Page 1

Studio City still awaiting nod for VIP tables Gaming Page 7

Thursday, October 20 2016 Year V  Nr. 1155  MOP 6.00  Publisher Paulo A. Azevedo Closing Editor Kam Leong  Transport

On-call taxis start running next April Page 2


Ng Lap Seng reportedly requests loosened house arrest terms Page 4


Commercial real estate loans double Page 6



Thailand’s demand for black shirts helps economy Page 11

U.A.E. seeking to diversify with value-added taxation Page 15


A bigger border checkpoint had been planned. To replace the current Lotus border connecting the MSAR to Hengqin Island. Now everything’s on hold. ‘Political changes’ and the top official’s insistence on two checkpoints are cited for the stymied plan, Business Daily is told. Page 3

Chinese high-roller risks

Gaming Be wary. Fitch says playing in the Chinese VIP market comes with built-in risks. Because high-roller gambling outside the country is still an issue for China’s gov’t. The detention of 18 Crown Resorts’ employees is sending an unmistakable message. Page 7

More judicial co-operation necessary

Still rainy days

Thumbs down from most retailers. Regarding business performance in August vis-à-vis a year ago. Motor vehicle sales are particularly hard hit. Altogether, it’s a mixed bag for September.

Politics So says Prosecutor-General Ip Song Sang. Who perceives enhanced co-operation with regional jurisdictions will increase the MSAR’s power to combat money-laundering. Page 5

Hubble bubble . . .

Retail Page 6

HK Hang Seng Index October 19, 2016 

23,304.97 -89.42 (-0.38%) Worst Performers

China Shenhua Energy Co


AAC Technologies Holdings


China Life Insurance Co Ltd


Industrial & Commercial


Wharf Holdings Ltd/The


Sands China Ltd


China Resources Power


Sino Land Co Ltd


MTR Corp Ltd


Swire Pacific Ltd


Hang Lung Properties Ltd


China Overseas Land &


Hengan International Group


CLP Holdings Ltd


China Petroleum & Chemical


China Merchants Port Hold-


Cathay Pacific Airways Ltd


Cheung Kong Infrastructure


China Unicom Hong Kong


New World Development


26°  31° 25°  30° 25°  29° 24°  29° 24°  28° Today

Source: Bloomberg

Best Performers



I SSN 2226-8294



Source: AccuWeather

Property Investment in real estate on the Mainland. Posting its strongest growth since May for September. And contributing to China’s Q3 economic expansion of 6.7 pct. Property investment’s up 7.8 pct y-o-y but developers fear tightening measures to prevent a bubble. Page 9

2    Business Daily Thursday, October 20 2016

Macau In Brief Politics

Macau Liaison Office names new Economy Department head Liu Bin has been appointed as Head of the Economy Department for the Liaison Office of the Central People’s Government in the Macau SAR, local broadcaster TDM Chinese radio news has reported. Before the new appointment, Mr. Liu was Director of the Research Department of the Office. Earlier this year, the Liaison Office appointed a new head of the Human Resources Department, in addition to the replacement of its former Director Li Gang by Wang Zhiming. Bian Tao, deputy head of the co-ordination department of the Office, remarked recently to Portuguese news agency Lusa that it is a common practice that appointments are organised at short notice. C.U. Public works

Bids invited for new Sino-Luso complex The government is inviting public bids for building a new complex supporting trade and economic co-operation between China and Portuguese-speaking countries in Nam Van, according to yesterday’s Official Gazette. The dispatch, signed by Li Canfeng, Director of the Land, Public Works and Transport Bureau (DSSOPT), indicates that January 23 next year is the deadline for submitting bids, whilst the tender would be opened on January 24. The new complex will be built on plots C15 and C16 in Zone C near Nam Van Lake, and occupy approximately 14,200 square metres, serving as a meeting venue for Forum Macao. The longest construction period allowable is 600 days. The plan to build the new complex was announced during the visit of Chinese Premier Li Keqiang to the Special Administrative Region last week, and will feature an exhibition centre for food products from Portuguese-speaking counties, a business service centre, a training centre, an information centre, an exhibition hall showcasing Luso-Sino relations and cultures, and an exhibition room showcasing the urban development of the city. Appointment

AMCM names new administrative committee member The Secretary for Economy and Finance Lionel Leong Vai Tac has appointed Vong Lap Fong as a new member of the administrative committee of the Monetary Authority of Macau (AMCM), according to a dispatch published yesterday in the Official Gazette. The new role of Mr. Vong takes effect from today for a period of one year. The new committee member has worked for AMCM since 1993, when he joined the Authority’s banking supervision department as an officer. He has been serving as a deputy director of the department since January 2007. A.L.


Special taxis taking to the road on April 1 Nelson Moura


he city’s special taxi (on-call taxi) licence concessionaire - Radio Taxi Macau Taxi Service Ltd, - will start its operation from April 1 next year, reveals its contract with the Transport Bureau published yesterday in the Official Gazette. The contract also regulates the company’s minimum answer rate of phone booking, in addition to the minimum number of taxis in operation. According to the contract, the company’s service hotline will have to respond to no less than 80 per cent

of phone bookings within each 30 seconds, whilst the rate of minimum taxis in operation is set at between 70 per cent and 80 per cent of the total number of vehicles it has, with the rate reduced to 40 per cent at night time. The company will be fined MOP50,000 (US$6,250) for violating either regulation. Radio Taxi will also have to provide a 24-hour service line in Cantonese, Mandarin, English and Portuguese; and allow users to pay using cash, credit card or electronic payments such as Macau Pass. The licence allows the company to run 100 special taxis in the city, with the first batch of 50 special taxis

available in the first half of next year. These special taxis can only be hailed by telephone, online order or via mobile phone application. According to the contract, the company will be able to charge for ordering a ride and booking a ride in addition to imposing a no-show charge, although Radio Taxi Macau proposed in its public tender bid that it would only charge MOP5 for ordering a ride but no no-show fee. The concession holder will be able to propose a change in the charge amount or propose alternative charges, after two years of commencing operations. The concession will be valid for eight years starting from April 1.


Optimistic outlook for automobile, yacht, aviation expo The exhibition will be held from November 4 to 6 this year, the organiser announced yesterday Cecilia U

The organiser of the Macau Automobile, Yacht and Business Aviation Exhibitions believes the city’s economic downturn may more or less affect sales during the year’s exhibitions, while noting the exhibition should stress more the exchange of ideas and brands promotion, with trading on the spot only part of the objective. Song Xiaodong, the General Manager of the subsidiary company engaging international convention and exhibition enterprise Nam Kwong (Group) Company Limited, said during a press conference held yesterday that despite the lacklustre performance of the city’s economy the exhibition encourages the communication and promotion of brands among exhibitors, in order to achieve reciprocity between exhibitors. “The economy in Macau is still undergoing adjustment,” said Mr. Song. “Therefore, it will certainly have an impact on the business deals during the exhibition.” However, Mr. Song emphasised that the exhibition has already gained a reputation as well as influencing the development of Macau as a leisure and tourism centre. The GM said the current

performance of Macau’s economy will not affect the quality of the exhibition, indicating that it will have an effective role in supporting the sustainable economy of the city. Song added that the exhibition - in particular, the auto show - provides another platform to introduce the

automobile market to other Lusophone countries, as Prime Minister Li Keqiang had mentioned automobile production in other regions during his visit to the city last week. Asked whether delays in the establishment of the Free Yacht Scheme would affect the exhibition, Song said the government has been improving the scheme, and as such he has confidence in the city’s future yacht market. The exhibition will be held from November 4 to 6 this year, with more than 100 automakers and manufacturers from 20 countries and regions already signed up for this year’s Macau Auto Show.


Environmental Bureau seeks to resolve e-waste via regional co-operation The Bureau is drafting guidelines for local bakeries and supermarkets to donate unsold food Annie Lao

Chan Kwok Ho, head of the Environmental Infrastructure Management Centre of the Environmental Protection Bureau (DSPA), said that the management of electronic waste should be handled through regional co-operation in order to resolve the e-waste recycling issue in the city. Mr. Chan attended TDM radio programme Macau Forum yesterday and said that Macau discards about 7,000 to 10,000 tons of electronic

waste each year. “Macau lacks industrial infrastructure compared to the n ei ghb o u ri n g r egi o n s w h e r e a complete industrial chain of processing e-waste is set up. The wasteful items can [be deemed] useful or valuable,” Mr. Chan explained. The official stressed that the Bureau collects all kinds of e-waste, which have to be passed to recycling companies then transported to neighbouring regions for recycling. The Bureau is now drafting a tenyear plan for the management of solid waste in the city, Chan said.

He hopes the plan can help set up a target to reduce the amount of per capita disposal in the city. “Our target is to reduce the current amount of per capita disposal, from 1.97 kilograms in 2014, by three per cent,” he added.

Food waste

Meanwhile, Mr. Chan revealed that the Bureau is now working with the Food Safety Centre to provide food donation guidelines to local bakeries and supermarkets regarding donating unwanted food or products. “About 30 to 40 per cent of the city’s waste actually comes from restaurants,” Mr. Chan said. “Only 20 per cent of the city’s total waste can be recycled while 80 per cent has to be sent to the incineration centre. Currently, the city’s per capita waste disposal is 2.1 kilograms, which is higher than our neighbouring regions,” he concluded.

Business Daily Thursday, October 20 2016    3

Macau Infrastructure

Mixed signals A bigger border was planned to replace the Lotus border in Cotai in order to accommodate more people and vehicles. But recently new orders have been issued. The plan is being suspended until . . . Alex Lee*


he local government has decided to build a new border checkpoint in Cotai to replace the existing one, the Lotus Border, in order to allow more people and vehicles to cross. The project is simple. But it seems in Macau that simple tends to become quite complex. The unrelenting construction of new entertainment resorts in Cotai, the predictable growth of tourists - especially now that efforts are being made to make the mass market replace the VIP gaming on the casino floors which means more people – and the need to relieve pressure on the Border Gate during peak tourist dates sparked the new project. According to our sources, the new Lotus Border has been projected to deal with the same number of visitors as the Border Gate on the northern district of the Peninsula , which means around 300,000 border crossings a day. In addition, the new project is expected to house new vehicle-control stations for

local cars, given that vehicles with local plates will ostensibly be allowed to drive on Hengqin Island – a plan in the pipeline for some years - by the end of the year. Meetings between different security force bodies, including police, Immigration and

Customs have taken place to “allow all parties to have a say on the new facilities,” Business Daily was told. Despite a pre-study already being drawn up, the green light has turned yellow and the project put on hold sine die.

