Despite clear signals that pessimism is more appropriate.
Oh well. He has to do what he has to do. ]
Siau Ming En
September 17, 2016
SINGAPORE — The world economy is not in a pessimistic state, but the present narrative talks itself into believing that the global economic situation is in “a funk”, Deputy Prime Minister Tharman Shanmugaratnam said on Friday (Sept 16) at The Singapore Summit dialogue.
“Don’t let the perceptions or the narrative have their own dynamic. They are overplayed, they are overstated and the future depends on us and what we do,” he told about 400 guests from 36 countries at Shangri-La Hotel.
Responding to a question on why the world economy is at its present state of pessimism and slow growth, given that there are job opportunities, labour and liquidity, he reiterated that it is not in a funk.
Adding that the “world economy looks very different when you are sitting in Asia”, Mr Tharman said that there is growth and business being done in the region, jobs are being created and incomes are rising.
“There has been an over-emphasis on monetary policy as some sort of solution to all our problems, and an under-emphasis on policies and collective action to boost the real economy — that’s the nature of our problem.”
In the session moderated by international broadcaster Nik Gowing, Mr Tharman answered questions that centred mostly on globalisation and its effects, in particular, how things that are happening in the United States and the United Kingdom, such as Brexit, could derail the Association of South-east Asian Nations (Asean).
Asked whether Asean was discouraged by Europe’s situation, Mr Tharman said that Asean cannot take the wrong lessons from Europe. He added that Asean is not doing badly on the investment front and in the trading of goods.
“I think we are slow on services and... we really need to get a lot more serious (about it), whether it is financial services or a whole range of modern services.... We will all do better if we open our markets (and) develop strengths in things we are good at.”
As to whether countries can learn from Singapore’s social welfare policy, Mr Tharman said the Republic has used a combination of social and economic policies to help its citizens, who have to be lifelong learners.
There is a very important space in public and economic policies that has allowed state activism to support personal effort and responsibility at work, raising families, and education, he added.
[In terms of actual facts, the above is sorely lacking in any hard facts. Just platitudes and assertions.]
Singapore’s rough week for shipping foreshadows challenging 2017
September 16, 2016
SINGAPORE — It has been a rough week for Singapore’s shipping services industry and the going could get even tougher next year with record debt falling due.
Rickmers Maritime, which operates container ships, said Thursday (Sept 15) it is asking creditors for leniency on about US$253 million (S$345 million) of debt. Marco Polo Marine, a provider of barges and tugs for coal, steel scrap and iron ores, said Tuesday it’s asking bondholders for approval to delay paying S$50 million of securities due next month. The city-state’s shipping and other logistics firms face a record US$1.8 billion in note repayments in 2017, data compiled by Bloomberg show.
Singapore, a former British colony, relied on its port to help transform itself into one of Asia’s so-called tiger economies. Container throughput shrank 8.7 per cent in 2015 as global trade slowed, while slumping crude prices have hurt firms that service the energy industry. Swiber Holdings, which operates construction vessels to support the oil industry, defaulted in August, while Ezra Holdings said last week it held talks on potential fundraising. Sembcorp Marine and Keppel Corp have reported slumping profits.
“It doesn’t look like the worst is over for the maritime industry,” said Mr Joel Ng, an analyst at KGI Fraser Securities in Singapore. “It’s tough for the creditors. The banks need to continue to provide liquidity given the industry’s cashflows are tight.”
Singapore’s bad loans rose to 2.25 per cent of the total in 2015, the highest since 2009. Oil services firms are also facing mounting difficulties as crude prices have dropped to about half the prices in 2013, forcing energy giants to put investment plans on hold.
“The shipping and oil and gas space has really been a minefield in the bond market,” said Mr Terence Lin, an assistant director of bonds and portfolio management at fund researcher iFast Corp in Singapore. “One of the positives from this is that there’ll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes.”
Rickmers Maritime won’t be able to repay US$179.7 million of senior debt due in March 2017 and the interest and principal on S$100 million of notes due in May 2017, it said in a filing Thursday. It’s asking investors to exchange their debt with S$28 million of new perpetual securities to avoid potential liquidation or judicial management that it says would be “likely to result in zero recovery for noteholders”.
Marco Polo Marine told some noteholders of its debt-delay plan at a meeting Tuesday, and those present “appeared generally supportive”, it said in an exchange filing. It will hold another meeting on Sept 16 on the debt extension proposal, which it didn’t disclose.
