Macau business daily, 2015-Jun-25

MOP 6.00

Directors appointed for DSPA, GIT and GDI

Closing editor: Luís Gonçalves

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MGTO signs MOU with Shaoguan counterpart Page 5

Sinosky Energy loses MOP29.8 mln in 2014

Macau New Era accumulates losses of MOP1.46 million Page 4

Year IV

Number 821 Thursday June 25, 2015

Publisher: Paulo A. Azevedo

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Designs on Diversification The government is adamant. Macau has a future as a creative centre in Asia. But many of its preferred ‘service platforms’ are in their infancy. Enter the Cultural Industries Fund. So far it has approved seven service platforms worth MOP42 million to help smaller cultural creative businesses. Macau Design Centre is possibly the most prominent of the emerging ‘platformers’. It has just been granted MOP7 million for a two-year term Page

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Fresh Start A new law firm. Founded by lawyer and appointed Legislative Assembly member Vong Hin Fai. Operations in the NAPE office commence July 1. Mr. Vong departed Rato, Ling, Vong, Lei & Cortés - Advogados, or Lektou, where he was a partner

Pessimism prevails

Chinese firms are not optimistic. In fact, they are the least upbeat among Asian businesses for the first time in nine quarters. A survey reveals that Asian companies’ optimism has shrunk overall. China’s performance and U.S. and E.U. uncertainties have tainted the business mood

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Brought to you by

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Busted flush It seemed like a shoe-in. But the avalanche of Chinese high-rollers has yet to materialise in Manila’s three casino resorts. The market value of operators like Melco Crown Philippines Resorts and Bloomberry Resorts has been shredded as investors flee. Making Philippine casino stocks among the world’s worst performers this year

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HSI - Movers June 23

That sinking feeling

Name

The demarcation of MSAR’s maritime boundaries. Not just to delineate jurisdiction says a Beijing academic. The Chinese Academy of Social Sciences scholar has made an astonishing proposition. Develop a deep water port, he says. The idea is to nurture marine tourism to build a marine economy for Macau

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www.macaubusinessdaily.com

Toursim

Play your aces

%Day

Tencent Holdings Ltd

+3.54

China Resources Powe

+3.00

PetroChina Co Ltd

+2.71

Kunlun Energy Co Ltd

+2.42

CNOOC Ltd

+2.14

China Merchants Hold

-1.48

Li & Fung Ltd

-1.81

MTR Corp Ltd

-1.98

Power Assets Holding

-2.11

China Mengniu Dairy C

-5.75

Source: Bloomberg

Know your strengths, says Anna Leask.

The Professor of Tourism Management at Edinburgh Napier University unequivocally advocates it as the way forward. For Macau that must mean gaming and World Heritage status, she suggests. Differentiation is the name of the game. While complementary tourism can work wonders, too

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June 25, 2015

Macau

Cultural Fund approves seven service platforms worth MOP42 million Seven service platforms have been approved subsidies by the Cultural Industries Fund to help smaller cultural creative businesses. The government hopes the initial funding will help the industry survive and thrive in the future Joanne Kuai

joannekuai@macaubusinessdaily.com

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ituated in a renovated industrial building in Areia Preta, Macau Design Centre (MDC) is now one of seven ‘service platforms’ approved by the government’s Cultural Industries Fund, with granted subsidies of MOP7 million for a two-year term.

Macau Design Centre under Macau Designers’ Association promotes the local cultural creative industry and develops local design. It provides a display area, event venues, as well as studios for local designers and creative personnel to use, with a rent “much cheaper than the market price” – just MOP7 per square foot per month.

MDC began its operation in November 2014. While the first phase of the renovation of the building was subsidised by the government, the purchase of equipment, operating costs and other outgoings were all settled by advance payment from local designers Dirco Fong, James Chu, Nelson Wong and Bruno Kuan.

Business Daily recently reported that MDC was suffering from accumulating costs and was on the verge of closing; now, with the Cultural Industries Fund finally signing a contract with them and granting subsidies effective from July 1 this year, the shareholders may take a second breath.

Service platform

The head of the Cultural Industries Fund, Executive Council spokesperson Leong Heng Teng, said Macau Design Centre is one of the seven ‘service platforms’ that the government has promised to grant subsidies to.

In a bid to help the local cultural creative industry, and understanding the nature of the industry which is difficult to start with and takes a long time to break-even, the government has injected from MOP2.65 million to MOP8.85 million into these seven service platforms, which range from design to music to fashion to branding industries.

“It’s hard for cultural and creative start-ups to cope with the skyrocketing rent and some youngsters in these sectors have the ambition and sincerity but don’t know how to do business. The government subsidises these service platforms in order to help them,” Leong Heng Teng told reporters yesterday at a media briefing introducing these service platforms.

MDC so far is the only one of the seven services platforms that is in operation, with the rest scheduled

We serve a role like a secretary. We would like to help the start-ups by providing relevant clerical services Teresa Ng Wai Kuan, Executive Director of Macau Cultural & Creative Integrated Services Centre

“My partner and I have both gone through the process of setting up our own businesses, that’s how we know that some trifles seem minor but [absorb] a lot of time and energy and hinder the creative process, such as dealing with administrative work, commercial and business registration and taxation. That’s why we would like to help the start-ups by providing relevant clerical services. ” Leong Heng Teng added the criteria of how much subsidy to grant is based on the scores given by the jury of the Fund committee, as well as evaluation of operating costs. Mr. Leong stressed that the government fund is there to help them but the goal is for the businesses to make profits on their own.

Benefiting SMEs to open in July and beyond. Another awardee of the fund said helping creatives with business, marketing, and administrative work is one of the main services they will provide.

“We serve a role like a secretary,” said Executive Director of Macau Cultural & Creative Integrated Services Centre, Teresa Ng Wai Kuan.

NEBA is a multimedia solution studio located in one of the 17 offices at Macau Design Centre. Co-founder Casber U told reporters that his company focuses on projection mapping, interactive technologies and animation.

The company is one of the 17 approved projects among 60 applications to score a spot at MDC. With an office and facilities for use,

such as meeting rooms, Casber U and his two partners are able to better manage their business.

Besides being granted some ‘government jobs’, such as making animation for the Environmental Protection Bureau’s new campaign, NEBA also has to fulfil its ‘obligation’ as a member at the Centre, as in providing services for some events hosted by the Centre, such as the projection for a Nepal Fundraising Event and lighting show for Christmas.

Another tenant, Kathy Cheang, is a local photographer who graduated from the Polytechnic Institute. She has been engaged in the business for around four years. With the lower rent at Macau Designer Centre, she could finally afford her own studio for her company - Kathy C Photography Ltd. - which specialises in commercial and advertising photography.

She said that prior to having a stable location, she had to rent other places for photo-shooting and it was hard to arrange all the equipment.

Since joining the MDC from the beginning, her job has stabilised with three to four assignments every week. The young photographer said currently she can break-even and is hopeful about boosting her business.

Business Daily | 3

June 25, 2015

Macau

Beijing academic: City should clarify marine boundary, build deep water port Demarcating MSAR’s maritime boundary is an important starting point for the city to progress further in developing a marine economy, a Chinese Academy of Social Sciences scholar believes Stephanie Lai

sw.lai@macaubusinessdaily.com

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he demarcation of MSAR’s maritime boundary should not be merely understood as a subject that clarifies the city’s jurisdiction of its own waters as the issue is a pivotal starting point for the city to further develop a marine economy such as building a deep water port and marine tourism, a Chinese Academy of Social Sciences (CASS) academic said yesterday.

Li Guoqiang, the deputy director of Chinese Borderland Studies at CASS, made the remark during his talk on China’s Maritime Silk Road initiative to Macau’s Electoral Committee for Chief Executive.

“Macau and the country [China] have not defined the city’s customary maritime boundary, which makes it difficult for Macau to actively rule on its waters and this is, of course, a problem,” Mr. Li said.

“It would be too narrow a focus if the clarification of the maritime boundary is merely understood as a legal issue that defines the city’s

jurisdiction of its waters,” Mr. Li stressed to the audience.

“I think the central government’s decision, which has been expressed

by President Xi, is that the MSAR can lawfully manage its surrounding waters while having legal protection for the long-term development of its marine economy,” he added.

Following a meeting with Chinese President Xi Jinping in December last year, Chief Executive of Macau Fernando Chui Sai On said that the central government had

already given the go-ahead for Macau to conduct a study on the administrative rights of its waters. The study should be finished by the end of this year, the Chief Executive said at the time.

Regarding this maritime matter, Mr. Chui also met with the head of the State Oceanic Administration, Wang Hong, in Beijing last week.

No ownership

Like the other coastal provinces of China, Macau

Vong Hin Fai starting new law firm in July

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he new law firm created by the lawyer and appointed member of the Legislative Assembly, Vong Hin Fai, will be named Vong Hin Fai – Lawyers and Private Notary. As Business Daily reported in May, Mr. Vong decided to leave the law firm where he was a partner, Rato, Ling, Vong, Lei & Cortés - Advogados, or Lektou, to establish his own office, which will be situated in NAPE. Beside Vong Hin Fai, some of the other lawyers leaving Lektou to join Vong Hin Fai – Lawyers and Private Notary are Vong Keng Hei, Cheang Tak Fat and Wong Sin Kei. From July 1 on the professional address of all these lawyers will be officially changed to the new office.

Initially, the decision of Von Hin Fai to leave Lektou created an “awkward situation” in the law firm not only because it was unexpected by the partners but because several lawyers and staff from the firm were invited to join the new office.

Von Hin Fai was born in 1958 and attended the Law Faculty of Macau University, graduating in 1993 with a Degree in Law. He was also awarded a Masters Degree of Law by the Law Faculty of the People’s University of China in 2003 and has been a lawyer and a notary public practicing in Macau since 1996 and 1997, respectively. He acted as Chief Executive Fernando Chui Sai On’s campaign chief in both past elections.

does not have any ownership of its surrounding waters although the city does exercise certain administrative rights over these waters – including the handling of security and the monitoring of sailing activities. However, the city requires a nod from the state whenever it is to start a reclamation project or the construction of ferry terminals or other infrastructure projects involving its surrounding waters.

Once the maritime

boundary issue is clarified, the Beijing scholar suggests that Macau consider the establishment of a deep water port and develop marine tourism, moves that would help diversify its economy.

“Building a deep water port for Macau could bring businesses for the logistics industry, manufacturing industry and other trade services,” the CASS scholar said.

The Beijing scholar acknowledged that the city’s disadvantages of developing itself as a world centre of tourism and leisure lie in its lack of developable space, infrastructure facilities and clear definition of its governing rights of the surrounding waters.

“I hope that Macau can build a deep water port because that will be an important component of the whole bay area economy comprising the city, Guangdong and Hong Kong,” Mr. Li said.