“The political changes on the other side of the border basically mean that we don’t have any interlocutor”, explains one of the sources with knowledge of the process. And Chinese authorities, says another person who also prefers not to disclose his/her identity, “have been pushing the idea of having one joint

border checkpoint for both sides whilst Macau’s Chief Executive prefers to maintain the separate waters”. The Land, Public Works and Transport Bureau (DSSOPT) told Business Daily yesterday that it does not have any information on the plans for a new border in Cotai. *With Nelson Moura

300,000 Number of people new facility projected to deal with on a daily basis

4    Business Daily Thursday, October 20 2016

Macau Opinion

Ashley Sutherland-Winch* Twitter’s wild ride The potential demise of Twitter is rapidly approaching but will the platform regain control of the social media world or fast become obsolete? Twitter is quickly becoming tech’s billion-dollar hot potato of the week with Salesforce being the most recent to decline buying the 140-character social media platform. This could open the door for a potential bid from Japanese telecom giant Softbank to acquire it and with Twitter still the most popular social media in Japan it contains valuable market data that may benefit the company. Shares of Twitter plunged by more than 5 per cent last Friday following reports from the Financial Times that SalesForce CRM, a customer relationship management software entity, had shelved its interest in acquiring the company. In early October, Twitter shares reached a yearto-date closing high with rumours of a bidding war on the horizon by giants like Google, Disney and Microsoft; but as each company’s interest began to wane, stock shares began to plummet. Since the company went public three years ago, it has struggled to show investors that it can attract new users - a big problem. Facebook currently reports having just over 1.7 billion active users, whilst Twitter has slipped from 313 million to 310 million. It is interesting that while the other large social media companies are maximising their exposure by constantly providing new features to engage their audiences and grow new demographics, Twitter is the slowest to keep up. In recent years, Twitter has allowed users to add photographs and video to their tweets with decreased character limits and added a live feed video feature but the platform remains largely gone unchanged since 2006. Facebook pretty much rules the world outside of Russia and Mainland China but slowly Instagram is steadily pushing Twitter out of the number 2 spot in many countries. Aside from the issue of active user growth stalling at a rapid rate, the company is struggling to make money but with ten per cent of revenue coming from sales of data collected within the platform Softbank’s interest is not a great surprise since Twitter still reigns supreme in Japan. Seen as both a strength and weakness in North America and Europe, Twitter’s 140 character-limit is very successful in Japan where the Kanji alphabet’s single character can represent a whole word. Regardless of which company ultimately acquires Twitter, the social media platform is having a wild ride, with the entire world watching what will happen next. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.


A walk in the park Ng Lap Seng has requested US authorities to loosen the conditions of his house arrest

Mr. Ng is currently awaiting trial in January of next year for the alleged bribery of an ex-president of the United Nations (UN) General Assembly, John Ashe, who was found dead in June from injuries resulting from lifting a barbell while on a bench. The businessman and his assistant, Jeff Yin, allegedly bribed Ashe with over US$500,000 in order to seek support from the global organisation to build a conference centre in the MSAR. The developer has secured a US$50 million bail bond with US$20 mil­ lion cash payment and by using his apartment as warranty. In addition, he is allowed to pay a security firm to guard him in his apartment instead of awaiting his trial under prison detention.

ocal real estate developer Ng Lap Seng - currently under house arrest in the US following charges of bribing a former official of the United Nations last year - has requested authorities there to permit him to go outside the house for some time during a week, according to US news outlet Newsday. The outlet reported that a lawyer working for Ng lap Seng has told a U.S. District Judge that Ng’s current house arrest in his US$4 million

(MOP32 million) apartment is causing the businessman ‘severe mental and physical hardship’ that could be reduced by outside trips. In his written request, Ng’s lawyer, Hugh Mo, stated that the ‘omnipresence of 24-hour security monitors in his apartment’ were causing his client distress, and asked for permission for outside walks under security team surveillance. Mr. Ng’s lawyer asked for the developer to be allowed one day a week ‘to walk in a park, to dine at a restaurant, to shop, to visit a museum’ in order to ‘relieve the stresses of home confinement’, the news outlet quoted.

Profit warning

Real estate Yuexiu Property expands territory in Mainland

All rented out

Big developer expands land bank

Nelson Moura


Equipment rental company sees less profit in the local market The city’s former largest construction equipment rental company - AP Rentals Holdings Limited - has announced a profit warning for the five months ending August 2016, according to a filing with the Hong Kong Stock Exchange. The group expects to see a 65 per cent yearon-year decrease in profits for the period, primarily attributable to its operations in Macau. The group noted a drop of about 18 per cent in revenue during the period, described as due to ‘the decrease in rental income from machinery in Macau which is due to the slowdown of business in Macau that the group has experienced since October 2015’. In the group’s most recent annual report, it notes that it has already begun transferring ‘some of the fleet equipment’ to projects in Hong Kong due to underutilisation caused by ‘the slowdown in the local construction industry recently’ and a ‘changing market environment’. According to the report, the Macau market made up 18.1 per cent of the group’s business, with the remainder coming from Hong Kong. Total revenue for the full 2015 year, ended March 31 2016, amounted to HK$239.3 million (US$29.8 million) with net profit amounting to HK$20.9 million; rental income from the two SARs amounts to HK$171.8 million for the fiscal year. Rental income amounted to approximately 71.8 per cent of the group’s total revenue for the period. K.W.

Yuexiu Property Company Limited is expanding its land bank in Mainland China through a RMB430.5 million (MOP510 million/US$63.85 million) acquisition in Hubei Province in central China, according to a filing with the Hong Kong Stock Exchange. The property, located in Wuhan City, occupies 55,837 square metres at about RMB7,700 per square metre. The land parcel is for commercial and urban railway transportation use and adds to the company’s total land bank of about 13.7 million square metres. ‘The Board believes that the Wuhan Wuchang Zhongbei Road Land Parcel is acquired by the Company for the

purpose of absorbing quality land bank appropriately under the strategy of Focus on three core regions, namely the Pearl River Delta, Central China and Yangtze River Delta,’ states the filing. Yuexiu Property Company is one of the four listed companies of parent company Yuexiu Group, which operates in finance and securities, real estate, transport and infrastructure. The group operates in the MSAR real estate sector via a subsidiary. In addition, the group operates a branch in Macau of Chong Hing Bank Limited, in which it acquired a 75 per cent equity interest, purchased in 2014. K.W.

Business Daily Thursday, October 20 2016    5

Macau Judiciary

Prosecutor: Judicial co-operation should be enhanced for anti-money laundering The Prosecutor-General says the city cannot do its best to combat money laundering without regional judicial co-operation


he ci ty m a y n e e d t o further consider judicial co-operation with nearby as well as overseas jurisdictions in order to better combat money-lanudering in the city, said Prosecutor-General Ip Song Sang at the opening ceremony of the 2016/17 Judicial Year yesterday. The Prosecutor-General noted local authorities have found difficulty in their investigations into moneylaundering cases involving activities in Mainland China or overseas, as local bodies are not be able to get evidence from outside the MSAR. He pointed out that that 346 moneylaundering cases were submitted in the past two judicial years but only two have been successfully prosecuted. He believes that the MSAR should consider amending its current laws in order to strengthen judicial cooperation with other jurisdictions. According to the ProsecutorGeneral, the Macau Prosecutions Office opened files for 13,964 criminal cases in the 2015/16 Judicial Year, which is down 3.3 per cent yearon-year, whilst it closed 17,335 cases, an increase of 22.8 per cent year-on-year. M ea n w hi l e, th e i n c u m b e n t Prosecutor-General indicated that the arrest of his predecessor, Ho Chiu Ming, for alleged corruption reflects

that the city strictly enforces the Basic Law. “The investigation of former Prosecutor-General Ho Chio Meng’s case and the subsequent judicial proceedings shows that Macau strictly implements and enforces the Basic Law,” he said. The former Prosecutor-General was arrested for allegedly colluding with local businessmen for advantages in February of this year, since when he has been held in custody. However, the president of the Macau Lawyers Association (AAM), Jorge Neto Valente, expressed his disappointment at the lack of transparency of the case on the sidelines of the ceremony. “It’s sad that there has been no information about the accusation being made public after the arrest of such a high-level official,” he said. “Especially authorities have said that every [accusation] was already proved and that they have all the evidence.”

Preventing gaming crimes outside casinos

Meanwhile, the president of the Court of Final Appeal, Justice Sam Hou Fai, said in his speech that the city should prevent gaming-related crimes from occurring outside local casinos. He perceives that the increase in the number of illegal gambling and

Prosecutor-General Ip Song Sang speaks at the opening ceremony of the 2016/17 Judicial Year

detainment cases, up 38 per cent year-on-year to 697 on the previous judicial year, reflects that the criminal trend is expanding outside gaming venues. He urged the city to halt the trend in a timely manner otherwise it would result in negative impacts on the city’s gaming industry. On the other hand, the president of the top court expressed his hope that the government and legislature could amend the city’s justice framework

law in order to improve the city’s jurisdiction. “The court cannot solve everything, but the judicial process is the last means to resolve legal disputes,” president Sam said. “The judicial proceedings are costly and time consuming. Therefore, it is not the only way to resolve all disputes. There is space for improvement in the Macau judicial system, in addition to its operation and management,” he added.

6    Business Daily Thursday, October 20 2016

Macau Economy

Retail returns a mixed bag More restaurants and retailers report bad business performance for the month of August Cecilia U


n the month of August, 61 per cent of 167 interviewed restaurants and similar establishments revealed that they had registered year-on-year growth in their receipts, indicating an increase of 18 percentage points compared to the previous month, according to the latest official data released yesterday by the Statistics and Census Services (DSEC). However, 61 per cent of restaurants said that their receipts had decreased year-on-year, with 94 per cent of the interviewed Japanese and Korean restaurants and 79 per cent of the Western restaurants seeing their turnover fall compared to one year ago. Meanwhile, some 20 per cent of the interviewed restaurants indicated an unsatisfactory performance in August, down 14 percentage points vis-à-vis the data in July. Chinese restaurants reported better performance in the month of August, however, with 30 per cent claiming a year-on-year increase in their receipts. In the retail trade, DSEC data reveals only 26 per cent of 135 interviewed retailers said their sales grew in August compared to the same period last year, indicating a similar pattern to that of July. Around 70 per cent of the retailers reported a bad performance compared to the sales of last year’s August, up 4 percentage points month-on-month. In particular, bad performance is significant in the sales of motor

vehicles, with 78 per cent of retailers reporting their sales had dropped by more than 20 per cent.

