Casinos compete over private jets for VIPs
rivate jet travel is taking off in Macau, partly as a result of competition between casino operators for high roller gamblers. The definition of private jets is also changing. It includes not only smaller executive aircraft but also full-size civilian airliners.
Tuesday May 14, 2013
Editor-in-chief Tiago Azevedo
April 19, 2013
Melco Crown Entertainment Ltd uses a 10-year-old Airbus A319 converted to move VIPs around according to a regulatory filing. Sands China Ltd’s parent company, Las Vegas Sands Corp, has a fleet of planes to serve its most valuable patrons.
“Not long ago it seemed they had more aircraft at the airport than Air Macau,” one industry source told Business Daily. Fortuna Jet, controlled by Hotel Fortuna boss Sio Tak Hong, has asked the Civil Aviation Authority of Macau for permission to operate
and maintain private jets. But the business has its ups and downs and Jet Asia, which has been in this market for some years, is now reducing its fleet because it does not get enough charters. More on pages 2 & 3
CTM asked to cut further its leased line charges
he telecommunications regulator says the government “has always been concerned” about fees that Companhia de Telecomunicações de Macau SARL (CTM) charges other telecom firms to use its mobile network. CTM, the city’s largest telco, holds a monopoly on Macau’s landline network. Last week CTM denied it was charging other operators “six to eight times more” for carriage than in similar markets. CTM added it had reduced its leased service charges for other telcos “by 10 to 40 percent” in August 2010. The company opened a new Telecentro concept store yesterday. Page 4
Four-year wait for social housing hopefuls
Reolian threatened by bus subsidy delays, says boss
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The waiting list for so-called social housing – units built by the government to rent out to people that can’t afford to buy – could be open again next week. But it’s already oversubscribed. There are just 4,800 flats available but over 5,600 households currently on the waiting list. Most of the available units are at Coloane’s Seac Pai Van complex, some distance from amenities such as shops. Only around 200 flats are located on Macau peninsula – the traditional heartlands for most lowincome families in Macau.
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May 14, 2013
Private jet set Private jet travel is taking off in Macau, but the business has its ups and downs Alex Lee
Melco Crown Entertainment has an Airbus A319 converted into a business jet (Photo: Manuel Cardoso)
private jet has long been a symbol of wealth and power, but the appeal of the comfort and privacy of flying beneath the radar of the public eye has never been greater than it is now, at least in Macau. The city has three enterprises that offer travel by private jet: one, Macau Legend Development Ltd, belongs to David Chow Kam Fai; another, Jet Asia Ltd, belongs to Stanley Ho Hung Sun’s Sociedade de Turismo e Diversões de Macau SA; the third is Macau Jet International Co Ltd, which
Jet Asia is reducing its fleet of private jets
operates two Falcon jets. A fourth enterprise, Sio Tak Hong’s Fortuna Jet, has applied to the Civil Aviation Authority of Macau for permission to operate and maintain private jets, according to the company’s website. Fortuna Jet declined to comment when approached by Business Daily. The Civil Aviation Authority told us it had received Fortuna Jet’s applications last year and was still considering them. Considering such applications was “usually a lengthy task”, a
spokesperson for the authority said. “When our assessment … is done, we will carry out inspections to check whether their operations are compliant with their manuals and whether these operations are sound.” The Civil Aviation Authority said no other enterprise had applied to operate private jets. Sources in the aviation industry, who declined to be identified, told Business Daily that Fortuna Jet’s aim was to have high-rolling gamblers charter its jets to bring them to Macau.
Casino operators have been chartering private jets to bring in high rollers for quite a while.
Not so simple Sands China Ltd’s parent company, Las Vegas Sands Corp, has a fleet of planes to serve its most valuable patrons. “Not long ago it seemed they had more aircraft at the airport than Air Macau,” said one of our sources. Las Vegas Sands uses its planes to transport not only high rollers, but also its own executives. Sheldon Adelson, the chairman of Las Vegas Sands, and Steve Wynn, the founder and chief executive of Wynn Resorts Ltd, are reputed to fly exclusively in private planes belonging to their companies. Jet Asia has been in this market for some years. But the company is now reducing its fleet of private jets because it does not get enough charters. A source said the company had “too many planes” and that the cost of maintaining them was “simply too high”. When the gaming market was liberalised, in 2002, Jet Asia saw what it thought was an opportunity to make money out of shuttling high rollers – or anybody else rich enough to turn their noses up at scheduled flights – into and out of Macau. But it was not that simple. Casino operators tend to trust only their own planes and pilots to fly their most valuable patrons to and fro. Melco Crown Entertainment Ltd uses a 10-year-old Airbus A319 converted into a business jet. It is basically the same type of aircraft Air Macau Co Ltd uses for its scheduled services, only configured to carry VIPs.
May 14, 2013
Taiwan’s man in Macau has creative approach Pricey parking bay A new hangar exclusively for private jets should be ready next year at Macau International Airport, according to the programme for tendering for the project. The programme says construction must be completed within 10 months of the contract being awarded. The airport needs the new hangar to cope with expansion of general aviation. One of the main thrusts of the airport’s master plan for expansion is development of its capability to handle private jets. The number of takeoffs or landings at the airport by private jets grew steadily to 1,416 last year from 383 in 2005, data provided by the Civil Aviation Authority of Macau show. In the first quarter of this year the number of takeoffs or landings by private jets was 398, 11.6 percent more than a year earlier. The airport intends to expand the area given over to general and business aviation to 89,600 square metres by 2030 from 12,000 square metres now, and to give particular attention to the area for private jets and small aircraft.
Our sources said Melco Crown Entertainment was also interested in obtaining a second-hand helicopter, probably an Augusta A109, the same type of aircraft used by Sky Shuttle Helicopters Ltd. “At the moment it is just a plan. If approved, it will be implemented in six to 12 months,” said one source.
Plane dealing Our sources said that if the plan was put into action, Sky Shuttle would probably operate the helicopter on Melco Crown Entertainment’s behalf. All of the casino operators contacted by Business Daily were reticent about their private jet operations – especially about their flights to other places where they do business, such as Las Vegas, Singapore and the Philippines. Galaxy Entertainment Group Ltd vice-chairman Francis Lui Yiu Tung said his company had bought a plane about two years ago. Mr Lui said he personally preferred to travel on scheduled flights, but declined to say who did use his company’s aircraft. Mr Wynn’s Gulfstream G650 plane has had plenty of hours in the air. A Gulfstream G650 can fly nonstop between Las Vegas and Macau, in theory. The price of a new Gulfstream G650 ranges from US$65 million (519 million patacas) to US$70 million. This type of aircraft is on the radar screens of Fortuna Jet’s Mr Sio and Melco Crown Entertainment executive co-chairman and chief executive Lawrence Ho Yau Lung. One of our sources said both “seem to have already placed orders for one each, with delivery sometime in 2016”.
The head of Taiwan’s representative office here says Macau need not worry about competition for its casinos Stephanie Lai
he new director-general of the Taipei Economic and Cultural Office in Macau, Lu Chang-Shui, has said he welcomes more bilateral trade, particularly in goods and services produced by cultural and creative industries. “Our strong point is the cultural and creative industries, which is also the sector that the MSAR government intends to promote,” Mr Lu told reporters yesterday on the sidelines of a seminar. In the Policy Address for 2013, delivered in November, Chief Executive Fernando Chui Sai On reiterated that the government would set up a fund to nurture cultural and creative industries. Mr Lu said: “Bilateral exchanges should also be reinforced in areas like tourism, Chinese traditional medicine and the development of small and medium businesses.” He acknowledged that higher education remained one of the strongest links between Taiwan and Macau. “Taiwan’s education expenses are not steep, while at the same time the quality of the education resources is well-assured,” he said. “And Taiwan is also able to provide a friendly and secure environment for learning.” Last year almost 5,000
Macau students were enrolled in universities in Taiwan, 800 more than in 2010, according to the Taipei Economic and Cultural Office in Macau. Of the Macau students that that graduate from university in Taiwan, 95 percent return here to work. Mr Lu said that if, as proposed, casinos opened on Taiwan’s outlying island of Matsu, they would not alter Taiwan’s ties with Macau. “There are concerns over competition between the two places, but Macau need not worry about it,” he said. “Macau has the advantage of having been in the gaming business for a long time, while Matsu is an offshore island that still needs a lot of infrastructure backup to develop gaming,” he said. “Taiwan’s gaming operations model will be totally different from Macau’s, and gaming development in each place can carry on side by side,” Mr Lu said. He said the Taiwan government had yet to decide on how to tax gaming. An authority on the gaming industry in this part of the world told Business Daily in February that legislation to allow casino resorts in Taiwan was unlikely to go before parliament in Taipei until the third quarter of this year.
