City needs film commission says local movie maker Macau has some of the most interesting backdrops in Asia for filmmakers. But the city needs government help to kick-start a home-based cinema industry says local director Albert Chu. “In every place, especially in Asian countries like Korea and Singapore, in Thailand, Vietnam, Malaysia, they always have a film commission, usually supported by the government,” he told Business Daily.
Year I Number 155 Monday November 5, 2012 MOP 6.00 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte
Pages 6 & 7
court has ordered the seizure of assets in Macau of prominent businessman Ngan In Leng over a debt in mainland China dating back to the 1990s. The plaintiff in the case – a majority state-owned business in Mr Ngan’s birthplace, Fujian province – says it is owed more than 100 million patacas (US$12.5 million). The complaint from Strong Chance Development Ltd has been pursued in the courts here for more than a decade. The business – incorporated in Hong Kong – is majority owned by Fujian Enterprises (Holdings)
Co Ltd, a company linked to the Fujian provincial government. Mr Ngan created a joint venture with Strong Chance in December 1990 to fund the construction of the Wa Bao housing project near the Macau Stadium in Taipa. Strong Chance says it is owed the cash in unsettled debts and profit that should have been divided up among the shareholders, plus interest, which it says Mr Ngan agreed to pay by the end of 1996.
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HANG SENG INDEX 22140
Mainland’s Citic to be main CTM shareholder
Beef over beef as meat prices rise ever higher
Gaming regulator expects slower revenue growth With massive base numbers achieved in recent years, gambling revenue growth is likely to narrow next year says the city’s gaming regulator. “Growth [in gambling revenue] of Macau will narrow next year, because the rise in gambling revenue was really high last year,” notes Manuel Joaquim das Neves, director of the Gaming Inspection and Coordination Bureau. “And this year, the growth in gambling revenue at the moment has already exceeded 10 percent,” he said on the sidelines of a responsible gambling campaign. Accumulated gambling revenue reached 251 billion patacas (US$31.4 billion) by October, with growth for the year reaching 13.5 percent – well down on the 42 percent expansion of 2011.
Air Macau parent Air China gets 1.05 bln yuan injection
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business daily November 5, 2012
Ngan assets seized over Wa Bao deal Businessman Ngan In Leng keeps up his legal battle against a company with ties to Fujian Tiago Azevedo
A decade of drama A decade-long legal battle has led to the assets of businessman Ngan In Leng being frozen. Strong Chance Development Ltd, a company with ties to the Fujian provincial government, says it wants more than 100 million patacas from Mr Ngan. Below are the key dates in the dispute.
Dec 21, 1990 Strong Chance and Grupo Bao Shing – Comércio Externo, Investimento, Construção e Fomento Predial Lda, with Ngan In Leng as a shareholder, create a joint venture called Wa Bao Development Co Ltd.
1991 Wa Bao buys land in Taipa, Lot BT37, for more than HK$170 million (US$21.9 million). Strong Chance claims to have paid HK$119.6 million to support the project.
Jul 5, 1993
Ngan In Leng has considerable interests in property
court has ordered the seizure of assets in Macau of prominent businessman Ngan In Leng over a debt that the plaintiff in the case says amounts more than 100 million patacas (US$12.5 million). Mr Ngan is chairman of Hang Huo Enterprise Group, which runs hotel, entertainment, property and trading companies. A deal between parties in Macau and the province of Fujian went badly wrong when they clashed over unpaid loans and profit sharing, Business Daily has learnt. Mr Ngan created a joint venture with Strong Chance Development Ltd, a company incorporated in Hong Kong, in December 1990, to fund the construction of the Wa Bao housing project near the Macau Stadium on Taipa. Strong Chance says it is owed more than 100 million patacas in unsettled debts and profit that should have been divided up among the shareholders, plus interest, which it says Mr Ngan agreed to pay by the end of 1996. Strong Chance is majority owned by Fujian Enterprises (Holdings) Co Ltd, a window company of the Fujian provincial government. Mr Ngan, 62, is a Fujian businessman who in 1980 migrated to Macau, where he is now resident. He was chairman of the defunct Viva Macau Airlines, which was grounded in 2010 over unsettled debts. He is also a member of the national committee of the Chinese People’s Political Consultative Conference.
and Strong Chance says it handed over HK$119.6 million to finance the project. Court papers show that Mr Ngan took over the project in July 1993, shouldering responsibility for repaying the loans, including interest, and dividing up the profit of HK$240 million among the shareholders. The portion of the profit to be paid to the Hong Kong company amounted to HK$108 million. Having clinched an agreement for the money to be paid before December 31, 1996, Strong Chance
KEY POINTS Ngan In Leng sued over Wa Bao deal Businessman’s stake in 24 companies seized Residential and commercial properties seized Lawyer says Mr Ngan financially stable
Wa Bao financing According to documents seen by Business Daily, Strong Chance and Grupo Bao Shing – Comércio Externo, Investimento, Construção e Fomento Predial Lda, the latter represented by Mr Ngan and two other partners, founded Wa Bao Development Co Ltd. The joint venture later acquired a parcel of land on Taipa for HK$170 million (US$21.9 million)
Wa Bao, a six-tower residential complex with 33 floors (Photo: Manuel Cardoso)
decided to go to court in December 2001, saying it was still owed millions of patacas. A lawyer representing Mr Ngan said he was not available for comment. But the lawyer said: “The financial stability of Mr Ngan is unwavering. It won’t be affected by this case.”
Assets seized The parties have been arguing in court since 2001. Court papers show that Mr Ngan paid part of the profit and interest to Strong Chance in 1997, valued at more than 69 million patacas. But the company says that in June it was still owed more than 101 million patacas. During the legal battle several of Mr Ngan’s assets in Macau were seized. His stake in 24 companies, including shares in Grupo Bao Shing, San Wa Bao Construction and Investment Co Ltd, Worldwide Travel Co Ltd and First Laser Ltd, were seized as a guarantee in the value of 90.7 million patacas. Five properties under Mr Ngan’s name, comprising residential and commercial assets, were also seized. The Court of First Instance also ordered the seizure of shares in two other companies that Mr Ngan and his wife transferred to two of their children. Shares in these mainland Chinese companies are said to be worth about 70 million yuan (89.5 million patacas). Strong Chance is trying to have the deal voided. Mr Ngan and Fujian Enterprises have also been engaged in a legal battle in Hong Kong. First Laser, a Macau company owned by Mr Ngan, claimed compensation of US$30.6 million for a deal that went wrong. The deal concerned a project for the production of non-linear crystals. Hong Kong’s Court of Final Appeal dismissed First Laser’s case on July 6.
Mr Ngan takes over the project and becomes responsible for paying back loans and interest to Strong Chance, and distributing profits of HK$240 million among the shareholders, with HK$108 million to go to Strong Chance.
Oct 9, 1996 Both parties agree for the loans to be paid to Strong Chance, plus interest of 10 percent, as well as the HK$108 million profit, before the end of the year.
Dec 28, 2001 Strong Chance files a suit against Mr Ngan with the Court of First Instance. It wants 60.5 million patacas for the loans plus interest and 52.8 million patacas for the profit plus interest.
Oct 10, 2006 The Court of First Instance acquits Mr Ngan in the first claim but orders him to pay the 52 million patacas profit plus interest claim.
Jan 21, 2010 The Court of Second Instance orders Mr Ngan to repay the amounts claimed but partially approves an appeal, postponing the quantification of the second claim to a later stage.
May 3, 2010 Strong Chance requests the court to seize assets owned by Mr Ngan to the value of 146.6 million patacas.
March 10, 2011 After a review from the Court of Final Appeal the amount is reduced to 90.7 million patacas.
Dec 13, 2011 Mr Ngan’s stake in 24 companies is seized, together with 42 bank accounts and five residential and commercial properties.
Mar 7, 2012 The Court of First Instance says stakes in two other companies that Mr Ngan and his wife transferred to two of their children are also to be seized.
November 5, 2012 business daily | 3
Sands China profit rises on middle-class
Status anxiety… Macau-style
Gaming operator expecting boost from Cotai pedestrian bridge and more gaming tables Vítor Quintã
Almost a fifth of Sands Macao’s VIP gambling tables were transferred to other casinos
asino operator Sands China Ltd posted a 17.4 percent climb in third-quarter profit as spending by middle-class Chinese gamblers boosted earnings. The stock surged. Net income for the China unit of Las Vegas Sands Corp. rose to US$326.7 million (2.6 billion patacas) from US$278.3 million a year ago, according to a statement from the parent company on October 2. Net revenue jumped 36.7 percent to US$1.64 billion as the operator controlled by billionaire Sheldon Adelson benefited from its newest resort Sands Cotai Central that opened in April. “Earnings growth came from the ramp-up of Sands Cotai Central and Venetian winning back mass market share,” Karen Tang, a Hong Kongbased analyst at Deutsche Bank, wrote in a research note to clients. Cotai Central recorded net revenue of US$295.9 million in the third quarter. Sands China’s market share will probably expand to 23 percent by 2014, from 19 percent in the third quarter this year, Ms Tang said. Mr Adelson expects business to improve even sooner, namely with the opening of a pedestrian bridge connecting Cotai Central to Venetian Macao next month. By January 2,000 new hotel rooms will open as part of Cotai
Central’s last phase, he added during a conference call. The billionaire brushed down doubts over Cotai Central’s hotel room occupancy figures. “Holiday Inn has an extremely high [occupancy] rate. The Conrad has more demand than it has supply, and … and we’re doing splendidly at the Sheraton,” he said.