Outlook for future performance

In general, only 15 per cent of restaurants anticipate an increase in their receipts for September, with 47 per cent expecting a decline in

receipts and 38 per cent foreseeing stable performance. The official data indicates that 87.5 per cent of restaurants engaged in providing Japanese and Korean cuisine were expecting a bad performing September, with none of the restaurants having an optimistic outlook. Retailers, meanwhile, remained cautious about their business prospects, with 57 per cent of retailers expecting declining business, while some 26 per cent believe their sales

will remain unchanged from the previous month. Official data also shows 17 per cent of retailers anticipate increased sales in September, posting a month-onmonth increase of 2 percentage points. Retailers engaged in the motor trade, in particular, anticipate a bad performance in September, while 60 per cent of retailers involved in leather production expect increased sales.


Commercial real estate loans double in August New approvals of residential mortgages also recorded an increase in the month Kam Leong

The new approvals of mortgage loans by local banks jumped in August; in particular, those of new commercial real estate loans recorded a notable increase of 111.4 per cent

month-on-month to MOP7.4 billion (US$925 million) in the period, the latest official data released yesterday by the Monetary Authority of Macau (AMCM) reveals. In the month, 87 per cent of the new approvals of commercial real estate loans were granted to local

residents, amounting to MOP7.3 billion, increasing 231 per cent month-on-month, whilst those to non-residents plunged 88.9 per cent month-on-month to MOP145.5 million. On a year-on-year basis, the total amount granted for commercial loans represents a decrease of 23.6 per cent, due to residents dropping by 23.5 per cent year-on-year even though non-residents registered


Distinguished circuits University of Macau sees technology laboratory top Asia for papers accepted in ‘Chip Olympics’ The University of Macau (UM) State Key Laboratory of Analogue and Mixed-Signal VLSI was ranked top in Asia and third best in the world in terms of the number of papers accepted for presentation at the 64th International Solid-State Circuits Conference (ISSCC) of the Institute of Electrical and Electronics Engineers, widely known as the ‘Chip Olympics’. The UM lab shares first place in the Asian ranking with the Korea Advanced Institute of Science and Technology (KAIST) of South Korea, both with six papers accepted by the ISSCC, followed by Pohang University of Science and Technology and Samsung Electronics with five papers accepted. Meanwhile, the Hong Kong University of Science and Technology (HKUST) and Chiao Tung University

in Taiwan occupied third position in the region, with four papers. In global terms, the UM lab ranks third with KAIST, Delft University

of Technology from the Netherlands and Columbia University and the University of Texas in the US. Established in 2010, the UM lab focuses on the research and development of integrated circuits and has ‘repeatedly achieved good results in the field of microelectronics, maintaining a leadership position and a competitive edge over HKUST,’ the University said in a press release. N.M.

an increase of nearly 80 per cent year-on-year. In addition, local banks’ approvals of residential mortgage loans grew by 6 per cent month-on-month to MOP3.7 billion in August. Compared to the same month last year, the amount fell by 33.6 per cent. Of the total housing mortgages granted, those to residents accounted for 95.6 per cent at MOP3.5 billion, suggesting a growth of 3.2 per cent. Meanwhile, those to non-residents surged 156.5 per cent month-onmonth to MOP164 million. AMCM explained that the growth is due to ‘a lower comparison base in the previous month’. On the other hand, approvals of equitable mortgages, which refers to new residential mortgages collateralised by uncompleted units, registered an increase of 26.9 per cent month-on-month in August, at MOP296.8 million. In particular, those to residents, accounting for 98.8 per cent of the total, soared 32.3 per cent month-on-month to MOP293.3 million. As at the end of August, the outstanding value of residential mortgages amounted to MOP177.9 billion, a slight increase of 0.4 per cent month-on-month, or a growth of 5.3 per cent year-on-year. Meanwhile, that of commercial real estate loans was up slightly by 0.2 per cent month-on-month, or by 13.1 per cent year-on-year, totalling MOP170 billion. Meanwhile, the delinquency ratio for housing mortgages stood at 0.15 per cent at the end of the month, up 0.03 percentage points monthon-month. The ratio for commercial mortgages jumped 0.07 percentage points month-on-month to 0.11 per cent.

Business Daily Thursday, October 20 2016    7


Crown crackdown

Fitch: China VIP risks for casino operators Imperial Pacific is facing more risk than its peers, while Crown Resorts has had 18 of its employees detained in China, says the rating firm Kam Leong*


ating agency Fitch warns that China’s detainment of 18 employees of Australian casino operator Crown Resorts Ltd. highlights the risks that global casino operators are facing in their businesses related to Chinese high rollers. ‘The detainment is a sign to Fitch that high roller gambling by the Chinese nationals outside of China remains top of mind for Chinese authorities,’ the agency wrote in a note on Tuesday. Among global players, the firm notes that those from Asia Pacific - in particular, Crown and Imperial Pacific (a Hong Kong-listed casino investor in the island of Saipan) – are likely to be more at risk. ‘Fitch believes the risks related to the more recent detainment (namely, reduced VIP volume) to be more applicable to [Asia Pacific] casino

operators outside of Macau,’ it said. ‘Crown and Imperial Pacific are more at risk, although their IDRs [Issuer Default Ratings] have factored in the risk related to the companies’ respective VIP business, which tends to be opaque’. Currently, Fitch has assigned a rating of BBB to Crown’s IDR, in addition to an expected rating of B (EXP) to Imperial Pacific, which refers to good credit quality and highly speculative, respectively. The rating firm added Crown could see ‘volatility in its VIP programme play over the next 24 months,’ although it believes the strength of its local mass markets continues to support its financial profile. For Imperial Pacific, the business model of which focuses on Chinese V I Ps, ‘a ti ght e n e d o p e rati n g environment in China could potentially have serious credit implications,’ Fitch noted. ‘In early 2015, China publicly condemned casino operators in

neighbouring countries targeting Chinese nationals. The comment is widely believed to exclude Macau,’ the firm noted.


According to a person familiar with the government’s move to detain 18 of the Melbourne-based company’s employees, Chinese authorities warned Crown Resorts last year to halt its efforts to attract high rollers from the Mainland to gamble overseas. China confirmed on Monday that staff members of Crown were being held in Shanghai for alleged gambling-related crimes, a development that sent the company’s shares plunging. Crown was among companies that received warnings after China arrested employees last summer at Korean casino operators Paradise Co. and Grand Korea Leisure Co., according to the person, who asked not to be identified because the probe is confidential. Following the warning, Chinese authorities observed that Crown had senior executives make short business trips to China instead of spending long periods in the country,


Studio City VIP table application awaiting DICJ decision The Gaming Inspection and Co-ordination Bureau (DICJ) has confirmed to Business Daily that it is analysing the application submitted by gaming operator Melco Crown Entertainment Ltd. to install VIP tables in the group’s Studio City However, in its response, the DICJ stated Melco Crown hadn’t specified ‘if they want to [get] new tables or move existing ones from other properties’. In previous statements, the CEO and Executive Director of the company, Lawrence Ho Yau Lung, hoped the Macau Government would authorise 30 VIP gaming tables for Studio City in order to improve the results of the casino resort, Business Daily has reported. The company’s Chief Operating Officer, Ted Chan, said recently that two-thirds of the VIP tables that Studio City is to get would be allocated to junket operators; namely, Tak Chun Group and Suncity Group. Questioned by Business Daily, junket operator Tak Chun Group stated it was ‘considering’ managing VIP

tables if the DICJ approves Melco Crown’s application, while Suncity Group said it was ‘awaiting confirmation by Melco Crown’ that the application is successful prior to proceeding with any operation. Last year, Melco Crown was

allocated 250 tables by the DICJ for installation in Studio City. Currently, the MSAR Government has a live dealer table cap of three per cent compound annual expansion until end-2022, from a base of 5,485 tables recorded at the end of the fourth quarter in 2012. Business Daily has also enquired of the gaming operator about the process of its application but had received no reply before this story went to press. N.M.

the person said. They also noted that the company shifted its marketing activities to focus more on resorts rather than casinos, the person said. Authorities don’t perceive those actions as amounting to a material change in Crown’s activities, the person added. Chinese Ministry of Foreign Affairs spokeswoman Hua Chunying declined at a briefing in Beijing on Tuesday to provide details about the cases against Crown or its staffers and referred questions to Shanghai police. The city’s public security bureau didn’t immediately respond to a faxed request for comment.

‘Break the Chain’

It hasn’t been possible to contact those in custody. Detention and charges would not automatically lead to prosecution. Australia’s Foreign Minister Julie Bishop said Tuesday that officials from her department had visited two Australian Crown employees detained in China and had requested to meet with a third as soon as possible. The action against Crown is part of a broader effort by Chinese authorities to curtail overseas gambling. The nation’s leaders have linked those activities to corruption, moneylaundering and domestic instability, particularly because many Chinese gamblers who have gone broke were small business owners. Police had been investigating Crown for several months as part of an operation targeting gambling-related activities dubbed ‘Duanlian’ - ‘to break the chain’ with the goal of terminating personal and financial links between foreign casino operators and Chinese clients, according to the person familiar with the case. The probe is focusing on whether the company enticed Chinese nationals to gamble in Australia, as well as if it used an illegal settlement network or other underground banking services to transfer money out of the country, the person said.

Arrested Korean employees released

In June last year, Chinese authorities detained 13 casino employees from South Korea for illegal gaming activities. ‘The fallout on Korea’s casino operations is hard to ascertain since VIP volumes had declined prior to the detainment, likely due to the broader corruption crackdown in China, and have stabilised since,’ Fitch indicated in its note. But all of the employees from the Korean casino operators arrested have now been released. Six Paradise employees who were arrested have been set free after serving jail time, a company spokeswoman said on Monday. Of Grand Korea’s seven jailed employees, three were released in August and four on Monday, its spokesman said on Tuesday. With Bloomberg

8    Business Daily Thursday, October 20 2016

Greater China  Portfolio

More gains amid sell-off When investors were fleeing Chinese shares at the start of the year, Samir Mehta, a senior fund manager at JO Hambro Capital Management, was heading in the opposite direction Jonathan Burgos


he self-described “contrarian” investor added to holdings of companies including casino operator Sands China Ltd. and technology firm Tencent Holdings Ltd. amid the selloff. Mehta took the share of his portfolio invested in China to 32 per cent at the end of last month from 20.5 per cent a year earlier. The strategy paid off as Hong Kong’s Hang Seng Index, where many of the stocks are listed, has gained 6.5 per cent year to date. Mehta’s Asia ExJapan Equity Fund has returned 15 per cent, beating 88 per cent of its peers. “People were very pessimistic and remain pessimistic on China,” the 49-year-old Mehta said in an interview at the Fullerton Hotel in Singapore after meeting with clients. “That’s usually the best time to buy.” Mehta jumped into the market early this year when economic growth slowed and a surprise devaluation of the yuan rattled investors. While Asia’s largest economy has since stabilized and the hard landing anticipated by many hasn’t occurred, many investors remain cautious about the outlook. Gross domestic product rose 6.7 per cent in the third quarter, data released Wednesday showed, the same as in the previous two periods and in line with analysts’ forecasts.

