Macau Business Daily, Oct 29, 2014

MOP 6.00 Closing editor: Luís Gonçalves Year III

Number 655 Wednesday October 29, 2014

Publisher: Paulo A. Azevedo

Residential noise fines up to MOP2,000 PAGE 3

Jaime Carion to retire PAGE 5

No smoke without fire

L

ocal labour groups are up in arms. They claim some gaming operators are permitting smoking on premium mass gaming floors. The government is accused of incompetence in enforcing the law. Casino staff say operators are trying to hoodwink them by claiming the government approves. The Health Bureau said it’s ‘paying close attention to the issue of premium mass areas being automatically converted into smoking areas’ Page

5

Pansy Ho lends weight to imported labour

PAGE 6

Name

%Day

Belle International

9.91

Ping An Insurance Gr

3.22

China Shenhua Energy

3.16

Kunlun Energy Co Ltd

2.99

China Mobile Ltd

2.81

China Petroleum & Ch

+0.76

Li & Fung Ltd

-0.32

Swire Pacific Ltd

-0.49

COSCO Pacific Ltd

-0.59

Hengan International

-1.28

Source: Bloomberg

I SSN 2226-8294

Brought to you by

Income supplement reaches MOP15 mln

www.macaubusinessdaily.com

A red 3Q for Melco Crown and SJM

October 28

Page 6

Controlling debt

Artyzen citizenM Asia to open in Hengqin

Local debt has attracted attention in China. The Chinese government has thus unveiled new rules. Authorities want local debt better classified. Institutions must address the issue accordingly.

A meeting of like minds. Hotel operators Artyzen Hospitality, owned by Shun Tak, and Dutch boutique brand citizenM have a JV. And say Hengqin Island has resort destination potential. Artyzen citizenM Asia president Robbert van der Maas told Business Daily: “We’re excited about Hengqin and we’ll operate a hotel there.”

Page 8

PAGE 2

PAGE 3

PAGE 4

HSI - Movers

Pansy Ho didn’t mince her words. Labour shortage is the main obstacle restricting the development of Macau tourism. The Vice Chairman and Secretary-General of the Global Tourism Economy Forum said the solution is more foreign workers in the SAR

Sometimes a helping hand is necessary.

Property management attracted the largest group of Macau residents to apply for the government’s income supplement scheme in the first half of the year. They accounted for 40 percent of the total. For the first half of the year MOP14.6 million in income supplements was distributed. Some 11 percent less than a year ago

Le Saunda and Belle revenues up in Macau

2014-10-29

2014-10-30

2014-10-31

23˚ 28˚

23˚ 29˚

24˚ 30˚

2

October 29, 2014

Macau Jiangxi inks 13 billion yuan-worth of contracts during GTEF Jiangxi Province has signed tourism contracts exceeding 13 billion yuan (US$2.12 billion) during the Global Tourism Economy Forum, which kicked off in Macau on Monday. The contracts cover construction of scenic sports, hot spring hotels and tourist products, unveiling the deep cooperation between Macau and the Mainland province. In addition, the province and Macau are to establish specific tourism channels for the other on their respective official websites, promoting the tourism of the other to their residents. On Monday, the province held a presentation for Forum participants, featuring ‘beautiful Jiangxi scenery’.

Artyzen, citizenM JV interested in Hengqin The hotel operators have expressed interest in establishing a hotel on the island, identifying the potential of Macau-Hengqin as a resort destination of the Pearl River Delta Stephanie Lai

sw.lai@macaubusinessdaily.com

W

hile Taipei was the Asian city where the joint venture of Artyzen Hospitality Group Ltd and the Dutch boutique hotel brand citizenM first planted their footprint, the operators say that Macau’s neighouring Hengqin Island is a likely option for establishing a hotel, given its great potential as an attractive resort destination in the heart of the Pearl River Delta.

In October last year, Artyzen Hospitality Group - wholly-owned by Hong Kong-listed conglomerate Shun Tak Holdings Ltd set up a joint venture named Artyzen citizenM Asia Ltd

with citizenM in order to introduce and manage the rollout of the boutique hotel brand in Asia.

While Taipei is already a destination confirmed foa a joint venture hotel by late 2016, Hengqin is also on the hotel operators’ radar in tandem with major cities in Greater China including Macau, Hong Kong, Shanghai and Beijing. The president of Artyzen Hospitality Group, Robbert van der Maas, spoke to Business Daily in an interview at the Global Tourism Economy Forum yesterday.

“We’re excited about Hengqin and we’ll operate a hotel there,” said Mr. van der

Maas when asked if Artyzen and citizenM has a plan to establish a hotel on the island, although he declined to elaborate further on the plan at the moment, “We’re very excited about Hengqin because it’s not just another area built for tourism – it’s also a major entry hub into Macau.”

“As you know, the [Guangzhou-Zhuhai] intercity trains will come to the island; major bus terminals and expressways will come into Hengqin area, and then the light railway and traffic connects into Macau.

So Hengqin itself will be the non-gaming extension [of Macau] of a full resort

development,” he said.

“On Hengqin, you have the incredible Chimelong, with their current hotel, water park and circus from Guangzhou; you also have the marine and golf [course] – it will really complement Macau-Hengqin as the heart of the Pearl River Delta in resort terms.”

In previous announcements and the latest interim report, Shun Tak noted that it is developing an ‘integrated landmark’ in Hengqin that will comprise office, hotel, commercial and serviced apartments in the future on a 23,834 square metre site near the Hengqin-Macau border, where site works are already underway.

However, van der Maas said he could not confirm at the moment if a citizenMbranded hotel will be established in Shun Tak’s property in Hengqin, saying that the joint venture would “work on different options”.

Perfect for Macau The Dutch brand citizenM – ‘M’ for ‘mobile’ - focuses on boutique hotels known for their hybrid of affordable room rates and high-end hotel design.

Chairman and founder of citizenM, Rattan Chadha, told us yesterday that there would not be any changes regarding the operation of citizenM hotels in Asia vis-a-vis those in Europe.

“For the brand you don’t change anything [in Asia] except for the food, I think,” Mr. Chadha remarked.

“From experience and from the operation, I don’t see any changes.”

Mr. van der Maas further remarked that the operation of citizenM was a “perfect model” that could work in Macau with its tight labour market and scarcity of available land and opportunities. The Artyzen president added that his team was actively seeking opportunities to establish a hotel in both Cotai and Macau Peninsula.

“The business model is all based on a team of ambassadors,” he said.

“We don’t have a concierge, and we don’t have all those layers of staff anymore. We have ambassadors: they’re almost like your area butlers. They know you from the moment you check in to the moment you check out.”

“The staff are multi-skilled and multi-tasked. Because of that model, we have a very high level of efficiency, with the luxury aspect coming into the physical touches in the hotel: from the quality of the bed, the technology, the rain showers, the Vitra furniture, wi-fi availability . . . So it’s a very efficient model – perfect for mature cities like Hong Kong, Macau, Shanghai and Bejing, etc.”

Bassaka Air seeking approval to fly into China

B

assaka Air, based at Cambodia’s Phnom Penh International Airport launched its first flight to Macau on Monday.

It told reporters that the carrier is now obtaining approval to fly into two cities in mainland China.

The startup airline has partnered with state-owned Chinese travel agency China International Travel Services to bring in Chinese visitors via its two leased Airbus A320s from casino operator NagaCorp,

according to Phnom Penh Post. Last month, the Cambodia-based news outlet reported NagaCorp’s plan to launch its own commercial flights between Phnom Penh and China under the lessor’s name, Bassaka Air, in order to boost its Chinese VIP junket programme.

“We’re in the process of obtaining approval to fly into China. That application’s been submitted,” Bassaka Air’s chief executive officer Joseph Stecker told reporters in an

interview at the Global Tourism Economy Forum held in Macau yesterday.

“With the application, we have to abide by the regulations of Chinese Civil Aviation and they have certain guidelines. They will allow us initially to select two cities...So this is an ongoing process and it may take forty, fifty days, or it may take two to three months or could be done sooner,” the airline’s CEO said, although he did not specify

which two mainland cities.

The airline obtained its aircraft operating certificate (AOC) from the civil aviation authority of Cambodia in early October.

Bassaka Air, which flew its inaugural flight between Phnom Penh and Macau on Monday, is currently running a charter flight service. The airline intends to launch a twice-weekly service between both destinations by mid-November.

S.L.

3

October 29, 2014

Macau

Income supplement MOP14.6mln in H1 The value of applications approved declined by 11 percent over that of a year ago Sara Farr

sarafarr@macaubusinessdaily.com

P

roperty management accounted for the largest share of Macau permanent residents who applied for the government’s income supplement scheme in the first half of the year.

Figures from the Financial Service Bureau (DSF) show that the total applications approved in the first six months of the year totalled MOP14.6 million patacas, down 11 percent compared to the same period last year.

A total of 1,405 residents working in property management had their applications approved, each receiving MOP3,967 quarterly, accounting for 38 percent of the overall income supplements granted.

But it is Macau’s manufacturing industry that is the lowest paid, given that each of the 714 approved applicants received MOP8,436 quarterly, accounting for 42 percent of the total sum spent on the scheme in the first half of the year.

In all, a total of 2,699 applicants had their requests approved and received the government’s income supplement. The average per capita amount of the supplement was MOP5,408 for every three months.

Individuals in retail received MOP5,648 quarterly, making them the second lowest paid workers here, followed by people in the food and beverage service who received MOP5,113. A total of 64 such applications were approved for the latter and 61 for the former.

The government increased the minimum income it guarantees poorly paid older people under its income supplement scheme. Under the revised scheme, the maximum income was increased by 6.4 percent to MOP5,000 a month. The increase was backdated to January. Prior to this, the maximum income for eligibility for the scheme was MOP4,700.

For the whole of last year, the number of applications approved for the government’s income supplement totalled 6,255, a drop of 13 percent compared to that of the previous year. This is the lowest figure on record since the implementation of the scheme in 2008.

In 2012, the scheme cost MOP31.6 million, and MOP35.8 million the year earlier.

According to official figures, the government spent some MOP30.8 million on income supplement in

Residential noise to attract fines

T

he acting vice head of the Environmental Protection Bureau (DSPA), Ip Kuong Lam, said yesterday that in the initial period of the new law on the control of noise the authority will only impose fines of between MOP1,000 and MOP2,000 on offenders generating residential noise, following the Bureau’s advice.