Gulfstream G650 Cockpit crew: 2 Passenger capacity: 11 to 18 Payload: 2,950 kg Length: 30.41 metres Wingspan: 30.36 metres Height: 7.72 metres Maximum speed: Mach 0.925 or 982 km per hour Long-range cruising speed: Mach 0.85 or 904 kph Short-range cruising speed: Mach 0.90 or 956 kph Range: 12,960 km Service ceiling: 15,500 metres
Steve Wynn has chosen a Gulfstream G650 for Wynn Resorts
Lu Chang-Shui became director-general of the Taipei Economic and Cultural Office here in March
May 14, 2013
Photo by Manuel Cardoso
Govt pressing CTM on leased-line fees The government hopes Citic Telecom’s takeover of CTM will make life easier for CTM’s competitors Tony Lai
he government hopes Citic Telecom International Holdings Ltd’s takeover of Companhia de Telecomunicações de Macau SARL (CTM) will allow other telecommunications companies some breathing space. The director of the Telecommunications Regulation Bureau, Lawrence Tou Veng Keong, said yesterday that the government “has always been concerned about the leased-line fees” CTM charges other telecommunications companies to use its network, and would like the fees reduced. “CTM actually submitted a proposal last November, but we think the reductions mentioned did not reflect the actual market conditions,” Mr Tou told reporters on the sidelines of an event arranged by CTM. CTM, the city’s biggest telecommunications company, has a monopoly of the landlines here. Operators of wireless networks other than CTM’s must pay CTM to use its landlines. “We hope that… after the restructuring of the shareholdings in CTM, the company will have a new perspective on the market,” Mr Tou said. He was referring to Citic Telecom’s intention to increase its stake in CTM
to 99 percent from 20 percent. “The market should not be dominated by one company, which is unhealthy to the development of telecommunications,” he said. “The company … should create room for other operators, other players in the industry, to expand. This is what truly benefits the development of Macau.” Mr Tou said he would continue to discuss leased-line fees with CTM. CTM chief executive Vandy Poon Fuk Hei declined to answer questions from reporters about leased-line fees. A spokesperson for CTM told Business Daily last week that it had offered “a lower-thanstandard service charge” to the other wireless networks. The spokesperson declined to say how much this charge was on the grounds that the company and the other wireless networks had agreed to keep the matter private. CTM reduced its leased-line fees by between 10 percent and 40 percent in August 2010.
Could do better One operator of a wireless network, SmarTone Mobile Communications (Macau) Ltd, said last week that leased-line fees were six to eight times
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MTEL to get landline licence this month The government could open up the city’s landline telecommunications market later this month, said Lawrence Tou Veng Keong, director of the Telecommunications Regulation Bureau. Companhia de Telecomunicações de MTEL, Ltda was the sole bidder for last year’s tender to break the monopoly held by Companhia de Telecomunicações de Macau SARL (CTM). A second licence will very likely be granted to MTEL, Mr Tou said last month. MTEL is to set up a joint venture with Chinese telecommunication equipment and network solutions provider ZTE Corp and invest up to one billion patacas (US$125 million).
higher here than in similar markets, such as Hong Kong. SmarTone asked the government to intervene. Mr Tou said yesterday that Citic Telecom had been keeping the government abreast of its intentions once it became the majority shareholder in CTM. “We have received documents from the shareholder about the future development plan and its views on the market,” he said. “We have carried out an analysis and… these basically conform to the government requirements on the company’s role in Macau and its future development,” he said. Mr Tou said his bureau would put its findings in a report for Chief Executive Fernando Chui Sai On to review. He said nothing about when the government might approve Citic Telecom’s takeover of CTM. Obtaining government approval is the final hurdle that the deal must clear. Citic Telecom, a subsidiary of mainland Chinese conglomerate Citic Pacific Ltd, intends to pay US$1.16 billion (9.3 billion patacas) to buy out CTM’s other main shareholders, Cable & Wireless Communications Plc and Portugal Telecom SGPS SA.
Citic Telecom told the Hong Kong Stock Exchange last month that its shareholders and the mainland regulators had approved the acquisition. Citic Telecom said in March that it expected to have all the necessary approvals by July 13, but that it could wait for another 90 days for approval from the Macau government. The chairman of Citic Telecom, Xin Yuejiang, declined to comment yesterday on his company’s plans for CTM. Mr Tou said CTM “has so far done its job” in serving the public but “can do better”.
May 14, 2013
Property fund close to Lilau project sale Completion of The Fountainside construction pushed back to July Vítor Quintã
eveloper Macau Property Opportunities Fund Ltd says it is close to selling the remaining units of a high-end residential project on Penha Hill. The fund managed by Sniper Capital Ltd has already sold 20 units at The Fountainside and expects to soon sell the remaining 18 flats and four villas.
Strong demand for the city’s properties is expected to persist … driven by strong demand for newly launched properties constrained by limited supply Macau Property Opportunities Fund
A show villa was launched last month as part of a final marketing and sales programme for the lowdensity project, the fund said in a note released last week. Finishing and fit-out works – slated for completion in the second quarter – will only be finished “by the end of July,” the statement admits. In January the fund said it expected to sell the remaining flats and villas for an average of US$800 (6,400 patacas) and US$1,400 per square foot, respectively. The villas will be marketed “on an exclusive basis” and will be targeted at “high-net worth individuals” from Macau, Hong Kong and mainland China, the fund said at the time. London-listed Macau Property Opportunities said in March it believes this sales period “will attract strong demand from local buyers”. The fund’s asset value per share rose by 13 percent to US$3.62 during the first quarter of this year, driven in part “by a strong performance in Macau’s property market”. “Strong demand for the city’s properties is expected to
Corporate New local slot games for Bally Casino equipment maker Bally Technologies Inc. is to include a new Chinese-themed slot machine game on its stand at G2E Asia. Zhi Nu is a five-reel, 50-line game with a progressive jackpot using Bally’s Pro Series V32 slot machine cabinet. The game has a storyline based on Chinese mythology, featuring the goddess Zhi Nu and her mortal lover Niu Lang. Another locally themed product is Chinese Zodiac, a new video slot available on Bally’s Pro Series V22/22 upright cabinet or the V22/26 slant cabinet. Other Chinese language games on display at G2E Asia will include China River, Fantastic 8s, Red Phoenix, Perfect 8s, Shadow Diamond, White Lion, Heavenly Empress and Pharaoh’s Dream. “We have focused on creating a new portfolio of dual-language English-Chinese video titles with rich graphics and rewarding bonuses that are sure to entertain casino patrons in the Asia-Pacific region,” said Kurt Gissane, Bally Technologies’ senior director and managing director of Asia-Pacific.
Edmunds to head FutureLogic’s global sales FutureLogic Inc. – a supplier of ticket printers and player coupon systems for the casino industry – has promoted John Edmunds (pictured) as chief marketing officer and chief sales officer. He will be responsible for global sales, marketing and product management. Mr Edmunds joins Tony Shepherd (chief financial officer), Peter Murphy (chief operating officer) and Mark Meyerhofer (chief technical officer) on FutureLogic’s C-level executive team. He will report to Eric Meyerhofer, the company’s chief executive. “Based on his experience and performance, John makes the ideal individual to unite and develop our global sales, marketing, and product management functions at a strategic and operational level across our business,” said Eric Meyerhofer. Mr Edmunds said in reaction to the appointment: “I am excited to have the opportunity to lead the company’s efforts to provide the best experience possible for our customers.” FutureLogic will be exhibiting its latest products at Global Gaming Expo Asia in Macau next week.
