Macau Business Daily, Nov 12, 2014

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 665 Wednesday November 12, 2014

Candy Factory A

Year III

‘so-so’ performance. That was CE Chui Sai On’s self-evaluation while delivering his 2015 budget plan to the Legislative Assembly yesterday. Bur ‘candy distribution’ is here to stay. Even if gaming revenues are becalmed. Plus salary increases above inflation for public servants. Subsidies for the elderly. And billions for the Social Security fund. He remains tightlipped on the cabinet reshuffle.

But expects gaming operators to come to the table on the World Tourism & Leisure Centre dream PAGE

Costs slow down Future Bright’s 3Q

HSI - Movers November 11

PAGE 4

Name

Macau hosts high‑level meeting on Chinese Medicine PAGE 4

Shopping Festival to diversify local economy PAGE 5

Vegas Club to save Caesars

%Day

Lenovo Group Ltd

3.23

Bank of China Ltd

2.98

Cathay Pacific Airwa

2.57

Galaxy Entertainment

2.55

Sands China Ltd

2.44

COSCO Pacific Ltd

-1.50

China Mobile Ltd

-1.87

PetroChina Co Ltd

-2.17

China Unicom Hong Ko

-2.79

Kunlun Energy Co Ltd

-3.31

Source: Bloomberg

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I SSN 2226-8294

Two sides of the coin Two sides of the same crisis. In Q3, Galaxy and SJM had opposite performances. The former saw revenues increase 6 percent and profits 1 percent from a year ago. Galaxy says it’s still “very optimistic” about Macau’s gaming industry future. SJM, by contrast, reported a 16 percent decline in profits. A decrease some two times bigger than market expectations.

Investors are reacting accordingly

PAGE 6 & 7

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Mapping out the future APEC continues to intrigue.

Chinese President Xi Jinping found support for a roadmap.

For the Free Trade Area of the Asia Pacific deal. Other Chinese projects have seen substantial progress

Pages 13 & 24

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MICE’s growing dependency MICE. They’re everywhere. Or could be. Millions of patacas are flowing into this sector nowadays. In fact, public money is picking up a third of total exhibition costs. Twice the 2013 hit. The government is now allocating another MOP5 million. To subsidise education institutions and companies for MICE-related programmes for staff

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November 12, 2014

Macau

Govt pouring millions into MICE industry This time the government is allocating MOP5 million to subsidise education institutions and companies in order to provide MICE-related programmes for staff Stephanie Lai

sw.lai@macaubusinessdaily.com

S

tarting from yesterday, the government has begun accepting applications for a new subsidy scheme supporting local companies and non-profit associations in order to provide non-degree programmes specialising in meetings, incentives, conventions and exhibitions (MICE) for their employees or members. This represents a continuation of the existing MSAR policy of expanding subsidies for the city’s MICE industry.

Under this new subsidy scheme, qualified local private tertiary education units, training centres or non-profit associations comprising MICE professionals can apply for up to MOP600,000 (US$75,125) to provide a non-degree training programme related to the MICE industry. This should be a short-term programme lasting less than 12 months, according to Macao Economic Services.

Another format of financial support under this new scheme allows companies or non-profit

associations with conventions and exhibitions professionals to subsidise their employees or members who wish to participate in MICE‑related certification programmes or examinations. The government will subsidise these employees or association members for a year by up to MOP30,000.

The institutions providing these non-degree training programmes are not restricted to Macau, as the government accepts qualified education units in Asia participating in the scheme.

A total of MOP5 million will be allotted from the Industrial and Commercial Development Fund for the first year of operation of this new subsidy scheme, Macao Economic Services noted.

“Not only the MICE events planning domain is included in these subsidised courses; those involving marketing and promotion, public relations management and contracting works are also covered by the scheme,” the head of conventions, exhibitions

and economic activities development department from Macao Economic Services, Mr. Chan Weng Tat, said yesterday at a briefing for interested applicants.

Continuous subsidy This new support scheme implemented for training MICE professionals is yet another subsidy plan from the government to help boost the conventions and exhibitions industry, as it has previously introduced incentive schemes to subsidise the outlays of event organisers for promotion, transport, accommodation, catering and rent.

Macao Economic Services

estimate that a total of MOP100 million will be spent this year supporting the new subsidy scheme for training MICE professionals, as well as for the International Meeting and Trade Fair Support Programme - an incentive scheme implemented in January this year subsidising companies engaged in attracting more international events to Macau.

“So far, we’ve received a total of 18 applications for this incentive scheme, which aims to attract big international events, of which five have already been approved,” Mr. Chan said. “Of these five approved applications, three are conventions and two are exhibitions. Three other cases

were rejected because they didn’t meet our requirements.”

The government expects MOP21 million will eventually be spent on these five cases.

According to official data released by the Statistics and Census Service, the number of professionals visiting MICE events here for the first half of this year totalled 60,530 individuals, some 183 percent more than a year before.

For the first half, the government subsidised 39 percent of the local exhibition organisers’ expenses at 90.6 million patacas, a bigger subsidy proportion at 16 percent than a year ago.

While the government spends more on the financial support of local MICE companies, exhibition organisers saw their revenue grow 101 percent year-onyear to 87.9 millon patacas for the first six months of this year – an amount still lagging behind the organisers’ expenses at 90.6 million patacas, some 49 percent more than the first half of last year.

Business Daily | 3

November 12, 2014

Macau

Chui’s benefits package intact for 2015 Wrapping up his first term as CE, Mr. Fernando Chui Sai On told the Legislative Assembly that he had performed so-so during the year. For the first year of his second term he continued his ‘fruits’ sharing policies - known as ‘candy distribution’ to residents - such as cash handouts. Following an increase in salary in April, public servants may enjoy another increase next year Kam Leong

kamleong@macaubusinessdaily.com

C

hief Executive Fernando Chui Sai On presented the budget plan for 2015 to the Legislative Assembly yesterday, confirming that the new government will continue the cash handout scheme despite the amount remaining the same. Meanwhile, the remuneration of civil servants will be increased to 79 patacas per salary point from January 1 next year, from the current 74 patacas per salary point, if the Legislative Assembly agrees.

According to the 2015 budget plan, the government is to continue dispensing similar subsidies or ‘fruits’ sharing policies to residents in the coming year, amounting to more than MOP11.4 billion.

These sharing policies, more or less the same as this year, include a cash handout scheme: permanent residents will receive MOP9,000 as before, while non-permanent residents will be allocated MOP5,400. The subsidy for the elderly will remain at MOP7,000, while another MOP7,000 will be allocated to the personal provident fund accounts of residents.

In addition to these measures, the next term of government will pour some 13.5 billion patacas into the Social Security Fund.

Asked by reporters at a press conference following the presentation why only the remuneration of public servants is to be increased but not the amount of the cash handout scheme, Mr. Chui claimed that the amount of such ‘fruits’ sharing policies are dependent upon the estimated amount of fiscal surplus; the increase in remuneration for public servants was decided upon as a result of a

report on the salary of civil workers as well as inflation and the average salary of private companies. He hopes the public understand that the amount of cash handouts will remain the same as the previous year.

Meanwhile, the new Budget also indicated the new government will continue its tax relief policies, which may result in the government’s revenue dropping next year by some MOP2.1 billion. Such policies include deducting 30 percent of professional tax, waiving all operation tax and refunding 60 percent of the 2014 professional tax to all residents who had to pay tax.

Anticipated fiscal surplus, revenue and expenditure in 2015 The Chief Executive expected in his 2015 budget plan that the fiscal surplus of the following year will only be MOP70.94 billion patacas, a decrease of some MOP6 billion, compared to the budgeted MOP76 billion of 2014.

According to the official data of the Financial Service Bureau, however, the fiscal surplus of this year, up to September, has already surpassed the target, at MOP79.3 billion.

In addition, Mr. Chui expects, as the budget plan shows, that total expenditure and revenue of the government will increase.

He is allocating a total of MOP83.72 billion to total expenditure in 2015, increased from the budgeted expenditure of last year, at MOP77.61 billion. Meanwhile, he expects the total revenue of 2015 for the government to reach MOP154, 66 billion, compared

to the budgeted revenue for 2014 of MOP153, 62 billion.

In fact, Mr. Chui claimed the conservative estimates of fiscal surplus is due to the consecutive decline in recent months of gaming profits, indicating that the gaming industry of Macau had entered a ‘normal’ adjustment phase, having enjoyed such profit increases for a very long time.

“In our forecast for next year’s economy we did not count in the high gaming profits [that the casinos may receive] in some months. [Instead,] We have done a rather conservative estimation,” he said, predicting the exact fiscal reserves for this year will be around MOP70 billion.

In addition, he stressed to reporters that the adjustment phase of the gaming industry is normal, especially considering that non-gaming profit had reached 1.6 billion patacas while the number of visitors was still climbing.

During the press conference, Mr. Chui also repeated how the government will review the gaming licences in 2015, as promised in his earlier political manifesto during his re-election bid.

“We will systematically review whether the six gaming operators have executed their promises of before [on developing non-gaming elements] and the current development. In the future, [operators] have to cooperate [with the government] to establish the objective of World Tourism & Leisure Centre,” Mr. Chui said, claiming that the government is concerned about the proportion of gaming elements and non-gaming

elements [essential] to a properly diversified economy.

Self-evaluation of 2014 performance: PASS In addition to presenting the budget plan for 2015, the CE remarked on his work for the year.

Asked by reporters how he responded to his performance rating by some residents as ‘zero-mark’, Mr. Chui defended himself by claiming he had read many different surveys and reports regarding his performance over the past five years.

“It should not be zero mark. I think [my performance] is a pass,” he said.

In addition, regarding his work in 2014, Mr. Chui said the current government had established longterm schemes for several categories – social security, health, education, housing, talent training as well as public security and economic service - showing that the expenditures of the government on society had increased.

According to Mr. Chui, the government spent 67.6 percent of the total expenditure in 2013 on society compared to 53.9 percent in 2010.

Regarding the new list of five Secretaries, the CE said during the press conference that he is waiting for the central government to confirm appointments and declined to comment on the rumoured lists.

The rumoured new Secretary for Administration and Justice, Chan Hoi Fan, the current coordinator of the Office for Personal Data Protection, also declined to comment while attending Mr. Chui’s presentation.

4 | Business Daily

November 12, 2014

Macau Brought to you by

HOSPITALITY

Future Bright’s profit margin pressured in Q3 Higher costs involved in running the food souvenir business for the group has weighed on its gross operating profit margin for the third quarter Stephanie Lai

sw.lai@macaubusinessdaily.com

A billion a day, almost Since the opening of the first post-monopoly casino, in 2004, the gambling landscape has changed beyond recognition. An early victim of the casino boom was sports betting and lotteries. Although the revenue from various types of lotteries and sporting bets were always much smaller than those recorded in casinos, the gap has risen enormously. In 2004, the casino’s revenue was 19 times bigger than that generated by lotteries; that ratio more than doubled in the following year and has increased continuously since. Last year, its value stood at about 324. That is, we are getting to the point where one day of casino revenue equals a full year of betting and lotteries’ revenue. The latter roughly halved in 2005 and continued to decrease in absolute value until 2008. The following year they started a small recovery and have stayed in the last two full years, 2102 and 2013, at levels similar to those registered in 2004. Values oscillating between 1 and 1.2 billion patacas seem to have become its present typical figures.