“With a deep water port in place, I believe the economic development here can enter into a new phase.”

Nam Kwong Natural Gas posted nearly MOP20 mln loss last year

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he city’s sole natural gas distributor, Nam Kwong Natural Gas Company Ltd., continued to register a loss last year as the company was still investing in and building a distribution network for delivering the gas.

For 2014, Nam Kuong Natural Gas has seen a loss of MOP19.75 million (US$2.47 million); since its inception of services in 2012 until last year, the company’s accumulated loss amounted to MOP45.55 million, according to the results gazetted yesterday.

The company’s cost for sales has ballooned from MOP980,703 in 2013 to MOP3.44 million last year. Meanwhile,

Nam Kwong sold 1.26 million cubic metres of natural gas last year, generating an income of MOP7.64 million.

Nam Kwong said in the results that it had completed the laying of major natural gas distribution pipelines in most of Cotai and Taipa last year, while the supply of natural gas was only available in Seac Pai Van area, the University of Macau Hengqin campus and parts of Taipa.

The company said it would continue to install the distribution network and enhance the natural gas supply facilities this year but did not specify the related investment involved.

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June 25, 2015

Macau opinion

Falling short

José I. Duarte Economist

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he Fund for Creative Industries has just published the first list of companies that it will support. That list sparked several comments and raised many questions about the criteria used and the decisions made. Unfortunately, many have focused almost exclusively on the grant given to a company belonging to the brother of one member of the jury.

Certainly, that case deserves scrutiny. That a company owned solely by a close relative of a jury member is given almost 4 million patacas for a project aimed at creating an ‘incubator for cultural and creative projects’, whatever that might mean, was bound to raise eyebrows. And the process of removal of that member, the submission of the case to the Commission Against Corruption, and its prompt dismissal by such Commission, did nothing to dispel the many concerns raised by the case.

Moreover, the comments made by the president of the fund, as replicated by the media, were less than helpful. The ‘explanations’ provided did not add much of a clarification to the issue. First, it was claimed these were not personal issues. Of course not: it is a matter of public interest, and that’s exactly why the subject should be properly and openly dealt with. Then, it was added, the projects were approved before the suspension and dismissal of the jury member concerned. Indeed, that is a fact: but it is not only irrelevant to the argument, it is also incongruous. How could a dismissal have happened before the act that was at its origin? Finally, he concluded that no reassessment was needed and that the issue was resolved, an obvious non sequitur!

What the public is entitled to is suitable guarantees that public funds are used with the common interest in mind and do not provide unfair advantages to private interests that happen to be close to the decision powers. In this and many other instances, such reassurances can only be achieved through transparent procedures and criteria. Decisions made should both be fair and seen to be fair. The publication of the list, and the comments made in their presentation, should have helped to clarify doubts and remove suspicions decisively.

They fell short of these desirable aims – and that is why we should look well beyond the case above.

The funding seems mainly directed to the so-called ‘services platforms’. Will someone consent to explaining what the Fund understands exactly by that and what is the rationale underpinning their priority status? Which were the criteria used and how were they weighted? Which evaluation and decision procedures were followed? What are the specific objectives of the projects approved, and their deliverables? Are there penalties for failing to carry on the projects as approved? Is there a monitoring and evaluation system?

Until these issues are clarified, many must be forgiven for harbouring misgivings about the whole opaque process.

Ho Cheong Kei will assume leadership of GIT, which handles the city’s light rapid transit (LRT) project

Directors appointed for DSPA, GIT and GDI

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he incumbent acting directors for the Environmental Protection Bureau (DSPA), Transportation Infrastructure Office (GIT) and Infrastructure Development Office (GDI) are to officially take up the lead in their offices for a year starting from the end of this month or July 1, according to the Official Gazette published yesterday.

The acting director of DSPA, Vai Hoi Ieong, is to assume the Bureau’s director post for a year starting from June 29, the Gazette, signed by Secretary for Transport and Public Works Raimundo do Rosário, stated.

Meanwhile, the acting deputy director of DSPA, Ip Kuong Lam, is promoted

to the position of deputy position for a one year’s tenure.

For GIT, which handles the city’s light rapid transit (LRT) project, acting co-ordinator Ho Cheong Kei will assume leadership of the Office for one year starting from July 1.

As for GDI, the organ responsible for processing Macau’s open tender for infrastructure projects, the incumbent acting director of the Office, Chau Vai Man, is to step up to the post as head for a year starting from the end of this month, the Gazette stated.

The assignment of the public works departments’ director’s post was finally announced yesterday following months of vacancies left

Macau New Era accumulates losses of MOP1.46 million

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us operator Macau New Era accumulated losses of MOP1.46 million during the fiscal year of 2014, which was the first year of operation of the company. New Era was founded in April 2014 to take over the bus service from bankrupt

Reolian Public Transport.

The results, which consider the period from 30 April to 31 December 2014, were announced yesterday in Macau’s Official Gazette. During this time the company generated MOP147.3 million in revenues and

amid the reshuffle of MSAR’s top officials last year.

Cheong Sio Kei, who had headed DSPA since its establishment in 2009, left the post in June last year without any replacement being announced until present.

Long-time chief of GIT, Lei Chan Tong, stepped down from the Office in January to work for the Housing Bureau, although his departure was not explained by either him or the administration.

The former head of GDI, Chan Hon Kit, only sees an official replacement now ahaving departed the Office in February citing “health issues”.

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spent MOP83.6 million on human resources (including a 5 per cent increase for workers), MOP56 million on other operating costs, and MOP9 million in depreciation and amortization.

The company also explained that during 2014 it had to acquire 35 extra buses for a total cost of MOP29.5 million, which increased its fleet from 245 to 280 buses.

Concerning the expenses related to the takeover from Reolian the company paid MOP96.7 million to acquire the infrastructure and fleet to the Macau Government and paid an extra of MOP19.7 million in order to compensate the former workers of Reolian, as established in the agreement with the Macau Executive.

Business Daily | 5

June 25, 2015

Macau AL subcommittee sign minimum wage bill The Chairman of the Third Standing Committee of the Legislative Assembly (AL), Cheang Chi Kong, said the subcommittee has finished the discussion regarding the minimum wage bill for cleaning and security workers and the proposition paper has been signed.

The legislator told reporters after a closed-door meeting of the AL sub-committee with government officials that the final draft suggests cleaners and security workers in Macau earn no less than MOP30 per hour or MOP240 per day or MOP6,240 per month.

MGTO signs agreement with Shaoguan counterpart Regional co-operation in tourism has long been pursued.

The agreement between the SAR and the neighbouring Guangdong Province city seeks to attract more tourists to both places Joanne Kuai

joannekuai@macaubusinessdaily.com

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haoguan, a prefecturelevel city in the north of Guangdong Province in the People's Republic of China is home to the mummified remains of the sixth Zen Buddhist patriarch Huineng and UNESCO natural World Heritage Site Mount Danxia.

Rich in tourism resources, the city and Macau seek to enhance cooperation. A memorandum

of understanding (MOU) regarding agreements on the tourism sector was signed by both sides yesterday in Macau.

Macau Government Tourist Office (MGTO) Director Maria Helena de Senna Fernandes and Shaoguan Tourism Bureau Director Wen Qingnian signed the MOU, while Secretary for Social Affairs and Culture Alexis Tam Chon Weng witnessed the ceremony.

Shaoguan tourism head Chang Wen Qingnian said he hopes more Macau tourists will visit Shaoguan and that professionals from the tourism sector from both sides could enhance communication and launch collaborative training programmes.

Helena de Senna Fernandes also indicated that both cities’ World Heritage Sites as recognised by UNSECO could be a selling point. She added that both tourism offices would lead a joint delegation and promote the tourism of Macau and Shaoguan to Singapore and Malaysia next month in addition to Guangzhou, Zhongshan, Zhuhai and Jiangmen.

Capacity and balance

Helena de Senna Fernandes said that MGTO has been making an effort to maintain the sources of tourists from the Mainland as well as opening up the overseas market, according to a TDM Radio report.

Besides putting up campaigns in other countries and regions, the authorities also seek to enhance business co-operation with overseas travel agencies and airlines.

In addition, ‘one trip, multiple stops’ tourism promotions involving co-operation by Mainland cities and Hong Kong is also a key aspect.

The MGTO director also indicated that authorities are trying to seek a balance, since the number of Mainland tourists to Macau reached 21 million last year and residents are concerned about tourism capacity. Currently, the goal is to maintain the number of Mainland tourists.

She added that in March the number of Mainland tourists to Macau declined but took a favourable turn in April and May. However, in recent years, the number Taiwan and Hong Kong tourists has tended to decline. She said that now the government is also focusing on how to regain tourists from these markets.

Sinosky Energy loses MOP29.8 mln in 2014

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inosky Energy (Holdings), the company that has the exclusive contract to supply Macau with natural gas, registered losses of MOP29.8 million last year. According to the results for the annual year of 2014 published in the Macau Official Gazette, since 2006 the company has accumulated losses of MOP177.1 million.

The losses were justified with a sale price of natural gas in Macau below the price paid to import it.

This notwithstanding, last year the revenue from the sale of natural gas reached MOP158.6 million.

Sinosky Energy is a joint venture between Macau Natural Gas Co. Ltd and China Petroleum & Chemical Corp. (Sinopec) and its relationship with the government has been one of ups and downs.

Recently, there was talk about the rescission of the exclusive contract with the government but the scenario was denied by the Secretary for Transport and Public Works. However, Raimundo Rosário admitted that there were problems that needed to be resolved.

Corporate

Inauguration ceremony for 7th Term of CEM Customer Liaison Committee held

MGM MACAU welcomes Social Welfare Bureau and Macau Deaf Association

Companhia de Electricidade de Macau (CEM) held its Inauguration Ceremony for the 7th Term of the CEM Customer Liaison Committee (CLC) at the Sheraton Macau Hotel on the evening of 23 June 2015. Guests attending the Inauguration Ceremony included Kou Ming, Economic Affairs Department Deputy Director of China Liaison Office, Arnaldo Santos, Director of Office for the Development of the Energy Sector, Iu Iu Cheong and

The ‘Joana Vasconcelos at MGM MACAU’ art exhibition has received a tremendous response since opening in March, with the hotel inviting government departments, local associations and institutions for guided tours, in order to bring art closer for everyone’s enjoyment.

The Social Welfare Bureau has given MGM MACAU great support in the exhibition by sharing the exhibition information with its affiliates and members, and arranging visits

José Chui, Former CLC Presidents, Vong Kok Seng, CLC President, Lei Chi Fong and Iun Iok Meng, CLC Vice Presidents, presidents and representatives of the local associations participating in the CLC, CLC members, as well as senior management of CEM. Witnessed by the guests, Committee members of the new term were awarded certificates of nomination by Arnaldo Santos and Bernie Leong, Chairman of CEM’s Executive Committee.

to the hotel for their members. Mr. Iong Kong Io, President of the Social Welfare Bureau of the Macau SAR, led a tour of over 30 members with the Macau Deaf Association for a guided art tour of MGM, which included the Valkyrie Octopus, and other art pieces on display throughout the property.