Moving tables Adjusted property earnings before interest, taxes, depreciation and amortization, or Ebitda, increased 24.3 percent to US$485.6 million. Most of that operational profit came from Sands’ flagship property, Venetian Macao, which recorded an increase of 18.3 percent to US$299 million, partially thanks to higherthan-average luck. Middle-class Chinese tourists, who make up the bulk of Macau’s so-called mass market, have helped shore up growth even as high-stake bettors have cut back in a weaker economy. Rolling chip volume, a measure of activity in the casino’s VIP rooms, dropped 12 percent from the previous year during the quarter, even as massmarket volume gained 6.2 percent, Sands said. One reason rolling-chip volume declined was because of renovations at Venetian’s Paiza Club, which reduced the number of active tables
in the category by an average of 23 during the quarter, the company said. There was also a rebound at Sands Macao, which saw its Ebitda rise 6.7 percent to US$80.9 million, even almost a fifth of the casino’s VIP tables were transferred to other properties. Some of those tables were likely moved to Cotai Central but the operator expects to have additional tables by January, Las Vegas Sands’ global gaming operations president Robert Goldstein said during a conference call. On the contrary, Four Seasons’ Plaza casino was hit by a bad streak and saw its operational profit drop by 8.9 percent to US$54.4 million. with Bloomberg
US$ 326.7 mln
Sands China’s third quarter profit
t’s unstable at the grass roots, dejected at the middle strata and out of control at the top”. Those words could easily have been a reference to the Western economic system since the 2009 crash. They were actually about China today and were uttered collectively in a statement by Chinese scholars at a recent government conference on the mainland. The fact that the scholars could speak so frankly is itself a commentary on how much China has changed in the past 30 years. But those who have benefited most from China’s opening to the world – the people who got rich exporting cheap goods to Europe and the United States and from speculating in property and commodities – behave in ways that won’t exactly fill Macau’s investors with confidence. The Hurun Report, a firm that tracks the attitudes and behaviour of wealthy Chinese, claims that 44 percent of those with more than 10 million yuan in assets have plans to emigrate. A whopping 85 percent of them plan to educate their children outside China. These rich people hold 19 percent of their assets overseas suggests the Hurun Report. And this is just the people willing to admit their wealth and to respond to polls. A senior executive from one of Macau’s gaming concessionaires conceded recently that the slowing of VIP baccarat revenue might be linked to high rollers’ uncertainty about the political transition in China. All this should give Macau casino companies and investors pause for thought. What kind of economic miracle is it and what kind of society is it where nearly half of the ‘winners’ would like to flee the country? This fundamental lack of faith permeates to the microeconomic level in the relationship between Macau and Nevada. Nevada was happy to approve some of its Las Vegas licensees having casino investments in Macau. Those investments are now reaping rich rewards – some in the form of dividends paid on shares – generally a tax efficient way for companies to export profits out of Macau. But Nevada is increasingly turning up its nose at other aspects of the Macau gaming business. Andrew Burnett, the new chairman of the Nevada Gaming Control Board, was recently quoted as saying the board was “exploring reinventing the whole junket representative process” in Nevada casinos because of concerns about its lack of transparency. This was a reference specifically to the growing number of rich Chinese gambling in Las Vegas using agents with links to Macau. All thoughtful readers will understand this announcement needs to be viewed through the lens of an impending U.S. presidential election; the hoo-hah about campaign contributions from Las Vegas casino bosses with Macau operations; and the general moral panic Stateside about the rise of China. There’s also more than a whiff of hypocrisy about this newfound concern. According to wellplaced sources spoken to by Business Daily, Las Vegas casinos have been accepting business from Chinese high rollers and their agents for the best part of a decade without any apparent objection from the regulators there until now. In the end, if enough money is going to enough of the right places in terms of tax to government, profits to casino shareholders and value for money to high rollers, then there will be very little incentive to look too hard under too many stones on either side of the Pacific Ocean. But it doesn’t speak very highly of humanity in general and the industry in particular when the gamblers fundamentally don’t trust their governments and the governments don’t trust their players. So much for legal, decent and honest.
business daily November 5, 2012
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HOSPITALITY Mirrored trends It might seem that number of passenger vessels arriving from Hong Kong and arrivals of Hong Kong tourists would be closely linked.Data recently published for September suggests otherwise – somewhat unexpectedly. Figures over the past four years also seem to go against common sense.
The graph above compares the cumulative totals for the first nine months of this year for the past four years. There was a decrease of about 9 percent from 2009 to 2010, followed by a period of stabilisation and a sharp increase of 40 percent most recently. Those values are strongly determined by the number of ships coming from Hong Kong island. The other ports are either stable, as is the case for the Kowloon pier for most of the period – despite a slight increase this year – or even decreasing, such as the number of vessels from the airport. Sailings from Tuen Mun have stopped all together and those figures provided a blip in the statistics for just longer than one year. This pattern is almost the exact reverse of the evolution the city has witnessed in visitors arrivals from Hong Kong. From 2008 to 2009, arrivals grew by more than 7 percent, which slowed to 4 percent. Between last year and this year, it contracted by 8 percent. These figures may suggest a more efficient use of the available vessels but the intensity of the trends in opposite directions is nonetheless surprising. J.I.D.
Annual increase in passenger vessels from Hong Kong
Regulator expects slower gaming revenue growth This year’s growth in gaming revenue will be difficult to match next year, says the director of the Gaming Inspection and Coordination Bureau Stephanie Lai
aming revenue growth will slow next year because of the high base for comparison built up so far this year, Gaming Inspection and Coordination Bureau director Manuel Joaquim das Neves said. “This year, growth in gaming revenue at the moment has already exceeded 10 percent,” Mr Neves told reporters on Saturday on the sidelines of an event to promote responsible gambling. Gaming revenue rose to a record 27.7 billion patacas (US$3.47 billion) last month, 3.2 percent more than a year before. Gaming revenue in the first 10 months of this year was 251 billion patacas, 13.5 percent more than in the corresponding period last year. Mr Neves said his bureau did not have a growth forecast for next year. But Ricardo Siu Chi Sen, professor of economics and international finance at the University of Macau, said growth of between 8 percent and 12 percent
would be a “reasonable” expectation. “I don’t think it’s quite possible to see the annual growth in gross gaming revenue hitting 15 to 20 percent in the coming year, given that the revenue figure in Macau has already reached a massive 300 billion patacas,” Mr Siu told Business Daily. He said growth could rise sharply in 2015 or 2016, when new casino resorts in Cotai are due to be completed, and both the Hong Kong-Zhuhai-Macau Bridge and Light Rapid Transit elevated railway should be open. Mr Neves said a tourist and casino resort called Eightcity, planned for the island of Yongyu-Muui in the South Korean city of Incheon, was unlikely to affect Macau adversely. He said the steady development of Macau’s gaming industry and the advantages of its geographical position were a defence against competition. Mr Siu said that because the city was an established gaming centre, Eightcity would not take away much
Manuel Joaquim das Neves says a casino resort planned for Incheon is unlikely to affect Macau adversely
business in the short term but that Macau needed to devote greater effort to developing mass-market gaming. “Even in the long term, I’d think that the South Korean gaming project would mainly draw custom from Japan or northern China, but Macau’s own customer base in China is mainly in the southern provinces of Guangdong and Guangxi,” said Mr Siu.
Air China stock issue gets nod China National Aviation Holding is given the green light to put 1.05 billion yuan into Air Macau’s parent, Air China Vítor Quintã
he China Securities Regulatory Commission has approved the issue by Air China Ltd of 1.05 billion yuan (1.3 billion patacas) worth of shares to its state-owned parent, China National Aviation Holding Co. Air China said on late Thursday it would issue 192.8 million shares for 5.45 yuan each. It said it would use the proceeds for “capital expenditures for certain projects of the company”, without elaborating. Air China is Asia’s secondbiggest airline by market value and the controlling shareholder in Air Macau Co Ltd. Beijing is helping each of the mainland’s state-controlled airlines. The economic slowdown, exchange rate fluctuations and rising fuel prices have cut into their profits.
