28/12/2015 World Business Report


28/12/2015

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With the recent glut in oil prices, investors are eyeing Saudi Arabia's

:00:07.:00:17.

Can the Kingdom find alternative sources of income?

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And, it's been a torrid year for German car maker Volkswagen.

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We'll take a look back at the emissions scandal that

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A very warm welcome to word business -- World Business Report.

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In a minute, we'll havemore on China's anti corruption crackdown

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But first: All eyes are on Saudi Arabia, which is expected to

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The king has already said the country wants to diversify its

:00:59.:01:03.

sources of income, as it strives to cut its dependence on oil revenue.

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The world's top oil exporter is expected to announce that it has run

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a big deficit this year, thanks to persistently low oil prices and the

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We're expecting more details in around six hours,

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plus a "transformation plan" later in the month.

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Richard Thompson is the Editorial Director at

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He joins me alive. Thank you for joining us. In recent years the

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government in Saudi Arabia has simply announced the budget but it

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year they will hold a news conference to explain some of the

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major changes, aren't they? Yeah, I mean, it is very significant because

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of the change in oil prices. And because we have a new king from the

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start of last year. This is his first budget. He is introducing

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significant changes across the government. So we have the pressure

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on Riyadh which is significant, it is 90% of their income. Saudi Arabia

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has this role as a political and social leader in the region and so

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Riyadh has to balance the idea of providing growth and momentum and

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economic diversification as mentioned but also balancing its

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books. We expect it to announce changes to spending and possibly to

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revenue policy. It is designed to cut this huge deficit that has been

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running. Estimates of about $133 billion US. That is about 20% of

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GDP. Expectations are for it to next year be reduced significantly. It

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will still be large, which is largely to do with this glut in oil.

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That is largely Saudi Arabia's own doing. Saudi Arabia has a very

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difficult balancing act to play, it is heavily committed to spending and

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wants to continue to diversify and create jobs, but it has to balance

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the books. Long-term it has to protect the position as one of the

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biggest and most important suppliers of energy. The strategic position

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regarding oil policy has being to keep pumping oil prices. It would

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like to take its competitors out of the market and retain this

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influence, because prices will start to come back up and Saudi Arabia

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wants to be in the best position for that day. The King has said he wants

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to diversify the economy away from such a heavy reliance on oil. What

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areas are they hoping to diversify into? Well, one of the primary areas

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is manufacturing, so, obviously, Saudi Arabia produces a huge amount

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of oil and a large percentage is exported as crude oil. In refining

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it into higher value petroleum products and taking that process

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further down or up the value chain into manufacturing, downstream

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manufacturing, you can create a more industrialised diversify at economic

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base, which is a priority, downstream diversification of the

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oil sector. They are also looking at mining, the development of non- oil

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natural resources that Saudi Arabia has, and tourism, you know,

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developing Saudi Arabia beyond that Hajj pilgrims, trying to get Saudis

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to spend more in the kingdom. It is quite a wide ranging strategy that

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they have. We will hear much more in around six hours with the details of

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the budget. Good to hear your thoughts and thank you for joining

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us. One of the big shocks of 2015 came

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when Volkswagen was forced to admit that cars it had sold in North

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America as "clean diesels" were in fact anything but, and could only

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pass emissions tests with the help of some rather special,

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and rather illegal, software. The company is still struggling with

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the fallout from the scandal, which triggered the recall

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of 11 million cars worldwide. And as Theo Leggett reports,

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the subject of car emissions and what to do about them is likely

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to prove a major theme In mid-2015 Volkswagon was riding

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high. It had become the best selling car maker in the world. Then it all

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went badly wrong. The company was caught using illegal software to

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help its diesel cars pass emission testing is in the US. So, let's be

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clear, our company was dishonest. With the EPA and the California Care

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Act Resources Board, and with all of you. In my German words we have

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screwed up. 11 million cars around the world were fitted with this

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cheating software. Fixing it would cost billions. The CEO, seen here in

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happier times, was forced to resign. What Volkswagon was doing was

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deliberate and illegal but the scandal has highlighted a wider

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problem with the way in which cars are tested. Simply the procedures

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are too artificial easy to cheat, and don't really reflect what goes

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on out in the open road. Here in Brussels, European lawmakers have

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been working on a new and better test for some time. Not everybody is

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happy with what they have come up with. The idea is to make sure that

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cars are tested out on the road as well as in the lab. But

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environmentalists said the standards are far too lenient. Governments

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have set limits which are twice as high as were allowed in the

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laboratory and they have delayed the introduction of those limits, so, so

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far governments are more concerned about the interest of the car

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industry than the health of citizens. Car companies have been

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accused of lobbying against these rules but they say they are actually

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in favour of them. We hope that the new testing methods, which had been

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proposed and which were stricter than today, will be agreed sooner.

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OK but have you been lobbying to water down the rules at any point?

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We have just wanted to make sure that whatever is on the table is

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realistic and technically feasible. There is no question the Volkswagen

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scandal cast a cloud over the industry. The question is whether it

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has a lasting impact, or whether talk of cleaning up emissions is

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just so much hot air? Chang Xiaobing, he's chairman of one

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of China's largest state-owned mobile operators, China Telecom,

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is being investigated by the Mariko Oi is in our

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Asia Business Hub in Singapore. This is a big story in China, isn't

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it? Indeed, Alice. He was actually reported missing on Sunday by local

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media but it has since been announced that he is being

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investigated, suspected of violation of discipline according to a

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statement released on the website of the central commission for

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discipline inspection. We don't know much about this investigation.

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According to the statement he was the former chairman of the second

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biggest Chinese operator, before becoming the CEO of China Telecom.

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In August, there were reports of the government was considering merging

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these companies. Of course, he is the latest in a series of high

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profile executives to be investigated by the authorities. In

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fact, 70 senior officials have been investigated since Beijing started

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to crack down on corruption. So, despite the year-end, the

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investigation continues. Good to check in with you. Thank you.

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Most Asian stock markets ticked up Monday - as traders returned

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Chinese shares are rising on news that lawmakers have agreed to start

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Oil prices have rebounded from multi-year lows while mainland

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Leading insurers have said they'll pass on to customers

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a 100% of the savings made from a government crackdown

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