Page 1

Science Fund disburses MOP96.4 mln y-t-d Science Page 2

Thursday, December 1 2016 Year V  Nr. 1185  MOP 6.00  Publisher Paulo A. Azevedo Closing Editor Kam Leong  Economy

Guru believes Beijing will protect MSAR economy Page 6


Ferrari terminates rights of SARs distributor Auto Italia Page 4


Wynn Macau, MGM Macau launch joint shuttle bus service Page 4

Mainland markets

Liquidity fears trigger commodities shake-up Page 8

Environmental push

Chinese government to reduce water consumption Page 9

Macau, Shenzhen enhance links Regional co-operation

The two governments inked three co-operation memoranda yesterday. Following ‘positive performances’ achieved in the past year. The new MOUs seek to simulate the MSAR’s development in the Free Trade Zone of the Mainland city of Qianhai. As well as facilitating the country’s strategic policies. Page 3

Package tours lose appeal

The MSAR welcomed 677,000 package tourists in October. Representing a y-o-y decrease of 19 pct. Mainland package tourists plummeted 23 pct y-o-y. By contrast, those from South Korea soared 38 pct y-o-y. While total hotel guests increased 21 pct y-o-y to 1.1 mln in the month.

Blueprint for the Bahamas Gaming Hong Kong-based Chow Tai Fook Enterprises has set its sights on the Bahamas. Specifically, the Baha Mar project. The company plans to open up new markets for the archipelago. Without breaking the relationship with the former developer. Page 7

Uneasy neighbour

Tourism Page 5

HK Hang Seng Index November 30, 2016 

22,789.77 +52.70 (+0.23%)

China Unicom Hong Kong

Worst Performers

Hang Lung Properties Ltd


Hengan International Group


PetroChina Co Ltd


Sino Land Co Ltd


China Life Insurance Co Ltd


Want Want China Holdings


China Mengniu Dairy Co Ltd


Wharf Holdings Ltd/The


Power Assets Holdings Ltd


Sands China Ltd


China Shenhua Energy Co

Galaxy Entertainment Group


Sun Hung Kai Properties Ltd




China Resources Power


Cheung Kong Property





China Merchants Port Hold-





16°  21° 17°  21° 18°  22° 19°  23° 18°  24° Today

Source: Bloomberg

Best Performers



I SSN 2226-8294



Source: AccuWeather

S. Korean instability South Korea’s industrial output fell last month. As Samsung Electronics discontinued its latest flagship Galaxy Note 7 smartphone. And railway workers went on strike. Piling up more instability. Ruling party lawmakers proposed President Park resign in April to resolve the growing political crisis. Pages 10 & 16

2    Business Daily Thursday, December 1 2016

Macau In Brief Aviation

Completion of MIA terminal expansion slated for H2 The north extension project of the Macau International Airport (MIA) Passenger Terminal Building is expected to be completed in the second half of 2017, increasing the Airport’s annual capacity from 6 million to 7.5 million passengers, the Macau International Airport Company Limited (CAM) announced yesterday. According to the release, the local Airport reached a record annual passenger volume of 6 million passengers yesterday; the Airport recently added three new routes to Guiyang in China, Manado in Indonesia and Fukuoka in Japan. The release also indicates that total passenger volumes increased 14 per cent year-onyear from January to October. In particular, passenger volumes from Mainland China, Taiwan and Southeast Asia grew by 2 per cent, 18 per cent and 22 per cent, respectively. In addition, passengers travelling through conventional and low cost airlines to and from MIA were said to have increased by 18 per cent and 7 per cent year-on-year during the period, respectively. N.M.

Science & Tech

Science Fund disburses MOP96.4 mln year-to-date The president of the Fund, Frederico Ma, says the total float of the body will increase to MOP220 mln next year Nelson Moura


total o f M O P 9 6 . 4 million (US$12 million) in subsidies for 62 projects has been approved by the Science and Technology Development Fund for scientific investigation projects since the beginning of the year, revealed Fund member Cheang Kun Wai at a research presentation of the Fund yesterday. According to Mr. Cheang, the number of approved projects represents 40 per cent of the total 154 applications filed for total subsidies of MOP334.6 million this year.

Within the granted amount, 37 per cent or MOP35.4 million was handed to life sciences projects and general medicine research, while 13 per cent or MOP12.7 million was awarded to projects related to Chinese Medicine. Other subsidised projects of the Fund primarily focused on microelectronics, environment, engineering and mathematics. Speaking to Business Daily on the sidelines of the event, Fund president Frederico Ma Chi Ngai said the body will increase its total capital from the current MOP200 million to MOP220 million in 2017, while the applicants that have failed to receive funding are also able to re-apply next year. Meanwhile, he claimed it is hard

to evaluate the success rate of the subsidised projects, especially those for commercial use, adding the Fund has aided “between 800 to 1,000 thesis and academic papers every year.” “Chinese Medicine has had an increased interest for research since we have a State Key Laboratory of Quality Research in Chinese Medicine at the University of Macau (UM) which has put a lot of effort into this field. [UM researchers] told me recently they’re thinking of commercialising their findings,” Mr. Ma told us. He also revealed that the Fund is considering establishing institutional collaborations with the Traditional Chinese Medicine Science and Technology Industrial Park of Cooperation between Guangdong and Macao in the future in addition to supporting Macau-registered projects developed in the Park to apply for subsidies from the Fund.


Gov’t appoints IFT training activities council members The Secretary for Social Affairs and Culture, Alexis Tam Chong Weng, has appointed members to the Co-ordinating Council for Training Activities of the Institute for Tourism Studies (IFT), according to a dispatch in the Official Gazette yesterday. The Council comprises nine members whose tenure will last for two years. Members include representatives from the Cultural Affairs Bureau, Macau Hotel Association, Association of Macao Tourist Agents, Macau Hoteliers & Innkeepers Association, Macao Convention & Exhibition Association, Macau Association of Retailers & Tourism Services, Administration of Airports, Ltd. and local flag carrier Air Macau. C.U. Subsidy

Gov’t splashes out MOP60 mln on non-tertiary education institutions The MSAR Government disbursed a total of MOP60 million (US$7.5 million) to institutions providing pre-school, primary and secondary education for the third quarter of this year, according to a dispatch released yesterday in the Official Gazette. Of all the schools or institutions which received the government subsidies, Colégio de Santa Rosa de Lima Chinese section obtained the highest amount of funding, at some MOP16.4 million, accounting for 27 per cent of the total. The fund, as stated in the dispatch, will be used for the refurbishment and construction of one of the school buildings. Meanwhile, Colégio Diocesano de São José 5 received some MOP7.5 million, the second biggest funding by the government in the quarter. The total amount disbursed in the third quarter this year increased by 142.6 per cent vis-a-vis MOP24.8 million recorded for the same period last year. C.U.

Government Office

Gov’t to relocate northern district service centre The government is planning to relocate its integrated service centre building in the northern district of the Peninsula to the plot which currently houses the Macau Power Station. This was revealed by the Director of the Land, Public Works and Transport Bureau (DSSOPT) Li Can Feng in his reply to legislator Si Ka Lon’s written enquiry about the government’s progress in building offices for public departments in

order to save public expense on renting private venues. According to the DSSOPT head, the new service centre will be similar in size to the current one in Areia Preta. The government recently announced its plan to build public housing, social facilities and a government complex building on the power station plot once the city’s sole power distributor CEM – Companhia de Electricidade de Macau - has vacated the plot.

Meanwhile, the official added in his reply that DSSOPT is planning to collect opinions from public departments for their requirements on office spaces for the Bureau’s future consideration in drafting the city’s urban master plan. The legislator cited a report from the Commission of Audit saying 68 government departments had paid MOP5.03 billion (US$630 million) to rent office spaces between 2004 and 2014. A.L.


Numerous entities benefit from government largesse MOP33 million in subsides for commercial and industrial development in Q3 Kelsey Wilhelm

The city’s Commercial and Industrial Development Fund disbursed some MOP33.08 million (US$4.1 million) in the third quarter of 2016, according to a dispatch published in the Official Gazette. The subsidies were given to 342 entities via 350 separate offerings, with recipients ranging from beauty product companies to restaurants to engineering firms, gold, technology, transport, real estate, music, construction, design and others. Over 54 per cent of the total funding went to six main entities, while 49.5 per cent of the funding went to three main benefactors: the Industrial and Commercial Association of the North District of Macau, the Federation of

Industry and Commerce of the Central and South Districts of Macau, and the Importers and Exporters Association of Macau. The three entities together received over MOP16.39 million in subsidies over the quarter. Subsidies for the Importers and Exporters Association went towards two expo and sales markets for Portuguese-speaking countries products, one in Macau and one in Tianjin, costing MOP1.73 million and MOP3.16 million, respectively.

Divvied up

The largest recipient, drawing MOP5.78 million down during the quarter, was the Federation of Industry and Commerce of the Central and South Districts of Macau. Of the total

subsidy to the Federation, MOP4.58 million went towards the 11th edition of the Shopping Festival for the districts covered by the association. The second largest recipient - the Industrial and Commercial Association of the North District of Macau at MOP5.7 million - saw the majority of its funding also go towards a shopping festival, amounting to MOP4.87 million, while the rest of the group’s received funding of MOP848,160 went towards offsetting the cost of activities for a support centre for small and medium enterprises (SMEs) in the district. Other large subsidy recipients were the Association of Young Entrepreneurs, which received MOP754,450 during the period, the Macau Chain Stores and Franchise Association, which received MOP567,620, and the Macau Jewellery Association, which received MOP245,714 during the quarter.

