:00:00. > :00:00.backlog. He blamed it on a surge in applications earlier this year. Time
:00:00. > :00:14.for the latest is best used live from Singapore `` latest business
:00:15. > :00:17.news live from Singapore. Indonesia's Central Bank meets for
:00:18. > :00:22.the first time since campaigning began in the presidential elections.
:00:23. > :00:27.And fierce competition. Our Asia India is taking off on its maiden
:00:28. > :00:35.flight. What does this mean for other rivals? Thank you for joining
:00:36. > :00:41.us on Asia Business Report on BBC World News. Indonesia's central
:00:42. > :00:46.banks to make bank meets today `` Central Bank meets today. An
:00:47. > :00:51.interest rate move is not expected. The spotlight is on the outlook for
:00:52. > :00:55.Southeast Asia's a guest economy. This is the key to the government's
:00:56. > :01:01.political fortunes. `` South East Asia's biggest economy. I spoke to
:01:02. > :01:04.an investment officer. He explains why it is unlikely that the bank of
:01:05. > :01:10.Indonesia will change its markets policy. US long`term interest rates
:01:11. > :01:13.have been coming down in recent months. So there is really no
:01:14. > :01:18.pressure for Indonesia to raise rates. Inflation ran at 7.3% in the
:01:19. > :01:22.month of May. So there is really no pressure for the central bank to
:01:23. > :01:26.raise rates. Having said that, a longer term issue is for Indonesia
:01:27. > :01:31.to keep attracting capital. To fund investment and to fund the growth of
:01:32. > :01:37.the economy. Why not cut rates now? We saw a slowdown in the Indonesian
:01:38. > :01:42.economy in 2013. Yet again in the first quarter of 2014 it stands at
:01:43. > :01:46.5.2%. Isn't there a case for them to reduce the cost of borrowing now
:01:47. > :01:52.rather than later? Indonesia's economy is held down by subsidies.
:01:53. > :01:57.Basically electricity and energy prices are subsidised by 2.5% of
:01:58. > :02:00.GDP. As a consequence, the government has to reduce those
:02:01. > :02:03.subsidies to spend that money on infrastructure and other more
:02:04. > :02:07.important things. How can they attract foreign investment when they
:02:08. > :02:14.have that minimum export and looser Labour laws? There is a shift in
:02:15. > :02:17.terms of investment focus. Away from resource`based investments. Mining,
:02:18. > :02:23.towards manufacturing. So you see big Japanese automakers, tyre
:02:24. > :02:26.makers, cars Tomic setting up big plants in Indonesia in recent
:02:27. > :02:29.months. They may have problems in terms of it attracting foreign
:02:30. > :02:34.investment, but the biggest asset right now is the large population of
:02:35. > :02:38.240 million people. They support the domestic economy. Indonesia last
:02:39. > :02:42.year got $22 billion of investment. That's not too bad. When you
:02:43. > :02:47.consider that China got about 115 billion. So Indonesia does get a
:02:48. > :02:50.fairly large foreign investment. The issue is to change the quality, the
:02:51. > :02:57.nature of that investment away from mining to as manufacturing. China is
:02:58. > :03:03.investing to build railways on the roads, airports along the Yangtze
:03:04. > :03:06.River. To help promote business along its waterways. It is the
:03:07. > :03:11.government's latest attempt to sustain high growth rates. It is
:03:12. > :03:16.that nation's third largest and joins the inland provinces to
:03:17. > :03:22.Shanghai. Japanese engineering giant Mitsubishi has joined forces with
:03:23. > :03:26.German firm Siemanns to come up with a French offer to rival that of
:03:27. > :03:34.General Electric. They are due to put up a proposal to the board next
:03:35. > :03:41.week. Toyota has decided and added 650,000 cars all in Japan to the
:03:42. > :03:45.recall list. It issued the list last year over a defect in passenger
:03:46. > :03:50.airbags. That takes the number of cars recalled over the issue to 2.8
:03:51. > :03:58.million. Shares in a have plummeted after the airline cancelled an order
:03:59. > :04:01.for 70 aircraft. It says it is, confident that new orders in the
:04:02. > :04:11.coming months will compensate for the cancellation. Malaysia's airline
:04:12. > :04:16.is said to be the first airline to fly in these skies. Air Asia India
:04:17. > :04:22.is becoming the fourth Budget carrier after space jet. Our
:04:23. > :04:25.correspondent reports. I am here at the Bangalore airport, one of the
:04:26. > :04:33.largest in the country. It is from here that Air Asia India's landmark
:04:34. > :04:37.flight will take off to Goa with 180 passengers. For its maiden flight
:04:38. > :04:45.the airline was selling tickets at $17. That is cheaper than a second
:04:46. > :04:48.class train ticket. That has triggered an airfare war with other
:04:49. > :04:53.domestic carrier slashing fares and offering heavy discounts. All this
:04:54. > :04:58.means great news for travellers, but that may not be the case for Indian
:04:59. > :05:02.airlines. Because financially, most of them are struggling. The combined
:05:03. > :05:07.losses of Indian airlines have been running into billions of dollars.
:05:08. > :05:12.Due to high taxes on fuel and steep airport charges, which have pushed
:05:13. > :05:19.up costs. A couple of airlines, including Kingfisher, had to shut.
