Year I Number 242 MOP 6.00 Tuesday March 19, 2013 Editor-in-chief Tiago Azevedo Deputy editor-in-chief Vitor Quintã
Monetary Authority ducks interest rate politics
ocal banks, not the regulator, will decide whether mortgage interest rates should rise in Macau said the chairman of the Monetary Authority of Macau yesterday. Anselmo Teng’s comments came after two Hong Kong financial institutions – HSBC Holdings Plc and Standard Chartered Plc – increased their prime mortgage rates last week for the first time since 2011. But the banks did that in response to politics, rather than purely market forces. The Hong Kong Monetary Authority decided on a property market cooling measure – as the People’s Bank of China has in the past on the mainland – and raised the amount of capital the banks must hold to cover their loans.
Affordable homes sale process starts March 27 The application period for one-bedroom subsidised homes at Ip Heng, Seac Pai Van, will run from March 27 to June 26, the Housing Bureau says. It’s the first batch of affordable housing to be sold under a law that came into effect in 2011. Over 1,500 onebedroom units up to 33.7 square metres will be available at prices ranging from 524,400 patacas (US$65,598) to 701,800 patacas.
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Unbuild it and they will come – with money Homeowners or tenants could receive as much as 11,000 patacas (US$1,400) if they remove illegal structures. It’s part of a new subsidy scheme coming into effect today. Nine months after the idea was first floated, the new rules signed off by Chief Executive Fernando Chui Sai On – were published in yesterday’s Official Gazette. All owners or tenants of existing homes will be eligible for the new programme.
State plan ‘positive’ for Macau – Xi Jinping
China’s president Xi Jinping told the chief executives of Macau and Hong Kong yesterday that the new state plan for the Chinese economy and Chinese society would have a “positive impact” on the two Special Administrative Regions. He added Macau was in a “good phase”. But he added he hoped the city would learn to overcome problems that restricted its development. He didn’t say what those problems were.
US$1 bln poker game Where everyone wins William Weidner – who helped to create The Venetian Macao – says a new casino strip in the Philippines is good for the whole industry. He’s a minority investor – via his chairmanship of Global Gaming Asset Management – in the US$1.2 billion Solaire Resort & Casino in Manila. “…it’s not a zero sum game. It’s not as if you’re going to take everybody visiting Macau and move them someplace else,” he told Business Daily from the plush surroundings of the new resort.
Read the full story from our special correspondent on Pages 2 & 3
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business daily March 19, 2013
Billion-dollar poker William Weidner – who helped to create The Venetian Macao – says a new casino strip in Manila is good for the whole industry Michael Grimes in Manila
usiness Daily spoke to William Weidner, a minority investor – via his chairmanship of Global Gaming Asset Management – in the US$1.2 billion Solaire Resort & Casino in Manila. Mr Weidner is a well-known face in Macau from his days at Las Vegas Sands Corp., where he helped to create Sands Macao, the first Las Vegas-style mass-market casino in the city, and to oversee the construction of the US$2.4 billion The Venetian Macao. One of the first visitors to Solaire – a little more than 12 hours before it opened its doors to the public on Saturday – was Macau casino developer Lawrence Ho Yau Lung. Mr Ho, co-chairman of Melco Crown Entertainment Ltd, was given a tour of the property by senior management. He was also in town for a signing ceremony to mark his own foray into the Manila casino market. His firm’s locallylisted subsidiary, Melco Crown (Philippines) Resorts Corporation is to fit out and manage the neighbouring US$1 billion Belle Grande Manila Bay. That venue was built by Belle Corp., a unit of Philippine conglomerate SM Group, controlled by Filipino Chinese businessman Henry Sy and his family. Was there any gamesmanship in the fact Melco Crown Entertainment chose to sign its management deal for Belle Grande Manila Bay here in the city the day before Solaire’s opening? Not at all. It’s ‘game on’ for us. I said to them we’ll be friendly competitors. Once you have something in the market then it’s a question of what you can do with it…it’s a question of ‘see you and raise you’. We’re already working on the next piece [of Solaire], because the idea is you must always be one step ahead. Is it important for the Manila casino business that there will be four casinos close together? Yes. Las Vegas grew into something where you get people [operators] across the street from one another seeing what is being put on offer. It’s a question of ‘I’ll see you and raise you one’. It’s like a billion dollar poker game. The buy-in is US$1 billion. Then each additional component is hundreds of millions. But it’s not ‘winner take all’. The good thing about it is that the more action there is, then the more interest there is, and the more interest there is, the more of a pot there is to share. How, as an investor in this region, can you convince governments to have either gaming for the first time, or more gaming? It’s about the multiplier effect that gaming has on the economy. It is there everywhere. The more mature the economy, then the higher the multiplier. And the Philippines is a pretty mature economy.
You’re hoping to bring in more foreign high rollers to the Philippines, but how do you build the mass market in Manila? Isn’t it obvious? The more attractive the venue, the more reasons to come here – with restaurants, shopping, shows. The easier it becomes to get to, the more interesting it is for your friends to join you somewhere. For example we’ve got one parking garage now, we’re building the next parking garage for ease of access, and we’re building more restaurants and retail space. And the more synergies there are [between entertainments] the greater the critical mass of things to see and do, the more the mass market grows. It leads to more share of time [for a resort] and more share of wallet. How do you convince the locals that a place like Solaire is for them and not just for rich foreigners? Several of the taxi drivers and people working in the Mall of Asia told me: ‘That’s not a place for me’. It’s all about word of mouth and how people hear from their friends about what’s available. Our employees and the people here generally are extraordinary people. They are naturally friendly. They are the kind of people that say ‘Hey come on in’. They will tell each other. Could the Solaire brand be used in other GGAM projects such as Matsu in Taiwan? After all, the Las Vegas brands we’re all familiar with had to start somewhere. No. That’s Ricky’s branding. [Enrique Razon Jr, chairman of Bloomberry Resorts Corp. the majority owner.] That’s his deal. ‘Solaire’ is suggestive of the wonderful beaches in places away from Manila like Boracay. It’s about how the Philippines is. Can you give us more details on the Matsu branding and how the resort would look? They [the locals] branded it themselves. They call it the Mediterranean of Asia. That’s the umbrella that we’re working under, because it’s Matsu’s place. Isn’t it the case that you would need exclusivity on Matsu – i.e. no other casino operators on that island chain – for a resort of the scale you’re considering? Yes…The only way that Matsu works is to build all that infrastructure.
An analyst said to me recently that he thought the statement from a mainland official in Fuzhou saying there would not be cooperation between the mainland authorities and Taiwan on gaming – in the sense of perhaps a complementary non-gaming resort next door on the mainland – might have dealt a ‘fatal blow’ to Matsu’s casino prospects generally. What’s your view? I’m not going comment on that. Do you think if Solaire is a success it will help your case for getting a resort in Taiwan? What we’re doing now is inviting the people of Taiwan to come and take a look [at Solaire]. We don’t know what’s going to happen politically there, because politics – in any market – always has an unknown element. We respect that. But I do hope that people in Taiwan will look at what we have helped to create here at Solaire, and how this relates to what they could do too. The wonderful thing about gaming and entertainment in integrated resorts is it’s not a zero sum game. It’s not as if you’re going to take everybody visiting Macau [casino resorts] and move them someplace else. What you do is end up with more share of time, as people see other ways of expressing how to enjoy themselves. The [casino] gaming market has constantly increased over time. So when New York opens some place [venue] and Chicago opens some place, Las Vegas doesn’t
It’s like a billion dollar poker game. The buyin is US$1 billion. Then each additional component is hundreds of millions
change. Think about it. When I came to Macau in 2004, Macau did US$3.5 billion [gross gaming revenue annually]. Las Vegas at the time did US$6 billion. Now Las Vegas does US$6.5 billion and Macau does nearly US$40 billion [annually]. And even as Macau was increasing, in the middle of
March 19, 2013 business daily | 3
MACAU Prospective homebuyers should consider their purchasing power before applying for loans, authorities warn
that period Singapore did US$6 billion. People think ‘Gee, I could go to a hotel – or I could go to a hotel with some added excitement in it’. That’s the attraction of the integrated resort. That’s what we’re trying to bring to more people in this region.