The fund launched a show villa at The Fountainside last month
persist,” the note says, “driven by strong demand for newly launched properties constrained by limited supply.”
In addition the fund made a profit of US$6 million from the “opportunistic” sale of a penthouse in One Central Residences in March.
May 14, 2013 April 19, 2013
Four-year wait looms for social housing hopefuls
Photo by Manuel Cardoso
There are only 4,800 flats available but over 5,600 households already on the waiting list Tony Lai
he public could start applying again for rentalonly public flats, also known as social housing, next week but there is still a long waiting list of previous applicants. The Housing Bureau admitted the current supply is only enough to meet the applications made before 2009, while new applicants will have to wait. Tam Kuong Man, the bureau director, said at a press conference yesterday there are currently some 4,800 public flats available for rent in Macau. Almost all of those flats are being finished at Coloane’s Seac Pai Van complex while only about 200 flats are located in the Macau
peninsula, he said. Mr Tam said the 5,676 households that applied for social housing in 2003, 2005 and 2009 and are still on the waiting list would have priority. The government “is confident” that the present supply was enough for those households, he said, while “the applicants in this new round can be guaranteed a flat within four years”. Only 57 percent of the 2003 applicants eventually chose to get a social flat and that percentage was even lower, 27 percent, for the 2005 applicants, the official said. “There are several reasons for the applicants to give up [on renting] – personal reasons, their monthly income exceeding the limit, changes
in the household structure and their involvement in criminal cases.” “Only about 40 percent of the applicants will in the end rent social houses,” Mr Tam said, while saying he hopes the ratio would be higher this time around. Wong Chan Tong, who heads the cabinet of Secretary for Transport and Public Works, told media at another event: “This new round of applications can better help the government grasp public demand [on social housing].” The administration could use the data collected to adjust the types of houses being built, said Mr Wong. Housing Bureau director Mr Tam gave no hint on how many social homes the government is going to
build in the future, apart from nearly 700 social flats planned for Taipa. “The government will use the city’s economic and social development as a reference to find land for public housing, as well as some land seized back from land squatters,” the director said. “Some plots will also be reserved at the five new reclaimed areas for building public housing.” Macau permanent residents older than 17 and with a monthly income below 7,820 patacas (US$977.5) can apply for social housing unit starting May 22. The application period will last for three months and it will “further tighten the human resources” in the Housing Bureau, Mr Tam admitted.
The lack of a pay rise does not help improve Reolian’s services, Cédric Rigaud says
Reolian future threatened by payment hike delay Public bus operator continues to lose money, says general manager Stephanie Lai
he government’s delay and lack of transparency in approving a payment hike for Reolian Public Transport Co “doesn’t help” improve service quality, general manager Cédric Rigaud stressed. The bus operator’s continued losses are starting to create doubts over the company’s future, even among its staff, he told media yesterday. “Our staff have been very dedicated in the past two years but they don’t know what the company’s future is like if the government
doesn’t give [Reolian] a proper answer,” Mr Rigaud said. The company made a loss of about 58 million patacas (US$ 7.3 million) last year. “The financial situation of the company is not very good: we’re losing money month after month,” Mr Rigaud added. Reolian’s operation was heavily burdened as the pressure caused by inflation on operational costs was not being offset. Despite a “difficult” financial situation, he said they would not reduce the salaries of their drivers,
while working to keep the current fleet up and running. The number of bus drivers working for Reolian has gone down by 12 since it made its debut in the summer of 2011. The operator had 412 drivers in the first quarter of this year, company data show. On the other hand the average daily bus runs has increased from 3,188 in 2011 to 3,516 in the first quarter of this year. “We’re still keeping the same size of fleet, and keep a certain [financial] reserve to retain our staff and recruitment,” said Mr Rigaud. Almost a month has passed since the government announced that it would pay two of the three bus operators, Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos
de Macau SARL (TCM), a further 23.3 percent for their services. Reolian has not been informed of when it might receive a similar hike. The operator has made progress in executing its service improvement plan, such as reinforcing drivers’ training and boosting safety hardware for buses, the Transport Bureau admitted. But there is no timeline for when the service charge hike might be approved, the bureau told Business Daily. “At the moment, we are still processing a few penalty cases against Reolian, where it had bus run delay issues and the company has to be fined,” said a bureau spokesperson. “The lack of transparency from the government doesn’t help to speed up our progress,” said Mr Rigaud.
May April14, 19,2013 2013
China State HK$10.5 bln deal for MGM Cotai
government approval – to build a gaming resort with approximately 500 gaming tables, 2,500 slot machines and 1,600 hotel rooms. The ground breaking for the new resort – currently with a budget of US$2.6 billion (20.78 billion patacas) – took place in late February. “As construction work of the project is expected to start from early of 2014, CSCI will classify such project into the new contract awarded in 2014 [list],” said the contractor in its own press release.
Biggest ever wholly conducted contract in history of mainland firm’s overseas unit Michael Grimes
The MGM Cotai site (Photo: Manuel Cardoso)
hina State Construction International Holdings Ltd has signed a HK$10.5 billion (US$1.35 billion) deal to act as main contractor on the construction of MGM Cotai, a new casino resort
planned for Cotai. CSCI says it is the largest wholly conducted contract in its history. The firm does business outside the mainland on behalf of the stateowned China State Construction
It will be MGM China’s second venue in Macau. The existing MGM Macau opened in December 2007 at a cost of US$1.25 billion. At that time it was branded MGM Grand Macau, and was a 50:50 joint venture between MGM Resorts International and Pansy Ho Chiu King, using a gaming sub-concession licence from Sociedade de Jogos de Macau SA. After flotation of MGM China on the Hong Kong Stock Market in May 2011 raised US$1.5 billion, MGM Resorts increased its stake in the Macau venture to a controlling 51 percent, and Ms Ho diluted her interest to 27 percent in exchange for a major portion of the IPO proceeds. In January 2012, CSCI also won a contract from Hong Konglisted shipping and construction conglomerate Shun Tak Holdings Ltd – founded by former Macau gaming monopolist and SJM founder Stanley Ho Hung Sun and run by his daughter Ms Ho. It was to build phase four of the Nova City residential development on Taipa.
Engineering Corporation. China State’s first Macau project was a joint effort with Hong Kongbased Leighton Contractors (Asia) Ltd to build Wynn Macau casino resort on Macau peninsula. That had a first phase opening in September 2006. MGM China Holdings Ltd, the firm behind MGM Cotai, said in a filing to the Hong Kong Stock Exchange yesterday the work on the new venue would be done by two wholly owned CSCI units – China State Construction Engineering (Hong Kong) Ltd and China Construction Engineering (Macau) Company Ltd. “Commencement date: [is] anticipated to be on or around January 2014,” said MGM China in its filing, adding the expected completion date was April 2016. MGM Grand Paradise Ltd, a subsidiary of MGM China, has been granted 71,833 square metres (773,204 sq. feet) of land on Cotai by the Macau government for an initial concession period of 25 years. The operator’s plan is – subject to
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May 14, 2013 April 19, 2013
Greater China KFC sales crash 36 pct in April Sales of fast food giant KFC in China slumped an estimated 36 percent last month, according to parent Yum! Brands Inc., as consumers shunned chicken due to the H7N9 bird ‘flu outbreak. For Yum overall, which includes other restaurant chains such as Pizza Hut, Chinese same-store sales fell an estimated 29 percent in April, according to an exchange filing. “Beginning the first week of April, publicity surrounding avian flu in China has had a significant, negative impact on KFC sales,” Yum said. “Historically, the impact of this publicity has initially been dramatic at KFC but relatively short-lived,” Yum said.
