Run on shops as homes market dries
Portuguese School’s UNESCO gong hits SJM
Gunboat diplomacy sours Hu-Clinton talks
‘We followed law’ on La Scala – govt chief T
he government said yesterday it was starting legal moves to take back the extra land granted last year to the corruption-linked La Scala residential project. Legislators welcomed the news. However they warned that officials still have a lot of explaining to do about why they agreed to improve the concession terms of a project they knew was being probed by the city’s corruption watchdog. But Lau Si Io, Secretary for Transport and Public Works, defended his department’s stance. “We were following the laws,” he told reporters yesterday. The administration says it has already told the
concessionaire –Sociedade Moon Ocean Ltd, a subsidiary of Hong Kong-listed developer Chinese Estates Holdings Ltd – of the decision to start the confiscation process. Chinese Estates confirmed to the Hong Kong Stock Exchange that it received a notice of preliminary hearing. It now has 15 days to reply. At the end of May, the Court of Final Appeal said former secretary for transport and public works Ao Man Long took bribes worth HK$20 million (US$2.5 million) in 2005 from Chinese Estates boss Joseph Lau Luen Hung and another businessman.
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Expats to profit from Euro fall
Air Macau’s first-refusal right over new routes is hurting the local airport, experts said during an international conference on low-cost carriers. The facility is underutilised, with many possible routes going to waste, as competitors to the monopoly are frozen out. Aviation market liberalisation is the key and could transform the city into a regional budget airline hub, they suggest.
Analysts expect the euro to decline to a two-year low against the US dollar next month as borrowing cost inequalities in the eurozone undercuts recovery measures and scares away investors. Macau visitors could drop as Chinese sectors relying on exports to Europe would be negatively affected. On the other hand, Macau’s European residents will see their purchasing power back home soar.
Falling rupee, rising fares hit city’s Indian tourists The number of Indian visitors to Macau fell nearly 15 percent year-on-year in the second quarter, data from the Statistics and Census Service show. Whether a proposal by Indian low-cost carrier SpiceJet Airlines for a new direct air service between New Delhi and Macau can overcome barriers such as the depreciation of the rupee in boosting Indian tourism, remains to be seen.
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Year I - Number 114 Thursday September 6, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00
business daily September 6, 2012
Aviation regulation regime ‘dreadful’ Executives and observers of the airline industry hope for further liberalisation of commercial aviation in East Asia Xi Chen
Macau does not have enough airlines, says the chairman for the Centre for Asia Pacific Aviation
iberalisation of the commercial aviation market has been uneven in Asia, with Southeast Asia ahead of the field and East Asia lagging behind, an international conference on low-cost carriers has heard. Yet East Asia – including Greater China, Japan and the Koreas – would
offer great promise for low-cost carriers if countries opened up their markets, the conference was told. Peter Harbison, chairman of the Centre for Asia Pacific Aviation, the conference’s organisers, told Business Daily that Macau had done well in liberalising other markets and should do the same with aviation.
Commercial aviation regulations made 60 to 70 years ago to protect flag carriers should have been dropped 20 years ago, as today’s market was more about consumers and businesses. “If dreadful aviation regulatory infrastructure were removed, Macau could have a bustling airport, probably looking at putting in another runway,” Mr Harbison said. He says the city does not have enough carriers and the government has not shown enough concern for the wellbeing of the airport. He said Air Macau’s right of first refusal of any route out of here was an extra constraint on the industry’s growth. Air Macau has a 25-year exclusive concession to operate all scheduled commercial flights originating here, which lasts until 2019.
Singapore model One speaker at the conference was David Huttner, the senior vice-president of aviation consultancy Nyras Ltd, who used to run low-cost carriers Virgin Express and Virgin Blue. Mr Huttner said the biggest obstacle that low-cost carriers faced
was an insufficiently liberal market. The market, not the government, should be the driving force behind commercial aviation. “Airlines are not public service providers, they are companies,” he said. Mr Huttner said Virgin Blue, now called Virgin Australia Airlines, had tried for four years to get the right to have a base in Macau but had faced too much red tape. Virgin Blue and Air Macau were in talks in 2004 to form a jointventure low-cost airline which would have served the mainland using Air Macau’s unused traffic rights. The negotiations failed. Mr Huttner said Macau’s closed market hobbled commercial aviation while, in contrast, Singapore’s open market had made it into a regional travel hub. The consensus at the conference was that low-cost carriers expand the market and create new opportunities for growth. “Being able to fly to Macau opens up a whole different market. It is also good for society overall to have more social and cultural exchange,” Mr Harbison said.
Airport could become low-cost carrier hub Territory holds potential but many obstacles ahead Xi Chen
acau has the potential to become a regional centre for low-cost airlines after the Hong Kong-Macau-Zhuhai Bridge finishes in 2016 says visiting expert Fu Xiao Wen. He was speaking on the sidelines of an industry conference organised by the Centre for Asia Pacific Aviation. With Hong Kong airport close to full capacity, if Macau has sufficient capacity and convenient transportation, then it could use its location to thrive, the Hong Kong Polytechnic University professor said. The Hong Kong-Macau-Zhuhai Bridge, once open, will shorten the travel time between the two SARs from more than an hour by boat to half an hour by road. “All consumers like low fares,
but it has to be balanced with convenience. If people have to spend too much time on ground transportation, it will offset the advantages offered by taking a lowcost carrier,” he told Business Daily. Mr Fu added that whether or not Macau can fulfil its potential depends on the overall airport capacity, the fees it charges, and a flexible regulatory environment that allows airlines to increase their frequencies more easily. Con Korfiatis, director of Flight Ideas Consulting and former head of the short-lived Viva Macau between 2006-2009, said the territory’s airport has not reached its capacity and is under-utilised. He said most visitors are still coming to the city by land or ferry, with foreign low-cost carriers seeing
only moderate traffic growth in the past few years.
Local constraints Currently eight low-cost carriers have flights going through Macau including five from South East Asia, two from South Korea and one from mainland China. There are still nine regional airlines that serve Hong Kong but not Macau, Mr Korfiatis stressed. He added that Air Macau, the sole concessionaire that has all air traffic rights in the territory, is using less than 10 of its more than 40 bilateral agreements. The deals with other jurisdictions allow international commercial air transport services between the agreeing parties.
However the consultant recognises the territory does not have a big enough home market and it has to draw passengers from Guangdong province for outbound flights. António Rato, an advisor to the Macau International Airport Co was more cautious, stressing that “operating a low-cost carrier terminal has not proven to work in other countries”. The airport has a capacity for 15 million passengers a year, but can only accommodate those airlines that are willing to pay a higher charge to ensure the infrastructure’s profitability, he told Business Daily. He said labour constraint is also a big issue locally, as the territory lacks manpower to run all the related functions such as the immigration control.
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September 6, 2012 business daily | 3
Govt scraps second La Scala land deal Lawmakers want political accountability for last year’s decision to grant more land for a corruption-tainted development Vítor Quintã
Chinese Estates says it will strongly oppose the government’s decision to revoke its second land grant (Photo: Manuel Cardoso)
he government has started legal proceedings to take back last year’slandgranttothecorruptionplagued La Scala housing project. Members of the Legislative Assembly praised the move but said the government must explain why it had agreed to revise the land deal for a project they knew was being probed by the corruption watchdog. A government spokesperson said concessionaire Moon Ocean Ltd, a subsidiary of developer Chinese Estates Holdings Ltd, had been told the government had started proceedings to declare the revision “invalid”. Chinese Estates told the Hong Kong Stock Exchange it had received
a notice of preliminary hearing and had 15 days to respond. The Hong Kong company said it was taking legal advice and “intends to make a submission strongly opposing the decision proposed to be made by the Macau government”. The company says it could appeal in court against any attempt to seize the land. Yesterday’s announcement follows last month’s decision to declare invalid several orders given in 2006 by Chief Executive Edmund Ho Hau Wah that confirmed the sale of the land where La Scala is being built. The Court of Final Appeal said in May that the former secretary for transport and public works, Ao Man
Long, had taken HK$20 million (US$2.5 million) in bribes from Chinese Estates boss Joseph Lau Luen Hung and BMA Investment chairman Steven Lo Kit Sing to ensure their bid for the land was successful. Five private companies controlled by the government, four of which have since been liquidated, granted the land to Moon Ocean in 2006. Moon Ocean was formerly owned by Lo.
Accountability demands Legislative Assembly members told Business Daily the move to revoke last year’s additional land grant was only natural after the government said declared the grant
from 2006 invalid. “The government also has to give a clearer explanation regarding its approval on the land grant in 2011,” said legislator Ho Ion Sang. “Many people in society did not accept the excuse the secretary [for transport and public works Lau Si Io] offered last time.” The Commission Against Corruption told Mr Lau’s office in December 2009 that the plots were part of an inquiry, but the deal was allowed to go ahead. Yesterday, Mr Lau played down any criticism. “I don’t think there was any flaw,” he told reporters. “We were following the laws in making that decision based on the circumstances at that time.” New Macau Association legislator Au Kam San, who has filed a complaint with the Public Prosecutors Office over the issue, called for Mr Lau to be held politically accountable. “The Macau SAR has to find out who is responsible for this grant and explain clearly the reasons behind the grant,” he said. “Right now they cannot provide convincing explanations to the Legislative Assembly, the court or even Chinese Estates.” Mr Ho said the government must find out which officials needed to take responsibility. Lawmaker Kwan Tsui Hang said: “The officials should at least admit their political sensitivity is not enough. They didn’t need to approve the land quickly if there were doubts [about the legal status of] the land”. If the plots came back to the government, Mr Ho said they should be used for housing, with certain restrictions. He said only Macau residents should be able to buy the flats, and that limits should be placed on the number bought and on the developer’s profit.