One of the noticeable features of this evolution is the fact that the sector’s Gross Added Value has been rising faster than total revenues, reflecting the sector’s higher operational efficiency. Compared with 2004, the sector GAV had posted, in 2013, a 9.6-fold increase.

That is the equivalent of an average rise of 28.6 percent per year. By comparison, and leaving aside the revenues for betting and lotteries, given their small weight in the overall sector performance, the total revenues generated in casinos had increased 8.6 times. That still represents a remarkable performance even if the annual average trails the GAV annual average by some 1.5 percentage points.

MOP993.8 mlillion average daily revenue from the gaming sector

H

ong Kong-listed restaurant operator Future Bright Holdings Ltd saw its third quarter turnover rise 8 percent year-on-year to HK$212.6 million (US$27.4 million) but its gross operating profit margin decreased considerably as the group recorded losses for supporting its food and souvenir business in the period.

The core of Future Bright’s turnover, the food and catering business, has seen a rise of 5.3 percent year-on-year to HK$196.3 million for the third quarter ended September 30 – a result recorded when the major income contributor, the group’s Japanese restaurants, saw a drop of 5.1 percent to HK$92.4 million. The Chinese and Western restaurants still posted growth in their businesses, said the group in unaudited results filed with the Hong Kong Stock Exchange on Monday.

The industrial catering segment registered a sharp rise of 166.7 percent to HK$10.4 million for the third quarter, the results show.

Future Bright explained that the increase seen in the turnover has been largely due to contributions by the group’s additional restaurants both in Macau Airport and the new campus of the University of Macau on Hengqin.

The group’s gross operating profit for the third quarter was HK$47.5 million, while its gross operating profit margin decreased considerably by 16.4 percent to 22.3 percent.

Apart from the increases in direct

operating expenses of the group’s food and catering business, Future Bright attributed the gross operating loss of some HK$21.1 million in the third quarter in the food souvenir business segment as the factor weighing on profit margin. The group incurred expenses on advertising, rentals and labour for the new shops selling souvenir biscuits.

For the first nine months of this year, Future Bright’s turnover reached HK$631.6 million, a rise of nearly 17 percent compared to the same period last year.

The group also reported that its gross operating profit for the January – September period was HK$204.8 million, while noting that it expected the higher costs involved in managing its food souvenir shops and new restaurants in Huafa Mall

in Zhuhai to pressurise the group’s profit margin for the second half of this year.

Future Bright, whose managing director is local legislator Chan Chak Mo, said in the results that it is in the “final stage of negotiation” to obtain a Japanese ramen restaurant franchise for 10 years in Macau, Hong Kong and Guangdong.

During the third quarter, the group has already successfully secured the franchise to operate the South Korean-originated ‘Mad for Garlic’ and ‘Bistro Seoul’ restaurants for 10 years in Macau, Hong Kong and Guangdong. The restaurant operator has also obtained the franchise to run ‘Pepper Lunch’ restaurants for 10 years in Macau (other than in the Cotai area) and Guangdong in the period.

High-level meeting on Chinese medicine culture

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high-level meeting on Chinese medicine culture is to be held in the city tomorrow and Friday. The meeting is part of the Tai Wu World Cultural Forum of China, currently the only organisation termed as a forum in China.

Three forums in three different themes on traditional medicine will be held during the two-day meeting.

In addition, one high-level summit conference, on how to make use of Macau as a platform for developing

the Chinese medicine industry, will be held.

The organiser estimated that more than 1,000 scholars - elites from enterprises and the media from nearly 20 countries - will attend the meeting, including the Chinese medicine masters and some 50 experts from China and overseas.

The assistant general manager of the meeting hosts - Nam Kwong (Group) Company Ltd’s Song Xiaodong - perceives that the special

region has its own advantages for developing traditional medicine, as the concepts and skills pertaining to Chinese medicine are well- preserved and passed down in Macau.

On the other hand, he believes that the government has addressed the issue of developing traditional medicine a lot, and sees the industry as one of the important fields in achieving a diversified economy for Macau.

K.L. with Xinhua

Business Daily | 5

November 12, 2014

Macau Genting Singapore Q3 core profit slumps 27 pct Core profit at Genting Singapore slumped 27 percent in July-September, hit by a drop in revenue from VIP players with the company warning of significant challenges in the Asian gaming and tourism industry due to an economic slowdown. Gaming revenue dropped 21 percent, with core earnings declining to S$253.9 million ($196 million) in the third quarter ended September. This was below an average estimate of S$315.6 million in a Reuters survey of five analysts. “The Asian gaming and tourism industry is experiencing significant challenges in the face of economic slowdown in our major visitor markets and other environmental factors,” the company, which is controlled by Malaysia’s Genting Bhd, said on Tuesday. Reuters

DSAJ: Domestic violence to be public crime

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he domestic violence law that is being drafted will list wrongful conduct as a public crime which will allow public prosecutors to take legal action against the offender without recourse to the victim, says Leong Pou Ieng, deputy director of the Legal Affairs Bureau (DSAJ).

The previous draft listed the crime as a semi-public offence in

which the offender would only be held responsible if the victim pressed charges. It drew great opposition from social groups that pointed out that the victims of domestic violence are usually too terrified to speak out or scared of ‘losing face’ because of family pressure.

When asked why the government had changed its stance, the DSAJ deputy director said that they had

Shopping Festival to diversify Macau visitors

listened to public opinion and that the government agrees with the social groups that authorities need to intervene when physical harm is very serious.

Ms. Leong added that currently the drafting process is entering its final stage and is expected to be finished within this month, following which it will be handed to the Legislative Assembly within

Nu Skin cuts forecast, denies SEC probe

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O

rganisers of the 4th Macau Shopping Festival hope the booming retail sector of Macau will become another attraction for tourists to Macau.

Ms. Terry Sio, president of the Macau Shopping Festival 2014 Organising Committee, and president of the Rainbow Group, said that dropping gaming revenues inevitably hurt the retail sector, especially high-end luxury goods sales. But they were hoping the shopping festival could attract more tourists into town and help diversify the industry. A ‘Lucky Draw Upon Arrival’ and discount offers spread around many local

shops are the main highlights of this year’s event.

Vincent Tung, general director of the organising committee, disclosed that around 30 million patacas were allocated to organising the festival, which they hope will generate at least 20 percent increase in revenues through the event.

A total of 17 organisers joined hands, including City of Dreams, Galaxy, ICBA Macau, New Yaohan, One Central, etc. The event is coorganised by the Macau Government Tourist Office.

The fourth edition of the Macau Shopping Festival will be held from December 3 to 31.

this year.

She stressed that no matter a one-off action or repetitive abuse, once physical injury is inflicted it will be regarded as public crime.

But they will be careful to draft the definition of ‘domestic violence’ not to include minor family conflicts in order to achieve the real purpose of the legislation, which is to protect the victim of violence.

u Skin Enterprises Inc, a direct seller of anti-ageing and nutritional products, has reported a 38.4 percent drop in quarterly profit as sales nearly halve in Greater China, its largest market.

The company’s net income fell to US$68.3 million in the third quarter ended September 30 from US$110.9 million, or $1.80 per share, a year earlier.

Revenue from Greater China comprising mainland China, Hong Kong, Macau and Taiwan - plunged 49.6 percent.

The company cut its profit and sales forecast for the current quarter as a strong dollar compounds troubles in China, and denied a report that it faces a U.S. regulatory investigation.

Shares of the company fell as much as 21.1 percent. Probes Reporter, an online publisher of investment research, said the U.S. Securities and Exchange Commission was investigating the company. The website did not say what the investigation was about.

“To our knowledge, the SEC has not opened a formal investigation nor made any request for the production of documents,” Nu Skin Chief Executive Truman Hunt said in a conference call with analysts last week.

Nu Skin was fined US$540,000 in March by a Chinese regulator for illegal sales and for misleading local consumers about the potential benefits of its products. The company also had to suspend distributor recruitment drives there until May.

Sales in Greater China nearly halved in the third quarter ended September 30.

The region accounted for 35.5 percent of the company’s total revenue, down from 50 percent a year earlier.

The number of distributors in Greater China declined 57 percent.

But business was picking up.

“In August, September, October we saw nice upticks in numbers of meetings and numbers of participants in promotional meetings in China,” Hunt said.

“We obviously don’t know where currencies are headed but feel like the business is stabilising in China to the point where we can potentially generate growth”.

Nu Skin cut its fourth-quarter sales forecast to US$590 million-US$610 million from US$650-US$675 million, blaming a stronger dollar.

The company also cut its profit forecast to 72-77 cents per share from US$1.00-US$1.05. Analysts on average were expecting a profit of US$1.01 per share on sales of US$658.5 million, according to Thomson Reuters.

Third-quarter net income slid 38.4 percent to US$68.3 million, or US$1.12 per share. Total revenue fell 29.7 percent to US$638.8 million.

Analysts had expected a profit of 92 cents per share on revenues of US$629.25 million.

As at last week, Nu Skin’s stock had lost about 63 percent of its value since allegations emerged in China.

Reuters

6 | Business Daily

November 12, 2014

Gaming

SJM’s drop surprises investors Analysts didn’t expect to see the one-time leader of Macau’s gaming market underperform and miss consensus. Some are maintaining a hold rating, while others are lowering estimates Sara Farr

sarafarr@macaubusinessdaily.com

S

JM Holdings Ltd has performed well under analysts’ consensus by between 5 and 8 percent, posting a 16 percent drop in its third quarter results to HK$1.5 billion compared to a year ago. This is now encouraging analysts to revise down estimates for the company.

Credit Suisse wrote in its note to clients that the ‘disappointment was mainly due to a provision of HK$43 million for the additional staff bonus announced in August, and a HK$20 million one-off mark-to-market loss from trading securities.’

Union Gaming analysts lowered EBITDA estimates for the whole of 2014 to HK$8.2 billion from the previous HK$8.5 billion, while that for 2015 has been adjusted to HK$8.7 billion from HK$9.2 billion; 2016 was lowered from HK$8.4 billion to HK$8.1 billion.

In addition, analysts are maintaining their hold rating on SJM shares ‘with VIP now weak for more than half a year (and getting weaker) and the mass market taking a more recent downturn,’ the note reads. Headwinds will likely persist, analysts warn.

Meanwhile, SJM is moving five tables in the VIP section of its Grand Lisboa property to mass and converting the upper floor of the premises to electronic gaming machines, which is slated to be ready by January next year. Also, the company’s Jai Alai casino could open sometime in 2015 depending on government permits.

‘In a slower market growth environment, casinos need to be more proactive in growing their businesses through yield enhancement efforts, player data-mining and offering of non-gaming attractions,’ analysts at Credit Suisse wrote. This, however, will likely put SJM at a disadvantage because the casino company lacks ‘non-smoking facilities and little control over how its franchise casino performed,’ analysts said.

Other analysts are remaining on the sidelines. Cameron McKnight, senior analyst at Wells Fargo Securities, LLC wrote in his latest note to clients that Beijing’s policy settings on the visa restrictions to mainland visitors, tightening of credit and anti-corruption drive are “negatively affecting growth,” which in turn is contributing to the slowdown in Macau.

Speaking to media yesterday, SJM CEO Ambrose So Shu Fai said

Chinese President Xi Jinping’s visit to Macau is likely to impact the number of tourists, during which time the territory could expect to welcome less visitors.