Rates for mortgages left up to the banks The Monetary Authority of Macau says costlier home loans in Hong Kong do not necessarily mean costlier home loans here Tony Lai
he Monetary Authority of Macau is leaving it to the banks here to decide whether to follow two big banks in Hong Kong in raising mortgage interest rates. “The interest rates are decided by banks, taking into consideration their capital, the risks involved, and the situation of Macau,” the chairman of the Monetary Authority, Anselmo Teng Lin Seng, told reporters yesterday.
Banks ‘comply with’ anti-money laundering rules
I do hope that people in Taiwan will look at what we have helped to create here at Solaire, and how this relates to what they could do too
The Monetary Authority of Macau said all banks here follow the rules against illegal financial transactions “without any issues”. “In any case, the banks in Macau have been complying by the guidelines and the laws … by the Financial Action Taskforce on money laundering and terrorism financing,” said Anselmo Teng Lin Seng, the authority’s chairman, yesterday. He added the banks here are also obliged to respect sanctions set up by the United Nations against individuals or companies linked to money laundering. United States congressman Ed Royce claimed earlier this month Delta Asia Bank Ltd was still supporting North Korea in alleged money-laundering activities and he asked for more sanctions on the bank. Mr Teng did not comment on whether the administration is worried over this accusation or if any investigation is being carried out. The United States imposed sanctions on Delta Asia in 2005 over similar accusations.
“Looking at the risk of mortgage lending, the delinquency rate of loans has been very low for a long time, only 0.05 percent, according to the latest data,” Mr Teng said. He was speaking after two Hong Kong banks, HSBC Holdings Plc and Standard Chartered Plc, raised their prime mortgage rates last week for the first time since 2011. They raised their rates by 0.25 percentage point after the Hong Kong Monetary Authority increased the amount of capital banks must hold to cover their loans. “The situation in Hong Kong is not the same as in Macau,” said Mr Teng. Secretary for Economy and Finance Francis Tam Pak Yuen said the government was “very concerned with the situation”. Mr Tam told reporters: “If the situation in Macau required us to communicate with the banks on this matter, we would do so. But any decision is based on the actual situation here.”
Dollar peg stays Macau banks appear to be in no hurry to increase mortgage rates. The deputy general manager of Bank of China (Macau) Ltd, Ip Sio Kai, said on Sunday that he did not see the need for banks here to follow the example set up by Hong Kong banks. Mr Ip, who is also acting chairman of the Macau Association of Banks, said mortgage rates here were between 2.0 percent and 2.75 percent, depending on the bank. A spokesperson for Industrial and Commercial Bank of China (Macau) Ltd said the bank knew nothing about any rate increase. The chief executive of Banco Espírito Santo do Oriente SA, José Morgado, said rates could rise if one bank took the lead.
“The more banks that decide to join this movement, the more likely it is that all the banks will raise their interest rates,” Mr Morgado said. Commenting on the decision by HSBC and Standard Chartered to raise their mortgage rates, he said: “It would be necessary to know the basis for this decision, to know whether it was imposed by the conditions in the Hong Kong financial system or on the initiative of the bank itself.” The Monetary Authority of Macau’s Mr Teng said interest rates here would remain low because the pataca was pegged to the Hong Kong dollar which, in turn, was pegged to the U.S. dollar. U.S. interest rates are low because of the U.S. Federal Reserve’s ultraeasy monetary policy. “But it is difficult to say what will happen in the market,” Mr Teng said. “People should pay attention to interest rates as there are some good signs showing up in the U.S. market.” He warned homebuyers to consider their resources before taking out mortgages, as an improvement in the U.S. economy could mean an increase in interest rates, making servicing a mortgage costlier. Mr Teng said there was no plan to unpeg the pataca from the Hong Kong dollar, as the peg worked effectively. With Vitor Quintã
Delinquency rate of loans in Macau, according to the Monetary Authority
business daily March 19, 2013
One-bedroom subsidised flats on sale next week People eligible to buy them can be wealthier than first thought Stephanie Lai
metre being 17,876 patacas. The Housing Bureau set yesterday the requirements for eligibility for subsidised housing. Individuals earning 7,820 patacas to 22,240 patacas per month, or households with two or more members together earning 12,210 patacas to 44,479 patacas per month will be eligible. These figures are higher than those suggested by Chief Executive Fernando Chui Sai On last year. To be eligible, an individual must not have assets worth over 672,168 patacas and a household must not have combined assets worth over 1.3 million patacas. “The latest income and asset limits are set with reference to the income levels of local residents in the past four quarters,” Housing
Bureau head Tam Kuong Man said at a press briefing. Mr Tam said that apart from the one-bedroom flats in Ip Heng, another 500 one-bedroom flats elsewhere would go on sale once the government had a more
U.S. says property crime proceeds laundered here The U.S. government calls for ‘robust oversight’ of junket operators in Macau Vítor Quintã
Money made unlawfully in mainland China’s property market is finding its way to Macau
acau’s gaming industry is being used to launder the proceeds of property-related crime, the U.S. Department of State says. The State Department’s latest annual International Narcotics Control Strategy
Report quotes Macau government officials as saying “property offences” are among the main sources of ill-gotten gains from crime here and in mainland China that are laundered in Macau. This is the first time the State Department’s bureau
accurate idea of demand. Legislative Assembly member Kwan Tsui Hang said the sale of the one-bedroom flats in Ip Heng would be an important test of the market for subsidised housing. “If there are many
Photo by Manuel Cardoso
ligible households can apply to buy one-bedroom flats in subsidised housing in Ip Heng in Seac Pai Van on Coloane from March 27 to June 26, the Housing Bureau announced yesterday. It will be the first sale of subsidised homes since the subsidised housing law came into force in 2011. Over 1,500 one-bedroom flats, ranging in floor area from 32.2 square metres to 33.7 square metres, will be put on sale. They will cost between 524,400 patacas (US$65,598) and 701,800 patacas. Sales of the two-bedroom and three-bedroom flats in Ip Heng began last summer. They cost between 697,000 patacas and 1,181,000 patacas, the average price per square
applicants with families instead of individuals applying for the one-bedroom units, this would indicate an acute problem with local housing needs,” Ms Kwan said. Ms Kwan and Centaline (Macau) Property Agency Ltd director Jacky Shek Po Tak think the sale of the one-bedroom flats will cool sales of homes in older buildings. “The small units in old buildings are selling for at least 2 million patacas currently,” said Mr Shek. “In recent years the price has got a bit too heated,” he said. “With more choice provided in the market,” he said, “I think prices in old buildings will then go down accordingly.”
of international narcotics and law enforcement affairs, which compiled the report, has linked property crime to money laundering here. Since 2009 the State Department’s annual report on drugs has included a review of Macau’s efforts to
counter money laundering. As in years gone by, this year’s report warns that “loosely-regulated” gaming promoters, or junket operators, “present vulnerabilities for money laundering”. The report says “the anonymity gained through the use of the junket operator in the transfer and commingling of funds” offers gamblers “alternatives to China’s currency movement restrictions”. A mainland Chinese individual is allowed to move no more than US$50,000 (400,000 patacas) out of the country each year. The report says junket operators help casinos “aiming to reduce credit default risk and unable to legally collect gambling debts in [mainland] China”. This “inherent conflict of interest”, together with “the absence of currency and exchange controls”, is a recipe for disaster, it says. The report says Macau’s law against money laundering does not require currency transaction reporting, but that gaming companies must report any transaction worth over 500,000 patacas.