State-controlled airlines Air China, China Eastern Airlines Corp Ltd and China Southern Airlines Ltd have all announced top-ups of their capital. Air China announced its top-up six months ago. Shareholder advocate David Webb hinted last month that approval of the share issue had been delayed by a fall of 19.4 percent in the price of Air China shares. The fall meant that China National Aviation Holding would have paid a premium of 10.5 percent for the new shares instead of getting a 10 percent discount. Air China postponed a private stock placement on October 22. It said it would not resume negotiations on the share sale for three months. The airline did not say how many
shares it would sell, how much it would sell them for or whom it would sell them to. Mr Webb was critical of the private placement, saying the amount raised would be “less than the 1.52 billion yuan paid out in the 2011 final dividend”. The share issue would make “almost no difference to the balance sheet, for all the paperwork involved”, he said. “Air China could simply have paid a smaller dividend and saved the trouble.” By the end of June, Air China’s net debt had risen to 82.4 billion yuan or 181 percent of its equity and almost 12 times last year’s net profit. The airline has commitments to buy 83.8 billion yuan worth of new aircraft. With Reuters
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November 5, 2012 business daily | 5
Beef prices on lunar trajectory But butchers are far from over the moon about the amount of business they are losing Tony Lai
utchers are losing customers as the price of fresh beef continues to climb. Another price rise was announced last week, meaning the wholesale price has risen by 34 percent so far this year. Both the main suppliers of
fresh meat, Nam Kwong Kok Fong Distribution and Transportation Ltd and Nam Yue Food Stuff and Aquatics Co Ltd, raised the wholesale price of fresh beef by 380 patacas (US$47.60) to 4,380 patacas for 60kg on Thursday. Nam Kwong and Nam Yue
The price of fresh beef rose last week by as much as 4 patacas a catty (Photo: Manuel Cardoso)
blamed the price increase on higher costs and the yuan’s appreciation. Butchers told Business Daily they were passing on the increase to consumers. They said they had increased the retail price by between 3 patacas and 4 patacas a catty (600 grams). “Today a catty of beef is being sold at 73 patacas but 70 patacas was the price before the latest rise,” said the owner of a beef stall in S. Domingos Market. “My business went down by at least 40 percent compared with early this year.” The wholesale price of fresh beef has risen several times this year. It was 3,260 patacas for each 60kg in January, suppliers told reporters last month. The wholesale price has since increased at an average rate of more than 100 patacas a month. “We’re not eating simply beef. We’re eating beef which is made of gold,” said a vendor of fresh beef in the Red Market. He said the price increases had driven away customers and that he
was ordering about one-fifth less beef from his suppliers than before. Butchers throughout the city are unhappy about what they describe as the government’s failure to act to stabilise prices. “The government has turned a blind eye and deaf ears to our problems and pleas,” said the butcher in the Red Market. “Facing such increases, we may all close down soon.” The butcher in S. Domingos Market said the market had had five stalls selling refrigerated beef when it had first opened but now had only two because business was bad. Government intervention is unlikely. Economic Services Bureau director Sou Tim Peng said in September that market forces should be free to set food prices.
Market forces rule The government would carry out “in-depth studies” on imported food when required, Mr Sou said. Lam U Tou is a representative of the livelihood concern group of the Macau Federation of Trade Unions. His group wants the government to be “more proactive”, he says. “The government should do a full review of the fresh meat import system or commission an independent third party to do so,” Mr Lam told Business Daily. He said the government should help butchers sell frozen beef by adopting a policy of favouring importers and retailers. The Civil and Municipal Affairs Bureau says imports of frozen beef increased by about 500 tonnes last year.
CTM’s focus on doubling Citic on cusp of being fibre broadband users CTM’s biggest investor The telco wants to maximise the reach of its fibre broadband network and establish a 4G mobile network
Citic Telecom makes a play for Portugal Telecom’s stake in CTM and may end up owning almost all of the Macau telco
he city’s biggest telecommunications company has outlined its ambition to double the number of fibre broadband subscribers on its books by the end of the fiscal year. CTM, Companhia de Telecomunicações de Macau SARL, last week lowered prices for residential broadband services by an average of 10 percent. Price cuts for the company’s three Home Fibre Broadband packages were between 12 percent and 20 percent and the company has promised it will double upload speeds. “Right now the fibre broadband users account for 5 percent of our total broadband users but we hope to raise this figure to 10 percent by the end of this financial year,” said Ebel Cham Pou I, CTM’s vice-president for the consumer segment. “Next [fiscal] year’s target will, of course, be more progressive.” She said the number of fibre subscriptions had increased by about 5,000 since the introduction of the service last year. CTM planned to invest in upgrades of its fibre network that would increase coverage from 70 percent to 100 percent,
C The feasibility of a 4G mobile phone network is being studied by CTM (Photo: Manuel Cardoso)
Ms Cham told reporters on Friday after the launch of Apple Inc.’s iPhone 5. The company plans to study the introduction of a fourth-generation mobile network. The study and upgrade are part of a three-year infrastructure plan that involves a 1.2-billion pataca (US$150 million) investment which was announced earlier this year. “We have already started the preparatory works for the 4G service … but the schedule to implement this service also depends on the government’s timetable,” Ms Cham said. The government had told the city’s mobile phone service providers were scheduled to phase out 2G services on January 1. But the government said last month it was studying the possibility of continuing a 2G service after that date.
itic Telecom International Holdings Ltd is in talks with Portugal Telecom to buy Portugal Telecom’s 28 percent stake in CTM, Companhia de Telecomunicações de Macau, SARL, Lisbon’s Diário Económico reported on Friday. Citic Telecom, a subsidiary of mainland conglomerate Citic Pacific Ltd, said last month it was in talks with CTM’s major shareholder, London-listed Cable and Wireless Communications Plc, about buying the 51-percent stake owned by the British firm. The Bloomberg news agency quoted unnamed sources as saying Citic Telecom could pay as much as US$750 million (6 billion patacas) for CWC’s stake. That deal values Portugal Telecom’s shares at more than US$410 million. If the deals with Portugal Telecom and Cable and Wireless go through, Citic Telecom will own 99 percent of CTM, Macau’s biggest telecommunications company. Citic Telecom currently owns about 20 percent of CTM.
Citic Telecom chief executive Norman Yuen Kee Tong spoke to Business Daily last week about the deal his company may do with Cable and Wireless. He said Citic Telecom was very interested in the Macau telecommunications market, in view of its strong performance fuelled by gaming and tourism. Mr Yuen said the acquisition would strengthen CTM. Citic Telecom bought its 20 percent stake in CTM from its parent company for HK$140 million in February 2010. CTM runs Macau’s only fixed-line telecommunications network and its leading mobile phone network. CTM’s revenue rose by 44.2 percent last year to 4 billion patacas and its net profit grew by 14.7 percent last year to 933.6 million patacas. Citic Telecom said in September that first-half revenue had increased by 16.9 percent from a year before to HK$1.7 billion and that it had made a first-half profit of HK$238.8 million. The price of Citic Telecom stock fell by 0.6 percent in trading in Hong Kong on Friday to close at HK$1.78 a share.
business daily November 5, 2012
Director’s call to govt: ‘Action!’
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Re-exporting industry To talk about exports by manufacturing industries in Macau is mostly to talk about re-exports – exports of goods that were not produced here and were then exported. The Statistics and Census Service recently published data for the first nine months of the year. This analysis compares the cumulative values of domestic exports and re-exports for the period January to September over the past four years.
The graph shows a contraction in domestic exports, due mainly to the decline of the textiles industry. About 10 years ago, the value of exports recorded for single month would often exceed total exports for the past nine months of this year. For the past three years, trade has stabilised, as represented by an almost horizontal line. The value of re-exports today far exceeds the value of domestic exports. There was a sharp increase in the value of re-exports after a slowdown in the aftermath of the international financial crisis. Between January and September, the value of reexports was at least 2 ½-times the value of domestic exports. The figures for the third quarter are not shown in this analysis but follow a similar pattern. The increase in re-exports means the ratio of exports to imports has increased from less than 10 percent over the past two years to above 11 percent at the start of this year. These are considered small numbers. If only domestic exports were included, the ratio would fall to about 3 percent. J.I.D.
Ratio of exports to imports in the third quarter
Better arts education, more money and a government-funded film commission should be the foundations of Macau’s own film industry, says director Albert Chu, the head of the CUT Association. In an exclusive interview with Business Daily, Mr Chu said the city’s film industry was in its infancy and it needed nurturing. There is enthusiasm for using Macau as a backdrop for films which, he said, could lead to greater things for an industry dwarfed by the film industries of Hong Kong and the mainland. By Luciana Leitão
What stage is the development of the film industry at? There is no film industry in Macau. But if we define a film industry as having some fixed film companies that do a certain amount of films every year and do the distribution in the local market and within Macau’s cinemas, then the industry here is in its infancy. It is going from independent film production to trying to build up a market or trying to understand how to make films into an industry. It now depends on the government, and whether our filmmakers can do their best to try to make it better.
We’re right beside Hong Kong, which has a big film industry. Why is Macau so far behind? It really has to do with the historical background. In the 1940s and 1960s a company from the mainland moved to Hong Kong and gradually built up the film industry. At that time Macau did not have people with a lot of knowledge of the film industry. At the same time a lot of people who had a professional background in films chose to leave Macau to go into business. A lot of people studied film in other places, like Hong Kong, and then settled down in different cities.
Only during the 1990s did more professional people choose to stay in Macau and start to do some kind of film production. I believe it also has to do with the way the government regards filming here. Is the government assisting the development of cinema? In the past the government considered film an art form. What we know is that in the 1970s and 1980s there was always a group of people who wanted to make films. They would learn in Hong Kong and film as a hobby in Macau. After a few years the group would be dissolved and another group
In 1999 we formed the CUT Association. After that we hoped to have more consistent promotion of film productions and film appreciation
November 5, 2012 business daily | 7
MACAU would come up. It still goes on like this. There is no consistency. In 1999, we formed the CUT Association. After that we hoped to have more consistent promotion of film productions and film appreciation. Only after the opening of the Cultural Centre was there any strategy to promote more film in Macau. Does filmmaking in Macau need an extra push from the government? Of course. In every place, especially in Asian countries like Korea and Singapore, in Thailand, Vietnam, Malaysia, they always have a film commission, usually supported by the government, which helps filmmakers and also helps to attract more film crews to come to their cities. As a first step, the government needs to put more effort, financially and in terms of management, into attracting resources from other places to help local filmmakers. Is the government doing that? They are now but we don’t have a film commission at the moment. What I know is that in the very near future they will have some funding to support local people to do feature movies. Considering its size, is it important for a city such as Macau to have a film industry? I can’t say [the city needs] a film industry but doing film is important for every city. Film is a way people look at a city. Some look at it in a more commercial way, some look at it in a more individual way. Independent films or commercial films are important for a city as entertainment, and also as a way to give people an idea of how a city is doing. Do local residents appreciate cinema? It’s getting better, especially among young people. Now you have more cinemas, like the Galaxy, so people enjoy going there for entertainment. But at the same time we also need to have a cinema or a film centre that regularly screens film from different areas and genres. It’s a way to educate Macau people to appreciate film. For the film market to develop healthily we need to have high-quality audiences. At the moment we need to have more film education in Macau.