“This year, we are seeing a decrease [in gaming revenues] because last year revenues were very high. Take SJM, for example; we had a recordhigh October last year. It’s not easy to compare [this year’s results] with a record [month],” Mr So said.

No certainties All gaming operators suffered declines with the slow growth rate of Macau’s gaming industry in October – although to different degrees. Ambrose So Shu Fai, CEO of SJM Holdings Ltd, told media yesterday that mainland Chinese visitors spending less has had an impact on the company’s business. However, “we expect that in the second half of next year, Macau’s gaming market will start to recover,” he said. “We certainly hope so; but no-one can predict for sure.”

He remains optimistic that the Christmas and Chinese New Year holidays will boost business although the next two months could see decreases in gaming revenue when compared to last year.

“For the whole year, there could be a slight increase when compared to last year,” Mr So added.

Galaxy revenues increase 6pct in Q3 The company’s chairman, Lui Che Woo, said he remains “very optimistic” about Macau’s medium and long-term prospects Sara Farr

sarafarr@macaubusinessdaily.com

A

t a time when the majority of casino operators in Macau are reporting decreases in third quarter financial results, Galaxy Entertainment Group recorded a revenue increase of 6 percent to HK$17.3 billion in the third quarter of the year, over that of the same period in 2013.

The company yesterday announced its unaudited financial results for the three months ended September 30 in a filing with the Hong Kong Stock Exchange.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 1 percent to HK$3.3 billion for the company, while that of Galaxy Macau alone increased by 4

percent to HK$2.4 billion.

And in the 12 months to the end of September, adjusted EBITDA rose 22 percent to HK$14.1 billion.

Revenues for the company’s Cotai property also increased considerably by 11 percent to HK$11.1 billion in the third quarter, year-on-year.

“Our results represent a strong performance in the face of strong macro headwinds, underlining the enduring appeal of our properties and management’s rigorous focus on growing revenues and driving efficiencies across the business,” Galaxy chairman Lui Che Woo said of his company’s financial results.

Business at the company’s StarWorld property on the

Peninsula didn’t fair as well, with revenues decreasing 0.5 percent to HK$5.7 billion in the third quarter of 2014 over that of the previous year. Its adjusted EBITDA also registered a 0.7 percent decrease to HK$904 million year-on-year.

“We remain very optimistic about Macau’s medium to longer prospects and [are] excited that Galaxy Macau Phase 2 is on schedule to complete on time and on budget by mid-2015,” Mr. Lui added.

Also on schedule is the company’s redevelopment works of Grand Waldo, the conceptual plans for which are slated to be announced in January. “The emphasis will be family-friendly leisure and

entertainment for the middle class supported by many local Macau businesses,” he added.

Site investigation works for Galaxy’s Cotai Phases 3 and 4 will “commence shortly” and the resort is expected to cost between HK$50 million and HK$60 million.

Galaxy had as much as

HK$11.5 billion cash on hand at the end of September and was virtually debt free with a net cash of HK$11.2 billion, according to the report.

In addition, the company paid another special dividend totalling HK$1.9 billion to shareholders on October 31.

That’s HK$0.45 per share.

Business Daily | 7

November 12, 2014

Gaming

Vegas club picks up tab for Caesars hotel loan

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aesars Entertainment Corp, the casino owner saddled with US$24 billion in debt, has a new source of income – from a nightclub on the Strip – to help refinance a loan.

The growing importance of bar tabs and nightlife was on display one recent Tuesday evening at Drai’s Nightclub atop the Cromwell Hotel, a newly refurbished Las Vegas Strip property owned by Caesars.

Dance music was thumping. Women in bikinis and sailor caps gyrated on platforms, while young people played volleyball in the pool. At the centre of it all was Victor Drai, a 67-year old Moroccan-born bar owner who has literally moved from the basement to the penthouse in Sin City’s burgeoning nightclub business.

His club, which opened in May, stands to gross as much as US$60 million in its first year of operation, with a profit margin of 50 percent, according to his business partner, Michael Gruber.

The money is so good that Caesars, which is struggling to remain solvent, may refinance a US$185 million loan taken out two years ago to remodel the hotel and build the club, he said.

Drai’s ascent, and the hotel’s good fortunes, show the growing importance of sales from places other than slot machines and blackjack tables in Las Vegas, where food and beverage sales, at US$3.6 billion, exceeded the US$2.9 billion taken in

by slot machines last year, according to the University of Nevada’s Centre for Gaming Research. Las Vegas visitors, poised to reach a record 40 million-plus this year, are looking for more social, and less sedentary, entertainment.

“The market is becoming younger, increasingly international, more affluent, and spending more on food and drink,” said Robert Shore an analyst at Union Gaming Group in Las Vegas. “These are clearly not slots players.”

No slots Mitch Garber, chief executive officer of Caesars Growth Partners, the Caesars unit that owns the Cromwell, declined to comment on the nightclub’s profits or a refinancing. Garber sang Drai’s praises, though, calling him “an awesome club operator – he’s just got this great gift for creating a vibe and a mood.”

Caesars, the largest U.S. owner of casinos, is struggling to cope with a slow recovery in gambling spending nationally and the debt it took on in a 2008 leveraged buyout. The company, which is in restructuring talks with lenders, reported a wider third-quarter loss today after markets closed.

Caesars declined 7.6 percent to US$10.66 in extended trading after the results. The shares fell 4.6 percent to US$11.54 at the close in New York, and have lost 46 percent this year.

Vegas clubs make money several ways, starting with the cover charges, typically $35 for men and $25 for women. There’s often a liquor mandate, compelling a customer who wants to reserve a table or cabana to buy anywhere from several hundred to several thousand dollars of booze – deposits required.

Spraying champagne At Drai’s, a 10-seat booth just off the dance floor on a Saturday night has a US$4,000 minimum for food and beverage spending. A 750 millilitre bottle of Belvedere vodka, about US$30 in a store, is US$595. Packages of champagne intended for spraying, not drinking, begin at US$2,000 for 10 bottles.

One customer - Drai’s staffers won’t say who - bought 700 bottles on a visit in September.

Drai doesn’t follow the lead of clubs such as MGM Resorts International’s Hakkasan and Wynn Resorts Ltd.’s Surrender that hire superstar DJs – Tiesto and Calvin Harris were recently in town – to draw crowds. He’s been booking mostly lesserknowns. Instead, it’s the setting that’s supposed to be the attraction, including views of the Bellagio’s fountains and the Paris Hotel’s faux Eiffel Tower down the street.

“It’s the aesthetics,” Drai said. “If you build a beautiful place, people find it.”

His club, which cost

US$75 million, has a dance floor that opens up to a swimming pool, which is lined with 35-foot palm trees. Some of the 25 private cabanas have plunge pools and their own bathrooms.

Drai spent $5 million on the lighting and sound systems.

He leases the space from the Cromwell in exchange for a cut of the profits.

A key to Drai’s success is his 35-member team of club hosts, said Marco Benvenuti, co-founder of Duetto, a company that helps casinos monitor nongambling spending and crafts promotions for customers.

These employees work waiters, bellmen, cab drivers, social media and other sources to find club-goers willing to spend big.

“They have the right connections and channels,” Benvenuti said. “They just know all the right places to tap.”

Hosts even chat up store clerks, said Ryan Craig, a former Wynn Resorts employee who manages Drai’s club. The reward for referrals is free admission and drinks.

The battle to get the best employees has become so fierce that Wynn Resorts founder Steve Wynn called Drai earlier this year and told him not to come by any of his properties because he didn’t want him poaching his staff, according to Drai, who said he told his people not to let Wynn in his place.

Wynn, through a spokesman, declined to comment.

After Hours lounge Drai, who is known locally as the ‘King of Clubs,’ has been a fixture in the bar scene since opening his first in 1999 in the basement

of the Barbary Coast - in the building that’s now the Cromwell.

He joined Wynn Resorts in 2007, parting ways with the company over a management dispute. Tryst and XS, venues Drai created and ran for Wynn, are still popular.

Drai’s After Hours, which operated for a while inside Bally’s, is back in the Cromwell basement. People can start at the rooftop pool party during the day, hit the adjacent disco at night and go downstairs at 1:00 a.m. to After Hours, where, if they have the stamina, they could stay until 10:00 a.m.

In keeping with the recent Tuesday night Yacht Club theme, Dan Kish, 26, and Jaron Washington, 25, swimming instructors from Chicago, wore board shorts and oxford shirts. Washington said he’d spend “three digits,” sharing bottle service costs with friends.

Sperrys, fairies “All I want to do is wear my Sperrys and talk to some fairies,” he said, referring to his boat shoes and the women he was soon chatting up.

Just how long this party can last is anyone’s guess.

“The club business is a growing segment on the Strip but is also very competitive,” said Alex Bumazhny, an analyst at Fitch Ratings in New York. “It is only good until the next guy builds something bigger.”

Drai said he’s just getting started, predicting he’ll double his business in a few years, making his perhaps the top-grossing bar in the nation.

“I could do US$120 million,” he said.

Bloomberg

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November 12, 2014

Greater China

China-US IT free trade deal steps ahead The ITA, which went into effect in 1997, now covers more than US$4 trillion in annual trade

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hina and the United States have reached a breakthrough in talks on eliminating duties on information technology products, a deal that could pave the way for the first major tariff-cutting agreement at the World Trade Organisation in 17 years.

The breakthrough would allow the “swift conclusion” on talks to expand the Information Technology Agreement (ITA) at the WTO in Geneva later this year, United States Trade Representative Michael Froman told reporters yesterday. It would reduce global tariffs on such products as medical equipment, GPS

This is encouraging news for the U.S.-China relationship Michael Froman United States Trade Representative

devices, video games consoles and next-generation semiconductors.

“This is encouraging news for the U.S.-China relationship,” Froman said on the side-lines of meetings of the Asia-Pacific Economic Summit (APEC) in Beijing.

“It shows how the U.S. and China work together to both advance our bilateral economic agenda but also to support the multilateral trading system.”

The ITA, which went into effect in 1997, now covers more than US$4 trillion in annual trade, according to the U.S. government.

Participants to ITA commit to eliminating tariffs on such items as computers and computer software, telecommunication equipment and other advanced technology products.

An expanded ITA would eliminate tariffs on about US$1 trillion worth of global sales on IT products, Froman said. More than 200 tariff lines will be reduced to zero under the new agreement.

U.S. Chamber of Commerce Executive Vice President Myron Brilliant immediately welcomed the announcement.

“With so many new products created since the ITA was concluded two decades ago, expanding the agreement’s coverage is imperative,” Brilliant said in a statement. “The commercial significance of these negotiations is obvious.”

An expanded ITA would eliminate tariffs on about US$1 trillion-worth of global sales of IT products, Michael Froman (pictured) said

Talks to update the WTO pact on technology trade broke down due in the summer of 2013 due to disagreements over the scope of coverage of what listed products would be covered by the agreement, said Froman.

“Since that time, the United States and China have been working to close our differences,” Froman said.

The United States and other countries were hopeful that China would agree to an expanded ITA

agreement, which requires signatories to eliminate duties on some IT products, during the APEC summit ending yesterday.

Washington has blamed China, the world’s biggest exporter of IT products, for derailing the talks by asking for too many exemptions.

“While we don’t take anything for granted, we’re hopeful that we’ll be able to work quickly to bring ITA to a successful conclusion,” Froman said.