Junket oversight The State Department calls for Macau to “continue to strengthen interagency coordination” to prevent money laundering in the gaming industry. It says the priority should be to introduce “robust oversight of junket operators, mandating due diligence over non-regulated
gaming collaborators, and implementing cross-border currency reporting”. Macau also should enhance its ability to support international investigations of money laundering or terrorism financing, the State Department says. Business Daily tried to get a comment from the Financial Intelligence Office yesterday but got no reply before it went to press. The director of the office, Deborah Ng, said in January that the authorities here could not freeze and seize assets held by individuals or institutions that are subject to U.N. sanctions. “Even though we are equipped with an overall legal framework that allows for the application of international conventions, we do not have the operational procedures to really implement the measures,” Ms Ng said. She said Macau’s Law Reform and International Law Bureau was preparing a bill that would allow the authorities to freeze and seize assets. The U.S. Department of State acknowledges that Macau continues “making considerable efforts to develop an anti-money laundering/counter-terrorist financing framework that meets international standards”. Amendments to the law against money laundering and terrorist financing will be sent to the Legislative Assembly next year. The amendments would increase the scope of the law to cover tax evasion, Ms Ng said.
March 19, 2013 business daily | 5
New president warns Macau of adversity Xi Jinping underlines Beijing’s message that the city should beware of what the future holds Stephanie Lai
ewly-installed Chinese President Xi Jinping said yesterday that Macau was going through a “good phase” but warned it of unspecified “adversities to come”. Mr Xi, who was also recently installed as head of the Chinese Communist Party, was speaking during a meeting in Beijing with the chief executives of Hong Kong and Macau. He said he hoped Macau would learn how to overcome problems that restricted its development, without saying what those problems were. Secretary for Finance and Economy Francis Tam Pak Yuen agrees that Macau should be “risk-conscious”. “We always say that we hope after the completion of some bigscale resort projects, it will slowly change the focus of Macau’s economic structure from gaming tourism to leisure tourism,” he told reporters. “This is beneficial to the long-term sustainable economic development in Macau,” he told journalists in a public event yesterday. The city will also strive for regional cooperation as one of the future directions for growth with mainland China, Southeast Asia and the Portuguese-speaking countries, Mr Tam added. “There is a possibility for fluctuations in the global economy so we estimate that the Macau economy would sustain a stable single-digit growth in 2013,” he predicted.
China dream It was Mr Xi’s first meeting with the leaders of China’s two special administrative regions since he became head of state on Friday. Mr Xi, Macau Chief Executive Fernando Chui Sai On and Hong Kong Chief Executive Leung Chun Ying exchanged views on the development of the two cities. Mr Xi’s remarks echoed those
The Chinese president and the chief executives of Hong Kong and Macau met in Beijing
made by a member of the Politburo Standing Committee, Zhang Dejiang, in a meeting with Macau deputies to the National People’s Congress. Mr Zhang, who will supervise Hong Kong and Macau affairs in the Politburo, spoke on March 7 of unspecified “future challenges” to Macau and said the city should “continue to pursue economic diversification”. Mr Xi visited Macau in 2009 and floated the idea that Hengqin Island would be crucial to the diversification of Macau’s economy and its development as a world-class destination for tourists. Yesterday he again spoke of his vision for China and encouraged both SARs to complement mainland China’s development. In his first speech as president, Mr Xi called on Sunday for “the continued realisation of the great renaissance of the Chinese nation and the Chinese dream”. David Zweig, a professor at Hong Kong University of Science and Technology, said Mr Xi was trying to “redefine the purpose of the party,
Street naming campaign for architect Manuel Vicente A campaign is under way to have one of the city’s streets named in honour of a leading Portuguese architect. Manuel Vicente died in Portugal on March 9, aged 78. The architect left a legacy in Macau of public sector and private sector works. They include a role in the reclamation plan that created the Nam Van and Sai Van lakes, the World Trade Centre building and public housing projects in Fai Chi Kei. Anyone wishing to contribute to a petition organised by Portugueselanguage newspaper Jornal Tribuna de Macau can sign it online at www.peticaopublica.com/?pi=JTM
so that there is a greater sense of the party being united with the people”. Mr Xi told the two chief executives that the new state plan for the Chinese economy and Chinese society would have a “positive impact” on Macau
and Hong Kong. Also at the meeting were Mr Zhang and the director of the State Council’s Hong Kong and Macau Affairs Office, Wang Guangya. With Tony Lai and AFP
business daily March 19, 2013
macau Assembly wants details on urban planning law The members of the Legislative Assembly’s third standing committee want the government to disclose more details on the advisory urban planning committee. The advisory body, made up of urban planners and engineers, residents’ representatives and government officials, will discuss where to build public facilities and review urban plans, as well as the impact of major development projects, according to an urban planning draft law. The committee’s make-up and mission will be written down later in a bylaw but legislators want to know more, committee president Cheang Chi Keong said after yesterday’s meeting.
Govt throws money at illegal structures Owners or tenants can ask for a subsidy within 90 days after demolition works Vítor Quintã
omeowners or tenants could receive as much as 11,000 patacas (US$1,400) if they remove illegal structures, as part of a new subsidy scheme that comes into effect today. Nine months after the idea was first floated, the new rules were published in yesterday’s Official Gazette. They were signed off by Chief Executive Fernando Chui Sai On. All owners or tenants of existing homes will be eligible for the new programme, unless the Land, Public Works and Transport Bureau has already ordered the structures to be removed. The scheme will cover structures
such as rooms, walls or permanent canopies built on rooftops, cage balconies, and support brackets for external air conditioning. Each home or apartment could be granted a maximum of 10,000 patacas, along with a further 1,000 patacas to cover transport and insurance expenses related to the removal works. The owners or tenants will have a 90-day period after carrying out the works to ask the Housing Bureau for the subsidy. The money will come out of the existing Support Scheme for Building Maintenance. Chan Wing Hei, the head of the Land, Public Works and Transport Bureau’s urbanisation department,
first mentioned the possibility of subsidising the removal of illegal structures last August. Those remarks came just weeks after the bureau published guidelines for property owners and construction contractors reiterating restrictions on new illegal structures. In September, Housing Bureau director Tam Kuong Man said his bureau was working with the Land, Public Works and Transport Bureau
to extend the Support Scheme for Building Maintenance’s coverage. The goal was to subsidise the removal of illegal structures installed in private buildings façades that present an immediate danger to the public, he said at the time. Rooftop illegal structures contributed to pushing the nowdemolished Ilha Verde’s Meng Heng building to the brink of collapse, authorities said last year.
Is not about disabilities. It’s about celebrating abilities Many illegal structures present an immediate danger to the public, authorities have warned
April 22nd-27th 2013
Weike Gaming appoints Venetian concerts new executive close Script Road Casino gaming supplier announced yesterday that it has appointed Jothy Sitharthan Markhamuthu as vice president for business development. Mr Sitharthan has been in the casino gaming industry for 10 years serving in operational roles throughout Asia Pacific. For instance, he was formerly the director of gaming machine operations at Macau-based City of Dreams resort and the director of systems for Asia Pacific at Bally Macau. Mr Sitharthan will be based in Singapore and oversees the sales and marketing department. He will be spearheading the strategy and development of the department to serve existing and potential clientele. “I hope I can bring forth my experience and contacts to expand both business opportunities and gaming markets for Weike Gaming,” said Mr Sitharthan in a statement. Thanks to his “valuable network in Asia Pacific,” Mr Sitharthan “will continue to take our business up to the next level,” said Chow Chee Keong, Weike Gaming’s vice president for operations.
Camané, the undisputed king of Portuguese traditional ‘fado’ music, shared the Cotai Arena stage with Portuguese folk music band Dead Combo on Saturday. On Friday the Venetian Macao resort had already welcomed another performance by Taiwanese jazzy singer-songwriter Joanna Wang and local rock band L.A.V.Y. The two concerts closed out the second edition of The Script Road – Macau Literary Festival. The Script Road Concerts, sponsored by Sands China Ltd, are part of the company’s ongoing contribution to the development of arts and culture in Macau, the gaming operator said in a statement. The Macau Literary Festival was held from March 10 to 16, featuring several panel sessions with writers from Portuguese-speaking countries and Greater China. But the initiative organised by the Portuguese-language newspaper Ponto Final also included film screenings, a book fair, book presentations, workshops and exhibitions. The festival will return next year, with the support from the Macau Foundation and the Cultural Institute
March 19, 2013 business daily | 7
Future Bright profit soars on property, food sales
with turnover up 23 percent to HK$336.4 million. “Our group was able to benefit from Macau’s continuance of healthy inflow of visitors and their higher spending in food and beverage, despite of the increasing operating costs,” Future Bright said. Food and labour costs increased by 18.4 percent to HK$422.5 million but there were better economies of scale deriving from a growth in turnover, the firm added.
