MSAR business presence felt throughout the region Business Page 2
Monday, September 12 2016 Year V Nr. 1128 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Construction
Grand Lisboa Palace construction halted in wake of fatal accident Page 2
www.macaubusinessdaily.com
Tech
MGP
Consumers unhappy as Apple’s new products unavailable locally Page 3
Macau Grand Prix F3 organiser pulls out due to ‘delays’ in organisation Page 2
Mass-led recovery Gaming
Analysts predict growth acceleration in the low-teens for H2 of 2016 and all of 2017, driven by increased gaming spending per visitor and the return of VIPs as premium mass players. Forecasts for a 10 pct y-o-y increase in H2 and a 12 pct y-o-y growth in 2017 are also based on increases in overnight visitors to the MSAR, especially those from Mainland China. Page 5
Chinese authorities are verifying more carmakers’ wrongdoings Page 9
M&A
CE visit to Portugal lacks economic angle
English Premier League probes Chinese acquisitions of football clubs Page 10
Politics Chief Executive Chui Sai On’s trip to Portugal is lacking a few key elements – namely the Secretary for Economy and Finance, members of the Legislative Assembly or government, and a delegation of businessmen, as present on previous trips by the head of the MSAR gov’t to the country. The one planned opportunity to discuss economic issues, at the Macau-Portugal Joint Committee meeting, might only focus on the use of the Portuguese language and an agreement on academic title recognition. Page 4
Live poker: irreplaceable
The MSAR will always be the “king” of live poker in Asia, and operators are showing a more positive attitude towards the game given the slowdown in the gaming industry. So says David Jung, Managing Director of Elysium Consulting Group, and one of the main figures in the development of poker in the city, speaking about the development of the game in the region, online gaming regulations and problem gambling.
Steady feeling
China’s inflation China’s rising month-onmonth inflation and narrower decline in producer prices in August have provided fresh evidence of a steadying economy, experts say. China’s consumer price index, a main gauge of inflation, rose 0.1 percent in August on a month-on-month basis, the National Bureau of Statistics announced Friday. Page 8
Interview | Poker Pages 6 & 7
HK Hang Seng Index September 9, 2016
24,099.70 +180.36 (+0.75%) Worst Performers
Hong Kong Exchanges and
+5.54%
Henderson Land Develop-
+2.38%
AAC Technologies Holdings
-3.99%
China Shenhua Energy Co
China Life Insurance Co Ltd
+4.14%
China Resources Land Ltd
+2.17%
Want Want China Holdings
-3.51%
Ping An Insurance Group Co
-0.58%
China Resources Power
+3.09%
Sands China Ltd
+2.03%
China Mengniu Dairy Co Ltd
-2.43%
Swire Pacific Ltd
-0.57%
Bank of East Asia Ltd/The
+2.89%
BOC Hong Kong Holdings
+1.91%
China Petroleum & Chemical
-2.28%
Tencent Holdings Ltd
-0.56%
China Overseas Land &
+2.43%
China Mobile Ltd
+1.82%
Hengan International Group
-1.94%
Link REIT
-0.43%
27° 31° 25° 31° 27° 32° 27° 32° 27° 32°
-1.07%
Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Subsidies
2 Business Daily Monday, September 12 2016
Macau Business
MSAR gets out to promote Annie Lao annie.lao@macaubusinessdaily.com
T
he MSAR presence was felt throughout South-East Asia this past weekend, as representatives from the government and business sectors attended events and fairs in Xiamen and Guangzhou, China, as well as in Jakarta, Indonesia. The largest Macau delegation, consisting of 300 local entrepreneurs, attended the 19th China International Fair for Investment and Trade (CIFIT) in Xiamen, beginning on Friday. This was the first time that the MSAR was listed as a ‘regional guest of honour’, cementing its push to make the city a platform for business between China and Portuguese-speaking countries. The delegation was led by president of the Macao Trade and Investment Promotion Institute (IPIM), Jackson Chang, who commented that the opening up of Mainland China’s business policy has allowed for business transactions using the yuan as a base currency in Macau totalling RMB1.57 trillion (US$230 billion/ MOP1.87 trillion) for 2015, making it the ninth highest in the world. Chang also pointed out that aside from the improvements in business management, bank facilities have increased offerings for use of RMB
MGP
currency transactions, and that technical and professional capacities of labour are improving, contributing to increasing offerings in the finance and commerce sector for Chinese or international companies who wish to procure opportunities in the Mainland and abroad.
CITIE
Marking its presence in Guangzhou, the Macao Government Tourist Office (MGTO) delegation, led by Deputy Director of MGTO Cecilia
The company run by Barry Bland, Motor Race Consultants, which has organized the Formula 3 races at the city’s Macau Grand Prix for the past 33 years, has pulled out of the event. The Grand Prix Organizing Committee says it ‘respects’ the company’s decision, according to an official communiqué. On Friday, Autosport publication
Also touting the same theme was the Macau booth at the Pacific Asia Travel Association (PATA) Travel Mart 2016 and Gold Awards Luncheon in Jakarta, Indonesia, which saw MGTO director Maria Helena de Senna Fernandes promote Macau during a five-day visit. At the PATA Gold Awards, MGTO received the Gold Award for ‘Marketing MediaMobile Travel Application’ for its ‘Step Out, Macao’ Mobile application. After the event, the MGTO director attended meetings with the governing body of PATA.
announced Bland’s decision to leave the F3 race management in Macau due to delays in the race organization. “Everything is running very late, there are a lot of unanswered questions and I don’t wish to put our reputation on the block for something we’re not happy with,” Bland stated, as quoted by the publication. Autosport also notes that the FIA is rebranding the race, potentially to become the F3 World Cup, however the race weekend will still be called the Macau Grand Prix.
Transportation
Uber stays Uber has announced that it will stay in Macau, according to a press release posted on their official website. Over the past f e w w e e ks, th e r i d e-sha r i n g mobile application company has organised an online petition that managed to obtain some 23,000 signatures. Some 300 protesters took to the streets on September 5 to support the operations of ride-sharing mobile applications, as previously reported by local media. Some 378 Uber rides have been caught by police since last October and fined over MOP10 million (US$1.25 million). On the other hand, Radio TaxiMacau TaxiService Ltd. won the bid for the city’s ‘special taxi licence’ l ast W e d n es d a y . Th e s p ec i a l taxis can only be hailed by telephone, online order or mobile phone application. In addition, Tax i G o , a n e w l o ca l l y -bas e d
Construction accident Construction work on site suspended
Fatal accident at Grand Lisboa Palace The Labour Affairs Bureau (DSAL) ordered the suspension of work on local gaming operator SJM Holdings Ltd’s construction of the Grand Lisboa Palace in Cotai from Friday afternoon, due to a fatal accident of
PATA
MGTO director Maria Helena de Senna Fernandes with the delegation to Jakarta, Indonesia
Motor Race Consultants leave MGP after 33 years
Out of gas
Tse accompanied by representatives of the local tourism sector, set up a booth for the 11th China (Guangdong) International Tourism Industry Expo 2016 (CITIE). The MGTO booth was co-organised together with the Tourism Administration of Guangdong Province and the Hong Kong Tourism Board (HKTB) to promote multi-destination tour routes in the three regions. It aimed to further develop regional co-operation in tourism with Guangdong and Hong Kong. Occupying an area of 72-square
metres, MGTO’s booth was themed ‘Experience Macao Your Own Style’.
a construction worker on the site, according to a press release published by the DSAL. One male non-resident worker died on site after being hit by a glass curtain wall that fell from a platform
due to a sudden malfunctioning of a hoist. The suspension order has resulted in the cessation of all lifting works at the construction site until the developer has implemented effective measures to improve occupational health and safety standards. The developer is required to submit a survey report to the DSAL on the measures to be implemented. Construction work will only resume after the company receives approval from the DSAL. The DSAL announced that it will contact the deceased worker’s family to assist with compensation. The Bureau reminded the city’s contractors to periodically have hoists checked by qualified mechanics, to ensure that they do not exceed maximum load limits, to arrange competent workers to operate heavy cranes, and to supervise and monitor the relevant lifting safety procedures in order to protect the safety of workers. A.L.
taxi-hailing application, launched on September 1, opened with the claim that the company is aiming to fulfill social responsibilities rather than chase after profits.
Health
No Zika so far Forty-seven local residents have tested negative for the Zika virus after recently travelling to Zika outbreak countries and regions, according to a report by local public broadcaster Chinese TDM radio. In addition, no local cases of the virus have been confirmed so far. The Health Bureau has introduced an antibody testing technique to increase the chances of detecting the Zika virus in the city, and the Civic and Municipal Affairs Bureau (IACM), together with the Health Bureau, is ramping up efforts for prevention, including a campaign at Iao Hon gardens held over the weekend. During the campaign, the groups distributed promotional materials to residents to help increase awareness of preventing mosquito-borne-disease transmission during the high-risk season. Pregnant women have been advised not to travel to Southeast Asian countries affected by the virus. A.L.
Business Daily Monday, September 12 2016 3
Macau
Technology iPhone 7, iPhone 7 Plus Macau launch date remains unknown
Sweet and sour Apple Local Apple fans have to resort to the Hong Kong Apple Store to get their hands on the company’s latest gadgets, with some calling Macau’s Apple Flagship Store ‘small and useless’. Joanne Kuai joannekuai@macaubusinessdaily.com
W
hile Mainland China, Taiwan and neighbouring Hong Kong are among the first batch of locations where Apple’s newly announced iPhone 7 and iPhone 7 Plus products can be pre-ordered - beginning last Friday (September 9) and available this Friday (September 16) - the launch date of the new iPhones in Macau remains unknown. A sales representative at Apple’s flagship store, which opened in Galaxy, Cotai in June, told Business Daily that they have no information regarding the timing for the new products to reach Macau. However, the price of the new products are already set – starting at MOP5,788 (US$724) (for the iPhone 7 32GB). The official information from Apple also indicates that for the same model, the price is set at HK$5,588 (MOP5,755 / US$720) in Hong Kong, RMB5,388 (MOP6,439 / US$806) in Mainland China, and US$649 (MOP5,185) in its home country, the United States. Apple’s different regional pricing is subject to factors including: currency exchange rates, taxation policies and operational costs. When queried on Apple’s iPhone Upgrade Program, where customers in the U.S. and (for the first time) in Mainland China can get unlocked iPhones and have the chance to upgrade to a new iPhone yearly, the Macau sales representative said such programs aren’t, and haven’t been available in Macau, but stressed that Macau customers have been, and will continue to enjoy a Trade-In Program, where customers can trade-in their current smartphones and get up to MOP2,300 to use towards the purchase of a new iPhone.