Reuters

Xi opens APEC calling for collective effort The meeting is expected to launch the FTAAP process, release a statement on the 25th anniversary of the APEC, and make a blueprint to lay foundation for all-round connectivity in the Asia-Pacific

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resident Xi Jinping urged concrete actions to facilitate free trade, improve connectivity and pursue innovation at the APEC Economic Leaders’ Meeting in Beijing yesterday.

Hosting the 22nd Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Beijing, Xi stressed that the APEC members have made important consensus on the launch of the Free Trade Area of the Asia-Pacific (FTAAP) process, promotion of connectivity as well as pursuit of innovation and development.

This year marks the 25th anniversary of the APEC, which has been a top-level and most representative cooperation mechanism that covers a wide range of areas in the Asia-Pacific.

“How can we resolve the risks that regional economic integration goes fragmented? How can we seek new growth momentum in the post-

financial crisis era? How can we break the financing bottleneck for connectivity development?” Xi said.

Xi called on the APEC to lead the drive, breaking down barriers and speeding up the FTAAP process to realize greater regional economic integration.

Xi suggested bolder reform and innovation in governance, industrial development and technologies for the region to seek new growth momentum.

New economic situation also requires that the region speed up improving connectivity and infrastructure, Xi said.

Leaders of member countries of Asia-Pacific Economic Cooperation (APEC) pose for a family photo at the International Convention Center at Yanqi Lake in Beijing

“To realize the plans we have set, the APEC needs mutual trust, inclusiveness, collaboration and mutual benefit,” he said.

The President called for collective efforts to deal with global challenges, such as pandemic diseases, food and energy safety as well as effective cooperation platforms.

The APEC can be an institutional platform to promote integration, a policy platform to strengthen experience exchanges, an open platform to fight against trade protectionism, a development platform to deepen economic and technological cooperation and a connection platform to promote connectivity, he said.

He announced at the meeting that China will donate US$10 million for institutional development and capacity building of the APEC and provide 1,500 training places for developing APEC members.

Xinhua

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November 12, 2014

Greater China

Alibaba’s headquarters in Hangzhou

Alibaba’s Singles’ Day harms merchants’ margins There is no obligation on merchants to take part in the festival, but if merchants do, the only discount option is 50 percent or more

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resh from pulling off the world’s largest IPO, China’s Alibaba is set to impress Wall Street with record sales on Singles’ Day, the year’s biggest online festival, but merchants complain that they bankroll the e-commerce giant’s big day.

Alibaba turned the Singles’ Day celebration, November 11, into an online shopping festival in 2009, copyrighting the “Double 11” term three years later after recognising its commercial potential.

Last year Alibaba reported sales of US$5.75 billion on the day, and this year merchants believe it is aiming for a headline-grabbing US$8 billion or more in gross merchandise volume (GMV).

It looks likely to comfortably exceed that estimate, since before midday on Tuesday Executive Chairman Jack Ma told China’s official state broadcaster

it had already hit 30 billion yuan (US$4.9 billion).

Such numbers have attracted rivals such as JD.com, Amazon.com, Vipshop Holdings, Suning Commerce Group and Wal-Mart Stores’ Yihaodian, and Chinese Premier Li Keqiang has praised the event as “a major highlight of consumption growth”.

But merchants told Reuters they had felt pressure from Alibaba’s Tmall to boost the day’s figures with heavy discounts and delayed recognition of earlier sales.

There is no obligation on merchants to take part in the festival, but if they do, the only discount option is 50 percent or more.

On Tmall, merchants say that if they don’t price products lower than in their stores on rival sites, Alibaba pushes them down the sales

page, effectively limiting their access to hundreds of millions of potential customers.

Delayed sales Alibaba is employing what it calls a “pre-sale initiative”, under which merchants advertise products at their discounted Singles’ Day price from as early as October 15. Tmall lets customers put down a deposit for the order but only allows merchants to process the full payment and ship the products on November 11.

The company said it had used such a scheme since 2012, since it helps merchants plan the logistics of shipping such large volumes of goods.

Merchants said this year it was used much more widely, and was aimed at boosting Alibaba’s figures.

The efforts by e-commerce sites to boost the figures on Singles’ Day haven’t gone unnoticed by regulators.

Last week, Chinese media reported that the State Administration for Industry and Commerce took aim at 10 of China’s biggest e-commerce firms, warning them to not engage in activities like artificially jacking up prices in the run-up to the event so they could claim huge discounts when those prices were slashed.

Merchants said Alibaba ensures discounts are genuine by having vendors discount their products from their lowest price within the 60 days before and after Singles’ Day. Though some vendors lament the pressure on their margins, Alibaba says the festival has grown from just 27 participating vendors in 2009 to 27,000 now.

Reuters

US$8 bln Alibaba promotion Singles’ Day expected gross merchandise volume

Aluminium falls as Chinese product exports strengthen Trade data over the weekend showed a strong pace of Chinese unwrought aluminium and products exports in October, up 12.5 percent for the year to date Eric Onstad

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luminium prices fell on Monday after data showed heavy exports of aluminium products from China, while nickel declined after inventories rose to a record high.

Three month aluminium on the London Metal Exchange ended down 1.05 percent at US$2,033.50 a tonne.

Volume was the heaviest on the LME at around 16,500 lots versus secondplace zinc at around 2,250.

“This is one of the bear arguments for aluminium. Yes, there’s a deficit in the world outside China, but this will be met by rising (Chinese) product exports,” said Robin Bhar, head of metals research at Societe Generale

in London.

October exports of 380,000 tonnes were down 5 percent from September but up 19 percent year-on-year and will increase in coming months as Chinese smelter capacity expands, said Ivan Szpakowski, an analyst at Citi in Shanghai.

“This growth in Chinese exports has had a notable weakening impact on Asian aluminium markets, and cargoes are being diverted to the Middle East, Turkey and southern Europe,” he said in a note.

LME copper was last bid down 0.82 percent at US$6,660 a tonne.

Copper earlier hit a session high of US$6,726.25 a tonne, its strongest

since November 4, after data showed Chinese copper imports improved.

I’m certainly not calling a restock cycle starting just yet, but with consumer inventories relatively low and prices where they are, there are certainly chances of one developing,” analyst Daniel Hynes of ANZ in Sydney said.

Workers at Peru’s largest copper mine began an indefinite strike on Monday, although the union and the Antamina mine provided differing accounts on the impact of the dispute on operations.

In other metals, nickel slid 1.13 percent to end at $15,250 a tonne after further gains in stocks.

LME inventories climbed 2,112 tonnes to a record of 389,334 tonnes, showing the market was well supplied despite a ban on ore shipments from top exporter Indonesia.

Reuters

KEY POINTS Chinese aluminium exports climb, weighing on market China copper imports up 2.6 pct in Oct to 400,000 T

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November 12, 2014

Greater China Alibaba beats sales record Alibaba Group Holding Ltd said about US$2 billion worth of goods were sold on the e-commerce giant’s websites within the first hour and 12 seconds of its annual shopping festival and exceeded the 2013 US$5 billion just after half day. Alibaba did US$3.1 billion in business in half a day during last year’s festival, equivalent to what it sold in the full day in 2012, but this year they reached US$6 billion. Half of the US$2 billion gross merchandise volume this year was sold within the first 18 minutes after the “11.11 Shopping Festival” opened, the company said.

October coal output up China’s coal production rose 2.5 percent from a year ago to 330 million tonnes in October, according to an industry website that cited data from the National Bureau of Statistics. Total output in the first ten months of 2014 stood at 3.42 billion tonnes, up 0.3 percent from a year ago, according to website Coalstudy. com. October’s production was up 13 percent from a month ago, suggesting some previously-shut mines were taking advantage of the recent rise in domestic coal prices to re-start operations, traders said.

COMAC signs deal for 30 jets Chinese state-owned plane maker Commercial Aircraft Corp of China (COMAC) has signed an initial agreement to sell 30 of its C919 singleaisle commercial jets to the financial leasing arm of China Merchants Bank, a person with direct knowledge of the deal told Reuters yesterday. The order, sealed at China’s premier air industry trade show in Zhuhai, lifts COMAC’s order book for the C919 to 430, mostly from domestic companies. Still in development, the C919 will be the first Chinese-built jet of its type, targeted at eventually competing with Boeing Co and Airbus Group NV.

Big fund to roll out Silk Road plan Details remain sketchy, but Xinhua said the plan would focus on China’s Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative

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hina, already at the centre of world trade, plans to spend billions of dollars to revive intercontinental land routes and develop maritime links to expand commerce and give it more weight in a freight system dominated by European shipping lines.

President Xi Jinping set out his vision during a September 2013 visit to Kazakhstan and on Saturday he announced an initial US$40 billion for a “Silk Road fund” to invest in infrastructure and industrial and financial cooperation, aiming to “break the connectivity bottleneck” in Asia.

The modern-day Silk Road starts at a railway station encircled by container depots in the village of Tuanjie (which means “solidarity”) in Chongqing, a city of 30 million where laptop maker Hewlett Packard and Apple supplier Foxconn have factories, among others.

The first stirrings of this new Silk Road predate Xi’s plan: a direct train to Duisburg in Germany left Chongqing in 2011.

A map published by state news agency Xinhua envisages two routes: an overland one snaking through Kazakhstan, Kyrgyzstan and Iran en route to Vienna in Austria; and a maritime route from Chinese ports to Belgium’s Antwerp.

Details remain sketchy, but Xinhua said the plan would focus on China’s Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative, building roads, railways, ports and airports across Central and South Asia.

One consideration is the fact that the biggest container shipping lines are European, such as AP Moeller Maersk A/S. There are more than 240 Chinese shipping firms but they carry only

President Xi Jinping set out his vision during a September 2013 visit to Kazakhstan and on Saturday he announced an initial US$40 billion for a “Silk Road fund”

a quarter of the country’s trade, the Ministry of Transport said in September, when the government announced tax and regulatory reforms to modernise the sector.

Based on Reuters calculations, state-backed firms have already invested at least US$5 billion in transport infrastructure over the past decade along routes that run through Central Asia and weave around Sri Lanka as well as along the Red Sea. The maritime route links the Chinese ports of Fuzhou and Guangzhou with ports in Indonesia, Sri Lanka, Kenya and Greece.

Loss-making Firms such as China Merchants Holdings, China Railway Construction Corp, Cosco Pacific and China Communications Construction Company have built or manage about 10 ports and have offered investment in at least five rail projects in Kyrgyzstan, Kenya and elsewhere.

Firms flock to Zhuahi’s aviation air show Crowds gathered to take photos with the double-decker A380 superjumbo, which Airbus is showing off at the show Bill Savadove

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lobal aviation firms flocked to China yesterday to show off their wares as economic development and an expanding middle class promise a bonanza in one of the world’s fastest-growing aircraft markets.

Chinese defence companies and the People’s Liberation Army’s air force are also putting the latest weaponry on parade at the country’s premier Zhuhai air show this week, including the new J-31 stealth fighter and its biggest-ever military transport plane, the Y-20.

For foreign companies, the air show offers a chance to tap a market in which air travel grew by an annual 11 percent last year to 350 million passengers -- a gold mine for plane

makers such as Airbus and Boeing.

“This is a tremendous market,” Briand Greer, president of aerospace for Asia-Pacific at US conglomerate Honeywell, told AFP. “Think about just that impact of 500 million more people flying,” he said, referring to the estimated number of people China expects to shift from rural areas to cities.