Further restaurant expansion on the horizon for Chan Chak Mo’s group Vítor Quintã
HK$242.3 million Future Bright net profit in 2012
Japanese food provided the biggest boost to Future Bright’s bottom line
estaurant operator Future Bright Holdings Ltd announced its profit more than doubled last year, thanks to the appreciation in value of a building near the St Paul Ruins and higher food sales here. Future Bright told the Hong Kong stock exchange on Friday that its net profit grew by 170.4 percent year-on-year to HK$242.3 million
(US$31.2 million). This “remarkable increase” was mainly due to an increase in turnover as the company opened six new outlets in the second half of 2012, the company said in the filing. The expansion included a canteen at the Macau University of Science and Technology campus in Cotai and two Pacific Coffee Company shops. The canteen is already providing a
return on investment and the others new outlets “have continued to perform better since January 2013,” the company said. The group’s revenue reached HK$659.6 million in 2012, up by 18.7 percent, mainly due to sales of food and beverages, which increased by the same rate to HK$632 million. It was Japanese food that provided the biggest boost to the bottom line,
And Future Bright wants to keep growing this year, with plans to open a further 10 outlets, including four at the new campus of the University of Macau on Hengqin Island, starting next July. Future Bright’s managing director is Chan Chak Mo, the president of the Macau Catering Industry Merchants General Association and a member of the Legislative Assembly. Future Bright’s managing director is Chan Chak Mo, the president of the Macau Catering Industry Merchants General Association and a member of the Legislative Assembly. The group has submitted to the government a development plan for a five-storey food-processing centre at a plot of 29,256 square feet (2,718 square metres) at the Zhuhai-Macau Cross-Border Industrial Park. The centre will allow the company to enter the food souvenir market next year, Future Bright said. The appreciation in value of a sixstorey commercial building owned by the company also contributed to the profit increase. Located near the St Paul Ruins, Centro Comercial e Turístico São Paulo is currently leased to the government. Its fair value gain had reached HK$125 million by the end of last December, 11.5 times higher than in 2011. With the current lease to expire at the end of the year, the company expects “a healthy increase in rental income” in 2014. In addition Future Bright received HK$11.9 million for the termination of a lease agreement for the Circle Square ground floor units, in downtown Macau. The board of directors has approved a final dividend of 4.5 cents of HK dollar a share, up from 3 cents the year before.
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First Ferry sale chops NWS’ local business
ong Kong-based conglomerate NWS Holdings Ltd saw its Macau revenue tumble last year, mostly due to the sale of its ferry operations here to rival Shun Tak Holdings Ltd. The group’s turnover in the territory shrank to just HK$1.4 million (US$180,400) in the second half of 2012 from HK$123.3 million a year earlier, the company told the Hong Kong stock exchange.
In August 2011 NWS Holdings’ unit New World First Holdings Ltd announced it was selling New World First Ferry Services (Macau) Ltd to Shun Tak for about HK$350 million. Despite the sale, the group’s transport business saw its operating profit rise by 2 percent year-on-year to HK$93.2 million. This figures back the company’s claim that New World Ferry Services (Macau) was a loss-making venture.
Two months before agreeing to sell the ferry operator, New World First Holdings said it was expecting a loss of over HK$10 million for that year, even after a fare hike. In addition the Macau operations accounted for 8 percent of NWS Holdings’ profit in the second half of 2012, down by just two percentage points. The smaller-than-expected decreased was due to a 7 percent growth in electricity and water sales “from
more entertainment and hotel facilities that came into operation,” the filing said. Sino-French Holdings (Hong Kong) Ltd, a joint-venture of NWS Holdings and France’s Suez Environnement SA, owns 85 percent of the city’s only water distributor Macao Water Supply Co Ltd and 42 percent of the only electricity supplier Companhia de Electricidade de Macau - CEM, SA V.Q.
business daily March 19, 2013
GREATER CHINA Tang sells US$6.2 mln of Burgundies Henry Tang, who lost a bid to become Hong Kong’s chief executive after the discovery of an illegal wine cellar at his house, sold HK$48 million (US$6.2 million) from his collection. The auction of more than 800 lots of Burgundy during the two-day Christie’s International Hong Kong wine auction beat a pre-sale estimate of HK$29 million. The top lot of six magnums of Romanee Conti Domaine de la Romanee Conti 1995 sold for HK$1.2 million, Christies said in a press release. “This single-owned collection was comprised of 71 Burgundy producers, many of which were unsung heroes,” Christie’s said.
Provincial debt levels in some second and third-tier cities keep increasing
Moody’s sees greater risk of default One-fifth of loans to financing arms of local governments are risky, central bank admits Kyoungwha Kim and David Yong
oody’s Investor Services said China’s local-government financing vehicles (LGFV) face greater risk of default, as regulators warn 20 percent of their loans are risky. A rally in LGFV bonds may reverse, particularly should delinquencies emerge, Christine Kuo, a Moody’s analyst, wrote in an e-mailed response. The average yield may rise to 7 percent by June from 6 percent now, according to
Shenyin & Wanguo Securities Co., the first brokerage incorporated in China and ranked the nation’s most influential research provider by New Fortune magazine in 2010. “I see increased risk of LGFV defaults because the financial profiles of many remain weak and heavy refinancing is needed,” Hong Kong-based Ms Kuo said. “Regulators have asked banks to control their LGFV exposures. Some of the projects could default unless
China to speed up market, capital account reforms: Yi Reforms will facilitate investment in the country, says PBOC’s deputy director Lomi Kriel
hina will speed up reforms to open its capital account now that People’s Bank of China Governor Zhou Xiaochuan has been reappointed, a senior central bank official said. PBOC Deputy Governor Yi Gang said China was pushing ahead with reforms to markets and the capital account, which remain tightly
controlled, amid market demand for freer access to the tightly managed yuan currency. “We are making tremendous progress in the capital account convertibility,” he told Reuters on the sidelines of InterAmerican Development Bank meetings in Panama. Mr Zhou, who took the helm of
other sources of funds are found.” People’s Bank of China Governor Zhou Xiaochuan said in a March 13 press briefing that about one-fifth of loans to the financing arms of local governments are risky. Net debt issuance by these entities surged 179 percent in 2012 to 1.132 trillion yuan (US$182 billion), accounting for 50 percent of corporate bond sales, according to Bank of America Corp. data. The China Banking Regulatory Commission warned lenders to
exercise caution and limit their holdings of bonds sold by local governments’ financing arms, the 21st Century Business Herald said on March 13. Banks aren’t allowed to increase outstanding loans to LGFVs above the level as of December 31, 2011, the report said.
the PBOC in 2002, was reappointed on Saturday. He has led the drive to liberalise interest rates and abolish the yuan’s peg to the U.S. dollar. China, which wants to internationalise the yuan and eventually make it a world reserve currency, is expected to make it basically convertible by 2015, or 2020 at the latest. Mr Yi said reforms already meant qualified institutional investors were more easily able to invest in China, pointing to inflows of US$40 billion by the end of last year, and it was also easier for qualified domestic investors to invest offshore. He expected a steady further flow of funds under the programmes. “When they [investors] apply, we can have better service, for example, in terms of the approval process would be quick and convenient, so that kind of procedure will be further improved to facilitate those who want to invest in China,” Mr Yi said. “It’s very convenient, and for those who are in China who want to invest abroad, it’s very convenient. The process will be sped up now [that
the governor has been approved]”. Current restrictions mean foreign companies hold about four times more Chinese currency than they can invest in the country, based on Reuters calculations of official data on cross-border trade settled in yuan. The PBOC worries that a buildup of yuan stranded offshore would discourage foreigners from holding the Chinese currency if a storm of volatility were to hit.