Business Daily Thursday, December 1 2016    3

Macau Regional Co-operation

Macau and Shenzhen ink three memorandums Yesterday, the cities sought to push regional co-operation forward whilst catering to national strategies developing the country’s economy Cecilia U


he MSAR and Shenzhen inked three co-operation memorandums at Government Headquarters yesterday which seek to stimulate the MSAR’s development in Shenzhen’s Free Trade Zone – Qianhai – in order to encourage and provide opportunities for young entrepreneurs to set up their own businesses. The memorandums, which also promote nationwide reading and further develop tourism in both regions, were signed by the two governments following a meeting yesterday morning chaired by Chief Executive Fernando Chui Sai On and the Mayor of Shenzhen, Xu Qin. The two authorities perceive the collaboration between the two regions to have achieved positive results in the past year in the fields of finance, business, culture and the livelihood of both cities’ residents. Questioned by reporters about the particulars of the positive outcomes achieved by the co-operation at a press briefing, Mayor Xu listed a few accomplishments, saying that the collaboration of the two cities was

of significant benefit to the country’s development. “The Dawan Area has become one of the most important roles in the development of the economy of the country,” said Mr. Xu, adding that the participation of the two cities in

developing the One Belt, One Road initiative and the progress of the “Dawan Area” are major successful results of the co-operation. The Chinese official also expects that the collaboration of the two regions will produce higher economic standards and quality; in particular, assisting the MSAR to further diversify its economy. Meanwhile, the city’s Secretary for Economy and Finance, Lionel Leong Vai Tac, pointed out that Shenzhen has

assisted the construction of the MSAR’s fundamental financial infrastructure, which includes the provision of an instant payment system for both Macau Patacas and Renminbi. Mayor Xu reckons Macau occupies an advantageous role as the bridge between the Lusophone countries and Mainland China and as the World Centre of Tourism and Leisure, believing the co-operation of the two cities will complement the shortcomings of each other. The official also expressed his confidence in the Macau-Shenzhen collaboration, anticipating that more resources from both regions will be dedicated to the endeavour, hoping every sector of both cities would encourage and strengthen development.


Latin City Parade starts rehearsals The annual ‘Parade through Macao, Latin City’ starts rehearsals today, with nine performing groups from Macau, Mainland China and Spain practising at Border Gate Square, the

Three Lamps District, Anim’Arte Nam Van and the Taipa Houses. “We hope the rehearsal can [generate] more atmosphere in the city and attract visitors before the Parade

actually starts,” the Chief of the Division of Recreational Activities of the Cultural Affairs Bureau, Cheang Kai Meng, said during yesterday’s press conference.

This year’s event was budgeted at MOP15 million (US$1.9 million) down MOP1 million year-on-year. “The budget of this year’s event is still under control. We cut down on printing materials and we’re using multi-media such as videos to promote the event instead,” the Chief of the Department of Cultural Events of the Cultural Affairs Bureau, Kent Ieong Chi Kin, explained. Asked whether the event - running with Macao Light Festival on the same day on December 4 - would have a negative impact on the Parade, Mr. Ieong indicated that the Macao Galaxy Entertainment International Marathon is also happening on that day, pointing out that these events will together further promote Macau as a World Centre of Tourism and Leisure. The Parade started in 2011 to celebrate the anniversary of the city’s handover to China. A.L.

4    Business Daily Thursday, December 1 2016

Macau Opinion

Ashley Sutherland-Winch* Counterfeit crackdown Internet shopping platforms are being plagued by counterfeit goods. To consumers who trust platforms like Taobao, Ebay and Amazon, the fear of purchasing faux goods is of concern; but to the brands being counterfeited, especially the smaller companies, it can be financially devastating. Amazon is beginning a massive crackdown on counterfeit goods in 2017. ‘Amazon has zero tolerance for the sale of counterfeit items on our site,’ the company said in a statement to Bloomberg. Alibaba Group Holding’s platform, frequently criticised for being a hotbed of fake branded products, released a statement in May that sellers of luxury items must now prove product authenticity or face being shut down. Amazon, EBay and Alibaba are largely shielded from legal liability as long as they have processes in place for brands to report fake goods and take timely action to suspend their sale once notified. Manufacturers, however, are growing increasingly frustrated with their products being counterfeited and some have joined with Amazon to take formal legal action in United States courts. Amazon is now desperate to bring order to an atmosphere where more than two million independent seller entities compete for the attention and purchases of shoppers around the globe. Xu Chunming, deputy head of Shanghai University’s Intellectual Property Institute, said Alibaba faces a long fight in combating counterfeits. “Generally speaking, Chinese citizens and companies have yet to improve their awareness in respecting and protecting intellectual property . . . and technically there’s a difficulty for Alibaba in stopping the sale of fake goods as it serves as a platform for sellers rather than as a manufacturer or seller,” he said. I believe that the Chinese are not alone in potentially not respecting and protecting intellectual property; it’s a worldwide epidemic. Inherently, I believe that consumers are constantly searching for less expensive products and deals without regard to brand. The counterfeit product industry also opens the door to access. Because many people cannot afford some luxury brands, the opportunity to purchase counterfeits can be overwhelming and exciting but not inherently respectful to the brand itself. On the other hand, counterfeiters do such a good job mimicking some lower end products that some consumers cannot tell the difference and believe they are indeed purchasing a true brand product. At the end of the day, consumers must become more savvy and online marketplaces will need to continue to improve their processes to validate products to finally make advances in the crackdown on counterfeit goods.

*Marketing and Public Relations Consultant and frequent contributor to this newspaper.


Racing away Ferrari has terminated the import and distribution rights of the Hong Kong and Macau distributor Kelsey Wilhelm


ith effect from May 27 of next year, the importation and distribution rights for Ferrari will no longer lie with current importer and distributor Auto Italia. According to a filing yesterday with the Hong Kong Stock Exchange by Auto Italia, who also import and distribute luxury vehicle brand Maserati as well as conducting finance and consultancy work, the termination comes after a wholly owned subsidiary of Auto Italia ‘received an advice from Ferrari to terminate the import and distribution rights of “Ferrari” cars in Hong Kong and Macau’. When contacted by Business Daily, Auto Italia said ‘for the time being, we have no further comment on this

subject,’ aside from the information stated in the filing with the stock exchange yesterday morning. Despite the brand being one of the two luxury car types that the company imports and distributes, it stated: ‘The Board considers that the cessation of Ferrari business will have no material adverse impact on the profitability of the Group.’ Auto Italia also notes that it is ‘in discussion with Ferrari for transition arrangement,’ regarding the six remaining months in which Auto Italia will retain the rights.

Decreasing sales

In Auto Italia’s interim report, it notes that a ‘decrease in overall car unit sales in Hong Kong operation’ contributed to its 11.7 per cent drop in revenue in the group’s car division, with revenue for the first half-year ended June 30 reaching HK$401.4

million (US$49.98 million) while sales and distribution costs and administrative expenses amounted to HK$104.2 million for the same period. Ferrari NV was spun off from Italian-U.S. manufacturer Fiat-Chrysler at the beginning of this year, notes Bloomberg, and the group’s third quarter revenue saw a 8.3 per cent increase, reaching 783 million euros, on the back of a 15 per cent rise in deliveries in China and a near doubling in engine sales to Maserati and Formula 1 racing teams. In October in Macau, car and motorcycle sales fell nearly 54 per cent year-on-year, while the value of imported road vehicles saw a 35 per cent year-on-year decrease. From January to October of this year road vehicle imports saw their value fall 42.3 per cent, to MOP1.6 billion. ‘The Group will continue to carry on the businesses of import, distribution and provision of after-sales services of “Maserati” cars in Hong Kong and Macau, provision of pre-delivery inspection services,’ as well as the finance, consulting and property investment segments of the business, notes Auto Italia’s filing.


Wynn Macau, MGM Macau launch joint shuttle bus service Gaming operators Wynn Resorts (Macau) S.A. and MGM China Holdings Ltd. have announced the launch of a joint shuttle bus service connecting passengers between the Border Gate, Wynn Macau and MGM Macau on the Peninsula from today. According to a joint press release by the two operators, the service is ‘a response to the transport integration arrangement of the Macau SAR Government.’ The joint service will operate daily between 9:00am and 12:00 midnight whilst frequency will be adjusted based upon demand, the companies said. ‘After the optimisation, the number of shuttle buses connecting these three locations will be reduced,’ they wrote. ‘This not only alleviates the traffic burden on the Macau Peninsula but also effectively integrates

the hotel shuttle bus routes.’ This is not the first joint shuttle bus service to be launched by the city’s

gaming operators. In June, Galaxy entertainment Group, Melco Crown Entertainment and The Venetian Macao of Sands China Ltd. launched a joint shuttle bus route titled the ‘Cotai Connection’ in order to facilitate the transport of guests and local residents within the Cotai Strip.


Overseas travel affecting Mainlanders’ visits to SARs The Greater China region saw visits of Mainland Chinese decrease for the third quarter of the year as they preferred travelling beyond the region, reveals the latest data released by the China Outbound Tourism Research Institute (COTRI). For the three months, the Institute pointed out that the number of trips by Mainland Chinese tourists to Hong Kong, Macau and Taiwan had decreased by 5.1 per cent compared to the same period of last year, amounting to some 17.5 million.

At the same time, Mainland Chinese visitors who travelled beyond the Greater China region jumped 14.1 per cent year-on-year to 20 million. For the first nine months of the year, some 101.5 million outbound travel occasions by Mainland Chinese were recorded, of which those travelling within the country, the two SARs and Taiwan dropped 6.2 per cent year-on-year to 49.8 million, while those travelling outside the region grew 14.5 per cent year-on-year to 51.7 million.

However, the report also noted that a number of Chinese visitors preferred not travelling to France and Germany owing to the recent terrorist events in the two countries. In addition, other European countries such as Spain, Switzerland and Italy also saw a double-digit decrease in the number of Chinese visitors. That notwithstanding, smaller countries like Croatia, Iceland, Poland and Norway saw a 20 per cent increase in the number of Chinese tourists during the period, says the Institute. C.U.

Business Daily Thursday, December 1 2016    5



Overall, 19 pct fewer package tourists in October While Korean visitors on package tours surged 37.8 per cent y-o-y Annie Lao


he number of visitors on package tours dropped by 19 per cent year-on-year to 677,000 for October, according to the latest information published by the Statistics and Census Services (DSEC) yesterday. Nevertheless, the package tour visitor number represents an increase of 11.8 per cent compared to September. Package tour visitors from Mainland China registered the highest year-on-year drop in the month, down 22.7 per cent to 542,000. In addition, those from Taiwan dropped 2 per cent year-on-year to 39,000. Visitors on package tours from

South Korea, however, surged 37.8 per cent year-on-year, amounting to 32,000, while those from Thailand increased by 7.3 per cent year-onyear to 11,500. For the first ten months of the year, total visitors on package tours posted a year-on-year decrease of 27 per cent from the same period of last year, at 6.1 million.