Just days before the show, Europe’s Airbus announced a US$10 billion deal for China Aircraft Leasing Co. to buy 100 planes from its A320 family.

The company says China is poised to become one of the world’s largest aviation markets, with Chinese deliveries already representing 25 percent of its global production.

Rival Boeing of the US forecasts China will need 6,020 new airplanes valued at US$870 billion over the next 20 years.

China’s home-grown ambitions But China wants part of the multibillion dollar market to go to its homegrown passenger planes.

Commercial Aircraft Corp. of China (COMAC) is developing a 158-168 seat narrow-body plane, the C919, and the 78-90 seat ARJ21 regional jet, which is scheduled to fly at the show.

It is also seeking suppliers to build the wide-body C929 passenger plane

China’s Exim Bank financed 85 percent of the cost of the US$361 million first phase of Sri Lanka’s Hambantota Port, which was constructed by China Harbour Engineering. A Chinese-Turkish consortium led by China Railway Construction built the US$4 billion Ankara-Istanbul high-speed rail line in Turkey.

The train services from Chongqing to Duisburg, and from other Chinese cities such as Chengdu and Wuhan to Europe, are loss-making and subsidised by local governments in China to support demand, according to Chinese rail officials.

But neither cost nor political risks along some of the routes seem to be important for the Chinese firms involved.

China Ocean Shipping Group, wants to use its extensive trade network to help increase ChongqingDuisburg rail volumes and is ready to launch more shipping routes.

Reuters

over the next decade, expanding its ambitions and rivalry with Boeing and Airbus.

Despite the optimism, industry officials see problems in the shortterm: a slowdown in the economy, strict controls on airspace and a corruption crackdown.

China’s economic growth -- which has a direct correlation with air traffic -- eased to 7.3 percent in JulySeptember, the lowest since the depths of the global crisis in early 2009.

Massive flight delays across the country in July, blamed on military exercises, cast the spotlight on another problem -- controls on airspace that leave only 20 percent of China’s skies open to civil flights.

A crackdown on corruption launched by China’s leader Xi Jinping after he came to power in late 2012 has also hit the aviation market. Government officials stopped flying higher classes, prompting two Chinese airlines to cut or remove first-class seats.

The graft crackdown has also affected the small but growing market for private jets in China, where owning an aircraft is often viewed as a needless luxury.

AFP

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Asia

Abbott says G20 must prove its relevance in Brisbane G20 finance ministers agreed in meetings this year to work towards raising the level of their combined economic output by at least two percent above the currently projected level

Russian President Vladimir Putin (R) speaks with Australian Prime Minister Tony Abbott (L) during their meeting on the sidelines of the APEC summit

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ustralian Prime Minister Tony Abbott yesterday said G20 leaders must prove the forum remains relevant by producing concrete outcomes from their summit this weekend, warning against “hiding behind lofty words”.

The world’s most powerful economies have a patchy record in delivering anything meaningful from their annual meetings but Abbott, as 2014 host, said he wanted that to change in Brisbane.

“Collectively, there is much work

to do,” he said in an opinion piece for the Australian Financial Review, ahead of the economic summit that includes the likes of US President Barack Obama and his Chinese counterpart Xi Jinping.

“The global economy remains weak. There’s a shortfall in available funds for infrastructure, a lack of employment opportunities globally and trade growth that remains disappointing. The G20’s ability to prove it can step up and act on these challenges is critical to the forum’s

relevance in the future.”

G20 finance ministers agreed in meetings this year to work towards raising the level of their combined economic output by at least two percent above the currently projected level in the next five years, relying heavily on the private sector to deliver growth and jobs.

Each country is expected to submit its detailed plans to achieve this in Brisbane.

While signing off on this is the key outcome that Abbott expects at the weekend, he said an equally important aspect of Australia’s rotating presidency was encouraging better accountability by those in charge over the decisions they make.

“There’s an equally important piece of work being done to ensure that, when leaders meet, it’s more than just a high-level talkfest,” he said.

“Australia, as G20 president this year, has worked hard to ensure that accountability -- to fellow G20 members and to the peoples we serve -- is central to our work.

“There’ll be no hiding behind lofty words and motherhood statements in Brisbane. Each nation’s domestic growth strategy will have been peer reviewed and the strategies will be published for the world to see.”

Together, it will be known as the Brisbane Action Plan.

Making the policy details publicly available “will ensure that people back in each of the G20 nations will know, straight after the summit, exactly how their leaders propose to drive new economic growth and deliver new jobs,” Abbott added.

“So there will be a domestic expectation upon leaders to deliver at home and an expectation from fellow G20 members who have resolved to hold each other accountable.”

The Australian leader added that he firmly believed that the G20 should stay focused on growth, jobs and the world’s economic governance with other issues set aside.

AFP

There’ll be no hiding behind lofty words and motherhood statements in Brisbane.

Each nation’s domestic growth strategy will have been peer reviewed and the strategies will be published for the world to see Tony Abbott Australia’s Prime Minister

Indian inflation seen cooling further The recent slowdown in inflation has largely been due to falls in local food prices

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ndian inflation is expected to slow to a record-low in October, dragged by sharp drops in food and oil prices, a Reuters poll showed, probably intensifying calls for an interest rate cut by the Reserve Bank of India.

The survey of 27 economists and analysts predicted consumer price inflation (CPI), scheduled for release today, cooled to an annual 5.80 percent in October.

If the forecast is met, it will be even lower than September’s 6.46 percent and the slowest pace of price rises since retail inflation numbers were first published in January 2012.

It would also make the RBI’s inflation targets - 8 percent by January 2015 and 6 percent a year later - appear more attainable.

Wholesale price inflation is forecast to ease to a near five-year low of 2.20 percent in October from September’s

2.38 percent, the Reuters poll showed.

This data will be released on Friday.

The recent slowdown in inflation has largely been due to falls in local food prices, which account for 50 percent of the CPI basket, and Capital Economics’ India economist Shilan Shah said it could still go lower.

“Over the coming months, we suspect that both measures of inflation will remain subdued by past standards,” Shah said.

The poll also predicted industrial production to have increased a meagre 0.6 percent in September, albeit better than August’s 0.4 percent.

A poor factory output number today will imply Asia’s third-largest economy may struggle to maintain a recent pickup in growth.

“Monetary loosening could come onto the agenda sooner than most seem to expect,” Shah said.

He said the RBI could cut its

KEY POINTS Oct retail inflation forecast to slow to 5.80 pct on the year Sept factory production seen up 0.6 pct on the year IIP and CPI data due on Wednesday, Nov. 12 at 1200 GMT WPI data due on Friday, Nov. 14 at 0630 GMT

benchmark repo rate by 100 basis points to 7.00 percent over the next 12 to 18 months.

However, some say the RBI may not want to release the monetary policy brakes in a hurry.

“These releases will point to slowing industrial activity alongside slippery inflation - a combination that will add to the growing chorus for rate cuts in December,” said Radhika Rao, economist at DBS. “But the RBI is unlikely to oblige.”

It will wait for more clarity on inflation and rates could stay unchanged until March, after the government releases its budget, Rao added.

A Reuters poll last month showed economists expect the RBI to keep its key repo rate steady at 8.0 percent well into next year, as it remains wary of a sudden surge in inflation due to a spike in food and oil prices.

Reuters

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November 12, 2014

Asia Singapore’s home resale prices rise The resale prices for non-landed private homes in Singapore rose slightly by 0.4 percent month on month in October, according to flash estimates released by the Singapore Real Estate Exchange (SRX) yesterday. When compared with last year, resale prices of non-landed private homes declined 4.5 percent.

Compared with the recent peak in January 2014, prices have decreased 5.2 percent, SRX said. The resale prices for private homes in the core central region fell 0.3 percent, while rest of central region and outside central region both increased 0.6 percent.

Aussie regulator tougher than the rest Australia’s financial regulator is happy to be considered as tougher than the rest of the world, while local lenders press the supervisor to align its standards with international peers. A major review of Australia’s financial system is due later this month. Backed by the government, it is the first major banking inquiry since 1997, which led to the creation of the Australian Prudential Regulatory Authority (APRA). Australia managed to weather the 2008/2009 global financial crisis thanks to a robust financial sector and strict lending standards.

Japan sentiment tumbles stressing tax hike delay The tax increases are part of a plan to secure more revenue for welfare spending and contain the country’s massive debt Stanley White and Kaori Kaneko

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entiment among Japanese households and service sector companies tumbled in October as a sales tax hike in April and worries about another tax increase next year prompted consumers to slash spending.

The grim data will likely fuel speculation that Prime Minister Shinzo Abe will delay next year’s sales tax increase to 10 percent because the economy is not strong enough.

Worsening sentiment is also a stark reminder of how far the economy has veered off course compared to the beginning of the year when the government claimed its fiscal stimulus spending would easily offset the impact of higher taxes.

“The sales tax hike is causing a lot of uncertainty,” said a worker at a supermarket in north-eastern Japan.

“The cost of daily goods is rising.

Heating oil costs are still high. People are cutting spending.”

The service sector sentiment index fell to 44.0 in October from 47.4 in September, a Cabinet Office survey showed yesterday, which was the lowest level in two years.

The survey focuses on workers such as taxi drivers and restaurant staff - called “economy watchers” for their proximity to consumer and retail trends. Those surveyed also turned more pessimist about the outlook two to three months from now.

The Cabinet Office downgraded its assessment of services sector sentiment for the first time since April.

“It has been six months since the first sales tax hike, and now more customers are gravitating toward shops with cheaper prices,” said a worker at a car dealership in central Japan.

Consumer confidence also deteriorated for a third straight month in October to 38.9 in October, down from 39.9 in September. It was the lowest reading since April.

Abe is supposed to decide by the end of this year whether to raise the sales tax to 10 percent from 8 percent next year.

However, there is speculation he will delay the plan and call an early election, after the initial sales tax increase in April from 5 percent helped push the economy into its deepest slump since the 2009 global financial crisis.

The government has said it will examine how quickly third-quarter gross domestic product rebounded to help it decide whether to raise the tax again.

The data is due on November 17, and some media say Abe could decide to delay the move after the figures are released.

Reuters

S.K. store sales slip again

Hyundai, Kia Motors to buy back shares

South Korea’s top department and discount store sales both fell for a second straight month in October compared with a year earlier, preliminary government data showed yesterday, but the pace of the declines slowed considerably from September. Sales at department stores run by Hyundai Department Store Co Ltd, Lotte Shopping Co Ltd and Shinsegae Co Ltd slipped by 0.9 percent on-year, the finance ministry estimated. This compared with a 6.3 percent drop seen in September in annual terms when consumers shut their wallets after splurging for the autumn Chuseok holidays.

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Singapore oil trader prepares lawsuit A creditor of bankrupt OW Bunker is preparing a lawsuit in Singapore seeking to reclaim its money, court documents showed, as the fallout from the collapse of the world’s largest marine fuel supplier begins to ripple through the sector. In a separate case, court documents showed a second ship fuel company, Vanguard Energy Pte Ltd, filed for bankruptcy in the city state on October 29, a week before OW Bunker said it had been driven to insolvency by suspected fraud at its Singapore trading unit. The market was thrown into turmoil after OW Bunker bankrupt in Denmark on Friday.