“The boards and management teams of the offshore and marine bond issuers still seem to be in denial on the need to do proper balance sheet restructuring,” said Mr Kurt Metzger, a Singapore-based restructuring consultant at GEM Advisory. “Bondholders are facing significantly higher risk and should be looking for significantly higher returns and improved structures.”
Unemployment rises in second quarter, with fewer vacancies than job seekers
SINGAPORE - The labour market reflected slower economic conditions with unemployment rising and vacancies falling in the second quarter of the year.
The seasonally-adjusted unemployment rate rose to 2.1 per cent in June this year, up from 1.9 per cent in March, according to official data from the Manpower Ministry (MOM) on Thursday (Sept 15), after preliminary estimates were released in July.
For citizens, unemployment was up to 3.1 per cent in June, from 2.6 per cent in March, while for residents the rate rose from 2.7 per cent to 3 per cent over the same period.
More people found themselves out of work for at least 25 weeks. The long-term unemployment rate of 0.8 per cent for Singaporeans and permanent residents was the highest since 2010, with those aged 40 and over and among degree holders especially affected.
Job vacancies, which have been falling since last year, hit 49,400 in June after being adjusted for variations due to peak seasons. However, it was the first time in four years that there were fewer vacancies than job seekers.
Redundancies rose, with 4,800 workers let go in the second quarter, up by nearly 50 per cent from the same quarter last year. This means 9,510 workers have been retrenched or had their contracts aborted in the first half of the year - the highest figure since 2009.
Fewer than half, or 45 per cent, of residents who lost their jobs in the first quarter of the year were back in work by June.
Overall, total employment growth slowed to 4,200 over the second quarter, less than half of the growth a year ago. This brought the total number of workers in Singapore to 3,673,400 as of June. The manufacturing sector continued to shed workers, ending the quarter with 3,400 fewer workers than it started with.
Local employment fell slightly by 200 in the first half of the year, according to a separate MOM statement, but this was less than the drop of 8,900 in the first half of last year.
The ministry said the decline is due to both structural and cyclical factors.
"Structurally, growth of the local working-age population is slowing, due to smaller cohorts of younger locals entering the workforce, and more 'baby boomers' retiring... local employment growth since 2015 has been further weighed down by cyclical weakness in the economy due to the subdued global economic conditions," said the ministry.
Foreign employment growth continued to be slower than in the earlier part of the decade. In the first six months of this year, a net 11,800 foreign employees were added, excluding foreign domestic workers. The bulk of these, or 9,300, were work permit holders, many of whom found work in the food and beverage and administrative and support services industries.
One bright spot was that labour productivity rose by 0.8 per cent in the first half of this year, compared with the same period last year.
With weaker global economic conditions, MOM said it expects demand for labour to remain modest for the rest of the year and for redundancies to rise "in sectors facing weak external demand and that are undergoing restructuring".
On the other hand, there could still be a shortage of workers in domestically-oriented sectors such as community, social and personal services, and accommodation and food services.
[China has been the engine of world economic growth. But there are signs that they have their own problems. Are these transient or insignificant? Or potential pitfalls?
Who do you want to believe?]
Increasing risk of banking crisis for China banking: international watchdog
Early warning indicator highest of all countries assessed by Bank for International Settlements
19 September, 2016
An early warning of financial overheating – the credit-to-GDP gap – hit 30.1 in China in the first quarter of this year, the financial watchdog said in a review of international banking and financial markets published on Sunday.
Any level above 10 signals a crisis occurring “in any of the three years ahead,” the BIS said. China’s indicator is way above the second-highest level of 12.1 for Canada and the highest of all the countries assessed by the BIS.
Debt has played a key role in shoring up China’s economic growth following the global financial crisis. Outstanding debt reached 255 per cent of GDP in 2015, fuelled in large part by a surge in corporate borrowing, up from 220 per cent just two years earlier.
China’s bank lending in August more than doubled from the previous month, with much of the gain down to strong mortgage demand.
China’s top banks are lending more to homebuyers and developers than at any time since at least the global financial crisis.
The credit-to-GDP gap takes into account the current credit-to-GDP and expected long-run trends. But a China strategist at an international hedge fund said international historical experience is not necessarily applicable to China. The strategist could not be named as he is not authorised to speak to the media.
The BIS also said the estimated debt service ratio – which measures principal and interest payments relative to income – is at 5.4, which is a “potential concern”.
This underlines the default risk as borrowers struggle to repay loans. Some analysts argue a weakening in banks’ capital strength raises the prospect that the government may have to inject more than US$100 billion to shore them up.