Beijing Capital International Airport Co. amid the selloff, as well as cyclical stocks in property, insurance, oil, steel and cement. After falling 36 per cent from a high in April 2015 to a low on Feb. 12, the Hang Seng Index has since rallied 28 per cent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong is up 29 per cent from this year’s low, also on Feb. 12. More than a quarter century of living through several financial and economic rises has helped Mehta, who was chief investment officer at Lloyd George Management from 1998 to 2007, and his co-fund manager, Cho Yu Kooi, refine their approach, he said. In the core part of his portfolio, which makes up 75 to 80 per cent of the fund, the aim is to own long-term sustainable growth businesses with good cash flows

and high and sustainable margins, said Mehta. “Patience is an important ingredient. If we don’t make a mistake, we would like to own the business for three to five years or longer.” The rest of the portfolio is allocated to cyclical stocks, where Mehta said he tries to adopt a contrarian approach to risk perceptions. He looks for companies with low valuations and little or no debt. “If we’re wrong on the cyclical risks when we buy the stocks, they are trading at such low multiples that the risk of losses, although real, is not extreme.”

Sands China

His winning picks haven’t been restricted to China, with data compiled by Bloomberg showing him starting to buy Thai Beverage Pcl in the first quarter. Mehta said in July that he bought the brewer, whose share price has surged 34 per cent since the end of March, because of its decent cash flows and restructuring prospects that could benefit minority shareholders. Mehta started adding to his stake in Sands China Ltd. amid a slump

in gambling driven by President Xi Jinping’s crackdown on graft. JO Hambro owns 7.4 million shares in the casino operator controlled by billionaire Sheldon Adelson from 466,000 a year ago, according to data compiled by Bloomberg. Macau reported its first monthly gain in gaming revenue since 2014 in August and Sands China is up 30 per cent this year, the third-best performance of the six companies on the Bloomberg Intelligence Macau Gaming Index. The Macau casinos have become more focused on recreational gamblers and are broadening their appeal to families after the anti-corruption campaign deterred high-rollers, said Mehta. “We picked Sands China over other casinos because the company’s management is very experienced. Their balance sheet is decent and the dividends are high.” While acknowledging risks such as the build-up of debt and deflationary tendencies in China, Mehta says things are now starting to look up for the world’s largest economy. “I’m not saying China is growing fast and furious and back to the glory days,” he said. “But relative from where we were last year, things are better.” Bloomberg

Tech Stocks

The country’s technology stocks “remain hot” and the worst is over for Macau casinos, Mehta said before China detained 18 Crown Resorts Ltd. employees. He said he’s unlikely to increase his Chinese holdings further as he’s now heavily invested there. Mehta said he also bought Weibo Corp. and

Financial stability

China Construction Bank eyes more than 50 debt-to-equity deals China Construction Bank Corp. said it had approached more than 50 companies that could convert debt to equity as part of the nation’s efforts to tame an explosion in corporate leverage that poses risks for financial stability. The bank assessed the firms’ debt levels, industry indicators, and the strength of their relationships with Construction Bank, said Zhang Minghe, who is leading the bank’s swap program, called “Spring Rain.” The companies include state-owned enterprises and private firms in industries from steel to coal, Zhang said at a briefing in Beijing on Tuesday. The banker was commenting after Construction Bank in the past week announced deals with Wuhan Iron Steel Group and Yunnan Tin Group, worth more than RMB34 billion (US$5 billion) and aimed at cutting leverage. Zhang said that the approach laid out by the government for the debt-to-equity initiative had avoided what bankers would be “most scared of” -- deals where the state was matchmaker.

Zhang said it was difficult to forecast how big the program would get, because it was market-oriented, rather than being subject to a government quota. In the Yunnan Tin deal, a Construction Bank unit is raising money from investors to buy RMB10 billion of loans extended by other lenders, according to the bank. None of the debt is non-performing.

Pension Funds

The unit gets stakes in Yunnan Tin subsidiaries, with the expectation of eventually being bought out. The investors, which include insurers, pension funds, and private-banking clients, may get returns of between 5 and 15 per cent annually over five years, without any guarantees, according to the bank. Debt-to-equity swaps involving companies abroad that have borrowed from Chinese lenders are also possible, according to Zhang. Construction Bank, which is China’s second-biggest lender, plans to set up a specialized “execution agency,” for

debt-to-equity swaps, Zhang said. Banks can’t convert debt into equity directly, and instead must work through such execution agencies. Chinese policy makers are stepping

up their fight against excessive leverage, with the cabinet last week releasing guidelines for reducing corporate debt and swapping debt for equity. Bloomberg News

Business Daily Thursday, October 20 2016    9

Greater China Oil output

In Brief

Mainland oil majors continue record-setting output cuts in Sept


Stocks little changed as economy stablising

Second biggest decline y-o-y decline in crude output sign that drillers efficiency drive could rebalance oversupplied international market Meng Meng and Chen Aizhu

China’s crude oil output fell 9.8 per cent in September from a year earlier in the second-biggest year-on-year decline on record, government data showed, with major producers continuing to shut high-cost wells to rein in spending. Domestic crude output dropped to 15.98 million tonnes, or 3.89 million barrels per day (bpd), near the lowest in six years on a daily basis, National Bureau of Statistics data showed on Wednesday, reflecting both spending cuts at oil fields and the closure of old wells. The sharp decline, following a record 9.9-per cent drop in August, is the latest sign that a prolonged efficiency drive by drillers in one of the world’s top five producers may help to rebalance the oversupplied global market. “Overall, low oil (prices) offer a good excuse or reason for Chinese firms to finally shut down those high-cost fields, which were previously operating with little concern over cost,” said Tee Sengyick of consultancy SIA Energy.

Daqing, China’s largest oilfield by output and one of its oldest, as well as Shengli in the eastern province of Shandong, are considered some of the nation’s most inefficient fields and have drawn the most scrutiny among producers in their output cuts.

Stable times

Those curbs have come as international oil prices have stabilised amid hopes that OPEC members will agree output cuts. Prices are hovering around US$52 a barrel after recovering strongly so far this year, but are still down more than 50 per cent since mid-2014 and upstream companies are still struggling to make a profit. China National Petroleum Corp’s (CNPC) president Wang Yilin earlier this month promised to adjust the company’s crude output plan to reduce “inefficient output” in the fourth quarter, the company’s official newspaper reported. Sinopec Oilfield Services Corp, a listed unit of CNPC’s upstream business, has forecast a nine-month net loss of

RMB8.9 billion (US$1.3 billion) due to low prices and weakness in the sector. This low production partly contributed to record high imports in September, with the robust intake seen extending to year-end as domestic output falls and strategic reserve storage capacity is expanded at newly opened sites. China processed 43.8 million tonnes of crude, or 10.658 million (bpd), in September, up 2.4 pct on a year earlier, the government data showed on Wednesday. In the first nine months, crude oil throughput rose 2.1 per cent from a year ago to 399.93 million tonnes, or 10.655 million bpd. China’s natural gas production for September rose 0.1 per cent from a year earlier to 10.2 billion cubic metres. Reuters


China Sept property investment and sales quicken, new construction slips Real estate growth contributes to economic expansion but real estate developers stay cautious September’s investment in Chinese real estate showed its strongest growth since May as booming construction, sales and prices contributed handsomely to third quarter economic expansion of 6.7 per cent - offsetting stubbornly weak exports. Property investment rose 7.8 per cent in September from a year earlier, compared with 6.2 per cent in August, according to Reuters calculations based on data issued by the National Bureau of Statistics (NBS) on Wednesday. But real estate developers may have become more cautious of taking on new developments, fearing a fall in sales momentum if the government imposes more tightening measures to prevent a property bubble, analysts say. New construction starts fell 19.4 per cent in September month, suggesting sentiment among builders may have already started to cool. “Today’s data showed developers are relatively cautious on new projects, because land has become rather expensive now, and such a strong sales momentum might not be sustainable moving forward,” said Wang Tao, chief China economist at UBS. More than 20 cities have adopted restrictive measures, including higher mortgage downpayments and an immediate ban on second-home purchases, to prevent speculative buying that could further fuel price bubbles. Most of these measures, however, were implemented during China’s national holidays over the first week of October, and were yet to be reflected in Wednesday’s NBS data. Wang said that the sharp decline in new construction starts in September was also due to high base number from the previous year, noting that the number is highly volatile. “The developers might have quickened the pace for investment, to finish the existing projects since sales performance was so great,” Wang said.

For the first nine months of the year, property investment grew 5.8 per cent, accelerating from 5.4 per cent in the first eight months. In September alone, the area of property sold grew a vibrant 34 per cent, Reuters calculations show, compared with 19.8 per cent in August.


Property sales by floor area in the first nine months grew 26.9 per cent, up from 25.5 per cent growth in January-August. But overheating in some parts of the property market over recent months has become a serious concern for policymakers. Housing prices in tier-1 and some tier-2 Chinese cities soared 27 per cent on-year in July and 28 per cent in August marking the second bout of housing fever this year, according to a UBS report. Some analysts noted that the sharp price rises reflected a rush to buy in anticipation of new ownership restrictions being introduced. Yet with policies set to curb prices and demand being withdrawn earlier, analysts expect sales momentum to gradually decelerate, while relatively high investment growth could be expected to last until year-end. “I think property investment will be able to support the economy in the

next two months, but after that the supportive effects will be smaller,” Wang said, adding that the government would increasingly rely on infrastructure investment next year. Sheng Laiyun, a spokesman for the National Bureau of Statistics, said the property sector contributed 8 per cent to China’s GDP growth in the first nine months of 2016, which came in as expected at 6.7 per cent. He said recent property market tightening measures would not have a “very big impact” on economic growth.