Indonesia’s motorbike sales fall Indonesia’s motorbike sales in October fell 5.4 percent from a year earlier, industry data showed yesterday. On a monthly basis, sales were down 4.4 percent. There were 675,652 motorbikes sold in Southeast Asia’s biggest economy in October, according to the Indonesian Motorbike Industry Association (AISI). For October, sales were led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Suzuki Motor Corp, the data showed.

yundai Motor Co. and Kia Motors Corp. will buy back a combined 670 billion won (US$616 million) of stock after their purchase of a Seoul property for three times the assessed price spurred a sell-off.

Hyundai, South Korea’s largest automaker, will buy back 2.2 million common shares and 652,019 preferred shares, while affiliate Kia will buy back 4.05 million common shares, both at Monday’s closing prices, according to separate regulatory filings by the companies today.

The announcement comes almost two months after the automakers and Hyundai Mobis Co. won an auction for prime property in South Korea’s central Gangnam district, offering triple the assessed price to state-run Korea Electric Power Corp. Hyundai

shares have slumped 24 percent since the deal was announced on September 18 through yesterday, compared with a loss of 5.1 percent for the benchmark Kospi Index.

Last month, Hyundai said on behalf of the land deal consortium that the three companies, all part of billionaire Chairman Chung Mong Koo’s automotive group, won’t issue debt and will use cash to fund the 10.6 trillion won purchase.

This damped investor optimism that the companies may increase their dividend pay-outs. The government had announced plans in August to encourage businesses to increase wages and dividends by levying a 10 percent punitive tax on corporate cash hoards.

Both Hyundai’s Chief Financial Officer Lee Won Hee and Kia’s then-

CFO and recently promoted co-Chief Executive Officer Park Han Woo said the companies are considering an interim dividend pay-out at their third-quarter earnings conference call last month to ease investor discontent.

Hyundai Motor will pay 55 percent of the total for the land, followed by Mobis with 25 percent and Kia the rest. The site was put on the market in July by state-run Korea Electric Power ahead of its relocation to the south of the country as part of a regional development plan by the government.

Hyundai Motor Group has said its plans for the site include a hotel, convention centre and auto theme park. The group plans to move 30 of its affiliates to the new site, it said in a statement.

Bloomberg News

Citigroup slashes 2015 iron ore price forecast, dipping below $60

C

itigroup has slashed its iron ore price forecast for 2015, predicting the steelmaking ingredient could drop below $60 per tonne in the most bearish estimate yet from a financial institution on the glut-hit commodity.

“We expect renewed supply growth to once again drive the market lower in 2015, combined with further demand weakness,” the U.S. investment bank said in a report on Tuesday.

Prices have tumbled more than 40 percent this year on massive oversupply and worries over appetite in key buyer China.

Citigroup expects iron ore to average $60 a tonne in the third quarter of next year, down from a previous forecast of $78 and to briefly

dip below $60 during that period.

It sees iron ore averaging $65 per tonne in both 2015 and 2016, down from an estimated $98 this year.

A ramp-up in output by top, lowcost producers at a time when demand growth in top iron ore buyer China was slowing has driven prices to five-year lows. At $75.50 per tonne <.IO62CNI=SI>, iron ore has lost nearly 44 percent this year, the hardest hit among industrial commodities.

Citigroup’s revision follows downgrades by other financial institutions.

ANZ Bank on Monday cut its 2015 iron ore forecast to $78 a tonne from $101, and its 2016 estimate to $85 from $95. Morgan Stanley and Goldman Sachs have

put their 2015 forecasts at $87 and $80 respectively.

At below $60 a tonne for iron ore, margins for even low-cost producers would get thinner. Australia’s Rio Tinto, the world’s No. 2 iron ore miner, had the lowest cash cost in the industry at $20.40 a tonne in the first half of 2014.

Sustained prices at $60-levels would be needed to curtail production outside China, Citigroup said, adding that Chinese iron ore output would need to fall further.

“We find only modest cutbacks are likely if iron ore remains in the $70s, with sustained prices in the $60s needed to prompt significant cutbacks,” it said.

Manolo Serap

18 | Business Daily

November 12, 2014

International Vodafone lifts earnings outlook Vodafone nudged its forecasts for core earnings higher yesterday after reporting a sharp improvement in its main quarterly revenue measurement helped by growing demand for mobile services in its big European markets. The British group reported second-quarter organic service revenue, which strips out items like handset sales and currency movements, down 1.5 percent, compared with the near 4 or 5 percent falls it recorded in the last six quarters. It also beat the consensus of a fall of 2.8 percent. The operator said it expected its full-year core earnings to be between 11.6 billion pounds and 11.9 billion pounds.

Venezuela rushes for fuel imports Venezuela is rushing to import up to 2.4 million barrels of diesel and gasoline after power outages hit its main refining complex, an unusual buying spree that has boosted U.S. and European fuel prices and threatens to worsen the OPEC member’s financial woes.

State-run oil company PDVSA has told traders since Friday that it wants to buy up to two 300,000-barrel cargoes of ultra low-sulphur diesel (ULSD) plus another six 300,000-barrel cargoes of gasoline, a fuel it rarely buys overseas, for delivery in a week’s time, traders told Reuters.

Islamic finance body announces new standards The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has issued two new sharia standards, revised three others and said it will review at least five more in coming months. The move appears to signal a more proactive approach by AAOIFI, which is one of the world’s top standard-setting bodies for Islamic finance but has acted only gradually to address some of the industry’s big issues and controversies in recent years. Before its latest announcement, AAOIFI had issued only two of its 88 standards in the last three years.

U.S. veterans sue banks Wounded U.S. veterans and family members of U.S. soldiers killed in Iraq sued five European banks on Monday, seeking to hold them responsible for shootings and roadside bombings because they allegedly processed Iranian money that paid for the attacks. The lawsuit filed in U.S. District Court in Brooklyn, New York, named Barclays Plc, Credit Suisse Group AG , HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Standard Chartered. Barclays, Credit Suisse, RBS and Standard Chartered declined to comment. The lawsuit was brought under the U.S. Anti-Terrorism Act.

Lafarge Nigeria to control United Cement A Nigerian unit of France’s Lafarge said on Monday it had entered into an agreement with Flour Mills of Nigeria to purchase a 30 percent stake in United Cement Company of Nigeria. The deal will give Lafarge’s Nigerian Cement Holdings complete control of the country’s third-largest cement manufacturer.

“Pursuant to the agreement, a first 15 percent tranche would be acquired in the first quarter of 2015, while the second 15 percent tranche is scheduled to be acquired by February 2016 at the latest,” Lafarge said in a statement.

Biggest U.S. trade visit shows Egypt in favour El-Sisi inherited an economy stuck in the worst slowdown in two decades, and one of the Middle East’s biggest budget deficits

T

he U.S. sent its biggest-ever trade delegation to Egypt, the latest sign that the allies have repaired the rift that followed the army’s ouster of an elected president last year.

Executives from about 70 companies, including Apache Corp. and Coca-Cola Co., held talks with officials in Cairo to explore opportunities in a country struggling to recover from more than three years of unrest. The mission, organized by the U.S. Chamber of Commerce, also met with President Abdel-Fattah El-Sisi, the former general who was elected in May after leading the overthrow of his Islamist predecessor, Mohamed Mursi.

The U.S. cut some of its annual US$1.3 billion military aid to Egypt after the army takeover, though without labelling it a coup. The American position has softened amid efforts to build a regional alliance, which ElSisi’s Egypt has vowed to join, against Islamist militants. Secretary of State John Kerry said in June that full aid would resume soon.

The reconciliation has angered rights activists who blame El-Sisi for the harshest crackdown on freedoms and political dissent in decades. The U.S. trade mission is “deeply troubling,” according to Sarah Leah Whitson, director of the Middle East and North Africa at Human Rights Watch.

“The Egyptian government is desperate for just this kind of international

Egypt’s President Abdel-Fattah El-Sisi talks with U.S. Secretary of State John Kerry

pat on the back and it’s very eager to demonstrate that everything is back to normal in Egypt,” she said in a phone interview.

El-Sisi inherited an economy stuck in the worst slowdown in two decades, and one of the Middle East’s biggest budget deficits.

There are signs that the worst may be over. Economic growth accelerated to 3.7 percent in the three months that ended in June, from 2.5 percent in the previous quarter, and more companies have announced plans to raise capital through share sales. El-Sisi cut fuel subsidies soon after his election, a move welcomed by investors.

Curt Ferguson, head of Coca-Cola Co.’s Middle East and North Africa division, who attended the meeting with El-Sisi, said the talks were strictly about business.

The company started building a US$122 million juice factory on the

outskirts of Cairo last month, part of a five-year plan to invest US$500 million in the expansion of its operations in Egypt, he said.

Investment Minister Ashraf Salman told the delegation that the government is working on laws to make it easier for companies to do business. Mounir Fakhry Abdel Nour, the minister for industry and trade, said there’s a plan to liberalize electricity prices, according to the state-run Middle East News Agency.

Michael Hanna, a senior fellow at The Century Foundation, a U.S.-based think tank, said the mission reflects U.S. efforts to bring ties back to normal.

Egypt, on the other hand, wants to build a relationship “based on economic ties and is much less interested in other aspects,” he said by phone.

“It’s highly unlikely that this is a sustainable basis going forward,” he said.

Bloomberg News

Maersk profit gains thanks to volumes/costs favour Container volumes are likely to rise by between 3 percent and 5 percent for the full year Richard Weiss

A.P.

Moeller-Maersk A/S, operator of the world’s biggest container line, said third-quarter profit increased as it cut costs and boosted box volumes.

Earnings before interest, tax, depreciation and amortization advanced 2.8 percent to US$3.20 billion, Copenhagen-based Maersk said yesterday in a statement.

Maersk Line, which moves almost one-sixth of the world’s containers, lifted volumes 3.7 percent as freight rates rose 0.9 percent, with unit costs falling by the same degree. The unit, battling industry overcapacity after a boom in ship orders coincided with the global slump, predicted a full-year profit higher than US$2 billion, versus the previous forecast for one “significantly above” the US$1.5 billion earned last year.

“I am very, very satisfied,” Group Chief Executive Officer Nils Smedegaard Andersen said in a posting on the company’s website.

With Brent crude futures priced below US$82 a barrel this week, down

We’ve seen an improvement with the result in a situation where rates have been under pressure and the oil price has been down compared to last year Nils Smedegaard Andersen, Maersk Group, CEO

from almost US$122 in June, Maersk’s oil unit saw earnings fall 4.6 percent to US$915 million, outweighing the benefit of lower bunker fuel prices at the shipping line.

“It’s very hard to predict what will be in 4 years, but it’s clear we now are a bit less bullish on the oil price than we were a couple of year ago,” Smedegaard Andersen said when ask if the company’s goal to lift earnings at the smaller oil drilling unit to $1 billion by 2018 had become harder. “If you assume the oil price will stay under pressure, then we will see an effect also on the drilling business.”

Container volumes are likely to rise by between 3 percent and 5 percent for the full year, compared with an earlier forecast of between 4 percent and 5 percent.

Maersk reiterated that group earnings will total US$4.5 billion this year, excluding discontinued operations, impairment losses and divestment gains.

Third-quarter profit was in line with the US$3.22 billion estimate of six analysts surveyed by Bloomberg News.

Bloomberg News

November 12, 2014

Business Daily | 19

The 61st edition of the Grand Prix starts tomorrow and until Sunday it will bring all the emotion of motorsport back to Macau.