MGM MACAU will continue to offer unique art experiences for locals and tourists alike.

The ‘Joana Vasconcelos at MGM MACAU’ art exhibition runs until October 31.

6 | Business Daily

June 25, 2015

Macau Brands

Trends

The lasting phone Raquel Dias newsdesk@macaubusinessdaily.com

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urprisingly, in the world of luxury cell phones, technology is not the key aspect. Rather, brands like Mobiado focus a lot more on design elements and the little details that make each product unique.

How can you make a luxury piece that is bound to be replaced soon? One that you cannot pass from father to son, like you do with luxury timepieces?

Mobiado might not have come up with an answer to that yet but they do a good job of introducing the mechanical element to each of their phones.

You won’t find a touch screen or a fancy Retina Display but you will feel the unique quality of their natural materials and special keyboards.

The Professional 3 VG frame is carved from solid aluminium and then finished with an anodized coating fit for the most demanding journey. Large sapphire crystal plates and sapphire buttons are precision inset into the body. The battery cover is machine engraved with the heritage Mobiado signature and the corners of the body are reinforced with golden plated brackets. Available in two sleek contemporary choices: Marrone and Graphite.

There’s a VG Leather Case, handmade in Alcantara and calf leather in Geneva, Switzerland. There is a built-in locking carabineer for the adventurous kind.

The newest innovation has to be the cube charger, a beautiful piece that works as a charger but is still great to look at.

Gaming and UNESCO sites trump Hong Kong and Singapore UNESCO World Heritage site status is essential for the region in growing its competitive Asian market, Anna Leask, Professor of Tourism Management at Edinburgh Napier University, told Business Daily João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he emphasis on the casino gaming industry and UNESCO World Heritage site status allow Macau to differentiate itself from Hong Kong and Singapore. This is the opinion of Anna Leask, Professor of Tourism Management at Edinburgh Napier University, who is working on a project about generational changes in consumer behaviour and the impact on tourist decision-making, studying the cases of Hong Kong, Macau and Singapore.

“All three destinations share similar resources in terms of their visitor appeal, although the emphasis on casino and gambling developments in Macau do distinguish this destination from the others. Macau also has the added advantage of the UNESCO World Heritage Site status that neither of the other destinations have”, she told Business Daily.

While the Macau Government is making efforts for the region to diversify tourism attractions beyond the gaming industry, the academic explained that this strategy will increase the appeal of the Special Administrative Region and encourage different visitors to check out the city.

“This approach would be likely to broaden the appeal of the destination and encourage a more diverse visitor market that could contribute to the development of the destination for both local communities and business partners”, Ms. Leask said.

Differentiation key for future

In relation to consumer behaviour and the impact of it on tourists’ decisions in terms of destination, the academic stressed the importance for regions to

Differentiation between destinations is key to their future – visitors need to know why they should choose one destination over another – so for Macau it would be appropriate to seek to identify the destination’s individual features, perhaps cultural and heritage orientated, so that the scope of the destination offering is extended Anna Leask, Professor of Tourism Management at Edinburgh Napier University

differentiate and to promote individual features.

“Differentiation between destinations is key to their future – visitors need to know why they should choose one destination over another – so for Macau it would be appropriate to seek to identify the destination’s individual features, perhaps cultural and heritage orientated, so that the scope of the destination offering is extended”, she said to Business Daily.

She also stressed that the tourism sector in the region is going through a phase when due to increasing competition differentiation is more important than ever.

“The global marketplace has become increasingly competitive in recent years and destinations are finding it hard to develop their individuality and stand out from alternative destinations. At this moment Macau, Hong Kong and Singapore are all striving to develop individuality and specialisms to allow them to compete for largely similar markets.”

While asked about the relationship of Hong Kong and Macau in terms of tourism, Ms. Leask said the regions are rather complementary and that increasing the offering in Macau can make visitors stay longer in the region.

“They are likely to be complementary – they can offer different features and gateways to alternative visitor experiences. For example, Hong Kong could lead to greater cruise tourism while Macau [could lead] to heritage tourism”, she said. “The disadvantages of one-day excursion travel can be overcome with strong product offerings to extend the experience or encourage repeat leisure and business travel.”

Business Daily | 7

June 25, 2015

Gaming

House doesn’t always win as Philippine casino bet on China sours The expected flood of high-rollers from China to Manila’s three casino resorts has so far failed to materialise, making Philippine casino stocks among the world’s worst performers this year

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ebruary 2014, Melco Crown Entertainment Ltd. coChairman James Packer described the construction of the City of Dreams casino in Manila as a “bet on China.” Sixteen months on, the gamble hasn’t paid off.

With a government crackdown on corruption in China scaring customers away from Macau, where gaming revenue has fallen year-on-year for four straight quarters, the opportunity appeared to be there for other Asian gambling hubs to cash in on punters seeking less scrutinised destinations.

Instead, the anticipated flood of high-rollers from China to Manila’s three casino resorts has so far failed to materialise, and the market value of operators like Melco Crown Philippines Resorts Corp. and Bloomberry Resorts Corp. has been shredded as investors flee, making Philippine casino stocks among the world’s worst performers this year.

Profits will tumble 56 per cent across the industry in 2016, JP Morgan Chase & Co. forecast this week.

“The chain reaction from Macau hit everyone,” said Noel Reyes, chief investment officer at Security Bank Corp., who manages the bestperforming Philippine equity fund in the past year. “Expectations VIP players will come in large numbers didn’t happen. The stocks have fallen quite significantly but not everyone is rushing back in, and there’s no clear light at the end of the tunnel.”

Poor performing stocks

Casino shares have crashed even as the benchmark Philippine Stock Exchange Index has climbed 4.4 per cent this year, peaking at an all-time

high in April amid official forecasts of two straight years of 8 per cent economic growth.

Shares of Bloomberry, which operates Solaire, have lost 27 per cent this year, and Resorts World Manila operator Travellers International Hotel Group Inc. has slumped 35 per cent. Melco Crown Philippines tumbled 56 per cent as earnings disappointed investors, outpacing even the 36 per cent loss at Wynn Macau Ltd., the Chinese territory’s worst-performing casino stock.

Bloomberry added 0.1 per cent to 9.02 pesos at 9:54 a.m. in Manila, while Travellers was unchanged and Melco climbed 3.2 per cent to 6.20 pesos, poised for its first gain in eight days after slumping to the lowest level since December 2012 on Tuesday.

JP Morgan Chase & Co. downgraded Melco’s stock to underweight from overweight in a report dated June 21, and cut its 12-month price target by 63 per cent to 5.80 pesos.

China arrivals

Arrivals in the Philippines from China, the country’s fourth-biggest tourist market, fell by about 33 per cent to 93,043 in the first quarter as the Chinese government stepped up its anti-corruption drive. A simmering territorial dispute between the two nations over islands in the South China Sea has also deterred travellers.

Geopolitics “seems to be getting in the way of seeing planeloads of tourists,” Cristino Naguiat, chief executive officer of the Philippine Amusement & Gaming industry body, said earlier this month.

Bloomberry fell to a first-quarter loss of 533 million pesos (US$11.8

million) as costs spiked with the expansion of the Solaire casino, increased marketing expenses and provision for bad debts. Travellers’s profit rose 1.6 per cent to 1.74 billion pesos, while Melco Crown Philippines, which opened City of Dreams in December, posted a record 3.09 billion-peso loss.

“The first-quarter results raised the question; can there be aggressive growth without the numbers coming from China?” said Richard Laneda, an analyst at COL Financial Group Inc. in Manila. “The growth in earnings didn’t match the pace most wanted to see. The market isn’t overreacting, there’s genuine uncertainty.”

“Too optimistic”

Some investors are overestimating the impact of the China market, and the

The chain reaction from Macau hit everyone.

Expectations VIP players would come in large numbers didn’t happen Noel Reyes, chief investment officer at Security Bank Corp

slump in Philippine gaming stocks is excessive, according to Marc ReyesLao, an analyst at BPI Securities Corp. in Manila.

Combined profit at Bloomberry, Travellers and Melco Crown Philippines is forecast to jump 47 per cent to 13.61 billion pesos next year from 2015, and to 15.59 billion pesos in 2017, according to analyst estimates compiled by Bloomberg.

Based on share-price forecasts, Philippine gaming stocks will return at least 40 per cent in the next 12 months.

“The dismal stock performance is not totally fundamentally driven,” Reyes-Lao said. “It’s partially because of negative sentiment towards the industry brought about by China’s campaign against corruption.

Investors have overreacted.”

JP Morgan reckons those earnings forecasts are “too optimistic.” In the report this week led by analyst Daisy Lu, the bank said Manila casinos are increasingly reliant on China for high-rolling VIP traffic and therefore vulnerable to the government’s corruption crackdown and scrutiny on casino marketing.

For investors including BDO Unibank Inc., the country’s largest money manager, the odds need to improve considerably before they put more chips on the table.

“For long-term investors, this might be a good time to buy, since they have been badly beaten up,” Frederico Ocampo, chief investment officer at BDO, said in an interview on June 15. “We need to see more compelling indicators that things have turned out for the better.”

Bloomberg

8 | Business Daily

June 25, 2015

Greater China

Yuan gold fix approval expected soon Sources say it would be derived from a contract traded on the bourse for a few minutes, with the exchange acting as the central counterparty A. Ananthalakshmi

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hina is expected to receive approval from its central bank for a yuan-denominated gold fix “anytime now”, with more details about the scheme potentially set to emerge at a major industry conference this week, sources told Reuters.

The world’s top gold producer and one of the biggest consumers wants to be a price-setter for bullion and is asserting itself at a time when the global dollardenominated benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation.

If the yuan fix takes off, China could compel buyers in the mainland and foreign suppliers to pay the local price, making the London fix less relevant in the world’s biggest bullion market.

However, given the yuan is not fully convertible, the two fixes could exist side by side globally.

The Shanghai Gold Exchange (SGE), on whose

KEY POINTS China central bank may approve fix anytime now -sources Around 15 Chinese banks expected to participate initially Traders eyeing Shanghai bullion conference for more details international platform the yuan-denominated fix will be launched, submitted details of the fixing process, and rules and regulations for participants, to the People’s Bank of China (PBOC) a few weeks ago, sources familiar with the matter said.

“They may approve it anytime now,” said one of the sources directly involved in the process, who declined to be named because of rules

on talking to media.

The SGE and PBOC did not reply to requests for comment.