“Best ever”... shows “courage”
Apple announced its new products, including iPhone 7 and iPhone 7 Plus, last Wednesday in San Francisco, calling them “the best, most advanced iPhone ever”. The new products have
some new features that Apple fans have requested, such as water resistance and a better battery life. But there was one thing that caught the attention of most – the lack of a headphone jack. Apple tried to justify its decision to eliminate the port that people have relied upon for years to listen to audio, by saying that it’s showing “courage” and believes going wireless is the future of technology. Despite these controversial changes, Alexander Chan, a Macau resident, is determined to get his hands on the newly-launched gadget as soon as possible. “I love them, especially the iPhone 7 Plus that I can take more beautiful photos with,” said Alexander. However, he told Business Daily that he had to get the new iPhone in Hong Kong as he normally does, as the Macau Apple Store “is still so small and useless”. While some Apple products have experienced lacklustre sales in China, the new products seem to have retained their appeal, with the new Jet Black (colour) models already having a fourto-six week waiting period for shipment from Apple’s Mainland China pre-order site. The products are “currently unavailable” on its Hong Kong site. On the Mainland China pre-order site, other colours take six to eight days to be shipped, according to information on Apple’s official website at the time this story went to press. iPhone 7 and iPhone 7 Plus are available in silver, gold, rose gold and the new black finish in 32GB, 128GB and 256GB, and the new jet black finish will be offered exclusively on the 128GB and 256GB models.
Unimpressed traders
The upgraded features of the new iPhone seem ‘less sincere’ than the previous innovations incorporated into its iPhone 6 and iPhone 6 Plus models, and the latest product from Apple may fail to attract as many customers as Apple wants, said a local trader.
A sales representative at LeiKei, a local electronic gadget chain, who wanted to remain anonymous, told Business Daily that the new iPhones are expected to hit the Macau streets by the end of September, but didn’t disclose the exact date. He claimed that their new iPhones will “for sure be cheaper than the ones at the Apple store at Galaxy, because they are from different importing channels,” without revealing further details. “People have stopped changing phones as often as they used to,”
said the sales representative. “A lot of smartphones from other brands are getting increasingly popular. It’s not just Apple that dominates the market. Samsung and other Android [operating system] smartphones sometimes are more favourable because of their compatibility with other devices. We even get lots of enquires for Huawei and even Xiaomi [Chinese smartphone brands].” “It’s really up to you, how much you want to spend on a smartphone, your budget,” he added. However, he predicts the Jet Black colour will still be highly sought after, especially the 256GB ones, as “its powerful, top in the market, and beautiful”.
4 Business Daily Monday, September 12 2016
Macau Opinion
Sheyla Zandonai
Giving credit The Macau SAR government has allocated a generous MOP900 million for the development of a new Central Library. The Hong Kong SAR spent nearly MOP700 million to build – from scratch – its 9,400 square metre, 12-storey-high Central Library. Singapore’s National Library, a 16-storey building completed in 2005, cost slightly more than MOP1 billion. Right. Those facilities were built more than a decade ago, and money has a different value these days. And it may well be that the Macau SAR government needs such an amount to produce a convincing project: designed by a talented architect, with multiple functions, environmentally-friendly technologies, and the latest information-retrieval systems. Moreover, the plan has been “studied” for such a long time – the idea of creating a new central library to replace the 120-year-old one at Tap Seac was first proposed in 2002 – and revised so many times in terms of design and location, that we must believe the government knows what it is doing. Let’s give them some credit for a change – it’s not easy to be a public servant in Macau – but of course with the proviso that they are clear and clean with their intentions, unlike in 2008 when the public tender for the new library facility had to be suspended due to a conflict of interest (a member of the project committee won the competition). Another point is that a central library is no trivial matter. It should confer prestige and respect on a city. More often than not, that costs money. It should make citizens proud and, even more importantly, instigate or enhance their reading habits. Then again, online databases such as Wikipedia are wondrous achievements of the contemporary world, so why bother? Because books are vessels of ideas, thoughts, imagery, and imaginaries that one cannot find on Facebook. A library is also a space of silence, and reflection – all, it seems, in short supply in a city as hectic and congested as Macau. If achieved, it can only do good. After all the fuss about the location – the old Hotel Estoril, proposed by deputy Chui Sai Peng in 2015, was quite sensible, but a central library placed in Hengqin would only be central to Hengqin – the government has apparently recovered its focus. Sticking with the old courthouse building, it seems the plan will finally take off. But with a completion date estimated to be in 2022? That will be 20 years since the plan was first unveiled by the government. Credit may run out.
Sheyla Zandonai is a scholar and contributor to this newspaper.
Politics
Alone in Lisbon MSAR Chief Executive Chui Sai On returns to Portugal but this time almost alone. No business, no economics on the official agenda. João Paulo Meneses, in Portugal newsdesk@macaubusinessdaily.com
F
or the first time, a Chief Executive of Macau has landed in Lisbon, on an official trip, without being accompanied by a Secretary for Economy and Finance and without a delegation of businessmen at his side. In addition, Chief Executive Chui Sai On - who arrived yesterday in Portugal - was almost alone, with no other members from the government, nobody from the Legislative Assembly and with no planned or announced business cooperation agreement events to attend. According to the MSAR Government Information Bureau (GCS), officials accompanying the Chief Executive to Portugal include: the Chief-of-Office of the Chief Executive’s Office, Ms O Lam; the Director of the Government Information Bureau, Mr Chan Chi Ping; and the Director of the Protocol, Public Relations and External Affairs Office, Mr Fung Sio Weng. The last time the Chief Executive made an official trip to Lisbon - his first - was in 2010. At that time, he was accompanied by two secretaries (of whom the Secretary of Economy and Finance was one), several legislators and 25 local businessmen, for a total of 70 people in the delegation. If we go back even further, the unusual circumstances of this current trip are even more obvious. The former Chief Executive Edmund Ho Hau Wah travelled officially to Portugal twice and on both occasions he was always accompanied by entrepreneurs from the MSAR as well as the Secretary of Economy and Finance. Another great difference: Chui Sai On will only meet with one Portuguese minister (the Minister of Foreign Affairs), a situation that
has never happened before - at least three or four different Portuguese ministers met Chui Sai On in 2010, and his predecessor in 2001 and 2006.
Secrecy
A number of details about this visit to Portugal make it seem unusual, including the fact that nobody in the press was provided any information about the official program for the trip. It should not have been necessary, but since the information did not arrive on time, Business Daily made an official request for the program details. The GCS promised to send the program through when it was ready, but at the time this story went to print, no information had been received. All that we know, because the Government says so on the GCS webpage, is that the Chief Executive will meet with Portuguese President, Mr Marcelo Rebelo de Sousa, and the Prime Minister, Mr António Costa. Business Daily has learned that the Chief Executive Chui will preside over the fourth meeting of the MacauPortugal Joint Committee today, alongside the Minister of Foreign Affairs of Portugal, Mr Augusto Santos Silva (the only minister he will meet). The last item on the CE’s trip to Portugal will be to “meet with young people from Macau studying in that country, in order to better understand their needs while living and studying overseas”, says the GCS. If it’s true that the official program boils down to only these four items, there will be no business on the menu and no meetings about the 5th Ministerial Conference of Forum Macau to be held in Macau in October.
The Macau-Portugal Joint Committee
Apart from the political gatherings, the only opportunity to discuss
economic issues will be today, during the fourth meeting of the MacauPortugal Joint Committee. The GCS says that: “both sides will engage in discussions regarding further cooperation opportunities arising from the plans to transform Macau into a world centre of tourism and leisure; and to become a commercial and trade cooperation service platform between China and the Portuguese-speaking countries”. But Business Daily has learned that Education and Portuguese Language will be the main items on the agenda at the summit. We know that the following topics will be addressed: “Macau as a platform for the dissemination of the Portuguese Language for Asia”; a proposal for a Scholarship Program for Portuguese students studying in Macau; and maybe the most relevant, a “Memorandum on Mutual Recognition of Academic Titles”. The Government says that the CE will “additionally review the results of the long-term cooperation between the two sides. The meeting will also aim to explore new ways to deepen exchanges in fields such as education and training of professionals. It will also help to boost bilateral cooperation in trade and economic services”. The Macau-Portugal Joint Committee was established under the Framework Agreement of Cooperation between the Macau Special Administrative Region and the Portuguese Republic, with the aim of strengthening cooperation between the two sides in a number of areas. The first meeting was held in Lisbon, in April 2011. “During the meetings with Portugal’s leaders, Mr Chui will brief them on the latest developments of the Macau SAR, including the city’s first-ever Five-Year Development Plan”. The GCS mentions a six-day visit, from 10 to 15 September, while the brief official program that we know about provides details from 12 to 14 September.
Business Daily Monday, September 12 2016 5
Macau
Gaming
Deutsche Bank: mass-led recovery starting Analysts of the firm predict gaming revenue in the mass market will accelerate to growth in the low-teens for the second half of the year and the following year. Kam Leong kamleong@macaubusinessdaily.com
T
he city’s gaming industry is on track to see recovery as visitor spending has started to rebound and high-rollers are converting to premium mass players, Deutsche Bank analyst, Karen Tang has commented. “We learnt that gaming spend per visitor has started to rise, and VIPs are returning as premium mass players. We conclude that Macau is now at the start of a mass-led gross-gaming revenue recovery,” the analyst wrote in her latest note released Friday. The brokerage’s head of Asia Gaming & Hotels said the conclusion
follows the firm’s “extensive interviews with a dozen of casino service staff & premium mass hosts,” adding that she is seeing growth from both base mass and premium mass segments. The Deutsche Bank analyst forecasts that the city’s mass gaming revenue growth will accelerate to growth in the low-teens - up by 10 per cent year-on-year in the second half of the year, and 12 per cent yearon-year growth for 2017. The investment firm has also lifted its estimated EBITDA for the sector by 10 per cent to US$6.6 billion (MOP52.7 billion) for 2017. In August, the city’s casino revenue rose by 1.1 per cent year-on- year
to MOP18.8 billion (US$2.4 billion), ending a 26-consecutive-month slump. Despite the fact that Secretary for Economy and Finance Lionel Leong Vai Tac noted recently that the start of the recovery would depend on the gaming revenue for this month, Chief Executive Fernando Chui Sai On said last week that the city has entered into “a relatively stable period” after “deep adjustments”.