In total, 2103w racing drivers will compete in the Guia Circuit for the prestige of the victory in the different races

20 | Business Daily

November 12, 2014

“The Grand Prix doubles tourist spending” João Costa Antunes has been involved in the organisation of the GP for 26 years.

In an interview with Business Daily, the Coordinator of the Macau Grand Prix Committee stressed the importance of the event in promoting Macau and diversifying the economy of the city João Santos Filipe

jsfilipe@macaubusinessdaily.com

What are the goals for this year’s 61st edition of the Grand Prix?

Our goals are the same as in the past. The team involved in the organisation of the Grand Prix wants to organise the best ever event in every aspect every year.

That’s what we’re focused on. And in terms of track instalment I believe that we’ve already achieved [our goals].

The Committee stresses instalment works were conducted in order to avoid disrupting city life.

Is that why you say this is the best Grand Prix ever?

Yes. This year, a lot of the track paving was done before school time in order to avoid causing trouble for parents taking their kids to school. Also, the track instalment works were conducted at night or during certain hours, which did not collide with rush hours. This is more expensive for the organisation but the effort is totally worth it.

How does the Committee decide which competitions participate in the Macau Grand Prix?

Before any decision is taken there is a study that involves different subcommittees.

These investigate what best suits the interests of Macau, not only from the sport perspective but in terms of international visibility. The race categories that Macau can host, however, are constrained by the physical limitation of the track.

The promotion of Macau as a tourist destination is one of the Committee’s main goals?

We want to contribute to the image of Macau as an international city of

There are more and more Chinese visitors coming to watch the Grand Prix

tourism and the races make a great contribution to the promotion of the region. But it also shows that Macau has the capacity to organise international events.

Over the years, the Grand Prix has helped diversify the economy and promote the qualification of the people involved. Today, all the big companies in Macau that organise MICE events started working with us. Also, we invest in the qualification of the safety staff, such as doctors and fireman that during the year will use their qualification to serve the population.

The contracts with the different championships racing in Macau are signed on an annual basis. Wouldn’t it be better for the Committee to have longer contracts?

The main component of the Grand Prix is the Formula 3 race. It’s a race for the champions of all champions and that will not change.

The motorcycle race is in the same position as it’s very unique.

For the other competitions, we believe that with annual contracts we can make the Grand Prix like an art gallery. There are the permanent exhibitions and then there are the temporary ones, which are not always available, but those can bring something new and ‘fresh’ to the art gallery.

Are many competitions interested in racing in Macau?

Yes, but our track time offer is limited and so every year we reject proposals by different competitions.

Usually, we make the final decision on the categories that will compete in Macau

by March.

FIA is organising Formula E, a competition using electriwc cars. Is this competition on the Committee’s radar?

They expressed interest in racing in Macau and I

Every year we reject proposals by different competitions

believe this competition has a great future ahead.

However, it needs time to mature. It’s too early to measure its importance and visibility. We want to see what will happen with this series before we host a race in Macau.

In the last ten years Beijing and Shanghai have developed into two important motorsports cities. Will this threaten the importance of Macau?

Not at all; this is actually benefiting Macau. I always said that regional integrated development would be very positive for everybody in motorsports and the automobile industry. We’ve always supported these projects around us.

Are the majority of spectators from Mainland China?

Not yet. There are more and more coming, which is related to the increasing interest from China in motorsports. But most spectators come from Hong Kong, Japan, South Korea and Southeast Asia. This is the traditional target of the Macau Grand Prix.

Is the Committee considering increasing the race capacity?

There are physical constraints but it’s not impossible to do it. However, at this moment we’re improving the headquarters of the Grand Prix and that’s what we’ll focus on.

Regarding the money invested and the direct benefit, does the budget balance or does it need investment?

It needs investment as the direct benefit in terms of cash is within the range of 20 to 25 percent of the money invested. However, there are many other benefits besides direct investment. The Grand Prix doubles tourist spending.

We’re receiving all that money indirectly and if we consider the promotion to Macau, then that value increases in a relation of one to six. In terms of the promotion of Macau in the media, for every pataca invested the return is six patacas.

How do you perceive the development of the Macau Grand Prix in the context of regional growth in future years?

The Grand Prix is growing and will continue to in the forthcoming years.

We have the dream of having new facilities for the headquarters. But we have to study this question very well because we need to find another purpose for the facilities so they will be used all year long and not only during race weekend.

Business Daily | 21

November 12, 2014

Grand Prix budget approaching MOP200 million The Macau Grand Prix budget could hit as much as MOP200 million. Meanwhile, the Grand Prix Committee expects to recover as much as MOP44 million from sponsorships and ticket sales João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he 61st edition of the Macau Grand Prix budget ranges from MOP190 to MOP200 million, an increase of MOP15MOP25 million compared to 2012. Last year’s budget is not comparable with this year, however, as the celebrations for the 60th edition spanned two weeks.

The increase in budget in

relation to 2012, when it was MOP175 million, has mainly been boosted by the cost of upgrading the race track.

In order to avoid disturbing residents and tourists, the Committee decided to proceed with track works and paving at night-time, which increased costs. This increase also reflects the rising costs of the construction sector and

general inflation in Macau.

In relation to money prizes, the organisation will award a total of MOP861,050. The most important prizes will be handed out in the Formula 3 competition. The World Touring Car races and the Chinese Racing Cup will not offer prize money.

In terms of revenue, the organisation has attracted

sponsorship in the amount of MOP33 million. This year, for the first time, the title sponsor of the Macau Grand Prix is game promoter Suncity, which was chosen as the primary sponsor following an open tender. Other companies involved with the Committee in the Grand Prix are CTM, Bentley, and Air Macau, in addition to others.

That expensive glow The budget to compete in the Macau Grand Prix varies from category to category but it can be as high as MOP1 million.

In the race for prestige - and excluding the costs of the car transportation, servicing and tyres account for most of the outlay

T

he Macau Grand Prix is one of the most prestigious events on the motorsports calendar but to be competitive there is a cost to pay.

The entry fee varies from EUR20,000 (MOP200,000) to EUR100,000 (MOP1 million), excluding the price of the car, the Team Manager of Asia Racing Team explained to Business Daily.

“Without the purchase of the car, the cost of the Macau GT Cup can vary from EUR20,000 if you enter a GTM class car to EUR100,000 if you participate with an

FIA GT3 car”, Philippe Descombes said. “The budget really depends on what car you’re driving, what is your result target, how many days of testing before the event, how much ‘effort’ you put into the car ... and the damage to the car”.

A budget of EUR60,000 (MOP600,000) allows a team to fight for victory in the Macau GT Cup. When it comes to preparing to enter the Macau Grand Prix teams have to consider different expenses such as the transport of car and equipment, payment of team

members and fuel. Every set of tyres for the Macau GT CUP, for example, costs more than HKS18,000.

“Servicing, tyres and transportation of cars are the largest expenses of the weekend. To service one GT car you need at least five people working during one complete week”, Descombes explained.

Transportation is one of the biggest expenses for the teams but in Macau this is more serious. In most of Asia, and contrary to what happens in America, Europe and even in Japan, trucks cannot cross

the borders and so teams have to find an alternative solution, which necessarily involves greater expenses.

In addition, there is always the risk of a heavy crash or a big fire that can destroy a car, further increasing costs for the teams.

“A big crash like the one we had with Eddy Yau in the 2011 Macau GT Cup cost the value of a new car (EUR345,000 or MOP3.45 million). The Macau Grand Prix is usually the last race of the season so the risk of spoiling a season with a big crash isn’t that high”, the

Macau Grand Prix Committee head João Costa Antunes revealed two weeks ago that the earnings from selling tickets for the races were already 20 percent higher than two years ago. Although no official figure has yet been released, the Committee is expecting sponsorship and ticket sales alone to return MOP44 million.

Ticket prices range from MOP130 to MOP900 during race days and MOP50 for practice days.

In terms of promotion of Macau, the organisers claim that for every pataca invested the indirect return in terms of media coverage, including magazines, newspaper articles and TV broadcasts, is six patacas. This figure has been confirmed by three different studies conducted over the last 15 years to assess the importance of the Grand Prix by an independent Singaporean company.

The revenue of the event accounts for 20 to 25 percent of the direct investment of the Macau Grand Prix Committee.

leader of Asia Racing Team concluded.

If on the one hand, the costs for the teams are very immediate, the benefits of racing in Macau may take longer as the prize money is limited in comparison to the outlay.

“Teams and drivers rely on sponsorship only. The prize money for the Macau GT Cup is very small, HK$16,000 for the winner – not enough to pay for a set of tyres – and there’s no other direct source of income”, Descombes said.

Money aside, Philippe Descombes says Macau is about prestige. And for the younger talent and teams there is hardly a better way to assert their quality than a victory in the Macau Grand Prix.

“For a team like ours the win brings prestige and reputation in the paddock.

Perhaps it doesn’t have an impact in the short term but it does in the long term. Who wouldn’t like to say they won the Macau GP!?”

J.S.F.

22 | Business Daily

Lisboa Bend

November 12, 2014

S. Francisco Hill

Maternity Bend D. Maria Bend Melco Hairpin Solitude Esses

Lisboa stand Mandarin Oriental Bend

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Grand stand A | B Ticketing Stalls

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Reservoir stand Start | Finish GP Building R Bend

Business Daily | 23

November 12, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

China’s Silk Road challenges U.S. dominance in Asia

THE TIMES OF INDIA The Reserve Bank of India has tightened bad loan classification norms for finance companies and has prescribed higher capital for deposit raising firms even as it withdrew its freeze on licensing new non-banking finance companies (NBFCs).

The classification of a loan as a non-performing asset has been brought in line with that of a bank. However, when it comes to raising capital, restrictions have been placed afresh as an NBFC can mobilize deposits only up to 1.5 times its net owned funds as against four times earlier.

THE KOREA HERALD South Korean conglomerates are becoming more dependent on the Chinese market for sales growth and the reliance is likely to deepen from a recent trade pact, a report by a local corporate research firm showed yesterday. According to CEO Score, an online corporate productivity evaluation firm, an analysis of 38 out of 200 top companies that reported their overseas earnings showed sales to China last year reached 145.15 trillion won, up 34.6 percent from around 108 trillion won in 2011.

INQUIRER The absence of exceptional trading gains continued to weigh on Landbank of the Philippines’ profit at the end of September, reflecting an industry-wide slump due to rising interest rates and volatile market conditions. In a statement, the government’s largest bank said it would still hit its full-year profit goal on the strength of its growing loan portfolio and expanding asset base. “We remain confident about meeting our full-year target,” Landbank president and CEO Gilda Pico said, citing the firm’s strong revenue growth.

VIETNAM NEWS Vietnamese enterprises, especially small- and mediumsized companies, have been repeatedly warned to prepare for both the challenges and opportunities when the ASEAN Economic Community is established next year. During a recent forum organised on Monday at HCM City University of Technology, local and foreign experts have expressed concern about the preparation of Vietnamese enterprises. Le Dang Doanh, a renowned economic expert, said the GDP of Viet Nam would increase 13 percent within five years and the annual growth rate of the GDP would be two per cent after AEC begins next year.

John Kemp

Reuters columnist

“T

he Silk Road, no longer just a concept in history books, has evolved into a story of modern logistics and Sino-European cooperation,” Yang Jiechi, China’s top diplomat, told a conference this month.

The New Silk Road Economic Belt - from China across Central Asia and Russia to Europe - and the 21st Century Maritime Silk Road through the Malacca Strait to India, the Middle East and East Africa - have become the centrepiece of China’s economic diplomacy.