Outbound residents

On the other hand, the number of outbound residents using travel agencies dropped 12.4 per cent year-onyear to 106,000 in the month. Of the total, those travelling on package tours plunged 21.7 per cent year-onyear to 40,000. In particular, those on package tours to Mainland China fell 24.2 per cent year-on-year to 28,800 in the month whilst those to Taiwan numbered 3,100, a decrease of 3.4 per cent compared to one year ago. For the first ten months of the year,

the total number of outbound residents using the services of travel agencies totalled 1.02 million, down 16.2 per cent year-on-year. For those using individual arrangements, the hottest destinations were Hong Kong, Taiwan, Japan, South Korea and Thailand, according to DSEC.

Hotel guests

Meanwhile, the data revealed that 1.1 million guests checked into the city’s hotels and guesthouses in the month of October, up 20.9 per cent year-on-year. Those from Mainland China accounted for 64.2 per cent of the total, amounting to 695,300, a jump of 18.6 per cent year-on-year. In addition, the number of hotel guests from Hong Kong increased 14.2 per cent yearon-year to 154,200. Meanwhile, those from S. Korea registered the highest increase, up 42.7 per cent year-on-year, with 25,100 guests checking into local hotels in the month.

Cumulatively, the city received 9.65 million hotel guests for the first ten months of the year, increasing 16.2 per cent compared to the same period last year.

Hotel occupancy

The city’s average hotel occupancy rate reached 83.5 per cent during the period, an increase of 2.5 percentage points year-on-year, the data shows, while 4-star hotels had the highest average occupancy rate of 87.9 per cent, an increase of 4.9 percentage points year-on-year. Meanwhile, occupancy of 5-star hotels was up by 2.3 percentage points year-on-year to 83.9 per cent while that of 3-star hotels dropped 0.8 percentage points year-on-year to 79.4 per cent. For the first ten months, the average occupancy rate of local hotels was 81.5 per cent, up 1.4 percentage points year-on-year, with that of 4-star hotels jumping 5.8 percentage points year-on-year to 85 per cent.

6    Business Daily Thursday, December 1 2016

Macau Economy

Beijing will protect MSAR economy, says guru An international affairs guru believes the Chinese central government will seek to maintain the stabilisation of the MSAR economy by maintaining the current number of visitors Nelson Moura


espite the anti-corruption and anti-gaming policies enforced by the Chinese central government, it is still in Beijing’s interests to guarantee the stability of the MSAR economy by maintaining visitor numbers to the city, reckons Jean-Pierre Cabestan, the Head of Department of Government and International Studies at Hong Kong Baptist University.

“Since Xi Jinping took over, Macau’s gross gaming revenues have clearly fallen but at the same time it is in China’s interests to keep Macau afloat and prosperous, making sure there are enough tourists coming,” Cabestan told Business Daily following a breakfast meeting of The France Macau Business Association (FMBA) yesterday. “Of course [the central government is] cracking down on corruption and local officials using state money for gambling but at the same time they will continue to allow a large number

of tourists to come to Macau in order to keep the economy in good shape,” he said.

One Road, One Belt of debt

Meanwhile, questioned about the practical effects of Beijing-backed initiatives on Macau - such as promoting the city as a Sino-Luso platform and the One Belt, One Road policy - the academic pointed out that the effectiveness of these policies might be affected by the current debts owed by developing countries to China. “Everybody is part of the One B e l t, O n e R o a d, a n d M aca u , having a connection to Lusophone countries such as Brazil, Angola and Mozambique can play a role. The problem is that the policy tends to include the whole world so it’s kind of diluted . . . the other problem

being that China might’ve been too generous, with now being more keen on returning its investment on developing countries to make sure the money is not lost.” According to the professor, the current Chinese economic slowdown can affect the scope of the ‘One Belt, One Road’ policy, as state-owned companies seek to become less dependent upon the state’s coffers and start demanding returns from investments in developing countries.

“Of course [the central government is] cracking down on corruption and local officials using state money for gambling but at the same time they will continue to allow a large number of tourists to come to Macau in order to keep the economy in good shape” Jean-Pierre Cabestan, Head of the Department of Government and International Studies at Hong Kong Baptist University

“China committed US$46 billion (MOP367.4 billion) to Pakistan alone just for this corridor through the country; it’s a big deal whether Pakistan can pay it back,” he said. “Venezuela has a debt of US$60 billion; Equator is the highest per capita debtor, with US$10 billion, and in Africa you have a number of countries like Mozambique and Angola where China has been involved in many infrastructure projects. If you add up all those commitments you [arrive at] almost US$1 trillion in investment.” The professor of International Studies was the speaker at yesterday’s FMBA meeting on ‘China’s New F o r ei g n a n d S ec u ri t y P o l i c y Assertiveness.’

Results Analysts predict highest y–o-y increase in revenue in 32 months

Christmas comes early Kelsey Wilhelm

Estimates are for Macau to see its largest year-on-year increase in gross gaming revenue in 32 months, according to analysts. Predictions are for a gross gaming revenue year-onyear increase of between 12 per cent and 16 per cent according to Bernstein and Deutsche Bank, while S&P Global sets a lower bar, at about 10 per cent year-on-year growth. This would place November gross gaming revenue at MOP18.7 billion (US$2.33 billion) to MOP18.9 billion, according to Bernstein, which, if at the upper end of the spectrum, would make it the third highest month in terms of revenue so far this year. The analysts note that VIP share in November of last year was low, set to ‘partially benefit’ this year’s results. Analysts at Deutsche Bank are expecting that VIP in November will show “more meaningful” year-onyear growth, “with mass growth in a similar range;” however, the analysts remain sceptical regarding the sustainability of the segment, due

to continual currency devaluation and the potential for further Mainland intervention.

Closing out 2016

“Wynn gained share in the month,” notes Bernstein, commenting that this also came at the expense of some share declines for Melco, MGM and

Galaxy. Analysts at S&P Global noted that regarding cannibalisation “the worst is behind in the industry” although more could occur with the new openings. Deutsche Bank analysts state that a slowdown could be seen in the final month of the year, noting that the “period of accelerating gross gaming revenue growth […] is about to pause, thereby curbing the explosive growth dream scenario,” predicting growth of 8 per cent to 12 per cent for the

month. Meanwhile, analysts at Citi predict full-2016 will end 4 per cent down year-on-year, but anticipate that 2017 will bring the first full year of growth in revenue since 2013.


‘We anticipate Mass GGR to reach a record high of MOP37.7 billion in the fourth quarter of 2017 (vs. the previous high of MOP37.1 billion achieved in the first quarter of 2014),’ states the group, as quoted by Benzinga. The group predicts a 10 per cent year-onyear increase in revenue for the year. Analysts at Fox Business, however, note that “if revenue growth continues, there will be plenty of money to be spread around and profits could rise overall, driving stocks higher as well. But if gaming goes into another decline, it could be a rough year ahead.” This year could be made more difficult if nearby Japan is able to push through integrated resort legislation, as noted by analysts at Deutsche Bank, yet opining that ‘Japan is poised to again tease and fall short as opposition remains firm, despite favourable media and sell side commentary and considerable optimism within the gaming operator community.’

Business Daily Thursday, December 1 2016    7

Gaming Stocks

Imperial Pacific Executive Director tightens hold

filing notes that Ms. Xia will ‘continue to acquire shares of the company in Executive Director of Saipan casino the future’ and notes her ‘confidence in the prospects of the Group’. The operator Imperial Pacific, Xia Yuki share purchase represents less Yu, is increasing her stake in the than 1 per cent of the total issued company’s stock by purchasing shares. Bloomberg notes that Ms. 5 million new shares, to the tune Xia’s annual remuneration for 2015, of HK$530,200 (US$68,300) as announced in a filing with the Hong including stock options and salary, Kong Stock Exchange yesterday. The amounted to over US$1.36 million.


Becoming a proud Bahamian Chow Tai Fook explains proposed Baha Mar purchase Kelsey Wilhelm

Regarding the recent proposal delivered for the Baha Mar integrated resort in the Bahamas, Chow Tai Fook Enterprises (CTFE) has told Business Daily that in response to allegations that links to SJM and Stanley Ho will link the property to organised crime “CTFE is committed to integrity and good governance in all of our business operations across the globe.” The company, which in an emailed statement noted their desire to “work with the (Bahamian) Government to achieve the goal of a phased opening,” notes its intention to continue relationships with the former developer, building off the “good foundations” and releasing an estimated completion date for the property “after a full review has been conducted.” The group notes that its decision to purchase the initially slated US$3.5 billion (MOP28 billion) integrated resort was “based on our foresight for growth,” given that the reputation of the territory “was very attractive to CFTE.” In addition, the territory’s proximity to the United States, between the U.S. state of Florida and Cuba, and a “great potential to open up new markets for the Bahamas through tourism promotion in Asia,” helped leverage the decision.

In a press statement, Dr. Henry Cheng, Chairman of CTFE, noted that “we are fully committed to this project and plan to hire as many Bahamians as possible to work at the

property.” “CTFE will invest millions ahead of the official deal completion through pre-opening activities and employment – which has already commenced and will be expanded in the coming weeks and months,” he added.

The group further notes that it is “in discussions with hotel brands previously involved in the Baha Mar project, including Hyatt and SLS Hotels,” as well as noting its decision to “re-engage” its subsidiary Rosewood Hotel Group to act as the hotel operator. “We are confident that Baha Mar will be a property that Bahamians can be proud of,” notes the statement.


Japan reopens debate on legislation to legalise casinos Legislation may be passed at the earliest this month Andy Sharp and Takashi Hirokawa

Japanese lawmakers reopened the debate Wednesday afternoon on a bill to legalise casinos, opening the possibility that legislation could be passed as soon as this month. Prime Minister Shinzo Abe needs the support of his Buddhist-backed junior coalition partner Komeito, whose lawmakers are more cautious on casinos because of ethical issues. The party said on Wednesday it has yet to make a decision on whether to support the bill. The session was boycotted by opposition lawmakers opposed to the legislation. Hiroyuki Hosoda, chairman of the ruling Liberal Democratic Party’s general council and head of a crossparty group of pro-casino lawmakers, told parliament that the building of integrated casino resorts would help stimulate regional economies through tourism. “It’s fundamental that the profits from casino facilities are returned to society,” he said. While betting on horse, boat and bicycle races is permitted in Japan, casinos remain banned. International gaming companies have been mulling putting in billions of dollars of investment as Tokyo gears to host the 2020 Olympic Games, promising to increase the number of tourists coming to the country. Japan has the potential

to transform itself into one of the biggest Asian gambling hubs with annual casino revenue of as much

as US$40 billion (MOP320 billion) according to CLSA Ltd. “Everybody is looking at Japan,” Lawrence Ho, Chief Executive Officer of Melco Crown Entertainment Ltd., said in an interview in Macau on

Tuesday. “Japan legislation seems like it’s finally going forward. I personally have been lobbying for it for many, many years. We would be extremely interested and will definitely participate in it, if we are lucky [enough] to.”

