Year I | Number 10 | April 13, 2012 Editor-in-chief | Tiago Azevedo Deputy editor-in-chief | José I. Duarte MOP $ 6.00 www.macaubusinessdaily.com
Cash handout begins April 24
Casino project freeze to aid existing resorts
World Bank cuts China growth to 8.2 pct
OF THE BOOM W
hile the territory’s economy continues to boom, so has the wealth gap, experts say. The rise in the median wage hides the fact that almost half of all workers still earn less than MOP10,000. The government has increased financial assistance to the disadvantaged, helping improve the quality of life of the
female-headed singleparent families, disabled people and the elderly. But for many people that receive no government help, including new immigrants, living from day to day is enormously difficult. An estimated 2,600 candidates among the poorest and most vulnerable have turned to the Caritasrun short-term food as-
sistance programme. Rising rents for private housing and rising food prices have exacerbated the troubles of the poor, since much of their income is spent on food and accommodation. Meanwhile many former employees of the flagging manufacturing industries are finding it impossible to get a new job in the ser-
vices industries. Whereas government’s cash handouts and financial assistance may be considered helpful and even generous, experts agree that they may not be enough to narrow the gap between rich and poor. They also warned that the gap might become unsustainable in the long run. More on page 8 & 9
Brought to you by
HANG SENG INDEX 20350 20325 20300 20275 20250 20225 20200 20175 20150
HSI - Movers Name
BOC HONG KONG HO
CHINA RES LAND
New law to build heritage conservation
Noise levels adding costs to Macau life
SINO LAND CO
HENDERSON LAND D
CHINA CONST BA-H
AIA GROUP LTD
The new cultural heritage protection law is finally on its way to the Legislative Assembly, three years after being announced. The draft states that all listed sites could have buffer zones, “whenever that becomes essential for its defence and promotion”. If approved, the law will regulate what can be built within those buffer zones. The draft law also seeks to cover “intangible findings” such as music and other arts. Page 2
Noise is spoiling tourist enjoyment of Macau’s historic old town says an independent study by Macau University of Science and Technology. In the first three months of 2012, Macau’s background noise was well above guidelines issued by the WHO according to official measurements. “The high pedestrian exposure to traffic noise in the historical urban area reduces the comfort of tourists walking in the historic centre,” the university study says. Page 4
CHINA COAL ENE-H
CATHAY PAC AIR
Brought to you by
Rail link pressure closer to Macau The city is ill-prepared to deal with the opening of the Gongbei station on the Guangzhou-Zhuhai Intercity Railway, scheduled for late this year. The boost in visitor arrivals will weigh heavily on already stressed infrastructure, as more visitors from the mainland’s more distant provinces and autonomous regions may come to Macau, IFT professor Don Dioko says. During the first two months of this year 1.4 million visitors from Guangdong visited Macau, accounting for 30.5 percent of all tourists. Page 7
business daily April 13, 2012
New law to better manage heritage Draft law with tougher regulations to preserve World Heritage sites, art and culture passes to Legislative Assembly By Terina Cao firstname.lastname@example.org
he new cultural heritage protection law, now on its way to the Legislative Assembly, will include special regulation for both the city’s World Heritage sites and their buffer zones. The law was first mooted three years ago. The Executive Council has ended its discussion of the draft law, which also seeks to cover “intangible findings” such as music and other arts. The draft states that all listed sites could have buffer zones, “whenever that becomes essential for its defence and promotion”, council spokesperson Leong Heng Teng said yesterday. If approved, the law will regulate what can be built within those buffer zones. The Cultural Institute will have the power to issue binding opinions on works including renovation or expansion. “Construction inside buffer zones is strictly controlled by the legislation,” Mr Leong said. The lack of protection around World Heritage sites in Macau has been a concern repeatedly voiced by the United Nations Educational, Scientific and Cultural Organisation (UNESCO). Last year, UNESCO said the current management system, buffer zone and legal provisions were inadequate to protect the visual and functional linkages between the in-
scribed monuments and the wider urban land and seascape of Macau. In 2010, the vice-president of the International Council on Monuments and Sites, Guo Zhan, suggested the government extend the buffer zones of historical centres in Macau. Mr Leong, however, said on Thursday that the existing zones would not be increased.
Intangible list “What we hope to do is to better assess the approval or rejection of the construction projects for this area through better legislation. We will also take into account the public opinion and launch public consultations,” Mr Leong said. The Cultural Institute is currently drafting a report on the protection of the local heritage to be submitted to UNESCO next February. By then, the Macau government must enact the heritage protection law and provisions on the urban planning system. The latter should be ready in the second half of this year, according to the 2012 Policy Address. Only after the cultural heritage protection law is enacted will the Cultural Institute begin drafting a list of protected sites, as well as a list of intangible heritage, institute head of the institute Guilherme Ung Vai Meng said. “The buildings that are already on
A new heritage protection law will regulate what can be built within buffer zones.
the list will remain there,” he said. “And we are keeping an eye on the whole legislative process. Once this draft law is approved we will improve and expand it (the list).” Mr Ung also said the government is considering subsidies for groups and associations that promote intangible art forms. Currently, the list of Macau’s intangible cultural heritage features six items, which are also successfully
inscribed on China’s Intangible Cultural Heritage list. The first three to be featured were Yueju opera or Cantonese opera, herbal tea and woodwork – Macau religious figure carving. Three other traditions were added last year: Cantonese naamyam or narrative songs, Macau Taoist ritual music and the Festival of the Drunken Dragon. with Vítor Quintã
Bill to raise civil servant salaries to pass unscathed By Cláudia Aranda email@example.com
Around 620,000 residents to benefit from the government’s handout
Cash handout begins April 24
he government will spend MOP4.1 billion (US$515 million) on this year’s cash handout to be launched from April 24. The programme will benefit around 542,700 permanent residents and 77,300 non-permanent residents (not holders of work permits as we wrote on yesterday’s edition). The Executive Council has finished reviewing the bylaw, under which each permanent resident will receive MOP7,000, while non-permanent residents will each receive MOP4,200. The first group to get the handout in late April will be those receiving subsidies from the Social Welfare Bureau, the Youth and Education Affairs Bureau and pensioners, followed by residents granted the elderly pension. Authorities will also set up an outreach centre where people can get
information on the handout. The government recommends that residents who fail to receive their cheque within 10 days of the scheduled date to contact the centre. In addition, the administration will spend MOP295 million on renewing the healthcare voucher programme. All residents will be entitled to vouchers worth MOP500, which can be cashed in at private clinics and hospitals until August next year. The handout scheme has been criticised by several scholars and legislators. They argue that the cash handouts exacerbate inflation, which stood at 5.8 percent in February. While announcing a second cash handout last year, Chief Executive Fernando Chui Sai On admitted that the measure would cause inflation to spike by about 0.45 percent. T.C., V.Q.
egislators have introduced no major changes to the draft law that will raise civil servant salaries by 6.45 percent, despite the size of the increase being criticised by Macau’s leading public workers association. Public servants will likely be paid more from May 1. Unlike previous pay rises, this year’s increment will not be backdated. According to the draft law, the increase takes effect from the month after the law is published in the Official Gazette. “A plenary meeting will be tentatively scheduled for the next week for the draft law to be passed and approved in detail,” Cheang Chi Keong, president of the Legislative Assembly’s Third Standing Committee, said yesterday. Government members are expected to attend the meeting. Legislator José Pereira Coutinho, who is also the president of the Macau Civil Servant’s Association, had earlier criticised the authorities for not applying any increase retroactively to January. He also rejected a government decision not to extend the increases to workers hired under a “task contract”. Legislators said the draft law fell short, since it did not extend the increase to public servants hired un-
der “task” or “individual employment” contracts. The government, however, argued that workers hired under the limited-term contracts were not staff workers of the public administration and were to be excluded from the latest salary adjustment. Workers under an individual employment contract would see their salary update automatically if their contract had an appropriate mechanism linked to government salaries. The government rejected backdating the increase to January 1. “It was a political choice,” the committee said. “There has been no compromise from the government when it evaluated and decided the remuneration rates’ adjustment.” In its assessment, the committee said the date had obvious budgetary implications, given that the increase would apply for 10 months out of the year. In actual terms, the increase will be about 4.65 percent for the full year, rather than the 6.45 percent announced by the government. The government claimed that backdating the increase would mean spending an extra MOP900 million and would force it to dip into the recently created fiscal reserve
business daily April 13, 2012
Photo by Manuel Cardoso
More than one-fifth of the 4,000 complaints about noise in 2008 were over construction works.