The belt and the road, as China’s diplomats refer to them, are the focus of the Asia-Pacific Economic Cooperation (APEC) summit in Beijing this week. They aim to cement China’s emerging role at the heart of the 21st century economy.

China’s President Xi Jinping has pledged US$40 billion to a new Silk Road fund for investing in infrastructure, resources and industrial and financial cooperation across Asia.

Chinese diplomats have also been busy promoting a new Asian Infrastructure Investment Bank, promising to provide half of its US$50 billion start-up capital, to help build ports, roads, power projects and other desperately needed infrastructure across the region.

The Silk Road fund and Asia Infrastructure Investment Bank pose a direct challenge to the traditional primacy of U.S.dominated financial and trade institutions in the region, including the International Monetary Fund, World Bank and Asian Development Bank, all of which were set up following the U.S. victory in World War Two. U.S. diplomats have been manoeuvring furiously to limit the impact of China’s economic diplomacy. In the past month, Australia and South Korea both declined to join the new Infrastructure Investment Bank following intense lobbying from officials in Washington, which went all the way up to Secretary of State John Kerry and President Barack Obama himself.

U.S. leadership challenged Officially, U.S. diplomats are concerned about governance standards at the new institutions.

There are fears about the large share of the voting rights that will go to China and the willingness of the new institutions to lend for projects that do not meet the social and environmental criteria currently employed by multilateral development banks.

Under intense pressure from the United States, the World Bank and Asian Development Bank

will no longer finance coal-fired power stations due to concerns about climate change. But many countries, including India, have indicated they intend to continue building coal-fired plants to bring electricity to millions of homes that are currently without secure and affordable access to modern energy.

U.S. officials fear the new Chinese-led institutions will lend to projects that are unable to secure financing from other multilateral institutions, rendering the conditionality ineffective.

But there is a deeper, unspoken fear that the new institutions will be used to enhance China’s leadership at the expense of the United States and its traditional allies in Asia including Japan, South Korea and Australia.

In the run-up to the APEC summit, U.S. diplomats have sought to keep the focus on the Trans-Pacific Partnership, a proposed U.S.-led regional trade deal, rather than the broader Free Trade Area of the Asia Pacific, promoted by China.

It is part of a mounting economic, political and military competition between the United States and China across the region.

Balance of economic power Asia-Pacific is not the only area where the post-war economic and financial leadership of the United States and its network of allies is being challenged.

The U.S. pivot to Asia is being matched by a similar move on the part of Russia, which has sought to reduce its dependence on the United States and Europe by upgrading its economic ties with China. In the past six months, Russia has signed two major deals to supply natural gas to China, which has become Russia’s most important trading partner.

In July 2014, China, Russia, India and Brazil reached agreement on a US$100 billion New Development

Bank to be headquartered in Shanghai. China and Russia have also been busy promoting economic and military ties across Central Asia through the Shanghai Cooperation Organisation.

The major financial and economic institutions, which experts sometimes call the “international financial architecture”, no longer correspond to the balance of power and the shifting centre of gravity in the world economy.

The International Monetary Fund, World Bank and regional development banks are all dominated by the United States and its allies in terms of voting rights, capital structure, headquarters location and staffing.

Efforts to reform them to give a greater role to China and the other fast-growing developing economies have largely proved unfruitful.

The multilateral lending institutions are severely undercapitalised and have nowhere near enough resources to meet the enormous infrastructure needs across Asia, Africa and Latin America.

The result is that many multilateral institutions appear to be out of date, too small and entrenched in colonialist approaches to development.

Trade and financial flows There is still an assumption that economies of developing countries are defined by their relationship with their more developed counterparts. But that world has vanished over the last decade.

More than half the exports from developing economies were sent to other developing economies in 2013, according to the World Trade Organization (“International Trade Statistics 2014”).

Countries in Asia sent more than 60 percent of their exports to other nations in Asia and to Africa and the Middle East, compared

with just over 15 percent each to North America and Europe.

As the world’s greatest export powerhouse, China has accumulated vast foreign exchange reserves and is now becoming a major supplier of capital.

Prior to the financial crisis, that capital was tied up passively and uselessly in U.S. Treasury bonds.

Now China wants to use its capital more productively to invest in infrastructure in its major trading partners and at the same time buy more economic and political influence.

There is nothing new in the idea that countries seek to turn financial capital into political power. Britain pursued the same approach in the 19h century, and the United States has done so successfully since World War Two. Market access and capital can all be traded for various forms of influence. The Marshall Plan traded U.S. economic assistance in European reconstruction for a pro-American orientation in European foreign policy.

As the balance of power within the global economy shifts, it is inevitable that the international economic architecture will have to evolve.

Some western foreign policy specialists have naively assumed that emerging markets would become integrated into existing post-war, western-dominated structures of power and governance.

But it was always at least as likely that those institutions would have to adapt and change to accommodate the rising economic and financial power of emerging markets.

Just as access to American markets and capital was once a key component of U.S. diplomacy, China is now employing its financial and trade muscle to win friends and influence.

Reuters

24 | Business Daily

November 12, 2014

Closing Vietnam sees sharp rise in rice exports

StanChart to axe 80-100 branches

High-quality rice exports from Vietnam’s southern Mekong delta sharply increased in the first 10 months of this year, up 44 percent year on year, according to the local Southwest Steering Committee. Local VietnamNet news portal reported yesterday, quoting data from the steering committee as saying that the region exported over 2.7 million tons of highquality rice, worth US$2.32 billion, accounting for 52 percent of the total rice export volume during the reviewed period. The average export price reached US$455.26 per ton in the first nine months, up 3.6 percent year on year.

Standard Chartered plans to cut 80-100 retail branches in 2015 as part of its plan to save US$400 million a year to improve profitability, according to slides the Asia-focused bank released on an investor road show. Standard Chartered said in the slides its retail bank’s potential returns were being held back by high costs. It had 1,248 branches at the end of June. The bank is holding a three-day road show for analysts and investors to try to convince them it can revive the bank’s fortunes after three profit warnings this year and several other problems.

Xi wins leaders’ support for road map on FTAAP Competition between different trade plans underscored the jockeying for position between the U.S. and China

P

resident Xi Jinping wrapped up a summit of Asia-Pacific Economic Cooperation leaders in Beijing with an agreement to press forward toward a regional free-trade pact that he says will be a historic achievement once realized.

Eight years after the idea was first proposed, Xi is pushing the creation of the Free Trade Area of the Asia-Pacific as part of efforts to counter U.S. influence in the region. The Chinese leader has emphasized his nation’s growing economic clout throughout the forum and offered tens of billions of dollars to build infrastructure along key trade routes.

“We decided to kick off and advance the process in a comprehensive and systematic manner towards the eventual realization of the FTAAP,” a declaration by the 21 APEC leaders stated.

Officials will undertake a strategic study of the pact and report back by the end of 2016, they said.

Competition between different trade plans underscored the jockeying

for position between the U.S. and China at this week’s meetings as President Barack Obama seeks to re-balance U.S. economic and strategic interests to Asia. Obama welcomed China’s push for the free-trade deal, a day after he hailed a separate trans-pacific agreement that doesn’t include the world’s second-largest economy.

‘Major goal’ “To found an FTAAP has been a major goal of the APEC summit, but the discussion was getting nowhere until this Beijing summit, which set up a timeline to make it happen,” said Zhou Yongsheng, a professor at the China Foreign Affairs University in Beijing. “China has been playing a leading role at this summit, and that’s a sign of things to come that the country will be more active on the world stage in the future.”

Xi’s use of the latest APEC gathering to hasten progress on the deal contrasted with China’s absence from talks for the separate U.S.-led Trans-Pacific Partnership,

A hand-out picture released by Xinhua shows the second section of the 22nd APEC Economic Leaders’ Meeting is held at the Yanqi Lake International Convention Centre

which Obama said in Beijing yesterday was close to being completed.

In an address yesterday at the summit, Xi said APEC nations should now push ahead on the Free Trade Area of the Asia-Pacific agreement, which would involve China and Russia, as the region seeks to find new drivers of growth. The business community wants to

Dubai plans US$689 mln IPO

Anti-corruption network takes shape

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Dubai company plans to launch a US$689 million initial public offer of shares this month as it builds a US$2.9 billion amusement park complex which is key to the emirate’s drive to expand as an international tourist destination.

Dubai Parks and Resorts, part of the governmentowned Meraas investment group, said yesterday it would sell 2.53 billion shares or 40 percent of its outstanding shares between November 17 and November 30, at a price of 1 dirham each.

The company has started work on three linked theme parks that it says will help Dubai meet its target to double annual tourist numbers to 20 million in 2020 from 10 million in 2012, and treble tourism income over that period.

The 1.5 million square metre project on the outskirts of Dubai is to feature three theme parks: Motiongate, based on films made by DreamWorks Animation and Sony Pictures, LEGOLAND Dubai, and Bollywood Parks.

Hotel, shopping and other entertainment facilities are also planned, with completion scheduled by September 30, 2016.

Reuters

see such a zone established, he said.

Obama backed Xi’s agenda.

“I want to commend China for focusing this year on what APEC can do to contribute to the realization of the Free Trade Area of the Asia Pacific,” Obama told the summit being held in a convention hall at Yanqi Lake, in north-eastern Beijing. “I look forward to the day when all of our economies

can be linked together in a high-standard, 21st century agreement.”

Russian President Vladimir Putin also supported a road map being developed in Beijing to forge ahead on the Asia-Pacific free trade zone.

Chile’s President Michelle Bachelet is among those who have already voiced support for the plan.

Bloomberg News

India tightens rules for “shadow banks”

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he APEC member economies have decided to set up a cross-border law enforcement network to strengthen transnational anti‑corruption cooperation in the region, Chinese President Xi Jinping said yesterday.

Leaders and representatives of the 21 APEC economies have reached consensus in hunting down fugitives at large, recovering their ill-gotten assets and expanding law enforcement cooperation, Xi told a press conference at the end of a two-day APEC Economic Leaders’ Meeting.

Earlier reports said the network would consist of anti-corruption and law enforcement personnel from the APEC member economies.

A regular contact mechanism and a law enforcement cooperation mechanism will be built under the network to facilitate information sharing and build up trust, and to investigate corruption, bribery, money laundering and illegal trade crimes.

The country is also seeking to widen the campaign to those who have fled abroad in what it called the Fox Hunt 2014 operation, to “block the last route of retreat” for corrupt officials.

ndia raised the minimum capital requirement for so-called shadow banks and tightened rules on deposits and bad loans to avoid any potential risk to the economy from these rapidly growing finance firms by regulating them like traditional banks.

Shadow banks, or non-banking financial companies (NBFCs), have in recent years played a bigger role in financing small businesses and individuals in India, taking over from the banks that reined in credit as economic growth slowed.

On Monday, the Reserve Bank of India (RBI) said these companies were now so entrenched in the financial system that they needed better regulation.

Assets of shadow banks, which include Capital First Ltd , Mahindra & Mahindra Financial Services Ltd and LIC Housing Finance Ltd, rose to 12.5 percent of GDP last year from 8.4 percent in 2006, RBI data shows.

“They are as exposed to risks arising out of counterparty failures, funding and asset concentration, interest rate movement and risks pertaining to liquidity and solvency, as any other financial sector player,” the RBI said in a statement.

Xinhua

Reuters