As a first step, the government needs to put more effort, financially and in terms of management, into attracting resources from other places to help local filmmakers
To make films you also need professional actors, film crews and distributors. Do we have these? As far as professional film crews are concerned, local people don’t have the knowledge. As usual, we will try to get professional film crews from Hong Kong and also from the mainland. But I think more and more Macau people like to make movies for themselves. After doing the first, second and third movies they will get more experience. Is doing short films the right strategy for starting a film industry in Macau? Doing short films as a training process and also as a starting point for making independent films [is good]. But in terms of getting into the market, maybe doing features is another big step. It’s really case-by-case. I did a short film like “Macau Stories – Love in the City” but later we want to do longer short films. Even if it’s not a feature film, we try to do two or three longer short films. Macau doesn’t have distributors. We, as producers, also do the distribution. Are events such as the Macao International Film and Video Festival and DocuPower enough to develop cinema here? They really help because we now have a platform. Also, they have a programme, they will subsidise work and they will have an instructor helping them to develop the projects. For people who really like to make movies, if they join a project, they have an instructor to help build up their knowledge. It’s a good way to become professional filmmakers. Overall, is the government investing enough in culture? In the past few years the creative industries have become another strategy, side by side with our gaming business. Our government wants to promote all kinds of creative industries. From this perspective, we all get more support from the government. The problem is whether the government has a more far-sighted and deepreaching strategy for keeping creative industries going. Is that happening? We have to wait and see. As a first step they will try to give more funding to the people engaged in creative industries. But as a second step they really need to give more art education to high school students and even to students at a very young age, in order to get high-quality audiences. Is cinema being contemplated in this overall strategy? I think so. When you look at all the creative industries, film is always the most profitable. At least the government tries to promote it and also they try to see whether Macau films can really get into the market. Is it possible to without having training centres or film schools? Macau people always get their training in different cities. At the moment we really don’t need to build an art school or film school to promote film. It is something we need in the longer run. But in the short run Macau people know how to get training in other places. After they learn the skills, do they have enough openings to do it as a career? That’s the problem.
business daily November 5, 2012
PBOC to prioritise economic growth China’s central bank will keep monetary policy prudent and money supply reasonable to prioritise the job of encouraging economic growth, the bank’s latest monetary policy report showed on Friday. The People’s Bank of China said in the report that although China’s inflation trend is stable, the country needs to guard against imported price pressures stemming in part from ultra-loose U.S. monetary policy. The central bank also said that the recovery in the world’s second-biggest economy is far from solid. Official and private sector factory surveys showed on Thursday that the economy is finally regaining some traction, although they pointed to a sluggish rebound, with the latter recording its 12th straight month of slowing growth.
Chinese traders strike in Spain over crackdown Chinese businesses in a major trading estate in Madrid staged a rare strike Saturday to protest a police crackdown on alleged moneylaundering which they said had stigmatized them. Police said they arrested more than 80 people, most of them Chinese. Hundreds of warehouses in the Cobo Calleja industrial zone, considered the biggest Chinese wholesale hub in Europe, shut down for the day to highlight how Chinese businesses have suffered since last month’s raids. “With this protest, which is rare in my culture, we want to send the message that we have nothing to do with corruption,” said Yinong Chen, a spokesman for the Cobo Calleja Business Association. “We act legally, we pay our taxes and we want to integrate into Spanish society,” he said, in comments broadcast on national radio station RNE.
China’s new leaders to face emboldened critics Risks of unrest seen as growing at very sensitive times
year ago, the villagers of Wukan in China forced their corrupt local leader to flee in a rebellion that shook the Communist Party and which serves as a warning to the country’s incoming leaders. At a congress starting Thursday, the party will anoint a new chief for the next 10 years, whose regime will have to address growing anger over graft as well as challenges from a vocal band of dissidents and rights activists. In the Wukan revolt, villagers defied the usually iron-fisted police and forced their longstanding party chief to flee after angry demonstrations denouncing shady land deals during his decades-long tenure. The crisis was defused in December when provincial authorities in Guangdong stepped in, agreed to untangle the complex web of land transfers to private developers, sacked the party chief and allowed villagers to hold elections. The newly elected deputy head of the village has a message for Xi Jinping, the 59-year-old vice president who is widely expected to be promoted to Communist Party general-secretary this week and then state president next year.
Priority to graft fighting “If they don’t wipe out and punish corruption, then things are only going to get worse,” Yang Semao told AFP in Wukan, a small fishing and farming village of about
12,000 people. “If they don’t crack down on graft, then you are only going to encourage more people to be corrupt (and) the new government leaders will become corrupt,” he said in an interview in his office. The unprecedented government backdown in Wukan was seen by many of China’s 650 million farmers and a growing community of human rights activists as a victory over despotism, as the gap between rich and poor grows ever wider. “The numbers of mass protests are increasing day by day and the scope is expanding. The ‘hated official’ and the ‘hated rich’ are becoming a part of the social psychology,” government critic Yang Jisheng, a retired editor at the state-run news agency Xinhua, told AFP. “This means political reform is urgently needed.” To quell the rising tide of unrest, China’s parliament this year approved a US$111-billion annual budget for what it calls “stability maintenance”. “Currently the budget for stability maintenance exceeds that of national defence,” Bao Tong, the highest Communist Party official jailed following the 1989 Tiananmen prodemocracy protests, told AFP. “This is a phenomenon very rarely seen in the world. No country in the world makes its own people the biggest enemy,” added the leading dissident. Arrests and convictions of dissidents, including the 2009
Beating the censors Such was the case late in October when The New York Times published an investigation into the finances of Premier Wen Jiabao showing his family had controlled assets worth US$2.7 billion. Other social grievances
Non-manufacturing industries reb Growth estimates reviewed upwards
CCP names Li Zhanshu head of central agencies China’s Communist Party put Li Zhanshu in charge of supervising agencies that directly answer to the central leadership ahead of the country’s power handover this month. Mr Li replaces Ling Jihua as secretary of the body overseeing departments under the party’s Central Committee, according to a statement posted on the website of the committee on November 1. Xi Jinping, China’s vice president who is forecast to succeed Hu Jintao as Communist Party general secretary at the party Congress that begins November 8, has tasked Mr Li’s work committee with five priorities, including stepping up efforts to fight corruption, according to the statement. The committee met October 23 to announce the appointment, which came two months after Mr Li took over from Mr Ling as the head of the party’s general office, the party said in the statement.
jailing of Liu Xiaobo who was awarded the 2010 Nobel Peace Prize, are seen as part of the “stability maintenance” agenda. Another tactic employed to curb restive impulses among the 1.3-billion population is state censorship on “weibos”, homegrown social media sites akin to the banned Twitter that have become hugely popular.
Market confidence is improving
November 5, 2012 business daily | 9
GREATER CHINA analysis
Is China making the consumption transition? James Saft
Wukan set a precedent in the fight against corruption
likely to haunt Mr Xi’s incoming leadership team include labour disputes, judicial incompetence, environmental protests, food safety and police brutality. With half of China now online, local disputes can be quickly amplified through the weibos, which are challenging the party’s ability to shape public opinion despite the censors’ best efforts to squelch debate. Government-backed land grabs remain one of the most explosive social issues. Most of China’s estimated 180,000 mass incidents or protests in 2010 were linked to allegedly corrupt deals, a 2011
study by the China Academy of Social Sciences said. Outgoing President Hu Jintao repeatedly called fighting graft a matter of “life or death” for the ruling party, while Mr Xi has also lambasted rampant dishonesty in government. Political reform, if it comes at all, is likely to a be a slow process, say analysts, and must focus on curbing graft in government. Encouraging the “Wukan model” of free local elections is one option available to Mr Xi and his comrades in the leadership, but some residents say it has not brought the accountability
for local officials and businessmen they hoped for. Despite mandates from above, county and prefectural-level leaders have refused to investigate years of village land deals due to the tangle of interests, they say. “Nothing has been resolved, we have been cheated,” resident Liu Hanxu said over a game of cards with his neighbours in Wukan’s village square. “We want the land back, we want money for the land that was stolen from us. Nothing has been resolved, they are cheating the people.” AFP
bound from 19-Month Low
hina’s nonmanufacturing industries rebounded from the slowest expansion in at least 19 months, adding to signs the world’s second-biggest economy is recovering after a sevenquarter slowdown. The purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on Saturday. September’s reading was the weakest since a new seasonally adjusted series of the gauge began in March 2011. The report may bolster expectations for a recovery in economic growth this quarter after a similar measure for manufacturing expanded for the first time in three months. The data may also reduce pressure on policy makers to roll out more stimulus as
they start a once-a-decade power transfer at a Congress in Beijing on November 8. “The impact of action to boost domestic demand has become more apparent and has bolstered market confidence,” Cai Jin, a vice chairman at the federation, said in the statement. The expansion in nonmanufacturing industries in October “will help consolidate the foundation for steady growth,” he said. China’s economic growth cooled to a three-year low of 7.4 percent in the third quarter as Premier Wen Jiabao’s campaign to curb consumer and property prices damped domestic demand and a sluggish global recovery capped the nation’s exports.