Seeking passage

The cross-party group submitted a bill to parliament in April 2015, but other legislation was given priority and discussion was postponed. The focus now will be on whether the bill passes before the current parliament session ends on December 14. Should the legislation pass, a further bill setting rules for operating resorts would have to be approved before any building could start. The Kyodo news wire reported on Tuesday that the ruling Liberal Democratic Party will seek to pass the bill in a lower house plenary session on December 6. It would then go to the upper chamber. The legislation stipulates the government’s ethical obligations, and requires the government to set out policies such as the management of entry for Japanese people. More than 5 million Japanese, about 5 per cent of the population, are addicted to gambling, the Asahi newspaper reported in August 2014, citing a study by a health ministry panel. About 8.7 per cent of adult male Japanese are habitual gamblers, along with 1.8 per cent of females, according to the study. Bloomberg

8    Business Daily Thursday, December 1 2016

Greater China Commodities

Liquidity fears trigger exodus from steel to rubber The reversal was stunning in both its speed and size Josephine Mason and Melanie Burton


n exodus of cash from steel to rubber to zinc threatened a blistering months-long rally across global commodity markets yesterday, triggered by fresh concerns about liquidity in China, the world’s second largest economy. Retail and institutional investors scrambled to exit bullish bets and shore up cash amid government efforts to steady the sliding yuan currency and curb capital outflows. Coking coal futures and construction product steel rebar posted their

biggest one-day falls on record, while Shanghai lead and zinc led steep falls across base metals and rubber dropped sharply. “Both longs and shorts are fleeing the commodities market,” said Liu Xinwei, steel analyst at Sublime. “Capital is flowing into risk-free products, as the treasury bond prices fall and yields increase.” Yuan borrowing costs surged after the central bank pulled funds from the financial system, making investments in commodities and equities more expensive and less attractive. Analysts said the selloff was long overdue after a months-long surge in steel and iron ore, China’s largest

commodity futures markets, which fed into a recent speculative surge in copper, zinc and lead. Shanghai copper hit 3-1/2-year highs earlier this month, while steel rebar futures touched their loftiest level since April 2014 on Tuesday. Still, the reversal was stunning in both its speed and size, reflecting the major role China’s retail investors with an appetite for risk play in global commodity markets. Coking coal futures on the Dalian Commodity Exchange and steel rebar on the Shanghai Futures Exchange fell 8 per cent and 7 per cent respectively, while iron ore dropped 8 per cent, one of its worst daily performances since the contract launched three years ago. Technical and computer-driven

selling and book squaring ahead of the month and year-end added pressure for a second straight day of selling, after China’s major commodity exchanges introduced new measures to tame the spectacular rally. Shanghai zinc and lead plunged 7 per cent, while nickel, tin and copper slid 4 per cent or more, dragging down London Metal Exchange metals.

Selloff overdue

The selling wiped out some of the massive gains in base metals seen over the past few weeks fuelled by hopes that U.S. President elect Donald Trump would boost infrastructure spending. A reduction in China’s steel capacity along with robust infrastructure spending has fuelled a 90 per cent spike this year in prices of construction steel product rebar. Analysts said a reversal was long overdue as the scale of the rally driven by speculative cash was not justified by fundamentals. Demand for steel and copper in China, the world’s top commodities market, from infrastructure and construction is relatively steady, but supplies are relatively robust. “If the cost of borrowing has gone higher, then obviously the bubble will come off a little bit,” said Bonnie Liu, General Manager of GF Futures in Hong Kong. “Technically we probably will see further selling, but probably we will see buying into the dips will be the strategy for next year.” Reuters


Wanda chairman says bubble won’t collapse Wang Jianlin said the group wants to own 20 per cent of all cinemas in the world within 10 years Eveline Danubrata

The chairman of Chinese property-to-entertainment conglomerate Dalian Wanda Group said this week that there is a property market bubble in China but the industry won’t collapse as there is still a significant potential for urbanisation. China’s real estate investment growth quickened in October to its highest since April 2014, data showed, suggesting that property developers have yet to feel any notable pressure from recent measures to curb speculative home purchases. “Yes, there’s a bubble in China,” Wang Jianlin (pictured), who was ranked by Forbes as China’s richest

man this year with a net worth of US$28.7 billion, told a conference in Jakarta. “Particularly in the last few years it’s quite big, but (the sector) will not collapse,” he said, noting that a significant part of the population in China still lives in rural areas and would like to move to the cities.

within 10 years, but did not give details on how it would achieve that. Earlier this month, Wanda extended its buying spree in Hollywood by signing an agreement for the US$1 billion takeover of Dick Clark Productions, the U.S. company that runs

the Golden Globe awards and Miss America pageants. When asked about another property tycoon, Donald Trump, winning the U.S. presidential election, Wang said his presidency could be positive for the economy. “Compared to the past 44 presidents is he better? Can a businessman be better than a career politician? We have to give him a chance.” Reuters

More cinemas

Since Wanda was founded in 1988, the group has become China’s largest commercial property company. It has also expanded into cinemas, sports clubs and finance, partly through acquisitions. Wang said the group wants to own 20 per cent of all cinemas in the world

Polluters crackdown

Government vows to cap water consumption The quality of water in rivers, lakes and reservoirs in several regions has deteriorated significantly China will keep national annual water consumption below 670 billion cubic metres (bcm) through to 2020, the state planning agency said yesterday, part of efforts to ease chronic regional shortages by cutting waste and boosting efficiency. The National Development and Reform Commission (NDRC) said it would also aim to cap total water consumption at less than 700 bcm a year though to 2030. China has long been worried about a water supply bottleneck that could jeopardise future economic

development, with per capita supplies at less than a third of the global average. Consumption last year stood at 635 billion cubic metres, up from 554.8 bcm in 2004, and China’s scarce supplies have been put under increasing pressure from growing demand for agriculture, energy and manufacturing, as well as a rising population and widespread pollution problems. Despite commitments to crack down on polluters, the quality of water in rivers, lakes and reservoirs in several regions has deteriorated

significantly, according to inspection teams reporting back to the Ministry of Environmental Protection. In a document published yesterday, the NDRC pledged to ensure that three quarters of its surface water was fit for human consumption by

2030, up from 66 per cent last year, and it also promised to ensure that underground water extraction rates were sustainable. It also included targets to improve soil quality, reduce overuse of pesticides and fertiliser, and tackle overgrazing on China’s grasslands. China said in a five-year plan on water pollution published earlier this month that it would cut water use per unit of GDP by 23 per cent over the 2016-2020 period, and would also “significantly reduce” the amount used in irrigation. It also pledged to introduce tiered water pricing in urban regions in a bid to encourage conservation, and said it would also create a water usage quota system covering all major agricultural and industrial products. Reuters

Business Daily Thursday, December 1 2016    9

Greater China Power fight

Evergrande rapidly builds up Vanke stake A statement released by the company follows disclosures by the Shenzhen Stock Exchange that block trades of China Vanke A shares, representing a 3.99 per cent stake, were made on Tuesday Clare Jim

China Evergrande Group said it has bought more shares in rival property developer China Vanke - the latest purchase in a rapid build up this month that could soon see it become the company’s second-biggest No. 2 shareholder. Vanke is at the centre of rare high-profile and complex corporate power struggle that has already seen its biggest shareholder, the Baoneng financial conglomerate, try to oust its board and Vanke management seek a white knight deal. While highly indebted Evergrande’s intention towards the country’s biggest homebuilder remain unclear, some analysts say it might seek seats on Vanke’s board at the latter’s next annual shareholder meeting in March. Evergrande said in a statement late Tuesday that it has now spent RMB36.3 billion (US$5.3 billion) to hold 14.07 per cent of Vanke. That represents a sudden jump from just 10 per cent a week ago and a holding of around 5 per cent in August. By contrast, Baoneng holds 25.4 per cent while Vanke’s second-biggest shareholder, China Resources Group owns 15.24 per cent. Vanke’s shares in Shenzhen jumped

over 5 per cent yesterday early trade, while its Hong Kong-listed stock climbed 1.3 per cent. Analysts said yesterday that around 25 per cent of Vanke shares remain as free float on the Shenzhen and Hong Kong markets combined and expectations are high that Evergrande will continue to buy.

Key Points Evergrande now owns 14 pct of Vanke No. 2 shareholder China Resources has 15.2 pct Evergrande has spent $5.3 bln on Vanke stake so far Evergrande has not commented on intentions towards Vanke “Even if Evergrande doesn’t take over Vanke in the end, it’ll get a good share of Vanke’s earnings as a minority shareholder. But if they do take it over, it’ll help Evergrande’s balance sheet a lot and lower its gearing,” said David Hong, head of research at CRIC Hong Kong. Evergrande’s statement follows disclosures by the Shenzhen stock

exchange that block trades of China Vanke A shares, representing a 3.99 per cent stake, were made on Tuesday. The shares were traded at 27.5 yuan each, 5.1 per cent higher than Tuesday’s closing price. Evergrande did not confirm it was

the purchaser of the block trade. Vanke’s management announced in June a US$6.9 billion deal with white knight Shenzhen Metro Group Co Ltd, fearing a hostile takeover bid by Baoneng Group but it remains unclear if that deal will proceed. Reuters

10    Business Daily Thursday, December 1 2016

Asia Manufacturers

Japan factory output steady The ministry maintains its assessment of industrial output, saying a gradual pick-up can be seen in production Minami Funakoshi


apan’s industrial output rose in October from the previous month and manufacturers say production likely bounced sharply this month, preliminary government data showed yesterday, in a sign of a tentative pickup in factory activity. Industrial output rose 0.1 per cent in October, increasing for the third consecutive month. The result slightly

beat the median forecast of a 0.1 per cent fall in a Reuters poll of economists, and followed a 0.6 per cent increase in September. Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expect output to rise 4.5 per cent in November and decrease 0.6 per cent in December. A METI official said manufacturers’ outlook for November is probably overly optimistic, adding the government expects output to rise 1.7 per

cent this month. On the other hand, outlook for December may not be as weak as manufacturers expect, the official added. Recovery in factory output is a welcome sign for policymakers, who have struggled to generate virtuous cycle of growth in consumption and production to lift an economy mired in nearly two decades of deflation and stagnation. “Industrial output is picking up as a trend,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “Output will continue to recover,” Tokuda said, adding that worries about downward risks have moderated recently.