Noise levels adding costs to Macau life Noise pollution remains high, with no measurement of its economic and social costs and still no legislation to make life better By Vítor Quintã firstname.lastname@example.org
oise pollution levels in Macau remain way above the standards applied in several developed countries, despite a slight improvement in the first quarter this year. In the first three months of last year, environmental noise ranged between 61.8 and 74.4 decibels, according to data released by the Environmental Protection Bureau recently. These levels exceed the guidelines issued by the World Health Organization, which limits the average noise level to 70 decibels in industrial, commercial and traffic areas, and to 55 decibels in residential areas. In the first three months this year, the average noise at the city’s four stations — Horta e Costa, Areia Preta, Jockey Club and Old Taipa — was down by 1.4 decibels from the same period last year. But the comparison is somewhat flawed because the Environmental Protection Bureau admitted that the noise levels for February and March 2011 at Horta e Costa are higher than usual due to sewage renovation works. No studies have been done on the costs of noise pollution to the city but, if they did, the results might surprise, Macau University of Science and Technology urban planning expert Sheng Ni told Business Daily. A European Union study estimated the economic and social costs of excessive noise at EU$40 billion (MOP419.5 billion) a year or about 0.4 percent of the European Union’s gross domestic product. That study warned that noise pollution could lead to devalued house prices, productivity losses from poorer health and rising health care costs. The World Health Organization
warns that long-term exposure to high levels of noise increases the risk of hypertension, hearing impairment and sleep disturbance.
Loud traffic A report Ms Sheng co-authored last year found that noise pollution is affecting tourism, especially near busy San Ma Lou, where measurements exceed 78 decibels in the evening. “The high pedestrian exposure to traffic noise in the historical urban area reduces the comfort of tourists walking in the historic centre and is ruining the reputation of the area as a World Cultural Heritage site,” the
Average continuous noise levels
study says. The study says that 60 percent of the time, traffic noise near major sidewalks during the evening peak hour exceeds even the 70-decibel standard used in the mainland. The main reason behind high noise levels in Macau is traffic, Ms Sheng said. The decision to turn San Ma Lou into a public transport-only lane on Sundays and public holidays is a step in the right direction, but not enough, she added. Indeed, the government is trying to cap the growth in the number of vehicles, but Ms Sheng says more must be done. She praised Singapore, where car quotas were introduced, calling it a good example. Macau’s noise regulations were approved in 1994 and say, somewhat vaguely, that noises 10 decibels higher than “normal background noise” can be considered “disturbing” and worthy of a fine. At the same time, it says that up to 65 decibels can still be described as “normal background” noise.
70 60 50 40 30 20 10 0
The Environmental Protection Bureau announced in late 2008 that it would revise the law, banning piledriving machinery at construction sites within 200 metres of sensitive locations such as residential areas, hospitals, schools, homes for the elderly, libraries and courts. The bureau said the new legislation would try to control noise levels by setting limits. However, it added that there would be no strict limits on social noise and left it to the police to judge its level. To introduce mandatory standards and penalties for individuals and companies found in breach is inevitable, said Ms Sheng. “In this case, Macau must follow the way things
are done in other regions.” Environmental engineering expert Wang Zhishi is more cautious, stressing that the high population density of the city aggravates noise and air pollution. “We have a big population and a shortage of land, so this condition determines any government action,” he said last February. The law revision has not been in the public eye since October 2010, when bureau director Cheong Sio Kei said the bylaw had been drafted and was ready for approval. He added that the document has been sent to Secretary for Transport and Public Works Lau Si Io. Business Daily asked the bureau for information on the draft bylaw but received no reply.
Long-term view Authorities are also working on a blueprint for environment protection planning up to 2020. It will cover the management of air quality, water quality, waste, energy and noise. According to the blueprint, noise levels should be reduced by 0.2 of a decibel this year, one decibel in 2015 and 2.3 decibels in 2020. In 2008, the bureau received about 4,000 complaints over noise pollution. Sixty-two percent pertained to social noise, 22 percent to construction works. No new statistics have been released since, but authorities acknowledge that “the noise climate has worsened” and the number of complaints over noise, especially at night, had soared in the last few years. Last September, Mr Cheong said an environmental complaints outreach centre would open by year-end. As yet, there has been no further word on its establishment.
April 13, 2012 business daily | 5
business daily April 13, 2012
macau Brought to you by
that’s why the four companies are currently being kept waiting.
‘We do not expect a precipitous decline in visitation or gaming spending trends this year’ Fitch Ratings Agency
Credit growth slows The monetary figures for February, released by the Monetary Authority, show lending seems to have reached a plateau. Credit to the private sector was only 0.3 percent higher in February than in January – although it was 23 percent higher than a year before. These figures may indicate a relative slowdown in investment and overall growth. Lending since September has hovered within a relatively narrow band, between MOP165 billion (US$20.67 billion) and MOP 167 billion. The plateau is apparent in the first graph.
170000 157500 145000 132500 120000
Jan 2011~Feb 2012
Growth in the money supply, although more volatile than growth in credit, also seems to be slowing. M1 contracted sharply in February when compared with January. That was probably because the Chinese New Year holidays fell in February this year. But the February figure is in line with the general trend since the second quarter of last year. Of the components of M1, currency in circulation dropped by about 6 percent and demand deposits by about 9 percent, bringing them back to their levels at the end of last year. M2 money supply was about the same in February as it was in January, but about 18 percent higher than a year before. This statistic includes quasi-monetary assets, such as savings and time deposits. Most of these assets are denominated in currencies other than the pataca, for the most part Hong Kong dollars. (J.I.D.)
M2 composition, by currency
Hot and cold Sunnier 2012 plus casino project freeze aids existing Macau resorts – Fitch By Associate Editor
acau gaming operators will benefit from a likely three-year freeze on large casino supply combined with better revenue growth in 2012 than was forecast, suggests a leading credit research company. Fitch Ratings says it expects Macau’s gaming market fundamentals to remain positive in the aftermath of Wednesday’s opening of Las Vegas Sands Corp.’s new casino property on the Cotai Strip. “Following the opening of Cotai Central, which will ultimately have almost 6,000 rooms, we do not expect any major casino properties to open in Macau until 2014-2015,” says Fitch. Four Macau gaming companies are currently seeking to build large new casino resorts on Cotai, the land reclamation area to the south of Macau’s traditional casino hub on Macau peninsula. They are Melco Crown Entertainment, MGM China, SJM Holdings and Wynn Macau.