Investment slows as production trails estimates Fears remain that economic growth is faltering
hina’s fixed-asset investment unexpectedly decelerated last month while industrial output trailed estimates, adding to concerns that the economy will fail to show much of a recovery this quarter. Fixed-asset investment excluding rural households in the first four months of the year increased 20.6 percent, the National Bureau of Statistics said yesterday in Beijing, compared with 20.9 percent in the first quarter. Production grew 9.3 percent in April from a year earlier and retail sales climbed 12.8 percent, according to the agency. The data may test the new leadership’s tolerance for slower economic expansion as President Xi Jinping and Premier Li Keqiang implement policy changes to improve the quality and efficiency of growth. The central bank warned last week that while the foundation for stable growth isn’t yet solid, stimulus policies could trigger inflation. “China’s economic recovery remains weak,” said Li Wei, a Shanghai-based economist at Standard Chartered Plc. “The government will stay vigilant on local-government debt, keep property-market controls and discourage public spending. All of those measures will restrain China’s growth rebound.” The gain in industrial output compared with the 9.4 percent
median estimate in a Bloomberg News survey of 38 analysts and an 8.9 percent increase in March. The median projection for retail-sales growth was 12.8 percent after a 12.6 percent increase the previous month. Economists estimated fixed-asset investment rose 21 percent in the first four months of the year, based on the median forecast.
The government will stay vigilant on localgovernment debt, keep property-market controls and discourage public spending. All of those measures will restrain China’s growth rebound Li Wei, economist, Standard Chartered
Stocks in China pared losses after the report. The benchmark Shanghai Composite Index was 0.2 percent lower at the close. Yesterday’s data indicate that second-quarter economic growth “may be somewhat better” than the first quarter’s, though it’s “still unlikely to be much better,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “Production only had very modest improvement” excluding so-called base effects from last year’s figures, she said. In its quarterly monetary-policy report last week, the People’s Bank of China said that the “foundation for stable economic expansion isn’t yet solid.” At the same time, the country can’t be “blindly optimistic” about the inflation outlook when uncertainties remain in areas such as property and farm-produce prices, it said. Consumer prices rose 2.4 percent in April from a year earlier, statistics bureau data last week showed, staying below the government’s 2013 target of 3.5 percent for a fourth month. Producer prices dropped for the 14th month, the longest negative streak since 2002, in a sign of overcapacity and lack of demand in some industries. While yesterday’s investment and industrial-production figures are “quite weak,” they aren’t “bad enough to trigger a policy easing,”
Factory output growth was surprisingly muted last m
Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a note. The pickup in factory production from March’s figure reflects a distortion from April having two more working days than last year’s month, Mr Zhang said. Mr Zhang maintained his forecast for 7.5 percent economic growth this quarter, down from 7.7 percent in the previous period.
Growth estimates Sales at large restaurants and catering businesses fell 2.8 percent in April from a year earlier, a sign
Investors plough more money into property April estate investment quickens but sales slow
rowth in real estate investment in China quickened in the first four months as developers saw improved liquidity conditions, though property sales slowed slightly due to continuing government curbs. Real estate investment, which affects more than 40 other sectors from cement and steel to furniture, rose 21.1 percent in the first four months of 2013 from a year earlier, quickening from an annual increase of 20.2 in the first quarter, the National Bureau of Statistics said yesterday. Revenues from property sales in January-April eased slightly to 59.8 percent from a surge of 61.3 percent in the January to March period, the NBS said. “The improved property
investment is mainly bolstered by relatively strong home sales and ample liquidity of developers,” said Luo Yu, a property analyst at private research house CEBM in Shanghai. China’s home prices have seen an upswing since around the middle of last year when the central bank began to expand monetary easing as part of Beijing’s growth-supporting policies. China’s credit boom in the first quarter could suggest new money is being channelled into the property sector, adding upward pressure on home prices. Average home prices in China’s 100 biggest cities climbed 1 percent in April from March, moderating from March’s month-on-month gain of 1.1 percent, a private survey showed. However, recent government
Real estate investment rose 21.1 pct in the first four months of 2013
cooling measures introduced in response to concerns over a property bubble have shown initial results, as home transactions slumped in major cities and month-on-month gains in home prices eased slightly in April. China should gradually rely on market forces, including taxation, to control the housing market while taking more effective measures to ensure strict restrictions are enforced by local governments, said the official People’s Daily in a commentary yesterday.
Relatively good sales and easier credit have also enabled developers to quicken their construction activity. Construction starts rose 1.9 percent in the first four months of 2013, improving from a decline of 2.7 percent in the first quarter, the NBS data showed. Total land area bought by developers fell 8.6 percent in the first four months from a year earlier, easing from a drop of 22 percent in the first quarter. Reuters
May April14, 19,2013 2013
Greater China IPO resumption likely to be delayed The resumption of initial public offerings in China, expected this month or next, will likely be delayed until July in part due to concerns over the strength of the economy, the official China Securities Journal reported yesterday. The securities regulator suspended IPO approvals in October to reduce equity supply and help stabilise the stock market, and also to improve the quality of firms that list on the Shanghai and Shenzhen stock exchanges. Around 750 companies are currently waiting for approval for a mainland listing, with some analysts estimating it could take as long as five years for some of them to list.
Samaras heads to China to boost trade ties Greek PM hopes trip will boost country’s ailing economy
that the effects of Mr Xi’s frugality campaign on banquet spending extended from the first quarter. Standard Chartered Plc on Friday became the latest bank to lower its growth estimates for China, cutting is 2013 forecast to 7.7 percent from 8.3 percent. “There are few signs of renewed dynamism,” analysts including Stephen Green, head of Greater China research in Hong Kong, and Li Wei wrote in a report. “Credit growth should support near-term activity, though it raises questions about leverage, credit quality and growth sustainability in the next few years.”
Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. last month cut their estimates for China’s growth this year to 7.8 percent after economic expansion unexpectedly slowed. Standard Chartered estimates a further moderation in the current period to 7.6 percent. One bright spot in the data was a 72.2 percent jump last month in retail sales of gold, silver and jewellery, compared with a 26.3 percent increase in March, as consumers took advantage of gold prices off to their worst start to a year since 1982.
HK ahead of NY as most expensive retail market
has benefited from those priced out of Bond Street. Annual retail rent in high-end shopping areas in Hong Kong averaged US$4,328 per square foot (36,351 euros per square metre). “Given that space is so expensive in Hong Kong’s prime shopping streets largely driven by continued demand from international luxury brands, many traditional retailers have moved into more niche secondary retail locations as they still want to be in and access the market, but have been priced out of the prime space,” Joe Lin, CBRE’s executive director of retail, said in a statement. New York ranked second among the most expensive global retail markets, with prime rents averaging US$2,970 per square foot. Europe’s prime retail markets followed, with London at US$1,053 per square foot and Paris at US$1,050 per square foot. The supply of prime space was tight elsewhere in the Asia Pacific region. An inflow of U.S. retailers helped Sydney maintain its prime rent at an average of US$1,018 per square foot, followed by Tokyo.
here’s expensive and then there’s Hong Kong. The Asian shopping haven in the first quarter kept its crown as having the world’s highest rent for prime retail properties, at nearly 50 percent more than for similar districts such as upper Fifth Avenue in Manhattan. Rents were more than four times the rate in similar areas in London and Paris, according to a report by global property advisor CBRE Group Inc. The 10 most expensive cities for retailers benefit from strong demand and modest new supply, a recipe for stable record-high prime rental rates, the report released on Sunday showed. In some markets, such as Hong Kong and London, the sky-high rents have prompted some newcomers to look nearby. For example, in London, Mayfair
reece’s Prime Minister Antonis Samaras hopes his four-day trip to China this week will help his country’s ailing economy by attracting investment and promoting the export of Greek products. Upon the invitation of the Chinese Premier Li Keqiang, Mr Samaras will visit Beijing, Shanghai and Hangzhou from Wednesday to Sunday, and will meet several Chinese officials. He is the second EU leader, after French President François Hollande, to visit mainland China since the new leadership came to power. Mr Samaras will be accompanied by his ministers of foreign affairs, tourism, development and merchant marine and a group of around 60 Greek businessmen. Emphasising the importance of the visit, local media report that the premier, who is expected to sign a series of bilateral and business agreements, hopes to turn Greece into a gateway to Europe and will discuss issues of transport, energy, privatisations, shipping and tourism. Already in Beijing, Deputy Minister for Development Notis Mitarachi said the visit signalled “a new page” in the relations between the two countries. “Greece’s relations with China have been good for years. It is now important to further develop specific collaboration agreements regarding investment and exports,” Mr Mitarachi told the Athens News Agency (ANA) over the weekend. “There is particular interest [on behalf of China] in infrastructure, namely ports and airports,” he added.
