29/08/2014 Asia Business Report


29/08/2014

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and Africa next month. Travel restrictions will be lifted. And the

:00:00.:00:00.

defection of Conservative MP Douglas Carswell to the UK Independence

:00:00.:00:00.

Party has triggered a by`election in Clacton, which Mr Carswell says he

:00:00.:00:07.

will contest on behalf of his new party.

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Now on BBC News all the latest business news live from Singapore.

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Malaysia Airlines is set to announce a big restructure after posting big

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losses and warning of more to come. And Japan's economy stalls as the

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sales tax pain persists. Hello and welcome to Asia Business

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Report on BBC World News. I am Rico Hizon.

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Shares of troubled national carrier Malaysia Airlines are suspended

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today, ahead of an announcement of the details of a major restructuring

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move. The company revealed a loss of $98 million for the three months

:00:55.:00:56.

until June, after the disappearance of MH370 in March and with the MH17

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tragedy months later. The airline has warned of weak earnings in the

:01:00.:01:08.

second half after a sharp decline in bookings. Our correspondent has

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more. Prayers for the victims of

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extraordinary aviation disasters that happened to one airline. Like

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his company, Malaysia Airlines Chief Executive Ahmad Jauhari Yahya is

:01:21.:01:24.

under enormous pressure. The losses announced this week underline the

:01:25.:01:34.

challenge the airline must meet. He says after MH370 disappeared, the

:01:35.:01:37.

airline tried to rebuild, but tragically, just as we were

:01:38.:01:40.

beginning to see signs of recovery in all regions, we were dealt a blow

:01:41.:01:44.

with MH17. The full financial impact of the tragedies will be seen in the

:01:45.:01:48.

next set of results. They will need fresh energy to come in and to make

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some very tough decisions that will probably be unpopular at a political

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level but they are things they will need to do in order for the airline

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to survive. That serious work is now the task of the state investment

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fund, Khazanah, which plans to take ownership of the company and

:02:07.:02:10.

implement a radical restructure. For staff, it is an anxious wait.

:02:11.:02:23.

TRANSLATION: I am very worried about the current situation, but I hope

:02:24.:02:27.

for success. There is no shortage of options for how to turn around the

:02:28.:02:32.

airline. As many as 6000 jobs could go, more than one quarter of its

:02:33.:02:34.

staff. Unprofitable international routes might be cancelled and the

:02:35.:02:37.

chief executive and other senior management replaced. No other

:02:38.:02:39.

carrier has lost two passenger planes in the space of less than six

:02:40.:02:43.

months. For the airline, fixing the finances is just the beginning. The

:02:44.:02:46.

restructure will only go some way towards gaining the confidence of

:02:47.:02:50.

passengers. The queues at this check`in counter aren't exactly

:02:51.:02:54.

long. Some planes are flying with rows of empty seats. Passengers

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aren't the only ones who are spooked. Nearly 200 cabin crew have

:03:00.:03:03.

resigned in the past six months, much more than normal turnover. The

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real challenge for Malaysia Airlines and its owners will be to get people

:03:07.:03:08.

flying again. In other news, Virgin Australia's

:03:09.:03:38.

losses have trebled to $330 million. The carrier says its underlying

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losses were less, at around 200 million, roughly in line with market

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expectations. It plans to sell a 35% stake in the velocity frequent`flier

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programme to Affinity Equity partners in a deal valued at about

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US$900 million. Figures from Japan highlighted

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challenges of boosting the third largest economy in the world, with

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industrial production rising less than expected in July while

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household spending slumped and the inflation rate remains unchanged. A

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Fujitsu research institute spokesperson tells us how to read

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the report. Japan has stabilised. We had a shock

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in April when the sales tax hike was increasing for consumers by 3% with

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real incomes diving down by 3% on that matter as well. 3.3%. If we

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strip out the sales tax, we have 1.3% real consumer inflation. This

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is good, but it does not mean we are on a positive trend. It is bottoming

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out. 1.3% is way below the 2% inflation target of the Japanese

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government. Will we see an upward trend going forward? Not for the

:04:41.:04:43.

summer. We very much hope the economy will recover. We hope for

:04:44.:04:50.

third quarter growth of 2.5% and it should increase to the end of the

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year, but it keeps the government on its toes to come up with more

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reforms for some reductions in taxes for corporations for example. Some

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reforms that make people more positive in terms of the overall

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outlook and that will help create a positive trend. We shouldn't expect

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too much this summer. Revised numbers from the US reveal

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the economy grew at a fastest pace than first thought, at 4.2% in the

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second quarter, up to .2%, reflecting stronger business

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spending and exports. It was the fastest pace of growth since the

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first quarter of 2013. `` third quarter. The Indian economy is

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growing at its slowest pace in three decades. Expectations had been high

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since Narendra Modi took charge of three months ago. The latest numbers

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are out today. Are there any signs of a pickup in business confidence?