The ministry maintained its assessment on industrial output, saying a gradual pick-up can be seen in production. In October, production gains in semiconductors, smartphone parts and large liquid crystal displays were supported by domestic and Chinese demand, said the METI official. Overall inventories fell 2.1 per cent versus a 0.5 per cent decrease in September.

Key Points Oct output +0.1 pct vs forecast -0.1 pct Manufacturers see output up sharply in Nov, down in Dec METI official says manufacturers’ outlook for Nov too optimistic Japan’s economy expanded for a third straight quarter in July-September as exports recovered, but domestic activity remained weak, highlighting the potential fragility in the export-reliant country’s recovery. Bank of Japan Governor Haruhiko Kuroda has maintained his optimistic view of the economy, saying it was on track for a moderate expansion as exports and output rebounded thanks to an expected improvement in the global economy. But he has also acknowledged that private consumption was not up to the mark and making some companies hesitant to raise the prices of their goods and services - potentially delaying achievement of the central bank’s 2 per cent inflation target. Reuters


Samsung Galaxy Note 7 crisis cited as S.Korea factory output sags Analysts say ongoing restructuring of marginal companies across shipbuilding and shipping industries will restrict production Cynthia Kim

South Korea’s tepid factory output sagged even further in October as production of electronic components and telecommunications equipment fell, clouding the economic growth outlook. A finance ministry official attributed the output drop in part to the cancellation of Samsung Electronics’ Galaxy Note 7, which would weigh on production across different elements of the supply chain. The average factory operation rate fell to 70.3 per cent in October from 71.6 per cent in September, staying close to the lowest level since the global financial crisis of 2009. In monthly terms, industrial output declined 1.7 per cent in October on a seasonally adjusted basis, government data showed yesterday. The drop comes after a revised 0.6 per cent gain in September on monthly terms, and is weaker than a 0.1 per cent decrease estimated by analysts in a Reuters poll. On an annual basis, industrial

output fell 1.6 per cent in October after a revised 1.7 per cent drop in September, compared with a median 2 per cent decline tipped in the same survey. South Korea’s is gripped by a political scandal involving President Park Geun-hye and some of the nation’s biggest companies, which has raised fears of policy paralysis at a time when exports are falling. Speaking at a policy meeting earlier yesterday, Finance Minister Yoo Il-ho said the political scandal has increased downside risks to the economy as it undermined consumer and investor sentiment in broad terms. “Output figures are expected to remain sluggish for the time being,” Lee Sang-jae, an Eugene Investment & Securities economist said after the data was issued. Lee added that it was hard to expect a solid recovery at least until the first quarter of 2017 as “there is an outburst of uncertainties at home and abroad.” Production of telecommunication equipment dropped 18.1 per cent

from September while output of electronic components fell 3.7 per cent, driving the overall index down, although car production rose 4.7 per cent from a month earlier. Service sector output saw a 0.2 per cent fall in October from a month earlier after a revised 0.7 per cent decline, in a sign that the outlook is worsening even for one of the few bright spots this year. Shipping sector restructure bites Analysts say the on-going restructuring of marginal companies across shipbuilding and shipping industries will restrain production and further

reduce the factory utilization rate, which is already at a cyclical low. Daewoo Shipbuilding & Marine Engineering Co Ltd, one of the world’s three largest shipyards, is currently suffering from a big drop in orders, while the nation’s biggest shipper Hanjin Shipping Co Ltd is under court receivership. “Given that those sectors are undergoing restructuring, their priorities through the end of December would be to push out inventories or finish whatever they have started before the year ends,” said Moon Jung-hui, an economist with KB Investment & Securities. Reuters

Business Daily Thursday, December 1 2016    11

Asia Key legislation

In Brief

Australian Senate gives PM milestone victory, then defeat It rejected a government proposal to lower the tax paid by foreign travellers on income they earn Colin Packham

Australian Prime Minister Malcolm Turnbull secured the passage of some cornerstone legislation yesterday but quickly suffered an embarrassing defeat of a government plan for a lower “backpacker tax” on work done by young, foreign visitors. Turnbull, facing pressure over a slump in his standing in opinion polls, was able to secure the passage of a law setting up a building-industry regulator after he struck a deal with independent senators. The prime minister has pinned his political fortunes to the introduction of a building-industry regulator, using the Senate’s rejection of earlier such legislation as a trigger to call an election in July, when he secured a narrow victory. But soon after securing passage of

legislation on a regulator, the Senate rejected a government proposal to lower the tax paid by foreign travellers on income they earn, often in rural jobs such as fruit picking. Turnbull now faces the prospect of angry rural voters who argue the current 32.5 per cent “backpacker tax” poses a risk to exports of fruit, which are set to earn a record A$2.27 billion (US$1.70 billion) next season. “We remain optimistic that we can persuade the Senate to change its mind,” Turnbull told reporters in Canberra. Turnbull this week said his government had reached an agreement with independent senators to lower the tax to 15 per cent. The Senate, however, rejected that deal, passing an alternative rate of 10.5 per cent. Without a compromise by Friday, the tax rate will be fixed

at 32.5 per cent on Jan. 1. Turnbull has been expected to focus on economic reform, a traditional area of strength for conservative governments like his, but he will need to turn around negative polls to avoid internal challenges, political analysts say.

“We remain optimistic that we can persuade the Senate to change its mind” Malcolm Turnbull, Australia’s Prime Minister “One of the rationales for replacing Abbott was the 30 consecutive bad polls, he will need to arrest the slide in popularity to avoid a similar pressure,” said Haydon Manning, professor of political science at Flinders University, referring to previous prime minister, Tony Abbott. Reuters

General poll

Malaysian PM calls for election preparations Malaysian Prime Minister Najib Razak has urged party members of the United Malays National Organization (UMNO) to make preparations for the 14th general election, though he still declined to give a definitive answer on whether he would call a snap election next year. Delegates who attended a closed-door presidential address ahead of the 70th UMNO General Assembly said they had received a clear message from Najib, who serves as UMNO president, to retake seats in the next general election, according to a yesterday report from the Star. Oil industry

JX plans to boost crude refining Japan’s JX Nippon Oil & Energy Corp said yesterday that it would boost the amount of crude it refines for local consumption by 6 per cent in December from the year before. The country’s top refiner said it would refine 1.14 million barrels per day of crude for domestic consumption, up on last December due to problems at multiple refineries at that time. “December is expected to stay cold, so we expect kerosene sales to stay strong,” a company spokesman said, adding that it stood ready to boost refining volumes, curb oil product exports or buy oil supplies domestically if warranted by levels of demand. Banks

ANZ CEO says sector under scrutiny following scandals

Malcolm Turnbull, Australia’s Prime Minister

Iraqi crude

Indonesia’s Pertamina seeks new processing agreement The deal will last for 12 months starting January 2017 Mark Tay

Indonesia’s Pertamina is seeking a new crude processing agreement for its 2017 Iraqi crude allocations as the firm’s current processing agreement with Shell expires in December. The state-controlled oil firm issued a tender for the new processing deal earlier this month and has since closed it. It is expected to announce the results “soon”, a Pertamina official said, without disclosing the exact timeline.

Key Points New crude processing agreement for 12 months starting Jan Tender to be awarded “soon” - Pertamina official Refiners and selected traders were invited to submit proposals for a processing agreement that will see Pertamina supply 1 to 2 million barrels of Iraqi crude per month in exchange for similar volumes of oil products, trading sources with knowledge of the tender said. The processing agreement will last for 12 months starting January 2017, and both Iraqi Basra Light and Heavy crude grades could be supplied by

the Indonesian oil firm. Shell is one of the participants in the tender, said a second Pertamina official, speaking on condition of anonymity because the official was not authorised to speak to the media. Shell didn’t immediately respond to a request for comment. In June, Pertamina selected Shell to process 1 million barrels per month of Iraqi crude at a Singapore refinery from July to December this year. Pertamina’s monthly Iraqi oil shipments to the Singapore refinery are

likely to consist of 290,000 barrels from a stake in the West Qurna block and a further 700,000 barrels from other Iraqi fields. The firm has resorted to crude processing agreements with third parties as its domestic refining capacity of around 1 million barrels per day only meets about two-thirds of Indonesia’s daily oil consumption. Indonesian refineries are also geared to refine low sulphur crude grades from West Africa and the Asia-Pacific and less suited to process high sulphur crude from the Middle East like Iraqi Basra Light and Heavy. Reuters

Australia and New Zealand Banking Group Chief Executive Shayne Elliott yesterday said the country’s banking sector has come under scrutiny from the public, regulators and the government following a series of scandals. Australia’s banks have come under intense political pressure amid calls for a powerful judicial inquiry into the financial sector, following revelations of misleading financial advice, insurance fraud and alleged interest-rate rigging. “It’s been a very difficult environment for industry,” Elliott said at a Reuters Newsmaker event in Sydney, adding: “I don’t think it’s just going to go away”. Amnesty International

Labour abuses found at Indonesian palm plantations Global consumer companies, including Unilever, Nestle, Kellogg and Procter & Gamble, have sourced palm oil from Indonesian plantations where labour abuses were uncovered, Amnesty International said yesterday. Children as young as eight worked in “hazardous” conditions at palm plantations run by Singapore-based Wilmar International Ltd and its suppliers on the Indonesian islands of Kalimantan and Sumatra, Amnesty said in a report. Amnesty, which said it interviewed 120 workers, alleges that many of them worked long hours for low pay and without adequate safety equipment.

12    Business Daily Thursday, December 1 2016

Asia Central bank

Rising debt levels threaten New Zealand’s financial stability Some 20 per cent of farms account for around 50 per cent of overall dairy debt


ising debt resulting from soaring home prices and low dairy prices is continuing to pose a risk to New Zealand’s financial system, the central bank warned yesterday. While house price inflation in the largest city of Auckland, home to a third of the population, had softened recently, house price to income ratios remained among the highest in the world, said a Financial Stability

Report from the Reserve Bank of New Zealand (RBNZ). Vulnerabilities in the housing market had increased in the past six months and house price pressures were spreading beyond Auckland to the rest of the country, said the report. “Credit to the household sector is growing rapidly, and the household debt-to-disposable income ratio now stands at 165 per cent, a record high,” said the report.