But even if they were all to be given the green light by the government tomorrow, it’s unlikely any of them would be ready before 2015 at the earliest. Macau currently has an acute shortage of labour and a policy limiting labour importation. The unemployment rate was 2.1 percent in February according to the territory’s Statistics and Census Bureau. So even if the government wanted to increase casino supply, it would be hard for the operators to find the necessary labour unless the labour import policy is changed at the same time. The government has made it clear it wants to restrict the casino supply side of the market. It thinks this is a good way of dampening the growth of gambling. Only so many players can crowd around each table at any one time and
KEY POINTS • No more major Macau casinos opening until 2014-2015 • 20 percent revenue growth yearon-year in 2012 • China economy slowing slightly to 8 percent expansion in 2012 • Mass-market gambling growth to exceed VIP growth in next few years • 5,500-table cap in Macau to 2013 then 3 percent annual growth limit
The other side of the casino market equation is demand from players and from visitors taking part in non-gaming activities including trade shows, concerts and shopping trips. Fitch Ratings acknowledges the gambling market has slowed significantly from the 42 percent year-on-year expansion in gross gaming revenue seen in 2011. Some analysts note that in a slowing market, the addition of even limited new supply can create the risk of ‘cannibalisation’ – where a new casino takes business from a sister property rather than expanding the whole market. The more bearish industry forecasts at the turn of the year predicted a dramatic fall in Macau gaming growth in 2012 – into the low to mid-teens of percent – linked to a slowdown in China’s economy. But Fitch says it stands by its original forecast of 20 percent growth yearon-year for Macau gaming in 2012. “Sands is opening the Cotai Central property at a time when the Macau gaming market is growing at a reduced, but still very healthy, pace. The growth rate slowed to 27 percent in the first quarter, down from 42 percent in 2011 and 58 percent in 2010, but we do not expect a precipitous decline in visitation or gaming spending trends this year,” states the agency. “We have not adjusted our original full year 2012 gaming revenue growth forecast of 20 percent, which reflects our broader view that economic growth in China will slow to 8 percent this year,” it adds. “Although VIP gamblers visiting Macau continue to make up the majority of the gaming market, the burgeoning Chinese middle class is supporting a healthy pick-up in the mass market. We expect this trend to continue in 2012, despite the weaker macroeconomic backdrop on the mainland,” says Fitch. The company says it expects the Macau government to continue its policy of limiting the growth of the market by capping the supply of new tables even beyond the expiry of the existing 5,500-table cap that runs until 2013. “The government has targeted a table growth rate after the cap of 3 percent annually,” it said. “The authorities’ commitment to manage market growth primarily through supply regulation, as opposed to travel restrictions, is a positive for incumbent gaming operators’ long-term profitability,” concludes Fitch.
Weather Beijing 26/12o C Changchun 21/5o C
Harbin 21/1o C
Xian 21/6o C Shanghai 16/11o C Chengdu 24/12o C Kunming 24/11o C Haikou 32/24o C Sanya 32/26o C
Guangzhou 27/22o C
MACAU (9-14 April) Day
19/22 o C
20/25 o C
22/27 o C
21/27 o C
20/26 o C
Shenzhen 26/20o C
Hong Kong 27/23o C
Macau 25/21o C
30/24 o C
19/12 o C
32/25 o C
36/28 C o
32/24 o C
April 13, 2012 business daily | 7
Macau not ready for closer rail link The Guangzhou-Zhuhai Railway will bring more mainland tourists to Macau, weighing heavily on already stressed infrastructure
Photo by Manuel Cardoso
By Cherry Lee email@example.com
Border Gate facilities are likely to become more crowded once the Guangzhou-Zhuhai Intercity Railway reaches Gongbei later this year.
he opening of the Gongbei station on the GuangzhouZhuhai Intercity Railway, scheduled for late this year, will bring a boost in visitor arrivals for which the city is ill-prepared,
an expert said. “Macau is not ready for the influx of tourists brought by the Gongbei light rail station,” Institute for Tourism Studies professor Don Dioko told
Business Daily. The railway will cut down the travel time between Guangzhou and Zhuhai from more than four hours to about 90 minutes but, more importantly, link to the line connecting the capital of Guangdong province to Beijing. Mr Dioko said the railway will definitely bring visitors to Macau from the mainland’s more distant provinces and autonomous regions. During the first two months of this year 1.4 million visitors from Guangdong visited Macau, accounting for 30.5 percent of all tourists. Mr Dioko said the improved rail connections with the mainland will place even more pressure on already congested Border Gate facilities. Research carried out by the Institute for Tourism Studies last year found the level of tourists’ satisfaction with hotel, restaurant and transport services had declined for the past three quarters. Mr Dioko predicted that some tourists might choose to stay in cheaper hotels in Gongbei once the railway comes through, perhaps helping balance out an overwhelming number of arrivals. The government’s goal should be to satisfy the tourists that do come to Macau, instead of trying to attract an ever-greater number of arrivals. The government and officials in Beijing were aware of the looming problem. Mr Dioko called on tourism officials to cooperate with their Beijing counterparts to better handle the tourist influx.
InBrief Workers’ union backs 2+2 reform The Macau Federation of Trade Unions has launched a campaign to collect signatures in support for one of the government proposals for political reform. The traditional association agrees with two more directly elected and two more indirectly elected seats at the Legislative Assembly, as well as with the expansion of the electoral committee for the Chief Executive. According to Ponto Final daily, the federation claims to have collected over 1,300 signatures in a single street event, held at the Toi San district last weekend.
Reborn pledge from diaspora A new association might be formed within the next few months to promote business between the territory and second- and third-generation Macanese living overseas. “We have knowledge and many contacts here in Macau and so we know how to help, we can also assist them [Macanese entrepreneurs] if they have interest in establishing themselves here,” Macanese Youth Meeting organiser Duarte Alves told the media.
business daily April 13, 2012
The rich get richer and the poor get nowhere
While Macau has become wealthier, the gap between the rich and the poor has widened and experts say the government’s welfare programmes are not helping narrow it By Cláudia Aranda and Terina Cao firstname.lastname@example.org | email@example.com
ong Wan Mui, 55, moved from Zhongshan to Macau in 1981 to join her husband. She had plans to forge a career that would permit her to provide for the future of her family and her children. She worked in the textile and footwear industry, as well as at a small construction company, but one employer after the other shut down. She found herself without work in 2008 and, despite being in good health and willing to work, she could not find a job in the booming gaming and service industries that matched her skills. Ms Gong and her two daughters, aged seven and 15, have since become one of many Macau families dependent on government financial assistance or the support of charities. They live on a MOP6,000 (US$750) monthly allowance from the Social Welfare Bureau. She spends more than 70 percent of her monthly payment on food and her children’s education, and the rest is spent on her rent of MOP200 a month for a home in public housing in Areia Preta. Ming Chan (not his real name) is a 65-year-old Macau-born resident working as a caretaker of an industrial building in the Iao Hon district. With a monthly salary of MOP3,200 from working 12-hour days, a retirement pension of MOP2,000 a month and an allowance of MOP6,000 a year for being a senior citizen, Mr Ming is also among Macau’s poor. It is with a smile on his wrinkled face that the old man says he succeeded – having waited four years – in getting a flat in public housing near the Border Gate for which he pays a monthly rent of MOP110.
Working hard Many old people died waiting for
public housing, Mr Ming says. So he considers himself a lucky man, compared with many of his jobless contemporaries, who must somehow get by on government allowances. He believes they are being left behind by Macau’s economic boom. Lee Jik-Joen, a visiting professor at the University of Macau’s department of sociology, says the government gives “generous” financial assistance to the disadvantaged. “It is well known that the quality of life of the female-headed single-parent families, disabled people, new arrivals and the older people has been greatly improved,” he says. The amounts of assistance have been increased by raising the minimum subsistence index “for the sake of meeting the basic needs of the vulnerable groups”, Mr Lee says. Also, the government has instituted annual one-off distributions of cash, and education and training funds for eligible residents. A few years ago the government decided that all residents should benefit from the city’s economic success and began distributing cash directly to the people, investing in public housing, allowing tax breaks and giving out financial assistance. Mr Lee says the government is working hard to build public housing for 19,000 households in the next few years. And basic health care for the poor ensures “no one will be left out because they have no money to pay the medical bill”, he says.
Enormously difficult People living in public housing will remain exempt from rent this year, says Cheong Lai, a 44-year-old mother of two, who has been unemployed since 2003, when she was incapacitated by an accident. She has just moved into a new public housing flat in Ilha Verde.
Ms Cheong arrived in Macau in 1997 from Zhanjiang, and worked in the textiles industry until she lost her job. The unemployed, the elderly, poor families, single-parent families, the disabled, the homeless and immigrants that have been in Macau less than three years are entitled to financial support or food assistance if they meet the Social Welfare Bureau’s criteria.