Overnighters give a boost
Ms. Tang indicated that the accelerated growth in mass-gaming revenue is attributable to a trend of increased overnight visitors to the territory, especially Chinese visitors who are converting from day-trippers to overnighters. “In the second quarter of 2016, Macau’s mass gaming revenue increased by four per cent [year-onyear], even though visitor numbers slipped by 0.5 per cent. This means
gaming spend per visitor was up by five per cent, first growth since the third quarter of 2014,” she wrote. The analyst noted that the growth in overnight visitors is important. “[It is] because spending per visitor is a bigger driver for mass gross gaming revenue than visitor growth,” the analyst said. “Longer stay means more play”. Meanwhile, the conversion of high rollers to premium mass players is also speeding up revenue growth in the mass market. “Our proprietary table count confirms the return of premium mass. The proportion of baccarat tables with over HK$2,000 minimum bet rose from 29 per cent of the mass floor in December to 36 per cent by July, with minimum bet rising prominently since July,” Ms. Tang indicated. “We believe this player conversion can sustain premium mass growth for the next one to two years,” she concluded.
6 Business Daily Monday, September 12 2016
Macau Interview Online gaming doesn’t have a market in the city says live and online poker specialist
Live poker is irreplaceable in MSAR As the Macau Poker Cup 25 drew to a close yesterday, Business Daily sat down with David Jung, Managing Director of Elysium Consulting Group and one of the main figures in the development of poker in the MSAR. As a former Asia Regional Marketing Director for online poker website PokerStars, and someone who had a hand in creating the local tournament in 2008, Jung was also involved in helping to legalise poker in the city, organising the Asia Pacific Poker Tour, opening PokerStars Live Macau rooms in the Grand Waldo and Grand Lisboa, and making the Macau Poker Cup one of the largest regional poker tournaments in Asia. Jung shared his views with Business Daily on online gaming regulations, poker development in the region and why gaming addiction seems to affect some Asian countries more than others, based on his experience in live poker development in Macau, Taiwan, Philippines, Japan, China and Singapore. Nelson Moura nelson.moura@macaubusinessdaily.com Photos by Nelson Moura
H
ow big is the worldwide poker market? I would say that back in 2010, the worldwide poker market was valued at around US$4 billion (MOP31.9 billion), but now it is probably half that, with the decrease mainly because of the Black Friday events in 2011 (when US federal authorities opened a federal case against the three biggest online poker websites PokerStars, Full Tilt Poker and Absolute Poker for alleged bank fraud and money laundering). What’s significant about that is that the Americans, for the worldwide market, composed 40 per cent of the player base, but they composed 60 per cent of the net depositors. Poker was growing at that time because it was feeding off the American players; since the Americans left, it has been declining. Everybody has been kind of adjusting from that paradise to a more recreational kind of poker playing. The industry is really trying to protect individual poker players who are not the best, but who play regularly. Almost every poker site has changed that way; they’re not concentrated on growing, but on surviving. In 2008 there used to be 200 poker sites, in 2010 there were maybe 70 poker sites and now there are maybe 20 truly good poker websites. How have regulations for poker websites changed? Regulation has caught up since 2006 and now countries in Asia and in Europe have regulated the sector some to completely make it illegal and some to include it in a tax regime. Some regimes, like in France, charge 50 per cent tax, so it’s very hard to make money and gain new players. Because poker is a player-to-player game, it is essential to get new players, and the only way to do it is by marketing. If you decrease the spending on marketing then the entire market starts to decrease. Few companies have the ability to spend that much money, so the overall poker market has decreased, except in China and Asia. So is Asia the best market for poker now? I would say Asia has the best momentum for poker, but whether it’s online or real world, or social or for money - poker is all different. In terms of social poker, Asia is definitely the place where it’s booming, especially China. Each market in Asia is developing its own kind of local poker network, whether it’s social, real money or a hybrid. For example, in the Philippines, desktop gaming is almost dead and
most player-to-player gaming was desktop, therefore poker in the Philippines is not really a great product. However, in places like Indonesia where desktop gaming is still strong, player-to-player is still very good. I think the best market in the world for poker will always be the United States, because it’s an American game, even if it was invented in France. Western Europe is also a great market, especially for real money poker. How is the poker scene in China? Real money tournaments are not allowed in China, but there are small tournaments with a very different structure, with set prizes that don’t change with the number of participating players. International players will never play those tournaments because they think the value is not as good, but in China you have to say what the prize will be before the tournament begins to get authorisation. They have live poker clubs in China, where you basically buy in chips and you can win some kind of prize. Every different province has a different jurisdiction and rules about it, and some of the provinces allow for real money tournaments once in a while. They have some very beautiful poker clubs, but not for real money poker, just social gaming poker.
“I think if countries like China land South Korea legalised gambling the way it is in Macau, nobody would do anything else and the countries would collapse.” How different are Chinese poker players from others? Interest in poker among young Chinese people is increasing and they know how to play many different poker variations that other players around the world don’t. While Americans normally want poker to be more skill-based, China is developing poker in its own way, especially mobile poker, embracing speed of play as part of the skill. Normally poker tournaments can last eight hours, but in China what they do is, for mobile social poker, every hand will have an ante - a forced bet - so games can be really fast. Therefore, these tournaments end after seeing
who can win the most in 30 minutes, while in American tournaments, players are very slow at making a move. American poker players look more to the monetary aspect of poker, while Chinese players are so excited about the game itself, they just want to play, so they accept these kinds of tournaments. How about the poker scene in Macau? I think for live real money poker tournaments, Macau will always be the king, and I think it’s always the real stepping-stone for Asia. If you are a serious poker player in Asia there’s only one place you want to play and that place is Macau. The Philippines
has a scene but it’s just not the same, it cannot compare. Even solely social poker players have the dream of one day playing here, so as long as Macau can continue to run world class tournaments, it will maintain that position and grow over time.
“If you are a serious poker player in Asia, there’s only one place to play and that is Macau.” Do you think gaming operators are becoming poker fans? Even though the rest of the gaming sector is doing very badly, poker is doing very well, so gaming operators are happy to have the poker operators coming in. I think since now the focus is shifting to mass-market, poker is a good product. Before they didn’t want it because they thought it occupied too much space and took a lot of manpower. It’s also probably only a tenth as profitable as the “reason games”, because casinos make money out of commission not win-loss, and in a tournament they only receive eight per cent of the buy-in. So most
Business Daily Monday, September 12 2016 7
Macau of the money the casinos do during the tournaments is from the hotels and food and beverage - after all, a tournament can last three days. Also during tournaments, the casinos put low stakes tables around the main ones, so that the girlfriends or boyfriends of the players can play too. When I was the regional manager of PokerStars, Grand Waldo at the time was very forward thinking and trying to be innovative, having the first craps table and the first poker tournament. Then we moved to Grand Lisboa, and in one way they were very happy and in another we took up a lot of space on their second floor. So what would you say are the best places to play poker in Macau? Well, in terms of aesthetics, I think Wynn Macau has the most beautiful poker rooms. The Venetian is a good place for an experienced player to win money from a lot of inexperienced players that go there, and City of Dreams I think has the hardest poker games in terms of the number of skilled players. How about in terms of online poker? I believe in Macau only SJM’s Macau Slot has a license, while everyone else can’t provide real money online gaming. In terms of real money gaming, PokerStars online is still by far the biggest player here, and has the biggest tournaments. What would you like to see done in the city in terms of regulations for online gaming? Regulations depend on the government’s view, but honestly if you are a player in Macau, the last thing you want to do is play online, since there’s so many options for where to go! I think how it is right now is fine, there’s definitely a reason for it. I don’t think that anyone thinks that Macau is an online gaming market.
If you come here, it better be for live gaming, because it’s so accessible in such a small area. For instance, for a gamer in Tokyo, it takes him two hours to get back home by bullet train from the province to bet, so he will play online. In Macau, if the taxi ride is more than 10 minutes to the nearest casino, it’s already an outrage.
“I don’t think anyone thinks that Macau is an online gaming market” A lot of times commuters do online gaming while they’re waiting, but Macau is so small that online gaming doesn’t really have a place here. I think the law is clear the way it is now, so they don’t need to do a lot of enforcement, since there’s just not a lot of online gaming. Do you think online gaming is viewed as a step too far in terms of gaming addiction? It depends on each country, since in each country there are politicians that don’t know about gaming or gaming behaviour. They might think it’s good because of tax revenues or bad, but it all depends on the market. In Macau, dealers have to be local residents, so nobody wants to go to university anymore if you have a guaranteed job that pays that much. However, the local resident population is quite small and they’ve been around gaming their whole lives, so even if there’s some problem gaming, it’s not too severe, it’s quite manageable. In Hong Kong, the Jockey Club tries not to be profitable because they want
to manage the social issues, and in England online gaming regulations are very open, because that market is used to that kind of gaming. However in places like China, South Korea or Japan or Eastern Asia, if online gaming was legal, no one would do anything, they would just game all day long. So in those countries online gaming has to be more regulated. Japan has pachinko, and South Korea has its casinos and social gaming, so I think that’s enough for them. China is always thinking of ways to be progressive and has kept gaming in Macau, so their strategy is very clear: in case they think the issue is getting out of hand, they reduce visas to the city, as a way to turn the tap on and off. So in your opinion, there is a regional dimension to gaming addiction that
needs to be taken into account? I think in terms of social gaming, regulations here are fine. In terms of real money gaming, I really believe you have to look at how much social damage there could be because of it. For example, Singapore has outlawed everything now, but if you look at the Philippines, everyone can gamble and socially it’s not much of an issue, because I think that even though Filipinos have the right to gamble, they don’t really take a lot of pleasure in gambling. They prefer singing, dancing, socialising and enjoying life in different ways, and see gambling as just one part of it. I think if countries like China and South Korea legalised gambling the way it is in Macau, nobody would do anything else and the countries would collapse.
8 Business Daily Monday, September 12 2016
Greater China Tourism industry
Thomas Cook, Fosun aim new venture at wealthy Mainlanders The companies are betting that China’s outbound tourism market can help drive growth in Europe.
T
homas Cook Group Plc, Europe’s second-biggest tour operator, set up a high-end Chinese travel agency with minority shareholder Fosun International Ltd. in a bid to capture a more lucrative slice of China’s booming vacation market. The tour company’s shares rose to their highest in more than three months.