The new bill, aimed at regulating noise emanating from construction, residential sites and equipment will come into effect in February of next year despite being passed by the Legislative Assembly in August.

The vice head claimed when attending a TDM radio show – Macau Forum – that the enforcement of residential noise will be administered by the Public Security Police Force (PSP), while the Bureau and PSP are still discussing the guidelines for enforcement.

He believes, however, that even with only two government departments responsible for enforcing

the new law, the Bureau and PSP, the efficiency of enforcement may be improved.

Meanwhile, regarding environmental noise, the new law will ban constructions sites from using pile-drivers which produce high pollution and high decibel noise. It also regulates the decibels of piledrivers with lower volumes.

Mr. Ip encourages construction parties to maintain a dialogue with nearby residents, such as leaving phone numbers so that residents can contact the party directly, in order to effectively resolve the problem of environmental noise produced by certain workers.

Following a radio show listener complaining to the vice head that some construction sites work on holidays, he replied that the current law allows construction involving public benefit to apply to work on holidays, although the time of working hours is not regulated.

K.L.

2013, compared to 31.5 million the previous year.

The scheme tops up with cash the incomes of poorly paid Macau permanent residents aged 40 or older.

An employee is eligible if he or she works at least 152 hours a month, or 128 hours a month if employed in the textiles or garment industries.

The supplement is paid quarterly.

4

October 29, 2014

Macau Brought to you by

HOSPITALITY Rising value The hotel sector survey for the year 2013 shows that last year the number of workers in the sector had hardly changed. The total number increased by 345 persons, a marginal increase of just below 0.9 percent.

This rise contrasts with the evolution in previous years. From 2009 to 2102, the number of staff in all categories of hotel rose by 51 percent, adding more on average of about 3,300 new workers every year. It seems clear that 2013 heralded a lull in the growth of the effectives. Compared to the previous year, however, revenues kept rising steadily. In the period shown, 2009 to 2013, sector revenues more than doubled, rising at an average annual rate of close to 24 percent. The stagnation in rise of number of workers slowed the rate of growth in 2013. But the sector revenue still posted a very respectable rise in excess of 15 percent when compared to the previous year.

Growth, however, changed quite noticeably between the various categories of hotels.

Hotels classified as 5-star, being the most numerous and the largest – they represented, last year, more than 80 percent of both staff and revenue - are in fact, the main drivers of growth. The growth rates, for staff and revenues stood at 1.2 percent and 16.4 percent, respectively, last year. For all the period shown the values for 5-star establishments exceed the average and dwarf the growth rates in all other categories.

Even the second in the staff growth ranking, guesthouses, trail at about half the rate.

In terms of revenue, the disparities are somewhat smaller in proportion but still very significant. In terms of relative figures, guesthouses, in 2013, took second spot, reducing 4-stars to third place.

15.4%

hotel revenue rise in 2013, on previous year

Le Saunda revenues up 8 pct in H1 The shoe retailer posted stable growth in its overall performance during the first half of the year, although its performance in the Hong Kong market turned south.

Macau and Mainland were on the upside Kam Leong

kamleong@macaubusinessdaily.com

S

hoe retailer Le Saunda Holdings Ltd. posted an increase in its revenue of 7.7 percent year-on-year during the first half of the fiscal year ended August 31, reaching more than HK$941 million, despite the percentage growth being affected by the remarkable decline in revenue in the Hong Kong market.

According to its filing with the Hong Kong Stock Exchange on Monday after trading hours, the Group’s Hong Kong stores posted revenues of some HK$76.7 million, a decrease of nearly 14 percent during the first six months.

The revenues of the Group’s Macau and Mainland markets, however, registered increases of 11 percent and 10.6 percent, amounting to some HK$19 million and HK$842 million, respectively.

In point of fact, the shoe retailer’s revenues primarily derive from its retail business. The total revenue the Group gained from the retail segments reached HK$937.8 million during the first half of the year.

The filing indicates that the Group had closed 134 physical stores in the six months to reduce cost and enhance efficiency. In addition, the Group also transformed one of

its self-owned brands, CNE, into an online brand for e-commerce, for which revenues soared by more than 200 percent year-on-year. The Group claims that e-commerce has become the new growth engine of its retail business in Mainland China.

Claiming it has been improving the performance of its existing stores, supported by e-commerce business development, the retailer also posted an increase in its same-store sales of some 13.8 percent year-on-year.

In addition, according to its filing, the Group is planning to increase

the number of stores for its highend brand Linea Rosa to 50 by the end of this year in order to make the brand one of the major revenue contributors, and as recognizable as the retailer’s core brand Le Saunda.

Currently, the Group is maintaining some 843 outlets, primarily in Macau, Hong Kong and Mainland China. The self-owned brands of the Group include Le Saunda, Le Saunda MEN, CNE and Linea Rosa, which retails ladies’ and men’s footwear, handbags and fashion accessories.

Belle Macau, Hong Kong H1 revenues drop Sara Farr

sarafarr@macaubusinessdaily.com

B

elle International Holdings Ltd posted an operating profit of 2.7 billion yuan (MOP3.5 billion) in the six months ended August 31, up 12.5 percent from 2.4 billion yuan a year earlier.

Overall company revenues increased by 10.9 percent to 18.6 billion yuan from 16.7 billion yuan, a company interim report filed with the Hong Kong Stock Exchange shows. And while the group’s overall revenues and profit are up, that of Belle’s Macau and Hong Kong segment are down. The interim report shows that only in mainland China did revenues increase.

Revenues for Belle International’s mainland Chinese market increased to 17.9 billion yuan in the six months ended August 31 from 16 billion yuan recorded in the same period a year earlier. Macau and Hong Kong revenue didn’t perform comparatively well, with numbers dropping slightly by 0.4 percent to 507.3 million from 509.3 million.

Revenue for the group’s ‘other locations’ also dropped to 166.6 million yuan from 180.3 million yuan year-on-year.

In its interim report, Belle International says the slowdown of the Chinese economy has had an

impact on consumer behaviour as ‘consumer confidence and willingness to spend are significantly lower.’

Despite the weak consumer sentiment, another factor the company says is affecting consumer habits is Beijing’s pro-thrift measures over the last two years that has likely impaired ‘the real spending power of certain consumer groups.’ In addition, ‘due to the rapid growth of shopping malls and e-commerce, foot traffic is drifting away from department stores,’ the interim report reads, adding that ‘the traffic issue is unlikely to go away in the near future.’

5

October 29, 2014

Macau

Casinos circumventing new smoking ban Local labour groups claim that some gaming operators are breaking the rules by permitting smoking on their premium mass gaming floors and criticise the government’s incompetence in enforcing the law Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he Macau Federation of Trade Unions (FAOM) says it has received several reports from casino workers at City of Dreams and Altira that smoking is being permitted on those casinos’ premium mass floors, which flagrantly flouts the government’s rules.

At a press conference held by FAOM, an unidentified worker from a casino in the Melco Crown Entertainment group told reporters that smoking was prohibited on the premium mass floor when the new rule took effect on October 6. Two weeks later, however, the company told their employees at a daily briefing that smoking is allowed in those areas, the person said.

The staffer said that the company was trying to sell them the idea that the company had received authorisation from the government in order to deflect scepticism. Most workers there, however, remain sceptical and have sought union advice, it was claimed.

Ella Lei Cheng I, vice-chairwoman of FAOM and chief of the group’s department of rights and interests, said that they have noticed incidents in which some gaming operators have converted their premium mass gaming floor, namely high-limit gaming areas, into “limited access areas” to allow smoking and gambling inside at the same time.

Ella Lei said the gaming operators were using a loophole in the policy and contradicting the authorities’ requirement of only permitting smoking in [genuine] VIP rooms.

“This kind of behaviour has become rampant,” said Ella Lei. “Before, they would ask gamblers to register as a member and use different chips to pretend they were VIP areas.

But I just went there myself the other day. And I could walk around just like being in a common area and people were smoking right beside me.”

“We urge the government to cancel the authorisations for these casinos to set up smoking lounges right away as a punishment, otherwise the other casinos might copy the act,” Lei said, adding that the group had already submitted a complaint regarding the case to the Health Bureau last Friday.

The casino source, who would not reveal their identity for fear of dismissal, said that nowadays more gamblers gather in those areas, especially smokers, which has made the air quality even worse [than before] and poses a more serious threat to health.

“The company doesn’t care about our health at all,” said the worker.

“And the government is apparently not going its job so these gaming operators are conniving.”

The latest smoking ban, introduced earlier this month, mandates that smoking on casino mass gaming floors is only permissible in enclosed smoking lounges with no gaming facilities.

Smoking areas with gaming tables and slot machines must be set up in non-main floor zones that have limited access to specific games and gamblers. The policy watchdog - the

DSSOPT director Jaime Carion to retire

I

ncumbent director of the Land, Public Works and Transport Bureau (DSSOPT) Jaime Roberto Carion is to retire on 1st November, it was announced by the Office of the Secretariat for Transport and Public Works in a statement issued yesterday.

The current deputy director of the Bureau, Chan Pou Ha, will serve as the acting director of DSSOPT. The statement also reads that

Carion, in public service for more than 36 years, applied for voluntary retirement. Secretary for Transport and Public Works Lau Si Io acknowledged Jaime Carion’s work as the Bureau director in terms of his professionalism, leadership and fulfilment of responsibilities.

The announcement also said that DSSOPT would continue conducting its work in accordance with policy.

Health Bureau - has made it clear that smoking would not be allowed in premium mass areas in a statement it issued right before the new rule was implemented.

In a written email reply to Business Daily’s enquiry regarding the issue, the Health Bureau said that the reports had been passed to the Gaming Inspection and Coordination Bureau

to follow up. It stressed that no new smoking areas had been approved and that it is ‘paying close attention to the issue of premium mass areas being automatically converted into smoking areas’.

Business Daily tried to contact Melco Crown Entertainment but had received no reply by the time we went to press.

6

October 29, 2014

Gaming

Pansy Ho: Labour shortage main Macau tourism issue As the Macau tourism industry expands, companies are struggling to hire people.

Pansy Ho said yesterday that the solution for what she considers the biggest challenge to the industry is to allow more foreign workers to come to the SAR João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he labour shortage is the main obstacle restricting the development of Macau tourism, the Vice Chairman and Secretary-General of the Global Tourism Economy Forum, Pansy Ho, said yesterday in a meeting with journalists during the Forum.