Mak’s building approval ready in under a year
residential development connected to a company run by legislator Mak Soi Kun has been approved for construction in less than a year, even as other developers slam the government for taking too long to examine projects. According to a dispatch published in yesterday’s Official Gazette, Sociedade de Investimento Predial Cheong Meng Ltda filed a request on June 23 last year to revise the concession contract for a vacant plot of 299 square metres at Rua de Formosa. The company revised its filing in October and sent it to Chief Executive Fernando Chui Sai On for approval. On June 19, the company was authorised to build a seven-storey residential and commercial building at the plot near Pui Tou School. The company administrators include Mr Mak and building
contractor Sam Hoi Si. The building could have up to 1,683 square metres of residential gross floor area and a further 361 square metres of commercial gross floor area. The company will pay 2.7 million patacas (US$344,000), with 1 million patacas paid upfront and the remaining in two instalments to be paid within a year. Cheong Meng has three years to develop the plot or risk losing it. Mr Mak, a directly-elected member of the Legislative Assembly, is also the head of the Macau Construction Industry Environmental Protection Society. Realtors and developers have accused the government of curbing the approval of property projects after the corruption scandal surrounding former secretary Ao Man Long. V.Q.
A company with ties to legislator Mak Soi Kun had its approval to build a seven-storey block of flats on Rua de Formosa approved in less than 12 months
business daily September 6, 2012
macau Little enthusiasm for social security system Up to August 10, only 30,732 people had joined the new social security system, Social Security Fund president Ip Peng Kin said, far below the 140,000 Macau residents the official had predicted in December 2010. On the contrary, 26,845 residents have chosen to become a non-mandatory contributor and make a one-off retroactive contribution, a figure close to the 28,500 people forecasted by the government. In addition, 13,487 new contributors have asked to start receiving an elderly pension, Mr Ip said in a reply to legislator José Pereira Coutinho.
Euro will slide further, analysts say European currency could fall to its lowest against the US dollar for two years José I. Duarte firstname.lastname@example.org
he euro may decline to a twoyear low against the US dollar next month, which could have mixed effects on Macau. A technical analysis report by Forecast Pte, a market research and analysis company in Singapore, suggests the euro is reaching the upper range of the downward channel. The downward channel is a set of parallel lines estimated to define the upper and lower limits of oscillation of the currency rate around a trend line. In this case, this channel follows a downward trend. According to the analysts, the euro has never climbed above the channel. Bloomberg reported yesterday that the euro was close to its upper limit, at US$1.267. A correction is expected, which should lead to a decline following the recent recovery. If the forecast proves right, that movement would bring the currency to about US$1.315 in early October. This would be below the lowest level reached since June 2010. “I agree that the euro is due for a fall. However I would base my conclusions more on the fact that any recovery in Europe has to deal with borrowing price inequalities in the eurozone,” said an analyst for a bank here who does not wish to be identified. The analyst said these inequalities, as long as they persist, would “hamper any recovery measures put in place by individual countries and will fuel debate on the breakdown of
The drop in the euro may be good news for Europeans living here
the [European] union”. The analyst said stronger or more effective measures that might be adopted would require wideranging agreement among countries in the eurozone. “But at the moment that is very uncertain.” The markets deal badly with uncertainty and investors would try to keep their distance from eurodenominated assets, the analyst said. If the US recovery steadied further this year, the euro might even “drop further to levels below possibly the US$1.20 [level] in the next few months,” the analyst said.
What happens to the euro does not have a direct impact on Macau, as most gamblers and tourists come from Asia. The drop might impact the city indirectly, though, if “sectors and companies in China relying in exports to Europe would be negatively affected”, analyst said. “That might result in a drop in the number of visitors to Macau.” But the euro drop might be good news for Macau’s European residents, the analyst said. “It will make any obligations in euros – mortgages, school fees or family support – comparatively
cheaper against the pataca.” The analyst said the drop might even tempt Europeans to come to Macau, as they “may find that now salaries in the region are more attractive”. Macau could take advantage of this to attract more qualified workers, as the unemployment rate here fell to 2 percent in July. Technical analysis is a technique for forecasting future prices of assets such as currencies, commodities or securities. The method is popular among some analysts and forecasters but its assumptions and results are subject to dispute.
School commendation could thwart SJM plan The architect of an internationally acclaimed addition to the Portuguese School says the building should be listed Vítor Quintã email@example.com
he United Nations Educational, Scientific and Cultural Organisation (UNESCO) has commended the new reading room at the Portuguese School of Macau, eliciting renewed calls for the building to be listed – which may hinder attempts by casino operator SJM Holdings Ltd to take over the land it sits on. The jury that picked the winners of UNESCO’s 2012 Asia-Pacific Awards for Cultural Heritage Conservation gave the reading room a commendation for innovation. UNESCO praised the steel and glass structure, calling it “an understated contemporary addition
to this aesthetically noteworthy 1963 modernist complex”. It said the reading room “contributes an additional layer of architectural significance to a modern heritage landmark and enhances the continued functionality of this icon of the Macanese Portuguese community”. UNESCO remarked that the school was “in a highly dense urban context that faces redevelopment pressure”. Macau architects Rui Leão and Carlotta Bruni designed the reading room. The Portuguese news agency Lusa quoted Mr Leão, who is the vice-president of the Macau
Architects Association, as saying the commendation highlighted the importance of listing buildings here for protection. “The Portuguese School building is not classified and it should be because it is one of the most remarkable 20th century buildings in Macau,” he said. The cultural heritage protection bill, which would allow for new buildings to be listed, was sent to the Legislative Assembly in July, but the vote on the first reading will have to wait until the members return from the summer recess. Listing of the Portuguese School would throw a spanner in the works of
SJM’s long-held ambition to take over the land occupied by the building, which is next to SJM’s flagship Grand Lisboa casino hotel. SJM subsidiary Sociedade de Jogos de Macau SA, a gaming concessionaire, and the school foundation signed in December 2004 a deal in which the subsidiary promised the school 100 million patacas (US$12.5 million) for a new school building and a gift of 190 million patacas. The prospectus for SJM’s initial public offering in 2008 said the company had by then paid 67.5 million patacas for a new school on Taipa. But the school later came up with a plan to move instead to Tap Seac Square.
September 6, 2012 business daily | 5
MACAU Macau sees 365 new bids for residency The Macau Trade and Investment Promotion Institute received 311 applications for temporary residency from qualified professionals in the first half of 2012, up by 41.4 percent year-on-year. But just 192 applications were approved, a drop of 14.7 percent. In addition, 54 people requested residency over a ‘major investment plan’, up by nearly two-thirds. Only six applications were accepted, one more than in the same period of 2011. Authorities also approved the renewal of nearly 3,000 residency authorisations in the first half.
Shop space lures more investors Commercial sales still growing after new record in June Tony Lai
ore people are turning to investment in retail spaces while the residential segment remained “quiet” last month, said a real estate agent. The number of transactions of second-hand houses “significantly dropped” last month to about 500, Ricacorp (Macau) Properties Ltd said in a monthly review released yesterday. The traditional off-season and factors such as the wet season have kept investors away from the market, Ricacorp executive director Jane Liu wrote. Sales of first-hand homes were also low in August as no new housing project was introduced onto the market, she said. Official data show that sales of commercial space set new records for a second consecutive month in June, as investors sought alternatives to residential real estate. Commercial transactions broke through 1.7 billion patacas (US$216 million) in June. “The retail space market keeps attractive to many potential investors” due to the tight residential market and also because shops are exempt from the special stamp duty implemented last year, Ms Liu said. Not only investment in commercial spaces is soaring, rentals are also going up quickly. Rent prices for some shops went up to 60,000 patacas (US$7,500)
Commercial transactions broke through 1.7 billion patacas in June (Photo: Manuel Cardoso)
per square foot, particularly driven by rentals in the NAPE area, Ms Liu wrote in her monthly review. Chinese media reports hinted that shops in the NAPE area could fetch a price of 35,000 patacas per square foot at the end of last year. In June, the value of shop sales had increased by 45.1 percent from a year before. A trend that was possibly sustained in July and August. Ricacorp also suggested increasing land supply for housing developments and speeding up approvals for private-sector developers to increase supply in the market. A government working group said last week it could not rule out new measures to curb residential
Govt hopes to buy firecracker factory
he government wants to buy the disused Iec Long firecracker factory in old Taipa village with a view to turning it into an industrial heritage theme park, the Cultural Affairs Bureau said yesterday. “A few days ago the bureau received information that the relevant authorities are in negotiations with the owners to acquire the full ownership rights over the whole area,” the bureau said. Cultural Affairs Bureau head Guilherme Ung Vai Meng said the question of who exactly owns the factory remains “a complex and sensitive” issue which has delayed the rehabilitation of the area. The Land, Public Works and Transport Bureau said in February last year that the 20,000 square metres occupied by the factory comprises plots that were sold or granted to the private owner, and plots that were owned by or had been returned to the government. The government said in 2007 it was planning to turn the factory into an industrial heritage theme park, complete with teahouse, two art galleries and a small auditorium. The manufacturing of firecrackers was once the dominant industry here, but it went into a steady decline in the 1980s and had completely disappeared by 1990. The chairman of Macau Ecological Society, Ho Wai Tim, said last month that the factory was the most complete industrial relic of its kind in southern China. The society is part of a pressure group dedicated to rejuvenating the historical area of Taipa by connecting the Cotai strip to the Taipa Museum Houses and the firecracker factory. V.Q.