Investment spending Bank of America Corp. on October 30 raised its estimate
for fourth-quarter economic growth to 7.8 percent from 7.5 percent while Nomura Holdings Inc. projects a rebound to 8.4 percent after the government cut interest rates, accelerated investment spending and project approvals and cut taxes. The Shanghai Composite Index, the nation’s benchmark stock gauge, had its strongest weekly rally in more than a month on speculation that economic growth is rebounding, rising 2.5 percent in the five days ending November 2. “The preemptive finetuning of macro-economic policies and structural reform measures are gradually taking effect and the economy is expected to keep steady and relatively rapid growth,” the People’s Bank of China said in its quarterly monetary policy report released on November 2. Bloomberg
onsumption is increasingly driving China’s economy, perhaps marking the country’s much-needed transition to a more sustainable model. But even if China is moving away, slowly, from its old model based on saving, investing, building and exporting, it is important to realise that the change brings with it new uncertainty, risks and the potential for disappointing growth. China’s economy grew 7.4 percent in the third quarter, down from 7.6 percent in the preceding three months and marking the seventh consecutive quarterly slowing in growth. Underlying figures, however, gave some cause for optimism, particularly a 14.2 percent rise in September retail sales, a rise of a full point from the month before. In the first nine months of the year consumption contributed 55 percent of Chinese GDP growth, outpacing the share of investment, which accounted for 50.5 percent (net exports subtracted 5.5 percent). That’s welcome news: economists have long fretted about China’s growth model, which relied on capital investment at home and, supported by an artificially cheap yuan, exports abroad. While that helped to underwrite a stunning run of growth, it also kept savings rates high and consumption at home relatively low. It also helped to facilitate a build-up of debt which leaves China structurally vulnerable and subject to asset and investment bubbles. That’s sparked much comparison with Japan, which enjoyed its own debt and investment-fuelled period of growth, only to fall into a morass of deflation and continued poor allocation of capital. With the rest of the world less willing and able to absorb China’s exports, and with real signs, such as in real estate, that debt was financing less and less viable projects, any sign of a transition to consumption at home is good news. Like so much change for the good, however, it brings with it real problems and risks during the transition period. First off, it is probably wise not to get too excited, even though 2012 would make the second straight year of consumption providing the lion’s share of growth. Chinese data is notoriously unreliable, and consumption includes government consumption as well as households, growth of which is both less sustainable and valuable. Secondly, the very idea of transition, even if inevitable, brings up the possibility of totally unpredictable step changes in the way in which China’s economy
operates. These changes, again even if needed, might well be smooth but also might be sudden and unsettling.
Unpredictability As Michael Pettis, a professor at Peking University’s Guanghua School of Management, argues, most of the economic forecasting on China takes as its underlying assumption that change will be fairly smooth and evolutionary, looking to predict changes in inputs and outputs. If something, however, is unsustainable - and much in China looks just that - then this approach fails, rarely but spectacularly. “If we are on the verge of a shift in the development model - perhaps, and usually, because the existing model is unsustainable and must be reversed, the analysis has no value at all,” Pettis wrote in a note to clients this month, before the GDP data. For a comparison, think about the relationship in the U.S. during the middle part of the last decade between interest rates, housing prices, construction employment and economic growth. Those relationships didn’t change little by little, but all of a sudden, and when they did all sorts of other relationships economists used to predict the future died with them. Therefore, at the very least, signs of a change towards a domestic- and consumptionoriented economy in China means that there may be quite a bit more uncertainty over the future. As financial markets don’t like uncertainty, to the extent that they realise this, they will impose a larger discount on what they are willing to pay for Chinese financial assets. This also makes forecasting demand for the many things China consumes much more difficult, at least in the short term. Over the medium and long term the trend is more clear: export-oriented investment for its own sake will diminish, though probably not before more capital is expended, making things even more difficult for industries abroad which must compete with China. To be sure, long term, China’s transition away from an export-atall-costs model is both good news and inevitable. Expecting the U.S., much less Europe, to continue to eat as much as China cooks over the coming five or 10 years is simply unrealistic. Both have their own transitional problems to wrangle. As with the U.S. after its own model change, still on-going, China’s transition period will be both fraught and extremely interesting. Reuters
business daily November 5, 2012
Hyundai, Kia, overstated fuel efficiency Errors affected 1 million cars across 13 models Ben Klayman and Deepa Seetharaman
outh Korea’s Hyundai Motor Co. and its affiliate Kia Motors Corp. say that they overstated fuel economy by at least a mile per U.S. gallon (1.6 kilometres per 3.8 litres) on more than one million recently sold vehicles. They have agreed to compensate owners for the additional fuel costs. The U.S. Environmental Protection Agency found the errors in 13 Kia and Hyundai models from the 2011 to 2013 model years. The findings are a blow to the two carmakers. They have centred their marketing campaigns on superior fuel economy. About 900,000, or 35 percent, of the cars sold in the United States through to October 31 were affected by the changes, in addition to 172,000 cars sold in Canada, Hyundai and Kia said in joint statement. “Given the importance of fuel efficiency for all us, we are extremely sorry for these errors,” said John Krafcik, head of Hyundai Motor America. “When we say to Hyundai owners, ‘We’ve got your back,’ that’s an assurance we don’t take lightly. The mileage on most labels will be reduced by one to two miles per gallon, with the largest adjustment being a 6-mpg highway reduction for one version of the Kia Soul, the EPA said. The South Korean automakers
KEY POINTS Hyundai, Kia say 35 pct of 2011-2013 cars affected Fuel economy errors affect 13 Kia, Hyundai models Four models lose 40 mpg highway rating
Not so economical – Hyundai’s Elantra Avante
said the changes will result in the 2012 Hyundai-Kia fleet fuel economy level being reduced by an average of 3 percent, to 26 mpg from 27 mpg. Customers will receive a debit card that will reimburse them for the difference in the EPA fuel economy rating, based on the fuel price in their area and their miles driven. An extra 15 percent to the amount will be added to acknowledge the inconvenience and owners will be able to refresh their cards for as long as they own their vehicles, the companies said.
Public apology The two companies also planned a full-page newspaper advertising campaign for Sunday U.S. time to apologise for the fuel economy errors, which stemmed from differences in its mileage tests from the EPA’s tests.
In its marketing, Hyundai has touted the fact that many of its models get 40 miles per gallon on the highway. In the “Save the Asterisks” campaign, Hyundai poked fun at rivals who offered 40 mpg only on specialised, low-volume models. Now three Hyundai models, the Elantra, Accent and Veloster, as well as the Kia Rio fall short of that mark as will the Hyundai Sonata and Kia Optima hybrids. “The fact that the companies’ ballyhooed 40 mpg cars are no longer members of that august club...will be something that haunts the companies for a long time to come,” Edmunds. com senior green car editor John O’Dell said in a statement. The automakers did not disclose how much the overall reimbursement program would cost other than to say it would be “certainly millions” of
Japan protests to China over maritime ‘incursions’
our Chinese government ships sailed into the territorial waters of disputed Tokyo-controlled islands in the East China Sea on
Sunday, Japan’s coastguard said. The maritime surveillance vessels entered the 12-nautical-mile zone around Uotsurijima, the main islet in
the disputed chain called the Senkaku Islands in Japan and the Diaoyu Islands in China at about noon (0300 GMT). Japanese Vice Foreign Minister Chikao Kawai “strongly protested to the Chinese ambassador Cheng Yonghua about the Chinese ships’ intrusion into Japan’s territorial waters, and the growing frequency of such moves” by telephone, the foreign ministry in Tokyo said in a statement. Mr Kawai said the “repeated provocative action” would undermine communication between the countries aimed at calming the situation, according to the statement. The Chinese envoy repeated Beijing’s own view on the issue but added he was seeking to resolve the dispute through dialogue, it said. Chinese vessels have moved in and
dollars, Mr Krafcik said. But the companies estimated that a typical Hyundai or Kia owner in Florida who purchased a car in January and drove 15,000 miles would expend 21.4 extra gallons of gas. That driver would get a payment of US$88.03, including the 15 percent premium. If all 900,000 U.S. owners receive the payments, the programme will cost nearly US$80 million. The EPA said it received a number of consumer complaints about Hyundai mileage estimates and the agency’s testing staff at a laboratory in Ann Arbor, Michigan, saw discrepancies between EPA testing results of a 2012 Hyundai Elantra and the information provided by the company. It then expanded its investigation into other Hyundai and Kia vehicles. Reuters
out of what Japan says is its sovereign territory over the past two months since Tokyo nationalised some of the islands in the group. On Friday, six Chinese government ships temporarily entered the territorial waters around the same islet, according to the coastguard. As well as the potential mineral reserves, national pride is at stake in the decades-old spat, which has recently spiked and hit the huge trade relationship between the two biggest economies in the region. Japan and China are readying for a third round of talks on the issue, but Japanese Prime Minister Yoshihiko Noda is not likely to hold bilateral talks with Chinese Prime Minister Wen Jiabao on the sidelines of an Asia-Europe summit in Laos opening today, reports have said. But Philippine President Benigno Aquino said yesterday his country would raise overlapping claims to the South China Sea during the summit. Mr Aquino said he expects to hold bilateral meetings with the leaders of the European Union, Poland, Switzerland, Norway and Italy during the two-day Asia-Europe Meeting in Laos. AFP
November 5, 2012 business daily | 11
‘G-20 thinks global recovery fragile’
India needs tariffs to prevent palm oil ‘dumping’
Australia finance minister Swan says Europe, U.S., must press on with reforms Michael Heath
ustralian Treasurer Wayne Swan said most of his Group of 20 counterparts see the global recovery as “fragile” and urged Europe to press on with closer financial integration and the U.S. to cut its budget deficit. “It’s critical that leaders of many major economies now get on with the necessary structural reforms needed to underpin growth,” Mr Swan said in his weekly economic statement released yesterday. “From my initial meetings, it’s clear most of my G-20 colleagues view the global recovery as fragile.” The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the International Monetary Fund said Oct. 9. That compares with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The minister said although the U.S. has recorded more positive data in recent weeks, that nation’s recovery remains “shaky.” “The most pressing issue for whoever wins this week’s presidential election will be
working with Congress to avert the fiscal cliff,” Swan said, referring to US$607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the U.S. Congress acts. President Barack Obama and Mitt Romney crisscrossed the U.S. on the final weekend of the campaign before Tuesday’s election as a closely watched poll in the swing state of Iowa showed the incumbent ahead there. Obama is leading the Republican challenger 47 percent to 42 percent among likely Iowa voters, the Des Moines Register’s Iowa Poll shows.