‘The companies have also set up a fund allowing Thomas Cook to buy as many as 50 hotels’
by billionaire Guo Guangchang, said it expects the number of Chinese traveling outside the country to grow by as much as 20 per cent annually. Thomas Cook shares rose 6.1 per cent, paring their decline this year to 37 per cent and brings the company’s market value to about 1.2 billion pounds (US$1.6 billion). Fosun, which owns 8.2 per cent of Thomas Cook, will use its resources globally to support the tour operator’s online travel services and other areas, Fosun International CEO Liang Xinjun
said at an event in Shanghai to announce the agreement.
Affluent, adventurous
Fosun’s financial muscle may help fuel expansion plans at Thomas Cook, which has a B1 credit rating by Moody’s Investors Service, four levels below investment grade. In July, the 180 yearold company cut its earnings forecast for 2016 after a string of terror attacks across Europe depressed summer travel. The joint-venture, catering to “affluent, adventurous, qualityoriented” Chinese travellers seeking “unique experiences,” is part of a partnership that began last year after
Fosun bought a stake in Thomas Cook. At the time, the companies also announced there’d be closer ties between the London-based operator and Fosun-owned Club Mediterranee. The companies have also set up a fund - mostly financed by Fosun - allowing Thomas Cook to buy as many as 50 hotels. While the hotel fund is behind schedule and hasn’t yet acquired any properties because of rising prices in Spain and uncertainty in countries including Egypt and Tunisia, it’s still in place and will focus as much as possible on acquiring resorts that cater to Chinese travellers, Fankhauser said. Bloomberg News
The agency will sell overseas holidays to the wealthiest 20 per cent of Chinese travellers, and guide them beyond Europe’s obvious destinations, aiming to make China a “substantial” part of Thomas Cook’s business, Chief Executive Officer Peter Fankhauser said in an interview in Shanghai. The companies are betting that China’s outbound tourism market - the largest in the world - can help drive growth in Europe, where travel has been depressed by recent terror attacks and the U.K.’s vote to leave the European Union. Fosun, a unit of a Shanghai-based conglomerate backed
Markets performance
Sovereign fund eyes Asian hedge funds to boost returns Asian hedge funds outperformed global funds in each calendar year from 2012. Saijel Kishan and Bei Hu
China’s US$814 billion sovereign wealth fund may increase investments in hedge funds in Asia, betting they can beat rivals trading in developed markets. Hedge fund managers face fewer competitors in Asia, where markets are less efficient and mature than in the U.S. and Europe, said Roslyn Zhang, managing director of fixed income and absolute-return investments at China Investment Corp (CIC). Money will probably be allocated to the funds in the next six to 12 months, she said. “Over the last few years we’ve seen the quality of talent improve a lot,” Zhang said in a telephone interview Wednesday. “The top managers in Asia probably have a better chance of producing more alpha here in Asia than in more developed markets,” she said, referring to profits generated in excess of a benchmark index. Asian hedge funds outperformed global funds in each calendar year from 2012, returning an annualized 9.5 per cent against 5.7 per cent in the four years through 2015, according to
Eurekahedge, while trailing them so far in 2016. They accounted for just 3.8 per cent of the global industry’s US$2.9 trillion of assets at the end of June, according to Chicago-based Hedge Fund Research Inc. The global hedge-fund industry has come under fire this year for lacklustre returns, with investors pulling the most money since the aftermath of the financial crisis. Zhang, who at a May conference criticized hedge funds for everything from high fees to crowding into the same trades, said CIC has no plans to follow some U.S. and European pension plans in pulling investments. CIC, which is based in Beijing, had a 3 per cent loss on its overseas investments last year, the first decline in four years, as commodity prices sank, while stock and bond returns were damped by negative interest rates and the strong U.S. dollar. It didn’t disclose the performance of its absolute return investments, which includes hedge funds and accounted for about 13 per cent of global holdings at the end of December, according to its latest annual report. CIC has previously invested in Asian
hedge funds through funds-of-funds, Zhang said, which farm out client money to managers. The state fund in 2011 backed PCA Investments, led by Hu Hang, an alumnus of Platinum Grove Asset Management. PCA shut its multi-strategy hedge fund two years ago after the sovereign wealth fund pulled its money, people familiar with the situation said at the time.
Macro managers
Zhang said CIC constantly reviews potential and existing managers, and has recently cut holdings in discretionary macro-managers, who bet on economic trends by trading everything from currencies to commodities, following poor performance. “We think discretionary macro managers are quite challenged in the near future,” she said, declining to name the firms that CIC has withdrawn money from. “The current macro environment is very different from 10 years ago or even a longer time period when the discretionary macro managers cut their teeth.” Paul Tudor Jones, the billionaire trader who started Tudor Investment Corp. in 1980, and Alan Howard, who co-founded Brevan Howard Asset Management in 2002, are among the macro managers who have suffered investor
redemptions amid losses this year. Zhang, who in May criticized hedge funds for herding into bets against the Chinese currency without really understanding the country, said CIC didn’t cut managers because they were bearish on the yuan or China.
Activist funds
CIC is being “patient” with the equity and activist hedge funds that it backs and that have posted a wide range of returns, Zhang said. “I don’t think that investment model is broken,” she said of managers who agitate for change at under-performing companies to boost their share prices. CIC has been a long-term investor in hedge funds, investing with some for three or four years, and as long as seven years with others, Zhang said. It has won fee concessions from some managers and is working on winning more. She declined to comment on how much CIC pays on average in fees. Tudor and Och-Ziff Capital Management are among the firms that have trimmed fees this year. “This is a very welcome trend for the managers, especially those industry leaders, to take a very proactive approach to reduce fees,” Zhang said. “I’m pushing for lower fees publicly and privately with our managers.” Bloomberg News
Business Daily Monday, September 12 2016 9
Greater China Automotive industry
In Brief
Green car subsidy scandal spreads China spent US$4.5 billion last year in subsidies for such vehicles Jake Spring
China has accused more than 20 additional car makers, including Nissan and Hyundai, of breaking rules on green car subsidies, according to a state media report, widening a scandal over a US$4.5 billion annual pay-out programme. On Thursday, China’s Ministry of Finance punished at least five car
Key Points Nissan, Hyundai among other firms accused -media “Major blow” to the industry -auto association China spent US$4.5 bln on green car subsidies last year
of the seventh most popular Chinese passenger car brand. The scandal has cast a pall over China’s drive to use subsidies to combat heavy pollution which affects large swathes of the country. This drive helped sales of electric and plug-in hybrids more than quadruple last year to 331,000 vehicles. China’s official Securities Daily newspaper reported on Friday that there was a list of an additional 20 companies who were also found to have committed violations. These include Japan’s Nissan, South Korea’s Hyundai, Geely, Anhui Jianghuai Automobile (JAC Motor) and a subsidiary of BYD. “As we understand the government investigation is proceeding, we cannot comment on this issue at this stage,” a Hyundai spokeswoman said in a
written statement. Nissan did not respond to requests for comment. Geely declined to comment. A BYD spokeswoman said the firm had not received any official notification from authorities. “Right now we do not have any idea where the suspected list is coming from.” A spokesman for JAC Motor, which this week announced it was exploring a potential joint venture focused on electric vehicles with German carmaker Volkswagen AG, said the firm did not have an immediate comment. The subsidy cheating investigation is another blow to China achieving a fullyear sales target of 700,000 electric and plug-in hybrid cars, said Yale Zhang, managing director of consultancy Automotive Foresight. Only 245,000 such cars were sold in the first eight months of the year, according to China’s automakers association. China spent US$4.5 billion last year in subsidies for such vehicles, although it is set to gradually phase out the payments by 2021. Reuters
Debt
Regulator launches committees for troubled borrowers Creditors of troubled Chinese firms can set up debt committees to assist with debt restructuring, the country’s banking regulator said on Friday, as more firms get into financial difficulties and are unable to repay their loans. As the country’s growth rate stutters, increasing numbers of borrowers are going bust and leaving China’s banks with trillions of yuan in soured debt. The aim of the committee, which can be set up on a voluntary basis, is to “guide firms with their debt restructuring, help troubled firms to resolve their troubles,” among other things, the China Banking Regulatory Commission said. Real estate
Authorities detain property agents over rumours
makers, accusing them of cheating its programme to subsidise electric and plug-in hybrid vehicles, receiving roughly 1 billion yuan (US$150 million) in illegal subsidies. “This is a major blow to the industry and also has a large impact on the country’s policy enforcement,” Xu Yanhua, a vice secretary for the China Association of Automobile Manufacturers told a news briefing. The ministry said it would revoke the production licence of Suzhou Gemsea Coach Manufacturing, while the other four firms would be fined. The companies named included a subsidiary of Chery Holding, owner
CPI
Inflation trends point to stabilising economy Consumer inflation has remained well below China’s official target of around 3 per cent in 2016 Elias Glenn
China’s consumer price inflation slowed to its weakest pace in almost a year in August, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to growing evidence of a steadying economy. Indeed, the broader inflation trends shown in Friday’s data confirm recent signs of a more sure-footed recovery in the world’s second-biggest economy, allowing authorities to resist any fresh monetary easing as they move to curb an unsustainable build up of credit in the financial system. “The picture is still one of rising price pressures, and for that reason I’d be sceptical of claims this latest drop in inflation is going to increase the likelihood of further monetary easing by the central bank,” said Capital Economics’ China economist Julian Evans-Pritchard in Singapore. “What’s holding them back from
further easing is not inflation concerns, it’s concerns of credit risks.” A housing and construction rebound has boosted industries including steel and coal, and while many sectors continue to struggle with overproduction, domestic demand has held up reasonably well, with trade data on Thursday showing a surprising improvement in imports. The consumer price index (CPI) rose 1.3 per cent in August from a year earlier, compared with a 1.8 per cent increase in July, the National Bureau of Statistics said on Friday. That was the slowest pace of inflation since October 2015. Analysts polled by Reuters had expected a 1.7 per cent gain. Consumer inflation has remained well below China’s official target of around 3 per cent in 2016, despite concerns that severe summer flooding, which has disrupted public infrastructure and agricultural production, would ramp up inflationary pressures. Food prices were up 1.3 per cent in
August, compared with a 3.3 per cent year-on-year gain in the previous month. Prices of pork, China’s staple meat, rose only 6.4 per cent versus a 16.1 per cent increase in July. Importantly, non-food prices showed headline inflation remained stable, rising 1.4 per cent, unchanged from July. The Statistics bureau data showed a 4.3 per cent year-on-year increase in healthcare costs and a 4.5 per cent rise in “other goods and services” were the main drivers. The producer price index (PPI) dropped 0.8 per cent in August from a year earlier, the slowest pace of decline since April 2012. China factory prices have been falling since March 2012, but a turning point could be on the horizon as the industrial sector improves on the back of a housing recovery, and commodity prices bounce globally. Analysts expect factory prices to turn positive by the end of the year, which will give a much-needed boost to earnings in the industrial sector and help ease pressures from debt obligations. “Today’s PPI data mirrors the improvement in industrial profitability,” said ANZ analyst Raymond Yeung in a note to clients. Indeed, this trend was backed up by data showing China’s imports rose for the first time in nearly two years in August as firms restocked and wholesale inflation expectations rose. The People’s Bank of China has not adjusted interest rates since October 2015, and analysts don’t expect any short-term easing steps as focus remains on reduction of industrial overcapacity and stemming credit risks. “Senior officials have been reiterating the priority of ‘supply-side structural reform’ and the role of active fiscal policy against the backdrop of capacity reduction and an overheating housing market,” said ANZ’s Yeung. “The possibility for further monetary easing has significantly declined.” Reuters
Chinese police have detained seven property agents in Shanghai for spreading rumours of plans for a new government regulation that caused a rash of divorces and a rush to buy new homes, state news agency Xinhua reported on Friday. The agents were alleged to have spread rumours online that a new regulation would require higher minimum down payments and mortgage interest rates for home buyers who have been divorced for less than a year, Xinhua said. The rumours led to a surge in divorce rates and a buying frenzy in the financial hub, Xinhua quoted local police as saying. HK IPO
Postal Savings Bank seeking US$8.2 bln State-owned Postal Savings Bank of China (PSBC) plans to raise up to US$8.2 billion in a Hong Kong initial public offering and will start taking orders from investors this week after it set a price range for the deal, IFR reported on Friday. PSBC plans to sell 12.2 billion shares at an indicative range of HK$4.68 to HK$5.18 each, putting the total deal at up to HK$63.2 billion (US$8.15 billion), added IFR, a Thomson Reuters publication. The company will start taking orders from investors for the IPO on September 13, with pricing slated for September 20, IFR said. Compensation
Taiwan says to offer preferred loans to tourism sector The Taiwan government said on Thursday it will offer T$30 billion (US$960 million) in preferred loans to the tourism industry amid a fall in the number of Chinese tourists visiting the island. The loans, along with other measures aimed at helping the struggling sector, come days ahead of a planned demonstration in Taipei by hotels, tour bus companies and travel agents to demand government support. It would be the first big protest following a dip in TaiwanChina ties since President Tsai Ing-wen took office in May.