prices that had increased by 62 percent in the 12 months to July. But the estate agent would prefer the government to introduce
– cautiously – more measures to rein in prices. Any abrupt change could end up hampering the market, she suggested.
business daily September 6, 2012
Photo by Manuel Cardoso
City’s Indian tourist trade takes a hit
Hopes new route from SpiceJet Airlines can bring upturn Associate Editor
espite the positive publicity and backslapping during the recent visit to India’s capital New Delhi by João Manuel Costa Antunes, director of Macau Government Tourist Office, there’s an uncomfortable statistic underlying Macau’s tourism trade with the world’s biggest democracy. The number of Indian visitors to Macau fell nearly 15 percent year-on-year in the second quarter, data from the Statistics and Census Service show. It was the third biggest fall in numbers in that period when measured by nationality, behind Singapore (28 percent) and Taiwan
(down 22.5 percent). It was a major blip in an otherwise upward trend that had seen numbers of Indian travellers to Macau rise from only 10,000 in 2003 to 170,000 in 2011 according to MGTO. The figures for the whole of 2012 are likely to be below the 2011 tally, with 29,230 Indian arrivals in the first quarter and 52,828 in the second quarter – 14.6 percent down on the 61,837 arrivals in the second quarter 2011. While European Commission statistics show Europeans take 46 percent of their holidays in the third quarter of the year, Indians make
most foreign trips in the second quarter. That tendency is reflected in the Macau data for 2010 and 2011. The fall in second quarter arrivals from the sub-continent this year is due in part to a recent reduction in air links between India and Hong Kong, the main arrival port used by Indian tourists visiting the region, says Ashish Bhatnagar, director of product development for Concorde Travel Consultants in Hong Kong. Concorde has extensive experience in escorting Indian tourists to Macau. “The main problem this year has been the lack of flights,” Mr Bhatnagar told Business Daily.
“Air India has stopped flying to Hong Kong, Kingfisher Airlines is in trouble and has stopped international services, and air fares between India and Hong Kong have gone up 35 percent since last year,” he added. At the beginning of June the country’s national carrier Air India – struggling with losses and a long strike by some of its pilots – announced it was dropping the Hong Kong route and six other international destinations it identified as unprofitable. In April, debt-laden Kingfisher Airlines dropped all the international flights in its timetable – Hong Kong included – and pared itself down to being a domestic airline with a much-reduced fleet in an attempt to avoid collapse. Another factor depressing Indian tourism numbers locally said Mr Bhatnagar, was India’s currency the rupee losing some of its value, thus reducing its citizens’ spending power when overseas. Raja Natesan, chief operating officer, of TUI India, a firm specialising in outbound package tours for Indian customers, added: “The leisure outbound travel market has taken a double hit with the depreciating rupee and rising air fares. There has been a combined hit to the pocket of anywhere between 18 percent and 40 percent when compared with last year.” Whether a proposal by Indian low-cost carrier SpiceJet Airlines for a new direct air service between New Delhi and Macau – possibly starting in November – can overcome barriers such as the depreciation of the rupee in boosting Indian tourism, remains to be seen. Indian tourists have previously chosen not a holiday exclusively in Macau, but southern China tours featuring Macau and Hong Kong legs. MGTO recently collaborated with Hong Kong Tourism Board and Tourism Administration of Guangdong Province to promote the Pearl River Delta region to Indian travel agents in Chennai, Mumbai and New Delhi.
Venetian Macao – favourite destination of sub-continent Las Vegas Sands Corp. has previously been one of the main beneficiaries of the Macau-India trade. Hotel room bookings for The Venetian Macao rose significantly from Indian tour groups after the casino resort was used as the venue for the International Indian Film Academy Awards in 2009. “We were involved in travel arrangements for IIFAA 2009,” says Ashish Bhatnagar of Concorde Travel Consultants. “Soon after that we were bringing groups of 450 Indian tourists at a time over to Macau.” Sheldon Adelson, chairman of LVS, in 2008 said he wanted
to build a casino resort hub in India similar to Macau’s Cotai Strip. Earlier this year he reiterated the plan in comments to the media in Las Vegas. “In my experience Indian tourists are not big gamblers,” says Mr Bhatnagar. “In a Macau tour group of several hundred, you might get two or three visiting the tables,” he suggests. And for the moment it seems most Indian travellers have interests closer to home. According to Nielsen Outbound Travel Monitor 2011, the top outbound destination for Indian travellers in 2010 – the most recent figures available – was Singapore, chosen by
23 percent of overseas travellers. According to Nielsen, 28 percent of Indian travellers polled cited visiting friends and relatives as their prime reason for choosing a destination. On that basis, Singapore, which has 9.2 percent of its 5.18 million population classified as ethnic Indian, and also has two casino resorts, scores well. In the second quarter of 2011 alone, 279,000 Indians arrived in Singapore according to Singapore Tourism Board data, and the average length of their stay was 6.4 days, reflecting the family and friends focus. In 2011 the average stay of an Indian visitor to Macau was 1.9 days according to the Statistics and Census Service.
Weather Beijing 24/17o C Changchun 24/15o C
Harbin 22/11o C
Xian 28/18o C Shanghai 27/24o C Chengdu 29/21o C Kunming 24/16o C Haikou 30/24o C Sanya 31/25o C
Guangzhou 34/24o C
MACAU (3-8 September) Day
Shenzhen 33/25o C
Hong Kong 30/26o C
Macau 30/25o C
31/26 C o
September 6, 2012 business daily | 7
City University eyes campus on Coloane The City University of Macau wants a new campus so it can double the size of its student body and complete its shift to full-time courses Tony Lai
he City University of Macau wants to establish a new campus on Coloane which, it says, will allow it to enrol more students and raise its standards. University rector Yan Zexian said yesterday that the university council had proposed setting up a new campus so that the institution, now in the NAPE district, could double its capacity to 6,000 students. Mr Yan told reporters yesterday that the university had applied to the government to undertake the project. “We tentatively chose Coloane to be the new site as the land supply is tight in Macau and Taipa,” he said. He said he had no further details. Mr Yan said the new campus was the brainchild of the university board, which is headed by Legislative Assembly member Chan Meng Kam. Mr Chan bought the university, formerly known as the Asia International Open University (Macau), and became chairman of
the university council in 2010. The university then began shifting its focus from part-time courses to full-time courses. Mr Yan said the university would continue the revamp of its structure and would concentrate on social sciences, the humanities and management. The Macau Foundation has given the university grants amounting to more than 61 million patacas (US$7.6 million) in the past three quarters, 40 million patacas was given in the second quarter of this year. In the last quarter of 2011, the university received 21 million patacas to help decorate three campuses, buy “educational equipment” and launch its Institute for Research on Official Portuguese-speaking Countries. “This just means the Macau administration fully supports the city’s education and culture industry. Other universities like the
Lusophone SMEs study doing business in China A new course is meant to help Portuguese-speaking small businessmen get their foot in the door here Tony Lai
mall and medium enterprises in the Portuguese-speaking world are just as eager as big corporations to forge business links with Macau and the mainland, says the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries. So the forum and the City University of Macau are holding a 20-day course to introduce 28 representatives from business or government from Angola, Brazil, Cape Verde, Mozambique and Portugal to the economies and investment environments of Macau and the mainland. “Many Portuguese-speaking countries urged us to hold this course to help spur their economies so that their SMEs, rather than only large
enterprises and conglomerates, can also develop economic cooperation with Macau and mainland China,” said Rita Santos, the deputy secretary-general of the forum. She told Business Daily after the opening ceremony of the course yesterday that the forum and university would also create opportunities for exchanges between those taking part in the course and SMEs in Macau and the mainland. “When there are more contacts and more exchanges, there will be surely more business opportunities,” Ms Santos said. She hopes the course can “quicken the necessary steps for Macau to serve as a cooperation platform between mainland China and Portuguesespeaking countries”. The forum is also working on introducing mainland enterprises to the Lusophone world. She said the forum helped businessmen from Macau and the mainland take part in an economic meeting in Cape Verde in June. Those attending the course will visit World Heritage sites here and the International Investment and Commercial Fair in Xiamen. The forum has spent nearly four months preparing this course. Ms Santos declined to say how much money the forum has spent on it.
The City University of Macau intends to focus on social sciences, the humanities and management
Macau University of Science and Technology also get subsidies from the government,” he said. Mr Yan told reporters that half of the funds had been spent subsidising the tuition fees of Macau students. The rest was used to improve facilities, including opening a new library and financing scientific research to match the institution’s new specialties.