The source, however, said more details would be announced at the LBMA Bullion Market Forum in Shanghai on Thursday if the PBOC approval comes through before the conference.

Once SGE gets PBOC approval, it will work to sign up Chinese and foreign

banks for the fix, with an aim to launch it later this year.

Around 15 Chinese banks are expected to participate initially, the source said.

The exchange has held talks with foreign banks regarding the fix but they co u l d b e r e l u c t a n t t o participate at a time when U.S. and European regulators are scrutinising benchmarks across asset classes following the manipulation of the

London interbank offered rate, or Libor.

“The PBOC is supportive (of the fix),” said a source at a foreign bullion bank.

“SGE’s challenge is to find the participants to be part of the process.”

In a trial run for the fix in April, some foreign banks participated along with many major Chinese banks.

While details of the fix are yet to be revealed, sources say it would be derived from a contract traded on the bourse for a few minutes, with the exchange acting as the central counterparty. That could make the process transparent - addressing one of the big concerns about the London fix.

The yuan fix is the most recent effort by SGE to boost China’s position in the global gold market. The exchange opened an international bourse in September 2014, allowing foreigners to trade yuan-denominated contracts for the first time.

Reuters

Australia latest US ally to join AIIB Treasurer of Australia was satisfied with how the bank would be governed

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ustralia said yesterday it will join the new Beijing-led Asian Infrastructure Investment Bank as a founding member, contributing A$930 million (US$719 million) in paid-in capital over five years.

Australia is the latest US ally to sign up to the bank, which has been shunned by Washington and Tokyo, the world’s largest and third-largest economies respectively.

The AIIB has 57 prospective members, and will have a paid-in capital of US$20 billion and total authorised capital of US$100 billion, Foreign Minister Julie Bishop and Treasurer Joe Hockey said in a joint statement.

“The decision comes after extensive discussions between the government, China and other key partners around the world,” the ministers said.

“There is an estimated infrastructure financing gap of around US$8 trillion in the Asian region over the current decade. The AIIB will be part of the solution to closing this gap.”

Hockey will seal the agreement in Beijing on Monday.

The bank, expected to be operational later this year and based in the Chinese capital, has been viewed by some as a rival to the World Bank and the Asian Development Bank, two institutions under strong US influence.

Its success has caught the US off guard, after it led a high-profile attempt to dissuade allies from taking part, and now finds itself increasingly isolated.

There have been concerns over transparency of the lender, which will fund infrastructure in Asia, as well as worries that Beijing will use it to push its own geopolitical and economic interests as a rising power.

But Hockey said that following “intense negotiations” with China and other prospective founding members, Australia was satisfied with how the bank would be governed.

“We are absolutely satisfied that the governance arrangements now in place will ensure that there is appropriate transparency and accountability in the bank,” the treasurer told broadcaster Sky News.

“I have spoken with the Secretary of the US Treasury Jack Lew about it in the last 48 hours and we’ve also spoken with the Japanese government to address their concerns.”

“They (the Americans) understood exactly where we were coming from.

It is a significant opportunity for Australia.”

The Australian government expects the bank, through its support

We are absolutely satisfied that the governance arrangements now in place will ensure that there is appropriate transparency and accountability in the bank John Hockey, Australia’s Treasurer

Australia’s Foreign Minister Julie Bishop

of Asian infrastructure projects, to help boost the nation’s exports -including minerals, agriculture and services -- to the region.

Australia and China signed a landmark trade deal last Wednesday after a decade of talks that Prime Minister Tony Abbott said would give the two nations unprecedented access to each other’s markets.

AFP

Business Daily | 9

June 25, 2015

Greater China Climate plan priced at US$6 trillion

Financial firms allowed issuing yuan bonds in Taiwan

The US and China announced on Monday they will partner on two new carbon-capture, utilization and storage projects Valerie Volcovici and David Brunnstrom

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t will cost China over US$6.6 trillion (41 trillion yuan) to meet the greenhouse gas reduction goals it will lay out later this month in its strategy for United Nations climate negotiations, the country’s lead negotiator for the talks said.

Xie Zhenhua, special representative for climate change affairs at China’s National Development and Reform Commission, said the objectives China will outline by the end of June will be “quite ambitious”.

Xie was participating in a threeday Strategic and Economic Dialogue forum in Washington where he met with counterparts in the Obama administration, including U.S. climate negotiator Todd Stern, Environmental Protection Agency Administrator Gina McCarthy and Energy Secretary Ernest Moniz.

To meet its objectives, China, the world’s biggest greenhouse gas emitter, must reconfigure its coaldependent energy mix and develop new energy sources, Xie said.

“We will need to carry out international cooperation and research and development to reduce the costs of relevant technologies and to innovate so that we can reach our

objectives,” he told reporters at a State Department briefing.

The United States and China announced on Monday they will partner on two new carbon-capture, utilization and storage projects to help commercialize the technology.

While key details of China’s plan are not yet known, it is expected to include targets announced in November, when it reached a key climate change deal with Washington to cap its emissions by 2030 and fill 20 percent of its energy needs from zero-carbon sources.

Earlier this month, Chinese Premier Li Keqiang reaffirmed the government’s commitment to hit a carbon emissions peak by “around 2030”. The country’s coal consumption decreased for the first time in years in 2014, however, leading some to speculate that its emissions could reach their peak sooner.

Stern, the U.S. climate change envoy, told reporters the plans China has already announced with Washington were “a quite strong contribution”.

But he said he hopes a final agreement of all countries at this

December’s key UN climate change conference in Paris contains “a strong set of...contributions, which are updated periodically” to ensure more ambitious targets.

Stern said China does not expect public finance to support its climate goals and that it is likely to attract investment as it adopts new technologies.

Earlier on Tuesday, Chinese Vice Premier Wang Yang told a panel moderated by former U.S. Treasury Secretary Hank Paulson that 750,000 electric vehicles were sold in China last year, three times more than the year before, “giving great opportunities and profit to companies like Tesla and BYD (Auto) “.

“To tackle climate change is both a challenge and an opportunity,” Wang said.

Ahead of the UN’s climate change conference in Paris, countries are required to submit national plans, which will serve as the building blocks of a final agreement.

So far, 11 countries, including the United States and Mexico, as well as the European Union have submitted theirs.

Reuters

Momo gets buyout offer from CEO Company’s chief executive and a group of investment firms offered to buy all shares of the Chinese mobile chat app company they do not already own for US$1.9 billion, six months after the company listed in the United States. Momo, which helps users find friends based on locations and exchange messages, pictures and videos, is the latest in a string of Chinese tech companies that have received proposals to drop their U.S. listings and take them private. Security software company Qihoo 360 Technology Co Ltd received a US$10.06 billion buyout offer from its CEO last week.

GOME says to buy Beijing retail chain GOME Electrical Appliances Holding Ltd plans to buy Beijing Dazhong Home Appliances Retail Co Ltd for 3.83 billion yuan (US$617 million), formalising its control of a company it has been managing for around eight years. GOME said it would buy the whole of Beijing Dazhong from Beijing Zhansheng Investment Co Ltd in a deal set off against a 3.6 billion yuan loan previously extended to Beijing Zhansheng, with the remainder paid in cash. The loan had the option to acquire the entire equity interest in Dazhong at any time.

Wanda ‘to buy more sports firms’ Rumours swirl that China could seek to host the 2026 football World Cup

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hinese property and entertainment giant Wanda Group, which formally took a 20 percent stake in Spanish football club Atlético de Madrid in April, will buy at least three more sports companies this year, its chairman said.

“Within this year, Wanda will still buy at least three sports companies,” Xinhua quoted chairman Wang Jianlin as saying. “Upon the completion of these mergers and acquisitions, Wanda is going to be the world number one in the sports industry.”

As well as the 45 million euro (now US$50 million) Atlético share, Wanda this year paid 1.05 billion euros for Swiss sports marketing group Infront, which is headed by the nephew of outgoing FIFA president Sepp Blatter and holds some broadcasting rights to the World Cup. Wanda is looking to increase its influence in the global sports business, as Beijing bids for the 2022 Winter Olympics and rumours swirl that China could seek to host the 2026 football World Cup. Wang’s phrasing suggests that the “at least three” deals do not include the Atlético or Infront acquisitions.

The billionaire, a diehard football fan, did not reveal specific targets, but said they should have activities in China and worldwide sports marketing or ownership rights, the report late Tuesday said.

Wang also claimed that “there will soon be good news announced about Chinese football”, without giving any details, Xinhua added.

Chinese regulators will allow mainland financial institutions to directly issue bonds in Taiwan, two people with direct knowledge of the matter told Reuters, in another step to towards deepening the pool of offshore yuan in Taiwan and reinforce financial relationships between Beijing and Taipei. Under previous regulations, only foreign branches of mainland financial institutions were allowed to issue yuan-denominated bonds, which acted as a limit on the size of issuance. Now yuan bonds can be issued and backed directly by mainland banks, some of the world’s largest financial institutions by market capitalisation.

AIIB door still opened to U.S., Japan China has left the door open for the United States and Japan to join a Beijing-led infrastructure bank but the offer has so far been rebuffed, Chinese Finance Minister Lou Jiwei said. “We have also opened our door for the two countries to joining this bank,” Lou told journalists following meetings with U.S. officials at annual talks on security and economic policy. “At present the two countries have not expressed their willingness or intention to join the AIIB,” he said, referring to the Asian Infrastructure Investment Bank (AIIB).

Atlético de Madrid players celebrate

Upon the completion of these mergers and acquisitions, Wanda is going to be the world number one in the sports industry Wang Jianlin, Wanda chairman

Wanda Group could not be reached immediately for comment.

Bloomberg News ranks Wang as China’s richest man and the ninthwealthiest in the world, with a net worth of US$42.1 billion.

His Beijing-based conglomerate, which has interests in hotels, entertainment and retail, last year saw a 30 percent jump in revenue to 242.5 billion yuan.

It bought US cinema chain AMC Entertainment Holdings in 2012 and has moved to branch out into film production and theme parks.

Its listed arm, Dalian Wanda Commercial Properties Co., raised US$3.7 billion in an initial public offering in Hong Kong in December.

AFP

Alibaba film unit ties up with Paramount Alibaba Pictures Group Ltd is making its first Hollywood movie investment and partnering with Paramount Pictures to promote the studio’s latest “Mission: Impossible” instalment in China. The film unit of Alibaba Group Holding Ltd will collaborate with Viacom Inc subsidiary Paramount in online ticketing, promotion and merchandising for “Mission: Impossible - Rogue Nation” in China, it said in a statement yesterday.

It did not say how much the tie-up would cost. Alibaba Pictures, previously known as ChinaVision Media Group, raised nearly 5 billion yuan (US$805.5 million) in 2014 from a share offer that put Alibaba in control of the company.