“The labour issue is the biggest challenge. We don’t have enough labour to fulfill our capacity. What is happening in Macau is the reverse of the feeling that if we continue to bring on board foreign labour it’s going to cause unemployment”, she said. “I can’t see that happening. Even employees are saying that they feel the pressure of overworking”.

Pansy Ho said that companies need more ways to resolve this problem, which is also affecting the time required for people in

Macau to learn the right skills for their profession and to get qualified.

“We need to expand our job pool. However, we need to find a harmonious and balanced way that ensures that everybody will win with this. This is what we need to make sure that Macau will continue to grow”, she said.

“The distance between Macau and its neighbouring areas will continue to shrink with the completion of the Hong Hong-Zhuhai-Macau Bridge and with the completion of the infrastructure of the rail network. Macau will be right at the heart of a 100 millionpopulation base”, she said.

“Whether you like it or not, these people are going to come to your doors”.

During the dialogue with the media, the number of nongaming events in Macau was broached.

Pansy Ho

“At this moment, if we do that [increase non-gaming activities] we’ll be unsuccessful.

The conditions are not right yet for this to achieve success.

We can see such success on the horizon by 2017 or 2020, when all this infrastructure [transport connections] are

there”, Pansy Ho said.

The MGM China director also stressed that improving the quality of Macau tourism would require courage.

“Macau started at the top level but we need courage to do more and continue to outperform ourselves in order

to attract more tourists”, she said. “We’re here in a very comfortable place. I think that if we don’t do anything we’ll be fine. There will still be a lot of people coming to visit these new facilities and go through this experience. But we want more”, she said.

Melco Crown and SJM gaming revenue becalmed The decline of gross gaming revenue in Macau is primarily affecting SJM and Melco Crown, the sole gaming concessionaires that have registered year-on-year drops for the first nine months of the year

A

fter companies increased their gross gaming revenues during the first half of the year the scenario changed with a year-on-year decline of 7.1 percent during the third quarter. This impact is affecting the gaming sector but it has been felt most keenly by Sociedade de Jogos de Macau (SJM) and Melco Crown Entertainment. Meanwhile, Galaxy Entertainment and Sands China are the companies performing better, even if the group led by Sheldon Adelson slipped in September.

For the first nine months of the year gaming revenue increased 5.9 percent to MOP275.9 billion, far from the first quarter performance of 19.8 percent. Melco Crown has failed to keep pace, with its gross gaming revenue shrinking 3.26 percent to MOP35.5 billion in the first three quarters of 2014 compared to a year ago, according to the data of JTM. This has affected the market share of the company led by Lawrence Ho and James Packer, which has dropped from 14.1 percent to 12.9 percent in the course of a year.

Melco Crown is not the only company in the red in terms of growth; SJM is also watching its gross gaming revenue decline and has been overtaken in different months as leader in market share. Sands China topped the ranking in February, May and August, while Galaxy led during

September. During the first quarter of the year the group founded by Stanley Ho achieved positive results, as its gross gaming revenue was increasing 4.7 percent. After nine months, however, the results are 1.5 percent down compared to the same period last year, after posting MOP64 billion in comparison, a billion less than last year.

Considering the market share for the first nine months of the year, SJM maintains the leading position with a share of 23.2 percent, although come the end of the year the company may be overtaken by Sands China and Galaxy, which in the same period reached a market share of 22.9 percent

and 20.7 percent, respectively. In September, SJM was the operator most affected by the slowdown in the casino gaming industry, with gross revenues plummeting more than 25 percent.

The data compiled by JTM reveals that during October the resistance to the decline in the gaming industry will be focused in Cotai via Galaxy and Sands China casinos. However, the overall results of the month will decline.

Galaxy is performing better and last month it topped the charts in terms of market share for the first time. Comparing this year’s nine months with the same period of

2013, Galaxy registered the largest growth, posting MOP57.1 billion (18.6 percent) and adding an extra 2.2 percentage points to its market share.

Although its gross gaming revenues decreased 12.7 percent in September, Sands China it still achieving a double-digit growth in 2014. Since the beginning of the year and until September, the company that owns The Venetian and Sands Cotai Central posted MOP63.3 billion (an increase of 12.8 percent) and expanded its market share by 1.4 percentage points in comparison to 2013.

As for Wynn Macau and MGM China, they have registered a moderate growth. The results of these companies increased 1.8 percent and 3.3 percent to MOP29.2 billion and MOP26.6 billion, respectively in comparison to the same period last year.

Wynn Macau and MGM China are also risking ending the year in the doldrums if they fail to reverse their negative trend in the VIP segment.

During the third quarter of the year the overall revenues from VIP baccarat decreased 19.07 percent to MOP46.8 billion in relation to the third quarter of 2013. Comparing the second quarter of 2014 to the third quarter the decline was steeper: 28.12 percent.

JTM/Business Daily

7

October 29, 2014

Gaming

Trump Entertainment No sports betting in New Jersey asks judge to allow Plaza slot-machine sale

T

rump Entertainment Resorts Inc idled 353 slot machines with names such as Top Dollar, Jackpot, Loveboat and Dangerous Beauty when it closed its Plaza casino in Atlantic City, New Jersey, after declaring bankruptcy.

Now the company is betting it can squeeze a bit more value from the slots by selling the machines and unloading the cost of securing, maintaining and storing them.

The company asked U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, for permission to sell the slots for US$146,650 to Patriot Gaming & Electronics Inc, with offices in New Gretna, New Jersey. That works out at about US$415 each for Patriot, which repurposes and distributes used slot machines, according to its website.

The slots ‘are no longer necessary’ for business and will help ‘obtain meaningful value’ for creditors, Trump Entertainment said in an October 24 filing.

Trump Entertainment also got final approval to use cash representing collateral

for secured lenders’ claims.

Even with the cash, the future of the 2,000-room Trump Taj Mahal casino is in doubt because Trump Entertainment hasn’t been able to arrange new financing for the bankruptcy reorganization, which began September 9. The right to use cash ends on December 31, absent a new agreement.

The official creditors’ committee, formed September 23, has two months to question the validity of secured lenders’ claims. Notwithstanding a challenge, the liens become valid at the end of the 60day period.

The cash-use order gives the committee a US$75,000 budget for investigating the validity of lenders’ liens.

The union representing casino workers filed an appeal on October 23 from a ruling by the bankruptcy judge allowing the casino owner to modify benefits and effectively cut wages.

The judge has refused to hold up implementation of his order during appeal.

Without relief from labour costs, Trump Entertainment said, the Taj Mahal would close next

month. The company’s 906room Trump Plaza Hotel & Casino has already closed.

First-lien lenders include Icahn Partners LP and affiliated funds. Under a plan the casino operator filed, the senior lenders would infuse $100 million in new capital and become owners.

T h e T r u m p Entertainment casinos confirmed a reorganization plan in 2010 when the existing first-lien debt was issued. Second-lien creditors became the primary shareholders.

The company filed for Chapter 11 protection September 9, citing assets and debts of as much as US$500 million each, amid growing regional competition. It won permission this month to scrap provisions of its union contract to save money.

Donald Trump, who founded the resorts, has no active role in management and is seeking to have his name removed from the Plaza and the company’s other casino, the Taj Mahal, which is still open for business. The dispute hearing was moved to November 24.

N

ew Jersey residents won’t be able to bet on National Football League games after a federal judge issued a temporary order blocking a new law allowing wagering on professional sports.

The renewed push for sports betting comes as Atlantic City’s gambling revenue sags with casinos in Pennsylvania, Delaware, Maryland and New York cutting into the New Jersey resort’s pie.

U.S. District Judge Michael Shipp in federal court in Trenton, New Jersey, halted a law signed by Governor Chris Christie on October 17 permitting sports wagering at racetracks and in Atlantic City casinos. The NFL and the professional baseball, basketball and hockey leagues sued October 20 to halt the law. Monmouth Park Racetrack wanted to start taking bets on October 26.

“We have to step back and evaluate what we’ll do next but certainly we will not be taking bets this weekend,” said Dennis Drazin, legal adviser to the racetrack.

“This is only a step in the road.”

The lawsuit by the NFL, Major League Baseball, the National Basketball Association, the National Hockey League and the National Collegiate Athletic Association cites a U.S. law that bans sports betting in all but four states: Nevada, Delaware, Montana and Oregon. Shipp previously blocked a 2012 New Jersey law allowing betting, and an appeals court upheld him.

Lawmakers and Christie tried a new tack, and Shipp rejected them again yesterday.

Shipp ruled the leagues and NCAA had “established a reasonable likelihood of success” in showing the new law violates the U.S. Professional and Amateur Sports Protection Act, or PASPA. He also said betting could lead to “irreparable harm” by stigmatizing the

leagues with gambling’s negative perception.

”Self-inflicted” “While the defendants may suffer some harm as a result of a temporary restraining order, much of this harm is self- inflicted,” Shipp said. While the operators of Monmouth Park said they had spent “great sums of money” preparing to take bets they could have waited until he ruled, Shipp said.

Shipp, who read his ruling in court, said that preserving the status quo is of “paramount importance” until he considers the case more fully. During the litigation, the leagues must post a bond of US$1.7 million, the judge said.

Following the late afternoon hearing, Christie spokesman Michael Drewniak confirmed that the governor will press ahead.

“This is a temporary order while the core issues surrounding sports wagering in New Jersey are fully considered by the court,” Drewniak said in an e-mail.

“We continue to have full confidence in the strength and appropriateness of our position as we move forward in the litigation.”

”Temporary delay” State Senator Raymond Lesniak, a Democrat from Elizabeth who’s been a main driver of the sportsbetting effort, said he was disappointed in the ruling.

“It’s incomprehensible,” he said. “This is not a huge setback. It’s a temporary delay.”

New Jersey voters approved a non-binding amendment to the state constitution to allow sports betting in 2011. In January 2012, Christie, a Republican, signed legislation authorizing sports betting, and the same leagues sued, obtaining an injunction from Shipp.

Bloomberg

More aid to Atlantic City for non-gambling projects

N

ew Jersey Governor Chris Christie has signed a bill to boost tax credits for the development of non-gambling businesses in the struggling casino hub of Atlantic City. The city has seen casino revenue drop for seven consecutive years under pressure from out-of-state competitors and is seeking to re-brand itself.