‘Sustainable footing’ “While avoiding the fiscal cliff is critical to supporting activity in the months ahead, the U.S. will also need to outline a strategy to get its budget back on a sustainable footing to support economic growth over the longer term,” Mr Swan said. The Treasurer said he would travel to Washington from the G-20 summit in Mexico for meetings with
Most troubling is that youth unemployment is around 50 percent in countries like Greece and Spain
U.S. Treasury Secretary Timothy F. Geithner, Federal Reserve Chairman Ben S. Bernanke, U.S. Congressional Budget Office Director Douglas Elmendorf and International Monetary Managing Director Christine Lagarde. In Europe, Greek Prime Minister Antonis Samaras’s bid to please lenders from the European Union and IMF with a 13.5 billion-euro austerity package – and therefore unlock funds – ran into renewed obstacles last week. A law on state asset sales scraped through parliament, raising questions whether the government will be able to muster enough support to pass the measures.
Youth unemployment Mr Swan noted that about 18.5 million people in Europe are looking for work, more than Australia’s entire adult population. “Perhaps most troubling is the fact that youth unemployment is around 50 percent in countries like Greece and Spain,” he said. Europe’s unemployment rate is 11.6 percent, compared with 5.4 percent in Australia. Back home, the Treasurer is bidding for a A$44 billion ($45 billion) swing to bring the nation’s budget back to a surplus in time for an election due by late next year. “We have an enviable combination of solid growth, low unemployment, contained inflation and low debt, with the budget returning to surplus ahead of every major advanced economy,” he said. “The problems we see in so many parts of the developed world only highlight the need for Australia to continue our nation’s long record of reform.” Bloomberg
Foreigners allowed to majority-own Myanmar businesses M yanmar’s new foreign investment law allows overseas firms fully to own ventures and offers tax breaks and lengthy land leases, state media said at the weekend. It released details of long-delayed legislation passed by parliament last week. The law, approved by President Thein Sein on Friday, had gone back and forth between the legislative and executive branches since March in a tussle involving a government eager to attract foreign investment, tycoons determined to protect their monopolies, and small businesses keen not to be shut out. Thein Sein took office in March 2011 at the head of a quasi-civilian government that brought almost 50
years of military rule to an end. He has undertaken economic and political reforms that have persuaded Western countries to suspend sanctions and prompted an upsurge of interest in the country from multinational firms, which see potential in Myanmar’s abundant resources and a primitive, low-cost economy bordering India and China. Most major firms have been waiting to see the new law before committing significant funds. The details in Myanmar-language state newspapers said joint ventures between foreigners and Myanmar citizens or the government would be permitted with any stake ratio agreed between the partners. Foreigners can still own 100
India, the biggest palm oil buyer, needs to impose a duty on imports to protect oilseed growers from cheaper overseas supplies as a surge in inventories in Southeast Asia lowers prices. India should levy a tax of 10 percent on crude palm oil, Dorab Mistry, director at Godrej International Ltd., said in New Delhi yesterday. Palm oil comprises almost 80 percent of India’s cooking-oil imports. Palm oil, used in everything from biofuels to candy to noodles, has fallen 21 percent this year as inventories surge in Indonesia and Malaysia, which account for 87 percent of world supply, and a global economic slowdown curbs demand.
Japan election unlikely before year-end Azuma Koshiishi, secretary-general of the ruling Democratic Party of Japan, said it will be “difficult” to dissolve the lower house of parliament and call a snap election by the end of this year, citing scheduling reasons. Prime Minister Yoshihiko Noda (pictured) alone will make the decision on the timing, and the priority is to handle key legislation in the current extraordinary session that convened on October 29, Koshiishi said yesterday on NHK television. Shinzo Abe, leader of the main opposition Liberal Democratic Party, later on the same television programme said the premier will need to express this week his intentions on dissolving the lower house within this year.
Samsung’s Galaxy S III tops 30 mln sales Samsung Electronics said yesterday that global sales of its flagship Galaxy S III smartphone had topped 30 million since its debut in May. “The Galaxy S III continues to be a runaway favourite with customers around the world,” stated JK Shin, head of Samsung’s IT and mobile communications division. The third version of the Galaxy S series offers a more powerful processor that lets users watch video and write emails simultaneously as well as a large 4.8-inch (12.2-cm) screen. The company sold 56.3 million smartphones in July-September, representing 31.3 percent of the global market, more than twice as much as rival Apple’s share, research firm IDC said last month.
S. Korean home loans stoke national debt
percent of businesses without the need for a local partner, as in the previous law dating from 1988. But there could be restrictions in some areas. A previous draft had said foreigners would only be able to hold a maximum 50 percent of a firm in certain sectors deemed sensitive, including agriculture, and that foreigners would have to hold at least 35 percent of any start-up joint venture. A parliamentary source told Reuters last week that additional regulations covering the restricted sectors could follow later. One article of the new law says the Myanmar Investment Commission can allow foreign investors into the restricted sectors with the approval of the government, in the interests of the people and the country.
South Korea’s total public and private-sector debt soared to US$2.75 trillion this summer due to greater spending to stimulate growth and growing household borrowing, a report said yesterday. As of June, combined debt held by the government, companies and households rose to 2,962 trillion won from 1,966 trillion won in 2007 and 2,859 trillion won at the end of last year, Yonhap news agency said. The ratio of such debt to nominal gross domestic product was 201.7 percent in 2007, 231.1 percent last December and 233.8 percent at the end of June, it said, citing bank data. The ratio has been on the rise since the 2008 financial crisis as the government expanded spending to spur growth and low borrowing costs prompted more households to rely on bank lending, Yonhap said. In June Moody’s Investors Service said the country’s household loans have grown “at an alarming rate” and are vulnerable to financial shocks arising from the global economic downturn. Many households rely on borrowing to buy a home and pay only the interest every month, repaying the principal when they sell the property. But a weak property market often means they cannot make enough to repay the principal when the loan falls due.