10 | Business Daily

June 25, 2015

Greater China

HKEx faces uphill battle with commodities ‘connect’ plan China has more than tripled the number of government-owned firms allowed to trade commodity derivatives overseas Melanie Burton and Lawrence White

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ong Kong Exchanges & Clearing (HKEx) is eager to wring value from its US$2.2 billion purchase of the London Metal Exchange but the chances of it emulating in metals its success in connecting with stock traders on the mainland may be slipping away.

Shares in HKEx have risen 65 percent this year, making it the world’s biggest bourse operator, as volume soared through the stock trading link with Shanghai and a related programme that lets mainland funds buy Hong Kong shares.

But metals are another game: China is speeding up efforts to internationalise its commodity markets all by itself, demand for metals has dwindled and regulatory hurdles are forbidding. The HKEx has had an icy reception from the Shanghai Futures Exchange (ShFE), vital for any commodities link.

“Implementing a ‘commodities connect’ is much trickier than with stocks, since you are talking about

KEY POINTS HKEx wants to be gateway to China’s vast commodities markets HKEx bought the London Metal Exchange in 2012 Analysts say emulating “Stock Connect” success will be tough a physical product with the need to be able to take delivery, as opposed to just a piece of paper,” said Arjan van Veen, an analyst at Credit Suisse in Hong Kong.

LME volumes fell 6 percent last month and it needs new products to boost activity.

Its “mini metals” contracts, one-

fifth the size of the main LME contracts and aimed at retail investors, have met a lukewarm response - not a good omen for the more retail-oriented Chinese market.

“Base metals are new to Hong Kong’s markets and new products often take time to develop so we are taking a long-term view with our Asia

commodities contracts,” HKEx said in a statement to Reuters.

But progress has been limited since it bought the LME in 2012, and it also said its immediate focus was another stock trading link with Shenzhen.

“Actively hostile”

The ShFE said it “has always kept a good relationship with the HKEx and will deepen cooperation with global exchanges”.

However, the Shanghai exchange already has a suite of metal contracts and an industry source close to HKEx said the ShFE was “actively hostile” to the “connect” idea. Other industry officials echoed that, including a Shanghai trader close to the ShFE. ShFE executives have been a far smaller presence than officials from other exchanges at high-profile LME Week Asia events in Hong Kong over the past three years, appearing just once on speakers’ lists, for example.

The ShFE, which runs China’s flagship copper contract, is speeding ahead with its own plans to attract foreign investment flows, preparing to open a new oil contract to foreigners this year.

Backing the ShFE, the Shanghai Free Trade Zone (FTZ) has attracted a bevy of global firms as China liberalises its currency and opens its markets further to the outside world.

“China is showing across multiple areas, not just commodities or metals, that it is very keen to get foreign participation in China via the FTZs. On commodities, one could look at what the ShFE has done with oil as the natural extension for metals,” said one of the industry sources.

In the opposite direction, China

Beijing prepares huge investment in aviation projects Outbound passenger volumes rose 39 percent year-on-year over the January-May period

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hina will invest 500 billion yuan (US$80 billion) in 193 major domestic aviation projects this year, the country’s aviation regulator said, to meet growing demand from travellers and to bolster growth as the world’s secondlargest economy slows.

The plan was outlined by Li Jiaxiang, head of the Civil Aviation Administration of China, at an aviation forum in Beijing. The remarks did not specify details about the projects.

The announcement comes amid a wider effort

by Beijing to increase overall infrastructure spending after economic growth slowed to a six-year low in the first quarter. The country’s state planner has so far in the first six months approved billions of dollars of railway and airport projects.

KEY POINTS China outbound passenger volumes up 39 pct yoy in Jan-May Chinese airlines plan to add 83 routes over summer, autumn

China’s aviation sector has grown rapidly in recent years, driven by demand from the country’s increasingly wealthy middle class. Outbound passenger volumes rose 39 percent year-on-year over the January-May period, Li said.

He added that Chinese airlines now fly 553 routes to 127 cities in 51 nations, and

plan to add 83 more routes over the summer and autumn period.

Government planners estimate China’s airports will increase to 240 by 2020 from around 200 today.

Of the 500 billion yuan investment, 200 billion yuan will be spent on 51 projects in Chinese cities such as Urumqi

and Kunming which are along routes marked out in China’s “One Belt, One Road” initiative, Li said.

Chinese President Xi Jinping launched in 2013 an initiative to increase trade and extend China’s influence with Central, West and South Asia as well as Europe and Africa through a series of projects

ranging from oil and gas pipelines to railways.

In line with the strategy, Li also said that the government plans to expand China’s traffic rights with Central, East and West Asian countries “at an appropriate time” which would pave the way for new routes.

Reuters

Business Daily | 11

June 25, 2015

Greater China has more than tripled the number of government-owned firms allowed to trade commodity derivatives overseas, boosting its clout in global markets for metals, energy and agricultural products.

Western interest in Chinese exchanges may be growing as investors seek greater access to price-setting contracts such as Dalian Exchange’s iron ore, said Jeremy Goldwyn, LME dealer Sucden Financial’s head of Asia business development. Another route in for HKEx could be to offer clearing services for mainland contracts, he said.

However, such a restricted role would not match the ambitions of HKEx Chief Executive Charles Li. The LME has launched a string of initiatives to focus liquidity on a single date each month and plans to offer a discount for trading big volumes.

The market talk is that HKEx plans to list a cash-settled metal futures contract, possibly cross-listing with a mainland exchange, that would be easier to trade against benchmarks in China and the United States, although prices may risk diverging from the physical market.

On the other hand, a physically deliverable product throws up problems around delivery in a different jurisdiction to where it is listed. And Chinese regulators are reluctant to give the LME a licence to open warehouses there.

“It’s medium-term very positive for HKEx, there’s huge potential,” van Veen said of the LME acquisition and expanding into China. “But it seems there’s a lot of work still to be done.”

Reuters

Evergrande, Tencent to buy solar firm Mascotte

Officials to pledge allegiance to Constitution

It was not immediately clear why the companies would be interested in a solar grade polysilicon producer

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hina’s Evergrande Real Estate Group Ltd and social media firm Tencent Holdings Ltd will buy Mascotte Holdings Ltd at a 97 percent discount to the solar tech maker’s share price, Mascotte said in a filing on Tuesday.

Mascotte requested trading of its shares suspended on June 9 because of what it said were unusual trading volumes. The same day, the company agreed to be bought by Evergrande and Tencent, according Tuesday’s filing to the Hong Kong Stock Exchange.

Evergrande and Tencent will buy new shares for around HK$750 million (US$96.74 million) accounting for 75 percent of Mascotte’s publicly traded share capital base, the solar firm said in the filing without disclosing how the pair would divide ownership.

Hong-Kong listed Mascotte describes itself on its website as a maker of solar grade polysilicon in Taiwan.

It was not immediately clear why Evergrande and Tencent would be interested in the firm. A spokeswoman for Tencent confirmed the transaction, but declined to provide details. Evergrande could not be reached for comment.

Evergrande, which has been buying up firms outside its core real estate business, entered the solar industry in October, partnering California-based Solar Power Inc to take over solar firm Guocang Group Ltd for HK$1.2 billion.

Evergrande and Tencent will pay HK$0.006 per share for Mascotte, the solar firm said, a 97 percent discount to the HK$0.285 the stock last traded at before the suspension. The shares had traded steadily around HK$0.1 for the past two years before rising as high as HK$0.4 in May as volumes increased.

Sharp share price swings have been testing the ability of Hong Kong’s securities regulator to prevent potential market abuse and contain a surge in volatility brought about by a landmark trading link with Shanghai.

Last month, shares in solar tech maker Hanergy Thin Film Power Group Ltd fell 47 percent in less than an hour, wiping US$18 billion off its market value before the firm asked for a suspension. The next day, Goldin Financial Holdings Ltd lost US$16 billion - over half its value - in two hours.

Reuters

Clare Jim

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Shares in HTF have been suspended since May 20, when they crashed 47 percent within an hour, having leaped six fold in the previous eight months to US$40 billion, making founder Li Hejun China’s richest man.

Two sources with knowledge of the situation said Hong Kong wanted to see Hanergy Holding’s books so it could judge whether HTF has a sustainable business model before allowing its shares to resume trading.

The stand-off demonstrates a broader problem that regulators around the world face in obtaining adequate disclosure from Chinese companies operating in their patch, and in evaluating their governance

CITIC promises financing support for “Belt and Road” The CITIC Group yesterday announced a total of over 700 billion yuan (US$115 billion) in investment and financing support for the Belt and Road initiatives.

China CITIC Bank, CITIC Securities, CITIC Trust and several others are among the companies involved. CITIC Bank alone offered over 400 billion yuan. In addition, the lender plans a fund for the Belt and Road with an initial capital of 20 billion yuan. The hefty financing will be spent in at least 10 countries along the Belt and Road on infrastructure, environmental protection, new energy, agriculture and education.

Electric car production grows three-fold in May Chinese manufacturers produced three times more new energy vehicles this May than they did last year, the Ministry of Industry and Information Technology said yesterday. Production of pure electric passenger cars rose 300 percent to 9,922, with hybrids rising nearly 400 percent to 4,923. Production of pure electric and hybrid commercial vehicles rose by 700 percent and 36 percent, respectively.

A total of 19,100 such vehicles rolled of the production line May. In the first five months, Chinese automakers produced 53,600 new energy vehicles; again nearly a threefold increase over 2014.

Hanergy declines to disclose parent’s accounts to HK bourse he Hong Kong bourse has asked Hanergy Thin Film Power Group (HTF) to hand over its Chinese parent company’s accounts before it will let the suspended stock trade again, but HTF is resisting the request, sources told Reuters.

Two sources familiar with the matter said HTF is studying a proposal that as an alternative to disclosing the parent company accounts to Hong Kong Exchanges and Clearing Ltd (HKEx), HTF could buy parts of its parent, Hanergy Holding.

Hanergy Holding, which buys solar panel making machines from HTF and then makes solar panels for sale to third parties, accounted for two-thirds of HTF’s sales last year.

Analysts say that makes HTF overly dependent on group sales, and since unlisted Hanergy Holding doesn’t publish accounts, it is impossible to know whether there is independent demand for the end product.

The proposal from HTF would bring the entire supply chain and ultimate sale of solar panels into its own books, the sources said.

“This plan is being offered as a solution, and the company will proceed with the purchase if HKEx approves it. This will resolve the problem of (connected transactions),” one of the sources said.

HTF and Hanergy Holding declined to comment, and HKEx said it does not comment on individual cases.

Chinese officials will pledge their allegiance to the Constitution when assuming office, according to a draft legal document submitted to China’s top legislature yesterday for deliberation.