Key Points China Jan-Sept property investment +5.8 pct y/y Sept only +7.8 pct y/y - Reuters calculations Jan-Sept sales +26.9 pct by floor area, Sept only +34 pct New construction growth slows significantly from August Although growth in inventories has been on a downward trend as speculative buying spilled over from bigger cities to lesser-known, lower-level centres, huge inventories of unsold homes continue to weigh on prices in many smaller centres. Growth in inventory floor area last month was 4.7 per cent higher than a year earlier, compared to 6.9 per cent in August. Reuters

China stocks were little changed on Wednesday after data showed the Chinese economy is stabilising, as expected. There was little surprise from China’s third-quarter gross domestic product (GDP) data. The economy grew 6.7 per cent from a year earlier, steady from the previous quarter, as increased government spending and a property boom offset stubbornly weak exports. “The upshot from today’s data is that economic activity seems to be holding up reasonably well, with few signs that a renewed slowdown is just around the corner,” wrote Julian Evans-Pritchard, China economist at Capital Economics. Growth rate

Mainland’s industrial output expands 6 pct in Jan.-Sept. China’s industrial output expanded 6 per cent in the first three quarters of 2016, thanks largely to strong performance in the high-tech and equipment manufacturing sectors, official data showed Wednesday. The growth rate was unchanged from that posted for the first half of the year, the National Bureau of Statistics (NBS) announced. Industrial output, officially called industrial value added, is used to measure the activity of designated large enterprises with annual turnover of at least RMB20 million (US$2.97 million). Exclusion

WTO members should ensure Chinese companies’ right of defence Members of the World Trade Organization (WTO) should comply with WTO rules and ensure Chinese companies’ right of defence while imposing trade remedy measures, an official said Tuesday. In a preliminary ruling made by the European Commission earlier this month, anti-dumping duties will be imposed on imports of hot-rolled steel from China for six months, with the exclusion of tool steel and high-speed steel products. The exclusion was the result of the defence put forward by Chinese steel and cutting toolmaker Tiangong International Co., but will also be enjoyed by other manufacturers of those products, Shen Danyang, spokesperson of the Ministry of Commerce, told a press conference. As there will be half a year before the announcement of the final ruling, Shen said Chinese companies should make continued efforts to defend themselves. Investment

FAI Investment edges up China’s fixed-asset investment (FAI) in the first nine months grew 8.2 per cent year on year, slightly up from the 8.1 per cent registered during the January-August period, official data showed Wednesday. In September, FAI rose 9 per cent year on year, accelerating from 8.2 per cent in August and 3.9 per cent in July, as the country boosted infrastructure spending to stabilize economic growth, according to data from the National Bureau of Statistics (NBS). Infrastructure investment expanded 19.4 per cent in the first nine months, while FAI in the industrial sector climbed 3.2 per cent during the period, up from 2.9 per cent in the first eight months.

10    Business Daily Thursday, October 20 2016

Greater China M&A

Shanghai electric power nearing deal to buy K-Electric Shanghai Electric Power Co. is nearing a deal to acquire a controlling stake in Pakistani utility K-Electric Ltd. from buyout firm Abraaj Group, people familiar with the matter said Dinesh Nair, Faseeh Mangi and Vinicy Chan


he state-backed Chinese company has been in exclusive negotiations to buy Abraaj’s 66 per cent stake in the US$2.4 billion power generator, the people said, asking not to be identified as the information is private. A formal agreement could come as early as this week, though the timing is still fluid, the people said. Pakistani regulations would require Shanghai Electric Power to make a mandatory offer to minority shareholders of K-Electric, according to the people. Negotiations are on-going and talks could still falter, the people said. A deal to buy out all of K-Electric would be the biggest acquisition in Pakistan for at least a decade as well as Shanghai Electric Power’s biggest overseas purchase, according to data compiled by Bloomberg. Shanghai Electric Power emerged as the lead bidder for the stake last month after submitting the highest offer, people familiar with the matter said at the time.

knowledge of the matter said in August. A representative for K-Electric didn’t answer calls seeking comment. Calls to Shanghai Electric Power’s office went unanswered, while a representative for Abraaj declined to comment.

Chinese companies have announced US$10 billion of overseas utility acquisitions this year, up from US$24 million during the same period in 2015, according to data compiled by Bloomberg. State Grid Corp. of China agreed in July to buy a US$1.8 billion stake in Brazilian power distributor CPFL Energia SA, the data show. Beijing Enterprises Holdings Ltd. reached a deal in February to acquire Germany’s EEW Energy from Waste GmbH for 1.44 billion euros (US$1.58 billion).

Shanghai Electric Power said in a Sept. 30 exchange statement it hired advisers to conduct due diligence on K-Electric and was still negotiating on the potential purchase. The company hasn’t yet received any notice of entering exclusive talks, and the deal still involves substantial uncertainties, according to the statement. The Chinese company said in a separate filing in August that it was doing preliminary preparation work to buy a stake in K-Electric. K-Electric, formerly known as Karachi Electric Supply Co., serves more than 2.2 million customers in and around the Pakistani city and employs nearly 11,000 people, according to its website. Bloomberg

Overseas Utilities

K-Electric had also drawn interest from Chinese clean-energy group Golden Concord Holdings Ltd., French utility Engie SA and at least one investment fund, people with


VW challenges sister brand Audi with new China-only model New sedan hopes to change brand’s image from mass market to luxury Jake Spring

Volkswagen (VW) will launch a top-end sedan in China on Friday that will compete directly with sister brand Audi and is aimed at buyers looking for luxurious yet less-flashy cars amid a nationwide crackdown on conspicuous consumption. Chinese President Xi Jinping’s sweeping war on deep-seated graft and extravagant lifestyles since assuming power almost four years ago has made the country’s consumer more wary about displaying wealth when buying anything - from fancy cars to designer handbags and fine wines. Volkswagen hopes the Phideon, a luxury-style sedan from a brand that has a mass-market image unlike automakers such as BMW or Mercedes-Benz, will help it cash in on buyers’ sentiments and drive sales in China - the world’s top auto market. “Shiny, blingy showing-off is no longer the behaviour in the (larger) cities,” said Holger Santel, vice president of sales for SAIC Volkswagen, VW’s joint venture with SAIC Motor . Customers are increasingly saying “I don’t want Audi, Benz, BMW. I don’t want to

show off.” VW di s p l a y e d th e Phi d e o n alongside Audi’s A6 sedan, BMW’s 5 series and Daimlers’ Mercedes-Benz E-Class at a media event in Shanghai, indicating it expects the Phideon to compete with these German luxury marques. “We definitely believe that our models are positioned in their own market segments,” an Audi spokesman said, adding Audi does

not comment on VW models as a matter of policy. Audi first rose to prominence in China as the vehicle of choice for government officials and some of its association with government excesses persists to date. The Audi A6 has a flashier price tag than Phideon but could cost the same after dealership discounts, auto experts say.

Phideon’s fate

VW, which is still associated with its low-end Santana sedans that have dominated the Shanghai taxi market

for decades, will not offer discounts or push sales volume targets on the Phideon model to keep the focus on quality, Santel said. Phideon is the second flagship sedan experiment for VW after the Phaeton, a global model in the same class as the Audi A8, that was discontinued earlier this year after it failed to meet sales targets in its roughly 13 years of existence. The smaller Phideon differs in that it is being launched as a China-only model, but a VW spokesman said the firm does not rule out exporting to other regions in the future. Phideon’s fate will depend on its price, said Yale Zhang, the managing director of consultancy Automotive Foresight. Ford’s launch of Taurus as a flagship sedan for China last November was a success, with its sales outstripping that of its entire Lincoln luxury brand in the first half of 2016, according to data from consultancy JATO Dynamics. But the Phideon’s RMB359,000 (US$53,273.58) starting price is roughly RMB100,000 yuan more than the Taurus and according to Zhang there is a risk the VW sedan could find a similar reception as the expensive Phaeton. Zhang predicts sales of 1,000-2,000 Phideons annually. Reuters

Business Daily Thursday, October 20 2016    11



Black shirts bright spot in Thai economy as mourning for king begins Orathai Sriring and Khettiya Jittapong


hais are crowding shopping malls and department stores to stock up on black clothes, as they begin a year of mourning for beloved King Bhumibol Adulaydej that could end up dampening consumption in Southeast Asia’s second-biggest economy. The rush on retail outlets such Japan’s Uniqlo, Tesco Lotus and BigC is in sharp contrast to thinning crowds at Bangkok’s cinemas, coffee shops and usually bustling bars since the king died on Thursday after a long illness. “Demand is overwhelming and black T-shirts were sold out within half an hour,” said a sales representative at Uniqlo’s flagship store in Bangkok’s upmarket Central World mall. “Many customers bought a dozen of them and we can’t limit the number of goods that they wanted to buy.” The government has announced a year of mourning, and is encouraging people to curtail festivities such as weddings and other events during the first 30 days, which could put a crimp in consumption. But the government does not expect the economy to need any additional stimulus measures as a result of any slowdown in economic activity during the year ahead, Deputy Prime Minister Somkid Jatusripitak said on Wednesday. “There is no need for any stimulus measures,” he said. “There is nothing to worry about... we must be confident in our country’s potential.” Previously announced economic measures, including cash handouts for low-income people, should help maintain economic momentum, Kobsak Pootrakool, a vice minister in the Prime Minister’s Office, said after Tuesday’s cabinet meeting. T o u r i s m M i n i st e r K o b ka r n Wattanavrangkul does not expect much of an impact on tourism, but “the mood and tone might be different”, she told Reuters. “We’re still welcoming tourists to share this precious moment with Thailand.”

Events business

Some hotels could see a drop-off in their events business. Ronnachit Mahattanapreut, senior vice president for finance at Central Plaza Hotel Pcl, told Reuters some seminars and conferences have been put off or cancelled and the company is negotiating with customers about postponing events. Karaked Sanamchai, manager at Sirichai Wholesale Centre, which supplies beer and alcoholic beverages in suburban Bangkok, said orders for

alcohol drinks have dropped around 20-30 per cent in the past week. Bars in Bangkok’s Patpong, a popular night market and red light district, are largely empty these days. “Usually there is joy with music and fun, but now the atmosphere has turned to sadness. It’s never been like this before,” said bartender Kwanmongkol Buttima at a bar in the area. The media sector is also likely to take a hit. The broadcast and telecommunications regulator has ordered TV and radio stations to refrain from broadcasting entertainment programs during the initial 30-day mourning period. Advertising spending will likely slow down from the fourth quarter into the first quarter of 2017, media analysts say. Cinema operators, such as Major Cineplex, may also be affected as Thais stick to home.

“Demand is overwhelming and black T-shirts were sold out within half an hour.” Sales representative of Uniqlo’s flagship store in Bangkok

Significant tourist impact

“To be honest, cancelling parties and celebration activities will hit the entertainment business and the tourism sector,” said a head of research at a Thai stock brokerage who declined to be named, given sensitivities around the monarchy. “The impact on tourism should be significant drag on the economy because tourism is one of a few drivers now,” he added. Thailand, with its beaches, Buddhist temples and infamous night life, had expected a record of 33 million visitors this year. Tourism accounts for about 10 per cent of Thailand’s economic output, and the industry has been a rare bright spot for an economy that has struggled for years as pivotal consumption and exports have been sluggish. “I don’t see an immediate impact on Thailand economic performance. The only drag would likely be in the tourism sector,” said Singapore-based Barnabas Gan of OCBC Bank, who is sticking to his 2016 GDP growth forecast of 3.2 per cent.