The bill makes non-

gaming projects eligible for the highest level of economic development incentives, joining Camden, Passaic, Paterson and Trenton. The law also creates a new tax credit for developers that donate public infrastructure to governments. Moody’s Investors Service downgraded the locality to junk in July because of its dependence upon the gambling industry.

8

October 29, 2014

Greater China Factory profit growth slows China’s industrial profit growth slowed in the first nine months, reinforcing signs of fragility in the world’s second-largest economy, as factories struggled with falling prices and softening domestic demand. Industrial companies made a combined profit of 4.37 trillion yuan (US$714.68 billion) between January and September, up 7.9 percent from a year earlier, the National Bureau of Statistics said on Tuesday. That compares with a 10 percent rise in the first eight months.

The slowdown was partly caused by a special levy on the incomes of some oil and gas firms.

More favourable policies for SMEs Chinese Vice Premier Zhang Gaoli has reassured small and medium-sized enterprises (SME) that supportive measures to help them weather the downward trend and stimulate economic growth are a priority. Zhang urged administrations and local authorities to genuinely implement favourable policies announced by the central government for SMEs when visiting small firms in east China’s Jiangsu Province on Monday. The government at all levels should continue to reduce burdens on the SMEs through simplified administrative procedures, tax breaks and improved financing channels, he said.

Ma says open to working with Apple

Alibaba Group Holdings Ltd executive chairman Jack Ma said he’s open to working with Apple Inc on mobile payments, as China’s richest person prepares to call on Hollywood this week in search of media partners. Alibaba affiliate Alipay is China’s largest payments service, while Apple just this month debuted its own version of a mobile wallet, letting iPhone 6 users make payments at retailers with their smartphones.

Water diversion to boost grain output China’s south-to-north water diversion project, expected to start operation in the coming days, will ease the drought that has been plaguing north China, greatly improving grain output, officials and experts have said. About 13 percent of water will be assigned for agriculture every year, which will add six billion cubic meters of water for ecological and agricultural use, a blessing for the thirsty farmland, said E Jingping, director of the South-North Water Diversion Office of the State Council, China’s cabinet.

COFCO completes two overseas acquisitions China’s state-owned foodstuffs conglomerate COFCO Corp. announced yesterday the completion of acquisition of controlling stakes in two global agricultural commodities traders. COFCO said the two investment deals -- a 51-percent stake in Netherlands-based grain trader Nidera and a 51-percent stake in the agricultural unit of Hong Kong-headquartered commodities trader Noble Group, have gone through acquisition examinations and completed transaction.

Government issue new rules on local debt Chinese authorities are struggling to manage a massive US$3 trillion in outstanding local government debt Lu Jianxin and Pete Sweeney

C

hina issued new rules on handling outstanding local government debt yesterday but left out some controversial provisions that were contained in an earlier draft of the regulations.

Beijing wants to accurately measure the amount of debt outstanding at the local government level by the end of the year, the Ministry of Finance said in new rules published on its website.

Chinese authorities are struggling to manage a massive US$3 trillion in outstanding local government debt, much of it raised by local government financing vehicles (LGFVs) to finance infrastructure and real estate projects.

The ministry added that the government wants to classify the debt and assign responsibility for it to appropriate bodies.

Local governments must divide borrowings into two main categories: debt issued before June 2013 which have been officially audited, and that built up by the end of 2014.

Provincial finance bureaux must report local government debt to the ministry before January 5, 2015, together with estimates of their ability to repay and their plans for doing so, it said.

“The purpose is make outstanding (local) government debt clear so as to lay the foundations to include all government debt into budgets,” the ministry said.

But the announcement yesterday did not include a key provision in the draft, which would have let local governments issue fresh municipal bonds to replace borrowings taken through opaque financing vehicles.

Also absent was a provision granting a grace period to local LGFVs, which suggests local governments would be allowed to continue to rely on these vehicles to

Local governments (Shanghai’s pictured) must divide borrowings into two main categories: debt issued before June 2013 which has been officially audited, and that built up by the end of 2014

raise money to fund projects already under construction.

Instead, Beijing will encourage localities to use a Public-PrivatePartnership (PPP) model to help fresh fundraising. The PPT model was not given prominence in the earlier draft.

“The PPP model must be actively promoted so as to encourage social capital to participate in public products and public services while earning reasonable returns,” the ministry said.

“Projects under construction must be given priority to use the PPP model,” it said without elaborating.

Critics have said that using municipal bond issuance to replace existing fundraising tools will require a massive expansion of China’s fledgling municipal bond market, which Beijing launched this year.

China’s current quota for the muni bond market remains tiny at 109.2 billion yuan (US$17.84 billion) for all of 2014.

Shenzhen Stock Exchange to strengthen delisting rules China issued new rules on October 17 to get loss-making companies or those in violation of regulatory requirements to delist Xiaochong Zhang and Michelle Chen

T

he Shenzhen Stock Exchange said it will strengthen delisting arrangements for companies on its ChiNext board to keep the market healthy and protect investors amid an economic slowdown in China.

A weakened economic environment has seen some companies making losses, but the progress towards delisting poor performers and rule breakers has been slow. The first delisting was in 2001, but delisting has been largely suspended since 2008.

Only 78 firms have been delisted

from the Shanghai and Shenzhen exchanges since 2000 due mainly to successive years of poor earnings, official data showed.

China issued new rules on October 17 to get loss-making companies or those in violation of regulatory requirements to delist, the first time it has offered a variety of ways for poorly-performing companies to seek delisting.

Liu said development of the ChiNext board was slower than she had hoped and the market was still very young compared to international

The grace period in the draft had raised concerns about Beijing’s determination to deny local governments the LGFV channel for fundraising going forward, analysts had said.

China’s cabinet in early October said local governments could no longer use LGFVs for future fundraising, as these have been widely criticised for facilitating a rash of irresponsible borrowing and investment in the world’s second-largest economy.

Such lending was originally encouraged by Beijing to stimulate the economy and offset the impact of the 2008/2009 global financial crisis.

The new rules also said local governments should include outstanding debts in their budgets, but did not specify when the regulations would be formulated. Debt raised

by LGFVs are not included in local government budgets.

Reuters

counterparts, but the restructuring of China’s economy could breathe fresh life into its listed companies.

ChiNext is a NASDAQ-style board that was launched in October 2009, with 387 companies listed at a market capitalisation of nearly 2 trillion yuan (US$328 billion) at end-August 2014.

The Shenzhen bourse is also studying proposals to allow nonprofitable internet companies to list and is working on differentiated rules, such as a stricter controls on who can invest, information disclosure, and delisting requirements to control potential risks.

Local media reported earlier that the China Securities and Regulatory Commission (CSRC) would allow some internet and technology companies with no profits to get listed on ChiNext after staying in the national equities exchange and quotations system for a year.

ChiNext is an important component of China’s multi-tier capital market system. Since its launch five years ago, the market has seen institutional investors take a 40 percent share in its listed companies by capitalisation, compared with less than 1 percent in the early phase of the market’s development.

Reuters

9

October 29, 2014

Greater China

CSR and CNR in talks to merge A merged CNR-CSR would have combined annual revenue of about US$32.71 billion Brenda Goh

C

hina’s top trainmakers, China CNR and CSR Corp, are in merger talks to create a giant able to compete globally with the likes of Siemens and Bombardier, state media reported yesterday.

China built the world’s longest high-speed train network in less than a decade and has expressed its desire to export its technology. The two state-owned firms however have fiercely competed against each other while trying to sell trains abroad.

The official China Securities Journal, citing unidentified sources, said the firms had set up working groups to discuss the integration, and that investment bank China International Capital Corp had been appointed to oversee the reorganisation.

“The heads of CNR and CSR are in agreement on the companies’ integration,” the newspaper quoted an industry source as saying.

“As the State Council is in charge of this, it can be done at great speed and at the moment the biggest concern is related to their projects and personnel changes.”

CNR and CSR halted trading on Monday and subsequently issued statements saying they would resolve “major issues” as soon as possible.

Trading would resume within five working days, they added.

Last month, CNR and CSR dismissed a report by financial news magazine Caixin that the government was looking to merge the firms to create a giant that can better compete with foreign rivals such as Germany’s Siemens and Canada’s Bombardier.

A merged CNR-CSR would have combined annual revenue of about 200 billion yuan (US$32.71 billion) based on 2013 company data, compared with Siemens’ 75.9 billion euros (US$96.5 billion) revenue last year and Bombadier’s US$18.2 billion.

Zhuzhou CSR Times Electric, a CSR subsidiary, also suspended trading.

CNR is due to report third-quarter results today, while CSR is scheduled to report on Friday, according to the Shanghai Stock Exchange.

Fierce competition The official Xinhua news agency, quoting Chinese Academy of Engineering railway expert Wang Mengshu, said a merger was aimed at reducing unhealthy competition between the two and to promote China’s high-speed rail products overseas.

The train makers were demerged from the government in 2000 to

promote competition, and have profited from China’s drive to connect the vast country by rail. Their main domestic customer is national operator China Railway Corporation.

But they have clashed in their

We estimate 14 percent potential profit accretion if CSR and CNR were to merge into one entity Yang Song Barclays analyst

chase for overseas sales. In 2011, they fought a price war for a Turkish contract, which eventually went to a South Korean firm. Two years later they were embroiled in a dispute over supplying trains to Argentina, leading the now-defunct Ministry of Railways to openly criticise the firms, according to Caixin.

Most recently, both firms have separately indicated their early interest in supplying trains to California’s proposed US$68 billion high-speed network. The Californian rail authority has yet to issue formal requests for proposals.

CNR, which listed on the Hong Kong stock exchange in May, posted 2013 sales of 97.24 billion yuan and net profits of 4.13 billion yuan, while CSR reported full-year revenue of 97.89 billion yuan and net profits of 4.14 billion yuan.

“We estimate 14 percent potential profit accretion if CSR and CNR were to merge into one entity,” Barclays analyst Yang Song said in a September 23 note, citing the removal of price competition and lower research and development costs.

“Most developed countries do not have two competing railway equipment manufacturers”, she said.

Reuters

10

October 29, 2014

Asia

Singapore says core inflation to stay firm

S

ingapore’s economy will probably grow moderately over the next few quarters, while core inflation is likely to stay firm due to wage cost pressures from a tight labour market, the central bank said yesterday.