‘Every year Macau sees people demonstrating. That is a signal. It shows that some low-income people are not satisfied with their situation, even though some observers may think that that kind of social unrest is not serious’ Patrick Ho Wai Hong
But for many people that receive no government help, living from day to day is enormously difficult, says the head of the Holy House of Mercy of Macau, António José de Freitas. The poorest and most vulnerable can turn to the Caritas-run shortterm food assistance programme, which is sponsored by the government and which is meant to help those that fall through the social safety net.
Caritas Macau secretary-general Paul Pun Chi Meng says an estimated 2,600 candidates – mostly poor families, the unemployed and elderly – have applied to the food bank since it was opened last September. Mr Pun says the government has allocated MOP10 million for the food bank for two years, and that within this period Caritas Macau expects to help 6,000 applicants.
Many challenges Rising rents for private housing and rising food prices have exacerbated the troubles of the poor, since much of their income is spent on food and accommodation. Last year, Caritas helped 20 households pay their rent. The unemployed are among the most disadvantaged by Macau’s changing, booming economy. Patrick Ho Wai Hong, associate professor in the University of Macau’s department of economics, says the unemployed are usually aged between 45 and 55, poorly educated, many are originally from the mainland and there are many former employees of manufacturing industries. “As those industries are going down, many of them lose their jobs and, due to their low education background, they are not able to find a new job in the services industries,” says Mr Ho. The most vulnerable include new immigrants, who do not qualify for government financial assistance or public housing, and who have to cope with many challenges at the same time, such as finding jobs, affordable homes, and schools for their children – and learning Cantonese. Last year 497 new immigrants paid their first visit to the Multi-Service for New Immigrants, an institution
April 13, 2012 business daily | 9
MACAU under the umbrella of the General Union of Neighbourhood Associations of Macau, asking for help in finding a job, according to Macau Iao Hon Community Centre director Hong Wai Tong and event coordinator Zhang Jyut Jan, who are charge of assisting the new arrivals. Data from the Statistics and Census Service show that there is a wide gap between the rich and poor. “There are large differences in the median income levels across different professional groups,” says Mr Ho of the University of Macau’s department of economics. Last year, gross domestic product per head was MOP531,723, and the unemployment rate dropped to a record low of 2.1 percent. The Statistics and Census Bureau says the median monthly earnings of the employed workforce reached MOP 10,000 in the fourth quarter of 2011, while the median earnings of all residents amounted to MOP12,000.
Trickle-down trickery But much of the population earns less than the median income, as 44.18 percent of all workers earn less than MOP 10,000 a month. Among this 44.18 percent are 55,600 unskilled workers, around 16.4 percent of the employed workforce, who earn MOP5,000 or less. The income gap between unskilled workers and workers in manufacturing on the one hand and employees of the services and gaming industries on the other is “getting bigger rather than smaller” says Mr Ho. “The median monthly income tends to keep increasing as most employers, especially in the gaming and hotel industries, are raising salaries in an effort to retain the imported staff,” he says. However, unskilled workers and workers in manufacturing are not getting similar pay rises, and the poor have trouble with rising rents and food prices.
‘Due to the invisible hand of the free market, the rich will get richer and the poor will be poorer. The disparity between the poor and the rich will become more obvious and the number of people falling below the poverty line will increase’ Lee Jik-Joen
So Mr Ho expects the gap between the rich and the poor to widen. The government is expected to come up with Macau’s latest Gini coefficient this year. The Gini coefficient measures the inequality of wealth on a scale of 0 to 1, with 0 signifying perfect equality and 1 perfect inequality. Macau’s Gini coefficient dropped to 0.37 in 2007-2008 from 0.45 in 2002-2003. “Many scholars hold on to the principle of the trickle-down theory,” says Mr Lee of the University of Macau’s department of sociology. The theory, Mr Lee says, is this: “As long as the community enjoys its socio-economic development, in
the long run, all workers’ salaries will be increased, thus the number of working poor and marginalised will be reduced.” He rejects the theory. “Due to the invisible hand of the free market, the rich will get richer and the poor will be poorer,” he says. “The disparity between the poor and the rich will become more obvious and the number of people falling below the poverty line will increase.”
Hole in the net Since Macau has no poverty line, Mr Lee suggests using the minimum subsistence index. While government’s cash handouts and financial assistance may be considered helpful and even generous, experts agree that they may not be enough to narrow the gap between rich and poor. They also believe the gap may become unsustainable in the long run. As representatives of charities, Mr Pun and Mr Freitas argue that the present social safety nets are not enough to help the poor escape poverty, and that giving out cash is ineffective because people tend to spend it on superfluous things. Both say the government should rethink its policies towards the poorest and most vulnerable. They say the government should identify the real needs of residents and suit its social welfare programmes to those needs. Mr Ho says that in the short term,
the cash handouts policy is meant to reduce social tensions and conflicts, and therefore can be expected to continue. “Every year Macau sees people demonstrating. That is a signal. It shows that some low-income people are not satisfied with their situation, even though some observers may think that that kind of social unrest is not serious,” he says. To ensure the continuation of its social welfare programmes, the government should develop the gaming industry to increase its revenue and thus its resources for social welfare. “The government must develop the gaming industry, attracting clientele from Southeast Asia and America,” he says. “Around 80 percent of Macau’s vis-
itors come from mainland China, but we should diversify the tourism,” Mr Ho says, so the government can start “relying more on Macau’s economy rather than on mainland China’s economy”. He says that in the long run, education and training is the key to improving standards of living. “Macau’s government should encourage unskilled and unemployed workers to receive some training skills that would be useful in helping them, changing and shifting their careers into the service industries.” Mr Lee is of a like mind, saying the government should establish more institutions to give the people proper education and training. “This is the way to help them help themselves”, he says.
• Macau’s Gini coefficient dropped to 0.37 in 20072008 from 0.45 in 2002-2003
• Caritas Macau estimates 2,600 candidates have applied to the food bank
• Close to half of all workers earn less than MOP 10,000 a month
• Amounts of assistance increased by raising the minimum subsistence index
• Present social safety nets not enough to help the poor escape poverty, experts say
business daily April 13, 2012
Mortgage discounts for new buyers Chinese banks are offering first-time home buyers discounts on mortgageinterest rates. Chinese and foreigninvested banks in cities including Beijing, Shanghai and Guangzhou, are offering discounts of 10 to 15 percent off the benchmark mortgage rate to qualified buyers who do not already own a home, the China Securities Journal reported yesterday, citing an unnamed industry source and unnamed bank branch managers.
Short-term money rates inched up China’s short-term borrowing rates increased slightly yesterday as banks reserved cash for an annual tax payment due this month, offsetting the effect of a large net injection of liquidity by the central bank this week. The benchmark weightedaverage seven-day bond repurchase rate inched up to 3.7991 percent from 3.7808 percent at Wednesday’s close. The overnight repo rate rose slightly to 3.0526 percent from 2.9375 percent, and the 14-day rate gained to 3.8353 percent from 3.7992 percent.
Stocks rise on policy easing speculation China’s stocks rose, driving the benchmark index to its biggest gain in two months, amid speculation government data will show economic growth slowed, giving policy makers scope to loosen monetary policy. The Shanghai Composite Index gained 41.94 points, or 1.8 percent, to 2,350.86 at the close, its biggest advance since February 8. The gauge climbed before data tomorrow that will probably show the economy expanded 8.4 percent in the first quarter, the slowest pace since 2009.
Taiwan to raise electricity price Taiwan said yesterday that state-owned Taipower will raise electricity prices by as much as 35 percent following a surge in global crude prices and to curb mounting losses at the utility. The increase, effective May 15, will lift the consumer price index forecast for this year by 0.66 percentage points and lower the economic growth target by 0.26 percentage points, the economic ministry said. The economy ministry said in a statement it would allow Taipower to raise prices for industrial use by 35 percent, residential tariffs by 16.9 percent, and commercial rates by 30 percent.