“Given that there is no substantial negative impact on growth and fundamentals, there isn’t a need to engage in monetary easing,” he said. The central bank has left its policy rate steady at 1.50 per cent, near a record low, since April 2015.

“Stimulative effects”

Despite a temporary impact on some activities, Pimonwan Mahujchariyawong, senior economist of Kasikorn Research Center, said she expected “there would be stimulative effects on activities, such as consumer goods and transportation related to the mourning.”

She said she’s sticking to her forecast of 3.3 per cent growth for 2016. Thailand’s economy grew 2.8 per cent last year. While black attire is one bright spot in the economy, other products are seeing a spurt of business as well. Sales of newspapers jumped w i th p e o p l e k e e n t o c o l l ect commemorative editions containing pictures and stories of the king. Wut Nontarit, editor at Post Today Newspaper, told Reuters daily sales have surged 50 per cent to 300,000 since Saturday, the highest capacity the publisher has. Reuters

12    Business Daily Thursday, October 20 2016

Asia In Brief Metals

India gold trades at premium for first time in 9 months -dealers Gold prices in India swung to a premium for the first time in nine months on Wednesday as jewellers and dealers in the world’s No.2 consumer of the metal ramped up purchases ahead of major festivals. Dealers were charging up to US$2 an ounce over official domestic prices, the first time premiums have been seen since mid-January, said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation. Gold importers have traditionally charged premiums to mitigate risks they take due to currency and price fluctuations. Oil

Some Japanese trading houses eye resuming Iran oil imports Japanese traders including Marubeni Corp and Sumitomo Corp that stopped buying Iranian oil during western sanctions are looking to resume imports, potentially by year-end, industry sources said. Conservative Japanese firms have so far held off taking Iranian crude due to a lack of internationally acceptable insurance coverage, but are looking at ways of using cover provided by the Japanese government, the sources said. The traders seeking to restart purchases together imported around 50,000 barrels per day (bpd) of Iranian oil before sanctions were imposed and renewed purchases would give a boost to Tehran’s aim of increasing its exports to 4 million bpd. Other Asian buyers have stepped up purchases of Iranian oil since sanctions were lifted in January, with Iranian imports to Asia, excluding Japan, jumping to 1.60 million bpd in August, up 92 percent on a year ago. Forex

Indonesia weighs if rules on capital movements needed - minister Indonesia will consider if revisions to its free foreign-exchange regime are needed to get exporters to bring more of their earnings home, a senior minister said on Wednesday. For decades, Indonesia effectively has not had any capital controls, a policy that has encouraged foreign investment. In 1999, a law on free flow of capital and a floating exchange rate for the rupiah was enacted. But President Joko Widodo’s administration has started to raise questions about the current system, amid concern many Indonesian exporters keep the bulk of their earnings abroad. “All this time, a lot of funds have been kept overseas, because we’re possibly too free,” Chief Economics Minister Darmin Nasution told reporters, adding that talks about possible revisions were still preliminary. The minister did not give any details of what measures Indonesia might take to change its free foreign-exchange regime.

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Corruption probe

S.Korea prosecutors indict Lotte chairman, 21 others Business is expected to normalise despite likely months-long trials Joyce Lee


outh Korean prosecutors said on Wednesday they have indicted 22 current and former officials of Lotte Group including Chairman Shin Dong-bin, as well as two entire group companies, concluding a corruption probe at the country’s fifth-largest conglomerate. The announcement marks the end of an investigation during which billion-dollar deals involving Lotte collapsed. Business at the retail-to-chemicals group is now expected to normalise, though those indicted are likely to undergo months-long trials. The Seoul Central District Prosecutors’ Office said in a statement it indicted Shin and other members of Lotte’s owner-family, as well as present and past executives and employees, plus Lotte Home Shopping and Lotte Engineering & Construction Co Ltd during the probe which became public in June. Prosecutors said they have charged Shin with embezzlement of about

50.8 billion won (US$45.2 million), and breach of trust involving about 124.9 billion won for perceived involvement in irregular payments to family members and unlawful support of group companies. “We will clearly explain the issues that the prosecution deems problematic,” a Lotte Group spokesman told Reuters.

Not detained

Shin is the latest chaebol leader - or boss at the family-run business groups that dominate Asia’s fourth-largest economy - to be charged for corporate crimes. Past cases involved the heads of Samsung Group, Hyundai Motor Group and SK Group. Last month, the Seoul Central District Court turned down prosecutors’ request for an arrest warrant for Shin after he appeared at a court hearing, saying it did not view detention as necessary. Though now indicted, Shin has not been detained and, like all defendants, is presumed innocent unless a court rules otherwise. That means he can continue running Lotte Group and its 103 trillion won (US$91.64 billion) worth of assets for the foreseeable future. His group had been preparing a US$4.5 billion initial public offering (IPO) of Hotel Lotte Co Ltd, but

shelved the plan after prosecutors’ investigation became public. The group may not be able to restart the IPO while trials continue, but it plans to announce measures to improve governance and also seek mergers and acquisitions, a person with knowledge of the group’s discussions told Reuters on Wednesday. The person was not authorised to speak with media about plans before official announcements and so declined to be identified. Reuters


Standard Chartered moving past India woes with Essar payment Standard Chartered Plc can finally start to move beyond its woes in India George Smith Alexander and Anto Antony

The London-based lender is set to receive a US$2.1 billion repayment in the next few weeks from Essar Global, the steel-to-power conglomerate that’s been one of its most problematic borrowers in the country, people with knowledge of the matter said. Standard Chartered may be able to write back around US$100 million of provisions it made to cover potential losses on Essar Global loans, according to the people, who asked not to be identified as the information is private. The bank, which gets most of its business from emerging markets, last year booked its first loss in more than a quarter century due to a sharp drop in revenue and surging loan impairments. Loan impairments from its ongoing business rose in the first half of 2016, due largely to provisions connected to Indian clients and the commodities industry. A repayment would show progress in the revamp plan of Standard Chartered Chief Executive Officer Bill Winters, who has been shrinking the bank’s balance sheet and tightening lending standards since taking his position last year. Standard Chartered’s woes in India are partly the result of an expansion there that failed to fully factor in the risk of lending to companies like Essar Global, current and former bank employees said in November last year, speaking on condition of anonymity. “This repayment is large enough to

make a dent in their impaired asset pile and will give a leg up to the bank’s turnaround plan,” Rethish Varma, the Bengaluru-based head of research at Aditya Trading Solutions Ltd., said by phone Wednesday. “Deleveraging of corporates at a scale like this will give confidence to banks.”

Spending Spree

Standard Chartered is one of the biggest winners from Essar’s deal to sell its refinery arm and related facilities to a group of investors including Rosneft PJSC at a US$13 billion enterprise value, Citigroup Inc. wrote in a research note earlier this week. The bank’s nonperforming loan portfolio may be reduced by about 20 per cent if the Essar debt is repaid, according to Citigroup, which reiterated its “buy” rating on Standard Chartered. Essar Global, owned by the billionaire Ruia brothers, has been grappling with debt after it embarked on an US$18 billion spending spree before commodity prices fell. Standard Chartered, which has about US$3.1 billion of outstanding lending to Essar Global, plans to replace around US$400 million of its exposure with

a loan to unlisted operating company Essar Ports Ltd. and will write off the remainder of about US$600 million, people with knowledge of the matter said this week. A representative for Standard Chartered declined to comment. Representatives for Essar Global’s domestic lenders, ICICI Bank Ltd. and Axis Bank Ltd., said they couldn’t immediately comment. Essar said in an e-mailed statement its intent is to reduce debt at the level of both the holding company and its operating companies.

Holding on

“The final amounts will be decided at the time of closure of the transaction,” it said in the statement. Standard Chartered has been in India since 1858, but it was after the 2008 global financial crisis that the country became a main growth engine. The bank established ties with about 17 of India’s biggest business groups, most of which are family-owned. Unlike Standard Chartered, Essar Global’s domestic lenders are holding on. The Indian conglomerate plans to pay a combined US$300 million to ICICI Bank and Axis Bank now, plus another US$250 million after completing the sale of Essar Oil Ltd., which is expected in the first quarter of 2017, the people said. After that, the two banks will still keep about US$450 million of combined exposure to Essar Global, which will be backed by adequate collateral, according to the people. The domestic lenders haven’t made any provisions for the Essar Global loans in the past and don’t currently plan to make any write-downs, the people said. Bloomberg

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Business Daily Thursday, October 20 2016    13

Asia Automakers

Renault-Nissan chief Ghosn set to chair Mitsubishi Motors This would be the first time an executive heads three different automakers simultaneously Ma Jie, Yuki Hagiwara and Ania Nussbaum


issan Motor Co. and Renault SA Chairman Carlos Ghosn is set to add that title at Mitsubishi Motors Corp., according to people with knowledge of the matter, putting him on track to become the first executive to head three different automakers at the same time. Nissan is acquiring a 34 per cent stake in Mitsubishi Motors, which sought a rescue following an admission that it improperly measured for fuel economy and manipulated testing data. Mitsubishi Motors on Wednesday forecast a steeper loss, its first in eight years, due to costs tied to the scandal. The Tokyo-based automaker said the net loss for the fiscal year ending March 31 will probably balloon to 240 billion yen (US$2.3 billion) from an earlier prediction for a deficit of 145 billion yen. “It’s easier for him to do things he did at Nissan, such as combining platforms, cutting costs and even closing plants,” said Koji Endo, a Tokyo-based auto analyst at SBI Securities Co. “In order to implement such massive restructuring, you need someone as powerful as Ghosn to get things going.” A Renault-Nissan-Mitsubishi alliance would create the world’s fourth-largest automotive group. Ghosn, 62, who is both chairman and chief executive officer at Nissan and Renault, is highly regarded in

the auto industry for being able to turn around flagging companies and is known for his sometimes brutal cost cutting. After his radical makeovers of French automaker Renault SA beginning in the 1990s and Nissan in the early 2000s, Ghosn earned the nickname “Le Cost Killer.” Taking over as Nissan’s president, he brought

the then-struggling company back from the brink by breaking up its socalled keiretsu network of suppliers, shutting plants and leveraging an alliance with Renault.


Yokohama, Japan-based Nissan has said it expects to close the deal before the end of the year. Two minicars Mitsubishi Motors produces for Nissan through a joint venture were among the models that initiated the company’s woes in April.