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In Mumbai, our correspondent follows a local product on its journey from

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factory floor to shop window. It is a busy day in this shoe

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factory. In the last few months, this has been a common sight with

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new orders coming in fast. It wasn't always like this. The Indian economy

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slowed down considerably over the last two years, affecting businesses

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across the board. But this firm, providing shoes to stores across the

:06:19.:06:21.

country, feels that business sentiment has started improving ever

:06:22.:06:23.

since the new government took charge.

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The initial sentiment shows everything went correct, everything

:06:34.:06:37.

in the right direction. We actually got to see the result. Everyone's

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gone through a lean period, right? So everyone sees an opportunity to

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grow big. They need to make up for lost time, make up for lost

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business. This seems to be that make up time taking place.

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Anil has come to the store to buy some new shoes for work. He worked

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in the information and technology sector and lost his work earlier

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this year due to the economic slowdown, as jobs in IT dried up.

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After numerous interviews, he finally got the job earlier this

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month. TRANSLATION: I went for many

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interviews, but there were very few jobs in the market. One or two

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companies were ready to hire me weren't offering a good salary.

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Since taking up this new job, three or four companies have shown

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interest in hiring me. Suddenly, there are so many jobs in the

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market, which wasn't the case when I was on the lookout.

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Most people and investors seem more positive about the economy than they

:07:41.:07:43.

were six months back. There is also a sense that this optimism may last

:07:44.:07:49.

only for a while. In the long`term, a lot will depend on how quickly the

:07:50.:07:52.

new government can introduce reforms bold enough to put Asia's

:07:53.:07:55.

third`largest economy on the fast track to grow.

:07:56.:08:07.

Fuel prices in Indonesia are some of the lowest in the world because the

:08:08.:08:12.

government spends $25 billion each year on subsidies, but there is a

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limit on how much cheap fuel the government provides. The state`owned

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oil giant imposed restrictions on subsidised fuel, but not now. Our

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correspondent looks at the impact on people travelling on one of the

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country's busiest highways. This is the north coast highway, a

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1300km road that links the cities in Java, Indonesia's most populated

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island. On average, 30,000 motor vehicles use this road every day.

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Trucks carry factory goods and residents of the towns go about

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their daily lives. Fuel is a crucial commodity here. In the past few

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days, subsidised fuel has been in high demand. We have travelled about

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200 kilometres and all along the road, we can see gas stations that

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didn't have the cheap fuel and those who did were limiting the amount

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that people can buy for each vehicle. At this petrol station, I

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have been told it has been out of a cheap fuel since yesterday and

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today's supply won't get here for another couple of hours. This man is

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on a long journey transporting goods for a company that operates mobile

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phone towers. Because of the limited supply, he has had to buy

:09:26.:09:32.

nonsubsidised fuel. TRANSLATION: I can go bankrupt. What

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the company pays is only enough for subsidised fuel. I lose money this

:09:36.:09:40.

way. Some are taking advantage of the restrictions on fuel.

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Nearby residents here are lining up to buy and resell it in remote

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villages. This woman has been waiting for six hours.

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TRANSLATION: I am trying to buy their fuel to make money but I have

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been waiting too long and there is no guarantee I will even get the

:09:57.:10:00.

fuel. Scenes like this aren't good for public morale. So the government

:10:01.:10:10.

stepped in. A spokesman from the state`owned oil firm told the BBC...

:10:11.:10:22.

How the government solves this issue at the pumps will affect Indonesia's

:10:23.:10:25.

growth. A new administration will take office in less than two months

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and already it is facing a critical challenge.

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A quick look at the markets in Asia. It is lacklustre in mid`morning

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Friday trade after US equities slept overnight after the latest tension

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between Ukraine and Russia. Japan is done by 86 points due to

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disappointing economic data, while Hong Kong at a straight into higher

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on selective buying. Thank you for investing your time with us. I am

:10:57.:10:58.

Rico Hizon. Goodbye for

:10:59.:10:59.

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