korea, and with the Association of Southeast Asian Nations. At the same time, in order to elevate China’s position in the revenue distribution of global value chains, China should seek negotiations for agreements with the US and Europe.

Before any of this can occur, however, China’s leaders much change their perspective. China’s recognition as the world’s largest trading country is not the fetchingly redundant “landmark milestone” that its leaders declared. That charmed point will be reached when Chinese industry raises its position within – and influence over – global value chains.

The Project Syndicate 2014

16

August 11, 2014

Closing Recoverable moon orbiter to be tested

Chinese, Japanese FMs hold informal contact on ties

China is preparing for the launch of an experimental recoverable moon orbiter, said the State Administration of Science, Technology and Industry for National Defence yesterday. The orbiter arrived in Xichang via air in southwest China’s Sichuan Province on Sunday and then transported to the Xichang Satellite Launch Centre, according to a statement from the administration. The launch will take place before the end of this year, it said. The plan is for the orbiter to be launched into lunar orbit and return to Earth at an escape velocity of 11.2 km per second.

Chinese Foreign Minister Wang Yi and his Japanese counterpart Fumio Kishida (pictured) held an informal contact here late Saturday to exchange views on ways to improve ChinaJapan relations. During their talks on the sidelines of the series of Foreign Ministers Meetings on East Asia cooperation, Wang clarified China’s principles and stance in a serious manner, and demanded the Japanese side to make concrete efforts to remove the political barriers in the relations between the two countries. The China-Japan relationship took a nosedive after the Japanese government’s “purchase” of the Diaoyu Islands.

China State Grid quietly expands As State Grid builds up its portfolio, it could start thinking about linking up its assets across the Mediterranean region

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he European Commission has long wanted the continent’s power grids to work in unison for reasons of efficiency and supply security, so far to little avail, but a regional power network could soon be a reality, courtesy of State Grid Corporation of China.

While Europe’s utilities have met hostility to cross-border forays and been outbid by infrastructure funds, State Grid, the world’s largest utility by revenues, with its deep pockets and reputation for hands-off management, has had an easier ride, buying minority stakes in Portuguese and Italian grid operators and pursuing designs on Greece and Spain, too.

If all goes to plan, it would become the first utility to build a major regional electricity grid portfolio, a feat that the Commission had hoped Europe’s big grid operators would have achieved in the five years since it forced the separation of the grids from power production to increase market competition.

For wholly state-owned State Grid, which distributes electricity to 1.1 billion people across 90 percent of China, the appeal of the consistent, regulated income from European power assets is obvious.

A State Grid official familiar with its overseas strategy said projects abroad typically yield high single-digit to double-digit returns, compared with low single digits at home.

Its relatively low yield requirements give it an edge over Western infrastructure funds and European sector peers.

In a recent statement, an official in State Grid’s international business department said it was actively investing in regulated electricity assets and realising steady returns.

“When we make overseas investment, we are not doing charity,” he said.

As State Grid builds up its portfolio, it could start thinking about linking up its assets across the region; the ownership of several grids by one operator allows easier cross-country power-load balancing, so it doesn’t get caught out by peaks in one area and can shift power within its own network rather than being forced to

HKEx CEO talks on SHG-HK link

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he cross-border stock investment scheme between Shanghai and Hong Kong is being developed to bridge the differences between the Chinese onshore and offshore markets, Hong Kong Exchanges and Clearing Ltd (HKEx) Chief Executive Charles Li said in a statement yesterday.

Li said it would be a long process for the mainland market to open and to align with the Hong Kong market, according to the statement published on the HKEx website.

“So we had to figure out a way to connect the markets while respecting the differences between the current regulatory regimes in the Mainland and Hong Kong. We needed to build a bridge connecting the two markets without fundamentally changing them,” he said.

The so-called Shanghai-Hong Kong Stock Connect scheme is expected to kick off in October, with no fixed date announced.

Under the scheme, foreign investors will place buy or sell orders on Shanghai’s A-share market through brokers located in Hong Kong.

Reuters

parlay with a competitor.

In 2012, State Grid bought 25 percent of Portuguese grid operator REN, then last month it entered Italy with a deal to buy 35 percent of CDP Reti for at least 2.1 billion euros (US$2.8 billion).

CDP Reti owns 30 percent of gas transport group Snam and is set to receive a similar stake in power grid Terna.

State Grid, with Terna and Belgium’s Elia, is also bidding for 66 percent of Greek grid operator ADMIE, sources told Reuters in May, and is interested in bidding for German utility E.ON’s northern Spanish grid, which serves

French wine producers turn to science

A

group of wine cooperatives in southwest France has joined forces with leading scientists to “liberate” the flavours most prized by consumers in growing wine markets, from China to the US. In a bid to bring out the fruitiness enjoyed by many new wine drinkers, the Vinneo project has been developing the blackcurrant aroma of the Fer Servadou grape variety and the violet aroma of the Negrette variety.

Since 2009 it has been working with scientists on technologies to develop a range of varietal wines -ones made from a single-named type of grape- to appeal to the palates of consumers worldwide.

“We didn’t want to make the wine our grandfather would have made. We wanted to make the wine our grandfather would have made if he could,” Vinovalie director Jacques Tranier told AFP. Vinovalie, which is leading the projects, is a group of four major cooperative wineries in southwest France.

Vinovalie exports have tripled over the last five years from two to six million euros (US$2.6 to US$8 million).

650,000 customers and could sell for as much 1 billion euros, a source familiar with the parties told Reuters.

E.ON has launched the sale process and first bids are due next week.

“After the recent investments of SGCC in South Europe, there is indeed a strategic positioning within the region,” ADMIE Chairman and CEO Yiannis Yiarentis told Reuters.

Patient and discreet, State Grid only invests where it is welcome, shying away from hostile bids, and has seized on the opportunities afforded by privatisations in cash-strapped southern euro zone countries.

Reuters

Film festival promotes minorities

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undreds of filmmakers have gathered on the Qinghai-Tibet Plateau for a documentary film festival focused on remote and threatened high-altitude environments and cultures.

The organizers of the 2014 Qinghai World Mountain Documentary Festival, which opened in Golmud, northwest China’s Qinghai Province, on Sunday, have received 551 documentaries that they have divided into the categories of anthropology, society and nature for awards consideration. They were all filmed at altitudes above 500 meters in 36 countries and regions.

“In a world of increasing globalization and development, mountain inhabitants are fortunate as physical isolation has made it possible for them to keep their values and traditions; however, their cultures must be salvaged and conserved before it’s too late. The documentaries help to preserve the genes of their culture,” said Sun. Chinese production “Village Diary,” records the life of farmers in a remote north China village over the course of a year, reflecting the challenges faced in rural China.

Xinhua