Loan curbs The financing units of local governments owe between 9.1 trillion
New agreements China, which has agreed to swap lines with more than 15 other countries as part of its yuan internationalisation drive, was also close to finalising new or renewed currency agreements with Brazil, Argentina and Britain, the PBOC official said. These promote use of the yuan in trade and investment. “We are looking forward to signing a local currency swap with Brazil in the near future,” he said. “We are in the process of talking with Argentina and trying to renew
March 19, 2013 business daily | 9
GREATER CHINA Tingyi fourth-quarter profit tumbles China’s Tingyi (Cayman Islands) Holding Corp, a maker of drinks and instant noodles, said fourth-quarter profit slid 75 percent as consumers shied away from its Japanese-style packaging and marketing amid a territorial row between the two countries. Tingyi, which has a broad-ranging partnership with PepsiCo Inc and sells noodles under the Master Kong brand in China, said its net profit was US$14.9 million for the three months ended in December, down from US$59.9 million in the same period a year earlier. Tingyi said its profit for 2012 rose 8.5 percent to its US$455.2 million, its second-highest annual result ever.
KEY POINTS Heavy refinancing of local govt vehicles needed – analyst Financing units owe between 9.1 trl and 14.5 trl yuan, says BNP Paribas Up to 5 trillion yuan of credit set to mature this year – research firm More than 30 pct of LGFVs have insufficient operating cash flow
yuan and 14.5 trillion yuan, or 18 to 30 percent of China’s gross domestic product, according to a BNP Paribas SA report published in January. Tighter curbs on bank loans prompted the units to scramble for funds in 2012, driving a 50 percent jump in net corporate bond sales and a 404 percent surge in trust financing, according to Bank of America. Aggregate financing, which includes non-bank lending, climbed 914 billion yuan to a record 2.54 trillion yuan in January, official data show. China’s non-financial credit has increased by nearly 60 percent of GDP in the past five years, outstripping the rise in the U.S.’s in the five years preceding the onset of its banking crisis in 2008, BNP Paribas said. The central government “is
that swap agreement. We are negotiating that swap agreement, and it won’t take too long.” The Bank of England said last month it would work with China’s central bank to sign a final agreement on a reciprocal three-year yuansterling swap and Mr Yi said he did not expect the process to take much longer. Similar agreements with other Latin American nations and the central
We are making tremendous progress in the capital account convertibility Yi Gang, PBOC Deputy Governor
concerned about financial risks and will take action to contain risks in 2013,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “We believe policy will have to be tightened eventually, but the timing and pace of tightening remain uncertain. We continue to focus on the size of total social financing as the best indicator of potential policy change.”
Increasing debt CEBM Group, a Shanghai-based investment research firm, estimated last month that about 4 trillion yuan to 5 trillion yuan of credit – including 2 trillion of bank loans, 2 trillion of trust loans and 180 billion yuan of LGFV bonds – is set to mature this year. The bond market has yet to show signs of concern. Most LGFV notes are rated AA and above, according to Bank of America, and the yield premium on one-year debt of that grade over AAA debt shrank by 71 basis points to 50 basis points in the year through March 15, Chinabond data show. The provincial debt levels in some second and third-tier cities, particularly those in western China such as Hainan and Ningxia, have increased with their debt-to-GDP ratios already exceeding 40 percent in 2010, CEBM said in a February 21 report. More than 30 percent of LGFVs have insufficient operating cash flow to cover debt payments, the report said, citing CBRC estimates. “This suggests that some local governments could potentially default,” CEBM analysts wrote. “An actual default would reverberate throughout China’s commercial banking system and have a systemic impact on China’s financial system.” Bloomberg News
Home prices up in most cities C
hina’s new home prices posted the broadest advance since December 2011, a test for new Premier Li Keqiang as he seeks to prevent a bubble without damping economic growth. Prices climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said yesterday. Beijing prices jumped 5.9 percent from a year earlier, the biggest since February 2011, while they advanced 8.1 percent in Guangzhou, the most since January 2011. China on March 1 imposed its toughest curbs in a year, ordering the central bank to raise downpayment requirements and interest rates for second mortgages in cities with excessive price gains, enforcing a property sales tax and telling local governments with the biggest price pressures to tighten home-purchase limits. It ordered individuals selling properties to pay a 20 percent tax on the sale profit when the original purchase price is available, a levy that is being easily avoided. “We are expecting more property policies in the next couple of months including those issued by local governments, because the fast-rising home prices have put the government under a lot of pressure,” said Ding Shuang, a senior China economist with Citigroup Inc. in Hong Kong. “It’s not only a big challenge for
the new administration, but also shows that previous curbs have not worked.”
More measures The southern cities of Guangzhou and Shenzhen were among major cities that led gains in February from a year earlier. Prices in Shenzhen advanced 5.7 percent. The special economic zone that borders Hong Kong said last week it is taking steps to guide developers in setting reasonable prices and is implementing the central government’s measures to ensure prices don’t rise too quickly. The biggest decline in new home prices last month was in Wenzhou, where they tumbled 10.1 percent from a year earlier. Existing home prices rose 6 percent in Beijing last month from 12 months ago and increased 3.9 percent in Shanghai, according to the data. They climbed 5.7 percent in Guangzhou and 3.9 percent in Shenzhen. Premier Wen Jiabao, who was succeeded by Mr Li on Friday, had vowed to keep housing affordable and taken multiple measures. During his tenure, Mr Wen raised downpayment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing and enacted home-purchase restrictions in about 40 cities.
banks of Japan, the euro zone and the United States would depend on whether there was demand, he added. “This is a market-driven process. I think if both parties think a swap agreement is helpful, why not do it? I think in reality it shows that it’s very convenient, and it’s also a factor of stabilisation.” Mr Yi also urged the Group of 20 nations to stick to an agreement made in Moscow last month not to engage in competitive currency devaluations. The Bank of Japan is the latest major central bank to pump extra liquidity into its economy, sparking new fears of a currency war. “We are closely watching what’s going on, and we will continue to do that, and certainly in our policy consideration we will consider what’s going on in a careful way,” he said when asked about Japan. “For G20 [countries] we should basically consistently do what we have agreed in Moscow and before. We want to, we’re against the currency war, we’re against all types of protectionism,” he said. Reuters
Mr Yi says investors have now more easy access to the Chinese market
business daily March 19, 2013
ASIA Singapore Feb exports plunge Singapore’s exports plunged far more than expected in February from a year earlier, hurt by a sharp drop in pharmaceuticals and oil rigs, according to official data released yesterday which showed the island state sharply underperforming trading rivals. A turnaround is in sight, however, as trade agency International Enterprises Singapore said that electronic exports rose month-on-month after adjusting for seasonal factors such as the Lunar New Year holiday that took place in February this year. After combining January and February exports, Dutch bank ING estimated that in U.S. dollar terms, Singapore’s 2013 exports fell 14.1 percent from the same two months a year ago.
Chidambaram may ease India FDI caps Finance minister says some limits ‘completely irrelevant’ Unni Krishnan
Morgan Stanley raises Topix target Morgan Stanley is raising its forecast for Japan’s Topix Index on the prospect the yen will continue to weaken, while cutting its target for the MSCI Emerging Markets Index. The brokerage increased its Topix forecast this year to 1,270 from 1,200, saying Japanese cyclical stocks will benefit from a depreciating yen. The Japanese currency may reach 105 to the dollar by the end of this year, analysts led by Jonathan Garner wrote in a report yesterday. Morgan Stanley has a “bullish outlook” on Japan in 2013 “due to considerable policy stimulus from the incoming government and Bank of Japan leadership,” the report said.
BOJ gets monetary policy fixer Incoming Bank of Japan Governor Haruhiko Kuroda will have a veteran of quantitative easing as his top policy planner, after Masayoshi Amamiya yesterday was brought back from running the bank’s Osaka branch. Mr Amamiya, who worked in the monetary affairs department for six years before being sent to Osaka in May, got his old job back as one of six executive directors, according to a BOJ statement in Tokyo. The veteran central banker did a stint at the Finance Ministry earlier in his career, an experience he may tap as the government and BOJ step up policy coordination.