More than 3,000 students are currently enrolled at the university, 1,800 are in undergraduate courses. More than half of all students are Macau residents. Since the start of last year, the University of Science and Technology has received almost 266 million patacas from the Macau Foundation, including 75 million patacas to cover part of its operating expenses.
business daily September 6, 2012
GREATER CHINA Cathay bans shark fin from cargo flights Cathay Pacific said on Tuesday it would no longer carry unsustainably sourced shark products on its cargo flights, dealing a blow to Hong Kong’s huge shark fin industry. “Cathay Pacific has decided to stop shipping unsustainably sourced sharks and sharkrelated products,” the airline said in a statement. “There is very compelling scientific evidence to support that this is the right thing to do for a company committed to sustainability.” It said the new policy would take about three months to be put in place as shippers had to be notified and “appropriate procedures” established.
Clinton praises ‘strong’ base for tie
U.S. Secretary of State Hillary Clinton meets Chinese leaders amid rum over the South China Sea U.S. solar-dumping case fast-tracked China is accelerating a dispute with the U.S. over solar energy taxes, moving forward its next salvo to hit as President Barack Obama faces re-election. China’s Ministry of Commerce will make preliminary findings as early as November, eight months before the deadline, on a complaint that U.S. manufacturers are dumping polysilicon, according to officials at Daqo New Energy Corp. and Jiangsu Zhongneng Polysilicon Technology Development Co., two of four companies that brought the case. Ministry officials are visiting the companies to gather proof of damage. “We’ll show our financial condition, workforce details and the impact on income,” Kevin He, investor relations manager for Daqo, said in an interview. “We hope the government sets appropriate punishment tariffs to curb dumping and protect us from damages” from U.S. and South Korea imports. China’s potential action on polysilicon, the most costly material in making solar cells, comes after the Obama administration announced plans to impose punitive duties of as much as 250 percent on U.S. imports of Chinese solar cells. The trade dispute is heating up as Mr Obama seeks re-election in November. The Chinese government hasn’t said its move is a retaliatory measure. The dispute between the world’s biggest energy-consuming nations centres on state support for the solar industry, a business both Mr Obama and Chinese Premier Wen Jiabao have said is a priority. Global investment in solar projects rose 61 percent to US$137.8 billion last year.
Deutsche Bank cuts jobs in HK Deutsche Bank AG cut about 40 jobs at its equities division in Hong Kong on Tuesday, a person with knowledge of the matter said. The reductions, mostly sales and trading positions, accounted for about 10 percent of the unit’s workforce, said the person, who asked not to be identified because the information is private. The Financial Times reported on the cuts earlier yesterday, citing unidentified people. The bank also cut about 15 positions in Tokyo on Tuesday, and had plans to tell to other 30 employees in equity research, sales and trading that they will be dismissed, two people with knowledge of the matter said. Deutsche Bank will cut about 1,900 jobs “predominantly” outside of Germany, including 1,500 positions in Corporate Banking & Securities and related infrastructure areas, according to a July 31 statement from the lender. “The adjustments were part of the global program announced on July 31 and there is no change in our full-service equity offering,” Amy Chang, a Hong Kong-based spokeswoman for Deutsche Bank, said yesterday. Co-chief executive officers Anshu Jain and Juergen Fitschen are paring costs amid declining investment banking revenue and a slump in Asian equity markets. Global banks have been reducing equities jobs as trading volumes slump. Bloomberg
Hillary Clinton & Hu Jintao – U.S.-China relationship mature enough to tackle areas of disagreement, says Mrs Clinton
ecretary of State Hillary Clinton met with Chinese President Hu Jintao and hailed a “strong” base for ties between the world’s two biggest economies, even as a meeting with Mr Hu’s likely successor was unexpectedly cancelled. Speaking at a press conference with Foreign Minister Yang Jiechi in Beijing, Mrs Clinton sought to ease Chinese concerns that the U.S. is interfering in territorial disputes in the South China Sea while saying
the two countries remain split over how to resolve the conflict in Syria. “We do not see eye to eye on everything,” Mrs Clinton said at the briefing. “When we have differences we work through them.” Mr Yang called the talks “constructive and productive”. His remarks contrasted with rhetoric in the Chinese media before Mrs Clinton’s visit that the U.S. is fomenting discord toward China by countries in the South China Sea.
Mrs Clinton and Mr Yang agreed on the need to develop a code of conduct for negotiating the disputes, while remaining at odds over the best way to settle the standoff. Beijing promised to ensure freedom of navigation in the South China Sea. “Freedom and safety of navigation in the South China Sea is assured,” Mr Yang said. “For China and our neighbouring countries, the South China Sea is really a lifeline for exchanges, trade and commerce.”.
Services PMI growth weakens Sector expansion declines to one-year low Lucy Hornby
hina’s services sector grew at its slowest pace in a year in August, even though firms are hiring more workers at higher wages, a private sector survey showed yesterday, following gloomy manufacturing polls earlier in the week. The HSBC services sector Purchasing Managers’ Index fell to 52.0 in August from 53.1 in July, but remained above the 50-point line that delineates expansion from contraction. A new business sub-index expanded at its slowest rate since August 2011, weighing on the headline figure. An employment sub-index rose to 52.7, its highest since November, while input prices, which primarily
reflect labour costs, were at their highest since May. Services account for about 43 percent of China’s gross domestic product. The survey follows two polls of China’s factory activity which painted a far gloomier picture, signalling the pace of growth in the world’s second-largest economy will weaken well into the third quarter and possibly beyond. The HSBC manufacturing PMI fell to 47.6 in August, its lowest level since March 2009, while an official PMI hit a nine-month low of 49.2 in August, contracting for the first time since November. “Service providers in China
expressed optimism regarding the business outlook,” wrote Markit Economics, which compiled the survey. “There were also reports of new product developments and business expansion plans. However, the extent of positive sentiment was the lowest in eight months, and muted in the context of historical data.”
Spending holds firm On Monday, an official services PMI rose to 56.3 for August, a twomonth high. But new orders slowed, helping weaken expectations for future performance. Although many indicators show
September 6, 2012 business daily | 9
greater china Ma cleared in row over costly musical Taiwan President Ma Ying-jeou and two top aides were cleared of wrongdoing in a controversy over a musical that cost millions of dollars in public money but was staged only twice, officials said yesterday. Mr Ma, then premier Wu Den-yih and then cultural minister Emile Sheng were probed over alleged wrongdoing after outrage mounted over a decision to spend US$7.2 million on the project. The Taipei district prosecutor’s office said there was no proof the bidding process was illegitimate. “Sheng is cleared of suspicion of corruption ... while Ma and Wu did not violate the law,” the statement said.
es with China
mbling regional tensions Mrs Clinton’s briefing with Mr Yang was held early after Vice President Xi Jinping, the leading candidate to succeed Mr Hu in a Communist Party leadership transition later this year, was cancelled. She was told on Tuesday night that Mr Xi wouldn’t be able to meet yesterday and had cancelled other appointments as well, a U.S. State Department official told reporters on condition of anonymity. “We were informed after 11pm last night by the Chinese side that for unexpected scheduling reasons, the meeting between Vice President Xi and Secretary Clinton is not going to happen today [yesterday],” a U.S. official said. “We understand from the Chinese side that Vice President Xi’s meetings with the prime minister of Singapore and a Russian official have also been cancelled.”