Big investor China has recently made several big investments in various sectors of the crisis-hit Greek economy. Most notably, in 2008 China’s giant transportation group China Cosco Holdings Co Ltd became a major force in the main Greek port of
Piraeus near Athens, while in March, U.S. computer giant Hewlett Packard Co. sealed a deal with Cosco to move a key part of its regional supplies through Piraeus. According to ANA, Mr Samaras’ meetings will focus on further developing Piraeus as a gateway of Chinese products into Europe. Chinese ambassador in Athens Du Qiwen stressed the importance of Mr Samaras’ meetings. “There is serious interest shown by a group of Chinese businesses. They are seriously interested in participating in the privatisation process of Athens international airport,” he told local reporters last week.
€3.25 bln Value of bilateral commerce in 2011
Mr Qiwen, who reportedly described the Cosco investment as “win win,” said prospects for the export of Greek olive oil, wine, furs and marble are very promising. According to data provided by the Greek-Chinese Chamber of Commerce and Industry, bilateral commerce between the two countries, negligible in the 1970s, jumped to 3.29 billion euros (US$4.3 billion) in 2010. In 2011, despite the economic crisis, it reached 3.25 billion euros. “Greece is starting to become very fashionable for the Chinese. There are Chinese couples who come to [the island of] Santorini to get married,” says head of the Greek-Chinese Chamber of Commerce and Industry Constantine Yannidis. The chamber estimates that between 60,000 and 100,000 Chinese tourists visited Greece in 2011.
Samaras heads for China with an entourage of government officials
May 14, 2013
Yen slides past 102 as G-7 tolerates drop Japanese stocks led Asian shares higher, while gold fell be an obvious beneficiary of that.” G-7 policy makers reaffirmed a February commitment to “not target exchange rates,” U.K. Chancellor of the Exchequer George Osborne told reporters on Saturday. Bonds fell, sending U.S. Treasury 10-year yields to 1.94 percent, the highest since March 26. Japanese 10-year rates advanced as much as six basis points to 0.75 percent, the highest since February 18.
Japanese exporters to benefit from weaker currency
he yen weakened past 102 per dollar for the first time since October 2008 as Group of Seven finance chiefs indicated they will tolerate the currency’s decline. The yen was little changed at 101.65 a dollar after losing 2.6 percent last week, the most in five weeks. It fell to 102.15 earlier yesterday. Japan’s Topix Index climbed 2.1 percent
and the MSCI Asia Pacific Index rose 0.5 percent. Standard & Poor’s 500 Index futures lost 0.3 percent after the measure closed at a record high last week. Gold dropped 1 percent, crude oil in New York retreated 0.9 percent and the South Korean won slid 0.7 percent. While signalling acceptance of the yen’s decline, G-7 policy makers
said they examined Japan’s strategy and that they will monitor its impact on currencies. “Markets are prepared to back Japanese authorities’ attempt to reflate in terms of a weaker yen and expanding monetary base,” said Tim Schroeders, a portfolio manager at Pengana Capital Ltd in Melbourne. “The export sector from Japan will
The MSCI Asia Pacific Index rose for the first time in three days, as the Topix headed for its highest close since September 2008. Toyota Motor Corp., the world’s biggest carmaker, climbed 4 percent. Nippon Telegraph & Telephone Corp. jumped 7.5 percent as Japan’s largest phone carrier forecast profit that beat analyst estimates. The yen has slumped as a leadership change in the Bank of Japan initiated unprecedented monetary easing, aiming to reach a 2 percent inflation target. The yen has plunged 13 percent this year, the worst-performance among the 10 developed-market currencies tracked by the Bloomberg Correlation Weighted Indexes. The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, advanced 0.1 percent to 83.25.
Philippines holds elections vital for Aquino reforms As president pushes anti-graft moves and tries to boost growth
resident Benigno Aquino is seeking to bolster his support in the Senate as Filipinos voted in elections yesterday, as he looks to expand an anti-corruption drive in the second half of his term. Voters formed long queues outside precinct offices to pick half of the 24seat Senate, members of the House of Representatives and other local officials. One poll earlier this month forecasted that candidates backed by Mr Aquino will win nine of the 12 Senate seats up for grabs. Mr Aquino, who has overseen an economic revival during the first three years of his single six-year term, said in a May 8 interview he wants to reduce the number of people who travel abroad to earn a living. Tightening his grip on the Senate will also enable him to push for stronger anti-graft measures and changes in education. “The president’s legislative agenda is unfinished,” said Prospero de Vera, a political science professor at the University of the Philippines. “A
More than 18,000 positions being contested in mid-term elections
friendly Senate would be instrumental.” Senators are elected nationally among the country’s estimated 106 million people, while the House of Representatives, which has more than 280 members, is chosen from candidates representing local
districts. Bills must pass both houses before the president signs them into law. Since four of the 12 senators whose terms expire in 2016 ran with Aquino’s coalition when he took power, a victory for nine more allies in this election would give him an effective
majority in the upper house. Even without that overt support during his first three years in office, Mr Aquino managed to secure Senate backing on key bills such as raising liquor taxes and providing free contraception. A Social Weather Stations poll conducted May 2-3
among 2,400 registered voters showed Mr Aquino’s allies winning three-quarters of the Senate seats up for grabs. The survey had a margin of error of plus or minus 2 percent. More than 50 people have already been killed in electionrelated violence, including candidates and their aides. The president’s popularity has remained high through the first half of his term, during which his predecessor Gloria Arroyo was arrested on graft charges and the country’s top judge was impeached for illegally concealing his wealth. The economy expanded 6.6 percent last year, the fastest in Asia after China, and the country was rewarded this year for narrowing a record budget deficit when Fitch Ratings and Standard & Poor’s gave the Philippines investmentgrade credit scores. Stocks have surged in the wake of the upgrades, with the Philippine Stock Exchange Index up 25 percent this year. Markets were closed yesterday for the elections. The country’s economic expansion masks unemployment and poverty levels that have remained almost unchanged from before Aquino took office. The jobless rate rose to 7.1 percent as of January, among the highest in the Asia-Pacific. AFP/Bloomberg News
May 14, 2013
Asia Markets are prepared to back Japanese authorities’ attempt to reflate in terms of a weaker yen and expanding monetary base Tim Schroeders, Pengana Capital
The Australian dollar fell toward an 11-month low before data on business confidence and amid speculation the central bank will cut interest rates further to curb the currency’s strength. The so-called Aussie lost 0.4 percent to 99.87 U.S. cents, while New Zealand’s currency fell 0.2 percent to 82.84 U.S. cents. Gold declined for a third day in the longest slump since April, when the metal entered a bear market, as holdings of the SPDR Gold Trust, the biggest gold-backed exchangetraded product, resumed a drop and the dollar strengthened. Spot gold sank 1 percent to 1434.13 an ounce. Crude in New York dropped 0.8 percent to US$95.28 a barrel, as the Organization of Petroleum Exporting Countries boosted output to the highest level in five months. Oil fell for a third day, the longest losing streak in four weeks. Bloomberg News
Bangladesh may raise garment worker pay B
angladesh is considering raising garment workers monthly minimum wage from about US$39 a month following a garment-factory building collapse
Panasonic surges as profit seen rising P
anasonic Corp. surged the most in three months in Tokyo trading after an analyst at Credit Suisse Group AG estimated declines in the Japanese currency may add as much as 30 billion yen (US$294 million) to earnings this year. The nation’s second-largest television maker rose as much as 13 percent, the biggest gain since
Pakistan stocks surge as Sharif approaches win Leader faces tests on curbing violence, restoring economy
akistan’s stocks rose to a record as unofficial election results showed a party led by former Prime Minister Nawaz Sharif winning the most seats in parliament. The benchmark KSE 100 Index gained 1.6 percent, the most since March 12, to close at 20,227.76, taking its rally this year to 19 percent. Mr Sharif’s Pakistan Muslim League will probably lead a government that will support the nation’s business community, said Farrukh Hussain, who oversees about US$110 million as chief investment officer at BMA Asset Management Co. Mr Sharif, who served two terms as Pakistan’s prime minister in the 1990s, will face the challenge of bolstering an economy hampered by a power crisis and quelling a Talibanled insurgency that has killed 151 people leading up to the elections. The gauge could rise between 3 percent and 5 percent this week, and 15 percent by the end of the year, BMA Asset’s Mr Hussain said. “With a Nawaz Sharif-led government, we can see a lot of support for the economy,” Mr Hussain said. “Investors would feel much more comfortable with the incoming government.” Mr Sharif’s party had won 127 seats in the lower house of parliament, according to a tally by state-run Pakistan Television. President Asif Ali Zardari’s Pakistan Peoples
Sharif closes in on Pakistan majority
Party, which headed the previous administration, took 31 seats, a third of its previous total. Sharif, whose family owns steel and sugar mills, ended state monopolies in shipping, airlines and telecommunications when in office. Pakistan’s US$210 billion economy grew an average 3.8 percent each year during Mr Sharif’s terms as prime minister, according to data on the World Bank’s website. Under Mr Zardari’s five-year administration, growth slowed to an average 3 percent, less than half the annual pace of the previous five years.