10 Business Daily Monday, September 12 2016
Greater China M&A
Premier League probes Mainland investors for ties to Beijing The organization has hired a corporate investigation firm to confirm details provided to it by the potential buyers. David Hellier and Tariq Panja
U
.K. soccer authorities are scrutinizing a flurry of Chinese investments in English Premier League clubs to try to identify who ultimately controls the funds flowing into the teams. The league’s rules prohibit the same owner from holding significant stakes in more than one team to prevent conflicts of interest and match-fixing. Pinning down the owner can be challenging with Chinese bidders because the central government has a hand in so many investments and business records are not always transparent, one of the people familiar with the situation said. Spurred by the state, which wants to develop the country’s soccer prowess and attract a World Cup, Chinese companies have invested more than 500 million pounds (US$668 million) in English soccer in the past nine months, enriching the league and driving up the value of clubs. League officials are worried that the Chinese government might, perhaps even inadvertently, end up with a significant stake in multiple teams,
one of the people said. “I’m sure the Premier League will want to ensure that future deals don’t lead to more than one club being significantly influenced by a single party, including where state-controlled investors are concerned,” said Marcus Shadbolt, a banker who advised on Chinese entrepreneur Lai Guochuan’s acquisition of Premier League club West Bromwich Albion in August.
“These governance procedures are to ensure the integrity of the competition.” Premier League spokesman
The Premier League is reviewing a proposal from a Chinese investor group to acquire Hull City, a league spokesman said. Real Estate developers Dai Xiu Li and Dai Yongge have
offered to buy the club from its current owner, British businessman Assem Allam, the China Daily reported.
Extended inquiry
The Premier League has hired a corporate investigation firm to confirm details provided to it by the potential buyers, according to one of the people familiar with the matter. That’s a standard procedure, the person said, but this background check has taken longer than most others. Hull asked the league to expedite the process but officials turned down the request, this person added. Dai Yongge’s Renhe Commercial Holdings Co. didn’t respond to an e-mailed request for comment about the status of its bid for the club and the Premier League’s investigation. Hull City did not respond to a request for comment. “There is a rigorous process for any change of ownership or investment in our clubs that includes proof and provenance of funding, extensive background checks on owners and directors and who the ultimate beneficial owner is,” a Premier League spokesman said. “These governance procedures are to ensure the integrity of the competition.” One Chinese state-backed consortium that includes Hong Kong-based China Everbright Group is interested in investing in Liverpool. The club’s owner, Fenway Sports Group, has
said it’s not for sale but it would contemplate parting with a minority stake. Another Premier League club, Manchester City, is 13 per cent owned by state-backed investment fund China Media Capital. The league has satisfied itself that the state’s ownership is less than 10 per cent, one of the people familiar with the situation said. The Premier League considers any stake of more than 30 per cent to represent an exercise of control. The league says it prohibits any single owner from holding more than 10 per cent of multiple clubs. As of this summer, two clubs in the second-tier Championship league also have new Chinese owners: Aston Villa was acquired by entrepreneur Tony Xia, while Wolverhampton Wanderers was bought by conglomerate Fosun International Ltd.
‘Fit, proper’
The league’s background checks include a check on whether potential owners are “fit and proper” stewards, whether they have sufficient funds to buy the club and run it and whether the money comes from legitimate sources. In the case of Chinese investment, officials also have to determine whether the funding comes from private or public sources, in order to enforce the rule against multiple team ownership. “I don’t think the Chinese government has anything to do with the purchase of English football clubs,” said Justin Zhang, head of the Greater China transaction desk at Ernst & Young in London. “These deals are driven by Chinese corporates who see the trend and huge growth potential of the Chinese sports industry.” League officials are trying to avoid potential conflicts of interest like those that arose in the 1997/98 UEFA Cup, which used to be a tournament for top European clubs, when three teams owned by U.K. entertainment and sports company ENIC qualified for the quarterfinals. That prompted the UEFA governing body to adopt rules barring a single owner from entering more than one team in the competition. Bloomberg News
Environmental protection
Government hits 60 pct of 2016 target for coal output cuts Coal producers have lobbied the government to approve a plan to increase output. China has reduced its coal production capacity by 150 million tonnes in the first eight months of the year, representing 60 percent of its 2016 target for capacity cuts, state media said on Friday citing the state planner. The rate is nearly 1.5 times progress in the first seven months of 38 percent, Lu Junling, a senior official with the National Development and Reform Commission (NDRC), was quoted as saying at an industry meeting on Thursday to discuss market stabilization measures. The country is the world’s top coal consumer but demand has been on the wane as economic growth slows and as the country shifts away from fossil fuels as part of a drive to curb pollution. China’s coal producers have lobbied the government to approve a plan to increase output that could add 8-9 million tonnes per month of new supply from some 74 mines
that produce high-quality clean coal. That was discussed at the meeting on Thursday and included a proposal that would allow producers to raise
output if domestic prices hit certain levels, state-media Xinhua said. According to the proposal, selected mines would be able to increase average daily production by 200,000 tonnes if the benchmark price, the Bohai-rim steam-coal price index (BSPI), trades above 460 yuan per tonne for two weeks. That would rise to 300,000 tonnes of coal a day if prices go up to 480 yuan per tonne, and would increase to 500,000 tonnes if prices hit 500
yuan for two weeks, Xinhua said. The BSPI is currently at 515 yuan, according to industry website CQCOAL.com. Any increases would be pulled if prices fall below trigger levels respectively at 460 yuan, 470 yuan and 490 yuan also for as long as two weeks. Zhengzhou Commodity Exchange thermal coal futures, due in January 2017, were trading at 502 yuan on Friday morning, down 1.6 percent from the previous session. Reuters
Business Daily Monday, September 12 2016 11
Asia
The BSE building in Mumbai India’s markets
Asia’s oldest stock exchange BSE files for long-awaited IPO Lack of clarity on rules for the listing of stock exchanges had delayed the process. Abhirup Roy and Devidutta Tripathy
B
SE Ltd, India’s secondbiggest stock exchange, on Friday filed for a longawaited initial public offering (IPO), seeking to list its shares on larger rival National Stock Exchange (NSE). Shareholders including Singapore Exchange will be selling up to 29.96 million shares, or a 27.9 per cent stake, in the IPO, according to a draft prospectus. Banking sources had previously said the IPO of Asia’s oldest exchange was likely to raise about US$150 million for its long-time investors,
some of whom are looking to cash out. Stronger stock markets in India have sparked a boom in IPOs this year. Financial sector listings especially have been lapped up by investors, with stocks such as RBL Bank and Ujjivan Financial Services surging after their debuts. ICICI Bank, the second-biggest Indian lender by assets, said on Thursday it was seeking to raise as much as US$909 million by selling shares in its insurance arm ICICI Prudential Life Insurance, in what will be the biggest local IPO since 2010. Founded in 1875, BSE, whose first venue for broker meetings was under a
Of the 107.35 million shares in BSE, trading members hold about 52.3 million shares, or 48.7 per cent with the rest held by Deutsche Boerse AG,
Singapore Exchange and a group of foreign portfolio investors, insurance firms and individuals. Singapore Exchange plans to sell its entire stake in BSE in the IPO, the prospectus showed. BSE, formerly known as the Bombay Stock Exchange, boasts the most listings in the world with more than 5,900 listed companies but it has been dwarfed by rival NSE in trading volumes, especially since the introduction of derivatives that have increased liquidity in large caps. For the quarter to the end of June, BSE reported total income of 1.65 billion rupees (US$24.7 million) and net profit of 527 million rupees. Rival NSE said in June it would will file for a domestic initial public offering (IPO) by January, and would also pursue one abroad. For the BSE IPO, Axis, Edelweiss, Jefferies and Nomura are the joint global coordinators, while Motilal Oswal, SBI Capital Markets, SMC Capitals and Spark Capital are among the other book runners. Reuters
quickly, an ambition that has so far proved unachievable. On top of that, some analysts fret that the BOJ’s negative interest rate policy and massive government debt purchases are doing the economy more harm than good. Under its current framework combining negative rates with hefty buying of government bonds and some riskier assets, the BOJ has gobbled up a third of Japan’s bond market and attracted criticism from banks for squeezing already thin profit margins. Sources have told Reuters the BOJ will consider modifying its policy
framework and debate some of the unintended consequences of its ultra-loose policy at the rate review September 20-21. In a speech last week, Kuroda publicly acknowledged for the first time that negative rates could dampen public sentiment by hurting banks’ profits and the rate of returns on pension investments. This has led some investors to speculate that the BOJ has few viable policy options left to encourage growth and dispel the deflationary expectations that deter household spending. Reuters
banyan tree in India’s financial capital Mumbai, has long been considering an IPO. However, lack of clarity on rules for the listing of stock exchanges had delayed the process.