Singapore’s economy is likely to stay on a moderate growth trajectory, given that global growth is expected to improve in 2015 compared to this year, the Monetary Authority of Singapore (MAS) said its halfyearly macroeconomic review.

“Aggregate demand in Singapore is expected to rise in line with the recovery in the global economy.

However, this will be capped by the on-going restructuring in the domestic economy and the uneven growth in Singapore’s major trading partners,” the central bank said.

The MAS reiterated Singapore’s official economic growth forecast

of 2.5-3.5 percent in 2014, adding that the economy is likely to grow at a “broadly similar pace” in 2015.

The central bank said core inflation on a year-on-year basis is likely to pick up slightly into early next year before easing in the second half. It reiterated that core inflation is expected to average 2-2.5 percent in 2014 and 2-3 percent in 2015.

It added that there was some uncertainty on the outlook for core inflation, stemming from possible moves in oil prices in the next few months.

“Domestic cost pressures, mainly emanating from the tight labour market, will remain the primary source of inflation. However, the extent of cost pass-through to consumer prices is likely to be uneven across sectors,” the MAS said.

Earlier this month, the MAS cut its forecasts for headline and core inflation this year but stuck to its tight

Kuroda’s easing not limited by time The remarks underscore a growing feeling within the BOJ that it may take longer than expected for inflation to hit 2 percent Leika Kihara

B

ank of Japan Governor Haruhiko Kuroda said there is no pre-set deadline for ending its massive monetary stimulus, signalling that the bank’s two-year timeframe for meeting its price target is not a rigid one.

Kikuo Iwata, one of the BOJ’s two deputy governors and an architect of its “quantitative and qualitative easing” (QQE), also said there was uncertainty on exactly when inflation

monetary policy stance of allowing a “modest and gradual” appreciation of the Singapore dollar, saying wage inflation is likely to remain relatively firm and core inflation is likely to stay above its historical average over the next few quarters.

The government’s push to boost productivity while reducing reliance on foreign workers has led to tightness in the labour market which has fuelled wage pressures.

While headline consumer inflation has been subdued this year due to a moderation in housing costs and car prices, core inflation has risen.

Core inflation excludes changes in the prices of cars and housing and is a focal point for MAS policy.

On the outlook for core inflation, the central bank said that strong wage growth in sectors such as education and healthcare will probably be passed on to consumer prices, although the

will hit 2 percent.

“It’s not set in stone like a train timetable,” Iwata told parliament yesterday, when asked about the two-year timeframe the BOJ set last April in meeting its price target.

“What is important is for the BOJ to act ... and make the utmost efforts to achieve 2 percent inflation,” he said.

In deploying its stimulus programme last April, the BOJ pledged to double base money via aggressive asset purchases to hit its 2 percent inflation target in roughly two years.

The remarks underscore a growing feeling within the BOJ that it may take longer than expected for inflation to hit 2 percent, as falling oil prices and a weak economy weigh on prices.

BOJ officials argue that the twoyear timeframe was never a rigid deadline and left room for some flexibility. But some market players feel the BOJ ought to ease further if it fails to accelerate inflation to 2 years by around April next year.

“I have been saying all along that we will aim to achieve 2 percent

The central bank said that strong wage growth in sectors such as education and healthcare will probably be passed on to consumer prices

impact of measures such as healthcare subsidies could lessen some of these cost pressures.

Parts of the retail industry, however, could find it difficult to raise prices, the MAS said.

While there has recently been some pass-through of costs to consumers in some services sectors, such as recreation and entertainment and prepared meals, price adjustments in some sectors have been weak, the central bank said.

The MAS added that headline, allitems inflation could ease to below 0.5 percent in the fourth quarter of this year, due to a comparison against a high base a year ago when the prices of car ownership permits surged.

It reiterated that all-items inflation was likely to come in at 1-1.5 percent in 2014, and 0.5-1.5 percent in 2015.

Reuters

KEY POINTS Tight labour market to put upward pressure on wage costs-MAS But pass-through of costs to consumer prices to remain uneven Some parts of retail industry may face difficulty raising prices

inflation at the earliest date possible, with two years in mind,” he told parliament.

Kuroda stuck to his optimistic view of the economy, saying that it will continue to recover moderately as companies and households emerge from the pain from a sales tax hike in April.

Consumer inflation may slow somewhat due to recent declines in oil prices but will likely accelerate toward 2 percent from late this year through early next year, he said.

The BOJ is set to roughly half its 1 percent economic growth forecast for this fiscal year at a meeting on Friday but maintain its projection that inflation will accelerate and hit its 2 percent target in the year from next April, sources have told Reuters.

Private economists have long expresses scepticism that the central bank would meet it its target within that timeframe. A Reuters poll released last week showed most analysts expect it to ease policy further in early 2015.

Reuters

11

October 29, 2014

Asia S.Korea drags down StanChart profit Standard Chartered Plc. said operating profit for the third quarter fell 16 percent, as the Asia-focused bank grappled with rising costs from the restructuring of its South Korean business and an increase in impaired loans. Operating profit for the July-September quarter fell to US$1.5 billion from US$1.8 billion in the same period a year ago. StanChart has said it expects profits to fall in 2014 for a second straight year, as the lender faces a number of challenges including a slowdown in growth in many of its core emerging markets and weak trading activity.

Philippine inflation to ease

SoftBank buys stake in Indian online retailer SoftBank said it will become New Delhibased Snapdeal’s biggest investor

J

apanese telecom and media group SoftBank Corp has agreed to buy a US$627 million stake in Indian online retailer Snapdeal, seeking to tap into potentially huge e-commerce growth in the market with the world’s third-biggest Internet user base.

Highlighting India as a new priority in its aggressive expansion, SoftBank said yesterday it’s also leading a US$210 million round of investment in an Indian logistics business in a separate deal. The cash-rich Japanese company made waves with its plans

to grow outside its home base last year when it bought No.3 U.S. mobile carrier Sprint Corp for US$21.6 billion.

SoftBank said it will become New Delhi-based Snapdeal’s biggest investor, but officials at the Japanese company declined to say immediately how big the stake in India’s thirdbiggest online marketplace will be.

The investment in Snapdeal is the largest in India’s growing e-commerce sector since industry leader Flipkart raised US$1 billion in July. Snapdeal has more than 25 million registered users

and more than 50,000 business sellers, according to a statement by SoftBank.

The Snapdeal investment was announced alongside SoftBank Internet and Media Inc’s (SIMI) lead in a US$210 million investment with existing investors in Indian transportation aggregator ANI Technologies Pvt. Ltd. SoftBank didn’t specify how much it was investing in ANI, which operates a mobile application for cab booking.

Both deals were negotiated under newly appointed SoftBank Vice chairman and SIMI chief executive Nikesh Arora, reflecting the company’s recent aggressive overseas expansion.

Arora will be joining both Snapdeal and ANI’s boards as part of the investment, SoftBank said.

In one of its highest profile investments since buying Sprint, SoftBank said earlier this month it was taking a minority stake in Hollywood movie studio Legendary Entertainment for US$250 million.

National implementation of the current 5 percent minimum palm content in biodiesel ran into problems earlier this year due to delays in construction work Anuradha Raghu

M

November onwards, a month ahead of an earlier proposed schedule, and from December for Sarawak, Sabah and Labuan territories.

National implementation of the current 5 percent minimum palm content in biodiesel ran into problems earlier this year due to delays in construction work of key blending facilities located in the Borneo islands.

However, Douglas said talks between the government and industry, including automobile manufacturers and petroleum companies, had ensured there were no issues in raising the mandate to 7 percent.

Malaysian palm prices, which set the tone for global prices, plunged nearly 28 percent during the first eight months of the year, hitting a five-year low of 1,914 ringgit on September 2 as stockpiles surged to a more than 1 year high above 2 million tonnes.

Futures have risen since September amid signs of weaker output due to the

Tata to speed up power station

Reuters

Malaysia to roll out B7 biodiesel plan from November

alaysia will increase the amount of palm oil in biodiesel from 5 percent to 7 percent from November, as the world’s No.2 palm grower tries to reduce stockpiles and prop up prices that have fallen nearly 20 percent this year.

Malaysia was also studying the possibility of again raising the mandate for palm oil in diesel to 10 percent, plantation industries and commodities minister Douglas Uggah Embas said yesterday, although he not give any timeline for implementation.

Crude palm oil is increasingly being used as an additive to fossil fuels as it can reduce costs and cut down on environmentally damaging emissions.

The so-called B7 biodiesel blend programme would boost the domestic use of biodiesel to 575,000 tonnes a year, Douglas told reporters in Kuala Lumpur, and could help boost palm prices.

The B7 biodiesel blend will be imposed in Peninsular Malaysia from

Philippine inflation will probably ease further in October on lower food and fuel prices and will be within targets this year and over the next two years, the head of the central bank said yesterday.

Governor Amando Tetangco (pictured) said the central bank expected annual inflation in October to be anywhere between 3.7 percent and 4.6 percent.

The headline consumer price index rose 4.4 percent in September, its lowest level in five months, and peaked this year at 4.9 percent in July and August.

rainy monsoon season, although the recovery has been capped by worries of surging supplies of competing edible oils.

Reuters

This will contribute towards a savings of 667.6 million litres of diesel a year Douglas Uggah Embas Plantation Industries and Commodities Minister

Tata Power Company Ltd plans to complete work on a US$1.8 billion thermal power station in Vietnam three years early, government officials said, as the two countries strive to showcase the economic ties between them. Vietnamese Prime Minister Nguyen Tan Dung, visiting India just a month after India’s president travelled to his country, said he had met Tata group officials and that the 1,320 megawatt project would be completed by 2019 instead of 2022. Tata Power won the contract last year to develop the coalfired Long Phu 2 Power Project.

U.S. consumers sue Takata Takata Corp, the Japanese company whose potentially defective airbags have led to the recall of millions of vehicles, was sued on Monday by consumers who claimed Takata and several car manufacturers defrauded them by concealing crucial information. The lawsuit filed with a U.S. District Court in Florida, is believed to be the first in the United States to seek class-action status on behalf of consumers nationwide.

Jindal Steel probed by coal licence India’s Jindal Steel and Power Ltd said the Indian federal police were investigating the granting of a coal mining licence block to the company. The company’s statement late on Monday was in response to media reports that the Central Bureau of Investigation (CBI) was investigating accusations that it paid bribes to secure coal blocks. Jindal said the CBI had filed a first information report against the company in connection with the allotment of a coal block in the central Indian state of Chhattisgarh.

