19/08/2014 Asia Business Report

ceasefire has been agreed. The government has been ordered to

pay more than ?200 million to an American defence company, after a

scheme to electronically monitor people entering and leaving the UK

was cancelled because it was behind schedule. Now on BBC News all the

latest business news live from Singapore. $1 billion, that's the

amount of money Indonesia is aiming to raise by reaching out to a new

pool of investors. And, doing business in China, Mercedes`Benz is

the most recent company to face penalties on the mainland.

Welcome. Thanks for joining us for this edition of Asia Business Report

on BBC World News. Indonesia is on a drive to raise funds. Today is the

first day of a roadshow for a $1 billion global Islamic bond. An

Islamic bond is different from a conventional government bond because

it complies with Sharia Law. Indonesia needs to raise cash to

finance its budget deficit and by making the Islamic bonds available

globally, they hope to reach a group of investors that are not tapped

yet. Although Indonesia has the biggest Muslim population in the

world, its Islamic finance industry lags behind Malaysia, which is the

biggest issuer of these bonds in south`east Asia. I spoke with Vicki

Jones, a debt capital markets lawyer about these bonds. These are

Sharia`compliant investment products, including the prohibition

on payment of interest. Investors still want to receive a return, so

we have to structure the arrangement in a way that gives that return and

in a way that the market has done that is to invest the assets, the

funds that investors put into product in various assets which

either create a profit or an income stream, which is then used to give a

return to the investors. Why would a government do that instead of a

conventional bond? Lots of reasons. They want to diversify those

investments, they want to tap a broader range of investors and that

would include issuing a variety of investors. Countries which have a

large Muslim population would have an interest in providing a

Sharia`compliant investment product to support the ethical concerns of

the population. That was Vicky Jones, debt capital

market lawyer. In other news making headlines, US `based oil and gas

giant says it has discovered a big oil well over the coast of Western

Australia. Estimates say it could be the largest find in Australia in

decades. It is said that the well is being evaluated and could result in

as many as 300 million barrels of crude. A company says the potential

of the well is extraordinary. The largest mining company in the world,

BHP, is preparing to release its results on Tuesday, and is

considering restructuring, announcing that a demerger is its

preferred option, which is the company is keen to spin off assets

which aren't big earners. An announcement is expected on the

restructuring process as early as today. Facebook is testing a new

feature that warns users about satirical content. These posts will

be tagged as satire. Satirical stories have created some confusion

and anger. Reports from China that the German car maker Mercedes`Benz

was found guilty of price`fixing has given foreign businesses and other

reason to question whether it is being unfairly targeted by the

government. China is the world's largest car market and other brands

like BMW, Chrysler and others have been accused of anti`competitive

behaviour. I spoke earlier with our correspondent, John Sudworth, for an

update on the fine Mercedes could face. We don't know yet what level

of fine the authorities will level on Mercedes`Benz. Ahead of the

announcement, under the shadow of the investigation, Mercedes and the

other carmakers you mentioned have already been engaging in heavy

cost`cutting. They have slashed the prices of spare parts after sales

services. Too little and too late to avoid the attention of the

authorities. There are some suggestions that a 20% reduction in

the cost of spare parts in China might cost a carmaker around 1% of

net profit. China has been saying that it doesn't discriminate between

domestic and overseas companies. The European chamber in China feels

otherwise. There is concern about this, not only in the car industry

but across foreign business sector. We have seen a number of industries

targeted, pharmaceuticals, technology companies, food

companies, all under the spotlight. There is a worry that foreign

business is singled out for political reasons. The cost`cutting

in the car industry shows that margins are high, the Chinese

authorities will suggest that proves there a point, that there is a case

to be answered. People think that in many ways these companies are

victims of their own success. The reason they can charge these prices

is because the real monopoly they have in China is a perceived

monopoly on quality. John Sudworth in Shanghai. We will get a sense of

global trade when we get half year results from China's big shipping

company, Costco international. Revenues last year totalled $9

billion, down 7% from 2012. Investor sentiment has recently taken a

positive swing. I spoke earlier with our correspondent in Hong Kong and

asked for an outlook on the industry and Costco International.

That industry has been struggling since the financial crisis of 2009.

A lot borrowed a lot of money before that period. They are struggling to

pay that down. Also, there has been a slump in global trade. There are

too many ships around, so rates one can charge for shipping on those

vessels are lower than they once were. This is something the industry

is struggling with over capacity. Costco say this is a problem that

could continue They didn't have a great year, its profits were down by

almost one third. We will see how they fared in the first six months

of the year and for the whole year. Indeed, a very challenging

environment for the industry. Surely, the focus is on

cost`cutting. Absolutely. There is huge pressure in the industry to cut

costs. The parent of Costco International, the China Ocean Group

has already cut some routes to Europe and America. Some developers

are looking to developing ghost ships, ships without captains on

board, where captains would sit on shore in an effort to cut costings.

Family business is integral to developing nations and that is no

different in south`east Asia's largest economy, Indonesia.

According to the latest Rich List, Indonesia's wealthiest million has

come from family`run companies. Keeping it all in the family can

have its disadvantages. In the final instalment of the series, our

correspondent reports from a plantation in western Indonesia.

Surveying his empire from the clouds, this massive factory complex

belongs entirely to the Kinoto family, with an estimated wealth of

more than $2 billion, they are amongst Indonesia's top ten

wealthiest families. This is the young man in charge on the ground.

Only 25 years old, Anderson is a manager at a pulp and paper company

whose product is sold in more than 75 countries. US educated, he is the

younger son of the owner. This is a family business that has been handed

down for two generations. The company relies on solid foundations.

Working in a multigenerational team can bring its challenges.

It isn't easy, but it is our culture and our company that is not only

about tenure but about fresh ideas. We have to have mutual respect. The

more senior people in the company have respect for the younger people

and the younger generation with fresh ideas. Likewise, the younger

generation need to have mutual respect for the people they work

with. My father said don't forget how far we hav come and never forget

how lucky you are so you can appreciate where you come from.

Anderson is the only son in the family business, but he hasn't let

his fast tracked career go to his head.

You are no different to anyone else, yes? The day that you feel your

sense of entitlement is the beginning of the decline, because

everything that you have, you need to work for. You are not entitled to

anything. This is the value that was imparted by my father and that is

close to the whole family. This is the nursery growing the next

generation of saplings. This business is firmly rooted in family

values and says that has been a key to its success. Thank you so much

for investing your time with us. I am Rico Hizon in Singapore. Goodbye

for now. The top stories this hour: President

Obama says Iraqi forces have taken back the country's largest dam. He

called it a major step forward in the battle against Islamic State

militants. Calls for calm in Missouri after

days of violence. The National Guard takes to the streets, as the

governor