‘Rival NSE said in June it would will file for a domestic initial public offering by January’
Monetary policy
Bank of Japan Governor meets Abe for policy review briefing Last week Kuroda publicly acknowledged for the first time that negative rates could dampen public sentiment. Stanley White and Tetsushi Kajimoto
Bank of Japan (BOJ) Governor Haruhiko Kuroda met Prime Minister Shinzo Abe on Friday to exchange views on the central bank’s comprehensive review of monetary policy due later this month, but Kuroda declined to reveal details of their discussion. Kuroda said the two did not discuss buying foreign currency bonds, an idea supported by one of Abe’s advisors. “There was no special instruction from the premier. We exchanged various views based on recent developments including Asian economies,” Kuroda told reporters after meeting Abe at the prime minister’s office. Kuroda has met with Abe regularly to discuss the economy since taking the BOJ top job in early 2013, but Friday’s meeting took place at a time of growing doubt about what the BOJ can achieve from a review of its bold quantitative easing campaign.
Kuroda and Deputy Governor Hiroshi Nakaso have said the review will examine ways for the BOJ to reach its 2 per cent price growth target more
Key Points BOJ will use review to study price goal ways and means PM Abe’s message for BOJ not disclosed Some investors worry BOJ policy nearing its limits
Bank of Japan Governor Haruhiko Kuroda
12 Business Daily Monday, September 12 2016
Asia In Brief Reconstruction
DPRK launches national campaign post-flood The Democratic People’s Republic of Korea (DPRK) called on its people to engage in a rehabilitation campaign in wake of strong storms, the official news agency KCNA reported yesterday. The ruling Workers’ Party of Korea has made it a top priority to rebuild the disaster-hit cities and counties, in particular in North Hamgyong Province in the northeast, where tens of thousands of houses and public buildings collapsed and railways and roads were destroyed, said the KCNA. The floods were caused by the strongest storms and heaviest downpour since 1945, it noted. Consumption
Indonesia retail sales growth slows Indonesia’s annual retail sales in July expanded at a slower pace of 6.7 per cent as consumer demand returned to normal after the Eid-al Fitr holiday, a Bank Indonesia survey showed on Friday. June annual retail sales growth was revised to 16.4 per cent from a previously reported 15.9 per cent. The survey of 700 retailers in 10 major cities predicted that August retail sales growth would reach 14.6 per cent from a year earlier, bolstered by food and nonfood sales. The survey also showed that price pressures would ease in October. Production
Malaysia’s factory output up Malaysia’s July industrial production grew 4.1 per cent from a year earlier, helped by strength in the mining, manufacturing and electricity sectors, government data showed on Friday. Factory output rose at a slower pace than the 5.3 per cent growth posted in June, and was slightly below economists’ expectations of a 4.3 per cent rise. Manufacturing output expanded 3.3 per cent in July from a year earlier, slowing from the previous month’s 4.7 per cent growth, data from the Statistics Department showed. Malaysia’s exports in July had fallen unexpectedly. Massive trial
Vietnam jails former bank chairman for 30 years A Vietnamese court jailed a former bank executive for 30 years on Friday for illegally withdrawing more than 9 trillion dong (US$404 million), the biggest such loss brought to light in the country’s banking sector, state-run newspapers reported. Pham Cong Danh, former chairman of the Construction Bank, was found guilty by the Ho Chi Minh City People’s Court of intentional wrongdoings and violations of lending rules, the official Thanh Nien (Young People) newspaper said. Danh stood trial with 35 other defendants, including many of the bank’s executives. The former chief executive officer was jailed for 22 years.
Taxes
Indonesia says rich taxpayers in ‘wait-and-see’ amnesty standoff The amnesty plan has been a flagship policy of President Joko Widodo. government’s revenue target as of Friday.
Karlis Salna
I
ndonesia’s tax amnesty is being held back by a limited choice of investment options available to individuals and companies when repatriating funds, National Development P l a n n i n g M i n i s t e r B a m ba n g Brodjonegoro said. While the government remains upbeat about the plan, which runs until March, Brodjonegoro said that some of the largest evaders were yet to participate. “Clearly, the so-called big taxpayers - which are quite many, many in terms of number, maybe hundreds or more - they are not participating yet in the tax amnesty,” he said in an interview Friday in Sydney. “They prefer to wait and see.” The amnesty plan has been a flagship policy of President Joko Widodo, with the government hoping it will add as much as 165 trillion rupiah (US$12.6 billion) to revenue, helping to ease pressure on the budget as the deficit heads toward the mandated ceiling of 3 per cent of gross domestic product. Inflows from the tax amnesty have reached about 4.6 per cent of the
“Our weakness is the financial instruments are limited,” Brodjonegoro said. “At least with our, I think, good tariff for the tax amnesty, we hope that they can still give some capital inflows into Indonesia.”
‘Inflows from the tax amnesty have reached about 4.6 per cent of the government’s revenue target as of Friday’ Those participating in the amnesty can invest in assets including government and SOE bonds, local infrastructure projects approved by the government, gold and
Bloomberg News
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Growth outlook
state-regulated property investment trusts. Repatriated funds must stay onshore for a minimum three years. Brodjonegoro, 49, was shifted from the post of finance minister in July and replaced by Sri Mulyani Indrawati, a former managing director at the World Bank who is tasked with overseeing the tax amnesty plan. Growth in Southeast Asia’s largest economy has come under pressure since last year amid falling commodity prices and weaker consumer demand. Falling revenue has prompted the government to cut back on spending, undermining the outlook further. The central bank estimates growth will be closer to the lower end of its 4.9 per cent to 5.3 per cent target this year, compared with 4.8 per cent in 2015. Brodjonegoro said global uncertainty and weak demand was “still haunting” Indonesia, adding that achieving growth of more than 6 per cent would require boosting the rate of investment to at least 10 per cent from 5 per cent to 6 per cent currently. “If you look at the consumption, then we have been able to maintain the inflation - so household consumption is stable,” he said. “So the key is the investment. So far, the investment growth is still under-performing.”
Business Daily Monday, September 12 2016 13
Asia Monetary policy
Bank of Korea holds rates Recent economic data has been mixed, which will make the central bank want to check more indicators before acting. Christine Kim and Cynthia Kim
South Korea’s central bank kept interest rates unchanged at 1.25 per cent for a third straight month on Friday, as expected, taking a cautious approach to mounting household debt at home while scanning for potential changes in U.S. monetary policy. The central bank’s decision was largely ignored by investors, who dumped South Korean stocks after North Korea appeared to detonate a nuclear bomb. All but one of 26 analysts in a Reuters poll saw the Bank of Korea (BOK) holding rates on Friday, while a majority saw one last cut coming soon. Bank of Korea Governor Lee Juyeol stated firmly that economic recovery was still on track, although
he noted inflation could head lower. Lee did not mention North Korea at his news conference following the BOK meeting. Although most analysts still see a rate cut soon, some have changed
their minds and think the BOK will hold indefinitely as there are more factors to deliberate over, including growing household debt and Hanjin Shipping Co Ltd’s recent collapse. Lee said the impact from the recent Hanjin Shipping collapse could be contained. “I’m aware that some exporters are going through considerable difficulties from the Hanjin Shipping incident. However, the impact on the economy won’t be big if measures in place from the government, including deployment of alternative vessels, are carried out smoothly.”
The Bank of Korea has trimmed the policy rate five times between 2014 and June this year to keep economic momentum going, something that has proven difficult as exports sputtered in the face of weak global demand. “For the most part, Lee was stressing the need to be observant ahead of the Fed’s policy meeting. There was little to take away besides the fact that inflation faces downside risks,” said Kim Jina, fixed-income analyst at IBK Securities. For now, the BOK will observe whether the government’s 11 trillion won (US$10 billion) supplementary budget passed by parliament last week will have an immediate effect on the economy. Recent economic data has been mixed, which will make the central bank want to check more indicators before acting. Revised economic forecasts by the BOK will be released in October. The BOK’s decision to hold rates landed hours after the European Central Bank maintained interest rates at record lows and kept the door open to more stimulus. It gave few hints about its next move, disappointing markets. Reuters
WHO
Asian nations plan fund to better prepare for health emergencies Governments also agreed to increase the number of health workers. Nita Bhalla
Eleven countries in South and East Asia on Friday agreed to establish an emergency fund to strengthen their health services to better respond to outbreaks of diseases, including emerging viruses such as Zika, the World Health Organisation (WHO) said on Friday.