12

October 29, 2014

Asia

Former N.Z. minister criticizes Japan’s attitude at TPP talks

Current Trade Minister said a deal among the 12 TPP nations could be reached in the first quarter of next year

A

former New Zealand trade minister yesterday called on Japan to leave the controversial Trans-Pacific Partnership (TPP) trade talks if it cannot offer comprehensive tariff reductions.

Trade spokesman for the main opposition Labour Party, Phil Goff, who, as trade minister, had signed the bilateral free trade agreement with China in 2008, made the call as concerns mounted that New Zealand negotiators were preparing to cave in and agree an inferior TPP deal with few benefits for the country’s pillar agriculture sector.

Current Trade Minister Tim Groser told Radio New Zealand earlier yesterday that after the latest threeday round of talks in Australia at the weekend, a deal among the 12 TPP nations could be reached in the first quarter of next year.

“It’s probably the most solid ministerial meeting I’ve attended in the last three years so we’re within sight of a finish line, but that does not mean we are necessarily going to cross it successfully,” Groser said.

New Zealand could still walk away from a deal if it excluded New Zealand’s top export, dairy products, but he did not think that would happen, he said.

That appeared to contradict comments by Japanese TPP Minister Akira Amari in the Japanese media that the “finish line” was still not in sight for crucial bilateral talks with the United States on cutting tariffs on agricultural produce.

Goff said in a statement that it was important that the goal of

Phil Goff, former New Zealand Trade Minister

a high quality and comprehensive agreement must not be “traded off to the detriment of New Zealand in the U.S.-Japan bilateral talks. “

“Japan was admitted to the negotiations on the basis of its agreement that the outcome of the negotiations would be high quality.

If it can’t meet that standard, then it should opt out of the talks,” said Goff.

“Dairy is New Zealand’s most important export product, which is why, in the Chinese and ASEAN free trade agreements negotiated when I was Trade Minister, a condition was set that tariffs on all our major exports be phased out completely over time,” he said.

“Leaving tariffs on New Zealand agricultural exports is the equivalent of the agreement allowing trade barriers on a major Japanese export such as cars.”

On Friday, agriculture industry leaders from New Zealand, Australia and Canada issued a joint call for negotiators to seal a trade deal with equal access across all 12 participating nations.

A critical element of a truly plurilateral agreement would be the comprehensive elimination of tariffs throughout the region, they said, adding that if TPP members provided select market access to some countries over others, regional supply chains might actually be worse off.

With a total population of 792 million people, the TPP region total GDP comprised almost 40 percent of the world’s economy.

The 12 TPP negotiating countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Secrecy surrounding the talks has provoked strong criticism and fears over incursions into national sovereignty.

Xinhua

S. Korea anticipates record low inflation The central bank sees inflation picking up gradually next year

S

outh Korean consumer confidence fell to a three-month low in October as the economy struggled to regain traction, a survey by the central bank showed yesterday.

Highlighting public concerns that the economic outlook will remain weak for some time, consumers also expected inflation for the next year to fall to a record low.

The composite consumer index (CCSI) edged down to 105 in October, compared to 107 in the previous month, the Bank of Korea said. It was the lowest since the index stood at the same 105 level in July.

A reading above 100 indicates consumers feel more positive in the coming month than the long-term average

sentiment accrued from 2003 to 2012.

The central bank’s index has so far stayed above the neutral line this year and last fell below 100 in December 2012.

The survey also showed October’s median expected inflation rate for the next 12 months at 2.7 percent, which was the lowest on record since the Bank of Korea started the inflation survey in February 2002.

The rate had stayed at 2.8 percent for five straight months through September. But 2.7 percent still remains within the central bank’s target band of 2.5 to 3.5 percent.

The Bank of Korea has repeatedly said that recent low price pressures have been mainly due to supply-side reasons including low crude oil and

agricultural products, rather than factors linked to local demand.

The bank sees inflation picking up gradually next year, although inflationary pressures are expected to remain soft for the time being.

The Bank of Korea said it polled more than 2,000 households across the nation from October 13 to 20.

Asia’s fourth-largest economy grew a seasonally adjusted 0.9 percent in July-September as government and consumer spending rebounded, data showed last week.

But exports were knocked by cooling global growth, a sign that more monetary easing may be needed to sustain a fragile recovery.

Reuters

2.7 pct

October’s median expected inflation rate for the next 12 months

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

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

13

October 29, 2014

Asia

Japan retail sales growth accelerates But a recent run of weak data on factory output and exports prompted the government to cut its economic assessment for two consecutive months Stanley White

J

apanese retail sales growth accelerated for the third straight month in September in an encouraging sign that consumer spending could be strong enough to absorb a second sales tax increase scheduled for next year.

The 2.3 percent annual rise blew past a 0.6 percent increase expected by economists in a Reuters poll and marked the biggest gain since March. It followed a 1.2 percent rise in August.

Consumer spending has disappointed since the government raised the sales tax once in April, so evidence that a durable turnaround is imminent could make it easier for

KEY POINTS Sept retail sales +2.3 pct yr/ yr, vs f’cast +0.6 pct Politicians worry sales tax hikes could hurt economy Take hikes needed to improve budget deficit

Reuters

Thai Airways forecasts Q4 profit as tourism picks up The state-controlled carrier is in the process of selecting a new president and its board will consider the issue at a meeting next month

L

oss-making Thai Airways International Pcl said yesterday it was confident it would post a net profit in the fourth quarter due to an increase in advance bookings and a pick up in the tourism industry.

Declines in global oil prices will

A Thai Airways plane at Bangkok Airport

Tokyo to go ahead with a second hike in the tax to boost revenue for welfare spending.

Rebounding consumer spending is also a welcome sign for the Bank of Japan, as it tries to guide inflation to 2 percent some time next fiscal year to eliminate the risk of Japan falling back into deflation.

“The recovery in consumer spending is gaining pace because demand is improving,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Things are finally improving.

Consumer spending will make a positive contribution to third-quarter gross domestic product.”

Retail sales accelerated due to gains in apparel, food and beverage sales, data released by the Ministry of Economy, Trade and Industry showed yesterday.

An adviser to Prime Minister Shinzo Abe has been arguing that the government should delay a second increase in the sales tax to 10 percent from 8 percent scheduled for October 2015 as the economy is not strong enough.

The government has already raised the nationwide sales tax to 8 percent from 5 percent on April, as part of a two-stage plan to ease pressure on the national budget.

Abe has to decide by year-end whether to proceed with the second tax hike to curb Japan’s mammoth debt burden, which at more than twice the size of its economy is the worst in the developed world.

A recent run of weak data on factory output and exports prompted the government to cut its economic assessment for two consecutive months, raising speculation that it may roll out more stimulus spending or push back the second tax increase.

People familiar with its deliberations said the BOJ is preparing to roughly halve its 1 percent economic growth forecast for this fiscal year at a meeting on October 31 but stand pat on policy and its prediction that inflation will hit its 2 percent target in the year from next April.

help reduce the airline’s fuel expense, and other cost-cutting measures will, also be positive for its earnings during the October-December period, acting president Siwakiat Jayema told reporters.

He was speaking a week before the flag

carrier, which posted losses for five straight quarters after the tourism industry was hit by domestic political unrest, is due to announce third quarter results.

“Tourists are coming back in the fourth quarter, it is the peak season for travel sector,” Siwakiat said, without giving any figures.

He said the airline was also forging ahead with its restructuring process, which included plan to shed more than a quarter of its full-time employees by 2018.

Thai Airways has yet to give any guidance about its third-quarter earnings. Phillip Securities said in a note it expected the carrier to post an operating loss in the July-September quarter, but its net profit will be positive due to foreign exchange gain.

Thai Airways said it expects its cabin factor, or the number of seats sold as a percentage of capacity, at about 75 percent in the fourth quarter and 70 percent for the whole of 2014.

The state-controlled carrier is in the process of selecting a new president and its board will consider the issue at a meeting next month, Siwakiat said without giving details about candidates.

Local newspapers reported this week that Charumporn Jotikasthira, former president of the Stock Exchange of Thailand, is tipped to take the top position.

Siwakiat declined to comment on the news report, while Charamporn was not available for immediate comment.

Reuters

Vietnam-U.S. trade beats forecasts The two-way trade between Vietnam and the United States is estimated to reach US$34.9 billion in 2014, of which Vietnam’s exports to the United States would earn US$29.4 billion, according to the American Chamber of Commerce (Amcham) in Vietnam. In its update report on forecast of the Vietnam-U.S. trade in 2014 and until 2020, Amcham readjusted the figures which are higher than those it released in July, local electronic daily Infonet reported yesterday, quoting Amcham as saying. Out of Vietnam’s export value to the U.S. this year, Amcham estimated that Vietnamese garment and textile exports would earn US$9.8 billion.

Nomura Q3 net profit up Nomura Holdings said its net third-quarter profit rose 39 percent year-on-year, beating forecasts, as by cost cuts helped offset a slight drop in retail brokerage sales. Japan’s biggest investment banking and brokerage group said its quarterly net profit rose to 53 billion yen (US$492 million), beating a consensus forecast of 41 billion yen by analysts on Thomson Reuters Starmine.

Sales from its retail division fell 1 percent from a year ago as last year’s stock market rally inspired by Prime Minister Shinzo Abe’s economic growth policies cooled off, weighing on trading volumes.

Honda Motor Q2 profit falls Honda Motor Co yesterday reported a 4.1 percent fall in second-quarter profit, missing analyst estimates, as it struggles with product recalls in the United States and Japan that could delay the development of new models. Japan’s third-biggest automaker by revenue booked 164.4 billion yen (US$1.52 billion) in operating profit for July-September, compared with a 184.1 billion yen mean estimate of 14 analysts polled by Thomson Reuters I/B/E/S. The automaker also kept its forecast for the full year ending March 31 at 770 billion yen. The result comes as U.S. consumers announced a lawsuit against Honda.

Australia to list Medibank Just as it prepares to list state-owned health insurer Medibank Private, Asia’s biggest initial public offering in two years, Australia is quietly unwinding the generous subsidies that had determined the company’s fortune over the past decade. The planned US$5 billion privatisation of Australia’s biggest health insurer opens for retail investors yesterday, and its backers are talking it up as a way to gain exposure to a sector that has enjoyed steady growth thanks to a system of state subsidies as well as the country’s ageing population.