The stock rally has driven the gauge to trade at 8 times estimated earnings, the most expensive level in almost two years, according to data compiled by Bloomberg. The current valuation is still 44 percent below the MSCI Asia-Pacific Index’s 14.2 multiple. “Valuations are still attractive,” Muhammad Imran, chief investment officer at ABL Asset Management Co. in Karachi. “People will take this election positively. Foreign inflows have been driving the market and this will continue.”
last month, a government minister said yesterday. The government will set up a panel to make recommendations in consultation with clothing factory owners and labour leaders on how much pay should be increased, Textiles Minister Abdul Latif Siddique told reporters yesterday. The raise would be effective retrospectively from May 1, according to Mr Siddique. The South Asian nation last hiked the minimum pay to 3,000 taka (US$39) a month in 2010 from 1,662 taka in 2006. The raise would come after the death toll from the collapse of the Rana Plaza factory building – the nation’s worst industrial disaster – rose to at least 1,127. The tragedy has led Prime
Minister Sheikh Hasina’s government to shut factories as the European Union’s Trade Commissioner Karel De Gucht considers steps including trade sanctions against Bangladesh to encourage changes in working conditions. Bangladesh inspectors found 700 garment factories “faulty in terms of workplace safety,” after inspecting 2,400 units since February 7, Commerce Minister G.M. Quader told reporters in Dhaka. “The factories have been set a deadline to fix the faults. The government will shut those factories if they don’t comply with the order,” he said, without specifying the cut-off time.
SoftBank plans Silicon Valley centre as part of Sprint takeover
February 4, before closing 7.6 percent higher at 806 yen. Japan’s benchmark Nikkei 225 Stock Average rose 1.2 percent. Panasonic last week forecast net income of 50 billion yen in the 12 months ending March, compared with a loss of 754 billion yen a year earlier, as the maker of Lumix cameras restructures to revive profit from TVs and semiconductors. The Osaka-based company based its projection on an exchange rate of 85 yen per dollar. “The current forex rates imply an upside of 30 billion yen,” Shunsuke Tsuchiya, an analyst at Credit Suisse in Tokyo who recommends buying the stock, said in a report to clients. Sony Corp., Japan’s biggest TV maker, rose as much as 6.8 percent while Sharp Corp., the third-largest,
jumped as much as 16 percent. Panasonic President Kazuhiro Tsuga plans to spend 250 billion yen on restructuring during the next two years, adding to the 1.1 trillion yen spent since 2011. Full-year operating profit for the maker of Viera televisions will rise 55 percent to 250 billion yen, it said on Friday. The company expects its television losses to narrow to 34 billion yen this year from a loss of 88.5 billion yen. TV sales will fall 16 percent to 11.5 million units this year, Panasonic said. Panasonic, which has lost more than 1.5 trillion yen in the past two fiscal years, fell further behind South Korea’s Samsung Electronics Co. and LG Electronics Inc. in the global TV market in 2012.
oftBank Corp., bidding to take over Sprint Nextel Corp. in a US$20.1 billion deal, is planning a new Silicon Valley office for the U.S. carrier that would employ as many as 1,000 people. Executives have already started holding monthly meetings in the California technology hub, which is partway between Softbank’s Tokyo headquarters and Sprint’s offices in Kansas. Masayoshi Son, president of the Japanese carrier, said he’s looking to inject more of an inventive spirit into Sprint and be an active chairman of the company. “I’d like to bring Silicon Valley into the mix,” Mr Son said in an interview. “We’re bringing SoftBank capital, our know-how and myself to this.” Mr Son has been laying out his vision for the merger in an effort to ward off a counterbid from Dish Network Corp., which offered US$25.5 billion for Sprint last month. He spent last week meeting with Sprint shareholders in New York, before making his case to West Coast investors. SoftBank said it hasn’t decided on the location of the new Silicon Valley office. The employees will come from SoftBank and Sprint, as well as new hires, Mr Son said.
May 14, 2013
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May 14, 2013
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World Stock Markets - Indices
0.9981 1.5367 0.9584 1.2966 101.71 7.994 7.7612 6.1463 54.97 29.73 1.2406 29.819 41.155 9741 101.519 1.24253 0.84374 7.965 10.3649 131.88 1.03
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1.0625 1.6381 0.9972 1.3711 102.15 8.0111 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 132.4 1.032
0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1307 51.3863 28.56 1.2152 28.913 40.54 9228 74.482 1.20054 0.77553 7.7018 9.6245 94.12 1.029
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SANDS CHINA LTD
May 14, 2013
U.S.-EU trade talks risk damaging Turkey ties Cenk Sidar Tyson Barker
Managing director of Sidar Global Advisors
.S. President Barack Obama travels to Europe next month to start formal negotiations on a trading bloc that would dwarf any the world has seen. He should look for ways to integrate Turkey into this new order. Trade between the U.S. and the European Union still accounts for a third of everything the world imports and exports, at US$645 billion last year. Foreign direct investment between the U.S. and the EU is more than US$3.7 trillion. So in the depths of a global economic crisis, no wonder people are excited about the potential boost to growth this would provide. Yet before thrashing out the details of the new Transatlantic Trade and Investment Partnership, Obama and his EU counterparts should consider the tough situation it would create for other close allies and trading partners, who won’t be at the bargaining table. Turkey is one of the most important of these. How it fits into U.S.-EU trade talks will be high on Prime Minister Recep Tayyip Erdogan’s agenda when he meets Obama in Washington on May 16. His country has a vital strategic partnership with the U.S. and a customs union with the EU. Yet it won’t have a say in the trans-Atlantic trade deal.
Deputy Prime Minister Ali Babacan estimates that Turkey may lose 2.5 percent of gross domestic product, or US$20 billion, a year if it is left out. According to Turkish media, Erdogan spelled out Turkish frustrations about this unfair trade situation in a letter to Obama in March.