World Bank cuts China growth to 8.2 pct The country’s economy may grow slightly below its potential rate, but recovery is likely by the middle of the year By Nick Edwards
he World Bank cut its forecast for China’s 2012 economic growth to 8.2 percent yesterday and said a rebound might not begin before the third quarter of the year as slack foreign demand and a government-induced real estate slowdown restrain a recovery. “There is the potential for growth to be bumping along the bottom for longer,” Ardo Hansson, the World Bank’s lead economist for China, told a news conference to release the multilateral lender’s quarterly update on China. The Bank’s new growth forecast for the world’s second-biggest economy would mark a 13-year low, compared with an 8.4 percent, 11-yearlow estimate in November 2011. An 8.2 percent expansion would mean China’s economy was growing slightly below its potential rate, Hansson said. In economic terms, it implies Beijing has space to tweak policies to boost growth without igniting inflation. “We see cyclical weakness continuing, but that the prospects for a soft landing remain high,” Hansson said, adding that Beijing had considerable
fiscal resources available to help bolster the economy if risks to the downside accelerate. The Bank’s economics team believes that when recovery does come, most likely by the middle of the year, but possibly not before the third quarter, its shape would be somewhere between a vigorous ‘V’ and a flat ‘L’. Though the report characterises the bounce as mild, it is faster than expected in November, when 2013 growth was estimated at 8.4 percent compared with 8.6 percent in the latest report. The World Bank forecast China’s export growth at 9.7 percent this year and 11.6 percent in the next, with import growth likely at 12 percent in 2012 and 12.5 percent in 2013. That outcome would see external demand having a negative contribution to growth for a second successive year, with trade subtracting 0.3 percent from GDP in 2012 and adding nothing at all in 2013, according to the Bank’s forecasts.
Property risks While risks to overseas demand for
goods from China’s vast factory sector were seen as a key external restraint on growth in the near term, the bigger problem was domestic real estate. The report welcomed the gradual cooling of a sector that had been in the grip of a speculative frenzy before the government unveiled a slew of policies to calm it two years ago. But it cautioned that downside risks were centred on that adjustment. “Given the significance of the sector in the overall economy, continued vigilance will be required to contain negative spillover effects,” the report said. “A more amplified downturn could have negative economywide impacts.” Hansson said that property tightening so far had not been overdone when looking at things on a national basis, though developments in specific cities might require particular policy responses to prevent wider fallout. “This is a sector that is difficult to micro-manage and fine-tune. There’s a lot of uncertainty about the timing of the effects after you pull the policy levers,” he said. Reuters
HKEx seeking first acquisition financing The holding company for the Hong Kong stock exchange may seek up to US$3 billion in financing for London Metal Exchange bid By Stephen Aldred and Denny Thomas
ong Kong Exchanges and Clearing Ltd is in talks with banks for a loan to help it finance an offer for the London Metal Exchange, sources told Reuters, a sign that the world’s most valuable bourse is aggressively pushing ahead with its bid. According to a source with direct knowledge of the matter, the holding company for the Hong Kong stock exchange, known as HKEx, is seeking to raise up to US$3 billion in its first-ever acquisition loan to back its bid for the 135-year old commodities exchange. A second source confirmed the loan discussions, but could not verify the amount. HKEx sat on the sidelines when the
exchange consolidation wave hit major financial capitals more than a year ago. Its place on the LME auction’s short list, together with its loan pursuit, shows that this time the HKEx is ready to pounce. HKEx declined to comment. In addition to HKEx, LME has short-listed three other suitors - CME Group Inc, NYSE Euronext and InterContinental Exchange Inc (ICE), and has set a May 7 deadline for second-round bids. Analysts and industry sources have valued LME at between 500 million and 1.5 billion pounds (US$783 million-US$2.4 billion). A US$3 billion acquisition financing package suggests HKEx’s willingness to pay top dollar for control of the world’s biggest market for industrial
metals. The company could use leftover cash from the loan for other corporate purposes. As in any auction, HKEx could decide not to proceed with a bid or a loan to back it. HKEx, with a market value of about US$18 billion, is the world’s biggest bourse by market capitalisation, sitting on cash and short-term investments of about HK$30.1 billion (US$3.9 billion) as of the end of last year, according to Thomson Reuters data. The exchange has limited ability to dip into cash reserves to fund purchases, however, as it is required to maintain a capital buffer to meet counter-party risks involved with running a clearing house. Reuters
April 13, 2012 business daily | 11
Sony maps out revival plan, cuts jobs
Sony Corp. said it will cut 10,000 jobs and spend nearly US$1 billion on restructuring costs this fiscal year
ony Corp said it is to cut around 10,000 jobs - 6 percent of its global workforce as new CEO Kazuo Hirai moves to reduce costs and staunch huge losses at the Japanese electronics giant. After a brief honeymoon since taking over from Howard Stringer this month, Hirai this week doubled Sony’s annual loss forecast to a record US$6.4 billion, and is under pressure to fix an ailing TV unit and turn around a brand that has been trampled on by consumer gadget leaders Apple Inc and South Korea’s Samsung Electronics. “We have heard a multitude of investor voices calling for change,” Hirai told a packed news conference at Sony’s Tokyo headquarters, close to the company’s first factory established 65 years ago. “Sony will change.” “Sony has always been an entrepreneurial company. That spirit has not changed,” he said. Sony, which has suffered its fourth consecutive year in the red, said it would usher in changes across its divisions, boost its games business and expand further into emerging markets. “Now is the time for Sony to change,” Hirai told reporters from Sony’s Tokyo headquarters. “What is urgent is that we strengthen our core businesses while rebuilding our TV business,” he added. In a statement ahead of the briefing, Sony said it would post a restructuring charge of about 75 bil-
BOJ to pursue monetary easing Bank of Japan Governor Masaaki Shirakawa said yesterday that the central bank will pursue “powerful monetary easing” to defeat deflation and ensure sustainable economic growth, reiterating his recent comments on the bank’s monetary policy. “The BOJ recognises that Japan’s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability,” Shirakawa said at the opening of the BOJ’s branch managers meeting.
CEO Kazuo Hirai says Sony ‘will change’
lion yen (US$926 million) in the year to March 2013, and aims to cut its fixed costs in the TV business by 60 percent in the 2013/14 business year from this year’s levels, and trim 30 percent off the business’ operating costs. Eyeing new business opportunities in the fast-growing medical business, Sony said it was targeting annual sales of 50 billion yen (US$617 million) in that sector in 2014/15, and was scouting for acquisitions and other strategic investments.
The job cuts follow two rounds of layoffs Stringer made in his sixyear tenure at Sony. Chief Financial Officer Masaru Kato noted earlier this week that around 5,000 workers would come off the Sony payroll with the sale of a chemicals business and a small liquid crystal display fabricator. Sony shares closed 0.9 percent higher at 1,528 yen yesterday ahead of the briefing. The benchmark Nikkei average ended up 0.7 percent. Agencies
South Korea’s ruling party wins parliament vote
Yen pulls away from peaks The safe-haven yen pulled away from multi-week peaks against major currencies yesterday after the European Central Bank official hinted at the possibility of more bond-buying. The yen eased 0.1 percent helping the dollar climb back to 80.90 yen, up from a six-week low at 80.57, while the euro rose to 106.30 yen from Wednesday’s trough of 105.45.
South Korea’s ruling conservatives win parliamentary poll fought mostly on economic issues
outh Korean President Lee Myung Bak’s party retained control of parliament in an upset win that boosts its chances of retaining the presidency in December elections. Lee’s New Frontier Party won 152 of the 300 seats in the National Assembly while the main opposition Democratic United Party secured 127 and its partner took 13, results showed. The victory may give new NFP chief Park Geun Hye momentum for the presidential race. While Lee’s popularity has plummeted since his term began in 2008 amid slowing growth and rising inflation, opposition pledges to raise taxes, boost welfare spending and revisit a U.S. trade deal failed to resonate. “It’s a bit of an unexpected result, given that people are grumbling about the economy,” said Lee Seung Woo, a strategist at Daewoo Securities in Seoul. “But the results show people made choices independent of daily life. The perception is that there will be no major changes in policies.” The vote took place as North Ko-
head of the ruling Workers’ Party, further consolidating his power since the death of his father Kim Jong Il in December. The benchmark Kospi index fell yesterday, declining 0.4 percent to 1,986.63, the lowest level since March 7.