business daily November 5, 2012
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PING AN BANK-A
52W (H) 2781.99 (L) 2172.878906
FTSE TAIWAN 50 INDEX NAME ACER INC
PRICE DAY %
TAIWAN MOBILE CO
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ASIA CEMENT CORP
HON HAI PRECISIO
HOTAI MOTOR CO
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AU OPTRONICS COR
HUA NAN FINANCIA
CHANG HWA BANK
CHENG SHIN RUBBE
CHIMEI INNOLUX C
MEGA FINANCIAL H
CHINA STEEL CORP
NAN YA PLASTICS
DELTA ELECT INC
FAR EASTERN NEW
SYNNEX TECH INTL
FAR EASTONE TELE
TAIWAN GLASS IND
FORMOSA CHEM & F
INDEX 5059.21 HIGH
52W (H) 5621.53 4950
(L) 4643.05 31-October
November 5, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GAlAXy ENtErtAINMENt
MElCo CrowN ENtErtAINMENt
MGM CHINA HolDINGS 38.4
SANDS CHINA ltD
SJM HolDINGS ltD
wyNN MACAu ltD
17.0 Max 18.06
WTI CRUDE FUTURE Dec12
BRENT CRUDE FUTR Dec12
GASOLINE RBOB FUT Dec12
NATURAL GAS FUTR Dec12 HEATING OIL FUTR Dec12
22.6 Max 23.75
Silver Spot $/Oz
Platinum Spot $/Oz
Palladium Spot $/Oz
LME ALUMINUM 3MO ($)
LME COPPER 3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan13 Dec12
WHEAT FUTURE(CBT) Dec12 SOYBEAN FUTURE Jan13 COFFEE 'C' FUTURE Dec12
Gold Spot $/Oz
CURRENCY EXCHANGE RATES
GAS OIL FUT (ICE) Dec12
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
1.0337 1.6021 0.9404 1.2835 80.43 7.9828 7.7503 6.2416 53.8113 30.77 1.2248 29.238 41.176 9631 83.117 1.20713 0.80089 8.0541 10.2831 103.24 1.03
-0.3759 -0.9031 -0.8082 -0.8497 -0.5346 -0.0025 -0.0026 -0.0304 -0.1975 -0.195 -0.3511 0.0205 0.0704 -0.0934 -0.1275 0.0265 -0.0187 0.2744 0.4901 0.31 0
1.2538 3.0753 -0.2446 -0.9721 -4.3765 0.2105 0.2206 0.8555 -1.3869 2.5349 5.8622 3.5604 6.4698 -5.8353 -5.6366 0.8002 4.058 0.9945 0.67 -3.4676 0.0097
1.0857 1.6309 0.9972 1.3859 84.18 8.0308 7.7979 6.3964 57.3275 32 1.315 30.5 44.35 9662 88.637 1.24569 0.86648 8.7923 11.089 111.44 1.0311
0.9582 1.5235 0.8862 1.2043 76.03 7.9823 7.7498 6.234 48.6088 30.2 1.2152 29.084 41.118 8875 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029
MACAU RELATED STOCKS (H) 52W
DAY % YTD %
SUGAR #11 (WORLD) Mar13
AMAX HOLDINGS LT
COTTON NO.2 FUTR Dec12
BOC HONG KONG HO
CHEUK NANG HLDGS
World Stock MarketS - Indices NAME
CHOW TAI FOOK JE
DOW JONES INDUS. AVG
NASDAQ COMPOSITE INDEX
HANG SENG BK
FTSE 100 INDEX
HSBC HLDGS PLC
HUTCHISON TELE H
LUK FOOK HLDGS I
MELCO INTL DEVEL
HANG SENG INDEX
CSI 300 INDEX
MGM CHINA HOLDIN
TAIWAN TAIEX INDEX
NEW WORLD DEV
SANDS CHINA LTD
SHUN HO RESOURCE
S&P/ASX 200 INDEX
FTSE Bursa Malaysia KLCI
SHUN TAK HOLDING
NZX ALL INDEX
SJM HOLDINGS LTD
WYNN MACAU LTD
JAKARTA COMPOSITE INDEX
PHILIPPINES ALL SHARE IX
HSBC Dragon 300 Index Singapor
STOCK EXCH OF THAI INDEX
HO CHI MINH STOCK INDEX
BOC HONG KONG HO
Laos Composite Index
INTL GAME TECH
JONES LANG LASAL
LAS VEGAS SANDS
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
MGM CHINA HOLDIN
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business daily November 5, 2012
Opinion Asia’s stifled services Changyong Rhee
Chief Economist at the Asian Development Bank
he eurozone crisis has dominated discussion among policymakers over the last few years, but the economic slowdown in Asia’s two giants – the People’s Republic of China (PRC) and India – has become a source of growing public concern as well. How worried should we be about an additional drag on the global economy? After years of doubledigit GDP growth, the PRC’s economy is decelerating. At the Asian Development Bank, we predict that its growth will slow to 7.7 percent this year, from 9.3 percent in 2011. The PRC’s population is aging, real wages are rising, and growth is moderating toward more sustainable rates. India, too, has massive potential to grow fast and reap a demographic dividend, but it has been struggling with structural reform. We expect that India’s expansion will slow to 5.6 percent in 2012, from 6.5 percent last year. Weak external demand is partly responsible for the falloff in growth, but internal factors – namely, slowing investment and stagnating consumption – are also holding back economic expansion. Maintaining growth in the face of a global slowdown is a daunting task, and it requires rethinking the future of “factory Asia.” Asia’s boom was driven largely by intraregional manufacturing linkages:
intermediate goods and parts were sourced from within Asia for assembly into final goods exported to advanced economies. But, with budgettightening around the world, demand for Asia’s exports is expected to continue to falter. Where, then, should Asia look for another source of growth? Upgrading the service sector – for example, business processing, tourism, and health care – could play a critical role in the region’s future growth. Asia’s service sector is already large, contributing significantly to growth and employment. Services accounted for nearly half of developing Asia’s GDP in 2010, two-thirds of India’s growth from 2000 to 2010, and 43 percent of growth in the manufacturing-oriented PRC in the same period. In addition, service workers comprise more than one-third of total employment in developing Asia.
Services upgrading If these countries follow the same path traveled by the advanced economies, agriculture’s dominance will give way to industry, which in turn will be supplanted by services, further broadening their role. There is certainly room to grow: the share of industry in developing Asia’s output surpassed the OECD average in 2010 (41 percent vs. 24 percent), but the share of services still lags by a
wide margin (48 percent vs. 75 percent). Making Asia’s service sector more dynamic is essential to future growth. But the sector is still dominated by traditional services, such as restaurants, taxis, and barbers. Modern services – such as Internet connectivity technology, or financial, legal, and other professional business services – account for less than 10 percent of Asia’s service economy, well below the 20-25 percent in advanced economies.
Asian policymakers must remember how they successfully developed their manufacturing sector – through competition
While traditional service industries are able to provide jobs, they do not generate much income. Labor productivity is also quite low: for most economies in the region, service-sector productivity is less than 20 percent of the OECD average. Even in South Korea, labor productivity in industry is 118 percent of the OECD figure, but only 43 percent of the average for services. A vibrant service sector could have broad economic benefits. Synergies between services and industry could improve overall productivity. For example, industrial design, marketing, and legal services could facilitate investment and development of new manufactured products. The service sector also tends to be more effective in job creation, particularly for women, thus supporting inclusive growth. Developing the service sector could also diversify the production base, thereby enhancing economic resilience andboostinggrowthmomentum. Modern services are becoming increasingly tradable, providing new export opportunities. India and the Philippines, for example, have established themselves as world leaders in the export of outsourced business processes. Skills gaps and a lack of infrastructure are frequently cited as factors that hinder service-sector dynamism in Asia. But burdensome
regulations are the biggest barrier. Excessive regulation that protects incumbent firms and other vested interests undermines market competitiveness and limits prospects for improved productivity and efficiency.
Competition needed For example, legal markets are dominated by rich lawyers, schools are controlled by teachers’ unions, and the medical sector is influenced by powerful doctors, resulting in high business costs that also hamper industrial development. Many service firms in Asia are owned by the public sector, so governments have less incentive to deregulate services. But the same authorities have already opened their economies’ manufacturing and agriculture sectors for the common good, even at the expense of minority groups like farmers and factory workers. Why, then, are they maintaining policies that protect the special-interest groups that dominate the service sector? Many argue that regulations protect small domestic firms against undue competition from large foreign firms. But the truth is that regulations are stifling even for domestic competition. In India, for example, there is fear that small mom-and-pop retailers will be crushed when Wal-Mart enters the market in the next few months. But policymakers must recognize that there are ways to protect small retailers without stifling competition. The government can, say, impose zoning regulations, help small retailers find specialized niches in the market, or provide skills training to displaced workers. The survival of artisanal retailers should not be used as an excuse to introduce or uphold business regulations that ultimately protect the incumbent rich. Asian policymakers must remember how they successfully developed their manufacturing sector – through competition. The same logic should be applied to services. Upgrading the service sector is low-hanging fruit for Asia, because tremendous investments are not required. And yet service-sector reform remains just out of reach for the region, owing to the absence of the political will needed to dismantle the vested interests that keep it there. © Project Syndicate
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November 5, 2012 business daily | 15
OPINION For John Maynard Keynes, wires economic theory was a sideline Business
Leading reports from Asia’s best business newspapers
India Times Auto major Hyundai Motor India Ltd said production at its two plants at Sriperumbudur continued to be on schedule and there is a decrease in number of workers who had abstained from work following strike by a section of workers. HMIL said it has already recognised United Union of Hyundai Employees (UUHE) as the official union “who have a majority membership of over 1,300 permanent workers amongst a total strength of 2,007 permanent workers” and will not recognise any other union.
Japan Times A joint venture between Sumitomo Corp. and Kazakhstan’s state-owned Kazatomprom uranium mining group officially opened a rare earth metal plant in the former Soviet republic. The plant, located in the northern town of Stepnogorsk, will extract rare earth minerals from surplus soil generated by Kazakhstan’s uranium mines. It will begin full-fledged production by year’s end of dysprosium, an essential metal for high-performance motors used In the manufacture of hybrid and electric vehicles. The facility will become Japan’s first supplier of dysprosium outside China.
Chairman of the finance department at the State University of New York
ven as global financial turmoil induces some to advocate for freer markets, the heavier hand of Keynesian macroeconomic policy is also experiencing a resurgence. Yet John Maynard Keynes was far more than the Ivory Tower academic economist we think we know. He was, above all, a practitioner and student of high finance. Investment and finance were his vocation, and political economics was his avocation. Keynes came from a line of academics. His father was a renowned philosopher and senior administrator at Cambridge University. Keynes was academically precocious. As an undergraduate, he was captivated by mathematical theory, and especially probability theory. After graduation, he served two years as a lowly clerk to the Crown, stationed in India. This otherwise unfulfilling experience gave Keynes the time to contemplate both the meaning of probability and the waning political and economic influence of Great Britain. He began to write articles on international economics that demonstrated his clear thinking. He also caught the eye of the U.K. Treasury, and soon rose to the highest echelon of international finance.