“The new funding stream will allow countries to invest in infrastructure and human resources that will enhance preparedness” Poonam Khetrapal Singh, WHO’s South East Asia director Made up of India, Bangladesh, Bhutan, South Korea, Indonesia, Maldives, Myanmar, Nepal, Sri Lanka, Thailand and Timor-Leste, the South East Asia region is highly susceptible to disasters such as floods which can result in disease outbreaks. The region is also threatened by a range of emerging diseases such as
SARS, MERS CoV, pandemic influenza and Zika, say experts, adding that countries remain ill-prepared to effectively contain an outbreak should it occur. The WHO said while nations already contributed to a fund to tackle health emergencies such as outbreaks of cholera or diarrhea in the aftermath of disasters, it was crucial to have finance available to help countries prepare beforehand. “To date, post-disaster funding through South-East Asia Regional Health Emergency Fund has done an excellent job of helping countries respond to health emergencies once they’ve occurred, as we saw most recently in Nepal and Sri Lanka,” said Poonam Khetrapal Singh, WHO’s South East Asia director. “The new funding stream will allow countries to invest in infrastructure and human resources that will enhance preparedness,” she added in a statement. In a resolution passed by the 11 countries at a WHO meeting in the Sri Lankan capital Colombo, governments also agreed to increase the number of health workers, provide them with training and better conditions in order to retain them. The ratio of health care providers in the region currently stands at 12.5 workers for every 10,000 people, just a quarter of the WHO recommended
A traveller walks near a travel advisory poster providing information on the Zika virus at Kuala Lumpur International Airport in Sepang, Malaysia.
minimum of 44.5. Aid workers welcomed the move, citing the Ebola crisis in West Africa in 2013-15, as an example of why it was necessary to build local capacity and prevent an outbreak becoming a crisis. “To deal with an outbreak, we need to work before, during and after. A
strong public health system is the best shock absorber in such settings,” said Unni Krishnan, Save the Children’s emergency health director in Asia and Pacific. “This initiative should aim to prepare local medical colleges and local health systems for such scenarios a collaborative approach between governments, U.N. systems and non-governmental organizations is key.” Reuters
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International In Brief Commerce
U.S. wholesale inventories flat U.S. wholesale inventories were unchanged in July as previously reported and sales recorded their biggest drop in six months, suggesting a modest boost to third-quarter economic growth from inventory investment. An outright drop in inventory investment weighed heavily on economic growth in the second quarter and some economists believe the inventory correction is close to running its course. The Commerce Department said on Friday that the flat reading followed an upwardly revised 0.3 per cent increase in June. Wholesale inventories were previously reported to have gained 0.2 per cent in June. Energy sector
Russia says to sign pipeline deal with Turkey in October Russia plans to sign an agreement with Turkey next month on the implementation of the Turkish Stream gas export pipeline project, Russian Energy Minister Alexander Novak was quoted as saying on Saturday. “The inter-governmental agreement and road map are currently being reconciled, the process of agreeing on the final text is underway. We plan to proceed to the signing in October,” Novak said, according to Russian news agency RIA. Talks on the project were halted last year after Turkey shot down a Russian air force jet and Russia retaliated with trade sanctions.
Avoidance practices
“Pay your taxes”, euro zone chief tells corporations The Commission is investigating multinationals’ tax arrangements in several EU countries to assess whether illegal state aid may have been given. Francesco Guarascio and Jason Hovet
M
ultinational companies should refrain from tax-avoidance practices and pay their fair share, the head of euro zone finance ministers said on Saturday in a new endorsement of the European Union’s fight against tax-dodging. In the wake of the ‘Panama Papers’ revelations of widespread tax-avoidance practices, Brussels has toughened up its drive for fairness by tightening controls and adopting stricter rules. The recent shock multi-billion euro tax demand on Apple was part of that trend as the EU also drafts plans for a common corporate tax base and a single European blacklist for tax havens. “My message to those companies
is you are fighting the wrong battle. You have to move on. Times are changing,” the head of the Euro group and Dutch Finance Minister Jeroen Dijsselbloem (pictured) told reporters on arriving at a meeting of EU finance ministers in Bratislava. “You need to pay your taxes in a fair way. Part of that would be in the U.S., part of that would be in Europe. So get ready to do that,” Dijsselbloem added. The Commission, which is in charge of protecting market competition in Europe, is investigating multinationals’ tax arrangements in several EU countries to assess whether, by lowering corporations’ tax bills, illegal state aid may have been given. Online retailer Amazon.com Inc and hamburger group McDonald’s Corp face European Commission probes over taxes in Luxembourg,
He also said the Commission will move forward with plans to align taxes on ebooks and online press with paper publications, in line with earlier announcements. German Finance Minister Wolfgang Schaeuble welcomed the efforts while EU Commission Vice-President Jyrki Katainen said new rules were needed to eliminate mismatches and loopholes between member states’ tax systems that companies exploit. “What is clear is that with every new case of unfair tax practise or abuse, public frustration grows,” he told a news conference at the conclusion of the summit. Ministers at the meeting also discussed a paper presented by the Slovak presidency of the EU calling for more tax certainty for multinationals. It aims to step up cooperation among EU states and also make companies’ tax bills more predictable. Reuters
Mastercard sued in Britain’s biggest damages claim
Airports Council International
Global airport traffic grows at fastest rate since 2010 Passenger traffic generated by Brazil, Russia, India, China and South Africa grew 8.2 per cent on an annual basis.
Ministers meeting
Euro zone expect Spain, Portugal to cut deficits Spain and Portugal must still tackle their excessive budget gaps even though they escaped being fined in July for breaking European Union deficit limits, euro zone finance ministers said on Friday. “I expect a very brief discussion and especially effective action from our Portuguese and Spanish colleagues,” Slovak Finance Minister Peter Kazimir, whose country holds the rotating EU presidency, told reporters on entering a meeting of finance ministers. At the recommendation of the European Commission, the EU decided not to penalise Madrid and Lisbon for not reducing the deficits to below the EU limit.
“What is clear is that with every new case of unfair tax practise or abuse, public frustration grows” Jyrki Katainen, EU Commission Vice-President
Excessive fees
Some 46 million people in Britain could potentially benefit from a legal case brought against Mastercard demanding 14 billion pounds (US$19 billion) in damages for allegedly charging excessive fees, according to court documents filed in London. The case brought by a former chief financial services ombudsman alleges the payments company charged unlawfully high fees to stores when shoppers swiped their debit or credit cards and these were passed on to consumers in higher prices. Mastercard is alleged to have done this for 16 years between 1992 and 2008.
while coffee chain StarbucksCorp has been ordered to pay up to 30 million euros (US$33 million) in back-taxes to the Dutch state. The Netherlands has appealed against the Commission’s decision, and Ireland did the same in the Apple case, fearing it could undermine the country’s long-established policy of attracting multinationals with low taxes. European Commissioner Pierre Moscovici plans to unveil proposals in the coming weeks on a common tax base for multinationals operating in the EU, telling reporters the initiative was about the tax base rather than rates, which will remain in the hands of member states.
Allison Lampert
Global airport traffic grew at its fastest rate last year since 2010, rising 6.4 per cent to 7.2 billion passengers, according to data published on Friday by an international trade association representing airports. But passenger growth this year could be tempered by the threat of militant attacks, geopolitical unrest and potential bottlenecks for passengers lining up to clear security checks, said the report by Montreal-headquartered Airports Council International, or ACI. “It is important to maintain cautious optimism as we navigate through 2016,” ACI World Director General Angela Gittens said in a news release. “There are several impediments that could curtail the continued rise in demand, which could potentially encumber growth prospects over the short and medium terms.” While the highest number of
passengers, 2.46 billion, went through the Asia-Pacific region in 2015, up 8.6 per cent from a year earlier, Atlanta’s Hartsfield-Jackson remained the world’s busiest airport, the report said.
‘The highest number of passengers, 2.46 billion, went through the Asia-Pacific region in 2015’ Passenger traffic in emerging markets and developing economies soared 8.1 per cent in 2015, compared with a 5.2 per cent rise in slowergrowing mature markets, said ACI, which collects data for over 2,300 airports in 160 countries.
Passenger traffic generated by Brazil, Russia, India, China and South Africa grew 8.2 per cent on an annual basis. Globally, there were 37 large airports with over 40 million passengers, more than double the number in 2005. “ Thi s l ev e l o f g r o w th i s unprecedented, particularly since a majority of the airports in this category are from the typical mature markets of North America and Europe,” the release said. It said North America experienced a resurgence in air transport demand, especially at many of its large hubs, following years of consolidation and capacity discipline by U.S. airlines. Large airports are benefiting from capacity shifts where flights are being directed through major connecting hubs. But the trend toward hubs comes at the expense of smaller regional airports, which are losing out on traffic, Gittens noted. Air cargo grew more weakly than passenger traffic, rising 2.6 per cent in total volume during 2015, partly because of subdued growth in emerging markets and developing economies. Reuters
Business Daily Monday, September 12 2016 15
Opinion Business Wires
The Times of India The Reserve Bank of India (RBI) has urged people to go for a fact checking before investment as cases of people being duped by misleading advertisements are on the rise. This comes a day after investors of Senco Jewellery Palace Abhusan claimed that they were lured by such advertisements. Investors like Madan Koley, who had invested Rs 10 lakh with the company, said advertisement was the trigger for investment. According to RBI, misleading advertisements promising abnormally high returns have already played havoc. So far, there have been 200 cases where companies have put out such false advertisements and amassed money from investors.
Refugees and rural poverty
Taipei Times The Taoyuan District Prosecutors’ Office said it has concluded its investigation into a tour bus inferno that killed two Taiwanese and all 24 Chinese tourists on board in July, listing the bus driver as a defendant on homicide charges, but because he died in the incident, the case was closed without prosecution. Prior to the release of the report, investigators said that it was highly likely that the ignition point was near the driver’s seat, and as forensic investigators did not find any evidence of a short circuit, human factors were considered.
The Korea Herald SK Group Chairman Chey Tae-won met with Wang Yupu, the president of China’s state-run oil and gas firm Sinopec to forge a business partnership between the two, the group’s affiliate SK Innovation said Friday. In the meeting held in Beijing, Chey said he was hoping to strengthen business ties between the two, citing a previous case of successful cooperation. In 2012, Chey concluded a negotiation with Sinopec after meeting its former Vice Chairman Wang Tianpu to build a joint ethylene plant in Hubei province of China.
Philstar Filipinos are seen benefitting from the planned lifting of the restrictions on the importation of rice through lower prices, reduction in hunger and lower inflation, Foundation for Economic Freedom (FEF) said. The think tank, which is focused on market-oriented reforms, well-defined and secure property rights, consumer welfare, and good governance, hailed the decision of the National Economic and Development Authority not to seek an extension of the quantitative restriction on rice when it expires next year. “Lower rice prices and higher disposable incomes for the poor, in turn, will boost the country’s competitiveness, improve quality of life and lead to a reduction in malnutrition,” FEF said.