‘Unnecessary speculation’ “The current schedule of the secretary’s visit has been agreed by both sides, I hope people won’t have unnecessary speculation,” Mr Yang said in response to a question
We believe the U.S.China relationship is on a strong and solid base Hillary Clinton, U.S. Secretary of State
the slowdown in the Chinese economy is likely to extend well into the third quarter, marking the seventh consecutive quarter of decelerating growth, consumer spending has so far held up, benefitting the services sector. Broadly speaking, China’s services sector is taking up a greater share of the economy, as more prosperous citizens are better able to afford items such as travel, dining out and massages. Domestic consumption contributed 4.5 percentage points to the first-half
KEY POINTS HSBC services sector PMI falls to 52.0 in August Non-manufacturing industries grew at its slowest pace in a year Sector accounts for about 43 percent of China’s GDP
about the cancellation. “We attach a great deal of importance to the secretary’s visit to China.” Mr Yang reiterated that China has sovereignty over the disputed islands in the South China Sea and repeated the government’s stance that it wants direct negotiation to resolve claims. Mrs Clinton said it’s “no secret” that the U.S. is disappointed with China and Russia for blocking tougher United Nations Security Council resolutions against Syria. The U.S. is pushing for the ouster of Syrian President Bashar alAssad, whose government has been battling rebels for almost 18 months in a conflict that has killed more than 23,000 people, according to the U.K.-based Syrian Observatory for Human Rights. “Any solution should come from people of Syria and reflect their wishes,” Mr Yang said. “It should not be imposed from outside.” Asia analysts such as Ernie Bower of the Centre for Strategic and International Studies in Washington said Mrs Clinton’s trip involves a delicate balancing act: reassuring nervous allies that the U.S. will stand firm against any Chinese incursions that infringe on freedom of navigation or commerce, while engaging China more than ever as a partner in promoting economic growth and defending against global threats. In her meeting with Mr Hu earlier yesterday, Mrs Clinton said the two sides were “able to explore areas of agreement and disagreement in a very open manner, which I think demonstrates the maturity of the relationship and the chance to take it further in the future.” “We believe the U.S.-China relationship is on a strong and solid base,” Mrs Clinton said. Mr Hu praised Mrs Clinton for “the importance you attach to the U.S.China relationship.” Bloomberg/AFP
Beijing committed to economic growth
hina has rolled out a series of plans for infrastructure spending this week, notably from the Ministry of Railroads, aiming to boost confidence that the government is committed to keeping economic growth from sagging further. The heavily indebted Ministry of Railroads has boosted its target for railway construction this year to 496 billion yuan (US$78.14 billion), up from the previous target of 470 billion yuan, the China Daily said yesterday, citing an industry executive. Last year, it spent 461 billion yuan. The Ministry of Health has earmarked 400 billion yuan by 2020 on systems, equipment and training upgrades to meet its goals to tackle chronic diseases, the paper added. The reports follow a spate of announcements by city governments in inland China of their spending plans, many of which appear to be cobbled together from previous longterm commitments. Analysts said the reports help give an impression of government action as economic data increasingly indicate that China is well into a seventh quarter of slowing growth. China is still digesting the legacy of a massive stimulus programme launched in late 2008 that staved off the effects of the global financial
crisis, but amplified inflationary pressures and left local governments saddled with mountains of debt. The Railway Ministry, which channelled much of that stimulus into a network of high-speed passenger trains, station upgrades and rail expansion, said this weekend it suffered an after-tax loss of US$1.4 billion, due to higher-than-anticipated operating costs and its debt burden. It is also struggling with the aftermath of a corruption scandal and a deadly crash. It has committed to invest at least 67 billion yuan a month in railway investment for the remainder of the year, the China Daily said, while acknowledging that total investment in fixed rail assets had actually dropped 30 percent in the first seven months of the year. Meanwhile, the government of Xinjiang, a resource-rich region on China’s Central Asian border, committed to 606 billion yuan in spending, the Economic Observer said this week, without giving a timeframe for the projects. Xinjiang is already the recipient of heavy spending commitments due to plans for hydropower and rail development to enable the exploitation of massive coal deposits in the far-flung arid region.
growth rate of 7.8 percent and capital spending added 3.9 percentage points, while exports cut 0.6 percentage points from total growth. “I believe consumer spending is robust, but not that it would stay robust if there is a protracted industrial contraction,” said Arthur Kroeber, managing director for GK Dragonomics, adding that Chinese consumer spending is one of the least well-measured factors in the economy. In the official survey, a sub-index for the construction industry ticked up, although it remained below 50. This summer, some local governments have made stabs at reviving the property sector, although those attempts have been batted down by Beijing due to concerns that they could re-ignite inflationary pressures. While both service sector surveys showed input prices rising, the official survey indicated that firms were able to pass through costs by charging more. The HSBC survey showed a sub-index for prices charged rose to a four-month high, but has stayed below 50 since March. Reuters
Chinese citizens are now better able to afford more items such as travel
business daily September 6, 2012
Australia’s economic InBrief growth slows Myanmar delays energy tender
Myanmar has delayed an oil and gas exploration tender to meet the transparency standards of the Western energy majors lining up, many for the first time, to invest in the rapidly reforming nation, a senior energy ministry official said. Myanmar still plans to hold the tender this year. The tender was expected to be launched this month, but the official said it was postponed after the government was approached by several Western oil firms, including ConocoPhillips, Hess Corp, Royal Dutch Shell, BP, BG Group and Australia’s Woodside Petroleum.
Economy slows in the second quarter amid a drop of global demand for resources and lacklustre domestic consumption Michael Heath
Vietnam arrests Vinalines former boss The former chairman of Vietnam’s biggest state shipping firm has been arrested abroad with the help of Interpol after more than three months on the run, Vietnamese authorities said yesterday, as the company faces scrutiny over corruption and debts. Duong Chi Dung was accused of deliberately mismanaging Vietnam National Shipping Lines (Vinalines) from 2005 to February this year before he disappeared. Debt at Vinalines was 43.1 trillion dong (US$2 billion) at the end of 2011, more than four times its equity of 9.41 trillion dong, the government said in June.
Singapore Air to fly to Yangon Singapore Airlines Ltd (SIA) said yesterday it will launch daily services to Yangon on October 28 to cater to rapidly growing demand for travel to Myanmar since the country launched political and economic reforms after decades of isolation. Increased flights to Myanmar could help raise the Southeast Asian nation’s profile among international visitors and bring in more tourist dollars. SIA and its regional unit, SilkAir, will serve Yangon, Myanmar’s commercial capital, with 16 weekly flights, the Singapore flagship carrier said. The flights are subject to government approvals.
Japan Air gets orders for all shares in IPO Japan Airlines Co.’s 663 billion yen (US$8.5 billion) initial public offering drew orders for all the stock being sold, said two people with knowledge of the transaction. The Tokyo-based carrier’s government-backed parent is offering 175 million shares for 3,500 yen to 3,790 yen apiece. International investors, which will be allocated about 25 percent of the IPO shares, already put in orders for about twice that amount, said one person. The other 75 percent, set to be sold to Japanese institutional and retail investors, is also covered, the person said.
Australia’s household consumption advanced 0.6 percent last quarter
ustralia’s economy slowed last quarter on weaker housing and rising imports, sending the local currency lower as traders bet the central bank will resume interest-rate cuts to prolong a 21year expansion. Second-quarter gross domestic product advanced 0.6 percent from the previous three months, when it rose a revised 1.4 percent, a Bureau of Statistics report released in Sydney yesterday showed. The median of 26 estimates in a Bloomberg News survey of economists was for a 0.7 percent gain. From a year earlier, the economy expanded 3.7 percent, the strongest annual pace since 2007 after the revised 4.4 percent growth in the first quarter. The report showed the fastest first-half expansion in five years before companies including BHP Billiton Ltd scaled back mining projects this quarter in response to lower prices of iron ore, the nation’s most valuable export. Reserve Bank of Australia Governor Glenn Stevens cut rates in May and June to buttress consumption as an elevated currency extended a slump in manufacturing and services. “Today’s [yesterday’s] figures will not change the fact that the RBA has a bias to ease monetary policy further,” said Justin Fabo, senior economist at Australia & New Zealand Banking Group Ltd in Sydney. ANZ Bank predicts the overnight cash-rate target will be lowered by November and again in early 2013, he said. Government spending rose 1.6 percent in the second quarter, adding 0.3 percentage point to GDP growth, and household consumption advanced 0.6 percent last quarter, also adding 0.3 point to the expansion, yesterday’s report showed. “The second half is going to be much more challenging,” said Stephen Walters, chief economist at JPMorgan. “You’re not going to get the same sort of growth rate we have had.”
Australia’s GDP growth in the April to June period from a year earlier
Housing slump Dwellings decreased 1.7 percent, subtracting 0.1 point from growth, the report showed. Imports gained 0.9 percent, subtracting 0.2 point from the expansion. Inventories subtracted 0.3 point from growth. Traders are pricing in about a 70 percent chance the RBA will lower the benchmark rate by a quarter percentage point to 3.25 percent at its meeting next month, swaps data compiled by Bloomberg show. Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the currency, which closed above parity with the U.S. dollar for all but 23 days this year. The Aussie has averaged US$1.0246 in the past two years, compared with 72 U.S. cents in the prior decade. Mounting signs of a slowdown in China’s economy have spurred a 3.4 percent drop in the Aussie over the past month, making it the worst performer among the 16 major currencies tracked by Bloomberg. A quarter of Australia’s exports, or about 5 percent of GDP, goes to the world’s second-largest economy, and 60 percent of those shipments are iron ore. “Australian economy grew faster
than every single major advanced economy both in the June quarter and over the year to June, and has successfully completed a stunning 21 consecutive years of economic growth – a feat not matched by any other advanced economy over this period,” Treasurer Wayne Swan said in a statement after the release. The nation’s household savings ratio rose to 9.2 percent in the three months through June from a revised 8.9 percent in the first quarter, today’s report showed.
Higher risks In Australia, data since midyear have indicated that the economy may grow more slowly than it did in the first half. A government report two days ago showed retail sales fell 0.8 percent in July from a month earlier, the steepest drop since October 2010. Consumer confidence in August declined by the most in five months, according to a Westpac Banking Corp. and Melbourne Institute index. BHP, the world’s biggest miner, last month decided to delay approval of an estimated US$33 billion expansion of the Olympic Dam copper, uranium and gold mine. Fortescue Metals Group Ltd, Australia’s biggest iron ore producer after Rio Tinto Group and BHP, said on Tuesday it’s cutting its full-year capital spending forecast by 26 percent to US$4.6 billion. Billionaire Gina Rinehart said high costs and higher risks may see mining companies abandon ironore operations in Australia, where she’s amassed a fortune estimated at US$19.3 billion from the steelmaking material. “Australia is indeed becoming too expensive and too uncompetitive to do export-orientated business,” Ms Rinehart, Asia’s richest woman, said in a video presentation. “We are becoming a high-cost and high-risk nation for investment.” Bloomberg
September 6, 2012 business daily | 11
India may raise import tax on gold
Japan ‘to buy disputed islands’
Imports jumped to a record 969 tonnes in 2011 Swansy Afonso
ndia, the largest gold buyer, may raise an import duty for a third time this year to curb purchases and reduce a record current-account deficit, according to industry executives, who said an increase would hurt demand. “The government may look at increasing the duty to 7.5 percent,” Prithviraj Kothari, president of the Bombay Bullion Association, said in a phone interview. D.S. Malik, a finance ministry spokesman in New Delhi, declined to comment. The tax on bars and coins was doubled to 4 percent in March after imports jumped to a record 969 tonnes in 2011. A further increase may deter jewellery buyers and investors during India’s festival season, which starts this month, as a decline in the rupee against the dollar boosts domestic gold prices to an all-time high. Imports plunged 42 percent to 340 tonnes in the first half, according to the producerfunded World Gold Council. “Any increase in duty will play havoc on the industry,” said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade
Federation. “The industry is grappling with high gold prices and demand is slow.” Gold priced in dollars has risen 8.2 percent this year, supported by investor demand as central banks may add stimulus to support the recovery. Immediate-delivery bullion, which reached a record US$1,921.15 an ounce in September last year, traded at US$1,692.50 an ounce yesterday. in Singapore.