Not everyone is in favor of Ghosn taking on the chairmanship of a third automaker. “I think he has enough work to be done at both Renault and Nissan,” said Hans-Peter Wodniok, a Frankfurtbased analyst with AlphaValue. “He should also spend all his time in these two companies rather than taking on another job in Japan.” A spokeswoman of the RenaultNissan alliance called the report of

“It’s easier for him to do things he did at Nissan, such as combining platforms, cutting costs and even closing plants.” Koji Endo, auto analyst at SBI Securities Co Ghosn’s appointment “speculation,” declining to comment further. Mitsubishi Motors spokesman Shinji Akiyama declined to confirm Ghosn’s appointment. A Nissan spokesman reiterated the deal to buy the strategic stake is in process, declining to comment on the appointment. Mitsubishi Motors shares surged 7.9 per cent to 522 yen on Wednesday after the Nikkei reported Ghosn’s appointment. Bloomberg

14    Business Daily Thursday, October 20 2016

International In Brief Currency

Sterling hits 8-day high but rebound not seen lasting Sterling hit an eightday high on Wednesday, building on its strongest one-day gains in over three months on a trade-weighted basis, after a UK government lawyer said parliament would have to ratify any deal to take Britain out of the EU. Having plunged to a record low last week on worries that Britain would undergo a “hard” Brexit, in which access to the single market was sacrificed for the sake of tighter controls on immigration, the Bank of England’s trade-weighted sterling index jumped 1.4 percent on Tuesday to an 11-day high of 74.7. It was just below that on Wednesday at 74.6. Investment needed

Rugby greats say game “dying” in Australia, call for urgent action Australian Rugby Union (ARU) will hold a major summit aimed at reviewing its strategic approach to growth after a number of Australian rugby’s greats urged the sport’s governing body to step in and stop the game from “dying”. Former coaches of the national team, known as the Wallabies, Bob Dwyer and Alan Jones have signed a letter, urging the ARU to invest in the game which is in decline. According to local media, the letter is yet to make its way to ARU chairman Cameron Clyne, but the organization has already taken action in response to the now-public plea from the Wallabies greats. The letter said the “alarming” decline in grassroots participation would have devastating flow-on effects which could eventually kill the game in Australia. Funding

Nigeria in talks with ICD on sukuk deal to diversify funding Nigeria is in talks with the investment arm of Saudi Arabia-based Islamic Development Bank about issuing the country’s first sukuk as the West African nation looks to diversify its sources of funding. “We are engaged in discussions with Nigeria,” Khaled al-Aboodi, chief executive officer of the Islamic Corporation for the Development of the Private Sector, said Tuesday in an interview in Ivory Coast’s commercial capital, Abidjan. “Once they feel this is a good option to go, we’ll be very happy to accompany them on this process.” Nigeria, West Africa’s biggest economy and home to about 80 million Muslims, is trying to diversify its funding sources to support an economy that’s been battered by the collapse in oil prices since mid-2014. Output is set to shrink this year for the first time since 1991, according to the International Monetary Fund.

Janet Yellen, U.S. Federal Reserve Chair


Central bankers liking it hot doesn’t mean mandate rethink Low interest rates are causing some officials to raise inflation targets to increase the buffer Jeff Black


isten to U.S. Federal Reserve Chair Janet Yellen or Bank of England Governor Mark Carney these days and you might conclude central bankers are rethinking their inflation targets. Not quite. Take Yellen. Having mused on Friday that a “high-pressure economy” might help heal the harm done by the recession, bond yields rose as investors bet that rising inflation may be less important to the Fed than boosting the labor market. Or Carney, who in the aftermath of the post-Brexit slump in the pound is now saying he’s ready to “look through” faster price gains. U.K. inflation surged to the fastest pace in almost two years in September. Yet having struggled for much of the last decade to push inflation higher, central bankers are still faced with a problem. Lower productivity growth and aging populations are depressing the neutral rate of interest, or the rate that neither spurs nor slows growth. That means less scope to cut borrowing costs in the next recession. Some officials, mindful that interest rates are still near zero in a number of advanced economies if not actually negative, have asked if central

banks ought to raise inflation targets to create more of a buffer against this zero boundary. San Francisco Fed President John Williams has thought out loud about shifting the target, though there is no consensus inside the Fed for such a move. Fed Vice Chairman Stanley Fischer rejected the idea on Monday, noting that raising the target when you haven’t hit it in several years would only further undermine credibility. However, Fischer did sound open to considering periodic reviews of the target with lawmakers, as the Bank of Canada now does. “You could argue that two or three years of overshooting following so many years of undershooting can help to stabilize inflation expectations, or that if you knew that the neutral rate was so low you’d start with a higher inflation target” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “But there’s very little sign of regime change. Central bankers are in no way seriously considering options” to change their monetary frameworks, he said. For the Fed, which has been under its 2 per cent inflation target for four years, the risks of stoking price pressures by driving down the jobless rate look low. Its preferred gauge


U.A.E. starts hiring for tax body ahead of value-added levy Zainab Fattah and Stefania Bianchi

The United Arab Emirates is hiring officials to set up a federal tax authority that will be in charge of collecting levies, as the oil-rich Gulf nation seeks to diversify its revenue base with value-added taxation. The ministry is advertising about 30 staff positions for the tax authority on its website, including compliance a n d e n f o r c e m e n t d i r e c t o r, auditors, analysts, accountants and administrators. Deloitte LLP is advising the Ministry of Finance on the structure and enforcement mechanism of the new government entity, according to two people familiar with the matter who spoke on condition of anonymity because the information isn’t public.

Squeezed by the oil-price collapse and its aftermath, the six-member Gulf Cooperation Council, which includes the U.A.E., is planning to impose VAT by 2018 as they seek to deepen their revenue base. The finance ministry declined to comment. Deloitte, in an e-mailed answer to questions, said that as “a management consultancy we provide specialist services and support to both regional public and private sector clients.” “One of the tenets of our business is confidentiality and therefore we would never discuss rumors in this regard.” The U.A.E. will post a budget deficit of 4 per cent of economic output this year, according to HSBC Holdings Plc estimates.

of inflation rose 1 per cent in the 12 months through August, the same margin by which the BOE is missing its own 2 per cent inflation goal. While investors are expecting higher inflation, there’s little sign they’re alarmed. The five-year break-even rate, a gauge of price-growth expectations based on the difference between yields on five-year notes and similar-maturity Treasury Inflation Protected Securities, has climbed since the start of September to 1.58 per cent, near its highest levels since May. Price gains that suddenly reappear after years of absence have the potential to wrong-foot central bankers heavily invested in stimulus programs and low interest-rate regimes that are tricky to get out of.

Easy Policy

The Fed raised rates in December after seven years near zero, the European Central Bank has been running a negative deposit rate for two years and the Bank of Japan’s policy rate is also below zero. The BOE cut rates for the first time in seven years in August, and some economists foresee another move this year. For central banks presiding over sluggish recoveries, removing policy stimulus before inflation speeds up may risk price pressures failing to reach the target. Keeping stimulus in place could see inflation overshoot. Adopting a higher inflation target during such a period may be hard to explain to the public. “All inflation-targeting central banks have had a problem in the last few years, so there would be a fear of failure if you upped the ante,” said Tim Graf, head of EMEA macro research at State Street Global Markets in London. So “you allow overshoots as opposed to raising the target,” he said. Fed officials don’t forecast overshooting their 2 per cent inflation goal and expect to reach it in 2018, according to their September projections. They see unemployment averaging 4.5 per cent in the fourth quarter of that year, versus their full-employment estimate of 4.8 per cent. In effect, they see a modest undershoot of their inflation target as compatible in the short-term with stable prices. Exceeding the inflation goal, even temporarily, is a problem that some central bankers may wish they had. In Japan, where inflation is currently stuck well below the target, the credibility of BOJ Governor Haruhiko Kuroda’s pledge to push price gains beyond 2 per cent before bringing them back again has stretched belief. Bloomberg

Business Daily Thursday, October 20 2016    15

Opinion Business Wires

The Japan News A group of Japanese scientists said Tuesday they have succeeded in creating fully functional mouse eggs from stem cells such as induced pluripotent stem (iPS) cells entirely in culture. Fertile and healthy pups were born of the eggs, said the research team, led by Katsuhiko Hayashi, professor at Kyushu University’s Department of Stem Cell Biology in Fukuoka. Usually, primordial germ cells in mice are made from fertilized eggs in about six days and develop into fully functional eggs in an additional five weeks. Since this egg formation process takes inside follicles and is complex, it had been considered difficult to reconstitute the process entirely outside the body.

Gene editing and seed stealing

Korea Herald The South Korean government and the ruling party agreed to speed up the completion of its three-legged defence system from the initially planned mid-2020s to early-2020s, in light of the ever-evolving threats from North Korea. The ruling Saenuri Party also strongly called for the procurement of nuclear-powered submarines here, a matter that the government said it will “carefully consider.” “Considering the recent security threats like the North’s Sept. 9 nuclear test, we agreed that our defence capacities should be augmented by adding to the previously suggested (defence) budget,” a Defence Ministry official said, debriefing reporters on the government-party meeting held early Tuesday morning.

Phnom Penh Post Samai Distillery, Cambodia’s first and only rum producer, is close to securing upwards of $1 million from foreign investors to expand its business operations and production capacity, a move that could see its products sold internationally, the company said. Daniel Pacheco, co-founder and director of Samai, said he is in late-stage discussions with a group of angel investors, and the company could soon secure a commitment for $550,000 to $700,000 in funding. He said that beyond the financial support, the investors would offer invaluable business advice for the start-up that first began producing rum in 2014. “We are also aiming to raise another $600,000 from other individual investors to [expand] our business,” he added.