“Rising house prices continue to reflect low interest rates, steady income growth, and an imbalance between population growth and the rate of house building. There is a risk that a reversal of any of these factors could cause a significant market correction.” Meanwhile, low dairy prices have caused the average dairy farm to suffer operating losses for the past two seasons. However, even with recent improvements in dairy pay-outs, some farms might struggle to achieve profitability, especially given that 20 per

cent of farms accounted for around 50 per cent of overall dairy debt. RBNZ governor Graeme Wheeler said in a statement that the RBNZ had asked Finance Minister Bill English to give it a debt-to-income (DTI) tool to regulate bank lending.

“As a result, problem loans are likely to continue to increase” Financial Stability Report from the Reserve Bank of New Zealand Deputy governor Grant Spencer said in the statement that the banking system had strong capital and funding buffers and profitability remained high. “However the banking system’s reliance on offshore wholesale funding is beginning to increase due to a widening gap between credit and deposit growth. Banks could become more susceptible to increased funding costs and reduced access to funding in the event of heightened financial market volatility,” Spencer said. Although annual consumer price index inflation in New Zealand remains well below the Reserve Bank of New Zealand’s 1-per cent to 3-per cent target band, it showed signs of lifting. Xinhua


Australia’s home building boom fast turning to rubble The central bank has been playing down the need for further easing following cuts in August and May Wayne Cole

Australia is watching a muchneeded boom in home building turn to rubble after approvals for new projects collapsed in October, a violent turnaround that could undermine policymakers’ hopes for solid economic growth next year.

“Overall the update is unambiguously weak and puts a clear marker in the ground showing the construction cycle is now turning down”

to 22.5 per cent. Most of the damage came in the once high-flying apartment sector where approvals dived by a quarter in October alone, and were down more than 42 per cent on the same month last year. That will be alarming news for the Reserve Bank of Australia (RBA), which has been counting on continued strength in home building to offset a lingering drag from a mining slump. Indeed, figures due next week had

already been expected to show the economy all but stalled in the third quarter, and may even have shrunk - only the fourth negative quarter in 25 years. “Total approvals are still relatively high but the speed at which they are rolling over is a real surprise,” said Shane Oliver, chief economist at AMP. “It already looks like the economy lost momentum in the third quarter and now residential investment could turn into a drag on growth next year,” he added. “That only underscores our call for another rate cut next year.” While the economy had been running at a brisk 3.3 per cent in

the year to June, that likely slowed closer to 2.0 per cent for the year to September. The RBA has been playing down the need for further easing following cuts in August and May that took the cash rate to an all-time low of 1.5 per cent. Policymakers argued that the massive drag from a slowdown in mining investment had almost passed, while a revival in prices for key commodity exports in recent months was set to boost national income. As a result, financial markets had all but given up on the chance of a further rate cut and were even toying with the idea of a hike late in 2017. “All talk of a hike is out the window after these building numbers,” said Oliver. Reuters

Matthew Hassan, an economist at Westpac Shock figures from the Australian Bureau of Statistics yesterday showed approvals to build new homes sank 12.6 per cent in October from a month earlier, confounding forecasts of a 1.5 per cent rise and the biggest drop since mid-2012. It was the third month of declines and brought the pullback since July

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Business Daily Thursday, December 1 2016    13

Asia Energy sector

In Brief

South Korea unveils new tariffs The ministry will expand subsidies to cover up to 50 per cent of the cost of installing solar power systems in homes and schools Jane Chung

South Korea plans to provide new incentives for renewable producers and consumers as its seeks to double power from green sources to 11 per cent of the country’s electricity supply by 2025 from 4.5 per cent last year. Seoul will implement a competitive market auction system for power producers as early as the first quarter of 2017, shifting away from the current feed-in-tariff system, the country’s energy ministry said in a statement yesterday. The new system means utilities can buy electricity from renewable power producers via tenders and fixed-price deals for up to 20 years - helping green energy producers ensure stable profits. The move comes after Asia’s fourthlargest economy said in July it would pump 42 trillion won (US$35.85 billion) into meeting its pledge at the Paris Climate summit last year to cut greenhouse gas emissions by 37 per cent by 2030. “The penetration rate of renewable energy sources is expected to grow up to 11 per cent by 2025, and we can meet this goal 10 years earlier than we have aimed,” Energy Minister Joo Hyung-hwan said at a meeting with power generators and companies. Joo said Korea’s upcoming power supply plan, due to be released next

year, will be more environmentally friendly in line with the country’s new renewable plans. At present, utilities can purchase electricity from renewable producers at prices set by the government via feed-in tariffs (FIT). That has allowed producers to secure sales of renewable energy at fixed prices, but has not stoked lower prices through competition. “We are planning to set a longterm goal to generate 30 per cent of our power with renewable energy

sources by 2030,” Lee Jong-sik, executive vice president of Korea Southern Power Co Ltd (KOSPO), told Reuters. In addition to the competitive auction system, the ministry will expand subsidies to cover up to 50 per cent of the cost of installing solar power systems in homes and schools. With the new plans, the ministry expects green energy sources to supply 11 per cent of the country’s total electricity by 2025. The aim is to increase installed capacity of renewable energy power to 45.5 gigawatts (GW), from 13.7 GW in 2015. Korea currently generates nearly 40 per cent of the country’s electricity from coal, followed by nuclear power at 30 per cent with the rest coming from oil, gas and renewable energy sources. Reuters

The Monetary Authority of Singapore (MAS) and the Bank of Japan have established a local currency swap agreement, the MAS said yesterday. The agreement allows for the exchange of local currencies between the two central banks of up to S$15 billion (US$10.53 billion) or 1.1 trillion yen, the MAS said. “It will enable MAS to provide Japanese yen liquidity to eligible Singapore financial institutions in support of their cross-border operations,” the central bank said. The swap agreement is effective as of yesterday for a term of three years, it added.

West Australian power network to be sold Western Australia state will sell a majority stake in its electricity grid via a public float to reduce the state’s debt, but ensure the asset remains in Australian hands, state officials said yesterday. The proposed public offering of Western Power, the state’s electricity network, follows the sale of Ausgrid, a power network owned by New South Wales state, last month to a consortium of Australian pension funds. That deal was agreed at a price lower than bids made by Chinese and Hong Kong suitors after Australia’s treasurer Scott Morrison blocked the foreign bids, frustrating the bidders and spooking foreign investors.

South Korea power plant

Australia takes aim at oil and gas industry The oil and gas tax review follows a recent audit which found that Australia’s biggest petroleum operation may have underpaid royalties by taking ineligible deductions Australia is targeting the oil and gas industry for a tax review ahead of next year’s budget, in a push to boost revenue after a sharp slump over the past three years and collect more from multinational giants. Treasurer Scott Morrison said yesterday that takings from the nation’s petroleum resource rent tax had halved to A$800 million (US$600 million) since 2013, while revenue from crude oil excise taxes had more than halved due to a collapse in oil and gas prices and falling output. “This is about ensuring sustainability and effectiveness and efficiency of our tax system. It is actually not primarily about revenue. It is important these companies pay their fair share when it comes to these issues,” Morrison told reporters. The drive comes as Australia is not expected to reap as much as hoped

Singapore, Japan agree on currency swap line

Public offering

Tax review

Sonali Paul

Central banks

from a more than US$200 billion investment spree over the past few years that will make it the world’s biggest exporter of liquefied natural gas (LNG) by around 2019. That is because the petroleum resource rent tax (PRRT) is designed to collect revenue after projects have recouped their investment and are profitable, which will take longer than expected in a world of weak oil and gas prices. “LNG projects, unlike conventional oil and gas projects, involve billions of dollars of up-front investment. It will take 10 or more years to recover that investment before making a return,” Shell Australia Chairman Andrew Smith said in an emailed statement. Canberra has already been tackling multinationals over clever accounting and the use of trading operations offshore to lower their tax exposure in Australia, and Morrison said the oil and gas focus is part of that effort.


Australia last targeted the resources industry in 2010, when then Labour Prime Minister Kevin Rudd proposed a super profits tax at the height of the mining boom which was eventually heavily watered down after a bitter fight with miners and contributed to his downfall. The oil and gas tax review follows a recent audit, which found that Australia’s biggest petroleum operation, the North West Shelf joint venture, whose owners include Chevron Corp and Royal Dutch Shell, may have underpaid royalties by taking ineligible deductions. Morrison said deduction calculations will be examined as part of the review.

Industry backs review

The oil and gas industry said it would cooperate with the review, in contrast with the mining industry in 2010, saying the petroleum resource rent tax was working as intended. ExxonMobil said it had paid over A$12 billion in PRRT since 1990. “We welcome the review. This will give us another opportunity to talk about our contribution,” ExxonMobil Australia Chairman Richard Owen said at an event in Sydney. The Australian Petroleum Production and Exploration Association said the industry had paid more than A$5 billion in taxes in 2015, despite recording its first ever net loss. “The continued payment of taxes at a time when the industry is under severe pressure debunks critics’ suggestions that the industry is not somehow paying its way,” APPEA Chief Executive Malcolm Roberts said in a statement. Oil and gas company shares fell on Wednesday along with oil prices, as OPEC looked like it would fail to agree on a production cut. Woodside fell 2 per cent, Santos dropped 3.5 per cent, while Beach Energy slid 4.8 per cent. Reuters

Japan fund managers increase stocks Japanese fund managers increased equity holdings and trimmed exposure to bonds in their model portfolios in November as domestic shares rose to the highest since January after Donald Trump was elected U.S. president, a Reuters survey showed. The survey of five Japan-based fund managers conducted between Nov. 17 and Nov. 22 showed respondents on average wanted to allocate 38.7 per cent of their portfolios to equities, up from 37.6 per cent in October. Within equities, the respondents increased their exposure to Japanese stocks to 48.7 per cent in November from 48.1 per cent in October. Oil industry

Singapore fuel margins at narrow discount Singapore’s benchmark 180cst fuel oil refining margins settled on Tuesday at their narrowest discount to Dubai crude in almost five years on the back of robust seasonal demand, limited supplies and falling crude prices ahead of an OPEC meeting. Refining margins for the benchmark 180-cst fuel oil have risen sharply this quarter, supported by supply issues in major producers like Russia and Venezuela as well as strong demand, said Nevyn Nah, oil products analyst at Energy Aspects. In addition to the strong market fundamentals, traders said tumbling crude prices also contributed to the strengthening in fuel oil margins.