Sharp to miss investment deadline Sharp Corp said it will miss a March 29 deadline to receive the second half of a US$120 million investment from Qualcomm Inc after it failed to complete a plan to begin fabricating power-saving screens the two companies are jointly developing. Qualcomm, which paid half in December, set conditions for the remainder that included having completed the specifications for the smartphone and tablet PC screens and preparations for their production. Sharp and Qualcomm will now fall back to a June 30 deadline for the Japanese company to meet conditions for the second payment, a spokeswoman said.
ndia’s finance minister said the nation may ease restrictions on foreign-direct investment and called on the central bank to cut interest rates, as he extends efforts to revive growth in Asia’s thirdlargest economy. “Many caps can be removed or certainly relaxed,” and a review of the limits has begun, Palaniappan Chidambaram, 67, said in an interview in New Delhi. A narrower budget deficit has created space for a rate cut, he said before the central bank’s policy decision today. He also said Indian companies seem “quite happy” with the rupee at its current level of 54 to 55 per dollar. The review may herald a sweeping relaxation of the investment caps in about two dozen industries ranging from telecommunications to banking,
which would be India’s biggest opening to overseas companies since the 1990s. Mr Chidambaram estimates the country’s economy may need more than US$75 billion of foreign capital this year and next to fund a record current- account gap, adding pressure to relax rules. Ten-year government bonds rose after the minister’s comments signalling he sees room for lower rates. The yield on the 8.15 percent note due June 2022 traded at 7.85 percent in Mumbai from 7.86 percent on March 15, according to the central bank’s trading system.
Reviving economy “Some of these caps are completely irrelevant in terms of the changed situation,” said Mr Chidambaram,
ASIC moves to curb growth of dark pools High frequency trade issues overstated, says Australian regulator
ustralia’s corporate regulator called for tighter regulation of financial markets to deal with “noise” from high-frequency trading, while suggesting concerns about computerised transactions and associated crashes were largely unfounded. The Australian Securities and Investments Commission, in a report on the impact of high-frequency trading (HFT) and so-called dark liquidity pools in instant market crashes, said high frequency trading in Australia was relatively small in scale. “We found public concerns over HFT appear to have been overstated and can be attributed to the increasing use of trading technology by investors
generally,” ASIC said. High-frequency trading refers to trades based on complex computerbased algorithms that guide decisions on what stocks to buy or sell. Using HFT, ownership of traded shares may last only fractions of a second and may not involve human intervention. Dark liquidity or “dark trades” refers to orders away from the market, making them non-transparent. They have caused concern in the United States about whether firms are trying to manipulate prices in dark pools. ASIC in its report yesterday found high-frequency trading in Australia was dominated by a small group of entities, with the 20 largest accounting for about 80 percent of
who became finance minister for the third time in July last year. “We need to clear some of the cobwebs accumulated in India and go out and woo specific business houses.” The finance minister has helped to spearhead policy changes to revive a faltering economy. The government since mid-September has permitted more foreign investment in retail and aviation, cut levies on overseas borrowing, curbed fuel subsidies and set up a panel to speed up stalled road, rail and port projects. “This creates transparency on what is being done and shows that the government is not only serious on continuing with the reforms but also implementing them,” said Leif Eskesen, chief India and Southeast Asia economist for HSBC Holdings Plc in Singapore. “It is important
all HFT turnover, or 22 percent of total equity market turnover. An ASIC investigating task force found order-to-trade ratios in Australia were moderate compared to overseas markets and that the average holding time was 42 minutes, not seconds. But the regulator said it had received feedback from market users that there were too many small and fleeting orders being used, despite a recent reduction, either to get a response from the market or disrupt other trading strategies. “We concluded that small and fleeting orders are impacting market integrity and efficiency and investor confidence. To minimise this impact, we consider it is appropriate to require these orders to rest for a minimum amount of time in our markets,” ASIC said. Small orders of A$500 or less for equities traded on the ASX and Chi-X markets, the regulator said, should not be cancelled or amended within 500 milliseconds of being submitted to the trading platform of a lit exchange market. The regulator also suggested new requirements for dark pool operators to keep and release information about their crossing systems, including
March 19, 2013 business daily | 11
Indonesia’s economy to grow 6.2 pct in 2013
We need to clear some of the cobwebs accumulated in India and go out and woo World Bank expects investment to modspecific business houses Palaniappan Chidambaram, India’s finance minister
erate this year Randy Fabi
tenure” are being considered. Foreign-direct investment fell 34 percent to US$22.8 billion in 2012, according to government data.
to demonstrate the determination and willingness to move forward on these policies.” The rupee has appreciated 2.1 percent versus the dollar since the changes began on September 13, to 54.29 per dollar yesterday. “Both importers and exporters, to the extent I know, to the extent that I have been told, seem quite happy with the rupee between 54 and 55,” Mr Chidambaram said. The finance minister said he’s trying to identify which of the world’s largest 500 companies have yet to invest in India. He visited Europe, Singapore and Hong Kong earlier in 2013 to court capital inflows. “We are looking at it in a very focused manner,” he said in the interview. He added that ways to attract portfolio inflows of a “longer
The deficit in the current account, the broadest measure of trade, widened to an unprecedented US$22.3 billion in the quarter ended September 30, or 5.4 percent of gross domestic product. Mr Chidambaram in the February 28 budget narrowed the fiscal gap to 5.2 percent of GDP in the year to March 31, 2013, seeking to avert a credit-rating downgrade and reduce inflation risks. Consumer prices are rising almost 11 percent, and inflation continues to be “a worry,” he noted. He set a budget-deficit goal of 4.8 percent of GDP for 2013-2014, relying on higher tax revenue and asset sales to help pay for increased welfare spending before polls due by 2014. The plan is credible and the threat of Asia’s No. 3 economy losing its investment-grade status has “clearly receded by quite a few yards,” the finance minister said. The Reserve Bank of India should “take comfort” from the effort to contain the deficit, Mr Chidambaram said. “We have argued on the government’s side that there is a case for lowering the policy rates,” he said. “We express our view but the governor has to take the call.”
Strong domestic demand has helped cushion the economy
Australian regulator seeks action on high frequency trade ‘noise
details of principle orders and reporting of questionable activity. High-frequency trades raised public alarm in May 2010 after a computer error involving a mutual fund triggered a 9 percent “flash crash” in the U.S. Dow Jones industrial average.
Several mysterious price spikes in Australia last October also raised concerns, including moves in the share price of Commonwealth Bank of Australia and Australia and New Zealand Banking Group. Reuters
he World Bank yesterday cut its growth forecast for Indonesia to 6.2 percent this year, from its 6.3 percent estimate in December, citing an expected moderation in domestic investment growth. “Investment will...continue to be a key source of growth but is expected to moderate somewhat from its rate of increase in 2012, as indicated by the slower pace of imported capital goods spending,” the World Bank said in its quarterly economic outlook for Indonesia. Growth in capital imports has been declining since early 2012, with capital imports down by 12.1 percent year-on-year in January 2013. Analysts say the fall in capital goods imports is partly due to the weakness in commodity prices, which has led to lower investment in mining and oil sectors. Indonesia’s resilience to the global economic slowdown has continued to attract foreign investment in recent years, but the country’s first annual trade deficit in 2012 has put pressure on the rupiah currency. As in much of the region, strong domestic demand has helped cushion the economy from the worst of the global downturn. The central bank has said it expects the current account to improve in the first quarter of this year, as exports
are seen picking up with an economic recovery in major markets such as China and the United States. Inflation in Southeast Asia’s largest economy is expected at 5.5 percent this year and 5.2 percent in 2014, the World Bank projected. The country’s headline inflation hit a 20-month high of 5.3 percent in February, the statistics bureau said earlier this month, after restrictions on some food imports pushed prices higher. “The outlook for CPI inflation is dominated by the risk of upside pressures from policy decisions relating to minimum wages, trade restrictions on foods, as well as the temporary effects of electricity tariff subsidy reform,” the World Bank said. Indonesia has managed to contain inflation by continuing to subsidise fuel costs, though that has meant heavy government spending on subsidies. Many economists say the subsidies must be cut, but President Susilo Bambang Yudhoyono is reluctant to take this measure, especially with national elections due next year. The World Bank estimated a fiscal deficit of 1.9 percent of Indonesia’s GDP in 2013 due to higher projected fuel subsidy spending and potentially weaker revenue collection. Reuters
business daily March 19, 2013
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Emerging markets’ feminine future Shaukat Aziz
Former Prime Minister of Pakistan, 2004-2007
For example, MAS Holdings in Sri Lanka has incorporated into the workplace nursing stations, on-site banking, and company buses that ease employees’ commutes and facilitate participation in sports programmes. Such measures not only lead to increased productivity; they also bolster loyalty, morale, and thus employee retention. At the same time, it is crucial that women enjoy total reproductive autonomy and sexual sovereignty. This can be achieved only with the provision of universal and unfettered access to reproductive and other relevant health-care services.