D
evelopment experts and policymakers understandably focus on migration to urban areas and the need for sustainable urbanization. But they should not lose sight of the dramatic changes happening in rural areas, which are too often ignored. While the growing demand for food – driven by rising population and incomes – is creating opportunities for rural people, hunger and poverty remain concentrated in rural parts of developing countries. Unless rural development receives more attention, young people will continue to abandon agriculture and rural areas in search of better livelihoods in cities or abroad. Last year at the United Nations General Assembly, world leaders adopted the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs), which include a commitment to “leave no one behind.” And, with the number of forcibly displaced people reaching all-time highs this year, the UN will hold a summit on September 19 to discuss the problem. But no effort to address the issues surrounding the global surge in migrants and refugees will succeed unless it specifically targets the plight of the world’s rural poor. According to the World Bank, in 1990, some 37 per cent of people in developing regions lived on less than US$1.90 a day. By 2012, 12.7 per cent did, amounting to more than one billion people rising out of extreme poverty. And yet, inequality between rural and urban areas has increased. Today, three-quarters of the world’s poorest and hungriest people live in rural areas. Small farms support 2.5 billion people worldwide, accounting for up to 80 per cent of food produced in Asia and Sub-Saharan Africa. But most smallholder farmers still operate without many of the basic conditions needed to grow their businesses and invest in their communities, such as finance, infrastructure, market access, secure land ownership, and rights to resources. This means that efforts to transform rural areas must target these institutional factors (along with improving gender equality and safeguarding the rule of law), while also introducing new technologies to local communities. And, most important, rural people themselves must be involved, not only as stakeholders or beneficiaries of aid, but as partners. Two new studies provide important perspectives on the challenge of reducing poverty, hunger, and inequality worldwide. The International Fund for Agricultural Development’s (IFAD) Rural Development Report, to be launched on September 14, compiles new research for policymakers and
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Kanayo F. Nwanze President of the International Fund for Agricultural Development (IFAD) and the first recipient of the Africa Food Prize.
others working to eradicate poverty. Leading thinkers analysed rural-development efforts in more than 60 developing countries, drawing conclusions about what does and doesn’t work. One central finding is that development focused specifically on rural communities has a major positive impact on incomes, security, and food and nutrition. And these quality-of-life improvements then translate into better education, health care, and other critical services. At the same time, these gains have not been evenly distributed, and SubSaharan Africa has seen far less progress than other areas. The second study, funded by IFAD and recently released by the International Food Policy Research Institute, examines the worldwide economic downturn starting in 2012 in the context of rural populations. It finds that as a result of the downturn, 38 million more people will remain in extreme poverty in 2030 than likely would have otherwise, with farm households in middle-income countries particularly at risk. This poses a serious challenge for the SDGs to end poverty “in all its forms everywhere,” and it strengthens the case for policies and investments specifically targeting rural areas, which is where poverty-reduction measures are needed more and will have a larger impact. Rural areas’ progress so far reveals their future potential. In many cases, their economies have diversified and become more dynamic, and new roads and communication networks have reduced the physical and cultural distance between rural and urban residents. In small towns and villages, new types of societies are evolving wherein agriculture, while still important, is no longer the only thing that defines economic and cultural life. It is time to look at development more h o l i st i c a l l y , a c k n o w l e dg i n g t h a t r u ra l development and urban development are not mutually exclusive – each needs the other. If we neglect rural areas, persistent poverty and hunger will continue to drive migration flows, not only to urban areas, but also to neighbouring and nearby countries and destinations farther abroad. Leaving rural areas behind will not move developing countries forward; on the contrary, for many, it threatens to throw the engines of progress into reverse. Project Syndicate
Small farms support 2.5 billion people worldwide, accounting for up to 80 per cent of food produced in Asia and Sub-Saharan Africa.
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16 Business Daily Monday, September 12 2016
Closing Frozen relations
Bridge to nowhere shows China’s failed efforts to engage North Korea Relations have been severely strained by North Korea’s nuclear and missile tests. Sue-Lin Wong
T
owering above the murky waters, the New Yalu River Bridge was supposed to symbolise a new era in relations between China and North Korea, helping bring investment to landmark free trade zones jointly run with the impoverished and isolated state. Costing 2.2 billion yuan (US$330 million) and partially completed last year, the dual-carriageway bridge today sits abandoned, the impressive border post on the Chinese side deserted and locked, not a soul to be seen. On the North Korean side the unfinished bridge ends abruptly in a field, with little sign of infrastructure work happening. Launched with great fanfare at a five-star Beijing hotel in 2012, the free trade zones close to the Chinese border city of Dandong were meant to be part of China’s efforts to coax its erstwhile diplomatic ally into cautious, export-oriented economic reforms, rather than sabre rattling and nuclear tests.
names like “Singapore City” lie bare or half-finished, and shopping malls empty or at very low capacity. At the Guomen Wanjia Home & Life Square Mall, Sun Lixia sits waiting for customers at a lighting store. “North Korea hasn’t opened their end of the bridge and we can’t really do anything about it. It’s been bad for the local economy here. Who knows when they’ll open it?” Sun said. “Apartments haven’t been selling quickly, a lot of people aren’t willing to move here,” she added. “There isn’t even a proper hospital here, it’s only been half completed.” It’s far cry from what one Dandong official told state media in 2012: that the development would resemble Causeway Bay, one of Hong Kong’s busiest commercial areas, and the bridge handle 50,000 people and 20,000 vehicles a day to North Korea.
“Abundant resources”
The Hwanggumphyong and Wihwa
Islands economic zones, along with one at the other end of the border at Rason, had high level support. Late North Korean leader Kim Jong Il inked an agreement for them during a trip to China in 2010. The Rason zone has been more successful, though, with much more development, including a Chinesebuilt road into town and a new bridge being built at its border crossing. Kim’s son, the youthful current leader Kim Jong Un, has yet to visit China, and seems unlikely to be invited any time soon as he pursues an accelerated nuclear weapons and missile testing programme to the increasing alarm of the outside world. A glossy promotional booklet f r o m 2012 sh o w s a n a rti st’ s rendering of gleaming tower blocks in Hwanggumphyong and wide, tree-lined avenues. “North Korea has not only abundant, high-quality human resources, but also rich capital resources and enormous land to develop,” the bilingual Chinese-English booklet reads, promising legal protection for investors and tax breaks. When Reuters visited last week,
Key Points China-North Korea trade zones near Dandong fail to take off Beijing hoped for closer economic ties with isolated neighbour Diplomatic relations on ice as Pyongyang expands weapons testing China’s anger at North Korea for carrying out its fifth and biggest nuclear test last week means the bridge looks unlikely to open any time soon, especially as Pyongyang is already under wide-ranging UN sanctions China has promised to uphold. The lonely streets of the Dandong New Zone stand testimony to the failure of those engagement efforts. Apartment complexes with fancy
South Koreans watch a television news broadcast at the station in Seoul, South Korea, 9 September 2016.
only farmland and barbed wire fencing could be seen from the Chinese side. “The government was counting on trade between China and North Korea to drive economic growth here but that hasn’t happened,” said a security guard who gave his family name as Liu, standing in front of an office building on the optimistically named Commercial Street. “To be honest, the main reason the new zone hasn’t developed is because the bridge isn’t open,” Liu added.
War ties
The new link is meant to supplement Dandong’s old “Friendship Bridge”, with its lone lane for both vehicles and people running parallel to a single-line railway track. About three-quarters of bilateral trade flows through the city, and statistics show how limited that still is. China’s trade with the North is dwarfed by that with capitalist South Korea, which was worth 908 billion yuan (US$136 billion) between January and July, compared to just 17.7 billion yuan between China and North Korea. Dandong’s emotional ties with North Korea run deep, thanks to its front line position during the 1950-53 Korean War when China and North Korea fought against a U.S.-led UN coalition. Shops are packed with often low quality-looking North Korean goods, including ginseng and spirits infused with snakes and medicinal herbs, and North Korean waitresses sing patriotic songs at government-run restaurants for curious tourists. Those relations have been severely strained by North Korea’s nuclear and missile tests and periodic shootings and murders blamed on North Korean residents and security forces. “I don’t like North Korea. The police on the other side used to shoot farmers who’d go over to sell potatoes, corn, things like that, in the winter,” said Dandong farmer Zhao Guangfu, 70. Jin Qiangyi, Director of Yanbian University’s Centre for North and South Korea Studies, said China found itself in a “distressing” position on what to do with North Korea. “We have a choice about whether we can push them to reform and open up, to get them to change,” Jin said. “Of course political and military sanctions need to be stepped up, but civilian opening up and exchanges must be strengthened too.” Shutting the door won’t work, Jin added. “ Ca n i t r ea l l y cha n g e that way?” Reuters
Investigation
Co-operation
Factory blaze
Beijing graft probe snares Tianjin mayor
The China-ASEAN Expo opens
Bangladesh struggles to find survivors after deadly fire
The highest-ranking Chinese Communist Party official investigated in more than a year is a former subordinate of President Xi Jinping’s. Huang Xingguo - mayor and acting party chief of northern port city Tianjin - is being probed for “serious disciplinary violations,” China’s top anti-graft agency said Saturday, using an official euphemism for graft. The Central Commission for Discipline Inspection statement provided no details about the nature of the allegations. Huang’s unusually long 20-month stint as interim Tianjin leader took in the massive warehouse fire and chemical explosions in August last year that killed at least 165 people and caused almost US$1 billion in economic losses. He retained his posts even as scores of local government officials and port executives were punished for allowing the large stockpile of hazardous chemicals so close to a residential area, in violation of safety rules. Huang is the highest-ranking former Xi subordinate to fall from grace since the president took power in 2012 and launched an unprecedented crackdown on official corruption. Bloomberg News
The 13th China-ASEAN Expo opened yesterday in China, highlighting industrial co-operation, trade and investment among China, ASEAN members and other countries along the Belt and Road. The expo, held in Nanning, capital of south China’s Guangxi Zhuang Autonomous Region, was given the theme, “Jointly building the 21st Century Maritime Silk Road, Forging an Even Closer China-ASEAN Community of Common Destiny.” The four-day event attracted more than 2,500 companies from 29 countries, including the 10 ASEAN members and countries including India, Pakistan, Sri Lanka and Kazakhstan. The China-ASEAN Business and Investment Summit also opened yesterday. The expo features 5,800 exhibition booths this year, an increase of 1,200 from the previous event. It includes more than 30 forums to encourage China-ASEAN cooperation in such fields as education, environmental protection, culture, transport and tourism. China is ASEAN’s largest trading partner, and ASEAN is China’s third-largest trading partner. Xinhua
Bangladesh fire fighters were struggling yesterday to search a packaging factory following a major blaze that killed 25 people amid fears more bodies could still be inside the destroyed building. Around 100 people were working at the factory on Saturday when the fire caused by an explosion in the boiler room tore through the four-storey structure on the outskirts on the capital Dhaka. Senior fire fighting official Anis Mahmud said his workers toiled through the night to douse the blaze but the structure was still too dangerous to enter properly to search through the debris. “The building is still standing on its skeleton but most of the walls have collapsed. There are small pits of fire inside therefore we have not managed to go in,” Mahmud told AFP. Some 70 people were also injured, some critically, in the blaze at the Tampaco Foils Limited factory, which packages food and cigarette products for local and foreign brands. Another fire fighter said he feared more bodies were still inside the factory in the industrial town of Tongi. “There might be more bodies underneath the rubble as many people were working inside during the accident,” he told AFP. AFP