Record deficit Curbing shipments of gold will help the country to narrow the current-account deficit as the drop in rupee boosts the cost of crude-oil purchases, according to the finance ministry. The shortfall widened to a record 4.2 percent of the gross domestic product in the year ended March from 2.7 percent in 2010-2011. The rise in the deficit, the broadest measure of trade, was due to slower exports and so-called relatively inelastic imports of petroleum products, gold and silver amid a rally in global prices, Finance Minister P. Chidambaram
said on August 23. “A hike in duty is not the solution,” said Mr Kothari at the bullion association. “Any such move will hit demand in a big way.” India first increased the import duty on gold to 2 percent on January 17 from a fixed rate of 300 rupees per 10 grams. PrimeMinisterManmohan Singh is seeking to rein in the current-account deficit as the economy expanded 5.5 percent in the three months through June from a year earlier, close to the threeyear low of 5.3 percent in the first quarter. Gold and silver, the second-largest import component after oil, accounted for 12.5 percent of imports last year, trade ministry data show. “The basic fear is that gold will again become a very good investment option and physical demand may rise, putting pressure on the trade deficit,” said Madan Sabnavis, Mumbai-based chief economist at Credit Analysis and Research Ltd. “We need to take action since we don’t have any system of restricting the quantity of gold that can be imported.” Bloomberg
A new tax increase may deter jewellery buyers during India’s festival season, which starts this month
apan’s government has agreed to buy a group of islands at the centre of a territorial dispute with China, media reports said yesterday, a move likely to prove a further irritant in a tense relationship. Tokyo will pay private Japanese landowners 2.05 billion yen (US$26 million) for three of the islands, known as Senkaku in Japan and Diaoyu in China, the Yomiuri Shimbun and Kyodo News reported, citing unnamed government sources. Deputy Chief Cabinet secretary Hiroyuki Nagahama met the landowners on Monday and struck the deal for the islands, which includes Uotsurijima, the largest in the chain, both said. At a news conference Chief Cabinet Secretary Osamu Fujimura refused to confirm the reports, but said negotiations were under way. “We are exchanging views with the landowners in various ways, but that process is ongoing,” he said. “We cannot comment on the contents at all. As a government, we will make a firm announcement after procedures are appropriately completed.” The Asahi Shimbun reported that Prime Minister Yoshihiko Noda’s cabinet would soon confirm the nationalisation of the islands and allocate funds for the purchase. Mr Noda plans to formally tell the Chinese about the purchase on the sidelines of the UN assembly later this month, the Asahi said, but a Japan-China summit has not yet been set. The government’s hand
Samsung widens plant checks China Labour Watch says it discovered ‘severe labour abuses’
outh Korea’s Samsung Electronics Co. acknowledged yesterday criticisms of working conditions at its plants in China, but rejected a U.S.-based watchdog’s charge that they were “inhumane”. Samsung factories and suppliers in China employed underage workers, forced them to work overtime and exposed them to unsafe conditions, a New York-based labour group said as it increased scrutiny on the world’s largest seller of mobile phones and TVs. Samsung spokesman James Chung said the company had noted a report
by China Labour Watch that found workers at the plants were required to put in excessive overtime and could not sit down while they worked. China Labour Watch discovered “severe labour abuses” at six factories owned and operated by Samsung and two plants operated by its suppliers, the group said in a report published on Tuesday. The violations include forced overtime work amounting to more than 100 hours a month, unpaid work, and 11 to 12 hours of standing, according to the report.
“We admit what was pointed out about the overtime. We will take ... steps to re-evaluate our working hour practices,” Mr Chung said, adding that working hours were often extended when new product lines were built. Mr Chung said workers were required to stand at their stations due to the “basic structure of the assembly lines” and stressed that the same conditions applied in South Korean plants. “We offer regular breaks for them ... This issue is related to how the assembly lines were designed and is something
has been forced on the inflammatory issue by the outspoken nationalist governor of Tokyo, Shintaro Ishihara. Mr Ishihara, who has made a career out of provocative remarks, often with China in his sights, earlier this year took all sides by surprise when he announced his intention to buy the archipelago for the metropolitan government. He charges that the national government, which leases four of the five islands in the chain and owns the fifth, has not done enough to protect Japanese territory from threats by China. Mr Ishihara, who gathered millions of dollars of donations towards his purchase plan, had said he wanted to develop the islands and at the weekend sent a team of surveyors to nearby waters. He told reporters yesterday that the donations could be handed over to the national government, but said the owners had told him there was no deal as yet. The government has no plans for any construction on the archipelago in an effort to avoid further friction with China and Taiwan, which also claims the islands, the Asahi said. Often testy Japan-China ties took a turn for the worse in August when pro-Beijing activists, including one from Macau, landed on one of the islands, Uotsurijima. They were arrested by Japanese authorities and deported. Days later about a dozen Japanese nationalists raised their country’s flag on the same island, prompting protests in cities across China. AFP
we can’t fix for a while,” he said. Samsung also said an audit of a factory belonging to one of its Chinese suppliers found problems, but no evidence of underage workers. It added it would also carry out checks of 249 other suppliers. The report said the transgressions amounted to “legal and inhumane violations” and stressed that workers lacked “any effective grievance channel” for rectifying the situation. Mr Chung dismissed the ‘inhumane’ tag as “totally unfair” and exaggerated. “We agree with some of the criticisms raised, and that is why we said we would re-evaluate our working hour practices. But we do not agree with its overall characterisation of our working conditions,” he said. AFP
business daily September 6, 2012
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CHINA UNICOM HON
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HANG LUNG PROPER
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AIA GROUP LTD
BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO CATHAY PAC AIR
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CHINA CONST BA-H
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CLP HLDGS LTD CNOOC LTD COSCO PAC LTD
HENDERSON LAND D
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SUN HUNG KAI PRO
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LI & FUNG LTD
CHINA RES ENTERP
SINO LAND CO
HONG KG CHINA GS
CHINA RES LAND
NEW WORLD DEV
CHINA RES POWER
PING AN INSURA-H
INDEX 19145.07 HIGH
52W (H) 21760.33984 (L) 16170.35
Hang SENG CHINA ENTErPRISE INDEX NAME
AIR CHINA LTD-H
CHINA RAIL CN-H
CHINA RAIL GR-H
BANK OF CHINA-H
CHINA CITIC BK-H
CHINA COAL ENE-H
CHINA COM CONS-H
IND & COMM BK-H
CHINA CONST BA-H
CHINA COSCO HO-H
CHINA LIFE INS-H
PICC PROPERTY &
PING AN INSURA-H
CHINA MERCH BK-H
BANK OF COMMUN-H BYD CO LTD-H
NAME YANZHOU COAL-H
CHINA NATL BDG-H
52W (H) 11916.1
Shanghai Shenzhen CSI 300 PRICE
DAQIN RAILWAY -A
SANY HEAVY INDUS
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DATANG INTL PO-A
SHANG PHARM -A
EVERBRIG SEC -A
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GD MIDEA HOLDING
BANK OF CHINA-A
GD POWER DEVEL-A
SHANXI LU'AN -A SHANXI XINGHUA-A
BANK OF COMMUN-A
BANK OF NINGBO-A
BAOSHAN IRON & S
BYD CO LTD -A
CHINA AVIC AVI-A
CHINA CITIC BK-A
CHINA CNR CORP-A
HONG YUAN SEC-A
CHINA CONST BA-A
HUAXIA BANK CO
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PRICE DAY %
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TAIWAN MOBILE CO TPK HOLDING CO L
52W (H) 2796.352 (L) 2186.962
FTSE TAIWAN 50 INDEX NAME
ASIA CEMENT CORP ASUSTEK COMPUTER
PRICE DAY %
HON HAI PRECISIO
HOTAI MOTOR CO
HUA NAN FINANCIA
CHANG HWA BANK
YULON MOTOR CO
CHENG SHIN RUBBE
CHIMEI INNOLUX C
MEGA FINANCIAL H
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CHINA STEEL CORP
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CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC FAR EASTERN NEW FAR EASTONE TELE
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INDEX 5047.28 HIGH
52W (H) 5621.53 (L) 4643.05
September 6, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) gaLaXy enTerTaInMenT
MeLCo CroWn enTerTaInMenT
MgM CHIna HoLDIngS 30.3
21.9 Max 22.3
SanDS CHIna LTD
SJM HoLDIngS LTD
WTI CRUDE FUTURE Oct12
BRENT CRUDE FUTR Oct12
GASOLINE RBOB FUT Oct12
17.8 Max 18.22
NATURAL GAS FUTR Oct12
Gold Spot $/Oz
Silver Spot $/Oz
Platinum Spot $/Oz
Palladium Spot $/Oz
LME ALUMINUM 3MO ($)
LME COPPER 3MO ($)
LME NICKEL 3MO ($)