ccording to the United Nations, 70 percent of women worldwide experience violence in their lifetime. The World Bank adds that women aged 15-44 are more likely to experience rape or domestic violence than cancer, car accidents, war, or malaria. Such indicators are even more alarming in emerging markets, where discrimination and gender inequality are particularly prevalent. This partly reflects the failure of public policy to ameliorate the distributive consequences of rapid economic growth. With the informal sector continuing to play a major role in emerging economies, women often have access to only unreliable and transitory employment that offers casual and irregular wages. Meanwhile, unprecedented urbanisation has disrupted traditional family structures, further undermining the role that women can play in economies and societies. The damaging impact of active gender discrimination – such as bride burning and female infanticide – is clear. But passive discrimination – tolerating rules and institutions that deny women equal say in reproductive decisions, equal access to education
and employment, equal pay for equal work, equal rights before the law, and equal political influence – is similarly destructive. In all of its forms, gender discrimination makes women vulnerable to sexual slavery, trafficking, and forced marriage, deprives women of their inalienable rights, and diminishes their quality of life. At the same time, it stunts the capacity of boys and men to understand women’s plight, thus diminishing their motivation to change the situation. While these issues are global, they are most urgent in emerging markets, where they are undermining the social and economic progress on which the rest of the world increasingly relies.
Failure to make full use of women’s talents undermines emerging markets’ economic development
Undermining growth In the wake of the global economic crisis, emerging markets have become the engines of worldwide growth. But these countries face growing constraints to sustainability, social cohesion, and political stability, including erosion of their international competitiveness, environmental degradation, weaknesses (including corruption) in national, local, and corporate governance,
wasted human capital, and growing social, economic, and gender inequality. Failure to make full use of women’s talents undermines emerging markets’ economic development, while the marginalisation and abuse of women threatens their social advancement and impairs their political stability. With most countries worldwide facing continued economic uncertainty, the international community has
a vested interest in emerging economies’ resilience, collective capacity to sustain global demand for goods and services, and ability to confront the challenges, such as gender inequality, that threaten their success. The importance of overcoming these barriers to development was emphasised at a recent symposium (of which I was the chair) at Green Templeton College, Oxford. Fifty leaders from government, business, civil society, and academia identified gender inequality as the most urgent constraint to sustainable growth, social cohesion, and political stability, and agreed on the steps needed to address the issue effectively. First and foremost, national policymakers must take concrete, comprehensive action to ensure that women are forced to abandon neither productive nor reproductive activities. To this end, governments should implement measures that guarantee, directly or indirectly, affordable child- and elder-care support systems for working parents. Moreover, private employers should be encouraged to build supportive workplaces by implementing creative solutions to common constraints.
But even healthy reproduction has a dark side. Neonaticide (killing infants that are less than one day old), infanticide (killing infants that are more than one day old), and the practice of disposing of female children in favour of male offspring are not only barbaric; they have led to imbalanced gender ratios in many emerging markets. Policymakers must enforce criminal sanctions against these practices. Subsequently, educational programmes for children and adults should be launched, in collaboration with religious groups, in order to improve public understanding of gender inequality. By promoting a shift in public perceptions, such programmes can catalyse fundamental behavioural changes. International action is also crucial. The World Bank and regional development banks should be encouraged to incorporate genderequality criteria into their eligibility criteria for loans and credit to emerging-market governments and privatesector corporations. Such a clear economic link would help to motivate local policymakers to take strong action, while helping to bolster public support for policies promoting gender equality. The international community has a profound stake in the future performance of emerging markets. In order to bolster these countries’ social and economic advancement, the development agenda in the coming years should include a robust commitment to promoting gender equality. © Project Syndicate
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March 19, 2013 business daily | 15
The insupportable equilibrium wires of economic thought Business
Leading reports from Asia’s best business newspapers
Theoretical physicist, is the author of ‘The Social Atom: Why the Rich Get Richer, Cheaters Get Caught and Your Neighbor Usually Looks Like You’
Retail giant Aeon Co. is likely to become the top shareholder in the Daiei Inc. supermarket chain, it has been learned, as Aeon has begun coordinating with major trading house Marubeni Corp. to acquire part of its 29 percent stake in Daiei. Aeon is also considering making Daiei its subsidiary, by acquiring the majority of its shares in a takeover bid. This would create a massive commodity distribution group, with sales in excess of 6 trillion yen (US$63.4 million) when combined with those of Daiei.
prevent it from settling into a nice equilibrium. As humans, we’re terrible at imagining how such processes work. Take a piece of paper and fold it, and then take that doubled paper and fold it again, and then again, 30 times in all. Actually, don’t waste your time. You’ll find you can’t do it because the result, if you did, would be about 70 miles thick. This is the power of positive feedback: Each step not only makes things bigger, but also makes them bigger more quickly. This leads to consequences far beyond our expectations.
Myanmar Times Maersk Line and MCC Transport, subsidiaries of Danish business conglomerate AP Moller-Maersk Group, announced that they intend to open a branch office in Myanmar following EU and U.S. trade sanction suspensions last year. The office is scheduled to be opened in the second half of 2013. Maersk has operated in Myanmar for around 20 years through a third party agent Win Universe Ltd. They now have four sailings a week departing from Yangon.
Economic Times SpiceJet Ltd is not “too worried” about the impending entry of AirAsia Bhd in the Indian market, its chief executive was quoted as saying. Neil Mills, SpiceJet CEO, said AirAsia might find it difficult to replicate a model of charging for every value-added service in India like it does elsewhere. “The 1937 Act did not envisage the low-cost model and that law stipulates what governs what the airlines can do and [can] not do in India. So, we are not even allowed to charge for allocated seating here so how are they [AirAsia] going to do that? Will a different set of rules apply for them?” he questioned.
Wall Street Journal Friday marks the one year anniversary of the implementation of the free trade agreement between South Korea and the U.S. After years of hard negotiations, the FTA has helped lower prices for Korean consumers of many products and given American exporters a boost. According to a report compiled by the Hyundai Research Institute, South Korea’s exports to the U.S. gained 4.1 percent last year to reach US$58.5 billion as the country’s overall outbound shipments slipped 1.3 percent due to the global economic slump. Imports from the U.S. declined 2.8 percent to US$43.3 billion, weighed on by a downturn in domestic demand, according to the report.
onjure an image in your mind: a pencil resting on a small table, perhaps next to a notebook. In what position did you imagine the pencil? Lying on its side, right? Why not upright, with either the eraser or the graphite tip touching the table and the rest pointing into the air? In terms of strict physical forces, it’s possible to position a pencil this way. We never see it happen because even the tiniest vibration, from the rumble of someone tapping the table to a slight shift in air currents, will knock it over. The upright pencil is in what’s called unstable equilibrium, a state of being that can exist if unperturbed, but that will change rapidly if given the tiniest shock from the physical world. By contrast, a pencil lying on its side is in stable equilibrium. Blow on it, even slam your ﬁst on the table, and the pencil will stay in that position or bounce around momentarily and then go back to it. Stable equilibria are generally more important than unstable, because things in such states stay there. Whether we’re thinking of forces affecting a pencil or the Dow Jones Industrial Average, we can expect something to remain near a stable equilibrium but to wander away from an unstable one. So whenever we consider a state of equilibrium, we’ve got to ask whether it’s stable.