Unfair trade Obama should respond to these justified concerns. Excluding the world’s 17thlargest economy from a U.S.EU free-trade area would be a missed opportunity and might endanger the “model partnership” that Obama has worked to build with Turkey. Turkey formed its customs union with the EU in 1995, with a view to eventually joining the bloc. The terms of this union stipulate that the government in Ankara can’t pursue a bilateral free-trade agreement with any country until the EU has established one already. By contrast, when the EU signs a trade deal with a third country, it gives access to Turkey’s market without Turkish consent. The result is that Turkey’s trade policy has been shadowing that of the EU, following on the heels of the European Commission’s trade negotiators as they moved
Washington-based director of trans-Atlantic relations at the Bertelsmann Foundation
from South Korea, to Japan, to India. In the case of a trade pact as ambitious as the one Obama will be discussing with the EU, however, Turkey is put at a severe disadvantage. Turkey will have to negotiate its own agreement with the U.S., or else find itself lowering tariffs on imports from the U.S. with nothing in return. The U.S., meanwhile, would have little economic incentive to sign a separate deal with Turkey once a trade pact with the EU is in place, because it would already get the benefits of such an agreement. This has been the result when the EU signed trade deals with several other countries. There are steps the Turkish government could take to counter this problem, such as levying additional taxes on U.S. products. Yet this isn’t a constructive tool. It would act as a red rag to Congress, whose support Turkey will need for any bilateral trade deal with the U.S. Some Turkish officials have suggested revising, which could mean leaving, the EU customs union in order to give Turkey a freer hand in determining its trade relations with third countries. That route might aid Turkish trade in the short term, but it could also signal that Turkey
has abandoned all hope of becoming a full EU member.
Political implications It’s an interesting question whether Erdogan’s ruling Justice and Development Party still wants to join the EU, and whether it might choose to use its exclusion from the trans-Atlantic trade talks as an excuse to pull back from further integration with the EU. If so, this would have serious political implications as Turkey seeks to diversify its economic relations more aggressively with countries such as Iran and Russia. Ending the EU accession process would also eliminate what has been a powerful force in strengthening Turkey’s democracy. Integrating Turkey into the emerging trans-Atlantic trade order would require some imagination. An initial measure, as spelled out in a 2012 report for the Turkish Industrialists’ and Businessmen’s Association, better known as Tusiad, would be to revamp the current Bilateral Investment Treaty between the U.S. and Turkey, which is now outdated. A more comprehensive deal could increase transparency, encourage investment and strengthen the ties required to achieve Obama’s model
partnership. The U.S. and Europe could also explore creating a “Track Two” consultative role in their negotiations for third countries that are deeply integrated into the trans-Atlantic economy. This Track Two body should include not only Turkey, but also Canada and Mexico, both of which have expressed an interest in participating in negotiations. The aim would be to ensure that gains from liberalised trans-Atlantic trade and investment don’t come at the expense of other close U.S. partners. Finally, the U.S. should explore the long-term economic and strategic value of a free-trade agreement with Turkey. At just US$19 billion in 2012, trade between the two countries has a lot of room to increase. Turkey is the third fastest growing market for U.S. agricultural products, an American export priority. A conventional free-trade agreement based on mutual reduction of customs duties in most sectors could mirror trans-Atlantic talks and be implemented simultaneously. As a founding member of the North Atlantic Treaty Organization and ally of the U.S., Turkey has grown dramatically in regional importance in recent years. Frustration at being shut out from the free-trade bargaining table could needlessly sour Turkey’s strategic relationship with the U.S., at a time when the Obama administration is trying to rely more on allies and scale back military involvement in the region. Admittedly, in the midst of negotiating two huge freetrade agreements – one with the EU and one with East Asia – the administration may struggle to persuade Congress to support another deal, with Turkey. There’s much more at stake, however, than economics. Bloomberg View
In the case of a trade pact as ambitious as the one Obama will be discussing with the EU, however, Turkey is put at a severe disadvantage
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May 14, 2013
Vietnam’s star is dimming
Leading reports from Asia’s best business newspapers
Inquirer Business Gaming operator Travellers International Hotel Group Inc., a partnership between Philippine retail tycoon Andrew Tan and the Genting Group, has officially filed an application for an initial public offering at the Philippine Stock Exchange. Disclosure documents said the potential offering was at an “initial stage” and that the principal terms, including the number of shares to be offered, the offer price, and any pre-transaction reorganisation, were yet to be finalised. It was earlier reported that Travellers would tap five international houses to arrange an IPO estimated at about US$500 million.
Wall Street Journal China Unicom (Hong Kong) Ltd is joining up with China Mobile Ltd, and in the future possibly China Telecom Corp, to offer a single standardised payment plugin that could be used by the country’s many app developers and app stores. The two will launch a prototype of the plugin on May 17, China Unicom deputy general manager Shen Zhou has said. The rare decision to cooperate comes as all three telecom operators come under increasing pressure from the rise of smartphone applications that have made traditional telecoms services like voice calls and text messaging obsolete.
Times of India The declining trend in India’s rupee is expected to be shortlived and is likely to be seen stabilising towards the 54 mark against the U.S. dollar soon, say experts. This is on the back of expected low inflation numbers coming next week and stabilising global economy, they say. “Our growth story is intact, which is clearly visible from the sustained capital inflows from overseas,” IDBI Bank Head (Treasury) N S Venkatesh said. “Also, markets are expecting low inflation numbers on May 14. These factors are likely to stabilise rupee back to the 5454.30 level,” he added.
Thanh Nien Daily Vietnam said it would cut interest rates to boost economic growth, joining nations from Sri Lanka to Australia in easing monetary policy. The State Bank of Vietnam will cut the refinancing rate to 7 percent from 8 percent effective May 13, Deputy Governor Nguyen Dong Tien. The discount rate will be reduced to 5 percent from 6 percent, he said. The rate cuts are the eighth since the start of 2012 and follow a reduction in March. Vietnam’s economy expanded 5.03 percent last year, the slowest pace since 1999.
Bloomberg View columnist
ike other would-be tiger economies, Vietnam faces a trifecta of new threats: a crisis-paralysed Europe, a faltering America, and a newly spendthrift Japan. Yet the biggest risk to the nation’s future may be oldfashioned nostalgia. It has been 27 years since Hanoi launched the “Doi Moi” reforms that allowed privately owned companies to participate in the economy and opened key sectors, such as agriculture. The rapid growth that followed propelled Vietnam toward the realm of middle-income nations, transforming the onetime war zone into a case study for development and poverty reduction. Now, though, Vietnam’s 1986 blueprint for a “socialist-oriented market economy” is looking dated. Recent data show the strategy that got Vietnam this far – a China-like heavy reliance on state-owned enterprises and top-down planning – is now holding the nation back. Vietnam is losing ground on global competitiveness league tables while growth has slowed to about 5 percent, the lowest rate since 1999. To recover, the country needs to do precisely what it has avoided doing thus far: build a truly vibrant and innovative private sector that can diversify growth and create prosperity. “A complete recalibration of the economy would be necessary to achieve stronger growth again,” says Vaninder Singh, a Singapore-based economist at Royal Bank of Scotland Group Plc. “This is not guaranteed as it will require a significant change in the corporate structure and improvements in productivity.” Does Prime Minister Nguyen Tan Dung’s government have the political will to modernise Vietnam’s US$124 billion economy? The International Monetary Fund appears to have its doubts. The IMF recently cut its 2014 Vietnam forecast by more than it did for any other Asian country, to 5.2 percent.