The 15th session of the 12th National People’s Congress (NPC) Standing Committee, China’s top legislature, began yesterday afternoon and continues for eight days

standards, whether for investor protection or matters such as moneylaundering controls.

The problem is particularly acute for authorities in Hong Kong, where many Chinese companies have secondary listings or listed units.

HTF is also under investigation by Hong Kong’s Securities and Futures Commission (SFC), which a source familiar with the situation has said is looking into possible market manipulation by unnamed parties during the stock’s rapid rise.

The SFC and HTF have declined to comment on the nature of the investigation.

Reuters

Alibaba to remove listings with Confederate flag W-commerce giant joined American retailers yesterday in pledging to pull down links to products displaying Confederate flag imagery in the wake of last week’s mass shooting at a historic black South Carolina church. The Confederate battle flag has become a lightning rod for outrage over the killing of nine black men and women at Emanuel African Methodist Episcopal Church in Charleston last Wednesday. Accused gunman Dylann Roof, a 21-year-old white man, is seen posing with the flag in photos posted on a website reported to be his.

Airbus could sell 5070 A330 jets Airbus is in talks to sell some 50-70 A330 wide-body jets to China as part of plans to set up a new industrial plant in the world’s fastest-growing aviation market, sources familiar with the discussions said. Airbus has been negotiating for about 18 months to establish an A330 cabin-completion centre in China alongside its existing final assembly plant for smaller A320 jets at the northern port city of Tianjin. The deals could be signed during a visit to Toulouse, where Airbus is based, by Chinese Prime Minister Li Keqiang on July 1.

12 | Business Daily

June 25, 2015

Asia

World financial fears keep Asian firms in holding pattern Companies in India recorded the steepest fall in confidence, logging 84 from 97 in the previous quarter Byron Kaye

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entiment at some of Asia’s biggest firms has deteriorated as a slowing Chinese economy, Greek sovereign debt crisis and looming U.S. interest rate hike create deepening concern about the state of the world economy, a Thomson Reuters/INSEAD survey showed.

The Thomson Reuters/INSEAD Asian Business Sentiment Index fell

to 70 for the June quarter, from 71 in March and 74 in the same period last year. A reading over 50 indicates an overall positive view.

Though gradual, the decline suggests the wait-and-see approach of top businesses is evolving from a passing phase to ingrained cautiousness as questions persist about the structural soundness of

Property saw the steepest fall in sentiment of any sector, scoring 77 from 88

economies in China, Europe and the United States.

“Progress in some areas is compensated by increasing risks in another,” said INSEAD Professor Antonio Fatas.

“There is increasing concern for China and possibly for other emerging markets in the region as the U.S. Federal Reserve starts raising rates.

There is no great excitement to compensate for the risks of the region and the broader world economy.”

Companies in India recorded the steepest fall in confidence, logging 84 from 97 in the previous quarter, as fervour over the election of probusiness Prime Minister Narendra Modi last year gives way to anxiety about whether two rate cuts this year can reignite a sluggish economy.

The biggest gainer was Thailand, scoring 94 versus 79, as firms adjusted to the disruption of a May 2014 military coup as well as two rate cuts which the central bank said had stabilised the economy.

India to more than double capital injection in state banks Morgan Stanley estimated this month the government would need to inject US$15 billion across all state banks “urgently” Neha Dasgupta and Abhishek Vishnoi

I

ndia plans to inject about US$3 billion into state-owned banks this fiscal year and could double that amount next year in a push to boost capital and help lenders meet the global Basel III regulatory requirements, Finance Secretary Rajiv Mehrishi said.

The planned capital infusion into the state lenders, which account for more than 70 percent of all outstanding bank loans, is more than double an earlier estimate of 79.4 billion rupees (US$1.25 billion) made in the government’s budget for this fiscal year.

It was unclear, however, what impact the increased funding would have on the fiscal deficit, which the government has targeted at 3.9 percent of GDP.

“What we are aiming at is an infusion of about US$3 billion in the current year and perhaps twice as much in the next year,” Mehrishi

told news local news channel CNBCTV18, during a visit to the United States with Finance Minister Arun Jaitley.

Chinese firms were the least optimistic for the first time in nine quarters, with a score near flat at 55.

The world’s second-largest economy so far this year has grown its slowest in over half a decade dogged by concerns of a property bubble and soft data on retail sales, industrial output and fixed asset investment.

Thomson Reuters and global business school INSEAD conducted the poll from June 8 to 20. Of 117 respondents, 40 percent were positive - from 45 percent in the previous quarter - while 60 percent were neutral. None were negative.

The biggest risk respondents cited was global economic uncertainty, followed by rising costs. Other risks included regulatory uncertainty and rising competition.

Property bubble

Property saw the steepest fall in sentiment of any sector, scoring 77 from 88. Record-low interest rates lifted demand, but a consequent surge

A slowing economy and stretched corporate balance sheets have led to a surge in bad loans at Indian banks. State-owned lenders have amassed bad loans at a faster pace than their privately owned peers, raising doubts about their ability to meet tougher global regulatory capital requirements.

Rating agency ICRA estimates non-performing loans at state banks this fiscal year to rise to between 5.3 percent and 5.9 percent of total loans from 4.4 percent in the year that ended March.

Morgan Stanley estimated this month the government would need to inject US$15 billion across all state banks “urgently” to achieve a common equity tier 1 ratio of around 10 percent.

Mehrishi said the government could finance the increased funding through off-budget means, but gave no further details.

It was also not immediately clear if the government would require banks to fulfil certain conditions to be eligible for grants. When it announced its previous plans for the US$1.25 billion capital injection, the government had said the top most profitable banks would be eligible.

Mehrishi and finance minister Jaitley are in the United States to promote investment in India.

Reuters

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Business Daily | 13

June 25, 2015

Asia in prices has led to speculation that the sector has become over-valued.

Adding to concerns is the impact on demand of the first Fed rate hike in a decade, which is widely expected in September.

“Normally property sentiment goes down when interest rates start to go up, and we haven’t seen any of that,” said AMP Capital chief economist Shane Oliver.

“This is a global phenomenon where we’ve got very low interest rates and that’s helped buoy property markets and development activity, but by the same token there’s been a lot of talk that property bubbles might re-inflate.”

The building sector meanwhile latched onto immediate demand spawned by low rates, recording the survey’s brightest outlook of 86, from 79. Unlike property developers, builders are less susceptible to fluctuation in property retail prices.

The shipping, finance and auto sectors logged the lowest readings of 56, 57 and 58 respectively. Financials comprised a quarter of respondents citing global economic uncertainty as a risk, followed by technology firms which made up a fifth.

Nick Hawkins, chief financial officer at survey respondent Insurance Australia Group Ltd, the country’s largest general insurer, said his firm’s plans to grow in China, India and Southeast Asia won’t be affected by a decline in sentiment.

“We really see our investment and our strategy into those markets as a long-term venture so I don’t think any slow-downs or (changes to) current economic conditions are really impacting our views.”

Reuters

S Korea supplementary MERS budget set to top 10 trillion won

Tourist arrivals in Thailand up

BoK Governor said the declines in economic indicators linked to MERS are easing

S

outh Korea will draw up a supplementary budget expected to exceed 10 trillion won (US$9 billion), to help cope with the effects of the outbreak of Middle East Respiratory Syndrome and an economic slump, a ruling party official said yesterday.

“The government has told us 5 trillion won of the budget will be used to make up for tax deficits, while 5 trillion and some more will be for extra spending,” Saenuri Party floor leader Yoo Seong-min told reporters after a party meeting.

Reuters confirmed Yoo’s comments with an aide, who asked not to be identified as he was not authorised to speak to media.

Yoo said a meeting will be held with government officials early today to discuss the budget and economic policies for the second half of this year. The finance ministry will release its revised economic forecasts on Thursday as well as its policy direction for the rest of 2015.

“Regarding the additional budget, the government has not prepared

a precise list on where the extra spending will go. It’s dangerous to confirm the size of the budget when that list has not been made available yet,” Yoo said at the Saenuri meeting, according to comments published on the party’s website.

The government confirmed 4 new cases of MERS yesterday, bringing the total number of cases to 179.

The virus outbreak has claimed 27 lives, and fear over contracting of MERS has kept South Koreans at home or away from shops - a blow to the service industry and overall domestic consumption.

Bank of Korea Governor Lee Ju-yeol said earlier in the day that the declines in economic indicators linked to MERS are easing, but sluggishness in service industries is expected to persist for a considerable time.

Lee also said it was important for South Koreans to continue with their lives and build recovery in consumer and investment sentiment.

Reuters

Indonesia considers tax amnesty for financial crimes Previous president Susilo Bambang Yudhoyono already carried out in 2008 a tax amnesty program called the “sunset policy” Hidayat Setiaji and Eveline Danubrata

Tourist arrivals increased 27.39 percent in the first six months compared with a year earlier, a deputy government spokesman said yesterday. Thailand saw more than 14 million tourist arrivals between January 1 and June 21, said deputy government spokesman Sansern Kaewkamnerd. Tourism accounts for 10 percent of the Thai economy. The industry was battered in 2014 during months of sometimes violent street protests that prompted some foreign governments to issue warnings against non-essential travel to Thailand. The country’s tourism council said it expects a record 29.5 million tourists this year.

Malaysia to use rubber supply in roads Malaysia plans to use 10 percent of its rubber supply in roads from 2016 as it looks to eat into excess supplies and shore up rubber prices, ministers said yesterday. The roads will be made using rubber cup lumps, or naturally coagulated latex, which will be processed into bituminous cup lumps and then mixed into asphalt. The Malaysian Rubber Board estimates 4.2 tonnes of cup lumps will be needed for each kilometre of road. Malaysia expects to produce about 710,000 tonnes of natural rubber this year.

Tokyo’s CPI worries Bank of Japan Some Bank of Japan board members expressed concern about weak gains in Tokyo consumer prices and said the situation should be monitored to see what implications the weakness might have for consumer prices nationwide.

However, many members agreed that the underlying price trend remained intact and the BOJ is likely to meet its 2 percent inflation target around the first half of fiscal 2016, minutes of the central bank’s May 21-22 policy meeting showed yesterday. Members also said industrial production could weaken for the time being.

Australian recruitment firm accepts rival’s offer

I

ndonesia’s tax office is considering a tax amnesty for financial crimes, in a move that could bring at least 100 trillion rupiah (US$7.5 billion) into state coffers, the director-general of taxes said yesterday.

Southeast Asia’s biggest economy is grappling with its weakest growth in six years and a huge budget deficit, while its tax collection rate is one of the lowest in the region as a proportion of gross domestic product.

President Joko Widodo’s administration has an ambitious tax revenue target of 1,489.3 trillion rupiah this year, up 30 percent from last year’s collection.