Elegant mathematics For several decades, academics have assumed that the economy is in a stable equilibrium. Distilled into a few elegant lines of mathematics by the economists Kenneth Arrow and Gerard Debreu back
We’ll never understand economies and markets until we get over the nutty idea that they alone … are inherently stable and have no internal weather
in the 1950s, the assumption has driven most thinking about business cycles and financial markets ever since. It informs the idea, still prevalent on Wall Street, that markets are efficient – that the greedy efforts of millions of individuals will inevitably push prices toward some true fundamental value. Problem is, all efforts to show that a realistic economy might actually reach something like the ArrowDebreu equilibrium have met with failure. Theorists haven’t been able to prove that even trivial, childlike models of economies with only a few commodities have stable equilibria. There is no reason to think that the equilibrium so prized by economists is anything more than a curiosity.
It’s as if mathematical meteorologists found beautiful equations for a glorious atmospheric state with no clouds or winds, no annoying rain or fog, just peaceful sunshine everywhere. In principle, such an atmospheric state might exist, but it tells us nothing about the reality we care about: our own weather. Outside economics, in areas such as meteorology, the biggest shift in scientific thinking of the last 50 years has been the movement to understand “out of equilibrium” systems. Consider tornadoes. The state of Kansas alone sees hundreds of them every year, and they come about through perfectly ordinary atmospheric processes. Warm, moist air sweeps in from the Gulf of Mexico, cold air descends from the Rockies, surface winds blow. All these events build on one another, and soon an ordinary grey sky becomes a violent, memorable twister. More technically, we could say that the atmosphere is prone to positive feedbacks, which
In one form or another, positive feedback lies behind almost everything that makes our world rich and surprising, changeable and dynamic, lively and unpredictable. It makes seeds sprout and grow into trees, matches burst into flame, and single cells divide and proliferate into living, thinking human beings. It drives political revolutions and new religions. Yet outside of these areas, an intellectual blind spot to the power of positive feedbacks still holds us back. Nowhere is this truer than in the science of human systems, in social science, and especially in economics and finance. We’ll never understand economies and markets until we get over the nutty idea that they alone – unlike almost every other complex system in the world – are inherently stable and have no internal weather. It’s time we began learning about the socioeconomic weather, categorising its storms, and learning either how to prevent them or how to see them coming and protect ourselves against them. Bloomberg View
* This is an excerpt from his new book, ‘Forecast: What Physics, Meteorology and the Natural Sciences Can Teach Us About Economics’
business daily March 19, 2013
CLOSING Yuan trade settlement up by two-thirds
Smartcard travel urged for mainlanders
The Monetary Authority of Macau revealed yesterday that the volume of cross-border yuan trade settlement business here reached 97.25 billion yuan (121.6 billion patacas) last year, growing by 62 percent year-on-year. The yuan deposits in all banks here amounted to 41.6 billion yuan by the end of December, accounting for 7.5 percent of all deposits of 554.2 billion patacas (US$69.3 billion). The financial regulator also said there was a nearly one-fourth growth to 5.38 billion patacas in the revenue the insurance industry got from insurance premium last year.
Mainlanders should be entitled to use a smartcard to enter and leave Macau like Hong Kong residents, suggest four Macau delegates to the National People’s Congress – according to Chineselanguage Macao Daily News. “While we think it would be meaningful if more mainland Chinese residents became eligible to participate in the e-Channel programme, we believe that such policy changes could take a long time and we would not necessarily expect implementation in the near future,” said Union Gaming Research Macau. Hong Kong is spending HK$30 million (US$3.9 million) to introduce stamp-free clearance for visitors from the end of March.
Xiao to take helm at securities watchdog New leader seen as a ‘transitional figure’ at the regulator
iao Gang, who stepped down on Sunday as chairman of Bank of China Ltd, will take on the challenge of restoring confidence in Asia’s third-largest stock market as head of the nation’s securities regulator. His appointment was announced to China Securities Regulatory Commission staff at a meeting on Sunday, according to a person with direct knowledge of the matter who asked not to be identified because he isn’t authorised to speak to the media. The 54-year-old, who resigned from Beijing-based Bank of China because of “the needs of national financial work,” will succeed Guo Shuqing at the watchdog. Mr Xiao is tasked with overseeing stocks in Asia’s worst-performing major market of the last three years, as well as deepening a bond market supervised by multiple regulators. His appointment comes as China transitions to a new government under Premier Li Keqiang, who pledged over the weekend to open the world’s second-biggest economy to more market forces even when it feels “like cutting one’s wrist”. “Xiao is likely to extend Guo’s policies, but there will definitely
be some changes,” Wang Aochao, Shanghai-based head of research at UOB Kay Hian Ltd, said yesterday. “Handling resistance to reforms will be Xiao’s biggest challenge.” China’s equities benchmark index, which had plunged to near a four-year low in December even as Mr Guo withheld approval for more than 800 initial public offerings, rallied to end January in a bull market before paring back gains.
Government reshuffle Mr Guo’s future role wasn’t disclosed at the CSRC meeting, the person said. He may be appointed governor of Shandong province in eastern China, the South China Morning Post reported on March 13. Shares of Bank of China fell as much as 3.4 percent in Hong Kong trading yesterday, closing at HK$3.49, a loss of 1.7 percent. The Hang Seng Index dropped 2 percent. China’s new premier vowed to target 7.5 percent annual economic growth through 2020. His economic team retained People’s Bank of China Governor Zhou Xiaochuan and added sovereign wealth fund chief Lou Jiwei as finance minister after a once-in-
Xiao Gang, former chairman of Bank of China Ltd
a-decade leadership transition. Mr Zhou, 65, had previously served as chairman of the securities watchdog between 2000 and 2002. Mr Xiao may be a “transitional figure” at the securities regulator as the government prepares him for a more senior role, such as succeeding Mr Zhou, said UOB’s Mr Wang. “If that’s the case, the pace of new measures being pushed out may slow,” he said. “His focus may be on making sure there’s no major problem within the securities system.” Mr Xiao’s success in steering the
Cyprus deal unnerves Asian markets A
The Cyprus parliament was set to vote yesterday on ratification of a one-off tax on bank deposits
sian stock and bond markets fell and safe-haven assets such as the yen rose yesterday after a radical bailout plan for Cyprus unnerved investors by re-igniting concerns about the euro zone’s weak banks and its fickle policies. Analysts worried that what appeared to be a knee-jerk reaction might turn into a full-blown selloff if euro zone officials struggle to implement their plan for Cyprus or fail to convince global markets that the proposal is a one-off deal. Market participants braced for more uncertainty and volatility as European markets followed Asia
lower and U.S. stock futures pointed to a weaker Wall Street open. Foreigners sold a hefty amount of South Korean shares and exited some of the more popular highyielding assets in the region, such as Malaysia’s ringgit and Indonesian stocks – assets they had been chasing for weeks to earn better yields. “While euro zone policymakers have stressed that Cyprus is an exceptional case, that will probably do little to calm sentiments. ‘Better safe than sorry’ may be the mantra,” Mizuho Corporate Bank said in a note. Cyprus and international lenders agreed at the weekend that savers
nation’s largest foreign-exchange lender through the global economic crisis and to mounting record profits, as well as his calls for a crackdown on shadow banking, may give him credibility with global and domestic investors. Mr Xiao was named head of Bank of China in March 2003. Under his stewardship, the Beijing-based lender’s net income probably grew for a seventh straight year to a record 132.5 billion yuan (US$21.3 billion) in 2012, according to a Bloomberg survey of 34 analysts. Bloomberg News
in the island’s outsized banking system would take a hit in return for the offer of 10 billion euros (US$13.07 billion) in aid, breaking with previous European Union practice that depositors’ savings are sacrosanct and raising fears that it could set a precedent for future euro zone bailouts. It wasn’t just the fear that Cyprus will set a precedent for the rescue of other bigger and weak banking systems, such as Spain’s, that unsettled markets. Uncertainty over how the Cyprus parliament will vote on the bailout, the implementation of the tax on depositors and worries of a run on deposits all contributed to yesterday’s sell-off in all assets perceived as risky. Asian shares had their worst single-day drop since late July. The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.8 percent to its lowest since January 2. Reuters
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