South Korea’s New Frontier Party won 152 of the 300 seats in the National Assembly
rea prepared to fire a long-range rocket in defiance of international condemnation, threatening a U.S. food aid deal and roiling markets. The totalitarian state on Wednesday named leader Kim Jong Un
The NFP’s majority was reduced as it struggled to overcome a series of scandals. Before Wednesday’s vote, the party held 162 parliament seats, while the DUP had 80 and the United Progressive Party held seven. The top campaign issue was the economy. Opposition politicians charged that Lee failed to deliver on a campaign pledge to increase annual growth by 7 percent and per capita income to US$40,000. Economic growth has slowed to an average 3.2 percent from 4.3 percent during predecessor Roh’s administration while inflation has risen. The benchmark Kospi index has fallen about 6 percent in the past year. Bloomberg
India’s industrial output up in Feb Indian industrial production rose less than estimated in February as weaker overseas demand and the highest interest rates since 2008 curbed output. Production at factories, utilities and mines advanced 4.1 percent from a year earlier, compared with a revised 1.1 percent gain in January, the Central Statistical Office said in a statement yesterday. The median of 36 estimates in a Bloomberg News survey was for a 6.7 percent gain.
Japan on full alert amid rocket launch Japanese Prime Minister Yoshihiko Noda said yesterday that the country was on full alert against North Korea’s planned rocket launch, expected at any time in the coming days. “We want to seek their self-restraint until the last minute,” Noda told reporters as he arrived for talks with a special taskforce set up to handle Japan’s response to the planned launch. “But we want to be fully prepared for any possible contingency,” Noda said.
business daily April 13, 2012
MARKETS Ticker NAME
Hang SENG INDEX Ticker NAME
HONG KONG EXCHNG
HSBC HLDGS PLC
AIA GROUP LTD
IND & COMM BK-H
LI & FUNG LTD
BANK OF CHINA-H
BANK OF COMMUN-H
NEW WORLD DEV
BANK EAST ASIA
PING AN INSURA-H
BOC HONG KONG HO
POWER ASSETS HOL
CATHAY PAC AIR
SINO LAND CO
SUN HUNG KAI PRO
CHINA COAL ENE-H
CHINA CONST BA-H
CHINA LIFE INS-H
TINGYI HLDG CO
WANT WANT CHINA
CHINA RES ENTERP
CHINA RES LAND
CHINA RES POWER
CHINA UNICOM HON
CLP HLDGS LTD
COSCO PAC LTD
HANG LUNG PROPER
HANG SENG BK
HENDERSON LAND D
HONG KG CHINA GS
Price 20327.32 52W (H) 24260.76
(L) 16170.35 37
IN FOCUS Shanghai Composite index (Last 1 month) 2500 2440 2380 2320
Shanghai Shenzhen CSI 300 NAME
AIR CHINA LTD-A
CSR CORP LTD -A
BANK OF BEIJIN-A
DAQIN RAILWAY -A
SANY HEAVY INDUS
BANK OF CHINA-A
DATANG INTL PO-A
BANK OF COMMUN-A
BAOSHAN IRON & S
EVERBRIG SEC -A
GD MIDEA HOLDING
SHANXI LU'AN -A
BYD CO LTD -A
CHINA CITIC BK-A
CHINA CNR CORP-A
CHINA COAL ENE-A
GD POWER DEVEL-A GF SECURITIES-A
SHENZ DVLP BK-A
CHINA CONST BA-A
CHINA COSCO HO-A
CHINA CSSC HOL-A
CHINA EAST AIR-A
CHINA LIFE INS-A
HUAXIA BANK CO
CHINA MERCH BK-A
IND & COMM BK-A
YANGQUAN COAL -A
INNER MONG BAO-A
INNER MONG YIL-A
NINGBO PORT CO-A
CHINA STATE -A
PANGANG GROUP -A
CHINA VANKE CO-A
PING AN INSURA-A
POLY REAL ESTA-A
CHINA YANGTZE-A CITIC SECURITI-A
Hang SENG CHINA ENTREPRISE INDEX NAME
Price 2570.436 52W (H) 3378.703 (L) 2254.56 MOVERS 280 9 11
NAME PETROCHINA CO-H
CHINA MERCH BK-H
PICC PROPERTY &
PING AN INSURA-H
CHINA NATL BDG-H
AIR CHINA LTD-H
BANK OF CHINA-H
CHINA RAIL CN-H
CHINA RAIL GR-H
BANK OF COMMUN-H
CHINA CITIC BK-H
CHINA COAL ENE-H
BYD CO LTD-H
CHINA COM CONS-H
CHINA CONST BA-H
CHINA COSCO HO-H
IND & COMM BK-H
CHINA LIFE INS-H
FTSE TAIWAN 50 INDEX NAME ACER INC
PRICE DAY %
PRICE DAY %
FAR EASTERN NEW
FAR EASTONE TELE
SYNNEX TECH INTL
FORMOSA CHEM & F
TAIWAN GLASS IND
ASIA CEMENT CORP
AU OPTRONICS COR CATCHER TECH
Price 10664.61 52W (H)13721.26 (L) 8058.58 MOVERS 35 4 1
PRICE DAY %
TAIWAN MOBILE CO
TPK HOLDING CO L
HON HAI PRECISIO
HOTAI MOTOR CO
CHANG HWA BANK
HUA NAN FINANCIA
YULON MOTOR CO
CHINA STEEL CORP
MEGA FINANCIAL H
NAN YA PLASTICS
CHENG SHIN RUBBE CHIMEI INNOLUX C CHINA DEVELOPMEN
COMPAL ELECTRON DELTA ELECT INC
Price 5319.88 52W (H) 6265.48 (L) 4643.05 MOVERS 21 24 5
April 13, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) gaLaXy enTerTaInMenT
MeLCo CroWn enTerTaInMenT
SanDS CHIna LTD
MgM CHIna HoLDIngS
SJM HoLDIngS LTD
CURRENCY EXCHANGE RATES MAJORS
3.85 3.79 3.73
3.67 3.61 3.55
MACAU RELATED STOCKS PRICE
DAY % YTD % 0
AMAX HOLDINGS LT
BOC HONG KONG HO
CHEUK NANG HLDGS
CHOW TAI FOOK JE
HANG SENG BK
HUTCHISON TELE H
LUK FOOK HLDGS I
MELCO INTL DEVEL
HSBC HLDGS PLC
Pataca - Taiwan dollar exchange rate (Last 1 year)
Wynn MaCaU LTD
MGM CHINA HOLDIN
NEW WORLD DEV
SANDS CHINA LTD
SHUN HO RESOURCE
World Stock MarketS - Indices NAME
DOW JONES INDUS. AVG
NASDAQ COMPOSITE INDEX
FTSE 100 INDEX
HANG SENG INDEX
CSI 300 INDEX
TAIWAN TAIEX INDEX
SHUN TAK HOLDING
SJM HOLDINGS LTD
WYNN MACAU LTD
BOC HONG KONG HO
S&P/ASX 200 INDEX
JAKARTA COMPOSITE INDEX
FTSE Bursa Malaysia KLCI
NZX ALL INDEX
PHILIPPINES ALL SHARE IX
HSBC Dragon 300 Index Singapor
STOCK EXCH OF THAI INDEX
INTL GAME TECH
HO CHI MINH STOCK INDEX
JONES LANG LASAL
Laos Composite Index
LAS VEGAS SANDS
MACAU CAPITAL IN
MGM CHINA HOLDIN
MGM RESORTS INTE SHUFFLE MASTER SJM HOLDINGS LTD WYNN RESORTS LTD
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalization. All data supplied by Bloomberg unless otherwise indicated.