Despite the concerns surrounding China’s debt, UBS analysts said in a report earlier this year that they do not expect an imminent banking crisis.
A high domestic savings rate, underdeveloped capital markets, a relatively closed capital account and government ownership of banks and many large borrowers mean no one can easily “pull the plug” on its credit cycle, they said.
Debt-to-GDP could reach 300 per cent before 2020, UBS said.
[Sept 30th update:]
30 Sep 2016
SINGAPORE: With nine containers of goods stranded at sea following the sudden collapse of South Korean behemoth Hanjin Shipping, the past three weeks have been both chaotic and frustrating for employees at the logistics department of Yong Wen Food Industries.
While most of the company's stranded goods are non-perishable items such as canned food, the firm does have two containers carrying 3,600 cartons of fresh milk from Italy. Employees at the Singapore-based food group have thus far received little detail regarding the whereabouts of most of its containers. Daily queries made to Hanjin's Singapore office have also gone unanswered since the shipping giant filed for court receivership last month.
"It's like they purposely ignore your calls and emails," said a female employee at Yong Wen Food Industries who declined to be named. "It is very frustrating because I just want to know how I can get to my cargo, especially the two 40-foot containers with milk that cannot be (left) under the sun. It is a huge amount and it will affect our sales."
For the time being, the local food importer and distributor is relying on other shipments to make up for the stranded goods meant to be distributed to local supermarkets, bakeries and retailers. With updates from Hanjin Shipping being slow and scarce, the company has decided to engage freight forwarders to try to locate and retrieve its goods.
While that will incur additional costs, the employee told Channel NewsAsia that her team does not have much of a choice. "(There's) no point sitting around and wait for information... might as well look for external help and these forwarders may have more information than we do."
CONFUSION AND UNCERTAINTY
Yong Wen Food Industries is not the only one in Singapore caught up in the global supply-chain mess triggered by the demise of the world's seventh-largest container line, which has left more than 100 ships and their cargo in limbo at sea.
When Channel NewsAsia visited Hanjin's Singapore office at the PSA Building on Wednesday (Sep 28) morning, at least 10 representatives from various segments of the supply chain were seen in a queue at the reception area.
This has become a common sight for the past month, according to these representatives whose businesses have been impacted by the shipping giant's sudden bankruptcy. Since news of the collapse emerged, frustrated shippers and cargo owners have been turning up at Hanjin's office demanding updates and more recently, making relevant payments for the retrieval of their goods.
Jasico Express Services' manager Neo Kang Wei, for one, has made several trips to Hanjin's office over the past few weeks. "They wouldn't answer the phone so I have to come down personally," he said.
The Singapore-based freight forwarder has "hundreds of containers" stranded on Hanjin's vessels, with most of them bound for delivery to various countries in the world, said Mr Neo. With the Singapore port being declared as one of the "safe havens" for Hanjin Shipping, following a High Court ruling to suspend "any enforcement or execution against any asset" of the South Korean firm and its local subsidiaries, the freight forwarder is hoping to unload all of its containers on board Hanjin's ships in Singapore before transferring them to alternative container lines.
But the process has been far from smooth-sailing. "It's been very bad and messy," said Mr Neo. "The sudden collapse created a lot of confusion .... no one knows what was happening and it was mainly because of a communication problem (on) Hanjin's (part)."
A local importer of construction materials, who spoke to Channel NewsAsia on the condition of anonymity, described his experience of trying to retrieve his five containers of customised construction equipment, worth nearly S$600,000, on board Hanjin Los Angeles as a "big nightmare".
The vessel carrying the equipment set sail from China's Tianjin port on Aug 12 and was supposed to arrive in Singapore on Aug 26. But just days before the shipping giant went into court receivership, the contractor said he started receiving notifications that his shipment would be delayed. After the announcement of bankruptcy, the updates stopped.
"I went to their office almost every day but all they say is: 'We don’t know when your vessel can come in'," the contractor recounted. "It was a disaster."
With a lack of concrete detail, the contractor said he was unable to make back-up plans as to whether to place a new order for his customised equipment, which were needed at a construction site in central Singapore by early October.
"Without this equipment, the whole construction cannot start. My client understands that it's not my fault, but contractually it's my responsibility to deliver ... If they decide to make claims, we are just an SME (small and medium-sized enterprise) and I cannot afford that.
"I told Hanjin's staff: 'If I have to give compensation, I will be like you and have to declare bankruptcy you know. This is no joke!'," he added.
Fortunately for him, Hanjin Los Angeles eventually called at Singapore's port on Tuesday and the contractor could finally heave a sigh of relief. "At least our case is settled, but what about the other SMEs like ours? I cannot imagine."