14    Business Daily Thursday, December 1 2016

International In Brief Prime Minister

Portugal’s state budget to bring renewed confidence Portugal will see a confidence boost next year following a “budget year of excellence,” Portugal’s Prime Minister Antonio Costa said on Tuesday, after the country’s state budget plan for 2017 was approved. “There has been a confidence boost thanks to the efforts we made through this year, to a majority voting this state budget at parliament, and to the serene way in which this debate ended,” Costa said. State budget forecasts economic growth of 1.5 per cent and a budget deficit of 1.6 per cent. It also forecasts inflation of 1.5 per cent and unemployment to decrease to 10.3 per cent. Employment

Airbus says to cut jobs to boost performance European aircraft manufacturer Airbus on Tuesday said to slash 1,164 posts as part of its major restructuring scheme to face competition. The plane maker plans to cut 1,164 job in 2017 expected “to affect support and integrated functions as well as the CTO (Chief Technology Office) organisation,” the group said in a press release. In a bid to invest in developing core competences, Airbus pledged to create around 250 jobs. In addition, Airbus said to move its headquarters from Paris and Munich to Toulouse in southern France accompanied by the transfer of 325 positions.

European financial sector

Carney returns Draghi’s Brexit warning with one of his own Prime Minister Theresa May plans to formally start the exit process by March, triggering at least two years of talks


ark Carney warned that the European Union has a lot to lose from any damage Brexit does to the British banking

system. “The U.K. is effectively the investment banker for Europe,” the Bank of England (BOE) governor said at a press conference in London yesterday. “These activities are crucial for firms in the European Union economy, and it’s absolutely in the interest of the European Union that there is an orderly transition and that there’s continual access to those services.” The remarks, made alongside a warning that risks to financial stability remain elevated, underline the stakes in the exit negotiations set to start next year. They were made after Dutch Finance Minister Jeroen Dijsselbloem said London risks losing its status as the euro area’s financial capital and European Central Bank President Mario Draghi said the U.K. would suffer the most in the divorce. “We can’t allow the financial service centre for Europe and the euro zone to be outside Europe and to go its own way in terms of rules and regulations,” Dijsselbloem said on Tuesday. “If, in the long run, the risk of a

less open U.K. economy in terms of trade, migration and foreign direct investment were to materialize, there would be a negative impact on innovation and competition and, thus, productivity and potential output,” Draghi said on Monday. “Such developments would first and foremost weigh on the U.K. economy. They would to a likely lesser extent also have some limited adverse spillover effects on the euro area.”

Spill back

Carney said in the press conference that all trade deals and financial reforms need a transition period, his first public endorsement of a buffer that businesses and banks are lobbying for amid concerns the U.K. will leave the EU before it strikes a deal over future links. “If any such adjustments take place in a short timeframe, there could be greater risk of disruption to services provided to the European real economy, which could spill back to the U.K. economy through trade and financial linkages,” the BOE said in its Financial Stability Report (FSR), which it publishes twice a year. The FSR was published alongside the latest financial health check. While in aggregate the tests showed

the banking system is well capitalized, Royal Bank of Scotland Group Plc failed to clear some hurdles and had to submit a new capital plan. Barclays Plc and Standard Chartered Plc were also found to have “some capital inadequacies” and will have to build further buffers to keep themselves safe.

Current account

On overall stability, the FSR echoed risks from previous reviews, including the current account deficit - almost 6 per cent of GDP - high household debt, commercial real estate, market liquidity and the global environment. The BOE said there’s been no material change to the U.K.’s ability to finance the current account, but warned that a sharp adjustment in the trade deficit “could test financial stability.” As this would be associated with a further drop in the pound, it would worsen the trade-off between growth and inflation, creating a further dilemma for Carney and fellow policy makers over how to set interest rates. The BOE also drew attention to global risks, saying this source of vulnerability has increased since its last review in July. Expectations of a U.S. fiscal boost and risks of reduced global trade since Donald Trump’s victory in the presidential election reinforced weak spots in indebted emerging-market economies. Bloomberg News

Retail biz

U.S. Cyber Monday online sales hit record Americans spent a record of US$3.45 billion in online purchases on Cyber Monday, up 12.1 per cent from last year’s holiday. This marks the largest online sales day in U.S. history, which tracks 80 per cent of all online transactions at the 100 largest retailers in the country, Adobe Digital Insights (ADI) said in a press release issued Tuesday. American online shoppers spent more than US$5 billion by the end of Black Friday, a 17.7 per cent increase year-overyear, ADI said on Saturday. Black Friday set a record by surpassing the three-billion-dollar mark for the first time at US$3.34 billion, it said.

Mark Carney, Bank of England governor

Political crisis

South Africa resolves to keep President Zuma in power The ruling party lost 8 per cent in the last local government elections where they lost strategic cities including the administrative capital Tshwane

Official report

Credit constraints rise in Germany The credit constraints for German industry and trade companies rises slightly in November compared to October, the research institute Ifo reported this week. According to the report, the per centage of companies reporting problems in borrowing rose slightly from 14.4 per cent in October to 14.6 per cent in November. The index in the manufacturing sector fell from 12.5 to 11.8 per cent, a new record low, while the indicator in the construction industry rose from 15.1 per cent to 16.7 per cent, the think tank said.

The National Executive Committee (NEC) of South Africa’ s ruling party debated calls for President Jacob Zuma to resign and resolved to keep him, party secretary general Gwede Mantashe told reporters this week. African National Congress (ANC), the ruling party, held the NEC meeting on Nov. 26-28. According to Mantashe, the party engaged in a robust debate. Zuma, president of both the party and country, did not take part in the debate and only listened. “We affirm our support in Zuma, president of the party and the republic. Following robust, honest, candid and at times difficult discussions, the NEC did not support the call for the president to step down.” Some ANC veterans, including former President Thabo Mbeki, as well as the opposition political parties

have called on Zuma to step down. Mantashe said that during the NEC debate, some argued for his resignation while others were against it. He said some requested a vote on the call for the president to resign and that was turned down. Mantashe said they used consensus in the party to oppose voting in the NEC. He also said those who had supported the call for Zuma to step down will not be victimized or treated differently. Mantashe said Zuma is unfairly criticized at times. The ANC lost 8 per cent in the last local government elections where they lost strategic cities including the administrative capital Tshwane. The NEC resolved to work for the unity in the party, and decided to have a National Policy and Consultative Conference from June 30 to July

5, 2017. They also agreed to hold a national conference in December 2017 where they will elect the new party leadership. “We would have elected new leadership of the ANC. There will be a new president who will be the face of the party in the 2019 campaign,” Mantashe said.

‘African National Congress SecretaryGeneral Gwede Mantashe said those who had supported the call for Zuma to step down will not be victimized or treated differently’ The ANC is currently visiting various parts of the country to engage with local communities to regain the lost ground. Xinhua

Business Daily Thursday, December 1 2016    15

Opinion Business Wires

The Phnom Penh Post E-commerce in Cambodia continues to be hindered by a lack of regulation that is slowing down the growth of the country’s online economy compared to the region, experts said yesterday. During an event organised by the Cambodian ICT Federation, panellists explained that the much-delayed e-commerce law has created uncertainty for businesses and a lack of protection for consumers. Mike Gaertner, chief operating officer of Sabay Digital, said that little progress has been made over the last decade for establishing basic e-commerce protections.

Is our economic future behind us?

The Times of India Fitch Ratings on Tuesday lowered India’s GDP growth forecast for this fiscal to 6.9 per cent from 7.4 per cent, saying there will be “temporary disruptions” to economic activity post demonetisation. It said economic activity will be hit in the October-December quarter because of the cash crunch created by withdrawal and replacement of 500 and 1000 rupee notes that accounted for 86 per cent of the value of currency in circulation. “Indian growth has also been revised down to reflect temporary disruptions to activity related to the RBI’s surprise demonetisation of large-denomination bank notes,” Fitch said.

Viet Nam News The number of newly-established firms in the past 11 months hit a five-year record high of 101,683 thanks to the Government’s incentive policies, the General Statistics Office (GSO) reported. The January-November period also saw another 24,560 firms, which had to close doors previously, resume operation, up 31.7 per cent year-on-year. It raised the country’s total firms that were either newly set up or resumed operation in the past 11 months to 126,200. On average, up to 382 new firms were set up per day during the period, GSO said.

Bangkok Post Thailand is embracing the dawn of digital transformation with total spending on enterprise IT infrastructure expected to reach 500 billion baht by 2020, says IDC Thailand. The country’s IT infrastructure spending in 2016 is expected to total 400 billion baht, up 3.9 per cent yearon-year. Jarit Sidhu, research manager and lead analyst of IDC Thailand, said organisations in Thailand have started the journey towards digital transformation this year. By 2020, IDC predicts that 30 per cent of the top 500 companies in Thailand will see the majority of their business depend on the ability to create digitally-enhanced products, services and experiences.