China lite That may sound grand in a world in which Group of Seven nations are barely expanding. But for a 90-million-person economy at Vietnam’s stage of development, it’s nothing short of a crisis. When they launched their reforms, leaders in Hanoi believed they were following a Chinese model that had already worked wonders. The Vietnamese approach was more gradualist and cautious than Deng Xiaoping’s. Still, the broad thrust was similar and has now begun to breed the same problems. Like China, Vietnam is suffering from a distorted
credit allocation system dominated by state-owned companies. Their reckless lending decisions have fuelled dangerous property bubbles and buried banks under nonperforming loans. The gap between rich and poor is growing rapidly; so are tensions between workers seeking higher wages and industries built on cheap labour. Dodgy land seizures and privatisations that enrich only the politically connected have sparked public outrage. Rampant corruption is undermining the ruling party’s legitimacy. The country cannot move forward without restructuring state-owned enterprises, which account for almost 40 percent of gross domestic product. Economists at McKinsey & Co., for example, estimate that Vietnam must boost labour productivity by more than 50 percent to maintain healthy growth. You don’t need a Nobel Memorial Prize in Economic Sciences to know that only a thriving private sector can do that.
Reason for worry In February, Deputy Finance Minister Truong Chi Trung promised that the government would unveil a plan to overhaul 52 stateowned groups by June. Yet based on past experience, there’s ample reason to believe that the reforms will lack specifics or teeth.
Like China, Vietnam is suffering from a distorted credit allocation system dominated by stateowned companies
This government has already missed a target to create an asset-management company to address bad debt in banks. Pledges to rein in runaway public investments, lending and state-owned enterprises aren’t just familiar – they are becoming downright monotonous. The question is whether Dung’s team can credibly implement any of these desperately needed improvements, never mind all three. Here, one shouldn’t downplay the role of corruption. Just like Xi Jinping in Beijing, Dung faces a uniquely uncommunistic problem: too many party bigwigs getting rich from Vietnam’s current
model. Those spoils deaden the impetus for change. Graft has risen in inverse proportion to the economy’s standing. In Transparency International’s 2012 Corruption Perceptions Index, Vietnam fell to 123rd place out of 176 nations from 112th place in 2011, a worse standing than Sierra Leone and Belarus. Meanwhile, on the World Economic Forum’s latest Global Competitive Index, Vietnam fell 10 places to 75th, lagging behind Uruguay and Ukraine. Vietnam’s challenge is in some ways more manageable than China’s: Its state-owned companies are smaller, its
vested interests less pervasive and powerful. But gradualism is no longer an option. It’s time for the country to develop its own model, one that roots out corruption, invests more in education and key growth sectors such as technology manufacturing, and empowers businesses to move up the value-added ladder. For years, other small Southeast Asian nations, such as Myanmar and Cambodia, have looked to Vietnam for ideas on how to reform their own economies. The country can become that kind of role model again. It just needs to look forward, not back. Bloomberg View
May 14, 2013
Closing Melco Crown directors get share options Customs busts tobacco smuggling case Lawrence Ho Yau Lung (pictured), co-chairman of Melco Crown Entertainment Ltd, is among nine of the company’s directors to be awarded new share options, according to a company filing in Hong Kong. It’s part of a management incentive scheme. A total of nearly 1.39 million ordinary shares at an exercise price of US$8.42 per share have been allocated, and 817,068 restricted shares. Restricted stock normally has conditions attached to prevent it being transferred to other ownership until a predetermined amount of time has passed. Mr Ho’s allocation is 362,610 shares split equally between ordinary and restricted stock.
The Macau Customs Service said yesterday it has busted the largest shredded tobacco smuggling case since the handover. Customs officers found over 4,300 kilograms of tobacco worth over 3 million patacas (US$375,000) in a container of food products aboard a boat that had abruptly changed its destination from Hong Kong to Macau. The government estimates the tobacco could be used to make 4.9 million cigarettes, dodging tax charges of 2.4 million patacas. The customs has pledged to continue with the investigation and to sue the trade company here that was receiving the container.
Airlines dive as virus spreads in Europe Increasing the potential for disruption to air travel Robert Wall
ritish Airways parent IAG SA and rival Air FranceKLM Group fell 4.6 percent as evidence mounts that a fatal virus spreading in Europe can be transmitted among people. Shares of International Consolidated Airlines Group SA dropped as much as 12.80 pence to 263.10 pence in London, the sharpest drop since April 5, when they retreated following concern about a bird ‘flu virus in China. Air France-KLM fell as much as
35 cents to 7.25 euros in Paris, the most since May 3. The novel coronavirus infection is spreading, with France reporting a second case, after having occurred mainly in Saudi Arabia following the first outbreak in September. The virus, which has killed more than half the 34 people known to have caught it, appears capable of limited human-to-human transmission, the World Health Organisation said on Sunday. “A more developed outbreak
could significantly hit short-term travel demand,” Damian Brewer, an analyst at RBC Capital Markets in London, said in a note to investors. “Any sustained dent in travel demand could also diminish cash flows and increase financial stress risk.” IAG, which also owns Iberia of Spain, was trading down 4 percent at 265 pence at the midday break. Air France-KLM was priced at 7.29 euros for a 4.1 percent decline. Deutsche Lufthansa AG, Europe’s second-biggest airline,
Cameron faces EU crisis as ministers break ranks British PM rebukes lawmakers for saying they would vote to leave
.K. Prime Minister David Cameron rebuked lawmakers in his Conservative Party who have already decided that Britain should withdraw from the European Union. Cameron said it was “very, very strange” for leading members of his party to say Britain should pull out of the 27- nation bloc before he has had a chance to change the terms of Britain’s relationship. “The idea of throwing in the towel before the negotiation’s started I think is a very, very strange opinion,” the prime minister told reporters on an airplane to Washington for talks with U.S. President Barack Obama. “What all Conservative Cabinet ministers agree is we should be spending the next period improving the European Union and improving our relations with the EU and putting that to the British public in a referendum.” Former Chancellor of the Exchequer Nigel Lawson and onetime Defence Secretary Michael Portillo have called for U.K. withdrawal, while Mayor of London
Boris Johnson has said it would be a “shot in the arm” for British democracy. On Sunday, Education Secretary Michael Gove and Defence Secretary Philip Hammond both said they would vote to leave if asked today. Mr Cameron has pledged a referendum on membership in 2017 if his party wins the 2015 general election. That commitment isn’t enough for more than 20 Conservative Members of Parliament, who have put their names to a parliamentary amendment expressing “regret” that no provision paving the way for a U.K. exit was included for this legislative session in the Queen’s Speech. They are seeking legislation enshrining the commitment to a referendum in law. “What they’re doing is putting the prime minister in an impossible situation,” Malcolm Rifkind, a Conservative lawmaker and former foreign secretary, told BBC Radio 4 yesterday. “They will have split their own party, they will cast questions over the prime minister’s authority, and indirectly, unintentionally, they will be helping the Labour Party’s
prospects at the next election. That is a pretty odd tactic.” The prime minister said yesterday he was confident his government will be able to deliver reforms to the EU before the 2017 vote. “What matters is making sure we do everything we can to reform the European Union and make it more flexible, more open, more competitive and improve Britain’s relations with the EU so when we have that referendum we give the British public a real choice,” he said. “Every Conservative Cabinet minister is confident we will be able to deliver those changes.” Bloomberg News
slid as much as 3.5 percent before trading 2.7 percent lower at 15.66 euros in Frankfurt. Coronaviruses are a family of pathogens that cause illnesses ranging from the common cold to Severe Acute Respiratory Syndrome, or SARS, which sickened more than 8,000 people and killed 774 in 2002 and 2003, according to the WHO. Keiji Fukuda, the Genevabased organisation’s directorgeneral for health security and the environment, said on Sunday in Riyadh, Saudi Arabia, that the occurrence of clusters in multiple countries suggests the virus can be spread among people when there is “close contact”. There isn’t yet any evidence that it can “sustain generalised transmission,” he added. The SARS outbreaks a decade ago severely curtailed air travel, pushing carriers to significant losses. While the International Air Transport Association estimates the industry will deliver a US$10.6 billion profit this year, that’s equal to a net income margin of only 1.6 percent. Bloomberg News