According to a notice dated Sep 29 on PSA's website, at least five vessels operated by the beleaguered shipping giant have called at local ports. No further details were given in the release, which only said: "This notice will be updated as and when other vessels operated by HJ are ready to come alongside."
ADDITIONAL COSTS FOR AFFECTED BUSINESSES
But even for those who can rescue their stranded goods, there are additional costs to bear.
PSA said on Sep 6 that companies with cargo shipped by Hanjin will have to fork out a refundable deposit of S$5,000 per container before taking delivery. The deposit will be refunded when firms return the same and empty container to PSA's yard.
Mr Andy Lane, a partner at CTI Consultancy, said the introduction of the refundable deposit is "practiced by just about all terminals globally" as some form of guarantee.
"Hanjin will be in arrears with PSA both locally in Singapore and also across their global portfolio," Mr Lane wrote in a emailed response. "Hanjin’s operated ships cannot be arrested in Singapore as collateral, so the best Hanjin assets to hold are the containers and therefore PSA wants to be sure that the empties will be returned for that purpose – hence the deposit."
In addition to that, cargo owners will also have to pay stevedorage fees - container charges incurred for unloading the goods - in cash.
For freight forwarders such as Jasico Express Services which are transloading containers, additional fees such as a change of status charge, shut out charge and stevedorage will be imposed, according to the PSA notice released on Sep 6.
Mr Neo said his company has been making these payments on behalf of its clients in order to secure the release of its goods. "For now, our clients just want their cargo so they are okay with it."
Online furniture store HipVan similarly went through a frustrating experience, when its container with goods worth US$20,000 (S$27,300) was stalled on a Hanjin ship at a port in China on Aug 30.
An earlier report by Reuters said about 10 vessels operated by the cash-strapped South Korean line have been seized at China ports by charterers, port authorities and others.
"It was a big cargo with many orders, so we were frustrated," CEO Danny Tan told Channel NewsAsia. "Our first reaction was to immediately place a replacement order with the factory because we did not know when the shipment will be released."
The online store specialising in designer furniture also offered affected customers a gift voucher, as well as the option of a full refund. Fewer than five customers opted for a refund, Mr Tan noted.
HipVan's shipping agent was eventually able to retrieve its container a week later and have it transferred onto another shipping vessel, which is expected to arrive in Singapore this week. Despite the more than two-week delay, Mr Tan said the company had been "lucky".
"We were lucky because the first vessel wasn't asked to leave the port. If it did, there'll be a headache because the port may not let them dock again since there's no guarantee they can pay the docking fees," he explained.
As for the additional costs related to the replacement order and alternative shipping arrangements, Mr Tan is not too worried either. "These are products that we constantly restock so we just had to push back the delivery date for the replacement order. It's a factory that we work with a lot so there's room for negotiations there."
ROUGHER SEAS AHEAD
The latest troubles surrounding South Korea's biggest container-shipping line come as a double whammy of slowing world trade and an excess of ships weigh down the global shipping industry.
Amid a bleak environment, some carriers have been forced to sell vessels at a discount while a handful of smaller operators have gone bust. Consolidation has also been taking place among carriers looking to compete on scale. Last December, the world's third-largest container shipping company CMA CGM bought over Singapore's Neptune Orient Lines, a move that analysts said had been "long overdue".
However, even with Hanjin's demise, the primary issue of overcapacity in the sector is unlikely to go away, analysts said.
"We do not believe Hanjin’s bankruptcy would have a large impact in the longer-term, given that the physical ships may be redeployed after Hanjin’s legal future is sorted out. At this point in time, we believe the impact of Hanjin Shipping is likely to be minimal," a Sep 14 report from OCBC Investment Research said.
Mr Lane from CTI Consultancy expects even rougher seas ahead for the shipping industry. In particular, carriers with "high gearing, a lot of short-term debt, impatient creditors, and shareholders unwilling to contribute further shareholders or governments not willing to bail them out" will likely be at risk of becoming the next Hanjin, he added.
For businesses that will have to continue relying on container-shipping lines, many said exercising caution is the way to go forward, but most agree that events like Hanjin's downfall are hard to pre-empt.
"We've used Hanjin so many times for our cargo from China. They are fast and prices are reasonable so it was a big surprise," said the local contractor who declined to be named. "Our shipping agents have suggested other container lines for us to consider ... I'll probably take the bigger names for now but the shipping industry is so scary, there's no certainty who's safe and who's not."