Japan nuclear plant gets approval A town in southwest Japan yesterday approved the restart of a nuclear power station, another step forward in Japan’s fraught process of reviving an industry left idled by the Fukushima catastrophe in 2011. Satsumasendai, a town of 100,000 that hosts the two-reactor Kyushu Electric Power Co plant, is 1,000 km southwest of Tokyo and has long relied on the Sendai plant for government subsidies and jobs. Nineteen of the city’s 26 assembly members voted in favour of restarting the plant while four members voted against and three abstained, a city assembly member told Reuters.

14

October 29, 2014

International UBS bulks up legal reserves

36 EU banks wouldn’t pass Basel III

UBS booked 1.8 billion Swiss francs (US$1.9 billion) in legal provisions for the third quarter, bulking up reserves as it discusses a settlement with U.S. prosecutors to a criminal investigation over alleged rigging of foreign exchange rates. Even with those charges, UBS beat forecasts with a 32 percent rise in net profit from a year earlier, due largely to a gain of 1.3 billion francs from slightly adjusting how it accounts for deferred tax assets. Authorities from around the world are investigating allegations that dealers at major banks colluded and manipulated key reference rates.

BP raises dividend despite oil price drop Oil major BP increased dividends in the third quarter as it saw a jump in operating cash flow despite lower oil prices and a steep drop in contributions from Russia where a depreciating rouble hit its income.

BP’s said its underlying replacement cost profit for the quarter was US$3.0 billion, broadly in line with expectations of US$2.948 billion in Reuters Smartestimate. That was down 21.5 percent year on year. The dividends for the third quarter will rise by 5.3 percent year on year to 10 cents per ordinary share.

France and Italy offer to trim deficit France and Italy unveiled plans to trim their deficits more than previously planned in last-minute pitches to get clemency from the European Commission on their 2015 budgets. The European Union’s executive arm has until Wednesday to decide whether to reject France and Italy’s 2015 draft budgets for failing to make sufficiently large improvements in their public finances. The two countries had so far defied pressure from Brussels and Berlin to rein in their public finances faster over concerns that more belt-tightening could throttle their already fragile economies.

Amazon buys Rooftop Media Amazon.com Inc. is buying online comedy service Rooftop Media, as the Internet retailer pursues its ambition of building a digital media library to rival Netflix. While the deal is small, it underscores Amazon’s intention of buying content to round out its online service. Its increasing spending on digital media has helped keep the company in the red, inviting criticism from investors. Audible, the audiobooks service it bought in 2008 for US$300 million, is picking up the 10-person start-up for an undisclosed sum.

BoE rejects financial “anything goes” attitude Tougher rules may be needed to stop a repeat of the behaviour in financial markets that has hit trust and confidence in recent years, Bank of England Deputy Governor Minouche Shafik said. Launching a consultation into commodity, bond and currency wholesale markets after banks were fined US$6 billion for rigging benchmark interest rates, Shafik said that more changes may be needed to stop the “anything goes” attitude of traders uncovered in recent enforcement cases. The review is being conducted jointly by the Bank of England, the Financial Conduct Authority and the Treasury, with recommendations due to be made in June next year.

The chairman of the financial supervisory committee of the European Central Bank (ECB) Daniele Nouy speaks during a press conference at the ECB in Frankfurt, Germany, 26 October 2014

E

urope’s banking health check has shown countries and lenders are implementing global capital rules at vastly different speeds, and 36 firms would have failed if new capital rules were fully applied.

The euro zone is lagging behind countries outside the bloc in implementing the Basel III capital rules that are due to come into full force in 2019, potentially adding another challenge for the European Central Bank when it takes over supervision of euro zone lenders next month.

Some 25 European banks failed a health check of whether they could withstand a recession, and another 11 would have failed if the full Basel III rules had been applied, according to data from the European Banking Authority released on Sunday.

That could put pressure on more banks to improve the amount and quality of their capital, potentially impacting their profitability, growth plans and dividend pay-outs.

Banks failed if they had common equity of 5.5 percent or less under a 2014/16 recession scenario. The

EBA’s “stress test” was based on transitional capital rules, which vary by country depending on how quickly they are phasing in rules.

But for the first time, so-called ‘fully loaded’ Basel III ratios -applying all the new global rules -- were released across Europe’s top 130 banks for analysts and investors to compare their capital strength.

Banks’ common equity -- as a percentage of risk-weighted assets -- were on average almost 100 basis points lower on a full Basel III basis than the reported ratios under the 2014/16 recession scenario of the test, according to Reuters calculations.

The divergence was substantial across countries.

Capital ratios for Greek banks were on average 7.8 percentage points lower under full Basel rules, and the difference for Irish banks was almost 7 percentage points. Ratios for Portuguese banks were 220 basis points lower on average and in Spain they were 100 bps lower.

On a full Basel III basis, five German banks, including HSH

Such a fact adds another challenge for the European Central Bank when it takes over supervision of euro zone lenders next month

Nordbank and DZ Bank, would have failed, compared to just one -Muenchener Hypothekenbank -- in the standard test.

But in Sweden, Denmark, Norway, Britain, Poland and Hungary there was almost no difference between the full Basel III rules and the transitional numbers, because national regulators have effectively fully implemented the rules already.

The pace at which Basel III is adopted is most relevant for big banks “where regulatory requirements are likely to put more and more pressure to build thicker and thicker capital buffers,” said Antonio Guglielmi, analyst at Mediobanca.

Analysts said Santander’s full Basel III ratio of 7.3 percent, compared to 8.9 percent on transitional rules, looked low for a “systemically important” bank -- one so big that its collapse could trigger a financial crisis.

Three others considered systemically important -- Unicredit , Royal Bank of Scotland and France’s BPCE -- had ratios of less than 7 percent on a full Basel III basis.

Reuters

KEY POINTS More banks would have failed stress tests under Basel III Data show countries applying new rules at varying speeds Big banks under most pressure to adapt to Basel III sooner

U.S. services sector growth slows The government is expected to report on Thursday that the U.S. economy expanded at a 3.0 percent annual pace in the third quarter, according to a Reuters survey of economists Lucia Mutikani

U

.S. services sector activity dipped to a six-month low in October, while manufacturing output in Texas dipped, pointing to some moderation in economic growth early in the fourth quarter.

Other data showed contracts to buy previously owned homes rebounded less than expected in September, an indication that the housing recovery remains gradual.

Analysts were little worried by the data and said the economy was fundamentally solid even with some anticipated cooling of growth in the fourth quarter.

Financial data firm Markit said its preliminary or ‘flash’ services sector purchasing managers index slipped to

57.3 last month, the lowest reading since April, from 58.9 in September.

A reading above 50 signals expansion in the vast services sector.

The index, which was dragged down by a fall in a new business sub-index, has declined for four straight months.

Separately, the Federal Reserve Bank of Dallas said its production index, which measures the state of manufacturing conditions in Texas, fell to 13.7 this month from 17.6 in September. The new orders subindex, however, doubled and hit a six-month high. Companies were also upbeat about the future.

In a separate report, the National Association of Realtors said its pending home sales index, based on contracts

signed in September, rose 0.3 percent after falling 1.0 percent in August.

These contracts usually translate into sales after a month or two. The gain last month was below Wall Street’s consensus forecast of a 0.5 percent rise. Contracts were up 1.0 percent compared to September last year.

Mortgage rates have declined in tandem with a sharp fall in U.S. Treasury debt yields as slowing global growth and a sharp sell-off in international stock markets this month prompted traders to push back expectations for an interest rate increase by the Federal Reserve. Last week, the 30-year fixed mortgage rate reached its lowest level since June of last year.

Reuters

15

October 29, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The years of living tactically

THE KOREA HERALD Debt owed by South Korea’s individuals, businesses and the government last year all exceeded the “critical points” set by an international organization, data showed yesterday, indicating that the country’s debt problems are deteriorating and restraining economic growth. According to the data analysed independently by Rep. Lee Hahn-koo, debt owed by individuals came to 1,219 trillion won (US$1.16 trillion) as of end2013, which represented 85.4 percent of GDP. It was higher than the WEF-set critical point of 75 percent, the data showed.

Javier Solana

EU High Representative for Foreign and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain He

VIETNAM NEWS Several types of vehicles will enjoy import tariff cuts beginning next year in line with Viet Nam’s commitment to the World Trade Organisation (WTO) on tax reduction.

According to the Ministry of Finance, which drafted the plan, all tariff cuts will take effect on January 1, 2015. It said the tax on four-wheel drive (4WD) vehicles would be reduced from 70 per cent to 59 per cent while the import tax on trucks with a loading capacity of less than five tonnes would be reduced from 59 per cent to 56 per cent.

BANGKOK POST Despite recent opposition from activists and villagers to a planned coal-fired power plant in Krabi province, two more are in the pipeline to be developed over the next seven or eight years in the new power development plan (PDP) starting next year, says Energy Minister Narongchai Akrasanee.

The PDP for 2015-36, which is in the final stage of drafting, includes coalfired power plants with a total generating output of 3,100 megawatts in Songkhla’s Thepha district and Rayong’s tambon Map Ta Phut.

THE JAKARTA GLOBE Profit at state-controlled home lender Bank Tabungan Negara dropped 29 percent in the first nine months of this year as the lender suffered from the negative impacts of tight liquidity conditions in the country’s banking system.

Net income fell to Rp 755 billion (US$63 million) in the January-September period from Rp 1.06 trillion in the same period in 2013, BTN said. Maryono, the president director at BTN said in general, the tight liquidity condition caused high funding costs and ultimately eroded the bank’s profit.

United Nations headquarters in Geneva, Switzerland

W

e have been living in an illusion. For years, the world has believed that the transition from a unipolar to a multipolar order would be peaceful, orderly, and steady, with new players like China, Brazil, and Turkey adapting to the existing multilateral framework in a natural, harmonious way. How wrong we were.

In fact, as the transition toward multipolarity has progressed, the international order has become increasingly unstable and tense. The 2008 global financial crisis compounded uncertainty and mistrust, disrupting key trends like globalization. But the biggest problem has been the failure of the developed countries – the architects of the post-World War II international order – to formulate an inclusive strategy to address global challenges and manage the transition to a new international system.