:05:20. > :05:23.Durie to the same reasons. So how is Air Asia India planning to make
:05:24. > :05:27.money? If you look at demand and supply, there is a lot more capacity
:05:28. > :05:31.that the Indian market can take on in terms of air traffic. With that
:05:32. > :05:36.being said, our model has always been about low fares, keeping the
:05:37. > :05:41.fares low, make sure that we make it affordable enough that people can
:05:42. > :05:46.fly. Bringing that model into India, keeping our costs razor thin. The
:05:47. > :05:48.new airline's main partner is a group which is joining hands with
:05:49. > :05:54.Singapore airlines to start another domestic carrier later this year.
:05:55. > :05:59.Last year, Abu Dhabi `based Etihad invested in jet Airways. This means
:06:00. > :06:05.more flight options for passengers. And also renewed interest in Indian
:06:06. > :06:11.aviation. But financially for the new entrant, it will not be a smooth
:06:12. > :06:22.ride. In Asia's third largest economy. China's e`commerce giant
:06:23. > :06:26.Aibaba is taking on American players like Amazon and eBay. `` Alibaba.
:06:27. > :06:33.This comes ahead of their share sale in the US. I spoke to the
:06:34. > :06:37.Asia`Pacific chief executive who explained why Alibaba is likely to
:06:38. > :06:40.succeed. I think they will apply the same principles that they have. I
:06:41. > :06:51.think we should not forget that in 2006, eBay had 80% market share of
:06:52. > :06:54.the e`commerce in China. And Alibaba was a late starter. It wiped out
:06:55. > :07:01.eBay very quickly on two principles. One was putting in touch sellers and
:07:02. > :07:06.buyers, the second was not taking a cut on the transaction, but making
:07:07. > :07:08.money out of marketing tools in an ecosystem they created. And I
:07:09. > :07:13.believe they will do exactly the same thing in the, maybe not to the
:07:14. > :07:18.same extent, but the principal will remain the same. So should Amazon
:07:19. > :07:24.and eBay be worried with the entry of Alibaba? They should, but they
:07:25. > :07:32.should be worried for the growth of Aly Alibaba for quite awhile now.
:07:33. > :07:39.This is only the beginning. The 11 main platform of Alibaba will be
:07:40. > :07:43.without ads. What kind of business model that they have you? How will
:07:44. > :07:48.they be making money? The fact that they will be out of advertising, is
:07:49. > :07:52.not dissimilar to what they do in China. I think they will make money
:07:53. > :08:04.by monetising marketing tools and services to the stores is as opposed
:08:05. > :08:07.paid advertising. Electronic cigarettes. Details have not been
:08:08. > :08:12.exposed, but the firm expects to wrap up acquisition in the second
:08:13. > :08:15.quarter of the 2014 fiscal year. Analysts believe that the cigarettes
:08:16. > :08:22.will eventually outsell traditional cigarettes in some markets. The
:08:23. > :08:24.Spanish owner of the fashion retailer Zara has reported its
:08:25. > :08:28.biggest drop in profits in five years. Net profits fell in the three
:08:29. > :08:32.months to April. More than one third of its sales come from a late
:08:33. > :08:35.Europe, but the sharp rise in the euro against currencies like the
:08:36. > :08:44.Japanese yen have reduced the level of profit that are patria did.
:08:45. > :08:50.Moving back now `` repatriated. In Indonesia, the country's big
:08:51. > :09:00.commercial banks are testing out a scheme called Rustlers banking. As a
:09:01. > :09:04.way of `` branchless ranking. Life in this village has been like this
:09:05. > :09:10.for a generation. But change is on its way here. For decades, farmers
:09:11. > :09:16.like this man have struggled to access ASIC financial services. The
:09:17. > :09:24.nearest bank is 16 kilometres away. `` ASIC financial services. But a
:09:25. > :09:30.new scheme means he can transfer money and save right here in a small
:09:31. > :09:35.shop in his village. `` basic. If I put my money in this branch, I have
:09:36. > :09:39.to wait for a minibus to take me. Here I can withdraw my money faster
:09:40. > :09:46.and get to the rice field earlier. Shopkeepers here were dumb at work
:09:47. > :09:51.as agents for the bank, carrying out simple transactions. `` shopkeepers
:09:52. > :09:53.here work as agents for the bank. This is crucial if Indonesia is to
:09:54. > :10:01.boost economic growth in rural like this were living below the
:10:02. > :10:05.poverty line last year. Critics say that Indonesian farmers need access
:10:06. > :10:15.to credit. This scheme does not for this scheme to work, banks need
:10:16. > :10:22.to provide borrowing services in rural areas. If it is simple
:10:23. > :10:26.transactions, like saving money and withdrawing funds, it is going to
:10:27. > :10:31.have limited success. But while this initiative may be a step in the
:10:32. > :10:40.right direction, some observers say it doesn't go far enough. And before
:10:41. > :10:43.we go, here is a quick look at the markets. Asian stocks are in
:10:44. > :10:47.negative territory in early Thursday trading. US equities fell overnight
:10:48. > :10:51.following the World Bank's production of its global growth
:10:52. > :10:58.forecast. Thank you for investing your time in
:10:59. > :11:08.The main news stories this our: after seizing two cities in two
:11:09. > :11:12.days, the advance of the Islamist militants in Iraq appears to have
:11:13. > :11:14.been halted north of Baghdad. Sepp Blatter has confirmed he wants to
:11:15. > :11:15.stand as another