The Star Malaysia’s overall national crime index has declined by 0.8per cent in the first nine months of the year, says the country’s Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi. He said the number of crime cases recorded nationwide declined from 85,739 to 85,049 cases in 2015 and 2016 respectively. Dr Ahmad Zahid pointed out that although the number of organised crimes and armed robberies had decreased, petty crimes such as snatch theft cases were on the upward trend. He said snatch theft cases went up by 36.18 per cent while murder-related cases went down by 10per cent, rape (7 per cent), motorcycles theft (8 per cent), car theft (10 per cent) and property-related cases at 1.9 per cent.


our hundred years ago, John Rolfe used tobacco seeds pilfered from the West Indies to develop Virginia’s first profitable export, undermining the tobacco trade of Spain’s Caribbean colonies. More than 200 years later, another Briton, Henry Wickham, took seeds for a rubber-bearing tree from Brazil to Asia – via that great colonialist institution, London’s Royal Botanic Gardens – thereby setting the stage for the eventual demise of the Amazonian rubber boom. At a time of unregulated plant exports, all it took was a suitcase full of seeds to damage livelihoods and even entire economies. Thanks to advances in genetics, it may soon take even less. To be sure, over the last few decades, great strides have been made in regulating the deliberate movement of the genetic material of animals, plants, and other living things across borders. The 1992 United Nations Convention on Biological Diversity, in particular, has helped to safeguard the rights of providers of genetic resources – such as (ideally) the farmers and indigenous people who have protected and nurtured valuable genes – by enshrining national sovereignty over biodiversity. While some people surely manage to evade regulations, laboriously developed legal systems ensure that it is far from easy. The majority of international exchanges of seeds, plants, animals, microbes, and other biological goods are accompanied by the requisite permits, including a material transfer agreement. But what if one did not have to send any material at all? What if all it took to usurp the desired seeds was a simple email? What if, with only gene sequences, scientists could “animate” the appropriate genetic material? Such Internet-facilitated exchanges of biodiversity would clearly be much harder to regulate. And, with gene sequencing becoming faster and cheaper than ever, and gene-editing technology advancing rapidly, such exchanges may be possible sooner than you think. In fact, genes, even entire organisms, can already move virtually – squishy and biological at each end, but nothing more than a series of ones and zeros while en route. The tiny virus that causes influenza is a leading-edge example of technical developments. Today, when a new strain of influenza appears in Asia, scientists collect a throat swab, isolate the virus, and run the strain’s genetic sequence. If they then post that strain’s sequence on the Internet, American and European laboratories may be able to synthesize the new virus from the downloaded data faster and more easily than if they wait for a courier to deliver a physical sample. The virus can spread faster electronically than it does in nature. More complicated viruses and some bacteria are in the range of such techniques today, though wholly synthesizing a higher organism with a more complex genome, such as maize, is many years away. But that may not matter, as new gene-editing technologies, like CRISPR-Cas9, enable scientists to stitch together complicated new organisms, using gene sequence information from organisms to which they do have physical access. For example, the key traits of a drought-resistant maize from a Zapotec community in Oaxaca, Mexico, might be reproduced by editing the genes of another maize variety. No major new advance in the technology is needed to unlock this possibility. What is needed is the genetic sequences of thousands of types of maize. Those data act as

Chee Yoke Ling Director of Third World Network

Edward Hammond a researcher and the director of Prickly Research

a sort of roadmap and resource pool, enabling scientists to compare sequences on a computer screen and identify pertinent variations. The selected adjustments might then be made to, say, the parents of a new Monsanto or DuPont Pioneer maize hybrid. Managing access to large genomic databases thus becomes critically important to prevent a virtual version of the theft carried out by Rolfe and Wickham. And, indeed, in an unguarded e-mail released under the US Freedom of Information Act, one of the US Department of Agriculture’s top maize scientists, Edward Buckler, called such management “the big issue of our time” for plant breeding. If agricultural biotechnology corporations like Monsanto and DuPont Pioneer – not to mention other firms that work with genetic resources, including pharmaceutical companies and synthetic biology startups – have free access to such databases, the providers of the desired genes are very likely to lose out. These are, after all, wholly capitalist enterprises, with little financial incentive to look out for the little guy. In this case, that “little guy” could be African sorghum growers, traditional medicinal practitioners, forest peoples, or other traditional communities – people who have created and nurtured biodiversity, but never had the hubris or greed to claim the genes as proprietary, patented inventions. All it would take is for someone to sequence their creations, and share the data in open databases. Yet open access is the mode du jour in sharing research data. The US government’s GenBank, for example, doesn’t even have an agreement banning misappropriation. This must change. After all, such no-stringsattached databases do not just facilitate sharing; they enable stealing. The question of how to regulate access to genetic sequence data is now cropping up in international discussions, including at the World Health Organization and the Food and Agriculture Organization. Perhaps the most important forum for such discussions is the Conference of the Parties to the Convention on Biological Diversity, the main treaty regulating access to biodiversity. The next meeting (COP 13) will take place in Cancún, Mexico, in early December. Participants at COP 13 must focus on the need to protect the rights of resource providers. To this end, they should pursue a careful assessment of existing policies and craft the necessary changes – before synthetic biology outpaces legal systems and renders them impotent. Arrangements must be made to supervise access to genetic sequences in a way that ensures fair and equitable sharing of benefits from their use. Otherwise, decades of work to promote conservation and prevent piracy will be undermined, endangering the biodiversity convention – and those it protects. Project Syndicate

Arrangements must be made to supervise access to genetic sequences in a way that ensures fair and equitable sharing of benefits from their use.

16    Business Daily Thursday, October 20 2016

Closing Weather

Typhoon Sarika causes losses, lands again in S. China

Typhoon Sarika has weakened and made landfall a second time in south China on Wednesday afternoon after it brought gales and downpours to Hainan Province. Sarika has weakened to become a severe tropical storm. It made landfall a second time in Dongxing City, Guangxi Zhuang Autonomous Region at 2:10 p.m. Wednesday, with maximum winds of 90 km per hour at its eye. Flights and high-speed trains have returned to normal in Hainan. Flights at Meilan International Airport in Haikou, capital of Hainan, began normal departures and landing on Tuesday evening. The eastern section of the island’s loop high-speed rail

line resumed operation on Wednesday afternoon. Security checks on the western section are under way. Ferry service across the Qiongzhou Strait between Hainan and Guangdong Province resumed on Wednesday afternoon. Sarika, the 21st typhoon of the year, made landfall in the east of Hainan on Tuesday morning, packing winds of up to 162 km per hour. Half a million people were evacuated in Hainan. The typhoon caused agricultural losses on the island. In Qionghai City, 62 villages were flooded and direct losses in its agricultural and fishery sectors reached RMB570 million (US$85 million). The storm also damaged 15,000 hectares of cropland in Changjiang Li Autonomous County.


Egypt’s central bank allocates US$1.8 bln to building of strategic goods stock Eric Knecht


gypt’s central bank has allocated US$1.8 billion to ensure six months of reserves in all strategic goods, Supply Minister Mohamed Ali ElSheikh said on Wednesday, after widespread sugar shortages prompted talk of an impending food crisis. Egypt already has five months worth of wheat and vegetable oil reserves and would ensure that Egyptians receive a steady supply of essential foods, Sheikh said at a news conference. The US$1.8 billion has already been allocated and the supply effort would be made in coordination with the armed forces, said Sheikh, a military major general who took charge in September of a ministry rocked by a wheat corruption scandal. Sheikh said his ministry would seek to end procurement of wheat to open air silos by next year’s buying season and move to more sophisticated climate-controlled silos that are designed to minimise waste and prevent fraud. The move comes as Egypt, the world’s largest wheat importer, tries to clamp down on alleged corruption in its strategic wheat supply chain that has wasted billions of pounds in public funds. Egyptian prosecutors are investigating allegations that millions of dollars intended to subsidise local wheat farmers were used to purchase more wheat on paper than was found in silos. The public prosecutor has charged several private silo owners and others with profiteering, forgery and enabling embezzlement. Parliamentarians who formed a fact-finding commission to

investigate the suspected fraud have said upwards of 2 million tonnes, or 40 per cent of the locally procured crop, may be unaccounted for. Sheikh said a committee composed of officials from the supply, agriculture and finance ministries had been established to determine the proper price for local wheat to be procured next year.

However, he said Egypt had yet to decide if it will shift to a system where it pays farmers the global wheat price plus the government subsidy. The plan was mooted earlier this year as part of efforts to minimise opportunities for corruption along the supply chain but was never implemented. Egypt was also reviewing eligibility

for a smart card system through which low income Egyptians access state-subsidised food, Sheikh said. He said the ministry would cut waste by cancelling cards allocated to people who have since died or emigrated and would review eligibility criteria for everyone else. He did not elaborate on what the new criteria may involve. Reuters



Outer space

Starbucks plans to double number of locations in China by 2021

Japan Q3 inbound tourism spending Russians congratulate Chinese, falls for first time in almost 5 yrs wish to fly together in space

Starbucks Corp. will more than double its number of locations in China by 2021, increasing the company’s bet on a country that Chief Executive Officer Howard Schultz says eventually could be a bigger market than the U.S. The chain will have 5,000 stores in mainland China within five years, up from about 2,300 now, the Seattle-based company said in a statement. Starbucks, which currently gets about 13 percent of its revenue from the Asia-Pacific region, also is promoting Belinda Wong to CEO of Starbucks China. Schultz’s ambition of making Starbucks bigger in China than the U.S. would still be a ways off: The chain has about 12,900 domestic locations. But third-quarter same-store sales climbed 7 percent in the country, compared with U.S. growth of 4 percent. Starbucks also recently began selling a new line of tea drinks across the Asia-Pacific region, and it will open a larger-size roastery store in China next year to further tout its brand. Wong, who joined Starbucks in 2000, will oversee the plans to double the company’s Chinese cafes. She also will be in charge of digital and e-commerce there, and will continue to report to John Culver, group president of Starbucks global retail. Bloomberg

Spending by tourists visiting Japan fell in the third quarter for the first time in almost five years, government data showed on Wednesday, a sign that the economic benefits of a tourism boom are starting to fade. Inbound tourists spent 971.7 billion yen ($9.40 billion) in July-September, down 2.9 percent from the same period a year earlier, according to the Japan Tourism Agency. Tourists have been visiting Japan in record numbers after Prime Minister Shinzo Abe’s administration relaxed visa requirements for some Asian countries. This was initially a boon as shoppers loaded up on clothes, electronics and home appliances, but a recent slowdown in earnings at major retailers is another sign that visitors to Japan are spending less, meaning economic growth could lose momentum. Weakness in consumer spending is worrying, because the Bank of Japan has not been able to generate sustained inflation after more than three years of aggressive money printing. The BOJ overhauled its monetary policy framework last month, in preparation for a long drawn out battle to get consumer prices to rise. Domestic consumer spending has struggled as gains in real wages have been more subdued than many economists expected. Reuters

The two Chinese astronauts aboard the Shenzhou-11 spacecraft entered the space lab Tiangong-2 on Wednesday morning, bringing China closer to its dream of building a space station. Veteran Russian cosmonaut Sergei Krikalyov, on behalf of all the cosmonauts at the Roscosmos State Corporation, sent a congratulatory letter to the Chinese astronauts. “I believe Russian and Chinese astronauts will step into each other’s spacecrafts and fly together in space in the future. Roscosmos will do its best to achieve this goal. I wish the Chinese astronauts a successful flight in this mission, hoping that we can meet later both in space and on the ground!” the letter said. “Chinese astronauts will spend 30 days in nearEarth orbit, this is an important test. We believe the outstanding exercises and precise theoretical knowledge will help the Chinese astronauts to tackle all kinds of tests,” Krikalyov said. As a veteran cosmonaut of six space flights and once the world record holder of having spent a total of 803 days and 9 hours and 39 minutes in space, Krikalyov said in the letter that he wanted to share his space experience with his Chinese colleagues. Xinhua

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