WHEAT FUTURE(CBT) Dec12
SOYBEAN FUTURE Nov12
COFFEE 'C' FUTURE Dec12
SUGAR #11 (WORLD) Oct12
COTTON NO.2 FUTR Dec12
AGRICULTURE ROUGH RICE (CBOT) Nov12 Dec12
GAS OIL FUT (ICE) Oct12
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
1.0185 1.586 0.9592 1.2524 78.42 7.9893 7.7565 6.3492 55.915 31.28 1.2488 29.868 42.022 9599 79.873 1.20137 0.78968 7.9395 10.0052 98.22 1.03
-0.5274 -0.0882 -0.5004 -0.4847 -0.0128 -0.0025 -0.0013 -0.0299 -0.4537 -0.2558 -0.1842 -0.0603 -0.3498 -0.1146 0.5033 -0.0275 0.3951 0.8111 0.4987 0.4582 0
-0.2351 2.0395 -2.1997 -3.3717 -1.9255 0.1289 0.1405 -0.8537 -5.097 0.8632 3.8277 1.3761 4.3263 -5.5214 -1.8041 1.2835 5.5352 2.4523 3.4662 1.4661 0.0097
1.0857 1.6302 0.9972 1.4247 84.18 8.0413 7.8077 6.406 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88423 9.0421 11.4015 111.6 1.0311
0.9388 1.5235 0.8482 1.2043 75.35 7.9823 7.7526 6.2769 45.98 29.91 1.2063 29.065 41.57 8553 72.057 1.19995 0.77553 7.7018 9.6245 94.12 1.0288
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business daily September 6, 2012
You pick: a strong recovery or an accountable Fed? Clive Crook Bloomberg columnist
t last week’s conference of central bankers in Jackson Hole, Wyoming, the main topic of conversation was off the programme. In the margins of the meeting, many of the bankers talked about the threat to their independence posed by meddling politicians. Nobody presented a paper on the subject, because it’s a tough one for the professionals to air in public. I understand the reticence. Whether or how to impose democratic accountability on central banking has become the most important question in political economy, not just in the U.S. but also in Europe and around the world. Unfortunately, the answer that’s emerging is unfit for public consumption. We can have proper checks and balances or good central banking, it seems, but not both. The idea that central banking could be kept above politics was never really plausible, but for a long time central bankers could get away with pretending otherwise. An independent central bank can promise to keep inflation low more credibly than a bank directed by a finance ministry – i.e., by politicians tempted to pump up the economy for short-run electoral purposes. The credibility of the promise shifts expectations in the economy, which makes the promise easier to keep. That’s the case for independence. Crucially, you could also argue (as long as you didn’t stop to think about it) that merely keeping inflation low could be done without straying into contested political terrain.
Unavoidable politics That was always a dubious proposition. Even a narrow-purpose central bank – one with a simple anti-inflation mandate – must decide how hard to lean against a boom and how urgently to fight a recession. In other words, it has to weigh control of inflation against stability in jobs and the real economy, and that question is unavoidably political. This trade-off was a matter of great controversy during the early 1980s when Paul Volcker, the Fed chairman, drew praise and blame for inflicting a recession on the U.S. economy to get inflation down. For the next 25 years, the question was mostly set aside. That changed when the recession forced central banks to innovate. Suddenly, the issue of independence is the elephant in the room. First, the traditional tools of monetary policy stopped working. Once the Federal Reserve, the Bank of England, the European Central Bank and others had cut short-term interest rates to zero, they had to deliver further monetary stimulus in unorthodox
Ben Bernanke, Federal Reserve chairman
ways – for instance, by expanding their balance sheets through quantitative easing. This takes risk onto the public sector’s books and, depending on what kind of assets the banks buy, channels support to particular economic sectors. It’s at least as much a fiscal as a monetary operation. Second, as John Cochrane of the University of Chicago pointed out recently, the Fed (like many other central banks) has been given new regulatory powers. Regulation is not a value-free process that can be left to disinterested technocrats – least of all if it’s used to advance goals such as more lending to small businesses or easier refinancing for distressed mortgage borrowers. Wider regulatory powers are another move deeper into political territory.
Central banks are encroaching on the politicians’ terrain out of necessity. They are doing what elected politicians should be doing, because the politicians refuse to
Cochrane highlights the problem but doesn’t say what should be done about it. Because he’s leery of central-bank activism, he leaves readers thinking that the Fed needs to be reined back. I disagree. I’m for central-bank activism. I think we would be in much worse trouble if the Fed hadn’t grown out of its usual role and acted as it has, and I wish that it and the ECB would act even more boldly. I can’t pretend, though, that this would be constitutionally kosher.
Government failure Something no central banker with an eye to keeping his job can say, but which is nonetheless true, is that the U.S. and Europe are suffering a systemic failure of democratic g ov e rn m en t. Ce n tr a l b a n ks a re encroaching on the politicians’ terrain out of necessity. They are doing what elected politicians should be doing, because the politicians refuse to. Under today’s conditions, with short-term interest rates at zero, countercyclical fiscal policy has to be granted a bigger role than usual. (There’s a strong, though admittedly not universal, consensus among economists in support of this view.) This role has two equally important dimensions, as Fed chief Ben S. Bernanke keeps saying, albeit in prudently elliptical terms. Budgetary stimulus should be maintained or increased in the short term, and public debt should be contained and reduced (under the terms of a plan announced right now) in the medium term. The Fed, Bernanke never tires of observing, can’t do it all. The point is,
at the moment he has no choice but to try. Washington’s political paralysis makes intelligent use of fiscal policy impossible, so monetary policy must do everything. Fiscal policy is paralysed in Europe, too, though for different reasons. The sticking point there is not an ideological quarrel about the proper role of government, but a fight between the European Union’s stronger, betterrun economies on one side and its weaker, badly run economies on the other, about who helps whom and to what degree. Really, it’s a fight about what “Europe” means. The upshot is the same: fiscal paralysis and bitterly contested demands for the central bank to fill the vacuum. Conservatives in the U.S. are very different from conservatives in Europe (who themselves differ a lot from country to country), but they have this much in common: they want the Fed and ECB to stay out of politics and concentrate on keeping prices stable. In a better world, where the elected branches of government did their jobs, that would be excellent advice. The world we have is one of acute political dysfunction, so it’s a formula for catastrophe. Already the pressure has slowed the banks’ response to the current emergency, and if the critics prevail they’ll make things even worse. You can have textbook checks and balances, with all political actors held accountable to voters and independent agencies held to a narrow technical mandate. Or you can have an economy on the path to recovery. Reluctantly, I’ll take the latter. Bloomberg View
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September 6, 2012 business daily | 15
wires Leading reports from Asia’s best business newspapers
This recovery is different Daniel Gros
Director of the Centre for European Policy Studies
Statesman India and Pakistan will soon sign three agreements in the areas of customs cooperation, mutual recognition of standards and redressal of trade issues, to enhance economic ties between the two countries. A memorandum of understanding on the three matters was signed during industry minister Anand Sharma’s visit to Islamabad in February. These three pacts are aimed at streamlining trade between the countries and to remove irritants that have prevented bilateral trade. Bilateral trade between India and Pakistan stood at US$2.7 billion in 2010-11.
Business Times Petron Malaysia Refining & Marketing Bhd (formerly Esso Malaysia Bhd) has made a net loss of RM75 million (US$24 million) for the second quarter ended June compared with a RM2 million profit in the same quarter a year ago due to the volatility in the global oil markets. The company recorded RM2.9 billion revenue in the second quarter of 2012, slightly lower than RM3.1 billion last year due to lower average prices, as sales volume decreased to 7.4 million barrels from 7.9 million barrels.
Bangkok Post Airports of Thailand Plc is speeding up completion of the Suvarnabhumi expansion by one year, to March 2016, to arrest the fast-growing traffic through the country’s gateway airport. The state-controlled airport operator’s board endorsed the expedited timeline for the 62.5-billion-baht scheme (US$2 billion). But the acceleration will only mean catching up with surging traffic demand, as the increased capacity will be entirely consumed by the expected demand. The reactivation of the old Don Mueang airport, beginning next month, should relieve some traffic congestion.