ONE YEAR Suscription REGULAR 1,560 Mop 20% discount 1,150 Mop
First Name (Mr/Mrs/Ms)
Address Postal Code
Phone Fax Email
Subscription Period: from
I wish to pay by Cheque or Direct Deposit Make payable to De Ficção-Projectos Multimedia Banco Comercial de Macau (BCM) Acct# 1099732111 Make payable to De Ficção-Projectos Multimedia Limitada Banco Nacional Ultramarino (BNU) Acct# 9008096687 Visa Master Card American Express Credit Card Account Number
Expiration Date mm
Cardholder’s Name Cardholder’s Signature
business daily April 13, 2012
Opinion in the late 1960’s that without exchange-rate movements as a shock absorber, a currency union requires fiscal transfers as a way to share risk. For a normal country, the national income-tax system constitutes a huge automatic stabilizser across regions. In the US, when oil prices go up, incomes in Texas and Montana rise, which means that these states then contribute more tax revenue to the federal budget, thereby helping out the rest of the country. Europe, of course, has no significant centralized tax authority, so this key automatic stabilizer is essentially absent. Some European academics tried to argue that there was no need for US-like fiscal transfers, because any desired degree of risk sharing can, in theory, be achieved through financial markets. This claim was hugely misguided. Financial markets can be fragile, and they provide little capacity for sharing risk related to labor income, which constitutes the largest part of income in any advanced economy.
A Centerless Euro Cannot Hold
Political legitimacy needed
By Kenneth Rogoff
Professor of Economics and Public Policy at Harvard
ith youth unemployment touching 50 percent in eurozone countries such as Spain and Greece, is a generation being sacrificed for the sake of a single currency that encompasses too diverse a group of countries to be sustainable? If so, does enlarging the euro’s membership really serve Europe’s apparent goal of maximizing economic integration without necessarily achieving full political union? The good news is that economic research does have a few things to say about whether Europe should have a single currency. The bad news is that it has become increasingly clear that, at least for large countries, currency areas will be highly unstable unless they follow national borders. At a minimum, currency unions require a confederation with far more centralized power over taxation and other policies than European leaders envision for the eurozone. What of Nobel Prize winner Robert Mundell’s famous 1961 conjecture that national and currency borders need not significantly overlap? In his provocative American Economic Review paper “A Theory of Optimum Currency Areas,” Mundell argued that as long as workers could move within a currency region to where the jobs were, the region could afford to forgo the equilibrating mechanism of exchange-rate adjustment. He
credited another (future) Nobel Prize winner, James Meade, for having recognized the importance of labor mobility in earlier work, but criticized Meade for interpreting the idea too stringently, especially in the context of Europe’s nascent integration. Mundell did not emphasize financial crises, but presumably labor mobility is more important today than ever. Not surprisingly, workers are leaving the eurozone’s crisis countries, but not necessarily for its stronger northern region. Instead, Portuguese workers are fleeing to booming former colonies such as Brazil and Macau. Irish workers are leaving in droves to Canada, Australia, and the United States. Spanish workers are streaming into Romania, which until recently had been a major source of agricultural labor in Spain.
Labour mobility critical
Not surprisingly, workers are leaving the eurozone’s crisis countries, but not necessarily for its stronger northern region. Instead, Portuguese workers are fleeing to booming former colonies such as Brazil and Macau. Irish workers are leaving in droves to Canada, Australia, and the United Statesedit risks over which it has very little control
Still, if intra-eurozone mobility were anything like Mundell’s ideal, today we would not be seeing 25 percent unemployment in Spain while Germany’s unemployment rate is below 7 percent. Later writers came to recognize that there are other essential criteria for a successful currency union, which are difficult to achieve without deep political integration. Peter Kenen argued
Founder & Publisher Paulo A. Azevedo | firstname.lastname@example.org Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief José I. Duarte Creative Director José Manuel Cardoso Designer Janne Louhikari Newsdesk Cláudia Aranda, Kristy Chan, Kelsey Wilhelm, Cherry Lee, Terina Cao, Tony Lai, Vitor Quintã Photography Carmo Correia, John Si, Manuel Cardoso Assistant to the publisher Laurentina da Silva | email@example.com office manager Elsa Vong | firstname.lastname@example.org Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Kenen was mainly concerned with short-term transfers to smooth out cyclical bumpiness. But, in a currency union with huge differences in income and development levels, the short term can stretch out for a very long time. Many Germans today rightly feel that any system of fiscal transfers will morph into a permanent feeding tube, much the way that northern Italy has been propping up southern Italy for the last century. Indeed, more than 20 years on, Western Germans still see no end in sight for the bills from German unification. Later, Maurice Obstfeld pointed out that, in addition to fiscal transfers, a currency union needs clearly defined rules for the lender of last resort. Otherwise, bank runs and debt panics will be rampant. Obstfeld had in mind a bailout mechanism for banks, but it is now abundantly clear that one also needs a lender of last resort and a bankruptcy mechanism for states and municipalities. A logical corollary of the criteria set forth by Kenen and Obstfeld, and even of Mundell’s labor-mobility criterion, is that currency unions cannot survive without political legitimacy, most likely involving region-wide popular elections. Europe’s leaders cannot carry out large transfers across countries indefinitely without a coherent European political framework. European policymakers today often complain that, were it not for the US financial crisis, the eurozone would be doing just fine. Perhaps they are right. But any financial system must be able to withstand shocks, including big ones. Europe may never be an “optimum” currency area by any standard. But, without further profound political and economic integration – which may not end up including all current eurozone members – the euro may not make it even to the end of this decade. © Project Syndicate
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email email@example.com Advertising firstname.lastname@example.org Subscriptions email@example.com
April 13, 2012 business daily | 15
Macau’s labour market dilemma Ricardo Siu Associate Professor of Business Economics, University of Macau
vailability of the right quantity and quality of labour are necessary to ensure service quality, and hence create a competitive edge for a modern leisure industry in a global market. This argument is true in Macau, as it aims to develop itself as a world tourism and leisure centre in the Pearl River Delta region. Nevertheless, a number of intricate issues are evidently blocking the proper functioning of Macau’s labour market. These issues are mainly reflected in the distortion of supply and demand, and result in a mismatch in the labour market. Indeed, dilemmas related to the proper functioning of the labour market may persist on account of the inclination of various parties to protect their economic benefits, and because of the passive role taken by the government.
The dilemma To economists and policymakers, an unemployment rate of about 4 percent is commonly regarded as “fullemployment” which is an unattainable level in any single economy. Benefited from the liberalisation and rapid growth of the casino industry since 2002, Macau’s unemployment rate has dropped significantly from a record high 7.1 percent in April 2000 to less than 4 percent from mid-2005, and down to a record low of 2.1 percent at the end of last year. Compared to the stagnant or even shrinking performance of most economies in North America and
Europe, especially since the outbreak of the global economic crisis in 2008, Macau undoubtedly stands out as a “miracle”. In view of shortages in labour quantity and quality, increasing the number of imported workers has been urged constantly by employers, including small and medium enterprises from various service sectors, in the past few years. From the standpoint of the community however, maintaining a situation of excess demand by restricting imported labour is certainly the most direct measure to protect and raise the income of workers. In a economic society such as Macau, where around half of the employed population has not completed high school education and a larger proportion is highly immobile in the job market, high protectionism turns out to be the consensus in the community. In the coming few years, the wrestle between employers and the community in defending their economic advantages may quite likely remain an unsolved puzzle.
Mismatch A common consequence of “full employment” and high protectionism in a labour market is the mismatch of labour. If we refer to the related facts in Macau, this issue is evident. In labour economics, when excess demand for labour expands within an industry, and if the gap cannot be narrowed by importing labour, the only alternative is to find the needed labour from other business sectors.