The reason for this failure is simple: the West has allowed short-term tactical concerns to impede the development of a long-term strategic vision. This obsession with tactics has affected governance at all levels, from local administrations to supranational institutions, allowing major actors to operate within uncoordinated realities, without any shared goals guiding their decision-making.

To be sure, there have been some noteworthy exceptions, owing to concerted efforts to consolidate a constructive strategic vision. For example, Western policy has yielded some progress toward a resolution regarding Iran’s nuclear program.

But, in other areas, strategic thinking has fallen short.

In Ukraine, for example, the conflict has both exposed and widened the fissure between Russia and the West.

Post-Soviet Russia’s struggle to integrate into the international order, together with its rejection of modernization, has fuelled a revisionist nationalism based on spheres of influence.

And it is not just Russia that has turned its back on Western modernity. The Middle East has been a hotbed of instability fuelled by historical tensions since the fall of the Ottoman Empire almost a century ago.

Now it is on fire – not least because the West’s repeated interventions have been guided by short-sighted tactical concerns.

Indeed, Western leaders failed to anticipate the longterm consequences of supporting autocracies, revealed in the Arab Spring revolts, or to foresee the impact of successive military interventions in Iraq, Syria, and Libya. As a result, nostalgia for the “glorious” past – such as the Islamic State’s caliphate envy – is proliferating in the Middle East, too.

The West was not prepared for global forces to push backward and to seek a future in the past. In any case, the Middle East must be allowed to take ownership of solutions to the challenges it faces; after all, no externally imposed solution has worked so far. The responsibility of the rest of the world is to build a stable backdrop

for such efforts: an inclusive international system in which countries abide by the same rules and norms.

In managing the transition toward multipolarity, the West’s greatest challenge lies in Asia – a region that is simultaneously dynamic and future-oriented and hampered by historical tensions and divides. Recognizing Asia’s profound importance to the new world order, US President Barack Obama announced a strategic “pivot” toward the region in 2012.

But Western leaders have hesitated to integrate China, Asia’s most economically formidable actor, into the international system.

Indeed, the last meeting of the International Monetary Fund – which recognized China as the world’s largest economy by purchasing power parity – concluded without increasing China’s share of votes. To put this in perspective, China was left with a slightly higher proportion of votes than Italy, whose economy is one-fifth the size, and just one-quarter of America’s vote share.

Moreover, the West has relegated support for the creation and strengthening of regional frameworks for cooperation in key areas like security to secondary importance. Unlike Eu-

In the United States, there is no question that the lack of strategic vision displayed in Obama’s foreign policy is at least partly a result of his need to navigate a defective system

rope, Asia’s wounds from WWII never healed. As a result, territorial disputes and nationalist claims remain a potent threat to regional – indeed global – stability.

But, for the West, applying longterm vision requires more than recognizing the imperative of strategic decision-making; it also demands efforts to revitalize polarized and dysfunctional domestic political systems. In the United States, there is no question that the lack of strategic vision displayed in Obama’s foreign policy is at least partly a result of his need to navigate a defective system.

For its part, the European Union has pursued short-sighted policies to address its economic challenges, without anticipating – or acknowledging – the social and political consequences, including the proliferation of anti-EU sentiment. Member states’ tactical approach to their particular problems (often defined by their status as creditor or debtor) has left the EU bereft of credible leadership and a unified vision. A more strategic approach would focus on boosting growth throughout the EU, such as by meeting the Europe 2020 targets for research, development, and innovation, and advancing the Transatlantic Trade and Investment Partnership.

Tactics are short-term solutions that often have significant unforeseen consequences, making it impossible to predict the kind of world they will generate.

Strategy forms a different axis of action, accounting for the structure of global interdependence and thus how individual changes may affect the entire system. Only by moving to this axis of strategy can we achieve the world we want: one that is habitable, stable, free, and prosperous.

Project Syndicate

16

October 29, 2014

Closing World Islamic economic forum kicks off in Dubai

China funds cultural heritage protection

The tenth World Islamic Economic Forum (WIEF) opened in Dubai, the United Arab Emirates, yesterday, gathering over 2,700 delegates from more than 100 countries to explore “Innovative Partnerships for Economic Growth.” In his opening speech, President of the Dubai Chamber of Commerce and Industry Hamad Buamim said the forum’s purpose is to create growth opportunities not only in the Islamic world, but globally. Some ten countries now use an estimated 95 billion dollars of Sukuk to fund their infrastructure, of which 75 percent are based in Malaysia.

The Ministry of Finance (MOF) has allocated 8.84 billion yuan (US$1.44 billion) in special funds to support the protection of cultural heritage this year. The state funding to cultural heritage protection was 14.35 percent higher than a year ago, according to the MOF yesterday. About 92 percent of the total funding, or 8.13 billion yuan, went to 2,299 cultural heritage protection projects, including the Great Wall, the Great Canal and the Silk Road. Another 663 million yuan of funding supported efforts to protect the non-tangible heritage items.

Commodities prices to help China In addition, less expensive petroleum products will help the country to eliminate “dirty” fuel and curb air pollution, as well as allow the government to cut subsidies on high-priced oil

P

rice slumps in the global commodity market will likely mean good news for China after the country reported slowing growth for the third quarter.

Continued weaker commodity prices led by crude oil are expected to save the country on enormous import bills, boost trade surplus and provide more leeway for Chinese policy makers to fine-tune the economy.

Crude prices started a downward streak in the beginning of July and have fallen considerably from their previous peak.

Overnight on Monday, light, sweet crude for December delivery dipped below US$80 a barrel on the New York Mercantile Exchange, tumbling from over US$107 on June 20.

December Brent crude dropped to less than US$86 on the same day, around 25 percent lower than the peak four months ago.

Other commodities, including iron ore and coal, are no exception, having struggled in losing territory for months.

Liu Jun, researcher with BOC International Futures,

attributed the bearish performance to an oversupplied global market, especially due to the unexpected rapid recovery of Libya’s oil output.

Libya ramped up its crude output to 810,000 barrels per day in September, increasing nearly fourfold from June, and oil supply from Iraq stayed unaffected by fierce warfare. The Organization of the Petroleum Exporting Countries (OPEC) showed no intention of reducing output, as Saudi Arabia fuelled up to vie for more market share.

Meanwhile, the U.S. is vigorously exploiting its shale oil, as data from the Energy Information Administration showed output per day grew

14.5 percent year on year in the first three quarters.

Despite the everincreasing supply, demand growth lagged behind due to a grim global economic outlook, which also weighed down crude prices.

Financial institutions have lowered their price forecasts.

Merrill Lynch cut its Brent crude price forecast to US$98 for next year and Goldman Sachs expects the price to fall US$15 to US$85 in the first quarter of 2015.

However, China’s appetite for commodities was insatiable amid weakening global demand. Its iron ore imports jumped 16.5 percent year on year to reach 700 million tonnes from January

to September, while crude oil imports were up 8.3 percent to 230 million tonnes. Demand for agricultural products and copper also grew rapidly.

China has been one of the top net importers of crude oil and iron ore, which constituted 11.3 percent and 5.4 percent of China’s total imports in 2013 respectively, according to Merrill Lynch.

A major consumer of commodities, China will take advantage of the price drop to run its economy at a lower cost with reduced import bills thanks to dropping prices.

If crude oil and iron ore prices stay at current levels for the rest of the year, China could save around US$4.5 billion per month compared

Japanese firms in China ECB sees no signs hope possible Xi-Abe meeting of deflation

A

ll it could take is a handshake: China’s president and Japan’s prime minister greet each other cordially for a bilateral meeting at an Asia-Pacific leaders’ summit, and from there deals are approved, consents are granted, and doing business starts looking a little more straightforward.

That is the hope of the Japanese business community in China, including Bank of TokyoMitsubishi UFJ (BTMU), according to Hidekazu Horikoshi, the China head of Japan’s biggest lender, which counts around 8,000 Japanese firms in China as clients.

Despite a gradual recovery in sales for most Japanese firms in China, some are still struggling with delays in government approval for projects and business licenses despite meeting all requirements, he said.

“Every Japanese company expects that once a photo of Xi Jinping and (Shinzo) Abe shaking hands is carried in newspapers, those approvals would be given immediately,” Horikoshi told Reuters in an interview yesterday, noting that BTMU would welcome the reconciliatory gesture.

Reuters

to a year ago, which will result in a marked increase in the current account surplus, according to a Merrill Lynch report.

The report said that the trade surplus will also be boosted, which will reduce the need for the government to conduct any large-scale easing, such as universal reserve requirement ratio cuts.

Falling commodity prices will reduce China’s inflation in the short term and may exert greater influence in the long run, giving the government more room to carry out targeted easing measures, according to the report.

Xinhua

Vietnam to lower key rates

T

he European Central Bank sees no signs of deflation or recession in the single currency area, but will remain vigilant, its chief economist said in a newspaper interview yesterday.

“We can’t ignore the feeble economic climate.

We are now seeing a loss of momentum,” Peter Praet told the Belgian newspapers Tijd and L’Echo.

“It is striking that growth is abating in an early phase of the business cycle. We take that seriously, but we shouldn’t exaggerate -- our base scenario for a gradual economic recovery is still realistic,” Praet said.

Asked whether the 18 countries which share the euro are on the verge of a new recession, Praet replied: “No, I wouldn’t say that.”

“Confidence indicators for the third and fourth quarter suggest marginal growth in the euro area.

That is rather worrying, as the momentum is certainly not strong enough for self-sustaining growth.”

Similarly, the risk of deflation -- a disastrous downward spiral of falling prices -- was “limited,” Praet said.

AFP

V

ietnam is lowering the ceiling on dollar and dong deposits, a move that the market has expected and which could reduce loan rates and boost economic growth.

The Southeast Asian nation expects economic growth of 6.2 percent in 2015, faster than the targeted 5.8 percent the government says is attainable this year.

Strong exports and a booming manufacturing sector are driving Vietnam’s economy, which independent economists have said remains constrained by structural woes such as a wasteful state sector, high levels of bad debts and subdued domestic spending.

Yesterday, the State Bank of Vietnam said that effective from Wednesday banks can offer a maximum interest of 5.5 percent to dong deposits with terms from one month to less than six months, compared with 6 percent now.

The ceiling on short-term dong loans extended to several sectors such as agriculture, exports and supporting industries will be lowered by one percentage point to 7 percent.

Reuters