ith the global economy yet to recover from the 2008 economic crisis, concern about the future – especially of the advanced economies – is intensifying. My Northwestern University colleague Robert J. Gordon captures the sentiment of many economists, arguing in his recent book The Rise and Fall of American Growth that the enormous productivity-enhancing innovations of the last century and a half cannot be equalled. If true, advanced economies should expect slow growth and stagnation in the coming years. But will the future really be so bleak? Probably not. In fact, pessimism has reigned over economists’ outlooks for centuries. In 1830, the British Whig historian Thomas Macaulay observed that, “[i]n every age, everybody knows that up to his own time, progressive improvement has been taking place; nobody seems to reckon on any improvement in the next generation.” Why, he asked, do people expect “nothing but deterioration”? Soon, Macaulay’s perspective was vindicated by the dawn of the railway age. Transformative advances in steel, chemicals, electricity, and engineering soon followed. When it comes to our technological future, I would expect a similar outcome. Indeed, I would go so far as to say, “We ain’t seen nothin’ yet.” Technological advances will create a tailwind of hurricane-like proportions to the world’s most advanced economies. My optimism is based not on some generalized faith in the future, but on the way science (or “propositional knowledge”) and technology (“prescriptive knowledge”) support each o th e r . J u st a s s c i e n t i f i c breakthroughs can facilitate technological innovation, technological advances enable scientific discovery, which drives more technological change. In other words, there is a positive feedback loop between scientific and technological progress. The history of technology is full of examples of this feedback loop. The seventeenth-century scientific revolution was made possible partly by new, technologically advanced tools, such as telescopes, barometers, and vacuum pumps. One cannot discuss the emergence of germ theory in the 1870s without mentioning prior improvements in the microscope. The techniques of x-ray crystallography used by Rosalind Franklin were critical to the discovery of the structure of DNA, as well as to discoveries that led to over 20 Nobel prizes. The instruments available to science today include modern versions of old tools that would have been unimaginable even a quarter-century ago. Telescopes have been shot into space and connected to high-powered adaptive-optics computers, to reveal a universe quite different from the one humans once imagined. In 2014, the builders of the Betzig-Hell microscope were awarded a Nobel Prize for overcoming an obstacle that had previously been considered insurmountable, bringing optical microscopy into the nanodimension. If that is not enough to quash technological pessimism, consider the revolutionary instruments and tools that have emerged in recent years – devices that would never even have been dreamed of a few decades earlier. Start with the computer. Economists have made valiant efforts to assess computers’ impact on the production of goods and services, and to measure their contribution

Joel Mokyr Professor of Economics and History at Northwestern University

to productivity. But none of these measures can adequately account for the untold benefits and opportunities computers have created for scientific research. There is no lab in the world that does not rely on them. The term in silico has taken its place next to in vivo and in vitro in experimental work. And entire new fields such as “computational physics” and “computational biology” have sprung up ex nihilo. In line with Moore’s Law, advances in scientific computation will continue to accelerate for many years to come, not least owing to the advent of quantum computing. Another new tool is the laser. When the first lasers appeared, they were almost an invention in search of an application. Nowadays, they are almost as ubiquitous as computers, used for seemingly mundane daily uses ranging from document scanning to ophthalmology. The range of research areas that now rely on lasers is no less broad, running the gamut of biology, chemistry, genetics, and astronomy. LIBS (laserinduced breakdown spectroscopy) is essential to the protein analysis on which so much research in molecular biochemistry depends. Recently, lasers enabled the confirmation of the existence of gravitational waves – one of the holy grails of physics. Yet another technological innovation that is transforming science is the gene-editing tool CRISPR Cas9. Already, sequencing genomes is a fast and relatively cheap process, its cost having dropped from US$10 million per genome in 2007 to under US$1,000 today. CRISPR Cas9 takes this technology to a new, truly revolutionary level, as it enables scientists to edit and manipulate the human genome. While that idea may give some people pause, the technology’s potential beneficial applications – such as enabling essential crops to withstand climate change and water salination – cannot be overestimated. Furthermore, digitization has lowered access costs for researchers substantially. All research relies on access to existing knowledge; we all stand on the shoulders of the giants (and even average-size figures) who came before us. We recombine their discoveries, ideas, and innovations in novel – sometimes revolutionary – ways. But, until recently, learning what one needed to know to come up with scientific and technological innovations took a lot more work, with countless hours spent scouring libraries and encyclopaedia volumes. Nowadays, researchers can find nanoscopic needles in information haystacks the size of Montana. They can access mega-databases, where they can find patterns and empirical regularities. The eighteenth-century taxonomist Carl Linnaeus would be envious. Our scientific knowledge is surging forward, leading to innumerable new applications. There can be no doubt that technology will forge ahead as well, in scores of expected and unexpected areas. It will bring economic growth, albeit perhaps not the kind that will register fully if we continue to rely on our out of date standards for national income accounting. Project Syndicate

Just as scientific breakthroughs can facilitate technological innovation, technological advances enable scientific discovery, which drives more technological change

16    Business Daily Thursday, December 1 2016

Closing Consumer prices

Eurozone inflation hits 31-month high

Eurozone inflation rose to a two-and-half year high in November as Europe moved further away from the low consumer prices that have put a fragile economic recovery under threat. The Eurostat statistics agency yesterday said consumer prices in the 19-country currency bloc rose by 0.6 per cent this month, the first time it has hit that level since April 2014. The level matched forecasts by analysts and will come as a relief to the European Central Bank which has embarked on a highly controversial and massive stimulus programme to boost inflation.

The eurozone’s ultra-low inflation is a huge worry for the ECB, where the goal is to keep inflation near 2.0 per cent. Inflation reflects underlying consumer demand in the economy and while still edging higher this month, 0.6 per cent means Europe is still short of a full-fledged recovery. Analyst Howard Archer said that core inflation - stripped of highly volatile oil prices - still remained far too low at 0.8 per cent. “The muted November core inflation data highlight that the ECB cannot relax on the inflation front yet, even if the headline rate looks primed to rise appreciably over the next few months,” Archer of IHS Global Insight wrote. AFP

Women’s rights

Let women drive, urges Saudi prince He also detailed the “economic costs” of women having to rely on foreign private drivers or taxis Ian Timberlake


n outspoken billionaire Saudi prince wants an “urgent” end to his country’s ban on women driving, saying overturning the law was a matter of women’s rights and economic necessity. “Stop the debate: Time for women to drive,” Prince Alwaleed bin Talal said on his official Twitter account, @Alwaleed_Talal.

“Preventing a woman from driving a car is today an issue of rights similar to the one that forbade her from receiving an education or having an independent identity”

theme park. He is a long-time advocate of women’s rights in the Islamic kingdom, which has some of the world’s tightest restrictions on women and is the only country where they are not allowed to drive. In conjunction with his short tweet, Alwaleed’s office issued an unusually long statement outlining his reasons for supporting an end to the ban. “Preventing a woman from driving a car is today an issue of rights similar to the one that forbade her from receiving an education or having an independent identity,” Alwaleed said. “They are all unjust acts by a

traditional society, far more restrictive than what is lawfully allowed by the precepts of religion.” He also detailed the “economic costs” of women having to rely on foreign private drivers or taxis, since public transit is not a viable alternative in the kingdom. Using foreign drivers drains billions of dollars from the Saudi economy, Alwaleed said. He calculated that families spend an average of 3,800 riyals ($1,000, 940 euros) a month on a driver, money which otherwise could help household incomes at a time when many are making do with less. Even if their husbands can take time out to transport the women, that requires temporarily leaving the office and “undermines the productivity of

the workforce,” Alwaleed said. “Having women drive has become an urgent social demand predicated upon current economic circumstances.” The prince said he is making his call on behalf of those with “limited means”. A slow expansion of women’s rights began under the late king Abdullah, who in 2013 named them to the Shura Council which advises cabinet. Abdullah also announced that women could for the first time vote and run in municipal elections, which were held last December. These and other decisions in Saudi history were initially opposed by “certain elements” but soon became accepted, Alwaleed said, calling for “a similarly decisive” political act. In April, Deputy Crown Prince Mohammed bin Salman said change cannot be forced, and “it is up to Saudi society.” In Alwaleed’s view, however, “what cannot be allowed is to have one segment imposing its preferences on the rest of society.” AFP

Prince Alwaleed bin Talal

Alwaleed is an unusually outspoken member of the Saudi royal family who holds no political posts but chairs Kingdom Holding Co., which has interests including US banking giant Citigroup and the Euro Disney


Korean crisis


Japanese minister says deals Park’s allies suggest that she New Zealand gov’t determined with Russia to be ‘win-win’ resign presidency in April to tackle non-tariff barriers Japan’s trade minister yesterday dismissed concerns that boosting economic ties with Russia as part of a push for progress on a decades-old territorial row would mainly benefit Moscow, saying any business deals would be “win-win” for both. Japanese Prime Minister Shinzo Abe is betting his close ties with Russian President Vladimir Putin and the lure of Japanese investment in fields from medical technology to energy could ease progress in the dispute over four islands seized by Russia at the end of World War Two when the leaders meet in Japan next month. The feud over the islands, called the Northern Territories in Japan and the Southern Kuriles in Russia, has kept Tokyo and Moscow from signing a peace treaty formally ending their conflict and strengthening ties in the face of a rising China. “This is not a matter of Japan giving money to Russia. These are all projects that will provide business chances for Japanese firms,” Trade Minister Hiroshige Seko, now in charge of economic cooperation with Russia, told Reuters. “These projects ... will cultivate new growth areas for Japanese firms and in the sense they will also be a plus for Russia, they will be win-win.” Reuters

Embattled South Korean President Park Geunhye may have bought some time in office after offering to resign on Tuesday over an influencepeddling scandal. A faction of her ruling Saenuri Party that had previously supported her impeachment said yesterday that it would accept her resignation at the end of April, and gave her nine days to make a proposal. The group of about 40 lawmakers holds the balance of power in an impeachment vote, which requires support from two-thirds of parliament. “It’s important for Park to clearly propose a detailed timetable for her resignation to show her sincerity,” Hwang Young-cheul, a spokesman for the Saenuri faction, said after a meeting with them yesterday. “End-April will be the most appropriate time.” Hwang also laid out some other conditions for Park: She should appoint a prime minister recommended by parliament to set up a coalition government, and give that person her power. If Park doesn’t spell out a plan for resigning, he said, his faction would again support an impeachment motion on Dec. 9 - the last day of the current parliamentary session. Bloomberg News

New Zealand Trade Minister Todd McClay yesterday reiterated the government’s determination to tackle the growth in non-tariff barriers in the Asia-Pacific region. McClay was commenting on the release of two studies this week that revealed the cost and impact of “unnecessary red tape and arbitrary trade rules” on exporters. Non-tariff measures (NTMs) in Asia-Pacific Economic Cooperation (APEC) economies were costing the region’s exporters US$790 billion, said a report from the New Zealand Institute of Economic Research (NZIER). The amount was triple the total costs associated with simple border tariffs. NTMs were costing New Zealand exporters about US$5.9 billion a year, said the report. Meanwhile, the APEC Business Advisory Council released a new study showing non-tariff barriers were making food trade more difficult and expensive than it should be, and undermining goals of food security in the Asia-Pacific region. The government’s New Zealand Trade and Enterprise agency was encouraging its export customers to come forward with market access issues they might be encountering. Xinhua

Business Daily #1185 December 1, 2016  

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