In this process, if the situation persists and the excess demand in that industry continues to grow, which is exactly the case observed in Macau over the past few years, workers may leave a job for which they are best qualified and perhaps interested to chase a higher income. On the other hand, to acquire the needed quantity of labour or ensure a minimum level of business operations, less-qualified or even unqualified workers have to be considered,
To deal with imperative problems, short-term imported labour seems an inevitable measure … in the medium to long-term, enhancing the quality of the labour force is an ultimate solution to lower protectionism, hence softening the rigidity of the existing problems.
not only by that industry but in other business sectors where qualified labour is “leaking away”. Indeed, this mismatch has been evidently associated with Macau’s labour market following the rapid expansion of the casino industry, hence the negative spillover effects to other business sectors in the past few years.
Policy puzzles Hence, effective and proactive action from the government is generally expected. Nevertheless, criticism has been publicised by both the industries and the community that the Macau government may not be able to fulfil its expected functions in the market. Despite the positive attitude or willingness to help, the effectiveness of related labour policies is largely encapsulated by social pressures, which have evidently undermined the efficiency of the labour market. According to the 2012 Index of Economic Freedom released by The Heritage Foundation, Macau’s labour freedom under the category of regulatory efficiency has lowered by 5 points from 60 last year to 55 this year. Consequently, Macau’s related ranking among 184 jurisdictions dropped from 95 to 116.
Any solution? Macau’s existing labour market dilemma is a knotty issue, which can hardly be resolved in the foreseeable years. Nevertheless, it is not impossible to deter further deterioration of the existent problems, or to improve the situation if needed measures are to be introduced effectively. To deal with imperative problems, short-term imported labour seems an inevitable measure despite the fact that, by the end of last year, it accounted for about 28 percent of the city’s employed population. In the medium to long-term, enhancing the quality of the labour force is an ultimate solution to lower protectionism, hence softening the rigidity of the existing problems. To ensure the advancement of the abilities and competitiveness of the local labour force, proactive plans to upgrade Macau’s education system and on-the-job training programmes are indispensable, but definitely challenging projects to the Macau society and the government. © Project Syndicate
wires Leading reports from Asia’s best business newspapers
Times of India
The Straits Times
The Ministry of Economic Affairs blocked on Wednesday a proposal by state-run Taiwan Power Co. to drastically increase electricity prices. “There are a lot of concerns and worries about the effect of the price increases on households, from the representatives of the Consumers’ Foundation in particular,” said the vice-minister of economic affairs, Lin Sheng Chung. Lin said it was difficult to determine when new electricity rates would come into effect.
Workers in India can expect an average wage increase of 11.5 percent this year, less than last year, as companies grapple with the sluggishness of the economy, according to a survey by consulting firm Right Step Consulting. Employees won an average wage increase of 11.9 percent last year. The consulting company said the country’s economy had grown 8.4 percent over the last two years, but slowed considerably in the 12 months ended March.
From January, Singapore Central Provident Fund members can claim income tax relief of up to S$7,000 (US$5,574) after topping up with cash the Special and Retirement Accounts of their parents-in-law and grandparents-inlaw. Tax relief is currently offered on cash top-ups to the accounts of spouses, siblings, parents and grandparents. Fund members will be entitled to use the savings from their Ordinary Account savings to make top-ups.
The rate of economic growth in the Philippines is likely to outstrip last year’s, given increased public spending, investment and private consumption, the Asian Development Bank said. “Longstanding structural weaknesses” are hurdles to achieving growth, the report said. The bank has forecast 4.8 percent growth in gross domestic product this year, which is less than the government’s target range of 5 percent to 6 percent.
business daily April 13, 2012
CLOSING British PM calls for Myanmar support
Taiwan to levy capital gains tax
British Prime Minister David Cameron yesterday called on the international community to “get behind” burgeoning reforms in Myanmar ahead of his scheduled historic visit to the country. Cameron praised Myanmar’s President Thein Sein and opposition leader Aung San Suu Kyi, who this month won a seat in parliament. “Where reform is beginning, like in Burma, we must get behind it,” Cameron told university students in Jakarta.
Taiwan’s government said yesterday it will introduce a capital gains tax on stocks and stock futures trading from next year, but foreign investors who do not have permanent offices on the island will be exempted from the new levy. Individual investors who make more than T$3 million (MOP813,000) of investment gains in the stock market annually will be subject to the tax, Reuters reported, part of broader reform plans to address the growing rich-poor gap.
Philippines moves to end standoff
he Philippines replaced its biggest warship with a Coast Guard vessel as it pushes to end a three-day standoff with Chinese authorities in the South China Sea, where the countries are competing for oil, gas and fish. The smaller Philippine ship “relieved” the BRP Gregorio del Pilar, a Naval vessel obtained from the U.S. last year, from the disputed Scarborough Shoal, Armed Forces Northern Luzon commander Lieutenant General Anthony Alcantara told reporters. China today reiterated that its two ships were not military vessels and were providing protection for fishermen that the Philippines wants to arrest, Bloomberg reported. The Philippines submitted a proposal to resolve the standoff, Raul Hernandez, a spokesman for the
Foreign Affairs Department, told reporters in Manila yesterday. “The ball is now in their court,” he said. The conflict is the latest stemming from overlapping claims in the South China Sea as countries fail to agree on how to implement a set of rules for operating in the waters. China claims most of the sea as its own and used patrol boats last year to disrupt hydrocarbon survey activities by the Philippines and Vietnam. “We hope that this issue does not become complicated and amplified,” China Foreign Ministry spokesman Liu Weimin told reporters in Beijing yesterday.
While talks with Beijing are underway, Manila removed warship from resource-rich disputed shoal in South China Sea
Chinese surveillance ships off Scarborough Shoal are providing protection for fishermen that the Philippines wants to arrest, China says
Travel plans Philippine Foreign Secretary Albert del Rosario said he wants to resolve the deadlock over illegal fishing be-
fore he travels to the United States on Sunday. Talks with Chinese envoy Ma Keqing, whom he last met Wednesday, are “moving forward,” he told reporters in Manila yesterday. “There’s some urgency if she wants to negotiate with me,” he said. “As far as I’m concerned, I want to get it done before I leave.” The Philippines and China have issued competing accounts of the confrontation. While the Philippines said Chinese ships had prevented it from arresting fisherman on its territory, China said the Philippines had
illegally blocked the passage of ships seeking shelter from rough weather. “We are working on a resolution on a diplomatic level,” Philippine President Benigno Aquino told reporters in Manila on Wednesday. “No one will benefit if violence breaks out.” Philippine personnel attempting to arrest Chinese fishermen aboard eight boats for illegal catches of giant clams and live sharks were blocked by two marine surveillance ships, the foreign affairs department in Manila said.
China firms to sell US$2 bln in bonds With dollar bonds’ interest rates much lower than for yuan notes, Chinese firms are jumping on the bandwagon
hinese and Hong Kong companies are seeking to sell as much as US$2 billion (MOP16 billion) in dollar-denominated bonds as borrowers take advantage of record-low interest rates. China National Petroleum Corp. is marketing US$650 million of fiveyear notes and US$500 million of 10-year securities, a person familiar told Bloomberg. Shenzhen International Holdings Ltd. and PCCW Ltd. are in talks with investors for benchmark-sized offerings, other people familiar with the matters said. Benchmark typically means at least US$500 million. Dollar-bond sales by companies in China, including Hong Kong, jumped 27 percent this year to US$13.84 billion from the same period a year earlier, according to data compiled by Bloomberg. Borrowing costs for dollar debt by Asian companies has fallen 40 basis points to 4.92 percent since the end
of December as the United States Federal Reserve keeps its plan to hold interest rates near zero at least through late 2014. “Dollar funding costs are so much cheaper than onshore as nominal yields are lower and the market is deeper for dollars,” Becky Liu, an analyst at HSBC Holdings Plc, the biggest underwriter of bonds denominated in the U.S. currency by Chinese and Hong Kong-based companies this year, said. “So far the credit quality of the issuers has been pretty decent and some are even top-tier quality, like CNPC. We’re likely to see more issuance out of China, including first-time issuers.” The yield on top-rated 10-year yuan-denominated corporate notes was 5.15 percent at the end of March, 165 basis points more than the rate on similar-maturity Chinese government securities, Chinabond indexes show. That was the biggest gap since Jan. 9.