South Korea and India agreed to provide a combined US$1.1 billion worth of financial support for their bilateral business cooperation, the finance ministry said. The agreement was signed during the finance minsters’ meeting held in central Seoul earlier in the day between the two countries, according to the ministry. Under the agreement, both will provide the financial support through their own export-import banks over the next five years to companies seeking to join in infrastructure construction projects in India.
Keynes eventually realized that his worldview was incompatible with political pragmatism, and he forged an alternative career. He had frequented the highest levels of Britain’s government, arts and society. He also had been dabbling in finance as an extension of his experiences at the Treasury and as a way to invest some of his own savings and borrowings. Keynes began to advise an exclusive clientele, and became known for the quality of his investment advice. He quickly became the financial adviser to a veritable who’s who of Britain’s intelligentsia. Keynes first flourished by investing in bonds and foreign exchange. His interest was sparked when he amassed a small fortune for the Treasury during World War I. In his responsibility for securing foreign exchange to purchase war supplies, Keynes accumulated, and then rapidly sold, Spanish pesetas that resulted in a large drop in the sterling/peseta exchange rate and a large profit for the Treasury. He held a dim view of the stock market, which he likened to casino gambling or a beauty contest. Keynes argued that investors don’t trade on an asset’s fundamental value, but rather in anticipation of the strategies of other investors. In turn, investors watch their colleagues, also with little
Jakarta Post Indonesian privately owned Mandala Airlines is set to open four new routes in December, connecting Padang, West Sumatra and Denpasar, Bali with other major cities in Indonesia and Singapore. After its acquisition by Singaporebased Tiger Airways, Mandala opened flights from Jakarta to Medan, North Sumatra. The budget carrier also serves the Medan-Singapore, JakartaBangkok and Jakarta-Kuala Lumpur routes. “The new routes will help develop the business and tourism sectors in cities that we connect,” the company said in a statement.
John Maynard Keynes
regard for the fundamental underlying value of the security. Asset valuation is obscured as traders strategize over their assessments based more on animal spirits than on reason. Instead, Keynes devoted his investment energies to bond markets — where traders sought competitive and regular fixed- income flows — to the construction of hedges to reduce risk, and to the foreignexchange markets where relative economic progress and terms of trade between nations dictate equilibrium. He believed that the more rational and seasoned investors operated in these markets. When Cambridge University needed a trust manager, it called on Keynes. Over two decades of management of the university’s Chest Fund, he garnered a spectacular 400 percent return, even though the stock market was
While politicians debate the appropriateness of Keynesian macroeconomic policy, we may learn more from his insights on the animal spirits that sometimes rule markets
little changed in that period. Keynes succeeded because of his long-held interest in market psychology, which dated to his 1921 book, “A Treatise on Probability.”
Valuation theory He observed that probability assessments by humans differ from the calculable risks in nature and science. He believed our personal probabilities are what we think they are, not those predetermined by unseen natural forces. Similarly, to Keynes, and to proponents of personal probabilities, the value of a stock is what a group of sometimes irrational speculators is willing to pay for it. Kenneth Arrow went on to enshrine this valuation theory in his revolutionary model of security prices. A contemporary of Keynes, the investor Bernard Baruch, is reputed to have quipped that “if economists are so smart, why aren’t they rich?” When Keynes died, his net worth, mostly from his investments, was about US$30 million in today’s dollars. Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., modeled
his “value investing” after Keynes’s investment strategy, and once said the economist’s “brilliance as a practicing investor matched his brilliance in thought.” When Keynes died, the Financial Times reported: “Some surprise has been expressed about the large fortune left by Lord Keynes, yet he was one of the few economists with the practical ability to make money.” Keynes remains an enigma. Viewed as a theorist, and one who made a career challenging conventional theory, he earned a living on London’s equivalent of Wall Street while he eschewed the emerging academic concepts of the efficient-market hypothesis and the market-disciplining effect of arbitrage. He observed, “Markets can remain irrational far longer than you or I can remain solvent.” He viewed markets as often irrational, especially during financial crises. While politicians debate the appropriateness of Keynesian macroeconomic policy, we may learn more from his insights on the animal spirits that sometimes rule markets, especially in times such as ours. Bloomberg View
business daily November 5, 2012
CLOSING US services probably sustained expansion India unites behind economy overhaul Service industries in the United States probably kept growing in October, lifted by gains in consumer spending that are helping bolster the expansion, economists said before a report to be released today. The Institute for Supply Management’s nonmanufacturing index, which covers almost 90 percent of the economy, was at 54.5 last month, little changed from 55.1 in September, according to the median forecast in a Bloomberg survey. Readings above 50 signal growth. Another report this week may show the trade deficit widened in September as exports cooled.
Indian prime-minister Manmohan Singh and the Congress party’s leadership united behind steps to further open the economy to foreign investment ahead of a crucial parliamentary session. “We have to embrace change,” Mr Singh told an open-air gathering in New Delhi yesterday that was opened by Rahul Gandhi, scion of India’s leading political dynasty. The prime minister has pledged to overhaul the economy, including allowing foreign investment in retail outlets, the pensions and insurance industries, aviation, broadcasting and power exchanges, and a decision to raise diesel prices.
Basel III delinquents may face sanctions New banking system rules challenged but no postponement in sight
ountries may face sanctions if they fail to implement new rules aimed at safeguarding the global banking system from another financial crisis, a senior Mexican finance official said yesterday. New rules forcing banks to roughly triple the size of capital buffers they hold are set to be phased in over six years starting in January, after each country has finalised its own version. But the United States and Europe, home to most of the world’s largest banks, are still at the drafting stage, prompting speculation that the Basel III timetable may be postponed. Juan Manuel Valle, head of banking supervision at the Mexican Treasury, said no country had suggested a delay but any that failed to meet the deadline would face pressure from their peers.
“For the ones that don’t have regulations in place in January, the question will be, what kind of punishment will they face?” he told Reuters on the sidelines of Group of 20 meetings, adding that details would only be worked out after countries become “non-compliant.” Mexico is hosting meetings of G20 finance ministers and central bankers starting today, when policymakers will consider what else needs to be done to ensure that the world’s biggest banks do not come calling for fresh taxpayer bailouts. G20 countries in 2010 agreed on Basel III rules to make sure banks had enough of their own resources to shield against future crises. But the rules have come under withering criticism from American and British regulators who have joined banks in calling for a
massive re-think. Thomas Hoenig, a director at the United States Federal Deposit Insurance Corp, which regulates some banks, and Bank of England director of financial stability Andrew Haldane have both slammed the rules for being overly complex. Banks have said that tougher capital standards will force them to put the brakes on lending, which is already sluggish under the weight of slumping global economic growth, and may further delay recovery. Mr Valle said European banks were clearly worse off than their United States counterparts. American banks “aren’t ready on an administrative level, but if they [the rules] are ready tomorrow, the banks can comply the day after tomorrow. That is not the case in Europe,” he said.
Czech economy suffering from weak domestic demand
Mr Valle said he would think twice about being overly tough on timing if he were in charge. “We should think again about whether we want to support our financial
institutions more to finance growth and accelerate the exit from the crisis ... and lengthen the period of adjustment towards the new levels,” he said. Reuters
European Union states squabble over budget Next European Union budget embroiled in tug-of-war over rebate and agricultural policy
he run-up to this month’s European Union 2014-20 budget summit is proving even more fractious than usual as the major contributors dig their heels in, demanding cuts
and concessions while the Commission insists on a 5 percent spending hike. United Kingdom has threatened to veto a deal which offers anything less than a freeze at the November
22-23 meeting, while France will hear nothing against the Common Agricultural Policy. The CAP policy accounts for about 44 percent of the budget and France remains its biggest beneficiary.
“France cannot accept a budget which would not maintain CAP spending,” French European Affairs minister Bernard Cazeneuve said on Wednesday. “Other areas for savings should be looked at,” Mr Cazeneuve said, pointing at the British rebate, worth 3.5 billion euros (US$4.55 billion) in 2011. Against this backdrop, Cyprus, which currently holds the rotating European Union presidency, proposed during the week cuts of 50 billion euros as a “starting point” for talks on the Commission’s budget of 1.03 trillion euros. Some 11 billion euros of the cuts would be in the agricultural policy, including 3.4 billion euros in direct aid for farmers. As for the contentious rebates – Germany, the Netherlands and Sweden have them as well as Britain – Cyprus offered options
for everyone, suggesting tentatively that they be replaced with a system of lump sum payments, be eliminated or allowed to continue as is. British prime minister David Cameron has made clear he will not accept any change to London’s rebate. On Wednesday, Mr Cameron lost a non-binding vote in Britain’s Parliament insisting that he push for a real cut in the 2014-20 budget, having attempted to stave off the move by promising to veto any above-inflation increase. The net effect was to lock him into an even more hardline position. Berlin and Paris are both looking at cuts of 70-100 billion euros, with savings to come from cohesion funds, which are spent helping new member states improve infrastructure and governance to match European Union standards. AFP
11/4/12 8:06 PM