Under the tax office’s proposal, the perpetrators of financial crimes including corruption and money

laundering can pay a 10-15 percent tax on the assets they bring back to Indonesia, in return for a pardon from criminal prosecution, Sigit Priadi Pramudito told reporters.

“Our priority is to pull back overseas funds. If we don’t do anything, who benefits? It’s Singapore,” Pramudito said. “There’s no other way to take back those funds. The money has been stored in Singapore for decades.”

There is an estimated 3,000 trillion rupiah (US$225.56 billion)

Our priority is to pull back overseas funds. If we don’t do anything, who benefits?

It’s Singapore Sigit Priadi Pramudito, Indonesia’s director-general of taxes

in Singapore alone, said Mekar Satria Utama, a spokesman for the tax office.

The plan is still under “intensive review” and Indonesia has not been in talks with the Singapore government yet, Utama said. It would need parliamentary approval.

A bill on the tax amnesty is expected to be deliberated as soon as this year, Finance Minister Bambang Brodjonegoro told The Jakarta Post on Sunday.

The Monetary Authority of Singapore did not immediately respond to an email seeking comment.

In 2008, under previous president Susilo Bambang Yudhoyono, Indonesia implemented a tax amnesty program called the “sunset policy”, which brought in additional tax revenue.

“It’s not a long-term fix. You can get a one-off increase, but that doesn’t necessarily mean that over time the tax collection would be better,” said Santitarn Sathirathai, head of Southeast Asia and India economics research at Credit Suisse.

Some longer-term measures include lowering the tax rate, increasing the attractiveness of the rupiah currency as a “store of value” and boosting the tax collection capabilities, Sathirathai said.

Reuters

Recruitment firm Skilled Group Ltd agreed to a A$422 million (US$325 million) takeover offer from Programmed Maintenance Services Ltd after its smaller rival raised its initial proposal, sending its shares up sharply. The deal will create a company with a market value of A$750 million and is one of largest in a wave of consolidation sweeping through Australia’s staffing industry.

Skilled Chairman Vickki McFadden said in a statement that the short term benefits of the deal were compelling and the combined firm would be a more diverse business with greater funding flexibility for acquisition opportunities.

Bangladesh tea prices fall again Tea prices in Bangladesh fell for the fourth straight week at a weekly auction due to low demand from local buyers in the Muslim fasting month of Ramadan, brokers said. Tea prices dropped sharply in the last marketing season on poor demand from local buyers because of the damage to business sentiment caused by renewed political unrest early this year that left more than 120 people dead and disrupted supplies. Bangladeshi tea fetched an average 196.04 taka (US$2.5) per kg at the auction on Tuesday.

14 | Business Daily

June 25, 2015

International U.S. firms fear financing drought A battle in Congress that could shut down the U.S. Export-Import (Ex-Im) Bank next week is already causing headaches for small exporters as they try to stop customers from defecting to foreign competitors and as export financing starts to freeze up. If the 80-year-old export credit-provider loses its operating authority, its proponents argue that thousands of U.S. exporters will suffer and that Washington will lose international economic influence.

Its conservative Republican critics say private enterprise will fill the funding gap, calling the bank a source of “crony capitalism” and “corporate welfare”.

Congo president files anti-corruption case Democratic Republic of Congo (DR Congo) President Joseph Kabila has filed a case at the public prosecutor’s office against corruption, money laundering and financing of terrorism.

“The president has accomplished his responsibility. The judiciary should also play its part,” said Luzolo Bambi, the presidential special advisor on good governance. The advisor said “corruption had become endemic in DR Congo.”

He said the president had received numerous cases of embezzlement of public goods and corruption in almost all sectors of the economy.

IKEA to test new retail format in Britain IKEA Group plans to trial a new small-format store in Britain as it seeks to extend its reach across the country, the world’s largest furniture retailer said yesterday.

“Our customers are ... telling us that with 18 stores in the UK, we are often too far away. Order and collection points give us the opportunity to trial new ways of being more accessible to our customers,” said Gillian Drakeford, the company’s UK manager. The move is part of a global initiative as IKEA to double sales to about 50 billion euros (US$56 billion) by 2020.

S. African mines minister hails “safest year” “There has been a reduction of about 86 percent in fatalities from 615 in 1993 to 84 in 2014, which is the safest year on record for the South African mining industry,” Ngoako Ramatlhodi, mines minister, said. Last year was exceptional for South African mining, with a fivemonth strike that brought most of the industry’s platinum production to a halt - a factor that probably contributed to the record as it meant tens of thousands of miners were not underground and exposed to danger during that time.

U.S. first-quarter GDP revised to show slight contraction Inventories could be a drag on second-quarter GDP

T

he U.S. economy contracted slightly in the first quarter as it struggled with bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports.

There are signs, however, that growth is accelerating in the second quarter as the temporary drag from unusually heavy snowfalls and the ports dispute fade. Retailers reported strong sales in May and employers stepped up hiring. Housing is also firming.

The Commerce Department said yesterday gross domestic product fell at a 0.2 percent annual rate in the January-March quarter instead of the 0.7 percent pace of contraction it reported last month.

A fairly stronger pace of consumer spending than previously estimated accounted for much of the upward revision. Consumer spending, which accounts for more than two thirds of U.S. economic activity, was revised up to 2.1 percent growth pace from the 1.8 percent rate reported last month.

With personal savings increasing at a robust US$720.2 billion pace, consumer spending could accelerate in the second quarter.

While export growth was revised higher, that was offset by an upward revision to imports, leaving a stilllarge deficit that subtracted almost 2 percentage points from GDP. The GDP revision was in line with economists’ expectations. The economy expanded at a 2.2 percent rate in the fourth quarter.

But the first-quarter slump in output likely is not a true reflection of the economy’s health. Economists, including those at the San Francisco Federal Reserve Bank, say a problem with the model the government uses to smooth the data for seasonal fluctuations also contributed to depressing the GDP number.

They have argued the so-called seasonal adjustment is not fully stripping out seasonal patterns, leaving “residual” seasonality. The government said last month it was

An increasingly strong dollar hinders U.S. exports

aware of the potential problem and was working to address it when in publishes annual GDP revisions in July.

When measured from the income side, the economy expanded at a 1.9 percent rate in the first quarter instead of the previously reported 1.4 percent pace. A measure of domestic demand growth was revised up fourtenths of a percentage point to a 1.2 percent rate.

Economists estimate unusually heavy snowfalls in February sliced off at least one percentage point from growth.

Estimates for spending on equipment were little changed.

Business spending has been hurt by a strong dollar and lower energy prices.

Businesses accumulated slightly more inventories than previously estimated in the first quarter, which could mean they have little incentive to keep on adding to stock in the current quarter. The value of inventory accumulated in the first

German business morale weakens in June

Sentiment in the manufacturing, wholesaling and retailing sectors U.S. refiners snap up weakened but the mood among Russian crude cargoes construction firms improved Refiners on the U.S. West Coast and Hawaii have stepped up purchases of Russian crude, taking advantage of a narrow gap between U.S. and global prices as they look to guard against a seasonal shortage of Alaskan supply, trade and industry sources said.

Up to four tankers were expected to carry nearly 3 million barrels of Russia’s ESPO crude from Kozmino near the city of Vladivostok to refineries in the United States this month and next, the sources said. That will help Russia diversify beyond key buyers in China, South Korea and Japan.

Michelle Martin

G

erman business morale weakened for a second straight month in June, a leading survey showed yesterday, suggesting concerns about the Greek debt crisis are hitting the mood in corporate boardrooms across Europe’s largest economy.

Ifo’s business climate index, based on a monthly survey of some 7,000

firms, dropped to 107.4 in June from 108.5 in May. That was its weakest reading since February and was below the Reuters consensus forecast for a reading of 108.1.

Fears about the risk of a default in Greece have prompted savers to withdraw billions from Greek

2.2 pct 4Q 2014 U.S. economic expansion quarter was revised up to an increase of US$99.5 billion from the US$95 billion rise reported last month.

That meant inventories contributed 0.45 percentage point to GDP instead of the previously reported 0.33 percentage point.

After-tax corporate profits were a bit weaker in the first quarter than previously thought. Profits after tax with inventory valuation and capital consumption adjustments were revised to show a 8.8 percent decline instead of the 8.7 percent drop reported last month.

Reuters

banks, forcing the European Central Bank to increase emergency liquidity assistance to keep them afloat.

Ifo economist Klaus Wohlrabe said the Greek crisis was not yet hitting orders but it was causing uncertainty.

While German economic growth slowed to 0.3 percent in the first quarter, many economists expect it to grow faster in the April-June period quarter given that the latest data has shown orders, output, exports and retail sales all rising.

Earlier this week the finance ministry said the German economy had a good start to the second quarter and indicators pointed to the upturn continuing.

The Ifo survey showed companies felt more downbeat about their current situation than in May and were also more pessimistic about their outlook for the next six months.

Last week Ifo revised up its expectations for German growth to 1.9 percent for this year as the country rides high on a tide of private consumption thanks to record-low unemployment.

Reuters

Business Daily | 15

June 25, 2015

Opinion Business

wires

The right food fight

Leading reports from Asia’s best business newspapers

Kenneth Rogoff

former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

BANGKOK POST The business sector has urged the government to delay a floating minimum wage plan or any policy that would push the daily wage above 300 baht, as it would push consumer prices higher and have a negative impact on the economy, says the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB). Supant Mongkolsuthree, chairman of the Federation of Thai Industries (FTI), a component of the committee, said the FTI had worked with the National Institute of Development Administration (Nida) on the issue by conducting a survey and questioning 1,303 companies.

THE JAPAN NEWS A bill that will oblige major companies to set goals for employing women was approved at the House of Representatives on June 4 and is expected to be enacted in the current Diet session. More companies have appointed women as executives, but some firms are short of female candidates for such positions.

To increase female executives in a sustainable way, companies must find better ways to secure and foster human resources. Foreign-affiliated companies as well as service and information technology companies tend to have actively employed female executives.

THE STAR Petronas, which failed to get British Columbia aboriginal group Lax Kw’alaams to accept its C$1.15bil (RM3.42bil) cash offer, now may face legal action from the group. According to a Bloomberg report, the group that claims title to land earmarked for the Petronas-led Pacific NorthWest’s C$11bil (RM32.7bil) liquefied natural gas terminal said it would take legal action if its environmental concerns weren’t addressed.

At this time, the project is still awaiting environmental approval from the federal environmental authority, although the BC provincial government has given it an environmental certificate.

THE JAKARTA GLOBE Following a rare tirade in which President Joko Widodo threatened to fire officials responsible for the long dwell time at Jakarta’s Tanjung Priok Port, the acting director general of Indonesian customs has claimed his office is not the only agency responsible. Supraptono said on Tuesday that the lengthy delays in moving containers through the port was not the fault of a single person or agency. During a visit to Tanjung Priok Port last Wednesday, Joko noted that Tanjung Priok’s dwell time, or the amount of time a container spends at the port before moving on, was an average of 5.5 days – the longest in Asia, he said.