Korea Herald South Korean credit card firms will lower their commission rates next month in an effort to ease smaller stores‘ financial burdens.Theaveragecommission rate will be lowered to 1.5 percent from the current 1.8 percent, benefiting some 1.8 million stores. Local credit card firms have been under sharp criticism for charging far higher fees to smaller merchants than large retailers. Merchants with annual sales of less than 200 million won (US$170,000) are qualified for the preferential rate.
he misguided belief that “this time is different” led policymakers to permit the credit boom of the early 2000’s to continue for too long, thus preparing the ground for the biggest financial crisis in living memory. But now, when it comes to recovery, the belief that this time should not be different might be equally dangerous. Many policymakers and economists have observed that the recovery from the 2007-2008 financial crisis has been much slower than most recoveries of the postwar era, which needed only a little more than a year, on average, to restore output and employment to their previous levels. By this standard, the current recovery is unacceptably slow, with both output and employment still below the previous peak. Policymakers thus feel justified in using all available macroeconomic levers to achieve a recovery that resembles those of the past. In doing so, officials are reluctant to take into account that the recent crisis resulted from an unprecedented credit boom gone bust. To some extent, it should have been logical to expect an unprecedented upturn as well. When the crisis erupted, many hoped for a V-shaped recovery, notwithstanding a substantial body of research showing that recoveries from recessions caused by a financial crisis tend to be weaker and slower than recoveries from “normal” recessions. The observation that recoveries following a financial crisis are different suggests that standard macroeconomic policies might not work as one would usually expect. And a transatlantic comparison suggests that this may indeed be the case.
Expansionary policies One would expect that the shock from the financial crisis should be comparable for the United States and the eurozone, given that they are of similar size, exhibit a similar degree of internal diversity, and experienced a similar increase in house prices (on average) in the years preceding the bust. Moreover, the relative increase in debt (leverage) in the financial system was similar on both sides of the Atlantic. And, indeed, U.S. economic performance has been very similar to that of the eurozone since the start of the crisis: GDP per capita today is still about 2 percent below the 2007 level on both sides of the Atlantic. The unemployment rate in the U.S. and the eurozone has increased by about the same amount as well – three percentage points. Of course, one can point to particular countries in Europe that are mired in recession. But
Mario Draghi, president of the European Central Bank
the U.S. also has depressed areas. For Ireland and Spain, read Nevada and California (and, for Greece, read Puerto Rico). The proper comparison is thus between the average of two continental-sized economies, both of which are characterised by considerable internal diversity. These similarities in economic performance are striking, given that macroeconomic policy in the U.S. and the eurozone has been so different. The U.S. let its fiscal deficit rise above 10 percent of GDP, compared to less than 6 percent of GDP in the eurozone. Measured over a five-year period (2007-2012), the U.S. has thus not done any better than the eurozone, although it has relied on a much larger dose of fiscal expansion. In the U.S. (and the United Kingdom), the general government deficit today is still around 8 percent of GDP, compared to a little more than 3 percent of GDP in the eurozone, and the U.S. debt/GDP ratio has increased by more than 41 percentage points, compared to “only” 25 points in the eurozone.
Big risks In fact, the economy that has imbibed the strongest dose of expansionary policy has recovered less: GDP per capita in the UK today is still 6 percent below the 2007 level. Of course, one could argue that the UK was particularly exposed to the bust, because financial services make up a
On balance, it thus seems that this time really is different, and that macroeconomic policies have done little to improve matters large part of its GDP. But the fact remains that its economy, supposedly the most flexible in Europe, has not recovered from the shock five years later, despite massive fiscal and
monetary stimulus, coupled with a substantial devaluation. On balance, it thus seems that this time – or, rather, this post-crisis environment – really is different, and that macroeconomic policies have done little to improve matters. Countries like the U.S. and the UK, which are accumulating debt at a record pace, are betting that deficit spending will eventually pay off in a stronger economy. But they risk ending up with debt/GDP ratios north of 100 percent, which would leave them at the mercy of financial markets should sentiment turn against them. History suggests that interest rates will not remain at record-low levels indefinitely, and that when change comes, it might be abrupt. Why should we expect this time to be different? © Project Syndicate
business daily September 6, 2012
CLOSING HK’s Leung cancels APEC trip
Videocon seeks US$3b for gas stake
Hong Kong Chief Executive Leung Chun Ying cancelled a trip to the AsiaPacific Economic Cooperation summit, as a proposed national education programme led to protesters staging a seven-day demonstration. Mr Leung, scheduled to attend the meeting in Russia this week scrapped the trip hours before his scheduled departure to “focus on domestic duties,” according to a government press release. Protesters began camping out at the government headquarters on August 30 ahead of the start of the school year demanding the withdrawal of a subject they said portrayed a one-sided view of Communist Party rule in China.
Videocon Industries Ltd, controlled by Indian billionaire Venugopal Dhoot, is seeking US$3 billion for its stake in a Mozambique gas field, said a person with direct knowledge of the matter. Videocon is in talks with companies including Royal Dutch Shell Plc, the person said. Selling its 10 percent share in the block in Mozambique, home to the world’s biggest gas discovery in a decade, will help the group pay 200 billion rupees (US$3.6 billion) of debt and reclaim mobile-phone licences in India that were cancelled by the nation’s top court earlier this year.
FSA demands commission clampdown U.K. banks face rules to curb mis-selling incentives Huw Jones
ritain’s banks have 18 months to stamp out incentives that encourage the mis-selling of financial products or face “intrusive” action, the Financial Services Authority said yesterday. U.K. banks have been hit by a string of scandals in the last 20 years for inappropriate selling of products, such as insurance, home loans and pensions, to customers who often did not need them. Compensation for mis-sold loan insurance alone will cost the banks 9 billion pounds (US$14.3 billion). Martin Wheatley, the FSA’s managing director, told a Thomson Reuters Newsmaker event it was time to tackle incentives for sales staff as banks were no longer serving customers properly. “Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to,” Mr Wheatley said. Mr Wheatley said banks could no longer expect to make heady returns and should get back to offering “plain vanilla products” that customers can understand. The FSA has started enforcement action against one company over its sales incentives to stop what he called the “pile it high and sell them cheap”
approach seen across the industry. “If we think in a year to 18 months’ time the industry has not cleaned up its act, then we will revisit it in a much more intrusive way,” Mr Wheatley said. “The question is how intrusive we need to be.” New rules could make certain that the FSA’s “new, fairer, approach is hard-wired into the way firms do business, and enforceable if they disregard them”.
Pressure on banks He said cultural change was needed at the top of firms to tackle poorly designed incentive schemes that boost the earnings of the sales person but “too often result in customers being sold products they do not need or cannot use”. The FSA will attend more bank board meetings and raise its concerns when it meets bank chiefs collectively each quarter to end a “disconnect” between CEOs’ willingness to correct shoddy sales practices and the apparent lack of action on the ground. The FSA was not aiming to ban commission but to put pressure on banks to have the right sales incentives, as piling on prescriptive rules could encourage them to find ways round
FSA managing director Martin Wheatley said customers’ interests came behind rewards for sellers
them, hence the emphasis on cultural change, he added. Mr Wheatley is due to make recommendations on September 28 on better supervision and governance for setting the benchmark Libor interest rate, which Barclays was fined US$453 million for rigging. Mr Wheatley declined to comment on his public consultation on proposed reforms to Libor which ends tomorrow. “I have a busy weekend ahead,” he said.
Gazprom faces EU anti-trust probe Regulator eyes possible anti-competitive practices in central and eastern European gas markets
AO Gazprom, Russia’s natural-gas export monopoly, faces a European Union anti-trust probe over longterm gas supply contracts in central and eastern Europe. The European Commission is investigating whether Gazprom imposed unfair prices by linking natural gas and oil prices, prevented gas from being traded between countries and hindered the diversification of supply. Gazprom shares dropped by as much as 1.8 percent after the EU announcement.
“We are interested in the long-term contracts between Gazprom and the companies who they supply,” said Antoine Colombani, a spokesman for the Brussels-based commission. If the probe “reveals new information, we will then expand the investigation.” Gazprom, which supplies about a quarter of European gas, and customers including RWE, E.ON’s Ruhrgas and Hungary units, OMV AG and Poland’s Polskie Gornictwo Naftowe I Gazownictwo SA were raided by EU officials last year to uncover information on prices and
supplies. Companies found to violate EU competition rules can be fined as much as 10 percent of annual revenue. Gazprom shares were down by 1.4 percent at 3:29pm in Moscow after declining the most since July 31. Gazprom defended its pricing policies as “meeting standards that are used by other gas producers and exporters,” according to an e-mailed statement from the Moscow-based company. The gas producer said it
The FSA will publish a review of sales incentives at 22 banks, insurers and investment firms, with most showing deficiencies that encouraged mis-selling. “What we found is not pretty. Most of the incentive schemes we looked at were likely to drive people to mis-sell in order to meet targets and receive a bonus, and these risks were not being properly managed,” Mr Wheatley said. Reuters
“pays great attention” to following international laws and legislation in the regions where it operates. The company said it hasn’t received official notice from regulators about the probe. Dmitry Peskov, a spokesman for Russian President Vladimir Putin, said Gazprom has applied a widely used price formula for gas sales for years. “It’s not clear why this suddenly has become a subject for investigation,” Mr Peskov said yesterday. “Why is there this assertion of a violation of the security of supplies? Because Gazprom was, is and will be a reliable supplier of natural gas to its customers.” Mr Colombani said EU regulators were looking at state-owned Gazprom’s behaviour as a company and the investigation “does not concern Russia”. Gazprom has been cooperative with the EU probe and made no attempt to obstruct the investigation, he said. The probe covers Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, as Estonia, Latvia and Lithuania, Colombani said. Bloomberg