T

o what extent should governments regulate or tax addictive behaviour?

This question has long framed public debate about alcohol, tobacco, gambling, and other goods and services in many countries worldwide. And now, in the United States – arguably the mother of global consumer culture – the debate has turned toward the fight against the epidemic of childhood obesity.

It is ironic that in a world where childhood malnutrition plagues many developing countries, childhood obesity has become one of the leading health scourges in advanced economies. The World Bank estimates that over a third of all children in Indonesia, for example, suffer from stunted growth, confronting them with the risk of lifetime effects on fitness and cognitive development. Yet, the plight of malnourished children in the developing world does not make obesity in the advanced countries any less of a problem.

Indeed, though perhaps not on a par with global warming and looming water shortages, obesity – and especially childhood obesity – nonetheless is on the short list of major public-health challenges facing advanced countries in the twenty-first century, and it is rapidly affecting many emerging-market economies as well. Yet solving it poses much more difficult challenges than the kind of successful public-health interventions of the last century, including near-universal vaccination, fluoridation of drinking water, and motor-vehicle safety rules.

The question is whether it is realistic to hope for success unless the government resorts to far more blunt instruments than it currently seems prepared to wield. Given the huge impact

A less intrusive approach to influencing food choices might be to institute a retail tax on all processed foods

of obesity on health-care costs, life expectancy, and quality of life, it is a topic that merits urgent attention.

The US leads the world in obesity, and is at the cutting edge of the debate. Almost everyone agrees that the first line of defence ought to be better consumer education. First Lady Michelle Obama’s “Let’s Move” educational campaign aspires to eliminate childhood obesity in a generation, though its impact so far remains unclear. Other efforts include appeals by celebrities like the chef Jamie Oliver and attempts to use peer-based learning, such as the Sesame Street-inspired platform Kickin’ Nutrition (full disclosure: the creator is my wife).

Yet, although education is essential to fight obesity, it is far from clear whether it will be enough in a food environment dominated by large corporations with deep pockets and every incentive to cultivate excessive consumption. Commercial television programs aimed at children are replete with

advertising for processed foods of dubious value to human health. And, for every celebrity who donates time to fighting obesity, there are a dozen who accept large payments to hawk products, such as ultra-sugary drinks, that are arguably the tobacco of our generation. It is hard for non-profits to compete with the production values embodied in Beyoncé’s Pepsi commercial or Taylor Swift’s Diet Coke commercial.

The causes of obesity are complex, and the science of understanding human behaviour is embryonic; but it is not hyperbole to call the problem an epidemic. According to the Centers for Disease Control and Prevention, roughly 18% of children aged 6-11 in the US are not just overweight, but obese.

The risks posed by this epidemic are manifold, but the main one is that childhood obesity begets adult obesity, with significantly increased risks of diabetes and heart disease.

Indeed, experts estimate that more than 18% of all adults in the advanced economies are obese. Even more stunning are estimates that roughly 9% of all Americans – and a similar percentage of adults worldwide – have diabetes.

Yet politicians push back on Big Food at their peril. When the popular former mayor of New York City, Michael Bloomberg, attempted to ban large sugary drinks, public opinion – not to mention the New York State Court of Appeals – rejected the effort, despite support from medical experts. Many commentators, even those sympathetic to Bloomberg’s goal, argued that it was wrong to try to legislate consumer behaviour so bluntly. Yet, when one considers other successful efforts to improve public health over the last five decades – for

example, smoking bans, seatbelt laws, and speed limits – one finds that legislation typically supplemented education.

A less intrusive approach to influencing food choices might be to institute a retail tax on all processed foods – not just sugary drinks – and an offsetting subsidy on non-processed foods. In the long run, lowincome families (which suffer the most from obesity) would be the greatest beneficiaries.

And, in the short term, any income effects could be offset by increased transfers. Together with the medical researchers David Ludwig and Dariush Mozaffarian, I have proposed an outline of such an approach.

Obviously, some processed foods are far worse than others.

A more complex breakdown is possible, and other ideas should of course be vetted and discussed. But our approach has the important practical advantage of simplicity. What must be understood, above all, is that US consumer culture is dominated by a food industry that exploits people’s natural joy in eating, and transforms it (in many cases) into something that is addictive and destructive. Any visitor to the US can readily see the pervasiveness of the problem.

The right place to start to address it is by creating a better balance between education and commercial disinformation. But food is so addictive, and the environment so skewed toward unhealthy outcomes, that it is time to think about broader government intervention. That should certainly include vastly enhanced expenditures on public education; but I suspect that a long-term solution will have to involve more direct regulation, and it is not too soon to start discussing the modalities.

Project Syndicate

16 | Business Daily

June 25, 2015

Closing Authorities start making progress at BRICS Bank

Singapore Exchange to improve technology after disruptions

China has taken its first step towards ratifying an agreement with the world’s largest emerging nations to create a developmental bank, state news agency Xinhua said yesterday. The National People’s Congress Standing Committee, China’s top parliament body, had started reviewing the agreement between Brazil, Russia, India, China and South Africa to create the bank, Xinhua quoted Vice Finance Minister Shi Yaobin as saying. Shi was quoted as saying that China would inject US$10 billion into the bank once the Chinese parliament has ratified the agreement, adding that Russia and India had ratified the agreements in April.

The stock exchange of Singapore will invest S$20 million (US$15 million) to beef up its technology infrastructure and will also temporarily refrain from raising securities and derivatives fees after suffering trading disruptions late last year. The disruptions drew criticism from the Monetary Authority of Singapore, the city-state’s central bank and the stock exchange’s regulator. The technology investment and freeze on fees announced yesterday are the bourse’s response to the events. A software error led the Singapore exchange to open the bourse three-and-a-half hours late in December. The delay followed a November 5 power failure that halted stocks and derivatives trading.

Beijing to ease restrictions on bond issuance A document says that corporates rated AA or above can issue corporate bonds without any quota restrictions

T

op economic planning agency plans to further loosen control over corporate bond sales in a bid to speed up infrastructure s p e n ding as econ omic growth slows, according to a document seen by Reuters and verified by two sources with direct knowledge of the matter.

The document, dated June 19 and labelled “extremely urgent”, appears to be a supplement to a document dated May 25 that’s available on the website of the National Development and Reform Commission (NDRC).

The NDRC’s press department said it was unaware of the June 19 document and declined to comment further.

The document says that corporates rated AA or above can issue corporate bonds without any quota restrictions if they can provide guarantees by pledging their own assets or through a third party, or if the project can offer certain returns within a short period of time.

It also says funds raised through bond issuance can

As overseas demand weakens, the property market cools and the private sector is still reluctant to invest, increasing new infrastructure spending is the only practical way to maintain economic growth Li Qilin, fixed‑income analyst, Minsheng Securities

be used to pay off previouslyissued bonds or other high interest debt, provided that the corporate issuer has maintained its current credit rating.

Lawmakers mull stricter air pollution control

Mainland to cancel cap limiting bank loans

C

N

hinese legislators are deliberating on regulating emissions from boats and ships as the country clamps down on air pollution.

According to a draft amendment to the Air Pollution Law, tabled to the National People’s Congress (NPC) Standing Committee for a second reading yesterday, ships on inland or river-to-sea waterways must use standard diesel as fuel to cut emissions.

Ocean-going vessels will also be required to use fuels that conform to China’s environmental protection standards after stopping at Chinese ports, the draft read.

The shipping sector accounted for around 8.4 percent of China’s sulphur dioxide emissions and 11.3 percent of nitrogen oxide emissions in 2013.

The country is also home to eight of the world’s 10 largest ports in terms of cargo handling capacities.

According to the draft, vessels at berth should operate on land-based power provided by the ports.

Ports, both new and existing, must be equipped with shore power facilities, it added.

The draft law amendment comes as China continues trying to rein in rampant air pollution.

Xinhua

Corporates with AA or higher credit ratings which issue bonds that are rated no less than AA+ can use up to 40 percent of the funds raised to pay off bank loans

and supplement operating capital.

The NDRC will also encourage province-level local government financing vehicles (LGFVs) to issue bonds to fund projects, according to the document.

Commercially-oriented LGFVs, when participating in projects under China’s public-private partnerships (PPP) scheme, can issue corporate bonds without quota restrictions, the document said.

Beijing is pushing the PPP model as a way to increase private investment in public infrastructure, but analysts say the model has yet to catch on among local governments or private investors.

“As overseas demand weakens, the property market cools and the private sector is still reluctant to invest, increasing new infrastructure spending is the only practical way to maintain economic growth,” said Li Qilin, a fixed-income analyst at Minsheng Securities Co. Support for China’s economy from the central bank has been put at risk by a surge in municipal bond issuance that has driven up yields, undermining its efforts to cut borrowing costs.

Heavily indebted local governments seeking to refinance expensive debt have issued more than 600 billion yuan (US$96.7 billion) of municipal bonds in the past month - more than in all of 2014.

Reuters

Indonesia increases amounts homes can borrow

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ational cabinet moved to scrap a rule that caps lending by commercial banks at 75 percent of their deposits, a measure that will increase the supply of cash in the financial system.

The State Council will propose amending the nation’s banking law to make the limit a ratio used for reference rather than a regulatory statute, according to a statement posted to its website yesterday. A system will be set up to monitor the liquidity of banks based on the ratio, it added.

Changes to the law need to be approved by the Standing Committee of the National People’s Congress.

Premier Li Keqiang is trying to reshape a state-run banking industry that has US$29 trillion of assets, almost twice the amount of its U.S. counterpart. Deregulating interest rates and easing regulatory controls are part of his efforts to support long-term growth by giving markets a bigger role in the economy.

The shake-up is coming five years after the nation completed the stock market listings of the last of its dominant big four banks.

entral bank, hoping to spur economic growth, has reduced the minimum downpayments consumers have to pay for cars and motorcycles while increasing the percentage of a home price that a buyer can borrow.

A new regulation loosening rules for automotive and mortgage lending took effect on June 18, it said yesterday.

“Our economy is slowing... Bank Indonesia wants to contribute to encouraging credit growth while staying prudent,” said Yati Kurniati, its director of macroprudential department, told a media briefing.

Bank Indonesia now requires customers to pay a minimum downpayment of 20 percent for motorbikes, down from 25 percent previously.

The new minimum downpayment for passenger cars bought using credit is 25 percent, compared with 30 percent previously. There was no change to the rule for commercial vehicles, where the minimum downpayment remains 20 percent.

Motorbike and car sales have fallen sharply this year. According to the latest data, motorbike sales dropped 36.5 percent while car sales fell 18.4 percent in May on an annual basis.

Bloomberg News

Reuters